/raid1/www/Hosts/bankrupt/TCR_Public/051110.mbx
T R O U B L E D C O M P A N Y R E P O R T E R
Thursday, November 10, 2005, Vol. 9, No. 267
Headlines
819 WEST IMPERIAL: Case Summary & 2 Largest Unsecured Creditors
A&J AUTOMOTIVE: Files Schedules of Assets & Liabilities
ADELPHIA COMMS: Balance Sheet Upside Down by $8.29B at March 31
ADELPHIA COMMS: Balance Sheet Upside-Down by $7.97B at June 30
AIRNET COMMUNICATIONS: Completes $7 Million Laurus Fund Financing
ALERIS INT'L: Earns $31.5 Million of Net Income in Third Quarter
AMERICAN REMANUFACTURERS: Taps Bankruptcy Services as Claims Agent
APARTMENTS AT TIMBER: Has Access to Fannie Mae Postpetition Loan
APARTMENTS AT TIMBER: U.S. Trustee Unable to Form Committee
ASARCO LLC: Court OKs Assumption of Four Road Machinery Contracts
ASARCO LLC: Court Okays Rejection of Gerald Metals Agreements
ASPEON INC: Massive Losses & Deficits Raise Going Concern Doubt
AT&T CORP: Moody's Places Ratings Under Review for Likely Upgrade
ATA AIRLINES: Can Use ATSB Lenders' Cash Collateral Until Nov. 21
ATA AIRLINES: Alejandre, et al., Balks at Disclosure Statement
ATA AIRLINES: Wants Plan Confirmation Period Extended to Jan. 30
ATLANTIC & WESTERN: Fitch Assigns Low-B Ratings on $300-Mil Notes
BANK OF AMERICA: S&P Puts Low-B Ratings on $34.5-Mil Cert. Classes
BELLAVISTA MORTGAGE: S&P Affirms Low-B Ratings on 8 Cert. Classes
BIRCH TELECOM: Wants Until February 8 to Remove Civil Actions
BIRCH TELECOM: U.S. Trustee Objects to KPMG's Employment
BLOCKBUSTER INC: Prices Convertible Perpetual Preferred Stock
BRICE ROAD: Balks at GE Credit's Pitch to Lift the Automatic Stay
C2 GLOBAL: Stephen Weintraub Replaces Gary Clifford as CFO
CATHOLIC CHURCH: Litigants Panel Balks to Spokane's Stay Request
CELLU TISSUE: Moody's Holds B2 Rating on $162 Mil. Senior Notes
CHURCH & DWIGHT: Completes $105M Buy-Out of P&G's SpinBrush Unit
CLEAN HARBORS: Moody's Lifts Rating on $150 Mil. Sr. Notes to B2
COATES INTERNATIONAL: Rosenberg Rich Raises Going Concern Doubt
CONSTELLATION BRANDS: Questions Vincor's Rejection of Merger Offer
CYCLELOGIC INC: Claims Objection Deadline Extended to Dec. 15
DELTA AIR: Wants Deloitte & Touche as Accountants
DELTA AIR: Wants Deloitte Tax as Tax Service Providers
DELTA AIR: Wants to Walk Away from Monarch Centre Lease
DREYER'S GRAND: Sept. 24 Balance Sheet Upside-Down by $46 Million
DRS TECH: Moody's Rates Proposed $650 Million Senior Loans at Ba3
EMS TECHNOLOGIES: Discloses Third Quarter 2005 Financial Results
ENRON CORP: Luzenac Files FERC Action Against Enron Power Mktg.
ENRON CORP: SK Corp. Increases Equity Stake in SK Enron to 51%
FALCON PRODUCTS: Expects to Emerge from Chapter 11 in Mid-November
GENERAL NUTRITION: Weak Performance Cues S&P's Negative Outlook
HEMOSENSE INC: Closes Private Placement and Raises $10 Million
HERITAGE PROPERTY: Releases Third Quarter 2005 Results
HOLLINGER INTERNATIONAL: Files Delinquent Annual Report
HOST MARRIOTT: Better Credit Measures Cue S&P to Lift Debt Rating
ICOS CORP: Balance Sheet Upside-Down by $66.76 Mil. at Sept. 30
INEX PHARMACEUTICALS: Stark Trading to Appeal B.C. Court Decision
INTEGRATED HEALTH: Trustee Seeks Accurate Disbursement Report
INTEGRATED HEALTH: Asks Court to Disallow IRS' Unsecured Claims
INTERLIANT INC: Court Delays Closing of Ch. 11 Cases to Nov. 17
INTERMET CORPORATION: Emerges from Chapter 11 Protection
JO-ANN STORES: Discloses Third Quarter Financial Results
KERZNER INTERNATIONAL: Posts $4.9 Million Net Loss in 3rd Quarter
LEVEL 3: Financial Risks Cue Fitch to Junk Issuer Default Rating
MAGRUDER COLOR: Gets Final Order on DIP Financing from 1029 Newark
MAJESTIC STAR: Trump Buy Spurs Moody's to Affirm Low-B Ratings
MCDERMOTT INT'L: Sept. 30 Balance Sheet Upside-Down by $53 Million
MESABA AVIATION: Section 341(a) Meetings Slated for November 30
MESABA AVIATION: Court Sets February 28 as Claims Bar Date
MESABA AVIATION: U.S. Trustee Picks 7-Member Committee
METABOLIFE INT'L: U.S. Trustee Amends Committee Membership
METABOLIFE INT'L: U.S. Trustee Opposes Retailers' Pitch for Panel
MIRANT CORP: Court Okays Tax Valuation Agreement on Mass. Facility
MIRANT CORP: Ch. 11 Examiner's Reporting Requirement Suspended
MORTGAGE ASSET: Fitch Affirms Low-B Ratings on Two Cert. Classes
N C TELECOM: Wants to Hire Bieging Shapiro as Bankruptcy Counsel
NEW WORLD: Court Permits Borden Retirement Program Termination
NMS COMMS: Completes Investigation of Q2 2005 Accounting Error
NORTHEAST GEN: Power Sale Prompts Moody's to Review Ratings
NORTHEAST GEN: S&P Shaves Ratings on $320 Mil. Sr. Bonds to B+
NRG ENERGY: Incurs $26.9 Million Net Loss in Third Quarter
O'SULLIVAN INDUS: Court Gives Final Nod on $35 Mil. DIP Financing
OMI TRUST: S&P's Rating on $290 Mil. Class Certs. Tumbles to D
ONE PRICE: Ch. 7 Trustee Taps Held Kranzler as Insolvency Experts
OWENS CORNING: Wants Court to OK Affiliated FM Insurance Accord
PERKINELMER INC: 96% of Noteholders Tender 8-7/8% Senior Notes
PC LANDING: Has Until December 18 to File Chapter 11 Plan
PLASTIPAK HOLDINGS: Extends 10.75% Senior Notes Offer to Dec. 5
PLATINUM UNDERWRITERS: S&P Places BB+ Ratings on Preferred Stock
PONDERLODGE INC: Court Names Paul Boston as Examiner
PONDEROSA PINE: JPMorgan Wants KBC-Related Information Excluded
QUALITY DISTRIBUTION: Sept. 30 Balance Sheet Upside-Down by $27MM
REFCO INC: Issues Clarification Regarding Chapter 7 Asset Sale
REVLON INC: Equity Deficit Widens to $1.17 Billion at Sept. 30
ROMACORP INC: Wants to Employ Andrews Kurth as Bankruptcy Counsel
ROMACORP INC: Wants Garden City Group as Claims & Noticing Agent
ROMACORP INC: Wants to Hire Houlihan Lokey as Financial Advisor
RYERSON TULL: Good Performance Prompts S&P's Stable Outlook
SECOND CHANCE: Court Sets December 31 as Claims Bar Date
STILLWATER MINING: Mining Costs Prompt S&P's Negative Outlook
STRESSGEN BIOTECH: Posts CDN$5.7 Million Net Loss in Third Quarter
SUNCOM WIRELESS: Discloses Third Quarter Financial Results
TRUMP ENTERTAINMENT: Moody's Junks $1.25 Bil. Senior Secured Notes
TW INC: Wants More Time to File Final Report
TW INC: Has Until Nov. 28 to Object to Proofs of Claim
U.S. CONCRETE: Earns $9 Million of Net Income in Third Quarter
UAL CORP: Wants Court Nod on Amended GECAS Sale/Leaseback Pact
UAL CORP: Court Approves Vx Capital Aircraft Settlement Pact
UNIVERSAL HOSPITAL: Sept. 30 Balance Sheet Upside-Down by $94 Mil.
UNUMPROVIDENT FINANCE: S&P Rates $400 Mil. Sr. Debentures at BB+
US LEC: Equity Deficit Widens to $230.08 Million at Sept. 30
US MINERAL: Inks $11.7 Million Exit Financing from LaSalle
VERIDIEN CORP: Corrects Accounting Errors in 2004 Annual Report
WATERMAN INDUSTRIES: Plan Confirmation Hearing Set for Dec. 1
WELLSFORD REAL: Earns $3.8 Million of Net Income in Third Quarter
WESTPOINT STEVENS: Chap. 11 Dismissal Hearing Continued to Dec. 6
WESTPOINT STEVENS: Ct. Denies HSBC's Cry for Admin. Claims Payment
WILLIAMS COS: Earns $4.4 Million of Net Income in Third Quarter
WMC MORTGAGE: S&P Junks Rating on Series 1997-2 Class B Certs.
WORLDCOM INC: Kennedy Wants Company's Rejection Request Denied
XYBERNAUT CORPORATION: IPI Financial Provides DIP Financing
*********
819 WEST IMPERIAL: Case Summary & 2 Largest Unsecured Creditors
---------------------------------------------------------------
Debtor: 819 West Imperial Highway, LLC
11157 West Washington Boulevard
Culver City, California 90232
Bankruptcy Case No.: 05-33214
Chapter 11 Petition Date: November 9, 2005
Court: Southern District of Indiana (Indianapolis)
Debtor's Counsel: Edward B. Hopper, II, Esq.
Stewart & Irwin PC
251 East Ohio Street, Suite 1100
Indianapolis, Indiana 46204
Tel: (317) 639-5454
Total Assets: $3,010,000
Total Debts: $3,340,000
Debtors' 2 Largest Unsecured Creditors:
Entity Nature of Claim Claim Amount
------ --------------- ------------
SGB Financial Services, Inc. Timber Ridge $1,220,000
c/o Joseph W. McNeal, Agent Apartments
6433 East Washington Street Located in
Suite 136 4005 Meadows Drive
Indianapolis, IN 46219 Suite E2,
Indianapolis,
Indiana. 286 units
constructed in 1954
by Leo Lipmann.
Citizens Gas & Coke Utility Leased 12 Gas Unknown
220 North Meridian Street Heaters
Indianapolis, IN 46202
A&J AUTOMOTIVE: Files Schedules of Assets & Liabilities
-------------------------------------------------------
A&J Automotive Group, Inc., delivered its Schedules of
Assets and Liabilities to the U.S. Bankruptcy Court for the
Middle District of Florida, disclosing:
Name of Schedule Assets Liabilities
---------------- ------ -----------
A. Real Property
B. Personal Property $86,912
C. Property Claimed
as Exempt
D. Creditors Holding
Secured Claims $57,469
E. Creditors Holding Unsecured
Priority Claims
F. Creditors Holding Unsecured $2,405,595
Nonpriority Claims
G. Executory Contracts and
Unexpired Leases
H. Codebtors
I. Current Income of
Individual Debtor(s)
J. Current Expenditures of
Individual Debtor(s)
-------- -----------
Total $86,912 $2,463,064
Headquartered in Clearwater, Florida, A&J Automotive Group, Inc.
is a used motor vehicle dealer. The Company filed for chapter 11
protection on September 19, 2005 (Bankr. M.D. Fla. Case No. 05-
18965). Daniel J. Herman, Esq., at Pecarek & Herman, Chartered,
represents the Debtor in its restructuring efforts. When the
Debtor filed for protection from its creditors, it estimated
assets between $50,000 to $100,000 and debts between $1 million to
$10 million.
ADELPHIA COMMS: Balance Sheet Upside Down by $8.29B at March 31
---------------------------------------------------------------
Adelphia Communications Corporation delivered its quarterly report
on Form 10-Q for the quarter ending March 31, 2005, to the
Securities and Exchange Commission on November 4, 2005.
Revenue increased $62 million, or 6%, during the three months
ended March 31, 2005, as compared to the same period in 2004.
SG&A expenses decreased $2 million, or 3%, during the three months
ended March 31, 2005, as compared to the same period in 2004.
The Company incurred costs that, although not directly related to
the Chapter 11 filing, are related to the investigation of the
alleged actions of the Rigas management, efforts to comply with
applicable laws and regulations and the sale of substantially all
of its assets to, and the assumption of certain of its liabilities
by, Time Warner NY Cable LLC, a subsidiary of Time Warner Cable
Inc., the cable subsidiary of Time Warner Inc., and Comcast
Corporation. These expenses include re-audit, legal and forensic
consulting fees and employee retention costs, and aggregated
$20 million and $31 million for the three months ending March 31,
2005, and 2004. The $11 million decrease in these fees for the
three months ended March 31, 2005, as compared to the same period
in 2004, was primarily due to $12 million of legal defense costs
recorded in 2004 for the Rigas family.
Certain expenses directly related to the Chapter 11 filing are
expensed and included in reorganization expenses due to
bankruptcy. These expenses aggregated $14 million and $15 million
for the three months ended March 31, 2005, and 2004. The Company
would continue to incur significant reorganization expenses until
it emerges from bankruptcy.
The Company's net loss was $83 million and $1.35 billion for
the three months ended March 31, 2005, and 2004. During the
three months ending March 31, 2004, it recorded charges of
$852 million for the cumulative effects of accounting changes
and a $425 million charge related to a Non-Prosecution Agreement.
At March 31, 2005, the Company's balance sheet shows
$12.95 billion in total assets and $21.97 billion in total debts.
At March 31, 2005, the Company's stockholders' deficit widened to
$8.29 billion from $8.22 billion at December 31, 2004.
A full-text copy of the regulatory filing is available at no
charge at http://ResearchArchives.com/t/s?2cc
Headquartered in Coudersport, Pennsylvania, Adelphia
Communications Corporation (OTC: ADELQ) is the fifth-largest cable
television company in the country. Adelphia serves customers in
30 states and Puerto Rico, and offers analog and digital video
services, high-speed Internet access and other advanced services
over its broadband networks. The Company and its more than
200 affiliates filed for Chapter 11 protection in the Southern
District of New York on June 25, 2002. Those cases are jointly
administered under case number 02-41729. Willkie Farr & Gallagher
represents the ACOM Debtors.
ADELPHIA COMMS: Balance Sheet Upside-Down by $7.97B at June 30
--------------------------------------------------------------
Adelphia Communications Corporation delivered its quarterly report
on Form 10-Q for the quarter ending June 30, 2005, to the
Securities and Exchange Commission on November 4, 2005.
Revenue increased $67 million, or 6%, during the three months
ended June 30, 2005, as compared to the same period in 2004
SG&A expenses were relatively flat during the three months ended
June 30, 2005, as compared to the same period in 2004.
The Company incurred costs that, although not directly related to
the Chapter 11 filing, are related to the investigation of the
alleged actions of the Rigas management, efforts to comply with
applicable laws and regulations and the sale of substantially all
of its assets to, and the assumption of certain of its liabilities
by, Time Warner NY Cable LLC, a subsidiary of Time Warner Cable
Inc., the cable subsidiary of Time Warner Inc., and Comcast
Corporation. These expenses include re-audit, legal and forensic
consulting fees and employee retention costs, and aggregated
$18 million and $35 million for the three months ending June 30,
2005, and 2004. The decrease in these expenses was primarily due
to a decline in re-audit related fees. The second quarter of 2004
also included $5 million of Rigas family legal defense costs.
Certain expenses directly related to the Chapter 11 filing are
expensed and included in reorganization expenses due to
bankruptcy. These expenses aggregated $18 million and $24 million
for the three months ended June 30, 2005, and 2004. The decrease
was primarily due to lower professional fees during the 2005
quarter.
The Company's net income for the three months ended June 30, 2005,
was $291 million versus a $169 million net loss for the three
months ended June 30, 2004, primarily as a result of the $458
million benefit it recorded as a result of its settlement with the
Rigas Family during the second quarter of 2005.
At June 30, 2005, the Company's balance sheet shows $12.9 billion
in total assets and $20.8 billion in total debts. At June 30,
2005, the Company's stockholders' deficit narrowed to $7.97
billion from an $8.21 billion deficit at December 31, 2004.
The Company's management said that as a result of the Company's
filing of the bankruptcy petition, there is substantial doubt
about the Company's ability to continue as a going concern.
Adelphia's ability to continue as a going concern is predicated
upon numerous matters, including:
* having a plan of reorganization confirmed by the Bankruptcy
Court and it becoming effective;
* obtaining substantial exit financing if the sale transaction
is not consummated and the Company is to emerge from
bankruptcy under a stand-alone plan, including working
capital financing, which the Company may not be able to
obtain on favorable terms, or at all. A failure to obtain
necessary financing would result in the delay, modification
or abandonment of the Company's development and expansion
plans and would have a material adverse effect on the
Company;
* obtaining consideration sufficient to settle prepetition
liabilities subject to compromise if the sale transaction is
not consummated, the amount of which is not known at this
time because the rights and claims of the Company's various
creditors will not be known until the Bankruptcy Court
confirms a plan of reorganization;
* extending the Second Extended DIP Facility through the
effective date of a plan of reorganization in the event the
sale transaction is not consummated before the maturity date
of the Second Extended DIP Facility. A failure to obtain an
extension to the Second Extended DIP Facility would result in
the delay, modification or abandonment of the Company's
development and expansion plans and would have a material
adverse effect on the Company;
* remaining in compliance with the financial and other
covenants of the Second Extended DIP Facility, including its
limitations on capital expenditures and its financial
covenants through the effective date of a plan of
reorganization;
* being able to successfully implement the Company's business
plans, decrease basic subscriber losses and offset the
negative effects that the Chapter 11 filing has had on the
Company's business, including the impairment of customer and
vendor relationships;
* resolving material litigation;
* renewing franchises -- failure to do so will result in
reduced operating results and potential impairment of assets;
* achieving positive operating results, increasing net cash
provided by operating activities and maintaining satisfactory
levels of capital and liquidity considering its history of
net losses and capital expenditure requirements and the
expected near-term continuation thereof; and
* motivating and retaining key executives and employees.
Due to the commencement of the Chapter 11 proceedings and the
Company's failure to comply with certain financial covenants, the
Company is in default on substantially all of its prepetition debt
obligations. Except as otherwise may be determined by the
Bankruptcy Court, the automatic stay protection afforded by the
Chapter 11 proceedings prevents any action from being taken
against the Company with regard to any of the defaults under the
pre-petition debt obligations. With the exception of the
Company's capital lease obligations and a portion of other
subsidiary debt, all of the pre-petition obligations are
classified as liabilities subject to compromise.
A full-text copy of the regulatory filing is available at no
charge at http://ResearchArchives.com/t/s?2cd
Headquartered in Coudersport, Pennsylvania, Adelphia
Communications Corporation (OTC: ADELQ) is the fifth-largest cable
television company in the country. Adelphia serves customers in
30 states and Puerto Rico, and offers analog and digital video
services, high-speed Internet access and other advanced services
over its broadband networks. The Company and its more than
200 affiliates filed for Chapter 11 protection in the Southern
District of New York on June 25, 2002. Those cases are jointly
administered under case number 02-41729. Willkie Farr & Gallagher
represents the ACOM Debtors.
AIRNET COMMUNICATIONS: Completes $7 Million Laurus Fund Financing
-----------------------------------------------------------------
AirNet Communications Corporation (NASDAQ:ANCC) reported the
closing of a $7.0 million convertible secured financing facility
with Laurus Master Fund Ltd., a New York-based institutional
equity fund that specializes in making direct investments in
growth-stage public companies. Under the facility, up to $7.0
million can be outstanding at any one time as a revolving line of
credit based on eligible accounts receivable and inventory.
Laurus Funds will initially advance AirNet Communications
$6 million.
The first $4.0 million of the initial advance is convertible into
equity at a conversion price of approximately $1.33 per share.
The remainder is convertible into equity at a conversion price of
approximately $3.79. In addition, AirNet Communications granted
Laurus Funds a warrant to purchase up to 964,187 shares of common
stock at an exercise price of approximately $1.45 per share.
AirNet also granted SCP Private Equity Partners II, L.P., an
existing investor and a diversified private equity investment firm
with over $800 million under management that is focused on making
mid and late stage venture investments in rapidly growing
technology companies, a warrant to purchase up to 100,000 shares
of AirNet's common stock at an exercise price of $1.35 per share.
TECORE Debt Retirement
After payment of expenses, the first $2.0 million in proceeds will
be used to retire existing debt held by TECORE, Inc., an existing
investor and a related party, at par value. The TECORE debt
accrues deferred interest at the rate of 12% per annum. The
balance of proceeds received under the line of credit will be
utilized for working capital.
AirNet's financing facility with Laurus Funds consists of a
secured minimum borrowing note and a secured revolving note which
allows for maximum borrowings at any one time of up to $7.0
million based on a certain percentage of eligible accounts
receivable and inventory at an interest rate of the greater of 6%
or prime plus 2% per annum, subject to certain incremental
interest rate reductions based upon increases in the company's
stock price. Amounts that are prepaid or converted into equity
may, depending on availability under the borrowing formula, be
borrowed again by AirNet. Amounts outstanding in excess of the
borrowing formula amount must be immediately repaid by AirNet and
will bear interest at a rate of 1.5% per month until paid, except
that Laurus Funds has agreed to make a loan in excess of the
formula amount and to waive this provision until Apr. 30, 2006.
The financing facility has a term of three years ending on Nov. 8,
2008. The company is subject to certain reporting covenants such
as the timely filing of financial reports with the Securities and
Exchange Commission, monthly financial reporting deadlines and
collateral reporting.
The securities sold in this private placement have not been
registered under the Securities Act of 1933 or any state
securities laws and unless so registered may not be offered or
sold except pursuant to an exemption from, or in a transaction not
subject to, the registration requirements of the Securities Act of
1933 and applicable state securities laws. However, AirNet has
agreed to file a registration statement within 30 days for the
resale of the shares of the common stock underlying the first $4
million of the initial advance, in addition to all shares of
common stock underlying the warrant issued to Laurus Funds.
AirNet Communications Corporation -- http://www.airnet.com/-- is
a leader in wireless base stations and other telecommunications
equipment that allow service operators to cost-effectively and
simultaneously offer high-speed wireless data and voice services
to mobile subscribers. AirNet's patented broadband, software-
defined AdaptaCell(R) SuperCapacity(TM) adaptive array base
station solution provides a high-capacity base station with a
software upgrade path to high-speed data, utilizing ArrayComm,
Inc.'s IntelliCell(TM) adaptive array algorithms. The Company's
RapidCell(TM) base station provides government communications
users with up to 96 voice and data channels in a compact, rapidly
deployable design capable of processing multiple GSM protocols
simultaneously. The Company's AirSite(R) Backhaul Free(TM) base
station carries wireless voice and data signals back to the
wireline network, eliminating the need for a physical backhaul
link, thus reducing operating costs. AirNet has 68 patents issued
or filed and has received the coveted World Award for Best
Technical Innovation from the GSM Association, representing over
400 operators around the world.
* * *
Going Concern Doubt
BDO Seidman, LLP, had expressed substantial doubt about AirNet
Communications' ability to continue as a going concern after
reviewing the company's financial statements for the year ending
Dec. 31, 2004. Deloitte & Touche, LLP, expressed similar doubts
when it reviewed the company's 2003 financials. BDO Seidman
points to the Company's recurring losses from operations, negative
cash flows, and accumulated deficit, as the problem areas.
As of Aug. 5, 2005, the Company's cash balance was $6.5 million.
The Company's current 2005 operating plan projects that cash
available from planned revenue combined with the on hand at
Aug. 5, 2005, may be adequate to defer the requirement for new
funding at least until the fourth quarter of 2005. There can be
no assurances that new financing can be secured at a reasonable
cost, if at all.
ALERIS INT'L: Earns $31.5 Million of Net Income in Third Quarter
----------------------------------------------------------------
Aleris International, Inc. (NYSE: ARS) reported financial results
for the third quarter of 2005.
In the third quarter of 2005, Aleris reported revenues of $554.9
million and net income of $31.5 million. These results include
$0.02 per share of special items including $2.7 million of mark-
to- market FAS 133 metal hedge gains that more than offset $1.2
million related primarily to the non-cash cost of sales impact of
the write-up of rolled products assets to fair value at date of
purchase and $1.0 million of restructuring charges related to the
merger as well as a $0.17 per share benefit related to a decrease
in our expected 2005 effective tax rate.
The reduction in the Company's expected tax rate was primarily due
to the tax benefit from the reversal of federal valuation
allowance resulting from the increased deferred tax liabilities
associated with the deferred gains on our gas hedges. For the
third quarter of 2004, the Company reported revenues of $283.0
million and a net loss of $0.3 million, including a $900,000 mark-
to-market FAS 133 metal hedge loss.
Net debt was reduced by $17.6 million during the third quarter,
including the utilization of $17.4 million of cash to acquire
Tomra during the quarter.
Steven J. Demetriou, Chairman and Chief Executive Officer of
Aleris, said, "We are extremely pleased with the momentum we
gained during the third quarter. We once again exceeded
underlying earnings expectations despite weak rolled products
volume as customer destocking continued. More importantly, we
took significant steps to strengthen Aleris and position the
Company for profitable growth. Since the end of the second quarter
we completed the purchase of all of the outstanding stock of Tomra
Latasa in Brazil, and completed the acquisition of ALSCO.
Associated with the ALSCO acquisition, we announced the closing of
our Carson rolling mill, which will further reduce our costs and
allow us to produce more cost effectively at our other facilities.
Finally, on Nov. 7, we announced the acquisition of selected Ormet
assets and our plans to produce 125 million pounds of their sheet
volume in our existing facilities, while further diversifying our
product offering. Our continued capture of synergy and
productivity benefits and a relentless focus on cash flow have
allowed us to begin to execute our growth strategy and we expect
continued strong execution as we integrate the most recent
acquisitions and accelerate our growth."
For the first nine months of 2005, Aleris reported revenues of
$1,803.5 million and net income of $79.5 million. These results
include a loss of $0.68 per share of special items including $10.4
million of mark-to-market FAS 133 metal hedge losses, $7.9 million
of purchase accounting adjustments and $4.8 million of
restructuring and asset impairment charges related to the merger.
For the comparable period of 2004, the Company reported revenues
of $854.0 million and net income of $2.7 million, including $4.5
million of costs related primarily to executive severance and $0.6
million of mark-to-market FAS 133 metal hedge gains.
Strong cash flow from operations has driven down net debt by $85.8
million since Dec. 31, 2004. Pro forma for the acquisition of
ALSCO net debt to EBITDA excluding special items on a last twelve
month basis is 1.9x at Sept. 30, 2005 compared with 3.0x at year-
end.
Mr. Demetriou said, "We are very excited about the future of
Aleris and look forward to completing a record year in 2005. We
have begun to see signs that the aluminum sheet inventory
correction executed by a portion of our customer base is ending.
Although underlying economic activity remains quite strong, our
outlook for the remainder of the year will likely be affected by
numerous acquisition integration-related initiatives currently
underway at Aleris. We continue to expect full year 2005 adjusted
earnings per share of $3.80 to $3.90. Looking beyond the current
year, we anticipate a continued favorable economic environment in
2006 with Aleris top-line results benefiting from acquisitions,
new products and hurricane reconstruction. Reduced costs from
merger and acquisition synergies ramp-up, the closing of the
Carson rolling mill, continued favorable scrap spreads in rolled
products and an intensified Six Sigma effort should provide
additional benefits in 2006. We expect to provide more specific
guidance for 2006 once we have completed our budgeting process
later this year."
Acquisitions
The Company's growth strategy accelerated since the end of the
second quarter with:
* the Aug. 31, 2005, completion of the Tomra acquisition,
* the Oct. 3, 2005, completion of the ALSCO Holdings, Inc.
acquisition, and
* the proposed acquisition of selected assets of the Ormet
Corporation announced Nov. 7, 2005.
Plant Closing
Following an evaluation of redundant manufacturing facilities
related to the ALSCO acquisition, the Company announced Nov. 3,
2005, the planned future closing of the Carson, California rolling
mill, a key step to realizing at least $12 million of synergies.
A restructuring and asset impairment charge of $25-$30 million is
contemplated.
Aleris International, Inc. -- http://www.aleris.com/-- is a major
North American manufacturer of rolled aluminum products and is a
global leader in aluminum recycling and the production of
specification alloys. The Company is a leading manufacturer of
value-added zinc products that include zinc oxide, zinc dust and
zinc metal. Headquartered in Beachwood, Ohio, a suburb of
Cleveland, the Company operates 33 production facilities in the
United States, Brazil, Germany, Mexico and Wales, and employs
approximately 4,000 employees.
* * *
Standard & Poor's Ratings Services currently rates the Company's
10-3/8% Senior Secured Notes at B.
AMERICAN REMANUFACTURERS: Taps Bankruptcy Services as Claims Agent
------------------------------------------------------------------
American Remanufacturers, Inc., and its debtor-affiliates ask the
Honorable Peter J. Walsh of the U.S. Bankruptcy Court for the
District of Delaware for permission to employ Bankruptcy Services,
LLC, as their claims, noticing and balloting agent, nunc pro tunc
to Nov. 7, 2005.
Bankruptcy Services will:
(a) notify all potential creditors of the Debtors' chapter 11
filings and the setting of the first meeting of creditors
pursuant to Section 341(a) of the U.S. Bankruptcy Code;
(b) file affidavits of service for all mailings, including a
copy of each notice, a list of persons to whom those
notices were mailed, and the date mailed;
(c) maintain an official copy of the Debtors' schedules,
including a list of creditors and amounts owed;
(d) furnish a notice of the last date for the filing of proofs
of claim and a form for filing a proof of claim to
creditors and parties-in-interest;
(e) docket all claims filed and maintain the official claims
register on behalf of the Clerk and provide to the Clerk an
exact duplicate;
(f) specify in the claims register for each claim docket:
(1) the claim number assigned,
(2) the date received,
(3) the name and address of the claimanat,
(4) the filed amount of the claim, if liquidated, and
(5) the allowed amount of the claim;
(g) record all transfers of claims and provide notices of the
transfer as required pursuant to Bankruptcy Rule 3001(e);
(h) maintain the official mailing list for all entities who
have filed proofs of claim;
(i) mail the Debtors' disclosure statement, plan, ballots and
any other related solicitation materials to holders of
impaired claims and equity interests;
(j) receive and tally ballots and respond to inquiries
respecting voting procedures and the solicitation of votes
on the plan; and
(k) provide any other distribution services as necessary or
required.
Ron Jacobs, president of Bankruptcy Services, LLC, discloses that
the Firm negotiated a $10,000 retainer. The Firm's professionals
bill:
Designation Hourly Rate
----------- -----------
Senior Managers/On-Site Consultants $225
Other Senior Consultants $185
Programmer $130 - $160
Associate $135
The Debtors believe that Bankruptcy Services, LLC, is
disinterested as that term is defined in Section 101(14) of the
U.S. Bankruptcy Code.
Bankruptcy Services, LLC -- http://www.bsillc.com/-- specializes
in providing consulting and data processing services to chapter 11
debtors in connection with the administration, reconciliation and
negotiation of claims and solicitation of votes to accept or
reject plans of reorganization.
Headquartered in Anaheim, California, American Remanufacturers,
Inc., are privately held companies that produce remanufactured
automotive components that include "half shaft" axles, brake
calipers, and steering components. The Debtors are the second
largest full-line manufacturer of undercar automotive parts in the
United States. The Debtor with its nine affiliates filed for
chapter 11 protection on November 7, 2005 (Bankr. D. Del. Case No.
05-20022). Kara S. Hammond, Esq., Pauline K. Morgan, Esq., Sean
Matthew Beach, Esq., at Young Conaway Stargatt & Taylor LLP and
Alan W. Kornberg, Esq., Kelley A. Cornish, Esq., Margaret A.
Phillips, Esq., and Benjamin I. Finestone, Esq., at Paul, Weiss,
Rifkind, Wharton & Garrison LLP represent the Debtors. When the
Debtors filed for protection from their creditors, they estimated
their assets between $10 million to $50 million and their debts at
more than $100 million.
APARTMENTS AT TIMBER: Has Access to Fannie Mae Postpetition Loan
----------------------------------------------------------------
The Hon. Timothy J. Mahoney of the U.S. Bankruptcy Court for the
District of Nebraska authorized Thomas D. Stalnaker, the chapter
11 Trustee appointed in Apartments at Timber Ridge, LP's chapter
11 case, to secure up to $62,320 in postpetition financing from
Fannie Mae.
Mr. Stalnaker will use the proceeds of the Fannie Mae loan to
finance the ongoing operations of the Debtor's residential
apartment building, remedy certain health and safety issues
existing at the property and fund a required deposit to the
Metropolitan Utilities District.
Due to prior gross mismanagement of the apartments, approximately
30 residential units in the building now pose health and safety
risks. These units are infested with mold, insects and other
vermin. The Trustee needs additional working capital to clean and
disinfect these units.
In addition, due to poor payment history, the MUD has threatened
to terminate vital utilities unless the Trustee makes a $50,000
bond or cash deposit.
Fannie Mae Term Loan
The $62,320 Fannie Mae loan bears interest at 5% per annum and
matures in one year unless there is an earlier termination due to:
-- an event of default;
-- the consummation of a Plan of Reorganization;
-- sale of substantially all of the Debtor's assets; or
-- lifting of the automatic stay on Fannie Mae's request.
On account of the DIP loan, Fannie Mae is granted an allowed
superpriority expense claim against the Debtor's estate. The
superpriority claim is subordinate only to a carve-out reserved
for payments due to the clerk of the Bankruptcy Court and
payments, not to exceed $50,000, due to the Trustee and his
professionals.
As security for the DIP Loan, Fannie Mae is granted perfected
security interests and first priority liens on all property of the
Debtor's estate. Fannie Mae is also granted a junior lien on any
of the Debtor's encumbered property.
Headquartered in Dallas, Texas, Apartments at Timber Ridge, LP,
aka Timber Ridge Apartments, operates a residential apartment
building in Omaha, Nebraska. The Company filed for chapter 11
protection on June 3, 2005 (Bankr. D. Nebr. Case No. 05-82135).
Howard T. Duncan, Esq., at Duncan Law Office, represents the
Debtor in its restructuring efforts. When the Debtor filed for
protection from its creditors, it listed estimated assets and
debts between $10 million to $50 million.
APARTMENTS AT TIMBER: U.S. Trustee Unable to Form Committee
-----------------------------------------------------------
Charles E. Rendlen III, the U.S. Trustee for Region 13, tells the
U.S. Bankruptcy Court for the District of Nebraska that no
Official Committee of Unsecured Creditors for Apartments at Timber
Ridge, LP, will be formed at this time.
Mr. Rendlen explains that no eligible creditors have expressed
willingness to serve on a committee. Mr. Rendlen reserves the
right to appoint a committee should interest develop among the
creditors.
Headquartered in Dallas, Texas, Apartments at Timber Ridge, LP,
aka Timber Ridge Apartments, operates a residential apartment
building in Omaha, Nebraska. The Company filed for chapter 11
protection on June 3, 2005 (Bankr. D. Nebr. Case No. 05-82135).
Howard T. Duncan, Esq., at Duncan Law Office, represents the
Debtor in its restructuring efforts. When the Debtor filed for
protection from its creditors, it listed estimated assets and
debts between $10 million to $50 million.
ASARCO LLC: Court OKs Assumption of Four Road Machinery Contracts
-----------------------------------------------------------------
The U.S. Bankruptcy Court for the Southern District of Texas gave
ASARCO LLC authority to assume four executory agreements with
Road Machinery, LLC.
As previously reported in the Troubled Company Reporter on
Oct. 24, 2005, the Road Machinery Agreements are:
1. On-Site Maintenance Service Agreement;
2. Ray Mine Stores Sales Agreement;
3. Off-Site Repair Agreements; and
4. Repair and Maintenance Plan Agreement.
C. Luckey McDowell, Esq., at Baker Botts, L.L.P., in Dallas,
Texas, tells Judge Schmidt that the Agreements provide ongoing
value to ASARCO's estate because Road Machinery's continued
business relationship is critical to the Debtor's bankruptcy
operations.
On-Site Maintenance Service Agreement
The On-Site Maintenance Service Agreement, dated July 13, 2005,
governs the terms and conditions of on-site repair orders placed
by ASARCO.
Road Machinery, an indirect affiliate of Komatsu Financial
Limited Partnership, provides the support and maintenance of
ASARCO's Komatsu-brand trucks and heavy equipment. Road
Machinery also services the trucks' sophisticated electronics and
uses proprietary software that enables it to diagnose and repair
the electrical equipment on the Komatsu-brand machinery.
Road Machinery estimates that the outstanding amounts due and
payable by ASARCO under the Maintenance Service Agreement total
around $790,000. ASARCO is reviewing Road Machinery's
calculations and expects to reach an agreement with Road
Machinery as to the final cure amount. ASARCO intends to pay the
cure amount on terms mutually acceptable to the parties.
Ray Mine Stores Sales Agreement
Under the Ray Mine Stores Sales Agreement, dated March 19, 2004,
Road Machinery maintains a parts store located at Ray Mine in
Pima County, Arizona. Mr. McDowell says that having the parts
store on location at ASARCO's operations site provides a
significant benefit by reducing the down time for broken
machinery.
Road Machinery has recently completed an audit and estimates that
the outstanding amounts due and payable by ASARCO under the Store
Agreement total $223,000.
Mr. McDowell informs Judge Schmidt that ASARCO is in the process
of reviewing Road Machinery's calculations. ASARCO expects to
reach an agreement with Road Machinery as to the final amount of
the cure payment.
Off-Site Repair Agreements
In addition to providing on-site repair and maintenance, Road
Machinery also provides off-site repair services for larger or
more complicated tasks. Specifically, Road Machinery can rebuild
and overhaul electrical components, mining engines, hydraulics,
and high-horsepower transmissions. As of the Petition Date, Road
Machinery was working on a number of off-site repair or rebuild
orders for ASARCO.
According to Mr. McDowell, Road Machinery has asserted a
garageman's lien with respect to an ASARCO equipment on which it
is working. The garageman's lien is a possessory lien, and thus
must either be paid for the ASARCO Equipment to be released or
Road Machinery would simply return work that was only one-third
complete, and of little value to ASARCO.
ASARCO still needs the repairs to be completed and that an
assumption of the Off-Site Agreement and related repair
agreements is the most efficient and beneficial way to proceed so
that the Equipment may be repaired and put back to work.
Road Machinery reported that, before the Petition Date, it had
completed $451,942 in work under the Off-Site Agreement. It
further estimates that an additional $1,287,172, in work remains
to be done to complete the Agreement.
Repair and Maintenance Plan Agreement
Under the Repair and Maintenance Plan Agreement, dated
Jan. 15, 1998, Road Machinery provides support for the
maintenance of trucks located at one of ASARCO's open-pit copper
mines in Arizona -- the Mission Mine. Mr. McDowell states that
no cure amount is due under the Maintenance Plan Agreement.
Rather, as of the Petition Date, there was a $46,504 credit
balance in ASARCO's favor.
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 Okays Rejection of Gerald Metals Agreements
-------------------------------------------------------------
ASARCO LLC asks the U.S. Bankruptcy Court for the Southern
District of Texas for authority to reject some tolling, purchase,
and exchange agreements with Gerald Metals, Inc.
ASARCO has determined that the Gerald Metals Agreements are of no
material value to its estate and that rejection of the Agreements
will provide ASARCO with a significant economic benefit.
Eric A. Soderlund, Esq., at Baker Botts L.L.P., in Dallas, Texas,
tells the Court that the goods and services to be provided or
received under the Agreements can be sold or sourced by ASARCO at
economic terms that would increase ASARCO's profit significantly.
According to Mr. Soderlund, the Gerald Metals Agreements would
cause ASARCO to incur administrative expenses that are not in the
best interest of the estate, while producing little, if any,
profit.
"ASARCO is actively seeking to minimize its expenses during the
reorganization of its estate. Rejecting the Subject Agreements
will assist ASARCO in further lowering its expenses," Mr.
Soderlund says.
ASARCO LLC inherited the Gerald Metals Agreements from ASARCO,
Inc.
ASARCO, Inc., entered into a Copper Concentrate Toll Agreement
with Gerald Metals for the toll conversion of certain copper
concentrates on December 22, 2004.
ASARCO Inc. also entered into a copper wire rod purchase contract
and an exchange agreement with Gerald Metals, which agreement
operates to significantly decrease the quantity of copper wire
rod that Gerald Metals was originally obligated to purchase from
ASARCO Inc. under the purchase contract.
ASARCO Inc. was merged into ASARCO LLC on February 17, 2005.
Mr. Soderlund relates that the parties intended the transaction,
evidenced by the Toll Agreement, to be a bailment. However, as a
protective measure, in the event that the transaction might be
characterized as something other than a bailment, the Toll
Agreement grants a security interest to Gerald Metals in ASARCO's
copper, alloys, and concentrates. A similar provision was
included in other toll agreements between the parties.
Gerald Metals filed UCC-1 financing statements related to various
toll agreements, including the Toll Agreement.
As of October 18, 2005, ASARCO has sent an invoice on Contract
Number C25007 to Gerald Metals for $3,131,315 on account of
various transactions.
Mr. Soderlund says other transactions not included in the
$3,131,315 Ray Invoice are subject to a process known as
"finalization," in which an independent third party reviews the
product and determines the final amount due under the agreements.
The parties anticipate that the Finalization Process will result
in one party owing the other anywhere from $0 to approximately
$1.5 million on those other transactions.
To provide some assurance to Gerald Metals, Mr. Soderlund notes
that ASARCO has agreed to permit Gerald Metals to withhold
$15 million of the amount that ASARCO has invoiced Gerald Metals
under the Ray Invoice until that time as the Finalization Process
has been completed. If it is determined after the Finalization
Process' completion that ASARCO owes Gerald Metals more than the
$1.5 million withheld in connection with the Finalization
Process, Gerald Metals will have a claim for the difference, and
that claim will be entitled to administrative priority.
In addition, Gerald Metals may have a claim against ASARCO for
damages for breach of contract based on the rejection pursuant to
Section 365(g) of the Bankruptcy Code. ASARCO has agreed to
waive all rights and defenses under the Agreements to challenge
the Section 365(g) Claim, except that ASARCO reserves the right
to challenge Gerald Metals' calculation and substantiation of the
Section 365(g) Claim amount.
Mitsui Objects
Mitsui & Company (USA), Inc., clarifies that it does not object
to the business judgment exercised by ASARCO LLC with regard to
the Gerald Metals contracts.
Mitsui, however, disputes the Debtor's attempt to obtain Court
approval for its plan to permit Gerald Metals to withhold $1.5
million of an invoiced amount until a final "true-up" has been
completed. Mitsui says this proposal violates ASARCO's
requirements to properly account for and segregate the Debtor's
silver inventory and the associated proceeds.
Mitsui explains that under its prepetition agreements with
ASARCO, it holds a security interest in the Debtor's silver
inventory and the proceeds. Mitsui points out that the Cash
Collateral Order requires the Debtor to continue maintaining the
proceeds of Mitsui's collateral in a segregated bank account and
promptly deposit into the Mitsui Cash Collateral Account the
portion of the proceeds that the Debtor has allocated to the
silver inventory.
Mitsui contends that ASARCO's proposal would result in the
improper withholding of that amount of money in the $1.5 million
withheld that is attributable to the silver inventory and
proceeds.
* * *
Judge Schmidt grants ASARCO's request. The Gerald Metals
Agreements are rejected effective as of Oct. 18, 2005.
Judge Schmidt establishes January 28, 2006, as the deadline for
Gerald Metals to file a claim for any damages arising from the
rejection.
