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/raid1/www/Hosts/bankrupt/TCR_Public/051117.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 17, 2005, Vol. 9, No. 273 Headlines ABSOLUTE WASTE: Voluntary Chapter 11 Case Summary ACCIDENT & INJURY: Court Confirms Third Amended Chapter 11 Plan ADVOCAT INC: Third Quarter Financials Disclose Liquidity Problem AFFINITY TECH: Sept. 30 Balance Sheet Upside-Down by $1.9 Million AMERICAN CELLULAR: Reports Results for Period Ended September 30 AMERICAN MOULDING: Files Schedules of Assets and Liabilities ANCHOR GLASS: US Trustee Opposes Jones Day Nunc Pro Tunc Retention ARVINMERITOR INC: Posts $19 Million Net Loss in Fourth Quarter ATA AIRLINES: Disclosure Statement Hearing Continued to Dec. 6 ATA AIRLINES: Wants Exclusive Period Extended to January 31 BALLY TOTAL: Annual Stockholders Meeting Slated for Jan. 26 BANCO RURAL: Moody's Lowers Foreign Currency Bond Rating to B2 BANK OF AMERICA: Fitch Rates $72.4 Million Cert. Classes at Low-B BEAR STEARNS: S&P Assigns Low-B Ratings on $99.7MM Cert. Classes BLACKBOARD INC: S&P Puts B+ Rating on Proposed $80M Sr. Sec. Loan BROOKLYN HOSPITAL: Committee Taps Otterbourg Steindler as Counsel BULL RUN: Incurs $5.3 Mil. Net Loss for Fiscal Year Ended Aug. 31 CABLEVISION SYSTEMS: Equity Deficit Narrows to $2.54 Billion CAPITAL GUARDIAN: Moody's Junks $14 Million Class C Notes' Ratings CAPITAL ONE: Hibernia Acquisition Cues Moody's to Lift Ratings CARL YECKEL: Court Converts Case to Chapter 7 Liquidation CARL YERKEL: Ch. 7 Trustee Taps Cavazos Hendricks as Counsel CARL YERKEL: Meeting of Creditors Set for December 13 CELLEGY PHARMA: Sept. 30 Balance Sheet Upside-Down by $4.5 Million CHAPARRAL ENERGY: Moody's Rates Proposed $325 Million Notes at B3 CLARKE AMERICAN: Moody's Puts B2 Rating on $175MM Sr. Unsec. Notes CLARKE AMERICAN: S&P Rates Proposed $655MM Senior Debts at Low-B COLLINS & AIKMAN: Panel Support Cross-Border Insolvency Protocol COLLINS & AIKMAN: Visteon Withdraws Set-Off Plea COLLINS & AIKMAN: Closes Western Avenue Dyers Operation in Mass. CONNECTICUT HEALTH: S&P Pares Revenue Debt Rating to BB from BB+ CONSOLIDATED CONTAINER: Equity Deficit Tops $78 Mil. at Sept. 30 CONSTAR INT'L: Incurs $23.5 Million Net Loss in Third Quarter CONSTELLATION BRANDS: S&P Rates Proposed $4.1-Bil Sr. Loans at BB CUMULUS MEDIA: Recognizes Termination Cost in Amended 10-Q D.E. MANAGEMENT: Case Summary & 3 Largest Unsecured Creditors DELPHI CORP: Non-Hourly Retirees Submit Candidates for Committee DELPHI CORP: Gets Final Order on Amended Reclamation Protocol DELPHI CORP: Wants Until June 7 to Make Lease-Related Decisions DELTAGEN INC: Court Confirms Joint Plan of Reorganization EAST 44TH: Section 341(a) Creditors Meeting Moved to December 2 ENRON CORP: Court Appoints Defendants' Committee & Liaison Counsel ENRON CORP: Committee Wants Court OK on Arthur Andersen Settlement ENRON CORP: Dresdner Holds $4.9 Million Allowed Unsecured Claim ENRON CORP: Inks Claims Settlement Pact with Sierra Pacific et al. ENTERGY NEW ORLEANS: BNY Balks at Critical Vendor Payments ENTERGY NEW ORLEANS: Wants to Continue Cash Management System ENTERGY NEW ORLEANS: Wants to Maintain Existing Bank Accounts EXIDE TECHNOLOGIES: Likely Credit Default Cues Going Concern Doubt FINANCIAL ASSET: Fitch Keeps Junk Rating on Class B4 Certificate FINOVA GROUP: 2005 3rd Qtr. Net Loss Raises Going Concern Opinion FIRST HORIZON: S&P Affirms Low-B Ratings on 22 Cert. Classes FLYI INC: Obtains Interim Order Restricting Stock Trading FLYI INC: Wants Court to Approve Uniform Bidding & Sale Procedures FRIENDLY ICE: Balance Sheet Upside Down by $105 Million at Oct. 2 GEORGIA-PACIFIC: Moody's Reviews Ba1 Corporate Family Rating GIBRALTAR INDUSTRIES: Moody's Rates $430 Million Debts at Low-Bs GIBRALTAR INDUSTRIES: S&P Puts Low-B Ratings on $730 Million Debts GMAC COMMERCIAL: Fitch Junks $19 Million Class M Certificates GREEKTOWN HOLDINGS: S&P Junks Rating on $185 Mil. Sr. Unsec. Notes GREENLAND CORP: Balance Sheet Upside Down by $9.8MM in 3rd Quarter HOST MARRIOTT: Buying 38 Hotels from Starwood for $4.1 Billion IMPSAT FIBER: Posts $5.2 Million Net Loss in Third Quarter INAMED CORP: Allergan Merger Prompts S&P to Review Ratings INTELSAT LTD: Incurs $54.5 Million Net Loss in Third Quarter ISRAEL HUMANITARIAN: Case Summary & 5 Largest Unsecured Creditors ISTAR FINANCIAL: Moody's Reviews Preferred Stock's Ba2 Rating KAISER ALUMINUM: Court Extends Exclusive Period Until Jan. 31 KAISER ALUMINUM: Motion to Estimate Insurance Claims Draws Fire KOCH CELLULOSE: Moody's Reviews $424 Million Debts' Ba3 Ratings KRISPY KREME: KremeKo CCAA Extended to Dec. 30 to Complete Sale LA QUINTA: Inks $3.4 Billion Merger Deal with Blackstone Group LEHMAN HEL: Fitch Junks $4 Million Class M Certificates LHM INC: Case Summary & 20 Largest Unsecured Creditors LOVELL PLACE: Quinn Buseck Approved as Creditors Committee Counsel MANITOWOC INC: Improved Performance Spurs S&P's Positive Outlook MCLEODUSA INC: Court Okays Rejection of 17 Burdensome Leases MCLEODUSA INC: Wants to Establish Lease Assumption Procedures MERISANT WORLDWIDE: Revenue Decline Spurs S&P to Junk Debt Rating MERRILL LYNCH: Fitch Affirms BB Rating on Class B-2 Certificates MERRILL LYNCH: S&P Assigns Low-B Ratings to $53.8MM Cert. Classes MESABA AVIATION: MAIR Holdings Reports Second Quarter Results MESABA AVIATION: Court OKs Payment of Employees' Prepetition Wages MIRANT CORP: Unsecured Creditors & Shareholders Approve Plan NETWORK PLUS: Ch. 7 Trustee Taps Dilks to Recover Unclaimed Funds NEWAVE INC: Sept. 30 Balance Sheet Upside-Down by $2.15 Million NORTHWEST AIRLINES: Equity Deficit Widens to $4.31BB at Sept. 30 NORTHWEST AIRLINES: TWU Ratifies Long-Term Labor Contract NORTHWEST AIRLINES: Court Imposes Interim Pay Cuts on IAM Unit O'SULLIVAN IND: Trustee Balks at Company Keeping Investment Funds PANTRY INC: Moody's Rates $130 Million Convertible Notes at B3 PBS ENTERPRIZES: Voluntary Chapter 11 Case Summary PLYMOUTH RUBBER: Wants More Time to File Plan & Solicit Votes PRECISE TECH: Rexam's Purchase Prompts S&P to Review Ratings QWEST COMMS: Fitch Lifts Issuer Default Rating to B+ from B REFCO INC: Names AlixPartners' Robert Dangremond as Interim CEO REMY INT'L: Low EBITDA Trend Cues S&P to Junk $125M Notes' Rating REVLON CONSUMER: Sept. 30 Balance Sheet Upside Down by $1.2 Bil. ROBOTIC VISION: Chapter 7 Trustee Hires Verdolino as Accountant RURAL/METRO: Sept. 30 Balance Sheet Upside-Down by $94.5 Million S-TRAN HOLDINGS: Wants Until February 7 to Remove Actions SAINT VINCENTS: Has Open-Ended Period to Remove Civil Actions SAINT VINCENTS: Gets Court OK Set Up Captive Insurance Subsidiary SEWERAGE & WATER: Fitch Downgrades $452 Million Bonds SFN INVESTMENTS: Voluntary Chapter 11 Case Summary SIRVA INC: Seeks Credit Facility Amendment with Lenders SOLUTIA INC: Balance Sheet Upside-Down by $1.43 Bil. at Sept. 30 STARWOOD HOTELS: Selling 38 Hotels to Marriott for $4.1 Billion STARWOOD HOTELS: S&P Rates Proposed $600-Mil Sr. Notes at Low-B ST. BERNARD PORT: S&P Shaves Revenue Bond Rating to BB from BBB- STELCO INC: Posts $42 Mil. Net Loss in 3rd Quarter Ended Sept. 30 STELCO INC: Creditors' Meeting Adjourned Until Monday TIMES SQUARE: S&P Affirms BB+ Rating on Mortgage & Lease Certs. TITANIUM METALS: Earns $33.1 Million in 3rd Quarter Ended Sept. 30 TKO SPORTS: Taps Weycer Kaplan as Bankruptcy Counsel TKO SPORTS: Files Schedules of Assets and Liabilities TRANSDIGM INC: Higher Leverage Cues S&P to Affirm B+ Credit Rating TRUMP ENT: Earns $3.2 Million of Net Income in Third Quarter VERESTAR INC: Committee Gets Court OK to Prosecute Estate Actions VIROPHARMA INC: Earns $18.7 Million in 3rd Quarter Ended Sept. 30 WESTON NURSERIES: Creditors Committee Taps Jager Smith as Counsel WINN-DIXIE: Court Okays Resolution of Remaining Reclamation Claims WISCONSIN AVE: Fitch Affirms BB- Rating on $9.2-Mil Class C Cert. XTREME COMPANIES: Sept. 30 Balance Sheet Upside-Down by $1.4 Mil. * Chadbourne & Parke Names Douglas R. Jensen as Litigation Counsel * EPIQ Systems Acquires nMatrix for $125 Million ********* ABSOLUTE WASTE: Voluntary Chapter 11 Case Summary ------------------------------------------------- Debtor: Absolute Waste Acquisitions, Inc. P.O. Box 260120 Corpus Christi, Texas 78426 Bankruptcy Case No.: 05-22374 Type of Business: The Debtor offers waste management services. Chapter 11 Petition Date: November 8, 2005 Court: Southern District of Texas (Corpus Christi) Judge: Richard S. Schmidt Debtor's Counsel: Patricia Reed Constant, Esq. Law Office of Patricia Reed Constant 800 North Shoreline Boulevard, Suite 320 S Corpus Christi, Texas 78401 Tel: (361) 887-1044 Fax: (361) 887-1043 Estimated Assets: $1 Million to $10 Million Estimated Debts: $1 Million to $10 Million The Debtor did not file a list of its 20 Largest Unsecured Creditors. ACCIDENT & INJURY: Court Confirms Third Amended Chapter 11 Plan --------------------------------------------------------------- The Honorable Harlin De Wayne Hale confirmed Accident & Injury Pain Centers, Inc., and its debtor-affiliates' Third Amended Plan of Reorganization filed on Oct. 20, 2005. Judge Hale determined that the Plan met the 13 standards for confirmation stated in Section 1129(a) of the Bankruptcy Code. The Plan proposes to retain the Debtors' pre-petition ownership and management structure. The Plan also provides for the pre- confirmation merger of Accident & Injury with the other debtor- affiliates. A Creditors Distribution Trust, created pursuant to the Plan, will be responsible for the distribution of funds to holders of allowed unsecured non-priority claims. The Trust will hold all equity interests in the Debtors until all allowed claims have been paid in full. Thereafter, the equity interests will be disbursed to Bob Smith and allowed subordinated claims of insiders will be paid. Treatment of Claims The Plan will separately treat the claims filed against Accident & Injury Pain Centers, Inc., its affiliated limited liability companies, and Accident & Injury's principals Robert Smith and Stephen Arthur Smith. The allowed secured claim of Comerica against Accident & Injury, consisting of approximately $1.7 million in account receivables and $135,499 in equipment obligations, will be paid, with interest at the original rate, in equal monthly installments over a three- year period. North Texas' Equipment Obligation to Comerica ($314,783 of which is on account of the North Texas MRI equipment notes and $95,000 pertaining to the North Texas MRI term notes), will be paid in equal monthly installments, with interest at the original rate, over the period from the Effective Date of the Plan through January 2007. White Rock's Term Obligation to Comerica, totaling $105,000 as of Sept. 30, 2005, will be paid in equal monthly installments, with interest at the original rate, from the effective date of the Plan through January 2007. The allowed secured claim of Northeast Bancshares, Inc., against White Rock, consisting of equipment obligation totaling $284,170, will be paid, with interest at the original rate, in equal amortizing monthly installments over a five-period. The allowed secured claims of Northeast Bancshares against Rehab 2112, totaling $23,407, will be paid in equal amortizing monthly installments over a five-year period, with interest at the original rate. The first installment is due on the Initial Plan Distribution Date. Receivable Finance will apply the certificates of deposit and money market accounts securing Northeast Bancshares' claims to satisfy these claims. Any excess funds after the application of the collateral will be transferred to the Creditors Distribution Trust. The allowed secured claim of Colonial Savings against Bob Smith will be paid in full over a 327-month period with interest at 5.75%. Steve Smith will continue making payments in accordance with the terms of the Countrywide Home Loans note and Countrywide Home will retain its lien until its allowed secured claim is fully paid. Accrued interest on Wells Fargo Home Mortgage's allowed secured claim against Steve Smith will be paid on the Initial Plan Distribution date. The balance will be paid in monthly installments for the first 24 months following the Initial Plan Distribution date. On the 25th month following the Initial Plan Distribution date, any balance will be amortized over a 30-year period and will be paid in equal monthly installments at the original interest rate. The allowed secured claim of Town North Bank, N.A., against Steve Smith will be paid on the same terms as the Wells Fargo Home Mortgage claim. Allstate and Encompass' asserted secured garnishment claim against the Debtors is subject to Comerica's setoff right and the class will therefore receive nothing under the Plan. Holders of allowed unsecured claims electing to reduce their claims to $5,000 will receive that reduced amount in full in four equal quarterly installments with the first payment beginning on the Initial Plan Distribution Date. Holders of allowed general unsecured claims will be paid in full with interest at the rate of 2.89% per annum over a 60-month period beginning on the Initial Plan Distribution Date. Each of the Debtors will make these minimum monthly payments to the Creditors Distribution Trust to meet the payment requirement for this class: Debtor Minimum Monthly Contribution ------ ----------------------------- Accident & Injury $201,735 Rehab 2112 12,584 North Texas 12,125 Lone Star 11,890 White Rock 17,385 Steve Smith 2,000 Bob Smith 3,000 Holders of equity interests receive nothing under the Plan. Reorganized A&I will issue 100% of its common stock to Bob Smith. Plan Funding Payments to allowed Claims against the Debtors under the Plan will be paid from: a) any income generated by property of a Debtor; b) proceeds from sales of property of a Debtor c) recoveries from Causes of Action retained by a Debtor; d) cash flow, after payment of normal and ordinary costs of operation, of a Debtor; and e) from the Plan Funding Reserve. A schedule of the Debtors' assets as of the Plan Filing is available for free at: http://bankrupt.com/misc/Accident_Assets.pdf Continuance of Allstate Civil Action The judgment and related verdict on the civil action styled Allstate Insurance Company, et al. v. Receivable Finance Company, L.L.C., et al. (Civil Action No. 01-CV-2247-N) is on appeal in the Fifth Circuit Court of Appeals. The Debtors seek reversal of the judgment. The Debtors' liability in this action, if any, will not be discharged under the Plan. Headquartered in Dallas, Texas, Accident & Injury Pain Centers, Inc. -- http://www.accinj.com/-- operates clinics that treat patients with highly advanced therapy equipment and techniques. The Company and its debtor-affiliates filed for chapter 11 protection on Feb. 10, 2005 (Bankr. N.D. Tex. Case No. 05-31688). Glenn A. Portman, Esq., at Bennett, Weston & LaJone, P.C., represents the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they reported estimated assets and debts of $10 million to $50 million. ADVOCAT INC: Third Quarter Financials Disclose Liquidity Problem ---------------------------------------------------------------- Advocat Inc. (NASDAQ OTC: AVCA) announced its results for the third quarter ended Sept. 30, 2005. Advocat reported net income from continuing operations of $1.8 million for the third quarter of 2005. Net income for common stock for the third quarter was $1.7 million. "Advocat reported higher revenues, operating income and net income in the third quarter, and continued to generate strong cash flows from operations," stated William R. Council, III, president and CEO of Advocat. "We continue to focus on strengthening our operations and are pleased with our improved results." "During the third quarter, we acquired the Briarcliff Health Care Center, a 120-bed skilled nursing facility in Oak Ridge, Tennessee. We have operated the Briarcliff facility under a lease agreement since 1990. We purchased the nursing home for approximately $6.7 million and financed the transaction with a commercial finance company. We believe our ability to secure this credit underscores the solid progress we have made in improving our financial condition." Third Quarter Results Advocat's net revenues from continuing operations increased 5.3% to $54.5 million compared with $51.7 million in the third quarter of 2004. The increase in third quarter net revenues was primarily due to patient revenues that increased 5.4% to $51.3 million compared with $48.6 million in the third quarter of 2004. Patient revenues benefited from Medicare rate increases that were effective October 1, 2004, increased Medicare utilization, increased Medicaid rates in certain states and a 0.7% increase in census in 2005 compared with 2004. Medicare revenues increased to 29.5% of patient revenues in 2005, up from 28.5% in 2004. Resident revenues increased to $3.2 million in2005 from $3.1 million in the third quarter of 2004. Ancillary service revenues, prior to contractual allowances, increased 22.3% to $10.9 million in 2005 from $8.9 million in the third quarter of 2004. Operating expenses increased to $42.8 million and represented 78.5% of patient and resident revenues for the third quarter of 2005 compared with $40.3 million, or 77.9% of such revenues, in the third quarter of 2004. The increase in operating expenses was primarily due to higher wage and benefit costs. The Company's results of continuing operations for the third quarter of 2005 included professional liability costs that declined to $1 million compared with $2.5 million in 2004. The provision for current liability claims recorded during the three months ended Sept. 30, 2005, was partially offset by downward adjustments in the liability primarily resulting from the quarterly actuarial valuations, resulting in a net expense of $1 million in the period. These reductions from the quarterly actuarial valuation were primarily the result of the effects of settlements of certain claims for amounts less than had been reserved in prior periods and the resulting effect of these settlements on the assumptions inherent to the actuarial estimate. The self-insurance reserves are assessed on a quarterly basis, with changes in estimated losses being recorded in the consolidated statements of operations in the period identified. Professional liability costs include cash and non-cash charges recorded based on current actuarial reviews. The actuarial reviews include estimates of known claims and an estimate of claims that may have occurred, but have not yet been reported to the Company. Liquidity Problem As of Sept. 30, 2005, the Company has recorded total liabilities for reported professional liability claims and estimates for incurred but unreported claims of $34.4 million, and has current debt obligations of $48.3 million. The Company does not have cash or available resources to pay in full this current debt, the accrued professional liability claims or any significant portion of either and has limited resources available to meet its anticipated operating, capital expenditure and debt service requirements during 2005. Nine Months Results Net revenues increased to $159 million in the first nine months of 2005 compared with $149.2 million in 2004. Patient revenues increased to $149.4 million in 2005 compared with $140.1 million in the first nine months of 2004. Resident revenues were $9.5 million compared with $9.2 million. Ancillary service revenues, prior to contractual allowances, increased to $31.1 million in 2005 from $27.4 million in 2004. Operating expenses were $123.6 million in 2005 and represented 77.8% of patient and resident revenues compared with $116.9 million, or 78.4% of such revenues, in 2004. The increase in operating expenses was primarily due to higher wage and benefit costs. Professional liability expense for the first nine months of 2005 resulted in a net benefit of $4.8 million compared with a net benefit of $2.2 million in the same period of 2004. During the nine months ended Sept. 30, 2005, the Company reduced its total recorded liabilities for self-insured professional liability risks to $34.4 million, down from $42.9 million at December 31, 2004. Downward adjustments in the liability primarily resulting from the quarterly actuarial valuations were partially offset by the provision for current liability claims recorded during the nine months ended Sept. 30, 2005, resulting in a net benefit of $4.8 million in the period. Net income from continuing operations for the first nine months of 2005 was $12.2 million, or $1.87 per diluted common share, compared with $8.3 million, or $1.29 per share, in the first nine months of 2004. Net income for common stock for the first nine months of 2005 was $12.1 million, or $1.90 per diluted share, compared with $6.7 million, or $1.08 per diluted share, in the same period of 2004. The 2005 results include income of $141,000 from discontinued operations compared with a loss of $1.4 million in the same period of 2004. Advocat Inc. -- http://www.irinfo.com/avc-- provides long-term care services to nursing home patients and residents of assisted living facilities in nine states, primarily in the Southeast. * * * As reported in the Troubled Company Reporter on Apr. 25, 2005, BDO Seidman LLP raised substantial doubt about Advocat Inc.'s ability to continue as a going concern after it audited the Company's financial statements for the year ended Dec. 31, 2004. The Company incurred operating losses in two of the three years in the period ended December 31, 2004, and although the Company reported a profit for the year ended December 31, 2004, that profit primarily resulted from non-cash expense reductions caused by downward adjustments in the Company's accrual for self-insured risks associated with professional liability claims. AFFINITY TECH: Sept. 30 Balance Sheet Upside-Down by $1.9 Million ----------------------------------------------------------------- Affinity Technology Group, Inc. (OTCBB: AFFI) reported financial results for the third quarter and nine months ended Sept. 30, 2005. Revenues for the quarter were $4,000 with a net loss of $135,000. For the comparable period in 2004, revenues were $23,000 and the Company reported a net gain of $242,000. The weighted average number of shares outstanding during the three months ended Sept. 30, 2005, was 42.2 million, compared to 41.9 million for the same period in 2004. Revenues for the nine months ended Sept. 30, 2005, were $13,000 thousand and the Company's net loss was $430,000. In the comparable nine-month period in 2004 revenues were $282,000 and the net loss was $66,000. The weighted average number of shares outstanding during the nine months ended Sept. 30, 2005, was 42.2 million, compared to 41.9 million for the same period in 2004. Joe Boyle, Affinity's President and Chief Executive Officer, stated, "During the third quarter of 2005, we received and responded to the U.S. Patent and Trademark Office's office action relating to the reexamination of the Company's third patent, U. S. Patent No. 6,105,007. We look forward to the resolution of the reexamination of our third patent. Our short-term goals remain unchanged. We will continue to seek adequate capital to get through the reexamination and continue to vigorously defend the validity of the claims of U. S. Patent No. 6,105,007." Through its subsidiary, decisioning.com, Inc., Affinity Technology Group, Inc. owns a portfolio of patents that covers the automated processing and establishment of loans, financial accounts and credit accounts through an applicant-directed remote interface, such as a personal computer or terminal touch screen. Affinity's patent portfolio includes U. S. Patent No. 5,870,721C1, No. 5,940,811, and No. 6,105,007. At Sept. 30 2005, Affinity Technology Group, Inc.'s balance sheet showed a $1,913,015 stockholders' deficit compared to a $1,392,293 deficit at Sept. 30, 2004. AMERICAN CELLULAR: Reports Results for Period Ended September 30 ---------------------------------------------------------------- American Cellular Corp. reported financial results for the period ended Sept. 30, 2005. For the three months ended Sept. 30, 2005, the company reported net income of $4,555,631 compared to net loss of $3,380,104 for the three months ended Sept. 30, 2004. For the nine-month period ended Sept. 30, 2005, the company reported net loss of $231,654. This compares to a net loss of $18,244,048 for the nine-month period ended Sept. 30, 2004. Working Capital Improvement At Sept. 30, 2005, the company had $56.4 million of working capital compared to working capital of $13.6 million at Dec. 31, 2004. American Cellular's ratio of current assets to current liabilities was 1.9:1.0 at Sept. 30, 2005, while the ratio at Dec. 31, 2004, was 1.2:1.0. The company reported an unrestricted cash balance of $55.7 million at Sept. 30, 2005, compared to an unrestricted cash balance of $41.5 million at Dec. 31, 2004. The company's net cash provided by operating activities totaled $32 million for the nine months ended Sept. 30, 2005, compared to $8.8 million for the nine months ended Sept. 30, 2004. The increase from 2004 to 2005 was primarily due to an increase in our operating income. The company used cash in investing activities for the nine months ended Sept. 30, 2005, and 2004. Investing activities are typically related to capital expenditures. The Company generally uses cash in investing activities. The company's net cash used in investing activities for the nine months ended Sept. 30, 2005, primarily related to capital expenditure of $36.3 million and its acquisition of Pennsylvania 4 RSA on Sept. 13, 2005, partially offset by proceeds from the tower sale and leaseback on June 30, 2005. The company's capital expenditures were $34.5 million for the nine months ended Sept. 30, 2004. Except for the proceeds from the sale of certain towers, during 2005, the company expects to continue to use cash in investing activities primarily on capital expenditures as a result of the continued development and improvement of its GSM/GPRS/EDGE wireless networks. Nortel Networks Obligations The company is obligated under a purchase and license agreement with Nortel Networks Corp. to purchase approximately $29.7 million of GSM/GPRS/EDGE related products and services prior to June 9, 2007. This obligation is the company's share of a total $90 million commitment of its parent Company, Dobson Communications Corporation. If the Company fails to achieve this commitment, the agreement provides for liquidated damages in an amount equal to 20% of the portion of the $29.7 million that remains unfulfilled. As of Sept. 30, 2005, $15 million of this commitment has been fulfilled. Tower Sale The company completed the sale of 184 towers on June 30, 2005, and completed the sale of an additional 21 towers in October 2005. The company will lease these towers back over the next ten years. The lease payments began at approximately $3.3 million per year and increase 3% a year through 2015. Pennsylvania 4 RSA Acquisitions On Sept. 13, 2005, the company acquired the non-license wireless assets of Endless Mountains Wireless, LLC in Pennsylvania 4 RSA. The company will operate Endless Mountains' licensed 850 MHz spectrum under a spectrum manager lease. In March 2006, the company will have the right to acquire Endless Mountains' Pennsylvania 4 RSA 850 MHz license, subject to FCC approval at the time of acquisition. If exercised, the company's acquisition of the license covering the leased spectrum is expected to close in mid-to-late 2006. The total purchase price for all acquired assets, including the FCC license, is approximately $12.2 million. American Cellular Corp. -- http://www.americancellular.net/-- is a rural and suburban provider of wireless communications services in the United States. * * * Standard & Poor's Rating Services rated the company's 10% Senior Notes due 2011 at B-. AMERICAN MOULDING: Files Schedules of Assets and Liabilities ------------------------------------------------------------ American Moulding and Millwork Company, delivered its Schedules of Assets and Liabilities to the U.S. Bankruptcy Court for the Eastern District of California, disclosing: Name of Schedule Assets Liabilities ---------------- ------ ----------- A. Real Property $7,471,196 B. Personal Property $10,192,580 C. Property Claimed as Exempt D. Creditors Holding $9,920,698 Secured Claims E. Creditors Holding Unsecured Priority Claims F. Creditors Holding $8,560,395 Unsecured Nonpriority Claims ----------- ----------- Total $17,663,776 $18,481,093 Headquartered in Sanford, North Carolina, American Moulding and Millwork Company -- http://www.amfurniture.com/-- is a supplier of real wood furniture and cabinetry. The Company filed for chapter 11 protection on Oct. 6, 2005 (Bankr. E.D. Calif. Case No. 05-34431). Thomas A. Willoughby, Esq., at Felderstein Fitzgerald Willoughby & Pascuzzi LLP represents the Debtor in its restructuring efforts. When the Debtor filed for protection from its creditors, it listed $17,663,776 in assets and $18,481,093 in debts. ANCHOR GLASS: US Trustee Opposes Jones Day Nunc Pro Tunc Retention ------------------------------------------------------------------ Felicia S. Turner, the U.S. Trustee for Region 21, asks the U.S. Bankruptcy Court for the Middle District of Florida to deny Anchor Glass Container Corporation's request to employ Jones Day as special counsel effective Aug. 8, 2005. The U.S. Trustee explains that the Debtor has failed to demonstrate excusable neglect for its delay in filing its application. Hence, the U.S. Trustee asserts that the nunc pro tunc approval should not be granted. As reported in the Troubled Company Reporter on Oct. 6, 2005, the Debtor wanted to employ Jones Day to represent it in connection with its review of approximately $4,500,000 of customer payments in June 2003 that had not been accounted for properly, as well as other payments. For its legal services, Jones Day will be paid based on its hourly rates and will be reimbursed of actual and necessary out-of-pocket expenses. The current hourly rates of the firm's partners currently expected to have primary responsibility for providing services to the Audit Committee are: Professional Hourly Rate ------------ ----------- Adrian Wager-Zito $525 Richard H. Deane, Jr. $515 Kevyn D. Orr $485 Lisa A. Stater $450 Anchor Glass Responds Robert A. Soriano, Esq., at Carlton Fields PA, in Tampa, Florida, contends that the facts and circumstances regarding the retention of Jones Day provides a satisfactory explanation as to why Anchor Glass Container Corporation's Application was not filed until September 16, 2005, and justifies the nunc pro tunc retention of Jones Day. Mr. Soriano explains that both the Debtor and Jones Day worked diligently to file the Application as quickly as possible, but a number of circumstances resulted in a slight delay in filing the Application. Mr. Soriano further states that Jones Day was retained only two weeks before the Petition Date to assist the Audit Committee in its investigation into certain customer payments. Upon commencement of the Debtor's Chapter 11 case, Alan Schumacher, the Chairman of the Audit Committee, asked Jones Day to continue working with the Audit Committee. On Aug. 25, 2005, Mr. Schumacher asked that Jones Day stand by while he sought clarification with the Debtor's counsel and accountants regarding Jones Day's role in continuing to assist the Audit Committee in its investigation and whether one of the Debtor's other professionals would assume that role. Jones Day continued to provide only limited services to the Audit Committee thereafter. Jones Day subsequently received confirmation from Mr. Schumacher that Jones Day would be retained to assist in the investigation. After it became clear that the Debtor would retain Jones Day, Jones Day promptly completed the drafting and internal review of the Application, including the extensive conflict check process required, and circulated it for review by the Debtor and its professionals during the week of September 5. The Debtor's professionals had a number of constructive comments that were incorporated into the Application before it was filed. Headquartered in Tampa, Florida, Anchor Glass Container Corporation is the third-largest manufacturer of glass containers in the United States. Anchor manufactures a diverse line of flint (clear), amber, green and other colored glass containers for the beer, beverage, food, liquor and flavored alcoholic beverage markets. The Company filed for chapter 11 protection on Aug. 8, 2005 (Bankr. M.D. Fla. Case No. 05-15606). Robert A. Soriano, Esq., at Carlton Fields PA, represents the Debtor in its restructuring efforts. When the Debtor filed for protection from its creditors, it listed $661.5 million in assets and $666.6 million in debts. (Anchor Glass Bankruptcy News, Issue No. 12; Bankruptcy Creditors' Service, Inc., 215/945-7000) ARVINMERITOR INC: Posts $19 Million Net Loss in Fourth Quarter -------------------------------------------------------------- ArvinMeritor, Inc. (NYSE: ARM) reported financial results for the fiscal year and fourth quarter ended Sept. 30, 2005. For the quarter ended Sept. 30, 2005, the company reported net loss of $19 million compared to a net loss of $153 million for the same period in 2004. For the year ended Sept. 30, 2005, the company reported net income of $12 million compared to a net loss of $42 million for the year ended Sept. 30, 2004. For the fourth quarter of fiscal year 2005, ArvinMeritor posted sales of $2.1 billion, a 6% increase over the same period last year. The increase in sales was driven by continued strength in commercial vehicle markets and an increase in sales from the company's new Commercial Vehicle Systems axle joint ventures with the Volvo group in Europe. Currency translation also increased sales by approximately $40 million. "ArvinMeritor delivered a strong performance in the fourth quarter and throughout our 2005 fiscal year, despite the tough challenges confronting the entire automotive industry," said Chairman, CEO and President Chip McClure. "Our experienced management team and dedicated employees delivered excellent performance, enabling ArvinMeritor to achieve full-year income from continuing operations, before special items, at the high end of our guidance range." Operating income, before special items, was $60 million in the fourth quarter of fiscal 2005. Restructuring costs in the fourth quarter of fiscal 2005 were $36 million, of which $33 million related to actions announced in May. Steel costs, net of recovery, were approximately $15 million higher in the fourth quarter than in the same period last year. Operating income was $58 million in the fourth quarter of fiscal year 2004. Income from continuing operations, excluding special items, was $29 million. Special items included $20 million of after-tax restructuring costs associated with actions announced in May and $3 million of after-tax costs associated with the debt exchange completed in September. In addition, income from continuing operations excludes $6 million of one-time favorable tax benefits. Jim Donlon, ArvinMeritor's CFO, said, "We are pleased with the results of our CVS business, which saw sales of $997 million in the fourth quarter of fiscal year 2005. Excluding $5 million of new restructuring costs and higher net steel costs of $11 million, CVS operating margins would have been 6.3%, compared to the reported 5.3 percent in the fourth quarter of fiscal year 2004." Donlon added, "Light Vehicle Systems is leading the way with our restructuring efforts and have made excellent progress in reshaping the business. Restructuring costs are on target and actions are proceeding as planned." With regard to the Light Vehicle Aftermarket business, "Due to evolving industry dynamics, we now believe selling the businesses individually, rather than as a whole, appears to be the right course of action to maximize our shareowners' value," McClure said. "This change in strategy has not materially impacted our view of the total expected proceeds. It does, however, for accounting purposes, require us to evaluate fair value on an individual business basis rather than LVA as a whole." This resulted in an after-tax non-cash impairment charge of $28 million, or $0.40 per diluted share in certain LVA businesses. Loss from discontinued operations, including the impairment charge, was $31 million compared to a loss of $183 million last year. Outlook for 2006 The company's fiscal year 2006 forecast for light vehicle production is 15.6 million vehicles in North America and 16.4 million vehicles in Western Europe. ArvinMeritor's forecast for North American Class 8 truck production is 305,000 units in fiscal year 2006. The forecast for heavy and medium truck volumes in Western Europe is 421,000 units. For the first quarter of fiscal year 2006, the sales forecast for continuing operations is $2.1 billion. The company's outlook for diluted earnings per share from continuing operations is $0.13 to $0.17, before special items. ArvinMeritor's sales outlook for continuing operations in 2006 is expected to be approximately $8.6 billion, and the outlook for full-year diluted earnings per share from continuing operations is in the range of $1.50 to $1.70. This guidance excludes gains or losses on divestitures, restructuring costs, and other special items, including extended customer shutdowns or production interruptions. "We are encouraged by the ongoing strong demand and volume in our commercial vehicle business -- and the growth opportunities we see for both CVS and LVS in diesel emissions technology," said McClure. "We are actively pursuing these and many other growth opportunities both in U.S. and international markets, while aggressively implementing actions to improve the profitability of our business." ArvinMeritor, Inc. -- http://www.arvinmeritor.com/--is a premier global supplier of a broad range of integrated systems, modules and components to the motor vehicle industry. The company serves light vehicle, commercial truck, trailer and specialty original equipment manufacturers and certain aftermarkets. Headquartered in Troy, Michigan, ArvinMeritor employs approximately 29,000 people at more than 120 manufacturing facilities in 25 countries. ArvinMeritor common stock is traded on the New York Stock Exchange under the ticker symbol ARM. * * * As reported in the Troubled Company Reporter on Sept. 6, 2005, Fitch Ratings has affirmed the senior unsecured 'BB+' rating and Stable Outlook of ArvinMeritor, Inc. The company has announced an exchange tender offer for up to $300 million in face amount of its $499 million 6.8% notes due 2009 and its $150 million 7-1/8% notes also due 2009. Fitch has assigned an indicative rating of 'BB+' and a Stable Outlook to the new issue. The new debt would mature in 2015 and has not yet been priced. On Sept. 4, 2005, Standard & Poor's Ratings Services assigned its 'BB' rating to ArvinMeritor Inc.'s proposed $300 million senior unsecured notes due September 15, 2015. At the same time, S&P affirmed all other long-term ratings on the company and related entities. Total consolidated debt at June 30, 2005, stood at about $1.5 billion. As reported in the Troubled Company Reporter on Sept. 2, 2005, Moody's Investors Service assigned a Ba2 rating to approximately $300 million of new unsecured notes maturing in 2015 which ArvinMeritor, Inc. intends to issue under an exchange offer to existing holders of two debt obligations. The exchange offer will be for up to $300 million par value split, based on amounts tendered, between the 7.125% senior unsecured notes maturing in March 2009 ($150 million total) and the 6.80% senior unsecured notes maturing in February 2009 (total $499 million). The Ba2 rating is level with the current Corporate Family and Senior Unsecured ratings. ATA AIRLINES: Disclosure Statement Hearing Continued to Dec. 6 -------------------------------------------------------------- At ATA Airlines, Inc., and its debtor-affiliates' behest, the U.S. Bankruptcy Court for the Southern District of Indiana continues the hearing to consider approval of the disclosure statement explaining the Reorganizing Debtors' plan of reorganization to Dec. 6, 2005 at 10:30 a.m. (EST Prevailing Indianapolis time). Objections to the approval of the Disclosure Statement must be filed and served no later than Nov. 30, 2005. At the Hearing, the Court will consider whether the Disclosure Statement contains adequate information pursuant to Section 1125 of the Bankruptcy Code that would enable a hypothetical investor typical to the holder of claims or interest of the relevant class to make an informed judgment about the Debtors' plan. 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. 40; Bankruptcy Creditors' Service, Inc., 215/945-7000) ATA AIRLINES: Wants Exclusive Period Extended to January 31 ----------------------------------------------------------- As previously reported, ATA Airlines, Inc., and its debtor- affiliates filed their joint Chapter 11 plan on September 30, 2005. However, due to current circumstances, each of Ambassadair Travel Club, Inc., Amber Travel, Inc., and C8 Airlines, Inc., formerly known as Chicago Express Airlines, Inc., has determined that reorganization is not feasible and more time is needed to consider whether it should propose a liquidating Chapter 11 plan or move to convert its case to a case under Chapter 7 of the Bankruptcy Code. Jeffrey C. Nelson Esq., at Bakers & Daniels, in Indianapolis, Indiana, asserts that cause exists to extend the Liquidating Debtors' plan exclusivity period beyond November 30, 2005. Citing In re Express One Int'l. Inc., 194 B.R. 98, 100 (Bankr. E.D. Tex. 1996), Mr. Nelson notes that one factor considered by courts in determining whether cause exists to extend a debtor's exclusive period to file a plan is whether an unresolved contingency exists. He says that a number of unresolved contingencies exist which prevent each of the Liquidating Debtors from determining whether it should file a liquidating plan or whether its creditors would be better served by converting its case. According to Mr. Nelson, the Debtors are currently focused on completing the transactions and financing associated with the Reorganizing Debtors' proposed reorganization. This task consumes most of the Reorganizing Debtors' resources and personnel. An administrative bar date has only recently passed for the estate of C8 and the Liquidating Debtors need time to analyze the claims to determine the administrative solvency of the estate. The Liquidating Debtors ask the U.S. Bankruptcy Court for the Southern District of Indiana to extend the period during which only they may: (a) file reorganization plans, to and including January 31, 2005; and (b) obtain acceptance of their plans, to and including April 3, 2006. 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. 40; Bankruptcy Creditors' Service, Inc., 215/945-7000) BALLY TOTAL: Annual Stockholders Meeting Slated for Jan. 26 ----------------------------------------------------------- Bally Total Fitness Holding Corporation (NYSE:BFT) will hold its annual meeting of stockholders on Jan. 26, 2006. The record date for stockholders entitled to vote at the annual meeting will be Dec. 20, 2005. The meeting will be held in the Chicago area. The details of the exact location, time and agenda for the meeting will be included in the Company's proxy materials. Bally Total Fitness is the largest and only nationwide commercial operator of fitness centers, with approximately four million members and 440 facilities located in 29 states, Mexico, Canada, Korea, China and the Caribbean under the Bally Total Fitness(R), Crunch Fitness(SM), Gorilla Sports(SM), Pinnacle Fitness(R), Bally Sports Clubs(R) and Sports Clubs of Canada(R) brands. With an estimated 150 million annual visits to its clubs, Bally offers a unique platform for distribution of a wide range of products and services targeted to active, fitness-conscious adult consumers. * * * As reported in the Troubled Company Reporter on Aug. 11, 2005, Moody's Investors Service affirmed the Caa1 corporate family (formerly senior implied) rating and debt ratings of Bally Total Fitness Holding Corporation. The affirmation reflects continued high risk of default and Moody's estimate of recovery values of the various classes of debt in a default scenario. Moody's said the ratings outlook remains negative. Moody's affirmed these ratings: * $175 million senior secured term loan B facility due 2009, rated B3 * $100 million senior secured revolving credit facility due 2008, rated B3 * $235 million 10.5% senior unsecured notes (guaranteed) due 2011, rated Caa1 * $300 million 9.875% senior subordinated notes due 2007, rated Ca * Corporate family rating, rated Caa1. BANCO RURAL: Moody's Lowers Foreign Currency Bond Rating to B2 -------------------------------------------------------------- Moody's Investors Service downgraded to B2, from B1, the long-term foreign currency bond rating assigned to Banco Rural S.A., and placed a negative outlook on the rating. In its Aug. 5, 2005 press release announcing the downgrade of Banco Rural's bank financial strength and deposit ratings, Moody's mistakenly assigned a foreign currency bond rating of B1, with a negative outlook, to Banco Rural's Euro medium-term note program. The foreign currency bond rating is, therefore, being downgraded to B2, in line with the bank's global local currency rating of B2. This rating was downgraded: * long-term foreign currency bond rating to B2, from B1, Outlook: negative BANK OF AMERICA: Fitch Rates $72.4 Million Cert. Classes at Low-B ----------------------------------------------------------------- Fitch Ratings upgrades Bank of America, N.A. - First Union National Bank Commercial Mortgage Trust's commercial mortgage pass-through certificates, series 2001-3: -- $42.6 million class B to 'AAA' from 'AA'; -- $17.1 million class C to 'AA' from 'AA-'; -- $17.1 million class D to 'AA-' from 'A+'; -- $14.2 million class E to 'A+' from 'A'. In addition, Fitch affirms these classes: -- $131.5 million class A-1 at 'AAA'; -- $608.6 million class A-2 at 'AAA'; -- $50 million class A-2F at 'AAA'; -- Interest-only class XC at 'AAA'; -- Interest-only class XP at 'AAA'; -- $17.1 million class F at 'A-'; -- $17.1 million class G at 'BBB+'; -- $14.2 million class H at 'BBB'; -- $14.2 million class J at 'BBB-'; -- $29.8 million class K at 'BB+'; -- $8.5 million class L at 'BB'; -- $8.5 million class M at 'BB-'; -- $14.2 million class N at 'B+'; -- $5.7 million class O at 'B'; -- $5.7 million class P at 'B-'. Fitch does not rate the $13.7 million class Q or the subordinate component class V-1, V-2, V-3, V-4, and V-5 certificates. The rating upgrades are due to paydown and defeasance since issuance. As of the November 2005 distribution date, the pool has paid down 9.3% to $1.03 billion from $1.14 billion at issuance. In addition, five loans have defeased. One loan, collateralized by an office building in Metairie, Louisiana, reported significant roof damage and moderate flooding as a result of Hurricane Katrina. The borrower, however, estimates the damage at under $1 million. In addition, the loan remains current as of the November 2005 distribution date. No other properties were reported as having significant damage due to Hurricanes Katrina, Rita, or Wilma. There are currently no delinquent or specially serviced loans. BEAR STEARNS: S&P Assigns Low-B Ratings on $99.7MM Cert. Classes ---------------------------------------------------------------- Standard & Poor's Ratings Services assigned its preliminary ratings to Bear Stearns Commercial Mortgage Securities Inc.'s $1.074 billion commercial mortgage pass-through certificates series 2005-LXR1. The preliminary ratings are based on information as of Nov. 15, 2005. Subsequent information may result in the assignment of final ratings that differ from the preliminary ratings. The preliminary ratings reflect: * the experience and financial strength of the sponsor and manager, * the liquidity provided by the trustee, * the historical and projected performance of the collateral, * the terms of the loan, and * the transaction structure. Standard & Poor's determined that the loan has a debt service coverage of 1.12x based on a 10.50% refinance constant, and a beginning and ending LTV of 78.54%. 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 Bear Stearns Commercial Mortgage Securities Inc. Class Rating Amount LTV DSC (x) ----- ------ ------ --- ------- A-1 AAA $267,877,000 19.58% 4.47 A-2 AAA $109,414,000 27.58% 3.18 A-3 AAA $169,870,000 40.00% 2.19 X-1 AAA $982,753,256 N/A N/A X-2 AAA $982,753,256 N/A N/A B-1 AA+ $68,395,000 45.00% 1.95 B-2 AA $34,197,000 47.50% 1.84 B-3 AA- $34,197,000 50.00% 1.75 C A+ $34,197,000 52.50% 1.67 D A $34,197,000 55.00% 1.59 E A- $34,152,000 57.50% 1.52 F BBB+ $51,387,000 61.25% 1.43 G BBB $68,349,000 66.25% 1.32 H BBB- $68,395,000 71.25% 1.23 J BB+ $75,196,000 77.50% 1.13 K BB $24,550,301 78.54% 1.12 DSC -- Debt service coverage. N/A -- Not applicable. BLACKBOARD INC: S&P Puts B+ Rating on Proposed $80M Sr. Sec. Loan ----------------------------------------------------------------- Standard & Poor's Rating Services assigned its 'B+' corporate credit rating to Washington, D.C.