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/raid1/www/Hosts/bankrupt/TCR_Public/060601.mbx T R O U B L E D C O M P A N Y R E P O R T E R Thursday, June 1, 2006, Vol. 10, No. 129 Headlines 900 ORIOLE: Voluntary Chapter 11 Case Summary A21 INC: Posts $2.4 Million Net Loss in 2006 First Fiscal Quarter ABB LUMMUS: Ct. Okays Connecticut Valley as Special Claims Manager ACE SECURITIES: Moody's Cuts Class B Cert.'s Ba2 Rating to Caa2 ADELPHIA COMMS: Court Disallows Lenders' Multi-Bil. Interest Claim ADELPHIA COMMS: Selling Real Property & Equipment for $1.2 Million AIMS WORLDWIDE: Posts $485,389 Net Loss in 2006 1st Fiscal Quarter AIRADIGM COMMS: Gets Court's Interim Nod on Cash Collateral Use ALBERTSONS INC: Moody's Lowers Corporate Family Rating to Ba3 AMARILLO BRACE: Case Summary & 5 Largest Unsecured Creditors AMCAST INDUSTRIAL: Court Approves Asset Sale to Monomoy Capital ASARCO LLC: Settles Dispute with Units Over Insurance Proceeds ASARCO LLC: Assumes Five Salt River Project Agreements ASARCO LLC: Wants to Ink two Tohono O'odham Settlement Agreements B-FAST CORP: March 31 Balance Sheet Upside Down by $26.9 Million BAY POINT: Moody's Puts (P)Ba2 Rating on Sr. Sec. Term Loan BEAR STEARNS: Moody's Assigns Low-B Rating on 2 Cert. Classes BREK ENERGY: Posts $124,398 Net Loss in 2006 First Fiscal Quarter BRITESMILE INC: Faces Nasdaq Delisting Due to Late 10-Q Filing CALHOUN CBO: Moody's Puts Ba2 Rated Notes on Watch for Upgrade CALPINE CORP: CCAA Creditor Can File Proofs of Claim Until June 30 CELERO TECHNOLOGIES: Ch. 7 Trustee Hires Fox Rothschild as Counsel CENDANT MORTGAGE: S&P Affirms Low-B Ratings on Four Cert. Classes CENVEO CORP: Moody's Rates Proposed $525 Million Loan at Ba3 CGC APARTMENTS: Voluntary Chapter 11 Case Summary CHANNEL-TRACK: Case Summary & 20 Largest Unsecured Creditors CITYSCAPE HOME: S&P Affirms BB Rating on Class B-1F Certificates CLEAN EARTH: Hires General Capital as Investment Banker CLEAN EARTH: SunBridge Fails in Bid to Get Decision on Lease COEUR D'ALENE: Earns $14.3 Million in Three Months Ended March 31 CORD BLOOD: March 31 Balance Sheet Upside Down by $4.3 Million CRF-18 LLC: S&P Assigns Double-B Rating to Class D Revenue Notes CUMMINS INC: Fitch Raises Jr. Conv. Sub. Debentures' Rating to BB CWALT INC: Fitch Assigns Low-B Ratings to Class B-3 & B-4 Certs. CWMBS INC: Fitch Assigns Low-B Ratings to Class B-3 & B-4 Certs. D&G INVESTMENTS: Plans to Pay Unsec. Creditors in Full under Plan DANA CORP: Gets Court Okay to Implement Travelers Bonding Program DANA CORPORATION: Adds 12 Claims to Tooling Claim Schedule DANA CORP: Sets off Allied Ring's $1.1 Million Claim Against Debt DELTA AIR: Pilots Ratify $280 Million Labor Cost Savings Contract DRAGON PHARMA: Earns $1.2 Million in 2006 First Fiscal Quarter EASYLINK SERVICES: Posts $376,000 Net Loss in 2006 First Quarter EL PASO CORP: S&P Upgrades Corporate Credit Rating to B+ from B ENRON CORP: Flagstaff Holds $360.1 Million of Allowed Claims ENRON CORP: Inks Settlements Expunging $121 Million of Claims ENRON CORP: Settling Lewis and Fiserv Transfers Dispute FRANKLIN CLO: Moody's Rates $13 Million Class E Notes at Ba2 FUNCTIONAL RESTORATION: Panel Can Hire Chief Restructuring Officer FUNCTIONAL RESTORATION: Taps Novian & Novian as Special Counsel GENERAL MOTORS: Troy Clarke Named President of GM North America GENERAL MOTORS: Investing $170MM for Michigan Production Project GMAC COMMERCIAL: S&P Removes Class F Cert.'s BB Rating from Watch GPC SYSTEMS: Case Summary & 8 Largest Unsecured Creditors GSR MORTGAGE: Fitch Places Low-B Ratings on Class B-4 & B-5 Certs. HANGER ORTHOPEDIC: Completes Tender Offer for $205 Mil. Sr. Notes HEWETTS ISLAND: Moody's Rates $17 Million Class E Notes at Ba2 INSPIRE INSURANCE: Liquidating Trustee Can Make Initial Payments INTERLINE BRANDS: S&P Assigns BB- Sr. Unsecured & B Sub. Ratings INVERNESS MEDICAL: Posts $2.6MM Net Loss in Quarter Ended March 31 ITC HOMES: Christopher Linscott Names as Examiner ITC HOMES: Hires Dustin Allred as Real Estate Broker ITC HOMES: Selling Gray Hawk Property for $270,000 JEROME DUNCAN: Court Converts Case to Chapter 7 Liquidation JEROME DUNCAN: Ch. 7 Trustee Hires Jacob & Weingarten as Counsel JT THORPE: Seeks Court Approval for St. Paul Insurance Pact K'S MERCHANDISE: Nears Out-of-Court Settlement with Creditors KENNEDY ROAD: Voluntary Chapter 11 Case Summary MARKSON ROSENTHAL: Sells Packaging Fulfillment Assets to Sonoco MARSH SUPERMARKETS: Gets Purchase Offer from Drawbridge/Cardinal MIRANT CORP: Brings NRG Takeover Bid Dispute to Delaware Court MULTICANAL SA: Court Grants Permanent Injunction v. U.S. Creditors NANTICOKE HOMES: U.S. Trustee Wants Ch. 11 Case Converted to Ch. 7 NES RENTALS: Moody's Reviews Low-B Rating on Corp. Family & Loan NETWORK INSTALLATION: Posts $1.3MM Net Loss in 2006 1st Quarter NRG ENERGY: Mirant Sues NRG for Obstructing $8 Bil. Takeover Bid OWENS CORNING: Compromising 37 Asbestos Property Damage Claims OWENS CORNING: Larry E. Tyree Co. Holds $335,128 Allowed Claim PLIANT CORP: Court Approves Securities Screening Wall Procedures POGO PRODUCING: Moody's Lowers Corp. Family Rating from Ba2 to Ba3 PUREBEAUTY INC: Moves to Reject 24 Store Leases QUANTA CAPITAL: Plans to Place Three Units in Run-Off RENATA RESORT: Case Summary & 20 Largest Unsecured Creditors RESIDENTIAL ACCREDIT: Fitch Rates Two Cert. Classes at Low-Bs SEARCHHELP INC: Posts $1.3 Million Net Loss in 2006 First Quarter SECURECARE TECHNOLOGIES: KBA Group Raises Going Concern Doubt SEMINOLE TRIBE: Moody's Affirms Ba1 Corp. Family & Bond Ratings SENSE HOLDINGS: Posts $1.2 Mil. Net Loss in 2006 1st Fiscal Qtr. SEQUENOM INC: Posts $3.7 Million Net Loss in 2006 First Quarter SOLA COMMS: Louisiana Bankr. Court Confirms Plan of Reorganization SOUTHWEST GAS: Moody's Lowers Preferred Shelf Rating to (P)Ba2 STARBOUND RE: S&P Assigns BB+ Rating to $91 Million Bank Loan SUPERIOR ESSEX: Plans 2.7 Million Stock Offering to Pay Debts SUPERVALU INC: Moody's Lowers Rating on Sr. Unsec. Notes to B2 SUN MICROSYSTEMS: Board Approves Restructuring Initiatives TEXAS STAR: Voluntary Chapter 11 Case Summary TRANS-ACTION EQUITY: Beal Bank Wants Chapter 11 Case Dismissed TRIBUNE CO: Fitch Cuts Sub. Exchangeable Debentures' Rating to BB+ ULTRASTRIP SYSTEMS: Posts $2.2 Million Net Loss in First Quarter UNITED ENERGY: Case Summary & 18 Largest Unsecured Creditors US AIRWAYS: Court Dismisses Fraizer's Complaint & Disallows Claim US AIRWAYS: Resolving Charlotte's Multi-Mil. Priority Tax Claims USG CORP: Battle Ensues Over Elm's $57.55 Mil. Asbestos PD Claims USG CORP: Investor Consortium's $12.5MM Claim Request Draws Fire VALENTEC SYSTEMS: Posts $119,909 Net Loss in 2006 First Quarter VERILINK CORP: Court OKs Maynard Cooper as Panel's Bankr. Counsel VERILINK CORP: Panel Hires Arnall Golden as Bankruptcy Counsel VOICE MOBILITY: March 31 Balance Sheet Upside Down by $7.4 Million WELLS FARGO: Fitch Puts Low-B Ratings on Four Certificate Classes WG HORIZIONS: Moody's Rates $12 Million Class D Notes at Ba2 WIZZARD SOFTWARE: Amends 2005 & 2004 Annual Financial Statements XM SATELLITE: Intends to Redeem 8.25% Series B Preferred Stock * Keith Gercken Joins Sheppard Mullin in San Francisco as Partner * Chapter 11 Cases with Assets & Liabilities Below $1,000,000 ********* 900 ORIOLE: Voluntary Chapter 11 Case Summary --------------------------------------------- Debtor: 900 Oriole LLC 5405 Alton Parkway, Suite 5A 545 Irvine, California 92604 Bankruptcy Case No.: 06-10808 Type of Business: The Debtor previously filed for chapter 11 protection on December 29, 2004 (Bankr. C.D. Calif. Case No. 04-17784). Its affiliate, 925 Oriole, LLC, also filed for chapter 11 protection on March 29, 2006 (Bankr. C.D. Calif. Case No. 06-10392). Chapter 11 Petition Date: May 31, 2006 Court: Central District Of California (Santa Ana) Judge: John E. Ryan Debtor's Counsel: Michael G. Spector, Esq. 2677 North Main Street, Suite 320 Santa Ana, California 92705 Tel: (714) 835-3130 Estimated Assets: $1 Million to $10 Million Estimated Debts: $1 Million to $10 Million The Debtor does not have creditors who are not insiders. A21 INC: Posts $2.4 Million Net Loss in 2006 First Fiscal Quarter ----------------------------------------------------------------- a21, Inc., filed its first quarter financial statements for the three months ended March 31, 2006, with the Securities and Exchange Commission on May 15, 2006. The Company reported a $2,416,000 net loss on $2,935,000 of revenues for the three months ended March 31, 2006. At March 31, 2006, the Company's balance sheet showed $20,732,000 in total assets, $14,608,000 in total liabilities, Minority Interest of $2,800,000 and $3,324,000 in stockholders' equity. The Company's March 31 balance sheet also showed strained liquidity with $4,000,000 in total current assets available to pay $4,711,000 in total current liabilities coming due within the next 12 months. Full-text copies of the Company's financial statements for the three months ended March 31, 2006, are available for free at http://ResearchArchives.com/t/s?a23 Going Concern Doubt BDO Seidman LLP , in Charlotte, North Carolina, raised substantial doubt about a21, Inc.'s ability to continue as a going concern after auditing the Company's financial statements for the year ended Dec. 31, 2005. The auditor pointed to the Company's working capital deficit and losses from operations. About A21 Inc. a21, Inc., markets advertising prints & Web mails through its subsidiary SuperStock, Inc. It offers services to advertising agencies, publishing and media companies. ABB LUMMUS: Ct. Okays Connecticut Valley as Special Claims Manager ------------------------------------------------------------------ The Honorable Judith K. Fitzgerald of the U.S. Bankruptcy Court for the District of Delaware allowed ABB Lummus Global Inc. to employ Connecticut Valley Claim Service Company, Inc., nunc pro tunc to April 21, 2006. Connecticut Valley will provide specialized claims management, administration, processing and support services. The Firm will: (a) prepare reports on the settlement or other resolution of claims by the Debtor prior to its bankruptcy filing; (b) provide analyses with respect to the Debtor's asbestos-related cases, including, but not limited to, those that have been opened or closed against the Debtor before it filed for bankruptcy, and the amount incurred and spent on indemnity and defense in the litigation of the case; (c) maintain existing claims file -- includes pleading, discovery materials and any existing settlement documents -- on asbestos-related cases filed against the Debtor before it filed for bankruptcy; (d) maintain and provide data and analysis concerning the amount of outstanding defense counsel bills; and (e) provide other data management analysis support as may be required by the interests of the Debtor. John Disckhoff, the president of Connecticut Valley, discloses that the Firm's professionals bill: Designation Hourly Rate ----------- ----------- President $220 IT Manager $175 Account Manager $150 Contract Specialist $125 Account Representative $125 Senior Claim Analyst $110 Senior Specialist $80 Mr. Dickhoff assures the Court that Connecticut Valley does not hold or represent an interest adverse to the Debtor and is disinterested as that term is defined in Section 101(14), as modified by Section 1107(b) of the Bankruptcy Code. Headquartered in Houston, Texas, ABB Lummus Global Inc. -- http://www.abb.com/lummus/-- offers advanced process technologies, project management, engineering, procurement and construction-related services for the oil and gas, petroleum refining and petrochemical process industries. The group oversees the construction of process plants and offshore facilities. The company filed for chapter 11 protection on Apr. 21, 2006 (Bankr. D. Del. Case No. 06-10401). Jeffrey N. Rich, Esq., at Kirkpatrick & Lockhart Nicholson Graham LLP, represents the Debtor. Laura Davis Jones, Esq., at Pachulski, Stang, Ziehl Young, Jones & Weintraub, LLP, serves as the Debtor's co-counsel. No Official Committee of Unsecured Creditors has been appointed in the Debtor's case. Joseph D. Frank, Esq., at Frank/Gecker LLP represents the Informal Asbestos Claimants' Committee. When the Debtor filed for protection from its creditors, it estimated more than $100 million in assets and debts. ACE SECURITIES: Moody's Cuts Class B Cert.'s Ba2 Rating to Caa2 ---------------------------------------------------------------- Moody's Investors Service downgraded six certificates from two ACE subprime mortgage deals issued in 2002 and 2004. The pools are backed by fixed-rate and adjustable-rate subprime mortgage loans that were originated by various lenders. Ocwen Federal Bank, FSB and Saxon Mortgage Services service the loans in the 2002-HE1 deal. Ocwen Federal Bank, FSB services the loans in the 2004-HE1 transaction. The three most subordinate certificates from both deals are being downgraded based on the weaker than anticipated performance of the mortgage collateral and the resulting erosion of credit support. In both of the transactions, overcollateralization amounts are currently below their targets and pipeline losses are likely to cause eventual depletion of the overcollateralization and losses on the most subordinate tranches. Furthermore, existing credit enhancement levels may be low given the current projected losses on the underlying pools. Complete rating actions: Issuer: ACE Securities Corp. Home Equity Loan Trust Downgrades: * Series 2002-HE1, Class M-2, downgraded from A2 to Baa1 * Series 2002-HE1, Class M-3, downgraded from Baa2 to B1 * Series 2002-HE1, Class M-4, downgraded from Baa3 to B3 * Series 2004-HE1, Class M-5, downgraded from Baa2 to Baa3 * Series 2004-HE1, Class M-6, downgraded from Baa3 to Ba2 * Series 2004-HE1, Class B, downgraded from Ba2 to Caa2 ADELPHIA COMMS: Court Disallows Lenders' Multi-Bil. Interest Claim ------------------------------------------------------------------ The Honorable Robert E. Gerber of the U.S. Bankruptcy Court for the Southern District of New York sustained the objection of Adelphia Communications Corporation, its debtor-affiliates and the Official Committee of Unsecured Creditors against claims for additional interest asserted by the administrative agents for six of the Debtors' prepetition credit facilities, on behalf of the lenders of those facilities. In its 26-page decision, Judge Gerber finds, among others: (a) that the Debtors' taking of an accrual for liabilities that might be imposed with respect to Grid Interest was focused only on financial accounting obligations, with a mindset based on the importance of conservative accounting, particularly after the excesses of the Rigas era; (b) no evidence that the Debtors' accounting personnel intended to waive any defenses the Debtors might have to those claims, and finds no intent to waive those defenses; (c) that the Debtors did not waive their defenses to bank lender claims for the additional interest; (d) that the bank lenders' actions too were based solely on financial accounting concerns, and that there is no indication that the bank lenders intended to waive claims for the recovery of sums that they did not accrue; and (e) that the bank lenders did not waive their claims to the additional interest sought. The Credit Facilities are: 1. Century-TCI Facility -- dated as of December 3, 1999, among Century-TCI California, L.P., certain lenders and Citibank, N.A., as the Administrative Agent; 2. UCA-HHC Facility -- dated as of May 6, 1999, among Hilton Head Communications, L.P., UCA Corp. and certain Borrowers, various Lenders and Wachovia Bank, N.A., as the Administrative Agent; 3. FrontierVision Facility -- a second amended and restated credit agreement dated as of December 19, 1997, among FrontierVision Operating Partners, L.P., various Lenders and JP Morgan Chase Bank, as the Administrative Agent; 4. The Parnassos Facility -- dated as of December 30, 1998 among Parnassos, L.P., various Lenders and The Bank of Nova Scotia, as the Administrative Agent; 5. The Century Facility -- dated as of April 14, 2000, among Century Cable Holdings LLC and certain other Borrowers, various Lenders and Bank of America, N.A., as Administrative Agent; and 6. The HVA Facility -- amended and restated credit agreement dated as of March 29, 1996, among Highland Video Associates, L.P., and Global Acquisition Partners, L.P., various Lenders and BNS as the Administrative Agent. The Debtors are also a party to the Olympus Facility dated as of September 28, 2001, among Olympus Cable Holdings, LLC, and certain Borrowers, various Lenders and Bank of Montreal, as Administrative Agent. But BMO did not seek additional interest in the proof of claim it filed on behalf of the lenders of the Olympus Facility. Representing the ACOM Debtors, Marc Abrams, Esq., at Willkie Farr & Gallagher LLP, in New York, related that in January 2004, the Administrative Agents filed these claims for the principal and interest under the Credit Facilities: Claimant Claim No. Claim Amount -------- --------- ------------ BMO 11158 $1,265,000,000 BNS 13383 undetermined BNS 13384 623,000 BofA 15928 2,480,000,000 Citibank 8810 1,000,000,000 JP Morgan 9888 617,312,500 Wachovia 11204 831,375,000 Mr. Abrams told the Court that the Lenders have received approximately $1,500,000,000 in postpetition adequate protection payments with respect to interest charges under the very same Credit Facilities used by the Rigas family to defraud the Debtors. Moreover, the Lenders will have their claims for principal and interest on the Credit Facilities paid in full under the Debtors' proposed plan of reorganization even though the ACOM Debtors never received the benefits of at least $3,000,000,000 of those funds, Mr. Abrams added. Notwithstanding the extraordinary benefits they have received, the Administrative Agents amended their proofs of claim asserting that the compliance certificate delivered to them were not accurate, and thus the interest rates that they would have charged the ACOM Debtors under the certain grid pricing schedules could have been higher than the interest rates actually charged, resulting in approximately $300,000,000 of additional interest charges, Mr. Abrams related. The Administrative Agents now seek to recover the $300,000,000 from the ACOM Debtors' unsecured creditors. From September through November 2005, the Administrative Agents filed these claims for additional interests: Claimant Claim No. Claim Amount -------- --------- ------------ BNS 18058 $2,100,000 to $41,900,000 BNS 18059 $4,100,000 to $81,000,000 BofA 17701 undetermined Citibank 17724 $4,800,000 to $92,000,000 JP Morgan 17702 $2,500,000 to $70,000,000 Wachovia 17722 $87,000,000 Mr. Abrams argued that the Administrative Agents' claims for additional interest should be disallowed because: -- there is no basis under the relevant loan agreements for awarding additional "grid" interest after inaccurate compliance certificates have been delivered; -- the Administrative Agents voluntarily waived any right to default interest in exchange for numerous benefits they received under the DIP Financing; -- the Agents waived their right to receive additional grid interest by continuing to accept, without objection, payments for interests at the grid rates in effect as of the Petition Date pursuant to the Final DIP Order; and -- the grid interest claims are untimely, since they have been asserted for the first time during a period of more than seven months to nearly two years after the Bar Date. Court's Ruling The Court disagreed with bank lenders' contention that they have a contractual entitlement to the incremental interest, and that the asserted contractual entitlement is recoverable as a secured claim under Section 506(b) of the Bankruptcy Code. Judge Gerber found that the amount payable as Grid Interest, as a matter of contract law, is determined by the compliance certificates. "Under the agreements, whatever is said in the compliance certificates is controlling. And there is no mechanism in the agreements for a re-computation of the Applicable Margin if the compliance certificates turn out to be inaccurate, by reason of either mistake or fraud." The Court noted that Wachovia Bank, N.A., and a number of the other bank lenders also contend that most of the contracts have a very broad definition of "Obligations," and include all obligations "arising under or in connection with the credit agreements." Thus, they argue, the incremental interest collectible is one of the "Obligations" under the credit agreements, and the Grid Interest, as one of the "Obligations," is thus recoverable. "But the argument is circular, and the Court must reject it," Judge Gerber opined. The desired additional interest constitutes part of the "Obligations" under the facilities to the extent -- but only the extent -- that it is provided for under the contracts, Judge Gerber emphasized. Moreover, Judge Gerber said, the Court is not persuaded by Wachovia and other bank lenders' contention that they have the necessary contractual entitlement because in some or all of the agreements, each borrower must indemnify the bank lenders against all losses and damages incurred in connection with the bank lenders entering into and performing under the credit agreements. Judge Gerber pointed out that the key word there is "indemnify," which has long been held to be synonymous with "hold harmless," and which has been variously defined as "[t]o restore the victim of a loss, in whole or in part, by payment, repair, or replacement, or "to make good a loss that someone has suffered because of another's act or default." The Court clarifies that indemnification provisions give rise to restitutionary rights, and are not back-door means to get the benefit of one's bargain. The Court considered it inappropriate to penalize the Debtors or the bank lenders for their accounting decisions with respect to accrual of additional interest claims. The Court believed that it has greater expertise in analyzing contractual obligations than do the Debtors' or the bank lenders' accounting personnel. Judge Gerber said the measure of the bank lenders' damages for fraud or misrepresentation would be their out-of-pocket loss -- essentially or entirely their outstanding principal -- and not the profits they would have realized in the absence of fraud. The Debtors will pay that principal back upon confirmation, and, so far as the record reflects, the bank lenders will have no further out-of-pocket damages. According to Judge Gerber, he does not need to address the Creditors' Committee's and the Debtors' other contentions, asserting waiver of the claims for incremental interest; that bank lenders should be judicially estopped from asking for it; and that proofs of claim filed on behalf of the bank lenders before the Bar Date failed to assert the claims for the additional interest. "There were no valid claims to waive. The other arguments are likewise academic." For these reasons, the Court ruled that the bank lenders will not have a claim for the incremental interest under their contracts. The Court noted that while most of the bank lenders did indeed retain remedies against Adelphia Communications Corporation in tort, those tort remedies do not include expectancy damages and at that time as the bank lenders are fully repaid the principal on their loans, they will have no claims in tort. Judge Gerber further ruled that the Debtors do not have to reserve sums under their reorganization plan to satisfy bank lender claims for the Grid Interest. The bank lenders' rights to seek allowance of other aspects of their claims remains in effect and all parties' rights with respect to future aspects of the bank lenders' claims are reserved and preserved. A full-text copy of the Court's Decision is available for free at http://ResearchArchives.com/t/s?a34 Based in Coudersport, Pa., Adelphia Communications Corporation -- http://www.adelphia.com/-- is the fifth-largest cable television company in the country. Adelphia serves customers in 30 states and Puerto Rico, and offers analog and digital video services, high-speed Internet access and other advanced services over its broadband networks. The Company and its more than 200 affiliates filed for Chapter 11 protection in the Southern District of New York on June 25, 2002. Those cases are jointly administered under case number 02-41729. Willkie Farr & Gallagher represents the ACOM Debtors. PricewaterhouseCoopers serves as the Debtors' financial advisor. Kasowitz, Benson, Torres & Friedman, LLP, and Klee, Tuchin, Bogdanoff & Stern LLP represent the Official Committee of Unsecured Creditors. (Adelphia Bankruptcy News, Issue No. 133; Bankruptcy Creditors' Service, Inc., 215/945-7000) ADELPHIA COMMS: Selling Real Property & Equipment for $1.2 Million ------------------------------------------------------------------ Pursuant to the excess assets sale procedures approved by the U.S. Bankruptcy Court for the Southern District of New York, Adelphia Communications Corporation and its debtor-affiliates inform the Court that they will sell these assets for $1,225,703: 1. Asset: Two electrical transformers Purchaser: Doug Beat Company Purchase Price: $10,000 Agent: none Deposit: (not mentioned) Appraised Value: No appraisal was conducted 2. Asset: Real property at Lot 31, Bloody Point, 83 Fuskie Lane, Hilton Head, South Carolina Purchaser: Jeff Bradley Purchase Price: $1,050,000 Agent: Charter One Realty Deposit: $10,000 Appraised Value: $820,000 3. Asset: Cable and electronics equipment Purchaser: West 1 CATV Supplies, Inc. Purchase Price: $6,000 Agent: none Deposit: (not mentioned) Appraised Value: No appraisal was conducted 4. Asset: Cable and electronics equipment Purchaser: Quality Cable & Electronics, Inc. Purchase Price: $3,213 Agent: none Deposit: (not mentioned) Appraised Value: No appraisal was conducted 5. Asset: Cable and electronics equipment Purchaser: Adams Global Communications, Inc. Purchase Price: $3,453 Agent: none Deposit: (not mentioned) Appraised Value: No appraisal was conducted 6. Asset: Cable and electronics equipment Purchaser: Broadband Remarketing International, LLC Purchase Price: $42,661 Agent: none Deposit: (not mentioned) Appraised Value: No appraisal was conducted 7. Asset: Cable and electronics equipment Purchaser: Digicomm International, Inc. Purchase Price: $110,376 Agent: none Deposit: (not mentioned) Appraised Value: No appraisal was conducted The maximum consideration to be paid for assets sold pursuant to the Court-approved Excess Asset Sale Procedures is $1,000,000. Shelley C. Chapman, Esq., at Willkie Farr & Gallagher, in New York, contends that the sale of the South Carolina Real Property may be authorized because: -- the net recovery to the Debtors' estate as a result of the Sale will not exceed $1,000,000; and -- the appraised value of the Property does not exceed $1,000,000. Based in Coudersport, Pa., Adelphia Communications Corporation -- http://www.adelphia.com/-- is the fifth-largest cable television company in the country. Adelphia serves customers in 30 states and Puerto Rico, and offers analog and digital video services, high-speed Internet access and other advanced services over its broadband networks. The Company and its more than 200 affiliates filed for Chapter 11 protection in the Southern District of New York on June 25, 2002. Those cases are jointly administered under case number 02-41729. Willkie Farr & Gallagher represents the ACOM Debtors. PricewaterhouseCoopers serves as the Debtors' financial advisor. Kasowitz, Benson, Torres & Friedman, LLP, and Klee, Tuchin, Bogdanoff & Stern LLP represent the Official Committee of Unsecured Creditors. (Adelphia Bankruptcy News, Issue No. 132; Bankruptcy Creditors' Service, Inc., 215/945-7000) AIMS WORLDWIDE: Posts $485,389 Net Loss in 2006 1st Fiscal Quarter ------------------------------------------------------------------ AIMS Worldwide, Inc., filed its first quarter financial statements for the three months ended March 31, 2006, with the Securities and Exchange Commission on May 15, 2006. The Company reported a $485,389 net loss on $249,715 of revenues for the three months ended March 31, 2006. At March 31, 2006, the Company's balance sheet showed $2,786,270 in total assets and $4,346,491 in total liabilities, resulting in a $1,560,221 stockholders' deficit. The Company's March 31 balance sheet also showed strained liquidity with $927,826 in total current assets available to pay $4,130,491 in total current liabilities coming due within the next 12 months. Full-text copies of the Company's financial statements for the three months ended March 31, 2006, are available for free at http://researcharchives.com/t/s?a2d Going Concern Doubt As reported in the Troubled Company Reporter on May 17, 2006, Cordovano & Honeck LLP in Denver, Colorado, raised substantial doubt about AIMS Worldwide, Inc.'s ability to continue as a going concern after auditing the Company's consolidated financial statements for the year ended Dec. 31, 2005. The auditor pointed to the Company's operating losses and working capital deficiency. AIMS Worldwide, Inc. -- http://www.aimsworldwide.com/-- is a marketing communications consultancy firm providing organizations with its AIMSolutions branded focused marketing solutions. The Company says AIMS(TM) or Accurate Integrated Marketing Solutions increases the accuracy of the strategic direction of its client's marketing program, improves results and reduces the cost, by refocusing "mass marketing" to a more strategic "One-2-One(TM)" relationship with the ideal customer. AIRADIGM COMMS: Gets Court's Interim Nod on Cash Collateral Use --------------------------------------------------------------- The Honorable Robert D. Martin of the U.S. Bankruptcy Court for the Western District of Wisconsin allowed Airadigm Communications, Inc., on an interim basis, to use cash collateral securing repayment of its debts to Telephone and Data Systems, Inc. Kathryn A. Pamenter, Esq., at Goldberg, Kohn, Bell, Black, Rosenbloom & Moritz, Ltd., in Chicago, Illinois, informed the Court that the Debtor would use the cash collateral to fund its reorganization and continuing business operations. Ms. Pamenter told the Court that the Debtor previously filed for bankruptcy on July 28, 1999. TDS, the Oneida Enterprise Development Authority and Ericsson, Inc., held significant secured claims against the Debtor in the prior bankruptcy case. In November 2000, the W.D. of Wisconsin Bankruptcy Court confirmed a plan of reorganization in the Debtor's first bankruptcy case. In connection with the prior bankruptcy case and in accordance with the 2000 Plan and other loan documents, TDS made advances to the Debtor from time to time and acquired the secured claims of OEDA and Ericsson. When the Debtor filed its second chapter 11 petition, it owed TDS approximately $136,652,535. Of the total prepetition indebtedness, at least $96,652,535 is secured by security interests in all of the Debtor's assets except for the Debtor's licenses issued by the Federal Communications Commission. The licenses are encumbered by liens securing indebtedness to the FCC in the approximate amount of $64,000,000. As adequate protection for its interests, the Court granted TDS replacement liens and security interests to the extent of any diminution in the value of its collateral. The Court will consider approving the Debtor's request on a final basis on June 6, 2006. Headquartered in Little Chute, Wisconsin, Airadigm Communications, Inc. -- http://www.eisnteinpcs.com/-- provides local wireless phone services through its Einstein PCS wireless networking technology. The company filed for chapter 11 protection on July 28, 1999 (Bankr. W.D. Wis. Case No. 99-33500). The Court confirmed its plan of reorganization in 2000. The company filed a second chapter 11 petition on May 8, 2006 (Bankr. W.D. Wis. Case No. 06-10930). Kathryn A. Pamenter, Esq., and Ronald Barliant, Esq., at Goldberg, Kohn, Bell, Black, Rosenbloom & Moritz, Ltd., represent the Debtor in its new bankruptcy proceedings. No Official Committee of Unsecured Creditors has been appointed in the Debtor's new bankruptcy case. In its second bankruptcy filing, the Debtor estimated assets between $10 million to $50 million and debts of more than $100 million. ALBERTSONS INC: Moody's Lowers Corporate Family Rating to Ba3 ------------------------------------------------------------- Moody's Investors Service lowered the long-term ratings of Albertson's, Inc. and its subsidiary American Stores, including the corporate family rating to Ba3 from Ba2. The rating outlook is stable. This rating action concludes the review for possible downgrade initially begun on Sept. 6, 2005. Ratings lowered: Albertson's, Inc. * Corporate family rating to Ba3 from Ba2 * Senior unsecured notes, Medium Term Notes, debentures, mandatory convertible debt and bonds to B2 from Ba3 American Stores Company * Senior unsecured notes, Medium Term Notes, debentures and bonds, guaranteed by Albertson's, Inc., to B2 from Ba3 Rating affirmed: * Albertson's, Inc. * Commercial paper at Not Prime Upon completion of the acquisition of Albertsons by SUPERVALU INC., Moody's will withdraw Albertson's corporate family rating. Should Albertson's commercial paper program be terminated after the pending acquisition of the company, Albertson's short term rating will also be withdrawn. The key drivers of the downgrade of the long-term ratings: (1) the imminent sale of the entire company to a consortium composed of SUPERVALU Inc., CVS Corporation and an investor group led by CERBERUS CAPITAL MANAGEMENT, L.P. Albertson's shareholders have approved the transaction; (2) the pending division of Albertson's assets and operations, post-transaction, with SUPERVALU acquiring about 1124 stores and related support operations, CVS acquiring all of Albertson's standalone drugstore business, and the CERBERUS-led consortium acquiring about 655 underperforming stores in Dallas/Fort Worth, Florida, Northern California, Rocky Mountains and Southwestern divisions; (3) the high leverage of new parent SUPERVALU post- transaction, with debt to EBITDA (based on Moody's standard analytical adjustments) for the combined company likely to be about 4.6 times, even without Albertson's share of under-funded multi-employer pension plans; and (4) Moody's expectation that the legacy debt of both Albertsons and American Stores will likely be held post merger by subsidiaries of SUPERVALU and that it will therefore be effectively subordinated to $4 billion of senior bank facilities at SUPERVALU that will benefit from the guarantees of operating subsidiaries. The Ba3 corporate family rating of Albertsons is based on the company's prospective position as a subsidiary of SUPERVALU. The combined Albertsons and SUPERVALU will be the third largest grocery retailing, with scale in terms of revenues that scores at the investment grade level. However, the significant increase in debt to fund the transaction will make the new SUPERVALU highly leveraged, with pro-forma credit metrics that fall into the Ba-range. The business risk of the combined entity is at the low-Baa or high-Ba level because of expected challenges in achieving the promised post-merger efficiencies, as well as continued competitive inroads by non- traditional retailers who continue to gain market share. The stable rating outlook reflects Moody's expectation that credit metrics of the combined company will remain near pro-forma current levels over the medium-term, as fixed charge burden for debt service, capital investment, and dividend payments will remain substantial relative to operating cash flow, and as grocery retailing competition will remain intense. An upgrade is unlikely within the medium-term because of the lengthy integration process for the combination. Over the longer term, ratings could move upward if the combined company establishes that it can obtain a material portion of the promised post-merger operating efficiencies and if its many geographies are able to maintain market share and operating margins in spite of the high level of competition. Additionally, an upgrade would require a strengthening of financial flexibility such that free cash flow to debt can be sustained above 10%, EBIT covers interest expense by more than 3 times, and debt to EBITDA falls toward 4.25 times. Factors that could lead Moody's to consider a negative rating action include a reversal in debt protection measure improvements such as debt to EBITDA approaching 5 times, EBIT to interest falling below 1.5 times, free cash flow to debt declining to break-even, permanent market share declines in several of the company's key markets, or extended challenges in combining the Albertson's stores with the existing SUPERVALU operations. Headquartered in Boise, Idaho, Albertsons, Inc., operates about 2500 food and drug stores in 37 states. Revenues for the fiscal year ended February 2, 2006 exceeded $40.3 billion. AMARILLO BRACE: Case Summary & 5 Largest Unsecured Creditors ------------------------------------------------------------ Debtor: Amarillo Brace & Limb, Inc. dba Aslan Orthotic & Prosthetic Centers 817 Hoover Drive Lubbock, Texas 79416 Bankruptcy Case No.: 06-50122 Type of Business: The Debtor offers orthotic and prosthetic products and services. Chapter 11 Petition Date: May 31, 2006 Court: Northern District of Texas (Lubbock) Judge: Robert L. Jones Debtor's Counsel: Max Ralph Tarbox, Esq. McWhorter, Cobb & Johnson, LLP P.O. Box 2547, 1722 Broadway Lubbock, Texas 79408 Tel: (806) 762-0214 Fax: (806) 762-8014 Estimated Assets: Less than $50,000 Estimated Debts: $1 Million to $10 Million Debtor's 5 Largest Unsecured Creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ Internal Revenue Service 941 Taxes $668,682 Austin, TX 73301 Income Taxes $8,663 John Hanley Partner Buy-Out $542,505 726 Orange Park Avenue Note Lakeland, FL 33801 State National Bank $276,259 1617 Broadway Lubbock, TX 79408 J & E Investments $38,500 Ford Motor Credit $24,068 AMCAST INDUSTRIAL: Court Approves Asset Sale to Monomoy Capital --------------------------------------------------------------- Monomoy Capital Partners, L.P. agreed to purchase Casting Technology Company, a subsidiary of Amcast Industrial Corporation that manufactures aluminum automotive components for domestic and transplant original equipment manufacturers. Financial terms of the transaction were not disclosed. Monomoy will acquire all of the operating assets of CTC from the estate of Amcast through a pre-negotiated sale of assets under Section 363 of the Bankruptcy Code. The U.S. Bankruptcy Court for the Southern District of Indiana approved the sale on May 24, 2006, and the parties expect to close the transaction by no later than June 7, 2006. CTC utilizes proprietary squeeze cast technology to cast and produce steering knuckles and compressor scrolls for Honda, Nissan, GM and Opel-Europe. The squeeze cast process allows the Company to produce lightweight, safety critical automotive parts with the shape and strength characteristics of a forged component at a fraction of the cost. CTC is located in Franklin, Indiana and has operated as a successful but largely neglected division of Amcast since 1992. "CTC is a terrific operating division of a troubled, bankrupt company," stated Justin Hillenbrand, a Monomoy principal. "We believe in the Company's squeeze cast technology; we have great confidence in Craig Conaty and his management team; and we admire the Company's spotless manufacturing record over the past five years. The Monomoy acquisition will transform CTC into a standalone business and provide CTC with unprecedented financial and strategic resources." Monomoy will retain the current operating management of CTC, including Craig Conaty, Jerry Pilman, Dave Gerken and Mark George, and will provide the new company with a new financial team. Craig Conaty, the current general manager of the CTC division, will assume the position of Chief Executive Officer of the new company. Conway, Mackensie and Dunleavy will provide interim management services over the next six months. "This transaction presents a tremendous opportunity for CTC," Mr. Conaty explained. "Monomoy has made a substantial investment in our core business and has developed a comprehensive program that will improve every aspect of the Company. Their experience in business restructuring and bankruptcy has helped us turn a difficult situation into an exciting new direction for CTC, its employees and customers." Monomoy has reached agreement in principle with SMW, Sanden, GM, Metaldyne, TRW and Opel to continue and expand CTC's current component contracts and has concluded discussions with the Company's largest suppliers to provide trade terms upon the closing of the acquisition. "The cooperation of SMW and Nissan were instrumental to this transaction," said Mr. Hillenbrand. "We thank both for their support and we look forward to a seamless transition to the new CTC on June 7." The acquisition of CTC is the fourth by Monomoy since August of 2005 and will join Awrey Bakeries, LLC, Hess Industries, Inc., and Barjan, LLC in the Monomoy portfolio. Richard Porter, Kevin Morris and James Mazza of Kirkland & Ellis, L.P. represented Monomoy in the transaction. About Monomoy Capital Partners Monomoy Capital Partners, L.P. -- http://www.mcpfunds.com/-- is a private equity fund founded in March 2005 to make controlling investments in smaller middle-market companies that require operational or financial restructuring. Monomoy targets fundamentally sound businesses with revenues less than $150 million and acquires businesses through bankruptcy, out-of-court restructurings, corporate divestitures and other complex transactions. About Amcast Industrial Headquartered in Fremont, Indiana, Amcast Industrial Corporation, manufactures and distributes technology-intensive metal products to end-users and suppliers in the automotive and plumbing industry. The Company and four debtor-affiliates filed for chapter 11 protection on Nov. 30, 2004. The U.S. Bankruptcy Court for the Southern District of Ohio confirmed the Debtors' Third Amended Joint Plan of Reorganization on July 29, 2005. The Debtors emerged from bankruptcy on Aug. 4, 2005. Amcast Industrial Corporation and Amcast Automotive of Indiana, Inc., filed for chapter 11 protection a second time on Dec. 1, 2005 (Bankr. S.D. Ind. Case No. 05-33322). David H. Kleiman, Esq., and James P. Moloy, Esq., at Dann Pecar Newman & Kleiman, P.C., represent the Debtors in their restructuring efforts. Henry A. Efromson, Esq., and Ben T. Caughey, Esq., at Ice Miller LLP, represent the Official Committee of Unsecured Creditors. Kevin I. Dowd at Berkeley Square Group LLC serves as Amcast's financial advisor. The Creditors' Committee receives financial advice from Thomas E. Hill at Alvarez & Marsal, LLC. When the Debtor and its affiliate filed for protection from their creditors, they listed total assets of $97,780,231 and total liabilities of $100,620,855. ASARCO LLC: Settles Dispute with Units Over Insurance Proceeds -------------------------------------------------------------- Before ASARCO LLC and its debtor-affiliates filed for bankruptcy, certain insurance policies were purchased to cover, among other things, asbestos-related liabilities. In June 2005, the Debtors received $2,200,000 from the KWELM group of insolvent London market carriers pursuant to asbestos insurance coverage. ASARCO LLC and its Asbestos Subsidiary Debtors had competing interests in the insurance proceeds, which resulted to a dispute. To settle the dispute, the parties agreed that the insurance proceeds will be used to pay for the services of bankruptcy professionals and advisors of the Debtors and the Official Committee of Unsecured Creditors for the Asbestos Subsidiary Debtors. The insurance proceeds will cover reorganization- related services. The parties also agreed that after the Initial Disbursements, ASARCO will deposit the remainder of the Proceeds into an interest-bearing escrow account to be maintained by Wells Fargo Bank, National Association. Withdrawals, transfers or disbursements from the Escrow Account will be made only upon presentation of a demand to Wells Fargo with the approval of ASARCO, the Asbestos Debtors and the Asbestos Committee, or upon Court order. In July 2005, the Debtors received $955,037 from Bermuda Fire & Marine Insurance Company for the asbestos insurance coverage. The Additional Proceeds was deposited into the Escrow Account and was used to pay the Debtors' bankruptcy professionals and advisors. In December 2005, the Debtors received an additional $761,847 from the KWELM group. The December Proceeds will be deposited into the Escrow Account and will be used to pay bankruptcy professionals and advisors. The December Proceeds may also be used to compensate officers and directors of the Asbestos Subsidiary Debtors and any post-bankruptcy expenses and costs incurred by the Asbestos Subsidiary Debtors in the ordinary course. 