/raid1/www/Hosts/bankrupt/TCR

/raid1/www/Hosts/bankrupt/TCR_Public/060110.mbx T R O U B L E D C O M P A N Y R E P O R T E R Tuesday, January 10, 2006, Vol. 10, No. 8 Headlines ACURA PHARMA: Issues 330,705 Shares to Pay Interest on Sec. Notes ADVOCAT INC: Buyer Terminates Sale of One North Carolina Facility AIRIQ INC: In Talks with Lenders to Amend $10 Mil. Credit Facility AMC ENT: Loews Merger Earns S&P's Junk Senior Subordinated Rating AMERICAN TECHNOLOGIES: Posts $11MM Net Loss in FY 2006 1st Quarter ANCHOR GLASS: AP Services Enters as Crisis Manager ANCHOR GLASS: Court Denies Davidco's Request for Rule 2004 Probe ANCHOR GLASS: Move to Appoint Retired Workers Committee Fails ARLINGTON HOSPITALITY: Panel Has Until Jan. 31 to Dispute Claims ARLINGTON HOSPITALITY: Wants Court Okay on Pact with Pyramids ARMSTRONG WORLD: Wants to Assume Amended Automotive Rentals Pact ASARCO LLC: Adoption of Modified Prudential Futures Contracts OK'd AUSTIN CO: Wants to Assume and Assign Agreements to Kajima USA BANCO DO BRASIL: Moody's Rates Proposed $300 Million Debt at Ba1 BISYS GROUP: Inks New $400 Million Credit Facility BROKERS INC: Liquidation Plan Confirmation Hearing Set for Jan. 25 BROKERS INC: Excl. Plan Solicitation Period Stretched to March 1 BROKERS INC: Wants to Sell Real Property in Virginia for $254,034 CALPINE POWERAMERICA: Voluntary Chapter 11 Case Summary CHESAPEAKE CORP: Industry Overcapacity Cues S&P to Lower Ratings CINCINNATI BELL: Exercise of Put Option Cues S&P to Watch Ratings COLLINS & AIKMAN: Plans To Close Premier Tooling Facility COLLINS & AIKMAN: Says Breitkreuz Has No Right to Protection COLLINS & AIKMAN: Secures Chrysler Supply Contract CONTECH CONSTRUCTION: S&P Rates Proposed $100 Mil. Facility at B+ DATAMETRICS CORPORATION: Completes Debt Restructuring with SG DMTI DON SIMPLOT: Hires Jerome Shulkin & Joseph Meier as Bank. Counsel DON SIMPLOT: U.S. Trustee Will Meet Creditors on Feb. 9 ENER1 INC: Posts $33 Mil. Net Loss in Quarter Ended September 30 ENRON CORP: Court OKs Five Point Stock Purchase & Sale Agreement ERHC ENERGY: Malone & Bailey Raises Going Concern Doubt FASHION HOUSE: Incurs $1.5 Mil. Net Loss in Third Quarter of 2005 FEDERAL-MOGUL: Cooper Resolving Asbestos Liabilities Thru Trust FEDERAL-MOGUL: Files Adversary Case vs. Bobby Whitley, et al. FLYI INC: Postpones Auction and Will Amend Bidding Procedures FOSS MANUFACTURING: Ch. 11 Trustee Hires DSI as Consultant FOSS MANUFACTURING: Gordian Group Hired as Investment Banker GREAT ATLANTIC: Posts $71 Million Net Loss in Third Quarter HARBORVIEW MORTGAGE: S&P Upgrades Class B-4 Certs. to BB+ from BB INERGY L.P.: Intends to Sell $200 Mil. Notes in Private Placement INTERSTATE BAKERIES: Court Approves Sieckmann Settlement Pact INTERSTATE BAKERIES: W. Spencer Buys Evans Property for $7.2M J. CREW: Operating Unit Can Access $335M Term Loan until March 30 KAISER ALUMINUM: Court Amends Settlement Pact Order with St. Paul KAISER ALUMINUM: Will Sell Spokane Valley Property for $418,176 LEAR CORP: Weakened Operating Profile Prompts Fitch's BB+ Rating LONG BEACH: Fitch Junks Ratings on Four Certificate Classes LORETTO-UTICA: Court Approves Menter Rudin as Counsel MCI INC: Closes Merger Deal with Verizon Communications MCLEODUSA INC: Exits Chapter 11 with Deleveraged Balance Sheet METROPOLITAN MORTGAGE: Inks Settlement Pact with OWALC & OSLAC METROPOLITAN MORTGAGE: Sells Lottery Receivables to Stone Street MILLS CORPORATION: Seeks Waiver on Line of Credit Default MILLS CORPORATION: Discloses Strategic Plan to Improve Operations MILLS CORPORATION: Appoints Edward Civera as Independent Director MIRANT CORP: Asks Court to Approve Russlyn Hanson-Sexton Agreement MIRANT CORP: California DWR Sells Unsecured Claims for $189.4 Mil. MIRANT: Gets Court Okay to Implement Equity Distribution Protocol NDCHEALTH CORPORATION: Per-Se Completes Acquisition of Business NDCHEALTH CORP: Wolters Kluwer Completes Purchase of IM Business NEXMED INC: Receives Nasdaq Delisting Warning Letter NORTHWEST AIRLINES: Committee Hires FTI as Financial Advisors NORTHWEST AIRLINES: Court Extends Removal Period to June 12 NORTHWEST AIRLINES: Lazard Approved as Panel's Financial Advisors O'SULLIVAN IND: Files First Amended Plan & Disclosure Statement O'SULLIVAN IND: Taps Edward Howard as Consultant on Interim Basis O'SULLIVAN IND: U.S. Trustee Balks at Chanin Capital's Retention OMEGA HEALTHCARE: Gets $173.4M from Private Placement of Sr. Notes OMNOVA SOLUTIONS: Financial Profile Earns S&P's Positive Outlook OWENS CORNING: Wants to Implement 2006 Retention Program PELICAN INLET: Case Summary & 9 Largest Unsecured Creditors PINNACLE ENT: Six Mil. Equity Offering Spurs S&P to Review Ratings QUEBECOR MEDIA: S&P Puts B Rating on Planned Bank Loan Facilities QUIGLEY CO: Court Approves Settlement With Pfizer & Centennial REFCO INC: Committee, et al., Balk at Ch. 11 Trustee Request REFCO INC: Wants Court to Approve RGL $43,120 Break-Up Fee REFCO INC: Wants Bid Procedures for PCIG Interest Sale Approved RH DONNELLEY: S&P Rates Proposed $2.142 Billion Senior Notes at B+ ROWECOM INC: Liquidating Trustee Makes 6% Interim Distribution SKYWAY COMMS: Judge Glenn Directs UST to Name Chapter 11 Trustee SNAP2 CORP: Files Delinquent Fiscal Year 2004 Financial Results TOWER AUTOMOTIVE: Retirees' Committee Seeks Clarification TOWER AUTOMOTIVE: Retirees Committee Taps Bridge as Fin'l Advisor TOWER AUTOMOTIVE: Wants to Reject Collective Bargaining Pacts TRM CORP: Discloses Stockholders Reselling 2.78M Shares U.S. PLASTIC: Wants to Sell Assets to AMPAC Capital for $5.5 Mil. UAL CORP: Committee Taps Watson Wyatt as Investment Consultants UAL CORP: Committee Wants Discount Rate Set for $8.3BB PBGC Claims UAL CORP: Court Authorizes Bid for FLYi Assets UAL CORP: Launches $3 Billion Exit Financing Facility UAL CORP: S&P Rates $3 Billion Senior Secured Debts at B+ UNITED HOSPITAL: Selling Real Property to Port Chester for $22MM USG CORP: Law Firms Want More Time to Complete Questionnaires USG CORP: Wants Until June 30 to File Plan of Reorganization WESTPOINT STEVENS: Balks at Steering Committee's Lift Stay Motion WESTPOINT STEVENS: Steering Panel Wants Dist. Ct. Order Followed WINBLE CORPORATION: Case Summary & 14 Largest Unsecured Creditors * Large Companies with Insolvent Balance Sheets ********* ACURA PHARMA: Issues 330,705 Shares to Pay Interest on Sec. Notes ----------------------------------------------------------------- Acura Pharmaceuticals, Inc., issued 330,705 shares of its common stock, $.01 par value per share, to the holders of a secured promissory note in the principal amount of $5 million, dated as of December 20, 2002. The issuance of the common shares represents an in-kind payment of accrued and unpaid interest on the Note for the quarter ended December 31, 2005. Peter A. Clemens, Acura Pharmaceuticals, Inc.'s senior vice president & chief financial officer, informed the Securities and Exchange Commission in a regulatory filing on September 30, 2005, that the Company issued the shares in reliance upon the exemption from registration provided by Section 4(2) of the Securities Act of 1933, as amended and Regulation D promulgated under the Securities Act of 1933. At the time of acquisition of the Note, the Noteholders represented to the Company that each of them was an accredited investor as defined in Rule 501(a) of the Securities Act of 1933 and that the Note and any securities issued pursuant thereto were being acquired for investment purposes. Acura Pharmaceuticals, Inc. -- http://www.acurapharm.com/-- together with its subsidiaries, is an emerging pharmaceutical technology development company specializing in proprietary opioid abuse deterrent formulation technology. * * * At Sept. 30, 2005, Acura Pharmaceuticals' balance sheet showed a $4,889,000 stockholders' deficit, compared to a $1,085,000 deficit at Dec. 31, 2004. ADVOCAT INC: Buyer Terminates Sale of One North Carolina Facility ----------------------------------------------------------------- Advocat Inc. (NASDAQ OTC: AVCA) has signed an agreement to extend the lease of four Florida nursing homes for an additional term of four years. The Company also reported that an agreement to sell one assisted living facility in North Carolina was terminated by the buyer. The facility is unrelated to the previously announced transaction to sell 11 assisted living facilities in North Carolina. Advocat's lease for the four nursing homes in Florida was to expire December 31, 2005. Under terms of the new agreement, the lease term was extended through February 2010. The four nursing homes are subject to mortgages held by Omega Healthcare Investors, Inc., and Advocat makes the lease payments directly to Omega. In November 2005, Advocat disclosed the sale for all its North Carolina assisted living facilities in two transactions. The termination of the agreement to sell the single facility for $3.5 million is unrelated to the agreement to sell the remaining 11 facilities for approximately $11 million to Agemark Acquisition, LLC, a North Carolina limited liability company. Advocat will continue to list the single facility for sale and expects the transaction with Agemark to close sometime during the first quarter of 2006. Advocat Inc. -- http://www.irinfo.com/avc-- provides long-term care services to nursing home patients and residents of assisted living facilities in nine states, primarily in the Southeast. * * * As reported in the Troubled Company Reporter on Apr. 25, 2005, BDO Seidman LLP raised substantial doubt about Advocat Inc.'s ability to continue as a going concern after it audited the Company's financial statements for the year ended Dec. 31, 2004. The Company incurred operating losses in two of the three years in the period ended December 31, 2004, and although the Company reported a profit for the year ended December 31, 2004, that profit primarily resulted from non-cash expense reductions caused by downward adjustments in the Company's accrual for self-insured risks associated with professional liability claims. AIRIQ INC: In Talks with Lenders to Amend $10 Mil. Credit Facility ------------------------------------------------------------------ AirIQ Inc. (TSX:IQ) is in discussions with its lender to amend its credit facility. The credit facility is currently a $10 million 364-day non-revolving credit facility and funds drawn on the facility bear interest at varying margins based on the lender's Canadian prime rate, United States base rate or banker's acceptance reference rate and are secured by a general security agreement and first priority mortgage over all of the assets of AirIQ. Non-Compliance with Financial Covenants AirIQ also reported that it was not in compliance with two financial covenants in the current credit agreement that governs its credit facility. The referenced financial covenants relate to the three-month period ended Nov. 30, 2005 which figures were required to be reported to the lender on January 3, 2006. AirIQ expects that its lender will waive the requirement to have complied with these covenants for the period ended November 30, 2005. AirIQ Inc. - http://www.airq.com/-- trades on the Toronto Stock Exchange under the symbol IQ. A leader in global wireless security, AirIQ is headquartered in Pickering, near Toronto, Canada, with offices in Lake Forest and San Diego, California, U.S.A. operates as a wireless Internet applications service provider specializing in Telematics. Telematics is the name given to information and control messages sent wirelessly to and from vehicles and vessels. AirIQ's services are offered to five primary markets: Commercial Fleets; Consumer; Vehicle Finance; Indirect Distribution; and Marine Fleets. AirIQ gives vehicle and vessel owners the abilities to manage and protect their mobile assets. AirIQ's services include: vehicle locating, boundary notification, automated inventory, maintenance reminders, security alerts, vehicle disabling, unauthorized movement alerts and many more features. AMC ENT: Loews Merger Earns S&P's Junk Senior Subordinated Rating ----------------------------------------------------------------- Standard & Poor's Ratings Services assigned ratings to the senior secured credit facilities and the senior subordinated notes that will be issued by AMC Entertainment Inc. upon closing of its merger with Loews Cineplex Entertainment Corp. AMC Entertainment will be the surviving entity and retain its name over the merged entity. The company's parent will remain Marquee Holdings Inc. The senior secured credit facilities were rated 'B+', with a recovery rating of '1', indicating a high expectation of full recovery of principal in the event of a payment default. The senior subordinated notes were rated 'CCC+'. At the same time, Standard & Poor's stated it expects to affirm all its existing ratings on AMC and Marquee, including the 'B' corporate credit ratings on the post merger company and Marquee, upon review of the final credit agreement. The outlook is expected to be negative after the closing of the transaction. The Kansas City, Missouri-based movie exhibitor is rated on a consolidated basis with its parent. Following the merger, the company will have approximately $2.5 billion in debt and $3 billion in present value of operating leases. "The rating reflects the company's high leverage, weak profit margins relative to peers, participation in a highly competitive industry, and reliance on the popularity of Hollywood films," said Standard & Poor's credit analyst Tulip Lim. These risks are partially offset by the company's modern theater circuit relative to other major theater chains, its large and geographically diverse U.S. operations, and some international diversity. The pending merger should strengthen the already solid competitive profile of the combined companies in large metropolitan U.S. markets, enhance profitability through cost reductions and scale advantages, and allow for better coordination of assets and capital spending. AMC's EBITDA margins are currently somewhat below average because of high fixed costs resulting from its heavy reliance on lease financing. The addition of Loews' higher margin operations, together with expected merger benefits, should facilitate an increase in the new AMC's EBITDA margins. The merger should also allow for better management of the combined companies' assets and capital expenditures and has the potential to improve the combined companies' discretionary cash flow. Even so, the integration of the companies will take some time, and there is the risk that the company will not execute their cost savings strategy to the extent planned. Pro forma lease-adjusted leverage will be high, and pro forma lease-adjusted coverage of interest is low. In 2005, AMC and Loews' profitability and discretionary cash flow were strained by negative box office trends. If box office trends are negative in the near-to-intermediate term, AMC's leverage will increase. Its liquidity will also suffer, especially given significant capital spending plans in the short term and the cash drain from severance payment charges. AMERICAN TECHNOLOGIES: Posts $11MM Net Loss in FY 2006 1st Quarter ------------------------------------------------------------------ American Technologies Group, Inc., delivered its financial results for the quarter ended Oct. 31, 2005, to the Securities and Exchange Commission on Dec. 22, 2005. For the three months ended Oct. 31, 2005, American Technologies incurred an $11,459,328 net loss on $3,992,505 of net sales, compared to a $111,554 net loss on $3,611 of net sales for the same period in 2004. Also, as of Oct. 31, 2005, the Company's balance sheet showed $18,552,282 in total assets, total liabilities of $18,080,985, and an accumulated deficit of $69,680,139. Whitco Acquisition American Technologies has entered into a letter of intent to acquire 100% of the partnership interests of Whitco Company, LP, from Catalyst Lighting Group, Inc., and Whitco Management, LLC, the general partner of Whitco and a wholly owned subsidiary of Catalyst. The letter of intent was approved by the Board of Directors of Catalyst Lighting Group, Inc., and signed on Dec. 23, 2005. Whitco provides light poles to commercial and industrial markets worldwide. Whitco provides marketing expertise and engineering knowledge to a nationwide contracted lighting representative base as well as OEM customers. "We believe this acquisition is a win-win for all parties involved," said William N. Plamondon, CEO of American Technologies Group. "Their profile fits our acquisition strategy and we will be able to work with them to grow the company." Going Concern Doubt Russell Bedford Stefanou Mirchandani LLP expressed substantial doubt about American Technologies' ability to continue as a going concern after it audited the Company's financial statements for the fiscal year ended July 31, 2005. The auditing firm pointed to the Company's recurring losses and insufficient cash flows to meet obligations and sustain its operations. About American Technologies American Technologies Group, Inc.,(OTC BB: ATGR), through its wholly owned subsidiary, North Texas Steel Company, Inc., is an American Institute of Steel Construction certified structural steel fabrication company and provides fabrication and detailing of structural steel components for commercial buildings, office buildings, convention centers, sports arenas, airports, schools, churches and bridges. ANCHOR GLASS: AP Services Enters as Crisis Manager -------------------------------------------------- The U.S. Bankruptcy Court for the Middle District of Florida authorized Anchor Glass Container Corporation to retain AP Services, LLC, as its crisis manager pursuant to the terms of an engagement letter dated Sept. 6, 2005. Under the APS Engagement Letter, Anchor and APS agree that: -- APS will provide, at Anchor's request, temporary employees to assist the Debtor in its restructuring efforts; and -- APS' Managing Director, John S. Dubel, will serve as the Debtor's Chief Restructuring Officer under the direct supervision of Anchor's Chief Executive Officer and the Special Committee of the Board of Directors. As CRO, Mr. Dubel will assist the Debtor in evaluating and implementing strategic and tactical options through the restructuring process. Mr. Dubel's hourly rate is $650. In addition to Mr. Dubel, the Temporary Staff that APS will provide include: Name Position Hourly Rate Commitment ---- -------- ----------- ---------- Jon Shell Assistant Treasurer $410 As Needed Ted Stenger TBD $670 As Needed Anchor will pay APS' employees at these hourly rates: Professional Hourly Rates ------------ ------------ Managing Directors $540 - $690 Directors $430 - $520 Vice Presidents $300 - $400 Associates $225 - $280 Analysts $150 - $190 The Bankruptcy Court further allowed the Debtor to pay the contemplated Contingent Success Fee. The Contingent Success Fee is an integral part of APS' compensation for the engagement. The Debtor will pay APS a $400,000 Contingent Fee on the earlier of: (i) confirmation of a Plan of Reorganization by the Court; or (ii) a sale of all or substantially all of the assets of the Debtor pursuant to a Court order. The Contingent Success Fee is not payable if APS is terminated for cause or if the Debtor's bankruptcy case is converted to Chapter 7. Headquartered in Tampa, Florida, Anchor Glass Container Corporation is the third-largest manufacturer of glass containers in the United States. Anchor manufactures a diverse line of flint (clear), amber, green and other colored glass containers for the beer, beverage, food, liquor and flavored alcoholic beverage markets. The Company filed for chapter 11 protection on Aug. 8, 2005 (Bankr. M.D. Fla. Case No. 05-15606). Robert A. Soriano, Esq., at Carlton Fields PA, represents the Debtor in its restructuring efforts. When the Debtor filed for protection from its creditors, it listed $661.5 million in assets and $666.6 million in debts. (Anchor Glass Bankruptcy News, Issue No. 15; Bankruptcy Creditors' Service, Inc., 215/945-7000) ANCHOR GLASS: Court Denies Davidco's Request for Rule 2004 Probe ---------------------------------------------------------------- The U.S. Bankruptcy Court for the Middle District of Florida denied Davidco Investors, LLC's request to serve Anchor Glass Container Corporation with a Rule 2004 subpoena duces tecum, seeking production of certain documents, without examination. As reported in the Troubled Company Reporter on Nov. 28, 2005, Davidco, on behalf of itself as lead plaintiff and others similarly situated, filed a consolidated amended class action complaint against the Debtor and certain of the Debtor's officers and directors and third parties in the U.S. District Court for the Middle District of Florida. Craig P. Rieders, Esq., at Geneovese Joblove & Battista, PA, in Miami, Florida, noted that the Debtor's Schedules of Assets and Liabilities and Statement of Financial Affairs list 21 insurance policies. Mr. Rieders said he also saw a list of certain policies on an exhibit attached to the Debtor's motion to enter into an insurance premium financing agreement. "Some of the policies listed by the Debtor in its schedules may provide coverage with respect to the claims at issue in the Class Action Complaint," Mr. Rieders says. Mr. Rieders says Davidco has made written and oral requests for the information sought but has failed to receive the information. Headquartered in Tampa, Florida, Anchor Glass Container Corporation is the third-largest manufacturer of glass containers in the United States. Anchor manufactures a diverse line of flint (clear), amber, green and other colored glass containers for the beer, beverage, food, liquor and flavored alcoholic beverage markets. The Company filed for chapter 11 protection on Aug. 8, 2005 (Bankr. M.D. Fla. Case No. 05-15606). Robert A. Soriano, Esq., at Carlton Fields PA, represents the Debtor in its restructuring efforts. When the Debtor filed for protection from its creditors, it listed $661.5 million in assets and $666.6 million in debts. (Anchor Glass Bankruptcy News, Issue No. 15; Bankruptcy Creditors' Service, Inc., 215/945-7000) ANCHOR GLASS: Move to Appoint Retired Workers Committee Fails ------------------------------------------------------------- The U.S. Bankruptcy Court for the Middle District of Florida denied Robert L. Simmons, Edna Rusnak and Hiram Miller's request to appoint a committee of Anchor Glass Container Corporation's retired employees under Section 1114 of the Bankruptcy Code. As reported in the Troubled Company Reporter on Nov. 28, 2005, Mr. Simmons, et al., asked for the formation of the retired employees' committee in order to pursue the collection of unpaid retirement benefit claims. The three retirees worked for Glass Containers Corporation. At the time of their retirement, Mr. Simmons, et al., and their enrolled spouses qualified to receive "retiree benefits" as the term is defined in Section 1114(a) of the Bankruptcy Code. The retiree benefits are not covered by a collective bargaining agreement. The Debtor succeeded to GCC's obligation to provide "retiree benefits" to Mr. Simmons, et al., through various acquisition and merger transactions. However, pursuant to a letter dated July 20, 2005, the Debtor informed the Mr. Simmons, et al., that effective October 1, 2005, it is not going to pay for their retiree benefits. Court's Ruling Judge Paskay explains that under Section 1114(d) of the Bankruptcy Code, the Court is required to appoint a committee, only if a debtor seeks to modify or not pay the retiree benefits. Judge Paskay notes the call for retiree representation was triggered by a July 20, 2005 letter from the Debtor's manager of Benefits Administration, notifying the Retired Employees that the Debtor's 1988 Plan, in which they were members would be modified effective October 1, 2005. The letter said that the retirees would be made to pay all required premiums if they want to participate under the modified Plan. Although the July 20 Letter provided that the change to the 1988 Plan was effective October 1, 2005, the change to the 1988 Plan was effective as of July 20, 2005, when the Letter was sent. The 1988 Plan was therefore modified prepetition, Judge Paskay says. Since the modifications took place before the Petition Date, Section 1114(d) is not applicable. The Retired Employees were at one time employees of Glass Containers Corporation and were participants in a Group Comprehensive Medical & Dental Plan maintained by Glass Containers. Glass Containers was acquired by Container General Corporation, which maintained a plan for the employees entitled "General Group Benefit Plan." In 1985, Diamond-Bathurst, Inc., acquired ownership of Container General. The Court notes that the record is devoid of any evidence proving which of any of the health insurance benefits plans were in effect at that time. In 1987, by which time the Retired Employees were already retired, Anchor Glass Container Corporation acquired Diamond-Bathurst. Despite their retirements, the Retired Employees remained participants in the benefits plan maintained by Anchor Glass and were covered by the 1988 Plan. Under the 1988 Plan, retirees were entitled to participate in the health and welfare plan for themselves and their qualified dependents for the rest of their lives. Judge Paskay further notes that the 1988 Plan reserved the right to the Plan Administrator to change or eliminate benefits under the plan and terminate the plan or portions of it. Headquartered in Tampa, Florida, Anchor Glass Container Corporation is the third-largest manufacturer of glass containers in the United States. Anchor manufactures a diverse line of flint (clear), amber, green and other colored glass containers for the beer, beverage, food, liquor and flavored alcoholic beverage markets. The Company filed for chapter 11 protection on Aug. 8, 2005 (Bankr. M.D. Fla. Case No. 05-15606). Robert A. Soriano, Esq., at Carlton Fields PA, represents the Debtor in its restructuring efforts. When the Debtor filed for protection from its creditors, it listed $661.5 million in assets and $666.6 million in debts.(Anchor Glass Bankruptcy News, Issue No. 15; Bankruptcy Creditors' Service, Inc., 215/945-7000) ARLINGTON HOSPITALITY: Panel Has Until Jan. 31 to Dispute Claims ---------------------------------------------------------------- The Official Committee of Unsecured Creditors of Arlington Hospitality, Inc., and its debtor-affiliates sought and obtained an extension until Jan. 31, 2006, from the U.S. Bankruptcy Court for the Northern District of Illinois, Eastern Division, of the deadline within which it may dispute: -- the validity of LaSalle Bank National Association's prepetition liens; and -- the extent of LaSalle's secured status. The Committee wants more time to review the value of LaSalle's collateral to determine whether LaSalle's claims are 100% secured. Interim DIP Financing Order The Company obtained an $11 million DIP Financing Facility consisting of: -- a $6 million revolving loan; -- a $1 million Term Loan A; and -- a $4 million of Term Loan B. Under its Interim DIP Order, the Court authorized the Debtors to borrow up to $6 million under the revolver pending the entry of a final order on the financing motion. The Interim DIP Order authorizes the Debtors to repay the prepetition indebtedness owed to LaSalle on a provisional basis. The Debtors subsequently drew down on their postpetition loan and paid LaSalle approximately $3.5 million. The Committee tells the Court that if the provisional payment is permitted to become final and it is subsequently determined that LaSalle is undersecured, LaSalle will have received a cash payment in full on account of the unsecured portion of its claim. This windfall, the Committee says, would be contrary to the absolute priority rule established in the Bankruptcy Code and would deplete the value available for distribution to the Debtors' unsecured creditors. Headquartered in Arlington Heights, Illinois, Arlington Hospitality, Inc., and its affiliates develop and construct limited service hotels and own, operate, manage and sell those hotels. The Debtors operate 15 AmeriHost Inn Hotels under leases from PMC Commercial Trust. Arlington Hospitality, Inc., serves as a guarantor under these leases. Arlington Inns Inc., an affiliate, filed for bankruptcy protection on June 22, 2005 (Bankr. N.D. Ill. Case No. 05-24749), the Honorable A. Benjamin Goldgar presiding. Arlington Hospitality and additional debtor- affiliates filed for chapter 11 protection on Aug. 31, 2005 (Bankr. N.D. Ill. Lead Case No. 05-34885). Catherine L. Steege, Esq., at Jenner & Block LLP, provides the Debtors with legal advice and Chanin Capital LLC serves as the company's investment banker. As of March 31, 2005, Arlington Hospitality reported $99 million in total assets and $94 million in total debts. ARLINGTON HOSPITALITY: Wants Court Okay on Pact with Pyramids ------------------------------------------------------------- Arlington Hospitality, Inc., and its debtor-affiliates ask the U.S. Bankruptcy Court for the Northern District of Illinois, Eastern Division, for authority to enter into a settlement agreement with Pyramids Allen Hotel, L.P. On Dec. 20, 2001, Arlington sold one of its hotels in Allen, Texas, to Pyramids. As part of the sale, Pyramids delivered a $300,000 stand-by purchase money installment note, due Dec. 20, 2021, and a consulting agreement. The note is secured by a subordinated deed of trust, assignment of leases and rents, and a security agreement. The Debtors' asset purchase agreement with Sunburst Hotel Holdings, Inc., and a back-up asset purchase agreement with Deer Island Partners LLC, expressly exclude Pyramids' note, consulting agreement and the deed of trust from the assets to be purchased. The Debtors and Pyramids have reached an agreement to discount Pyramids' obligations under the note, consulting agreement and deed of trust. Under the settlement, Pyramids will be released from its obligations upon a lump payment of $200,000 to Arlington. Liquidating the note will allow the Debtors to make distributions to creditors more quickly than if it were required to wait until the note becomes due in 2021. Headquartered in Arlington Heights, Illinois, Arlington Hospitality, Inc., and its affiliates develop and construct limited service hotels and own, operate, manage and sell those hotels. The Debtors operate 15 AmeriHost Inn Hotels under leases from PMC Commercial Trust. Arlington Hospitality, Inc., serves as a guarantor under these leases. Arlington Inns Inc., an affiliate, filed for bankruptcy protection on June 22, 2005 (Bankr. N.D. Ill. Case No. 05-24749), the Honorable A. Benjamin Goldgar presiding. Arlington Hospitality and additional debtor- affiliates filed for chapter 11 protection on Aug. 31, 2005 (Bankr. N.D. Ill. Lead Case No. 05-34885). Catherine L. Steege, Esq., at Jenner & Block LLP, provides the Debtors with legal advice and Chanin Capital LLC serves as the company's investment banker. As of March 31, 2005, Arlington Hospitality reported $99 million in total assets and $94 million in total debts. ARMSTRONG WORLD: Wants to Assume Amended Automotive Rentals Pact ---------------------------------------------------------------- On February 6, 1998, Armstrong World Industries, Inc., and Automotive Rentals, Inc., entered into an agreement, pursuant to which Automotive Rentals agreed to lease vehicles as may be requested by AWI from time to time. AWI and Automotive Rentals repeatedly amended the Lease and Fleet Management Services Agreement. The fourth and last amendment was on October 8, 1999. The principal terms of the Amended Automotive Rentals Agreement are: a. Ordering, Delivery and Acceptance of Vehicles AWI sends Automotive Rentals written orders for vehicles to be leased and specifies a make, model, equipment and delivery point; b. Individual Lease Agreement On the delivery of each vehicle, Automotive Rentals delivers to AWI a Motor Vehicle Lease Agreement, which identifies the vehicle and sets forth the monthly rental payments; c. Vehicle Lease Term After the expiration of a vehicle's initial lease term, the lease relating to that vehicle is extended on a month-to- month basis until the Depreciation Period, which is 30, 36, 40, 44, 50 or 57 months or less, as specified in a terms and conditions of the lease agreement; d. Monthly Payments AWI pays monthly rental payments by the 15th of every month. Further, AWI pays Automotive Rentals a late payment penalty in the amount of the then current prime rate, as set forth in the "Money Rates" section of The Wall Street Journal, applied to the amount due of any invoice outstanding as of the due date; e. Assignment of Rentals Automotive Rentals may assign all of its rights, title, and interest in each Motor Vehicle Lease Agreement to a financing institution in which AWI is required to remit to Automotive Rental's assignee any remaining monthly rental payments owed; f. Lease Termination Fee AWI must pay Automotive Rentals an undisclosed lease termination fee; g. Disposition after Surrender of Leased Vehicles After AWI surrenders possession of a leased vehicle, Automotive Rentals sells that vehicle and retains any costs in transporting the vehicle or in making any pre-sale repairs. Automotive Rentals pays to AWI, as a rental adjustment on automobiles and light trucks -- under 11,000-lb gross vehicle weight -- 100% of any excess of the net resale proceeds over the depreciated value. If the net resale proceeds are less than the depreciated value of the vehicle, then AWI must pay a rental adjustment for the deficiency, provided that Automotive Rentals guarantees to AWI minimum net resale proceeds equal to 20% of the capitalized value at the beginning of the initial lease term. If AWI extends the lease beyond the initial lease term, Automotive Rentals guarantees 25% of the Fair Value of the vehicle at the inception of the concluding month's extension period. Those guarantees are limited to vehicles whose mileage does not exceed 1,667 miles per month; h. Fleet Management Services In addition to leasing vehicles to AWI, Automotive Rentals also provides certain services with respect to the passenger vehicles and light-duty trucks leased. The Maintenance Programs -- covering the cost, term, and other details applicable to these services -- are: * Coverall Program; * Budget Maintenance Program; * 24-Hour Roadside Assistance Program; * Accident Reporting or Claims Analysis, Appraisals and Repairs Program; * Subrogation Recovery Program; * Driver Abstract Program; * Fleet Administration Program; and * Renewal Management Program; i. Insurance AWI carries insurance for Automotive Rentals' benefit, with a minimum single limit of $1,000,000 for bodily injury and a minimum single limit of $100,000 for property damage; j. Indemnification AWI must indemnify and hold Automotive Rentals harmless against loss or liability arising out of the condition, operation and possession of any vehicle, or any loss or liability resulting from any repair or maintenance to the vehicle until Automotive Rentals repossess the vehicle; k. Default In the event of a default in any payments or in the performance of any covenant, the non-defaulting party notifies the defaulting party of the default and, if the default remains uncorrected for 10 days, the non-defaulting party may pursue any remedies it may have under the Amended Automotive Rentals Agreement; l. Cancellation The Amended Automotive Rentals Agreement may be cancelled upon 60 days' written notice to the other party. Rebecca L. Booth, Esq., at Richards, Layton & Finger, P.A., in Wilmington, Delaware, informs Judge Fitzgerald that under the Amended Automotive Rentals Agreement, AWI currently leases 14 vehicles for a total monthly rent of $1,500 to $2,000, inclusive of fees related to the Maintenance Programs. Ms. Booth relates that on August 29, 2001, Automotive Rentals filed a prepetition general unsecured claim -- Claim No. 3451 -- against AWI for $45,586, on account of amounts allegedly due to Automotive Rentals under the Amended Automotive Rentals Agreement. AWI objected to the Claim. The Court then sustained AWI's objection pertaining to the Automotive Rentals Claim and reduced and allowed it for $32,148. According to Ms. Booth, since the Automotive Rentals Claim was allowed, the parties have determined that AWI has a credit balance equal to $86,993. The Credit Balance represents funds accrued prepetition in connection with the Coverall Program. AWI continues to lease vehicles from Automotive Rentals and believes that assuming the Amended Automotive Rentals Agreement is in the best interests of its estate and creditors. Thus, AWI seeks Judge Fitzgerald's authority to assume the Agreement. In addition, AWI seeks to offset the Credit Balance against the amount AWI owes to Automotive Rentals pursuant to the Automotive Rentals Claim. Headquartered in Lancaster, Pennsylvania, Armstrong World Industries, Inc. -- http://www.armstrong.com/-- the major operating subsidiary of Armstrong Holdings, Inc., designs, manufactures and sells interior finishings, most notably floor coverings and ceiling systems, around the world. The Company and its debtor-affiliates filed for chapter 11 protection on December 6, 2000 (Bankr. Del. Case No. 00-04469). Stephen Karotkin, Esq., at Weil, Gotshal & Manges LLP, and Russell C. Silberglied, Esq., at Richards, Layton & Finger, P.A., represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $4,032,200,000 in total assets and $3,296,900,000 in liabilities. As of March 31, 2005, the Debtors' balance sheet reflected a $1.42 billion stockholders' deficit. (Armstrong Bankruptcy News, Issue No. 85; Bankruptcy Creditors' Service, Inc., 215/945-7000) ASARCO LLC: Adoption of Modified Prudential Futures Contracts OK'd ------------------------------------------------------------------ ASARCO LLC sought and obtained authority from the U.S. Bankruptcy Court for the Southern District of Texas in Corpus Christi to: (1) assume the Prudential Contracts, as modified; (2) enter into Postpetition Futures Contracts with Prudential; and (3) enter into a new Account Agreement with respect to Postpetition Futures Contracts. As previously reported in the Troubled Company Reporter on Dec. 19, 2005, ASARCO has 95 prepetition futures contracts with Prudential Financial Derivatives, LLC, consisting of: * 23 contracts of December 2005 CMX copper, * 57 contracts of March 2006 CMX copper, * 13 contracts of May 2006 CMX copper, and * two contracts of July 2006 CMX copper. Moreover, since it continues to be in the market for selling copper for future delivery at fixed prices, ASARCO's operations will be less subject to price fluctuations if it can enter into new contracts as the former contracts terminate or run to completion. C. Luckey McDowell, Esq., at Baker Botts L.L.P., in Dallas, Texas states that as the copper's current price is at an all time high price, ASARCO may elect to use futures contracts to sell its anticipated production forward, hence, fixing its profit on sales against future production. ASARCO would also use Postpetition Futures Contracts for that purpose as well. Modifications to Prudential Contracts ASARCO's prepetition positions in futures contracts were aimed at fixed prices before the labor strike in early July 2005. Since the Petition Date, ASARCO has been liquidating those prepetition positions by selling in the month of scheduled delivery of the copper. Mr. McDowell relates that ASARCO has been fortunate that copper sales could be completed through delivery of copper cathode ASARCO has continued to produce. However, Mr. McDowell says, ASARCO has not taken on new futures positions since the strike began because of the resulting uncertain production levels. With the resolution of the labor strike and the resumption of normal copper production, Mr. McDowell tells the Court that ASARCO will again need to offer an option to purchase copper for forward delivery at known prices. Pricing copper in advance requires that ASARCO again hedge against market fluctuations by entering into Postpetition Futures Contracts. In support of its positions on the Prudential Contracts, ASARCO maintains a $2,240,139 equity account, consisting of $1,620,751 in cash and $619,388 in unrealized profits. ASARCO is a member of the New York Commodity Exchange, a division of the New York Mercantile Exchange, and is normally required to maintain a margin balance equal to $2,000 per futures contract of 25,000 pounds. Mr. McDowell recounts that on the Petition Date, ASARCO asked NYMEX to permit it to maintain, rather than suspend, its membership. NYMEX accepted ASARCO's request, but it doubled ASARCO's minimum margin balance to $4,000 per futures contract. The higher margin balance requires ASARCO to maintain a $632,000 balance based on its current futures contracts. Currently, ASARCO has over $2,200,000 in equity in the account, so the revised margin requirements will not require ASARCO to post additional capital in the account. Account Agreement and Postpetition Futures Contract Subsequently, ASARCO and Prudential have agreed to permit ASARCO to close out its positions in existing futures contracts by allowing ASARCO to enter into offsetting positions in accordance with this schedule: Schedule No. of Lots to be Liquidated -------- ---------------------------- October 2005 3 November 2005 29 December 2005 26 January 2006 7 February 2006 14 March 2006 7 April 2006 12 May 2006 8 June 2006 10 July 2006 0 August 2006 4 Mr. McDowell tells Judge Schmidt that if ASARCO does not keep to that schedule, Prudential may terminate some or all of the Prudential Contracts. In that event, ASARCO agrees that it will not object to the termination of the contract based on theories of delay or laches. Prudential has agreed to accept the higher margin balance imposed by NYMEX, but Prudential reserves its right to increase that margin requirement at a later time if the circumstances so require. Prudential may also terminate its Contracts on one business day's notice if ASARCO fails to post its required margin payments, which rights are contained in the account agreement. Furthermore, ASARCO and Prudential will enter into Postpetition Futures Contracts. Under its terms, Prudential would have the same rights to terminate the Postpetition Futures Contracts as are provided for under the Account Agreement or as to commodity brokers with respect to prepetition futures contracts. To the extent that there is a loss on the liquidation or termination of a Postpetition Futures Contract, Prudential will be entitled to an administrative claim under Section 503(b) of the Bankruptcy Code. Headquartered in Tucson, Arizona, ASARCO LLC -- http://www.asarco.com/-- is an integrated copper mining, smelting and refining company. Grupo Mexico S.A. de C.V. is ASARCO's ultimate parent. The Company filed for chapter 11 protection on Aug. 9, 2005 (Bankr. S.D. Tex. Case No. 05-21207). James R. Prince, Esq., Jack L. Kinzie, Esq., and Eric A. Soderlund, Esq., at Baker Botts L.L.P., and Nathaniel Peter Holzer, Esq., Shelby A. Jordan, Esq., and Harlin C. Womble, Esq., at Jordan, Hyden, Womble & Culbreth, P.C., represent the Debtor in its restructuring efforts. When the Debtor filed for protection from its creditors, it listed $600 million in total assets and $1 billion in total debts. The Debtor has five affiliates that filed for chapter 11 protection on April 11, 2005 (Bankr. S.D. Tex. Case Nos. 05-20521 through 05-20525). They are Lac d'Amiante Du Quebec Ltee, CAPCO Pipe Company, Inc., Cement Asbestos Products Company, Lake Asbestos of Quebec, Ltd., and LAQ Canada, Ltd. Details about their asbestos-driven chapter 11 filings have appeared in the Troubled Company Reporter since Apr. 18, 2005. Encycle/Texas, Inc. (Bankr. S.D. Tex. Case No. 05-21304), Encycle, Inc., and ASARCO Consulting, Inc. (Bankr. S.D. Tex. Case No. 05- 21346) also filed for chapter 11 protection, and ASARCO has asked that the three subsidiary cases be jointly administered with its chapter 11 case. On Oct. 24, 2005, Encycle/Texas' case was converted to a Chapter 7 liquidation. (ASARCO Bankruptcy News, Issue No. 13; Bankruptcy Creditors' Service, Inc., 215/945-7000). AUSTIN CO: Wants to Assume and Assign Agreements to Kajima USA -------------------------------------------------------------- The Austin Company and its debtor-affiliates ask the U.S. Bankruptcy Court for the Northern District of Ohio, Eastern Division: -- for authority to assume and assign certain prepetition executory agreements to Kajima U.S.A. Inc.; and -- to establish related cure amounts, pursuant to Section 365 of the Bankruptcy Code. As reported in the Troubled Company on Dec. 29, 2005, the Debtors accepted a bid submitted by Kajima USA, a subsidiary of Kajima Corporation of Japan, for the purchase of Austin's core U.S. assets. An affiliate of Kajima USA, Inc., has agreed to acquire the core Austin assets for a combination of cash and assumed liabilities. The Debtors tell the Court that the transfer of the agreements is necessary pursuant to terms of the asset purchase agreement. The Debtors determined that by assuming and assigning the agreements to Kajima, they will avoid incurring contract rejection damages that would result from rejection of the agreements. The Debtors agreed to pay the cure costs in exchange for the assignment of the agreements. To establish the final allowed cure cost for each agreement, the Debtors request that any non-debtor party that does not object to the cure costs be deemed to have consented to the cure costs. About Kajima and Kajima USA With over 160 years of experience and over 13,000 employees around the world, Kajima Corporation is a global leader in the design, construction and real estate development industries. Traded publicly on the Tokyo and London exchanges, Kajima reported over $16 billion in revenues in 2004 and was ranked by Engineering News Record as the eighth largest contractor in the world based on construction volume. When Kajima USA, a principal subsidiary of Kajima Corporation, started its operations in 1964, its goal was to become a full- service design/build provider for Japanese clients in the United States. Since then, Kajima has expanded that goal with a group of U.S. companies that span the real estate development, design and construction industries. Kajima USA companies include Kajima Associates, Inc., a design and engineering services company; Kajima Construction Services, a design-build and construction services company; Hawaiian Dredging Construction Company, Inc., a major general contractor in Hawaii; KUD International, LLC, a fee developer/program manager for large scale urban projects; Industrial Developments International, Inc., one of top five industrial developers in the US; Commercial Developments International, Inc., a developer of commercial properties; and HOK, in which Kajima holds an interest. About The Austin Company Headquartered in Cleveland, Ohio, The Austin Company is an international firm offering a comprehensive portfolio of in-house architectural, engineering, design-build, construction management and consulting services. The Company also offers value-added strategic planning services including site location, transportation and distribution consulting, and facility and process audits. The Company and two affiliates filed for chapter 11 protection on Oct. 14, 2005 (Bankr. N.D. Ohio Case No. 05-93363). Christine M. Pierpont, Esq., at Squire, Sanders & Dempsey, LLP, represents the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they estimated between $10 million to $50 million in total assets and debts. BANCO DO BRASIL: Moody's Rates Proposed $300 Million Debt at Ba1 ---------------------------------------------------------------- Moody's Investors Service assigned a Ba1 rating to Banco do Brasil S.A.