-based Blackboard Inc. At the same time, Standard & Poor's assigned its 'B+' rating and its '4' recovery rating to the company's proposed $80 million senior secured facility. The senior secured facility consists of a $10 million five-year revolving credit facility, undrawn at close, and a six-year $70 million term loan. The bank loan rating -- the same as the corporate credit rating -- long with the recovery rating, reflect our expectation of marginal recovery of principal by creditors in the event of a payment default or bankruptcy. The outlook is stable. Proceeds of the facility, in conjunction with existing cash, will be used to fund the acquisition of WebCT, a private company, for a net purchase price of $154 million. Both Blackboard and WebCT provide enterprise software applications and related services, including online course management software, tailored to the education industry, with clients concentrated in the U.S. post-secondary and K-12 arenas. "Our rating on Blackboard reflects the company's narrow business profile, fragmented and competitive market place, and rapid growth," said Standard & Poor's credit analyst Stephanie Crane. "These factors partially are offset by a strengthening position in a growing niche software market, a significant base of recurring business, and moderate financial leverage for the rating," she continued. Blackboard's target market is primarily the 6,400 North American higher education institutions, and secondarily, K-12 institutions and international educational institutions. Despite being a competitive and fragmented market, Blackboard has a leading position in course management software, a niche market with current total annual revenues of about $400 million. The acquisition of WebCT further solidifies this position, increasing Blackboard's revenue by an estimated two-thirds, and expanding Blackboard's overall client base by almost half. While Blackboard benefits from high renewal rates, and moderately high switching costs, the market is highly fragmented and entry from resource-intensive competitors or open-source software could be a risk. BROOKLYN HOSPITAL: Committee Taps Otterbourg Steindler as Counsel ----------------------------------------------------------------- The Official Committee of Unsecured Creditors of The Brooklyn Hospital Center and its debtor-affiliate asks U.S. Bankruptcy Court for the Eastern District of New York for permission to employ Otterbourg, Steindler, Houston & Rosen, P.C., as its counsel. Otterbourg Steindler will: 1) assist the Committee in its consultation with the Debtors relative to the administration of their chapter 11 cases and attend meetings and negotiate with the Debtors' representatives; 2) assist and advise the Committee in its examination and analysis of the conduct of the Debtors' affairs and in the review, analysis and negotiation of any financing agreements; 3) assist the Committee in the review, analysis and negotiation of any plan of reorganization and an accompanying disclosure statement that may filed; 4) take all necessary action to protect and preserve the Committee's interests, including possible prosecution of actions on its behalf, negotiations concerning all litigation in which the Debtors are involved, and review and analysis of claims filed against the Debtors' estates; 5) prepare on behalf of the Committee all necessary motions, applications, answers, orders, reports and papers in support of positions taken by the Committee; 6) appear before the Bankruptcy Court, the Appellate Courts and the U.S. Trustee to protect the Committee's interests before those courts and before the U.S. Trustee; and 7) perform all other legal services to the Committee that are necessary in the Debtors' chapter 11 cases. Glenn B. Rice, Esq., a member of Otterbourg Steindler, is one of the lead attorneys for the Committee. Mr. Rice reports Otterbourg Steindler's professionals bill: Designation Hourly Rate ----------- ----------- Partners & Counsel $450 - $725 Associate $240 - $525 Paralegals & Legal Assistants $175 - $195 Otterbourg Steindler assures the Court that it does not represent any interest materially adverse to the Committee, the Debtors or their estates. Headquartered in Brooklyn, New York, The Brooklyn Hospital Center -- http://www.tbh.org-- provides a variety of inpatient and outpatient services and education programs to improve the well being of its community. The Debtor, together with Caledonian Health Center, Inc., filed for chapter 11 protection on Sept. 30, 2005 (Bankr. E.D.N.Y. Case No. 05-26990). Lawrence M. Handelsman, Esq., and Eric M. Kay, Esq., at Stroock & Stroock & Lavan LLP represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $233,000,000 in assets and $337,000,000 in debts. BULL RUN: Incurs $5.3 Mil. Net Loss for Fiscal Year Ended Aug. 31 ----------------------------------------------------------------- Bull Run Corporation (OTC: BULL) reported operating income of $1.7 million for the fiscal year ended Aug. 31, 2005, compared to a $2.7 million loss from operations in the prior year. Current year results included approximately $.8 million of expenses incurred in connection with the Company's planned merger with Triple Crown Media, Inc., and the prior year results include a $4.2 million intangibles impairment charge. The net loss available to common stockholders was approximately $5.3 million for the fiscal year ended Aug. 31, 2005, compared to $16.9 million in the prior year, including losses from discontinued operations of approximately $0.1 million and $7.5 million, respectively. The Company's collegiate sports marketing business, its largest segment in terms of revenue, is seasonal. As a result, the Company generates a proportionately low amount of revenue in the fourth quarter of its fiscal year. Revenues for the fourth quarter of the fiscal year ended Aug. 31, 2005, were approximately $7.8 million compared to $7.2 million for the fourth quarter of the prior year. The operating loss for the fourth quarter, including approximately $0.7 million of merger-related expenses, was approximately $2.1 million, compared to an operating loss of $1.6 million for the fourth quarter of the prior year. "We are very pleased with the significant improvement in our operating business this past year under the leadership of Tom Stultz," said Robert S. Prather, Jr., President and CEO of Bull Run. "We believe that eliminating the loss-producing segment a year ago and focusing on the core, historically-profitable collegiate marketing and association management businesses has been a successful strategy." In August 2005, Bull Run announced its intention to merge with Triple Crown Media, Inc. Following the merger, Triple Crown Media would be comprised of Bull Run's collegiate marketing and association management businesses, and the newspaper publishing business and Graylink Wireless business currently operated by Gray Television, Inc. The merger, which is subject to certain closing conditions, including an affirmative vote by Bull Run's shareholders, is expected to be completed by the first quarter of 2006. Thomas J. Stultz, President and CEO of Bull Run's operating subsidiary, Host Communications, Inc., commented, "We made some incredible strides this year, from the reestablishment of key business relationships, to an important 10-year contract extension with the University of Kentucky for multi-media marketing rights, to contract extensions with all of our association clients and the addition of a new association client. We are extremely excited to combine the growth potential of the core businesses of Host together with the newspaper publishing and wireless businesses of Gray under Triple Crown Media." Stultz, who formerly managed the newspaper publishing business at Gray, will become President and CEO of Triple Crown Media upon completion of the merger. Liquidity and Capital Resources The Company's balance sheet showed assets of $64,676,000 of assets at Aug. 31, 2005, and liabilities totaling $123,737,000. Due to negative operating cash flow generated in the past, the Company currently has trade payables and other cash obligations that exceed its current assets. In the fiscal years ended Aug. 31, 2005 and 2004, J. Mack Robinson, the Company's Chairman, provided an aggregate total of $3 million and $6.6 million, respectively, in cash that was used for operating purposes. The Chairman has also committed to fund, if necessary, cash for the Company to meet the quarterly principal payment requirements under the bank credit facility, as amended in October 2005, totaling $10 million before the November 2006 maturity of the facility. Funding of some or all of these payments is likely to be necessary for the Company to continue as a going concern for the next 12 months. As of Aug. 31, 2005, the Company's indebtedness to its bank lenders was approximately $58.9 million. In October 2005, the bank credit agreement was amended to provide an additional $3 million in available financing, all of which was borrowed in October 2005. The agreement, having a maturity date of November 15, 2006 at which time all remaining amounts outstanding become due and payable, requires quarterly principal payments of $2.5 million each beginning Feb. 28, 2006. The Company's ability to meet the principal payment requirements is contingent upon continued investments in the Company's debt or equity securities or cash advances by the Company's Chairman. The agreement provides for no additional borrowing capacity beyond the additional $3 million borrowed in October 2005. The agreement requires the maintenance of interest coverage ratios, which are measured quarterly. The Company's debt to the banks is collateralized by a lien on all of the Company's assets. In addition, the Company's Chairman personally guarantees substantially all of the debt outstanding under the bank credit agreement, and if the Company is unable to meet payment obligations under the agreement, it is likely that the bank lenders would call the guarantee, thereby requiring the Chairman to repay the amount of the loan to the banks. Based in Atlanta, Georgia, Bull Run Corporation - http:// www.bullruncorp.com./ -- is a sports and affinity marketing and management company operating through its subsidiary, Host Communications, Inc. Host's "Collegiate Marketing and Production Services" business segment provides sports marketing and production services to a number of collegiate conferences and universities, and on behalf of the National Collegiate Athletic Association. Host's "Association Management Services" business segment provides various associations with services such as member communication, recruitment and retention, conference planning, Internet web site management, marketing and administration. CABLEVISION SYSTEMS: Equity Deficit Narrows to $2.54 Billion ------------------------------------------------------------ Cablevision Systems Corporation (NYSE:CVC) reported financial results for the third quarter ended Sept. 30, 2005. Consolidated net revenue grew 11% to over $1.2 billion compared to the year- earlier period, reflecting strong revenue growth in Telecommunications Services; Madison Square Garden; and AMC, IFC and WE networks, offset in part by lower revenue in Rainbow's Other Programming businesses. Operating income increased 8% to $107.2 million and adjusted operating cash flow increased 3% to $378.6 million. Highlights for the third quarter include: * sixth consecutive quarter of basic subscriber gains; * revenue Generating Unit (RGU) growth of more than 308,000 new video, high-speed data and voice units; * more than 1.3 million RGUs added across Cable Television's services since Q3'04; and * Cable Television net revenue growth of 16% and AOCF growth of 11% as compared to Q3'04. Cablevision President and CEO James L. Dolan commented: "Cablevision had another excellent quarter with increases in net revenue, operating income and adjusted operating cash flow. This success was driven by the strength of our video, voice and Internet services, which continue to enjoy industry-leading penetration rates. Additional highlights for the third quarter include our sixth consecutive quarter of basic subscriber growth as well as impressive subscriber gains for our digital video service. Our voice service also achieved excellent results and, by the end of the third quarter, more than one out of every three Cablevision high-speed data customers also purchased Optimum Voice." "Rainbow Media's AMC, IFC and WE had an impressive quarter as well with increases in both net revenues and adjusted operating cash flow. This growth was fueled by a double-digit increase in advertising revenue, principally at AMC and WE, which both experienced record ratings in the third quarter," concluded Mr. Dolan. Results from Continuing Operations The operating results of FSN Ohio, FSN Florida and Rainbow DBS's distribution operations are included in discontinued operations and are not presented in the table below. The VOOM HD Networks are included in the Rainbow segment for all periods presented. Telecommunications Services includes Cable Television -- Cablevision's "Optimum" branded video, high-speed data, and voice residential and commercial services offered over its cable infrastructure -- and its "Optimum Lightpath" branded, fiber-delivered commercial data and voice services. Telecommunications Services net revenues for the third quarter rose 16% to $910.6 million, operating income increased 23% to $141.6 million, and AOCF increased 11% to $353.7 million, all as compared to the year-earlier period. Cable Television Cable Television third quarter net revenues increased 16% to $872.3 million, operating income increased 20% to $146 million and AOCF rose 11% to $338.5 million, each compared to the year-earlier period. The increases in revenue, operating income, and AOCF reflect the addition of more than 1.3 million Revenue Generating Units since the third quarter of 2004, resulting from growth in video, high-speed data, and voice customers. Highlights include: * basic video customers up 3,506 or 0.1% from June 2005 and 56,851 or 1.9% from September 2004; sixth consecutive quarter of basic subscriber gains; * iO: Interactive Optimum digital video customers up 101,611 or 6% from June 2005 and 506,003 or 38% from September 2004; * Optimum Online high-speed data customers up 80,570 or 5% from June 2005 and 341,410 or 27% from September 2004; * Optimum Voice customers up 122,851 or 26% from June 2005 and 412,017 from September 2004, a three-fold increase; * Revenue Generating Units up 308,170 or 5% from June 2005 and 1,314,631 or 23% from September 2004; * Advertising revenue up 7% from September 2004; * Cable Television RPS of $96.69, up $1.47 or 2% from June 2005 and $11.74 or 14% from September 2004; and * AOCF margin of 38.8% compared to 39.4% in June 2005 and 40.5% in September 2004. Lightpath For the third quarter, Lightpath net revenues increased 15% to $49.4 million, operating loss decreased 34% to $4.5 million and AOCF increased 20% to $15.2 million, each as compared to the prior year period. The increase in revenue and AOCF is primarily attributable to revenue growth in Ethernet data services over Lightpath's fiber infrastructure as well as growth in traditional data services. The improvements in operating loss and AOCF reflect the revenue growth as well as certain expense savings resulting primarily from staff reductions implemented earlier in the year. Lightpath revenue also includes Optimum Voice call completion activity, which has no impact on AOCF. Rainbow Rainbow consists of our AMC, IFC and WE: Women's Entertainment national programming services as well as Other Programming which includes: FSN Chicago, FSN Bay Area, fuse, MagRack, Sportskool, News 12 Networks, IFC Entertainment, VOOM HD Networks, Metro Channels, Rainbow Network Communications, Rainbow Advertising Sales Corp. and other Rainbow developmental ventures. Rainbow net revenues for the third quarter decreased 9% to $211.9 million, operating income increased 73% to $19.2 million and AOCF increased 3% to $46.1 million, all compared to the year-earlier period. AMC/IFC/WE Third quarter net revenues increased 11% to $144.2 million, operating income increased 25% to $52.3 million and AOCF increased 15% to $68.5 million, each compared to the prior year period. The third quarter results reflect: * higher advertising revenue driven by continued ratings growth, with AMC recording its strongest quarter ever with a primetime HH rating of .98; * higher affiliate revenue, primarily due to the recognition in the third quarter of affiliate revenue attributable to the second quarter that was not recognized in the second quarter due to a contractual dispute; and * viewing subscriber increases of 9% at IFC, 3% at WE and 2% at AMC as compared to September 2004. Other Programming Third quarter net revenues decreased 34% to $72.6 million, operating loss increased $2.5 million to $33.1 million, and the AOCF deficit increased $7.7 million to $22.4 million, all as compared to the prior year period. The decrease in net revenue was primarily driven by lower affiliate revenue at FSN Chicago resulting from the termination of contracts after losing professional sports content and from payments not being received in accordance with an existing affiliate agreement and the closure of two Metro Channels. The increases in operating loss and AOCF deficit primarily reflect the net revenue losses as well as higher expenses at IFC Films and News 12, offset in part by lower amortization of contractual rights at VOOM HD Networks. Madison Square Garden Madison Square Garden's businesses include: MSG Network, FSN New York, the New York Knicks, the New York Rangers, the New York Liberty, the MSG Arena complex and Radio City Music Hall. Madison Square Garden's third quarter net revenue increased 23% to $135.2 million compared to the third quarter of 2004. Operating income decreased $18.6 million to an operating loss of $15.8 million and AOCF decreased to $1.8 million from $15.2 million in the third quarter, both as compared to the year- earlier period. MSG's third quarter results were primarily impacted by: * higher network affiliate revenue, including the impact of certain contractual retroactive rate adjustments; * higher net charges for personnel transactions at the Knicks and Rangers; and * impact of certain other events, primarily the favorable result of the Republican National Convention in 2004 and the expenses associated with the Hurricane Katrina benefit concerts in September 2005. Total Company Consolidated results exclude FSN Ohio, FSN Florida, and Rainbow DBS's distribution operations, which are reflected in discontinued operations for all periods presented. Consolidated third quarter results compared to the prior year period are: * net revenues increased 11% to $1.2 billion. This was the result of continued RGU growth in Cable Television as well as net revenue growth at Madison Square Garden and AMC, IFC and WE networks, partially offset by a decrease in net revenues at Rainbow's Other Programming businesses; * operating income increased 8% to $107.2 million and consolidated AOCF increased 3% to $378.6 million. The increases in operating income and AOCF reflect the factors discussed, offset by higher expenses at Madison Square Garden and higher advisory fees related to corporate transactions. A full-text copy of Cablevision's third quarter report in Form 10-Q filed with the Securities and Exchange Commission is available for free at http://ResearchArchives.com/t/s?2e6 Cablevision Systems Corporation -- http://www.cablevision.com/-- is one of the nation's leading entertainment, media and telecommunications companies. In addition to its cable, Internet, and voice offerings, the company owns and operates Rainbow Media Holdings LLC and its networks; Madison Square Garden and its teams; and, Clearview Cinemas. In addition, Cablevision operates New York's Radio City Music Hall. As of Sept. 30, 2005, Cablevision's equity deficit narrowed to $2.54 billion from a $2.63 billion deficit at Dec.31, 2004. CAPITAL GUARDIAN: Moody's Junks $14 Million Class C Notes' Ratings ------------------------------------------------------------------ Moody's Investors Service downgraded these two classes of notes issued by Capital Guardian ABS CDO I, Ltd: 1) the U.S. $70,000,000 Class B Second Priority Senior Secured Floating Rate Notes, due 2037, formerly rated Aa3 on watch for possible downgrade, were downgraded to Baa2 on watch for possible downgrade; and 2) the U.S. $14,100,000 Class C Mezzanine Secured Floating Rate Notes, due 2037, formerly rated B1 on watch for possible downgrade, were downgraded to Ca. According to Moody's, these rating actions result from the significant deterioration in credit quality of the transaction's portfolio coupled with asset defaults and par loss. Rating Actions: Issuer: Capital Guardian ABS CDO I, Ltd. Class Description: U.S. $70,000,000 Class B Second Priority Senior Secured Floating Rate Notes * Prior Rating: Aa3 on watch for possible downgrade * Current Rating: Baa2 on watch for possible downgrade Class Description: U.S. $14,100,000 Class C Mezzanine Secured Floating Rate Notes * Prior Rating: B1 on watch for possible downgrade * Current Rating: Ca CAPITAL ONE: Hibernia Acquisition Cues Moody's to Lift Ratings -------------------------------------------------------------- Moody's Investors Service upgraded the long-term ratings of Capital One Financial Corporation and its subsidiaries (parent company senior unsecured to Baa1 from Baa3, bank deposits to A3 from Baa1). The rating agency also confirmed the long-term debt ratings of Hibernia Corporation (subordinated at Baa2) and Hibernia National Bank (issuer at A3), and lowered the short-term ratings of Hibernia National Bank to Prime-2. The rating action concludes a ratings review, which began on March 7, 2005, and was taken in anticipation of the acquisition of Hibernia by Capital One which has received all necessary approvals and is expected to close shortly. Moody's said the upgrades of Capital One's long-term deposit, debt, and bank financial strength ratings reflect the benefits to Capital One's credit profile from the acquisition. Hibernia has a solid regional retail banking franchise with a strong core deposit base and good profitability. The acquisition of Hibernia will add to Capital One's growing earnings diversification and reduce its reliance on earnings from credit cards. Although the sizable cash component in the acquisition price will lower Capital One's capital ratios, Moody's expects that Capital One's strong internal capital generation should help the company re-build its capital ratios quickly. The rating agency also noted that on a consolidated basis the acquisition reduces Capital One's reliance on secured funding, thereby reducing the structural subordination of unsecured creditors to a level more consistent with that at other rated U.S. banking companies. The two notch upgrade for Capital One's debt ratings reflects this change, and as well as being consistent with Moody's current notching practices for similarly rated U.S. banks. Although Hibernia National Bank will remain as a separate legal entity, Moody's believes that the credit profile of Capital One Bank will still benefit from the statutory cross-guarantee provisions covering affiliated depositories in the U.S. as well as the ability of such affiliates to provide funding to each other without restrictions. The planned re-branding of Hibernia's franchise as well as planned systems integrations will further link the credit profiles of the banking affiliates. Because of these factors, Moody's concluded that the ratings of Capital One's three deposit-taking subsidiaries should be at the same level. Consistent with this, Moody's said the downgrade of Hibernia National Bank's short-term deposit rating to Prime-2 from Prime-1 reflects Moody's view that the combined company's increased reliance on non-core funding relative to Hibernia's stand-alone funding profile increases Hibernia's credit transition risk. Under Moody's rating methodology only A3-rated banks with a very low and observable credit transition risk receive a Prime-1 short- term deposit rating; all other A3-rated banks receive a Prime-2 short-term deposit rating. And the confirmation of Hibernia's long-term debt ratings reflects the solid credit profile of the combined company as well as the limited impact of structural subordination on Hibernia's unsecured creditors. Moody's said there remains some uncertainty about the long-term impact of the recent Gulf Coast hurricanes on Hibernia's franchise value and earnings profile, especially within Orleans and St. Bernard parishes where a substantial portion of the local population remains displaced. Approximately 19% of Hibernia's deposit base is located in those two parishes, as are 18 of the 24 Hibernia branches, which are still closed. Even to the extent that this franchise is modestly diminished as a result of a permanent reduction in population and businesses in New Orleans, Moody's believes that Hibernia's retail banking franchise should still provide sufficient incremental earnings diversification for Capital One to support the upgrade. Furthermore, access to Capital One's resources should help Hibernia respond to the challenges, risks, and opportunities posed in the hurricanes' aftermath. Thus far Hibernia's total core deposit base has shown good growth, as typically occurs with most banks in the U.S. following a hurricane. To the extent that the hurricanes have a more significant adverse impact on the franchise value and long-term earnings profile of Hibernia's (and Capital One's) retail banking franchise, then the company's ratings could come under negative pressure. Moody's said that the future direction of Capital One's ratings will depend upon Capital One's success in continuing to diversify its earnings and reduce its reliance on credit cards while maintaining its solid profitability and good asset quality. Increased earnings diversification could strengthen Capital One's credit profile if the sources of diversification have: * good franchise value, * solid profitability, and * are uncorrelated with each other. Reduced reliance on confidence-sensitive and performance-sensitive funding would strengthen the liquidity profile and could also cause upward ratings pressure. Higher ratings also depend upon Capital One taking additional steps to further strengthen its corporate governance. A decrease in profitability below that of peers, especially if caused by weaknesses in one or more major business lines, could put negative pressure on the ratings. Ratings upgraded include: Capital One Financial Corporation: -- senior debt to Baa1 from Baa3 -- subordinate shelf to P(Baa2) from P(Ba1) -- junior subordinate shelf to P(Baa2) from P(Ba1) -- preferred shelf to P(Baa3) from P(Ba2) Capital One Bank: -- bank financial strength to C from C- -- long-term deposits to A3 from Baa1 -- senior debt to A3 from Baa2 -- issuer rating to A3 from Baa2 -- long-term other senior obligations to A3 from Baa2 -- subordinated debt to Baa1 from Baa3 Capital One FSB: -- bank financial strength to C from C- -- long-term deposits to A3 from Baa1 -- issuer rating to A3 from Baa2 -- long-term other senior obligations to A3 from Baa2 Capital One Capital I: -- preferred stock to Baa2 from Ba1 These ratings were confirmed: Hibernia Corporation: -- issuer rating at Baa1 -- subordinated debt at Baa2 Hibernia National Bank: -- long-term other senior obligations at A3 -- issuer rating at A3 These ratings were downgraded: Hibernia National Bank: -- short-term deposits and other senior obligations to Prime-2 from Prime-1 Capital One Financial Corporation, headquartered in McLean, Virginia, is the fifth largest U.S. credit card issuer and reported $105.7 billion in managed assets (including securitized receivables) at Sept. 30, 2005. Hibernia Corporation, a financial holding company headquartered in New Orleans, Louisiana with retail banking operations in Louisiana and Texas, reported $23.4 billion in assets at Sept. 30, 2005. CARL YECKEL: Court Converts Case to Chapter 7 Liquidation --------------------------------------------------------- William T. Neary, the United States Trustee supervising Carl Yerkel's bankruptcy case, asked the Hon. Steven A. Felsenthal of the U.S. Bankruptcy Court for the Northern District of Texas, Dallas Division, to convert the Debtor's case to a chapter 7 liquidation. Judge Felsenthal accepted the invitation. James W. Cunningham is appointed as the Chapter 7 Trustee of Carl Yerkel's bankruptcy case. State Court Lawsuit Mr. Yeckel is a former President and director of the Carl B. and Florence E. King Foundation, a large charitable organization. The Texas Attorney General and the King Foundation sued Mr. Yerkel for various acts of misconduct and breach of fiduciary duty in his capacity as an officer and director. The jury sided in favor of the King Foundation and ordered Mr. Yerkel to pay approximately $15 million. The judgment is on appeal and is the subject of a pending motion for relief from the automatic stay in Mr. Yeckel's bankruptcy case. The U.S. Trustee says that all the creditors listed on Mr. Yeckel's bankruptcy schedules originate from the state court litigation: -- the IRS, with a disputed $13 million claim, asserts an excise tax relating to excessive compensation received by Mr. Yeckel; -- the Texas Attorney General's Office, with a disputed $253,000 claim, relates to legal fees incurred during the state court litigation; and -- the Underwood law firm, with a $150,000 claim, stems from defending Mr. Yeckel in the state court lawsuit. The U.S. Trustee says that the Debtor's bankruptcy case revolves around litigation and is a two party dispute between Mr. Yeckel and the King Foundation. Mr. Yeckel intends to continue his appeal of the state court judgment. At the 341 meeting of creditors, Mr. Yerkel did not mention the possible sale of his residential house, which has a market value of $1.4 million. He also imparted little knowledge of his non- debtor wife's assets. The U.S. Trustee says that the Debtor's primary objective in this bankruptcy is to pursue litigation. The U.S. Trustee added that in its most simplistic form, the King Foundation must pay Mr. Yeckel to enable Mr. Yeckel to pay the King foundation and confirm a plan of reorganization. The U.S. Trustee says an individual found to have committed fraud in a fiduciary capacity cannot retain his status as a debtor-in- possession. Mr. Yeckel's prior acts bespeak to an inability to fulfill the fiduciary duties imparted upon a debtor-in-possession. Residing in Dallas, Texas, Carl Yerkel filed for chapter 11 protection on August 12, 2005 (Bankr. N.D. Tex. Case No. 05-39136). Eric A. Liepins, Esq., at Eric A. Liepins, P.C., in Dallas, Texas, represents the Debtor. When the Debtor filed for protection from his creditors, he estimated assets between $1 million to $10 million and debts between $10 million to $50 million. On Nov. 3, 2005, the Court converted the Debtor's chapter 11 case to a chapter 7 liquidation. James W. Cunningham is the Chapter 7 Trustee for Carl Yerkel's bankruptcy estate. CARL YERKEL: Ch. 7 Trustee Taps Cavazos Hendricks as Counsel ------------------------------------------------------------ James W. Cunningham, the Chapter 7 Trustee appointed in Carl Yerkel's bankruptcy case, asks the Hon. Steven A. Felsenthal of the U.S. Bankruptcy Court for the Northern District of Texas, Dallas Division, for permission to employ Cavazos, Hendricks & Poirot, P.C., as his bankruptcy counsel, nunc pro tunc to Nov. 10, 2005. Cavazos Hendricks will: (a) assist the Trustee in investigating fraudulent transfers; (b) advise and consult with the Trustee concerning questions arising in the conduct of the administration of the estate and concerning the Trustee's rights and remedies with regard to the estate's assets and the claims of secured, preferred and unsecured creditors and other parties-in- interest; (c) appear, prosecute, defend and represent the Trustee's interest in suits arising in or related to the Debtor's case; (d) assist in the preparation of pleadings, motions, notices and orders as required for the orderly administration of the Debtor's estate; and (e) investigate any means necessary to preserve some property rights owned by the estate and to determine and take all necessary and reasonable actions for the preservation or liquidation of those assets as necessary. Charles B. Hendricks, Esq., a shareholder at Cavazos, Hendricks & Poirot, P.C., discloses that the Firm's fees will range from $5,000 to $100,000. The Firm's hourly billing rates are: Designation Hourly Rate ----------- ----------- Attorney $180 - $310 Paraprofessional $15 - $60 The Chapter 7 Trustee believes that Cavazos, Hendricks & Poirot, P.C., is disinterested as that term is defined in Section 101(14) of the U.S. Bankruptcy Code. Cavazos, Hendricks & Poirot, P.C. -- http://www.chfirm.com/-- is a law firm concentrating in bankruptcy law with an emphasis on representing Chapter 11 business debtors as debtors-in-possession and Chapter 7 bankruptcy trustees. Residing in Dallas, Texas, Carl Yerkel filed for chapter 11 protection on August 12, 2005 (Bankr. N.D. Tex. Case No. 05-39136). Eric A. Liepins, Esq., at Eric A. Liepins, P.C., in Dallas, Texas, represents the Debtor. When the Debtor filed for protection from his creditors, he estimated assets between $1 million to $10 million and debts between $10 million to $50 million. On Nov. 3, 2005, the Court converted the Debtor's chapter 11 case to a chapter 7 liquidation. James W. Cunningham is the Chapter 7 Trustee for Carl Yerkel's bankruptcy estate. CARL YERKEL: Meeting of Creditors Set for December 13 ----------------------------------------------------- The United States Trustee for Region 6 will convene a meeting of Carl Yerkel's creditors at 9:00 a.m., on Dec. 13, 2005, at the Office of the U.S. Trustee, Room 524, 1100 Commerce Street in Dallas, Texas. This is the first meeting of creditors required under Section 341(a) of the U.S. Bankruptcy Code following the conversion of a chapter 11 proceeding to a chapter 7 liquidation. 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. Residing in Dallas, Texas, Carl Yerkel filed for chapter 11 protection on August 12, 2005 (Bankr. N.D. Tex. Case No. 05-39136). Eric A. Liepins, Esq., at Eric A. Liepins, P.C., in Dallas, Texas, represents the Debtor. When the Debtor filed for protection from his creditors, he estimated assets between $1 million to $10 million and debts between $10 million to $50 million. On Nov. 3, 2005, the Court converted the Debtor's chapter 11 case to a chapter 7 liquidation. James W. Cunningham is the Chapter 7 Trustee for Carl Yerkel's bankruptcy estate. CELLEGY PHARMA: Sept. 30 Balance Sheet Upside-Down by $4.5 Million ------------------------------------------------------------------ Cellegy Pharmaceuticals, Inc. (Nasdaq: CLGY) reported its financial results for the third quarter ended Sept. 30, 2005. Net loss for the quarter ended Sept. 30, 2005, was $2,793,000. Cellegy had a net loss of $3,143,000 during the same period in 2004. Cellegy's cumulative net loss for the nine-month period in 2005 was $3,044,000 compared to a net loss of $8,909,000 during the same period last year. Revenues for the quarters ended Sept. 30, 2005, was $1,952,000 compared to revenues of $1,952,000 for the quarter ended Sept. 30, 2004. For the quarter ended Sept. 30, 2005, revenues consisted of $471,000 in Rectogesic(R) (nitroglycerin ointment) product sales, and $1,252,000 in research grant revenues and a $200,000 milestone from the launch of Tostrex(R) in Sweden by ProStrakan, the Company's European marketing partner. Prior year revenues for the same period consisted primarily of $170,000 in sales in Australia, $92,000 in skin care product sales, and $208,000 in licensing revenue. 2004 results did not include Biosyn, which was acquired by Cellegy in October 2004. Revenues for the nine months ended Sept. 30, 2005, was $11,307,000 while revenues for the nine months ended Sept. 30, 2004, was $1,251,000. Licensing revenues of $6,988,000 included $6.5 million of revenue from the settlement of the Company's litigation with PDI, Biosyn research grant revenues of $3.4 million and product sales of $899,000. Prior year results included $638,000 of licensing revenue and $613,000 in product sales. The Company had cash and cash equivalents of $2.3 million at September 30, 2005 compared to $8.7 million at December 31, 2004. Cash used in operations during the first nine months of 2005 was $12.2 million as compared to $8.4 million during the same period in the prior year. The $3.8 million increase in the use of cash in operations in 2005 was due primarily to the settlement of PDI's lawsuit and its associated legal costs, officer severance expenses and the inclusion of Biosyn in Cellegy's 2005 consolidated results. The use of cash for the first nine months of 2005 was partially offset by approximately $5.7 million in net proceeds from the May 2005 private placement and approximately $1 million received from Vaxgen as part of the sublease termination agreement. Cellegy Pharmaceuticals is a specialty biopharmaceutical company that develops and commercializes prescription drugs for the treatment of women's health care conditions, including reduction in the transmission of HIV and sexual dysfunction, as well as, gastrointestinal disorders. In October 2004, Cellegy acquired Biosyn, Inc., a privately held biopharmaceutical company in Huntingdon Valley, Pennsylvania. The addition of Biosyn, a leader in the development of novel microbicide gel products for contraception and the reduction in transmission of HIV in women, expands Cellegy's near term product pipeline and complements Cellegy's women's health care focus. Cellegy believes that Savvy(R) (C31G vaginal gel), currently undergoing Phase 3 clinical studies in the United States and Africa, is one of the most clinically advanced products in development for the reduction in transmission of HIV. Cellegesic(TM) (nitroglycerin ointment), branded Rectogesic outside the United States, is approved in the United Kingdom for the treatment of pain associated with chronic anal fissures. A similar formulation of Rectogesic is currently being sold in Australia, New Zealand, Singapore and South Korea. Fortigel, branded Tostrex outside the United States, for the treatment of male hypogonadism, was approved by the Medical Products Agency (MPA) in Sweden in December 2004. ProStrakan, is the exclusive distributor of Tostrex in Sweden and the European Union. Approvals of Rectogesic and Tostrex by the other member states of the European Union will be pursued by ProStrakan through the Mutual Recognition Procedure. At Sept. 30, 2005, Cellegy Pharmaceuticals, Inc.'s balance sheet showed a $4,525,000 stockholders' deficit compared to a $6,743,000 deficit at Dec. 31, 2004. * * * Going Concern Doubt Due to its cash position and negative operating cash flows, Cellegy received a going concern qualification in the report of its independent registered public accounting firm included in the Annual Report on Form 10-K for the year ended December 31, 2004. The Company's plans, with regard to its cash position, include raising additional required funds through one or more of the following options, among others: making further Kingsbridge SSO draw downs, seeking partnerships with other pharmaceutical companies to co-develop and fund research and development efforts, pursuing additional out-licensing arrangements with third parties, re-licensing and monetizing future milestone and royalty payments expected from existing licensees and seeking equity or debt financing. However, there is no assurance that any of these options will be implemented on a timely basis or that the Company will be able to obtain additional financing on acceptable terms. In addition to these options, Cellegy will continue to implement further cost reduction programs and reduce discretionary spending, if necessary, to meet its obligations. CHAPARRAL ENERGY: Moody's Rates Proposed $325 Million Notes at B3 ----------------------------------------------------------------- Moody's Investors Service assigned first-time ratings to Chaparral Energy, Inc., an exploration and production company focused primarily in the Mid-Continent and Permian Basin areas of the United States. With a stable outlook, Moody's assigned: * a Corporate Family Rating of B2 to Chaparral; and * a B3 rating to its proposed $325 million senior unsecured notes due 2015. Proceeds from the offering will be used to repay borrowings under the company's senior secured credit facility and a $132 million bridge loan due to GE recently entered into in connection with the company's acquisition of GE's limited partner interest in CEI Bristol-Acquisition L.P. Moody's also assigned a Speculative Grade Liquidity rating of SGL-3 to Chaparral. The ratings are restrained by: * Chaparral's small size with proved developed (PD) reserves of approximately 66.7 million barrels of oil equivalent (boe) or 400 billion cubic feet of gas equivalent (bcfe) and total proved reserves of 117 million boe (702 bcfe); * its high leverage resulting from primarily debt-financed growth in recent years due to the absence of a source of equity capital; * its high full-cycle costs, primarily due to high cash operating costs; * its low leveraged full-cycle ratio due to lower cash margins resulting from large realized hedging losses and high operating and interest costs; * some concerns about the reliability of its long-lived reserves which by their very nature are more subject to negative revisions than shorter-lived reserves in poor pricing environments; and * its plans for rapid growth and spending on riskier and more costly projects such as carbon dioxide (CO2) tertiary recovery. The ratings are supported by the durable nature of the Chaparral's production profile which is characterized by low decline rates and its relatively low all-sources finding and development (F&D) costs, which is largely a function of the mature, long-lived nature of the company's reserves. The rating outlook is stable. Chaparral's ratings will not likely improve unless it achieves greater size and scale which will depend on the successful implementation of its drilling programs and acquisitions over time combined with strong operating performance and capital productivity. In order to warrant an upgrade, Chaparral also will need to demonstrate much higher cash-on-cash returns (a higher leveraged full-cycle ratio) which is not likely to happen until the company's lower-price commodity hedges roll off or additional unhedged production is added. Even though the hedge positions help to reduce cash flow variability, they are in a massive loss position and have materially dragged down the company's realized prices relative to its peer group. This comes at a time when costs, both operating and F&D, are trending up across the industry in large part due to the higher commodity price environment. Chaparral has no room in the rating for further leverage and additional acquisitions and/or capital spending in excess of internally generated cash flow which, without a sufficient level of equity funding, could have negative ratings implications as could a material increase in the company's cost structure or a downward revision to its reserves. Formed in 1988, most of Chaparral's history has involved acquiring producing properties primarily in the Mid-Continent and Permian Basin areas. Beginning in 2001, Chaparral expanded its focus to include exploitation of its acreage holdings through an ongoing development drilling program. As a result of its drilling program and continued acquisitions, the company's reserve base has grown significantly from approximately 30.8 million boe (185 bcfe) of total proved reserves at the end of 2001 to approximately 85.9 million boe (516 bcfe) at the end of 2004. At the end of 2004, Chaparral had approximately 37.5 million boe (225 bcfe) of PUD reserves (approximately 44% of total proved reserves), of which 22 million boe (132 bcfe) relates to the company's CO2 tertiary recovery projects. On Sept. 30, 2005, Chaparral acquired the 99% limited partner interest in CEI Bristol for approximately $158 million. The acquisition added approximately 19.1 million boe (115 bcfe) of proved reserves, putting Chaparral's total pro forma reserves at June 30, 2005 at approximately 117 million boe (702 bcfe). The acquisition cost per boe is a relatively competitive $8.04/boe ($1.34/mcfe) and $58,900 per boe of daily production. Including future capital associated with developing PUD reserves increases the acquisition cost to approximately $8.82/boe ($1.47/mcfe). Current pro forma annualized production is approximately 5 million boe (30 bcfe), which translates into a PD reserve life of around 13.3 years, which is high relative to the majority of its peers reflecting the mature nature of the company's reserve base. While longer life reserves add a degree of durability to the company's profile, Moody's observes that such reserves are more price sensitive than shorter life reserves. Given the rapid growth in the size of the company over the last few years, it comes as no surprise that capital expenditures have grown dramatically increasing from approximately $40.7 million in 2002 to $97.9 million in 2004. Capital expenditures for 2005 are expected to total approximately $300 million (including CEI- Bristol) and the company currently plans capital expenditures in 2006 of approximately $145 million. Included in the company's capital spending plan for next year is approximately $8 million for CO2 tertiary recovery projects and an investment of approximately $10 million to a joint venture formed to construct and operate an ethanol plant. Chaparral has plans for several CO2 tertiary recovery projects in the Camrick area near the Texas/Oklahoma border and in the Velma Sims Unit located in the Oklahoma panhandle. Chaparral has tested the CO2 flood in the Camrick area with favorable results. At the end of 2004, Chaparral added approximately 18.5 million boe (111 bcfe) of proved reserves (approximately 22% of total reserves) associated with 14 CO2 projects in the two areas. Future capital to bring these projects to production is estimated to be approximately $177 million, the bulk of which is expected to be spent over the next five years. Four of the 14 projects are expected to initiate CO2 injection by end of 2006. In an effort to provide a portion of the supply of CO2 needed for the projects and as a stand-alone investment opportunity, Chaparral plans to lead a joint venture (Oklahoma Ethanol LLC) with Oklahoma Farmers Union Sustainable Energy LLC to construct an ethanol plant that is expected to produce a minimum of 50 million gallons of ethanol per year. The total cost of the plant is expected to be approximately $71 million and Chaparral will have a 67% interest. Approximately 65% of the construction cost is expected to be financed with non-recourse debt. Chaparral's 3 year all-sources F&D costs of approximately $7.92/boe ($1.31/mcfe) is competitive for its rating category. (Note this F&D cost figure has been adjusted to include future development costs associated with the significant amount of PUD reserves added over the last three years.) Including the acquisition of CEI-Bristol increases the 3-year average to approximately $8.16/boe ($1.36/mcfe). However, Moody's observes that longer-lived properties, which constitute the bulk of the company's reserve base, generally can be acquired for less, as measured on a per-unit basis, than shorter-lived properties because they have a lower net present value. Chaparral's F&D costs will likely increase in the years to come as drilling costs rise and acquisitions become more expensive. Moody's will monitor whether Chaparral will be able to complete its development drilling programs on budget. Chaparral's drillbit F&D costs are not particularly meaningful given the acquire-and-exploit nature of the company's strategy thus far. The company's full-cycle costs for the nine months ended September 30, 2005, on a pro forma basis for the acquisition and the senior notes offering, are a high $29.05/boe ($4.84/mcfe), which include: * a relatively high $12.60/boe ($2.10/mcfe) of lease operating expense (LOE) and production taxes; * $2.90/boe ($0.48/mcfe) of G&A expense (including capitalized amounts); * $5.39/boe ($0.90/mcfe) of interest expense; and * 3-year fully-developed F&D costs of $8.16/boe ($1.36/mcfe). The company's high LOE costs reflect the nature of its low per- well production and a relatively high level of workovers as well as elevated production taxes given current commodity prices. Chaparral's LOE will likely increase as the company's CO2 projects, which have higher operating costs, are brought to production in the coming years and as the cost of oilfield services continues to trend up. Chaparral's leveraged full-cycle ratio is approximately 184% which is lower than most of its peers (which currently range 200%-250%) primarily due to the impact of the company's realized hedging losses and higher operating cost structure on the company's cash margin. The company's hedging losses have not been inconsequential, totaling approximately $39.7 million ($10.76/boe or $1.79/mcfe) for the nine months ended Sept. 30, 2005, on a pro forma basis. Included in these hedging losses is approximately $11.7 million of unrealized losses on the ineffective portion of hedges, which Moody's has added back to revenues for purposes of computing the company's leveraged full- cycle ratio. Currently, approximately 70% of estimated production through the end of 2006 is hedged at approximately $40.57/bbl and $7.41/mmbtu. The company's pro forma debt-to-PD reserves is approximately $5.96/boe ($0.99/mcfe) as of September 30, 2005, which is in line with its single B-rated peers. However, given the long-lived nature of the company's properties, this debt-to-PD reserves figure is not directly comparable to companies with shorter reserve lives for the same reasons that Chaparral's F&D costs are lower. Factoring in future development capital on PUD reserves, leverage, as measured by adjusted debt- to-total proved reserves, is approximately $6.34/boe ($1.06/mcfe). The senior notes are notched down one from the corporate family rating due to the size of the indenture's secured debt carve-out which permits whatever borrowings are allowed under the company's senior secured credit facility. While Moody's observes that the notes are guaranteed by the company's subsidiaries that also guarantee the credit facility, the size of the carve-out and borrowing base facility is significant enough to warrant a notching of the notes. The SGL-3 rating reflects adequate liquidity. Chaparral is expected to rely on external sources of committed financing as operating cash flow is expected to be close to, or somewhat less than, capital expenditures over the next 12 months. Pro forma for the notes offering, will have a borrowing base of $172.5 million and availability of approximately $113 million under its credit facility after closing. The company's credit agreement requires that it maintain a current ratio (as defined) of more than 1:1 and a minimum debt service coverage ratio (as defined) on a trailing 4-quarter basis of more than 1:1. Moody's expects that the company will maintain compliance with these covenants over the next 12 months. The company's ability to sell assets is limited due to the secured nature of the credit facility. Chaparral Energy, Inc. is headquartered in Oklahoma City, Oklahoma. CLARKE AMERICAN: Moody's Puts B2 Rating on $175MM Sr. Unsec. Notes ------------------------------------------------------------------ Moody's Investors Service assigned ratings to Clarke American Corp.'s debt to be issued in connection with M&F Worldwide Corp.'s $800 million acquisition of the company from a subsidiary of Honeywell International Inc. This is the first time Moody's has rated debt issued by Clarke. The ratings reflect the company's high leverage and significant business risk associated with the company's core check printing operations due to the ongoing erosion in demand for checks as consumers and businesses shift to electronic payment formats. The ratings outlook is stable. Moody's assigned these ratings: * B1 rating to the $480 million guaranteed senior secured credit facility consisting of: -- $40 million revolver maturing five years from closing -- $440 million term loan B maturing six years from closing * B2 rating to the $175 million guaranteed senior unsecured notes maturing eight years from closing * B1 Corporate Family Rating * SGL-2 Speculative-Grade Liquidity Rating The ratings reflect Clarke's: * high leverage, * significant level of business risk, * limited product diversity, and * a concentrated customer base. Debt at closing of the acquisition will represent a high 4.8x EBITDA (calculated including operating leases and Moody's other standard adjustments). Moody's is concerned that the decline in physical check demand (averaging approximately 4% per year) as consumers adopt less costly and more convenient alternative payment forms such as electronic transfers and debit and credit cards will continue and ultimately accelerate, thereby raising the risk of erosion in Clarke's revenue base. This can prompt investments outside traditional areas of expertise in an effort to find alternative revenue sources. Declining check demand also sustains excess industry capacity and downward pressure on check product prices. Clarke's significantly higher leverage than its two primary and financially stronger competitors provides less flexibility to manage these business risks. Revenue concentration in printed checks and related services is high while the financial institution division constitutes a greater share of revenues (84%) than competitors. Clarke is more exposed to the price and volume pressures arising from the increase in customer bargaining power accompanying financial industry consolidation. Customer concentration is high with 43% of revenues derived from the 10 largest financial institution clients and Bank of America accounting for a significant portion of sales. As evidence, one client has chosen not to renew its contract with Clarke expiring at the end of 2005. Moody's believes BofA's effective preclusion from any additional large bank acquisitions due to the national 10% deposit ceiling could affect a traditional contributor to Clarke's revenue growth. In addition to interest from the proposed debt offerings, several factors will potentially influence Clarke's cash flow in the near term. Clarke will have a significant cash tax burden (subject to generating taxable income) that will limit the EBITDA to cash flow conversion. Management expects to increase growth-related capital expenditures in the next few years to enhance customer relationship tools, call routing capabilities and client web site interconnectivity. While a near term drag on cash flow, these investments should enhance longer-term revenue potential. Term loan amortization ($15 million in 2006) will step up by $5 million per year through maturity, increasing the company's vulnerability to operating shortfalls and diminishing flexibility to meet customer requests for up-front contract acquisition or renewal payments should cash flow fall short of management's projections. The ratings more favorably reflect the company's strong market position in the check printing business and management's historical capability to grow revenues notwithstanding the pressure from declining check volumes and prices. While the check printing industry is mature and has undergone considerable consolidation, the remaining participants have demonstrated an ability to reduce costs. This has translated into sizable market positions and a good track record of cash flow generation. Clarke believes its focus on helping financial institution clients grow deposit accounts creates a more value added relationship that improves customer retention. Integration into financial institutions' Internet and phone check ordering systems creates frequent contact with the end users of checks. Clarke expects to continue to opportunistically leverage this interaction to offer enhanced delivery and service options (which account for a significant source of earnings) that increase average order size and to provide direct marketing services on behalf of financial institutions. Clarke also benefits from its long-standing relationship with BofA whose traditional focus on retail client base expansion supplemented by acquisitions has contributed significantly to Clarke's revenue growth. Clarke became BofA's sole source check supplier in 2003. The SGL-2 rating reflects the company's "good" liquidity position. Clarke will have a minimal cash balance at closing with internal liquidity provided by free cash flow after interest, taxes, and capital expenditures of $25-30 million in 2006. None of the company's top 10 clients have a contract expiring within the next 12 months (except, as previously mentioned, the client that is not renewing its' contract at the end of 2005), which diminishes the likelihood of a spike in contract renewal payments. Revenues are slightly lower than average in the calendar fourth quarter but otherwise exhibit little seasonal fluctuation. Working capital swings traditionally fall within a $10-12 million range. Moody's expects free cash flow to satisfy the scheduled $15 million term loan amortization in 2006. The company is expected to have a $2 million draw on the $40 million revolver at closing but otherwise minimal usage to smooth working capital flows. Moody's anticipates the company will maintain compliance with bank covenants, which are expected to be based on a cushion to the projections provided to the bank group. Because substantially all assets are pledged to the bank facility, Moody's believes the potential for asset sales to provide incremental liquidity is low. Honeywell acquired Clarke through its purchase of Novar plc in March 2005, at which time Honeywell identified Clarke as a non- core asset to be sold. M&F's acquisition of Clarke will include the assumption of guarantees of certain derivative contracts relating to Novar's Indalex aluminum business, which Honeywell is also in the process of disposing. As