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. Lehman Brothers Inc. provides the ASARCO with financial advisory services and investment banking services. Paul M. Singer, Esq., James C. McCarroll, Esq., and Derek J. Baker, Esq., at Reed Smith LLP give legal advice to the Official Committee of Unsecured Creditors and David J. Beckman at FTI Consulting, Inc., gives financial advisory services to the Committee. 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 proceeding. The Court appointed Michael Boudloche as Encycle/Texas, Inc.'s Chapter 7 Trustee. Michael B. Schmidt, Esq., and John Vardeman, Esq., at Law Offices of Michael B. Schmidt represent the Chapter 7 Trustee. (ASARCO Bankruptcy News, Issue No. 22; Bankruptcy Creditors' Service, Inc., 215/945-7000). ASARCO LLC: Assumes Five Salt River Project Agreements ------------------------------------------------------ Salt River Project Agricultural Improvement and Power District provides electricity to ASARCO LLC's mines in the Gila and Pinal counties through five separate Electrical Service Agreements with supplemental Interruptible Riders. SRP asked the U.S. Bankruptcy Court for the Southern District of Texas in Corpus Christi to compel ASARCO to decide whether to assume or reject the five Electric Service Agreements. At the parties' agreement, the Bankruptcy Court authorizes ASARCO to assume all five Agreements and the related Interruptible Riders. The Court directs ASARCO to pay these monetary defaults to SRP: -- $3,134,436 as principal payment to SRP; -- 7% interest per annum from Aug. 9, 2005, until payment date; and -- $57,723 for attorneys' fees. In addition, ASARCO is directed to pay $16,510 to the Pima County Treasurer all ad valorem property taxes due for 2005 on the real estate secured and encumbered by two Deeds of Trust. SRP will continue to offer the Interruptible Rider service for each substation until the earlier of: -- 12 months from the confirmation of a plan of reorganization for ASARCO; -- April 30, 2008; or -- the date the SRP Board of Directors eliminates Interruptible Rider service for all Large General Service customers. ASARCO, SRP, the Official Committee of Unsecured Creditors and The CIT Group/Business Credit, Inc., stipulate and agree that: (a) SRP will extend secured credit for electricity through monthly billing in arrears for all electrical service, with payment to be made no later than 16 days after billing date. If ASARCO fails to pay, SRP will send a notice of default. On the 6th day after receipt of notice of default, if ASARCO still has not paid, SRP may terminate electric service without notice or court approval. (b) The existing security deposit of $560,000 will be applied by SRP to ASARCO's Cure Payment. (c) The two Deeds of Trust filed on record in Pima County presently create valid, enforceable and perfected first priority liens in favor of SRP on the real property to secure all credit extended by SRP for electricity sold to ASARCO. The first priority lien interest created by the Deeds of Trust will be superior to any liens of any ASARCO creditor. (d) The Deeds of Trust will be renewed and modified, and the liens extended, without compromising their first priority lien status, to reduce the default rate of interest to 10%, and to clarify that the default rate of interest applies to all sums ASARCO owes SRP that are past due. (e) If ASARCO's daily average electricity usage exceeds $90,000 over any consecutive 14-day period, SRP may require an additional security deposit in the amount necessary to secure the additional increased usage. At no time will SRP be required to extend unsecured credit to ASARCO. (e) SRP's right to and interest in any cash payments and additional security deposits will be superior to the claimed interest of any creditor of ASARCO, including CIT, except to the extent that an unused balance of any cash security deposit might remain in the hands of SRP after SRP has been paid in full on any postpetition claim against ASARCO. (f) All of ASARCO's existing and future indebtedness to SRP will constitute an administrative expense against the estate. (g) Any post-confirmation extension of credit will be subject to analysis and approval by SRP in accordance with its standard Business Credit Policy and without reference to any agreement or arrangement contained within this Stipulation. SRP will have no obligation to extend post confirmation credit to ASARCO and may in its sole discretion require additional security subsequent to the entry of an order confirming a plan, or in the appointment of a trustee, or a conversion to Chapter 7. (h) The Stipulation will be governed by Arizona laws. Headquartered in Tucson, Arizona, ASARCO LLC -- http://www.asarco.com/-- is an integrated copper mining, smelting and refining company. Grupo Mexico S.A. de C.V. is ASARCO's ultimate parent. The Company filed for chapter 11 protection on Aug. 9, 2005 (Bankr. S.D. Tex. Case No. 05-21207). James R. Prince, Esq., Jack L. Kinzie, Esq., and Eric A. Soderlund, Esq., at Baker Botts L.L.P., and Nathaniel Peter Holzer, Esq., Shelby A. Jordan, Esq., and Harlin C. Womble, Esq., at Jordan, Hyden, Womble & Culbreth, P.C., represent the Debtor in its restructuring efforts. Lehman Brothers Inc. provides the ASARCO with financial advisory services and investment banking services. Paul M. Singer, Esq., James C. McCarroll, Esq., and Derek J. Baker, Esq., at Reed Smith LLP give legal advice to the Official Committee of Unsecured Creditors and David J. Beckman at FTI Consulting, Inc., gives financial advisory services to the Committee. 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 proceeding. The Court appointed Michael Boudloche as Encycle/Texas, Inc.'s Chapter 7 Trustee. Michael B. Schmidt, Esq., and John Vardeman, Esq., at Law Offices of Michael B. Schmidt represent the Chapter 7 Trustee. (ASARCO Bankruptcy News, Issue No. 22; Bankruptcy Creditors' Service, Inc., 215/945-7000). ASARCO LLC: Wants to Ink two Tohono O'odham Settlement Agreements ----------------------------------------------------------------- ASARCO LLC seeks authority from the U.S. Bankruptcy Court for the Southern District of Texas in Corpus Christi to enter into the ASARCO and Tohono O'odham Settlement Agreements. ASARCO LLC is a defendant in United States v. Tucson (U.S. District Court, District of Arizona, No. CV-75-039 TUC FRZ) and Alvarez v. Tucson (U.S. District Court, District of Arizona, No. CV 93-0039 TUC FRZ), in which it is claimed that ASARCO contaminated groundwater through operation of its mines on the San Xavier District of the Nation. Pursuant to the Southern Arizona Water Rights Settlement Agreement of 2004, ASARCO is required to execute these agreements for the adjudication process of ASARCO's lawsuits: A. The ASARCO Agreement Parties to this Agreement are ASARCO, the Tohono O'odham Nation, the San Xavier District, two classes of San Xavier allottees and the United States government. The key provisions of the Agreement are: (a) ASARCO may take up to 10,000 acre-feet per year of the Nation's allocation of Central Arizona Project water to reduce ASARCO's pumping of groundwater on and near the Reservation. Subject to a 13% increase every five years, ASARCO will pay: -- $15 per acre-foot to replace water pumped on the Reservation under wells leased to ASARCO at the Mission Mine by the Nation, and -- $20 per acre-foot to reduce off-Reservation pumping. (b) ASARCO's option to renew the Well Site Lease for an additional 25 years is recognized as already having occurred as of 1997. (c) ASARCO will reduce its groundwater pumping under the Well Site Lease by the same volume as the CAP water delivered to it. (d) ASARCO will construct and maintain the CAP infrastructure at Mission Mine. To finance the construction of the infrastructure, ASARCO may borrow up to $800,000, on a secured basis from the Nation for up to 14 years at 6% interest. The loan will be repaid from the value of Arizona groundwater storage credits available as a result of the Arizona Water Settlements Act of 2004 and state legislation. (e) The parties reached a contingent settlement of the Alvarez groundwater contamination claim. The ground water contamination settlement is effective only if ASARCO begins to use CAP water leased from the Nation. Payments for CAP water will go to a special account called "The Ground Water Contamination Settlement Account" until Asarco has paid $1,500,000. If ASARCO does not use enough CAP water to pay the $1,500,000 within 14 years, ASARCO will supplement the CAP payments based on the schedules set out in the Agreement. If ASARCO chooses to receive CAP water during the first three years after the Effective Date, the Nation, the District, the Allottees and the United States government will waive and release ASARCO from claims for damages to groundwater. (f) The Nation, the Allottees and the United States government waive all claims arising from ASARCO's withdrawal of underground water through the date of the execution of the agreement. They will also release all claims against ASARCO after the date of execution of the agreements to the extent claims arise out of ASARCO's withdrawal of water pursuant to Type 1 and Type 2 state water rights, which grant the holders the right to pump groundwater in certain geographical areas. B. The Tohono O'odham Settlement Agreement This Agreement incorporates the ASARCO Agreement. Parties to this Agreement are the United States government, the state of Arizona, the Nation, the city of Tucson, Farmers Investment Co., the United States v. Tucson Allottee Class, the Alvarez v. Tucson Allottee Class, and ASARCO. The key provisions of the Agreement relevant to ASARCO are: (a) The Nation is obligated to allocate, as a "first right of beneficial use" to the Allottees and the District, 35,000 acre-feet per year of the 50,000 acre-feet per year delivered to the San Xavier District. (b) United States v. Tucson and the water claims in Alvarez v. Tucson will be dismissed with prejudice once the court determines that the Settlement is fair and conditioned only on the anticipated publication of the findings required by the Secretary of the Interior. Judith W. Ross, Esq., at Baker Botts LLP, in Dallas, Texas, asserts that execution of the Agreements is an advantage to ASARCO since it already provides congressionally approved waivers from the United States government and the Indian entities concerning ASARCO's use of its wells. Ms. Ross adds that the ASARCO Agreement settles the dispute whether ASARCO properly exercised its option to renew the Well Site Leases as of 1997. The ASARCO Agreement also provides a possible new water source subject to payment of $1,500,000 over a 14-year period. The new water source will cost ASARCO less, lowering costs of production and pumping. The Agreement also provides waivers for claims in the Alvarez lawsuit. In addition, Ms. Ross says, the ASARCO Agreement provides that "minimum royalties" satisfy the covenants to "diligently prospect, develop and operate" the Mission Mine lands leased to ASARCO, preserving the option not to mine under the Mission Mine Indian leases when it is not profitable to do so. The SAWRSA Proposal provides for a study of a possible land exchange of on-Reservation Mission Mine complex lands for other lands in order to change the jurisdiction for land reclamation responsibilities after the closure. Without the Agreements, Ms. Ross contends that ASARCO will suffer a number of negative consequences, including the continuation of the litigation of the lawsuit concerning the water rights. 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. Lehman Brothers Inc. provides the ASARCO with financial advisory services and investment banking services. Paul M. Singer, Esq., James C. McCarroll, Esq., and Derek J. Baker, Esq., at Reed Smith LLP give legal advice to the Official Committee of Unsecured Creditors and David J. Beckman at FTI Consulting, Inc., gives financial advisory services to the Committee. 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 proceeding. The Court appointed Michael Boudloche as Encycle/Texas, Inc.'s Chapter 7 Trustee. Michael B. Schmidt, Esq., and John Vardeman, Esq., at Law Offices of Michael B. Schmidt represent the Chapter 7 Trustee. (ASARCO Bankruptcy News, Issue No. 22; Bankruptcy Creditors' Service, Inc., 215/945-7000). B-FAST CORP: March 31 Balance Sheet Upside Down by $26.9 Million ---------------------------------------------------------------- b-Fast Corp. filed its second quarter financial statements for the three months ended March 31, 2006, with the Securities and Exchange Commission on May 19, 2006. The Company reported a $432,000 net loss applicable to common stockholders on $1,098,000 of net sales for the three months ended March 31, 2006. At March 31, 2006, the Company's balance sheet showed $7,306,000 in total assets, $29,683,000 in total liabilities, and $4,609,000 in Redeemable Preferred Stock, resulting in a $26,986,000 stockholders' deficit. The Company's March 31 balance sheet also showed strained liquidity with $544,000 in total current assets available to pay $28,904,000 in total current liabilities coming due within the next 12 months. Full-text copies of the Company's financial statements for the three months ended March 31, 2006, are available for free at http://ResearchArchives.com/t/s?a39 Going Concern Doubt WithumSmith+Brown, P.C., in Princeton, New Jersey, raised substantial doubt about b-Fast Corp.'s ability to continue as a going concern after auditing the Company's consolidated financial statements for the year ended Dec. 31, 2005. The auditor pointed to the Company's working capital and stockholders' deficiencies. Based in Newtown, Pennsylvania, b-Fast Corp. supplies ground support services for general aviation aircraft at the Harrisburg International Airport located in Middletown, Pennsylvania. These services include fueling, de-icing, ground handling and storage of aircraft along with the subleasing of hangar and office space to tenants. BAY POINT: Moody's Puts (P)Ba2 Rating on Sr. Sec. Term Loan ----------------------------------------------------------- Moody's Investors Service assigned a provisional (P)Ba2 rating to the senior secured term loan of Bermuda-domiciled Bay Point Holdings Ltd. and a provisional (P)Baa3 insurance financial strength rating to Bay Point Re Ltd, its wholly-owned Bermuda- based operating subsidiary. The outlook for the provisional ratings is stable. Moody's noted that it expects to confirm these ratings upon review of final executed documentation for both Bay Point Holdings and Bay Point Re, provided the documentation is consistent with the terms and conditions specified to date that underlie the provisional ratings. The privately-placed senior secured term loan of Bay Point Holdings, which is being syndicated to financial institutions and other institutional lenders under Section 144A guidelines, is scheduled to incept on May 31, 2006 and to mature on December 31, 2010. The loan is secured by the capital stock of Bay Point Re, and is non-amortizing, but allows for voluntary prepayments, requires mandatory prepayments under certain circumstances, and is callable at a premium. According to Moody's, Bay Point Holdings is a privately held holding company for Bay Point Re, a newly formed Class 3 licensed Bermuda reinsurer that has entered into a quota-share reinsurance treaty with Bermuda-based Harbor Point Re Limited. Bay Point Re will assume specified percentages of certain lines of reinsurance -- including property, marine, energy and certain other lines of business underwritten by Harbor Point Re Limited for the 2006 and 2007 underwriting years. Initial capitalization for Bay Point Re is expected to be up to $250 million, comprised of up to $125 million in a senior secured term loan, cumulative preferred shares and common equity. The company's capital and risk assumption capacity -- or "minimum capital cushion" - is gauged to support a maximum risk load over the life of the transaction as calibrated by the greater of two tests, one involving the ratio of maximum projected in-force premiums, and the other involving a combination of modeled return- periods for the in-force portfolio. Bay Point Re will post its total paid-in capital as cash and securities into a trust to collateralize its reinsurance obligations to Harbor Point Re Limited. Investment holdings are expected to be entirely investment-grade, with an average quality toward the high end of rating spectrum, and a duration that is reasonably matched to Bay Point's expected liability duration. Moody's analysis focused on both structural and contractual features of the Bay Point vehicle, as well as stochastic analysis of the company's existing and expected underwriting and investment portfolios, and its expense and capital structures, which were components of analyzing both the probability of loss, and expected severity of loss for both Bay Point Holdings' debt-holders, and Bay Point Re's policyholder. Moody's stated that Bay Point Re's ratings primarily reflect the company's capitalization level and balance sheet that is unencumbered by legacy exposures, structural characteristics that are designed to offer protection to debt investors, and its conservative investment policy. The rating agency stated that these fundamental strengths are significantly tempered by Bay Point Re's relatively high debt leverage profile, the inherent underwriting volatility of its catastrophe-exposed reinsurance portfolio, some uncertainty about the overall risk composition of its portfolio over time -- given its multi-line and global span, and by parameter risk in the assumptions underlying the risk modeling that forms the basis of the company's capitalization. Moody's further noted that its expectations at the current rating level are that Bay Point Holdings will continue to maintain a financial leverage profile at no more than 50% debt to total capital and that shareholders' equity will not decline by more than 15% over a 12 month period. That said, the rating agency noted that the ratings will likely reflect updated analysis of the cumulative performance of the company, its future overall risk-adjusted capitalization level, and updated prospective probabilistic analysis of its reinsurance portfolio at future points in time. These provisional ratings have been assigned: Bay Point Holdings Ltd. * senior secured term loan due 2010 at (P)Ba2; Bay Point Re Ltd. * insurance financial strength at (P)Baa3. Bay Point Holdings Ltd., based in Bermuda, is the holding company for Bay Point Re Ltd., which is a licensed Class 3 Bermuda insurer that has entered into a quota-share reinsurance treaty with Bermuda-based Harbor Point Re Limited pursuant to which Bay Point Re will assume specified percentages of certain lines of reinsurance business underwritten by Harbor Point on behalf of ceding companies for the 2006 and 2007 underwriting years. Moody's insurance financial strength ratings are opinions of the ability of insurance companies to repay punctually senior policyholder claims and obligations. BEAR STEARNS: Moody's Assigns Low-B Rating on 2 Cert. Classes ------------------------------------------------------------- Moody's Investors Service has assigned a Aaa rating to the senior certificates issued by Bear Stearns Asset Backed Securities I Trust 2006-HE5, Asset-Backed Certificates, Series 2006-HE5, and ratings ranging from Aa1 to Ba2 to the mezzanine and subordinate certificates in the deal. The securitization is backed by fixed-rate and adjustable-rate, closed-end, subprime mortgage loans acquired by EMC Mortgage Corporation. The collateral was originated by Fieldstone Mortgage Company, Town & Country Credit Corporation, and various other originators, none of which originated more than 10% of the mortgage loans. The ratings are based primarily on the credit quality of the loans, and on the protection from subordination, overcollateralization, excess spread, and an interest rate swap agreement. Moody's expects collateral losses to range from 5.35% to 5.85%. EMC Mortgage Corporation will service the loans and act as master servicer. Moody's has assigned EMC Mortgage Corporation its highest servicer quality rating of SQ1 as a primary servicer of first lien subprime loans and a servicer quality rating of SQ2 as a primary servicer of second lien loans. The Complete Rating Actions: Bear Stearns Asset Backed Securities I Trust 2006-HE5 Asset-Backed Certificates, Series 2006-HE5 * Class I-A-1, Assigned Aaa * Class I-A-2, Assigned Aaa * Class I-A-3, Assigned Aaa * Class II-A, Assigned Aaa * Class M-1, Assigned Aa1 * Class M-2, Assigned Aa2 * Class M-3, Assigned Aa3 * Class M-4, Assigned A1 * Class M-5, Assigned A2 * Class M-6, Assigned A3 * Class M-7, Assigned Baa1 * Class M-8, Assigned Baa2 * Class M-9, Assigned Baa3 * Class M-10, Assigned Ba1 * Class M-11, Assigned Ba2 BREK ENERGY: Posts $124,398 Net Loss in 2006 First Fiscal Quarter ----------------------------------------------------------------- Brek Energy Corporation filed its first quarter financial statements for the three months ended March 31, 2006, with the Securities and Exchange Commission on May 15, 2006. The Company reported a $124,398 net loss on $150,763 of revenues for the three months ended March 31, 2006. At March 31, 2006, the Company's balance sheet showed $6,629,883 in total assets, $1,275,341 in total liabilities, and $5,284,409 in stockholders' equity. Full-text copies of the Company's financial statements for the three months ended March 31, 2006, are available for free at http://researcharchives.com/t/s?a30 Going Concern Doubt Mendoza Berger & Company, LLP, in Irvine, California, raised substantial doubt about Brek Energy Corporation's ability to continue as a going concern after auditing the Company's consolidated financial statements for the year ended Dec. 31, 2005. The auditor pointed to the Company's recurring losses from operations. Headquartered in Reno, Nevada, Brek Energy Corporation -- http://www.brekenergy.com/-- is a natural gas and petroleum exploitation, development, and production company that acquires, operates and develops unconventional hydrocarbon prospects, primarily in the Rocky Mountain region. The Company drills in the Riverbend Project located in the Unita Basin of northeastern Utah, targeting the Wasatch, Mesaverde and Blackhawk formations. BRITESMILE INC: Faces Nasdaq Delisting Due to Late 10-Q Filing -------------------------------------------------------------- BriteSmile, Inc., received, on May 23, 2006, a written notification from the staff of the Nasdaq Stock Market stating that the Company's failure to timely file its Quarterly Report on Form 10-Q for the quarterly period ended April 1, 2006, as required by NASD Marketplace Rule 4310(c)(14), would serve as an additional basis for delisting the Company's securities from the Nasdaq Stock Market. The Quarterly Report on Form 10-Q that was the subject of the Staff's notification was filed by the Company on May 23, 2006. The May 23 Notice is in addition to the previously disclosed written notification from the Staff received on Jan. 25, 2006, stating that the Company's common stock would be delisted from The Nasdaq SmallCap Market at the opening of business on Feb. 3, 2006 pursuant to Marketplace Rule 4300 unless the Company provided a specific plan to achieve and sustain compliance with all listing requirements. The Company appealed the Staff's January 25 determination to delist the Company's common stock. A hearing on the matter was held on March 9, 2006, at which representatives of the Company appeared before the Panel to request that the Panel continue to list the Company's common stock on the Nasdaq SmallCap Market. Since that date, the Company has worked to comply with the Panel's conditions for continued listing, which included filing a Quarterly Report on Form 10-Q for the quarterly period ended April 1, 2006 reflecting actual stockholders' equity at April 1, 2006 of at least $2.5 million. The equity reported in the filed Form 10-Q for the period ending April 1, 2006 was $9.3 million. The May 23 Notice further provided that the Panel will consider this additional deficiency in rendering a determination regarding the Company's continued listing on the Nasdaq Capital Market and requested that the Company present its views with respect to this matter to the Panel no later than May 30, 2006. The Company continues to cooperate with the Panel and plans to present it views with respect to this matter in accordance with the NASD Marketplace Rules. Until the Panel renders its decision with respect to the continued listing of the Company's common stock, the Company's common stock will continue to trade on the Nasdaq SmallCap Market. The Company can make no assurance that the Panel will grant the Company's request for continued listing. If the Company's common stock is delisted from the Nasdaq SmallCap Market, it may become eligible thereafter for quotation on the OTC Bulleting Board or in the "Pink Sheets." About BriteSmile Headquartered in Walnut Creek, California, BriteSmile, Inc. (Nasdaq: BSML) -- http://www.britesmile.com/-- develops and markets the most advanced teeth whitening technology available, as well as manages state-of-the-art BriteSmile Professional Teeth Whitening Centers. BriteSmile Spa Centers currently operates in Beverly Hills, Irvine, Palo Alto, Walnut Creek, San Francisco and La Jolla, California; Houston, Texas; Denver, Colorado; Boston, Massachusetts; McLean, Virginia; Atlanta, Georgia; New York, New York; Chicago and Schaumburg, Illinois; and, Phoenix, Arizona. * * * Going Concern Doubt As reported in the Troubled Company Reporter on May 22, 2006, Stonefield Josephson, Inc., expressed substantial doubt about BriteSmile, Inc.'s ability to continue as a going concern after auditing the company's financial statement for the year ended Dec. 31, 2005. The auditing firm pointed to the company's accumulated deficit and net loss. The auditing firm also noted that the company is in the process of selling its entire operations as well as the legal claims against the company. At Dec. 31, 2005, the company's balance sheet showed total assets of $27,842,000 and total liabilities of $30,293,000, resulting in a shareholders' deficit of $2,451,000. CALHOUN CBO: Moody's Puts Ba2 Rated Notes on Watch for Upgrade -------------------------------------------------------------- Moody's Investors Service placed on watch for possible upgrade the rating on these notes issued in 1998 by Calhoun CBO Ltd.: * The U.S. $240,000,000 Senior Secured Floating Rate Notes, Due 2010 Prior Rating: Ba2 Current Rating: Ba2, on watch for possible upgrade The rating action reflects the improvement in the credit quality of the transaction's underlying collateral portfolio since the last rating action, as well as the ongoing delevering of the transaction, according to Moody's. CALPINE CORP: CCAA Creditor Can File Proofs of Claim Until June 30 ------------------------------------------------------------------ The Court of Queen's Bench of Alberta, Judicial District of Calgary, set June 30, 2006, at 5:00 p.m., as the deadline for all creditors owned money by Calpine Corporation's Canadian subsidiaries, collectively called as the CCAA debtors, to file formal written Proofs of Claim. The June 30 bar date applies only to Calpine's subsidiaries currently under Canada's "Companies Creditors Arrangement Act." The CCAA Debtors are: -- Calpine Canada Energy Limited; -- Calpine Canada Power Ltd.; -- Calpine Canada Energy Financial ULC -- Calpine Energy Services Canada Ltd.; -- Calpine Canada Resources Company; -- Calpine Canada Power Services Ltd.; -- Calpine Canada Energy Finance II ULC; -- Calpine Natural Gas Services Limited; -- 3094479 Nova Scotia Company; -- Calpine Energy Services Canada Partnership; -- Calpine Canada Natural Gas Partnership; and -- Calpine Canadian Saltend Limited Partnership Any creditor or party-in-interest asserting a claim, arising prior to Dec. 20, 2005, against any of the CCAA Debtors, should send separate Proofs of Claim for each CCAA Debtor where it asserts a claim by the June 30 Deadline. Proofs of Claim must be sent to Ernst & Young, Inc., the appointed monitor for the CCAA parties. Holders of claims arising as a result of the repudiation or termination by a CCAA Debtor after Dec. 20, 2005, but before April 10, 2006, of any contract lease or other type of agreement should also send a proof of claim to the monitor by the deadline. A separate bar date will be set by further order of the Court for claims arising from the repudiation or termination of any contract, lease or other agreement by a CCAA Debtor after April 10, 2006 Individual Bondholders are not required to file Proofs of Claim since the Trustees under the applicable bond indentures are authorized to file aggregated Proofs of Claim for each series of bonds issued by the CCAA Debtors. A copy of the Claims Procedure Order and the Proof of Claim Document Package is available for free at: http://www.ey.com/ca/calpinecanada Headquartered in San Jose, California, Calpine Corporation -- http://www.calpine.com/-- supplies customers and communities with electricity from clean, efficient, natural gas-fired and geothermal power plants. Calpine owns, leases and operates integrated systems of plants in 21 U.S. states and in three Canadian provinces. Its customized products and services include wholesale and retail electricity, gas turbine components and services, energy management and a wide range of power plant engineering, construction and maintenance and operational services. The Company filed for chapter 11 protection on Dec. 20, 2005 (Bankr. S.D.N.Y. Lead Case No. 05-60200). Richard M. Cieri, Esq., Matthew A. Cantor, Esq., Edward Sassower, Esq., and Robert G. Burns, Esq., Kirkland & Ellis LLP represent the Debtors in their restructuring efforts. Michael S. Stamer, Esq., at Akin Gump Strauss Hauer & Feld LLP, represents the Official Committee of Unsecured Creditors. As of Dec. 19, 2005, the Debtors listed $26,628,755,663 in total assets and $22,535,577,121 in total liabilities. (Calpine Bankruptcy News, Issue No. 9; Bankruptcy Creditors' Service, Inc., 215/945-7000) CELERO TECHNOLOGIES: Ch. 7 Trustee Hires Fox Rothschild as Counsel ------------------------------------------------------------------ The Honorable Diane W. Sigmund of the U.S. Bankruptcy Court for the Eastern District of Pennsylvania gave Terry P. Dershaw, Esq., the chapter 7 trustee appointed in Celero Technologies, Inc.'s bankruptcy case, permission to hire Fox Rothschild LLP as its counsel. The chapter 7 trustee said he selected Fox Rothschild for its ability, integrity and professional experience. Fox Rothschild will: (a) give the chapter 7 trustee legal advice with respect to his powers and duties in the bankruptcy proceedings; (b) prepare in behalf of the chapter 7 trustee the necessary applications, answers, orders, reports and other legal papers; (c) perform all of the chapter 7 trustee's legal services; (d) review all proofs ordinary course claims and prepare a final accounting and distribution. Documents filed with the Court did not disclose the firm's compensation. Edward J. DiDonato, Esq., a partner at the firm assured the Court that the firm and its professionals do not hold material interests adverse to the Debtor's estate and are disinterested as that term defined in Section 101(14) of the Bankruptcy Code. Headquartered in Philadelphia, Pennsylvania, Celero Technologies, Inc., filed for chapter 11 protection on August 22, 2005 (Bankr. E.D. Pa. Case No. 05-31273). Amy E. Vulpio, Esq., Michelle A. Schultz, Esq., and Robert A. Kargen, Esq., at White and Williams LLP represent the Debtor. When the Company filed for protection from its creditors, it listed $500,000 to $1 million in assets and $10 million to $50 million in liabilities. The Court converted the chapter 11 case to a chapter 7 liquidation proceeding on February 22, 2006. The Court appointed Terry P. Dershaw, Esq., as chapter 7 trustee. CENDANT MORTGAGE: S&P Affirms Low-B Ratings on Four Cert. Classes ----------------------------------------------------------------- Standard & Poor's Ratings Services affirmed its ratings on 61 classes of asset-backed certificates from five Cendant Mortgage Capital LLC transactions. In addition, ratings are affirmed on 12 classes from one PHH Mortgage Corp. transaction. The affirmations are based on credit support percentages that are sufficient to maintain the current ratings. These transactions benefit from credit enhancement provided by subordination. As of the April 2006 remittance date, total delinquencies ranged from 0.32% (series 2003-4) to 1.88% (series 2002-1). There were no cumulative losses on these transactions with the exception of series 2003-1, for which cumulative losses (as a percentage of the original trust balance) were 0.05%. The outstanding pool balances ranged from 13.83% (series 2002-1) to 71.74% (series 2003-6) of their original sizes. The collateral for these transactions consists of conventional fixed-rate residential mortgage loans. The loans are secured by first liens on one- to four-family residential properties. Ratings Affirmed: Cendant Mortgage Capital LLC: Series Class Rating ------ ----- ------ 2002-1 A-3, A-4, P, X, B-1, B-2 AAA 2002-1 B-3 AA 2002-8 A-1, A-3, A-4, A-5, A-6, A-7, A-8, A-9, P, X AAA 2003-1 A-1, A-3, A-4, A-5, A-6, A-7, A-8, A-9, A-10 AAA 2003-1 P, X AAA 2003-1 B-1 AA 2003-1 B-2 A 2003-1 B-3 BBB 2003-1 B-4 BB 2003-1 B-5 B 2003-4 I-A-1, I-A-2, I-A-3, I-A-4, I-A-5, I-P, I-X AAA 2003-4 II-A-1, II-A-2, II-A-3, II-A-4, II-P, II-X AAA 2003-4 B-1 AA 2003-4 B-2 A 2003-4 B-3 BBB 2003-4 B-4 BB 2003-4 B-5 B 2003-6 A-1, A-2, A-3, A-4, A-5, A-6, A-7, P, X AAA 2003-6 B-3 BBB PHH Mortgage Corp.: Series Class Rating ------ ----- ------ 2003-3P A-1, A-2, A-3, A-4, A-5, A-6, X AAA 2003-3P B-1 AA 2003-3P B-2 A 2003-3P B-3 BBB 2003-3P B-4 BB 2003-3P B-5 B CENVEO CORP: Moody's Rates Proposed $525 Million Loan at Ba3 ------------------------------------------------------------ Moody's assigned a Ba3 rating to Cenveo Corporation's proposed senior secured credit facilities and affirmed other ratings. Details of the rating action are as follows: Ratings assigned: * $200 million senior secured revolving credit facility, due 2012 -- Ba3 * $325 million senior secured term loan facility, due 2013 -- Ba3 Ratings affirmed: * Corporate Family rating -- B1 * $320 million 7-7/8% senior subordinated notes, due 2008 -- B3 Ratings affirmed, subject to withdrawal: * $300 million senior secured credit facility, due 2008 -- Ba3 * $350 million 9-5/8% senior unsecured notes, due 2012 --B1 The rating outlook is negative. The ratings reflect Cenveo's high leverage of 6.3 times debt to EBITDA, and its reported free cash flow loss in the last twelve months ended March 2006. The ratings also reflect the high degree of competition faced by Cenveo's commercial printing and envelope businesses, and the decline in the traditional documents printing market, exacerbated by the impact of electronic substitution. However, Moody's recognizes the recent stabilization of Cenveo's top line and expects that continued improvement in profitability and reduction in debt would lead to improved operating margins and free cash flow in addition to reduced leverage. The continuing negative outlook is reflective of the event-risk implicit in management's stated intention to pursue acquisitions, and Moody's concern that the company's success in restoring profitability on the cost side will be offset by market-driven margin compression outside of management's control. Proceeds from the proposed term loan, together with $64 million of cash on hand, will be largely used to fund Cenveo's tender offer for its $350 million senior unsecured notes. Pro-forma for the proposed refinancing, Cenveo expects that total debt will decrease by approximately $29 million. Headquartered in Stamford, Connecticut, Cenveo is a leading manufacturer of envelopes and a leading provider of insert and direct mail advertising products. The company reported 2005 sales of approximately $1.7 billion. CGC APARTMENTS: Voluntary Chapter 11 Case Summary ------------------------------------------------- Debtor: CGC Apartments-Grimmett Drive Development LLC c/o Cindy G. Cimerring 1 South Hopper Street Montgomery, Alabama 36107 Bankruptcy Case No.: 06-10927 Chapter 11 Petition Date: May 30, 2006 Court: Western District of Louisiana (Shreveport) Debtor's Counsel: Grant E. Summers, Esq. Davidson, Jones & Summers, APLC 509 Market Street, Suite 800 Shreveport, Louisiana 71101 Tel: (318) 424-4342 Fax: (318) 226-0168 Estimated Assets: $1 Million to $10 Million Estimated Debts: $1 Million to $10 Million The Debtor did not file a list of its 20 largest unsecured creditors. CHANNEL-TRACK: Case Summary & 20 Largest Unsecured Creditors ------------------------------------------------------------ Debtor: Channel-Track & Tube-Way Industries, Inc. P.O. Box 70067 Houston, Texas 77270 Tel: (713) 864-2551 Fax: (713) 868-4550 Bankruptcy Case No.: 06-32247 Debtor affiliate filing separate chapter 11 petition: Entity Case No. ------ -------- Channel-Way Industries, Inc. 06-32248 Type of Business: The Debtor is a manufacturer of support systems for wire, tubing and cable. See http://channel-track.com/ Chapter 11 Petition Date: May 31, 2006 Court: Southern District of Texas (Houston) Debtors' Counsel: Gretchen Gauer McCord, Esq. Ronald J. Sommers, Esq. Nathan Sommers Jacobs 2800 Post Oak Boulevard, 61st Floor Houston, Texas 77056-6102 Tel: (713) 892-4816 Fax: (713) 892-4800 Estimated or Estimated or Total Assets Total Debts ------------- ------------ Channel-Track & Tube-Way $1 Million to $500,000 to Industries, Inc. $10 Million $1 Million Channel-Way $350 $1,067,000 Industries, Inc. A. Channel-Track & Tube-Way Industries, Inc.'s 20 Largest Unsecured Creditors: Entity Claim Amount ------ ------------ Summer Group $200,000 C and H Financial $99,511 4929 Wilshire Boulevard, Suite 280 Los Angeles, CA 90010 Ocean 1 Marine Products, Ltd. $60,928 P.O. Box 4346 Houston, TX 77210 Herbert Lackshin $48,014 3555 Timmons Lane, Suite 1450 Houston, TX 77027 Triple S Steel Supply Co. $31,185 Weinstein Spira & Co. $25,858 Arbor Metals $24,514 Non-Ferrous Extrusions $22,402 Fabrication Technology Association $21,228 Advanced Machine Maintenance $20,855 DIVSPEC $19,942 Spectrum Metals, Inc. $19,486 U.S. Healthworks $14,288 CL Alloys $13,901 Curls Steel Corp. $12,262 Guardomation, Inc. $12,089 Smith Rubin & Associates $11,444 AFCO Aluminum Products $11,194 Tide Air, Inc. $10,923 Southwest Stainless Inc. $10,077 B. Channel-Way Industries, Inc. does not have any creditors who are not insiders. CITYSCAPE HOME: S&P Affirms BB Rating on Class B-1F Certificates ---------------------------------------------------------------- Standard & Poor's Ratings Services lowered its rating on class M-2F of Cityscape Home Equity Loan Trust 1997-C to 'BBB' from 'A'. At the same time, the rating is placed on CreditWatch negative. Concurrently, ratings were affirmed on all other classes from this series and all other Cityscape Home Equity Loan Trust transactions rated by Standard & Poor's. The lowered rating reflects decreased credit support due to losses that have consistently and significantly outpaced excess interest, resulting in the depletion of overcollateralization. The affirmations reflect adequate credit support, which is provided by subordination, overcollateralization, and excess interest. In addition, various classes from series 1996-2, 1996-3, and 1996-4 are insured by policies issued by: * MBIA Insurance Corp., * Financial Security Assurance Inc., or * Financial Guaranty Insurance Co. The ratings on these classes reflect the financial strength of the underlying insurance providers. As of the April 2006 distribution date, total delinquencies for the two non-bond-insured transactions ranged from 37.75% (series 1997-C group 1) to 53.05% (series 1997-B group 2). Serious delinquencies ranged from 31.24% (series 1997-B group 1) to 53.05% (series 1997-B group 2), and cumulative losses ranged from 4.39% (series 1997-C group 2) to 9.84% (series 1997-C group 1). As of the April 2006 distribution date, total delinquencies for the bond-insured transactions ranged from 36.37% (series 1996-2) to 43.73 (series 1996-3). Serious delinquencies ranged from 25.33% (series 1996-4) to 29.93% (series 1996-3), and cumulative losses ranged 9.02% (series 1996-4) to 11.88% (series 1996-2). All of the transactions are backed by fixed- or adjustable-rate subprime home equity mortgage loans secured by first and second liens on owner-occupied one- to four-family residences. Rating Lowered And Placed On Creditwatch Negative: Cityscape Home Equity Loan Trust Home equity pass-thru certificates Rating Series Class To From ------ ----- -- ---- 1997-C M-2F BBB/Watch Neg. A Ratings Affirmed: Cityscape Home Equity Loan Trust Home equity pass-thru certificates Series Class Rating ------ ----- ------ 1996-2 A-5 AAA 1996-3 A-8, A-IO AAA 1996-4 A-8, A-9, A-IO AAA 1997-B A-6, A-7 AAA 1997-B M-1F AA+ 1997-B M-2A BBB 1997-B M-2F A 1997-B B-1F BB 1997-C A-3, A-4, M-1A AAA 1997-C M-1F, M-2A AA 1997-C B-1A BBB CLEAN EARTH: Hires General Capital as Investment Banker ------------------------------------------------------- The U.S. Bankruptcy Court for the Eastern District of Kentucky gave Clean Earth Kentucky, LLC, and Clean Earth Environmental Group, LLC, permission to employ General Capital Partners, LLC, as their investment banker and broker. As reported in the Trouble Company Reporter on March 31, 2006, General Capital will: (a) prepare a program which may include marketing