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/raid1/www/Hosts/bankrupt/TCR_Public/051108.mbx T R O U B L E D C O M P A N Y R E P O R T E R Tuesday, November 8, 2005, Vol. 9, No. 265 Headlines AAIPHARMA INC: Files Plan & Disclosure Statement in Delaware ACCELLENT CORP: Prices 10% Senior Subordinated Notes ALLMERICA FINANCIAL: S&P Revises CreditWatch to Positive ALLIANCE GAMING: Moody's Reviews Debt Ratings for Likely Downgrade ALLIED HOLDINGS: Has Until Jan. 15 to Remove Causes of Action ALLIED HOLDINGS: Wants to Reject General Motors Contract ALLIED HOLDINGS: Responds to Objections Against KERP ALOHA AIRLINE: Amended Plan Confirmation Hearing Set for Nov. 28 AMC ENTERTAINMENT: Incurs $10.72 Million Net Loss in Third Quarter ANCHOR GLASS: Panel & U.S. Trustee Object to AP Services Retention ANCHOR GLASS: Encore Can Proceed with District Court Appeal ANCHOR GLASS: Cahill Gordon Approved as Special Counsel ASARCO LLC: Sen. Cantwell Wants Wash. Site Obligations Honored ASARCO LLC: Boudloche is Chapter 7 Trustee of Encycle/Texas ASARCO LLC: Court Extends Time to Remove Civil Actions to Feb. 6 ASSET-BACKED FUNDING: Fitch Puts Low-B Ratings on $7.2 Mil. Certs. BIO-RAD LABORATORIES: Discloses Third Quarter Financial Results BOYD GAMING: Earns $32.9 Million of Net Income in Third Quarter BROOKFIELD PROPERTIES: Earns $33 Million of Net Income in 3rd Qtr. BUENA VISTA: Taps Steven Schwaber as General Bankruptcy Counsel BUENA VISTA: Section 341(a) Meeting Slated for November 22 CALPINE CORP: EBITDA Drop Cues Fitch to Junk Senior Unsec. Notes CASCADES INC: Earns $3 Million of Net Income in Third Quarter CERVANTES ORCHARDS: Wants to Use Lenders' Cash Collateral CHAPCO CARTON: Ch. 7 Trustee Wants to Conduct Rule 2004 Probe CHESAPEAKE ENERGY: S&P Rates $1.1 Billion Notes at BB CINRAM INT'L: Moody's Reviews Ba3 Corporate Family Rating CNA FINANCIAL: Moody's Affirms Preferred Stock Rating at Ba2 CONSTAR INT'L: Moody's Junks Rating on $175 Million Senior Notes CONVERIUM AG: Financial Restatement Cues S&P to Watch Ratings DEAN FOODS: Financial Plans Prompt S&P's Stable Outlook DEAN FOODS: Earns $104 Million of Net Income in Third Quarter DEAN FOODS: Completes Multi-Million Sale of Dips Business DELTA AIR: Wants to Walk Away from ALPA Bargaining Agreement DENBURY RESOURCES: Low Leverage Prompts S&P to Lift Rating to BB EAGLEPICHER INC: Obtains $345 Mil. in DIP Financing Commitments ENRON CORP: Gets Court Nod on Project Teresa Settlement Pact ENRON CORP: Court Approves Clinton Energy's Settlement with SCA ENRON CORP: Wants Court to Approve East Bank Settlement Pact ESCHELON TELECOM: Reports Third Quarter Financial Results EVERGREEN INT'L: Improved Financials Cues S&P to Lift Ratings EXCELLIGENCE LEARNING: Must File Financials by Nov. 14 Says Nasdaq FLYI INC: Files Chapter 11 Petition to Restructure Aircraft Leases FLYI INC: Case Summary & 40 Largest Unsecured Creditors FLYI INC: S&P's Credit Rating Tumbles to D After Bankruptcy Filing GARDEN STATE: Court Extends Plan Filing Period to Jan. 5 G0LDSTAR EMERGENCY: J. Patrick Magill Approved as Interim CEO G0LDSTAR EMERGENCY: Court Denies Exclusive Periods Extension GREENBRIER COMPANIES: Reports Results for Fiscal Fourth Quarter HIGHLANDERS ALLOYS: Court Extends Plan Filing Period to Jan. 22 INTERSTATE BAKERIES: Fishlowitz Class Holds $6-Mil Unsecured Claim INTERSTATE BAKERIES: Selling Chicago Property for $7 Million INTERSTATE BAKERIES: Wants to Walk Away From 13 Burdensome Leases JP MORGAN: Fitch Puts Low-B Ratings on $27.5 Mil. Cert. Classes KAISER ALUMINUM: Names Post-Emergence Board of Directors LB-UBS COMMERCIAL: Fitch Puts Low-B Ratings on $38MM Cert. Classes LIBERTY FIBERS: List of 20 Largest Unsecured Creditors MAJESTIC STAR: Trump Stock Purchase Spurs S&P's Negative Watch MAJESTIC STAR: Buys Trump Indiana for $253 Million MEDICAL TECHNOLOGY: Files First Amended Disclosure Statement MERIDIAN AUTOMOTIVE: Panel Taps PCA as Special Brazilian Counsel METROPOLITAN MORTGAGE: Fitch Junks Five Certificate Classes NATIONAL ENERGY: Wants Court to Avoid $678,839 Transfer to Orrick NAVIGANT INTERNATIONAL: Receives Waiver from Lenders NETWORK COMMS: Niche Rivalry Cues S&P to Junk $175M Sr. Sub. Notes NETWORK INSTALLATION: Acquires Spectrum Communications NORTHWEST AIRLINES: Worldspan Wants Arbitration Allowed NORTHWEST AIRLINES: More Parties Balk at Aircraft Lease Rejection NORTHWEST AIRLINES: Taps Anna Schaefer as Finance Vice President NORTHWEST AIRLINES: Reaches Agreement With Two Unions on Pay Cuts OPTIMUM GROUP: Optimum West's FSR is Marginal Says A.M. Best ORCHARD SUPPLY: Moody's Rates $235 Million Sr. Unsec. Notes at B2 PILGRIM CLO: Fitch Upgrades $10-Mil Class C Notes to BB+ from BB- POTTSVILLE HOSPITAL: S&P Pares $33.601M Revenue Bonds to BB+ PXRE GROUP: Katrina Impact Prompts Fitch to Shave Low-B Ratings REAL ESTATE: Moody's Rates $800,000 Class L Certificates at B3 RED TAIL: U.S. Trustee Unable to Form Creditors Committee RELIANCE GROUP: Liquidator Gets Court OK on $300 Mil. Distribution RELIANT ENERGY: Low 3rd Quarter Results Spur S&P to Watch Ratings REVERE INDUSTRIES: Moody's Junks Planned $55 Million Term Loan ROMACORP INC: Bondholders Consent to Debt Restructuring ROMACORP INC: Case Summary & 21 Largest Unsecured Creditors RUSH FINANCIAL: Sept. 30 Balance Sheet Upside-Down by $1.5MM SALEM COMMS: Earns $3.4 Million of Net Income in Third Quarter SCHOOL SPECIALTY: Moody's Reviews B2 Corporate Family Rating SHAW COMMS: Moody's Puts Ba2 Rating on Proposed C$300 Million Debt SHAW COMMS: To Redeem $172.7 Million 8.50% Preferred Securities SMARTIRE SYSTEMS: KPMG Raises Going Concern Doubt SOUTH DAKOTA: MetaBank Wants Stay Lifted to Liquidate Collateral STELCO INC: Ontario Court Dismisses Bondholders' Appeal SYCAMORE CBO: Moody's Reviews $37MM Notes' Ba1 Rating for Upgrade SYNAGRO TECH: Earns $5.1 Million of Net Income in Third Quarter TELESYSTEM INTERNATIONAL: Court Grants Additional Powers to KPMG TESORO PETROLEUM: Moody's Rates $900 Million Unsec. Notes at Ba1 TRUMP ENTERTAINMENT: Sells Trump Indiana to Majestic Star UAL CORP: Barclays Holds $20.7 Million Allowed Unsecured Claim UAL CORP: Judge Wedoff Approves LOIs for Verizon & Disney Jets UAL CORP: Battle Over PBGC's $8.3 Billion Claims Ensues UNIAO DE BANCOS: Moody's Reviews D+ Bank Financial Strength Rating UNION AVENUE: U.S. Trustee Wants Case Converted to Chapter 7 UNITED WOOD: Wants Court to Declare Default Notice as Void US AIRWAYS: Reports October Traffic Statistics & Merger Update VARIG S.A.: Creditors Accept $62 Million BNDES Offer VARIG S.A.: Preliminary Injunction In Place Until November 11 VENTURE HOLDINGS: Has Until Nov. 16 to File Reorganization Plan WEIGHT WATCHERS: S&P Places Low-B Ratings on $220M Lien Term Loans WINN-DIXIE: Annual Shareholders Meeting is on December 8 * Large Companies with Insolvent Balance Sheets ********* AAIPHARMA INC: Files Plan & Disclosure Statement in Delaware ------------------------------------------------------------ AAIPharma Inc. (PINK SHEETS:AAIIQ.PK) reported that the Company and its domestic subsidiaries filed a Plan of Reorganization and corresponding Disclosure Statement with the U.S. Bankruptcy Court for the District of Delaware. The chapter 11 plan that the company has filed is the product of extensive negotiations among: * the Company, * the Official Committee of Unsecured Creditors, and * the advisors to an Ad Hoc Committee of the Company's Secured Noteholders. The Plan has the support of the Official Committee of Unsecured Creditors and based upon discussions with the advisors to the Ad Hoc Committee, the Company believes that the Ad Hoc Committee will support the chapter 11 plan. These committees represent the company's key creditor constituencies. AAIPharma and its domestic subsidiaries filed for chapter 11 bankruptcy protection on May 10, 2005, and successfully completed the sale of substantially all of the assets of the Company's Pharmaceuticals Division on July 25, 2005. "AAIPharma is making important strides in re-positioning the Company as an innovative and premier provider of development services to customers seeking increased R&D productivity and tailored solutions to their development challenges," stated Dr. Ludo J. Reynders, President and CEO of AAIPharma. "We believe that we have made the difficult but necessary decisions to create a stronger capital structure to help ensure that AAIPharma will have the financial strength and flexibility to grow and prosper. The filing of our chapter 11 plan is a significant milestone in our bankruptcy case, and we are extremely pleased with the level of support from our key creditor constituencies for our chapter 11 plan. The support that we receive from these constituencies will help us to proceed as expeditiously as possible through the balance of this process." Disclosure Statement Hearing A hearing on the adequacy of the Disclosure Statement has been scheduled to commence on Dec. 2, 2005. Court approval of the Disclosure Statement is necessary to allow AAIPharma to begin soliciting acceptances of the plan. Consummation of the plan is subject to a number of conditions, including, among others, acceptance by the requisite creditors and a determination by the Bankruptcy Court that the Plan complies with the confirmation requirements of the Bankruptcy Code. 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 CORP: Prices 10% Senior Subordinated Notes ---------------------------------------------------- Accellent Corp. priced its previously announced cash tender offer and consent solicitation for any and all of its outstanding $175,000,000 aggregate principal amount of 10% Senior Subordinated Notes due 2012 (CUSIP No. 58455RAB4). The Tender Offer Consideration for each $1,000 principal amount of Notes validly tendered and accepted for purchase and not validly withdrawn is $1,137.01. The Offer to Purchase and Consent Solicitation Statement, and related Consent and Letter of Transmittal, both dated Oct. 21, 2005, more fully describe the terms of Accellent's tender offer to purchase any and all of the outstanding Notes and its consent solicitation to eliminate substantially all of the restrictive and reporting covenants, certain events of default and certain other provisions in the Indenture. Subject to the terms and conditions of the tender offer and consent solicitation, Accellent will pay the "Total Consideration" to the holders who properly tendered their Notes and delivered their consents to the proposed amendments at or prior to 5:00 p.m. New York City time on Nov. 3, 2005. The Total Consideration is comprised of: (1) the Tender Offer Consideration and (2) the Consent Payment, and is equal to $1,167.01 for each $1,000 principal amount of Notes validly tendered and accepted for purchase and not validly withdrawn. As reported in the Troubled Company Reporter on Nov. 5, 2005, Accellent Corp. reported that, as of 5:00 p.m. New York City time on Nov. 3, 2005, it received valid tenders and consents from the holders of $175,000,000 in aggregate principal amount of its outstanding 10% Senior Subordinated Notes due 2012 (CUSIP No. 58455RAB4) representing 100% of the outstanding Notes in connection with its previously announced cash tender offer and consent solicitation for the Notes. The percentage of consents received exceeds the Requisite Consents needed to amend the indenture governing the Notes. Notes tendered may no longer be withdrawn and consents delivered may no longer be revoked. Holders who provided consents to the proposed amendments described in the Offer to Purchase and Letter of Transmittal will receive a consent payment of $30.00 per $1,000 principal amount of Notes tendered and accepted for purchase pursuant to the offer if they provided their consents on or prior to 5:00 p.m. New York City time on the Consent Date. The tender offer consideration for each $1,000 principal amount of Notes validly tendered and accepted for purchase and not validly withdrawn was determined at 10:00 a.m. New York City time on Nov. 4, 2005 based on the present value of the Notes (minus accrued interest) as of the payment date, assuming each $1,000 principal amount of the Notes would be redeemed on July 15, 2008 at a redemption price of $1,050.00, and the present value of the interest that would be paid on the Notes so tendered from and not including the payment date up to and including July 15, 2008, in each case, determined in accordance with standard market practice by reference to a rate equal to 50 basis points over the yield on the 4.125% U.S. Treasury Note due August 15, 2008, minus the Consent Payment of $30.00 per $1,000 of principal amount of Notes. Holders who tendered their Notes prior to the Consent Date will be entitled to receive the Consent Payment. Holders who properly tendered their Notes also will be paid accrued and unpaid interest, if any, from the last interest payment date up to, but not including, the payment date. The obligations to accept for purchase and to pay for Notes in the tender offer and consent solicitation are conditioned on, among other things, satisfaction or waiver of the conditions to the closing of the merger and transactions contemplated by the previously announced Agreement and Plan of Merger, dated as of Oct. 7, 2005, between Accellent Inc. (the Company's parent) and Accellent Acquisition Corp., an entity controlled by affiliates of Kohlberg Kravis Roberts & Co. L.P. There is no guarantee that the Merger will be completed. Completion of the Merger is subject to customary closing conditions, including the expiration or early termination of any applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. Accellent has engaged Credit Suisse First Boston LLC and J.P. Morgan Securities Inc. as dealer managers for the tender offer and solicitation agents for the consent solicitation. Questions regarding the tender offer and consent solicitation may be directed to Credit Suisse First Boston LLC at (800) 820-1653 (U.S. toll-free) or (212) 538-0652 (collect) or J.P. Morgan Securities Inc. at (866) 834-4666 (U.S. toll-free) or (212) 834-3424 (collect). Requests for documentation should be directed to MacKenzie Partners, Inc. at (212) 929-5500 (collect), the information agent for the tender offer and consent solicitation. Accellent Corp. -- http://www.accellent.com/-- provides fully integrated contract manufacturing and design services to medical device manufacturers in the cardiology, endoscopy and orthopaedic markets. Accellent has broad capabilities in design and engineering services, precision component fabrication, finished device assembly and complete supply chain management. This enhances customers' speed to market and return on investment by allowing companies to refocus internal resources more efficiently. * * * As reported in the Troubled Company Reporter on Nov. 3, 2005, Standard & Poor's Ratings Services affirmed its ratings on Accellent Inc. including the 'B+' corporate credit rating and removed them from CreditWatch, where they were placed with negative implications Oct. 11, 2005, following the company's acceptance of a $1.27 billion buyout offer by Kohlberg Kravis Roberts & Co. The outlook is stable. Ratings on Accellent Corp. -- previously Medical Device Manufacturing Inc. -- will be withdrawn upon completion of the buyout. At the same time, Accellent's $375 million secured term loan B and $75 million revolving credit facility were assigned a 'BB-' bank loan rating and a recovery rating of '1', indicating a high expectation for full recovery of principal in the event of a payment default. In addition, Standard & Poor's assigned its 'B-' rating to the company's $325 million fixed-coupon senior subordinated notes. The acquisition will be financed with $700 million of debt and $640 million of equity; outstanding debt will be retired. As reported in the Troubled Company Reporter on Nov. 4, 2005, Moody's Investors Service assigned a B2 corporate family rating to Accellent Inc., a holding company which will be wholly-owned by Kohlberg Kravis Roberts & Co. following the closing of a transaction valued at $1.27 billion. Moody's also assigned a B2 rating to $450 million in proposed senior secured bank facilities and a Caa1 rating to $325 million of proposed senior subordinated notes. The ratings are subject to Moody's review of final documentation. ALLMERICA FINANCIAL: S&P Revises CreditWatch to Positive -------------------------------------------------------- Standard & Poor's Ratings Services revised its CreditWatch implications on two synthetic transactions related to Allmerica Financial Corp. The CreditWatch status of the ratings on PreferredPLUS Trust Series ALL-1 and CorTS Trust For AFC Capital Trust I are revised to positive from negative. These actions follow the Oct. 31, 2005, revision of the CreditWatch status of the rating assigned to AFC Capital Trust I's -- a wholly owned subsidiary of Allmerica Financial Corp. -- preferred stock to positive from negative. The ratings on these swap-independent synthetic transactions are weak-linked to the underlying collateral, the preferred stock issued by AFC Capital Trust I. The CreditWatch revisions reflect the current credit quality of the underlying securities. Creditwatch Implications Revised To Positive PreferredPLUS Trust Series ALL-1 $48 Million Trust Certificates Series ALL-1 Rating ------ Class To From ----- -- ---- A B/Watch Pos B/Watch Neg B B/Watch Pos B/Watch Neg CorTS Trust For AFC Capital Trust I $36 Million Allmerica Corporate-backed Trust Securities Certificates Series 2001-19 Rating ------ Class To From ----- -- ---- A B/Watch Pos B/Watch Neg ALLIANCE GAMING: Moody's Reviews Debt Ratings for Likely Downgrade ------------------------------------------------------------------ Moody's Investors Service continued its review of Alliance Gaming's rating for possible downgrade. The company announced that it expects to be in compliance with the financial covenants contained in its credit agreement as of June 30, 2005. However, the company will be in technical default under the credit agreement as of November 8, 2005 because it will be unable to file its annual report on form 10-K by that date. The company is working with its lenders to address the technical default. Alliance indicated it expects to file the annual report in early December 2005, and will report preliminary fiscal year 2005 results next week. Additionally, the company reported based upon its review of its revenue recognition and other accounting issues that it expects: 1) to restate its fiscal 2003 and 2004 annual reports, as well as its 2004 and 2005 quarterly reports; and 2) report material weakness over financial controls. Any downgrade will consider: * the business and financial impact of this announcement on previously reported results; * the impact it may have on the company's overall business reputation; and * the company's plan to address material weaknesses over financial controls. Any further negative rating action will also take into account the company's future operating outlook, and the recent termination of a distributor agreement. In August 2005, Alliance entered into a termination agreement with its distributor of video poker games for the Oklahoma market, which had originally been entered into in December 2004. This termination is expected to impact fiscal year 2005 revenue and margin for 600 gaming machines the company has now taken back. These ratings remain on review for possible downgrade: -- $75 million senior secured revolving credit facility due 2008, to B1 from Ba3; -- $350 million senior secured term loan due 2009, to B1 from Ba3; and -- Corporate family rating, to B1 from Ba3 Headquartered in Las Vegas, Nevada, Alliance Gaming Corporation is engaged primarily in the design, manufacture and distribution of gaming devices and systems worldwide. The company also owns and operates Rainbow Casino in Vicksburg, Mississippi. ALLIED HOLDINGS: Has Until Jan. 15 to Remove Causes of Action ------------------------------------------------------------- The U.S. Bankruptcy Court for the Northern District of Georgia extended until Jan. 15, 2005, the period within which Allied Holdings, Inc., and its debtor-affiliates may remove claims or causes of action. Pursuant to 28 U.S.C. Section 1452, a party may remove any claim or cause of action in a civil action other than a proceeding before the United States Tax Court or a civil action by a governmental unit to enforce the governmental units police or regulatory power, to the district court for the district where the civil action is pending, if the district court has jurisdiction of the claim or cause of action under 28 U.S.C. Section 1334. Headquartered in Decatur, Georgia, Allied Holdings, Inc. -- http://www.alliedholdings.com/-- and its affiliates provide short-haul services for original equipment manufacturers and provide logistical services. The Company and 22 of its affiliates filed for chapter 11 protection on July 31, 2005 (Bankr. N.D. Ga. Case Nos. 05-12515 through 05-12537). Jeffrey W. Kelley, Esq., at Troutman Sanders, LLP, represents the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they estimated more than $100 million in assets and debts. (Allied Holdings Bankruptcy News, Issue No. 10; Bankruptcy Creditors' Service, Inc., 215/945-7000) ALLIED HOLDINGS: Wants to Reject General Motors Contract -------------------------------------------------------- Pursuant to Section 365 of the Bankruptcy Code, Allied Holdings, Inc., and its debtor-affiliates may assume or reject any executory contract or unexpired lease subject to the approval of the U.S. Bankruptcy Court for the Northern District of Georgia. In this regard, the Debtors seek the Court's authority to reject their executory contract with General Motors Corporation. Harris B. Winsberg, Esq., at Troutman Sanders, LLP, in Atlanta, Georgia, explains that the GM Contract is burdensome to the Debtors because they are suffering an operating loss by performing under the Contract. The burdens of complying with the GM Contract outweigh the benefits received under the Contract, Mr. Winsberg notes. The Debtors did not provide a description of the GM Contract. Headquartered in Decatur, Georgia, Allied Holdings, Inc. -- http://www.alliedholdings.com/-- and its affiliates provide short-haul services for original equipment manufacturers and provide logistical services. The Company and 22 of its affiliates filed for chapter 11 protection on July 31, 2005 (Bankr. N.D. Ga. Case No. 05-12515). Jeffrey W. Kelley, Esq., at Troutman Sanders, LLP, represents the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they estimated more than $100 million in assets and debts. (Allied Holdings Bankruptcy News, Issue No. 10; Bankruptcy Creditors' Service, Inc., 215/945-7000) ALLIED HOLDINGS: Responds to Objections Against KERP ---------------------------------------------------- As previously reported in the Troubled Company Reporter on Oct. 24, 2005, the U.S. Trustee and the International Brotherhood of Teamsters filed objections to the proposed Severance Pay and Retention and Emergence Bonus Plan for Allied Holdings, Inc., and its debtor affiliates' key employees. Under the Retention Plan, the Covered Employees are divided into four Tiers based on each Key Employee's position and the relative importance and indispensability of that employee's contribution to the Debtors' business operations. They are entitled to these benefits pursuant to the Plan: -- Severance Benefits; and -- Retention and Emergence Bonuses In addition, the Key Employee Retention Plan allows the Debtors to grant bonuses not exceeding $30,000 on a discretionary basis to each selected employee other than the Key Employees. The selection will be based on the employees' level of contribution to the Debtors. The Discretionary Bonus Pool is included in the $4,566,301 total cost to the Debtors for the Retention and Emergence Bonuses. William T. Neary, the U.S. Trustee for Region 6, asserted that the Court should not approve the KERP absent a strong evidentiary showing that it is essential to the retention of the Key Employees and to the survival of the Debtors' business. The U.S. Trustee noted that the KERP is heavily front-loaded with easily obtainable goals because: a) fully half of the Stay Bonuses are payable to Tiers 1 and 2 for merely consulting with the Committee and preparing and filing a plan; and b) payments to Tiers 3 and 4 are due merely upon the passage of time. The Teamsters pointed out that there is no showing that the Debtors are actually threatened by, or face serious prospects of, flight of its already highly paid executives. The mere assertion that some executives may leave employment is simply not sufficient, even under the business judgment standard, to support the bloated edifice of bonuses sought. Debtors' Response Harris B. Winsberg, Esq., at Troutman Sanders, LLP, in Atlanta, Georgia, tells the Court that the Debtors' Severance and Employee Retention Plan was formulated at the conclusion of a lengthy and reasoned decision-making process undertaken by their independent board of directors. "In an exercise of its business judgment, the Debtors' board reached the conclusion that the Plan as proposed serves to recognize the relative importance and indispensability of the Covered Employees' contribution to the Debtors' business operations and reorganization efforts," Mr. Winsberg relates. Mr. Winsberg contends that the Plan serves a business purpose that is not only sound, but also vital. Without the services and dedication of their employees, particularly the key employees who are the most knowledgeable and skilled, a rapid deterioration of the Debtors' going-concern value may occur, Mr. Winsberg asserts. Mr. Winsberg points out that the Teamsters' Objection asserts that the Plan is too rich. However, Mr. Winsberg argues, the Plan as proposed is a far cry from the comprehensive key employee retention programs as found in other large Chapter 11 cases pursuant to which key employees may be entitled to earn retention payments totaling in the tens of millions of dollars. In addition, Mr. Winsberg contends that the Plan addresses the need to provide Covered Employees with an opportunity to earn cash compensation beyond base salaries in order to attempt to minimize turnover and to motivate all Covered Employees to continue to work diligently and productively to achieve a successful conclusion of these Chapter 11 cases. Furthermore, Mr. Winsberg asserts that the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 presents no obstacle to approval of the Plan. "Section 503 of the Act, which limits the institution of key employee retention programs, has no application here," Mr. Winsberg insists. "[T]he Act is not applicable because it applies only to cases filed after October 17, 2005." Moreover, Mr. Winsberg refutes the Teamsters' suggestion that Section 503 evinces a Congressional intention that the programs should be restricted under the current Bankruptcy Code as without merit. To the contrary, Mr. Winsberg avers, the fact the heavily criticized amendment to Section 503 was deemed necessary shows that current law permits approval of severance and retention motions. "There is nothing within the Act or applicable legislative history that supports the suggestion that the Debtors' Motion should be subjected to the scrutiny required by legislation that is not yet effective." Mr. Winsberg maintains. Headquartered in Decatur, Georgia, Allied Holdings, Inc. -- http://www.alliedholdings.com/-- and its affiliates provide short-haul services for original equipment manufacturers and provide logistical services. The Company and 22 of its affiliates filed for chapter 11 protection on July 31, 2005 (Bankr. N.D. Ga. Case No. 05-12515). Jeffrey W. Kelley, Esq., at Troutman Sanders, LLP, represents the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they estimated more than $100 million in assets and debts. (Allied Holdings Bankruptcy News, Issue No. 10; Bankruptcy Creditors' Service, Inc., 215/945-7000) ALOHA AIRLINE: Amended Plan Confirmation Hearing Set for Nov. 28 ---------------------------------------------------------------- The U.S. Bankruptcy Court for the District of Hawaii will convene a hearing at 9:30 a.m., on Nov. 28, 2005, to consider confirmation of the First Amended Joint Plan of Reorganization jointly filed Aloha Airgroup, Inc., and its debtor-affiliates and Yucaipa Corporate Initiatives Fund I, L.P. Yucaipa Corporate is a co-plan sponsor and plan investor for the Amended Joint Plan. Summary of Amended Joint Plan The Plan provides for the Debtors' continuing operation after the Effective Date as reorganized business entities and for the Reorganized Debtors to retain substantially all of their assets. The value of the consideration contributed by Yucaipa Corporate and the other Plan Investor, Aloha Aviation Investment Group, LLC, under the Plan exceeds $100,000,000. The Plan Investors will create a new company and contribute the Equity Investment to Newco. The Reorganized Debtors will not be subject to any Claims against or Interests in the Debtors that are being discharged under the Plan. All Cash necessary for the Reorganized Debtors to make payments pursuant to the Plan will be obtained from the funds received from the Plan Investors, Newco, the Exit Financing, the Reorganized Debtors' Cash balances, the operations of the Reorganized Debtors or post-Effective Date borrowings, as applicable. On the Effective Date, a Liquidating Trust will be established for the purpose of distributing the Distributions to the holders of Allowed General Unsecured Claims against Aloha Airlines, and the investigation, prosecution or settlement of Rights of Action in accordance with the terms of the Plan. Treatment of Claims and Interests The Amended Plan groups claims and interests into eight classes. The Unimpaired Claims are: 1) Secured Claims against each Debtor, which will receive either one or a combination of: a) Cash equal to the amount of the Allowed Secured Claim or deferred Cash payments totaling at least the allowed amount of the Allowed Claim, or b) the property of the Debtors securing the holder's Allowed Claim or payments of Liens amounting to the indubitable equivalent of the value of the holder's interest in the Debtors' property securing the Allowed Claim, or c) reinstatement of the Secured Claim or other treatment as the Debtors and the holder of that Claim will agree upon in writing; 2) Priority Claims against Aloha Airlines, which will be paid the allowed amount of those Claims in full, in Cash by Aloha Airlines on or after the Effective Date; and 3) Priority Claims against Aloha Airgroup, which will be paid the allowed amount of those Claims in full, in Cash by Aloha Airgroup on or after the Effective Date. The Impaired Claims are: 1) General Unsecured Claims against Aloha Airlines, which will receive $175,000 in Cash, payable on the Effective Date, and the Pro Rata Distribution of the proceeds of a non-interest bearing unsecured promissory note made by Reorganized Aloha Airlines in favor of the Liquidating Trust, in the principal amount of $2 million payable without interest; 2) General Unsecured Claims against Aloha Airgroup, which will not receive anything on account of their Claims; 3) Subordinated Unsecured Claims against Aloha Airlines, which will be cancelled on the Effective Date and the holders of those Claims will not receive anything on account of their Allowed Subordinated General Unsecured Claims; 4) Subordinated Unsecured Claims against Aloha Airgroup, which will be cancelled on the Effective Date and the holders of those Claims will not receive anything nothing on account of their Allowed Subordinated General Unsecured Claims; and 5) Old Securities, which will be cancelled on the Effective Date and the holders of Old Securities will not receive anything. A full-text copy of the Amended Disclosure Statement is available for a fee at: http://www.researcharchives.com/bin/download?id=051107024742 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. As of Dec. 30, 2004, Aloha Airgroup reported $333,901 in assets and $24,124,069 in liabilities, while Aloha Airlines reported $9,134,873.23 in assets, and $543,709,698.75 in liabilities. AMC ENTERTAINMENT: Incurs $10.72 Million Net Loss in Third Quarter ------------------------------------------------------------------ AMC Entertainment, Inc., delivered its quarterly report on Form 10-Q for the quarter ending Sept. 29, 2005, to the Securities and Exchange Commission on Nov. 1, 2005. Total revenues decreased 10.2%, or $45,182,000, during the 13 weeks ended September 29, 2005, compared to the 13 weeks ended September 30, 2004. Total costs and expenses decreased 8.7% or $37,146,000, during the 13 weeks ended September 29, 2005, compared to the 13 weeks ended September 30, 2004. Merger and acquisition costs decreased $2,096,000 from $3,056,000 to $960,000 during the 13 weeks ended September 29, 2005, compared to the 13 weeks ended September 30, 2004. The prior year costs were higher primarily due to the costs associated with the Company's merger with Loews Cineplex Entertainment consummated in the third quarter of fiscal 2005. Current year costs are primarily comprised of additional professional and consulting costs related to the merger and other potential acquisition and divestiture activities. Management fee increased $500,000 during the current period. Management fees of $250,000 are paid quarterly, in advance, to two primary shareholders of the Company's parent in exchange for consulting and other services. Other general and administrative expense decreased 43.5%, or $6,137,000, primarily due to a $3,078,000 decrease in stock-based compensation related to re-measurement of expense on options issued by the Company's parent company, Marquee Holdings Inc., for certain members of the Company's management based on estimated fair value. The prior period expense relates to deferred stock units granted during fiscal 2005 under the 2003 LTIP and expense related to restricted stock awards becoming fully vested. Incentive-based compensation decreased $2,531,000 due to declines in operating results, a $784,000 decrease in salaries expense related to the Company's reorganization activities and postretirement expense decreased $505,000 as a result of the Company's reorganization activities. Restructuring charges were $839,000 during the 13 weeks ended September 29, 2005. These expenses are related to one-time termination benefits and other costs related to the displacement of approximately 200 associates related to an organizational restructuring, which was completed to create a simplified organizational structure and contribution of assets by National Cinema Network, Inc., to National CineMedia, LLC. The Company's organizational restructuring is substantially complete as of September 29, 2005. On June 30, 2005, the Company sold Japan AMC Theatres, Inc., including four theatres in Japan with 63 screens. The results of operations of these theatres have been classified as discontinued operations. Additionally, on September 1, 2005, it sold its remaining Japan theatre with 16 screens and has classified its operations as discontinued operations. Loss for shares of common stock decreased during the 13 weeks ended September 29, 2005, to a $10,717,000 loss from a $12,369,000 loss in the prior period. Cash dividends of $5,156,000 and accretion of $505,000 were recorded during the prior period. At September 29, 2005, the Company's balance sheet showed $2.64 billion in total assets and $1.77 billion in total debts. A full-text copy of the regulatory filing is available at no charge at http://researcharchives.com/t/s?2c5 Headquartered in Kansas City, Missouri, AMC Entertainment Inc. http://www.amctheatres.com/-- is a subsidiary of Marquee Holdings Inc. Through its circuit of AMC Theatres, AMC Entertainment operates 229 theaters with 3,546 screens in the United States, Canada, France, Hong Kong, Japan, Portugal, Spain and the United Kingdom. * * * As reported in the Troubled Company Reporter on Aug. 5, 2004, Standard & Poor's Ratings Services revised its outlook on AMC Entertainment, Inc., to stable from positive, based on the increased leverage that will result from the pending sale and recapitalization of the company. At the same time, Standard & Poor's affirmed its ratings, including its 'B' corporate credit rating, on the company. ANCHOR GLASS: Panel & U.S. Trustee Object to AP Services Retention ------------------------------------------------------------------ The Official Committee of Unsecured Creditors of Anchor Glass Container Corporation and the United States Trustee for Region 21 object to the terms of the retention of AP Services LLP and John S. Dubel. As reported in the Troubled Company Reporter on Sept. 29, 2005, the Debtor sought permission from the U.S. Bankruptcy Court for the Middle District of Florida to retain AP Services as its crisis manager pursuant to the terms of an engagement letter dated Sept. 6, 2005. Under the APS Engagement Letter, Anchor and APS agree that: -- APS will provide, at Anchor's request, temporary employees to assist the Debtor in its restructuring efforts; and -- APS' Managing Director, John S. Dubel, will serve as the Debtor's Chief Restructuring Officer under the direct supervision of Anchor's Chief Executive Officer and the Special Committee of the Board of Directors. As CRO, Mr. Dubel will assist the Debtor in evaluating and implementing strategic and tactical options through the restructuring process. Mr. Dubel's hourly rate is $650. In addition to Mr. Dubel, the Temporary Staff that APS will provide include: Name Position Hourly Rate Commitment ---- -------- ----------- ---------- Jon Shell Assistant Treasurer $410 As Needed Ted Stenger TBD $670 As Needed Objections (A) Creditors Committee The Committee objects to the pre-approval of the Contingent Success Fee to be paid to AP Services and Mr. Dubel before any application, notice, and hearing on the Contingent Success Fee. The Committee asserts that the amount of any fees should not be determined until after AP Services files a separate application for approval and after notice and a hearing. Furthermore, the Committee asserts that the indemnification agreement proposed by AP Services is overly broad. The Committee suggests that the exceptions to the indemnification should also include, without limitation, breach of fiduciary duty on the part of AP Services. Accordingly, the Committee asks the Court to modify the terms of AP Services' retention. (B) U.S. Trustee Trial Attorney Benjamin E. Lambers, Esq., relates that on September 16, 2005, Mr. Dubel testified on behalf of the Debtor at the meeting of creditors held pursuant to 11 U.S.C. Sec. 341. Mr. Dubel indicated that he and AP Services would comply with a protocol for the engagement of Jay Alix & Associates and its affiliates, which has been found acceptable in other bankruptcy cases. On September 20, 2005, the U.S. Trustee indicated some concerns to the Debtor with respect to whether AP Services and Mr. Dubel were fully complying with the protocol. To date, the U.S. Trustee has not been able to resolve these concerns. Hence, the U.S. Trustee objects to the employment of AP Services and Mr. Dubel. 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. 11; Bankruptcy Creditors' Service, Inc., 215/945-7000) ANCHOR GLASS: Encore Can Proceed with District Court Appeal ----------------------------------------------------------- The U.S. Bankruptcy Court for the Middle District of Florida modified the automatic stay to allow Encore Glass, Inc., to prosecute an appeal pending before the U.S. District Court for the Middle District of Florida. As reported in the Troubled Company Reporter on Oct. 14, 2005, Anchor Glass Container Corporation filed its previous bankruptcy case on April 15, 2002. Encore Glass filed a claim for $6,102,913 in May 2002, which claim was later increased to $6,838,905. In July 2002, Anchor filed an objection to Encore's Claim, marking the start of a contested matter. In July 2003, the Bankruptcy Court issued an order granting the Debtor's Motion for Summary Judgment as to the contested matter and Encore later filed a notice of appeal. Encore and the Debtor agreed to abate the appeal so that the Bankruptcy Court could finalize some outstanding issues in the contested matter. The Court issued an order dated January 25, 2005, which decided those outstanding issues. The Appeal is still pending with the United States District Court for the Middle District of Florida. Encore filed its initial brief in July 2005 and the Debtor's answer brief was due in August. However, before it could file its answer brief, the Debtor filed for bankruptcy. Lori V. Vaughan, Esq., at Foley & Lardner LLP, in Tampa, Florida, asserted that Encore has no other forum for liquidating its claim. Ms. Vaughan said Encore's only opportunity to have its claim finally resolved is in the Appeal. Whether Encore has an allowed claim will need to be decided at some point in the Debtor's bankruptcy case and it would be more efficient for all parties to have the Appeal completed and the issue decided, Ms. Vaughan contended. 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. 11; Bankruptcy Creditors' Service, Inc., 215/945-7000) ANCHOR GLASS: Cahill Gordon Approved as Special Counsel ------------------------------------------------------- The U.S. Bankruptcy Court for the Middle District of Florida allowed Anchor Glass Container Corporation to retain Cahill Gordon & Reindel LLP as its special counsel, nunc pro tunc to August 8, 2005. As special counsel, Cahill Gordon will provide services with respect to: -- corporate law-related issues related including federal and state securities law matters, tax and pension matters; -- corporate governance; -- assistance in debtor-in-possession financing; -- assistance in connection with other postpetition transactions including asset sales; -- business combinations; -- financing transactions in connection with a reorganization plan; and -- litigation matters as are designated by the Debtor and do not constitutes matters central to the Debtor's reorganization. As reported in the Troubled Company Reporter on Aug. 16, 2005, the Debtor will compensate Cahill Gordon for legal services an hourly basis in accordance with the firm's customary hourly rates and for reasonable and necessary expenses and charges incurred in connection with the case: Professionals Hourly Rates ------------- ------------ Partners, Senior Counsel $636 - 668 and Counsel Associates $332 - 628 and Senior Attorneys Paralegal/Legal Assistant $160 - 260 Specialized Corporate $420 Research Paraprofessional 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. 11; Bankruptcy Creditors' Service, Inc., 215/945-7000) ASARCO LLC: Sen. Cantwell Wants Wash. Site Obligations Honored -------------------------------------------------------------- United States Senator Maria Cantwell coordinated with Judge Schmidt of the U.S. Bankruptcy Court for the Southern District of Texas, Corpus Christi Division, and Daniel Tellechea Salido, ASARCO LLC's Chairman of the Board, CEO, and President, concerning the proposals ASARCO received to purchase and develop ASARCO's property in Ruston and Tacoma, Washington, on and near the Commencement Bay Nearshore Tideflats Superfund Site. In a correspondence dated Oct. 17, 2005, Senator Cantwell asked ASARCO, and the Court if necessary, to take steps to assure that ASARCO honors its commitments to address contamination caused by the historical operation of its smelter. Senator Cantwell believes that if the property is sold, ASARCO's obligations related to the property can only be effectively addressed as part of the sale. She said the obligations cannot and should not be separated from sale and ownership of the property. "As a condition of transfer of the property, the purchaser must agree to perform obligations to which ASARCO committed as integral elements of its remediation of this site under the the Comprehensive Environmental Response and Liability Act," Senator Cantwell said. These obligations, according to Senator Cantwell, are contained in several key documents including: -- Consent Decree governing the Site; -- the Definitive Agreement; -- the Plan definition Report; and -- the Final Environmental Impact statement governing remediation and development of the Site. Senator Cantwell further proposed that ASARCO should provide copies of those documents to the prospective purchasers of the property, and the sale should be explicitly conditioned on agreement by the purchaser to fulfill the commitments in those documents. Senator Cantwell explained that the obligations contained include: (a) remediation of the entire Site, including the yacht basin, and capping and armoring of the slag peninsula and sediments; (b) restoration of the "green face" on the seep slopes; (c) construction & capping of the "Bennett Street Promontory" over the onsite containment facility; (d) securing remediation and redevelopment of the cooling pond site; (e) construction, capping, grading, seeding & irrigation of Peninsula Park, Crescent View Park and View Corridors; (f) improvements to the Point Defiance Marina, including construction of additional public boat lunches; (g) demolition and relocation of greenhouses as necessary at Point Defiance Park; (h) construction or improvement of Ruston Way, Roundabout Road, Peninsula Park Road, Boat Launch Access Drive and other significant roads, with accompanying sidewalks, bike lanes and landscaping; (i) construction of pathways for a functional pedestrian circulation system; (j) construction of the Waterfront Promenade; (k) Post-remediation operation and maintenance throughout the site; (l) indemnification of the Metropolitan Park District of Tacoma, City of Tacoma and Town of Ruston against claims arising from historic operations on the Site. On behalf of her constituents in Puget Sound, Senator Cantwell urged both ASARCO and the Court to require any purchaser to work with the Metropolitan Park District of Tacoma, City of Tacoma, and the Town of Ruston to assure that those commitments are honored. * * * Judge Schmidt assures Senator Cantwell of his commitment in presiding over the ASARCO bankruptcy case, and adds that he will fully enforce the Bankruptcy Code and environmental laws. 