part of the merger agreement, Honeywell will indemnify Clarke, M&F and other related parties for any potential liability arising from the guarantees. The merger agreement provides that such guarantees will be either supported by a letter of credit and/or transferred to a non-acquired entity. If the guarantees are not transferred to a non-acquired entity, the indemnification will be supported by a letter of credit for up to $60 million, which M&F believes should cover any potential liability on the guarantees. Payment on the guarantee, if requested by the counterparty, will be made directly by Honeywell or by drawing on the letter of credit. Moody's believes the indemnity and letter of credit reduce the likelihood that Clarke will be responsible for performance of the guarantees. M&F will complete the transaction by acquiring Novar USA, Inc., which is Honeywell's subsidiary containing the operations of what will be Clarke (currently housed in Novar USA, Inc.'s subsidiary Security Printing, Inc.) and the guarantees discussed above. Moody's ratings considered the audit for Security Printing, Inc. and are subject to a review of the audit for Novar USA, Inc. Ronald Perelman controls an investment company that holds 38% of the common stock of publicly traded M&F. M&F will fund the $203 million equity portion of the $800 million purchase price for Clarke from cash on hand ($94 million at September 30, 2005) and through a dividend from its indirect wholly-owned subsidiary Mafco Worldwide Corporation. Moody's ratings assume that this contribution to Clarke will be made in non-redeemable common stock as currently envisioned. Mafco will finance the dividend with borrowings under a new credit facility. Clarke is significantly larger than Mafco and will be M&F's largest operating subsidiary. Because the debt of Clarke and Mafco will not contain cross guarantee, cross collateralization or cross default provision, Moody's ratings for Clarke do not incorporate Mafco's operations or debt. The credit agreement and indenture will include restrictions on Clarke's ability to: * pay dividends, * repurchase shares, * issue additional debt, and * transact with affiliates. Moody's ratings are subject to review of final terms and conditions of the credit agreement and indenture. The stable ratings outlook anticipates that Clarke will continue to develop products and services that moderate its vulnerability to declines in printed check volumes and prices. Moody's also expects that Clarke will utilize cash flow to pay down debt and will not engage in transactions that increase leverage at Clarke or its immediate parent holding company. The ratings or outlook could be lowered if deterioration in check industry price or volume conditions, loss of market share or debt- financed transaction raises Clarke's debt-to-EBITDA sustainably above 5x. Debt reduction through free cash flow or an equity offering that lowers debt-to-EBITDA to 4.0x along with stable revenue and operating margin trends could result in a favorable change in Clarke's rating or outlook. The senior secured credit facilities are guaranteed on a senior secured basis by all of the borrower's domestic subsidiaries and Clarke's direct parent, CA Acquisition Holdings, Inc. (CAH), which is a wholly-owned subsidiary of M&F. The facilities are not guaranteed by M&F. Collateral consists of a first priority lien on substantially all tangible and intangible assets of the borrowers and guarantors. The capital stock of the borrower and domestic subsidiaries as well as 66% of the stock of any future first tier foreign subsidiaries is also included in the security package. The blanket guarantee and collateral structure provides senior secured creditors with the first claim on the cash flow and assets in a distress scenario. The senior secured facilities constitute over 70% of outstanding debt and, accordingly, are rated at the B1 corporate family rating. Term loan amortization and the 75% excess cash flow sweep provide greater assurance that the bulk of the company's cash flow will be used to reduce debt. Financial covenants will include maximum senior consolidated leverage, maximum total consolidated leverage and minimum consolidated interest coverage ratios that provide senior creditors negotiating leverage should the company's credit metrics fall short of expectations. The notes are Clarke's senior unsecured obligations and are supported by senior unsecured guarantees from all direct and indirect operating subsidiaries. The notes will not be guaranteed by CAH or M&F. Only the bank credit facility will restrict CAH's business activities including the ability to issue debt. The company has indicated no current plans to issue debt at CAH and an offering at that level could adversely affect ratings. The B2 rating on the notes are one notch below the corporate family rating reflecting the effective subordination to a material amount of secured debt. Clarke, headquartered in San Antonio, Texas, is a provider of check and check-related products and services and of direct marketing services to: * financial institutions, * businesses, and * consumers in the United States. Annual revenues approximate $610 million. CLARKE AMERICAN: S&P Rates Proposed $655MM Senior Debts at Low-B ---------------------------------------------------------------- Standard & Poor's Ratings Services assigned its 'B+' corporate credit rating to Clarke American Corp. At the same time, Standard & Poor's assigned its 'B+' bank loan rating and recovery rating of '3' to the company's proposed $480 million senior secured credit facilities, indicating the expectation of a meaningful recovery of principal in the event of a payment default. Standard & Poor's also assigned its 'B-' rating to the company's planned $175 million eight-year senior unsecured notes. Proceeds from the credit facilities and senior unsecured notes, together with a $200 million contribution from M&F Worldwide Corp., will be used primarily to complete the acquisition of CAC by MFW. Upon completion of the acquisition, CAC will become a wholly owned subsidiary of MFW. Pro forma for this transaction, total debt outstanding is expected to be $617 million as of Sept. 30, 2005. The outlook is stable. CAC is the third-largest provider of check-related products and services to financial institutions, small businesses, and consumers in the United States. In terms of check printing revenues, the company is behind Deluxe Corp. and John H. Harland Company. CAC focuses on two main market segments: Financial Institutions and Direct to Consumers. The ratings reflect: * the consolidated credit quality of MFW, and * factors in the expectation that management will continue to seek acquisitions at the parent level. In addition, the ratings consider: * the long-term prospects for declining check-printing volumes and * the expectation for a high level of competition between the three largest check printing companies as they pursue one another's customers. These factors are partially tempered by: * CAC's good market position within the check-printing segment, which still generates relatively good margins relative to other print segments, and * credit measures that are in line with the ratings. COLLINS & AIKMAN: Panel Support Cross-Border Insolvency Protocol ---------------------------------------------------------------- The Official Committee of Unsecured Creditors of Collins & Aikman Corporation and its debtor-affiliates posed no objection to the proposed cross-border insolvency protocol, but expressly reserves of all of its rights to raise in the future any issues relating to the European Debtors and their Administration as those issues may impact the U.S. Debtors, their estates and their unsecured creditors. As reported in the Troubled Company Reporter on Oct. 14, 2005, the Debtors proposed a cross-border insolvency protocol to facilitate the efficient administration of their Chapter 11 cases and the administrative proceedings of their European units. Marc J. Carmel, Esq., at Kirkland & Ellis LLP, in New York, explains that the Protocol will ensure that the counsel, retained professionals and management for each of the U.S. Debtors and the European Debtors work cooperatively and effectively with minimal friction or duplication of efforts. While the Protocol has not yet been formally approved, the Debtors have been acting in accordance with the terms of the Protocol since it was developed on July 15, 2005. The terms of the Protocol are designed to: (a) promote the orderly and efficient administration of the Insolvency Proceedings; (b) harmonize and coordinate activities undertaken and information exchanged in connection with the Insolvency Proceedings; (c) honor the independence and integrity of the US and English Courts; and (d) promote international cooperation and respect for comity among the U.S. and English Courts. A full-text copy of the 15-page Protocol is available for free at http://bankrupt.com/misc/collins_protocol.pdf Committee's Statement The Official Committee of Unsecured Creditors notes that the cross-border insolvency protocol provides, in essence, that the parties will agree to communicate and negotiate with each other regarding the sharing of Confidential Information. While the Protocol does not provide the Committee or the U.S. Debtors with direct access to information or a guarantee of information regarding the European Debtors and their Administration, to date, the Committee has been receiving periodic updates from the U.S. Debtors and the Administrators regarding the Administration and recently participated in a productive meeting with the Administrators. The Committee is hopeful that, despite the non-binding nature of the Protocol, during the course of the Chapter 11 cases and the Administration, the Administrators will be forthcoming in providing information to the Committee and the U.S. Debtors regarding the European Debtors and the Administration that is pertinent to the U.S. Debtors and their unsecured creditors. Headquartered in Troy, Michigan, Collins & Aikman Corporation -- http://www.collinsaikman.com/-- is a global leader in cockpit modules and automotive floor and acoustic systems and is a leading supplier of instrument panels, automotive fabric, plastic-based trim, and convertible top systems. The Company has a workforce of approximately 23,000 and a network of more than 100 technical centers, sales offices and manufacturing sites in 17 countries throughout the world. The Company and its debtor-affiliates filed for chapter 11 protection on May 17, 2005 (Bankr. E.D. Mich. Case No. 05-55927). When the Debtors filed for protection from their creditors, they listed $3,196,700,000 in total assets and $2,856,600,000 in total debts. (Collins & Aikman Bankruptcy News, Issue No. 18; Bankruptcy Creditors' Service, Inc., 215/945-7000) COLLINS & AIKMAN: Visteon Withdraws Set-Off Plea ------------------------------------------------ Visteon Corporation and Collins & Aikman Corporation and its debtor-affiliates agree to the withdrawal of Visteon's request to lift the automatic stay to effect set-off, without prejudice to Visteon's right to refile the Motion at a later date and without costs, attorneys' fees or sanctions. As reported in the Troubled Company Reporter on July 22, 2005, asked the U.S. Bankruptcy Court for the Eastern District of Michigan to lift the automatic stay to set off its mutual prepetition debt with the Debtors. Prior to the Petition Date, Visteon provided component parts to the Debtors for which it remains unpaid. The Debtors owe Visteon $2,217,171. The Debtors also provided component parts to Visteon for which they remain unpaid. The amount owing from Visteon total $43,667. The Debtors opposed Visteon's request, saying Visteon does not have a valid right to set off. There are no mutual obligations between the Debtors and Visteon. Visteon owes amounts to Collins & Aikman Interiors, Inc., and Collins & Aikman Automotive Canada. However, the Debtors who owe amounts to Visteon are JPS Automotive, Inc., C&A Automotive Exteriors, Inc., and C&A Products, Co. Headquartered in Troy, Michigan, Collins & Aikman Corporation -- http://www.collinsaikman.com/-- is a global leader in cockpit modules and automotive floor and acoustic systems and is a leading supplier of instrument panels, automotive fabric, plastic-based trim, and convertible top systems. The Company has a workforce of approximately 23,000 and a network of more than 100 technical centers, sales offices and manufacturing sites in 17 countries throughout the world. The Company and its debtor-affiliates filed for chapter 11 protection on May 17, 2005 (Bankr. E.D. Mich. Case No. 05-55927). When the Debtors filed for protection from their creditors, they listed $3,196,700,000 in total assets and $2,856,600,000 in total debts. (Collins & Aikman Bankruptcy News, Issue No. 18; Bankruptcy Creditors' Service, Inc., 215/945-7000) COLLINS & AIKMAN: Closes Western Avenue Dyers Operation in Mass. ---------------------------------------------------------------- Collins & Aikman Corporation (CKCRQ) reported on Nov. 15, 2005, that it will discontinue production at its yarn dyeing facility in Lowell, Massachusetts. Operations are expected to continue through the first quarter of 2006. Following careful and in-depth evaluation, the Company has strategically elected to exit the business that is currently conducted at its Lowell operations as part of ongoing efforts to improve operating performance. Production will be transferred gradually to the company's existing supply base. "We regret the impact these tough decisions will have on our employees and the local community. We do not take these decisions lightly and would not be proceeding if these steps were not essential to restoring Collins & Aikman's financial health," said Frank Macher, Collins & Aikman's president and CEO. The Company is currently evaluating all of its operations and implementing a number of cost reduction and efficiency improvement initiatives aimed at creating a viable entity that could successfully emerge from bankruptcy. Company officials met earlier with employees and have contacted customers and local officials to announce the planned closure. The Western Avenue Dyers factory has approximately 150 employees. The facility was acquired from Joan Automotive Fabrics in September of 2001. Headquartered in Troy, Michigan, Collins & Aikman Corporation -- http://www.collinsaikman.com/-- is a global leader in cockpit modules and automotive floor and acoustic systems and is a leading supplier of instrument panels, automotive fabric, plastic-based trim, and convertible top systems. The Company has a workforce of approximately 23,000 and a network of more than 100 technical centers, sales offices and manufacturing sites in 17 countries throughout the world. The Company and its debtor-affiliates filed for chapter 11 protection on May 17, 2005 (Bankr. E.D. Mich. Case No. 05-55927). When the Debtors filed for protection from their creditors, they listed $3,196,700,000 in total assets and $2,856,600,000 in total debts. CONNECTICUT HEALTH: S&P Pares Revenue Debt Rating to BB from BB+ ---------------------------------------------------------------- Standard & Poor's Ratings Services lowered its rating on Connecticut Health and Educational Facilities Authority's revenue debt one notch to 'BB' from 'BB+', issued for Windham Community Memorial Hospital Inc., based on sizable and growing accrued liabilities related to pension and postretirement benefits that have significantly reduced the hospital's unrestricted fund balance over the years. The outlook is stable. Factors supporting the stable outlook include: * the hospital's operational improvements, which are reflected by the break-even operating results achieved at unaudited fiscal year-end Sept. 30, 2005; * stable liquidity levels; and * leading market share in its primary service area. Windham Community Memorial Hospital's revenue pledge and a mortgage lien on its principal campus in Willimantic, Connecticut secure the bonds. The corporation includes the hospital and Hatch Hospital Corp. "We assume improved reimbursement rates and generally stable utilization, as well as improved labor productivity management, will allow the hospital to maintain its current financial profile," said Standard & Poor's credit analyst Anita Varghese. "To achieve a higher rating over time, Windham will have to demonstrate stronger profitability and build its cash reserves to meet future capital needs." Windham maintains sizable accrued liabilities on its balance sheet related to its pension and postretirement benefit plans, which, over the years, has diminished its unrestricted fund balance to $7 million as of Sept. 30, 2005. Management: * has placed a soft freeze on its defined benefit plan for new employees who started after April 1, 2004. * will cash fund $3.6 million into its pension plan over the next couple of years; if no further changes are made to the plan, however, higher contributions will likely be required in fiscal 2008 and beyond. * forecasts liquidity to remain flat over the next year or two as the hospital completes an expansion and renovation of its emergency department and outpatient services. Deterioration in Windham's fund balance has elevated the debt-to-capitalization ratio to a high 64%. Unaudited fiscal 2005 results indicate a sound financial turnaround from the losses incurred in fiscals 2004, 2003, and 2002. Windham posted break-even operating results in fiscal 2005 compared with an $863,000 operating loss in fiscal 2004. The majority of losses in fiscals 2003 and 2002 were due to onetime factors, including: * a correction of accounting errors and * an internal systems failure that ended in lost accounts receivables resulting in $1.2 million of additional bad debt. Senior management has corrected the onetime issues and has put precautionary measures in place to prevent discrepancies in the future. As part of Windham's recovery plan, the hospital reduced its workforce in fiscals 2005 and 2004 by a total of 55 full-time equivalent employees through attrition and the elimination of existing positions and negotiated improved managed-care contracts. Ongoing challenges include higher-than-expected pension and employee health insurance expenses. An excess profit of $764,000 in fiscal 2005 generated maximum annual debt service coverage, including capital leases, of 1.8x. The rating action affects roughly $16.5 million of revenue debt outstanding. CONSOLIDATED CONTAINER: Equity Deficit Tops $78 Mil. at Sept. 30 ---------------------------------------------------------------- Consolidated Container Company LLC delivered its quarterly report on Form 10-Q for the quarter ending Sept. 30, 2005, to the Securities and Exchange Commission on Nov. 9, 2005. Net sales for the third quarter of 2005 were $207.7 million, an increase of $9.5 million or 4.8%, compared to $198.2 million for the same period of 2004. Gross profit for the third quarter of 2005 was $23 million, an increase of $0.1 million or 0.4%, compared to $22.9 million for the same period of 2004. Selling, general and administrative expense includes non-production related costs including salaries, benefits, travel, rent, and other costs for our corporate functions such as executive management, sales, procurement, finance, accounting, and human resources. Loss on disposal of assets for the third quarter of 2005 was $0.2 million, compared to a loss of $1.6 million for the same period of 2004. The loss in 2005 was primarily due to impairment charges recognized at three locations and the sale of assets at a closed plant, partially offset by the gain recognized from the sale of assets at a previously closed plant. The loss in 2004 was attributed to the sale of three plants. The Company incurred a $1.25 million net loss in the quarter ending Sept. 30, 2005. At Sept. 30, 2005, the Company's balance sheet shows $681.78 million in total assets and $760.34 million in total debts. As of Sept. 30, 2005, the Company's equity deficit widened to $78.57 million from a $67.95 million deficit at Dec. 31, 2004. A full-text copy of the regulatory filing is available at no charge at http://ResearchArchives.com/t/s?2e9 Consolidated Container Company LLC, which was created in 1999, develops, manufactures and markets rigid plastic containers for many of the largest branded consumer products and beverage companies in the world. CCC has long-term customer relationships with many blue-chip companies including Dean Foods, DS Waters of America, The Kroger Company, Nestle Waters North America, National Dairy Holdings, The Procter & Gamble Company, Coca-Cola North America, Quaker Oats, Scotts and Colgate-Palmolive. CCC serves its customers with a wide range of manufacturing capabilities and services through a nationwide network of 61 strategically located manufacturing facilities and a research, development and engineering center located in Atlanta, Georgia. Additionally, the company has 4 international manufacturing facilities in Canada, Mexico and Puerto Rico. CONSTAR INT'L: Incurs $23.5 Million Net Loss in Third Quarter ------------------------------------------------------------- Constar International Inc. (NASDAQ: CNST) delivered its financial results for the quarter ended Sept. 30, 2005, to the Securities and Exchange Commission on Nov. 9, 2005. Constar reported a 15.4% increase in Net Sales for the third quarter, from the $224.5 million reported for the 2004 third quarter to $259 million for the three-months ended Sept. 30, 2005. The growth reflects the pass through of increased resin prices and increased shipments of both conventional and custom products in the United States. Third quarter gross profit increased to $13.8 million compared to $13.0 million in last year's third quarter. The improvement reflects a positive mix shift to custom products and increased operating efficiencies in U.S. plants that resulted from higher production of domestic units. Michael J. Hoffman, Constar's President and Chief Executive Officer, commented, "We continue to be pleased with the manufacturing performance of our domestic operations and are seeing the benefits of our increased sales of custom products. With custom volume growth in excess of 25% in the third quarter, we have continued our expansion in custom PET where pricing and contract terms support new business growth. In the domestic conventional industry, persistent margin compression has stalled capacity growth, resulting in supply shortages. As we approach contract renewals, our objective is to implement a structure of sustainable prices and terms under which we would be willing to commit our capacity." Mr. Hoffman continued, "As for our European business, we are disappointed with profit performance, which has been impacted by soft consumer demand and productivity issues in our U.K. facility. However, we remain focused on improving the financial results of this business through improved pricing, cost reductions and better overall operating performance." Constar recorded a non-cash asset impairment charge of $22.2 million ($19.9 million, net of tax) in the third quarter related to the write-down of certain long-lived European assets as a result of reduced operating profits in the United Kingdom and Holland. Further, the Company reported a third quarter net loss of $23.5 million, compared to a net loss of $5.5 million in the 2004 third quarter. Excluding the non-cash asset impairment charge, the third quarter net loss would have been $3.6 million. Nine-Month Results For the first nine months of 2005, net sales rose 16.1% to $745.7 million over the $642.4 million reported for the same period last year. The growth resulted from the pass-through of increased resin prices, increased shipments of both conventional and custom products in the United States and favorable foreign currency translation. The increase was reduced in part by previously agreed to price reductions implemented to extend key long-term contracts and meet competitive pricing as well as reduced volumes in certain European markets. Gross profit for the first nine months of 2005 was $30.7 million compared to $36.2 million for the first nine months of last year. The reduced gross profit resulted from previously agreed to price concessions implemented to extend key contracts and meet competitive pricing, lower volumes in Europe and increased costs related to transportation and utilities. These items were partially offset by increased operating margins in U.S. plants that resulted from higher domestic unit sales and a positive mix shift toward higher margin custom products. Constar reported a net loss of $51.2 million, or $4.22 per diluted share, compared to a net loss of $18.3 million, or $1.52 per diluted share, in the first nine months of last year. The 2005 net loss includes the non-cash asset impairment charge mentioned above and a $10 million loss associated with the Company's February refinancing. Excluding the asset impairment charge and loss on refinancing, the net loss for the first nine months of 2005 was $21.3 million, or $1.76 per dilute share. Based in Philadelphia, Pennsylvania, Constar International -- http://www.constar.net/-- is a leading global producer of PET (polyethylene terephthalate) plastic containers for food, soft drinks and water. The Company provides full-service packaging solutions, from product design and engineering, to ongoing customer support. Its customers include many of the world's leading branded consumer products companies. * * * As reported in the Troubled Company Reporter on Nov. 8, 2005, Moody's Investors Service downgraded these ratings at the conclusion of the review of Constar's ratings for possible downgrade that was initiated on Sept. 21, 2005: -- To B3 from B2 for the $220 million floating rate first mortgage note, due 2012 -- To Caa3 from Caa1 for the $175 million 11% senior subordinated note, due 2012 -- To B3 from B2 for the corporate family rating The ratings outlook is negative. Moody's Investors lowered Constar's ratings to reflect: * ongoing pressures on profitability and cash flow primarily because of prolonged softness in Constar's European business which accounts for approximately 25% of consolidated revenue; * increased utility expenses; * less-than-optimal product mix with volume strength in low margin conventional water business; and * delays in the ramp up of certain custom projects. As reported on the Troubled Company Reporter on Sept. 27, 2005, Standard & Poor's Ratings Services lowered its corporate credit rating on Constar to 'B-' from 'B'. At the same time, Standard & Poor's lowered its rating on the company's $220 million senior secured notes to 'CCC+' from 'B-' and its rating on the $175 million senior subordinated notes to 'CCC' from 'CCC+'. The outlook is negative. Constar had approximately $457 million in total debt outstanding at June 30, 2005. CONSTELLATION BRANDS: S&P Rates Proposed $4.1-Bil Sr. Loans at BB ----------------------------------------------------------------- Standard & Poor's Ratings Services assigned its 'BB' rating to Constellation Brands Inc.'s proposed $4.1 billion senior secured credit facilities. The bank loan rating and accompanying analysis are based on preliminary documentation and subject to review once final documentation has been received. Existing ratings on beverage alcohol producer and distributor, including its 'BB' corporate credit rating, remain on CreditWatch with negative implications, where they were placed on Sept. 28, 2005, following the company's announcement that it had made an unsolicited offer to buy Vincor International Inc. The transaction is subject to regulatory and shareholder approvals. Vincor is Canada's largest and one of the world's top 10 wine companies, in terms of revenue. The CreditWatch placement also reflects Standard & Poor's concern that Constellation Brands' pursuit of Vincor could result in a significant escalation of the current offering price. Net proceeds from the bank facilities will be used to: * finance the proposed acquisition, * refinance Constellation Brands' existing bank debt, and * provide for working capital and other general corporate purposes. Ratings on the company's $2.9 billion existing credit facility will be withdrawn upon closing of the new facility. Pro forma for the transaction, Fairport, New York-based Constellation Brands would have about $4.2 billion of debt outstanding. CUMULUS MEDIA: Recognizes Termination Cost in Amended 10-Q ---------------------------------------------------------- Cumulus Media Inc. delivered its amended annual report on Form 10-Q/A for the quarter ended June 30, 2005, to the Securities and Exchange Commission on Nov. 9, 2005. Cumulus Media restated its second-quarter final statements to recognize a non-cash contract termination charge to account for payments totaling $14.4 million made by Katz Media Group, Inc., to Interep National Radio Sales, Inc. Contract Termination Cost During the three months ended June 30, 2005, the Company was released from its pre-existing national advertising sales agency contract with Interep and engaged Katz as its new national advertising sales agent. In connection with the Company's release from the Interep contract, Katz agreed to pay Interep $14.4 million in twenty-five consecutive equal monthly installments commencing May 16, 2005. No payments were or will be made by the Company to Interep in connection with the termination of the contract. As the Katz Payment appeared to create no obligation and no cash outlay for the Company, management did not originally believe that it triggered an accounting event for the Company. Accordingly, the Company's financial statements for the quarterly period ended June 30, 2005, as originally filed on Aug. 9, 2005, did not reflect any effect of the Katz Payment. However, based on the Company's subsequent reconsideration of the accounting treatment of the transaction, the Company now believes that it should have recognized a second quarter non-cash contract termination cost charge and related liability during the second quarter to account for payments totaling $14.4 million made by Katz to Interep. Further, since Katz will pay the contract termination cost, the Company believes the payment should be accounted for as consideration received from a vendor and recorded as an adjustment to the cost of sales services provided by Katz over the life of the Katz contract. Accordingly, the Company has corrected its accounting to recognize a non-cash contract termination charge and liability as of the termination date of the Interep contract. As a result of the restatement, Station Operating Expenses increased by $13.8 million for the three and six months ended June 30, 2005. Of the increase, $13.6 million was recorded as a contract termination cost and represents the fair value of the Katz Payment as of the contract termination date. A corresponding liability has been recorded to the accompanying Consolidated Balance Sheets to recognize the contract termination liability. In future periods and over the nine year life of the Katz contract, the Company will recognize a non-cash benefit equal to the original $13.6 million contract termination cost. This benefit will be recorded as a component of station operating expenses and represents an adjustment to the cost of Katz's sales services. An additional $0.2 million of commission expense was also recorded for the three months ended June 30, 2005 to properly allocate the Katz commission expense. The adjustments recorded had no impact on the Company's provision for income taxes during the three and six months ended June 30, 2005, as the deductible temporary difference is fully offset by a valuation allowance. Restated Financial Results Cumulus Media reported a $4,974,000 net loss on $87,440,000 of revenues for the three months ended June 30, 2005, in contrast to a $13,219,000 net loss on 86,314,000 or revenues for the comparable period in the prior year. Net revenues increased $1.1 million, or 1.3%, to $87.4 million for the three months ended June 30, 2005 from $86.3 million for the three months ended June 30, 2004. This increase was primarily attributable to a 5.2% increase in local advertising revenue versus the prior year, offset by a 17.7% decrease in national advertising revenue. The Company's balance sheet showed $1.7 billion of assets at June 30, 2005, and liabilities totaling $795.3 million. For the six months ended June 30, 2005, net cash provided by operating activities increased $5 million to $32.5 million from net cash provided by operating activities of $27.5 million for the six months ended June 30, 2004. For the six months ended June 30, 2005, net cash used in investing activities increased $73.6 million to $87.2 million from net cash used in investing activities of $13.5 million for the six months ended June 30, 2004. This increase was primarily attributable to the timing and funding of acquisitions and the purchase of certain intangible assets. The Company completed several acquisitions of radio stations during both the current and prior year six-month periods. For the six months ended June 30, 2005, net cash provided by financing activities totaled $25.4 million compared to net cash used in financing activities of $17.3 million during the six months ended June 30, 2004. Headquartered in Atlanta, Georgia, Cumulus Media Inc. -- http://www.cumulus.com/-- is the second largest radio company in the United States based on station count. Giving effect to the completion of all announced pending acquisitions and divestitures, Cumulus Media Inc. will own and operate 310 radio stations in 61 mid-size and smaller U.S. media markets. Cumulus Media Inc. shares are traded on the NASDAQ National Market under the symbol CMLS. * * * As reported in the Troubled Company Reporter on Nov. 2, 2005, Moody's Investors Service affirmed the existing debt ratings and stable rating outlook of Cumulus Media, Inc. following the company's announcement of the formation of Cumulus Media Partners, LLC with a group of private equity sponsors (Bain Capital, The Blackstone Group and Thomas H. Lee Partners) to acquire the radio broadcasting division of Susquehanna Pfaltzgraff Co. for approximately $1.2 billion. These ratings are affirmed: (i) a Ba2 on the $400 million senior secured revolving credit facility due 2012, (ii) a Ba2 on the $400 million senior secured term loan facility due 2012, and (iii) the company's Ba2 Corporate Family rating. Moody's said the outlook is stable. D.E. MANAGEMENT: Case Summary & 3 Largest Unsecured Creditors ------------------------------------------------------------- Debtor: D.E. Management, Inc. 4526 South Jupiter Drive Salt Lake City, Utah 84124 Bankruptcy Case No.: 05-80083 Chapter 11 Petition Date: November 14, 2005 Court: District of Utah (Salt Lake City) Debtor's Counsel: H. Delbert Welker, Esq. Law Offices of H.D. Welker 8160 Highland Drive, Suite 111 Sandy, Utah 84093 Tel: (801) 438-1099 Fax: (801) 733-4007 Estimated Assets: $1 Million to $10 Million Estimated Debts: $500,000 to $1 Million Debtor's 3 Largest Unsecured Creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ Jon McBride Judgment entered $123,509 c/o James Dunn January 16, 2003 1108 West South Jordan Parkway Suite 1A South Jordan, Utah 84095 Wholesale Flooring Materials provided $8,350 c/o Richard Cannon 389 North University Avenue Provo, Utah 84601 Ready Mix Concrete Materials provided $1,200 67 East 8000 South Midvale, Utah 84047 DELPHI CORP: Non-Hourly Retirees Submit Candidates for Committee ---------------------------------------------------------------- Daniel D. Doyle, Esq., at Spencer Fans Britt & Browne LLP, in St. Louis, Missouri, relates that thousands of retirees and their spouses and dependents receive health, life and disability benefits pursuant to plans maintained by Delphi Corporation and its debtor-affiliates prior to the Petition Date, including benefits to early retirees to bridge them to Medicare age and reimbursement accounts for Medicare-eligible retirees. These health, life and disability benefits constitute "retiree benefits" for purposes of Section 1114 of the Bankruptcy Code. Michael Beard, Russel Detwiler, Floyd Jones, and John McGrath don't receive retiree benefits pursuant to a collective bargaining agreement. The Non-hourly Retirees have previously sought reconsideration of the Court's first-day order granting the Debtors' request to appoint labor unions as authorized representatives of union retirees and, in the alternative, to establish a retirees committee composed only of union retirees. The Non-hourly Retirees argued that: (i) the Debtors should have no role in selecting members of the Retirees Committee should the unions fail to elect to represent union retirees under Section 1114(c) of the Bankruptcy Code; (ii) notice to salaried retirees was inadequate; and (iii) non-hourly retirees should serve on the Retirees Committee because their benefits will be affected. The Non-hourly Retirees' request is still pending. The Non-hourly Retirees inform the Court that the Debtors had $10,400,000,000 in unfunded retiree benefit liabilities at the end of 2004. The Non-hourly Retirees attest that none of them has had gross income of $250,000 or more during the 12 months preceding the Petition Date, or will demonstrate to the Court that they could not obtain comparable replacement coverage on the day prior to the Petition Date. By this motion, the Non-hourly Retirees ask the Court to appoint an Official Committee of Retirees, which will serve as the sole authorized representative under Section 1114 of the Bankruptcy Code of those persons receiving any retiree benefits not covered by the Debtors' collective bargaining agreements. The four Non-hourly Retirees who are willing to serve on the Retirees Committee are: 1. Michael Beard 704 Ingraham Haines City, FL 33844 2. Russell Detwiler 770 Riverwalk Circle Corunna, MI 48817 3. Floyd W. Jones 1139 Risecliff Grand Blanc, MI 48439 4. John M. McGrath 578 North Lakeview Drive Hale, MI 48739 "A Retiree Committee composed of non-hourly retirees appropriately should be established now, rather than on the Debtors' strategic timetable for modifying or eliminating those benefits later in the case," Mr. Doyle asserts. "Establishing a Committee now would be more efficient tha[n] awaiting the Debtors' later rush to modify retiree benefits, with the Retirees Committee similarly rushing to hire professionals, gauge the adequacy of and review [the Debtors'] financial disclosures, and ensure compliance with section 1114(f) procedures." Headquartered in Troy, Michigan, Delphi Corporation -- http://www.delphi.com/-- is the single largest global supplier of vehicle electronics, transportation components, integrated systems and modules, and other electronic technology. The Company's technology and products are present in more than 75 million vehicles on the road worldwide. The Company filed for chapter 11 protection on Oct. 8, 2005 (Bankr. S.D.N.Y. Lead Case No. 05-44481). John Wm. Butler Jr., Esq., John K. Lyons, Esq., and Ron E. Meisler, Esq., at Skadden, Arps, Slate, Meagher & Flom LLP, represents the Debtors in their restructuring efforts. As of Aug. 31, 2005, the Debtors' balance sheet showed $17,098,734,530 in total assets and $22,166,280,476 in total debts. (Delphi Bankruptcy News, Issue No. 8; Bankruptcy Creditors' Service, Inc., 215/945-7000) DELPHI CORP: Gets Final Order on Amended Reclamation Protocol ------------------------------------------------------------- Delphi Corporation and its debtor-affiliates expect to receive numerous reclamation claims pursuant to Section 546(c) of the Bankruptcy Code demanding that the Debtors return certain goods purportedly delivered to the Debtors on or prior to the Petition Date. Under Section 546(c)(2) of the Bankruptcy Code, the court may deny reclamation to a seller of goods with a statutory or common law right of reclamation if the court grants the Seller's claim an administrative expense priority pursuant to Section 503(b) of the Bankruptcy Code. Accordingly, the Debtors ask the U.S. Bankruptcy Court for the Southern District of New York to grant administrative treatment to the valid claim of any Seller: (i) who timely demands in writing reclamation of Goods pursuant to Section 546(c)(1) of the Bankruptcy Code and Section 2-702 of the Uniform Commercial Code as enacted under applicable state law, (ii) whose Goods the Debtors have accepted for delivery, (iii) who specifically identifies the Goods to be reclaimed and thus proves the validity and amount of its reclamation claim, and (iv) whose Goods the Debtors do not agree to make available for pick-up by the Seller. The Debtors sought to adopt a uniform procedure for determining and settling all valid Reclamation Claims so that litigation regarding Reclamation Claims does not interfere with their reorganization efforts. Because of the objections submitted by the Unsecured Creditors Committee to the previous Reclamation Procedures submitted by the Debtors and approved by the Court, the Debtors submitted an Amended Reclamation Procedures. * * * On a final basis, The Honorable Robert D. Drain of the Southern District of New York Bankruptcy Court authorizes the Debtors to resolve Reclamation Claims in accordance with these Amended Reclamation Procedures: A. Reclamation Demands (1) All Sellers seeking to reclaim Goods from the Debtors will be required to submit a written demand. (2) The Reclamation Demand must identify with specificity the goods for which reclamation is sought and the basis for the Reclamation Claim. (3) Any Seller who fails to timely submit a Reclamation Demand pursuant to Section 546 of the Bankruptcy Code will be deemed to have waived its right to payment on any purported Reclamation Claim. B. The Statement of Reclamation (1) Within 90 days after the Petition Date or receipt of a timely Reclamation Demand, whichever is later, the Debtors will provide the Seller with a copy of the Reclamation Order and a statement of reclamation. (2) The Reclamation Statement will set forth the extent and basis, if any, on which the Debtors believe the underlying Reclamation Claim is not legally valid. In addition, the Statement will identify any defenses that the Debtors choose to reserve, notwithstanding any payment of the Reconciled Reclamation Claim. (3) Sellers who are in agreement with the Reconciled Reclamation Claim as contained in the Reclamation Statement may indicate the assent on the Statement of Reclamation and return the Statement to the Debtors' representative as set forth in the Statement, with copies to: Skadden, Arps, Slate, Meager & Flom LLP 333 West Wacker Drive, Suite 2100 Chicago, Illinois 60606 Att'n: John K. Lyons, Esq. Allison Verderber Herriott, Esq. within 60 days after the date of receipt of the Statement of Reclamation. (4) Sellers who are in disagreement with the Reconciled Reclamation Claim as contained in the Reclamation Statement must indicate the dissent on the Reclamation Statement and return the Statement by the Reconciliation Deadline. A returned Reclamation Statement must be accompanied by: (i) a copy of the Reclamation Demand together with any evidence of the date the Reclamation Demand was sent and received; (ii) the identity of the Debtor that ordered the products and the identity of the Seller from whom the Goods were ordered; (iii) any evidence demonstrating when the Goods were shipped and received; (iv) copies of the Debtor's and Seller's purchase orders, invoices, and proofs of delivery together with a description of the Goods shipped; and (v) a statement identifying which information on the Debtors' Reclamation Statement is incorrect, specifying the correct information and stating any legal basis for the objection. (5) The failure of a Dissenting Seller to materially comply with the requirements for returning Reclamation Statements will constitute a waiver of the Dissenting Seller's right to object to the proposed treatment and allowed amount of the Reclamation Claim unless the Court orders otherwise. (6) Any Seller who fails to return the Reclamation Statement by the Reconciliation Deadline or who returns the Reclamation Statement by the Reconciliation Deadline but fails to indicate assent or dissent will be deemed to have assented to the Reconciled Reclamation Claim. C. Fixing the Amount of the Reclamation Claim (1) The Reclamation Claims of: (i) all Sellers who return the Reclamation Statement by the Reconciliation Deadline and indicate their assent to the Reconciled Reclamation Claim; (ii) all Sellers who fail to return the Reclamation Statement by the Reconciliation Deadline; and (iii) all Sellers who return the Reclamation Statement by the Reconciliation Deadline but who fail to indicate either assent or dissent, will be deemed an Allowed Reclamation Claim in the amount of the Reconciled Reclamation Claim. (2) The Debtors are authorized to negotiate with all Dissenting Sellers and to adjust the Reconciled Reclamation Claim either upward or downward to reach an agreement regarding the Dissenting Seller's Reclamation Claim. The Debtors are also authorized to include any Reserved Defenses as part of any agreement. In the event the Debtors and a Dissenting Seller are able to settle on the amount or treatment of the Dissenting Seller's Reclamation Claim, the Reclamation Claim will be deemed an Allowed Reclamation Claim in the settled amount. (3) In the event that no consensual resolution of the Dissenting Seller's Reclamation Demand is reached within 60 days of the Reconciliation Deadline, the Debtors will file a motion for determination of the Dissenting Seller's Reclamation Claim and set the motion for hearing at the next regularly scheduled omnibus hearing occurring more than 20 days after the filing of the motion for determination, unless another hearing date is agreed to by the parties or ordered by the Court. The Dissenting Seller's Reclamation Claim, if any, will be deemed an Allowed Reclamation Claim as fixed by the Court in the Determination Hearing or as agreed to by the Debtors and the Dissenting Seller prior to a determination by the Court in the Determination Hearing. D. Treatment of Allowed Reclamation Claims (1) The Debtors may at any point satisfy in full any Reclamation Claim or Allowed Reclamation Claim by making the Goods at issue available for pick-up by the Seller or Dissenting Seller. (2) All Allowed Reclamation Claims for which the Debtors choose not to make the Goods available for pick-up will, subject to the review procedures with the Creditors Committee, be paid in full as an administrative expense at any time during the Debtors' cases in their sole discretion or pursuant to a confirmed plan of reorganization, in either case only if and to the extent that the allowed reclamation claims constitute administrative expenses under applicable law. Prior to the Debtors' return of any goods in respect of any Reclamation Claim or the Debtors' acceptance or agreement to the allowance of or the payment of any Reclamation Claim, the Debtors will as promptly as reasonably practicable provide the professionals to the Creditors Committee with a "Reclamation Report," the first version of which will cover at least 75% of the face value of all Reclamation Claims asserted against the Debtors and later versions of which will also cover additional Reclamation Claims as is reasonably practicable. Each Reclamation Report will include: (a) a list of each reclamation vendor asserting a Reclamation Claim; (b) a summary of the assertions of each reclamation vendor and the amount of each Reclamation Claim; (c) the Debtors' legal analysis of, and position with respect to, any legal issues that relate to the validity and allowability of all or any material portion of the Reclamation Claims; (d) the Debtors' legal analysis of, and position with respect to, any legal issues that relate specifically to one or more Reclamation Claims; and (e) the actions, including allowance or payment of a Reclamation Claim and any return of goods subject to a Reclamation Claim, that the Debtors propose to take with respect to each Reclamation Claim. The Creditors Committee may file a written objection to all or any portion of a Reclamation Report within 10 business days after its receipt of that Reclamation Report or the later time as the Debtors and the Creditors Committee will agree on. Objections will be set for hearing for the next applicable monthly omnibus hearing and noticed by the Creditors Committee, both in accordance with the Case Management Order. If the Creditors Committee does not timely object to a particular Reclamation Report, the Debtors will be entitled to take the actions set forth in the Reclamation Report. If the Creditors Committee files an Objection, the Debtors will not take any action with respect to the Reclamation Claims covered by the Objection to the Reclamation Report except in accordance with a Court order and will be entitled to take the action set forth in the Reclamation Report with respect to the Reclamation Claims not covered by the Objection. All adversary proceedings, except those proceedings brought by the Debtors in accordance with the Reclamation Procedures, in their Chapter 11 cases relating to Reclamation Claims, whether currently pending or initiated in the future, will be stayed, and the claims asserted therein will be subject to the Reclamation Procedures. Vendors will have administrative expense priority status for those undisputed obligations arising from shipments of goods received and accepted by the Debtors on or after the Petition Date. To the extent necessary or appropriate, the Debtors will seek Court approval of any settlements and compromises with trade vendors with respect to payments of reclamation claims. Headquartered in Troy, Michigan, Delphi Corporation -- http://www.delphi.com/-- is the single largest global supplier of vehicle electronics, transportation components, integrated systems and modules, and other electronic technology. The Company's technology and products are present in more than 75 million vehicles on the road worldwide. The Company filed for chapter 11 protection on Oct. 8, 2005 (Bankr. S.D.N.Y. Lead Case No. 05-44481). John Wm. Butler Jr., Esq., John K. Lyons, Esq., and Ron E. Meisler, Esq., at Skadden, Arps, Slate, Meagher & Flom LLP, represents the Debtors in their restructuring efforts. As of Aug. 31, 2005, the Debtors' balance sheet showed $17,098,734,530 in total assets and $22,166,280,476 in total debts. (Delphi Bankruptcy News, Issue No. 8; Bankruptcy Creditors' Service, Inc., 215/945-7000) DELPHI CORP: Wants Until June 7 to Make Lease-Related Decisions --------------------------------------------------------------- Kayalyn A. Marafioti, Esq., at Skadden, Arps, Slate, Meagher & Flom LLP, in New York, relates that Delphi Corporation and its debtor-affiliates were lessors or lessees with respect to approximately 90 Real Property Leases when they filed for chapter 11 protection. As part of the Debtors' restructuring efforts, the Debtors are in the process of evaluating all of their owned and leased real estate, including the Real Property Leases. In particular, the Debtors are currently negotiating certain terms of their collective bargaining agreements, including, without limitation, operational restrictions, which prevent the Debtors from exiting non-strategic, non-profitable operations and restrict the Debtors' ability to permanently lay off idled workers for whom the Debtors must provide space during the working hours. Since a large number of the Debtors' Real Property Leases are affected by these terms, the Debtors are yet unable to determine which leases should be assumed and which should be rejected. Until these issues are resolved, Ms. Marafioti believes that it would be premature for the Debtors to assume or reject all of the Real Property Leases. "If the period, under section 365(d)(4) the Bankruptcy Code, is not extended beyond December 7, 2005, the Debtors may be compelled, prematurely, to assume substantial, long-term liabilities under the Real Property Leases or forfeit benefits associated with some Real Property Leases to the detriment of the Debtors' ability to operate and preserve the going-concern value of their business for the benefit of all creditors and other parties-in-interest." Moreover, through the reorganization process, the Debtors intend to achieve competitiveness for Delphi's core U.S. operations by realigning the Company's global product portfolio and manufacturing footprint to preserve the Debtors' core businesses. These determinations, Ms. Marafioti says, will affect the Debtors' evaluation of which of their Real Property Leases to assume and which to reject. "The Debtors are striving to meet these goals and emerge from chapter 11 by early to mid-2007." Accordingly, the Debtors ask the U.S. Bankruptcy Court for the Southern District of New York to extend the date by which they may assume or reject unexpired nonresidential real property leases to and including June 7, 2007, without prejudice to their right to seek a further extension of the deadline and without prejudice to a lessor's right to seek to shorten the deadline. Headquartered in Troy, Michigan, Delphi Corporation -- http://www.delphi.com/-- is the single largest global supplier of vehicle electronics, transportation components, integrated systems and modules, and other electronic technology. The Company's technology and products are present in more than 75 million vehicles on the road worldwide. The Company filed for chapter 11 protection on Oct. 8, 2005 (Bankr. S.D.N.Y. Lead Case No. 05-44481). John Wm. Butler Jr., Esq., John K. Lyons, Esq., and Ron E. Meisler, Esq., at Skadden, Arps, Slate, Meagher & Flom LLP, represents the Debtors in their restructuring efforts. As of Aug. 31, 2005, the Debtors' balance sheet showed $17,098,734,530 in total assets and $22,166,280,476 in total debts. (Delphi Bankruptcy News, Issue No. 8; Bankruptcy Creditors' Service, Inc., 215/945-7000) DELTAGEN INC: Court Confirms Joint Plan of Reorganization --------------------------------------------------------- The Honorable Dennis Montali of the U.S. Bankruptcy Court for the Northern District of California in San Francisco confirmed on November 14, the Joint Plan of Reorganization filed by Deltagen, Inc., and Deltagen Proteomics, Inc. Judge Montali determined that the Plan satisfies the 13 standards for confirmation enumerated in Section 1129(a) of the Bankruptcy Code. As reported in the Troubled Company Reporter, the Debtors' Joint Plan effectuates a reorganization of Deltagen and the liquidation of Deltagen Proteomics. Following confirmation, Deltagen will emerge from bankruptcy as a reorganized company and will continue to conduct business as a tool and service vendor of knockout mouse data and materials. Deltagen anticipates paying its creditors in full on or after the Effective Date of the Plan out of its existing Cash. Deltagen's shareholders will retain their interests in the Reorganized Debtor. The Plan provides for the immediate liquidation of DPI and its separate assets and the distribution of the net proceeds to DPI's separate creditors. DPI will then dissolve under applicable non-bankruptcy law. The interests in DPI, which are currently held solely by Deltagen, will be extinguished. Terms of the Plan Creditor Class Amount of Claims Projected Recovery -------------- ---------------- ------------------ Priority Employee $50,000 100% Noteholders $300,000 100% Deltagen Unsecured Creditors $8,500,000 100% DPI Unsecured Creditors 850,000 2% Deltagen Interests Unimpaired DPI Interests Cancelled Deltagen Inc. provides essential data on the in vivo mammalian functional role of newly discovered genes. The Company and its debtor-affiliates filed for chapter 11 protection on June 27, 2003 (Bankr. N.D. Calif. Case No. 03-31906). Alan Talkington, Esq., and Frederick D. Holden, Esq., at Orrick, Herrington and Sutcliffe, and Henry C. Kevane, Esq., at Pachulski, Stang, Ziehl, Young, Jones & Weintraub, P.C., represent the Debtors. On Nov. 14, 2005, Judge Montali confirmed the Debtors' Joint Plan of Reorganization. EAST 44TH: Section 341(a) Creditors Meeting Moved to December 2 --------------------------------------------------------------- The United States Trustee for Region 2 will convene a meeting of East 44th Realty LLC 's creditors at 1:30 p.m., on Dec. 2, 2005, at 80 Broad Street, 2nd Floor in New York. This is the first meeting of creditors required under Section 341(a) of the U.S. Bankruptcy Code in all bankruptcy cases. The meeting was originally scheduled for September 23. All creditors are invited, but not required, to attend. This Meeting of Creditors offers the one opportunity in a bankruptcy proceeding for creditors to question a responsible office of the Debtor under oath about the company's financial affairs and operations that would be of interest to the general body of creditors. Headquartered in New York, East 44th Realty, LLC, is a tenant of a building located at 228-238 East 44th Street in Manhattan. The building is comprised of 164 residential units and three commercial spaces. The Debtor is the sub-lessor of the premises, collects rents from its subtenants and manages the premises. The Debtor is the tenant under a net-lease dated as of Dec. 9, 1960. The Debtor filed for chapter 11 protection on August 5, 2005 (Bankr. S.D.N.Y. Case No. 05-16167). Warren R. Graham, Esq., at Davidoff Malito & Hutcher LLP represents the Debtor in its restructuring efforts. When the Debtor filed for protection from its creditors, it listed $25,737,873 in assets and $13,128,560 in debts. ENRON CORP: Court Appoints Defendants' Committee & Liaison Counsel ------------------------------------------------------------------ Pursuant to the June 2005 Order consolidating adversary proceedings against Enron Corporation and its debtor-affiliates, the Hon. Arthur Gonzalez of the U.S. Bankruptcy Court for the Southern District of New York appoints certain individuals to constitute the initial Defendants' Committee. Papers filed with the Bankruptcy Court did not disclose the identity of the Committee members. The Court authorizes the Defendants' Committee, through its designated members, to propound any discovery demand, or to prosecute any discovery motion pursuant to Rule 26-37 of the Federal Rules of Civil Procedure, that could be propounded or prosecuted by any defendant in the Consolidate Adversary Proceedings. The Court makes it clear that all members of the Defendants' Committee will participate in the Committee at their own expense, without any cost sharing or reimbursement either of expenses incurred by their participation, unless otherwise ordered by the Court. The Court also directs the Defendants' Committee to designate a Liaison Counsel from among its members. The Liaison Counsel, Judge Gonzalez explains, will attend to ministerial duties as reasonably requested by the Defendants' Committee to assist in the coordination of its activities among the members of the Defendants' Committee and the Plaintiffs pursuant to the Consolidation Order. The Liaison Counsel will have no substantive, legal, or other obligations either to the members of the Defendants' Committee or to any of the defendants in the Proceedings. The role of the Liaison Counsel will be entirely ministerial. Judge Gonzalez appoints Ronald L. Glick, Esq., at Stevens & Lee, as the initial Liaison Counsel. 