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/raid1/www/Hosts/bankrupt/TCR_Public/060608.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 8, 2006, Vol. 10, No. 135 Headlines ABS CAPITAL: Moody's Places Junk Rated Priority Notes on Watch ACE SECURITIES: Moody's Assigns Low-B Rating on Two Cert. Classes ALLIED HOLDINGS: Wants to Borrow Against Insurance Policies AMR CORP: S&P Lifts Corp. Credit Rating One Notch to B from B- ANDREW CORP: Inks Merger Agreement with ADC Telecommunications ANTEON INT'L: Moody's Holds Ba2 Rating on $200MM Secured Revolver ATRIUM COS: S&P Puts B Rating on Proposed $475MM Debt Facilities BPK RESOURCES: Posts $1.5 Mil. Net Loss in Quarter Ended March 31 BTSC HOLDINGS: S&P Rates Proposed $100 Million Sr. Notes at CCC+ BUFFALO COAL: U.S. Trustee Appoints Eight-Member Official Panel BUFFALO COAL: Court Approves Hoyer Hoyer as Bankruptcy Counsel BUFFALO COAL: List of 20 Largest Unsecured Creditors CALPINE CORP: Wants to Amend and Assume Cogeneration Plant Deals CALPINE CORP: CCFC Asks for Waivers Under $800MM Loans Contracts CAREGIVERS: Case Summary & 20 Largest Unsecured Creditors CASCADES INC: Moody's Assigns Ba1 Rating to CA$550 Mil. of Loans CCS MEDICAL: Moody's Lowers rating on $110 Mil. Term Loan to Caa3 CHOICE ONE: Moody's Rates Planned $400MM Debt Facility at Ba3 CITIUS I: Moody's Rates $4 Million Class E Notes at Ba1 COGECO CABLE: Agrees to Buy Cable Operator Cabovisao for EUR464MM COMMUNICATIONS CORP: Case Summary & 11 Largest Unsecured Creditors CONSOLIDATED CONTAINER: Equity Deficit Tops $84.5MM at March 31 CONSUMERS ENERGY: Reports $10 Million Net Income in First Quarter COPAMEX SA: S&P Affirms BB- Senior Unsecured Currency Ratings CREDIT SUISSE: Moody's Affirms Rating on $8.8MM Certs. at Caa2 DANA CORP: Court Directs Debtors to Pay US Bancorp Lease Debts DANA CORP: Wants Court to Approve Agreement with Underwriters DANA CORP: Committee Hires UBS Securities as Investment Bankers DATATEL INC: S&P Assigns CCC+ Rating to Amended $100 Million Loan DELTA AIR: Amended Company By-Laws Allow CEO to Choose Top Execs DELTA AIR: Plays to Lay-Off 9,000 Employees by Year-End 2007 DOBSON COMMS: Unit Buys $234.4MM of Tendered Floating Rate Notes E*TRADE: Moody's Lifts B1 Rating on Sr. Unsec. Notes to Ba2 FALCONBRIDGE LTD: To Sell Assets to LionOre Mining for $650 Mil. FISHER COMMS: Sells 24 Radio Stations to Cherry Creek for $33.3MM FREESTAR TECH: Incurs $2.2 Mil. Net Loss in 2006 1st Fiscal Qtr. GALLERIA INVESTMENTS: Receiver Hires Moskowitz as Special Counsel GLOBAL ENERGY: Posts $377,793 Net Loss in Quarter Ended March 31 GOODYEAR TIRE: Fitch Affirms Senior Unsecured Debt's CCC+ Rating GRANDE COMMS: S&P Raises Corp. Credit & Sr. Notes' Ratings to B- GRANITE BROAD: Moody's Lowers B3 Rating on $400MM Notes to Caa1 GRANT PRIDECO: Moody's Lifts Corp. Family Rating to Ba1 from Ba2 GUARDIAN TECHNOLOGIES: Posts $2 Mil. Net Loss in 2006 1st Quarter HECTOR MORALES: Case Summary & 13 Largest Unsecured Creditors HORIZON NATURAL: Zurich's Administrative Claim is Disallowed HOST MARRIOTT: Moody's Ups $37.8MM Class G Cert.'s Rating to Baa1 HOVNANIAN ENTERPRISES: Fitch Rates $250 Mil. Senior Notes at BB+ ICEWEB Inc: Posts $666,126 Net Loss in 2006 1st Fiscal Quarter IMMUNE RESPONSE: March 31 Balance Sheet Upside-Down by $134.7 Mil. INCO LTD: To Sell Falconbridge Assets to LionOre Mining for $650MM INDYMAC BANCORP: DBRS Rates Preferred Securities at BB (High) ITC DELTACOM: Works to Regain Nasdaq Listing Compliance JMJ TECHNOLOGIES: Voluntary Chapter 11 Case Summary LATHAM: Moody's Puts B2 Rating on Planned $200 Mil. Debt Facility L-3 COMMS: Mourns Death of Chief Executive Officer Frank C. Lanza LEVEL 3: S&P Assigns CCC- Rating to Proposed $150MM Notes Issue LORAL SPACE: Unstayed Confirmation Order Moots Appeal LORBER INDUSTRIES: Wants Until Sept. 12 to Decide on Leases MARKSON ROSENTHAL: Brings In NachmanHaysBrownstein as Advisors MARKSON ROSENTHAL: Court OKs Drinker Biddle as Committee Counsel MARKSON ROSENTHAL: Panel Employs Weiser as Financial Consultants MCCLATCHY CO: Agrees to Sell Five Knight Ridder Publications MERIDIAN AUTOMOTIVE: Projected Financial Data Underpinning Plan MERIDIAN: Wants to Enter into Fee Letters with 3 Potential Lenders MERIDIAN AUTOMOTIVE: Asks for Court's Nod on $375MM Exit Facility MERRILL LYNCH: DBRS Puts Low-B Rating on Six Certificate Classes NIGHTHAWK SYSTEMS: Posts $1.3 MM Net Loss in 2006 1st Fiscal Qtr. NORTEL CORP: DBRS Holds Rating on $1.8 Billion Notes at B (low) NORTHWEST AIRLINES: Has Until June 15 to File Statements NORTHWEST AIRLINES: Wants to Enter Into Amended IAM CBA Amendment NORTHWEST AIRLINES: Asks Court to Extend Removal Period to Nov. 15 NORTHWESTERN CORP: Seeks Approval of Asset Sale to Babcock & Brown NRG VICTORY: U.S. Court Hearing on Chapter 15 Petition Deferred OLYMPIA GROUP: Assets Auction Set for June 13 in California ORIS AUTOMOTIVE: Court Okays Johnston Barton as Bankruptcy Counsel ORIS AUTOMOTIVE: Bids for Assets Must be Submitted by June 16 OVERSEAS SHIPHOLDING: Earns $128.3 Million in First Quarter PATRON SYSTEMS: Posts $4.4 Mil. Net Loss in 2006 1st Fiscal Qtr. PICK UPS PLUS: Post $412,449 Net Loss in 2006 1st Fiscal Quarter PINNACLE ENT: To Buy Harrah Entertainment's Assets for $25 Million PMA CAPITAL: Fitch Affirms Low-B Issuer Default & Sr. Debt Ratings POGO PRODUCING: Closes Sale of 50% Stake in Gulf of Mexico Assets POGO PRODUCING: Prices $450 Million of 7-7/8% Senior Sub. Notes PROTOCALL TECHNOLOGIES: Founder Bruce Newman Assumes CEO Post PROTOCALL TECHNOLOGIES: Eisner LLP Raises Going Concern Doubt Q COMM: Posts $1.8 Mil. Net Loss in 2006 1st Fiscal Quarter QWEST COMMS: March 31 Working Capital Deficit Tops $923 Million REFCO INC: Can Assumes and Assign Fifth Avenue Lease to Undertow REFCO INC: Chap. 11 Trustee Withdraws Request to Hire Klee Tuchin SATELLITE ENTERPRISES: Meyler & Company Raises Going Concern Doubt SEARS CANADA: DBRS Reviews BB Rating on Revolving Term Facility SAINT VINCENTS: Can Use Sun Life's Collateral Until August 2 SILICON GRAPHICS: Final DIP Hearing Rescheduled to June 20 SILICON GRAPHICS: Inks Lease Settlement Pact with Three Landlords SKNM INC: Case Summary & 20 Largest Unsecured Creditors SOLUTIA INC: Ad Hoc Panel Says Disclosure Statement is Inadequate THICKSTUN BROS: Litigation with Encompass Services Continues TOMBALL CENTER: Case Summary & Largest Unsecured Creditor TOWER AUTOMOTIVE: Wants Court to Deny Fuji Dietec's Request TRANSPORT IND: Moody's Holds Senior Secured Debt Rating at B2 UGS CAPITAL: Moody's Puts Rating on Proposed $300MM Notes at Caa1 UNITED RENTALS: Fitch Affirms Low-B Issuer Default & Debt Ratings US MICROBICS: Posts $722,230 Net Loss in 2006 1st Fiscal Quarter VALOR COMMS: Windstream Merger Cues S&P to Hold Ratings on Watch VARIG S.A.: Preliminary Injunction Continued to June 13 VARIG S.A.: Promises to Pay ILFC Arrears by June 13 VIRTRA SYSTEMS: March 31 Working Capital Deficit Tops $4.5 Million VOCALSCAPE: Posts $493,269 Net Loss in 2006 1st Fiscal Qtr WHITE KNIGHT: Case Summary & 18 Largest Unsecured Creditors WILD OATS: S&P Withdraws CCC+ Corp. Credit & Sr. Unsecured Ratings WINDSTREAM CORP: S&P Rates Proposed $2.5 Billion Notes at BB- XTO ENERGY: Acquires Peak Energy Resources for $105 Million Y3K SECURE: March 31 Balance Sheet Upside Down by $11.2 Mil. YOUTH & FAMILY: S&P Puts B Rating on Proposed $170MM Debt Facility * David Mitchell Joins Fried Frank as Partner in New York * Larry Engel Joins Morrison & Foerster in San Francisco * Chapter 11 Cases with Assets & Liabilities Below $1,000,000 ********* ABS CAPITAL: Moody's Places Junk Rated Priority Notes on Watch -------------------------------------------------------------- Moody's Investors Service placed on watch for possible downgrade the ratings of these classes of notes issued by ABS Capital Funding, Ltd.: * $28,000,000 Class B Second Priority Notes, Due 2033 Prior Rating: Caa2 Current Rating: Caa2, on watch for possible downgrade According to Moody's, the current rating action reflects a continued deterioration in the overall credit quality of the underlying collateral pool which consists primarily of asset- backed securities. According to the deal surveillance reports as of April 2006, the weighted average rating factor of the portfolio was 2152, compared to the transaction's trigger level of 450 and the diversity score was 18.5, compared to the trigger level of 20. The overcollateralization level for the Class B Notes is currently 100.69% as compared with its trigger level of 101.4% and the interest coverage level for the Class B Notes is currently 66.5% as compared with its trigger level of 105%. ACE SECURITIES: Moody's Assigns Low-B Rating on Two Cert. Classes ----------------------------------------------------------------- Moody's Investors Service assigned an Aaa rating to the senior certificates issued by Ace Securities Corp. Home Equity Loan Trust, Series 2006-OP1, Asset Backed Pass-Through Certificates, and ratings ranging from Aa1 to Ba2 to the subordinate certificates in the deal. The securitization is backed by Option One Mortgage Corporation originated adjustable-rate and fixed-rate subprime mortgage loans acquired by DB Structured Products, Inc. The ratings are based primarily on the credit quality of the loans, and on the protection from subordination, excess spread, overcollateralization, and an interest rate swap agreement. Moody's expects collateral losses to range from 5.15% to 5.65%. Option One Mortgage Corporation will service the loans. Moody's has assigned Option One its top servicer quality rating as a primary servicer of subprime loans. The complete rating actions: Ace Securities Corp. Home Equity Loan Trust, Series 2006-OP1, Asset Backed Pass-Through Certificates * Cl. A-1A, Assigned Aaa * Cl. A-1B, Assigned Aaa * Cl. A-2A, Assigned Aaa * Cl. A-2B, Assigned Aaa * Cl. A-2C, Assigned Aaa * Cl. A-2D, Assigned Aaa * Cl. M-1, Assigned Aa1 * Cl. M-2, Assigned Aa2 * Cl. M-3, Assigned Aa3 * Cl. M-4, Assigned A1 * Cl. M-5, Assigned A2 * Cl. M-6, Assigned A3 * Cl. M-7, Assigned Baa1 * Cl. M-8, Assigned Baa2 * Cl. M-9, Assigned Baa3 * Cl. M-10, Assigned Ba1 * Cl. M-11, Assigned Ba2 ALLIED HOLDINGS: Wants to Borrow Against Insurance Policies ----------------------------------------------------------- Before their bankruptcy filing, Allied Holdings, Inc., and its debtor-affiliates provided retiree benefits to 24 non-bargaining retired employees pursuant to the Employee Death Benefit Plan adopted November 1, 1989, by Allied Systems, Ltd. On April 19, 2006, the Debtors sought to terminate the Plan. According to Harris B. Winsberg, Esq., at Troutman Sanders LLP, in Atlanta, Georgia, the Plan was funded by universal life insurance policies acquired and owned by Allied from Pacific Life Insurance Company and Jefferson Pilot. The cash values of the Policies as of the Petition Date are: Insurer Insured Cash Value ------- ------- ---------- Pacific Life Francis Barnes $76,286 Robert Brogan, Jr. 20,871 Jimmie Creed 63,056 James Gartin 79,225 Julius Griggs 2,774 Maurice Harris 33,169 Alfred Hart 75,179 Richard Kee 65,784 William Lyle 75,647 Raymond Sell 61,120 Thomas Sims 92,382 Thomas Suber 34,071 Jesse White 34,315 Irvin Williams 55,093 John Williams 38,329 Jefferson Pilot Thomas Argo 15,747 Ashley Grandy 12,744 Vernon Grimes 7,449 Charles Vining 31,930 --------- Total $857,180 ========= The Policies provide that Allied may borrow any amount up to the cash surrender value of the Policies. Allied is the sole owner and beneficiary of the Policies. Allied possesses and exercises all incidents of ownership and the proceeds of the Policies are the Debtors' sole and exclusive property. Mr. Winsberg tells the Court that Allied is prepared to withdraw its interest in and borrow against the Policies. By this motion, the Debtors ask the Court to authorize them: (i) in their discretion, to obtain loans against or surrender their interest in the Policies; and (ii) to use the sums obtained in the ordinary course of business to preserve the value of their estates and the interests of creditors. Mr. Winsberg relates that the Debtors notified the DIP Lenders that they would be in default of several financial covenants, including EBITDA. The DIP Lenders are not willing to provide additional availability to fund the Debtors' projected cash flow deficits and require the Debtors to present and implement a plan to fund the estimated shortfall. The Debtors have identified their interest in the Policies as a potential source of liquidity, to which the DIP Lenders have agreed. Mr. Winsberg says the Debtors intend to promptly reinvest the proceeds of the Policies in the ordinary course of their business. In addition, the Debtors propose that any borrowings be deemed nonrecourse so that the Insurer's rights and remedies are limited to the Policies. Mr. Winsberg maintains that the Debtors have satisfied the legal prerequisites to obtain postpetition financing out of the ordinary course of business because: -- the proposed borrowing is an exercise of the Debtors' sound and reasonable business judgment; -- no alternative financing is available on any other basis; -- the financing is in the best interests of the estates and their creditors; and -- no better offers, bids, or timely proposals are before the Court. Headquartered in Decatur, Georgia, Allied Holdings, Inc. (OTC Pink Sheets: AHIZQ.PK) -- http://www.alliedholdings.com/-- and its affiliates provide short-haul services for original equipment manufacturers and provide logistical services. The Company and 22 of its affiliates filed for chapter 11 protection on July 31, 2005 (Bankr. N.D. Ga. Case Nos. 05-12515 through 05-12537). Jeffrey W. Kelley, Esq., at Troutman Sanders, LLP, represents the Debtors in their restructuring efforts. Henry S. Miller at Miller Buckfire & Co., LLC, serves as the Debtors' financial advisor. Anthony J. Smits, Esq., at Bingham McCutchen LLP, provides the Official Committee of Unsecured Creditors with legal advice and Russell A. Belinsky at Chanin Capital Partners, LLC, provides financial advisory services to the Committee. When the Debtors filed for protection from their creditors, they estimated more than $100 million in assets and debts. (Allied Holdings Bankruptcy News, Issue No. 22; Bankruptcy Creditors' Service, Inc., 215/945-7000) AMR CORP: S&P Lifts Corp. Credit Rating One Notch to B from B- --------------------------------------------------------------- Standard & Poor's Ratings Services raised its ratings on AMR Corp. and subsidiary American Airlines Inc., including raising the long- term corporate credit ratings on each entity to 'B' from 'B-'. The short-term rating on AMR was raised to 'B-2' from 'B-3'. The ratings were removed from CreditWatch with positive implications, where they were placed on April 21, 2006. The outlook is stable. Rating actions on individual debt issues varied, with not all securities upgraded, depending on specific circumstances of secured obligations. Fort Worth, Texas-based AMR has consolidated debt and leases of about $22 billion. "The upgrade reflects improving earnings and cash flow prospects, driven by better revenue generation and ongoing cost-cutting efforts, which have more than offset the effect of high fuel prices," said Standard & Poor's credit analyst Philip Baggaley. "In addition, AMR recently bolstered its liquidity with a $400 million equity offering that supplements $4.3 billion of unrestricted cash at March 31, 2006," the credit analyst continued. In its review, Standard & Poor's evaluated secured obligations individually, and in certain cases affirmed existing ratings, rather than upgrading them. American Airlines' 1999-1 pass- through certificates, Class A-2 and Class B were affirmed, because, although these certificates are secured by desirable planes that American would likely want to keep in any bankruptcy reorganization, they have large bullet maturities due in October 2009. Standard & Poor's considers it possible that negotiations between American and certificateholders would result in full recovery but an extension of payments (which would cause a default if debt amortization was extended beyond the final legal maturity dates of these certificates). In contrast, the 1999-1 Class A-1 certificates were upgraded, as they are amortizing obligations that are paying down fairly rapidly. The various classes of American's 2001-1 certificates are secured by a combination of desirable new aircraft and older (relatively fuel-inefficient) MD83's; existing ratings on these securities were affirmed, rather than upgraded. Ratings of older (unenhanced) equipment trust certificates and pass-through certificates were mostly upgraded one notch, in line with the upgrade of American's corporate credit rating, except in cases where evaluation of the collateral indicated a greater or lesser upgrade. The 'B' long-term corporate credit ratings on AMR Corp. and subsidiary American Airlines Inc. reflect: * participation in the competitive, cyclical, and capital- intensive airline industry; * erosion of financial strength by substantial, albeit declining, losses; and * a heavy debt and pension burden. Satisfactory liquidity, with $4.3 billion of unrestricted cash at March 31, 2006, is a positive. American Airlines is the world's largest airline, measured by traffic, with solid market shares in the U.S. domestic, trans-Atlantic, and Latin American markets, but a minimal presence in the Pacific. A healthy cash balance and other potential sources of liquidity support credit quality, despite substantial debt maturities. Improving revenue trends in the U.S. domestic market should allow greatly improved operating results in 2006, which is incorporated into the revised ratings. Accordingly, and given still difficult industry conditions and a heavy debt burden, an outlook revision to positive is not considered likely. A material deterioration in airline industry conditions, most likely due to higher fuel prices not offset by higher fares, could prompt a revision of the outlook to negative. ANDREW CORP: Inks Merger Agreement with ADC Telecommunications -------------------------------------------------------------- Andrew Corporation and ADC Telecommunications Inc. entered into a definitive merger agreement to create a global leader in wireline and wireless network infrastructure solutions. The transaction, which was approved by the boards of directors of both companies, will build upon the complementary strengths of each company to create significant growth opportunities and global economies of scale to expand earnings. For the most recent reported twelve months as of May 31, 2006, combined sales for the two companies on a pro forma basis totaled approximately $3.3 billion. The proposed business combination remains subject to shareholder and regulatory approvals. Strategic Combination of ADC and Andrew The wireline and wireless markets for next-generation broadband, video, data and voice services are rapidly expanding and have strong growth potential. Carriers in every part of the world are upgrading their networks to expand high-speed data and video offerings. These trends hold significant promise for the strategic combination of ADC and Andrew. "Today we are announcing plans for a promising new growth stage for our two great companies," Robert E. Switz, president and chief executive officer of ADC, said. "With this strategic combination, we will be a world leader in communications network infrastructure products and services. The strategic, operational and financial synergies of our two strong companies create a significant opportunity to grow value for our customers, shareholders and employees." Mr. Switz will be president and CEO of the combined company after closing. "With accelerating globalization and consolidation among telecommunications service providers and communications equipment suppliers, now is the right time for ADC and Andrew to join forces and grow value as a world leader in network infrastructure solutions," said Ralph E. Faison, president and CEO of Andrew. "As we join ADC's leadership position in wireline connectivity solutions and Andrew's leadership position in wireless infrastructure solutions, ADC and Andrew will have a substantially greater global presence, customer base, economies of scale, product breadth, innovation ability and financial strength. The synergies that we expect to create will enable us to better serve our converging customer base worldwide as their wireline and wireless networks deliver high-speed, any-content, anywhere communications services." Mr. Faison will serve as a consultant to the combined company to facilitate an efficient transition. Strengths of a Combined Company As a combined company, ADC and Andrew will be a leader in wireline and wireless infrastructure solutions with strong global market presence and customer relationships. The strengths of the combined company include: * broad-based connectivity solutions for copper, coaxial, fiber, radio frequency, broadcast and enterprise networks, combined with broad-based wireless solutions for antennas, cable products, base station subsystems, in-building and distributed coverage, geolocation systems and satellite communications; * approximately $3.3 billion in sales (on a pro forma basis for the trailing twelve months) into more than 140 countries comprised of approximately 23% to wireline customers, 44% to wireless customers, 6% to enterprise customers, 24% to original equipment manufacturers and 3% to other customers. The combined customer base currently includes nearly all major wireline and wireless service providers in the world, as well as many of the world's largest communications OEMs, and large corporate, government and education enterprises; * geographic sales distribution (on a pro forma basis for the trailing twelve months) of approximately 53% in the United States & Canada, 29% in Europe, Middle East and Africa, 11% in Asia-Pacific and 7% in Latin America; * approximately 20,000 employees worldwide of which approximately 37% are in the United States & Canada, 22% are in Europe, Middle East and Africa, 25% are in Asia-Pacific and 16% in Latin America; * facilities around the world including locations in 35 countries; * strong research and development efforts and a significant portfolio of U.S. and foreign patents on wireline and wireless infrastructure solutions. Transaction Overview The strategic business combination is structured as a stock-for- stock merger with Andrew becoming a wholly owned subsidiary of ADC. The transaction is expected to qualify as a tax-free reorganization. Under the terms of the agreement, Andrew shareholders will receive 0.57 of an ADC common share for each common share of Andrew they hold. Upon completion of the transaction, ADC shareholders will own approximately 56 percent of the combined company and Andrew shareholders will own approximately 44% of the combined company. ADC will assume all debt of Andrew and Andrew's convertible notes will become convertible into ADC shares. "We are committed to moving forward quickly and aggressively after closing to combine our operations and integrate our corporate cultures. We will be focused on capturing the full benefits of this combination for our customers, shareholders and employees," Mr. Switz said. Post closing, the transaction is expected to be non-dilutive to earnings per share in the first year of the combined company and accretive thereafter, excluding purchase accounting adjustments and other acquisition-related expenses. ADC and Andrew have estimated that synergies will generate additional annual pre-tax earnings of $70 million to $80 million in the third year after closing the transaction. The combined company will be based at ADC's world headquarters in Minnesota with ADC's John A. Blanchard continuing as non-executive chairman, and ADC's Robert E. Switz continuing as its president and CEO. The board of directors of the combined company will be composed of 12 members of which eight will be current ADC directors, including Blanchard and Switz, and four will be current Andrew directors. Key members of the management team from both companies will comprise the management team of the combined company after closing. The name of the combined company will be ADC Andrew. The merger is subject to customary regulatory and governmental reviews in the United States and elsewhere, as well as the approval by shareholders of both companies and other customary conditions to closing. Assuming there is not a significant delay in obtaining the required approvals, the transaction is expected to be completed in four to six months. Until the merger is completed, both companies will continue to operate their businesses independently. Financial and Legal Advisors Credit Suisse Securities (USA) LLC acted as the primary financial advisor to ADC and Dresdner Kleinwort Wasserstein Securities LLC provided a fairness opinion to ADC. Dorsey & Whitney LLP served as ADC's primary outside legal counsel. Citigroup Corporate and Investment Banking acted as the primary financial advisor to Andrew with additional assistance from Lehman Brothers, Inc., and Merrill Lynch provided a fairness opinion to Andrew. Mayer, Brown, Rowe & Maw LLP served as Andrew's primary outside legal counsel. About ADC Based in Minneapolis, Minnesota, ADC Telecommunications Inc. -- http://www.adc.com/-- provides the connections for wireline, wireless, cable, broadcast, and enterprise networks around the world. ADC's innovative network infrastructure equipment and professional services enable high-speed Internet, data, video, and voice services to residential, business and mobile subscribers. ADC (NASDAQ: ADCT) has sales into more than 140 countries. About Andrew Headquartered in Westchester, Illinois, Andrew Corporation (NASDAQ: ANDW) -- http://www.andrew.com/-- designs, manufactures and delivers innovative and essential equipment and solutions for the global communications infrastructure market. The company serves operators and original equipment manufacturers from facilities in 35 countries. Andrew is an S&P 500 company founded in 1937. * * * As reported in the Troubled Company Reporter on June 2, 2006, Standard & Poor's Ratings Services placed its 'BB' corporate credit rating and other ratings on Andrew Corp. on CreditWatch with positive implications. The CreditWatch listing followed the announcement that the company has agreed to be acquired by unrated ADC Telecommunications Inc., in a transaction expected to close in four to six months. ANTEON INT'L: Moody's Holds Ba2 Rating on $200MM Secured Revolver ----------------------------------------------------------------- Moody's Investors Service affirmed the ratings of Anteon International Corporation. Anteon entered into a merger agreement with General Dynamics Corporation under which the latter will acquire Anteon for $2.1 billion and the assumption of net debt. Anteon's stockholders have approved the merger. As a condition of the merger, Anteon's credit facilities must be repaid. If the merger is consummated as Moody's expects, Anteon's ratings will be withdrawn. Moody's affirmed these ratings: * $200 million senior secured revolver maturing Dec. 31, 2008, Ba2 * $165 million senior secured Term Loan B due Dec. 31, 2010, Ba2 * Corporate Family Rating, Ba2 Pending acquisition of Anteon by General Dynamics, the ratings outlook is stable. Anteon's credit profile is strong for the Ba2 rating category. For the twelve months ended March 31, 2006 Anteon exhibited, on a lease adjusted basis, total debt to EBITDA of 1.9 times and EBIT interest coverage of 6.5 times. Headquartered in Fairfax, Virginia, Anteon International Corporation provides information technology solutions and advanced systems engineering services to US government clients. The company also designs, integrates, maintains, and upgrades information systems for national defense, intelligence, emergency response, and other high priority government missions. Revenues for the fiscal year ended December 31, 2005 were approximately $1.5 billion. ATRIUM COS: S&P Puts B Rating on Proposed $475MM Debt Facilities ---------------------------------------------------------------- Standard & Poor's Rating Services affirmed its 'B' corporate credit ratings on Dallas, Texas-based Atrium Cos. Inc. and its parent, Atrium Corp. At the same time, Standard & Poor's assigned its 'B' bank loan rating and '2' recovery rating to Atrium Cos.' proposed first-lien $50 million revolving credit facility due 2011 and $425 million term loan B due 2012, based on preliminary terms and conditions. The debt rating and recovery rating indicate expectations of substantial (80%-100%) recovery of principal in the event of a payment default. Standard & Poor's also affirmed its 'CCC+' senior unsecured rating on Atrium's Corp.'s $174 million 11.5% holding company discount notes. The outlook is stable. The proceeds from the $425 million term loan, which includes a $47 million delayed draw portion, will be used to refinance the existing term loan B and to acquire unrated Champion Window Holdings Inc., as well as another U.S. window manufacturer. The addition of the two window manufacturers will increase: * Atrium's penetration in local markets; * its scale and purchasing power; and * its sales through the direct-to-builder distribution channel. However, the acquisitions do not materially improve Atrium's business position because they do not add product diversity and Atrium already has a strong presence in the states where Champion and the other acquisition do business. Pro forma for the proposed transactions, Atrium will have total debt, including capitalized operating leases, of $718 million, with pro forma total debt to EBITDA of 6.3x as of March 31, 2006. "Although we expect a softening of demand in the near-term, relatively favorable long-term end-market conditions and Atrium's business position support the ratings," said Standard & Poor's credit analyst Lisa Wright. "We could revise the outlook to negative if new construction markets or repair and remodeling demand weaken more than we expect or if Atrium experiences significant raw-material cost increases that it cannot pass through to customers. We see a ratings upgrade as unlikely, given Atrium's very aggressive financial policy, which we expect will prevent the company from achieving meaningful debt reduction over the intermediate term." Atrium is a leading low-cost manufacturer of aluminum and vinyl windows, with a national footprint. BPK RESOURCES: Posts $1.5 Mil. Net Loss in Quarter Ended March 31 ----------------------------------------------------------------- BPK Resources, Inc., filed its first quarter financial statements for the three months ended March 31, 2006, with the Securities and Exchange Commission on May 22, 2006. The Company reported a $1,547,896 net loss with no revenues for the three months ended March 31, 2006. At March 31, 2006, the Company's balance sheet showed $3,180,417 in total assets and $2,343,307 in total liabilities, resulting in a $837,110 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?add Going Concern Doubt As reported in the Troubled Company Reporter on May 17, 2006, L J Soldinger Associates, LLC, in Deer Park, Illinois, raised substantial doubt about BPK Resources' 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 net losses since inception. About BPK Resources Based in Totowa, New Jersey, BPK Resources, Inc., used to acquire, explore and develop natural gas and oil properties. Over the past 18 eighteen months, the Company divested substantially all of its oil and gas interests. During the fourth quarter of 2005, the sole well in which the Company retained an interest had been completely depleted. The Company recorded an impairment charge of $3,528 to fully impair the remaining balance of the well. BTSC HOLDINGS: S&P Rates Proposed $100 Million Sr. Notes at CCC+ ---------------------------------------------------------------- Standard & Poor's Rating Services assigned its 'B-' corporate credit rating to Delaware-based BTSC Holdings Inc. At the same time, Standard & Poor's assigned its 'CCC+' senior secured