- Grand Cayman Branch's proposed US$300 million perpetual non- cumulative junior-subordinated securities. The Ba1 rating is the result of joint probabilities of default that are incorporated into Banco do Brasil's credit risk rating, which is indicated by its A3 global local currency rating, and by Brazil's Ba3 foreign currency ceiling for bonds and notes. The outlook on the rating is stable. Moody's noted that the subordination and other features of the proposed securities were taken into consideration in the assignment of the bond rating. However, given the A3 global local currency rating, the notching that would usually be applied to subordinated issues does not affect the final foreign currency rating outcome. In addition, the rating agency noted that the proposed securities were assigned a basket B on its Debt-Equity Continuum (A is most debt-like and E is most equity-like). As such, they will be treated as 25% equity and 75% debt when Moody's applies its adjustments to Banco do Brasil's credit metrics. Moody's noted that upon approval of Tier 1 regulations by the Central Bank of Brazil, Banco do Brasil may elect to qualify the securities as Tier 1 capital, at which point Moody's may reassess its basket treatment. In determining the basket assignment under its Hybrid Criteria, Moody's ranks hybrid securities relative to the features of common equity, including: * No Maturity, * No Ongoing Payments, and * Loss Absorption. The rankings can be either none, weak, moderate or strong relative to common equity, with none being the closest to debt and strong the closest to equity. Moody's basket B designation considered the features of the proposed securities, including the perpetual maturity, and optional, non-cumulative payment deferral mechanism. The securities represent the bank's most junior subordinated debt and rank pari passu with the most senior preferred stock, if any would be issued (Banco do Brasil currently has no preferred stock outstanding). Moreover, there are limited rights to investors, no material events of default, and the securities do not cross- default. As such, the securities would form a loss-absorbing cushion for senior creditors. Banco do Brasil is the largest bank in Brazil, with assets of approximately US$110 billion as of September 2005. The bank's franchise and distribution network, which is geographically and product-diversified, ensures its dominance over the banking system's core deposits, with 21% market share. The increasing contribution of core revenues to the bank's profits reflects the strength of its business franchise and the commitment of its management to align the bank with market standards. Moody's has recently upgraded Banco do Brasil's financial strength rating to D, in an indication of improved financial metrics, earnings and capital quality, in particular. Moody's also assigns an A3 global local currency rating to Banco do Brasil , which incorporates the strong likelihood of government support in the event of a systemic crisis. This conclusion is based on: * Banco do Brasil's dominant share of the Brazilian deposits market; * its importance to the Brazilian banking system; and * its ownership and history of support. Banco do Brasil S.A. is headquartered in Brasilia, Brazil, and it had total assets of approximately US$110 billion as of September 2005. This rating was assigned: Banco do Brasil S.A. Grand Cayman Branch's US$300 million perpetual non-cumulative junior- subordinated securities -- Ba1 long-term foreign currency subordinated bond rating. Outlook is stable. BISYS GROUP: Inks New $400 Million Credit Facility -------------------------------------------------- The BISYS Group, Inc. entered into a new credit facility that provides for: (i) a revolving credit facility of up to $100 million which is immediately available and may be used for working capital and other corporate purposes, and (ii) a term loan in an aggregate amount of up to $300 million which would be available, if necessary, to repay the company's currently outstanding $300 million of 4% convertible notes due March 15, 2006. SunTrust Bank serves as the Administrative Agent for the new facility. The company's previous $150 million revolving credit facility has been terminated. No borrowings were outstanding under the prior agreement at the time of termination. The new facility, which has a term of one year, provides the company with immediate borrowing availability and simplifies its financial covenants and reporting obligations. The current interest rates payable under the revolving portion of the new facility are comparable to those in its prior credit facility. Should the company choose to fund the term loan portion of the facility, its interest expense may increase, as the borrowing costs associated with the term loan are higher than those associated with the Company's currently outstanding 4% convertible notes. The Company expects to close the sale of the Information Services business prior to Feb. 28, 2006. The company intends to use a portion of the proceeds from this sale to retire its convertible notes, but if the closing of the sale is delayed, it may choose to repay the maturing notes with the term loan portion of the new facility. The BISYS Group, Inc. (NYSE: BSG) - http://www.bisys.com/-- provides outsourcing solutions that enable investment firms, insurance companies, and banks to more efficiently serve their customers, grow their businesses, and respond to evolving regulatory requirements. Its Investment Services group provides administration and distribution services for mutual funds, hedge funds, private equity funds, retirement plans and other investment products. Through its Insurance Services group, BISYS is the nation's largest independent wholesale distributor of life insurance and a leading independent wholesale distributor of commercial property/casualty insurance, long-term care, disability, and annuity products. BISYS' Information Services group provides industry-leading information processing, imaging, and back-office services to banks, insurance companies and corporate clients. Headquartered in New York, BISYS generates more than $1 billion in annual revenues worldwide. * * * Lenders' Consent As reported in the Troubled Company Reporter on Dec. 19, 2005, BISYS obtained a consent from the lenders under its Senior Unsecured Credit Facility: * to extend the cure periods with respect to defaults resulting from the company's failure to file certain required financial reports and * to deliver the related compliance certificates. The filings of these reports are being delayed pending completion of the restatement. The cure periods with respect to its Form 10-Q for the fiscal quarter ended March 31, 2005 and Form 10-K for the fiscal year ended June 30, 2005 have each been extended to Jan. 31, 2006. The cure period with respect to the company's Form 10-Q for the fiscal quarter ended Sept. 30, 2005 was previously extended to Jan. 31, 2006. In connection with this consent, BISYS repaid the $53.7 million term loan portion of the Credit Facility in full and agreed that it will not request credit under the Credit Facility until such time as it files its Form 10-K for the fiscal year ended June 30, 2005 and completes the Information Services sale. BISYS believes that its operating cash flows and cash on hand will be sufficient to support its near-term working capital and other cash requirements through the expected closing of such sale. BROKERS INC: Liquidation Plan Confirmation Hearing Set for Jan. 25 ------------------------------------------------------------------ The U.S. Bankruptcy for the Middle District of North Carolina will convene a confirmation hearing at 11:00 a.m., on Jan. 25, 2006, for the Second Amended Plan of Liquidation filed by Brokers Incorporated. The Court approved the adequacy of the Debtor's Modified Disclosure Statement explaining the Plan on Dec. 9, 2005. Summary of Amended Liquidation Plan The Amended Plan proposes the liquidation of the Debtor's remaining assets for the highest possible value with the net sale proceeds and collections to be distributed to creditors. A Liquidation Fund will be established in an interest-bearing deposit account to be funded from the net proceeds of the sale of the remaining assets. Treatment of Claims and Interests A) Class 1 claims consist of allowed administrative claims will be fully paid in cash, after the effective date of the Plan or in five business days after the entry of an order approving those claims. B) Class 2 claims consist of allowed priority claims other than priority security deposit claims and priority tax claims under 11 U.S.C. Section 507(a)(6) and 507(a)(8) will be paid from the proceeds of the Liquidation Fund after full payment of all allowed class 1 claims. C) Class 3 claims consist of allowed priority security deposit claims under 11 U.S.C. 507(a)(8) will be fully paid from the proceeds of the Liquidation Fund after the effective date or on other terms agreed between the Debtor and the holders of those claims; D) Class 4 claims consist of tax claims having priority under 11 U.S.C. 507(a)(8) and totaling approximately $248,156 will be paid from the proceeds of the Liquidation Fund after full payment of all allowed class 1, class 2 and class 3 claims. E) Class 5 claim consists of the secured claim of Branc Bank and Trust and Class 6 claims consisting of the secured claim of SunTrust Banks, Inc., have both been paid in full during the Debtor's bankruptcy proceeding and they will no longer receive any payments under the Plan. F) Class 7 claim consists of the allowed claim of SunTrust Bank pursuant to the Promissory Note dated Sept. 20, 2004, and under the SunTrust Loan II Agreement, which totals approximately $200,000. The Debtor's obligation under the Loan II Agreement will be modified to extend the maturity to three years and the terms of the Agreement will remain in full force after the Plan's confirmation. G) Class 8 claim consists of the allowed secured claim of Bank of North Carolina pursuant to the BNC Loan Documents totaling approximately $492,827. The terms of the terms of Loan Documents will remain in full force after the Plan's confirmation and BNC's claim will be paid from the liquidation of the first BNC property and the rent collections from the second BNC property. H) Class 9 claims consist of the disputed secured claim of Carlton Eugene Anderson. In the event that Mr. Anderson's claim is allowed, his claim will be paid from the Anderson Reserve Account upon the entry of a final order determining the Debtor's exact liability for that claim, but if that claim is disallowed, Mr. Anderson will not receive anything. I) Class 10 claims consist of all general unsecured claims, estimated at approximately 1,213,937 will be paid in full after full payment of all class 1, class 2, class 3 and class 4 claims. Class 10 claims' payments will have an interest of 6.25% beginning from the petition date until those claims are paid in full. J) Class 11 claim consists of the claim of the Estate of Dolen J. Bowers, which will be paid from the proceeds of the Liquidation Fund after full payment of all class 1, class 2, class 3, class 4, class 6, class 7, class 8, class 9 and class 10 claims. K) Class 12 claims consist of equity security holders, who will retain their equity interest in the Debtor but will not receive any distribution until full payment of all class 1, class 2, class 3, class 4, class 5, class 6, class 7, class 8, class 9 and class 10 claims. A full-text copy of the Modified Disclosure Statement is available for a fee at: http://www.researcharchives.com/bin/download?id=060109024656 Objections to the Amended Plan, if any, must be filed and served by Jan. 11, 2006. Headquartered in Thomasville, North Carolina, Brokers Incorporated, filed for chapter 11 protection on Nov. 22, 2004 (Bankr. M.D. N.C. Case No. 04-53451). Christine L. Myatt, Esq., at Nexsen Pruet Adams Kleemeier, PLLC, represents the Debtor in its restructuring efforts. When the Debtor filed for protection from its creditors, it listed estimated assets of $10 million to $50 million and $1 million to $10 million in estimated debts. BROKERS INC: Excl. Plan Solicitation Period Stretched to March 1 ---------------------------------------------------------------- The U.S. Bankruptcy for the Middle District of North Carolina extended until March 1, 2006, the period within which Brokers Incorporated may solicit acceptance for its Second Amended Plan of Liquidation. The confirmation hearing for that Plan is currently scheduled on Jan. 25, 2006. The Debtor gave the Court three reasons supporting the extension: 1) although the confirmation hearing is scheduled for Jan. 25, the Debtor sought the extension out of abundance of caution on its part so it can have no impediments in the plan solicitation process; 2) the Debtor believes that proceeds from real property it already liquidated and the anticipated proceeds from real property to be sold in the next 60 days, pending Court approval, will make available funds necessary to pay all holders of allowed claims and to place sufficient sums in the reserve fund to pay all disputed claims; and 3) the Unsecured Creditors Committee supports the extension of the exclusive plan solicitation period. Headquartered in Thomasville, North Carolina, Brokers Incorporated, filed for chapter 11 protection on Nov. 22, 2004 (Bankr. M.D. N.C. Case No. 04-53451). Christine L. Myatt, Esq., at Nexsen Pruet Adams Kleemeier, PLLC, represents the Debtor in its restructuring efforts. When the Debtor filed for protection from its creditors, it listed estimated assets of $10 million to $50 million and $1 million to $10 million in estimated debts. BROKERS INC: Wants to Sell Real Property in Virginia for $254,034 ----------------------------------------------------------------- Brokers Inc. asks the U.S. Bankruptcy Court for the Middle District of North Carolina for authority to sell four residential lots in Virginia, free and clear of all liens, interests and encumbrances. The lots total 156.655 acres and is located at Ferry Road, Hermitage Road and River Oak Drive in Danville, Pittsylvania County, Virginia. On October 28, 2005, the Debtor entered into a purchase agreement for the property with Derek Mitchell, Marcus Shelton and Johnny Haymore. The Purchase Agreement states that: a) the closing will occur within 30 days after the Court approves the sale of the property; b) at closing, the Buyers will pay $254,034 for the property; and c) the Buyers will deposit $5,000 towards their obligations under the Purchase Agreement. The sale proceeds will be used for distribution to creditors. Headquartered in Thomasville, North Carolina, Brokers Incorporated, filed for chapter 11 protection on Nov. 22, 2004 (Bankr. M.D. N.C. Case No. 04-53451). Christine L. Myatt, Esq., at Nexsen Pruet Adams Kleemeier, PLLC, represents the Debtor in its restructuring efforts. When the Debtor filed for protection from its creditors, it listed more than $10 million in assets and more than $1 million in debts. CALPINE POWERAMERICA: Voluntary Chapter 11 Case Summary ------------------------------------------------------- Lead Debtor: Calpine PowerAmerica-OR,LLC 50 West San Fernando Street San Jose, California 95113 Bankruptcy Case No.: 06-10034 Debtor affiliates filing separate chapter 11 petitions: Entity Case No. ------ -------- Calpine Hidalgo Design, L.P. 06-10039 Type of Business: The Debtors are affiliates of Calpine Corporation, which supplies customers and communities with electricity from clean, efficient, natural gas-fired and geothermal power plants. Calpine Corp. and 77 of its affiliates filed for chapter 11 protection on Dec. 20, 2005 (Bankr. S.D.N.Y. Lead Case No. 05-60200). See http://www.calpine.com/ Calpine California Equipment Finance Company, LLC, and six affiliates also filed for chapter 11 protection on Dec. 27, 2005 (Bankr. S.D.N.Y. Case No. 05-60464) Calpine Hidalgo, Inc., and six affiliates also filed for chapter 11 protection on Jan. 8, 2006 (Bankr. S.D.N.Y. Case No. 06-10026). Chapter 11 Petition Date: January 9, 2006 Court: Southern District of New York (Manhattan) Judge: Burton R. Lifland Debtors' Counsel: Richard M. Cieri, Esq. Matthew A. Cantor, Esq. Edward Sassower, Esq. Robert G. Burns, Esq. Kirkland & Ellis LLP Citigroup Center 153 East 53rd Street New York, New York 10022-4611 Tel: (212) 446-4800 Fax: (212) 446-4900 Estimated Assets Estimated Debts ---------------- --------------- Calpine Less than $50,000 Less than $50,000 PowerAmerica-OR,LLC Calpine Hidalgo $10 Million to Less than $50,000 Design, L.P. $50 Million The Debtors did not file a list of their 20 largest unsecured creditors. CHESAPEAKE CORP: Industry Overcapacity Cues S&P to Lower Ratings ---------------------------------------------------------------- Standard & Poor's Ratings Services lowered its corporate credit rating on Richmond, Virginia-based Chesapeake Corp. to 'BB-' from 'BB'. Standard & Poor's also lowered its senior unsecured debt rating to 'B+' from 'BB' and its subordinated debt rating to 'B' from 'B+'. The outlook is stable. "The downgrade of the corporate credit rating reflects industry overcapacity and current soft demand in Europe, that when combined with expected higher debt levels to fund the company's cost-reduction program, will result in credit measures over the next few years that are more commensurate with a 'BB-' rating," said Standard & Poor's credit analyst Dominick D'Ascoli. The lowering of the unsecured debt rating to one notch below the corporate credit rating reflects a higher level of priority obligations than previously expected. Chesapeake's use of its revolving credit facility to fund an acquisition and repay subordinated debt, and the likelihood of additional revolver borrowings to fund costs associated with the cost-reduction program have meaningfully increased the amount of priority debt that ranks ahead of unsecured lenders. Standard & Poor's expects a meaningful amount of priority debt will remain outstanding over the intermediate term. The ratings on paperboard and plastics packaging producer Chesapeake reflect: * negative to weak discretionary cash flow, * a aggressive debt leverage, * industry overcapacity, * competitive pricing pressures, * ability to pass on raw-material cost increases to customers and, * the diversity of the company's end markets and operations. Discretionary cash flow is expected to be negative in 2006 and thin in 2007, leading to an expected increase in debt. This is in addition to the $65 million increase in debt during the third quarter of 2005 for the acquisition of Impaxx Pharmaceutical Packaging Group Inc., which resulted in total debt of $444 million on Oct. 2, 2005. Excluding debt associated with the Arlington Press acquisition, total debt to EBITDA was an aggressive 3.8x on Oct. 2, 2005. The Arlington Press acquisition increases Chesapeake's financial leverage. A further increase in financial leverage is expected in 2006 as the company funds its cash shortfall. Standard & Poor's expects the 2006 cash shortfall to approximate the expenditures made in connection with the company's $25 million cost-reduction program. As savings are realized from the two-year program, leverage as measured by total debt to EBITDA should begin to improve somewhat. CINCINNATI BELL: Exercise of Put Option Cues S&P to Watch Ratings ----------------------------------------------------------------- Standard & Poor's Ratings Services placed on CreditWatch with positive implications its recovery ratings of '3' on $650 million of secured credit facilities and $50 million of secured notes of Cincinnati Bell Inc. At the same time, Standard & Poor's affirmed its other ratings on the diversified telecommunications carrier, including the 'B+' corporate credit rating and 'B+' secured bank loan and secured notes ratings, and the 'BB-' rating on the senior unsecured debt of its wholly owned incumbent local exchange carrier subsidiary, Cincinnati Bell Telephone Co. The outlook is negative. As of Sept. 30, 2005, the combined company had $2.1 billion of total debt outstanding. The CreditWatch placement and rating affirmations followed recent disclosure that Cingular Wireless LLC has exercised its put option on its 19.9% share in its wireless partnership with CBI for $83 million. To date, the minority share of the partnership was excluded from the bank loan and secured note analysis. "With exercise of the put, the additional value included in the bank loan and secured note analysis provides sufficient coverage of the fully drawn bank loan and secured notes to support a recovery rating of '2'," said Standard & Poor's credit analyst Catherine Cosentino. A recovery rating of '2' represents prospects for substantial recovery of principal in a payment default. Upon completion of the transaction and inclusion of the additional share of the wireless venture in the security package, the recovery ratings will be raised. The ratings on CBI reflect the company's aggressive leverage, coupled with prospects for increasing competition faced by both its ILEC subsidiary, CBT, and Cincinnati Bell Wireless LLC. Management is taking steps to mitigate threats to CBT, which provides the majority of consolidated cash flow. These steps include a plan to offer alternative video services in 2006 using asymmetrical digital subscriber loop 2+ (ADSL2+) technology. However, competition from cable telephony poses the potential for both increased access line losses and pricing pressure at the ILEC. And, although the overall wireless industry has continued to grow, CBI has experienced some recent wireless subscriber losses. The company's modest capital spending needs should enable it to continue to generate sizable free cash flows, somewhat mitigating these challenges. CBI is aggressively leveraged, given its substantial business risk. The Cingular transaction is expected to close around mid-February 2006, based on terms in the partners' operating agreement. CBT faces the challenge of combating line losses by marketing its bundled communications offerings. CBT lost 5.2% of its access lines in its incumbent local telephone region, largely as a result of wireless substitution. However, this decline was partially offset by gains in the company's competitive local exchange carrier operation. Although wireless substitution will continue to some extent, Standard & Poor's views cable telephony as a more formidable longer term threat to the incumbent telephone business. Time Warner Cable Inc., the cable television service provider in the greater Cincinnati market, launched cable telephony service in mid-2004 and is expected to continue to market this service aggressively over the next few years. Rising competition may also begin to pressure the company's local telephone EBITDA margins, which have been quite strong. Besides actively marketing bundled services, CBT has begun to aggressively roll out digital subscriber line service to counter increased wireline competition. COLLINS & AIKMAN: Plans To Close Premier Tooling Facility --------------------------------------------------------- Collins & Aikman Corporation (CKCRQ) plans to close its Premier Tooling operation in Sterling Heights, Michigan, by March 31, 2006. The facility currently has approximately 140 employees who fabricate tooling for molded plastic products in support of future programs. The Company intends to complete existing fabrication work at the facility with employment levels expected to balance- out during the first quarter. "Following careful and in-depth evaluation, we have elected to exit the injection mold tooling fabrication portion of the business, which will alleviate difficult capital requirements on our balance sheet and improve our cash flow," said Frank Macher, Collins & Aikman's President and CEO. "While the rationale supporting this action is compelling, we deeply regret the impact this closing will have on our employees." Macher added, "We are fully prepared to execute this plan with no disruption of service to our customers." Collins & Aikman will transfer equipment to its facilities in New Hampshire and North Carolina where it will continue to fabricate tooling to support its proprietary manufacturing processes in plastics skins, soft trim and flooring. The Company will utilize existing suppliers to build plastic injection molds, fixtures and gages for future programs. Headquartered in Troy, Michigan, Collins & Aikman Corporation -- http://www.collinsaikman.com/-- is a global leader in cockpit modules and automotive floor and acoustic systems and is a leading supplier of instrument panels, automotive fabric, plastic-based trim, and convertible top systems. The Company has a workforce of approximately 23,000 and a network of more than 100 technical centers, sales offices and manufacturing sites in 17 countries throughout the world. The Company and its debtor-affiliates filed for chapter 11 protection on May 17, 2005 (Bankr. E.D. Mich. Case No. 05-55927). When the Debtors filed for protection from their creditors, they listed $3,196,700,000 in total assets and $2,856,600,000 in total debts. (Collins & Aikman Bankruptcy News, Issue No. 21; Bankruptcy Creditors' Service, Inc., 215/945-7000) COLLINS & AIKMAN: Says Breitkreuz Has No Right to Protection ------------------------------------------------------------ Collins & Aikman Corporation and its debtor-affiliates ask the U.S. Bankruptcy Court for the Eastern District of Michigan to deny Breitkreuz Molds and Plastics, Inc.'s request for adequate protection payments and allowance of administrative claims. Marc J. Carmel, Esq., at Kirkland & Ellis LLP, in New York, asserts that Breitkreuz, has no claim, secured or otherwise, with respect to certain molds purchased by the Debtors. Breitkreuz has no right to adequate protection, he maintains. Breitkreuz Claims As reported in the Troubled Company Reporter on Dec. 5, 2005, the Debtors and Breitkreuz inked a contract for the production of plastic injection molds for the General Motors 2005 GMX001 Chevrolet Cavalier program. Pursuant to the Contract, the Debtors were obligated to pay $469,800 for the Molds production subject to a discount, which the parties agreed would be $4,500. The total amount due is $465,300. In March 2004, the Debtors paid $145,500 leaving a balance of $319,800. The Internal Revenue Service served a levy on the Debtors to collect the amounts due to Breitkreuz on the account receivable. However, Mr. Hawley relates, the Debtors refused to comply with the legally enforceable levy, despite having the obligation to do so. Instead, on November 1, 2004, the Debtors paid $168,169 leaving a remaining unpaid balance of $151,631. By virtue of the levy, Mr. Hawley points out that the IRS succeeded to the rights of payment of Breitkreuz and became a fully secured creditor for the remaining balance. The Debtors have not made the required payment to the IRS for use of the Molds postpetition. As a result, the IRS is entitled to an administrative expense claim for the postpetition use of the Molds for $90,475 -- seven months times $12,925 - calculated through Dec. 17, 2005. Breitkreuz and the IRS asked the U.S. Bankruptcy Court for the Eastern District of Michigan to: -- grant the IRS adequate protection of its secured claim in the form of adequate protection payments of $12,925 per month payable on the 15th day of each month commencing December 15, 2005; and -- allow the IRS' administrative expense claim for postpetition tooling usage for $90,475. Debtors' Response Mr. Carmel explains that the Molds were severely defective upon receipt by the Debtors. The defects in the Molds were so severe that the Molds never completed a Production Part Approval Process, which must be completed before payment is due. If anything, Mr. Carmel argues that Breitkreuz owes the Debtors for the costs and expenses incurred in connection with the defective Molds. As a result of the defective Molds, the Debtors incurred costs and expenses totaling $1,140,000. Pursuant to the Uniform Commercial Code, Mr. Carmel points out that Breitkreuz is required to reimburse the Debtors for the costs and expenses they incurred as a result of the defective Molds. This amount, Mr. Carmel notes, far exceeds the amount allegedly owed to Breitkreuz by the Debtors. Even after deducting the amount allegedly owed to Breitkreuz, Mr. Carmel relates that Breitkreuz owes the Debtors a net amount of no less than $988,365. Thus, at the very least, Breitkreuz does not have a claim against the Debtors, and, if anything, Breitkreuz owes the Debtors money, Mr. Carmel says. Headquartered in Troy, Michigan, Collins & Aikman Corporation -- http://www.collinsaikman.com/-- is a global leader in cockpit modules and automotive floor and acoustic systems and is a leading supplier of instrument panels, automotive fabric, plastic-based trim, and convertible top systems. The Company has a workforce of approximately 23,000 and a network of more than 100 technical centers, sales offices and manufacturing sites in 17 countries throughout the world. The Company and its debtor-affiliates filed for chapter 11 protection on May 17, 2005 (Bankr. E.D. Mich. Case No. 05-55927). When the Debtors filed for protection from their creditors, they listed $3,196,700,000 in total assets and $2,856,600,000 in total debts. (Collins & Aikman Bankruptcy News, Issue No. 21; Bankruptcy Creditors' Service, Inc., 215/945-7000) COLLINS & AIKMAN: Secures Chrysler Supply Contract -------------------------------------------------- DaimlerChrysler AG's Chrysler Group has selected Collins & Aikman Corporation (CKCRQ) as the supplier for a significant portion of the interior systems on a future platform of vehicles scheduled for 2008. "We are extremely pleased to be selected by DaimlerChrysler and appreciate their confidence in our ability to fully support this major program," said Frank Macher, President and CEO of Collins & Aikman. "An award of this magnitude reflects Collins & Aikman's ability to compete and deliver on cost, quality, craftsmanship and innovation across our full line of interior products." Supplying a complete range of services, Collins & Aikman will be responsible for all design, engineering, logistics and quality planning for instrument panels, integrated cockpit systems, center floor consoles, pillar and garnish trim, rear package trays, molded carpet flooring systems, accessory mats, rear cargo and trunk trim and other components for the future vehicle program. Multiple existing Collins & Aikman facilities will produce the components and systems to support the program. Headquartered in Troy, Michigan, Collins & Aikman Corporation -- http://www.collinsaikman.com/-- is a global leader in cockpit modules and automotive floor and acoustic systems and is a leading supplier of instrument panels, automotive fabric, plastic-based trim, and convertible top systems. The Company has a workforce of approximately 23,000 and a network of more than 100 technical centers, sales offices and manufacturing sites in 17 countries throughout the world. The Company and its debtor-affiliates filed for chapter 11 protection on May 17, 2005 (Bankr. E.D. Mich. Case No. 05-55927). When the Debtors filed for protection from their creditors, they listed $3,196,700,000 in total assets and $2,856,600,000 in total debts. (Collins & Aikman Bankruptcy News, Issue No. 21; Bankruptcy Creditors' Service, Inc., 215/945-7000) CONTECH CONSTRUCTION: S&P Rates Proposed $100 Mil. Facility at B+ ----------------------------------------------------------------- Standard & Poor's Ratings Services lowered its ratings on West Chester, Ohio-based Contech Construction Products Inc., and removed the ratings from CreditWatch where they were placed with negative implications on Nov. 29, 2005, in connection with the sale of the company to Apax Partners L.P. The corporate credit rating was lowered to 'B+' from 'BB-'. The outlook is stable. At the same time, Standard & Poor's assigned its 'B+' bank loan rating and '2' recovery rating to Contech's proposed $100 million revolving credit facility due in 2012 and $425 million term loan due in 2013, based on preliminary terms and conditions. The recovery rating indicates the likelihood of substantial recovery in the event of a payment default. S&P's expectations are for recovery at the higher end of this range. Proceeds from the credit facilities, and $225 million of senior subordinated notes due in 2014, will be used to finance the $1 billion acquisition of the company, including fees and expenses, from the previous equity sponsor. Contech's existing debt will be repaid, and the related ratings withdrawn. Total debt, including capitalized operating leases, will be $666 million at closing, with total debt to last-12-months EBITDA, pro forma for a full year of fiscal 2005 acquisitions, of 5.7x at Dec. 31, 2005. The downgrade reflects the weaker financial profile that Contech will have following this transaction. "The increase in debt leverage to more than 5.5x from around 3x currently indicates a meaningfully more aggressive financial policy," said Standard & Poor's credit analyst Lisa Wright. "Contech is adding about $325 million of debt with the proposed transaction, which will increase interest costs by about $30 million annually." The ratings on Contech reflect: * its exposure to the cyclical commercial and residential construction sectors, * volatile raw-material costs, * low barriers to entry, and * very aggressive financial policy. Partially offsetting these risks are the company's: * variable cost structure, * relatively stable operating margins, and * strong market shares in niche and local markets. The company has leading market shares in such product subsectors as regional corrugated metal pipe markets and steel pedestrian bridges. DATAMETRICS CORPORATION: Completes Debt Restructuring with SG DMTI ------------------------------------------------------------------ DataMetrics Corporation (OTCBB:DMTI) completed a major restructuring and capital investment deal with SG DMTI Capital, LLC. According to Daniel Bertram, President and CEO of DataMetrics, the transaction includes: * the conversion of approximately $3.4 million of debt to equity, * an infusion of $500,000 fresh operating capital through a new loan from SG DMTI, and * up to an additional $500,000 in the form of preferred stock subject to the attainment of certain milestones. This follows the sale/leaseback of its headquarters building with an affiliate of SG DMTI. SG DMTI is part of a private equity firm that specializes in corporate turnarounds and is managed by Philip Sassower and Andrea Goren. "DataMetrics had a debt load and capitalization structure that was constricting and we felt there was a great upside if we could remove these obstacles," said Mr. Sassower in explaining why SG DMTI decided to make the investment. "With this restructuring and investment, together with the sale/leaseback transaction, DataMetrics can now focus on growth, both internal and through acquisition, and on becoming the worldwide leader in the market for rugged IT solutions." As reported in the Troubled Company Reporter on Nov. 24, 2005, the company closed on the sale of its headquarters building located at 1717 Diplomacy Row, Orlando Florida to SG DMTI, LLC. Concurrent with the closing, DataMetrics Corporation and SGD entered into a five year triple-net lease with an additional five year option. Daniel Bertram, President and CEO of DataMetrics, further announced that the company and SGD also have an agreement in principle for a restructuring of the Company's debt obligations which, if consummated, will result in the infusion of fresh operating capital into the company. Financial details were not immediately available. Sale On Nov. 4, 2005 DataMetrics Corporation closed on the sale of its headquarters building located at 1717 Diplomacy Row, Orlando Florida to SG DMTI, LLC for gross proceeds of $1,500,000. The net proceeds of the sale, after satisfaction of mortgage, taxes, liens, and other obligations of the Company were approximately $117,000. Concurrent with the closing of the sale of the property, the Company and SGD entered into a five year triple-net lease for rent in amount of $150,000 per year. The lease also has an additional five year renewal option. Bridge Loan On Nov. 7, 2005, the Company received $200,000 from SGD. The Bridge Loan is evidenced by a promissory note secured by substantially all of the Company's assets. The note accrues interest at a rate of 10% per annum and matures on Dec. 7, 2005. The funds are being utilized for operating capital. In connection with certain financial restructuring of the Company, the Company anticipates executing a second promissory note in favor of SGD in the amount of $500,000. It is contemplated that the $500,000 note will offset the Bridge Loan. There can be no assurances, however, that the restructuring will be consummated. The DataMetrics Corporation -- http://www.datametrics.com/-- designs, develops, and manufactures ruggedized printers, plotters, workstations, PCs, flat panel monitors, VMEs and peripherals (disk drives, tape drives, keyboards, trackballs and other equipment) for government, defense, aerospace, and industrial customers worldwide. DataMetrics also offers a wide range of services including engineering design, environmental testing, and build-to- print capability that utilize our 40 years of experience. At Apr. 30, 2004, DataMetrics Corporation's balance sheet showed a $2,765,000 stockholders' deficit compared to a $2,733,000 deficit at Jan. 31, 2004. DON SIMPLOT: Hires Jerome Shulkin & Joseph Meier as Bank. Counsel ----------------------------------------------------------------- Don J. Simplot asks the U.S. Bankruptcy Court for the District of Idaho for permission to employ, as his bankruptcy counsel: -- Jerome Shulkin, Esq., at Shulkin Hutton, Inc., P.S., and -- Joseph M. Meier, Esq., at Cosho, Humphrey, LLP. Mr. Shulkin will serve as the Debtor's general counsel, while Mr. Meier will serve as Mr. Simplot's local counsel in Idaho. Messrs. Shulkin and Meier are expected to: a) give the Debtor legal advice with respect to his powers and duties as debtor-in-possession; b) advise the Debtor in matters concerning creditors, claims, property rights and the operation of business while in chapter 11; c) prepare on behalf of the Debtor all necessary applications, answers, orders and reports; and d) perform all other legal services necessary in the Debtor's chapter 11 proceeding. Mr. Meier bills at $200 per hour while Mr. Shulkin's billing rate was not disclosed in Court documents. To the best of the Debtor's knowledge, both counsel are "disinterested persons" as that term is defined in Section 101(14) of the Bankruptcy Code. Headquartered in Boise, Idaho, Don J. Simplot owns 50% interest in EEX Acquisition, LLC, which filed for chapter 11 protection on Oct. 14, 2005 (Bankr. W.D. Wash. Case No. 05-28286)(J. Overstreet). The Debtor is also an affiliate of G B Vessel Acquisition LLC, which also filed for bankruptcy protection on Oct. 14, 2005 (Bankr. W.D. Wash. Case No. 05-28316). The Debtor filed for chapter 11 protection on Jan. 4, 2006 (Bankr. D. Idaho Case No. 06-00002). When the Debtor filed for protection from his creditors, he listed $10 million to $50 million in assets and debts. DON SIMPLOT: U.S. Trustee Will Meet Creditors on Feb. 9 ------------------------------------------------------- The United States Trustee for Region 18 will convene a meeting of Don J. Simplot's creditors at 9:00 a.m., on Feb. 9, 2006, at 720 Park Boulevard, Suite 210 located at Washington Group Central Plaza in Idaho. This is the first meeting of creditors required under 11 U.S.C. Sec. 341(a) in all bankruptcy cases. All creditors are invited, but not required, to attend. This Meeting of Creditors offers the one opportunity in a bankruptcy proceeding for creditors to question a responsible office of the Debtor under oath about the company's financial affairs and operations that would be of interest to the general body of creditors. Headquartered in Boise, Idaho, Don J. Simplot owns 50% interest in EEX Acquisition, LLC, which filed for chapter 11 protection on Oct. 14, 2005 (Bankr. W.D. Wash. Case No. 05-28286)(J. Overstreet). The Debtor is also an affiliate of G B Vessel Acquisition LLC, which also filed for bankruptcy protection on Oct. 14, 2005 (Bankr. W.D. Wash. Case No. 05-28316). The Debtor filed for chapter 11 protection on Jan. 4, 2006 (Bankr. D. Idaho Case No. 06-00002). Jerome Shulkin, Esq., at Shulkin Hutton Inc., P.S., and Joseph M. Meier, Esq., at Cosho Humphrey, LLP, represent the Debtor in his restructuring efforts. When the Debtor filed for protection from his creditors, he listed $10 million to $50 million in assets and debts. ENER1 INC: Posts $33 Mil. Net Loss in Quarter Ended September 30 ---------------------------------------------------------------- Ener1, Inc., incurred a $32,619,000 net loss on $25,000 of net sales for the quarter ended Sept. 30, 2005, versus $1,150,000 of net income on zero sales for the comparable period in 2004. The Company has experienced net operating losses since 1997 and negative cash flows from operations since 1999, and had an accumulated deficit of $157 million as of Sept. 30, 2005. Management says that the Company could continue to incur negative cash flows through Sept. 30, 2006. Ener1's balance sheet showed $13,957,000 in total assets at Sept. 30, 2005, and liabilities of $94,834,000, resulting in a stockholders' deficit of $80,877,000. As of Sept. 30, 2005, the Company had a $62 million working capital deficit. Working capital included $7 million in cash and $700,000 in prepaid expenses, offset by $1.6 million in accounts payable, accrued expenses and accrued exit costs and $67.5 million in derivative liabilities on conversion features of securities. About Ener1 Ener1, Inc. (OTCBB: ENEI) -- http://www.ener1.com -- is an alternative energy technology company. The company's interests include: 80.5% of EnerDel (www.enerdel.com), a lithium battery company in which Delphi Corp. owns 19.5%; 49% of Enerstruct, a Japanese lithium battery technology company in which Ener1's strategic investor ITOCHU owns 51%; wholly owned subsidiary EnerFuel, a fuel cell testing and component company (www.enerfuel.com); and wholly owned subsidiary NanoEner, which develops nanotechnology-based materials and manufacturing processes for batteries and other applications (www.nanoener.com). ENRON CORP: Court OKs Five Point Stock Purchase & Sale Agreement ---------------------------------------------------------------- Reorganized Debtors Enron Corp. and Enron Alligator Alley Pipeline Company ask the U.S. Bankruptcy Court for the Southern District of New York to approve a Stock Purchase and Sale Agreement dated Nov. 16, 2005, between Enron Transportation Services, LLC, and Five Point Florida, LLC. Under the Stock Agreement, Enron Transportation will transfer to Five Point Florida: (1) the Alligator Alley Pipeline; (2) Enron Transportation's shares of capital stock, par value $1.00 per share, in Alligator Alley; and (3) a sum of cash. Alligator Alley and the Pipeline Alligator Alley is a wholly owned subsidiary of non-debtor Enron Transportation. Enron Transportation is a limited liability company that is solely managed by EOC Preferred, L.L.C., which, in turn, is solely managed by Enron. Alligator Alley's sole asset is a 110-mile petroleum crude oil product pipeline and related structures and equipment located in the Everglades area of Florida. Alligator Alley has no employees and no business operations. During the pendency of its Chapter 11 case, Alligator Alley did not assume any of the contracts, easements, rights of way, permits or commitments held in connection with the Alligator Alley Pipeline. All of Alligator Alley's executory contracts and unexpired leases were deemed rejected pursuant to the Reorganized Debtors' Chapter 11 Plan. Alligator Alley has only four prepetition third-party creditors and one intercompany creditor, Brian S. Rosen, Esq., at Weil, Gotshal & Manges LLP, in New York, relates. Three of the creditors held Allowed Secured or Allowed Convenience Claims, which have been paid in full. The remaining creditor holds an Allowed General Unsecured Claim and pursuant to the Plan, will continue to receive distributions on that claim. The claim of Enron Operations Services Corp., a Reorganized Debtor, will be satisfied pursuant to the terms of the Plan. According to Mr. Rosen, Alligator Alley ceased to operate the Alligator Alley Pipeline in 1998. Subsequently, Alligator Alley began the process of preparing to abandon the pipeline and its associated property, including necessary remediation efforts. At the time Alligator Alley was approached by Five Point, Alligator Alley had begun the process of remediation and demolition before abandoning the property, pursuant to a plan approved by the Florida Department of Environmental Protection. As the current owner of the property, Alligator