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. 9; Bankruptcy Creditors' Service, Inc., 215/945-7000). ASARCO LLC: Boudloche is Chapter 7 Trustee of Encycle/Texas ----------------------------------------------------------- Judge Schmidt of the U.S. Bankruptcy Court for the Southern District of Texas, Corpus Christi Division, converted Encycle/Texas, Inc.'s bankruptcy case to a Chapter 7 liquidation, pursuant to Section 1112(a) of the Bankruptcy Code, on Oct. 24, 2005. The Court appointed Michael Boudloche as Chapter 7 Trustee to oversee the liquidation of Encycle/Texas' estate. As previously reported in the Troubled Company Reporter on Sept. 23, 2005, the State of Texas requested that the case be converted to Chapter 7, and that a trustee be appointed as soon as possible. The State of Texas believes that upon conversion, government superfund assets will be available for use at the Plant to help Encycle cope with environmental concerns that arise due to damage caused by hurricanes. The U.S. Trustee had no objection to the conversion. The Texas Commission on Environmental Quality also finds it appropriate that Encycle's management and control be placed in the hands of a Chapter 7 trustee. Hal F. Morris, Assistant Attorney General of the Bankruptcy & Collections Division of the State of Texas, assures Judge Schmidt that the Commission will work with Encycle's duly appointed Chapter 7 trustee to appropriately address public health and safety concerns. To protect the public, the Texas Commission will seek appropriate cost recovery from the bankruptcy estate as an administrative expense priority. 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. On Oct. 24, 2005, Encycle/Texas' case was converted to a Chapter 7 liquidation. (ASARCO Bankruptcy News, Issue No. 9; Bankruptcy Creditors' Service, Inc., 215/945-7000). ASARCO LLC: Court Extends Time to Remove Civil Actions to Feb. 6 ---------------------------------------------------------------- Under 28 U.S.C. Section 1452(a), a party may remove any claim or cause of action in a civil action other than a proceeding before the United States Tax Court or a civil action by a governmental unit to enforce the governmental unit's police or regulatory power to the district court for the district where the civil action is pending, if the district court has jurisdiction of the claim under 28 U.S.C. Section 1334. Rule 9027(a) of the Federal Rules of Bankruptcy Procedure provides that if the claim or cause of action in a civil action is pending when a case under Chapter 11 of the Bankruptcy Code is commenced, a notice of removal may be filed only within the longest of: (A) 90 days after the Petition Date; (B) 30 days after entry of an order terminating a stay, if the claim or cause of action in a civil action has been stayed under Section 362 of the Bankruptcy Code; or (C) 30 days after a trustee qualifies in a Chapter 11 reorganization case but not later than 180 days after the Petition Date. Jack L. Kinzie, Esq., at Baker Botts, L.L.P., in Dallas, Texas, relates that ASARCO LLC is a party to numerous lawsuits in various state and federal courts, and that the issues involved in many of the lawsuits are complex and require individual analysis. ASARCO needs more time to review the lawsuits to determine whether removal of the various cases is in the best interest of the bankruptcy estate. At ASARCO's request, Judge Schmidt extends ASARCO's deadline to remove civil actions until Feb. 6, 2006. 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. On Oct. 24, 2005, Encycle/Texas' case was converted to a Chapter 7 liquidation. (ASARCO Bankruptcy News, Issue No. 9; Bankruptcy Creditors' Service, Inc., 215/945-7000). ASSET-BACKED FUNDING: Fitch Puts Low-B Ratings on $7.2 Mil. Certs. ------------------------------------------------------------------ Fitch Ratings has assigned these ratings to Asset-Backed Funding Corp.'s asset-backed certificates, series 2005-OPT1, which closed on Aug. 30, 2005: -- $403.89 million classes A1SS, A1MZ, A-2A, A-2B, A-2C 'AAA'; -- $22.09 million class M-1 'AA+'; -- $19.86 million class M-2 'AA'; -- $6.21 million class M-3 'AA-'; -- $6.45 million class M-4 'A+'; -- $5.96 million class M-5 'A'; -- $6.21 million class M-6 'A-'; -- $5.46 million class M-7 'BBB+'; -- $3.48 million class M-8 'BBB'; -- $5.21 million class M-9 'BBB-'; -- $4.22 million non-offered class B-1 'BB+'; -- $2.98 million non-offered class B-2 'BB'. The 'AAA' rating on the senior certificates reflects the 18.65% total credit enhancement provided by the 4.45% class M-1, 4% class M-2, 1.25% class M-3, 1.30% class M-4, 1.20% class M-5, 1.25% class M-6, 1.10% class M-7, 0.70% class M-8, 1.05% class M-9, 0.85% non-offered class B-1, 0.60% non-offered class B-2 and the initial and target overcollateralization of 0.90%. All certificates have the benefit of monthly excess cash flow to absorb losses. In addition, the ratings reflect the quality of the loans, the integrity of the transaction's legal structure as well as the capabilities of Option One Mortgage Corp. as servicer and Deutsche Bank National Trust Company, as trustee. The certificates are supported by two collateral groups. Group 1 will consist of mortgage loans that have original principal balances that conform to Fannie Mae and Freddie Mac guidelines. The Group 1 mortgage pool consists of first lien, adjustable-rate and fixed-rate mortgage loans that have a cut-off date pool balance of $200,028,761. Approximately 16.72% of the mortgage loans are fixed rate mortgage loans and 83.28% are adjustable-rate mortgage loans. The weighted average current loan rate is approximately 7.395%. The weighted average remaining term to maturity is 356 months. The average principal balance of the loans equals $156,395. The weighted average original loan-to-value ratio is 79.29%. The properties are primarily located in California, Florida and Texas. Group 2 will consist of original balances that may or may not conform to Fannie Mae and Freddie Mac guidelines. The Group 2 mortgage pool consists of first and second lien, adjustable-rate and fixed-rate mortgage loans that have a cut-off date pool balance of $296,453,236. Approximately 16.20% of the mortgage loans are fixed rate mortgage loans and 83.80% are adjustable-rate mortgage loans. The weighted average current loan rate is approximately 7.370%. The WAM is 356 months. The average principal balance of the loans equals $212,816. The weighted average OLTV is 77.83%. The properties are primarily located in California, New York and Florida. For federal income tax purposes, multiple real estate mortgage investment conduit elections will be made with respect to the trust estate. Option One was incorporated in 1992, and began originating and servicing subprime loans in February 1993. Option One is a subsidiary of Block Financial, which is in turn a subsidiary of H & R Block, Inc. BIO-RAD LABORATORIES: Discloses Third Quarter Financial Results --------------------------------------------------------------- Bio-Rad Laboratories, Inc. (AMEX: BIO and BIOb), disclosed financial results for the third quarter ended September 30, 2005. Third-quarter net sales from continuing operations were $283.2 million, up 9.4% compared to the $258.8 million reported for the third quarter of 2004. On a currency-neutral basis, sales were up by 8.4% for the period. This growth was driven by strong sales in the areas of protein expression analysis, process chromatography, diabetes monitoring, blood virus screening, and quality control products. Third-quarter income from continuing operations was $16.2 million up 157.9% from the same period last year. Third-quarter 2004 earnings were affected, however, by $13.7 million, or $9.5 million net of taxes, of one-time purchased in-process R&D costs. Excluding the one-time charges from the comparison, year-over-year earnings increased about 3%. Year-to-date revenues from continuing operations grew by 11.7% to $873.7 million as compared to the same period last year. Normalizing for the impact of currency effects, growth was 9.0%. Income from continuing operations increased by 30.4% to $64.1 million compared to $49.2 million for the first nine months of 2004. Year-to-date gross margin was 55.4% compared to 56.5% in the same period last year. Third-Quarter Highlights Overall net sales for the quarter grew by 9.4% to $283.2 million compared to $258.8 million reported in the third quarter of 2004. On a currency-neutral basis, revenues were up 8.4% versus third- quarter 2004 results. Basic earnings from continuing operations were $0.62 per share, or $0.61 per share on a diluted basis, compared to both basic and diluted earnings per share of $0.24 in the same period of 2004. Life Science segment net sales for the quarter were $132.1 million, up 9.5% over the same period last year, which includes a 0.8% increase due to currency effects. Sales growth in the third quarter was the result of a combination of factors including increased sales of process chromatography products as well as of products such as the Bio-Plex(R) platform (and associated protein expression analysis reagents) and the ExperionTM automated electrophoresis system, both of which are gaining market acceptance. The Life Science segment also introduced the BioOdysseyTM CalligrapherTM miniarrayer, which brings microarray chip writing performance to individual researchers. Segment growth was somewhat tempered, however, by erosion in the average selling price of BSE tests and competition in the real-time PCR instrumentation business. Clinical Diagnostics segment net sales for the quarter were $148.3 million, an increase of 8.7% compared to the $136.4 million reported in the third quarter of 2004. Normalizing for the impact of currency effects, sales growth for the segment was 7.5%. Strong sales of blood virus screening products in the U.S. transfusion sector, increased blood typing sales in Europe, and expanding worldwide demand for the Company's quality control products were the primary contributors to increased quarterly net sales. Other gains in the Clinical Diagnostics segment include increased sales of newborn screening products in Northern Europe and strong demand for the Company's diabetes monitoring, and HIV and Hepatitis testing products in the U.S. and Asia Pacific. On August 30th, the Federal District Court in Connecticut granted a permanent injunction in the Coompany's ongoing litigation with Applera and Roche. Among other things, the injunction prevents us from selling the MJ Research line of thermal cycling products that we acquired in August 2004 in the United States. However, the Company believes that a settlement agreement with Applera and Roche had been reached and the Company has made motions to the court asking that the settlement agreement be enforced and requesting a stay of the injunction during an appeal. Although the timing and outcome of these motions are uncertain at this time, if the injunction continues in place throughout the fourth quarter, our Life Science business could be negatively impacted with sales being reduced by as much as $10 to $15 million and pre-tax operating profit reduced by $8 to $10 million versus prior expectations. Also during the fourth quarter, the Company anticipates recording a gain on the sale of our shares in Instrumentation Laboratory S.p.A. and BioSource International of approximately $10 to $11 million. "Overall, we are pleased with the Company's performance during the third quarter, in spite of ongoing litigation we acquired as part of our acquisition of MJ Research last fall. We continue to be optimistic about resolving these matters in due course," said President and Chief Executive Officer Norman Schwartz. Bio-Rad Laboratories, Inc. -- http://www.bio-rad.com/-- is a multinational manufacturer and distributor of life science research products and clinical diagnostics. It is based in Hercules, California, and serves more than 70,000 research and industry customers worldwide through a network of more than 30 wholly owned subsidiary offices. * * * As reported in the Troubled Company Reporter on Dec. 15, 2004, Moody's Investors Service assigned a rating of Ba3 to Bio-Rad Laboratories' $200 million senior unsecured subordinated notes, due 2014. The ratings outlook has been changed to stable from positive. New ratings assigned: * Bio Rad Laboratories $200 million Senior Unsecured Subordinated Notes, due 2014, rated Ba3 Ratings affirmed: * Bio Rad Laboratories Senior Implied Rating, Ba2 * Bio Rad Laboratories Senior Unsecured Rating, Ba2 * Bio Rad Laboratories $225 million Senior Unsecured Subordinated Notes, due 2013, Ba3 BOYD GAMING: Earns $32.9 Million of Net Income in Third Quarter --------------------------------------------------------------- Boyd Gaming Corporation (NYSE:BYD) reported its financial results for the third quarter 2005. The Company reported adjusted earnings of $.57 per diluted share, an increase of 50% over the $.38 per diluted share reported in the third quarter last year. The third quarter was the first time since recent acquisitions in which all of the Company's properties were also reported in the comparable quarter in the prior year. The higher than expected earnings were attributable to strong results in the Company's key growth markets of Las Vegas and Atlantic City. The Company's Las Vegas properties, operating principally in the locals market, as a group reported a 10.0% gain in revenues and a 33% increase in EBITDA in the quarter, both versus the third quarter last year. In Atlantic City, Borgata reported a record quarter, with property level EBITDA of $75.5 million, exceeding the prior record quarter by $12.5 million. The Company's overall strong earnings gains were achieved despite disruptions to the Company's four properties located in Louisiana and Mississippi beginning with Hurricane Katrina in late August, including the closures of Treasure Chest for 35 days and Delta Downs for nine days in the quarter. The Company reported EBITDA of $156 million for the third quarter, an increase of 17.0% over the $133 million reported for the third quarter last year. Five of the Company's six operating units reported impressive year-over-year increases in quarterly revenue and EBITDA, with only the hurricane-impacted Central Region reporting a decline. Revenues for the third quarter were $537 million, an increase of 2.7% over the $522 million reported for the third quarter last year, with a 10.0% gain for the Company's Nevada properties offset by a 7.0% decline in the Central Region. Net income for the third quarter was $32.9 million versus $35.5 million reported for the third quarter 2004. Bill Boyd, Chairman and Chief Executive Officer of Boyd Gaming, commented, "I am very pleased with our Company's positive financial performance. This was our first 'apples-to-apples' quarter in a while, with all units on a same-store basis, and we exceeded prior year results by a wide margin. And the numbers would have been even stronger had we not been affected by the two devastating hurricanes that struck the Gulf Coast and closed two of our Louisiana properties during the third quarter. I am most proud of our continuing strength in our operations in Las Vegas and Atlantic City." Financial Statistics The Company provided these additional information for the third quarter ended September 30, 2005: September 30 debt balance $2,391,000,000 September 30 cash $140,000,000 Dividends paid in the quarter $11,100,000 Maintenance capital expenditures $28,000,000 Expansion capital expenditures: * Blue Chip $23,000,000 * South Coast $86,000,000 * Barbary Coast land $16,000,000 * Other $1,000,000 Shares outstanding on September 30 $89,200,000 Capitalized interest $6,300,000 The Company received a $6.3 million distribution from Borgata during the quarter, representing 35% of the Company's half of Borgata's pre-tax income for the second quarter 2005. The September 30 debt balance for Borgata is $327,000,000. Headquartered in Las Vegas, Boyd Gaming Corporation (NYSE: BYD) -- http://www.boydgaming.com/-- is a leading diversified owner and operator of 18 gaming entertainment properties, plus one under development, located in Nevada, New Jersey, Mississippi, Illinois, Indiana and Louisiana. * * * As reported in the Troubled Company Reporter on June 16, 2005, Standard & Poor's Ratings Services revised its rating outlook on casino operator Boyd Gaming Corp. to positive from stable. At the same time, Standard & Poor's affirmed its ratings on the Las Vegas, Nevada-based company, including its 'BB' corporate credit rating. Total debt outstanding was approximately $2.26 billion at March 31, 2005. "The outlook revision reflects Boyd's solid operating performance over the past several quarters, which has resulted in pro forma credit measures that have exceeded our previous expectations," said Standard & Poor's credit analyst Michael Scerbo. BROOKFIELD PROPERTIES: Earns $33 Million of Net Income in 3rd Qtr. ------------------------------------------------------------------ Brookfield Properties Corporation (BPO: NYSE, TSX) reported results for the third quarter ended September 30, 2005. Net income for the three months ended Sept. 30, 2005, was $33 million compared to $11 million for the same period in 2004. Brookfield's portfolio-wide occupancy rate was 94.0% as at September 30, 2005, compared to 92.7% at the end of 2004. In Brookfield's primary markets of New York, Boston, Washington, D.C., Toronto and Calgary, the occupancy rate at Sept. 30, 2005 was 95.4% compared to 94.0% at the end of 2004. Investment and Financing Activity Completed the acquisition of O&Y Properties Corporation on Oct. 21, 2005. A newly formed company owned by a Consortium, which includes the Company's subsidiary BPO Properties Ltd. and two institutional investors, completed the acquisition of O&Y Properties Corporation on October 21, 2005, at a price of C$12.72 per share in cash. O&Y Properties Corporation's principal assets include First Canadian Place in Toronto and a 41% interest in O&Y Real Estate Investment Trust. On Oct. 21, 2005, the Company also announced that Newco had taken up all of the 30.3 million limited voting units of O&Y REIT validly deposited under its take-over bid for limited voting units of O&Y REIT. The Consortium intends to cause O&Y REIT to effect a subsequent acquisition transaction whereby all issued and outstanding limited voting units of O&Y REIT will be redeemed for C$16.25 per unit in cash and the properties held by O&Y REIT will be transferred to the members of the Consortium directly. A special meeting of O&Y REIT unitholders to approve the subsequent acquisition transaction has been scheduled for November 28, 2005. All of the limited voting units acquired by Newco under the take-over bid will be voted in favor of the subsequent acquisition transaction and may be counted towards the "majority of minority" approval requirement, thereby ensuring that the subsequent acquisition transaction will be approved. The C$2 billion acquisition of the O&Y portfolio, one of the largest real estate deals in Canadian history, adds 24 office properties consisting of 29 buildings and development sites totaling 10.8 million square feet in five Canadian cities to Brookfield's roster of premier properties. BPO Properties will provide 25% of the equity (which approximates C$200 million) and serve as property and asset manager for the portfolio, thereby significantly expanding Brookfield's assets under management. Reached an agreement to sell the company's 50% interest in Colorado State Bank building for approximately $22 million as part of the company's strategy to redeploy equity from this secondary market into existing primary and selected new markets. Colorado State Bank building is a 26-story, 412,000 square foot property in the downtown Denver financial district. The transaction is expected to close by November 30, 2005. Acquired remaining 50% interest in the Bay Adelaide development site for C$105 million, providing the company with full flexibility to realize long-term value in the ownership of this 1.8 million-square foot site, which spans two city blocks in the heart of downtown Toronto. Repurchased 483,500 common shares of the company at an average price of $29.05 during the third quarter of 2005, bringing the total number of shares repurchased in 2005 to approximately 2.2 million at an average price of $26.98. Since the inception of the company's normal course issuer bid in 1999, the company has repurchased approximately 20 million common shares. Operating Highlights Earned $163 million of net operating income from commercial property operations for the three months ended September 30, 2005, and leased approximately 800,000 square feet of space. Year-to-date leasing stands at 2.9 million square feet, approximately three times the amount contractually expiring. Earned $24 million of net operating income from residential development operations in the third quarter of 2005, an increase of $13 million over the same period in 2004. For the first nine months of 2005, net operating income was $61 million, an increase of $32 million over the same period in 2004. The division's primary markets of Calgary and Edmonton continue to be the beneficiaries of an extremely strong local economy due to the explosive growth of oil sands industry in the province of Alberta. Outlook "Looking forward, Brookfield is well-positioned to capitalize on many opportunities. We are adding tremendous value to our portfolio with the soon-to-be completed acquisition of the O&Y portfolio. We are in pre-development planning and/or pre-leasing negotiations with much of our six million square feet of development sites," said Ric Clark, President & CEO of Brookfield Properties Corporation. "Although we have some work to do in the near-term, the company remains well-positioned for long-term growth," he concluded. Dividend Declaration The Board of Directors of Brookfield declared a quarterly common share dividend of $0.18 per share payable on the last business day of December 2005 to shareholders of record at the close of business on December 1, 2005. Shareholders resident in the United States will receive payment in U.S. dollars and shareholders resident in Canada will receive their dividends in Canadian dollars at the exchange rate on the record date, unless they elect otherwise. The quarterly dividends payable for the Class AAA Series F, G, H, I, J and K preferred shares were also declared payable on the last business day of December 2005 to shareholders of record at the close of business on December 15, 2005. Brookfield Properties Corporation -- http://www.brookfieldproperties.com/-- owns, develops and manages premier North American office properties. The Brookfield portfolio comprises 47 commercial properties and development sites totaling 46 million square feet, including landmark properties such as the World Financial Center in New York City and BCE Place in Toronto. Brookfield is inter-listed on the New York and Toronto Stock Exchanges under the symbol BPO. * * * As reported in the Troubled Company Reporter on Oct. 6, 2004, Standard & Poor's Ratings Services assigned its 'P-3(High)' Canadian national scale and 'BB+' global scale preferred share ratings to Brookfield Properties Corp.'s C$150 million -- with an underwriter's option of up to an additional C$50 million -- 5.20% cumulative class AAA redeemable preferred shares, series K. At the same time, Standard & Poor's affirmed its ratings outstanding on the company, including the 'BBB' long-term issuer credit rating. S&P said the outlook is stable. BUENA VISTA: Taps Steven Schwaber as General Bankruptcy Counsel --------------------------------------------------------------- Buena Vista Lofts, LLC, asks the U.S. Bankruptcy Court for the Central District of California for authority to employ the Law Offices of Steven A. Schwaber as its general bankruptcy counsel. Steven A. Schwaber will: (a) advise the Debtor with respect to the rights, duties, and obligations of a debtor and debtor-in-possession under Chapter 11 of the Bankruptcy Code; (b) review and to the extent necessary, amend the Debtor's petition, schedules, and statement of financial affairs; (c) advise the Debtor regarding all reports required by the U.S. Trustee's office and all other matters related to compliance with those requirements; (d) represent the Debtor at the Section 341(a) hearing and such other appearances as the Office of the U.S. Trustee may require; (e) take appropriate action to obtain Court approval of any proposed transactions by the Debtor that are not in the ordinary course of business; including use of cash collateral, sales, leases, and borrowing, etc; (f) defend the Debtor against any motion for relief from the automatic stay that may be filed; (g) prosecute third party adversary proceedings as appropriate; (h) conduct strategic planning and analysis; (i) assist the Debtor in the investigation of the acts, conduct, assets, liabilities, and financial condition of the Debtor, the operations of the Debtor's business, and other matters relevant to the case; (j) assist the Debtor with strategic planning and analysis and participating in the formation and confirmation of a Plan of Reorganization; and (k) perform such other legal services as may be required and as are in the interest of the estate. The Debtor discloses that Steven A. Schwaber, Esq., principal of the Firm, will be the lead counsel and will bill $375 per hour. The Debtor tells the Court that the Firm's other professionals bill: Professional Hourly Rate ------------ ----------- Senior Associates $250 - $350 Junior Associates $150 - $225 Paralegals $95 Mr. Schwaber assures the Court that the Firm is a "disinterested person" as that term is defined in Section 101(14) of the Bankruptcy Code. Headquartered in Los Angeles, California, Buena Vista Lofts, LLC filed for chapter 11 protection on Oct. 6, 2005 (Bankr. C.D. Calif. Case No. 05-36011). When the Debtor filed for protection from its creditors, it listed $23,453,000 in total assets and $12,169,703 in total debts. BUENA VISTA: Section 341(a) Meeting Slated for November 22 ---------------------------------------------------------- The United States Trustee for Region 16 will convene a meeting of Buena Vista Lofts, LLC.'s creditors at 10:00 p.m., on Nov. 22, 2005, at 725 S. Figueroa Street, Room 2610 in Los Angeles, California. 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 Los Angeles, California, Buena Vista Lofts, LLC filed for chapter 11 protection on Oct. 6, 2005 (Bankr. C.D. Calif. Case No. 05-36011). Steven A. Schwaber, Esq., at the Law Offices of Steven A. Schwaber, represents the Debtor in its restructuring efforts. When the Debtor filed for protection from its creditors, it listed $23,453,000 in total assets and $12,169,703 in total debts. CALPINE CORP: EBITDA Drop Cues Fitch to Junk Senior Unsec. Notes ---------------------------------------------------------------- Calpine Corp.'s outstanding credit ratings have been downgraded by Fitch Ratings: -- Senior unsecured notes to 'CCC-' from 'CCC+'; -- Second-priority senior secured notes to 'B-' from 'B+'; -- First-priority senior secured notes to 'B' from 'BB-'; Calpine Canada Energy Finance ULC (guaranteed by CPN) -- Senior unsecured notes to 'CCC-' from 'CCC+'. The ratings are removed from Rating Watch Evolving where they were placed on May 25, 2005. The Rating Outlook is Negative. The rating action reflects further deterioration in CPN's core operating EBITDA, slower than anticipated progress in achieving previously stated debt reduction targets, and the continued uncertainty surrounding ongoing bondholder litigation. For the nine-month period ended Sept. 30, 2005, consolidated operating EBITDA -- adjusted to exclude the effects of both non-cash gains and losses -- dropped 22.7% to $880.4 million despite improving spark spread conditions and on-peak capacity factors in CPN's core operating regions in California and Texas. For the 12-month period ended Sept. 20, 2005, consolidated interest coverage as measured by operating EBITDA to cash interest expense was a mere 0.8x. Due to the seasonally weak fourth quarter, Fitch does not expect meaningful improvement in consolidated interest coverage metrics for the fiscal year 2005. Since unveiling its accelerated de-leveraging strategy in early May 2005, CPN has managed to reduce consolidated debt by approximately $1.1 billion versus the company's stated goal of $3.0 billion by year-end 2005. CPN's efforts to reduce debt have been frustrated by ongoing bondholder litigation, which has effectively frozen approximately $600 million of cash proceeds that could otherwise be utilized for bond repurchases. In addition, higher natural gas prices combined with CPN's strained liquidity position has resulted in CPN redirecting a meaningful portion of cash proceeds generated from the recent sale of oil and gas properties toward the purchase of natural gas fuel supply. Fitch continues to monitor CPN's progress in reducing debt and achieving its stated operating cost reduction targets. Factors that could stabilize CPN's credit profile in the near term include full achievement of the planned debt retirements and simplification of CPN's capital structure, favorable resolution of outstanding bondholder litigation, and the realization of projected working capital benefits from CPN's new energy marketing and trading ventures with Bear Stearns. Failure to achieve the full benefits from these initiatives will likely lead to more aggressive restructuring measures. CASCADES INC: Earns $3 Million of Net Income in Third Quarter ------------------------------------------------------------- Cascades Inc. (Symbol: CAS-TSX) reported net earnings of $3 million for the quarter ended Sept. 30, 2005. This compares with net earnings of $27 million for the same period in 2004. Sales increased 2% during the third quarter of 2005, amounting to $874 million compared with $854 million for the same period last year. The operating loss amounted to $2 million for the quarter and includes $20 million of closure, restructuring and impairment costs in regards to the Thunder Bay and Red Rock mills as well as a $3 million unrealized loss on financial commodity instruments. This amount compares to an operating income of $34 million achieved for the same period last year. "Recent results are quite encouraging as Cascades has managed to be cash-flow positive despite very challenging business conditions, characterized by increased foreign competition and lesser demand for certain of our products," Alain Lemaire, President and Chief Executive Officer, stated. "In addition, as we are confronted with the continued appreciation of the Canadian dollar, increasing energy and chemical prices, market dynamics do not always allow for an immediate adjustment in selling prices." Net earnings for the nine-month period ended Sept. 30, 2005 were $7 million. This compares with net earnings of $18 million for the corresponding period in 2004. Founded in 1964, Cascades Inc. -- http://www.cascades.com/-- produces, transforms and markets packaging products, tissue paper and fine papers, composed mainly of recycled fibres. Cascades employs nearly 15,600 men and women who work in some 140 modern and flexible production units located in North America, in Europe and in Asia. Cascades' management philosophy, its more than 40 years of experience in recycling, its continued efforts in research and development are strengths which enable the company to create new products for its clients and thus offer superior performance to its shareholders. The Cascades shares trade on the Toronto stock exchange under the ticker symbol CAS. * * * Standard & Poor's Ratings Services rated the Company's 7-1/4% Senior Notes due 2013 at BB+. CERVANTES ORCHARDS: Wants to Use Lenders' Cash Collateral --------------------------------------------------------- Cervantes Orchards & Vineyards, LLC, asks the U.S. Bankruptcy Court for the Eastern District of Washington for authority to access cash collateral, securing repayment to its lenders, to harvest and maintain a 300-acre orchards and vineyards which are not leased to or managed by Gilbert Orchards, Inc. Gilbert has agreed to lend Cervantes up to: -- $410,000 for crop harvesting (the cost of the fruit picking and packing might be as low as $375,000); and -- $70,000 for fertilization, payroll taxes, insurance, debt service and other incidental expenses. Currently, the Debtor's owner is financing the continued harvest and maintenance of the non-Gilbert acreage through volunteer labor and loans from his other businesses, including Cervantes Nurseries. While this support is adequate in a very short term, additional capital is necessary for proper fertilization, preservation and repairs to these orchards and vineyards, the Debtor says. The Debtor estimates that $600,000 to $750,000 in net revenues will be received from the 2005 harvest, including amounts obtained from Gilbert Orchards, Stemilt Growers, and crops from the non- Gilbert orchards and vineyards. The Debtor wants to use 25% of the net revenue to service the non-Gilbert orchards and vineyards. The rest of the money, the Debtor says, will be used to pay its vendors and secured lenders -- Deere Credit, Inc., Zions/U.S. Bank, and Columbia Trust Bank. The Debtor believes that allowing it to use part of the revenues is in the best interest of the estate's creditors. In addition, the Debtor proposes replacement liens for the lenders in newly received cash and cash equivalents to insure against the diminution of their interests. Headquartered in Sunnyside, Washington, Cervantes Orchards and Vineyards LLC filed for chapter 11 protection on Aug. 19, 2005 (Bankr. E.D. Wash. Case No. 05-06600). R. Bruce Johnston, Esq., at Law Offices of R. Bruce Johnston represents the Debtor in its restructuring efforts. When the Debtor filed for protection from its creditors, it listed estimated assets of $10 million to $50 million and estimated debts of $1 million to $10 million. CHAPCO CARTON: Ch. 7 Trustee Wants to Conduct Rule 2004 Probe ------------------------------------------------------------- Deborah K. Ebner, the chapter 7 Trustee for the estate of Chapco Carton Company, seeks authority from the U.S. Bankruptcy Court for the Northern District Of Illinois, Eastern Division, to conduct examinations, pursuant to Rule 2004 of the Federal Rules of Bankruptcy Procedure. Ms. Ebner wants to investigate persons and entities that could provide information on the conduct, property and financial condition of the Debtor, including information regarding recoverable avoidable transfers. The Trustee's counsel, Benjamin Schneider, Esq., tells the Bankruptcy Court that the Trustee has sent demand letters seeking the return of avoidable transfers from 143 transferees totaling approximately $5.3 million. Mr. Schneider says the Trustee needs to conduct additional inquiries to evaluate other potentially recoverable transfers made by the Debtor. Ms. Ebner tells the Court that the proposed examinations will contribute to greater distributions for creditors. Headquartered in Bolingbrook, Illinois, Chapco Carton Company -- http://www.chapcocarton.com/-- manufactured, sold and distributed folding cartons used for retail packaging in food, candy, office supplies and automotive parts industries. The Company filed for chapter 11 protection on July 13, 2004 (Bankr. N.D. Ill. Case No. 04-26000). The Honorable Bruce W. Black converted the case into a chapter 7 liquidation on Mar. 24, 2005. Deborah K. Ebner, Esq., was appointed chapter 7 Trustee. Chad H. Gettleman, Esq., at Adelman Gettleman & Merens, represents the Company. When the Debtor filed for protection from its creditors, it listed $15,232,256 in assets and $19,220,379 in liabilities. CHESAPEAKE ENERGY: S&P Rates $1.1 Billion Notes at BB ----------------------------------------------------- Standard & Poor's Ratings Services assigned its 'BB' rating to oil and gas exploration and production company Chesapeake Energy Corp.'s $500 million senior notes due 2020 and its $600 million 2.75% contingent convertible senior notes due 2035. Standard & Poor's also assigned its 'B' rating to Chesapeake's $500 million 5% cumulative convertible preferred stock issue. Amounts do not include overallotment options. At the same time, Standard & Poor's affirmed its 'BB/B-1' corporate credit rating on the company. The outlook is stable. Pro forma for the recent capital raises, Oklahoma City, Oklahoma-based Chesapeake will have $5.4 billion in debt outstanding. The $1.6 billion in proceeds from the three offerings will be used to finance the $2.2 billion Columbia Natural Resources LLC acquisition. The CNR assets consist primarily of 1.1 trillion cubic feet equivalent of proved reserves in the Appalachia region plus approximately 4.1 million net acres of oil and gas leasehold. "In order for Chesapeake to remain comfortably at the current rating, we expect the company to finance the CNR acquisition ultimately with roughly 50% debt and 50% equity," said Standard & Poor's credit analyst David Lundberg. "However, we expect the financing mix will be tilted toward debt in the intermediate term," said Mr. Lundberg. Pro forma for the acquisition, Chesapeake's will have approximately 7.3 trillion cubic feet equivalent of proved reserves as of Sept. 30, 2005, 92% of which is natural gas. The CNR acquisition is expected to be consummated by year-end. CINRAM INT'L: Moody's Reviews Ba3 Corporate Family Rating --------------------------------------------------------- Moody's Investors Service placed Cinram International Inc.'s Ba3 Corporate Family and Ba3 Senior Secured ratings under review direction uncertain. The review is prompted by the company's announcement that it plans to pursue a recapitalization as an income deposit security structure. Cinram has stated that the recapitalization plan has been conditionally approved by its Board of Directors. Implementation of the plan is subject to resolution of certain structural issues, including renegotiation of its bank facilities and shareholder approval. Moody's estimates the plan may be implemented in early 2006. The direction of the review is uncertain because the structure of the reorganization has not yet been determined by the company, and while free cash flow may be substantially reduced, the possibility exists that debt levels may be reduced as well. The ratings review will focus on: 1) the potential for the recapitalization plan to be implemented; 2) any change to leverage resulting from the conversion to an IDS structure; 3) the impact the IDS structure may have on Cinram's ability to repay future debt; and 4) Cinram's future business prospects including expected DVD volume growth and pricing erosion along with any impact that the eventual change to new a high definition DVD format may have on Cinram. Ratings affected by this action: * Corporate Family Rating, Ba3 * Senior Secured, Ba3 * Revolver, due September 2007 US$150 million [nil outstanding] * Tranche A, due September 2007 US$144 million * Tranche D, due September 2009 US$622 million Cinram International Inc. is one of the world's largest manufacturers and distributors of: * DVD's, * CD's, and * VHS pre-recorded media, with headquarters in Toronto, Ontario, Canada. CNA FINANCIAL: Moody's Affirms Preferred Stock Rating at Ba2 ------------------------------------------------------------ Moody's Investors Service affirmed the Baa3 senior debt rating of CNA Financial Corporation (NYSE: CNA) and the A3 insurance financial strength ratings of Continental Casualty Company and its rated pooled and reinsured property/casualty insurance affiliates. The outlook for the ratings has been changed to stable from negative. The rating agency also said it affirmed, with a stable outlook, the Baa1 insurance financial strength rating of CNA's life insurance subsidiary, Continental Assurance Company. According to Moody's, the rating affirmation and stable outlook reflect CNA's significantly improved underwriting performance in 2004 and through the first three quarters of 2005 notwithstanding catastrophe-related underwriting losses sustained in the third quarter of 2005, primarily related to Hurricanes Katrina and Rita. The rating agency said that CNA's improved core underwriting results are evident in the company's reported combined ratio of 106.2% for the first nine months of 2005, including approximately 9 percentage points (or a pre-tax impact of $443 million net of reinsurance) related to third quarter hurricane losses. However, Moody's noted that the group's combined ratio, when excluding catastrophes, has remained higher than most of its commercial insurance industry peers, reflecting: * a combination of adverse reserve development on prior years' business; * significant interest expense on the group's aggregate stop- loss covers; and * an improved but still above-average expense ratio. CNA's improved underwriting and operating performance has contributed to a strengthened risk-adjusted capital and operating leverage profile at CNA's principal operating unit -- Continental Casualty Company (CCC) and its affiliated property/casualty insurance subsidiaries -- as well as to a reduced financial leverage profile at CNA Financial Corporation. Although CCC continues to experience some adverse reserve development on reserves supporting business written in the 1997-2000 period, as well as on run-off business including asbestos and environmental- related claims, Moody's believes that CNA's reserve position has strengthened substantially in recent years. Furthermore, provisions for ceded reinsurance balances and bad debts remain reasonable. That said, adverse reserve development remains a general concern, albeit at a diminished level than in the recent past. Moody's continues to consider Loews' Corporation, CNA's majority shareholder, to be a supportive influence, as reflected in Loews' strong involvement in CNA's corporate governance and capital contributions to the insurer in recent years. The rating agency noted that absent Loews' support, CNA's ratings would likely be lower. At the current rating level, Moody's expects that CNA will sustain recent improvements in capitalization and that operational leverage will continue to gradually decline: * as earnings contribute to capital growth; * as premium growth should remain moderate; and * as reinsurance recoverable balances and claim reserves should continue to decline relative to shareholders' equity. Moody's also expects that, with a refocused business model in commercial and specialty property/casualty insurance, as well as a significant investment in recent years in management information systems, CNA will be better able to manage its underwriting in what is likely to be a more competitive pricing environment in the coming years. CNA remains one of the leading commercial and specialty lines property/casualty insurers in the USA, and has significant market positions across many specialty classes of business. Factors that could lead to a ratings upgrade include: -- an upgrade of Loews Corporation (senior debt at Baa1); -- sustained reduction in the group's financial leverage profile (e.g. below 20%); -- sustained improvement in operating profitability, before realized investment gains; -- sustained earnings coverage of interest on debt and aggregate stop-loss reinsurance balances, and preferred dividends in excess of 5x; and -- sustained annual adverse reserve development less than 2.5% of total reserves. Factors that could lead to a ratings downgrade include: -- sustained adjusted financial leverage in excess of 25%; -- a downgrade of Loews Corporation or an indication of diminished support of CNA by Loews; -- annual catastrophe losses exceeding 15% of shareholders' equity; -- earnings