rating and '3' recovery rating to the company's proposed $100 million senior secured second-lien floating-rate notes due in 2011 and issued as a private placement, based on preliminary terms and conditions. The debt rating and recovery rating indicate expectations of meaningful (50%-80%) recovery of principal in the event of a payment default. The outlook is stable. The proceeds from the notes and $36 million of management equity will be used to: * purchase a foundation contractor and a dry and wet utility contractor; * repay existing indebtedness; and * fund working capital. Pro forma for the proposed transaction, BTSC will have total debt of $106 million, with pro forma total debt to EBITDA of 3.0x as of March 31, 2006. "BTSC's leading regional market position supports the ratings, but the company remains vulnerable to regional housing market downturns, rising interest rates, and adverse weather conditions," said Standard & Poor's credit analyst Lisa Wright. "The company's modest revenue base, thin cash flow, and expectations for debt-financed acquisitions limit upside rating prospects. We could revise the outlook to negative if BTSC's markets experience a sharper-than-expected slowdown in new residential construction or if liquidity is constrained by increasing material or labor costs that the company is unable to pass through to its customers." BTSC is a specialty contractor for new residential construction that is controlled by private equity firm Parallel Investment Partners. BUFFALO COAL: U.S. Trustee Appoints Eight-Member Official Panel --------------------------------------------------------------- The U.S. Trustee for Region 4 appointed eight creditors to serve on an Official Committee of Unsecured Creditors in Buffalo Coal Company, Inc.'s chapter 11 case: 1. Thomas J. Fleury Beckwith Machinery Company 4565 William Penn Highway Murraysville, Pennsylvania 15668 Tel: (724) 325-9394 Fax: (724) 325-9299 2. Amy Bates Austin Powder Company 25800 Science Park Drive Cleveland, Ohio 44122 Tel: (216) 464-2400 Fax: (216) 464-5476 3. William H. Mayer, III Bill Miller Equipment Sales, Inc. P.O. Box 112 Eckert, Maryland 21528 Tel: (301) 689-1013 Fax: (301) 689-0112 4. Richard B. Bolen Double H Mining Co. Inc. P.O. Box 338 Reedsville, West Virginia 26547 Tel: (304) 288-3424 Fax: (304) 693-7649 5. William H. Murphy Godwin Pumps of America 1 Floodgate Road Bridgeport, New Jersey 08014 Tel: (856) 467-3636 Fax: (856) 467-7025 6. Darroll L Talbott Guttman Oil Company P.O. Box 1728 Elkins, West Virginia 26241 Tel: (304) 636-2600 Fax: (304) 636-8133 7. Randolph King, Jr. Kings Tire Service P.O. Box 3511 Bluefield, West Virginia 24701 Tel: (304) 323-3977 Fax: (304) 325-0572 8. Dion W. Hayes Virginia Electric and Power Company c/o Dion Hayes McGuire Woods One James Center Richmond, Virginia Tel: (804) 775-1144 Fax: (804) 689-2078 Court documents do not show who the Committee has retained to represent them in the Debtor's case. Official creditors' committees have the right to employ legal and accounting professionals and financial advisors, at the Debtors' expense. They may investigate the Debtors' business and financial affairs. Importantly, official committees serve as fiduciaries to the general population of creditors they represent. Those committees will also attempt to negotiate the terms of a consensual chapter 11 plan -- almost always subject to the terms of strict confidentiality agreements with the Debtors and other core parties-in-interest. If negotiations break down, the Committee may ask the Bankruptcy Court to replace management with an independent trustee. If the Committee concludes reorganization of the Debtors is impossible, the Committee will urge the Bankruptcy Court to convert the chapter 11 cases to a liquidation proceeding. Headquartered in Oakland, Maryland, Buffalo Coal Company, Inc., is engaged in coal mining and processing services. The company filed for chapter 11 protection on May 5, 2006 (Bankr. N.D. W.Va. Case No. 06-00366). David A Hoyer, Esq., at Hoyer, Hoyer & Smith, PLLC, represents the Debtor in its restructuring efforts. When the Debtor filed for protection from its creditors, it listed total assets of $119,323,183 and total debts of $105,887,321. BUFFALO COAL: Court Approves Hoyer Hoyer as Bankruptcy Counsel -------------------------------------------------------------- Buffalo Coal Company, Inc., obtained authority from the U.S. Bankruptcy Court for the Northern District of West Virginia to employ Hoyer, Hoyer & Smith, PLLC, as its bankruptcy counsel. Hoyer Hoyer is expected to: a. give the Debtor legal advice with respect to its powers and duties as a debtor-in-possession and in the management of its assets; b. prepare on behalf of the debtor all necessary motions, application, answers, orders, reports and other legal papers; and c. perform all other legal services for the Debtor as may be necessary. The Debtor tells the Court that the firm's professionals bill: Professional Hourly Rate ------------ ----------- Ralph W. Hoyer, Esq. $275 Christopher S. Smith, Esq. $250 Stephen P. Hoyer, Esq. $225 David A. Hoyer, Esq. $200 Jennelle L. Harper, Esq. $125 The Debtor says that paralegals at the firm bill $75 per hour. The Debtor discloses that its non-debtor sister-company, United Energy Coal, has paid the firm a $125,000 retainer. To the best of the Debtor's knowledge, the firm does not represent any interest adverse to the Debtor or its estate. The firm's attorneys can be reached at: Ralph W. Hoyer, Esq. Christopher S. Smith, Esq. Stephen P. Hoyer, Esq. David A. Hoyer, Esq. Jennelle L. Harper, Esq. Hoyer, Hoyer & Smith, PLLC 22 Capitol Street Charleston, West Virginia 25301 Tel: (304) 344-9821 http://www.hhsmlaw.com/ Headquartered in Oakland, Maryland, Buffalo Coal Company, Inc., is engaged in coal mining and processing services. The company filed for chapter 11 protection on May 5, 2006 (Bankr. N.D. W.Va. Case No. 06-00366). David A Hoyer, Esq., at Hoyer, Hoyer & Smith, PLLC, represents the Debtor in its restructuring efforts. Court documents do not show who the Official Committee of Unsecured Creditors has retained to represent them in the Debtor's case. When the Debtor filed for protection from its creditors, it listed total assets of $119,323,183 and total debts of $105,887,321. BUFFALO COAL: List of 20 Largest Unsecured Creditors ------------------------------------------------------ Buffalo Coal Company, Inc., released a list of its 20 Largest Unsecured Creditors with the U.S. Bankruptcy Court for the Northern District of West Virginia, disclosing: Entity Nature Of Claim Claim Amount ------ --------------- ------------ Virginia Electric and Power Lawsuit $88,406,616 Company 701 E. CAry Street Richmond, VA 23219 CDS Trust, LLC Royalties $1,542,515 c/o C. Del Signore P.O. Box 6 Terra Alta, WV 25764 WV State Tax Department West Virginia $1,219,598 Internal Auditing Division Severance Tax P.O. Box 425 Charleston, WV 25322-0425 Austin Powder Company Goods and Services $1,053,543 P.O. Box 6049-C Cleveland, OH 44191 Guttman Oil Company Goods and Services $812,878 P.O. Box 1728 Elkins, WV 26241 Savange Services, Inc. Goods and Services $714,178 P.O. Box 57908 Salt Lake City, UT 84157-0908 King's Tire Service, Inc. Goods and Services $555,603 US Route 52 North Bluewell, WV 24701 Komatsu Financial LP UCC $427,157 P.O. Box 99303 Chicago, IL 60693-9303 United States Treasury Federal Excise Tax $422,106 IRS Center Cincinnati, OH 45999-0009 Godwin Pumps of America, Inc. $355,110 P.O. Box 191 Bridgeport, NJ 08014 West Virginia State West Virginia $300,829 Tax Department Severance Tax Compliance Division P.O. Box 229 Charleston, WV 25321-0229 Double H Mining, Inc. $243,153 Bill Miller Equipment Sales $195,280 Sherrif of Grant County Real Property Taxes $134,454 Airgas Specialty Products, Goods and Services $130,159 Inc. Benefit Assistance Corp. Claims Services $124,828 WV State Tax Department West Virginia $122,171 Internal Auditing Division Severance Tax Ashby Fire Equipment $120,098 Company LLC Massie Reclamation, Inc. Goods and Services $92,250 Strum Environmental Services Goods and Services $80,884 Headquartered in Oakland, Maryland, Buffalo Coal Company, Inc., is engaged in coal mining and processing services. The company filed for chapter 11 protection on May 5, 2006 (Bankr. N.D. W.Va. Case No. 06-00366). David A Hoyer, Esq., at Hoyer, Hoyer & Smith, PLLC, represents the Debtor in its restructuring efforts. Court documents do not show who the Official Committee of Unsecured Creditors has retained to represent them in the Debtor's case. When the Debtor filed for protection from its creditors, it listed total assets of $119,323,183 and total debts of $105,887,321. CALPINE CORP: Wants to Amend and Assume Cogeneration Plant Deals ---------------------------------------------------------------- Calpine Corporation and its debtor-affiliates ask the U.S. Bankruptcy Court for the Southern District of New York for authority to amend and assume: (a) a Ground Lease Agreement among Texas City Cogeneration, L.P., as successor-in-interest to Northern Cogeneration One Company and Cogenron, Inc., and Union Carbide Corporation; (b) a Steam Agreement between Union Carbide and Texas City Cogeneration, as successor-in-interest to Cogenron, Inc.; (c) a Refinery Gas Agreement between Texas City Cogeneration and BP Products North America Inc.; and (d) a Confidentiality Agreement between Texas City Cogeneration and BP Products. Texas Cogeneration Company owns all of the equity of Clear Lake Cogeneration, L.P., a debtor-affiliate of Calpine Corporation, and Texas City Cogeneration. Texas City Cogeneration, which operates a cogeneration plant on land leased from Union Carbide, sells steam to UCC. Based on the configuration of the Texas City Facility, Texas City Cogeneration must run its combustion turbines to generate steam for UCC around the clock. Revenues from the sale of steam to UCC and the sale of electricity to other parties are not sufficient to cover the costs of generation. Thus, except in certain periods in which electricity is in great demand, under the current Steam Agreement, the Texas City Facility generally operates at a loss, Bennett L. Spiegel, Esq., at Kirkland & Ellis LLP, in Los Angeles, California, explains. The Debtors negotiated a short-term, interim Master Power Purchase Agreement with Dow Pipeline Company, an affiliate of UCC, pursuant to which Texas City Cogeneration provides electricity to Dow Pipeline and Dow Pipeline delivers natural gas to Texas City Cogeneration and covers Texas City Cogeneration's operating costs. The Master Power Purchase Agreement enabled Texas City Cogeneration to meet its steam obligations to UCC under the Current Steam Agreement. However, because the Master Power Purchase Agreement is costly to Dow Pipeline and does not generate a profit for the Debtors, neither the Debtors nor Dow Pipeline have agreed to operate indefinitely under the Master Power Purchase Agreement. To address all of these issues and to facilitate a reorganization of Texas City Cogeneration's arrangements, the Debtors engaged in several months of good faith, arm's-length negotiations. As a result, the Debtors determined that amendments to existing contracts would be necessary. The proposed amendments are: (1) Second Amendment to Steam Agreement -- reduces the amount of steam that Texas City Cogeneration must supply to UCC, thereby reducing the costs associated with the 24-hour operation of two turbines; -- increases the price of steam charged to UCC; -- modifies the term of the Steam Agreement to extend it 10 years from the Effective Date of the Second Amendment; -- grants UCC the ability to dispatch a second turbine for incremental steam needs or reliability needs, with UCC paying for the incremental costs, including any losses from power sales as a result if such dispatch; -- provides for a Take or Pay of 400 kpph on an instantaneous basis; and -- requires Texas City Cogeneration to burn a limited quantity of off-gas, priced at 15% below the amended price of natural gas. (2) Amendment to Ground Lease -- modifies the term of the Ground Lease so that it expires 15 years from the Effective Date of the Second Amendment to the Steam Agreement, rather than five years after termination of the Steam Agreement; and -- provides Texas City Cogeneration with one year to perform certain restoration obligations under the Ground Lease in the event it is terminated. (3) Amendment to Refinery Gas Agreement -- allow Texas City Cogeneration to accept third-party gas up to a maximum rate of 250MMBtu/hour and an annual maximum quantity of 210,000 MMBtu for use in its heat recovery steam generators. (4) Amendment to the Confidentiality Agreement -- extends the confidentiality obligations through the end of the term of the Refinery Gas Agreement. Pursuant to the Amendments, the parties also agree that Texas City Cogeneration will cure any prepetition obligations under the Ground Lease and the Steam Agreement. UCC will pay Texas City $177,716 in prepetition amounts due. The parties will also exchange mutual releases. The Debtors are current under the Refinery Gas Agreement and have no existing cure obligations. About Calpine Corp. 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. 16; Bankruptcy Creditors' Service, Inc., 215/945-7000) CALPINE CORP: CCFC Asks for Waivers Under $800MM Loans Contracts ---------------------------------------------------------------- Calpine Construction Finance Company, L.P. and CCFC Finance Corp. commenced a consent solicitation, for holders of record as of June 1, 2006, to seek a waiver under the indenture governing their $415,000,000 principal amount of Second Priority Senior Secured Floating Rate Notes due 2011. CCFC is also requesting a similar waiver from the lenders under the credit and guarantee agreement governing its $385,000,000 First Priority Senior Secured Institutional Term Loans due 2009. The proposed waivers would waive certain existing defaults and events of default under the Indenture and Credit Agreement that occurred following the Chapter 11 bankruptcy filing on Dec. 20, 2005 by Calpine Corporation (OTC Pink Sheets: CPNLQ), the Company's ultimate parent, and certain of Calpine Corporation's controlled subsidiaries. The defaults and events of default under the Indenture and Credit Agreement resulted from (i) the failure of Calpine Energy Services, L.P., one of Calpine Corporation's controlled subsidiaries that filed for bankruptcy, to make a portion of the payments due to CCFC in March 2006 under a gas sale and power purchase agreement and to cure such defaults within the applicable cure period; and (ii) the failure of CCFC to timely deliver certain financial reports required pursuant to the Indenture and Credit Agreement. With respect to the Indenture, a waiver agreement will be executed following receipt by the Company of the consent of at least a majority in aggregate principal amount of outstanding Notes. With respect to the Credit Agreement, a similar waiver agreement will be executed following receipt by CCFC of the consent of lenders holding more than 50% of the aggregate outstanding Term Loans. The effectiveness of each of the waivers is conditioned, among other things, upon the effectiveness of the other. The waivers will be effective immediately upon satisfaction of the conditions precedent to their effectiveness, which may occur prior to the expiration of the consent solicitation under the Indenture and the request for waiver under the Credit Agreement. The waivers will require the Company to reach agreement with the holders of the Notes and the lenders under the Credit Agreement regarding the treatment of the gas sale and power purchase agreement by Aug. 4, 2006. Consents given in the consent solicitation may be revoked at any time prior to the effectiveness of the waiver under the Indenture, but not thereafter. Upon their effectiveness, the respective waiver agreements will implement the waivers for all holders of the Notes and lenders under the Term Loans whether or not they provided their consent. The consent solicitation under the Indenture and waiver request under the Credit Agreement will expire at 5:00 p.m., New York City time, on June 9, 2006, unless extended. The consent solicitation may be amended, extended or terminated, at the option of the Company, as set forth in the solicitation letter and consent form from the Company. For a complete statement of the terms and conditions of the consent solicitation, holders of the Notes should refer to the solicitation letter and consent form. Global Bondholder Services Corporation will act as Information Agent in connection with the consent solicitation. Questions concerning the terms of the consent solicitation, and requests for copies of the solicitation letter, the consent form or other related documents should be directed to the Information Agent by calling (866) 736-2200. Wilmington Trust Company will act as Tabulation Agent. Requests for assistance in delivering consents should be directed to the Tabulation Agent at (302) 636-6181. Goldman Sachs Credit Partners L.P. is the administrative agent under the Credit Agreement. About CCFC and CCFC Finance CCFC is an indirect subsidiary of Calpine Corporation. It was formed to develop, own and operate power-generating facilities. CCFC currently owns and operates six natural gas-fired combined- cycle facilities located in California, Texas, Oregon, Florida and Maine, which have a combined estimated peak capacity of nearly 3,700 megawatts. CCFC Finance Corp. is a direct subsidiary of CCFC that was formed solely to act as co-issuer of the Notes. About Calpine Corp. 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. CAREGIVERS: Case Summary & 20 Largest Unsecured Creditors --------------------------------------------------------- Debtor: Caregivers, Non-Profit Corp. 2111 Woodward Avenue, Suite 700 Detroit, Michigan 48226 Bankruptcy Case No.: 06-47132 Type of Business: The Debtor is a non-profit organization offering caregiving services to patients. Chapter 11 Petition Date: June 6, 2006 Court: Eastern District of Michigan (Detroit) Judge: Phillip J. Shefferly Debtor's Counsel: Debra Beth Pevos, Esq. 25800 Northwestern Highway, Suite 1000 Southfield, Michigan 48075 Tel: (248) 746-2842 Fax: (248) 746-2760 -- and -- Wallace M. Handler, Esq. Sullivan, Ward, Asher & Patton, P.C. 25800 Northwestern Highway 1000 Maccabees Center Southfield, Michigan 48075-1000 Tel: (248) 746-0700 Estimated Assets: $100,000 to $500,000 Estimated Debts: $1 Million to $10 Million Debtor's 20 Largest Unsecured Creditors: Entity Claim Amount ------ ------------ Business Creditline Chase Bank $300,000 P.O. Box 196 Detroit, MI 48231 Films Media Group $4,360 2572 Burnswick Pine Lawrenceville, NJ 8648 Forbes Management $4,360 2111 Woodward Avenue, Suite 900 Detroit, MI 48201 World Medical Relief $1,985 Standard Insurance $1,757 Accident Fund of Michigan $1,490 SBC Internet Services $884 Concentra Occupational Health $737 Konica Minolta - Albin $628 Megapath Networks $580 Nextel $569 Assurant Employee Benefits $555 Impact Publications $550 Comdata Corp. $467 Office Max Contract, Inc. $438 Citicorp Vendor Finance, Inc. $390 Imagistics $375 Verizon Wireless Messaging $335 Viking Office Products $241 Office Depo $221 CASCADES INC: Moody's Assigns Ba1 Rating to CA$550 Mil. of Loans ---------------------------------------------------------------- Moody's affirmed Cascades' Ba2 corporate family rating, assigned Ba1 ratings to both its C$450 million senior secured five-year revolver and C$100 million senior secured seven-year term loan, and affirmed its Ba3 senior unsecured rating. Cascades' Ba2 corporate family rating is based primarily on its high leverage, weak debt protection measurements, and modest size in relation to other industry participants. The rating is supported by the diversity derived from its boxboard, packaging and tissue businesses and, through its 50% interest in Norampac, in the Canadian containerboard segment, which provide greater earnings stability than typically seen in the industry. Importantly, the Ba2 rating considers the steps taken by Cascades over the past two years to significantly rationalize high cost operations, derive efficiencies from existing operations and, more recently, its efforts to rationalize industry capacity in the boxboard segment in a financially supportable manner. However, the Ba2 rating also reflects relatively high financial leverage for the rating category, as well as the company's exposure to the stronger Canadian dollar and to cyclical pricing, particularly in the containerboard and boxboard segments, and to volatile raw material costs, including recycled fibers, energy, and chemicals. The rating outlook is stable. Assignments: Issuer: Cascades Inc. * Senior Secured Bank Credit Facility, Assigned Ba1 Withdrawals: Issuer: Cascades Inc. * Senior Secured Bank Credit Facility, Withdrawn, previously rated Ba1 The most recent rating action for Cascades was an affirmation of the Ba2 Corporate Family Rating on November 24, 2004, which followed a downgrade of the Corporate Family Rating to Ba2 from Ba1 on November 11, 2004. Headquartered in Kingsey Falls, Quebec, Cascades Inc. is a Quebec- based packaging and paper company producing boxboard, containerboard, specialty packaging products and tissue. Consolidated revenues in 2005 were C$3.5 billion. CCS MEDICAL: Moody's Lowers rating on $110 Mil. Term Loan to Caa3 ----------------------------------------------------------------- Moody's Investors Service lowered CCS Medical Inc.'s ratings. The downgrades reflect material negative variance of cash flow and EBITDA levels relative to Moody's expectations when initial ratings were assigned in September 2005. The shortfall results from the convergence: (1) greater than anticipated cuts in Medicare reimbursement rates for its respiratory business; (2) higher than expected bad debt levels due to poor collections; and (3) higher near-term working capital needs. These issues place continued near-term pressure on liquidity and exacerbate already high financial leverage and modest debt service coverage. The ratings outlook is changed to negative from stable reflecting the absence of visibility into the company's earnings and ongoing concern about its ability to remain in compliance with its financial covenants. Non-compliance could result from slower than expected sales growth or ongoing cash flow constraints, including working capital, bad debt or reimbursement changes. If the company faces ongoing or additional pressures on cash flow, including slower than expected volume growth, such that free cash flow remains negative or liquidity is further impaired, the ratings could be lowered. Moody's does not anticipate that the ratings outlook would revert to stable without evidence of continued growth in sales and improvement in working capital trends and cash flow. Moody's downgraded these ratings: CCS Medical Inc.: * Caa1 from B3 corporate family rating; * Caa1 from B3 $50 million secured revolver; * Caa1 from B3 $320 million first priority secured term loan; * Caa3 from Caa2 $110 million second priority secured term loan The Caa1 ratings reflect Moody's expectation that based on first quarter 2006 results, free cash flow is well-below expectations and will remain negative over the near-term. The ratings also reflect CCS Medical's very high financial leverage, lack of operating history and reliance on governmental payors. This is highlighted by rate reductions put in place by the Centers for Medicare and Medicaid Services that were significantly worse than anticipated. However, the ratings acknowledge management's efforts to identify and address operating issues and focus on new strategies - including engagement of a third party firm - to better manage working capital and more effectively execute integration. CCS Medical Inc., based in Clearwater, Florida, is a newly formed holding company whose operating subsidiaries are Chronic Care Solutions, Inc. and MPTC Holdings, Inc. The company is a leading mail-order provider of medical supplies - including diabetes, respiratory and wound care products - to chronically-ill patients. On a combined basis, pro-forma revenues at year end 2005 are estimated at approximately $400 million. Warburg Pincus is the company's largest shareholder. CHOICE ONE: Moody's Rates Planned $400MM Debt Facility at Ba3 ------------------------------------------------------------- Moody's Investors Service assigned a B1 corporate family rating, a Ba3 rating for the proposed $30 million senior secured revolving credit facility and for the proposed $400 million first lien term loan facility, and a B2 rating for the $160 million second lien term loan facility at Choice One Communications, Inc., with the company's name expected to change at closing. The outlook is stable. The bank facilities, along with $150 million in additional sponsor equity will be used to fund the creation of the second largest competitive local exchange carrier in the US, through the combination of Choice One, CTC and Conversent. In addition, Moody's has upgraded the ratings of the senior secured revolving credit facility and the senior secured term loan of Conversent Holdings, Inc. and Mountaineer Telecommunications, LLC to B1, given the high probability of the proposed merger concluding, and the repayment of Conversent's debt in full at closing. Conversent's corporate family rating was also upgraded to B1. Moody's assigned these ratings: Issuer -- Choice One Communications, Inc. * Corporate Family Rating -- Assigned B1 * Senior Secured Revolving Credit Facility -- Assigned Ba3 * 1st Lien Term Loan -- Assigned Ba3 * 2nd Lien Term Loan -- Assigned B2 * Outlook is Stable Issuer -- Conversent Holdings, Inc. and Mountaineer Telecommunications, LLC * Corporate Family Rating -- Upgraded to B1 from B2 * Senior Secured Revolving Credit Facility -- Upgraded to B1 from B2 * 1st Lien Term Loan -- Upgraded to B1 from B2 * Outlook is changed to Stable from Developing The B1 corporate family rating reflects the Company's moderate financial risk, free cash flow generation and the company's emerging operating scale in the northeastern USA. The ratings are tempered by the Company's challenging competitive position as a CLEC, the complexity of integrating three companies with distinct corporate cultures and operating systems, and the potential for further acquisitions, which may postpone debt reduction. The Company's leverage at closing is expected to be 3.9x 2006 EBITDA, and excluding the integration costs, Moody's expects the Company to generate $38 million in free cash flow in 2006. Moody's also views favorably the $150 million of new equity to be contributed by the company's equity sponsors. Additionally, proforma for the pending transaction, with $26 million of cash in hand and full availability of the $30 million revolver, the company has ample liquidity. The combination of Choice One, CTC and Conversent is continuing the consolidation trend in the telecommunications industry that is gradually easing the overcapacity that was built up over the last decade. The combined entity is expected to benefit from a geographic concentration in a heavily populated region that has a higher number of business lines per telephone company central office, than the national average. Moody's expects the Company to drive cost synergies by optimizing the combined transport and colocation facilities, and to drive revenue and cash flow growth by expanding customer penetration in its existing markets without significant additional capital. The stable rating outlook considers the company's growth plans and the reasonable likelihood of achieving merger synergies and continuing free cash flow growth accompanied by the modest deleveraging over the rating horizon. Given the challenges management will face in integrating the operations and achieving cost synergies to drive free cash flow growth, the ratings are somewhat prospective in nature. Should the company fail to quickly realize on the expected merger benefits, the outlook and/or the rating could come under downward pressure. The Company will be a CLEC, with executive management based in Rochester, NY, Waltham, MA and Marlborough, MA. CITIUS I: Moody's Rates $4 Million Class E Notes at Ba1 ------------------------------------------------------- Moody's Investors Service assigned the following ratings to the specified tranches of notes issued by Citius I Funding, Ltd: * Prime 1 to the U.S. $1,800,000,000 Class A CP Notes; * Aaa to the Up to U.S. $1,800,000,000 Class A ST Notes; * Aaa to the Up to U.S. $1,800,000,000 Class A LT Notes; * Aaa to the U.S. $70,000,000 Class A-1 Secured Floating Rate Notes, due 2046; * Aaa to the U.S. $25,000,000 Class A-2 Secured Floating Rate Notes, due 2046; * Aa2 to the U.S. $45,000,000 Class B Secured Floating Rate Notes, due 2046; * A2 to the U.S. $25,000,000 Class C Deferrable Floating Rate Notes, due 2046; * Baa2 to the U.S. $15,000,000 Class D Deferrable Floating Rate Notes, due 2046; and * Ba1 to the U.S. $4,000,000 Class E Deferrable Floating Rate Notes, due 2046. Moody's noted that its ratings on this cash flow high grade ABS CDO reflect the credit quality of the underlying assets, which consist primarily of structured finance securities, including residential mortgage backed securities, commercial mortgage-backed securities and collateralized debt obligations, as well as the credit enhancement for the Notes inherent in the capital structure and the transaction's legal structure. Moody's stated that the ratings of the long term notes generally addresses the ultimate cash receipt of all required interest and principal payments as provided by the governing documents, and are based on the expected loss posed to the noteholders relative to the promise of receiving the present value of such payments. According to Moody's, the short term rating assigned to the Class A CP Notes addresses the promise of receiving timely payments principal amount of and all accrued interest on such notes, and in addition to the credit quality of the underlying collateral, depends on the short term rating of Barclays Bank PLC as Liquidity Provider under the Issuer's Liquidity Facility Agreement Aladdin Capital Management LLC is serving as the collateral manager on this transaction. COGECO CABLE: Agrees to Buy Cable Operator Cabovisao for EUR464MM ----------------------------------------------------------------- Cogeco Cable Inc. entered into an agreement with Cable Satisfaction International Inc., Catalyst Fund Limited Partnership I and Cabovisao-Televisao por Cabo, S.A., to purchase, at a cost of EUR464.9 million, all the shares of the second largest cable operator in Portugal, an indirect wholly-owned subsidiary of CSII. The price includes the purchase of senior debt and reimbursement of certain other liabilities of Cabovisao. The agreed-upon purchase price for the shares and senior debt corresponds to a multiple of 10.6 of operating income before amortization for the first quarter ended March 31, 2006, and a multiple of 12.6 of operating income before amortization over the last 12 months ended March 31, 2006. The final purchase price will be determined following completion of a post-closing working capital adjustment. This acquisition is in accordance with the external growth strategy announced by Cogeco Cable last October. "Cabovisao is well positioned in the high-growth cable telecommunications market in Portugal, including the Aveiro, the Lisboa-Palmela, the Caldas and the Alentejo regions," Louis Audet, President and Chief Executive Officer of Cogeco Cable, said. "Cogeco Cable is pleased with its growth potential and expects to make attractive additions to the services already provided to its customers thanks to its modern distribution infrastructure. In addition, Cogeco Cable will share with Cabovisao its knowledge of the cable distribution industry which it has developed over the last 35 years and which will also foster stability in the ownership and management of that company. Cogeco Cable believes that there will be continued growth in the dynamic telecommunications market in Portugal. This acquisition is consistent with Cogeco Cable's pursuit of external growth opportunities in the past and enables the Corporation to take part in the development of the cable telecommunications sector in Europe. In the future, Cogeco Cable's shareholders can expect management to use the same level of discipline and seriousness with which the Corporation has secured growth and creation of value for its shareholders in the past." Cogeco Cable believes this is an important measure as it allows the Corporation to assess its ongoing business without the impact of depreciation or amortization expenses as well as non-operating factors. It is intended to indicate Cogeco Cable's ability to incur or service debt, invest in capital expenditures or deferred charges and allows the Corporation to compare to its peers who may have different capital structures. This measure is not a defined term under Canadian or Portuguese Generally Accepted Accounting Principles. The transaction is subject to usual conditions and to the obtaining of a further orders of the Superior Court of Quebec as part of the implementation of a plan of arrangement and reorganization of CSII which has already been approved by the Court. A motion anticipated to be filed later today with the Court for this purpose would be heard June 15, 2006. The implementation of this plan and the sale to Cogeco Cable will enable Cabovisao to refocus on its growth opportunities in the Portuguese market. Cogeco Cable will finance the acquisition of Cabovisao through an underwritten credit facility of $900 million over five years committed by Canadian Imperial Bank of Commerce. CIBC World Markets has acted as financial advisor in connection with the proposed transaction. The total debt ratio on Cogeco Cable's consolidated EBITDA1 following the acquisition of Cabovisao will be 4.8 compared to 3.1 before this transaction. About Cabovisao Cabovisao-Televisao por Cabo, S.A., is a leader in cable telecommunications in its market, providing analog television, high-speed Internet and telephony services to approximately 611,000 revenue-generating units and 820,000 homes passed in Portugal. Approximately 264,000 customers subscribe to Cabovisao's analog television service, 130,000 customers subscribe to HSI service and 217,000 subscribe to its telephony service. Cabovisao's distribution infrastructure is fully integrated and interconnected by a fiber optic network connecting and servicing all areas of Portugal. The hybrid fiber optic and two-way 750 MHz coaxial cable network, built recently over a 10-year period, meets the DOCSIS 1.1 standard and reaches approximately 20% of all Portuguese households. About Cogeco Cable Headquartered in Montreal, Quebec, Cogeco Cable Inc. -- http://www.cogeco.ca/-- is evolving into one of Canada's major telecommunications companies, by building on its cable distribution base with the offering of analog, digital television, high-speed Internet and digital telephony services. Cogeco Cable provides about 1,464,000 revenue-generating units (basic, digital, Internet and telephony service customers) to approximately 1,462,000 households in its service territory. It is the second largest cable system operator in both Ontario and Quebec and the fourth largest in Canada. 