Alley has a continuing obligation to complete the remediation activities. Mr. Rosen relates that the remediation effort is approximately 33% complete and at Five Point's request, was suspended during the pendency of the sale. Alligator Alley estimates that the remaining remediation would cost in excess of $500,000, and additional costs may be incurred in order to abandon the assets. Mr. Rosen tells the Court that the work remaining to be done may include: -- aeration and removal of soil; -- installment of monitoring wells; and -- evaluation and implementation of the remaining requirements to meet Department of Transportation requirements for abandonment. Five Point Five Point is a wholly owned subsidiary of Five Point Energy, an exploration and production company with operations in the Florida Everglades. The Reorganized Debtors believe that Five Point will use a portion of the Alligator Alley Pipeline in connection with its ongoing operations and the remainder of the Pipeline will be abandoned, after completion of the necessary remediation requirements. Environmental Obligations After the Closing Date of the Agreement, Alligator Alley, as owner of the property, will continue to be responsible for meeting environmental obligations associated with the property, regardless of its new ownership. Neither Enron Transportation nor any Debtor other than Alligator Alley itself ever owned or operated the properties owned by Alligator Alley. No claim has been asserted against Enron or Enron Transportation with respect to environmental conditions at properties owned by Alligator Alley, Mr. Rosen notes. Pursuant to the Stock Agreement, Five Point will become the sole owner of Alligator Alley and will become solely responsible for the associated environmental obligations. The other salient terms of the Stock Agreement are: A. Sale and Purchase of Assets Enron Transportation will sell, and Five Point will purchase, the Alligator Alley Pipeline and the Shares on an as is, where is basis, without any recourse. Enron Transportation will pay Five Point $233,039 as remediation cost in consideration for Five Point acquiring the Shares and assuming all responsibility for Alligator Alley's environmental obligations and liabilities pertaining to the operation of Alligator Alley. B. Post-Closing Obligations After the Closing, Enron Transportation will have no further responsibility for any obligations of Alligator Alley, with the exception of liability for accounts of all creditors holding allowed claims against Enron Transportation and for which the Plan provides for distributions to be made. Five Point will also waive and release Enron Transportation from all liability, responsibility or obligation. D. Indemnification After the Closing, Five Point will indemnify and hold harmless Enron Transportation, its affiliates, their officers, directors, employees or representatives against all losses, claims, suits liabilities, damages or expenses incurred by any Seller Indemnitee arising after Closing with respect to the Shares or Alligator Alley's operations or administration. "[T]he sale contemplated by the Agreement has no direct impact on the creditors of Alligator Alley," Mr. Rosen assures the Court. A full-text copy of the Stock Agreement is available for free at: http://bankrupt.com/misc/FivePointAgreement.pdf * * * Judge Gonzalez approves the Reorganized Debtors' request in its entirety. Headquartered in Houston, Texas, Enron Corporation -- http://www.enron.com/-- is in the midst of restructuring various businesses for distribution as ongoing companies to its creditors and liquidating its remaining operations. Before the company agreed to be acquired, controversy over accounting procedures had caused Enron's stock price and credit rating to drop sharply. Enron filed for chapter 11 protection on December 2, 2001 (Bankr. S.D.N.Y. Case No. 01-16033). Judge Gonzalez confirmed the Company's Modified Fifth Amended Plan on July 15, 2004, and numerous appeals followed. The Confirmed Plan took effect on Nov. 17, 2004. Martin J. Bienenstock, Esq., and Brian S. Rosen, Esq., at Weil, Gotshal & Manges, LLP, represent the Debtors in their restructuring efforts. (Enron Bankruptcy News, Issue No. 166; Bankruptcy Creditors' Service, Inc., 15/945-7000) ERHC ENERGY: Malone & Bailey Raises Going Concern Doubt ------------------------------------------------------- Malone & Bailey, PC, expressed substantial doubt about ERHC Energy Inc.'s ability to continue as a going concern after it audited the Company's financial statements for the fiscal year ended Sept. 30, 2005. The auditing firm pointed to the Company's recurring losses from operations since inception and dependence on outside sources of financing for the continuation of its operations. Fiscal Year 2005 Results During the year ended Sept. 30, 2005, ERHC Energy incurred an $11,270,478 net loss, compared to a $3,593,388 net loss for the fiscal year ended Sept. 30, 2004. A significant portion of the increase in net loss for fiscal year 2005 was attributable to a $5,749,575 loss on extinguishment of debt related to the inducement to Chrome Oil Services, Ltd., to convert debt into common stock and the addition of board compensation of $1,990,361. ERHC Energy generated no revenues during 2005 and 2004 and thus relied on borrowings funded from its line of credit provided by Chrome as well as the sale of common stock. At Sept. 30, 2005, the Company's balance sheet showed $6,720,210 in total assets and liabilities of $2,779,011. Its current liabilities exceed current assets by $1,758,428 as of Sept. 30, 2005. ERHC Energy's current focus is to exploit its assets, which are rights to working interests in exploration acreage in the Joint Development Zone between the Democratic Republic of Sao Tome & Principe and the Federal Republic of Nigeria, and in the exclusive territorial waters of Sao Tome. The Company has formed relationships with upstream oil and gas companies to assist the Company in exploiting its assets in the JDZ. About ERHC ERHC Energy is an independent oil and gas company. The Company was formed in 1986, as a Colorado corporation, and was engaged in a variety of businesses until 1996, when it began its current operations as an independent oil and gas company. FASHION HOUSE: Incurs $1.5 Mil. Net Loss in Third Quarter of 2005 ----------------------------------------------------------------- The Fashion House Holdings, Inc., fka TDI Holding Corporation, delivered its financial results for the quarter ended Sept. 30, 2005, to the Securities and Exchange Commission on Jan. 3, 2006. Fashion House incurred a $1,501,745 net loss in the third quarter of 2005 in contrast to $1,176,072 of net income for the same period last year. Management attributes the net loss to lower net sales, increased operating expenses and increased interest expense. In addition, the Company benefited from a $1,350,000 gain on the sale of trademark rights during the third quarter of 2005. Sales in the quarter ended Sept. 30, 2005, decreased to $455,867 from sales of $1,407,856 in the third quarter of 2004. The entire decrease in sales was due to the sale of the Nicole Miller trademark rights in 2004. At Sept. 30, 2005, Fashion House's balance sheet showed $1,339,276 in total assets and liabilities of $2,924,220, resulting in a stockholders' deficit of $1,584,944. The Company had a working capital deficit of $1,938,601 and an accumulated deficit of $5,731,838 at the end of the third quarter of 2005. Going Concern Doubt Hein & Associates LLP expressed substantial doubt about Fashion House's ability to continue as a going concern after it audited the Company's financial statements for the fiscal years ended March 31, 2005, and 2004. The auditing firm pointed to the Company's working capital stockholders' deficits. About Fashion House The Fashion House Holdings, Inc., designs, develops, and markets a diversified selection of women's dress and casual fashion footwear. It targets moderate to premium priced categories of the women's fashion footwear market. Fashion House's business centers on the licensing of recognized brand names. FEDERAL-MOGUL: Cooper Resolving Asbestos Liabilities Thru Trust --------------------------------------------------------------- Cooper Industries, Ltd., and other parties involved in the resolution of the Federal-Mogul Corporation bankruptcy proceeding have reached an agreement regarding Cooper's participation in Federal-Mogul's 524(g) asbestos claimants' trust. By participating in this trust, Cooper will resolve its liability for asbestos claims arising from Cooper's former Abex Friction Products business. The proposed settlement agreement is subject to court approval, approval of 75 percent of the current Abex asbestos claimants and certain other approvals. The settlement will resolve more than 38,000 pending Abex claims. Future claims will be resolved through the bankruptcy trust, and Cooper will be protected against future claims by an injunction to be issued by the district court upon plan confirmation. "Since Federal-Mogul's bankruptcy process began in October 2001, we have worked tirelessly to bring this matter to a constructive conclusion," said Kirk Hachigian, chief executive officer and president, Cooper Industries. "At the same time, we have strengthened the Company's financial position and improved our strategic flexibility. Given the costs of continued litigation, the uncertainty of legislative reforms and the risks inherent in remaining in the tort system, we believe resolving the Abex liabilities through the trust is the preferable option for our shareholders. With this settlement in place, we will have certainty and finality on the Abex liability and can focus management resources on executing our strategic plan." The claims to be resolved through the bankruptcy trust relate to the Abex Friction Products business of Cooper's former Automotive Products segment. Cooper sold its Automotive Products business to FMC in October 1998. Cooper began defending against these claims pursuant to its guaranty obligations to the prior owner of Abex when Federal-Mogul filed a Chapter 11 bankruptcy petition and indicated that it may not honor its indemnity obligations to Cooper. Key terms and aspects of the Proposed Settlement Agreement: -- Cooper has agreed to pay $130,000,000 in cash into the trust, with $100,000,000 payable upon Federal-Mogul's emergence from bankruptcy. The remainder will be paid in two $15,000,000 installments due on January 15, 2006 and January 15, 2007, or upon emergence from bankruptcy, if later. Cooper will receive a total of $37,500,000 during the funding period from other parties associated with the Federal-Mogul bankruptcy; -- Cooper will provide the trust 1.4 million shares of the Company's stock upon Federal-Mogul's emergence from bankruptcy. The agreement provides that the trust may, during the first year after issuance, sell these shares to Cooper at market prices and, thereafter, in open market transactions; -- The agreement also provides for further payments by Cooper subject to the amount and timing of insurance proceeds. Cooper has agreed to make 25 annual payments of up to $20,000,000 each reduced by certain insurance proceeds received by the trust. In years that the insurance proceeds exceed $17,000,000, Cooper will be required to contribute $3,000,000 with the excess insurance proceeds carried over to the next year; -- Cooper, through Pneumo-Abex LLC, has access to Abex insurance policies with remaining limits on policies with solvent insurers in excess of $800,000,000. The trust will retain 10% of the insurance proceeds for indemnity claims paid by the trust until Cooper's obligation is satisfied and will retain 15% thereafter. The agreement also provides for Cooper to receive the insurance proceeds related to indemnity and defense costs paid prior to the date a stay of current claims is entered by the bankruptcy court; and -- Cooper will also be required to forego certain claims and objections in the Federal-Mogul bankruptcy proceedings. In addition, the parties involved have agreed to petition the court for a stay on all current claims outstanding. Although the payments related to the settlement could extend to 25 years and the collection of insurance proceeds could extend beyond 25 years, the liability and insurance will be undiscounted on Cooper's balance sheet as the amount of the actual annual payments is not reasonably predictable. Cooper is in the process of finalizing the amount of insurance recoveries that will be included in the charge to discontinued operations. Cooper anticipates taking an after-tax charge to "loss from discontinued operations" of between $150,000,000 and $225,000,000 in the fourth quarter ended December 31, 2005. The range of the charge to discontinued operations primarily related to insurance recoveries, which in any scenario when finalized will be on the lower end of the range of potential insurance recovery estimates. In addition to Cooper, parties to the agreement include FMC; Federal-Mogul Products, Inc.; the Future Claimants' Representative for FMC and FMP appointed in the Chapter 11 cases known as In re Federal-Mogul Global Inc., T&N Limited, et al., No. 01-10578, pending in the United States Bankruptcy Court for the District of Delaware; the Official Committee of Asbestos Claimants for FMC and FMP appointed in the Reorganization Cases; Pneumo-Abex LLC; and PCT International Holdings Inc. These parties have agreed to the terms of the proposed settlement agreement. About Cooper Industries Cooper Industries, Ltd., with 2004 revenues of $4,500,000,000, is a global manufacturer of electrical products and tools and hardware. Headquartered in Houston, Texas, Cooper has approximately 29,000 employees serving more than 90 locations around the world, and sells products to customers in more than 50 countries. About Federal-Mogul Headquartered in Southfield, Michigan, Federal-Mogul Corporation -- http://www.federal-mogul.com/-- is one of the world's largest automotive parts companies with worldwide revenue of some US$6 billion. The Company filed for chapter 11 protection on Oct. 1, 2001 (Bankr. Del. Case No. 01-10582). Lawrence J. Nyhan Esq., James F. Conlan Esq., and Kevin T. Lantry Esq., at Sidley Austin Brown & Wood, and Laura Davis Jones Esq., at Pachulski, Stang, Ziehl, Young, Jones & Weintraub, P.C., represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed US$10.15 billion in assets and US$8.86 billion in liabilities. At Dec. 31, 2004, Federal-Mogul's balance sheet showed a US$1.925 billion stockholders' deficit. At Nov. 30, 2005, Federal-Mogul's balance sheet showed a US$1,450.4 billion stockholders' deficit, compared to a US$1.926 billion deficit at Dec. 31, 2004. Federal-Mogul Corp.'s U.K. affiliate, Turner & Newall, is based at Dudley Hill, Bradford. (Federal-Mogul Bankruptcy News, Issue No. 100; Bankruptcy Creditors' Service, Inc., 215/945-7000) FEDERAL-MOGUL: Files Adversary Case vs. Bobby Whitley, et al. ------------------------------------------------------------- Federal-Mogul Corporation, Federal-Mogul Products, Inc., the Official Committee of Asbestos Claimants and Eric D. Green, as acting representative of future asbestos personal injury claimants, seek declaratory and injunctive relief against: (1) Bobby Whitley; (2) certain individuals and their legal representatives; and (3) all unknown present and future claimants holding claims or demands of the type defined as Pneumo Asbestos Claims. Edwin J. Harron, Esq., at Young Conaway Stargatt & Taylor LLP, in Wilmington, Delaware, relates that the Defendants consist of all claimants who are currently plaintiffs in judicial actions pending in federal or state court and who allege liability directly or indirectly for asbestos-related deaths or personal injuries against: * Pneumo Abex LLC, successor by merger to Pneumo Abex Corporation, or any other Pneumo Protected Party on account of products produced by or the operation of the former friction products division of a predecessor of Pneumo Abex; and * any Pneumo Protected Party to the extent those claims arise out of Wagner Electric Corporation's automotive brake business during the period that Wagner or its successors-in- interest were direct or indirect subsidiaries of Cooper LLC. The 1990 Transactions In 1994, Wagner acquired certain assets from Pneumo Abex Corp., which prior to the closing, comprised the Friction Products Division. As part of the 1994 Pneumo/Abex Asset Purchase Agreement, Wagner agreed to indemnify Pneumo Abex and its affiliates on an after-insurance basis from certain asbestos- related claims relating to the assets and business purchased by Wagner. In 1997, Cooper, Wagner's then parent, merged Wagner into Moog Automotive, another of Cooper's subsidiaries. By operation of law, Moog, as the surviving entity, became liable for Wagner's indemnification and other obligations under the 1994 APA. In October 1998, Federal-Mogul purchased 100% of the stock of Moog from Cooper pursuant to a stock purchase agreement and renamed the company FMP. By operation of law, FMP continued to be obligated under Wagner's contractual indemnity and other obligations in favor of Pneumo Abex and its affiliates as set forth in the 1994 APA. Cooper's Claims During the period between the 1998 SPA and the Petition Date, FMP performed its obligations in favor of Pneumo Abex by: -- defending Pneumo Abex against asbestos-related personal injury claims; and -- paying defense costs and indemnity payments. After the Petition Date, FMP ceased performing any obligations under the 1994 APA, Mr. Harron relates. Accordingly, Pneumo Abex filed a proof of claim against FMP prior to the Claims Bar Date, based on the indemnification provisions of the 1994 APA. Cooper, Wagner's then corporate parent, guaranteed Wagner's performance of its contractual obligations under the 1994 APA in favor of Pneumo Abex. As part of the 1998 SPA, Federal-Mogul agreed to indemnify Cooper with respect to Cooper's guaranty of FMP's performance. Accordingly, Cooper filed proofs of claim against the Debtors, among other parties, arising out of the 1994 APA and 1998 SPA with respect to asbestos-related claims against Pneumo Abex and Cooper's purported payment of those claims. As part of the 1998 SPA, Federal-Mogul also agreed to indemnify Cooper for all asbestos-related personal injury claims arising out of Wagner's automotive brake business. Accordingly, Cooper filed contingent claims against one or more of the Debtors invoking that indemnity. Mr. Harron notes that FMP's asbestos-related liabilities relate primarily to: (i) Wagner's manufacture and sale of Wagner-branded brake products; and (ii) the 1994 acquisition of the Friction Products Division. The Cooper Settlement Pursuant to a Term Sheet executed on December 15, 2005, the Plaintiffs have compromised and settled Cooper's substantial claims against the Debtors, their estates, and their non-Debtor Affiliates. In exchange for Cooper's substantial contribution of insurance proceeds and related rights, cash, stock and other consideration, the Debtors agreed to provide the Pneumo Protected Parties: (i) Inclusion in the Plan of a Section 524(g) channeling injunction; and (ii) A Litigation Stay which, if granted, will provide interim injunctive relief analogous to the agreed-upon channeling injunction under the Plan. The Pneumo Protected Parties include: (1) Cooper Industries, Ltd.; (2) Cooper Industries, LLC, successor by merger to Cooper Industries, Inc.; (3) PCT International Holdings Inc.; (4) Pneumo Abex; (5) each of the Pneumo Parties' past, present and future affiliates; (6) the Pneumo Parties' successors or assigns, including the Flavors Company but excluding Pepsi Americas, Inc. and its Predecessors; and (7) each of the Pneumo Parties and their affiliates' past, present and future officers, directors, employees, agents, affiliates, shareholders, lenders, attorneys, accountants, financial advisors, consultants and other representatives. Pursuant to Section 362 of the Bankruptcy Code, the filing of FMP's Chapter 11 petition operates as an automatic stay applicable to all entities which, inter alia, stays the commencement or continuation of all pending and future Pneumo Asbestos Claims against any Pneumo Protected Party, Mr. Harron reminds the Court. "A justifiable controversy exists between Plaintiffs, on the one hand, and Defendants, on the other hand, in that notwithstanding the filing of FMP's voluntary chapter 11 petition and the operation of the automatic stay, Defendants, or some of them, have commenced actions post-petition or proceeded with prepetition litigation against the Pneumo Protected Parties, seeking recovery on Pneumo Asbestos Claims relating to the Friction Products Division, or claims arising out of Wagner's automotive brake business prior to the 1998 SPA," Mr. Harron asserts. Accordingly and in compliance with the Cooper Settlement, the Debtors ask the Court to: (a) declare that the automatic stay enjoins the Defendants from commencing or continuing any act or judicial or administrative proceeding to liquidate, enforce or recover any Pneumo Asbestos Claim against the Pneumo Protected Parties or their insurers; and (b) restrain and enjoin the Defendants from commencing or prosecuting any judicial or administrative action or proceeding seeking to liquidate, enforce or recover on any Pneumo Asbestos Claim against the Pneumo Protected Parties or their insurers, pending the earlier of: -- the confirmation and effectiveness of the Plan; or -- the termination of the injunction for cause. Headquartered in Southfield, Michigan, Federal-Mogul Corporation -- http://www.federal-mogul.com/-- is one of the world's largest automotive parts companies with worldwide revenue of some US$6 billion. The Company filed for chapter 11 protection on Oct. 1, 2001 (Bankr. Del. Case No. 01-10582). Lawrence J. Nyhan Esq., James F. Conlan Esq., and Kevin T. Lantry Esq., at Sidley Austin Brown & Wood, and Laura Davis Jones Esq., at Pachulski, Stang, Ziehl, Young, Jones & Weintraub, P.C., represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed US$10.15 billion in assets and US$8.86 billion in liabilities. At Dec. 31, 2004, Federal-Mogul's balance sheet showed a US$1.925 billion stockholders' deficit. At Nov. 30, 2005, Federal-Mogul's balance sheet showed a US$1,450.4 billion stockholders' deficit, compared to a US$1.926 billion deficit at Dec. 31, 2004. Federal-Mogul Corp.'s U.K. affiliate, Turner & Newall, is based at Dudley Hill, Bradford. (Federal-Mogul Bankruptcy News, Issue No. 100; Bankruptcy Creditors' Service, Inc., 215/945-7000) FLYI INC: Postpones Auction and Will Amend Bidding Procedures ------------------------------------------------------------- The Hon. Eugene R. Wedoff authorized UAL Corporation and its debtor-affiliates to submit a bid for FLYi, Inc.'s assets. On December 16, 2005, the Debtors submitted a bid for an undisclosed amount of FLYi's assets. FLYi Postpones Auction FLYi, Inc., has recently advised the U.S. Bankruptcy Court for the District of Delaware that it will not proceed with the auction of its assets. While FLYi received multiple expressions of interest for its business and assets, FLYi's counsel Brendan Linehan Shannon, Esq., at Young Conaway Stargatt & Taylor, LLP, in Wilmington, Delaware, relates that only one formal bid contemplated the continuation of the company's operations as a going concern. The Going Concern Bid, however, had several features that prevented FLYi from accepting proposal as a viable bid for its business. Mr. Shannon notes that since the beginning of December 2005, FLYi and the Official Committee of Unsecured Creditors appointed in its Chapter 11 case have been focused on developing the going concern expressions of interest. Mr. Shannon explains that the Going Concern Bid: -- provided insufficient consideration; -- had numerous conditions that were beyond FLYi's control to satisfy including the renegotiation of certain material contracts on terms acceptable to the bidder; and -- did not provide for funding for the significant operating losses and cash burn FLYi expected to incur prior to closing of the transaction. Mr. Shannon further relates that since receiving the Going Concern Bid, FLYi and its Committee have been focused on developing and improving that bid, as well as continuing discussions with bidders that had expressed interest in a going concern transaction in the past. Ultimately, however, FLYi was unable to substantially improve the Going Concern Bid or find an attractive alternative going concern bidder. After intensive evaluation of all of their alternatives, FLYi concluded that the value of its estates would be maximized by discontinuation of its scheduled flight operations and liquidation of its assets pursuant to one or more sale or other transactions that do not contemplate the continued operation of Independence Air as a going concern. FLYi will be amending the bidding procedures. FLYi may retain one or more firms to assist in devising an auction process that maximizes the value of certain assets in a post-discontinuation of operations environment. 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. 111; Bankruptcy Creditors' Service, Inc., 215/945-7000) Headquartered in Dulles, Virginia, FLYi, Inc., aka Atlantic Coast Airlines Holdings, Inc. -- http://www.flyi.com/-- is the parent of Independence Air Inc., a small airline based at Washington Dulles International Airport. The Debtor and its six affiliates filed for chapter 11 protection on Nov. 7, 2005 (Bankr. D. Del. Case Nos. 05-20011 through 05-20017). Brendan Linehan Shannon, Esq., M. Blake Cleary, Esq., and Matthew Barry Lunn, Esq., at Young, Conaway, Stargatt & Taylor, represent the Debtors in their restructuring efforts. As of Sept. 30, 2005, the Debtors listed assets totaling $378,500,000 and debts totaling $455,400,000. FOSS MANUFACTURING: Ch. 11 Trustee Hires DSI as Consultant ---------------------------------------------------------- The U.S. Bankruptcy Court for the District of New Hampshire gave Patrick J. O'Malley, the Chapter 11 Trustee of Foss Manufacturing Company, Inc., permission to employ Development Specialists, Inc., as his consultant, nunc pro tunc to Oct. 28, 2005. Development Specialists is a consulting firm that specializes in providing consulting, liquidation, and management services to insolvent, bankrupt, troubled or reorganizing businesses. The Firm's services will include counseling and management services in connection with accounting, asset disposition, litigation support, preference analysis and claims analysis. The Firm's charges will be included in the Trustee's fee applications. Mr. O'Malley assures the Court that the Firm does not hold any interest materially adverse to the Debtor's estate. Headquartered in Hampton, New Hampshire, Foss Manufacturing Company, Inc. -- http://www.fossmfg.com/-- is a producer of engineered, non-woven fabrics and specialty synthetic fibers, for a variety of applications and markets. The Company filed for chapter 11 protection on Sept. 16, 2005 (Bankr. D.N.H. Case No. 05-13724). Andrew Z. Schwartz, Esq., at Foley Hoag LLP represents the Debtor in its restructuring efforts. When the Debtor filed for protection from its creditors, it listed estimated assets of $10 million to $50 million. FOSS MANUFACTURING: Gordian Group Hired as Investment Banker ------------------------------------------------------------ Patrick J. O'Malley, the chapter 11 trustee for Foss Manufacturing Company, Inc., sought and obtained authority from the U.S. Bankruptcy Court for the District of New Hampshire to retain Gordian Group LLC as his investment banker. Gordian Group will: a) advise the Trustee as to any potential financial transaction; b) assist in the development of a list of potential acquirers, investors and strategic partners, and interaction with such parties in an effort to create interest in one or more financial transactions; c) assist in negotiation with current or potential lenders, creditors, shareholders and other interested parties regarding the Debtor's operations and prospects and any potential financial transaction; d) assist with the development, negotiation and implementation of one or more financial transactions, including participation in negotiations with creditors, stockholders and other parties involved in a financial transaction; e) assist in valuing the Debtor or valuing the Debtor's assets or operations; f) provide expert advice and testimony relating to financial matters at any time prior to consummation of a financial transaction; g) assist in preparing proposals to creditors, employees, shareholders and other parties-in-interest in connection with any financial transaction; h) assist with presentations made to the Bankruptcy Court, the Trustee and creditors or stockholders regarding the potential financial transactions or other issues related thereto; i) render other investment banking services as may be mutually agreed upon by the parties; and j) have no duties or responsibilities in respect of the company's subsidiaries or any disposition of their respective assets. If desired, any duties or responsibilities, and the consideration therefore, will be set forth in a further engagement letter mutually agreed to among the parties hereto and thereto. Gordian and the Trustee have agreed to a one-time, upfront fee of $75,000, plus a transaction fee equal to: -- 1.75% of the aggregate gross consideration paid or payable or received in connection with all financial transactions; and -- in the case of a reorganization, the greater of 1.75% of: i) the aggregate amount of any new debt and equity financing committed to or raised in connection with the reorganization, and ii) the enterprise value (as mutually determined by the parties in good faith) of the Debtor upon consummation of the reorganization; Notwithstanding any other term of the agreement, the aggregate fees payable or paid to the Firm will not exceed $675,000, inclusive of the upfront fee. Peter S. Kaufman, head of Restructuring and Distressed M&A of Gordian, assures the Court that the firm is a "disinterested person" as that term is defined in section 101(14) of the Bankruptcy Code. Headquartered in Hampton, New Hampshire, Foss Manufacturing Company, Inc. -- http://www.fossmfg.com/-- is a producer of engineered, non-woven fabrics and specialty synthetic fibers, for a variety of applications and markets. The Company filed for chapter 11 protection on Sept. 16, 2005 (Bankr. D.N.H. Case No. 05-13724). Andrew Z. Schwartz, Esq., at Foley Hoag LLP represents the Debtor in its restructuring efforts. When the Debtor filed for protection from its creditors, it listed estimated assets of $10 million to $50 million. GREAT ATLANTIC: Posts $71 Million Net Loss in Third Quarter ----------------------------------------------------------- The Great Atlantic & Pacific Tea Company, Inc. (A&P, NYSE Symbol: GAP) reported unaudited fiscal 2005 third quarter and year-to-date results for the 12 and 40 weeks ended Dec. 3, 2005. For the third quarter, U.S. sales were $1.58 billion, compared with $1.67 billion in the third quarter of fiscal 2004. Fiscal 2004 third quarter total sales of $2.52 billion include $850 million related to A&P Canada which was sold in August 2005. U.S. total comparable store sales increased 1.8% vs. year-ago. Excluding New Orleans, U.S. comparable store sales decreased 0.3% vs. year-ago. Net loss for the quarter was $71 million this year versus a loss of $75 million last year. Reported EBITDA for the third quarter was negative $35 million this year versus a positive $16 million for the third quarter of fiscal 2004. EBITDA for both quarters includes items the Company considers non-operating in nature that management excludes when evaluating the results of the U.S. on-going business. The current quarter includes: * a $2 million benefit related to the Visa/Mastercard lawsuit settlement, * charges of $19 million related to Midwest operations exit costs, * net charges of $15 million in restructuring costs relating to the cost reduction initiatives within administration and supply and logistics, * charges of $8 million related to impairment charges on long- lived assets, * charges of $13 million related to store closures in New Orleans as a result of Hurricane Katrina, * charges of $3 million related to early extinguishment of debt and write off of deferred financing fees for the prior credit facility and * $4 million of real estate related losses. Fiscal 2004 third quarter results include $27 million from A&P Canada, $9 million in one-time savings in employee benefit costs, charges of $35 million related to impairment on long-lived assets, $1 million in net restructuring costs and $2 million of real estate related losses. For the 40 weeks year to date, U.S. sales were $5.41 billion versus $5.61 billion in fiscal 2004. Total sales of $7.13 billion for the 40 weeks year to date and $8.29 billion in fiscal 2004 include $1.72 billion and $2.68 billion in sales, respectively, related to A&P Canada which was sold in August 2005. U.S. total comparable store sales were unchanged from last year. Excluding New Orleans, U.S. comparable store sales decreased 0.6% vs. year- ago. Net income for the 40 weeks year to date was $432 million which included the gain on the sale of Canada, compared with a loss of $182 million for fiscal 2004. Reported EBITDA for the 40 weeks year to date and fiscal 2004 was negative $101 million and positive $120 million, respectively. EBITDA for the 40 weeks year to date includes: * $68 million from A&P Canada, * a $2 million benefit related to the Visa/Mastercard settlement, * $22 million of real estate related gains, * charges of $105 million related to Midwest operations exit costs, * $89 million in net restructuring costs, * charges of $18 million related to impairment charges on long-lived assets, * charges of $18 million related to Hurricane Katrina, * charges of $15 million related to the Canadian hedging agreement and * charges of $33 million for early extinguishment of debt and write off of deferred financing fees related to the prior credit facility. EBITDA for fiscal 2004 includes: * $64 million from A&P Canada, * $9 million in one-time savings in employee benefit costs, * charges of $35 million related to impairment on long-lived assets, * $2 million in net restructuring costs and * $1 million of real estate related losses. Christian Haub, Executive Chairman, said, "I am very encouraged by the progress generated by our new management team in both reducing costs and improving sales trends, especially through the latter stages of the third quarter. Accordingly, our results, excluding special items, were significantly improved, a positive sign that we are on track to achieve our profitability objectives as planned." Eric Claus, President & Chief Executive Officer, said "I'm very proud of our team's execution of key cost management, operating and selling strategies in the third quarter. Our store level initiatives are clearly resonating with customers, resulting in improved sales. These positive outcomes at such an early stage of our rebuilding process bode well for the achievement of ongoing sales momentum, and progress toward overall profitability by fiscal 2007. "Going forward, we plan to continue to improve operating results by further reducing costs, while marketing aggressively and investing to bring our store facilities to new quality standards both on the fresh and discount sides." Mr. Claus said. Founded in 1859, A&P is one of the nation's first supermarket chains. The Company operates 407 stores in 9 states and the District of Columbia under the following trade names: A&P, Waldbaum's, The Food Emporium, Super Foodmart, Super Fresh, Farmer Jack, Sav-A-Center and Food Basics. Headquartered in Montvale, New Jersey, The Great Atlantic & Pacific Tea Company, Inc. operates 637 supermarkets in 10 states, the District of Columbia and Ontario, Canada. Sales for the fiscal year ended February 26, 2005 were approximately $10.8 billion. * * * As reported in the Troubled Company Reporter on Dec. 30, 2005, Moody's Investors Service confirmed the B3 corporate family rating and other long-term ratings of The Great Atlantic & Pacific Tea Company, Inc., upgraded the company's Speculative Grade Liquidity Rating to SGL-1 from SGL-3 and assigned a stable outlook. The confirmation of A&P's long term ratings is based upon Moody's view that the positive impact on credit metrics from the recent reduction in debt and the significant increase in liquidity from asset sale proceeds is not sufficient to offset weak comparable store sales in the face of: * intense competition; * low profitability in the company's U.S. operations; and * ongoing negative free cash flow generation as A&P continues the aggressive capital expenditures necessary to upgrade its store base. The stable rating outlook incorporates the more solid capital structure given A&P's current large cash balances and lower debt levels following the sale of its Canadian operations. This rating action concludes the review for possible upgrade begun on July 20, 2005. Ratings confirmed: The Great Atlantic & Pacific Tea Company, Inc.: * Long Term Corporate Family Rating at B3 * Senior unsecured notes and bonds at Caa1 * Multi-seniority shelf at (P)Caa1 for senior, at (P)Caa2 for subordinated, at (P)Caa2 for junior subordinated, and at (P)Caa3 for preferred stock A&P Finance I, A&P Finance II and A&P Finance III: * Trust preferred securities shelf at (P)Caa2 Rating confirmed and to be withdrawn: * Senior secured and guaranteed bank agreement at B2; Facility was cancelled in October 2005 Rating upgraded: * Speculative Grade Liquidity Rating to SGL-1 from SGL-3 The outlook is stable. HARBORVIEW MORTGAGE: S&P Upgrades Class B-4 Certs. to BB+ from BB ----------------------------------------------------------------- Standard & Poor's Ratings Services raised its ratings on four classes from HarborView Mortgage Loan Trust 2003-1. At the same time, ratings are affirmed on the remaining rated classes from this transaction and on 270 other classes of certificates from various HarborView Mortgage Loan Trust transactions. The raised ratings on series 2003-1 are the result of: * accelerated principal prepayments, * positive loan performance, and * the shifting interest payment structure of the transaction. These factors have allowed credit support percentages to increase to levels that are adequate for the higher ratings. Projected credit support for these certificates ranged from 2.00x to 2.10x the levels associated with the higher ratings. The affirmations are based on pool performance that has allowed credit support to remain at levels that are adequate to support the current ratings on the certificates. The performance of the pools of mortgage loans backing all of these trusts has been very good. Cumulative losses range from 0.00% to 0.03% of the original pool balances. Total delinquencies range from 0.15% to 5.61% of the current pool balances. Credit support for all of the HarborView transactions is provided through subordination. The underlying collateral for these transactions consists mostly of 30-year fixed-, adjustable-, and hybrid-rate mortgage loans secured by first liens on one- to four-family properties. Additionally, some of the transactions include mortgages with a negative amortization feature. Ratings Raised HarborView Mortgage Loan Trust Rating Series Class To From ------ ----- -- ---- 2003-1 B-1 AA+ AA 2003-1 B-2 A+ A 2003-1 B-3 BBB+ BBB 2003-1 B-4 BB+ BB Ratings Affirmed HarborView Mortgage Loan Trust Series Class Rating ------ ----- ------ 2003-1 A, A-R AAA 2003-1 B-5 B 2003-2 1-A, A-R, 2-A-1, 2-X, 2-A-2, 3-A AAA 2003-2 B-1 AA 2003-2 B-2 A 2003-2 B-3 BBB 2003-2 B-4 BB 2003-2 B-5 B 2003-3 1A-1, A-R, 2A-1, 2A-2, 2A-3, A-X AAA 2003-3 B-1 AA 2003-3 B-2 A 2003-3 B-3 BBB 2003-3 B-4 BB 2003-3 B-5 B 2004-1 1-A, 2-A, 3-A, 4-A, X, A-R AAA 2004-1 B-1 AA 2004-1 B-2 A 2004-1 B-3 BBB 2004-1 B-4 BB 2004-1 B-5 B 2004-2 1A-1, 2A-1, AX, A-R AAA 2004-2 B-1 AA 2004-2 B-2 A 2004-2 B-3 BBB 2004-2 B-4 BB 2004-2 B-5 B 2004-3 1-A, 2-A, A-R AAA 2004-3 B-1 AA 2004-3 B-2 A 2004-3 B-3 BBB 2004-3 B-4 BB 2004-3 B-5 B 2004-4 1-A, 2-A, 3-A, X-1, X-2, A-R AAA 2004-4 B-1 AA 2004-4 B-2 A 2004-4 B-3 BBB 2004-4 B-4 BB 2004-4 B-5 B 2004-5 1-A, 2-A-1, 2-A-2A, 2-A-2B, 2-A-3 AAA 2004-5 2-A-4, 2-A-5, 2-A-6, 3-A, X, AR AAA 2004-5 B-1 AA 2004-5 B-2 A 2004-5 B-3 BBB 2004-5 B-4 BB 2004-5 B-5 B 2004-6 1-A, 2-A, 3-A-1, 3-A-2A, 3-A-2B AAA 2004-6 4-A, 5-A, A-R AAA 2004-6 B-1 AA 2004-6 B-2 A 2004-6 B-3 BBB 2004-6 B-4 BB 2004-6 B-5 B 2004-7 1-A, 2-A-1, 2-A-2, 2-A-3, 3-A-1 AAA 2004-7 3-A-2, 4-A, X-1, X-2, A-R AAA 2004-7 B-1 AA 2004-7 B-2 A 2004-7 B-3 BBB 2004-7 B-4 BB 2004-7 B-5 B 2004-8 1-A, 2-A-1, 2-A-2, 2-A-3, 2-A4A AAA 2004-8 2-A4B, 3-A1, 3-A2, X, A-R AAA 2004-8 B-1 AA 2004-8 B-2 A 2004-8 B-3 BBB 2004-8 B-4 BB 2004-8 B-5 B 2004-9 1-A, 2-A, 3-A, 4-A1A, 4-A1B AAA 2004-9 4-A2, 4-A3, X, A-R AAA 2004-9 B-1 AA 2004-9 B-2 A 2004-9 B-3 BBB 2004-9 B-4 BB 2004-9 B-5 B 2004-10 1-A-1, 1-A-2A, 1-A-2B, 2-A AAA 2004-10 3-A-1A, 3-A-1B, 4-A, X-1 AAA 2004-10 X-2, X-3, A-R AAA 2004-10 B-1 AA 2004-10 B-2 A 2004-10 B-3 BBB 2004-10 B-4 BB 2004-10 B-5 B 2004-11 1-A, 2-A1A, 2-A1B, 2-A2A AAA 2004-11 2-A2B, 2-A3, 3-A1A, 3-A1B AAA 2004-11 3-A2A, 3-A2B, 3-A3, 3-A4 AAA 2004-11 X-1, X-2, X-3, X-B, X-R AAA 2004-11 B-1 AA 2004-11 B-2 A 2004-11 B-3 BBB 2004-11 B-4 BB 2004-11 B-5 B 2005-1 1-A, 2-A1A, 2-A1B, 2-A2 AAA 2005-1 X, A-R AAA 2005-1 B-1 AA 2005-1 B-2 A 2005-1 B-3 BBB 2005-1 B-4 BB 2005-1 B-5 B 2005-2 1-A, 2-A-1A, 2-A-1B, 2-A-1C AAA 2005-2 2-A2, X, PO, A-R AAA 2005-2 B-1 AA 2005-2 B-2 A 2005-2 B-3 BBB 2005-2 B-4 BB 2005-2 B-5 B 2005-3 1-A, 2-A1A, 2-A1B, 2-A1C AAA 2005-3 2-A2, X-1, X-2, PO-1, PO-2, A-R AAA 2005-3 B-1 AA 2005-3 B-2 A 2005-3 B-3 BBB 2005-3 B-4 BBB- 2005-3 B-5 BB 2005-3 B-6 B 2005-4 1-A, 2-A, 3-A1, 3-A2, 4-A, 5-A, A-R AAA 2005-4 B-1 AA 2005-4 B-2 A 2005-4 B-3 BBB 2005-4 B-4 BBB- 2005-4 B-5 BB 2005-4 B-6 B 2005-5 1-A-1A, 1-A-1B, 2-A-1A, 2-A-1B AAA 2005-5 2-A-1C, X-1, X-2, PO-1, PO-2, A-R AAA 2005-5 B-1 AA 2005-5 B-2 A 2005-5 B-3 BBB 2005-5 B-4 BBB- 2005-5 B-5 BB 2005-5 B-6 B 2005-6 1-A-1A, 1-A-1B, X, A-R AAA 2005-6 B-1 AA 2005-6 B-2 A 2005-6 B-3 BBB 2005-6 B-4 BB 2005-6 B-5 B 2005-7 1-A-1, 1-A2, 1-X, 1-PO, A-R AAA 2005-7 2-A1, 2-A2A, 2-A2B, 2-X, 2-PO AAA 2005-7 1-B1, 2-B1 AA 2005-7 1-B2, 2-B2 A 2005-7 1-B3, 2-B3 BBB 2005-7 1-B4, 2-B4 BB 2005-7 1-B5, 2-B5 B INERGY L.P.: Intends to Sell $200 Mil. Notes in Private Placement ----------------------------------------------------------------- Inergy, L.P. (NASDAQ:NRGY) and its wholly owned subsidiary Inergy Finance Corp. reported that they intend to sell in a private placement, subject to market conditions, $200 million senior unsecured notes due 2016. Inergy, L.P. intends to use the net proceeds from the private placement to repay borrowings under its revolving acquisition credit facility. Inergy L.P. -- http://www.inergypropane.com/-- sells and leases propane, propane supplies and equipment to retail consumers (residential, commercial, industrial and agricultural) under a number of regional brand names. In addition to its retail business, the company also operates a natural gas storage business and provides wholesale propane supply, price risk management and distribution services to customers throughout the United States and Canada. * * * As reported in the Troubled Company Reporter on Dec. 14, 2005, Standard & Poor's Ratings Services raised its corporate credit rating on propane distributor Inergy L.P. to 'B+' from 'B'. The outlook was also revised to stable from positive. In addition, the 'B-' rating on the company's $425 million, 6.875% senior notes was raised to 'B'. Kansas City, Missouri-based Inergy had about $561 million of debt as of Sept. 30, 2005. "The ratings upgrade reflects consistent financial performance and adequate credit measures, despite rapid acquisitive growth over the past year," said Standard & Poor's credit analyst Kevin L. Beicke. "In addition, the successful integration of the Star Gas Propane assets alleviates some previous concerns, and the upgrade further reflects an improved business profile due to the recent acquisition of the Stagecoach natural gas storage facility," he continued. The ratings are limited by Inergy's master limited partnership structure and weak business profile, which is characterized by: * acquisition risk and exposure to weather, * seasonal demand patterns, and * changing commodity prices. These concerns are only partially countered by: * Inergy's natural gas storage operations, * the propane segment's favorable service territory, and * high ownership percentage of customer tanks. The stable outlook is based on the solid operating performance of the partnership's propane segment and the expectation of continued financial performance. The stable outlook is contingent on progress toward a timely Phase II completion in mid-2007, as well as the maintenance of Inergy's current financial profile. Future large acquisitions or acquisitions of assets considered of greater risk than the company's current operations would likely result in an outlook revision to negative or a ratings downgrade. INTERSTATE BAKERIES: Court Approves Sieckmann Settlement Pact ------------------------------------------------------------- After obtaining relief from the automatic stay, Brenda Sieckmann prosecuted her lawsuit against Interstate Brands Corporation filed in the Circuit Court of the City of St. Louis, Missouri, relating to the death of her husband, Mark Sieckmann. Ms. Sieckmann has obtained a judgment against Interstate Brands in the Wrongful Death Action in the net amount of $9,750,500, which Judgment is being appealed by Interstate Brands. Approximately $1,500,000 of the Judgment has been satisfied. Interstate Brands, through its insurance broker, Lockton Companies, Inc., purchased an insurance policy from Property & Casualty Insurance Company with effective dates of June 15, 2003, to July 1, 2004. Interstate Brands, through Lockton, also purchased an insurance policy from National Union Fire Insurance Company of Pittsburgh, PA, with effective dates of July 1, 2003, to July 1, 2004. The Insurers deny that they provided coverage for the Judgment against Interstate Brands at the layer of $2,500,000 through $3,500,000, which results in an alleged $1,000,000 gap in Interstate Brands' insurance