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. 162; Bankruptcy Creditors' Service, Inc., 15/945-7000) ENRON CORP: Committee Wants Court OK on Arthur Andersen Settlement ------------------------------------------------------------------ Enron Corporation, its debtor-affiliates and the Official Committee of Unsecured Creditors commenced an adversary proceeding against Arthur Andersen LLP to recover certain payments made by the Debtors to Andersen. On Nov. 29, 2004, the Court granted the Plaintiffs' request for partial summary judgment on their first claim for relief and directed the clerk of the Court to enter a final judgment on the First Claim against Andersen for $7,902,374. To stay execution of the Judgment pending appeal, Andersen posted an Irrevocable Standby Letter of Credit issued by LaSalle Bank N.A. totaling $8,771,885. On Dec. 7, 2004, Andersen filed a notice of appeal with the United States District Court for the Southern District of New York. To settle and compromise the claims asserted by the Debtors and the Creditors Committee against Andersen, the parties entered into a compromise and settlement agreement. The principal terms of the Settlement Agreement are: a. Enron will instruct LaSalle to transfer $7,750,000 to the account designated by the Debtors as a draw under the L/C and extinguish the balance of the L/C. b. Upon the Debtors' receipt of the $7,750,000, the Plaintiffs will be deemed to release, acquit, and forever discharge Andersen, its affiliates, employees, partners, agents, and all persons acting by or through Andersen in connection with the claims asserted in the first amended complaint in the Adversary Proceeding from and against all claims or actions under Sections 544, 547, 548, 549, 550 and 553 of the Bankruptcy Code and comparable state law. The Release will have no effect on and will not operate to release: -- any Texas Litigation Claims, whether asserted affirmatively or defensively in any forum; -- the defensive use, pursuant to Section 502(d), by the Plaintiffs of Avoidance Claims in response to any claims or causes of action that are or could be asserted by any Andersen Released Parties against the Plaintiffs; or -- any obligations created by the Settlement. c. Upon actual receipt by Enron of the Payment, Andersen will be deemed to also release, acquit, and forever discharge the Plaintiffs and their affiliates from all claims that were or could have been asserted in the Adversary Proceeding or in the Debtors' Chapter 11 cases. d. No Andersen Released Party will file any proof of claim in any of the Debtors' Chapter 11 cases in any way related to the payment of the Settlement Amount or any of the claims in the Adversary Proceeding. In the event any claim is filed, the Settlement Agreement will be a complete defense to that claim. e. Upon actual receipt by Enron of the payment called for by the Settlement Agreement, counsel for the Committee will file stipulations of dismissal with the Bankruptcy Court and the District Court. According to Douglas W. Henkin, Esq., at Milbank Tweed Hadley & McCloy LLP, in New York, the Creditors Committee and Enron, in entering into the Settlement, have considered the relative strength of the defenses asserted by Andersen and the cost, expense, and delay associated with further litigating the legal and factual issues implicated in the Adversary Proceeding, the outcome of which is uncertain. The Settlement Agreement is the product of arm's-length negotiations among the Debtors, the Committee, Enron, and Andersen, and represents the parties' good faith determination of the prospects of the Adversary Proceeding, Mr. Henkin attests. The Creditors Committee asks the Court to approve the Settlement Agreement as fair and reasonable. 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. 162; Bankruptcy Creditors' Service, Inc., 15/945-7000) ENRON CORP: Dresdner Holds $4.9 Million Allowed Unsecured Claim --------------------------------------------------------------- Enron Corp. affiliate Enron Credit Limited and Dresdner Bank AG were parties to various financial and energy agreements. In connection with the Agreements, Enron executed a guaranty in favor of Dresdner. On Oct. 4, 2002, Dresdner filed a $4,959,952 general unsecured claim -- Claim No. 6638 -- against Enron asserting the Guaranty and amounts allegedly owing by ECL to Dresdner under the Agreements. Enron objected to the Claim. In a Court-approved stipulation, the parties agree that Claim No. 6638 will be allowed as a Class 4 general unsecured claim against Enron for $4,959,952. Distributions on Claim No. 6638 will be made only in accordance with the Debtors' Chapter 11 Plan. The Claim Objection will be deemed withdrawn. 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. 162; Bankruptcy Creditors' Service, Inc., 15/945-7000) ENRON CORP: Inks Claims Settlement Pact with Sierra Pacific et al. ------------------------------------------------------------------ Enron Corp. reached an agreement on Nov. 16, 2005, to settle all civil and contractual claims between the company and certain of its subsidiaries and other parties related to electricity and natural gas transactions in the Western United States from 1997- 2003. These claims include those filed in proceedings with the Federal Energy Regulatory Commission and the U.S. Bankruptcy Court for the Southern District of New York. The parties entering into the settlement agreement with Enron are: * Nevada Power Company, * Sierra Pacific Power Company, * and Sierra Pacific Resources (Nevada Companies). "This settlement represents the latest in a series of significant claims that have been resolved in Enron's bankruptcy proceedings," said John Ray, Enron's Board Chairman. "We are pleased that this settlement enables us to collect additional value for the creditors, and, at the same time, resolve claims against the estate so that we can accelerate distributions to all creditors." In the settlement, as consideration of their mutual dismissal and release of claims against each other: (i) Enron will receive a $129 million termination payment to be made by the Nevada Companies arising under contracts for the sale of electricity that were terminated in 2002 and (ii) the Nevada Companies will receive a shared allowed unsecured bankruptcy claim of $126.5 million against Enron Power Marketing, Inc., an Enron subsidiary, which will entitle the Nevada Companies to receive distributions on such claim pursuant to Enron's confirmed Chapter 11 Plan of Reorganization. According to the claim recovery rate for EPMI under the Plan, the settlement produces a net value to Enron's creditors of $100.03 million. The settlement remains subject to the approval of the FERC and the Court. 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. ENTERGY NEW ORLEANS: BNY Balks at Critical Vendor Payments ---------------------------------------------------------- As previously reported, Entergy New Orleans, Inc., filed a Supplemental Motion seeking the U.S. Bankruptcy Court for the Eastern District of Louisiana's authority to pay an additional $7,870,792 to some of its prepetition vendors and contractors. The Bank of New York, as successor trustee pursuant to a Mortgage and Deed of Trust dated as of May 1, 1987, contends that the Debtor has not carried its burden of showing that the vendors listed on the supplemental list are in fact "critical vendors" entitled to preferential treatment. Clayton T. Hufft, Esq., at Heller, Draper, Hayden, Patrick and Horn, L.L.C., in Baton Rouge, Louisiana, asserts that for a debtor to be authorized to pay the prepetition claims held by its "critical vendors," it must first show that disfavored creditors would be as well off with reorganization as with liquidation and the alleged vendors were in fact critical to the debtor and would cease deliveries or performing services if prepetition debts were left unpaid. According to Mr. Hufft, the Debtor did not explain why the additional vendors are indeed "critical vendors" necessary to preserve the value of its estate or that each of the particular vendors would in fact discontinue providing supplies or services to the Debtor if the prepetition amounts were not paid. Mr. Hufft notes that the supplemental list of "critical vendors" appears to contain vendors who are not critical to the reorganization or rehabilitation of the Debtor. For instance, the supplemental list contains prepetition charges of at least four hotels: (1) Hyatt Regency New Orleans - $284,888; (2) Radisson Hotel New Orleans Airport - $12,828; (3) Ramada Inn St. Rose - $96,177; and (4) Sheraton Baton Rouge - $14,752. "It is hard to imagine how six weeks after the filing of the case the four hotels are critical vendors unwilling to provide postpetition lodging on a cash basis on behalf of the Debtor when in fact the hotels did not evict the hotel guests immediately upon the filing," Mr. Hufft argues. Moreover, Mr. Hufft points out that the asserted critical vendor list contains multi-national and public entities that obviously have been unsecured creditors in other cases where they continued to supply services postpetition. Given the breadth of the vendor list submitted, Mr. Hufft says that it is hard to envision that any entity that was a prepetition trade creditor of the Debtor and who still supplies postpetition services is not a "critical vendor" under the Debtor's overly broad interpretation of the term. Furthermore, Mr. Hufft continues, the late filing of the request also suggests that vendors on the supplemental list would not discontinue their performance of services or delivery of goods to the Debtor if they were not currently paid their prepetition claims. These vendors have most likely continued to provide goods and services to the Debtor since the Petition Date, without receiving payment of their prepetition claims, all while being paid for their postpetition services. Accordingly, the Bank of New York asks the Court to deny the Supplemental Motion. Headquartered in Baton Rouge, Louisiana, Entergy New Orleans Inc. -- http://www.entergy-neworleans.com/-- is a wholly owned subsidiary of Entergy Corporation. Entergy New Orleans provides electric and natural gas service to approximately 190,000 electric and 147,000 gas customers within the city of New Orleans. Entergy New Orleans is the smallest of Entergy Corporation's five utility companies and represents about 7% of the consolidated revenues and 3% of its consolidated earnings in 2004. Neither Entergy Corporation nor any of Entergy's other utility and non-utility subsidiaries were included in Entergy New Orleans' bankruptcy filing. Entergy New Orleans filed for chapter 11 protection on Sept. 23, 2005 (Bankr. E.D. La. Case No. 05-17697). Elizabeth J. Futrell, Esq., and R. Partick Vance, Esq., at Jones, Walker, Waechter, Poitevent, Carrere & Denegre, L.L.P., represent the Debtor in its restructuring efforts. When the Debtor filed for protection from its creditors, it listed total assets of $703,197,000 and total debts of $610,421,000. (Entergy New Orleans Bankruptcy News, Issue No. 5; Bankruptcy Creditors' Service, Inc., 215/945-7000) ENTERGY NEW ORLEANS: Wants to Continue Cash Management System ------------------------------------------------------------- Entergy New Orleans, Inc., participates in a cash management system provided by Entergy Services, Inc., which permits ENOI to operate efficiently and achieve economies of scale, Nan Roberts Eitel, Esq., at Jones, Walker, Waechter, Poitevent, Carrere & Denegre, L.L.P., in New Orleans, Louisiana, relates. According to Ms. Eitel, the Debtor's cash management system has been refined to: (a) provide an efficient method of collecting, transferring and distributing funds; and (b) establish procedures and controls necessary to account for funds and transactions in an accurate and timely manner. Ms. Eitel tells the U.S. Bankruptcy Court for the Eastern District of Louisiana that discontinuing or altering the system would greatly increase the Debtor's administrative costs to the detriment of its estate and its creditors as well as interfere with previously obtained regulatory approvals. In this regard, the Debtor seeks the Honorable Jerry A. Brown of the Bankruptcy Court for the Eastern District of Louisiana's authority to continue using its Cash Management System. Ms. Eitel states that the Debtor has made only two changes to its cash management system postpetition. The first change, Ms. Eitel recounts, was made so that the Debtor avoids obtaining unauthorized credit from other Entergy affiliates as part of the Entergy System Money Pool. "ENOI previously did not fund checks for payment until after they were presented for payment to an ESI account," Ms. Eitel reveals. "This resulted in short term extensions of credit to ENOI on a daily basis until the ESI 'one wire' and 'one check' accounts were reconciled. Now, ENOI funds checks or wires as they are written or transmitted, and this avoids short-term extensions of credit to ENOI." Ms. Eitel explains that the second change was made to provide the Debtor with its own payroll account as debtor-in-possession rather than sharing a payroll account with Entergy Louisiana, Inc., as it did prepetition. The Debtor also changed the name on its General Fund account, and its checks on that account, to reflect its status as debtor-in-possession, but the account otherwise remains unchanged, Ms. Eitel adds. Headquartered in Baton Rouge, Louisiana, Entergy New Orleans Inc. -- http://www.entergy-neworleans.com/-- is a wholly owned subsidiary of Entergy Corporation. Entergy New Orleans provides electric and natural gas service to approximately 190,000 electric and 147,000 gas customers within the city of New Orleans. Entergy New Orleans is the smallest of Entergy Corporation's five utility companies and represents about 7% of the consolidated revenues and 3% of its consolidated earnings in 2004. Neither Entergy Corporation nor any of Entergy's other utility and non-utility subsidiaries were included in Entergy New Orleans' bankruptcy filing. Entergy New Orleans filed for chapter 11 protection on Sept. 23, 2005 (Bankr. E.D. La. Case No. 05-17697). Elizabeth J. Futrell, Esq., and R. Partick Vance, Esq., at Jones, Walker, Waechter, Poitevent, Carrere & Denegre, L.L.P., represent the Debtor in its restructuring efforts. When the Debtor filed for protection from its creditors, it listed total assets of $703,197,000 and total debts of $610,421,000. (Entergy New Orleans Bankruptcy News, Issue No. 5; Bankruptcy Creditors' Service, Inc., 215/945-7000) ENTERGY NEW ORLEANS: Wants to Maintain Existing Bank Accounts ------------------------------------------------------------- To supervise the administration of a Chapter 11 case, the Office of the United States Trustee established operating guidelines for debtors that operate their businesses. The Operating Guidelines require Chapter 11 debtors to, among other things: (i) close all existing bank accounts and open new debtor-in-possession bank accounts; and (ii) establish a separate "tax trust account" for all estate amounts required to pay certain taxes, like payroll and sales and use taxes. The requirements are designed to provide a clear line of demarcation between prepetition and postpetition transactions and operations, and prevent the inadvertent postpetition payment of prepetition claims. Nan Roberts Eitel, Esq., at Jones, Walker, Waechter, Poitevent, Carrere & Denegre, L.L.P., in New Orleans, Louisiana, tells the Honorable Jerry A. Brown of the Bankruptcy Court for the Eastern District of Louisiana that Entergy New Orleans, Inc.'s bank accounts fall into three general categories: (a) 12 accounts maintained in the Debtor's name; (b) Entergy Services, Inc., accounts where it acts as the Debtor's agent; and (c) ESI "flow-through" accounts. Ms. Eitel discloses that all of the Debtor's accounts are maintained at depository institutions approved by the Office of the United States Trustee for Region 5. All ESI accounts are also maintained at a U.S. Trustee-approved depository institution except for one account that is maintained at Federated Investors. ESI uses Federated Investors to invest excess cash in accounts that it manages as agent for the Entergy operating companies, including the Debtor, Ms. Eitel explains. However, she notes that since the Petition date, the Debtor has had no funds in the Federated Investors Account. By this motion, the Debtor seeks the U.S. Bankruptcy Court for the Eastern District of Louisiana's authority to maintain its existing bank accounts. The Debtor believes that continuing the Accounts in the current form will lead to a smooth and orderly transition into its Chapter 11 case. Charts summarizing the Debtor's Accounts and the ESI Accounts are available for free at: http://bankrupt.com/misc/cs_ENOIandESIaccounts.pdf Ms. Eitel further tells the Court that the Debtor has established a methodology to distinguish between the Debtor's prepetition and postpetition liabilities so that prepetition checks, drafts, wire transfers, or other forms of tender that have not yet cleared the relevant Disbursement Accounts as of the Petition Date will not be honored, unless authorized by the Court or the Bankruptcy Code. Moreover, Ms. Eitel says that since the Petition Date, any drafts that have been presented for payment on either the Debtor's account or on ESI's account for the Debtor's liability or debt have been placed on an automatic hold. ESI employees evaluate whether each draft is: -- for a prepetition or postpetition obligation; -- an approved critical vendor payment; -- other authorized payment; or -- payment for which Court authorization has been sought. ESI employees then either approve or disapprove the payment of the draft accordingly. "This evaluation of drafts will continue until ESI is assured that no unapproved prepetition drafts are presented for payment," says Ms. Eitel. Headquartered in Baton Rouge, Louisiana, Entergy New Orleans Inc. -- http://www.entergy-neworleans.com/-- is a wholly owned subsidiary of Entergy Corporation. Entergy New Orleans provides electric and natural gas service to approximately 190,000 electric and 147,000 gas customers within the city of New Orleans. Entergy New Orleans is the smallest of Entergy Corporation's five utility companies and represents about 7% of the consolidated revenues and 3% of its consolidated earnings in 2004. Neither Entergy Corporation nor any of Entergy's other utility and non-utility subsidiaries were included in Entergy New Orleans' bankruptcy filing. Entergy New Orleans filed for chapter 11 protection on Sept. 23, 2005 (Bankr. E.D. La. Case No. 05-17697). Elizabeth J. Futrell, Esq., and R. Partick Vance, Esq., at Jones, Walker, Waechter, Poitevent, Carrere & Denegre, L.L.P., represent the Debtor in its restructuring efforts. When the Debtor filed for protection from its creditors, it listed total assets of $703,197,000 and total debts of $610,421,000. (Entergy New Orleans Bankruptcy News, Issue No. 5; Bankruptcy Creditors' Service, Inc., 215/945-7000) EXIDE TECHNOLOGIES: Likely Credit Default Cues Going Concern Doubt ------------------------------------------------------------------ Exide Technologies delivered its quarterly report on Form 10-Q for the quarter ending September 30, 2005, to the Securities and Exchange Commission on Nov. 9, 2005. Net loss for the second quarter of fiscal 2006 was $33.02 million versus the second quarter of fiscal 2005 $17.1 million net loss. Second quarter fiscal 2006 results include: * $6.64 million restructuring costs; * $1.71 million continuing reorganization items in connection with the bankruptcy; and * a $378,000 loss on revaluation of Warrants. Second quarter fiscal 2005 results include: * $4.83 million restructuring costs; * $1.72 million reorganization items in connection with the bankruptcy of; and * $12.06 million gain on revaluation of Warrants. Net sales were $686.48 million in the second quarter of fiscal 2006 versus $637.6 million in the second quarter of fiscal 2005. Gross profit was $103,898 or 15% of net sales in the second quarter of fiscal 2006 versus $95,012 or 15% of net sales in the second quarter of fiscal 2005. Expenses were $135,463 in the second quarter of fiscal 2006 versus $113,249 in the second quarter of fiscal 2005. At Sept. 30, 2005, the Company's balance sheet shows $2.14 billion in total assets, $1.79 billion in total debts, and $335.33 million in equity. For each of the last three quarters in fiscal 2005, the Company was not in compliance with one or more of its debt covenants of its Senior Secured Credit Facility. In each case, the Company was either able to obtain a waiver or negotiate an amendment to the Credit Agreement to achieve compliance. As of Nov. 9, 2005, the Company believes, based upon its financial forecast and plans, that it will comply with the Credit Agreement covenants for at least through Sept. 30, 2006. It should be noted, however, that in the past management has had difficulty in accurately predicting the Company's performance and covenant compliance. This uncertainty with respect to the Company's ability to maintain compliance with its financial covenants throughout fiscal 2006 prompted PricewaterhouseCoopers LLP, the Company's auditor, to expressed substantial doubt about the Company's ability to continue as going concern in PwC's June 28, 2005, audit report, after it audited the Company's financial results for the fiscal year ending March 31, 2005. Failure to comply with the Credit Agreement covenants, without waiver, would result in further defaults under the Credit Agreement. Should the Company be in default, it is not permitted to borrow under the Credit Agreement, which would have a very negative effect on liquidity. Although the Company has been able to obtain waivers of prior defaults, there can be no assurance that it can do so in the future or, if it can, what the cost and terms of obtaining such waivers would be. Future defaults would, if not waived, allow the Credit Agreement lenders to accelerate the loans and declare all amounts due and payable. Any such acceleration would also result in a default under the Indentures for the Company's notes and their potential acceleration. A full-text copy of the regulatory filing is available at no charge at http://ResearchArchives.com/t/s?2e7 Headquartered in Princeton, New Jersey, Exide Technologies -- http://www.exide.com/-- is the worldwide leading manufacturer and distributor of lead acid batteries and other related electrical energy storage products. The Company filed for chapter 11 protection on Apr. 14, 2002 (Bankr. Del. Case No. 02-11125). Matthew N. Kleiman, Esq., and Kirk A. Kennedy, Esq., at Kirkland & Ellis, represent the Debtors in their restructuring efforts. Exide's confirmed chapter 11 Plan took effect on May 5, 2004. On April 14, 2002, the Debtors listed $2,073,238,000 in assets and $2,524,448,000 in debts. * * * As reported in the Troubled Company Reporter on July 8, 2005, Standard & Poor's Ratings Services lowered its corporate credit rating on Exide Technologies to 'CCC+' from 'B-', and removed the rating from CreditWatch with negative implications, where it was placed on May 17, 2005. "The rating action reflects Exide's weak earnings and cash flow, which have resulted in very high debt leverage, thin liquidity, and poor credit statistics," said Standard & Poor's credit analyst Martin King. Lawrenceville, New Jersey-based Exide, a manufacturer of automotive and industrial batteries, has total debt of about $740 million, and underfunded post-employment benefit liabilities of $380 million. FINANCIAL ASSET: Fitch Keeps Junk Rating on Class B4 Certificate ---------------------------------------------------------------- Fitch Ratings has taken rating actions on: Financial Asset Securitization, Inc., series 1997-NAMC2 -- Class A affirmed at 'AAA'; -- Class B1 affirmed at 'AAA'; -- Class B2 affirmed at 'AAA'; -- Class B3 affirmed at 'A'; -- Class B4 remains at 'CC'. The underlying collateral for all the transactions consists of conventional, fully amortizing 30-year fixed-rate mortgage loans secured by first liens on one- to four-family residential properties. The affirmations represent $3 million in outstanding principal. Credit enhancement for the affirmed classes has grown at least 10 times the original amounts. Further information regarding current delinquency, loss and credit enhancement statistics is available on the Fitch Ratings Web site at http://www.fitchratings.com/ FINOVA GROUP: 2005 3rd Qtr. Net Loss Raises Going Concern Opinion ----------------------------------------------------------------- The Finova Group, Inc., delivered its quarterly report on Form 10-Q for the quarter ending Sept. 30, 2005, to the Securities and Exchange Commission on Nov. 8, 2005. The Company reported that for the three months ended Sept. 30, 2005, it reported a net income loss of $37.2 million compared to net income of $23.1 million for the three months ended Sept. 30, 2004. In general, the decrease in net income was primarily attributable to the third quarter of 2005 containing a lower level of asset realization in excess of recorded carrying amounts. The Company realized a net loss on financial assets of $2.7 million for the three months ended Sept. 30, 2005, compared to a net gain of $33.5 million for the three months ended Sept. 30, 2004. The net loss during the third quarter of 2005 was primarily attributable to $10.4 million of net valuation markdowns within the Company's transportation leveraged lease portfolio. Because substantially all of the Company's assets are pledged to secure the obligations under the Intercompany Notes securing the Senior Notes, FINOVA's ability to obtain additional or alternate financing is severely restricted. Accordingly, FINOVA intends to rely on internally generated cash flows from the liquidation of its assets as its only meaningful source of liquidity. Going Concern Opinion The Company's independent public accountants, Ernst & Young LLP reports that as of Sept. 30, 2005, the Company has a substantial negative net worth. While FINOVA continues to pay its obligations as they become due, the ability of the Company to continue as a going concern is dependent upon many factors, particularly the ability of its borrowers to repay their obligations to FINOVA and the Company's ability to realize the value of its portfolio. Even if the Company is able to recover the book value of its assets, and there can be no assurance of the Company's ability to do so, the Company would not be able to repay the Senior Notes in their entirety at maturity in November 2009. Headquartered in Scottsdale, Arizona, The Finova Group, Inc., provides commercial financing to small and mid-sized businesses; other services include factoring, accounts receivable management, and equipment leasing. The firm has three segments: Commercial Finance, Specialty Finance, and Capital Markets. FINOVA targets such markets as transportation, wholesaling, communication, health care, and manufacturing. Loan write-offs had put the firm on shaky ground. The Company and its debtor-affiliates and subsidiaries filed for Chapter 11 protection on March 7, 2001 (U.S. Bankr. Del. 01-00697). Daniel J. DeFranceschi, Esq., at Richards, Layton & Finger, P.A., represents the Debtors. FINOVA has since emerged from Chapter 11 bankruptcy. Financial giants Berkshire Hathaway and Leucadia National Corporation (together doing business as Berkadia) own FINOVA through the almost $6 billion lent to the commercial finance company. At June 30, 2005, FINOVA Group's consolidated balance sheet showed $531.4 million in stockholders' deficit. FIRST HORIZON: S&P Affirms Low-B Ratings on 22 Cert. Classes ------------------------------------------------------------ Standard & Poor's Ratings Services affirmed its ratings on 101 classes of securities issued from 11 First Horizon Alternative Mortgage Pass-Through Trust transactions. The affirmations reflect stable credit support percentages, very low losses, and rapid prepayments. Credit enhancement is provided through a senior subordinate structure for each of the transactions. As of the October 2005 distribution date, serious delinquencies range from 0.00%, series 2004-AA2 and 2005-FA1, to 0.29%, series 2004-AA5. Cumulative realized losses are only found in series 2004-AA1, 0.07% and series 2004-AA3, 0.001%. The pools were initially composed of fixed- and adjustable-rate prime jumbo nonconforming mortgage loans secured by first and second liens on owner occupied one- to four-family dwellings. Ratings Affirmed First Horizon Alternative Mortgage Pass-Through Trust Mortgage Pass-thru Certs Series Class Rating ------ ----- ------ 2004-AA1 A-1, A-2, A-3 AAA 2004-AA1 B-1 AA 2004-AA1 B-2 A 2004-AA1 B-3 BBB 2004-AA1 B-4 BB 2004-AA1 B-5 B 2004-AA2 I-A-1, II-A-1 AAA 2004-AA2 B-1 AA 2004-AA2 B-2 A 2004-AA2 B-3 BBB 2004-AA2 B-4 BB 2004-AA2 B-5 B 2004-AA3 A-1, A-2, A-3 AAA 2004-AA3 B-1 AA 2004-AA3 B-2 A 2004-AA3 B-3 BBB 2004-AA3 B-4 BB 2004-AA3 B-5 B 2004-AA4 A-1 AAA 2004-AA4 B-1 AA 2004-AA4 B-2 A 2004-AA4 B-3 BBB 2004-AA4 B-4 BB 2004-AA4 B-5 B 2004-AA5 I-A-1, II-A-1, II-A-2 AAA 2004-AA5 B-1 AA 2004-AA5 B-2 A 2004-AA5 B-3 BBB 2004-AA5 B-4 BB 2004-AA5 B-5 B 2004-AA6 A-1, A-2, A-IO AAA 2004-AA6 B-1 AA 2004-AA6 B-2 A 2004-AA6 B-3 BBB 2004-AA6 B-4 BB 2004-AA6 B-5 B 2004-AA7 I-A-1, I-A-2, II-A-1, II-A-2 AAA 2004-AA7 B-1 AA 2004-AA7 B-2 A 2004-AA7 B-3 BBB 2004-AA7 B-4 BB 2004-AA7 B-5 B 2005-AA1 I-A-1, I-A-IO, II-A-1, II-A-2, II-A-IO AAA 2005-AA1 B-1 AA 2005-AA1 B-2 A 2005-AA1 B-3 BBB 2005-AA1 B-4 BB 2005-AA1 B-5 B 2004-FA1 I-A-1, I-A-PO, II-A-1, II-A-PO, III-A-1 AAA 2004-FA1 III-A-PO AAA 2004-FA1 B-1 AA 2004-FA1 B-2 A 2004-FA1 B-3 BBB 2004-FA1 B-4 BB 2004-FA1 B-5 B 2004-FA2 I-A-1, I-A-PO, II-A-1, II-A-PO, III-A-1 AAA 2004-FA2 III-A-PO AAA 2004-FA2 B-1 AA 2004-FA2 B-2 A 2004-FA2 B-3 BBB 2004-FA2 B-4 BB 2004-FA2 B-5 B 2005-FA1 I-A-1, I-A-2, I-A-3, I-A-4, I-A-5, I-A6 AAA 2005-FA1 I-A-7, I-A-PO, II-A-1, II-A-PO AAA 2005-FA1 B-1 AA 2005-FA1 B-2 A 2005-FA1 B-3 BBB 2005-FA1 B-4 BB 2005-FA1 B-5 B FLYI INC: Obtains Interim Order Restricting Stock Trading --------------------------------------------------------- As reported in the Troubled Company Reporter on Nov 8, 2005, FLYi, Inc., parent of low-fare airline Independence Air, reported that the Company and its subsidiaries including Independence Air, have filed, on Nov. 7, 2005, voluntary petitions for reorganization under Chapter 11 of the U.S. Bankruptcy Code in order to restructure the company's aircraft leases and other obligations to achieve necessary cost savings. In conjunction with the filing of the petitions, the Company filed a variety of "first day motions" to help ensure a smooth transition into the Chapter 11 reorganization case. Among the first day motions was one that would require notices from and restrict the transfer of FLYi's equity securities by or to any person or entity that beneficially owns or that would, after such transfer, beneficially own at least 2,200,000 shares of FLYi common stock. The Company sought this order in order to preserve to the fullest extent possible the flexibility to develop and implement a plan of reorganization that maximizes the use of their net operating losses for U.S. income tax purposes. On Nov. 10, 2005, the U.S. Bankruptcy Court for the District of Delawar entered an interim order approving, among other things, the notification and hearing procedures requested by the Company that must be satisfied before certain transfers of the Company's equity securities are deemed effective. Headquartered in Dulles, Virginia, FLYi, Inc., aka Atlantic Coast Airlines Holdings, Inc. -- http://www.flyi.com/-- is the parent of Independence Air Inc., a small airline based at Washington Dulles International Airport. The Debtor and its six affiliates filed for chapter 11 protection on Nov. 7, 2005 (Bankr. D. Del. Case Nos. 05-20011 through 05-20017). Brendan Linehan Shannon, Esq., M. Blake Cleary, Esq., and Matthew Barry Lunn, Esq., at Young, Conaway, Stargatt & Taylor, represent the Debtors in their restructuring efforts. As of Sept. 30, 2005, the Debtors listed assets totaling $378,500,000 and debts totaling $455,400,000. FLYI INC: Wants Court to Approve Uniform Bidding & Sale Procedures ------------------------------------------------------------------ Paul D. Leake, Esq., at Jones Day, in New York, reminds the U.S. Bankruptcy Court for the District of Delaware that FLYi, Inc. and its debtor-affiliates have taken significant steps in the 17 months since the commencement of independent operations to attempt to improve revenues, reduce costs and increase liquidity. The Debtors believe that the value of their estates will be maximized in a going concern transaction, whether pursuant to an investment proposal or a going concern sale proposal. At the same time, Mr. Leake says, the Debtors recognize that an investor or going concern purchaser may not materialize and that a sale of individual assets may maximize the value of their estates. Accordingly, the Debtors and their financial advisors have determined to pursue a multi-track strategy to be implemented -- the solicitation of bids for: (a) an investment in the Debtors' business sufficient to permit the Debtors to reorganize pursuant to a plan, (b) the sale of all or substantially all of the Debtors' business or assets as a going concern, or (c) a sale of select assets of the Debtors. "The Debtors see little benefit to an extended stay in chapter 11. The sooner an investor or purchaser can be located, the sooner the Debtors can undertake operational or other changes in chapter 11 to implement a transaction. The Debtors intend to diligently and expeditiously continue this process in [their] chapter 11 cases and request that the Court provide expedited hearing dates to improve the Bidding Procedures and related transactions. Additionally, given the costs of remaining in chapter 11, the Debtors believe that it would be in the best interests of their stakeholders to quickly conclude the process," Mr. Leake says. The Debtors propose to implement uniform bidding procedures designed to promote competitive bidding for investment or sale proposals with respect to their business and assets to maximize the value of their estates. The salient terms of Bidding Procedures are: (a) Parties seeking to become a qualified bidder and to submit a bid must deliver, among others, an executed confidentiality agreement, a written non-biding expression of interest, and written evidence of financial capacity to consummate an investment or sale transaction, by Dec. 1, 2005; (b) Bids must be delivered to: Miller Buckfire & Co., LLC 250 Park Avenue, 20th Floor New York, NY 10177 Attn: Lloyd A. Sprung with a copy to: Jones Day 222 East 41st Street New York, NY 10017-6702 Attn: Paul D. Leake, Esq. (c) The Debtors reserve the right to require Qualified Bidders to provide an earnest money deposit not to exceed $10,000,000; (d) Formal binding unconditional bids must be submitted no later than 5:00 p.m. (Eastern Standard Time) on Dec. 16, 2005, by Miller Buckfire and Jones Day; (e) The Debtors must file a motion seeking approval of an investment or sale proposal on or before December 9, 2005; and (f) If more than one Qualified Bid has been received, the Debtors will conduct an auction on January 3, 2006, at 10:00 a.m.; Miller Buckfire is preparing an informational package for all persons that have expressed an interest in submitting investment or sale proposals. If the Debtors enter into a stalking horse agreement with a bidder, the Debtors propose to provide bidding protections to that bidder. A full-text copy of the Proposed Bidding Procedures is available for free at http://ResearchArchives.com/t/s?2ec Headquartered in Dulles, Virginia, FLYi, Inc., aka Atlantic Coast Airlines Holdings, Inc. -- http://www.flyi.com/-- is the parent of Independence Air Inc., a small airline based at Washington Dulles International Airport. The Debtor and its six affiliates filed for chapter 11 protection on Nov. 7, 2005 (Bankr. D. Del. Case Nos. 05-20011 through 05-20017). Brendan Linehan Shannon, Esq., M. Blake Cleary, Esq., and Matthew Barry Lunn, Esq., at Young, Conaway, Stargatt & Taylor, represent the Debtors in their restructuring efforts. As of Sept. 30, 2005, the Debtors listed assets totaling $378,500,000 and debts totaling $455,400,000. (FLYi Bankruptcy News, Issue No. 2; Bankruptcy Creditors' Service, Inc., 215/945-7000) FRIENDLY ICE: Balance Sheet Upside Down by $105 Million at Oct. 2 ----------------------------------------------------------------- Friendly Ice Cream Corporation delivered its quarterly report on Form 10-Q for the third quarter and nine months ended Oct. 2, 2005, to the Securities and Exchange Commission on Nov. 9, 2005. Third Quarter Results The Company's net income for the three months ended Oct. 2, 2005, was $3.4 million, or $0.43 per share, compared to $3.5 million, or $.44 per share, reported for the three months ended Sept. 26, 2004. Comparable restaurant sales decreased 4% for company-operated restaurants and 2.6% for franchised restaurants for the quarter ended Oct. 2, 2005 compared to the quarter ended Sept. 26, 2004. This was the first decline in comparable sales for franchised restaurants since the first quarter of 2001. Total company revenues were $143.6 million in the third quarter of 2005, a decrease of $9.5 million, or 6.2%, as compared to total revenues of $153.1 million for the third quarter of 2004. Restaurant revenues decreased by $11.4 million, which was partially offset by a $1.7 million increase in foodservice revenues and a $0.2 million increase in franchise revenues. The re-franchising of 19 company-operated restaurants over the last fifteen months resulted in a $5.5 million decline in restaurant revenues when compared to the same quarter in the prior year. During the first three weeks of September 2005, the Company experienced double-digit declines in comparable company-operated restaurant revenues compared to the same period in 2004. The Company believes that higher gasoline prices, especially during the first three weeks of September 2005, may have had a negative impact on customer visits during all day-parts with the afternoon and evening snack periods experiencing the greatest declines. Nine-Month Results The Company's net income was $2.9 million or $0.37 per share, for the nine months ended Oct. 2, 2005, as compared to a net loss of $3.2 million or $0.42 per share, for the nine months ended Sept. 26, 2004. The Company had a working capital deficit of $2 million and $13.5 million as of Oct. 2, 2005 and Jan. 2, 2005, respectively. Friendly Ice Cream Corporation -- http://www.friendlys.com/-- is a vertically integrated restaurant company serving signature sandwiches, entrees and ice cream desserts in a friendly, family environment in 530 company and franchised restaurants throughout the Northeast. The company also manufactures ice cream, which is distributed through more than 4,500 supermarkets and other retail locations. With a 70-year operating history, Friendly's enjoys strong brand recognition and is currently remodeling its restaurants and introducing new products to grow its customer base. As of July 3, 2005, Friendly Ice Cream's equity deficit widened to $105,099,000 from a $105,026,000 deficit at Jan. 2, 2005. GEORGIA-PACIFIC: Moody's Reviews Ba1 Corporate Family Rating ------------------------------------------------------------ Moody's Investors Service placed Georgia-Pacific Corporation's long-term debt ratings on review for possible downgrade. The rating action follows the announcement that Koch Industries has agreed to purchase GP in a transaction that values the company at some $20 billion. With details of financing arrangements not yet known, the action anticipates the potential of material incremental debt to be serviced by GP's cash flow stream. Moody's review will clarify and assess: * plans with respect to establishing a capital structure; * dividend policy; * asset divestitures; * cost savings; * growth imperatives and acquisition parameters; * liquidity planning; and * details on how the businesses will be positioned and operated. Moody's expects the review to be completed within 60-to-90 days. At the same time, Moody's affirmed GP's Speculative Grade Liquidity Rating at SGL-2, indicating good liquidity. Ratings placed on review: Georgia-Pacific Corporation: * Corporate family rating: Ba1 * Senior unsecured: Ba2 Fort James Corporation: * Senior Unsecured: Ba1 G-P Canada Finance Company: * Backed senior unsecured: Ba2 Fort James Operating Company: * Backed senior unsecured: Ba1 Rating Affirmed: Georgia-Pacific Corporation: * Speculative Grade Liquidity Rating: SGL-2 Georgia-Pacific Corporation, headquartered in Atlanta, Georgia, is a global leader in tissue and other consumer products, and has significant operations in: * building products, * packaging, and * fine paper. GIBRALTAR INDUSTRIES: Moody's Rates $430 Million Debts at Low-Bs ---------------------------------------------------------------- Moody's Investors Service assigned to Gibraltar Industries Inc. Ba1 and Ba3 ratings for a $230 million proposed senior secured term loan B and $200 million proposed senior subordinated note offering, respectively. Moody's has also assigned Gibraltar Ba2 corporate family and SGL-1 speculative grade liquidity ratings. This is the first time Moody's has rated the company. The ratings are subject to the company's successful closing on its announced $240 million acquisition of Alabama Metal Industries Corporation -- AMICO, which will initially be funded by a bridge loan and the company's current revolving credit facility, and final documentation for the company's proposed amended credit facilities and senior subordinated notes. The rating outlook is stable. The Ba2 corporate family rating is supported by: * the company's market leading position for nearly all of its major products and services; * a diverse product base focused on building products and steel processing; * consistent improving operating margins despite volatile input costs; * moderate financial leverage; and * substantial tangible asset coverage of total debt. The rating also incorporates the business and financial risks presented by the acquisition of AMICO as well as Gibraltar's own steel processing business given the potential volatility of operating performance and cash flow, particularly with regard to inventory management, due to unpredictable steel prices. In addition, the company is exposed to cyclical end markets, particularly automotive, and has customer concentration in large retail home centers. The rating also reflects Gibraltar and AMICO's exposure to residential and commercial construction markets. Moody's believes the prevailing low mortgage rates that have supported robust home sales, refinancing, and construction activity over the last several years are likely to revert back towards more normalized levels putting potential meaningful downward pressure on construction markets. However, while mortgage rate increases could stifle overall sales in residential markets more than the commercial market, which is rebounding from depressed levels over the last couple of years, Moody's believes that continued increases in residential fixed investments will continue to be a fairly sustainable economic trend, albeit somewhat cyclical. The rating is further supported by Moody's belief that the combined companies have a defensible market position in diverse niche building and steel products that do not represent a significant cost percentage of any given construction project. The companies' favorable competitive position vis-a-vis imports is further reinforced by its highly variable cost structure and considerable customer and geographic diversification, while imports are limited by high freight costs for products that do not ship well. In addition, Moody's believes that structural changes in the steel industry since 2001, characterized by a considerable amount of consolidation, will help mitigate against steel prices returning to previously depressed levels. Therefore, Moody's expects Gibraltar will continue to generate modest amounts of free cash flow even in a difficult operating environment. Given the potential for cash flow volatility, the stable outlook is predicated upon the company continuing to maintain moderate financial leverage resulting from expanding operating margins and improved free cash flow generation following a period of high inventory prices and stockpiling, during which Gibraltar ran a cash flow deficit. In 2004, AMICO and Gibraltar's steel processing segment increased unit volumes and realized selling price increases in excess of higher steel costs. Going forward, however, Moody's believes these businesses could experience a revenue decline given lower hot rolled coil steel prices and a potential slowdown in volume growth. Specifically, the stable outlook reflects Moody's expectation that the company will maintain: * debt-to-EBITDA at, or below, 3.0x; * average free cash flow-to-debt in the mid-teens; * operating margins in the high single to low double digits; and * minimum EBIT interest coverage of 3.5x. Failure to maintain these levels due to weaker than anticipated operating results, significant working capital needs and/or a significant cash-financed acquisition could put negative pressure on the outlook and/or ratings. Conversely, Moody's could consider a ratings upgrade if: * operating margins remained consistently above 10%; * debt-to-EBITDA dropped to under 2.5x; * average free cash flow-to-debt trended towards 20%; and * EBIT interest coverage was over 4.0x due to continued strong operating performance and an improvement in free cash flow generation. However, Moody's does not anticipate upward rating pressure in the near term given potential volatility in operating and cash flow performance and the company's growth through acquisition strategy. Moody's assigned a Ba1 rating to the $230 million senior secured term loan, which is one notch above the Ba2 corporate family rating, due to more than 2.0x asset coverage of total secured debt, which includes the term loan and an anticipated $90 million outstanding on the revolving credit facility. At the outset of the financing, secured debt will be 60% of the total debt capital structure, but Moody's anticipates this will reduce over time as the company pays off debt. Moody's does not expect the company will need to borrow additional funds from the secured revolver other than for seasonal working capital needs. However, should the company draw significant additional funds from the secured revolver, Moody's could downgrade the senior secured rating down one rating level even if the corporate family rating did not change. The senior credit facilities are guaranteed on a senior secured basis by all of Gibraltar's subsidiaries, including AMICO. When adding the additional $200 million in senior subordinated notes, asset coverage of total debt falls to just above 1.0x, warranting the two notches between the Ba3 senior subordinated rating and the senior secured rating. Moody's has also assigned a speculative grade liquidity rating of SGL-1 to Gibraltar. The SGL-1 reflects the company's "very good" liquidity position based on: * expectations of improving free cash flow generation; * more than $200 million of availability for modest seasonal working capital needs on its $300 million senior secured revolver; * a favorable near-term debt maturity profile; and * sufficient flexibility afforded under its financial covenants. Headquartered in Buffalo, New York, Gibraltar Industries is a leading manufacturer, processor, and distributor of metals and other engineered products for the: * construction, * automotive, and * industrial markets. Gibraltar is North America's: * leading ventilation product manufacturer, mailbox manufacturer, cold-rolled strip steel producer; * second-largest commercial thermal processor; and * number two manufacturer of structural connectors. Gibraltar had LTM pro forma revenues of $1.4 billion as of June 30, 2005. Alabama Metal Industries Corporation (AMICO), headquartered in Birmingham, Alabama, is a leader in the manufacturing and distribution of Industrial Flooring/Grating and Expanded Metal Products throughout North America. GIBRALTAR INDUSTRIES: S&P Puts Low-B Ratings on $730 Million Debts ------------------------------------------------------------------ Standard & Poor's Rating Services assigned its 'BB' corporate credit rating to Buffalo, New York-based Gibraltar Industries Inc. The outlook is stable. At the same time, S&P assigned its 'BB' bank loan rating and '3' recovery rating to the company's proposed $300 million revolving credit facility due in 2010 and $230 million term loan due in 2012, based on the preliminary terms and conditions of the amended and restated senior credit facilities. The bank loan and recovery ratings indicate expectations of meaningful recovery of principal in the event of a payment default. S&P also assigned a 'B+' rating to the company's proposed $200 million senior subordinated notes due 2015, to be issued under Rule 144a with registration rights. The proceeds from the term loan and the subordinated notes will be used to repay a $300 million interim credit facility and about $120 million of revolving credit facility borrowings. Gibraltar used its existing revolving credit facility and the interim credit facility: * to acquire steel product manufacturer Alabama Metal Industries Corp. for $240 million on Oct. 3, 2005, and * to refinance $148 million of private placement and acquisition notes. S&P will raise AMICO's ratings and withdraw them. Pro forma for the proposed financing transaction, Gibraltar will have total debt, including capitalized operating leases of $550 million, with pro forma total debt to last-12-month EBITDA of 3.3x as of Sept. 30, 2005. Gibraltar's leading positions in niche markets and national sales platform provide some protection against the cyclicality and seasonality of its largest end markets, which are residential construction and automotive manufacturing. The addition of AMICO expands Gibraltar's nonresidential construction products. Pro forma for the AMICO acquisition, the building products segment will represent about 60% of total sales. "We expect relatively favorable residential housing market conditions and home centers' same-store sales performance to benefit Gibraltar over the near term. Over the intermediate term, continued focus on expanding the range of building products sold on a national basis should support the ratings, while Gibraltar's processed metals segment will likely be challenged by U.S. automotive manufacturers' weak performances," said Standard & Poor's credit analyst Lisa Wright. "Gibraltar's aggressive sales growth strategy over the next five years is expected to constrain the ratings. However, the outlook could be revised to positive if growth meaningfully improves Gibraltar's business profile, particularly by reducing reliance on sales to U.S. automobile manufacturers and home center retailers. The outlook could be revised to negative if the company experiences a significant rise in raw material costs that it is unable to pass through to customers or if manufacturing and residential construction end-market demand slows and intensifies pricing competition," Ms. Wright said. The borrowers of the revolving credit facility and term loan are: * Gibraltar Industries Inc., a Delaware corporation, and * Gibraltar Steel Corp. of New York, an operating company. GMAC COMMERCIAL: Fitch Junks $19 Million Class M Certificates ------------------------------------------------------------- Fitch Ratings upgrades GMAC Commercial Mortgage Securities, Inc., series 1998-C2: -- $164.5 million class D to 'AAA' from 'A'; -- $38 million class E to 'AA+' from 'BBB+'; -- $88.6 million class F to 'BBB+' from 'BB+'; -- $44.3 million class G to 'BB+' from 'BB'; -- $19 million class H to 'BB' from 'BB-'. In addition, Fitch affirms these classes: -- $1.3 billion class A-2 at 'AAA'; -- Interest-only class X at 'AAA'; -- $126.5 million class B at 'AAA'; -- $113.9 million class C at 'AAA'; -- $19 million class J at 'B+'; -- $19 million class K at 'B'; -- $25.3 million class L at 'B-'; -- $19 million class M at 'CCC'. Class A-1 has paid in full. The $2.5 million class N is not rated by Fitch. The upgrades are a result of increased subordination levels due to additional loan amortization and prepayments. Twelve loans have defeased since Fitch's last rating action. As of the November 2005 distribution date, the transaction's principal balance decreased 20.6% to $2.01 billion compared with $2.53 billion at issuance. To date, the pool has realized losses in the amount of $16.5 million. Currently, seven loans are in specially servicing. Fitch expects losses on five of the specially serviced loans, which will deplete the principal balance of the nonrated class N and reduce the principal balance of class M, currently rated 'CCC' by Fitch. The largest of these loans is 90 days delinquent and is secured by a 420-unit multifamily property in West Des Moines, Iowa. As of August 2005, the property was 58% occupied. Foreclosure is anticipated in February 2006. The second largest specially serviced loan is 90 days delinquent and is secured by a 467-unit multifamily property in Saginaw, Michigan. The special servicer has indicated that a foreclosure bid case may be filed pending the outcome of environmental issues. Fitch reviewed the five credit assessed loans. The debt service coverage ratio for each loan is calculated using a Fitch-adjusted net cash flow divided by debt service payments based on the current balance using a Fitch-stressed refinancing constant. Four of the five loans have maintained investment-grade credit assessments. The OPERS Factory Outlet Portfolio is secured by 12 cross- collateralized and cross-defaulted outlet properties within nine centers. Occupancy remains stable at 93.4% as of August 2005 compared with 93.6% in August 2004 and 96.7% at issuance. As of year-end 2004, the debt service coverage ratio was 1.95 times compared with 1.68x at issuance. The master servicer stated that the Riviera Centre Factory Stores had minor damage to the roof of the building caused by Hurricanes Katrina and Rita. No tenants were displaced, and the center was fully open as of September 2005. The allocated loan balance of the Riviera Centre is 18.3% of the loan and 1.6% of the transaction's collateral. The loan maintains its investment-grade status. The Boykin Portfolio has seen an improvement in net cash flow since Fitch's last rating action. The average daily rate has remained stable, and an increase in occupancy has resulted in an increase in the portfolio's overall revenue per available room to $71.05 as of September 2005, compared with $63.16 as of September 2004 and $55.35 at issuance. The DSCR as of YE 2004 is 1.64x compared with 1.55x TTM November 2004. This loan remains below investment grade. The three remaining investment-grade credit assessed loans, Arden Portfolio, South Towne Center & Marketplace, and Grove Property Trust have performed at or better than issuance. GREEKTOWN HOLDINGS: S&P Junks Rating on $185 Mil. Sr. Unsec. Notes ------------------------------------------------------------------ Standard & Poor's Ratings Services assigned its 'B' corporate credit rating to Detroit, Michigan-based Greektown Holdings LLC, the parent company of Greektown Casino LLC. At the same time, Standard & Poor's assigned its 'B' bank loan rating and a recovery rating of '3' to Greektown Holdings' proposed $290 million senior secured credit facility, reflecting Standard & Poor's expectation that lenders would realize a meaningful recovery of principal in the event of a payment default. In addition, Standard & Poor's assigned its 'CCC+' rating to the company's proposed $185 million senior unsecured notes due 2013, reflecting structural subordination. The ratings reflect: * the expectation for very high debt levels over the next few years to fund payments to minority owners and the expansion of the Greektown casino, * its reliance on a single-property for cash flow generation, and * the risks to cash flow at the existing facility associated with potential disruptions caused by the proposed expansion. In addition, ratings reflect the expectation that, if covenants imposed by the Michigan Gaming Control Board and the company's lending agreements are breached, which could lead to a forced sale of Greektown, the Sault Ste. Marie Tribe of Chippewa Indians would support Greektown to cure the breaches, and meet its obligation to make payments to minority owners. GREENLAND CORP: Balance Sheet Upside Down by $9.8MM in 3rd Quarter ------------------------------------------------------------------ Greenland Corporation (OTC:GRLC) delivered its financial results for the quarter ended Sept. 30, 2005, to the Securities and Exchange Commission on Nov. 9, 2005. Greenland reports a $215,000 net loss on $357,000 of revenues for the three months ended Sept. 30, 2005, as compared to a $252,000 net loss on $561,000 of revenues for the same period in 2004. Net loss for the nine months ended Sept. 30, 2005, was $1 million in contrast to a net loss of $1.2 million for the comparable period in 2004. The Company has experienced a poor client retention rate. Management believes this is due in large part to the various changes of operations the Company has transitioned through, that most clients were purchased from other companies creating an additional transition problem, and the fact that certain former employees have left the Company and may have engaged in conduct not in the Company's interest. Greenland's balance sheet showed $286,000 of assets at Sept. 30, 2005, and liabilities totaling $10,139,000, resulting in a stockholders' deficit of $9,853,000. The Company has historically financed its operations through cash generated from the sale of equity securities and debt financing. To date, it has not been able to support operations from revenues through sales of products or services. At Sept. 30, 2005, the Company had a working capital deficit of $10 million compared with a working capital deficit of $8.7 million at Dec. 31, 2004. Stockholders' deficit increased for the nine months ended Sept. 30, 2005, from the previous fiscal year by $1.2 million, due primarily to the $1 million comprehensive loss which was offset by an increase in additional paid in capital. Going Concern Doubt Kabani & Company, Inc., expressed substantial doubt about Greenland Corporation'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 recurring net losses, accumulated deficit of $41 million and working capital deficiency of $8.7 million at Dec. 31, 2004. Greenland Corporation's -- http://www.greenlandcorp.com/-- operates through two subsidiaries ExpertHR and Check Central. ExpertHR is engaged in the business of providing administrative services on an outsourced basis in the areas of human resources, payroll administration, compliance issues, business insurance management, benefits administration, safety and loss control. Check Central is positioned to be a full-service provider for automated banking services. The Company develops, produces and markets an automated check-cashing machine that presently provides full ATM functionality, phone cards, and money orders. HOST MARRIOTT: Buying 38 Hotels from Starwood for $4.1 Billion -------------------------------------------------------------- Host Marriott Corporation (NYSE: HMT) will acquire 38 properties from Starwood Hotels & Resorts Worldwide, Inc. (NYSE: HOT) in a stock-and-cash transaction valued at approximately $4.1 billion, including debt assumption. The deal includes hotels under the Sheraton, W, Westin, St. Regis and Luxury Collection brands. As part of the agreement, Starwood will generally continue to manage the properties under their current flags for up to 40 years. The boards of directors of both companies have approved the proposed transaction. Host is acquiring 38 hotels, including 20 Sheratons, 13 Westins, one St. Regis, two W's, one Luxury Collection and one non-branded hotel. The portfolio includes 28 hotels in North America, six hotels in Europe and two each in Asia and Latin America. Total rooms in the portfolio are 18,964. Total EBITDA pre-management fees for total year 2005 for the portfolio are expected to be approximately $376 million, and $315 million post-management fees. Therefore, Host will be acquiring approximately $315 million in EBITDA. 54% of the post fee EBITDA in the portfolio is derived from Sheraton, 35% from Westin with the remainder coming from the other brands. 81% of post fee EBITDA is from North American hotels. Terms of payment include: -- $4.096 billion in cash and stock based on Host's closing stock price on Friday, November 11 of $17.44; -- $2.329 billion or 57% will be in the form of 133.5 million shares of Host stock which will be distributed directly to Starwood holders of record at closing; and -- $1.767 billion will be in the form of cash and assumed debt including $104 million in property specific debt and, subject to bondholder consent, approximately $600 million in Sheraton Holding Corp. debt. The remaining $1.063 billion will be paid in cash to both Starwood and its shareholders. Under the terms of the sale, a subsidiary of Host will be acquiring, among other assets, all the stock of Starwood's real estate investment trust in a transaction that will be taxable to shareholders. In this transaction, Starwood's shareholders will receive $11.18 in value for each share of class B stock they own (based on Host's Friday closing price). This consideration will be in the form of 0.6122 shares of Host stock and 50.3 cents in cash for each Class B share. As a result $2.451 billion in cash and stock proceeds from the transaction, or 60% of total proceeds, will flow directly to Starwood shareholders. Starwood will receive $941 million in cash and transfer $704 million in debt to Host. The $11.18 of value that the Class B shareholders will receive on a per share basis will represent taxable proceeds on the exchange of their Class B shares and will be offset by the shareholder's cost basis in the Class B shares producing a net capital gain or loss on the transaction. Starwood will provide information to the shareholders that will assist them in the determination of the amount of the tax basis in their paired shares that is attributable to their Class B shares. The hotels sold will generally be encumbered by license and management agreements with a 20 year initial term and two 10 year extension options exercisable at Starwood's discretion. The license agreement defines Starwood's rights and obligations as a brand owner and pays a license fee of 5% of Gross Room Revenue and 2% of Food and Beverage revenue. The management agreement defines Starwood's rights and obligations as a manager and pays 1% of Gross Operating Revenue and Incentive fee which is a share of profits in excess of a return on the owner's investment. This unique structure provides enhanced influence to ensure continued brand innovation, quality and consistent and differentiated guest service experience. Under the agreements to be entered into with Host total fees for the portfolio in 2005 would have been $61 million. Starwood and Host are committed to working together to add maximum value to this portfolio and find additional opportunities to leverage their mutual strengths going forward. "This well-timed sale commits Starwood to an 'asset right' strategy, shifting our revenue and profit mix to place greater emphasis on successfully developing and leveraging our renowned brands," Steven J. Heyer, Starwood Chief Executive Officer, said. Following the close of this transaction and other transactions previously signed or closed, Starwood will continue to own 93 properties with 28,432 rooms that produce more than $500 million in annualized EBITDA. Mr. Heyer said: "Even after this significant transaction, Starwood will remain, and intends to remain, one of the largest owners of hotel and vacation properties. This remaining portfolio will include properties that serve to facilitate innovation speed and proof of concept for our system, support our vacation ownership business and provide significant upside potential through re- branding or redevelopment. We will seek new opportunities to maximize our return on invested capital through continued effective management of our assets and the continued purchase and churn of hotel real estate as opportunities emerge." The transaction is subject to the approval of Host Marriott shareholders and to customary closing conditions, including necessary regulatory approvals. The transaction is expected to be completed in the first quarter of 2006. Bear, Stearns & Co. Inc. and Deutsche Bank AG. acted as financial advisors and Sidley Austin Brown and Wood LLP served as lead legal counsel to Starwood. Goldman Sachs served as financial advisor and Latham & Watkins and Hogan & Hartson LLP served as legal counsel to Host Marriott. The properties to be acquired include: (A) North America Sheraton Location # of Rooms -------- -------- ---------- Sheraton San Diego Hotel & Marina San Diego, CA 1,044 Sheraton Boston Hotel Boston, MA 1,216 Sheraton New York Hotel & Towers New York, NY 1,746 Sheraton Hotel Parsippany Parsippany, NJ 370 Sheraton Indianapolis Indianapolis, IN 560 Sheraton Needham Hotel Needham, MA 247 Sheraton Centre Toronto Hotel Toronto, Ontario 1,377 Le Centre Sheraton Hotel Montreal, Quebec 825 Sheraton Stamford Hotel Stamford, CT 448 Sheraton Hamilton Hotel Hamilton, Ontario 301 Sheraton Providence Airport Hotel Providence, RI 206 Sheraton Suites Tampa Airport Tampa, FL 259 Sheraton Hotel Braintree Braintree, MA 374 Sheraton Milwaukee Brookfield Hotel Brookfield, WI 389 Sheraton Tucson Hotel & Suites Tucson, AZ 216 Westin Location # of Rooms ------ -------- ---------- Westin Grand, D.C. Washington D.C. 263 Westin Indianapolis Indianapolis, IN 573 Westin Seattle Seattle, WA 891 Westin Waltham Boston Boston, MA 346 Westin Mission Hills Resort Rancho Mirage, CA 512 Westin Tabor Center Denver, CO 430 Westin Cincinnati Cincinnati, OH 456 Westin Los Angeles Airport Los Angeles, CA 740 Westin South Coast Plaza Costa Mesa, CA 390 W Location # of Rooms - -------- ---------- W New York New York, NY 688 W Seattle Seattle, WA 426 St. Regis Location # of Rooms St. Regis Houston Houston, TX 232 Other Location # of Rooms ----- -------- ---------- Capitol Hill Suites Washington D.C. 152 (B) International Sheraton Location # of Rooms -------- -------- ---------- Sheraton Skyline Hotel & CC London, U.K. 350 Sheraton Warsaw Hotel & Towers Warsaw, Poland 350 Sheraton Roma Hotel & CC Rome, Italy 634 Sheraton Santiago Hotel & CC Santiago, Chile 379 Sheraton Fiji Resort Nadi, Fiji 281 Westin Royal Denarau Resort ('06) Nadi, Fiji 273 Westin Location # of Rooms ------ -------- ---------- Westin Palace Madrid Madrid, Spain 468 Westin Palace Milan Milan, Italy 228 Westin Europa & Regina Venice, Italy 185 Luxury Collection Location # of Rooms ----------------- -------- ---------- San Cristobal Tower Santiago, Chile 139 Headquartered in White Plains, N.Y., Starwood Hotels & Resorts Worldwide, Inc. -- http://www.starwoodhotels.com/-- is one of the leading hotel and leisure companies in the world with approximately 750 properties in more than 80 countries and 120,000 employees at its owned and managed properties. With internationally renowned brands, Starwood(R) corporation is a fully integrated owner, operator and franchiser of hotels and resorts including: St. Regis(R), The Luxury Collection (R), Sheraton(R), Westin(R), Four Points(R) by Sheraton, and W(R), Hotels and Resorts as well as Starwood Vacation Ownership, Inc., one of the premier developers and operators of high quality vacation interval ownership resorts. Host Marriott -- http://www.hostmarriott.com/-- is a Fortune 500 lodging real estate company that owns or holds controlling interests in upscale and luxury hotel properties primarily operated under premium brands, such as Marriott(R), Ritz- Carlton(R), Hyatt(R), Four Seasons(R), Fairmont(R), Hilton(R) and Westin(R). * * * Standard & Poor's Ratings Services revised its outlook on hotel and leisure company Starwood Hotels & Resorts Worldwide Inc. to positive from stable. At the same time, the ratings were affirmed on the White Plains, New York-based company, including the 'BB+' corporate credit rating. In addition, Standard & Poor's placed its 'BB+' ratings on Starwood subsidiary ITT Corp.'s $450 million senior notes and $150 million senior notes on CreditWatch with negative implications, reflecting the expectation that these obligations will be assumed by Host Marriott Corporation (BB-/Stable/--), a lower rated entity, subject to bondholder consent. The ratings on the notes would be lowered to the level of Host's senior unsecured rating, which is currently 'BB-', if they are assumed on a pari- passu basis upon the close of the transaction expected by the first quarter of 2006. As reported in the Troubled Company Reporter on Nov. 10, 2005, 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+'. S&P said the outlook is stable. About $5 billion in debt was outstanding as of Sept. 9, 2005. IMPSAT FIBER: Posts $5.2 Million Net Loss in Third Quarter ---------------------------------------------------------- IMPSAT Fiber Networks, Inc. (OTCBB: IMFN) reported results for the third quarter of 2005. Net revenues during the third quarter of 2005 totaled $65.4 million, an increase of $7.8 million, or 13.6%, compared to the third quarter of 2004. All product lines increased revenues period-over-period. For the nine months ended Sept. 30, 2005, net revenues totaled $186.7 million, an increase of $18.5 million, or 11%, as compared to the same period in 2004. Commenting on the results of the third quarter, Impsat CEO Ricardo Verdaguer stated: "I am proud to announce Impsat's seventh consecutive quarter of increased revenues and the highest quarterly revenues since the last quarter of 2000. Our strategy in Brazil is proving successful as we continue growing revenues in that country. As expected, the increase in total revenues has improved EBITDA as compared to the prior periods in 2004. The macroeconomic situation in the region continues to be positive, supporting our results." Net interest expense for the three months ended Sept. 30, 2005 totaled $7.1 million, compared to net interest expense of $5.2 million for the third quarter of 2004. The increase in the Company's net interest expense is due in part to the increase in the rate of interest on subsidiary indebtedness totaling $113.2 million in outstanding principal amount as of Sept. 30, 2005, and to increased withholding taxes on such subsidiary indebtedness. For the three months ended Sept. 30, 2005, the Company recorded a net loss of $5.2 million, compared to a net income of $700,000 during the third quarter of 2004. Cash and cash equivalents at Sept. 30, 2005 were $19.8 million. This compares to cash and cash equivalents of $41.8 million at June 30, 2005 and $57.1 million at the end of the third quarter of 2004. Total indebtedness as of Sept. 30, 2005, was $247.7 million as compared to $271.6 million on Sept. 30, 2004. Of the total indebtedness at Sept. 30, 2005, $18.3 million represented short-term debt and the current portion of long-term debt, while the other $229.4 million represented long-term debt. IMPSAT Fiber Networks, Inc. -- http://www.impsat.com/-- is a leading provider of private telecommunications network and Internet services in Latin America. The Company offers integrated data, voice, data center and Internet solutions, with an emphasis on broadband transmission, including IP/ATM switching, DWDM, and non-zero dispersion fiber optics. It also provides telecommunications, data center and Internet services through our networks, which consist of owned fiber optic and wireless links, teleports, earth stations and leased satellite links. IMPSAT owns and operates 15 metropolitan area networks in some of the largest cities in Latin America, including Buenos Aires, Bogota, Caracas, Quito, Guayaquil, Rio de Janeiro and Sao Paulo. * * * Going Concern Doubt Based on its current liquidity position and its history of losses, the Company has received a going concern qualification in the report of its independent registered public accounting firm included in the Annual Report on Form 10-K for the year ended Dec. 31, 2004. As previously announced, the Company has formed a Special Committee of its Board, with Lehman Brothers Inc. as its exclusive financial advisor, to explore recapitalization alternatives. These alternatives may take the form of a repurchase, refinancing or rescheduling of payment terms of indebtedness of the Company and/or its operating subsidiaries, a potential capital infusion, or other types of transactions. There can be no assurance, however, that any such transaction will be successfully negotiated or consummated. INAMED CORP: Allergan Merger Prompts S&P to Review Ratings ---------------------------------------------------------- Standard & Poor's Ratings Services placed its ratings for Inamed Corp., including 'BB' corporate credit rating, on CreditWatch with positive implications. The CreditWatch listing follows specialty pharmaceutical company Allergan Inc.'s announcement that it is planning to acquire Inamed for roughly $3.1 billion. Should the acquisition be completed, Inamed would become part of a much larger and more diverse company focusing on ophthalmic pharmaceuticals and providing medical products for the cosmetic and reconstructive markets. Expectations for a much-improved business profile and a modest financial profile -- Inamed has no significant debt and Allergan has a net cash position -- point to a higher rating than the current 'BB'. However, at the close of the transaction, Allergan may refinance Inamed's bank loan. Under that scenario, Standard & Poor's would withdraw the senior secured bank loan rating on Inamed. "We will resolve the CreditWatch listing once more financing details become clear," said Standard & Poor's credit analyst Jordan Grant. INTELSAT LTD: Incurs $54.5 Million Net Loss in Third Quarter ------------------------------------------------------------ Intelsat, Ltd., reported results for the quarter and nine months ended Sept. 30, 2005. Intelsat, Ltd., and its subsidiaries, reported revenue of $293.6 million and a net loss of $54.5 million for the quarter ended Sept. 30, 2005. The Company also reported EBITDA, or earnings before interest, taxes and depreciation and amortization, of $195.2 million and covenant EBITDA of $206.3 million for the quarter ended Sept. 30, 2005. Intelsat generated strong free cash flow from operations of $53.2 million for the third quarter of 2005. Free cash flow from operations is defined as net cash provided by operating activities, less payments for satellites and other property and equipment and payments for deposits on future satellites. For the first nine months of 2005, Intelsat reported revenue of $876.6 million and a net loss of $259.6 million. EBITDA for the nine-month period was $461.1 million, and covenant EBITDA was $616.9 million. "Intelsat's performance in lease services and managed solutions provides improved balance given the continued expected run-off in contracted channel revenue, and operating costs are now reflecting the changes we implemented earlier this year," said Intelsat, Ltd. CEO David McGlade. "Meanwhile, we are working diligently on securing the necessary approvals for our planned merger with PanAmSat, a landmark transaction that will combine the complementary strengths of two great companies." On August 29, Intelsat and PanAmSat Holding Corporation announced that the two companies have signed a definitive merger agreement under which Intelsat will acquire PanAmSat for $25 per share in cash, or $3.2 billion . The transaction will create a premier satellite company that will be a leader in the digital delivery of video content, the transmission of corporate data and the provisioning of government communications solutions. Using a combined fleet of 53 satellites, the company will serve customers in more than 200 countries and territories. Following the transaction, the company is expected to have pro forma annual revenues of more than $1.9 billion and to maintain strong free cash flow from operations, providing significant resources for capital expenditures and debt service. As was previously announced, at a special meeting of shareholders on October 26, PanAmSat shareholders approved and adopted the merger agreement between the companies. Also on October 26, Intelsat received a request from the United States Department of Justice seeking additional information and documentary materials in connection with the merger. The companies continue to expect to complete the merger in the second or third quarter of 2006. Total revenue increased $27.4 million, or 10 percent, to $293.6 million for the quarter ended Sept.30, 2005, from $266.2 million for the quarter ended Sept. 30, 2004. Revenue highlights include: * an increase in lease services of $15.3 million to $189.8 million; * a $6.6 million increase in managed solutions revenues, which totaled $29.8 million for the quarter; * higher mobile satellite services (MSS) revenues, totaling $15.7 million, an offering of the COMSAT General business which was acquired in October 2004 and integrated into Intelsat General; * a decline in channel services revenue of $11.3 million to $54 million, reflecting continued business trends in this area. Total operating expenses for the quarter ended Sept. 30, 2005, were $242.6 million, compared to $201.6 million in the prior year period. The largest component of total operating expenses was depreciation and amortization expense, which increased $30.3 million to $147.3 million due to purchase accounting treatment following the acquisition of Intelsat, Ltd. by Intelsat Holdings, Ltd., earlier this year, as well as the IS-10-02 and IA-8 satellites, which entered service in August 2004 and July 2005, respectively. These factors were offset in part by the write-off of the IS-804 satellite and the impairment of the IA-7 satellite. The increase in operating expenses was also due to higher Intelsat General direct cost of revenue, offset in part by the impact of our cost control efforts and staff reductions. Net loss was $54.5 million for the quarter ended Sept. 30, 2005, compared with a net loss of $17.1 million for the quarter ended Sept.30, 2004. The higher net loss for the 2005 period as compared with the prior year was primarily due to higher operating expenses and interest expense resulting from the financing in connection with the Acquisition and the financing in connection with the payment of a dividend by the Company to Intelsat Holdings, Ltd. in March 2005. EBITDA increased $42.3 million, to $195.2 million, or 66 percent of revenue, for the quarter ended September 30, 2005 from $152.9 million, or 57 percent of revenue, for the same period in 2004. The 2004 period was negatively affected by the loss from discontinued operations related to the Company's decision to dispose of its investment in Galaxy Satellite TV Holdings, Ltd. When excluding the impact of the Galaxy loss, which reduced EBITDA in 2004 by $27.8 million, EBITDA as a percentage of revenue was maintained, despite the increased revenue contribution from managed solutions and Intelsat General, both of which carry lower EBITDA margins than traditional fixed satellite services. This was due primarily to our cost control efforts and staff reductions. A full-text copy of Intelsat's third quarter report in Form 10-Q filed with the Securities and Exchange Commission is available for free at http://ResearchArchives.com/t/s?2eb Intelsat, Ltd. offers telephony, corporate network, video and Internet solutions around the globe via capacity on 25 geosynchronous satellites in prime orbital locations. Customers in approximately 200 countries rely on Intelsat's global satellite, teleport and fiber network for high-quality connections, global reach and reliability. * * * As reported in the Troubled Company Reporter on Nov. 16, 2005, Intelsat, Ltd.'s announcement of its results for the third quarter ended Sept. 30, 2005, does not affect the ratings of Intelsat, wholly owned subsidiary Intelsat (Bermuda), Ltd., and operating subsidiary Intelsat Subsidiary Holding Company Ltd. The company remains on Rating Watch Negative. As reported in the Troubled Company Reporter on Sept. 1, 2005, Moody's Investors Service has affirmed Intelsat, Ltd.'s ratings and changed the outlook for all ratings to developing from negative following the company's announcement that it is acquiring PanAmSat for $3.2 billion plus the assumption of PanAmSat's debt ($3.2 billion). The transaction, which Moody's expects to be largely, if not entirely, financed with new debt, would significantly increase Intelsat's pro forma leverage thereby increasing credit risk for Intelsat debt holders and pressuring the rating downwards. Therefore, Moody's anticipates placing all ratings on review for possible downgrade or lowering the ratings once the timing and structure of the transaction and resolution of regulatory review becomes more certain. Moody's has affirmed these ratings: Intelsat: * Corporate family rating -- B2 * $400 Million 5.25% Global notes due in 2008 -- Caa1 * $600 Million 7.625% Sr. Notes due in 2012 -- Caa1 * $700 Million 6.5% Global Notes due in 2013 -- Caa1 Intelsat Subsidiary Holding Company Ltd.: * $300 Million Sr. Secured Revolver due in 2011 -- B1 * $350 Million Sr. Secured T/L B due in 2011 -- B1 * $1 Billion Sr. Floating Rate Notes due in 2012 -- B2 * $875 Million Sr. 8.25% Notes due in 2013 -- B2 * $675 Million Sr. 8.625% Notes due in 2015 -- B2 Intelsat (Bermuda) Ltd.: * $478.7 Million Sr. Unsecured Discount Notes due 2015 -- B3 Moody's has changed the outlook to developing from negative. ISRAEL HUMANITARIAN: Case Summary & 5 Largest Unsecured Creditors ----------------------------------------------------------------- Debtor: Israel Humanitarian Foundation, Inc. 276 Fifth Avenue, Suite 404 New York, New York 10001 Bankruptcy Case No.: 05-60110 Type of Business: The Debtor is a charitable foundation that solicits and administers charitable donations for a broad variety of humanitarian causes both in Israel and the United States. Former U.S. Supreme Court Justice Arthur Goldberg founded IHF in 1960. Among the projects supported by IHF are geriatric care centers, centers for autistic children, wellness centers for underprivileged mothers and their babies, training of guide dogs for the blind, and assistance for victims of terror attacks. See http://www.ihf.net/ Chapter 11 Petition Date: November 16, 2005 Court: Southern District of New York (Manhattan) Debtor's Counsel: Ronald M. Terenzi, Esq. Berkman, Henoch, Peterson & Peddy, PC 100 Garden City Plaza Garden City, New York 11530 Tel: (516) 222-6200 Fax: (516) 222-6209 Financial Condition as of November 11, 2005: Total Assets: $1,214,422 Total Debts: $2,900,294 Debtor's 5 Largest Unsecured Creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ UBS Financial Services Line of Credit $1,454,789 499 Washington Boulevard Jersey City, NJ 07310-1988 Clalit Health Services Judgment $1,438,733 101 Arlozorov Street Tel Aviv, Israel Simmons Ritchie & Segal Legal Fees $3,924 Accounting Department P.O. Box 662048 Arcadia, CA 91066 Monica R. Jacobson, P.C. Legal Fees $2,640 225 Broadway, Suite 1901 New York, NY 10007 Tobin Lucks Legal Fees $209 P.O. Box 4502 Woodland Hills, CA 91365 ISTAR FINANCIAL: Moody's Reviews Preferred Stock's Ba2 Rating ------------------------------------------------------------- Moody's Investors Service placed iStar Financial Inc.'s Baa3 senior unsecured ratings on review for possible upgrade. This action was prompted by the REIT's much-accelerated reduction of its secured debt, as demonstrated by its recent prepayment of $832 million of secured indebtedness, which unencumbered over $1.6 billion of the REIT's assets. Moody's noted that as a result of this paydown, iStar's secured leverage declined to 5.3% of gross assets (pro forma for $135 million secured debt paydown post quarter-end) from 17% at June 30, 2005. iStar's secured debt as a percentage of its total debt decreased to 8.3% (on a pro forma basis) from 25% at June 30, 2005, and iStar's unencumbered assets as a percentage of its gross assets grew to 94.2% at Sept. 30, 2005 (pro forma) from 73.2% at June 30, 2005. With this secured debt prepayment (which entailed a $37.5 million non-cash prepayment charge), iStar has substantially completed its shift to an unsecured financing basis. Moody's believes that this sharp improvement in iStar's capital structure, coupled with its consistent, strong performance and maintenance of solid asset quality, create support for a review for upgrade. During its rating review Moody's will be focusing on: 1) iStar's leverage appetite, and its range over the intermediate term; 2) the REIT's asset mix and quality, and trends in concentrations; 3) the REIT's prospective profit volatility; and 4) the outlook for the REIT's business franchise, including new efforts such as AutoStar and Oak Hill. Moody's has become more comfortable with higher leverage for iStar as it has grown, diversified and reduced its secured debt, which had been very high. Major drivers of the REIT's rating over the long term will be the robustness and diversity of its business franchise, coupled with earnings stability and asset quality. These ratings were placed on review for upgrade: iStar Financial Inc.: * Senior unsecured debt at Baa3; * preferred stock at Ba2; * senior debt shelf at (P)Baa3; * subordinated debt shelf at (P)Ba1; and * preferred stock shelf at (P)Ba2. iStar Financial Inc. [NYSE: SFI] is a property finance company that elects REIT status. iStar provides structured mortgage, mezzanine and corporate net lease financing. iStar Financial is headquartered in New York City, and had assets of $8 billion and equity of $2.5 billion as of Sept. 30, 2005. KAISER ALUMINUM: Court Extends Exclusive Period Until Jan. 31 -------------------------------------------------------------- The U.S. Bankruptcy Court for the District of Delaware extended the period during which Kaiser Aluminum Corporation and its debtor-affiliates have the exclusive right to: (1) file a plan or plans of reorganization through and including Jan. 31, 2006; and (2) solicit acceptances of that plan through and including March, 31, 2006. As previously reported in the Troubled Company Reporter on Oct. 10, 2005, Kimberly D. Newmarch, Esq., at Richards, Layton & Finger, in Wilmington, Delaware, notes that no order has been entered yet regarding the confirmation of the Liquidation Plans of Alpart Jamaica, Inc., Kaiser Jamaica Corporation, Kaiser Alumina Australia Corporation, and Kaiser Finance Corporation. On the other hand, Kaiser Aluminum Corporation, Kaiser Aluminum & Chemical Corporation and certain of their Debtor affiliates have commenced the process for soliciting votes to accept or reject their Plan of Reorganization. The extension period will allow completion of the confirmation process for the Liquidating Debtors and permitting the Reorganizing Debtors to proceed with the solicitation and confirmation of their Plan. Headquartered in Foothill Ranch, California, Kaiser Aluminum Corporation -- http://www.kaiseraluminum.com/-- is a leading producer of fabricated aluminum products for aerospace and high- strength, general engineering, automotive, and custom industrial applications. The Company filed for chapter 11 protection on February 12, 2002 (Bankr. Del. Case No. 02-10429), and has sold off a number of its commodity businesses during course of its cases. Corinne Ball, Esq., at Jones Day, represents the Debtors in their restructuring efforts. On June 30, 2004, the Debtors listed $1.619 billion in assets and $3.396 billion in debts. (Kaiser Bankruptcy News, Issue No. 82; Bankruptcy Creditors' Service, Inc., 215/945-7000) KAISER ALUMINUM: Motion to Estimate Insurance Claims Draws Fire --------------------------------------------------------------- As previously reported in the Troubled Company Reporter on Oct. 27, 2005, Kaiser Aluminum Corporation and its debtor- affiliates asked the U.S. Bankruptcy Court for the District of Delaware to estimate the Insurance Claims at $0, pursuant to Section 502(c)(1) of the Bankruptcy Code, and disallow the Insurance Claims for voting purposes. In January 2003, ACE Property and Casualty Company, Century Indemnity Company, Industrial Underwriters Insurance Company, Pacific Employers Insurance Company, St. Paul Mercury Insurance Company and Industrial Indemnity Company filed Claim Nos. 7159 to 7161 and Claim Nos. 7163 to 7175 against 15 Debtors. ACE Companies also filed Claim Nos. 7517 to 7524 against six Debtors in May 2003. The Insurance Claims assert identical contingent and unliquidated claims against each of Kaiser Aluminum Corporation and its debtor- affiliates for any amounts potentially owing under 30 separate insurance policies issued to Kaiser Aluminum & Chemical Corporation, including any additional premium payments, deductibles or other expenses that may become due under the Policies Kimberly D. Newmarch, Esq., at Richards, Layton & Finger, in Wilmington, Delaware, contends that under any methodology, the Insurance Claims should be estimated at zero because the ACE Companies denied any obligation to even provide coverage to the Debtors under the Policies in the Coverage Litigation. "The ACE Companies cannot possibly have any claim against the [Debtors], whether for deductibles, retrospective premium payments or other amounts, if the ACE Companies have no obligation to provide coverage under the Policies." Ace Companies Object Thomas G. Whalen, Jr., Esq., at Stevens & Lee, P.C., in Wilmington, Delaware, tells the Court that it is impossible to understand the factual basis for the Debtors' request on a claim- by-claim basis without reference to specific claims filed against the Debtors that are allegedly covered under the Policies. To the extent that the Debtors assert continuing rights to insurance coverage under certain agreements relating to insurance policies that Ace Companies allegedly issued, Mr. Whalen argues that the Debtors are bound to perform their continuing reciprocal obligations under those agreements. Ace Companies' Claims are intended to preserve the insurers' rights to receive any and all reciprocal payments and performance under the Policies that the Debtors remain obligated to provide, Mr. Whalen explains. In addition, Ace Companies informs Judge Fitzgerald the Debtors "failed to articulate an explicit justification for estimation of the Claims." The only articulated basis for disallowance is that the Claims are presently contingent and unliquidated. Mr. Whalen points out that since the Insurance Agreements impose continuing obligations on the Debtors, claims may arise under the Agreements "at any time that third parties assert claims against Debtors that are alleged to be covered under the Policies." Because the automatic stay has prevented all persons from prosecuting claims against the Debtors that may be covered under the Insurance Agreements, the Claims necessarily remain contingent and unliquidated. The Ace Companies have, however, reserved the right to amend their proofs of claim from time to time to reflect any liquidated claims on an ongoing basis. "Without the support of affirmative evidence and/or based solely on the fact that the Claims are partially contingent and unliquidated, the Motion should be denied," Mr. Whalen asserts. The Ace Companies further object to any impairment of their rights under the Insurance Agreements or any pre-emption of a full adjudication, or other impairments, of their rights, claims and defenses in any coverage-related arbitration or litigation. In the event that the Bankruptcy Court determines that a judicial estimation of the Claims is necessary, Ace Companies ask the Court: -- to limit the scope of the estimation; and -- for a procedural due process with respect to any evidentiary hearing including a determination of an appropriate methodology to be used for the estimation. Headquartered in Foothill Ranch, California, Kaiser Aluminum Corporation -- http://www.kaiseraluminum.com/-- is a leading producer of fabricated aluminum products for aerospace and high- strength, general engineering, automotive, and custom industrial applications. The Company filed for chapter 11 protection on February 12, 2002 (Bankr. Del. Case No. 02-10429), and has sold off a number of its commodity businesses during course of its cases. Corinne Ball, Esq., at Jones Day, represents the Debtors in their restructuring efforts. On June 30, 2004, the Debtors listed $1.619 billion in assets and $3.396 billion in debts. (Kaiser Bankruptcy News, Issue No. 82; Bankruptcy Creditors' Service, Inc., 215/945-7000) KOCH CELLULOSE: Moody's Reviews $424 Million Debts' Ba3 Ratings --------------------------------------------------------------- Moody's Investors Service placed Koch Cellulose, LLC's ratings under review, direction uncertain. The rating action follows the announcement that Koch Industries, Inc., and Georgia-Pacific have reached a definitive agreement for Koch Forest Products, Inc., a wholly owned Koch subsidiary, to purchase Georgia-Pacific in a transaction that has an equity value for Georgia-Pacific of $13.2 billion and a total enterprise value of $21 billion, including all Georgia-Pacific debt. KoCell is a wholly owned subsidiary of Koch. As no information has been publicly announced, the ramifications of this transaction on KoCell's ratings are uncertain. Moody's expects to clarify and assess the impact of this transaction within the next 60 to 90 days. These ratings have been affected: * Corporate family rating: Ba3 * $300 million gtd senior secured term loan B: Ba3 * $50 million gtd senior secured revolving credit facility: Ba3 * $74 million synthetic letter of credit facility: Ba3 Koch Cellulose, LLC, headquartered in Brunswick, Georgia, is a manufacturer of fluff and SBSK pulp. KRISPY KREME: KremeKo CCAA Extended to Dec. 30 to Complete Sale --------------------------------------------------------------- The Ontario Superior Court of Justice extended KremeKo, Inc.'s protection under the Companies' Creditors Arrangement Act through Dec. 30, 2005. The extension will permit the company to complete the sale of its assets to Krispy Kreme Doughnut Corporation, a wholly owned subsidiary of Krispy Kreme Doughnuts, Inc. (NYSE: KKD), pursuant to an asset purchase agreement. The CCAA stay expired on May 13, 2005, and was subsequently extended until Nov. 15, 2005, to allow the Company an opportunity to conclude a restructuring plan with KKDC. As reported in the Troubled Company Reporter on Nov. 15, KKDC obtained Canadian Court approval to purchase the assets of KremeKo, one of its Canadian franchisees, and will now operate these Canadian operations as its wholly owned subsidiary. The asset purchase agreement fixes the purchase price at the combined value of the secured lenders' indebtedness, the outstanding advances from the DIP financing facility, and the liabilities to be assumed by KKDC. Excluding the value of the assumed liabilities, the purchase price for KremeKo's assets is $17.6 million, representing an $8.2 million premium over the best possible offer generated through the sale process. In relation to the sale, KremeKo's corporate name will be changed to 1456212 Ontario Inc. DIP Loan On Nov. 4, 2005, KremeKo further amended a term sheet with Krispy Kreme extending the DIP loan maturity date to Dec. 30, 2005. The amendment allows the Company to borrow a maximum of CDN$1.5 million in three tranches of CDN$500,000 each with availability similar to its previous term sheet. KremeKo projects negative cash flows for the nine-week period ending Jan. 1, 2006, shows: Kremeko, Inc. Revised Cash Flow Forecast For the Six-Week Period Ending Jan. 1, 2006 (in Canadian $) Receipts $3,022,000 Disbursements 3,338,000 ---------- Net Cash Flow ($316,000) DIP Advances 150,000 Opening Cash Balance 525,000 ---------- Closing Cash Balance $359,000 As of Nov. 9, KremeKo has drawn $850,000 in DIP advances -- $500,000 from the first tranche and $350,000 from the second tranche. Bankruptcy Assignment The Ontario Court has authorized Robert Pajor, the chief restructuring officer appointed in KremeKo's CCAA proceedings, to file an assignment in bankruptcy on behalf of KremeKo at any time following the closing of the sale transaction pursuant to the asset purchase agreement. Krispy Kreme anticipates that the purchase transaction will close by the end of the month. The Canadian operations include six retail stores, along with a wholesale operation. KremeKo, Inc., Krispy Kreme's Canadian franchisee, is currently restructuring under the Companies' Creditors Arrangement Act. Pursuant to the Court's Initial Order, Ernst & Young Inc. was appointed as Monitor in KremeKo's CCAA proceedings. The Monitor is attempting to sell the KremeKo business. Headquartered in Winston-Salem, North Carolina, Freedom Rings operates six out of the approximately 360 Krispy Kreme stores and 50 satellites located worldwide. The Company filed for chapter 11 protection on Oct. 16, 2005 (Bankr. Del. Case No. 05-14268). M. Blake Cleary, Esq., Margaret B. Whiteman, Esq., and Matthew Barry Lunn, Esq., at Young Conaway Stargatt & Taylor, LLP, represent the Debtor in its restructuring efforts. When the Debtor filed for protection from its creditors, it estimated between $10 million to $50 million in assets and debts. Founded in 1937 in Winston-Salem, North Carolina, Krispy Kreme -- http://www.krispykreme.com/-- is a leading branded specialty retailer of premium quality doughnuts, including the Company's signature Hot Original Glazed. Krispy Kreme currently operates approximately 350 stores and 60 satellites in 45 U.S. states, Australia, Canada, Mexico, the Republic of South Korea and the United Kingdom. LA QUINTA: Inks $3.4 Billion Merger Deal with Blackstone Group -------------------------------------------------------------- La Quinta Corporation and La Quinta Properties, Inc. (NYSE: LQI) entered into a definitive merger agreement to be acquired by an affiliate of The Blackstone Group for $11.25 per paired share in cash. The price represents a premium of 37% over Nov. 8's closing price of $8.22. The total value of the transaction, including debt, is approximately $3.4 billion. The boards of directors of La Quinta unanimously approved the merger agreement and recommended approval by their stockholders. La Quinta Corporation stockholders will be asked to vote on the proposed transaction at a special meeting that will be held on a date to be announced. The completion of the merger agreement is subject to various customary closing conditions. The closing of the merger agreement is expected to occur during the first quarter of 2006. Completion of the merger agreement is not subject to the receipt of financing by Blackstone. "We are pleased to have signed a merger agreement with one of the world's preeminent owners of hotels and resorts," Francis W. Cash, chairman and chief executive officer for La Quinta, said. "Blackstone was attracted by our strong brands, high quality hotels, excellent management team and operating culture that is focused on delivering superior guest satisfaction. We believe this transaction is beneficial to our stockholders and will build on the accomplishments we have achieved over the last five years." Jonathan D. Gray, senior managing director of The Blackstone Group, said, "We are excited to be acquiring La Quinta and look forward to working with its employees and franchise owners to continue the company's success. We feel particularly fortunate to inherit such a great organization and vibrant franchisee base." Morgan Stanley acted as financial advisor to La Quinta. Bear Stearns, Deutsche Bank and Merrill Lynch acted as financial advisors to Blackstone. Acquisition financing is being provided by Bank of America, Bear Stearns and Merrill Lynch. Goodwin Procter LLP acted as legal advisor to La Quinta. Simpson Thacher & Bartlett LLP acted as legal advisor to Blackstone. About The Blackstone Group The Blackstone Group -- http://www.Blackstone.com/-- a private investment firm with offices in New York, Atlanta, Boston, Los Angeles, London, Hamburg, Mumbai and Paris, was founded in 1985. Blackstone's Real Estate Group has raised six funds, representing over $8 billion in total equity and has a long track record of investing in hotels and other commercial properties. In addition to real estate, The Blackstone Group's core businesses include private equity investing, corporate debt investing, distressed debt securities, marketable alternative asset management, corporate advisory services and restructuring and reorganization advisory. About La Quinta La Quinta Corporation -- http://www.LQ.com/-- and its controlled subsidiary, La Quinta Properties, Inc. (NYSE: LQI) is one of the largest owner/operators of limited-service hotels in the United States. Based in Dallas, Texas, the Company owns and operates 360 hotels and franchises more than 240 hotels in 39 states under the La Quinta Inns(R), La Quinta Inn & Suites(R), Baymont Inn & Suites(R), Woodfield Suites(R) and Budgetel(R) brands. * * * As reported in the Troubled Company Reporter on Nov. 16, 2005, Fitch Ratings placed La Quinta Corp. on Rating Watch Negative. The affected ratings include: -- Issuer default rating 'BB-'; -- Senior secured credit facility 'BB'; -- Senior unsecured rating 'BB-'; -- Preferred stock rating 'B'. As reported in the Troubled Company Reporter on Nov. 14, 2005, Standard & Poor's Ratings Services placed its ratings on La Quinta Corp., including its 'BB' corporate credit ratings, on CreditWatch with developing implications. Irving, Texas-based La Quinta owns, operates, and franchises 604 hotels as of Sept. 30, 2005. LEHMAN HEL: Fitch Junks $4 Million Class M Certificates ------------------------------------------------------- Fitch