The Court permits Gerald Metals to withhold the $1.5 million
under the Ray Invoice to be used as security to set off any
amounts ASARCO may found to owe Gerald Metals as a result of the
Finalization Process.
ASARCO's right to challenge Gerald Metals' calculation and
substantiation of the amount of any claim under Section 365(g) is
reserved.
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).
ASPEON INC: Massive Losses & Deficits Raise Going Concern Doubt
---------------------------------------------------------------
Aspeon Inc., delivered its annual report on Form 10-KSB for the
fiscal year ending June 30, 2004, to the Securities and Exchange
Commission on Nov. 1, 2005.
The Company reported that for the fiscal year ended June 30, 2004,
its revenues were $865,000, but it had $0 cash on hand, $5,600 of
assets, no operating business or other source of income, and it
had retained a deficit in excess of $90 million and a
stockholders' deficit of approximately $7.9 million.
As of June 30, 2005, the Company reported it had $0 cash on hand,
$26,300 of assets, no operating business or other source of
income, and outstanding liabilities of approximately $8 million.
The Company has also been sued certain of its shareholders.
During the fiscal year ended June 30, 2005, the Company's sole
director, David J. Cutler, advanced an $88,000 loan to the Company
with an interest rate of 8% for the Company to meet its ongoing
operating expenses and fund the costs of bringing its financial
statements and SEC reporting up to date. Since then, Mr. Cutler
has continued to make further advances to the Company by way of
loans for the Company to meet its ongoing operating expenses and
fund the costs of bringing its financial statements and SEC
reporting up to date as required. But there is no assurance that
Mr. Cutler will continue to provide the Company with further
funding in the future.
Going Concern Doubt
The Company's independent public accountant, Larry O'Donnell
C.P.A., P.C., in a report dated Oct. 7, 2005, raised substantial
doubt about the Company's ability to continue as a going concern
citing:
* significant losses,
* a working capital deficit as of June 30, 2004, and
* no ongoing source of income.
A full-text copy of the regulatory filing is available for free at
http://ResearchArchives.com/t/s?2ca
Aspeon Inc. used to design, manufacture and sell open systems
touch screen point-of-sale computers for the food service and
retail industries. The Company also provided customized,
integrated business application software.
AT&T CORP: Moody's Places Ratings Under Review for Likely Upgrade
-----------------------------------------------------------------
Moody's Investors Service updated its review for possible
downgrade of the debt of various subsidiaries of SBC
Communications Inc., as well as the review for possible upgrade of
the ratings of AT&T Corp, to reflect consideration of the strength
of guarantees offered by SBC in support of its current
subsidiaries.
Moody's has determined that SBC's existing guarantee of certain
subsidiaries, which is conditional upon SBC's continued 100%
ownership of these subsidiaries, is no longer sufficient to
represent full credit substitution. In order to maintain its
ratings on approximately $5.2 billion of SBC subsidiary debt,
Moody's will require either an unconditional and irrevocable
guarantee, or sufficient financial information for the rated
issuers to allow the agency to form an opinion regarding their
standalone creditworthiness. Moody's will apply the same approach
in its review of existing AT&T debt, should SBC choose not to
provide either an irrevocable and unconditional guarantee or
financial information, after acquiring that company. All ratings
of SBC and its subsidiaries remain on review for possible
downgrade.
In August 2004, Moody's concluded that it no longer had sufficient
information regarding various operating subsidiaries of SBC to
assess their credit quality on a standalone basis. At that time
the ratings were lowered, to that of SBC itself, based on SBC's
unconditional and irrevocable guarantee as long as it was sole
owner. Moody's accepted the guarantee in the expectation all
future debt issuance would occur from the parent company, that the
subsidiary debt would be extinguished over time, that the
subsidiaries' cash generation ability would continue to form the
core of SBC's business and would, at worst, decline at a
predictable rate. Traditional voice revenues have continued to
deteriorate throughout the industry and the pace of industry
restructuring has accelerated.
Furthermore, Moody's expects that, as SBC's consumer and
enterprise data, wireless, and video cash flows grow, traditional
voice services' relative contribution to the company's total cash
flows will decline in importance. As a result, the agency has
concluded that full credit substitution will now require an
unconditional commitment to the bondholders on the part of the
guarantor. In the absence of such a guarantee, or of adequate
financial information to be able to assign a standalone rating for
SBC's operating subsidiaries, Moody's will withdraw its ratings on
their debt amounting to $5.2 billion outstanding.
In placing AT&T's ratings under review for possible upgrade,
Moody's noted, in its press release of January 25, 2005, that the
review would "focus on SBC's intentions for AT&T's debt upon
completion of the merger." In concluding its review, Moody's will
consider the strength of any guarantee that SBC may choose to
offer in support of AT&T's outstanding debt.
Unless SBC chooses to replace the existing conditional guarantees
with ones that are unconditional and irrevocable, Moody's will
withdraw the existing ratings of the conditionally guaranteed
operating subsidiary debt by no later than the end of 2005.
Should SBC buy AT&T and then both stop filing AT&T financials and
not provide an unconditional, irrevocable guarantee, Moody's would
expect to withdraw its ratings on AT&T debt.
Moody's notes that SBC has provided an unconditional and
irrevocable guarantee for specified debt at Southwestern Bell and
Pacific Bell, of which approximately $1.5 billion remains
outstanding.
Moody's has separately assigned an A2 senior unsecured rating to
SBC's $2 billion debt issue.
Ratings affected by this action:
SBC Communications Inc.
-- Senior Unsecured, A2
-- Existing debt $13.2 billion
-- New debt issue $ 2 billion
-- Commercial Paper, P-1 $ 2.7 billion
SBC Communications Capital Corp.
-- Senior Unsecured, A2 (merged into parent) $250 million
Southwestern Bell Telephone Co.
-- Senior Unsecured, A2 $250 million
-- Senior Unsecured, A2 $1.3 billion
Pacific Bell Telephone Co.
-- Senior Unsecured, A2 $1.175 billion
-- Senior Unsecured, A2 $1.25 billion
Ameritech Capital Funding Corp.
-- Senior Unsecured, A2 $2.1 billion
Indiana Bell Telephone Co.
-- Senior Unsecured, A2 $150 million
Michigan Bell Telephone Co.
-- Senior Unsecured, A2 $200 million
Southern New England Telephone Co.
-- Senior Unsecured, A2 $110 million
Wisconsin Bell, Inc.
-- Senior Unsecured, A2 $125 million
AT&T Corp.
-- Senior Unsecured, Ba1 $7.7 billion
SBC Communications Inc. is a telecommunications company
headquartered in San Antonio, Texas, and AT&T Corp. is a
telecommunications company headquartered in New York, New York.
ATA AIRLINES: Can Use ATSB Lenders' Cash Collateral Until Nov. 21
-----------------------------------------------------------------
ATA Airlines, Inc., its debtor-affiliates and the ATSB Lenders
stipulate that the Debtors may use the ATSB Lenders' cash
collateral and other collateral through the earliest of:
(i) the close of business on November 21, 2005;
(ii) the occurrence of any event of default; or
(iii) the time the Debtors' settlement agreement with the ATSB
Lenders and the Official Committee of Unsecured
Creditors, approved by the Court on April 15, 2005, will
be materially breached or rendered null and avoid.
The parties stipulate that the Debtors will continue paying for
the services of Sage-Popovich, Inc., and Lazard Freres & Co. LLC.
Unless the Debtors obtain additional Available Cash pursuant to
their capital-raising efforts, the Debtors' Available Cash is
projected to fall to precariously low levels by the end of October
2005, which could result in an event of default under the Cash
Collateral Order. Therefore, the Debtors and the ATSB Lenders
agree to modify the event of default provisions of the Cash
Collateral Order to include these terms:
(a) By the close of business on November 21, 2005, the Debtors
have not entered into a fully executed definitive
agreement with one or more investors that is:
(x) consistent with the terms of the Cash Collateral
Order, as expressly modified by the Stipulation;
(y) consistent with certain Investment Agreement
parameters; and
(z) subject only to Court approval and the closing
conditions set forth in the Investment Agreement --
which closing conditions will be subject to the
prior written approval of the ATSB Lenders -- or
(b) The Debtors fail to file a revised disclosure statement
with the Court within 10 business days of the execution
of the Investment Agreement.
Subject to the prior written consent of the ATSB Lenders, an
Investment Agreement must provide for the Debtors to receive:
(a) no less than $30,000,000 of debtor-in-possession financing
on terms and conditions acceptable to the ATSB Lenders in
their sole discretion; and
(b) an investment of no less than $70,000,000 in the
reorganized Debtors, on terms and conditions acceptable to
the ATSB Lenders in their sole discretion, by no later
than the effective date of a plan of reorganization in
ATA's Chapter 11 Case.
In addition, the Debtors and the ATSB Lenders agree that the Cash
Collateral Order will be expressly modified so that an event of
default under the Cash Collateral Order will occur one business
day after any ATSB Lender provides notice to the Debtors and the
Official Committee of Unsecured Creditors that, in the ATSB
Lenders' reasonable judgment, one or more of the closing
conditions to the Investment Agreement will not be satisfied in
the time period provided, and the closing condition has not been
waived or deemed satisfied by the relevant party to the
Investment Agreement.
The ATSB Lenders stipulate that any amendment to the Southwest
DIP financing, which is approved according to the terms of the
Southwest DIP financing, is acceptable to them.
The Debtors, the ATSB Lenders and the Creditors Committee agree
that the deadline by which the Committee must file any challenge,
on the basis of Sections 544 and 548 of the Bankruptcy Code, to
the ATSB Lenders' "Guarantor Unsecured Claims" will be extended
until the Debtors' deadline to use the Cash Collateral.
The Debtors covenant with the ATSB Lenders to maintain:
(i) at least $29,815,904 in Available Cash during the
Extension Period; and
(ii) at least 90% of the Available Cash amount forecasted at
each weekend in the Debtors' 13-week cash forecast dated
October 25, 2005:
Week Ending Available Cash 90% of Available Cash
----------- -------------- ---------------------
10/28/05 $44,222,152 $39,799,937
11/04/05 $47,895,456 $43,105,910
11/11/05 $43,793,440 $39,414,096
11/18/05 $49,179,130 $44,261,217
11/25/05 $50,376,003 $45,338,403
Headquartered in Indianapolis, Indiana, ATA Airlines, owned by ATA
Holdings Corp. -- http://www.ata.com/-- is the nation's 10th
largest passenger carrier (based on revenue passenger miles) and
one of the nation's largest low-fare carriers. ATA has one of the
youngest, most fuel-efficient fleets among the major carriers,
featuring the new Boeing 737-800 and 757-300 aircraft. The
airline operates significant scheduled service from Chicago-
Midway, Hawaii, Indianapolis, New York and San Francisco to over
40 business and vacation destinations. Stock of parent company,
ATA Holdings Corp., is traded on the Nasdaq Stock Exchange. The
Company and its debtor-affiliates filed for chapter 11 protection
on Oct. 26, 2004 (Bankr. S.D. Ind. Case Nos. 04-19866, 04-19868
through 04-19874). Terry E. Hall, Esq., at Baker & Daniels,
represents the Debtors in their restructuring efforts. When the
Debtors filed for protection from their creditors, they listed
$745,159,000 in total assets and $940,521,000 in total debts.
(ATA Airlines Bankruptcy News, Issue No. 39; Bankruptcy Creditors'
Service, Inc., 215/945-7000)
ATA AIRLINES: Alejandre, et al., Balks at Disclosure Statement
--------------------------------------------------------------
ATA Airlines, Inc., flight attendants Martha Alejandre, Kimberly
Watson, Jenna Casale, Samantha Byrd, and Lori Diefenbacher filed
charge forms with the U.S. Equal Employment Opportunity Commission
on August 25, 2004, alleging that ATA engaged in intentional torts
and sex discrimination against them.
Erron H. Fisher, Esq., at John T. Moran & Associates, in Chicago,
Illinois, relates that the intentional torts committed by ATA
against the Flight Attendants consist of sex discrimination,
disparate treatment, economic/social blackmail, and other non-
dischargeable torts in bankruptcy proceedings. Each of the
Flight Attendants was accused of sexual misconduct by ATA, which
was documented in each Flight Attendants' personal file, without
investigation by ATA.
Each of the Flight Attendants also filed a proof of claim seeking
damages of approximately $500,000.
Mr. Fisher notes that the Reorganizing Debtors approached each of
the Flight Attendants outside the presence of and without
permission of the Flight Attendants' Counsel, John T. Moran. He
says the Reorganizing Debtors attempted to negotiate resolution of
the complaints. The resolution consisted of and was conditioned
upon the immediate termination of the Flight Attendants' Counsel.
Accordingly, Mr. Moran filed Claim No. 229 for intentional tort of
interference with prospective advantages, which is not subject to
discharge in bankruptcy proceedings.
The Flight Attendants and Mr. Moran ask the U.S. Bankruptcy Court
for the Southern District of Indiana to deny any proposed
reorganization plan which would reduce, limit, or otherwise
determine the amount which the Claimants can seek with pending
litigation.
Headquartered in Indianapolis, Indiana, ATA Airlines, owned by ATA
Holdings Corp. -- http://www.ata.com/-- is the nation's 10th
largest passenger carrier (based on revenue passenger miles) and
one of the nation's largest low-fare carriers. ATA has one of the
youngest, most fuel-efficient fleets among the major carriers,
featuring the new Boeing 737-800 and 757-300 aircraft. The
airline operates significant scheduled service from Chicago-
Midway, Hawaii, Indianapolis, New York and San Francisco to over
40 business and vacation destinations. Stock of parent company,
ATA Holdings Corp., is traded on the Nasdaq Stock Exchange. The
Company and its debtor-affiliates filed for chapter 11 protection
on Oct. 26, 2004 (Bankr. S.D. Ind. Case Nos. 04-19866, 04-19868
through 04-19874). Terry E. Hall, Esq., at Baker & Daniels,
represents the Debtors in their restructuring efforts. When the
Debtors filed for protection from their creditors, they listed
$745,159,000 in total assets and $940,521,000 in total debts.
(ATA Airlines Bankruptcy News, Issue No. 39; Bankruptcy Creditors'
Service, Inc., 215/945-7000)
ATA AIRLINES: Wants Plan Confirmation Period Extended to Jan. 30
----------------------------------------------------------------
Pursuant to Section 1121(d) of the Bankruptcy Code, ATA Airlines,
Inc., and its debtor-affiliates ask the U.S. Bankruptcy Court for
the Southern District of Indiana to extend their exclusive period
to confirm their Joint Plan of Reorganization to and including
January 30, 2006.
The Reorganizing Debtors filed their Chapter 11 Plan and
Disclosure Statement on September 30, 2005.
Terry E. Hall, Esq., at Baker & Daniels, in Indianapolis, Indiana,
tells the Court that the Reorganizing Debtors remain engaged in
arranging for new capital from a "New Investor" as referenced in
the Plan and the Disclosure Statement.
Ms. Hall acknowledges that a seven-year extension of the
Codeshare Agreement between ATA Airlines, Inc., and Southwest
Airlines, Co., is conditioned upon ATA achieving confirmation of
a plan of reorganization by December 31, 2005. However, the
Reorganizing Debtors believe that the negotiations now occurring
among the constituent parties, including Southwest Airlines, will
result in an agreement extending the deadline for confirmation of
a plan to no earlier than January 30.
Ms. Hall points out that in In re Texaco, Inc., 76 B.R. 322, 326
(Bankr. S.D.N.Y. 1987), the court held that "[t]he large size of
the debtor and the consequent difficulty in formulating a plan of
reorganization for a huge debtor with a complex financial
structure are important factors which generally constitute cause
for extending the exclusivity periods."
The Reorganizing Debtors are or will be involved in negotiations
among many constituent parties, including the Air Transportation
Safety Board, the Official Committee of Unsecured Creditors, the
City of Chicago, Southwest Airlines, as well as the potential New
Investor. These discussions are interrelated and in many ways
interdependent, Ms. Hall notes. The complexity of the discussions
has made it necessary to seek additional time in which to confirm
the Plan to provide information of a kind sufficient to allow the
creditors of the Reorganizing Debtors to reasonably consider the
Plan prior to voting.
Headquartered in Indianapolis, Indiana, ATA Airlines, owned by ATA
Holdings Corp. -- http://www.ata.com/-- is the nation's 10th
largest passenger carrier (based on revenue passenger miles) and
one of the nation's largest low-fare carriers. ATA has one of the
youngest, most fuel-efficient fleets among the major carriers,
featuring the new Boeing 737-800 and 757-300 aircraft. The
airline operates significant scheduled service from Chicago-
Midway, Hawaii, Indianapolis, New York and San Francisco to over
40 business and vacation destinations. Stock of parent company,
ATA Holdings Corp., is traded on the Nasdaq Stock Exchange. The
Company and its debtor-affiliates filed for chapter 11 protection
on Oct. 26, 2004 (Bankr. S.D. Ind. Case Nos. 04-19866, 04-19868
through 04-19874). Terry E. Hall, Esq., at Baker & Daniels,
represents the Debtors in their restructuring efforts. When the
Debtors filed for protection from their creditors, they listed
$745,159,000 in total assets and $940,521,000 in total debts.
(ATA Airlines Bankruptcy News, Issue No. 39; Bankruptcy Creditors'
Service, Inc., 215/945-7000)
ATLANTIC & WESTERN: Fitch Assigns Low-B Ratings on $300-Mil Notes
-----------------------------------------------------------------
Fitch Ratings has assigned ratings to $300 million of Atlantic &
Western Re Limited variable-rate notes. The notes comprise two
tranches.
-- $100 million class A variable-rate notes due Nov. 15, 2010
'BB';
-- $200 million class B variable-rate notes due Nov. 15, 2010
'B'.
Atlantic & Western Re Limited is a special-purpose, Cayman Islands
exempted company formed solely to issue the variable-rate notes,
enter into a reinsurance contract with PXRE Reinsurance Ltd., and
conduct activities related to the notes' issuance. PXRE, a
subsidiary of PXRE Group Ltd., is a worldwide provider of
catastrophe reinsurance products and services to both primary
insurers and reinsurers.
The securities are structured into tranches such that the class A
notes are exposed to European windstorm risk and U.S. hurricane
risk. The class B notes are exposed to the previously mentioned
risks, as well as U.S. earthquake risk. The risk structure of the
contract is a modeled loss to a notional portfolio.
Under the reinsurance contract, A&W will make specified payments
to PXRE if, during the next five years, any of the covered perils
occurs that causes modeled losses above a specified threshold.
Proceeds from the notes' issuance collateralize A&W's obligations
under the reinsurance contract. Fitch's ratings of the notes
address the likelihood that investors will receive payment of
interest and principal in accordance with terms of the transaction
documents.
Fitch's rating process included a review of the methodology and
models used by the modeling firm, AIR Worldwide Corporation; the
loss-assessment probabilities resulting from that analysis; and
the legal and structural soundness of the notes. Fitch's ratings
are based on risk-adjusted modeled results where the transaction's
base-case modeled results were adjusted to consider uncertainty
associated with the model's frequency and severity assumptions and
methodology. Fitch then compared these risk adjusted modeled
results with the catastrophe bond rating grid as part of its
overall rating process. Fitch's analysis of the transaction's
structure included a review of A&W's organizational documents,
contracts between A&W and other parties, and various legal
opinions.
BANK OF AMERICA: S&P Puts Low-B Ratings on $34.5-Mil Cert. Classes
------------------------------------------------------------------
Standard & Poor's Ratings Services assigned its preliminary
ratings to Bank of America Large Loan Inc.'s $1.2 billion
commercial mortgage pass-through certificates series 2005-MIB1.
The preliminary ratings are based on information as of Nov. 8,
2005. Subsequent information may result in the assignment of
final ratings that differ from the preliminary ratings.
The preliminary ratings reflect the credit support provided by the
subordinate classes of certificates, the liquidity provided by the
trustee, the economics of the underlying mortgage loans, and the
geographic and property type diversity of the loans. Standard &
Poor's analysis determined that, on a weighted average basis, the
trust pool has a debt service coverage of 1.36x based on a
weighted average stressed constant of 9.9%, a beginning LTV of
67.8%, and an ending LTV of 67.7%.
A copy of Standard & Poor's complete presale report for this
transaction can be found on RatingsDirect, Standard & Poor's
Web-based credit analysis system, at http://www.ratingsdirect.com/
The presale can also be found on the Standard & Poor's Web site at
http://www.standardandpoors.com/ Select Credit Ratings, and then
find the article under Presale Credit Reports.
Preliminary Ratings Assigned
Bank of America Large Loan Inc.
Class Rating Amount ($) Recommended
credit support (%)
----- ------ ---------- ------------------
A-1 AAA 674,194,218 26.469
A-2 AAA 224,731,407 26.469
B AA+ 43,025,500 22.770
C AA 51,187,425 19.072
D AA- 30,309,875 16.606
E A+ 30,309,875 14.141
F A 30,309,875 11.675
G A- 30,309,875 9.210
H BBB+ 25,314,640 7.150
J BBB 28,760,678 4.811
K BBB- 60,846,632 0.000
X-1A* AAA 1,229,300,000** N/A
X-1B* AAA 1,229,300,000** N/A
X-2* AAA 40,200,000** N/A
X-3* AAA 228,000,000** N/A
X-4* AAA 52,500,000** N/A
X-5* AAA 384,000,000** N/A
K-LH BBB- 3,864,000** N/A
X-LHK* BBB- 3,864,000** N/A
L-LH BB+ 5,191,000** N/A
X-LHL* BB+ 5,191,000** N/A
M-LH BB 3,345,000** N/A
X-LHM* BB 3,345,000** N/A
N-LH BB- 2,712,173** N/A
X-LHN* BB- 2,713,173** N/A
L-RC BB+ 7,640,000** N/A
M-RC BB 4,360,000** N/A
* Interest-only class.
** Notational amount.
N/A - Not applicable.
BELLAVISTA MORTGAGE: S&P Affirms Low-B Ratings on 8 Cert. Classes
-----------------------------------------------------------------
Standard & Poor's Ratings Services affirmed its ratings on 60
classes of residential mortgage-backed certificates from four
BellaVista Mortgage Trust transactions.
The rating affirmations are based on credit support percentages
that are sufficient to support the current ratings. Credit
support for these transactions is provided by subordination.
As of the October 2005 remittance data, delinquencies have ranged
between 0.00% and 2.19% of the current pool balances. The
mortgage loans have not experienced any cumulative realized
losses.
The collateral backing the certificates consists of prime, 30-year
hybrid adjustable-rate mortgages.
Ratings Affirmed
BellaVista Mortgage Trust
Mortgage Loan Pass-through Certificates
Series Class Rating
------ ----- ------
2004-1 I-A,I-A-IO,II-A-1,II-A-2 AAA
2004-1 II-A-2-IO,II-A-3,II-A-4 AAA
2004-1 II-A-4-IO,II-A-5 AAA
2004-1 I-M,II-M, AA
2004-1 I-B-1,II-B-1 A
2004-1 I-B-2,II-B-2 BBB
2004-1 I-B-3,II-B-3 BB
2004-1 I-B-4,II-B-4 B
2004-2 A-1,A-2,A-3,A-4,X,A-R AAA
2004-2 M AA
2004-2 B-1 A
2004-2 B-2 BBB
2004-2 B-3 BB
2004-2 B-4 B
2005-1 I-A-1,I-A-2,II-A,III-A AAA
2005-1 IV-A,I-A-X,II-A-X,IV-A-X AAA
2005-1 B-X,A-R AAA
2005-1 B-1 AA
2005-1 B-2 A
2005-1 B-3 BBB
2005-1 B-4 BB
2005-1 B-5 B
2005-2 I-A,II-A-1,II-A-2,I-A-X AAA
2005-2 II-A-X,II-PO,B-X,B-PO,A-R AAA
2005-2 B-1 AA
2005-2 B-2 A
2005-2 B-3 BBB
2005-2 B-4 BBB-
2005-2 B-5 BB
2005-2 B-6 B
BIRCH TELECOM: Wants Until February 8 to Remove Civil Actions
-------------------------------------------------------------
Birch Telecom, Inc., and its debtor-affiliates ask the U.S.
Bankruptcy Court for the District of Delaware for an extension,
until Feb. 8, 2006, to file notices with respect to pre-petition
civil actions pursuant to Rule 9006(b) of the Federal Rules of
Bankruptcy Procedure.
The Debtors explain that they parties to numerous judicial and
administrative proceedings currently pending in various courts and
administrative agencies throughout the country. Those actions
consist of all forms of commercial, tort and employment-related
litigation.
The Debtors give the Court three reasons supporting the extension:
1) they have devoted most of the time since the Petition Date
in stabilizing their businesses, implementing various cost-
saving measures and implementing procedures to comply with
the substantial reporting and disclosure requirements
required for debtors-in-possession;
2) the requested extension will give them more time and
opportunity to make fully-informed decisions concerning the
removal of the pre-petition civil actions in order to
protect their valuable right to adjudicate lawsuits pursuant
to 28 U.S.C. Section 1452;
3) the requested extension will not prejudice the Debtors'
adversaries in the civil actions because if the extension is
granted, it will not prevent those adversaries from seeking
a remand pursuant to 28 U.S.C. Section 1452(b).
The Court will convene a hearing at 11:00 a.m., on Nov. 16, 2005,
to consider the Debtors' request.
Headquartered in Kansas City, Missouri, Birch Telecom, Inc. and
its subsidiaries -- http://www.birch.com/-- own and operate an
integrated voice and data network, and offer a broad portfolio of
local, long distance and Internet services. The Debtors provide
local telephone service, long-distance, DSL, T1, ISDN, dial-up
Internet access, web hosting, VPN and phone system equipment for
small- and mid-sized businesses. Birch Telecom and 28 affiliates
filed for chapter 11 protection on Aug. 12, 2005 (Bankr. D. Del.
Case Nos. 05-12237 through 05-12265). When the Debtors filed for
protection from their creditors, they estimated more than $100
million in assets and debts.
BIRCH TELECOM: U.S. Trustee Objects to KPMG's Employment
--------------------------------------------------------
Kelly Beaudin Stapleton, the U.S. Trustee for Region 3, asks the
U.S. Bankruptcy Court for the District of Delaware to direct Birch
Telecom, Inc., and its debtor-affiliates to delete some provisions
of the terms of their employment of KPMG LLP as their accountants
and tax advisors, or in the alternative, deny the Debtors'
application to employ KPMG.
On Oct. 17, 2005, the Debtors filed an application seeking to
retain KPMG as their accountants and tax advisors.
Ms. Stapleton explains that annexed to the Debtors' application
were two engagement letters, one addressing the audit services and
the other addressing tax advisory services.
The engagement letter governing tax advisory services contains an
attachment styled as KPMG LLP Standard Terms and Conditions Tax
Advisory Services.
Ms. Stapleton explains that there are two provisions in the
engagement letter governing tax advisory services that she objects
to and should be stricken.
First, Ms. Stapleton says, there is a conflict between the
limitation of liability provision in the Standard Terms attachment
and the same provision written in the engagement letter, in which
the effect is to eliminate or severely curtail the circumstances
under which KPMG may be held liable for more than the amount of
its fees and to limit the types of damages for which KPMG may be
held liable.
The Debtors' application does not assert or provide any evidence
that the limitation of liability provisions being sought by KPMG
are common in the marketplace for tax advisory services. Those
kinds of provisions are not just uncommon; they are frequently
stricken from engagement agreements in bankruptcy cases, Ms.
Stapleton says.
Second, Ms. Stapleton continues, the indemnification provisions
that KPMG is seeking and mentioned in both the Standard Terms
attachment and the engagement letter are not common in the
marketplace for tax advisory services and also raises substantial
questions about their reasonableness.
Ms. Stapleton asks the Court to strike the proposed limited
liability and indemnity provisions as a condition of KPMG's
engagement to perform tax advisory services, or in the
alternative, deny the application.
The Court will convene a hearing at 11:00 a.m., on Nov. 16, 2005,
to consider the U.S. Trustee's request.
Headquartered in Kansas City, Missouri, Birch Telecom, Inc., and
its subsidiaries -- http://www.birch.com/-- own and operate an
integrated voice and data network, and offer a broad portfolio of
local, long distance and Internet services. The Debtors provide
local telephone service, long-distance, DSL, T1, ISDN, dial-up
Internet access, web hosting, VPN and phone system equipment for
small- and mid-sized businesses. Birch Telecom and 28 affiliates
filed for chapter 11 protection on Aug. 12, 2005 (Bankr. D. Del.
Case Nos. 05-12237 through 05-12265). When the Debtors filed for
protection from their creditors, they estimated more than $100
million in assets and debts.
BLOCKBUSTER INC: Prices Convertible Perpetual Preferred Stock
-------------------------------------------------------------
Blockbuster Inc. (NYSE: BBI - News) priced a private placement of
7-1/2% Series A cumulative convertible perpetual preferred stock
to Qualified Institutional Buyers pursuant to rule 144A under the
Securities Act of 1933.
The expected gross proceeds will be $150 million, and the initial
purchasers will have an option to purchase and sell an additional
$22.5 million of Shares if the over-allotment option in connection
with the offering is exercised in full. Blockbuster intends to
use the net proceeds from the offering to repay a portion of its
borrowings under its revolving credit facility and for general
corporate purposes. Affiliates of Carl C. Icahn, a director and
an affiliate of Blockbuster, have committed to purchase from the
initial purchasers, on the same terms and conditions, $38 million
of the Shares.
Blockbuster will issue 150,000 Shares at a price of $1,000 per
Share. Each Share is convertible at the option of the holder at a
conversion price of $5.15 per Share, subject to adjustment, which
represents an initial conversion rate of approximately 194.1748
shares of Blockbuster's class A common stock, representing a
conversion premium of approximately 2-21/2% over Blockbuster's
class A common stock closing price on Nov. 8, 2005 of $4.20 per
share. Dividends of 7-1/2% per year are payable quarterly.
Dividends may be payable in cash or, if certain conditions are
met, shares of class A common stock or a combination of cash and
class A common stock, at Blockbuster's option.
The offering is scheduled to close simultaneously with the
effectiveness of the third amendment to Blockbuster's credit
facility, which is expected to occur on Tuesday, Nov. 15, 2005.
Blockbuster Inc. -- http://www.blockbuster.com/-- is a leading
global provider of in-home movie and game entertainment, with more
than 9,100 stores throughout the Americas, Europe, Asia and
Australia.
* * *
As reported in the Troubled Company Reporter on Aug. 15, 2005,
Fitch downgraded Blockbuster Inc.'s:
-- Issuer default rating (IDR) to 'CCC' from 'B+';
-- Senior secured credit facility to 'CCC' from 'B+' with an
'R4' recovery rating;
-- Senior subordinated notes to 'CC' from 'B-' with an 'R6'
recovery rating.
Fitch said the Rating Outlook remains Negative.
Also, Moody's Investors Service downgraded the long-term debt
ratings of Blockbuster Inc. (corporate family to B3 and
subordinated notes to Caa3) and the Speculative Grade Liquidity
Rating to SGL-4. The outlook is negative.
These ratings are downgraded:
* Corporate family rating to B3 from B1;
* Senior secured bank credit facilities to B3 from B1;
* Senior subordinated notes to Caa3 from B3.
* Speculative grade liquidity rating to SGL-4 from SGL-3.
BRICE ROAD: Balks at GE Credit's Pitch to Lift the Automatic Stay
-----------------------------------------------------------------
As previously reported, General Electric Credit Equities, Inc.,
asked the U.S. Bankruptcy Court for the Southern District of Ohio,
Eastern Division, to lift the automatic stay so it can proceed
with the foreclosure action it had initiated against Brice Road
Developments, LLC. GE Credit said the Debtor sought bankruptcy
protection to stall the foreclosure process on the Kensington
Commons apartments.
Brice Road financed the construction of the Kensington
Commons, a 264-unit apartment complex located in Columbus, Ohio,
through a $14.4 million prepetition mortgage from Armstrong
Mortgage Company.
Armstrong held liens and security interests in substantially all
of the Debtor's assets as security for the loan. GE Credit is a
successor-in-interest to the Armstrong mortgage. The Debtor's
debt to GE Credit at Sept. 23 total approximately $14.2 million.
The full amount of the loan is due and payable because of the
default.
GE Credit alleges bad faith filing and lack of adequate protection
as grounds warranting the lifting of the automatic stay.
Brice insists that its case was not filed in bad faith because it
does not attempt to isolate a heavily encumbered property from
other assets.
As for granting the lender adequate protection, the Debtor says
that as an unsecured creditor, GE Credit is not entitled to
adequate protection under Section 362(d)(1) of the Bankruptcy
Code.
The Debtor contends that there is absolutely no ground to support
GE's request to lift the automatic stay. Besides, the Debtor
adds, the automatic stay does not impair the value of GE Credit's
interest.
While Brice Road lacks equity in Kensington Commons, the Debtor
says the property is necessary for its reorganization. Given a
reasonable period of time, the Debtor asserts it can reorganize
its business.
Headquartered in Dublin, Ohio, Brice Road Developments, L.L.C.,
owns Kensington Commons, a 264-unit apartment complex located
outside of Columbus, Ohio. The Company filed for chapter 11
protection on Sept. 2, 2005 (Bankr. S.D. Ohio Case No. 05-66007).
Yvette A Cox, Esq., at Bailey Cavalieri LLC represents the Debtor
in its restructuring efforts. When the Debtor filed for
protection from its creditors, it estimated assets and debts of
$10 million to $50 million.
C2 GLOBAL: Stephen Weintraub Replaces Gary Clifford as CFO
----------------------------------------------------------
Counsel Corporation (TSX: CXS) and C2 Global Technologies Inc.
(OTC-BB: COBT.OB) reported that Gary Clifford, the Chief Financial
Officer of both Counsel and C2, has decided to leave the companies
effective Dec. 15, 2005. Stephen Weintraub, who is currently the
Secretary and an Executive Vice President of both companies, will
assume the CFO positions upon Mr. Clifford's departure.
"We accept Gary's decision to leave with great reluctance and
thank him for his significant contribution over the past three
years" said Allan Silber, Chairman of Counsel and C2. "We wish
him success in his future endeavours."
"Stephen is a seasoned executive. A Chartered Accountant and
LL.B., he joined Counsel in 1983 as Vice President, Finance and
Chief Financial Officer, a position he held until 1989. We expect
the transition of responsibilities from Gary to Stephen to go
smoothly" said Mr. Silber.
About Counsel
Counsel Corporation (TSX: CXS) -- http://www.counselcorp.com/--
is a diversified company focused on the acquisition of businesses
in diverse industry sectors and at various stages of their
business life cycles. Its goal for acquired businesses is to
create value within these businesses and to realize on the value
creation at the appropriate time. Counsel presently holds assets
in three specific sectors: communications in the United States and
real estate and long-term care in Canada.
About C2 Global
C2 Global Technologies -- http://www.c-2technologies.com/--
is a broad based communications company serving residential,
small- and medium-sized business and large enterprise customers in
the United States. A facilities-based carrier, it provides a
range of products including local dial tone and 1+ domestic and
international long distance voice services, as well as fully
managed and fully integrated data and enhanced services. C2
offers its communications products and services both directly and
through a network of independent agents, primarily via multi-level
marketing and commercial agent programs. C2 also offers a proven
network convergence solution for voice and data in Voice over
Internet Protocol communications technology and holds two
foundational patents in the VoIP space.
As of June 30, 2005, C2 Global's stockholders' deficit widened to
$77,442,000, compared to a $61,965,000 deficit at Dec. 31, 2004.
CATHOLIC CHURCH: Litigants Panel Balks to Spokane's Stay Request
----------------------------------------------------------------
As previously reported in the Troubled Company Reporter on
September 9, 2005, the Diocese of Spokane and 22 members of the
Association of Parishes in Washington filed separate notices
advising Judge Williams that they will take an appeal to the U.S.
District Court for the Eastern District of Washington from the
Bankruptcy Court's order granting the Committee of Tort Litigant's
request for partial summary judgment and finding that certain
properties that the Diocese "held for another" actually constitute
property of the Diocese's estate.
The Diocese and the Association of Parishes and certain related
schools and ministries will also take an appeal from the
Bankruptcy Court's order denying the Association's request to
dismiss the Litigants Committee's complaint for lack of standing
and lack of jurisdiction.
The 22 members of the Association of Parishes are:
1. Assumption Church Spokane,
2. Cathedral of Our Lady of Lourdes Spokane,
3. Mary Queen of Heaven Church Spokane,
4. Our Lady of Fatima Parish Spokane,
5. Sacred Heart Church Spokane,
6. St. Aloysius Church Spokane,
7. St. Ann Church Medical Lake,
8. St. Anne Church Spokane,
9. St. Anthony Church Spokane,
10. St. Augustine Church Spokane,
11. St. Charles Church Spokane,
12. St. Francis Assisi Church Spokane,
13. St. Francis Xavier Church Spokane,
14. St. John Vianney Church Spokane Valley,
15. St. Joseph Church Colbert,
16. St. Joseph Church Otis Orchards,
17. St. Joseph Church Spokane,
18. St. Mary Church Spokane Valley,
19. St. Mary Presentation Church Deer Park,
20. St. Peter Church Spokane,
21. St. Rose of Lima Cheney, and
22. St. Thomas Moore Parish Spokane
Spokane & Parishes Want Order Stayed
The Diocese of Spokane, the Association of Parishes and the
related schools and ministries sought leave from the Bankruptcy
Court to file appeals from Judge Williams' Orders.
The 22 members of the Association of Parishes also asked the
Bankruptcy Court to stay the Orders pending the appeals.
Shaun M. Cross, Esq., at Paine, Hamblen, Coffin, Brooke & Miller,
LLP, in Spokane, Washington, explains that the Bankruptcy Court's
Orders are of great significance to the Diocese and other
defendants. Unless reversed by an appellate court, the Orders
have the effect of creating a "law of the case" which would result
in the Diocese being forced to submit a plan of reorganization
that includes property in which it has no beneficial interest.
That plan, Mr. Cross points out, would pit the Diocese against the
true beneficial owners of the disputed property, the schools and
parishes, in violation of the civil and canonical trust
relationship between the Diocese, on the one hand, and the
parishes and schools on the other.
Litigants Committee Objects to Stay Requests
James Stang, Esq., at Pachulski, Stang, Ziehl, Young, Jones &
Weintraub PC, in Los Angeles, California, argues that no matter
how the relevant factors are applied, the request filed by the
Diocese of Spokane, the Association of Parishes, and the related
schools and ministries asking the Court to stay the Orders pending
the appeals must be denied.
Mr. Stang contends that "the appellants have virtually no chance
of success" because the reasoning of the Memorandum Decision
issued by the U.S. Bankruptcy Court for the Eastern District of
Washington is both thorough and sound. There is also no risk of
imminent irreparable harm to the parties.
The Tort Litigants Committee notes that the appellants' suggestion
that a stay will not result in substantial harm to the victims of
sexual abuse by members of Spokane's clergy is ludicrous.
"Everyday that passes without a resolution increases the harm done
to the Committee's constituents," Mr. Stang asserts.
The Litigants Committee reminds the Court that public interest
lies squarely in favor of just and efficient administration of the
bankruptcy laws. The administration will be hindered if the
bankruptcy case is put on hold because of the appeals.
Undefined Parameters
Mr. Stang recounts that Spokane has asked that the Court "stay,
pending appeal, all further action in this adversary proceeding
relating to the ownership of the real and personal property of the
parishes and the schools with the Spokane Diocese . . ." The
Parishes, on the other hand, made no attempt to delineate the
parameters of their requested stay.
The Litigants Committee sent a written request to the Diocese and
the Parishes asking them to explain the boundaries of their
request.
In their response, the Parishes indicated that the stay they seek
would:
(1) prevent the Diocese from administering the Disputed Real
Property in its bankruptcy case; and
(2) stay any portion of the adversary proceeding that would be
advanced under the order granting partial summary
judgment.
The Parishes said they do not seek to affect the bankruptcy plan
process so long as the plan being put forward allowed the appeals
to proceed to conclusion.
Meanwhile, the Diocese provided no response to the Committee's
inquiry.
Requests Must be Denied
Mr. Stang points out that none of the elements used to justify a
stay pending appeal is presented by the facts of the case.
Besides, Mr. Stang continues, the appellants "have submitted no
evidence to support their claims."
The Tort Claimants' Committee and Michael Shea support the
Litigants Committee's objection.
The Roman Catholic Church of the Diocese of Spokane filed for
chapter 11 protection (Bankr. E.D. Wash. Case No. 04-08822) on
Dec. 6, 2004. Michael J. Paukert, Esq., at Paine, Hamblen,
Coffin, Brooke & Miller, LLP, represents the Spokane Diocese in
its restructuring efforts. When the Debtor filed for protection
from its creditors, it listed $11,162,938 in total assets and
$81,364,055 in total debts. (Catholic Church Bankruptcy News,
Issue No. 45; Bankruptcy Creditors' Service, Inc., 215/945-7000)
CELLU TISSUE: Moody's Holds B2 Rating on $162 Mil. Senior Notes
---------------------------------------------------------------
Moody's Investors Service restored the rating outlook for Cellu
Tissue Holdings, Inc. to stable from developing. The rating
action follows Cellu Tissue's October 6th announcement that the
Agreement and Plan of Merger between its parent, Cellu Paper
Holdings, Inc., and an affiliate of Kohlberg & Company was
terminated by mutual consent. Prior to the announcement,
uncertainties concerning: post-transaction capital structure; the
relative positions of respective bondholders; the financial
profile of the combined business; and execution risks, prompted
Moody's to characterize the outlook for both companies as
"developing." With the uncertainties eliminated, the outlook was
restored to stable, and all debt ratings were affirmed.
Cellu Tissue's B2 corporate family rating reflects the modest
scale of the company's operations, relatively weak balance sheet,
and price exposure to raw material and energy, as well as
significant competitive pressures, the ability of customers to
bring production back in-house, high degree of customer
concentration, and the likelihood of acquisitions. However, the
ratings are supported by the company's strong market position for
several of its products, long-term customer relationships,
relatively good cash flow generation, and adequate liquidity.
The stable outlook reflects our expectation that operating
performance will improve as management continues to focus on the
company's ability to pass through higher raw material and energy
costs; the mix-shift to converted tissue products; and the full
availability to its revolver. Factors that could negatively
impact the ratings or outlook would be the inability to pass
through these raw material and energy costs, improve product mix,
or maintain adequate liquidity.
Cellu Tissue is exposed to the volatility of market pricing for
raw material inputs, which negatively affected the margins of the
second quarter of fiscal year 2006. The company purchases 100% of
its market pulp and energy needs from third parties with
approximately 65% of anticipated pulp supply needs under contract
with several different pulp suppliers with some of the contracts
enabling the company to shift a certain amount of pulp purchases
to the spot market if spot pricing is more economical. However,
the contracts have minimum volume requirements and even though the
company receives a discount on some purchases, prices are still at
market. As a result, margins and cash flows could be
significantly impaired in the event the company is unable to pass
through higher raw input prices to its customers.
Outlook restored to Stable from Developing.
Ratings Affirmed:
-- Corporate Family: B2
-- $162 million senior secured guaranteed 9-3/4% notes due
2010: B2
-- Speculative Grade Liquidity Rating: SGL-3
Based in East Hartford, Connecticut, Cellu Tissue manufactures and
markets a variety of specialty tissue hard rolls and
machine-glazed paper used in the manufacture of various end
products, including diapers, facial and bath tissue, assorted
paper towels and food wraps. The company also produces a variety
of converted tissue products.
CHURCH & DWIGHT: Completes $105M Buy-Out of P&G's SpinBrush Unit
----------------------------------------------------------------
Church & Dwight Co., Inc. (NYSE:CHD) completed its previously
announced purchase of the SpinBrush toothbrush business from
Procter & Gamble. The transaction was completed substantially
under the original terms announced on September 14, 2005, which
called for Church & Dwight to pay $75 million in cash at closing,
plus an inventory settlement amount following the business
transfer and additional payments of up to $30 million based on the
near-term performance of the business.
SpinBrush is a leader in the battery powered segment of the
toothbrush category with a range of product offerings for both
adults and children. Sales of the business for the year ended
June 30, 2005, were $110 million, over 80% of which were in the
U.S. and Canada.