coverage. J.D. Kutter Insurance Associates, Inc., insurance broker for Mr. Sieckmann's employer, issued a certificate of insurance providing, among other things, that Interstate Brands was to be named as an additional insured under a policy of insurance issued by Crum & Forster Specialty Insurance with effective dates of February 28, 2003, to February 1, 2004. Crum & Forster has denied that Interstate Brands is an additional insured. Interstate Brands maintains that it should be an additional insured under Crum & Forster Policy No. GLO 0000262. Interstate Brands believes there is insurance coverage for the entirety of the Judgment, and that if there is any Gap, it is because of the fault and negligence of other parties. On June 15, 2005, National Union filed a declaratory judgment action against Interstate Brands and Ms. Sieckmann in the United States District Court for the Eastern District of Missouri, which concerns the alleged Gap and other coverage issues. On August 15, 2005, Ms. Sieckmann filed an action against Interstate Brands, Lockton, Discover, National Union and J.D. Kutter in the City of St. Louis, which concerns, in part, the alleged Gap in Interstate Brands' insurance coverage, and, in part, whether Interstate Brands was made an additional insured under the Crum & Forster policy of insurance, as represented by J.D. Kutter. Papers filed with the Court do not specify the role of Discover. Interstate Brands and Ms. Sieckmann have engaged in extensive discussions. They believe that their interests are aligned in the National Union Action and the Gap Action to the extent that each believes Interstate Brands is, or but for the fault of other parties would be, fully insured for the Judgment. Specifically, Interstate Brands and Ms. Sieckmann agree that: (a) Interstate Brands assigns and transfers to Ms. Sieckmann all of the recovery and proceeds from its rights, claims, causes of action, remedies, and defenses, regardless of their nature, that Brands has against Lockton, Discover, National Union, J.D. Kutter, Crum & Forster, and any other person or entity that in any way arises out of or is related to Interstate Brands' insurance coverage, or lack thereof, for the Gap and the SIR; (b) Interstate Brands waives any claim or argument that the February 17 Agreed Order allowing Ms. Sieckmann to pursue the Wrongful Death Lawsuit, and an April 27, 2005 Plaintiff's Reply to Interstate Brands' Response to Plaintiff's Motion to Remand filed in the Eastern District of Missouri, resulted in Ms. Sieckmann's waiver of any right to collect damages or other monetary losses from Brands with respect to the Gap. However, Interstate Brands reserves all other rights and claims regarding the Agreed Order and the Reply Memorandum; (c) The Parties enter into a joint defense and prosecution agreement under which, inter alia: (i) Interstate Brands appoints Robert Radice to act as counsel for Interstate Brands to prosecute and defend all rights, claims, causes of action, remedies, and defenses for which the recovery and proceeds are being assigned; (ii) Ms. Sieckmann agrees to pay all fees, costs and other expenses associated with the prosecution and defense of all rights claims causes of action, remedies and defenses for which the recovery and proceeds are being assigned; (iii) Ms. Sieckmann agrees to defend and indemnify and hold Interstate Brands harmless from and against any liability or claim or action by any third party, whether by direct action, third party action, cross or counterclaim, contribution, subrogation, or otherwise, arising out of or related to Interstate Brands' association with the defense or prosecution of the rights, claims, causes of action, remedies and defenses for which the recovery and proceeds are being assigned; (iv) Interstate Brands agrees to reasonably cooperate with Ms. Sieckmann, and her counsel, in the prosecution and defense of all claims, causes of action, remedies and defenses for which the recovery and proceeds are being assigned; (v) The counsel for each Party should act or be deemed to act as legal counsel for the benefit of their clients only; and (vi) The information shared pursuant to the Agreement will be kept confidential and both Parties should take all reasonable steps to preserve the confidentiality of the information; (d) Ms. Sieckmann agrees not to levy execution by garnishment, or otherwise collect or attempt to collect, on any property, asset, or right of Interstate Brands or any of its affiliates with respect to the Judgment or any future judgment entered against IBC arising out of the alleged wrongful death of Mr. Sieckmann or arising out of any and all attempts to obtain, from any source, the payment of damages, interest, insurance proceeds, or other compensation allegedly due because of the alleged wrongful death of Mr. Sieckmann; (e) Ms. Sieckmann agrees to dismiss the negligent and fraudulent misrepresentation counts against Interstate Brands in the Sieckmann Insurance Action with prejudice, each party to bear its own costs and fees. Interstate Brands understands and acknowledges that Ms. Sieckmann will file an Amended Petition in the Ms. Sieckmann Insurance Action only asserting a claim for garnishment against Interstate Brands, and that the action will be defended by Gap Counsel; (f) To the extent that Ms. Sieckmann recovers from J.D. Kutter or Crum & Forster related to Interstate Brands' status as an additional insured under Crum & Forster Policy No. GLO 0000262 pursuant to the assignment of recovery and proceeds, any recovery will be applied to the SIR; (g) Nothing contained in the Agreement will affect the Parties' claims, defenses, or rights pending or yet to be raised in the Wrongful Death Action or any appeal; (h) Nothing contained in the Agreement will affect Claim No. 6623 filed by Ms. Sieckmann in Interstate Brands' bankruptcy case, and both Parties acknowledge that Interstate Brands, at some future date, may object to the Claim. Should Interstate Brands object to the Claim, then at the time as the objection is made, both Parties reserve their rights to litigate the alleged waiver of the SIR before the Bankruptcy Court; and (i) The Parties are reserving and preserving all claims and actions that they have or may have against any other person or entity and related in any way to Interstate Brands' insurance coverage for the Judgment. J. Eric Ivester, Esq., at Skadden Arps Slate Meagher & Flom LLP, in Chicago, Illinois, explains that the terms and conditions of the Agreement were reached only after arm's-length negotiations between the Parties, and resolve actual and potential disputes and controversies that, if permitted to continue, would involve time-consuming and expensive proceedings, and thus expose the Debtors to significant costs as well as the possibility of adverse decisions. Pursuant to Rule 9019 of the Federal Rules of Bankruptcy Procedure, the Debtors ask the Court to approve the Agreement. * * * The Court grants the Motion effective on December 19, 2005. Headquartered in Kansas City, Missouri, Interstate Bakeries Corporation is a wholesale baker and distributor of fresh baked bread and sweet goods, under various national brand names, including Wonder(R), Hostess(R), Dolly Madison(R), Baker's Inn(R), Merita(R) and Drake's(R). The Company employs approximately 32,000 in 54 bakeries, more than 1,000 distribution centers and 1,200 thrift stores throughout the U.S. The Company and seven of its debtor-affiliates filed for chapter 11 protection on September 22, 2004 (Bankr. W.D. Mo. Case No. 04-45814). J. Eric Ivester, Esq., and Samuel S. Ory, Esq., at Skadden, Arps, Slate, Meagher & Flom LLP, represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $1,626,425,000 in total assets and $1,321,713,000 (excluding the $100,000,000 issue of 6.0% senior subordinated convertible notes due August 15, 2014, on August 12, 2004) in total debts. (Interstate Bakeries Bankruptcy News, Issue No. 34; Bankruptcy Creditors' Service, Inc., 215/945-7000) INTERSTATE BAKERIES: W. Spencer Buys Evans Property for $7.2M ------------------------------------------------------------- As reported in the Troubled Company Reporter on Dec. 16, 2005, Interstate Bakeries Corporation and its debtor-affiliates propose to sell their property located at 1995 Evans Avenue in San Francisco, California, to WYL Orion Properties, LLC, subject to higher and better offers. The principal terms of the Sale Agreement signed by the Parties are: Purchase Price: $6,000,000 Escrow Deposit: WYL Orion deposited $600,000 which is being held in escrow until all closing conditions are met. Closing: The closing will occur within five business days of the approval of the Sale Agreement subject to the payment of the Purchase Price Conditions to Closing: The Sale Agreement is subject to higher and better offers as well as Court approval. Condition of Property: The Debtors will deliver good and marketable fee simple title to the Land and Improvements, free and clear of liens, other than Permitted Exceptions. The Property is being sold AS-IS, WHERE-IS, with no representations or warranties, reasonable wear and tear, casualty and condemnation excepted. The Debtors request that the proposed sale be exempted from transfer, stamp or similar taxes, conveyance fees and recording fees, costs or expenses imposed by any federal, state, county or other local law in connection with the transfer or conveyance of the Property. San Francisco Objects The City and County of San Francisco ask the Court to deny the Debtors' Sale Motion because the Debtors seek an exemption of the sale from stamp and similar taxes pursuant to Section 1146(c) of the Bankruptcy Code. Michael J. McQuaid, Esq., at Carr, McClellan, Ingersoll, Thompson & Horn, in Burlingame, California, argues that in the case of Baltimore County v. Hechinger Liquidation Trust, 335 F.3d 243 (3rd Cir. 2003) and NVR Homes, Inc. v. Clerks of the Circuit Courts, 189 F.3d 442 (4th Cir. 1999), cert. denied, 528 U.S. 117, 120 S. Ct. 936, 145 L.Ed. 2d 915 (2000), the courts held that a sale or transfer prior to the entry of a confirmation order is unauthorized under Section 1146(c) and is not entitled to the tax exemption. According to Mr. McQuaid, the Debtors will likely argue that San Francisco's Objection is late and thus should not be considered. San Francisco asserts that the Debtors should have known that it will object to the sale considering that it had raised this ground in a timely objection to the Debtors' sale of property at 2460 Alameda Street, San Francisco, California. San Francisco also complains that it did not receive proper notice of the sale. * * * At the December 9, 2005 auction, William D. Spencer outbid WYL Orion Properties, LLC, for the Evans Property. Mr. Spencer's final bid of $7,200,000 was declared by the Debtors as the highest offer submitted. The Debtors withdrew their request for the exemption from payment of stamp and similar taxes. Accordingly, the Court approved the Sale of the Evans Property to Mr. Spencer. In the event that the Successful Bidder fails to close for any reason, the Debtors are authorized to consummate the sale transaction with the next highest and best bidder, and that bidder will be deemed to be the Successful Bidder and all of the terms of the Sale Order will apply to that bidder as if it were the original Successful Bidder. Headquartered in Kansas City, Missouri, Interstate Bakeries Corporation is a wholesale baker and distributor of fresh baked bread and sweet goods, under various national brand names, including Wonder(R), Hostess(R), Dolly Madison(R), Baker's Inn(R), Merita(R) and Drake's(R). The Company employs approximately 32,000 in 54 bakeries, more than 1,000 distribution centers and 1,200 thrift stores throughout the U.S. The Company and seven of its debtor-affiliates filed for chapter 11 protection on September 22, 2004 (Bankr. W.D. Mo. Case No. 04-45814). J. Eric Ivester, Esq., and Samuel S. Ory, Esq., at Skadden, Arps, Slate, Meagher & Flom LLP, represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $1,626,425,000 in total assets and $1,321,713,000 (excluding the $100,000,000 issue of 6.0% senior subordinated convertible notes due August 15, 2014, on August 12, 2004) in total debts. (Interstate Bakeries Bankruptcy News, Issue No. 34; Bankruptcy Creditors' Service, Inc., 215/945-7000) J. CREW: Operating Unit Can Access $335M Term Loan until March 30 ----------------------------------------------------------------- J. Crew Operating Corp., a J. Crew Group, Inc., subsidiary, entered into an amendment to an October 3, 2005, commitment letter with Goldman Sachs Credit Partners L.P., Bear Stearns Corporate Lending Inc., Bear, Stearns & Co. Inc. and Wachovia Bank, National Association. Under the agreement, the financing institutions committed, subject to certain conditions, to provide a senior secured term loan to Operating with a principal amount of up to $295 million -- which may be increased in certain circumstances to $335 million at Operating's option. The amendment extended the banks' commitments to provide the Term Loan to March 30, 2006. J. Crew Group is a nationally recognized retailer of men's and women's apparel, shoes and accessories. The Company operates 157 retail stores, the J. Crew catalog business, http://www.jcrew.com/and 45 factory outlet stores. As of October 29, 2005, J. Crew's equity deficit narrowed to $525 million from a $578 million deficit at October 30, 2004. * * * As reported in the Troubled Company Reporter on Dec. 19, 2005, Standard & Poor's Ratings Services raised its corporate credit rating on specialty apparel retailer J. Crew Group Inc. to 'B' from 'B-'. The rating remains on CreditWatch with positive implications due to the planned recapitalization of the company, which includes an IPO of its common stock and debt refinancing. As reported in the Troubled Company Reporter on Sept. 22, 2005, Moody's placed the ratings of J. Crew Group, Inc. on review for possible upgrade following the company's filing for an upcoming initial public offering and plan to utilize the proceeds to de- lever its balance sheet. These ratings were placed on review for possible upgrade: * Corporate family rating of B3 * Senior discount notes of Caa2 KAISER ALUMINUM: Court Amends Settlement Pact Order with St. Paul ----------------------------------------------------------------- As previously reported in the Troubled Company Reporter on December 23, 2005, the Honorable Judith Fitzgerald of the U.S. Bankruptcy Court for the District of Delaware approved Kaiser Aluminum and Chemical Corporation's settlements, in their entirety, with seven of the eight Settling Insurers: -- Associated International Insurance Company, -- Affiliated FM Insurance Company, -- Evanston Insurance Company, -- Employers Mutual Casualty Company, -- Federal Insurance Company, -- New York Marine Parties, -- Allstate Insurance Company, and -- St. Paul Surplus Lines Insurance Company. * * * Judge Fitzgerald amends her order approving the Debtors' settlement agreement and mutual release with St. Paul Surplus Lines Insurance Company. The Debtors will dismiss with without prejudice their Claims against St. Paul in the Products Action. The parties will bear their own costs and expenses in the Products Action. Nothing in the Order, however, will prevent the Debtors from recovering their costs and expenses in the Products Action from any entity other than St. Paul. The Court authorizes the Debtors to sell the St. Paul insurance policies back to St. Paul, free and clear of liens. 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. 87; Bankruptcy Creditors' Service, Inc., 215/945-7000) KAISER ALUMINUM: Will Sell Spokane Valley Property for $418,176 --------------------------------------------------------------- Kaiser Aluminum Corporation and its debtor-affiliates notify the U.S. Bankruptcy Court for the District of Delaware that they intend to sell a real property located in Spokane Valley, Spokane County, Washington, to Lawrence B. Stone for $418,176, in accordance with sale procedures for miscellaneous assets established by the Court. The Debtors will sell the Property "as is, where is," free and clear of liens. The Purchaser has delivered a $20,000 earnest money deposit. The Purchase Price will be subject to certain adjustments. Spokane Valley Property consists of 24 acres of unimproved real property, which has been zoned for heavy industrial use. Kaiser Aluminum & Chemical Corporation originally acquired the Property in 1990 for the development of a new production facility. That facility was never constructed and the Property is being held by KACC as part of its discontinued operations. The parties have entered into a Real Estate Purchase and Sale Agreement dated September 21, 2005. The Purchase Agreement has been amended twice, in October and in December. The purchaser is not related to the Debtors. The Debtors will pay an 8% commission to Kiemle & Hagood Company, the selling and listing agent. Executory contracts or unexpired leases related to the Property will not be assumed or assigned as part of the sale. 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. 87; Bankruptcy Creditors' Service, Inc., 215/945-7000) LEAR CORP: Weakened Operating Profile Prompts Fitch's BB+ Rating ---------------------------------------------------------------- Fitch Ratings has downgraded Lear Corp.'s issuer default rating, senior secured bank lines, and senior unsecured notes to 'BB+' from 'BBB-'. The Outlook remains Negative. The downgrade reflects Fitch's concerns regarding limited free cash flow generation due to a weakened operating profile, which increases the potential for further balance sheet deterioration in the near-term. In addition, the company potentially has up to $717 million in maturities coming due in 2007. Of the total $717 million, $317 million is attributable to the first put date of a convertible debt issue with an equity strike price in excess of $60 per share and $400 million is a maturing term loan. However, the company has adequate liquidity with approximately $1.5 billion in available revolver. While Lear is likely to experience negative free cash flow for full year 2005, Fitch expects the company to be breakeven to slightly positive free cash flow in 2006, mitigating the extent of Fitch's rating downgrade to one notch. Issues that impaired Lear's recent negative free cash flow performance include: * higher raw material costs, * significantly lower customer volumes of SUV products on which Lear has a substantial amount of content, * a one-time extension of customer payment terms, * costs associated with restructuring, and * increased capital spending due to a heavy North American launch schedule in 2005 and investment in new technology. During 2005, launches representing 40% of Lear's North American revenue reduced the company's operating leverage. Also, the Ford Explorer, General Motors' truck based SUVs, and the Dodge Durango -- some of Lear's highest contented vehicles -- all saw production declines in excess of 30% in 2005. Compounding the decline in operating leverage, the Explorer and the GM SUV products constituted a large portion of the 2005 launches. In 2006, Fitch expects Lear's free cash flow to improve as a result of operating leverage from: * the 2005-launched new business, * more stable customer SUV production volumes, * ramp-up of 2006 new business programs, * lower capital investment, and * initial cost savings from 2005 restructuring efforts. Fitch believes that SUV production should continue to decline but not in the erratic way or to the degree which volumes were reduced by automakers in 2005, barring prolonged gas prices around $3 per gallon. Fitch also assumes continued high raw material costs. Longer term, Fitch projects Lear could return to sustainable free cash flow performance and to reduce debt. The company continues to be an innovator, demonstrated by the 'flexible seat architecture' technology launched in new products this year as well as advances in interior electronics. Lear has successfully attracted new customers, increasing non-U.S. Big 3 business to about 46% of total revenue and to roughly 50% of $4 billion in total new business backlog. Fitch sees minimal execution risk in the company's restructuring plan, which includes relocating operations in low-cost countries and should be completed in late 2006 to early 2007. Total cash cost is expected to be around $205 million, excluding proceeds from asset sales. However, operating income should improve by $100 million to $125 million in 2007 as a result of these actions. Also in 2007, Fitch believes there could be some relief from raw material costs. LONG BEACH: Fitch Junks Ratings on Four Certificate Classes ----------------------------------------------------------- Fitch Ratings has taken rating actions on these Long Beach Mortgage Loan Trust issue: Series 2002-2 Group 1 -- Class I-A affirmed at 'AAA'; -- Class I-M2 downgraded to 'BBB' from 'A'; -- Class I-M3 downgraded to 'B' from 'BBB-'; -- Class I-M4A downgraded to 'CCC' from 'B'; -- Class I-M4B downgraded to 'CCC' from 'B'. Series 2002-2 Group 2 -- Class II-M2 downgraded to 'BBB' from 'A'; -- Class II-M3 downgraded to 'B' from 'BBB-'; -- Class II-M4A downgraded to 'CCC' from 'B'; -- Class II-M4B downgraded to 'CCC' from 'B'. All of the mortgage loans in the series 2002-2 transactions were either originated or acquired by Long Beach Mortgage Company. Group 1 consists of first lien, adjustable-rate and fixed-rate mortgage loans with principal balances that conform to Fannie Mae loan limits, and Group 2 consists of first and second lien, adjustable-rate and fixed-rate mortgage loans with principal balances that generally do not conform to Fannie Mae loan limits. As of the December 2005 distribution date, series 2002-2 transaction is 42 months seasoned, and the pool for Group 1 and Group 2 are approximately 16% and 10%, respectively. Long Beach Mortgage Company is the master servicer for this transaction, and Washington Mutual Bank, rated 'RPS2' for subprime products by Fitch, is the subservicer for all of the mortgage loans. Classes M2, M3, M4A and M4B represent interests in both loan groups, and solely for purposes of determining distributions of principal and interest and the allocation of losses realized on mortgage loans, each class consists of two components: I-M2 and II-M2; I-M3 and II-M3; I-M4A and II-M4A; and I-M4B and II-M4B. The credit enhancement for a component class may differ between the loan groups. However, a default of a component class would result in a default of the entire class and therefore the ratings reflect the credit risk to the weaker of the two components. The affirmation reflects a satisfactory relationship between CE and future loss expectations and affects approximately $22.5 million of outstanding certificates. Additionally, the affirmation on class I-A reflects a guaranty provided by the Federal National Mortgage Association, whose financial strength is rated 'AAA' by Fitch. The negative rating actions, which affect approximately $105.1 million of outstanding certificates, reflect deterioration in the relationship between CE and future loss expectations. Both Group 1 and Group 2 have experienced high monthly losses, which have exceeded the available excess spread, resulting in the deterioration of overcollateralization. Additionally, faster than expected prepayment in this transaction has created relatively high delinquency trigger threshold, which has allowed Group 1 to pass its trigger event in December 2005, thereby allowing its target OC to step down significantly. As of the December 2005 distribution date, the OC for Group 1 is $3,192,857 or 3.50% of the collateral balance. The six-month average monthly loss after application of excess spread is approximately $295,315, and Group 1 has incurred cumulative losses to date of 3.18%. Approximately 28.15% of the remaining pool balance is more than 60 days delinquent. As of the December 2005 distribution date, the OC for Group 2 is $2,457,732 or 5.85% of the collateral balance. The six-month average monthly loss after application of excess spread is approximately $244,113, and Group 2 has incurred cumulative losses to date of 3.22%. Approximately 32.36% of the remaining pool balance is more than 60 days delinquent. Further information regarding current delinquency, loss, and credit enhancement statistics is available on the Fitch Ratings Website at http://www.fitchratings.com/ LORETTO-UTICA: Court Approves Menter Rudin as Counsel ----------------------------------------------------- Loretto-Utica Properties sought and obtained permission from the U.S. Bankruptcy Court for the Northern District of New York to employ Menter, Rudin & Trivelpiece, P.C., as its counsel. The Firm will: (a) give legal advice with respect to its powers and duties as debtor-in-possession in the continued operation of its business and management of its property; (b) prepare on behalf of the Debtor necessary applications, answers, reports, orders and other legal papers; and (c) perform all other legal services for the Debtor as necessary. The Firm's professionals bill: Designation Hourly Rate ----------- ----------- Partners $275 - $260 Associates $160 - $225 Law Clerks $100 Paralegals $90 Jeffrey A. Dove, Esq., a member at Menter Rudin, leads the engagement. He disclosed that the Firm will charge $100,000 as a general retainer plus up to $1,039 reimbursement for filing fees. Mr. Dove assures the Court that his Firm is a "disinterested person" as that term is defined in Section 101(14) in the Bankruptcy Code. Headquartered in Syracuse, New York, Loretto-Utica Properties Corporation filed for chapter 11 protection on Dec. 15, 2005 (Bankr. N.D.N.Y. Case No. 05-73473). Jeffrey A. Dove, Esq., at Menter, Rudin & Trivelpiece, P.C., represents the Debtor in its restructuring efforts. When the Debtor filed for protection from its creditors, it estimated $1 million to $10 million in assets and estimated $10 million to $50 million in debts. MCI INC: Closes Merger Deal with Verizon Communications ------------------------------------------------------- Verizon Communications Inc. (NYSE:VZ) and MCI, Inc., closed on their merger, enhancing Verizon's ability to deliver the benefits of converged communications, information and entertainment to customers across the country and around the world. "This milestone for Verizon creates a new competitive force with the power of the global MCI network and the reach of Verizon's broadband and wireless networks in the U.S.," said Verizon Chairman and CEO Ivan Seidenberg. "Our added network capabilities and strong customer relationships provide a solid foundation for innovative and integrated wireless, wireline and multimedia services designed to meet customer demands for speed, mobility and control." Mr. Seidenberg added, "Our strategy is to be a customer-focused leader in consumer broadband and video, as well as business and government services, in both the landline and wireless environments. We believe that our superior networks are the basis for innovation and competitive advantage in communications. The combination of our world-class wireless and broadband access networks with the leading global IP (Internet protocol) backbone will allow us to deliver the highest quality end-to-end experience for our customers." Following the merger, Verizon, which continues to be based in New York, has approximately $90 billion in annual total consolidated operating revenues and approximately 250,000 employees, serving customers in 150 countries. New Unit Named 'Verizon Business' Verizon Business is the name of the new Verizon business unit encompassing business and government customers and related functions of the former MCI as well as similar businesses that previously were part of Domestic Telecom, including the former Verizon Enterprise Solutions Group. Verizon now operates three network-based businesses: -- Verizon Business; -- Verizon Wireless, operator of America's most reliable wireless network; and -- Verizon's landline segment, which is deploying the most advanced wireline broadband and video network in America today. Verizon Business serves medium and large businesses and government customers, and it will announce details of new products and services later this month. This new business segment boasts a highly trained and experienced force of sales and service professionals deployed in hundreds of sales offices around the world. It owns and operates an end-to- end, global IP network spanning more than 100,000 miles, providing next-generation IP network services to medium and large businesses and government customers. As previously announced, John Killian has been named president of this new unit, and his leadership team executives have been overseeing integration planning for their respective functions since October. "We have the team in place to hit the ground running and offer Verizon Business customers greater value from Day One," said Mr. Killian. "We believe that our strong commitment to customers and our integrated product offerings will deliver the most advanced business communications solutions and best customer experience available in today's marketplace." While further details about Verizon Business will be announced at the upcoming market launch, Verizon will continue to build on the success of its "master brand" strategy. Other segments of the former MCI are being combined with similar existing functions in Verizon. For example, the MCI Foundation will be part of the Verizon Foundation. Transaction Details The merger was announced on Feb. 14, 2005, and received the required state, federal and international regulatory approvals by year-end 2005. Verizon and MCI have been engaged in integration planning since the merger was approved by MCI shareholders on Oct. 6, 2005. Under terms of the merger agreement, MCI shareholders will receive 0.5743 shares of Verizon and cash for each of their MCI shares. Verizon elected to make a supplemental cash payment of $2.738 per MCI share (or $779 million in the aggregate), rather than issue additional shares of Verizon, so that the merger consideration was equal to at least $20.40 per share of MCI. The parties mutually agreed that there would be no purchase price adjustment related to the amount of certain MCI liabilities. The merger was also structured as a tax-free reorganization, and generally MCI shareholders will be taxed only to the extent of a previously paid special dividend and the supplemental cash payment. Effective Jan. 6, trading in MCI's common stock (NASDAQ:MCIP) has been halted. MCI shareholders holding certificates will very shortly receive information about how to exchange their shares. MCI shareholders who hold their shares in book entry or through a broker will have their shares automatically exchanged for Verizon shares and cash. Verizon shareholders need not take any action. Verizon's Leadership Team Verizon's top management team and Board of Directors remain unchanged. Michael Capellas, former president and CEO of MCI, is leaving the business now that the merger has been completed. Mr. Seidenberg said, "Michael's work in transforming MCI over these past few years has been extraordinary. He has been a great leader, and he leaves a legacy as an architect of one of the world's great, next-generation communications companies -- a strong competitive force focused on customer innovation." Verizon Communications Inc. (NYSE:VZ) -- http://www.verizon.com/ -- a Dow 30 company, is a leader in delivering broadband and other communication innovations to wireline and wireless customers. Verizon operates America's most reliable wireless network, serving 49.3 million customers nationwide; one of the most expansive wholly-owned global IP networks; and one of the nation's premier wireline networks, serving home, business and wholesale customers. Based in New York, Verizon has a diverse workforce of approximately 250,000 and generates annual consolidated operating revenues of approximately $90 billion. Headquartered in Clinton, Mississippi, WorldCom, Inc., now known as MCI -- http://www.worldcom.com/-- is a pre-eminent global communications provider, operating in more than 65 countries and maintaining one of the most expansive IP networks in the world. The Company filed for chapter 11 protection on July 21, 2002 (Bankr. S.D.N.Y. Case No. 02-13532). On March 31, 2002, the Debtors listed $103,803,000,000 in assets and $45,897,000,000 in debts. The Bankruptcy Court confirmed WorldCom's Plan on October 31, 2003, and on April 20, 2004, the company formally emerged from U.S. Chapter 11 protection as MCI, Inc. (WorldCom Bankruptcy News, Issue No. 110; Bankruptcy Creditors' Service, Inc., 215/945-7000) * * * As reported in the Troubled Company Reporter on Feb. 22, 2005, Standard & Poor's Ratings Services placed its ratings of Ashburn, Virginia-based MCI Corp., including the 'B+' corporate credit rating, on CreditWatch with positive implications. The action affects approximately $6 billion of MCI debt. MCLEODUSA INC: Exits Chapter 11 with Deleveraged Balance Sheet -------------------------------------------------------------- McLeodUSA Incorporated emerges from Chapter 11 protection after its Joint Prepackaged Plan of Reorganization took effect on Friday, Jan. 6, 2006. The U.S. Bankruptcy Court for the Northern District of Illinois approved the Plan on Dec. 16, 2005, after having received the affirmative vote of more than 90% of the creditors who voted on the Plan. New CEO The company named Royce J. Holland as the Company's new Chief Executive Officer. Mr. Holland brings more than 30 years experience in the telecommunications, energy and engineering/construction industries to McLeodUSA. Most recently, Mr. Holland was co-founder, Chairman and CEO of Allegiance Telecom, Inc., an integrated telecommunications services provider active in 36 major metropolitan areas across the USA. Allegiance was acquired by XO Communications in 2004. Previously, Mr. Holland was President and a co-founder of MFS Communications Company, Inc., one of the country's first competitive local exchange carriers, with operations in 52 metropolitan areas in North America, Europe and Asia. Founded in 1988, MFS was acquired by WorldCom in 1996. New Board of Directors Effective upon the company's emergence on Jan. 9, 2006, the company also named a new Board of Directors. In addition to Mr. Holland, the members of the new Board are: * John Hank Bonde, * Donald C. Campion, * Eugene Davis, * John D. McEvoy, * Alex Stadler and * D. Craig Young. New Credit Facility Under the terms of the Plan, the Company has significantly deleveraged its balance sheet by eliminating approximately $677 million in debt, plus interest, and reducing its annual interest expense by over $50 million. The company's remaining debt was reduced to approximately $73 million using proceeds from the recent sale of the company's headquarters facility. As of the effective date of the Plan, the company has debt outstanding, net of available cash, of approximately $50 million. McLeodUSA has also entered into a new credit facility that provides the Company with access to an additional $50 million, comprised of a $40 million dollar revolving credit facility and a new $10 million term loan. "This is an important day for McLeodUSA," said Stan Springel, Chief Restructuring Officer. "The Company has substantially strengthened its balance sheet and significantly reduced liabilities by over $677 million. Our new $50 million credit facility will provide continued assurance to our customers, employees and vendors about our strong liquidity position." "It is a testament to our employees, customers and vendors, and their continued confidence in our business, that we were able to emerge from bankruptcy in only ten weeks, without disruption and while continuing to pay our trade creditors in full," added Joe Ceryanec, the Company's acting Chief Financial Officer. Royce Holland, the Company's new Chief Executive Officer, added further, "I am extremely happy to be joining McLeodUSA at this time. I believe that the Company's new financial structure, coupled with its strong suite of products and high quality service, leaves us well-positioned for success." Consistent with the Plan, McLeodUSA's former Preferred and Common Stock has been cancelled, and the Company's stock will no longer be publicly traded. Overview of the Plan As reported in the Troubled Company Reporter on Nov. 2, 2005, the principal economic terms of the Plan, Stanford Springel, chief restructuring officer of McLeodUSA, relates, provide for the Company's balance sheet to be restructured by: (a) converting Senior Prepetition Lender Claims into New Term Loan Notes; (b) converting Junior Prepetition Lender Claims into 100% of the New Common Stock, subject to dilution by the Management Stock Plan Awards; and (c) canceling the Company's existing Preferred Stock and Common Stock. Importantly, Mr. Springel says, all other unsecured claims, except for the claims held by landlords of a designated group of leases of non-residential real property that the Debtors intend to reject, are unimpaired under the Plan. Under the Plan, holders of the Rejected Lease Claims will be paid 100% of the allowed amount of their claims as determined by Section 502(b)(6) of the Bankruptcy Code. Under the Plan, there are three classes of Impaired Claims: -- Class 4 Senior Prepetition Lender Claims, -- Class 5 Junior Prepetition Lender Claims, and -- Class 6 Lease Rejection Claims There are two classes of Impaired Interests: -- Class 8 Old Preferred Stock Interests and Subordinated Claims, and -- Class 9 Old Common Stock Interests and Subordinated Claims. All other Claims and Interests are Unimpaired: -- Class 1 Non-Tax Priority Claims, -- Class 2 Other Secured Claims, -- Class 3 General Unsecured Claims, and -- Class 7 Equity Interests in Debtors' Subsidiaries Holders of unimpaired claims and interests will be unaffected by the Plan. According to Mr. Springel, the value of the Company is significantly less than the aggregate amount of the Claims held by the Prepetition Lenders, which Claims are secured by substantially all assets of the Company. The Plan essentially provides for the transfer of ownership of the Company to the Junior Prepetition Lenders. Headquartered in Cedar Rapids, Iowa, McLeodUSA Incorporated -- http://www.mcleodusa.com/-- provides integrated communications services, including local services in 25 Midwest, Southwest, Northwest and Rocky Mountain states. The Debtor and its affiliates filed for chapter 11 protection on Oct. 28, 2005 (Bankr. N.D. Ill. Case Nos. 05-53229 through 05-63234). Peter Krebs, Esq., and Timothy R. Pohl, Esq., at Skadden, Arps, Slate, Meagher and Flom, represent the Debtors in their restructuring efforts. As of June 30, 2005, McLeodUSA Incorporated reported $674,000,000 in total assets and $1,011,000,000 in total debts. McLeodUSA Inc. previously filed for chapter 11 protection on January 30, 2002 (Bankr. D. Del. Case No. 02-10288). The Court confirmed the Debtor's chapter 11 plan on April 5, 2003, and that Plan took effect on April 16, 2002. The Court formally closed the case on May 20, 2005. METROPOLITAN MORTGAGE: Inks Settlement Pact with OWALC & OSLAC -------------------------------------------------------------- Metropolitan Mortgage Securities Co., Inc., and Summit Securities, Inc., ask the U.S. Bankruptcy Court for the Eastern District of Washington to approve a compromise of intercompany claims with Old West Annuity & Life Insurance Company and Old Standard Life Assurance Company. Under the settlement, the parties agree: * to exchange mutual releases; * to a $200,000 payment from Old Standard to Summit to settle Old West's $1.176 million tax obligation under the intercompany tax sharing agreement; and * that Old West will pay $175,0000 to Metropolitan to settle overpaid timeshare receipts of $300,000 and allocated management services of $188,000 owed under the management services contract. The Debtors believe that the terms of the settlement with their insurers are fair and equitable, and in the best interest of the estates, considering the risks and expenses associated with resolving these claims through litigation. Headquartered in Spokane, Washington, Metropolitan Mortgage & Securities Co., Inc., owns insurance businesses. Metropolitan filed for Chapter 11 protection (Bankr. E.D. Wash. Case No. 04-00757), along with Summit Securities Inc., on Feb. 4, 2004. Bruce W. Leaverton, Esq., at Lane Powell Spears Lubersky LLP and Doug B. Marks, Esq., at Elsaesser, Jarzabek, Anderson, Marks, Elliot & McHugh represent the Debtors in their restructuring efforts. When Metropolitan Mortgage filed for chapter 11 protection, it listed total assets of $420,815,186 and total debts of $415,252,120. METROPOLITAN MORTGAGE: Sells Lottery Receivables to Stone Street ---------------------------------------------------------------- Metropolitan Mortgage & Securities Co., Inc., and Summit Securities, Inc., ask the U.S. Bankruptcy Court for the Eastern District of Washington to approve the sale of their lottery receivables to Stone Street Capital, Inc., for $670,953. The Debtors believe that the sale of the receivables to Stone Street represents a fair value and will generate more distribution for the estates' creditors. Headquartered in Spokane, Washington, Metropolitan Mortgage & Securities Co., Inc., owns insurance businesses. Metropolitan filed for Chapter 11 protection (Bankr. E.D. Wash. Case No. 04- 00757), along with Summit Securities Inc., on Feb. 4, 2004. Bruce W. Leaverton, Esq., at Lane Powell Spears Lubersky LLP and Doug B. Marks, Esq., at Elsaesser, Jarzabek, Anderson, Marks, Elliot & McHugh represent the Debtors in their restructuring efforts. When Metropolitan Mortgage filed for chapter 11 protection, it listed total assets of $420,815,186 and total debts of $415,252,120. MILLS CORPORATION: Seeks Waiver on Line of Credit Default --------------------------------------------------------- The Mills Corporation reported that it will restate its audited financial results from 2000 through 2004 and its unaudited quarterly results for 2005 to correct accounting errors related primarily to certain investments by a wholly-owned taxable REIT subsidiary, Mills Enterprises, Inc., and changes in the accrual of the compensation expense related to its Long-Term Incentive Plan (LTIP). MEI was formed in 1998 to enable the company to make investments in development-stage tenants, including in the retail, food and beverage, and entertainment sectors. Based upon a review of the accounting for various investments by MEI and one similar investment by one of our mall joint ventures, the company determined that the accounting for certain of these investments was inappropriate (primarily equity versus loan accounting, the impairment of loans, reversal of a gain on the sale of partnership interest, and the timing of recognition of various items). The impact of these adjustments is expected to reduce Net Loss by approximately $0.03 per diluted share and increase FFO by approximately $0.04 per diluted share in the first nine months of 2005 due to the reversal of the third quarter allowance against a note receivable, which is now recorded in the restatement of the prior period. The impact of these adjustments is expected to reduce Net Income by approximately $0.03 per diluted share in 2004, approximately $0.08 per diluted share in 2003 and approximately $0.23 per diluted share in 2002. The impact of these adjustments is expected to reduce FFO by approximately $0.03 per diluted share in 2004, approximately $0.07 per diluted share in 2003 and approximately $0.23 per diluted share in 2002. The impact of these adjustments on years prior to 2002 is expected to be an increase in accumulated deficit as of December 31, 2001 for The Mills of approximately $9 million. After giving effect to the restatement, The Mills' investment in MEI is expected to total approximately $5 million, primarily related to its investment in Foodbrand, the operator of food courts in several of the Company's projects. As the Company reviewed the accounting for its LTIP program in preparation for the adoption of FAS123R, it determined that errors had been made in matching the accrual of its LTIP liability with the applicable employee service periods. There is no change in the amount of LTIP compensation related to these adjustments. The impact of this adjustment is expected to increase net loss and reduce FFO by approximately $0.01 per diluted share in the first nine months of 2005 and to reduce net income and FFO by approximately $0.02 per diluted share in 2004, approximately $0.06 per diluted share in 2003 and approximately $0.06 per diluted share in 2002. The LTIP adjustment does not impact any years prior to 2002 and is not expected to have a material impact on future periods. In addition, the LTIP adjustment does not impact actual cash compensation paid to employees, which was correctly paid under the terms of the LTIP. Line of Credit Default As a result of these events, the company is in default of certain provisions of its line of credit and certain project-related loans. The company has commenced its efforts to obtain a waiver of the default and certain consents from its bank group and other lenders. To provide short-term liquidity, the company has secured a $150 million term loan from JP Morgan. The adjustments to the Company's accounting practices have been discussed with its independent auditor, Ernst & Young LLP. The Company will include the restated results for the fiscal years ended December 31, 2002, 2003 and 2004 in an amended 2004 Annual Report on Form 10-K and for each quarterly period for 2005 in amended Form 10-Qs. In the interim, investors should no longer rely on the 2002, 2003 and 2004 financial statements and the associated auditor's report currently on file with the SEC in the Company's 2004 Form 10-K or on 2005 Form 10-Qs currently on file with the SEC. Material Weakness in Internal Controls The company is aware that the occurrence of a restatement of previously issued financial statements to correct errors is a strong indicator that material weaknesses in internal controls exist. At this time, the company expects to report a material weakness in its internal control over financial reporting in its 2005 Form 10-K. Based in Arlington, Virginia, The Mills