/raid1/www/Hosts/bankrupt/TCR

/raid1/www/Hosts/bankrupt/TCR_Public/051208.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, December 8, 2005, Vol. 9, No. 291 Headlines ALABAMA METAL: S&P Raises Corp. Credit Rating to BB from B+ ALLMERICA FINANCIAL: Spin-Off Plans Prompts S&P to Review Ratings ATA AIRLINES: Has Until December 31 to Decide on Unexpired Leases ATA AIRLINES: McCarter & English Can Draw on Prepetition Retainer ATLAS PIPELINE: Moody's Rates Planned $250M Sr. Unsec. Notes at B1 ATLAS PIPELINE: S&P Rates Proposed $250MM Sr. Unsec. Notes at B+ ALLEGHENY TECHS: Moody's Lifts $300 Million Notes' Rating to Ba3 ASSOCIATED ESTATES: S&P Chips Junk Rating on Preferred Stock BALLY TOTAL: Company Insiders Sell 1.2 Million Common Shares BLOCK COMMS: Offers to Buy $175 Mil. of 9-1/4% Senior Sub. Notes BLOCK COMMS: Moody's Rates Proposed $150 Million Sr. Notes at B1 BLOCK COMMS: S&P Assigns BB- Rating to Planned $190M Sr. Sec. Loan CABOODLES LLC: Can Access Pittco Capital's Cash Collateral CABOODLES LLC: Wants Open-Ended Lease Decision Period CAPITAL AUTOMOTIVE: Moody's Withdraws $500MM Notes' (P)Ba2 Rating CARROLS CORP: Lenders Extend Financial Filing Deadline to Feb. 15 CENDANT MORTGAGE: Fitch Places Low-B Ratings on 15 Cert. Classes CLEAN HARBORS: Improved Financial Profile Cues S&P to Lift Ratings COMSTOCK HOMEBUILDING: Moody's Rates Proposed $150MM Notes at B3 COMSYS INFORMATION: Moody's Rates Proposed $100 Million Loan at B3 COMSYS IT: Venturi Integration Spurs S&P to Junk $100M Junior Loan CONSUMER DIRECT: Equity Deficit Tops $5.5 Mil. at September 30 COOPER-STANDARD: Moody's Reviews Sr. Subordinated Debt's B3 Rating CMS ENERGY: Plans to Auction & Sell Palisades Nuclear Power Plant CREDIT SUISSE: S&P Raises Low-B Ratings on 5 Certificate Classes CROSS COUNTRY: Moody's Withdraws $200 Million Debts' Ba1 Ratings DELPHI CORP: Has Until June 7 to Make Lease-Related Decisions DELPHI CORP: Appointment of Non-Hourly Retirees' Panel Deferred DELPHI CORP: Pepco Wants Stay Lifted to Terminate Sales Agreement DELTA AIR: CIT Purchases Ten Boeing Aircraft for $600 Million DELTA AIR: Retiree's Panel Objects to Use of Disability Funds EMPIRE GLOBAL: Posts $900K Net Loss for the Quarter Ended Sept. 30 ENTERGY NEW ORLEANS: Deloitte & Touche Approved as Auditors ENTERGY NEW ORLEANS: Can Honor Prepetition Employee Obligations ENTERGY NEW ORLEANS: Wants Ordinary Course Profs. to Continue EQUINOX HOLDINGS: Related Merger Prompts S&P's Negative Watch GB HOLDINGS: Shareholder Wants Examiner or Equity Panel Appointed GB HOLDINGS: Creditors Panel Taps McElroy Deutsch as Co-Counsel HARLAN SPRAGUE: Moody's Places Ba2 Rating on $190 Million Debts IAP WORLDWIDE: Moody's Junks Proposed $225 Million Term Loan IAP WORLDWIDE: S&P Puts Low-B Ratings on Proposed $675 Mil. Loans KAISER ALUMINUM: Court Okays Insurer's Stipulation on Plan Terms KEY ENERGY: Debt Payment Prompts S&P to Withdraw Ratings LEINER HEALTH: Moody's Confirms $150 Million Notes' Caa1 Rating M/I HOMES: Exercises Option to Increase Credit Facility to $725M MAGRUDER COLOR: Can Employ San Filippo as Financial Advisors MAJESTIC STAR: S&P Raises Low-B Ratings on $370 Million Debts MERIDIAN AUTOMOTIVE: Lenders Want Committee's Lawsuit Dismissed MERIDIAN AUTOMOTIVE: Wants to Modify Retire Benefits Plan MERIDIAN AUTOMOTIVE: Court Okays PCA as Panel's Brazilian Counsel MARKWEST ENERGY: Moody's Rates Proposed $615 Mil. Facilities at B1 METROMEDIA FIBER: Court Delays Entry of Final Decree to Jan. 16 MIRANT CORP: Reorganized Profile Earns S&P's B+ Credit Rating MMI PRODUCTS: Refinancing Concerns Spur S&P's Negative Outlook MORTON'S RESTAURANT: $150 Mil. IPO Prompts S&P to Review B- Rating MTR GAMING: Moody's Reviews $130 Million Unsec. Notes' B2 Rating NEWMARKET CORP: Strong Credit Profile Cues S&P to Lift Debt Rating NLC MUTUAL: A.M. Best Downgrades Financial Strength Rating to C++ NORTHWESTERN CORP: Directors Evaluating Strategic Alternatives NORTHWESTERN CORP: MMI Sells Generation Equipment for $20 Million OM GROUP: Moody's Confirms $400 Million Sub. Notes' Caa1 Rating OPTIGENEX INC: Net Loss Reaches $1 Million in Qtr. Ended Sept. 30 PAXSON COMMS: Moody's Rates Proposed $430 Million Rate Notes at B3 PAYMENT DATA: Completes Sale of bills.com to Freedom Financial PC LANDING: Judge Walsh Confirms Joint Plan of Reorganization REFCO INC: Refco Capital Markets Disclosures Some Financial Data RELIANCE GROUP: Creditors Panel Settles Securities Suit for $15MM SEARS HOLDINGS: Appoints Lisa Schultz to Lead Apparel Design Team SECURITIZED ASSET-BACKED: S&P Puts Low-B Ratings on 4 Class Certs. SIRVA INC: Appoints J. Michael Kirksey as Chief Financial Officer SPANSION TECHNOLOGY: Moody's Rates $400 Million Sr. Notes at Caa1 SPANSION INC: S&P Puts B Rating on Planned $400M Sr. Unsec. Notes STELCO INC: Board Reviews Informal Committee's Plan Proposal STRUCTURED ASSET: Moody's Rates Class B2 Sub. Certificates at Ba2 SUSSER HOLDINGS: Moody's Rates Proposed $170 Million Notes at B2 TECHNEGLAS INC: Court Approves Stipulation with Nippon Electric TRICELL INC: Equity Deficit Narrows to $3.6 Million at Sept. 30 TRICELL INC: Board Names Reed as New President & Pursell as CFO TW INC: Wants Until February 27 to Object to Proofs of Claim UAL CORP: Inks Commitment Letter on Exit Financing with GE Capital UAL CORP: Wants Court to Stretch Solicitation Period to March 3 UAL CORP: Wants Court Nod on EDS Outsourcing Services Agreement US AIRWAYS: Reports November Traffic Statistics VALLEY MEDIA: Court Approves Settlement with Hit Entertainment VANGUARD HEALTH: Moody's Assigns B2 Corporate Family Rating WOLF HOLLOW: Moody's Rates Proposed $110 Million Term Loan at B2 * Chadbourne & Parke Names Robert Sidorsky as Litigation Counsel ********* ALABAMA METAL: S&P Raises Corp. Credit Rating to BB from B+ ----------------------------------------------------------- Standard & Poor's Ratings Services raised its corporate credit rating on Alabama Metal Industries Corp. to 'BB' from 'B+' and removed the rating from CreditWatch with positive implications, where it was placed Sept. 16, 2005. Subsequently, S&P withdrew the rating in connection with AMICO's purchase by Gibraltar Industries Inc. (BB/Stable/--), which was rated by Standard & Poor's in November 2005. Birmingham, Alabama-based AMICO manufactures primarily steel products for North American industrial and construction end markets. ALLMERICA FINANCIAL: Spin-Off Plans Prompts S&P to Review Ratings ----------------------------------------------------------------- Standard & Poor's Ratings Services' 'BB' counterparty credit and financial strength ratings on Allmerica Financial Life Insurance & Annuity Co. remains on CreditWatch with negative implications, where they were placed on Aug. 22, 2005. The ratings had been placed on CreditWatch following Allmerica Financial Corp.'s (NYSE:AFC) announcement that it had agreed to sell AFLIAC to Goldman Sachs Group Inc. The transaction is now expected to close on or about Dec. 31, 2005. "We will be meeting with Goldman Sachs this month to discuss AFLIAC's strategic role within the overall Goldman Sachs organization as well as Goldman Sach's proposed hedging program for AFLIAC," said Standard & Poor's credit analyst Ovadiah Jacob. Standard & Poor's decision to place the ratings on AFLIAC on CreditWatch negative means the ratings could be affirmed or lowered. In determining how to resolve the CreditWatch status of the ratings, Standard & Poor's will consider the degree and type of support provided by AFLIAC's new owner and the prospects for the run-off business. If the rating is lowered, Standard & Poor's does not expect to lower it by more than one notch. ATA AIRLINES: Has Until December 31 to Decide on Unexpired Leases ----------------------------------------------------------------- The U.S. Bankruptcy Court for the Southern District of Indiana extended the deadline for ATA Airlines, Inc., and its debtor- affiliates to assume, assume and assign, or reject unexpired leases of nonresidential real property up to and through Dec. 31, 2005. Terry E. Hall, Esq., at Baker & Daniels, in Indianapolis, explained that the Reorganizing Debtors' decision with respect to each Lease depends in large part on whether the location will play a future role under the Reorganizing Debtors' Plan. Whether each lease is assumed, assumed and assigned, or rejected will depend, most significantly, on whether the Reorganizing Debtors will continue operations at the location once the Plan is implemented. 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. 42; Bankruptcy Creditors' Service, Inc., 215/945-7000) ATA AIRLINES: McCarter & English Can Draw on Prepetition Retainer ----------------------------------------------------------------- Before they filed for bankruptcy, ATA Holdings Corp. and ATA Airlines, Inc., employed McCarter & English, LLP, to represent them in connection with a pending lawsuit filed by Hodges Horton against the Debtors in the United States District Court for the District of New Jersey. McCarter & English required the Debtors to provide a $10,000 retainer. In connection with legal services performed and expenses incurred prepetition, the Reorganizing Debtors jointly owe $2,655 to McCarter & English. In a Court-approved stipulation, the Parties agree to the modification of the automatic stay under Section 362(d) of the Bankruptcy Code for the limited purpose of allowing McCarter & English to deduct $2,655 from the Retainer. McCarter & English agrees to promptly turnover the balance of the Retainer to the Reorganizing Debtors. 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. 42; Bankruptcy Creditors' Service, Inc., 215/945-7000) ATLAS PIPELINE: Moody's Rates Planned $250M Sr. Unsec. Notes at B1 ------------------------------------------------------------------ Moody's Investors Service assigned first-time ratings to Atlas Pipeline Partners, L.P., a natural gas gathering and processing company. Moody's assigned a B1 Corporate Family Rating to Atlas and a B1 rating to its proposed $250 million senior unsecured notes offering. Moody's also assigned a Speculative Grade Liquidity rating of SGL-3 to Atlas, which indicates adequate liquidity for the next twelve months. The rating outlook is stable. Atlas' ratings are supported by: * its strategic position in the Appalachian and Mid-Continent areas of the United States; * its relatively low commodity price risk, which is a function of its contract mix and hedging program; and * relatively conservative financial policies relative to the ratings. However, the ratings are restrained by: * the inherent risks associated with the midstream business; * Atlas' small size relative to its competitors, several of whom have significant financial resources; * the partnership's rapid growth and transformation over the past 18 months; and * an expectation of ongoing acquisitions, including, potentially, acquisitions in areas where the partnership has little historical experience as demonstrated by its recent acquisition of NOARK Pipeline System, L.P. (NOARK) from OGE Energy Corp. and its attempt to acquire Alaska Pipeline Company from SEMCO Energy, Inc. last year. The rating outlook is stable. While certain of Atlas' financial metrics are consistent with some higher rated entities, its ratings will not likely improve until it develops more of a track record of successfully integrating acquisitions and achieves greater size and scale. Atlas' ratings could be negatively affected by: * poor integration of acquisitions; * an unexpected drop in volume growth or other operational or financial setback; or * an aggressive shift in the partnership's financial policies. The rating and the outlook assume that the partnership continues to manage its capital structure and fund acquisitions in a manner consistent with its recent history. Atlas is one of the smallest public MLPs that Moody's rates, even including the recent acquisitions. At the end of 2004, Atlas had total assets of approximately $217 million, which have increased to approximately $720 million as of September 30, 2005 (pro forma for the NOARK acquisition). This rapid growth reflects the partnership's strategy to acquire and exploit natural gas gathering and processing assets, which is consistent with its stated objective of generating cash for distribution to unitholders and the MLP business model. Atlas can be expected to continue acquiring assets in the future, which introduces event risk, integration risk, and the need to continue to access the debt and equity capital markets. Atlas has built on the solid foundation of its position in the Appalachian Basin. The basin is characterized by long-lived gas reserves and predictable decline rates. Even though it is one of the oldest gas provinces in the country with low producing rates per well, the area remains active because of its proximity to the large northeast gas consuming region. All of the natural gas that Atlas gathers in Appalachia comes from Atlas America under natural gas gathering agreements that price on a percentage-of-proceeds basis. Atlas America owns 100% of Atlas' GP, which owns a 2% general partner interest along with a 13% LP interest in Atlas. Atlas America sponsors limited and general partnerships to raise funds from investors to explore for oil and gas in Appalachia. While Appalachia provides a foundation of consistent cash flow, Atlas has diversified geographically through acquisitions of natural gas assets in the Mid-Continent region during 2004 and 2005. These acquisitions, including the Spectrum, Elk City, and NOARK acquisitions completed in July 2004, April 2005, and October 2005, respectively, provide opportunities for system expansion and optimization that should lead to higher volume throughput and cash flow growth. On a pro forma basis, Atlas generates approximately 78% of its gross margin in the Mid-Continent region, of which approximately 26% is attributable to NOARK. The NOARK acquisition is somewhat off-strategy in that it consists primarily of a FERC regulated interstate pipeline that extends from eastern Oklahoma through Arkansas and into Missouri, which is a business with different dynamics than the partnership's core competence of natural gas gathering and, more recently, processing. There is some question as to whether Atlas will be able to perform with this asset and an even larger question as to whether the partnership will seek out other acquisitions that could complicate its story. In terms of commodity price risk, Moody's believes that Atlas' exposure is manageable due to its contract mix and hedging program. Over half of Atlas' pro forma gross margin comes from percentage-of-proceeds contracts and a large portion of that is hedged through a combination of contracts with Atlas America for its Appalachian production and financial hedges. Atlas' financial hedges, which are used to hedge exposures in its Mid-Continent operations, are primarily for natural gas and the specific NGLs its produces as opposed to proxy hedges tied to crude oil. Substantially all of Atlas' remaining gross margin comes from various fee-based contracts. For the LTM period ended September 30, 2005, Atlas had pro forma adjusted EBITDA of approximately $70 million (for this purpose, adjusted EBITDA excludes non-cash stock compensation, a gain related to a terminated acquisition, and is net of the minority interest attributable to NOARK). Relative to pro forma debt of approximately $260 million (excluding approximately $40 million of non-recourse debt related to NOARK that is guaranteed by a third party), debt-to-EBITDA was 3.7x, which is line with similarly rated peers at Atlas' stage of business development. Moody's estimates that pro forma adjusted EBITDA for 2006 will increase to approximately $75-$85 million based on volume growth trends and the favorable commodity price environment, which should reduce debt-to-EBITDA to the 3.1x-3.6x range, which is consistent with management's leverage targets and is conservative for the rating. Pro forma adjusted EBITDA-to-interest was approximately 3.0x for the LTM period ended September 30, 2005 and is expected to exceed 4.0x 2006. Debt-to-capitalization will be approximately 50% at closing and is expected to remain at or about that level for the foreseeable future. Excluding unrealized hedging losses in accumulated other comprehensive income as of September 30, 2005 and the non-recourse debt related to NOARK, pro forma debt-to- capitalization was approximately 43%. The B1 rating assigned to Atlas' proposed $250 million of senior unsecured notes is not notched relative to the company's Corporate Family Rating because of the expectation of low amount of senior secured bank debt in the partnership's capital structure. At closing, Atlas will have approximately $8 million outstanding under its senior secured revolving credit facility. Moody's understands that the partnership intends to have little outstanding on the facility at any time and to use it primarily as an acquisition bridge facility similar to what it did with both the Elk City and NOARK acquisitions. Should further acquisitions occur in the future, the partnership intends to borrow under the facility temporarily and then subsequently repay the borrowings with a mix of equity and term debt. A failure to do so in a timely manner could result in Moody's notching down the senior unsecured note rating in relation to the Corporate Family Rating. Atlas' SGL-3 rating reflects overall liquidity that is adequate over the next 12 months. Atlas forecasts that its operating cash flow should adequately cover maintenance capex and distributions over the next 12 months. However, Atlas plans growth capex of $45-$50 million over the next 12 months, including approximately $30-$35 million related to the construction of the Sweetwater plant, which will likely be funded through a combination of new equity and borrowings under the partnership's senior secured credit facility. After closing, Atlas should have availability of over $200 million under the facility. Financial covenants under the credit facility include a maximum funded and senior secured debt-to-EBITDA ratio of 6.0x, which steps down to 5.75x at March 31, 2006 and 4.5x at June 30, 2006, and a minimum EBITDA-to-interest ratio of 2.5x, which increases to 3.0x at March 31, 2006. Atlas should meet these covenants during the next 12 months, although there is always some level of uncertainty given the nature of the business. Moody's estimates that annualized EBITDA would need to fall short of the partnership's forecasts by $10-$15 million at June 30, 2006 in order to bust the funded debt-to- EBITDA covenant, which is the most constraining covenant. Such a shortfall is not out of the realm of possibility. Atlas' "back- door" liquidity, or the ability to sell assets to raise cash, is limited due to the secured nature of its bank credit facilities. Atlas is headquartered in Moon Township, Pennsylvania. ATLAS PIPELINE: S&P Rates Proposed $250MM Sr. Unsec. Notes at B+ ---------------------------------------------------------------- Standard & Poor's Ratings Services assigned its 'BB-' corporate credit rating to midstream natural gas master limited partnership Atlas Pipeline Partners L.P. At the same time, Standard & Poor's assigned its 'B+' rating to the company's proposed $250 million senior unsecured notes due 2015. The outlook is stable. The Moon Township, Pennsylvania-based partnership will have about $258.5 million of debt after issuing the notes. In addition, APL has $39.6 million of NOARK Pipeline Finance LLC debt on its balance sheet that is severally guaranteed by Southwestern Energy Co. and paid solely from amounts otherwise distributable by NOARK to Southwestern attributable to their 25% ownership. Proceeds from the note offering will be used to repay about $243 million of the amount currently drawn under the company's secured bank credit facility. The borrowings were used to partially finance the company's acquisition of gas-gathering and gas-processing assets in Elk City, Oklahoma in April 2005 and for the $163 million acquisition of a 75% interest in the NOARK gas pipeline, a FERC-regulated interstate pipeline and non-FERC-regulated gathering system located in southeastern Oklahoma, Arkansas, and southeastern Missouri. The ratings for APL reflect a below-average business profile. Weaknesses include the small scale of its operations relative to competitors, a short operating history in the Mid-Continent, exposure to processing volumes and gathering rates, aggressive growth through acquisitions, heavy competition in Mid-Continent operations, and a commodity exposure that is high for an MLP. APL's business profile also incorporates the influence of the credit quality of its general partner, Atlas America. Strengths include a long history of operations in the stable, long lived, gas producing Appalachian region, a strategy of hedging a significant level of future natural gas and natural gas liquids commodity exposure, and operations that now have a greater geographical diversification and should help reduce APL's reliance on Atlas America. "The 'B+' rating on the senior unsecured notes is one notch below the corporate credit rating and represents the subordination of the notes to a senior secured credit facility," said Standard & Poor's credit analyst Aneesh Prabhu. While only a small portion of the facility is expected to be drawn after the partnership refinances its current draw from longer-term financing, it will be the only facility available and is expected to be used for modest working capital needs, as well as future acquisitions. The partnership's financial metrics are strong for the rating, with projected funds from operations to debt at about 27% and FFO interest coverage at about 4.2x to 4.4x. Ratios are likely to be maintained at current levels through 2007, if projected volumes are achieved and because much of expected production is hedged. The stable outlook relies on the continuation of the partnership's prudent risk-management strategy to overcome unpredictable natural gas gathering and processing cash flows. Ratings may be raised should the partnership build a good operating track record in its Mid-Continent operations. The outlook also reflects expectations that financial metrics will be maintained at the projected level and that APL's capital structure will remain weighted more heavily toward equity. Although less likely, ratings could be lowered if the partnership experiences significant volume reduction, or changes its hedging strategy, which would result in higher business risk. ALLEGHENY TECHS: Moody's Lifts $300 Million Notes' Rating to Ba3 ---------------------------------------------------------------- Moody's Investors Service upgraded Allegheny Technologies Inc.'s corporate family rating to Ba2 from B1 and its senior unsecured note rating to Ba3 from B3. In a related rating action, Moody's upgraded Allegheny Ludlum's debentures, guaranteed by ATI, to Ba2 from B1. The rating outlook is stable. The upgrade recognizes: * ATI's significantly improved operating and cash flow generation performance; * strengthened debt protection measures; and * solid liquidity position. The improved profile reflects not only the benefits from a more positive business and price environment but also the benefits being achieved as the company continues to execute its plan to transform its business platform and focus on higher value added products in its flat rolled segment as well as high performance metals segment. The upgrade also recognizes the number of initiatives taken by the company to achieve permanent reductions in its cost base, which include reduction in other post retirement benefit liabilities and strengthening its capital structure. As a result, Moody's believes the company is better positioned to weather the ongoing cyclical nature inherent in its business. The stable outlook reflects Moody's expectation that the company's performance through 2006 will continue to exhibit strong earnings and cash flow generation, reflective of strength in key end-use segments such as aerospace and chemicals and the improving profile in non-residential construction. The outlook also anticipates that the company will continue, on its improved cash flow generation, to: * manage its cash uses relative to its cash sources; * fund capital expenditures from internally generated funds, as announced; and * maintain a liquidity position that provides good cushion for the down years in the stainless steel sector. Based upon the company's anticipated earnings performance, cash flow generation levels, strong cash position and the absence of any material debt maturities in the near term, it is unlikely that the rating would be downgraded absent debt financed acquisitions or a material change in levels of shareholder returns. Continued improvement in operating and leverage metrics such that a sustainable EBIT margin on the order of 13% and adjusted debt/EBITDA remaining in the 2.5x range were achieved, together with ongoing free cash flow generation, could be contributing factors for a rating upgrade. ATI's rating reflects the company's improved financial position following several quarters of increased demand in key end-user markets, as well as the benefits of its earlier business and financial restructuring activities. Moody's believes the current business platform, larger, due to the acquisition of J&L Steel in 2004, and less leveraged, with the June 2004 equity offering of $230 million, is better placed to take advantage of the current robust demand in aerospace and other specialty alloy end-markets as well as the improved stainless steel markets. In addition, the acquisition of J&L, which appears to have been integrated with little difficulty, has brought several benefits. Importantly, the acquisition provided a platform for ATI to negotiate with its union workforce for improved terms relating to productivity and costs both at the J&L facilities as well as heritage ATI operations. Post retirement liabilities have been reduced by approximately $331 million due to the ability to cap the company's share of retiree medical costs and other measures. ATI has also made investments in its melting capacity with the start-up of two new electric arc furnaces, thereby improving efficiency and the cost platform. Segment operating margin percentages are now in the mid teens compared to low single digits in recent years. Although debt levels remain essentially unchanged since year-end 2004, ATI's debt coverage ratios have improved substantially and are now placed comfortably at or above the Ba range on several metrics based on Moody's rating methodology. Sustainability of these levels will be an important rating consideration going forward. For the LTM period ended September 30, 2005, Adjusted Debt to EBITDA was 2.3x times, down from 6.4 times at year-end 2004. As ATI and its subsidiaries have no significant debt maturities until 2011, Moody's does not expect the overall debt levels to change materially and continued ratio improvement will need to be driven by growth in earnings. Nevertheless, limiting factors in the rating include: * ATI's relatively small size; * recent history of operating losses, which demonstrate the cyclical nature of its end-user market; * exposure to rising raw material costs; * import competition; and * potential contraction in the US economy. Given ATI's small size and position in stainless steel and specialty materials, its operations were severely affected by the downturn in aerospace and related markets in 2001 as well as the depressed conditions in the stainless steel sector. Moody's notes that ATI incurred net losses from 2001 through 2003. Reflective of its lack of vertical integration, ATI remains weakly positioned in terms of raw material sourcing and relies on surcharges to recover rising costs for scrap steel, nickel and titanium and, more recently, energy. To date the company has been successful in mitigating increasing raw material costs, although there can be a bit of a lag period. The notching of ATI's senior unsecured notes (rated Ba3) one rating category below the corporate family rating reflects the contractual and structural subordination of these notes to the guaranteed senior secured $325 million revolver and to the guaranteed debentures at Allegheny Ludlum. The Ludlum operations, which include ATI's flat rolled production facilities, generated approximately 46% of ATI's operating cash flow in the period to September 30, 2005. Moody's notes that with this rating action Moody's has tightened the notching to one notch below the corporate family rating given the improved outlook for ATI's business as a whole and the overall improvement in coverage measures. For segment reporting purposes ATI reports operating results along three business lines: * Flat-Rolled Products, * High Performance Metals, and * Engineered Products. Flat-rolled operations should continue to dominate the overall business profile of the company as it accounts for approximately 50% of sales. Included in this operation are ATI's flat stainless steel businesses, which are generally more commodity-like and are quicker to come under pricing pressure in a downturn. ATI considers this "base-load" capacity and looks to manage production schedules to achieve higher levels of value-added steel products and enhance margins. ATI's strategy to focus on value-added steel products should position it well over the next 12-24 months as the aerospace and power generation markets, two key areas for ATI, have improved markedly from low levels in 2000-2003. These ratings were upgraded: 1. Allegheny Technologies Incorporated's Corporate Family Rating to Ba2 from B1 2. Allegheny Ludlum Corporation's $150 million of 6.95% guaranteed debentures, due 2025, to Ba2 from B1 3. Allegheny Technologies Incorporated's $300 million of 8.375% senior unsecured notes, due 2011, to Ba3 from B3 Headquartered in Pittsburgh, Pennsylvania, Allegheny Technologies Inc. is a specialty stainless steel and alloy producer with fiscal 2004 steel production of 620,000 tons and revenues of $2.7 billion. For the LTM ended September 30, 2005, revenues were $3.4 billion. ASSOCIATED ESTATES: S&P Chips Junk Rating on Preferred Stock ------------------------------------------------------------ Standard & Poor's Ratings Services lowered its corporate credit rating on Associated Estates Realty Corp. to 'B' from 'B+' and its preferred stock rating to 'CCC' from 'CCC+'. At the same time, the outlook is revised to stable from negative. "The downgrade reflects continued weakness in AEC's core Midwest markets, which we believe will confine already weak cash flow coverage measures and an aggressive leverage position," said credit analyst Tom Taillon. "The outlook revision reflects our opinion that while AEC's market conditions could deteriorate further, preferred investors should retain a level of cash flow protection that is acceptable for the current rating level." Expectations are for continued weaker but relatively stable debt protection metrics. The company could gain positive momentum if its core Midwestern assets strengthen and translate into sustainable improvements to its financial profile. BALLY TOTAL: Company Insiders Sell 1.2 Million Common Shares ------------------------------------------------------------ Bally Total Fitness (NYSE:BFT) insiders sold 1.2 million common shares of Bally stock since the company's Nov. 30, 2005, release of nine-month 2005 financial results and restatement of prior-year financial information going back to 2000. The transactions took place on Dec. 2 and Dec. 5. As previously disclosed, the Company expected that during a limited trading window some members of management would sell certain holdings of previously restricted company stock in connection with personal tax planning or diversification determinations. The shares vested earlier this year due to share accumulations by certain stockholders. The Company had been in a quiet period since May 2004, during which insiders could not sell stock due to the Company not filing financial statements since May 2004. "I made a decision based on personal circumstances to liquidate some, not all, of my holdings in Bally common stock," Chairman and CEO, Paul Toback, said. "Others made similar decisions based on their own personal circumstances. Our management team has worked diligently over the past few years to help turn this Company around and is more committed than ever to the success of Bally Total Fitness. Even factoring in the recent sales, company insiders continue to hold approximately 5% of Bally's outstanding shares through direct beneficial holdings and options." 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 Dec. 6, 2005, Standard & Poor's Ratings Services revised its CreditWatch implications on Bally Total Fitness Holding Corp. to developing from negative. The corporate credit rating remains at 'CCC'. Bally's ratings were originally placed on CreditWatch on Aug. 8, 2005, following the commencement of a 10-day period after which an event of default would have occurred under the company's $275 million secured credit agreement's cross-default provision and the debt would have become immediately due and payable. Subsequently, Bally entered into a consent with lenders to extend the 10-day period until Aug. 31, 2005. Prior to Aug. 31, the company received consents from its bondholders extending its waiver of default to Nov. 30, 2005. BLOCK COMMS: Offers to Buy $175 Mil. of 9-1/4% Senior Sub. Notes ---------------------------------------------------------------- Block Communications, Inc., commenced a cash tender offer for any and all of its outstanding $175,000,000 aggregate principal amount of 9-1/4% Senior Subordinated Notes due 2009 (CUSIP No. 093645AB5 and ISIN US093645AB52). In connection with the tender offer, the Company is soliciting consents from holders of the Notes to effect certain proposed amendments to the indenture governing the Notes, including, among other things: * the elimination of substantially all of the restrictive covenants, * the elimination of certain events of default, * the elimination of the subsidiary guarantees, and * the amendment of certain other provisions contained in the indenture. The tender offer is scheduled to expire at 12:00 midnight, New York City time, on Jan. 3, 2006, unless extended or earlier terminated. The consent solicitation will expire at 5:00 p.m., New York City time, on Dec. 16, 2005, unless extended. Tendered Notes may be validly withdrawn and delivered consents may be validly revoked until the Withdrawal Rights Deadline. The total consideration per $1,000 principal amount of Notes validly tendered and not withdrawn prior to the Consent Payment Deadline will be based on a fixed spread of 50 basis points over the yield on the Price Determination Date of the 1-1/2% U.S. Treasury Note due March 31, 2006. Holders whose Notes are validly tendered and not withdrawn on or before the Consent Payment Deadline and accepted for purchase by the Company will receive the total consideration and accrued and unpaid interest up to, but not including, the Initial Payment Date. The Company is offering to make a consent payment (which is included in the total consideration) of $30.00 per $1,000 principal amount of Notes to holders who validly tender their Notes and deliver their consents at or prior to the Consent Payment Deadline. Holders who tender their Notes will be required to consent to the proposed amendments and holders may not deliver consents to the proposed amendments without tendering their Notes. No consent payments will be made in respect of Notes tendered after the Consent Payment Deadline. The total consideration will be calculated at 2:00 p.m., New York City time, on a date which is at least 10 business days prior to the Expiration Date. The Company expects this date to be Dec. 16, 2005, unless the tender offer and consent solicitation is extended. Holders who validly tender their Notes and validly deliver their consents by the Consent Payment Deadline will receive payment on the initial payment date, which is expected to be on December 21, 2005. Tendered Notes may not be withdrawn and consents may not be revoked after the date on which the Company and the trustee for the Notes execute a supplemental indenture to effect the proposed amendments to the indenture governing the Notes, which is expected to be 5:00 p.m., New York City time, on Dec. 16, 2005. The tender offer and consent solicitation are subject to the satisfaction of certain conditions including: (1) receipt of consents from holders of a majority in aggregate principal amount of the outstanding Notes, (2) execution of the Supplemental Indenture, (3) the Company's consummation of new debt financing transactions that raise an aggregate amount of proceeds sufficient to fund the payment of the purchase price, premiums, fees and other expenses associated with the tender offer and consent solicitation and to refinance the Company's existing senior debt and (4) certain other customary conditions. The Company may amend, extend or terminate the tender offer and consent solicitation in its sole discretion. The complete terms and conditions of the tender offer and consent solicitation are described in the Offer to Purchase and Consent Solicitation Statement dated Dec. 5, 2005, copies of which may be obtained from Global Bondholder Services Corporation, the information agent for the tender offer and consent solicitation, at (866) 924-2200 (US toll free) or, for bankers and brokers (212) 430-3774. The Company has engaged Banc of America Securities LLC to act as the exclusive dealer manager and solicitation agent in connection with the tender offer and consent solicitation. Questions regarding the tender offer or consent solicitation may be directed to Banc of America Securities LLC, High Yield Special Products, at (888) 292-0070 (US toll-free) and (704) 388-9217 (collect). Block Communications, Inc., is a privately held diversified media company with operations in cable television, telecommunications, newspaper publishing and television broadcasting. The company's Buckeye CableSystem is located in the greater Toledo, Ohio metropolitan area and the Sandusky, Ohio area, and is one of the largest privately owned metropolitan cable systems in the United States. Through Buckeye TeleSystem, the Company owns and operates a facilities-based telephony business that serves mid- to large- size businesses located primarily in the Toledo market serviced by the Company's cable system. In addition, the Company publishes two daily metropolitan newspapers, the Pittsburgh Post-Gazette in Pittsburgh, Pennsylvania and The Blade in Toledo and owns and operates four television stations -- two in Louisville, Kentucky, and one each in Boise, Idaho and Lima, Ohio -- and is a two-thirds owner of a television station in Decatur, Illinois. * * * Standard & Poor's Ratings Services rated the company's 9-1/4% Senior Subordinated Notes due 2009 at B-. BLOCK COMMS: Moody's Rates Proposed $150 Million Sr. Notes at B1 ---------------------------------------------------------------- Moody's Investors Service assigned Ba2 ratings to Block Communications, Inc.'s new $190 million senior secured credit facilities ($75 million revolving credit facility due 2012, $115 million term loan B facility due 2013) and a B1 rating to the company's proposed issuance of $150 million in senior unsecured guaranteed notes due 2015. Additionally, Moody's affirmed the company's Ba3 corporate family rating and stable outlook. The proceeds of the transaction will be used to refinance the company's capital structure including the $73.5 