coverage of interest on debt and aggregate stop-loss reinsurance balances, and preferred dividends below 2x; and -- annual adverse reserve development in excess of 5% of total reserves. These ratings have been affirmed with the outlook changed to stable: CNA Financial Corporation: * senior unsecured debt at Baa3 * preferred stock at Ba2 The Continental Corporation: * senior debt at Baa3 Members of the Continental Casualty Company intercompany reinsurance pool - insurance financial strength at A3: -- American Casualty Company of Reading, Pennsylvania -- Boston Old Colony Insurance Company -- CNA Casualty of California -- CNA Lloyd's of Texas -- Columbia Casualty Company -- Commercial Insurance Company of Newark, New Jersey -- Continental Casualty Company -- Continental Insurance Company of New Jersey -- Continental Insurance Company -- Continental Lloyd's Insurance Company -- Continental Reinsurance Corporation -- Firemen's Insurance Company of Newark, New Jersey -- Kansas City Fire and Marine Insurance Company -- Mayflower Insurance Company -- National Fire Insurance Company of Hartford -- National-Ben Franklin Insurance Company of Illinois -- Niagara Fire Insurance Company -- Pacific Insurance Company -- The Buckeye Union Insurance Company -- The Fidelity and Casualty Company of New York -- The Glens Falls Insurance Company -- Transcontinental Insurance Company -- Transportation Insurance Company -- Valley Forge Insurance Company CNA Financial Corporation is engaged through its subsidiaries in commercial property and casualty insurance. For the nine months ended September 30, 2005, CNA Financial Corporation reported net income of $469 million and net written premiums for property/casualty insurance operations of $5.2 billion. As of September 30, 2005, shareholders' equity was $9.4 billion. CONSTAR INT'L: Moody's Junks Rating on $175 Million Senior Notes ---------------------------------------------------------------- Moody's Investors Service lowered the ratings of Constar International, Inc. reflecting: * ongoing pressures on profitability and cash flow primarily because of prolonged softness in Constar's European business which accounts for approximately 25% of consolidated revenue; * increased utility expenses; * less-than-optimal product mix with volume strength in low margin conventional water business; and * delays in the ramp up of certain custom projects. The adequacy of Constar's liquidity, given the expectation of orderly access to its $70 million asset based facility (not rated by Moody's) because of continued over collateralization, coupled with modest abatement in product price declines, precluded further reduction in the ratings and provides some comfort that the upcoming interest payments (due in November and December) for Constar's notes should be satisfied. Furthermore, the ratings incorporate some potential benefit from the commercialization of previously delayed projects and the continuation of Constar's ability to pass through the majority of raw material and energy cost increases. The downgrade of these ratings concludes the review of Constar's ratings for possible downgrade which was initiated on Sept. 21, 2005: -- To B3 from B2 for the $220 million floating rate first mortgage note, due 2012 -- To Caa3 from Caa1 for the $175 million 11% senior subordinated note, due 2012 -- To B3 from B2 for the corporate family rating The ratings outlook is negative. The negative ratings outlook reflects the urgency of timely and consistent execution of recovery strategies because, in Moody's opinion, EBIT is likely to remain insufficient to cover interest expense throughout the intermediate term and runrate financials cannot support Constar's substantial total debt (adjusted to include pension and post-retirement liabilities of approximately $17 million and leases). Any negative variance under revised expectations, specifically further operating shortfalls and increases in financial leverage or the inability to pass through resin costs on a timely basis, would likely trigger additional downgrade of the ratings. Adjusted debt to EBITDA was approaching 7 times for the last twelve months ended June 30, 2005, and there was negative free cash flow. Even at revised ratings, there is little room for further decline in credit metrics. The widening of the notching for the senior subordinated notes to Caa3 from Caa1 reflects the increased severity of loss expected in a default scenario given the decline in Constar's enterprise value. The rating also reflects the deep contractual subordination of the notes to sizable amounts of senior debt in the capital structure (approximately $240 million), while giving consideration to the approximately $150 million of trade payables and accrued expenses as of June 30, 2005. Lowering the rating of the first lien mortgage notes to B3 from B2 reflects the benefits and limitations of the collateral, specifically the likely elongated time it would take to liquidate the collateral. However, the rating reflect an expectation of full recovery in the event of a default. Based in Philadelphia, Constar International, Inc. is a global producer of PET (polyethylene terephthalate) plastic containers for: * food, * soft drinks, and * water. Consolidated revenue for the twelve months ended June 30, 2005 was approximately $900 million. CONVERIUM AG: Financial Restatement Cues S&P to Watch Ratings ------------------------------------------------------------- Standard & Poor's Ratings Services placed its 'BBB+' long-term counterparty credit and insurer financial strength ratings on Switzerland-based reinsurer Converium AG and the guaranteed operating entities of the Converium group on CreditWatch with negative implications. At the same time, Standard & Poor's placed its 'BB+' long-term counterparty credit and senior unsecured debt ratings on Converium Holdings (North America) Inc. and its 'BBB-' long-term guaranteed junior subordinated debt rating on Converium Finance S.A. on CreditWatch with negative implications. "The CreditWatch placement follows Converium's announcement today that, following an internal review of certain reinsurance transactions primarily relating to ceded reinsurance, it plans to restate its financial accounts and delay its third-quarter results release, and reflects the uncertainties surrounding this event," said Standard & Poor's credit analyst Marcus Rivaldi. Standard & Poor's aims to resolve the CreditWatch status following receipt of the restated financials and third-quarter results, currently scheduled for mid-December 2005. The ratings may be affirmed and a stable outlook assigned if: (1) Standard & Poor's view on prospective group capitalization and operating performance is subsequently confirmed, (2) there is no material deviation from the management's current expectation of no reduction in unaudited shareholders' equity reported for June 30, 2005, (3) there is no significant negative regulatory action or negative impact on financing arrangements resulting from the restatement action, and (4) in the meantime, there is an early indication that Converium retains the support of its key European client base and key staff. The outlook may be revised to negative or the ratings lowered if these expectations are not met, the latter course of action being likely if, during the course of the CreditWatch placement, Converium appears unable to retain the support of its key European client base and key staff. If the ratings are lowered, it is not envisaged that this would be by more than one notch. Ratings information is available to subscribers of RatingsDirect, Standard & Poor's Web-based credit analysis system, at http://www.ratingsdirect.com/ It can also be found on Standard & Poor's public Web site at http://www.standardandpoors.com/under Credit Ratings in the left navigation bar, select Find a Rating, then Credit Ratings Search. DEAN FOODS: Financial Plans Prompt S&P's Stable Outlook ------------------------------------------------------- Standard & Poor's Ratings Services revised its outlook on one of the leading dairy processors, Dean Foods Co. and its wholly owned subsidiary, Dean Holding Co., to stable from positive. At the same time, Standard & Poor's affirmed its 'BB+' corporate credit rating and other ratings on Dean Foods and Dean Holdings. Dallas, Texas-based Dean Foods had total debt of $3.3 billion at Sept. 30, 2005. "The outlook revision reflects Standard & Poor's expectation that in the near to intermediate term the company will use a substantial portion of free cash flow for share repurchases rather than for permanent debt reduction," said Standard & Poor's credit analyst Jayne Ross. While the company may face some higher energy and resin costs in the next several quarters as well as the continuing effect of several hurricanes, credit protection measures should remain at or near their current levels. Standard & Poor's expects that Dean Foods will be acquisitive and will take advantage of consolidating trends in the dairy and related food. Acquisitions are expected to be of a size such that their integration into Dean Foods' operations should continue to be fairly seamless. The company has the financial flexibility to pursue acquisitions in related industries under its revolving credit facility and with its stable cash flow from operations. DEAN FOODS: Earns $104 Million of Net Income in Third Quarter ------------------------------------------------------------- Dean Foods Company (NYSE: DF) reported that net income from continuing operations for the third quarter of 2005 totaled $66.4 million, compared with $37.8 million in the prior year third quarter. Adjusted net income from continuing operations for the third quarter was $77.7 million compared to $65.9 million in the third quarter of 2004. For the three months ended Sept. 30, 2005, Dean Foods reported net income of $103,875,000 compared to a net income of $40,192,000 for the same period in 2004. "Our businesses performed well despite a very challenging environment which included two hurricanes and rapidly rising fuel and resin costs," said Gregg Engles, chairman and chief executive officer. "Consistent with recent trends, our Dairy Group again posted strong volume increases and our WhiteWave division posted strong growth in both net sales and profitability." Net sales for the third quarter totaled $2.6 billion, an increase of 2.4% over the third quarter of 2004. The increase in net sales was primarily due to higher fluid dairy volumes and increased sales at WhiteWave Foods, which were offset by the pass-through of lower raw milk and butterfat costs in the Dairy Group. Consolidated operating income from continuing operations in the third quarter totaled $145.7 million, versus $139.3 million in the third quarter of 2004. Adjusted third quarter operating income from continuing operations totaled $163.7 million, an 8.5% increase over the $150.9 million reported in the third quarter of 2004. The Company's adjusted third quarter 2005 operating margin was 6.2%, up 35 basis points over the third quarter of the prior year. The increase in the adjusted operating income was primarily due to the positive impact of lower raw milk and butterfat costs and increased profitability at WhiteWave Foods, which was partially offset by higher packaging and distribution costs. Included in adjusted operating income for the third quarter of 2005 is a $3.9 million charge, which represents the second half of the total expense related to the accelerated vesting of stock units issued to key employees in January 2003. Long-term debt as of September 30, 2005, was approximately $3.1 billion, including $67 million due within one year that is reported as part of current liabilities. At the end of the quarter, approximately $940 million of the Company's senior credit facility was available for future borrowings. Outlook "While our businesses continue to demonstrate very strong performance, there are several obvious headwinds affecting our near-term business outlook, including high fuel, energy and packaging costs. We expect between $35 and $40 million higher overall costs related to these items in the fourth quarter of this year than we had last year. We are working hard to mitigate the impact of these increased costs through price increases, but expect near-term operating performance to be negatively impacted by these issues and are therefore adjusting our expectations for the remainder of 2005," said Mr. Engles. "We expect fourth quarter earnings of approximately $0.52 to $0.55 per share, resulting in full year 2005 earnings of approximately $1.93 to $1.96 per share, a 14% to 16% increase over 2004 earnings from continuing operations of $1.69 per share. Looking forward to 2006, we believe we will be able to largely mitigate the impact of the higher fuel, energy and resin costs early in the year through price increases on our products. Assuming a relatively stable dairy commodity environment, we expect full year sales of $10.5 billion. We expect earnings per share to be in the range of $2.20 to $2.25 per diluted share before the effects of stock option expensing." In accordance with FAS 123(R), the Company will begin expensing stock options in 2006 and estimates the impact of stock option expensing will be approximately $0.09 to $0.10 per share in 2006, roughly the same as in 2005, had FAS 123(R) been in place. Dean Foods Company is one of the leading food and beverage companies in the United States. Its Dairy Group division is the largest processor and distributor of milk and other dairy products in the country, with an extensive refrigerated direct- store-delivery network. Through its WhiteWave and Horizon Organic brands, Dean Foods Company also owns the nation's leading soymilk and organic milk brands. The company's Specialty Foods Group is a leading manufacturer of private label pickles and non- dairy powdered coffee creamers. Dean Foods Company and its subsidiaries operate approximately 120 plants in 36 U.S. states, Spain, Portugal and the United Kingdom, and employ approximately 29,000 people. * * * As reported in today's Troubled Company Reporter, Standard & Poor's Ratings Services revised its outlook on one of the leading dairy processors, Dean Foods Co. and its wholly owned subsidiary, Dean Holding Co., to stable from positive. At the same time, Standard & Poor's affirmed its 'BB+' corporate credit rating and other ratings on Dean Foods and Dean Holdings. Dallas, Texas-based Dean Foods had total debt of $3.3 billion at Sept. 30, 2005. DEAN FOODS: Completes Multi-Million Sale of Dips Business --------------------------------------------------------- Dean Foods Company (NYSE: DF) completed the sale of its Marie's(R) dips and dressings and Dean's(R) dips businesses in the third quarter. As a result of this sale, the Company recorded a gain on sale of $37.8 million in the third quarter. As reported in the Troubled Company Reporter on July 14, 2005, the Company completed the spin-off of its majority-owned subsidiary TreeHouse Foods, Inc., as an independent, publicly traded company effective June 27, 2005. Dean Foods Company is one of the leading food and beverage companies in the United States. Its Dairy Group division is the largest processor and distributor of milk and other dairy products in the country, with an extensive refrigerated direct- store-delivery network. Through its WhiteWave and Horizon Organic brands, Dean Foods Company also owns the nation's leading soymilk and organic milk brands. The company's Specialty Foods Group is a leading manufacturer of private label pickles and non- dairy powdered coffee creamers. Dean Foods Company and its subsidiaries operate approximately 120 plants in 36 U.S. states, Spain, Portugal and the United Kingdom, and employ approximately 29,000 people. * * * As reported in today's Troubled Company Reporter, Standard & Poor's Ratings Services revised its outlook on one of the leading dairy processors, Dean Foods Co. and its wholly owned subsidiary, Dean Holding Co., to stable from positive. At the same time, Standard & Poor's affirmed its 'BB+' corporate credit rating and other ratings on Dean Foods and Dean Holdings. Dallas, Texas-based Dean Foods had total debt of $3.3 billion at Sept. 30, 2005. DELTA AIR: Wants to Walk Away from ALPA Bargaining Agreement ------------------------------------------------------------ Pursuant to Section 1113 of the Bankruptcy Code, Delta Air Lines and its debtor-affiliates seek the U.S. Bankruptcy Court for the Southern District of New York's permission to reject the collective bargaining agreement between Delta Air Lines, Inc., and the Air Line Pilots Association, International. Delta employs approximately 50,000 employees in the United States, of whom approximately 6,000 are pilots covered by the CBA. The Agreement was originally effective July 1, 2001, and was substantially amended as of December 1, 2004. Both Delta and ALPA agreed to the 2004 amendment to the ALPA CBA in the hope that the substantial pilot labor cost reductions reflected in that amendment, along with cost reductions affecting other Delta employees and with other actions by Delta to restructure its financial obligations, would enable Delta to avoid bankruptcy. John J. Gallagher, Esq., at Paul, Hastings, Janofsky & Walker LLP, in Washington, D.C., relates that, unfortunately, continued competitive pressure on Delta's revenues, continued increases in the cost of jet fuel, and other factors, have combined to bring Delta to the Court for restructuring under Chapter 11. The Debtors propose to modify the ALPA Agreement to, among other things, generate $325 million in annual reductions in Delta's pilot labor costs: Annual Estimated Cost Reductions Proposal ($ millions) -------- ---------------- A. Compensation * Reduce hourly pay rates 19.5% across-the-board $186.9 * Eliminate premium for night pay 1.7 * Eliminate premium for International pay 5.8 * Reduce per diem hourly expense allowance 5.0 B. Work Rules * Reduce amount of pay pilots receive for time not on board the aircraft 21.2 * Reduce staffing levels to meet operational needs: -- Change relief crew composition 1.5 * Permit the Company to create more efficient scheduling rules: -- Allow management pilots to fly open time without pay protecting another pilot 1.80 -- Reduce from two times to one and a half times pay for pilots assigned open time for which they did not volunteer 0.7 -- Eliminate pay back day-off for reserves who voluntarily fly open time on their scheduled day-off 0.4 -- Change the order in which open time is assigned 0.9 -- Reduce training expenses by limiting pilots' ability to change from one position to another 0.8 -- Change sick pay to 20 hours per year at full pay -- 60% thereafter 14.0 -- Eliminate accident leave 0.9 -- Reduce vacation accrual and amount of pay for vacation days 21.7 -- Charge $50 annual fee for access to unlimited free standby travel for pilot and pilot's eligible pass riders 0.3 -- Eliminate obligation to recall furloughed pilots 5.8 C. Benefits * Future retirees to pay full cost of retiree medical coverage 17.1 * Replace Survivorship Plan with $500,000 life insurance 22.1 * Eliminate 2% of 401(k) contribution 18.0 * Modify eligibility requirements for long-term disability 2.8 * Hard freeze defined benefit plan 10.3 D. Management Flexibility/Scope * Reduce restrictions on number and capacity of regional jets operated by Delta's regional partners -- * Eliminate required minimum flying levels -- * Reduce restrictions on partnerships with foreign carriers -- * Remove poison pill -- * Eliminate restrictions on furlough/obligation to recall pilots -- E. Profit Sharing * Significant improvement providing payment to covered employees of 15% of the first $1.5 billion of annual pre-tax income, and 20% of annual pre-tax income over $1.5 billion -- ---------- TOTAL $339.7 ========== Delta has provided ALPA with all information necessary to evaluate the proposal as well as with substantial additional material requested by ALPA, Mr. Gallagher says. Since presenting its proposal to ALPA on September 12, 2005, Delta has met with ALPA and has conferred in good faith in an attempt to reach mutually satisfactory modifications to the ALPA CBA. Delta remains willing to meet with ALPA to reach a mutually satisfactory modification of the ALPA CBA with the purpose of enabling Delta to reorganize. However, Delta avers that: a. delay in implementation of the contract changes proposed to ALPA imperils Delta's ability to accomplish a successful reorganization; and b. ALPA and its professional advisors have had ample opportunity during two years of prepetition study, and additional postpetition study, to appreciate Delta's financial situation and the economic condition of the airline industry. Delta's Restructuring Efforts According to Edward H. Bastian, Delta's executive vice president and chief financial officer, since January 2001, Delta has lost approximately $10 billion. To address these losses, Delta has massively restructured its operations. By June 30, 2005, Delta implemented initiatives to achieve approximately 85% of the $5 billion in annual benefits required by Delta's prepetition Transformation Plan, which include both revenue enhancements and cost reductions. Delta's successful reorganization requires further reduction in costs to a level where it can earn a profit in an intensely competitive marketplace. Delta's Business Plan contemplates a total of $3 billion per year reduction in costs and increase in revenues over prepetition levels, including a $930 million reduction in Delta's annual labor costs. Delta Says Changes Necessary Delta believes that its weak financial and competitive position makes labor cost reductions imperative. A. Competition from Lower Cost Carriers Daniel M. Kasper, a managing director of LECG, Corp., relates that as a result of the increased competition from low cost carriers due to the Airline Deregulation Act of 1978, legacy or network carriers, including Delta, that have that survived into 2001 lost more than $28 billion from 2001 through the first half of 2005. The LCCs generally have significantly lower operating costs, including lower labor costs lower average salaries, more flexible work rules, and lower benefit costs -- especially because they do not have defined benefit pension plans. Delta and the other legacy carriers have lost their pricing power, due largely to the growth of the LCCs, which can make a profit at low fare levels. B. Business Plan Cannot Succeed Without Cost Reductions Delta's fundamental problem is that its costs are higher than its revenues, Mr. Bastian relates. Even with the other benefits achievable under Chapter 11 and revenue and network improvements, he says the only way to bring Delta's total costs in line with realistic revenue expectations is through the reductions in Delta's labor costs for all employees, including pilots. If these cost reductions are promptly implemented, Delta can staunch the cash outflow and, with its DIP financing, survive until it can turn the corner to modest profitability in 2007, Mr. Bastian contends. C. Breach of the DIP Loan Covenants To withstand its immediate liquidity crisis, and to have the opportunity to make the structural changes necessary to emerge from bankruptcy, Delta obtained a $1.9 billion DIP loan from General Electric Capital Corporation and Morgan Stanley. However, Mr. Bastian attests that if Delta is unable to achieve the level of labor costs that underpin the Business Plan, Delta will substantially increase its risk of breaching its minimum Earnings Before Interest, Taxes, Depreciation, Amortization, and Aircraft Rent covenant in its DIP loan agreements. If Delta were to default on these covenants and the DIP lenders were to foreclose on their collateral or accelerate their loans, the result could be liquidation. Proposal Equitable to All Parties Geraldine P. Carolan, vice president-Labor Relations, relates that Delta's non-pilot employees constitute 65% of Delta's total annual mainline labor costs, while pilots constitute 35% of the costs during the first half of 2005. Delta's proposed labor cost reductions are in the same proportion: 65% of the $930 million to the non-pilot employees, and 35% to the pilots. Ms. Carolan notes that Delta's non-pilot employees have borne the brunt of cost reductions through reduced wages from 2000 to 2005. >From 2000 to 2004, while Delta's pilots were enjoying an average 34% pay rate increase, the pay rates for Delta's non-pilot employees increased only 5.2%. Moreover, while non-pilot employees were working harder and having benefits reduced, pilots' benefits and their work rules were left largely unchanged. Delta's pilots also continued to enjoy benefits like survivor benefits and disability benefits, which were being phased out for the non-pilot employees. On the other hand, Delta's unit labor costs for pilots in 2005 remain among the highest in the entire airline industry. In addition, Delta pilots currently earn 3.9 times the average earnings of Delta flight attendants, well above the ratio for the same positions at other airlines. After the proposed pay reduction for both groups, the ratio will be reduced to 3.6 still above American and Continental and matching the LCCs, which are in the "Mid-7" group of carriers. Unlike pilots and non-pilot employees, Delta's executives, having taken various pay cuts in the past, already are paid considerably below market. Delta has announced that officers will be subject to a further pay cut of 15% and directors will be subject to a 9% pay cut even though this reduction will bring these managers even further below market, by an increasingly serious degree, and could well lead to unwanted attrition. Profit Sharing Mr. Bastian notes that Delta's Business Plan necessarily is based upon forecasts of its ability to achieve both projected revenue and necessary cost reductions. As with any forecasts, there is risk that Delta's liquidity and earnings results may fall below the projected levels if revenue and cost factors are not as anticipated. On the other hand, if events turn out to be better than Delta has anticipated in the Business Plan, Delta has proposed a safety valve for all of its employees in the form of a generous profit sharing plan. Under Delta's Section 1113 Proposal, pilots would be entitled to participate in the company's enhanced profit- sharing plan, which would provide an annual aggregate payment to covered employees equal to 15% of the first $1.5 billion in Delta's pre-tax income per year, followed by 20% of pre-tax income above $1.5 billion per year. 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. 11; Bankruptcy Creditors' Service, Inc., 215/945-7000) DENBURY RESOURCES: Low Leverage Prompts S&P to Lift Rating to BB ---------------------------------------------------------------- Standard & Poor's Rating Services raised its corporate credit rating on independent oil and gas exploration and production company Denbury Resources Inc. to 'BB' from 'BB-'. The outlook is stable. Dallas, Texas-based Denbury has about $240 million of funded debt. "The rating action is based on the company's consistent operating performance and low financial leverage, as well as favorable near-term fundamentals for domestic oil and natural gas producers," said Standard & Poor's credit analyst David Lundberg. The stable outlook on Denbury reflects the favorable near-term outlook for commodity prices and the company's modest leverage position and consistent operating results. At the same time, Standard & Poor's recognizes that 2006 capital expenditures will be high and that the company will be more subject to commodity price volatility than in the past. EAGLEPICHER INC: Obtains $345 Mil. in DIP Financing Commitments --------------------------------------------------------------- EaglePicher Incorporated reported that it has obtained a commitment from: * Goldman Sachs Credit Partners L.P. for $295 million of senior secured debtor-in-possession financing, and * Angelo, Gordon & Co., L.P. and Tennenbaum Capital Partners, LLC for $50 million of junior secured debtor-in-possession financing, subject to normal closing conditions. The proceeds of this financing will be used to repay in full EaglePicher's existing bank debt and its current debtor-in- possession financing and is convertible into financing for the reorganized company upon the U.S. Bankruptcy Court for the Southern District of Ohio's approval of a plan of reorganization and satisfaction of other conditions. Angelo, Gordon and Tennenbaum are also significant holders of the Company's 9.75% Senior Notes. This financing is subject to Court approval and is expected to be completed by the end of 2005. "This financing enables us to assure our customers, suppliers and most importantly, our employees, that our capital structure is set, and we have sufficient financing in place to complete our restructuring and execute our business plan," said Stuart B. Gleichenhaus, interim Chairman, President and CEO of EaglePicher. "We are particularly pleased that our two largest noteholders have shown confidence in EaglePicher through their commitment for $50 million of additional financing." Interim Chairman, President and CEO Mr. Gleichenhaus, who succeeds Bert Iedema, will serve in the roles of Chairman, President and CEO until EaglePicher completes its reorganization. Mr. Gleichenhaus, age 48, will also continue to serve as Chief Restructuring Officer for EaglePicher and be responsible for leading the company through the final restructuring activities. Previously Mr. Gleichenhaus has been involved in originating, structuring or restructuring numerous complex transactions over a period of more than twenty years at firms including Salomon Brothers, Banc of America Securities and Ernst & Young Corporate Finance (now Giuliani Capital Advisors). New Chief Operating Officer David L. Treadwell was named Chief Operating Officer of EaglePicher reporting to the CEO. Mr. Treadwell, 51, also serves as president of Hillsdale Automotive, a division of EaglePicher. All EaglePicher operating divisions will report to Mr. Treadwell. Mr. Treadwell has earned a solid reputation for working companies though transitions. Most recently, Mr. Treadwell served as CEO of Oxford Automotive where he led the $1 billion Tier 1 automotive supplier through a successful restructuring process. Mr. Treadwell's experience spans more than 20 years. Mr. Treadwell began his career with the late Heinz Prechter in his automotive, publishing and real estate groups. During Mr. Treadwell's tenure he led ASC Incorporated through several transitions and oversaw acquisitions and divestitures under the Prechter Holdings umbrella. Mr. Treadwell led the divestiture and wrap up of Prechter Holdings after the death of Prechter. Gleichenhaus, Treadwell and Douglas C. Laux, Senior Vice President and Chief Financial Officer of EaglePicher, were appointed as the board of directors of EaglePicher. Stock Transfer EaglePicher also announced that its parent company EaglePicher Holdings had filed a motion with the bankruptcy court seeking approval to transfer all of the common stock of EaglePicher to an irrevocable trust managed by three unaffiliated U.S. citizens. "This is now an appropriate time to begin the transition to new management and to transfer control over EaglePicher to US citizens," commented Mr. Iedema. Mr. Iedema is Chief Executive Officer of Granaria Holdings B.V. of The Netherlands, the controlling shareholder of EaglePicher Holdings, and will continue as President and CEO of EaglePicher Holdings. Headquartered in Phoenix, Arizona, EaglePicher Incorporated -- http://www.eaglepicher.com/-- is a diversified manufacturer and marketer of innovative advanced technology and industrial products for space, defense, automotive, filtration, pharmaceutical, environmental and commercial applications worldwide. The company along with its affiliates and parent company, EaglePicher Holdings, Inc., filed for chapter 11 protection on April 11, 2005 (Bankr. S.D. Ohio Case No. 05-12601). Stephen D. Lerner, Esq., at Squire, Sanders & Dempsey L.L.P, represents the Debtors in their restructuring efforts. Houlihan Lokey Howard & Zukin is the Debtors financial advisor. When the Debtors filed for protection from their creditors, they listed $535 million in consolidated assets and $730 in consolidated debts. ENRON CORP: Gets Court Nod on Project Teresa Settlement Pact ------------------------------------------------------------ In March 1997, Enron Corp., along with numerous parties, formed Project Teresa to raise third party capital and to create a leasing company of leased assets. The Project aims to achieve certain financial accounting benefits arising from basis increases in stock and partnership interests. Under Project Teresa, the parties entered into various transactions, including Enron contributing certain assets to Organizational Partners, Inc., which, in turn, contributed the assets to Enron Leasing Partners, L.P. The contributed assets included, among others, the lease for Enron's headquarters building located at 1400 Smith Street in Houston, Texas. Seneca Delaware, Inc., formerly known as EN-BT Delaware, Inc., and Potomac Capital Investment Corporation, as shareholders and lenders in OPI, and EN-BT, as a limited partner in ELP, infused $30 million in aggregate equity and debt investments. Brazos Loan In April 1997, Enron monetized the value of its Building in Houston, Texas, pursuant to a synthetic lease financing structure in which Brazos Office Holdings, L.P., provided cash to Enron with financing received from a syndicate of banks, with JP Morgan Chase as Agent. Contemporaneously with the Brazos Loan, Brazos and OPI entered into a lease agreement, which was assigned to the Brazos Lenders, and Enron guaranteed OPI's obligations under the Prime Lease for the benefit of the Brazos Lenders. On Oct. 11, 2002, the Agent filed two proofs of claim in connection with, among other things, the Parent Guaranty. OPI subsequently assigned its rights under the Prime Lease to ELP, which subleased the headquarters building to Enron. Enron subsequently assigned its rights and obligations under the sublease to Enron Property & Services Corp. Brazos Settlement Susheel Kirpalani, Esq., at Milbank, Tweed, Hadley & McCloy LLP, in New York, relates that the Enron Parties have negotiated a settlement with JPMC and certain of the Brazos Lenders, other than EN-BT and Deutsche Bank AG, in connection with the alleged liabilities owing to Brazos. However, the DB Parties have informed the Enron Parties that they oppose the Brazos Settlement. The Reorganized Debtors anticipate that the Brazos Settlement will be presented to the Court in the future. The Brazos Transactions are not included within the Teresa Transactions, Mr. Kirpalani notes. Ownership in ELP, EPMC and OPI The Teresa Transactions resulted to ownerships and claims of various entities, including ELP, OPI, Enron Pipeline Holding Company and Enron Property Management Corp.: (A) ELP: OPI owns the majority limited partnership interest in ELP. EN-BT owns a minority limited partnership interest in ELP. EPMC owns the general partnership interest in ELP. Enron Property & Services Corp., a wholly owned subsidiary of Enron, provides management services to ELP. ELP holds a scheduled, prepetition claim against Enron and EPSC for $472,369,095 and $7,933,829. ELP also holds an administrative rent claim against Enron for $8,300,000. (B) OPI: Potomac owns 100% of the Series A Preferred Shares of OPI. EN-BT owns 100% of the Series B Preferred Shares of OPI. Enron owns 100% of the Common Shares of OPI. (C) EPHC: ELP holds an 80.2% preferred stock interest in EPHC, which holds a scheduled prepetition claim against Enron for $131,992,165, which yields a net interest of ELP in EPHC of $99,593,207. (D) EPMC: Enron indirectly owns 100% of the Common Shares of EPMC. EPMC holds a scheduled prepetition claim against Enron for $6,645,738. Deutsche Bank and EN-BT Claims On Sept. 26, 2003, Enron and several of its affiliated Debtors commenced an adversary proceeding against, among other persons, Deutsche Bank AG and EN-BT to assert causes of action in connection with the Teresa Transactions. On the other hand, the DB Parties filed Claim Nos. 12800 and 12801 in Enron's Chapter 11 case. They also asserted claims, demands and causes of action against ELP, OPI, EPMC and EPSC. Project Teresa Settlement The Enron Parties and the DB Parties have engaged in negotiations to resolve their differences in connection with Project Teresa and the Brazos Settlement. They were able to reach a settlement agreement. The salient terms of the Teresa Settlement Agreement are: (a) The DB Parties will receive not less than $21,428,880 from OPI: (i) EN-BT, as holder of the Series B Preferred Shares of OPI, will receive $16,428,880 from OPI: * $12,397,959 of which represents a return of its initial equity investment in OPI; and * $4,030,921 of which represents unpaid dividends and accrued interest assuming a Closing Date of September 30, 2005; and (ii) EN-BT, as holder of the minority limited partnership interest in ELP, will receive $5,000,000 from OPI in settlement of its claims against ELP; (b) In the event the closing date occurs after September 30, 2005, the settlement amount will be increased by pro rating the aggregate amount of unpaid dividends and accrued interest as of the Closing Date based on these amounts: -- $4,128,126 as of October 31, 2005, -- $4,225,330 as of November 30, 2005, and -- $4,322,534 as of December 31, 2005; (c) In exchange for the payment: -- the DB Parties consent to the Brazos Settlement; -- the Enron Parties will redeem the DB Parties' preferred equity and partnership interests in OPI and ELP; and -- the Adversary Proceeding and the Teresa Claims will be deemed irrevocably withdrawn or waived, with prejudice; and (d) The parties will exchange limited mutual releases. Pursuant to Rule 9019 of the Federal Rules of Bankruptcy Procedure, the Reorganized Debtors ask the U.S. Bankruptcy Court for the Southern District of New York to approve the Teresa Settlement Agreement. * * * The Court approves the stipulation. 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., 215/945-7000) ENRON CORP: Court Approves Clinton Energy's Settlement with SCA --------------------------------------------------------------- Pursuant to Rule 9019(a) of the Federal Rules of Bankruptcy Procedure, the U.S. Bankruptcy Court for the Southern District of New York approved a settlement agreement between Debtor Clinton Energy Management Services, Inc., and SCA Packaging North America, Inc. Clinton and SCA's predecessor-in-name were parties to prepetition contracts for the sale of natural gas. In the Settlement Agreement, the parties agree that: (a) SCA will pay Clinton the payments due under the Contract as agreed; and (b) Clinton and SCA will exchange a mutual release of claims related to the Contract. The Settlement Agreement provides that upon receipt of the Settlement Payment, Clinton will file a notice of dismissal with prejudice of its claim against SCA. Edward A. Smith, Esq., at Cadwalader, Wickersham & Taft LLP, in New York, asserts that the payment in the Settlement Agreement will adequately compensate the estate for the value of the Contract. Furthermore, Mr. Smith adds, the Settlement Agreement will avoid future disputes and litigation concerning the Contract. 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. 161; Bankruptcy Creditors' Service, Inc., 215/945-7000) ENRON CORP: Wants Court to Approve East Bank Settlement Pact ------------------------------------------------------------ Enron Energy Services, Inc., and East Bank Club Venture were parties to prepetition transactions for the sale of electric energy and natural gas. Pursuant to a Settlement Agreement entered into between the Parties: (1) East Bank will pay EESI payments due under the transactions; and (2) EESI and East Bank will mutually release all their claims related to the transactions. The Settlement Agreement also contemplates that each liability scheduled by EESI related to East Bank will be deemed irrevocably withdrawn, with prejudice, and to the extent applicable expunged and disallowed in its entirety. EESI asks the U.S. Bankruptcy Court for the Southern District of New York to approve the Settlement Agreement. 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. 