Ratings downgrades two classes, representing approximately $4 million in outstanding principal, and affirms one class, representing approximately $4.1 million, of Lehman HEL Trust 1998-1. The negative rating actions are taken due to the continued poor performance of the collateral. -- Class A affirmed at 'AAA'; -- Class M-1 downgraded to 'CCC' from 'BBB'; -- Class M-2 downgraded to 'C' from 'CCC'. The collateral consists of nonconforming closed-end fixed-rate home equity loans. The loans were initially acquired by Lehman Capital, a division of Lehman Brothers Holdings Inc., and initially originated by First Union Home Equity Bank. Aurora Loan Services, rated 'RPS2+' by Fitch, is the servicer of the loans. At issuance, the collateral had a weighted average seasoning of 39 months, a weighted average combined loan-to-value ratio of approximately 77.89% and approximately 30% of the pool was collateralized with a second lien. The losses on the collateral to date have been higher than initially expected. As of the Oct. 25 distribution, the cumulative loss was 3.09%. The initial expected loss was approximately 1.75%. Fitch has taken numerous negative rating actions on this transaction. The class M-1 was initially rated 'AA'. The class M-2 was initially rated 'A'. The class A currently benefits from approximately 49% of the pool as credit enhancement, which has allowed the bond to be affirmed despite higher-than-expected collateral losses. If losses continue at a high rate and the class A's CE deteriorates, the rating will be reassessed. Further information regarding current delinquency, loss, and credit enhancement statistics is available on the Fitch Ratings Web site at http://www.fitchratings.com/ LHM INC: Case Summary & 20 Largest Unsecured Creditors ------------------------------------------------------ Debtor: LHM, Inc. aka Gregory's 4885 Alpha Road, Suite 125 Dallas, Texas 75244 Tel: (972) 934-8578 Bankruptcy Case No.: 05-86862 Type of Business: The Debtor owns and operates One Gregory's, Inc., a retail shoe company. Chapter 11 Petition Date: November 16, 2005 Court: Northern District of Texas (Dallas) Debtor's Counsel: Rosa R. Orenstein, Esq. Orenstein and Associates 325 North Saint Paul, Suite 2340 Dallas, Texas 75201 Tel: (214) 757-9191 Total Assets: $2,610,907 Total Debts: $1,536,870 Debtor's 20 Largest Unsecured Creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ Internal Revenue Service 2004 4th quarter $176,466 4050 Alpha Road and first three 5103 NWSAT quarters of 2005 Farmers Branch, TX 75244 for 941 Taxes Christian Dior Merchandise $129,375 712 Fifth Avenue New York, NY 10019 Larry R. Matney Larry Matney $118,998 6521 Ivy Glen obtained a Dallas, TX 75240 personal loan for $200,000 and loaned it to the company. Leslie H. Matney Loans from $116,079 6521 Ivy Glen Stockholder Dallas, TX 75240 Alexander McQueen Merchandise $95,401 50 Hartz Way Secaucus, NJ 07094 Yves Saint Laurent America Merchandise $78,928 50 Hartz Way Secaucus, NJ 07094 Roberto Cavalli Merchandise $78,575 Art Fashion Corporation 745 Fifth Avenue, Suite 1419 New York, NY 10151 Diesel Merchandise $53,596 2500 Marcus Avenue Lake Success, NY 11042 AXA Equitable $43,626 Individual Annuity Center P.O. Box 2996 New York, NY 10116-2996 Helmut Lang Merchandise $40,443 Via L. Albertini, 12 60131 Ancona, Italy Bottega Venata Merchandise $39,495 50 Hartz Way Secaucus, NJ 07094 Celine Merchandise $39,486 135 South LaSalle Street Chicago, IL 60606-3375 Alexandra Neel Merchandise $35,989 Naryla Srl Via Giosue Carducci, 18 20'23 Milano, Italy County of Dallas Personal Property $35,528 Attn: David Childs Taxes Tax Assessor & Collector P.O. Box 620088 Dallas, TX 75262-0088 Car Shoe Italia Merchandise $34,778 28 Via Fogazzaro 20135 Milano, Italy Rizal/RT International Merchandise $28,111 c/o Palma Settimi 310 Fields Lane Brewster, NY 10509 State of Texas Sales Taxes $27,159 Comptroller of Public Accounts for September and 111 East 17th Street October 2005 Austin, TX 78774-0100 Galleria Mall Investors Rent $25,000 13350 Dallas Parkway, Suite 3080 Dallas, TX 75240 JAYA Merchandise $24,162 Via K. Marx 752 Roncocesi 42100 ReggioeEmilia, Italy Valentino Merchandise $22,731 c/o Century Business Credit P.O. Box 360286 Pittsburgh, PA 15250-6265 LOVELL PLACE: Quinn Buseck Approved as Creditors Committee Counsel ------------------------------------------------------------------ The U.S. Bankruptcy Court for the Western District of Pennsylvania gave the Official Committee of Unsecured Creditors of Lovell Place Limited Partnership permission to employ Quinn, Buseck, Leemhuis, Toohey and Kroto, Inc., as its counsel. Quinn Buseck will: a) advise the Committee with respect to its duties and powers in the Debtor's chapter 11 case and consulting with the Debtor concerning the administration of its bankruptcy case; b) assist the Committee in its investigation of the acts, conduct, assets, liabilities, and financial condition of the Debtor, the operation of the Debtor's business, the desirability of the continuation of its business, and any other matters relevant to the formulation of a plan of reorganization or to the Debtor's chapter 11 case; c) prepare all necessary motions, applications, answers, orders, reports, or other papers in connection with the administration of the Debtor's estate; d) review any proposed plan and disclosure statement, participating with the Debtor or others in the formation or modification of a plan, or propose to the Committee a chapter 11 plan if appropriate; e) provide services to the Committee in the area of governmental affairs as requested; and f) perform other legal services as may be required by the Committee in the Debtor's chapter 11 case. Lawrence C. Bolla, Esq., a member at Quinn Buseck, is one of the lead attorneys for the Committee. Mr. Bolla reports Quinn Buseck's professionals bill: Designation Hourly Rate ----------- ----------- Counsel $115 - $250 Paraprofessionals $65 - $90 Quinn Buseck assures the Court that it does not represent any interest materially adverse to the Committee and is a disinterested person as that term is defined in Section 101(14) of the Bankruptcy Code. Headquartered in Erie, Pennsylvania, Lovell Place Limited Partnership, develops and leases residential and commercial real estate. The Company filed for chapter 11 protection on Oct. 15, 2005 (Bankr. W.D. Pa. Case No. 05-15114). Guy C. Fustine, Esq., at Knox McLaughlin Gornall & Sennett, P.C., represents the Debtor in its restructuring efforts. When the Debtor filed for protection from its creditors, it listed total assets of less than $10 million and total debts of $26 million. MANITOWOC INC: Improved Performance Spurs S&P's Positive Outlook ---------------------------------------------------------------- Standard & Poor's Ratings Services revised its outlook on diversified manufacturing company The Manitowoc Co. Inc. to positive from stable. The ratings on the company are affirmed, including the 'BB-' corporate credit rating. "The outlook revision to positive recognizes the company's improved operating performance, especially in its crane operations, as well as its lower debt leverage and continued disciplined financial policies, which, if sustained, could result in a modest upgrade," said Standard & Poor's analyst John Sico. The Manitowoc, Wisconsin-based company had about $500 million in debt outstanding at Sept. 30, 2005. The ratings on Manitowoc reflect: * its weak business risk profile operating in the highly cyclical construction and industrial end markets, and * its aggressive financial profile. Manitowoc provides cranes, food-service equipment, and marine services, three diverse segments in which it holds broad and leading positions. The company also maintains good customer, product, and geographic diversity and oversees low-cost and efficient global manufacturing operations. Manitowoc's crane business, which accounts for more than two-thirds of company revenues, has seen a gradual improvement in operations, and it is expected to continue expanding, even though construction spending generally lags the economy. Before the recent rebound, the construction equipment sector had been particularly affected by the severe decline in nonresidential construction spending that started in 2001, a downturn in which cranes were affected more than other construction equipment. The crane operation's sales and earnings improved in 2004 and 2005, while the heavy-duty/high-capacity crawler crane market in North America is just now beginning to show signs of rebounding. Crane's backlog is up significantly over last year, and the outlook for this business is that there will continue to be gradual improvement as the company moves into 2006. Operating margins rose to 7% in the crane segment, an increase from 4% last year, despite the effect of higher steel costs. The food-service segment accounts for about 20% of sales but contributes a greater proportion of operating earnings. Operating margins in the segment were about 14% through the first nine months of 2005, slightly lower than in the previous year because of higher prices for steel and other commodities. This segment is more focused on the replacement and renovation market than on sales to new locations. Performance in the marine business, which accounts for about 10% of sales, has been disappointing because of the run-up in raw material and labor costs for certain contracts. Improvement in earnings is expected as these contracts unwind, as the company reaps the benefits of its efficiency and cost savings initiatives at its shipyards, and as the prospects for a good winter repair season unfold. The company has struggled to overcome the effect that high steel costs have had on the margins in this segment as well as to control labor and other operating costs rising amid considerable shipbuilding and repair activity. MCLEODUSA INC: Court Okays Rejection of 17 Burdensome Leases ------------------------------------------------------------ McLeodUSA Incorporated and its debtor-affiliates sought and obtained authority from the U.S. Bankruptcy Court for the Northern District of Illinois, Chicago Division, to reject 17 non- residential real property leases effective as of Oct. 31, 2005: Rejection Lessor/Claimant Address Damages Amt. --------------- ------- ------------ B.C. Tower, LLC 76 W. Michigan Ave., B 1/F $24,960 BattleCreek, Michigan Aristocrat Fund 3000 Kellway Drive, Suite 130 1,484,040 XXVII, LP Metroplex Tech Center Carrolton, Texas MBNA Technology Inc. 3000 Kellway Drive, Suite 130 0 Metroplex Tech Center Carrolton, Texas 11th & Ash, LLC 601 E., 18th Ave. 86,240 190 Pearl Plaza Denver, Colorado Rudisill Plaza 201 E. Rudisill Blvd. 326,292 Associates 101 Rudisill Plaza Fort Wayne, Indiana Fortune Associates 1250 S. Home Ave. 6,000 Partnership, LLP Kokomo, Indiana Downtown 818 W. Seventh St. 885,672 Properties, LLC 400 Los Angeles, California J. Michael Irish 1803 Broadway, 1/F 37,284 Lubbock, TX John D. McAdams & 2906 S. Carey St. 6,000 Donelle L. McAdams Marion, Indiana Robert P. Beurskens 2901 South Center St. 7,680 Marshalltown, Iowa Callowhill 401 N. Broad St., 433,224 Management, Inc. Philadelphia, Pennsylvania AP-Knight, LP 14100 San Pedro 58,920 Suite 210 San Antonio, Texas Louisiana-Edwards 401 Edwards St., 102,636 Operating Suite 410 Associates, LP Shreveport, Louisiana McCleary, Inc. 5808 Stateline Road 5,400 South Beloit, Illinois Dorothy D. Booker 226 Highland St., 14,329 Suite B Springfield, Illinois John R. & Sandra G. 1001 S. 9th Street 2,400 Hockenyos Springfield, Illinois Intervest - 15 East 5th Street 238,733 First Place Tulsa Suites 200, 221 and 305 Limited Partnership Tulsa, Oklahoma The Rejection Leases provided the Debtors with facilities for housing their telecommunications equipment and sales and general administrative offices. Timothy Pohl, Esq., at Skadden, Arps, Slate, Meagher & Flom, LLP, tells the Court that the Leases are no longer necessary to the Debtors' ongoing operations. Moreover, the rent and other expenses due under the Leases constitute an unnecessary drain on the Debtors' cash flow. The Debtors do not believe that they would be able to obtain any value for the Leases by assignment to third parties. The Court directs the Debtors to make postpetition payments due under the Rejection Leases, to the extent the payments are required under Section 365(d)(3) of the Bankruptcy Code. Procedures for Allowing Rejection Claim Damages The Debtors will serve on each party to the Lease a notice, which will state the proposed Lease Rejection Claim amount for each of the Leases. Any landlord that disputes the amount of the Lease Rejection Claim Amount set forth in the Rejection Damages Notice must file a proof of claim with the Court and serve it on the counsel to the Debtors and the counsel to the Prepetition Lenders by Nov. 23, 2005. Any proof of claim must state with specificity what damages the party to the rejected lease believes is appropriate, along with appropriate support documentation. If no proof of claim is timely received by the Claims Deadline, the Lease Rejection Claim Amount set forth will automatically become the allowed amount of the Lease Rejection Claim for purposes of distributions to the holder of the Lease Rejection Claim under the Plan, and the non-debtor party to the Rejection Lease will be forever barred from asserting any other claim arising out of rejection of the Rejection Lease. If a proof of claim is received, the objecting party and the Debtors may attempt to resolve the dispute on a consensual basis. If the parties consensually reach a resolution as to the allowed amount of the Lease Rejection Claim Amount, the Debtors will file a notice with the Court setting forth the amount. If the parties are unable to reach a resolution of the disputed amount of the claim, the Debtors will ask the Court to schedule a hearing date to set the Lease Rejection Claim Amount. Headquartered in Cedar Rapids, Iowa, McLeodUSA Incorporated -- http://www.mcleodusa.com/-- provides integrated communications services, including local services in 25 Midwest, Southwest, Northwest and Rocky Mountain states. The Debtor and its affiliates filed for chapter 11 protection on Oct. 28, 2005 (Bankr. N.D. Ill. Case Nos. 05-53229 through 05-63234). Peter Krebs, Esq., and Timothy R. Pohl, Esq., at Skadden, Arps, Slate, Meagher and Flom, represent the Debtors in their restructuring efforts. As of June 30, 2005, McLeodUSA Incorporated reported $674,000,000 in total assets and $1,011,000,000 in total debts. McLeodUSA Inc. previously filed for chapter 11 protection on January 30, 2002 (Bankr. D. Del. Case No. 02-10288). The Court confirmed the Debtor's chapter 11 plan on April 5, 2003, and that Plan took effect on April 16, 2002. The Court formally closed the case on May 20, 2005. (McLeodUSA Bankruptcy News, Issue No. 4 Bankruptcy Creditors' Service, Inc., 215/945-7000). MCLEODUSA INC: Wants to Establish Lease Assumption Procedures ------------------------------------------------------------- Pursuant to their Plan of Reorganization, McLeodUSA Incorporated and its debtor-affiliates are authorized to enter into any sale of assets pursuant to a sale contract approved by the board of directors of each Debtor party and consented to by the Majority Prepetition Lenders. Accordingly, the Debtors will designate unexpired leases and executory contracts to be assumed and assigned to asset purchasers under an Authorized Asset Sale. With respect to the Assigned Contracts, the Debtors will serve on each party to an Assigned Contract a notice of assumption and assignment. The Assumption and Cure Notice will: -- state the Cure Amount; -- identify the proposed assignee; and -- notify each party that the party's lease or contract will be assumed and assigned to the designated asset purchaser. Any objection to the Cure Amount or the Lease Assumption and Assignment must be filed within 15 days of the mailing date of the Assumption and Cure Notice. Any objection to the Cure Amount must state with specificity what cure the party to the Assigned Contract believes is required with appropriate support documentation. The Debtors will work with any objecting party to resolve disputes related to the Cure Amount. If the parties cannot resolve the dispute related to the Cure Amount, then the matter will be set for hearing before the Court. If no objection is timely received, the Cure Amount set forth in the Assumption and Cure Notice will be controlling notwithstanding anything to the contrary in any Assigned Contract or other document, and the non-debtor party to the Assigned Contract will be forever barred from asserting any other claim arising prior to the assignment against the Debtors or the Purchaser as to the Assigned Contract. Headquartered in Cedar Rapids, Iowa, McLeodUSA Incorporated -- http://www.mcleodusa.com/-- provides integrated communications services, including local services in 25 Midwest, Southwest, Northwest and Rocky Mountain states. The Debtor and its affiliates filed for chapter 11 protection on Oct. 28, 2005 (Bankr. N.D. Ill. Case Nos. 05-53229 through 05-63234). Peter Krebs, Esq., and Timothy R. Pohl, Esq., at Skadden, Arps, Slate, Meagher and Flom, represent the Debtors in their restructuring efforts. As of June 30, 2005, McLeodUSA Incorporated reported $674,000,000 in total assets and $1,011,000,000 in total debts. McLeodUSA Inc. previously filed for chapter 11 protection on January 30, 2002 (Bankr. D. Del. Case No. 02-10288). The Court confirmed the Debtor's chapter 11 plan on April 5, 2003, and that Plan took effect on April 16, 2002. The Court formally closed the case on May 20, 2005. (McLeodUSA Bankruptcy News, Issue No. 4 Bankruptcy Creditors' Service, Inc., 215/945-7000). MERISANT WORLDWIDE: Revenue Decline Spurs S&P to Junk Debt Rating ----------------------------------------------------------------- Standard & Poor's Ratings Services lowered its ratings on low-calorie sweetener processor Merisant Worldwide Inc. and its wholly owned operating subsidiary Merisant Co., including its corporate credit rating to 'CCC+' from 'B-'. Total debt outstanding on a consolidated basis was about $534.3 million as of Sept. 30, 2005. "The downgrade reflects financial performance below expectations, and continued declining revenue across several geographic regions, mostly evidenced in the North American markets," said Standard & Poor's credit analyst Mark Salierno. For the first nine months of fiscal 2005, total net sales declined to $230.1 million from $251.3 million over the same period of 2004, a decline of 8.4%. Sales fell 18.2% and 18.3% within North America and Latin America respectively, driven by lower sales volume in food service and grocery channels. The low-calorie sweetener industry is experiencing favorable growth trends driven by: * increased health-consciousness, * higher incidence of diabetes/glucose intolerance, and * favorable demographics. However, Merisant has not capitalized on this growth due to an increasingly challenging competitive landscape. Moreover, profitability continues to be affected by a less favorable product mix, primarily due to softness in the higher-margin grocery segment and the introduction of lower-margin product offerings introduced in the club channel to recoup volume and become more price competitive. Heightened competition has limited opportunities to push through price increases in all channels, and will force the company to spend heavily on advertising to retain market share, further pressuring margins. MERRILL LYNCH: Fitch Affirms BB Rating on Class B-2 Certificates ---------------------------------------------------------------- Fitch Ratings has taken rating actions on Merrill Lynch Bank: MLB USA Series 2001-A Group 1: -- Class A affirmed at 'AAA'; -- Class M-1 affirmed at 'AA'; -- Class M-2 affirmed at 'A'; -- Class B-1 affirmed at 'BBB'; -- Class B-2 affirmed at 'BB'. The collateral consists of high balance, adjustable rate mortgage loans secured by first liens on one- to four-family residential properties, condominiums and shares issued by private non-profit housing corporations and related proprietary leases or occupancy agreements. Merrill Lynch Credit Corporation originated or acquired all of the mortgage loans. The loans are currently being serviced by PHH Mortgage Corp., rated 'RPS1' by Fitch. At issuance, the mortgage loans had a weighted average FICO of 692 and a weighted average loan-to-value ratio of 85%. All of the loans have stated maturities of 25 years. In contrast to most prime residential transactions, the trust does benefit from excess interest in protection against losses resulting from liquidated loans. To date there has been less than 1 basis point of realized losses when compared to the original principal balance of the collateral. The affirmations, affecting $213 in outstanding principal, reflect Fitch's expectations that there is sufficient credit enhancement to protect the certificates against future losses. Further information regarding current delinquency, loss, and credit enhancement statistics is available on the Fitch Ratings Web site at http://www.fitchratings.com/ MERRILL LYNCH: S&P Assigns Low-B Ratings to $53.8MM Cert. Classes ----------------------------------------------------------------- Standard & Poor's Ratings Services assigned its preliminary ratings to Merrill Lynch Mortgage Trust 2005-CKI1's $3.073 billion commercial mortgage pass-through certificates series 2005-CKI1. The preliminary ratings are based on information as of Nov. 15, 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 fiscal agent, * the economics of the underlying loans, and * the geographic and property type diversity of the loans. Classes A-1, A-1D, A-2, A-3, A-1A, A-4, A-4FL, A-SB, A-5, A-M, A- J, B, C, and D are currently being offered publicly. The remaining classes will be offered privately. Standard & Poor's analysis determined that, on a weighted average basis, the pool has a debt service coverage of 1.55x, a beginning LTV of 98.8%, and an ending LTV of 87.5%. 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 he 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 Merrill Lynch Mortgage Trust 2005-CKI1 Recommended Class Rating Amount Credit Support ----- ------ ------ -------------- A-1 AAA $98,700,000 30.000% A-1D AAA $75,000,000 30.000% A-2 AAA $196,600,000 30.000% A-3 AAA $94,677,000 30.000% A-1A AAA $140,930,000 30.000% A-4 AAA $150,000,000 30.000% A-4FL AAA $150,000,000 30.000% A-SB AAA $176,000,000 30.000% A-5 AAA $1,069,709,000 30.000% A-M AAA $307,374,000 20.000% A-J AAA $234,372,000 12.375% B AA $53,791,000 10.625% C AA- $26,895,000 9.750% D A $53,790,000 8.000% E A- $30,738,000 7.000% F BBB+ $53,790,000 5.250% G BBB $30,738,000 4.250% H BBB- $34,579,000 3.125% I BB+ $7,685,000 2.875% K BB $11,526,000 2.500% L BB- $11,527,000 2.125% M B+ $3,842,000 2.000% N B $7,684,000 1.750% P B- $11,527,000 1.375% Q NR $42,264,027 N/A X AAA $3,073,738,027* N/A * Notional dollar amount. NR -- Not rated. N/A -- Not applicable. MESABA AVIATION: MAIR Holdings Reports Second Quarter Results ------------------------------------------------------------- MAIR Holdings, Inc. (Nasdaq:MAIR) reported a net loss of $25.5 million, for the fiscal year 2006, second quarter ended Sept. 30, 2005, compared to net earnings of $4.7 million, during the same quarter a year ago. The loss is primarily due to a pre- tax charge of $36.5 million for impairment and other charges, primarily related to the recent bankruptcy filing of Northwest Airlines, Inc. "Northwest's bankruptcy filing and its subsequent actions had a negative impact on us," said Paul Foley, MAIR Holdings' president and chief executive officer. "These events led directly to the Chapter 11 filing by our Mesaba Aviation subsidiary and are responsible for much of the second quarter adverse financial results. As we go forward, we plan to help both of our subsidiaries navigate through this turbulent period in the airline industry and emerge as competitive low cost and attractive operators and partners." The $36.5 million impairment and other charges, along with approximately $4.6 million in start up expenses associated with the CRJ operation at Mesaba, were the primary reasons for the decrease in operating results to a loss of $40.2 million in the second quarter of fiscal 2006 compared to operating income of $7.5 million in the second quarter of fiscal 2005. Operating revenue for the second quarter increased 0.6% to $114.9 million compared with $114.2 million during the same quarter a year ago. Operating expenses for the second quarter increased 45.4% to $155.1 million compared with $106.7 million during the same quarter a year ago. The impairment and other charges of $36.5 million consisted of: * a $31.9 million reserve for prepetition amounts due from Northwest to Mesaba for services provided by Mesaba prior to the date on which Northwest filed its bankruptcy petition (net of certain offsetting liabilities), * a $2.1 million charge to write off the unamortized portion of the warrants that expired in the second quarter as part of Mesaba's new airline services agreement with Northwest, and * a $2.5 million goodwill impairment charge associated with Big Sky Airlines. In addition to Mesaba's charge relating to the Northwest prepetition receivable, Northwest has, since its bankruptcy filing, implemented and proposed various changes to Mesaba's fleet. Specifically, nine of the Avro regional jets operated by Mesaba were taken out of Northwest's schedule as of Oct. 31, 2005, and Northwest has indicated its intent to remove additional aircraft from Mesaba's fleet in the future. Mesaba's decision to file for Chapter 11 bankruptcy protection on Oct. 13, 2005 was a direct result of Northwest's missed payments and its subsequent fleet changes. However, despite recording a reserve for the Northwest receivable, Mesaba intends to assert all legal rights and remedies it may have to attempt to recover the receivable. Additionally, Mesaba will continue to formulate its bankruptcy reorganization plan. Big Sky Transportation Co., d/b/a Big Sky Airlines, -- http://www.bigskyair.com/-- currently serves 20 communities in Montana, Colorado, Idaho, Oregon, Washington and Wyoming with a fleet of 19 passenger Beechcraft 1900D aircraft. Big Sky is based in Billings, Montana and has codeshare agreements with Northwest Airlines, Alaska Airlines, Horizon Air and America West Airlines which allows customers the convenience of traveling with one ticket, through baggage checking and economical through fares, to destinations throughout the world. Big Sky is a provider of air service under the Essential Air Service program administered by the Department of Transportation. MAIR Holdings, Inc.'s -- http://www.mairholdings.com/-- primary business units are its regional airline subsidiary Mesaba Aviation, Inc., d/b/a Mesaba Airlines, and its regional airline subsidiary Big Sky Transportation Co., d/b/a Big Sky Airlines. MAIR Holdings, Inc. is traded under the symbol MAIR on the NASDAQ National Market. 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 AVIATION: Court OKs Payment of Employees' Prepetition Wages ------------------------------------------------------------------ As reported in the Troubled Company Reporter Oct. 24, 2005, Mesaba Aviation, Inc., sought the U.S. Bankruptcy Court for the District of Minnesota's authorization to pay: a. all wages, salaries and benefits earned and accrued for the Employees since Sept. 24, 2005, with payments not exceeding $6.2 million: Payment Payroll Employees Date Amount Period --------- --------- ---------- --------- Pilots, flight 09/24/05- attendants & mechanics 10/14/05 $3,200,000 10/07/05 Ground operations, dispatchers, management 10/01/05- & clerical 10/21/01 1,500,000 10/13/05 Pilots, flight 10/08/05- attendants & mechanics 10/28/05 1,500,000 10/13/05 b. employee claims under the Benefit Plan which have accrued prepetition and remain unpaid totaling around $1.2 million; and c. the employer's share of all federal, state and local payroll taxes, and 401(k) contributions, pertaining to the payment of those prepetition wages and salaries in an amount not to exceed $800,000. The Honorable Gregory F. Kishel authorizes the Debtor to pay its employees all wages, salaries and benefits earned and accrued on or after Sept. 24, 2005, with the payments not to exceed $8,500,000 in the aggregate, including related federal, state, and local payroll taxes, deductions and withholdings and related employer 401(k) contributions. 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. 3; Bankruptcy Creditors' Service, Inc., 215/945-7000) MIRANT CORP: Unsecured Creditors & Shareholders Approve Plan ------------------------------------------------------------ Mirant Corp.'s (Pink Sheets: MIRKQ) Second Amended Chapter 11 Plan of Reorganization has been widely accepted by the key classes of creditors and shareholders created under the Plan. The final voting tabulation shows that over 97% of Mirant's unsecured creditors and shareholders who voted on the Plan approved it. The unsecured creditors voting in favor of the Plan hold more than 80% of the unsecured debt that voted. The Plan was also accepted by the unsecured creditor classes of most of Mirant's debtor-subsidiaries, including Mirant Americas Generation LLC, Mirant Americas Energy Marketing, and Mirant Americas, Inc. "The strong vote of support for our Plan of Reorganization is another major milestone in Mirant's Chapter 11 case," said M. Michele Burns, Mirant's chief restructuring officer, who has led the company's reorganization process. "It signals that both our creditors and shareholders have confidence in the Plan and believe that they have been treated fairly." Added Mr. Burns, "In the last three months, we have achieved strong momentum toward emergence from bankruptcy and positioned the new Mirant to be a much stronger competitor. Along with our core constituents voting for a Plan of Reorganization that will cut our total debt by nearly half, we have obtained commitments for over $2.3 billion in loans to finance the business upon exit from Chapter 11. Coupled with our current cash and cash equivalents of over $1 billion and expected debt reduction, Mirant can emerge from bankruptcy with one of the strongest balance sheets in the merchant power sector." The widespread approval of the Plan by Mirant's creditors and shareholders clears the way for the company to proceed toward a confirmation hearing on the Plan before the United States Bankruptcy Court for the Northern District of Texas. The hearing is currently scheduled to begin on Dec. 1, 2005. "With our Chapter 11 case moving toward a close, we will move forward to create value by being disciplined in all we do," said Edward R. Muller, Mirant's chairman and chief executive officer. Despite the Plan's support by all three of Mirant' statutory creditor and shareholder committees, and the Plan's formal acceptance by the company's principal constituencies, some creditor classes of subsidiaries of Mirant voted against the Plan and a number of parties also filed objections to the Plan's confirmation. At the Dec. 1, 2005, hearing, Mirant will ask the Court to overrule any such opposition to the Plan that has not been resolved before or at the hearing. 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. NETWORK PLUS: Ch. 7 Trustee Taps Dilks to Recover Unclaimed Funds ----------------------------------------------------------------- Michael B. Joseph, the Chapter 7 Trustee overseeing the liquidation of Network Plus, Inc., and its debtor-affiliates' estates, asks the U.S. Bankruptcy Court for the District of Delaware for authority to employ Dilks & Knopik, LLC, as professional funds locator. The Trustee needs Dilks to identify unclaimed funds, which Mr. Joseph can't do on his own. Dilks has extensive knowledge and expertise in collecting unclaimed funds, the Trustee says. The Trustee proposes to pay Dilks a one-third contingency fee of any unclaimed funds recovered for its services. Jeffrey Hudspeth, an associate at Dilks & Knopik, assures the Court of the firm's "disinterestedness" as that term is defined in Section 101(14) of the Bankruptcy Code. Network Plus Corp., a network-based integrated communications provider, which offers broadband data and telecommunications services, filed for chapter 11 protection on February 04, 2002 (Bankr. Del. Case No. 02-10341). On June 11, 2003, the Debtors' cases were converted into chapter 7 liquidation proceedings. Michael B. Joseph was appointed chapter 7 trustee. Jonathan M. Stemerman, Esq., of Wilmington, Del., represents the chapter 7 trustee. Edward J. Kosmowski, Esq., Joel A. White, Esq., and Maureen D. Like, Esq., at Young Conaway Stargatt & Taylor represents the Debtors. As of Sep 30, 2001, the Debtors post $433,239,000 in total assets and $371,300,000 in total debts. NEWAVE INC: Sept. 30 Balance Sheet Upside-Down by $2.15 Million --------------------------------------------------------------- NeWave, Inc. (OTC Bulletin Board: NWWV) reported third quarter results for the period ended Sept. 30, 2005. Gross revenue for the three months ended Sept. 30, 2005, was $1,777,000 compared to $2,105,000 for the three month period ended Sept. 30, 2004. Gross revenue for the nine months ended Sept. 30, 2005 was $5,021,000 compared to $4,762,000 for the same period in 2004. NeWave CFO Paul Daniel stated, "Although our revenue for the quarter was slightly down versus last year, our year to date revenue is still outpacing last year's results. We took significant non-cash charges of approximately $1.3 million in the quarter as we begin to position ourselves for expected bottom line growth in 2006." NeWave CEO Michael Hill commented, "Over the past six months we have publicly stated our goal of continuing to grow our revenue but have also focused our efforts in becoming profitable. To that end we have recently; (i) moved towards discontinuing the cash intensive and non- profitable operations of 'Auction Liquidator' and 'Discount Online Warehouse'; (ii) focused on growing memberships while reducing the cost structure of our core business 'onlinesupplier.com'; and (iii) have begun to explore potential strategic acquisitions which we believe would add synergies and scale to our business." Mr. Hill added, "I believe in the coming months, NeWave will be well positioned to experience significant top and bottom line growth in 2006." NeWave, Inc. is a leading online auction and e-commerce company which through its wholly-owned subsidiary "onlinesupplier.com", is engaged in providing online solutions and tools to its customers for monthly membership fees. NeWave provides its members with a commercial website, hosting, a merchant account (PayPal, Visa & Mastercard) and access to thousands of high value products and value-added services. Since inception in August of 2003, "onlinesupplier.com" has serviced over 235,000 paid members. At Sept. 30, 2005, NeWave, Inc.'s balance sheet showed a $2,150,021 stockholders' deficit compared to a $224,074 positive equity at Dec. 31, 2004. NORTHWEST AIRLINES: Equity Deficit Widens to $4.31BB at Sept. 30 ---------------------------------------------------------------- Northwest Airlines Corporation delivered its quarterly report on Form 10-Q for the quarter ending Sept.30, 2005, to the Securities and Exchange Commission on Nov. 9, 2005. Operating revenues increased 10.7% by $326 million to $3.38 billion, the result of higher system passenger, regional carrier, cargo and other revenues. Operating expenses increased 19.2% by $572 million to $3.55 billion. Non-operating expense increased 157% by $184 million to $301 million primarily due to reorganization expenses that totaled $159 million. The net result for the quarter was a $469 million loss. As of Sept. 30, 2005, the Company had cash, cash equivalents and short-term investments of $2.11 billion. This amount includes $520 million of restricted cash, cash equivalents and short-term investments, resulting in available liquidity of $1.59 billion. Liquidity decreased by $867 million during the nine months ended Sept. 30, 2005, largely due to net losses, capital expenditures, debt payments, funding of the Company's irrevocable tax trust and certain cash holdbacks and deposits required by various transaction processors as a result of the Company's bankruptcy filing. At Sept. 30, 2005, the Company's balance sheet shows $13.96 billion in total assets and $18.27 billion in total debts. As of September 30, 2005, Northwest Airlines' equity deficit widened to $4.31 billion from a $3.09 billion deficit at Dec. 31, 2004. The Company's management said the Company's ability to continue as a going concern depends on its ability to, among others: * obtain and maintain any necessary financing for operations and other purposes, whether debtor-in-possession financing or other financing; * maintain adequate liquidity; * absorb escalating fuel costs; * obtain court approval with respect to motions in the Chapter 11 proceedings prosecuted by it from time to time; or * develop, confirm and consummate a plan of reorganization with respect to the Chapter 11 proceedings. The Company's bankruptcy filing triggered defaults on substantially all the Company's debt and lease obligations. Under Section 362 of the Bankruptcy Code, the filing of a bankruptcy petition automatically stays most actions against a debtor, including most actions to collect pre-petition indebtedness or to exercise control over the property of a debtor's estate. Absent an order of the Bankruptcy Court, substantially all prepetition liabilities are subject to settlement under the plan of reorganization. A full-text copy of the regulatory filing is available at no charge at http://ResearchArchives.com/t/s?2e8 Northwest Airlines Corporation -- http://www.nwa.com/-- is the world's fourth largest airline with hubs at Detroit, Minneapolis/St. Paul, Memphis, Tokyo and Amsterdam, and approximately 1,400 daily departures. Northwest is a member of SkyTeam, an airline alliance that offers customers one of the world's most extensive global networks. Northwest and its travel partners serve more than 900 cities in excess of 160 countries on six continents. The Company and 12 affiliates filed for chapter 11 protection on Sept. 14, 2005 (Bankr. S.D.N.Y. Lead Case No. 05- 17930). Bruce R. Zirinsky, Esq., and Gregory M. Petrick, Esq., at Cadwalader, Wickersham & Taft LLP in New York, and Mark C. Ellenberg, Esq., at Cadwalader, Wickersham & Taft LLP in Washington represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $14.4 billion in total assets and $17.9 billion in total debts. NORTHWEST AIRLINES: TWU Ratifies Long-Term Labor Contract --------------------------------------------------------- Northwest Airlines (OTC: NWACQ) disclosed that members of the Transport Workers Union has ratified a long-term labor cost restructuring agreement on Nov. 16, 2005. The contract is the second long-term labor cost restructuring agreement ratified by one of its seven unions that provides the total contribution from a work group toward the $1.4 billion in annual labor cost reductions the airline is seeking as part of its re-organization. "We appreciate the commitment that our TWU-represented employees have shown with ratification of this contract to building a stronger Northwest," said Julie Showers, vice president of labor relations. "Reaching another consensual agreement with one of our unions builds on the progress we have already made in achieving our labor cost savings goal." The TWU represents approximately 160 flight dispatchers and planners at Northwest, all of whom work in Minneapolis/St. Paul. The agreement represents $1.5 million in annual labor cost savings for the airline and will be in effect until the conclusion of the fourth full calendar year after the airline emerges from its Chapter 11 re-organization. On Nov. 14, 2005, members of the Northwest chapter of the Air Line Pilots Association ratified an interim agreement that provides the company with needed cost savings while providing the airline and ALPA with additional time to negotiate a long-term agreement. Northwest has also reached an interim agreement with the Professional Flight Attendants Association. A tentative agreement on long-term wage and benefit reductions with employees represented by the Northwest Airlines Meteorology Association has been reached and is out for ratification. Northwest Airlines Corporation -- http://www.nwa.com/-- is the world's fourth largest airline with hubs at Detroit, Minneapolis/St. Paul, Memphis, Tokyo and Amsterdam, and approximately 1,400 daily departures. Northwest is a member of SkyTeam, an airline alliance that offers customers one of the world's most extensive global networks. Northwest and its travel partners serve more than 900 cities in excess of 160 countries on six continents. The Company and 12 affiliates filed for chapter 11 protection on Sept. 14, 2005 (Bankr. S.D.N.Y. Lead Case No. 05- 17930). Bruce R. Zirinsky, Esq., and Gregory M. Petrick, Esq., at Cadwalader, Wickersham & Taft LLP in New York, and Mark C. Ellenberg, Esq., at Cadwalader, Wickersham & Taft LLP in Washington represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $14.4 billion in total assets and $17.9 billion in total debts. NORTHWEST AIRLINES: Court Imposes Interim Pay Cuts on IAM Unit -------------------------------------------------------------- The U.S. Bankruptcy Court for the Southern District of New York granted Northwest Airlines' (OTC: NWACQ) request for temporary wage and benefit cuts of $114 million on an annual basis for the carrier's employees represented by the International Association of Machinists and Aerospace Workers. As reported in the Troubled Company Reporter on Nov 9, 2005, Northwest reached interim labor cost savings agreements with the Air Lines Pilots Association and the Professional Flight Attendants Association. The ALPA Master Executive Council agreed to temporary pay and other reductions of $215 million on an annualized basis and PFAA leaders agreed to cuts of $117 million. The interim pay reductions for the three unions are effective today. As reported in the Troubled Company Reporter on Nov. 14, 2005, Northwest reported that the membership of the Aircraft Technical Support Association has ratified a long-term labor cost restructuring agreement with the company. The airline also has a tentative agreement with the Northwest Airlines Meteorology Association. "With [yester]day's court action, we now have interim pay reductions in place with our three large unions that provide Northwest Airlines with immediate labor cost savings. We must now complete our discussions with union leaders on long-term agreements," said Doug Steenland, president and chief executive officer. Mr. Steenland continued, "Another key milestone in our ongoing restructuring efforts is the permanent wage and benefit reductions we achieved with the Aircraft Technical Support Association and the Transport Workers Union of America." "Those agreements, teamed with a tentative agreement with the Northwest Airlines Meteorology Association, along with two rounds of salaried and management pay cuts and the labor cost savings achieved through Northwest's new aircraft maintenance program, are essential to the airline's continuing efforts to achieve a competitive cost structure." "We sincerely appreciate the financial sacrifices our employees are making to help ensure that Northwest completes its restructuring process and emerges as a strong, global competitor," Steenland concluded. Northwest Airlines Corporation -- http://www.nwa.com/-- is the world's fourth largest airline with hubs at Detroit, Minneapolis/St. Paul, Memphis, Tokyo and Amsterdam, and approximately 1,400 daily departures. Northwest is a member of SkyTeam, an airline alliance that offers customers one of the world's most extensive global networks. Northwest and its travel partners serve more than 900 cities in excess of 160 countries on six continents. The Company and 12 affiliates filed for chapter 11 protection on Sept. 14, 2005 (Bankr. S.D.N.Y. Lead Case No. 05- 17930). Bruce R. Zirinsky, Esq., and Gregory M. Petrick, Esq., at Cadwalader, Wickersham & Taft LLP in New York, and Mark C. Ellenberg, Esq., at Cadwalader, Wickersham & Taft LLP in Washington represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $14.4 billion in total assets and $17.9 billion in total debts. O'SULLIVAN IND: Trustee Balks at Company Keeping Investment Funds ----------------------------------------------------------------- Felicia S. Turner, the United States Trustee for Region 21, tells the U.S. Bankruptcy Court for the Northern District of Georgia that O'Sullivan Industries Holdings, Inc., and its debtor- affiliates' request for a waiver of the bond requirement in Section 345(b) of the Bankruptcy Code is totally inconsistent with the protections, which the Bankruptcy Code provision seeks to provide. Succinctly stated, the U.S. Trustee relates that the funds held by the Debtors' estates must be FDIC insured, collateralized or bonded. "Since the goal of this provision of the Bankruptcy Code is the protection of creditors of the Debtors' estates, any deviation from the strict requirements of this provision requires extraordinary circumstances which the Debtors have not demonstrated exist here," the U.S. Trustee asserts. "Such deviation, however, may not include total absolution of the Debtors from the requirement to provide precautions to preserve estate funds, which is what the Debtors are requesting." The U.S. Trustee states that prior to the Bankruptcy Reform Act of 1994, a strict reading of Section 345(b) compelled that the requirements for safeguarding estate funds could not be modified or waived. Accordingly, the U.S. Trustee notes, Congress does intend to permit the court to waive or modify the strict requirements of Section 345(b) for cause shown. The waiver or modification, however, is contingent upon the ability of the Debtors to provide other investments to preserve the estates' funds on behalf of creditors, the U.S. Trustee explains. Accordingly, the U.S. Trustee asks the Court to deny the Debtors' request. 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. (O'Sullivan Bankruptcy News, Issue No. 5; Bankruptcy Creditors' Service, Inc., 215/945-7000) PANTRY INC: Moody's Rates $130 Million Convertible Notes at B3 -------------------------------------------------------------- Moody's Investors Service rated the proposed secured bank loan and senior subordinated convertible notes of The Pantry, Inc. at Ba3 and B3, respectively, and affirmed the existing senior subordinated notes at B3 and the corporate family rating at B1. Proceeds from the new debt principally will be used to repay the existing term loan. Constraining the ratings are: * the risks inherent in the company's strategy of rolling up small convenience store chains; * expected pressures on gasoline and tobacco unit volumes; and * the sizable fixed charge burden. The ratings anticipate that gasoline profitability will retreat to a normalized level following unprecedented highs during 2005. However, the company's status as the third largest chain of non- oil company convenience stores and progress in gasoline and merchandise margins support the ratings. The rating outlook remains stable. These ratings are assigned, subject to review of final documentation: -- $330 million NEW secured bank loan at Ba3 -- $130 million senior subordinated convertible notes at B3 These ratings are affirmed: -- $250 million 7.75% senior subordinated notes (2014) at B3 -- Corporate Family Rating (previously called the Senior Implied Rating) at B1 The B1 rating on the existing $375 million bank loan will be withdrawn following completion of the proposed transaction. The ratings reflect: * sales concentration in the high-volume; * low-margin categories of gasoline and tobacco (price and demand for both products outside the control of any one company); * the intense competition in gas and convenience retailing including with large oil companies and non-traditional gasoline retailers such as Wal-Mart (senior unsecured rating of Aa2); and * Moody's concern that retail fuel demand will eventually be impacted if energy prices remain near historically high levels. Also constraining the ratings are: * the post-transaction debt protection measures; * Moody's expectation that using most discretionary cash flow for acquisitions will slow the pace of credit metric improvements; and * the belief that overall demand for tobacco products will continue to fall. However, the ratings are supported by: * the medium-term inelasticity of fuel demand regardless of retail price; * the purchasing and operating efficiencies derived from the company's relatively large size in the convenience store industry; and * the steady growth of commissions and non-tobacco merchandise sales. Also benefiting the ratings are: * the success of initiatives to raise gasoline gross profit through consolidated purchasing; * management's pattern of fiscal discipline with the acquisition program; and * the successful track record of improving operating, merchandising, and purchasing practices at the acquired stores. The stable rating outlook acknowledges: * the company's success at consistently increasing commission and non-tobacco merchandise revenue relative to fuel and tobacco; * the ability of the company to source fuel from a variety of sources given its relatively large size in the convenience store industry; and * Moody's expectation that debt protection measures will modestly improve. The ratings are not based on the expectation that high levels of gasoline profitability in the September 2005 quarter will become the norm. Ratings could fall if EBITDAR failed to cover interest expense, rent, capital expenditures, and acquisitions, or liquidity tightened from permanent borrowings on the revolving credit facility. Over the longer term, ratings could move upward as: * EBITDAR consistently covers interest expense, rent, capital expenditures by more than 1.2 times; * lease adjusted leverage sustainably falls below 4 times; * average unit volume and operating profit grow even as non-traditional competitors open additional fuel retailing locations; and * the company achieves satisfactory returns on investment with its strategies to increase store count. The Ba3 rating on the proposed bank loan (to be comprised of a $125 million Revolving Credit Facility and a $205 million Term Loan) recognizes the security provided by substantially all tangible and intangible assets of the company and its subsidiaries, as well as the equity shares and guarantees of material operating subsidiaries. The bank loan rating relative to the corporate family rating reflects the increased proportion of junior debt in the capital structure and Moody's opinion that orderly liquidation value of tangible assets exceeds the secured debt commitment. The bank agreement is expected to permit acquisitions if pro-forma revolver availability is greater than $20 million and pro-leverage leverage is at least 0.25 times less than the covenant requirement. Going forward, Moody's expects that acquisitions will be financed out of discretionary free cash flow and the revolving credit facility will be used only to bridge temporary cash flow timing differences. Pro-forma for the transaction, all of the revolving credit facility would have been available except for $41 million issued for letters of credit. The B3 rating on the senior subordinated notes considers that this debt is guaranteed by the company's operating subsidiaries. However, this subordinated class of debt is contractually subordinated to significant amounts of more senior obligations. As of September 2005, the more senior claims principally would have been comprised of the bank loan, about $193 million of lease financing obligations, and $140 million of trade accounts payable. The bond indenture permits acquisitions if the pro-forma fixed charge to EBITDA ratio is greater than 2.0:1. The B3 rating on the proposed seven-year senior subordinated convertible notes reflects Moody's opinion that these notes rank equally with the senior subordinates notes (2014) in priority of claim. For purposes of credit metric calculations, Moody's treats these convertible notes as 100% debt. Moody's expects that the conversion price will be approximately 30% greater than the issue date equity price (currently around $40 per share). Revenue has substantially increased because of rising fuel prices, ongoing acquisitions, and continued strong gasoline demand (gallons sold per store increase of 4.7% in the September 2005 fiscal year). Merchandise (excluding tobacco) comparable store sales have also increased as the company adjusts the merchandise mix at existing and newly acquired stores. Pro-forma for the new capital structure, Moody's estimates that lease adjusted leverage was about 5 times and fixed charge coverage was around 2 times. Moody's expects that gasoline profitability will decline from recent peaks and growing competition will pressure fuel margins over the longer term. Moody's anticipates that the company will maintain ample liquidity by modulating the pace of acquisitions and new store development The Pantry, Inc, with headquarters in Sanford, North Carolina and operations across the Southeast and adjoining states, operates 1400 convenience stores. Revenue for the 12 months ending September 2005 equaled $4.4 billion. PBS ENTERPRIZES: Voluntary Chapter 11 Case Summary -------------------------------------------------- Debtor: PBS Enterprizes, Inc. dba Days Inn of Cody aka Luxury Inn of Cody, Inc. 408 West 23rd, Suite 1 Cheyenne, Wyoming 82001 Bankruptcy Case No.: 05-23222 Type of Business: The Debtor is a Days Inn franchisee. See http://www.daysinn.com/ Chapter 11 Petition Date: November 1, 2005 Court: District of Wyoming (Cheyenne) Judge: Peter J. McNiff Debtor's Counsel: Paul Hunter, Esq. Law Office of Paul Hunter 2616 Central Avenue Cheyenne, Wyoming 82001 Tel: (307) 637-0212 Estimated Assets: $1 Million to $10 Million Estimated Debts: $1 Million to $10 Million The Debtor did not file a list of its 20 Largest Unsecured Creditors. PLYMOUTH RUBBER: Wants More Time to File Plan & Solicit Votes ------------------------------------------------------------- Plymouth Rubber Company Inc., and Brite-Line Technologies, Inc., ask the U.S. Bankruptcy Court for the District of Massachusetts, Eastern Division, for an extension of their time to file a chapter 11 plan and solicit acceptances of that plan from their creditors. The Debtors want their plan-filing deadline extended to Jan. 31, 2006, and want until Mar. 31, 2006, to solicit acceptances of that plan. The Debtors assert that their cases are complex because of the disputed priority of the various secured claims. Despite this, the Debtors have made substantial progress in stabilizing their business and smoothing their cash flow. Also, the Debtors have implemented their plan to transition manufacturing operations to China. The Debtors need the extension to negotiate for the terms of a consensual plan among their three secured creditors as well as with the Official Committee of Unsecured Creditors. Headquartered in Canton, Massachusetts, Plymouth Rubber, Inc., manufactures and distributes plastic and rubber products, including automotive tapes, insulating tapes, and other industrial tapes, mastics and films. Through its Brite-Line Technologies subsidiary, Plymouth manufactures and supplies highway marking products. The Company and its subsidiary filed for chapter 11 protection on July 5, 2005 (Bankr. D. Mass. Case Nos. 05-16088 through 05-16089). Victor Bass, Esq., at Burns & Levinson LLP, represents the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they estimated $10 million to $50 million in assets and debts. PRECISE TECH: Rexam's Purchase Prompts S&P to Review Ratings ------------------------------------------------------------ Standard & Poor's Ratings Services placed its 'B' corporate credit and other ratings on Precise Technology Inc. on CreditWatch with positive implications following the announcement by U.K.