million outstanding under the existing senior secured credit facilities and $175 million in 9.25% senior subordinated notes due 2009. As such, the refinancing is neutral to leverage. The ratings and outlook reflect Block's relatively strong positions within its broadcast markets, the strength and stability of its cable operations (accounting for 29% of the revenues and 73% of EBITDA for the TTM ended September 30, 2005), balanced by Moody's expectation that the company's publishing segment will continue to face operating challenges into 2006. Moody's assigned these ratings: 1) Ba2 rating to the $75 million senior secured revolving credit facility due 2012; 2) Ba2 rating to the $115 million senior secured term loan B due 2013; and 3) B1 rating to the $150 million of proposed senior notes due 2015. Moody's affirmed these rating: 1) Ba3 corporate family rating; and 2) B2 rating on the $175 million of 9.25% senior subordinated notes due 2009. The outlook is stable. Additionally, Moody's has withdrawn the Ba2 ratings on the company's existing senior secured credit facilities and intends to withdraw the B2 rating on the $175 million of 9.25% senior subordinated notes upon completion of the company's proposed tender offer. The ratings reflect the risks posed by Block's still high financial leverage, the lackluster performance in its television and publishing segments that has been below that of the company's comparative peer groups. The ratings remain constrained by the continued deterioration in operating performance of its publishing segment. Moody's notes that while the publishing business generated $254.3 million in revenues, representing 57% of total revenues, it contributed only $6.1 million in EBITDA, implying only a 2.4% margin, for the trailing twelve months ended September 30, 2005, (a decline from the $10 million in EBITDA generated from this segment for FY 2004). While Moody's believes the company will conduct union negotiations to seek more favorable contract terms, Moody's expects that for the near-to intermediate term the company's publishing operations will remain pressured by the high cost structure and growing health care and post retirement expenses associated with its predominantly unionized workforce. The ratings also incorporate other risks associated with Block's operating segments which include: * negative circulation trends, and paper price volatility relevant to the newspaper publishing sector; * the high and rising costs of cable programming, particularly as it relates to smaller system operators; and * the company's overall exposure to today's more fluid advertising environment. However, the ratings are supported by: * the high underlying asset value attributed to the company's media assets including its advanced cable system; * the inherent "stick value" associated with its five broadcast television stations (including a duopoly in the Louisville, Kentucky market, the 50th DMA); and * the two broadsheet newspapers that are dominant in their markets (Pittsburgh Post-Gazette and Toledo Blade). Moreover, the ratings benefit not only from the stability of the cable operations, but also the strong prospects for cable revenue and cash flow growth due to an expected increase in the penetration rate of enhanced services to its existing residential subscriber base (telephony, cable modem, digital cable, tiered service offerings). Further, the company has expressed willingness to consider strategic alternatives for its under-performing television and publishing assets which could potentially de-lever its balance sheet. The stable outlook reflects Moody's expectation that the improvement in broadcasting cash flow with the return of political revenues in 2006, coupled with expected cash flow growth associated with enhanced service offerings of the cable operations should be able to substantially offset the expected continued weakness of the company's publishing business. Moody's estimates that the publishing segment will burn cash in 2006 after capital expenditures without significant revisions to current union labor contracts. As such, Moody's anticipates that leverage (as measured as total debt to EBITDA using Moody's standard analytic adjustments) may increase to above 5.0 times by FYE 2006, reducing the cushion within the current Ba3 corporate family rating category. Moody's expects that Block will attempt to implement cost savings in the publishing segment to improve profitability and return to a positive free cash flow position; however, to the extent that Block is unable to achieve concessions associated with its current union contract, and leverage exceeds 5.0 times and remains at this level for several quarters, a negative outlook or rating change could be warranted. If the company is able to successfully implement cost savings ahead of our expectations, and leverage falls below 4.0 times on a sustainable basis, the ratings could experience positive momentum. Block's pro forma leverage is high for a diversified media company with total debt to EBITDA of 4.3 times, and cash flow coverage is low with (EBITDA-CapEx)/Interest of 1.1 times for the trailing twelve month period ended September 30, 2005. Given that Block has completed the upgrade of its cable system (100% of cable infrastructure rebuilt to 879 MHz) and its Post-Gazette facilities in Pittsburgh, Moody's expects capital expenditures to decline to closer to the maintenance levels (about $40 million), thus improving cash flow coverage over time. The Ba2 the senior secured credit facilities reflect their senior most position in the capital structure and the debt protection measures detailed in the credit agreement. The facilities are secured by all of the stock and assets of the borrower and its subsidiaries and benefit from subsidiary guarantees. The notch up to Ba2 on this class of debt from the Ba3 corporate family rating reflects the more than ample collateral coverage provided to bank lenders. The B1 ratings on the senior unsecured notes reflect their effective l subordination to the senior secured bank credit facilities although these notes will also benefit from subsidiary guarantees. Block Communications, Inc., is a diversified media company that operates in the: * cable television, * publishing, and * television broadcasting industries. Block is privately held by the Block family and is located in Toledo, Ohio. BLOCK COMMS: S&P Assigns BB- Rating to Planned $190M Sr. Sec. Loan ------------------------------------------------------------------ Standard & Poor's Ratings Services assigned its 'BB-' bank loan rating and '1' recovery rating to Block Communications Inc.'s proposed $190 million senior secured credit facility. The bank loan and recovery ratings are assigned based on a preliminary term sheet and indicate high expectations for full recovery of principal following a potential payment default or bankruptcy. At the same time, we assigned a 'B-' rating to Block's proposed $150 million senior unsecured notes due 2015. Closing of the bank facilities is contingent on Block's selling $150 million in unsecured notes. Financing proceeds of $265 million will be used to repay the existing $73.5 million in bank debt, to tender for the $175 million 9.25% senior subordinated notes due 2009, and for a tender premium and transaction fees. Ratings on the existing issues will be withdrawn upon completion of the proposed transactions. The 'B+' corporate credit rating on the Toledo, Ohio-based cable operator and newspaper publisher was affirmed. The outlook is stable. CABOODLES LLC: Can Access Pittco Capital's Cash Collateral ---------------------------------------------------------- The U.S. Bankruptcy Court for the Western District of Tennessee, Western Division, authorized Caboodles, LLC, to use cash collateral securing repayment of indebtedness to Pittco Capital Partners, L.P. Pittco holds a $13,776,511 secured claim against Caboodles. The claim is secured by a valid and perfected security interest in all of Caboodle's personal property and tangible assets. The Debtor will use the encumbered funds to pay operating expenses in the ordinary course of business, salaries of its employees, and the U.S. Trustee's quarterly fee. To provide the lender with adequate protection, as required under Sec. 363 of the U.S. Bankruptcy Code to compensate the lender for any diminution in the value of its collateral, the Debtor grants Pittco security interests in all new inventory, income and accounts receivable. The new postpetition liens will be binding, effective, enforceable and fully perfected pursuant to Sec. 364 of the Bankruptcy Code. Headquartered in Memphis, Tennessee, Caboodles, LLC, aka Caboodles Cosmetics, manufactures cosmetics. The company filed for chapter 11 protection on Sept. 30, 2005 (Bankr. W.D. Tenn. Case No. 05-35710). Steven N. Douglass, Esq., at Harris Shelton Hanover Walsh, PLLC, represents the Debtor in its restructuring efforts. When the Debtor filed for protection from its creditors, it listed $18,422,133 in assets and $15,874,247 in debts. CABOODLES LLC: Wants Open-Ended Lease Decision Period ----------------------------------------------------- Caboodles, LLC, asks the U.S. Bankruptcy Court for the Western District of Tennessee, Western Division, to extend the period within which it may assume, assume and assign, or reject its unexpired non-residential lease until confirmation of a plan of reorganization. The Debtor leases a warehouse located at Suite 112, 6400 Shelby View Drive, in Memphis, Tennessee. Headquartered in Memphis, Tennessee, Caboodles, LLC, aka Caboodles Cosmetics, manufactures cosmetics. The company filed for chapter 11 protection on Sept. 30, 2005 (Bankr. W.D. Tenn. Case No. 05-35710). Steven N. Douglass, Esq., at Harris Shelton Hanover Walsh, PLLC, represents the Debtor in its restructuring efforts. When the Debtor filed for protection from its creditors, it listed $18,422,133 in assets and $15,874,247 in debts. CAPITAL AUTOMOTIVE: Moody's Withdraws $500MM Notes' (P)Ba2 Rating ----------------------------------------------------------------- Moody's Investors Service affirmed the (P)Ba1 rating on Capital Automotive REITs' proposed senior secured credit facility ($1.95 billion term loan and companion $250 million revolver) with a stable outlook. The rating agency has withdrawn the (P)Ba2 senior unsecured rating on the new notes, which will no longer be issued. The facility has been increased by $530 million, obviating the notes, and formerly unencumbered assets will serve as the additional collateral for the facility, creating additional pressure on the REIT's unsecured debt rating. The senior secured credit facility is being issued in conjunction with DRA Advisors LLC's acquisition of the company. The secured credit facility will now be supported by a collateral pool of first mortgages on all of Capital Automotive's dealership groups, diversified in terms of locations and franchises. The market value of the collateral pool will total $3.0 billion, equaling 1.6X asset coverage with the revolver unfunded (1.4X funded). The funding structure no longer retains any meaningful amount of unencumbered assets; all properties will collateralize the senior secured facility. The stable rating outlook on the proposed senior secured credit facility reflects Moody's expectation that the REIT will continue to grow steadily while maintaining stable credit metrics. The rating outlook also includes the expectation that the company will maintain its leadership in the auto dealer net-lease sector without any reduction in occupancies or rent coverages. Moody's would consider an upgrade if Capital Automotive improved fixed charge coverages to 2X, reduced effective leverage to the mid-60% range and secured debt around 50% of gross assets. The REIT would also be required to reestablish an unsecured asset base equal to at least 20% of gross asset value. Any deterioration in fixed charge coverage would create negative earnings pressure, according to Moody's. Additional negative pressure will likely result should portfolio rent coverages drop below 2X, or should the REIT suffer a decline in leadership causing a 15% decline in NOI. This rating was affirmed with a stable outlook: Capital Automotive LP: * (P)Ba1 proposed $2.2 billion senior secured credit facility This rating has been withdrawn: Capital Automotive REIT: * (P)Ba2 proposed $500 million senior notes Moody's also expects to downgrade to Ba3 and B1, respectively, the ratings on the outstanding senior unsecured and preferred stock of Capital Automotive should the transaction close as planned. As of now, the respective ratings are affirmed at Baa3 and Ba1, and remain under review for downgrade. The planned downgrade of the REIT's senior bonds, which Moody's had previously indicated would be downgraded to Ba2, reflects the REIT's altered capital structure, and attendant lack of any material level of unencumbered assets. In its last rating action, Moody's assigned the ratings (P)Ba1 and (P)Ba2 to Capital Automotive's proposed senior secured facility and senior unsecured notes, respectively, on November 29, 2005. Capital Automotive REIT [NASDAQ: CARS] is a real estate investment trust headquartered in McLean, Virginia, USA. The REIT's strategy is to acquire real property and improvements used by operators of multi-site, multi-franchised automotive dealerships and related businesses. As of September 30, 2005, the Company had interests in 347 properties, consisting of 510 automotive franchises in 32 states. The properties are leased under long-term, triple-net leases with a weighted average initial lease term of approximately 15 years. Approximately 76% of the REIT's real estate portfolio is located in the top 50 metropolitan areas in the USA in terms of population, and 73% of the REIT's real estate portfolio is invested in properties leased to the "Top 100" dealer groups as published by "Automotive News." The REIT reported assets of $2.4 billion and equity of more than $1 billion at September 30, 2005. DRA Advisors LLC, founded in 1986, is a New York City-based registered investment advisor specializing in real estate investment management services for institutional and private investors, including: * pension funds, * university endowments, * foundations, and * insurance companies. CARROLS CORP: Lenders Extend Financial Filing Deadline to Feb. 15 ----------------------------------------------------------------- Carrols Corporation obtained a consent and waiver from its lenders under Carrols' Loan Agreement dated as of December 15, 2004, which governs its senior credit facility. The lenders permitted Carrols to extend the time to deliver its third quarter 2005 financial statements to February 15, 2006. As reported in the Troubled Company Reporter on Nov. 30, 2005, as a result of the review of some accounting matters, the company said it will be able to file its quarterly financial statements prior to Dec. 6, 2005. Failure to provide financial statements to its senior lenders under its Senior Credit Facility by that date would constitute an event of default. Carrols Corporation is one of the largest restaurant companies in the U.S. currently operating 537 restaurants in 17 states. Carrols is the largest franchisee of Burger King restaurants with 336 Burger Kings located in 13 Northeastern, Midwestern and Southeastern states. It also operates two regional Hispanic restaurant chains that operate or franchise more than 200 restaurants. Carrols owns and operates 135 Taco Cabana restaurants located in Texas, Oklahoma and New Mexico, and franchises three Taco Cabana restaurants. Carrols also owns and operates 66 Pollo Tropical restaurants in south and central Florida and franchises 25 Pollo Tropical restaurants in Puerto Rico (21 units), Ecuador (3 units) and South Florida. CENDANT MORTGAGE: Fitch Places Low-B Ratings on 15 Cert. Classes ---------------------------------------------------------------- Fitch Ratings has taken rating actions on these Cendant Mortgage Corporation mortgage pass-through certificates: Series 2002-4 -- Class A affirmed at 'AAA'; -- Class B-1 affirmed at 'AAA'; -- Class B-2 affirmed at 'AAA'; -- Class B-3 affirmed at 'AA+'; -- Class B-4 affirmed at 'AA'; -- Class B-5 upgraded to 'A' from 'A-'. Series 2002-8 -- Class A affirmed at 'AAA'; -- Class B-1 affirmed at 'AAA'; -- Class B-2 affirmed at 'AA'; -- Class B-3 affirmed at 'A'; -- Class B-4 affirmed at 'BBB'; -- Class B-5 affirmed at 'BB'. Series 2003-1 -- Class A affirmed at 'AAA'; -- Class B-1 affirmed at 'AA+'; -- Class B-2 affirmed at 'A+'; -- Class B-3 affirmed at 'BBB'; -- Class B-4 affirmed at 'BB'; -- Class B-5 affirmed at 'B'. Series 2003-4 -- Class IA affirmed at 'AAA'; -- Class IIA affirmed at 'AAA'; -- Class B-1 upgraded to 'AA+' from 'AA'; -- Class B-2 upgraded to 'A+' from 'A'; -- Class B-3 affirmed at 'BBB'; -- Class B-4 affirmed at 'BB'; -- Class B-5 affirmed at 'B'. Series 2003-6 -- Class A affirmed at 'AAA'; -- Class B-1 affirmed at 'AA'; -- Class B-2 affirmed at 'A'; -- Class B-3 affirmed at 'BBB'; -- Class B-4 affirmed at 'BB'; -- Class B-5 affirmed at 'B'. Series 2003-8 Group 1 -- Class IA affirmed at 'AAA'; -- Class IB1 affirmed at 'AA'; -- Class IB2 affirmed at 'A'; -- Class IB3 affirmed at 'BBB'; -- Class IB4 affirmed at 'BB'; -- Class IB5 affirmed at 'B'. Series 2003-8 Group 2 -- Class IIA affirmed at 'AAA'; -- Class IIB1 affirmed at 'AA'; -- Class IIB2 affirmed at 'A'; -- Class IIB3 affirmed at 'BBB'; -- Class IIB4 affirmed at 'BB'; -- Class IIB5 affirmed at 'B'. Series 2003-9 Group 1 -- Class IA affirmed at 'AAA'; -- Class IB1 affirmed at 'AA'; -- Class IB2 affirmed at 'A'; -- Class IB3 affirmed at 'BBB'; -- Class IB4 affirmed at 'BB'; -- Class IB5 affirmed at 'B'. Series 2003-9 Group 2 -- Class IIA affirmed at 'AAA'; -- Class IIB1 affirmed at 'AA'; -- Class IIB2 affirmed at 'A'; -- Class IIB3 affirmed at 'BBB'; -- Class IIB4 affirmed at 'BB'; -- Class IIB5 affirmed at 'B'. All of the mortgage loans in the aforementioned transactions were either originated or acquired in accordance with the underwriting guidelines established by Cendant Mortgage Corporation. The mortgage loans consist of 15- and/or 30-year fixed-rate mortgages secured by first liens, primarily on one- to four-family residential properties. Additionally, any mortgage loan with an original loan to value in excess of 80% is required to have a primary mortgage insurance policy. As of the November 2005 distribution date, the transactions are seasoned from a range of 25 to 41 months, and the pool factors range from approximately 11% to 83%. All of the mortgage loans are currently being serviced by PHH Mortgage Corporation, rated 'RPS1' by Fitch. The affirmations reflect a satisfactory relationship between credit enhancement and future loss expectations and affect approximately $962.8 million of outstanding certificates. The upgrades reflect an improvement in the relationship between CE and future loss expectations and affect approximately $3.30 million of outstanding certificates. As of the November 2005 distribution date, the current pool factor for series 2002-4 is approximately 11%. The current CE level for class B-5 has grown to at least 8.5 times original. Class B-5 currently benefits from 1.73% subordination. There have been no losses incurred to date in this transaction. The current pool factor for series 2003-4 is approximately 61%. The current CE levels for classes B-1 and B-2 have grown to at least 1.5x original. Class B-1 currently benefits from 1.84% subordination and class B-2 currently benefits from 1.15% subordination. There have been no losses incurred to date in this transaction. CLEAN HARBORS: Improved Financial Profile Cues S&P to Lift Ratings ------------------------------------------------------------------ Standard & Poor's Ratings Services raised its ratings on Clean Harbors Inc. The corporate credit rating was raised to 'BB' from 'BB-', and the senior secured notes rating was raised to 'B+' from 'B'. At the same time, the ratings were removed from CreditWatch, where they were placed with positive implications on Nov. 9, 2005. The outlook is stable. Standard & Poor's also affirmed its 'BB+' rating and '1' recovery rating on Clean Harbors' senior secured revolving credit facility due 2010. The bank loan rating is one notch higher than the corporate credit rating; this and the recovery rating indicate the expectation that bank lenders would fully recover their principal in the event of a payment default. In addition, Standard & Poor's affirmed its 'BB' rating and '2' recovery rating on the company's senior secured synthetic letter of credit facility. These ratings indicate the expectation that bank lenders can expect substantial recovery of principal in the event of a payment default. The ratings on Clean Harbors' previous credit facilities have been withdrawn following the completion of the debt refinancing. "The upgrade reflects the improvement in the company's financial risk profile because of favorable demand conditions and improving capacity utilization rates that have contributed to stronger operating results this year," said Standard & Poor's credit analyst Robyn Shapiro. "The upgrade also incorporates our strong expectation that management is committed to the continued strengthening of the financial profile, and that debt will be reduced through the completion of the previously announced equity issuance and with available free cash flow." The ratings on Clean Harbors reflect an aggressive financial risk profile, including significant environmental liabilities, a growth strategy that could limit further improvement of the balance sheet, and a weak business risk profile. These factors are partially offset by a leading position in the hazardous waste management industry, strengthened operating results and improved financial flexibility after the refinancing transactions. Clean Harbors provides collection, transportation, treatment, and disposal of hazardous and industrial wastes. It serves 45,000 customers, including more than 175 Fortune 500 companies, in 36 U.S. states, Canada, Mexico, and Puerto Rico. COMSTOCK HOMEBUILDING: Moody's Rates Proposed $150MM Notes at B3 ---------------------------------------------------------------- Moody's Investors Service assigned first-time ratings to Comstock Homebuilding Companies, Inc., including a B1 Corporate Family Rating, a B3 rating on the proposed $150 million issue of senior subordinated notes, and a Speculative Grade Liquidity rating of SGL-2. The ratings outlook is stable. The stable ratings outlook is based on Moody's expectation that the company could drive its current debt/capitalization ratio up to the mid-to-high 60% range as a result of potential acquisitions before bringing this ratio down to the low 60% level on a longer term basis. The ratings reflect: * the company's relatively small size and scale and limited current geographic reach; * risks associated with expansion into new markets; * the higher-than-industry average for spec building due to its condo tower business; and * the cyclical nature of the homebuilding industry. At the same time, the ratings recognize that Comstock scores within acceptable to strong ranges for its rating on many of the financial metrics outlined in the Moody's Homebuilding Methodology dated December 2004. In addition, the company's building activities are primarily located in one of the most robust and faster growing homebuilding markets in the U.S., and it is viewed to be conservative with regard to its land supply. The SGL-2 rating indicates good liquidity for the next four quarters, reflecting: * the company's acceptable availability under its secured bank credit facilities; * the absence of any material near-term debt maturities; * adequate headroom under its financial covenants; and * strong credit protection measures. The rating is constrained by the expected heavy seasonal working capital requirements of its homebuilding segment, which leave the company with large negative free cash flows. These ratings were assigned: * B1 Corporate Family Rating * B3 rating on $150 million of senior subordinated notes due January 2011 * SGL-2 liquidity rating All of Comstock's debt, which includes borrowings under $314 million of aggregate revolver, construction, and acquisition and development bank credit facilities (unrated by Moody's), is guaranteed by the company's operating subsidiaries. Founded in 1985, Comstock conducts homebuilding operations through operating divisions in the Washington, D.C. metropolitan area (92% of revenues), covering Northern Virginia and Maryland, and in Raleigh, North Carolina (8% of revenues). This geographic concentration, plus the company's relatively limited product and price point diversity as well as its overall small relative size, make the company more susceptible to a cyclical industry downturn and/or regional downturn than its much larger competitors. The company has identified a number of additional projects in its existing market areas in which it would like to invest and a number of potential acquisition targets elsewhere in the mid-Atlantic and in the southeast by which it could further expand its footprint. Again, given its relatively small size, the company would be more susceptible than its larger competitors to integration risk, financial overexposure, and start up costs that could have a significant short-term effect on overall results. The company began operations as a land developer and specialty homebuilder but then focused during the 1990's on production homebuilding for first-time and early move-up buyers. In 2002 and 2003, Comstock expanded into urban style mixed-use projects, high rise condos, and the active adult market. As a result of this product mix change, condo revenues accounted for approximately 47% of 2005 year-to-date revenues and 73% of backlog. Although Comstock does very little spec construction in its traditional homebuilding business, the condo operations, particularly the high-rise condo segment, may start construction with just 30% to 50% of the units having been pre-sold. Consequently, Comstock's overall proportion of spec building tends to be at the higher end of industry averages. If the company's market area should weaken suddenly, it could be left with excess unsold inventory. On the plus side, Comstock's financial metrics are satisfactory to strong for the ratings assigned. In 2004, the company's debt leverage, as measured by debt/capitalization of 58.9%, was acceptable for its rating, EBIT coverage of interest of 4.6x would have mapped to a higher rating, and gross margins of 33.4% far exceeded the bounds of its assigned ratings. In 2006 and beyond, because of the company's increasing proportion of condo conversions and other projects, gross margins are expected to decline to the low-to-mid 20% range-still a healthy figure for the ratings. The company's slightly over four-year lot supply (roughly one-third owned) on a go-forward basis would have mapped to a higher ratings level as well. Although showing some signs of slow down in the rapid pace of new home sales and price appreciation, the Washington, D.C. metropolitan area remains one of the better markets to be in if one has to be concentrated in a single market. Pro forma for the offering of $150 million of new five-year senior sub notes, repayment of approximately $145.5 million of bank debt, and disbursement of approximately $4.5 million for fees and expenses, total debt/capitalization as of the nine months ended September 30, 2005 would be approximately 55% while total debt/EBITDA as of the 12 months ended the same date would be approximately 4.3x, with both metrics acceptable for the ratings assigned. Going forward, the ratings and outlook would be strengthened by: * a significant build-up in the company's tangible equity base; * a successful diversification into other markets; * a reduction in the proportion of spec construction; and * a permanent reduction in the company's debt leverage metric. The ratings and outlook would be stressed by a misstep in the company's expansion process and/or a significant increase in debt leverage. The SGL-2 liquidity rating would be adversely impacted if the company were to make unusually large land purchases or to bulk up its work-in-process inventory, thereby reducing its available liquidity under its revolver. The SGL-2 rating would be bolstered if the company were to become strongly free cash flow positive on a consistent annual basis or were to increase the revolver portion of its overall bank credit facilities. Headquartered in Reston, Virginia, Comstock Homebuilding Companies, Inc.: * designs and builds: -- single-family homes and town homes, -- mid-rise and high-rise condominiums, -- urban-style mixed use developments, and -- active adult communities; and engages in condo conversions. Revenues and EBITDA for the trailing twelve month period ended September 30, 2005 were approximately $168 million and $39 million, respectively. COMSYS INFORMATION: Moody's Rates Proposed $100 Million Loan at B3 ------------------------------------------------------------------ Moody's Investors Service assigned a B3 rating to the proposed $100 million second lien term loan of COMSYS Information Technology Services, Inc., and concurrently withdrew the B2 rating previously assigned to the proposed senior unsecured notes of COMSYS IT Partners, Inc. Comsys IT is the direct holding company parent of Comsys and recently cancelled a proposed $150 million offering of senior unsecured notes. The proceeds from the second lien term loan and approximately $47 million of borrowings under a $120 million first lien revolving credit facility (not rated) are expected to be used to repay existing secured debt and pay related fees and expenses. Since Comsys IT has no rated debt, the corporate family and SGL ratings of Comsys IT have been withdrawn and assigned at the Comsys level. The ratings outlook is stable. The ratings reflect: * intense competition; * pricing pressure; * historically weak operating performance during economic downturns; and * risks related to the September 2004 merger with Venturi Partners, Inc. and related integration efforts. The ratings also reflect: * the company's large national scale; * expected increases in outsourced corporate IT spending; and * cost savings achieved during 2005 in connection with the Venturi acquisition. Moody's assigned these ratings to COMSYS Information Technology Services, Inc.: * $100 million second lien term loan due 2010 at B3 * Corporate family rating at B2 * Speculative grade liquidity rating at SGL-3 Moody's has withdrawn these ratings of COMSYS IT Partners, Inc.: * $150 million senior unsecured notes due 2013 at B2 * Corporate family rating at B2 * Speculative grade liquidity rating at SGL-3 Comsys acquired the information technology staffing operations of Venturi in a tax free exchange of stock on September 30, 2004. Venturi's IT staffing operations represented about 40% of the pro forma combined revenues of Comsys. In addition to expanding the company's geographic reach and diversifying its customer base, the merger was predicated on realizing significant cost savings. The company has substantially completed its cost saving initiatives by: * centralizing certain corporate and administrative functions; * consolidating overlapping facilities; and * personnel and reorganizing its management team. Ongoing risks related to the merger include the integration of technology platforms and the ability of the company to retain key clients, local management teams and employees. The IT staffing industry has high turnover rates and any difficulties in recruiting and retaining consultants could have a significant impact on the underlying business. The company's financial performance was severely impacted by the weak economy and decline in corporate IT spending during 2002 and 2003, particularly in the telecommunications and internet sectors. During economic downturns, companies tend to reduce their use of temporary employees and/or permanent placement services before implementing layoffs of permanent employees. In addition, the economic slowdown affected the willingness and ability of companies to invest capital in upgrading their technology systems. As a result, revenues declined 27% and 14% in 2002 and 2003, respectively. The company's billable consultants declined 46% from January 2001 through June 2003. Beginning in the third quarter of 2003, headcount numbers have trended upward reflecting an increase in new IT projects and a decline in project postponements and deferrals. Pro forma combined revenues increased from $577 million in 2003 to $639 million in 2004. Moody's believes that the IT staffing industry in the US will continue to grow modestly over the intermediate term as corporate IT budgets recover from the constrained capital spending levels sustained during the recent economic slowdown. In addition, IT staffing companies should also benefit from continued demand for a more flexible workforce, which allows companies to manage their labor costs more effectively. Nevertheless, Moody's expects the company's financial performance to continue to be impacted by challenging industry conditions. The IT staffing industry is highly competitive and fragmented, with numerous national, regional and local competitors. Although most of these competitors are smaller than Comsys, a hand full of competitors have greater financial and marketing resources than the company. Barriers to entry are low and new competitors continue to enter existing markets. In addition, more companies are using low cost offshore outsourcing centers, particularly in India, to perform technology work and projects. The company has modest customer concentration as it generates about a third of its revenues from its top ten customers. Due to the competitive environment and excess supply of consultants relative to demand during the last few years, pricing pressure from clients has been significant although a continued recovery in corporate IT spending may alter the supply/demand imbalance and ease pricing pressures. The ratings are also supported by the company's broad geographic profile (41 offices in 26 states) and increased scale post-Venturi merger which should benefit the company as larger customers increasingly seek to minimize the number of outsourcing vendors utilized. The stable ratings outlook anticipates relatively flat revenues and operating margins (4%-5% range excluding restructuring charges) in the intermediate term. Quarterly revenues may fluctuate significantly due to the timing of IT projects and variations in usage of IT staffing services by customers. Despite an expected improvement in corporate IT spending, Moody's believes that it will be difficult for the company to show substantial organic growth in its revenue base due to increasing competition, pricing pressure and continued migration of IT work to firms offshore. Moody's expects 2005 fiscal year end Debt to EBITDA (reflecting Moody's standard adjustments) of about 4.8 times and free cash flow to debt of 5%-7% in 2006. The ratings could be upgraded if the company achieves steady organic revenue growth and improves operating margins such that sustainable debt to EBITDA is less than 4 times and free cash flow to debt is over 8%. The ratings could be downgraded if the company: * loses significant clients; * experiences difficulty completing the merger integration; or * suffers deteriorating operating margins such that debt to EBITDA increases to over 5.5 times and free cash flow to debt falls below 5% for an extended period of time. The SGL-3 speculative grade liquidity rating reflects an adequate liquidity profile characterized by modest expected free cash flow from operations and significant availability under a $120 million revolving credit facility. Moody's expects the company to have minimal cash balances upon the closing of the refinancing. Cash flow from operations over the next twelve months may be weak due to variability in the utilization rates of its consultant base, fluctuations in working capital requirements and the timing of restructuring payments. The company's cash needs in the next four quarters are also expected to include about $5-$6 million of capital expenditures and $5 million of debt amortization requirements. Pro forma for the refinancing at close, the company is expected to have about $43 million of revolver borrowings and $3 million of letter of credit utilization. Effective availability under the borrowing base revolver using anticipated covenant levels is expected to initially be about $50 million. Comsys may need to further increase its revolver borrowings to fund working capital volatility, acquisition earn-outs and niche acquisitions. The company's bank facility is expected to contain financial covenants that set a maximum level of total leverage and a minimum level of fixed charge coverage. Moody's expects the company to have adequate cushion against these covenants over the next four quarters. As to alternate liquidity, substantially all of the company's assets are pledged under the company's secured credit facility and the company has few, if any, non-core assets that could be sold. The B3 rating assigned to the second lien term loan, notched one level below the corporate family rating, reflects the effective subordination of second lien debt to the $120 million first lien revolver and $10 million first lien term loan. The first and second lien credit facilities are secured by a first and second lien, respectively, on the assets of Comsys, including the stock and assets of its domestic subsidiaries. Headquartered in Houston, Texas, Comsys is a leading IT staffing company that provides a full range of specialized staffing and project implementation services and products. Pro forma combined revenues (adjusted for the Venturi merger) for the LTM period ending July 3, 2005 was $652 million. COMSYS IT: Venturi Integration Spurs S&P to Junk $100M Junior Loan ------------------------------------------------------------------ Standard & Poor's Ratings Services assigned its 'CCC+' rating and recovery rating of '5' to COMSYS IT Partners Inc.'s $100 million junior secured term loan due 2010. At the same time, Standard & Poor's affirmed its 'B' corporate credit rating on COMSYS and withdrew its rating on the company's $150 million senior unsecured notes due 2013, which are no longer being marketed. The outlook is negative. At Oct. 2, 2005, COMSYS had pro forma debt of roughly $150 million and preferred stock of $25 million. Transaction proceeds will be used to refinance the company's indebtedness, which was incurred in 2004 as part of the company's September 2004 acquisition of Venturi Partners Inc. COMSYS' $25 million high-cost 15% pay-in-kind preferred stock will remain in place. Houston, Texas-based COMSYS specializes in IT staffing services, with 41 offices in 26 states. "The ratings reflect the potential challenges associated with the ongoing integration of the Venturi acquisition, and COMSYS' still small size in the competitive and cyclical domestic IT staffing market," said Standard & Poor's credit analyst Hal F. Diamond. "These factors are partially offset by COMSYS' management's track record of coping with difficult industry conditions." The company provides IT services to about 30% of Fortune 500 companies, with the 15 largest customers representing about 44% of 2004 sales. Its client base has diversified somewhat following the Venturi acquisition. However, large customers increasingly have been seeking pricing discounts in exchange for higher volumes of business. Increasing competition from both onshore and offshore IT