the Debtors' assets through newspapers, magazines, journals, letters, fliers, signs, telephone solicitation, or such other methods as General Capital may deem appropriate; (b) prepare advertising letters, fliers or similar sales materials which would include information regarding the Debtors' assets; (c) locate parties who may have an interest in acquiring or refinancing the Debtors' assets. (d) circulate materials to interested parties regarding the Debtors assets, after completing confidentiality documents with those interested parties. The Debtors give General Capital the right to execute and modify confidentiality agreements on the Debtors' behalf; (e) respond, provide information to, communicate and negotiate with and obtain offers from interested parties and make recommendations to the Debtors as to whether or not a particular offer should be accepted; (f) communicate regularly with the Debtors in connection with the status of General Capital's efforts with respect to the disposition of the Debtors' assets; (g) recommend to the Debtors the proper method of handling any specific problems encountered with respect to the marketing or disposition of the Debtors' assets. (h) facilitate the auction sale for the Debtors' assets in conjunction with the Debtors' counsel. The Debtors told the Court that General Capital will be paid a fixed fee of $20,000. Michael J. Eddy, managing director of General Capital, assured the Court that the Firm is disinterested as that term is defined in Section 101(14) of the Bankruptcy Code. Headquartered in Cynthiana, Kentucky, Clean Earth Kentucky, LLC -- http://www.cleanearthllc.com/-- manufactures specialized sewer machines, street sweepers, and refuse trucks. The Company and its affiliate, Clean Earth Environmental Group, LLC, filed for chapter 11 protection on Jan. 24, 2006. (Bankr. E.D. Ky. Case No. 06-50052). Laura Day DelCotto, Esq., at Wise DelCotto PLLC, represents the Debtors in their restructuring efforts. R. Scott Williams, Esq., at Haskell Slaughter Young & Rediker, LLC, represents the Official Committee of Unsecured Creditors. When the Debtors filed for protection from its creditors, they estimated individual assets and debts between $10 million to $50 million. CLEAN EARTH: SunBridge Fails in Bid to Get Decision on Lease ------------------------------------------------------------- The U.S. Bankruptcy Court for the Eastern District of Kentucky denied SunBridge Capital, Inc., fka Commercial Leasing Corporation's request to compel Clean Earth Environmental Group, LLC to decide whether to accept or reject an unexpired lease. SunBridge and the Debtor are parties to an Equipment Lease dated Oct. 3, 2003. Pursuant to the terms of the Lease, the Debtor has to make 60 monthly rental payments of $3,322 per month. The Debtor was able to pay up to 27 monthly payments and is in default on the terms of the lease. Under the lease, the Debtor was required to pay a late charge, equal to 5% any delayed monthly payment. SunBridge complained that the Debtor had not made any postpetition payments on the lease and that its interests are not being adequately protected. For this reason, SunBridge wanted to get the Debtor's decision on the lease prior to the confirmation of any Plan of Reorganization. The Court Directs the Debtor to provide SunBridge with proof of insurance coverage for the property covered by the Equipment Lease. The Debtor is also required to identify the sublessee of the leased equipment and provide a copy of the sublease agreement. Headquartered in Cynthiana, Kentucky, Clean Earth Kentucky, LLC -- http://www.cleanearthllc.com/-- manufactures specialized sewer machines, street sweepers, and refuse trucks. The Company and its affiliate, Clean Earth Environmental Group, LLC, filed for chapter 11 protection on Jan. 24, 2006. (Bankr. E.D. Ky. Case No. 06-50052). Laura Day DelCotto, Esq., at Wise DelCotto PLLC, represents the Debtors in their restructuring efforts. R. Scott Williams, Esq., at Haskell Slaughter Young & Rediker, LLC, represents the Official Committee of Unsecured Creditors. When the Debtors filed for protection from its creditors, they estimated individual assets and debts between $10 million to $50 million. COEUR D'ALENE: Earns $14.3 Million in Three Months Ended March 31 ----------------------------------------------------------------- Coeur D'Alene Mines Corporation reported $14,338,000 of net income on $44,854,000 of revenues for the three months ended March 31, 2006. At March 31, 2006, the Company's balance sheet showed $749,569,000 in total assets and $247,482,000 in total liabilities and stockholders' equity of $502,087,000. Full-text copies of the Company's financial statements for the quarter ended March 31, 2006, is available at no charge at: http://ResearchArchives.com/t/s?a2c Coeur D'Alene Mines Corporation -- http://www.coeur.com/-- is the world's largest primary silver producer, as well as a significant, low-cost producer of gold. The Company has mining interests in Nevada, Idaho, Alaska, Argentina, Chile, Bolivia and Australia. Coeur D'Alene Mines Corp.'s 1.25% Convertible Senior Notes due 2024 carry Standard & Poor's B- rating. CORD BLOOD: March 31 Balance Sheet Upside Down by $4.3 Million -------------------------------------------------------------- Cord Blood America, Inc., filed its first quarter financial statements for the three months ended March 31, 2006, with the Securities and Exchange Commission on May 16, 2006. The Company's Statement of Operations for the three months ended March 31, 2006, showed a net loss of $1,711,479 on revenues of $656,628. At March 31, 2006, the Company's balance sheet showed $1,301,630 in total assets and $5,658,995 in total liabilities, resulting in a $4,357,364 stockholders' deficit. The Company's March 31 balance sheet also showed strained liquidity with $957,487 in total current assets available to pay $5,654,254 in total current liabilities coming due within the next 12 months. Full-text copies of the Company's financial statements for the three months ended March 31, 2006, are available for free at http://ResearchArchives.com/t/s?a27 Going Concern Doubt Rose, Snyder & Jacobs, in Encino, California, raised substantial doubt about Cord Blood America, Inc.'s ability to continue as a going concern after auditing the Company's consolidated financial statements for the year ended Dec. 31, 2005. The auditing firm pointed to the Company's recurring operating losses, insufficient working capital, and accumulated deficit. Headquartered in West Hollywood, California, Cord Blood America, Inc. (OTCBB:CBAI) -- http://www.cordblood-america.com/-- is the parent company of Cord Partners, which facilitates umbilical cord blood stem cell preservation for expectant parents and their children. Its mission is to be the most respected stem cell preservation company in the industry. Collected through a safe and non-invasive process, cord blood stem cells offer a powerful and potentially life-saving resource for treating a growing number of ailments, including cancer, leukemia, blood, and immune disorders. CRF-18 LLC: S&P Assigns Double-B Rating to Class D Revenue Notes ---------------------------------------------------------------- Standard & Poor's Ratings Services assigned its preliminary ratings to CRF-18 LLC's $47.59 million CRF USA community reinvestment revenue notes series 18. The preliminary ratings are based on information as of May 30, 2006. Subsequent information may result in the assignment of final ratings that differ from the preliminary ratings. The preliminary ratings reflect the credit enhancement consisting of: * overcollateralization, * subordination, * an interest reserve account, and * excess spread. The ratings are also based on CRF's demonstrated servicing ability. This securitization is a pool of small business development loans that are not insured or guaranteed by any governmental agency. Preliminary Ratings Assigned: CRF-18 LLC: Class Rating Amount ----- ------ ------ A-1 AAA $12.97 million A-2 AAA $12.97 million A-3 AAA $12.97 million B A $4.83 million C BBB $1.60 million D BB $2.25 million E NR $5.00 million F NR $2.16 million NR -- Not rated. CUMMINS INC: Fitch Raises Jr. Conv. Sub. Debentures' Rating to BB ----------------------------------------------------------------- Fitch upgraded Cummins Inc. as: -- Issuer Default Rating to 'BBB-' from 'BB+' -- Senior Unsecured Bank facility to 'BBB-' from 'BB+' -- Senior Unsecured Notes to 'BBB-' from 'BB+' -- Junior Convertible Subordinated Debentures to 'BB' from 'BB-' The Rating Outlook is Stable. Approximately $1.3 billion of debt is impacted by this rating action. The rating upgrade reflects: * CMI's strong operating performance in 2005 and into 2006 in each of its segments; * the company's international growth and diversification; and * improved balance sheet. Although 2006 is expected to be a cyclical peak for the Class 8 market, Cummins is well positioned from a product, competitive, and financial standpoint to support an investment grade rating through a cyclical downturn. In 2005, CMI achieved record sales in each of its operating segments which led to the highest gross sales and profits in the company's history. First-quarter results followed with double digit percentage sales and operating profit growth from the prior year. Cash and marketable securities totaled $840 million at year-end 2005 and were $734 million at first-quarter end 2006. Operating EBITDA increased 53.1% to $1.0 billion in 2005, free cash flow increased 26.3% to $518 million, and debt decreased $278 million or 16.9% to $1.367 billion. These led to improved credit metrics, with Total Debt-to-EBITDA at 1.3x at year-end 2005 versus 2.4x year-end 2004. Total Adjusted Debt-to-Operating EBITDAR decreased to 1.8x at year-end 2005 from 3.0x at the prior year- end. Additionally, Operating EBITDA-to-Gross Interest Expense stood at 9.7x at year-end versus 6.1x year-end 2004. This occurred despite heavy working capital requirements to support the company's solid growth. CMI's balance sheet will improve further in 2006 with the expected conversion of $300 million in convertible subordinated debentures in June 2005, and the company's intent to repay $250 million in unsecured notes in December 2006. CMI's 2006 free cash flow is expected to increase further in 2006, which is reinforced by first quarter results. Uses of cash will include: * higher capital expenditures; * higher pension contributions; and * debt reduction. There also exists the potential for accelerated share repurchases. Negative pressure include: * rising commodity costs; * the impact of higher interest rates and fuel prices on end demand; and * the expected downturn in Class 8 demand in 2007. The company is expected to enter 2007 with a very healthy cash cushion. The first-quarter results ended April 2, 2006, were strong and like 2005 were driven by higher volume and improved price realization as well as improved plant efficiencies. CMI sales increased 21.2% to $2.6 billion and operating profit was up 47.6% to $248 million from the first quarter of 2005. CMI's engine segment reported record EBIT of $179 million. Fitch's expectation is that sales and profitability will continue to be strong throughout the year based on the U.S. trucking industry's continued 2007 EPA emissions pre-buy of heavy duty trucks. Over the long-term, Cummins will be required to make continued heavy capital investment in R&D to meet ever-stricter emissions regulations, and faces competition from better-capitalized companies. The industry has also become much more vertically integrated over the last cycle, potentially allowing key customers to turn to more in-house engine sourcing. Nevertheless, the company's recent products have been well-received by the end consumers, and Cummins retains a strong brand reputation for its technology. CMI designs, manufacturers, distributes and services diesel and natural gas engines, electric power generations systems and engine-related component products, including filtration and emissions equipment, fuel systems, controls, and air handling systems. Cummins sells its products to Original Equipment Manufactures, distributors and other customers worldwide. Slightly over half their sales are outside the U.S. CWALT INC: Fitch Assigns Low-B Ratings to Class B-3 & B-4 Certs. ---------------------------------------------------------------- Fitch rated CWALT, Inc.'s mortgage pass-through certificates, alternative loan trust 2006-18CB: -- $1.005 billion classes A-1 through A-16, X, PO and A-R certificates (senior certificates) 'AAA' -- $21 million class M certificates 'AA' -- $7.9 million class B-1 certificates 'A' -- $5.8 million class B-2 certificates 'BBB' -- $4.2 million class B-3 privately offered certificates 'BB' -- $3.2 million class B-4 privately offered certificates 'B' The 'AAA' rating on the senior certificates reflects: * the 4.25% subordination provided by the 2.00% class M; * the 0.75% class B-1; * the 0.55% class B-2; * the 0.40% privately offered class B-3; * the 0.30% privately offered class B-4; and * the 0.25% privately offered class B-5 (not rated by Fitch). Classes M, B-1, B-2, B-3, and B-4 are rated 'AA', 'A', 'BBB', 'BB', and 'B' based on their respective subordination only. Fitch believes the above credit enhancement will be adequate to support mortgagor defaults. In addition, the rating also reflects: * the quality of the underlying mortgage collateral; * strength of the legal and financial structures; and * the master servicing capabilities of Countrywide Home Loans Servicing LP, rated 'RMS2+' by Fitch, a direct wholly owned subsidiary of Countrywide Home Loans, Inc. Approximately 52.49% and 47.51% were originated under CHL's Standard Underwriting Guidelines and Expanded Underwriting Guidelines, respectively. Mortgage loans underwritten pursuant to the Expanded Underwriting Guidelines may have higher loan-to-value ratios, higher loan amounts, higher debt-to-income ratios and different documentation requirements than those associated with the Standard Underwriting Guidelines. In analyzing the collateral pool, Fitch adjusted its frequency of foreclosure and loss assumptions to account for the presence of these attributes. The certificates represent an ownership interest in a group of primarily 30-year conventional, fully amortizing mortgage loans. The pool consists of 30-year fixed-rate mortgage loans totaling $1,049,999,240 as of the initial cut-off date (May 1, 2006), secured by first liens on one-to four- family residential properties. The average loan balance is $219,436. The mortgage pool, as of the initial cut-off date, demonstrates an approximate weighted-average original loan-to-value ratio of 71.75%. The weighted average FICO credit score is approximately 718. Cash-out refinance loans represent 32.35% of the mortgage pool and second homes 5.33%. The states that represent the largest portion of mortgage loans are: * California (20.96%), and * Florida (10.22%). All other states represent less than 5% of the pool as of the cut- off date. None of the mortgage loans are 'high cost' loans as defined under any local, state or federal laws. CWALT purchased the mortgage loans from CHL and deposited the loans in the trust, which issued the certificates, representing undivided beneficial ownership in the trust. The Bank of New York will serve as trustee. For federal income tax purposes, an election will be made to treat the trust fund as one or more real estate mortgage investment conduits. CWMBS INC: Fitch Assigns Low-B Ratings to Class B-3 & B-4 Certs. ---------------------------------------------------------------- Fitch rated CWMBS, Inc.'s mortgage pass-through certificates, CHL Mortgage Pass-Through Trust 2006-J3: -- $210.7 million classes A-1 through A-4, X, A-R, PO (senior certificates) 'AAA' -- $3.6 million class M 'AA' -- $1.1 million class B-1 'A' -- $651,800 class B-2 'BBB' -- $434,600 class B-3 'BB' -- $325,900 class B-4 'B' The 'AAA' rating on the senior certificates reflects: * the 3.00% subordination provided by the 1.65% Class M; * the 0.55% Class B-1; * the 0.30% Class B-2; * the 0.20% privately offered Class B-3; * the 0.15% privately offered Class B-4; and * the 0.15% privately offered Class B-5 (not rated by Fitch). Classes M and B-1 through B-4 are rated 'AA', 'A', 'BBB', 'BB' and 'B' based on their respective subordination only. Fitch believes the above credit enhancement will be adequate to support mortgagor defaults. In addition, the ratings also reflect: * the quality of the underlying mortgage collateral; * strength of the legal and financial structures; and * the master servicing capabilities of Countrywide Home Loans Servicing LP, rated 'RMS2+' by Fitch, a direct wholly owned subsidiary of Countrywide Home Loans, Inc. As of the cut-off date, May 1, 2006, the mortgage pool consists of 30-year fixed-rate mortgage loans secured by first liens on one-to four- family residential properties totaling $217,254,137. The average loan balance is $576,271. The weighted-average original loan-to-value is 68.36%. The weighted average FICO credit score is approximately 748. Cash-out refinance loans represent 36.65% of the mortgage pool and second homes 5.99%. The states that represent the largest portion of mortgage loans are: * California (49.81%), * Colorado (7.33%), and * Florida (5.51%). All other states represent less than 5% of the cut-off date pool balance. None of the mortgage loans are 'high cost' loans as defined under any local, state or federal laws. CWMBS purchased the mortgage loans from CHL and other sellers, and deposited the loans in the trust, which issued the certificates, representing undivided beneficial ownership in the trust. The Bank of New York will serve as trustee. For federal income tax purposes, an election will be made to treat the trust fund as one or more real estate mortgage investment conduits. D&G INVESTMENTS: Plans to Pay Unsec. Creditors in Full under Plan ----------------------------------------------------------------- D & G Investments of West Florida, Inc., proposes to pay holders of unsecured claims in full under the Amended Plan of Reorganization filed with the U.S. Bankruptcy Court for the Middle District of Florida in Tampa. J.C. Benefield, on account of his secured claim will be paid monthly. The claims bears and interest at a prime plus 1.5% per annum starting from the confirmation date with a 20-year amortization and a balloon payment 24 months from the effective date of the plan. All allowed arrears (interest at 8% per annum), costs, and other fees will be added to the mortgage balance at the time of the confirmation to obtain the mortgage balances. Mr. Benefield will retain his lien until his claim is paid in full. For two years after confirmation, the Debtor will try to sell the real property, which secures repayment of the Debtor's debt to Mr. Benefield. The Debtor will pay Mr. Benefield the balance of the loan if it successfully sells the property. Insiders on account of their claims will be paid only after unsecured creditors are paid in full. A copy of the plan is available for a fee at: http://www.researcharchives.com/bin/download?id=060531221535 Headquartered in Seminole, Florida, D & G Investments of West Florida, Inc., filed for chapter 11 protection on July 20, 2005 (Bankr. M.D. Fla. Case No. 05-14434). Thomas C. Little, Esq., at Thomas C. Little, PA, represents the Debtor in its restructuring efforts. When the Debtor filed for protection from its creditors, it estimated assets of $10 million to $50 million and debts of $1 million to $10 million. DANA CORP: Gets Court Okay to Implement Travelers Bonding Program ----------------------------------------------------------------- Dana Corporation and its debtor-affiliates obtained authority from the U.S. Bankruptcy Court for the Southern District of New York to maintain, continue and renew their existing financial guarantee and performance bonding program with Travelers Casualty and Surety Company of America and perform their obligations under the program. In the ordinary course of their businesses, the Debtors are required to provide financial guarantee and performance bonds to third parties to secure the payment or performance of certain obligations, including, without limitation: (a) U.S. customs requirements; (b) notary or permit obligations; (c) court-ordered bonds related to replevin and mechanic's liens; (d) workers' compensation obligations; and (e) various state-required bonds related to taxes and highway use. The Bonds can be drawn by the applicable beneficiary of the Bond should the Debtors default on their payment or performance obligations to the beneficiary. Failure to provide, maintain or to timely replace the Bonds could jeopardize the Debtors' ability to conduct certain of their operations and could significantly and adversely impact their reorganization efforts, Corinne Ball, Esq., at Jones Day, in New York, told the Honorable Burton R. Lifland. The Debtors placed substantially all of their Bonds, which had face value of approximately $64,100,000 as of March 3, 2006, with Travelers, pursuant to various prepetition agreements, including: (i) a General Contract of Indemnity Agreement, dated May 10, 2002, and as amended by a Rider dated Feb. 24, 2005; (ii) a Collateralized Bond Surety Program Registered Pledge and Master Security Agreement, dated Aug. 20, 2001; and (iii) a Pledged Collateral Account Agreement, dated Aug. 20, 2001. The Debtors provided collateral for the Bonds in the form of cash deposits in a pledged account under Travelers' control. In addition, the Debtors were obligated to reimburse Travelers for any draws, costs, expenses, damages, attorneys' fees and losses that may arise in connection with the Bonds issued by Travelers. Continuation of Bonding Program Ms. Ball further told Judge Lifland that the Debtors have explored various alternatives to continuing the Bonding Program with Travelers. The Debtors have determined that Travelers is best situated to continue providing the Bonding Program on a postpetition basis due to: (a) Traveler's willingness to provide Bonds to the Debtors on more favorable terms and conditions; and (b) the administrative and other benefits to the Debtors by maintaining a single program to satisfy substantially all of their bonding needs with one surety. Pursuant to a term sheet, Travelers agreed to continue acting as the Debtors' surety and, at it option and sole discretion, issue Bonds on the Debtors' behalf in the aggregate amount of no more than $150,000,000 outstanding at any time. Travelers will pay any claims made against the Bonds and may incur the expenses as Travelers deems necessary in handling Bond Claims. Dana will assume the Prepetition Agreements, as modified by the Term Sheet, pursuant to Section 365. Moreover, the parties agree to execute a side letter agreement to govern the pricing of the Bonding Program, which will be maintained as strictly confidential, provided, however, that Dana may disclose its estimate of the annual aggregate cost of the Bonding Program and provide additional information to the Creditors Committee on a confidential basis. Collateral Dana will maintain the Collateral in an amount equal to at least 100% of the penal amount of the Bonds to secure any and all losses, costs, expenses, damages, premium obligations, attorneys' fees or other obligations arising out of the Bonds, the Prepetition Agreements or the Bonding Program generally. If additional or replacement Collateral is necessary, the Replacement Collateral must be in the form of (i) an irrevocable letter of credit in form, content and issuer acceptable to Travelers or (ii) cash or cash equivalents pledged to Travelers in an account maintained at Smith Barney and under the control of Travelers. All Collateral will be held as security for all Bonds issued under the Bonding Program. Dana will not be required to provide additional security unless and until the amount of the aggregate penal sum of all Bonds outstanding exceeds the then current required security amount by $500,000. Travelers will be granted a first-priority lien and security interest in all Collateral obtained or held by Travelers, pursuant to the Term Sheet. The Collateral will not be subject to surcharge, assessment or other liens, pursuant to Sections 506 or 364. In addition, Travelers will be granted a "super-priority" administrative expense claim, subordinate to the claims of the Debtors' postpetition DIP lenders, for any claims related to Bonds it may have in excess of the Collateral. The Collateral is not subject to the liens or security interests of any of the Debtors' creditors, including those of the Debtors' postpetition senior lenders in connection with the Debtors' postpetition debtor-in-possession financing agreements. Because the value of the Collateral already posted with Travelers exceeds the value of the outstanding Bonds, the assumption of the Prepetition Agreement does not improve Travelers' position and will not require any additional cash outlay by the estates, Ms. Ball informs the Court. The automatic stay of Section 362 will be modified solely to the extent necessary to permit Travelers consistent with the terms, conditions and limitations of the Bonding Program and any relevant Bond to (i) cancel any Bond after five business days' advance written notice to the Debtors and the Creditors Committee, and (ii) liquidate or use Collateral pledged to Travelers or under their control in accordance with the Bonding Program. Broker's Statement Hylant Group provides the Debtors with brokerage services for their insurance programs. Brian Sullivan, vice president of Hylant Group, informed the Court that the firm explored various alternatives to continue the Debtors' Bonding Program with Travelers Casualty and Surety Company of America. Mr. Sullivan said that the Travelers Bonding Program represents the best program for the Debtors because, among other things: -- the terms and conditions of the Bonds are at least as favorable, if not more so, than those of Traveler's competitors; -- a new bonding program with a different provider would require the Debtors to post duplicate collateral for a period of times; and -- there are additional administrative and other benefits to the Debtors by maintaining a single program to satisfy substantially all of their bonding needs with one surety. About Dana Corporation Headquartered in Toledo, Ohio, Dana Corporation -- http://www.dana.com/-- designs and manufactures products for every major vehicle producer in the world, and supplies drivetrain, chassis, structural, and engine technologies to those companies. Dana employs 46,000 people in 28 countries. Dana is focused on being an essential partner to automotive, commercial, and off-highway vehicle customers, which collectively produce more than 60 million vehicles annually. The company and its affiliates filed for chapter 11 protection on Mar. 3, 2006 (Bankr. S.D.N.Y. Case No. 06-10354). Corinne Ball, Esq., and Richard H. Engman, Esq., at Jones Day, in Manhattan and Heather Lennox, Esq., Jeffrey B. Ellman, Esq., Carl E. Black, Esq., and Ryan T. Routh, Esq., at Jones Day in Cleveland, Ohio, represent the Debtors. Henry S. Miller at Miller Buckfire & Co., LLC, serves as the Debtors' financial advisor and investment banker. Ted Stenger from AlixPartners serves as Dana's Chief Restructuring Officer. Thomas Moers Mayer, Esq., at Kramer Levin Naftalis & Frankel LLP, represents the Official Committee of Unsecured Creditors. When the Debtors filed for protection from their creditors, they listed $7.9 billion in assets and $6.8 billion in liabilities as of Sept. 30, 2005. (Dana Corporation Bankruptcy News, Issue Nos. 8, 9 & 10; Bankruptcy Creditors' Service, Inc., 215/945-7000). DANA CORPORATION: Adds 12 Claims to Tooling Claim Schedule ---------------------------------------------------------- Dana Corporation and its debtor-affiliates discovered additional claims that were not identified in their original motion to pay claims of certain suppliers of tooling, machinery or other equipment. In a supplemental list to the Tooling Claim Schedule, the Debtors identified Buy-Outside Tooling Claims of these suppliers: Tooling Supplier P.O. No. Amount ---------------- -------- ------ Danaven 2416 $270,000 Conicos 3253 341,505 Freudenburg NOK 4449 119,549 General Aluminum 1662 71,350 General Aluminum 2807 91,100 L&W Engineering 2811 9,500 Metaldyne 5567 6,000 New Jernberg 2155 45,000 ODM Tool & Mfg 5538 7,670 Waukesha Tool 4144 27,000 Waukesha Tool 4177 27,150 Automatic Spring 3192 20,495 --------- Total 1,036,319 ========= Headquartered in Toledo, Ohio, Dana Corporation -- http://www.dana.com/-- designs and manufactures products for every major vehicle producer in the world, and supplies drivetrain, chassis, structural, and engine technologies to those companies. Dana employs 46,000 people in 28 countries. Dana is focused on being an essential partner to automotive, commercial, and off-highway vehicle customers, which collectively produce more than 60 million vehicles annually. The company and its affiliates filed for chapter 11 protection on Mar. 3, 2006 (Bankr. S.D.N.Y. Case No. 06-10354). Corinne Ball, Esq., and Richard H. Engman, Esq., at Jones Day, in Manhattan and Heather Lennox, Esq., Jeffrey B. Ellman, Esq., Carl E. Black, Esq., and Ryan T. Routh, Esq., at Jones Day in Cleveland, Ohio, represent the Debtors. Henry S. Miller at Miller Buckfire & Co., LLC, serves as the Debtors' financial advisor and investment banker. Ted Stenger from AlixPartners serves as Dana's Chief Restructuring Officer. Thomas Moers Mayer, Esq., at Kramer Levin Naftalis & Frankel LLP, represents the Official Committee of Unsecured Creditors. When the Debtors filed for protection from their creditors, they listed $7.9 billion in assets and $6.8 billion in liabilities as of Sept. 30, 2005. (Dana Corporation Bankruptcy News, Issue No. 9; Bankruptcy Creditors' Service, Inc., 215/945-7000). DANA CORP: Sets off Allied Ring's $1.1 Million Claim Against Debt ----------------------------------------------------------------- As of March 3, 2006, Dana Corporation owed $1,165,805 to its nondebtor affiliate, Allied Ring Corporation. Allied Rings supplies parts to Dana. On the other hand, Allied Ring owed $2,610,554 to Dana for: * various services provided by Dana Corp.; and * various amounts that the Debtor paid that are reimbursable by Allied Ring pursuant to various agreements. The Debtors inform the U.S. Bankruptcy Court for the Southern District of New York that they intend to set off the Allied Claim against the Dana Debt. The Set-Off will result in a net creditor obligation of $1,444,749 by Allied Ring to Dana. Allied Ring will pay its net obligation to Dana by May 28, 2006. Dana and Allied Ring assert that the proposed set-off complies with the requirements of Sec. 553 of the Bankruptcy Code. Headquartered in Toledo, Ohio, Dana Corporation -- http://www.dana.com/-- designs and manufactures products for every major vehicle producer in the world, and supplies drivetrain, chassis, structural, and engine technologies to those companies. Dana employs 46,000 people in 28 countries. Dana is focused on being an essential partner to automotive, commercial, and off-highway vehicle customers, which collectively produce more than 60 million vehicles annually. The company and its affiliates filed for chapter 11 protection on Mar. 3, 2006 (Bankr. S.D.N.Y. Case No. 06-10354). Corinne Ball, Esq., and Richard H. Engman, Esq., at Jones Day, in Manhattan and Heather Lennox, Esq., Jeffrey B. Ellman, Esq., Carl E. Black, Esq., and Ryan T. Routh, Esq., at Jones Day in Cleveland, Ohio, represent the Debtors. Henry S. Miller at Miller Buckfire & Co., LLC, serves as the Debtors' financial advisor and investment banker. Ted Stenger from AlixPartners serves as Dana's Chief Restructuring Officer. Thomas Moers Mayer, Esq., at Kramer Levin Naftalis & Frankel LLP, represents the Official Committee of Unsecured Creditors. When the Debtors filed for protection from their creditors, they listed $7.9 billion in assets and $6.8 billion in liabilities as of Sept. 30, 2005. (Dana Corporation Bankruptcy News, Issue No. 9; Bankruptcy Creditors' Service, Inc., 215/945-7000). DELTA AIR: Pilots Ratify $280 Million Labor Cost Savings Contract ----------------------------------------------------------------- Delta Air Lines confirmed that its pilots, represented by the Air Line Pilots Association International, ratified a new contract that the company hailed as crucial to Delta's successful reorganization. With 95% of eligible pilots participating, 61% voted in favor of the agreement. The contract, subject to U.S. Bankruptcy Court approval, provides the company with approximately $280 million in average annual pilot labor cost savings through a combination of changes to pay, benefits and work rules. If approved by the Court, the agreement will become effective June 1, 2006 and amendable on Dec. 31, 2009. "The additional pilot savings are a significant, necessary and appreciated component of Delta's restructuring plan," Gerald Grinstein, Delta's chief executive officer, said. "Everyone at Delta at every level is contributing, personally and professionally, to Delta's long-term success and their efforts, coupled with network and revenue improvements and other restructuring initiatives, are delivering measurable results. We stand unified and focused on the shared goal of transforming our airline into a strong, fiercely competitive and profitable company -- one that can grow and provide good jobs and financial rewards for its people and superior service and amenities to its customers. Our company has a solid plan for the future and Delta people are making real progress together." Barring any disruptions, the company is on track to achieve approximately 70% of its business plan's $3 billion annual targeted financial benefits by the end of the year with the goal of successfully emerging from bankruptcy in the first half of 2007. "We believe this new pilot agreement helps provide the competitive framework necessary for Delta's successful restructuring, and is in the best interest of all stakeholders," Edward H. Bastian, Delta's executive vice president, chief financial officer and head of the company's in-court restructuring efforts, said. Delta-DP3 Inc. Agreement Delta also reached an agreement with DP3, Inc., the organization representing retired Delta pilots on pension issues and, in addition to the Pension Benefit Guaranty Corporation, was one of only two parties objecting to the pilot agreement. With its concerns resolved, the retired pilot organization has withdrawn its opposition, and the federal pension agency is now the sole objector to the pilot contract. The company strongly disagrees with the PBGC objection and maintains those assertions are without merit. The matter is pending before the U.S. Bankruptcy Court. About ALPA Founded in 1931, the Air Line Pilots Association represents 62,000 pilots at 39 airlines in the U.S. and Canada. ALPA represents approximately 6,000 active Delta Air Lines pilots and 500 furloughed Delta pilots. Visit the ALPA website at http://www.alpa.org/and the Delta pilots' website at http://www.deltapilots.org/. About Delta Air Based in Atlanta, Ga., Delta Air Lines -- http://www.delta.com/-- is the world's second-largest airline in terms of passengers carried and the leading U.S. carrier across the Atlantic, offering daily flights to 502 destinations in 88 countries on Delta, Song, Delta Shuttle, the Delta Connection carriers and its worldwide partners. The Company and 18 affiliates filed for chapter 11 protection on Sept. 14, 2005 (Bankr. S.D.N.Y. Lead Case No. 05- 17923). Marshall S. Huebner, Esq., at Davis Polk & Wardwell, represents the Debtors in their restructuring efforts. Timothy R. Coleman at The Blackstone Group L.P. provides the Debtors with financial advice. Daniel H. Golden, Esq., and Lisa G. Beckerman, Esq., at Akin Gump Strauss Hauer & Feld LLP, provide the Official Committee of Unsecured Creditors with legal advice. John McKenna, Jr., at Houlihan Lokey Howard & Zukin Capital and James S. Feltman at Mesirow Financial Consulting, LLC, serve as the Committee's financial advisors. As of June 30, 2005, the Company's balance sheet showed $21.5 billion in assets and $28.5 billion in liabilities. DRAGON PHARMA: Earns $1.2 Million in 2006 First Fiscal Quarter -------------------------------------------------------------- Dragon Pharmaceutical Inc., filed its first quarter financial statements for the three months ended March 31, 2006, with the Securities and Exchange Commission on May 15, 2006. The Company reported a $1,223,633 net income on $16,637,377 of net sales for the three months ended March 31, 2006. At March 31, 2006, the Company's balance sheet showed $102,915,911 in total assets, $68,766,980 in total liabilities, and $34,148,931 in stockholders' equity. The Company's March 31 balance sheet also showed strained liquidity with $28,739,605 in total current assets available to pay $45,316,802 in total current liabilities coming due within the next 12 months. Full-text copies of the Company's financial statements for the three months ended March 31, 2006, are available for free at http://ResearchArchives.com/t/s?a32 Going Concern Doubt Webb & Company, P.A., in Boynton Beach, Florida, raised substantial doubt about Dragon Pharmaceutical Inc.'s ability to continue as a going concern after auditing the Company's consolidated financial statements for the year ended Dec. 31, 2005. The auditor pointed to the Company's recurring working capital deficiency. About Dragon Pharmaceutical Dragon Pharmaceuticals Inc. engages in Biotechnology for therapeutic use. The company also develops genetic engineered supplements. EASYLINK SERVICES: Posts $376,000 Net Loss in 2006 First Quarter ---------------------------------------------------------------- Easylink Services Corporation filed its first quarter financial statements for the three months ended March 31, 2006, with the Securities and Exchange Commission on May 15, 2006. The Company reported a $376,000 net loss on $18,461,000 of revenues for the three months ended March 31, 2006. At March 31, 2006, the Company's balance sheet showed $41,005,000 in total assets, $28,996,000 in total liabilities, and $12,009,000 in stockholders' equity. The Company's March 31 balance sheet also showed strained liquidity with $18,069,000 in total current assets available to pay $27,328,000 in total current liabilities coming due within the next 12 months. Full-text copies of the Company's financial statements for the three months ended March 31, 2006, are available for free at http://ResearchArchives.com/t/s?a37 Going Concern Doubt As reported in the Troubled Company Reporter on May 16, 2006, Grant Thornton LLP expressed substantial doubt about Easylink Services Corporation's ability to continue as a going concern after it audited the Company's financial statement for the year ended Dec. 31, 2005. The accounting firm pointed to the Company's history of operating losses, accumulated deficit and negative working capital. About Easylink Services Headquartered in Piscataway, New Jersey, Easylink Services Corporation -- http://www.EasyLink.com/-- provides outsourced business process automation services to medium and large enterprises, including 60 of the Fortune 100, to improve productivity and competitiveness by transforming manual and paper- based business processes into efficient electronic business processes. EL PASO CORP: S&P Upgrades Corporate Credit Rating to B+ from B --------------------------------------------------------------- Standard & Poor's Ratings Services raised its long-term corporate credit rating on pipeline giant El Paso Corp. and its subsidiaries to 'B+' from 'B'. The outlook is positive. Houston, Texas-based El Paso reported about $17.1 billion of debt outstanding as of March 31, 2006. "The upgrades recognize the considerable progress that the company has made refocusing on the core pipeline and oil and gas exploration and production operations and stabilizing its financial position," said Standard & Poor's credit analyst Ben Tsocanos. The company's ventures into diverse unregulated business, which entailed significant financial leveraging and market risk, now represent a minimal component of El Paso's profile. "The upgrade also incorporates our assessment that El Paso has firmed up its once precarious liquidity position ahead of still sizable near-term maturities, though refinancing risk remains," said Mr. Tsocanos. The positive outlook indicates: * that additional near-term ratings improvement is possible; * contingent on further improvement in the financial profile; * demonstrated operational progress in the E&P business; and * completion of the company's exit from power generation and marketing and trading. ENRON CORP: Flagstaff Holds $360.1 Million of Allowed Claims ------------------------------------------------------------- Enron Corp. and Enron North America Corp. have reached a stipulation with Flagstaff Capital Corporation, SPCP Group, LLC, Goldman Sachs Credit Partners, L.P., Stanfield Offshore Leveraged Assets, Ltd., and Bear Stearns Investment Products Inc., resolving their disputes in connection with various credit and related agreements they entered into June 22, 2001. On Nov. 30, 2001, Flagstaff determined that an Event of Default had occurred or was occurring under the Flagstaff Transactions, and Flagstaff exercised its rights under a Put Option Agreement to require Enron to purchase certain Warrant Rights. On that same day, Flagstaff provided Enron with an executed assignment of the Warrant Rights. Once Flagstaff delivered the Put Notice, it was irrevocable and Flagstaff's sole recourse with respect to the Flagstaff Transactions was to allege claims against Enron for payment of a make whole amount. The Royal Bank of Scotland; Mizuho Corporate Bank, Ltd., formerly known as The Industrial Bank of Japan, Limited, New York Branch; The Bank of Tokyo-Mitsubishi Ltd.; Hansen Investments Co.; and Newman Investments Co. were parties to the Flagstaff Transactions. The Flagstaff Parties assert various causes of action against the Debtors in connection with the Flagstaff Transactions. Among others, on March 28, 2003, Mizuho and Banco Bilbao Vizcaya Argentaria S.A. commenced Adversary Proceeding No. 03-2288A against Enron. On Nov. 13, 2003, the Court (1) authorized the sale of Compagnie Papiers Stadacona, which owned Enron's principal newsprint and directory paper asset in Quebec, Canada, and (2) upon consummation of the transactions, directed the escrow of the proceeds. The Flagstaff Parties assert claims for, among others, termination payment pursuant to agreements under the Flagstaff Transactions, Make Whole Amount payments, attorneys' fees and indemnities: Claimant Debtor Claim No. -------- ------ --------- Mizuho Enron 10780 Mizuho ENA 11087 JPMCB Enron 11137 JPMCB Enron 11151 Flagstaff Enron 11152 JPMCB Enron 11153 JPMCB ENA 11154 Flagstaff ENA 11155 Bank of Tokyo ENA 12862 Bank of Tokyo Enron 12863 RBS Entities ENA 12889 RBS Entities Enron 12890 Banco Bilbao ENA 14068 Mitsubishi Trust and Banking Corp. ENA 13661 Claim No. 11153 asserts a contingent secured claim for not less than $367,621,000, and unsecured nonpriority and miscellaneous other claims. The other Flagstaff Claims were filed in unliquidated or contingent amounts. The Reorganized Debtors objected to the validity, priority and amounts asserted in the Claims. Pursuant to a Court-approved Stipulation, the parties agree that: (1) Enron and ENA will pay $20,000,000 to SPCP, as agent for the Flagstaff Claimholders, for distribution on a pro rata basis to the Claimholders in accordance with these percentages: Claim Holder Pro Rata Share ----------- -------------- SPCP 33% Goldman 46% Stanfield 14% Bear Stearns 8% (2) the Warrant and Warrant Rights, as defined in the Warrant Agreement, dated as of June 22, 2001, will be assigned to Enron by Flagstaff, and Flagstaff will have no further rights against Hansen in accordance with the Agreement. At the option of Enron, the Flagstaff Claimholders will: (i) waive any and all of their interests under the Stadacona Proceeds, or (ii) assign to Enron any and all of their interests or rights under the Stadacona Proceeds; (3) Claim Nos. 10780, 11087, 11151, 11153, 11154, 11155, 13661, 14068 and portions of Claim Nos. 12862 and 12863, which specifically relate to the Flagstaff Transactions will be disallowed and expunged with prejudice; and (4) in consideration for the disallowance and expungement of the Flagstaff Claims, five Class 4 claims will be allowed in these amounts: Claim Holder Amount ----------- ------ SPCP $70,831,670 Goldman 97,227,000 Stanfield 29,074,355 Bear Stearns 16,514,305 Enron 146,452,670 ----------- Total $360,100,000 The RBS Entities consist of The Royal Bank of Scotland plc, National Westminster Bank plc, Ulster Bank Ireland Limited, and The Royal Bank of Scotland Commercial Svcs. Limited. Headquartered in Houston, Texas, Enron Corporation filed for chapter 11 protection on December 2, 2001 (Bankr. S.D.N.Y. Case No. 01-16033) following controversy over accounting procedures, which caused Enron's stock price and credit rating to drop sharply. Judge Gonzalez confirmed the Company's Modified Fifth Amended Plan on July 15, 2004, and numerous appeals followed. The Debtors' confirmed chapter 11 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. Luc A. Despins, Esq., Matthew Scott Barr, Esq., and Paul D. Malek, Esq., at Milbank, Tweed, Hadley & McCloy, LLP, represent the Official Committee of Unsecured Creditors. (Enron Bankruptcy News, Issue No. 171; Bankruptcy Creditors' Service, Inc., 15/945-7000) ENRON CORP: Inks Settlements Expunging $121 Million of Claims ------------------------------------------------------------- Reorganized Enron Corporation and its debtor-affiliates ask the U.S. Bankruptcy Court for the Southern District of New York to approve six settlement agreements between: (1) Enron Energy Marketing Corp., and CHB Partnership; (2) EEMC and Enron Energy Services, Inc., on one hand, and the College Districts, consisting 37 entities, including the Community College League of California, and the North Orange County Community College District, on the other; (3) EESI, and Freedman's Steak and Seafood, doing business as Forty-One North; (4) EESI, and Hi Tecmetal Group, Inc.; and (5) Enron Energy Services North America, Inc.; Enron Energy Information Solutions, Inc.; EEMC; and EESI, on one hand, and Johnson & Johnson; Johnson & Johnson Worldwide Energy Management Division; Johnson & Johnson Services, Inc.; and ALZA Corporation, on the other. Before the Debtors filed for bankruptcy, the parties entered into contracts relating to the Debtors' sale of power, Evan R. Fleck, Esq., at Cadwalader, Wickersham & Taft LLP, in New York, relates. Following negotiations, the parties entered into the Settlement Agreements, which provide that: (i) each Counterparty will make settlement payments to the applicable Reorganized Debtor or Debtor; and (ii) they will mutually release each other from all claims related to the contracts. Most of the Settlement Agreements also provide that each scheduled liability or proof of claim related to the Counterparties will be deemed irrevocably withdrawn, with prejudice, and to the extent applicable, expunged and disallowed in its entirety. The parties also agree to the dismissal of three adversary proceedings filed by the Debtors against the Johnson & Johnson Parties: Case No. Debtor -------- ------ 05-01555 EEMC 05-01832 EESI 05-01833 EEIS The proofs of claim filed by the College Districts against the Debtors will be expunged: Claimant Claim No. Claim Amount -------- --------- ------------ Allan Hancock Joint Community 15680 $1,809,523 Barstow College District 18257 692,215 Butte-Glen Comm. Coll. Dist. 16357 2,951,840 Cerritos Community Coll. Dist. 15431 7,299,675 Coast Community Coll. Dist. 14788 7,624,976 College of the Sequoias Dist. 15678 644,108 Comm. College League of Calif. 