Church & Dwight Co., Inc., manufactures and markets a wide range
of personal care, household and specialty products, under the ARM
& HAMMER brand name and other well-known trademarks. In addition
to Arm & Hammer toothpaste, the Company's oral care portfolio
includes the Mentadent(R) brand of toothpaste and toothbrushes,
and Close-up(R), Aim(R) and Pepsodent(R) toothpastes, all of which
are sold in the U.S. and Canada, and the Pearl Drops(R) brand of
tooth polish which is primarily sold in Europe.
* * *
As reported in the Troubled Company Reporter on, Dec.13, 2004,
Standard & Poor's Ratings Services assigned a 'B+' debt
rating to Church & Dwight Company Inc.'s $175 million senior
subordinated notes due 2012.
In addition, Standard & Poor's affirmed its ratings on Princeton,
New Jersey-based Church & Dwight, including its 'BB' corporate
credit rating. Approximately $853 million of pro forma debt is
outstanding.
As reported in the Troubled Company Reporter on, Dec. 10,
2004, Moody's Investors Service assigned a Ba3 rating to the
$175 million senior subordinated notes to be issued by Church &
Dwight, Inc.
Existing senior unsecured and senior subordinated debt ratings
have been upgraded by one notch, to Ba2 and Ba3, respectively. In
addition, CHD's Ba2 senior implied and senior secured debt ratings
were affirmed and the ratings outlook was revised to positive from
stable.
CLEAN HARBORS: Moody's Lifts Rating on $150 Mil. Sr. Notes to B2
----------------------------------------------------------------
Moody's Investors Service assigned ratings to the proposed amended
senior secured credit facilities of Clean Harbors, Inc., upgraded
the second lien senior notes and raised the Corporate Family
Rating. Concurrently, Moody's changed the ratings outlook to
stable from positive at prior rating categories. These actions
acknowledge Clean Harbor's continued progress in strengthening its
balance sheet through a proposed equity offering of two million
shares, ongoing improvement in credit statistics, the successful
integration of a major acquisition over the last three years,
consistent performance in recent quarters, and a favorable current
environment for the company's services.
Moody's took these rating actions:
-- Assigned a Ba3 rating to the proposed $70 million amended
revolver, maturing in 2010;
-- Assigned a B1 rating to the proposed $50 million amended
secured letters of credit facility, maturing in 2010;
-- Upgraded to B2 from B3 the $150 million 11.25% guaranteed
second lien senior notes, due 2012; and
-- Upgraded to B1 from B2 the Corporate Family Rating.
The ratings outlook is stable.
The proposed $120 million amended senior secured credit facilities
due 2010 consist of a $70 million guaranteed senior secured
revolving credit facility and a $50 million guaranteed secured
synthetic letter of credit facility. Proceeds from the equity
offering are intended to redeem approximately $52.5 million of the
outstanding guaranteed second lien senior notes, finance general
corporate needs including working capital and to pay an equity
clawback premium and fees and expenses associated with the
refinancing. At closing the revolver is expected to have no
outstandings but will be used alongside the letters of credit
facility to cover the company's ongoing letter of credit
requirements, which totaled $90.4 million as of June 30, 2005.
The ratings are contingent upon the receipt of executed
documentation in form and substance acceptable to Moody's. The
ratings of the existing revolving credit and synthetic letter of
credit facilities have been prospectively withdrawn.
The upgrade of the Corporate Family Rating to B1 from B2
acknowledges the delevering effect of the transaction itself with
debt to EBITDA falling to about 3.5 times from 4.5 times on a pro
forma basis as of Sept. 30, 2005. The upgrade also reflects pro
forma free cash flows to adjusted debt levels in excess of 15%.
The upgrade also reflects the expectation of further organic
improvement in terms of continued operating cost efficiencies and
increased penetration of existing customer relationships.
Moody's also notes that the company continues to experience
benefits from outsourcing trends in the hazardous waste industry,
particularly in light of energy cost increases and the recent
issuance of final regulations by the EPA with respect to hazardous
waste incinerators. Both developments are expected to impact
captive incinerator operators and lead to significant comparative
cost advantages in favor of specialized external providers.
Despite Clean Harbors' leading market position, scale and revenue
diversification, the ratings remain constrained by high operating
leverage and limited progress with improvement in landfill
utilization as well as operating lease commitments which have been
capitalized for credit rating purposes and off balance sheet
obligations of approximately $171 million of environmental
liabilities as of Sept. 30, 2005. The bulk of the environmental
liabilities relate to closure and remediation obligations assumed
with the purchase of the Chemical Services Division of Safety-
Kleen in 2002 and the remainder to other landfill closure and
post-closure liabilities.
The stable ratings outlook reflects the expectation of good
liquidity throughout the near term, as cash generated by
operations should be sufficient to fund working capital
requirements and capital expenditures. In particular, minimal
advances are anticipated under the proposed $70 million revolver,
although the facility will be used for letters of credits.
Meaningful steps with respect to execution on current initiatives
relating to improved asset utilization and a sustained track
record in free cash flow to debt levels could result in a further
positive change in ratings outlook. Declining cash flow metrics
or significant acquisitions, particularly if they are debt
financed, could pose negative pressure on the ratings.
The Ba3 rating on the $70 million guaranteed senior secured
revolving credit facility reflects the good asset coverage in a
distress scenario arising from a first lien on the guarantor
assets. The borrowers under the revolving credit facility will be
Clean Harbors, Inc. and US subsidiaries of the company. Up to
$5.3 million of the revolving credit facility will be available to
the company's Canadian subsidiaries. The US facilities are
guaranteed by the company and its US subsidiaries and secured
through a first lien on the tangible and intangible assets of the
US guarantors. The Canadian facilities are guaranteed by the
Canadian subsidiaries and secured through a first lien on the
tangible and intangible assets of the guarantors.
The revolving credit facility also allows the company to issue up
to $50 million of letters of credit, with the outstanding amount
of such letters of credit reducing the maximum amount of
borrowings permitted. Financial covenants include a maximum
leverage ratio, a minimum interest coverage ratio and a fixed
charge coverage ratio. The facilities will also make allowance
for an additional $60 million uncommitted accordion feature which
is not been being rated by Moody's.
The B1 rating on the guaranteed secured synthetic letter of credit
facility reflects the benefits and limitations of the collateral
package in a distress scenario. While this facility also enjoys a
first priority lien on the tangible and intangible assets of the
company, Moody's believes that the priority of the revolver over
accounts receivable under a distress scenario means that a portion
of the security available to creditors under the guaranteed
secured synthetic letter of credit facility is based on less
liquid collateral.
The rating on the $150 million issue of second-lien senior notes
due 2012 has been upgraded to B2 from B3. The rating continues to
reflect modest residual value, in distress, to support the notes -
albeit full coverage would be anticipated. Following the
completion of the equity offering, the company expects to
repurchase $52.5 million notes of the $148.2 million outstanding
as of Sept. 30, 2005.
Headquartered in Braintree, Massachussetts, Clean Harbors, Inc. is
a leading North American provider of environmental and hazardous
waste management services. The company's infrastructure consists
of approximately 48 waste management facilities, including nine
landfills, five incineration locations and seven wastewater
treatment centers. The company provides essential services to
more than 45,000 customers. Revenue for the trailing twelve
months ended Sept. 30, 2005 was approximately $694 million.
COATES INTERNATIONAL: Rosenberg Rich Raises Going Concern Doubt
---------------------------------------------------------------
Rosenberg, Rich, Baker, Berman & Company expressed substantial
doubt about Coates International, Ltd.'s ability to continue as a
going concern after it audited the Company's financial statements
for the years ended Dec. 31, 2004, and 2003. The auditing firm
pointed to the Company's substantial losses in the past two years,
zero operating revenues, limited capital resources and entry into
a new phase of activity.
In its Form 10-KSB for the year ended Dec. 31, 2004, submitted to
the Securities and Exchange Commission, Coates International
reported a $678,790 net loss, as compared to a $1,752,909 net loss
in 2003. The lack of revenues coupled with the increase of
operating expenses resulted in a loss from operations of
$1,257,576 for the year as compared with a loss from operations of
$1,823,930 in 2003.
The Company's balance sheet showed $2,405,862 in total assets at
Dec. 31, 2004, and liabilities totaling $2,542,308, resulting in a
stockholders' deficit of $136,446. At Dec. 31, 2004, the Company
had a $268,402 working capital deficit.
Coates International, Ltd. -- http://www.coatesengine.com-- has
completed the development of a spherical rotary valve SRV Engine,
the development of which was initiated by its founder, George J.
An engine equipped with the CSRV can run on any number of fuels
while reducing emissions and increasing efficiency. The Company
plans to license its CSRV engine technology to makers of heavy-
duty vehicles, automobiles, and industrial engines. CIL owns 30%
of former subsidiary Coates Motorcycle Co., which plans to market
a V-twin bike powered by CSRV technology.
CONSTELLATION BRANDS: Questions Vincor's Rejection of Merger Offer
------------------------------------------------------------------
Constellation Brands, Inc. (NYSE: STZ, ASX: CBR), questioned the
recommendation made by the Board of Directors of Vincor
International Inc. (TSX: VN) that shareholders reject
Constellation's CDN$31 per share cash offer.
"Vincor shareholders have every right to be disappointed with the
action - or inaction - of their Board of Directors," said Richard
Sands, Constellation Brands' chairman. "It has been almost two
months since we approached Vincor with a proposal and more than a
month since we announced we were prepared to pay CDN$31 per share
in cash. In all that time, the Vincor Board has failed to
demonstrate concrete steps to deliver maximum value to its
shareholders."
"Vincor's Board remains entrenched in the position it took even
before we announced our CDN$31 per share cash offer. Its reasons
were flawed then and are flawed now, yet Vincor's Board continues
to reject the only existing value-enhancing alternative for its
shareholders," Mr. Sands continued. "The Vincor Board's response
to Constellation is not based on performance but only on their
expectations, their plans and prospects that only they can see."
According to Mr. Sands, Vincor's shareholders should be asking
their Board and management these questions:
* Where would Vincor shares be trading in the absence of the
Constellation offer? Prior to the announcement of the
Constellation proposal, Vincor shares were trading in the low
CDN$20s and heading lower. Its recent financial performance,
including declining operating income, continues a long trend
of being below market expectations.
* Why does Vincor continue to underperform? Constellation
agrees with Vincor's admission, in announcing its most recent
results, that Vincor's profitability is not acceptable. The
contribution of Vincor's smaller-scale international
operations continues to be weak and sales in its core
Canadian market grew by only six percent.
* Has the Board found anyone willing to pay more for Vincor
than Constellation's offer? Constellation's offer of CDN$31
per share in cash, which offers full and fair value as well
as the certainty of cash and an established closing date,
remains the best and only alternative available to Vincor's
shareholders.
* Why has Vincor's Board excluded Constellation from its so-
called value maximizing process -- especially after admitting
that Constellation is the best bidder for Vincor's assets?
Vincor's Board has claimed to be pursuing alternatives to
maximize shareholder value but has continuously refused to
provide information to Constellation that could achieve that
goal.
"The question Vincor shareholders should ask themselves is simply
whether they choose to benefit from Constellation's immediate
all-cash offer or accept the continued risk and uncertainty of the
Board's promises," Mr. Sands said. "Throughout this process,
Constellation has been clear, fair and accessible -- in stark
contrast to Vincor. We believe that the entrenched position of
Vincor's Board and management threatens their suppliers,
customers, business partners, employees, and most especially,
Vincor's shareholders."
As previously announced, Constellation commenced its cash takeover
bid on Thursday, October 20, 2005, and the offer expires at 5:00
p.m. Toronto time on Monday, November 28, 2005, unless extended.
Constellation's offer is not conditional on financing or the
completion of due diligence but contains certain customary
conditions, including the valid tender, and non-withdrawal, of at
least 66-2/3% of Vincor's common shares and receipt of required
regulatory consents and approvals.
Constellation Brands, Inc. -- http://www.cbrands.com/-- is a
leading international producer and marketer of beverage alcohol
brands with a broad portfolio across the wine, spirits and
imported beer categories. Well-known brands in Constellation's
portfolio include: Corona Extra, Corona Light, Pacifico, Modelo
Especial, Negra Modelo, St. Pauli Girl, Tsingtao, Black Velvet,
Fleischmann's, Mr. Boston, Paul Masson Grande Amber Brandy, Chi-
Chi's, 99 Schnapps, Ridgemont Reserve 1792, Effen Vodka, Stowells,
Blackthorn, Almaden, Arbor Mist, Vendange, Woodbridge by Robert
Mondavi, Hardys, Nobilo, Alice White, Ruffino, Robert Mondavi
Private Selection, Blackstone, Ravenswood, Estancia, Franciscan
Oakville Estate, Simi and Robert Mondavi Winery brands.
* * *
As reported in the Troubled Company Reporter on Oct. 4, 2005,
Moody's Investors Service placed the long-term ratings of
Constellation Brands, Inc., under review for possible downgrade
and lowered the company's speculative grade liquidity rating to
SGL-2 from SGL-1. The review of Constellation's long-term ratings
follows its announcement that it has offered to purchase all of
the outstanding common shares of Vincor International Inc. in a
transaction currently valued at approximately C$1.4 (US$1.2)
billion, including approximately C$305 (US$260) million of assumed
Vincor net debt.
Ratings placed on review for possible downgrade:
* Ba2 corporate family rating formerly senior implied rating)
* Ba2 on the $2.9 billion senior secured credit facility
consisting of a $500 million revolver, $600 million tranche A
term loans and $1.8 billion tranche B term loans
* Ba2 $200 million 8.625% senior unsecured notes, due 2006
* Ba2 $200 million 8% senior unsecured notes, due 2008
* Ba2 GBP 80 million 8.5% senior unsecured notes, due 2009
* Ba2 GBP 75 million 8.5% senior unsecured notes, due 2009
* Ba3 $250 million 8.125% senior subordinated notes, due 2012
Rating lowered:
* Speculative grade liquidity rating to SGL-2 from SGL-1
As reported in the Troubled Company Reporter on Oct. 4, 2005,
Standard & Poor's Ratings Services placed its 'BB' corporate
credit rating and other ratings on beverage alcohol producer and
distributor Constellation Brands Inc. on CreditWatch with negative
implications.
CYCLELOGIC INC: Claims Objection Deadline Extended to Dec. 15
-------------------------------------------------------------
The Hon. Peter J. Walsh of the U.S. Bankruptcy Court for the
District of Delaware extended until Dec. 15, 2005, the period
within which Ana Maria Lozano-Stickley, the Liquidating Trustee
appointed under the confirmed Plan of Liquidation of CycleLogic,
Inc., can object to claims filed against the Debtor's estate.
Ms. Lozano-Stickley asked the Bankruptcy Court for the extension
because she wants more time to analyze claims, prepare and file
additional objections to claims and, if appropriate, consensually
resolve disputed claims.
The Trustee explained that a careful and thorough analysis and
review of Priority and General Unsecured Claims is essential so
that objections to invalid or deficient claims may be properly
filed.
Headquartered in Miami, Florida, CycleLogic, Inc., was an Internet
media company and wireless software provider. The Company filed
for chapter 11 protection on December 23, 2003 (Bankr. Del. Case
No. 03-13881). Joseph A. Malfitano, Esq., at Young, Conaway,
Stargatt & Taylor LLP represents the Debtor. When the Company
filed for protection from its creditors, it listed estimated
assets of more than $100 million and estimated debts of
$10 million to $50 million. The Court confirmed the Debtor's
chapter 11 Plan on May 25, 2004, and the Plan took effect on
July 23, 2004. Ana Maria Lozano-Stickley is the Liquidation
Trustee under the confirmed Plan. Alfred Villoch, III, Esq., and
Joseph A. Malfitano, Esq., at Young Conaway Stargatt & Taylor LLP
represents the Liquidating Trustee.
DELTA AIR: Wants Deloitte & Touche as Accountants
-------------------------------------------------
Delta Air Lines Inc. and its debtor-affiliates seek the U.S.
Bankruptcy Court for the Southern District of New York's authority
to employ Deloitte & Touche LLP as their independent auditors and
accountants.
Edward H. Bastian, executive vice president and chief financial
officer of Delta Air Lines, Inc., relates that Deloitte &
Touche's experience in providing independent auditing and
accounting services is widely recognized, and the Firm regularly
provides those services to large and complex business entities,
both in and out of bankruptcy proceedings. Deloitte & Touche has
provided the Debtors with independent auditing and accounting
services since 2002.
Effective on the Petition Date, Deloitte Touche agrees to:
a. audit and report on the consolidated financial statements
of the Debtors and their non-debtor affiliates for the
year ending December 31, 2005, and thereafter, in each
case, pursuant to applicable engagement letters;
b. examine management's assertion that the Debtors
maintained effective internal controls over financial
reporting;
c. audit and report on the subsidiary company financial
statements of Comair, Inc., for the year ending
December 31, 2005, and thereafter;
d. review quarterly financial information to be included in
reports of the Debtors filed with the U.S. Securities and
Exchange Commission;
e. assist the Debtors in connection with the preparation of
financial information related to a former non-debtor
subsidiary, Atlantic Southeast Airlines, Inc., to be
included in a third party's various reports required to be
filed with the SEC in relation to the September 2005 sale
of the subsidiary by the Debtors;
f. audit and report on the financial statements the Debtors'
benefit plans:
* Delta Retirement Plan,
* Delta Pilots Retirement Plan,
* Delta Pilots Defined Contribution Plan,
* Delta Pilots Money Purchase Pension Plan,
* Western Air Lines, Inc. Pilots Defined Benefit Plan,
* Delta Family-Care Savings Plan,
* Delta Family-Care Disability & Survivorship Plan,
* Delta Pilots Disability & Survivorship Plan,
* Delta Family-Care Medical Plan,
* Delta Pilots Medical Plan,
* DAL Global Services LLC 401(k) Savings Plan,
* Comair Savings and Investment Plan,
* Delta Air Lines, Inc. Severance Plan,
* Voluntary and Involuntary Supplemental Unemployment
Plan, and
* Long Term Disability Plan for Delta Employees;
g. audit and report on the statutory financial statements
for the Debtors' non-debtor affiliate, Aero Assurance
Ltd., for the year ending December 31, 2005;
h. audit and report on the financial statements of the
Puerto Rico branch of the Debtors for the year ending
December 31, 2005;
i. perform agreed upon procedures on the Debtors' Statement
of Immigration and Naturalization Service User Fees Report
for the year ending December 31, 2005;
j. audit and report on the Debtors' schedules of passenger
facility charges collected, withheld, refunded/exchanged
and remitted for the year and for each quarter during the
year ending December 31, 2005, and thereafter, and
examine management's assertion that the Debtors maintained
effective internal control over administering the PFCs
during the year ending December 31, 2005;
k. audit and report on the Debtors' schedules of airport
improvement fees remitted to the Ottawa, Montreal,
Halifax, and Vancouver Airport Authorities and the
schedule of passenger facility fees remitted to the
Fredericton Airport Authority for the year ending
December 31, 2005, and thereafter, and examining
management's assertions that the Debtors maintained
effective internal control over administering the airport
improvement and passenger facility fees during the year
ending December 31, 2005;
l. issue debt compliance letters as may be required by
certain of the Debtors' financing arrangements;
m. assist the Debtors in connection with the preparation and
filing of amendments to their registration statements
required by the SEC in relation to their securities
offerings;
n. provide accounting consultation services as may be
requested by the Debtors and as may be agreed to by
Deloitte & Touche; and
o. provide other audit and accounting services as may be
approved by the Audit Committee of Delta Air Lines, Inc.
and requested by the Parties.
The Parties are still negotiating the financial terms of the
engagement.
Deloitte & Touche received $1,263,123 from the Debtors in the 90
days before the Petition Date. As of the Petition Date, Deloitte
& Touche is owed $78,500 in respect of audit services for the
non-debtor benefit plans, Western Air Lines, Inc. Pilots Defined
Benefit Plan, the Long Term Disability Plan for Delta Employees,
the Delta Family-Care Savings Plan, and the Delta Pilots Money
Purchase Pension Plan, each for the year ended December 31, 2004.
John H. Black, a partner at Deloitte & Touche, assures the Court
that the Firm is a disinterested person within the meaning of
Section 101(14) of the Bankruptcy Code, as modified by Section
1107(b).
Mr. Black discloses that:
a. Davis Polk & Wardell, and Akin, Gump, Strauss, Hauer &
Feld have provided, and currently provide legal services
to Deloitte & Touche or its affiliates in matters
unrelated to the Debtors' Chapter 11 cases, and Deloitte &
Touche or its affiliates have provided, currently provide,
and may in the future provide services to Davis Polk and
Akin Gump;
b. Deloitte & Touche and its affiliates have provided,
currently provide, and may in the future provide
professional services to certain current and former
officers and directors of the Debtors, including Larry D.
Thompson, a former director, John F. Smith Jr., Non-
Employee Chairman of the Board, James M. Whitehurst, an
officer, and Vickie B. Escarra and Todd G. Helvie, both
former officers;
c. Deloitte Touche Tohmatsu, a Swiss Verein, is an
association of various members firms including Deloitte &
Touche USA LLP, an affiliate of Deloitte & Touche.
Certain non-U.S. member firms of DTT or their affiliates
have provided, currently provide and may in the future
provide ordinary course professional services to overseas
subsidiaries, divisions or branches of the Debtors;
d. Deloitte & Touche has business relationships in unrelated
matters with its principal competitors, other accounting
firms, including PricewaterhouseCoopers LLP and Ernst &
Young LLP;
e. Delta and an affiliate of Deloitte & Touche, among other
parties, have entered into a corporate incentive
agreement;
f. certain financial institutions or their affiliates,
including Bank of America, Barclays, Citibank, Harris
Bank, JPMorgan Chase, Key Bank, LaSalle Bank, Wachovia,
and Wells Fargo are lenders to an affiliate of Deloitte
& Touche. Deloitte & Touche is a guarantor of the
indebtedness;
g. among 46 other plaintiffs, Delta Air Lines Master Trust, a
non-debtor investment trust, has commenced an action
against Deloitte & Touche in the Circuit Court of
Jefferson County, Alabama. This matter is unrelated to
the Debtors' Chapter 11 cases or services provided by
Deloitte & Touche to the Debtors;
h. Deloitte & Touche Tax Technologies LLC, an affiliate of
Deloitte & Touche, has licensed and continues to license
certain software related to sales and use tax compliance
to the Debtors and has provided certain installation and
training services in connection with such software;
i. the Debtors subscribe to an on-line accounting research
database of Deloitte & Touche Products Company LLC, an
affiliate of Deloitte & Touche. The Debtors paid $1,500
to Deloitte & Touche Products Company LLC in March 2005
for the subscription. If the Debtors elected to renew the
subscription, the payment for the renewal would be due in
November 2005;
j. Deloitte & Touche or its affiliates provides services to
the Delta Museum and the Delta Foundation, non-debtor
affiliates of the Debtors;
k. Deloitte & Touche or its affiliates provide a range of
services to other major airlines based in the United
States, including UAL Corporation and Northwest Airlines
Corporation, in matters unrelated to the Debtors' Chapter
11 cases; and
l. certain parties-in-interest may be adverse to and involved
in litigation matters with Deloitte & Touche and its
affiliates in connection with matters unrelated to the
Debtors' Chapter 11 cases
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)
DELTA AIR: Wants Deloitte Tax as Tax Service Providers
------------------------------------------------------
Pursuant to Sections 327(a) and 328(a) of the Bankruptcy Code and
Rule 2014(a) of the Federal Rules of Bankruptcy Procedure, Delta
Air Lines Inc. and its debtor-affiliates ask U.S. Bankruptcy Court
for the Southern District of New York permission to employ
Deloitte Tax LLP as their tax service providers.
Edward H. Bastian, executive vice president and chief financial
officer of Delta Air Lines, Inc., relates that Deloitte Tax has
significant qualifications and experience in performing tax
compliance and consulting services.
Pursuant to an Engagement Letter, Deloitte Tax agrees to provide:
(a) tax compliance services:
1. reviewing the U.S. Consolidated Federal Income Tax
Return, including proper tax return disclosure and
reporting, of the Debtors and their non-debtor
affiliates for the year ending December 31, 2005, and
thereafter and providing certain other tax compliance
services related to the Debtors' operations in Puerto
Rico;
2. reviewing schedule M items that are greater than
$1 million in total for various Debtor subsidiaries
and former non-debtor subsidiary Atlantic Southeast
Airlines, Inc. for the year ending December 31, 2005,
and thereafter; and
3. assisting the Debtors in the calculation of
cancellation of debt income and original issue
discount in relation to debt offerings by the
Debtors.
(b) tax provision services:
1. assisting Deloitte & Touche in reviewing the Debtors'
consolidated quarterly and annual accounting for
income taxes in accordance with FAS 109 for the U.S.
portion of the provision for the year ending
December 31, 2005, and thereafter; and
2. assisting Deloitte & Touche in reviewing the
subsidiary Comair, Inc.'s annual accounting for
income taxes in accordance with FAS109 for the
U.S. portion of the provision for the year ending
December 31, 2005, and thereafter;
(c) tax audits services:
1. providing Internal Revenue Service audit defense
assistance relating to the Debtors' tax position in
the Meals and Entertainment Recovery deductions;
2. assisting the Debtors, where requested, in positions
taken in the Meals and Entertainment Recovery
deductions if examined by state taxing jurisdictions;
and
3. assisting the Debtors in various federal audit issues
as requested by the Debtors.
(d) tax consulting services:
1. reviewing prior year tax returns, including the
CorpTax software application to determine the tax
basis in Delta's assets for purpose of calculating
the Net Unrealized Built-In Gain/Loss under Section
382 of the Internal Revenue Code. This review will
consider the Debtors' contingency planning and
providing tax consulting regarding availability,
limitation, preserving tax attributes;
2. reviewing prior year tax returns and analyzing the
original acquisition transaction to determine the tax
basis in the assets of Atlantic Southeast Airlines
under the Debtors' disposition planning;
3. reviewing prior year tax returns and analyzing the
original acquisition transaction to determine the tax
basis in the assets of Comair under the Debtors'
disposition planning;
4. determining the tax basis in the subsidiaries' stock
under applicable consolidated return regulations and,
if there is an excess loss account with respect to
the stock of any subsidiary, providing tax consulting
regarding methods to avoid triggering the related
income;
5. providing tax consulting services related to the
Meals & Entertainment Recovery Services study for the
tax years ended June 30, 1993, through June 30, 1997;
6. providing tax consulting services regarding property
tax valuation and appeal work in the State of
California for the tax years 2002 through 2004; and
7. providing various tax consultation services as
requested by the Debtors.
Ann Schuerman, a partner at Deloitte Tax; Rebecca Turner, manager;
and Lyla McWilliams, senior, will manage and administer the
engagement on a continuing basis, using other staff members as
required.
Deloitte Tax has provided prepetition tax services to the Debtors
and their affiliates. Deloitte Tax received $63,693 in the 90
days before the Debtors' Chapter 11 filing.
Deloitte Tax will charge the Debtors $225,000 to $275,000 based
on its standard hourly rates, plus reasonable out-of-pocket
expenses.
The Firm's current hourly rates are:
Professional Hourly Rate
------------ -----------
Partner, Principal, or Director $525
Senior Manager $445
Manager $395
Senior $280
Staff $220
Ms. Scheuerman assures the Court that the Deloitte Tax is a
disinterested person within the meaning of Section 101(14) of the
Bankruptcy Code, as modified by Section 1107(b). She says that
Deloitte Tax has transacted, and will transact, with various
parties-in-interest in matters unrelated to the Debtors' Chapter
11 cases.
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)
DELTA AIR: Wants to Walk Away from Monarch Centre Lease
-------------------------------------------------------
Delta Air Lines, Inc., and Monarch Centre Association, LLC, are
parties to an ATL Lease Agreement, dated September 1, 1997.
Delta Air Lines Inc. and its debtor-affiliates seek the U.S.
Bankruptcy Court for the Southern District of New York's
permission to:
-- reject the lease, effective October 31, 2005, under Section
365(a) of the Bankruptcy Code; and
-- abandon the personal property associated with the Lease
under Section 554(a).
Marshall S. Huebner, Esq., at Davis Polk & Wardwell, in New York,
explains that the Lease governs the Debtors' use and occupancy of
certain office space located at 3424 Peachtree Road NE, Suite
1745, in Atlanta, Georgia. Pursuant to the terms of a separation
agreement between Delta and Ronald Allen, a former chief
executive officer of Delta, the Debtors maintain the Office Space
for the benefit and personal use of Mr. Allen. Delta does not
otherwise use the Office Space and derives no benefit from the
maintenance of the Office Space.
As part of their ongoing restructuring efforts, the Debtors have
determined that the Office Space and, therefore, the Lease, are
not necessary to their continued business operations.
The personal property that the Debtors seek to abandon is of
inconsequential value and of no benefit to their estates, Mr.
Huebner adds.
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)
DREYER'S GRAND: Sept. 24 Balance Sheet Upside-Down by $46 Million
-----------------------------------------------------------------
Dreyer's Grand Ice Cream Holdings, Inc. (NNM:DRYR) reported
results for the third quarter ended Sept. 24, 2005.
Total net revenues for the third quarter of 2005 increased
$46,591,000, or 10%, to $520,268,000.
Net sales of company brands for the third quarter of 2005
increased $64,789,000, or 16 percent from the comparable quarter
in 2004, to $475,201,000 after promotional costs. The increase
was driven primarily by net sales increases for the company's
premium and superpremium products reflecting continued strong
sales of premium Dreyer's and Edy's(R) Slow Churned(TM) Light ice
cream, strong introductory sales of superpremium Haagen-Dazs(R)
Light ice cream and continued strong growth of Dreyer's and Edy's
classic premium ice cream. The increase also reflects an increase
in net sales of the company's frozen snack products primarily due
to new product launches, including Dibs(TM) and Nestle(R) Kids
products, and also due to the addition of The Skinny Cow(R)
products to the company-owned portfolio following the acquisition
of Silhouette Brands, Inc. in July 2004.
The market share of Dreyer's company brands of packaged ice cream
sold in the US grocery channel reached 23 percent for the quarter.
Net sales of partner brands, products distributed for other
manufacturers, decreased $13,185,000, or 24 percent from the
comparable quarter in 2004, to $40,634,000 for the third quarter
of 2005. The decrease was primarily attributable to reduced net
sales of certain partner brands due to competition and changes in
consumer preference, and the reclassification of the net sales of
The Skinny Cow product line as company brands. The decrease was
partially offset by the classification of sales of the
Dreamery(R), Whole Fruit(TM) Sorbet and Godiva(R) brands as
partner brands as a result of a September 2004 agreement with
Integrated Brands, Inc., a subsidiary of CoolBrands International,
Inc.
The company's gross profit increased by $17,290,000, or 30%, to
$74,604,000 for the third quarter of 2005, representing a 14
percent gross margin compared with a 12 percent gross margin for
the same period in 2004. The increase in gross profit was driven
primarily by an increase in incremental sales, a decrease in
drayage expense paid to CoolBrands, a decrease in the cost of
cream and a product mix shift from sales of lower margin partner
brands to higher margin company brands. The increase was
partially offset by increased promotional costs, primarily
associated with new product launches, and a decease in revenues
received from Integrated Brands for manufacturing and distribution
of Dreamery, Whole Fruit Sorbet and Godiva brands.
The company reported a net loss available to Class A callable
puttable and Class B common stockholders for the quarter ended
Sept. 24, 2005 of $74,933,000, compared with $76,824,000 for the
quarter ended Sept. 25, 2004.
Dreyer's Grand Ice Cream Holdings, Inc. --
http://www.dreyersinc.com/-- a combination of Dreyer's Grand Ice
Cream, Inc. and Nestl, Ice Cream Company, LLC, Nestl,'s US frozen
dessert business, and its subsidiaries manufacture and distribute
a full spectrum of ice cream and frozen dessert products. Brands
currently manufactured and distributed by Dreyer's include Grand;
Grand Light(R); H"agen-Dazs(R); Nestl,(R) Drumstick(R), Crunch(R),
Butterfinger(R), Baby Ruth(R), Toll House(R), Carnation(R), Push-
Ups(R); Dole(R); Homemade; Fruit Bars; Starbucks(R) and Healthy
Choice(R). The company's premium products are marketed under the
Dreyer's brand name throughout the western states and Texas, and
under the Edy's(R) name throughout the remainder of the United
States. Dreyer's, together with Edy's, is the best selling brand
of packaged premium ice cream in the country. Internationally,
the Dreyer's brand extends to select markets in the Far East and
the Edy's brand to the Caribbean and South America.
At Sept. 24, 2005, Dreyer's balance sheet showed a $45,899,000
stockholders' deficit, compared to $247,471,000 positive equity at
Dec. 25, 2004.
DRS TECH: Moody's Rates Proposed $650 Million Senior Loans at Ba3
-----------------------------------------------------------------
Moody's Investors Service lowered the ratings of DRS Technologies,
Inc., Corporate Family Rating to B1 from Ba3, ratings on the
company's senior subordinated notes to B3 from B2, and assigned a
Ba3 rating to the company's proposed $650 million senior credit
facilities, consisting of a $350 million revolving credit
facility, due 2011, and a $300 million term loan due 2012. The
ratings outlook is stable. This concludes the ratings review for
possible downgrade commenced on Sept. 22, 2005.
Proceeds from the new credit facility will be used, along with
about $950 million of additional unsecured debt securities
expected to be issued, $250 million of cash, and approximately
$570 million of additional DRS equity, to fund the acquisition of
Engineered Support Systems, Inc. for approximately $1.9 billion,
to repay about $88 million of ESSI debt, to refinance existing DRS
senior secured debt, as well as for transaction fees.
Approximately $133 million of the $350 million revolving credit is
expected to be drawn upon close.
The lower ratings reflect DRS' high leverage, increased
substantially through the debt-financed acquisition of ESSI,
integration risks associated with the acquisition, the largest in
the company's history, and the potential for additional leverage
associated with future acquisitions. These effects are offset
somewhat by the company's history of integrating prior
acquisitions while promptly repaying debt and restoring credit
fundamentals. Moreover, Moody's continues to recognize the
company's strong operating performance, substantial liquidity
levels, and an ongoing strong defense and civilian security
business environment.
The stable ratings outlook reflects Moody's expectations that cash
flow will increase as the result of growth and successful
integration of ESSI, allowing the company to reduce debt by at
least $100 million over the next 12-18 months. The ratings or
their outlook may be revised upward if leverage were to return to
under 4.5 times debt/EBITDA, EBIT/interest coverage were to exceed
2.7 times, and free cash flow were to exceed 10% of total debt on
a sustained basis. Ratings would likely face downward pressure if
earnings or cash flows from acquired businesses fail to contribute
significantly to the company's results, or if the company diverts
meaningful amounts of cash flows generated to uses other than debt
repayment such that leverage remains at levels above 5.5 times
debt/EBITDA for a prolonged period, EBIT/interest falls below 1.8
times, or free cash flow falls below 5% of total debt.
Upon close of the proposed transactions, including anticipated
supplemental financing used to fund this acquisition, DRS' balance
sheet debt will more than double, from $708 million to about
$1.5 billion. In Moody's view, ESSI's contributions to DRS in
terms of earnings and assets do not currently support a Ba3 rating
at this debt level. DRS' Debt/EBITDA is expected to increases
from about 4 times as of September 2005 to approximately 5.8 times
pro forma this acquisition and refinancing, which is high even for
the B1 rating category. Likewise, EBIT coverage of interest
reduces from 2.9 times to pro forma 2.1 times, while free cash
flow is estimated to reduce from approximately 12% of debt to
below 6%. However, approximately $433 million of pro forma debt
comprise re-payable revolving credit or term loan borrowings.
Moody's anticipates that DRS near term cash flow levels will be
adequate to repay at least $100 million of debt by the end of FY
2007, which would likely result in leverage of approximately 5
times or lower.
DRS' acquisition of ESSI for $1.9 billion, which represents almost
13 times LTM July 2005 EBITDA, suggests a substantial premium paid
for future earnings prospects as well as some expected benefits
from synergies to be derived from integrating certain of ESSI's
business lines with those of DRS. This would imply that DRS'
ability to return to pre-acquisition credit fundamentals will rely
quite heavily on revenue growth and margin stability of both
acquired ESSI operations as well as the existing DRS business
segments. However, Moody's believes DRS' acquisition of ESSI to
be strategically logical, as it diversifies DRS' revenue base in
terms of both customer and platform concentration: ESSI has a
substantial amount of U.S. Air Force contracts, where DRS had
lagged in terms of contract access, and no single platform will
represent more than 3% of estimated pro forma 2006 revenue.
Furthermore, ESSI contributes substantial levels of revenue
visibility -- over $600 million of funded backlog as of September
2005, or approximately 60% of ESSI's LTM July 2005 revenue -- as
well as fairly strong and stable margins from predominantly fixed
price contracts. In Moody's view, this supports expectations of
cash flow generation adequate to result in material debt reduction
over the next few years.
The Ba3 rating assigned to the proposed senior secured credit
facilities, one notch higher than the Corporate Family Rating,
reflects the priority of the secured debt over a substantial level
of expected unsecured debt in the pro forma capital structure.
The senior secured credit facilities are split between a
$350 million revolver maturing 2011 and $300 million term loan
maturing 2012. Moody's estimates that approximately $1.5 billion
of senior unsecured and subordinated debt will rank below the
senior secured facilities when all financing transactions close.
As such, total senior secured commitments will represent only
about 30% of total debt commitment. Moreover, Moody's estimates
that the combined DRS/ESSI pro forma tangible asset base and
enterprise value provides substantial coverage to further support
the one notch differential. The B3 rating of the company's $560
million in senior subordinated notes remains two notches below the
Corporate Family Rating and reflects the notes' junior status in
claim behind all current senior commitments, as well as potential
additional senior debt, secured and unsecured.
These ratings have been assigned:
-- Senior secured revolving credit facility due 2011, rated
Ba3;
-- Senior secured revolving term loan due 2012, rated Ba3.
These ratings have been downgraded:
-- Corporate Family Rating, to B1 from Ba3;
-- 6.875% senior subordinated notes due 2013, to B3 from B2.
These ratings have been withdrawn:
-- Senior secured revolving credit facility due 2008 (Ba3);
-- Senior secured revolving term loan due 2010 (Ba3).
DRS Technologies, Inc., headquartered in Parsippany, New Jersey is
a significant second-tier supplier of defense electronics systems
to the U.S. military and intelligence agencies, major aerospace
and defense contractors, and international military forces. DRS
operates through two major groups: C4I -- Command, Control,
Communications, Computers and Intelligence Group, and SR Group --
Surveillance and Reconnaissance Group. The company had LTM
September 2005 revenues of $1.4 billion.
Engineered Support Systems, Inc., headquartered in St. Louis,
Missouri, is a diversified supplier of integrated military
electronics, support equipment and technical services focused on
advanced sustainment and logistics support solutions for all
branches of the U.S. armed services, major prime defense
contractors, certain international militaries, homeland security
forces and selected government and intelligence agencies. ESSI
also produces specialized equipment and systems for commercial and
industrial applications. ESSI had approximately $1 billion in LTM
July 2005 revenue.
EMS TECHNOLOGIES: Discloses Third Quarter 2005 Financial Results
----------------------------------------------------------------
EMS Technologies, Inc. (Nasdaq:ELMG) reported strong earnings from
continuing operations in the third quarter on record revenues.
Third-quarter earnings from continuing operations were $3.3
million in 2005, which tripled the $1.0 million in earnings,
reported for the comparable period in 2004. Third-quarter
revenues from continuing operations in 2005 were $84.4 million --
46% higher than the revenues of $57.6 million reported in 2004.
Alfred G. Hansen, president and chief executive officer,
commented, "With these latest results, we reported another strong
quarterly performance in 2005 based on solid revenue growth,
execution and profitability by each of the divisions in our
continuing operations. LXE, SATCOM and EMS Wireless set new
revenue records for the third quarter, and when consolidated, all
divisions combined to set an all-time quarterly revenue record for
the Company."
Discussion with Lenders
"Soon after the end of the third quarter, we signed a definitive
agreement to sell our Space & Technology/Montreal division, and we
now expect to close this transaction before year-end. We also
continued to pursue negotiations under a non-binding letter of
intent from a potential strategic buyer of our SatNet division.
During the third quarter, we recognized a $4.0 million asset
impairment charge for the SatNet division, based on the terms and
conditions on which we could expect to be able to sell the
division, as well as the weakening of the U.S. dollar and near-
term market conditions. As a result of the effect of this charge
under the financial covenants in our revolving credit agreement,
we have discussed with our lenders -- and we expect to obtain -- a
waiver of covenant default prior to filing our third quarter
report on Form 10-Q.
"We continue to be pleased with favorable business developments in
2005. Based on our current expectations, we are raising our
earnings guidance for the year to $.80 - $.85 per share from
continuing operations, as compared with the previous guidance of
$.75 - $.80. Looking forward to 2006, we expect revenue growth of
10-15%, based on the expected demand for our current products, the
planned introduction of new high-potential products, and positive
outlook for defense communications programs."
EMS Technologies, Inc. is a leading provider of technology
solutions to wireless and satellite markets. The Company focuses
on mobile information users, and increasingly on broadband
applications. The Company is headquartered in Atlanta, employs
approximately 1,800 people worldwide, and has manufacturing
facilities in Atlanta, Montreal, Ottawa and Brazil.
The Company has four reporting segments:
-- LXE mobile computers and wireless local area networks, for
materials handling and logistics.
-- Defense & Space Systems antennas and other hardware, for
space and satellite communications, radar, surveillance,
military countermeasures, and other specialized uses.
-- SATCOM antennas and terminals, for aeronautical, land-
mobile and maritime communications via satellite.
-- EMS Wireless base station antennas and repeaters, for
PCS/cellular telecommunications.
ENRON CORP: Luzenac Files FERC Action Against Enron Power Mktg.
---------------------------------------------------------------
Luzenac America, Inc., a division of talc producing group,
Luzenac, made a filing with the Federal Energy Regulatory
Commission under Section 1290 of the Energy Policy Act of 2005.
This statute gives the FERC exclusive jurisdiction to determine
whether a termination payment for power not delivered by a seller,
who manipulated the electricity market, should be made in the case
of certain contracts.
Luzenac had a contract with Enron Power Marketing Services, Inc.,
signed prior to June 20, 2001, to supply power to its Sappington
and Three Forks, Montana talc processing facilities. In December
of 2002, Enron stopped delivering power under that contract.
Despite Enron's failure to supply power and the FERC's prior
findings that Enron manipulated the electricity market, Enron is
now seeking a $6.7 million termination payment, plus interest,
from Luzenac.
The statute requires the FERC to decide whether the termination
payment sought by Enron is not permitted under a rate schedule or
contract or is otherwise unlawful on the grounds that the contract
is unjust and unreasonable or contrary to the public interest.
"At [the] FERC's public meeting [on Oct. 20], the Commissioners
announced new rules FERC will be implementing in the future to
prohibit market manipulation under the Energy Policy Act;
Luzenac's petition presents the FERC with the opportunity to
immediately fulfill the goal of Congress by protecting consumers
from unlawful contract termination charges imposed by market
manipulators, such as Enron," said Debbie Swanstrom, an energy
attorney representing Luzenac. "[The] FERC found long ago that
Enron manipulated the electricity market and FERC has the
responsibility to now stop Enron from plucking any more rotten
fruit from its poisonous tree," she continued.
Luzenac looks forward to a prompt review and resolution of this
issue by the FERC.
FERC Can Settle Dispute,
Bankruptcy Court Says
On Nov. 2, 2005, the Honorable Arthur J. Gonzalez of the United
States Bankruptcy Court for the Southern District of New York
ruled that the Federal Energy Regulatory Commission has
jurisdiction to resolve the contract dispute between Luzenac
America, Inc. and Enron Power Marketing, Inc.
Judge Gonzalez's decision is the first judicial application of the
"Cantwell Amendment," recently enacted Section 1290 of the 2005
Energy Policy Act. Based on that statute, the Court denied
Enron's attempt to bar Luzenac from pursuing a petition before
Federal Energy Regulatory Commission, which it filed on Oct. 20,
2005.