72% of the Corporation's service units are located in the Province of Ontario and 28% are located in the Province of Quebec. * * * As reported in the Troubled Company Reporter on June 6, 2006, Standard & Poor's Ratings Services placed its ratings on Cogeco Cable Inc., including its long-term 'BB+' corporate credit rating, on CreditWatch with negative implications, following Cogeco's announcement that it has entered into an agreement to purchase the second-largest cable TV operator in Portugal, Cabovisao-Televisao por Cabo S.A. The CreditWatch placement reflects an expected material weakening of the company's financial metrics resulting from the debt-financed acquisition. As reported in the Troubled Company Reporter on June 6, 2006, Dominion Bond Rating Service placed the rating of Cogeco Cable Inc. "Under Review with Negative Implications", following the report that the Company intends on purchasing the second- largest cable operator in Portugal, Cabovisao-Televisao por Cabo, S.A., for approximately EUR465 million, using 100% bank debt financing. The Company's Senior Secured Notes & Debentures are Under Review - Negative BB (high) and the Company's Second Secured Debentures, Series A are Under Review - Negative BB. COMMUNICATIONS CORP: Case Summary & 11 Largest Unsecured Creditors ------------------------------------------------------------------ Debtor: Communications Corporation of America 700 St. John Street, Suite 300 Lafayette, Louisiana 70501 Bankruptcy Case No.: 06-50410 Debtor affiliates filing separate chapter 11 petitions: Entity Case No. ------ -------- ComCorp Holdings, Inc. 06-50411 ComCorp Broadcasting, Inc. 06-50412 ComCorp of Texas, Inc. 06-50413 ComCorp of Lafayette, Inc. 06-50414 ComCorp of Baton Rouge, Inc. 06-50415 ComCorp of Bryan, Inc. 06-50416 ComCorp of El Paso, Inc. 06-50417 ComCorp of Louisiana, Inc. 06-50418 ComCorp of Tyler, Inc. 06-50419 ComCorp of Indiana, Inc. 06-50420 ComCorp of Monroe, Inc. 06-50421 Type of Business: The Debtors are media and broadcasting companies. Along with media company White Knight Holdings, Inc., it owns and operates around 23 TV stations in Indiana, Texas, and Louisiana. The Debtors filed for chapter 11 protection concurrently with White Knight Holdings (Bankr. W.D. La. Case No. 06-50422) and its subsidiaries, which are also engaged in media, television, and the broadcasting industry. The entities have asked the Bankruptcy Court for joint administration of their chapter 11 cases. Both Debtors have entered into commercial inventory agreements, joint sales agreements, and shared services agreements, as part of the ordinary course of business. Communications Corporation and White Knight Holdings however, are independent companies, and each is not an affiliate of the other. Alvarez & Marsal, LLC, continue to provide restructuring management services to the Debtors. Chapter 11 Petition Date: June 7, 2006 Court: Western District of Louisiana (Lafayette/Opelousas) Judge: Gerald H. Schiff Debtors' Counsel: Douglas S. Draper, Esq. William H. Patrick III, Esq. Tristan Manthey, Esq. Heller, Draper, Hayden, Patrick & Horn, LLC 650 Poydras Street, Suite 2500 New Orleans, LA 70130-6103 Tel: (504) 568-1888 Fax: (504) 522-0949 Estimated Assets: More than $100 Million Estimated Debts: More than $100 Million Debtors' Consolidated List of their 11 Largest Unsecured Creditors: Entity Claim Amount ------ ------------ Preston-Patterson Co., Inc. $406,074 P.O. Box 244 Conshohocken, PA 19428 Fox Broadcasting Company $232,506 c/o Ernst & Young 7578 Collections Center Drive Chicago, IL 60693-6616 Gamut Communications, Inc. $76,241 8 Twin Tree Court Cedar Crest, NM, 87008 Millennium TV $52,382 Katz Media $17,130 Continental TV $13,385 The Lamar Companies $8,700 Katz Media Corp. $8,381 Harris Corporation $8,274 ITT Hartford $7,470 Thompson, Coe, Cousins & Iron $1,905 CONSOLIDATED CONTAINER: Equity Deficit Tops $84.5MM at March 31 --------------------------------------------------------------- Consolidated Container Company LLC reported $2.2 million of net income on $223.5 million of revenues for the three months ended March 31, 2006, compared to a $11.1 million net loss on $205 million of revenues for the same period in 2005. At March 31, 2006, the Company's balance sheet showed $685.4 million in total assets and $769.9 million in total liabilities, resulting in a $84.5 million equity deficit. A full-text copy of the Company's Quarterly Report is available for free at http://researcharchives.com/t/s?aef Headquartered in Atlanta, Georgia, Consolidated Container Company LLC -- http://www.cccllc.com/-- which was created in 1999, develops, manufactures and markets rigid plastic containers for many of the largest branded consumer products and beverage companies in the world. CCC has long-term customer relationships with many blue-chip companies including Dean Foods, DS Waters of America, The Kroger Company, Nestle Waters North America, National Dairy Holdings, The Procter & Gamble Company, Coca-Cola North America, Quaker Oats, Scotts and Colgate-Palmolive. CCC serves its customers with a wide range of manufacturing capabilities and services through a nationwide network of 61 strategically located manufacturing facilities and a research, development and engineering center. Additionally, the company has 4 international manufacturing facilities in Canada, Mexico and Puerto Rico. CONSUMERS ENERGY: Reports $10 Million Net Income in First Quarter ----------------------------------------------------------------- Consumers Energy Company reported $10 million of net income on $1.8 million of revenues for the three months ended March 31, 2006, compared to $157 million of net income on $1.6 million of revenues for the same period in 2005. At March 31, 2006, the Company's balance sheet showed $12.9 billion in total assets and $10 billion in total liabilities. A full-text copy of the Company's Quarterly Report is available for free at http://researcharchives.com/t/s?aec Headquartered in Jackson, Michigan, Consumers Energy Company -- http://www.consumersenergy.com/-- the primary subsidiary of CMS Energy, is a combination electric and natural gas utility that serves more than 3.3 million customers in Michigan's Lower Peninsula. * * * As reported in the Troubled Company Reporter on April 4, 2006, Fitch assigned a rating of 'BB+' to Consumers Energy Company's $300 million 364-day revolving credit facility. The facility is secured by a second lien on the collateral securing Consumers' first mortgage bonds. Fitch said the rating outlook is stable. COPAMEX SA: S&P Affirms BB- Senior Unsecured Currency Ratings ------------------------------------------------------------- Fitch Ratings affirmed Copamex, S.A. de C.V.'s senior unsecured foreign and local currency Issuer Default Ratings at 'BB-' and the senior unsecured national scale rating at 'A-(mex)'. Fitch also affirmed the rating of Copamex's peso-denominated medium-term notes or Certificados Bursatiles at 'A(mex)' and the short-term rating at 'F2(mex)'. The Outlook is Stable. The ratings are supported by: * the company's market position; * stable operating performance; and * improved debt maturity profile. Copamex continues to maintain a strong market position in its core business lines and a stable revenue base. During 2005, 53% of revenues were derived from products with leading market shares in Mexico. Over the past several years, the company has maintained stable EBITDA levels of around US$40 million per year. The combination of a favorable outlook in Mexico on consumer demand for paper products and cost efficiencies in energy consumption should enable moderate increases in revenues and EBITDA during 2006. At March 31, 2006 total on-balance sheet debt reached MXP1.422 billion on a gross basis and MXP1.317 billion net of restricted cash related to a 15% collateral on MXP700 millions outstanding CBs. The debt was composed of peso-denominated medium-term notes issues totaling MXP1.267 billion, MXP54 million of U.S. dollar- denominated commercial paper and MXP101 of bank debt. During 2005, the company completed a US$40 million five-year revolving assignment of receivables to an irrevocable trust administered by Banco Invex as trustee and borrower. Proceeds from the transaction (funded by Rabobank) were used by Copamex for: * working capital purposes; * liquidation of a factoring facility; * cash collateral; and * debt repayment. Although this transaction was structured without recourse, the asset coverage (unencumbered receivables) on unsecured creditors of Copamex has diminished. The company's leverage including off- balance sheet liabilities remains high and credit protection measures are in the weak range of the rating category. At March 31, 2006, the company had a ratio of on-balance sheet debt (net of restricted cash) to last 12 months EBITDA of 3.1x and a ratio of EBITDA to interest expense of 2.9x. During 2005, Copamex improved its debt maturity profile with the refinancing of debt with MXP700 million of CBs due 2008 and 2009. The company is at present seeking to extend the maturity of MXP100 million of CBs due 2006 to 2010. Management's strategy is focused on organic growth with modest capital expenditures, which should allow the company to generate modest free cash flow during 2006 and reduce debt. This should translate into moderate improvements in credit protection measures during the year and beyond. Failure to meet these financial targets could affect the ratings negatively. Copamex was founded in 1928 as an industrial paper manufacturer. During 2003 and 2004, the company divested its multi-wall bag business and its consumer division and used proceeds for debt reduction. Copamex has three main business divisions: packaging, printing and writing, and child diapers. In 2005 sales and EBITDA reached US$434 million and US$39 million respectively. Packaging accounted for 48% of revenues, printing and writing for 45%, and diapers for the remaining 7%. CREDIT SUISSE: Moody's Affirms Rating on $8.8MM Certs. at Caa2 -------------------------------------------------------------- Moody's Investors Service upgraded the ratings of five classes and affirmed the ratings of 14 classes of Credit Suisse First Boston Mortgage Securities Corp., Commercial Mortgage Pass-Through Certificates, Series 2003-CPN1: * Class A-1, $231,282,440, Fixed, affirmed at Aaa * Class A-2, $533,863,000, Fixed, affirmed at Aaa * Class A-SP, Notional, affirmed at Aaa * Class A-X, Notional, affirmed at Aaa * Class A-Y, Notional, affirmed at Aaa * Class B, $30,192,000, Fixed, upgraded to Aa1 from Aa2 * Class C, $10,064,000, Fixed, upgraded to Aa2 from Aa3 * Class D, $12,888,000, Fixed, upgraded to A1 from A2 * Class E, $10,064,000, Fixed, upgraded to A2 from A3 * Class F, $10,064,000, WAC Cap, upgraded to A3 from Baa1 * Class G, $17,612,000, WAC Cap, affirmed at Baa2 * Class H, $10,064,000, WAC Cap, affirmed at Baa3 * Class J, $20,127,000, Fixed, affirmed at Ba1 * Class K, $15,096,000, Fixed, affirmed at Ba2 * Class L, $7,548,000, Fixed, affirmed at Ba3 * Class M, $7,548,000, Fixed, affirmed at B1 * Class N, $6,290,000, Fixed, affirmed at B2 * Class O, $5,032,000, Fixed, affirmed at B3 * Class P, $8,806,000, Fixed, affirmed at Caa2 As of the May 17, 2006 distribution date, the transaction's aggregate certificate balance has decreased by approximately 4.0% to $966.4 million from $1.0 billion at securitization. The Certificates are collateralized by 170 mortgage loans ranging from less than 1.0% to 8.2% of the pool, with the top 10 loans representing 36.0% of the pool. The pool includes a shadow rated component, representing 10.5% of the pool, which consists of 73 loans secured by residential cooperative properties. These loans are shadow rated Aaa by Moody's. Eight loans, representing approximately 8.1% of the pool, have defeased and are collateralized by U.S. Government securities. The trust has not experienced any realized losses to date. One loan, representing less than 1.0% of the pool, is in special servicing. Moody's estimates a minimal loss from this loan. Nineteen loans, representing 15.7% of the pool, are on the master servicer's watchlist. Moody's was provided with partial and full year 2005 operating results for 95.4% and 76.1% of the performing conduit loans, respectively. Moody's weighted average loan-to-value ratio for the conduit component is 89.9%, compared to 92.2% at securitization. The upgrade of Classes B, C, D, E and F is due to stable overall pool performance, a relatively high percentage of defeased loans and increased credit support. The three largest loans represent 18.8% of the outstanding pool balance. The largest loan is the Northgate Mall Loan, which is secured by a portion of a 1.1 million square foot regional mall located approximately 10 miles northwest of Cincinnati in Colerain, Ohio. The mall is anchored by Lazarus, Sears, J.C. Penney and Dillard's. Occupancy in the in-line stores is 81.0%, compared to 85.9% at securitization. The property is performing in-line with expectations. Moody's LTV is 88.2%, essentially the same as at securitization. The second largest loan is the Quaker Headquarters Loan, which is secured by a 416,000 square foot Class A office building located in the West Loop submarket of downtown Chicago, Illinois. The property serves as the world headquarters for the Quaker Oaks Company, which leases 97.1% of the premises under a lease expiring in August 2012. The loan is interest only for the entire five- year term. Moody's LTV is 93.8%, compared to 94.1% at securitization. The third largest loan is the Metroplex Portfolio Loan, which is secured by three industrial flex/tech buildings located within the Dallas Metroplex. The portfolio totals 344,000 square feet and is 98.2% leased, compared to 100.0% at securitization. The property is performing in-line with expectations. Moody's LTV is 99.9%, essentially the same as at securitization. The pool's collateral is a mix of office and mixed use, multifamily and residential cooperatives, retail, U.S. Government securities and industrial. The collateral properties are located in 28 states. The highest state concentrations are Ohio, New York, Illinois, Texas, and Maryland. All of the loans are fixed rate. DANA CORP: Court Directs Debtors to Pay US Bancorp Lease Debts -------------------------------------------------------------- The U.S. Bankruptcy Court for the Southern District of New York directed Dana Corporation and its debtor-affiliates to pay and perform to U.S. Bancorp Equipment Finance, Inc., all past due and future obligations under a lease which arose on or after March 3, 2006, except those specified in Section 365(B)(2) of the Bankruptcy Code, until the Lease is rejected. The Court deemed U.S. Bancorp's request withdrawn, without prejudice. The Court further ruled that U.S. Bancorp may not renew its request so long as the Debtors complies with the Court's orders. As reported in the Troubled Company Reporter on May 19, 2006, U.S. Bancorp asked the Court to compel Dana to assume or reject the master lease agreement it entered into with U.S. Bancorp prior to its bankruptcy filing. U.S. Bancorp also asked the Court to compel Dana to pay and perform all its past due and future postpetition obligations to U.S. Bancorp until such time Dana decides to reject the Lease. Under the Master Lease Agreement, U.S. Bancorp and Dana entered into three schedules pursuant to which U.S. Bancorp leased equipment to Dana. Dana is obligated to make 36 consecutive monthly payments, with the first due 30 days after Dana's acceptance of the equipment subject to the Schedules: Schedule No. Acceptance Date Monthly Payment ----------- --------------- --------------- 23897B-022- March 30, 2004 $5,029 0027343-001 23897C-022- June 30, 2004 $8,692 0027343-002 23897D-022- July 28, 2004 $8,492 0027343-003 According to U.S. Bancorp, Dana defaulted under the Master Lease and Schedule No. 1 by failing to make the rental installment due on March 1, 2006. Dana also defaulted under the Master Lease, Schedule No. 2 and Schedule No. 3 by failing to make the rental installments due on Feb. 1, 2006. Since its bankruptcy filing, the Debtors have failed to make any payments to U.S. Bancorp in connection with the Lease, U.S. Bancorp said. 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. 10; Bankruptcy Creditors' Service, Inc., 215/945-7000). DANA CORP: Wants Court to Approve Agreement with Underwriters ------------------------------------------------------------- Dana Corporation and its debtor-affiliates ask the U.S. Bankruptcy Court for the Southern District of New York to approve the settlement agreement they entered into with certain underwriters at Lloyds' London. In February 2001, the Underwriters commenced an action in the Court of Common Pleas of Lucas County, Ohio, against Allstate Insurance Company, as successor-in-interest to Northbrook Excess and Surplus Insurance Company, among others. The Underwriters seek contribution and interest, and declaratory judgment, arising from their payment of indemnity and defense expenses to the Debtors, relating to asbestos-related bodily injury claims made against the Debtors. The Debtors were not a party to the Ohio Contribution Action. The London Underwriters are certain underwriters and companies that subscribe portions of excess comprehensive general liability insurance policies placed by the Debtors in the London insurance market. Allstate also provided comprehensive general liability insurance to the Debtors. In the Ohio Contribution Action, the Underwriters asserted that they have paid asbestos bodily injury claims on the Debtors' behalf for many years. The Underwriters sought to recover from Allstate their contribution payments. Subsequently, the Debtors were joined as a party to the Ohio Contribution Action. As against Allstate, the Ohio Contribution Action was stayed pending the completion of an arbitration between the Debtors and the Underwriters over the Underwriters' right to pursue the relief sought against Allstate in the Ohio Contribution Action. The Underwriters and the Debtors resolved the arbitration through confidential settlements, pursuant to which: (a) the Debtors agreed that the Underwriters were entitled to pursue the Ohio Contribution Action against Allstate; (b) the Debtors agreed that it would take no steps to stay or prevent the Underwriters' pursuit of the Ohio Contribution Action against Allstate; and (c) the Underwriters agreed to limit the amount they may obtain from Allstate solely to interest on amounts they paid to the Debtors as indemnity or defense expenses for asbestos bodily injury claims. The Underwriters have not brought any claim or action against the Debtors in the Ohio Contribution Action. After the Debtors' bankruptcy filing, Allstate sent a letter to the Ohio Court, suggesting the automatic stay may affect the Underwriters' pursuit of their claims in the Ohio Contribution Action. Accordingly, the Debtors and the Underwriters stipulate that the automatic stay: (1) is modified solely to permit the Underwriters to pursue the Ohio Contribution Action against Allstate; (2) is modified to permit the Underwriters to collect from Allstate the interest portion of any judgment or settlement entered in the Ohio Contribution Action, so long as the collection will not reduce the available limits of the Allstate Policies; and (3) precludes the Underwriters from collecting from, or enforcing against, Allstate the contribution portion of any judgment entered in the Ohio Contribution Action. 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 No. 10; Bankruptcy Creditors' Service, Inc., 215/945-7000). DANA CORP: Committee Hires UBS Securities as Investment Bankers --------------------------------------------------------------- The Official Committee of Unsecured Creditors in Dana Corporation and its debtor-affiliates' chapter 11 cases obtained permission from the U.S. Bankruptcy Court for the Southern District of New York to retain UBS Securities LLC as its investment bankers, nunc pro tunc to March 14, 2006. As reported in the Troubled Company Reporter on May 8, 2006, UBS is expected to: (a) advise and assist the Creditors Committee in its analysis of the liquidity position, assets and liabilities, and financial condition of the Debtors; (b) advise and assist the Committee in the Committee's review and analysis of the Debtors' business plan; (c) advise the Committee in its analysis of the Debtors' debt capacity in light of their projected cash flows; (d) advise and assist the Committee in its review and analysis of any proposed capital structure for the Debtors; (e) assist the Committee in its analysis of any valuation of the Debtors or their separate businesses; (f) attend Committee meetings as well as due diligence meetings with the Debtors or other third parties as appropriate; (g) advise and assist the Committee in its analysis of the Debtors' financing alternatives; (h) advise and assist in the Committee's assessment of the financial issues and options concerning the sale of any assets of the Debtors in analyzing strategic alternatives available to the Debtors; (i) advise and assist the Committee in its review and analysis of all Plans; (j) advise and assist the Committee in its review and analysis of any new securities, other consideration or other inducements to be offered or issued under any Plan; (k) assist the Committee or participate in negotiations with the Debtors and other parties-in-interest; (l) provide testimony in Court on behalf of the Committee, if necessary, with respect to the financial aspects of any Plan; and (m) provide other financial advisory services in the Reorganization Cases reasonably or as may be agreed to be performed by UBS. UBS will be paid: (i) a $175,000 monthly cash advisory fee; provided that 50% of the fee will be credited, to the extent actually paid, against the restructuring transaction fee. (ii) a $2,250,000 restructuring transaction fee, payable upon the consummation of any Restructuring Transaction, including, without limitation on the effective date of any Chapter 11 plan of reorganization. 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 No. 10; Bankruptcy Creditors' Service, Inc., 215/945-7000). DATATEL INC: S&P Assigns CCC+ Rating to Amended $100 Million Loan ----------------------------------------------------------------- Standard & Poor's Ratings Services lowered its corporate credit rating on Fairfax, Virginia-based Datatel Inc. to 'B' from 'B+'. At the same time, Standard & Poor's assigned its 'B+' debt rating, with a recovery rating of '1' to Datatel's amended $155 million first-lien bank facility, which will consist of a $35 million revolving credit facility and a $120 million term loan. Standard & Poor's also assigned its 'CCC+' debt rating, with a recovery rating of '4' to Datatel's amended $100 million second- lien term loan. The rating outlook is negative. "The first-lien bank loan rating, which is one notch higher than the corporate credit rating, along with the '1' recovery rating, reflect our expectation of full recovery of principal by creditors in the event of a payment default," said Standard & Poor's credit analyst Ben Bubeck. The second-lien bank loan rating, which is two notches below the corporate credit rating, along with the '4' recovery rating, reflect Standard & Poor' expectation of marginal (25%-50%) recovery of principal by creditors in the event of a payment default, given their priority in the capital structure. Proceeds from the amended facilities, which represent a net incremental borrowing of $127 million, will primarily be used to redeem a portion of Datatel's outstanding redeemable preferred stock. The ratings downgrade reflects the substantial increase to Datatel's operating lease adjusted debt leverage, which will be above 8x following this transaction, including approximately $26 million of remaining redeemable preferred stock. While leverage should improve modestly into the low-7x area in the near term given expectation for substantial cash inflows in the summer months, the company is expected to draw on its revolver again prior to next year's cash inflow. This heightened level of debt leverage leaves Datatel minimal cushion for any operating disruptions, particularly given its modest EBITDA and free operating cash flow base. The ratings on Datatel reflect a narrow product focus in a competitive market and high debt leverage. These factors are only partially offset by: * a solid business position in its addressed niche market; * a significant base of recurring revenues; * solid profit margins; and * expectation for modest free operating cash flow generation. DELTA AIR: Amended Company By-Laws Allow CEO to Choose Top Execs ---------------------------------------------------------------- In a regulatory filing with the U.S. Securities and Exchange Commission, Delta Air Lines, Inc., discloses that on May 25, 2006, its Board of Directors amended the company's By-Laws relating to the officers of the corporation to allow its chief executive officer to appoint: -- vice presidents, other than executive vice presidents and senior vice presidents; -- assistant secretaries and assistant treasurers. The By-Laws previously stated that the Board of Directors would elect all officers of the corporation. Leslie P. Klemperer, Delta's vice president, deputy general counsel and secretary, discloses that, under the amendment, the Board of Directors retains the sole authority to elect the chair, a vice chair, the chief executive officer, the chief operating officer, the chief financial officer, executive vice presidents, senior vice presidents, the secretary, the controller and the treasurer of the company. The Board of Directors also has the authority to elect vice presidents, assistant secretaries and assistant treasurers. A full-text copy of Delta's By-Laws, as amended, is available for free at http://ResearchArchives.com/t/s?acc Headquartered in Atlanta, Georgia, Delta Air Lines -- http://www.delta.com/-- is the world's second-largest airline in terms of passengers carried and the leading U.S. carrier across the Atlantic, offering daily flights to 502 destinations in 88 countries on Delta, Song, Delta Shuttle, the Delta Connection carriers and its worldwide partners. The Company and 18 affiliates filed for chapter 11 protection on Sept. 14, 2005 (Bankr. S.D.N.Y. Lead Case No. 05-17923). Marshall S. Huebner, Esq., at Davis Polk & Wardwell, represents the Debtors in their restructuring efforts. 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. (Delta Air Lines Bankruptcy News, Issue No. 33; Bankruptcy Creditors' Service, Inc., 215/945-7000). DELTA AIR: Plays to Lay-Off 9,000 Employees by Year-End 2007 ------------------------------------------------------------ Delta Air Lines, Inc., expects to cut 9,000 jobs as it completes its Chapter 11 cases, Bloomberg News reports. In an interview with Bloomberg, Gerald Grinstein, Delta's chief executive officer, said that Delta is on track of its plan to achieve $3,000,000,000 in annual savings and new revenues to exit Chapter 11 by 2007. Delta's plan of reorganization "anticipated that [the Debtors] have to lay off between 7,000 and, now, 9,000 people," Mr. Grinstein said. By the end of 2006, Delta expects that it would be 70% of the way towards its overall restructuring goal. With regards to Comair Holdings LLC, Delta's commuter unit which has been struggling to reach an agreement with its flight attendants, Mr. Grinstein stated that Delta has no plans to sell or spin off Comair. "We [are] now actively negotiating with [the flight] attendants." Headquartered in Atlanta, Georgia, Delta Air Lines -- http://www.delta.com/-- is the world's second-largest airline in terms of passengers carried and the leading U.S. carrier across the Atlantic, offering daily flights to 502 destinations in 88 countries on Delta, Song, Delta Shuttle, the Delta Connection carriers and its worldwide partners. The Company and 18 affiliates filed for chapter 11 protection on Sept. 14, 2005 (Bankr. S.D.N.Y. Lead Case No. 05-17923). Marshall S. Huebner, Esq., at Davis Polk & Wardwell, represents the Debtors in their restructuring efforts. 