15422 42,500 Contra Costa Comm. Coll. Dist. 15967 7,846,007 El Camino Community Coll. Dist. 17647 5,119,279 Feather River College Dist. 15978 694,164 Foothill-DeAnza Community 18598 4,299,330 Fremont-Newark Comm. Coll. Dist. 15755 3,076,232 Gavilan Joint Comm. Coll. Dist. 18265 1,263,955 Grossmont-Cuyamaca Community 15630 372,769 Hartnell Comm. College District 14865 2,713,625 Los Angeles Comm. Coll. Dist. 25113 5,654,028 Mira Costa College District 15840 174,707 North Orange County Community 15391 12,594,975 Palomar Comm. College District 16647 447,822 Rio Hondo Comm. Coll. District 14871 3,444,266 San Joaquin Delta Community 16351 6,822,690 San Jose/Evergreen Community 16650 5,512,391 San Luis Obispo County -- Questa College 16541 3,022,765 San Mateo County Comm. 16352 6,383,923 Santa Clarita Comm. Coll. Dist. 14926 3,928,155 Santa Monica Comm. Coll. Dist. 16008 4,656,558 Shasta-Tehama-Trinity Comm. 14861 3,071,315 Sierra Joint Comm. Coll. Dist. 14981 4,243,792 Sonoma County Jr. College Dist. 17320 5,038,155 Southwestern Comm. Coll. Dist. 15695 252,966 Victor Valley Coll. Dist. 16545 4,226,145 West Valley Mission 14744 3,327,884 Yuba Comm. College District 17333 2,631,429 ------------ T O T A L $121,884,162 Headquartered in Houston, Texas, Enron Corporation filed for chapter 11 protection on December 2, 2001 (Bankr. S.D.N.Y. Case No. 01-16033) following controversy over accounting procedures, which caused Enron's stock price and credit rating to drop sharply. Judge Gonzalez confirmed the Company's Modified Fifth Amended Plan on July 15, 2004, and numerous appeals followed. The Debtors' confirmed chapter 11 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. Luc A. Despins, Esq., Matthew Scott Barr, Esq., and Paul D. Malek, Esq., at Milbank, Tweed, Hadley & McCloy, LLP, represent the Official Committee of Unsecured Creditors. (Enron Bankruptcy News, Issue No. 173; Bankruptcy Creditors' Service, Inc., 15/945-7000) ENRON CORP: Settling Lewis and Fiserv Transfers Dispute ------------------------------------------------------- Reorganized Enron Corporation and its debtor-affiliates ask the U.S. Bankruptcy Court for the Southern District of New York to approve a settlement with Lewis & Clark College and Fiserv Securities, Inc., now known as NF Clearing, Inc. According to Richard L. Wasserman, Esq., at Venable LLP, in Baltimore, Maryland, Enron Corp., in 2001, transferred over $1,000,000,000 to various entities to prepay or redeem, prior to the stated maturity date, commercial paper that it had previously issued. On Nov. 6, 2003, Enron filed Adversary Proceeding No. 03-92667, styled Enron Corp. v. J.P. Morgan Securities Inc., et al., against a number of parties, including Lewis & Clark College and Fiserv Securities, Inc., now known as NF Clearing, Inc., to avoid and recover preferential or fraudulent transfers in connection with the early redemption transfers. Enron sought to recover $249,979 from the Lewis Parties in connection with one of the commercial paper debt prepayments. The Lewis Parties denied Enron's material allegations and sought dismissal of the Complaint. After negotiations, Enron and the Lewis Parties entered into a settlement agreement to resolve their dispute. The parties agree that: (1) the Lewis Parties will make a $100,000 settlement payment to Enron; (2) the Lewis Parties will forfeit, waive and release any claim against Enron; and (3) the Reorganized Debtors will dismiss with prejudice the Adversary Proceeding, as against the Lewis Parties. Headquartered in Houston, Texas, Enron Corporation filed for chapter 11 protection on December 2, 2001 (Bankr. S.D.N.Y. Case No. 01-16033) following controversy over accounting procedures, which caused Enron's stock price and credit rating to drop sharply. Judge Gonzalez confirmed the Company's Modified Fifth Amended Plan on July 15, 2004, and numerous appeals followed. The Debtors' confirmed chapter 11 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. Luc A. Despins, Esq., Matthew Scott Barr, Esq., and Paul D. Malek, Esq., at Milbank, Tweed, Hadley & McCloy, LLP, represent the Official Committee of Unsecured Creditors. (Enron Bankruptcy News, Issue No. 172; Bankruptcy Creditors' Service, Inc., 15/945-7000) FRANKLIN CLO: Moody's Rates $13 Million Class E Notes at Ba2 ------------------------------------------------------------ Moody's Investors Service assigned ratings to six classes of notes issued by Franklin CLO V, Limited: Moody's Ratings: (1) Aaa to the $50,000,000 Class A-1 Senior Revolving Notes Due 2018; (2) Aaa to the $303,000,000 Class A-2 Senior Term Notes Due 2018; (3) Aa2 to the $49,000,000 Class B Senior Floating rate notes Due 2018; (4) A2 to the $23,500,000 Class C Deferrable Mezzanine Floating Rate Notes Due 2018; (5) Baa2 to the $21,500,000 Class D Deferrable Mezzanine Floating Rate Notes Due 2018; and (6) Ba2 to the $13,000,000 Class E Deferrable Mezzanine Floating Rate Notes Due 2018. These ratings address the ultimate cash receipt of all interest and principal payments required by the notes' governing documents, and are based on the expected loss posed to holders of the notes relative to the promise of receiving the present value of such payments. The ratings are also based upon the transaction's legal structure and the characteristics of the collateral pool. Franklin Advisers Inc., will manage the selection, acquisition and disposition of collateral on behalf of the Issuer. FUNCTIONAL RESTORATION: Panel Can Hire Chief Restructuring Officer ------------------------------------------------------------------ The U.S. Bankruptcy Court for the Central District of California issued a tentative ruling favoring the appointment of a chief restructuring officer for Functional Restoration Medical Center Inc. The Official Committee of Unsecured Creditors appointed in the Debtor's bankruptcy case requested the retention of a CRO after Siemens Financial Services and Siemens Medical Solutions, creditors of the Debtor, filed a motion appointing a chapter 11 trustee or in the alternative, an examiner with expanded powers. The Committee believes that it would be inappropriate to appoint a chapter 11 trustee since the problem is incompetence. According to the Committee failed to: -- timely file its Schedules of Assets and Liabilities and Statement of Financial Affairs; -- provide the Committee with information regarding the affiliated corporations of Moosa Heikali, M.D., the Debtor's founder and current president; -- respond to the Committee's document requests; and -- operate within the budget approved by the Court because it does not have a centralized accounting system. The Committee asserts that the Debtor's management is incapable of guiding the Debtor through the chapter 11 process. Consequently, the Committee concluded that the Debtor needs the expertise of a professional in order to successfully reorganize its business under chapter 11. Court Ruling The Court contends that the Debtor needs more financial assistance and agreed that the Debtor needs a new and specialized management. The Court declared that reorganization under chapter 11 requires sophisticated business skills that Dr. Heikali lacks. According to the Court, only a fully independent professional can adequately assure creditors and other parties in interest that the money is properly accounted for and that effective accounting controls are in place. If the Debtor and the Committee fails to agree on the appointment of a CRO, the Court, on a statutory basis, will assign a chapter 11 trustee. Headquartered in Encino, California, Functional Restoration Medical Center, Inc. is the second largest owner and operator of MRI centers in Southern California. The Debtor filed for chapter 11 protection on Mar. 9, 2006 (Bankr. C.D. Calif. Case No. 06- 10306). Daniel A. Lev, Esq., at SulmeyerKupetz, represents the Debtor in its restructuring efforts. When the Debtor filed for protection from its creditors, its estimated assets and debts between $10 million and $50 million. FUNCTIONAL RESTORATION: Taps Novian & Novian as Special Counsel --------------------------------------------------------------- Functional Restoration Medical Center, Inc., asks the U.S. Bankruptcy Court for the Central District of California for permission to employ Novian & Novian, LLP, as its special corporate and litigation counsel. Novian & Novian will: a) advise the Debtor on corporate restructuring and finance issues; b) assist in the raising and documentation of additional financing via a debt or equity interests; c) advise the Debtor on employment law issues and restructuring of its labor force; d) advise the Debtor on real estate lease negotiations; and e) provide legal representation in connection with various pending or threatened litigation matters as identified in the Debtor's schedules and statement of affairs, and to represent the Debtor in actions filed by or against the Debtor in the future. The Debtor discloses that the Firm's professionals bill: Professionals Designation Hourly Rate ------------- ----------- ----------- Farid Novian Partner $375 Farhad Novian Partner $375 Susan Rodriguez Associate $325 Josh Mendlesohn Associate $295 Paralegals $95 Law Clerks $75 Mr. Farid Novian assures the Court that the firm is disinterested as the term is defined in Section 101(14) of the Bankruptcy Code and does not hold or represent any interest adverse to the Debtors' estates. Headquartered in Encino, California, Functional Restoration Medical Center, Inc. is the second largest owner and operator of MRI centers in Southern California. The Debtor filed for chapter 11 protection on Mar. 9, 2006 (Bankr. C.D. Calif. Case No. 06- 10306). Daniel A. Lev, Esq., at SulmeyerKupetz, represents the Debtor in its restructuring efforts. XRoads Solutions Group, LLC, serves as its financial advisor. When the Debtor filed for protection from its creditors, its estimated assets and debts between $10 million and $50 million. GENERAL MOTORS: Troy Clarke Named President of GM North America --------------------------------------------------------------- Troy Clarke has been appointed president of GM North America and GM group vice president, effective July 1, General Motors Chairman and CEO Rick Wagoner reported on May 30, 2006. Mr. Clarke, president of GM Asia Pacific since 2004, will work closely with Mr. Wagoner in implementing the GMNA turnaround plan, and will oversee day-to-day operations of GM's largest sales region. Mr. Wagoner has been leading GMNA since April 2005 to develop and drive the region's turnaround strategy. "While much work remains to be done, we have reached several significant milestones in our turnaround plan over the past year," Mr. Wagoner said. "This is the right time to turn the region's day-to-day operations over to Troy, who has the experience and skills to help lead the GMNA team as it continues this unprecedented restructuring. Troy has a track record of success in general management, manufacturing and labor relations in the United States and globally, which will be invaluable in his new assignment." Mr. Wagoner said he and his senior leadership team will continue to be actively involved in executing the next key steps in the GMNA turnaround plan, including: * a successful resolution of the Delphi reorganization; * completion of the accelerated attrition and capacity- reduction programs, and achievement of the $7 billion structural cost-reduction target; * flawless launches of key new cars, trucks and advanced technologies; and * ongoing refinement and acceleration of GM's brand and product-focused marketing strategy. David "Nick" Reilly, a GM vice president and president and CEO of GM Daewoo Auto & Technology Co. in South Korea, will replace Mr. Clarke as president of GM Asia Pacific and will become a GM group vice president, also effective July 1. Mr. Reilly also will succeed Mr. Clarke as chairman of the GMDAT Board of Directors. A replacement for Mr. Reilly as CEO of GMDAT will be announced at a later date. "Nick has demonstrated his managerial strength, most recently in growing GM Daewoo into a profitable enterprise that has quickly become a key part of our global expansion plans, well in advance of what was generally expected," Mr. Wagoner said. "The success of GM Daewoo is a tribute to Nick's leadership and commitment." Vice Chairman John Devine, 62, who reported in December that he planned to retire this year, has decided to make his retirement effective June 1, Mr. Wagoner said. "We all owe John a tremendous debt of gratitude for his vast contributions to GM over the past five years," Mr. Wagoner said. "John took on a number of challenging and important assignments during his tenure as vice chairman and chief financial officer. His extensive experience and expertise in the auto business, along with the respect he enjoys on Wall Street, enabled him to contribute to our turnaround in an exceptional manner." Mr. Clarke, 51, joined GM at the Pontiac division in 1973 and over the succeeding decade held several engineering and manufacturing assignments there. He was named director of manufacturing for GM de Mexico in 1997, and president and managing director in 1998, when he also became a corporate vice president. In 2001, Mr. Clarke was appointed vice president of labor relations in Detroit, and he became group vice president of manufacturing and labor relations in 2002. He served as GM's chief negotiator during the 2003 labor negotiations in North America. Mr. Reilly, 56, has been at GM Daewoo since 2002, when he was named to lead the transition team for the company's formation. He has been a GM vice president since 1997. He began his GM career in 1975 at the former Detroit Diesel Allison Division in the United Kingdom. From 1978 to 1984, he held assignments in Belgium, the United States and Mexico. After serving in operations and manufacturing posts with Vauxhall and the Isuzu joint venture in Luton, England, Mr. Reilly became vice president of quality and reliability for GM Europe in Zurich, Switzerland. Mr. Reilly returned to the United Kingdom in 1996 as chairman and managing director of Vauxhall, and returned to Zurich in 2001 as vice president of sales, marketing and after-sales for GME. About General Motors General Motors Corp. -- http://www.gm.com/-- the world's largest automaker, has been the global industry sales leader for 75 years. Founded in 1908, GM today employs about 327,000 people around the world. With global headquarters in Detroit, GM manufactures its cars and trucks in 33 countries including Mexico. In 2005, 9.17 million GM cars and trucks were sold globally under the following brands: Buick, Cadillac, Chevrolet, GMC, GM Daewoo, Holden, HUMMER, Opel, Pontiac, Saab, Saturn and Vauxhall. GM operates one of the world's leading finance companies, GMAC Financial Services, which offers automotive, residential and commercial financing and insurance. GM's OnStar subsidiary is the industry leader in vehicle safety, security and information services. * * * As reported in the Troubled Company Reporter on May 9, 2006, Moody's Investors Service placed the B3 senior unsecured rating of General Motors Corporation under review for possible downgrade, and affirmed the company's Corporate Family Rating at B3. The rating actions are in response to the company's disclosure that it is pursuing various options to replace or amend its existing $5.6 billion bank credit facility, and that these options could result in providing its bank lenders with a security interest in certain GM assets. GM anticipates that any credit facility replacement or amendment will be completed by the end of the second quarter or early in the third quarter. GENERAL MOTORS: Investing $170MM for Michigan Production Project ---------------------------------------------------------------- General Motors will invest $125 million in its GM Powertrain Ypsilanti Transmission Operations facility for additional capacity to produce a family of Hydra-Matic six-speed rear-, and all-wheel drive automatic transmissions for GM's cars, trucks and SUVs. GM will invest another $45 million for vendor tooling, containers and investment at other locations necessary to support the expanded Ypsilanti operations. At YTO, the investment will help transition hourly and salaried employees from four-speed to six-speed transmission production. It includes partial facility renovation, new machinery, equipment and tooling to support the new processes. Six-speed transmissions are gaining market popularity because they help save fuel while also improving acceleration performance. The six-speed automatic enables a reduced engine rpm at highway cruising speeds, which reduces engine wear and noise, and improves fuel economy. GM is launching new six-speed automatic transmission variants for front-, rear- and all-wheel-drive applications in nearly 40 global GM models in 2006 and 2007. By 2010, GM will have introduced 10 new variants of six-speed automatic transmissions and produced as many as three million six-speeds annually. "The six-speed automatic is a best-of-both-worlds scenario, delivering great fuel economy and improved performance," John Buttermore, GM Powertrain vice president of manufacturing, said. "It is almost like having two transmissions in one -- the high numerical first gear provides tremendous off-the-line acceleration, but the transmission is able to use the six gears to evenly distribute the torque and settle at an overdrive gear that helps deliver great fuel economy. "On behalf of GM, I commend the United Auto Workers, UAW Local 735, and local and state leaders for helping to provide the business case and securing the necessary incentives to support this investment in six-speed transmission production." "This new investment in the Ypsilanti powertrain facility demonstrates GM's confidence that UAW Local 735 members build a world-class quality six-speed RWD transmission," Richard Shoemaker, UAW vice president and director of the GM Department, said. "Six speed transmissions improve fuel economy and engine performance, and we're pleased that UAW Local 735 members will be expanding production of these important components for GM cars and trucks." In 2005, Ypsilanti Transmission Operations began production of the Hydra-Matic 6L80 six-speed transmission, the result of a $300-million investment announced in 2003. Additional capacity was added by a $152-million investment in 2005. Both of these investments were made possible by local and state incentives. The Hydra-Matic 6L50 from Ypsilanti Transmission Operations will debut in certain 2007 Cadillac STS rear- and all-wheel drive performance sedans and the V8-powered SRX crossover SUV. The 6L50 also uses the Driver Shift Control feature, which allows the driver to shift the transmission like a clutchless manual gearbox. "Technology is the driving force of Michigan 's automotive future," Governor Jennifer M. Granholm said. "We are pleased to have worked closely with General Motors to bring this very high- tech development to Michigan and retain jobs in Ypsilanti." "From both a social and an economic standpoint, Ypsilanti Transmission Operations is a vitally important part of our community, and we were pleased to support the incentives necessary for preserving jobs and making the plant competitive for future production," Ypsilanti Township Supervisor Ruth Ann Jamnick, said. "This cooperation benefits GM and the YTO workforce, as well as the citizens of Ypsilanti Township." Kingsley P. Wootton, GM Powertrain Ypsilanti Transmission Operations plant manager, said the investment helps ensure that the plant will continue to be an important part of the community. "Our strong partnership with the UAW and Local 735 resulted in an innovative work agreement that helped usher in a new era of competitively produced world-class six-speed transmissions." "A new team concept arrangement was developed for six-speed production, which includes hourly members of UAW Local 735 and salaried employees. The team concept includes cohesive teams of four to six members, with a designated leader that assists the team, ensuring an efficient operation. Team members work with engineering personnel to provide input on product design and its impact on manufacturing, with a goal of 'zero defects.' A heightened safety initiative, with a workplace goal of 'zero incidents,' is also included in the team concept arrangement." The historic Willow Run/Ypsilanti Transmission Operations facility produced planes during World War II. It was converted to a dedicated transmission plant in 1953, after a fire destroyed another transmission facility in Livonia, Michigan. The 4.8 million-square-foot facility employs 3,600 hourly and salaried employees. About General Motors General Motors Corp. -- http://www.gm.com/-- the world's largest automaker, has been the global industry sales leader for 75 years. Founded in 1908, GM today employs about 327,000 people around the world. With global headquarters in Detroit, GM manufactures its cars and trucks in 33 countries including Mexico. In 2005, 9.17 million GM cars and trucks were sold globally under the following brands: Buick, Cadillac, Chevrolet, GMC, GM Daewoo, Holden, HUMMER, Opel, Pontiac, Saab, Saturn and Vauxhall. GM operates one of the world's leading finance companies, GMAC Financial Services, which offers automotive, residential and commercial financing and insurance. GM's OnStar subsidiary is the industry leader in vehicle safety, security and information services. * * * As reported in the Troubled Company Reporter on May 9, 2006, Moody's Investors Service placed the B3 senior unsecured rating of General Motors Corporation under review for possible downgrade, and affirmed the company's Corporate Family Rating at B3. The rating actions are in response to the company's disclosure that it is pursuing various options to replace or amend its existing $5.6 billion bank credit facility, and that these options could result in providing its bank lenders with a security interest in certain GM assets. GM anticipates that any credit facility replacement or amendment will be completed by the end of the second quarter or early in the third quarter. GMAC COMMERCIAL: S&P Removes Class F Cert.'s BB Rating from Watch ----------------------------------------------------------------- Standard & Poor's Ratings Services affirmed its ratings on four classes of GMAC Commercial Mortgage Securities Inc.'s mortgage pass-through certificates from series 2003-FL1. Concurrently, the rating on class F is taken off CreditWatch with negative implications, where it was placed Oct. 24, 2005. The removal of the CreditWatch negative placement on class F rating reflects the recent full payoff of the Greenspoint Technology Center loan and the payment of all fees related to the loan's modification by the junior participation held outside the trust. The affirmed ratings reflect Standard & Poor's analysis of the underlying collateral. As of the remittance report dated May 11, 2006, the trust principal balance was $45.1 million, down from $411.4 million at issuance. There are two remaining loans, down from 16 at issuance. Both loans are senior participations with floating rates based on a margin over the one-month LIBOR rate. The junior participations are held outside the trust and are not part of the trust collateral. The transaction has not experienced a loss to date. The Hartman portfolio secures the larger remaining loan ($32.1 million), which has a $2.3 million junior participation held outside of the trust. The loan is secured by 18 properties in Houston, Texas, with 1.3 million total sq. ft. The 18 properties include: * eight industrial buildings, * eight retail properties (consisting of two anchored and six unanchored buildings), and * two office properties. The net cash flow is stable compared with the level at issuance, as indicated by the performance for the nine months ended Sept. 30, 2005. The loan was scheduled to mature on Jan. 1, 2006, but the borrower exercised the option to extend the maturity by two years, or until Jan. 1, 2008. No other maturity extensions are available. The Upstate New York portfolio secures the smaller remaining loan ($13 million), which has a $9.5 million junior participation held outside of the trust. Eight office properties with 343,270 total sq. ft. located in and around Albany, Syracuse, and Rochester, N.Y., secure the loan. The net cash flow is stable compared with the level at issuance, as indicated by the performance for the nine months ended Sept. 30, 2005. The loan was transferred to Capmark Finance Inc., the special servicer, after the borrower did not repay the loan at maturity on Jan. 1, 2006. The loan became 90 days delinquent but is now operating under a forbearance agreement that extends through year-end 2006. The forbearance agreement gives the borrower time to sell the collateral properties as well as other noncollateral properties in order to pay off the debt on the Upstate New York portfolio. As was the case with the Greenspoint Technology Center loan, any fees related to the workout of the Upstate New York portfolio will be borne by the junior participation held outside of the trust. There is one two-year extension of the loan's maturity date available. Rating Affirmed And Removed From Creditwatch Negative: GMAC Commercial Mortgage Securities Inc. Mortgage pass-through certificates series 2003-FL1 Rating Credit enhancement Class To From (pooled interests) ----- -- ---- ------------------ F BB BB/Watch Neg. 0.00% Ratings Affirmed: GMAC Commercial Mortgage Securities Inc. Mortgage pass-through certificates series 2003-FL1 Credit enhancement Class Rating (pooled interests) ----- ------ ------------------ C AAA 93.25% D AAA 43.13% E AA 22.73% GPC SYSTEMS: Case Summary & 8 Largest Unsecured Creditors --------------------------------------------------------- Debtor: GPC Systems, Inc. 2108-B Gallows Road Vienna, Virginia 22182 Bankruptcy Case No.: 06-10560 Type of Business: The Debtor develops enhanced custom software systems and Microsoft Great Plains Accounting Applications for companies throughout the Washington, D.C. area. See http://www.gpcsystems.com/ Chapter 11 Petition Date: May 30, 2006 Court: Eastern District of Virginia (Alexandria) Judge: Robert G. Mayer Debtor's Counsel: Thomas P. Gorman, Esq. Tyler, Bartl, Gorman & Ramsdell, PLC 700 South Washington Street, Suite 216 Alexandria, Virginia 22314 Tel: (703) 549-5010 Fax: (703) 549-5011 Estimated Assets: $1 Million to $10 Million Estimated Debts: $1 Million to $10 Million Debtor's 8 Largest Unsecured Creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ Internal Revenue Service Taxes $1,181,662 Special Procedures - Support Staff P.O. Box 10025 Richmond, VA 23240-0025 American Express - Flex Acct. $53,634 P.O. Box 1270 Newark, NJ 07101 Wells Fargo Line of Credit $27,889 P.O. Box 6426 Carol Stream, IL 60197 MBNA America Bank $21,210 GE Capital Colonial Pacific Lease $19,672 American Line of Credit $3,048 US Bank - Visa Card $2,966 Guy & Patsy Caron Office Lease Unknown GSR MORTGAGE: Fitch Places Low-B Ratings on Class B-4 & B-5 Certs. ------------------------------------------------------------------ Fitch rated GSR Mortgage Loan Trust, series 2006-5F, residential mortgage pass-through certificates as: -- $497,513,214 classes 1A-1, 2A-1 through 2A-6, 3A-1 through 3A-7, 4A-1, 4A-2, 5A-1, A-P, and A-X (senior certificates) 'AAA' -- $3,881,000 class M-1 'AA+' -- $6,978,000 class B-1 'AA' -- $3,101,000 class B-2 'A' -- $2,067,000 class B-3 'BBB' -- $1,292,000 class B-4 'BB' -- $775,000 class B-5 'B' The 'AAA' rating on the senior certificates reflects: * the 3.75% subordination provided by the 0.75% class M-1; * 1.35% class B-1; * 0.60% class B-2; * 0.40% class B-3; * 0.25% privately offered class B-4; * 0.15% privately offered class B-5; and * 0.25% privately offered class B-6. Class B-6 is not rated by Fitch. The ratings also reflect: * the quality of the underlying collateral; * the strength of the legal and financial structures; and * the master servicing capabilities of Wells Fargo Bank, N.A., which is rated 'RMS1' by Fitch. This transaction contains certain classes designated as exchangeable certificates and others as regular certificates. Classes 3A-1 through 3A-7 are the exchangeable certificates. Classes 1A-1, 2A-1 through 2A-6, 3A-1, 3A-2, 4A-1, 4A-2, 5A-1, A-P, A-X, M-1, B-1 through B-6 are the regular certificates. All or a portion of certain classes of offered certificates may be exchanged for a proportionate interest in the related exchangeable certificates. All or a portion of the exchangeable certificates may also be exchanged for the related offered certificates in the same manner. This process may occur repeatedly. The classes of offered certificates and of exchangeable certificates that are outstanding at any given time and the outstanding principal balances and notional amounts of these classes will depend upon any related distributions of principal, as well as any exchanges that occur. Offered certificates and exchangeable certificates in any combination may be exchanged only in the proportions shown in the governing documents. Holders of exchangeable certificates will be the beneficial owners of a proportionate interest in the certificates in the related combination group and will receive a proportionate share of the distributions on those certificates. On each distribution date when exchangeable certificates are outstanding, principal distributions from the applicable related certificates are allocated to the related exchangeable certificates that are entitled to principal. The payment characteristics of the classes of exchangeable certificates will reflect the payment characteristics of their related classes of regular certificates. As of the cut-off date, May 1, 2006, the pool of loans consists of 884 fixed-rate mortgage loans, which have both 15 and 30-year amortization terms, with an approximate balance of $516,901,283.63. The mortgage pool has an average unpaid principal balance of $584,729.96 and a weighted average FICO score of 739. The weighted average amortized current loan-to-value ratio is 70.45%. Rate/Term and cash-out refinances represent 20.56% and 27.38%, respectively, of the mortgage loans. The states that represent the largest geographic concentration of mortgaged properties are: * California (34.66%), * New Jersey (6.56%), * Virginia (6.45%), * Florida (6.22%), and * New York (5.46%). All other states comprise fewer than 5% of properties in the pool. None of the mortgage loans are 'high cost' loans as defined under any local, state or federal laws. GS Mortgage Securities Corp. purchased the mortgage loans from each seller and deposited the loans in the trust, which issued the certificates, representing undivided and beneficial ownership in the trust. For federal income tax purposes, the securities administrator will cause multiple real estate mortgage investment conduit elections to be made for the trust. Wells Fargo Bank, N.A. will act as securities administrator and U.S. Bank, N.A. will serve as the trustee. HANGER ORTHOPEDIC: Completes Tender Offer for $205 Mil. Sr. Notes ------------------------------------------------------------------ Hanger Orthopedic Group, Inc., purchased $190,397,000 principal amount of its outstanding 10-3/8% Senior Notes due 2009 (CUSIP No. 41043FAE9) and $15,485,000 principal amount of its outstanding 11- 1/4% Senior Subordinated Notes due 2009 (CUSIP No. 41043FAB5). As a result, the supplemental indentures dated as of May 22, 2006 became operative on May 26, 2006. The tender offer is scheduled to expire at 11:59 p.m., New York City time, on June 6, 2006, unless such date is extended or earlier terminated. Holders of Notes who tender their Notes at or prior to the Expiration Date will be eligible to receive only the Tender Offer Consideration set forth in the Offer to Purchase and Consent Solicitation Statement. Holders who tender Notes must also deliver consents to the proposed amendments with respect to the series of such Notes and with respect to the indentures, which governs such Notes. Holders may not deliver consents without also tendering their Notes and Holders who validly tender their Notes will be deemed to have delivered their consents. Lehman Brothers Inc. and Citigroup Corporate and Investment Banking are the co-dealer managers for the Offers and co- solicitation agents for the Consent Solicitations. Questions about the Offers should be directed to: Lehman Brothers Inc. Telephone (212) 528-7581 (collect) Toll Free (800) 438-3242 or Citigroup Corporate and Investment Banking Attention: Liability Management Toll Free (800) 558-3745 The information agent for the Offers is D.F. King & Co. Inc. Requests for additional sets of the tender offer materials may be directed to: D.F. King & Co. Inc. Toll Free (800) 735-3107 About Hanger Orthopedic Headquartered in Bethesda, Maryland, Hanger Orthopedic Group, Inc. (NYSE: HGR) -- http://www.hanger.com/-- is the world's premier provider of orthotic and prosthetic patient care services. Hanger is the market leader in the United States, owning and operating 621 patient care centers in 46 states including the District of Columbia, with 3,290 employees including 1,021 practitioners (as of 12/31/05). Hanger is organized into four units. The two key operating units are patient care, which consists of nationwide orthotic and prosthetic practice centers and distribution which consists of distribution centers managing the supply chain of orthotic and prosthetic componentry to Hanger and third party patient care centers. The third is Linkia, which is the first and only provider network management company for the orthotics and prosthetics industry. The fourth unit, Innovative Neurotronics, introduces emerging neuromuscular technologies developed through independent research in a collaborative effort with industry suppliers worldwide. * * * As reported in the Troubled Company Reporter on May 8, 2006, Standard & Poor's Ratings Services assigned its 'B' senior secured bank loan rating to Hanger Orthopedic Group Inc.'s (B/Negative/--) proposed $75 million revolving credit facility due in 2011 and $230 million term loan B due in 2013. A recovery rating of '2' also was assigned to the secured loan, indicating the expectation for substantial recovery of principal in the event of a payment default. At the same time, Standard & Poor's assigned its 'CCC+' senior unsecured debt rating to the company's proposed $190 million of senior unsecured notes due in 2014. The rating agency also affirmed its 'B' corporate credit rating. The rating outlook remains negative. HEWETTS ISLAND: Moody's Rates $17 Million Class E Notes at Ba2 -------------------------------------------------------------- Moody's Investors Service assigned ratings to six classes of notes issued by Hewett's Island CLO IV, Ltd. Moody's Ratings: (1) Aaa to the $300,000,000 Class A First Priority Senior Secured Floating Rate Notes Due 2018; (2) Aa2 to the $33,000,000 Class B Second Priority Senior Secured Floating Rate Notes Due 2018; (3) A2 to the $14,500,000 Class C Third Priority Senior Secured Deferrable Floating Rate Notes Due 2018; (4) Baa2 to the $11,000,000 Class D-1 Fourth Priority Mezzanine Deferrable Floating Rate Notes Due 2018; (5) Baa2 to the $3,000,000 Class D-2 Fourth Priority Mezzanine Deferrable Fixed Rate Notes Due 2018; and (6) Ba2 to the $17,000,000 Class E Fifth Priority Mezzanine Deferrable Floating Rate Notes Due 2018. The collateral manager is CypressTree Investment Management Company, Inc and the collateral pool is primarily broadly syndicated loans. INSPIRE INSURANCE: Liquidating Trustee Can Make Initial Payments ---------------------------------------------------------------- The Honorable D. Michael Lynn of the U.S. Bankruptcy Court for the Northern District of Texas in Forth Worth authorized Michael G. Lawrence, the Liquidating Trustee of INSpire Trust -- successor-in-interest to INSpire Insurance Solutions, Inc., and INSpire Claims Management, Inc., -- to pay holders of allowed claims as much as 20% of their allowed claims from Trust funds. J. Robert Forshey, Esq., Forshey & Prostok, LLP, told the Court that one of the largest claims against the Trust, as asserted by Sul America Compania Nacional de Seguros, was for an amount in excess of $5.2 million. The Trust didn't make any distributions to other creditors due the size of Sul America's claim. But since the Liquidating Trustee has already resolved through settlement Sul America's claim, he deems it timely to make distributions. The allowed claims aggregate $1,966,360. The remaining unresolved claims amount to $1,229,488. A copy of the list of allowed and disputed claims is available for free at http://ResearchArchives.com/t/s?a29 INSpire Insurance Solutions, Inc., and INSpire Claims Management, Inc., filed for chapter 11 protection on Feb. 15, 2002 (Bankr. N.D. Tex. Case No. 02-41228). The Bankruptcy Court confirmed the First Amended Plan of Reorganization of the Debtors on Nov. 13, 2002. Michael G. Lawrence is the Liquidating Trustee of INSpire Trust under the Plan. J. Robert Forshey, Esq., Forshey & Prostok, LLP, represents the Liquidating Trustee. INTERLINE BRANDS: S&P Assigns BB- Sr. Unsecured & B Sub. Ratings ---------------------------------------------------------------- Standard & Poor's Ratings Services assigned its preliminary 'BB-' senior unsecured rating and 'B' subordinated rating to the recently filed unlimited shelf registration of Jacksonville, Florida-based Interline Brands Inc. (BB-/Stable/--). The actual senior unsecured debt rating at the time of issuance could be one or two notches below the corporate credit rating, based on the amount of priority liabilities expected to rank ahead of senior unsecured lenders in the event of bankruptcy. Standard & Poor's expects proceeds from any securities issued in the near term to be used to refinance Interline Brands' existing indebtedness. Interline Brands had about $314 million of total debt, including capitalized operating leases, as of March 31, 2006. The ratings on Interline, which competes in the highly fragmented maintenance, repair, and operations distribution industry, reflect its aggressive capital structure and modest financial scope in a competitive industry, partially offset by: * good customer, product, and geographic diversity; * a relatively favorable industry outlook; and * competitive operating margins. Ratings List: Interline Brands Inc.: Corporate credit rating: BB-/Stable/-- Senior secured debt: BB (Recov rtg: 1) Subordinated debt: B Ratings Assigned: Unlimited shelf registration: Senior