Corporation, -- http://www.themills.com/-- is a developer, owner and manager of a diversified global portfolio of retail destinations including regional shopping malls, market dominant retail and entertainment centers, and international retail and leisure destinations. It currently owns 42 properties in the U.S., Canada and Europe, totaling 51 million square feet. In addition, The Mills has various projects in development, redevelopment or under construction around the world. Its portfolio of real estate properties generated more than $8.7 billion in retail sales in 2004. The Mills is traded on the New York Stock Exchange under the ticker: MLS. MILLS CORPORATION: Discloses Strategic Plan to Improve Operations ----------------------------------------------------------------- The Mills Corporation (NYSE: MLS) disclosed, on Jan. 6, 2006, a strategic plan designed to focus on the Company's core operations and development opportunities, streamline management, increase operating efficiencies and reduce costs. The initial steps of the plan include: -- Enhanced focus on core operations; scaling back of predevelopment pipeline. -- Workforce reduction and other departures affecting 17 officers. -- Establishment of a Best Practices Office to implement improvements in accounting and information technology; retained Deloitte Consulting LLP. -- Appointment of a new independent Board member with financial expertise who will serve on the Audit Committee. -- Appointment of a new head of asset management. "The significant actions that we are announcing reflect our absolute commitment to do the right thing for the Company and our shareholders," said Larry C. Siegel, Chairman and Chief Executive Officer of The Mills. "We have a strong portfolio of retail properties and development opportunities and the underlying fundamentals of our business remain solid. We are confident that our renewed focus on our core operations, along with the measures that are being taken to increase operating efficiencies and improve our cost structure, should result in a stronger company, better able to deliver sustained future growth and value to our shareholders." "We intend to enhance our focus on those projects with the greatest potential for shareholder value creation," said Mark D. Ettenger, President of The Mills. "Our approach to every project will continue to stress discipline and a careful evaluation of risk-adjusted return, so that we can determine if the value to be created warrants the level of capital and management attention needed to pursue each opportunity." Domestically, The Mills will continue to concentrate its efforts on those development and predevelopment projects which the company believes are most likely to enhance shareholder value, including Meadowlands Xanadu (Bergen County, NJ); 108 North State Street (Chicago, IL); and Potomac Town Center (Woodbridge, VA) and the redevelopment projects at Del Amo Fashion Center (Los Angeles, CA); The Shops at Riverside (Bergen County, NJ); Stoneridge (San Francisco, CA) and other selected properties in the company's portfolio. Accordingly, ten predevelopment projects will be written off, including six domestic projects. Internationally, The Mills will focus on Europe and Canada, both of which have been historically successful geographic regions for the Company. Within Europe, the Company will concentrate on the redevelopment of St. Enoch, the development of Mercati Generali in Rome and other select projects. The fourth quarter restructuring charge related to the projects being written off totals approximately $71 million. The company intends to explore opportunities to recover on its investment in certain of its domestic projects. Workforce Reduction As a result of a reduction in force previously disclosed in the Form 8-K filed on Jan. 4, 2006, combined with expected retirements and other management departures, a total of 17 officers have left or will leave the company. The company currently estimates that its workforce reduction plan and other termination charges will result in a one-time charge in the fourth quarter of 2005 of approximately $5 million, consisting of severance and termination costs, all of which has been or will be paid in cash. The company is in the process of determining the impact of the payroll and benefit cost savings resulting from these management changes on future earnings and Funds From Operations. The 2005 compensation expense related to the departing officers totals approximately $8 million, which does not include other payroll- related expenses such as benefits. The company noted that it is in the process of developing its guidance for 2006 and expects to provide further details on the expected impact of the management changes and other restructuring items when it provides its guidance on its 2005 year end conference call. New Office The Mills also announced that it has established a Best Practices Office, reporting to Mr. Ettenger, to implement improvements in the company's accounting and information technology departments. In connection with this, Deloitte Consulting LLP has been retained to help implement these changes, many of which are already underway. Deloitte Consulting LLP also will be assisting with the completion of the Company's year end close process. Material Weakness The company also will continue to implement process improvements to address the weaknesses in its internal controls over financial reporting identified in its Form 10-Q for the third quarter of 2005 and the anticipated material weakness in its internal control over financial reporting related to the restatement of its financial statements described below. The company incurred costs of approximately $1 million in consulting fees associated with the creation of the Best Practices Office. Restructuring Charges In aggregate, the Company expects to incur one-time restructuring charges in the fourth quarter of 2005 of approximately $77 million comprised of approximately $71 million in project write-offs, approximately $5 million of severance costs and approximately $1 million in consulting fees associated with the creation of the Best Practices Office. Enhanced Supplemental Disclosures The Mills also announced that beginning with its fourth quarter 2005 results, the company will revise the format of its quarterly supplemental financial package to include additional disclosures to further investors' understanding of the Company's business and allow investors to evaluate The Mills' results more effectively. The company's construction in progress schedule will be enhanced through the inclusion of costs incurred and The Mills' capital contribution for every project with a balance of more than $3 million of CIP. The enhanced supplemental disclosure will also include a quarterly proportionate share FFO statement for the current quarter and all prior quarters in 2005. Additional items that will be added to the supplemental disclosure include The Mills' share of Net Operating Income from both consolidated and unconsolidated joint ventures. Based in Arlington, Virginia, The Mills Corporation, -- http://www.themills.com/-- is a developer, owner and manager of a diversified global portfolio of retail destinations including regional shopping malls, market dominant retail and entertainment centers, and international retail and leisure destinations. It currently owns 42 properties in the U.S., Canada and Europe, totaling 51 million square feet. In addition, The Mills has various projects in development, redevelopment or under construction around the world. Its portfolio of real estate properties generated more than $8.7 billion in retail sales in 2004. The Mills is traded on the New York Stock Exchange under the ticker: MLS. MILLS CORPORATION: Appoints Edward Civera as Independent Director ----------------------------------------------------------------- On Dec. 30, 2005, The Mills Corporation appointed Edward S. Civera as a new independent member of the Company's Board of Directors. Mr. Civera will serve as a member of the Audit Committee. Mr. Civera spent 25 years with Coopers & Lybrand (now PricewaterhouseCoopers LLP), the last 15 years as both a partner and managing partner. Mr. Civera is currently the Chairman of the Board of HealthExtras, Inc., and is also a board member of MedStar Health, a non-profit healthcare organization. Mr. Civera is also a member of the board of MCG Capital, a public regulated investment company. Previously, Mr. Civera was the president and co-chief executive officer of United Payor & United Providers, Inc. "We are pleased to welcome Mr. Civera to our Board," said Mr. Siegel. "With his career as a public company executive, combined with his experience in finance and accounting, Ed will provide significant insight to The Mills as we work to enhance transparency and discipline throughout the organization." The Company also announced that Scott Ball has been appointed as the new head of the Company's asset management division. Mr. Ball joined The Mills in March 2005, having spent 19 years at the Rouse Company. Mr. Ball will work closely with Mr. Siegel and Mr. Ettenger to improve core performance and drive operating efficiencies at The Mills. Based in Arlington, Virginia, The Mills Corporation, -- http://www.themills.com/-- is a developer, owner and manager of a diversified global portfolio of retail destinations including regional shopping malls, market dominant retail and entertainment centers, and international retail and leisure destinations. It currently owns 42 properties in the U.S., Canada and Europe, totaling 51 million square feet. In addition, The Mills has various projects in development, redevelopment or under construction around the world. Its portfolio of real estate properties generated more than $8.7 billion in retail sales in 2004. The Mills is traded on the New York Stock Exchange under the ticker: MLS. * * * Line of Credit Default As a result of restating its audited financial results from 2000 through 2004 and its unaudited quarterly results for 2005, the company is in default of certain provisions of its line of credit and certain project-related loans. The company has commenced its efforts to obtain a waiver of the default and certain consents from its bank group and other lenders. To provide short-term liquidity, the company has secured a $150 million term loan from JP Morgan. The adjustments to the Company's accounting practices have been discussed with its independent auditor, Ernst & Young LLP. The Company will include the restated results for the fiscal years ended December 31, 2002, 2003 and 2004 in an amended 2004 Annual Report on Form 10-K and for each quarterly period for 2005 in amended Form 10-Qs. In the interim, investors should no longer rely on the 2002, 2003 and 2004 financial statements and the associated auditor's report currently on file with the SEC in the Company's 2004 Form 10-K or on 2005 Form 10-Qs currently on file with the SEC. Material Weakness in Internal Controls The company is aware that the occurrence of a restatement of previously issued financial statements to correct errors is a strong indicator that material weaknesses in internal controls exist. At this time, the company expects to report a material weakness in its internal control over financial reporting in its 2005 Form 10-K. MIRANT CORP: Asks Court to Approve Russlyn Hanson-Sexton Agreement ------------------------------------------------------------------ Mirant Mid-Atlantic, LLC, a Mirant Corporation debtor-affiliate, operates an electric generation facility located in Prince George's County in Maryland, commonly known as "Chalk Point." Michelle C. Campbell, Esq., at White & Case LLP, in Miami, Florida, relates that Russlyn Hanson-Sexton was employed under a contract at Mirant Chalk Point from July 2000 to November 2002. At all times, Ms. Hanson-Sexton was an employee of Richard Lawson Excavating. On March 19, 2004, Ms. Hanson-Sexton commenced a lawsuit in the United States District Court for the District of Maryland, Southern Division, against MIRMA seeking monetary damages for alleged injuries and damages arising during the period of her employment at Chalk Point. She alleged discrimination based on sex, hostile work environment, and retaliation, and seeks $500,000 in damages for lost future wages and $1,000,000 in compensatory damages and certain legal costs. The Maryland District Court stayed the Lawsuit pending a decision by the Bankruptcy Court regarding whether the Lawsuit should proceed before the Maryland District Court. MIRMA denies any liability with respect to the Lawsuit. On August 10, 2004, Ms. Hanson-Sexton filed two proofs of claim based on the Complaint: -- Claim No. 7796 for $2,000,000 against Mirant Corp.; and -- Claim No. 7797 for $2,000,0000 against MIRMA. Subsequently, the Debtors reached a settlement agreement with Ms. Hanson-Sexton. The principal terms of the Agreement provide that Ms. Hanson-Sexton will: a. have an allowed unsecured claim for $60,000 against MIRMA; b. release MIRMA from all claims in relation to the Complaint; c. cooperate in the dismissal of the Lawsuit; d. pay any taxes, levies and assessments received by her relating to the Settlement Agreement; and e. waive any right to future employment with the Company. Headquartered in Atlanta, Georgia, Mirant Corporation -- http://www.mirant.com/-- is a competitive energy company that produces and sells electricity in North America, the Caribbean, and the Philippines. Mirant owns or leases more than 18,000 megawatts of electric generating capacity globally. Mirant Corporation filed for chapter 11 protection on July 14, 2003 (Bankr. N.D. Tex. 03-46590). Thomas E. Lauria, Esq., at White & Case LLP, represents the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $20,574,000,000 in assets and $11,401,000,000 in debts. (Mirant Bankruptcy News, Issue No. 90 Bankruptcy Creditors' Service, Inc., 215/945-7000) MIRANT CORP: California DWR Sells Unsecured Claims for $189.4 Mil. ------------------------------------------------------------------ The California Department of Water Resources reported that California parties have sold their unsecured claims against Mirant Americas Energy Marketing for $189.4 million. The claims were the result of a comprehensive $750 million settlement for the company's alleged misconduct during the 2000-2001 energy crisis. The sale will provide electricity ratepayers with the full value of the energy settlement plus interest. At the time the settlement was reached, the unsecured claims were subject to a discount of at least 50 percent through Mirant's bankruptcy proceedings. As part of the overall settlement, which was approved by the Mirant bankruptcy court and the Federal Energy Regulatory Commission in April 2005, DWR and the state's three Investor- Owned Utilities (IOUs) were given unsecured claims totaling $177.25 million. Of that total, DWR received unsecured claims totaling $89.75 million while the IOUs -- Pacific Gas & Electric, Southern California Edison and San Diego Gas & Electric -- received a combined unsecured claim for $87.5 million. The sale of the claims, which was brokered by Credit Suisse First Boston L.L.C., comes on the heels of another multi-million dollar savings for ratepayers secured by the Governor Schwarzenegger Administration with other state and private parties. In December, the state saved ratepayers nearly $145 million by refinancing a portion of its power supply revenue bonds. In total, Gov. Schwarzenegger has guided successful energy settlements totaling more than $3.2 billion on behalf of electricity ratepayers since 2004. As in prior settlements, DWR will return its portion of the settlement to California ratepayers by reducing its next revenue requirement determination, which is submitted annually to the California Public Utilities Commission. The revenue requirement recovers DWR's cost for power it delivers to customers of the IOUs. For more information on the Mirant settlement, the recent refinancing or other energy settlements, visit DWR's energy Web site at http://www.cers.water.ca.gov/ Headquartered in Atlanta, Georgia, Mirant Corporation -- http://www.mirant.com/-- is a competitive energy company that produces and sells electricity in North America, the Caribbean, and the Philippines. Mirant owns or leases more than 18,000 megawatts of electric generating capacity globally. Mirant Corporation filed for chapter 11 protection on July 14, 2003 (Bankr. N.D. Tex. 03-46590). Thomas E. Lauria, Esq., at White & Case LLP, represents the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $20,574,000,000 in assets and $11,401,000,000 in debts. (Mirant Bankruptcy News, Issue No. 90 Bankruptcy Creditors' Service, Inc., 215/945-7000) MIRANT: Gets Court Okay to Implement Equity Distribution Protocol ----------------------------------------------------------------- Mirant Corporation and its debtor-affiliates Plan of Reorganization provides for a number of distribution provisions relating to making payments to holders of public securities and bank debts. Specifically, the Plan provides certain mechanics for making distributions under the Plan on account of: * Public Debt Securities -- MAG Short-term Note Claims, MAG Long-term Note Claims and Mirant Note Claims; and * Allowed Equity Interests. Michelle C. Campbell, Esq., at White & Case LLP, in Miami, Florida, believes that it is critical for Mellon Investor Services, LLC, as transfer agent; the Old Indenture Trustees; the Depository Trust Company; and certain Facility Agents to implement and maintain accurate records of various public securities and bank debt holders as of the Effective Date to effectuate distributions. Ms. Campbell adds that to facilitate distributions under the Plan, which is scheduled to occur on January 3: (a) the Transfer Agents, Old Indenture Trustees and DTC must close their transfer ledgers and related registers as of the Effective Date; and (b) the Debtors must provide notification to the Transfer Agents, the Old Indenture Trustees and DTC of the need to close the transfer records and maintain accurate and complete records of ownership as of the Effective Date. However, nothing in the Plan specifically requires the Transfer Agent, the Old Indenture Trustees, the DTC, or the Facility Agents to implement and maintain those records, Ms. Campbell informs Judge Lynn. Thus, the Debtors ask the U.S. Bankruptcy Court for the Northern District of Texas to approve uniform procedures necessary to facilitate Plan Distributions to public securities and bank debt holders: A. Mellon Investor and the Old Indenture Trustees, or their agents, will: a. close the transfer ledgers for the Public Debt Securities -- the MAG Short-term Notes, the Mirant Notes, the MAG Long-term notes and the Subordinated Notes -- and the Allowed Equity Interests as of the close of business on January 3; and b. provide accurate and complete lists of all record holders of Public Debt Securities and Allowed Equity Interests as of the close of business on January 3 to: * New Mirant, * the Plan Trustees, * the official creditors committees of Mirant Corporation and Mirant Americas Generation LLC; and * the Official Committee of Equity Holders. Except with respect to the MAG Long-term Notes, Mellon Service and the Old Indenture Trustees will not recognize any transfers after the Effective Date in the Public Debt Securities. B. DTC will close the registers it maintained for the Public Securities as of the close of business on January 3. Except for the MAG Long-term Notes, the DTC will not recognize any transfers after the Effective Date in the Public Securities. The DTC will establish an "escrow cusip" with respect to each of the cusips relating to the Public Debt Securities and Allowed Equity Interests. C. As of the close of business day on January 3, the Facility Agents will: a. close the transfer ledgers for the: * MAG Revolvers; * Mirant "C" Facility; * Mirant 364-Day Revolver; * Mirant 4-Year Revolver; * Commodity Prepay Facility; and * the Equipment Warehouse Facility; and b. provide accurate and complete lists of all records holders of the Mirant Facilities to New Mirant, the Plan Trustees, the Mirant Committee, the MAG Committee and the Equity Committee. D. Plan Distributions on account of Public Debt Securities will be made by New Mirant to the Old Indenture Trustees for the Public Debt Securities; provided, however, that with respect to distributions of New Mirant Common Stock, New Mirant and the Old Indenture Trustees will coordinate with the stock transfer agent to effect the distributions. The Old Indenture Trustees, the stock transfer agent, or their agents, will make the Plan Distributions in accordance with the Old Indentures to the DTC. DTC will make the Plan Distributions directly to the registered holders of the Public Debt Securities for the benefit of the beneficial holders on the DTC Register. E. Plan Distributions on account of the Allowed Equity Interests will be made by New Mirant directly to the registered holders of the Allowed Equity Interests on January 3 except for those holders of record of Allowed Equity Interests who are listed on the DTC Register. With respect to those holders of record of Allowed Equity Interests who are listed on the DTC Register, Plan Distributions will be made by New Mirant to the DTC, which will make the Plan Distributions directly to the holders of record of Allowed Equity Interests on the DTC Register. F. Plan Distributions on account of the Mirant Facilities will be made by New Mirant to their Facility Agents; provided, however, that the Disbursing Agent and the Facility Agents will coordinate with the stock transfer agent to effect the distributions. The Facility Agents for the Mirant Facilities, or their agents and the stock transfer agent, will make the Plan Distributions in accordance with the relevant credit facility agreements to the registered holders of the Credit Facilities. G. Except with respect to the MAG Long-term Notes, the National Association of Securities Dealers, Inc., the Nasdaq National Market and Nasdaq's Market Integrity Department will ensure that all trading in Public Debt Securities and Allowed Equity Interests is suspended on the OTC Bulletin Board/Pink Sheets and the PORTAL Market, as of the close of business on January 3 and will not permit any trading after the Effective Date in the Allowed Equity Interests or the Public Debt Securities. Except with respect to the MAG Long-term Notes, NASD, Nasdaq and Market Integrity will remove the trading symbols and eliminate market makers' quotations on the Allowed Equity Interests and the Public Debt Securities as of the close of business on the Effective Date. E. New Mirant will ensure the proper distribution of the Designated Net Litigation Distributions, if any, to each holder of: a. an Allowed Mirant Debtor Class 3-Unsecured Claim; b. a Contested Mirant Debtor Class 3-Unsecured Claim that subsequently becomes Allowed; and c. Allowed Mirant Debtor Class 5-Equity Interests. Court Order Judge Michael D. Lynn grants the Debtors' request to implement the procedures to effectuate the Plan Distributions to holders of public securities and bank debt. Headquartered in Atlanta, Georgia, Mirant Corporation -- http://www.mirant.com/-- is a competitive energy company that produces and sells electricity in North America, the Caribbean, and the Philippines. Mirant owns or leases more than 18,000 megawatts of electric generating capacity globally. Mirant Corporation filed for chapter 11 protection on July 14, 2003 (Bankr. N.D. Tex. 03-46590). Thomas E. Lauria, Esq., at White & Case LLP, represents the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $20,574,000,000 in assets and $11,401,000,000 in debts. (Mirant Bankruptcy News, Issue No. 89 Bankruptcy Creditors' Service, Inc., 215/945-7000) NDCHEALTH CORPORATION: Per-Se Completes Acquisition of Business --------------------------------------------------------------- Per-Se Technologies, Inc. (Nasdaq: PSTI) reported the successful completion of its acquisition of NDCHealth Corporation (NYSE: NDC). NDCHealth stockholders will receive $14.05 in cash and 0.2253 of Per-Se common stock for each share of NDCHealth. The amount of Per-Se common stock is based on the weighted average volume sales price of Per-Se common stock (as traded on the Nasdaq National Market) for the 20 consecutive full trading days ending on the third trading day prior to, but not including, the closing date of the merger (Jan. 6, 2006). The weighted average volume sales price of Per-Se common stock for this period was $24.188. The trading of NDCHealth common stock will be suspended before the opening of the market on Jan. 9, 2006. As approved by Per-Se stockholders on Jan. 5, 2006, the company issued $200 million, or approximately 8.3 million shares, of common stock in connection with the acquisition. The company also secured financing in the form of a new senior credit facility consisting of: * a $435 million Term Loan B and * a $50 million revolving credit facility. The Term Loan B bears interest at a rate of LIBOR plus 2.25% and matures in seven years. The revolving credit facility has an interest rate that varies between LIBOR plus 1.50% and LIBOR plus 2.50%, based on performance, and matures in five years. The company has incurred no borrowings under the revolving credit facility. All outstanding debt of NDCHealth was retired in connection with the closing of the transaction. Per-Se expects to provide financial guidance on the combined company when it releases fourth quarter 2005 earnings in early March 2006. Per-Se continues to expect that its acquisition of NDCHealth will be accretive to diluted earnings per share and significantly accretive to cash flow per share in 2006. As part of the transaction, Wolters Kluwer, based in Amsterdam, the Netherlands, purchased the pharmaceutical information management business from NDCHealth. About Per-Se Technologies Per-Se Technologies (Nasdaq: PSTI) - http://www.per-se.com/-- is the leader in Connective Healthcare. Connective Healthcare solutions from Per-Se enable healthcare providers to achieve their income potential by creating an environment that streamlines and simplifies the complex administrative burden of providing healthcare. Per-Se's Connective Healthcare solutions help reduce administrative expenses, increase revenue and accelerate the movement of funds to benefit providers, payers and patients. About NDCHealth Corporation Headquartered at Atlanta, Ga., NDCHealth Corporation -- http://www.ndchealth.com/-- is a leading information solutions company serving all sectors of healthcare. Its network solutions have long been among the nation's leading, automating the exchange of information among pharmacies, payers, hospitals and physicians. Its systems and information management solutions help improve operational efficiencies and business decision making for providers, retail pharmacy and pharmaceutical manufacturers. * * * As reported in the Troubled Company Reporter on Sept. 1, 2005, Moody's Investors Service has placed the ratings of Per Se Technologies, Inc. and NDCHealth Corporation on review for possible downgrade, following Per Se's announcement of August 29th to acquire NDCHealth's physician, hospital, and retail pharmacy businesses for $665 million. The transaction is expected to be funded with a combination of cash and equity and is likely to increase Per-Se's debt leverage substantially. The acquisition is expected to close by early calendar 2006 and is subject to shareholder and regulatory approvals. Per-Se's total acquisition consideration of $665 million includes refinancing NDCHealth's outstanding $270 million debt at closing. As part of the transaction, Wolters Kluwer will purchase the pharmaceutical information management business from NDCHealth for $382 million in cash. NDCHealth's review will focus on the refinancing plan for NDCHealth's $270 million outstanding debt. To the degree all of this debt is refinanced as anticipated by Per-Se, the outstanding ratings for NDCHealth will likely be withdrawn. Per Se's review will focus on: 1) the prospects for revenue and cost synergies associated with the acquisition; 2) levels of debt and equity financing chosen to consummate the transaction; 3) anticipated integration costs associated with the acquisition; 4) prospects to reduce NDCHealth's costs for accounting controls, which have elevated over the past twelve months as NDCHealth has restated revenues within its physician business; and 5) anticipated revenues and costs associated with NDCHealth's information management business, anticipated to be sold to Wolters Kluwer. Per Se ratings on review for possible downgrade: * Corporate Family rating of B1 * $75 million secured revolving credit facility maturing June 2007 rated B1 NDC ratings on review for possible downgrade: * Corporate Family rating of B1 * $125 million secured term loan due 2008 rated B1 * $100 million secured revolving credit facility due 2008 rated B1 * $200 million senior subordinated notes due 2012 rated B3. NDCHEALTH CORP: Wolters Kluwer Completes Purchase of IM Business ---------------------------------------------------------------- Wolters Kluwer completed the acquisition of the NDCHealth Information Management business. The Information Management (IM) business is now a part of Wolters Kluwer Health's Pharma Solutions unit and all IM products are adopting the brand name Source(TM) reflecting the unique business intelligence strength these tools offer biotech and pharmaceutical manufacturers. Wolters Kluwer's intent to acquire NDCHealth Information Management, a leading provider of pharmaceutical data and business intelligence products, was announced on August 29, 2005, with the acquisition completed today after the Per-Se Technologies and NDCHealth shareholders agreed to the acquisition on January 5. Anti-trust authorities had earlier approved the acquisition. Wolters Kluwer CEO and Chairman of the Executive Board Nancy McKinstry said, "This acquisition fully supports our strategic focus for the Health division. By incorporating NDCHealth Information Management into our existing business, Wolters Kluwer can grow significantly as a provider of solutions and tools that biotech, pharmaceutical and medical device customers need to make informed decisions about their critical marketing and product development strategies." "We are committed to serving the current needs of IM's customers while investing in the analytical data solutions they'll need moving forward," said Jeff McCaulley, CEO of Wolters Kluwer Health. "Adding the newly-named Source product portfolio to our intelligence products in drug discovery and development provides the foundation for a powerful suite of value-added content tools that will help our customers be more successful in their markets." NDCHealth Information Management's 384 employees, based primarily in Phoenix, Arizona, are now a part of Wolters Kluwer Health's Pharma Solutions unit. Terms of Acquisition The acquisition took place at the agreed-upon purchase price of $382 million, paid in cash. This represents approximately a multiple of 2.3 times the IM group's anticipated 2005 revenues, and 10.6 times its adjusted EBITDA1 . The acquisition is expected to be accretive to ordinary earnings per share in 2006 by approximately 3 euro cents. Wolters Kluwer acquired NDCHealth Information Management from NDCHealth Corporation. The remainder of NDCHealth was secured by Per-Se Technologies. About Wolters Kluwer Health Wolters Kluwer Health (Conshohocken, Pa.) is a leading provider of information for professionals and students in medicine, nursing, allied health, pharmacy and the pharmaceutical industry. Major brands include Lippincott Williams & Wilkins and Facts & Comparisons for medical and drug reference tools and textbooks; Ovid Technologies, Medi-Span and SKOLAR for electronic information; and Adis International and Source for pharmaceutical information. Wolters Kluwer is a leading multinational publisher and information services company. The Company's core markets are spread across the health, corporate services, financial services, tax, accounting, law, regulation, and education sectors. Wolters Kluwer has annual revenues (2004) of EUR 3.3 billion, employs approximately 18,400 people worldwide and maintains operations across Europe, North America and Asia Pacific. Wolters Kluwer is headquartered in Amsterdam, the Netherlands. Its depositary receipts of shares are quoted on the Euronext Amsterdam (WKL) and are included in the AEX and Euronext 100 indices. For more information, see www.wolterskluwer.com. About NDCHealth Corporation Headquartered at Atlanta, Ga., NDCHealth Corporation -- http://www.ndchealth.com/-- is a leading information solutions company serving all sectors of healthcare. Its network solutions have long been among the nation's leading, automating the exchange of information among pharmacies, payers, hospitals and physicians. Its systems and information management solutions help improve operational efficiencies and business decision making for providers, retail pharmacy and pharmaceutical manufacturers. * * * As reported in the Troubled Company Reporter on Sept. 1, 2005, Moody's Investors Service has placed the ratings of Per Se Technologies, Inc. and NDCHealth Corporation on review for possible downgrade, following Per Se's announcement of August 29th to acquire NDCHealth's physician, hospital, and retail pharmacy businesses for $665 million. The transaction is expected to be funded with a combination of cash and equity and is likely to increase Per-Se's debt leverage substantially. The acquisition is expected to close by early calendar 2006 and is subject to shareholder and regulatory approvals. Per-Se's total acquisition consideration of $665 million includes refinancing NDCHealth's outstanding $270 million debt at closing. As part of the transaction, Wolters Kluwer will purchase the pharmaceutical information management business from NDCHealth for $382 million in cash. NDCHealth's review will focus on the refinancing plan for NDCHealth's $270 million outstanding debt. To the degree all of this debt is refinanced as anticipated by Per-Se, the outstanding ratings for NDCHealth will likely be withdrawn. Per Se's review will focus on: 1) the prospects for revenue and cost synergies associated with the acquisition; 2) levels of debt and equity financing chosen to consummate the transaction; 3) anticipated integration costs associated with the acquisition; 4) prospects to reduce NDCHealth's costs for accounting controls, which have elevated over the past twelve months as NDCHealth has restated revenues within its physician business; and 5) anticipated revenues and costs associated with NDCHealth's information management business, anticipated to be sold to Wolters Kluwer. Per Se ratings on review for possible downgrade: * Corporate Family rating of B1 * $75 million secured revolving credit facility maturing June 2007 rated B1 NDC ratings on review for possible downgrade: * Corporate Family rating of B1 * $125 million secured term loan due 2008 rated B1 * $100 million secured revolving credit facility due 2008 rated B1 * $200 million senior subordinated notes due 2012 rated B3. NEXMED INC: Receives Nasdaq Delisting Warning Letter ---------------------------------------------------- NexMed, Inc. (NASDAQ: NEXM) received a notice from Nasdaq indicating that it did not comply with the minimum $50 million market value of listed securities requirement for continued listing set forth in Marketplace Rule 4450(b)(1)(A). Additionally, the Company does not comply with the alternative Marketplace Rule 4450(b)(1)(B) which requires total assets and total revenue of $50 million each for the most recently completed fiscal year or two of the last three most recently completed fiscal years. Nasdaq will provide written notice that the Company's common stock will be delisted from the Nasdaq National Market at the opening of business on Jan. 31, 2006 unless the Company's market value of listed securities is $50 million or more for a minimum of 10 consecutive business days during the 30-day period ended Jan. 30, 2006 or if the company's total stockholder equity is above $10 million before January 30, 2006 in accordance with Marketplace Rule 4450 (a)(3). Should the Company receive such notice, it plans to file a request for a hearing with the Nasdaq's Listing Qualifications Panel to appeal the Nasdaq determination. The company has been informed that the appeal process may take up to 4 weeks during which the Company's stock will remain listed on the Nasdaq National Market. As of Dec. 29, 2005 the market value of listed securities based on current shares outstanding of 54,530,382 was $41,443,090. In order to comply with the $50 million market value criteria, the Company's share price would have to be $0.92 or greater for 10 consecutive days before January 30, 2006. There can be no assurance that the Nasdaq Listing Qualifications Panel will decide to allow the Company to remain listed or that any Company actions to attempt to comply with alternative listing criteria will prevent the delisting of its common stock from the Nasdaq National Market. NexMed, an innovative drug developer, offers large pharmaceutical companies the opportunity to save considerably on R&D costs, develop new patient-friendly transdermal products, and extend patent lifespans and brand equity, through participation in early stage licensing and development partnerships. NexMed currently has a host of medicines in development, such as treatments for nail fungus, sexual disorders and more, all based on its proprietary NexACT drug delivery technology. Current partners include Novartis International Pharmaceutical for a topical anti- fungal nail treatment, and Schering AG for Alprox-TD, a topical treatment for erectile dysfunction. * * * Going Concern Doubt PricewaterhouseCoopers LLP expressed substantial doubt about NexMed's ability to continue as a going concern after it audited the Company's financial statements for the year ended Dec. 31, 2004 2003 and 2002. The auditing firm pointed to the Company's recurring losses, negative cash flows from operations and limited capital resources. NORTHWEST AIRLINES: Committee Hires FTI as Financial Advisors ------------------------------------------------------------- The U.S. Bankruptcy Court for the Southern District of New York authorized the Official Committee of Unsecured Creditors of Northwest Airlines Corp. and its debtor-affiliates to retain FTI Consulting, Inc., as its financial advisors, effective as of Oct. 6, 2005. R. Douglas Greco, Esq., chairperson of the Committee, told the Court that FTI's services are necessary to enable the Committee to assess and monitor the efforts of the Debtors and their professional advisors to maximize the value of their estates and reorganize successfully. As advisor to the Committee, FTI will: (a) assist the Committee in the review of financial related disclosures required by the Court, including the Schedules of Assets and Liabilities, the Statement of Financial Affairs and Monthly Operating Reports; (b) review the Debtors' short-term cash management procedures; (c) review the Debtors' employee benefit programs, including key employee retention, incentive, pension and other post-retirement benefit plans; (d) assist and advise the Committee with respect to the Debtors' identification of core business assets and the disposition of assets or liquidation of unprofitable operations; (e) review the Debtors' performance of cost/benefit evaluations with respect to the affirmation or rejection of various executory contracts and leases; (f) assist in the evaluation of the Debtors' operations and identification of areas of potential cost savings, including overhead and operating expense reductions and efficiency improvements; (g) review financial information distributed by the Debtors, including, but not limited to, cash flow projections and budgets, cash receipts and disbursement analyses, analyses of various asset and liability accounts, and analyses of proposed transactions for which Court approval is sought; (h) assist the Committee with information and analyses, as it relates to the other services, required pursuant to any DIP financing including, but not limited to, preparation for hearings regarding the use of cash collateral and any DIP financing; (i) attend meetings and assist in discussions with the Debtors, potential investors, banks, other secured lenders, the Committee and any other official committees organized in the Debtors' Chapter 11 proceedings, the U.S. Trustee, other parties-in-interest and professionals hired by the Committee, as requested; (j) assist in the review and preparation of information and analysis, as it relates to the other services, necessary for the confirmation of a plan in the Debtors' Chapter 11 proceedings; (k) assist in the evaluation and analysis of avoidance actions, including fraudulent conveyances and preferential transfers; and (1) assist in various tax matters including, but not limited to, the impact of the Debtors' claims and equity trading and tax issues related to a plan of reorganization; (m) provide litigation advisory services with respect to accounting and tax matters, along with expert witness testimony on case related issues as required by the Committee; and (n) render other general business consulting or other assistance as the Committee or its counsel may deem necessary that are consistent with the role of a financial advisor and not duplicative of services provided by other professionals in this proceeding. FTI will be paid $275,000 per month, plus reimbursement of actual and necessary expenses it incurs. FTI reserves the right to request a success or completion fee, which will be subject to approval by both the Committee and the Court. Samuel Star, senior managing director at FTI, disclosed that the firm was retained in 2004 by Boise Schiller & Flexner, LLP, on behalf of Northwest Airlines, Inc., in an antitrust matter before the United States District Court for the District of Minnesota. A nominal amount of work was performed in 2004, which was not, and will not be, billed. FTI will not perform any work in connection with this matter during the Debtors' Chapter 11 proceedings, Mr. Star assures the Court. FTI has also been involved with other litigation matters in the airline industry. In addition, Anna Schaefer who will become the Debtors' vice president of finance and chief accounting officer, effective Dec. 1, 2005, is the sister of one of FTI's non-management employees within our administrative support practice. That employee, however, has no access to client information and in no way is involved with the Debtors' Chapter 11 proceedings or the FTI engagement team serving the Committee. George P. Stamas, Esq., a partner at Kirkland & Ellis, is currently a member of FTI's Board of Directors. Mr. Stamas is not involved with the Kirkland & Ellis team in the Debtors' Chapter 11 proceedings, nor does Mr. Stamas have any professional involvement in this matter in any capacity. Mr. Star told the Court that FTI is not a "Creditor" with respect to fees and expenses of any of the Debtors within the meaning of Section 101(10) of the Bankruptcy Code. Northwest Airlines Corporation -- http://www.nwa.com/-- is the world's fourth largest airline with hubs at Detroit, Minneapolis/St. Paul, Memphis, Tokyo and Amsterdam, and approximately 1,400 daily departures. Northwest is a member of SkyTeam, an airline alliance that offers customers one of the world's most extensive global networks. Northwest and its travel partners serve more than 900 cities in excess of 160 countries on six continents. The Company and 12 affiliates filed for chapter 11 protection on Sept. 14, 2005 (Bankr. S.D.N.Y. Case No. 05-17930). Bruce R. Zirinsky, Esq., and Gregory M. Petrick, Esq., at Cadwalader, Wickersham & Taft LLP in New York, and Mark C. Ellenberg, Esq., at Cadwalader, Wickersham & Taft LLP in Washington represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $14.4 billion in total assets and $17.9 billion in total debts. (Northwest Airlines Bankruptcy News, Issue No. 12; Bankruptcy Creditors' Service, Inc., 215/945-7000) NORTHWEST AIRLINES: Court Extends Removal Period to June 12 ----------------------------------------------------------- The U.S. Bankruptcy Court for the Southern District of New York extended Northwest Airlines Corp. and its debtor-affiliates' time to file notices of removal to numerous actions currently pending in various states. The State Court Actions involve a wide variety of claims, including, but not limited to, breach of contract and personal injury claims. Judge Gropper extended the period within which the Debtors, with the exception of NWA Aircraft Finance, Inc., may seek to remove civil actions pending on the Petition Date to and including the earlier to occur of: (a) June 12, 2006; or (b) 30 days after entry of an order terminating the automatic stay with respect to the particular action sought to be removed. The period within which Aircraft Finance may seek to remove civil actions pending as of September 30, 2005, is extended to and including the earlier to occur of: (a) June 28, 2006; or (b) 30 days after entry of an order terminating the automatic stay with respect to the particular action sought to be removed. Gregory M. Petrick, Esq., at Cadwalader, Wickersham & Taft LLP, in New York, explained that, to determine whether to remove any of the State Court Actions, the Debtors must conduct a comprehensive analysis of their pending civil actions and evaluate various factors under Section 1452 of the Judicial Procedures Code, and determine whether the outcome of a State Court Action may alter their rights and liabilities and affect the ultimate distribution to their creditors. At present, the Debtors have not yet had an opportunity to evaluate these factors and determine which State Court Actions they will remove, Mr. Petrick related. Thus, the Debtors will not have sufficient time to properly and accurately analyze each of the State Court Actions and make the appropriate determinations concerning removal of specific actions within the original time period prescribed by Rule 9027 of the Federal Rules of Bankruptcy Procedure. Mr. Petrick asserted that the extension of the Removal Period will afford the Debtors a sufficient opportunity to make informed