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. (Delta Air Lines Bankruptcy News, Issue No. 33; Bankruptcy Creditors' Service, Inc., 215/945-7000). DOBSON COMMS: Unit Buys $234.4MM of Tendered Floating Rate Notes ---------------------------------------------------------------- Dobson Communications Corporation reported that the cash tender offer for any and all of the First Priority Senior Secured Floating Rate Notes due 2011 (CUSIP No. 256067AF6) issued by its wholly owned subsidiary Dobson Cellular Systems, Inc. expired at 12:00 midnight, New York City time, on June 5, 2006. Dobson Cellular has received validly tendered Notes from holders of $234.4 million, or 93.8% of the aggregate outstanding principal amount of Notes. Dobson Cellular accepted for purchase $232.4 million in aggregate principal amount of tendered Notes on May 23, 2006, the initial settlement date. Holders who validly tendered Notes prior to the consent time (5:00 p.m., New York City time, on Friday, May 19, 2006) received total consideration per $1,000 principal amount of Notes tendered of $1,038.45, which includes a consent payment of $30, plus accrued and unpaid interest up to, but not including, the initial settlement date. An additional $2 million in aggregate principal amount of Notes was tendered subsequent to the consent time and prior to the expiration time. Dobson Cellular will accept for payment these additional tendered Notes on the final settlement date, expected to be June 6, 2006. Holders who validly tendered Notes after the consent time and prior to the expiration time will receive tender consideration per $1,000 principal amount of Notes tendered of $1,008.45, plus accrued and unpaid interest up to, but not including, the final settlement date. Morgan Stanley & Co. Incorporated acted as Dealer Manager and Solicitation Agent for the tender offer and consent solicitation. Bondholder Communications Group served as the Information and Tender Agent for the tender offer and consent solicitation. Headquartered in Oklahoma City, Dobson Communications Corporation (NASDAQ: DCEL) -- http://www.dobson.net/-- provides wireless phone services to rural markets in the United States and owns wireless operations in 16 states. * * * As reported in the Troubled Company Reporter on April 24, 2006, Fitch assigned Dobson Communications Corp. a 'B-' issuer default rating; a 'CCC+/RR5' rating for its $160 million senior floating rate notes; 'CCC+/RR5' rating for its $150 million senior convertible debentures; 'CCC+/RR5' rating for its $420 million senior notes; and 'CCC-/RR6' rating for its $136 million convertible preferred stock. Fitch Ratings assigned Dobson Cellular Systems Inc. a 'B-' issuer default rating; 'BB-/RR1' rating for its $75 million senior secured credit facility; 'BB-/RR1' rating for its $500 million first priority secured notes; and 'BB-/RR1' rating for its $325 million second priority secured notes. Dobson Communications Corp.' 8-7/8% Senior Notes due 2013 carry Moody's Investors Service's Caa2 rating and Standard & Poor's CCC rating. E*TRADE: Moody's Lifts B1 Rating on Sr. Unsec. Notes to Ba2 ----------------------------------------------------------- Moody's Investors Service upgraded the senior unsecured rating of E*TRADE Financial to Ba2 from B1 and long term deposit rating of E*TRADE's thrift subsidiary, E*TRADE Bank, to Baa3 from Ba2. The rating outlook remains positive. The last rating action on E*TRADE and E*TRADE Bank was on September 29, 2005, when Moody's affirmed all outstanding ratings of E*TRADE and raised the outlook on the long-term and bank financial strength ratings from stable to positive. In explaining today's upgrade, Moody's noted the improved profitability and more diversified revenue mix of the firm, as well as the reduction in the firm's earnings volatility over the past several years. The rating agency also recognized E*TRADE's significant progress reducing its dependence on volatile trading commissions, and the increased proportion of spread income attributable to the firm's growing base of low-cost free credit balances and sweep deposits. "E*TRADE has come a long way since the days of the equities 'bubble'. Today, it is a larger, more disciplined company with a more diversified product offering and sustainable earnings," says Moody's Senior Vice President Blaine Frantz. Nonetheless, Moody's still views the discount brokerage industry as characterized by strong competition and pricing pressures, and E*TRADE's revenues remain broadly tied to retail investor sentiment, albeit no longer to trading commissions per se. The rating agency also cited E*TRADE's improved scale and size brought about by the recent acquisitions of Harrisdirect and BrownCo as one of the factors underpinning the rating upgrade. Noting the predominantly successful integration of Harrisdirect as measured by lower-than expected attrition levels of customer accounts and balances, Moody's said that it expects E*TRADE to be able to both extract cost savings and realize increased revenue opportunities as it begins to offer its newly acquired customers easy access to a range of trading, loan and cash management products. Weighing on the ratings is E*TRADE's sizable amount of holding company debt and high double leverage. However, Moody's views positively E*TRADE's recent conversion of approximately $185 million of convertible bonds to common equity as indicative of the issuer's commitment to keeping its financial leverage in check. The positive outlook on E*TRADE's ratings reflects Moody's expectation that E*TRADE will continue to improve its operating leverage and profitability, starting with successfully managing the BrownCo integration. Continuing diversification of revenues, as well as further reductions in the cross-cycle volatility of earnings and debt leverage are also factors that would be influential in considering any further positive rating actions. The upgrade of E*TRADE Bank's deposit ratings to Baa3 reflects the thrift's improved risk-adjusted profitability, growing deposit base, strong asset quality and sound capitalization. Annual pre- tax income at the thrift has risen steadily over time, more than doubling since 2002. Through both acquisitions and organic growth, the thrift has also doubled deposits from $9 billion in 2002 to $19 billion as of March 31, 2006. While the thrift's overall GAAP profitability and net interest margin are somewhat modest compared to peers, Moody's recognizes that this is in large part a result of the thrift's focus on low- credit-risk assets, principally prime or above home equity loans, mortgages and high quality mortgage- and asset-backed securities. Due to its high-quality asset mix and low overhead ratio, E*TRADE Bank's risk-adjusted profitability is much improved and is quite competitive in comparison to the same or even higher rated peers. Although it considers the liquidity of the thrift as sound, Moody's believes that the use of market-sensitive funding does present a fair amount of roll-over risk that could see the thrift having to liquidate securities at an inopportune time or result in reduced earnings and cash flow generated from the securities portfolio. E*TRADE maintains substantial collateralized borrowing capacity at the Federal Home Loan Bank to mitigate this risk. Moody's upgrade of E*TRADE Bank's BFSR to D+ is based on the thrift's improved financial and operating fundamentals. However, the rating agency also noted that the thrift's BFSR reflects its limited capacity to originate loans and deposits on its own, as well as its heavy dependence on acquired residential mortgages. Without clients from the broker affiliate, the thrift would have a significantly less viable stand-alone business franchise. The positive rating outlook on the thrift's ratings reflects our expectation that E*TRADE will continue successfully monetizing growing customer assets, while maintaining a conservative approach to credit risk. E*TRADE has so far successfully managed interest rate and market risks; continuing to do so is a pre-requisite for an upgrade, just as failure to do so would weigh negatively on the ratings. These ratings of E*TRADE Financial were upgraded: * Senior Unsecured to Ba2 from B1 * Long-term Issuer to Ba2 from B1 * Senior Unsecured Shelf to (P)Ba2 from (P)B1 * Subordinate Shelf to (P)Ba3 from (P)B3 * Preferred Shelf to (P)B1 from (P)Caa1 * The outlook on all of the above ratings is positive. These ratings of E*TRADE Bank were upgraded: * Long-term Bank Deposits to Baa3 from Ba2 * Bank Financial Strength to D+ from D * Long-term Other Senior Obligations to Ba1 from Ba3 * Long-term Issuer to Ba1 from Ba3 * Short-term Bank Deposits to Prime-3 from Not Prime * Short-term Other Senior Obligations to Prime-3 from Not Prime * The outlook on all of the above ratings is positive. E*TRADE provides internet-based brokerage and banking services through its operating subsidiaries. The company generated $676 million in pre-tax profit in 2005. FALCONBRIDGE LTD: To Sell Assets to LionOre Mining for $650 Mil. ---------------------------------------------------------------- Falconbridge Limited and Inco Limited reached a definitive agreement with LionOre Mining International Ltd. covering the sale to LionOre of certain assets and related operations of Falconbridge. Inco and Falconbridge have been discussing with the U.S. Department of Justice and European Commission about the assets and related operations that would be divested and the associated arrangements that would be necessary as the proposed remedy to address potential competition issues that the DOJ and the Commission have identified relating to Inco's pending acquisition of Falconbridge. The sale of these assets and related operations to LionOre will include Falconbridge's Nikkelverk refinery in Norway and the Falconbridge marketing and custom feed organizations that market and sell the finished nickel and other products produced at Nikkelverk and obtain third-party feeds for this facility. Inco also agreed to supply up to 60,000 tonnes of nickel in matte under a 10-year supply agreement, which approximates the current volume of feed provided by Falconbridge's operations to the facility. The closing of this sale is conditioned on, and expected to be completed upon receipt of, the clearance by both the DOJ and the Commission of the pending acquisition of Falconbridge by Inco, as well as Inco taking up and paying for Falconbridge shares pursuant to its offer and certain other standard terms and conditions to closing. The purchase price to be paid by LionOre for the assets and related operations to be sold is $650 million, of which $400 million will be in cash and $250 million of LionOre common shares. This purchase price is subject to certain adjustments tied to changes in the final working capital levels of the operations to be sold to LionOre and certain other adjustments. "We are pleased in having reached this agreement with LionOre," said Scott Hand, Chairman and CEO of Inco. "This is an important milestone in the regulatory clearance process and we look forward to completing this process so that the acquisition can be cleared by the U.S. Department of Justice and the European Commission." Inco and Falconbridge understand that the DOJ and the Commission are reviewing the final terms of the proposed remedy that they have been discussing with these regulatory agencies, including the terms of this sale to LionOre. Inco and Falconbridge expects that the DOJ and the Commission will advise them whether the acquisition will be cleared based upon this sale to LionOre prior to the end of June 2006. Both companies believe that the competition issues that have been identified by the DOJ and the Commission are addressed by the agreements entered into covering this sale to LionOre. The parties will continue to cooperate with the DOJ and the Commission in connection with their respective final reviews of the terms of the remedy. About Inco Headquartered in Sudbury, Ontario, Inco Limited (TSX, NYSE:N) -- http://www.inco.com/-- is the world's #2 producer of nickel, which is used primarily for manufacturing stainless steel and batteries. Inco also mines and processes copper, gold, cobalt, and platinum group metals. It makes nickel battery materials and nickel foams, flakes, and powders for use in catalysts, electronics, and paints. Sulphuric acid and liquid sulphur dioxide are produced as byproducts. The company's primary mining and processing operations are in Canada, Indonesia, and the UK. About Falconbridge Headquartered in Toronto, Ontario, Falconbridge Limited -- http://www.falconbridge.com/-- is a leading copper and nickel company with investments in fully integrated zinc and aluminum assets. Its primary focus is the identification and development of world-class copper and nickel orebodies. It employs 14,500 people at its operations and offices in 18 countries. The Company owns nickel mines in Canada and the Dominican Republic and operates a refinery and sulfuric acid plant in Norway. It is also a major producer of copper (38% of sales) through its Kidd mine in Canada and its stake in Chile's Collahuasi mine and Lomas Bayas mine. Its other products include cobalt, platinum group metals, and zinc. * * * Falconbridge's CDN$150 million 5% convertible and callable bonds due April 30, 2007, carries Standard & Poor's BB+ rating. FISHER COMMS: Sells 24 Radio Stations to Cherry Creek for $33.3MM ----------------------------------------------------------------- Fisher Communications, Inc., signed a definitive agreement to sell its twenty-four small-market radio stations located in Montana and eastern Washington to Cherry Creek Radio LLC for $33.3 million. This sale, which is subject to FCC approval and certain other conditions, is expected to close by the end of third quarter 2006. Fisher will continue to own three radio stations in Seattle, as well as television stations in Washington, Oregon, and Idaho. In 2005, Fisher's small-market radio stations generated revenue of $12.2 million. "By selling our small-market radio stations we are able to focus on increasing the synergies and operating performance of our remaining cluster of Northwest stations," Fisher Communications' President and CEO, Colleen B. Brown, said. "We are pursuing new opportunities, such as our entrance into Spanish-language television announced in late 2005." The Company expects to use a portion of the net proceeds to pay for the purchase of a television station in the Portland, Oregon DMA reported in December 2005, which is also expected to close by Sept. 30, 2006. The Company intends to use any remaining net proceeds from the sale to invest further in its business operations. Kalil & Co., Inc. acted as the exclusive broker for this transaction. Fisher Communications, Inc. (NASDAQ:FSCI) -- http://www.fsci.com/ -- is a Seattle-based integrated media company. The Company's nine network-affiliated television stations, and a tenth station 50% owned by Fisher Communications, are located in Washington, Oregon, and Idaho, and its 27 radio stations broadcast in Washington and Montana. The Company also owns and operates Fisher Plaza, a facility located near downtown Seattle. Fisher Communications, Inc.'s 8-5/8% Senior Notes due 2014 carry Moody's Investors Service's B2 rating and Standard & Poor's B- rating. FREESTAR TECH: Incurs $2.2 Mil. Net Loss in 2006 1st Fiscal Qtr. ---------------------------------------------------------------- FreeStar Technology Corporation filed its first quarter financial statements for the three months ended March 31, 2006, with the Securities and Exchange Commission on May 22, 2006. The Company reported a $2,216,696 net loss on 494,296 of revenues for the three months ended March 31, 2006. At March 31, 2006, the Company's balance sheet showed $9,464,211 in total assets and $1,483,050 in total liabilities resulting in $7,981,160 stockholders' equity. The Company's March 31 balance sheet showed strained liquidity with $4,888,796 in total current assets available to pay $1,483,050 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?ade Going Concern Doubt As reported in the Troubled Company Reporter on March 3, 2006, Russell Bedford Stefanou Mirchandani LLP raised substantial doubt about FreeStar's ability to continue as a going concern after it audited the company's financial statements for the fiscal year ended June 30, 2005. The auditors cited the company's difficulty in generating sufficient cash flow to meet its obligations and sustain operations. About FreeStar Technology FreeStar Technology Corporation is a payment processing company. Its wholly owned subsidiary Rahaxi Processing Oy., based in Helsinki, is a robust Northern European BASE24 credit card processing platform. Rahaxi currently processes in excess of 1 million card payments per month for such companies as Finnair, Ikea, and Stockman. FreeStar is focused on exploiting a first-to- market advantage for its Enhanced Transactional Secure Software, which is a software package that empowers consumers to consummate e-commerce transactions with a high level of security using credit, debit, ATM (with PIN), electronic cash or smart cards. GALLERIA INVESTMENTS: Receiver Hires Moskowitz as Special Counsel ----------------------------------------------------------------- The U.S. Bankruptcy Court for the Northern District of Georgia allowed GlassRatner Management and Realty Advisors, LLC, as Receiver of Galleria Investments, LLC's property, to employ Neil A. Moskowitz, P.C., as its special counsel. Neil Moskowitz will: a) handle tenant disputes, tenant-related matters, and other lease-related matters; b) advise, assist, and represent the Receiver in the collection of rents, resolution of tenant disputes, analysis of whether new leases are appropriate; and to advise and represent the Receiver; and c) perform any and all other legal services incident or necessary to the proper administration of this case and the representation of the Custodian in the performance of its duties and exercise of its rights and powers under the Bankruptcy Code. Neil A. Moskowitz, Esq., the principal of Neil A. Moskowitz, P.C., bills the Debtor $250 per hour for his services. Neil Moskowitz is owed $2,779 for prepetition services rendered. The firm will not waive that claim and will pursue reimbursement as an allowable cost of the Receiver under Section 543 of the Bankruptcy Code. Mr. Moskowitz assures the Court that his firm does not hold any interest materially adverse to the Debtor or its estate. About Galleria Investments LLC Headquartered in Decatur, Georgia, Galleria Investments, LLC, operates a shopping center in Duluth, Georgia. The company filed for chapter 11 protection on Mar. 6, 2006 (Bankr. N.D. Ga. case No. 06-62557). G. Frank Nason, IV, Esq., at Lamberth Cifelli Stokes & Stout, P.A., represents the Debtor in its restructuring efforts. When the Debtor filed for protection from its creditors, it estimated assets and debts between $10 million and $50 million. Galleria Investments has been under state court receivership since Feb. 24, 2006. GLOBAL ENERGY: Posts $377,793 Net Loss in Quarter Ended March 31 ---------------------------------------------------------------- Global Energy Group, Inc., filed its first quarter financial statements for the three months ended March 31, 2006, with the Securities and Exchange Commission on May 22, 2006. The Company reported a $377,793 net loss on $285,518 of revenues for the three months ended March 31, 2006. At March 31, 2006, the Company's balance sheet showed $17,287,808 in total assets and $8,311,037 in total liabilities resulting in a $8,976,771 stockholders' equity. The Company's March 31 balance sheet showed strained liquidity with $437,924 in total current assets available to pay $2,895,053 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?adf Going Concern Doubt As reported in the Troubled Company Reporter on May 19, 2006, Baumann, Raymondo & Company Pa, in Tampa, Florida, raised substantial doubt about Global Energy Group, 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 negative working capital and its accumulated deficit of $12,025,561. About Global Energy Global Energy Group, Inc., invents, develops, and commercializes new technologies that improve the energy efficiency of existing products and processes. The Company focuses on thermodynamics, heat transfer and heat exchange, which are important to the heating, ventilation, air conditioning, and refrigeration industries. GOODYEAR TIRE: Fitch Affirms Senior Unsecured Debt's CCC+ Rating ---------------------------------------------------------------- Fitch affirmed ratings for The Goodyear Tire & Rubber Company. Existing recovery ratings were also affirmed. Goodyear's debt and recovery ratings are: -- Issuer Default Rating 'B' -- $1.5 billion first lien credit facility 'BB/RR1' -- $1.2 billion second lien term loan 'BB/RR1' -- $300 million third lien term loan 'B/RR4' -- $650 million third lien senior secured notes 'B/RR4' -- Senior Unsecured Debt 'CCC+/RR6' Goodyear Dunlop Tires Europe B.V.: -- EUR505 million European secured credit facilities 'BB/RR1' The Rating Outlook is Stable. Approximately $5.3 billion of debt is affected by the ratings. The ratings incorporate: * Goodyear's well-recognized brand name; * its position as one of the three largest global tire companies; and * a manageable debt structure. Goodyear has demonstrated improved operating results, reflecting benefits from previously initiated efforts to: * improve its product mix; * build stronger margins; and * reduce its cost structure. However, despite a series of successful new product introductions and recent solid results in Latin America, GT's ability to generate better margins and cash flow remains challenged due to: * high raw material costs; * a competitive environment; and * weak conditions in original equipment and low-end consumer tire markets. The recovery ratings reflect Fitch's expectation that most of the secured bank debt would experience substantial recovery in a distressed scenario, supporting higher ratings relative to the Issuer Default Rating. However, third-lien and unsecured debt- holders face a higher risk of material losses based on GT's current operating performance. GT's financial flexibility has improved from very weak levels prior to 2005, but cash requirements in 2006 for pension contributions and capital expenditures are likely to require most of, or perhaps exceed, GT's cash flow from operations. Pension plans were underfunded by $3.0 billion at the end of 2005, and the company estimates it will be required to make contributions of $650-$875 million during 2006, up sharply from recent years. Future required contributions could remain substantial, depending on asset returns, interest rates and the outcome of federal pension legislation currently being considered. The expiration in July 2006 of the union contract at GT's North American operations creates additional uncertainty about the effectiveness and timing of the company's efforts to reduce costs. The North American Tire segment suffers from a high cost structure due in part to GT's high labor costs and a manufacturing footprint that is more concentrated in the U.S. than its competitors. The terms of a new contract will partly determine how much flexibility GT will have with respect to its plans to eliminate or replace high-cost production capacity in the U.S. A strike, if it were to occur, could have a negative impact on the company's liquidity and competitive position. On the other hand, the successful resolution of contract negotiations and continued progress in restructuring operations could contribute to a stronger credit profile and support GT's plan to reduce leverage. The company may consider an equity offering that would help it reduce debt and leverage, but the amount and timing of any offering remains uncertain. Liquidity at March 31, 2006, consisted of nearly $1.6 billion of cash, and availability under a domestic $1.0 billion bank credit facility, offset by $568 million of current debt. In addition to debt maturities, cash requirements include pension contributions and $720 million for capital expenditures planned by GT. Fitch anticipates that other expenditures for legal settlements and working capital will be relatively stable, but operating results and cash flow will also be dependent on raw material costs, any additional restructuring and, as mentioned earlier, the resolution of labor negotiations. GRANDE COMMS: S&P Raises Corp. Credit & Sr. Notes' Ratings to B- ---------------------------------------------------------------- Standard & Poor's Ratings Services raised the ratings on San Marcos, Texas-based Grande Communications Holdings Inc., including its corporate credit rating and senior secured notes, to 'B-' from 'CCC+'. The ratings were simultaneously removed from CreditWatch, where they had been placed with positive implications on April 17, 2006. The outlook is stable. In addition, Standard & Poor's assigned the $168 million senior secured notes (principal amount at maturity) a '4' recovery rating, indicating an expectation for marginal (25%-50%) recovery of principal in the event of a payment default or bankruptcy. At March 31, 2006, the company had $160 million of debt (accreted value) and $508 million of preferred stock. "The upgrade reflects our more favorable view of prospects for Grande's business plan," said Standard & Poor's credit analyst Catherine Cosentino. Nevertheless, the business risk profile remains vulnerable for Grande, a cable TV over-builder and competitive local exchange carrier. The company has made progress through the first quarter of 2006 in continuing to grow its cable TV subscriber base, as well as its telephone and broadband customers in the face of greater competition from both the incumbent telephone company (primarily AT&T Inc.) and franchised cable TV operator, predominantly Time Warner Cable . For 2005, the company's cable TV base grew by 7.6% to 89,417 and its total connections expanded by 10.6% to 276,142. For the first quarter of 2006, this trend continued despite the institution of a cable TV rate increase. Through such growth, the company has been able to achieve a customer penetration of marketable homes and small businesses of about 41%, which is a good performance for an over-builder. Grande has also benefited from the significant concentration of multiple dwelling units in its subscriber base, in which availability of competitive satellite TV is not ubiquitously available. Among the MDUs, there is also some benefit from exclusive on-site marketing arrangements that the company has with landlords to offer cable TV in their buildings. The company has also been successful in selling bundled services to its cable customers through some discounting relative to the incumbent telephone and cable TV providers. The vast majority of these retail communications subscribers take at least two services. These efforts have all translated into increased bundled consumer revenues and consolidated EBITDA, at 15.1% and 39.8% growth, respectively, for 2005 (9.8% and 9.1%, respectively, for the first quarter of 2006, on a year-over-year basis). However, the company's EBITDA margin continues to be very limited, at 15.4% for the first quarter of 2006 due to its relatively high ongoing marketing and other customer retention expenses, as well as a fairly high cost structure for its cable TV service due to its relatively small size. In addition, the company's margin is constrained by the network services business, which represents about 24% of total revenues, and which has a much lower gross profit margin than the bundled consumer business, largely due to pricing pressures in the carrier services sector. GRANITE BROAD: Moody's Lowers B3 Rating on $400MM Notes to Caa1 --------------------------------------------------------------- Moody's Investors Service downgraded Granite Broadcasting Corporation's $400 million of 9.75% senior secured notes due 2010 to Caa1 from B3. Additionally, Moody's affirmed the company's existing ratings, including its Caa2 corporate family rating. The outlook remains negative. The downgrade to Caa1 is prompted by Moody's belief that the company's precarious liquidity situation may depress the valuation of the company's portfolio of middle market television stations, providing a reduced cushion to senior secured bondholders in a distress scenario. Further, Moody's notes that following the loss of the WB affiliation, Granite received a discounted purchase price for its re-marketed WB stations, providing the company less proceeds to either reinvest in replacement assets or apply to debt reduction. Thus, the Caa1 rating reflects Moody's belief that asset coverage of the senior secured debt has deteriorated and may be insufficient to cover the senior secured notes. The Caa2 corporate family rating incorporates the company's inability to service its debt with cash on hand or internally generated funds. While the company did not make its scheduled $19.7 million coupon payment on June 1, 2006 to senior secured bondholders, Moody's believes that it is likely that Granite's pending sale of its WB stations will close prior to the end of the 30-day grace period provided under the terms of the indenture, thus providing the company with sufficient liquidity to avoid a default scenario. The negative outlook continues to reflect Moody's belief that even if Granite applies the remaining proceeds from asset sales to debt reduction, Granite's improvements in operations from cost reduction efforts and investment in replacement assets may not be sufficient to cover the company's funding requirements over the intermediate term. Moody's lowered this rating: * Sr. Secured Debt -- to Caa1 from B3 Moody's affirmed these ratinggs: * Preferred Stock - C * Corporate Family Rating -- Caa2 The outlook is negative. Granite Broadcasting Corporation is a television broadcaster headquartered in New York, New York. GRANT PRIDECO: Moody's Lifts Corp. Family Rating to Ba1 from Ba2 ---------------------------------------------------------------- Moody's Investors Service upgraded Grant Prideco, Inc.'s corporate family and senior unsecured note ratings to Ba1 from Ba2, with a stable rating outlook. GRP, is a leading provider of drill stem technology and drill pipe manufacturing, drill bit technology and manufacturing, and high-performance engineered connections and premium tubular products. The company has 25 manufacturing facilities and more than one hundred sales, service and repair facilities strategically located in all major oil and gas regions around the world. At a Ba1 rating level, and especially this late in the up-cycle, Moody's would expect GRP to sustain a capital structure that can absorb a very major contraction in cash flow without threatening the rating. Accordingly, the outlook or ratings would be sensitive to substantial leveraged acquisitions, though well- bought acquisitions that add a welcome degree of product diversification could be leveraged more than acquisitions that intensify current product and business lines. The outlook or ratings could also suffer if GRP executed equity repurchases in excess of the previously announced $150 million. The upgrades are supported by GRP's very low leverage after a sustained historic sector up-cycle, its larger scale and greater product and geographic marketing diversification than it carried during the last sector downturn, expected strong cash flow and earnings through 2006 and through much or all 2007, very strong order backlog, fiscal discipline, expected prudent funding of any future acquisition activity, and overall strong credit metrics that compare favorably with investment grade oilfield services companies. GRP is led by a seasoned disciplined business and financial management team sensitive to the risks of up-cycle acquisitions, suitable acquisition funding strategies, and continuing to improve the business and constrain leverage in advance of an inevitable sector down-cycle. This is particularly vital given the extreme cyclicality of the drilling products and services and Tubular Technology and Services segments. The ratings also benefit from a comparatively low level of maintenance capital spending and rising diversification through a rising level of international activity where demand tends to be less cyclical. The ratings are restrained by GRP's comparatively small size and low degree of diversification relative to investment grade oilfield services companies; acquisition risk associated with GRP's desire to add diversifying dimensions to its business lines; the extreme cyclicality of its mainline drillpipe business and a very substantial exposure to very price