unsecured debt (prelim): BB- Subordinated debt (prelim): B INVERNESS MEDICAL: Posts $2.6MM Net Loss in Quarter Ended March 31 ------------------------------------------------------------------ Inverness Medical Innovations, Inc., reported a $2,630,000 net loss on $122,753,000 of sales for the three months ended March 31, 2006. At March 31, 2006, the Company's balance sheet showed $906,269,000 in total assets, $399,564,000 in total liabilities and stockholders' equity of $506,705,000. Full-text copies of the Company's financial statements for the quarter ended March 31, 2006, are available at no charge at http://ResearchArchives.com/t/s?a2b Based in Waltham, Massachusetts, Inverness Medical Innovations, Inc. -- http://www.invernessmedical.com/-- is a leading global developer of advanced diagnostic devices and is presently exploring new opportunities for its proprietary electrochemical and other technologies in a variety of professional diagnostic and consumer-oriented applications including immuno-diagnostics with a focus on women's health and cardiology. Inverness Medical Innovations, Inc.'s 8-3/4% Senior Subordinated Notes due 2012 carry Moody's Investors Service's Caa3 rating and Standard & Poor's CCC+ rating. ITC HOMES: Christopher Linscott Names as Examiner ------------------------------------------------- The Honorable Eileen W. Hollowell of the U.S. Bankruptcy Court for the District of Arizona authorized the appointment of Christopher G. Linscott as examiner for ITC Homes, Inc. In an order dated April 25, 2006, the Court directed Ilene J. Lashinsky, the U.S. Trustee for Region 14, to appoint an examiner for the Debtor. The Debtor had asked the Court to appoint an examiner in its Chapter 11 case to: a) investigate and report to the Court, findings regarding allegations made by M&S Unlimited, LLC, and Moshe and Susie Gedalia, that it had engaged in self-dealing, conflicted transactions, conversion or other acts of misconduct; b) review its records regarding the profits, if any, received from the sales of property sold to the Debtor by M&S Unlimited; and c) calculate the amount of M&S Unlimited's claim, taking into account all credits, offsets, setoffs, recruitments, and other matters affecting the claim. M&S Unlimited and the Gedalias supported the Debtor's request. Michael J. Crawford, at Mesch, Clark & Rothschild, PC, told the Court that in addition to the tasks listed in the Debtor's original motion, the Gedalias also want the examiner to: a) investigate the Debtor's business practices to determine if fraudulent transfers were conducted or whether the Debtors engaged in self-dealing and conversion of other ITC assets; b) investigate whether the Debtor and its principal, Ron Amiran, have taken advantage of other corporate opportunities, including the development of the area immediately adjacent to the Gedalias' property and the investment on other companies or parcels for development; and c) examine, calculate and report to the Court the amount of the Gedalias' claims against the Debtor. Nevada District Court Action As reported in the Troubled Company Reporter on March 28, 2006, M&S Unlimited, the Gedalia's, Mr. Amiran and the Debtor are parties to an agreement to develop a tract of land in Vail, Arizona, named Santa Rita Acres Estate. Mr. Amiran formed ITC Homes for the sole purpose of developing that property. M&S Unlimited told the bankruptcy court that during this time, Mr. Amiran had no funds so it agreed to borrow capital for the project. The Gedalias subsequently filed an action in the Nevada state court against Mr. Amiran, the Debtor and related entities seeking emergency relief to stop further diversion of the assets of the real estate development and permanent relief for an accounting and for damages. On Dec. 1, 2005, the Nevada state court entered an order enjoining any further payments to Mr. Amiran and ordering an accounting. M&S Unlimited and the Gedalias pursued the court-ordered accounting through the court-approved auditors and discovered apparent misappropriation of assets. On Jan. 4, 2006, the Nevada Court appointed an independent receiver, retired Brigadier General Ashley Hall. Even after the appointment of Mr. Hall, M&S Unlimited alleges that Mr. Amiran continued to attempt to exert control over ITC Homes. Since assuming operational control, the receiver has continued sales and construction in the ordinary course but has periodically been confronted with various attempts by Mr. Amiran to direct and divert funds from the receivership, or to interfere with the operation of the business. After seeking bankruptcy protection, the Debtor successfully asked the bankruptcy court to require the receiver to turnover its assets. Pursuant to the bankruptcy court's turnover order, the receiver turned over operational control of Debtor's business to Debtor. The Debtor now has control over its assets while the receiver remains in operational control of related non-Debtor entities. M&S Unlimited and the Gedalias asked the Bankruptcy Court to dismiss the Debtor's chapter 11 proceedings. Judge Hollowell denied their request. Headquartered in Vail, Arizona, ITC Homes, Inc. -- http://www.itchomesinc.net/-- develops residential real estates. The Company filed for chapter 11 protection on Jan. 26, 2006 (Bankr. D. Ariz. Case No. 06-00053). Scott D. Gibson, Esq., at Gibson, Nakamura & Decker, PLLC, represents the Debtor. When the Debtor filed for protection from its creditors, it estimated assets and debts of $10 million to $50 million. ITC HOMES: Hires Dustin Allred as Real Estate Broker ---------------------------------------------------- The U.S. Bankruptcy Court for the District of Arizona authorized ITC Homes, Inc., to retain Dustin Allred Real Estate, LLC, as broker. Dustin Allred will market and sell several homes located at the Debtor's new subdivision in Tucson, Arizona. The Debtor will pay Dustin Allred a 1% commission on the sale price, plus a $350 service fee, upon the closing of each new sale in the subdivision. Upon the closing of each home for resale, Dustin Allred is entitled to a 6% commission on the sale price. The Debtor assures the Court that Dustin Allred does not hold or represent any material interest that is adverse to the Debtor or its estate. Dustin Allred can be reached at: Dustin Allred Real Estate 4040 N Weimer #8 Tucson, Arizona 85719 Tel: (520)241-0433 Headquartered in Vail, Arizona, ITC Homes, Inc. -- http://www.itchomesinc.net/-- develops residential real estates. The Company filed for chapter 11 protection on Jan. 26, 2006 (Bankr. D. Ariz. Case No. 06-00053). Scott D. Gibson, Esq., at Gibson, Nakamura & Decker, PLLC, represents the Debtor. When the Debtor filed for protection from its creditors, it estimated assets and debts of $10 million to $50 million. ITC HOMES: Selling Gray Hawk Property for $270,000 -------------------------------------------------- ITC Homes, Inc., asks the U.S. Bankruptcy Court for the District of Arizona for permission to sell real property, located at 10202 East Gray Hawk Road in Tucson, Arizona. The Debtor wants to sell the property, free and clear of all liens, to Sue Ellen Amiran for approximately $270,000. Ms. Amiran is the wife of Ron Amiran, the Debtor's general manager. Ms. Amiran will buy the property pursuant to a Purchase Agreement. A copy of this purchase agreement is available for a fee at: http://www.researcharchives.com/bin/download?id=060530214841 The Debtor obtained an appraisal for the property from Madson Brown & Associates to ensure maximum benefit for the Debtor from the sale. A copy of the Uniform Residential Appraisal Report is available for a fee at: http://www.researcharchives.com/bin/download?id=060530215526 Headquartered in Vail, Arizona, ITC Homes, Inc. -- http://www.itchomesinc.net/-- develops residential real estates. The Company filed for chapter 11 protection on Jan. 26, 2006 (Bankr. D. Ariz. Case No. 06-00053). Scott D. Gibson, Esq., at Gibson, Nakamura & Decker, PLLC, represents the Debtor. When the Debtor filed for protection from its creditors, it estimated assets and debts of $10 million to $50 million. JEROME DUNCAN: Court Converts Case to Chapter 7 Liquidation ----------------------------------------------------------- The Hon. Marci B. McIvor of the U.S. Bankruptcy Court for the Eastern District of Michigan, approved the conversion of Jerome Duncan, Inc.'s chapter 11 case to a chapter 7 liquidation proceeding. Judge McIvor appointed Shelia J. Solomon to serve as the Debtor's interim chapter 7 trustee. As reported in the Trouble Company Reporter on March 27, 2006, Saul Eisen, Esq., the U.S. Trustee for Region 9, told the Court that there was no practical reason for the case to remain under chapter 11 since the Debtor's operation will come to an end shortly. Mr. Eisen concluded that converting the case to a chapter 7 liquidation and have an independent trustee investigate potential claims and causes of action will be more beneficial and efficient. Headquartered in Sterling Heights, Michigan, Jerome Duncan Inc., was the largest dealer of automobiles manufactured by Ford Motor Company in the state of Michigan. The Debtor employed over 200 individuals in its operations and generated between $300 and $500 million in annual sales. The company filed for chapter 11 protection on June 17, 2005 (Bankr. E.D. Mich. Case No. 05-59728). Arnold S. Schafer, Esq., at Schafer and Weiner, PLLC, represents the Debtor in its restructuring efforts. Judith Greenstone Miller, Esq., at Jaffe, Raitt, Heuer & Weiss, PC, represents the Official Committee of Unsecured Creditors. JEROME DUNCAN: Ch. 7 Trustee Hires Jacob & Weingarten as Counsel ---------------------------------------------------------------- The Hon. Marci B. McIvor of the U.S. Bankruptcy Court for the Eastern District of Michigan gave Shelia J. Solomon, the interim chapter 7 Trustee appointed in Jerome Duncan, Inc.'s case, permission to employ Jacob & Weingarten, P.C., as her legal counsel. Jacob & Weingarten will assist Ms. Soloman with all legal matters related to her duties as interim Trustee. Steven P. Schubiner, Esq., a Jacob & Weingarten member, disclosed that the Firm's professionals bill: Professional Hourly Rate ------------ ----------- Steven P. Schubiner, Esq. $340 S. Sher, Esq. $340 Stuart Lee Sherman, Esq. $325 E. David Brockman, Esq. $280 Don W. Blevins, Esq. $260 Robert K. Siegel, Esq. $250 Michael P. Herzoff, Esq. $250 Alan J. Schwartz, Esq. $225 Carole Crosby, Esq. $200 Scott R. Schubiner, Esq. $200 Mr. Schubiner assures the Court that his Firm is a "disinterested person" as that term is defined in Section 101(14) of the Bankruptcy Code. Headquartered in Sterling Heights, Michigan, Jerome Duncan Inc., was the largest dealer of automobiles manufactured by Ford Motor Company in the state of Michigan. The Debtor employed over 200 individuals in its operations and generated between $300 and $500 million in annual sales. The company filed for chapter 11 protection on June 17, 2005 (Bankr. E.D. Mich. Case No. 05-59728). Arnold S. Schafer, Esq., at Schafer and Weiner, PLLC, represents the Debtor. On April 12, 2006, Judge McIvor converted the case to chapter 7 liquidation. Shelia J. Solomon served as the Debtor's interim chapter 7 trustee. JT THORPE: Seeks Court Approval for St. Paul Insurance Pact ----------------------------------------------------------- JT Thorpe, Inc., and its debtor affiliates is seeking approval from the U.S. Bankruptcy Court for the Central District of California for a settlement agreement with St. Paul Fire and Marine Insurance Company, Travelers Casualty and Surety Company fka The Aetna Casualty and Surety Company and The Travelers Indemnity Company. The Settlement Agreement resolves insurance coverage disputes between the Debtors and the St. Paul Parties. Any objections to the Settlement Agreement must be filed not later than June 7, 2006, with the Clerk of the Bankruptcy Court at this address: Office of the Clerk U.S. Bankruptcy Court Central District of California Edward R. Roybal Federal Building and Courthouse 255 East Temple Street Los Angeles, CA 90012-3332 Copies of the objections must also be served to: a) Attorneys for the St. Paul Parties John A. Nadas, Esq. Douglas R. Gooding, Esq. Choate, Hall & Stewart LLP Two International Place Boston, MA 02110 Tel: 617-248-5000 Fax: 617-248-4000 b) Attorneys for the Official Committee of Unsecured Creditors Michael H. Ahrens, Esq. Sheppard Mullin Richter & Hampton LLP 17th Floor Four Embarcadero Center San Francisco, CA 94111 Tel: (415) 434-9100 Fax: (415) 434-3947 c) Attorneys for the future representatives Gary S. Fergus, Esq. Fergus 595 Market Street, Suite 2430 San Francisco, CA 94115 Tel: (415) 537-9032 Fax: (415) 537-9038 A hearing to consider approval on the Settlement Agreement is scheduled on June 21, 2006, 10:00 a.m., at Courtroom 1475 Edward R. Roybal Federal Building and Courthouse No. 255 East Temple Street in Los Angeles, California. Copies of the settlement agreement and related documents are available at http://www.cacb.uscourts.gov/and through written request by mail or facsimile to the Debtors' counsel at this address: Brian L. Davidoff, Esq. Jeanne C. Wanlass, Esq. Rutter Hobbs & Davidoff, Inc. 1901 Avenue of the Stars, Suite 1700 Los Angeles, CA 90067 Tel: (310) 286-1700 Fax: (310) 286-1728 K'S MERCHANDISE: Nears Out-of-Court Settlement with Creditors ------------------------------------------------------------- Gordon Brothers Group, a Boston-based merchant banking and finance company, announced Friday that an out-of-court settlement between Decatur-based K's Merchandise and its creditors is on the horizon. The settlement will allow K's to continue operations and avoid bankruptcy. While speculation over the future of K's, which operates 17 stores in Illinois, Indiana, Iowa, Missouri and Kentucky, has been soaring over the past few weeks, the promise of a settlement marks a pivotal point in the outcome of the 50-year old, family-owned business. Jay R. Indyke, Esq., at Kronish Lieb Weiner & Hellman LLP, representing an ad-hoc committee of major unsecured creditors that was formed in April to assess and negotiate repayment options, confirmed that an agreement has been reached between the committee and Gordon Brothers Group. "Now that the ad-hoc committee and Gordon Brothers Group have reached an agreement, the next step is to send it out to some 2,000 creditors for vote," Mr. Indyke said. "The information is being provided to creditors right now and the committee hopes and expects that we will achieve approval from the creditors on this deal before the end of June." Earlier this year, Gordon Brothers Group stepped in with new financing after LaSalle Retail Finance, K's previous lender, declared the company in default. This much-needed cash infusion along with Gordon Brother Group's retail operating and advisory expertise helped K's avoid legal action by creditors. Now, with a creditor settlement appearing likely, senior management from K's and Gordon Brothers Group can focus on their endeavor to find opportunities for renewed profitability and keep K's legacy alive. Already underway are plans for improving the breadth and depth of K's merchandise selection. These include revamping the furniture department to capitalize on current trends and aggressively expanding the jewelry selection. "Helping retailers like K's find value in their business is what we do best," said Frank Morton, Managing Director, Gordon Brothers Group. "We are enthusiastic about a potential creditor settlement because that means we can deliver on K's current marketing and merchandising plans in an effort bring value to their customers and bolster the business." The 103-year-old Gordon Brothers Group has a history of helping troubled retailers find success by bringing in the necessary operating, advisory and financial expertise needed during challenging times. About K's Merchandise Beginning with one store in Decatur, IL in 1957, K's Merchandise currently operates 17 stores in Illinois, Iowa, Missouri, Indiana and Kentucky. The privately owned company sells a broad range of merchandise from sporting goods to furniture to electronics to jewelry. About Gordon Brothers Group, LLC Gordon Brothers Group -- http://www.gordonbrothers.com-- was founded in 1903, is based in Boston, Mass., and has 20 offices worldwide. Gordon Brothers provides global advisory, operating and financial services to companies at times of growth or restructuring. Gordon Brothers Group purchases and/or sells in excess of $10 billion in assets (including inventory, real estate, industrial assets, accounts receivable and intellectual property) annually and appraises over $30 billion in assets. The firm also provides debt financing and equity capital to consumer products companies, and facilitates mergers and acquisitions with strategic partners. KENNEDY ROAD: Voluntary Chapter 11 Case Summary ----------------------------------------------- Debtor: Kennedy Road Ltd. 16211 North Scottsdale Road, Suite 498 Scottsdale, Arizona 85254 Bankruptcy Case No.: 06-01586 Type of Business: The Debtor's president, Scott Alan Rubin, filed for chapter 11 protection on March 8, 2006 (Bankr. D. of Arizona Case No. 06-00575). Chapter 11 Petition Date: May 30, 2006 Court: District of Arizona (Phoenix) Judge: Sarah Sharer Curley Debtor's Counsel: D. Lamar Hawkins, Esq. Hebert Schenk P.C. 4742 North 24th Street, Suite 100 Phoenix, Arizona 85016 Tel: (602) 248-8203 Fax: (602) 248-8840 Estimated Assets: $1 Million to $10 Million Estimated Debts: $1 Million to $10 Million The Debtor did not file a list of its 20 largest unsecured creditors. MARKSON ROSENTHAL: Sells Packaging Fulfillment Assets to Sonoco --------------------------------------------------------------- Sonoco (NYSE: SON) completed the acquisition of certain point-of- purchase display and packaging fulfillment assets of Markson Rosenthal & Co. The assets were acquired by way of an auction conducted by the U.S. Bankruptcy Court for the District of New Jersey, as part of Markson Rosenthal's Chapter 11 filing. Terms of the acquisition were not disclosed. "We are pleased to have been successful in obtaining these assets, which include display design and packaging fulfillment operations in Bolingbrook, Illinois. These operations tie well with Sonoco's existing P-O-P and service center operations in the United States," Charles Sullivan, executive vice president of Sonoco's global consumer packaging and services operations, said. "Following our acquisition of CorrFlex Graphics in 2004, we have been working to expand our point-of-purchase display and fulfillment operations to meet the needs of our customers. We will continue to look for opportunities to further build this important business." About Sonoco Headquartered in Hartsville, South Carolina, Sonoco -- http://www.sonoco.com/-- founded in 1899, is a $3.5 billion global manufacturer of industrial and consumer packaging products and provider of packaging services, with more than 300 operations in 35 countries serving customers in some 85 nations. About Markson Rosenthal Headquartered in Englewood Cliffs, New Jersey, Markson Rosenthal & Company, Inc. -- http://www.marksonrosenthal.com-- manufactures point of purchase displays and offers contract packaging services. The Company filed for chapter 11 protection on April 14, 2006 (Bankr. D. N.J. 06-13163). Allen J. Underwood, Esq., and Ben Becker, Esq., at Becker, Meisel LLC represent the Debtor in its restructuring efforts. The Official Committee of Unsecured Creditors has selected Douglas J. McGill, Esq., and Robert Malone, Esq., at Drinker, Biddle & Reath as its counsel. When the Debtor filed for protection from its creditors, it reported zero assets and $11,870,120 in debts. MARSH SUPERMARKETS: Gets Purchase Offer from Drawbridge/Cardinal ---------------------------------------------------------------- Marsh Supermarkets, Inc. received an unsolicited letter, dated May 22, 2006, from Drawbridge Special Opportunities Advisors LLC and Cardinal Paragon, Inc. making a proposal to acquire Marsh for $13.625 per share in cash, subject to completion of due diligence, and otherwise on substantially the same terms as the merger agreement with MSH Supermarkets Holding Corp., an affiliate of Sun Capital Partners, Inc. Attached to the May 22 letter from Drawbridge/Cardinal is the form of merger agreement that Drawbridge and Cardinal stated they would be prepared to execute immediately following: (i) the Company's consent to their making their proposal to acquire the Company for $13.625 per share and (ii) a few days for Drawbridge/Cardinal to review and discuss with the Company's management the non-public schedules to the merger agreement with MSH. Marsh-MSH Merger Deal As reported in the Troubled Company Reporter on May 5, 2006, Marsh signed a definitive merger agreement to be acquired by MSH in an all cash transaction for $11.125 per share, and the Board of Directors determined to recommend that the Company's shareholders approve the merger with MSH. The Company's Board of Directors has made no determination to change its recommendation in favor of the MSH merger agreement at this time. Cardinal, like other participants in the strategic alternative process conducted by the Company, executed a confidentiality agreement containing an agreement not to make an offer to acquire Marsh without Marsh's consent. Marsh forwarded the May 22 letter (as well as two other letters it previously received from Drawbridge/Cardinal) to MSH and requested that MSH consent to the Company granting Drawbridge/Cardinal's request. On May 26, 2006, Marsh received a letter from MSH in which MSH indicated its willingness, subject to certain terms, to consent to Marsh granting Drawbridge/Cardinal's request. These terms include: * granting Drawbridge/Cardinal three days to execute a definitive merger agreement with Marsh; * requiring that any definitive agreement entered into between Drawbridge/Cardinal and Marsh expressly waive all standstill agreements with all parties and that Drawbridge/Cardinal forego any breakup fee other than a reimbursement for the breakup fee paid to MSH; and * the merger agreement with MSH be amended to require the Company to reimburse MSH for transaction expenses as well as the breakup fee in the event the Merger Agreement is terminated. The Company has rejected these conditions in view of the existing protection afforded MSH under the provisions of the merger agreement regarding competing proposals, including the $10 million breakup fee. Moreover, even if the Company were to accept those terms, there is no assurance that Drawbridge/Cardinal would make an offer under those conditions. About Marsh Supermarkets Headquartered in Indianapolis, Indiana, Marsh Supermarkets, Inc. -- http://www.marsh.net/-- is a leading regional chain, operating 69 Marsh(R) supermarkets, 38 LoBill(R) Foods stores, eight O'Malia(R) Food Markets, 154 Village Pantry(R) convenience stores, and two Arthur's Fresh Market(R) stores in Indiana, Illinois, and western Ohio. The Company also operates Crystal Food Services(SM), which provides upscale catering, cafeteria management, office coffee, coffee roasting, vending, and concessions, and restaurant management and Primo Banquet Catering and Conference Centers, Floral Fashions(R), McNamara Florist(R), and Enflora(R) -- Flowers for Business. * * * As reported in the Troubled Company Reporter on May 8, 2006, Moody's Investors Service placed the ratings of Marsh Supermarkets, Inc., including the B3 Corporate Family Rating and Caa2 rating of 8.875% Senior Subordinated Notes due 2007 on review-direction uncertain. MIRANT CORP: Brings NRG Takeover Bid Dispute to Delaware Court -------------------------------------------------------------- Mirant Corporation sought a court order in Delaware directing NRG Energy Inc. not to obstruct its unsolicited takeover bid. Mirant, according to the Associated Press, claimed that the New Jersey based energy producer is unfairly rejecting its nearly $8 billion takeover bid by using a "transaction ploy" to turn aside the offer by alleging that Mirant is using confidential information from NRG's former financial adviser. In the lawsuit, Sophia Pearson of Bloomberg News reports that Mirant also accused NRG directors of breaching their fiduciary duties to stockholders by not considering the offer. Mirant is asking a judge to declare that it isn't barred from attempting the takeover, and that NRG cannot rely on the alleged breach of confidentiality as the sole basis to reject the offer, the Bloomberg News said. As reported in the Troubled Company Reporter on May 31, 2006, Mirant made a proposal to acquire NRG at a premium of approximately 33% to NRG's share price as of May 30, 2006. The proposal would be immediately accretive to the pro forma free cash flow per share of Mirant. Mirant received a financing commitment from JPMorgan of approximately $11.5 billion for the transaction. Mirant said that NRG flatly rejected the proposal without engaging in any discussions. Mirant continues to believe that the proposal creates significant value for the owners of both companies and has decided to make its proposal public in a letter to NRG's board of directors. In a press statement covered by the Troubled Company Reporter on May 31, 2006, NRG said it rejected Mirant's hostile offer and declined to enter into talks because the proposal undervalues NRG. About NRG Energy Headquartered in Princeton, New Jersey, NRG Energy, Inc. -- http://www.nrgenergy.com/-- currently owns and operates a diverse portfolio of power-generating facilities, primarily in the Northeast, South Central and Western regions of the United States. Its operations include baseload, intermediate, peaking, and cogeneration facilities, thermal energy production and energy resource recovery facilities. NRG also has ownership interests in generating facilities in Australia and Germany. About Mirant 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), and emerged under the terms of a confirmed Second Amended Plan on Jan. 3, 2006. Thomas E. Lauria, Esq., at White & Case LLP, represented the Debtors in their successful restructuring. When the Debtors filed for protection from their creditors, they listed $20,574,000,000 in assets and $11,401,000,000 in debts. At Dec. 2, 2005, Moody's Investors Service assigned a B1 long-term corporate family rating to Mirant Corp. MULTICANAL SA: Court Grants Permanent Injunction v. U.S. Creditors ------------------------------------------------------------------ The Hon. Allan Gropper of the U.S. Bankruptcy Court for the Southern District of New York placed his final stamp of approval on the Section 304 petition filed by Martin G. Rios in behalf of Multicanal SA. The Court's final order means a permanent injunction against Multicanal's creditors in the United States. Consequently, all creditors of the company in the U.S. are enjoined from taking any action against Multicanal. With the Court's approval in hand, Multicanal can now proceed with the implementation of its restructuring plan under the "Acuerdo Preventivo Extrajudicia" proceedings commenced in Argentina. The National Court of First Instance on Commercial Matters No. 4 confirmed Multicanal's restructuring plan on Apr. 14, 2004. The plan got the US Court's recognition, pursuant to Section 304 of the US Bankruptcy Code, on Sept. 28, 2005. Judge Gropper issued the order making the Sec. 304 final after Multicanal informed the Court that the fairness issue under Section 3(a)(10) of the US Securities Act has been cured. According to Multicanal's regulatory filing, a purchaser of the debt previously held by one of its creditors -- Huff Alternative Income Fund L.P. -- had undertaken to correct the discrimination against U.S. retail holders in a manner compatible with U.S. securities law. Judge Gropper previously ruled that the APE plan discriminated against US creditors by not allowing them a choice other than the cash option. Judge Gropper wanted that flaw remedied before issuing a final order. A copy of Judge Gropper's decision is available free of charge at http://researcharchives.com/t/s?a42 Multicanal is represented by: Andres de la Cruz, Esq. Lindsee P. Granfield, Esq. Cleary Gottlieb Steen & Hamilton LLP One Liberty Plaza New York, NY 10006-1470 Tel: +1 212 225 2000 Fax: +1 212 225 3999 -- and -- Jose Maria Saenz Valiente Maria Lucila Romero Ivan Lorenzo Saenz Valiente Asociados Parana 754 - 8 Piso (C1017AAP) Ciudad Autonoma de Buenos Aires Argentina Tel: (54 11) 4816-6996 Multicanal S.A. -- http://www.multicanal.com.ar/-- is an Argentinean multiple cable systems operator with its principal operations in Argentina and smaller operations in Uruguay and Paraguay. Grupo Clarin SA owns Multicanal. Multicanal filed a petition under Section 304 of the Bankruptcy Code on Jan. 16, 2004 (Bankr. S.D.N.Y. Case No.: 04-10280). The Company estimated its assets and debts at more than $100 Million when it filed the petition. NANTICOKE HOMES: U.S. Trustee Wants Ch. 11 Case Converted to Ch. 7 ------------------------------------------------------------------ The U.S. Trustee for Region 3, Kelley Beaudin Stapleton, asks the U.S. Bankruptcy Court for the District of Delaware to convert Nanticoke Homes, Inc.'s chapter 11 case to a chapter 7 liquidation proceeding. If the case won't or can't be converted, the U.S. Trustee wants the case dismissed. When the Debtors' counsel, Phillips, Goldman & Spence LLP, moved to withdraw representation for the Debtor, it acknowledged that the Debtor is administratively insolvent as it does not have the financial wherewithal to pay its debts when due. Moreover, funding for a plan was allegedly to be provided by the Debtor's principals. But the principals are no longer cooperating with Debtor's counsel in the prosecution of this chapter 11 case. William K. Harrington, Esq., trial attorney at the Office of the U.S. Trustee, informs the Court that no funds remain from the avoidance action proceeds or from the proceeds of any sales as those funds were previously used to pay administrative expense claims. Accordingly, "cause" exist to convert the case to a case under chapter 7 of the Bankruptcy Code as there is a continuing diminution of the assets of the estate and the absence of a reasonable likelihood of rehabilitation and the Debtor appears to be unable to effectuate a plan, Mr. Harrington contends. Nanticoke Homes, Inc., filed for chapter 11 protection on March 01, 2002 (Bankr. Del. Case No. 02-10651). Stephen W. Spence, Esq., at Philippe, Goldman & Spence, P.A., represented the Debtor in its restructuring efforts. James E. Huggett, Esq., at Margolis Edelstein and Jennifer Lee Scoliard, Esq., Stephanie Ann Fox, Esq., and Steven K. Kortanek, Esq., at Klehr Harrrison Harvey represented the Official Committee of Unsecured Creditors. When the Company filed for protection from its creditors, it listed estimated debts and assets of more than $10 million each. NES RENTALS: Moody's Reviews Low-B Rating on Corp. Family & Loan ---------------------------------------------------------------- Moody's Investors Service is reviewing the long-term ratings of NES Rentals Holdings, Inc. for possible downgrade in response to the company's announcement that it has signed a definitive agreement to be acquired by affiliates of Diamond Castle Holdings, LLC, a New York-based private equity firm, in a transaction valued at approximately $850 million including the assumption of certain liabilities. Ratings under review: * Corporate Family Rating -- B2; and * second lien senior secured bank credit facility - B3. The company's speculative grade liquidity rating remains at the SGL-3 level and is not affected by the current review. Moody's review is focusing on the impact that the proposed transaction will have on NES' future capital structure, financial strategy and credit metrics. The review is also assessing the degree to which the company's operating strategy will be able to sustain earnings, cash flow generation and liquidity. NES Rentals Holdings, Inc., based in Chicago, Illinois, is one of the largest equipment rental companies in the US. NETWORK INSTALLATION: Posts $1.3MM Net Loss in 2006 1st Quarter --------------------------------------------------------------- Network Installation Corp. filed its first quarter financial statements for the three months ended March 31, 2006, with the Securities and Exchange Commission on May 15, 2006. The Company reported a $1,329,230 net loss on $1,006,844 of revenues for the three months ended March 31, 2006. At March 31, 2006, the Company's balance sheet showed $14,005,708 in total assets, $13,252,768 in total liabilities, and $752,940 in stockholders' equity. The Company's March 31 balance sheet also showed strained liquidity with $6,049,792 in total current assets available to pay $8,164,848 in total current liabilities coming due within the next 12 months. Full-text copies of the Company's financial statements for the three months ended March 31, 2006, are available for free at http://ResearchArchives.com/t/s?a1b Going Concern Doubt Jaspers + Hall, PC, in Denver, Colorado, raised substantial doubt about Network Installation Corp.'s ability to continue as a going concern after auditing the Company's financial statements for the year ended Dec. 31, 2005. The auditor pointed to the Company's recurring losses from operations and stockholders deficiency. About Network Installation Headquartered in Irvine, California, Network Installation Corp. -- http://www.networkinstallationcorp.net/-- is a single source provider of communications infrastructure, specializing in the design, installation, deployment and integration of specialty systems and computer networks. Through its wholly-owned subsidiaries, Com Services and Kelley Technologies, the Company provides its services to these customers and industries: Gaming & casinos, local and regional municipalities, K-12 and education. NRG ENERGY: Mirant Sues NRG for Obstructing $8 Bil. Takeover Bid ---------------------------------------------------------------- Mirant Corporation sought a court order in Delaware directing NRG Energy Inc. not to obstruct its unsolicited takeover bid. Mirant, according to the Associated Press, claimed that the New Jersey based energy producer is unfairly rejecting its nearly $8 billion takeover bid by using a "transaction ploy" to turn aside the offer by alleging that Mirant is using confidential information from NRG's former financial adviser. In the lawsuit, Sophia Pearson of Bloomberg News reports that Mirant also accused NRG directors of breaching their fiduciary duties to stockholders by not considering the offer. Mirant is asking a judge to declare that it isn't barred from attempting the takeover, and that NRG cannot rely on the alleged breach of confidentiality as the sole basis to reject the offer, the Bloomberg News said. As reported in the Troubled Company Reporter on May 31, 2006, Mirant made a proposal to acquire NRG at a premium of approximately 33% to NRG's share price as of May 30, 2006. The proposal would be immediately accretive to the pro forma free cash flow per share of Mirant. Mirant received a financing commitment from JPMorgan of approximately $11.5 billion for the transaction. Mirant said that NRG flatly rejected the proposal without engaging in any discussions. Mirant continues to believe that the proposal creates significant value for the owners of both companies and has decided to make its proposal public in a letter to NRG's board of directors. In a press statement covered by the Troubled Company Reporter on May 31, 2006, NRG said it rejected Mirant's hostile offer and declined to enter into talks because the proposal undervalues NRG. About Mirant 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), and emerged under the terms of a confirmed Second Amended Plan on Jan. 3, 2006. Thomas E. Lauria, Esq., at White & Case LLP, represented the Debtors in their successful restructuring. When the Debtors filed for protection from their creditors, they listed $20,574,000,000 in assets and $11,401,000,000 in debts. About NRG Energy Headquartered in Princeton, New Jersey, NRG Energy, Inc. -- http://www.nrgenergy.com/-- currently owns and operates a diverse portfolio of power-generating facilities, primarily in the Northeast, South Central and Western regions of the United States. Its operations include baseload, intermediate, peaking, and cogeneration facilities, thermal energy production and energy resource recovery facilities. NRG also has ownership interests in generating facilities in Australia and Germany. * * * As reported in the Troubled Company Reporter on Jan. 16, 2006, Fitch Ratings placed a 'BB' rating to NRG's $5.2 billion secured credit facility, consisting of a $3.2 billion secured term loan B and $2 billion of revolving credit/synthetic letter of credit facilities, a 'B' rating to NRG's proposed $3.6 billion issuance of senior unsecured notes, and a 'CCC+' rating to NRG's proposed issuance of $500 million mandatory convertible preferred stock. In addition, Fitch has assigned NRG a 'B' issuer default rating, as well as recovery ratings for the debt instruments. Fitch said the Rating Outlook is Stable. As reported in the Troubled Company Reporter on Jan. 9, 2006, Standard & Poor's Ratings Services affirmed its 'B+' corporate credit rating on power generation company NRG Energy Inc. Standard & Poor's assigned its 'BB-' rating and '1' recovery rating to NRG's $3.2 billion first lien term loan B and $2 billion revolving credit and LOC facilities, 'B-' rating to NRG's $3.6 billion unsecured notes, and 'CCC+' rating to NRG's $500 million mandatory convertible securities. The 'BB-' rating and '1' recovery rating on the $3.2 billion term loan B and $2 billion revolving credit and LOC facilities indicate the expectation of full recovery of principal in the event of a payment default. Standard & Poor's affirmed its 'CCC+' ratings on NRG's preferred stock issues. The stable outlook reflects Standard & Poor's view that NRG's credit quality should not significantly deteriorate in the short term. OWENS CORNING: Compromising 37 Asbestos Property Damage Claims -------------------------------------------------------------- Owens Corning and Fibreboard Corporation ask the U.S. Bankruptcy Court for the District of Delaware to approve settlements compromising 37 asbestos property damage claims with these claimants: Owens Corning Fibreboard Claimant Claim No. Claim No. -------- ------------- ---------- 880 Third Avenue 8609 8362 Altoonal School District 8752 9557 Anderson Memorial Hospital 8822 8795 Athens Board of Education 8687 8809 Clara Mass Hospital 8648 8500 Clarksville-Montgomery Board 8727 8831 Fair Lawn Professional Center 8628 8441 Garrison Public School 8783 8926 Green Bay Area Public Schools 8709 8871 Hall County School District 8771 9573 Jacksonville City Hall 8608 8357 Kindred Public School Dist. 2 8886 Langley Professional Office 8596 8328 One Liberty Plaza 8576 8299 Presbyterian Church of Jamesburg 8573 8271 Saint Peter & Paul Congregation 8683 8633 The City of Rock Hill Buildings 8735 8959 Wauwatosa School District 8678 9556 Winneconne Public School Dist. 8677 9555 Pursuant to the Settlements, the Debtors and the claimants agree to resolve the Property Damage Claims on these terms: a. Each of the Property Damage Claims against Owens Corning will be allowed as a general unsecured non-priority claim for $5,000. The Claim will be paid as a Convenience Claim pursuant to the Debtors' Fifth Amended Plan of Reorganization. b. Each of the Property Damage Claims against Fibreboard will be allowed as a general unsecured non-priority claim for $5,000, which will be paid by Fibreboard's property damage insurers on the Initial Distribution Date under the Plan. c. As a precondition to receiving the payments, each of the claimants will release Owens Corning and Fibreboard from any liability associated with the Claims. The Debtors assert that the continued litigation over the Claims would involve substantial cost, likely exceeding the cost of the Settlements. Owens Corning (OTC: OWENQ.OB) (BULLETIN BOARD: OWENQ.OB) -- 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 Oct. 5, 2000 (Bankr. Del. Case. No. 00-03837). Norman L. Pernick, Esq., at Saul Ewing LLP, represents the Debtors. Elihu Inselbuch, Esq., at Caplin & Drysdale, Chartered, represents the Official Committee of Asbestos Creditors. James J. McMonagle serves as the Legal Representative for Future Claimants and is represented by Edmund M. Emrich, Esq., at Kaye Scholer LLP. (Owens Corning Bankruptcy News, Issue No. 131; Bankruptcy Creditors' Service, Inc., 215/945-7000). OWENS CORNING: Larry E. Tyree Co. Holds $335,128 Allowed Claim -------------------------------------------------------------- Owens Corning and its debtor-affiliates have allowed Larry E. Tyree Co. Inc.'s claim at a reduced amount On March 11, 2002, Tyree filed Claim No. 5813 in an unliquidated amount, asserting "indemnification and/or contribution for warranty and environmental claims" with respect to damages incurred for product failure of the Debtors' underground storage tanks. Tyree purchased and installed over 1,000 Owens Corning storage tanks during the late 1970s through the 1980s. Tyree attached to the claim a copy of a complaint filed by Tartan Corp. Liquidating Trust against Tyree and Owens Corning, which among other things, is based on Tyree's contribution or indemnification claims with respect to product failure. The Debtors disputed Tyree's claims. At the Debtors' request, the Court disallowed Claim No. 5813. On March 25, 2002, Tyree filed Claim No. 6049, which in addition to the copy of the Tartan Complaint, attaches a copy of a summons and notice of a complaint filed by Lakehill Associates, Inc., against Tyree. Thus, in addition to the claims asserted in the Tartan Complaint, Claim No. 6049 asserts a claim against the Debtors for indemnification and contribution with respect to the Lakehill Complaint. Tyree amended Claim No. 6049 on March 21, 2005. Tyree waived all of its claims against the Debtors with respect to the Lakehill Complaint, but retained its asserted claims for indemnification and contribution with respect to the Tartan Complaint. Pursuant to Section 502 of the Bankruptcy Code, the Debtors ask the Court to disallow Amended Claim No. 6049 because: a. Tyree has no basis to assert a claim against the Debtors under the warranty; and b. the Amended Claim asserts an unliquidated claim for contribution and indemnification. Tyree has no basis to assert a claim based on the warranty because the warranties are held by the storage tank owners, Norman L. Pernick, Esq., at Saul Ewing LLP, in Wilmington, Delaware, argues. Tyree purchased the tanks from Owens Corning and installed them for Tyree's own customers. In the alternative, the Debtors ask the Court, pursuant to Section 509(c), to subordinate the Tyree Claim to the claim filed by Tartan. The Debtors' books and records show that Tartan filed Claim No. 5942 for $1,000,000. The Debtors settled the Tartan Claim by allowing Tartan a general unsecured claim for $335,128. Owens Corning (OTC: OWENQ.OB) (BULLETIN BOARD: OWENQ.OB) -- 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 Oct. 5, 2000 (Bankr. Del. Case. No. 00-03837). Norman L. Pernick, Esq., at Saul Ewing LLP, represents the