decisions concerning removal of each State Court Action and will assure that they do not forfeit their valuable removal rights. The rights of the Debtors' adversaries will not be prejudiced by the extension, Mr. Petrick contended. In that regard, Section 362(a) of the Bankruptcy Code automatically stays prosecution of the State Court Actions against Debtors. Mr. Petrick said that if the Debtors are ultimately successful in removing any of the State Court Actions to federal court, any party to the action may seek to have it remanded to the state court pursuant to Section 1452(b). Therefore, the extension will not prejudice the rights of other parties in the State Court Actions. Northwest Airlines Corporation -- http://www.nwa.com/-- is the world's fourth largest airline with hubs at Detroit, Minneapolis/St. Paul, Memphis, Tokyo and Amsterdam, and approximately 1,400 daily departures. Northwest is a member of SkyTeam, an airline alliance that offers customers one of the world's most extensive global networks. Northwest and its travel partners serve more than 900 cities in excess of 160 countries on six continents. The Company and 12 affiliates filed for chapter 11 protection on Sept. 14, 2005 (Bankr. S.D.N.Y. Lead Case No. 05- 17930). Bruce R. Zirinsky, Esq., and Gregory M. Petrick, Esq., at Cadwalader, Wickersham & Taft LLP in New York, and Mark C. Ellenberg, Esq., at Cadwalader, Wickersham & Taft LLP in Washington represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $14.4 billion in total assets and $17.9 billion in total debts. (Northwest Airlines Bankruptcy News, Issue No. 12; Bankruptcy Creditors' Service, Inc., 215/945-7000) NORTHWEST AIRLINES: Lazard Approved as Panel's Financial Advisors ----------------------------------------------------------------- The U.S. Bankruptcy Court for the Southern District of New York allowed the Official Committee of Unsecured Creditors of Northwest Airlines Corp. and its debtor-affiliates, to retain Lazard Freres & Co. LLC as its financial advisors, nunc pro tunc to Oct. 6, 2005. R. Douglas Greco, Esq., chairperson of the Creditors Committee, informed the Court that since October 6, the Firm has: (i) reviewed the Debtors' operating and financial information and conducted general due diligence on the Debtors' business and case matters; (ii) met with the Debtors' management, advisors and other professionals involved in the cases; (iii) participated in meetings with the Committee; and (iv) responded to inquiries from creditors. Lazard is an investment banking firm focused on providing financial and investment banking advice and transaction execution on behalf of its clients. It is a registered broker-dealer and investment advisor registered with the U.S. Securities and Exchange Commission and is also a member of the National Association of Securities Dealers. Mr. Greco related that the Firm's professionals have been employed as financial advisors and as investment bankers in a number of troubled company situations. Those who will continue to represent the Air Transportation Stabilization Board in the ATA Airlines, Inc., Chapter 11 cases, and Lufthansa in the United Air Lines proceedings will not be involved in the present engagement, Mr. Greco assured the Court. Pursuant to an engagement letter, dated October 6, 2005, Lazard agrees to: (a) review and analyze the business model, operations, liquidity situation, properties, assets and liabilities, financial condition and prospects of the Debtors; (b) review, analyze and report to the Creditors Committee with respect to the Debtors' business plan; (c) evaluate the Debtors' debt capacity in light of their projected cash flows; (d) review and provide an analysis of any proposed capital structure for the Debtors; (e) review and provide an analysis of any valuation of the Debtors or their assets; (f) advise and attend meetings of the Committee as well as due diligence meetings with the Debtors or other third parties as appropriate; (g) advise and assist the Committee in evaluating any potential DIP loan or other financing by the Debtors; (h) review, analyze and advise the Committee with respect to the existing debt structures of the Debtors, and refinancing alternatives to existing secured debt; (i) review, analyze and provide advice with respect to the Debtors' pension plans; (j) advise and assist the Committee in analyzing strategic alternatives available to the Debtors; (k) review and provide an analysis of all proposed restructuring plans proposed by any party; (l) review and provide an analysis of any new securities, other consideration or other inducements to be offered and issued under the Plan; (m) assist the Committee in negotiations with the Debtors; and (n) provide other financial advisory services as the Committee or counsel may from time to time request consistent with expertise. The Committee has also retained FTI Consulting, Inc., to provide financial advisory services. Mr. Greco explained that in most complex airline restructuring cases, the creditors committee has routinely retained two firms -- the UAL Committee retained Saybrook Restructuring Advisors and Mesirow Financial; the Delta Air Lines Committee is seeking to retain Houlihan Lokey Howard & Zukin and Mesirow Financial. Mr. Greco said Lazard and FTI have developed an appropriate allocation of responsibilities, thus substantially eliminating any risk of duplicate work product or inconveniences to the Debtors. In addition, Lazard and FTI have both implemented certain internal measures to improve coordination among themselves, the Committee and the Debtors, like establishing a single contact person from each firm and using a single e-mail address for communication with all the professionals of each firm. Lazard will be paid a $275,000 financial advisory fee per month until the termination of its engagement, subject to any recapture or credit adjustment and holdback requirements The Firm will also charge for all reasonable out-of-pocket expenses incurred on submission of statements for those expenses. The parties agree that all matters relating to Lazard's entitlement, if any, to an additional "success" or "completion" fee will be deferred until the later part of the Debtors' Chapter 11 case. The Creditors Committee requested that the Debtors provide certain indemnification and contribution obligations to Lazard. Daniel Aronson, managing director at Lazard, assured the Court that Lazard is a "disinterested person" within the meaning of Section 101(14) of the Bankruptcy Code. Mr. Aronson, however, disclosed that Lazard has advised, or transacted with, various parties-in-interest in matters unrelated to the Debtors' Chapter 11 cases. He added that, in 1994, a predecessor company of Lazard participated in a public offering of 20 million common shares of NWA Corp. as a syndicate member. The predecessor company was allocated 300,000 shares for offering, representing less than 2% of the offering, and received a de minimis fee. Moreover, as part of its regular business operations, Lazard's asset management affiliate, Lazard Asset Management LLC, may act as investment advisor for or trade securities, including on behalf of creditors, equity holders or other parties-in-interest in the Debtors' cases, and Lazard managing directors and employees. Some of these LAM accounts and funds may now or in the future hold debt or equity securities of the Debtors. Lazard has in place compliance procedures to ensure that no confidential or non-public information concerning the Debtors has been or will be available to employees of LAM, Mr. Aronson assures Judge Gropper. Northwest Airlines Corporation -- http://www.nwa.com/-- is the world's fourth largest airline with hubs at Detroit, Minneapolis/St. Paul, Memphis, Tokyo and Amsterdam, and approximately 1,400 daily departures. Northwest is a member of SkyTeam, an airline alliance that offers customers one of the world's most extensive global networks. Northwest and its travel partners serve more than 900 cities in excess of 160 countries on six continents. The Company and 12 affiliates filed for chapter 11 protection on Sept. 14, 2005 (Bankr. S.D.N.Y. Case No. 05-17930). Bruce R. Zirinsky, Esq., and Gregory M. Petrick, Esq., at Cadwalader, Wickersham & Taft LLP in New York, and Mark C. Ellenberg, Esq., at Cadwalader, Wickersham & Taft LLP in Washington represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $14.4 billion in total assets and $17.9 billion in total debts. (Northwest Airlines Bankruptcy News, Issue No. 12; Bankruptcy Creditors' Service, Inc., 215/945-7000) O'SULLIVAN IND: Files First Amended Plan & Disclosure Statement --------------------------------------------------------------- O'Sullivan Industries, Inc., and its debtor-affiliates delivered their First Amended Joint Plan of Reorganization and First Amended Disclosure Statement to the U.S. Bankruptcy Court for the Northern District of Georgia on January 3, 2006. The Debtors report that, as of the Petition Date, they had approximately $6,000,000 in outstanding borrowings under the revolving credit line and approximately $14,400,000 in outstanding letters of credit under their 2003 Senior Credit Facility with General Electric Capital Corporation. Proceeds from their $35,000,000 DIP Facility with The CIT Group/Business Credit, Inc., as agent, lender, and letter of credit issuer, and GoldenTree Asset Management L.P. and the other financial institutions were used to repay the borrowings and have been used to issue back-to-back letters of credit with respect to the L/C outstanding under the Senior Credit Facility. Accordingly, the Debtors do not believe they will have any outstanding obligations under the Senior Credit Facility as of the Effective Date of the Plan, although the Debtors do not know with any certainty when the balance of the $500,000 they deposited into the segregated account with GE Capital to fund indemnification obligations will be returned. Under the DIP Facility, the interest rate on borrowings through March 31, 2006, is, at the Debtors' option, LIBOR plus 4% or an index rate plus 2%. From then, the margin fluctuates based on the Debtors' average borrowing availability under the DIP Facility. There is also a fee for L/C of the LIBOR margin less 0.25% and a 0.5% unused commitment fee. The Debtors may prepay their obligations under the DIP Facility, in whole or in part, without premium or penalty, except for the payment of an early termination fee of 1% multiplied by the Revolving Line of Credit Amount, in the event that the DIP Facility is refinanced within six months of the closing date by lenders other than the DIP Lenders. The DIP Facility will terminate on the earlier of October 20, 2006, or the Debtors' emergence from bankruptcy. To date, the Debtors obligations under the DIP Facility total approximately $23,200,000, which includes approximately $14,400,000 in outstanding L/Cs, with remaining availability of approximately $6,800,000. The Debtors' EBITDA decreased from $19,300,000 for Fiscal Year 2004 to $1,340,000 for Fiscal Year 2005. The Debtors also experienced liquidity constraints and had only about $1,300,000 of cash on hand as of the Petition Date. Exit Facility & Issuance of New Notes The Debtors are in the process of obtaining financing under an Exit Credit Facility with Reorganized O'Sullivan Industries as borrower. The Debtors anticipate that the Exit Credit Facility will be: -- in an aggregate principal amount equal to $40,000,000 to $50,000,000, consisting of an Exit Credit Facility Revolver, and an the Exit Credit Facility Term Loan; and -- sufficient in amount to provide for the distributions contemplated under the Plan plus availability of up to $15,000,000. Various obligations under the Exit Credit Facility will be secured by first and second priority Liens on, and security interests in, substantially all of the Reorganized Debtors' Assets, and that Reorganized O'Sullivan Industries' obligations under the Exit Credit Facility will be guaranteed by O'Sullivan Industries Holdings, Inc., O'Sullivan Industries Virginia, Inc., and O'Sullivan Furniture Factory Outlet, Inc. In addition, Reorganized O'Sullivan Industries will issue the New Notes, in the aggregate principal amount of $10,000,000. The New Notes will be secured by liens and security interests on all or substantially all of the assets of the Reorganized Debtors that are junior in priority only to the security interests granted to the Exit Credit Facility Lenders. The New Notes will (a) bear interest at a rate equal to 150 basis points higher than the non-default interest rate under, and (b) will mature six months beyond the maturity date of, the Exit Credit Facility Term Loan. Under certain conditions, based on the Reorganized Debtors' operating cash flows, Reorganized O'Sullivan Industries may, in its sole discretion, pay any interest due under the New Notes in-kind rather than in Cash. New Common Stock On the Effective Date, Reorganized O'Sullivan Holdings will issue 10,000,000 shares of New O'Sullivan Holdings Common Stock to the Holders of Allowed Claims in Class 2C. As of the Effective Date, the 10,000,000 shares of New O'Sullivan Holdings Common Stock will collectively represent 100% of the outstanding shares of New O'Sullivan Holdings Common Stock on a fully diluted basis. Distributions Under the Plan The Debtors provide an estimate of the Allowed amount of claims on the Effective Date for these Classes: Claim Description Estimated Claim Amount ----------------- ---------------------- Administrative Claims $5,500,000 DIP Facility Claims $21,800,000 Tax Claims $1,068,771 Class 2A Unimpaired Claims The Debtors have paid all (Senior Credit outstanding Allowed Senior Facility Claims) Credit Facility Claims from the proceeds of the DIP Facility. The Debtors believe that there will not be any Allowed Senior Credit Facility Claims as of the Effective Date, although the Debtors do not know when any balance of the $500,000 deposited by them into the segregated account with GECC to fund indemnification obligations will be returned. Class 2C $89,400,000 Impaired Claims (Senior Secured Notes Secured Claims) Class 4 Claims To date, the Debtors estimate the total amount of Allowed Class 4 Claims to be approximately $99,800,000 under the BancBoston Note and the Tandy Agreements, plus approximately $18,600,000 in the Senior Secured Notes Deficiency Claims totaling approximately $118,400,000. Under the Amended Plan, holders of Impaired Class 3 General Unsecured Claims are entitled to a pro rata share of the Avoidance Recoveries, if any, which will be distributed only until the Allowed Senior Secured Notes Deficiency Claims, together with all Senior Secured Notes Postpetition Interest, have been paid in full. Furthermore, the holders of Impaired Class 3 General Unsecured Claims are entitled to vote on the Plan. To date, the Debtors estimate the total amount of Allowed Class 3 Claims to be $132,000,000 by the Effective Date of the Plan. The total claim amount consists of: (a) $102,400,000 in Senior Subordinated Notes Claims; (b) $11,000,000 for all other General Unsecured Claims; plus (c) $18,600,000 in Senior Secured Notes Deficiency Claims. A full-text copy of the Debtors' First Amended Plan of Reorganization is available for free at: http://bankrupt.com/misc/OSUL1stAmendedDisclosureStatement.pdf A full-text copy of the Debtors' First Amended Disclosure Statement is available for free at: http://bankrupt.com/misc/OSUL1stAmendedPlan.pdf The Debtors relate that the hearing to consider confirmation of the Plan is scheduled for February 16, 2006, at 9:30 a.m. Headquartered in Roswell, Georgia, O'Sullivan Industries Holdings, Inc. -- http://www.osullivan.com/-- designs, manufactures, and distributes ready-to-assemble furniture and related products, including desks, computer work centers, bookcases, filing cabinets, home entertainment centers, commercial furniture, garage storage units, television, audio, and night stands, dressers, and bedroom pieces. O'Sullivan sells its products primarily to large retailers including OfficeMax, Lowe's, Wal-Mart, Staples, and Office Depot. The Company and its subsidiaries filed for chapter 11 protection on October 14, 2005 (Bankr. N.D. Ga. Case No. 05- 83049). On September 30, 2005, the Debtor listed $161,335,000 in assets and $254,178,000 in debts. (O'Sullivan Bankruptcy News, Issue No. 9; Bankruptcy Creditors' Service, Inc., 215/945-7000) O'SULLIVAN IND: Taps Edward Howard as Consultant on Interim Basis ----------------------------------------------------------------- As previously reported in the Troubled Company Reporter on November 3, 2005, O'Sullivan Industries Holdings, Inc., and its debtor-affiliates sought the U.S. Bankruptcy Court for the Northern District of Georgia's authority to employ Edward Howard & Co., as their public relations consultant. Edward Howard provides strategic counseling in corporate relations, financial relations, and public affairs and has experience in serving as a public relations consultant to Chapter 11 debtors in the automotive, chemical, home decor, retail pharmaceutical, steel, and technological industries, among others. The Debtors tell the Court that they are familiar with the Edward Howard's professional standing and reputation and that the firm is skilled in providing communications consulting services in restructurings and reorganizations. * * * At the Debtors' behest, the Court approved the motion on an interim basis. Headquartered in Roswell, Georgia, O'Sullivan Industries Holdings, Inc. -- http://www.osullivan.com/-- designs, manufactures, and distributes ready-to-assemble furniture and related products, including desks, computer work centers, bookcases, filing cabinets, home entertainment centers, commercial furniture, garage storage units, television, audio, and night stands, dressers, and bedroom pieces. O'Sullivan sells its products primarily to large retailers including OfficeMax, Lowe's, Wal-Mart, Staples, and Office Depot. The Company and its subsidiaries filed for chapter 11 protection on October 14, 2005 (Bankr. N.D. Ga. Case No. 05- 83049). On September 30, 2005, the Debtor listed $161,335,000 in assets and $254,178,000 in debts. (O'Sullivan Bankruptcy News, Issue No. 8; Bankruptcy Creditors' Service, Inc., 215/945-7000) O'SULLIVAN IND: U.S. Trustee Balks at Chanin Capital's Retention ---------------------------------------------------------------- As previously reported in the Troubled Company Reporter on December 16, 2005, the U.S. Bankruptcy Court for the Northern District of Georgia authorized the Official Committee of Unsecured Creditors of O'Sullivan Industries Holdings, Inc., and its debtor- affiliates' chapter 11 cases, on an interim basis, to retain Chanin Capital Partners, LLC, as its financial advisor. U.S. Trustee Responds Felicia S. Turner, the United States Trustee for Region 21, asks the Court to strike its order authorizing the Official Committee of Unsecured Creditors to retain Chanin Capital Partners, LLC, as financial advisor. Leroy Culton, Esq., in Atlanta, Georgia, notes that the Retention Order incorporates and approves certain provisions of the Retention Letter executed between the Creditors Committee and Chanin dated October 27, 2005. In particular, the Retention Letter contains a fee-tail provision, which entitles Chanin to compensation in the event the retention agreement is terminated. Pursuant to that provision, Chanin asserts that it is entitled to a deferred fee if a restructuring transaction is consummated within 18 months of the effective date of Chanin's termination. There is no legal basis in the Bankruptcy Code on which Chanin may assert entitlement to fees of any kind, Mr. Culton argues. The U.S. Trustee relates that Chanin may seek compensation by application for any fees during the fee-tail period provided that the application state with particularity the: -- the services Chanin provided to commencement of the fee- tail period, which resulted in a definitive agreement after the fee-tail period commenced; and -- the benefit was conferred on the Debtors' estates by the services. In addition, the Retention Letter provides Chanin a $450,000 Deferred Fee payable on the effective date of a Restructuring Transaction, in addition to a $125,000 regular monthly advisory fee. "The Retention Letter provides no reason for the Deferred Fee, especially since, logically, the regular monthly advisory fee is intended to fully compensate Chanin for its services on a non- going basis," the U.S. Trustee contends. "The Retention Letter provides no methodology of assessing the reasonableness of the fee based on independently verifiable factors." The Retention Letter provides that the Creditors Committee must indemnify Chanin from the harmful consequences of Chanin's actions except for those consequences found by a court of competent jurisdiction to have resulted from Chanin's "gross negligence or willful misconduct", Mr. Culton notes. "This indemnification provision is inconsistent with Chanin's fiduciary duties to the Creditors Committee." Ad Hoc Committee Supports U.S. Trustee's Objection GoldenTree Asset Management L.P., Mast Credit Opportunities I, (Master) Ltd., and Breakwater Fund Management, LLC, as the Ad Hoc Senior Secured Noteholders Committee, assert that the Deferred Fee is entirely unreasonable and unwarranted and would grossly overcompensate Chanin regardless of whether its services confer any benefit on its constituency or the Debtors' estates. Dennis J. Connolly, Esq., at Alston & Bird, LLP, in Atlanta, Georgia, argues that the Deferred Fee is inappropriate for five reasons: (a) It is not tied to Chanin's success in representing general, unsecured creditors, but rather, is simply a fixed, non-contingent fee that is payable on the effective date of a Restructuring Transaction; (b) It would become payable even in the event that the Restructuring Transaction that triggers the Deferred Fee were to involve a restructuring of debt other than the debt owed to Chanin's constituency; (c) It would be payable to Chanin even if its constituency -- holders of general, unsecured claims -- receives no distribution of the Debtors' reorganization value under a confirmed plan of reorganization; (d) If Chanin's retention is terminated by the Creditors Committee, Chanin would be entitled to payment of the Deferred Fee if a Restructuring Transaction were to be consummated within 18 months of the effective date of the termination; and (e) In contradistinction to the analogous transaction-based fees to be paid to Lazard Freres & Co., LLC, and Rothschild, Inc., the Deferred Fee is not subject to being reduced by any portion of the Monthly Fees paid to Chanin during the course of the Debtors' Chapter 11 cases. In the event the Court decides to authorize the Deferred Fee as a form of compensation to Chanin, the Ad Hoc Committee seeks that: -- the Deferred Fee be paid from the distributions, if any, to Unsecured Creditors under the Plan and not from the Debtors' estates; -- the Deferred Fee be subject to reduction to reflect an appropriate credit of the monthly fees paid to Chanin; and -- the Tail Period should be eliminated. The Retention Order also provides that Chanin will be compensated pursuant to the standard of review in Section 328(a) of the Bankruptcy Code. Mr. Connolly argues that in light of the fact that Chanin's constituency is out of the money by a substantial margin, tying Chanin's compensation to the extremely restrictive standard of review prescribed by Section 328(a) is entirely inappropriate. Chanin's compensation should be subject to a Court review for reasonableness under the standard prescribed by Section 330(a)(1) of the Bankruptcy Code, Mr. Connolly contends. In this regard, the Ad Hoc Committee asks the Court to: (i) strike the Deferred Fee as an element of Chanin's compensation; and (ii) subject Chanin's fees and expenses to a Court review for reasonableness in accordance with the standard prescribed by Section 330. Headquartered in Roswell, Georgia, O'Sullivan Industries Holdings, Inc. -- http://www.osullivan.com/-- designs, manufactures, and distributes ready-to-assemble furniture and related products, including desks, computer work centers, bookcases, filing cabinets, home entertainment centers, commercial furniture, garage storage units, television, audio, and night stands, dressers, and bedroom pieces. O'Sullivan sells its products primarily to large retailers including OfficeMax, Lowe's, Wal-Mart, Staples, and Office Depot. The Company and its subsidiaries filed for chapter 11 protection on October 14, 2005 (Bankr. N.D. Ga. Case No. 05- 83049). On September 30, 2005, the Debtor listed $161,335,000 in assets and $254,178,000 in debts. (O'Sullivan Bankruptcy News, Issue No. 8; Bankruptcy Creditors' Service, Inc., 215/945-7000) OMEGA HEALTHCARE: Gets $173.4M from Private Placement of Sr. Notes ------------------------------------------------------------------ On December 30, 2005, Omega Healthcare Investors, Inc., issued $175 million of 7% Senior Notes due 2016 through a private placement to qualified institutional buyers pursuant to Rule 144A and in offshore transactions pursuant to Regulation S, promulgated under the Securities Act of 1933, as amended. The Notes were sold pursuant to a December 20, 2005, Purchase Agreement among Omega and its subsidiaries, as guarantors, to: * Deutsche Bank Securities Inc., * Banc of America Securities LLC, and * UBS Securities LLC The Notes were sold at an issue price of 99.109% of the principal amount of the notes, resulting in gross proceeds to Omega of $173.4 million. A full-text copy of the Purchase Agreement is available for free at http://ResearchArchives.com/t/s?432 Terms of the Notes The Notes bear an interest rate of 7%, payable semi-annually in arrears on January 15 and July 15 of each year, commencing on July 15, 2006. Interest on the Notes will accrue from Dec. 30, 2005. The Notes mature on January 15, 2016. The Notes are unconditionally guaranteed, jointly and severally, on a senior unsecured basis by Omega and its subsidiaries until certain conditions are met. The Notes are Omega's unsecured senior obligations and rank equally with all of Omega's existing and future senior debt, and senior to all of Omega's existing and future subordinated debt. The Notes are, and will be, effectively subordinated to Omega's existing and future secured debt. The Notes are, and will be, unconditionally guaranteed by Omega's existing and future subsidiaries that guarantee Omega's Senior Credit Facility or any of Omega's other indebtedness. These guarantees are unsecured senior obligations of the guarantors and rank equally with existing and future unsecured senior debt of such guarantors, and senior to all existing and future subordinated debt of such guarantors. The guarantees are effectively subordinated to existing and future secured debt of the guarantors. Use of Proceeds Omega intends to use the net proceeds from the sale of the Notes: (1) to repurchase its $100 million aggregate principal amount of 6.95% notes due 2007, including the payment of applicable premiums and consent fees related to the repurchase; (2) to repay a portion of its outstanding indebtedness under its March 22, 2004, Credit Agreement, among: -- OHI Asset, LLC, -- OHI Asset (ID), LLC, -- OHI Asset (LA), LLC, -- OHI Asset (TX), LLC, -- OHI Asset (CA), LLC, -- Delta Investors I, LLC, -- Delta Investors II, LLC, and -- Bank of America, N.A., (3) for working capital and general corporate purposes; and (4) to pay related fees and expenses. Bank of America, N.A., is an affiliate of Banc of America Securities LLC. In addition, each of the other initial purchasers serve in various agent capacities under the Senior Credit Facility. The Notes are issued pursuant to a December 30, 2005, Indenture between Omega and U.S. Bank National Association, as trustee. A full text copy of the Indenture is available for free at http://ResearchArchives.com/t/s?433 Headquartered in Timonium, Maryland, Omega HealthCare Investors, Inc. -- http://www.omegahealthcare.com/-- is a real estate investment trust investing in and providing financing to the long- term care industry. At September 30, 2005, the Company owned or held mortgages on 216 skilled nursing and assisted living facilities with approximately 22,407 beds located in 28 states and operated by 38 third-party healthcare operating companies. * * * Omega Healthcare's 6.95% notes due 2007 and 7% notes due 2014 carry Moody's Investors Service's B1 rating, Standard & Poor's BB- rating and Fitch's BB- rating. OMNOVA SOLUTIONS: Financial Profile Earns S&P's Positive Outlook ---------------------------------------------------------------- Standard & Poor's Ratings Services revised its outlook on OMNOVA Solutions Inc. to positive from negative. At the same time, S&P affirmed all of its ratings on the company including the 'B' corporate credit rating. Fairlawn, Ohio-based OMNOVA Solutions, with about $800 million of annual sales and approximately $187 million of total debt outstanding as of Aug. 31, 2005, manufactures emulsion polymers, decorative and functional surfaces, such as commercial wall coverings, and specialty chemicals. "The outlook revision reflects the strengthening of the financial profile as pricing initiatives in the performance chemicals business and continued focus on cost reduction allowed OMNOVA to offset higher raw-material costs," said Standard & Poor's credit analyst George Williams. The rating could be raised by one notch over the next year or two if the company continues to demonstrate the ability to successfully manage a difficult raw material pricing environment while achieving further improvements to the financial profile. The ratings reflect the company's fair market positions and decent product diversification, offset by competitive markets, exposure to volatile raw-material costs, and a highly leveraged financial profile. OMNOVA was created in October 1999 as a spin-off of GenCorp Inc.'s polymer products businesses. The performance chemicals segment, which accounts for 56% of revenues, focuses on the manufacture of latex and a portfolio of specialty chemicals. In particular, the company is the second-largest producer of styrene butadiene latex, which is used in carpet-backing applications and in manufacturing coated paper. The decorative and building product segments focuses on polyvinyl chloride and paper-based decorative surface products and single-ply roofing systems. Proficiency in vinyl applications and design capabilities support the company's well-established global share of commercial wall coverings and good positions in coated fabrics and decorative laminates. However, these industry segments result in considerable exposure to the commercial real estate cycle. OWENS CORNING: Wants to Implement 2006 Retention Program -------------------------------------------------------- Owens Corning's 2004 Employee Retention Program expires for certain participants on December 31, 2005, unless extended pursuant to an evergreen provision. Norman L. Pernick, Esq., at Saul Ewing LLP, in Wilmington, Delaware, tells the U.S. Bankruptcy Court for the District of Delaware that as with the prior programs, the 2004 Retention Program was a success. Voluntary turnover of Key Employees in 2004 and 2005 was 1%, compared with a manufacturing industry median of 5.5%. The 2004 Retention Program was structured as an evergreen program which renews on an annual basis if the Debtors have not emerged as of each January 1st. The Committees and the Futures Representative have a right to object to the continuation of the program on an annual basis. Starting in September 2005, the Debtors' Human Resources Leaders, working with the Chairman of the Compensation Committee of the Debtors' Board of Directors and Mercer Resources Consulting, Inc. -- the Debtors' human resources consultants -- conducted a detailed analysis of the need for, and the reasonableness of, continuing the 2004 Retention Program beyond 2005. The Retention Team concluded that continuation of the 2004 Retention Program, subject to modifications, was necessary to achieve the goal of retaining the Debtors' Key Employees, particularly given the very favorable results of the prior programs. The recommendations of the Retention Team were adopted by the full Compensation Committee at a meeting on November 30, 2005. On September 14, 2005, the Debtors sought Court authority to amend the Debtors' Key Management Severance Agreements with David T. Brown, the Debtors' Chief Executive Officer and Michael H. Thaman, the Debtors' Chief Financial Officer and Chairman of the Debtors' Board of Directors. A hearing on the Severance Motion is currently scheduled for February 7, 2006. By letter dated December 15, 2005, the Debtors provided formal notice to counsel to the Committees and the Futures Representative of their intent to continue the 2004 Retention Program, subject to these modifications as approved by the Compensation Committee: (a) The employee participation levels have been reduced from 25% to 100% of base salary to 25% to 75% of base salary; (b) The cap on the annual cost of the plan has been reduced from $19,500,000 to $13,900,000; and (c) Messrs. Brown and Thaman will not participate in the 2006 Retention Program. The 2006 Retention Program will have a limited number of participants at 275, with firm dollar caps on individual participation levels as well as the aggregate annual retention payments. Mr. Pernick tells the Court that confirmation of the Debtors' Fifth Amended Plan of Reorganization carries with it its own level of uncertainty for employees, and the Debtors are fearful that Key Employees may be recruited by other companies who can provide greater corporate certainty and security, including stock awards and options. Losing the Key Employees will severely harm the Debtors in many ways: (1) Employees of a debtor-in-possession are difficult to replace because experienced job candidates often find the prospect of working for a company in Chapter 11 unattractive; (2) The Debtors may have to pay executive search firm fees to recruit suitable replacement employees, as well as signing bonuses, reimbursement for relocation expenses, and above-market salaries to induce qualified candidates to accept employment with chapter 11 debtors. The hidden costs of retraining are more difficult to calculate, but just as high, if not higher; and (3) The loss of any important employee can lead to additional employee departures, as employees often follow the example of their resigning colleagues, mentors or leaders. The Debtors believe that the 2006 Retention Program will significantly benefit their cases by boosting employee morale at a time when employee dedication and loyalty is needed most. The 2006 Retention Program is necessary to facilitate successful emergence from bankruptcy, and the Debtors believe that it is a sound exercise of their business judgment given its relatively reasonable cost, Mr. Pernick says. Accordingly, the Debtors ask the Court to approve and authorize the implementation of the 2006 Retention Program. Owens Corning -- http://www.owenscorning.com/-- manufactures fiberglass insulation, roofing materials, vinyl windows and siding, patio doors, rain gutters and downspouts. Headquartered in Toledo, Ohio, the Company filed for chapter 11 protection on October 5, 2000 (Bankr. Del. Case. No. 00-03837). Mark S. Chehi, Esq., at Skadden, Arps, Slate, Meagher & Flom, represents the Debtors in their restructuring efforts. (Owens Corning Bankruptcy News, Issue No. 123; Bankruptcy Creditors' Service, Inc., 215/945-7000) PELICAN INLET: Case Summary & 9 Largest Unsecured Creditors ----------------------------------------------------------- Debtor: Pelican Inlet Aqua Farms, Inc. 5787 SW 9th Court Cape Coral, Florida 33914 Bankruptcy Case No.: 06-00044 Type of Business: The Debtor is a clam seed supplier. Chapter 11 Petition Date: January 6, 2006 Court: Middle District of Florida (Ft. Myers) Debtor's Counsel: Jeffrey W. Leasure, Esq. Jeffrey W. Leasure, PA P.O. Box 61169 Fort Myers, Florida 33906-1169 Tel: (239) 275-7797 Estimated Assets: $1 Million to $10 Million Estimated Debts: $1 Million to $10 Million Debtor's 9 Largest Unsecured Creditors: Entity Claim Amount ------ ------------ Pine Island Market Trust One $1,800,000 c/o Thomas G. Eckerty Successor Trustee 12734 Kenwood Lane, Suite 89 Fort Myers, FL 33907 Pine Island Properties, Ltd. $406,900 1850 Victoria Avenue Fort Myers, FL 33901 Lee County Tax Collector $16,000 1446 Lee Street Fort Myers, FL 33901 Internal Revenue Service $3,550 P.O. Box 105404 Atlanta, GA 30348-5404 Suncoast Portable Toilet Co. $997 Bean, Whitaker, Lutz & Kareh, Inc. $555 Waste Services of Florida $226 Bill Keyes, Esq. $193 State of Florida $100 Department of Agriculture PINNACLE ENT: Six Mil. Equity Offering Spurs S&P to Review Ratings ------------------------------------------------------------------ Standard & Poor's Ratings Services placed its ratings on Pinnacle Entertainment Inc., including the 'B+' corporate credit rating, on CreditWatch with positive implications following the company's announcement that it intends to offer 6 million shares of its common stock, with an overallotment option granted to the underwriters for an additional 900,000 shares, for estimated net proceeds of approximately $163 million. The proceeds of the proposed offering will be used for general corporate purposes, including the pursuit of one or more of identified capital projects, which comprise new hotel towers at the company's Belterra Casino Resort, L'Auberge du Lac in Lake Charles, Louisiana, and at its Boomtown New Orleans asset in New Orleans, Louisiana. Proceeds may also be used to fund a portion of the construction costs of ongoing St. Louis, Missouri, projects. Total debt outstanding at Sept. 30, 2005, was approximately $700 million. "The CreditWatch listing reflects the material impact the proposed equity offering will have on the company's consolidated financial profile and liquidity situation at a time when it is pursuing multiple capital spending initiatives," said Standard & Poor's credit analyst Michael Scerbo. In resolving the CreditWatch listing, Standard & Poor's will meet with Pinnacle's management to review its financial policies and future operating strategies. If an upgrade were the ultimate outcome of Standard & Poor's analysis, it would be limited to one notch, to 'BB-'. QUEBECOR MEDIA: S&P Puts B Rating on Planned Bank Loan Facilities ----------------------------------------------------------------- Standard & Poor's Ratings Services assigned its 'B' rating to Montreal, Quebec-based Quebecor Media Inc.'s proposed bank loan facilities, which are comprised of: * a CDN$125 million revolving credit facility due 2011, * a CDN$150 million term loan A facility due 2011, and * a $500 million term loan B facility due 2013. The loan is rated two notches below the 'BB-' long-term corporate credit rating, reflecting its junior position in the company's capital structure with debt at wholly owned subsidiaries, Videotron Ltee and Sun Media Corp., ranking ahead the proposed facilities. In addition, all ratings outstanding on Quebecor Media, Videotron, and Sun Media were affirmed. The outlook on all companies is stable. Proceeds from the proposed new bank facilities will be used to repay a significant portion of the notes and related swaps currently outstanding at Quebecor Media, as well as to fund a CDN$75 million dividend to the company's shareholders. "Authorized debt facilities for Quebecor Media are not expected to increase following the transaction; however, interest expense will be significantly lowered given the more favorable interest rate of the proposed bank facilities compared with that which applies to the company's existing notes," said Standard & Poor's credit analyst Lori Harris. The ratings on Quebecor Media, one of the largest cable and media companies in Canada, are based on the credit risk profile of the company and its consolidated subsidiaries, including Videotron and Sun Media. Both Videotron, a leading cable distributor in the province of Quebec and third largest in Canada, and Sun Media, second-largest newspaper publisher in Canada, are rated the same as the parent company, Quebecor Media. The ratings on Quebecor Media largely reflect: * its aggressive financial profile, * its high debt leverage, * its reduced free cash flow due to a substantial increase in capital expenditures, * its challenging industry fundamentals in the company's newspaper division, and * intense competition in all of its business segments. These factors are partially offset by Quebecor Media's solid market position in cable and newspapers, which together accounted for about 70% of revenues and 83% of reported operating income for the nine months ended Sept. 30, 2005. The stable outlook reflects Standard & Poor's expectation that Quebecor Media's operating assets will maintain their solid market positions and that credit measures will remain in line with the ratings. The outlook could be revised to positive or the ratings could be raised if the company improves its financial profile and is able to sustain better operating performance and stronger credit measures. The outlook could be revised to negative if the company fails to meet expectations, resulting in the weakening of Quebecor Media's operating performance and credit measures. QUIGLEY CO: Court Approves Settlement With Pfizer & Centennial -------------------------------------------------------------- The U.S. Bankruptcy Court for the Southern District of New York approved a settlement agreement among Quigley Company, Inc., Pfizer Inc., and Centennial Insurance Company. The Litigation and Insurance Policy As previously reported, Centennial Insurance issued to Pfizer a general liability Insurance Policy that provides $2 million of coverage from Oct. 1, 1978 through Oct. 1, 1979 for products and completed operations, including asbestos-related bodily injury claims. The Insurance Policy also provides coverage to Quigley, as a subsidiary of Pfizer, during that period. In 1993, Pfizer and Quigley commenced an action against certain insurers, including Centennial. That Litigation involved disputes concerning the obligations of certain insurers, including Centennial, for asbestos-related bodily injury claims in connection with certain insurance policies, including the Insurance Policy. The 1999 Agreement and Shortfall Action To settle the Litigation, Quigley, Pfizer and Centennial entered into an Agreement on March 17, 1999. The 1999 Agreement governs the application of the Insurance Policy to Asbestos-Related Bodily Injury Claims, and defines the manner in which Quigley and Pfizer may bill and Centennial would pay for Asbestos-Related Bodily Injury Claims under the Insurance Policy. Pfizer and Quigley agreed to dismiss Centennial from the Litigation with prejudice upon execution of the 1999 Agreement. In 2001, Pfizer, Quigley and other plaintiffs brought the Shortfall Action against Centennial. That action addresses amounts Quigley or Pfizer may become liable to pay in settlement of a judgment on claims or lawsuits alleging that Quigley or Pfizer are obligated for amounts initially allocated to members of the Center for Claims Resolution (CCR) who withdrew from the CCR and have filed for chapter 11 protection, as well as fees and expenses incurred in connection with the defense and disposition of those claims. Summary of the September 2005 Settlement Agreement In September 2005, the Debtor, Pfizer and Centennial entered into the Settlement Agreement to resolve the Shortfall Action. The salient terms of that Settlement Agreement are: 1) Centennial will pay $2 million to the Asbestos PI Trust, with: a) $600,000 to be paid without further delay and $700,000 to be paid soon after the Debtor's Third Amended Plan of Reorganization is confirmed, and b) $700,000 to be paid within one year of the date of the confirmation order; and 2) Quigley and Pfizer will dismiss Centennial from the Shortfall Action with prejudice, and Centennial will dismiss Quigley and Pfizer from the Shortfall Action with prejudice. A full-text copy of the September 2005 Settlement Agreement is available for free at http://ResearchArchives.com/t/s?3cf Headquartered in Manhattan, Quigley Company, Inc., is a subsidiary of Pfizer, Inc., which used to produce and market a broad range of refractories and related products to customers in the iron, steel, glass and other industries. The Company filed for chapter 11 protection on Sept. 3, 2004 (Bankr. S.D.N.Y. Case No. 04-15739) to resolve legacy asbestos-related liability. When the Debtor filed for protection from its creditors, it listed $155,187,000 in total assets and $141,933,000 in total debts. Michael L. Cook, Esq., Lawrence V. Gelber, Esq., and Jessica L. Fainman, Esq., at Schulte Roth & Zabel LLP, represent the Company in its restructuring efforts. Albert Togut, Esq., at Togut Segal & Segal serves as the Futures Representative. REFCO INC: Committee, et al., Balk at Ch. 11 Trustee Request ------------------------------------------------------------ As reported in the Troubled Company Reporter on Dec. 14, 2005, Deirdre A. Martini, the United States Trustee for Region 2, asked the Honorable Robert D. Drain of the U.S. Bankruptcy Court for the Southern District of New York to appoint a Chapter 11 trustee in Refco Inc., and its debtor-affiliates' chapter 11 cases pursuant to Section 1104(a)(2) of the Bankruptcy Code. Andrew D. Velez-Rivera, Esq., trial attorney for the U.S. Trustee, tells the Court that the appointment of a truly independent fiduciary to investigate the Debtors' prepetition affairs and to maximize the recoveries for their estates has been of paramount concern to the U.S. Trustee since Refco, Inc., filed for bankruptcy protection. * * * Responses from Creditors Committee, RCM Customer Group & Josefina Sillier (A) Creditors Committee The U.S. Trustee fails to establish the need for a Chapter 11 Trustee, Luc A. Despins, Esq., at Milbank, Tweed, Hadley & McCloy LLP, in New York, argues. The Trustee Motion calls for an independent fiduciary to investigate claims of prepetition misconduct by the Debtors' management and to maximize the recoveries for the estate. Yet nowhere in the request does the U.S. Trustee explain why the appointment of a Chapter 11 trustee is necessary to address those concerns, let alone offer "clear and convincing evidence" of the need for a trustee in the Debtors' cases, Mr. Despins contends. Moreover, the recent appointment of Harrison J. Goldin as the Debtors' chief executive officer effectively moots the need for a Chapter 11 Trustee, Mr. Despins points out. Mr. Goldin is an independent fiduciary uniquely qualified to maximize the value of the Debtors' estates for the benefit of their creditors, customers and parties-in-interest, Mr. Despins explains. In addition, Mr. Goldin has been appointed as a fiduciary in other cases by the U.S. Trustee itself. The U.S. Trustee is therefore effectively estopped from contending that Mr. Goldin is not a well-qualified fiduciary, Mr. Despins argues. The Official Committee of Unsecured Creditors is actively involved in monitoring the Debtors' Chapter 11 cases and has confidence that Mr. Goldin will act as an independent fiduciary for the benefit of all parties, Mr. Despins assures Judge Drain. The Debtors' "consent" to the appointment of a trustee -- as evidenced by a stipulation presented by the U.S. Trustee -- is irrelevant and should not be given any weight by the Court, Mr. Despins maintains. "The Debtors' board 'consented' to executing the Stipulation under extreme pressure from the government, and [as of January 3, 2005] the Debtors have provided no explanation, much less proof, that such consent was a sound exercise of business judgment by the board." Accordingly, the U.S. Trustee's request should be denied. In the alternative, the Creditors Committee asks the Court to adjourn the U.S. Trustee request as premature. Mr. Despins says that the Court should first rule on whether Refco Capital Markets, Ltd.'s Chapter 11 case should be converted to one under Chapter 7. A conversion, if granted, would require the displacement, as to the RCM estate, of any Chapter 11 trustee appointed for the Debtors. Even if the Court were ultimately to order the appointment of a Chapter 11 trustee, the Creditors Committee wants the Court to direct the U.S. Trustee to hold an immediate election pursuant to Section 1104(b) of the Bankruptcy Code. The Court should defer final approval of a Chapter 11 trustee until a Section 1104(b) election can be held. (B) RCM Customer Group Customers of Refco Capital Markets, Ltd., holding claims aggregating over $500,000,000, note that the call for appointment of a Chapter 11 trustee is predicated on the assumption that RCM is an eligible debtor for a Chapter 11 reorganization case. "If that assumption is incorrect, and RCM can only be subject to a chapter 7 stockbroker liquidation pursuant to Subchapter III, then this case will be converted and a separate chapter 7 trustee for RCM will be required," Thomas J. Moloney, Esq., at Cleary Gottlieb Steen & Hamilton LLP, in New York, points out. The Customer Group previously asked the Court to convert RCM's Chapter 11 case to a Chapter 7 Stockbroker Liquidation. The Court should therefore postpone consideration of the Chapter 11 Trustee Motion until after the important threshold subject matter jurisdictional question posed by the Customer Group's request to convert RCM's case, Mr. Moloney asserts. The Customer Group asks the Court to deny the Chapter 11 Trustee Motion as premature. (C) Josefina Sillier Josefina Franco Sillier asserts that the benefits derived by the appointment of a Chapter 11 trustee should be considered against the cost of that appointment. Ms. Sillier believes that the "practical realities" of the RCM proceeding mandate conversion to a stockbroker liquidation pursuant to Subchapter III of Chapter 7, not the appointment of a Chapter 11 trustee. RCM is a stockbrokerage business that no longer continues to operate and has no hope of rehabilitation, James W. Giddens, Esq., at Hughes Hubbard & Reed LLP, in New York, relates. "In such cases, it was Congress' specific intent that the entity be liquidated under this specific statutory scheme, not through a Chapter 11 trustee administering a liquidating plan for all Refco debtor entities." Ms. Sillier asks the Court to deny the Trustee Motion as it relates to RCM. Mr. Sillier is a customer of RCM and maintains a brokerage firm account at RCM containing no less than $32,862,418 of cash and securities. 