outsourcing providers has also exacerbated pricing pressures. CONSUMER DIRECT: Equity Deficit Tops $5.5 Mil. at September 30 -------------------------------------------------------------- Consumer Direct of America delivered its financial results for the quarter ended Sept. 30, 2005, to the Securities and Exchange Commission on Nov. 21, 2005. Consumer Direct incurred a $1,920,945 net loss for the three months ended Sept. 30, 2005, as compared to a $1,526,259 net loss for the same period in 2004. The Company reported a $7,488,862 net loss for the first nine months of 2005 in contrast to a $2,913,787 net loss for the comparable period in 2004. Management says the $4.6 million increase in loss for the nine months ended Sept. 30, 2005, was due to the new accounting rules that required the monetizing of stock conversion features of bridge loans which totaled $2.9 million, the costs associated with the acquisition of Ocean West and an increase in interest and professional fees. The Company's balance sheet showed $14,860,582 in assets at Sept. 30, 2005, and liabilities of $21,578,093, resulting in a stockholders' deficit of approximately $5,541,522. At Sept. 30, 2005, the Company had an accumulated deficit of $25,390,771. Going Concern Doubt De Joya & Company expressed substantial doubt about Consumer Direct's ability to continue as a going concern after it audited the Company's financial statements for the year ended Dec. 31, 2004. The auditing firm pointed to the Company's recurring losses from operations and accumulated deficit. Headquartered in Las Vegas, Nevada, Consumer Direct of America, Inc. -- http://www.cdoa.biz/-- operates as a direct-to-consumer mortgage broker that originates mortgages loans in the United States. As of Dec. 31, 2004, CDA operated through 46 retail branches in 34 states. In addition, the company, through its subsidiary, Ocean West Holding Corp., originates and sells loans secured by real property with one to four units. COOPER-STANDARD: Moody's Reviews Sr. Subordinated Debt's B3 Rating ------------------------------------------------------------------ Moody's Investors Service placed the ratings of Cooper-Standard Automotive Inc. and to its wholly-owned subsidiary Cooper-Standard Automotive Canada Limited under review for possible downgrade. The review is prompted by Cooper Standard's announcement that it has signed a definitive agreement to acquire the Fluid Handling Systems business of ITT Industries Inc. in a transaction valued at approximately $205 million, which will require incremental debt financing. ITT's Fluid Handling Systems division is a leading manufacturer of steel and plastic tubing and quick connects for fuel and brake lines used in automotive applications, and had net sales of approximately $437 million. The ratings under review for possible downgrade are: Cooper Standard Automotive, Inc.: * Corporate Family Rating at B1; * Senior Secured bank Facility rating at B1; * Senior Unsecured rating at B2; and * senior subordinated debt rating at B3 Cooper Standard Automotive Canada Limited: * Senior Secured Bank Credit Facility rating at B1 The Speculative Grade Liquidity rating of Cooper Standard Automotive, Inc. has been lowered to SGL-3 reflecting: * the need for incremental financing to complete the acquisition; * the potential increase in working capital needs of the expanded business; * the existing moderate cushion under the financial covenants given Cooper Standard's weaker operating performance; and * the need to approach the company's bank group to reflect the revised capital structure. Moody's review will consider the business opportunities and financial risks associated with Cooper Standards' acquisition of the Fluid Handling Business of ITT, as well as the potential fit of the newly acquired operations within Cooper-Standard's existing business. The review will consider the degree to which incremental debt incurred to fund the acquisition will be supported by acquired earnings, and the degree to which the company's financial metrics are affected by the transaction. The review will also consider the effects of the current adverse business environment in the auto components sector on Cooper Standard's earnings and cash flow, and the strategies the company is pursuing to enhance performance, which has eroded in recent periods. The rating review will also consider the company's ongoing progress in containing costs and generating cash flow to reduce the debt incurred to fund the December 2004 acquisition of Cooper Standard from Cooper Tire and Rubber Company. Cooper-Standard, headquartered in Novi, Michigan, is a privately held portfolio company of The Cypress Group and Goldman Sachs Capital Partners. It is a leading global manufacturer of: * fluid handling; * body sealing; and * noise, vibration and harshness control systems for automotive vehicles. As a percentage of revenues, these business lines currently respectively contribute approximately 34%, 47%, and 19% of the total. The company sells about 90% of its products to automotive original equipment manufacturers. Annual revenues currently approximate $1.9 billion. CMS ENERGY: Plans to Auction & Sell Palisades Nuclear Power Plant ----------------------------------------------------------------- CMS Energy Co. (NYSE: CMS) plans to sell the Palisades nuclear power plant and will establish a competitive bid process expected to lead to a sale in 2007. The process will include a long-term power purchase agreement with the new owner to retain the benefits of the low-cost nuclear generation for Consumers Energy's 1.8 million electric customers. The Palisades plant, located near South Haven, Mich., is the only operating nuclear plant owned by Consumers Energy, CMS Energy's principal subsidiary. It produces up to 798 megawatts, or about 18% of Consumers Energy's electricity generating capacity. The plant currently is licensed to operate until 2011. The Company has filed with the U.S. Nuclear Regulatory Commission seeking to renew the license for 20 additional years. David Joos, CMS Energy's president and chief executive officer, said the decision to sell the plant reflects the current realities in the nuclear power marketplace. "Ownership of nuclear power plants is consolidating as companies with multiple nuclear units are able to share operating practices, experience, and resources and benefit from economies of scale," Joos said. "Though we've seen great improvements at Palisades since turning over operations to the Nuclear Management Company in 2000, NMC has shrunk as other member utilities have sold their plants, and we believe our best course of action is to sell Palisades." Mr. Joos emphasized that Palisades will be sold only if a satisfactory bid is made. "We will sell Palisades only if it makes sense for the Company and its customers," he said. "We expect a high level of interest in Palisades and we're optimistic that we'll see some attractive bids." Concentric Energy Advisors has been retained to serve as the auction manager and financial adviser for the sale of Palisades. CEA will provide strategic support throughout the transaction and regulatory approval process. The NRC will have to approve the transfer of the plant's operating license to a new owner. The Federal Energy Regulatory Commission and the Michigan Public Service Commission also will review various elements of any sale. The MPSC also will have an ongoing role in approving any power supply agreements resulting from the sale. CMS Energy Co. is an integrated energy company, which has as its primary business operations an electric and natural gas utility, natural gas pipeline systems, and independent power generation. * * * As reported in the Troubled Company Reporter on Jan. 17, 2005, Fitch assigned a 'B+' rating to CMS Energy Corp.'s $150 million issuance of 6.30% senior unsecured notes, due 2012. Proceeds from the issuance will be used to refinance higher cost debt and for general corporate purposes. Fitch said the Rating Outlook is Positive. As reported in the Troubled Company Reporter on Dec. 27, 2004, Moody's Investors Service upgraded the ratings of CMS Energy Corporation, including its Senior Implied rating to Ba3 from B2, senior unsecured debt to B1 from B3, subordinated debt to B3 from Caa2, and preferred stock to Caa1 from Ca. Moody's also upgraded CMS' Speculative Grade Liquidity rating to SGL-2 from SGL-3. In addition, Moody's assigned a Ba3 rating to CMS' $300 million secured bank credit facility. This action concludes the review of CMS' ratings for possible upgrade. The rating outlook is stable. CREDIT SUISSE: S&P Raises Low-B Ratings on 5 Certificate Classes ---------------------------------------------------------------- Standard & Poor's Ratings Services raised its ratings on 14 classes of mortgage pass-through certificates from three transactions issued by Credit Suisse First Boston Mortgage Securities Corp. At the same time, ratings are affirmed on 28 classes from the same transactions. Credit support for these transactions is provided by subordination, overcollateralization, and excess spread. The raised ratings reflect the strong performance of the mortgage loan pools, along with actual and projected credit support percentages that adequately support the raised ratings. Current credit support for the upgraded classes has increased to an average of 2.19x the credit support required for the new rating levels. The higher credit support percentages resulted from significant principal prepayments and the shifting interest structure of the transactions. As of the November 2005 remittance date, the upgraded transactions had total delinquencies below 1.00%; total delinquencies ranged from 0% to 0.99% for loan group 1 of series 2003-AR5. None of the upgraded classes had severe delinquencies. Realized losses were below 3 basis points for the upgraded groups. The transactions have paid down to well below 35% of their original principal balances. The affirmations reflect actual and projected credit support percentages that should be sufficient to support the certificates at their current rating levels. As of the November 2005 distribution date, total delinquencies for the affirmed transactions ranged from 5.28% of the current pool balance to 7.36%. Serious delinquencies ranged from 3.78% to 6.61%. There were no realized losses. The collateral backing each transaction consists of groups of Alt-A, adjustable-rate, conventional mortgage loans with original terms to maturity of 30 years or less and secured by first liens on primarily one- to four-family residential properties. Ratings Raised Credit Suisse First Boston Mortgage Securities Corp. Residential Mortgage-Backed Certs Rating Series Class To From ------ ----- -- ---- 2003-AR2 C-B-1 AAA AA+ 2003-AR2 C-B-2 A+ A 2003-AR2 C-B-3 BBB+ BBB 2003-AR2 C-B-4 BB+ BB 2003-AR5 C-B-1 AAA AA+ 2003-AR5 C-B-2 AA+ AA 2003-AR5 C-B-3 A+ BBB 2003-AR5 C-B-4 BBB BB 2003-AR5 C-B-5 B+ B 2003-AR9 C-B-1 AAA AA 2003-AR9 C-B-2 AA A+ 2003-AR9 C-B-3 A BBB+ 2003-AR9 C-B-4 BBB- BB 2003-AR9 C-B-5 B+ B Ratings Affirmed Credit Suisse First Boston Mortgage Securities Corp. Residential Mortgage-backed Certs Series Class Rating ------ ----- ------ 2003-AR2 I-A-1, II-A-1, III-A-1, IV-A-1 AAA 2003-AR2 C-B-5 B 2003-AR2 V-A-1 AAA 2003-AR2 V-M-1 AA 2003-AR2 V-M-2 A 2003-AR5 I-A-1, I-A-2, II-A-2, II-A-3, II-A-1 AAA 2003-AR5 I-X, II-X AAA 2003-AR5 III-A-1 AAA 2003-AR5 III-M-1 AA 2003-AR5 III-M-2 A 2003-AR9 AR, I-A-1, I-A-3, II-A-1, II-A-2, I-A-2 AAA 2003-AR9 I-X, II-X AAA 2003-AR9 III-A-1 AAA 2003-AR9 III-M-1 AA 2003-AR9 III-M-2 A CROSS COUNTRY: Moody's Withdraws $200 Million Debts' Ba1 Ratings ---------------------------------------------------------------- Moody's withdrew the ratings of Cross Country Healthcare, Inc.'s senior secured credit facilities following the company's recent refinancing of its existing facility with an unrated facility. Moody's also withdrew the compay's Ba1 corporate family rating. These ratings have been withdrawn: * $75 million senior secured revolver, due 2008, rated Ba1 * $125 million senior secured Term Loan B, due 2009, rated Ba1 * Corporate family rating, Ba1 Cross Country, Inc., headquartered in Boca Raton, Florida, is one of the nation's leading providers of healthcare staffing services. The company services more than 3,000 hospitals, pharmaceutical companies and other healthcare providers in all 50 states. The company recognized revenue of $629 million for the last twelve months ended September 30, 2005. DELPHI CORP: Has Until June 7 to Make Lease-Related Decisions ------------------------------------------------------------- The Honorable Robert D. Drain of the U.S. Bankruptcy Court for the Southern District of New York extends the date by which Delphi Corporation and its debtor-affiliates may assume or reject their unexpired non-residential 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. The date by which the Debtors must assume or reject the ORIX Warren, LLC, non-residential real property lease located at 4551 Research Parkway in Warren, Ohio, is extended to and including December 7, 2006. The Initial Extension will be further extended for an additional six months to June 7, 2007, without further notice or a hearing, unless ORIX files an objection to the Additional Extension by October 1, 2006, in which case a hearing with respect to the ORIX Lease and the granting of the Additional Extension will be held at the next omnibus hearing to occur at least 30 days following the October 1, 2006, deadline. In the event of a hearing, the Debtors will bear the burden of proof regarding "cause" for the extension, as that term is contemplated under Section 365(d)(4) of the Bankruptcy Code, and the Debtors will file their related pleading at least 10 calendar days prior to the applicable omnibus hearing. 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. 10; Bankruptcy Creditors' Service, Inc., 215/945-7000) DELPHI CORP: Appointment of Non-Hourly Retirees' Panel Deferred --------------------------------------------------------------- As previously reported in the Troubled Company Reporter on Oct. 14, 2005, Delphi Corporation and its debtor-affiliates told the U.S. Bankruptcy Court for the Southern District of New York, an "authorized representative" of the current hourly retirees must be recognized and appointed in their chapter 11 cases. Mr. Butler asserted that a single Retiree Committee will adequately represent the interests of all Unrepresented Union Retirees and it will permit the Debtors to conduct focused negotiations with one entity. Moreover, a single Retiree Committee will lessen the financial burden on the Debtors' estates. Pursuant to Section 1114(b)(2), a Retiree Committee may seek to have its reasonable out-of-pocket expenses, as well as the fees and costs of its advisors, paid out of the assets of the Debtors' estates. No Union Filed for Election Michael Beard, Russell Detweiler, Floyd Jones and John M. McGrath, non-hourly retirees of Delphi Corporation, et al., note that no International Union has filed an election for a retirees committee to represent their union retirees under Section 1114 of the Bankruptcy Code within the deadline set in the Retiree Committee Order, so that no retirees committee would be established at present. The Debtors have stated that if and when they seek Bankruptcy Court approval to eliminate or modify the retiree medical and life insurance benefits of their non-union retired employees, they will provide the Non-Hourly Retirees notice of those proceedings. In reliance on the record and the Debtors' statement, the Non-Hourly Retirees withdraw their request to vacate or amend the Court's Retiree Committee Order, while preserving all rights to file a similar motion in future circumstances. 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. 10; Bankruptcy Creditors' Service, Inc., 215/945-7000) DELPHI CORP: Pepco Wants Stay Lifted to Terminate Sales Agreement ----------------------------------------------------------------- Pepco Energy Services, Inc., is a party to a prepetition Master Electric Sales Agreement dated July 8, 2003, with Delphi Corporation and its subsidiaries. The Sales Agreement provides that the terms of the applicable Addendum to the Sales Agreement are "strictly confidential." Brent Strickland, Esq., at Whiteford, Taylor & Preston, in Baltimore, Maryland, tells the U.S. Bankruptcy Court for the Southern District of New York that Delphi has defaulted on the payment terms under the Sales Agreement during the postpetition period and has not cured the default as of Nov. 21, 2005. Accordingly, Delphi Corporation and its debtor-affiliates are in breach of the Sales Agreement. Mr. Strickland asserts that timely payment is critical because if payment is not received by a certain date and the payment default is not cured within a prescribed time period, Pepco is unable to provide a "drop" service notice to the public utility that ultimately delivers the power to the Debtors through its electric distribution system. As a result, Pepco becomes liable to the public utility to deliver an additional month's worth of electricity or suffer costs and additional potential exposure for failing to comply with the public utility's supplier tariff requirements. Furthermore, by the Court's Utilities Order, the Debtors and Pepco are required to continue performance on the prepetition terms of the Sales Agreement. Thus, Delphi has also violated the terms of the Utilities Order by failing to perform the Sales Agreement under its prepetition terms. Accordingly, Pepco asks the Court to: (a) lift the automatic stay to allow for termination of the Sales Agreement; or (b) in the alternative, compel the Debtors to assume or reject the Sales Agreement. 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. 10; Bankruptcy Creditors' Service, Inc., 215/945-7000) DELTA AIR: CIT Purchases Ten Boeing Aircraft for $600 Million ------------------------------------------------------------- CIT Group Inc. (NYSE: CIT) will purchase ten new Boeing 737-800 aircraft from Delta Air Lines upon the delivery of the aircraft by The Boeing Company to Delta. The total dollar value of the aircraft is approximately $600 million, based on Boeing's current list prices. The ten aircraft are currently part of Delta's existing order backlog with Boeing. Nine of the aircraft will be delivered in 2007 and one in 2008. The sale of the aircraft was approved by U.S. Bankruptcy Court for the Southern District of New York presiding over Delta's Chapter 11 bankruptcy proceedings. About CIT Aerospace CIT Aerospace, a unit of CIT Group Inc., offers leasing and finance packages including operating leases and structuring and advisory services for commercial and regional airlines in addition to providing financial solutions to manufacturers and suppliers in the Aerospace & Defense Industry. CIT Aerospace manages a fleet of over 300 commercial and regional aircraft leased and financed to over 100 airlines around the world. About CIT Group CIT Group Inc. (NYSE: CIT) -- http://www.cit.com/-- a leading commercial and consumer finance company, provides clients with financing and leasing products and advisory services. Founded in 1908, CIT has over $60 billion in assets under management and possesses the financial resources, industry expertise and product knowledge to serve the needs of clients across approximately 30 industries. CIT, a Fortune 500 company and a component of the S&P 500 Index, holds leading positions in vendor financing, factoring, equipment and transportation financing, Small Business Administration loans, and asset-based lending. With its Global Headquarters in New York City, CIT has approximately 6,000 employees in locations throughout North America, Europe, Latin and South America, and the Pacific Rim. About Delta Air Lines Headquartered in Atlanta, Georgia, Delta Air Lines -- http://www.delta.com/-- is the world's second-largest airline in terms of passengers carried and the leading U.S. carrier across the Atlantic, offering daily flights to 502 destinations in 88 countries on Delta, Song, Delta Shuttle, the Delta Connection carriers and its worldwide partners. The Company and 18 affiliates filed for chapter 11 protection on Sept. 14, 2005 (Bankr. S.D.N.Y. Lead Case No. 05-17923). Marshall S. Huebner, Esq., at Davis Polk & Wardwell, represents the Debtors in their restructuring efforts. As of June 30, 2005, the Company's balance sheet showed $21.5 billion in assets and $28.5 billion in liabilities. DELTA AIR: Retiree's Panel Objects to Use of Disability Funds ------------------------------------------------------------- The Official Committee of Delta Retirees asked the U.S. Bankruptcy Court for the Southern District of New York to end Delta Air Lines' improper use of funds from a separate Disability and Survivors Trust. Delta had spent over $30 million of the Trust funds in the last three years for employee severance benefits, even though the Trust documents prohibited those payments since March 2002. In a filing during the first week of the bankruptcy, Delta had claimed the Trust was "fully funded," but financials provided since show the Trust has an asset shortfall of more than $212 million. The Committee also raised questions about Delta's separate amendment of its benefit plans, two days before the bankruptcy, to retroactively authorize $22 million in 2004 payments out of the Trust for active workers' sick pay. The Committee is seeking relief under a bankruptcy statute that protects disability and death benefits of retired workers. "The Trust was set up to pay specific benefits for widows, orphans, and the disabled," said the Committee's lawyer Dean Gloster of Farella Braun + Martel. "Not as a fund for Delta operating expenses." In an official statement, Committee chairwoman Cathy Cone said, "Delta is a world-class organization that has, for almost all of its history, tried to do the right thing for the people who worked so hard as part of the Delta family, and to do the right thing for their families. In this instance, Delta made a mistake, and Delta did something wrong. We have brought that mistake to their attention and to the attention of the Court. We fully expect that Delta will now do the right thing and correct this wrong." About the Official Committee of Delta Retirees The Official Section 1114 Committee of Non-Pilot Retirees -- http://www.delta1114.org/-- is composed of seven retirees, and was appointed on Nov. 10, 2005 to protect the health, medical, disability, insurance and death benefits of retired employees in the Delta bankruptcy. About Farella Braun + Martel LLP Since its founding in 1962, Farella Braun + Martel -- http://www.fbm.com/-- has achieved a national reputation for the acumen of its business practice, the high profile cases of its complex commercial litigation practice and its prestigious client base. The San Francisco-based firm serves a diverse group of clients from multinational corporations to emerging businesses. The firm also has an office in the Napa Valley focused on the wine industry and related businesses. About Delta Air Lines Headquartered in Atlanta, Georgia, Delta Air Lines -- http://www.delta.com/-- is the world's second-largest airline in terms of passengers carried and the leading U.S. carrier across the Atlantic, offering daily flights to 502 destinations in 88 countries on Delta, Song, Delta Shuttle, the Delta Connection carriers and its worldwide partners. The Company and 18 affiliates filed for chapter 11 protection on Sept. 14, 2005 (Bankr. S.D.N.Y. Lead Case No. 05-17923). Marshall S. Huebner, Esq., at Davis Polk & Wardwell, represents the Debtors in their restructuring efforts. As of June 30, 2005, the Company's balance sheet showed $21.5 billion in assets and $28.5 billion in liabilities. EMPIRE GLOBAL: Posts $900K Net Loss for the Quarter Ended Sept. 30 ------------------------------------------------------------------ Empire Global Corp. (OTCBB: EMGL) reported a $927,092 net loss for the three-month period ended Sept. 30, 2005, compared to a $44,061 net loss for the same period in 2004. The Company's balance sheet showed $3,045,000 in total assets at Sept. 30, 2005, and liabilities of $876,405. Going Concern Doubt SF Partnership, LLP, of Toronto, Canada, expressed substantial doubt about Empire Global's ability to continue as a going concern after it audited the Company's financial statements for the three-month and nine-month periods ended Sept. 30, 2005 and 2004. The auditing firm pointed to the Company's recurring losses from operations since inception. Excel Empire Acquisition Empire Global has entered into a Plan of Merger and Reorganization Agreement with Excel Empire Limited, a British Virgin Islands Corporation whereby it will acquire 100% of the capital stock of Excel through the issuance of 36,400,000 Restricted Shares of Common Stock of Empire Global Corp. Excel Empire Limited is a corporation that owns and operates a newly constructed 645,000 square ft. commercial shopping center complex, a 25-story 5-Star hotel currently under construction and scheduled for completion in early 2006 and a 150-acre state-of-the-art film studio, which is currently home to the CCTV Film Studio. The Project has an appraised value of approximately $150 million and comes to Empire free of all debt and encumbrances. The Advisory Committee of Empire Global Corp. stated: "The acquisition of Excel Empire Limited represents a platform for expanding our business into one of the fastest growing and untapped economies in the world. Our target regions and cities of interest in China are areas that demonstrate exceptional upside growth and income potential and offer the best possible value for the shareholders." About Empire Global Empire Global Corp., fka Pender International Inc., operates as a merchant bank for growth companies. The Company offers undervalued small-to-medium sized advanced stage companies strong management, capital and marketing to bring their operations to profitability. ENTERGY NEW ORLEANS: Deloitte & Touche Approved as Auditors ----------------------------------------------------------- Entergy New Orleans Inc. sought and obtained the U.S. Bankruptcy Court for the Eastern District of Louisiana's authority to employ Deloitte & Touche, LLP, to serve as its independent auditor, nunc pro tunc to the filing of the utility's chapter 11 petition. Deloitte & Touche has provided the Debtor independent auditing and other attestation and accounting services since 2001, Elizabeth J. Futrell, Esq., at Jones, Walker, Waechter, Poitevent, Carrere & Denegre, L.L.P., in New Orleans, Louisiana, relates. Since the Petition Date, Deloitte & Touche has also provided the Debtor independent audit services, including year-end audit and quarterly review. The Debtor states that it owes Deloitte & Touche $50,000 for those services. The compensation for Deloitte & Touche's professional auditing services will be based on the hours actually expended by each assigned staff member at a blended hourly billing rate of $220. Deloitte & Touche will also seek reimbursement for necessary expenses incurred. On September 26, 2005, the Debtor sought and obtained the Court's authority for the interim compensation of professionals and Committee members. In this regard, the Debtor intends for Deloitte & Touche to be an estate professional whose fees and expenses will be governed by the Interim Compensation Order. Thomas L. Keefe, a partner at Deloitte & Touche, assures the Court that the firm does not hold or represent an interest adverse to the Debtor's estate that would impair its ability to objectively perform auditing services for the Debtor. Deloitte & Touche is a "disinterested person" as that term is defined in Section 101(14) of the Bankruptcy Code, as modified by Section 1107(b) of the Bankruptcy Code. Mr. Keefe maintains that that Deloitte & Touche has not provided, and will not provide, professional services to any of the creditors, other parties-in-interest, or attorneys in connection with the Debtor's Chapter 11 case. However, from time to time, Deloitte & Touche or its affiliates have provided may currently provide and may in the future continue to provide professional services to certain of the Debtor's creditors or other parties- in-interest in matters unrelated to the Debtor's Chapter 11 Case. Because Deloitte & Touche is a national firm with many client relationships, it is unable to state with certainty that every client relationship or other connection has been disclosed. Mr. Keefe tells the Court that if Deloitte & Touche discovers additional information that requires disclosure, it will file a supplemental disclosure with the Court promptly. 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. 6; Bankruptcy Creditors' Service, Inc., 215/945-7000) ENTERGY NEW ORLEANS: Can Honor Prepetition Employee Obligations --------------------------------------------------------------- Under the laws of the State of Louisiana, Entergy New Orleans, Inc., is required to provide certain workers' compensation benefits to provide its employees with workers' compensation coverage for claims arising or related to their employment. For many years, the Debtor has self-insured its workers' compensation benefits. The Louisiana Workers' Compensation Act sets forth the security requirements for employers who self-insure their workers' compensation benefits. In accordance with the LWCA, the Director of the Louisiana Workers' Compensation Administration granted the Debtor a Certificate of Authority to Self-Insure. To obtain and retain the Certificate, the Debtor, as principal, posted Surety Bond No. 6144772 for $100,000 with Safeco Insurance Company of America, as surety to the State of Louisiana, for the use and benefit of all its employees and their dependents, to whom the Debtor may, during the life of the Bond, become liable for benefits under the LWCA. Should the Debtor suspend payment of workers' compensation benefits, upon written demand by the Director, Safeco is obligated to pay to the Department the entire amount of the Bond within 30 days of receipt of the demand, Elizabeth J. Futrell, Esq., at Jones, Walker, Waechter, Poitevent, Carrere & Denegre, LLP, in Baton Rouge, Louisiana, states. Workers' Compensation Claims As of the Petition Date, the Debtor has six workers' compensation claims by, or on behalf of, its inactive employees arising out of accidents on the job that occurred before the Petition Date. The Workers' Compensation Claims include two elements: (1) Replacement Wages On a bi-weekly basis, the total Replacement Wages payable to the claimants would be less than $3,000. (2) Workers' Compensation Medical Benefits As of the Petition Date, four recipients of Workers' Compensation Medical Benefits have outstanding bills totaling less than $1,000. Two of the Recipients may be eligible to receive medical benefits as retired employees, within the meaning of Section 1114 of the Bankruptcy Code. Hence, the Debtor is arguably obligated to provide the two Recipients with Retiree Medical Benefits. Although the Workers' Compensation Medical Benefits of the two Recipients is more comprehensive than their Retiree Medical Benefits, the additional cost to the Debtor would be negligible because the medical expenses would have relate to the injury to constitute a Workers' Compensation Medical Benefit, Ms. Futrell explains. Accordingly, the Debtor sought and obtained the U.S. Bankruptcy Court for the Eastern District of Louisiana's authority to: (a) pay the Replacement Wages, until further Court order; and (b) continue to honor certain of its obligations to provide the Workers' Compensation Medical Benefits to its inactive employees. Ms. Futrell asserts that the Workers' Compensation Claims are priority claims within the meaning of Section 507(a)(4) of the Bankruptcy Code. Thus, the Debtor's estate will not be harmed by permitting the payment of the Workers' Compensation Claims before the effective date of a plan of reorganization. Moreover, the Director may demand payment under the Bond, if the Debtor ceases making payments on the Workers' Compensation Claims. In that event, the Debtor would be forced to satisfy as yet unknown demands by the Director to continue to self-insure its postpetition workers' compensation benefits. The cost to comply with those unknown demands could be substantial, Ms. Futrell says. "This compares favorably to the relatively small amount that would be necessary for [the Debtor] to continue to honor its [prepetition] workers' compensation claims." Moreover, Ms. Futrell asserts that payment of the Workers' Compensation Claims is necessary to maintain the morale of the Debtors' active employees, many of whom are victims of Hurricane Katrina. 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. 6; Bankruptcy Creditors' Service, Inc., 215/945-7000) ENTERGY NEW ORLEANS: Wants Ordinary Course Profs. to Continue ------------------------------------------------------------- Entergy New Orleans, Inc., seeks the U.S. Bankruptcy Court for the Eastern District of Louisiana's authority to: (a) employ professionals utilized in the ordinary course of business without requiring the submission of separate retention pleadings for each professional; and (b) pay the ordinary course professionals without the need for a fee application. In the day-to-day performance of their duties, the Debtor's employees regularly call on certain outside counsel to assist them in carrying out their assigned responsibilities. Tara G. Richard, Esq., at Jones, Walker, Waechter, Poitevent, Carrere & Denegre, LLP, relates that the Debtor cannot continue to operate its business with sound business practice unless it retains and pays for the services of ordinary course professionals. Ms. Richard explains that a number of the Ordinary Course Professionals are unfamiliar with the fee application procedures employed in bankruptcy cases. Thus, some of the Ordinary Course Professionals might be unwilling to work with the Debtor if those fee application requirements were imposed. The operation of the Debtor's business would be hindered if the Debtor were required to file retention pleadings and follow the usual fee application process required of other bankruptcy professionals, Ms. Richard asserts. In addition, the cost of preparing and prosecuting the retention applications and fee applications would be significant and unnecessary because it would be borne by the Debtor's estate. Moreover, the retention pleading requirements would flood the Office of the Clerk of Court and the U.S. Trustee's office with unnecessary fee applications. The Debtor also anticipates employing certain Ordinary Course Professionals to perform ongoing litigation-related services during the pendency of its Chapter 11 case. Although most of litigation will be stayed, the Debtor seeks authority to retain the services of these attorneys should circumstances render these services necessary. The Debtor proposes to file statements with the Court disclosing: (1) the name of the Ordinary Course Professional; (2) the aggregate amounts paid as compensation for services rendered and reimbursement of expenses incurred by the Ordinary Course Professional during the previous 120 days; and (3) a general description of the services rendered by each Ordinary Course Professional. The Debtor will provide the U.S. Trustee with unredacted copies of the bills or invoices of the Ordinary Course Professionals before payment and receipts of related expenses. The Debtor will also require each Ordinary Course Professional to file an Affidavit of Disinterestedness with the Court and to serve copies on the Debtor, the Office of the U.S. Trustee, counsel to any statutory creditors' committee appointed, and those listed on the Special Notices List, prior to or contemporaneous with its first submission to the Debtor of invoices accompanying a request for compensation. Although some of the Ordinary Course Professionals hold unsecured claims against it, the Debtor does not believe that any of the Ordinary Course Professionals have an interest materially adverse to it, its creditors or other parties-in-interest. Bank of New York Responds The Bank of New York, as indenture trustee to the Mortgage and Deed of Trust dated May 1, 1987, seeks clarification that the Debtor does not intend to pay at this time and without further Court order, the $325,000 prepetition amount due to the Ordinary Course Professionals the Debtor currently expects to utilize. Douglas S. Draper, Esq., at Heller, Draper, Hayden, Patrick and Horn, L.L.C., in Baton Rouge, Louisiana, points out that the Debtor has paid millions of dollars to prepetition creditors, including affiliates, since the filing of its Chapter 11 case without any Court authority. The request is clear that the Ordinary Course Professionals will not be involved in the administration of the Debtor's case. However, Mr. Draper reveals that at least one of the OCP represents Entergy Corporation and Entergy Services, Inc. "That [OCP] has taken an active role in representing the interests of Entergy and ESI in connection with litigation over the Final DIP Order and other matters in litigation in the Debtor's Chapter 11 case." Mr. Draper also points out that in its latest cash flow forecast, the Debtor proposed to make significant payments to ESI for corporate services. "No payments should be made by the Debtor to ESI for reimbursement of professionals employed by Entergy or ESI in connection with the bankruptcy case without order of the Court." The Bank of New York asks the Court to condition any order approving the Debtor's request to provide that: (a) the Debtor is not authorized to pay the prepetition claims of the Ordinary Course Professionals at this time and without Court order; and (b) no payments will be made by the Debtor to ESI for bankruptcy services related to its Chapter 11 case without Court order. 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. 