sensitive North American drilling activity that drives much of its drillpipe demand patterns, and the potential margin impact of a secular shift in producer capital spending to unconventional plays that may reduce the demand for premium drill pipe, tubulars, and drilling products. Furthermore, in the past, sharp declines in North American drilling activity triggered very sharp contractions in contract driller and producer sector purchases of drill pipe and other oil field products with a commensurate impact on GRP's cash flows. Downturns, in drill pipe orders were amplified and extended when rig count contractions occurred at times of high drill pipe inventories held by GRP, its competitors, contract drillers, and oil and gas producers. While Moody's expects GRP to be somewhat less cyclical than in the past we would continue to expect major contractions in cash flows to accompany major contractions in drilling activity. Moody's estimates that GRP's 2006 adjusted EBITDA would be in the range of $500 million to $560 million, easily covering approximately $17 million to $20 million of adjusted interest expenses; $30 million to $50 million of working capital needs; $35 million or more of maintenance capital expenditures; and $50 million to $70 million of budgeted growth capital spending. In a sharp downturn, Moody's envisions a sharp decline in EBITDA. At the end of the first quarter 2006, GRP had $59 million of cash on hand and $344 million of undrawn fixed asset and working capital secured bank revolver availability taking into account approximately $6 million of letters of credit. This provides GRP with ample liquidity for growth capital outlays and modest acquisitions. In spite of GRP's strong credit metrics, the company's modest scale, modest diversification, and our expectation that it will conduct acquisitions to augment its business portfolio make it highly unlikely that it will be considered for an investment-grade rating, in the near-term. The outlook or ratings could suffer if GRP executed a leveraged material acquisition, especially if the sector outlook appears to be softening. If GRP implements equity purchases in excess of the previously announced $150 million, the outlook or ratings may also be pressured. Grant Prideco, Inc. is headquartered in Houston, Texas. GUARDIAN TECHNOLOGIES: Posts $2 Mil. Net Loss in 2006 1st Quarter ----------------------------------------------------------------- Guardian Technologies International, Inc., filed its first quarter financial statements for the three months ended March 31, 2006, with the Securities and Exchange Commission on May 26, 2006. The Company reported a $2,004,360 net loss on $309,669 of revenues for the three months ended March 31, 2006. At March 31, 2006, the Company's balance sheet showed $3,755,343 in total assets, $1,046,981 in total liabilities, $1,138,934 in common shares subject to repurchase, and $1,569,428 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?ae3 Going Concern Doubt Goodman & Company, L.L.P., in Norfolk, Virginia, raised substantial doubt about Guardian Technologies International, Inc.'s ability to continue as a going concern after auditing the Company's financial statements for the years ended Dec. 31, 2005, and 2004. The auditor pointed to the Company's significant operating losses since inception and need for additional financing. Based in Dulles, Virginia, Guardian Technologies International, Inc. -- http://www.guardiantechintl.com/-- designs and develops imaging informatics solutions for the healthcare, aviation and homeland security industries. The Company utilizes high- performance imaging technologies and advanced analytics to create integrated information management technology products and services that address critical problems in healthcare and homeland security for corporations and governmental agencies. HECTOR MORALES: Case Summary & 13 Largest Unsecured Creditors ------------------------------------------------------------- Debtor: Hector B. Perez Morales aka Bernardo Perez Hector 1504 Calle Martin Travieso San Juan, Puerto Rico 00911 Bankruptcy Case No.: 06-01802 Type of Business: The Debtor is a principal of MB Joma, Inc., which previously filed for chapter 11 protection on August 30, 2005 (Bankr. D. P.R. Case No. 05- 08110). Chapter 11 Petition Date: June 6, 2006 Court: District of Puerto Rico (Old San Juan) Debtor's Counsel: Teresa M. Lube Capo, Esq. Lube & Soto Law Office, P.S.C. 702 Calle Union Apartment G-1 Condominio Unimar San Juan, Puerto Rico 00907-4202 Tel: (787) 722-0909 Fax: (787) 977-1709 Estimated Assets: $1 Million to $10 Million Estimated Debts: $1 Million to $10 Million Debtor's 13 Largest Unsecured Creditors: Entity Claim Amount ------ ------------ MAS Inc. $4,175,000 Mr. Nelson Matos Apartado 3004 Guaynabo, PR 00970 Felix Olomo c/o Lic. Emilio Soler $2,800,000 Cobian Plaza 213 Avenue Ponce de Leon 1607 Santurce, PR 00989 Mabel Ladycany $1,500,000 Calle Loiza 1903 Santurce, PR 00911-1827 Doral Financial Corp. $1,184,250 P.O. Box 71529 San Juan, PR 00936 Citi Cards $20,375 Hormigonera Mayaguezana $14,000 Carmen L. Ortiz $4,000 Sears Roebuck and Co. $2,926 Banco Bilbao Vizcaya $1,236 First Premier Bank $1,252 NCO Financial Systems $130 Puerto Rico Telephone Co. $108 AFNI Inc. $26 HORIZON NATURAL: Zurich's Administrative Claim is Disallowed ------------------------------------------------------------ The Honorable William S. Howard of the U.S. Bankruptcy Court for the Eastern District of Kentucky ruled last week that Zurich American Insurance Company does not hold an allowable administrative expense claim against HNRC DISSOLUTION CO., fka Horizon Natural Resources Company, based on alleged post- confirmation deductible losses arising under workers' compensation, commercial automobile, and general liability policies with the company and its two affiliates that were assumed by the debtors before their assets were sold to Lexington Coal Company, LLC. Judge Howard's Opinion is published at 2006 WL 1477601. Judge Howard says that Zurich's decision not to participate in the plan process until after the debtors' plans were confirmed deprived creditors and other parties in interest of the opportunity to factor in the insurer's claim, which would have had a major effect on the consideration of the feasibility of the debtors' proposed plan, and Zurich's post-confirmation request for estimation of its claim was neither appropriate nor timely under the circumstances. This dispute was litigated by: Gregory R. Schaaf, Esq. Greenebaum Doll & McDonald PLLC 300 West Vine Street, Suite 1100 Lexington, Kentucky 40507 representing Lexington Coal Company; and: Douglas T. Logsdon, Esq. McBrayer, McGinnis, Leslie & Kirkland, PLLC 201 East Main Street, Suite 1000 Lexington, Kentucky 40507-1361 - and - Karen Lee Turner, Esq. Eckert Seamans Cherin & Mellott, LLC 1515 Market Street, 9th Floor Philadelphia, Pennsylvania 19102-1909 representing Zurich American Insurance Company. Headquartered in Ashland, Kentucky, Horizon Natural Resources, fka AEI Resources Holding, is one of the United States' largest producers of steam (bituminous) coal. The Company filed for chapter 11 protection on February 28, 2002 (Bankr. E.D. Ky. Case No. 02-14261). Ronald E. Gold, Esq., at Frost Brown Todd LLC, represents the Debtor in its restructuring efforts. When the Company filed for protection from its creditors, it listed over $100 million in total assets and total debts. On Sept. 16, 2005, the Court confirmed the Debtors' Plan of Liquidation. HNRC DISSOLUTION CO. is the successor to the Debtor pursuant to that Plan of Liquidation. HOST MARRIOTT: Moody's Ups $37.8MM Class G Cert.'s Rating to Baa1 ----------------------------------------------------------------- Moody's Investors Service upgraded the ratings of five classes and affirmed the ratings of two classes of Host Marriott Pool Trust, Commercial Mortgage Pass-Through Certificates, Series 1999-HMT: * Class A, $87,650,985, Fixed, affirmed at Aaa * Class B, $174,862,895, Fixed, affirmed at Aaa * Class C, $56,475,000, Fixed, upgraded to Aaa from Aa1 * Class D, $98,990,000, Fixed, upgraded to Aa1 from A2 * Class E, $35,875,000, Fixed, upgraded to Aa3 from A3 * Class F, $46,800,000, Fixed, upgraded to A3 from Baa3 * Class G, $37,880,000, Fixed, upgraded to Baa1 from Ba1 The Certificates evidence beneficial interests in a trust fund, the principal asset of which is a mortgage loan secured by eight hotel properties located in six states and Washington, D.C. The portfolio contains a total of 6,055 guest rooms, compared to 5,716 guest rooms at securitization due to the substitution of the New York Drake Swissotel with the Hyatt Regency Washington, D.C. The New York Marriott Marquis, located in midtown Manhattan, comprises 40.8% of the pool balance. Other significant assets include the San Francisco Airport Hyatt Regency, the Hyatt Regency Washington, D.C. and the Chicago Swissotel. As of the May 3, 2006 distribution date, the transaction's certificate balance has decreased by approximately 19.0% from $665 million at securitization to $538.5 million as a result of amortization on a 20-year schedule. The operating performance of the individual hotels has been mixed with five properties exceeding Moody's expectations and two, the San Francisco Airport Hyatt Regency and the Cambridge Hyatt Regency, performing below Moody's expectations. The pool has benefited from an increase in net cash flow by the substitution of the New York Drake Swissotel with the larger Hyatt Regency Washington, D.C. Moody's is upgrading Classes C, D, E, F and G due to the improved operating performance of the overall portfolio and increased subordination levels. The better performing properties in the pool include the New York Marriott Marquis, which achieved a RevPAR of $241.50 for the trailing 12-month period ending March 2006, representing a 34.9% increase over Moody's recognized RevPAR of $179.00 at securitization and a 23.3% increase in net cash flow to $49.3 million from $40.0 million at securitization. The Reston Hyatt Regency achieved RevPAR of $138.41 for the same period, representing a 31.2% increase over Moody's RevPAR of $105.50 at securitization and a 50.6% increase in net cash flow to $11.9 million from $7.9 million at securitization. The Westin Buckhead experienced an 18.6% increase in RevPAR to $123.95 from $104.50 at securitization and a 49.0% increase in net cash flow to $7.3 million from $4.9 million at securitization. The San Francisco Hyatt Regency and the Cambridge Hyatt Regency each experienced a decline in RevPAR of 23.3% and 10.4% respectively. The San Francisco Hyatt Regency's net cash flow decreased by 84.6% to $1.6 million from $10.4 million at securitization and the Cambridge Hyatt Regency's net cash flow decreased by 21.7% to $6.1 million from $7.8 million at securitization. Moody's loan to value ratio is 48.7%, compared to 71.0% at securitization. The properties are owned by entities associated with Host Hotels & Resorts, Inc. On April 17, 2006 Host Marriott Corporation changed its name to Host Hotels & Resorts, Inc. HOVNANIAN ENTERPRISES: Fitch Rates $250 Mil. Senior Notes at BB+ ---------------------------------------------------------------- Fitch Ratings assigned a 'BB+' rating to Hovnanian Enterprises, Inc.'s $250 million senior unsecured notes due 2017. Fitch affirmed Hovnanian's Issuer Default Rating of 'BB+', senior unsecured debt and unsecured bank credit facility ratings. Fitch affirmed the 'BB-' senior subordinated notes rating. The series A noncumulative perpetual preferred stock rating of 'B+' is also affirmed. The $250 million issue will be ranked on a pari passu basis with all other senior unsecured debt, including Hovnanian's revolving and letter of credit facility. Proceeds from the new debt issue will be used for general corporate purposes and repayment of existing debt. The Rating Outlook is Stable. Ratings for Hovnanian are based on the company's: * successful execution of its business model; * conservative land policies and geographic, price point; and * product line diversity. The company has been an active consolidator in the homebuilding industry which has contributed to above average growth during the past seven years, but has kept debt levels somewhat higher than its peers. Management has also exhibited an ability to quickly and successfully integrate its acquisitions. In any case, now that the company has reached current scale there may be somewhat less use of acquisitions going forward and acquisitions may be smaller relative to Hovnanian's current size. Significant insider ownership aligns management's interests with the long term financial health of the company. Risk factors include the inherent, although somewhat tempered, cyclicality of the homebuilding industry. The ratings also manifest the company's aggressive, yet controlled growth strategy, concentration in California (22% of consolidated deliveries in the first half of fiscal 2006) and Hovnanian's capitalization and size. The company's EBITDA, EBIT and FFO to interest ratios tend to be somewhat below the average public homebuilder, while inventory turnover tends to be similar. Hovnanian's leverage is higher and debt to EBITDA ratio is slightly above the averages of its peers. Although the company has certainly benefited from the generally strong housing market of recent years, a degree of profit enhancement is also attributed to purchasing design and engineering, access to capital and other scale economies that have been captured by the large national and regional public homebuilders in relation to non-public builders. These economies, the company's presale operating strategy and a return on equity and assets orientation provide the framework to soften the margin impact of declining market conditions in comparison to previous cycles. Hovnanian's ratio of sales value of consolidated backlog to debt since 2001 has ranged between 1.6x to 3.2x and is currently 2.3x -- a comfortable cushion. Hovnanian employs conservative land and construction strategies. The company typically purchases land only after necessary entitlements have been obtained so that development or construction may begin as market conditions dictate. Hovnanian extensively uses lot options. The use of land option contracts without specific performance clauses gives the company the ability to renegotiate price/terms or void the option which limits down side risk in market downturns and provides the opportunity to hold land with minimal investment. At present 72% of its lots are controlled through options -- a higher percentage than most public builders. Total consolidated lots, including those owned, were 121,829 at April 30, 2006. This represents a 6.1 year supply based on latest twelve months home deliveries. However, the company has one of the lowest owned lot positions in the industry, typically owning only a one to two year supply. An estimated 85%-90% of its homes are pre-sold. The balance is homes under construction or homes completed in advance of a customer's order. Hovnanian's unconsolidated joint venture activity is growing, but is still moderate in size and conservatively levered. Fitch estimates that in recent years at least half of Hovnanian's growth has resulted from a series of acquisitions -- seventeen during the past eight years. (However, in each of the last five years more than 90% of the company's growth in earnings has come from operations owned more than one year.) The acquisitions have enabled the company to grow its position and increase market share, often broadening product and customer bases in existing markets. They have also enabled the company to enter new markets. The combinations typically were funded by debt and to a lesser degree by stock and retained earnings. At times there were earn-outs which reduced risk and served to retain key management. Hovnanian's current acquisition strategy focuses on purchasing smaller builders and land portfolios in current markets and on making selected acquisitions in new markets if there is a good strategic fit and appropriate returns can be achieved. The key analysis will be return on capital as to whether an acquisition will be executed. Fitch believes that management would balance debt and stock as acquisition currency to maintain current credit ratios. The company is publicly committed to maintaining an average net debt/equity ratio of 1.0:1.0. Hovnanian maintains a $1.5 billion revolving and letter of credit facility. The facility contains an accordion feature under which the aggregate commitment can be increased to $2.0 billion subject to the availability of additional commitments. As of April 30, 2006 the outstanding balance under the agreement was $275 million. Also, at the end of the second quarter of 2006, Hovnanian had issued $411 million of letters of credit which reduces cash available under the agreement. The revolving credit agreement matures in July 2009. The company has irregularly purchased moderate amounts of its stock in the past. Hovnanian repurchased 600,000 shares of common stock in fiscal 2005 at a cost of $34 million and repurchased 500,000 shares of common stock at a cost of $21 million so far in fiscal 2006. Just under one million shares remain in the current class A common stock repurchase authorization as of June 1, 2006. ICEWEB Inc: Posts $666,126 Net Loss in 2006 1st Fiscal Quarter -------------------------------------------------------------- IceWEB, Inc., filed its first quarter financial statements for the three months ended March 31, 2006, with the Securities and Exchange Commission on May 22, 2006. The Company reported a $666,126 net loss on $642,059 of revenues for the three months ended March 31, 2006. At March 31, 2006, the Company's balance sheet showed $2,326,830 in total assets and $1,818,283 in total liabilities, and $508,547 of stockholders' equity. The Company's March 31 balance sheet also showed strained liquidity with $1,099,775 in total current assets available to pay $1,593,283 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?ae0 Going Concern Doubt As reported in the Troubled Company Reported on January 24, 2006, Sherb & Co., LLP, expressed substantial doubt about IceWEB, Inc.'s ability to continue as a going concern after it audited the Company's financial statements for the fiscal years ended Sept. 30, 2005 and 2004. The auditing firm pointed to the Company's consecutive net loss for fiscal year 2005 and 2004 About IceWEB Headquartered in Herndon, Virginia, IceWEB, Inc. (OTC BB: IWEB) -- http://www.iceweb.com/-- enables small and medium sized organizations with its, hardware, software and professional services. The Company's application service provider software delivery model reduces the customer's Total Cost of Ownership and improves the efficiency of IT environments. IMMUNE RESPONSE: March 31 Balance Sheet Upside-Down by $134.7 Mil. ------------------------------------------------------------------ The Immune Response Corporation reported $6.5 million of net income on $11 million of revenues for the three months ended March 31, 2006, compared to a $4.3 million net loss on $11 million of revenues for the same period in 2005. At March 31, 2006, the Company's balance sheet showed $9.9 million in total assets and $144.7 million in total liabilities, resulting in a $134.7 million equity deficit. A full-text copy of the Company's Quarterly Report is available for free at http://researcharchives.com/t/s?adc Going Concern Doubt Levitz, Zacks & Ciceric expressed substantial doubt about The Immune Response's ability to continue as a going concern after auditing the company's financial statements for the years ended Dec. 31, 2005 and 2004. The auditing firm pointed to the company's stockholders' deficit and comprehensive loss for each of the years in the two-year period ended Dec. 31, 2005. Headquartered in Carlsbad, California, The Immune Response Corporation (Nasdaq: IMNR) -- http://www.imnr.com/-- is an immuno-pharmaceutical company focused on developing products to treat autoimmune and infectious diseases. The Company's lead immune-based therapeutic product candidates are NeuroVax(TM) for the treatment of multiple sclerosis (MS) and IR103 for the treatment of Human Immunodeficiency Virus (HIV) infection. Both of these therapies are in Phase II clinical development and are designed to stimulate pathogen-specific immune responses aimed at slowing or halting the rate of disease progression. INCO LTD: To Sell Falconbridge Assets to LionOre Mining for $650MM ------------------------------------------------------------------ Falconbridge Limited and Inco Limited reached a definitive agreement with LionOre Mining International Ltd. covering the sale to LionOre of certain assets and related operations of Falconbridge. Inco and Falconbridge have been discussing with the U.S. Department of Justice and European Commission about the assets and related operations that would be divested and the associated arrangements that would be necessary as the proposed remedy to address potential competition issues that the DOJ and the Commission have identified relating to Inco's pending acquisition of Falconbridge. The sale of these assets and related operations to LionOre will include Falconbridge's Nikkelverk refinery in Norway and the Falconbridge marketing and custom feed organizations that market and sell the finished nickel and other products produced at Nikkelverk and obtain third-party feeds for this facility. Inco also agreed to supply up to 60,000 tonnes of nickel in matte under a 10-year supply agreement, which approximates the current volume of feed provided by Falconbridge's operations to the facility. The closing of this sale is conditioned on, and expected to be completed upon receipt of, the clearance by both the DOJ and the Commission of the pending acquisition of Falconbridge by Inco, as well as Inco taking up and paying for Falconbridge shares pursuant to its offer and certain other standard terms and conditions to closing. The purchase price to be paid by LionOre for the assets and related operations to be sold is $650 million, of which $400 million will be in cash and $250 million of LionOre common shares. This purchase price is subject to certain adjustments tied to changes in the final working capital levels of the operations to be sold to LionOre and certain other adjustments. "We are pleased in having reached this agreement with LionOre," said Scott Hand, Chairman and CEO of Inco. "This is an important milestone in the regulatory clearance process and we look forward to completing this process so that the acquisition can be cleared by the U.S. Department of Justice and the European Commission." Inco and Falconbridge understand that the DOJ and the Commission are reviewing the final terms of the proposed remedy that they have been discussing with these regulatory agencies, including the terms of this sale to LionOre. Inco and Falconbridge expects that the DOJ and the Commission will advise them whether the acquisition will be cleared based upon this sale to LionOre prior to the end of June 2006. Both companies believe that the competition issues that have been identified by the DOJ and the Commission are addressed by the agreements entered into covering this sale to LionOre. The parties will continue to cooperate with the DOJ and the Commission in connection with their respective final reviews of the terms of the remedy. About Falconbridge Headquartered in Toronto, Ontario, Falconbridge Limited -- http://www.falconbridge.com/-- is a leading copper and nickel company with investments in fully integrated zinc and aluminum assets. Its primary focus is the identification and development of world-class copper and nickel orebodies. It employs 14,500 people at its operations and offices in 18 countries. The Company owns nickel mines in Canada and the Dominican Republic and operates a refinery and sulfuric acid plant in Norway. It is also a major producer of copper (38% of sales) through its Kidd mine in Canada and its stake in Chile's Collahuasi mine and Lomas Bayas mine. Its other products include cobalt, platinum group metals, and zinc. About Inco Headquartered in Sudbury, Ontario, Inco Limited (TSX, NYSE:N) -- http://www.inco.com/-- is the world's #2 producer of nickel, which is used primarily for manufacturing stainless steel and batteries. Inco also mines and processes copper, gold, cobalt, and platinum group metals. It makes nickel battery materials and nickel foams, flakes, and powders for use in catalysts, electronics, and paints. Sulphuric acid and liquid sulphur dioxide are produced as byproducts. The company's primary mining and processing operations are in Canada, Indonesia, and the UK. * * * Inco Limited's 3-1/2% Subordinated Convertible Debentures due 2052 carry Moody's Investors Service's Ba1 rating and Standard & Poor's BB+ rating. INDYMAC BANCORP: DBRS Rates Preferred Securities at BB (High) ------------------------------------------------------------- Dominion Bond Rating Service confirmed the ratings of IndyMac Bancorp Inc. and its subsidiaries, as indicated below, and has revised the rating trend to Positive from Stable. Concurrently, DBRS assigned a rating of BB (high) to IndyMac's Trust Preferred Securities. * Short-Term Instruments Confirmed R-2 (middle) * Short-Term Instruments Confirmed R-2 (low) * Deposits & Senior Debt Confirmed BBB Pos * Issuer & Senior Debt Confirmed BBB (low) Pos * Trust Preferred Securities New Rating BB (high) The Positive rating trend reflects DBRS's expectation that IndyMac will continue to grow origination volumes and demonstrate robust earnings, despite the difficult operating environment. DBRS believes that IndyMac's solid market position, expanding product line, respectable credit performance, and expanding deposit franchise, will serve as a solid foundation for continued sound profitability. Additionally, the Positive rating trend reflects DBRS's belief that IndyMac's liquidity and funding profile will be further strengthened with demonstrated use of its recently inaugurated asset-backed commercial paper program. This adds to the diversity of funding, while reducing IndyMac's reliance on other sources of market funding, which is considered a weakness and is factored into the rating. DBRS will monitor the Company's ability to navigate through the anticipated downturn in the mortgage cycle, brought on by increased competition and interest rates, slowing industry originations, and potentially slowing housing markets. DBRS may be in the position to raise IndyMac's ratings over the next 12 to 18 months, should IndyMac maintain the positive momentum as illustrated by continued solid earnings, strong originations volume, and further diversification of funding, while maintaining asset quality. DBRS's ratings incorporate the Company's track record in gaining market share under various economic and interest rate environments, overall good asset quality measures, solid financial performance, and sufficient capitalization. DBRS believes that IndyMac's growing deposit base and its bank charter provide the Company with a source of reliable low-cost funding. Importantly, IndyMac's "hybrid thrift and mortgage banking" business model allows the Company to take advantage of the higher returns of the mortgage banking industry, while also benefiting from a layer of earnings stability added by the thrift segment. Nonetheless, the company's overall dependency on the cyclical and often volatile mortgage business is viewed as its primary weakness as IndyMac's earnings are still closely correlated with the level of originations. IndyMac's profitability is dependent on its ability to maintain its originations levels in the current environment. Additionally, as a participant in the residential lending industry to borrowers with Alt-A credit, IndyMac remains challenged to sustain its profitability while protecting its credit quality and the quality of its balance sheet. DBRS's ratings recognize IndyMac's strong franchise and prominent market position in the residential lending industry. IndyMac has a significant market presence as one of the largest originators of Alt-A mortgages in the U.S. and as the largest originator of reverse mortgage products in the U.S. The growing reverse mortgage business segment adds growth potential with minimal credit risk, as these loans are sold to third parties. Despite cyclical industry-wide challenges, IndyMac's earnings continue to grow, with the Company recording net income of $79.9 million for the first quarter 2006 and $300 million for 2005. The notable growth in profitability reflects the Company's increase in net interest income at the thrift and the strength of the mortgage operations. This confirms the success of the Company's hybrid business model. Despite the increasing interest rate environment, IndyMac continues to generate strong origination volumes, which increased to a record $20 billion in the first quarter of 2006. Originally established in 1985, with assets of $25 billion, IndyMac Bancorp Inc., a thrift holding company, operates through IndyMac Bank, F.S.B. IndyMac provides residential mortgage financing and services nationwide through 15 regional offices, and traditional thrift services through 26 branches in southern California. The emphasis of the branch network is on deposit collection and on providing relationship-based residential mortgage, home equity, consumer construction, and sub-division construction financing. ITC DELTACOM: Works to Regain Nasdaq Listing Compliance ------------------------------------------------------- ITC DeltaCom, Inc., received a staff determination letter from the Nasdaq Stock Market indicating it has failed to maintain a minimum market value of publicly held shares of $15 million as required by Marketplace Rule 4450(b)(3) and that, as a result, ITC DeltaCom's common stock is subject to delisting from the Nasdaq National Market. On June 6, 2006 ITC DeltaCom appealed the Nasdaq staff's determination to a Nasdaq listing qualifications panel. To succeed on its appeal, ITC DeltaCom must establish that it has a plan that will enable it to achieve and sustain compliance with the rule in future periods. ITC DeltaCom's common stock will continue to trade on the Nasdaq National Market while the panel considers ITC DeltaCom's appeal. "Despite our limited public float, we plan to appeal before the Nasdaq panel and, given our significant ownership by a limited number of parties, there will be no impact on our ability to continue to provide outstanding value and service to our many business customers across the Southeast," Richard E. Fish, Jr., Executive Vice President and Chief Financial Officer, said. "The Company's management team remains focused on its goal of continuing the encouraging progress in strengthening ITC DeltaCom's operating results that we announced last month." ITC DeltaCom received the determination letter because, although the market value of its publicly held shares exceeded the $15 million minimum requirement at times during May 2006, it did not do so for ten consecutive trading days during the past three months, as required for ITC DeltaCom to regain compliance with this requirement. The market value of ITC DeltaCom's publicly held shares has been adversely affected by the substantial number of shares that have been excluded from the minimum market value calculation under Nasdaq's rules. This calculation excludes the market value of outstanding shares of common stock held by officers, directors and 10% stockholders, who collectively own a majority of ITC DeltaCom's total outstanding common stock, from the minimum required value. In addition, because the market value of publicly held shares is based exclusively on the market value of ITC DeltaCom's outstanding common stock, it does not reflect the value of any of ITC DeltaCom's outstanding preferred stock, which had a book value of approximately $70.3 million as of March 31, 2006. About ITC DeltaCom Headquartered in Huntsville, Alabama, ITC DeltaCom, Inc. (Nasdaq: ITCD) -- http://www.deltacom.com/-- provides, through its operating subsidiaries, integrated