Debtors. Elihu Inselbuch, Esq., at Caplin & Drysdale, Chartered, represents the Official Committee of Asbestos Creditors. James J. McMonagle serves as the Legal Representative for Future Claimants and is represented by Edmund M. Emrich, Esq., at Kaye Scholer LLP. (Owens Corning Bankruptcy News, Issue No. 130; Bankruptcy Creditors' Service, Inc., 215/945-7000). PLIANT CORP: Court Approves Securities Screening Wall Procedures ---------------------------------------------------------------- The Official Committee of Unsecured Creditors appointed in the chapter 11 cases of Pliant Corporation and its debtor-affiliates seeks the U.S. Bankruptcy Court for the District of Delaware's authority to trade in the Debtors' Securities upon the establishment and implementation of an "Ethical Wall". Don A. Beskrone, Esq., at Ashby & Geddes, P.A., in Wilmington, Delaware, relates that certain of the Committee members are directly investment advisors or manages that provide investment- advisory services to institutional, pension, mutual fund and high net-worth clients and affiliates funds and accounts. These Members may buy and sell Securities and other financial assets for their own portfolios. If Members are barred from trading Securities during the pendency of the Debtors' cases because of their service on the Committee, they risk the loss of potentially beneficial investment opportunities for their clients and themselves. In the alternative, if Members resign from the Committee, their clients' interests may be compromised by virtue of the Members taking a less active role in the reorganization process. Accordingly, the Committee asks the Court to: (a) declare that a Committee Member is permitted to trade in the Debtors' Securities and will not be deemed to have violated its duties as a Committee Member by trading in Securities during the pendency of the Debtors' cases provided that the Committee Member implements an Ethical Wall to insulate its trading activities from the activities related to its Committee service and the reorganization process; (b) declare that the Ethical Wall procedures to be employed by an Ethical Wall Entity will include these information- blocking procedures: * The Ethical Wall Entity will cause all Committee Personnel to execute a letter, acknowledging that they may receive non-public information and that they are aware of the Ethical Wall Procedures; and * Committee Personnel will not share non-public Committee Information with any other employees of that Ethical Wall Entity other than in compliance with the Ethical Wall Procedures except: -- senior management of the Ethical Wall Entity who, due to their duties and responsibilities, have a legitimate need to know certain information provided that those individuals (i) otherwise comply with the Ethical Wall, and (ii) use the information only in connection with their senior managerial responsibilities and not for trading purposes; and -- regulators, auditors, and designated legal personnel for the purpose of rendering legal advice to Committee personnel and who will not share the non- public information in files accessible to other employees; * Committee Personnel will keep non-public information generated from Committee activities in files inaccessible to other employees; * Committee Personnel will receive no information regarding the Ethical Wall Entity's trades in Securities in advance of those trades, except the Committee Personnel may receive the usual and customary internal and public reports showing the Ethical Wall Entity's purchases and sales and the amount and class of securities owned by the Ethical Wall Entity, including the Securities; and * the Ethical Wall Entity will review from time to time the Ethical Wall Procedures to ensure compliance with the Court Order and will keep and maintain records of their review; (c) apply to an Ethical Wall Entity only if it is engaged in trading of Securities as a regular part of its business; (d) declare that the provisions of the Order will apply to an Ethical Wall Entity during the pendency of the cases in the event that the Ethical Wall Entity ceases to be a Committee Member; and (e) declares that nothing in the Committee's request or Court Order will lead to the conclusion that the Debtors' debt obligations constitute "securities." Mr. Beskrone argues that the Securities and Exchange Commission supports the concept of committee members trading in debtor's securities while being regulated by an Ethical Wall. Moreover, the Committee Members have the resources, experience, and knowledge of the Debtors' business to safely trade in Debtors' Securities, Mr. Beskrone points out. The Committee Members are among the Debtors' largest creditors and have the incentive to pursue the Committee's work for a Chapter 11 plan confirmation. On the contrary, denial of the Committee's request will discourage large creditors with expertise and experience in reorganization from joining creditors' committees, Mr. Beskrone says. The Court rules that if an Ethical Wall entity divests itself of all or substantially all of its Securities position, the Ethical Wall entity will notify the Official Committee of Unsecured Creditors. Headquartered in Schaumburg, Illinois, Pliant Corporation -- http://www.pliantcorp.com/-- produces value-added film and flexible packaging products for personal care, medical, food, industrial and agricultural markets. The Debtor and 10 of its affiliates filed for chapter 11 protection on Jan. 3, 2006 (Bankr. D. Del. Lead Case No. 06-10001). James F. Conlan, Esq., at Sidley Austin LLP, and Edmon L. Morton, Esq., and Robert S. Brady, Esq., at Young, Conaway, Stargatt & Taylor, represent the Debtors in their restructuring efforts. The Debtors tapped McMillan Binch Mendelsohn LLP, as their Canadian bankruptcy counsel. The Ontario Superior Court of Justice named RSM Richter, Inc., as the Debtors' information officer in their restructuring proceeding under Companies Creditors Arrangement Act in Canada. Kenneth A. Rosen, Esq., at Lowenstein Sandler, P.C., serves as counsel to the Official Committee of Unsecured Creditors. Don A. Beskrone, Esq., at Ashby & Geddes, P.A., is local counsel to the Creditors' Committee. As of Sept. 30, 2005, the company had $604,275,000 in total assets and $1,197,438,000 in total debts. (Pliant Bankruptcy News, Issue Nos. 12 & 14; Bankruptcy Creditors' Service, Inc., 215/945-7000) POGO PRODUCING: Moody's Lowers Corp. Family Rating from Ba2 to Ba3 ------------------------------------------------------------------ Moody's Investors Service downgraded Pogo Producing Company's Corporate Family Rating from Ba2 to Ba3. Per Moody's current notching practice for senior subordinated notes, Moody's downgraded Pogo's senior subordinated note rating from Ba3 to B2. Action concludes a review for downgrade begun April 17, 2006 when Pogo announced the acquisition of Latigo Petroleum for $750 million and its sale of 50% of its Gulf of Mexico properties for $500 million Prior to that, Pogo's standing within its ratings had been weak given its rising unsustainable reserve replacement costs, inconsistent production trends, and a sharp decline in organic reserve replacement. Latigo's properties are located in the Permian Basin of West Texas and, to a lesser degree, the Texas Panhandle. The rating outlook is stable. Up-cycle prices and cash flows before capital spending provide a cushion of time during which Pogo will need to demonstrate stabilized-to-rising sequential quarter trends for production at tolerable production and reserve replacement costs for the rating, as well as restrain further leverage this year. Towards the end of 2006 and throughout 2007, Pogo will also need to generate sustained debt reduction from current levels that are elevated after recent acquisitions. The rating outlook and new ratings could be pressured during the course of 2006 if sequential quarter production, reserve replacement, full cycle costs continue to remain weak, and/or Pogo's leverage rises beyond current forecasted levels. Beginning with first quarter 2007, Pogo will additionally need to significantly reduce leverage on proven developed reserves in 2007. The ratings would also be pressured if management engages in further material shareholder friendly activities that add debt and/or delay debt reduction. The downgrade reflects Moody's assessment of Pogo's operating profile, leverage, and results as it continues to restructure its asset portfolio. Through acquisitions and divestitures at a time of historic up-cycle acquisition costs, Pogo is transitioning itself from being a producer focused on short-lived Gulf of Thailand and shallow water GOM properties to a predominantly onshore property portfolio. Pogo did retain approximately 50% of its GOM holdings. The downgrade reflects the high leverage which Moody's estimates will approach $8/barrel of PD reserves by the end of 2006, a very high full-cycle cost structure in the high $30/barrel range due to several years of surging reserve replacement costs and due to inconsistent-to-weak organic production trends. As Pogo's operating and equity market performance has weakened, the attendant ongoing risk of a strategic event has mounted. Pogo's acquisition of Latigo and sale of 50% of its Gulf of Mexico assets follows $84 million of other minor acquisitions in Canada and U.S., the $1.725 billion 2005 acquisition of Northrock Resources in Canada, and its $820 million 2005 sale of its GOT properties. Pogo paid a hefty $17.41/boe for Latigo's proven reserves and a very high $112,500 per unit of current daily production. The company sold its GOM properties for $20.98/boe or $62,500 per unit of daily production. Excluding the GOT properties, Pogo's first quarter 2006 production from continuing operations increased 6% over fourth quarter 2005. Including the GOT properties, first quarter 2006 production was down by in the range of 18%. Now that the sharp production declines of Pogo's GOT properties is removed, and 50% of Pogo's short-lived GOM properties have been divested, the smaller longer- lived pro-forma production base should be less challenging to grow. While the pro-forma reserve base is approximately 20% larger than at year-end 2004, the onshore properties produce at a lower rate than the flush production from divested short-lived reserves. During Pogo's transformation, it has also been compelled to address weak equity performance and shareholder pressure by launching a $375 million share repurchase program, of which Pogo had repurchased $360 million through February 2006. Pogo also raised its dividend since 2004 by over 50%. After a long period of very low leverage, since the end of 2004 Pogo has continued to add leverage, having incurred over $1.2 billion of debt since the beginning of 2005. Per Moody's global ratings methodology for independent exploration and production firms, on historic pro-forma estimates, Pogo's composite operating, financial, and strategy profile maps to a B2 corporate family rating. Leverage maps to the B category, overall returns also map to the B category, and historic reserve replacement costs map to the Caa range. Pogo displays a very high full-cycle cost structure, poor organic reserve replacement trends, and very high leverage on PD reserves. However, other factors warrant a Ba3 rating at this time. These factors include a high price environment to assist Pogo's post- acquisition reinvestment activity, a comparatively large reserve and production scale and diversification for the new ratings, the fact that Pogo's acquisitions and divestures are yielding a reserve and prospect portfolio likely to have lower reinvestment risk, expected lower reserve replacement costs on the newer properties versus the divested properties, a seasoned historically fiscally conservative management team, the fact that Pogo's leverage was incurred for asset acquisitions, and that management is expected to reduce leverage materially in 2007. The ratings are also supported by longer lived pro-forma production, having a PD reserve life in the range of 8 years compared to approximately 5 years in 2003 and 6 years in 2006. Pogo Producing Company is headquartered in Houston, Texas. PUREBEAUTY INC: Moves to Reject 24 Store Leases ----------------------------------------------- PureBeauty, Inc., and its debtor-affiliates ask the U.S. Bankruptcy Court for the Central District of California in San Fernando for authority to reject certain unexpired nonresidential real property leases and sub-leases, effective April 18, 2006. A list of the leases and subleases the Debtors want to reject is available for free at http://researcharchives.com/t/s?a2f Stacia A. Neeley, at Klee, Tuchin, Bogdanaff & Stern, LLP, says the Debtors have vacated the premises subject to the rejected leases and subleases prior to their bankruptcy filing. Ms. Neeley said the Debtors will accrue unnecessary and potentially burdensome administrative costs if they do not reject the leases immediately. The Debtors had determined that continued operation on the rejected leases was not feasible. They based their decision on poor performance at these retail locations, the above-market rental rates contained in the leases, and relatively short terms remaining under the leases. The Debtors also want the Court to approve go-forward procedures regarding their rejection of other nonresidential real property leases. The Debtors are party to approximately 69 leases as of their bankruptcy filing. According to Ms. Neeley, the proposed rejection procedures will streamline the Debtors' ability to reject leases and prevent the Debtors from incurring unnecessary administrative costs. A summary of the proposed lease rejection procedures is available for free at http://researcharchives.com/t/s?a3c PureBeauty, Inc. -- http://www.purebeauty.com/-- operates 48 retail stores and salons offering professional hair care and skincare services, featuring a leading assortment of professional and prestige personal care products. PureBeauty also operates six "brand" stores, providing customers with a variety of aspirational products and services. PureBeauty Inc. and Pure Salons, Inc., an affiliate, filed for chapter 11 protection on April 18, 2006 (Bankr. C.D. Calif. Case No. 06-10545). Stacia A. Neeley, Esq., at Klee, Tuchin, Bogdanoff & Stern LLP represent the Debtors in their restructuring efforts. The Debtors' Official Committee of Unsecured Creditors selected Eric E. Sagerman, Esq., and David J. Richardson, Esq., at Winston & Strawn, LLP, as its counsel. When the Debtors filed for protection from their creditors, they estimated assets between $10 million and $50 million and debts between $50 million and $100 million. QUANTA CAPITAL: Plans to Place Three Units in Run-Off ----------------------------------------------------- Quanta Capital Holdings disclosed in a regulatory filing its intention to put into run-off its Bermuda, United States and Europe units. An insurer that closes to new business is said to be in run-off. The net effect is a slow winding down of operations that allow claims to be met on policies previously sold. The company's decision came as a result of A.M. Best's Mar. 2 downgrade of the insurers financial strength rating to B++, which is too low to attract business from insurance buyers. Quanta Capital hired financial advisors Friedman, Billings and Ramsey and Co. and JP Morgan Chase Co. to help the company explore strategic alternatives. The company also disclosed plans to cease selling: -- casualty reinsurance, -- marine and aviation reinsurance, and -- trade credit and political risk. The company's Lloyd's of London operation, Syndicate 4000, and an environmental consulting business, ESC, will remain in business. Quanta Capital Holdings Ltd. (NASDAQ: QNTA) provides specialty insurance, reinsurance, risk assessment and risk consulting products and services through its subsidiaries. Through operations in Bermuda, the United States, Ireland and the United Kingdom, Quanta focuses on writing coverage for specialized classes of risk through a team of experienced, technically qualified underwriters. The company offers specialty insurance and reinsurance products that often require extensive technical underwriting skills, risk assessment resources and engineering expertise. RENATA RESORT: Case Summary & 20 Largest Unsecured Creditors ------------------------------------------------------------ Debtor: Renata Resort, LLC fdba Sunset Pier Resort, LLC fdba The Sunset Pier Resort, LLC P.O. Box 18199 Panama City, Florida 32417 Bankruptcy Case No.: 06-50114 Type of Business: The Debtor operates a hotel and resort. Chapter 11 Petition Date: May 31, 2006 Court: Northern District of Florida (Panama City) Judge: Lewis M. Killian Jr. Debtor's Counsel: John E. Venn, Jr., Esq. John E. Venn, Jr., P.A. 220 West Garden Street, Suite 603 Pensacola, Florida 32502 Tel: (850) 438-0005 Fax: (850) 438-1881 Total Assets: $19,947,271 Total Debts: $8,524,196 Debtor's 20 Largest Unsecured Creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ Tome Murphree Expense $69,087 914 West 26th Reimbursement Lynn Haven, FL 32444 Burke Blue & Hutchison Legal Fees $60,000 P.O. Box 70 Panama City, FL 32402 CBRE Breach of Contract $4,500 201 East Kennedy Boulevard for Appraisal Suite 1500 Tampa, FL 33602 Sylvia Harrison Claim for Fraud, Unknown Conspiracy, Wrongful Termination and Constructive Trust Butche and Starla Metcalf Breach of Contract Unknown Bruce McInnis Breach of Contract Unknown Bruce and Melissa Robinson Breach of Contract Unknown Bradley Robinson Breach of Contract Unknown Bill Arnett Breach of Contract Unknown Bill and Gwen Perkins, Jr. Breach of Contract Unknown Benny and Brenda Eaton Breach of Contract Unknown Barry and Allison Zweig Breach of Contract Unknown Barbara Mitulski Breach of Contract Unknown Baker Morgan Breach of Contract Unknown Ari and Helen Flechner Breach of Contract Unknown Anthony and Debbie Teal Breach of Contract Unknown Angelo and Rita Pyroulis Breach of Contract Unknown Angela McLean Breach of Contract Unknown Adam Slutsky Breach of Contract Unknown Adam and Jennifer Slutsky Breach of Contract Unknown RESIDENTIAL ACCREDIT: Fitch Rates Two Cert. Classes at Low-Bs ------------------------------------------------------------- Fitch rated Residential Accredit Loans, Inc.'s mortgage pass- through certificates, series 2006-QS5: -- $650,856,995 classes A-1 - A-9, A-P, A-V, R-I and R-II senior certificates 'AAA' -- $25,825,800 class M-1 'AA' -- $6,979,700 class M-2 'A' -- $5,234,800 class M-3 'BBB' In addition, these privately offered subordinate certificates are rated by Fitch: -- $3,838,900 class B-1 'BB' -- $2,791,900 class B-2 'B' The $2,442,910 class B-3 is not rated by Fitch. The 'AAA' rating on the senior certificates reflects: * the 6.75% subordination provided by the 3.75% class M-1; * 1% class M-2; * 0.75% class M-3; * privately offered 0.55% class B-1; * 0.40% privately offered class B-2; and * 0.35% privately offered class B-3. Fitch believes the above credit enhancement will be adequate to support mortgagor defaults as well as bankruptcy, fraud and special hazard losses in limited amounts. In addition, the ratings reflect the quality of the mortgage collateral, strength of the legal and financial structures, and Residential Funding Corp.'s (RFC; rated 'RMS1' by Fitch) servicing capabilities as master servicer. As of the cut-off date (May 1, 2006), the mortgage pool consists of 3377 conventional, fully amortizing, 30-year fixed-rate mortgage loans secured by first liens on one- to four-family residential properties, with an aggregate principal balance of $697,971,005. The mortgage pool has a weighted average original loan-to-value ratio of 74.9%. The pool has a weighted average FICO score of 714, and approximately 42.9% and 10.4% of the mortgage loans possess FICO scores greater than or equal to 720 and less than 660, respectively. Equity refinance loans account for 30.3%, and second homes account for 3.9%. The average loan balance of the loans in the pool is $206,684. The three states that represent the largest portion of the loans in the pool are: * California (16.9%), * Florida (14.5%), and * Texas (6.3%). All of the mortgage loans were purchased by the depositor through its affiliate, Residential Funding, from unaffiliated sellers as described in this prospectus supplement and in the prospectus, except in the case of 28.1% of the mortgage loans, which were purchased by the depositor through its affiliate, Residential Funding, from Homecomings. Approximately 16.3% of the mortgage loans were purchased from National City Mortgage Corporation, an unaffiliated seller. Except as described in the preceding sentence, no unaffiliated seller sold more than 7.2% of the mortgage loans to Residential Funding. Approximately: * 70.5% of the mortgage loans are being subserviced by Homecomings, a wholly-owned subsidiary of Residential Funding Corporation; * 3.2% of the mortgage loans are being subserviced by GMAC Mortgage Corporation, an affiliate of Residential Funding Corporation; and * 16.3% of the mortgage loans are being subserviced by National City Mortgage Corporation, an unaffiliated subservicer. None of the mortgage loans were subject to the Home Ownership and Equity Protection Act of 1994. Furthermore, none of the mortgage loans are loans that, under applicable state or local law in effect at the time of origination of the loan are referred to as: 1) 'high-cost' or 'covered' loans; or 2) any other similar designation if the law imposes greater restrictions or additional legal liability for residential mortgage loans with high interest rates, points and/or fees. The mortgage loans were originated under GMAC-RFC's Expanded Criteria Mortgage Program (Alt-A program). Alt-A program loans are often marked by one or more of these attributes: * a non-owner-occupied property; * the absence of income verification; or * an LTV or debt service/income ratio that is higher than other guidelines permit. In analyzing the collateral pool, Fitch adjusted its frequency of foreclosure and loss assumptions to account for the presence of these attributes. Deutsche Bank Trust Company Americas will serve as trustee. RALI, a special purpose corporation, deposited the loans in the trust, which issued the certificates. For federal income tax purposes, an election will be made to treat the trust fund as two real estate mortgage investment conduits. SEARCHHELP INC: Posts $1.3 Million Net Loss in 2006 First Quarter ----------------------------------------------------------------- SearchHelp, Inc., filed its first quarter financial statements for the three months ended March 31, 2006, with the Securities and Exchange Commission on May 19, 2006. The Company reported a $1,305,495 net loss on $26,029 of total revenues for the three months ended March 31, 2006. At March 31, 2006, the Company's balance sheet showed $2,427,214 in total assets and $2,637,891 in total liabilities, resulting in a $210,677 stockholders' deficit. The Company's March 31 balance sheet also showed strained liquidity with $510,342 in total current assets available to pay $1,296,249 in total current liabilities coming due within the next 12 months. Full-text copies of the Company's financial statements for the three months ended March 31, 2006, are available for free at http://ResearchArchives.com/t/s?a35 Going Concern Doubt Lazar, Levine and Felix LLP in New York raised substantial doubt about SearchHelp, Inc.'s ability to continue as a going concern after auditing the Company's consolidated financial statements for the year ended Dec. 31, 2005. The auditor pointed to the Company's recurring losses from operations, negative working capital and capital deficiency. SearchHelp, Inc., sells family oriented software through its subsidiary, FamilySafe, Inc., and sells film and cameras through its subsidiary, E-Top-Pics, Inc. SECURECARE TECHNOLOGIES: KBA Group Raises Going Concern Doubt ------------------------------------------------------------- KBA Group LLP in Dallas, Texas, raised substantial doubt about SecureCARE Technologies, Inc.'s ability to continue as a going concern after auditing the Company's consolidated financial statements for the years ended Dec. 31, 2005, and 2004. The auditor pointed to the Company's recurring losses and negative cash flows from operations. The Company reported a $2,985,285 net loss on $387,159 of revenues for the year ended Dec. 31, 2005. At Dec. 31, 2005, the Company's balance sheet showed $258,407 in total assets and $2,669,217 in total liabilities, resulting in a $2,410,810 stockholders' deficit. The Company's Dec. 31 balance sheet also showed strained liquidity with $61,241 in total current assets available to pay $2,260,850 in total current liabilities coming due within the next 12 months. A full-text copy of the Company's 2005 Annual Report is available for free at http://ResearchArchives.com/t/s?a36 $7 Million Loan From Euro Financial As reported in the Troubled Company Reporter on April 12, 2006, SecureCARE Technologies, Inc., gets access to a $7 million loan under a Loan Agreement with Euro Financial Fidelity, Inc. The Loan will be represented by a ten year 6% promissory note providing for quarterly payments of accrued interest commencing April 1, 2007, and a balloon payment of all accrued interest and principal on April 1, 2016. The Loan Agreement restricts the Company's use of the Loan proceeds to certain items agreed to by the Company and Euro Financial. Payment of the Note is secured by 1,000 shares of newly authorized Series C Contingently Convertible Preferred Stock. Each share of Series C Stock is convertible into 56,000 shares of the Company's Common Stock (an aggregate of 56,000,000 shares) if the Company defaults under the Note and Loan Agreement, but otherwise has no voting rights, no rights to receive dividends nor any liquidation preference. Since the Company does not have sufficient shares of its common stock authorized to meet this contingent obligation, it agreed to increase its authorized shares of common stock at its next shareholders' meeting. The Company will also timely register the shares, which are contingently issuable upon conversion of the Series C Preferred. Upon repayment of the Loan, the Series C Stock will have no further rights. The issuance of the Series C Stock was exempt from registration by reason of Section 4(2) of the Securities Act of 1933, as amended, as not involving any public offering. Based in Austin, Texas, SecureCARE Technologies, Inc., fka eClickMD, Inc., provides Internet-based document exchange and e-signature solutions for the healthcare industry. The Company's SecureCARE.net application is a secure, HIPAA-ready (Health Insurance Portability and Accountability Act) tracking and reporting tool that streamlines operations. The Company's software is tailored to the needs of physicians, clinics, home healthcare, hospice and durable medical equipment providers. SEMINOLE TRIBE: Moody's Affirms Ba1 Corp. Family & Bond Ratings --------------------------------------------------------------- Moody's Investors Service revised the ratings outlook of the Seminole Tribe of Florida to negative from developing. The Tribe's Ba1 corporate family rating and Ba1 rating on its Gaming Division Bonds Series 2005A due 2013 and Series 2005B due 2020 were affirmed. These rating actions follow the Tribe's decision to file a lawsuit against Power Plant Entertainment, a subsidiary of Cordish Company and Coastal Development and the Tribe's former financial advisor. Additionally, it takes into consideration that the National Indian Gaming Commission still has not issued its audit findings regarding the Tribe's use of net gaming revenue. The negative outlook considers the complexity of the Tribe's lawsuit against Power Plant as well as the uncertainty associated with the outcome, particularly given the lack of legal precedent with respect to this particular type of lawsuit between a Native American Tribe and a commercial casino developer. This makes it difficult for Moody's to assume that any legal ruling will be neutral or favorable to the Tribe, or identify any medium to long-term possible unintended consequences that may impact the Tribe's casino operations. The negative outlook also takes into account that despite the completion of fieldwork in Dec. 2005 and the Tribe's expectation that there will not be NIGC audit issues that will negatively impact the Tribe and/or its casino operation, the NIGC has not yet issued its findings. The NIGC audit issue was the primary reason that a developing outlook was initially assigned to the Tribe in Sep. 2005. Any material adverse legal decision or audit finding that impairs the Tribe's ability to operate its casino at its current level could result in a ratings downgrade. The affirmation of the Tribe's Ba1 ratings is based on the expectation that the lawsuit will not negatively impact the Tribe's financial results over the near-term given that Power Plant has no operational ties to the casino. In addition to the Tribe's strong financial profile, the ratings continue to recognize the high quality of the Tribe's casino assets, and the favorable demographics of the densely populated central and southern Florida gaming markets. The ratings also acknowledge the Tribe's geographic concentration and other risks common in Native American gaming financings including the likely difficulty bondholders would face in recovering their investment in a liquidation scenario, and significant cash distributions. The Tribe initiated a lawsuit against Power Plant based on its belief that it has the fiduciary duty to dispute the development agreement that has been in effect for approximately six years between the Tribe and Power Plant. Power Plant developed the Tribe's Hard Rock brand casino in Hollywood, Florida. As part of the existing agreement between the Tribe and Power Plant, Power Plant is being paid 30 percent of all the Tribes gaming revenues as an advisory fee, although it is not currently providing any services. The Tribes lawsuit claims the agreement violates a federal law prohibiting non-Indians from acquiring a proprietary interest in a tribal gaming operation. Under tribal laws and the National Indian Gaming Regulatory Act, it is illegal for gambling revenue to go to a third party. The Tribe's decision to sue Power Plant follows several years of unsuccessful negotiations related to a buy-out of the development agreement. Moody's previous rating action on the Tribe occurred on Sep. 29, 2005 when a Ba1 rating was assigned to the Tribe's taxable Series A and Series B Gaming Division Bonds, as well as a Ba1 corporate family rating and developing outlook. The Seminole Tribe of Florida is a federally recognized Indian tribe with enrolled membership of about 3,100 members, most of who reside on Tribal lands in Florida. The Tribe owns and operates six Class II gaming facilities located on Tribal lands throughout southern and central Florida. The gaming operations are managed by the Seminole Gaming Division, an organizational unit of the Tribal government with no separate legal existence. SENSE HOLDINGS: Posts $1.2 Mil. Net Loss in 2006 1st Fiscal Qtr. ---------------------------------------------------------------- Sense Holdings, Inc. filed its first quarter financial statements for the three months ended March 31, 2006, with the Securities and Exchange Commission on May 15, 2006. The Company reported a $1,174,168 net loss on $30,381 of revenues for the three months ended March 31, 2006. At March 31, 2006, the Company's balance sheet showed $1,642,299 in total assets, $355,317 in total liabilities, and $1,286,982 in stockholders' equity. Full-text copies of the Company's financial statements for the three months ended March 31, 2006, are available for free at http://researcharchives.com/t/s?a19 Going Concern Doubt As reported in the Troubled Company Reporter on Nov. 29, 2005, Sherb & Co., LLP, expressed substantial doubt about Sense Holdings' ability to continue as a going concern after auditing the Company's financial statements for the year ended Dec. 31, 2005. The auditing firm pointed to the Company's losses, negative cash flows, and accumulated deficit. Sense Holdings, Inc. -- http://www.senseme.com/-- designs, develops, manufactures and sells fingerprint-based identification products and systems that incorporate state-of-the-art biometric technology to verify a person's identity. The Company has developed two proprietary BioClock(R) hardware platform: CheckPrint(R) T/A system verifies the presence of employees at the workplace and monitors their time and attendance at work; and, CheckPrint(R) A/C system permits access to locked buildings, offices or other secured areas only to selected individuals, whose identities can be verified using the Company's fingerprint identification software. SEQUENOM INC: Posts $3.7 Million Net Loss in 2006 First Quarter --------------------------------------------------------------- Sequenom, Inc., filed its first quarter financial statements for the three months ended March 31, 2006, with the Securities and Exchange Commission on May 15, 2006. The Company reported a $3,720,000 net loss on $6,911,000 of revenues for the three months ended March 31, 2006. At March 31, 2006, the Company's balance sheet showed $19,583,000 in total assets, $11,254,000 in total liabilities, and $8,329,000 in stockholders' equity. The Company's March 31 balance sheet also showed strained liquidity with $12,174,000 in total current assets available to pay $8,774,000 in total current liabilities coming due within the next 12 months. Full-text copies of the Company's financial statements for the three months ended March 31, 2006, are available for free at http://ResearchArchives.com/t/s?a33 Going Concern Doubt Ernst & Young, LLP, in San Diego, California, raised substantial doubt about Sequenom, Inc.'s ability to continue as a going concern after auditing the Company's consolidated financial statements for the year ended Dec. 31, 2005. The auditor pointed to the Company's recurring losses from operations, including a net loss of $26.5 million for the year ended December 31, 2005 and $442.6 million accumulated deficit as of December 31, 2005. About Sequenom Inc Sequenom -- http://www.sequenom.com/-- is a genetics company committed to providing the best genetic analysis products that translate genomic science into superior solutions for biomedical research and molecular medicine. Its proprietary MassARRAY^r system is a high performance nucleic acid analysis platform that efficiently and precisely measures the amount of genetic target material and variations therein. Its system is able to deliver reliable and specific data from complex biological samples and from genetic target material that is available only in trace amounts. SOLA COMMS: Louisiana Bankr. Court Confirms Plan of Reorganization ------------------------------------------------------------------ The U.S. Bankruptcy Court for the Western District of Louisiana confirmed, on May 31, 2006, SOLA Communications, LLC's Plan of Reorganization, paving the way for the Company to emerge from Chapter 11. At the hearing, held on May 23, 2006, Hon. Gerald H. Schiff ruled that the Company's Plan of Reorganization is in the best interests of creditors, that it affords proper treatment to all parties under the Bankruptcy Code, and that the Company's business plan is sound and feasible. SOLA and its Miami-based lender and equity sponsor, Bayside Capital, reached an agreement earlier this year to provide SOLA with necessary capital for emergence from bankruptcy and funding for future business opportunities. Bayside exchanged its secured loans for a combination of new indebtedness and majority ownership of reorganized SOLA. The exchange substantially strengthens SOLA's balance sheet and provides more cash flow to grow the business. "We are excited to support the Company as it moves forward and implements its strategic growth plan," Bayside Managing Director Anthony DiSimone, said. "This is a momentous day for the Company, its employees and its customers and we are proud to welcome SOLA to the Bayside family of companies." Bayside and its affiliates have available in excess of $2.5 billion of committed equity capital to support and grow middle market businesses. "New SOLA is born today -- the Judge's ruling is the commencement of a bright future for this Company," SOLA Manager and Chief Executive Officer Lyndon James, said. Mr. James, along with the assistance of the management team and employees, will continue to lead SOLA following its exit from Chapter 11. SOLA's unsecured creditors voted overwhelmingly to accept the Plan of Reorganization. The creditors in the two general unsecured classes voted approximately 85% and 95% in favor of the plan. Under the Plan of Reorganization, the Company anticipates making payments to creditors in early June 2006. "We are extremely gratified to have received the strong support of our trade partners for our plan," Lyndon James commented. "We value those relationships and we look forward to continuing to grow with them." "Today's achievement would not have been possible without the dedication of every employee, customer, vendor and business partner during the reorganization process," Mr. James continued. "We thank and salute them, and our success going forward will be testament to each one's support." "Our customers can look forward to the superior reliability and service they have come to expect from the SOLA team," SOLA General Manager Deryl Rice noted, "and we look forward to demonstrating to our loyal business partners what SOLA can accomplish for them as a stronger company." About Bayside Capital Headquartered in Miami, Florida, Bayside Capital, LLC -- http://www.bayside.com/-- is a private investment firm, which actively invests in the debt and equity of middle market companies that can benefit from operational enhancements, improved access to capital, or balance sheet realignments. With the ability to provide capital through a broad array of securities including senior and subordinated debt, equity, debtor-in-possession lending facilities, and special situation loans, Bayside has the experience and resources to help companies quickly resume growth initiatives and improve their strategic position. With offices in Atlanta, Boston, and San Francisco, the firm is one of the most active private equity investors in small and medium-sized companies. About SOLA Communications Based in Lafayette, Louisiana, and with offices in Houston, Texas, Mobile, Alabama and Larose, Louisiana, SOLA Communications, LLC -- http://www.solacomm.com/-- specializes in the design, installation, enhancement and service of Telecommunications, Safety & Control, Antenna & Tower and Satellite solutions. SOLA has a long-standing reputation for delivering superior service and innovative products and solutions. SOLA's products and services have no geographic boundaries and are available worldwide. SOUTHWEST GAS: Moody's Lowers Preferred Shelf Rating to (P)Ba2 -------------------------------------------------------------- Moody's Investors Service downgraded the senior unsecured long- term debt ratings of Southwest Gas Corporation to Baa3 from Baa2 with stable outlook. This action concludes the rating review initiated on March 10, 2006. The downgrade reflects the view that the credit measures of SWX remain weak when compared with its gas utility peers in light of its continued rapid growth and sensitivity to decline in earnings on account of warmer than normal weather and the absence of revenue decoupling in Arizona and Nevada that would serve to protect this company from weather variation and customer conservation. The company's heightened sensitivity to warmer than normal weather is exacerbated by the fact that in 2005 it experienced one of the 10 warmest years on record with 2003 being one of the warmest years in over 100 years. The cumulative effects of this warmer than normal weather has continued into the recent quarter ending March 31, 2006 which was mostly responsible for the company's loss of $9 million in operating margin. While the company was able to obtain some rate relief in recent years, the fact that it is among the fastest growing gas utilities in the country continues to expose it to regulatory lag as rate cases in its key state of Arizona take at least a year to resolve and even then, typically deliver only part of the rate improvement necessary for it to earn its allowed rate of return. While the company has been encouraged in certain jurisdictions to further pursue discussions with interested parties as to the possibilities of adopting some form of weather normalization clause protection or conservation tracker, these efforts will take more time before they could be implemented even if agreed upon by all the stakeholders concerned. For a few years the company has been performing at the lower end of its peers in terms of the financial rating indicators employed by Moody's which include, as example, fiscal 2005 return on equity of 6.0%, EBIT/Interest Expense coverage of 1.7, Retained Cash Flow to Adjusted Debt of 10.0% and Adjusted Debt to Adjusted Cap. of 62.5%. The comparable ratios for Baa2 peers averaged 8.9% ROE, 2.8 EBIT/Interest Exp. coverage, 13% RCF to Adj. Debt and 55% Adj. Debt to Cap. In addition, cash flow from operations after dividend payments has been insufficient to cover the active level of capital expenditures, a trend that has existed for several years and which is likely to continue into the foreseeable future given the company's very rapid growth rate. In addition, operating expenditures rose 14% in fiscal 2005 and 6% in the first quarter of 2006, reflecting the impact of general cost increases and incremental costs associated with providing service to a growing customer base, pressures that are expected to continue in the foreseeable future. The challenges for this company which bear directly on the aforementioned financial indicators are the ability to obtain the most comprehensive rate design possible to protect against warmer than normal weather, the reduction of regulatory lag by incorporating forward period test data along with pursuing more profitable growth alternatives, the correction for margin losses on account of customer conservation, and exercising strong control over operating expenses. The stable outlook anticipates a gradual improvement on the key rating drivers mentioned above that have negatively impacted the company's credit metrics and have prompted this rating adjustment. Downgraded Ratings of SWX: Southwest Gas Corporation * Baa3 from Baa2 senior unsecured; Southwest Gas Capital II * Ba1 from Baa3 preferred trust securities; Southwest Gas Corporation * (P) Ba2 from (P) Ba1 preferred shelf. Southwest Gas Corporation is headquartered in Las Vegas, Nevada, and provides natural gas service to over 1.7 million customers in Arizona, Nevada and California. STARBOUND RE: S&P Assigns BB+ Rating to $91 Million Bank Loan ------------------------------------------------------------- On May 26, 2006, Standard & Poor's Ratings Services assigned: a) its 'A+' senior unsecured bank loan rating to Starbound Re Ltd.'s $46.5 million (Debt III) bank loan; b) its 'BBB-' senior unsecured bank loan rating to Starbound's $46.5 million bank loan; and c) its 'BB+' senior