The dispute revolves around a long-term contract entered into
between Enron Power Marketing, Inc., and Luzenac America, Inc., in
August 2000 by which Enron agreed to supply electrical power to
Luzenac's Sappington and Three Forks, Montana talc processing
facilities.
In December 2002, Enron stopped delivering power under the
contract and filed for bankruptcy. Enron then sued Luzenac in
bankruptcy court for $6.7 million, plus interest.
On Oct. 28, 2005, Enron filed a motion in the bankruptcy court
seeking to prevent Luzenac from pursuing its petition before FERC,
claiming that the bankruptcy court, not the FERC, had jurisdiction
to resolve the dispute. Enron also asserted that Luzenac should
be sanctioned because its FERC filing violated orders of the
bankruptcy court.
In response, Judge Gonzalez ruled that when Congress passed
Section 1290 of the Energy Policy Act of 2005 it gave the FERC
exclusive jurisdiction over the Luzenac-Enron contract dispute.
Consequently, Luzenac's petition did not violate the law or any
orders issued by the bankruptcy court.
"We are pleased that the Court has denied Enron's efforts to
prevent us from obtaining a decision from the agency that Congress
has selected to handle this matter," Ralph Godell, counsel for
Luzenac America, Inc., stated. "We look forward to [the] FERC
issuing a prompt ruling on our pending petition. We are confident
that FERC will find Enron's claims against Luzenac to be without
merit."
Luzenac Group -- http://www.luzenac.com/-- is a market-focused
talc producer. As world leader in our field, we are committed to
setting the standards for the talc industry in such areas as
innovation, technical assistance, product quality, health, safety
and the environment, and ethical behavior.
Headquartered in Houston, Texas, Enron Corporation --
http://www.enron.com/-- is in the midst of restructuring various
businesses for distribution as ongoing companies to its creditors
and liquidating its remaining operations. Before the company
agreed to be acquired, controversy over accounting procedures had
caused Enron's stock price and credit rating to drop sharply.
Enron filed for chapter 11 protection on December 2, 2001 (Bankr.
S.D.N.Y. Case No. 01-16033). Judge Gonzalez confirmed the
Company's Modified Fifth Amended Plan on July 15, 2004, and
numerous appeals followed. The Confirmed Plan took effect on
Nov. 17, 2004. Martin J. Bienenstock, Esq., and Brian S. Rosen,
Esq., at Weil, Gotshal & Manges, LLP, represent the Debtors in
their restructuring efforts. (Enron Bankruptcy News, Issue No.
160; Bankruptcy Creditors' Service, Inc., 15/945-7000)
ENRON CORP: SK Corp. Increases Equity Stake in SK Enron to 51%
--------------------------------------------------------------
South Korea's largest oil refiner, SK Corp., disclosed that it
increased its investment holdings by 1% in SK Enron, a joint
venture with Enron Corp. SK Corp. purchased 999,999 shares in SK
Enron, raising its stake in the joint venture to 51%.
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)
FALCON PRODUCTS: Expects to Emerge from Chapter 11 in Mid-November
------------------------------------------------------------------
Falcon Products, Inc. (Pink Sheets: FCPR.PK) reached an agreement
in principle with the Pension Benefit Guaranty Corporation
relating to the termination of the Company's pension plans.
The agreement, which has been approved by the U.S. Bankruptcy
Court for the Eastern District of Missouri, Eastern Division, and
is subject to the execution of definitive documentation, should
enable the Company to satisfy one of the significant remaining
conditions under Falcon's Plan of Reorganization. Under the Plan
of Reorganization, which was confirmed by the Court on Oct. 6,
2005, emergence from bankruptcy was subject to the satisfaction of
several conditions including finalization of exit financing
arrangements and termination of the Company's pension plans. The
Company expects to satisfy the remaining conditions and emerge
from Chapter 11 in mid-November 2005, assuming that the PBGC
completes its administrative process to effectuate termination of
the pension plans, and does so on a timely basis.
Commenting on the announcement, John S. Sumner, Jr., Falcon's
president and chief executive officer, stated, "The agreement with
the PBGC clears a significant hurdle and should allow us to
quickly move forward with our emergence from Chapter 11. Over the
past several weeks the Company has been preparing for the exit
from bankruptcy and is looking forward to emerging as soon as
possible and moving forward with our mission to deliver quality
products, on time to our customers."
Upon emergence, the majority of Falcon's equity will be held by
funds affiliated with Oaktree Capital Management, LLC and
Whippoorwill Associates, Inc. and the Company will no longer be a
public reporting entity. The Company will make the required
filings with the Securities and Exchange Commission to terminate
its public reporting requirements.
Falcon was represented in the Chapter 11 case by Stutman, Treister
and Glatt as its reorganization counsel and Imperial Capital LLC
as its financial advisor. Both firms are located in Los Angeles.
Headquartered in Saint Louis, Missouri, Falcon Products, Inc.
-- http://www.falconproducts.com/-- designs, manufactures, and
markets an extensive line of furniture for the food service,
hospitality and lodging, office, healthcare and education segments
of the commercial furniture market. The Debtor and its eight
debtor-affiliates filed for chapter 11 protection on January 31,
2005 (Bankr. E.D. Mo. Lead Case No. 05-41108). Brian Wade
Hockett, Esq., and Mark V. Bossi, Esq., at Thompson Coburn LLP
represent the Debtors in their restructuring efforts. When the
Debtors filed for protection from their creditors, they listed
$264,042,000 in assets and $252,027,000 in debts. On Oct. 18,
2005, the Honorable Barry S. Schermer confirmed the Debtors' Third
Amended Joint Plan of Reorganization.
GENERAL NUTRITION: Weak Performance Cues S&P's Negative Outlook
---------------------------------------------------------------
Standard & Poor's revised its outlook on Pittsburgh,
Pennsylvania-based General Nutrition Centers Inc. to negative from
stable. The company's ratings, including the 'B' corporate credit
rating, were affirmed. GNC, a leading specialty retailer of
nutritional supplements, has $597 million outstanding debt,
including preferred stock.
"The outlook revision is based on the company's
less-than-anticipated progress from its rebuilding efforts and
lower margins," said Standard & Poor's credit analyst Kristi
Broderick, "along with its weak franchise operations and
deteriorating credit metrics."
Ratings on GNC reflect the company's:
* recent weak operating performance,
* expectations of continued operational challenges,
* product liability risk, and
* high debt leverage.
According to Ms. Broderick, "The company's recent weak operating
performance is due to softness in the diet category, a drop-off in
sales of low-carb products, and poor operational execution, which
has resulted in a loss of market share."
In addition, GNC's merchandise assortment has not been managed
well, and the company has not had a successful new product in a
couple of years. This has contributed to the disappointing
performance, since new products are a key tenet of the industry.
HEMOSENSE INC: Closes Private Placement and Raises $10 Million
--------------------------------------------------------------
HemoSense, Inc. (AMEX:HEM) closed its previously announced private
placement in which it sold 1,481,482 shares of its common stock at
a price of $6.75 per share, raising $10 million in gross proceeds
from certain institutional investors. In connection with their
participation in the closing, these investors received warrants to
purchase an aggregate of 740,741 shares of HemoSense's common
stock at an exercise price of $8.165 per share. Lazard Capital
Markets LLC served as lead placement agent and Roth Capital
Partners, LLC served as co-placement agent for the transaction.
HemoSense has agreed to file a registration statement covering the
resale of the shares and the shares issuable upon exercise of the
warrants. As a condition to the transaction, certain principal
holders of the Company's securities agreed to waive the right for
other stockholders to have their shares covered by the
registration statement.
HemoSense, Inc. -- http://www.hemosense.com/-- develops,
manufactures and markets easy-to-use, handheld blood coagulation
testing systems for monitoring patients taking warfarin, an oral
blood-thinning agent given to prevent potentially lethal blood
clots. The HemoSense INRatio(R) system, used by healthcare
professionals and patients themselves, consists of a small,
portable monitor and disposable test strips. It provides accurate
and convenient measurement of blood-clotting time, or PT/INR
values. Routine measurements of PT/INR are necessary for the safe
and effective management of the patient's warfarin dosing.
INRatio is sold in the United States and internationally.
At June 30, 2005, HemoSense, Inc.'s balance sheet showed a
$37,941,000 stockholders' deficit compared to a $35,220,000
deficit at Sept. 30, 2004.
HERITAGE PROPERTY: Releases Third Quarter 2005 Results
------------------------------------------------------
Heritage Property Investment Trust, Inc. (NYSE: HTG) reported
results of its operations for the three and nine months ended
Sept. 30, 2005.
For the three months ended September 30, 2005, Funds from
Operations, a widely accepted measure of REIT performance,
increased 11.6% to $33.7 million, as compared to $30.2 million,
for the same period in 2004. For the nine months ended Sept. 30,
2005, FFO increased 2.0% to $96.6 million, as compared to $94.7
million, for the nine months ended Sept. 30, 2004.
Net income attributable to common shareholders increased to $8.4
million, for the three months ended Sept. 30, 2005, as compared to
$7.9 million, for the same period in 2004. Net income
attributable to common shareholders decreased to $23.0 million for
the nine months ended Sept. 30, 2005, as compared to $32.5
million, for the same period in 2004. Net income attributable to
common shareholders for the nine months ended Sept. 30, 2004
includes a gain on sale of discontinued operations of $3.0 million
reflecting the Company's sale of an office building in April 2004.
Balance Sheet Position
Heritage completed the third quarter with total assets of
approximately $2.5 billion and an aggregate of $1.4 billion of
indebtedness. As of Sept. 30, 2005, Heritage's market
capitalization was $3.1 billion, resulting in a debt-to-total
market capitalization ratio of approximately 46.2%. Heritage's
indebtedness had a weighted average interest rate of 6.05% with an
average maturity of 4.53 years. As of Sept. 30, 2005, $359
million was outstanding under Heritage's line of credit.
Waiver
As previously reported, Heritage obtained a waiver under its line
of credit for any default or potential default caused by the
restatement of its financial statements.
As of Sept. 30, 2005, Heritage had a shopping center portfolio of
171 properties, located in 30 states and totaling approximately
34.9 million square feet of total gross leasable area, of which
28.7 million square feet is company-owned gross leasable area.
Leasing Activity
During the third quarter of 2005, the Company executed 185 leases
(new and renewed), for 719,000 square feet in the Company's
shopping center portfolio. In doing so, the Company achieved a
4.8% increase over prior rents on a cash basis from $12.18 per
square foot to $12.76 per square foot. For the first nine months
of 2005, the Company has signed 499 leases (new and renewed), for
1.8 million square feet in the Company's shopping center
portfolio. In doing so, the Company achieved a 6.6% increase over
prior rents on a cash basis from $11.86 per square foot to $12.64
per square foot.
At Sept. 30, 2005, the percentage of the Company's portfolio
leased was 92.5%, an increase of 0.4 percentage points from the
same period last year. At June 30, 2005, the Company's portfolio
was 92.5% leased.
Acquisitions
During the third quarter of 2005, Heritage completed three
acquisitions located in:
* Simpsonville, South Carolina;
* Parlin/Old Bridge Township, New Jersey; and
* Manchester, Connecticut (five separate properties).
As a result of these acquisitions, the Company added over 700,000
square feet of gross leaseable area to its portfolio. The
aggregate purchase price paid by the Company for these shopping
centers was approximately $142 million, including approximately
$29 million of assumed mortgage indebtedness and approximately
$6 million of operating partnership units in one of the Company's
operating subsidiaries.
In addition, on August 2, 2005, Heritage completed the acquisition
of the 40% minority partnership interest in Williamson Square
Shopping Center, located in Franklin, Tennessee, held by
Heritage's joint venture limited partner. As a result, Heritage
now owns 100% of the partnership interests in Williamson Square.
The purchase price, which was based on a formula set forth in the
partnership agreement, was $2.9 million and was funded with
borrowings under the Company's line of credit. Heritage also
repaid upon maturity the previously outstanding mortgage
indebtedness encumbering Williamson Square. As a result,
Williamson Square is now unencumbered.
Development Joint Ventures
Heritage also reported that it has entered into a joint venture
for the construction of a new approximately 625,000 square foot
development to be located in La Vista, Nebraska, part of the
greater Omaha metro area. The first phase of this project is
expected to be anchored by Cabela's, a leading specialty retailer
of hunting, fishing, camping and related outdoor merchandise. If
ongoing negotiations for the project conclude successfully,
Heritage currently expects that Cabela's will open its new,
approximately 125,000 square foot location as early as fall 2006.
The La Vista retail store would be Cabela's third store in
Nebraska, the company's home state.
Capital Raising Joint Venture
As previously announced, Heritage has been exploring capital
raising joint venture opportunities involving an initial
contribution of certain of its existing assets and the funding of
future shopping center acquisitions. Although no agreement
regarding any transaction has been entered into, Heritage is
pleased to report that it has tentatively selected a joint venture
partner and is currently negotiating the principal terms of the
joint venture. Assuming an agreement is reached, the Company
currently anticipates completing the joint venture during the late
fourth quarter of 2005 or early first quarter of 2006.
Restatement Update
As previously announced, on Oct. 17, 2005, Heritage determined
that as result of an error discovered in its audited financial
results for:
* the fiscal years ended December 31, 2003 and December 31,
2004, and the quarterly periods contained therein, and
* its unaudited quarterly results for the periods ended
Mar. 31, 2005 and June 30, 2005,
Heritage would need to amend these financial statements to correct
the error. The error pertains to the unrecorded liability and
related compensation expense relating to certain stock options
previously granted to Thomas C. Prendergast, Heritage's Chairman,
President and Chief Executive Officer. These stock options are
subject to a tax-offset provision contained in Mr. Prendergast's
employment agreement.
Heritage will be amending the historical financial statements
noted in the preceding paragraph to record a liability and to
recognize compensation expense related to the tax-offset payment
provision and to reflect that the stock options subject to the
tax-offset payment provision should be accounted for on a variable
basis.
Material Weakness
In connection with the restatement, Heritage's management
reevaluated its disclosure controls and procedures and concluded
that its controls over financial reporting with respect to
accounting for significant compensation arrangements were
insufficient. In addition, Heritage's management concluded that
this control deficiency represented a material weakness. As a
result of this material weakness, Heritage's management further
concluded that its disclosure controls and procedures were not
effective as of December 31, 2004. To remediate the material
weakness, Heritage has enhanced its review procedures over the
accounting for significant compensation arrangements.
Dividend Payment
On Oct. 17, 2005, the Company paid its regular quarterly dividend
of $0.525 per common share to shareholders of record on September
30, 2005.
Prendergast Employment Agreement
As of Nov. 8, 2005, the tax-offset provision contained in Mr.
Prendergast's employment agreement has not been amended, but
discussions between the Compensation Committee of the Company's
Board of Directors and Mr. Prendergast are currently underway. As
previously explained, the tax offset provision, in its current
form, will impact the Company's financial results positively or
negatively, depending upon the Company's stock price as of
December 31, 2005 (or earlier, if the provision is eliminated
prior to that date), which amount cannot be quantified at this
time. Furthermore, if an amendment to Mr. Prendergast's employment
agreement is entered into at or prior to the end of the year that
eliminates the effect of the tax offset provision, the Company
expects that an additional charge to net income will be incurred
at that time, which amount also cannot be quantified as of the
date of this release.
Heritage Property Investment Trust, Inc. --
http://www.heritagerealty.com/-- is a fully integrated, self-
administered and self-managed REIT traded on the New York Stock
Exchange under the symbol "HTG". Heritage is one of the largest
owners and operators of neighborhood and community shopping
centers in the United States. Heritage focuses on grocer-anchored
shopping centers with multiple anchors. Heritage is headquartered
in Boston Massachusetts and has an additional 16 regional offices
located in the Eastern, Midwestern and Southwestern United States.
HOLLINGER INTERNATIONAL: Files Delinquent Annual Report
-------------------------------------------------------
Hollinger International Inc. filed a delinquent annual report for
the year ended Dec. 31, 2004, with the Securities and Exchange
Commission on Nov. 3, 2005.
As previously reported in the Troubled Company Reporter on
Aug. 31, 2005, the filing of the Company's 2004 annual report was
delayed because the Company diverted a significant amount of its
resources to complete a restatement of prior years' financial
statements relating to U.S. federal tax matters in 1998 and 1999
and the time required to complete additional testing under
Section 404 of the Sarbanes-Oxley Act of 2002.
In addition, management determined that the Company's disclosure
controls and procedures were ineffective as of Dec. 31, 2004. As
a result, the Company undertook substantial additional procedures
to remediate the weaknesses in its disclosure controls and
procedures.
2004 Financial Results
In its Form 10-K for the year ended Dec. 31, 2005, Hollinger
reports earning $234.7 million of net income on $553.9 million of
revenues, as compared to a $74.3 million net loss on $531.3
million of revenues in the prior year.
Operating revenues and operating loss in 2004 were $553.9 million
and $11.0 million, respectively, compared with operating revenues
of $531.3 million and an operating loss of $26.0 million in 2003.
The $22.6 million increase in operating revenues over the prior
year is a reflection of an increase in advertising revenues at the
Company's Chicago and Canadian Newspaper Group.
The Company's balance sheet showed $1.7 billion of assets and
liabilities totaling $1.5 billion. At Dec. 31, 2004, working
capital deficiency, excluding debt obligations and escrow deposits
and restricted cash was $34.5 million compared to a deficiency of
$368.5 million, excluding discontinued operations, at Dec. 31,
2003.
Litigation Involving Controlling Stockholder
On January 28, 2004, Hollinger International, through the Special
Committee, filed a civil complaint in the United States District
Court for the Northern District of Illinois (Hollinger
International Inc. v. Hollinger Inc., et al., Case No. 04C-0698)
asserting breach of fiduciary duty and other claims against:
* Hollinger, Inc.;
* The Ravelston Corporation Limited;
* Ravelston Management, Inc.;
* Lord Conrad M. Black of Crossharbour;
* F. David Radler;
* J.A. Boultbee;
* Amiel Black; and
* Daniel W. Colson
The action sought approximately $484.5 million in damages,
including approximately $103.9 million in pre-judgment interest,
and also included claims under the Racketeer Influenced and
Corrupt Organizations Act.
On October 8, 2004, the District Court granted the defendants'
motion to dismiss the RICO claims and also dismissed the remaining
claims without prejudice on jurisdictional grounds. The Court has
denied the Company's request for an immediate appeal of the
Court's dismissal of the RICO claims.
On October 29, 2004, the Company filed a second amended complaint
seeking to recover approximately $542.0 million in damages,
including prejudgment interest of approximately $117.0 million,
and also punitive damages, on breach of fiduciary duty, unjust
enrichment, conversion, fraud, and civil conspiracy claims
asserted in connection with transactions described in the Report,
including unauthorized "non-competition" payments, excessive
management fees, sham broker fees and investments and divestitures
of Company assets.
The second amended complaint also adds Richard N. Perle, a
Director of the Company, as a defendant and eliminated as
defendants certain companies affiliated with Black and Radler.
The second amended complaint alleges that Perle breached his
fiduciary duties while serving as a member of the executive
committee of the Company's Board of Directors.
In December 2004, all defendants moved to dismiss the complaint
against them on a variety of grounds, and on March 11, 2005, the
Court denied those motions. All defendants have now answered the
complaint, and with their answers defendants Black, Radler,
Boultbee, Amiel Black and Colson asserted third-party claims
against Richard Burt and James Thompson and former director Marie-
Josee Kravis. These claims seek contribution for some or all of
any damages for which defendants are held liable to the Company.
On June 27, 2005, Burt, Thompson, and Kravis moved to dismiss the
claims against them. In addition, Black asserted counterclaims
against the Company alleging breach of stock option contracts with
the Company and seeking a declaration that Black may continue
participating in the Company's options plans and exercising
additional options.
Ravelston and RMI asserted counterclaims against the Company and
third-party claims against HCPH Co. and Publishing. Without
specifying any alleged damages, Ravelston and RMI allege that the
Company has failed to pay unidentified management services fees in
2002, 2003, and 2004 and breached an indemnification provision in
the management services agreements.
Ravelston and RMI also allege that the Company breached a
March 10, 2003 "Consent and Agreement" between the Company and
Wachovia Trust Company. That Consent provided, among other
things, for the Company's consent to a pledge and assignment by
RMI to Wachovia Trust Company, as trustee, of the management
services agreements as part of the security for Hollinger Inc.'s
obligations under Hollinger Inc.'s 117/8% Senior Secured Notes.
The Consent also provided for certain restrictions and notice
obligations in relation to the Company's rights to terminate the
management services agreements. Ravelston and RMI allege that
they were "third-party beneficiaries" of the Consent, that the
Company breached it, and that they have incurred unspecified
damages as a result. The Company believes that the Consent was
not approved or authorized by either the Company's Board of
Directors or its Audit Committee. The Company moved to dismiss
these claims on August 15, 2005.
The U.S. Attorney's Office has intervened in the case and moved to
stay discovery until the close of criminal proceedings. The
Company has informed the Court that it agrees to a temporary stay
of discovery, other than document discovery, until December 1,
2005. The Court has not yet ruled on the motion.
Internal Control Weakness
Hollinger International announced on Nov. 3, 2005, that its
independent registered public accounting firm, KPMG LLP, expressed
an unqualified opinion on its 2004 consolidated financial
statements.
KPMG did not express an opinion either on management's assessment
or on the effectiveness of the Company's internal control over
financial reporting, as required under Section 404 of the
Sarbanes-Oxley Act of 2002, because the scope of KPMG's work was
not sufficient to enable them to express an opinion. Management
has concluded, however, that the Company's internal control over
financial reporting was ineffective as of Dec. 31, 2004.
The SEC, in its complaint filed with the federal court in Illinois
on November 15, 2004, naming Black, F. David Radler and Hollinger
Inc. as defendants, alleges that Black, Radler and Hollinger Inc.
were liable for the Company's failure to devise and maintain a
system of internal accounting controls sufficient to provide
reasonable assurance that transactions were recorded as necessary
to permit preparation of financial statements in conformity with
U.S. generally accepted accounting principles from at least 1999
through at least 2003.
The SEC also alleges that Black, Radler and Hollinger Inc.,
directly and indirectly, falsified or caused to be falsified
books, records, and accounts of the Company in order to conceal
their self-dealing from the Company's public stockholders.
Current management has taken steps to correct internal control
deficiencies and weaknesses during and subsequent to 2004, and
believes that the Company's internal controls and procedures have
strengthened. However, it is possible that the Company has not
yet discovered all deficiencies or weaknesses that may be material
to the Company's business, results of operations or financial
position and may not be able to remediate all material weaknesses
by December 31, 2005.
About Hollinger International
Hollinger International Inc. --
http://www.hollingerinternational.com/-- is a newspaper publisher
whose assets include The Chicago Sun-Times and a large number of
community newspapers in the Chicago area as well as in Canada.
* * *
As reported in the Troubled Company Reporter on Aug. 6, 2004,
Moody's Investors Service changed the rating outlook on Hollinger
International Publishing, Inc., to positive from stable and has
withdrawn other ratings.
Ratings withdrawn:
* $45 million Senior Secured Revolving Credit Facility, due
2008 -- Ba2
* $210 million Term Loan "B", due 2009 -- Ba2
* $300 million of 9% Senior Unsecured Notes, due 2010 -- B2
Ratings confirmed:
* Senior Implied rating -- Ba3
* Issuer rating -- B2
Moody's says the outlook is changed to positive.
HOST MARRIOTT: Better Credit Measures Cue S&P to Lift Debt Rating
-----------------------------------------------------------------
Standard & Poor's Ratings Services raised its ratings on upscale
hotel owner and operator Host Marriott Corp., including its
corporate credit rating to 'BB-' from 'B+'. The outlook is
stable. About $5 billion in debt was outstanding as of
Sept. 9, 2005.
The upgrade reflects Host's progress in improving credit measures
to a level that is consistent with the higher ratings, through a
combination of earnings growth and modest debt reduction in the
past several quarters. Standard & Poor's expects the company's
operating performance will remain solid in the intermediate term,
driven by continued strong U.S. lodging demand and the favorable
characteristics of Host's hotel portfolio. Standard & Poor's
expects that future acquisitions will be funded in a manner
consistent with the new ratings.
The Bethesda, Maryland-based company's portfolio has performed
well since the lodging industry began to recover in late 2003. In
the first nine months of 2005, the company's comparable revenue
per available room grew 9.1%, while adjusted EBITDA rose to
$596 million, up 15% from the year-ago period. This followed
RevPAR and adjusted EBITDA growth of 7.3% and 12%, respectively,
in 2004. Total debt has declined by almost $480 million since the
end of 2003.
"We expect operating momentum to remain strong during 2006,
driving a further improvement to Host's credit measures," said
Standard & Poor's credit analyst Sherry Cai.
ICOS CORP: Balance Sheet Upside-Down by $66.76 Mil. at Sept. 30
---------------------------------------------------------------
ICOS Corporation (Nasdaq:ICOS) released its financial results for
the three and nine months ended September 30, 2005, and summarized
recent events.
Lilly ICOS LLC (Lilly ICOS), a 50/50 joint venture between ICOS
Corporation and Eli Lilly and Company that is marketing Cialis(R)
(tadalafil) for the treatment of erectile dysfunction (ED),
reported 2005 third quarter net income of $19.8 million, compared
to a net loss of $21.4 million in the 2004 third quarter -- an
improvement of $41.2 million. Profitability was achieved as a
result of sustained growth in sales of Cialis around the world and
reductions in marketing and selling expenses. Worldwide sales of
Cialis in the third quarter of 2005, totaled $195.1 million, an
increase of 27% compared to $154.1 million in the third quarter of
2004.
For the nine months ended September 30, 2005, Lilly ICOS
reported a net loss of $23.6 million, compared to a net loss of
$230.6 million for the nine months ended September 30, 2004.
Worldwide sales of Cialis for the first nine months of 2005,
totaled $536.1 million, an increase of 34% compared to
$399.6 million in the first nine months of 2004.
Lilly ICOS recently announced positive results with tadalafil from
a double-blind, placebo-controlled clinical study in the treatment
of urinary symptoms in men with benign prostatic hyperplasia
(BPH). The Phase 2 proof-of-concept study demonstrated clinically
meaningful and statistically significant improvement in the
primary endpoint, the International Prostate Symptom Score (IPSS).
In addition, tadalafil demonstrated statistically significant
improvement relative to placebo on most of the secondary endpoints
included in the study.
"We are extremely pleased with the robust results of the Phase 2
proof-of-concept study in BPH," commented Paul Clark, ICOS
Chairman, President and CEO. "In this study, a new mechanism -- a
PDE5 inhibitor -- delivered promising results that, if confirmed
in Phase 3 studies, might offer a new, once-a-day treatment of
urinary symptoms for men with BPH. For the more than 50 percent
of men with BPH who also suffer from ED, tadalafil might offer a
unique profile."
David Goodkin, M.D., ICOS Senior Vice President and Chief Medical
Officer, added, "Other treatment opportunities are also being
pursued with tadalafil, including pulmonary arterial hypertension,
a rare but life-threatening disease, and hypertension, a common
disorder, which dramatically increases the risk of cardiovascular
complications. Tadalafil relaxes smooth muscle cells within the
walls of blood vessels. As a result, we think tadalafil may have
potential as a once-a-day treatment for these conditions."
Financial Results
For the three months ended September 30, 2005, ICOS reported a net
loss of $11.5 million, compared to a net loss of $26.6 million for
the three months ended September 30, 2004.
Equity in earnings of Lilly ICOS was $10.0 million in the 2005
third quarter, compared to equity in losses of $10.5 million
in the third quarter of 2004, reflecting the aforementioned
$41.2 million improvement in Lilly ICOS' results.
ICOS Corporation's total revenue was $20.8 million in the third
quarter of 2005, compared to $19.7 million in the third quarter of
2004.
Collaboration revenue from Lilly ICOS totaled $13.6 million in the
2005 third quarter, compared to $14 million in the corresponding
period of the prior year. The decrease primarily reflects a
reduction in Lilly ICOS' reimbursement of the cost of our sales
force, from 100% in 2004, to 60% beginning in January 2005,
partially offset by higher revenue for research and development
activities conducted on behalf of Lilly ICOS.
Co-promotion services revenue was $1.8 million in the 2005 third
quarter. The Company began promoting AndroGel(R) (testosterone
gel) to physicians, on behalf of Solvay Pharmaceuticals, Inc., in
February 2005. The Company receives a fee per-sales-call, up to a
maximum number of calls. The Company expects to complete the
remaining billable sales calls for this year by the end of
November 2005. The agreement will not be extended into 2006.
Total operating expenses were $42 million for the three months
ended September 30, 2005, compared to $35.6 million for the three
months ended September 30, 2004.
Research and development expenses increased $3.5 million from the
three months ended September 30, 2004, to $21.4 million for the
three months ended September 30, 2005. The increase was primarily
due to higher expenses associated with our discovery and
preclinical research programs and incremental development
activities being performed by ICOS personnel on behalf of Lilly
ICOS, partially offset by the impact of the discontinuation of a
clinical program in the 2005 first quarter.
For the nine months ended September 30, 2005, ICOS reported a net
loss of $80.5 million, compared to a net loss of $164.8 million
for the nine months ended September 30, 2004. The 2005 decrease
is primarily due to lower Lilly ICOS losses, partially offset by
the reduced reimbursement of the cost of our sales force.
At September 30, 2005, the Company had cash, cash equivalents,
investment securities and associated interest receivable of
$167.8 million.
Financial Guidance
Lilly ICOS' net income for the year ending December 31, 2005, is
expected to be around $30 million, plus or minus $7 million. The
level of Cialis sales achieved is the primary variable that will
affect Lilly ICOS' results for 2005. The Company presently
expects 2005 worldwide Cialis net product sales around $730
million to $750 million. The Company also expects Lilly ICOS'
selling, general and administrative expenses to decline, in the
fourth quarter of 2005, compared to both the fourth quarter of
2004 and the third quarter of 2005.
The Company presently expects that ICOS Corporation's net loss
for the year ending December 31, 2005, will be in the range of
$77 million to $82 million, assuming 2005 net income of $30
million for Lilly ICOS.
The expected decrease in ICOS' net loss in 2005, compared to
$198 million in 2004, is primarily due to the Company's
expectation that Lilly ICOS will be profitable in 2005, compared
to Lilly ICOS having reported a net loss of $262 million in 2004.
A full-text copy of the Company's quarterly report on Form 10-Q
filed with the Securities and Exchange Commission is available for
free at http://ResearchArchives.com/t/s?2c8
ICOS Corporation, a biotechnology company headquartered in
Bothell, Washington, is dedicated to bringing innovative
therapeutics to patients. Through Lilly ICOS LLC, ICOS is
marketing its first product, Cialis (tadalafil), for the treatment
of erectile dysfunction. ICOS is working to develop treatments
for serious unmet medical conditions such as benign prostatic
hyperplasia, pulmonary arterial hypertension, cancer and
inflammatory diseases.
As of September 30, 2005, ICOS Corp.'s balance sheet reflected a
$66,760,000 equity deficit at June 30, 2005, compared to
$6,528,000 of positive equity at Dec. 31, 2004.
INEX PHARMACEUTICALS: Stark Trading to Appeal B.C. Court Decision
-----------------------------------------------------------------
Inex Pharmaceuticals Corporation ("INEX"; TSX: IEX) reported that
on Nov. 7, 2005, it received notice that Stark Trading and
Shepherd Investments International Ltd. will appeal the decision
of the Supreme Court of British Columbia dismissing the bankruptcy
petition brought forward by Stark. The Supreme Court of British
Columbia dismissed the bankruptcy petition on October 27, 2005.
Timothy M. Ruane, President and Chief Operating Officer of INEX,
said INEX has not received any details of the legal basis for
Stark's appeal. "We believe the decision of the Supreme Court to
dismiss the bankruptcy petition was correct and we will continue
to defend our position vigorously. We are continuing to operate
our business and advance our products through development to
maximize the value of our assets for all stakeholders."
Stark is the majority holder of certain promissory notes issued by
Inex International Holdings, a subsidiary of INEX. The promissory
notes are not due until April 2007 and can be repaid in cash or in
shares, at INEX's option, at maturity.
As reported in the Troubled Company Reporter on Oct. 31, 2005, the
B.C. Supreme Court has dismissed the bankruptcy petition brought
forward by Stark Trading for Inex Pharmaceuticals.
INEX Pharmaceuticals Corporation -- http://www.inexpharma.com/--
is a Canadian biopharmaceutical company developing and
commercializing proprietary drugs and drug delivery systems to
improve the treatment of cancer.
INTEGRATED HEALTH: Trustee Seeks Accurate Disbursement Report
-------------------------------------------------------------
Pursuant to Section 1930(a)(6) of the Judiciary Procedures Code,
each of Integrated Health Services, Inc., and its debtor-
affiliates are required to pay the United States Trustee a
quarterly fee for each quarter for the duration of their Chapter
11 cases.
The quarterly fees are calculated upon "disbursements," and range
from a minimum of $250, when disbursements total less than
$15,000, to a maximum of $10,000, when disbursements total
$5,000,000 or more.
Kelly Beaudin Stapleton, the U.S. Trustee for Region 3, explains
that "disbursements" for purposes of calculating the IHS Debtors'
quarterly fees include, among other things, all payments of the
expenses of operating the IHS Debtors' businesses.
Ms. Stapleton notes that Section 1930(a)(6) imposes no limitation
on the source of the "disbursements" to be used in calculating
quarterly fees, and imposes quarterly fees "on each case under
chapter 11." As a result, "disbursements" are not limited to
payments made by a debtor from its own account. Instead, all
payments of the expenses of operating a debtor's business, whether
made by the debtor or by another entity, are made in the debtor's
case and thus constitute "disbursements" of the debtor that must
be included when calculating the appropriate quarterly fee due in
the debtor's case.
Pursuant to the Debtors' centralized cash management system,
Integrated Health Services, Inc., paid all of the various
Debtors' operating expenses through IHS' main corporate
concentration account maintained at Citibank, N.A., thereby
funding various disbursement accounts for payment of accounts
payable, employee benefit obligations, payroll, taxes and other
obligations.
The Debtors properly reported disbursement information through
March 31, 2001. However, Ms. Stapleton alleges that the Debtors
no longer provided disbursement information after that.
Without the needed information, Ms. Stapleton asserts that she
cannot ascertain the exact amount of disbursements attributable to
each Debtor's case. The exact amount of Quarterly Fees due cannot
be determined. Moreover, Ms. Stapleton cannot determine the exact
amount by which the Debtors have underpaid their statutorily
mandated fees.
U.S. Trustee's Fee Statement
Richard L. Schepacarter, Esq., Trial Attorney for the U.S.
Trustee, points out that neither Section 1930(a)(6) nor any other
provision of law requires the U.S. Trustee to "bill" debtors for a
certain amount. The burden is entirely on each debtor to report
its disbursements and to pay the quarterly fee consistent with the
level of disbursements made in its case.
Instead of an "invoice," the U.S. Trustee provides every Chapter
11 debtor with a "Chapter 11 Quarterly Fees Statement" every
quarter. The Fee Statement estimates the quarterly fee owed for
that quarter based on the disbursement information available to
the U.S. Trustee.
Upon receipt of the Fee Statement, every Chapter 11 debtor is on
notice that the fee amount listed is only an estimate if actual
disbursement information for the quarter is unavailable, and that
an estimated fee will be calculated upon whatever financial
information the U.S. Trustee has at his disposal.
According to Mr. Schepacarter, the Fee Statement, among other
things, stresses that, if the debtor calculates its fee to be less
than the "estimated" quarterly fee, it must provide the missing
disbursement information. In addition, the "Disbursements
History" section of the Fee Statement requires the debtor to
certify under penalty of perjury that the disbursement information
is true and correct. If the information in the "Disbursements
History" is not correct, the debtor is expected to provide the
correct information so that the U.S. Trustee can ensure that the
correct quarterly fee is paid.
Accurate Information Must be Provided
To date, the Debtors have already paid $3,995,500 in Quarterly
Fees since the Petition Date, leaving a residual estimated balance
of $8,398,750 due through the third quarter of 2005, Mr.
Schepacarter explains.
Without accurate and complete monthly and quarterly disbursement
information, however, the U.S. Trustee cannot ensure that the
correct quarterly fee is paid in each case.
For this reason, Ms. Stapleton asks the U.S. Bankruptcy Court for
the District of Delaware to:
(a) compel the Debtors to properly report disbursements in
accordance with Section 1930(a)(6) and prevailing and
controlling case law;
(b) direct the Debtors to provide the internal expense
allocation information they promised to maintain, and
which they are required to provide to the U.S. Trustee, so
that the U.S. Trustee can determine the actual expenses
paid on each Debtor's behalf by IHS; and
(c) direct the Debtors to pay additional quarterly fees
consistent with the Debtors' actual disbursements and
Section 1930(a)(6).
Integrated Health Services, Inc. -- http://www.ihs-inc.com/--
operated local and regional networks that provide post-acute care
from 1,500 locations in 47 states. The Company and its
437 debtor-affiliates filed for chapter 11 protection on
February 2, 2000 (Bankr. Del. Case No. 00-00389). Rotech Medical
Corporation and its direct and indirect debtor-subsidiaries broke
away from IHS and emerged under their own plan of reorganization
on March 26, 2002. Abe Briarwood Corp. bought substantially all
of IHS' assets in 2003. The Court confirmed IHS' Chapter 11 Plan
on May 12, 2003, and that plan took effect September 9, 2003.
Michael J. Crames, Esq., Arthur Steinberg, Esq., and Mark D.
Rosenberg, Esq., at Kaye, Scholer, Fierman, Hays & Handler, LLP,
represent the IHS Debtors. On September 30, 1999, the Debtors
listed $3,595,614,000 in consolidated assets and $4,123,876,000 in
consolidated debts. (Integrated Health Bankruptcy News, Issue
No. 98; Bankruptcy Creditors' Service, Inc., 215/945-7000)
INTEGRATED HEALTH: Asks Court to Disallow IRS' Unsecured Claims
---------------------------------------------------------------
In 1997, Integrated Health Services, Inc., and HealthSouth
Corporation entered into a purchase agreement whereby IHS acquired
the stock of VTA Management Services, Inc.
VTA was a management consulting company that provided licensed
physical therapists, occupational therapists and speech
pathologists to nursing homes, schools, hospitals and similar
facilities with temporary or supplemental staffing needs.
On July 10, 2000, the United States Department of the Treasury,
Internal Revenue Service, filed Claim No. 2316 against VTA for
$26,715,261, representing Federal employment tax assessments for
the years 1990 through 1995, plus interest. The Claim asserted an
unsecured, non-priority status.
James L. Patton, Jr., Esq., at Young Conaway Stargatt & Taylor,
LLP, in Wilmington, Delaware, relates that at all relevant times,
VTA has disputed the assessment. The dispute is still pending in
a civil action before the United States District Court for the
Eastern District of New York captioned "VTA Management Services,
Inc., et al., v. United States," Case No. 01-CV-0145 (ARR).
On May 17, 2002, the IHS Debtors objected to Claim No. 2316,
stating that HealthSouth is the one liable for the Claim. The
IRS responded by noting, without any explanation, that it had
erroneously filed the Claim as a general unsecured claim and would
amend it to assert priority status.
The IHS Debtors' objection with respect to Claim No. 2316 was
adjourned indefinitely and is currently pending.
In August 2005, the IRS filed Claim No. 14146, purporting to amend
Claim No. 2316.
Claim No. 14146 asserts:
* an unsecured priority claim against VTA for $26,714,499; and
* a general unsecured claim for $762, based on the same
disputed tax assessments that are the subject of the
District Court Action.
Claim Must be Disallowed
IHS Liquidating LLC tells Judge Walrath that Claim No. 14146 must
be disallowed because it is time-barred, and was filed without the
Court's permission.
According to Mr. Patton, the IRS has not, at any time, sought
permission to file Claim No. 14146, and cannot, under any
circumstance, demonstrate excusable neglect. Nor can the IRS
establish that Claim No. 14146 should be deemed a valid amendment
relating back to Claim No. 2316 for purposes of Rule 7015 of the
Federal Rules of Bankruptcy Procedure, Mr. Patton asserts.
At this late stage in the Debtors' Chapter 11 proceedings, the
prejudicial effect of allowing Claim No. 14146 would be profound,
Mr. Patton says.
The Debtors relied on Claim No. 2316 in formulating a Plan of
Reorganization, and in estimating the distributions that would be
available to unsecured creditors, who relied on the Debtors'
estimates in voting on and accepting the Plan. Throughout the
entirety of the IHS Debtors' cases, the Debtors estimated their
maximum exposure with respect to Claim No. 2316 to be
approximately $800,000. Mr. Patton says the elevation of the
Claim to priority status would impose on the Debtors' estates the
prospect of a $26,000,000 increase in their priority tax
obligations, which would force IHS Liquidating to suspend
distribution to unsecured creditors indefinitely, while the merits
are adjudicated in the District Court Action.
Mr. Patton further notes that:
(a) allowance of Claim No. 14146 would impose substantial
delay and uncertainty with respect to the long-awaited
distributions to unsecured creditors that is contemplated
under the Plan;
(b) allowance of Claim No. 14146 as a priority claim could
substantially reduce -- if not eliminate -- recoveries
available for unsecured creditors; and
(c) Claim No. 14146 would work an unfair prejudice on the
holders of Class 4 Senior Lender Claims, which are also
sharing their pro rata distributions as part of their
bargained-for distributions under the Plan.
"It would be highly prejudicial for the Court to permit a claimant
who asserted an unsecured claim prior to the consummation of the
Plan . . . to elevate its claim to priority status two years after
the Plan was consummated," Mr. Patton asserts.
IHS Liquidating, hence, asks the Court to disallow Claim No. 14146
in its entirety.
Integrated Health Services, Inc. -- http://www.ihs-inc.com/--
operated local and regional networks that provide post-acute care
from 1,500 locations in 47 states. The Company and its
437 debtor-affiliates filed for chapter 11 protection on
February 2, 2000 (Bankr. Del. Case No. 00-00389). Rotech Medical
Corporation and its direct and indirect debtor-subsidiaries broke
away from IHS and emerged under their own plan of reorganization
on March 26, 2002. Abe Briarwood Corp. bought substantially all
of IHS' assets in 2003. The Court confirmed IHS' Chapter 11 Plan
on May 12, 2003, and that plan took effect September 9, 2003.
Michael J. Crames, Esq., Arthur Steinberg, Esq., and Mark D.
Rosenberg, Esq., at Kaye, Scholer, Fierman, Hays & Handler, LLP,
represent the IHS Debtors. On September 30, 1999, the Debtors
listed $3,595,614,000 in consolidated assets and $4,123,876,000 in
consolidated debts. (Integrated Health Bankruptcy News, Issue
No. 98; Bankruptcy Creditors' Service, Inc., 215/945-7000)
INTERLIANT INC: Court Delays Closing of Ch. 11 Cases to Nov. 17
---------------------------------------------------------------
The Post Effective Date Creditors' Committee of I Successor
Corp., the successor-in-interest to Interliant, Inc., and its
debtor-affiliates, pursuant to the Debtors' Third Amended Plan of
Liquidation, sought and obtained an order from the U.S. Bankruptcy
Court for the Southern District of New York delaying the entry of
a final decree closing Interliant's chapter 11 cases until
Nov. 17, 2005.
Adam H. Friedman, Esq., at Olshan Grundman Frome Rosenzweig &
Wolosky LLP, in New York, tells the Court that while the claims
administration process is substantially complete, and all
preference actions have been settled or dismissed, the Committee's
litigation against certain former insiders continues.
Additionally, settlement discussions are underway in the insider
litigation. Thus, a further extension of the Final Decree
deadlines was required.
Headquartered in Purchase, New York, Interliant, Inc., is a
provider of Web site and application hosting, consulting services,
and programming and hardware design to support the information
technologies infrastructure of its customers. The Company and its
debtor-affiliates filed for chapter 11 protection on August 5,
2002 (Bankr. S.D.N.Y. Case No. 02-23150). Cathy Hershcopf, Esq.,
and James A. Beldner, Esq., at Kronish Lieb Weiner & Hellman, LLP,
represent the Debtors in their restructuring efforts. When the
Company filed for protection from its creditors, it listed
$69,785,979 in assets and $151,121,417 in debts. The Court
confirmed the Debtors' Third Amended Plan of Liquidation on
March 12, 2004, allowing the Debtors to emerge from bankruptcy on
Sept. 30, 2004.