telecommunications and technology services to businesses and consumers in the southeastern United States. ITC DeltaCom has a fiber optic network spanning approximately 14,500 route miles, including more than 11,000 route miles of owned fiber, and offers a comprehensive suite of voice and data communications services, including local, long distance, broadband data communications, Internet connectivity, and customer premise equipment to end-user customers. The Company is one of the largest competitive telecommunications providers in its primary eight-state region. The Company has interconnection agreements with BellSouth, Verizon, SBC, CenturyTel and Sprint for resale and access to unbundled network elements and is a certified competitive local exchange carrier in Arkansas, Texas, Virginia and all nine BellSouth states. At March 31, 2006, the Company's balance sheet showed a stockholders' deficit of $47,956,000, compared to a $31,654,000 deficit at Dec. 31, 2005. JMJ TECHNOLOGIES: Voluntary Chapter 11 Case Summary --------------------------------------------------- Debtor: JMJ Technologies, Inc. 3100 Cumberland Boulevard Southeast, Suite 1750 Atlanta, Georgia 30039 Tel: (770) 919-7220 Fax: (770) 919-9112 Bankruptcy Case No.: 06-66182 Type of Business: The Debtor designs and develops software for the healthcare industry. Chapter 11 Petition Date: June 2, 2006 Court: Northern District of Georgia (Atlanta) Judge: Robert Brizendine Debtor's Counsel: Kathleen J. St. John, Esq. Nurenberg, Paris, Heller & McCarthy Co., LPA 1206 Timberland Drive Marietta, Georgia 30067 Tel: (770) 984-1123 Total Assets: $1,000,000 Total Debts: $1,466,176 The Debtor did not file a list of its 20 largest unsecured creditors. LATHAM: Moody's Puts B2 Rating on Planned $200 Mil. Debt Facility ----------------------------------------------------------------- Moody's Investors Service assigned a B2 rating to Latham Manufacturing Corporation proposed $200 million senior secured credit facilities comprised of a $45 million senior secured revolver and a $155 million senior secured term loan B. As a result of the refinancing, Moody's has withdrawn the ratings on the company's $40 million senior secured revolver and on its $155 million senior secured term loan B. Key factors affecting the ratings include: high product and customer concentration, leverage, free cash flow, and market position. These rating actions were taken: * $45 million Revolving Credit Facility due 2009, assigned B2; * $155 million Senior Secured Term B due 2010, assigned B2. These rating was affirmed: * Corporate Family Rating, rated B2. The rating's outlook has been changed to stable from positive. Proceeds from the transaction are to be used to finance, in part, to make a complimentary acquisition, to refinance existing debt, and for general corporate purposes. The ratings are constrained by the company's product concentration -- pools and pool related accessories; high customer concentration; seasonality of its business; and reliance on discretionary income. The company's top 5 clients represent around 50% of sales. Pools are discretionary purchases and new sales are likely to vary depending on consumer confidence and general economic activity levels. The company's business is primarily based in the Northeastern United States and Canada. The company's total leverage is in the mid 4 times, thereby placing the company in the B2 rating category on this measure. The ratings benefit from the company's strong customer relationships and a high amount of interdependence with one of its owners. The company's pool liners have an estimated useful life that is likely to be around 10 years thereby creating a recurring revenue stream. Similarly, the contemplated acquisition while expanding the company's product offering, will also create an additional recurring revenue. The company's portfolio of packaged pools and one piece fiberglass pools gives the company greater product diversity. The ratings outlook has been changed to stable from positive to reflect the company's acquisition appetite and the belief that its credit metrics are likely to remain within the B2 rating category for the next 18 months. The facilities will be issued by Latham Manufacturing Corp., a subsidiary of Latham Acquisition Corp. The facilities are to be secured by a first priority perfected lien on and security interest in the borrower and each existing and subsequently acquired or organized direct or indirect domestic and first tier foreign subsidiary of the borrower, and substantially all the tangible and intangible assets of the parent, and of the borrower. Latham Manufacturing, based in Latham, NY, is a wholly owned subsidiary of Latham Acquisition Corp, a company formed by Brockway Moran & Partners, Inc. Total revenues for 2005 totaled $176 million. L-3 COMMS: Mourns Death of Chief Executive Officer Frank C. Lanza ----------------------------------------------------------------- L-3 Communications disclosed that Frank C. Lanza, its chairman and chief executive officer, suddenly passed away yesterday evening. He was 74. "We are all shocked and saddened by the passing of Frank C. Lanza," Robert B. Millard, lead director of the L-3 Communications Board of Directors, said. "On behalf of the Board of Directors and all L-3 employees we would like to extend our deepest condolences to the Lanza family." Mr. Millard noted that Mr. Lanza visited his doctors on June 6, 2006, and it was determined that he was proceeding satisfactorily in his recovery from surgery two months ago. His death was sudden and unexpected. "There is no question that Frank Lanza has been one of the most visionary business leaders in the defense industry," Mr. Millard continued. "Frank worked to build Loral into a leading defense firm. Frank went on to co-found L-3, the fastest-growing high technology defense company in the world by acquiring a number of small and large businesses that he transformed into leaders in their niche markets." "What was not widely known about Frank is that he and his wife Pat were involved in numerous charitable activities through their family foundation," Mr. Millard said. "Frank was blessed by a wonderfully supportive family and he will be greatly missed by all those who appreciated his insight, his leadership, his candor and his credibility. The defense industry has lost a great advocate for innovation, excellence and personal integrity." Mr. Lanza began his career as an engineer with the Philco Western Development Laboratory. In 1959, he joined the Dalmo Victor Division of Textron where he managed the development and production of major electronic warfare programs. He was named vice president of Dalmo Victor in 1970. He joined Loral in 1972 as president of Loral Electronic Systems and served as president and chief operating officer of Loral Corporation from 1981 to 1996. Then that same year, Mr. Lanza became executive vice president of Lockheed Martin Corporation and president and chief operating officer of Lockheed Martin's C3I and Systems Integration Sector, a $6 billion sector comprising many of the heritage Loral businesses that were strategically combined with Lockheed Martin. He co-founded L-3 Communications in 1997 and the company was listed on the New York Stock Exchange in 1998. Mr. Lanza was a member of the Board of Governors for the Aerospace Industries Association. He was also a member of the Board of Directors for the Coast Guard Foundation and received the 2003 Distinguished Corporate Leadership award from the Soldiers', Sailors', Marines' and Airmen's Club. The National Management Association selected Mr. Lanza as the 1978 Gold Knight of Management. Mr. Lanza was also on the board of the American Italian Cancer Foundation. Mr. Lanza served in the U.S. Coast Guard during the Korean War. About L-3 Headquartered in New York City, L-3 Communications Corporation -- http://www.L-3com.com/-- is a leading provider of Intelligence, Surveillance and Reconnaissance systems, secure communications systems, aircraft modernization, training and government services. The company is a leading merchant supplier of a broad array of high technology products, including guidance and navigation, sensors, scanners, fuzes, data links, propulsion systems, simulators, avionics, electro optics, satellite communications, electrical power equipment, encryption, signal intelligence, antennas and microwave components. L-3 also supports a variety of Homeland Security initiatives with products and services. Its customers include the Department of Defense, Department of Homeland Security, selected U.S. Government intelligence agencies and aerospace prime contractors. L-3 Communications Corporation's 7-5/8% Senior Subordinated Notes due 2012 carry Moody's Investors Service's Ba3 rating and Standard & Poor's BB+ rating. LEVEL 3: S&P Assigns CCC- Rating to Proposed $150MM Notes Issue --------------------------------------------------------------- Standard & Poor's Ratings Services assigned its 'CCC-' rating to the proposed $150 million convertible senior notes due 2012 being offered by Level 3 Communications Inc. (CCC+/Stable/B-3), a wholesale long-haul telecommunications carrier. Offering proceeds, together with approximately $600 million in cash from a proposed primary offering of 125 million shares of common stock, will be used: * to purchase some or all of the $398 million of 9.125% senior notes due 2008 and the $62 million of 10.5% senior discount notes due 2008; and * for general corporate purposes. All ratings on Level 3 are affirmed. The planned repayment of some or all of the two 2008 debt issues could reduce the remaining amount outstanding due in that year to about $140 million, providing modest financial profile improvement. In addition, Broomfield, Colorado-based Level 3's recent acquisitions have included significant equity components, deleveraging the company somewhat. Level 3's relatively good access to debt and equity financing continues to bolster liquidity. Still, revenue growth remains under pressure from price compression, despite rising traffic volumes and the company's initial indications of improving industry conditions. "We expect negative discretionary cash flow through at least the medium term, making the company potentially reliant on its cash balance and external financing for its operating needs for an extended period," said Standard & Poor's credit analyst Eric Geil. "The company is likely to use potential below-par or maturity- lengthening debt exchanges to extend its debt maturities, and we could view these transactions as tantamount to a default on original debt issue terms." Level 3's liquidity and access to capital markets provides some cushion to weather the weak industry climate. "We could consider a positive outlook if recent industry improvement proves sustainable and the company's considerable capital investments and acquisitions yield consistent revenue growth that translates into expanding EBITDA and discretionary cash flow," Mr. Geil said. "However, if revenue gained from recent acquisitions does not lead to sustainable growth of EBITDA and discretionary cash flow and if access to external liquidity falters, we could revise the outlook to negative. In addition, if Level 3 engages in potential debt- exchange transactions that we deem to be coercive, we would temporarily lower the rating to 'SD', indicating a selective default." LORAL SPACE: Unstayed Confirmation Order Moots Appeal ----------------------------------------------------- The Loral Stockholders Protective Committee took an appeal to the U.S. District Court for the Southern District of New York from Bankruptcy Judge Robert Drain's Aug. 1, 2005, order confirming Loral Space & Communications Ltd.'s Fourth Amended Joint Plan of Reorganization. In an Order entered May 26, 2006, District Judge Marrero tells the shareholder group that their appeal is moot and must be dismissed. Judge Marrero's Decision is published at 2006 WL 1458465. The District Court observes that the committee failed to seek a stay pending appeal. Moreover, there was no showing that the parties who might be adversely affected by the appeal had been notified thereof or given an opportunity to participate. The transactions that occurred in reliance on the confirmed plan were simply too numerous, and a reopening of the confirmation proceedings for re-valuation and possible redistribution of estate assets would create an unmanageable situation for the bankruptcy court. About Loral Space Loral Space & Communications -- http://www.loral.com/-- is a satellite communications company. It owns and operates a fleet of telecommunications satellites used to broadcast video entertainment programming, distribute broadband data, and provide access to Internet services and other value-added communications services. Loral also is a world-class leader in the design and manufacture of satellites and satellite systems for commercial and government applications including direct-to-home television, broadband communications, wireless telephony, weather monitoring and air traffic management. The Company and various affiliates filed for chapter 11 protection (Bankr. S.D.N.Y. Case No. 03-41710) on July 15, 2003. Stephen Karotkin, Esq., and Lori R. Fife, Esq., at Weil, Gotshal & Manges LLP, represented the Debtors in their successful restructuring and prosecution of their Fourth Amended Joint Plan of Reorganization to confirmation on Aug. 1, 2005. As of Dec. 31, 2004, the Company listed assets totaling approximately $1.2 billion and liabilities totaling approximately $2.3 billion. LORBER INDUSTRIES: Wants Until Sept. 12 to Decide on Leases ----------------------------------------------------------- Lorber Industries of California asks the U.S. Bankruptcy Court for the Central District of California in Los Angeles to extend, until Sept. 12, 2006, the period within which it can assume, assume and assign, or reject unexpired nonresidential real property lease. The Debtor is in the process of retaining Lee & Associates, a commercial real estate broker, to review the unexpired leases, and to market those leases for assumption and assignment. The Debtor gave the Court three reasons explaining why the extension is warranted: a) the Debtor is paying for use of the leased property at the applicable lease rates and is continuing to perform its other obligation under the unexpired leases in a proper manner; b) pending its decision on the unexpired leases, the Debtor will perform all of its undisputed obligations arising from and after its bankruptcy filing; and c) some of the unexpired leases may be important assets of the Debtor's estates. The Debtor may face with administrative claims if its marketing efforts were unsuccessful or the unexpired leases may not be assumed and assigned. The extension, the Debtor says, will give more time to continue the process of winding down its operations. A list of the Debtor's unexpired leases is available for free at http://researcharchives.com/t/s?af2 Headquartered in Gardena, California, Lorber Industries of California -- http://www.lorberind.com/-- manufactures texturized and knitted fabrics. The company filed for chapter 11 protection on Feb. 10, 2006 (Bankr. C.D. Calif. Case No. 06-10399). Joseph P. Eisenberg, Esq., at Jeffer, Mangels, Butler & Marmaro LLP, represents the Debtor in its restructuring efforts. Reem J. Bello, Esq., at Weiland, Golden, Smiley, Wang Ekvall & Strok, LLP represents the Official Committee of Unsecured Creditors. The Debtor's schedules show $25,580,387 in assets and $24,740,726 in liabilities. MARKSON ROSENTHAL: Brings In NachmanHaysBrownstein as Advisors -------------------------------------------------------------- Markson Rosenthal & Co., Inc. obtained authority from the U.S. Bankruptcy Court for the District of New Jersey in Newark to employ NachmanHaysBrownstein, Inc. as its financial advisors. NachmanHaysBrownstein is expected to: a) review and analyze the Debtor's business, management, operations, properties, financial condition and prospects; b) assist the Debtor in preparing operating budgets and cash flow projections; c) participate in planning and strategy discussions with regard to the sale of the Debtor's assets and manage due diligence requested by potential buyers through to closing of the sale of the Debtor's assets; d) support the Debtor's relationships with its lender and creditors; e) review the assumptions underlying the Debtor's periodic operating and cash flow statements and the business terms proposed in any potential transaction; f) review and provide analysis of proposed transactions for which the Debtor seeks Court approval; g) assist processes undertaken by the Debtor to sell all or substantially all of its assets; h) assist with preparation of the Debtor's reports to the Bankruptcy Court and the Office of the U.S. Trustee concerning its financial condition, operations, and other required information; i) assist with communications with the Debtor's secured and unsecured creditors, including any official committee of creditors; j) assist the Debtor's counsel in the preparation of any motions and for any hearings, and be available to testify in Bankruptcy Court as required; and k) assist the Debtor with winding-up and other liquidation activities in connection with any assets, obligations and operations of Debtor not covered by a sale. Howard Brod Brownstein, a certified turnaround professional and principal of NachManHaysBrownstein, told the Court that the firm rendered services to the Debtor prior to its bankruptcy filing in connection with the Debtor's liquidity problems. Mr. Brownstein assured the Court that NachManHaysBrownstein does not hold any interest adverse to the Debtor and is a disinterested person as that term is defined in Sec. 101(14) of the Bankruptcy Code. Mr. Brownstein also attested that NachManHaysBrownstein received a $19,455 retainer from the Debtor. Compensation According to Mr. Brownstein, NHB's professionals bill: Designation Hourly Rate ------------ ----------- Principals $375 - $450 Managing directors $300 - $400 Senior consultants $300 Other professional staff $125 - $300 The Debtor has agreed to pay NHB additional compensation in connection with its postpetition services for the sale of the Debtor's business. In particular, the Debtor and NHB agreed that: a) in the event of a sale of all or part of the Debtor's business to Sonoco Corrflex, LLC or its affiliates, the additional compensation to NHB is capped at $10,000; or b) if the sale occurs to party other than Sonoco, and Sonoco or its affiliates act as the stalking horse bidder, the Additional Compensation will be $10,000 plus 4% of the amount by which the net total consideration from the successful buyer exceeds the net total consideration of Sonoco's stalking horse bid. Headquartered in Narberth, Pennsylvania, NachManHaysBrownstein -- http://www.nhbteam.com/-- is a turnaround and crisis management consulting firm. 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. Douglas J. McGill, Esq., and Robert Malone, Esq., at Drinker, Biddle & Reath represent the Official Committee of Unsecured Creditors. When the Debtor filed for protection from its creditors, it reported zero assets and $11,870,120 in debts. MARKSON ROSENTHAL: Court OKs Drinker Biddle as Committee Counsel ---------------------------------------------------------------- The U.S. Bankruptcy Court for the District of New Jersey in Newark gave the Official Committee of Unsecured Creditors in Markson Rosenthal & Co., Inc.'s chapter 11 cases authority to retain Drinker Biddle & Reath LLP as its attorney, nunc pro tunc to April 27, 2006. As counsel, Drinker Biddle will: a) advise the Committee with respect to its rights, powers, and duties in the Debtor's chapter 11 cases; b) assist and advise the Committee in its consultations with the Debtor relative to the administration of the Debtor's cases including the sale of the Debtor's businesses as a going concern; c) assist the Committee in analyzing the claims of creditors and in negotiating with the creditors; d) assist the Committee with its investigation of the acts, conduct, assets, liabilities, and financial condition of the Debtor and of the operation of the Debtor's businesses in order to maximize the value of the Debtor's assets for the benefit of all creditors; e) assist the Committee in its analysis of, and negotiations with the Debtor or any third party concerning matters related to, among other things, the terms of a plan of reorganization or plan orderly liquidation; f) assist and advise the Committee with respect to any communications with the general creditor body regarding significant matters in the Debtor's cases; g) commence and prosecute necessary and appropriate actions or proceedings on behalf of the Committee; h) review, analyze or prepare, on behalf of the Committee, all necessary applications, motions, answers, orders, reports, schedules, pleadings and other documents; i) represent the Committee at all hearings and other proceedings; and j) confer with other professional advisors retained by the Committee in providing advice to the members of the Committee. Robert K. Malone, a partner with Drinker Biddle, told the Court that the firm does not hold any interest adverse to the Debtor and is a "disinterested" person as defined in Sec. 101(14) of the Bankruptcy Code. According to Mr. Malone, Drinker Biddle's professionals bill: Designation Hourly Rate ------------ ----------- Partners $515 - $350 Counsel or Associates $370 - $210 Paraprofessionals $190 - $125 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. Douglas J. McGill, Esq., and Robert Malone, Esq., at Drinker, Biddle & Reath represent the Official Committee of Unsecured Creditors. When the Debtor filed for protection from its creditors, it reported zero assets and $11,870,120 in debts. MARKSON ROSENTHAL: Panel Employs Weiser as Financial Consultants ---------------------------------------------------------------- The Official Committee of Unsecured Creditors in Markson Rosenthal & Co., Inc.'s chapter 11 cases obtained authority from the U.S. Bankruptcy Court for the District of New Jersey in Newark to retain Weiser, LLP, as its financial consultants, nunc pro tunc to April 27, 2006. Weiser is expected to: a) review all financial information prepared by the Debtor or its consultants as requested by the Committee; b) monitor the Debtor's activities regarding cash expenditures, receivable collections, asset sales and projected cash requirements; c) review the Debtor's business plan and financial projections to determine the feasibility of alternatives to the proposed sale of the Debtor's business; d) assist in the Debtor's sale process collectively or in segments, parts or other delineations, if any; e) attend at meetings including the Committee, the Debtor, creditors, their attorneys and consultants, Federal and state authorities, if required; f) review of the Debtor's periodic operating and cash flow statements; g) review of Debtor's books and records for related party transactions, potential preferences, fraudulent conveyances and other potential prepetition investigations; h) conduct any investigation that may be undertaken with respect to the prepetition acts, conduct, property, liabilities and financial condition of the Debtors, their management, creditors including the operation of their businesses, and as appropriate avoidance actions; i) review and analysis of proposed transactions for which the Debtors seek Court approval; j) assist in a sale process of the Debtors collectively or in segments, parts or other delineations, if any; k) assist the Committee in developing, evaluation, structuring and negotiating the terms and conditions of all potential plans of reorganization including preparation of a liquidation analysis; l) analysis of claims filed; m) estimate the value of the securities, if any, that may be issued to unsecured creditors under any such plan; n) provide expert testimony on the results of the Committee's findings; o) assist the Committee in developing alternative plans including contacting potential plan sponsors if appropriate; and p) provide the Committee with other and further financial advisory services with respect to the Debtors, including valuation, general restructuring and advice with respect to financial, business and economic issues, as may arise during the course of the restructuring as requested by the Committee. James Horgan, a partner with Weiser LLP, assured the Court that the firm does not hold any interest adverse to the Debtor and is a "disinterested" person as that term is defined in Sec. 101(14) of the Bankruptcy Code. According to Mr. Horgan, the Weiser's professionals bill: Partners $320-$450 Senior Managers $264-$320 Managers $204-$264 Seniors $168-$204 Assistants $108-$132 Paraprofessionals $72-$132 Weiser also seeks reimbursement of actual and necessary expenses, charges and disbursements it incurs for services provided to the Committee in the Debtor's case, Mr. Horgan said. 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. Douglas J. McGill, Esq., and Robert Malone, Esq., at Drinker, Biddle & Reath represent the Official Committee of Unsecured Creditors. When the Debtor filed for protection from its creditors, it reported zero assets and $11,870,120 in debts. MCCLATCHY CO: Agrees to Sell Five Knight Ridder Publications ------------------------------------------------------------ The McClatchy Company entered into definitive agreements to sell five more Knight Ridder newspapers. As a result, McClatchy has now entered into definitive sales agreements for 11 of the 12 newspapers it is seeking to divest. The sale of the 11 newspapers will bring total consideration of slightly more than $2 billion, including cash proceeds of $1.935 billion. "We are pleased with the full, fair prices we will receive, and pleased that we were able to execute on these sales as we promised," McClatchy CEO Gary Pruitt said. "Some skeptics doubted us on both counts, but these deals reaffirm the underlying strength of the newspaper business, and the soundness of our plan for acquiring Knight Ridder. We expect to announce the sale of the (Wilkes-Barre, PA) Times Leader in the next few weeks, which will complete the sale of all 12 newspapers we are seeking to divest." The five newspapers are being sold for a total of $450 million. They include the Akron Beacon Journal (Ohio); Duluth News Tribune (Minnesota) and Grand Forks Herald (North Dakota); The Fort Wayne News-Sentinel (Indiana); and the (Aberdeen) American News (South Dakota). McClatchy reported on April 26 that it would sell three California newspapers and the St. Paul Pioneer Press (Minnesota) for $1 billion and announced on May 23 that it would sell Knight Ridder's two newspapers in Philadelphia for $562 million. The closing of each of the divestiture transactions is conditioned upon the closing of McClatchy's acquisition of Knight Ridder. McClatchy's acquisition of Knight Ridder could close as soon as June 27, following a planned Knight Ridder shareholders vote on June 26. Most of the divestiture transactions are expected to close immediately or shortly following that closing. "The prices we're receiving for these 11 newspapers are certainly within the range we expected," Mr. Pruitt said. Net after-tax proceeds of approximately $1.4 billion from the sales will immediately be applied to pay down debt incurred in the purchase of Knight Ridder's 32 newspapers. "We bought the Knight Ridder papers for a multiple of about 9.5 times their 2005 cash flow; these 11 newspapers taken together will bring us 11.1 times the trailing 12-month cash flows through April," Pruitt said. McClatchy said when divestiture plans were reported in March that it expected sales of individual papers would generate widespread interest and substantial returns. "To buyers whose strategy is a good fit, all of these papers represented outstanding opportunities that come around only rarely in our industry," Mr. Pruitt said. "The fact that the sales attracted seven very diverse and impressive purchasers for these papers speaks volumes about the value of newspapers and the confidence of investors who expect them to perform well. This is a good news story for the newspaper industry, and for everybody who understands the essential role that quality newspapers play." Background to the Transaction On March 13, 2006, The McClatchy Company reported a definitive agreement under which McClatchy will acquire Knight-Ridder, Inc. Knight Ridder publishes 32 daily newspapers in 29 U.S. markets, with a circulation of 3.4 million daily and 4.5 million Sunday. Knight Ridder has websites in all of its markets and a variety of investments in Internet and technology companies, publishes a growing portfolio of targeted publications and maintains investments in two newsprint companies. Knight Ridder's Internet operation develops and manages the company's online properties. It is the founder and operator of Real Cities -- http://www.RealCities.com/-- the largest national network of city and regional websites in more than 110 U.S. markets. As part of that report, McClatchy said it planned to sell 11 of the acquired newspapers that do not fit with the company's longstanding operating strategies and acquisition criteria, and to sell the St. Paul Pioneer Press due to anticipated anti-trust concerns involving McClatchy's (Minneapolis) Star Tribune. After McClatchy's planned divestitures and the close of the Knight Ridder acquisition, The McClatchy Company will become the nation's second-largest newspaper company measured by daily circulation (approximately 3.2 million), with 32 daily newspapers and approximately 50 non-dailies. The expanded McClatchy will own leading newspapers in many of the fastest-growing markets nationwide, with an enhanced portfolio of Internet assets. The transaction is subject to customary terms and conditions, including approval by the Knight Ridder shareholders and is expected to close this summer. On April 26, 2006, the McClatchy Company reported a definitive agreement with MediaNews Group, Inc. and The Hearst Corporation under which the companies will pay McClatchy $1 billion in cash to acquire four newspapers. MediaNews will purchase two northern California papers, the San Jose Mercury News and Contra Costa Times, and Hearst will acquire the Monterey Herald, and the St. Paul Pioneer Press in St. Paul, Minnesota. As reported in the Troubled Company Reporter on May 24, 2006, McClatchy agreed to sell Philadelphia Newspapers, Inc. to Philadelphia Media Holdings LLC in a transaction valued at $562 million. The purchase covers the Philadelphia Inquirer and Philadelphia Daily News, both daily newspapers, and related media assets including philly.com. About The McClatchy Company Headquartered in Sacramento, California, The McClatchy Company -- http://www.mcclatchy.com/-- is a leading newspaper and Internet publisher. It publishes 12 daily and 16 non-daily newspapers located in western coastal states, North and South Carolina, and the Twin Cities of Minneapolis/St. Paul. McClatchy has daily circulation of 1.4 million and Sunday circulation of 1.8 million. McClatchy's newspapers include, among others, the Star Tribune in Minneapolis, The Sacramento Bee, The Fresno Bee and The Modesto Bee in California, The News & Observer (Raleigh, North Carolina), The News Tribune (Tacoma, Washington), the Anchorage Daily News and Vida en el Valle, a bilingual Spanish weekly newspaper distributed throughout California's Central Valley. McClatchy also operates leading local websites in each of its daily newspaper markets, offering readers information, comprehensive news, advertising, e-commerce and other services, and owns and operates McClatchy Interactive, an interactive operation that provides websites with content, publishing tools and software development. McClatchy is listed on the New York Stock Exchange under the symbol "MNI." * * * As reported in the Troubled Company Reporter on April 24, 2006, Moody's Investors Service assigned a Ba1 Corporate Family Rating to The McClatchy Company and a Ba1 