secured bank loan rating to Starbound's $91 million bank loan (Debt I subordinated to Debt II and Debt III). The differences in ratings reflect the probabilities of the debt becoming impaired. Starbound is a limited-life, special-purpose Class 3 reinsurance company domiciled in Bermuda and set up specifically to provide additional capacity to the Florida insurance market, and Renaissance Reinsurance Ltd. (Ren Re; A+/Stable/--) has agreed to underwrite policies on behalf of the facility. "The ratings on Starbound are based on a very remote (0.2%) modeled probability of even the lowest-rated bank loan (Debt I) becoming impaired," said Standard & Poor's credit analyst James Brender. "They're also based on Ren Re's strong competitive position and risk management, Starbound Re's predetermined exposures and risk tolerances, and very strong price increases in Florida, which is more than 75% of Starbound Re's exposure." These positive factors are offset in part by the difficulties of modeling exposure to natural disasters, which is exacerbated by Starbound's significant concentration of risk in Florida. The lack of a strong alignment of interest between Ren Re and Starbound is a minor negative rating factor. Leverage and coverage were not considered explicitly as ratings factors because of Starbound's use of a trust structure. However, these factors indirectly affect the modeled results for a given capital structure and premium base. Starbound may borrow up to $184 million from a consortium of banks for a term of about 1.75 years. The entity's capital structure will also include $126.5 million of equity. The proceeds from capital-raising transactions will be placed in a collateral account, which will provide Ren Re with a source of indemnity cover for losses relating to its property catastrophe lines of business and other related lines. The duration of Starbound's assets will be consistent with that of its obligations. Ren Re will retain a minimum of 20% of the premium from a defined selection of its property catastrophe business ceded to Starbound through a quota share reinsurance treaty, under which Starbound's liability will attach simultaneously with that of Ren Re and otherwise follow the fortunes with respect to the business retroceded to Starbound. SUPERIOR ESSEX: Plans 2.7 Million Stock Offering to Pay Debts ------------------------------------------------------------- Superior Essex Inc. plans to offer 2.7 million shares of its common stock in an underwritten public offering. This offering will be made under the company's effective shelf registration statement filed with the Securities and Exchange Commission. Superior Essex intends to grant the underwriters an over-allotment option covering an additional 405,000 shares. Superior Essex intends to use the net proceeds from this offering to reduce outstanding borrowings under its senior secured revolving credit facility, to fund working capital needs due to rising copper costs, and for other general corporate purposes, including potential strategic acquisitions, which are evaluated from time to time as part of the company's business strategy. UBS Investment Bank and JPMorgan Securities Inc. will be joint book running managers for the offering, with Morgan Joseph serving as co-manager. A copy of the prospectus supplement and related base prospectus relating to this offering may be obtained from: UBS Investment Bank Attn: Prospectus Department 299 Park Avenue New York, NY 10171 Telephone (800) 223-3006 or from: JPMorgan Securities Inc. Prospectus Library 4 Chase Metrotech Center, CS Level Brooklyn, NY 11245 Telephone (718) 242-8002 Fax (718) 242-1350 Headquartered in Atlanta, Georgia, Superior Essex Inc. (Nasdaq:SPSX) -- http://www.superioressex.com/-- manufactures a broad portfolio of wire and cable products with primary applications in the communications, magnet wire and related distribution markets. It is a leading manufacturer and supplier of copper and fiber optic communications wire and cable products to telephone companies, distributors and system integrators; a leading manufacturer and supplier of magnet wire and fabricated insulation products to major original equipment manufacturers for use in motors, transformers, generators and electrical controls; and a distributor of magnet wire, insulation, and related products to smaller OEMs and motor repair facilities. * * * As reported in the Troubled Company Reporter on March 27, 2006, Standard & Poor's Rating Services revised its outlook on Atlanta, Georgia-based Superior Essex Inc. to positive from stable, and affirmed its 'B+' corporate credit rating; 'BB' secured bank loan rating; and 'B' senior unsecured debt rating. SUPERVALU INC: Moody's Lowers Rating on Sr. Unsec. Notes to B2 -------------------------------------------------------------- Moody's Investors Service downgraded certain ratings of SUPERVALU, Inc., including the senior unsecured long-term rating to B2 and the corporate family rating to Ba3. Moody's also withdrew the Not Prime short-term rating because the company has canceled its commercial paper program. The downgrade is prompted by the increased business risk and weakened financial flexibility following the pending purchase of about 1,124 supermarkets from Albertson's by SUPERVALU. The rating outlook is stable. This rating action concludes the review for downgrade that commenced on January 23, 2006 and was continued on April 13, 2006. Ratings downgraded: * Senior unsecured note rating to B2 from Ba3, * Corporate family rating to Ba3 from Ba2. This rating is withdrawn: * Short-term commercial paper rating of Not Prime. Moody's does not rate the proposed $4 billion bank loan that will partially fund the pending transaction. The Ba3 corporate family rating of SUPERVALU reflects that the most important quantitative and qualitative rating factors will be consistent with a Ba-rated retail company after the pending acquisition. In contrast to previous investment grade attributes, the company's more aggressive financial policy merits a Ba score and weaker pro-forma credit metrics fall near the lower end of the Ba-range. The ratings also recognize Moody's view that business risk is at the low-Baa or high-Ba level because of expected challenges in achieving the promised post-merger efficiencies and intense grocery retailing competition, including from non-traditional competitors, in spite of the company's position as the third- largest grocery retailer and the non-seasonal nature of food retailing. The stable outlook reflects Moody's expectation that credit metrics will remain near pro-forma current levels over the medium- term, that the fixed charge burden for debt service, capital investment, and dividend payments will remain substantial relative to operating cash flow, and that grocery retailing competition will remain intense. An upgrade is unlikely within the medium-term because of the lengthy integration process as SUPERVALU more than doubles the size of the company and expands into new markets. Over the longer term, ratings could move upward if the company establishes that it can obtain a material portion of the promised post-merger operating efficiencies and if the company's many geographies are able to maintain market share and operating margins in spite of the high level of competition. Additionally, an upgrade would require a strengthening of SUPERVALU's financial flexibility such that Free Cash to Debt sustainably exceeds 10%, EBIT covers interest expense by more than 3 times, and Debt to EBITDA falls toward 4.25 times. Factors that could lead Moody's to consider a negative rating action include a reversal in debt protection measure improvements such as debt to EBITDA approaching 5 times, EBIT to interest falling below 1.5 times, or free cash flow to debt declining to break-even, permanent market share declines in several of the company's key markets, or extended challenges in combining the Albertson's store with the existing SUPERVALU operations. SUPERVALU, Inc., headquartered in Eden Prairie, Minnesota, currently is the second-largest independent grocery distributor. Following the pending acquisition of about 1,124 supermarkets from Albertson's, Inc, the company will become the third-largest grocery retailer as the operator or licenser of about 2,500 supermarkets in many regions of the country. Total pro-forma sales equal about $44 billion. SUN MICROSYSTEMS: Board Approves Restructuring Initiatives ---------------------------------------------------------- Sun Microsystems Inc.'s board of directors approved a growth plan with the goal of accelerating Sun's return to consistent profitability. The plan provides for increasing investment in core technology and channel resources, while accelerating acquisition synergies and disinvestments in non-core processes and research and development activities. Over the past month, a team led by Sun's president and chief executive officer, Jonathan Schwartz, and chief financial officer, Michael Lehman, conducted thorough reviews of the company's global operations. As a result of this ongoing analysis, the company is instituting a number of initiatives to better align expenses with its core business strategy and drive the company's operating income goals of at least 4% of revenues for Q4FY07 and of at least 10% of revenues long-term. More specifically, the plan addresses several cost cutting initiatives including a 11-13% reduction in force and the consolidation of its real estate portfolio. The company is reducing the approximately 37,500 worldwide employee headcount by 4,000 to 5,000 people over the next six months and is selling its Newark campus and exiting leased facilities in Sunnyvale, California. The company will continue operations of its two major Bay Area campuses, Menlo Park and Santa Clara, California. These initiatives are designed to focus and streamline the company and are expected to result in an annual cost savings between $480 million and $590 million, with the full impact expected to take effect by Q4 of Fiscal 2007. The company expects to incur restructuring charges ranging from $340 million to $500 million over the next several quarters in connection with the plan, the majority of which will be incurred in the fiscal quarter ended June 30, 2006. "Momentum is clearly increasing around Sun's core technology and channel programs, with Java, Solaris, SunFire and StorageTek platforms all gaining share," Mr. Schwartz said. "We've worked hard to reinvent the entirety of Sun's product line, from software to systems, storage and services. It's on that rebuilt foundation, that we are reinventing our business model on a far simpler base and focusing our energies on the automation, energy efficiency and network innovation at the heart of our technology leadership." In addition to these restructuring activities, Sun's board has approved the company's operational goals and priorities for its fiscal 2007 business plan. Key components of that plan include: * a Q4 Fiscal 2007 operating income goal of at least 4% of revenue, excluding any amounts related to restructuring, but including amounts related to stock-based compensation (FAS 123R) and amortization of purchased intangibles; * a longer term operating income goal of at least 10% of revenue; * expected Fiscal 2007 full year revenue growth in the low to middle single digits; * expected Fiscal 2007 gross margin of around 43%; and * expected Fiscal 2007 operating expenses in the range of $5.6 billion to $6 billion, excluding any amounts related to restructuring, but including amounts related to stock-based compensation (FAS 123R) and amortization of purchased intangibles. Executive Appointments Since taking over as CEO on April 24, Mr. Schwartz reported a number of important executive moves including the appointment of Richard Green to EVP of Software, John Fowler to EVP of Systems and David Yen to EVP of Storage. Additionally, Sun disclosed the expanded roles of Don Grantham to EVP of Global Sales and Services, Greg Papadopoulos to CTO and EVP of Research and Development, Crawford Beveridge to EVP and Chairman, EMEA, APAC and Americas and Bill MacGowan as Chief Human Resources Officer and EVP of People and Places. "The team that I have aligned, combined with today's announcement, represents Sun's reinvigorated focus and recommitment to driving customer and shareholder value," Mr. Schwartz said. "I'm confident that we're on the right path -- revenues and gross margins were up in Q3 year-over-year and our investments in core R&D activities are paying off. We have a solid foundation -- a strong balance sheet with approximately $4.4 billion in cash and marketable securities, long-term partnerships with other technology leaders worldwide, and strong relationships with virtually every Fortune 1000 company. I believe that execution of our strategy to provide innovation and choice will pay off in value to customers and that value will be reflected in business performance." About Sun Microsystems Headquartered in Santa Clara, California, Sun Microsystems, Inc. -- http://www.sun.com/-- provides products and services for network computing. It provides network computing infrastructure solutions that consist of computer systems, network storage systems, support services, and professional and knowledge services. Sun Microsystems, Inc.'s 7-1/2% Senior Notes due Aug. 15, 2006, and 7.65% Senior Notes due Aug. 15, 2009, carry Moody's Investors Service's Ba1 rating and Standard & Poor's BB+ rating. TEXAS STAR: Voluntary Chapter 11 Case Summary --------------------------------------------- Debtor: Texas Star Industrial Group, Ltd. Co. dba Texas Star Business Centre 1205 Texas Star Parkway, Suite 120 Euless, Texas 76040 Tel: (817) 545-3717 Bankruptcy Case No.: 06-41518 Chapter 11 Petition Date: May 31, 2006 Court: Northern District of Texas (Fort Worth) Debtor's Counsel: J. Robert Arnett, II, Esq. Arnett Gaubert, LLP 4650 Trammell Crow Center 2001 Ross Avenue Dallas, Texas 75201 Tel: (214) 760-0900 Fax: (214) 760-0905 Estimated Assets: $1 Million to $10 Million Estimated Debts: $1 Million to $10 Million The Debtor did not file a list of its 20 largest unsecured creditors. TRANS-ACTION EQUITY: Beal Bank Wants Chapter 11 Case Dismissed -------------------------------------------------------------- Beal Bank SSB asks the U.S. Bankruptcy Court for the District of Colorado to dismiss Trans-Action Equity Investors III, Co.'s chapter 11 case. The Debtor was involved in more than nine years of litigation with Beal Bank over a failed single asset real estate apartment in Colorado Springs. The Debtor owes Beal Bank over $28 million pursuant to promissory notes and secured by deeds of trust encumbering the apartment project. Donald D. Allen, Esq., at Block Markus & Williams LLC, relates that the Debtor has filed the chapter 11 case in bad faith because: 1) The Debtor chose to file the bankruptcy case the day before Beal Bank's foreclosure was to occur; 2) The Debtor chose to file the bankruptcy case only after Beal Bank had finally obtained a decree of foreclosure, after more than nine years litigation between Beal Bank and the Debtor; 3) The Debtor has no significant creditors other than the Bank; 4) The Debtor's schedules are inaccurate that they list unsecured debts that are not owed and they list creditors that have no claim against the Debtor; 5) There is little likelihood of rehabilitation of the Debtor; 6) The Debtor is using bankruptcy as a vehicle to resolve disputes solely between the Debtor and Beal Bank as its sole creditor; and 7) The Debtor will be unable to effectuate confirmation of a plan. Mr. Allen adds that the Debtor is insolvent and is unlikely to be able to pay its sole secured creditor, Beal Bank. The Court will convene a hearing at June 8, 2006, 1:30 p.m., to consider Beal Bank's request. Headquartered in Colorado Springs, Colorado, Trans-Action Equity Investors III, Co. develops real estate and maintains apartments. The Debtor filed for chapter 11 protection on April 18, 2006 (Bankr. D. Col. Case No. 06-11886). Robert M. Duitch, Esq., at Robert M. Duitch, P.c., represents the Debtors in their restructuring efforts. When the Debtor filed for protection from their creditors, they listed $5,613,120 in assets and $28,333,020 in debts. TRIBUNE CO: Fitch Cuts Sub. Exchangeable Debentures' Rating to BB+ ------------------------------------------------------------------ Fitch Ratings downgraded Tribune Co.'s Issuer Default Rating to 'BBB-' from 'A-'. The Rating Outlook is Negative. Approximately $3.2 billion of outstanding senior unsecured and subordinated debt on the balance sheet as of March 31, 2006 is affected by this action. -- Issuer Default Rating to 'BBB-' from 'A-' -- Senior unsecured revolving credit facility to 'BBB-' from 'A-' -- Senior unsecured notes due 2006-2027 to 'BBB-' from 'A-' -- Subordinated exchangeable debentures due 2029 to 'BB+' from 'BBB+' -- Commercial paper program to 'F3' from 'F2' The downgrade reflects the significant debt load that Tribune is assuming in order to return capital to shareholders. Tribune announced that it will incur over $2 billion in additional bank debt and publicly issued bonds to fund its tender of 25% of its outstanding shares. The leveraged share buy-back represents a significant departure from Tribune's historically conservative financial policies and emphasizes the pressures that slower growing traditional media companies are under to boost their stock prices. With pro forma leverage of over 4.0x, Tribune's metrics are strained for a 'BBB-' company with Tribune's business risk profile as its core business lines, newspapers and broadcasting, each face significant secular challenges. However, Fitch expects Tribune to generate meaningful free cash flow over the next several years which should be supported by $200 million in additional cost cuts the company has identified. Tribune has stated that the majority of free cash flow and the net proceeds from $500 million in non-core asset sales are expected to be applied toward debt repayment, which should return the capital structure to an investment grade credit profile. Leverage, calculated as debt (with the PHONES at $1 billion at year-end 2005) to operating EBITDA, is expected to be 3.5x or lower by year-end 2007, and that leverage would be reduced further in subsequent periods. Also factored into the new ratings is Fitch's expectation that Tribune will supplement free cash flow generation shortfalls with additional asset sales, if necessary, to meet its debt repayment targets and timing. Tribune's track record of repaying debt following the Times Mirror acquisition in 2000 was considered, although margins and equity prices are expected to be under significantly more pressure during this debt pay-down period. Further downgrades could occur if Fitch's view changes regarding Tribune's capacity, commitment or incentive to maintain investment grade ratings. In addition, the 'BBB-' rating continues to reflect: * declining circulation trends for newspapers; * pressures on newspaper advertising revenue streams; * significant substitution risk and competitive threat from online rivals (particularly in high margin classified categories); * volatile newsprint prices; * the threat of emerging technologies on the economics of the pure-play broadcasting business; and * the volatility of cash flow due to cyclical and political fluctuations. The Negative Rating Outlook reflects: * the risks of accelerated deterioration in Tribune's major business lines and markets; * additional stock price pressure; and * potential further financial policy revisions. These concerns are balanced somewhat by Tribune's strong free cash flow characteristics and solid liquidity. While growth prospects for Tribune's businesses remain weak, Fitch believes its assets will generate positive free cash flow through a downturn. The quality and geographic diversity of Tribune's assets, as well as the success of several of the company's online investments support the rating as well. Fitch has been mindful of heightened event risk across the newspaper space and this announcement of Tribune's departure from high investment grade capital structure parameters exemplifies this risk. Circulation was down around 4% for the six-month period ended Mar. 31, 2006. Newspaper advertising revenue has been down 0.5% year to date through April with significant pressure coming from national advertising and the automotive sub- segment of the classified category. Retail has also been under pressure due to major retailer consolidations. Tribune's broadcasting revenue has been down 2% through April year to date as its WB stations have suffered lower ratings due in part to the introduction of Local People Meters in its markets. Tribune expects the introduction of the CW network will improve ratings and reduce ad inventory and could have a positive affect on pricing and revenue growth. Fitch believes there are significant secular pressures facing these two industries (particularly in large markets) as advertising dollars are being redirected toward the internet and cable to the detriment of traditional media. Consolidated operating EBITDA margins remain healthy, above 20%, but both businesses face the risk of margin compression as these revenue pressures are coupled with cost structures that are largely fixed or contain elements that are largely outside of management's control. These secular issues have placed pressure on Tribune's stock, which was down 18% in 2004, 28% in 2005 and is down around 7% year to date. In an attempt to stem the stock price slide, Tribune has dedicated over a billion dollars of free cash flow toward share repurchases over the past several years buying back over $700 million in 2004, $440 million in 2005 and $140 million in the first quarter of 2006. While Tribune has stated its intention to improve its credit metrics more reflective of its current rating, the Negative Outlook incorporates the risk that the stock might not rebound and that further financial policy revisions may be contemplated. Fitch calculates leverage assigning 50% equity credit to PHONES subordinated debt per Fitch's hybrid criteria and alternatively by taking the face value of the PHONES and deducting the value of the Time Warner stock. Both measures are slightly over 4.0x pro forma for the transaction and Fitch expects both measures to be at or below 3.5x by year-end 2007. Tribune has stated it would meet its de-leveraging targets through a combination of operating cash flow and potential asset sales. Fitch does not believe acquisition risk will be significant over the intermediate term as the company will likely spend less than $100 million per year for internet related assets that complement its portfolio of online investments. Tribune's liquidity will be supported by $750 million in pro-forma un-drawn bank credit facilities, and the company's solid free cash flow of over $400 million. After terming out the company's commercial paper balances, TRB will have approximately $1.25 billion of bank debt. Tribune's debt generally has a long tenor with over half of its debt coming due after 2010. As this transaction demonstrates, bond indentures do not provide a significant level of protection against the risk of leveraging transactions as there are no financial covenants and no material change of control, asset sales, or additional debt provisions. However, there is a limitation on secured debt of 10% of net assets. (There is presently no secured debt in the capital structure.) ULTRASTRIP SYSTEMS: Posts $2.2 Million Net Loss in First Quarter ---------------------------------------------------------------- UltraStrip Systems, Inc., filed its first quarter financial statements for the three months ended March 31, 2006, with the Securities and Exchange Commission on May 15, 2006. The Company reported a $2,272,010 net loss on $679,316 of revenues for the three months ended March 31, 2006. At March 31, 2006, the Company's balance sheet showed $1,733,411 in total assets and $4,791,771 in total liabilities, resulting in a $3,058,360 stockholders' deficit. The Company's March 31 balance sheet also showed strained liquidity with $1,561,767 in total current assets available to pay $4,791,771 in total current liabilities coming due within the next 12 months. Full-text copies of the Company's financial statements for the three months ended March 31, 2006, are available for free at http://ResearchArchives.com/t/s?a1d Going Concern Tedder, James, Worden & Associates, P.A., in Orlando, Florida, raised substantial doubt about UltraStrip Systems, Inc.'s ability to continue as a going concern after auditing the Company's consolidated financial statements for the year ended Dec. 31, 2005. The auditor pointed to the Company's working capital deficit and losses from operations. About UltraStrip UltraStrip Systems, Inc. is a water-engineering firm that develops and sells patented equipment to provide solutions to environmental problems. The Company's Mobile Water Filtration Systems, provided through its Ecosphere Technologies subsidiary, provides a solution to use its powerful water-filtration and purification technology in the world's most challenging applications, both in developing regions, and in areas hit by man-made or natural events that damage vital water resources. UltraStrip's patented robotic water jetting systems are designed to provide an environmentally safe coatings removal process in both heavy marine, automobile, and above ground storage tank applications. The robotic systems have been utilized for U.S. Naval ships. UNITED ENERGY: Case Summary & 18 Largest Unsecured Creditors ------------------------------------------------------------ Debtor: United Energy Coal, Inc. 32 Enterprise Drive Oakland, Maryland 21550 Tel: (301) 533-0933 Tel: (301) 533-0933 Bankruptcy Case No.: 06-00453 Type of Business: The Debtor is an affiliate of Buffalo Coal Company, Inc., which previously filed for chapter 11 protection on May 5, 2006 (N.D. W. Va. Case No. 06-00366). Chapter 11 Petition Date: May 31, 2006 Court: Northern District of West Virginia (Elkins) Debtor's Counsel: David A. Hoyer, Esq. Hoyer, Hoyer & Smith, PLLC 22 Capitol Street Charleston, West Virginia 25301 Tel: (304) 344-9821 Fax: (304) 344-9519 Total Assets: $103,575,293 Total Debts: $94,016,306 Debtor's 18 Largest Unsecured Creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ Virginia Electric and Lawsuit $88,408,616 Power Company 701 East Cary Street Richmond, VA 23219 Lehigh Cement Company Consent Judgment $1,800,000 7660 Imperial Way Allentown, PA 18195 Maxus Leasing UCC $494,665 345 Mount Lebanon Boulevard Suite 24 Pittsburgh, PA 15234 Savage Services Corp. Goods and Services $370,708 P.O. Box 57908 Salt Lake City, UT 84157-0908 GMS Mine Repair and Services $306,593 Maintenance, Inc. P.O. Box 2446 Mount Lake Park, MD 21550 Bill Miller Equipment Goods and Services $292,870 Sales, Inc. P.O. Box 112 Eckhart, MD 21528 Anker Energy Corp. Goods and Services $275,000 2708 Cranberry Square Morgantown, WV 26508 Austin Powder Company Goods and Services $264,982 P.O. Box 6049-C Cleveland, OH 44191 Guttman Oil Company Goods and Services $203,947 BB&T UCC $209,833 King's Tire Service, Inc. Goods and Services $113,767 Rockwood Casualty Insurance Co. Services $69,782 Tri-County Petroleum Goods and Services $53,201 U.S. Treasury Federal Income Tax $44,918 A&D Well Co., Inc. Goods and Services $40,742 American Express Credit Card Charges $35,433 CBIZ Benefits & Insurance Services $23,514 Services L. Robert Kimball and Goods and Services $18,450 Associates, Inc. US AIRWAYS: Court Dismisses Fraizer's Complaint & Disallows Claim ----------------------------------------------------------------- As previously reported, Reorganized US Airways, Inc., its debtor- affiliates and Phillip H. Frazier filed summary judgment motions on account of Mr. Frazier's Claim No. 3463 and the Reorganized Debtors' objections to the Claim. The Court rules in favor of US Airways, and denies Mr. Frazier's request for summary judgment. Judge Mitchell holds that Mr. Frazier's evidence is not sufficient to establish a triable issue of material fact on any of the three causes of action asserted in his complaint. Accordingly, Claim No. 3463 is disallowed and Mr. Frazier's complaint is dismissed, Judge Mitchell says. Frazier's Complaint Mr. Frazier, a long-time employee of US Airways, filed a claim in US Airways' first Chapter 11 case based on alleged employment discrimination. After US Airways objected to his claim, Mr. Frazier filed a pleading that included a request for relief from the automatic stay to pursue his claim in state court. Prior to the hearing on Mr. Frazier's motion, USAir I's Plan of Reorganization was confirmed. The Bankruptcy Court treated Mr. Frazier's pleading as a motion for relief from the discharge injunction, but denied the motion on the ground that the Bankruptcy Court was the appropriate forum in which to liquidate the claim. The Court did note, however, that there might be some aspect of Mr. Frazier's claim that arose post-confirmation and was, therefore, not encompassed by the discharge injunction. Mr. Frazier subsequently filed an Equal Opportunity Employment Commission complaint in California in June 2003 asserting discrimination claims that mirrored the claims that he had filed in the Bankruptcy Court. US Airways responded first by sending Mr. Frazier a letter demanding that he withdraw the complaint because it violated the discharge injunction. When Mr. Frazier refused to do so, US Airways filed a motion to have him held in civil contempt for violation of the discharge injunction. During the hearing on the contempt motion, the Bankruptcy Court expressed doubt that the EEOC complaint necessarily violated the discharge injunction. Although the Court agreed that the claims resembled, and could be read as embracing, those that had been asserted in Mr. Frazier's proof of claim, they could also be read more narrowly to allege only post-confirmation discrimination. Perceiving which way the wind was blowing, US Airways' counsel withdrew the contempt motion. After a trial held in the Bankruptcy Court in February 2004, Mr. Frazier's discrimination claims were disallowed. Following US Airways' second Chapter 11 petition, Mr. Frazier commenced an adversary proceeding seeking $9,060,000 in compensatory and punitive damages, as well as reinstatement to his former position for alleged: (1) employment discrimination; (2) intentional infliction of emotional distress; and (3) malicious use of process. The Bankruptcy Court stayed the adversary proceeding and ordered that the complaint be treated as a proof of claim. Subsequently, USAir II's Plan of Reorganization was confirmed under which allowed claims will receive a pro-rata distribution of stock in the parent holding company, US Airways Group, Inc. After USAir II's Plan was confirmed, Mr. Frazier filed an amended complaint, and both Mr. Frazier and the Reorganized Debtors have filed motions for summary judgment. Employment Discrimination US Airways argued that Mr. Frazier cannot establish that the bringing of the contempt motion was an "adverse employment action," since it did not directly affect the terms, conditions, or benefits of his employment. US Airways proffered that the reason for filing the contempt motion was to protect the estate from what it believed was a violation of the discharge injunction as set forth in the Debtors' confirmed Plan of Reorganization. To show US Airways' proffered explanation was merely a pretext for discrimination, Mr. Frazier told the Court that US Airways admitted in open court that the request for contempt was filed to retaliate against him. However, after examining the transcript of the contempt hearing, Judge Mitchell did not find the purported admission. Judge Mitchell, instead, discovered that Mr. Frazier provided his own declaration that he was discriminated against. "Mr. Frazier's naked opinion, without more, is not sufficient to establish even a prima facie case, let alone to rebut a proffered non-discriminatory explanation," Judge Mitchell explains. Mr. Frazier's reliance on an EEOC finding of "reasonable cause" of retaliation to support his claim, is likewise inadequate, Judge Mitchell adds. Malicious Use of Process According to Judge Mitchell, Mr. Frazier is alleging "malicious prosecution" rather than "abuse of process," because the gist of the claim is that the motion for contempt was a groundless civil proceeding instituted against him. Judge Mitchell points out that malicious prosecution differs from abuse of process in that malicious prosecution lies for maliciously causing process to issue while abuse of process lies for the improper use of process after it has been issued. Moreover, to establish a prima facie case of malicious prosecution under Virginia law, a plaintiff must prove that: (1) the defendant instituted a prior proceeding against the plaintiff; (2) the proceeding was instituted without probable cause; (3) the proceeding was instituted with malice; (4) the underlying proceeding terminated in the plaintiff's favor; and (5) the plaintiff sustained special damages as a result of the proceeding. Judge Mitchell holds that the malicious prosecution claim fails because Mr. Frazier has not shown special damages, as required under Virginia law. Judge Mitchell further stresses that given the ambiguous description by Mr. Frazier of the scope of his claim, US Airways was not required to sit and trust that only post-confirmation claims were to be prosecuted when the charge itself did not contain express language to that effect. Emotional Distress "Mr. Frazier's argument that US Airways should be found liable as a matter of law for intentional infliction of emotional distress, is also without merit," Judge Mitchell maintains. To prevail on a claim for "intentional infliction of emotional distress," the alleged act must have an effect on the plaintiff that is so severe that no reasonable person could be expected to endure it, Judge Mitchell says. However, even if the Court were to find that the bringing of the contempt motion was completely unjustified, Judge Mitchell notes that the Court would be unable to find that Mr. Frazier has shown severe distress because by its very nature, litigation frequently engenders anxiety and distress. "This is not a case where Mr. Frazier was accused by US Airways of especially heinous conduct likely to make him the object of public obloquy, or where Mr. Frazier suffered imprisonment or other severe repercussions as a result of the charges being brought," Judge Mitchell remarks. While it very well may be that Mr. Frazier suffered sleepless nights and depression after being served with the contempt motion, there is no evidence that his level of distress and anxiety exceeded what would be expected in any person who was charged with contempt of court, the Court declares. About US Airways Headquartered in Arlington, Virginia, US Airways' primary business activity is the ownership of the common stock of: * US Airways, Inc., * Allegheny Airlines, Inc., * Piedmont Airlines, Inc., * PSA Airlines, Inc., * MidAtlantic Airways, Inc., * US Airways Leasing and Sales, Inc., * Material Services Company, Inc., and * Airways Assurance Limited, LLC. Under a chapter 11 plan declared effective on March 31, 2003, USAir emerged from bankruptcy with the Retirement Systems of Alabama taking a 40% equity stake in the deleveraged carrier in exchange for $240 million infusion of new capital. US Airways and its subsidiaries filed another chapter 11 petition on Sept. 12, 2004 (Bankr. E.D. Va. Case No. 04-13820). Brian P. Leitch, Esq., Daniel M. Lewis, Esq., and Michael J. Canning, Esq., at Arnold & Porter LLP, and Lawrence E. Rifken, Esq., and Douglas M. Foley, Esq., at McGuireWoods LLP, represent the Debtors in their restructuring efforts. In the Company's second bankruptcy filing, it lists $8,805,972,000 in total assets and $8,702,437,000 in total debts. The Debtors' chapter 11 plan for its second bankruptcy filing became effective on Sept. 27, 2005. The Debtors completed their merger with America West on the same date. (US Airways Bankruptcy News, Issue No. 120; Bankruptcy Creditors' Service, Inc., 215/945-7000) US AIRWAYS: Resolving Charlotte's Multi-Mil. Priority Tax Claims ---------------------------------------------------------------- In the first bankruptcy case of US Airways, Inc., and its debtor- affiliates, the tax collector for the city of Charlotte and Mecklenburg County, in North Carolina, filed two priority claims aggregating $7,151,708 for year 2002 personal property taxes. The Reorganized Debtors objected to the USAir I Priority Tax Claims, and by order dated June 19, 2003, the claims were disallowed by default because the Tax Collector failed to respond to the objection. The Tax Collector then sought to alter and amend the June 2003 Order, asserting that neither the Tax Collector nor its attorneys received a copy of the objection. In March 2004, the Tax Collector filed amended priority tax claims for $7,090,964. The request to alter and the USAir I Amended Priority Tax Claims were not resolved during the Reorganized Debtors' first bankruptcy case. In the present bankruptcy case, the Tax Collector filed two priority claims aggregating $4,434,003 for year 2004 personal property taxes and re-filed the USAir I Amended Priority Tax Claims for $7,090,964. The Tax Collector also filed administrative claims for $4,202,279 for year 2005 personal property taxes. The Tax Collector asked the Court to lift the automatic stay to determine the amount of its priority tax claims. The Reorganized Debtors objected to the USA I Amended Priority Tax Claims and the USAir II Priority Tax Claims, to which the Tax Collector responded. Pursuant to Section 1129(a)(9)(C) of the Bankruptcy Code and the Reorganized Debtors' confirmed Plan of Reorganization, if any of the Claims are allowed, the Tax Collector is entitled to receive deferred cash payments over a period not exceeding six years after the assessment of the tax. In a Court-approved stipulation, the parties agreed to resolve all claims and matters at issue pursuant to these terms: (1) The USAir I Amended Priority Tax Claims and the USAir II Priority Tax Claims are allowed for $8,800,000 in full satisfaction of all the Tax Collector's claims which have been, or could have been, asserted through tax year 2004 against the Reorganized Debtors and their estates in both bankruptcy cases; (2) The Allowed Claim will be paid to the Tax Collector, in full, on or before June 25, 2006. (3) The Administrative Claims are withdrawn as they have been paid, in full. (4) All other claims asserted against any of the Reorganized Debtors in the bankruptcy cases by or on behalf of the Tax Collector, are forever and irrevocably disallowed, discharged, waived and expunged in their entirety, and the Tax Collector releases the Reorganized Debtors and their estates from any Claims, except the Allowed Claim. (5) The Motion to Alter and Amend and the Motion to Lift Stay are granted only to the extent necessary to reinstate the USAir I Amended Priority Tax Claim, and the requests will be marked satisfied. (6) All claim objections with respect to the claims addressed, and any responses, are withdrawn and deemed satisfied. About US Airways Headquartered in Arlington, Virginia, US Airways' primary business activity is the ownership of the common stock of: * US Airways, Inc., * Allegheny Airlines, Inc., * Piedmont Airlines, Inc., * PSA Airlines, Inc., * MidAtlantic Airways, Inc., * US Airways Leasing and Sales, Inc., * Material Services Company, Inc., and * Airways Assurance Limited, LLC. Under a chapter 11 plan declared effective on March 31, 2003, USAir emerged from bankruptcy with the Retirement Systems of Alabama taking a 40% equity stake in the deleveraged carrier in exchange for $240 million infusion of new capital. US Airways and its subsidiaries filed another chapter 11 petition on Sept. 12, 2004 (Bankr. E.D. Va. Case No. 04-13820). Brian P. Leitch, Esq., Daniel M. Lewis, Esq., and Michael J. Canning, Esq., at Arnold & Porter LLP, and Lawrence E. Rifken, Esq., and Douglas M. Foley, Esq., at McGuireWoods LLP, represent the Debtors in their restructuring efforts. In the Company's second bankruptcy filing, it lists $8,805,972,000 in total assets and $8,702,437,000 in total debts. The Debtors' chapter 11 plan for its second bankruptcy filing became effective on Sept. 27, 2005. The Debtors completed their merger with America West on the same date. (US Airways Bankruptcy News, Issue No. 121; Bankruptcy Creditors' Service, Inc., 215/945-7000) USG CORP: Battle Ensues Over Elm's $57.55 Mil. Asbestos PD Claims ----------------------------------------------------------------- USG Corporation and its debtor-affiliates object to Claim Nos. 4788 and 4786 filed by 1401 Elm 1999 Acquisition Limited Partnership. The Debtors assert that the Claims are barred by the applicable statute of limitations. Elm asserts a $57,550,986 claim for asbestos contamination of its single commercial office building in Dallas, Texas. Claim No. 4788 alleges that Elm acquired ownership of the property in "1964 (approx.)