INTERMET CORPORATION: Emerges from Chapter 11 Protection
--------------------------------------------------------
Intermet Corporation reported that its plan of reorganization,
previously approved by the U.S. Bankruptcy Court for the Eastern
District of Michigan, has become effective and INTERMET has
emerged from bankruptcy court protection. In connection with the
emergence, Intermet entered into a $285-million credit facility
with Goldman, Sachs & Co. as the lead arranger.
Commenting on the announcement, Gary F. Ruff, CEO of Intermet,
said, "We are pleased to have successfully completed our
restructuring process. The entire Intermet team can now focus its
complete attention and efforts on manufacturing castings and
serving our customers."
As contemplated by Intermet's plan of reorganization, Intermet has
become a Delaware corporation. Intermet's former common stock has
been cancelled and shares of its new common stock will be issued
to its pre-petition unsecured creditors in accordance with the
terms of the plan. Additionally, simultaneously with the
consummation of and as contemplated by the plan of reorganization,
Intermet raised $75 million through a rights offering pursuant to
which electing pre-petition unsecured creditors purchased shares
of common stock of the reorganized company. Finally, as
contemplated by the plan of reorganization, Intermet will file the
appropriate forms with the Securities and Exchange Commission
later today to deregister as a public company and terminate its
public company reporting obligations. Going forward, Intermet
will be a private company and will not be required to file further
reports with the SEC.
Intermet's plan of reorganization also provides that holders of
unsecured claims of $125,000 or more will either receive common
stock of Intermet or receive a cash distribution, the amount of
which is based on the claimholders' voting elections or their
failure to vote or make certain elections. Holders of claims
under $125,000, called convenience claims, will receive a cash
distribution. Intermet is in the process of determining
appropriate reserves, as necessary, for certain disputed claims
and expects to begin making distributions to claim holders as soon
as reasonably practicable after the amounts of these reserves are
sufficiently resolved to enable meaningful distributions.
Headquartered in Troy, Michigan, Intermet Corporation --
http://www.Intermet.com/-- provides machining and tooling
services for the automotive and industrial markets specializing in
the design and manufacture of highly engineered, cast automotive
components for the global light truck, passenger car, light
vehicle and heavy-duty vehicle markets. Intermet, along with its
debtor-affiliates, filed for chapter 11 protection on Sept. 29,
2004 (Bankr. E.D. Mich. Case Nos. 04-67597 through 04-67614).
Salvatore A. Barbatano, Esq., at Foley & Lardner LLP, represents
the Debtors. When the Debtors filed for protection from their
creditors, they listed $735,821,000 in total assets and
$592,816,000 in total debts.
JO-ANN STORES: Discloses Third Quarter Financial Results
--------------------------------------------------------
Jo-Ann Stores, Inc. (NYSE:JAS), reported that October net sales
increased 8.8% to $174.6 million from $160.5 million in the same
period last year. October same-store sales increased 3.4%
compared to a same-store sales decrease of 0.3% last year.
The Company previously indicated that it expected same-store sales
could range from a decline of 2% to an increase of 2% for the
remaining four months of fiscal 2006. Furthermore, the Company
estimated that the gross margin rate in the third and fourth
quarters of fiscal 2006 could decline 150 to 250 basis points
versus the same period last year.
Although October same-store sales were better than the Company's
previously communicated expectations, the Company experienced
substantial gross margin rate deterioration compared with the same
period last year. The Company estimates the gross margin rate for
the third quarter will be within its previously estimated range.
For the third quarter, net sales increased 5.8% to $474.2 million
from $448.3 million for the same period last year. Same-store
sales increased 0.7% for the quarter, versus a same-store sales
decrease of 0.9% for the same period last year.
Year-to-date net sales increased 4.4% to $1.28 billion from
$1.22 billion in the prior year. Year-to-date same-store sales
increased 0.3%, versus a same-store sales increase of 2.7% for the
same period last year.
Jo-Ann Stores, Inc. -- http://www.joann.com-- the leading
national fabric and craft retailer with locations in 47 states,
operates 712 Jo-Ann Fabrics and Crafts traditional stores and
135 Jo-Ann superstores.
* * *
As reported in the Troubled Company Reporter on Oct. 10, 2005,
Standard & Poor's Ratings Services placed its ratings, including
its 'BB-' corporate credit rating, on Hudson, Ohio-based specialty
retailer Jo-Ann Stores Inc. on CreditWatch with negative
implications.
KERZNER INTERNATIONAL: Posts $4.9 Million Net Loss in 3rd Quarter
-----------------------------------------------------------------
Kerzner International Limited (NYSE: KZL) reported results for the
third quarter of 2005. The Company reported a net loss in the
quarter of $4.9 million compared to a net loss of $11.2 million in
the same period last year, resulting in diluted net loss per share
of $0.14 compared to diluted net loss per share of $0.33 in the
same period last year.
Adjusted net income in the quarter was $10.6 million compared to
$3.7 million in the same period last year. Adjusted net income
per share in the quarter was $0.28 compared to $0.11 in the same
period last year. Butch Kerzner, Chief Executive Officer of the
Company, commented, "I am pleased to report record third quarter
levels of adjusted EPS. This achievement is largely attributable
to our Paradise Island properties and the improved performance of
One&Only Palmilla. Collectively, the Paradise Island properties
achieved record third quarter EBITDA of $33.4 million. One&Only
Resorts also performed strongly, as RevPAR increased by 20%."
"We have also strengthened our balance sheet by refinancing
our $400 million of senior subordinated debt and increased
the borrowing capacity on our revolving credit facility to
$650 million. When combined with our businesses' free cash flow
generation capabilities, we believe our capital resources are well
positioned to undertake future growth initiatives, including the
Phase III expansion project in The Bahamas; Atlantis, The Palm,
Dubai; our planned investment in Morocco and other projects that
may arise."
Liquidity
The Company has recently executed these financing initiatives:
* Completed an offering in the quarter of $400 million of
6-3/4% Senior Subordinated Notes due 2015. In conjunction
with this offering, the Company tendered for all of its
$400 million of 8-7/8% Senior Subordinated Notes due 2011.
As of Sept. 30, 2005, $3.1 million of the 8-7/8% Notes
remained outstanding. An additional $1.5 million of the
8-7/8% Notes were tendered for in the fourth quarter,
bringing the remaining balance of 8-7/8% Notes on the
Company's balance sheet to $1.6 million. The Company has
recorded a loss on early extinguishment of debt of
$27.8 million, which has been excluded from adjusted earnings
per share.
* Terminated $150 million of fixed-to-variable rate swap
agreements, which results in an increase in fixed rate debt,
in advance of planned variable rate borrowings for growth
initiatives under the Company's Revolving Credit Facility.
The termination of these swap agreements resulted in the
realization of $4.8 million, which reduced the loss on early
extinguishment of the 8-7/8% Notes.
* Amended and restated the Company's Revolving Credit Facility
on October 31, 2005, increasing the availability under the
facility from $500 million to $650 million and amending
certain pricing and financial covenants.
* Announced that its Board of Directors had approved a share
repurchase program authorizing the repurchase of up to
two million of the Company's ordinary shares. The Company
subsequently commenced this program and repurchased 612,500
shares in the quarter for $35.7 million.
At September 30, 2005, the Company held $244.3 million in cash and
cash equivalents, short-term investments and restricted cash.
This amount consisted of $113 million in cash and cash
equivalents, $59.8 million in short-term investments and
$71.5 million in restricted cash. Restricted cash includes
$68 million of escrowed funds for the Company's investment in the
joint venture developing Atlantis, The Palm, which is expected to
increase by an additional $75 million upon completion of the
subordinated debt financing to reflect the Company's increased
equity commitment to the project.
Total interest-bearing debt at the end of the quarter was
$801.9 million, comprised primarily of the Company's newly issued
$400 million of 6-3/4% Notes, $230 million of 2.375% Convertible
Senior Subordinated Notes due 2024, as well as $110 million of
financing related to the One&Only Palmilla and approximately
$58.3 million of non-affiliated debt associated with Reethi Rah.
The non-affiliated debt associated with One&Only Palmilla and
Reethi Rah is consolidated under FIN 46R.
At the end of the quarter, the Company's Revolving Credit Facility
was undrawn. In determining the credit statistics used to measure
compliance with the Company's financial covenants under this
facility, the incremental debt and interest expense associated
with the consolidation of Reethi Rah and the 50%-owned One&Only
Palmilla are excluded.
In the quarter, the Company incurred $70.6 million in capital
expenditures, related primarily to Paradise Island. Total capital
expenditures included capitalized interest of $2.2 million. In
the fourth quarter of 2005, the Company expects to spend between
$90 million and $100 million on Paradise Island capital
expenditures.
In the quarter, the Company invested $13.2 million in Atlantis,
The Palm. The Company expects to invest between $30 million and
$35 million in the project in the fourth quarter of 2005. This
investment will be sourced from escrowed funds, which are
classified as restricted cash on the Company's balance sheet.
As of September 30, 2005, shareholders' equity was $1.15 billion
and the Company had approximately 36.4 million Ordinary Shares
outstanding.
Other Matters
In the quarter, the Company recorded a net income tax benefit of
$15.8 million, which represents a U.S. federal tax benefit and
state and foreign income tax expenses. It includes a benefit of
$15.7 million related to the refinancing of its 8-7/8% Notes,
which is not included in the Company's adjusted earnings per
share. In the quarter, the Company paid cash taxes of
approximately $0.4 million.
Kerzner International Limited engages develops and operates
destination resorts, luxury resort hotels, and gaming properties
worldwide. The company was incorporated as Sun International
Hotels Limited in 1993 and changed its name to Kerzner
International Limited in 2002. Kerzner is headquartered in
Paradise Island, The Bahamas.
* * *
As reported in the Troubled Company Reporter on Sept. 19, 2005,
Moody's Investors Service assigned a B2 rating to Kerzner
International Limited's proposed $400 million guaranteed senior
subordinated notes due 2015, and affirmed the company's Ba3
Corporate Family Rating and stable rating outlook. The notes are
offered pursuant to Rule 144A of the Securities Act of 1933.
Proceeds of the note offering will be used, together with cash on
hand, to repurchase all of Kerzner's 8-7/8% guaranteed senior
subordinated notes tendered for pursuant to a tender offer
launched on August 12, 2005. The B2 rating on the 8 7/8% notes
will be withdrawn once the notes are redeemed.
As reported in the Troubled Company Reporter on Sept. 19, 2005,
Standard & Poor's Ratings Services assigned its 'B' rating to
Kerzner International Ltd.'s proposed $400 million senior
subordinated notes due 2015. Proceeds from these notes, along
with cash on hand, will be used to refinance its existing
$400 million senior subordinated notes due 2011 and to fund fees
and expenses associated with this transaction.
At the same time, Standard & Poor's affirmed its ratings,
including its 'BB-' corporate credit rating, on the hotels and a
casino owner and operator. S&P said the outlook on Kerzner
remains stable.
LEVEL 3: Financial Risks Cue Fitch to Junk Issuer Default Rating
----------------------------------------------------------------
Fitch has affirmed the 'CCC' issuer default rating, along with
each individual issue rating assigned to Level 3 Communications,
Inc. and Level 3 Financing, Inc. Approximately $6 billion of debt
as of Sept. 30, 2005 is affected by this action.
The affirmation reflects the company's high leverage, large amount
of negative free cash flow, and large debt maturities beginning in
2008 as well as the execution risk associated with changing its
revenue mix from declining mature services to more growth oriented
services. This action also acknowledges Level 3's liquidity
position with approximately $1.3 billion of cash and marketable
securities as of the end of third-quarter 2005, along with
significant covenant flexibility to issue more holding company
debt.
The predominant credit profile risk facing Level 3 relates to its
need to address significant debt maturities starting in 2008 when
$1.3 billion of debt matures. While the company was successful
placing $880 million of convertible senior notes in April 2005,
there is no guarantee that additional market access will be
available absent material operational and financing improvements.
Fitch expects that negative free cash flow should improve
significantly for the company in 2006 due to its pending
acquisition of WilTel Communications Group, LLC, scaling of growth
services, and lower capital spending compared with 2005.
Nevertheless, Fitch expects that the company will continue to
produce negative free cash flow through 2007.
Level 3's maturity schedule for the next five years consists of $0
in 2006, $1 million in 2007, $1.291 billion in 2008, $363 million
in 2009, and $1.6 billion in 2010. The company has projected that
negative free cash flow for full-year 2005 will range between $370
million-395 million. Level 3 has $1.3 billion of cash and
marketable securities. Its capital structure consists of a fully
drawn $730 million secured term loan due 2011 and $500 million of
senior unsecured notes at Level 3 Financing, as well as
$3.84 billion of senior unsecured and $875 million of subordinated
notes at the Level 3 holding company level.
One covenant currently limiting new debt issuance that gives the
company good flexibility is total consolidated debt divided by
consolidated capital, which should be less than 2.25 times. Fitch
estimates that this covenant would allow Level 3 to issue more
than $6 billion of new incremental debt. Level 3 does not have
any maintenance covenants related to interest coverage or
leverage.
If Level 3 is unable to materially improve free cash flow in 2006,
significantly reduce leverage, or be unable to show continued good
progress in changing its revenue mix to a greater growth focus, a
negative rating action might result, which could include a change
of Rating Outlook by Fitch.
Fitch has affirmed these ratings:
Level 3 Communications, Inc.
-- Issuer default rating 'CCC';
-- Senior unsecured 'CCC-'/'R5';
-- Subordinated 'CC'/'R6';
-- Rating Outlook Stable.
Level 3 Financing, Inc.
-- Issuer default rating 'CCC';
-- Senior secured term loan 'B'/'R1';
-- Senior unsecured 'B'/'R1';
-- Rating Outlook Stable.
MAGRUDER COLOR: Gets Final Order on DIP Financing from 1029 Newark
------------------------------------------------------------------
The U.S. Bankruptcy Court for the District of New Jersey granted
Magruder Color Company and its debtor-affiliates final approval:
a) to obtain post-petition financing from 1029 Newark Investment
Company LLC pursuant to a Note and Loan Security Agreement
between the Debtors and 1029 Newark; and
b) to modify the automatic stay under Section 362 of the
Bankrutpcy Code and grant adequate protection to Newark
Investment.
Use of Loan Proceeds
The Court authorizes the Debtors to enter into the Security
Agreement with 1029 Newark and obtain DIP financing of up to $3.5
million pursuant to the Security Agreement and the Court's Final
DIP Order.
The Debtors will use the loan proceeds to fund their businesses
and on-going operations and to satisfy their post-petition
obligations of approximately $2.9 million to Wachovia Bank, N.A.
The Debtor's use of the proceeds of the DIP loan will be in
compliance with the Court's Final DIP Order, the Security
Agreement and a 7-week Budget beginning Oct. 22, 2005, until
December 3, 2005.
A full-text copy of the 7-week Budget is available for free at:
http://bankrupt.com/misc/MagruderColorFinalDIPBudget.pdf
A full-text copy of the Security Agreement is available for free
at:
http://bankrupt.com/MagruderColorLoan&SecurityAgreement.pdf
Adequate Protection & Modification
of the Automatic Stay
As adequate protection for its interests, 1029 Newark is granted
valid and perfected first priority security interests and liens on
the Debtors' personal property and a second position security
interest and lien on the Debtors' real property.
As additional protection, 1029 Newark is granted an allowed super-
priority administrative claim having priority in right of payment
over all other post-petition obligations and liabilities incurred
by the Debtors.
The Court modifies and vacates the automatic stay provisions of
Section 362 of the Bankruptcy Code to permit 1029 Network to
perform any act authorized by virtue of its DIP loan and the Final
DIP Order.
Headquartered in Elizabeth, New Jersey, Magruder Color Company
-- http://www.magruder.com/-- and its affiliates manufacture
basic pigment and also supply quality products to the ink, paint,
and plastics industries. The Company and its debtor-affiliates
filed for chapter 11 protection on June 2, 2005 (Bankr. D.N.J.
Case No. 05-28342). Bruce D. Buechler, Esq., at Lowenstein
Sandler PC represent the Debtors in their restructuring efforts.
When the Debtors filed protection from their creditors, they
estimated assets and debts of $10 million to $50 million.
MAJESTIC STAR: Trump Buy Spurs Moody's to Affirm Low-B Ratings
--------------------------------------------------------------
Moody's Investors Service revised the outlook of Majestic Star
Casino, L.L.C. to developing following the announcement that it
will acquire Trump Entertainment Resorts Holdings, L.P.'s Gary,
Indiana riverboat casino for $253 million in cash, or about 8
times the casino property's latest twelve month EBITDA.
Concurrently, the ratings for both Majestic Star and Trump were
affirmed; Trump's rating outlook is stable. The acquisition is
expected to close by the end of 2005 and is subject to customary
approvals and consents.
The acquisition is expected to be financed with all debt.
Majestic Star's developing outlook reflects uncertainty regarding
its consolidated debt structure post closing, as well as the
possible need for capital investment in the Trump property due to
under investment, along with higher interest expense relative to
lower year over year cash from operations. Year to date earnings
and cash flow have been hurt by higher promotional expenses due to
competitive conditions in the company's markets.
The affirmation of Majestic's ratings assumes that the company
will benefit over time from higher earnings at the Trump property
given that Majestic Star's property generates higher margins than
the Trump riverboat. Majestic Star currently owns a riverboat
casino adjacent to Trump Indiana, and through a joint venture,
Majestic Star and Trump own, develop and operate all common
land-based and waterside operations in support of their riverboat
casinos at Buffington Harbor in Gary, Indiana.
The affirmation of Trump's ratings considers that the asset sale
will provide the company with additional capital that it can use
to invest in its Atlantic City properties. However, the company
must obtain lender approval for the sale, as well as the ability
to retain all or a portion of the sale proceeds. There is some
level of uncertainty regarding the timing and degree of any cash
flow improvement related to future capital investment. Trump's
Atlantic City casinos, which are in need of both maintenance and
upgrade capital investment, are currently competing with new and
improved properties in that market, most notably the Borgata,
which has grown largely at the expense of Atlantic City's other
casino properties. Trump's B3 corporate family rating also
incorporates the potential for longer-term competition from
neighboring jurisdictions including Pennsylvania, Delaware,
Maryland and New York.
These Trump ratings have been affirmed:
-- $200 million senior secured revolver due 2010 -- B2;
-- $150 million senior secured term loan due 2012 -- B2;
-- $150 million senior secured delayed draw term loan due
2012 -- B2;
-- $1.25 billion second lien senior secured notes due 2015 --
Caa1;
-- Speculative grade liquidity rating -- SGL-3; and
-- Corporate family rating -- B3.
These Majestic Star ratings have been affirmed:
-- $80 million senior secured revolver due 2007 -- B1;
-- $260 million senior secured notes due 2010 -- B2; and
-- Corporate family rating -- B2.
Majestic Star Casino, LLC directly and indirectly owns and
operates riverboat casinos in Gary, Indiana; Tunica, Mississippi;
and Black Hawk, Colorado. Trump Entertainment Resorts Holdings,
L.P. owns the Trump Taj Mahal Casino Resort, Trump Plaza Hotel and
Casino, and Trump Marina Hotel Casino in Atlantic City, in
addition to its Gary, Indiana riverboat casino.
MCDERMOTT INT'L: Sept. 30 Balance Sheet Upside-Down by $53 Million
------------------------------------------------------------------
McDermott International, Inc. (NYSE:MDR) reported net income of
$58.5 million for the 2005 third quarter, compared to net income
of $18.3 million for the corresponding period in 2004. Weighted
average common shares outstanding on a fully diluted basis were
approximately 73.3 million and 68.4 million for September 30, 2005
and September 30, 2004, respectively.
Revenues in the third quarter of 2005 were $503.5 million,
compared to $450.2 million in the corresponding period in 2004,
reflecting increases at both consolidated segments. Operating
income was $74.1 million in the 2005 third quarter, compared to
$39.8 million in the 2004 third quarter. Operating income for the
third quarter of 2005 included approximately $0.2 million of
corporate qualified pension expense, compared to $14.1 million of
corporate qualified pension expense in the third quarter of 2004.
The reduction in corporate qualified pension expense reflects the
previously announced spin-off of The Babcock & Wilcox Company
pension plan and related expense, which was completed on January
31, 2005. In addition, beginning Jan. 1, 2005, McDermott now
allocates to its Government Operations segment the pension expense
related to that segment.
"McDermott produced solid results from its two consolidated
businesses during the third quarter of 2005, and we continue to
expect that B&W will be reconsolidated in our results during early
2006," said Bruce W. Wilkinson, Chairman of the Board and Chief
Executive Officer of McDermott. "This was an active quarter for
the Company, including the activities associated with the
currently proposed B&W settlement and the signing of approximately
$1.0 billion of new awards at J. Ray."
As a result of the Aug. 29, 2005 announcement, and the subsequent
filing, of a currently proposed plan of reorganization for B&W's
Chapter 11 settlement, beginning in the third quarter of 2005,
McDermott has suspended recording the quarterly non-cash
adjustment associated with B&W's previously negotiated settlement,
as the previous plan is no longer considered probable. In the
third quarter of 2004, McDermott recorded an after-tax revaluation
expense of $1.1 million associated with the revaluation expense of
the previously negotiated settlement.
The Babcock & Wilcox Company
McDermott wrote off its remaining investment in B&W of $224.7
million during the second quarter of 2002 and has not consolidated
B&W with the Company's financial results since B&W's Chapter 11
bankruptcy filing in February 2000. In accordance with the
currently proposed settlement related to B&W's Chapter 11
proceedings, the Company currently expects that B&W will be
reconsolidated in early 2006.
During the third quarter of 2005 on a deconsolidated basis, B&W's
revenues were $373.1 million, an increase of $94.1 million
compared to the third quarter of 2004. In the 2005 third quarter,
B&W recorded an estimated net expense of $468.4 million related to
the currently proposed Chapter 11 settlement announced on August
29, 2005. As a result of this expense, B&W's operating loss for
the third quarter of 2005, prepared in accordance with generally
accepted accounting principals, was $441.6 million. Excluding the
net expense related to the Chapter 11 settlement from B&W's GAAP
operating income, B&W's non-GAAP operating income for the third
quarter of 2005 was $26.7 million. During the third quarter of
2005, B&W recorded approximately $6.8 million of pension expense,
which in prior years resided in the corporate segment. In the
third quarter of 2004, B&W's operating income was $20.6 million.
At September 30, 2005, B&W's backlog was $1.6 billion, compared to
backlog of $1.5 billion and $1.3 billion at December 31, 2004 and
September 30, 2004, respectively.
McDermott International, Inc. is a leading worldwide energy
services company. The Company's subsidiaries provide engineering,
fabrication, installation, procurement, research, manufacturing,
environmental systems, project management and facility management
services to a variety of customers in the energy and power
industries, including the U.S. Department of Energy.
At Sept. 30, 2005, McDermott International, Inc.'s balance sheet
showed a $53,464,000 stockholders' deficit compared to a
$261,443,000 deficit at Dec. 31, 2004.
MESABA AVIATION: Section 341(a) Meetings Slated for November 30
---------------------------------------------------------------
Habbo G. Fokkena, the United States Trustee for Region 12,
will convene a meeting of Mesaba Aviation Inc.'s creditors on
November 30, 2005, at 1:00 p.m. The meeting will take place at
the U.S. Courthouse, Room 1017, 300 S 4th St., in Minneapolis,
Minnesota.
This is the first meeting of creditors required under Section
341(a) of the Bankruptcy Code 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.
Mesaba Aviation, Inc., d/b/a Mesaba Airlines,--
http://www.mesaba.com/-- operates as a Northwest Airlink
affiliate under code-sharing agreements with Northwest Airlines.
The Company filed for chapter 11 protection on Oct. 13, 2005
(Bankr. D. Minn. Case No. 05-39258). Michael L. Meyer, Esq., at
Ravich Meyer Kirkman McGrath & Nauman PA, represents the Debtor in
its restructuring efforts. When the Debtor filed for protection
from its creditors, it listed total assets of $108,540,000 and
total debts of $87,000,000. (Mesaba Bankruptcy News, Issue No. 5;
Bankruptcy Creditors' Service, Inc., 215/945-7000)
MESABA AVIATION: Court Sets February 28 as Claims Bar Date
-----------------------------------------------------------
Pursuant to a notice dated Nov. 3, 2005, the U.S. Bankruptcy Court
for the District of Minnesota set February 28, 2006, as the last
day for all creditors, except governmental units, to file a proof
of claim in Mesaba Aviation, Inc.'s Chapter 11 case.
Governmental units will have until April 11, 2006, to file a
claim in Mesaba's case.
Mesaba Aviation, Inc., d/b/a Mesaba Airlines,--
http://www.mesaba.com/-- operates as a Northwest Airlink
affiliate under code-sharing agreements with Northwest Airlines.
The Company filed for chapter 11 protection on Oct. 13, 2005
(Bankr. D. Minn. Case No. 05-39258). Michael L. Meyer, Esq., at
Ravich Meyer Kirkman McGrath & Nauman PA, represents the Debtor in
its restructuring efforts. When the Debtor filed for protection
from its creditors, it listed total assets of $108,540,000 and
total debts of $87,000,000. (Mesaba Bankruptcy News, Issue No. 5;
Bankruptcy Creditors' Service, Inc., 215/945-7000)
MESABA AVIATION: U.S. Trustee Picks 7-Member Committee
------------------------------------------------------
Habbo G. Fokkena, United States Trustee for Region 12, appointed
seven creditors to serve on the Official Committee of Unsecured
Creditors in Mesaba Aviation, Inc.'s Chapter 11 case.
The Committee is composed of:
1. BAE Systems Regional Aircraft
13850 McLearen Road
Herndon, VA 20171
Contact Person: John J. Seichter
Phone No.: (703) 736-2507
2. Messier Services, Inc.
4360 Severn Way
Sterling, VA 20166-8910
Contact Person: John Freiling
Phone No.: (703) 450-8200
3. AAR Aircraft & Turbine Center
3312 Paysphere Circle
Chicago, IL 60674
Contact Person: Michael Carr
Phone No.: (630) 227-2140
4. Aircraft Braking Systems
PO Box 73252
Cleveland, OH 44193-0165
Contact Person: Matt Rice
Phone No.: (330) 796-9640
5. Air Line Pilots Association, Intl.
c/o Cohen, Weiss and Simon LLP
330 West 42nd Street
New York, NY 10036-6976
Contact Person: Paul Glover
Phone No.: (212) 356-0216 (Peter DeChiara)
6. Pan Am International Flight Academy
5000 NW 36th Street
Miami, FL 33122
Contact Person: Paul Glover
Phone No.: (407) 275-3900
7. Aerospace Composite Tech
3220 S. Groove Street
Fort Worth, TX 76110
Contact Person: Steven Bowen
Phone No.: (817) 921-2220
The U.S. Trustee also designated John J. Seichter of BAE Systems
as acting chairperson of the Committee pending selection by the
Committee members of a permanent Chairperson.
Mesaba Aviation, Inc., d/b/a Mesaba Airlines,--
http://www.mesaba.com/-- operates as a Northwest Airlink
affiliate under code-sharing agreements with Northwest Airlines.
The Company filed for chapter 11 protection on Oct. 13, 2005
(Bankr. D. Minn. Case No. 05-39258). Michael L. Meyer, Esq., at
Ravich Meyer Kirkman McGrath & Nauman PA, represents the Debtor in
its restructuring efforts. When the Debtor filed for protection
from its creditors, it listed total assets of $108,540,000 and
total debts of $87,000,000. (Mesaba Bankruptcy News, Issue No. 5;
Bankruptcy Creditors' Service, Inc., 215/945-7000)
METABOLIFE INT'L: U.S. Trustee Amends Committee Membership
----------------------------------------------------------
Steven Jay Katzman, the United States Trustee for Region 15,
amended the appointment of creditors serving on the Official
Committee of Unsecured Creditors in Metabolife International,
Inc.'s chapter 11 cases.
Three members have been added to the Committee:
* Metro Networks Communications, LP
* Mobility Technologies Inc.
* The Chemins Company, Inc.,
while two have been removed:
* NYCA, Inc.
* California Creative Enterprises, Inc.
The Creditors' Committee's current members are:
1. Sherry Fuss
c/o Andrews & Thornton
Attn: Anne Andrews, Esq.
820 N Parton Street, 2nd Floor
Santa Ana, CA 92701
Tel: 714-565-7555
Fax: 714-242-9802
2. Phillip Overstreet
c/o The Jacks Law Firm
Attn: Tommy Jacks, Esq.
111 Congress Avenue
Austin, TX 78701
Tel: 512-478-4422
Fax: 512-478-5015
3. Rebecca Welty
c/o Lopez Hodes Restaino
Attn: Steve Skikos, Esq.
625 Market Street, 15th Floor
San Francisco, CA 94105
Tel: 415-956-5257
Fax: 415-956-4416
4. Patricia and Hollis Riley
c/o Blizzard McCarthy & Nabers
Attn: Edward Blizzard, Esq.
440 Louisiana, Suite 1710
Houston, TX 77002
Tel: 713-844-3750
Fax: 713-844-3755
5. Metro Networks Communications, LP
Attn: Lauro Bueno
40 West 57th Street, 15th Floor
New York, NY 10019
Tel: 212-641-2111
Fax: 212-641-2198
6. Mobility Technologies, Inc.
dba Traffic Pulse Network/Traffic.Com
Attn: AJ Freeman
851 Duportail Road, Suite 220
Wayne, PA 19087
Tel: 610-407-7400, Ext. 2266
Fax: 610-889-7572
Official creditors' committees have the right to employ legal and
accounting professionals and financial advisors, at the Debtors'
expense. They may investigate the Debtors' business and financial
affairs. Importantly, official committees serve as fiduciaries to
the general population of creditors they represent. Those
committees will also attempt to negotiate the terms of a
consensual chapter 11 plan -- almost always subject to the terms
of strict confidentiality agreements with the Debtors and other
core parties-in-interest. If negotiations break down, the
Committee may ask the Bankruptcy Court to replace management with
an independent trustee. If the Committee concludes reorganization
of the Debtors is impossible, the Committee will urge the
Bankruptcy Court to convert the chapter 11 cases to a liquidation
proceeding.
Headquartered in San Diego, California, Metabolife International,
Inc. -- http://www.metabolife.com/-- sells dietary supplements
and management products in grocery, drug and mass retail locations
nationwide. The Company and its subsidiary, Alpine Health
Products, LLC, filed for chapter 11 protection on June 30, 2005
(Jointly Administrated Under Bankr. S.D. Calif. Case No.
05-06040). David L. Osias, Esq., and Deb Riley, Esq., at Allen
Matkins Leck Gamble & Mallory LLP, represent the Debtors in their
chapter 11 cases. When the Debtors filed for protection from
their creditors, they listed $23,983,112 in total assets and
$12,214,304 in total debts.
METABOLIFE INT'L: U.S. Trustee Opposes Retailers' Pitch for Panel
-----------------------------------------------------------------
Steven Jay Katzman, the U.S. Trustee for Region 15, asks the U.S.
Bankruptcy Court for the Southern District of California to deny
the retailers' request for an appointment of an Official Committee
of Retailers or for the reconfiguration of the existing Official
Committee of Unsecured Creditors of Metabolife International, Inc.
The U.S. Trustee asserts that the current composition of the
Committee can adequately represent the interests of the general
unsecured creditors. Mr. Katzman believes that creditors with
divergent interests can work together to formulate a plan of
reorganization in the Debtors' cases.
The U.S. Trustee recalls that he has attempted to appoint retailer
claimants to the Committee, but received refusals. These
refusals, the U.S. Trustee says, along with other actions taken by
the retailers, seem to imply that they may be attempting to create
the need for a separate committee appointment.
Mr. Katzman expects that the administrative costs of the Debtors'
bankruptcy proceedings will be high. He doesn't want those costs
escalated by appointing a new committee.
Headquartered in San Diego, California, Metabolife International,
Inc. -- http://www.metabolife.com/-- sells dietary supplements
and management products in grocery, drug and mass retail locations
nationwide. The Company and its subsidiary, Alpine Health
Products, LLC, filed for chapter 11 protection on June 30, 2005
(Jointly Administrated Under Bankr. S.D. Calif. Case No.
05-06040). David L. Osias, Esq., and Deb Riley, Esq., at Allen
Matkins Leck Gamble & Mallory LLP, represent the Debtors in their
chapter 11 cases. When the Debtors filed for protection from
their creditors, they listed $23,983,112 in total assets and
$12,214,304 in total debts.
MIRANT CORP: Court Okays Tax Valuation Agreement on Mass. Facility
------------------------------------------------------------------
Mirant Canal, LLC, owns a power plant located in the Town of
Sandwich in Massachusetts, and is the Town's largest taxpayer.
As of the Petition Date, Mirant Canal owed the Town $1,836,063 on
account of real and personal property taxes levied on the Canal
Facility for the 2003 tax year.
Mirant Corporation and its debtor-affiliates and the Town engaged
in multiple discussions to establish a mutually acceptable
solution relating to Mirant Canal's inability to pay the 2003
Taxes due to the pendency of its Chapter 11 case.
As a result of these discussions and given the substantial harm
that the non-payment of the 2003 Taxes would have inflicted on
the Town's citizens, the Debtors sought and obtained Court
approval to pay the 2003 Taxes to the Town pursuant to a Letter
Agreement.
Pursuant to the terms of the Letter Agreement, in exchange for
seeking approval to pay the 2003 Taxes, the Town agreed to work
in good faith with Mirant Canal to execute a long-term agreement,
which sets the value of the Canal Facility for property tax
purposes.
Accordingly, Mirant Corporation, Mirant Canal and their debtor-
affiliates sought and obtained Court approval to enter into a Tax
Valuation Agreement that fixes the value of Mirant Canal's
facility and its other property for local property tax purposes.
The material terms of the Tax Valuation Agreement are:
a. The property owned by Mirant Canal, which will be taxed
subject to the Valuation Agreement are:
1. 136 acres of land;
2. any and all structures and buildings constructed or to
be constructed on the Site, including the existing
buildings and structures located on the Site;
3. any and all equipment, machinery or facilities used in
or related to the production of electricity, and
ancillary and appurtenant facilities, fixtures, and
related personal property located at the Site or used in
connection with the generation or transmission of
electric power from the site, including but not limited
to, oil storage, docking facilities, natural gas and
electric lines;
4. any and all fuel, supplies, inventories, materials,
spare parts and other consumable property located at the
Site used in or related to the production of
electricity; and
5. any and all other personal property located at the site
and owned by Mirant including but not limited to,
vehicles, office furniture and equipment.
The property to be taxed will not include:
* any real or personal property not owned by Mirant or its
affiliate, including "Switchyard" and transmission and
distribution facilities at or near the Site owned by
third parties;
* any pollution control equipment, which is exempt from
local property taxation, but in the event that the
pollution control equipment is in the future subject to
local taxation, it will be deemed to be part of the
property to be taxed.
b. The term of the Valuation Agreement is for the fiscal year
2006 through, and including, the fiscal year 2013, with the
fiscal year beginning on July 1 and ending on June 30 of
the next calendar year;
c. Effective at the beginning of the 2006 fiscal year, full
and fair cash valuation of the Property will be
$254,000,000 per fiscal year of the Term with valuation
stabilizers in fiscal years 2009 and 2013;
d. Additional, non-environmental material additions or
improvements or substantial equipment retirements to the
Property will result in adjustments to the fair cash
valuation; and
e. Mirant Canal's failure to make any payment required under
the Valuation Agreement by the applicable due date will not
constitute a breach of the Agreement, provided that the
failure is:
* remedied within five business days after Mirant Canal's
receipt of written notice from the Town; or
* the subject of a good faith dispute.
In the event of breach by Mirant Canal, the Town can
immediately terminate the Valuation Agreement upon written
notice to Mirant Canal. In the event of an uncured
payment due to a default that is not the subject of a good
faith dispute, Mirant Canal will pay:
* a late fee of $1,000 per day for each day that any
payment is due, provided, however, that no more than
$25,000 will be due and owing for each instance; and
* accrued interest on all late payments.
A full-text copy of the Tax Valuation Agreement is available at
no cost at http://bankrupt.com/misc/Canal_Tax_Valuation.pdf
Headquartered in Atlanta, Georgia, Mirant Corporation --
http://www.mirant.com/-- is a competitive energy company that
produces and sells electricity in North America, the Caribbean,
and the Philippines. Mirant owns or leases more than 18,000
megawatts of electric generating capacity globally. Mirant
Corporation filed for chapter 11 protection on July 14, 2003
(Bankr. N.D. Tex. 03-46590). Thomas E. Lauria, Esq., at White &
Case LLP, represents the Debtors in their restructuring efforts.
When the Debtors filed for protection from their creditors, they
listed $20,574,000,000 in assets and $11,401,000,000 in debts.
(Mirant Bankruptcy News, Issue No. 81 Bankruptcy Creditors'
Service, Inc., 215/945-7000)
MIRANT CORP: Ch. 11 Examiner's Reporting Requirement Suspended
--------------------------------------------------------------
William K. Snyder, the Chapter 11 Examiner for the chapter 11
cases of Mirant Corporation and its debtor-affiliates, has
prepared and submitted seven interim reports at regular intervals,
usually in a bi-monthly basis, since his appointment in
April 2004.
Mr. Snyder has also prepared "single-issue" reports on various
other topics, including:
-- an analysis of intercompany claims against Mirant Americas,
Inc.;
-- an analysis of the "MIRMA hedge"; and
-- an evaluation of the continuing confidentiality of certain
documents relating to the compensation of certain key
employees.
Michael P. Cooley, Esq., at Gardere Wynne Sewell LLP, in Dallas,
Texas, relates that at this stage of the case, much of the fruit
of the Examiner's efforts is disclosed in single-issue reports or
else made public through other means. Much of what could be
reported with regard to matters like the valuation ruling and the
Debtors' second amended disclosure statement process are either
already known by the Court or strictly confidential.
Considering that other significant matters can and continue to be
reported on separately, the Examiner believes that the ongoing
bi-monthly reporting obligation has reached a point where the
time and expense associated with preparing regular bi-monthly
reports outweighs their utility for the Court.
Accordingly, Mr. Snyder sought and obtained the Court's approval
to suspend his bi-monthly reporting requirement.
Mr. Cooley assures the Court that the suspension of the bi-
monthly reporting requirement will not preclude the Examiner from
preparing and submitting single-issue reports on specific
investigations as warranted or as those investigations are
concluded.
Headquartered in Atlanta, Georgia, Mirant Corporation --
http://www.mirant.com/-- is a competitive energy company that
produces and sells electricity in North America, the Caribbean,
and the Philippines. Mirant owns or leases more than 18,000
megawatts of electric generating capacity globally. Mirant
Corporation filed for chapter 11 protection on July 14, 2003
(Bankr. N.D. Tex. 03-46590). Thomas E. Lauria, Esq., at White &
Case LLP, represents the Debtors in their restructuring efforts.
When the Debtors filed for protection from their creditors, they
listed $20,574,000,000 in assets and $11,401,000,000 in debts.
(Mirant Bankruptcy News, Issue No. 80 Bankruptcy Creditors'
Service, Inc., 215/945-7000)
MORTGAGE ASSET: Fitch Affirms Low-B Ratings on Two Cert. Classes
----------------------------------------------------------------
Fitch Ratings has affirmed these Mortgage Asset Securitization
Transactions, Inc. mortgage-pass through certificates:
MASTR Series 2003-12
-- Classes 1-A, 2-A, 3-A, 4-A, 5-A, and 6-A at 'AAA'.
MASTR Series 2004-5
-- Classes 1-A and 2-A at 'AAA';
-- Class B-1 at 'AA';
-- Class B-2 at 'A';
-- Class B-3 at 'BBB';
-- Class B-4 at 'BB';
-- Class B-5 at 'B'.
The affirmations, affecting approximately $665 million of the
outstanding balances, are due to credit enhancement consistent
with future loss expectations. The above deals suffered no losses
since their initial ratings.
The collateral of the above MASTR deals consists of conventional,
fully amortizing, prime 10-year to 30-year fixed-rate mortgage
loans secured by first liens on one- to four-family residential
properties. The original weighted average loan-to-value ratio for
MASTR 2003-12 is 62.02% and the original weighted average FICO
score is 736. The OLTV for MASTR 2004-5 is 66.22% and the
original weighted average FICO score is 734. Both deals are
master serviced by Wells Fargo Bank Minnesota, N.A., which is
rated 'RMS1' by Fitch.
The pool factor, i.e. current mortgage loans outstanding as a
percentage of the initial pool, for MASTR 2003-12 is 76% and for
MASTR 2004-5 is 74%. As of the Oct. 25, 2005 distribution date,
MASTR 2003-12 is seasoned 22 months and MASTR 2004-5 is seasoned
18 months.
Further information regarding current delinquencies, losses and
credit enhancement is available on the Fitch Ratings Web site at
http://www.fitchratings.com/
N C TELECOM: Wants to Hire Bieging Shapiro as Bankruptcy Counsel
----------------------------------------------------------------
N C Telecom asks the U.S. Bankruptcy Court for the District of
Colorado for permission to employ Duncan E. Barber and his firm,
Bieging Shapiro & Burrus, LLP, as its counsel, nunc pro tunc to
October 14, 2005.
Mr. Barber and Bieging Shapiro will:
1) provide legal advice to the Debtor with respect to its
powers and duties under the Bankruptcy Code;
2) aid the Debtor in the development of a plan or
reorganization under Chapter 11;
3) file the necessary petitions, schedules, pleadings, reports,
and actions which may be required in the continued
administration of the Debtor's property under Chapter 11 and
in the course of these Chapter 11 proceedings;
4) take necessary actions to enjoin and stay until final decree
herein continuation of pending proceedings and to enjoin and
stay until final decree herein commencement of lien
foreclosure proceedings and all matteres as may be provided
under Section 362 of the Bankruptcy Code;
5) analyze claims and causes of action of the Debtor and object
to claims and commence and prosecute adversary proceedings
as necessary in the administration of the case; and
6) perform any and all other legal services for the Debtor
which may be necessary herein or in connection with the case
or any proceeding herein or in the administration thereof.
The firm's professionals' hourly rates are:
Professional/Designation Hourly Rate
------------------------ -----------
Duncan E. Barber $260
Julie Trent $250
Shiela J. Finn $160
Paralegal $120
Bieging Shapiro received a $35,000 prepetition retainer, a portion
of which was applied to prepetition services and costs of the
firm.
Mr. Barber 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 Meeker, Colorado, N C Telecom --
http://www.nctelecom.net-- offers Internet connection services.
The Company filed for chapter 11 protection on Oct. 14, 2005
(Bankr. D. Colo. Case No. 05-47275). Duncan E. Barber, Esq., at
Bieging Shapiro & Burrus LLP represents the Debtor in its
restructuring efforts. When the Debtor filed for protection from
its creditors, it listed $1 million to $10 million in assets and
$10 million to $50 million in debts.
NEW WORLD: Court Permits Borden Retirement Program Termination
--------------------------------------------------------------
The U.S. Bankruptcy Court for the Middle District of Pennsylvania
gave New World Pasta Company and its debtor-affiliates permission
to terminate retiree medical, dental and life insurance benefits
extended to the retired employees of Borden Foods Corporation.
There are approximately 191 Borden Retirees presently receiving
the retiree benefits.
New World assumed responsibility for funding the retiree benefit
program after it acquired certain assets of Borden Foods in 2001.
Pursuant to the purchase, New World agreed to maintain the
benefits until July 30, 2003. However, New World stated in the
Summary Plan Description governing the benefit program that it
expects and intends to continue funding the program indefinitely,
but reserves the right to end or amend them at any time.
As reported in the Troubled Company Reporter on Sept. 22, 2005,
Robert J. Bein, Esq., at Saul Ewing LLP told the Bankruptcy Court
that the retiree benefit program costs the Debtors approximately
$311,000 per year without any benefit to them or their employees.