6; Bankruptcy Creditors' Service, Inc., 215/945-7000) EQUINOX HOLDINGS: Related Merger Prompts S&P's Negative Watch ------------------------------------------------------------- Standard & Poor's Ratings Services placed its ratings, including its 'B' corporate credit rating, on Equinox Holdings Inc. on CreditWatch with negative implications, following the company's announcement that it has agreed to be acquired by The Related Companies L.P. for about $505 million in cash. As part of Related's proposed financing for the transaction, a Related entity will commence a cash tender offer to purchase Equinox's outstanding 9% senior notes due 2009. At Sept. 30, 2005, Equinox had about $163 million of debt outstanding. "The CreditWatch listing is based on concerns that the transaction could increase Equinox's debt leverage and heighten financial risks," said Standard & Poor's credit analyst Andy Liu. The company has been performing well with steady membership and revenue growth. However, Equinox is also rapidly expanding its club base, with six new clubs planned for 2006, and this has kept its debt burden high. New York-based Equinox is an operator of upscale fitness clubs in New York, Chicago, Miami, Los Angeles, and San Francisco. The transaction is expected to close in January 2006. Standard & Poor's will assess the company's new capital structure, liquidity, and club operations in resolving the CreditWatch listing. GB HOLDINGS: Shareholder Wants Examiner or Equity Panel Appointed ----------------------------------------------------------------- Robino Stortini Holdings, LLC, asks the U.S. Bankruptcy Court for the District of New Jersey appoint a chapter 11 examiner or to direct the U.S. Trustee for Region 3 to appoint an official committee of equity interest holders in GB Holdings, Inc.'s chapter 11 case. Robino Stortini currently owns over 1.8 million shares that represent 16% of the issued and outstanding shares of the Debtor's common stock. Robino Stortini explains that Carl Icahn is the chairman of the Debtor's Board of Directors. Mr. Icahn also owns 90% of the outstanding Depositary Units of and serves as chairman of the Board of Directors of American Real Estate Partner, L.P., a publicly traded limited partnership. American Real Estate owns approximately 77.5% of the outstanding common stock of GB Holdings and approximately 63.4% of the outstanding stock of Atlantic Coast Entertainment Holdings, Inc., the Debtor's only significant asset. The Exchange Offer On June 3, 2004, the Debtor filed a proxy statement with the SEC detailing the terms an exchange offer. The effect of the Exchange Offer was the transfer of substantially all of the Debtor's assets to ACE Gaming, a wholly owned subsidiary of Atlantic Coast. In exchange for all of its assets, the Debtor would receive a substantial number of Atlantic Coast shares or warrants to purchase Atlantic Coast common stock, depending on the principal amount of GBH Notes exchanged for Atlantic Coast Notes. The stockholders of the Debtor approved the Exchange Offer on July 22, 2004. Approximately 60.2% of the GBH Notes, including all of the GBH Notes controlled by Mr. Icahn and accounting for 58% of the principal amount of the GBH Notes were submitted for exchange. When the Exchange Offer was completed, the only thing the stockholders of GBH received were the Atlantic Coast warrants, and of the 10 million warrants issued, Mr. Icahn and his affiliates received 77% of them. GBH had transferred all of its assets in exchange for one asset, the 2.8 million shares of Atlantic Coast common stock, which is the parent of ACE Gaming. ACE Gaming now held all of GBH's assets. On Sept. 2, 2004, the SEC granted GBH application to delist the company's common stock effective Sept. 3, 2004. The delisting meant that GBH's stockholders no longer had a public regulated market to trade their shares. For stockholders like Robino Stortini, it meant that its substantial monetary investment was effectively frozen. Arguments for Appointment of an Examiner or Equity Committee Daniel K. Astin, Esq., at The Bayard Firm, in Wilmington, Delaware, asserts that the circumstances of the Exchange Offer and the Debtor's resulting actions justify the need to direct the U.S. Trustee to appoint an independent, unbiased examiner to address the issues related to the Exchange Offer, to facilitate a reorganization that is in the best interest of all creditors and equity holders and to investigate the abuses prevalent in deals involving Mr. Icahn. The appointment of an independent examiner will increase the transparency of the Debtor's bankruptcy proceeding, ensure maximum participation of key constituencies and avoid costly litigations that may occur in connection with the Debtor's dealings with Mr. Icahn, Mr. Astin says. Alternatively, if the Court does not approve the appointment of a chapter 11 examiner, it should enter an order directing the U.S. Trustee to appoint an equity holders' committee that will represent and protect the interests of minority shareholders because it is unjust to permit the Debtor to reorganize or liquidate its assets without the input of those shareholders. The Court will convene a hearing at 10:00 a.m., on Dec. 12, 2005, to consider Robino Stortini's request. Headquartered in Atlantic City, New Jersey, GB Holdings, Inc., primarily generates revenues from gaming operations in Atlantic Coast Entertainment Holdings, which owns and operates The Sands Hotel and Casino in Atlantic City, New Jersey. The Debtor also provides rooms, entertainment, retail store and food and beverage operations. These operations generate nominal revenues in comparison to the casino operations. The Debtor filed for chapter 11 protection on September 29, 2005 (Bankr. D. N.J. Case No. 05-42736). Peter D. Wolfson, Esq., Andrew P. Lederman, Esq., and Mark A. Fink, Esq., at Sonnenschein Nath & Rosenthal LLP represents the Debtor. When the Debtor filed for protection from its creditors, it estimated assets and debts between $10 million to $50 million. GB HOLDINGS: Creditors Panel Taps McElroy Deutsch as Co-Counsel --------------------------------------------------------------- The U.S. Bankruptcy Court for the District of New Jersey gave the Official Committee of Unsecured Creditors of GB Holdings, Inc., permission to employ McElroy, Deutsch, Mulvaney & Carpenter, LLP as its co-cousel. McElroy Deutsch will: 1) assist, advise and represent the Committee with respect to the administration of the Debtor's chapter 11 case and the exercise of oversight with respect to the Debtor's affairs; 2) advise the Committee with regards to its powers and duties and assist in maximizing the value of the Debtor's assets for the benefit of all creditors and other parties-in- interest; 3) assist the Committee in pursuing confirmation of a plan of reorganization and approval of a disclosure statement, or in motions for conversion to a chapter 7 or the appointment of a chapter 11 trustee; 4) assist the Committee in investigating the Debtor's assets, liabilities, financial condition, claims and its operations; 5) commence and prosecute any necessary and appropriate actions and proceedings on behalf of the Committee that may be relevant to the Debtor's chapter 11 case; 6) prepare on behalf of the Committee all necessary applications, motions, answers, orders, reports and other legal papers; 7) communicate with the Committee's constituents as the Committee may consider desirable and assist the Committee in its request for the appointment of a trustee or examiner; 8) appear in Court to represent the interests of the Committee; and 9) render all other legal services to the Committee that are appropriate, necessary and proper in the Debtor's chapter 11 case. Charles S. Stanziale, Esq., and Jeffrey T. Testa, Esq., at McElroy Deutsch are the lead professionals from the Firm performing services to the Committee. Mr. Stanziale charges $475 per hour for his services, while Mr. Testa charges $300 per hour. Mr. Stanziale reports McElroy Deutsch's professionals bill: Designation Hourly Rate ----------- ----------- Partners $375 - $475 Associates $250 - $350 Paraprofessionals $125 - $150 McElroy Deutsch 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 Atlantic City, New Jersey, GB Holdings, Inc., primarily generates revenues from gaming operations in Atlantic Coast Entertainment Holdings, which owns and operates The Sands Hotel and Casino in Atlantic City, New Jersey. The Debtor also provides rooms, entertainment, retail store and food and beverage operations. These operations generate nominal revenues in comparison to the casino operations. The Debtor filed for chapter 11 protection on September 29, 2005 (Bankr. D. N.J. Case No. 05-42736). Peter D. Wolfson, Esq., Andrew P. Lederman, Esq., and Mark A. Fink, Esq., at Sonnenschein Nath & Rosenthal LLP represents the Debtor. When the Debtor filed for protection from its creditors, it estimated assets and debts between $10 million to $50 million. HARLAN SPRAGUE: Moody's Places Ba2 Rating on $190 Million Debts --------------------------------------------------------------- Moody's Investors Service assigned first time ratings to the proposed debt of Harlan Sprague Dawley, Inc. The proceeds from the financing, along with cash equity from Genstar Capital and rollover equity from the major shareholder will be used to effect the purchase of Harlan and refinance existing net debt. List of the new ratings assigned: * $15 million U.S. Dollar-Denominated Senior Secured Revolver, due 2010, rated B2 * $15 million euro-Denominated Senior Secured Revolver, due 2010, rated B2 * $160 million First Lien Senior Secured Term Loan, due 2011, rated B2 * Corporate Family Rating, rated B2 The rating outlook is stable. The ratings are subject to the closing of the proposed acquisition and the review of executed documentation. The credit ratings reflect: * Harlan's high leverage with proposed debt almost equivalent to the company's annual revenue; * low free cash flow relative to debt; * competition from larger firms with greater resources; and * the risks of having over 60% of sales outside of the United States. Harlan's dependence on the pharmaceutical and biotechnology research and development budgets of customers makes the company susceptible to cyclical fluctuations in research spending and potential threats from consolidation in the pharmaceutical and biotechnology industries. Moody's is also concerned that the acquisition of smaller companies could limit Harlan's operating and financial flexibility. The ratings also reflect some concern that the production and manufacture of research models runs the risk of potential contamination, which could tarnish the company's reputation for contamination-free production, damage existing inventory, lead to additional costs, and potentially result in lost orders. The research models group also must incur expenses to secure and protect its facilities, particularly in light of potential adverse publicity from special interest animal groups. The ratings benefit from these favorable industry trends: * a large and growing global research and development market; * an increase in the number of trials conducted due to more drug compounds under development; * more extensive testing per compound due to safety and efficacy concerns; and * mandatory animal trials prior to running human clinical trials. More important, pharmaceutical companies continue to out-source pre-clinical and research models to companies such as Harlan and Charles River Laboratories International (rated Ba1) due to the: * lack of excess capacity; * increasing costs of drug development and discovery; * incentives to reduce the development time of a compound; and * limited resources of biotechnology companies to develop drug candidates internally. Additionally, the research models business has attractive competitive dynamics due to: * steady demand; * high barriers to entry and switching costs; * a limited number of suppliers; and * lack of specific substitutes. The ratings also consider: * Harlan's leading market position in the provision of research models and services; * long-term relationships with leading pharmaceutical; * biotechnology and academic institutions; and * diversification of the company's sales geographically and among numerous clients. The company benefits from: * its global infrastructure of facilities; * a solid reputation for maintaining rigorous health standards and operating processes; and * strong position in the European pre-clinical services market. The stable outlook reflects Moody's expectation that Harlan will be able to report double digit revenue growth through increasing its core research model and services business, expanding its pre- clinical services offering to the North America market, and generating cross-selling synergies between the research models group and the pre-clinical group. Through implementing several operating initiatives, including consolidating facilities and improving labor productivity, the company should be able to expand operating cash flow and increase margins. Due to a minimal amount of capital expenditures needed to maintain the business and support growth, Harlan is expected to produce free cash flow as a percentage of adjusted debt of between 2% to 4% over the next two years. Since Harlan's credit metrics are weak for its rating category, any meaningful improvement in operating results and/or financial flexibility would most likely serve more to strengthen the company's position in the existing rating category than to place upward pressure on the ratings. On the other hand, if there is a significant deterioration in the level of cash flow, the ratings could face downward pressure. Genstar Capital has signed a definitive agreement to acquire 65% of Harlan from existing shareholders. To finance the transaction, Harlan intends to have a $190 million senior secured credit facility and issue $80 million of mezzanine notes (privately held and not rated) while the equity sponsor will contribute a significant amount of common equity; the major existing shareholder intends to rollover a meaningful amount of common equity. The balance of the proceeds will be used to refinance existing net debt of $79.5 million and pay transaction fees and expenses. The senior secured credit facility consists of a $160 million first lien term loan, a $15 million U.S. dollar- denominated revolver, and a $15 million euro-denominated revolver. Harlan Sprague Dawley, Inc. is the borrower of the U.S. dollar- denominated revolver, term loan and mezzanine notes and Harlan Netherlands B.V. is the borrower of the euro-denominated revolver. The B2 rating for the credit facility reflects the benefit of a first lien loan on substantially all domestic tangible and intangible assets of the U.S. Borrower and its present and future domestic subsidiaries, in addition to a pledge of 100% of the stock of Harlan France S.A.R.L. and the Euro Borrower and 65% of the stock of the remaining first-tier foreign subsidiaries. The credit facility will be guaranteed by Holdings and all domestic subsidiaries of the U.S. Borrower. The U.S. Borrower's obligations are also guaranteed by the Euro Borrower. Despite the support of the mezzanine notes and the contribution of additional equity, the credit facility is rated at the same level as the corporate family rating for these reasons: 1) inadequate recovery and protection under a distressed scenario; 2) no tangible equity; 3) a predominantly intangible asset base, with goodwill and other intangible assets accounting for almost 70% of total assets; and 4) the absence of a lien on the assets of international subsidiaries, which account for over 60% of the company's revenues and almost 80% of its EBITDA over the last twelve months. Harlan Sprague Dawley Inc. is a global provider of research models and services and pre-clinical services for drug discovery and development. Harlan, founded in 1931, serves over 1,600 customers, including: * some of the leading pharmaceutical and biotechnology companies, * government agencies, * medical research institutions, and * universities. The company operates 44 production facilities worldwide with over 2,300 employees. For the twelve months ended September 30, 2005, revenues were approximately $266.3 million and adjusted EBITDA was $41.2 million IAP WORLDWIDE: Moody's Junks Proposed $225 Million Term Loan ------------------------------------------------------------ Moody's Investors Service assigned ratings to IAP Worldwide Services, Inc. IAP is undertaking a proposed dividend recapitalization and plans to enter into senior secured credit facilities that include a $100 million first lien revolver, $350 million first lien term loan, and $225 million second lien term loan. Proceeds of the first and second lien term loans are to be used to: * repay $378 million of debt outstanding under the existing secured credit facilities; * fund a dividend to shareholders of $186 million; * pay fees and expenses of $9 million; and * fund a premium of $2 million to replace the existing second lien loan. Moody's assigned these ratings: * $100 million proposed first lien revolver, maturing 2010, rated B1 * $350 million proposed first lien term loan, due 2012, rated B1 * $225 million proposed second lien term loan due 2013, rated Caa1 Moody's withdrew these ratings: * $75 million senior secured revolver due 2010, B1 rating prospectively withdrawn * $255 million first lien term loan, B1 rating prospectively withdrawn * $105 million second lien term loan, B2 rating prospectively withdrawn Moody's lowered these rating: * Corporate Family Rating, lowered from B1 to B2 The rating outlook is stable. The downgrade of the corporate family rating to B2 from B1 reflects IAP's shift to a more aggressive financial and business profile. The proposed debt and decapitalization associated with the $186 million dividend payment have resulted in pro forma total debt to last twelve months' EBITDA for the period ended September 30, 2005 rising to approximately 6.1 times from approximately 4.3 times at the time of Moody's prior ratings in July 2005. Free cash flow to debt is expected to be in the range of 5% to 7% during the intermediate term, after looking through the positive impact that the unusually destructive hurricane season has had on IAP's contingency and disaster relief operations. The ratings continue to reflect: * IAP's modest free cash flow; * significant financial leverage; and * the risk associated with significant revenue generation from politically unstable regions of the world. The company also derives substantially all of its revenues from the US government, and over 25% of revenues from one contract with the US Air Force (albeit with multiple task orders), and is therefore subject to potential changes in government spending policies and programs. The ratings benefit from IAP's position as a leading provider of support services to the US government and international entities, with over $1 billion in revenue and operating margins that are expected to approximate 7% or better through the intermediate term. Fixed price contracts account for about 52% of revenues year-to-date through October 31, 2005 and generally allow for greater profitability than either cost-plus contracts (36%), or time & materials contracts (12%). IAP's operations have a significant variable cost component, which should enable the firm to adjust its cost base in the event of contract cancellations. IAP's solid win rates on rebid contracts (94.7% since 2001) and new contracts awarded (55% since March 2005) further support the ratings. The current funded backlog amounts to about $1.4 billion. The stable ratings outlook reflects the expected continued growth in demand for outsourced services by the federal government and the belief that IAP is competitively positioned to benefit from this growth. Moody's expects IAP to grow revenues within existing core businesses and to utilize free cash flows to reduce borrowings under its secured credit facilities. The ratings or outlook could be negatively impacted if IAP continues to grow acquisitively and concurrently increases financial leverage. Additional negative factors that could affect the ratings include the absence of leverage reduction during the intermediate term or negative performance versus expectations due to the unexpected loss of contracts or the inability to recompete successfully on existing contracts. It will likely take several quarters of strong financial performance and evidence of sustained reduction in financial leverage before the outlook would change to positive. The B1 rating on the $100 million proposed first lien revolver and $350 million proposed first lien term loan reflects the expected full recovery with some collateral excess in a distressed scenario. The expected excess recovery afforded notching of the first lien facilities above the corporate family rating. The addition of more first lien debt for an acquisition or other purposes would likely put downward pressure on the rating. The borrower is IAP Worldwide Services, Inc., and guarantees by each direct and indirect wholly owned subsidiary of the borrower, with exceptions for non-US subsidiaries, support the facility. The first lien facilities are to receive a first priority security interest in substantially all assets of the borrower and guarantors, as well as pledges of 100% of the capital stock of each of the domestic subsidiaries and 65% of the capital stock of each directly owned foreign subsidiary. At present, substantially all of the operating earnings and assets of the company are guarantor earnings and assets. Covenants are expected to include: * a 75% cash flow sweep; * minimum interest coverage; * maximum total leverage; and * maximum capital expenditures. Annual term amortization of 1% on the first lien term loan amounts to over 10% of IAP's expected annual run-rate free cash flow. The Caa1 rating assigned to the $225 million second lien term loan reflects the subordination of the loan to the sizable amount of first lien debt and its potential to incur loss in a distressed scenario. The loan benefits from the same guarantees as the first lien facilities and has a second priority claim on the same collateral and pledges. There is to be an intercreditor agreement governing claims among lenders that will provide for, among other things: * subordination of the security interests of lenders under the second lien facility; * waivers by the second lien lenders to challenge debtor-in- possession financing; and * standstill provisions for the second lien lenders relating to the collateral. The second lien loan is to have a maximum total leverage covenant that is set wider than the similar covenant on the first lien facilities. IAP Worldwide Services, Inc., headquartered in Cape Canaveral, Florida, is a leading provider of: * facilities management, * contingency support, and * technical services to U.S. military and government agencies. IAP is owned by: * Cerberus Capital Management LP (74%), * the original founders of IAP Worldwide (25%), and * others (1%). Cerberus Capital Management acquired its ownership interest in IAP in May 2004. IAP's annual pro forma revenue for the twelve months ended September 30, 2005 amounted to over $1 billion. IAP WORLDWIDE: S&P Puts Low-B Ratings on Proposed $675 Mil. Loans ----------------------------------------------------------------- Standard & Poor's Ratings Services assigned its 'B+' bank loan rating and '2' recovery rating to IAP Worldwide Services Inc.'s proposed $450 million first-lien credit facility. Standard & Poor's also assigned its 'B-' bank loan rating and '5' recovery rating to IAP's proposed $225 million second-lien term loan. At the same time, Standard & Poor's affirmed its 'B+' corporate credit rating on IAP and revised the outlook to negative from stable. The issues are part of a proposed recapitalization, which the company is using to finance a dividend to shareholders. Proceeds from the issuances will be used to fund roughly $186 million of dividends and to refinance the company's existing debt obligations. Cape Canaveral, Florida-based IAP is a provider of contingency operations, facilities management, and technical services to the U.S. military and civilian agencies. The company will have about $575 million of pro forma debt after the proposed transaction. "The outlook revision reflects the increased leverage that will result from the proposed dividend as well as the company's more aggressive financial policy," said Standard & Poor's credit analyst James Siahaan. The transaction would give the company little room to maintain the current ratings if profitability declined or if the company's other strategic and financial decisions led to additional deterioration in the financial profile. The company's ratings affirmation reflects: * its good operating performance and * its strong rebid record on contracts. The ratings on IAP also reflect: * its revenue concentration from a few large contracts and * its less-predictable nature of contingency operations, which contribute most revenues and profits. These weaknesses are partly mitigated by the low fixed-capital intensiveness of operations. The rating also factors in the slight integration challenges the company will face following its March 2005 acquisition of Johnson Controls World Services Inc. The largest company segment is contingency support, which has provided 63% of 2005 year-to-date revenues. This segment includes power generation, emergency disaster relief, air traffic control, and transport operations in the U.S. and in war theaters overseas. Facilities management, meanwhile, has contributed 24% of revenues. Through this segment, the company maintains U.S. military bases in the U.S. and overseas. The technical services segment has contributed 13% of 2005 revenues. Most of the company's revenues, 53% year-to-date, were generated in the U.S., though they are also concentrated in Kuwait and Iraq. Unrated Cerberus Capital Management L.P., a private investment firm, owns 74% of IAP, while the original founders own the rest. Revenues and margins depend mostly on the size of certain high-margin contingency operations. To a lesser extent, they depend on the operations and maintenance portion of the overall U.S. defense budget. Contingency operations contracts may be of shorter duration and are less predictable than those of facility management and technical services operations segments, which are likely to benefit from the growing trend of outsourcing by clients. In all business segments, nevertheless, IAP is likely to benefit from its strong contract rebid record, which lessens the risk related to the company's dependence on large contracts. KAISER ALUMINUM: Court Okays Insurer's Stipulation on Plan Terms ---------------------------------------------------------------- As previously reported in the Troubled Company Reporter on November 18, 2005, several insurance companies objected to Kaiser Aluminum Corporation and its debtor-affiliates' Disclosure Statement and asked the U.S. Bankruptcy Court for the Southern District of Indiana to establish certain solicitation and voting procedures in connection with the confirmation of the Debtors' Plan of Reorganization. The Objections asserted, among other things, that the Plan is not insurance neutral and the transfer of the Debtors' rights under certain insurance policies violates the terms of the insurance policies. The Insurers also indicated that they needed extensive discovery to adequately prepare their confirmation objections. Over the past several weeks, the Reorganizing Debtors; the Official Committee of Asbestos Claimants; Martin J. Murphy, the legal representative of future asbestos personal injury claimants; Anne M. Ferazzi, the legal representative for the future silica claimants; and the Insurers have been negotiating a resolution of the issues raised by the Insurers' various pleadings. On Nov. 4, 2005, the parties entered into a stipulation under which they agreed to certain Plan modifications to address the Insurers' request for additional clarity. The Stipulation also addresses the scope of the Insurers' potential objections and discovery related to confirmation, the litigation of the objections, if any, and the collateral effects of confirmation. The Court approved the Debtors' Stipulation. 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. 84; Bankruptcy Creditors' Service, Inc., 215/945-7000) KEY ENERGY: Debt Payment Prompts S&P to Withdraw Ratings -------------------------------------------------------- Standard & Poor's Rating Services withdrew its 'B-' corporate credit rating on Key Energy Services Inc. At the same time, Standard & Poor's withdrew its ratings on the company's $275 million 8.375% senior unsecured notes and $150 million 6.375% senior unsecured notes. The ratings are being withdrawn because all rated debt has been repaid from cash on hand and proceeds from the company's back-up credit facilities obtained in August 2005. LEINER HEALTH: Moody's Confirms $150 Million Notes' Caa1 Rating --------------------------------------------------------------- Moody's Investors Service raised the short-term rating of Leiner Health Products Inc. by one notch to SGL-3, following a liquidity-enhancing amendment to the company's bank credit agreement. In addition to these liquidity benefits, the confirmation of Leiner's long-term ratings recognizes the mostly equity-financed acquisition of Pharmaceutical Formulations, Inc., as well as other potential growth and profit improvements. However, Leiner's ratings outlook is negative, as the company must reverse year-to-date profit erosion and cash outflows in order to hold its ratings, and faces several near and long-term challenges. The rating action concludes the review for possible downgrade, which was initiated in August. These ratings were affected by this action: * Corporate family rating, confirmed at B2; * $50 million senior secured revolving credit facility due 2009, confirmed at B2; * $240 million senior secured term loan facility due 2011, confirmed at B2; * $150 million 11% senior subordinated notes due 2012, confirmed at Caa1; and * Speculative grade liquidity rating, upgraded to SGL-3 from SGL-4. Leiner recently secured an amendment to its credit agreement, which loosens financial covenants and provides significant add-backs for costs related to its joint care investments, the acquisition and integration of PFI, and restructuring activity. Concurrent with the amendment, Leiner acquired PFI for around $23 million, $13 million of which was financed with a cash equity investment by existing shareholders (as required by the amendment). Shareholders have also agreed to invest an additional $6.5 million in the event that liquidity drops under $20 million. In addition to these liquidity enhancements, Moody's rating action recognizes the potential for improved operating performance in the latter stages of fiscal 2006 and into fiscal 2007. Underpinning this view is the sensible and conservatively-financed acquisition of PFI, which: * provides Leiner with scale in private label ibuprofen; * strengthens its OTC market position; and * diversifies its customer base. The ability to leverage PFI's sales across Leiner's supply chain is one of several sales and profit improvement initiatives the company has planned. Others include: * continued growth in joint care products (in a more favorable price and cost environment); * product and customer expansions; and * cost reductions. Further, Moody's notes that Leiner could see substantial year- over-year improvements as it anniversaries the weak first half 2006 operating results, which included: * the impacts of adverse Vitamin E reports; * retailer inventory reductions; and * large reserves related to branded product returns that management does not expect to recur. Leiner's ratings continue to be supported by its strong relationships with growing retailers and by the long-term growth prospects for nutritional supplements, owing to favorable demographic and acceptance/awareness trends. Notwithstanding these strengths, the negative outlook recognizes that Leiner's unadjusted September 2005 LTM credit metrics (with debt-to-EBITDA around 6.9x) are weakly-positioned in the B2 category, and that the company must reverse declining profit trends and turn cash flow positive in order to maintain its current rating levels. In this regard, Moody's notes the significant near-term and longer-term challenges the company's faces, including: 1) a cautious retail purchasing environment; 2) limited pricing power owing to its concentrated customer base, well-resourced competition, and non-branded product line; 3) exposure to raw material and energy price swings; 4) integrating PFI and realizing anticipated sales and profit levels, especially given the difficulties of its recent bankruptcy; and 5) exposure to industry fads, product liability, and adverse publicity risks (heightened by sales concentration in certain product categories). In order to avoid a ratings downgrade, Leiner must stabilize year-over-year profits in the latter part of fiscal 2006 and significantly improve earnings in early fiscal 2007, such that debt-to-EBITDA falls under 6.0x, positive cash flow is generated, and borrowing access is maintained. Although there is limited upward rating potential over the next year, the ratings outlook could be stabilized if these measures are sustained. Leiner Health Products, Inc., headquartered in Carson, California, is: * a manufacturer of: -- store brand vitamins, -- minerals, and -- nutritional supplements; and * is a supplier of store brand OTC pharmaceuticals. It also provides contract manufacturing services to consumer products and pharmaceutical companies. Revenues for the 12-month period ended September 2005 were approximately $678 million. M/I HOMES: Exercises Option to Increase Credit Facility to $725M ---------------------------------------------------------------- M/I Homes, Inc. (NYSE: MHO) increased its bank credit facility to $725 million from $600 million, exercising an accordion feature included within its existing credit agreement. The facility, led by J.P. Morgan Securities, Inc., matures in 2008. Robert H. Schottenstein, Chief Executive Officer and President, commented, "We appreciate the support of our banking partners. Their commitment to and confidence in our Company has been an important factor in our success." M/I Homes, Inc., is one of the nation's leading builders of single-family homes, having sold more than 65,000 homes. The Company's homes are marketed and sold under the trade names M/I Homes, Showcase Homes and Shamrock Homes. The Company has homebuilding operations in Columbus and Cincinnati, Ohio; Indianapolis, Indiana; Tampa, Orlando and West Palm Beach, Florida; Charlotte and Raleigh, North Carolina; Delaware; and the Virginia and Maryland suburbs of Washington, D.C. * * * As reported in the Troubled Company Reporter on Sept. 12, 2005, Fitch Ratings affirms M/I Homes, Inc.'s (NYSE: MHO) 'BB' senior unsecured debt and unsecured bank credit facility rating. This rating applies to approximately $200 million in outstanding senior notes. The Rating Outlook is Stable. The ratings reflect M/I Homes' sound financial structure, relatively solid coverage ratios and steady operating performance consistent with the current point in the housing cycle and the company's exposure to the Midwest. M/I Homes' estimated 2005 FFO/interest incurred ratio of 10.7 times (x), EBITDA interest coverage ratio of 10.3x, and current debt-to-capital ratio of 45.5% are considered very reasonable for the rating and provide financial flexibility in the event of an economic downturn. The rating incorporates the potential for leverage to rise somewhat from current levels. MAGRUDER COLOR: Can Employ San Filippo as Financial Advisors ------------------------------------------------------------ The U.S. Bankruptcy Court for the District of New Jersey gave Magruder Color Company, Inc., and its debtor-affiliates permission to employ San Filippo & Associates as their financial advisors. San Filippo will: a) act as the primary contact for all suitors interested in acquiring the Debtors' assets and analyze and make recommendations to the Debtors with respect to any offers from those suitors; b) provide financial analysis related to proposed asset sales and review all financial information prepared by the Debtors, including financial statements showing in detail all assets and liabilities; c) monitor the Debtors' activities regarding cash expenditures, receivables collection, asset sales and projected cash requirements; d) provide financial analysis for any business plans, cash flows, asset sales or plans of reorganization and accompanying disclosure statements; e) provide assistance in communications with the Court and the U.S. Trustee, including preparation of analysis and reports as may be required by parties-in-interest; f) review the Debtors' periodic operating and cash flow statements and provide expert testimony regarding work performed as may be requested; g) review the Debtors' books and records for various transactions, including related party transactions, potential preferences, fraudulent conveyances and other potential prepetition investigations; h) provide all other financial advisory and consulting services as may be requested by the Debtors or their counsel to facilitate their chapter 11 cases. Steven A. San Filippo, a Director at San Filippo, disclosed that the Firm received a $90,000 retainer. Mr. Filippo will charge $400 per hour for his services. Mr. Filippo disclosed that in the event of any consummated sale of assets or stock during San Filippo's engagement by the Debtors, the Firm will be paid with a Transaction Fee equal to 1% of the aggregate value of the assets sold and liabilities assumed by the buyer for those assets. Mr. Filippo reported San Filippo's professionals bill: Designation Hourly Rate ----------- ----------- Associates $100 - $250 Analysts $75 - $150 San Filippo assures the Court that it does not represent any interest materially adverse to the Debtors or their estates. Headquartered in Elizabeth, New Jersey, Magruder Color Company -- http://www.magruder.com/-- and its affiliates manufacture basic pigment and also supply quality products to the ink, paint, and plastics industries. The Company and its debtor-affiliates filed for chapter 11 protection on June 2, 2005 (Bankr. D.N.J. Case No. 05-28342). Bruce D. Buechler, Esq., at Lowenstein Sandler PC represent the Debtors in their restructuring efforts. When the Debtors filed protection from their creditors, they estimated assets and debts of $10 million to $50 million. MAJESTIC STAR: S&P Raises Low-B Ratings on $370 Million Debts ------------------------------------------------------------- Standard & Poor's Ratings Services raised its rating on The Majestic Star Casino LLC's existing $80 million first-lien bank loan to 'BB' from 'BB-' and assigned a recovery rating of '1', reflecting a high expectation of full recovery of principal by lenders in the event of payment default or bankruptcy. In addition, Standard & Poor's raised its rating on the company's $290 million 9.5% senior secured notes due 2010 to 'BB-' from 'B' and also assigned a recovery rating of '1'. These notes incorporate a $30 million add-on offering that will be included in the proposed financing. Standard & Poor's also assigned its 'B-' rating to the proposed $200 million senior unsecured notes due 2011 to be issued by Majestic and its subsidiary, Majestic Star Casino Capital Corp. At the same time, Standard & Poor's assigned its 'B-' rating to the proposed $55 million senior unsecured discount notes due 2011 to be issued by Majestic Holdco, LLC and its subsidiary Majestic Star Holdco, LLC, which is the parent of Majestic. In addition, Standard & Poor's affirmed its 'B+' corporate credit rating on the Las Vegas, Nevada-based casino owner and operator. All ratings were removed from CreditWatch with negative implications where they were placed on Nov. 4, 2005. The outlook is negative. About $584 million in debt was outstanding as of Sept. 30, 2005, pro forma for the transaction. Proceeds from the proposed note offerings, including the proposed $30 million add-on, will be used to finance the acquisition of Trump Indiana Inc., which owns and operates a riverboat casino and hotel at Buffington Harbor in Gary, Indiana, from Trump Entertainment Resorts Holdings L.P. (B/Stable/--) for $253 million, and to pay related transaction fees and expenses. The affirmation of the corporate credit rating reflects our expectation that the acquisition of the Trump Indiana riverboat will be accomplished in a manner that will allow credit measures to remain in line with the current ratings once synergies are realized and factoring in some anticipated debt repayment during the intermediate term. The Majestic Star riverboat and the Trump Indiana riverboat share amenities and infrastructure, and meaningful overlapping costs exist. MERIDIAN AUTOMOTIVE: Lenders Want Committee's Lawsuit Dismissed --------------------------------------------------------------- As previously reported in the Troubled Company Reporter on Sept. 9, 2005, the Official Committee of Unsecured Creditors, on Meridian Automotive Systems, Inc., and its debtor-affiliates' behalf, wants to avoid