161; Bankruptcy Creditors' Service, Inc., 215/945-7000) ESCHELON TELECOM: Reports Third Quarter Financial Results --------------------------------------------------------- Eschelon Telecom, Inc., reported its results for the third quarter ended September 30, 2005. Highlights are: * completed $75 million initial public offering in August 2005 and became the first competitive local exchange carrier to successfully complete an IPO in over five and a half years; * cash flow positive for the quarter after adjusting for IPO and senior note redemption; * record lines sold of 29,043; * low average monthly customer line churn at 1.20% during the quarter ended September 30, 2005; * continued strong revenue and Pro Forma Adjusted EBITDA of $57.9 million and $10.9 million; * redeemed 35% of outstanding senior second secured notes on September 15, 2005; "I am pleased to report that we were cash flow positive for the third quarter after adjusting for our IPO and our senior note redemption," stated Richard A. Smith, Eschelon's President and Chief Executive Officer. "We also set record highs in line sales and lows in customer line churn and we continue to gather operating momentum after completing another quarter of solid business plan execution." Total revenues for the third quarter of 2005 were $57.9 million, an increase of $1.0 million from the second quarter of 2005 and an increase of $17.4 million from the third quarter of 2004. The increase from the second quarter was due to access line growth. The increase from the third quarter of 2004 is primarily due to the inclusion of ATI and, to a lesser extent, line growth. Gross margin for the third quarter of 2005 was $33.1 million, an increase of $5.3 million from the second quarter of 2005 and an increase of $8.6 million from the third quarter of 2004. The increase from the second quarter is primarily due to the second quarter including $4.7 million for the Global Crossing settlement. The annual increase is due to the growth in revenue. Pro forma adjusted gross margin for the third quarter of 2005 was $33.1 million, an increase of $0.5 million from the second quarter of 2005 and an increase of $8.6 million from the third quarter of 2004, due to the growth in revenue. Cash operating expenses for the third quarter of 2005 were $22.4 million, a decrease of $0.7 million from the second quarter of 2005 and an increase of $4.0 million from the third quarter of 2004. The ATI acquisition was the primary cause for the annual increase. The decrease in the third quarter was primarily due to a decline in fringe benefit expense resulting from lower medical/dental claims. Pro Forma Adjusted EBITDA for the third quarter of 2005 was $10.9 million, an increase of $0.8 million from the second quarter of 2005 and an increase of $4.8 million from the third quarter of 2004. Pro Forma Adjusted EBITDA is a non-GAAP measure. Capital expenditures for the third quarter of 2005 were $8.7 million, a decrease of $0.8 million from the second quarter of 2005 and an increase of $2.1 million from the third quarter of 2004. The annual increase is due to the acquisition of ATI. Capital expenditures typically fluctuate by quarter depending upon timing of major equipment purchases. The reported variance in the third quarter is within a normal range. Cash, restricted cash and available-for-sale securities at September 30, 2005, were $30.8 million, an increase of $8.8 million from the second quarter of 2005. The increase in cash from the second quarter of 2005 was primarily due to the net proceeds from our initial public offering of common stock completed in August 2005. Eschelon Telecom, Inc., is a facilities-based competitive communications services provider of voice and data services and business telephone systems in 19 markets in the western United States. Headquartered in Minneapolis, Minnesota, the company offers small and medium-sized businesses a comprehensive line of telecommunications and Internet products. Eschelon currently employs approximately 1,134 telecommunications/Internet professionals, serves over 50,000 business customers and has approximately 400,000 access lines in service throughout its markets in Minnesota, Arizona, Utah, Washington, Oregon, Colorado, Nevada and California. * * * As reported in the Troubled Company Reporter on Sept. 5, 2005, Standard & Poor's Ratings Services revised its outlook on Minneapolis, Minnesota-based Eschelon Telecom Inc. to positive from developing following the company's consummation of its initial public offering, resulting in net proceeds of $69.8 million, of which roughly $51 million will be used to redeem the senior second secured notes due 2010. Additionally, $63 million of preferred stock will be converted to common shares. All ratings, including the company's 'CCC+' corporate credit rating, were affirmed. EVERGREEN INT'L: Improved Financials Cues S&P to Lift Ratings ------------------------------------------------------------- Standard & Poor's Ratings Services raised its corporate credit rating on Evergreen International Aviation Inc. to 'B-' from 'CCC' and the senior unsecured debt rating to 'CCC+' from 'CCC-'. Both ratings were removed from CreditWatch, where they were placed with positive implications on Oct. 14, 2005. The outlook is now stable. The rating actions reflect Evergreen's somewhat improved financial profile and Standard & Poor's expectation that favorable market conditions will enable the company to sustain its stronger financial position over the near to intermediate term. The McMinnville, Oregon-based company has about $340 million of lease-adjusted debt. "Increased earnings and cash flow resulting from healthy market fundamentals and the receipt of $16.6 million in a lawsuit involving Asiana Airlines have improved Evergreen's liquidity position and financial profile sufficiently to warrant an upgrade," said Standard & Poor's credit analyst Lisa Jenkins. "Still, the rating is constrained by the company's continuing heavy debt service requirements and exposure to competitive, capital intensive, and cyclical end markets." Evergreen derives the majority of its revenues and operating profits from Evergreen International Airlines, its airfreight transportation subsidiary. The company also provides ground logistics services, aircraft maintenance and repair services, helicopter and small aircraft services, and aviation sales and leasing. Demand for most of Evergreen's services has been healthy in recent months and is expected to remain so over the near to intermediate term. In particular, the airfreight business is benefiting from continuing strong military demand and healthy commercial demand, driven by U.S. imports from China. Demand for airfreight services is expected to remain solid over the near to intermediate term, which should enable the company to sustain the improvement in operating earnings. These favorable market conditions have enabled the company to significantly increase operating earnings and cash flow in the first six months of fiscal 2006, compared with the same period of fiscal 2005. However, Evergreen continues to face significant debt service requirements, which will continue to consume much of the company's cash flow. Credit risk is heightened by the cyclical and competitive nature of the industry in which it competes, the capital intensity of its airline operations, its private ownership, which limits capital raising options, and its financial history, which includes a payment default a number of years ago and various subsequent covenant defaults. Evergreen should benefit from continued healthy demand over the near to intermediate term, which should enable it to sustain its improved financial performance. If this allows Evergreen to reduce debt service requirements, the outlook could be revised to positive. Conversely, if earnings and cash flow come under renewed pressure or if investments lead to a material increase in debt or lease commitments, the outlook could be revised to negative. EXCELLIGENCE LEARNING: Must File Financials by Nov. 14 Says Nasdaq ------------------------------------------------------------------ Excelligence Learning Corporation (Nasdaq:LRNSE) reported that the NASDAQ Listing Qualifications Panel has agreed to continue the listing of the Company's securities on The NASDAQ SmallCap Market provided that the Company files its quarterly report on Form 10-Q for the three months ended June 30, 2005 and all restated financial statements for prior periods on or before Nov. 14, 2005. On Aug. 19, 2005, the Company said it had received notice from the NASDAQ Listing Qualifications Staff that the Company's securities were subject to potential delisting from The NASDAQ SmallCap Market due to the Company's failure to file its quarterly report on Form 10-Q for the three months ended June 30, 2005 on a timely basis. As permitted by NASDAQ rules, the Company appealed the Staff's determination and was granted a hearing before the NASDAQ Listing Qualifications Panel, in which the Company requested an extension to file its quarterly report on Form 10-Q. In connection with its decision to grant the Company's request for a filing extension, the Panel has requested prompt notification of any significant events that occur during the extension period. To maintain its listing, the Company must also demonstrate compliance with all other continued listing requirements of The NASDAQ SmallCap Market. The Company is working diligently to complete its restated financial statements and its delinquent quarterly report so that its independent auditors may complete their associated audit and review in order to allow the Company to make its filings as quickly as possible, but the Company cannot guarantee that it will be able to complete such filings by Nov. 14, 2005. If the Company is unable to file the required reports by such date, it would likely request a further filing extension. There can be no guarantee that any such extension would be granted by the Panel. If such an extension were to become necessary and were not granted, the Company's securities could be delisted from The NASDAQ SmallCap Market. Headquartered in Monterey, California, Excelligence Learning Corporation -- http://www.excelligencelearning.com/-- is a developer, manufacturer and retailer of educational products which are sold to child care programs, preschools, elementary schools and consumers. The Company serves early childhood professionals, educators, and parents by providing quality educational products and programs for children from infancy to 12 years of age. With its proprietary product offerings, a multi-channel distribution strategy and extensive management expertise, the Company aims to foster children's early childhood and elementary education. The Company is composed of two business segments, Early Childhood and Elementary School. Through its Early Childhood segment, the Company develops, markets and sells educational products through multiple distribution channels primarily to early childhood professionals and, to a lesser extent, consumers. Through its Elementary School segment, the Company sells school supplies and other products specifically targeted for use by children in kindergarten through sixth grade to elementary schools, teachers and other education organizations. Those parties then resell the products either as a fundraising device for the benefit of a particular school, student program or other community organization, or as a service project to the school. * * * As reported in the Troubled Company Reporter on Sept. 15, 2005, Excelligence Learning Corporation (Nasdaq:LRNSE) reported that, on September 7, 2005, and upon the recommendation of management, its Board of Directors concluded that the Company's previously issued financial statements as of and for the year ended December 31, 2004 and the quarter ended March 31, 2005, should not be relied upon and should be restated. This conclusion was based on the results of the previously announced internal investigation initiated by the Company's Audit Committee to determine if the Company improperly failed to record and accrue for certain obligations for the period and fiscal year ended December 31, 2004. Material Weakness The circumstance of a restatement is a strong indicator that a material weakness may have existed in the Company's internal control over financial reporting. Management is continuing to evaluate whether there were one or more material weaknesses related to the Company's restatements. FLYI INC: Files Chapter 11 Petition to Restructure Aircraft Leases ------------------------------------------------------------------ FLYi, Inc., parent of low-fare airline Independence Air, reported that the Company and its subsidiaries including Independence Air, have filed voluntary petitions for reorganization under Chapter 11 of the U.S. Bankruptcy Code in order to restructure the company's aircraft leases and other obligations to achieve necessary cost savings. Asset Sale The company also said it will request court approval to engage in a formal court-supervised auction process to seek outside investors or purchasers it needs to continue its operations. If the process is successful, it is expected to be concluded within the next sixty days. Those who have expressed interest during previous discussions, as well as new parties, will be invited to present their bids. Bidders will be permitted to demonstrate their interest in investing in the company, or to bid on all or portions of the company's assets. The company currently anticipates that it has the financial resources to fund its obligations-including the payment of employee wages and benefits-during the process. As it undertakes the auction process, Independence Air plans to continue serving customers, and to continue its flight schedules in the ordinary course of business. The company plans to honor reservations and tickets on Independence Air and to allow its 1,000,000+ iCLUB(SM) members to continue to accrue and redeem points on the airline with no restrictions. The company has no plans to make any additional changes to its operating schedule or route map of destinations at this time. Independence Air now offers approximately 220 daily departures to 36 destinations. "After careful consideration, we have concluded that a court- supervised restructuring will allow us to complete our cost- savings initiatives while seeking outside investors or purchasers, and represents the best solution for Independence Air, our customers, employees, creditors and the communities we serve," said Kerry Skeen, Chairman and CEO of FLYi, Inc. Mr. Skeen added, "Since the launch of Independence Air almost 18 months ago, our employees have helped us achieve a remarkable degree of customer service success and brand recognition while operating in what has been described as the most challenging economic environment in airline industry history, including record high fuel prices and extreme revenue weakness. These circumstances have prevented us-and virtually all U.S. airlines- from meeting financial goals. We have already reduced operating costs by undertaking a comprehensive operational restructuring. We will continue that effort and move quickly to use the tools of the Chapter 11 process to implement other changes that will allow us to achieve an even more competitive cost structure to make us more attractive to potential investors or purchasers." Pay Cuts As part of this cost-cutting effort, the company has announced it is undertaking a process aimed at company-wide wage reductions. Taking a leadership role, CEO Kerry Skeen has agreed to an immediate 25% salary reduction on top of a 15% cut earlier this year. President and Chief Operating Officer Tom Moore will take a 20% cut, on top of an earlier 10% reduction. Management and other salaried employees will be subject to an immediate 5% pay reduction. The company has been engaging the leaders of its unionized work groups-pilots, flight attendants and mechanics-in an effort to enact changes to wage rates and work rules. It is anticipated that an announcement on a tentative agreement with both the flight attendants (AFA) and mechanics (AMFA) will be released shortly. Mr. Skeen concluded, "We want to once again offer our sincere thanks to the seven million passengers who have flown with us so far. Since we launched last summer, we have built a brand that truly stands for something -- a very different style of service -- and our customers have been more than generous in their praise of our people. As we work behind the scenes to address the company's financial situation, we thank you for your continued support of Independence Air at Washington Dulles and in all the communities we serve. " In conjunction with today's filing, Independence Air filed a variety of "first day motions" to help ensure a smooth transition into the Chapter 11 reorganization case. During the auction process, vendors, suppliers and other business partners will be paid under normal terms for goods and services provided during the reorganization. Miller Buckfire and Co., LLC and ENA Advisors have been retained as the company's financial advisors and Jones Day has been retained as restructuring counsel. Gibson Dunn & Crutcher LLP serves as the company's corporate counsel. All FLYi, Inc. shareholders are advised that the likely outcome of the company's Chapter 11 case is the cancellation of the company's existing common stock without consideration, in which case FLYi stock would have no value. FLYi stock is highly speculative and the company urges investors to use extreme caution in decisions about the stock. Headquartered in Dulles, Virginia, FLYi, Inc., aka Atlantic Coast Airlines Holdings, Inc. -- http://www.flyi.com/-- is the parent of Independence Air Inc., a small airline based at Washington Dulles International Airport. The Debtor and its six affiliates filed for chapter 11 protection on Nov. 7, 2005 (Bankr. D. Del. Case Nos. 05-20011 through 05-20017). Brendan Linehan Shannon, Esq., M. Blake Cleary, Esq., and Matthew Barry Lunn, Esq., at Young, Conaway, Stargatt & Taylor, represent the Debtors in their restructuring efforts. As of Sept. 30, 2005, the Debtors listed assets totaling $378,500,000 and debts totaling $455,400,000. Unrestricted cash as of the day of filing was $24.0 million. FLYI INC: Case Summary & 40 Largest Unsecured Creditors ------------------------------------------------------- Lead Debtor: FLYi, Inc. aka Atlantic Coast Airlines Holdings, Inc. 45200 Business Court Dulles, Virginia 20166 Bankruptcy Case No.: 05-20011 Debtor affiliates filing separate chapter 11 petitions: Entity Case No. ------ -------- Independence Air, Inc. 05-20012 Atlantic Coast Jet, LLC 05-20013 Atlantic Coast Academy, Inc. 05-20014 IA Sub, Inc. 05-20015 WaKeeney, Inc. 05-20016 Atlantic Coast Airlines, Inc. 05-20017 Type of Business: FLYi Inc. is the parent of Independence Air Inc., a small airline based at Washington Dulles International Airport. Independence Air offers low fares every day serving 38 destinations in 23 states in the Eastern, Midwestern and Western United States, with 200 scheduled non-stop flights system-wide every weekday with comfortable leather seats and Tender Loving Service(SM). See http://www.flyi.com Chapter 11 Petition Date: November 7, 2005 Court: District of Delaware Judge: Mary F. Walrath Debtors' Counsel: Brendan Linehan Shannon, Esq. M. Blake Cleary, Esq. Matthew Barry Lunn, Esq. Young, Conaway, Stargatt & Taylor The Brandywine Building 1000 West Street, 17th Floor P.O. Box 391 Wilmington, Delaware 19899-0391 Tel: (302) 571-6600 Fax: (302) 571-1253 Financial Condition as of September 30, 2005: Total Assets: $378,500,000 Total Debts: $455,400,000 Consolidated List of Debtors' 40 Largest Unsecured Creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ U.S. Bank National Association Convertible Notes $125,000,000 Goodwin Square As Trustee 225 Asylum Street Hartford, CT 06103 Export Development Canada Aircraft Loans $56,443,254 151 O'Connor Ottawa, ON K1A1K3 Canada HSH Nordbank AG Aircraft Loans $19,507,071 Martensdamm 6 Kiel 24103 Germany Canadian Regional Aircraft Loan $18,814,257 Aircraft Finance Transaction No. 1 Limited 22 Greenville Street Saint Helier, Jersey JE48PX Channel Islands Trident Turboprop (Dublin) Ltd. Convertible Notes $16,141,438 North Wall Quay Interest Bearing Dublin 1, Dublin Notes/ Lease Ireland Settlement Claims 1997-1 Pass Through Trusts Aircraft Loans $7,134,833 Manufactures & Traders Co. 25 S. Charles Street, 16th Floor Baltimore, MD 21210 BAE Systems Regional Convertible Notes $5,000,000 Aircraft Inc. Acting on its behalf & on behalf Of its affiliate BAE Systems (Operations) Limited 13850 McLearen Road Herndon, VA 20171 FINOVA Capital Corp. Convertible Notes $4,459,208 4800 North Scottsdale Road M/S 4W75 Scottsdale, AZ 85251 AVSA S.A.R.L. Interest Bearing $3,750,000 2 Rond-Point Maurice Bellonte Notes Blagnac, 31700 France BAE Systems Regional Interest Bearing $3,500,000 Aircraft Inc. Notes Acting on its behalf & on behalf Of its affiliate BAE Systems (Operations) Limited 13850 McLearen Road Herndon, VA 20171 Wachovia Bank NA Aircraft Rent $2,414,913 401 South Tryon Street Obligations 12th Floor, NC1179 Charlotte, NC 28288-5272 ING Lease (Ireland) B.V. Aircraft Rent $1,134,787 1325 Avenue of the Americas New York, NY 10019 Erste Bank der Oesterreichischen Bank Loan $652,891 Sparkassen AG, London Branch 68 Comhill London EC3V 3QE United Kingdom SEQUA CORP. Maintenance Contract $621,091 4430 Direct Drive P.O. Box 200150 San Antonio, TX 78219 Stacy M. Platone Litigation Claim $370,000 20415 Riverbend Square Apartment 203 Sterling, VA 20165 Aircraft Protective Systems Trade Payable $159,947 APS, Inc. U.S. Bank National Association Trustee Fees $150,494 America OnLine Inc. Trade Payable $140,238 Wachovia Bank NA Trustee Fees $125,200 Pan Am Trade Payable $123,213 Hillsborough County Aviation Trade Payable $116,857 U.S. Bank National Association Aircraft Rent $100,319 Obligations Greensville-Spartanburg Airport Related $100,162 Charges Treasurer of Allen County Property Taxes $90,003 Travelocity.com LLP Trade Payable $89,111 Avcraft Aerospace GMBH Trade Payable $82,000 Rockwell Collins Inc. Trade Payable $80,583 Citta, Inc. Trade Payable $80,167 RDA Corporation Trade Payable $79,228 Marion County Treasurer Property Taxes $73,819 Tangible Impact, Inc. Trade Payable $73,097 Tysons Corner Holding, LLC Trade Payable $69,996 Allied Signal Aerospace Trade Payable $68,881 Saint Joseph County Treasurer Property Taxes $65,928 Reebaire Services Inc. Trade Payable $60,381 New Media Strategies Inc. Trade Payable $53,332 Cisco Systems Capital Corp. Trade Payable $52,714 TravelZoo USA, Inc. Trade Payable $51,259 Avex Flight Support Inc. Trade Payable $48,305 FAA Government Obligations Unknown FLYI INC: S&P's Credit Rating Tumbles to D After Bankruptcy Filing ------------------------------------------------------------------ Standard & Poor's Ratings Services lowered its ratings on FLYi Inc., including lowering the corporate credit rating to 'D' from 'CC.' Ratings on pass-through certificates were also lowered and remain on CreditWatch with negative implications. "The rating actions follow the company's filing for Chapter 11 bankruptcy protection on Nov. 7, 2005," said Standard & Poor's credit analyst Betsy Snyder. "Over the next 60 days, the company will seek outside investors in order to continue its operations," she continued. Dulles, Virginia-based FLYi is the parent of Independence Air, a small airline based at Washington Dulles International Airport. Since its conversion to a low-cost airline in mid-2004, the company's losses have been substantial after several profitable years when it served as a feeder partner to United Air Lines Inc. and Delta Air Lines Inc. In the first half of 2005, the company lost $202 million after a $192 million loss in 2004. Its previously healthy unrestricted cash position had eroded to only $24 million at the time of its bankruptcy filing. Absent new investment to support a reorganization, the company will likely be liquidated. In its bankruptcy filing, the company has indicated it will reject all eight J41 aircraft financed through pass-through trust series 1997-1A-C. The other six aircraft included in this pass-through trust series are CRJ-200 models. Series A noteholders will likely receive substantial, but less than full, recovery on their investment. However, it is very unlikely that series B and C noteholders will receive anything. Recent developments in the 50-seat regional jet aircraft market have resulted in an oversupply of this size of aircraft, which has led to the announced cessation of production in 2006 by Bombardier. In addition, recovery will also be reduced by interest payments expected to be made to noteholders from the dedicated liquidity facility and costs associated with repossession of the aircraft. GARDEN STATE: Court Extends Plan Filing Period to Jan. 5 -------------------------------------------------------- The U.S. Bankruptcy Court for the District of New Jersey extended the period within which Garden State MRI Corporation may file a plan of reorganization until Jan. 5, 2006. The Debtor may solicit acceptances to that plan until March 6, 2005. The Debtor sought the extension to continue good-faith negotiations to resolve issues facing its estate. Headquartered in Vineland, New Jersey, Garden State MRI Corporation, dba Eastlantic Diagnostic Institute -- http://www.eastlanticdiagnostic.com/-- operates an out-patient imaging and radiology facility. The Company filed for chapter 11 protection on June 9, 2005 (Bankr. D. N.J. Case No. 05-29214). Arthur Abramowitz, Esq. and Jerrold N. Poslusny, Jr., Esq., at Cozen O'Connor, represent the Debtor in its restructuring efforts. When the Debtor filed for protection from its creditors, it listed estimated assets of less than $50,000 and estimated debts between $10 million to $50 million. G0LDSTAR EMERGENCY: J. Patrick Magill Approved as Interim CEO ------------------------------------------------------------- The U.S. Bankruptcy Court for the Southern District of Texas gave Goldstar Emergency Medical Services, Inc., and its debtor- affiliates permission to employ and appoint J. Patrick Magill of MCR Capital Advisors Corporation as their interim Chief Executive Officer. Mr. Magill will: 1) manage corporate activities, including the development of strategic and tactical business plans and processes, control of cash and commitments for expenditures; 2) review historical financial statements, cash flow analysis, accounts receivables, accounts payable, inventory and related sales and financial projections; 3) assist the Debtors in preparing and conducting negotiations with creditors, landlords, the IRS, prospective purchasers, and regulatory agencies; 4) assist in preparing and analyzing any chapter 11 plans and disclosure statements and analyzing potential sale or partition of the Debtors; 5) provide expert testimony and assist in lawsuits or adversary proceedings; and 6) assist the Debtors with other matters connected with their reorganization efforts as the management or counsel for the Debtors may request. Besides Mr. Magill, Arthur C. Rice and Thomas A. Colvin of MCR Capital will also provide services to the Debtor. Messrs. Magill, Rice and Colvin will each charge $175 per hour for their services, plus reimbursement of necessary out-of-pocket expenses. Mr. Magill reports that fees of MCR Capital will be capped at $25,000 per month. The Debtors assure the Bankruptcy Court that Mr. Magill and MCR Capital does not hold any interest adverse to their estates and are "disinterested persons" as that term is defined in section 101(14) of the Bankruptcy Court. Headquartered in Houston, Texas, Goldstar Emergency Medical Services, Inc., aka Goldstar EMS -- http://www.goldstarems.com/ -- is one of the largest providers of emergency medical services in Texas with over 120,000 ambulance responses annually. Goldstar Emergency and its debtor-affiliates filed for chapter 11 protection on April 25, 2005 (Bankr. S.D. Tex. Lead Case No. 05- 36446). Goldstar staffs Mobile Intensive Care capable ambulances, which are supplied and stocked with the most technologically advanced equipment available such as automatic vehicle locators, electronic data collection devices, Zoll Biphasic M series monitors and a host of other premier medical products. Edward L Rothberg, Esq., and Melissa Anne Haselden, Esq., at Weycer Kaplan Pulaski & Zuber represent the Debtors in their restructuring efforts. When the Debtors filed for chapter 11 protection, they estimated between $10 million to $50 million in assets and debts. G0LDSTAR EMERGENCY: Court Denies Exclusive Periods Extension ------------------------------------------------------------ The U.S. Bankruptcy Court for the Southern District of Texas denied Goldstar Emergency Medical Services, Inc., and its debtor- affiliates' request to extend their exclusive periods to file a chapter 11 plan and to solicit acceptances of that plan. The Debtors wanted their exclusive filing period extended to Dec. 31, 2005, and their exclusive solicitation period extended to March 1, 2006. As a result, the Debtors' exclusive filing period expired on October 24, 2005. The Debtors and their counsel, Melissa Anne Haselden, Esq., at Weycer Kaplan Pulaski & Zuber, told the Court that the extension of the Debtors' exclusive periods was necessary in light of the devastation caused by hurricanes Katrina and Rita in the state of Texas where they operate. But the despite the arguments and the evidence presented by the Debtors, the Court found no merit to grant the Debtors' request. Headquartered in Houston, Texas, Goldstar Emergency Medical Services, Inc., aka Goldstar EMS -- http://www.goldstarems.com/ -- is one of the largest providers of emergency medical services in Texas with over 120,000 ambulance responses annually. Goldstar Emergency and its debtor-affiliates filed for chapter 11 protection on April 25, 2005 (Bankr. S.D. Tex. Lead Case No. 05- 36446). Goldstar staffs Mobile Intensive Care capable ambulances, which are supplied and stocked with the most technologically advanced equipment available such as automatic vehicle locators, electronic data collection devices, Zoll Biphasic M series monitors and a host of other premier medical products. Edward L Rothberg, Esq., and Melissa Anne Haselden, Esq., at Weycer Kaplan Pulaski & Zuber represent the Debtors in their restructuring efforts. When the Debtors filed for chapter 11 protection, they estimated between $10 million to $50 million in assets and debts. GREENBRIER COMPANIES: Reports Results for Fiscal Fourth Quarter --------------------------------------------------------------- The Greenbrier Companies (NYSE: GBX) reported that net earnings for the fiscal fourth quarter and fiscal year ended August 31, 2005, were $10.6 million, up 33% from the $8.0 million in the fourth quarter of fiscal 2004. The Company reported revenues grew by 31% to $265 million in the fourth quarter of fiscal 2005, compared with $202 million in the fourth quarter of fiscal 2004. For the full fiscal 2005, the Company reported net earnings were a record $29.8 million, up 43% from $20.8 million in fiscal 2004. Greenbrier reported that revenues grew to a record $1 billion for the full fiscal 2005, up 40% from $729 million in fiscal 2004. EBITDA for fiscal 2005 was $88 million, compared to $62 million in 2004. "Fiscal 2005 was a very successful year for the Company, marked by numerous financial, strategic and corporate governance accomplishments," William A. Furman, president and chief executive officer, said. "Our backlog coupled with railroad industry fundamentals provides good financial visibility for 2006 and into 2007." Business Ventures During 2005, the Company increased the public float in its stock and simplified its capital structure. This objective was achieved through a secondary stock offering, issuance of $175 million of senior unsecured notes, and a new $150 million revolving credit facility. Greenbrier acquired the remaining 50% interest in its joint venture to build freight cars in Sahagun, Mexico and took over day-to-day management of the operations. The financial performance of this operation has improved dramatically under Greenbrier's control. The Company expanded global supply chain initiatives through a strategic alliance with Zhuzhou Rolling Stock Works, part of China South Rail, the largest freight car manufacturer in China. Through ZRSW and other global suppliers, the Company continues to drive down its manufacturing costs, increase throughput, and identify commercial collaboration opportunities in China and elsewhere. Greenbrier entered into an agreement with Babcock & Brown Rail Management LLC to jointly acquire and lease railcars for the North American market. Independent Board Members The Company met its goal of having a majority of independent Board members well before the statutory requirement of December 31, 2005. Ambassador Charles Swindells was added to the Board as an independent director. Five of the eight Board members are independent under the definition of the New York Stock Exchange. The Greenbrier Companies -- http://www.gbrx.com/-- headquartered in Lake Oswego, Oregon, is a leading supplier of transportation equipment and services to the railroad industry. In addition to building new railroad freight cars in the U.S., Canada, and Mexico and to repairing and refurbishing freight cars and wheels at 17 locations across North America, Greenbrier builds new railroad freight cars and refurbishes freight cars for the European market through both its operations in Poland and various subcontractor facilities throughout Europe. Greenbrier owns approximately 10,000 railcars, and performs management services for approximately 129,000 railcars. * * * Standard & Poor's Ratings Services rated the Company's 8-3/8% Senior Notes due 2015 at B+. HIGHLANDERS ALLOYS: Court Extends Plan Filing Period to Jan. 22 --------------------------------------------------------------- The U.S. Bankruptcy Court for the Southern District of West Virginia extended, through and including Jan. 22, 2005, the time within which Highlanders Alloys, LLC, has the exclusive right to file a chapter 11 plan. The Debtor also retains the exclusive right to solicit acceptances of that plan from its creditors through March 23, 2005. The Debtor explains that it has been diligently pursuing a sale of its business as a going concern and has made substantial progress toward a potential sale. The interested potential purchaser is fully capable of completing the sale and has engaged in earnest negotiations for that sale. In anticipation of a sale of the business as a going concern and in order to propose a feasible plan of reorganization, the Debtor needs additional time to bring its recommenced operations fully up to speed and to complete its sale negotiations. The Debtor adds that the extension will enable the Debtor to continue to pursue the sale negotiations without distractions while formulating a feasible chapter 11 plan. Headquartered in New Haven, West Virginia, Highlanders Alloys, LLC, manufactures silicon manganese alloys for the steel and automotive industries. The Company and its debtor-affiliate filed for chapter 11 protection on May 27, 2005 (Bankr. S.D. W.Va. Case No. 05-30516). John Patrick Lacher, Esq., and Robert O. Lampl, Esq., at Law Offices of Robert O. Lampl, represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they estimated total assets and debts of $1 million to $10 million. INTERSTATE BAKERIES: Fishlowitz Class Holds $6-Mil Unsecured Claim ------------------------------------------------------------------ Paul M. Hoffmann, Esq., at Stinson Morrison Hecker LLP, in Kansas City, Missouri, relates that Mitchell Fishlowitz is the representative of a putative class captioned Fishlowitz, et al., etc. v. Interstate Brands Corporation, Inc., Case No. CV03-9585 RGK (JWJx), which is currently pending in the United States District Court for the Central District of California. The Fishlowitz Class, which is composed of Interstate Brands' former and current employees, asserted claims against the company based on violations of federal and California laws. Interstate Brands has denied the Fishlowitz Class' allegations and contested their claims. On Feb. 16, 2005, Mr. Fishlowitz asked the Bankruptcy Court to lift the automatic to allow the California Court Action to continue against the Debtors and non-debtor codefendants. On March 18, 2005, Mr. Fishlowitz's counsel filed Claim Nos. 7443 and 7447 in the Debtors' Chapter 11 cases, on behalf of Mr. Fishlowitz and of other members of the general public similarly situated. Additionally, 327 of the members of the purported 1,984-person class filed individual claims. As of Sept. 9, 2005, the California Court has not certified the Fishlowitz Action as a class action in accordance with Rule 23(c) of the Federal Rules of Civil Procedure. Nevertheless, Mr. Fishlowitz filed the two claims on behalf of the Fishlowitz Class as a purported class. On Aug. 24, 2005, the parties engaged in mediation before Judge Federman of the United States Bankruptcy Court for the Western District of Missouri. During the course of mediation, the parties reached an agreement in principal on the economic terms of a settlement of the Fishlowitz Action. To avoid the expense, delay, and uncertainty of litigation, the parties agreed that: (a) The Fishlowitz Class will be collectively allowed a $6,000,000 general, prepetition, unsecured claim, subject to a final order from the California Court authorizing and approving the Settlement Agreement; (b) The Debtors will pay the Fishlowitz Class $2,000,000, as an administrative expense claim; (c) The Allowed Claims and Payments will constitute the total amount of allowances or payments to be made by the Debtors to the Fishlowitz Class; (d) The Fishlowitz Class will waive its claim to entitlement of postpetition interest on the $6,000,000 Allowed Claim for the period after the Petition Date through the date of the preliminary approval of the Settlement Agreement in the Fishlowitz Action. However, the parties are free to argue regarding the accrual and payment of postpetition interest attributable to time periods after the Preliminary Approval Date; (e) The $6,000,000 Allowed Claim will be one class claim that is entitled to one vote with respect to any plan of reorganization proposed in the Debtors' Chapter 11 cases; (f) The Debtors and their affiliated parties will receive full and complete releases from each member of the Salesperson Class; (g) Released Parties will receive full and complete releases from each member of the Uniform Class; (h) The Fishlowitz Class agrees to the dismissal of the Fishlowitz Action, with prejudice, upon entry of the Final Order; (i) All of the Fishlowitz Class claims that were filed against the Debtors will be deemed withdrawn, with prejudice, upon the occurrence of the Final Order Date except to the extent that they deal with matters other than the Released Claims or to the extent that the Claimants opt out of the Class; and (j) Mr. Fishlowitz and his assigns will release the Released Parties to the fullest extent possible, including a waiver pursuant to Section 1542 of the Civil Code. Accordingly, the Debtors ask the Court to: (1) modify the automatic stay to allow them to proceed in the Fishlowitz Action for the purpose of conducting a fairness hearing and seeking approval for and implementation of the Settlement Agreement; (2) approve their Settlement Agreement with the Fishlowitz Class; and (3) conditionally approve a $6,000,000 unsecured class claim and a $2,000,000 administrative class claim in favor of the Fishlowitz Class members. * * * The Court approves the Debtors' request. 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. 31; Bankruptcy Creditors' Service, Inc., 215/945-7000) INTERSTATE BAKERIES: Selling Chicago Property for $7 Million ------------------------------------------------------------ Interstate Bakeries Corporation and its debtor-affiliates seek the U.S. Bankruptcy Court for the Western District of Missouri's authority to sell their real estate property at 1301 West Diversey Parkway, in Chicago, Illinois, to 1301 West Diversey, LLC, an Illinois limited liability company, for $7,000,000, subject to higher or otherwise better offers. The Chicago Property includes approximately 1.3 acres of land with a 33,107-square foot building that the Debtors currently use for the operation of a depot and a thrift store. Thus, the Debtors also want the sale of the Chicago Property to be subject to a lease of the Property for up to one year by the Successful Bidder to the Debtors to enable the Debtors to continue operating the depot and thrift store on the Property while they continue to evaluate their business operations in Chicago and search for other more suitable and cost-efficient space. A joint venture composed of Hilco Industrial, LLC, and Hilco Real Estate, LLC, serves as the Debtors' broker with respect to the Chicago Property. The Debtors, in conjunction with their legal and financial advisors and Hilco, determined that the sale agreement proposed by West Diversey represents the best offer for the Chicago Property. The Proposed Sale Agreement between the Debtors and West Diversey further provides that: A. Escrow Deposit West Diversey has already deposited $700,000 in escrow. B. Closing The Closing will occur within five business days of Court approval of the Proposed Sale Agreement subject to the payment of the Purchase Price. C. Lease West Diversey agrees to lease the Chicago Property to the Debtors for one year, subject to the Debtors' right and ability to terminate the Lease at any time upon 30 days prior notice. Monthly gross rent under the Lease is $19,312, provided that the Debtors are responsible for payment of utilities and repairs to the Property, while West Diversey is responsible for the payment of real property taxes. D. Title & Condition of Property The Debtors will deliver good and marketable fee simple title to the Land and Improvements, free ad clear of liens, other than Permitted Exceptions, including the Lease. The Property is being sold "as-is, where-is," with no representations or warranties, reasonable wear and tear and casualty and condemnation excepted. West Diversey is assuming all environmental liabilities of the remediation program that is currently ongoing on the Property. To maximize the value realized by their Chapter 11 estates from the sale of the Chicago Property, the Debtors will continue to seek and solicit bids that are higher or otherwise better than the offer submitted by West Diversey. The Debtors have agreed to provide Bid Protections to West Diversey in the form of a termination fee equal to $140,000 or 2% of the Purchase Price. The Debtors will also pay reasonable and documented expense reimbursement of up to $50,000 to West Diversey. Illinois Responds The Illinois Department of Revenue; the County of Cook, Illinois; and the City of Chicago object to the Debtors' request to the extent it seeks a declaratory judgment that the proposed sale is exempt from stamp and similar taxes pursuant to Section 1146(c) of the Bankruptcy Code. The Illinois Parties assert that the exemption does not apply to pre-confirmation sales. They further note that the Section 1146(c) exemption extends only to "stamp and similar taxes" imposed on the making or delivery of an instrument of transfer. The Illinois Parties, therefore, ask the Court to deny the Debtors' request to the extent the Debtors: (i) seek to extend the exemption to additional taxes beyond "stamp and similar taxes"; and (ii) attempt to extend the exemption to include conveyance fees, recording fees, costs and expenses. 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. 31; Bankruptcy Creditors' Service, Inc., 215/945-7000) INTERSTATE BAKERIES: Wants to Walk Away From 13 Burdensome Leases ----------------------------------------------------------------- Interstate Bakeries Corporation and its debtor-affiliates have determined that 13 unexpired non-residential real property leases: -- constitute an unnecessary drain on their cash flow; -- are unnecessary to their ongoing operations and business; -- are not a source of potential value for their future operations, creditors and interest holders; and -- do not have any marketable value beneficial to their Chapter 11 estates. The Debtors seek the U.S. Bankruptcy Court for the Western District of Missouri's authority to reject the 13 Real Property Leases effective as of Nov. 9, 2005, to reduce their postpetition administrative costs: Landlord Location Lease Date -------- -------- ---------- Downtown LLC 216 East Santa Fe, 03/16/1982 Olathe, Kansas The Palms Investment 15602 North 35th Ave., 03/04/1987 Group, LLC Phoenix, Arizona Nuccitelli Investments 1605 Old Bayshore 06/22/1990 Highway, San Jose, California Far East Foods, Inc. 140 North Barrington 10/25/1991 d/b/a Barrington Road, Streamwood, Meadows Shopping Illinois Center Hoerth Storage 56 Halbach Court Fond 02/18/1992 du Lac, Wisconsin George Kingston 7882 North Main St., 04/01/1992 Jonesboro, Georgia Villa North LLC 815 North Main Street, 12/15/1992 Bluffton, Indiana Waterfall Shopping 610 North Alma School 01/21/1993 Center, Inc. Road, Chandler, Arizona David Collette 277 Jefferson Ave., 08/01/1993 Pocatello, Idaho Hedgeapple Management 1812 South Highway 54, 05/28/1998 Eldon, Missouri Soldier Field Plaza, 808 South Broadway, 11/14/2001 LLP Rochester, Minnesota Division Street 527 West Grant Street 02/01/2003 Associates (Bay 8), Orlando, Florida A.G. Bogen Company 620 West 58th Street, 12/04/2003 Minneapolis, Minnesota 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. 31; Bankruptcy Creditors' Service, Inc., 215/945-7000) JP MORGAN: Fitch Puts Low-B Ratings on $27.5 Mil. Cert. Classes --------------------------------------------------------------- Fitch Ratings has assigned these ratings to J.P. Morgan Mortgage Acquisition Corp.'s asset-backed pass-through certificates, series 2005-WMC1, which closed on Oct. 27, 2005: -- $1.098 billion classes A-1 through A-4 'AAA'; -- $55.74 million class M-1 'AA+'; -- $49.95 million class M-2 'AA'; -- $29.68 million class M-3 'AA-'; -- $26.79 million class M-4 'A+'; -- $25.34 million class M-5 'A'; -- $23.17 million class M-6 'A-'; -- $20.99 million class M-7 'BBB+'; -- $18.10 million class M-8 'BBB'; -- $18.10 million class M-9 'BBB-'. -- $13.75 million privately offered class M-10 'BB+' -- $13.75 million privately offered class M-11 'BB'. The 'AAA' rating on the senior certificates reflects the 24.15% total credit enhancement provided by the 3.85% class M-1, 3.45% class M-2, 2.05% class M-3, 1.85% class M-4, 1.75% class M-5, 1.60% class M-6, 1.45% class M-7, 1.25% class M-8, 1.25% M-9, 0.95% privately offered class M-10, 0.95% privately offered class M-11 and initial and target overcollateralization of 3.75%. All certificates have the benefit of monthly excess cash flow to absorb losses. In addition, the ratings reflect the quality of the loans, the integrity of the transaction's legal structure as well as the capabilities of J.P. Morgan Chase as servicer, U.S. Bank National Association as trustee and JPMorgan Chase Bank as securities administrator. The certificates are supported by two collateral groups. Group I consist of mortgage loans with principal balances conform to Fannie Mae and Freddie Mac guidelines. Group II consists of all other remaining mortgage loans. The group I mortgage pool consists of adjustable-rate and fixed-rate, first and second lien mortgage loans with a cut-off date pool balance of $532,588,419. Approximately 15.79% of the mortgage loans are fixed-rate mortgage loans, 84.24% are adjustable-rate mortgage loans and 8% are second lien mortgage loans. The weighted average loan rate is approximately 7.095%. The weighted average remaining term to maturity is 340 months. The average principal balance of the loans is approximately $154,284. The weighted average combined loan-to-value ratio is 81.62%. The properties are primarily located in California, Florida and Maryland. The group II mortgage pool consists of adjustable-rate and fixed-rate, first and second lien mortgage loans with a cut-off date pool balance of $915,323,728. Approximately 19.47% of the mortgage loans are fixed-rate mortgage loans, 80.53% are adjustable-rate mortgage loans and 12.11% are second lien mortgage loans. The weighted average loan rate is approximately 7.153%. The WAM is 334 months. The average principal balance of the loans is approximately $218,454. The weighted average CLTV is 82.88%. The properties are primarily located in California, New York and Florida. WMC is a mortgage banking company incorporated in the State of California. WMC was owned by a subsidiary of Weyerhaeuser Company until May 1997 when it was sold to WMC Finance Co., a company owned principally by affiliates of Apollo Management, L.P., a private investment firm. On June 14, 2004, GE Consumer Finance acquired WMC Finance Co. As of March 2000, WMC changed its business model to underwrite and process 100% of its loans on the internet via "WMC Direct". For federal income tax purposes, multiple real estate mortgage investment conduit elections will be made with respect to the trust estate. KAISER ALUMINUM: Names Post-Emergence Board of Directors -------------------------------------------------------- Kaiser Aluminum reported it has selected the individuals who will serve as directors of the company after it emerges from Chapter 11 in early 2006. The new board -- which consists of labor leaders; finance, accounting and governance professionals; and leaders with experience in metals, energy, aerospace, engineering and manufacturing industries -- was selected by a committee of advisors including management and representatives of principal creditor interests in the Chapter 11 case. Upon emergence from Chapter 11, members of the Kaiser Aluminum board will include: * George Becker, * Carl Frankel, * Teresa Hopp, * Bill Murdy, * Al Osborne, * Georganne Proctor, * Jack Quinn, * Tom Van Leeuwen, and * Brett Wilcox. Jack Hockema, president and CEO of Kaiser Aluminum, will serve as chairman of the new board. "This outstanding slate of leaders who will serve as our post- emergence directors represents another critical step toward building our future as a new, financially strong company with an efficient and flexible operating structure, excellent quality products and a loyal, growing customer base," said Mr. Hockema. "These men and women will offer invaluable guidance and oversight to the company as it continues to compete and grow as a world- class producer of high-quality aluminum products following emergence from Chapter 11." "The post-emergence board will be comprised of a unique set of individuals, each with significant knowledge and experience in areas critical to the success of Kaiser Aluminum," said Lisa Beckerman, chair of the board selection committee and legal advisor to the Unsecured Creditors Committee in the Chapter 11 case. "Although they come from diverse backgrounds representing top organizations in their respective fields, these future board members share in a vision for the future of this company and its goals for growth and success." George Becker served two terms as president of the United Steel Workers of America international and served in many other roles with the USW for over forty years. Now retired, Mr. Becker is currently chairman of the labor advisory committee to the U.S. Trade Representative and the Department of Labor, appointed by President Bill Clinton and reappointed by President George W. Bush. Mr. Becker is also a member of the U.S.