rating to McClatchy's proposed $3.75 billion senior unsecured bank credit facility, and lowered its commercial paper rating to Not Prime from Prime-3. The rating actions conclude the review for downgrade initiated on March 13, 2006 in connection with the company's announced $6.5 billion acquisition of Knight-Ridder. The rating outlook is stable. MERIDIAN AUTOMOTIVE: Projected Financial Data Underpinning Plan --------------------------------------------------------------- Meridian Automotive Systems, Inc., and its debtor-affiliates filed its projected financial data underpinning its first amended plan of reorganization. Meridian Automotive Systems, Inc. Projected Consolidated Balance Sheet (Unaudited) ($ in millions) Projected Projected Projected Emergence Dec. 2006 Dec. 2007 --------- --------- --------- Total Current Assets $198.0 $177.2 $207.0 Property, Plant & Equipment, net $187.8 $171.4 $146.9 Intangible & Other Assets $136.0 $135.2 $133.6 --------- --------- --------- Total Assets $521.8 $483.7 $487.4 ========= ========= ========= Total Current Liabilities $89.2 $69.9 $78.2 Total Debt $280.6 $284.3 $290.1 Other Non-Current Liabilities $36.6 $36.6 $36.6 Stockholders' Equity $115.3 $93.0 $82.5 --------- --------- --------- Total Liabilities & Stockholders' Equity $521.8 $483.7 $487.4 ========= ========= ========= Projected Projected Dec. 2008 Dec. 2009 --------- --------- Total Current Assets $226.7 $252.7 Property, Plant & Equipment, net $118.3 $86.5 Intangible & Other Assets $132.0 $130.3 --------- --------- Total Assets $477.0 $469.5 ========= ========= Total Current Liabilities $84.9 $87.9 Total Debt $277.5 $276.2 Other Non-Current Liabilities $36.6 $36.6 Stockholders' Equity $78.0 $68.7 --------- --------- Total Liabilities & Stockholders' Equity $477.0 $469.5 ========= ========= Meridian Automotive Systems, Inc. Projected Consolidated Statements of Operations (Unaudited) ($ in millions) Projected Projected Projected Projected Jul-Dec 06 Dec. 2007 Dec. 2008 Dec. 2009 ---------- --------- --------- --------- Total Sales $343.1 $803.6 $861.6 $854.5 Cost of Sales $326.9 $751.4 $802.7 $801.3 ---------- --------- --------- --------- Gross Profit $16.3 $52.1 $58.9 $53.2 Sales and Administrative $10.9 $22.6 $22.7 $22.8 Other admin expenses $1.9 $4.9 $5.7 $6.1 ---------- --------- --------- --------- Income from Operations $3.4 $24.6 $30.5 $24.3 ---------- --------- --------- --------- Other Income $0.0 $0.0 $0.0 $0.0 Interest Expense $19.4 $33.9 $34.3 $33.4 Restructuring Expense $5.9 $0.0 $0.0 $0.0 ---------- --------- --------- --------- Income (Loss) before tax ($21.8) ($9.3) ($3.8) ($9.1) ---------- --------- --------- --------- Taxes $0.6 $1.2 $0.7 $0.2 ---------- --------- --------- --------- Net Income ($22.4) ($10.4) ($4.5) ($9.3) ========== ========= ========= ========= Adjusted EBITDAR $27.2 $74.6 $81.8 $76.4 Meridian Automotive Systems, Inc. Projected Consolidated Statements of Cash Flows (Unaudited) ($ in millions) Projected Projected Projected Projected Jul-Dec 06 Dec. 2007 Dec. 2008 Dec. 2009 ---------- --------- --------- --------- Net income ($22.4) ($10.4) ($4.5) ($9.3) Depreciation & Other Non-Cash Adjustments $23.8 $50.0 $51.3 $52.1 Changes in Working Capital ($11.5) ($19.9) ($6.9) $15.0 ---------- --------- --------- --------- Cash Flow from Operations ($10.1) $19.6 $40.0 $57.8 Capital Expenditures ($7.5) ($25.5) ($22.7) ($20.2) ---------- --------- --------- --------- Cash Flow from Investing ($7.5) ($25.5) ($22.7) ($20.2) Debt Borrowings $2.2 $7.1 ($11.4) $0 Other Debt Changes $15.4 ($1.3) ($1.3) ($1.3) ---------- --------- --------- --------- Cash Flow from Financing $17.5 $5.9 ($12.6) ($1.3) ---------- --------- --------- --------- Net Change in Cash $0.0 $0.0 $4.6 $36.4 ========== ========= ========= ========= Headquartered in Dearborn, Mich., Meridian Automotive Systems, Inc. -- http://www.meridianautosystems.com/-- supplies technologically advanced front and rear end modules, lighting, exterior composites, console modules, instrument panels and other interior systems to automobile and truck manufacturers. Meridian operates 22 plants in the United States, Canada and Mexico, supplying Original Equipment Manufacturers and major Tier One parts suppliers. The Company and its debtor-affiliates filed for chapter 11 protection on April 26, 2005 (Bankr. D. Del. Case Nos. 05-11168 through 05-11176). James F. Conlan, Esq., Larry J. Nyhan, Esq., Paul S. Caruso, Esq., and Bojan Guzina, Esq., at Sidley Austin Brown & Wood LLP, and Robert S. Brady, Esq., Edmon L. Morton, Esq., Edward J. Kosmowski, Esq., and Ian S. Fredericks, Esq., at Young Conaway Stargatt & Taylor, LLP, represent the Debtors in their restructuring efforts. Eric E. Sagerman, Esq., at Winston & Strawn LLP represents the Official Committee of Unsecured Creditors. The Committee also hired Ian Connor Bifferato, Esq., at Bifferato, Gentilotti, Biden & Balick, P.A., to prosecute an adversary proceeding against Meridian's First Lien Lenders and Second Lien Lenders to invalidate their liens. When the Debtors filed for protection from their creditors, they listed $530 million in total assets and approximately $815 million in total liabilities. (Meridian Bankruptcy News, Issue No. 28; Bankruptcy Creditors' Service, Inc., 215/945-7000). MERIDIAN: Wants to Enter into Fee Letters with 3 Potential Lenders ------------------------------------------------------------------ Pursuant to Sections 105(a) and 363(b) of the Bankruptcy Code, Meridian Automotive Systems, Inc., and its debtor-affiliates seek authority from the U.S. Bankruptcy Court for the District of Delaware to enter into fee letters with up to three potential lenders or potential lending syndicate members in connection with securing exit financing. The Fee Letters will require the Debtors to: (a) pay due diligence fees and out-of-pocket expenses, including legal fees of the Potential Lenders in connection with their non-binding proposals to provide the Debtors with exit financing; and (b) provide indemnification of the Potential Lenders in connection with the exit financing. A key element of the restructuring contemplated by the Debtors' Plan of Reorganization, as amended, and a condition precedent to the occurrence of the Effective Date, is the availability of an Exit Facility that provides sufficient funding for the Debtors to meet their cash obligations under the Plan as of the Effective Date. Although the Debtors have not entered into agreements with any prospective lender, based on initial discussions with lending institutions, the Debtors would like to continue discussions with the Potential Lenders, based on their level of interest, preliminary discussions of exit financing terms, and the receipt of non-binding proposals from each of the Potential Lenders, Robert S. Brady, Esq., at Young Conaway Stargatt & Taylor, LLP, in Wilmington, Delaware, tells the Court. Mr. Brady notes that because the Debtors' negotiations with the Potential Lenders are ongoing and confidential, the specific terms of the Financing Proposals and the Potential Lenders' identity can't be made public yet. Mr. Brady relates that although the Debtors anticipate that one or more of the Potential Lenders will provide the Exit Facility, no commitments to lend have been made at this time and any actual commitment to lend is subject to each Potential Lender's due diligence and review of the Debtors. The Debtors anticipate that each Potential Lender will ask the Debtors to enter into a Fee Letter, which will require, among other things, that the Debtors pay Work Fees associated with the Potential Lenders' reasonable out-of-pocket expenses, including legal fees, that may be incurred in connection with their due diligence and documentation efforts. The Debtors are still negotiating the specific terms of the Fee Letters with the Potential Lenders. The Potential Lenders do not wish to undertake a costly and time consuming due diligence process to achieve a final financing package if they must bear all of the execution risks attendant to the financing not closing. For this reason, the Potential Lenders have asked the Debtors to seek advance authority to pay the Work Fees. Moreover, each Potential Lender has asked the Debtors to indemnify the Potential Lenders from and against any and all claims, liabilities and expenses, except to the extent the claim, liability, or expense is found to have resulted primarily from the Indemnified Party's gross negligence, bad faith, or willful misconduct. The Debtors believe that the benefits of having a competitive financing process will outweigh the costs associated with the Potential Lenders' due diligence efforts. The total Work Fees payable to any single Potential Lender will not exceed $250,000. The Work Fees payable to all Potential Lenders will not exceed $600,000 in the aggregate. The Debtors believe that the total Work Fees that may be payable to the Potential Lenders are reasonable and consistent with amounts normally demanded in the marketplace. Thus, Mr. Brady asserts, the Court should authorize the Debtors to enter into the Fee Letters and pay the Work Fees to the Potential Lenders so that the Debtors can continue to expeditiously move toward obtaining the Exit Facility and securing timely confirmation of the Plan. Headquartered in Dearborn, Mich., Meridian Automotive Systems, Inc. -- http://www.meridianautosystems.com/-- supplies technologically advanced front and rear end modules, lighting, exterior composites, console modules, instrument panels and other interior systems to automobile and truck manufacturers. Meridian operates 22 plants in the United States, Canada and Mexico, supplying Original Equipment Manufacturers and major Tier One parts suppliers. The Company and its debtor-affiliates filed for chapter 11 protection on April 26, 2005 (Bankr. D. Del. Case Nos. 05-11168 through 05-11176). James F. Conlan, Esq., Larry J. Nyhan, Esq., Paul S. Caruso, Esq., and Bojan Guzina, Esq., at Sidley Austin Brown & Wood LLP, and Robert S. Brady, Esq., Edmon L. Morton, Esq., Edward J. Kosmowski, Esq., and Ian S. Fredericks, Esq., at Young Conaway Stargatt & Taylor, LLP, represent the Debtors in their restructuring efforts. Eric E. Sagerman, Esq., at Winston & Strawn LLP represents the Official Committee of Unsecured Creditors. The Committee also hired Ian Connor Bifferato, Esq., at Bifferato, Gentilotti, Biden & Balick, P.A., to prosecute an adversary proceeding against Meridian's First Lien Lenders and Second Lien Lenders to invalidate their liens. When the Debtors filed for protection from their creditors, they listed $530 million in total assets and approximately $815 million in total liabilities. (Meridian Bankruptcy News, Issue No. 28; Bankruptcy Creditors' Service, Inc., 215/945-7000). MERIDIAN AUTOMOTIVE: Asks for Court's Nod on $375MM Exit Facility ----------------------------------------------------------------- Meridian Automotive Systems, Inc., and its debtor-affiliates seek authority from the U.S. Bankruptcy Court for the District of Delaware to enter into an exit facility to fund their Plan of Reorganization. The Debtors expect the Exit Facility, in the total amount of up to $375,000,000, to consist of: (i) a senior secured revolving line of credit in the amount of $75,000,000; (ii) a term loan in the amount of approximately $125,000,000 plus a $25,000,000 synthetic letter of credit facility; and (iii) a term loan of approximately $150,000,000. The Debtors anticipate that the principal terms of the Exit Facility will be no less favorable than: A) Exit Revolving Credit Facility Borrower: Reorganized Meridian Guarantors: All domestic subsidiaries of the Borrower Lenders: An agent and syndicate of lenders to be selected by Meridian upon the conclusion of negotiations. Facility Type: Asset based revolving line of credit. Amount: $75,000,000 Maturity Date: No sooner than 4th anniversary date of the Effective Date. Use of Proceeds: To refinance the existing DIP Credit Agreement, make Distributions to creditors under the Plan, pay fees and expenses associated with the Exit Facility, and to fund the ongoing working capital needs and general corporate purposes of the Reorganized Debtors. Interest Rate: Market rate Underwriting and Commitment Fees: Market rate Unused Line Fee: Market rate Security: Subject to the financing markets and together with the Exit Term Loan A Credit Facility, a first priority lien on substantially all assets of the Reorganized Debtors, including 100% of the capital stock of, or other equity interests in, Reorganized Meridian's domestic subsidiaries, and no more than 65% of the capital stock of, or other equity interests in, Reorganized Meridian's foreign subsidiaries. Priority: The Exit Revolving Credit Facility and Exit Term Loan A Credit Facility will be senior in priority to the Exit Term Loan B Credit Facility. Representations, Warranties, Covenants & Events of Default: Customary for facilities of this type. B) Exit Term Loan A Credit Facility Borrower: Reorganized Meridian Guarantors: All domestic subsidiaries of the Borrower. Lenders: An agent and syndicate of lenders to be selected by Meridian upon the conclusion of negotiations. Facility Type: Term loan. Amount: $125,000,000, plus $25,000,000 synthetic letter of credit facility. Maturity Date: No sooner than the 5th anniversary of the Effective Date. Use of Proceeds: To refinance the existing DIP Credit Agreement, including DIP Letters of Credit, and make Distributions to creditors under the Plan. Interest Rate: Market rate Commitment and Underwriting Fees: Market rate Letters of Credit Fee: Market Rate Amortization: 1% per year, with a bullet at maturity. Security: Subject to the financing markets and together with the Exit Term Loan A Credit Facility, a first priority lien on substantially all assets of the Reorganized Debtors, including 100% of the capital stock of, or other equity interests in, Reorganized Meridian's domestic subsidiaries, and no more than 65% of the capital stock of, or other equity interests in, Reorganized Meridian's foreign subsidiaries. Priority: The Exit Revolving Credit Facility and Exit Term Loan A Credit Facility will be senior in priority to the Exit Term Loan B Credit Facility and the New Third Lien Notes. Representations, and Events of Default: Customary for facilities of this type. C) Exit Term Loan B Credit Facility Borrower: Reorganized Meridian Guarantors: All domestic subsidiaries of the Borrower. Lenders: An agent and syndicate of lenders to be selected by Meridian upon the conclusion of negotiations. Facility Type: Term loan Amount: $150,000,000 Maturity Date: No sooner than the 6h anniversary of the Effective Date. Use of proceeds: To make Distributions to creditors under the Plan. Interest Rate: Market rate Commitment and Underwriting Fees: Market rate Amortization: None, bullet at maturity. Security: Junior priority lien on substantially all assets of the Reorganized Debtors, including 100% of the capital stock of, or other equity interests in, Reorganized Meridian's domestic subsidiaries, and 65% of the capital stock of, or other equity interest in, Reorganized Meridian's foreign subsidiaries. Priority: Liens securing the Exit Term Loan B Credit Facility will be junior in priority to the Exit Revolving Credit Facility and the Exit Term Loan A Credit Facility, and senior in priority to the liens securing the New Third Lien Notes, if any. Representations, Warranties, Covenants and Events of Default: Customary for facilities of this type. Headquartered in Dearborn, Mich., Meridian Automotive Systems, Inc. -- http://www.meridianautosystems.com/-- supplies technologically advanced front and rear end modules, lighting, exterior composites, console modules, instrument panels and other interior systems to automobile and truck manufacturers. Meridian operates 22 plants in the United States, Canada and Mexico, supplying Original Equipment Manufacturers and major Tier One parts suppliers. The Company and its debtor-affiliates filed for chapter 11 protection on April 26, 2005 (Bankr. D. Del. Case Nos. 05-11168 through 05-11176). James F. Conlan, Esq., Larry J. Nyhan, Esq., Paul S. Caruso, Esq., and Bojan Guzina, Esq., at Sidley Austin Brown & Wood LLP, and Robert S. Brady, Esq., Edmon L. Morton, Esq., Edward J. Kosmowski, Esq., and Ian S. Fredericks, Esq., at Young Conaway Stargatt & Taylor, LLP, represent the Debtors in their restructuring efforts. Eric E. Sagerman, Esq., at Winston & Strawn LLP represents the Official Committee of Unsecured Creditors. The Committee also hired Ian Connor Bifferato, Esq., at Bifferato, Gentilotti, Biden & Balick, P.A., to prosecute an adversary proceeding against Meridian's First Lien Lenders and Second Lien Lenders to invalidate their liens. When the Debtors filed for protection from their creditors, they listed $530 million in total assets and approximately $815 million in total liabilities. (Meridian Bankruptcy News, Issue No. 28; Bankruptcy Creditors' Service, Inc., 215/945-7000). MERRILL LYNCH: DBRS Puts Low-B Rating on Six Certificate Classes ---------------------------------------------------------------- Dominion Bond Rating Service assigned provisional ratings as indicated above to the various classes of Merrill Lynch Financial Assets Inc.'s Commercial Mortgage Pass-Through Certificates, Series 2006-Canada 19 AAA through B (low) (see above). The XP and XC balances are notional. * Class A-1 New Rating - Provisional AAA * Class A-2 New Rating - Provisional AAA * Class A-3 New Rating - Provisional AAA * Class XP-1 New Rating - Provisional AAA * Class XP-2 New Rating - Provisional AAA * Class XC New Rating - Provisional AAA * Class B New Rating - Provisional AA * Class C New Rating - Provisional A * Class D New Rating - Provisional BBB * Class E New Rating - Provisional BBB (low) * Class F New Rating - Provisional BB (high) * Class G New Rating - Provisional BB * Class H New Rating - Provisional BB (low) * Class J New Rating - Provisional B (high) * Class K New Rating - Provisional B * Class L New Rating - Provisional B (low) Finalization of ratings is contingent upon receipt of final documents conforming to information already received. The collateral consists of 75 fixed-rate loans secured by 124 multi-family, mobile home parks, and commercial properties. The pool has a total loan balance of Cdn$584,186,547. DBRS inspected 79.6% of the pool. Based on DBRS's site inspections, 10.8% of the sampled properties are considered to have excellent property quality and 39.1% of the sampled properties to have above-average property quality. Thirty-nine loans representing 41% of the pool provide for full or partial recourse to the borrowers and/or guarantors. DBRS shadow- rates three loans investment grade, representing 8% of the pool. The investment-grade, shadow-rated loans indicate the long-term stability of the underlying assets. The shadow-rated investment- grade ratings assigned by DBRS: * Marriott Pooled Senior Loan - BBB (low) * Wal-Mart Collingwood - AA * Winnipeg Health - A (high) Although the pool is heavily concentrated in the top-ten loans, representing 45.9% of the pool balance, two of the top-ten loans, representing 11.7% of the pool, are secured by multiple properties, which adds diversity to the pool. Twelve loans, representing 23.9% of the pool, have a DBRS-stressed loan-to-value greater than 90%. Five loans are secured by hotels and three loans are secured by retirement homes, both property types are considered more volatile. The pool weighted average DBRS-stressed term debt service coverage ratio is 1.40 times; the weighted average DBRS-stressed refinance DSCR is 1.34 times. The DBRS-stressed loan-to-value is 82.9%. NIGHTHAWK SYSTEMS: Posts $1.3 MM Net Loss in 2006 1st Fiscal Qtr. ----------------------------------------------------------------- Nighthawk Systems, Inc., filed its first quarter financial statements for the three months ended March 31, 2006, with the Securities and Exchange Commission on May 22, 2006. The Company incurred a $1,315,681 net loss on $141,387 of revenues for the three months ended March 31, 2006. At March 31, 2006, the Company's balance sheet showed $1,028,725 in total assets and $3,150,971 in total liabilities, resulting in a $2,122,246 stockholders' deficit. The Company's March 31 balance sheet also showed strained liquidity with $989,269 in total current assets available to pay $1,046,135 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?abe Going Concern Doubt As reported in the Troubled Company Reporter on May 17, 2006, GHP Horwath, P.C., in Denver, Colorado, raised substantial doubt about Nighthawk 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 net loss of $2.7 million, negative working capital of 0.5 million, and stockholders' deficit of $2.5 million. About Nighthawk Systems Nighthawk Systems, Inc., designs and manufactures ready-to-deploy intelligent remote power control products that can remotely control virtually any device from any location. NORTEL CORP: DBRS Holds Rating on $1.8 Billion Notes at B (low) --------------------------------------------------------------- Dominion Bond Rating Service confirmed the ratings of Nortel Networks Corporation, Nortel Networks Limited, Nortel Networks Inc., and Nortel Networks Capital Corporation as indicated below, with all trends now Stable. * Senior Secured Bank Debt Confirmed B * Secured Senior Notes Confirmed B * Senior Unsecured Notes Confirmed B (low) * Convertible Notes Confirmed B (low) * Senior Unsecured Bank Debt Confirmed B (low) * Notes & Long-Term Senior Debt Confirmed B (low) Stb * Class A, Redeemable Preferred Shares Confirmed Pfd-5 (low) Stb * Class A, Non-Cumulative Redeemable Preferred Shares Confirmed Pfd-5 (low) Stb Specific ratings for Nortel issues are listed at the bottom of this press release. This resolves the "Under Review with Negative Implications" status that Nortel's ratings were placed under as of March 10, 2006. The confirmation of Nortel's ratings is a result of Nortel filing its 2005 10-K on May 1, 2006, and its 10-Q for the first quarter of 2006 on June 6, 2006. Therefore, Nortel has brought its financial disclosure back in line within the timelines of its recently received amendments and waivers relating to both its Secured and Unsecured Bank facilities and the Export Development Canada facility. In addition, Nortel is also now in compliance under its public indentures. DBRS notes that the delay in the Company's filings related to restatement of revenues, primarily related to contract revenues being recognized in the wrong periods and subsequently deferred to future periods, resulting in a negative revenue adjustment of approximately $1.1 billion relating to the 2003-2005 period and US$384 million for prior periods. The impact on net earnings reported for the 2003-2005 period was a decrease of $461 million, and $70 million for prior periods. Although these adjustments have increased substantially since the initial numbers were disclosed on March 10, 2006, DBRS does acknowledge that a portion of these revenues and earnings will flow through into future periods. With its filing issues resolved, DBRS has now reinstated its long- term ratings of B at the secured level and B (low) at the unsecured level. Nortel's current ratings remain underpinned by its product and geographic diversity along with its ability to generate near breakeven free cash flow on a normalized basis. However, DBRS will continue to monitor Nortel's ability to maintain its cash balances above $1.25 billion as required under its bank facilities with pro forma cash currently at $2.1 billion along with the Company's ability to extend its debt maturity profile. In addition, while Nortel has recently announced its strategy to improve operating performance over the medium term, DBRS still believes that the Company will face near-term challenges resulting from the consolidation of its competitors and customers along with the increased presence of emerging market vendors in both the wireline and wireless equipment markets. Specific DBRS ratings on Nortel debt issues: Nortel Networks Corporation: * $1.8 billion Convertible Notes due September 2008 - B (low) Nortel Networks Limited: * $200 million Secured Senior Notes due January 2023 - B Nortel Networks Inc.: * $850 million Senior Secured Bank Debt maturing February 2007 - B * $450 million Senior Unsecured Bank Debt maturing February 2007 - B (low) Nortel Networks Capital Corporation: * $150 million Senior Unsecured Notes due June 2006 - B (low) * $150 million Senior Unsecured Notes due January 2026 - B (low) Nortel has two types of Class A Preferred Shares; for one of these types, the unpaid dividends are non-cumulative. NORTHWEST AIRLINES: Has Until June 15 to File Statements -------------------------------------------------------- The U.S. Bankruptcy Court for the Southern District of New York gave Northwest Airlines Corp. and its debtor-affiliates until June 15, 2006, to file their statements of financial affairs. As reported in the Troubled Company Reporter on May 30, 2006, Gregory M. Petrick, Esq., at Cadwalader, Wickersham & Taft LLP, in New York, relates that the preparation and filing of the Debtors' schedules of assets and liabilities on May 1, 2006, was a major undertaking considering that they have more than 60,000 creditors and are party to over 100,000 executory contracts. "The Debtors worked diligently to gather the necessary information to prepare and file the Schedules, which consists of over 26,500 pages of information in total." Mr. Petrick tells Judge Gropper that, in order to complete the SOFAs, the Debtors and their professionals need additional time to review the data collected from various sources and reconcile discrepancies between those data and the Debtors' books and records, resolve certain inconsistencies, and identify errors and omissions. About Northwest Airlines Northwest Airlines Corporation (OTC: NWACQ) -- http://www.nwa.com/ -- is the world's fourth largest airline with hubs at Detroit, Minneapolis/St. Paul, Memphis, Tokyo and Amsterdam, and approximately 1,400 daily departures. Northwest is a member of SkyTeam, an airline alliance that offers customers one of the world's most extensive global networks. Northwest and its travel partners serve more than 900 cities in excess of 160 countries on six continents. The Company and 12 affiliates filed for chapter 11 protection on Sept. 14, 2005 (Bankr. S.D.N.Y. Lead Case No. 05-17930). Bruce R. Zirinsky, Esq., and Gregory M. Petrick, Esq., at Cadwalader, Wickersham & Taft LLP in New York, and Mark C. Ellenberg, Esq., at Cadwalader, Wickersham & Taft LLP in Washington represent the Debtors in their restructuring efforts. The Official Committee of Unsecured Creditors has retained Akin Gump Strauss Hauer & Feld LLP as its bankruptcy counsel in the Debtors' chapter 11 cases. When the Debtors filed for protection from their creditors, they listed $14.4 billion in total assets and $17.9 billion in total debts. (Northwest Airlines Bankruptcy News, Issue No. 28; Bankruptcy Creditors' Service, Inc., 215/945-7000). NORTHWEST AIRLINES: Wants to Enter Into Amended IAM CBA Amendment ----------------------------------------------------------------- Northwest Airlines Corp. and its debtor-affiliates ask the United States Bankruptcy Court for the Southern District of New York for permission to enter into an amended collective bargaining agreement with the International Association of Machinist. IAM represents the Debtors' airport agents, ground personnel, baggage handlers, plant protection employees, clerical workers and certain training personnel The Debtors and IAM are parties to four collective bargaining agreements: (a) the Clerical Office, Fleet and Passenger Services Agreement; (b) the Equipment Service and Stock Clerk Personnel Agreement; (c) the Plant Protection Employees Agreement; and (d) the Flight Simulator Technicians and Simulator Support Specialists Agreement. The IAM CBAs became effective February 1997, and became amendable as of February 2003. The IAM CBAs remain in effect pursuant to status quo provisions of the Railway Labor Act, 45 U.S.C. Section 151 et. seq. On March 7, 2006, approximately 7,700 of the Debtors' gate agents, reservation agents, clerical employees and security guards covered by either the COFPS Agreement or the PP Agreement ratified the modifications to their CBAs. Simultaneously, IAM members covered by either the ESSC Agreement or the Sim Tech Agreement failed to ratify the modifications to their CBA. The ESSC Agreement covers 5,632 IAM members and the Sim Tech Agreement covers 42 IAM members. On May 19, 2006, the Debtors reached a tentative agreement with the IAM negotiating committee on terms for modification of the ESSC Agreement. The ESSC's ratification vote is set to conclude on June 9, 2006. Amendments The Debtors are seeking the Court's approval at this time so that the modified CBAs governing COFPS, PP and ESSC workers may be implemented immediately on ratification. Should the ESSC Letter of Agreement not be ratified, the Debtors will withdraw their request. Gregory M. Petrick, Esq., at Cadwalader, Wickersham & Taft LLP, in New York, explains that the modifications to the COFPS Agreement, PP Agreement and ESSC Agreement will result in the Debtors achieving cost savings targeted from those groups. The new agreements will provide: -- an 11.5% reduction in base pay rates and a new pay progression, with pay increases of 1% in 2008 and 1.5% in 2009-2010 from the pay reductions when implemented. The wages adjustment represents a 7.5 percentage point increase in rates in effect as a result of the reductions implemented under the interim relief granted to the Debtors under Section 1113(e) of the Bankruptcy Code; -- new work rules designed to increase productivity, including reduced restrictions on the use of part-time employees and reduced vacation accrual rates, sick leave pay rates and paid holidays; -- increased ability to outsource customer service agents services and other services to provider greater flexibility; and -- replacement of the Debtors' current group medical and dental plans applicable to the IAM with a company-wide medical/dental plan requiring 15% employee contribution to the premiums, and modifying deductibles and insurance coverage contributions. The CBAs, as modified, will become amendable on December 31, 2010 if the Debtors emerge from bankruptcy in 2006. If the Debtors do not emerge from bankruptcy until 2007, the agreement may be extended until December 31, 2011. Pension Program The IAM Letters of Agreement contemplates changes to the IAM members' pension plans. If the Debtors' defined benefit pension program remains frozen, future pension contributions by the Debtors to employees covered by the COFPS and ESSC Agreements will be provided under the IAM National Pension Plan, with a 5% employer contribution. Employees covered by the PP Agreements will be given a 5% employer contribution to a defined contribution plan. If the defined benefit plan is terminated, the Debtors' contribution will increase to 6.5% for both groups. The Debtors may seek to terminate their defined benefit pension plans if timely and sufficient legislation is not enacted to reduce pension-funding costs to acceptable levels or the Debtors suffer adverse economic circumstances. Termination of the defined benefit pension plan will not violate the IAM CBAs. Profit Sharing IAM members will participate in Northwest's profit sharing plan based on this formula: (a) if the Debtors' pre-tax income as a percent of revenue for any year in which the plan is in place is less than or equal to 10%, the aggregate payout amount will be equal to 10% of pre-tax income, provided the amount is in excess of $1,000,000; (b) if the Debtors' Pre-Tax Margin for a Plan Year is greater than 10%, the aggregate payout amount will be equal to the sum of: (i) 10% of that portion of income, which would have resulted in the Pre-Tax Margin being equal to 10%; and (ii) 15% of Income for the Plan Year in excess of the 10% Margin Portion, provided the sum is in excess of $1,000,000; and (c) if either the pre-tax