certain liens and claims of the first lien lenders and second lien lenders. Lender-Defendants Want Complaint Dismissed In separate filings with the U.S. Bankruptcy Court for the District of Delaware, these 26 Lender-Defendants object to the Complaint filed by the Official Committee of Unsecured Creditors: (1) Bank of America, N.A., (2) Barclays Bank PLC, (3) Bear Sterns Asset Management, Inc., (4) Bear Sterns Investment Products, Inc., (5) Citibank International PLC, (6) Citigroup Financial Products, Inc., (7) Credit Suisse, Cayman Islands Branch, (8) Davidson Kempner Partners, (9) DK Acquisition Partners, LP, (10) Fernwood Associates LLC, (11) Fernwood Foundation Fund LLC, (12) Fernwood Restructurings, Ltd., (13) Goldman Sachs Credit Partners L.P., (14) Goldman Sachs Asset Management L.P., (15) Goldman Sachs Credit Partners L.P., (16) Intermarket Management Corp., (17) Lehman Commercial Paper, Inc., (18) Satellite Senior Income Fund, LLC, (19) Satellite Asset Management, L.P., (20) Stanfield Capital Partners LLC, (21) Stanfield Modena CLO Ltd., (22) Stanfield Transatlantic CDO, Ltd., (23) Stonehill Capital Management LLC, (24) Stonehill Institutional Partners, L.P., (25) Windward Capital L.P.,and (26) XL Re Ltd. The 26 Lender-Defendants assert that: (a) The Complaint fails to state a claim on which relief can be granted; (b) They are not proper parties to the adversary proceeding because they are not the holders of the security interests and guarantees at issue; (c) The Committee is barred from recovery, in whole or in part, because: -- the Lender-Defendants are not bound by the unauthorized acts of the Debtors' agent; -- the secured party of record did not authorize the purported First Lien Termination Statement; -- as of the date the purported Preferential Composites Financing Statement was filed, the obligations under the First Lien Facility were fully secured by properly perfected security interests in assets of the Debtors other than those subject to the purported Preferential Composites Financing Statement; and -- as of the date the purported Preferential Composites Financing Statement was filed, the obligations under the Second Lien Facility were fully secured by properly perfected security interests in assets of the Debtors other than those subject to the purported Preferential Composites Financing Statement. Therefore, the First Lien Financing Statement was and still is fully and properly perfected and effective; (d) Any otherwise avoidable transfers to the Lender- Defendants: -- constituted payment of a debt incurred in the ordinary course of business or financial affairs of the Debtors and the Lender-Defendants; -- were made in the ordinary course of business or financial affairs of the Debtors and the Lender- Defendants; and -- were made according to ordinary business terms; (e) The Complaint fails to state a claim to avoid the purported Preferential Composites Financing Statement under Section 547 of the Bankruptcy Code because, among other defects, the purported Preferential Composites Financing Statement; -- was not a transfer of the Debtors' property; -- was not made while the Debtors were insolvent; and -- did not enable its recipient to receive more than it would have received under Chapter 7 of the Bankruptcy Code absent the filing; (f) The Committee's claims for relief are barred as against the Lender-Defendants by the equitable doctrines of unclean hands, estoppel, waiver, laches and in pari delicto; (g) The Complaint must be dismissed because the relief it seeks is moot; (h) They are not proper parties to the action because they do not hold or assert any security interest, lien or claim with respect to any assets of the Debtors in connection with the First Lien Facility or the Second Lien Facility; (i) The Committee should be required to make a more definite statement insofar as the Complaint purports to make allegations against the Lender-Defendants; (j) The Complaint should be dismissed for insufficiency of process; (k) The Complaint should be dismissed for insufficiency of service of process; and (l) The Committee's claims are barred since a "Challenge," as defined in the Final DIP Order, was not promptly served. Therefore, the Lender-Defendants ask the Court to: (1) dismiss, with prejudice, Count I of the Complaint, which challenges the perfection of the First Liens on Meridian Composite's assets; and (2) enlarge their deadline to respond to Count II through Count XII of the Complaint until 10 days after the entry of a Court order granting the Lender-Defendants' request. The Lender-Defendants maintain that: * dismissal of Count I of the Complaint is warranted under Rule 12(b)(6) of the Federal Rules of Civil Procedure because the Committee failed to state a claim on which the Committee can obtain a recovery; * priority of avoided liens is not enhanced by preservation under Section 551 of the Bankruptcy Code; * even if the Committee prevails on preference claim, liens on the assets of Meridian Automotive Systems -- Composites Operations, Inc., that are preserved for the benefit of the Debtors' Chapter 11 estates, and which the Committee is deemed to hold, are junior in priority to Second Liens; and * under the Intercreditor Agreement, the First Lien Lenders are deemed to have a senior interest in Meridian Composites' Collateral over the Second Lien Lenders. Credit Suisse Objects to Scheduling Order David B. Stratton, Esq., at Pepper Hamilton LLP, in Wilmington, Delaware, relates that on Nov. 11, 2005, the Committee circulated a scheduling order purporting to require the designation of certain defense "liaison counsel," and to establish various deadlines in the Adversary Proceeding. Mr. Stratton informs the Court that the Scheduling Order "contemplate and necessitate that the parties litigate the myriad issues raised by the Complaint, some of which are extremely fact- and expert-intensive, on a time schedule that will result in substantial fees and expenses being incurred by all parties to the great detriment of the estate and the Second Lien Lenders." Therefore, Credit Suisse opposes the use of the Debtors' estates' resources to finance the litigation of the Adversary Proceeding on the ground that the issues raised should be deferred until later in the Debtors' Chapter 11 cases. Credit Suisse wants the litigation postponed until after the Debtors produce the "Reorganization Plan term sheet," which is required to be submitted to the Lenders by December 15, 2005, to automatically extend the maturity date of the DIP Facility under the terms of the Final Revolving and Credit Guarantee Agreement. This way, the parties will be in a much better position to address whether any of the fees and costs attendant to litigating the Adversary Proceeding are justified, Mr. Stratton says. Accordingly, Credit Suisse asks the Court to adjourn consideration of the Scheduling Order and any contested requests or other matters which would require the expenditure of substantial time and resources in the Adversary Proceeding until after a further Status Conference with the Court to be scheduled on the first omnibus hearing date in 2006, after the parties have had an opportunity to review and discuss the Plan Term Sheet and its effects on the Adversary Proceeding. Stipulations of Dismissal ABN AMRO Bank contends that it is not a proper party to the Avoidance Action on account of it having sold its participation in the First Lien Facility and that the alleged entity identified in the Complaint as "ABN Amro" is not a legal entity. ABN AMRO Bank asks the Committee to voluntarily dismiss ABN AMRO Bank from the Avoidance Action. ABN AMRO Bank further represents that it is not a party to, or a lender in connection with the Second Lien Credit Agreement, and that it does not hold or assert any security interest, lien or claim with respect to any assets of the Debtors in connection with the First Lien Facility and the Second Lien Facility. In a stipulation, the Committee agrees to dismiss without prejudice ABN AMRO Bank from the Avoidance Action, subject to these conditions: (i) In the event that ABN AMRO Bank's representations are false, the Agreement will be deemed null and void ab initio; (ii) In the event the Agreement is avoided, the Committee will be entitled to take whatever action that is necessary to reinstate the Avoidance Action with respect to ABN AMRO Bank as soon as reasonably practical; (iii) In the event the Committee reinstates the Avoidance Action, then ABN AMRO Bank agrees to accept service of process and will respond to the Complaint within 30 calendar days from the date of service of the Complaint; and (iv) In the event that Plaintiff reinstates the Avoidance Action as to the claims and causes of action pleaded in the Complaint, ABN AMRO Bank waives any defense based on any limitations period based in law or equity, including, but not limited to, any applicable statute of limitation, claim of laches, or the Final DIP Order that would be available to ABN AMRO Bank by reason of its prior dismissal from the Avoidance Action pursuant to the Agreement. In a separate stipulation, the Committee has also agreed to dismiss CSFB International Trading LLC from the Avoidance Action. CSFB International represents that it is not a party to, or a lender in connection with the First Lien Credit Agreement or the Second Lien Credit Agreement. CSFB International attests that it does not hold or assert any security interest, lien or claim with respect to any assets of the Debtors in connection with the First Lien Facility and the Second Lien Facility. The Committee's voluntary dismissal is subject to these conditions: (i) In the event that any of CSFB International's representation is untrue or incorrect, CSFB International will be deemed to have breached the Agreement, and the Agreement will be deemed null and void ab initio; (ii) In the event the Agreement is breached, the Committee will be entitled to take whatever action that is necessary to reinstate the Avoidance Action with respect to CSFB International as soon as reasonably practical; (iii) In the event the Committee reinstates the Avoidance Action, CSFB International agrees to: -- accept service of process; -- file an answer to the Complaint within 20 calendar days of its service; -- waive any defense based on any limitations period based in law or equity, including, but not limited to, any applicable statute of limitation, claim of laches, or the Final DIP Order, provided however that CSFB International does not waive any defense that currently exists; and -- waive any claim of prejudice resulting from CSFB International's absence from the Avoidance Action, and all decisions, opinions, determinations and Court orders in the Avoidance Action will be deemed to apply to the Committee and CSFB International, as if it was a party to the Avoidance Action ab initio. Headquartered in Dearborn, Mich., Meridian Automotive Systems, Inc. -- http://www.meridianautosystems.com/-- supplies technologically advanced front and rear end modules, lighting, exterior composites, console modules, instrument panels and other interior systems to automobile and truck manufacturers. Meridian operates 22 plants in the United States, Canada and Mexico, supplying Original Equipment Manufacturers and major Tier One parts suppliers. The Company and its debtor-affiliates filed for chapter 11 protection on April 26, 2005 (Bankr. D. Del. Case Nos. 05-11168 through 05-11176). James F. Conlan, Esq., Larry J. Nyhan, Esq., Paul S. Caruso, Esq., and Bojan Guzina, Esq., at Sidley Austin Brown & Wood LLP, and Robert S. Brady, Esq., Edmon L. Morton, Esq., Edward J. Kosmowski, Esq., and Ian S. Fredericks, Esq., at Young Conaway Stargatt & Taylor, LLP, represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $530 million in total assets and approximately $815 million in total liabilities. (Meridian Bankruptcy News, Issue No. 18; Bankruptcy Creditors' Service, Inc., 215/945-7000). MERIDIAN AUTOMOTIVE: Wants to Modify Retire Benefits Plan --------------------------------------------------------- Edward J. Kosmowski, Esq., at Young Conaway Stargatt & Taylor, LLP, in Wilmington, Delaware, relates that Meridian Automotive Systems, Inc., and its debtor-affiliates currently employ 5,300 active employees -- of whom about 3,200 are either management or non-union hourly employees -- at 22 facilities in the United States. The Debtors also maintain retiree medical benefit plans for management and non-union hourly employees at their Grand Rapids, Michigan, operations, which comprise four of the 22 U.S. facilities operated by the Debtors. At the Grand Rapids facilities, only 147 of the 1,050 total salaried and non-union hourly employees are currently eligible to receive retiree medical benefits upon retirement, Mr. Kosmowski reports. The vast majority of the Debtors' employees both at Grand Rapids and nationwide are not entitled to special benefits. The Meridian Automotive Systems, Inc., Welfare Benefits Plan for the Grand Rapids Operations Retiree Associates, which established retiree medical benefits at the Debtors' Grand Rapids operations, expressly allows Meridian in its sole discretion to amend, modify, suspend, withdraw or terminate their Retiree Benefits Plan in whole or in part, at any time, retroactively or otherwise, for active Associates or retirees, Mr. Kosmowski informs the Court. "The Debtors, prior to seeking bankruptcy protection, repeatedly exercised this right to amend the Retiree Benefits Plan at Grand Rapids, and in fact before the initiation of these bankruptcy proceedings twice modified the eligibility requirements of the Plan to place most current Grand Rapids employees on the same footing as most other employees at the Debtors' other locations, by completely eliminating their eligibility for retiree medical benefits." Since 2001, the Debtors' expenses for providing health care coverage, Mr. Kosmowski says, have increased by 45%. The Debtors have maintained and continue to desire to maintain competitive health care coverage for their active employees. However, the Debtors' current financial condition, coupled with skyrocketing health care costs, now require that the Debtors address a costly retiree benefit that is afforded to only a small and select portion of its non-unionized workforce by modifying the Plan again, to streamline the Plan and reduce the Debtors' costs. Meridian Automotive Systems, Inc., and its debtor-affiliates seek authority from the U.S. Bankruptcy Court for the District of Delaware to modify their Retiree Benefits Plan to streamline the Plan structure and allow certain carefully tailored costs savings that balance the needs of the few employees and retirees receiving special benefits under the Retiree Benefits Plan and the long-term financial needs of the Debtors, upon which all of the Debtors' employees and creditors depend. The Debtors specifically seek to: * modify the monthly premium rate structure to establish a new 2006 baseline for cost sharing between the retirees and the Company. Retirees would pay premiums equivalent to approximately 30% of the Company's total 2006 cost per retiree, an increase from the current average of 20% per retiree, but equivalent to the 30% that active employees pay for their healthcare coverage; * cap the total expenditures so that after 2006, any additional cost increases would be passed on to retirees through increased monthly premiums. The current plan provides for a 5% cap on annual increases in the Company's total expenditures; * eliminate and merge into one benefit tier, for employees under the age of 55 as of December 1, 1998, the Debtors' current five categories of retiree benefits, which are each dependent on dates of service and retirement date. With costs shared 70%/30% between the Debtors and retirees for 2006, most categories of retirees will see their contribution percentage reduced by as much as 50%, for those eligible employees with 15 to 19 years of service; * eliminate, for employees under the age of 55 as of December 1, 1998, an option currently available that allows retirees with less than 25 years of service to participate in the Plan as of age 60 while paying 100% of the cost until the Debtors' contributions become available at age 65. Employees retiring with at least 25 years of service would remain eligible, as under the current Plan, to participate in the Plan with full benefits as of age 60; * establish coverage for non-Medicare eligible employees under a single Blue Cross PPO plan, rather than the current choice of three, while adding optional vision and hearing coverage at the employee's expense; and * eliminate prescription drug coverage for Medical-eligible employees in coordination with allowing eligible employees to elect Medicare Part D coverage, and again, add optional vision and hearing coverage at the employee's expense. Deductibles, co-pays and co-insurance for Plan participants would increase somewhat, reflecting increased medical costs, although the Plan would still provide comprehensive coverage with the same maximum benefit levels as before, Mr. Kosmowski maintains. The Debtors have determined that the proposed modifications strike an important balance between preservation of a narrow benefit that is available to a small fraction of their workforce and the Debtors' financial well being. Mr. Kosmowski reports that only about 4% of the Debtors' 3,200 active management and hourly non-union employees in the U.S. are eligible for the special coverage. Although the number of affected employees and retirees is small, the changes would reduce the Debtors' balance sheet liability by $5,800,000, their annual expense by $791,000, and their annual retiree health cash benefit payments by an estimated $438,000, Mr. Kosmowski explains. "Failure to modify the Retiree Benefits Plan . . . would further strain [the] Debtors' already limited resources, a particularly unwarranted outcome since [they] could instead reasonably exercise their unilateral right to simply terminate the Plan." Inapplicability of Section 1114 Section 1114 of the Bankruptcy Code generally prevents a debtor from modifying or discontinuing vested retiree benefits without first complying with specified procedures. Mr. Kosmowski asserts that Section 1114 has no bearing on the proposed modification because the Retiree benefits Plan unambiguously provides that the Debtors may terminate or modify the Plan at any time. "As a matter of law, neither the Bankruptcy Code nor Section 1114 provides any greater protection for retirees' benefits than the pertinent plan documents themselves provide," Mr. Kosmowski maintains. "Thus, if a debtor is entitled to terminate retirees' benefits according to the terms of the applicable plan or program prior to filing bankruptcy, that debtor retains the same power of termination when serving as a debtor-in-possession." Headquartered in Dearborn, Mich., Meridian Automotive Systems, Inc. -- http://www.meridianautosystems.com/-- supplies technologically advanced front and rear end modules, lighting, exterior composites, console modules, instrument panels and other interior systems to automobile and truck manufacturers. Meridian operates 22 plants in the United States, Canada and Mexico, supplying Original Equipment Manufacturers and major Tier One parts suppliers. The Company and its debtor-affiliates filed for chapter 11 protection on April 26, 2005 (Bankr. D. Del. Case Nos. 05-11168 through 05-11176). James F. Conlan, Esq., Larry J. Nyhan, Esq., Paul S. Caruso, Esq., and Bojan Guzina, Esq., at Sidley Austin Brown & Wood LLP, and Robert S. Brady, Esq., Edmon L. Morton, Esq., Edward J. Kosmowski, Esq., and Ian S. Fredericks, Esq., at Young Conaway Stargatt & Taylor, LLP, represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $530 million in total assets and approximately $815 million in total liabilities. (Meridian Bankruptcy News, Issue No. 18; Bankruptcy Creditors' Service, Inc., 215/945-7000). MERIDIAN AUTOMOTIVE: Court Okays PCA as Panel's Brazilian Counsel ----------------------------------------------------------------- The U.S. Bankruptcy Court for the District of Delaware gave the Official Committee of Unsecured Creditors of Meridian Automotive Systems-Composites Operations and its debtor-affiliates authority to retain Peixoto e Cury Advogados as its special Brazilian counsel, effective as of Aug. 30, 2005. As previously reported in the Troubled Company Reporter on Nov. 8, 2005, the Committee needs PCA to prosecute an adversary proceeding filed by the Committee for the avoidance of liens and claims and related declaratory relief against certain of the Debtors' prepetition lenders. Pedro Jorge da Costa Cury, a partner at PCA, will supervise the legal services to be performed by the firm for the Committee. In exchange for its legal services, PCA will be paid in accordance with its ordinary and customary hourly rates: Professional Hourly Rate ------------ ----------- Partner $250 Consultant $230 Senior Associate $210 Experienced Associate $190 Junior Associate $170 Paralegal $50 Headquartered in Dearborn, Mich., Meridian Automotive Systems, Inc. -- http://www.meridianautosystems.com/-- supplies technologically advanced front and rear end modules, lighting, exterior composites, console modules, instrument panels and other interior systems to automobile and truck manufacturers. Meridian operates 22 plants in the United States, Canada and Mexico, supplying Original Equipment Manufacturers and major Tier One parts suppliers. The Company and its debtor-affiliates filed for chapter 11 protection on April 26, 2005 (Bankr. D. Del. Case Nos. 05-11168 through 05-11176). James F. Conlan, Esq., Larry J. Nyhan, Esq., Paul S. Caruso, Esq., and Bojan Guzina, Esq., at Sidley Austin Brown & Wood LLP, and Robert S. Brady, Esq., Edmon L. Morton, Esq., Edward J. Kosmowski, Esq., and Ian S. Fredericks, Esq., at Young Conaway Stargatt & Taylor, LLP, represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $530 million in total assets and approximately $815 million in total liabilities. (Meridian Bankruptcy News, Issue No. 18; Bankruptcy Creditors' Service, Inc., 215/945-7000). MARKWEST ENERGY: Moody's Rates Proposed $615 Mil. Facilities at B1 ------------------------------------------------------------------ Moody's Investors Service assigned a B1 Senior Secured rating to MarkWest Energy Operating Company, L.L.C.'s (OLP) proposed $615 million Senior Secured Credit Facilities. MarkWest Energy Operating Company is a wholly owned operating subsidiary of MarkWest Energy Partners, L.P. These facilities are expected to close no later than January 31, 2006. At the same time, Moody's affirmed MarkWest's B1 Corporate Family Rating and lowered the ratings of MarkWest's senior unsecured notes to B2 from B1. The outlook was changed to stable from positive. MarkWest purchased the Javelina gas processing and fractionation facility in Corpus Christi for $355 million plus working capital on November 1. MWE funded this acquisition with $74 million of private equity and new one-year $500 million credit facilities, consisting of a $400 million term loan (subsequently reduced to $376 million) and a $100 million revolver (with approximately $21 million drawn). MWE expects to refinance these facilities with a combination of equity and unsecured notes, which it expects to complete by the second quarter 2006. However, in order to mitigate the risk of the one-year bridge loan, MarkWest is planning new credit facilities. The new five-year $615 million senior secured credit facilities are expected to consist of a $250 million revolving credit facility and a $365 million term loan. These new facilities will provide longer term financing until its planned permanent financing takes place next year. Since Moody's first rated MarkWest in October 2004, the company has completed two major acquisitions: * a 50% non-operating membership interest in Starfish Pipeline Company in March for $42 million cash; and * the Javelina assets in November. These acquisitions, along with the company's capital spending, have increased MWE's assets from $529 million at year-end 2004 to about $1 billion currently. EBITDA has increased from about $65 million to over $100 million, pro forma for the Starfish and Javelina assets. EBITDA is expected to continue growing in 2006 reflecting the East Texas gas plant expansion coming on line in January and other organic projects. MWE is more diversified, particularly with Javelina, and its proportion of fee-based gross margin, including its commodity price hedging, is about 62%. However, MWE's debt/EBITDA (unadjusted) has increased substantially from about 3.5x in 2004 to 4.8x LTM 9/30, reflecting the debt-financed Starfish acquisition. Currently, MWE's leverage is about 5.7x, considering the additional debt from the Javelina acquisition, offset by the $74 million private equity issuance and pro forma for Javelina's cash flow. MarkWest's B1 corporate family rating reflects its increased size and scale, and its improved diversification, offset by its higher leverage. The senior unsecured notes are notched to B2, reflecting the significant proportion of secured debt in the capital structure. Secured bank debt currently accounts for 63% of MWE's total debt while the $225 million notes are only 37%. The stable outlook reflects Moody's expectation that the company will execute its permanent financing plan by the second quarter 2006. Moody's expects that MarkWest will issue sufficient public equity such that its debt to capitalization will be below its targeted level of 50%. Assuming this occurs, debt/EBITDA will drop to about 4.0x using pro forma 2005 cash flow and will trend toward 3.5x as 2006 run-rate EBITDA grows. MarkWest's rating outlook could be changed to positive if it completes its permanent financing plans, implying a successful 2005 audit and reduced leverage to below 4x, as well as completing its East Texas plant expansion and successfully integrating the Javelina system assets. Conversely, continued high leverage, poor acquisition integration or issues with its 2005 audit and year-end statements would likely lead to a negative outlook. Moody's will reconsider the notching of MarkWest's senior unsecured notes once the company completes its permanent financing plans. Notching will depend on the amount of senior secured debt in MarkWest's capital structure and the company's stated intentions regarding issuing equity to finance acquisitions and the use of secured versus unsecured debt in its capital structure. MarkWest's speculative grade liquidity rating remains SGL-3, indicating our expectation of adequate liquidity for the 12 months ending December 31, 2006. The SGL-3 rating reflects Moody's expectation that the company will fund its maintenance capital expenditure program and distributions from operating cash flow; however acquisitions or expansion capex would likely require external funding. Once MWE completes its contemplated bank financing, it should have virtually all of the $250 million revolving credit facility available, which will provide an additional source of liquidity. The covenant levels for the new facilities have not been finalized; however, Moody's believes that covenant compliance under the proposed facilities is likely and will be maintained. The rating is restrained by weak sources of alternate liquidity since substantially all of MWE's assets are encumbered by the credit facilities. MarkWest Energy Partners, L.P., headquartered in Denver, Colorado, is a midstream natural gas master limited partnership. METROMEDIA FIBER: Court Delays Entry of Final Decree to Jan. 16 --------------------------------------------------------------- The U.S. Bankruptcy Court for the Southern District of New York delayed entry of a final decree formally closing AboveNet, Inc., fka Metromedia Fiber Network, Inc., and its debtor-affiliates' chapter 11 cases until Jan. 16, 2006. The Court confirmed the Debtors' Second Amended Plan of Reorganization on Aug. 21, 2003, and the Plan took effect on Sept. 8, 2003. The Reorganized Debtors gave the Court four reasons supporting the delay: 1) while the claims administration process is largely complete, there are still certain disputed claims that have not been resolved or litigated; 2) there are several other case issues that will need to be resolved before the entry of a final decree, including their prosecution of certain further claims objections where the objection deadline has been previously extended by order of the Court, including proofs of claim filed by the Securities and Exchange Commission and the County of Santa Clara; 3) there are certain remaining estate litigations that need to be prosecuted, including potential claims objections currently subject to objection deadline extensions with various counter-parties and litigation of various causes of action; and 4) it is in the best interests of the Reorganized Debtors and their creditors and it will give them more time and opportunity to distribute the assets of the estates only to those actual creditors and in amounts that are appropriate. Headquartered in White Plains, New York, Metromedia Fiber Network, Inc., n/k/a AboveNet Inc., builds urban fiber-optic networks and supplies fiber to all types of telecom carriers as well as to other businesses. The Company and most of its domestic subsidiaries filed for chapter 11 protection (Bankr. S.D.N.Y. Case No. 02-22736) on May 20, 2002. Lawrence C. Gottlieb, Esq., at Kronish Lieb Weiner & Hellman, LLP represents the Reorganized Debtors. When Metromedia filed for protection from its creditors, it listed $7,024,208,000 in total assets and $4,262,000,000 in total debts. Metromedia Fiber emerged from chapter 11 on Sept. 8, 2003, and changed its name to AboveNet Inc. MIRANT CORP: Reorganized Profile Earns S&P's B+ Credit Rating ------------------------------------------------------------- Standard & Poor's Ratings Services assigned its 'B+' corporate credit rating to power generator and developer Mirant Corp. The outlook is stable. The rating reflects the credit profile of Mirant, based on the structure the company expects to have on emergence from bankruptcy at or around year-end 2005. Mirant entered into bankruptcy in July 2003. The U.S. Bankruptcy Court and nearly all of Mirant's creditors have approved the reorganization plan. Mirant has interests in 14,227 MW of largely merchant power assets in the U.S., 2,306 MW of contracted power generation assets in the Philippines, and 1,039 MW of largely contracted generation in Trinidad and regulated electricity supply operations in Jamaica, Curacao, and Grand Bahamas. Atlanta, Georgia-based Mirant will have about $3.4 billion in recourse debt at emergence, a figure that does not include an $800 million revolver and $973 million in lease debt obligations. Mirant and its subsidiaries are rated on a consolidated basis. However, subsidiaries with nonrecourse debt are viewed as stand-alone subsidiaries, and are analyzed based on their distributable cash flow to Mirant. "The stable outlook on Mirant is supported by forecast financial performance based on conservative assumptions of power market prices, expected strong cash flow generation over the next year or so, due to high natural gas prices that support attractive operating margins from coal-fired generation assets, and a lack of near-term maturities," said Standard & Poor's credit analyst Terry A. Pratt. The rating remains under some pressure from outstanding litigation, and the outlook could be changed to negative or the rating lowered, if Mirant incurs claims that negatively affect liquidity or that result in the interruption of cash flows from the Mid-Atlantic assets. "An improvement in the ratings, which is unlikely, would require improved financial performance, debt reduction, and resolution of residual bankruptcy-related claims," he continued. MMI PRODUCTS: Refinancing Concerns Spur S&P's Negative Outlook -------------------------------------------------------------- Standard & Poor's Ratings Services revised its outlook on Houston, Texas-based MMI Products Inc. to negative from stable and affirmed its ratings on the company, including its 'B-' corporate credit rating. "The outlook revision reflects our concern about MMI's ability to refinance its current debt and the potential event of default under the revolving credit facility if MMI does not refinance the $200 million of senior subordinated notes on or before Dec. 15, 2006," said Standard & Poor's credit analyst Lisa Wright. The company has a highly leveraged capital structure. "If MMI does not have a plan in place to refinance its notes by the end of June 2006, the corporate credit rating will be lowered to 'CCC+' and the outlook would be negative, Ms. Wright said. "The outlook could be revised to stable or positive if MMI refinances its notes and improves its earnings performance in 2006 from 2005 levels and remains free cash flow positive. MMI's earnings are expected to improve in 2006 supported by commercial construction and infrastructure demand." MMI's end markets -- especially commercial and residential construction -- are cyclical, and its costs are volatile. In 2005, demand for concrete products continues to improve gradually as commercial construction activity slowly picks up from low levels. However, through the third quarter of 2005, higher-cost steel inventory and weak demand for the company's fence products negatively affected earnings. Over the medium term, earnings are expected to improve because of gradual growth in demand for the company's concrete construction along with growth in commercial construction. Infrastructure demand also drives MMI's sales and should improve now that large-project funding is more certain following the passage of the federal highway bill. However, markets remain competitive, leaving MMI vulnerable to pricing pressure and market-share losses. MORTON'S RESTAURANT: $150 Mil. IPO Prompts S&P to Review B- Rating ------------------------------------------------------------------ Standard & Poor's Ratings Services placed its ratings, including its 'B-' corporate credit rating, on Hyde Park, New York-based Morton's Restaurant Group Inc. on CreditWatch with positive implications. The rating action follows the company's announcement that it plans a $150 million initial public offering. "Given that the company's outstanding debt is currently $141 million," said Standard & Poor's credit analyst Robert Lichtenstein, "leverage could significantly improve with the successful completion of the offering." Standard & Poor's will monitor the company's plans with respect to the use of proceeds from offering. MTR GAMING: Moody's Reviews $130 Million Unsec. Notes' B2 Rating ---------------------------------------------------------------- Moody's Investors Service placed the ratings of MTR Gaming Group, Inc., on review for possible downgrade following the announcement that it has a received an offer to be acquired by a newly formed management-led entity, TBR Acquisition Group, LLC, for $9.50 per share, or close to $260 million. These ratings were placed on review for possible downgrade: * $130 million senior unsecured notes due 2010 -- B2; and * Corporate family rating -- B1. Although no specific financing plans for the proposed buyout are available at this time, and the company has not yet responded to the proposal, the review for possible downgrade acknowledges the possibility that the proposed buyout could be accepted and financed with additional debt. MTR currently has about $130 million of debt outstanding, which values the buyout proposal at about 7.5 times. Separately, MTR's existing senior unsecured notes include a change of control provision where note holders have the right to require the company to purchase the notes at 101% of principal plus accrued and unpaid interest. Moody's review, assuming a definitive agreement with respect to the current buyout proposal is reached, will focus on the method of financing as well as future operating and development plans. TBR is controlled by Edson Arnealt and Robert Blatt, MTR's Chief Executive Officer and Executive Vice President, respectively, both of whom are also directors of MTR. The Board of Directors of MTR has established a special committee of four independent directors to act on behalf of MTR with respect to outside offers for the company. The offer is subject to customary approvals and consents as well as TBR obtaining financing for the transaction. MTR Gaming Group, Inc. owns and operates: -- Mountaineer Racetrack & Gaming Resort in Chester, West Virginia; -- Scioto Downs in Columbus, Ohio; -- the Ramada Inn and Speedway Casino in North Las Vegas, Nevada; and -- Binion's Gambling Hall and Hotel in downtown Las Vegas. Additionally, the company, through an affiliate, operates a harness racetrack and 50-table card room outside of Minneapolis, Minnesota. Currently, the company is in the process of acquiring a 90% interest in Jackson Trotting Association, LLC, which operates the Jackson Harness Raceway in Jackson, Michigan. The company has a license to build a thoroughbred racetrack and pari-mutuel wagering in Erie, Pennsylvania. For the last twelve months ended September 30, 2005, MTR generated EBITDA of $52.7 million on net revenues of $338.4 million. NEWMARKET CORP: Strong Credit Profile Cues S&P to Lift Debt Rating ------------------------------------------------------------------ Standard & Poor's Ratings Services raised its ratings on NewMarket Corp., including its corporate credit rating to 'BB' from 'BB-'. The outlook is stable. NewMarket, based in Richmond, Virginia, is a multinational manufacturer of fuel and lubricant additive products and has about $153 million of debt outstanding, excluding operating leases and underfunded postretirement obligations. The upgrade reflects NewMarket's: * strengthening credit profile following $34 million of debt reduction in the third quarter, and * improved operating results within the challenging petroleum additives segment. "Despite raw material cost pressures and the continued decline of tetraethyl lead earnings, NewMarket has been able to stabilize margins and continues to generate good free operating cash flow from the its core operations," said Standard & Poor's credit analyst George Williams. The ratings reflect NewMarket's: * weak business profile attributable to its focus on the highly competitive global petroleum additives industry, * exposure to volatile raw-material costs, and * the vagaries of economic cycles. These factors are somewhat offset by well-entrenched market positions in niche product areas, a satisfactory liquidity position, and good cash flow generation that has contributed to meaningful debt reduction and trengthening cash flow protection measures. NewMarket has about $1 billion in sales. Good geographical diversity and significant barriers to entry into the petroleum additives businesses support the company's business position. However, NewMarket's three major competitors in the petroleum additives segment are substantially larger and have significant financial resources to fund research and development costs to meet new product specifications required by auto and diesel engine manufacturers. In addition, the industry is characterized by slow-to-no-growth and a concentrated customer base. Operating results in the petroleum additives segment have improved over the last year because of the benefits of cost reductions and volume improvements in the engine oils business, stronger pricing initiatives, and growth in the important fuel and specialty additives markets. As a result, operating margins have improved to about 11% in recent quarters. However, further