-China Economic & Security Review Commission chartered by Congress to study and report on a wide range of issues. Previously, Mr. Becker served as an AFL-CIO vice president, chairing the AFL-CIO Executive Council's key economic policy committee. During that time, Mr. Becker was an executive member of the International Metalworkers Federation and chairman of the World Rubber Council of the International Federation of Chemical, Energy, Mine and General Workers' Unions. Mr. Becker also served two terms as the USWA International Vice President for Administration. Carl B. Frankel currently serves as a union-nominated member of LTV Steel Corporation's corporate board of directors and a member of the board of directors of Us TOO, a prostate cancer support and advocacy organization. Previously, Mr. Frankel was general counsel to the United Steel Workers of America. Prior to this tenure, Mr. Frankel was associate general counsel to the USWA for twenty-nine years. From 1987 through 1999, Mr. Frankel served at the staff level of the Collective Bargaining Forum, a government- sponsored tripartite committee consisting of government, union and employer representatives designed to improve labor relations in the United States. Mr. Frankel is an elected fellow of the College of Labor and Employment Lawyers and a published author of several articles. Mr. Frankel has also earned the Sustained Superior Performance Award from the NLRB and the Outstanding Performance Award from the NLRB. Mr. Frankel earned a Bachelor's degree and Juris Doctorate from the University of Chicago. Teresa A. Hopp is a board member and audit committee chair for On Assignment, Inc. in Calabasas, California, where she is responsible for oversight of Sarbanes-Oxley compliance. Ms. Hopp previously served as chief financial officer for Western Digital Corporation. Prior to joining Western Digital Corporation, Ms. Hopp served as an audit partner for Ernst & Young LLP where she managed audit department resource planning and scheduling, and served as internal education director and information systems audit and security director. Ms. Hopp graduated summa cum laude from the California State University, Fullerton, with a Bachelor's degree in Business Administration. William F. Murdy is chairman and chief executive officer of Comfort Systems USA. Previously, he served as interim president and chief executive officer of Club Quarters; chairman, president, and chief executive officer of Landcare USA, Inc. Mr. Murdy has also served as president and chief executive officer of General Investment & Development in Boston, Massachusetts, and as president and managing general partner with Morgan Stanley Venture Capital, Inc. Previously, Mr. Murdy served as senior vice president-Petroleum Operations at Pacific Resources, Inc. Mr. Murdy's current directorships also include UIL Holdings. Mr. Murdy holds a Bachelor of Science degree in Engineering from the U.S. Military Academy, West Point, and a Master's degree in Business Administration from the Harvard Business School. Alfred E. Osborne, Jr., Ph.D. currently holds several leadership positions and since 2002 has been senior associate dean at the University of California at Los Angeles' Anderson School of Management. Since 1987, Mr. Osborne has been director, and more recently faculty director, of the Harold & Pauline Price Center for Entrepreneurial Studies. Mr. Osborne also has served as associate professor of Global Economics and Management, and faculty director of The Head Start Johnson & Johnson Management Fellows Program. Previously, Mr. Osborne held various administrative posts at UCLA, including terms as chairman of the Business Economics faculty and director of the MBA program. In addition, Dr. Osborne is a trustee of the WM Group of Funds and holds several corporate directorships, including Nordstrom, K2 Sports, EMAK WorldWide and FPA's Capital, Crescent and New Income Funds. Mr. Osborne holds a Doctorate degree in Business Economics, a Master's degree in Business Administration, a Master of Arts degree in Economics and a Bachelor's degree in Electrical Engineering from Stanford University. Georganne C. Proctor served from February 2003 to April 2005 as executive vice president of Finance for Golden West Financial Corporation, the holding company of World Savings Bank, the second largest U.S. thrift behind Washington Mutual. From 1994 through 2002, Mrs. Proctor was senior vice president, chief financial officer and a member of the board of directors for Bechtel Group, Inc.; and also served in several other financial positions with the Bechtel Group from 1982-1991. From 1991-1994, Ms. Proctor served with Walt Disney Company as director of Project & Division Finance of Walt Disney Imagineering and director of Finance & Accounting for Buena Vista Home Video, International. Mrs. Proctor holds a Master's degree in Business Administration from the California State University, Hayward, and a Bachelor's degree in Business Administration from the University of South Dakota. Former United States Representative Jack Quinn became president of Cassidy & Associates after serving in Congress for twelve years. Mr. Quinn assists clients to promote policy and appropriations objectives in Washington, D.C. with a focus on transportation, aviation, railroad, highway, infrastructure, corporate and industry clients. Recently, Mr. Quinn was elected to trustee of the AFL-CIO Housing Investment Trust. While in Congress, Mr. Quinn was chairman of the Transportation and Infrastructure Subcommittee on Railroads. Mr. Quinn was also a senior member of the Transportation Subcommittees on Aviation and Highways and Mass Transit. In addition, Mr. Quinn was chairman of the Executive Committee in the Congressional Steel Caucus. Prior to his election to Congress, Congressman Quinn served as supervisor of the town of Hamburg, New York. Mr. Quinn received a Bachelor's degree from Siena College in Loudonville, New York, and a Master's degree from the State University of New York, Buffalo. Mr. Quinn received honorary Doctorate of Law degrees from Medaille College and Siena College. Mr. Quinn is also a certified school district superintendent through the New York State Education Department. Thomas M. Van Leeuwen, CFA, has served as a director in the equity research departments for both Credit Suisse First Boston and Deutsche Bank Securities, two of the world's leading international financial service providers. Prior to that, Mr. Van Leeuwen was first vice president of equity research with Lehman Brothers. Mr. Van Leeuwen held the position of research analyst with Sanford C. Bernstein & Co., Inc., and systems analyst with The Procter & Gamble Company. Mr. Van Leeuwen holds a Master's degree in Business Administration from the Harvard Business School and a Bachelor of Science degree in Operations Research and Industrial Engineering from Cornell University. Brett Wilcox is a consultant or board member to a number of metals and energy companies. He previously was chief executive officer of Golden Northwest Aluminum, Inc., and manager of Northwest Energy Development, LLC. Mr. Wilcox also served as executive director of Direct Service Industries, Inc., a trade association of large aluminum and other energy-intensive companies, and as an attorney with Preston, Ellis and Gates in Seattle, Washington. Mr. Wilcox was vice chairman of the Oregon Progress Board and a member of the governors' comprehensive review of the Northwest Regional Power System. Mr. Wilcox has also served on the Oregon governor's task forces on the structure and efficiency of state government, employee benefits and compensation, and government performance and accountability. Mr. Wilcox received a Bachelor's degree from the Woodrow Wilson School of Public and International Affairs at Princeton University and a Juris Doctorate from Stanford Law School. 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. LB-UBS COMMERCIAL: Fitch Puts Low-B Ratings on $38MM Cert. Classes ------------------------------------------------------------------ LB-UBS Commercial Mortgage Trust 2005-C5 commercial mortgage pass-through certificates are rated by Fitch Ratings: -- $100,000,000 class A-1 'AAA'; -- $345,000,000 class A-2 'AAA'; -- $48,000,000 class A-3 'AAA'; -- $126,000,000 class A-AB 'AAA'; -- $847,849,000 class A-4 'AAA'; -- $170,185,000 class A-1A 'AAA'; -- $233,862,000 class A-M 'AAA'; -- $195,859,000 class A-J 'AAA'; -- $14,154,000 class B 'AA+'; -- $35,197,000 class C 'AA'; -- $29,332,000 class D 'AA-'; -- $23,465,000 class E 'A+'; -- $23,465,000 class F 'A'; -- $2,144,814,000 class X-CP* 'AAA'; -- $2,338,620,305 class X-CL* 'AAA'; -- $26,398,000 class G 'A-'; -- $17,539,000 class H 'BBB+'; -- $17,540,000 class J 'BBB'; -- $23,386,000 class K 'BBB-'; -- $8,770,000 class L 'BB+'; -- $11,693,000 class M 'BB'; -- $2,923,000 class N 'BB-'; -- $2,924,000 class P 'B+'; -- $5,846,000 class Q 'B'; -- $5,847,000 class S 'B-'; -- $23,386,305 class T 'NR'; -- $1,012,000 class CM-1** 'AA'; -- $5,038,000 class CM-2** 'A'; -- $956,000 class CM-3** 'A-'; -- $2,994,000 class CM-4** 'BBB' -- $3,905,000 class SP-1** 'NR'; -- $12,719,000 class SP-2** 'NR'; -- $12,378,000 class SP-3** 'NR'; -- $3,919,000 class SP-4** 'NR'. -- $7,839,000 class SP-5** 'NR'; -- $8,818,000 class SP-6** 'NR'; -- $13,422,000 class SP-7** 'NR'. * Notional Amount and Interest Only. ** Non-pooled classes Classes A-1, A-2, A-3, A-4, A-AB, A-1A, A-M, A-J, X-CP, B, C, D, E, and F are offered publicly, while classes X-CL, G, H, J, K, L, M, N, P, Q, S, T, CM-1, CM-2, CM-3, CM-4, SP-1, SP-2, SP-3, SP-4, SP-5, SP-6, and SP-7 are privately placed pursuant to rule 144A of the Securities Act of 1933. The certificates represent beneficial ownership interest in the trust, primary assets of which are 134 fixed-rate loans having an aggregate principal balance of approximately $2,338,620,305 as of the cutoff date. For a detailed description of Fitch's rating analysis, please see the Report titled 'LB-UBS Commercial Mortgage Trust 2005-C7' dated Oct. 19, 2005, available on the Fitch Ratings Web site at http://www.fitchratings.com/ LIBERTY FIBERS: List of 20 Largest Unsecured Creditors ------------------------------------------------------ Liberty Fibers Corporation submitted a list of its 20 Largest Unsecured Creditors to the U.S. Bankruptcy Court for the Eastern District of Tennessee: Entity Nature of Claim Claim Amount ------ --------------- ------------ Georgia Gulf Corporation Trade Debt $520,269 P.O. Box 629 Plaquemine, LA 70764 Hills Fuel Company Trade Debt $329,019 P.O. Box 148 Fries, VA 24330 Norfalco Sales, Inc. Trade Debt $240,541 6755 Mississauga Road Suite 340 Ontario L2N 7Y2 Canada Lewis Hollingsworth, LP $198,848 Morristown Driver's Service $125,272 Chemtreat, Inc. $110,000 Cherokee Millwright Inc $104,501 Dycho Company $101,767 Four Seasons Ground Trade Debt $95,220 Trail Energy $88,932 Hamblen County Trustee $79,829 Jones Chemical, Inc. Trade Debt $77,737 Yale Carolinas, Inc. $65,618 Remco, LLC $59,350 Uniquema $48,552 AFCO Insurance $48,266 Ware Energy, Inc. $39,416 Ovasco Industries $32,040 Motion Industries, Inc. $31,992 S&ME Inc. $31,471 Headquartered in Lowland, Tennessee, Liberty Fibers Corporation, fka Silva Acquisition Corporation, manufactures rayon staple fibers. The Debtor filed for chapter 11 protection on Sept. 29, 2005 (Bankr. E.D. Tenn. Case No. 05-53874). Robert M. Bailey, Esq., at Bailey, Roberts & Bailey, PLLC, represents the Debtor in its restructuring efforts. When the Debtor filed for protection from its creditors, it estimated assets and debts between $10 million to $50 million. MAJESTIC STAR: Trump Stock Purchase Spurs S&P's Negative Watch -------------------------------------------------------------- Standard & Poor's Ratings Services placed its ratings for Las Vegas, Nevada-based The Majestic Star Casino LLC, including the 'B+' corporate credit rating, on CreditWatch with negative implications. The CreditWatch placement follows the announcement that the company had signed a definitive stock purchase agreement to acquire the Trump Indiana Inc. subsidiary, which owns and operates a riverboat casino and hotel at Buffington Harbor in Gary, Indiana, of Trump Entertainment Resorts Holdings L.P. Based on the current proposed terms, the purchase price is $253 million, representing an approximately 8.1x multiple of trailing-12-month EBITDA. The sale is expected to be completed by the end of the year, subject to various approvals. In resolving its CreditWatch listings, Standard & Poor's will review several factors, including the method of financing, the company's pro forma capital structure, management's near- and longer-term growth objectives, integration plans, and overall financial policy. "If a downgrade for the company were the outcome of our analysis, it would be limited to one notch," noted Standard & Poor's credit analyst Peggy Hwan. MAJESTIC STAR: Buys Trump Indiana for $253 Million -------------------------------------------------- The Majestic Star Casino, LLC, reported that it has signed a definitive agreement to purchase 100% of the stock of Trump Indiana, Inc. Trump Indiana owns and operates a casino vessel and hotel at Buffington Harbor in Gary, Indiana. Majestic will pay a purchase price of $253 million, subject to certain adjustments and customary representations and warranties. "We are excited about the acquisition of Trump Indiana and believe that we will not only realize immediate significant efficiencies by combining the operations of Majestic and Trump Indiana, but most importantly, we will be able to take advantage of our enormous land base at Buffington Harbor. Over time, we believe that we will own and operate the most competitive gaming operation in the Chicagoland market," said Don H. Barden, Chairman and CEO of Majestic. Mr. Barden continued, "Trump Indiana has been a good neighbor throughout the years, and we have enjoyed working with them." Majestic currently owns a casino vessel adjacent to Trump's casino vessel, and through a joint venture with Trump, owns and operates Buffington Harbor Riverboats, LLC, which manages all ancillary operations at Buffington Harbor. Trump and Barden Development, Inc., the parent of Majestic, jointly own the parking garage located at Buffington Harbor. Majestic has engaged a master planner to assist with the overall development of the approximately 300 acres at Buffington Harbor, with the objective of making Buffington Harbor a premier gaming and entertainment destination site. Consistent with the terms of the agreement, the transaction is expected to close by the end of the year, subject to required regulatory approvals. The Majestic Star Casino, LLC is a multi-jurisdictional gaming company. Majestic also owns and operates a Fitzgeralds-brand casino and hotel in Tunica County, Mississippi (Fitzgeralds Tunica) and a Fitzgeralds-brand casino in Black Hawk, Colo. (Fitzgeralds Black Hawk). Majestic also manages for Barden Development, Inc., its parent company, a casino and hotel in downtown Las Vegas (Fitzgeralds Las Vegas). As of Dec. 31, 2004, the casinos that Majestic owns and manages collectively contained approximately 4,496 slot machines, 119 table games and 1,145 hotel rooms. * * * As reported in today's Troubled Company Reporter, Standard & Poor's Ratings Services placed its ratings for Las Vegas, Nevada- based The Majestic Star Casino LLC, including the 'B+' corporate credit rating, on CreditWatch with negative implications. The CreditWatch placement follows the announcement that the company had signed a definitive stock purchase agreement to acquire the Trump Indiana Inc. subsidiary, which owns and operates a riverboat casino and hotel at Buffington Harbor in Gary, Indiana, of Trump Entertainment Resorts Holdings L.P. Based on the current proposed terms, the purchase price is $253 million, representing an approximately 8.1x multiple of trailing-12-month EBITDA. The sale is expected to be completed by the end of the year, subject to various approvals. MEDICAL TECHNOLOGY: Files First Amended Disclosure Statement ------------------------------------------------------------ Medical Technology, Inc., delivered the First Amended Disclosure Statement explaining its Plan of Reorganization to the U.S. Bankruptcy Court for the Northern District of Texas in Fort Worth on Oct. 5, 2005. Relevant components of the Debtor's Plan include: -- the full payment of unsecured creditors; -- a restructuring and extension of secured debts; and -- the full payment, of Orthodontics Inc. and Generation II USA Inc.'s over $6.8 million in claims from a judgment awarded by the U.S. District Court for the Western District of Washington, Seattle Division, if the Debtor's pending appeal is denied. Payments due under the Plan will be funded from the Reorganized Debtor's income and other sources of funds, including future borrowing or sale of stock. The Reorganized Debtor will be responsible for making all distributions or payments on account of allowed claims as contemplated in the Plan. Treatment of Claims Convenience claims, consisting of any allowed claim of $2,000 or less and any allowed claim for which the holder elects to reduce its claim to $2,000, will be paid in full within two months from the effective date of the Plan. Convenience claims total approximately $30,777. Tax Claims totaling approximately $86,800 will be paid in full on the effective date. Allowed critical vendor claims, totaling approximately $367,714, will be paid within 30 days after the effective date. The approximately $1.6-million secured claim of North MARQ on account of two prepetition building loans will be treated in accordance with section 1124(2) of the Bankruptcy Code. The Plan provides that: a) the Debtor will cure any default existing on these loans on or prior to the effective date of the Plan; b) the maturity of the two loans will be reinstated as it existed prior to any default; and c) the holder of the building notes will be compensated for any damages incurred as a result of any reasonable reliance on contractual provision in accordance with section 1124(2)(c) of the Bankruptcy Code. Chase Bank's secured claim, totaling approximately $1.3 million, will be paid according to these terms: a) The Chase Receivable Line will be paid in 36 equal monthly installments. The receivable line will continue to be secured by a first lien and security interest in the chase collateral and will continue to bear interest at the non- default rare. The Reorganized Debtor will maintain a borrowing base at least $200,000 over the unpaid balance of the receivable line and will provide Chase with a Borrowing Base Certificate on a monthly basis. b) The Chase Equipment Line and the Chase Advancing Note will be paid in 36 equal monthly installments. The Equipment Line and Advancing Note will continue to be secured by a first lien and security interest in the chase collateral and will continue to bear interest at the non-default rate. The Reorganized Debtor will execute and deliver to Chase Bank documents renewing and extending the Advancing Note, Receivable Line and Equipment Line. Ford's secured claim will be paid in accordance with the terms of applicable agreements governing the loan. The Debtor can elect to pay other secured claims, totaling approximately $47,406, either: a) through the return of the collateral securing the claim; b) in installments over a period of six years at the prime rate of interest; or c) by allowing the claim holder to offset in satisfaction of its secured claim. General unsecured claims, totaling approximately $1,709,783, will be paid according to these terms: a) unsecured claim holders can elect to reduce their claim to $2,000 and will be treated as a convenience claim; or b) receive full payment of their claims in 60 equal installments, plus interest, beginning on the initial distribution date. Disputed Litigation Claims The Debtor continues to dispute any liability in the patent infringement lawsuit filed by the Generation II companies and has appealed the judgment awarded by the Seattle District Court. The Debtor also contests its liability on various other lawsuits seeking damages for breach of contract, breach of implied warranty and negligence. All claims resulting from these lawsuits are classified as contested claims. Any allowed claim of the Generation II companies, totaling approximately $6.8 million, will be paid in 120 equal monthly installments, plus interest, beginning on the initial distribution date. Pending the District Court's decision on the appeal, the Debtor will make monthly deposits of interest accrued on the judgment amount into an escrow account. Any judgment awarding damages to David. N. Pinkus and Brandon Joel Bailey will be paid solely through applicable insurance policies. The claim of Frank R. Noyes, MD, will be adjudicated and allowed as apart of the litigation pending before the U.S. District Court for the Southern District of Ohio. Claims arising from this litigation, if any, will be paid in 120 equal monthly installments, plus interest, beginning on the initial distribution date. Any allowed claim of dj Orthopedics, LLC, will be paid in 120 equal monthly installments, plus interest, beginning on the initial distribution date. Equity interest holders will retain their interest in the Reorganized debtor. Headquartered in Grand Prairie, Texas, Medical Technology, Inc., dba Bledsoe Brace Systems -- http://www.bledsoebrace.com/home.asp -- manufactures and distributes orthopedic knee braces, ankle braces, ankle supports, knee immobilizers, arm braces, sport braces, boots, and walkers. The Debtor filed chapter 11 protection on July 25, 2005 (Bankr. N.D. Tex. Case No. 05-47377). J. Robert Forshey, Esq., Jeff P. Prostok, Esq., and Julie C. McGrath, Esq., at Forshey & Prostok, LLP, represent the Debtor in its restructuring efforts. When the Debtor filed for protection from its creditors, it estimated assets and debts between $10 million to $50 million. MERIDIAN AUTOMOTIVE: Panel Taps PCA as Special Brazilian Counsel ---------------------------------------------------------------- The Official Committee of Unsecured Creditors of Meridian Automotive Systems-Composites Operations, et al., asks the U.S. Bankruptcy Court for the District of Delaware for authority to retain Peixoto e Cury Advogados as its special Brazilian counsel, effective as of August 30, 2005. The Committee needs PCA to prosecute an adversary proceeding filed by the Committee for the avoidance of liens and claims and related declaratory relief against certain of the Debtors' prepetition lenders. Pedro Jorge da Costa Cury, a partner at PCA, will supervise the legal services to be performed by the firm for the Committee. The Committee believes that PCA is well qualified to represent its interests in the Adversary Proceeding because of the firm's substantial experience in civil and commercial litigation in Brazil. PCA will assist Ashby & Geddes, P.A., in prosecuting the Adversary Proceeding with respect to the Brazilian Assets. The firm's services will be limited to the causes of action asserted in the Adversary Proceeding concerning the Brazilian Assets. In exchange for its legal services, PCA will be paid in accordance with its ordinary and customary hourly rates: Professional Hourly Rate ------------ ----------- Partner $250 Consultant $230 Senior Associate $210 Experienced Associate $190 Junior Associate $170 Paralegal $50 PCA will also be reimbursed for its actual and necessary expenses in connection with its services. Mr. da Costa Cury assures Judge Walrath that PCA: -- is a "disinterested person," as that term is defined in Section 101(14) of the Bankruptcy Code; -- does not represent or hold an interest that is adverse to the Debtors with respect to the matters on which it is to be employed; -- does not have any material connections with the Debtors or any other party-in-interest in the Debtors' Chapter 11 cases. Headquartered in Dearborn, Mich., Meridian Automotive Systems, Inc. -- http://www.meridianautosystems.com/-- supplies technologically advanced front and rear end modules, lighting, exterior composites, console modules, instrument panels and other interior systems to automobile and truck manufacturers. Meridian operates 22 plants in the United States, Canada and Mexico, supplying Original Equipment Manufacturers and major Tier One parts suppliers. The Company and its debtor-affiliates filed for chapter 11 protection on April 26, 2005 (Bankr. D. Del. Case Nos. 05-11168 through 05-11176). James F. Conlan, Esq., Larry J. Nyhan, Esq., Paul S. Caruso, Esq., and Bojan Guzina, Esq., at Sidley Austin Brown & Wood LLP, and Robert S. Brady, Esq., Edmon L. Morton, Esq., Edward J. Kosmowski, Esq., and Ian S. Fredericks, Esq., at Young Conaway Stargatt & Taylor, LLP, represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $530 million in total assets and approximately $815 million in total liabilities. (Meridian Bankruptcy News, Issue No. 17; Bankruptcy Creditors' Service, Inc., 215/945-7000). METROPOLITAN MORTGAGE: Fitch Junks Five Certificate Classes ----------------------------------------------------------- Fitch Ratings has taken rating actions on these Metropolitan Mortgage & Securities Co., Inc. issues: Series 1997-B -- Class A1D affirmed at 'AAA'; -- Class A2 affirmed at 'AAA'; -- Class B1 upgraded to 'AAA' from 'AA'; -- Class B2 upgraded to 'AAA' from 'BBB'; -- Class B3 upgraded to 'AAA' from 'BB'. Series 1998-A -- Class X affirmed at 'AAA'; -- Class M1 affirmed at 'AAA'; -- Class M2 upgraded to 'AAA' from 'AA'; -- Class B1 affirmed at 'A'. Series 1998-B -- Class X affirmed at 'AAA'; -- Class M-1 affirmed at 'AAA'; -- Class M-2 upgraded to 'AA' from 'A'; -- Class B-1 downgraded to 'CCC' from 'B-'; -- Class B-2 remains at 'C'. Series 1999-A -- Class X affirmed at 'AAA'; -- Class M-1 upgraded to 'AAA' from 'AA'; -- Class M-2 upgraded to 'AA-' from 'A'; -- Class B-1 affirmed at 'B'; -- Class B-2 remains at 'C'. Series 1999-B -- Class M1 affirmed at 'AAA'; -- Class M2 upgraded to 'AA+' from 'AA'; -- Class B1 affirmed at 'A'. Series 1999-C -- Class B1 upgraded to 'AAA' from 'BBB'; -- Class B2 upgraded to 'AA' from 'BB'; -- Class B3 upgraded to 'A' from 'B'. Series 1999-D -- Class M1 affirmed at 'AAA'; -- Class M2 upgraded to 'AA+' from 'AA'; -- Class B1 upgraded to 'AA-' from 'A'; -- Class B2 upgraded to 'BB+' from 'BB'. Series 2000-A -- Classes A-4, A-IO affirmed at 'AAA'; -- Class M-1 downgraded to 'A' from 'AA'; -- Class M-2 downgraded to 'C' from 'CCC'. Series 2000-B -- Classes A1A, A1F affirmed at 'AAA'; -- Class M-1 upgraded to 'AAA' from 'AA'; -- Class M-2 downgraded to 'BBB' from 'A'; -- Class B-1 downgraded to 'C' from 'CCC'. The collateral for the above transactions consists primarily of fixed- and adjustable-rate mortgage loans secured by first liens on residential properties or commercial real estate such as retail, professional, mobile home parks, industrial, mixed-use, restaurant, and tavern properties. At origination, the commercial loans represented approximately 5%-15% of the above trusts. The affirmations reflect adequate relationships of credit enhancement to future loss expectations and affect approximately $66 million of outstanding certificates. The upgrades reflect an improvement in the relationship of CE to future loss expectations and affect approximately $65 million in outstanding certificates. The downgrades reflect deterioration in the relationship of CE to future loss expectations and affect approximately $35.8 million of outstanding certificates. The above transactions, with the exception of series 1997-B, have failed their cumulative loss triggers, which have prevented the trusts from paying principal to the subordinate bonds. This feature allowed CE to build on a percentage basis, benefiting the senior and mezzanine bonds, despite the deterioration of overcollateralization on the majority of the trusts. The most subordinate Fitch-rated classes of series 1998-A, 1999-B, and 1999-C were protected from the OC depletion because of a not rated class that is absorbing losses to the trust. With the exception of 1999-D which currently has 5.94% of enhancement provided by OC, the trusts that do not have the added support of a NR class experienced negative rating actions to the most subordinate classes. The upgrades for series 1997-B are a reflection of the trust's payment structure and increasing credit enhancement. The OC does not have a stepdown feature and has continued to grow as a percentage of the outstanding balance. Currently, the OC is approximately 50% of the current pool balance. Fitch expects the OC to continue to grow as a percentage of the outstanding balance. The majority of the mortgage loans were originated or acquired by Metropolitan Mortgage & Securities Co. Metropolitan filed for Chapter 11 bankruptcy in February 2004. Ocwen Financial Corp., with a Fitch servicer rating of 'RPS2', acquired the servicing rights of the above transactions in April 2001 except for Series 2000-A, which Ocwen is the sub-servicer, and the master servicer is Metwest Mortgage Services, Inc., a wholly owned subsidiary of Metropolitan. Further information regarding current delinquency, loss, and credit enhancement statistics is available on the Fitch ratings Web site at http://www.fitchratings.com/ NATIONAL ENERGY: Wants Court to Avoid $678,839 Transfer to Orrick ----------------------------------------------------------------- Kenneth Oestreicher, Esq., at Whiteford, Taylor & Preston, LLP, in Baltimore, Maryland, tells the Court that within 90 days before the Petition Date, Orrick, Herrington & Sutcliffe LLP, received transfers totaling $678,839 from NEGT Energy Trading Holdings Corporation. Orrick Herrington was a creditor of ET Holdings and the Transfers were made on account of an antecedent debt owed by ET Holdings before the Transfers were made, Mr. Oestreicher says. According to Mr. Oestreicher, ET Holdings was insolvent at the time the Transfers were made. He points out that the Transfers enabled Orrick Herrington to receive more on account of the debt than it would have received if: -- ET Holdings' case was under Chapter 7 of the Bankruptcy Code; -- the Transfers had not been made; and -- Orrick Herrington received payment of the debt to the extent provided by the provisions of the Bankruptcy Code. Thus, Mr. Oestreicher asserts that pursuant to Section 547 of the Bankruptcy Code, the Transfers may be avoided and set aside as preferential transfers. According, ET Holdings asks the Court to: a. avoid and set aside the Transfers made to Orrick Herrington; b. enter judgment against Orrick Herrington in favor of ET Holdings for the Transfer Amount; and c. award ET Holdings costs incurred in the suit. 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) NAVIGANT INTERNATIONAL: Receives Waiver from Lenders ---------------------------------------------------- Navigant International, Inc. (d/b/a TQ3Navigant - Pink Sheets: FLYR) filed Form 10-Qs on Nov. 4, 2005, with the Securities and Exchange Commission for the periods ended March 27, 2005, and June 26, 2005. Waivers and Amendments from Covenants Navigant also reported that it obtained waivers and amendments from its lenders regarding non-compliance with covenants at Sept. 25, 2005, primarily caused by the unanticipated delay in $3 million of payments due from vendors which were received after the close of the quarter. The Company is finalizing its application for re-listing its common stock on The Nasdaq National Market now that it is current with its periodic filings. Navigant will release its 2005 third quarter results (for the period ended Sept. 25, 2005) after the market closes tomorrow, Nov. 9, 2005. Navigant expects to file its Form 10-Q for the quarter ended Sept. 25, 2005 with the SEC concurrent with the release of its results. Edward S. Adams, Chairman and Chief Executive Officer, commented, "We are pleased to bring our SEC filings up to date. Importantly, throughout the period when the filings were delayed, Navigant's operations performed well, attracting new customers and maintaining high customer retention levels. With our filings current we can turn our attention to our operations and decrease legal and accounting expenses incurred as a result of the review. We are hopeful we can re-list FLYR shares on The Nasdaq National Market to afford investors a more visible means of investing in the Company." Form 10-Q Filings The March 27, 2005, and June 26, 2005, 10-Qs include restatements of previously filed financial information for the first and second quarters of fiscal 2004 and adjustments to the previously provided results for the first and second quarters of fiscal 2005. The restatements relate to non-cash adjustments that had the effect of reducing previously reported earnings per share for the reported periods. Non-compliance of Covenants On Oct. 21, 2005, Navigant International reported that it sought waivers and amendments from its lenders regarding non-compliance with certain covenants in the Company's credit facility as of Sept. 25, 2005. A primary cause of Navigant's non-compliance was the unanticipated delay in $3,000,000 of payments due from vendors. These amounts were due prior to Sept. 25, 2005, but were not paid until after that date. The vendors have now paid the amounts. Another cause was an unanticipated reduction in net earnings of approximately $350,000 due to the impact of hurricanes Katrina and Rita. For the fiscal quarter ended September 25, 2005, the Company did not comply with the Consolidated Total Leverage Ratio and the Consolidated Senior Leverage Ratio covenants as defined in its Credit Facility. Under the Credit Facility, Navigant was required to have a Consolidated Total Leverage Ratio of 3.80:1 as of Sept. 25, 2005; the actual ratio was 3.85:1. The Credit Facility also required Navigant to have a Consolidated Senior Leverage Ratio of 2.5:1 as of Sept. 25, 2005; the actual ratio was 2.53:1. Denver-based Navigant International, Inc., d/b/a TQ3Navigant, is a global provider of travel management solutions that add significant value by reducing costs, increasing management and control, and improving travel efficiency. The Company delivers integrated travel management solutions blending advanced technology with personalized service and expertise. The Company currently employs approximately 5,200 Associates and has operations in approximately 1,000 locations in 23 countries and U.S. territories. Navigant's shares are traded over-the-counter under the symbol FLYR. NETWORK COMMS: Niche Rivalry Cues S&P to Junk $175M Sr. Sub. Notes ------------------------------------------------------------------ Standard & Poor's Ratings Services assigned its 'B' corporate credit rating to Network Communications Inc. The rating outlook is stable. In addition, NCI's $100 million senior secured credit facilities were rated 'B+' with a recovery rating of '1', indicating the high expectation for full recovery of principal in the event of a payment default. Lastly, Standard & Poor's assigned its 'CCC+' rating to NCI's privately placed Rule 144A $175 million senior subordinated notes due 2013. Proceeds will be used to refinance existing debt, including $25 million of pay-in-kind notes. Pro forma total debt was $250 million at June 19, 2005. Lawrenceville, Georgia-based NCI is a leading publisher of targeted real estate classified advertising magazines. "The rating reflects NCI's niche position in the increasingly competitive and cyclical real estate classified advertising market, its narrow product portfolio, high financial leverage, and the risks arising from the migration of its classified real estate advertising revenues to the Internet," said Standard & Poor's credit analyst Hal Diamond. "These negative factors are minimally offset by NCI's established position in magazine-based real estate classified advertising, recently good operating performance, its moderately diverse customer and readership base, and its relatively high conversion of EBITDA to discretionary cash flow." NETWORK INSTALLATION: Acquires Spectrum Communications ------------------------------------------------------ Network Installation Corp. (OTC Bulletin Board: NWKI) acquired 100% of the outstanding shares of Spectrum Communications Cabling Services, Inc., a complete solution network service firm which provides network design, installation and maintenance of voice and data network systems. Spectrum shareholders received 18,567,639 shares of Network Installation common stock in the exchange. Based on Spectrum's un-audited revenue of approximately $12 million through October of 2005, and Network Installation's recent acquisition of Kelley Technologies, the Company's combined annual revenue run rate for 2005 is expected to be approximately $22 million. Network Installation CEO Jeffrey R. Hultman stated, "With our recent acquisition of Kelley Technologies and now with the acquisition of Spectrum, we've achieved two significant milestones within just the past 45 days. In acquiring Spectrum, we've not only added another tremendous, high growth component, but we have further enhanced our senior management team with the addition of Spectrum founder Robert Rivera. In my prior positions as CEO at both Pac Tel Cellular and Dial Page, we were able to quickly and efficiently achieve significant scale due to the superior personnel we had assembled. I aim to continue following that same strategy once again with Network Installation." Spectrum President Robert Rivera commented, "I consider this a terrific opportunity to team up with Jeff and become an integral part of the Network Installation organization. I believe Spectrum's core competencies blend seamlessly with Network Installation and Kelley Technologies. With our industry experiencing record growth, it is certainly within our collective capabilities to achieve the critical mass and scale consistent with Jeff's strategy. I look forward to hitting the ground running." About Spectrum Communications Spectrum Communications -- http://www.spectrumccsi.com/-- provides network design, installation and maintenance of voice and data network systems. Recognized for its expertise in innovative solutions within the communications industry for over 16 years, Spectrum Communications is able to complete a turn-key solution to meet their clients networking needs. Spectrum offers prospective education, health care, and commercial customers over a decade and a half of experience as a leading "single source" provider of innovative and cost-effective technology solutions, including the procurement of communications services that enable organizations to transmit voice, data, and video within the organization and to the outside world in a fast, secure, and cost-effective manner. Spectrum maintains offices in Corona, California and Colorado Springs, Colorado. About Network Installation Network Installation Corp. -- http://www.networkinstallationcorp.net/-- provides communications and IT solutions to the Fortune 1000, Gaming Industry, Government Agencies, Municipalities, K-12 and Universities. These solutions include complete project management from design, installation and deployment of data, voice and video networks as well as wireless networks including Wi-Fi applications and integrated telecommunications solutions including Voice over Internet Protocol applications. At June 30, 2005, Network Installation's balance sheet showed a $2,196,412 stockholders' deficit, compared to a $1,877,631 deficit at Dec. 31, 2004. NORTHWEST AIRLINES: Worldspan Wants Arbitration Allowed ------------------------------------------------------- Worldspan, L.P., asks the U.S. Bankruptcy Court for the Southern District of New York to lift the automatic stay to allow arbitration aimed at resolving a contractual dispute with Northwest Airlines, Inc. Worldspan is a limited partnership that was formed in the early 1990s by Northwest, Delta Air Lines, Inc., and Trans World Airlines. From its inception, Worldspan provided computer services to its three owner-airlines to assist them in hosting and tracking their "inventories" of available passenger seats on their commercial flights, as well as in allowing both the airlines and third-party travel agents and online travel providers to make inquiries about the airlines' flights and purchase tickets. In 2003, the owner-airlines sold Worldspan to unaffiliated parties. As part of the sale transaction, Northwest, Delta and Worldspan executed the Founder Airline Services Agreements, which defined the services that Worldspan would continue to provide to Northwest and Delta. After the sale transaction, a dispute arose between Northwest and Worldspan regarding the "Ticket Control Number" data. This data, which is created from transaction occurring on the travel agency and online travel provider side of Worldspan's business, is sold by Worldspan to dozens of airlines, the vast majority of which do not use Worldspan to host their passenger seat inventories. Northwest argues that Worldspan is required to provide TCN data to Northwest under the FASA. Worldspan counters that the TCN data is not covered by the FASA and that Northwest must pay a separate charge to acquire the data from Worldspan. After an unsuccessful attempt to consensually resolve the dispute, Northwest initiated arbitration against Worldspan on February 14, 2005. The parties have completed both document and deposition discovery and there is currently no further pending discovery. Due to scheduling problems, the Arbitration hearing was rescheduled to November 14 and 15, 2005. Anna Palazzolo, Esq., at Dechert LLP, in New York, tells the Court that a favorable outcome of the Arbitration for Worldspan will not result in the collection of money from Northwest, but will simply define the parties' rights under their contract. Thus, the nature of the issues in the Arbitration and the brief expected duration of the hearing establish that Northwest will not suffer any prejudice from moving forward with the hearing date it agreed to just a few weeks before the Petition Date. 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. 