-based packaging group Rexam PLC that it will acquire Precise for $257.5 million in cash plus assumption of existing debt. The acquisition is expected to close before the end of 2005 and is subject to certain conditions and regulatory approvals. North Versailles, Pennsylvania-based Precise is a full service, custom injection molder of thermoplastic components and assemblies serving the personal care, health care, consumer packaging and food and beverage markets. It has annual sales of more than $300 million. "The acquisition of Precise is a further step in Rexam's strategy to expand in plastic packaging. It will also provide Rexam with an entry into the growing North American pharmaceutical and health care packaging market, while extending the company's capability for existing customers," said Standard & Poor's credit analyst Robyn Shapiro. "Rexam currently supplies these customers mainly from Europe." The current ratings on Precise reflect: * a vulnerable business risk profile due to the modest scope of the company's operations, * a highly fragmented and competitive industry structure, * the commodity nature of its products, and * a highly leveraged financial risk profile. Partially offsetting factors include: * well-established positions in several packaging niches, * long-term contracts with customers that provide a stable revenue base and include resin cost pass-through provisions, and * relatively stable end markets. S&P expects to resolve the CreditWatch listing and to raise the ratings on Precise upon completion of the acquisition by the higher rated Rexam. QWEST COMMS: Fitch Lifts Issuer Default Rating to B+ from B ----------------------------------------------------------- Fitch has upgraded and removed from Rating Watch Positive Qwest Communications International, Inc.'s Issuer Default Rating to 'B+' from 'B'. Fitch has also upgraded specific issue ratings and recovery ratings assigned to Qwest and its wholly owned subsidiaries, including upgrading the senior unsecured debt rating assigned to Qwest Corporation to 'BB+' from 'BB'. In addition, Fitch has revised the Rating Outlook to Positive from Stable. Approximately $17.2 billion of debt as of Sept. 30, 2005, is affected by Fitch's actions. Fitch initially placed all of the ratings assigned to Qwest and its subsidiaries on Rating Watch Positive following Qwest's announcement that its wholly owned subsidiary Qwest Services Corporation launched a $3 billion cash tender offer and consent solicitation for QSC's 13.5% senior subordinated secured notes due 2010, 14% senior subordinated secured notes due 2014, and the 13% senior subordinated secured notes due 2007. Fitch's upgrade of Qwest is concurrent with the closing of the early participation stage of the tender. Fitch believes that the tender, funded in part with approximately $2 billion of cash from Qwest's balance sheet and from the proceeds generated by Qwest's issuance of $1.1 billion of 3.5% convertible senior notes due 2025, will generate net interest savings of approximately $250 million and will simplify the company's capital structure. From an ongoing liquidity perspective, Fitch believes that the cash and short-term investments the company will have on hand post the tender offer coupled with expected free cash flow generation will provide the company with sufficient liquidity. The company derives additional liquidity support from its five-year $850 million secured revolving credit facility at QSC. Scheduled maturities over the next three years total $2.1 billion, which is within expected free cash flow generation during that timeframe. Additionally, approximately 47% of the maturities are at Qwest Corporation, which has lower refinancing risk. Qwest's leverage pro forma for the debt tender will reduce to 3.9 times, which is an improvement from 4.7x as of the end of 2004. Going forward Fitch expects credit protection metrics to continue to improve driven by continued revenue stability and nominal operating margin expansion, which should produce additional free cash flow growth. The company expects to generate between $600 million and $800 million of free cash flow during 2005. During 2006, Fitch anticipates that Qwest, through operational gains together with $250 million of incremental free cash flow captured through the tender offer, will generate between $1 billion and $1.2 billion of free cash flow. Additionally, provided the company satisfies scheduled maturities with cash on hand, Fitch believes that Qwest's year-end 2006 leverage metric will be approximately 3.6x. Qwest's credit profile has benefited from: * stabilizing access line erosion, * margin improvements derived from ongoing cost reductions, and * the reduction of unconditional purchase obligations. The company's credit profile is further stabilized by the elimination of the overhang on the credit related to the recent $400 million settlement of shareholder litigation. Overall, Fitch's ratings for Qwest and its subsidiaries incorporate: * the scope, scale and relatively stable cash flow generated by QC's local exchange business, * the company's stable liquidity position, and * the expectation of positive free cash flow generation. Fitch's ratings also recognize the competitive pressure from the product and technology substitution that QC's local exchange business faces, which has negatively affected the company's access line portfolio and operating margins. Fitch believes that the launch of cable telephony service by the large cable multiple- system operators will add to the competitive pressure. However, Fitch believes that approximately 15% to 25% of Qwest's access lines are also served by cable telephony, and the availability of cable telephony within Qwest local service territory is not expected to materially increase during 2006. Also, the high business risk and cash requirement of Qwest's out-of-region long-haul business is reflected in Fitch's ratings. Lastly, Fitch believes that the company's operating profile, relative to its RBOC peer group, is limited with the lack of significant growth opportunities. The Positive Outlook reflects Fitch's expectation for: * further stabilization of the company's revenue base, and * increased strengthening of its in-region long distance business and DSL products. Additionally, Fitch expects further margin expansion driven in part by the continued roll-off of the unconditional purchase obligations. Fitch points out that the Dept. of Justice investigation is ongoing and several ERISA and pension fund lawsuits are pending. The company indicates that $100 million of reserves remain for potential settlements. From Fitch's perspective, settlements materially in excess of the remaining reserve would likely result in a revision to the company's Rating Outlook. Fitch has raised the Recovery Ratings assigned to the senior unsecured debt issued by Qwest Capital Funding, Qwest Communications Company, and the senior unsecured debt issued by Qwest by one notch. This action reflects the improved recovery prospects for bondholders at this level of Qwest's capital structure resulting from the tender of the QSC notes. These issuer default and recovery ratings have been upgraded by Fitch: Qwest Communications International -- Senior unsecured to 'BB' from 'B+'; to 'RR2' from 'RR3'*; -- Senior unsecured to 'B+' from 'B-'; to 'RR4' from 'RR5'. Qwest Capital Funding -- Senior unsecured to 'B+' from 'B-'; to 'RR4' from 'RR5'. Qwest Services Corporation -- Senior secured revolver to 'BB+' from 'BB'. -- Subordinate notes to 'BB' from 'B+'; to 'RR2' from 'RR3'. Qwest Communications Corporation -- Senior unsecured to 'B+' from 'B-'; to 'RR4' from 'RR5'. Qwest Corp. -- Senior unsecured to 'BB+' from 'BB'; -- Term loan to 'BB+' from 'BB'. *Guaranteed by QSC on a senior unsecured basis. REFCO INC: Names AlixPartners' Robert Dangremond as Interim CEO --------------------------------------------------------------- Refco, Inc. (OTC: RFXCQ) reported on Nov. 15, 2005, that its Board of Directors accepted the resignation of William M. Sexton as CEO and named Robert N. Dangremond, managing director of AlixPartners, LLC, a leading global turnaround and restructuring management company, as interim chief executive officer of the Company effective immediately. Subject to approval from the U.S. Bankruptcy Court for the Southern District of New York, AlixPartners was earlier retained by Refco to oversee its Chapter 11 bankruptcy filing. At the time, Mr. Dangremond was named chief restructuring officer and Eric A. Simonsen, also a managing director with the firm, was named chief administrative officer. Scott Schoen, Chairman of the Executive Committee of the Board of Directors, said, "The Company and the Board are extremely appreciative of Bill's years of fine work as Chief Operating Officer of Refco. We are also deeply grateful for the role he has played in managing through the transition and repercussions from the recent events related to the recent departure of Phil Bennett as CEO. "Bill Sexton has been a key leader in protecting and preserving franchise value and jobs for more than 1400 Refco employees in working through the process that led to last week's announcement of an agreement to sell the global derivatives brokerage business to Man Financial. We wish him only the best in his future endeavors." Mr. Dangremond has held numerous management positions in public and private corporations including Mirant, Zenith Electronics and Harnischfeger Industries (renamed Joy Global). Mr. Dangremond served as CEO and president of Forstmann & Company and chairman and CEO of AM International. As reported in the Troubled Company Reporter on Nov. 11, 2005, Refco reported that it received approval from the Court for its sale of substantially all of the assets of Refco's regulated commodities futures business to Man Financial Inc., a wholly owned subsidiary of Man Group PLC, for $282 million in cash and approximately $41 million of assumed liabilities and other considerations. 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. REMY INT'L: Low EBITDA Trend Cues S&P to Junk $125M Notes' Rating ----------------------------------------------------------------- Standard & Poor's Ratings Services lowered its corporate credit rating on Anderson, Indiana-based Remy International Inc. to 'CCC+' from 'B-'. At the same time, the $160 million first-priority senior secured bank facility rating was lowered to 'B-', while the $125 million second-priority senior secured floating rate notes were lowered to 'CCC', and the senior subordinated notes were lowered to 'CCC-'. Remy is a large manufacturer, and remanufacturer, of aftermarket and original equipment electrical components -- primarily starter motors and alternators -- and aftermarket powertrain components for heavy- and light-duty trucks. Citigroup Venture Capital Equity Partners LP controls privately held Remy, which had $710 million of total balance sheet debt at Sept. 30, 2005. The outlook is negative. "The downgrade reflects Remy's downward EBITDA trend, illustrated by its much weaker-than-expected $11.5 million third-quarter EBITDA," said Standard & Poor's credit analyst Nancy C. Messer. "We are concerned about the company's ability to stabilize EBITDA and renew its expansion in the intermediate term given weak OE production volumes, persistently high raw materials costs, disappointing aftermarket retail sales, and the possibility of soft commercial truck volumes in 2007." Remy's EBITDA for 2005, which the company estimates will be about $60 million, will fall meaningfully below prior estimates and be insufficient to cover interest expense. At year-end 2005, Remy's lease-adjusted total debt to EBITDA will be very aggressive at more than 12x. Any material improvement in the credit ratios would depend on longer term cost-side benefits from ongoing restructuring efforts and the company's achievement of full synergies from its integration of Unit Parts Co., in addition to improved market demand. Although Remy expects 2006 earnings and cash flow to improve as it benefits from new business and in-sources the production of certain components, EBITDA will likely remain depressed. Remy's liquidity has eroded in 2005, becoming very constrained. On Sept. 30, 2005, the company had $66 million of availability on its $160 million senior secured revolving credit facility, which does not contain financial covenants that could restrict access. The company also has $26 million of cash. Remy's plan to enhance its liquidity position in the second half of 2005, through seasonal working capital improvements and inventory reduction, has been only marginally successful. The company's operations are expected to consume cash in the first quarter of 2006 as part of its typical seasonal usage. Remy's nine months EBITDA, excluding $2.6 million of restructuring charges, totaled $38 million, a 56% year-over-year decline. The company has attributed the serious discrepancy from anticipated 2005 EBITDA levels to a variety of unusual items and operating issues. The unusual costs resulted primarily: * from accruals for back-dated custom duties on remanufacturing business and * from the company's timing when it integrated certain UPC business into a facility in Mexico. However, they also include: * severance costs, * foreign exchange translation effect, and * bad debt expense. The operating shortfalls resulted from: * weak demand in the North American retail electrical aftermarket, * soft OE production volumes, * higher raw materials costs, and * capital and engineering costs related to a higher-than- normal number of new product launches in 2005-2006. REVLON CONSUMER: Sept. 30 Balance Sheet Upside Down by $1.2 Bil. ---------------------------------------------------------------- On Nov. 9, 2005, Revlon Consumer reported financial results for its third quarter ended Sept. 30, 2005. The company posted $275.3 million net sales in the third quarter of 2005, a decline of $19.1 million or 6.5%, as compared to $294.4 million in the same quarter last year. Net sales for the nine months ended Sept. 30, 2005, decreased $24.4 million, or 2.7%, to $894.5 million, as compared to $918.9 million for the same period in 2004. The drop is primarily due to lower shipments in the U.S., higher consolidated returns, allowances and discounts. The Company's U.S. and Canada operations posted $158.7 million of net sales for the third quarter of 2005, compared with $192 million for the third quarter of 2004, a decrease of $33.3 million or 17.3%. Revlon Consumer Products Corporation is a wholly owned subsidiary of Revlon, Inc., a worldwide cosmetics, skin care, fragrance, and personal care products company. The Company's vision is to become the world's most dynamic leader in global beauty and skin care. The Company's brands, which are sold worldwide, include Revlon(R), Almay(R), Ultima(R), Charlie(R), Flex(R), and Mitchum(R). At Sept. 30, 2005, Revlon Consumer Products Corporation's balance sheet showed a $1,166,200,000 stockholders' deficit. * * * As reported in the Troubled Company Reporter on March 10, 2005, Moody's Investors Service assigned a Caa2 rating to the proposed $205 million senior notes offering by Revlon Consumer Products Corporation. In addition, Moody's affirmed Revlon's existing ratings and its negative rating outlook. The affirmation and assignment of long-term ratings reflect the company's continued operational and financial progress, including the prospective improvement in Revlon Consumer's near-term liquidity profile as proceeds from the notes are used to refinance bonds maturing as early as February 2006. However, the continuation of a SGL-4 speculative grade liquidity rating and a negative long-term rating outlook reflect the company's ongoing negative free cash flow profile and ongoing liquidity concerns beyond the near term. The ratings affected by this action are: * New $205 million senior notes due 2011, assigned at Caa2; * Senior implied rating, affirmed at B3; * $160 million senior secured revolving credit facility due 2009, affirmed at B2; * $800 million senior secured term loan facility due 2010, affirmed at B3; * $116 million 8.125% senior notes due 2006, affirmed at Caa2; * $76 million 9% senior notes due 2006, affirmed at Caa2; * $327 million 8.625% senior subordinated notes due 2008, affirmed at Caa3; * Speculative grade liquidity rating, affirmed at SGL-4; * Senior unsecured issuer rating, affirmed at Caa2. At the same time, Standard & Poor's Ratings Services affirmed its ratings on Manhattan-based cosmetics manufacturer Revlon Consumer Products Corp., including its 'B-' corporate credit rating. At the same time, Standard & Poor's assigned a 'CCC' senior unsecured debt rating to Revlon's planned $205 million senior unsecured note offering due 2011. S&P says the outlook is negative. ROBOTIC VISION: Chapter 7 Trustee Hires Verdolino as Accountant --------------------------------------------------------------- Steven M. Notinger, the chapter 7 trustee overseeing the liquidation of Robotic Vision Systems, Inc., n/k/a Acuity Cimatrix, Inc., and its debtor-affiliates, sought and obtained permission from the U.S. Bankruptcy Court for the District of New Hampshire to employ Verdolino & Lowey, P.C., as his accountant. Verdolino & Lowey will: a. assist in reviewing, reconciling, analyzing and, if necessary, objecting to proofs of claim; b. assist in reviewing Debtor books and records for preference and fraudulent transfer claims; c. assist in valuation and insolvency analyses and if necessary expert report preparation and testimony; d. assist with other litigation matters, if any, including but limited to D&O; e. assist with regard to accounting and accounting system matters; f. prepare federal and state income tax returns; g. assist in obtaining and retaining necessary records, including computer and hard copy or paper records; h. assist with liquidation and termination of various benefit plans including pension, 401(k) and health insurance/cobra; and i. assist in other matters as directed by the Court, Debtor, Debtor's Counsel and the U.S. Trustee's Office. Craig R. Jalbert, a certified insolvency and restructuring advisor and a principal at Verdolino, discloses that his firm didn't receive a retainer. Verdolino & Lowey's professionals' hourly billing rates range between $70 to $330. To the best of the Chapter 7 Trustee's knowledge, Verdolino & Lowey is a "disinterested person" as that term is defined in Section 101(14) of the Bankruptcy Code. Headquartered in Nashua, New Hampshire, Robotic Vision Systems, Inc., n/k/a Acuity Cimatrix, Inc. -- http://www.rvsi.com/-- designs, manufactures and markets machine vision, automatic identification and related products for the semiconductor capital equipment, electronics, automotive, aerospace, pharmaceutical and other industries. The Company, together with its debtor- affiliate, filed for chapter 11 protection on Nov. 19, 2004 (Bankr. D. N.H. Case No. 04-14151). Bruce A. Harwood, Esq., at Sheehan, Phinney, Bass + Green represents the Debtors in their restructuring efforts. When the Debtors filed for chapter 11 protection, they listed $43,046,000 in total assets and $51,338,000 in total debts. The Court converted the Debtors' chapter 11 cases to a chapter 7 liquidation proceeding on Oct. 12, 2005. RURAL/METRO: Sept. 30 Balance Sheet Upside-Down by $94.5 Million ---------------------------------------------------------------- Rural/Metro Corporation (NASDAQ Capital Market: RURL) reported financial results for its fiscal 2006 first quarter ended Sept. 30, 2005. The Company reported first-quarter net revenue of $140.9 million, an increase of 10% compared to net revenue of $128.1 million for the prior year's first quarter. Net income for the first quarter was $3.6 million, which included the $3.7 million fiscal 2006 income tax provision. This compared to net income of $4.4 million for the same period of the prior year, which included $100,000 related to the income tax provision. At Sept. 30, 2005, the Company had 25.3 million diluted shares outstanding, compared to 22.7 million for the same period of the prior year, with the increase in outstanding shares applicable to the exercise of employee stock options. "We are pleased with the results of our first quarter as we continue to achieve solid growth within our medical transportation and fire protection businesses," Jack Brucker, President and Chief Executive Officer, said. "We continued to generate strong cash flow from operations, which enabled us to make a second unscheduled principal payment of $7.0 million on our Term Loan B on Oct. 11, 2005. We have reduced this debt by a total of $14 million in less than nine months, and remain committed to deleveraging the balance sheet in the future. This total reduction in debt will result in annual interest savings of approximately $850,000." Total working capital at the end of the quarter was $56.3 million, including cash and short-term investments of $21.3 million, compared to working capital of $43.8 million, including cash of $17.7 million at June 30, 2005. At Sept. 30, 2005, Rural/Metro's balance sheet showed a $94,487,000 stockholders' deficit, compared to a $98,643,000 deficit at June 30, 2005. Rural/Metro Corporation -- http://www.ruralmetro.com/-- provides emergency and non-emergency medical transportation, fire protection, and other safety services in 23 states and approximately 365 communities throughout the United States. S-TRAN HOLDINGS: Wants Until February 7 to Remove Actions --------------------------------------------------------- S-Tran Holdings, Inc., and its debtor-affiliates ask the U.S. Bankruptcy Court for the District of Delaware to extend until Feb. 7, 2006, the period within which they may remove actions pursuant to Rule 9027 of the Federal Rules of Bankruptcy Procedures. The Debtors remind the Court that since the bankruptcy filing, they have been occupied with matters of immediate importance to their chapter 11 cases. The Debtors tell the Court that they have devoted their time to address the issue of the numerous freight claims filed against the Debtors and are actively analyzing information relevant to potential asset recoveries for the Debtors' estates. The Debtors say that these matters have taken precedence over analysis of the actions. The Debtors believe that the extension will afford them the opportunity to make fully informed decisions concerning removal of each action and will assure that their rights are not forfeited. The Debtors tell the Court that the rights of their adversaries will not be prejudiced by the extension since any party to an action that is removed may seek to have it remanded by the state court. The Bankruptcy Court will convene a hearing at 1:30 p.m. on Dec. 12, 2005, to consider the Debtors' request. Headquartered in Cookeville, Tennessee, S-Tran Holdings, Inc., provides common carrier services and specialized in less-than- truckload shipments and also supplies overnight and second day service to shippers in 11 states in the Southeast and Midwestern United States. The Company and its debtor-affiliates filed for chapter 11 protection on May 13, 2005 (Bankr. D. Del. Case No. 05- 11391). 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 listed total assets of $22,508,000 and total debts of $30,891,000. SAINT VINCENTS: Has Open-Ended Period to Remove Civil Actions ------------------------------------------------------------- The Hon. Prudence Carter Beatty of the U.S. Bankruptcy Court for the Southern District of New York extended Saint Vincents Catholic Medical Centers of New York and its debtor-affiliates' period to remove civil actions, pursuant to Rule 9027(a) of the Federal Rules of Bankruptcy Procedures, up to the confirmation of any plan of reorganization in their Chapter 11 cases. As reported in the Troubled Company Reporter on Oct. 10, 2005, the Debtors asked for an open-ended deadline to remove civil actions so they can have more time to complete the task of analyzing whether any pending Civil Action. As of the Petition Date, the Debtors were parties to several hundred civil actions and proceedings in a variety of state and federal courts. Judge Beatty's order does not extend to the lawsuits commenced by Angela Robb and Lynn Marziale. The Debtors may file notices of removal for the Robb and Marziale Lawsuits only within the longer of: (a) 30 days after entry of an order terminating the automatic stay, or (b) 30 days after a trustee qualifies in the Debtors' Chapter 11 cases, but not later than January 1, 2006, which is 180 days after the Petition Date. As reported in the Troubled Company Reporter on Oct. 20, 2005, Ms. Marziale and Ms. Robb are plaintiffs to separate prepetition civil actions pending in the New York State Supreme Court against several defendants including Saint Vincent Catholic Medical Centers. Ms. Marziale opposed the Debtors' request for extension. Headquartered in New York, New York, Saint Vincents Catholic Medical Centers of New York -- http://www.svcmc.org/-- the largest Catholic healthcare providers in New York State, operate hospitals, health centers, nursing homes and a home health agency. The hospital group consists of seven hospitals located throughout Brooklyn, Queens, Manhattan, and Staten Island, along with four nursing homes and a home health care agency. The Company and six of its affiliates filed for chapter 11 protection on July 5, 2005 (Bankr. S.D.N.Y. Case No. 05-14945 through 05-14951). Gary Ravert, Esq., and Stephen B. Selbst, Esq., at McDermott Will & Emery, LLP, represent the Debtors in their restructuring efforts. As of Apr. 30, 2005, the Debtors listed $972 million in total assets and $1 billion in total debts. (Saint Vincent Bankruptcy News, Issue No. 14; Bankruptcy Creditors' Service, Inc., 215/945- 7000) SAINT VINCENTS: Gets Court OK Set Up Captive Insurance Subsidiary ----------------------------------------------------------------- The U.S. Bankruptcy Court for the Southern District of New York authorized Saint Vincents Catholic Medical Centers of New York and its debtor-affiliates to establish a wholly owned insurance subsidiary to be licensed by the State of New York and provisionally named Queensbrook New York, Inc. The Debtors want to operate an insurance subsidiary in order to maintain existing levels of insurance for certain of the attending physicians and avoid third party costs of $269,000 on an annual basis. As reported in the Troubled Company Reporter on Aug. 26, 2005, the Debtors explained that they maintain several medical professional liability programs which involve: (a) primary insurance purchased from third parties like National Union Fire Insurance Company of Pennsylvania; (b) reinsurance of those liabilities through a wholly owned subsidiary of SVCMC; and (c) excess reinsurance from unrelated third parties like Transatlantic Reinsurance Company. Headquartered in New York, New York, Saint Vincents Catholic Medical Centers of New York -- http://www.svcmc.org/-- the largest Catholic healthcare providers in New York State, operate hospitals, health centers, nursing homes and a home health agency. The hospital group consists of seven hospitals located throughout Brooklyn, Queens, Manhattan, and Staten Island, along with four nursing homes and a home health care agency. The Company and six of its affiliates filed for chapter 11 protection on July 5, 2005 (Bankr. S.D.N.Y. Case No. 05-14945 through 05-14951). Gary Ravert, Esq., and Stephen B. Selbst, Esq., at McDermott Will & Emery, LLP, represent the Debtors in their restructuring efforts. As of Apr. 30, 2005, the Debtors listed $972 million in total assets and $1 billion in total debts. (Saint Vincent Bankruptcy News, Issue No. 14; Bankruptcy Creditors' Service, Inc., 215/945-7000) SEWERAGE & WATER: Fitch Downgrades $452 Million Bonds ----------------------------------------------------- Fitch Ratings has downgraded the underlying ratings of the Sewerage and Water Board of New Orleans, Louisiana and the New Orleans Audubon Commission. These ratings remain on Rating Watch Negative. Sewerage and Water Board -- $200 million sewerage service revenue bonds lowered to 'B' from 'BBB'; -- $137 million sewerage service refunding bond anticipation notes series 2005A lowered to 'B' from 'F2'; -- $46 million water revenue bonds lowered to 'B' from 'BBB'; -- $27 million drainage system bonds lowered to 'B' from 'BBB+'. Audubon Commission -- $42 million general obligation aquarium bonds lowered to 'B' from 'BBB'. These actions follow a previous downgrade of these credits on Oct. 6, 2005. Fitch's long-term 'B' rating applies to highly speculative credits, indicating that significant credit risk is present but that a limited margin of safety remains. The short-term 'B' rating applies to: * speculative credits with minimal capacity for timely payment of financial commitments, and * vulnerability to near-term adverse changes in financial and economic conditions. The post-Katrina picture in New Orleans has come into sharper focus in recent weeks, as repopulation and rebuilding efforts continue. Fitch now considers the short- and longer term prospects for recovery more problematic, given: * the large number of displaced residents that have not returned to the city, * the coordination difficulties facing federal, state and local officials in rebuilding efforts, and * the subsequent impact on the business community and the local government sector. The magnitude of the challenges facing local and state leaders, including levee reconstruction, home reconstruction/demolition, and interim housing have stymied repopulation efforts in large sections of the city. This unsettled situation in turn is affecting both the ability of local government agencies to re-establish revenue streams and businesses to hire workers and attract customers. Fitch views the local and regional economies as being at risk for significant shifts in size and demographics; further delay in the return of residents risks the permanent loss of a significant portion of the workforce as displaced citizens establish jobs, housing and schooling in other communities. The board, which provides retail water, sewer and drainage services to residents in New Orleans, has resumed billing for services in portions of its service area, primarily on the west bank. Water service is available to the west bank and most of the east bank, and sewer service is being provided in the west bank and on a limited basis on the east bank. The east bank is home to roughly 80% of the board's customer base. Staffing is at roughly one-half of pre-Katrina levels, and liquidity remains a concern. The board anticipates that its customer base in 2006 will be only 30% of pre-storm levels, which raises serious questions about its prospects for generating sufficient revenues to pay operating and capital costs. State and federal financial assistance will offer some relief, although questions about the scope and nature of much of the proposed assistance remain unanswered; the state legislature is currently considering financial assistance proposals in a special session that will end on Nov. 22. The Audubon Commission operates the Aquarium of the Americas, the debt of which is repaid through a limited property tax levied against all taxable property in New Orleans. It is estimated that the extensive flooding in the city caused by Katrina will generate a reduction in the city's tax base of roughly 50%. The projected size of this tax base loss, combined with the non-essential nature of the services provided by the aquarium, further increases the potential for a reduction in the amount of property tax revenues collected by the commission. Fitch will continue to monitor these credits along with remaining New Orleans area credits on Rating Watch Negative. As more information becomes available as the reconstruction process proceeds, Fitch will review the credit fundamentals of each entity and take any appropriate rating action. SFN INVESTMENTS: Voluntary Chapter 11 Case Summary -------------------------------------------------- Debtor: SFN Investments LLC 15127 Northeast 24th Street, Suite 294 Redmond, Washington 98052 Bankruptcy Case No.: 05-30445 Chapter 11 Petition Date: November 3, 2005 Court: Western District of Washington (Seattle) Judge: Karen A. Overstreet Debtor's Counsel: James E. O'Donnell, Esq. Law Office of James E. O'Donnell 2611 Northeast 113th Street, Suite 300 Seattle, Washington 98125 Tel: (206) 223-0250 Estimated Assets: $100,000 to $500,000 Estimated Debts: $1 Million to $10 Million The Debtor did not file a list of its 20 Largest Unsecured Creditors. SIRVA INC: Seeks Credit Facility Amendment with Lenders ------------------------------------------------------- SIRVA, Inc. (NYSE: SIR) notified the Securities and Exchange Commission that it will delay the filing of its financial statements under Forms 10-K and 10-Q. The company disclosed that it has not yet completed the preparation and audit of its financial statements for the fourth quarter and full year ended Dec. 31, 2004, and the restatements of certain prior period financial results. Until the restatements are complete, SIRVA said it cannot estimate the impact on the first, second and third quarters of 2004, and cannot prepare its financial statements for the quarters ended March 31, 2005, June 30, 2005, Sept. 30, 2005, and the nine months ended Sept. 30, 2005. As previously reported in the Troubled Company Reporter, the audit committee of the company's board of directors has conducted a review of certain of the company's financial reporting practices and related processes, and had engaged outside legal and financial advisors to assist in its review. The board concluded that the company's previously issued financial statements for: -- the fiscal years ended Dec. 31, 2003, and 2002; -- quarterly financial statements for the first three quarters of 2004; and -- quarterly financial information for all four quarters of 2003, should not be relied upon because of errors in those financial statements. SIRVA is currently in the process of restating those previously-issued financial statements. Credit Amendment The company has negotiated with its lenders for an amendment to its credit facility to provide: (i) an extension of the deadlines for filing its periodic reports under the Exchange Act; and (ii) greater flexibility under the credit facility's financial covenants. With regard to the filing of its financial statements, the company requests the following time extensions: Financial Statements Proposed Filing Date -------------------- -------------------- 2004 10-K Nov. 30, 2005 2005 10'Q's March 31, 2006 2005 10-K June 30, 2006 2006 Q1 10-Q July 31, 2006 An amendment fee of 25 bps will be paid to consenting lenders. SIRVA, Inc. -- http://www.sirva.com/-- is a leader in providing relocation solutions to a well- established and diverse customer base around the world. The company is the leading global provider that can handle all aspects of relocations end-to-end within its own network, including home purchase and home sale services, household goods moving, mortgage services and insurance. SIRVA conducts more than 365,000 relocations per year, transferring corporate and government employees and moving individual consumers. The company operates in more than 40 countries with approximately 7,500 employees and an extensive network of agents and other service providers. SIRVA's well-recognized brands include Allied, northAmerican, Global, and SIRVA Relocation in North America; Pickfords, Huet, Kungsholms, ADAM, Majortrans, Allied Arthur Pierre, Rettenmayer, and Allied Varekamp in Europe; and Allied Pickfords in the Asia Pacific region. * * * As reported in the Troubled Company Reporter on Aug. 11, 2005, Standard & Poor's Ratings Services lowered its ratings on relocation service provider SIRVA Inc. and its primary operating subsidiary, SIRVA Worldwide Inc. The corporate credit rating on both entities was lowered to 'B+' from 'BB'. All ratings remain on CreditWatch with negative implications, where they were placed on April 8. 2005, due to: * the continued delay in filing SIRVA's year-end 2004 financial statements; * ongoing investigation related primarily to its insurance and European businesses; and * the disclosure that the cost to address its financial control weaknesses will be significantly higher than originally anticipated. In July 2005, SIRVA was granted amendments to its bank facility and accounts-receivable securitization program, extending the filing deadline for its financial statements until Sept. 30, 2005. SOLUTIA INC: Balance Sheet Upside-Down by $1.43 Bil. at Sept. 30 ---------------------------------------------------------------- Solutia, Inc., delivered its quarterly report on Form 10-Q for the quarter ending Sept. 30, 2005, to the Securities and Exchange Commission on Nov. 9, 2005. The Company reported a $15 million net loss on $538 million of net revenues for the quarter ending Sept. 30, 2005. The Company incurred an $18 million net loss for the quarter ending Sept. 30, 2005. The $17 million, or 6%, increase in net sales as compared to the third quarter 2004 resulted primarily from an increase in average selling prices of approximately 4% and higher sales volumes of approximately 2%. The $38 million change in corporate expenses (gain) in comparison to the third quarter 2004 was primarily a result of the net gain included in 2004. Charges of $3 million and the net gain of $31 million included in the third quarter 2005 and 2004 results, respectively, both resulted from various curtailment and settlement activity due to amendments to Solutia's various postretirement plans. Equity earnings loss from affiliates improved by $29 million in the third quarter 2005 as compared to the third quarter 2004. This improvement was primarily a result of higher average selling prices and improved manufacturing performance at both the Astaris and Flexsys joint ventures. Reorganization items incurred in the third quarter 2005 included: (1) $13 million of professional fees for services provided by debtor and creditor professionals directly related to Solutia's reorganization proceedings; (2) $2 million of expense provisions for: (a) employee severance costs incurred directly as part of the Chapter 11 reorganization process; and (b) a retention plan for certain Solutia employees approved by the bankruptcy court; (3) $1 million net gain for adjustments to record certain prepetition claims at estimated amounts of the allowed claims; and (4) $1 million of other reorganization charges primarily involving costs incurred with exiting the acrylic fibers operations. At Sept. 30, 2005, the Company's balance sheet shows $1.94 billion in total assets and $3.37 billion in total debts. As of Sept. 30, 2005, the Company's equity deficit narrowed to $1.43 billion from a $1.44 billion deficit at Dec. 31, 2004. Continuation of Solutia as a going concern is contingent upon, among other things, Solutia's ability: (1) to comply with the terms and conditions of its DIP financing; (2) to obtain confirmation of a plan of reorganization under the U.S. Bankruptcy Code; (3) to return to profitability; (4) to generate sufficient cash flow from operations; and (5) to obtain financing sources to meet Solutia's future obligations. The Company's management says these matters create substantial doubt about Solutia's ability to continue as a going concern. As a result of the Chapter 11 filing, Solutia was in default on all its debt agreements as of Sept. 30, 2005, with the exception of its DIP credit facility and Euronotes. A full-text copy of the regulatory filing is available at no charge at http://researcharchives.com/t/s?2ed Headquartered in St. Louis, Missouri, Solutia, Inc. -- http://www.solutia.com/-- with its subsidiaries, make and sell a variety of high-performance chemical-based materials used in a broad range of consumer and industrial applications. The Company filed for chapter 11 protection on December 17, 2003 (Bankr. S.D.N.Y. Case No. 03-17949). When the Debtors filed for protection from their creditors, they listed $2,854,000,000 in assets and $3,223,000,000 in debts. Solutia is represented by Richard M. Cieri, Esq., at Kirkland & Ellis. STARWOOD HOTELS: Selling 38 Hotels to Marriott for $4.1 Billion --------------------------------------------------------------- Starwood Hotels & Resorts Worldwide, Inc. (NYSE: HOT) disclosed a definitive agreement under which Host Marriott Corporation (NYSE: HMT) will acquire 38 properties from Starwood in a stock-and-cash transaction valued at approximately $4.1 billion, including debt assumption. The deal includes hotels under the Sheraton, W, Westin, St. Regis and Luxury Collection brands. As part of the agreement, Starwood will generally continue to manage the properties under their current flags for up to 40 years. The boards of directors of both companies have approved the proposed transaction. Host is acquiring 38 hotels, including 20 Sheratons, 13 Westins, one St. Regis, two W's, one Luxury Collection and one non-branded hotel. The portfolio includes 28 hotels in North America, six hotels in Europe and two each in Asia and Latin America. Total rooms in the portfolio are 18,964. Total EBITDA pre-management fees for total year 2005 for the portfolio are expected to be approximately $376 million, and $315 million post-management fees. Therefore, Host will be acquiring approximately $315 million in EBITDA. 54% of the post fee EBITDA in the portfolio is derived from Sheraton, 35% from Westin with the remainder coming from the other brands. 81% of post fee EBITDA is from North American hotels. Terms of payment include: -- $4.096 billion in cash and stock based on Host's closing stock price on Friday, November 11 of $17.44; -- $2.329 billion or 57% will be in the form of 133.5 million shares of Host stock which will be distributed directly to Starwood holders of record at closing; and -- $1.767 billion will be in the form of cash and assumed debt including $104 million in property specific debt and, subject to bondholder consent, approximately $600 million in Sheraton Holding Corp. debt. The remaining $1.063 billion will be paid in cash to both Starwood and its shareholders. Under the terms of the sale, a subsidiary of Host will be acquiring, among other assets, all the stock of Starwood's real estate investment trust in a transaction that will be taxable to shareholders. In this transaction, Starwood's shareholders will receive $11.18 in value for each share of class B stock they own (based on Host's Friday closing price). This consideration will be in the form of 0.6122 shares of Host stock and 50.3 cents in cash for each Class B share. As a result $2.451 billion in cash and stock proceeds from the transaction, or 60% of total proceeds, will flow directly to Starwood shareholders. Starwood will receive $941 million in cash and transfer $704 million in debt to Host. The $11.18 of value that the Class B shareholders will receive on a per share basis will represent taxable proceeds on the exchange of their Class B shares and will be offset by the shareholder's cost basis in the Class B shares producing a net capital gain or loss on the transaction. Starwood will provide information to the shareholders that will assist them in the determination of the amount of the tax basis in their paired shares that is attributable to their Class B shares. The hotels sold will generally be encumbered by license and management agreements with a 20 year initial term and two 10 year extension options exercisable at Starwood's discretion. The license agreement defines Starwood's rights and obligations as a brand owner and pays a license fee of 5% of Gross Room Revenue and 2% of Food and Beverage revenue. The management agreement defines Starwood's rights and obligations as a manager and pays 1% of Gross Operating Revenue and Incentive fee which is a share of profits in excess of a return on the owner's investment. This unique structure provides enhanced influence to ensure continued brand innovation, quality and consistent and differentiated guest service experience. Under the agreements to be entered into with Host total fees for the portfolio in 2005 would have been $61 million. Starwood and Host are committed to working together to add maximum value to this portfolio and find additional opportunities to leverage their mutual strengths going forward. "This well-timed sale commits Starwood to an 'asset right' strategy, shifting our revenue and profit mix to place greater emphasis on successfully developing and leveraging our renowned brands," Steven J. Heyer, Starwood Chief Executive Officer, said. Following the close of this transaction and other transactions previously signed or closed, Starwood will continue to own 93 properties with 28,432 rooms that produce more than $500 million in annualized EBITDA. Mr. Heyer said: "Even after this significant transaction, Starwood will remain, and intends to remain, one of the largest owners of hotel and vacation properties. This remaining portfolio will include properties that serve to facilitate innovation speed and proof of concept for our system, support our vacation ownership business and provide significant upside potential through re- branding or redevelopment. We will seek new opportunities to maximize our return on invested capital through continued effective management of our assets and the continued purchase and churn of hotel real estate as opportunities emerge." The transaction is subject to the approval of Host Marriott shareholders and to customary closing conditions, including necessary regulatory approvals. The transaction is expected to be completed in the first quarter of 2006. Bear, Stearns & Co. Inc. and Deutsche Bank AG. acted as financial advisors and Sidley Austin Brown and Wood LLP served as lead legal counsel to Starwood. Goldman Sachs served as financial advisor and Latham & Watkins and Hogan & Hartson LLP served as legal counsel to Host Marriott. The properties to be acquired include: (A) North America Sheraton Location # of Rooms -------- -------- ---------- Sheraton San Diego Hotel & Marina San Diego, CA 1,044 Sheraton Boston Hotel Boston, MA 1,216 Sheraton New York Hotel & Towers New York, NY 1,746 Sheraton Hotel Parsippany Parsippany, NJ 370 Sheraton Indianapolis Indianapolis, IN 560 Sheraton Needham Hotel Needham, MA 247 Sheraton Centre Toronto Hotel Toronto, Ontario 1,377 Le Centre Sheraton Hotel Montreal, Quebec 825 Sheraton Stamford Hotel Stamford, CT 448 Sheraton Hamilton Hotel Hamilton, Ontario 301 Sheraton Providence Airport Hotel Providence, RI 206 Sheraton Suites Tampa Airport Tampa, FL 259 Sheraton Hotel Braintree Braintree, MA 374 Sheraton Milwaukee Brookfield Hotel Brookfield, WI 389 Sheraton Tucson Hotel & Suites Tucson, AZ 216 Westin Location # of Rooms ------ -------- ---------- Westin Grand, D.C. Washington D.C. 263 Westin Indianapolis Indianapolis, IN 573 Westin Seattle Seattle, WA 891 Westin Waltham Boston Boston, MA 346 Westin Mission Hills Resort Rancho Mirage, CA 512 Westin Tabor Center Denver, CO 430 Westin Cincinnati Cincinnati, OH 456 Westin Los Angeles Airport Los Angeles, CA 740 Westin South Coast Plaza Costa Mesa, CA 390 W Location # of Rooms - -------- ---------- W New York New York, NY 688 W Seattle Seattle, WA 426 St. Regis Location # of Rooms St. Regis Houston Houston, TX 232 Other Location # of Rooms ----- -------- ---------- Capitol Hill Suites Washington D.C. 152 (B) International Sheraton Location # of Rooms -------- -------- ---------- Sheraton Skyline Hotel & CC London, U.K. 350 Sheraton Warsaw Hotel & Towers Warsaw, Poland 350 Sheraton Roma Hotel & CC Rome, Italy 634 Sheraton Santiago Hotel & CC Santiago, Chile 379 Sheraton Fiji Resort Nadi, Fiji 281 Westin Royal Denarau Resort ('06) Nadi, Fiji 273 Westin Location # of Rooms ------ -------- ---------- Westin Palace Madrid Madrid, Spain 468 Westin Palace Milan Milan, Italy 228 Westin Europa & Regina Venice, Italy 185 Luxury Collection Location # of Rooms ----------------- -------- ---------- San Cristobal Tower Santiago, Chile 139 Host Marriott -- http://www.hostmarriott.com/-- is a Fortune 500 lodging real estate company that owns or holds controlling interests in upscale and luxury hotel properties primarily operated under premium brands, such as Marriott(R), Ritz- Carlton(R), Hyatt(R), Four Seasons(R), Fairmont(R), Hilton(R) and Westin(R). With headquarters in White Plains, N.Y., Starwood Hotels & Resorts Worldwide, Inc. -- http://www.starwoodhotels.com/-- is one of the leading hotel and leisure companies in the world with approximately 750 properties in more than 80 countries and 120,000 employees at its owned and managed properties. With internationally renowned brands, Starwood(R) corporation is a fully integrated owner, operator and franchiser of hotels and resorts including: St. Regis(R), The Luxury Collection (R), Sheraton(R), Westin(R), Four Points(R) by Sheraton, and W(R), Hotels and Resorts as well as Starwood Vacation Ownership, Inc., one of the premier developers and operators of high quality vacation interval ownership resorts. * * * Standard & Poor's Ratings Services revised its outlook on hotel and leisure company Starwood Hotels & Resorts Worldwide Inc. to positive from stable. At the same time, the ratings were affirmed on the White Plains, New York-based company, including the 'BB+' corporate credit rating. In addition, Standard & Poor's placed its 'BB+' ratings on Starwood subsidiary ITT Corp.'s $450 million senior notes and $150 million senior notes on CreditWatch with negative implications, reflecting the expectation that these obligations will be assumed by Host Marriott Corporation (BB-/Stable/--), a lower rated entity, subject to bondholder consent. The ratings on the notes would be lowered to the level of Host's senior unsecured rating, which is currently 'BB-', if they are assumed on a pari- passu basis upon the close of the transaction expected by the first quarter of 2006. STARWOOD HOTELS: S&P Rates Proposed $600-Mil Sr. Notes at Low-B --------------------------------------------------------------- Standard & Poor's Ratings Services revised its outlook on hotel and leisure company Starwood Hotels & Resorts Worldwide Inc. to positive from stable. At the same time, the ratings were affirmed on the White Plains, New York-based company, including the 'BB+' corporate credit rating. In addition, Standard & Poor's placed its 'BB+' ratings on Starwood subsidiary ITT Corp.'s $450 million senior notes and $150 million senior notes on CreditWatch with negative implications, reflecting the expectation that these obligations will be assumed by Host Marriott Corporation (BB-/Stable/--), a lower rated entity, subject to bondholder consent. The ratings on the notes would be lowered to the level of Host's senior unsecured rating, which is currently 'BB-', if they are assumed on a pari- passu basis upon the close of the transaction expected by the first quarter of 2006. The outlook revision follows the company's announcement it would sell 38 hotels totaling almost 19,000 rooms to Host for $4.1 billion. Consideration for the purchase will be $2.3 billion in Host stock paid to Starwood's shareholders, almost $1.1 billion in cash, and the assumption by Host of $700 million in Starwood's debt. Of the almost $1.1 billion cash consideration, Starwood will receive $941 million, and Starwood's shareholders will directly receive $122 million. Cash proceeds received by Starwood from the Host transaction, expected near-term proceeds from additional asset sales of more than $300 million, along with about $900 million in unrestricted cash balances as of September 