." Claim No. 4786, which amends Claim No. 4788, indicates that Elm purchased floors 10 to 49 of the building in 1999. No details of the transaction are disclosed. Paul N. Heath, Esq., at Richards, Layton & Finger, P.A., Wilmington, Delaware, tells the Court that under Tex. Civ. Prac. & Rem. Code Ann. Section 16.003(a), Elm's asbestos property damage claim must be brought within two years after the claim accrues. Elm states that at least some of the asbestos-containing materials in the building were removed from the building beginning in 1996. By that time, the presence in the building of the asbestos-containing products for which Elm seeks recovery from the Debtors was actually known by the owners, Mr. Heath contends. He also notes that well before 1996, commercial building owners in the United States generally, and certainly in large metropolitan areas like Dallas, were well aware of potential risks that had been raised regarding in-place asbestos- containing materials of the type allegedly present in Elm's building. In addition, Mr. Heath says, the U.S. Court of Appeals for the Third Circuit in Prudential Ins. Co. of Amer. v. United States Gypsum Co., 359 F.3d 226, 230 (3d Cir. 2004), has recognized that potential dangers from asbestos-containing materials in buildings were widely known at least as early as October 20, 1983. With respect to renovation activities which disturb in-place asbestos-containing materials, Environmental Protection Agency regulations have been in effect since the early 1970s with respect to potential releases of asbestos during those activities. To the extent that any ownership interest was acquired after the alleged asbestos abatement was commenced in 1996, there is significant reason to believe that the ownership interest was acquired with actual knowledge of the existence of asbestos- containing materials in its building by virtue of the alleged abatement activities and related due diligence performed by a sophisticated purchaser of commercial real estate, Mr. Heath maintains. "[G]iven the widespread awareness in the commercial real estate community regarding the issue, it is virtually certain that [Elm] was aware of the presence of asbestos in the building, and of the potential hazards allegedly associated with that material, a decade or more before the 1996 abatement," Mr. Health asserts. "The applicable statute of limitations began to run as to [Elm] not when it actually knew of the elements of its claim, but when it knew or should have known it had suffered injury," he adds. The Debtors also object to the Claims on the ground that Elm failed to provide sufficient evidence relating to product identification. Accordingly, the Debtors ask the Court to disallow the Claims. Elm Responds 1401 Elm 1999 Acquisition Limited Partnership clarifies that at the time it purchased floors 10 through 49 of the basement and sub-basement, it was aware that asbestos-containing fireproofing had been removed from portions of the basements and first floors as part of a major renovation in the Tower. However, it was not aware of any removal of the asbestos-containing fireproofing in the Tower. Since purchasing the Tower, Elm has not removed any of the fireproofing in the tower. Elm retained Material Analytical Services, Inc., in November 2002 to inspect the floors that it owns. Elm filed a PD claim in January 2003 based on MAS' report. Elm wants the Debtors' objection overruled. Elm says the Debtors failed to apply the proper trigger regarding limitations on its claim. Theodore J. Tacconelli, Esq., at Ferry Joseph & Pearce, P.A., in Wilmington, Delaware, notes that that courts throughout the country have consistently held that general knowledge regarding the hazards of asbestos does not cause injury, much less property damage. Mr. Tacconelli points Judge Fitzgerald to: * MDU Res. Group v. W.R. Grace & Co., 14 F.3d 1274, 1278-79 (8th Cir. 1994), cert. denied, 15 U.S. 824 (1994), wherein the court rejected W.R. Grace's argument that knowledge of the mere presence of asbestos triggers the statute of limitations was rejected, and held that the proper question was when MDU could have learned, with the exercise of reasonable diligence, that its building had been contaminated by asbestos; * Adams-Arapahoe Sch. Dist. v. GAF Corp., 959 F.2d 868, 872 (10th Cir. 1992), wherein the court held that "[o]nly asbestos contamination constitutes a physical injury compensable under tort law"; * California Sansome v. U.S. Gypsum Co., 55 F.3d 1402 (9th Cir. 1995), wherein the court held that contamination must occur in the first instance in order to trigger the running of statute of limitations; * City of Wichita v. United States Mineral Products Co., 72 F.3d 1491 (10th Cir. 1996), wherein the court held that actual physical injury by "contamination" is an essential element of any negligence claim and liability may not be premised upon the risk of future harm not yet suffered; and * BellSouth Communications v. W.R. Grace & Co., 77 F.3d 603 (2d Cir. 1996), wherein the court held that claim does not accrue until contamination of the building by asbestos and consequent health risk occurs. Texas courts have required that there be a "legal injury" in order for limitations to run, Mr. Tacconelli notes, citing Baker v. City of Fort Worth, 146 Tex. 600, 210 S.W.2d 564 (1948), wherein the court held that "where bridge erected on adjoining land without invasion of plaintiff's rights or premises at time of construction, no legal injury resulted at that time and plaintiff's cause of action did not accrue until water diverted onto his land by reason of the bridge." The court in Waxler v. Household Credit Services, Inc., 106 S.W.3d 277 (Tex. App. -Dallas 2003) (citing Black v. Wills, 758 S.W.2d 809, 816 (Tex. App. - Dallas 1988, no writ), also held that "[u]nder the 'legal injury' rule, a cause of action sounding in tort generally accrues when the tort is completed, that is the act committed and damage suffered. . . . This is the date of legal injury and the statute of limitations begins to run at that time." Mr. Tacconelli also contends that the fact that a building owner may have knowledge of federal rules and regulations regarding asbestos-containing building products does not constitute "constructive notice" so as to trigger limitations. Mr. Tacconelli notes that in Kansas City v. W.R. Grace & Co., 778 S.W.2d 264, (Mo. App. 1989), the court held that "simply because Kansas City had notice of NESHAPs, its causes of action for negligence and strict liability were not caused to accrue. In California Sansome Co. v. U.S. Gypsum, 55 F.3d 1402, 1403 (9th Cir. 1995), the court held that "ruling that articles, publications, regulations, and seminars on the hazards of asbestos did not put plaintiff 'on inquiry notice' of asbestos contamination." Mr. Tacconelli further notes that in support of its claim, Elm attached a constituent analysis performed by MAS regarding the asbestos-containing product in the building and MAS' letter report dated November 22, 2002. The report and the results from the various tests performed by MAS establish that the asbestos- containing material in Elm's building is SprayDon fireproofing manufactured by USG. Moreover, the Debtors have in prior cases accepted MAS findings that the Debtors manufactured asbestos-containing materials installed in buildings, Mr. Tacconelli adds. Product identification findings by MAS have also been recognized in other bankruptcies as proof that a debtor's asbestos-containing material was installed in a particular building for which a claim had been filed. About USG Corp. 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., Gus Kallergis, Esq., Brad B. Erens, Esq., Michelle M. Harner, Esq., Mark A. Cody, Esq., and Daniel B. Prieto, Esq., at Jones Day represent the Debtors in their restructuring efforts. Lewis Kruger, Esq., Kenneth Pasquale, Esq., and Denise Wildes, Esq., represent the Official Committee of Unsecured Creditors. Elihu Inselbuch, Esq., and peter Van N. Lockwood, Esq., at Caplin & Drysdale, Chartered, represent the Official Committee of Asbestos Personal Injury Claimants. Martin J. Bienenstock, Esq., Judy G. Z. Liu, Esq., Ralph I. Miller, Esq., and David A. Hickerson, Esq., at Weil Gotshal & Manges LLP represent the Statutory Committee of Equity Security Holders. Dean M. Trafelet is the Future Claimants Representative. Michael J. Crames, Esq., and Andrew A. Kress, Esq., at Kaye Scholer, LLP, represent the Future Claimants Representative. Scott Baena, Esq., and Jay Sakalo, Esq., at Bilzen Sumberg Baena Price & Axelrod LLP, represent the Asbestos Property Damage Claimants Committee. 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. 111; Bankruptcy Creditors' Service, Inc., 215/945-7000) USG CORP: Investor Consortium's $12.5MM Claim Request Draws Fire ---------------------------------------------------------------- A request for a $12.5 million administrative expense priority claim against USG Corporation and its debtor-affiliates received flak form various parties-of-interest. As reported in the Troubled Company Reporter on April 13, 2006, a consortium of investors tapped by the Statutory Committee of Equity Security Holders proposed an equity backstop commitment agreement to compete with another backstop agreement the Debtors inked with Berkshire Hathaway, Inc., in connection with the Debtors' proposed rights offering. The Consortium is comprised of investment funds managed by eight fund groups including: * Deephaven Capital Management LLC, * Fidelity Management & Research Company, * Silver Point Capital, L.P., * D.E. Shaw & Co., L.P., * Abrams Capital Partners, * Redwood Capital Management, LLC, * Citadel Limited Partnership, and * Caspian Capital Advisors LLC. The Consortium's agreement got rejected. The Consortium argued that its competing proposal drove up Bershire's terms in the equity backstop pact inked by the Debtors with Berkshire and had contributed substantially to the Debtors' estates. Consortium's Efforts Have No Impact, Debtors Say The Debtors ask the Bankruptcy Court to deny, in its entirety, the request of the Consortium of Investors because it failed to demonstrate that it is entitled to a $12,500,000 payment as an administrative claim under Section 503(b) of the Bankruptcy Code. The Debtors argue that even if the Consortium could demonstrate that it made a substantial contribution in their Chapter 11 cases, the Consortium would still not be entitled to an administrative claim in connection with the Consortium's role as unsuccessful bidders in the Debtors' case. The Debtors acknowledge that the Consortium's participation in the Debtors' cases resulted in the renegotiation of the initial proposal by Berkshire Hathaway, Inc., and a reduction of Berkshire's $100,000,000 commitment fee. However, Paul N. Heath, Esq., at Richards, Layton & Finger PA, in Wilmington, Delaware, tells Judge Fitzgerald that the Consortium proposal was demonstrably inferior to both the proposals by Berkshire and Credit Suisse Securities (USA) LLC, since it lacked essential terms like the $1,800,000,000 escrow. Mr. Heath contends that the Consortium proposal did not impact the Debtors' analysis of the bids or their negotiations with the other two bidders. Despite the Consortium's assertion, it did not entice Credit Suisse to prepare its proposal. Although the Debtors were informed of the Consortium's interest early in the bidding process, the Debtors were in contact with Credit Suisse regarding its interest in making a proposal well before receiving the Consortium's proposal. Notwithstanding their objections to the proposed $12,500,000 payment, the Debtors remain willing to reimburse the Consortium's reasonable attorney's fees even if it fell short of providing the Debtors with an acceptable alternative to the Berkshire proposal. U.S. Trustee Argues Consortium Failed to Meet Burder Kelly Beaudin Stapleton, the United States Trustee for Region 3, tells the Bankruptcy Court that the Consortium consistently fails to meet its burden with respect to its proposed $12,500,000 reimbursement plus additional attorneys' fees. Under Section 503(b)(3)(D) of the Bankruptcy Code, administrative expenses are allowed for actual and necessary expenses incurred by, among others, a creditor or an equity security holder in making a substantial contribution in a case. In addition, Section 503(b)(4) provides that reasonable compensation is allowed as an administrative expense for professional services rendered by an attorney or an accountant of an entity whose expense is allowable under Section 503(b)(3). The U.S. Trustee asks Judge Fitzgerald to deny the Consortium's request because: (a) The Consortium has completely failed to meet its burden under Section 503(b) because there is nothing to support the $12,500,000 payment or the reasonable attorneys fees requested. (b) There is nothing to support that the proposed $12,500,000 fee is an actual, necessary expense of the Consortium as required by Section 503(b)(3)(D). (c) No substantial contribution to the estate was made. (d) The Consortium has failed to overcome the presumption that they were acting primarily in their own self- interest and not in the estate's best interest. (e) The proposed amount is completely unreasonable. Creditors Panel Thinks So Too The Official Committee of Unsecured Creditors Committee argues that the Consortium's proposed $12,500,000 "termination fee" is not an actual, necessary expense that conferred a direct and tangible benefit on the Debtors' estates. The Consortium's request fails to provide information in support of the Termination Fee, specific amount for attorneys' fees, and invoices, time records or other documentation to substantiate the actual and necessary services rendered by the Consortium in making a substantial contribution to the Debtors' cases. Michael Lastowski, Esq., at Duane Morris LLP, in Wilmington, Delaware, says there is no basis to reward the Consortium with its Termination Fee because the Debtors did not and were not required by the Bankruptcy Code to conduct any type of auction. Mr. Lastowski states that even if the alternative backstop proposal could be analogized in some manner to an auction situation, Berkshire Hathaway constituted the "stalking horse" bidder by enticing other alternative proposals to come in. Mr. Lastowski further notes that although the Consortium's efforts may have indirectly saved the estate financial resources, the Consortium's actions were not extraordinary nor do they warrant any type of premium or salvage fee. Moreover, Mr. Lastowski argues that the Consortium's proposed fee is unreasonable and bears no relationship to the Consortium's efforts or to the net value ultimately conferred on the Debtors' estate. How was the Fee Determined? The Official Committee of Property Damage Claimants wants the Consortium's request denied because it fails to offer any basis for its assertions other than some "revisionist history." The PD Committee also contends that the Consortium fails to instruct how the proposed fee was determined except that the Official Committee of Equity Security Holders purportedly prevailed on the Consortium to reduce its fee request from $15,000,000 as a condition of the Equity Committee's agreement to support the Consortium's request. However, the PD Committee maintains, neither the Consortium nor the Equity Committee saw fit to seek the Court's prior approval of the Consortium's right to any fee in the event its proposal for an equity rights offering backstop was unsuccessful. About USG Corp. 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., Gus Kallergis, Esq., Brad B. Erens, Esq., Michelle M. Harner, Esq., Mark A. Cody, Esq., and Daniel B. Prieto, Esq., at Jones Day represent the Debtors in their restructuring efforts. Lewis Kruger, Esq., Kenneth Pasquale, Esq., and Denise Wildes, Esq., represent the Official Committee of Unsecured Creditors. Elihu Inselbuch, Esq., and peter Van N. Lockwood, Esq., at Caplin & Drysdale, Chartered, represent the Official Committee of Asbestos Personal Injury Claimants. Martin J. Bienenstock, Esq., Judy G. Z. Liu, Esq., Ralph I. Miller, Esq., and David A. Hickerson, Esq., at Weil Gotshal & Manges LLP represent the Statutory Committee of Equity Security Holders. Dean M. Trafelet is the Future Claimants Representative. Michael J. Crames, Esq., and Andrew A. Kress, Esq., at Kaye Scholer, LLP, represent the Future Claimants Representative. Scott Baena, Esq., and Jay Sakalo, Esq., at Bilzen Sumberg Baena Price & Axelrod LLP, represent the Asbestos Property Damage Claimants Committee. 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. 111; Bankruptcy Creditors' Service, Inc., 215/945-7000) VALENTEC SYSTEMS: Posts $119,909 Net Loss in 2006 First Quarter --------------------------------------------------------------- Valentec Systems, Inc., filed its first quarter financial statements for the three months ended March 31, 2006, with the Securities and Exchange Commission on May 19, 2006. The Company reported a $119,909 net loss on $5,972,891 of revenues for the three months ended March 31, 2006. At March 31, 2006, the Company's balance sheet showed $25,612,236 in total assets, $22,660,210 in total liabilities, and $2,952,026 in stockholders' equity. The Company's March 31 balance sheet also showed strained liquidity with $17,671,397 in total current assets available to pay $22,588,461 in total current liabilities coming due within the next 12 months. Full-text copies of the Company's financial statements for the three months ended March 31, 2006, are available for free at http://ResearchArchives.com/t/s?a3b Going Concern Doubt Webb & Company, P.A., in Boynton Beach, Florida, raised substantial doubt about Valentec Systems, Inc.'s ability to continue as a going concern after auditing the Company's consolidated financial statements for the year ended Dec. 31, 2005. The auditor pointed to the Company's working capital deficiency and negative cash flow from operations. Valentec Systems, Inc., designs, develops, manufactures, and sells ammunition and light weapons for military use. VERILINK CORP: Court OKs Maynard Cooper as Panel's Bankr. Counsel ----------------------------------------------------------------- The Honorable Jack Caddell of the U.S. Bankruptcy Court for the Northern District of Alabama in Decatur authorized the Official Committee of Unsecured Creditors appointed in Verilink Corporation and its debtor-affiliate Larscom, Inc.'s bankruptcy cases to employ Maynard, Cooper, Gale, P.C., as its bankruptcy co-counsel, nunc pro tunc to April 10, 2006. Maynard Cooper will: (a) provide legal advice to the Committee with respect to its duties and powers in the Debtors' bankruptcy cases; (b) consult with the Committee and the Debtors concerning the administration of the the Debtors' bankruptcy cases; (c) assist the Committee in its investigation of the acts, conduct, assets, liabilities, and financial condition of the Debtors, their operations, the desirability of continuing or selling the businesses or assets, and any other matter relevant to the Debtors' bankruptcy cases or the formulation of a chapter 11 plan; (d) assist the Committee in evaluating claims against Debtors' estates, including analysis of possible objections to the validity, priority, amount, subordination, or avoidance of claims and transfers fo property in consideration of those claims; (e) assist the Committee in participating in the formulation of a plan, including the Committee's communications with unsecured creditors concerning the plan; (f) assist the Committe with any effort to request the appointment of a trustee or examiner; (g) advise and represent the Committee in connection with administrative matters arising in the Debtors' bankruptcy cases, including obtaining credit, selling assets, and rejection or assumption of executory contracts and unexpired leases; (h) appear before the Bankruptcy Court and any Federal, State or Applellate Courts; and (i) perform other legal services as may be required and in the interests of unsecured creditors. Maynard Cooper will coordinate with Arnall Golden Gregory LLP, the Committee's co-counsel, to ensure that their legal services are not duplicative. Jayna Partan Lamar, Esq., a shareholder at Maynard, Cooper, Gale, P.C., discloses that the Firm's professionals bill: Designation Hourly Rate ----------- ----------- Partners $245 - $425 Associates and Staff Attorneys $170 - $245 Legal Assistants $110 - $150 Mr. Lamar assures the Court that Maynard, Cooper, Gale, P.C., does not hold or represent any interest adverse to the Committee or to the Debtors and is disinterested as that term is defined in Section 101(14) of the Bankruptcy Code. Headquartered in Hunstville, Alabama, Verilink Corporation -- http://www.verilink.com/-- is a leading provider of next- generation broadband access solutions for today's and tomorrow's networks. The Company develops, manufactures and markets a broad suite of products that enable carriers and enterprises to build converged access networks to cost-effectively deliver next- generation communications services to their end customers. The Company and its debtor-affiliate, Larscom Inc., filed for chapter 11 protection on April 9, 2006 (Bankr. N.D. Ala. Case No. 06-80566 & 06-80567). Robert McCay Dearing Mercer, Esq., at Powell Goldstein LLP, represents the Debtors. Darryl S. Laddin, Esq., at Arnall Golden Gregory LLP and Jayna Partain Lamar, Esq., at Maynard, Cooper & Gale, P.C., give legal advice to the Official Committee of Unsecured Creditors. When the Debtors filed for protection from their creditors, they listed total assets of $37,221,000 and total debts of $23,913,000. VERILINK CORP: Panel Hires Arnall Golden as Bankruptcy Counsel -------------------------------------------------------------- The Honorable Jack Caddell of the U.S. Bankruptcy Court for the Northern District of Alabama in Decatur authorized the Official Committee of Unsecured Creditors appointed in Verilink Corporation and its debtor-affiliate Larscom, Inc.'s bankruptcy cases to employ Arnall Golden Gregory LLP as its bankruptcy co-counsel, nunc pro tunc to April 28, 2006. Arnall Golden will: (a) advise the Committee with respect to its rights, powers and duties in the Debtors' bankruptcy cases; (b) assist and advise the Committee in its consultations with the Debtors relative to the administration of these cases; (c) assist the Committee in analyzing the claims of the Debtors' creditors and negotiate with those creditors; (d) assist the Committee's investigation of the acts, conduct, assets, liabilities and financial condition of the Debtors and of the operation of the Debtors' businesses; (e) advise and represent the Committee in connection with the administrative matters arising in the Debtors' cases, including obtaining credit, selling of assets, and the rejection or assumption of executory contracts and unexpired leases; (f) assist the Committee in its analysis of, and negotiations with the Debtors or any third party concerning matters related to the terms of a chapter 11 plan or plans of the Debtors; (g) assist and advise the Committee with respect to its communications with the general creditor body regarding significant matters in the Debtors' cases; (h) review and analyze all applications, orders, statements of operations and schedules filed with the Court, and advise the Committee as to their propriety; (i) assist the Committee in evaluating and pursuing, if necessary, claims and clauses of action against the Debtors' secured lenders; (j) assist the Committee in preparing pleadings and applications as may be necessary in furtherance of the Committee's interests and objectives; (k) represent the Committee at all hearings and other proceedings; and (l) perform other legal services as may be required and deemed to be in the interests of the Committee. Arnall Golden Gregory LLP will coordinate with, Maynard, Cooper, Gale, P.C., the Committee's co-counsel, to ensure that their legal services are not duplicative. Hayden J. Kepner, Jr., Esq., a partner at Arnall Golden Gregory LLP, discloses that the Firm's professionals bill: Designation Hourly Rate ----------- ----------- Attorneys $225 - $425 Paralegals $120 - $145 Mr. Kepner assures the Court that Arnall Golden Gregory LLP does not hold or represent any interest adverse to the Committee or to the Debtors and is disterested as that term is defined in Section 101(14) of the Bankruptcy Code. Headquartered in Hunstville, Alabama, Verilink Corporation -- http://www.verilink.com/-- is a leading provider of next- generation broadband access solutions for today's and tomorrow's networks. The Company develops, manufactures and markets a broad suite of products that enable carriers and enterprises to build converged access networks to cost-effectively deliver next- generation communications services to their end customers. The Company and its debtor-affiliate, Larscom Inc., filed for chapter 11 protection on April 9, 2006 (Bankr. N.D. Ala. Case No. 06-80566 & 06-80567). Robert McCay Dearing Mercer, Esq., at Powell Goldstein LLP, represents the Debtors. Darryl S. Laddin, Esq., at Arnall Golden Gregory LLP and Jayna Partain Lamar, Esq., at Maynard, Cooper & Gale, P.C., give legal advice to the Official Committee of Unsecured Creditors. When the Debtors filed for protection from their creditors, they listed total assets of $37,221,000 and total debts of $23,913,000. VOICE MOBILITY: March 31 Balance Sheet Upside Down by $7.4 Million ------------------------------------------------------------------ Voice Mobility International, Inc. filed its first quarter financial statements for the three months ended March 31, 2006, with the Securities and Exchange Commission on May 15, 2006. The Company reported a $776,749 net loss on $39,000 of revenues for the three months ended March 31, 2006. At March 31, 2006, the Company's balance sheet showed $2,520,749 in total assets and $9,940,767 in total liabilities, resulting in a $7,420,018 stockholders' deficit. Full-text copies of the Company's financial statements for the three months ended March 31, 2006, are available for free at http://researcharchives.com/t/s?a2e Going Concern Doubt Ernst & Young LLP, in Vancouver, Canada, expressed substantial doubt about Voice Mobility International, Inc.'s ability to continue as a going concern after auditing the Company's consolidated financial statements for the year ended Dec. 31, 2005. The auditor pointed to the Company's recurring net losses and shareholders' deficiency. Based in Burnaby, British Columbia, Canada, Voice Mobility International, Inc. -- http://www.voicemobility.com/-- markets and deploys next generation messaging solutions that provide enhanced messaging features and functionality while ensuring integration with, or replacement of, existing first generation voicemail messaging systems. WELLS FARGO: Fitch Puts Low-B Ratings on Four Certificate Classes ----------------------------------------------------------------- Wells Fargo mortgage pass-through certificates, series 2006-7, are rated by Fitch Ratings as: Group 1: -- $211,787,497 classes I-A-1, I-A-PO, and I-A-R 'AAA' (senior certificates) -- $2,699,000 class I-B-1 'AA' -- $432,000 class I-B-2 'A' -- $323,000 class I-B-3 'BBB' -- $216,000 class I-B-4 'BB' -- $216,000 class I-B-5 'B' Groups 2 and 3: -- $200,137,757 classes II-A-1, III-A-1, and A-PO 'AAA' (senior certificates) -- $4,251,000 class Cr-B-1 'AA' -- $1,245,000 class Cr-B-2 'A' -- $415,000 class Cr-B-3 'BBB' -- $726,000 class Cr-B-4 'BB' -- $311,000 class Cr-B-5 'B' The 'AAA' rating on the Group I senior certificates reflects: * the 1.90% subordination provided by the 1.25% class I-B-1; * the 0.20% class I-B-2; * the 0.15% class I-B-3; * the 0.10% privately offered class I-B-4; * the 0.10% privately offered class I-B-5; and * the 0.10% privately offered class I-B-6. The ratings on the class I-B-1, I-B-2, I-B-3, I-B-4, and I-B-5 certificates are based on their respective subordination. Class I-B-6 is not rated by Fitch. The 'AAA' rating on the Group 2 and 3 senior certificates reflects the: * 3.50% subordination provided by the 2.05% class Cr-B-1; * 0.60% class Cr-B-2; * 0.20% class Cr-B-3; * 0.35% privately offered class Cr-B-4; * 0.15% privately offered class Cr-B-5; and * 0.15% privately offered class Cr-B-6. The ratings on the class Cr-B-1, Cr-B-2, Cr-B-3, Cr-B-4 and Cr-B-5 certificates are based on their respective subordination. Class Cr-B-6 is not rated by Fitch. Fitch believes the amount of credit enhancement available will be sufficient to cover credit losses. The ratings also reflect: * the high quality of the underlying collateral; * the integrity of the legal and financial structures; and * the primary servicing capabilities of Wells Fargo Bank, N.A. (rated 'RPS1' by Fitch). Group 1 consists of 346 fully amortizing, fixed interest rate, first lien mortgage loans, with original weighted average months to maturity of approximately 178. The aggregate unpaid principal balance of the pool is $215,890,167 as of May 1, 2006 (the cut-off date), and the average principal balance is $623,960. The weighted average original loan-to-value ratio of the loan pool is approximately 63.08%. The weighted average coupon of the mortgage loans is 5.887%, and the weighted average FICO score is 750. Equity take-out and rate/term refinance represent 38.62% and 20.80%, respectively. The states that represent the largest geographic concentration are: * California (33.37%), * Texas (8.16%), * Florida (6.87%), and * New York (5.59%). All other states represent less than 5% of the outstanding balance of the pool. Group 2 and Group 3 consist of 510 fully amortizing, fixed interest rate, first lien mortgage loans, with original WAM of approximately 359. The aggregate unpaid principal balance of the pool is $207,397,006 as of May 1, 2006 (the cut-off date), and the average principal balance is $406,661. The weighted average OLTV of the loan pool is approximately 72.88%. The WAC of the mortgage loans is 6.399%, and the weighted average FICO score is 744. Equity take-out and rate/term refinance represent 21.21% and 12.36%, respectively. The states that represent the largest geographic concentration are: * California (39.10%), * Virginia (9.95%), * Washington (6.65%), and * New York (6.26%). All other states represent less than 5% of the outstanding balance of the pool. None of the mortgage loans are 'high cost' loans as defined under any local, state or federal laws. All of the mortgage loans were generally originated in conformity with underwriting standards of Wells Fargo Bank, N.A. WFB sold the loans to Wells Fargo Asset Securities Corporation, a special purpose corporation, who deposited the loans into the trust. The trust issued the certificates in exchange for the mortgage loans. WFB will act as servicer and custodian, and HSBC Bank USA, N.A. will act as trustee. Elections will be made to treat the trust as a real estate mortgage investment conduit for federal income tax purposes. WG HORIZIONS: Moody's Rates $12 Million Class D Notes at Ba2 ------------------------------------------------------------ Moody's Investors Service assigned ratings to five classes of Notes issued by WG Horizons CLO I: (1) Aaa to the $296,000,000 Class A-1 Floating Rate Notes Due 2019, (2) Aa2 to the $24,000,000 Class A-2 Floating Rate Notes Due 2019, (3) A2 to the $21,000,000 Class B Deferrable Floating Rate Notes Due 2019, (4) Baa2 to the $16,000,000 Class C Floating Rate Notes Due 2019, and (5) Ba2 to the $12,000,000 Class D Floating Rate Notes Due 2019. The Moody's ratings of the Notes address the ultimate cash receipt of all required interest and principal payments, as provided by the Notes' governing documents, and are based on the expected loss posed to Noteholders, relative to the promise of receiving the present value of such payments. Moody's also analyzed the risk of diminishment of cash flows from the underlying portfolio of corporate debt due to defaults, the characteristics of these assets and the safety of the transaction's legal structure. West Gate Horizons Advisors, LLC will manage the selection, acquisition and disposition of collateral on behalf of the Issuer. WIZZARD SOFTWARE: Amends 2005 & 2004 Annual Financial Statements ---------------------------------------------------------------- Wizzard Software Corporation filed with the Securities and Exchange Commission on May 26, 2006, its amended financial statements for the years ended Dec. 31, 2005, and Dec. 31, 2004. The company's Statement of Operations showed: For the Year Ended ----------------------- 12/31/05 12/31/04 ----------- ---------- Revenues $3,027,160 $2,711,555 Net loss ($5,961,572) ($5,341,731) The company's Balance Sheet showed: For the Year Ended ----------------------- 12/31/05 12/31/04 ----------- ---------- Current Assets $1,210,047 $619,833 Total Assets $2,358,147 $727,284 Current Liabilities $1,558,708 $222,941 Total Liabilities $1,677,932 $100,000 Total Stockholders' Equity $680,215 $404,343 Going Concern Doubt Gregory & Associates, LLC, in Salt Lake City, Utah, raised substantial doubt about Wizzard Software Corporation's ability to continue as a going concern after auditing the Company's consolidated financial statements for the year ended Dec. 31, 2005. The auditor pointed to the Company's recurring losses from operations, and incurred losses since its inception. Full-text copies of the company's financial statements are available for free at: Amended 2005 http://ResearchArchives.com/t/s?a24 Amended 2004 http://ResearchArchives.com/t/s?a31 About Wizzard Software Wizzard Software -- http://www.wizzardsoftware.com/-- architects solutions to business problems using its expertise in consulting, speech development tools and building speech based applications for the Desktop and Internet. XM SATELLITE: Intends to Redeem 8.25% Series B Preferred Stock -------------------------------------------------------------- XM Satellite Radio Holdings Inc. (Nasdaq: XMSR) issued a notice to redeem all of its outstanding 8.25% Series B Convertible Redeemable Preferred Stock due 2012. Each share of Series B preferred stock has a liquidation preference of $50 and is convertible into shares of XM's Class A common stock at $40 per share. As of May 26, 2006, there were 107,985 shares of Series B preferred stock outstanding. The redemption of the Series B preferred stock, plus payment of accrued dividends, is expected to occur on June 26, 2006. Headquartered in Washington, D.C., XM Satellite Radio Inc. -- http://www.xmradio.com/-- an emerging force in broadcasting, was incorporated in 1992 and is a wholly owned subsidiary of XM Satellite Radio Holdings Inc. XM is publicly traded on the NASDAQ exchange since October 5, 1999. XM has broadcast facilities in New York and Nashville, and additional offices in Boca Raton, Florida; Southfield, Michigan; and Yokohama, Japan. XM Satellite Radio Holdings Inc.'s 1.75% Convertible Senior Noted due 2009 carry Moody's Investors Service's Caa3 rating and Standard & Poor's CCC- rating. * Keith Gercken Joins Sheppard Mullin in San Francisco as Partner ----------------------------------------------------------------- Keith R. Gercken has joined the San Francisco office of Sheppard, Mullin, Richter & Hampton LLP as a partner. Mr. Gercken, most recently with Pillsbury Winthrop Shaw Pittman in San Francisco, is a member of the firm's Tax, Employee Benefits, Trusts and Estate Planning practice group. Mr. Gercken's practice includes all areas of business income taxation, with emphasis on corporate and partnership taxation and international transactions. He advises corporate and individual clients on the U.S. federal and international tax consequences on a wide range of transactions, including taxable and tax-free mergers and acquisitions; partnerships and joint ventures; the formation and operation of equity funds; finance transactions; tax-free exchanges; international licensing; foreign operations (including cross-border joint ventures between U.S. and non-U.S. partners); and inbound investment into the United States by non- U.S. investors. "Keith is a very accomplished tax attorney, and we are extremely pleased to welcome him to the firm," Guy Halgren, chairman of the firm, said. "He brings nearly 20 years of experience from a variety of organizations, including Ernst & Young and private corporations. His tax specialty expertise in international trade, M&A and private equity, among others, adds a great deal of value to the service and counsel we bring to clients." "Sheppard Mullin is a premier law firm," commented Mr. Gercken. "I look forward to expanding the firm's tax practice in San Francisco and working with my new Corporate colleagues in other offices. Joining a firm with a growing and successful transactional practice offers significant opportunity for my practice." "We are thrilled to have Keith join us in San Francisco and continue the expansion we've experienced in the last month," Betsy McDaniel, managing partner of the San Francisco office, said. "Keith is the third partner to join us in May, along with healthcare partner Maureen Corcoran and media defense litigator James Chadwick. The office, with more than 75 attorneys, now has greater depth and breadth in these three areas of specialization." Mr. Gercken's recent representative matters include: (i) representing Zions Bancorporation in connection with its $1.7 billion acquisition of Amegy Bancorporation, (ii) representing Bank of the West in connection with its $1.4 billion acquisition of Commercial Federal Bank, (iii) representing SICOR Inc. in connection with its $3.4 billion acquisition by Teva Pharmaceutical Industries Ltd., (iv) representing Applied Molecular Evolution, Inc. in connection with its $400 million acquisition by Eli Lilly and Company, (v) representing a large public pension fund in connection with the establishment and restructuring of numerous U.S. domestic and international real estate investment funds, (vi) advising a multinational telecommunications company in connection with several significant stock and asset acquisitions and dispositions in Latin America and Asia, (vii) representing a Hong Kong-based restaurant developer in connection with the formation of a worldwide joint venture, and (viii) representing a U.S.-based financial services company in connection with the partial sale and restructuring of its investment in a Puerto Rico electric generation facility. Mr. Gercken graduated, magna cum laude, from University of California, Hastings College of the Law in 1987 and earned a B.A. from University of California at Berkeley in 1983. About Sheppard, Mullin, Richter & Hampton LLP Founded in 1927, Sheppard, Mullin, Richter & Hampton LLP -- http://www.sheppardmullin.com/-- is a full service AmLaw 100 firm with more than 480 attorneys in nine offices located throughout California, New York and Washington, D.C. The firm's California offices are located in Los Angeles, San Francisco, Santa Barbara, Century City, Orange County, Del Mar Heights and San Diego. Sheppard Mullin provides legal expertise and counsel to U.S. and international clients in a wide range of practice areas, including antitrust, corporate and securities; entertainment, media & communications; finance and bankruptcy; government contracts; intellectual property; labor and employment; litigation; real estate/land use; tax, employee benefits, trusts and estate planning; and white collar defense. * Chapter 11 Cases with Assets & Liabilities Below $1,000,000 ------------------------------------------------------------- Recent chapter 11 cases filed with assets and liabilities below $1,000,000: In re Bailey Asaka System Engineering Corp. Bankr. E.D. Va. Case No. 06-10547 Chapter 11 Petition filed May 25, 2006 See http://bankrupt.com/misc/vaeb06-10547.pdf In re Jeff Young Bankr. D. Minn. Case No. 06-31099 Chapter 11 Petition filed May 25, 2006 See http://bankrupt.com/misc/mnb06-31099.pdf In re Jonathan Creek Hideaway, Inc. Bankr. W.D. N.C. Case No. 06-10325 Chapter 11 Petition filed May 25, 2006 See http://bankrupt.com/misc/ncwb06-10325.pdf In re Osaka at Docksider, Inc. Bankr. D. N.J. Case No. 06-14668 Chapter 11 Petition filed May 25, 2006 See http://bankrupt.com/misc/njb06-14668.pdf In re Salon 5, Inc. Bankr. D. N.J. Case No. 06-14648 Chapter 11 Petition filed May 25, 2006 See http://bankrupt.com/misc/njb06-14648.pdf In re Thomas W. Michaelis Bankr. N.D. Ohio Case No. 06-31227 Chapter 11 Petition filed May 25, 2006 See http://bankrupt.com/misc/ohnb06-31227.pdf In re WILMAX Clinical Research, Inc. Bankr. S.D. Ala. Case No. 06-10757 Chapter 11 Petition filed May 25, 2006 See http://bankrupt.com/misc/alsb06-10757.pdf In re ATP Restaurants, Inc. Bankr. E.D. Pa. Case No. 06-12186 Chapter 11 Petition filed May 26, 2006 See http://bankrupt.com/misc/paeb06-12186.pdf In re American Port-O-Let Services Corp. Bankr. S.D. Fla. Case No. 06-12228 Chapter 11 Petition filed May 26, 2006 See http://bankrupt.com/misc/flsb06-12228.pdf In re Double C Transportation, Inc. Bankr. W.D. Ark. Case No. 06-71029 Chapter 11 Petition filed May 26, 2006 See http://bankrupt.com/misc/arwb06-71029.pdf In re George F. Rayner Bankr. D. Maine Case No. 06-10164 Chapter 11 Petition filed May 26, 2006 See http://bankrupt.com/misc/mnb06-10164.pdf In re National Packaging Corporation Bankr. N.D. Tex. Case No. 06-32096 Chapter 11 Petition filed May 26, 2006 See http://bankrupt.com/misc/txnb06-32096.pdf In re Palm Beach Bobcat & Trash Services, Inc. Bankr. S.D. Fla. Case No. 06-12231 Chapter 11 Petition filed May 26, 2006 See http://bankrupt.com/misc/flsb06-12231.pdf In re TVL Dynamics Inc. Bankr. E.D. N.Y. Case No. 06-71182 Chapter 11 Petition filed May 26, 2006 See http://bankrupt.com/misc/nyeb06-71182.pdf In re WAS, Inc. Bankr. N.D. Ind. Case No. 06-10796 Chapter 11 Petition filed May 26, 2006 See http://bankrupt.com/misc/innb06-10796.pdf In re Budapest Restaurant Corp. Bankr. N.D. Ohio Case No. 06-12129 Chapter 11 Petition filed May 29, 2006 See http://bankrupt.com/misc/ohnb06-12129.pdf In re Hydro-Engineering, Inc. Bankr. S.D. Tex. Case No. 06-32218 Chapter 11 Petition filed May 30, 2006 See http://bankrupt.com/misc/txsb06-32218.pdf In re Imperial House, Inc. Bankr. E.D. Mich. Case No. 06-46803 Chapter 11 Petition filed May 30, 2006 See http://bankrupt.com/misc/mieb06-46803.pdf In re Tex-Mex Z, Inc. Bankr. S.D. Tex. Case No. 06-32204 Chapter 11 Petition filed May 30, 2006 See http://bankrupt.com/misc/txsb06-32204.pdf ********* Monday's edition of the TCR delivers a list of indicative prices for bond issues that reportedly trade well below par. Prices are obtained by TCR editors from a variety of outside sources during the prior week we think are reliable. Those sources may not, however, be complete or accurate. The Monday Bond Pricing table is compiled on the Friday prior to publication. Prices reported are not intended to reflect actual trades. Prices for actual trades are probably different. Our objective is to share information, not make markets in publicly traded securities. Nothing in the TCR constitutes an offer or solicitation to buy or sell any security of any kind. It is likely that some entity affiliated with a TCR editor holds some position in the issuers' public debt and equity securities about which we report. Each Tuesday edition of the TCR contains a list of companies with insolvent balance sheets whose shares trade higher than $3 per share in public markets. At first glance, this list may look like the definitive compilation of stocks that are ideal to sell short. Don't be fooled. Assets, for example, reported at historical cost net of depreciation may understate the true value of a firm's assets. A company may establish reserves on its balance sheet for liabilities that may never materialize. The prices at which equity securities trade in public market are determined by more than a balance sheet solvency test. A list of Meetings, Conferences and Seminars appears in each Wednesday's edition of the TCR. Submissions about insolvency- related conferences are encouraged. Send announcements to conferences@bankrupt.com/ On Thursdays, the TCR delivers a list of recently filed chapter 11 cases involving less than $1,000,000 in assets and liabilities delivered to nation's bankruptcy courts. The list includes links to freely downloadable images of these small-dollar petitions in Acrobat PDF format. Each Friday's edition of the TCR includes a review about a book of interest to troubled company professionals. All titles are available at your local bookstore or through Amazon.com. Go to http://www.bankrupt.com/books/to order any title today. Monthly Operating Reports are summarized in every Saturday edition of the TCR. For copies of court documents filed in the District of Delaware, please contact Vito at Parcels, Inc., at 302-658-9911. For bankruptcy documents filed in cases pending outside the District of Delaware, contact Ken Troubh at Nationwide Research & Consulting at 207/791-2852. ********* S U B S C R I P T I O N I N F O R M A T I O N Troubled Company Reporter is a daily newsletter co-published by Bankruptcy Creditors' Service, Inc., Fairless Hills, Pennsylvania, USA, and Beard Group, Inc., Frederick, Maryland, USA. Marie Therese V. Profetana, Shimero Jainga, Joel Anthony G. Lopez, Emi Rose S.R. Parcon, Rizande B. Delos Santos, Cherry A. Soriano-Baaclo, Christian Q. Salta, Jason A. Nieva, Lucilo M. Pinili, Jr., 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 ***