improvement in operating margins may be difficult over the near-term as raw-material costs remain high. NLC MUTUAL: A.M. Best Downgrades Financial Strength Rating to C++ ----------------------------------------------------------------- A.M. Best Co. has downgraded the financial strength rating to C++ (Marginal) from B+ (Very Good) for NLC Mutual Insurance Company (South Burlington, Vermont). The rating has been removed from under review and assigned a negative outlook. The rating reflects NLC's marginal capitalization, elevated underwriting leverage and history of adverse loss reserve development. These negative rating factors are partially offset by NLC's niche market expertise, adequate liquidity and strong reinsurance program. NLC is a non-profit captive mutual insurance company that provides property/casualty coverages to risk-sharing pools set up by state municipal leagues. Leverage has risen in recent operating years under increasing reserves, ceded recoverables and premium levels. Negative return measures in 2004 followed significant prior year reserve development that led to significant underwriting losses. Underwriting results deteriorated further in the third quarter of 2005 following the audit of its New York state workers' compensation program. Prior to 2003, NLC had a generally favorable pre-dividend combined ratio, which outperformed the professional reinsurance industry composite. NLC's high ceded leverage is partially offset due to highly rated reinsurers participating on its excess programs. Following a decline in capital at year-end 2004, the company implemented a capital call provision wherein $9.5 million is to be paid by its members prior to year-end 2005. Subsequent to the third quarter of 2005, all of this assessment was collected. A.M. Best Co., established in 1899, is the world's oldest and most authoritative insurance rating and information source. NORTHWESTERN CORP: Directors Evaluating Strategic Alternatives -------------------------------------------------------------- NorthWestern Corporation d/b/a NorthWestern Energy (Nasdaq: NWEC) reported that the Company's board of directors met to consider potential strategic alternatives to maximize stockholder value. At the meeting, the Board directed management and its financial advisor CSFB to immediately commence an evaluation of all strategic alternatives including the previously announced Black Hills proposal. The company also said that in order to protect the interests of its stockholders and to permit the Board to review and evaluate its strategic alternatives in an orderly fashion, it has adopted a stockholders rights plan. The rights plan is similar to plans adopted by many other companies to protect the interests of stockholders by discouraging coercive, unfair or abusive takeover tactics that do not offer fair value to all stockholders and that could impinge on the Board's review of strategic alternatives. Under the rights plan, preferred stock purchase rights will be distributed as a dividend at the rate of one right for each share of common stock of the Company held by stockholders of record as of the close of business on Dec. 15, 2005. The rights will expire on Dec. 5, 2015. The rights generally will be exercisable only if a person or group acquires beneficial ownership of 15% or more of the Company's common stock, or commences or publicly announces a tender or exchange offer upon consummation of which they would beneficially own 15% or more of the Company's common stock. A person or group who beneficially owns 15% or more of the outstanding shares of the company's common stock prior to the adoption of the rights plan will not cause the rights to become exercisable upon adoption of the rights plan. As a result, the rights will not be triggered even though the Harbert Distressed Investment Fund, Ltd. beneficially owned approximately 20% of the outstanding shares of the Company's common stock prior to the adoption of the rights plan. However, the Harbert Fund will cause the rights to become exercisable if it (subject to certain exceptions) becomes the beneficial owner of additional shares of the Company's common stock or its beneficial ownership decreases below 15% and subsequently, increases to 15% or more. Continuing the company's growth and maximizing long-term stockholder value are major goals of the Board of Directors and management. NorthWestern Corporation, d/b/a NorthWestern Energy, -- http://www.northwesternenergy.com/-- is one of the largest providers of electricity and natural gas in the Upper Midwest and Northwest, serving more than 617,000 customers in Montana, South Dakota and Nebraska. * * * As reported in the Troubled Company Reporter on Nov. 30, 2005, Fitch Ratings has affirmed NorthWestern Corp.'s outstanding senior secured debt obligations at 'BBB-' and the senior unsecured revolving credit facility at 'BB+'. The Rating Outlook has been revised to Evolving from Positive. The rating action follows the disclosure by NOR on Nov. 23, 2005 that it is evaluating a merger proposal received from Black Hills Corporation, Inc. NORTHWESTERN CORP: MMI Sells Generation Equipment for $20 Million ----------------------------------------------------------------- NorthWestern Corporation d/b/a NorthWestern Energy (Nasdaq: NWEC) reported that its wholly owned subsidiary, Montana Megawatts I, LLC has entered into an agreement to sell the generation equipment acquired for its Great Falls, Montana, combined cycle electric generation facility to Navasota Holdings Texas Partners LP. Under the terms of the agreement, MMI will be paid $20 million for the equipment, and the sale is expected to close during the first quarter of 2006. NorthWestern will continue to market the Great Falls project site and various permit and contractual rights. NorthWestern Corporation, d/b/a NorthWestern Energy, -- http://www.northwesternenergy.com/-- is one of the largest providers of electricity and natural gas in the Upper Midwest and Northwest, serving more than 617,000 customers in Montana, South Dakota and Nebraska. * * * As reported in the Troubled Company Reporter on Nov. 30, 2005, Fitch Ratings has affirmed NorthWestern Corp.'s outstanding senior secured debt obligations at 'BBB-' and the senior unsecured revolving credit facility at 'BB+'. The Rating Outlook has been revised to Evolving from Positive. The rating action follows the disclosure by NOR on Nov. 23, 2005 that it is evaluating a merger proposal received from Black Hills Corporation, Inc. OM GROUP: Moody's Confirms $400 Million Sub. Notes' Caa1 Rating --------------------------------------------------------------- Moody's Investors Service confirmed the ratings of OM Group, Inc., including the B2 corporate family rating and assigned a stable rating outlook to the company. The ratings confirmation reflects: * OMG's filing of all relevant financial statements that has cured technical violations under its senior subordinated notes indenture and credit agreement; * its resolution of shareholder lawsuits that were filed late in 2002; and * strong cash flow generation despite material cash payments to settle shareholder lawsuits. Nevertheless, the ratings reflect Moody's concern over a deterioration in the company's 2005 operating results, primarily stemming from a significant decline in cobalt prices, securing additional feed streams for nickel such that it resumes operations closer to historical levels, and the fact that the company received a material weakness letter from its auditor in August 2005 (although recognizing that the company is proactively addressing this issue). This completes a review that was initiated July 8, 2004. Ratings confirmed: * Corporate family rating - B2 * $400 million guaranteed senior subordinated notes due 2011 - Caa1 Moody's believes that OMG's ratings or rating outlook could be upgraded if the company can secure additional feed streams in nickel such that: * it resumes operations closer to historical levels; * cobalt sales volumes stabilize; * nickel and cobalt prices remain above long-term historical averages; * operating margin improves; and * issues related to the material weakness are resolved. For any upgrade to occur Moody's would want to see free cash flow to debt above 5%. Conversely, the ratings outlook could be adversely affected if negative volume trends in the cobalt segment do not reverse, margins continue to deteriorate or if it appears probable that OMG's free cash flow will be negative in 2006. The July 2004 ratings review was prompted by Moody's concern over the company's technical default under the indenture governing its subordinated notes. However, OMG's filing of all relevant financial statements has cured technical violations under its senior subordinated notes indenture and credit agreement. The ratings also derive support from the company's resolution of shareholder class action lawsuits and shareholder derivative lawsuits that were filed in November 2002. With respect to the class action lawsuits, OMG paid $74 million in cash and $8.5 million in stock to resolve these lawsuits during the third quarter of 2005. These payments were partially offset by the receipt of $25 million of insurance reimbursements in September and the subsequent collection of an additional $19 million in November. Regarding the shareholder derivative lawsuits, OMG has issued 380,000 shares of common stock to plaintiffs as part of a settlement agreement dated September 23, 2005. Moody's is also encouraged by the fact that the company's cash flow has been strong despite payments related to shareholder lawsuits. Specifically, cash from operations increased to $50 million for the nine months ended 2005 compared to $17 million in the same period last year as payments for shareholder lawsuits were offset by inventory reductions and insurance reimbursements. However, Moody's also notes that the EBITDA margin for the firm has declined during 2004 and 2005 from 24% in the first quarter of 2004 to 8% in the third quarter of 2005. The margin decline exceeds what Moody's would expect merely from lower cobalt prices. Therefore, Moody's believes it is important that OMG improve free cash and EBITDA margins before consideration for a rating upgrade. OMG's pro forma balance sheet debt would have been $424 million as of September 30, 2005. Incorporating Moody's Financial Metrics, debt levels increase to $465 million as of the same date (includes $12 million and $29 million for pension and leases, respectively). Based on LTM EBITDA of $137.6 million, debt to EBITDA was 3.4 times, while free cash flow to debt was 1% over the same period. EBITDA to interest expense is favorable at 3.4 times. In addition, the ratings incorporate Moody's concern that OMG's fortunes are connected to the price of cobalt, which can be volatile. The company's operating results are particularly susceptible during periods of rapidly changing metal prices. A substantial drop in average cobalt prices (to $13.41 per pound in 3Q2005 from $23.18 same period last year) has adversely affected cobalt segment operating profit, which declined to $6.5 million in 3Q2005 from $39.1 million in 3Q2004 (volume was down 6% over the same period), largely reflecting the flow through of higher cost cobalt inventory. Moody's notes that OMG is securing additional nickel feed with the expansion of the Black Swan mine which is one component of resuming operations closer to historical levels. The expansion will increase total nickel output by approximately 50% to over 13,000 metric tons per year, which will be used as feed for the Harjavalta, Finland refinery. Nevertheless, Moody's recognizes that the expansion would address the challenges OMG has faced securing nickel feed at its Harjavalta refinery. Moreover, favorable long-term demand trends for nickel-based batteries, supported by new consumer electronic applications and the growth of hybrid electric vehicles, augurs well for future pricing levels. Headquartered in Cleveland, Ohio, OM Group, Inc., is a vertically integrated international producer of cobalt and nickel-based specialty chemicals, whereby the company applies proprietary technology to unrefined cobalt and nickel raw materials to market more than 1,500 different product offerings to approximately 3,300 customers. The company's products are used in many end markets, such as: * rechargeable batteries, * coatings, * custom catalysts, and * liquid detergents. The company reported revenues of $1.3 billion for twelve months ended September 30, 2005. OPTIGENEX INC: Net Loss Reaches $1 Million in Qtr. Ended Sept. 30 ----------------------------------------------------------------- Optigenex, Inc., delivered its financial statements for the quarter ended Sept. 30, 2005, to the Securities and Exchange Commission on Nov. 21, 2005. The company reported a $1,079,750 net loss on $40,468 of net sales for three months ended Sept. 30, 2005. At Sept. 30, 2005, the company's balance sheet showed $7,669,585 in total assets, $1,000,384 in total liabilities and $6,669,201 in stockholders' equity. A full-text copy of Optigenex Inc.'s third quarter results is available at no charge at http://ResearchArchives.com/t/s?3a3 Going Concern Doubt Goldstein Golub Kessler LLP in Manhattan raised substantial doubt about Optigenex Inc.'s ability to continue as a going concern after it audited the company's financial statements for the year ended Dec. 31, 2004. Goldstein Golub pointed to the company's recurring losses from operations. Headquartered in Manhattan, Optigenex, Inc. -- http://www.ac-11.com/-- is an applied DNA Sciences Company, which researches, develops and markets a patented product known as AC- 11(TM) within the wellness, age intervention, personal care markets and in clinically relevant disease states. Optigenex, Inc. effective solutions to age-related issues. These solutions take the form of supplements, cosmeceuticals or even specialized services. PAXSON COMMS: Moody's Rates Proposed $430 Million Rate Notes at B3 ------------------------------------------------------------------ Moody's Investors Service assigned a B2 rating to Paxson Communications Corporation's $700 million of proposed first lien senior secured floating rate notes due 2012 and a B3 rating to $430 million of proposed second lien senior secured floating rate notes due 2013. Additionally, Moody's lowered the corporate family rating to B3 from B2 and affirmed the company's other existing ratings. The outlook is now stable. The proceeds of the transaction will be used to retire the company's existing indebtedness including its: * $365 million of senior secured floating rate notes; * $200 million of 10.75% senior subordinated notes due 2008; and * $478 million of 12.25% senior subordinated notes due 2009. The downgrade in the corporate family rating reflects the company's current lack of a clear long-term operating strategy and the continued underutilization of its strong station portfolio represented by its non-ratings reliant model. Despite expected cost reductions emanating from the company's decision earlier this year to abandon its prior ratings-reliant strategy, Moody's believes the current strategy will only improve operating performance to maintenance levels, at best, and will not resolve the larger issue of how the company expects to support what at present appears to be an unsustainable capital structure. Further, the downgrade incorporates Moody's belief that the cushion between asset values and the company's debt securities has shrunk. Moody's views Paxson's recent strategic agreement with NBC Universal and the appointment of Brandon Burgess as CEO as credit positives. The NBC agreement reaffirms its commitment to its current investment in Paxson and should foster either an improvement in operations or a resolution of Paxson's weakened balance sheet in Moody's opinion. The revision of the outlook to stable incorporates the company's initial success in cutting costs resulting in $27.6 million EBITDA for 3Q'05 vs. $11.6 million for 3Q'04 and Moody's expectation that performance will continue to benefit from these initiatives as Paxson moves from a strategy dependent on cash-consumptive ratings based programming to its current strategy, one based on non-ratings reliant infomercials. Moody's assigned these ratings: 1) B2 rating to the $700 million of proposed first lien senior secured floating rate notes due 2012; and 2) B3 rating to the $430 million of proposed second lien senior secured floating rate notes due 2013 (cash pay or PIK). Moody's lowered this rating: 1) Corporate Family rating to B3 from B2. Moody's affirmed these ratings: 1) B1 rating on the $365 million Senior Secured Floating Rate Notes due 2010 (tender in process); 2) Caa1 rating on the $678 million of senior subordinated notes (tender in process); 3) Caa2 rating on the cumulative exchangeable junior preferred stock; and 4) SGL-3 speculative grade liquidity rating. The outlook is stable. Moody's intends to withdraw the B1 rating on the existing senior secured floating rate notes and Caa1 ratings on the senior subordinated notes upon completion of the expected tender offers. The ratings remain constrained by: * Paxson's significant debt burden ($2.4 billion including preferred securities as of September 30, 2005); * leverage that will continue to increase as the company's preferred securities claims accrete in value (54% of the company's debt consists of preferred securities); * Moody's belief that Paxson will be unable to redeem the 14.25% and 9.75% preferred securities at their scheduled maturity in November 2006; * television station assets that continue to underperform relative to peers in the broadcasting sector; * prior management's inability to execute on the company's former business plans; and * the risk that current management will be unable to successfully manage the current non-ratings reliant operating strategy or develop a new business strategy that better utilizes the company's current broadcast assets. The ratings are supported by the significant asset value represented by its portfolio of large market television stations, including stations in all of the top 20 markets and 40 of the top 50, which theoretically can provide coverage of all of the company's debt in a distress scenario (BIA appraisal of $2.65 billion). Moody's believes that Paxson will experience improvement in EBITDA margins given the new focus on more stable infomercial revenues coupled with a much-reduced cost structure. Additionally, the proposed refinancing has reduced Moody's concerns about the company's near term liquidity given the flexibility of the second lien coupon portion being either cash pay or PIK in nature. Further, the rating also benefits from liquidity on the balance sheet (cash balances of about $100 million as of September 30, 2005) that provides a reasonable cushion to support any operating cash shortfalls in the near term. The stable outlook reflects Moody's belief that Paxson will continue to benefit from the reductions in its cost structure over the ratings horizon. The rating may face negative pressure if Paxson does not continue to execute upon its current cost reduction initiatives or, more importantly, fails to identify and implement a long-term operating strategy that is more commensurate with its existing capital structure. Moody's does not believe Paxson will experience any positive ratings momentum in the near-term. The SGL-3 rating reflects Paxson's adequate liquidity profile as projected over the next twelve months. The SGL-3 rating reflects the weak cash flow profile and the lack of a bank revolving credit facility, offset by the lack of any restrictive financial maintenance covenants. Moody's notes that Paxson is required to redeem all outstanding 14.25% junior exchangeable preferred stock on November 15, 2006, and all outstanding 9.75% convertible preferred stock on December 31, 2006. Moody's expects Paxson to refinance these obligations with additional junior securities if market conditions permit. Failure to refinance these maturing preferred issues would result in those holders electing an additional director to the board. Also influencing the rating, Moody notes that free cash flow for 2006 is not expected to provide full coverage relative to servicing Paxson's total debt burden (assuming cash coupon on the sencond lien notes); however, the added flexibility of paying the coupon on the second lien notes with cash or PIK payments should allow the company to marginally add to its current cash position. Moody's anticipates that all payments regarding the preferred securities will continue to be on a PIK basis. Further, the SGL rating benefits from its existing cash balances of about $100 million as of 3Q'05. Paxson's assets are largely encumbered by the senior secured floating rate notes. However, Moody's believes the value of Paxson's large portfolio of stations, which have sold at attractive prices, exceeds the debt they secure and provide an alternate source of liquidity. The B2 rating for the first lien senior secured floating rate notes reflects their senior-most position in the capital structure and a first priority security interest in substantially all of the company's assets. In addition, the level of collateral coverage and the proportion of junior capital that sits below the first lien senior secured floating rate notes support their notching up from the corporate family rating of B3. The B3 rating for the second lien senior secured floating rate notes reflects their second priority position behind the first lien notes as well as their security interest in most of the company's assets. Notably, the indenture of the $1.13 billion in senior secured floating rate notes requires that 1.5 times asset coverage be maintained (i.e. $1.70 billion) based on the BIA appraised assets. Moody's notes that the company's recent BIA appraisal valued Paxson's station portfolio at approximately $2.65 billion, thereby providing the company with significant cushion under this indenture. Further, the company is required to make a mandatory offer to repurchase the floating rate notes at par upon the sale of its New York, LA or Chicago stations. The Caa2 rating on the preferred stock reflects its deep subordination and first loss position in the overall debt structure. Paxson Communications Corporation operates the largest U.S. television station group reaching approximately 83% of prime time television including all of the top 50 markets. It is headquartered in West Palm Beach, Florida. PAYMENT DATA: Completes Sale of bills.com to Freedom Financial -------------------------------------------------------------- Payment Data Systems, Inc. (OTC BB: PYDS), closed the transaction to sell the domain name and trademark of bills.com to Freedom Financial Network, LLC of San Mateo, California. In conjunction with the close of the sale, the company received cash of $950,000 and executed an agreement to build a private labeled bill payment site for FFN and provide related online payment processing services for an initial term of three years. Michael Long, Chairman and CEO of PDS, said, "We are very pleased to be able to close this transaction with Freedom Financial Network. The underlying agreements validate the viability of our strategy of private labeling and creates a cash position that significantly enhances our financial profile and opens up new opportunities for PDS." Mr. Long added, "We look forward to a long and mutually beneficial relationship with Freedom. They are clearly executing a vision for growth and we are pleased to be able to play a part in that." Andrew Housser, Co-CEO of Freedom Financial Network, said, "We are very excited about the acquisition of bills.com and see this as a key step in enhancing our brand and profile in the consumer debt management industry. In addition we look forward to entering the fast growing bill payment space by partnering with one of the leading players in the industry." About Freedom Financial Network Based in San Mateo, Calif., Freedom Financial Network, LLC -- http://www.freedomfinancialnetwork.com/-- provides consumer debt resolution services through its Freedom Debt Relief and Freedom Tax Relief divisions. The company works for the consumer, negotiating with creditors to lower principal balances due that routinely result in savings of half the amount owed. Freedom Financial Network serves more than 4,000 clients nationwide and manages more than $120 million in consumer debt, offering an alternative to bankruptcy, credit counseling, and debt consolidation. About Payment Data Systems Payment Data Systems Inc. -- http://www.paymentdata.com/-- is an integrated payment solutions provider to merchants and billers. The company provides an extensive set of tailored products to deliver world-class payment acceptance, processing, and risk/fraud management. Payment Data has solutions for merchants, billers, banks, service bureaus and card issuers. PDS owns the electronic bill payment portal at http://www.billx.com/and bills.com has the ability to transmit payments to thousands of national billers. Payment Data is also the exclusive license holder of the rights to market the Carmen Electra gift and prepaid cards at http://www.carmencard.com/ * * * Going Concern Doubt Akin, Doherty, Klein & Feuge, PC, expressed substantial doubt about Payment Data's ability to continue as a going concern after it audited the company's financial statements for the years ended Dec. 31, 2004 and 2003. The auditing firm pointed to the company's substantial losses since inception that has led to a significant decrease in cash position and a deficit in working capital. PC LANDING: Judge Walsh Confirms Joint Plan of Reorganization ------------------------------------------------------------- The Hon. Peter J. Walsh of the U.S. Bankruptcy Court for the District of Delaware confirmed PC Landing Corp. and its debtor-affiliates' Second Amended Joint Plan of Reorganization. Judge Walsh determined that the Plan satisfies the 13 standards for confirmation enumerated in Section 1129(a) of the Bankruptcy Code. Terms of the Plan Under the terms of the Plan, secured lenders will receive $25 million of new 7% senior secured debt. The remaining $634 million deficiency claim will be satisfied by a pro rata distribution of New Common Stock in the Reorganized Debtors. The Plan's treatment of the secured lenders' claims allows for significant recoveries for unsecured creditors and provides enough cash for the Reorganized Debtors to successfully commence operations after emergence from bankruptcy. General unsecured creditors will receive pro rata shares of the New Common Stock. Intercompany claims and existing equity interests will be cancelled on the Effective Date. Headquartered in Dallas, Texas, PC Landing Corporation and its debtor-affiliates, own and operate one of only two major trans-Pacific fiber optic cable systems with available capacity linking Japan and the United States. The Debtor filed for chapter 11 protection on July 19, 2002 (Bankr. D. Del. Case No. 02-12086). Laura Davis Jones, Esq., at Pachulski Stang Ziehl Young Jones & Weintraub, P.C., represents the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they estimated assets of over $10 million and estimated debts of more than $100 million. REFCO INC: Refco Capital Markets Disclosures Some Financial Data ---------------------------------------------------------------- Refco, Inc. (OTC: RFXCQ.PK) released schedules of certain assets, client accounts, and intercompany balances of its unregulated Refco Capital Markets, Ltd. unit, as ordered by the United States Bankruptcy Court for the Southern District of New York. The schedules list $1.91 billion in market value stocks, bonds, and cash that may be related to client accounts, valued as of Nov. 18, 2005, but do not include other assets held by RCM, such as claims against other Refco units (which were listed separately in the amount of $2.68 billion as of Sept. 30, 2005), certain claims against clients and certain securities, which have not been valued. The schedules also list $3.68 billion in client accounts, also valued as of Nov. 18, 2005. The schedules do not contain any information about any other Refco units, such as the assets remaining in Refco's futures commission merchant, Refco, LLC, which was recently sold to Man Financial, Inc., a wholly owned subsidiary of Man Group Plc. The schedules also do not reflect any debts owed by other Refco units, such as the company's bank credit facility and public bond debt, or any other assets or debts of RCM not related to client accounts. The schedules are not intended to suggest, and should not be understood as a suggestion, of the amount that RCM clients may recover in RCM's bankruptcy case or in any other proceeding. In addition, the schedules disclaim any representation or warranty about the ability to collect on the claims against other Refco units or against any third parties. The schedule of Refco Capital Markets, Ltd.'s Assets is available for free at http://ResearchArchives.com/t/s?3a4 The schedule of Refco Capital Markets, Ltd.'s Client Accounts is available for free at http://ResearchArchives.com/t/s?3a5 The schedule of Refco Capital Markets, Ltd.'s Intercompany Balances is available at http://ResearchArchives.com/t/s?3a6 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. RELIANCE GROUP: Creditors Panel Settles Securities Suit for $15MM ----------------------------------------------------------------- Beginning on June 22, 2000, 15 class actions alleging violations of federal securities laws were filed in the United States District Court for the Southern District of New York against Reliance Group Holdings and certain individual defendants: * Saul P. Steinberg, * Robert M. Steinberg, and * Lowell C. Freiberg. The securities class actions were subsequently consolidated. The lead plaintiffs in the Consolidated Securities Class Action are: * Paul Minish, * Verde Investments, Inc., * Verde Reinsurance Co., Ltd., * Donald and Bonnie Lee Siok, and * Gary Kimmel. In addition, in May 2001, a derivative action titled "Glen Leibowitz and Harvey Greenfiled v. Saul P. Steinberg, et al." was commenced in the Supreme Court of the State of New York in and for Westchester County. RGH subsequently removed the Derivative Action to the Bankruptcy Court as an adversary proceeding. The Memorandum of Understanding Arnold Gulkowitz, Esq., at Orrick, Herrington & Sutcliffe LLP, in New York, recounts that in May 2001, the Lead Plaintiffs and the Defendants entered into a Memorandum of Understanding to settle the claims alleged in the Securities Class Action. Under the MOU, the Defendants agreed to cause their insurance carriers to pay $17,400,000 to the Plaintiffs in exchange for releases of liability in the Securities Class Action and conditioned on the dismissal of the Derivative Action and the Court's approval of the settlement terms. In connection with the MOU, the Defendants and the Underwriters entered into a Settlement Funding and Release Agreement wherein the Underwriters approved and consented to the MOU and agreed to fund the entire $17,400,000 settlement in exchange for obtaining a release from liability under certain insurance policies. Liquidator Blocks MOU Subsequently, the Commonwealth Court of Pennsylvania placed Reliance's then operating subsidiary, Reliance Insurance Company, in rehabilitation, and named M. Diane Koken, the Insurance Commissioner of the Commonwealth of Pennsylvania, as the RIC Liquidator. On June 4, 2001, the Liquidator filed an emergency petition to block the MOU and Funding Agreement. On April 1, 2003, the Official Unsecured Creditors' Committee, the Official Unsecured Bank Committee and the RIC Liquidator entered into a global settlement agreement resolving various pending lawsuits and claims involving the Liquidator, RGH and Reliance Financial Services Corporation, and providing for the allocation of assets between RGH and RFSC on the one hand, and RIC on the other. Both Bankruptcy Court and Commonwealth Court approved the PA Settlement Agreement. Liquidator Appeals NY Court Decision Subsequently, on July 15, 2004, the Southern District of New York Court granted the Plaintiffs' request to enforce the MOU and the Funding Agreement. The Liquidator then filed an appeal to the Order in the U.S. Court of Appeals for the Second Circuit Court. Plaintiffs and Liquidator Execute LOA Mr. Gulkowitz tells Judge Gonzelez that a letter of agreement was then executed on September 22, 2004, by the Plaintiffs and the Liquidator. The Letter reduced the settlement amount to $15,000,000. In exchange for the settlement, the Liquidator agreed: (i) to withdraw her pending appeal in the Second Circuit Court of Appeals; (ii) not to object to the Settlement, and to cooperate in achieving final approval of the Settlement by the Bankruptcy Court; and (iii) to arrange for the release of the claims asserted in the Derivative Action. The Koken Settlement In April 2005, the Bankruptcy Court granted the Creditors Committee's joint request to approve the settlement of "Koken v. Steinberg, et al.," which was filed by the Liquidator in the Commonwealth Court against 18 former directors and officers of RIC. The Commonwealth Court also approved the Koken Settlement on May 10, 2005. Mr. Gulkowitz notes that under the terms of the Koken Settlement, the Liquidator is to receive not less than $85,000,000: -- 40% of which will be allocated among the Debtor and RFSC according to the PA Settlement Agreement; and -- which will then be divided between the Debtor and RFSC according to the terms of a court-approved settlement term sheet dated January 29, 2004, concerning the division of assets between them. As a result of the allocations, the creditors should receive approximately $24,650,000 under the Koken Settlement. Furthermore, the creditors may receive additional funds on account of a $13,500,000 reserve created pursuant to the Koken Settlement to fund certain potential future litigation costs. Any unused funds from the reserve are to be transferred to the Liquidator and allocated in accordance with the PA Settlement and the RGH/RFSC Settlement. Mr. Gulkowitz says that in accordance with the Koken Settlement, the Underwriters funded into escrow the settlement amount in the Securities Class Action, up to a $15,000,000 cap. One of the conditions precedent to the effectiveness of the Koken Settlement is the final resolution of the Securities Class Action. The parties to the Koken Settlement are also to execute or have executed in escrow a mutual release. As previously reported, RGH's Plan of Reorganization contemplates the transfer of all of RGH's assets to the Liquidating Trust. The Plan also provides that the claims in the Derivative Action will be assigned to the Liquidating Trust, to be resolved and released under the Trustee's administration, on the Effective Date. The Stipulation By this motion, the Creditors Committee asks the Court to approve a stipulation between the Plaintiffs and the Defendants and to authorize the parties to enter into releases. Under the Stipulation, the parties have agreed to settle the Securities Class Action for $15,000,000. The Underwriters have deposited that amount into an escrow account as required by the Koken Settlement. The Stipulation also provides that: (a) the $15,000,000 escrowed cash will be released to fund the Settlement, subject to reduction for payment of certain costs; (b) the Lead Plaintiffs and the members of the Class will release and forever discharge all claims or liabilities arising from matters involved in the complaint and relating to the purchase of the relevant securities of the Debtor during the period between February 8, 1999, and December 6, 2000; (c) the Defendants will release any and all claims or liabilities against the Lead Plaintiffs relating to the institution, prosecution or settlement of the Securities Class Action; (d) the release of claims relating to the Derivative Action will become effective. Moreover, in connection with the Derivative Action, the Stipulation provides for the execution and delivery of the mutual release relating to Bruce Sokoloff, Senior Vice President-Administration of Reliance Group Holdings, Inc. The Sokoloff Mutual Release Incorporates the terms and conditions of the Mutual Release. The effective date of the Sokoloff Mutual Release is the same as that of the Mutual Release. (e) The Defendants will release the Underwriters from all claims or liabilities that have or can be asserted for coverage under certain insurance policies issued by the Underwriters for the Settled Claims and the manner in which the Underwriters investigated, responded or resolved those claims. According to Mr. Gulkowitz, the Stipulation also contemplates that the counsel to the Plaintiffs and counsel to the Defendants execute a supplemental agreement where the Defendants may terminate the Settlement if certain conditions occur. In the event of a termination, the Stipulation will become null and void. Stipulation is Necessary The Creditors Committee says that the proceeding with the Securities Class Action would require substantial time and expense, with no certain outcome. The Committee believes that a full adjudication of the matter would necessitate increased cost to the Debtor, its estate and its creditors. Given the substantial complexity, and the potentially high costs associated with further investigating and litigating the Securities Class Action, the Creditors Committee believes that the proposed settlement is in the best interest of RGH, its estate and its creditors. According to Mr. Gulkowitz, the Creditors Committee has standing to bring the request because RGH has indicated that RGH does not and will not object to the Settlement, but is abstaining from bringing the request to avoid any potential conflicts with its insurers, and ultimately to protect the value of the Debtors' estate. Headquartered in New York, New York, Reliance Group Holdings, Inc. -- http://www.rgh.com/-- is a holding company that owns 100% of Reliance Financial Services Corporation. Reliance Financial, in turn, owns 100% of Reliance Insurance Company. The holding and intermediate finance companies filed for chapter 11 protection on June 12, 2001 (Bankr. S.D.N.Y. Case No. 01-13403) listing $12,598,054,000 in assets and $12,877,472,000 in debts. The insurance unit is being liquidated by the Insurance Commissioner of the Commonwealth of Pennsylvania. On Nov. 7, 2005, the Hon. Eugene Gonzalez issued an order confirming the Creditors Committee's First Amended Plan for RGH. (Reliance Bankruptcy News, Issue No. 85; Bankruptcy Creditors' Service, Inc., 215/945- 7000) SEARS HOLDINGS: Appoints Lisa Schultz to Lead Apparel Design Team ----------------------------------------------------------------- Sears Holdings Corporation (Nasdaq: SHLD) named Lisa Schultz executive vice president, Sears Holdings Apparel Design, a new position. In her new role, Ms. Schultz will have responsibility for all of Sears' and Kmart's apparel design teams and report to Chairman Edward S. Lampert. She was previously senior vice president of design for Kmart. Mr. Lampert stated, "In two years, Lisa has assembled a team of talented and enthusiastic designers and has refashioned and defined the Kmart apparel line. She has also been a valuable contributor to the development of our strategy. Lisa's demonstrated ability to attract, retain and develop creative talent will be critical as she expands our combined design organization and works with our valuable design associates in New York City and Hoffman Estates." Ms. Schultz, who previously was responsible for the development and success of the Gap's design organization, joined Kmart in the fall of 2003. Sears Holdings Corporation -- http://www.searshc.com/-- is the nation's third largest broadline retailer, with approximately $55 billion in annual revenues, and with approximately 3,800 full-line and specialty retail stores in the United States and Canada. Sears Holdings is the leading home appliance retailer as well as a leader in tools, lawn and garden, home electronics and automotive repair and maintenance. Key proprietary brands include Kenmore, Craftsman and DieHard, and a broad apparel offering, including such well-known labels as Lands' End, Jaclyn Smith and Joe Boxer, as well as the Apostrophe and Covington brands. It also has Martha Stewart Everyday products, which are offered exclusively in the U.S. by Kmart and in Canada by Sears Canada. (Kmart Bankruptcy News, Issue No. 104; Bankruptcy Creditors' Service, Inc., 215/945-7000) * * * As reported in the Troubled Company Reporter on March 31, 2005, Moody's Investors Service affirmed the Ba1 senior implied rating of Sears Holding Corporation. Moody's said the rating outlook is stable. Ratings assigned: Sears Holdings Corporation * Senior implied rating at Ba1; * Senior unsecured issuer rating at Ba1; and * $4 billion senior secured revolving credit facility at Baa3. As reported in the Troubled Company Reporter on March 30, 2005, Fitch Ratings assigned a 'BB' rating to Sears Holdings senior unsecured debt, with a negative outlook. SECURITIZED ASSET-BACKED: S&P Puts Low-B Ratings on 4 Class Certs. ------------------------------------------------------------------ Standard & Poor's Ratings Services affirmed its ratings on 95 classes of mortgage-backed certificates from 10 transactions issued by Securitized Asset-Backed Receivables LLC Trust. The rating affirmations are based on credit support percentages that are sufficient to maintain the current ratings on the certificates. Credit enhancement for these transactions is provided by a combination of overcollateralization, excess interest, and subordination of the junior classes. Cumulative losses in these transactions range from 0% to 0.21% of the original pool balances. Ninety-plus-day delinquencies, including REOs and foreclosures, range from 0.70% to 5.86% of the current pool balances. The underlying collateral for these transactions consists mostly of conventional, first- or second-lien, adjustable- or fixed-rate, fully amortizing, residential mortgage loans. The mortgage loans were originated in accordance with underwriting guidelines that target nonconforming or subprime mortgage loans. Ratings Affirmed Securitized Asset Backed Receivables LLC Trust Series Class Rating ------ ----- ------ 2004-DO1 A-1, A-2 AAA 2004-DO1 M-1 AA 2004-DO1 M-2 A 2004-DO1 M-3 A- 2004-DO1 B-1 BBB+ 2004-DO1 B-2 BBB 2004-DO1 B-3 BBB- 2004-DO2 A-1, A-2 AAA 2004-DO2 M-1 AA+ 2004-DO2 M-2 AA 2004-DO2 M-3 AA- 2004-DO2 B-1 A+ 2004-DO2 B-2 A 2004-DO2 B-3 BBB+ 2004-NC1 A-1, A-2 AAA 2004-NC1 M-1 AA 2004-NC1 M-2 A 2004-NC1 M-3 A- 2004-NC1 B-1 BBB+ 2004-NC1 B-2 BBB 2004-NC1 B-3 BBB- 2004-NC2 A-1, A-2 AAA 2004-NC2 M-1 AA 2004-NC2 M-2 A 2004-NC2 M-3 A- 2004-NC2 B-1 BBB+ 2004-NC2 B-2 BBB 2004-NC2 B-3 BBB- 2004-NC2 B-4 BB+ 2004-NC3 A-1, A-2 AAA 2004-NC3 M-1 AA+ 2004-NC3 M-2 A+ 2004-NC3 M-3 A 2004-NC3 B-1 A- 2004-NC3 B-2 BBB+ 2004-NC3 B-3 BBB 2004-NC3 B-4 BBB- 2004-OP1 A-1, A-2 AAA 2004-OP1 M-1 AA 2004-OP1 M-2 A 2004-OP1 M-3 A- 2004-OP1 B-1 BBB+ 2004-OP1 B-2 BBB 2004-OP1 B-3 BBB- 2004-OP2 A-1, A-2 AAA 2004-OP2 M-1 AA+ 2004-OP2 M-2 A+ 2004-OP2 M-3 A 2004-OP2 B-1 A- 2004-OP2 B-2 BBB+ 2004-OP2 B-3 BBB 2004-OP2 B-4 BBB- 2005-EC1 A-1A, A-1B, A-2A, A-2B, A-2C AAA 2005-EC1 M-1 AA+ 2005-EC1 M-2 AA 2005-EC1 M-3 A+ 2005-EC1 M-4 A 2005-EC1 B-1, B-2 BBB+ 2005-EC1 B-3 BBB- 2005-EC1 B-4 BB+ 2005-FR1 A-2A, A-2B, A-2C AAA 2005-FR1 M-1 AA 2005-FR1 M-2 A 2005-FR1 M-3 A- 2005-FR1 B-1 BBB+ 2005-FR1 B-2 BBB 2005-FR1 B-3 BBB- 2005-FR1 B-4 BB+ 2005-OP1 A-1A, A-1B, A-2A, A-2B, A-2C AAA 2005-OP1 M-1 AA+ 2005-OP1 M-2 AA 2005-OP1 M-3 A 2005-OP1 M-4 A- 2005-OP1 B-1 BBB+ 2005-OP1 B-2 BBB 2005-OP1 B-3 BBB- 2005-OP1 B-4 BB+ SIRVA INC: Appoints J. Michael Kirksey as Chief Financial Officer ----------------------------------------------------------------- SIRVA, Inc. (NYSE: SIR), appointed J. Michael Kirksey as chief financial officer. Mr. Kirksey brings nearly 30 years of broad experience in a range of financial and operational capacities with public companies. Mr. Kirksey will be based in the company's Westmont, Illinois headquarters where he will oversee the operations of the firm's global financial team. Mr. Kirksey will begin the transition to his new position on Dec. 13, 2005. Mr. Kirksey brings to SIRVA extensive senior management experience in finance and operations from his tenure with several global publicly-traded companies where he was closely involved in developing and implementing growth strategies, communicating with capital markets and overseeing financial reporting and internal controls. Most recently, Mr. Kirksey served as Executive Vice President and Chief Financial Officer of Input/Output, Inc., (NYSE: IO), a global imaging and software company that assists in the exploration for oil and gas. Previously, Mr. Kirksey served as Chief Executive Officer and Chief Financial Officer of Metals USA, Inc., a metals fabrication and distribution company with annual revenue of $2 billion. Mr. Kirksey began his career with Arthur Andersen LLP, where he worked for 13 years. "Mike has demonstrated a proven ability as a global financial leader," said SIRVA Chief Executive Officer Brian Kelley. "He is a great addition to our leadership team who combines sound financial expertise, operating judgment and international experience that will help us achieve our long-term goals." Mr. Kirksey, who received a B.S. in Accounting from Harding University, succeeds Ronald L. Milewski, who will become Executive Vice President -Restructuring and Chief Risk Officer effective Dec. 13,2005. 