2005, are expected to fund $450 million in near-term debt maturities and make share repurchases over the intermediate term under the company's $1.3 billion share repurchase authorization. In addition, about $470 million in mortgage-backed debt at Starwood will be defeased in connection with the transaction and the company announced in October 2005 that is would make a $360 million payment to IRS. The outlook revision reflects the decline in Starwood's pro forma lease adjusted total debt to about $3.1 billion following the transaction's close from almost $5 billion as of September 2005. As a part of the agreement: * Starwood will continue to manage the hotels sold to Host under 20-year management contracts with two 10-year extension options, * Host will acquire all of the stock of Starwood's real estate investment trust in a transaction that is taxable to Starwood shareholders, and * Host will acquire the stock of Sheraton Holding Corp. Although Starwood's approximately $1.25 billion in EBITDA in the 12 months ended September 2005 is expected to decline by more than $315 million due to asset sales, the lodging environment is expected to remain strong over the near term. ST. BERNARD PORT: S&P Shaves Revenue Bond Rating to BB from BBB- ---------------------------------------------------------------- Standard & Poor's Ratings Services lowered its ratings on the debt of three transportation issuers in Louisiana and removed them from CreditWatch with negative implications, where they had been placed Aug. 30 following the effects of Hurricane Katrina. At the same time, the debt rating on another related issuer was affirmed and removed from CreditWatch. "These rating actions reflect our view of the exposure of each credit's specific market and demand characteristics, including employment and tourism, to the considerable broader regional economic effects and dislocation associated with Katrina and its aftermath," said Standard & Poor's credit analyst Kurt Forsgren. "We also evaluated the prospects and timing of returning to pre-hurricane financial and operating performance levels, as well as the long-term fundamental business and competitive position of each enterprise, notwithstanding the significant degree of uncertainly in the near to intermediate future." While Greater Baton Rouge Port Commission's 'BBB-' revenue bond rating was affirmed, removed from CreditWatch, and assigned a stable outlook, these issuers' revenue bond ratings were lowered and removed from CreditWatch: -- Greater New Orleans Expressway Commission to 'A-' from 'A+', assigned stable outlook, -- Port of New Orleans Board of Commissioners to 'BBB' from 'A-', assigned developing outlook, and -- St. Bernard Port Harbor and Terminal District to 'BB' from 'BBB-', assigned stable outlook. After Hurricane Katrina struck the Gulf Coast, these credits were placed on CreditWatch based on: * the potential for damage to operations negatively affecting financial performance, * the lack of critical information necessary to assess how the storm and its aftermath would affect credits in the long term. Overall, those issuers with ratings remaining in the investment-grade category: * are current on all existing and projected debt service obligations; * have demonstrated adequate to very good operational recovery; and, * most importantly, exhibit both financial flexibility and demand characteristics that are less exposed to the key factors influencing recovery of the regional economy, including employment and tourism. For the rating lowered to the speculative-grade 'BB' category, the issuer has met debt service payments and has adequate liquidity in the near term. However, significant uncertainty remains regarding the pace of financial recovery as a result of exposure to economic conditions and factors outside the control or influence of management. In addition, the enterprise is more exposed to local or regional economic trends and has limited flexibility in adjusting either rates or the relatively high fixed cost structure to produce self- sufficient financial performance, reducing liquidity measures over the near term. Issuers with ratings in the 'BB' category are less vulnerable to nonpayment than other speculative-grade issuers and have the current capacity to meet the financial commitments on their obligations. Adverse business, financial, or economic conditions, however, would likely impair an obligor's capacity or willingness to meet these commitments. A developing outlook indicates that the rating could be raised or lowered within the next six months to two years. STELCO INC: Posts $42 Mil. Net Loss in 3rd Quarter Ended Sept. 30 ----------------------------------------------------------------- Stelco Inc. (TSX: STE) reported a net loss of $42 million or $0.41 per common share, for the quarter ended Sept. 30, 2005. This compares to net earnings of $58 million or $0.57 per common share, for the third quarter of 2004 and $40 million or $0.39 per share, for the previous quarter. Nine-month net earnings were $47 million or $0.46 per common share, compared to net earnings of $63 million or $0.62 per common share, for the same period in 2004. The results, when compared to third quarter 2004, reflect lower spot market selling prices, decreased shipments, reduced production levels, higher reorganization costs and higher energy costs, partly offset by higher income tax recoveries and lower scrap and coke costs. Also included in the third quarter 2005 is a loss resulting from the sale of substantially all of the assets of Stelpipe Ltd., more than offset by income tax recoveries recognized, related to Stelpipe net operating loss carry forwards. Net sales revenue in the third quarter was $725 million compared to $897 million for the same period last year. During the first nine months of 2005, sales revenue was $2.462 billion compared to $2.446 billion recorded during the first nine months of 2004. The Company produced 1,107,000 net tons of semi-finished steel in the third quarter of 2005 compared to 1,385,000 net tons produced in the third quarter of 2004. Production for the first nine months of this year stood at 3,660,000 net tons compared to the 4,078,000 net tons produced during the same period in 2004. Shipments in the third quarter of 2005 totalled 1,067,000 net tons compared to 1,143,000 net tons shipped during the third quarter of last year. Shipments during the first nine months of this year totalled 3,306,000 net tons compared to 3,564,000 net tons shipped during the first nine months of 2004. At September 30, 2005, the Company's consolidated net liquidity position was $307 million, consisting of $36 million of cash, cash equivalents and restricted cash as well as $469 million in available lines of credit, less $198 million of drawings on lines of credit. At June 30, 2005, net liquidity was $407 million, consisting of $26 million of cash, cash equivalents and restricted cash as well as $472 million in available lines of credit, less $91 million of drawings on lines of credit. At December 31, 2004, net liquidity was $284 million, consisting of $43 million of cash, cash equivalents and restricted cash as well as $456 million in available lines of credit, less $215 million of drawings on lines of credit. During the third quarter, the Company announced a number of significant developments in its Court-supervised restructuring process. These included the filing of a restructuring plan; a definitive agreement to sell substantially all of the assets of Stelpipe Ltd.; restructuring agreements with the Province of Ontario, the USW, and Tricap Management Limited; and the calling of a meeting of Affected Creditors. During the fourth quarter of 2005, the Company will be taking the first major step in its "Strategic Capital Expenditure Plan". During the quarter, the Lake Erie facility will have a 20-day planned shutdown beginning on November 15, 2005. This is the initial step to increase the output of the Lake Erie hot strip mill and allow for the closure of the 56" mill at Hamilton. It is anticipated that this capital project will be complete in the third quarter of 2006. Spot market prices and shipments are expected to improve in the fourth quarter. However, we expect this to be offset by higher energy costs, the planned shutdown of the Stelco Lake Erie hot strip mill to install components related to the Phase II upgrade, and the associated effect of lowering the value-added mix of sales due to slab sales in the fourth quarter. The strength of the Canadian dollar and the threat of increased import levels remain a concern to the Corporation. In addition, the remaining estimated non-cash loss of $31 million related to the sale of substantially all of the assets of Stelpipe will be recorded in the fourth quarter. Should the criteria of assets held for sale be met with respect to other non-core asset sales that are being pursued, additional non-cash losses to be recorded will be material. Courtney Pratt, Stelco President and Chief Executive Officer, said, "The third quarter results demonstrate the continuing competitive challenge we face and the vital importance of securing a consensual restructuring which will enable us to move forward with our strategic capital program. As we have said throughout this process, this capital program is essential to making Stelco competitive through all stages of the market cycle and ensuring a positive long-term future." Stelco, Inc. -- http://www.stelco.ca/-- is a large, diversified steel producer. Stelco is involved in all major segments of the steel industry through its integrated steel business, mini-mills, and manufactured products businesses. In early 2004, after a thorough financial and strategic review, Stelco concluded that it faced a serious viability issue. The Corporation incurred significant operating and cash losses in 2003 and believed that it would have exhausted available sources of liquidity before the end of 2004 if it did not obtain legal protection and other benefits provided by a Court-supervised restructuring process. Accordingly, on Jan. 29, 2004, Stelco and certain related entities filed for protection under the Companies' Creditors Arrangement Act. The Court has extended Stelco's CCAA stay period until Dec. 5, 2005, in order to accommodate the creditors' meetings and a sanction hearing. STELCO INC: Creditors' Meeting Adjourned Until Monday ----------------------------------------------------- The meeting of Stelco Inc.'s (TSX:STE) creditors to consider and vote upon the Company's restructuring plan has been adjourned until Monday, Nov. 21, 2005. The meetings of creditors of Stelco subsidiaries will also be adjourned to the same date. At meetings of the affected creditors of Stelco and certain of its subsidiaries held yesterday, the Company indicated to the Court- appointed Monitor that it was advisable to adjourn the meetings rather than proceed with votes at that time. The Monitor then exercised its discretion and ordered the adjournment. In requesting the adjournments Stelco expressed regret for the inconvenience caused by the adjournments. The Company indicated that the situation remained fluid as negotiations among stakeholder groups are continuing. "While we remain hopeful that a consensual plan can be achieved, it's clear we can't get there today," Courtney Pratt, Stelco President and Chief Executive Officer, said. "The plan as currently filed is not acceptable to the majority of affected creditors. In that context, there seems little point in submitting the plan to a vote at this time." "An adjournment will provide time for negotiations among the parties to continue towards final resolution in a focused and timely manner," Mr. Pratt noted. "Our goal, as it has been throughout this process, is to secure a consensual restructuring. We want to address the concerns of bondholders while maintaining the support of those groups that have already endorsed the current plan. We believe this approach is the best way in which to achieve the most positive outcome for our stakeholders." Stelco, Inc. -- http://www.stelco.ca/-- is a large, diversified steel producer. Stelco is involved in all major segments of the steel industry through its integrated steel business, mini-mills, and manufactured products businesses. In early 2004, after a thorough financial and strategic review, Stelco concluded that it faced a serious viability issue. The Corporation incurred significant operating and cash losses in 2003 and believed that it would have exhausted available sources of liquidity before the end of 2004 if it did not obtain legal protection and other benefits provided by a Court-supervised restructuring process. Accordingly, on Jan. 29, 2004, Stelco and certain related entities filed for protection under the Companies' Creditors Arrangement Act. The Court has extended Stelco's CCAA stay period until Dec. 5, 2005, in order to accommodate the creditors' meetings and a sanction hearing. TIMES SQUARE: S&P Affirms BB+ Rating on Mortgage & Lease Certs. --------------------------------------------------------------- Standard & Poor's Ratings Services affirmed its 'BB+' rating on Times Square Hotel Trust's mortgage and lease amortizing certificates and revised the outlook to positive from stable. The action follows the Nov. 15, 2005, affirmation of the 'BB+' corporate credit rating assigned to Starwood Hotels & Resorts Worldwide Inc. and concurrent revision of the outlook to positive. The rating on the Times Square Hotel Trust transaction is based on the payments and obligations of Starwood pursuant to a triple net lease of the W New York-Times Square Hotel located on Broadway at 47th Street. TITANIUM METALS: Earns $33.1 Million in 3rd Quarter Ended Sept. 30 ------------------------------------------------------------------ Titanium Metals Corporation (NYSE: TIE) reported operating income of $51.3 million and net income attributable to common stockholders of $33.1 million for the quarter ended Sept. 30, 2005, compared to operating income of $13.5 million and net income attributable to common stockholders of $25.2 million for the quarter ended Sept. 30, 2004. The 2004 amounts have been restated for the effects of the Company's previously reported change in its method for inventory costing. The Company's net sales increased 58% to $190 million during the third quarter of 2005 compared to net sales of $120.2 million during the year-ago period, due to increases in both average selling prices and sales volumes. Mill product average selling prices increased 35% and melted product average selling prices increased 66% during the third quarter of 2005, compared to the year-ago period. Mill product sales volume increased 9% while melted product sales volume increased 14% during the third quarter of 2005, compared to the year-ago period. Other non-mill product sales increased 85% compared to the year ago period due principally to higher selling prices for titanium scrap and improved demand for the Company's fabrication products. Such sales accounted for $5.1 million of additional operating income during the third quarter of 2005, as compared to the year ago period. Operating income during the third quarter of 2005 was adversely impacted by higher costs for raw materials as compared to the year ago period. The Company's backlog at the end of September 2005 was a record $710 million, a $130 million (22%) increase over the $580 million backlog at the end of June 2005 and a $310 million (78%) increase over the $400 million backlog at the end of September 2004. The Company's aggregate unused borrowing availability under its U.S. and European credit agreements approximated $102 million at Sept. 30, 2005. J. Landis Martin, Chairman and CEO, said, "Our third quarter 2005 operating income of $51.3 million is, by a significant margin, a record for TIMET. Our previous high for operating income was $40.4 million, achieved in the fourth quarter of 1997. Additionally, third quarter 2005 net sales were our highest since the second quarter of 1998. Based on our record level backlog as of Sept. 30, 2005 and other factors, we continue to believe that the current up-cycle will likely continue through 2006 and beyond." Consistent with the guidance provided on Oct. 11, 2005, the Company currently expects its full year 2005 net sales to range from $740 million to $760 million, its full year 2005 operating income to range from $155 million to $165 million and its full year 2005 net income attributable to common stockholders to range from $140 million to $150 million. All share and per share disclosures presented in this release for the three and nine months ended Sept. 30, 2004 have been adjusted to give effect to the Company's previously reported two-for-one stock split effective after the close of trading on Sept. 6, 2005. Headquartered in Denver, Colorado, Titanium Metals Corporation -- http://www.timet.com/-- is a worldwide producer of titanium metal products. * * * As reported in the Troubled Company Reporter on Mar. 18, 2005, Standard & Poor's Ratings Services raised its corporate credit rating on Denver, Colorado-based Titanium Metals Corp., to 'B+' from 'B'. Standard & Poor's also raised its preferred stock rating to 'CCC+' from 'CCC'. S&P says the outlook is stable. TKO SPORTS: Taps Weycer Kaplan as Bankruptcy Counsel ---------------------------------------------------- TKO Sports Group USA Limited sought and obtained authority from the U.S. Bankruptcy Court for the Southern District of Texas to employ Weycer, Kaplan, Pulaski & Zuber, P.C., as its bankruptcy counsel. Weycer Kaplan is expected to: (a) give the Debtor legal advice with respect to: * the chapter 11 case, * the Debtor's powers and duties as debtor-in-possession, and * the continued operation of the Debtor's business and management of the Debtor's property; and (b) perform all legal services for the debtor-in-possession, which may be necessary. The Debtor discloses that the Firm's professionals bill: Professional Hourly Rate ------------ ----------- Edward L. Rothberg, Esq. $300 Hugh Ray, III, Esq. $210 Melissa A. Haselden, Esq. $200 Legal Assistants/Paralegals $100 To the best of the Debtor's knowledge, the Firm does not represent any interest adverse to the estate. Headquartered in Houston, Texas, TKO Sports Group USA Limited, a/k/a TKO Sports Group, Inc. -- http://www.strengthtko.com/-- manufactures sporting goods and fitness equipment. The Company filed for chapter 11 protection on Oct. 11, 2005 (Bankr. S.D. Tex. Case No. 05-48509). When the Debtor filed for protection from its creditors, it estimated assets between $1 million and $10 million and debts between $10 million and $50 million. TKO SPORTS: Files Schedules of Assets and Liabilities ----------------------------------------------------- TKO Sports Group USA Limited, delivered its Schedules of Assets and Liabilities to the U.S. Bankruptcy Court for the Southern District of Texas, disclosing: Name of Schedule Assets Liabilities ---------------- ------ ----------- A. Real Property B. Personal Property $8,193,809 C. Property Claimed as Exempt D. Creditors Holding $5,533,732 Secured Claims E. Creditors Holding $1,330 Unsecured Priority Claims F. Creditors Holding $5,036,548 Unsecured Nonpriority Claims ---------- ----------- Total $8,193,809 $10,571,610 Headquartered in Houston, Texas, TKO Sports Group USA Limited, a/k/a TKO Sports Group, Inc. -- http://www.strengthtko.com/-- manufactures sporting goods and fitness equipment. The Company filed for chapter 11 protection on Oct. 11, 2005 (Bankr. S.D. Tex. Case No. 05-48509). Edward L. Rothberg, Esq., at Weycer, Kaplan, Pulaski & Zuber, P.C., represents the Debtor in its restructuring efforts. When the Debtor filed for protection from its creditors, it listed $8,193,809 in assets and $10,571,610 in debts. TRANSDIGM INC: Higher Leverage Cues S&P to Affirm B+ Credit Rating ------------------------------------------------------------------ Standard & Poor's Ratings Services affirmed its ratings on TransDigm Inc., including the 'B+' corporate credit rating. The outlook remains stable. "The affirmation takes into account increased leverage to fund shareholder and deferred compensation payments, offset by good profitability and cash flow generation, as well as a recovery in the commercial aerospace market," said Standard & Poor's credit analyst Christopher DeNicolo. Although credit protection measures prior to the distributions were generally above average for the rating, there was a good possibility of increased leverage to fund acquisitions or shareholder value initiatives. On Nov. 10, 2005, TransDigm used $104 million of its own cash to pay a dividend to its parent, TransDigm Holding Co., and to make bonus payments to management. In turn, TransDigm Holding used the funds received to make a dividend to its parent, TD Holding Corp. In combination with the proceeds from a new $200 million unsecured loan due 2011, TD Holding used the funds to make certain payments to shareholders and to pay deferred compensation expenses. Although the loan is not guaranteed by TransDigm, the firm is TD Holding's only source of cash flow to pay interest and principal on the loan. Consolidated debt to EBITDA, pro forma for the transaction for fiscal 2005, is likely to increase to 5.3x from previous expectations of around 4x. Similarly, debt to capital is expected to increase to almost 75% from around 55%. The dividend will utilize almost all of TransDigm's available cash, but adequate liquidity is provided by a $100 million revolver and internal cash generation. The ratings for TransDigm reflect: * a relatively modest scale of operations around $350 million revenues, * cyclical and competitive pressures in the commercial aerospace industry, and * a highly leveraged balance sheet, but incorporate the firm's leading positions in niche markets and very strong profit margins. Cleveland, Ohio-based TransDigm is a well-established supplier of highly engineered aircraft components for use on nearly all commercial and military airplanes as well as engines. The company has expanded its product offering through several acquisitions, including three so far in fiscal 2005 for a total of more than $60 million. A recovery in the commercial aerospace market, efforts to reduce costs, and the proven ability to maintain high margins should enable TransDigm to offset increased debt levels and preserve a credit profile consistent with current ratings. The outlook could be revised to negative if leverage increases significantly as a result of debt financed acquisitions or efforts to enhance shareholder value. The outlook could be revised to positive if excess cash is used to reduce debt materially and lower leverage ratios are maintained. TRUMP ENT: Earns $3.2 Million of Net Income in Third Quarter ------------------------------------------------------------ Trump Entertainment Resorts, Inc. (NASDAQ NMS: TRMP) reported its operating results for the third quarter and nine months ended Sept. 30, 2005. Consolidated net revenues for the quarter ended Sept. 30, 2005 were $277.3 million, compared to $273.6 million for the quarter ended Sept. 30, 2004. The company has treated Trump Indiana's results as discontinued operations, given the previously announced pending sale of Trump Indiana. Consolidated income from operations for the quarter ended Sept. 30, 2005, was $32.7 million, compared to $28.3 million for the quarter ended Sept. 30, 2004. During the 2005 third quarter, in connection with its reorganization proceedings commenced on Nov. 21, 2004, the company recorded reorganization expenses and related costs of $5.7 million as a result of continued professional fees incurred with respect to the reorganization. Consolidated net income for the quarter ended Sept. 30, 2005, was $3.2 million, compared to a net loss of $25.1 million for the quarter ended Sept. 30, 2004. EBITDA for the quarter ended Sept. 30, 2005, was $54.7 million, compared to EBITDA of $56.4 million reported for the quarter ended Sept. 30, 2004. Readers are advised that the term "EBITDA" is not a measure of financial performance under generally accepted accounting principles. The Company supplementally provides EBITDA because it believes that it is commonly used by investors in measuring an entity's operating performance in the gaming industry. A reconciliation of EBITDA to income from operations is included in the attached schedules. "Our third quarter financials continue to reflect matters associated with the Company's reorganization," James B. Perry, the Company's Chief Executive Officer and President, commented. "Additionally, the results reflect the initial changes made to increase the profitability of some marketing programs. While these changes negatively impact revenue in the short term, they are designed to enable us to realize margin improvements going forward." Trump Entertainment Resorts, Inc. -- http://www.trumpcasinos.com/ -- is a leading gaming company that owns and operates four properties. The company's assets include Trump Taj Mahal Casino Resort and Trump Plaza Hotel and Casino, located on the Boardwalk in Atlantic City, New Jersey, Trump Marina Hotel Casino, located in Atlantic City's Marina District, and the Trump Casino Hotel, a riverboat casino located in Gary, Indiana. Together, the properties comprise approximately 371,300 square feet of gaming space and 3,180 hotel rooms and suites. The company is the sole vehicle through which Donald J. Trump, the company's Chairman and largest stockholder, conducts gaming activities and strives to provide customers with outstanding casino resort and entertainment experiences consistent with the Donald J. Trump standard of excellence. Trump Entertainment Resorts, Inc. is separate and distinct from Mr. Trump's real estate and other holdings. Headquartered in Atlantic City, New Jersey, Trump Hotels & Casino Resorts, Inc., nka Trump Entertainment Resorts, Inc. -- http://www.thcrrecap.com/-- through its subsidiaries, owns and operates four properties and manages one property under the Trump brand name. The Company and its debtor-affiliates filed for chapter 11 protection on Nov. 21, 2004 (Bankr. D. N.J. Case No. 04-46898 through 04-46925). Robert A. Klymman, Esq., Mark A. Broude, Esq., John W. Weiss, Esq., at Latham & Watkins, LLP, and Charles Stanziale, Jr., Esq., Jeffrey T. Testa, Esq., William N. Stahl, Esq., at Schwartz, Tobia, Stanziale, Sedita & Campisano, P.A., represent the Debtors in their successful chapter 11 restructuring. When the Debtors filed for protection from their creditors, they listed more than $500 million in total assets and more than $1 billion in total debts. The Court confirmed the Debtors' Second Amended Plan of Reorganization on Apr. 5, 2005, and the plan took effect on May 20, 2005. * * * As reported in the Troubled Company Reporter on Nov. 10, 2005, 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. 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. VERESTAR INC: Committee Gets Court OK to Prosecute Estate Actions ----------------------------------------------------------------- The U.S. Bankruptcy Court for the Southern District of New York authorized Verestar, Inc., and its debtor-affiliates' Official Committee of Unsecured Creditors to pursue avoidance actions, nunc pro tunc to June 29, 2004, against: * the Debtors' parent, American Tower Corporation, * Bear Stearns & Co., Inc., and * the officers and directors of ATC and Verestar. American Tower asserts $522,122,000 against the Debtors' estates. The Debtors, in turn, have asserted defenses and counterclaims against American Tower. The Committee accused the officers and directors, Bear Stearns and ATC of aiding and abetting conspiracy, deepening insolvency, and tortuous interference with prospective or existing business relations. The Committee can now investigate, defend, commence, prosecute and litigate actions on behalf of the estates. Headquartered in Fairfax, Virginia, Verestar, Inc., -- http://www.verestar.com/-- was a provider of satellite and terrestrial-based network communication services prior to the sale of substantially all of its assets. Verestar is a wholly-owned subsidiary of American Tower Corporation, a non-debtor. The Company and two of its affiliates filed for chapter 11 protection on December 22, 2003 (Bankr. S.D.N.Y. Case No. 03-18077). Matthew Allen Feldman, Esq., at Willkie Farr & Gallagher LLP represents the Debtors. When the Company filed for protection from its creditors, it listed $114 million in assets and more than $635 million in debts. VIROPHARMA INC: Earns $18.7 Million in 3rd Quarter Ended Sept. 30 ----------------------------------------------------------------- ViroPharma Incorporated (Nasdaq: VPHM) filed its quarterly report for the period ended Sept. 30, 2005, with the Securities and Exchange Commission on Nov. 8, 2005. Net income in the third quarter and nine-months ended Sept. 30, 2005 was $18.7 million and $41 million, respectively, compared to a net loss of $3.3 million and $25.3 million for the same periods in 2004. The primary drivers of the change from net loss in 2004 to net income in 2005 were the effects of improved operating income, partially offset by debt-related costs and income tax expense in 2005. Net sales of Vancocin(R), potent antibiotic approved by the U.S. Food and Drug Administration to treat antibiotic-associated pseudomembranous colitis, were a record $35.7 million for the third quarter of 2005 and $85.5 million for the first nine months of 2005. Operating income in the third quarter and nine months ended Sept. 30, 2005 was $23.9 million and $60 million, respectively, compared to operating losses in the third quarter and nine months of 2004 of $3.3 million and $21.8 million, respectively. The increases in operating results from 2004 to 2005 were driven primarily by sales of Vancocin and the related cost of sales. "The third quarter of 2005 marked the third sequential quarter of record revenue and strong financial results for ViroPharma, and also marked a time of great momentum throughout our business," commented Michel de Rosen, ViroPharma's chief executive officer. "Vancocin continued to perform well, with prescriptions growing 36 percent over the third quarter of 2004. We hired, and have since launched, our regional medical scientist team, who are now working with key opinion leaders throughout the U.S. to ensure appropriate usage of Vancocin and rapid identification of patients at high risk of serious Clostridium difficile associated disease. We further reduced our debt from the end of the second quarter, ending the quarter with only $86.7 million remaining. Finally, enrollment in our Phase 1b study with HCV-796 and Phase 2 trial with maribavir continued, and we expect to have the clinical data available from these studies in the fourth quarter of 2005 and the first quarter of 2006, respectively." The Company's balance sheet showed $202,623,000 of assets at Sept. 30, 2005, and liabilities totaling $115,878,000. Management anticipates that revenues from Vancocin will continue to generate positive cash flow and should allow us to fund substantially all of our ongoing development and other operating costs for the foreseeable future. At Sept. 30, 2005, the Company had cash, cash equivalents and short-term investments of $65.2 million. Also, at Sept. 30, 2005, the annualized weighted average nominal interest rate on our short-term investments was 3.3%. Debt Highlights During 2005, ViroPharma recorded a charge of $4 million for the change in fair value of derivative liability that related to the make-whole provision on the senior convertible notes, which are no longer outstanding. The Company recorded a $1.2 million net gain related to the repurchase of $41.2 million of subordinated convertible notes for $39.8 million in the second quarter of 2005. The net gain is comprised of the gross gain of $1.4 million less the write-off of $0.2 million of deferred finance costs. The increases in both periods for interest expense were due to the interest, amortization of financing costs, and debt discount from the senior convertible notes, issued in January and April 2005. Interest expense also includes the $0.6 million and $0.9 million related to the beneficial conversion feature for the settlement of the make whole provision of the senior convertible notes in shares of common stock during June and July 2005, respectively. During 2005 the Company reduced its debt principal by $116.2 million through $41.2 million of purchases of convertible subordinated notes and by the conversion of $75 million of senior convertible notes. On July 12, 2005, the Company effected an auto-conversion on the final $15.4 million of the senior convertible notes. The Company had $86.7 million in principal amount of notes outstanding as of Sept. 30, 2005. For the year 2005, ViroPharma expects: -- Net product sales: $120 to $123 million, representing growth of 122 percent to 128 percent over unaudited net product sales of Vancocin in 2004; -- Cost of sales: $18 to $18.5 million; -- Research and Development: $11.5 to $13.5 million; -- Marketing, General and Administrative: $10 to $12.5 million; -- Net cash flows provided by operations: At least $60 million. Exton, Pennsylvania based ViroPharma Incorporated -- http://www.viropharma.com/-- is committed to the development and commercialization of products that address serious diseases treated by physician specialists and in hospital settings. ViroPharma commercializes Vancocinr approved for oral administration for treatment of antibiotic-associated pseudomembranous colitis caused by Clostridium difficile and enterocolitis caused by Staphylococcus aureus, including methicillin-resistant strains. ViroPharma currently focuses its drug development activities in viral diseases including cytomegalovirus (CMV) and hepatitis C (HCV). WESTON NURSERIES: Creditors Committee Taps Jager Smith as Counsel ----------------------------------------------------------------- The Official Committee of Unsecured Creditors of Weston Nurseries, Inc., asks the U.S. Bankruptcy Court for the District of Massachusetts for permission to employ Jager Smith P.C. as its counsel. Jager Smith will: 1) assist and advise the Committee with respect to its responsibilities, powers and duties in the Debtor's chapter 11 case; 2) assist the Committee in its investigation of the acts, conduct, assets, liabilities and financial condition of the Debtor; 3) review pending motions of the Committee before the Court and assist in the review of those motions; 4) provide legal advice to the Committee in the connection with a proposed plan of reorganization, in the prosecution of avoidance actions or claims against third parties, and in other matters related to the formulation of a chapter 11 plan in the Debtor's chapter 11 case; 5) prepare on behalf of the Committee all necessary applications, motions, responses, orders, reports and other legal papers; and 6) perform all other legal services to the Committee that are necessary and proper under 11 U.S.C. Section 1103. Steven C. Reingold, Esq., a partner at Jager Smith, is one of the lead attorneys for the Committee. Mr. Reingold charges $275 per hour for his services. Mr. Reingold reports Jager Smith's professionals bill: Professional Designation Hourly Rate ------------ ----------- ----------- Bruce F. Smith Partner $400 Michael J. Fencer Associate $250 Designation Hourly Rate ----------- ----------- Paralegals $105 - $135 Jager Smith assures the Court that it does not represent any interest materially adverse to the Committee and is a disinterested person as that term is defined in Section 101(14) of the Bankruptcy Court. Headquartered in Hopkinton, Massachusetts, Weston Nurseries, Inc., -- http://www.westonnurseries.com/-- is central New England's premier resource in designing, creating, and enjoying outdoor living areas. Weston Nurseries grows and sells quality plants, trees, shrubs, and perennials. The Company filed for chapter 11 protection on Oct. 14, 2005 (Bankr. D. Mass. Case No. 05-49884). Alan L. Braunstein, Esq., at Riemer & Braunstein, LLP 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. WINN-DIXIE: Court Okays Resolution of Remaining Reclamation Claims ------------------------------------------------------------------ The U.S. Bankruptcy Court for the Middle District of Florida authorized Winn-Dixie Stores, Inc., and its debtor-affiliates to determine the amount of the reclamation claims that have not been fully reconciled and agreed by the vendors. As previously reported in the Troubled Company Reporter on Oct. 24, 2005, that the unresolved reclamation claims are segregated into three categories: (1) Those vendors that agree with the Debtors' proposed reclamation analysis, but have not yet resolved set-off or consumption issues; (2) Those vendors that failed to agree or disagree with their Statement of Reclamation; and (3) The dissenting vendors. Unresolved Set-off and Consumption Issues According to Mr. Baker, 184 vendors have agreed with the Debtors' proposed gross amount of their reclamation claims but have not yet completed the reconciliation of any offsets to their claims. After the Court approved the Reclamation/Trade Lien Stipulation, the Debtors established a two-step process for the vendors to opt in. The vendors would first need to assent to the Statement of Reclamation and send it to the Debtors. Then, after the Statement of Reclamation was received, the Debtors would contact the vendor to determine if it was interested in participating in the trade lien program. In many cases, a vendor and the Debtors never agreed on the consumption rate, and may not have reached an agreement with respect to the prepetition accounts payable credits and accounts receivables. For this type of reclamation claims, the Debtors want the Court to determine that the appropriate amount of unresolved prepetition offsets are the amounts that they have set forth. The Debtors also want the Court to determine the rate of consumption at trial. Unreturned Statement of Reclamation Mr. Baker reports that 79 vendors did not return their Statement of Reclamation and chose not to indicate their assent or dissent to their Statement. For this type of reclamation claims, the Debtors seek a determination that each vendor's reclamation claim will be deemed allowed in the amount of their Reconciled Reclamation Claim and that the amount of the set-offs will be deducted from the Reconciled Reclamation Claim, therefore resulting in an allowed reclamation claim subject to a determination of the consumption rate. Dissenting Vendors According to Mr. Baker, 48 vendors disagreed with the Reconciled Reclamation Claim contained in their Statement of Reclamation. Based on the Debtors' books and records and the documents provided by the vendors, the Debtors want to set up a process that lets the Court determine that the vendor's reclamation claims should be allowed in the amount set forth in each vendor's Statement of Reclamation. Mr. Baker says that unless the Debtors and the vendors agree on the allowed amount of their reclamation claims and consumption rates, each vendor will be obligated to contact the Debtors' counsel by Dec. 15, 2005, to schedule an evidentiary hearing with respect to the outstanding issues. Mr. Baker tells Judge Funk that with respect to reclamation vendors that have responded to their Statement of Reclamation, the Debtors are actively working to resolve those reclamation claims. Headquartered in Jacksonville, Florida, Winn-Dixie Stores, Inc. -- http://www.winn-dixie.com/-- is one of the nation's largest food retailers. The Company operates stores across the Southeastern United States and in the Bahamas and employs approximately 90,000 people. The Company, along with 23 of its U.S. subsidiaries, filed for chapter 11 protection on Feb. 21, 2005 (Bankr. S.D.N.Y. Case No. 05-11063). The Honorable Judge Robert D. Drain ordered the transfer of Winn-Dixie's chapter 11 cases from Manhattan to Jacksonville. On April 14, 2005, Winn- Dixie and its debtor-affiliates filed for chapter 11 protection in M.D. Florida (Case No. 05-03817 to 05-03840). D.J. Baker, Esq., at Skadden Arps Slate Meagher & Flom LLP, and Sarah Robinson Borders, Esq., and Brian C. Walsh, Esq., at King & Spalding LLP, represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $2,235,557,000 in total assets and $1,870,785,000 in total debts. (Winn-Dixie Bankruptcy News, Issue No. 26; Bankruptcy Creditors' Service, Inc., 215/945-7000). WISCONSIN AVE: Fitch Affirms BB- Rating on $9.2-Mil Class C Cert. ----------------------------------------------------------------- Fitch Ratings affirms Wisconsin Avenue Securities' subordinate REMIC mortgage pass-through certificates, series 1996-M5: -- $3.3 million class B at 'AA'. -- $9.2 million class C at 'BB-'. The $9.9 million class A-3 certificates were exchanged for Federal National Mortgage Association guaranteed REMIC pass-through certificates and are not rated by Fitch. The $6.6 million Class D certificates are also not rated by Fitch. To date, the deal has suffered $2 million in losses. The affirmations are the result of increased credit enhancement levels, which has been offset by increasing concentrations and declining performance of the underlying collateral. The certificates are collateralized by six mortgage loans, secured by multifamily properties. The properties are diversified among five states, with the highest concentrations in Georgia, Texas, and California. As of the October 2005 distribution date, the transaction's aggregate principal balance has decreased 84% to $29 million from $216 million at issuance. ORIX Real Estate Capital Markets, LLC, the master servicer, collected year-end 2004 operating statements for 100% of the loans in the pool. The YE 2004 weighted-average debt service coverage ratio was 0.83 times, a decrease from 1x at YE 2003 and 1.28x at issuance. Currently, there are no delinquent or specially serviced loans. Four loans are currently on the master servicer's watchlist due to declining performance and low occupancy. One of the four watchlisted loans has sustained minor damage as a result of Hurricane Katrina. XTREME COMPANIES: Sept. 30 Balance Sheet Upside-Down by $1.4 Mil. ----------------------------------------------------------------- Xtreme Companies, Inc. (OTC Bulletin Board: XTME -- News) reported that it posted revenue of $334,671 for the quarter ended Sept. 30, 2005, compared to $0 for the quarter ended Sept. 30, 2004. Total revenue for the nine-month period ended Sept. 30, 2005, was $954,971 compared to $110,852 for For the three months ended Sept. 30, 2005, the company reported net loss of $588,711. This compares to a net loss of $343,831 for the three months ended Sept. 30, 2004. Xtreme CEO Kevin Ryan stated, "As I have suggested recently, our business is beginning to grow quite rapidly. Over the past several months, our 'First Responders' division was awarded with its first ever international sale as well as additional sales via homeland security grants for fire, rescue and patrol boats. Furthermore, the 'Challenger Offshore' lines continue to show tremendous growth. We've recently announced the receipt of approximately $1 million in orders and as well as the launch of the new Sport Fish and Mega Yacht lines." Mr. Ryan added, "I believe as much as 2005 has proven so far to be the initial thrust of Xtreme's emergence in the marketplace, 2006 should be a period of even more significant growth." Xtreme Companies, Inc. -- http://www.xtremecos.com/-- is engaged in manufacturing and marketing of mission-specific Fire-Rescue and Patrol boats used in emergency, surveillance and defense deployments. The boats have been marketed and sold directly to fire and police departments, the U.S. Military and coastal port authorities throughout the United States. Additionally, Xtreme is the exclusive marketer and distributor for Marine Holdings, Inc. d/b/a Challenger Offshore -- http://www.challengeroffshore.com/-- which manufactures semi- custom fiberglass boats of 19' to 97' in length, which include leisure, performance, fishing and motor yachts. MHI is best known for their products that compete directly with the industry's largest boat producers. Xtreme holds an option to purchase 100% of the outstanding shares of MHI by March 2006. At Sept. 30, 2005, Xtreme Companies, Inc.'s balance sheet showed a $1,437,064 stockholders' deficit compared to an $894,853 deficit at Dec. 31, 2004. * Chadbourne & Parke Names Douglas R. Jensen as Litigation Counsel ------------------------------------------------------------------ The international law firm of Chadbourne & Parke LLP reported that Douglas R. Jensen, 50, has been named counsel in the litigation group, resident in the Firm's New York office. A former Assistant U.S. Attorney in the Southern District of New York for 11 years, Mr. Jensen most recently served as Deputy Chief of the Criminal Division. Mr. Jensen's expertise includes complex commercial litigation, white-collar criminal defense and SEC investigations. As Assistant U.S. Attorney, Mr. Jensen prosecuted and tried complex securities fraud, money laundering, narcotics and mail and wire fraud cases. Mr. Jensen joins Chadbourne from Kasowitz, Benson, Torres & Friedman LLP, where, among other things, he acted as an independent examiner to ensure compliance with non-prosecution agreements entered into with the Justice Department and SEC. Prior to working in the U.S. Attorney's Office, Mr. Jensen was a partner with Gaston & Snow in New York. "Doug's extensive experience will provide added depth to our white-collar and SEC enforcement and litigation practices, which are extremely active globally," said Charles K. O'Neill, Chadbourne's managing partner. "We plan on continuing to expand our special investigations and litigation and SEC enforcement practice groups to accommodate the needs of clients when faced with such issues that affect them." "Doug's diverse background in criminal and civil litigation, combined with his experience as an Assistant U.S. Attorney, make him a tremendous asset to our team," said Abbe D. Lowell, partner, Chadbourne's special investigations and litigation practice. "We are pleased to have a lawyer of Doug's caliber on board to help serve the growing client demand for our counsel." Chadbourne's litigation department has earned a national reputation for excellence in all areas of high-stakes, high- profile, complex business disputes. Chadbourne's special investigations and litigation and securities enforcement practices are national and international in scope representing clients in connection with a range of matters, including securities enforcement and litigation, both civil and criminal. "I'm excited to be part of Chadbourne's litigation team," said Mr. Jensen. "The Firm's excellent reputation will provide me a stronger platform on which to continue to develop and enhance my legal practice and areas of expertise. I look forward to helping the Firm's clients successfully resolve their complex litigation challenges." Mr. Jensen earned a J.D. from the New York University School of Law School, where he was Note and Comments Editor of the Review of Law and Social Change, an M.A. from Columbia University, and a B.A., cum laude, from Colorado College. Chadbourne & Parke LLP, -- http://http://www.chadbourne.com/-- an international law firm headquartered in New York City, provides a full range of legal services, including mergers and acquisitions, securities, project finance, corporate finance, energy, telecommunications, commercial and products liability litigation, securities litigation and regulatory enforcement, special investigations and litigation, intellectual property, antitrust, domestic and international tax, insurance and reinsurance, environmental, real estate, bankruptcy and financial restructuring, employment law and ERISA, trusts and estates and government contract matters. The Firm has offices in New York, Washington, D.C., Los Angeles, Houston, Moscow, St. Petersburg, Kyiv, Almaty, Warsaw (through a Polish partnership), Beijing, and a multinational partnership, Chadbourne & Parke, in London. * EPIQ Systems Acquires nMatrix for $125 Million ------------------------------------------------ EPIQ Systems, Inc. (NASDAQ: EPIQ) will acquire nMatrix, Inc., for $125 million consisting of $100 million cash and $25 million stock. nMatrix is a leading provider of case management and document management products and services for electronic discovery and litigation support. The company's projected operating revenue for its fiscal year ending Dec. 31, 2005, is approximately $20 million, more than double the revenue for its fiscal year ending Dec. 31, 2004. The acquisition will provide complementary diversification to EPIQ Systems' existing legal technologies business and extend the company's presence in its core marketplace. EPIQ Systems will operate nMatrix as a wholly owned subsidiary from its current locations in New York, London, and Melbourne, Australia. Tom W. Olofson, chairman and chief executive officer, and Christopher E. Olofson, president and chief operating officer of EPIQ Systems, said, "The acquisition of nMatrix provides us with an immediate leadership position in the high-growth electronic discovery market. There is a strong affinity between the business of nMatrix and EPIQ Systems' existing presence in the legal technology services markets. We have a significant opportunity to grow nMatrix's business and to leverage client relationships across the combined company." EPIQ Systems will fund the cash component of the purchase price with a combination of cash on hand and a $125 million credit facility arranged by KeyBank. EPIQ Systems, Inc. -- http://www.epiqsystems.com/-- is a national leader in the market for fiduciary management and claims administration systems and provides an advanced offering of integrated technology-based products and services. Our solutions enable clients to optimize the administration of large and complex bankruptcy, class action, mass tort, and other similar legal proceedings. EPIQ Systems' clients include corporations, attorneys, trustees and administrative professionals who require sophisticated case administration and document management capabilities, extensive subject matter expertise, and a high service capacity. EPIQ provides clients a packaged offering of both proprietary technology and value-added services that comprehensively addresses their extensive business requirements. ********* Monday's edition of the TCR delivers a list of indicative prices for bond issues that reportedly trade well below par. Prices are obtained by TCR editors from a variety of outside sources during the prior week we think are reliable. Those sources may not, however, be complete or accurate. The Monday Bond Pricing table is compiled on the Friday prior to publication. Prices reported are not intended to reflect actual trades. Prices for actual trades are probably different. Our objective is to share information, not make markets in publicly traded securities. Nothing in the TCR constitutes an offer or solicitation to buy or sell any security of any kind. It is likely that some entity affiliated with a TCR editor holds some position in the issuers' public debt and equity securities about which we report. Each Tuesday edition of the TCR contains a list of companies with insolvent balance sheets whose shares trade higher than $3 per share in public markets. At first glance, this list may look like the definitive compilation of stocks that are ideal to sell short. Don't be fooled. Assets, for example, reported at historical cost net of depreciation may understate the true value of a firm's assets. A company may establish reserves on its balance sheet for liabilities that may never materialize. The prices at which equity securities trade in public market are determined by more than a balance sheet solvency test. A list of Meetings, Conferences and Seminars appears in each Wednesday's edition of the TCR. Submissions about insolvency- related conferences are encouraged. Send announcements to conferences@bankrupt.com/ Each Friday's edition of the TCR includes a review about a book of interest to troubled company professionals. All titles are available at your local bookstore or through Amazon.com. Go to http://www.bankrupt.com/books/to order any title today. Monthly Operating Reports are summarized in every Saturday edition of the TCR. For copies of court documents filed in the District of Delaware, please contact Vito at Parcels, Inc., at 302-658-9911. For bankruptcy documents filed in cases pending outside the District of Delaware, contact Ken Troubh at Nationwide Research & Consulting at 207/791-2852. ********* S U B S C R I P T I O N I N F O R M A T I O N Troubled Company Reporter is a daily newsletter co-published by Bankruptcy Creditors' Service, Inc., Fairless Hills, Pennsylvania, USA, and Beard Group, Inc., Frederick, Maryland USA. Yvonne L. Metzler, Emi Rose S.R. Parcon, Rizande B. Delos Santos, Jazel P. Laureno, Cherry A. Soriano-Baaclo, Marjorie C. Sabijon, Terence Patrick F. Casquejo, Christian Q. Salta, Jason A. Nieva, Lucilo Junior M. Pinili, Tara Marie A. Martin and Peter A. Chapman, Editors. Copyright 2005. All rights reserved. ISSN: 1520-9474. This material is copyrighted and any commercial use, resale or publication in any form (including e-mail forwarding, electronic re-mailing and photocopying) is strictly prohibited without prior written permission of the publishers. Information contained herein is obtained from sources believed to be reliable, but is not guaranteed. The TCR subscription rate is $675 for 6 months delivered via e- mail. Additional e-mail subscriptions for members of the same firm for the term of the initial subscription or balance thereof are $25 each. For subscription information, contact Christopher Beard at 240/629-3300. *** End of Transmission ***