8; Bankruptcy Creditors' Service, Inc., 215/945-7000) NORTHWEST AIRLINES: More Parties Balk at Aircraft Lease Rejection ----------------------------------------------------------------- As previously reported, Northwest Airlines Corp. and its debtor-affiliates told the U.S. Bankruptcy Court for the Southern District of New York they need to adjust the fleet size and mix in light of current market conditions for aircraft, projected demand for air travel, current and projected flight schedules, maintenance requirements, labor costs, and other business and economic factors. The Debtors estimated that more than 100 aircraft in the aggregate will be designated for deletion from the fleet. As of September 14, 2005, the Debtors have determined that it is not in the best interest of their estates to retain 13 Excess Aircraft. A list of the 13 Excess Aircraft is available for free at http://ResearchArchives.com/t/s?233 Further Objections A number of parties object to the Debtors' request to reject 13 aircraft effective as of the Petition Date, and reject or abandon 102 aircraft effective when the Debtors submit notices of rejection or abandonment by October 29, 2005. The Objections raise a number of issues, including the Debtors' failure to comply with the "return and surrender" provisions under Section 1110(a) of the Bankruptcy Code and their contractual obligations when surrendering the Aircraft. The Objectors also oppose to the retroactive rejection of the leases. Instead, they want the effective date of the rejection conditioned on the Debtors' full compliance of the return provisions of Section 1110(a). Moreover, the Objectors ask that the Debtors maintain insurance of each of the Aircraft until at least its rejection is declared effective. They also want the Debtors to outline the procedures for returning or abandoning the Aircraft. Most Parties have also requested modification of the automatic stay to allow them or their agents to enforce any of their rights and remedies under applicable aircraft agreements. The Objecting Parties include: (1) National City Leasing Corporation, owner participant in leases to a Boeing 757 and two British Aerospace Avro 146- RJ85A aircraft, identified among the Potential Excess Aircraft; (2) The Fifth Third Leasing Company, Inc., successor-in- interest to the beneficiary under trust agreements, between First Security Bank of Utah, National Association, and the Debtors pertaining to two Boeing DC9-30 aircraft and engines FSB; (3) ABN AMRO Bank N.V., secured party under the terms of the leases covering two Excess Aircraft and two Potential Excess Aircraft; (4) First Chicago Leasing Corporation, owner participant under a structured lease for an Aircraft bearing tail number N636US; (5) U.S. Bank National Association, and Wells Fargo Bank National Association, trustees of trusts serving as lessors for various Aircraft; and (6) an ad hoc committee of various entities who are holders of aircraft-related securities or parties to financing or leasing transactions with the Debtors. Evergreen's Objection Evergreen Air Center, Inc., is a party to storage and maintenance agreements with the Debtors relating to certain Aircraft. The Debtors owe Evergreen in excess of $350,000 stemming from the services it provided, and still provides, to them. Evergreen objects to the Debtors' Request on grounds that they are contemplating the disposition of various Aircraft in Evergreen's possession, in violation of its rights under applicable law. According to Joel L. Herz, Esq., in Tucson, Arizona, Evergreen has a mechanics' lien on the Aircraft. Hence, Evergreen is entitled to the possession of those Aircraft until it is paid in full. Evergreen also objects to the Request due to inadequate notice. Evergreen says it was not served notice of the Request, notwithstanding the impact to its rights. Debtors Say Only Two Objection Issues are Relevant Mark C. Ellenberg, Esq., at Cadwalader, Wickersham & Taft LLP, in New York, argues that the issue, and the only issue, presented by the Debtors' Request is whether the rejections and abandonments are in the best interests of the estates. Not a single Objection disputes that it would be in the best interests of the estates for the Request to be granted. Rather than address the single issue before the Court, each of the Objectors, in one form or another, seeks to assert its "parochial interests" as a counterparty to the leases or financings affected, Mr. Ellenberg contends. Thus, the Objections assert various rights supposedly existing under Section 1110 of the Bankruptcy Code, seek to have rules established for the return of aircraft, equipment and documents after rejection or abandonment, and make various contentions about the allowance of administrative claims. Mr. Ellenberg says that "[a]s interesting as these topics may be, none of them are raised by the motion. Each is an issue for another day." According to the Debtors, only two objections actually relate to their Request. The first is that "retroactive" rejection or abandonment is not permissible. Mr. Ellenberg, however, asserts that the law is clear that a court can make the rejection of a contract effective as of the date the motion for rejection was filed. The second pertinent argument is that the Court cannot give the Debtors authority to reject a contract in the future. Mr. Ellenberg counters that this argument misses the point that the authority is being granted immediately, on the basis of the existing financial terms. The Debtors, therefore, insists that the Objections to their Request should be overruled. As far as the Objections relate to issues pertaining to Section 1110, Mr. Ellenberg points out that Section 1110(c) is triggered, on its face, only when the lessor/lender becomes entitled to take possession pursuant to Section 1110(a)(1) and makes a written demand for possession. The Request merely seeks authority to reject and abandon and does not seek to determine any claims that the affected lessors and lenders may have on account of the rejection or abandonment. Moreover, the Debtors contend that there is no requirement for a "rejection process" or an "abandonment process" under Sections 365 or 554 of the Bankruptcy Code. The Debtors need not fulfill any other requirements for rejection or abandonment of the Aircraft. There is also no basis to assert post-rejection or post-abandonment administrative obligations with respect to abandoned or rejected Aircraft. Mr. Ellenberg further explains that there is no prejudice to any Objector if rejection or abandonment of the Excess Aircraft is deemed effective as of the Petition Date, as the Objectors have been aware of the Debtors' decision to reject or abandon the Aircraft since that time. There are no required preconditions to effectiveness of rejection or abandonment in the Bankruptcy Code. As for the renegotiation of the contracts relating to the Potential Excess Aircraft, the Debtors maintain that nothing in the Bankruptcy Code or case law prohibits them from doing so. In addition, the Request does not compel lessors or lenders to accept the revised terms proposed by the Debtors. The market and arm's-length negotiations will still govern. Mr. Ellenberg assert that U.S. Bank's objection to the 45-day negotiation period proposed by the Debtors fails because there is nothing in the Bankruptcy Code or applicable case law that requires a different period and it is in the Debtor's interest to get the transactions completed. If U.S. Bank were to agree to extend the Section 1110 window, the Debtors would certainly consider extending the time for negotiation of revised financing terms. With regard to the Objectors' request for Northwest to maintain insurance, the Debtors aver that they have no obligation to oblige following the rejection or abandonment, much less until the time the creditor decides to retrieve the Aircraft. The Debtors also clarify that they are not requesting that the rights of any other party, including parties asserting mechanic's liens, be affected through the Request. Furthermore, Mr. Ellenberg insists that it is unnecessary for the Court to provide clarification of the automatic stay's inapplicability to: (a) the Aircraft, engines and all other collateral covered by the applicable agreements; and (b) actions taken, or proceedings commenced, by the creditor in connection with its enforcement of its rights and remedies under the applicable agreements. * * * To the extent not resolved, Judge Gropper overrules all objections with respect to seven Aircraft and approves their rejection or abandonment effective as of October 7, 2005. A list of the seven Aircraft is available for free at: http://bankrupt.com/misc/northwestrejectedaircraft.pdf The Debtors will comply with the surrender and return provisions under Section 1110 of the Bankruptcy Code for the Aircraft, to the extent a lease or loan transaction is covered by Section 1110. Judge Gropper directs the Debtors to cooperate with lessors and lenders and other affected parties in the execution and delivery of lease termination statements and title transfer documents in a form adequate for filing with the Federal Aviation Administration. The Court will convene a hearing to consider the Debtors' Request as it pertains to the remaining Aircraft at a later date. 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. 8; Bankruptcy Creditors' Service, Inc., 215/945-7000) NORTHWEST AIRLINES: Taps Anna Schaefer as Finance Vice President ---------------------------------------------------------------- Northwest Airlines reported that Anna Schaefer has been named vice president - finance and chief accounting officer, effective Dec. 1, 2005. She replaces James Mathews, who will depart from Northwest on Nov. 30, 2005 to become controller of ADC Telecommunications. "Anna's 14 years at Northwest Airlines and her deep experience in finance and accounting will be critical as we restructure our costs so that the airline can remain a strong global competitor in the years ahead," David Davis, senior vice president - finance and controller, said. Ms. Schaefer, who will report to Mr. Davis, will be responsible for overseeing all accounting related functions at Northwest including revenue accounting, corporate accounting and reporting, cargo accounting, payroll and payables. Commenting on Jim Mathews, Mr. Davis said, "We appreciate Jim's five years of dedicated service to Northwest in finance and accounting and we wish him well in his new position." Ms. Schaefer has held a variety of leadership positions in accounting, information services and marketing at Northwest including her most recent position as managing director, accounting. In addition to working with Northwest Airlines, Schaefer has also held positions at Sabre Travel Information Network, National Car Rental System, Inc. and Equico Lessors, Inc. Ms. Schaefer holds a bachelor's degree in accounting and business administration/finance from Mankato State University. She is a certified public accountant. 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: Reaches Agreement With Two Unions on Pay Cuts ----------------------------------------------------------------- Northwest Airlines (OTC: NWACQ) reached interim labor cost savings agreements with the Air Lines Pilots Association (ALPA) and the Professional Flight Attendants Association (PFAA). The ALPA Master Executive Council agreed to temporary pay and other reductions of $215 million on an annualized basis and PFAA leaders agreed to cuts of $117 million. The ALPA agreement is subject to membership ratification. Northwest also confirmed that it has reached tentative agreements on permanent wage and benefit reductions with employees represented by the Aircraft Technical Support Association (ATSA) and the Northwest Airlines Meteorology Association (NAMA). The airline hopes to reach an agreement with the Transport Workers Union of America (TWU), shortly. The airline was unable to reach an interim agreement with the International Association of Machinists and Aerospace Workers' (IAM) leadership and consequently has filed a Section 1113(e) motion with the U.S. Bankruptcy Court for the Southern District of New York that seeks temporary wage and benefit reductions of $114 million from that union. Northwest has asked for a mid-November hearing date. "All of our union leaders understand the need for labor cost reductions and this interim agreement with ALPA and PFAA will provide additional time to reach final agreements while providing Northwest Airlines with the immediate costs savings that it requires," said Doug Steenland, president and chief executive officer. Northwest and the IAM are continuing to negotiate a permanent cost reduction agreement as well. Steenland continued, "We are pleased to have reached tentative contract agreements with the Aircraft Technical Support Association and Northwest Airlines Meteorology Association and look forward to reaching an agreement with leaders of the Transport Workers Union of America in the near future." "These new contracts, along with salaried and management pay cuts implemented last December and also planned for next month, as well as labor cost savings achieved through our new aircraft maintenance program, are key steps in Northwest's efforts to achieve a competitive labor cost structure", Steenland concluded. As reported in the Troubled Company Reporter on Nov. 4, 2005, Northwest Airlines was in negotiations with its unions to secure $1.4 billion in labor cost savings. NWA hopes to achieve these cost savings through consensual agreements with its unions. As previously announced, Northwest filed an 1113(c) motion with the U.S. Bankruptcy Court for the Southern District of New York to secure labor cost savings if the company and its unions do not achieve consensual agreements. The 1113(c) motion was filed on Oct. 12, 2005, and the hearing is scheduled to commence on Nov. 16, 2005. The company has been in discussions with: * The Air Lines Pilots Association (ALPA), * The International Association of Machinists and Aerospace Workers, and * The Professional Flight Attendants Association, regarding the possibility of extending the deadline for the Section1113(c) hearing to mid- January in order to allow all parties more time to reach consensual labor cost saving agreements. In light of Northwest's significant financial challenges, the company has advised ALPA, IAM and PFAA that interim financial relief of approximately 60% of the $1.4 billion target would have to go into effect in mid-November to allow for an extension of the 1113(c) hearing. 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. OPTIMUM GROUP: Optimum West's FSR is Marginal Says A.M. Best ------------------------------------------------------------ A.M. Best Co. affirmed the financial strength ratings of B- (Fair) of the subsidiaries of Optimum General, Inc. (Quebec, Canada): * Optimum Frontier Insurance Company, * Optimum Insurance Company and its subsidiary, Optimum Farm Insurance Company. Concurrently, A.M. Best has affirmed the FSR of C++ (Marginal) of Optimum West Insurance Company. The outlook for all ratings is stable. OGI is a privately held insurance holding company ultimately owned by Optimum Group (Montreal, Canada), a private international financial services company. The affirmation of the ratings reflects each company's adequate risk-adjusted capitalization, improved operating performance and favorable turnaround in reserve development. The positive rating strengths are offset in part by the companies' elevated leverage position and underwriting results, which lag behind the industry. The latter is primarily due to the companies' elevated underwriting expense ratio. A.M. Best Co., established in 1899, is the world's oldest and most authoritative insurance rating and information source. ORCHARD SUPPLY: Moody's Rates $235 Million Sr. Unsec. Notes at B2 ----------------------------------------------------------------- Moody's Investors Service assigned a B1 corporate family rating to Orchard Supply Hardware LLC and a B2 rating to Orchard Supply Hardware LLC's $235 million senior unsecured notes maturing 2013. This is the first time that Moody's has rated the debt of Orchard Supply Hardware LLC. The rating outlook is stable. The ratings take into account Orchard Supply Hardware Stores Corporation's announcement that Ares Management LLC will acquire a 19.9% stake from its ultimate parent, Sears Holdings Corp., and retain an option to acquire an additional 30.2% over the next three years. The $235 million in senior notes, combined with an unrated $120 million commercial mortgage financing, a $50 million initial draw on an unrated $130 million senior secured bank facility, and a $51 million equity investment by Ares will fund a $448 million dividend to Sears, as well as cover $8 million in transaction costs. Resulting pro forma leverage measured on a Debt/EBITDA basis will be roughly 5.9x (all ratios incorporate Moody's standard analytic adjustments). The B1 corporate family rating considers: * the leveraged nature of Orchard's expected balance sheet; * the present competitive landscape it faces in its predominantly California market, competition which is expected to heighten as Lowe's (presently 65 stores, vs. 100 in the less-populous Texas market) and Home Depot (214, vs. 174 in less-populous Texas) continue to expand in California; and * the lack of any tangible support from its ultimate parent, Sears Holdings. The rating is supported by: * the company's solid historical operating performance despite myriad executive changes as a result of its ownership by Sears; * the solid, mostly hardware niche it occupies in its market; * its ability to sell the highly-regarded Craftsman line of hand and power tools; and * its expected ability, even with this increased debt, to generate free cash flow. Orchard has thus far been successful as a smaller scale alternative to the home improvement superstores, focusing more on repair and maintenance projects than on the more complex home improvement "solutions" market. With its network of 84 stores in California (60 in the northern part of the state, and the other 24 surrounding Los Angeles), it has carved out a profitable niche between the local "mom and pop" operator and the big box home improvement centers. It offers a more limited range of SKU's than the big boxes, but goes deeper within its chosen categories which results in higher margins than either Home Depot or Lowe's. The B2 rating of the senior unsecured notes reflects their junior position in the capital structure behind the $150 million secured bank credit facility, as well as effectively junior to the $120 million in secured mortgage debt at the real estate subsidiary. The stable outlook reflects the company's consistent operating performance, and the expectation that it will continue to manage itself conservatively during what is initially a modest new store growth program. Upward rating pressure would emanate from free cash flow/debt exceeding 10%, while downward pressure would result if free cash flow/debt were to fall below 5%. Orchard Supply Hardware Corporation, is the parent of Orchard Supply Hardware LLC, which currently operates 84 hardware stores in California. PILGRIM CLO: Fitch Upgrades $10-Mil Class C Notes to BB+ from BB- ----------------------------------------------------------------- Fitch Ratings upgrades two classes and affirms one class of notes issued by Pilgrim CLO 1999-1 Ltd./Corp. These rating actions are effective immediately: -- $23,283,102 class A notes affirmed at 'AAA'; -- $60,000,000 class B notes upgraded to 'AA' from 'BBB+'; -- $10,000,000 class C notes upgraded to 'BB+' from 'BB-'. Pilgrim CLO 1999-1 is a collateralized debt obligation, which closed Nov. 30, 1999 and is managed by ING Investments Management Co. The collateral is composed of all senior secured loans and bonds. Currently the transaction is in the amortization period. Included in this review, Fitch discussed the current state of the portfolio with the asset manager and their portfolio management strategy going forward. In addition, Fitch conducted cash flow modeling utilizing various default timing and interest rate scenarios to measure the breakeven default rates going forward relative to the minimum cumulative default rates required for the rated liabilities. As of the latest trustee report dated Oct. 2, 2005, the class A notes have been paid 94.3% of the original $405 million balance. Since Fitch's last review on Dec. 23, 2004 the class A notes were paid an additional $153 million, improving credit enhancement on all classes of notes. Assets rated below 'B-' increased to 12.3% on the latest trustee report versus 8.6% on the last review. However, the negative credit migration of the portfolio is offset by the significant deleveraging and shortening of average life of the transaction. Additionally, all overcollateralization ratios are passing above trigger levels. The rating of the class A notes addresses the likelihood that investors will receive full and timely payments of interest, as per the governing documents, as well as the aggregate outstanding amount of principal by the stated maturity date. The rating of the classes B and C notes addresses the ultimate payment of interest and initial principal amount by the legal final maturity date. Fitch will continue to monitor and review this transaction for future rating adjustments. Additional deal information and historical data are available on the Fitch Ratings Web site at http://www.fitchratings.com/ For more information on the Fitch VECTOR Model, see 'Global Rating Criteria for Collateralised Debt Obligations,' dated Sept. 13, 2004, also available at http://www.fitchratings.com/ POTTSVILLE HOSPITAL: S&P Pares $33.601M Revenue Bonds to BB+ ------------------------------------------------------------ Standard & Poor's Ratings Services lowered its rating to 'BB+' from 'BBB-' on Pottsville Hospital Authority, Pennsylvania's outstanding $33.610 million series 1998 hospital revenue bonds, issued for Pottsville Hospital and Warne Clinic, based on the clinic's liquidity decline and limited balance sheet. The outlook is stable. "The rating action reflects a decline in the clinic's liquidity position over the past year, coupled with a very limited balance sheet," Standard & Poor's credit analyst Suzie Desai said. "The revision reflects a weak balance sheet and limited cash flow that could make Pottsville vulnerable to swings in operations and possible future cash payments, for such areas as pension contributions. However, we do expect Pottsville to able to continue to generate a positive, though likely limited, bottom line with adequate coverage as well as maintain its balance sheet at current levels." Factors supporting the rating include a good business position that is supported by niche service areas in obstetrics and psychiatry, evidenced by good volumes and a leading market share of 52%; and positive but uneven financial performance in recent years, resulting in maximum annual debt service coverage of no less than 1.8x. The bonds are secured by the revenues of Pottsville Hospital and Warne Clinic and Schuylkill Rehabilitation Center. The hospital operates 200 beds and is located in Schuylkill County, Pennsylvania, about 60 miles from Harrisburg, Pennsylvania, and 35 miles from Reading, Pennsylvania. PXRE GROUP: Katrina Impact Prompts Fitch to Shave Low-B Ratings --------------------------------------------------------------- Fitch Ratings has downgraded the long-term rating of PXRE Group Ltd. to 'BB+' from 'BBB-'. Additionally, Fitch has downgraded the rating on PXRE Capital Trust I's preferred securities to 'BB' from 'BB+' and the insurer financial strength rating on PXRE's lead operating subsidiaries, PXRE Reinsurance Ltd. and PXRE Reinsurance Company, to 'BBB+' from 'A-'. All ratings have been removed from Rating Watch Negative. The Rating Outlook is Negative. Fitch's rating actions follow PXRE's announcement of third-quarter 2005 earnings and updated estimates for hurricane losses. Fitch's rating actions reflect its updated view of the catastrophe risk inherent in PXRE's book of business and the resultant capital and earnings volatility. The company's year-to-date hurricane-related losses are estimated at $350 million, not including Hurricane Wilma, which equates to roughly half of PXRE's beginning of the year shareholders' equity. This is higher than Fitch's expectations for the rating category, even for a company with PXRE's business profile, which includes an expectation of periodic high severity losses. Additionally, the losses roughly equate to 3 times its annualized six-month 2005 net income. Fitch further notes that PXRE's loss estimates are based on an industry loss estimate of $35 billion-$40 billion, and with some estimates of the industry loss as high as $60 billion, it is very possible that PXRE's losses could develop adversely. Based on this recent performance, combined with a generally weak historic earnings pattern, Fitch does not believe PXRE's current profile fits within Fitch's 'A-' rating category. While PXRE has replenished lost capital, the downgrade is less reflective of near-term capital levels and more reflective of Fitch's lack of confidence in PXRE's future performance and core underwriting abilities. Fitch's Negative Rating Outlook reflects Fitch's ongoing concerns about the concentration of risk in PXRE's book of business. While PXRE has indicated its plans to somewhat revise its risk profile going forward, Fitch is uncertain of the timing, magnitude, and ultimate effect on exposure these changes will have. Additionally, there remains the possibility of further development in hurricane loss estimates as well as new exposure from Hurricane Wilma. Fitch's ratings on PXRE will also reflect its evolving views on catastrophe risk and capital management and how its assessment of these factors could affect its ratings on the company going forward. Fitch views this as especially important given PXRE's exposure to catastrophe-related losses and recent underwriting performance. Fitch had originally placed its ratings on PXRE on Rating Watch Negative on Sept. 13, 2005, based on potential large loss exposure to Hurricane Katrina. Fitch maintained the Rating Watch Negative after PXRE's capital raising completion pending further assessment of PXRE's risk profile and potential catastrophe exposure and the release of PXRE's third quarter 2005 earnings. Positively, Fitch notes that, in the past, major insurance losses have spurred significant increases in insurance and/or reinsurance prices. PXRE's ability to successfully raise capital is an indication of the capital market's confidence in both PXRE's organization, future reinsurance pricing. These ratings have been downgraded, removed from Rating Watch Negative, and assigned a Negative Rating Outlook: PXRE Group Ltd. --Long-term rating to 'BB+' from 'BBB-'. PXRE Capital Trust I --Trust preferred securities $100 million 8.85% due Feb.1, 2027 to 'BB' from 'BB+'. PXRE Reinsurance Company PXRE Reinsurance Ltd. --Insurer financial strength to 'BBB+' from 'A-'. REAL ESTATE: Moody's Rates $800,000 Class L Certificates at B3 -------------------------------------------------------------- Moody's Investors Service assigned these definitive ratings to certificates issued by Real Estate Asset Liquidity Trust Commercial Mortgage Pass-Through Certificates, Series 2005-2 (all figures are denoted in Canadian Dollars): -- Aaa to the $348.6 million Class A-1 Certificates due October 2020; -- Aaa to the $212.8 million Class A-2 Certificates due October 2020; -- Aa2 to the $9.3 million Class B Certificates due October 2020; -- A2 to the $14.8 million Class C Certificates due October 2020; -- Baa2 to the $8.8 million Class D-1 Certificates due October 2020; -- Baa2 to the $4.4 million Class D-2 Certificates due October 2020; -- Baa3 to the $1.9 million Class E-1 Certificates due October 2020; -- Baa3 to the $1.9 million Class E-2 Certificates due October 2020; -- Ba1 to the $4.7 million Class F Certificates due October 2020; -- Ba2 to the $3.1 million Class G Certificates due October 2020; -- Ba3 to the $1.6 million Class H Certificates due October 2020; -- B1 to the $1.6 million Class J Certificates due October 2020; -- B2 to the $1.6 million Class K Certificates due October 2020; -- B3 to the $0.8 million Class L Certificates due October 2020; -- Aaa to the $583.4* million Class XP-1 Certificates due October 2020; -- Aaa to the $0.001* million Class XP-2 Certificates due October 2020; -- Aaa to the $622.0* million Class XC-1 Certificates due October 2020; and -- Aaa to the $0.001* million Class XC-2 Certificates due October 2020. * Initial notional amount The ratings on the Certificates are based on the quality of the underlying collateral -- a pool of multifamily and commercial loans located in Canada. The ratings on the Certificates are also based on the credit enhancement furnished by the subordinate tranches and on the structural and legal integrity of the transaction. The pool's strengths include: * its high percentage of less risky asset classes (multifamily, industrial, anchored retail); * recourse on 81.4% of the pool; * the overall low leverage; and * the creditor friendly legal environment in Canada. Moody's concerns include the concentration of the pool, where the top ten loans account for 45.1% of the total pool balance and the existence of subordinated debt on 18.1% of the pool. Moody's beginning loan-to-value ratio was 81.8% on a weighted average basis. Moody's assigned provisional ratings to these Certificates on October 12, 2005. RED TAIL: U.S. Trustee Unable to Form Creditors Committee --------------------------------------------------------- Ilene J. Lashinsky, the United States Trustee for Region 18, tells the U.S. Bankruptcy Court for the District of Oregon that no Official Committee of Unsecured Creditors for Red Tail Canyon, LLC, will be formed at this time. Ms. Lashinsky explains that no eligible creditors have expressed willingness to serve on a committee. Headquartered in Portland, Oregon, Red Tail Canyon LLC owns and operates the Red Tail Canyon townhouse apartments located in South Aspen Summit Drive, Multnomah County, Portland, Oregon. The Company filed for chapter 11 protection on Sept. 19, 2005 (Bankr. D. Ore. Case No. 05-41235). J. Stephen Werts, Esq., at Cable Huston Benedict Haagensen & Lloyd LLP, 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. RELIANCE GROUP: Liquidator Gets Court OK on $300 Mil. Distribution ------------------------------------------------------------------ M. Diane Koken, Insurance Commissioner of the Commonwealth of Pennsylvania, in her capacity as Liquidator of Reliance Insurance Company, asked the Commonwealth Court to approve her Third Proposal to distribute assets to State Guaranty Associations. Preston Buckman, Esq., Special Funds Counsel at the Pennsylvania Insurance Department, explains that once an insolvent insurer like RIC is placed in liquidation, State Guaranty Associations are statutorily compelled to pay certain covered claims pursuant to statutory limitations in each state. Once a Guaranty Association pays a covered claim that would otherwise have been an obligation of the insolvent insurer, the Guaranty Association becomes subrogated to the claim of the insured or the claimant, and steps into the shoes of the policyholder for purposes of the priority of distribution. Based on the payment of covered claims, Guaranty Associations in the RIC estate will become the largest Class (b) policyholder claimants of the estate. Pursuant to Section 221.36 of the Pennsylvania Statute, the Liquidator must seek authority from the Commonwealth Court to disburse assets out of the insolvent insurer's marshaled assets to any guaranty association. Section 221.36 requires the proposal to include: (a) A reserve for administrative expenses and secured claims; (b) Disbursement of assets marshaled to date and the prospect of future disbursement as assets become available; (c) Equitable allocation to the various guaranty associations; (d) Securing by the Liquidator of an agreement to return assets under certain circumstances to ensure pro rata distributions among members of the same creditor class; and (e) Potential reports by the guaranty associations. The Liquidator proposes to distribute $300,000,000 in cash to the Guaranty Associations. In setting this amount, the Liquidator considered the nature of the estate's assets. The Liquidator reserved sufficient assets to pay her administrative expenses as well as the class (a) expenses of the Guaranty Associations. According to Mr. Buckman, the Third Proposal provides the Guaranty Associations, security funds or entities performing substantially equivalent functions with early access to available RIC funds to pay covered policyholder claims. The Third Proposal also provides the framework for future early access distributions. The Liquidator may make future distributions as additional funds are collected and become available. After consultation with the representatives of the Guaranty Associations related with the National Conference of Insurance Guaranty Funds, the Liquidator decided to use "paid loss and ALAE" data in the allocation formula for distribution in the Third Proposal, rather than claims payments made or to be made. The allocation formula will take into consideration amounts already received from the First and Second Distribution. After consultation with the representatives of the Life and Health Insurance Guaranty Associations, the Liquidator determined that, given amounts already paid to these Guaranty Associations in the First and Second Distributions, no Life and Health Insurance Guaranty Associations will be eligible to receive an allocation under the Third Proposal, except the New Hampshire Life and Health Insurance Guaranty Association. The fifty states and the District of Columbia stand to receive cash distributions: State Amount ----- ------ Alabama $4,967,339 Alaska 911,217 Arizona 747,860 Arkansas 766,944 California 16,016,659 Colorado 2,497,077 Connecticut 6,213,940 Delaware 561,085 District of Columbia 1,223,726 Florida 40,429,277 Georgia 5,074,785 Hawaii 673,129 Idaho 106,572 Illinois 5,991,760 Indiana 572,741 Iowa 1,144,973 Kansas 1,291,100 Kentucky 2,718,604 Louisiana 10,156,085 Maine 475,293 Maryland 3,505,996 Massachusetts 1,548,513 Michigan 6,812,734 Minnesota 2,072,939 Mississippi 4,017,893 Missouri 5,197,523 Montana 306,206 Nebraska 659,065 Nevada 692,739 New Hampshire 1,284,782 New Jersey 16,885,968 New Mexico 524,117 New York 83,737,606 North Carolina 7,823,661 North Dakota 33,759 Ohio 2,043,049 Oklahoma 2,046,800 Oregon 1,727,277 Pennsylvania 21,382,325 Rhode Island 1,038,265 South Carolina 3,037,177 South Dakota 293,916 Tennessee 5,142,661 Texas 8,300,740 Utah 756,192 Vermont 981,391 Virginia 3,805,145 Washington 9,722,711 West Virginia 243,601 Wisconsin 1,800,427 Wyoming 34,656 ------------ Total $300,000,000 * * * The Court approves the distribution. Headquartered in New York, New York, Reliance Group Holdings, Inc. -- http://www.rgh.com/-- is a holding company that owns 100% of Reliance Financial Services Corporation. Reliance Financial, in turn, owns 100% of Reliance Insurance Company. The holding and intermediate finance companies filed for chapter 11 protection on June 12, 2001 (Bankr. S.D.N.Y. Case No. 01-13403) listing $12,598,054,000 in assets and $12,877,472,000 in debts. The insurance unit is being liquidated by the Insurance Commissioner of the Commonwealth of Pennsylvania. (Reliance Bankruptcy News, Issue No. 83; Bankruptcy Creditors' Service, Inc., 215/945-7000) RELIANT ENERGY: Low 3rd Quarter Results Spur S&P to Watch Ratings ----------------------------------------------------------------- Standard & Poor's Ratings Services placed its 'B+' corporate credit rating on Reliant Energy Inc. and two of its subsidiaries, Orion Power Holdings Inc. and Reliant Energy Mid-Atlantic Power Holdings LLC, on CreditWatch with negative implications. As of Sept. 30, 2005, Houston, Texas-based Reliant had about $5 billion of total debt outstanding, including off-balance-sheet obligations. The rating action follows the company's poorer than expected third quarter results, its weak prospects for ongoing cash in 2006, and the uncertainty of the retail business model in 2007 and beyond. "The performance and results of Reliant's hedging strategy on its wholesale operations in the PJM region is disappointing, especially in a period of relatively high wholesale prices," said Standard & Poor's credit analyst Arleen Spangler. Standard & Poor's also said that the retail business, as currently structured in Texas, provides little margin for the regional electricity providers and currently can support little to no debt. "Therefore, lenders to Reliant are relying almost exclusively solely on the wholesale business to support debt service obligations," said Ms. Spangler. "That being the case, any deterioration in expected cash flow from this business line has a negative effect on credit quality." Standard & Poor's expects to resolve the CreditWatch listing after getting clarity on the regulatory construct of the retail business post price to beat. REVERE INDUSTRIES: Moody's Junks Planned $55 Million Term Loan -------------------------------------------------------------- Moody's Investors Service assigned a B2 rating to the proposed $135 million senior secured bank revolving credit facility/first lien term loan of Revere Industries, LLC. In addition, a Caa1 rating has been assigned to the proposed $55 million second lien term loan. A B2 corporate family rating has also been assigned. The rating outlook is stable. The ratings are subject to final documentation. Proceeds from the first and second lien term loans are expected to be used to repay: * the existing $139.2 million senior debt; * $19.8 million existing subordinate debt; and * related transaction fees. The revolver is anticipated to remain undrawn at close. These ratings were assigned: * B2 to the proposed five-year $25 million senior secured revolving credit facility; * B2 to the proposed six-year $110 million senior secured first lien term loan; * Caa1 to the proposed six and a half year $55 million second lien term loan; and * B2 Corporate family rating. The rating outlook is stable. The initial credit ratings are constrained by Revere's relatively high leverage and modest cash flow generation. Using Moody's standard adjustments, December 2005 leverage (Debt/ EBITDA), is expected to be approximately 5.0x and the rating agency estimates that FCF/Debt could increase to 4% by the end of 2006 which are reasonable for the current rating category. Revere should generate EBITDA margins in the range of 9.5% to 10.5% in 2006 with its interest coverage (EBITDA/interest expense) of 2.5x remaining relatively flat through December 2006. Despite long-standing customer relationships, Revere's customer concentration is viewed as a risk to it business as its top two customers represent 30% of 2004 revenue. The ratings benefit from Revere's dominant position in the niche markets it serves complemented by a blue-chip customer base. Revere benefits from its position as the sole source supplier for 85% of its customer base, its ability to pass through increases in commodity costs to most of its customer base and the significant barriers to entry created by its long-standing customer relationships and its value-added product engineering. Through its four operating divisions (rolled aluminum (35.1% of revenue), plastic injection molding (24.7 %), aluminum casting (21.6%) and powdered metallurgy (18.6%)), Revere manufactures a diverse suite of products including: * various custom-engineered plastic and powdered metallurgy product solutions; * aluminum sheet and foil; and * cold-side turbocharger impellers. Financial covenants in the proposed loan agreements include: * a maximum first lien leverage ratio; * maximum total leverage ratio; and * a minimum fixed charge coverage ratio. The proposed revolver and first lien term loan will be secured by a first priority, perfected lien on all assets and capital stock of Revere and all of its subsidiaries. The second lien facility has a second priority secured interest in all of the collateral securing the first lien facilities. The proposed facility will be unconditionally guaranteed by all direct and indirect subsidiaries of Revere. The first lien term loan will amortize in equal installments at an annual rate of 1% per year with the balance due in year six. The second lien facility will not be subject to interim scheduled amortization. The facilities will include an excess cash flow sweep. The B2 rating on Revere's senior secured revolving credit facility and first lien term loan reflects the benefits and limitations of the collateral. The senior first lien credit facility total $135 million will be secured by total tangible assets of $147 million and intangible assets of $34 million at September 30, 2005. The second lien facility has been rated two notches below reflecting their junior status relative to the first lien facilities and the increased risk of loss under a distressed scenario. Moody's notes that changes in documentation, structure, or operating performance from what has been relied upon, may have yielded a different ratings outcome. The stable rating outlook reflects favorable market conditions with positive near-term growth prospects. Moody's anticipates Revere's expected cash flow generation, although modest, will be sufficient to cover the first lien term loan amortization and interest payments. The ratings or outlook could be favorably impacted by a sustained improvement in Moody's adjusted EBITDA margins to 11% that translate into growth in cash flows and a reduction of Revere's financial leverage to 4.0x. Conversely, the ratings or outlook could be pressured by a deterioration in cash flows, the loss of a significant customer or a change in financial posture that negatively impacts Revere's leverage. Revere is a leading manufacturer of plastic and metal custom-engineered components for major industrial customers across a wide variety of industries. ROMACORP INC: Bondholders Consent to Debt Restructuring ------------------------------------------------------- Romacorp, Inc., owner and franchisor of Tony Roma's restaurants, has reached an agreement in principle with a majority of its bondholders for a consensual restructuring, whereby the bondholders would exchange their debt for predominant ownership in the company. The restructuring, which will take place under Chapter 11 of the U.S. bankruptcy code, is subject to court approval of a plan of reorganization and certain other contingencies. The restructuring would provide Romacorp's bondholders with approximately 90% ownership of the Company upon successful completion of the process. Romacorp said that despite continued growth in new franchised restaurant openings and strong sales increases from remodeled company-owned restaurants in recent years, high-interest debt incurred during the '90s has stifled its progress. Refinancing the debt, combined with the resulting change in ownership, should provide a much stronger platform for future growth, the company said. "We are excited about the opportunity to restructure our company," said Romacorp CEO David Head. "This will allow us to accelerate our growth plan, which includes a very successful new prototype and a remodel package that is delivering double-digit sales increases. Tony Roma's is successful and well known throughout the world, and once this process is behind us, we look forward to taking this great brand to new heights." The company said it expects to complete the restructuring process by the end of the first quarter of 2006. The transaction is subject to bankruptcy court approval and confirmation of the Chapter 11 plan, as well as certain other contingencies. During the restructuring process, Romacorp said it expects to meet its financial obligations in the ordinary course of business. Headquartered in Dallas, Texas, Romacorp, Inc., own and operate the Tony Roma chain of restaurants in 30 locations and franchises in more than 200 locations. The Debtor and seven of its affiliates filed for chapter 11 protection on Nov. 6, 2005 (Bankr. N.D. Tex. Case Nos. 05-86818 through 05-86825). Jason S. Brookner, Esq., at Andrews Kurth LLP, represents the Debtors in their restructuring efforts. Houlihan Lokey Howard & Zukin Capital, Inc. is the Debtors financial advisor. As of Sept. 25, 2005, the Debtor listed assets totaling $20,769,000 and debts totaling $76,309,000. ROMACORP INC: Case Summary & 21 Largest Unsecured Creditors ----------------------------------------------------------- Lead Debtor: Romacorp, Inc. 9304 Forest Lane, Suite 200 Dallas, Texas 75243 Bankruptcy Case No.: 05-86818 Debtor affiliates filing separate chapter 11 petitions: Entity Case No. ------ -------- Roma Restaurant Holdings, Inc. 05-86819 Roma Dining, L.P 05-86820 Roma Franchise Corporation 05-86821 Roma Prince George's, Inc. 05-86822 Roma Owings Mills, Inc. 05-86823 Roma Holdings, Inc. 05-86824 Roma Systems, Inc. 05-86825 Type of Business: The Debtors own and operate the Tony Roma chain of restaurants in 30 locations and franchises in more than 200 locations. Chapter 11 Petition Date: November 6, 2005 Court: Northern District of Texas (Dallas) Judge: Barbara J. Houser Debtors' Counsel: Jason S. Brookner, Esq. Andrews Kurth LLP 1717 Main Street, Suite 3700 Dallas, Texas 75201 Tel: (214) 659-4457 Fax: (214) 659-4829 Debtors' Financial Advisor: Houlihan Lokey Howard & Zukin Capital, Inc. Debtors' Claims Agent: The Garden City Group, Inc. Financial Condition as of September 25, 2005: Total Assets: $20,769,000 Total Debts: $76,309,000 Debtors' 21 Largest Unsecured Creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ Bank of New York Senior Notes $58,000,000 