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. SPANSION TECHNOLOGY: Moody's Rates $400 Million Sr. Notes at Caa1 ----------------------------------------------------------------- Moody's Investors Service assigned first time corporate family rating of B3 to Spansion Technology, Inc., a leading provider of flash memory semiconductors. Spansion, currently owned 60% by Advanced Micro Devices and 40% by Fujitsu Limited, is expected to execute an initial public offering with approximately one third of the company being held publicly upon completion. The rating outlook is stable. These first time ratings have been assigned to Spansion: * Corporate Family Rating -- B3 * $400 million senior unsecured note due 2015 -- Caa1 * Speculative Grade Liquidity rating -- SGL-2 Concurrent with the initial public offering, Spansion expects to issue $400 million senior unsecured notes in a private placement under Rule 144A without registration rights. Net proceeds from the note issuance will be used to repay approximately $300 million of borrowings owed to its current owners, AMD and Fujitsu, with the remainder going to its balance sheet, which when combined with expected IPO proceeds of about $667 million before fees and expenses will constitute Spansion's opening balance sheet cash of approximately $780 million. The ratings reflect: 1) the high degree of business risk inherent to the capital intensive, volatile, and technologically evolving flash memory market; 2) the prospect that, despite strong bit demand driven by the cell phone market, continued aggressive pricing could cause Spansion's free cash flow to be negative over the near to intermediate and trigger the need for additional debt financing; 3) fairly limited financial flexibility notwithstanding good balance sheet liquidity pro forma the pending IPO and note issuance; 4) Spansion's limited ability to weather sustained market weakness or technological or manufacturing missteps; 5) the significantly larger financial resources and business diversity of some of its key competitors; and 6) the company's impending stand alone status, although Moody's recognizes that Spansion has been migrating to a stand alone operation over the last several quarters and service agreements with its current owners are in place through 2006. The ratings also consider: 1) Spansion's strong position in the NOR flash memory market, although this traditional, $8 billion market directed primarily at the cell phone and embedded end markets is mature and slow growing; 2) strong customer relationships among a range of end market customers including all of the top cell phone, consumer electronics, and automotive OEM's; and 3) the potential for Spansion's proprietary flash architecture called MirrorBit, which effectively doubles the density of each memory cell, to gain increased market acceptance as electronic devices require greater data density at lower cost per bit. The stable outlook reflects our expectation that Spansion will be able to continue good execution of its manufacturing and technology roadmap, including the continued market penetration of its MirrorBit technology whose richer average selling prices could help to improve its profit profile. The ratings are not likely to experience upward pressure until Spansion is able to achieve operating profitability, with the prospect that such performance can be sustained through cycles. This in turn would improve its ability to internally fund the significant capital expenditure requirements that are necessary to remain technologically and cost competitive and bolster its financial flexibility so that it can continue to sustain critical R&D and process technology advances even during sector downturns. The ratings could face negative pressure if: 1) the company struggles to move towards profitability, which Moody's believes would be driven by a combination of top line growth and more importantly, gross margin expansion given the relatively fixed nature of R&D and SG&A costs; 2) fails to advance its MirrorBit technology with cell phone OEM's and other applications; 3) experiences increased competitive pressures from the very fast growing NAND flash technology; or 4) the company's liquidity profile weakens. Pro forma the pending IPO and note issuance, Spansion will have cash of about $784 million and $740 million of debt, including the proposed $400 million senior unsecured note issuance and about $340 million of secured credit facilities and capital leases that mature at various points over the next three years. Given Spansion's liquidity and free cash flow prospects during this time, Moody's believes it will need to refinance this debt. Pro forma debt to latest twelve month EBITDA measures about 2.7 times. As noted above, a critical challenge for Spansion relates to its ability to improve cash flow generation to fund the significant capital expenditures that are necessary to remain competitive. For the latest twelve months ended September, EBITDA of $271 million compared to about $427 million of capital expenditures. Over the near to intermediate term, Moody's expects about double the level of capital expenditures. The SGL-2 reflects 1) Spansion's good balance sheet liquidity following the IPO that when combined with cash flow from operations should be sufficient to fund necessary capital expenditures over the next twelve months; 2) external liquidity in the form of its undrawn $175 million borrowing base revolving credit facility that matures September 2010, that should maintain good room under its one financial covenant, a minimum EBITDA; and 3) our view that Spansion has limited non core assets that could be readily sold if liquidity pressures were to develop. Spansion Technology Inc., headquartered in Sunnyvale, California, is one of the largest Flash memory providers and the largest company in the world dedicated exclusively to developing, designing and manufacturing Flash memory. For fiscal 2004 and the first nine months of fiscal 2005, net sales were $2.3 billion and $1.4 billion, respectively. SPANSION INC: S&P Puts B Rating on Planned $400M Sr. Unsec. Notes ----------------------------------------------------------------- Standard & Poor's Ratings Services assigned its 'B' corporate credit rating to Sunnyvale, California-based Spansion, Inc., the joint venture between Advanced Micro Devices Inc. (AMD; B/Stable/--) and Fujitsu Ltd. (BBB-/Stable/--). The rating outlook is stable. At the same time, Standard & Poor's assigned its 'B' rating to Spansion's proposed $400 million of senior unsecured notes due 2015. Proceeds from the note issue and a concurrent IPO are expected to be used primarily to repay outstanding debt to AMD and Fujitsu. "The ratings on Spansion reflect the company's exposure to the aggressively competitive and cyclical NOR flash semiconductor industry, significant capital investment requirements, and a history of periodic material negative free cash flows," said Standard & Poor's credit analyst Bruce Hyman. "These factors are partially offset by Spansion's leading market position, prospects for the development of differentiated technologies, and market growth expectations in certain served markets." Spansion's revenues are derived from the manufacturing and sale of NOR flash semiconductors, a type of embedded memory used in mobile phones, consumer products, automotive electronics, and other devices. The $8 billion-$9 billion global NOR flash market displays many of the characteristics of commodity-like semiconductor markets, such as DRAM. These include: * severe revenue cyclicality, * intense price pressure, * high capital investment requirements, and * periods of negative free cash flows for suppliers. Furthermore, the NOR flash market has relatively modest expected growth rates. Spansion and principal rival Intel Corp. have held comparable mid-20% shares of the global NOR market for several years. Competitor Intel aggressively cut prices in 2004 and recaptured market share from Spansion, while putting pressure on industry profitability. In more recent quarters, the market environment has stabilized, and Spansion's operating performance has recovered somewhat. Following the proposed refinancing, Spansion is expected to have relatively moderate financial leverage for its rating level, which helps to somewhat offset the company's high business risk. In addition to funded debt of $400 million from the new notes, Spansion is expected to have approximately $320 million of additional liabilities, including capital leases, a Japanese term loan, and others. Based on trailing-12-month EBITDA as of June 30, 2005, total debt to EBITDA is 2.7x. Improving profitability in the second half of 2005 is expected to result in slightly lower financial leverage at year-end. STELCO INC: Board Reviews Informal Committee's Plan Proposal ------------------------------------------------------------ Stelco Inc.'s Board of Directors (TSX:STE) has reviewed and considered the proposal of the Steering Committee of the Informal Committee of Stelco Senior Debentureholders. The company's Board of Directors approved an amended restructuring plan for consideration by its creditors on Dec. 5. Plan Terms The amended plan reflects the terms of the stakeholder agreement announced by Stelco on Nov. 23, 2005, with one major exception. The proposed amended plan does not include what had been 9% Unsecured Convertible Notes converting into 25 million common shares of the Company. Those Notes are replaced by a proposed cash component under which affected creditors will receive a pro rata share of $137.5 million. The funding for this is to come from a proposed subscription for common shares from Tricap Management Limited and other equity investors discussed later in this news release. This subscription will be made under a plan sponsor agreement to be entered into by Stelco, Tricap Management Limited and the other subscribers noted below, all of which are acting independently. This cash component would amount to approximately 55% of the face value of what had been anticipated to be an issuance of Unsecured Convertible Notes in the face amount of $250 million. The amended plan is based on: -- The availability of a $600 million asset-based revolving loan facility. -- The availability of a $375 million revolving bridge facility being negotiated with Tricap Management Limited. -- A $150 million Unsecured Subordinated 1% Note, issued to the Province of Ontario in exchange for a $150 million cash contribution. If the pension solvency deficiency is fully funded by year 10, then 75% of the Note would be forgiven at maturity, with the balance payable in cash or shares. -- Warrants, with a seven-year maturity, issued to the Province of Ontario to purchase up to approximately 8% of the fully diluted equity (or approximately 2.3 million new common shares) at an exercise price of $11.00 per new common share. Existing secured operating lenders will be repaid in full. Unsecured creditors will receive a pro rata share of: -- Secured Floating Rate Notes: $275 million; interest of LIBOR (London Interbank Offering Rate) plus 500 basis points if paid in cash or LIBOR plus 800 basis points if paid in Secured Floating Rate Notes at the Company's option; 10-year term, payable in cash on maturity. -- $137.5 million in cash that will be provided by the above- noted equity investors in return for approximately 88% of the equity in the Company on a fully diluted basis. Of that percentage, 40% will be underwritten by Tricap Management Limited, 30% by Sunrise Partners Limited Partnership, and 30% by Appaloosa Management LP. -- 1.1 million new common shares, representing approximately 4% of the fully diluted common shares of the Company. The Stelco Pension Plans will receive: -- An upfront cash contribution of $400 million. -- Fixed annual cash funding payments of $65 million each year between 2006-2010 and $70 million each year between 2011- 2015. -- There may be increased payments through annual cash sweep payments, commencing in 2007, based on cash flow and liquidity tests. -- Any solvency deficiency at the end of 2015 will be funded through the normal 5-year pension funding rules. A six-month grace period on cash funding payments will be provided during the first half of 2006, increasing Stelco's liquidity on emerging from Court protection. The existing shares will be effectively cancelled. As the Company has stated for some time, there is insufficient value to provide full recovery to unsecured creditors. Factors affecting the Company, its value and the recovery for unsecured creditors include volatile steel prices, reduced production and shipments, and increased costs. Under the proposed plan sponsor agreement, the size of Stelco's Board of Directors will be fixed at nine members. Tricap Management Limited will have the right to name four of the directors. The other capital providers subscribing for common shares will have the right to nominate one each. The remaining directors will be chosen through a consultative process. Board nominees will be elected on the basis of cumulative voting. This means that shareholders may allocate the total number of votes they're entitled to cast in any way they wish, i.e. all for one nominee, among several nominees, or divided among all nominees. The plan sponsor agreement requires plan implementation to occur not later than March 31, 2006. Subject to creditors approving and the Court sanctioning the plan, Stelco expects to implement the plan early in 2006 and, if possible, before March 31, 2006. The Board has concluded that the proposal would not garner the stakeholder support required to ensure an achievable plan that would lead to an effective restructuring of the Company. The Board of Directors urged stakeholder groups to continue their current and ongoing negotiations with the goal of achieving and coming forward with a consensual plan. The Board advised that, in accordance with the direction of the Superior Court of Justice (Ontario), a plan or an amended plan will be presented and put to a vote when the previously-adjourned meetings of affected creditors resume tomorrow, Dec. 9, 2005. 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. 12, 2005, in order to accommodate the creditors' meetings and a sanction hearing. STRUCTURED ASSET: Moody's Rates Class B2 Sub. Certificates at Ba2 ----------------------------------------------------------------- Moody's Investors Service assigned a Aaa rating to the senior certificates issued by Structured Asset Securities Corporation Series 2005-WF4, and ratings ranging from Aa1 to Ba2 to the subordinate certificates in the deal. The securitization is backed by Wells Fargo Bank, N.A. originated adjustable-rate (74%) and fixed-rate (26%) subprime mortgage loans acquired by Lehman Brothers Holdings Inc. The ratings are based primarily: * on the credit quality of the loans; and * on the protection from: -- subordination, -- overcollateralization, -- excess spread, -- limited cross-collateralization, -- primary mortgage insurance, and -- an interest rate swap agreement. Moody's expects collateral losses to range from 4.00% to 4.50%. Wells Fargo Bank, N.A. will service the loans, and Aurora Loan Services LLC will act as master servicer. Moody's has assigned Wells Fargo Bank, N.A. its top servicer quality rating (SQ1) as a primary servicer of subprime 1st lien loans. The complete rating actions are: Structured Asset Securities Corporation Mortgage Pass-Through Certificates, Series 2005-WF4 * Class A1, Rated Aaa * Class A2, Rated Aaa * Class A3, Rated Aaa * Class A4, Rated Aaa * Class M1, Rated Aa1 * Class M2, Rated Aa2 * Class M3, Rated Aa3 * Class M4, Rated A1 * Class M5, Rated A2 * Class M6, Rated A3 * Class M7, Rated Baa1 * Class M8, Rated Baa2 * Class M9, Rated Baa3 * Class B1, Rated Ba1 * Class B2, Rated Ba2 SUSSER HOLDINGS: Moody's Rates Proposed $170 Million Notes at B2 ---------------------------------------------------------------- Moody's Investors Service rated the proposed $170 million unsecured note of Susser Holdings, LLC at B2 and assigned a speculative grade liquidity rating of SGL-3. Susser operates convenience stores in Texas and Oklahoma. Cash proceeds from the new debt, together with an equity contribution of $128 million from Wellspring Capital, CEO Sam Susser, and other senior management and $170 million from a concurrent sale and leaseback transaction, will finance the leveraged buyout of the company for total consideration of about $277 million and refinance all existing debt. Moody's belief that the company will finance growth from incremental borrowings and the high level of competition in convenience and fuel retailing limit the ratings. However, the company's strong fuel retailing market share in its trade areas and ownership of a substantial real estate portfolio support the ratings. The ratings anticipate that gasoline profitability will retreat to a normalized level following unprecedented highs during 2005. The rating outlook is stable. This is the first time that Moody's has rated Susser. Ratings assigned: * $170 million eight-year senior unsecured notes at B2 * Speculative grade liquidity rating at SGL-3 * Corporate family rating at B2 Moody's did not assign ratings to the $50 million secured revolving credit facility that is part of the proposed financing structure. The ratings recognize: * the 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 H.E.B. (unrated); and * mediocre post-transaction debt protection measures. Also constraining the ratings are Moody's belief that the company will experience free cash flow deficits given plans: * to substantially invest in store count growth; * to rebrand from Circle K to Stripes; and * to continue developing the Laredo Taco Company foodservice brand. However, the demand inelasticity for gasoline regardless of the retail price, collateral support from post-transaction ownership of a substantial real estate portfolio, and Moody's belief that foodservice and other non-tobacco merchandise sales will grow faster than the declining tobacco category support the ratings. Also benefiting the ratings are the leading convenience retailing share in the several Texas and Oklahoma markets where the company operates and the steady, if low-margin, revenue stream from the sizable fuel distribution segment. Moody's understands that the current senior management team will continue with the company following the transaction. The assigned ratings do not anticipate complete implementation of targeted operating improvements at the pace projected by management. The stable rating outlook reflects Moody's expectations that the company's financial profile will modestly improve as it: 1) increases revenue and debt protection measures in line with new store development; 2) substantially reduces the free cash flow deficit over the next two years; and 3) grows non-fuel revenue at a reasonable pace. Ratings could fall if: * liquidity tightens from permanent borrowings on the revolving credit facility; * leverage rises above 6 times and or fixed charge coverage does not exceed 1 time; or * non-traditional fuel retailers exert downward pricing pressure on gasoline profitability. The ratings are not based on the expectation that high gasoline profitability during the latter half of 2005 will become the norm. Over the longer term, ratings could move upward as the company achieves satisfactory returns on investment with its strategies to increase store count as evidenced by: * EBITDAR comfortably covers interest expense, rent, and capital investment; * lease adjusted leverage sustainably falls below 5 times; and * store revenue and profit grow even as non-traditional competitors open additional fuel retailing locations. The B2 rating on the proposed eight-year senior unsecured notes considers that this debt will be guaranteed by the company's operating subsidiaries. This class of debt is contractually subordinated to the unrated $50 million asset-based revolving credit facility and ranks pari passu with about $82 million of accounts payable. In addition to the substantial amount of junior equity capital to be invested by the new owners, the assigned rating relative to the Corporate Family rating contemplates meaningful restrictions on incurrence of additional indebtedness and against disposal of assets such as the remaining owned real estate locations. The adequate liquidity rating of SGL-3 reflects Moody's expectation that the company will finance free cash flow deficits from incremental revolving credit facility borrowings. Moody's believes that capital investment for new store development over the next twelve months will exceed operating cash flow. The liquidity rating is unlikely to rise while investing cash flow is large relative to operating cash flow. However, potential liquidity from post-transaction unencumbered ownership of approximately 110 locations, given that accounts receivable and inventory are designated as collateral for the bank loan, are a potential medium-term liquidity resource. Pro-forma for the transaction, Moody's estimates that lease adjusted leverage is high at around 6 times and fixed charge coverage is low at about 1 time. Moody's expects merchandise revenue to rise in future years as newly opened stores and foodservice expansion more than offset the decline in the tobacco category. In comparison with other rated convenience stores that have maintained tobacco volume as supermarkets, drug stores, and mass merchants have retreated from the category, less expensive retail prices in neighboring Mexico have always limited the proportion of tobacco in Susser's revenue mix. Regarding gasoline profitability, cents per gallon margin appears to have stabilized following several years of increasing competition in South Texas from non-traditional gasoline retailers. Moody's expects that Susser will experience free cash flow deficits over the next several years because of the significant capital investments, but the rating agency anticipates that the company will maintain adequate liquidity by modulating the pace of new store development. Susser Holdings LLC, with its operating subsidiary's headquarters in Corpus Christi, Texas, operates 318 convenience stores in Texas and Oklahoma. The company also wholesales fuel to 374 additional locations. Revenue for the twelve months ending October 2, 2005 was about $1.8 billion. TECHNEGLAS INC: Court Approves Stipulation with Nippon Electric --------------------------------------------------------------- The U.S. Bankruptcy Court for the Southern District of Ohio, Eastern Division, approved a stipulation and agreement between Techneglas, Inc. and its debtor-affiliate, Nippon Electric Glass, Ohio, Inc. On May 20, 2005, Techneglas filed a $4.6 million claim against NEG Ohio in NEG's chapter 11 case. NEG Ohio filed a $1.6 million claim on Jan. 7, 2005, and a contingent and unliquidated claim on Jan. 14, 2005, in Techneglas' case. On Aug. 22, 2005, Techneglas and NEG Ohio, together with Nippon Electric Glass America, Inc., filed a First Amended Joint Plan of Reorganization. In a Court-approved stipulation, the parties agree that: -- the Techneglas claim will be allowed as a Class 3B general unsecured claim for $4 million; -- the NEG Ohio Liquidated Claim will be allowed as a Class 4A general unsecured claim for $1.6 million; -- the NEG Ohio Unliquidated Claim will be disallowed in its entirety and expunged; -- the NEG Ohio Allowed Claim will be satisfied in its entirety by a $1.6 million offset against the Techneglas Allowed Claim, and NEG Ohio will receive no distributions on account of the NEG Ohio Allowed Claim under the Plan; and -- the Techneglas Allowed Claim will be partially satisfied, to the extent of $1.6 million -- by offset against the NEG Ohio Allowed Claim, and the $2.4 million remaining balance of the Techneglas Allowed Claim will be satisfied by the cash distribution to be made to Class 3b creditors. Headquartered in Columbus, Ohio, Techneglas, Inc. -- http://techneglas.com/-- manufactures television glass (CRT panels, CRT funnels, solder glass and specialty glass), dopant sources, glass resins and specialty bulbs. The Company and its debtor-affiliates filed for chapter 11 protection on Sept. 1, 2004 (Bankr. S.D. Ohio Case No. 04-63788). David L. Eaton, Esq., Kelly K. Frazier, Esq., and Marc J. Carmel, Esq., at Kirkland & Ellis, and Brenda K. Bowers, Esq., Robert J. Sidman, Esq., at Vorys, Sater, Seymour and Pease LLP, represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed total assets of $137 million and total debts of $336 million. The Court confirmed the Debtor's First Amended Joint Plan of Reorganization on Oct. 7, 2005. TRICELL INC: Equity Deficit Narrows to $3.6 Million at Sept. 30 --------------------------------------------------------------- Tricell, Inc., delivered its third quarter financial statements to the Securities and Exchange Commission on Nov. 21, 2005. The company reported $349,900 of net income on $240,167,787 of sales for the three months ended Sept. 30, 2005. At Sept. 30, 2005, the company's balance sheet showed $37,399,099 in total assets, $40,968,433 in total liabilities resulting in a $3,569,334 stockholders' equity deficit. The company's Sept. 30 balance sheet also showed strained liquidity with $37,152,034 in current assets available to satisfy $40,968,433 of current liabilities coming due within the next 12 months. A full-text copy of Tricell, Inc.'s third quarter results is available at no charge at http://ResearchArchives.com/t/s?3a7 Going Concern Doubt Berenfeld, Spritzer, Shechter and Sheer, expressed substantial doubt about Tricell Inc.'s ability to continue as a going concern after it audited the company's financial statements for the year ended Dec. 31, 2004. Berenfeld Spritzer pointed to the Company's recurring losses and accumulated deficit. Tricell UK Ltd. and Tricell Ltd. were founded in 1999 to participate in, and continues to participate in today, the distribution and sale of mobile telephone handsets to the global wholesale market. The Company has built a management team with considerable expertise and success in product acquisition, wholesale distribution and service provision in this highly competitive market place. Current customers include wireless network operators, resellers, retailers and wireless equipment manufacturers. Tricell handles wireless products manufactured by industry-leading technology companies such as Nokia, Motorola, Sony Ericsson, Kyocera, Samsung, Siemens, Panasonic, NEC and Toshiba. At Sept. 30, 2005, Tricell Inc.'s balance sheet showed a $3,569,334 stockholders' deficit, compared to a $4,253,892 deficit at Dec. 31, 2004. TRICELL INC: Board Names Reed as New President & Pursell as CFO --------------------------------------------------------------- On Nov. 18, 2005, the Board of Directors of Tricell, Inc., appointed four persons to the board: -- James Reed, also as president -- Neil Pursell, also as chief financial officer -- Adrian "John" Sumnall, and -- Neil Proctor. In conjunction with these appointments, Andre Salt resigned from his position as president effective Nov. 18, 2005. Mr. Salt will continue as the company's chief executive officer and chairman of the board. Tricell's new directors and officers were previously shareholders of Ace Telecom Limited, which Tricell acquired in a stock acquisition on June 30, 2005. The acquisition of Ace, with its extensive customer base in the telecommunications industry, has reinforced Tricell's wholesale trading and distribution business significantly. James Reed, age 35, who is now Tricell's president, previously served as an officer of Ace, beginning in April 2003. Prior to April 2003, Mr. Reed was the Chief Operating Officer of the Starcom One Group, in which he was responsible for Starcom's successful trading operations. Prior to joining Starcom in 1999, he was the UK Sales Manager for CellStar UK. Mr. Reed has been a key individual within the mobile phone industry since 1993. Adrian "John" Sumnall, age 35, previously served as an officer of Ace, beginning in May 2003. Prior to May 2003, Mr. Sumnall was responsible for the entire Starcom European sales department. Through his excellent relationships and quality negotiating skills, Starcom was enabled to be successful in the market place it operates within. Prior to joining Starcom in March 2001, Mr. Sumnall was regarded as the top sales executive for CellStar UK, a Starcom competitor. Neil Procter, age 43, previously served as an officer of Ace, beginning in April 2003. Prior to April 2003, Mr. Proctor was responsible for the entire Starcom product sourcing department. Mr. Proctor joined Starcom in September 2000. Neil Pursell, age 41, who now serves as Tricell's CFO, previously served as an officer of Ace, beginning in May 2003. Mr. Pursell is a fellow of the professional UK Accountancy Body Association of Chartered Certified Accountants (he obtained this qualification in 1991). From June 2001 to May 2003, Mr. Pursell was the Chief Financial Officer of the Starcom. His responsibilities included the day-to-day management of Starcom's financial affairs. Prior to joining Starcom in May 2001, Mr. Pursell was a partner in the professional Chartered Accountancy firm Barringtons of Staffordshire, UK. Mr. Pursell joined Barringtons in November 1981. As a partner at Barringtons, Mr. Pursell was an audit partner responsible for signing limited company audit reports, thus having the expertise to recognize and resolve weak financial & business controls, he also was responsible for delivering advice and assistance on raising finance, management consultancy, strategic tax planning, and international trade. Going Concern Doubt Berenfeld, Spritzer, Shechter and Sheer, expressed substantial doubt about Tricell Inc.'s ability to continue as a going concern after it audited the company's financial statements for the year ended Dec. 31, 2004. Berenfeld Spritzer pointed to the Company's recurring losses and accumulated deficit. Tricell UK Ltd. and Tricell Ltd. were founded in 1999 to participate in, and continues to participate in today, the distribution and sale of mobile telephone handsets to the global wholesale market. The Company has built a management team with considerable expertise and success in product acquisition, wholesale distribution and service provision in this highly competitive market place. Current customers include wireless network operators, resellers, retailers and wireless equipment manufacturers. Tricell handles wireless products manufactured by industry-leading technology companies such as Nokia, Motorola, Sony Ericsson, Kyocera, Samsung, Siemens, Panasonic, NEC and Toshiba. At Sept. 30, 2005, Tricell Inc.'s balance sheet showed a $3,569,334 stockholders' deficit, compared to a $4,253,892 deficit at Dec. 31, 2004. TW INC: Wants Until February 27 to Object to Proofs of Claim ------------------------------------------------------------ TW, Inc., fka Cablevision Electronics Investments, Inc., asks the U.S. Bankruptcy Court for the District of Delaware to further extend until February 27, 2005, the period within which it can object to claims filed against its estate. The Debtor has reviewed and resolved 395 claims totaling approximately $460 million with and without the need for filing objections. Moreover, after filing claim objections, only two unresolved administrative claims totaling approximately $118,000 remain against the Debtor. The extension will provide the Debtor more time to review and resolve any disputed claim and to file appropriate objections, if necessary. TW, Inc., filed for chapter 11 protection on March 14, 2003 (Bankr. Del. Case No. 03-10785). Jeremy W. Ryan, Esq., and Mark Minuti, Esq., at Saul Ewing LLP represent the Debtors. When the Company filed for protection from its creditors, it listed assets of over $50 million and debts of more than $100 million. UAL CORP: Inks Commitment Letter on Exit Financing with GE Capital ------------------------------------------------------------------ As previously reported, the U.S. Bankruptcy Court for the Northern District of Illinois authorized UAL Corporation and its debtor-affiliates to enter into a Commitment Letter dated October 6, 2005, with JPMorgan Chase Bank, N.A. and Citicorp USA, Inc. Under the October 6 Commitment Letter, JPMorgan Chase and Citicorp committed to provide the Debtors with an exit facility of up to $3,000,000,000. The Exit Facility will be underwritten jointly by JPMorgan Chase and Citicorp, and structured, arranged and syndicated by J.P. Morgan Securities Inc., and Citigroup Global Markets, Inc. Following the Court's approval of the October 6 Commitment Letter, the Debtors, J.P. Morgan Securities and Citigroup engaged in intensive discussions with General Electric Capital Corporation regarding GECC's participation in the Exit Facility. According to David A. Agay, Esq., at Kirkland & Ellis LLP, in Chicago, Illinois, the discussions culminated in the execution of a new Joint Commitment Letter, which provides for GECC's underwriting of $500,000,000 of the $3,000,000,000 Exit Facility, thereby reducing JPMorgan Chase's and Citicorp's commitments to $1,250,000,000 each. GECC has also agreed to serve as syndication agent for the Exit Facility. However, in its role as a syndication agent and as a Primary Lender under the GECC Commitment Letter, GECC has asked the Debtors to indemnify it to the same extent the Debtors have already been authorized by the Court to indemnify JPMorgan and CITI pursuant to the October 6 Commitment Letter. GECC further required the Debtors to obtain Court approval of their indemnification obligations. Mr. Agay notes that except for the inclusion and indemnification of GECC as a Primary Lender and