Mr. Bein explained that termination of the retirement program is
permitted under applicable non-bankruptcy law. The Employees
Retirement Income Security Act stipulates that an employer may
make unilateral changes to retiree benefits so long as the summary
plan description pertaining to those benefits reserved the
employer's right to modify.
Headquartered in Harrisburg, Pennsylvania, New World Pasta Company
-- http://www.nwpasta.com/-- is a pasta manufacturer in the
United States. The Company, along with its debtor-affiliates,
filed for chapter 11 protection (Bankr. M.D. Penn. Case No. 04-
02817) on May 10, 2004. Eric L. Brossman, Esq., and Robert Bein,
Esq., at Saul Ewing LLP, in Harrisburg, serve as the Debtors'
local counsel. Bonnie Steingart, Esq., and Vivek Melwani, Esq.,
at Fried, Frank, Harris, Shriver & Jacobson LLP, represent the
Creditors' Committee. In its latest Form 10-Q for the period
ended June 29, 2002, New World Pasta reported $445,579,000 in
total assets and $451,816,000 in total liabilities.
NMS COMMS: Completes Investigation of Q2 2005 Accounting Error
--------------------------------------------------------------
NMS Communications (NASDAQ: NMSS) reported the completion of the
independent investigation into an accounting error in the second
quarter 2005 results.
The investigation did not identify any additional material
accounting errors. The impact of the previously announced error
in revenue recognition is a reduction in revenue of $502,000 and
operating profit and net income of $252,000 in the second quarter
ended June 30, 2005. As a result of this change, the Company
recorded revenue of $422,000 and earnings of $210,000 on the
revenue transaction in the third quarter ended September 30, 2005.
The Company expects to record the remaining revenue associated
with the accounting error in the fourth quarter ended December 31,
2005.
Material Weakness
As of the end of the second by this report, we performed an
evaluation, under the supervision of the Chief Executive Officer
and the Chief Financial Officer, of the effectiveness of the
design and operation of our disclosure controls and procedures
pursuant to Exchange Act Rule 13a-15(e). Based upon, and as of the
date of the end of the period covered by this report, our Chief
Executive Officer and Chief Financial Officer concluded that our
disclosure controls and procedures were ineffective because of the
material weakness in our internal control over financial reporting
described below. Notwithstanding the existence of this material
weakness, our management believes, including our Chief Executive
Officer and Chief Financial Officer that the consolidated
financial statements included in this report fairly present in all
material respects our financial condition, results of operations
and cash flows for the periods presented.
Our management is responsible for establishing and maintaining
adequate internal control over financial reporting as defined in
Rule 13a-5(f) under the Exchange Act. Our internal control over
financial reporting is a process designed to provide reasonable
assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. Because
of its inherent limitations, internal control over financial
reporting may not prevent or detect material misstatements. Also,
projections of any evaluation of effectiveness to future periods
are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance
with policies and procedures may deteriorate.
A material weakness is a control deficiency, or combination of
control deficiencies, that results in more than a remote
likelihood that a material misstatement of the annual or interim
financial statements will not be prevented or detected. As of the
end of the period covered by this report, we identified the
following material weakness in our internal control over financial
reporting: we did not maintain effective controls over the
accuracy of our recognition of product revenues and the associated
deferred revenue account. Due to changes in personnel and their
responsibilities within our sales and finance functions during the
second quarter of 2005, modifications to contract terms were not
properly reviewed and therefore evaluated for their effect on
revenue recognition. This control deficiency resulted in the
restatement of our consolidated financial statements for the
quarter ended June 30, 2005. Additionally, this control deficiency
could result in a misstatement of product revenues and deferred
product revenue accounts that would result in a material
misstatement to the annual or interim consolidated financial
statements that would not be prevented or detected. Accordingly,
we have concluded that this control deficiency constitutes a
material weakness.
The Company is in the process of designing and implementing
improvements in its internal control over financial reporting to
address the material weakness described above. These actions
include providing supplemental revenue recognition training to all
relevant personnel, the hiring of additional accounting resources,
changing the reporting responsibilities within the accounting
group and streamlining the process of gathering relevant sales and
accounting documents and information as they relate to revenue
transactions.
Other than as described above, there were no changes in our
internal control over financial reporting, as such term is defined
in Exchange Act Rules 13a-15(f) and 15d-15(f), that occurred
during the quarter ended September 30, 2005 that have materially
affected, or are reasonably likely to materially affect, our
internal control over financial reporting.
NMS Communications -- http://www.nmscommunications.com/-- is a
leading provider of technologies and solutions for mobile
applications and infrastructure. NMS develops products that
enable new mobile voice, data and video applications and improve
the performance and quality of wireless networks, helping our
customers grow their revenues and profits. NMS Communications is
a trademark of NMS Communications Corporation.
NORTHEAST GEN: Power Sale Prompts Moody's to Review Ratings
-----------------------------------------------------------
Moody's Investors Service placed the Ba1 rating of the senior
secured bonds of Northeast Generation Company under review for
possible downgrade.
The rating action reflects the announcement by Northeast
Utilities, NGC's parent company that it intends to divest all
competitive businesses by 2006 in order to focus solely on its
regulated operations. Although this change in strategy is
generally positive for NU's overall credit profile, there may be
negative implications for NGC's standalone credit quality.
NGC's total output is currently sold to Select Energy, an
affiliate and indirect subsidiary of NU, under a power purchase
agreement expiring at the end of 2007. Select's obligations under
the PPA are guaranteed by NU. Given NU's new strategy, Moody's
believes that NU is unlikely to continue to renew its obligations
under the PPA and related guaranty and, therefore, that NGC's
long-term credit profile may become more consistent with that of a
merchant generator.
Moody's review will consider NGC's competitiveness in a merchant
environment and power market operating conditions in the Northeast
in the event of an early termination or expiration of the Select
Energy contract.
Headquartered in Berlin, Connecticut, NGC is a pumped storage and
conventional hydroelectric power generator and is an indirect
subsidiary of Northeast Utilities.
NORTHEAST GEN: S&P Shaves Ratings on $320 Mil. Sr. Bonds to B+
--------------------------------------------------------------
Standard & Poor's Ratings Services lowered the rating on Northeast
Generation Co.'s $320 million senior secured bonds to 'B+' from
'BB+' to reflect the project's stand-alone rating and fully de-
link the rating from that of parent Northeast Utilities. The
outlook is developing.
The rating action follows NU's announcement on Nov. 7, 2005, that
it would sell all of its unregulated businesses, including NGC, in
2006. As a result, Standard & Poor's concluded that the Select
Energy Inc. contract that benefits NGC may expire on Dec. 31, 2007
and the project would then operate on a merchant basis.
Standard & Poor's has analyzed various scenarios for merchant
operation and found that without a robust capacity market in New
England, under low natural gas prices, the project may have debt
service coverage ratios of less than 1x.
The developing outlook indicates that the rating could be raised,
affirmed, or lowered, depending on the timing and implementation
of Locational Installed Capacity in New England and future
ownership of the assets.
NGC, an indirect, wholly owned subsidiary of NU owns, operates,
and maintains a portfolio of 1,296 MW of generation assets and
firm capacity in New England. The assets are composed of various
generation resources, the majority of which are several
conventional hydro stations and a 1,080 MW, pumped-storage
facility.
"The developing outlook indicates that the rating could be raised,
affirmed, or lowered, depending on the timing and implementation
of LICAP in New England and future ownership of the assets," said
Standard & Poor's credit analyst Arleen Spangler. "To the extent
LICAP provides sufficient revenues that are somewhat predictable,
the rating could stabilize or be raised depending on the magnitude
of LICAP," she continued. If the LICAP implementation becomes
uncertain, the rating could be lowered.
NRG ENERGY: Incurs $26.9 Million Net Loss in Third Quarter
----------------------------------------------------------
NRG Energy, Inc. (NYSE: NRG) reported a $26.9 million net loss for
the quarter ended September 30, 2005, compared to net income of
$54.2 million for the same period last year.
Net income for the nine months ended September 30, 2005, and 2004
totaled $19.6 million versus $167.5 million. The decrease in the
quarter and year-to-date results versus 2004 is primarily due to
unrealized MtM accruals, which are economically neutral to the
Company in that offsetting gains on underlying accrual positions
will be recognized as power is delivered and the hedges settle.
The year-to-date results also include $51 million of non-cash
expenses related to the reversal of 2004 MtM gains. These items
were partially offset by the strong operating results from our
Northeast assets due to higher energy prices and increased
generation, the sale of surplus emission credits, and lower
interest expense. Generation across the portfolio increased 17%
as compared to the third quarter 2004, including a 42% increase in
output from our Northeast region.
"Our stronger commercial results were underpinned by an operating
performance that improved during the quarter and was particularly
strong among our oil and gas plants in the Northeast," said David
Crane, NRG's President and Chief Executive Officer. "While the
sharp increase in electricity prices in the forward market led to
mark-to-market losses on our forward hedge positions, I am pleased
that our commercial results improved significantly this quarter on
a year-on-year basis."
Third Quarter and Year-to-Date 2005 Financial Highlights
* 42% increase in generation quarter over quarter from
Northeast assets;
* $263 million and $568 million of adjusted EBITDA for three
and nine months ending September 30, 2005, respectively,
before $173.2 million and $206.2 million of domestic realized
MtM losses;
* $250 million accelerated share repurchase reducing our
outstanding common shares by 6.3 million to 80.7 million,
$250 million 3.625% convertible preferred issuance, and
$229 million 8% note repurchase; and
* 51.9% net debt-to-total capital ratio at September 30, 2005.
Generation from the Company's oil-fired and gas-fired assets
increased significantly over 2004 and drove the overall Company's
generation improvement. The Company's oil-fired assets increased
their generation 327% and 129% for the quarter and year-to-date,
respectively, while its New York City gas-fired assets increased
92% and 96% for the quarter and year-to-date, respectively.
Financial results realized by the Company's Northeast assets
improved with higher energy margins due to the steep rise in
natural gas and power prices. Additionally, operating results for
the quarter included $22 million of gains from emission credit
sales, which represents a portion of the Company's 2005 surplus
position. Year-to-date debt repurchases of $645 million and the
2004 refinancing of the Company's credit facility, drove interest
expense lower versus last year by $20.3 million and $42.9 million
for the quarter and year-to-date, respectively. These
improvements were offset by higher purchased energy costs at South
Central, changes to the Company's asset portfolio due to the
disposition of assets and expirations of contracts, and the
unrealized MtM losses. Operating and maintenance expense was flat
quarter over quarter and $27 million higher year-to-date due to an
increased number of planned outages this year versus 2004.
The fuel and energy markets in which the Company transacts, at
times experience significant volatility. During the first half of
this year, the Company entered into financial transactions to lock
in forward prices for a significant portion of its expected power
generation for the balance of 2005 and calendar year 2006. While
all of these transactions are economic hedges of the portfolio,
70% of our current portfolio of forward sales are afforded hedge
accounting treatment. During the third quarter, the forward
prices for power rose sharply along with the price movements of
natural gas. As a result of prices rising above the levels at
which the forward sales were put in place, the MtM for a portion
of the hedges is recorded in operating results at Sept. 30, 2005.
Additionally, our hedging activity requires cash and letter of
credit collateral support when prices rise above the hedged
prices. Collateral supporting our trading activity was
$759 million at September 30, 2005.
For 2007 and beyond, the Company expects to utilize hedging
strategies that are option-based with a goal of establishing a
floor on earnings, leaving upside market participation, minimizing
MtM swings and optimizing collateral support of its hedging
program. For 2007, it already have locked in a floor on 30% of
its projected on-peak coal generation at current forward prices
while preserving the majority of the Company's ability to benefit
from further upward movement in northeastern electricity prices.
"The coordinated transactions we recently entered into with
respect to our 2007 position are indicative of the broader array
of tools we intend to use to forward hedge our baseload assets
while preserving the ability of those assets to benefit from the
upside in commodity prices," said Mr. Crane.
Texas Genco Acquisition Update
As previously reported, on Sept. 30, 2005, NRG entered into an
agreement to purchase Texas Genco for a total purchase price of
approximately $5.8 billion for the stock of Texas Genco which
includes the assumption by the Company of approximately
$2.5 billion of indebtedness. The Company expects to finance the
acquisition and refinance the $2.5 billion in debt assumed in the
acquisition through a combination of a new senior secured credit
facility, an unsecured high yield notes offering and the sale of
common and preferred equity securities in the public markets.
Since announcing the planned acquisition of Texas Genco, the
Company and Texas Genco filed an application with the Nuclear
Regulatory Commission seeking consent to the indirect transfer of
control of Texas Genco's 44% ownership interest in the South Texas
Nuclear Project. Applications for approval of the acquisition
also have been filed with FERC in accordance with Federal Power
Act, the Federal Trade Commission and the Department of Justice
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and
the Public Utility Commission of Texas has been notified. The
Company continues to work toward a first quarter 2006 transaction
close date.
Outlook
The Company expects the high and volatile commodity price
environment that has existed over the past several months as the
direct or indirect result of extreme weather, production
disruptions in the Gulf of Mexico and the general tightening of
the supply-demand balance for wholesale electricity across all of
its domestic regions to persist for the balance of 2005 and into
2006. As a result of the generally projected positive impact of
these external factors on the unhedged portion of the Company's
domestic portfolio, and the Company's success in achieving its
2005 internal financial objectives from FORNRG, the Company is
increasing its full-year 2005 guidance for adjusted EBITDA
(excluding MtM) from $633 million to $700 million. In addition,
due to the impact of the $426 million in collateral postings
during the third quarter, the Company is modifying its full-year
2005 cash flow from operations guidance from $419 million to $109
million
A full-text copy of the Company's quarterly report on Form 10-Q
filed with the Securities and Exchange Commission is available for
free at http://ResearchArchives.com/t/s?2cb
NRG Energy, Inc., owns and operates a diverse portfolio of power-
generating facilities, primarily in the United States. Its
operations include baseload, intermediate, peaking, and
cogeneration facilities, thermal energy production and energy
resource recovery facilities. The company, along with its
affiliates, filed for chapter 11 protection (Bankr. S.D.N.Y. Case
No. 03-13024) on May 14, 2003. The Company emerged from chapter
11 on December 5, 2003, under the terms of its confirmed Second
Amended Plan. James H.M. Sprayregen, Esq., Matthew A. Cantor,
Esq., and Robbin L. Itkin, Esq., at Kirkland & Ellis, represented
NRG Energy in its $10 billion restructuring.
* * *
As reported in the Troubled Company Reporter on Oct. 6, 2005,
Moody's Investors Service affirmed the ratings of NRG Energy, Inc.
(NRG: B1 Corporate Family Rating) and Texas Genco, LLC (TGN: Ba3
Corporate Family Rating). This action follows the announcement
that NRG has agreed to acquire all the outstanding equity of TGN
for about $5.8 billion and the assumption of about $2.5 billion of
TGN net debt. The rating outlook for NRG is revised to developing
from stable. The rating outlook for TGN continues to be stable.
Ratings affirmed at NRG include:
* Secured term loan and secured revolving credit rated Ba3;
* Corporate Family Rating at B1;
* Second lien secured notes rated B1;
* Preferred stock at B3;
* Speculative Grade Liquidity (SGL) Rating of SGL-1
O'SULLIVAN INDUS: Court Gives Final Nod on $35 Mil. DIP Financing
-----------------------------------------------------------------
O'Sullivan Industries Holdings, Inc. (OTC: OSULP) received final
approval from the U.S. Bankruptcy Court for the Northern District
of Georgia of its debtor-in-possession postpetition financing with
The CIT Group/Business Credit, Inc. and other lenders. The Final
Order granted by Judge Mullins allows O'Sullivan to borrow up to
$35 million under certain conditions and subject to borrowing
availability.
O'Sullivan also said that the Court has granted its Final Order
authorizing O'Sullivan to honor pre-petition customer credit,
return and warranty programs. This order will allow O'Sullivan to
utilize all programs in place with customers and to provide a
continued high level of service.
Commenting on these orders, Rick Walters, interim CEO, stated,
"These orders enhance the ongoing stability of O'Sullivan by
providing liquidity through the bankruptcy process. Further, our
ability to service our customers will remain unaffected by the
filing. We are pleased that our restructuring is proceeding in an
orderly fashion and we look forward to exiting Chapter 11 as
quickly as possible."
Headquartered in Roswell, Georgia, O'Sullivan Industries Holdings,
Inc. -- http://www.osullivan.com/-- designs, manufactures, and
distributes ready-to-assemble furniture and related products,
including desks, computer work centers, bookcases, filing
cabinets, home entertainment centers, commercial furniture, garage
storage units, television, audio, and night stands, dressers, and
bedroom pieces. O'Sullivan sells its products primarily to large
retailers including OfficeMax, Lowe's, Wal-Mart, Staples, and
Office Depot. The Company and its subsidiaries filed for chapter
11 protection on October 14, 2005 (Bankr. N.D. Ga. Case No. 05-
83049). On September 30, 2005, the Debtor listed $161,335,000 in
assets and $254,178,000 in debts.
OMI TRUST: S&P's Rating on $290 Mil. Class Certs. Tumbles to D
--------------------------------------------------------------
Standard & Poor's Ratings Services lowered its rating on the class
M-1 certificates issued by OMI Trust 2001-D, a manufactured
housing transaction related to Oakwood Homes Corp., to 'D' from
'CCC-'.
The lowered rating reflects the unlikelihood that investors will
receive timely interest and the ultimate repayment of their
original principal investment. OMI Trust 2001-D reported an
outstanding liquidation loss interest shortfall for class M-1 on
the October 2005 payment date.
Standard & Poor's believes that interest shortfalls for this
transaction will continue to be prevalent in the future, given the
adverse performance trends displayed by the underlying pool of
collateral, as well as the location of mezzanine class write-down
interest at the bottom of the transaction's payment priorities.
Standard & Poor's will continue to monitor the outstanding ratings
associated with this transaction in anticipation of future
defaults.
Rating Lowered
OMI Trust 2001-D
$290 Million Senior/Subordinated Pass-through Certs Series 2001-D
Rating
Class To From
----- -- ----
M-1 D CCC-
ONE PRICE: Ch. 7 Trustee Taps Held Kranzler as Insolvency Experts
-----------------------------------------------------------------
The U.S. Bankruptcy Court for the Southern District of New York
gave Kenneth Silverman, Esq., the chapter 7 Trustee for the
estates of One Price Clothing Stores, Inc., and its debtor-
affiliates, permission to employ Held, Kranzler, McCosker &
Pulice, LLP, as his accountants and insolvency experts.
Held Kranzler will:
1) perform a forensic examination of the Debtor's books and
records to determine if any preferential payments or
fraudulent occurred;
2) assist in the preparation of all tax returns, forms and
reports required by the various taxing authorities;
3) assist in preparing the estates' tax returns and in
analyzing and investigating any insider transactions; and
4) perform all other accounting and insolvency expert services
to the chapter 7 Trustee or his counsel that are necessary
in the Debtor's bankruptcy case.
Russell Kranzler, C.P.A., a Member of Held Kranzler, is one of the
lead professionals who will provide services for the chapter 7
Trustee.
Mr. Kranzler reports Held Kranzler's professionals bill:
Designation Hourly Rate
----------- -----------
Partners $250
Managers $195
Senior Accountants $165
Held Kranzler assures the Court that it does not hold any interest
adverse to the chapter 7 Trustee, the Debtors and their estates
and is a "disinterested person" as that term is defined in Section
101(14) of the Bankruptcy Court.
Headquartered in Duncan, South Carolina, One Price Clothing
Stores, Inc. -- http://www.oneprice.com/-- operates a chain of
off price specialty retail stores. These stores offered a wide
variety of contemporary, in-season apparel and accessories for the
entire family. The Company, together with its two affiliates,
filed for chapter 11 protection on February 9, 2004 (Bankr.
S.D.N.Y. Case No. 04-40329). Neil E. Herman, Esq., at Morgan,
Lewis & Bockius, LLP, represents the Debtors. When the Company
filed for chapter 11 protection, it listed $110,103,157 in total
assets and $112,774,600 in total debts. The Court converted the
Debtors' chapter 11 case to a chapter 7 liquidation proceeding on
March 23, 2005. Kenneth P. Silverman is the chapter 7 Trustee for
the Debtors' estates. Ronald J. Friedman, Esq., at Silverman
Perlstein & Acampora LLP represents the chapter 11 Trustee.
OWENS CORNING: Wants Court to OK Affiliated FM Insurance Accord
---------------------------------------------------------------
Anna P. Engh, Esq., at Covington & Burling, in Washington, D.C.,
relates that over the past 20 years, Owens Corning's liability
insurers have paid more than $2,000,000,000 toward the settlement
and defense of asbestos claims. Owens Corning has exhausted the
available "products" limits of its policies that had been issued
by solvent insurers without asbestos-related exclusions.
For several years, Owens Corning has been seeking confirmation
from its insurers that they will pay asbestos claims that are not
subject to the "products" limits of their policies, also known as
the "non-products" claims, Ms. Engh further relates. The "non-
products" claims include claims involving alleged injury during
the course of Owens Corning's installation of asbestos-containing
materials.
Affiliated FM Insurance
Affiliated FM Insurance Company made payments to Owens Corning in
connection with:
-- an excess liability policy it issued to the Company; and
-- a settlement agreement it entered into, together with other
parties, with Owens Corning in 1997.
Affiliated FM asserts that as a result of those prior payments,
all applicable limits of the excess liability policy that it
issued to Owens Corning have been fully exhausted.
According to Ms. Engh, Owens Corning and Affiliated FM disagree
whether, and the extent to which, Affiliated FM has further
coverage obligations to Owens Corning.
Owens Corning maintained that Affiliated FM continues to have
coverage obligations with respect to asbestos-related "non-
products" claims, notwithstanding the exhaustion of the policies'
"products" limits.
For its part, Affiliated FM asserts that it has no further
coverage obligations to Owens Corning with respect to asbestos-
related claims, regardless of whether they are characterized as
"products" or "non-products," Ms. Engh notes.
Settlement Efforts
On October 26, 2001, Owens Corning commenced a lawsuit against
Affiliated FM and other insurance companies seeking coverage for
"non-products" claims, styled Owens Corning v. Birmingham Fire
Insurance Company, et al., No. CI0200104929, in the Court of
Common Pleas of Lucas County, Ohio.
Subsequently, Owens Corning and the defendants, including
Affiliated FM, engaged in extensive discovery and motion
practice. During recent settlement negotiations between Owens
Corning and Affiliated FM, the parties were awaiting various
summary judgment rulings and were preparing for a jury trial set
to commence on November 7, 2005.
On September 17, 2005, Owens Corning and Affiliated FM reached an
agreement to settle their dispute concerning coverage for "non-
products" claims. Shortly thereafter, the parties executed a
Settlement Agreement effective September 23, 2005.
In accordance with the confidentiality provisions of the
Settlement Agreement, the Debtors seek the Court's authority to
file the Settlement Agreement under seal.
The principal terms of the Settlement Agreement are:
(a) Affiliated FM will pay Owens Corning a monetary amount
either through an escrow account or as directed by a
confirmed plan of reorganization, depending on the
progress of the Debtors' bankruptcy case.
Affiliated FM's payment of the Settlement Amount will
constitute a sale to and purchase by Affiliated FM of
Owens Corning's rights and interests in the excess
liability policy Affiliated FM issued to Owens Corning
pursuant to Section 363(b)(1) and (f) of the
Bankruptcy Code;
(b) Owens Corning and Affiliated FM will mutually release one
another and their related entities from all claims
relating to the excess liability policy Affiliated FM
issued to Owens Corning and the 1997 Settlement;
(c) The key terms of the Settlement Agreement are contingent
on the entry of a final order confirming the Debtors' Plan
that includes an injunction pursuant to Section 524(g) of
the Bankruptcy Code, to protect Affiliated FM, among other
insurers;
(d) In addition to the 524(g) Injunction, Owens Corning will
use its reasonable best efforts to obtain other injunctive
protections for Affiliated FM as part of the Debtors' Plan
under Section 105 of the Bankruptcy Code or otherwise; and
(e) In the event that the Settlement Agreement becomes null
and void -- for example, if a 524(g) Injunction does not
issue -- Affiliated FM will not be obligated to make any
further payment of the Settlement Amount and will be
entitled to the prompt release and return of any
payment or payments previously made to the Escrow Account,
and the Parties will have restored all rights, defenses,
and obligations relating to the excess liability policy
Affiliated FM issued to Owens Corning and the 1997
Settlement.
The Debtors ask the Court to approve its Settlement Agreement with
Affiliated FM Insurance.
Headquartered in Toledo, Ohio, Owens Corning --
http://www.owenscorning.com/-- manufactures fiberglass
insulation, roofing materials, vinyl windows and siding, patio
doors, rain gutters and downspouts. The Company filed for chapter
11 protection on October 5, 2000 (Bankr. Del. Case. No. 00-03837).
Mark S. Chehi, Esq., at Skadden, Arps, Slate, Meagher & Flom,
represents the Debtors in their restructuring efforts. At Sept.
30, 2004, the Company's balance sheet shows $7.5 billion in assets
and a $4.2 billion stockholders' deficit. The company reported
$132 million of net income in the nine-month period ending
Sept. 30, 2004. (Owens Corning Bankruptcy News, Issue No.
119; Bankruptcy Creditors' Service, Inc., 215/945-7000)
PERKINELMER INC: 96% of Noteholders Tender 8-7/8% Senior Notes
--------------------------------------------------------------
PerkinElmer, Inc. (NYSE: PKI) reported that, in connection with
the previously announced cash tender offer and consent
solicitation for any and all of its outstanding 8-7/8 % Senior
Subordinated Notes due 2013, it has received the requisite
consents to approve certain amendments to the indenture governing
the notes. The amendments to the indenture will eliminate
substantially all of the restrictive covenants and certain events
of default contained in the indenture.
Approximately $260 million, or 96%, of the approximately $270
million outstanding principal amount of notes, and the consents
related thereto, had been validly tendered by the consent deadline
of 5:00 p.m. New York City time, Monday, Nov. 7, 2005.
PerkinElmer intends to execute the supplemental indenture
incorporating the amendments with U.S. Bank, National Association,
the trustee, as described in the Offer to Purchase and Consent
Solicitation Statement dated Oct. 25, 2005 as soon as practical.
However, the amendments will not become operative unless and until
PerkinElmer purchases the validly tendered notes pursuant to the
offer.
PerkinElmer expected the price determination date for the offer
yesterday, Nov. 8, 2005. PerkinElmer may elect to accept for
payment all notes validly tendered on the initial settlement date,
which will be promptly following the price determination date.
However, PerkinElmer reserves the right, in its sole discretion,
to extend or forgo the initial settlement date. The tender offer
will expire at 9:00 a.m., New York City time, on Nov. 23, 2005,
unless extended, and PerkinElmer expects the final settlement
date, if any, to occur promptly after the expiration of the tender
offer.
All withdrawal rights of tendering holders of notes terminated at
5:00 p.m., New York City time, on Nov. 7, 2005. Accordingly,
tendering holders may no longer withdraw their notes. Holders who
have not yet tendered their notes may tender at or prior to 9
a.m., New York City time, on Nov. 23, 2005. PerkinElmer has
elected to pay the full purchase price, including the consent
payment, for all validly tendered notes, including those tendered
subsequent to the consent deadline. The purchase price and the
consent payment are each described in the Offer to Purchase.
Citigroup Corporate and Investment Banking and Goldman Sachs & Co.
are acting as the dealer managers for the tender offer and the
consent solicitation. Global Bondholder Services Corporation is
serving as the depositary and information agent for the tender
offer and consent solicitation.
Requests for documents relating to the tender offer and consent
solicitation may be directed to Global Bondholder Services
Corporation by telephone at 1-866 470-4500 or 1-212 430-3774 or in
writing at 65 Broadway, Suite 704, New York, NY 10006. Questions
regarding the tender offer and consent solicitation may be
directed to Citigroup Corporate and Investment Banking, Liability
Management Group, at 1-800-558-3745 or 1-212-723-6106 or to
Goldman, Sachs & Co., Credit Liability Management Group, at 1-800
828-3182 or 1-212-357-7867.
PerkinElmer Inc. -- http://www.perkinelmer.com/-- is a global
technology leader driving growth and innovation in Health Sciences
and Photonics markets to improve the quality of life. PerkinElmer
reported revenues of $1.7 billion in 2004, has 10,000 employees
serving customers in more than 125 countries, and is a component
of the S&P 500 Index.
* * *
As reported in the Troubled Company Reporter on Nov. 3, 2005,
Standard & Poor's Ratings Services raised its ratings on
Wellesley, Massachusetts-based PerkinElmer Inc. The corporate
credit rating was raised to 'BBB-' from 'BB+'; the subordinated
debt rating also was raised to 'BB' from 'BB-'. The outlook is
stable.
"The upgrade reflects sustained improvements in operating
performance and profitability, combined with financial
deleveraging over the past two years," said Standard & Poor's
credit analyst Joshua Davis.
At the same time, S&P assigned its 'BBB-' rating to PerkinElmer's
new $350 million senior unsecured revolving credit facility
maturing in 2010, which replaces a $100 million senior secured
credit facility.
PC LANDING: Has Until December 18 to File Chapter 11 Plan
---------------------------------------------------------
The U.S. Bankruptcy Court for the District of Delaware extended PC
Landing Corp. and its debtor-affiliates' exclusive period to file
a chapter 11 plan until Dec. 18, 2005. The Court also gave the
Debtors until Mar. 3, 2006, to solicit plan acceptances.
As reported in the Troubled Company Reporter on July 19, 2005, the
Court approved the Debtors' Disclosure Statement explaining their
First Amended Joint Plan of Reorganization.
The Debtors told that Court that they are currently negotiating
with various state and federal agencies and third parties in
connection with certain issues that will affect their ability to
confirm a plan of reorganization. The Debtors further tell the
Court that they are optimistic and they believe the Plan will
likely be confirmed very soon.
The Debtors said that they are not seeking the extension in order
to delay administration of their chapter 11 cases or to pressure
creditors to accept an unsatisfactory plan. On the contrary, the
Debtors say, they asked for the extension to facilitate an
orderly, efficient and cost-effective plan process for the benefit
of all creditors.
Headquartered in Dallas, Texas, PC Landing Corporation and its
debtor-affiliates, own and operate one of only two major trans-
Pacific fiber optic cable systems with available capacity linking
Japan and the United States. The Debtor filed for chapter 11
protection on July 19, 2002 (Bankr. Del. Case No. 02-12086).
Laura Davis Jones, Esq., at Pachulski Stang Ziehl Young Jones &
Weintraub, P.C., represents the Debtors in their restructuring
efforts. When the Debtors filed for protection from their
creditors, they estimated assets of more than $100 million.
PLASTIPAK HOLDINGS: Extends 10.75% Senior Notes Offer to Dec. 5
---------------------------------------------------------------
Plastipak Holdings, Inc. extended the expiration date for the
previously announced cash tender offer and consent solicitation
for its outstanding 10.75% Senior Notes due 2011 (CUSIP No.
727610AB3) to 5:00 p.m., New York City time, on Dec. 5, 2005 from
5:00 p.m., New York City time, on Nov. 21, 2005. The company has
received tenders and consents from holders of $320.5 million in
aggregate principal amount of the Notes, representing
approximately 98.6% of the outstanding Notes.
The price determination date will be 2:00 p.m., New York City
time, on Nov. 21, 2005, which is 10 business days prior to the new
Expiration Date. The completion of the tender offer and consent
solicitation is subject to the satisfaction or waiver by the
company of a number of conditions, as described in the Offer to
Purchase and Consent Solicitation Statement dated October 12,
2005. Holders who validly tender their Notes and which Notes are
accepted for purchase are expected to receive payment on or
promptly after the date on which the company satisfies or waives
the conditions of the tender offer and consent solicitation.
Requests for documents relating to the tender offer and consent
solicitation may be directed to Global Bondholder Services
Corporation, the depositary and information agent for the tender
offer and consent solicitation, at (212) 430-3774 (collect) or
(866) 389-1500 (U.S. toll-free). Additional information
concerning the tender offer and consent solicitation may be
obtained by contacting Banc of America Securities LLC, the dealer
manager and solicitation agent for the tender offer and consent
solicitation at (704) 388-9217 (collect) or (888) 292-0070 (U.S.
toll-free).
Plastipak Holdings, Inc. -- http://www.plastipak.com/-- is a
leading manufacturer of plastic packaging containers for many of
the world's largest consumer products companies. For the fiscal
year ended Oct. 30, 2004, Plastipak manufactured and distributed
approximately 8.5 billion containers worldwide for over 450
customers. To meet the demand of its diverse customer base,
Plastipak operates 16 plants in the United States, Brazil and
Europe. Plastipak also provides integrated transportation and
logistics services, which the company's management believes makes
it uniquely, vertically integrated in the plastic packaging
industry. Plastipak has obtained 153 U.S. patents for its state-
of-the-art packages and package- manufacturing processes.
* * *
As reported in the Troubled Company Reporter on Oct. 14, 2005,
Plastipak Holdings, Inc., commenced a cash tender offer and
consent solicitation for its $325 million of outstanding 10.75%
Senior Notes due 2011. The terms and conditions of the tender
offer and consent solicitation are set forth in Plastipak's offer
to purchase and consent solicitation statement, dated Oct. 12,
2005, and the related letter of transmittal and consent.
Consent Solicitation
In connection with the tender offer, Plastipak is soliciting
consents to proposed amendments to the indenture governing the
Notes, which would eliminate substantially all of the restrictive
covenants and certain events of default in the indenture.
Plastipak is offering to make a consent payment (which is included
in the total consideration) of $30.00 per $1,000 principal amount
of Notes to holders who validly tender their Notes and deliver
their consents on or prior to the consent payment deadline.
Holders may not tender their Notes without delivering consents and
may not deliver consents without tendering their Notes.
PLATINUM UNDERWRITERS: S&P Places BB+ Ratings on Preferred Stock
----------------------------------------------------------------
Standard & Poor's Ratings Services assigned its preliminary 'BBB'
senior debt, 'BBB-' subordinated debt, and 'BB+' preferred stock
ratings to the $750 million universal shelf registration filed by
Platinum Underwriters Holdings Ltd.
"These ratings reflect the company's strong competitive position
in the global reinsurance market, strong capitalization, and
moderate financial leverage," explained Standard & Poor's credit
analyst Jason Jones. Offsetting these strengths are Platinum's
short tenure as an independent company and 2005 hurricane losses
which marred otherwise strong earnings.
Although the third-quarter hurricane losses were a significant 22%
of June 30, 2005, shareholders' equity, Platinum raised
$162 million of new common equity to bring Sept. 30, 2005, equity
to $1.2 billion, which is up from $1.1 billion as of year-end
2004.
Standard & Poor's believes the timing and amount of Platinum's
shelf utilization will reflect the company's capital needs for
2006 business opportunites. The main driver of new business is
expected to be property and marine reinsurance, as favorable rate
increases after the 2005 hurricanes are likely to increase
Platinum's opportunities in this market. Excluding the equity
security units, which are treated as hybrid equity capital by
Standard & Poor's, Platinum's debt-to-capital is expected to
remain close to its current 15.5% and
debt-plus-preferred-to-capital could go higher but is expected to
remain less than 25%. Excluding the impact of 2005 hurricanes,
fixed-charge coverage, excluding ESU interest, is expected to be
at least 7x, which is more than sufficient for the rating.
PONDERLODGE INC: Court Names Paul Boston as Examiner
----------------------------------------------------
The Hon. Gloria M. Burns of the U.S. Bankruptcy Court for the
District of New Jersey named Paul B. Boston, CPA, as Examiner in
Ponderlodge, Inc.'s chapter 11 case.
The Bankruptcy Court found cause to appoint an Examiner based on
allegations raised by Steamboat Capital III, LLC, and the Office
of the U.S. Trustee.
As previously reported in the Troubled Company Reporter, Kelly
Beaudin Stapleton, the U.S. Trustee for Region 3, asked for the
appointment of a chapter 11 Trustee because of numerous fiduciary
breaches committed by William Plaumer, the Debtor's principal and
sole shareholder. Steamboat Capital, which holds a first priority
security interest in all of the Debtor's assets on account of a
$2.2 million prepetition loan, supported Ms. Stapleton's move.
Judge Burns authorized the appointment of Arthur Abramowitz as
chapter 11 Trustee on Oct. 17, 2005. In addition to the
appointment of a chapter 11 Trustee, the Bankruptcy Court has now
appointed Mr. Boston as Examiner.
Mr. Boston will:
a) investigate and issue a report on all post-petition
financial activity of the Debtor, including, but not
limited to an investigation of receipts and disbursements;
b) prepare a weekly report of the Debtor's financial
operations and file that report with the court and provide
copies to counsel for the Debtor, Steamboat and the U.S.
Trustee;
c) review and issue a report on all potential claims held by
the Debtor against any insider, affiliate, shareholder,
officer directors and any relatives thereof;
d) investigate and issue a report on all other potential
avoidance actions under 11 U.S.C. Sections 542, 544, 547,
548, 549 and 550;
e) determine the Debtor's break-even point;
f) review the accuracy of the monthly operating reports; and
g) review and approve all checks before disbursement.
Headquartered in Villas, New Jersey, Ponderlodge, Inc. --
http://www.ponderlodge.com/-- operates a golf course. The
Company filed for chapter 11 protection on July 13, 2005 (Bankr.
D. N.J. Case No. 05-32731). D. Alexander Barnes, Esq., at
Obermayer, Rebmann, Maxwell & Hippel LLP represents the Debtor in
its chapter 11 case. When the Debtor filed for protection from
its creditors, it estimated assets of $10 million to $50 million
and debts of $1 million to $10 million.
PONDEROSA PINE: JPMorgan Wants KBC-Related Information Excluded
---------------------------------------------------------------
JPMorgan Chase Bank, N.A., as agent for a group of lenders, under
a Term Loan Agreement dated Dec. 16, 1994, asks the U.S.
Bankruptcy Court for the District of New Jersey to preclude
Ponderosa Pine Energy LLC and its debtor-affiliates from
introducing any evidence concerning their communications about the
plan of reorganization with KBC Bank, N.V.
In the alternative, JPMorgan wants the Court to compel the Debtors
to produce all documents and provide testimony concerning all
their communications with KBC Bank, a secured creditor.
Ponderosa filed a Joint Plan of Reorganization and accompanying
Disclosure Statement on Oct. 7, 2005.
KBC's role in the plan of reorganization has not been identified
and the treatment of its claim has not been disclosed or discussed
in the Disclosure Statement, JPMorgan notes. The assertion of a
joint interest between Ponderosa and KBC is anomalous since the
two have no business relationship, much less a common or identical
legal interest, JPMorgan asserts.
JPMorgan says the Debtors have refused to produce any documents
and provide complete testimony concerning communications with KBC
Bank. JPMorgan believes that the Debtors are withholding
information as part of a litigation strategy.
JPMorgan says the Debtors refused to produce documents relating
to:
* communications with any creditors, including but not limited
to KBC Bank, N.V., concerning any actual or contemplated plan
of reorganization of any of the Debtors;
* any proposed DIP or exit financing that any of the Debtors
has obtained or is seeking to obtain; or
* the satisfaction of creditor and equity interests under the
proposed plan.
To promote fairness, JPMorgan asserts that the Debtors should not
be allowed to provide testimony on these topics since it has
already asserted a purported privilege with respect to
communications with KBC. JPMorgan contends that it's unfair to
let a party disclose information beneficial to its cause and hide
what's not, on the ground of attorney-client privilege.
Furthermore, the Debtors have not established that:
-- the communications were made in the course of a joint
defense effort,
-- the statements were designed to further the effort, or
-- the privilege has not been waived.
Headquartered in Morristown, New Jersey, Ponderosa Pine Energy,
LLC, and its affiliates are utility companies that supply
electricity and steam. The Company and its debtor-affiliates
filed for chapter 11 protection on April 14, 2005 (Bankr. D. N.J.
Case No. 05-22068). Mary E. Seymour, Esq., and Sharon L. Levine,
Esq., at Lowenstein Sandler PC represent the Debtors in their
restructuring efforts. When the Debtors filed for protection from
their creditors, they listed estimated assets and debts of more
than $100 million.
QUALITY DISTRIBUTION: Sept. 30 Balance Sheet Upside-Down by $27MM
-----------------------------------------------------------------
Quality Distribution, Inc. (Nasdaq: QLTY) reported record revenues
for the quarter ended Sept. 30, 2005, of $170.6 million, a 7.7%
increase over third quarter revenues of $158.4 million last year.
This represents the eleventh consecutive quarterly year-over-year
increase in revenues. Revenue for the nine months ended Sept. 30,
2005 increased 7.7% to $502.8 million from $467.0 million last
year. Transportation revenue increased 2.1% from the prior-year
quarter and by 3.8% from the prior nine-month period, driven
primarily by rate increases.
Commenting on the results and outlook, President and Chief
Executive Officer Jerry Detter said, "Overall, demand in the
quarter ran well below our expectations. While early July is
traditionally a soft period, we did not see the usual seasonal
recovery until the last week of August. Thereupon, Hurricane
Katrina disrupted business in the Southeast in the first two weeks
of September. On a positive note, beginning with the third week
of September and continuing into October, demand has been very
strong. In fact, the Company has experienced all-time record
levels of billed revenue in the last three weeks of October."
Net income for the quarter was $50,000 as compared with net income
of $2.8 million in the third quarter of last year.
Tim Page, Chief Financial Officer, stated, "The trucking revenue
shortfall we experienced this quarter impacted our pre-tax income
by approximately $1.7 million versus plan. In addition, insurance
expense was approximately $4.2 million ($0.14 per share, tax
effected at 35%) higher than it otherwise would have been as the
result of the unexpected adverse development of a case arising out
of a traffic accident that occurred in an earlier period." Mr.
Page further stated, "Year to date our experience in terms of the
frequency of accidents has been trending at levels below last year
and well below industry averages. Unfortunately, as a result of
the severity of two specific incidents, the Company has accrued
approximately $9.2 million in unanticipated insurance expense.
Adjusted for income taxes at 35%, the net impact on year- to-date
earnings of these two large claims is approximately $0.31 per
fully diluted share."
Net income for the nine-month period was $5.7 million as compared
with a net loss of $4.1 million, for the same period last year.
Adjusting for the items noted in the Adjusted Net Income
Reconciliation section of this release, and tax effecting income
before taxes at a 35% tax rate would have yielded an adjusted net
income for the nine months of $6.9 million and $11.6 million for
the same period last year.
Headquartered in Tampa, Florida, Quality Distribution, Inc.
through its subsidiary, Quality Carriers, Inc. and TransPlastics,
a division of Quality Carriers, Inc., and through its affiliates
and owner-operators, manages approximately 3,500 tractors and
7,400 trailers. The Company provides bulk transportation and
related services. The Company also provides tank cleaning
services to the bulk transportation industry through its
QualaWash(R) facilities. Quality Distribution is an American
Chemistry Council Responsible Care(R) Partner and is a core
carrier for many of the Fortune 500 companies that are engaged in
chemical production and processing.
At Sept. 30, 2005, Quality Distribution, Inc.'s balance sheet
showed a $27,824,000 stockholders' deficit compared to a
$34,100,000 deficit at Dec. 31, 2004.
REFCO INC: Issues Clarification Regarding Chapter 7 Asset Sale
--------------------------------------------------------------
It has been reported that Refco Inc. (OTC Bulletin Board: RFXCQ)
plans to implement the sale of its regulated business through a
Chapter 7 proceeding.
This has created a misimpression and Refco makes the following
clarification:
"For Refco LLC, our regulated futures commission merchant, this is
merely the most efficient procedure for immediately transferring
Refco's open customer accounts in bulk to an appropriate buyer of
Refco's business that will be the result of a transaction to be
approved by the Court. This action will expedite the process and
quickly move accounts that will continue to be handled by their
same brokers on the same platforms on which they currently trade.
"This situation does not mean that customer accounts are being
liquidated or that employees or brokers are losing their jobs.
This is the most efficient mechanism for implementing the sale of
Refco's business as a going concern."