101 Barclay St., 8th Floor West due 2008 New York, NY 10286 Highland Capital Management LP Senior Notes $13,030,282 Two Galleria Tower, Suite 1300 due 2008 13455 Noel Road Dallas, TX 75240 Wells Fargo Senior Notes $11,234,000 1 California Street due 2008 San Francisco, CA 94111 Prudential Senior Notes $7,029,000 751 Broad Street due 2008 Newark, NJ 07102 CSFB Senior Notes $6,142,567 466 Lexington Avenue due 2008 New York, NY 10017 Northstar/ING Investments LLC Senior Notes $5,571,000 7337 East Doubletree Ranch Road due 2008 Scottsdale, AZ 85258 Northeast Investors Senior Notes $4,686,480 150 Federal Street, Suite 100 due 2008 Boston, MA 02110 Sentinel Capital Partners Management Fee $841,667 777 Third Avenue, 32nd Floor New York, NY 10017 PFG Trade $350,000 P.O. Box 730 Dover, FL 33527 Deltec Asset Management Corp. Senior Notes $318,000 645 5th Avenue due 2008 New York, NY 10022 Florida Department of Revenue $151,000 Liberty Mutual Insurance Co. $102,000 Radix Construction Trade $100,000 US Foodservice Trade $100,000 Fashion Seal Uniforms Trade $95,000 US Foodservice - Las Vegas Trade $90,000 Carroll County Foods Trade $42,000 Roma JMA Trade $34,000 Freshpoint South Florida Trade $28,000 Lockton Trade $27,455 Reds Market Orlando Trade $21,000 RUSH FINANCIAL: Sept. 30 Balance Sheet Upside-Down by $1.5MM ------------------------------------------------------------ Rush Financial Technologies, Inc., dba RushTrade Group, delivered its financial results for the quarter ended Sept. 30, 2005, to the Securities and Exchange Commission on Oct. 27, 2005. For the three months ended Sept. 30, 2005, Rush Financial reported a $607,772 net loss on $609,416 of revenues, compared to a $615,031 net loss on $438,335 of revenues for the same period in 2004. The Company's balance sheet showed $1,817,630 of assets at Sept. 30, 2005, and liabilities totaling $3,328,347, resulting in a $1,510,717 stockholders' deficit. At September 30, 2005, the Company's current liabilities exceeded its current assets by $2,579,569. Current liabilities include past due payroll obligations of approximately $558,758 and past due notes payable totaling $352,000. Defaults Rush Financial has been unable to meet many of its obligations as they have become due. Two convertible notes totaling $185,000, due to a related party, are past due. Two additional notes totaling $166,667 are due and two more notes totaling $133,333 will mature in the second quarter of 2006. The Company is negotiating with the holders to extend these notes. The Company is presently engaged in several legal proceedings that could have an adverse effect on its ability to continue as a going concern if the outcomes are unfavorable. The outstanding claim under these proceedings is estimated at $200,000. About Rush Financial Headquartered in Dallas, Texas, Rush Financial Technologies, Inc., -- http://www.rushgroup.com-- through its subsidiaries, provides various broker/dealer services in the United States. It develops and operates portfolio management software products, order management systems, direct-access trading software applications, and data services center. The company offers market data platforms and direct access trading systems to online investors, semiprofessional traders or institutional portfolio managers, and traders using its direct access routing technology. Rush Financial also provides securities and direct access online brokerage, trading, and order routing services to retail customers utilizing its software products. SALEM COMMS: Earns $3.4 Million of Net Income in Third Quarter -------------------------------------------------------------- Salem Communications Corporation (Nasdaq:SALM) reported results for the three-month and nine-month periods ended Sept. 30, 2005. For the quarter ended Sept. 30, 2005 compared to the quarter ended Sept. 30, 2004: * net broadcasting revenue increased 8.3% to $51.2 million from $47.3 million; * operating income increased 41.4% to $11.5 million from $8.1 million; * net income increased 33.7% to $3.4 million from net income of $2.6 million; * station operating income increased 8.4% to $19.8 million from $18.3 million; * EBITDA increased 27.9% to $14.5 million from $11.4 million; * adjusted EBITDA increased 6.3% to $15.1 million from $14.2 million; * same station net broadcasting revenue increased 6.5% to $44.7 million from $42 million; * same station SOI increased 7.9% to $18.6 million from $17.2 million; and * same station SOI margin increased to 41.6% from 41.1%. "We continue to report same station net broadcasting revenue and station operating income growth rates that are among the best in the radio industry," Edward G. Atsinger III, president and CEO said. "Our growth during the quarter is due to strong same station performance at our News Talk stations, where revenue grew 15.3% and at our contemporary Christian music stations in Atlanta and Los Angeles, which increased revenue by 13.5% and 12.1%. Our Christian Teaching and Talk stations extended their consistent performance as same station revenue improved by 5.2% in the quarter." For the nine months ended Sept. 30, 2005 compared to the nine months ended Sept. 30, 2004, net broadcasting revenue increased 8.9% to $150.5 million from $138.2 million; operating income increased 13.8% to $31.6 million from $27.8 million; net income increased to $9.4 million from net income of $3.6 million; SOI increased 8.1% to $57.1 million from $52.8 million; EBITDA increased to 35.6% to $41.3 million from $30.5 million; adjusted EBITDA increased 5.1% to $42.6 million from $40.5 million; same station net broadcasting revenue increased 7.8% to $129 million from $119.7 million; same station SOI increased 11.6% to $53.7 million from $48.1 million; and same station SOI margin increased to 41.6% from 40.2%. Accounts As of September 30, 2005, the company had net debt of $309.6 million and was in compliance with all of its covenants under its credit facilities and bond indentures. Salem's bank leverage ratio was 4.97 as of Sept. 30, 2005 versus a compliance covenant of 6.75. Salem's bond leverage ratio was 5.43 as of Sept. 30, 2005 versus a compliance covenant of 7.0. Acquisitions During the quarter ended Sept. 30, 2005, Salem closed acquisition transactions with WGUL (860 AM) in Dunedin, Florida and WLSS (930 AM) in Sarasota, Florida for a total of $8.7 million on Aug. 12, 2005; and KCRO (660 AM) in Omaha, Nebraska (Omaha-Council Bluffs market) for $3.2 million on Sept. 1, 2005. Stock Repurchases During the quarter ended Sept. 30, 2005, the company repurchased 154,932 shares of its Class A common stock for $2.8 million. Since the inception of the stock repurchase program through Sept. 30, 2005, the company has repurchased 365,251 shares of its Class A common stock for $6.6 million. Salem Communications Corporation (NASDAQ:SALM) -- http://www.salem.cc/-- headquartered in Camarillo, California, is the leading U.S. radio broadcaster focused on Christian and family-themed programming. Upon the close of all announced transactions, the company will own 105 radio stations, including 67 stations in 24 of the top 25 markets. In addition to its radio properties, Salem owns Salem Radio Network(R), which syndicates talk, news and music programming to approximately 1,900 affiliates; Salem Radio Representatives(TM), a national radio advertising sales force; Salem Web Network(TM), a leading Internet provider of Christian content and online streaming; and Salem Publishing(TM), a leading publisher of Christian-themed magazines. * * * Salem Communications' 7-3/4% senior subordinated notes due 2010 carry Standard & Poor's single-B rating. SCHOOL SPECIALTY: Moody's Reviews B2 Corporate Family Rating ------------------------------------------------------------ Moody's Investors Service changed the direction of School Specialty Inc.'s review to on review for possible upgrade following the termination of the proposed go private recapitalization of the company led by Bain Capital. The speculative grade liquidity rating of SGL-3 is being confirmed and taken off review for possible downgrade. In addition, the ratings on the proposed debt offerings to finance the recapitalization will be withdrawn. Moody's ongoing review will focus on the company's anticipated operating performance and prospects, including its recent downward revision in earnings as a result of its lower than expected monthly operating results in the company's peak August and September selling season, as well as the company's expected financial policies and capital structure going forward. The review will likely conclude with no more than a one notch upgrade to the current B2 corporate family rating. The SGL-3 speculative grade liquidity rating reflects adequate liquidity as Moody's expects that the company will be able to fund its working capital and capital expenditures from internally generated cash flow and seasonal borrowings over the next four quarters. Seasonal borrowing are primarily concentrated in the company's first quarter and free cash flow is predominantly generated in one quarter. Moody's notes that School Specialty's existing $250 million revolving credit facility expires in April 2006; however, the company is currently in the midst of refinancing this facility with the recent termination of the proposed recapitalization. The current revolving credit agreement is subject to five financial covenants which the Company is expected to maintain adequate cushion over ensuring full access to this facility over the remainder of its availability. This rating is placed on review for possible upgrade: * Corporate Family Rating of B2 This rating is being confirmed: * Speculative Grade Liquidity Rating of SGL-3 These ratings are being withdrawn: * $175 Million senior secured revolving credit facility of B1; * $375 million senior secured term loan B of B1; * $150 million senior secured delayed draw credit facility of B1; * $350 Million senior unsecured notes due 2013 of B3; * $225 Million senior subordinated notes due 2015 of Caa2. School Specialty, Inc., headquartered in Greenville, Wisconsin, is the largest provider of supplemental educational products and equipment to the pre-kindergarten through twelfth grade educational markets in the United States and Canada. Its products are sold via its catalogue, ecommerce websites, and sales force. Total revenues for the fiscal year ended April 30, 2005 were approximately $1.0 Billion. SHAW COMMS: Moody's Puts Ba2 Rating on Proposed C$300 Million Debt ------------------------------------------------------------------ Moody's Investors Service affirmed all ratings of Shaw Communications Inc. and assigned a senior unsecured rating of Ba2 to the company's proposed C$300 million senior unsecured debenture issue which is to be used to retire bank debt and the US$172 million 8.5% CoPrs preferred security issue. The outlook for all ratings is stable. Shaw's Corporate Family Rating of Ba2 is supported by: 1) free cash flow generation, 2) operating scale within Canada, 3) leading North American internet penetration, 4) efficient cable/internet operation, and 5) launch of the telephony product. The rating is constrained by: 1) high leverage, 2) heavy planned shareholder distributions, 3) modest revenue growth, 4) lack of further improvement in operating margins, 5) increasing capital expenditure, and 6) net governance weaknesses. The outlook is stable because Moody's does not expect material improvement in Shaw's already good operating performance, while increasing capital expenditures and ongoing shareholder payments (dividends and buybacks) are expected to limit meaningful improvements in the relationship of cash flows to debt. The rating might be upgraded if Shaw were to decide to dedicate more of its operational cash flow to debt reduction as opposed to shareholder distributions, which would be reflected in free cash flow-to-debt (after Moody's standard adjustments) in the low double digit range, as compared to the 6% generated in fiscal 2005. Conversely, the rating might be downgraded if Shaw's operating performance were to weaken or if shareholders were to continue to receive a large majority of the company's cash flow after capital expenditures. The rating might be downgraded if free cash flow less ongoing buybacks to debt was likely to remain in the mid-single digit range. Moody's believes that Shaw's revenue growth will remain in the mid-upper single digit range, as telephony growth offsets a maturation of internet growth given Shaw's already high Internet penetration rate. Shaw's EBITDA margin is expected to remain relatively stable in the low 40% range, as the company's industry- leading cable/internet margin of approximately 50% is offset with much lower, although positive, satellite results. Moody's believes that further improvement in operating results will be difficult, given Shaw's already superior results. Shaw's capital expenditures have increased materially from earlier expectations, and the company is currently using all of its cash flow after those expenditures to pay shareholders via dividends and share buybacks. While the company has the ability to produce cash flow, management is not using it to reduce debt, and this constrains the rating. The ratings affected by this action are: 1) Corporate Family Rating: Ba2 (unchanged) * Senior Unsecured: Ba2 (unchanged) -- 7.40%, Oct 2007 C$297 million -- 7.88%, April 2010 US$440 million -- 7.68%, April 2011 US$225 million -- 7.61%, December 2011 US$300 million -- 7.50%, November 2013 C$350 million -- Proposed issue due 2012 C$300 million 2) Trust Preferred Shares (CoPrs) Ba3 (unchanged) -- 8.54% Series B, due September 2027 C$ 98 million -- 8.50% Series, due September 2097 US$ 172 million* -- 8.875% Series, due September 2049 C$147 million * to be retired from the proposed senior unsecured debt issue Shaw Communications Inc. is a cable and satellite operator headquartered in Calgary, Alberta, Canada. SHAW COMMS: To Redeem $172.7 Million 8.50% Preferred Securities --------------------------------------------------------------- Shaw Communications Inc. (TSX:SJR.NV.B) (NYSE:SJR) has given notice of its intention to redeem all of its outstanding Series B $172.5 million 8.50% Canadian Originated Preferred Securities, which are listed on the New York Stock Exchange under the symbol SJR PrB. The CUSIP number of the Series B Preferred Securities is 82028K705. The redemption date will be December 16, 2005. The redemption price of US$25.00 per Series B Preferred Security plus accrued and unpaid interest will be paid on the redemption date. Shaw believes that the redemption of the Series B Preferred Securities is prudent given the current interest and foreign exchange rate environments. The redemption results in a potential estimated economic benefit in excess of $50 million. This represents the foreign exchange benefit realized on the redemption of the unhedged par value of the Series B Preferred Securities, combined with the present value of the potential carrying charge savings over a ten-year term, net of breakage costs of approximately $16 million. The breakage costs are in respect of a cross currency swap relating to certain Series B Preferred Security distributions. Questions about the redemption process can be directed to the trustee, Bank of New York, at 1-800-438-5473. Additional Financing Shaw also has a commitment from Toronto Dominion Bank to provide an additional $100 million credit facility. The commitment is in the form of a 364-day extendible revolving loan facility, which is convertible to a one-year non-revolving term loan at the end of the 364-day period. It is anticipated, subject to negotiation of final terms acceptable to both parties, that the facility will close in the second quarter. Shaw Communications Inc. -- http://www.shaw.ca/-- is a diversified Canadian communications company whose core business is providing broadband cable television, Internet, Digital Phone, telecommunications services (through Big Pipe Inc.) and satellite direct-to-home services (through Star Choice Communications Inc.) to approximately 3.0 million customers. Shaw is traded on the Toronto and New York stock exchanges and is a member of the S&P/TSX 60 index (Symbol: TSX - SJR.NV.B, NYSE - SJR). * * * As reported in today's Troubled Company Reporter, Moody's Investors Service affirmed all ratings of Shaw Communications Inc. and assigned a senior unsecured rating of Ba2 to the company's proposed C$300 million senior unsecured debenture issue which is to be used to retire bank debt and the US$172 million 8.5% CoPrs preferred security issue. The outlook for all ratings is stable. SMARTIRE SYSTEMS: KPMG Raises Going Concern Doubt ------------------------------------------------- KPMG LLP expressed substantial doubt about SmarTire Systems Inc.'s ability to continue as a going concern after it audited the Company's financial statements for the fiscal years ended July 31, 2005, and 2004. In an addendum to its audit report, KPMG pointed to the Company's uncertainty in meeting its current operating and capital expense requirements. Fiscal Year 2005 Results In its annual report for the fiscal year ended July 31, 2005, submitted to the Securities and Exchange Commission, SmarTire reported a $14,291,681 net loss on $1,463,460 of revenues, compared to a $10,987,026 net loss on $1,658,279 of revenues in the prior year. The Company's balance sheet showed $33,284,543 of assets at July 31, 2005, and liabilities totaling $22,900,586. At July 31, 2005, the Company had accumulated deficit of $75,132,150 and working capital of $7,510,569. Management says that SmarTire requires additional financing to fund its operation since there is no assurance that it can draw down on the $160-million equity line of credit from Cornell Capital Partners. The drawdown is subject to an effective Registration Statement filed with the SEC and the registration statement is currently not effective. Dana Corp Agreement SmarTire inked a marketing and distribution deal with Dana Corporation on Oct. 12, 2005. Under the agreement, the Company granted to Dana's Heavy Vehicle Technology and Systems Group the right to directly, or indirectly through Dana's Road Ranger marketing alliance with Eaton Corporation, the nonexclusive right to market, sell and distribute its tire pressure monitoring components to OEMs, fleets and aftermarket distributors not under the control of an OEM, throughout North America, Mexico, Australia and New Zealand. The parties will mutually agree on monthly, quarterly and annual sales targets to be achieved by Dana. If at any time Dana fails to meet these sales targets, the parties will mutually develop a corrective action plan that will provide for no less than two quarters for Dana to achieve sales targets. The marketing and distribution agreement will remain in effect until Oct. 12, 2012, at which time the marketing and distribution agreement will continue indefinitely until terminated by either party upon one year's notice to the other party. About SmarTire SmarTire develops and markets technically advanced tire pressure monitoring systems for the transportation and automotive industries that monitor tire pressure and tire temperature. Its TPMSs are designed for improved vehicle safety, performance, reliability and fuel efficiency. The Company has three wholly owned subsidiaries: SmarTire Technologies Inc., SmarTire USA Inc. and SmarTire Europe Limited. SOUTH DAKOTA: MetaBank Wants Stay Lifted to Liquidate Collateral ---------------------------------------------------------------- MetaBank, a secured creditor of South Dakota Acceptance Corporation, asks the U.S. Bankruptcy Court for the District of South Dakota, Southern Division, to lift the automatic stay in the Debtor's chapter 11 case. The Debtor's primary business involves the collection of debts owed pursuant to retail installment contracts for the purchase of motor vehicles. These debts originated from the Debtor's affiliate, Dan Nelson Automotive Group, Inc., and assigned to South Dakota. The terms of MetaBank's lending relationship with South Dakota are governed by an First Amendment and Restated Loan and Security Agreement dated Oct. 26, 2004. Under the credit agreement, the Debtor owes MetaBank $16,926,225. The loan is secured by a blanket lien in the Debtor's personal property. Having reviewed South Dakota's collection activity, MetaBank concluded that it is undersecured. MetaBank wants the stay lifted to allow it recover and liquidate its collateral. Headquartered in Sioux Falls, South Dakota, South Dakota Acceptance Corporation dba CNAC, dba Mr. Payroll, dba First Midwest Fidelity, and Dan Nelson Automotive Group, Inc., filed for chapter 11 protection on June 20, 2005 (Bankr. D. S.D. Case No. 05-40866). When the Debtor filed for protection from its creditors, it listed $15,624,000 in assets and $28,028,058 in debts. STELCO INC: Ontario Court Dismisses Bondholders' Appeal ------------------------------------------------------- The Ontario Court of Appeal dismissed an appeal by Stelco Inc.'s Informal Committee of Senior Debenture Holders from orders issued by Justice Farley on Oct. 4. Those orders authorized Stelco to, among other things, enter into agreements with the Province of Ontario, elements of the United Steelworkers and Tricap Management Limited. The Court of Appeal held that Mr. Justice Farley had jurisdiction to make the orders in question and that those orders moved the restructuring process along to the point where the bondholders would be free to exercise their voting rights at the meeting of creditors to be held on Nov. 15, 2005. "We're continuing the negotiations designed to bring creditors on board our restructuring plan," Courtney Pratt, Stelco President and Chief Executive Officer, said. "We want to address their concerns while maintaining the support of stakeholders who have already supported the plan. The fact is that there's just not enough value in the company to give everyone everything they want. So we're working hard to provide everyone with enough to earn their support." Stelco, Inc. -- http://www.stelco.ca/-- is a large, diversified steel producer. Stelco is involved in all major segments of the steel industry through its integrated steel business, mini-mills, and manufactured products businesses. In early 2004, after a thorough financial and strategic review, Stelco concluded that it faced a serious viability issue. The Corporation incurred significant operating and cash losses in 2003 and believed that it would have exhausted available sources of liquidity before the end of 2004 if it did not obtain legal protection and other benefits provided by a Court-supervised restructuring process. Accordingly, on Jan. 29, 2004, Stelco and certain related entities filed for protection under the Companies' Creditors Arrangement Act. The Court has extended Stelco's CCAA stay period until Dec. 5, 2005, in order to accommodate the creditors' meetings and a sanction hearing. SYCAMORE CBO: Moody's Reviews $37MM Notes' Ba1 Rating for Upgrade ----------------------------------------------------------------- Moody's Investors Service placed three classes of notes issued by Sycamore CBO (Cayman) Ltd. on review for possible upgrade: 1) the U.S.$140,000,000 Class A-1 Senior Secured Floating Rate Notes due August 10, 2009; 2) the U.S.$41,000,000 Class A-2 Senior Secured Fixed Rate Notes due August 10, 2009; and 3) the U.S. $37,000,000 Class A-3 Senior Secured Fixed Rate Notes due February 10, 2011. According to Moody's, the U.S.$140,000,000 Class A-1 Senior Secured Floating Rate Notes and the U.S.$41,000,000 Class A-2 Senior Secured Fixed Rate Notes has delevered 77% as of the August 2005 payment date. The rating action is also due to an improvement of credit quality of the underlying collateral portfolio. Rating Action: Under review for possible upgrade Issuer: Sycamore CBO (Cayman) Ltd. Class Description: U.S.$140,000,000 Class A-1 Senior Secured Floating Rate Notes due August 10, 2009 * Prior Rating: A1 * Current Rating: A1 (under review for upgrade) Class Description: U.S.$41,000,000 Class A-2 Senior Secured Fixed Rate Notes due August 10, 2009 * Prior Rating: A1 * Current Rating: A1 (under review for upgrade) Class Description: U.S. $37,000,000 Class A-3 Senior Secured Fixed Rate Notes due February 10, 2011 * Prior Rating: Ba1 * Current Rating: Ba1 (under review for upgrade) SYNAGRO TECH: Earns $5.1 Million of Net Income in Third Quarter --------------------------------------------------------------- Synagro Technologies, Inc. (Nasdaq and ArcaEx Markets: SYGR) reported results of operations for the three and nine months ended Sept. 30, 2005. Net income before preferred stock dividends totaled $5.1 million, compared to net income of $4.4 million for the same period in 2004. Revenue for the quarter ended Sept. 30, 2005, increased $2.3 million or 2.7% to $88.2 million from $85.9 million in the comparable period last year. Operating income for the quarter increased $800,000 to $13.7 million compared to $12.9 million in the comparable quarter last year. Pre-tax income for the quarter increased $2 million to $9.2 million from income of $7.2 million reported in the third quarter of 2004 due to the $800,000 increase in operating income and a $1.2 million decrease in other expense, net related primarily to a $1 million decrease in interest expense. Earnings before interest, taxes, depreciation and amortization expense for the quarter increased to $19.2 million from $17.7 million in the comparable quarter last year primarily due to the changes in income from operations and other expense. "For the quarter our top line revenue increased 2.7% to $88.2 million, including increases in our design build and event revenues," Robert C. Boucher, Jr., Company Chief Executive Officer, stated. "Our contract revenues decreased $0.8 million due to an expected decrease in revenue on a long-term cleanout contract that will not have significant activity in 2005. This contract generated $0.4 million of revenue this quarter, compared to $3.3 million of revenue in the third quarter of 2004." Revenue for the nine months ended Sept. 30, 2005, increased $7.2 million or 3% to $248 million from $240.8 million in the comparable nine months last year. Operating income for the nine months totaled $23 million compared to $33.5 million in the comparable nine months last year. Pre-tax income for the nine months decreased to a loss of $13.6 million from income of $17 million reported in the first nine months of 2004. Net loss before preferred stock dividends totaled $9.1 million for the nine months ended Sept. 30, 2005, compared to net income of $10.4 million for the same period in 2004. EBITDA for the first nine months of 2005, adjusted to exclude the transaction costs and expenses, stock option redemptions and transaction bonuses, and debt extinguishment costs related to the Recapitalization totaling $27.8 million, decreased to approximately $47.4 million from approximately $48.1 million in the comparable period last year primarily due to the changes in income from operations and other expense. Capital Structure In June 2005, the Company closed a new $305 million senior credit agreement, repaid $190 million of debt under its previously outstanding senior and subordinated debt agreements, converted all outstanding shares of preferred stock into 41,885,597 shares of common stock, and completed a $160 million offering of 9,302,326 primary and 27,847,674 secondary shares of common stock. Accordingly, the Company incurred certain costs and write-offs relating to the Recapitalization, including $1.5 million of transaction costs and expenses, $6.8 million of stock option redemptions and transaction bonuses, and $19.5 million of debt extinguishment costs. The Company also recognized as dividends $4.6 million of previously unrecognized accretion on preferred stock. Headquartered in Houston, Texas, Synagro Technologies, Inc. -- http://www.synagro.com/-- offers a broad range of water and wastewater residuals management services focusing on the beneficial reuse of organic, nonhazardous residuals resulting from the wastewater treatment process, including drying and pelletization, composting, product marketing, incineration, alkaline stabilization, land application, collection and transportation, regulatory compliance, dewatering, and facility cleanout services. * * * As reported in the Troubled Company Reporter on June 17, 2005, Synagro's 9-1/2 % senior subordinated notes due Apr. 1, 2009, carry Moody's Investors Service's Caa1 rating and Standard & Poor's single-B rating. TELESYSTEM INTERNATIONAL: Court Grants Additional Powers to KPMG ---------------------------------------------------------------- Telesystem International Wireless Inc. (TSX VENTURE:TIW) reported that the Superior Court, District of Montreal, Province of Quebec has issued, under the Company's plan of arrangement, an order to vest the Court-appointed Monitor, KPMG Inc., with further powers and duties once the common shares of TIW are cancelled and delisted from the TSX Venture Exchange. The Company has not yet determined the dates for the cancellation and delisting of its common shares, but is targeting the end of November 2005. Telesystem International Wireless Inc. -- http://tiw.ca/-- operates under a court supervised Plan of Arrangement to complete the transaction with Vodafone announced on March 15, 2005, proceed with its liquidation, including the implementation of a claims process and the distribution of net cash to shareholders, cancel its common shares and proceed with its final distribution and be dissolved. TESORO PETROLEUM: Moody's Rates $900 Million Unsec. Notes at Ba1 ---------------------------------------------------------------- Moody's Investors Service assigned a Ba1 rating to Tesoro Petroleum's pending two tranche $900 million senior unsecured note offering, approximately in the range of $450 million due 2012 and $450 million due 2015. Moody's also upgraded Tesoro's Corporate Family Rating to Ba1 from Ba3 and its senior secured bank revolver rating from Ba2 to Baa3. The rating outlook is stable. After a sustained phase of major debt reduction, today's actions coincide with Tesoro's general completion of a strategic review, covering the scale of its new stock buyback program, organic projects and capital spending plan, and assessment of the acquisition market. Moody's believes Tesoro emerges from that process still committed to suitable fiscal discipline and liquidity for the new ratings, a discipline reinforced by its prior experience with highly leveraged acquisitions in a volatile margin capital intensive sector in which essential working capital needs also surge dramatically during crude oil price spikes and stay high with sustained high prices. The upgrades generally reflect: * major deleveraging; * expected fiscal prudence; * a sound sector outlook; and * expected adequate cash flow and cash balance cushion to internally fund a heavy 2006 capital spending budget and $200 million equity buyback. Liquidity is strong, with: * $440 million of pro-forma cash; * $472 million of pro-forma committed undrawn revolver availability; and * expected above mid-cycle cash flow next year. However, the ratings are restrained by still substantial Lease Adjusted Leverage and Lease + Bareboat Charter Adjusted Leverage, forthcoming substantially escalated capital spending, and inherent margin volatility. Operating lease expense approximates $111 million per year. Moody's also notes that 55% of Tesoro' cash flow and earnings are generated by one refinery, a significant regional margin and operating downtime risk concentration given the nature of the refining business. Moody's also notes, however, that Tesoro maintains over $1 billion of business interruption insurance. Note proceeds and cash balances will fund the retirement of the: * 9.625% senior subordinated notes due 2008; * 9.625% senior subordinated notes due 2012; and * 8% senior secured notes due 2008 (previously B2 senior subordinated and Ba2 senior secured, respectively). The senior subordinated note ratings are upgraded to Ba2, notched according to Moody's single notching policy for subordinated notes of issuers having Corporate Family ratings of Ba2 and Ba1 (absent over-riding structural considerations) and the senior secured note rating is upgraded to Baa3. These ratings will be withdrawn immediately upon the notes' retirement, which is imminent. Tesoro is an independent petroleum refiner and marketer with 6 refineries having a combined distillation capacity of 558,000 barrels/day and a below average 8.5 Nelson Complexity Rating (referring to a refinery's relative ability to convert crude oil into high value transportation fuels and other high value product). Higher complexity indicates a capacity to convert higher percentages of a given barrel of oil into high value product. Its largest refinery has high complexity and generates some 55% of cash flow. The ratings also gain support from a currently strong margin environment, and a regionally and operationally diversified refining portfolio consisting of six refineries focused on West Coast and Rocky Mountain markets. The refineries span several regional crack spread environments, diversify exposure to weakening regional crude oil supply trends, and range from high complexity deep conversion capability (the 168,000 barrels per day Golden Eagle refinery in the San Francisco Bay Area) to low complexity light sweet refining capability (Anacortes, Washington, 108,000 bpd; Hawaii, 95,000 bpd; Alaska, 72,000 bpd; Mandan, North Dakota, 60,000 bpd; and Salt Lake City, 55,000 bpd). The refining portfolio also diversifies exposure to important volatile crude cost differentials between expensive light sweet crude oil and cheaper heavy sour crude oils. Declining California production does impact the Golden Eagle refinery but imported crude oil readily covers the shortfall with incremental costs tending to be passed on to the market. The two notch upgrade of the Corporate Family Rating is compatible with: * the operating strengths, needs, and weaknesses of Tesoro's business portfolio; * a currently strong but ever-volatile sector margin environment; * the pro-forma financial structure; * greater funding for Tesoro's environmental capital spending activity; and * its renewed focus on important organic, margin improving projects, and authorized shareholder enhancements. In its first phase of shareholder actions, Tesoro: 1) increased its dividend 100% but this merely brings it closer to a more competitive range and adds up to a low $28 million per year; and 2) approved a $200 million 2006 stock buyback program. It will be important for its buyback programs to avoid releveraging. The ratings are restrained by still substantial Lease, bareboat charter, and Pension Adjusted debt in the range of at least $1.8 billion and resulting adjusted balance sheet leverage of approximately 50%. For 2005, Tesoro's long and short term bareboat charter expense will approximate $74 million, excluding additional very considerable spot charter costs. Bareboat charter costs are core financial obligations covering core capital assets (tankers) deemed vital to sustaining the current scale and mode of operations, including moving intermediate feedstocks and finished products amongst its Pacific refineries (Alaska, Hawaii, Washington, and San Francisco). Additional operating lease expense approximates $37 million a year. Several operating characteristics may limit Tesoro's ultimate upgrade potential. While Tesoro holds 6 refineries, its largest typically generates the majority of EBITDA. Its two largest refineries typically generate 76% of EBITDA. Golden Eagle has experienced significant unscheduled downtime over the years though this has been improving and Tesoro also carries substantial business interruption insurance. The portfolio also carries comparatively high unit operating costs. As well, four of Tesoro's refineries are well below 100,000 barrels of daily capacity, have low complexity (though historically suitable to their local markets), have been historically protected to varying degrees by niche economics, and face inherent risk of potential niche erosion. The upgrades further reflect: 1) general completion this week of Tesoro's management and board level strategic review, with the outcomes to date compatible with the new ratings; 2) the accelerated lease-adjusted leverage reduction due to extraordinary sector margins and modest capital spending; 3) strong liquidity support for $650 million of 2006 capital spending and the planned at least $200 million of 2006 stock buybacks. Tesoro reduced balance sheet debt by $1.1 billion from its difficult 2002 peak due to generally strong sector margins commencing in 2003. Pro-forma September 30, 2005 cash balances approximate $440 million, bringing net leverage to a comparatively low level, though such liquidity is deemed important in this volatile, capital and working capital intensive sector. Thus, net leverage and liquidity measures have improved very substantially over the last three years, with the pace accelerating through 2005. As a necessity, and subsequently to reduce the leverage risk premium hampering its equity performance, cash flow conservation for debt reduction was Tesoro's top priority. Capital spending will rise very substantially to $670 billion in 2006 versus approximately $350 million in 2005 and approximately $540 million in 2007. Tesoro will dedicate substantial capital to upgrade the product yield, unit cost, and margin profiles of several of its refineries. Such projects would strengthen the refining portfolio. Moody's also believes that, while the generally low overall complexity of Tesoro's portfolio may present significant opportunities for organic reinvestment to improve premium light product yield, achieve unit cost savings, or the ability to economically run higher volumes of cheaper heavier and sour crude oil and still achieve desire product slates, these projects would consume substantial cash prior to first cash flow. Pro-forma September 30, 2005 balance sheet debt would approximate $1 billion, down from $1.6 billion at March 31, 2004 and $1.2 billion at year-end 2004. Lease and pension adjusted debt appears now be $1.8 billion to $1.9 billion, including $88 million of unfunded pension liabilities. The lease rentals cover refined product tanker bareboat charters for vessels essential to moving Tesoro's intermediate and finished product volumes amongst its Pacific Basin refineries and markets. Pro-forma Balance Sheet Debt/Capital is roughly 37% and approximately 50% adjusting for operating leases and unfunded pension fund costs. Fully-loaded pro-forma Adjusted Debt/Complexity Barrel approximates $380/Barrel and pro-forma Adjusted Debt/Distillation Capacity Barrel approximates $3,200/barrel. These numbers would be materially lower if non- core operating leases were excluded from adjusted leverage. Tesoro Petroleum Corporation is headquartered in San Antonio, Texas. TRUMP ENTERTAINMENT: Sells Trump Indiana to Majestic Star --------------------------------------------------------- Trump Entertainment Resorts, Inc. (NASDAQ NMS: TRMP) reported that the Company and The Majestic Star Casino, LLC, have signed a definitive stock purchase agreement to sell Trump Indiana, Inc., a subsidiary of the Company that owns and operates the Company's riverboat casino and hotel at Buffington Harbor in Gary, Indiana, to Majestic. The agreement calls for Majestic to pay a purchase price of $253 million, subject to certain adjustments and customary representations and warranties. The sales price represents approximately 8.1 times the trailing 12-month Earnings Before Interest, Taxes, Depreciation and Amortization of Trump Indiana. After accounting for certain taxes, fees and other closing costs and expenses, the sale is anticipated to result in approximately $227 million in net proceeds to the Company. Under the agreement, Majestic will purchase all of the issued and outstanding equity of Trump Indiana. The sale, which is expected to be consummated by the end of the year, is subject to the receipt of customary regulatory approvals and the consent of the Company's lenders under its $500 million credit facility. Majestic currently owns a riverboat casino adjacent to Trump Indiana, and through a joint venture, Majestic and Trump Indiana own, develop and operate all common land-based and waterside operations in support of their riverboat casinos at Buffington Harbor in Gary, Indiana. Through another joint venture, Trump Indiana and an affiliate of Majestic also operate a parking garage at Buffington Harbor. James B. Perry, the Company's President and Chief Executive Officer, commented on the pending sale, "Trump Indiana has been a reliable contributor to the Company's operating earnings, and the employees at the site can be proud of their accomplishments these past nine years. Majestic has been a good neighbor, and we wish them continued success as the operator of both boats at the site. The net proceeds of the sale should provide the Company with additional capital to invest in our Atlantic City properties and the flexibility to pursue other growth opportunities. I congratulate our management team, led by our Chief Strategic Officer, Scott Butera, on all of their hard work in putting this transaction together." Donald J. Trump, the Chairman of the Company's Board of Directors, commented further, "We are very pleased with the outcome of this strategic transaction. We are also appreciative of the partnership we had with Majestic Star, and are confident that they will continue to operate both assets with great success." Headquartered in Atlantic City, New Jersey, Trump Hotels & Casino Resorts, Inc., nka Trump Entertainment Resorts, Inc. -- http://www.thcrrecap.com/-- through its subsidiaries, owns and operates four properties and manages one property under the Trump brand name. The Company and its debtor-affiliates filed for chapter 11 protection on Nov. 21, 2004 (Bankr. D. N.J. Case No. 04-46898 through 04-46925). Robert A. Klymman, Esq., Mark A. Broude, Esq., John W. Weiss, Esq., at Latham & Watkins, LLP, and Charles Stanziale, Jr., Esq., Jeffrey T. Testa, Esq., William N. Stahl, Esq., at Schwartz, Tobia, Stanziale, Sedita & Campisano, P.A., represent the Debtors in their successful chapter 11 restructuring. When the Debtors filed for protection from their creditors, they listed more than $500 million in total assets and more than $1 billion in total debts. The Court confirmed the Debtors' Second Amended Plan of Reorganization on Apr. 5, 2005, and the plan took effect on May 20, 2005. UAL CORP: Barclays Holds $20.7 Million Allowed Unsecured Claim -------------------------------------------------------------- Prior to UAL Corporation's bankruptcy petition date, Barclays Bank PLC financed two 737-322 aircraft in UAL and its debtor- affiliates' fleet through leveraged lease transactions. The Aircraft bear tail numbers N323UA and N324UA. Each of the Aircraft was initially acquired by a separate owner trust that in turn leased the Aircraft to the Debtors under lease agreements dated Aug. 1, 1988. Under the terms of the Leases, the Debtors were obligated to make regular rent payments as set forth in each Lease. From and after the Petition Date, the Debtors continued to use the Aircraft in their business operations. The Aircraft were part of the auction pool portion of the Debtors' fleet. Shortly after the Petition Date, the Debtors sent proposals to financiers of auction pool aircraft to restructure its lease and mortgage obligations. In December 2002, Barclays signed two restructuring proposals related to the Aircraft, under which the Debtors would compensate Barclays at a rate of $65,000 per month for its use of the aircraft. The next step in the process was for the Debtors and Barclays to execute term sheets that would provide more detail to the restructuring proposals. In July 2003, the Debtors and Barclays entered into two separate term sheets for the Aircraft, which the Court approved. The Debtors were, thus, authorized to execute definitive documentation in connection with the restructuring of the Leases. The Term Sheets would expire if the parties did not complete the definitive documentation within a certain period of time. The termination dates of the Term Sheets were extended numerous times as the parties negotiated the definitive documentation to complete the restructurings. However, the Debtors and Barclays could not come to terms on the definitive documentation, and the Term Sheets eventually expired in November 2004. Per the Term Sheets, the Debtors did not make any payments to Barclays for its use of the Aircraft while the parties attempted to complete the definitive documentation. In January 2005, the Debtors and Barclays entered into a letter agreement by which the Debtors would reject the Aircraft and return them to Barclays. The Debtors rejected the leases pursuant to a Court order dated January 24, 2005 with an effective rejection date of January 31, 2005. In March 2005, Barclays filed claims which amended previously filed claims and which assert administrative and unsecured claims with respect to the Aircraft: Previously-Filed Claim No. Claim No. Aircraft --------- ---------------- -------- 43867 39137 N324UA 43866 3910 N323UA Barclays asserts an aggregate of $32,255,096 in unsecured claims. In August 2005, Barclays sought the allowance and payment of an administrative expense claim for the Debtors' postpetition use of the Aircraft. Barclays calculated the Administrative Claim under the Leases at $6,216,992 for N323UA, and $6,219,469 for N324UA -- plus attorneys' and brokerage fees -- for a total of $14,125,550. The Debtors and the Official Committee of Unsecured Creditors objected to the Administrative Expense Request. The Debtors, Barclays, and the Committee submitted a joint pretrial statement on Sept. 12, 2005, in preparation for an evidentiary hearing on the Administrative Expense Request. In the interim, the Debtors and Barclays engaged in a series of good-faith negotiations and reached an agreement to resolve the Administrative Expense Request and the Claims. The Debtors ask the U.S. Bankruptcy Court for the Northern District of Illinois to approve its settlement with Barclays. The settlement provides that: (a) the Debtors will pay Barclays $81,363 per month for use of the Aircraft from the Petition Date through the Return Date, totaling $2,077,469 for N323UA and $2,101,879 for N324UA, for a total of $4,179,348; (b) the Debtors will pay Barclays $30,000 in legal fees; and (c) Barclays will be allowed an Unsecured Claim for $10,359,915 for N323UA and $10,404,638 for N324UA, which was calculated by subtracting the current fair market value of the aircraft and the administrative claim payments from the stipulated loss value of the aircraft at the Petition Date and $85,000 in attorneys' fees. Mark Kieselstein, Esq., at Kirkland & Ellis, in Chicago, Illinois, asserts that the settlement with Barclays is advantageous to the Debtors. Barclays will receive $11,500,000 less than the face value asserted in its Claim. The Debtors will avoid the costs of additional negotiation or litigation, in which there is no guarantee of success. Without the settlement, the matter would proceed to an evidentiary hearing with legal preparation and expert testimony. Mr. Kieselstein admits that the settlement of the Administrative Claims exceeds the amount of postpetition rent under the Term Sheets. However, the settlement amount approximates market rates for the Debtors' postpetition use of the Aircraft. This compromise prevents the Debtors from having to compensate Barclays at much higher prepetition lease rates under Section 365(d)(10) of the Bankruptcy Code, Mr. Kieselstein says. * * * The Hon. Eugene Wedoff authorizes the Debtors to pay Barclays $4,209,333 for postpetition use of the Barclays Aircraft and associated legal fees. Barclays is allowed unsecured claims of $10,359,915 for N324UA and $10,404,638 for N324UA. 