syndication agent, the GECC Commitment Letter is identical in all material respects to the October 6 Commitment Letter. The Exit Facility now will be underwritten by JPMorgan Chase, Citicorp, and GECC, and structured, arranged, and syndicated by J.P. Morgan Securities and Citigroup. With numerous attractive features, including an interest rate of LIBOR plus 450 basis points and a manageable amortization schedule, the Debtors believe that the terms of the Exit Facility are the best available. The Debtors seek the Court's authority to: (a) enter into the GECC Commitment Letter; (b) indemnify GECC; and (c) assume future indemnification obligations in favor of additional exit lenders executing the GECC Commitment Letter, without having to return to the Court for additional authorization. Mr. Agay points out that GECC's wherewithal, experience, and credibility makes it a logical participant in the Debtors' Exit Facility. GECC's familiarity with the Debtors' operations, through its financing of aircraft, its participation in the Debtors' DIP and the exit financing process, and its other relationships with the Debtors, minimize the need for new due diligence. The Debtors believe that as a leading international financing institution, GECC's agreement to underwrite the $500,000,000 portion of the Exit Facility provides a strong endorsement of the Exit Facility. By pre-syndicating this significant portion, GECC's participation, together with that of JPMorgan and CITI, will further minimize the execution risk at exit. Mr. Agay clarifies that the Debtors are not, at this time, seeking approval of the fees that will be payable upon closing of the Exit Facility. Rather, the Debtors are seeking approval of the GECC Commitment Letter, including the provisions relating to indemnification, to facilitate the documentation and other actions necessary to allow for closing of the Exit Facility upon Plan Confirmation. A full-text copy of the GECC Commitment Letter is available for free at http://bankrupt.com/misc/GECC_commitment_letter.pdf Headquartered in Chicago, Illinois, UAL Corporation -- http://www.united.com/-- through United Air Lines, Inc., is the holding company for United Airlines -- the world's second largest air carrier. The Company filed for chapter 11 protection on December 9, 2002 (Bankr. N.D. Ill. Case No. 02-48191). James H.M. Sprayregen, Esq., Marc Kieselstein, Esq., David R. Seligman, Esq., and Steven R. Kotarba, Esq., at Kirkland & Ellis, represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $24,190,000,000 in assets and $22,787,000,000 in debts. (United Airlines Bankruptcy News, Issue No. 108; Bankruptcy Creditors' Service, Inc., 215/945-7000) UAL CORP: Wants Court to Stretch Solicitation Period to March 3 --------------------------------------------------------------- UAL Corporation and its debtor-affiliates are currently in the midst of their solicitation process and are preparing for a confirmation hearing beginning on Jan. 18, 2006, with an anticipated exit in February. However, as the exclusivity periods expire on Jan. 2, the Debtors will not have a chance to confirm their solicited Plan of Reorganization before another party could file a competing plan on Jan. 3. Chad J. Husnick, Esq., at Kirkland & Ellis LLP, in Chicago, Illinois, explains that the Debtors face this issue of timing because, in consultation with the Official Committee of Unsecured Creditors and the United States Trustee, the Debtors agreed to substantially lengthen the confirmation, solicitation, and voting processes. The Debtors agreed to delay commencing the solicitation process to give the Creditors' Committee more time to review and comment on the Plan. "Facing a competing plan on the eve of confirmation would have a wasteful, destabilizing, and distracting effect on United's exit process," Mr. Husnick asserts. For this reason, the Debtors ask the Court to bridge the exclusive solicitation period through March 3, 2006, so that in the unexpected event that the Plan is not confirmed in late January, the Debtors, in consultation with the Committee, will have a chance to regroup and determine what steps to take next without having to immediately face the potential filing of a competing plan. By seeking an additional 60 days, the Debtors hope to maintain a disciplined schedule to continue moving toward exit on their current track as expeditiously as possible, Mr. Husnick adds. Headquartered in Chicago, Illinois, UAL Corporation -- http://www.united.com/-- through United Air Lines, Inc., is the holding company for United Airlines -- the world's second largest air carrier. The Company filed for chapter 11 protection on December 9, 2002 (Bankr. N.D. Ill. Case No. 02-48191). James H.M. Sprayregen, Esq., Marc Kieselstein, Esq., David R. Seligman, Esq., and Steven R. Kotarba, Esq., at Kirkland & Ellis, represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $24,190,000,000 in assets and $22,787,000,000 in debts. (United Airlines Bankruptcy News, Issue No. 108; Bankruptcy Creditors' Service, Inc., 215/945-7000) UAL CORP: Wants Court Nod on EDS Outsourcing Services Agreement --------------------------------------------------------------- As part of their restructuring, UAL Corporation and its debtor- affiliates are in the process of updating their hardware, software, and overall technology infrastructure. In the first quarter of 2005, the Debtors issued a request for proposal for a services agreement that would enable them to outsource both distributed computing information technology hardware and software and associated support and maintenance. The request for proposal was sent to three parties interested in bidding on the project. In April 2005, the Debtors eliminated one supplier from consideration because its proposal did not meet the requirements. The Debtors then conducted parallel negotiations with Electronic Data Systems Corporation and EDS Information Services L.L.C., and a second supplier. After several months of negotiations and analysis, the Debtors determined that the joint proposal from EDS and EIS was the best offer, based on a number of important factors, including: -- the proposal's technical solution, -- underlying economics, -- the Debtors' technology needs, -- the potential impact on the Debtors' operations, -- EDS' airline experience, and -- EDS' service delivery performance. Since that time, the parties continued to negotiate the terms of the Agreement. By this motion, the Debtors seek the Court's permission to enter into a Master Outsourcing Services Agreement with EDS and EIS. The Services Agreement With respect to hardware and software, EDS and EIS will: (a) provide a substantial portion of the Debtors' End User desktop computing equipment located at airports and administrative office locations; (b) provide all of the Debtors' LAN equipment located at airports and administrative office locations; and (c) periodically refresh and update the Debtors' systems and equipment during the term of the Services Agreement. With respect to IT services, EDS and EIS will: (a) provide maintenance for all inscope hardware, regardless of who owns the device; (b) provide installations, moves, adds and changes for all End User desktop computing and LAN equipment; (c) perform projects for the Debtors like opening or closing a new airport station and deploying a new piece of technology in the field; (d) provide Help Desk Services for all technology services; and (e) provide Procurement Services for all IT hardware and services in response to a request form the Debtors. James H.M. Sprayregen, Esq., at Kirkland & Ellis LLP, in Chicago, Illinois, relates that the Services Agreement has a 10-year term, though the Debtors have the unilateral option to extend through 12 years. The Services Agreement's effective date is Nov. 30, 2005, with transition planning services commencing immediately, and an assumption of distributed computing support services as of February 16, 2006. Mr. Sprayregen further notes that: * The Debtors have an Annual Minimum Revenue commitment of approximately $20,000,000 per year; * The Services Agreement implements an "Industry Standard" service obligation, as well as discrete performance thresholds for critical services; and * The Debtors have a right of termination for convenience. Services Agreement Must be Approved Under the Services Agreement, the Debtors will greatly improve their IT infrastructure and support systems, and lower their IT maintenance costs by several million dollars annually, Mr. Sprayregen asserts. Absent the ability to outsource the IT services contemplated under the Services Agreement, the Debtors would have to make significant capital investments and hire additional personnel or risk failing to provide needed IT service support levels. In comparison, Mr. Sprayregen adds, EDS and its subcontractors have significant experience providing similar IT services to other major airlines. Moreover, the Debtors will not have to make any upfront investment for over $100,000,000 in hardware and software upgrades. "Simply put, EDS can offer United better IT services at a lower price than any other alternative," Mr. Sprayregen explains. Although the Debtors believe that the Services Agreement may be an ordinary course agreement, the Debtors are seeking the Court's permission to enter into the Services Agreement, out of an abundance of caution, and based on a request by EDS and EIS. Terms are Confidential Mr. Sprayregen informs the Court that the terms of the Services Agreement are highly confidential and sensitive. The Debtors cannot publicly disclose the terms of the Agreement in great detail. Accordingly, the Debtors seek the Court's permission to file the Agreement under seal. The Debtors have disclosed fully the details of the Services Agreement with counsel to the Official Committee of Unsecured Creditors and DIP financing lenders. Headquartered in Chicago, Illinois, UAL Corporation -- http://www.united.com/-- through United Air Lines, Inc., is the holding company for United Airlines -- the world's second largest air carrier. The Company filed for chapter 11 protection on December 9, 2002 (Bankr. N.D. Ill. Case No. 02-48191). James H.M. Sprayregen, Esq., Marc Kieselstein, Esq., David R. Seligman, Esq., and Steven R. Kotarba, Esq., at Kirkland & Ellis, represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $24,190,000,000 in assets and $22,787,000,000 in debts. (United Airlines Bankruptcy News, Issue No. 108; Bankruptcy Creditors' Service, Inc., 215/945-7000) US AIRWAYS: Reports November Traffic Statistics ----------------------------------------------- US Airways Group, Inc. (NYSE: LCC) reported traffic statistics for the month of November 2005. For America West operated flights, revenue passenger miles for the month were a record 1.9 billion, up 1.6% from November 2004. Capacity was 2.5 billion available seat miles, down 0.1% from November 2004. The passenger load factor for November was a record 78.9% versus 77.5% in November 2004. For US Airways mainline operated flights, RPMs for November 2005 were 2.7 billion, a decrease of 12.7% from November 2004. Capacity was 3.6 billion ASMs, down 13.9% from November 2004. The passenger load factor for the month of November was a record 74.1% up from 73.1% in November 2004. "We continued to see unit revenue and yield improvements during November, with both west and east networks achieving double-digit unit revenue gains in November that outpaced our performance in October," said Scott Kirby, executive vice president, sales and marketing. "We are looking forward to beginning our service to Hawaii later this month and are seeing strong traffic driven to these new routes from our east network." Integration Update As part of the airline's monthly traffic release, US Airways will provide a brief update on the integration process between US Airways and America West. Listed below are major accomplishments from the month of November: * To date, 24 of 38 common-use airports integrated. * The airline will retain the naming rights to America West Arena renaming the venue US Airways Center in January 2006. * All US Airways operated aircraft will continue to offer power ports in every row. For the month of November 2005, America West will report domestic on-time performance of 85.2% and a completion factor of 99.0% to the U.S. Department of Transportation. US Airways will also report to the DOT domestic on-time performance of 82.7% and a completion factor of 99.4%. US Airways and America West's recent merger creates the fifth largest domestic airline employing approximately 35,000 aviation professionals. US Airways, US Airways Shuttle and US Airways Express operate approximately 4,000 flights per day and serve more than 225 communities in the U.S., Canada, Europe, the Caribbean and Latin America. US Airways and its subsidiaries filed another chapter 11 petition on September 12, 2004 (Bankr. E.D. Va. Case No. 04-13820). Brian P. Leitch, Esq., Daniel M. Lewis, Esq., and Michael J. Canning, Esq., at Arnold & Porter LLP, and Lawrence E. Rifken, Esq., and Douglas M. Foley, Esq., at McGuireWoods LLP, represent the Debtors in their restructuring efforts. In the Company's second bankruptcy filing, it lists $8,805,972,000 in total assets and $8,702,437,000 in total debts. * * * As reported in the Troubled Company Reporter on Oct. 4, 2005, Fitch Ratings has affirmed the issuer default rating of 'CCC' and the senior unsecured rating of 'CC' on the debt obligations of America West Airlines, Inc. Fitch has also initiated coverage of US Airways Group, Inc., with an IDR of 'CCC' and a senior unsecured rating of 'CC'. The recovery ratings for the senior unsecured obligations of both US Airways Group and AWA are 'R6', indicating an expected recovery of less than 10% in a default scenario. VALLEY MEDIA: Court Approves Settlement with Hit Entertainment -------------------------------------------------------------- The U.S. Bankruptcy Court for the District of Delaware approved a settlement agreement between Al Krichhein, the Liquidating Trustee appointed pursuant to Valley Media's confirmed Liquidating Plan, and Hit Entertainment (USA), Inc., aka Lyrick Studios, Inc. The agreement calls for the substantial reduction of Hit's prepetition claim in settlement of the avoidance action suit commenced by Valley Media, Inc. Nature of Conflict On Aug. 6, 2002, Valley Media filed a complaint to avoid preferential transfers and to recover property against Hit Entertainment. The Debtor sought to recover approximately $1,106,580 in transfers made to Hit Entertainment within 90 days prior to the Debtor's bankruptcy filing on Nov. 20, 2001. Hit Media had asserted various defenses in response to the complaint. Settlement After extensive negotiations, the parties agreed that Hit Entertainment's $2,164,844 prepetition claim against the Estate will be reduced to $1,092,422 effective upon the Liquidating Trustee's receipt of a $10,000 settlement amount. Upon payment of the settlement amount, the avoidance action suit will be dismissed with prejudice. A copy of the settlement agreement is available for a fee at http://www.researcharchives.com/bin/download?id=051111022907 Headquartered in Woodland, California, Valley Media, Inc. -- http://www.valleymedia.com/-- was a full-line distributor of music and video entertainment products. The Company filed for chapter 11 protection on November 20, 2001 (Bankr. D. Del. Case No. 01-11353). Robert J. Dehney, Esq., and Michael G. Busenkell, Esq., at Morris, Nichols, Arsht & Tunnell represent the Debtor. When the Debtor sought protection from its creditors, it listed $241,547,000 in total assets and $259,206,000 in total debts. Judge Walsh entered an order confirming Valley Media's Liquidating Plan on May 6, 2005. A summary of that plan appeared in the Troubled Company Reporter on Mar. 29, 2005, and Feb. 22, 2005. VANGUARD HEALTH: Moody's Assigns B2 Corporate Family Rating ----------------------------------------------------------- Moody's Investors Service affirmed the ratings of Vanguard Health System, Inc.'s intermediate holding company, Vanguard Health Holding Company II, LLC and its co-issuer Vanguard Holding Company II, Inc., and also affirmed the ratings of Vanguard's ultimate holding company, Vanguard Health Holding Company I, LLC and its co-issuer Vanguard Holding Company I, Inc. Moody's also changed the outlook to stable from negative. The negative outlook was assigned in August 2004 when Moody's rated the transaction associated with The Blackstone Group's leveraged buyout of the company. On September 26, 2005, Vanguard refinanced and repriced its existing senior credit facilities by borrowing approximately $795.7 million of replacement term loans. Moody's also reassigned the corporate family rating to the highest consolidating entity in the organization with rated debt. Vanguard Health Holding Company I, LLC and Vanguard Holding Company I, Inc. (co-issuers): Ratings Assigned: * Corporate family rating, B2 (reassigned from VHC II LLC) Ratings Affirmed: * $216 million 11.25% senior discount notes, due October 1, 2015, Caa2 Vanguard Health Holding Company II, LLC and Vanguard Holding Company II, Inc. (co-issuers): Ratings Affirmed: * $250 million senior secured revolving credit facility, due 2010, B2 * $795.7 million senior secured term loan, due 2011, B2 * $575 million 9% senior subordinated notes, due October 1, 2014, Caa1 Ratings Withdrawn: * Corporate family rating, B2 (reassigned to VHC I LLC) The change in outlook and the affirmation of the ratings reflect Moody's belief that improved operating results at Vanguard are consistent with a company comfortably in the B2 rating category according to Moody's Global For-Profit Hospital Rating Methodology. In particular, improvements in operating cash flow relative to adjusted debt and increased demand for services at the company's hospitals are consistent with higher rating categories. The company has expanded services in its existing markets and invested in outpatient surgery centers, resulting in same-facility adjusted admissions growth of 6.3% in fiscal 2005 following growth of 6.6% in 2004. The first quarter of 2006 also experienced good same-facility adjusted admissions growth of 3.2%. As a result of its expansion efforts, Moody's expects the company to continue having solid adjusted admissions growth but does expect this metric to reduce over time to be more in line with industry growth trends. In addition, good market share has allowed Vanguard to negotiate favorable contracts with managed care, which has resulted in same- facility revenue per adjusted admission growth of 6.6% in 2005 (and 4.9% for the first quarter of 2006). As a result, same- facility revenue increased 13.8% for fiscal year 2005. The acquisition of three Massachusetts facilities from Tenet Healthcare Corporation on December 31, 2004, which the company funded through a $150 million draw on its delayed-draw term loan has diversified the company's revenue stream. These facilities accounted for about 50% of the company's consolidated 2005 revenue growth. The ratings also reflect continued high leverage a year after the September 2004 leveraged buy-out. Moody's calculates that adjusted cash flow to adjusted debt was 12% for the twelve months ended September 30, 2005. Increased capital expenditures, as a result of the company's expansion projects in its San Antonio and Phoenix markets, have resulted in slightly negative free cash flow. For the twelve months ended September 30, 2005, adjusted free cash flow to adjusted debt was -4%. The company disclosed in its most recent annual SEC filing that it expects to spend another $244.6 million on these expansion projects over the next three fiscal years. Moody's contemplated the higher level of spending in its rating last year. As a result of these capital commitments, Moody's expects near-term free cash flow to remain negative. Free cash flow may reach break-even levels if either further operational improvements and the integration of the three newly acquired facilities result in an increase in operating cash flow or expansion and acquisition activity are somewhat curtailed. The ratings consider the company's margins, which continue to be lower than the Moody's peer group, concentration of cash flow in the company's San Antonio market and management's aggressive stance towards debt-financed expansion. In addition, Moody's is concerned about trends in the hospital sector including rising numbers of uninsured and underinsured patients as well as operating expenses (bad debt, labor, supplies and insurance) that continue to be a considerable strain on margins. The stable outlook reflects Moody's expectation that Vanguard will continue to focus on operational improvements and integration of the three Massachusetts facilities. Moody's believes that Vanguard will be able to appropriately service its debt obligations through cash flow and revolver liquidity despite significant capital expenditures planned through fiscal year 2008. In addition, Moody's expects Medicare reimbursement to remain stable since CMS has again provided for an increase to inpatient reimbursement rates. If Vanguard were to engage in a significant debt-financed acquisition, the ratings could come under pressure. In addition, if margins deteriorate as a result of an increase in bad debt expense, which is currently lower than Moody's peer group average, or if the company's expansion ceases to produce a concomitant improvement in operations, the ratings could come under pressure. Moreover, if capital expenditures exceed our expectations resulting in an over reliance on the revolver without a corresponding return on investment, Moody's could downgrade the ratings. However, if Vanguard continues to improve operations, resulting in sustained adjusted free cash flow to adjusted debt greater than 5%, Moody's could upgrade the ratings. The senior secured credit facilities are notched at the level of the corporate family rating. Vanguard has significant collateral, but Moody's believes this collateral would not be adequate to cover the approximately $1 billion in senior secured debt in a reasonable distress scenario. The senior subordinated debt (at VHC II LLC) is notched two levels below the corporate family rating to reflect the notes' unsecured nature and contractual subordination to a significant amount of secured debt. The senior discount notes (at VHC I LLC) are notched three levels below the corporate family rating to reflect the structural subordination to the senior subordinated notes at VHC II LLC. Vanguard Health Systems, Inc. owns and operates 19 acute-care facilities in five states. For the twelve months ended September 30, 2005, the company generated approximately $2.4 billion in net revenue. WOLF HOLLOW: Moody's Rates Proposed $110 Million Term Loan at B2 ---------------------------------------------------------------- Moody's Investors Service assigned ratings of B1 to the proposed $130 million first lien senior secured term loan (term loan B) due 2012, $110 million first lien synthetic letter of credit facility (synthetic LC) due 2012 and to the $50 million first lien working capital facility due 2010. Moody's also assigned a rating of B2 to the proposed $110 million second lien senior secured term loan (term loan C) due 2012 issued by Wolf Hollow I L.P. (Wolf Hollow or the project). The outlook is stable. Proceeds from the term loans along with approximately $121 million of equity provided by Stark Power Generation I Holdings, LLC (sponsor) will finance the acquisition of the Wolf Hollow power generating facility by the sponsor from Carroll Energy, Inc. and fund various reserve accounts, closing costs and settle certain outstanding contract disputed amounts with the project's former EPC contractor, Stone & Webster Inc. The $110 million Synthetic LC will support the project's collateral requirements under its power offtake and fuel supply contracts. The term loan B, synthetic LC and the $50 million working capital facility will be secured on a first lien basis and the term loan C will be secured on a second lien basis by all of the project's assets and contract rights. A silent third lien position will be granted to Shaw for a subordinated pay in kind note of $6.2 million in consideration of the settlement of the aforementioned contract dispute. The ratings and stable outlook for the first and second lien debt incorporate these credit strengths: 1. Existing power purchase agreement (PPA) with Exelon Generation Company (Baa1 senior unsecured) that has eighteen years remaining and a five year PPA with J. Aron & Company (whose obligations are subject to a guaranty from the Goldman Sachs Group, Aa3 senior unsecured) 2. Offtake contracts provide for a pass through of fuel costs subject to certain minimum heat rate efficiency standards 3. Plant operations supported by operations and maintenance and long term services agreements with experienced and proven counterparties 4. A meaningful level of liquidity available to the project including the requirement to maintain a cash funded debt service reserve for a minimum six months of debt service, a $50 million working capital facility and the funding of operating and major maintenance reserves 5. A financing structure that incorporates a project style cash waterfall funding mechanism that provides a significant level of lender protection 6. A cash sweep mechanism under the financing structure that provides for 100% of the project's excess cash flow available to repay lenders 7. A meaningful level of de-levering of the first lien debt can be expected prior to final maturity These credit strengths are offset by these challenges: 1. Limited operating record and start-up performance problems that have reduced operating efficiencies below expected performance metrics 2. The project's demonstrated heat rate has been higher than the required threshold under the Exelon PPA, thereby limiting the pass through of natural gas costs 3. The firm liquidated damages basis of the J. Aron PPA exposes the project to market power prices in the event of outages, including planned maintenance outages 4. The relatively weak cash flow coverage metrics expected to be achieved by the project 5. Given the project's location in the ERCOT market, which is currently overbuilt, refinancing of the term debt at maturity will be impacted by the relative supply demand balance as the project will only benefit from the Exelon PPA for approximately 50% of the plant's output at the time the term debt matures 6. Weak credit quality of the project's natural gas supplier, El Paso Merchant Energy L.P. (guaranteed by El Paso Corporation, B3 Corporate Family Rating) 7. Additional first lien claim on the assets by J. Aron under the terms of its PPA further weakens the position of the term lenders under a distressed scenario The ratings consider the relative stability of the project's cash flows stemming from the long-term power purchase agreement with Exelon Generating Company that runs through 2023 for 350 MW (approximately 50%) of the plant's capacity (Exelon PPA) and the power purchase agreement for 330 MW with J. Aron Company (J. Aron PPA) that runs through the first five years of the financing term. The PPAs hedge approximately all of the project's cash flow during the first five years of the term of the debt and approximately 50% for the remainder of the term of the debt. Under the terms of the PPA, Exelon is required to pay the project capacity payments and purchase the energy produced by the project if dispatched. Exelon has the exclusive first priority right to dispatch the project up to the first 350 MW of contracted capacity on a unit contingent basis. Under the terms of its PPA, J. Aron has the right to capacity, energy and ancillary services up to 330 MW of output on a firm liquidated damages basis. The ratings also reflect the mitigation of natural gas price risk through the fuel cost pass through mechanisms under the Exelon and J Aron PPAs. However, Moody's notes that the reimbursement for fuel costs under the Exelon PPA is based upon a heat rate of 6,905 Btu/kWh and 7,150 Btu/kWh under the J Aron PPA. Based on the historical operating performance of the project since achieving commercial operations in August 2003 and the expected operating performance when being dispatched under the Exelon and J Aron PPAs, the lenders' independent engineer has opined that the heat rate could be expected to range from approximately 7,050 Btu/kWh to 7,250 Btu/kWh. The expected operating heat rate will expose the project to a less than optimal pass through of fuel costs under the Exelon PPA and would negatively impact overall project economics in high natural gas price scenarios. However, the J. Aron PPA mitigates fuel price risk since the contracted heat rate requirement is within the project's anticipated heat rate levels. The ratings consider the relatively weak credit quality of its fuel supplier El Paso Merchant Energy L.P. (guaranteed by El Paso Corporation, B3 corporate family rating). However, Moody's anticipates that since the gas supply is based upon market prices and is passed through under the Exelon and J. Aron PPAs, the project's gas supply needs could be met with alternate suppliers if necessary. The project has experienced operating problems that have caused higher than expected forced outage levels since the commencement of commercial operations. However, the ratings consider the performance improvements that are expected as a result of new O&M and long-term services agreements with experienced and proven service providers. Operations and maintenance will be performed by FM Operating Services, a joint venture between Fluor Corporation and Mitsubishi Power Systems. Additionally, Wolf Hollow has entered into a long-term services agreement with Mitsubishi Power Systems for a period of approximately 12 years, providing technical support, replacement parts and repair services for the project The ratings reflect the inclusion within the project structure of a meaningful level of liquidity and debt service reserves that will be cash funded at closing. The first and second lien term loans will benefit from six month debt service reserves that will be cash funded at closing. The project will benefit from operating and maintenance reserves that will be funded at approximately $11 million at closing. The financing structure also includes a $50 million working capital facility, which will be undrawn at closing and available for ongoing liquidity requirements of the project. The project is expected to carry a comprehensive insurance program that will include business interruption coverage for up to 18 months with a 45-60 day deductible period and physical damage coverage for up to $380 million. Business interruption insurance will include coverage of replacement power to fulfill the liquidated damages requirements under the J. Aron contract. The ratings recognize incorporation of a project style cash waterfall funding mechanism in the financing structure and the cash sweep mechanism whereby a 100% of excess cash flow after funding of all applicable reserve accounts under the cash waterfall will be available to prepay the first lien debt and, to the extent that first lien debt has been repaid in full, will be available to prepay second lien debt. The ratings reflect the relatively low cash flow coverage metrics. Moody's expects that the average debt service coverage ratio (assuming only the scheduled 1% amortization of the first lien term loan) for the term of the debt will be approximately 1.6x and Moody's adjusted funds from operations to debt will be approximately 6% under the pro forma base case. However, Moody's notes that approximately 98% of the project cash flows over the first five years of the term debt is based upon contractual revenues, which limits the volatility of the cash flows during this period. Additionally, in view of the cash sweep mechanism, the project is likely to see a meaningful level of de-levering of the first lien term loan prior to final maturity. The B1 ratings on the first lien secured credit facilities reflect their effective senior position in the capital structure. The B2 rating of the second lien term loan incorporates the junior claim lenders have on the collateral package and reflects the relative weaker rights of the second lien lenders under the inter creditor arrangements. However, the rating of the second lien debt incorporates Moody's expectation of a reasonable level of de-levering of the funded first lien loans with contracted cash flows, which will be expected to benefit the second lien lenders over the term. The first lien funded term debt is expected to be paid down from approximately $180/kw to approximately $92/kw at the expiration of the J. Aron contract and further down to approximately $47/kw at maturity under the base case and reasonable levels of pay down of the first lien term loan can be expected under various downside scenarios. The stable outlook reflects the degree of predictability of the project's cash flows in view of the power purchase agreements and incorporates the expectation that the project's operating performance would improve following the implementation of the O&M procedures proposed by the new operator. The assigned ratings are predicated upon the final structure and documentation being consistent with Moody's current understanding of the transaction. Wolf Hollow is a 730 MW natural gas fired combined cycle power production facility located in the Electric Reliability Council of Texas Inc. control area, approximately 30 miles southwest of Fort Worth, Texas. The project was originally developed by AES Corporation and was subsequently owned by Carroll Energy, Inc., an agent for KBC Bank N.V. who originally provided construction financing for the project. Pursuant to the proposed transaction, the project will be 100% owned indirectly by the Sponsor, Stark Power Generation I Holdings LLC. The Sponsor was established by Stark Investments, a Wisconsin based asset management firm with over $7 billion of assets under management. * Chadbourne & Parke Names Robert Sidorsky as Litigation Counsel ---------------------------------------------------------------- The international law firm of Chadbourne & Parke LLP reported that Robert Sidorsky has been named counsel in the litigation group, resident in the Firm's New York office. Mr. Sidorsky was a litigation partner at Mullin Hoard & Brown where he served as managing partner of its New York office, and prior to that, was a partner at Thacher Proffitt & Wood. Mr. Sidorsky, 47, comes to Chadbourne with more than 20 years of experience in state and federal courts. Mr. Sidorsky's practice is concentrated in the areas of accountants' liability, securities, and complex fraud litigation. Mr. Sidorsky has handled matters for corporations, trustees and government agencies in a number of high profile cases arising out of false financial reporting and misappropriation of corporate assets. Additionally, Mr. Sidorsky has broad experience representing entities in bankruptcy matters dealing with accounting issues. Mr. Sidorsky has advised foreign law firms with respect to accountant liability litigation and has worked closely with leading forensic accountants and certified fraud examiners in the United States and United Kingdom. "Seasoned litigators, with extensive expertise in accounting and securities matters, are critical in order to properly serve clients," said Thomas E. Bezanson, head of Chadbourne's litigation practice. "Robert is a welcome addition and will add to the Firm's already formidable litigation practice. The breadth of his experience is another major step forward for our commercial litigation practice, whose continued expansion illustrates the Firm's commitment to meet the evolving demands of our clients." Mr. Sidorsky has worked on a wide variety of commercial litigation for both domestic and international clients involving officer and director liability, the antifraud provisions of the federal securities laws, breach of contract and tortious interference, RICO, banking litigation, misappropriation of trade secrets, and the Lanham Act. Mr. Sidorsky has written extensively about securities law and the responsibility of auditors for detecting and reporting corporate fraud. Mr. Sidorsky earned a B.A., magna cum laude, from Harvard College, and his J.D. from Columbia Law School, where he was managing editor of the Columbia Journal of Transnational Law. About Chadbourne & Parke LLP Chadbourne & Parke LLP -- 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. ********* Monday's edition of the TCR delivers a list of indicative prices for bond issues that reportedly trade well below par. Prices are obtained by TCR editors from a variety of outside sources during the prior week we think are reliable. Those sources may not, however, be complete or accurate. The Monday Bond Pricing table is compiled on the Friday prior to publication. Prices reported are not intended to reflect actual trades. Prices for actual trades are probably different. Our objective is to share information, not make markets in publicly traded securities. Nothing in the TCR constitutes an offer or solicitation to buy or sell any security of any kind. It is likely that some entity affiliated with a TCR editor holds some position in the issuers' public debt and equity securities about which we report. Each Tuesday edition of the TCR contains a list of companies with insolvent balance sheets whose shares trade higher than $3 per share in public markets. At first glance, this list may look like the definitive compilation of stocks that are ideal to sell short. Don't be fooled. Assets, for example, reported at historical cost net of depreciation may understate the true value of a firm's assets. A company may establish reserves on its balance sheet for liabilities that may never materialize. The prices at which equity securities trade in public market are determined by more than a balance sheet solvency test. A list of Meetings, Conferences and Seminars appears in each Wednesday's edition of the TCR. Submissions about insolvency- related conferences are encouraged. Send announcements to conferences@bankrupt.com Each Friday's edition of the TCR includes a review about a book of interest to troubled company professionals. All titles are available at your local bookstore or through Amazon.com. Go to http://www.bankrupt.com/books/to order any title today. Monthly Operating Reports are summarized in every Saturday edition of the TCR. For copies of court documents filed in the District of Delaware, please contact Vito at Parcels, Inc., at 302-658-9911. For bankruptcy documents filed in cases pending outside the District of Delaware, contact Ken Troubh at Nationwide Research & Consulting at 207/791-2852. ********* S U B S C R I P T I O N I N F O R M A T I O N Troubled Company Reporter is a daily newsletter co-published by Bankruptcy Creditors' Service, Inc., Fairless Hills, Pennsylvania, USA, and Beard Group, Inc., Frederick, Maryland USA. Yvonne L. Metzler, Emi Rose S.R. Parcon, Rizande B. Delos Santos, Jazel P. Laureno, Cherry Soriano-Baaclo, Marjorie Sabijon, Terence Patrick F. Casquejo, Christian Q. Salta, Jason A. Nieva, Lucilo Pinili, Jr., Tara Marie Martin, and Peter A. Chapman, Editors. Copyright 2005. All rights reserved. ISSN: 1520-9474. This material is copyrighted and any commercial use, resale or publication in any form (including e-mail forwarding, electronic re-mailing and photocopying) is strictly prohibited without prior written permission of the publishers. 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 ***