Headquartered in New York, New York, Refco Inc. --
http://www.refco.com/-- is a diversified financial services
organization with operations in 14 countries and an extensive
global institutional and retail client base. Refco's worldwide
subsidiaries are members of principal U.S. and international
exchanges, and are among the most active members of futures
exchanges in Chicago, New York, London and Singapore. In addition
to its futures brokerage activities, Refco is a major broker of
cash market products, including foreign exchange, foreign exchange
options, government securities, domestic and international
equities, emerging market debt, and OTC financial and commodity
products. Refco is one of the largest global clearing firms for
derivatives.
The Company and 23 of its affiliates filed for chapter 11
protection on Oct. 17, 2005 (Bankr. S.D.N.Y. Case No. 05-60006).
J. Gregory Milmoe, Esq., at Skadden, Arps, Slate, Meagher & Flom
LLP, represent the Debtors in their restructuring efforts. Refco
reported $16.5 billion in assets and $16.8 billion in debts to the
Bankruptcy Court on the first day of its chapter 11 cases.
REVLON INC: Equity Deficit Widens to $1.17 Billion at Sept. 30
--------------------------------------------------------------
Revlon, Inc. (NYSE: REV), reported results for the third quarter
and nine months ended September 30, 2005. The Company also
announced significant progress on its two recently announced major
brand initiatives and provided its outlook for the balance of
2005.
As previously announced, the first initiative involves a complete
relaunch of the Almay brand and builds on Almay's healthy beauty
heritage and the desire among consumers for simplicity and
personalization. The second initiative, focused on women over 50
years of age, involves the launch of a complete line of cosmetics
under a new brand name that is designed to serve this affluent and
growing consumer demographic currently underserved in the
marketplace. The Company indicated that it has secured
significant retail customer acceptance of these major brand
initiatives. As a result, the Company expects to gain an
approximate 25% increase in color cosmetics retail merchandising
space in 2006. Revlon indicated that it currently expects the
initiatives to generate net sales of approximately $30 to
$40 million for the full year of 2005, after the full-year
impact of some $40 million of incremental provisions for returns
and allowances associated with the launches. The Company also
expects that the total upfront launch and related costs in 2005,
including the aforementioned provisions for returns and
allowances, as well as accelerated amortization and other launch
costs, will be approximately $75 million. The Company expects the
related 2005 shipments of the two launches to significantly, but
not fully, offset these costs.
For the quarter, the Company indicated that net sales of
$275 million declined 6% versus net sales of $294 million in the
third quarter of 2004. The net sales in 2005 included the impact
of anticipated incremental returns and allowances totaling
approximately $32 million associated with launching the brand
initiatives. Adjusted EBITDA for the quarter was a negative
$6 million. Adjusted EBITDA was also affected by anticipated
launch costs totaling approximately $36 million, including the
aforementioned $32 million of provisions for incremental returns
and allowances. This compares with Adjusted EBITDA of $26 million
in the third quarter of 2004.
In terms of U.S. marketplace performance for the quarter,
according to ACNielsen, the color cosmetics category for the
quarter grew 2.9% versus the same period last year. The Company's
retail consumption growth of 4.5% for the quarter outpaced that of
the category, resulting in a color cosmetics market share gain of
0.3 points to 21.6%. The Almay brand led the growth, with an 11%
increase in retail consumption for the quarter, driving share
growth of 0.5 points to 6.3%. The Revlon brand grew retail
consumption 2.0% for the quarter, slightly below the growth of the
category, resulting in a share decline of 0.1 points to 15.3%. In
other key categories, the Company gained share during the quarter
in hair color and beauty tools, and maintained share in anti-
perspirants and deodorants.
Commenting on the Company's performance, Revlon President and
Chief Executive Officer Jack Stahl stated, "Our marketplace
performance this year reflects a continued strengthening of our
brands, which is beginning to drive growth and excitement in our
categories and result in market share gains. At the same time,
our financial performance does not yet reflect all the progress we
are making in the marketplace, where our new and restaged products
are performing very well. Certain of our base products continue to
be soft, where they have yet to benefit from our planned actions
to re-energize important franchises. As we move into 2006, we
intend to continue to leverage our new product development
capability to strengthen our important base franchises in order to
drive their growth."
Commenting on the Almay relaunch and the Company's new brand as
well as the overall outlook for the business, Mr. Stahl continued,
"We very much appreciate the support we have received from our
retail customers and the enthusiasm with which we are partnering
to create in-store excitement and drive category growth. Our two
brand initiatives are intended to drive category growth, and we
expect them to create sustainable value in the category and for
our business. We intend to invest appropriately behind the
business to ensure our marketplace success. In the near term,
however, we believe retailers are approaching inventory and
working capital management with caution due, in part, to the
recent decline in consumer confidence, which we believe is
currently slowing shipment trends in North America. Because of
this, as well as our investment in the initiatives, we now expect
Adjusted EBITDA for 2005 to be approximately $170 million.
Notwithstanding our tempered outlook for 2005, as we look forward,
we believe 2006 will prove to be a very good year for us. More
specifically, we now expect strong growth in both sales and
Adjusted EBITDA, supported by significant investment spending in
2006, as we expect to benefit from our continuing actions to
strengthen our existing franchises, bring exciting new products to
the marketplace and achieve success of our two new major brand
initiatives."
Third Quarter Results
Net sales in the third quarter of 2005 declined approximately 6%
to $275 million, compared with net sales of $294 million in the
third quarter of 2004. The net sales performance primarily
reflected the provisions for the anticipated incremental returns
and allowances totaling $32 million associated with the brand
initiatives, as well as lower shipments in North America.
Partially offsetting these factors were lower returns and
allowances on the base business and strength in International,
including the benefit of favorable foreign currency translation.
Excluding the favorable impact of foreign currency translation,
net sales in the quarter declined approximately 8%.
In North America, net sales for the quarter declined approximately
17% to $159 million, versus $192 million in the third quarter of
2004. This performance largely reflected the $32 million of
provisions for incremental returns and allowances and lower
overall shipments, partially offset by lower returns and
allowances on the base business. The lower shipments continued to
reflect strength of new and restaged products, which was more than
offset by softness of base products. These base products have not
yet benefited from the focus and reinvestment in marketing and new
product development that several of the Company's large franchises
received earlier this year and are now benefiting from.
In International, net sales advanced 14% to $117 million, versus
$102 million in the third quarter of 2004. Driving this
performance was shipment strength in Asia Pacific and Latin
America, as well as the benefit of favorable foreign currency
translation and lower provisions for sales incentives. Excluding
the favorable impact of foreign currency translation,
International net sales advanced 11% versus year-ago.
Operating loss in the quarter was $32.3 million, versus an
operating loss of $2.0 million in the third quarter of 2004. This
performance primarily reflected approximately $40 million of costs
associated with the brand initiatives, including the $32 million
of provisions for incremental returns and allowances. Also
impacting the comparison were increased brand support, higher
distribution expenses, and the decline in shipments. Partially
offsetting these factors were lower returns and allowances on the
base business, as the Company continues to fine-tune its
promotional strategy and gain efficiencies in this area.
Adjusted EBITDA in the current quarter was a negative
$6.1 million, compared with Adjusted EBITDA of $25.7 million in
the same period last year. This performance was driven by largely
the same factors that impacted the operating income comparison.
Net loss in the current quarter was $65.4 million, versus net loss
of $91.6 million in the third quarter of 2004. Net loss in the
year-ago quarter included approximately $59 million of expenses
for the early extinguishment of debt associated with the Company's
refinancing activities completed during the third quarter last
year. On a diluted per share basis, net loss in the third quarter
of 2005 was $0.18, compared with a diluted per share loss of $0.25
in the third quarter of 2004.
Cash flow used for operating activities in the third quarter of
2005 was $69.1 million, compared with cash flow used for operating
activities of $35.2 million in the third quarter of 2004. This
increase included the anticipated working capital build associated
with launching the brand initiatives later this year, as well as
the slowdown during the quarter in North America shipments.
Revlon Inc. is a worldwide cosmetics, skin care, fragrance, and
personal care products company. The Company's vision is to
deliver the promise of beauty through creating and developing the
most consumer preferred brands. Websites featuring current
product and promotional information can be reached at
http://www.revlon.com/and http://www.almay.com/ Corporate and
investor relations information can be accessed at
http://www.revloninc.com/ The Company's brands, which are sold
worldwide, include Revlon(R), Almay(R), Ultima(R), Charlie(R),
Flex(R), and Mitchum(R).
As of September 30, 2005, the Company's equity deficit widened to
$1.17 billion from a $1.02 billion deficit at December 31, 2004.
ROMACORP INC: Wants to Employ Andrews Kurth as Bankruptcy Counsel
-----------------------------------------------------------------
Romacorp, Inc., and its debtor-affiliates ask the Honorable
Barbara J. Houser of the U.S. Bankruptcy Court for the Northern
District of Texas, Dallas Division, for permission to employ
Andrews Kurth LLP as their bankruptcy counsel, nunc pro tunc to
Nov. 6, 2005.
Andrews Kurth will:
(a) advise the Debtors with respect to their powers and duties
as debtors-in-possession in the continued operations of
their businesses and management of their properties;
(b) take all necessary action to protect and preserve the
Debtors' estates, including the prosecution of action on
behalf of the Debtors, the defense of any actions commenced
against the Debtors, the negotiation of disputes in which
the Debtors are involved and the preparation of objections
to claims filed against the estates;
(c) prepare on behalf of the Debtors, as debtors-in-possession,
all necessary motions, applications, answers, orders,
reports, and papers in connection with and required for the
orderly administration of the estates;
(d) negotiate and prepare on behalf of the Debtors a disclosure
statement, plan of reorganization and all related
documents; and
(e) perform any and all other legal services for the Debtors in
connection with their chapter 11 cases that the Debtors
determine are necessary and appropriate.
Jason S. Brookner, Esq., a partner at Andrews Kurth LLP, discloses
that the Firm received a $125,000 retainer. The Firm's
professional bill:
Professional Hourly Rate
------------ -----------
Peter S. Goodman, Esq. $595
Jason S. Brookner, Esq. $450
Monica S. Blacker, Esq. $380
Matthew D. Wilcox, Esq. $235
Designation Hourly Rate
----------- -----------
Attorneys $180 - $695
Paralegals $85 - $205
The Debtors believe that Andrews Kurth LLP is disinterested as
that term is defined in Section 101(14) of the U.S. Bankruptcy
Code.
Andrews Kurth LLP -- http://www.akllp.com/-- is a full-service
law firm.
Headquartered in Dallas, Texas, Romacorp, Inc., own and operate
the Tony Roma chain of restaurants with 22 company-owned stores,
86 domestic franchise stores and 118 international franchise
stores. The Debtor and seven of its affiliates filed for chapter
11 protection on November 6, 2005 (Bankr. N.D. Tex. Case No.
05-86818). When the Debtors filed for protection from their
creditors, they listed $20,769,000 in total assets and $76,309,000
in total debts.
ROMACORP INC: Wants Garden City Group as Claims & Noticing Agent
----------------------------------------------------------------
Romacorp, Inc., and its debtor-affiliates ask the Honorable
Barbara J. Houser of the U.S. Bankruptcy Court for the Northern
District of Texas, Dallas Division, for permission to employ The
Garden City Group, Inc., as their notice, claims and balloting
agent.
Garden City Group will:
(a) prepare and serve required notices in the Debtors' cases;
(b) receive proofs of claim at a post office box, if directed
to do so by the Court, and maintain copies of all proofs of
claim and proofs of interest filed in the Debtors' cases;
(c) maintain official claims registers in the Debtors' cases by
docketing all proofs of claim and proofs of interest in a
claims database;
(d) implement necessary security measures to ensure the
completeness and integrity of the claims registers;
(e) transmit to the Clerk's Office a copy of the claims
registers in a monthly basis unless requested more or less
frequently by the Clerk's Office;
(f) maintain an up-to-date mailing list for all entities that
have filed proofs of claim or proofs of interest and make
that list available upon request to the Clerk's Office or
any party-in-interest;
(g) provide access to the public for examination of copies of
the proofs of claim or proofs of interest filed in the
Debtors' cases without charge during regular business
hours;
(h) record all transfers of claims pursuant to Bankruptcy Rule
3001(e) and provide a notice of those transfers;
(i) comply with applicable federal, state, municipal and local
statutes, ordinances, rules, regulations, orders and other
requirements;
(j) provide temporary employees to process claims as necessary;
(k) provide a website to provide information about the Debtors'
cases;
(l) provide a toll-free "800" number to provide information
about the Debtors' cases and receive questions about the
Debtors' case;
(m) promptly comply with further conditions and requirements as
the Clerk's Office or the Court may at any time prescribe;
(n) provide other claims processing, noticing, balloting and
related administrative services as may be requested from
time to time by the Debtors; and
(o) act as balloting agent, which may include some or all of
the these services:
1. print of ballots including the printing of creditor and
shareholder specific ballots;
2. prepare voting reports by plan class, creditor, or
shareholder and amount for review and approval by the
client and its counsel;
3. coordinate the mailing of ballots, disclosure statement
and plan of reorganization to all voting and non-voting
parties and provide affidavit of service; and
4. receive ballots at a post office box, inspecting ballots
for conformity to voting procedures, date stamping and
numbering ballots consecutively, and tabulating and
certifying the results.
Neil L. Zola, the executive vice president and chief operating
officer of The Garden City Group, Inc., discloses that the Firm
received a $5,000 retainer.
The Debtors believe that The Garden City Group, Inc., is
disinterested as that term is defined in Section 101(14) of the
U.S. Bankruptcy Code.
The Garden City Group, Inc. -- http://www.gardencitygroup.com/--
specializes in noticing, claims processing, balloting and other
administrative tasks in reorganization cases.
Headquartered in Dallas, Texas, Romacorp, Inc., own and operate
the Tony Roma chain of restaurants with 22 company-owned stores,
86 domestic franchise stores and 118 international franchise
stores. The Debtor and seven of its affiliates filed for chapter
11 protection on November 6, 2005 (Bankr. N.D. Tex. Case No. 05-
86818). Peter S. Goodman, Esq., Jason S. Brookner, Esq., Monica
S. Blacker, Esq., and Matthew D. Wilcox, Esq., at Andrews Kurth
LLP represent the Debtors in their restructuring efforts. When
the Debtors filed for protection from their creditors, they listed
$20,769,000 in total assets and $76,309,000 in total debts.
ROMACORP INC: Wants to Hire Houlihan Lokey as Financial Advisor
---------------------------------------------------------------
Romacorp, Inc., and its debtor-affiliates ask the Honorable
Barbara J. Houser of the U.S. Bankruptcy Court for the Northern
District of Texas, Dallas Division, for permission to employ
Houlihan Lokey Howard & Zukin Capital, Inc., as their financial
advisor, nunc pro tunc to Nov. 6, 2005.
Houlihan Lokey will:
(a) review the Debtors' financial position, financial history,
operations, competitive environment, and assets;
(b) assist the Debtors in reviewing and evaluating potential
strategic alternatives, including presentations to the
Debtors' Board of Directors and creditor constituencies;
(c) develop a list of potential purchasers, investors and
strategic partners and interacting with those investors to
evaluate interest in a sale transaction;
(d) assist the Debtors in preparing a business plan and
financial projections;
(e) prepare voluminous materials utilized in connection with
marketing efforts, including:
(i) summary teaser memorandum;
(ii) confidential offering memorandum; and
(iii) management presentation, provided to interested
investors;
(f) assist the Debtors in creating an extensive on-line
dataroom;
(g) submit and discuss the Offering Memoranda with interested
parties, coordinate, schedule and attend management
presentations with the Debtors and potential investors,
facilitate investor due diligence and otherwise interface
between the Debtors and potential investors;
(h) contact financing sources to arrange for:
(i) debtor-in-possession financing and
(ii) new senior financing, either in connection with a sale
transaction or on a stand alone basis;
(i) advise the Debtors as to various possible transaction
structures;
(j) coordinate and organize discussions with the holders of the
Debtors' 10.5% senior notes regarding a potential sale
transaction or stand alone restructuring transaction in an
effort to reach a fully consensual agreement among the
Debtors' stakeholders;
(k) create presentation materials for various creditor
constituencies outlining various strategic alternatives;
(l) facilitate creditors' due diligence, including
participating on various teleconferences and attend
diligence meeting;
(m) assist the Debtors in matters related to the Debtors' use
of cash collateral, and any other financing in the Debtors'
cases, including identifying potential sources of capital,
assist in the due diligence process, and negotiating the
terms of any proposed financing, as requested;
(n) provide testimony in any chapter 11 case concerning any of
the subjects encompassed by the Firm's financial advisory
services, if appropriate and is required;
(o) assist the Debtors and Debtors' counsel in preparing
documentation required in connection with the
restructuring; and
(p) assist the Debtors in the preparation of projections and a
liquidation analysis in connection with any proposed plan
of reorganization.
Richard S. Klein, a member at Houlihan Lokey Howard & Zukin
Capital, Inc., disclosed that the Firm received $1,175,000 for
fees incurred in 2003 and $400,000 for fees incurred in April
2005. The Firm expects to receive:
-- a $200,000 non-refundable retainer;
-- a $50,000 monthly fee starting Aug. 1, 2005;
-- reimbursed expenses not exceeding $85,000; and
-- a $1,000,000 transaction fee plus 3% aggregate gross
consideration received in excess of $60 million, less:
(a) 100% of the retainer;
(b) 100% of two monthly fess; and
(c) 50% of all monthly fees after deducting two monthly
fees.
The Debtors believe that Houlihan Lokey Howard & Zukin Capital,
Inc., is disinterested as that term is defined in Section 101(14)
of the U.S. Bankruptcy Code.
With 10 offices in the United States and Europe, Houlihan Lokey
Howard & Zukin Capital, Inc. -- http://www.hlhz.com/-- is an
international investment bank that provides a wide range of
services, including mergers and acquisitions, financing, financial
opinions, advisory services, and financial restructuring.
Headquartered in Dallas, Texas, Romacorp, Inc., own and operate
the Tony Roma chain of restaurants with 22 company-owned stores,
86 domestic franchise stores and 118 international franchise
stores. The Debtor and seven of its affiliates filed for chapter
11 protection on November 6, 2005 (Bankr. N.D. Tex. Case No. 05-
86818). Peter S. Goodman, Esq., Jason S. Brookner, Esq., Monica
S. Blacker, Esq., and Matthew D. Wilcox, Esq., at Andrews Kurth
LLP represent the Debtors in their restructuring efforts. When
the Debtors filed for protection from their creditors, they listed
$20,769,000 in total assets and $76,309,000 in total debts.
RYERSON TULL: Good Performance Prompts S&P's Stable Outlook
-----------------------------------------------------------
Standard & Poor's Ratings Services revised its outlook on Ryerson
Tull Inc. to stable from negative and affirmed its 'BB-' corporate
credit and 'B' unsecured debt ratings on the metals processor and
distributor. Chicago, Illinois-based Ryerson had about $1.1
billion in total debt at Sept. 30, 2005.
"The outlook revision reflects the company's improved operating
performance and credit metrics since its acquisition of Integris
Metals Inc.," said Standard & Poor's credit analyst Paul Vastola.
"It also reflects our expectations that ongoing improvements in
Ryerson's working capital management will enable the company to
continue to reduce its aggressive debt levels in the intermediate
term."
Following the Jan. 4, 2005, acquisition of Integris Metals, a
large North American metals distributor, Ryerson became the
largest company within this highly fragmented industry, about
double the size of the next-largest company. The company's
revenues are now tracking in excess of $5 billion.
Integris' higher value-added product mix and higher margins are
helping to improve Ryerson's margins. Integris also enhanced
Ryerson's product and end-market diversity, which should lessen
the volatility in Ryerson's performance through the cycle.
Indeed, Integris strengthened Ryerson's position in Canada and in
aluminum and stainless steel products, which now generate about
50% of Ryerson's sales, lessening concentration of sales in the
more-competitive and volatile flat-rolled steel product segment.
"Ryerson should continue to benefit from relatively favorable
market conditions and better working capital management in the
intermediate term," Mr. Vastola said.
SECOND CHANCE: Court Sets December 31 as Claims Bar Date
--------------------------------------------------------
The Honorable Jeffrey R. Hughes of the U.S. Bankruptcy Court for
the Western District of Michigan extended until December 31, 2005,
at 5:00 p.m., the deadline for all creditors owed money by Second
Chance Body Armor, Inc., n/k/a SCBA Liquidation, Inc., on account
of claims related to Triflex Vests, to file their proofs of claim.
Triflex claimants must file written proofs of claim on or before
the December 31 claims bar date and those forms must be delivered
by mail to:
Latonya Callaway
AlixPartners, LLC
Re: Second Chance Body Armor
2100 McKinney Avenue, Suite 800
Dallas, Texas 75201
Based in Central Lake, Michigan, Second Chance Body Armor, Inc.
-- http://www.secondchance.com/-- manufactures wearable and soft
concealable body armor. The Company filed for chapter 11
protection on Oct. 17, 2004 (Bankr. W.D. Mich. Case No. 04-12515)
after recalling more than 130,000 vests made wholly of Zylon, but
it did not recall vests made of Zylon blended with other
protective fibers. Stephen B. Grow, Esq., at Warner Norcross &
Judd, LLP, represents the Debtor in its restructuring efforts.
When the Debtor filed for protection from its creditors, it listed
estimated assets and liabilities of $10 million to $50 million.
Daniel F. Gosch, Esq., at Dickinson Wright PLLC, represents the
Official Committee of Unsecured Creditors.
STILLWATER MINING: Mining Costs Prompt S&P's Negative Outlook
-------------------------------------------------------------
Standard & Poor's Ratings Services revised its outlook on
Stillwater Mining Co. to negative from stable. At the same time
Standard & Poor's affirmed its 'BB-' corporate credit and its
other ratings on the company.
"The outlook revision reflects the company's inability thus far to
increase its production levels and lower its mining costs," said
Standard & Poor's credit analyst Dominick D'Ascoli, "despite heavy
capital spending directed toward this goal, which together with
the depletion of its equity palladium inventories expected in
early 2006 is likely to result in negative free cash flows and a
weakened financial profile over the next couple of years. Ratings
could be lowered if the company is unable to improve its level
of sustainable production and mining costs or if operating
disruptions occur that result in a meaningful decline to its
liquidity.
Mr. D'Ascoli added, however, that "Stillwater's ratings continue
to benefit from favorable floor prices set under its sales
contracts. The outlook could be revised to stable if the company
is able to reach targeted production and cost improvements while
maintaining adequate liquidity levels in the process."
Stillwater, based in Billings, Montana, is a small producer of
palladium and platinum and also recycles platinum group metals
from spent auto catalysts. The company is 55%-owned by Russia-
based OJSC MMC Norilsk Nickel, which acquired its equity interest
in 2003 in exchange for $100 million in cash and 877,000 ounces of
palladium metal. Stillwater has since been selling approximately
110,000 ounces per quarter at a slight discount to market prices
and generating about $20 million of free cash flow per quarter,
but its inventory of this equity palladium is expected to deplete
in early 2006.
STRESSGEN BIOTECH: Posts CDN$5.7 Million Net Loss in Third Quarter
------------------------------------------------------------------
Stressgen Biotechnologies (TSX: SSB) reported a net loss from
continuing operations of CDN$5.7 million for the three months
ended Sept. 30, 2005, compared to a net loss from continuing
operations of CDN$8.4 million for the same period in 2004.
For the nine months ended Sept. 30, 2005, the Company reported a
net loss from continuing operations of CDN$23.2 million, compared
to a net loss from continuing operations of CDN$22.2 million for
the same period in 2004. The Company had cash, cash equivalents
and short-term investments of CDN$5.8 million as of Sept. 30,
2005. As announced on Nov. 1, 2005, the Company raised gross
proceeds of CDN$2.6 million.
"The Company has achieved important financial and corporate
milestones this past quarter," Gregory M. McKee, President and
Chief Executive Officer at Stressgen, commented. "As part of our
new strategic direction, we are implementing several additional
financial and program initiatives including corporate partnering
efforts, non-dilutive financial contribution plans and others that
we believe can provide a solid foundation for our future corporate
and program development."
Stressgen Biotechnologies Corporation -- http://www.stressgen.com/
-- a biopharmaceutical company that focuses on the discovery,
development and commercialization of innovative therapeutic
vaccines for the treatment of infectious diseases and cancer. The
corporation is publicly traded on the Toronto Stock Exchange under
the symbol SSB.
* * *
The Company's auditor, Deloitte & Touche LLP, expressed
substantial doubt about the Company's ability to continue as a
going concern, in its March 14, 2005, audit report, pointing to
the Company's recurring losses from operations and difficulty in
generating sufficient cash flow to meet its obligations and
sustain its operations.
On June 30, 2005, the Company had cash, cash equivalents and
short-term investments totaling $13,230,000, working capital of
$9,400,000 and accumulated deficit of $222,409,000.
On December 31, 2004, the Company had cash, cash equivalents and
short-term investments totaling $21,578,000, working capital of
$19,335,000 and accumulated deficit of $212,349,000. The Company
incurred a net loss from continuing operations of $17,520,000 for
the six months ended June 30, 2005, and a net loss from continuing
operations of $31,845,000 for the year ended December 31, 2004.
The Company used $16,967,000 of net cash in operations for the six
months ended June 30, 2005.
SUNCOM WIRELESS: Discloses Third Quarter Financial Results
----------------------------------------------------------
Triton PCS Inc., nka SunCom Wireless Holdings, Inc., (NYSE: TPC)
reported third quarter service revenue of $156.1 million, with
average revenue per user of $54.60. Subscribers totaled 919,550
at quarter end.
Adjusted EBITDA was $5.5 million, reflecting the costs of
integrating former AT&T Wireless customers, while net cash
provided by operations was $2.9 million for the quarter.
During the third quarter, the company completed the integration of
the AT&T Wireless networks and the migration of customers to
SunCom Wireless systems in the acquired markets in North Carolina
and Puerto Rico. The company also finalized all handset
migrations related to these customers.
The migration was necessary in order to transition these customers
to SunCom's systems and generally required customers to initiate a
handset change out. A number of challenges associated with the
migration of former AT&T Wireless subscribers impacted the
Company's third quarter operating results. The process required
significant customer involvement, which resulted in higher than
expected subscriber churn as well as higher retention costs to
reduce subscriber deactivations.
"Now that we have fully completed the customer migrations and
systems integration, 100 percent of SunCom customers are supported
by SunCom networks and systems," said SunCom CEO Michael Kalogris.
"With the end of the migration process, I am confident that our
current strategy will enable us to realize our full growth
potential from the new markets."
"As we worked through the migration process, we made a significant
investment in building long-term relationships with our customers,
which had a short-term, negative impact on our financial results,"
added Mr. Kalogris. "Building and maintaining these relationships
is our top priority and a critical part of our strategy to
successfully grow our business."
Recent Events:
* Urban Comm Purchase Terminated
On August 16, the company terminated the agreement to
purchase Urban Communicators. SunCom's $5 million deposit
plus interest was returned, and all matters related to this
transaction have been settled.
* Enterprise Subscriber Sale
On September 20, the company reached an agreement whereby
Cingular acquired approximately 29,000 former AT&T Wireless
enterprise customers that had not yet migrated to SunCom in
exchange for a cash payment of $3.1 million.
Financial Highlights:
* Adjusted EBITDA in the third quarter was $5.5 million,
compared to $64.5 million one year ago. Net cash provided by
operating activities was $2.9 million in the third quarter,
compared with net cash provided by operating activities of
$58.7 million in the third quarter of 2004.
* Third quarter total revenue of $214.5 million increased from
$212.2 million a year earlier. Service revenue in the recent
quarter declined to $156.1 million, representing a 6.2%
decrease from $166.5 million in the second quarter of 2005.
Roaming revenue was $34.3 million, compared with $44 million
a year earlier, reflecting the lower rate and decreased
minutes associated with the agreement with Cingular that took
effect in the fourth quarter of 2004.
* ARPU was $54.60, a decrease from $56.73 in the second quarter
of 2005.
* Subscribers at the end of the third quarter were 919,550, as
compared with 899,862 a year ago.
* Monthly churn in the third quarter was 3.8% compared with
3.2% in the second quarter 2005.
* Cost per gross addition was $453 in the third quarter,
compared with $415 a year earlier.
* Capital Expenditures in the quarter were $34.9 million,
bringing year-to-date capital spending to $78.2 million.
* The company ended the third quarter with $434.2 million in
cash and short-term investments.
SunCom Wireless, based in Berwyn, Pennsylvania, is licensed to
provide digital wireless communications services in an area
covering 14.3 million people in the Southeastern United States and
4 million people in Puerto Rico and the U.S. Virgin Islands.
Based in Berwyn, Pennsylvania, SunCom Wireless fka Triton PCS,
Inc., is licensed to provide digital wireless communications
services in an area covering 14.3 million people in the
Southeastern United States and 4.0 million people in Puerto Rico
and the U.S. Virgin Islands.
* * *
As reported in the Troubled Company Reporter on Mar. 22, 2005,
Standard & Poor's Ratings Services lowered its ratings on Triton
PCS Inc. The corporate credit rating was lowered to 'CCC+' from
'B-'. S&P said the outlook is negative.
As reported in the Troubled Company Reporter on Nov. 9, 2004,
Moody's Investors Service downgraded the existing ratings of
Triton PCS, Inc., completing the review for possible downgrade
initiated in July. Moody's also assigned a B2 rating to the
proposed $250 million senior secured term loan. The outlook for
these ratings is negative.
The affected ratings are:
* Senior implied rating downgraded to Caa1 from B2
* Issuer rating downgraded to Caa1 from B2
* $250 million senior secured term loan assigned B2
* $725 million 8.5% Senior Notes due 2013 downgraded to Caa1
from B2
* $350 million 9.375% Senior Subordinated Notes due 2011
downgraded to Ca from B3
* $400 million 8.75% Senior Subordinated Notes due 2011
downgraded to Ca from B3
TRUMP ENTERTAINMENT: Moody's Junks $1.25 Bil. Senior Secured Notes
------------------------------------------------------------------
Moody's Investors Service revised the outlook of Majestic Star
Casino, L.L.C. to developing following the announcement that it
will acquire Trump Entertainment Resorts Holdings, L.P.'s Gary,
Indiana riverboat casino for $253 million in cash, or about 8
times the casino property's latest twelve month EBITDA.
Concurrently, the ratings for both Majestic Star and Trump were
affirmed; Trump's rating outlook is stable. The acquisition is
expected to close by the end of 2005 and is subject to customary
approvals and consents.
The acquisition is expected to be financed with all debt.
Majestic Star's developing outlook reflects uncertainty regarding
its consolidated debt structure post closing, as well as the
possible need for capital investment in the Trump property due to
under investment, along with higher interest expense relative to
lower year over year cash from operations. Year to date earnings
and cash flow have been hurt by higher promotional expenses due to
competitive conditions in the company's markets.
The affirmation of Majestic's ratings assumes that the company
will benefit over time from higher earnings at the Trump property
given that Majestic Star's property generates higher margins than
the Trump riverboat. Majestic Star currently owns a riverboat
casino adjacent to Trump Indiana, and through a joint venture,
Majestic Star and Trump own, develop and operate all common
land-based and waterside operations in support of their riverboat
casinos at Buffington Harbor in Gary, Indiana.
The affirmation of Trump's ratings considers that the asset sale
will provide the company with additional capital that it can use
to invest in its Atlantic City properties. However, the company
must obtain lender approval for the sale, as well as the ability
to retain all or a portion of the sale proceeds. There is some
level of uncertainty regarding the timing and degree of any cash
flow improvement related to future capital investment. Trump's
Atlantic City casinos, which are in need of both maintenance and
upgrade capital investment, are currently competing with new and
improved properties in that market, most notably the Borgata,
which has grown largely at the expense of Atlantic City's other
casino properties. Trump's B3 corporate family rating also
incorporates the potential for longer-term competition from
neighboring jurisdictions including Pennsylvania, Delaware,
Maryland and New York.
These Trump ratings have been affirmed:
-- $200 million senior secured revolver due 2010 -- B2;
-- $150 million senior secured term loan due 2012 -- B2;
-- $150 million senior secured delayed draw term loan due
2012 -- B2;
-- $1.25 billion second lien senior secured notes due 2015 --
Caa1;
-- Speculative grade liquidity rating -- SGL-3; and
-- Corporate family rating -- B3.
These Majestic Star ratings have been affirmed:
-- $80 million senior secured revolver due 2007 -- B1;
-- $260 million senior secured notes due 2010 -- B2; and
-- Corporate family rating -- B2.
Majestic Star Casino, LLC directly and indirectly owns and
operates riverboat casinos in Gary, Indiana; Tunica, Mississippi;
and Black Hawk, Colorado. Trump Entertainment Resorts Holdings,
L.P. owns the Trump Taj Mahal Casino Resort, Trump Plaza Hotel and
Casino, and Trump Marina Hotel Casino in Atlantic City, in
addition to its Gary, Indiana riverboat casino.
TW INC: Wants More Time to File Final Report
--------------------------------------------
TW, Inc., fka Cablevision Electronics Investments, Inc., asks the
U.S. Bankruptcy Court for the District of Delaware to extend until
Feb. 22, 2006, the deadline within which it must file a final
report and to delay until Feb. 22, 2006, the entry of an automatic
final decree closing its chapter 11 case.
The Court confirmed the Debtor's Third Amended Plan of Liquidation
on May 27, 2005, and the Plan took effect on July 1, 2005.
The Debtor explains that it is premature to close its chapter case
now because there are still approximately 40 adversary actions and
numerous claim objections that need to be resolved, which will
increase the size of the estate and reduce the number of claims
against the estate.
Additionally, a delay will not prejudice any creditors and
parties-in-interest but will ensure that creditor recoveries will
be maximized under the confirmed Plan.
The Court will convene a hearing at 3:00 p.m., on Nov. 28, 2005,
to consider the Debtor's request.
TW, Inc., filed for chapter 11 protection on March 14, 2003
(Bankr. Del. Case No. 03-10785). Jeremy W. Ryan, Esq., and Mark
Minuti, Esq., at Saul Ewing LLP represent the Debtors. When the
Company filed for protection from its creditors, it listed assets
of over $50 million and debts of more than $100 million. The
Court confirmed the Debtor's Plan of Liquidation on May 27, 2005,
and the Plan took effect on July 1, 2005.
TW INC: Has Until Nov. 28 to Object to Proofs of Claim
------------------------------------------------------
The U.S. Bankruptcy Court for the District of Delaware extended
the deadline within which TW, Inc., fka Cablevision Electronics
Investments, Inc., can object to claims filed against its estate,
until Nov. 28, 2005.
The Court confirmed the Debtor's Third Amended Plan of Liquidation
on May 27, 2005, and the Plan took effect on July 1, 2005.
The Debtor gave the Court three reasons that militate in favor of
the extension:
1) it is currently attempting to resolve the contested claims
that are the subject of formal objections and it is in the
process of reviewing and reconciling with its own books and
records on approximately eight to ten additional claims;
2) it is currently reviewing 13 remaining unresolved
Administrative Claims totaling approximately $965,000 and it
is in the process of attempting to resolve any disputes with
the claimants and will appropriate objections to those
claims prior to the Administrative Claims Bar Date; and
3) an extension will permit the Debtor to object to disputed
claims in the event it is unlikely to consummate a
settlement for any disputed claims.
TW, Inc., filed for chapter 11 protection on March 14, 2003
(Bankr. Del. Case No. 03-10785). Jeremy W. Ryan, Esq., and Mark
Minuti, Esq., at Saul Ewing LLP represent the Debtors. When the
Company filed for protection from its creditors, it listed assets
of over $50 million and debts of more than $100 million.
U.S. CONCRETE: Earns $9 Million of Net Income in Third Quarter
--------------------------------------------------------------
U.S. Concrete, Inc. (NASDAQ: RMIX), reported net income of
$9 million for the quarter ended September 30, 2005, compared to
net income of $8 million in the third quarter of 2004. As
previously disclosed, the third quarter of 2004 reflected an
effective income tax rate of 31 percent due to a loss on early
extinguishment of debt recorded in the first quarter of 2004.
Assuming a normalized effective income tax rate of 40 percent,
non-GAAP net income for the third quarter of 2004 would have been
$6.9 million.
Net income for the first nine months of 2005 was $8.6 million
compared to a net loss of $10.6 million for the first nine months
of 2004, which included a $28.8 million loss on the early
extinguishment of debt. Excluding the loss on early
extinguishment of debt and assuming a normalized effective tax
rate of 40 percent, non-GAAP net income for the first nine months
of 2004 would have been $8 million.
Revenues in the third quarter of 2005 increased 16.2 percent to
$172.3 million compared to $148.3 million in the third quarter of
2004, reflecting higher ready-mixed concrete prices and sales
volumes and increased other concrete-related product sales. The
Company's average sales price per cubic yard of ready-mixed
concrete during the third quarter of 2005 was 12.8 percent higher
than in the third quarter of 2004. Compared to the third quarter
of 2004, ready-mixed concrete sales prices improved in all major
regions, adequately covering raw material cost increases,
primarily in cement and aggregates. Compared to the second
quarter of 2005, the Company's average sales price per cubic yard
of ready-mixed concrete in the third quarter of 2005 increased
3.4 percent as a result of previously announced price increases
that became effective on July 1.
The Company's ready-mixed concrete sales volume in the third
quarter of 2005 was approximately 1.57 million cubic yards, up
5.5 percent from 1.49 million cubic yards of ready-mixed concrete
sold in the third quarter of 2004.
Gross profit in the third quarter of 2005 was $35.3 million
(20.5 percent gross profit margin), an increase of 17.3 percent
compared to $30.1 million (20.3 percent gross profit margin) in
the third quarter of 2004. The increase in gross profit was
primarily due to higher ready-mixed concrete sales prices and
increased ready-mixed concrete sales volumes. Commenting on the
third quarter of 2005 results, Michael Harlan, U.S. Concrete's
Executive Vice President and Chief Operating Officer, stated, "The
fundamentals of our business continue to trend in the right
direction in most of our markets. We are experiencing improved
pricing and volumes resulting in higher profitability, which is
particularly encouraging given the significant shortfall in
profits we have had to overcome from the first quarter."
EBITDA was $22.8 million in the third quarter of 2005, up
21.5 percent compared with EBITDA of $18.8 million in the third
quarter of 2004. The Company defines EBITDA as net income (loss)
plus the provision for income taxes, net interest expense, loss on
early extinguishment of debt and noncash impairments,
depreciation, depletion and amortization.
The Company's selling, general and administrative expenses
were $12.9 million for the third quarter of 2005, compared to
$11.5 million for the third quarter of 2004. As a percentage
of revenues, selling, general and administrative expenses were
7.5 percent in the third quarter of 2005 as compared to
7.8 percent in the third quarter of 2004. General and
administrative costs in the third quarter of 2005 were higher
than the third quarter of 2004 primarily due to higher
compensation costs, including incentive-based and stock-based
compensation.
The Company's net cash provided by operations for the third
quarter of 2005 was $20.8 million compared to $11.1 million for
the third quarter of 2004. The Company's free cash flow (defined
as net cash provided by operations less capital expenditures for
property, plant and equipment, net of disposals) for the third
quarter of 2005 was $16.4 million compared to $9.6 million in the
third quarter of 2004. Third quarter 2005 free cash flow was
higher than the third quarter of 2004 due to higher earnings and
income tax refunds received.
The Company's net debt at September 30, 2005, was $152 million,
down $16.2 million from June 30, 2005. Net debt at Sept. 30,
2005, was comprised of total debt of $200 million less cash and
cash equivalents of $48 million.
Outlook
Based on current information, the Company expects fourth quarter
2005 revenues in the range of $130 million to $140 million, EBITDA
in the range of $9 million to $13 million and earnings per diluted
share in the range of $0.06 to $0.11.
Commenting on the Company's outlook, Eugene Martineau, U.S.
Concrete's President and Chief Executive Officer, stated, "We
reported third quarter earnings just above the high end of our
previous guidance and expect to have stronger fourth quarter
operating results on a year-over-year basis, assuming normal
operating conditions. October ready-mixed concrete volumes were
better than last year but were hampered by inclement weather,
primarily at our east coast operations. We are working diligently
to service our customer base in advance of winter conditions."
Mr. Martineau continued, "Looking forward to 2006, we expect our
revenues to exceed full-year 2005 forecasted revenues reflecting
continued improvement in pricing and organic growth. Full-year
2006 earnings guidance will be provided upon completion of our
budgetary process."
U.S. Concrete Inc. -- http://www.us-concrete.com/-- provides
ready-mixed concrete and related concrete products and services to
the construction industry in several major markets in the United
States.
* * *
As reported in the Troubled Company Reporter on Feb. 24, 2005,
Standard & Poor's Ratings Services revised its outlook on U.S.
Concrete, Inc., to stable from positive, and affirmed its 'B+'
corporate credit and 'B-' subordinated debt ratings.
UAL CORP: Wants Court Nod on Amended GECAS Sale/Leaseback Pact
--------------------------------------------------------------
UAL Corporation, its debtor-affiliates and General Electric
Commercial Aviation Services, LLC, entered into a letter agreement
to finance the Debtors' purchase of six Boeing 767-300ER aircraft
under their global settlement with the Public Debt Group.
Following the Court's approval of the Letter Agreement, the
Debtors and GECAS were unable to consummate the sale lease-back
transactions because GECAS was unable to obtain requisite
internal approvals, James H.M. Sprayregen, Esq., at Kirkland &
Ellis, in Chicago, Illinois, tells the Court.
As a result, the Debtors were forced to enter into an agreement
with Q Aviation, LLC, to supply replacement financing on some of
the 767 Aircraft, which gained Court approval.
As of October 28, 2005, the Debtors have closed the purchases for
N646UA, N661UA, and N644UA. While N646UA and N661UA will be
financed by Q Aviation, the Debtors intend for N644UA to be
financed by GECAS.
Amended Letter Agreement
Though the transactions originally contemplated under the Letter
Agreement were not consummated, GECAS and the Debtors continued
to negotiate terms for GECAS' financing of the Aircraft.
Following weeks of negotiation, the Debtors and GECAS arrived at
an amended Letter Agreement.
"GECAS is now prepared to proceed with, and has obtained all
requisite internal approvals to consummate, the sale lease/back
transactions contemplated under the Letter Agreement under
slightly less favorable terms," Mr. Sprayregen explains.
Though the Debtors have the authority to amend the Letter
Agreement without further Court order, the Debtors believe that
the change in pricing in the Amended Letter Agreement requires
new Court approval.
Accordingly, the Debtors ask the Court to approve the Amended
Letter Agreement.
Mr. Sprayregen notes that the Amended Letter Agreement is
identical to the original Letter Agreement in all respects,
except that:
(1) GECAS will pay 2% less to purchase the aircraft from the
Debtors than under the original Letter Agreement;
(2) GECAS has obtained all necessary approvals; and
(3) the refinancing delivery date will be extended to
December 16, 2005.
Mr. Sprayregen notes the Amended Letter Agreement will:
* allow the Debtors to replenish their liquidity during the
airline industry's slow winter season; and
* help the Debtors reduce costs for maintenance and operation
of its aircraft fleet, which is a central component in the
reorganization strategy.
Amended Terms are Confidential
Mr. Sprayregen tells Judge Wedoff that the Amended Letter
Agreement is highly confidential and sensitive to both the
Debtors and GECAS. The Debtors, therefore, want to file the
Amended Letter Agreement under seal.
The Debtors have provided the details of the Amended Letter
Agreement with counsel to the Official Committee of Unsecured
Creditors and all non-recused members of the Creditors'
Committee, as well as the DIP lenders.
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. 100; Bankruptcy Creditors' Service,
Inc., 215/945-7000)
UAL CORP: Court Approves Vx Capital Aircraft Settlement Pact
------------------------------------------------------------
The U.S. Bankruptcy Court for the Northern District of Illinois
approves UAL Corporation and its debtor-affiliates' Letter
Agreement and Settlement with Vx Capital Partners LLC.
U.S. Bank, as Mortgage/Indenture Trustee, will receive all
payments and claims with respect to these aircraft:
1) N320UA
The Debtors will pay U.S. Bank $1,972,500. U.S. Bank will
be allowed a general unsecured claim of $12,860,728.