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. 104; Bankruptcy Creditors' Service, Inc., 215/945-7000) UAL CORP: Judge Wedoff Approves LOIs for Verizon & Disney Jets -------------------------------------------------------------- The U.S. Bankruptcy Court for the Northern District of Illinois grants UAL Corporation and its debtor-affiliates' request on a final basis with respect: * the Verizon Capital Corporation Aircraft bearing Tail Nos. N646UA and N661UA; and * the Walt Disney Television and Pictures Aircraft bearing Tail No. N647UA. The Hon. Eugene Wedoff approves the Letters of Intent for the Verizon and Disney Aircraft in their entirety. The Debtors and the Trustees are authorized to enter into and consummate the Verizon and Disney Aircraft LOIs. Allowance of the deficiency claims as provided in the LOIs will be without prejudice to: a) any tax indemnity claims of Verizon or Disney related to their aircraft; or b) any objection to the claims filed by the Debtors. Furthermore, the Deposit for the Verizon and Disney LOIs are approved, nunc pro tunc. The Deposit is non-refundable and not subject to avoidance, repayment, disgorgement or clawback. However, the Debtors will recover the Deposit, with interest, if the Trustees do not obtain the requisite directions from a majority of the holders of the controlling notes in the relevant transactions. The Trustees and Certificateholders will suspend all marketing efforts for the Aircraft. 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. 104; Bankruptcy Creditors' Service, Inc., 215/945-7000) UAL CORP: Battle Over PBGC's $8.3 Billion Claims Ensues ------------------------------------------------------- As reported in the Troubled Company Reporter on Oct. 13, 2005, 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. PBGC Responds The Pension Benefit Guaranty Corporation asks the Court to overrule the objection filed by the Official Committee of Unsecured Creditors. Jeffrey B. Cohen, Esq., the PBGC's Chief Counsel, in Washington, D.C., asserts that the Committee wants the Court to ignore PBGC regulations, which were adopted pursuant to an express delegation by the U.S. Congress. Mr. Cohen tells the Court that the PBGC regulations are entitled to the full force and effect of law and are controlling. The Committee's attempt to influence the calculation of the benefit liabilities violates the principles underlying the PBGC's methodology. The PBGC's calculations replicate the market value of private annuity contracts by using mortality and interest rate assumptions interdependently. The PBGC's measurement of termination liability promotes uniformity by replicating the price that an employer would pay to close out a pension plan through the purchase of annuities in the market place. This provides assurance that a termination liability will be measured in a fair, objective and consistent manner. The PBGC's initial unfunded benefit liability claims were contingent upon termination of the Debtors' Pension Plans. Since the PBGC has become a statutory trustee for the Pension Plans and guarantor of benefits payable, those claims are no longer contingent. The dates of plan termination have been established. The PBGC has completed recalculations and will soon amend its unfunded benefit liability claims, which will exceed $10,000,000,000, Mr. Cohen says. Mr. Cohen asserts that the Committee does not take a stand. The Committee does not specify how much of the PBGC's Claim the Court should allow. Instead, the Committee only asks the Court to ignore PBGC regulations regarding various assumptions, in favor of different but unspecified assumptions that provide for "more equitable treatment of all creditors." Mr. Cohen argues that the Committee's assertion that the PBGC's Claim should be reduced for consideration received under the PBGC Settlement with the Debtors is "at odds with both economic reality and the proper legal basis for valuing PBGC's bankruptcy claims." The PBGC gave up considerable value under the PBGC Settlement, like its claims against the Debtors for unpaid contributions, unpaid premiums, and comprehensive claims against the non-debtor controlled group members. These concessions by the PBGC must be taken into account, Mr. Cohen adds. Committee Will Provide Proof at Hearing On behalf of the Official Committee of Unsecured Creditors, Mark A. Flessner, Esq., at Sonnenschein, Nath & Rosenthal, in Chicago, Illinois, alleges that the Pension Benefit Guaranty Corporation wants to use "an extremely low discount rate that bears no relationship to the actual return on plan asset investments and assumes retirement and mortality rates that may bear no relation to the actual retirement and mortality rates of eligible employees." Mr. Flessner argues that the PBGC's Claims are overstated because they are not reduced by the consideration under the PBGC Settlement. Mr. Flessner also asserts that the PBGC's discount rate is unreasonably low and that a "prudent investor" rate or a similar realistic investment rate should be used to discount the plans' benefit liabilities. At trial, the Committee will provide the Debtors' actual retirement age experience and mortality rates. The Committee will demonstrate the value of the net consideration received by the PBGC pursuant to the PBGC Settlement, by which PBGC's claims should be reduced. Responses (1) URPBPA The United Retired Pilots Benefit Protection Association asks the Court to find that the PBGC's 45% assignment of its claims to the Debtors violates the Employee Retirement Income Security Act. Frank Cummings, Esq., at LeBoeuf, Lamb, Greene & MacRae, in Washington, D.C., argues that URPBPA's members may assert a claim against the Debtors for the portion of the PBGC's 45% assignment that is applicable to qualified benefits lost by retired pilots. Mr. Cummings says URPBPA should be allowed to monitor the proceedings to ensure that nothing affects URPBPA's right to assert its claim against the Debtors. (2) ALPA The Air Line Pilots Association supports the Committee's objection. However, ALPA believes that the PBGC should not be forced to reduce its Claims by the consideration under the PBGC Settlement. (3) PBGC Matthew C. Luzadder, Esq., at Kelley, Drye & Warren, in Chicago, Illinois, says the PBGC will introduce documentary and testimonial evidence demonstrating that the Pension Plans' unfunded benefit liabilities were calculated in accordance with applicable regulations, which constitute relevant non-bankruptcy law. Mr. Luzadder asserts that the Court must accept that method as controlling substantive law. The Committee wants the PBGC's Claim reduced for consideration to be received under the PBGC Settlement. Mr. Luzadder reminds the Court that the PBGC gave up many valuable claims and rights under the Agreement. In fact, the PBGC's Claims may be increased by the value relinquished. 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. 103; Bankruptcy Creditors' Service, Inc., 215/945-7000) UNIAO DE BANCOS: Moody's Reviews D+ Bank Financial Strength Rating ------------------------------------------------------------------ Moody's Investors Service placed on review for possible upgrade the D+ bank financial strength rating of Uniao de Bancos Brasileiros S.A.- Unibanco. According to Moody's, the review reflects consistent improvements in Unibanco's financial performance and, in particular, its core profitability, which has been supported by: * a higher-yielding and more balanced asset mix; * controlled costs; and * improved cross selling. In spite of the limitations imposed by a volatile operating environment, Unibanco's profitability indicators have become aligned to those of higher-rated bank peers. The review will focus on the bank's ability to sustain such performance in a scenario of heightened competitiveness, and gradually declining interest rates. Moody's review will also center on the maintenance of asset quality as the loan portfolio grows, as well as management's ability to continue to extract the most value of Unibanco's franchise, following its reorganization in 2004. Moody's noted that Unibanco's established presence in the wholesale and retail banking markets is complemented by a strong operation in the consumer finance segment, as well as by growing participation in both insurance and credit card businesses. The bank's efforts to develop alternative distribution channels as well as capture additional clientele have yielded some clear results -- particularly by increasing client penetration and cross-selling opportunities. Those efforts have resulted in robust and consistent core earnings. Moody's indicated, however, that Unibanco -- as in the case of Brazilian banks in general-- is challenged to maintain adequate asset quality in a scenario of dynamic credit expansion. The bank also faces the challenge of improving its funding mix, while defending its market share in several consumer segments. Unibanco is headquartered in Sao Paulo, Brazil, and as of June 2005, it had total assets of approximately US$35 billion and equity of approximately US$3.7 billion. This rating was placed on review for possible upgrade: * Bank financial strength rating: D+ UNION AVENUE: U.S. Trustee Wants Case Converted to Chapter 7 ------------------------------------------------------------ The U.S. Bankruptcy Court for the District of New Jersey will convene a hearing at 10:00 a.m. on Dec. 6, 2005, to consider the U.S. Trustee's request to convert Union Avenue Auto Body, Inc.'s chapter 11 case to a liquidation proceeding under chapter 7 of the Bankruptcy Code. Kelly Beaudin Stapleton, the U.S. Trustee for Region 3, wants the Debtor's case converted to a chapter 7 liquidation proceeding because of the Debtor's inability to reorganize and its continued losses. Ms. Stapleton learned at a status conference in April 2005 that: a) the Debtor had received termination notices from its insurance companies and that all of the Debtor's insurance policies had been cancelled for lack of payment; b) the Debtor does not have the funds to pay insurance premiums owed; c) the Debtor was delinquent in the payment of employee withholding taxes totaling approximately $20,000; and d) the Debtor's business operations have shut down. In addition, Ms. Stapleton tells the Bankruptcy Court that the Debtor has unpaid post-petition debts of $102,864 as of March 2005 and is delinquent in the payment of quarterly fees totaling approximately $1,250. Ms. Stapleton explains that a conversion would open the way for the appointment of an independent trustee who would liquidate any assets and investigate any avoidance actions that might lead to a distribution to creditors. Headquartered in East Rutherford, New Jersey, Union Avenue Auto Body, Inc. filed for chapter 11 protection on December 29, 2004 (Bankr. D. N.J. Case No. 04-50195). When the Company filed for protection from its creditors, it estimated total assets at $1 Million to $10 Million and debts at $1 Million to $10 Million. UNITED WOOD: Wants Court to Declare Default Notice as Void ---------------------------------------------------------- United Wood Products Company filed an action in the U.S. Bankruptcy Court for the District of Oregon against Kimberly-Clark Worldwide, Inc., and Sterling Bank: * alleging violation of the automatic stay; and * seeking declaratory and injunctive relief. Nature of Conflict In August 2003, United and Kimberly-Clark entered into a Wood Fuel Supply and Services Agreement. Under the contract, United will provide wood waste and creosote to fuel the No. 14 Boiler at Kimberly-Clark's Everett, Washington, facility from 2003 to 2008. Sterling Bank issued an Irrevocable Letter of Credit to Kimberly- Clark which provided that it can draw upon the L/C in the event that United defaults under the Agreement, provided that a written notice of default was issued and 30 days have elapsed since the date of the default notice. United claims it delivered adequate supplies of good quality wood waste to Kimberly-Clark from August 2003 through February 2004. However, on June 15, 2004, Kimberly-Clark issued a notice of default asserting its right to terminate the agreement if the default was not cured within 30 days. United continued to perform under the Agreement until October 1, 2004, when Kimberly-Clark terminated the Agreement. On April 18, 2005, Kimberly-Clark filed a complaint against United in the Superior Court of Washington for Snohomish County [Case No. 052079787], alleging breach of the Agreement. United answered the complaint and filed counterclaims against Kimberly-Clark for breach of the Agreement, breach of the implied covenant of good faith and fair dealing, conversion and unjust enrichment. On September 29, 2005, ten days after United filed its chapter 11 case, Kimberly-Clark sent another copy of the notice of default. Because the letter was sent after the case was filed, United asserts that Kimberly-Clark violated the automatic stay under 11 U.S.C. Section 362. As a result of the automatic stay violation, Kimberly-Clark's notice of default is void, United insists. As a condition precedent to drawing upon the Letter of Credit, Kimberly-Clark must send United a notice of default. This won't be satisfied because Kimberly-Clark has already violated the automatic stay, United says. Unless Kimberly-Clark is temporarily prohibited from drawing upon the L/C and Sterling Bank is temporarily enjoined from paying the L/C, the Debtor says its estate and creditors will suffer immediate, irreparable injury, loss or damage. Against this backdrop, United urges the Court to: * declare the notice of default sent on September 29 as void, * issue a temporary restraining order and preliminary injunction restraining Kimberly-Clark from drawing upon the Letter of Credit, and * issue a temporary restraining order and preliminary injunction restraining Sterling Bank from paying the Letter of Credit. Headquartered in Portland, Oregon, United Wood Products Company, aka United Oil Company, filed for chapter 11 protection on Sept. 19, 2005 (Bankr. D. Ore. Case No. 05-41285). John G. Crawford, Jr., Esq., at Schwabe, Williamson & Wyatt represents the Debtor in its restructuring efforts. As of Sept. 30, 2005, the Debtor listed total assets of $58,622,000 and total debts of $3,181,125. US AIRWAYS: Reports October Traffic Statistics & Merger Update -------------------------------------------------------------- US Airways Group, Inc. (NYSE: LCC) reported traffic statistics for the month of October 2005. For America West operated flights, revenue passenger miles for the month were 2 billion, a decrease of 2.9 percent from October 2004. Capacity was 2.5 billion available seat miles, down 0.3 percent from October 2004. The passenger load factor for October was 77.3 percent versus 79.4 percent in October 2004. For US Airways mainline operated flights, RPMs for October 2005 were 2.9 billion, a decrease of 13.3 percent from October 2004. Capacity was 3.9 billion ASMs, down 12.3 percent from October 2004. The passenger load factor for the month of October was 74.8 percent down from 75.6 percent in October 2004. "Despite the decline in load factor, we experienced strong growth in yields, which lead to strong unit revenue increases for both airlines during October, Scott Kirby, executive vice president, sales and marketing, said. "In fact, both the former America West and the former US Airways systems produced double digit unit revenue increases during October." October Integration Update To date, 16 of 38 common-use airports have been integrated. On Oct. 2, first phase of code-sharing began. To date, 215 city pairs are now available for purchase. On Oct. 5, customers can earn and burn frequent flyer miles across the entire combined route network. On Oct. 10, US Airways announced that the reservation system for combined airline would be the EDS reservation system currently used by America West. On Oct. 25, US Airways signed a lease for the 148,000 square foot Rio West Business Park to house a portion of consolidated operations in Tempe with plans to house a variety of functions into the new buildings in April 2006. For the month of October 2005, America West will report domestic on-time performance of 84.1 percent and a completion factor of 98.7 percent to the U.S. Department of Transportation. US Airways will also report to the DOT domestic on-time performance of 79.8 percent and a completion factor of 98.0 percent. US Airways and America West's recent merger creates the fifth largest domestic airline employing nearly 36,000 aviation professionals. US Airways, US Airways Shuttle and US Airways Express operate approximately 4,000 flights per day and serve more than 225 communities in the U.S., Canada, Europe, the Caribbean and Latin America. US Airways and its subsidiaries filed another chapter 11 petition on September 12, 2004 (Bankr. E.D. Va. Case No. 04-13820). Brian P. Leitch, Esq., Daniel M. Lewis, Esq., and Michael J. Canning, Esq., at Arnold & Porter LLP, and Lawrence E. Rifken, Esq., and Douglas M. Foley, Esq., at McGuireWoods LLP, represent the Debtors in their restructuring efforts. In the Company's second bankruptcy filing, it lists $8,805,972,000 in total assets and $8,702,437,000 in total debts. * * * As reported in the Troubled Company Reporter on Oct. 4, 2005, Fitch Ratings has affirmed the issuer default rating of 'CCC' and the senior unsecured rating of 'CC' on the debt obligations of America West Airlines, Inc. Fitch has also initiated coverage of US Airways Group, Inc., with an IDR of 'CCC' and a senior unsecured rating of 'CC'. The recovery ratings for the senior unsecured obligations of both US Airways Group and AWA are 'R6', indicating an expected recovery of less than 10% in a default scenario. VARIG S.A.: Creditors Accept $62 Million BNDES Offer ---------------------------------------------------- Bloomberg News reports that creditors of VARIG S.A. have accepted a $62 million financing proposal from Banco Nacional de Desenvolvimento Economico e Social, Brazil's government-run national development bank, to bail out VARIG. Pursuant to the proposal, BNDES will fund a third party investor of the special purpose company that will be formed to hold shares of Varig Logistica S.A., and Varig Manutencao e Engenharia. The amount will be earmarked to cure VARIG's postpetition lease arrearages on aircraft retained by the airline. VARIG has identified TAP Portugal as the potential investor, according to published reports. VARIG selected TAP as partner in its debt restructuring process. VARIG's controlling shareholder, Rubem Berta Foundation, selected TAP among other participants. Investnews in Brazil identified the other aspirants as Docas Investimentos S/A, MatlinPatterson, Ocean Air, Trabalhadores do Grupo Varig and French ATS. Varig will send the TAP proposal to BNDES for approval. TAP said it would deposit $62 million into the accounts of leasing firms overseas to avoid repossession of about 20 to 40 aircraft used by VARIG, according to NoticiasFinancieras. Headquartered in Rio de Janeiro, Brazil, VARIG S.A. is Brazil's largest air carrier and the largest air carrier in Latin America. VARIG's principal business is the transportation of passengers and cargo by air on domestic routes within Brazil and on international routes between Brazil and North and South America, Europe and Asia. VARIG carries approximately 13 million passengers annually and employs approximately 11,456 full-time employees, of which approximately 133 are employed in the United States. The Company, along with two affiliates, filed for a judicial reorganization proceeding under the New Bankruptcy and Restructuring Law of Brazil on June 17, 2005, due to a competitive landscape, high fuel costs, cash flow deficit, and high operating leverage. The Debtors may be the first case under the new law, which took effect on June 9, 2005. Similar to a chapter 11 debtor-in-possession under the U.S. Bankruptcy Code, the Debtors remain in possession and control of their estate pending the Judicial Reorganization. Sergio Bermudes, Esq., at Escritorio de Advocacia Sergio Bermudes, represents the carrier in Brazil. Each of the Debtors' Boards of Directors authorized Vicente Cervo as foreign representative. In this capacity, Mr. Cervo filed a Sec. 304 petition on June 17, 2005 (Bankr. S.D.N.Y. Case Nos. 05-14400 and 05-14402). Rick B. Antonoff, Esq., at Pillsbury Winthrop Shaw Pittman LLP represents Mr. Cervo in the United States. As of March 31, 2005, the Debtors reported BRL2,979,309,000 in total assets and BRL9,474,930,000 in total debts. (VARIG Bankruptcy News, Issue No. 11; Bankruptcy Creditors' Service, Inc., 215/945-7000) VARIG S.A.: Preliminary Injunction In Place Until November 11 ------------------------------------------------------------- Docas Investimentos, S.A., Sindicato Nacional Dos Aeronautas and Sindicato Brasileiro Dos Aeroviarios want the U.S. Bankruptcy Court for the Southern District of New York to deny the request of certain of VARIG S.A.'s creditors to lift the preliminary injunction. As previously reported in the Troubled Company Reporter, Central Air Leasing Limited, Wells Fargo Bank Northeast, N.A., Ansett Worldwide Aviation, U.S.A and its affiliated or related corporations, and the Boeing Company asked for the removal of the preliminary injunction to give the Foreign Debtors time to close the sale of Varig Logistica S.A. to MatlinPatterson Global Advisors, LLC. William E. Brueckner, Esq., at Ernstrom & Dreste, LLP, in Rochester, New York, explains that the Foreign Proceedings are proceeding apace and have seen very significant developments in generating a plan for recovery for the Foreign Debtors. Mr. Brueckner tells Judge Drain that Docas has proposed a plan of recovery for VARIG, which is being endorsed by the Sindicatos. The Banco Nacional de Desenvolvimento Economico e Social has also proposed a separate recovery plan of the airline. BNDES' proposal would make $62,000,000 available to satisfy VARIG's creditors while the Docas proposal would make as much as $90,000,000 available for that purpose. Mr. Brueckner says potential investors in the Docas proposal and BNDES proposal have been aware of the prior proceedings in the U.S. Bankruptcy Court, including, without limitation, the expiration of the existing Preliminary Injunction at the end of the day on November 11, 2005. The potential investors have worked intently with that expiration in mind to develop and obtain approvals of their proposals for the Foreign Debtors' recovery. Termination or dissolution of the Preliminary Injunction would serve as an obvious and devastatingly adverse obstacle to any proposal for the recovery of the Foreign Debtors, Mr. Brueckner points out. By contrast, Mr. Brueckner says the brief continuation of the Preliminary Injunction through the end of the day on November 11, 2005, as presently contemplated, would allow very favorable and promising developments currently unfolding in the Foreign Proceedings to mature. Docas is a major holding company and investor in the Brazilian economy, with assets in excess of $500,000,000, and holdings in the agribusiness, petroleum, construction, shipbuilding, electricity, media, and leisure and entertainment sectors. The Sindicatos are workers' unions representing the interests of employees in the airline and air travel industries. Docas presented its recovery plan for VARIG to the Assembly of Creditors in the Foreign Proceedings on October 13, 2005. Docas and the Sindicatos also discussed Docas' proposal with the Brazilian Vice-President, Jose de Alencar, and Murilo Portugal, Brazil's Minister of the Economy. Mr. Brueckner notes that both the Docas/Sindicatos Proposal and the BNDES Proposal demonstrate that the Foreign Debtors are proceeding quickly toward liquidity proposals, and that negotiations with investors are ongoing. Central Air Lessors Talk Back On behalf of the Central Air Lessors, Carlos Rameh, Esq., at C. Rameh Advogados Associados in Sao Paolo, Brazil, informs the Bankruptcy Court that Jose Aranha, a BNDES employee, clarified at the creditors meeting on October 20, 2005, that BNDES is willing to lend the third-party investor of the special purpose company that will be formed to hold all or most of the shares of Varig Logistica S.A., and Varig Manutencao e Engenharia, two thirds of the $62,000,000 to be used to acquire the SPC. Thus, BNDES, in the initial stages, would lend the Investor $42,000,000. BNDES' proposal requires the Investor to be ready with its $21,000,000. "Mr. Aranha emphasized that the BNDES' proposal would not include any direct financing to VARIG, but solely to the Investor," Mr. Rameh says. Mr. Rameh also notes that Mr. Aranha confirmed the BNDES proposal will not result in immediate disbursement of any funds to the aircraft lessors. Mr. Rameh points out that there are several steps required before the first disbursement proposed by BNDES can be made which Mr. Aranha said would have to be accomplished in a "fast track" basis. No exhaustive list was disclosed during the October 20 meeting, however, Mr. Rameh says some of the steps discussed include: 1. VARIG must identify the Investor, which must be ready willing and able to immediately invest the $21,000,000; 2. VARIG must present the Investor to the BNDES and the BNDES credit committee must conduct a credit investigation of the Investor -- which investigation Mr. Aranha estimated would require at least one week; 3. Approval of the Brazilian Department of Civil Aviation for the transfer of shares of VarigLog, considering among other things that the DAC must approve the changes to the ownership of Brazilian air transportation companies and the Brazilian Aeronautical Code limits the proportion of voting shares of Brazilian air transportation companies held by non-Brazilians; 4. Approval of the Brazilian Commercial Court responsible for VARIG's Judicial Recuperation Proceedings; and 5. Incorporation of the SPC. Based on prior experience with formation of corporations in Brazil and obtaining approvals of the DAC and BNDES, Mr. Rameh tells the Bankruptcy Court that completion of the steps would usually require several weeks or even months to be obtained. In addition, if any of the steps fails there would be a risk that the BNDES proposal might never be consummated at all. According to Mr. Rameh, VARIG's objection to the dissolution of the Injunction contains several misrepresentations. VARIG's assertion that the BNDES proposal will provide immediate financing is incorrect because the funding will not be "immediate" and the financing will not be provided directly to VARIG in the form of a loan. VARIG and UBS estimated that as of October 20, 2005, the aggregate amount of VARIG's post-June 17 arrearages on aircraft and engine leases is approximately $62,000,000. Mr. Rameh says the estimate appears to be inaccurate or is at least inconsistent with declarations that VARIG has made in Brazil. In a petition VARIG filed in the Rio de Janeiro Commercial Court on October 10, VARIG said that as of October 20, it would owe $71,900,000 in postpetition lease obligations to its lessors. VARIG indicated that "[a]fter some delay in the process of electing a committee, which was no fault of VARIG, a creditor meeting was held on October 13, 2005 to consider the Matlin Transaction." Mr. Rameh clarifies that the full Creditors Committee has not yet been elected because the labor creditor class has not yet agreed on a Creditors Committee member. In addition, Mr. Rameh points out that the October 13 Creditor Meeting was not held for the purpose of considering the Matlin Transaction. It was held for the purpose of considering VARIG's full judicial recovery plan, which could include the Matlin Transaction as well as the airline's long-term plan of reorganization. Mr. Rameh says VARIG's long-term plan of reorganization is vague in relation to the repayment of prepetition debt. Many creditors that might have supported the Matlin Transaction are unwilling to vote in favor of the more comprehensive plan. VARIG said "[b]ecause under the Brazilian law creditors have a right to be heard with respect to a sale of a debtor's assets, the Brazilian Court required the formation of a creditors' committee and notice of a general meeting of creditors." This statement is incorrect, Mr. Rameh asserts. Pursuant to Article 66 of the New Bankruptcy and Restructuring Law of Brazil, Mr. Rameh explains that the Brazilian Court could have approved the Matlin Transaction. The fact that the Brazilian Court has not yet approved the Matlin Transaction demonstrates that VARIG has failed to convince the Brazilian Court to grant approval. VARIG also pointed out that a creditor has requested conversion of the judicial recuperation proceeding into a liquidation proceeding. Mr. Rameh clarifies that the Central Air Lessors did file a motion with the Brazilian Court on September 28, 2005, informing the Brazilian Court that VARIG had failed to pay postpetition obligations and that the default was not permitted by the NBRL, and that the Central Air Lessors were, therefore, entitled to payment of the amounts or dissolution of the Brazilian Injunction. To date the Brazilian Court has not issued any ruling on the Central Air Lessors' request nor has the Court issued a date for a hearing on the request. Mr. Rameh also relates that the Brazilian Court has not yet established a deadline by which the Foreign Debtors are required to pay their postpetition obligations. The Foreign Debtors have indicated to the Brazilian Court that their rental obligations increase by $7,500,000 weekly. * * * Judge Drain rules that the Preliminary Injunction will remain in full force and effect. The Preliminary Injunction will continue through and including November 11, 2005, and the Court will convene a hearing on November 9, 2005, at 10:00 a.m., to consider the Foreign Representatives' request for continuation of the Preliminary Injunction. The requests to modify the Preliminary Injunction are denied. However, nothing will affect the rights of any person or entity, or the duties of the Foreign Debtors to those persons or entities, granted or provided under the NBRL with respect to the Foreign Debtors and their estates. Judge Drain rules that the scope of the injunctive relief provided in the Preliminary Injunction: (a) will not exceed the scope of any injunction issued by, or stay as applied by, the Brazilian Court; (b) will not prevent or impair the transactions contemplated by the Foreign Debtors' financing motion, dated August 22, 2005, that is presently pending before the Brazilian Court or the proposal made by BNDES; and (c) will be automatically reduced to the extent of any reduction or modification by the Brazilian Court of any injunction or stay in the Foreign Proceeding. Judge Drain directs the Foreign Debtors to provide to their aircraft lessors, and to any other creditors upon written request: -- updated cash flow reports showing the Foreign Debtors' actual sources and uses of funds during the past 3-month period together with any assumptions underlying the projections approximately every week for the trailing week period; and -- a fleet plan, to be updated periodically, indicating which aircraft (by amount and type) are expected to be operational and in use each month by the Foreign Debtors. The Foreign Debtors must also take reasonable measures to ensure that aircraft lessors receive payment of all payment defaults first arising after June 17, 2005, pro rata out of the proceeds received by the Foreign Debtors as consideration for the transactions contemplated by the Financing Motion or the BNDES Proposal or other sources of funds or financing. Objections to the continuation of the Preliminary Injunction are due November 4, 2005. Headquartered in Rio de Janeiro, Brazil, VARIG S.A. is Brazil's largest air carrier and the largest air carrier in Latin America. VARIG's principal business is the transportation of passengers and cargo by air on domestic routes within Brazil and on international routes between Brazil and North and South America, Europe and Asia. VARIG carries approximately 13 million passengers annually and employs approximately 11,456 full-time employees, of which approximately 133 are employed in the United States. The Company, along with two affiliates, filed for a judicial reorganization proceeding under the New Bankruptcy and Restructuring Law of Brazil on June 17, 2005, due to a competitive landscape, high fuel costs, cash flow deficit, and high operating leverage. The Debtors may be the first case under the new law, which took effect on June 9, 2005. Similar to a chapter 11 debtor-in-possession under the U.S. Bankruptcy Code, the Debtors remain in possession and control of their estate pending the Judicial Reorganization. Sergio Bermudes, Esq., at Escritorio de Advocacia Sergio Bermudes, represents the carrier in Brazil. Each of the Debtors' Boards of Directors authorized Vicente Cervo as foreign representative. In this capacity, Mr. Cervo filed a Sec. 304 petition on June 17, 2005 (Bankr. S.D.N.Y. Case Nos. 05-14400 and 05-14402). Rick B. Antonoff, Esq., at Pillsbury Winthrop Shaw Pittman LLP represents Mr. Cervo in the United States. As of March 31, 2005, the Debtors reported BRL2,979,309,000 in total assets and BRL9,474,930,000 in total debts. (VARIG Bankruptcy News, Issue No. 11; Bankruptcy Creditors' Service, Inc., 215/945-7000) VENTURE HOLDINGS: Has Until Nov. 16 to File Reorganization Plan --------------------------------------------------------------- The Hon. Thomas J. Tucker of the U.S. Bankruptcy Court for the Eastern District of Michigan, Southern Division, established Nov. 16, 2005, as the last day within which Venture Holdings Company and its debtor-affiliates may file a plan of reorganization and an accompanying disclosure statement. Based in Fraser, Michigan, Venture Holdings Company and its debtor-affiliates filed for chapter 11 protection (Bankr. E.D. Mich. Case No. 03-48939) on March 28, 2003. Deluxe Pattern Corporation and its debtor-affiliates filed for chapter 11 protection on May 24, 2004 (Bankr. E.D. Mich. Case No. 04-54977). As of March 31, 2002, the Debtors had total assets of $1,459,834,000 and total debts of $1,382,369,000. Venture's prepetition lenders acquired Venture's assets during the chapter 11 proceeding. John A. Karaczynski, Esq., and Robert M. Aronson, Esq., at Akin Gump Strauss Hauer & Feld LLP, represent the Creditors' Committee. WEIGHT WATCHERS: S&P Places Low-B Ratings on $220M Lien Term Loans ------------------------------------------------------------------ Standard & Poor's Ratings Services assigned its 'B+' corporate credit rating to online commercial weight-loss service provider WeightWatchers.com, a subsidiary and exclusive licensee of Weight Watchers International Inc. Standard & Poor's also assigned its 'B+' bank loan rating to the company's $150 million first lien term loan, and a 'B-' bank loan rating to the company's $70 million second lien term loan, with a recovery rating of '5' on both liens, indicating that first and second lien investors could expect negligible recovery of principal in the event of a payment default. At the same time, Standard & Poor's revised its outlook on WWI to positive from stable. In addition, Standard & Poor's affirmed its ratings on WWI, including its 'BB' corporate credit rating. The outlook on WW.com is positive. Pro forma for the transaction, New York, New York-based WW.com will have about $220 million of total debt outstanding, excluding operating leases. As previously announced, WWI will redeem the remaining shares of WW.com from Artal Luxembourg SA for $304.8 million, excluding transaction expenses. WW.com will utilize a new $220 million senior secured credit facility to finance this transaction, in addition to cash on hand. Following the completion of the acquisition, WW.com will become a wholly owned subsidiary of WWI, and Artal will retain its 62% ownership stake of WWI. "We expect WW.com to maintain its growth momentum and strengthen its credit protection measures. In the event that WWI can provide direct support for the loan in the form of a guarantee, the ratings could be raised during the outlook period," said Standard & Poor's credit analyst Mark Salierno. Alternatively, if operating performance and credit protection measures were to weaken at WW.com, the outlook could be revised to stable. WINN-DIXIE: Annual Shareholders Meeting is on December 8 -------------------------------------------------------- The 2005 annual meeting of shareholders of Winn-Dixie Stores, Inc., will be held on Thursday, December 8, 2005, 9:00 a.m., at the Company's headquarters at 5050 Edgewood Court, Jacksonville, Florida. At the meeting, shareholders will be asked to act on these matters: * Election of three Class III directors for terms expiring in 2008; * Ratification of the appointment of KPMG LLP as independent registered public accounting firm for fiscal year 2006; and * Any other business that may properly come before the meeting. The Board of Directors has fixed October 14, 2005, as the record date for the annual meeting. Only holders of Winn-Dixie common stock of record at the close of business on that date will be entitled to notice of, and to vote at, the annual meeting. Winn-Dixie filed with the Securities and Exchange Commission its proxy statement to be used in conjunction with the Annual Meeting. A full-text copy of that statement is available at no charge at http://ResearchArchives.com/t/s?2c2 Headquartered in Jacksonville, Florida, Winn-Dixie Stores, Inc. -- http://www.winn-dixie.com/-- is one of the nation's largest food retailers. The Company operates stores across the Southeastern United States and in the Bahamas and employs approximately 90,000 people. The Company, along with 23 of its U.S. subsidiaries, filed for chapter 11 protection on Feb. 21, 2005 (Bankr. S.D.N.Y. Case No. 05-11063). The Honorable Judge Robert D. Drain ordered the transfer of Winn-Dixie's chapter 11 cases from Manhattan to Jacksonville. On April 14, 2005, Winn- Dixie and its debtor-affiliates filed for chapter 11 protection in M.D. Florida (Case No. 05-03817 to 05-03840). D.J. Baker, Esq., at Skadden Arps Slate Meagher & Flom LLP, and Sarah Robinson Borders, Esq., and Brian C. Walsh, Esq., at King & Spalding LLP, represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $2,235,557,000 in total assets and $1,870,785,000 in total debts. (Winn-Dixie Bankruptcy News, Issue No. 25; Bankruptcy Creditors' Service, Inc., 215/945-7000). * Large Companies with Insolvent Balance Sheets ----------------------------------------------- Total Shareholders Total Working Equity Assets Capital Company Ticker ($MM) ($MM) ($MM) ------- ------ ------------ ------- -------- ACCO Brands Corp ABD (28) 878 (364) Abraxas Petro ABP (43) 106 (5) Accentia Biophar ABPI (8) 34 (20) AFC Enterprises AFCE (44) 216 52 Alaska Comm Sys ALSK (9) 589 49 Alliance Imaging AIQ (52) 621 43 AMR Corp. AMR (729) 29,436 (1,882) Atherogenics Inc. AGIX (98) 213 190 Bally Total Fitn BFT (172) 1,461 (290) Biomarin Pharmac BMRN (65) 209 (38) Blount International BLT (220) 446 126 CableVision System CVC (2,430) 10,111 (1,607) CCC Information CCCG (95) 112 34 Centennial Comm CYCL (463) 1,456 85 Cenveo Inc CVO (12) 1,146 127 Choice Hotels CHH (165) 289 (34) Cincinnati Bell CBB (625) 1,891 (18) Clorox Co. CLX (532) 3,570 (229) Columbia Laborat CBRX (12) 18 11 Coley Pharma COLY (5) 71 30 Compass Minerals CMP (83) 686 149 Crown Media HL CRWN (34) 1,289 (130) Deluxe Corp DLX (101) 1,461 (297) Denny's Corporation DENN (261) 498 (72) Domino's Pizza DPZ (553) 414 3 Echostar Comm DISH (972) 7,281 269 Emeritus Corp. ESC (123) 720 (43) Empire Resorts NYNY (20) 62 (5) Foster Wheeler FWLT (490) 2,012 (175) Guilford Pharm GLFD (20) 136 60 Graftech International GTI (53) 1,026 283 I2 Technologies ITWO (153) 386 124 ICOS Corp ICOS (67) 232 141 IMAX Corp IMAX (38) 241 27 Immersion Corp. IMMR (11) 46 30 Indevus Pharma IDEV (103) 119 86 Intermune Inc. ITMN (7) 219 133 Investools Inc. IED (20) 64 (46) Isis Pharm. ISIS (124) 147 46 Kulicke & Soffa KLIC (44) 365 182 Lodgenet Entertainment LNET (69) 283 22 Maxxam Inc. MXM (681) 1,024 103 Maytag Corp. MYG (95) 2,989 371 McDermott Int'l MDR (140) 1,489 123 McMoran Exploration MMR (61) 407 118 NPS Pharm Inc. NPSP (55) 354 258 ON Semiconductor ONNN (317) 1,171 300 Qwest Communication Q (2,716) 23,727 822 RBC Bearings Inc. ROLL (5) 247 125 Riviera Holdings RIV (27) 216 5 Rural/Metro Corp. RURL (97) 316 44 Rural Cellular RCCC (465) 1,376 30 Ruth's Chris Stk RUTH (49) 110 (22) SBA Comm. Corp. SBAC (50) 857 19 Sepracor Inc. SEPR (213) 1,193 830 St. John Knits Inc. SJKI (52) 213 80 Tiger Telematics TGTL (46) 20 (55) US Unwired Inc. UNWR (76) 414 56 Vector Group Ltd. VGR (33) 527 173 Verifone Holding PAY (36) 248 48 Vertrue Inc. VTRU (35) 441 (80) Weight Watchers WTW (36) 938 (266) Worldspace Inc. WRSP (1,720) 560 (1,786) WR Grace & Co. GRA (574) 3,465 848 ********* 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. 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For bankruptcy documents filed in cases pending outside the District of Delaware, contact Ken Troubh at Nationwide Research & Consulting at 207/791-2852. ********* S U B S C R I P T I O N I N F O R M A T I O N Troubled Company Reporter is a daily newsletter co-published by Bankruptcy Creditors' Service, Inc., Fairless Hills, Pennsylvania, USA, and Beard Group, Inc., Frederick, Maryland USA. Yvonne L. Metzler, Emi Rose S.R. Parcon, Rizande B. Delos Santos, Jazel P. Laureno, Cherry Soriano-Baaclo, Marjorie Sabijon, Terence Patrick F. Casquejo, Christian Q. Salta, Jason A. Nieva, Lucilo Pinili, Jr., Tara Marie Martin, and Peter A. Chapman, Editors. Copyright 2005. All rights reserved. ISSN: 1520-9474. This material is copyrighted and any commercial use, resale or publication in any form (including e-mail forwarding, electronic re-mailing and photocopying) is strictly prohibited without prior written permission of the publishers. 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