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. (Refco Bankruptcy News, Issue No. 18; Bankruptcy Creditors' Service, Inc., 215/945-7000) REFCO INC: Wants Court to Approve RGL $43,120 Break-Up Fee ---------------------------------------------------------- As previously reported in the Troubled Company Reporter on Jan. 9, 2005, Refco Inc., and its debtor-affiliates asked the U.S. Bankruptcy Court for the Southern District of New York to authorize Refco Group Ltd., LLC, to sell "Purchase Shares," consisting of 14.29% minority stake in Partners Capital Investment Group, L.L.C., under the terms of a proposed repurchase agreement. Partners Capital is a non-regulated international investment advisory firm primarily involved in providing investment advisory and financial consulting services to institutions and high net worth individuals, as well as acting as general partner to six investment funds sponsored by Refco Group, with approximately $880,000,000 of assets under management. Shortly after the Petition Date, Partners Capital approached the Debtors to propose a repurchase of the Purchase Shares. The Debtors and the Purchaser then engaged in intense negotiations over several weeks, culminating in the agreement memorialized in the Purchase Agreement. Pursuant to the Purchase Agreement, Refco Group will transfer, subject to Court approval and an auction process, its 14.29% interest in Partners Capital to Partners Capital in exchange for $1,540,000 in cash, without deduction or setoff of any kind. * * * Sally McDonald Henry, Esq., at Skadden, Arps, Slate, Meagher & Flom, LLP, in New York, relates that Partners Capital Investment Group, L.L.C., has expended and likely will continue to expend considerable time, money and energy pursuing the Purchase Agreement with Refco Group Ltd., LLC. In recognition of this expenditure of time, energy and resources and the benefits to Refco Group's estates of securing a minimum bid, Refco Group seeks bid protections for Partners Capital: (a) A $43,120 Break-up Fee; (b) Reimbursement of Partners Capital's documented expenses incurred in connection with the Acquisition Transaction and the Debtors' Chapter 11 cases up to $15,000; (c) An initial Overbid Requirement of any Qualified Bid in the minimum amount of $50,000, with further bidding increments in the minimum amount of $10,000; (d) A requirement that any party bidding at the Auction must overbid the Acquisition Transaction with a cash portion of the consideration sufficient to satisfy the Expense Reimbursement and Breakup Fee and must otherwise undertake the Acquisition Transaction on terms in the aggregate no less favorable to Refco Group as Partners Capital's offer pursuant to the Purchase Agreement; (e) An Adequate Assurance Requirement that any potential bidder must: -- provide written evidence to Refco Group of its financial wherewithal to complete the Acquisition Transaction; and -- execute a non-disclosure agreement; (f) A Disclosure Requirement that Refco Group assemble a Disclosure Package that contains certain information concerning Partners Capital provided by Partners Capital to Refco Group on a confidential basis and that Disclosure Packages may not be distributed to any party other than a Potential Bidder that has executed a Non-disclosure Agreement; (g) A requirement that Refco Group provide Disclosure Packages to Potential Bidders only and that each Potential Bidder is required to certify that it has returned or destroyed all copies of, compilations of, and notes concerning, the Disclosure Package in accordance with the Non-disclosure Agreement; and (h) A requirement that any Breakup Fee or Expense Reimbursement required to be made by Refco Group to Partners Capital will be paid at the closing of any transaction involving the Purchase Shares and will be deemed to be administrative expenses, under Sections 503(b) and 507(b) of the Bankruptcy Code. Ms. Henry tells the Court that the Bid Protections were a material inducement for, and a condition of, Partners Capital's entry into the Purchase Agreement. Refco believes that the Bid Protections are fair and reasonable in view of the fact that Partners Capital's efforts have increased the chances that Refco Group will receive the highest and best offer for the Purchase Shares by: -- establishing a minimum for other bidders and thereby attracting other bidders to the Auction; -- waiving certain re-purchase and tag-along rights which materially enhance Refco Group's ability to conduct an auction; and -- agreeing that member approvals under the Operating Agreement will be subject to a reasonableness limitation. Accordingly, the Debtors ask the Court to approve the Bid Protections and authorize payment of the Expense Reimbursement and Break-up Fee. 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. (Refco Bankruptcy News, Issue No. 17; Bankruptcy Creditors' Service, Inc., 215/945-7000) REFCO INC: Wants Bid Procedures for PCIG Interest Sale Approved --------------------------------------------------------------- As previously reported in the Troubled Company Reporter on Jan. 9, 2005, Refco Inc., and its debtor-affiliates asked the U.S. Bankruptcy Court for the Southern District of New York to authorize Refco Group Ltd., LLC, to sell "Purchase Shares," consisting of 14.29% minority stake in Partners Capital Investment Group, L.L.C., under the terms of a proposed repurchase agreement. Partners Capital is a non-regulated international investment advisory firm primarily involved in providing investment advisory and financial consulting services to institutions and high net worth individuals, as well as acting as general partner to six investment funds sponsored by Refco Group, with approximately $880,000,000 of assets under management. Shortly after the Petition Date, Partners Capital approached the Debtors to propose a repurchase of the Purchase Shares. The Debtors and the Purchaser then engaged in intense negotiations over several weeks, culminating in the agreement memorialized in the Purchase Agreement. Pursuant to the Purchase Agreement, Refco Group will transfer, subject to Court approval and an auction process, its 14.29% interest in Partners Capital to Partners Capital in exchange for $1,540,000 in cash, without deduction or setoff of any kind. * * * The Debtors propose to implement uniform bid procedures for the sale of Refco Group Ltd., LLC's 14.29% minority stake in Partners Capital Investment Group, L.L.C. A full-text copy of the Bid Procedures is available for free at: http://bankrupt.com/misc/refcogroupbidprocedures.pdf The Bid Procedures contemplate an auction process similar to that conducted for the sale of the assets of Refco, LLC: * qualification of bidders, * access to information, and * a minimum initial overbid requirement. The Bid Procedures also contemplate certain protections for Partners Capital, as the opening bidder, who has committed to a floor price for the Auction. The Bid Procedures specifically provide that: (a) The Minimum Bid must be equal or exceed the sum of: * the $1,540,000 purchase price; plus * the $50,000 Minimum Overbid Increment; plus * the Break-Up Fee; plus * the Expense Reimbursement. (b) The initial overbid requirement of any qualified bid is an amount not less than $50,000, with further bidding in $10,000 increments; (c) If the Debtors receive a Qualified Bid other than the Acquisition Transaction, an auction will be held on January [__] 2006, at __:00 _.m. Eastern Time, at the offices of Skadden, Arps, Slate, Meagher & Flom LLP, Four Times Square, New York, NY 10036 or at any other location as the Debtors may designate. (d) Refco Group is permitted to assemble a Disclosure Package, containing: * Partners Capital 2003 & 2004 Financials, * Partners Capital September 30, 2005 Financials, * Last 4 Quarters Income Statement and Balance Sheet, and * Fourth Amended and Restated Limited Liability Company Agreement dated July 31, 2005; (e) If there are qualified competing bids, the Debtors will allow Partners Capital and qualified bidders to submit improved bids. Based on the terms of the bids received and other information as the Debtors deem relevant, the Debtors, in their sole discretion, after consultation with representatives of the Official Committee of Unsecured Creditors, may adopt rules for the submission of improved bids and conduct the auction in all respects in a manner they determine, in their reasonable business judgment, will better promote the goals of obtaining the highest, best or otherwise financially superior proposal that is not consistent with any of the provisions of the Bidding Procedures Order or the Bankruptcy Code; (f) At the close of the Auction, the Debtors will identify which Qualified Bidder had the highest or otherwise best bid, which will be determined by considering: * the total consideration to be received by the Debtors; * the likelihood of each Qualified Bidder's ability to timely close a transaction and make any deferred payments, if applicable; and * the net benefit to the estate, taking into account the Breakup-Fee and Expense Reimbursement. (g) The sale hearing will be held on January [__], 2006, at __:__ _.m. Eastern Time. 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. (Refco Bankruptcy News, Issue No. 17; Bankruptcy Creditors' Service, Inc., 215/945-7000) RH DONNELLEY: S&P Rates Proposed $2.142 Billion Senior Notes at B+ ------------------------------------------------------------------ Standard & Poor's Ratings Services assigned its 'B+' rating to these proposed notes to be issued by R.H. Donnelley Corp. (BB/Watch Neg/--): * $332 million senior discount notes due 2013; * $600 million senior discount notes due 2013; and * $1.21 billion senior notes due 2016. At the same time, Standard & Poor's placed the new ratings on CreditWatch with negative implications. R.H. Donnelley Corp. is a yellow page directory publisher based in Cary, North Carolina. Following the close of RHD's acquisition of Dex Media Inc. for about $4.2 billion, plus debt assumption of $5.4 billion as of September 2005, Standard & Poor's will lower its ratings on the proposed notes issues one notch to 'B'. At that time, Standard & Poor's will lower its long-term corporate credit ratings on RHD and operating subsidiary R.H. Donnelley Inc. to 'BB-' from 'BB', remove the ratings from CreditWatch with negative implications, and assign a stable outlook. The ratings on the proposed notes are two notches below the corporate credit rating, reflecting the structural subordination of the notes to debt at RHD Inc. Additionally, Standard & Poor's has affirmed its ratings on Dex and operating subsidiaries Dex Media West LLC and Dex Media East LLC, including the 'BB-' long-term corporate credit ratings, with a stable outlook. Proceeds from the proposed RHD notes will be used to redeem $332 million of RHD's remaining preferred shares outstanding from partnerships affiliated with the Goldman Sachs Group, and to finance $1.85 billion of the cash acquisition cost. RHD will issue $2.4 billion in common equity to complete the financing of the Dex acquisition. The corporate credit ratings on RHD and Dex entities would both be at the 'BB-' level after the acquisition closes, reflecting the consolidated credit quality of ultimate parent company RHD, a holding company with no direct operations and significant debt to be serviced by the cash flows of RHD Inc., Dex West, and Dex East. While RHD Inc., Dex West, and Dex East have different financial profiles with separate financing structures, the operations of the entities are expected to be managed as one company with the same senior management team. "Ratings reflect RHD's substantial pro forma debt levels, significant acquisitions over the past few years at both RHD and Dex, material dividend payments at Dex, and preferred share redemptions at RHD," said Standard & Poor's credit analyst Emile Courtney. "This is offset somewhat by the company's strong market positions, predictable sales and cash flow levels, and geographic and customer diversity." RHD will be the third-largest print and Internet directory publisher in the U.S., with 2005 pro forma EBITDA of $1.53 billion. The combined company will publish more than 600 directories in 28 states with circulation of 73 million, 600,000 advertisers, and more than 1,800 sales representatives. ROWECOM INC: Liquidating Trustee Makes 6% Interim Distribution -------------------------------------------------------------- The Liquidating Trustee overseeing the liquidation of RoweCom, Inc., under the chapter 11 plan confirmed by the U.S. Bankruptcy Court for the District of Massachusetts sent creditors a letter dated December 28, 2005, saying: CRAIG AND MACAULEY | Professional Corporation COUNSELLORS AT LAW www.craigmacauley.com FEDERAL RESERVE PLAZA 600 ATLANTIC AVENUE BOSTON, MASSACHUSETTS 02210 TEL (617) 367-9500 FAX (617) 742-1788 December 28, 2005 RE: In re Sabine, Inc. (f/k/a RoweCom, Inc.) and its Substantively Consolidated Debtors (collectively, the "Debtors"), Chapter 11; Case No. 03-10668, United States Bankruptcy Court for the District of Massachusetts ------------------------------------------- To Interested Parties: As you may know, I and my firm represented the Official Committee of Unsecured Creditors (the "Committee") in the above-referenced matter. I have been appointed as the Liquidating Trustee of the Liquidating Trust of Sabine, Inc. f/k/a RoweCom, Inc. (the "Liquidating Trust") established under the confirmed Third Amended Joint Plan of Liquidating Proposed by the Debtors and Creditors' Committee Dated November 23, 2004 (the "Plan"). Pursuant to the Plan, the Liquidating Trustee is charged with the distributing the assets of the Debtors' estates. The Plan further provides the terms pursuant to which distributions are to be made to the creditors of the Debtors' estates. The Liquidating Trustee has commenced an interim distribution for allowed priority and general unsecured claims pursuant to the Plan. Interim distribution checks for such claims will be issued prior to the end of December, 2005. Interim Pursuant to the Plan, allowed priority claims are to be paid in full. For holders of an allowed general unsecured claim the distribution represents a pro rate distribution on account of the claim. The percentage dividend on this initial distribution is slightly more than 6% of the amount of the claimholder's allowed general unsecured claim. The aggregate amount of general unsecured claims in the Debtors' bankruptcy cases is approximately $73,673,000. The Plan requires that the Liquidating Trust maintain reserves for administrative expenses and "Disputed Claims" that have not yet been resolved. As of the date of this letter, the aggregate amount of claims that remain subject to dispute is approximately 5582,000.00. Additionally, certain assets of Liquidating Trust have yet to be fully liquidated including, without limitation, the Liquidating Trust's claim in the bankruptcy case of enivid, inc. f/k/a divine, inc. and certain causes of action brought by the Litigation Trust. In light of the foregoing considerations and after consultation with the Creditors' Committee, the Liquidating Trustee has decided to distribute approximately $5,000,000 to creditors. Any further and final distribution in the Debtors' case will follow final resolution of the Liquidating Trust's claim in the enivid, inc. bankruptcy and the litigation pursued by the Liquidating Trustee. Questions regarding the initial distribution and/or claims must be in writing (by regular mail or email) and addressed to Brendan Recupero of this office (email: brecupero@craigmacauley.com) with a copy to Jill Costie c/o Development Specialists, Inc. Three First National Plaza, Suite 2300 Chicago, IL 60602-4250 email: jcostie@dsi.biz If inquiring via email, you must include "Sabine" or "RoweCom" in the subject line. Thank you. Sincerely /s/ Christopher J. Panos Christopher J. Panos Rowecom, Inc., offered content sources and innovative technologies and provides information specialists, particularly in the library, with complete solutions serving all their information needs, in print or electronic format. The Company, together with six of its affiliates, filed for chapter 11 protection on January 27, 2003 (Bankr. Mass. Case No. 03-10668). Stephen E. Garcia, Esq., Mindy D. Cohn, Esq., at Kaye Scholer LLC and Jeffrey D. Sternklar, Esq., Jennifer L. Hertz, Esq., at Duane Morris, LLP represent the Debtors in their restructuring efforts. When the Company filed for protection from its creditors, it listed estimated assets and debts of over $50 million each. SKYWAY COMMS: Judge Glenn Directs UST to Name Chapter 11 Trustee ---------------------------------------------------------------- The Hon. Paul M. Glenn of the U.S. Bankruptcy Court for the Middle District of Florida, Tampa Division, directs the U.S. Trustee for Region 21 to appoint a Chapter 11 Trustee for Skyway Communications Holding Corp. As previously reported, a consortium of lenders known as the Talib Parties asked the Court to dismiss or appoint a chapter 11 trustee in the Debtor's chapter 11 case. The Talib Parties alleged: a) prepetition mismanagement by the Debtor's officers; b) prepetition misrepresentations by the Debtor's officers concerning the viability of Skyway's technology and the status of development; c) false representations in public documents; and d) excessive expenditures by the Debtor's officers. The Talib group consist of: * Nuwave Limited, * Omar S. Bangaitah, * Ahmed Salem Bugshan, * Ahmad M. Al Ajlan, * Ali Al Sabah, * Castle Bridge Investors Ltd., * Ibrahim Al Therban, * International Financial Advisors K.S.C.C., * Khalid Al Attal, * Kuwait Investment Company, * Kuwait Real Estate Company, * Q Invest Inc., * Madi M. Haider, * Mohammad H. Al Dall, * Nedal Al Massoud, * Osama A Al Abduljaleel, * Mahmoud H. Haider, * Pearl of Kuwait Real Estate Co., * Saleh Al Salmi * Taiba Group, Inc., * Therfield Holdings, * Waleed A. Al Essa, * Yasser Zakaria Al Nahhas, * Yousef Al Saleh, and * Nazar F. Talib. The Talib group is represented by: Stanford R. Solomon The Solomon Tropp Law Group, P.A. 400 North Ashley Plaza, Suite 3000 Tampa, Florida 33602-4331 Tel: 813-225-1818 Fax: 813-225-1050 Headquartered in Clearwater, Florida, SkyWay Communications Holding Corp. fka I-Teleco.com, Inc., fka Mastertel Communications Corp. -- http://www.skywaynet.us/-- develops ground to air in- flight aircraft communication. The Debtor filed for chapter 11 protection on June 14, 2005 (Bankr. M.D. Fla. Case No. 05-11953). When the Debtor filed for protection from its creditors, it listed $1 million to $10 million in assets and $10 million to $50 million in debts. SNAP2 CORP: Files Delinquent Fiscal Year 2004 Financial Results --------------------------------------------------------------- Bagell Josephs & Company, LLC, expressed substantial doubt about Snap2 Corporation's ability to continue as a going concern after it audited the Company's financial statements for the years ended Sept. 30, 2004 and 2003. In a report addressed to Snap2's board of directors and stockholders, dated Aug. 25, 2005, the auditing firm pointed to the Company's net losses and substantial accumulated deficit. Fiscal Year 2004 Results For the fiscal year ended Sept. 30, 2004, Snap2 incurred a $4,526,823 net loss on $2,116,074 of revenues, as compared to a $145,624 net loss on zero revenues in the prior year. Snap2's balance sheet showed $2,037,918 in total assets at Sept. 30, 2005, and liabilities of $1,321,297. Fiscal Year 2003 Restatements The Company restated its Sept. 30, 2003 financial statements, filed on Nov. 17, 2003, because internal management prepared them and not audited by an independent registered public accounting firm. The restatement resulted in a $139,624 increase in net loss. About Snap2 Snap2, originally founded as ISES Corporation in 1997, is a software company focusing on providing applications, middleware and software services for next generation consumer devices. TOWER AUTOMOTIVE: Retirees' Committee Seeks Clarification --------------------------------------------------------- The Official Committee of Retired Employees in Tower Automotive Inc. and its debtor-affiliates' chapter 11 cases asks Judge Gropper to clarify the Court order dated November 10, 2005, approving the appointment of the Retirees Committee, to render clear for all of the parties whether the Retirees Committee: (a) represents recent retirees; (b) will represent future retirees; and (c) should raise issues unique to recent and future retirees. Steven C. Bennett, Esq., at Jones Day, in New York, tells the Court that the most recent retirees, who retired prior to January 1, 2006, might arguably have claims for violation of Section 1114 of the Bankruptcy Code, which provides a status quo safeguard to retirees during the plan negotiation process and requires the Debtors to pay in a timely fashion and refrain from modifying any retiree benefits until a determination is made as to what modifications are necessary. If recent retirees retired on the mistaken belief that the Debtors could and would terminate their retirement benefits if they did not retire early, they may have some remedy that would not be applicable to the remainder of the retiree group, Mr. Bennett points out. The most recent and future retirees, Mr. Bennett continues, may have separate arrangements with the Debtors of which the Retiree Committee is unaware. According to Mr. Bennett, the severance deals arguably constitute additional compensation, not available to pre-existing retirees, that might be counted as compensation for some part of the Debtors' reduction in other retirement benefits. "It is unclear whether the Retiree Committee should be inquiring into, and taking account of, any such separate severance deals," Mr. Bennett says. Debtors Respond The Debtors ask Judge Gropper to clarify the Appointment Order to indicate that the four people who retired on December 1, 2005, are included among the Retirees Committee's constituents, since these retirees retired before the January 1, 2006 termination date. Anup Sathy, Esq., at Kirkland & Ellis LLP, in New York, tells Judge Gropper that the Court should not allow the Retirees Committee to confuse the issues and extend its representation to the current non-union employees whose interests it does not rightfully represent. Mr. Sathy discloses that the Debtors are currently implementing a comprehensive cost reduction model for improving their North American operations. In connection with this process, the Debtors have determined that, to remain competitive in the industry, they must reduce benefit costs associated with their current employees and retirees. In addition to recently terminating future retiree benefits for current employees, the Debtors intend to utilize the "Section 1113/1114" process to the extent necessary to effect the necessary reductions for their union employees and retirees currently receiving benefits. For this reason, the Debtors want the Retirees Committee's request denied, or in the alternative, granted for the limited purpose of explicitly referencing the December retirees as members of Retirees Committee's representative constituency whose interests it may represent and advocate in the context of the Debtors' cases. The Debtors also ask the Court to declare that the Debtors' employees who retire on or after the Termination Date are not included in the Retirees Committee's constituency or represented persons. "The attempt by the Retiree Committee to raise issues to the contrary should be disregarded or, at best, recognized for what they are -- a disguised attempt to bolster their position and further frustrate the Debtors' necessary agenda with respect to the Section 1114 process," Mr. Sathy asserts. The Official Committee of Unsecured Creditors supports the Debtors' position in its entirety. Retirees Committee Talks Back Steven C. Bennett, Esq., at Jones Day, in New York, tells Judge Gropper that the Debtors are simply asserting that at all times, their retiree welfare benefit plans expressly permitted amendment and termination of benefits at any time for any reason, while providing no sufficient information to the Retirees Committee to confirm that assertion. Furthermore, the Debtors have asserted that they are currently implementing a comprehensive cost reduction model, which indicates that they must reduce benefit costs associated with their current union and non-union employees and retirees. The Retirees Committee has not been provided with sufficient information on this, Mr. Bennett maintains. Recent discussion between the Debtors' professionals and the Retirees Committee's professionals indicates that the Debtors have deliberately withheld vital information required for a full understanding of their business plan, Mr. Bennett tells the Court. As a result, the Retirees Committee is in the process of preparing a request, pursuant to Rule 2004 of the Federal Rules of Bankruptcy Procedure, to compel the Debtors to provide essential information. "It is quite troubling, however, that the Debtors have apparently chosen to 'hide the ball' until the very eve of a hearing at which interested parties may be compelled to schedule an evidentiary hearing in less than a month's time," Mr. Bennett remarks. Headquartered in Grand Rapids, Michigan, Tower Automotive, Inc. -- http://www.towerautomotive.com/-- is a global designer and producer of vehicle structural components and assemblies used by every major automotive original equipment manufacturer, including BMW, DaimlerChrysler, Fiat, Ford, GM, Honda, Hyundai/Kia, Nissan, Toyota, Volkswagen and Volvo. Products include body structures and assemblies, lower vehicle frames and structures, chassis modules and systems, and suspension components. The Company and 25 of its debtor-affiliates filed voluntary chapter 11 petitions on Feb. 2, 2005 (Bankr. S.D.N.Y. Case No. 05-10576 through 05-10601). James H.M. Sprayregen, Esq., Ryan B. Bennett, Esq., Anup Sathy, Esq., Jason D. Horwitz, Esq., and Ross M. Kwasteniet, Esq., at Kirkland & Ellis, LLP, represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $787,948,000 in total assets and $1,306,949,000 in total debts. (Tower Automotive Bankruptcy News, Issue No. 25; Bankruptcy Creditors' Service, Inc., 215/945-7000) TOWER AUTOMOTIVE: Retirees Committee Taps Bridge as Fin'l Advisor ----------------------------------------------------------------- The Official Committee of Retired Employees of Tower Automotive Inc. and its debtor-affiliates asks the U.S. Bankruptcy Court for the Southern District of New York for authority to retain Bridge Associates, LLC, as its financial advisors, nunc pro tunc to November 29, 2005. Retirees Committee Chairperson Michael W. Doherty relates that the Committee selected Bridge Associates because of its extensive and diverse experience, knowledge, and reputation in the field of financial crisis consulting, financial structure analysis, and bankruptcy reorganization. As financial advisor, Bridge Associates will: (a) review and analyze the Debtors' business operations, including historical financial results and future projections, and assist the Retirees Committee in assessing the Debtors' current business and financial condition; (b) review and analyze the Debtors' business plans, cash flow projections and other reports or analyses prepared by the Debtors or their professionals to advise the Retirees Committee on the viability of the continuing operations and the reasonableness of projections and underlying assumptions; (c) analyze the financial ramifications of proposed transactions for which the Debtors seek Court approval including, but not limited to, assumption or rejection of leases, asset sales, management compensation, retention plan, and any plan of reorganization; (d) analyze the Debtors' internally prepared financial statements and related documentation to evaluate the Debtors' performance as compared to projected results; (e) advise the Retirees Committee regarding strategic options available for the Debtors' business operations and assets; (f) review and evaluate any asset sale program proposed by Debtors; (g) analyze the terms of, and report to the Retirees Committee on, the value of any offers the Debtors may make to settle the claims asserted by the Retirees Committee and its constituents; (h) review all retiree benefit plans and: -- report to the Retirees Committee on potential or actual commonality of benefits; -- evaluate the Debtors' individual and collective liability under the retiree benefit plans; and -- work with any benefits actuary and consultant the Retirees Committee engages to establish the actual dimensions of the current and future claims represented by the Retirees Committee; (i) assist the Retirees Committee and its counsel in preparing responses to any of the Debtors' request to modify or terminate retiree benefit plans pursuant to Section 1114 of the Bankruptcy Code and participate in negotiations over any proposed termination or modification to retiree benefit plans to resolve any dispute amicably, or prepare for and testify in support of, the Retirees Committee's position in litigation; (j) assist the Retirees Committee in negotiating the terms of the Debtors' plan of reorganization, including, as may be necessary, developing, evaluating, proposing, negotiating and documenting alternatives to the Debtors' plan; (k) analyze and value any securities and other assets to be distributed under the Debtors' plan or alternatives to the Debtors' plan proposed by the Retirees Committee or other third parties; (l) review, analyze and investigate any potential causes of action that the Retirees Committee and its constituents may have against the Debtors and other parties-in- interest; (m) attend and participate in meetings with the Retirees Committee, its counsel and the Debtors' representatives; (n) provide other financial advisory services as may be requested by the Retirees Committee; and (o) perform all other financial advisory services for the Retirees Committee that may be necessary or appropriate to assist it in performing its duties under Section 1114. Bridge Associates' ordinary and customary hourly rates are: Managing Directors $300 - $450 Directors $300 - $450 Senior Consultants $300 - $450 Principals $250 - $300 Senior Associates $250 - $300 Consultants $250 - $300 Associates $150 - $250 Consultants $150 - $250 Anthony H.N. Schnelling, Esq., a managing director at Bridge Associates, assures the Court that the firm does not hold or represent any interest adverse to the Retirees Committee in the matters for which the firm is proposed to be retained. Headquartered in Grand Rapids, Michigan, Tower Automotive, Inc. -- http://www.towerautomotive.com/-- is a global designer and producer of vehicle structural components and assemblies used by every major automotive original equipment manufacturer, including BMW, DaimlerChrysler, Fiat, Ford, GM, Honda, Hyundai/Kia, Nissan, Toyota, Volkswagen and Volvo. Products include body structures and assemblies, lower vehicle frames and structures, chassis modules and systems, and suspension components. The Company and 25 of its debtor-affiliates filed voluntary chapter 11 petitions on Feb. 2, 2005 (Bankr. S.D.N.Y. Case No. 05-10576 through 05-10601). James H.M. Sprayregen, Esq., Ryan B. Bennett, Esq., Anup Sathy, Esq., Jason D. Horwitz, Esq., and Ross M. Kwasteniet, Esq., at Kirkland & Ellis, LLP, represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $787,948,000 in total assets and $1,306,949,000 in total debts. (Tower Automotive Bankruptcy News, Issue No. 25; Bankruptcy Creditors' Service, Inc., 215/945-7000) TOWER AUTOMOTIVE: Wants to Reject Collective Bargaining Pacts ------------------------------------------------------------- Section 1113(c) of the Bankruptcy Code permits a debtor who satisfies a number of procedural and substantive prerequisites to reject a collective bargaining agreement. After bargaining in good faith and sharing relevant information with its unions, the debtor must make proposals to modify its existing CBA that are "necessary to permit the reorganization" of the debtor. Section 1114(g) of the Bankruptcy Code, on the other hand, requires a debtor seeking to modify medical benefits for current retirees, to satisfy requirements that are identical to those of Section 1113(c). Pursuant to Sections 1113(c) and 1114(g), Tower Automotive Inc. and its debtor-affiliates seek the U.S. Bankruptcy Court for the Southern District of New York's authority to reject their collective bargaining agreements with: * the International Union, United Automobile, Aerospace and Agricultural Implement Workers of America; * the PACE/United Steelworkers of America; * the International Union of Electronic, Electrical, Salaried, Machine & Furniture Workers - Communication Workers of America; and * Milwaukee Unions composed of: -- Smith Steel Workers, AFL-CIO; -- International Association of Machinists and Aerospace Workers; -- Technical Engineers Association; -- International Brotherhood of Electrical Workers; -- Service Employees International Union; -- Steamfitters Union; and -- Chicago Regional Council of Carpenters The Debtors also seek the Court's authority to modify the retiree benefits of retirees represented by the Official Committee of Retired Employees, the UAW, and the IUE/CWA. John F. Hagan, Jr., Esq., at Kirkland & Ellis LLP, in Chicago, Illinois, relates that the Debtors, as automotive suppliers, are facing daunting revenue and cost challenges in an unstable market. On the revenue side, major automobile manufacturers like General Motors, Ford, and Chrysler, which provide the majority of the Debtors' business, have suffered declining market share and financial losses, forcing them to close plants, fire employees, reduce the number of vehicles they are making, and intensify pressure for price concessions from suppliers, just to stabilize their own operations. At the same time, increasing costs for labor, steel, and other inputs have squeezed the Debtors' profits from the cost side, forcing the Debtors' North American operations, as well as several other automotive suppliers, to file for Chapter 11. The Debtors' retiree benefit obligations in particular are staggering, Mr. Hagan discloses. The Debtors estimate that the net present value of their accumulated postretirement benefit obligation is $178,000,000. Of this amount, $133,000,000 is attributed to current retirees, and $45,000,000 is attributed to anticipated costs of projected future retirees. The Debtors also project having to contribute a minimum of $88,000,000 to their defined benefit plans from 2005 through 2008 and at least $92,100,000 from 2005 through 2010. The Debtors contribute $400,000 to the IAM National Pension Plan and $700,000 to the United Furniture Workers Pension Fund A annually. Mr. Hagan tells Judge Gropper that emerging from bankruptcy will require the Debtors to successfully execute their business plan by both improving revenue opportunities and decreasing costs. Mr. Hagan notes that as disappointing as this reality is, the Debtors' unionized employees and retirees must now equitably contribute to the Debtors' reorganization to survive. Since the Petition Date, the Debtors have made significant strides toward improving their profits, mitigating cash burn and cutting non-labor costs. However, despite all of their restructuring initiatives, the Debtors' cash flow "has been -- and remains -- in the red, leaving little doubt that a feasible plan of reorganization hinges on the Debtors' ability to reduce its uncompetitive labor costs," Mr. Hagan explains. Without the savings from the proposed rejection of the CBAs, the Debtors project that their North American operations would be cash flow negative through 2010. Thus, the Debtors' survival and long-term viability unquestionably depend on their ability to obtain the labor cost relief. Over the past several months, Mr. Hagan says, the Debtors have made every effort to make the process of reducing their labor and legacy costs a consensual one, including: (i) opening their books and financial records to their unions and to the Retirees Committee -- the Representatives -- and providing them with the documents and information necessary to evaluate the Debtors' proposals; and (ii) urging negotiations toward a mutually agreeable resolution. The Debtors believe that none of the Representatives has "good cause" under either Section 1113 or Section 1114 for refusing to agree to their proposals. Mr. Hagan asserts that the Debtors have met the Section 1113 and 1114 requirements in that they: (a) have already made proposals to each of their Unions and Representatives for cost reductions that would allow the Debtors to return to profitability, obtain exit financing, and leave Chapter 11 once and for all; (b) are treating all employees fairly, as the Debtors' proposals seek to: -- place all union employees at similar wage rates in each of their geographic regions; -- have all employees contribute a similar amount for health care; and -- treat all union employees the same with respect to wage freezes or reductions, 401(k) match and the pension freeze; and (c) are treating retirees fairly, as the Debtors propose a quintessential equity by eliminating retiree medical for both current and future retirees. Moreover, other stakeholders, like the Debtors' officers, salaried and management employees, vendors, and customers, have contributed substantially to the Debtors' cost-cutting efforts, making the requested labor reductions fair and equitable, Mr. Hagan notes. In the aggregate, the Debtors' current proposals for active employees will save the Debtors on average $19,600,000 annually from 2006 to 2010. The proposals to retirees will save an additional $20,000,000 annually. "With the savings from its proposals, Tower will be on the path toward being able to effectively compete for new business, generating positive cash flow, and being able to raise the liquidity to exit and stay out of Chapter 11," Mr. Hagan assures Judge Gropper. "Without these savings, Tower will be left in limbo, unable to pursue a feasible business plan or plan of reorganization." Headquartered in Grand Rapids, Michigan, Tower Automotive, Inc. -- http://www.towerautomotive.com/-- is a global designer and producer of vehicle structural components and assemblies used by every major automotive original equipment manufacturer, including BMW, DaimlerChrysler, Fiat, Ford, GM, Honda, Hyundai/Kia, Nissan, Toyota, Volkswagen and Volvo. Products include body structures and assemblies, lower vehicle frames and structures, chassis modules and systems, and suspension components. The Company and 25 of its debtor-affiliates filed voluntary chapter 11 petitions on Feb. 2, 2005 (Bankr. S.D.N.Y. Case No. 05-10576 through 05-10601). James H.M. Sprayregen, Esq., Ryan B. Bennett, Esq., Anup Sathy, Esq., Jason D. Horwitz, Esq., and Ross M. Kwasteniet, Esq., at Kirkland & Ellis, LLP, represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $787,948,000 in total assets and $1,306,949,000 in total debts. (Tower Automotive Bankruptcy News, Issue No. 25; Bankruptcy Creditors' Service, Inc., 215/945-7000) TRM CORP: Discloses Stockholders Reselling 2.78M Shares ------------------------------------------------------- Fifteen stockholders of TRM Corporation's shares of common stock will be reselling the 2,778,375 shares, which were subject to a Registration Statement filed with the U.S. Securities and Exchange Commission and reported in the Troubled Company Reporter on Jan. 3, 2006. The selling stockholders are: Selling Stockholders Number of Shares Offered -------------------- ------------------------ Steelhead Investments Ltd. 800,000 SF Capital Partners Ltd. 100,000 D.E. Shaw Valence Portfolios, L.L.C. 93,500 Calm Waters Partnership 68,800 Walker Smith International Fund, Ltd. 57,000 Trenton Capital (QP), Ltd. 48,193 Walker Smith Capital (QP), L.P. 41,400 Camden Partners Limited Partnership 21,000 Nite Capital, L.P. 15,000 WS Opportunity Fund International, Ltd. 9,800 Trenton Capital, Ltd. 7,882 Walker Smith Capital, L.P. 7,300 WS Opportunity Fund, L.P. 7,500 WS Opportunity Fund (QP), L.P. 7,000 D.E. Shaw Investment Group, L.L.C. 6,500 The Company's common stock is traded on the Nasdaq National Market under the symbol "TRMM." The Company's common shares traded around $15 in early October. Trading price of the Company's shares steadily dropped to around $12 in November. The Company's stock now trades around $7. A full-text copy of the Registration Statement is available for free at http://ResearchArchives.com/t/s?413 Headquartered in Portland, Oregon, TRM Corporation -- http://www.trm.com/-- is a consumer services company that provides convenience ATM and photocopying services in high-traffic consumer environments. TRM's ATM and copier customer base has grown to over 35,000 retailers throughout the United States and over 46,200 locations worldwide, including 6,400 locations across the United Kingdom and over 4,900 locations in Canada. TRM operates one of the largest multi-national ATM networks in the world, with over 22,000 locations deployed throughout the United States, Canada, Great Britain, including Northern Ireland and Germany. * * * As reported in the Troubled Company Reporter on Dec. 2, 2005, Standard & Poor's Ratings Services raised its recovery rating on TRM Corporation's senior secured bank loan to '3' from '4'. This indicates that lenders can expect meaningful recovery of principal in the event of a payment default or bankruptcy. The 'B+' bank loan and corporate credit ratings were affirmed. U.S. PLASTIC: Wants to Sell Assets to AMPAC Capital for $5.5 Mil. ----------------------------------------------------------------- U.S. Plastic Lumber Corp. and its debtor-affiliates ask the U.S. Bankruptcy Court for the Southern District of Florida, West Palm Beach Division, for authority to sell substantially all of their assets to AMPAC Capital Solutions, LLC, for $5.5 million, consisting of: -- $2.3 million in cash; and -- the satisfaction and release of $3.2 million of postpetition loans provided by AMPAC under a DIP Facility Agreement. Additionally, AMPAC has agreed to assume $582,000 of obligations incurred by the Debtors in the ordinary course of business. Prior to their bankruptcy filings, the Debtors borrowed under a Loan and Security Agreement, dated Dec. 19, 2002, with Guaranty Business Credit Corporation. In May 2004, Guaranty Business assigned to AMPAC Capital its rights, title and interest in the loan agreement. As of the petition date, the Debtors' outstanding balance under the credit pact is approximately $7.5 million. In March 2005, the Debtors paid about $2 million from the proceeds of the sale of their Ocala, Florida, assets to reduce the loan balance to $5.5 million. The Debtors determined that the sale of their assets is the only course of action left to them. Having filed an amended plan of reorganization in Sept. 2005, the Debtors were nearing the closing of an investment purchase agreement with Skiritai Capital LLC, and an exit facility agreement with certain creditors. However, the resignation of Bruce Disbrow, the Debtors' chief executive officer in mid-October 2005, ruined any chances of the Debtors' continued operations. Because of Mr. Disbrow's resignation, Skiritai withdrew from its intention to put an investment in the Reorganized Debtors. At the same time, the exit facility lenders also backed out of talks with the Debtors. The Debtors add that the sale of their assets will preserve the jobs of their existing employees. Siemens Objects Siemens Financial Services, Inc., asserts perfected, first- priority liens on some of the equipment that the Debtors are selling to AMPAC, on account of $2,551,563 promissory notes. Siemens wants its interest protected pursuant to Section 363(e) of the Bankruptcy Code and Rule 4001(a)(1) of the of Federal Rules of Bankruptcy Procedure. Siemens asserts that if the sale of the Debtors' assets will be approved, the value of its collateral must be paid immediately upon closing and in cash. Headquartered in Boca Raton, Florida, U.S. Plastic Lumber -- http://www.usplasticlumber.com/-- manufactures plastic lumber and is the technology leader in the industry. The Company filed for a chapter 11 protection on July 23, 2004 (Bankr. S.D. Fla. Case No. 04-33579). Stephen R. Leslie, Esq., at Stichter, Riedel, Blain & Prosser, P.A., represents the Debtor in its restructuring efforts. When the Debtor filed for protection from its creditors, it listed $78,557,000 in total assets and $48,090,000 in total debts. UAL CORP: Committee Taps Watson Wyatt as Investment Consultants --------------------------------------------------------------- The Official Committee of Unsecured Creditors appointed in UAL Corporation and its debtor-affiliates seeks the U.S. Bankruptcy Court for the Northern District of Illinois' authority to retain Watson Wyatt & Company and Watson Wyatt Investment Consulting, Inc., as actuarial and investment consultants, effective as of Jan. 3, 2006. Fruman Jacobson, Esq., at Sonnenschein Nath & Rosenthal LLP, in Chicago, Illinois, relates that Watson Wyatt has extensive actuarial experience in all aspects of tax qualified employee pension benefits. As consultants, Watson Wyatt will: (a) provide consulting advice and develop actuarial analyses associated with determining plan liabilities; (b) provide consulting advice concerning the appropriate investment rates of return to be used in discounting the Debtors' benefit plan liabilities; (c) provide consulting and actuarial services in connection with the Pension Benefit Guaranty Corporation's requests for admissions, interrogatories, and document production requests; (d) provide consulting in areas in which Watson Wyatt generally consults with its clients as reasonably requested by the Committee; and (e) attend meetings and negotiation sessions. Watson Wyatt's activities may also include: -- reviewing documents and testimony that the Committee deems relevant; -- performing analyses; and -- if requested, rendering opinions in connection with the trial, including possible deposition or trial testimony. According to Mr. Jacobson, Watson Wyatt intends to work closely with other professionals retained by the Committee to ensure that there is no unnecessary duplication of services performed or charged to the Debtors. Watson Wyatt will be paid based on its current hourly rates ranging from $150 to $642 per hour. David Riddell, a member of the firm, assures the Court that Watson Wyatt is a "disinterested person" as that term is defined in Section 101(14) of the Bankruptcy Code. Watson Wyatt, Mr. Riddell continues, does not hold or represent an interest adverse to the interest of the estates or of any class of creditors or equity security holders. 