2) N343UA
The Debtors will pay U.S. Bank $2,580,000. U.S. Bank will
be allowed a general unsecured claim of $13,198,544.
The Debtors waive and relinquish the termination options on
N173UA, N383UA, N385UA and N386UA.
The Court order does not modify the rights, claims or defenses of
Verizon Capital Corp. for tax indemnity under its Tax Indemnity
Agreements for N173UA and N343UA.
The Debtors are released from any and all claims and obligations
related to N320UA and N343UA. However, the Debtors are not
released from obligations arising, or claims allowed, under the
order, the Letter Agreement, or the Settlement.
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. 100; Bankruptcy Creditors' Service,
Inc., 215/945-7000)
UNIVERSAL HOSPITAL: Sept. 30 Balance Sheet Upside-Down by $94 Mil.
------------------------------------------------------------------
Universal Hospital Services, Inc. reported financial results for
the quarter and nine months ended Sept. 30, 2005.
Total revenues were $53.4 million for the third quarter of 2005,
representing a $3.8 million or 8% increase from total revenues of
$49.6 million for the same period of 2004. Through the first nine
months of 2005, revenues increased by 10% to $162.0 million.
Net loss for the quarter was $1.1 million, compared to a net loss
of $1.0 million for the same quarter last year. During the first
nine months of 2005 the company reported a net loss of $1.6
million versus a net loss of $300,000 for the same period of 2004.
Third quarter EBITDA before management/board fees and SOX
compliance costs was $18.3 million, representing a $1.5 million or
9% increase from $16.8 million for the same period of 2004.
EBITDA before management/board fees and SOX compliance costs for
the first nine months of 2005 increased $3.3 million, or 6% to
$55.7 million from $52.4 million for the first nine months of
2004.
"We are pleased that third quarter and year-to-date results met
our expectations in spite of the challenges of a weak hospital
census environment and medical equipment recalls," said Gary
Blackford, President and CEO. "We are making solid progress in
building operating efficiencies and a more productive, diversified
business model as we continue toward our goal of becoming the
premier Equipment Lifecycle Services company in the industry."
Based in Edina, Minnesota, Universal Hospital Services, Inc. is a
leading medical equipment lifecycle services company. UHS offers
comprehensive solutions that maximize utilization, increase
productivity and support optimal patient care resulting in capital
and operational efficiencies. UHS currently operates through more
than 75 offices, serving customers in all 50 states and the
District of Columbia.
At Sept. 30, 2005, Universal Hospital Services, Inc.'s balance
sheet showed a $94,635,000 stockholders' deficit compared to a
$93,058,000 deficit at Dec. 31, 2004.
UNUMPROVIDENT FINANCE: S&P Rates $400 Mil. Sr. Debentures at BB+
----------------------------------------------------------------
Standard & Poor's Ratings Services assigned its 'BB+' senior debt
rating to UnumProvident Finance Co. plc.'s $400 million 6.85%
senior debentures maturing Nov. 15, 2015. The proceeds will be
used to facilitate the repatriation of foreign earnings under the
Home Investment Act of 2004.
"The rating reflects the full and unconditional guarantee by
UnumProvident Corp. and is based on the strong competitive
position of its insurance operating companies, with substantial
market leadership in group and individual disability insurance,
and improved asset quality," explained Standard & Poor's credit
analyst Shellie Stoddard. Somewhat offsetting these strengths are
operating earnings, which have recently been volatile and weak
relative to the rating, increased financial leverage and decreased
interest coverage, and marginal holding company liquidity.
Although this debt issue will create a slightly higher year-end
2005 leverage ratio and lower fixed-charge coverage, 2006 fixed
charges are expected to return to 4x-5x, which is supportive of
the rating. It is expected that UnumProvident will use the
repatriated funds to participate in the mandatory convertible
remarketing in February 2006. As of Sept. 30, 2005, UnumProvident
had $2.86 billion of debt outstanding.
UnumProvident was formed by the late 1990s mergers of Provident
Cos. Inc., Paul Revere Life Insurance Co., and Unum Corp. These
three were among the largest sellers of group and individual
disability insurance products, and in combination hold a dominant
market position. In 2004, UnumProvident held a 26% market share
in group income protection and 38% in individual. UnumProvident's
position in group life and long-term care is not nearly as
formidable, but it benefits significantly from cross-sales to the
sizeable group income protection client base.
Operating earnings are expected to improve in 2005 and 2006, with
a pretax margin of about 10%. Fixed-charge coverage will remain
marginally appropriate for the rating at 4x-5x, excluding special
charges. Revenue will decrease marginally due to sale of certain
non-U.S. units and a planned decline in sales and persistency in
large group disability insurance.
US LEC: Equity Deficit Widens to $230.08 Million at Sept. 30
------------------------------------------------------------
US LEC Corp. delivered its quarterly report on Form 10-Q for the
quarter ending September 30, 2005, to the Securities and Exchange
Commission on October 31, 2005.
Revenue increased to $98.8 million for the three months ended
September 30, 2005, from $87.3 million for the three months ended
September 30, 2004.
Network expenses are comprised primarily of leased transport,
facility installation, and usage charges. Network expenses
increased to $47.7 million for the three months ended
September 30, 2005, from $44.0 million for the three months
ended September 30, 2004, but decreased as a percentage of
revenue to 48% from 50% for the same periods primarily as a result
of the decrease in the total per circuit cost of the Company's
local network and customer loops.
Selling, general and administrative expenses for the quarter
ended September 30, 2005, increased to $37.6 million compared to
$32.9 million for the quarter ended September 30, 2004, and
remained flat as a percentage of revenue at 38%.
Charges related to the early extinguishment of debt totaled
$4.4 million in 2004 and were related to the early retirement of
the Company's subordinated debt and the related acceleration of
the $2 million discount associated with this subordinated debt and
$2.4 million of unamortized debt issuance fees related to the
senior credit facility and the subordinated notes.
Net loss for the three months ended September 30, 2005, amounted
to $3.1 million. Dividends paid in kind and accrued on preferred
stock for the three months ended September 30, 2005, amounted to
$4.1 million.
At September 30, 2005, the Company's balance sheet shows
$287.71 million in total assets and $517.78 million in debts.
As of September 30, 2005, the Company's equity deficit widened
to $230.08 million from a $205.30 million equity deficit at
December 31, 2004.
A full-text copy of the regulatory filing is available at no
charge at http://ResearchArchives.com/t/s?2c6
Based in Charlotte, N.C., US LEC Corp. -- http://www.uslec.com/--
provides voice, data and Internet services to over 25,200
mid-to-large-sized business class customers throughout the eastern
United States.
US MINERAL: Inks $11.7 Million Exit Financing from LaSalle
----------------------------------------------------------
Anthony R. Calascibetta, the chapter 11 Trustee of United States
Mineral Products Company dba Isolatek International, asks the U.S.
Bankruptcy Court for the District of Delaware for authority to
obtain $11,680,000 of exit financing, as contemplated in its Fifth
Amended Plan of Reorganization, from LaSalle Business Credit, LLC.
The Trustee says that the exit financing facility is instrumental
to the confirmation of the plan and continuation of the Debtor's
business operations after the plan's effective date. The Debtor's
plan is scheduled for a confirmation hearing on November 14.
Under the exit facility agreement, the loan will mature on
Dec. 31, 2008. To protect LaSalle's interests, it will be given a
first priority senior security interests and liens on the Debtor's
postpetition assets. In addition, LaSalle will have a second
priority lien on the Debtor's property located at 83 Main Street
in Morris County, New Jersey.
Headquartered in Stanhope, New Jersey, United States Mineral
Products Company manufactures and sells spray-applied fire
resistive material to the constructions industry in North America
and South America. The Company filed for chapter 11 protection on
July 23, 2001 (Bankr. D. Del. Case No. 01-2471). Henry Jon
DeWerth-Jaffe, Esq., at Pepper Hamilton LLP, represent the Debtor
in its restructuring efforts. When the Debtor filed for
protection from its creditors, it listed total assets of
$23,773,000 and total debts of $13,864,000. Anthony Calcisbetta
serves as the Debtor's chapter 11 trustee since Oct. 2, 2003.
VERIDIEN CORP: Corrects Accounting Errors in 2004 Annual Report
---------------------------------------------------------------
Veridien Corporation delivered an amended annual report on Form
10-KSB/A for the year ended Dec. 31, 2004, to the Securities and
Exchange Commission on Nov. 2, 2005.
Veridien amended its 2004 annual report, due to errors in the
accounting for marketable securities. In addition, the Company
filed amendments to its quarterly reports for the period ended
March 31, 2005, and June 30, 2005, because these reports used
balance sheet numbers from the erroneous annual report.
The errors in the Company's 2004 annual report resulted from
recording of the valuation, at the insistence of its former
auditors, Carter, Cartier, Melby & Guarino, CPA's, PA, of
securities the Company owns at a discounted price when the shares
should have been reported as non-impaired marketable securities.
The correction resulted in:
a) an increase in sales, as the original value of the
securities received as payment of license services was
discounted when it should not have been;
b) changes in realized and unrealized gains and losses as a
result of the initial valuation and valuation of the
securities throughout the Company's ownership of them; and
c) a decrease in the Company's reported loss for 2004 by
$121,065.
Amended Annual Results
Veridien reported a $636,728 net loss on $1,802,154 of revenues
for the year ended Dec. 31, 2004, as compared to a $914,874 net
loss on $1,661,911 of revenues in the prior year.
At Dec. 31, 2004, the Company's balance sheet showed $1,436,530 of
assets and liabilities totaling $5,548,466, resulting in a
stockholders' deficit of $4,111,936. The Company had working
capital deficits of approximately $929,916 and $2,452,161 as of
Dec. 31, 2004, and 2003 respectively,
Amended Second Quarter Results
On a restated basis, the Company incurred a $961,547 net loss in
the quarter ended June 30, 2005, instead of the $840,482 net loss
formerly reported. Its restated current assets were $933,805
rather than the $925,304 first stated. Current liabilities,
restated were $2,274,711, down slightly from the $2,435,565
originally reported.
Going Concern Doubt
Carter, Cartier, Melby & Guarino, CPA's, PA, expressed substantial
doubt about Veridien's ability to continue as a going concern
after it audited the Company's financial statements for the years
ended Dec. 31, 2004, and 2003. The auditing firm pointed to the
Company's substantial losses since inception, stockholders' equity
deficit, working capital deficit and continued cash flow
deficiency.
About Veridien
Veridien Corporation - http://www.vrde.com/-- is a life sciences
company, focused on infection control, healthy lifestyle products
and diagnostic products. Over the Company's history it has
invented, developed and patented its own unique products, sourced
and marketed inventive products developed by others and in more
recent times partnered with innovative pioneers to pursue
development of proprietary technology.
WATERMAN INDUSTRIES: Plan Confirmation Hearing Set for Dec. 1
-------------------------------------------------------------
With a confirmation hearing scheduled for December 1, 2005, the
final day for receipt of ballots on the bankruptcy reorganization
plan filed by Waterman Industries, Inc., has been set at Nov. 28.
Waterman Industries' First Amended Disclosure Statement and Plan
were filed on October 25, 2005, following a hearing held on
October 13 before Honorable Judge W. Richard Lee of the U.S.
Bankruptcy Court for the Eastern District of California, in
Fresno.
In April 2004, Pathway Strategic Partners, LLC, a corporate
recovery consulting firm and subsidiary of Buxbaum Group, was
approved by the Court to oversee the company's restructuring.
The debtor and secured lender Galena National Investments were Co-
Proponents of the Disclosure Statement and Plan. Galena is
successor in interest to Wells Fargo Bank and asserts a security
interest in the vast majority of the debtor's personal property
assets. The plan provides for the sale of Waterman's personal
property assets to Galena National Investments and, subsequent to
the effective date, the liquidation of remaining assets,
prosecution of legal actions, settling of disputed claims, payment
of Plan Expenses and distribution of proceeds to creditors.
"The restructuring of Waterman's operations and business practices
has propelled the company to a very healthy level of
profitability," noted Kenneth G. Leddon, Principal of Pathway
Strategic Partners and Chief Restructuring Officer of Waterman.
"The confirmation of this Plan should ensure a bright future for
Waterman employees, suppliers and customers, while providing
creditors with an optimal return from these circumstances."
At the hearing:
* Riley Walter of Walter Law Group appeared for the debtor;
* Randy Rogers of Winston & Strawn LLP appeared for Galena
National Investments, LLC; and
* Donald Fitzgerald of Feldstein, Fitzgerald, Willoughby &
Pascuzzi LLP appeared for the Creditor Committee.
In addition to Walter and Leddon, the debtor was represented at
the hearing by Birchel Brown, Managing Director of Pathway
Strategic Partners and Chief Operating Officer of Waterman
Industries.
About Pathway Strategic Partners
Pathway Strategic Partners, LLC, --
http://www.pathwayturnaround.com/-- headquartered in Newport
Beach, is a corporate recovery consulting firm that provides
turnaround management, interim management, debtor/creditor
advisory, assessment, operational improvement and asset
appraisal/liquidation services to stakeholders of underperforming
or financially distressed companies. The Pathway Strategic Team
comprises seasoned former CEO's, CFO's, COO's and management
consultants who bring a broad range of skills and industry
experience.
About Buxbaum Group
Buxbaum Group, together with affiliate Buxbaum/Century, had built
its reputation for over 30 years as one of the largest liquidators
and appraisers of retail and wholesale inventories, as well as
machinery and industrial equipment, across North America. While
continuing to operate in those areas, the company has shifted its
primary focus in recent years to turnaround investing along with
specialty financing. Additionally, its Pathway Strategic Partners
subsidiary provides turnaround, expansion and/or downsizing
strategies, in conjunction with other advisory consulting and
management services.
About Waterman Industries Inc.
Headquartered in Exeter, California, Waterman Industries, Inc.
-- http://www.watermanusa.com/-- provides water and irrigation
control services. The Company filed for chapter 11 protection on
February 10, 2004 (Bankr. E.D. Calif. Case No. 04-11065). Riley
C. Walter, Esq., at Walter Law Group, represents the Debtor in its
restructuring efforts. When the Debtor filed for protection from
its creditors, it listed more than $10 million in estimated assets
and debts.
WELLSFORD REAL: Earns $3.8 Million of Net Income in Third Quarter
-----------------------------------------------------------------
Wellsford Real Properties, Inc. (AMEX: "WRP") reported third
quarter 2005 revenues of $4,231,164 and net income of $3,776,753.
For the corresponding quarter in 2004, WRP reported revenues of
$8,253,519 and a net loss of $12,677,924.
For the nine months ended Sept. 30, 2005, WRP reported revenues of
$12,569,984 and net income of $3,954,913. For the corresponding
period in 2004, WRP reported revenues of $22,960,326 and a net
loss of $22,510,387.
Commercial Property Activities
In September 2005, WRP ceased its Commercial Property Activities
when its 35.21% equity interest in Wellsford/Whitehall, a joint
venture by and among WRP, various entities affiliated with the
Whitehall Funds and private real estate funds sponsored by The
Goldman Sachs Group, Inc., was redeemed for approximately
$8,300,000. WRP realized a gain of $5,846,000 on the redemption.
WRP's share of the income from Wellsford/Whitehall was
approximately $5,473,000 for the three months ended Sept. 30,
2005, while it was a loss of $2,149,000 for the three months ended
Sept. 30, 2004.
Debt and Equity Activities
At Sept. 30, 2005, WRP had the following investments in its Debt
and Equity Activities SBU:
(i) an equity investment of approximately $687,000 in
Clairborne Fordham, a company initially organized to
provide $34,000,000 of mezzanine construction financing
for a high-rise condominium project in Chicago, which
currently owns and is selling the remaining unsold
components of this project;
(ii) approximately $6,791,000 invested in Reis, Inc., a real
estate information and database company; and
(iii) a $630,000 investment in Wellsford Mantua, a company
organized to purchase land parcels for rezoning,
subdivision and creation of environmental mitigation
credits.
Palomino Park
WRP is the developer and managing owner of Palomino Park, a five
phase, 1,707 unit multifamily residential development in Highlands
Ranch, a southern suburb of Denver, Colorado. Three phases (Blue
Ridge, Red Canyon and Green River) aggregating 1,184 units are
operated as rental property.
In March 2005, WRP's Board of Directors authorized the sale of
these three phases and in the second quarter of 2005, WRP engaged
a broker to market these phases. The 264 unit Silver Mesa phase
has been converted into condominiums and through September 30,
2005, WRP had sold all 264 units. The Gold Peak phase is under
construction as a 259 unit for-sale condominium project and as of
Sept. 30, 2005, there were 73 Gold Peak units under contract. At
Sept. 30, 2005, the Company had an 85.85% interest in Palomino
Park and a subsidiary of EQR owned the remaining 14.15% interest.
With respect to EQR's 14.15% interest in the corporation that owns
Palomino Park, there existed a put/call option between the Company
and EQR related to one-half of such interest (7.075%). In
February 2005, the Company informed EQR of its intent to exercise
this option at a purchase price of approximately $2,087,000. This
transaction was completed on October 13, 2005. Any transaction
for the remaining half of EQR's interest would be subject to
negotiation between the Company and EQR.
In August 2005, WRP entered into an agreement to sell the three
residential rental phases of its Palomino Park project for
$176,000,000. The sale is subject to approval of the Plan of
Liquidation by WRP's stockholders on November 17, 2005.
At Sept. 30, 2005, the Company's other development projects
include:
(i) a venture which owns 101 single family home lots situated
on 139 acres of land in East Lyme, Connecticut upon which
it is constructing houses for sale;
(ii) a joint venture that owns approximately 300 acres,
currently zoned for 13 single family home lots, in
Claverack, New York; and
(iii) interests in a 10 acre parcel in Beekman, New York which
is owned by the Company and a contract to acquire a
contiguous 14 acre parcel, the acquisition of which is
conditioned upon site plan approval to build a minimum of
60 residential condominium units. The Company's $300,000
deposit in connection with the contract is secured by a
first mortgage lien on the property.
WRP has a contingent purchase option from the seller of the East
Lyme land on a contiguous parcel of land which could be used to
develop an additional 60 single family homes. Such right was
exercised during April 2005; however, the seller at that time
could not deliver the parcel in accordance with the terms and
conditions of the agreement. The seller is currently attempting
to remedy this situation. The purchase price for this land is
approximately $3,700,000.
As reported in the Troubled Company Reporter on Oct. 11, 2005, the
Company's annual stockholder meeting will be held on Nov. 17, 2005
at 9:30AM. The board of directors of the Company has fixed the
close of business on Oct. 11, 2005, as the record date for
determining the stockholders entitled to receive notice of and to
vote at the stockholder meeting. One of the purposes of this
meeting is to consider and vote regarding the previously announced
plan of liquidation and dissolution of Wellsford Real.
The Board anticipates that the initial distribution will be $14.00
per share, which is at the high end of the previously anticipated
range of between $12.00 and $14.00 per share. The initial
distribution is anticipated to be made within 30 days after the
completion of the sale of the three rental phases of Palomino
Park. The closing of the sale is expected to be completed by the
end of November 2005 if the Plan is approved by the stockholders.
Mr. Jeffrey Lynford, Chairman and CEO stated, "Assuming that the
Plan is approved by the stockholders and the sale of the Palomino
Park rental phases closes before the end of November, we intend to
make the initial $14.00 per share distribution to stockholders as
early in December as possible."
Wellsford Real Properties, Inc. is a real estate merchant banking
firm headquartered in New York City which acquires, develops,
finances and operates real properties, constructs for-sale single
family home and condominium developments and organizes and invests
in private and public real estate companies.
WESTPOINT STEVENS: Chap. 11 Dismissal Hearing Continued to Dec. 6
-----------------------------------------------------------------
Judge Robert D. Drain of the U.S. Bankruptcy Court for the
Southern District of New York adjourned the hearing on WestPoint
Stevens, Inc., and its debtor-affiliates' motion to dismiss their
Chapter 11 cases to December 6, 2005, at 10:00 a.m. Eastern Time.
John J. Rapisardi, Esq., at Weil, Gotshal & Manges, LLP, in New
York discloses that the Dismissal Motion hearing may be further
adjourned without further notice to creditors or parties-in-
interest other than by notifying the Court.
As reported in the Troubled Company Reporter on August 16, 2005,
the Debtors asked the Court to dismiss their chapter 11 cases.
The Debtors inform the Court that they have no ongoing business
operations and are administratively insolvent, thus, confirmation
of a chapter 11 plan is impossible in accordance with the
Bankruptcy Code. The Debtors believe that a chapter 7 conversion
is not advisable because it will increase administrative cost to
the estate and require the appointment of a chapter 7 trustee.
Headquartered in West Point, Georgia, WestPoint Stevens, Inc., --
http://www.westpointstevens.com/-- is the #1 US maker of bed
linens and bath towels and also makes comforters, blankets,
pillows, table covers, and window trimmings. It makes the Martex,
Utica, Stevens, Lady Pepperell, Grand Patrician, and Vellux
brands, as well as the Martha Stewart bed and bath lines; other
licensed brands include Ralph Lauren, Disney, and Joe Boxer.
Department stores, mass retailers, and bed and bath stores are its
main customers. (Federated, J.C. Penney, Kmart, Sears, and Target
account for more than half of sales.) It also has nearly 60 outlet
stores. Chairman and CEO Holcombe Green controls 8% of WestPoint
Stevens. The Company filed for chapter 11 protection on
June 1, 2003 (Bankr. S.D.N.Y. Case No. 03-13532). John J.
Rapisardi, Esq., at Weil, Gotshal & Manges, LLP, represents the
Debtors in their restructuring efforts.
WESTPOINT STEVENS: Ct. Denies HSBC's Cry for Admin. Claims Payment
------------------------------------------------------------------
Judge Drain denied HSBC Bank U.S.A., National Association's
request to direct WestPoint Stevens, Inc., and its debtor-
affiliates to reimburse the expenses it incurred in making a
substantial contribution to the Debtors' estate and their
creditors.
Judge Drain rules that HSBC Bank U.S.A. is not entitled to an
administrative expense priority pursuant to Sections 503(b) or
105(a) of the Bankruptcy Code.
As previously reported in the Troubled Company Reporter on
September 26, 2005, the Debtors issued:
-- 7-7/8% Senior Notes due 2005 for $525 million in aggregate;
and
-- 7-7/8% Senior Notes due 2008 for $475 million in aggregate,
to various holders, pursuant to separate Indentures, both dated as
of June 9, 1998, with the Bank of New York, as trustee.
HSBC Bank U.S.A., National Association, is the successor indenture
trustee to the Bank of New York in connection with the 525
Indenture and the 475 Indenture.
Deborah A. Reperowitz, Esq., at Reed Smith LLP, in New York,
relates that as of the Petition Date, the Debtors were obligated
to HSBC for:
(i) $544,064,063 under the 525 Indenture, representing the
$525,000,000 principal plus $19,064,063 in accrued
interest; and
(ii) $492,248,437 under the 475 Indenture, representing the
$475,000,000 principal plus $17,248,437 in accrued
interest.
According to Ms. Reperowitz, HSBC has also incurred fees and costs
as indenture trustee, including attorney's fees, which the Debtors
are obligated to pay. As of June 30, 2005, HSBC's administrative
expense claim against the Debtors was $300,738. Ms. Reperowitz
says that HSBC has continued to incur fees and expenses subsequent
to June 30, 2005.
Headquartered in West Point, Georgia, WestPoint Stevens, Inc., --
http://www.westpointstevens.com/-- is the #1 US maker of bed
linens and bath towels and also makes comforters, blankets,
pillows, table covers, and window trimmings. It makes the Martex,
Utica, Stevens, Lady Pepperell, Grand Patrician, and Vellux
brands, as well as the Martha Stewart bed and bath lines; other
licensed brands include Ralph Lauren, Disney, and Joe Boxer.
Department stores, mass retailers, and bed and bath stores are its
main customers. (Federated, J.C. Penney, Kmart, Sears, and Target
account for more than half of sales.) It also has nearly 60 outlet
stores. Chairman and CEO Holcombe Green controls 8% of WestPoint
Stevens. The Company filed for chapter 11 protection on
June 1, 2003 (Bankr. S.D.N.Y. Case No. 03-13532). John J.
Rapisardi, Esq., at Weil, Gotshal & Manges, LLP, represents the
Debtors in their restructuring efforts. (WestPoint Bankruptcy
News, Issue No. 58; Bankruptcy Creditors' Service, Inc.,
215/945-7000)
WILLIAMS COS: Earns $4.4 Million of Net Income in Third Quarter
---------------------------------------------------------------
The Williams Companies, Inc. (NYSE:WMB) reported third-quarter
2005 unaudited net income of $4.4 million compared with net income
of $98.6 million for third-quarter 2004.
Year-to-date through Sept. 30, Williams reported net income of
$246.8 million compared with net income of $90.3 million for the
first three quarters of 2004.
For third-quarter 2005, the company reported income from
continuing operations of $5.7 million on a diluted basis, compared
with $16.2 million for third-quarter 2004 on a restated basis.
Results for the 2005 quarter reflect the benefit of increased
natural gas production and higher net realized average prices for
production sold, along with reduced levels of interest expense.
These benefits were offset by the impact of forward unrealized
mark-to-market losses experienced in the Power segment. Results
for the 2004 quarter reflect the benefit of forward unrealized
mark-to-market gains experienced in Power, offset by approximately
$155 million in pre-tax charges associated with the early
retirement of debt.
Rising natural gas prices during the third quarter of this year
benefited Williams' Exploration & Production business, but
contributed to reduced results in the company's Power business.
For the first nine months of 2005, Williams reported income from
continuing operations of $248.6 million on a diluted basis,
compared with a loss of $2.3 million for the same period in 2004
on a restated basis.
CEO Perspective
"The benefit of having diversity in our businesses and our revenue
streams was evident during the third quarter," said Steve Malcolm,
chairman, president and chief executive officer. "We were able to
create value and produce positive results, despite dealing with
the hurricanes and a variety of factors that strained results in
our Power business. At the same time, our cash flows remain
strong, we're raising our guidance and we've increased our capital
spending estimate for 2006."
"We're making these investments to produce the natural gas that
America needs, to provide reliable services to our customers, and
to seize opportunities to help bring even more energy online by
building new pipeline and processing systems," Mr. Malcolm added.
Recurring Results Adjusted for Effect of Mark-to-Market Accounting
Recurring income from continuing operations -- after adjusting for
the mark-to-market impact to reflect income as though
mark-to-market accounting had never been applied to Power's
designated hedges and other derivatives -- was $125.3 million for
the third quarter of 2005. In last year's third quarter, the
adjusted recurring income from continuing operations was
$49 million on a restated basis.
Results for the 2005 quarter reflect the benefit of increased
natural gas production and higher net realized average prices for
production sold, along with reduced levels of interest expense.
For the first nine months of 2005, recurring income from
continuing operations -- after adjusting for the mark-to-market
impact to reflect income as though mark-to-market accounting had
never been applied to Power's designated hedges and other
derivatives -- was $357.3 million compared with $139.3 million, or
27 cents per share, for the same period in 2004 on a restated
basis.
Guidance:
Company Raises Profit Targets and Capital Spending
In 2005, Williams now expects consolidated segment profit of
$1.375 billion to $1.525 billion, compared with previous
expectations of $1.3 billion to $1.585 billion for this measure.
On a recurring basis adjusted for the impact of mark-to-market
accounting, Williams now expects $1.55 billion to $1.70 billion in
consolidated segment profit and earnings per share of 84 cents to
94 cents for 2005. The company previously expected $1.375 billion
to $1.660 billion in consolidated segment profit and earnings per
share of 70 cents to 90 cents for 2005, on a recurring basis
adjusted for the impact of mark-to-market accounting.
In 2006, Williams now expects consolidated segment profit of
$1.520 billion to $1.820 billion on a recurring basis adjusted for
the impact of mark-to-market accounting, compared with previous
expectations of $1.515 billion to $1.815 billion for this measure.
In 2007, Williams now expects consolidated segment profit of
$1.830 billion to $2.255 billion on a recurring basis adjusted for
the impact of mark-to-market accounting, compared with previous
expectations of $1.640 billion to $2.065 billion for this measure.
In 2008, Williams expects consolidated segment profit of $2.05
billion to $2.6 billion on a recurring basis adjusted for the
impact of mark-to-market accounting.
Williams cited favorable prices for natural gas as the primary
factor for increasing the company's consolidated segment profit
forecasts.
The company's overall capital budget has increased, as well. It
now plans to spend $1.2 billion to $1.35 billion for 2005;
$1.825 billion to $2.050 billion for 2006; and $1.425 billion to
$1.625 billion for 2007.
Previously, Williams forecasted capital spending of $1.1 billion
to $1.3 billion for 2005; $1.525 billion to $1.750 billion for
2006; and $1.1 billion to $1.3 billion for 2007.
The $300 million increase in capital spending guidance for 2006 is
budgeted for increased drilling costs and additional drilling in
Exploration & Production, along with new infrastructure projects
in Midstream.
The Williams Companies, Inc. -- http://www.williams.com/--
through its subsidiaries, primarily finds, produces, gathers,
processes and transports natural gas. The company also manages a
wholesale power business. Williams' operations are concentrated
in the Pacific Northwest, Rocky Mountains, Gulf Coast, Southern
California and Eastern Seaboard.
* * *
As reported in the Troubled Company Reporter on Jan. 24, 2005,
Standard & Poor's Ratings Services assigned its 'B+' rating to The
Williams Cos., Inc., Credit-Linked Certificate Trust IV's
$100 million floating-rate certificates due May 1, 2009.
The rating reflects the credit quality of The Williams Cos., Inc.,
('B+') as the borrower under the credit agreement and Citibank
N.A. ('AA/A-1+') as seller under the subparticipation agreement
and account bank under the certificate of deposit.
The rating addresses the likelihood of the trust making payments
on the certificates as required under the amended and restated
declaration of trust.
WMC MORTGAGE: S&P Junks Rating on Series 1997-2 Class B Certs.
--------------------------------------------------------------
Standard & Poor's Ratings Services affirmed its ratings on 16
classes from five series of mortgage pass-through certificates
issued by WMC Mortgage Loan Trust.
The affirmations reflect adequate actual and projected credit
support percentages to the respective classes, despite high
collateral delinquencies and losses. In addition, the
transactions have each been seasoned for six or more years. The
affirmations also reflect the substantial paydown of the mortgage
pools whereby the shifting interest sequential payment structure
caused the projected credit support percentages to increase to
more than the original credit support levels for each respective
rating level. All five transactions have paid down their
respective pool balances to less than 5% of the original balances.
As of the October 2005 remittance date, total delinquencies were:
32.89% for series 1997-1, 49.40% for series 1997-2, 49.65% for
series 1998-1, 39.55% for series 1998-A, and 53.88% for series
1998-B. Cumulative realized losses, as a percentage of original
pool principal balance for each of these transactions, were: 7.86%
for series 1997-1, 8.06% for series 1997-2, 8.85% for series 1998-
1, 8.25% for series 1998-A, and 8.04% for
series 1998-B. The step-down overcollateralization target for
each of these transactions is 0.50% of each respective original
pool balance. Four of these transactions are below their o/c
targets, whereas series 1998-A is at its target.
These transactions employ a shifting interest, sequential payment
structure, whereby credit support is provided by subordination,
o/c, and excess interest cash flow, except for the class B
certificates. Credit support for the class B certificates
excludes subordination.
The underlying collateral for the five transactions consists of
15- to 30-year, adjustable-rate, subprime mortgage loans, secured
by first liens on one- to four-family residential properties.
Ratings Affirmed
WMC Mortgage Loan Trust
Mortgage Pass-through Certs
Series Class Rating
------ ----- ------
1997-1 M-1 AAA
1997-1 M-2 A
1997-1 B B
1997-2 M-1 AAA
1997-2 M-2 A
1997-2 B CCC
1998-1 M-1 AAA
1998-1 M-2 A
1998-1 B B
1998-A M-1 AAA
1998-A M-2 A+
1998-A B BBB
1998-B A-2, M-1 AAA
1998-B M-2 A+
1998-B B BBB
WORLDCOM INC: Kennedy Wants Company's Rejection Request Denied
--------------------------------------------------------------
As previously reported in the Troubled Company Reporter on
September 21, 2005, Mark A. Shaiken, Esq., at Stinson Morrison
Hecker, LLP, in Kansas City, Missouri, told the U.S. Bankruptcy
Court for the Southern District of New York that in early 2000,
Donna Miller, WorldCom, Inc. and its debtor-affiliates' former
vice president of Employee Benefits, asked Kennedy and Associates
to review certain of the company's disability plans to identify
and evaluate potential cost savings. Kennedy's review also
included the Debtors' health care plans as well as Medicare
conversion and recovery efforts.
Kennedy contended that it presented a report of its findings in
September 2000 and a proposal for additional and auditing work to
Ms. Miller, Mr. Shaiken relates. The written proposal purportedly
outlined a $5,000 monthly retainer and a "50/50" split of the
savings.
Kennedy alleged that Ms. Miller asked for a formal contract and in
response, Kennedy sent Ms. Miller an agreement.
Mr. Shaiken emphasizes that Kennedy never received a signed copy
of the Alleged Agreement from Ms. Miller or any other employee of
the Debtors.
Beginning in May 2001, Kennedy sent invoices to the Debtors
amounting $5,000 per month. The Debtors paid the invoices until
February 2002, Mr. Shaiken states. The Debtors also paid Kennedy
three additional amounts totaling $170,000, between April and
June 2002, in recognition of their efforts in helping the Debtors
secure a $1,000,000 refund from The Hartford. Kennedy did not
invoice the Debtors for any amounts after May 2002.
Kennedy contends that the Alleged Agreement is ongoing, according
to Mr. Shaiken. Nevertheless, Kennedy admits that it has had no
contact with the Debtors concerning its benefit plans consulting
work since April 2003.
On January 23, 2003, Kennedy filed Claim No. 23470. Mr. Shaiken
notes that the Claim does not assert that it is based on an
executory contract. A written agreement that was not signed by
the Debtors was attached to the Claim.
BSI, LLC, the Debtors' claims management service, listed the
Claim as filed and further noted that it was not scheduled as an
executory contract on the Debtors' Schedule G. The Debtors
objected to the Claim.
Kennedy responded to the Debtors' claim objection and asserted for
the first time that the Alleged Agreement was executory.
Moreover, Kennedy contended that the Alleged Agreement had been
assumed as of the Effective Date, triggering a statutory
requirement to cure all defaults under Section 365(b)(1)(A) of the
Bankruptcy Code.
Rather than litigate the issues and utilize valuable court time,
the Debtors accept Kennedy's assertion that the Alleged Agreement
should be characterized as an executory contract, and seek the
Court's authority to reject the Alleged Agreement, nunc pro tunc
to the Confirmation Date.
The Debtors did not list any agreement with Kennedy in their
schedules and statements of affairs. Thus, any Alleged Agreement
between the parties was not designated for rejection, Mr. Shaiken
notes.
Kennedy Objects
The Debtors' request should be denied on legal, factual and policy
bases, Alex Pirogovsky, Esq., at Ungaretti & Harris, LLP, in
Chicago, Illinois, asserts.
The Debtors wish to avoid compliance with Section 8.01 of the
Plan, which provides that executory contracts not otherwise
rejected are deemed assumed, Mr. Pirogovsky points out.
The Debtors are bound by the terms of the confirmed Modified
Second Amended Joint Plan of Reorganization, Mr. Pirogovsky
contends. "The Debtors proposed the Plan, they expect their
creditors to be bound by its terms and the Debtors, in turn,
should be, and statutorily are, bound by all of the Plan
provisions. Granting [the] Debtors the relief they seek would
make the provisions of confirmed plans illusory and meaningless,
and would destroy the reliability, integrity and conclusiveness of
final court orders."
"Had the Debtors wished to seek rejection of the Benefit Plans
Consulting Services Agreement between Kennedy & Associates, Inc.
and WorldCom, Inc., they had to do so before confirmation of the
Plan," Mr. Pirogovsky relates. "Despite the Debtors' invented
excuses for not having done so, [they] had ample opportunity to
seek rejection within the statutorily required time period."
Mr. Pirogovsky further asserts that the Debtors are not entitled
to nunc pro tunc relief because:
(i) the function of a nunc pro tunc order is to correct an
error or oversight, not to create a new set of facts that
never existed; and
(ii) the facts in the Debtors' case do not present the type of
narrow situation in which nunc pro tunc relief should be
granted.
"This is, at best, a case of negligence and oversight, from which
[the] Debtors are now looking to be 'bailed out' by the Court,"
Mr. Pirogovsky says.
Without citing any authority, the Debtors implied that:
(a) Kennedy has some duty or obligation to inform them that
it has an executory contract claim;
(b) The notice must be made within a specific period of time;
(c) Kennedy failed to provide the notice on a timely basis;
and
(d) Therefore, Kennedy cannot now claim that the Contract is
executory.
"The [Debtors'] argument is preposterous, evidenced by the facts
that [they] could not locate a single court or commentator who
discussed this imaginative concept and had to invent a factual
scenario to support it," Mr. Pirogovsky maintains.
Kennedy timely filed a proof of claim against the Debtors, Mr.
Pirogovsky tells Judge Gonzales. "The Debtors simply forgot about
[Kennedy], overlooked [Kennedy's] contract and failed to exercise
diligence in connection with [Kennedy's] claim, or hoped that
[Kennedy], acting pro se, would not realize the implications of
[its] executory contract claim or [its] own potential fiduciary
obligation and would not pursue [its] claim if WorldCom remained
silent about the Contract."
In connection with Kennedy's defense against the Debtors'
assertions, the Debtors and certain of their officers will likely
be exposed as having violated their fiduciary duties under ERISA
with respect to employee benefit plans, Mr. Pirogovsky tells the
Court.
The evidence in connection with Kennedy's proof of claim will show
that the Debtors agreed to pay Kennedy, among other amounts,
50% of WorldCom's savings or expense reduction in connection with
its benefit plans as a result of Kennedy's work, Mr. Pirogovsky
points out.
Kennedy actively performed services for the Debtors for about four
years. During that time, Kennedy identified millions of dollars
of plan assets, the recovery of which the Debtors should have
pursued. "The recoveries would have directly benefited the
Debtors in that their reserves and premiums would have decreased,
and in some cases, the Debtors would have received reimbursements
of overpayments," Mr. Pirogovsky notes.
The fiduciary duty violations are continuing, and rather than
discharge them, the Debtors persist in their attempts to avoid the
issue altogether, Mr. Pirogovsky adds.
"The Court should stop [the] Debtors from continuing to abuse the
legal system to hide their failings at the expense of [Kennedy]
and those to whom [the] Debtors and their officers owe fiduciary
duties," Mr. Pirogovsky maintains.
Debtors Respond
Based on informed provided by the Debtors, BSI, LLC, working in
conjunction with AlixPartners, sent Kennedy & Associates, Inc.
three proof of claim forms on November 22, 2002, Mark A. Shaiken,
Esq., at Stinson Morrison Hecker, LLP, in Kansas City, Missouri,
relates. Two of the claim forms relate to business customer
contracts under which Kennedy was a customer of services the
Debtors provided:
(1) The claim form bearing the identification code "CON-
521149" relates to a contract between MCI WorldCom, Inc.,
and Kennedy, pursuant to which MCI WorldCom provided
services to Kennedy. The Debtors described the contract
as "On-Net Service Agreement Option 1."
(2) The claim form bearing the identification code "CON-
521150" relates to a contract between UUNET and Kennedy,
pursuant to which UUNET provided DSL services to Kennedy.
BSI sent the two claim forms because Kennedy might have been
entitled to a rebate or some other type of refund in connection
with the services provided to it by MCI WorldCom and UUNET.
Mr. Shaiken argues that the contracts that resulted in the
transmission of the Claims Forms are unrelated to the Alleged
Agreement at issue in the claim filed by Kennedy.
The third claim form relate to Kennedy's status as a vendor of the
Debtors.
The identification of active vendors was not coextensive with the
identification of parties that had contractual relationships with
the Debtors, Mr. Shaiken contends. "AlixPartners' records show no
contract between [Kennedy] and the Debtors under which
[Kennedy] was a vendor or provided services to the Debtors.
There is no contract listed on the Debtors' Schedule G under which
[Kennedy] was a vendor or provided services to the
Debtors."
In addition, Mr. Shaiken relates, Kennedy waited four months
before raising the issue of an executory contract. Thus,
Kennedy's delayed assertion denied the Debtors a fair opportunity
to seek to reject the Alleged Agreement prior to the Confirmation
Date.
Absent nunc pro tunc relief, the Reorganized Debtors will be
unfairly prejudiced by parties-in-interest, like Kennedy, who wait
long after the Confirmation and Effective Dates to assert that the
contract is executory, Mr. Shaiken says.
Section 365(d)(2) of the Bankruptcy Code does not bar the Court
from entering a rejection order after confirmation, Mr. Shaiken
maintains.
Headquartered in Clinton, Mississippi, WorldCom, Inc., now known
as MCI -- http://www.worldcom.com/-- is a pre-eminent global
communications provider, operating in more than 65 countries and
maintaining one of the most expansive IP networks in the world.
The Company filed for chapter 11 protection on July 21, 2002
(Bankr. S.D.N.Y. Case No. 02-13532). On March 31, 2002, the
Debtors listed $103,803,000,000 in assets and $45,897,000,000 in
debts. The Bankruptcy Court confirmed WorldCom's Plan on
October 31, 2003, and on April 20, 2004, the company formally
emerged from U.S. Chapter 11 protection as MCI, Inc. (WorldCom
Bankruptcy News, Issue No. 107; Bankruptcy Creditors' Service,
Inc., 215/945-7000)
XYBERNAUT CORPORATION: IPI Financial Provides DIP Financing
-----------------------------------------------------------
IP Innovations Financial Services, Inc., reported that it arranged
a debtor-in-possession loan for Xybernaut Corporation (OTC:
XYBRQ.PK). IPI is serving as financial advisor on the transaction
and is assisting Fairfax, Virginia-based Xybernaut on maximizing
the value of its intellectual property assets.
The loan is secured principally by Xybernaut's extensive
intellectual property portfolio, which includes more than 750
worldwide patents and patent applications, as well as trademarks
and copyrights.
"This successful DIP financing addresses a need in the market for
new economy companies to leverage IP to gain access to sufficient
levels of capital in support of restructuring," said Keith
Bergelt, CEO of IP Innovations. "As IP is increasingly a
significant component of corporate value, we expect DIP loans will
more frequently come to be driven by intellectual property value."
IPI was a strategic advisor in the transaction, and drew upon its
proprietary IP valuation capabilities and experience in assessing
patent, trademark and copyright assets to underwrite and place the
loan. The loan is up to $5 million over a one-year period.
The United States Bankruptcy Court for the Eastern District of
Virginia approved the loan as part of Xybernaut's Chapter 11
bankruptcy proceeding, and the loan has the support of the
company's Creditors' Committee.
IP Innovations Financial Services, Inc. -- http://www.ipinn.com/
-- is a leading provider of intellectual property-based financing.
The firm provides funded loans and unfunded credit enhancements to
allow royalty and non-royalty generating patents, trademarks and
copyrights to be used as collateral in corporate financing
opportunities. IPI provides lenders with the ability to expand
their customer base and affords IP owners access to low cost, non-
dilutive capital.
Headquartered in Fairfax, Virginia, Xybernaut Corporation,
develops and markets small, wearable, mobile computing and
communications devices and a variety of other innovative products
and services all over the world. The corporation never turned a
profit in its 15-year history. The Company and its affiliate,
Xybernaut Solutions, Inc., filed for chapter 11 protection on
July 25, 2005 (Bankr. E.D. Va. Case Nos. 05-12801 and 05-12802).
John H. Maddock III, Esq., at McGuireWoods LLP, represents the
Debtors in their chapter 11 proceedings. When the Debtors filed
for protection from their creditors, they listed $40 million in
total assets and $3.2 million in total debts.
*********
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
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please contact Vito at Parcels, Inc., at 302-658-9911. For
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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
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Copyright 2005. All rights reserved. ISSN: 1520-9474.
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