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. 111; Bankruptcy Creditors' Service, Inc., 215/945-7000) UAL CORP: Committee Wants Discount Rate Set for $8.3BB PBGC Claims ------------------------------------------------------------------ As previously reported, UAL Corporation and its debtor-affiliates proposed a plan of reorganization that allows the general unsecured claim filed by the Pension Benefit Guaranty Corporation for unfunded benefit liabilities "in an amount determined under PBGC Regulations." The Official Committee of Unsecured Creditors argued that the calculation of the Claim based on the PBGC regulations conflicted with the policy of equality of distribution to similarly situated creditors reflected in Sections 1123 and 1129 of the Bankruptcy Code. However, the Court issued a summary judgment declaring that the amount of the PBGC Claim must be determined in accordance with the Employee Retirement Income Security Act of 1974 and the PBGC regulations rather than the policies and provisions of bankruptcy law. Committee Discusses PBGC Discount Rate Fruman Jacobson, Esq., at Sonnenschein Nath & Rosenthal LLP, in Chicago, Illinois, argues that the Court must set a discount rate to establish the present value of the PBGC Claim as of the Petition Date. The Court must take the lump sum amount calculated under the PBGC regulations and discount that amount from the termination dates to the Petition Date. Furthermore, the Court must consider evidence regarding the appropriate discount rate. Mr. Jacobson notes that the Creditors Committee will produce evidence on the appropriate discount rate that should be used. The Creditors Committee believes that the Treasury bill rate suggested by the Court does not take into account the significant variation in the discount rate set by the PBGC regulations over the relevant period or the varied rate of return on the assets. Mr. Jacobson asserts that the PBGC Claim must be adjusted to account for Section 1362 of the Labor Code's "Special Rule" for unfunded benefit liability that exceeds 30% of the plan sponsor's worth. When the liability exceeds 30%, Mr. Jacobson says, the entire amount is not immediately due and owing. Instead, the PBGC is only entitled to payments "under commercially reasonable terms prescribed by the corporation." Mr. Jacobson argues that anything that the PBGC received in excess of what it relinquished must act as a credit against any claim allowed on behalf of the PBGC. The PBGC has acknowledged that the offset issues remain outstanding and subject to further discovery. Therefore, the parties must submit evidence regarding the value of the consideration provided and received by the Debtors and the PBGC. Since the PBGC is not entitled to postpetition interest on its unsecured claim under Section 502(b)(2) of the Bankruptcy Code, the Court must also review the components of the PBGC Claim and disallow any part attributable to interest. Mr. Jacobson notes that the Court must likewise hear evidence on any dispute with respect to the calculation of the Claim in the event that ERISA and the PBGC regulations were employed in a calculation, but were improperly applied. 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. 111; Bankruptcy Creditors' Service, Inc., 215/945-7000) UAL CORP: Court Authorizes Bid for FLYi Assets ---------------------------------------------- The Hon. Eugene R. Wedoff authorized UAL Corporation and its debtor-affiliates to submit a bid for FLYi, Inc.'s assets. On December 16, 2005, the Debtors submitted a bid for an undisclosed amount of FLYi's assets. FLYi Postpones Auction FLYi, Inc., has recently advised the U.S. Bankruptcy Court for the District of Delaware that it will not proceed with the auction of its assets. While FLYi received multiple expressions of interest for its business and assets, FLYi's counsel Brendan Linehan Shannon, Esq., at Young Conaway Stargatt & Taylor, LLP, in Wilmington, Delaware, relates that only one formal bid contemplated the continuation of the company's operations as a going concern. The Going Concern Bid, however, had several features that prevented FLYi from accepting proposal as a viable bid for its business. Mr. Shannon notes that since the beginning of December 2005, FLYi and the Official Committee of Unsecured Creditors appointed in its Chapter 11 case have been focused on developing the going concern expressions of interest. Mr. Shannon explains that the Going Concern Bid: -- provided insufficient consideration; -- had numerous conditions that were beyond FLYi's control to satisfy including the renegotiation of certain material contracts on terms acceptable to the bidder; and -- did not provide for funding for the significant operating losses and cash burn FLYi expected to incur prior to closing of the transaction. Mr. Shannon further relates that since receiving the Going Concern Bid, FLYi and its Committee have been focused on developing and improving that bid, as well as continuing discussions with bidders that had expressed interest in a going concern transaction in the past. Ultimately, however, FLYi was unable to substantially improve the Going Concern Bid or find an attractive alternative going concern bidder. After intensive evaluation of all of their alternatives, FLYi concluded that the value of its estates would be maximized by discontinuation of its scheduled flight operations and liquidation of its assets pursuant to one or more sale or other transactions that do not contemplate the continued operation of Independence Air as a going concern. FLYi will be amending the bidding procedures. FLYi may retain one or more firms to assist in devising an auction process that maximizes the value of certain assets in a post-discontinuation of operations environment. Headquartered in Dulles, Virginia, FLYi, Inc., aka Atlantic Coast Airlines Holdings, Inc. -- http://www.flyi.com/-- is the parent of Independence Air Inc., a small airline based at Washington Dulles International Airport. The Debtor and its six affiliates filed for chapter 11 protection on Nov. 7, 2005 (Bankr. D. Del. Case Nos. 05-20011 through 05-20017). Brendan Linehan Shannon, Esq., M. Blake Cleary, Esq., and Matthew Barry Lunn, Esq., at Young, Conaway, Stargatt & Taylor, represent the Debtors in their restructuring efforts. As of Sept. 30, 2005, the Debtors listed assets totaling $378,500,000 and debts totaling $455,400,000. 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. 111; Bankruptcy Creditors' Service, Inc., 215/945-7000) UAL CORP: Launches $3 Billion Exit Financing Facility ----------------------------------------------------- UAL Corporation (OTC Bulletin Board: UALAQ), the holding company whose primary subsidiary is United Airlines, reported the launch of its exit financing loan for up to $3 billion. The six-year loan will be secured by substantially all available assets and comprised of a $300 million revolving credit facility and an up to $2.7 billion term loan, both priced at LIBOR + 450 basis points. Proceeds will be used for several purposes: * to repay outstanding loans under United's debtor-in- possession financing; * certain bankruptcy-related expenses; * working capital; and * other general corporate purposes. The financing is led by JPMorgan and Citigroup. GE Capital will act as syndication agent. "We have been pleased that our debtor-in-possession loan has been oversubscribed, and we look forward to successful syndication of our exit facility," said Kathryn Mikells, United vice president and treasurer. A hearing to confirm United's plan of reorganization is scheduled for Jan. 18, 2006 at the U.S. Bankruptcy Court for the Northern District of Illinois, and the company is planning to exit bankruptcy on or about Feb. 1, 2006. 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. UAL CORP: S&P Rates $3 Billion Senior Secured Debts at B+ --------------------------------------------------------- Standard & Poor's Ratings Services assigned its 'B+' rating to United Air Lines Inc.'s (rated 'D') senior secured bank revolving credit and term loan of up to $3 billion, due 2011, currently being syndicated. In addition, a '1' recovery rating is assigned, indicating a high expectation of full recovery of principal in the event of a second United bankruptcy. The ratings assume emergence from Chapter 11 bankruptcy proceedings by United and its UAL Corp. (rated 'D') parent, targeted for early February 2006, and satisfaction of other conditions precedent to the bank facility becoming effective. Upon United's and UAL's emergence, Standard & Poor's anticipates assigning its 'B' corporate credit rating to both companies. The expected rating outlook is stable. The 'B+' bank loan rating is based upon the anticipated 'B' corporate credit ratings of United and UAL, and on a high likelihood of full recovery of principal in any future United bankruptcy. "The anticipated 'B' corporate credit rating reflects United's participation in the price-competitive, cyclical, and capital-intensive airline industry; on difficult industry conditions, characterized by high and volatile fuel prices and fierce competition from low-cost carriers in the U.S. domestic market; and on UAL's highly leveraged financial profile," said Standard & Poor's credit analyst Philip Baggaley. "These weaknesses are mitigated to some extent by United's extensive and well-positioned route system providing good revenue potential, especially on international routes, and by reductions in labor costs and financial obligations achieved in bankruptcy." The proposed senior secured credit facilities of up to $3 billion consist of a $300 million revolving credit facility maturing six years from closing and a $2.7 billion term loan B maturing six years from closing. The facilities are secured by substantially all of United's unencumbered assets, principally aircraft and related assets such as spare engines and spare parts, international route rights and unrestricted cash (covenant minimum of $1.2 billion initially, reducing after Dec. 31, 2006, to $1 billion if United is in compliance with a fixed charge coverage test). Standard & Poor's used a discrete asset approach and applied discounts to the various types of collateral in its simulated default scenario. In that scenario, stressed collateral coverage was in the 1x to 1.3x range. Given the conservative assumptions used in modeling and the likelihood that UAL and United would be able to reorganize in any such bankruptcy, recovery prospects were judged sufficient to support a '1' recovery rating and 'B+' bank loan rating. UNITED HOSPITAL: Selling Real Property to Port Chester for $22MM ---------------------------------------------------------------- New York United Hospital Medical Center and U.H. Housing Corp., ask the U.S. Bankruptcy Court for the Southern District of New York for authority to sell certain real property assets to Port Chester Redevelopment Group, subject to higher and better offers. On Nov. 17, 2005, the parties entered into an asset sale agreement, which calls for the sale of the Debtors' real property assets located in Port Chester, in New York, for $22 million in cash. The Debtors remind the Court that they are in the process of winding-down their operations and are in the process of preparing a plan of liquidation. The Debtors believe that the sale of the properties will return a greater benefit to their estates than any of the alternatives, including: -- a sale at a later date; -- property leases; or -- the sale of the properties in separate parcels. The Debtors believe that their secured lenders, the Dormitory Authority of the State of New York, Kimco Capital Corporation and SB Capital Group LLC, will consent to the sale of the properties with their liens attaching to, and being paid out from, the sale proceeds in the same order of priority as currently exists. The Debtors tell the Court that the sale proceeds will be used to provide for the orderly liquidation and distribution to the Debtors' creditors. To protect the buyer's bid, the Debtors propose a $220,000 break- up fee. The Debtors request that the sale hearing be held on Jan. 24, 2006, at 10:00 a.m. Alvarez & Marsal LLC serves as the Committees' financial advisor assigned to market the assets. Headquartered in Port Chester, New York, New York United Hospital Medical Center is a 224-bed, community healthcare provider and a member of the New York-Presbyterian Healthcare System, serving several Westchester communities, including Port Chester, Rye, Mamaroneck, Rye Brook, Purchase, Harrison and Larchmont. The Company filed for chapter 11 protection on December 17, 2004 (Bankr. S.D.N.Y. Case No. 04-23889). Lawrence M. Handelsman, Esq., at Stroock & Stroock & Lavan LLP, represents the Debtor in its restructuring efforts. When the Debtor filed for protection from its creditors, it listed total assets of $39,000,000 and total debts of $78,000,000. USG CORP: Law Firms Want More Time to Complete Questionnaires ------------------------------------------------------------- Baron & Budd, P.C., Foster & Sear, LeBlanc & Waddell, LLP, and Silber Pearlman, LLP, ask the United States District Court for the District of Delaware to extend the time for them to complete and return the standard questionnaires in the chapter 11 cases of USG Corporation and its debtor-affiliates to select personal injury asbestos claimants until February 8, 2006. Pursuant to an order dated October 17, 2005, Judge Conti directed the Debtors to serve the Questionnaire on a sample of 2000 PI claimants. The PI Estimation Order also requires the Questionnaire to be timely returned by mail no later than January 9, 2006. Daniel K. Hogan, Esq., at The Hogan Firm, in Wilmington, Delaware, relates that Baron & Budd, LeBlanc & Waddell and Silber Pearlman have 100 Questionnaires for which they have primary responsibility for completion, while Foster & Sear is accountable for 30 Questionnaires. Each of the Objecting Law Firms then began reviewing its files for the information necessary to accurately complete the detailed 27-page Questionnaires. Simultaneous with their work on the USG Questionnaires, the Objecting Law Firms were also reviewing their files and completing the 10-page Asbestos Personal Injury Questionnaire for their clients who are holders of asbestos PI prepetition litigation claims in W.R. Grace & Co.'s Chapter 11 cases, for submission by January 12, 2006. Mr. Hogan notes that completing each USG Questionnaire involves answering 100 questions -- most of which are multi-part -- and compiling and submitting copies of medical reports and records. Mr. Hogan reminds Judge Conti that she has previously recognized the complexity of the Questionnaires. Although the Objecting Law Firms have worked diligently to complete the Questionnaires, the diversion of attorneys and staff resources to the work on completing the voluminous number of Questionnaires -- coupled with the intervening holiday season and its attendant attorney and staff vacations -- has made completion of the USG Questionnaires by the January 9 Deadline impossible, Mr. Hogan points out. Headquartered in Chicago, Illinois, USG Corporation -- http://www.usg.com/-- through its subsidiaries, is a leading manufacturer and distributor of building materials producing a wide range of products for use in new residential, new nonresidential and repair and remodel construction, as well as products used in certain industrial processes. The Company filed for chapter 11 protection on June 25, 2001 (Bankr. Del. Case No. 01-02094). David G. Heiman, Esq., and Paul E. Harner, Esq., at Jones Day represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $3,252,000,000 in assets and $2,739,000,000 in debts. (USG Bankruptcy News, Issue No. 101; Bankruptcy Creditors' Service, Inc., 215/945-7000) USG CORP: Wants Until June 30 to File Plan of Reorganization ------------------------------------------------------------ USG Corporation and its debtor-affiliates ask Judge Judith K. Fitzgerald of the U.S. Bankruptcy Court for the District of Delaware to further extend: * the period during which they have the exclusive right to file a plan of reorganization to and including June 30, 2006; and * the period during which they have the exclusive right to solicit acceptances of that plan to and including September 1, 2006. The Estimation Proceedings Paul N. Heath, Esq., at Richards, Layton & Finger, P.A., in Wilmington, Delaware, relates that although the vastly different perspectives regarding the estimated amount of asbestos personal injury claims have made the path to emergence from the Debtors' Chapter 11 cases difficult, the parties are now moving steadily down that path. Specifically, the parties are engaged in discovery in the estimation proceedings and the United States District Court for the District of Delaware has indicated that it intends to conduct the hearings on estimation shortly after the conclusion of discovery. The Debtors anticipate that once the District Court has estimated the Asbestos PI Claims liability, they will be able to develop and file a plan of reorganization that will fairly address the interests of all stakeholders. "The process for estimation of the Asbestos PI Claims is even more defined now, and, accordingly, the bases for the continuation of the Exclusive Periods are equally clear," Mr. Heath says. "Furthermore, during the next six-month period, the creditors will not be at risk because the Debtors' businesses continue to perform at a record pace, resulting in growing estates in which all stakeholders will share," he assures the Court. According to Mr. Heath, the Asbestos PI Claimants have served the Debtors with an expansive document request, interrogatories and requests for admissions. The Debtors have undertaken a massive effort to provide the Asbestos PI Claimants with the materials they require, which has already resulted in the production of over 700,000 pages of documents. Moreover, in October 2005, the Debtors have already served questionnaires to gather the pertinent facts from a sample of 2,000 present claimants, Mr. Heath tells Judge Fitzgerald. Pursuant to District Judge Conti's order, the responses to the questionnaires are due on January 9, 2006. In addition, the parties have exchanged lists of prospective expert and fact witnesses, and the Debtors are continuing to develop the evidence they will present during the estimation hearing. Mr. Heath notes that the Asbestos PI Claimants' views on how estimation should be conducted are dramatically different than the Debtors' views. Thus, Mr. Heath says, only through an extended period of briefing and argument, which started soon after Judge Conti's appointment and continued until October 2005, were the Debtors able to secure the right to present the evidence that they are now gathering. That result will ensure that the interests of all stakeholders are duly considered before a plan of reorganization is formulated and later approved. Under Judge Conti's discovery schedule, fact discovery will close on June 30, 2006. There will be a hearing before the District Court on July 18, 2006, to set the expert discovery schedule, and the tentative date for the exchange of expert reports is August 4, 2006. The Declaratory Relief Action The Debtors have asked Bankruptcy Court to determine which Debtor is liable for any allowed Asbestos PI Claims, Mr. Heath states. The PI Claimants have sought to dismiss the Declaratory Relief Action. Over the past six months, the Debtors have been actively engaged in a discovery process with respect to the Action. Mr. Heath points out that it is uncertain whether the Court will decide on the issue prior to the filing of a plan of reorganization in the Debtors' Chapter 11 cases. Asbestos Property Damage Claims Mr. Heath reports that the Debtors also continue to make progress in narrowing the issues on the asbestos property damage claims. As of the end of December 2005, the Debtors have filed five omnibus objections to PD Claims based on the absence or inadequacy of product identification information. These objections have led to the disallowance of over 400 PD Claims. In addition, as a result of discussions with counsel purporting to represent a large number of PD Claimants, more than 100 PD Claims have been withdrawn. The Debtors have continued to pursue, informally, both discussions and access to information intended to facilitate the resolution of additional PD Claims. The Debtors envision the likely need to pursue additional objections to PD Claims that they believe are factually or legally deficient, and as to which the Debtors and the PD Claimants have been unable to reach a consensual resolution. Cooperation and Discussions with Stakeholders The Debtors attest that, notwithstanding the key issues that are in litigation, they have endeavored to maintain a constructive dialogue with their key creditor constituencies and have, throughout their bankruptcy cases, shared all significant financial and other relevant information with their constituents. USG's Businesses Continue To Be Profitable Mr. Heath notes that the Debtors have continued to operate their businesses profitably and expect to continue to generate significant cash from operations during the proposed extension of the Exclusive Periods. Specifically, during the first nine months of 2005, the Debtors generated record sales exceeding $3,800,000,000 and net earnings during that same period increased by approximately 52%, compared with net earnings during the first nine months of 2004. In addition, the Debtors have realized record sales of $1,340,000,000 for the third quarter of 2005, during which earnings were up approximately 76% compared to the third quarter of 2004. The Debtors' extraordinary operational performance, Mr. Heath points out, demonstrates yet again that their management has not allowed the bankruptcy to distract it from the most important objective of all: the maximization of the value of the Debtors' estates to be shared by all stakeholders. Although the Debtors are more anxious than any other party to exit Chapter 11 as soon as possible, they continue to protect the economic interests of all stakeholders, Mr. Heath relates. Extension is Necessary Mr. Heath asserts that absent a merits-based evaluation of the Asbestos PI Claims liability, the value of the estates cannot be allocated fairly among the Debtors' stakeholders. Therefore, the filing of any plan of reorganization in the Debtors' cases at this time would be premature, and would, by necessity, be contentious and not confirmable. Moreover, the plan process in the Debtors' bankruptcy cases cannot proceed without first resolving the issues surrounding the nature and extent of U.S. Gypsum Co.'s alleged asbestos liability, Mr. Heath says. Given this fact, the Debtors' request for an extension of the Exclusive Periods is warranted. Court Hearing The Court will convene a hearing on February 21, 2006, to consider the Debtors' request. By application of Del.Bankr.LR 9006-2, the deadline is automatically extended until the Court rules on the request. Headquartered in Chicago, Illinois, USG Corporation -- http://www.usg.com/-- through its subsidiaries, is a leading manufacturer and distributor of building materials producing a wide range of products for use in new residential, new nonresidential and repair and remodel construction, as well as products used in certain industrial processes. The Company filed for chapter 11 protection on June 25, 2001 (Bankr. Del. Case No. 01-02094). David G. Heiman, Esq., and Paul E. Harner, Esq., at Jones Day represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $3,252,000,000 in assets and $2,739,000,000 in debts. (USG Bankruptcy News, Issue No. 101; Bankruptcy Creditors' Service, Inc., 215/945-7000) WESTPOINT STEVENS: Balks at Steering Committee's Lift Stay Motion ----------------------------------------------------------------- As previously reported, WestPoint Stevens, Inc. and its debtor- affiliates sold substantially all of their assets to WestPoint International, Inc., and WestPoint Home, Inc. The consideration paid by the Purchasers included equity securities in the form of common stock and Subscription Rights in WPI, along with the assumption by the Purchasers of certain liabilities. The First Lien Lenders and Second Lien Lenders were granted replacement liens in the Sale Proceeds, including the Parent Shares and Subscription Rights, "to the same extent, validity and priority that they attached to the Purchased Assets immediately prior to the Closing." Contrarian Funds, LLC, Satellite Senior Income Fund, LLC, CP Capital Investments, LLC, Wayland Distressed Opportunities Fund I-B, LLC, and Wayland Distressed Opportunities Fund I-C, LLC, as members of the Steering Committee, and Beal Bank, S.S.B., as the First Lien Collateral Trustee, acting on behalf of First Lien Lenders other than Aretex LLC appealed the Sale Order to the United States District Court for the Southern District of New York. In November 2005, the District Court made it clear that the Objecting First Lien Lenders are entitled to realize cash from the sale of the Securities subject to their Interests, including but not limited to all of the Subscription Rights. In December 2005, the District Court clarified that the Interests granted to First Lien Lenders under the Sale Order continue to attach to all of the replacement collateral, which includes Parent Shares and Subscription Rights distributed to Aretex under the Sale Order and in accordance with all requirements imposed by the Asset Purchase Agreement, in full payment and satisfaction of Aretex's First Lien Indebtedness. The matter has been remanded to the Bankruptcy Court. By this motion, the Steering Committee asks the Court to lift the automatic stay to permit it and the First Lien Collateral Trustee to exercise any and all rights and remedies that may exist with respect to any and all of the Collateral that secures the outstanding First Lien Indebtedness owed by the Debtors. Sidney P. Levinson, Esq., at Hennigan, Bennett & Dorman, LLP, in Los Angeles, California, asserts that relief from stay is mandatory under Section 362(d)(2) of the Bankruptcy Code given that the Debtors have no equity in the Securities and cannot demonstrate that the Securities are necessary for an effective reorganization. Even if relief from stay were not mandatory, Mr. Levinson contends that the Court should grant relief from stay for cause under Section 362(d)(1). Under the Sale Order, the Court held the value of the Securities was $575,800,000, which is at least $78,000,000 below the total principal amount of the First Lien Indebtedness and the Second Lien Indebtedness as of July 8, 2005, not even taking into account unpaid accrued interest, fees, expenses since August 1, 2005, of more than $13,000,000. Mr. Levinson adds that the Debtors also cannot carry their burden to prove that the Securities are necessary for an effective reorganization. Mr. Levinson notes that the Debtors have abandoned all prospects for a plan of reorganization, as evidenced by their motion to dismiss their cases filed August 2005. The Debtors remain administratively insolvent, unable to reorganize the business, which has been sold, or fund a liquidating plan of reorganization, Mr. Levinson points out. The Debtors now face accrual of interest on the outstanding First Lien Indebtedness of more than $3,000,000 per month. Given the Debtors' admission that reorganization is impossible and that there is no reasonable likelihood of rehabilitation, Mr. Levinson asserts, immediate relief from the automatic stay is warranted. In the alternative, Mr. Levinson maintains that cause exists by reason of the Debtors' inability to provide the Objecting First Lien Lenders and the Steering Committee with adequate protection of their secured claims. Second Lien Lenders Object GSC Partners, Pequot Capital Management, Inc., and Perry Principals LLC, as lenders under the Second Lien Credit Agreement dated June 29, 2001, tell the Court that the Steering Committee's request is moot and should be dismissed as moot, without prejudice to other proceedings. The Court has already lifted the automatic stay with respect to the proceeds of the sale of the Debtors' business. Debtors Respond The Debtors believe that relief from the automatic stay for the purpose of allowing the Steering Committee or the First Lien Agent to foreclose on the Securities is premature. The Debtors point out that: (1) It is not clear whether the Securities held by Aretex should be sold in order to comply with the District Court's ruling. (2) Lifting the automatic stay, presumably to allow state law foreclosure on the Securities, may not maximize the value of the Securities for the First Lien Lenders and Second Lien Lenders. (3) Aretex is seeking to appeal the decision of the District Court. Granting relief from the automatic stay could make that appeal moot. However, the Debtors ask the Court to deny the Lift Stay Motion to the extent that the Steering Committee seeks to interfere in any way with the obligations of the Purchaser under the APA to pay third parties directly for certain obligations, including without limitation, the expenses incurred in winding down the Debtors' estates. Headquartered in West Point, Georgia, WestPoint Stevens, Inc. -- http://www.westpointstevens.com/-- is the #1 US maker of bed linens and bath towels and also makes comforters, blankets, pillows, table covers, and window trimmings. It makes the Martex, Utica, Stevens, Lady Pepperell, Grand Patrician, and Vellux brands, as well as the Martha Stewart bed and bath lines; other licensed brands include Ralph Lauren, Disney, and Joe Boxer. Department stores, mass retailers, and bed and bath stores are its main customers. (Federated, J.C. Penney, Kmart, Sears, and Target account for more than half of sales.) It also has nearly 60 outlet stores. Chairman and CEO Holcombe Green controls 8% of WestPoint Stevens. The Company filed for chapter 11 protection on June 1, 2003 (Bankr. S.D.N.Y. Case No. 03-13532). John J. Rapisardi, Esq., at Weil, Gotshal & Manges, LLP, represents the Debtors in their restructuring efforts. (WestPoint Bankruptcy News, Issue No. 61; Bankruptcy Creditors' Service, Inc., 215/945-7000) WESTPOINT STEVENS: Steering Panel Wants Dist. Ct. Order Followed ---------------------------------------------------------------- The Steering Committee and Beal Bank, S.S.B., as first lien administrative agent and collateral trustee, appealed to the United States District Court for the Southern District of New York from certain provisions of the Bankruptcy Court order authorizing the sale of substantially all of the WestPoint Stevens, Inc., and its debtor-affiliates' assets. The Steering Committee comprises of Contrarian Funds, LLC, Satellite Senior Secured Income Fund, LLC, CP Capital Investments, LLC, Wayland Distressed Opportunities Fund I-B, LLC, and Wayland Distressed Opportunities Fund 1-C, LLC. District Court Judge Laura Taylor Swain amended certain portions of the District Court's November 16, 2005, Order relating to the Sale Order Appeal. Judge Swain clarifies that the Sale Order is vacated to the extent it precludes treatment of the claims and collateral of the objecting First Lien Lenders and of the Second Lien Lenders under a Chapter 11 plan in a manner conflicting with or derogating from the provisions of the Sale Order or the Asset Purchase Agreement, and not the Intercreditor Agreement. Panel Wants District Court Order Implemented The Steering Committee asks Judge Drain to implement an order issued by the United States District Court for the Southern District of New York on November 16, 2005, as amended on December 7, 2005. The Order is premised on the District Court's ruling that, as a matter of law, the First Lien Lenders were not paid and satisfied in full with the securities issued by WestPoint International, Inc., that constitute proceeds of the sale. As a consequence, the Opinion concluded that: "The provisions for such claim satisfaction and the release of liens in connection therewith will be vacated insofar as they apply to the Objecting First Lien Lenders, and the matter will be remanded to the Bankruptcy Court for further proceedings consistent with this Opinion. The Subscription Rights currently held in escrow pursuant to the Stay Order will continue so to be held pending further order of the Bankruptcy Court." By virtue of the Order's vacation of the claim satisfaction provisions, the First Lien Lenders continue to be owed principal under the First Lien Credit Agreement for about $293,000,000 plus interest and fees that have accrued since August 1, 2005, totaling more than $13,000,000. Moreover, as a result of the Order's vacation of the lien release provisions in the Sale Order, the replacement liens granted to the First Lien Lenders in the replacement collateral remain intact, and have not been released under the Sale Order. In addition, the District Court expressly contemplated that the collateral securing the First Lien Lenders' claims would be sold, with the cash realized from that sale used to pay the Objecting First Lien Lenders and, to the extent any surplus remained after payment in full of the First Lien Lenders, then to pay the Second Lien Lenders. The Steering Committee believes that there are a few matters before the Bankruptcy Court that must be addressed in light of the District Court's ruling. Among those matters, most of which are ministerial in nature, are: (a) Registration of escrowed subscription rights on WPI's books and records in the name of the First Lien Collateral Trustee; (b) Registration of all of the Securities that constitute replacement collateral with the Securities and Exchange Commission; (c) The District Court's ruling impacts the Bankruptcy Court's preliminary ruling concerning the Adequate Protection Escrow Account. Rather than revisit that ruling now, the Steering Committee proposes that the Bankruptcy Court defer issuing any final ruling, pending the sale of the Securities, as that sale may generate sufficient proceeds to moot the dispute concerning distribution of the proceeds in the Adequate Protection Escrow Account; (d) With respect to the Steering Committee's Motion for Reallocation, the Bankruptcy Court should enter an order that the proceeding is moot, based on the Order, which vacates the provisions of the Sale Order calling for distribution to the Second Lien Lenders, as well as the prohibition on post-closing reallocation that was formerly contained in the Sale Order; and (e) The Court should lift any stay that currently applies to the adversary proceeding, to allow the Steering Committee to amend its complaint to incorporate, among other things, the Order and recent actions undertaken by WPI's board of directors and controlling shareholder that give rise to further causes of action. The Steering Committee members are Contrarian Funds LLC, Satellite Senior Income Fund, LLC, CP Capital Investments, LLC, Wayland Distressed Opportunities Fund I-B, LLC and Wayland Distressed Opportunities Fund I-C, LLC. Second Lien Lenders Respond GSC Partners, Pequot Capital Management, Inc., and Perry Principals LLC, as lenders under the Second Lien Credit Agreement dated June 29, 2001, contend that the Court should require the Objecting First Lien Lenders to provide some reasonable description of their intended course of action and should additionally require that the Objecting First Lien Lenders "give up for sale" the Securities they have already received. The Second Lien Lenders assert that the District Court Opinion had nothing to do with the Adequate Protection Escrow Account and the Bankruptcy Court's alternative holding awarding the Adequate Protection Escrow Account to the Second Lien Lenders regardless of whether the First Lien Lenders were paid in full was clearly correct on the merits. Headquartered in West Point, Georgia, WestPoint Stevens, Inc. -- http://www.westpointstevens.com/-- is the #1 US maker of bed linens and bath towels and also makes comforters, blankets, pillows, table covers, and window trimmings. It makes the Martex, Utica, Stevens, Lady Pepperell, Grand Patrician, and Vellux brands, as well as the Martha Stewart bed and bath lines; other licensed brands include Ralph Lauren, Disney, and Joe Boxer. Department stores, mass retailers, and bed and bath stores are its main customers. (Federated, J.C. Penney, Kmart, Sears, and Target account for more than half of sales.) It also has nearly 60 outlet stores. Chairman and CEO Holcombe Green controls 8% of WestPoint Stevens. The Company filed for chapter 11 protection on June 1, 2003 (Bankr. S.D.N.Y. Case No. 03-13532). John J. Rapisardi, Esq., at Weil, Gotshal & Manges, LLP, represents the Debtors in their restructuring efforts. (WestPoint Bankruptcy News, Issue No. 61; Bankruptcy Creditors' Service, Inc., 215/945-7000) WINBLE CORPORATION: Case Summary & 14 Largest Unsecured Creditors ----------------------------------------------------------------- Debtor: Winble Corporation of Colorado P.O. Box 77 Durango, Colorado 80302-0077 Bankruptcy Case No.: 06-10053 Chapter 11 Petition Date: January 8, 2006 Court: District of Colorado (Denver) Judge: Michael E. Romero Debtor's Counsel: Philipp C. Theune, Esq. Theune Law Offices, PC 1775 Sherman Street, 31st Floor Denver, Colorado 80203-1100 Tel: (303) 832-1150 Total Assets: $7,040,384 Total Debts: $7,397,145 Debtor's 14 Largest Unsecured Creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ Wells Fargo Bank 2005 Loan $54,507 21680 Gateway Center Drive Suite 280 Diamond Bar, CA 91765 Durango Heating & Refrigeration Trade Debt $1,070 150 Whistling Horse Trail Durango, CO 81301-8991 City of Durango Utilities $877 P.O. Box J2830 Durango, CO 81302-2830 Encompasse Insurance Trade Debt $196 J & T Distributing Trade Debt $184 Qwest Utilities $172 Griegos Lock & Key Trade Debt $138 San Juan Copy Systems Trade Debt $106 City of Cortez Trade Debt $95 Sundance Carpet Cleaning Carpet Cleaning $88 Services Superior Alarm Trade Debt $81 Central Distributing Trade Debt $74 Primus Trade Debt $9 Empire Electric Trade Debt $0 * Large Companies with Insolvent Balance Sheets ----------------------------------------------- Total Shareholders Total Working Equity Assets Capital Company Ticker ($MM) ($MM) ($MM) ------- ------ ------------ ------- -------- Abraxas Petro ABP (27) 120 (4) Accentia Biophar ABPI (8) 34 (20) AFC Enterprises AFCE (44) 216 53 Alaska Comm Sys ALSK (9) 589 49 Alliance Imaging AIQ (43) 643 42 AMR Corp. AMR (729) 29,436 (1,882) Atherogenics Inc. AGIX (98) 213 190 Bally Total Fitn BFT (1,463) 486 (442) Biomarin Pharmac BMRN (65) 209 (38) Blount International BLT (201) 427 110 CableVision System CVC (2,486) 10,204 (1,881) CCC Information CCCG (95) 112 34 Centennial Comm CYCL (488) 1,511 69 Cenveo Inc CVO (12) 1,146 127 Choice Hotels CHH (165) 289 (34) Cincinnati Bell CBB (672) 1,893 (10) Clorox Co. CLX (532) 3,570 (229) Columbia Laborat CBRX (13) 17 10 Compass Minerals CMP (83) 686 149 Crown Media HL CRWN (64) 1,250 (125) Deluxe Corp DLX (101) 1,461 (297) Denny's Corporation DENN (261) 498 (72) Domino's Pizza DPZ (553) 414 3 DOV Pharmaceutic DOVP (3) 116 94 Echostar Comm DISH (785) 7,533 321 Emeritus Corp. ESC (134) 713 (62) Empire Resorts NYNY (18) 65 (4) Foster Wheeler FWLT (375) 1,936 (186) Guilford Pharm GLFD (20) 136 60 Graftech International GTI (13) 1,026 283 Hollinger Int'l HLR (177) 1,001 (396) I2 Technologies ITWO (144) 352 112 ICOS Corp ICOS (67) 232 141 IMAX Corp IMAX (34) 245 30 Immersion Corp. IMMR (15) 46 29 Indevus Pharma IDEV (115) 113 79 Intermune Inc. ITMN (30) 194 109 Investools Inc. IED (20) 64 (46) Kulicke & Soffa KLIC (32) 386 186 Ligand Pharm LGND (96) 306 (99) Lodgenet Entertainment LNET (69) 283 22 Maxxam Inc. MXM (677) 1,044 114 Maytag Corp. MYG (95) 2,989 371 McDermott Int'l MDR (53) 1,627 244 McMoran Exploration MMR (61) 407 118 NPS Pharm Inc. NPSP (55) 354 258 Owens Corning OWENQ (8,443) 8,142 976 ON Semiconductor ONNN (317) 1,171 300 Quality Distribu QLTY (26) 377 20 Quest Res. Corp. QRES (27) 244 (29) Qwest Communication Q (2,716) 23,727 822 Revlon Inc. REV (1,169) 980 86 Riviera Holdings RIV (28) 221 6 Rural/Metro Corp. RURL (93) 315 56 Rural Cellular RCCC (460) 1,367 46 SBA Comm. Corp. SBAC (47) 886 25 Sepracor Inc. SEPR (213) 1,193 703 St. John Knits Inc. SJKI (52) 213 80 Sun Healthcar SUNH (110) 320 (27) Tiger Telematics TGTL (66) 31 (76) Tivo Inc. TIVO (9) 163 36 US Unwired Inc. UNWR (76) 414 56 Unigene Labs Inc. UGNE (15) 14 (9) Unisys Corp UIS (141) 3,888 318 Vector Group Ltd. VGR (38) 536 168 Vertrue Inc. VTRU (35) 441 (80) Visteon Corp. VC (1,430) 8,823 404 Vocus Inc. VOCS (9) 21 (10) Worldspace Inc. WRSP (1,475) 765 249 WR Grace & Co. GRA (574) 3,465 848 ********* Monday's edition of the TCR delivers a list of indicative prices for bond issues that reportedly trade well below par. Prices are obtained by TCR editors from a variety of outside sources during the prior week we think are reliable. Those sources may not, however, be complete or accurate. The Monday Bond Pricing table is compiled on the Friday prior to publication. Prices reported are not intended to reflect actual trades. Prices for actual trades are probably different. Our objective is to share information, not make markets in publicly traded securities. Nothing in the TCR constitutes an offer or solicitation to buy or sell any security of any kind. 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Soriano-Baaclo, Marjorie C. Sabijon, Terence Patrick F. Casquejo, Christian Q. Salta, Jason A. Nieva, Lucilo Junior M. Pinili, Tara Marie A. Martin and Peter A. Chapman, Editors. Copyright 2006. 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 $725 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 ***