income or the sum of 10% Margin Portion and the 15% Excess Margin Portion is less than $1,000,000, the aggregate payment amount will be zero. $181,000,000 Claim IAM will have an allowed $181,000,000 general unsecured prepetition claim in the Debtors' Chapter 11 case. IAM releases all other claims with the exception of certain grievance claims. The IAM Claim does not arise until the effective date of a plan of reorganization for the Debtors and will not be counted for voting purposes to accept or reject the plan. The Debtors and IAM reserve their rights and arguments with respect to the issues of whether a claim for damages arises from rejection of a collective bargaining agreement and to the amount of that claim, should it exist. In the event the Debtors agree to the treatment of that claim with any other union arising from the rejection, the IAM will be accorded consistent treatment. Concessions from Other Groups The Debtors are required to implement revisions to the labor contracts of the Debtors' other unionized employees, which, when combined with savings from the Debtors' nonunion employees, results in cost savings that are reasonably projected to produce $1,131,000,000 in average annual savings in labor costs: -- from January 1, 2006, to December 31, 2010; or -- December 31, 2011, if the Debtors do not emerge from bankruptcy until 2007. About Northwest Airlines Northwest Airlines Corporation (OTC: NWACQ) -- http://www.nwa.com/ -- is the world's fourth largest airline with hubs at Detroit, Minneapolis/St. Paul, Memphis, Tokyo and Amsterdam, and approximately 1,400 daily departures. Northwest is a member of SkyTeam, an airline alliance that offers customers one of the world's most extensive global networks. Northwest and its travel partners serve more than 900 cities in excess of 160 countries on six continents. The Company and 12 affiliates filed for chapter 11 protection on Sept. 14, 2005 (Bankr. S.D.N.Y. Lead Case No. 05-17930). Bruce R. Zirinsky, Esq., and Gregory M. Petrick, Esq., at Cadwalader, Wickersham & Taft LLP in New York, and Mark C. Ellenberg, Esq., at Cadwalader, Wickersham & Taft LLP in Washington represent the Debtors in their restructuring efforts. The Official Committee of Unsecured Creditors has retained Akin Gump Strauss Hauer & Feld LLP as its bankruptcy counsel in the Debtors' chapter 11 cases. When the Debtors filed for protection from their creditors, they listed $14.4 billion in total assets and $17.9 billion in total debts. (Northwest Airlines Bankruptcy News, Issue No. 28; Bankruptcy Creditors' Service, Inc., 215/945-7000). NORTHWEST AIRLINES: Asks Court to Extend Removal Period to Nov. 15 ------------------------------------------------------------------ Northwest Airlines Corp. and its debtor-affiliates ask the United States Bankruptcy Court for the Southern District of New York to further extend the period within which they may remove civil actions to the earlier of: (a) November 15, 2006; or (b) 30 days after entry of an order terminating the automatic stay with respect to the particular action sought to be removed. The Debtors relate that they are parties to numerous actions currently pending before various federal and state courts and administrative agencies. The civil actions involve a wide variety of claims including breach of contract and personal injury claims. The request is without prejudice to their right to seek a further extension after notice and a hearing. Gregory M. Petrick, Esq., at Cadwalader, Wickersham & Taft LLP, in New York, explains that to determine whether to remove any of the Civil Actions, the Debtors must: -- conduct a comprehensive analysis of the Civil Actions and evaluate various factors under, inter alia, 28 U.S.C. Section 1452; and -- determine whether the outcome of a Civil Action may alter the Debtors' rights and liabilities and effect the ultimate distribution to the Debtors' creditors. Mr. Petrick relates that the Debtors, their management and employees, and their professionals have not had sufficient time to investigate fully the Civil Actions or evaluate completely the merits of removing those actions because of the considerable time and attention required to administer the Chapter 11 cases and to operate their business. Mr. Petrick explains that an extension will: -- afford the Debtors a sufficient opportunity to make fully informed decisions concerning removal of each Civil Action; -- assure that the Debtors do not forfeit valuable rights of removal under Section 1452; and -- not prejudice the rights of the Debtors' adversaries. If the Debtors are ultimately successful in removing any of the Civil Actions, any party to that action may seek to have it remanded back to the Court or relevant administrative agency from which it came pursuant to Section 1452(b). Therefore, the extension of time period during which the Civil Actions may be removed will not prejudice the rights of other parties, Mr. Petrick contends. About Northwest Airlines Northwest Airlines Corporation (OTC: NWACQ) -- http://www.nwa.com/ -- is the world's fourth largest airline with hubs at Detroit, Minneapolis/St. Paul, Memphis, Tokyo and Amsterdam, and approximately 1,400 daily departures. Northwest is a member of SkyTeam, an airline alliance that offers customers one of the world's most extensive global networks. Northwest and its travel partners serve more than 900 cities in excess of 160 countries on six continents. The Company and 12 affiliates filed for chapter 11 protection on Sept. 14, 2005 (Bankr. S.D.N.Y. Lead Case No. 05-17930). Bruce R. Zirinsky, Esq., and Gregory M. Petrick, Esq., at Cadwalader, Wickersham & Taft LLP in New York, and Mark C. Ellenberg, Esq., at Cadwalader, Wickersham & Taft LLP in Washington represent the Debtors in their restructuring efforts. The Official Committee of Unsecured Creditors has retained Akin Gump Strauss Hauer & Feld LLP as its bankruptcy counsel in the Debtors' chapter 11 cases. When the Debtors filed for protection from their creditors, they listed $14.4 billion in total assets and $17.9 billion in total debts. (Northwest Airlines Bankruptcy News, Issue No. 28; Bankruptcy Creditors' Service, Inc., 215/945-7000). NORTHWESTERN CORP: Seeks Approval of Asset Sale to Babcock & Brown ------------------------------------------------------------------ NorthWestern Corporation, dba NorthWestern Energy, submitted formal applications with state and federal regulatory authorities seeking approval of its sale to Babcock & Brown Infrastructure. NorthWestern and BBI have filed joint applications with the Federal Energy Regulatory Commission, the Montana Public Service Commission and the Nebraska Public Service Commission and submitted a "petition for a declaratory ruling" to the South Dakota Public Utilities Commission. "We look forward to working with all of the regulatory agencies to successfully complete this process," Steve Boulton, Chief Executive Officer of Babcock & Brown Infrastructure, said. "We expect commissioners and staff to review these applications carefully and to conduct a constructive and thorough examination of the proposed sale of NorthWestern to BBI. We are confident that once this review is completed, the benefits to all stakeholders, and particularly NorthWestern's customers, will be confirmed." "NorthWestern is a financially sound company and reliable utility service provider in three states," Mike Hanson, President and Chief Executive Officer of NorthWestern Energy, said. "We look forward to demonstrating how BBI's acquisition will complement NorthWestern's existing strategy and long tradition of providing safe and reliable service for our customers and communities. This transaction simply allows NorthWestern to exchange one set of shareholders with a short-term outlook for owners with a long-term strategy and vision of the future." The filings initiate the regulatory approval process that is necessary before the $2.2 billion acquisition of NorthWestern can be completed. The transaction, which is also subject to NorthWestern shareholder approval, is expected to close in 2007. Upon closing NorthWestern's common stock will cease to be publicly traded, and the Company will become a locally managed subsidiary of BBI. About Babcock & Brown Infrastructure Babcock & Brown Infrastructure -- http://www.bbinfrastructure.com/ -- is a utility infrastructure company based in Sydney, Australia, listed on the Australian Stock Exchange and admitted to the ASX 200 Index. BBI owns and manages utility and infrastructure businesses worldwide. BBI owns companies in electricity transmission and distribution, gas transmission and distribution, and transport infrastructure, and has ownership interests in thermal and renewable power generation. BBI has a current enterprise value of approximately $4.9 billion. About NorthWestern Energy NorthWestern Energy -- http://www.northwesternenergy.com/-- is one of the largest providers of electricity and natural gas in the Upper Midwest and Northwest, serving approximately 628,500 customers in Montana, South Dakota and Nebraska. * * * As reported in the Troubled Company Reporter on May 1, 2006, Moody's Investors Service affirmed the ratings of NorthWestern Corporation. The rating outlook for Northwestern remains positive. The action follows the announcement that Northwestern had entered into a purchase and sale agreement with Babcock & Brown Infrastructure, for BBI's purchase of all of the shares of NOR. Moody's also affirmed NOR's other ratings, including its senior secured debt of Ba1, senior unsecured debt of Ba2 and its SGL-2 liquidity rating. NRG VICTORY: U.S. Court Hearing on Chapter 15 Petition Deferred --------------------------------------------------------------- The hearing to consider the chapter 15 petition filed by Alan Boyce, as foreign representative of NRG Victory Reinsurance Limited, in the U.S. Bankruptcy Court for the Southern District of New York, is deferred from June 12, 2006, to a date to be confirmed after a reconvened meeting of creditors is scheduled. A meeting on a proposed scheme of arrangement with NRG Victory and its creditors has been held on May 23, 2006 in London. However, in the days leading up to the Creditors' Meeting, certain of NRG Victory's reinsurance policyholders asserted that they had very significant claims against NRG and expressed concern as to how their claims would be valued under the proposed Scheme. Given the significant impact which the Scheme will have on both NRG and its Creditors, NRG concluded that more time is required to understand the nature of the claims and to discuss with policyholders their concerns about how those claims would be treated under the Scheme. The decision was then taken to adjourn the Creditors' Meeting. NRG will notify its Creditors of the date and location of the reconvened meeting through its Website http://www.nrg-solventscheme.co.uk/ Notice of the Creditors' Meeting and other related documents have been circulated to known Creditors, brokers and other intermediaries. Copies of the documents may be obtained from: NRG Victory Reinsurance Limited c/o NRG Victory Management Services Limited Attn: Martin Baker Lyn Davies Charter House, Park Street, Ashford, Kent, TN24 8EQ United Kingdom Tel: +44(0) 1233 722 600 Fax: +44(0) 1233 722 601 Copies of the documents can also be downloaded and printed from NRG's Website at http://www.nrg-solventscheme.co.uk/ Headquartered in Ashford, England, NRG Victory Reinsurance Ltd. operated a reinsurance company but ceased underwriting operations in 1993. Alan Boyce, in his capacity as foreign representative for the company, filed a chapter 15 petition on May 12, 2006 (Bankr. S.D.N.Y. Case No. 06-11052). Sara M. Tapinekis, Esq., Andrew P. Brozman, Esq., David A. Sullivan, Esq., at Clifford Chance US LLP, represents Mr. Boyce in the U.S. proceedings. As of the petition date, the Debtor estimated more than US$100 million in assets and debts. OLYMPIA GROUP: Assets Auction Set for June 13 in California ----------------------------------------------------------- Great American Group will conduct an auction of Olympia Group Inc.'s assets at 10:30 a.m., on June 13, 2006, at 14635 Baldwin Park Town Center, Baldwin Park in California. No inventory will be available for viewing during the auction. However, items are available for viewing from 8:00 a.m. to 5:00 p.m. on June 12, 2006, at 505 South 7th Avenue, City of Industry in California. The auction, approved by the U.S. Bankruptcy Court for the Central District of California, will feature over $15 million of branded home and gardening tools including Olympia Tool, Roughneck, Village Blacksmith, Thorsen, Continental, E-Z Read and Babco. Over 200 of the Debtor's patents and trademarks, with an appraised value of $2.5 million, are also up for sale during the auction. The Debtor's intellectual property rights are well known in the consumer and trade industry and are protected in the U.S., Mexico, Canada, China, Great Britain, and Germany. All buyers are required to make a 25% deposit on the day of the sale for all purchases. A 10% buyer's premium will apply to each item sold during the auction. A 13% buyer's premium will apply to on-line buyers. Interested buyers may contact: Joe Rivkin Great American Group Phone: 626-336-4999 ext 113 Buyers can also bid in real-time along with the live auction attendees at http://www.greatamerican.com/Online bidders are required to pre-register at Great American's website. Headquartered in City of Industry, California, Olympia Group Inc. manufactures hand & garden tools, abrasives, tool carrying containers, pneumatics, cutting and striking tools. The Company filed for chapter 11 protection on Jan. 31, 2006 (Bankr. C.D. Calif. Case No. 06-10111). Jeffrey W. Dulberg, Esq., at Pachulski Stang Ziehl Young & Jones PC, represents the Debtor. ORIS AUTOMOTIVE: Court Okays Johnston Barton as Bankruptcy Counsel ------------------------------------------------------------------ The Honorable Tamara O. Mitchell of the U.S. Bankruptcy Court for the Northern District of Alabama in Birmingham authorized Oris Automotive Parts Alabama, Ltd., to employ Johnston, Barton, Proctor & Powell LLP as its bankruptcy counsel. As reported in the Troubled Company Reporter on April 10, 2006, Johnston Barton will: a. give the Debtor legal advice with respect to its duties as debtor-in-possession in the continued operation of its business and management of its assets; b. prepare on behalf of the Debtor necessary motions, applications, answers, contracts, reports and other legal documents; c. perform any and all legal services on behalf of the Debtor arising out of or connected with the bankruptcy proceedings; d. perform other legal services for the Debtor including, but not limited to, work arising out of labor, tax, environmental, corporate, litigation and other matters involving the Debtor; e. advise and consult with the Debtor for the preparation of all necessary schedules, disclosure statement and plans of reorganization; and f. perform all other legal services required by the Debtor in connection with the Debtor's chapter 11 case. Clark R. Hammond, Esq., a partner at Johnston Barton, told the Court that the Firm's professionals bill: Professional Designation Hourly Rate ------------ ----------- ----------- Clark R. Hammond, Esq. Partner $330 Shayana Boyd Davis, Esq. Associate $230 Max A. Moseley, Esq. Associate $220 Lindan J. Hill, Esq. Associate $200 Mr. Hammond assured the Court that the Firm is disinterested as that term is defined in Section 101(14) of the Bankruptcy Code. Headquartered in McCalla, Alabama, Oris Automotive Parts Alabama, Ltd. -- http://www.oris-gmbh.de/-- manufactures automotive parts. The company filed for chapter 11 protection on March 16, 2006 (Bankr. N.D. Ala. Case No. 06-00813). Clark R. Hammond, Esq., at Johnston, Barton, Proctor & Powell LLP, represents the Debtor in its restructuring efforts. When the Debtor filed for protection from its creditors, it estimated assets between $1 million to $10 million and debts between $10 million to $50 million. ORIS AUTOMOTIVE: Bids for Assets Must be Submitted by June 16 ------------------------------------------------------------- The Honorable Tamara O. Mitchell of the U.S. Bankruptcy Court for the Northern District of Alabama in Birmingham approved Oris Automotive Parts Alabama, Ltd.'s modified sales procedures. Judge Mitchell also approved the $6,300,000 bid of Flex-N-Gate as the stalking horse bidder for the Debtor's leasehold interest in real estate, equipment, inventory, intellectual property and other related assets free and clear of liens, claims, encumbrances and interests. Flex-N-Gate is entitled to a $250,000 break-up fee if the Debtor's assets are sold to another buyer. Auction The auction of the Debtor's assets will be held at the offices of the Debtor's counsel at 9:00 a.m. on June 19, 2006. Bids must be submitted and received no later than 12:00 p.m. on June 16, 2006, to: Clark R. Hammond, Esq. Johnston Barton Proctor & Powell, LLP 1901 6th Avenue North, Suite 2900 Birmingham, AL 35203 Fax: (205) 458-9500 All potential bidders must make a $500,000 deposit in certified check, cashier's check or letter of credit from a financial institution acceptable to the Debtor, or by wire transfer. The initial Bid received by the Debtor from qualified bidders prior to the auction must be for cash consideration of $300,000 more than the consideration payable under the EOI or the Asset Purchase Agreement. The initial overbid made at the Auction, must be a qualified bid of not less than $6,600,000, and any successive overbids, will be made in increments of not less than $50,000. Objections, if any, must be submitted to the Court by 12:00 p.m. on June 16, 2006. Judge Mitchell will convene a sale hearing at 11:00 a.m. on June 19, 2006. The Debtor believes that an immediate sale of the Assets is essential in order to obtain the maximum value for the Debtor's estate and its creditors. The Debtor wants to consummate the sale at the earliest possible date so that the value of the assets will be optimized and not substantially diminished. Further, the Debtor believes that if the sale process is delayed, potential bidders who have expressed interest in the Debtor's assets may lose interest. Moreover, the Debtor source of funding for operations will terminate on or before June 30, 2006. The APA entered into with Flex provides that it is obligated to consummate the sale only if it closes on or before June 30, 2006. A full-text copy of the Debtor's sales procedures is available for free at http://ResearchArchives.com/t/s?af0 Headquartered in McCalla, Alabama, Oris Automotive Parts Alabama, Ltd. -- http://www.oris-gmbh.de/-- manufactures automotive parts. The company filed for chapter 11 protection on March 16, 2006 (Bankr. N.D. Ala. Case No. 06-00813). Clark R. Hammond, Esq., at Johnston, Barton, Proctor & Powell LLP, represents the Debtor in its restructuring efforts. When the Debtor filed for protection from its creditors, it estimated assets between $1 million to $10 million and debts between $10 million to $50 million. OVERSEAS SHIPHOLDING: Earns $128.3 Million in First Quarter ----------------------------------------------------------- Overseas Shipholding Group, Inc., reported $128.3 million of net income on $291 million of revenues for the three months ended March 31, 2006, compared to a $164.9 million net loss on $271 million of revenues for the same period in 2005. At March 31, 2006, the Company's balance sheet showed $3.3 billion in total assets and $1.3 billion in total liabilities. A full-text copy of the Company's Quarterly Report is available for free at http://researcharchives.com/t/s?ae7 With offices in New York, Athens, London, Manila, Newcastle and Singapore, Overseas Shipholding Group, Inc. (NYSE:OSG) -- http://www.osg.com/-- is widely recognized as one of the world's most customer focused marine transportation companies providing high quality tonnage and value-added services to major oil companies and other major charterers around the globe. The Company is focused on identifying and meeting the needs of our partners and customers in a rapidly changing market. * * * As reported in the Troubled Company Reporter on Feb. 15, 2005, Standard & Poor's Ratings Services affirmed its ratings, including the 'BB+' corporate credit rating, on Overseas Shipholding and removed all ratings from CreditWatch, where they were placed on Dec. 14, 2004. S&P's CreditWatch placement followed the Company's announcement that it would acquire Stelmar Shipping Ltd. Overseas Shipholding completed its $1.3 billion acquisition of Stelmar on Jan. 20, 2005. S&P said the outlook is stable. As reported in the Troubled Company Reporter on Feb. 10, 2005, Moody's Investors Service confirmed Overseas Shipholding's senior unsecured and senior implied ratings at Ba1. Moody's also changed the rating outlook to negative from stable. This completed Moody's ratings review opened on Dec. 13, 2004, following the announcement by the company of its acquisition of Stelmar Shipping (not rated) for $1.36 billion. PATRON SYSTEMS: Posts $4.4 Mil. Net Loss in 2006 1st Fiscal Qtr. ----------------------------------------------------------------- Patron Systems, Inc., filed its first quarter financial statements for the three months ended March 31, 2006, with the Securities and Exchange Commission on May 22, 2006. The Company reported a $4,400,074 net loss on $261,785 of revenues for the three months ended March 31, 2006. At March 31, 2006, the Company's balance sheet showed $12,947,755 in total assets and $7,460,745 in total liabilities, resulting in $5,487,010 stockholders' equity. The Company's March 31 balance sheet also showed strained liquidity with $1,800,847 in total current assets available to pay $7,460,745 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?abf Going Concern Doubt As reported in the Troubled Company Reporter on May 16, 2006, Marcum & Kliegman LLP expressed substantial doubt about Patron Systems, Inc.'s ability to continue as going concern after auditing the Company's financial statements for the year ended Dec. 31, 2005. The accounting firm pointed to the Company's net losses incurred since its inception, its working capital deficiency and the numerous litigation matters it is involved with. About Patron Systems Headquartered in Boulder, Colorado, Patron Systems, Inc. -- http://www.patronsystems.com/-- offers integrated enterprise email and data security and enforceable compliance. The Company's suite of Active Message Management(TM) products addresses eform creation, capture, sharing, and manages data in an industry standard format as well as providing solutions for mailbox management, email policy management, email retention policies, archiving and eDiscovery, proactive email supervision, and protection of messages and their attachments in motion and at rest. PICK UPS PLUS: Post $412,449 Net Loss in 2006 1st Fiscal Quarter ---------------------------------------------------------------- Pick Ups Plus, Inc., filed its first quarter financial statements for the three months ended March 31, 2006, with the Securities and Exchange Commission on May 22, 2006. The Company reported a $412,449 net loss on $380,921 of revenues for the three months ended March 31, 2006. At March 31, 2006, the Company's balance sheet showed $593,501 in total assets and $4,222,734 in total liabilities, resulting in a $3,629,233 stockholders' deficit. The Company's March 31 balance sheet also showed strained liquidity with $146,117 in total current assets available to pay $4,162,134 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?ac0 Going Concern Doubt As reported in the Troubled Company Reporter on May 16, 2006, Lazar Levine & Felix LLP in New York raised substantial doubt about Pick Ups Plus, Inc.'s ability to continue as a going concern after auditing the consolidated financial statements of the Company for the years ended Dec. 31, 2005, and 2004. The auditor pointed to the Company's losses, negative working capital, and accumulated deficit. About Pick Ups Plus Pick Ups Plus, Inc. (OTC BB: PUPS) -- http://www.pickupsplus.com/ -- is a retail operator and franchiser of automotive parts and accessories stores catering to the light truck and SUV market, with five franchised locations in the U.S. and two company owned-stores. It markets and distributes the ValuGard line of professional car care and environmental protection products through its Automotive Preservation, Inc., subsidiary to automotive dealerships for new vehicle preparation, detailing shops and automotive specialty stores. PINNACLE ENT: To Buy Harrah Entertainment's Assets for $25 Million ------------------------------------------------------------------ Pinnacle Entertainment, Inc., signed a definitive agreement under which it will acquire certain Lake Charles, Louisiana gaming assets of Harrah's Entertainment, Inc. (NYSE: HET). The agreement, which formalizes a letter of intent reported on April 17, also calls for the sale of certain of Pinnacle's Casino Magic Biloxi assets to a subsidiary of Harrah's Entertainment. Terms of the Agreement Under the agreement, Pinnacle will acquire two gaming subsidiaries of Harrah's, which own two casino boats, related licenses and permits, and a 263-room hotel. Harrah's Lake Charles was severely damaged by Hurricane Rita in September 2005. Harrah's will acquire Pinnacle's Casino Magic Biloxi site and certain related assets, and receive an additional payment of approximately $25 million from Pinnacle. Casino Magic Biloxi has been closed since being struck by Hurricane Katrina on Aug. 29, 2005, which destroyed the gaming barge and extensively damaged the hotel complex. Each company will retain its insurance claims. "The purchase of Harrah's Lake Charles will allow us to build on our success at L'Auberge du Lac, which just marked its first-year anniversary and is now the state's leading generator of riverboat gaming revenues," Daniel R. Lee, Chairman and Chief Executive Officer, said. "In addition to expanding L'Auberge with a 250- room hotel project, we plan to add another riverboat casino in the Lake Charles area. We are also exploring options for the other license elsewhere in Louisiana. We enjoyed being a part of the Biloxi community for many years and hope to return to Mississippi at some point in the future." The definitive agreement is subject to receipt of all required regulatory approvals, as well as the passage of a local-option referendum in Lake Charles that the Company anticipates will be on the ballot in late September. If those conditions are satisfied, the transaction is expected to close in the fourth quarter of 2006. About Harrah's Founded in 1937, Las Vegas-based Harrahs Entertainment, Inc. -- http://www.harrahs.com/-- is the world's premier provider of branded casino entertainment. The Company owns or manages through various subsidiaries more than 40 casinos in three countries, primarily under the Harrah's, Caesars and Horseshoe brand names. About Pinnacle Headquartered in Las Vegas, Nevada, Pinnacle Entertainment, Inc. (NYSE: PNK) -- http://www.pnkinc.com/-- owns and operates casinos in Nevada, Louisiana, Indiana and Argentina, owns a hotel in Missouri, receives lease income from two card club casinos in the Los Angeles metropolitan area, has been licensed to operate a small casino in the Bahamas, and owns a casino site and has significant insurance claims related to a hurricane-damaged casino previously operated in Biloxi, Mississippi. Pinnacle opened a major casino resort in Lake Charles, Louisiana in May 2005 and a new replacement casino in Neuquen, Argentina in July 2005. * * * As reported in the Troubled Company Reporter on May 24, 2006, Standard & Poor's Ratings Services revised its CreditWatch implications on Las Vegas-based casino owner and operator Pinnacle Entertainment Inc. to positive from negative. As reported in the Troubled Company Reporter on March 20, 2006, Moody's Investors Service placed the ratings of Pinnacle Entertainment, Inc. on review for possible upgrade. Pinnacle ratings affected include its B2 corporate family rating, B1 senior secured bank loan rating, and Caa1 senior subordinated debt rating. As reported in the Troubled Company Reporter on Mar. 15, 2006, Fitch Ratings has placed the ratings of Pinnacle Entertainment on Rating Watch Negative. The ratings affected include 'B' issuer default rating; 'BB/RR1' senior secured credit facility rating; and 'CCC+/RR6' senior subordinated note rating. PMA CAPITAL: Fitch Affirms Low-B Issuer Default & Sr. Debt Ratings ------------------------------------------------------------------ Fitch Ratings affirmed the issuer default rating and senior debt rating of PMA Capital Corp. at 'BB-' and 'B+' respectively. Fitch also affirmed the 'BBB-' insurer financial strength ratings of the three active primary insurance subsidiaries collectively referred to as PMA Insurance Group: -- Pennsylvania Manufacturers Association Insurance Company; -- Pennsylvania Manufacturers Indemnity Company; and -- Manufacturers Alliance Insurance Company. Lastly, Fitch affirmed the 'B-' IFS rating of PMA Capital Insurance Company's (PMA Re) run-off reinsurance subsidiary. All Rating Outlooks are Stable. Fitch last reviewed and affirmed all of PMA's ratings on May 8, 2006. That is the date when the Pennsylvania Department of Insurance approved a $73.5 million extraordinary dividend from PMA Re to PMA. Since that time, Fitch met with senior management for an annual review of the ratings. In addition, PMA filed an 8k on May 12, 2006 stating that it will redeem $35 million of the 6.50% senior secured convertible debentures due 2022. PMA's main challenge is to smoothly manage the run-off of PMA Re and Caliber One operations while simultaneously restoring PMAIG's competitive profile. Fitch recognizes this is a process that will take time and prudence; however, Fitch notes that PMA is starting to build positive momentum in its operations. PMA's ratings continue to be based on: * the company's expertise in worker's compensation; * strong risk based capital; and * conservative investment portfolio. Offsetting these factors are: * the company's concentration in Pennsylvania Worker's compensation; * run-off operation uncertainty; and * the competitive environment of chosen markets. As of March 31, 2006, PMAIG had net premiums written of $113.4 million, compared with $105.5 million for the same period in the prior year and a GAAP combined ratio of 102.1%, compared with a 103.4% prior year. PMA Capital Insurance Company: -- Insurer financial strength affirmed at 'B-'/Stable Manufacturers Alliance Insurance Co.: -- Insurer financial strength affirmed at 'BBB-'/Stable Pennsylvania Manufacturers Association Insurance Co.: -- Insurer financial strength affirmed at 'BBB-'/Stable Pennsylvania Manufacturers Indemnity Co.: -- Insurer financial strength affirmed at 'BBB-'/Stable PMA Capital Corp.: -- Issuer default rating affirmed at 'BB-'/Stable -- Senior debt rating affirmed at 'B+'/Stable -- $57.5 million senior notes, 8.5% due June 15, 2018 -- $79 million convertible debt, 6.5% due Sept. 30, 2022 -- $0.7 million convertible debt, 8.5%, due Sept. 30, 2022 POGO PRODUCING: Closes Sale of 50% Stake in Gulf of Mexico Assets ----------------------------------------------------------------- Pogo Producing Company closed the sale of an undivided 50% interest in each of Pogo's Gulf of Mexico oil and gas leasehold interests to Mitsui & Co., Ltd., Mitsui & Co. (U.S.A.), Inc. and Mitsui Oil Exploration Co., Ltd. for $500 million, subject to customary purchase price adjustments. Proceeds from the sale have been used to reduce the outstanding indebtedness recently incurred in funding the acquisition of Latigo Petroleum, Inc., which closed on May 2, 2006. "We are pleased with the timely closing of the Mitsui transaction. It represents another significant step in our stated strategy to grow Pogo's onshore North American presence," said Paul G. Van Wagenen, Chairman and Chief Executive Officer of Pogo. "We are committed to enhancing the company's value and believe that our strategy will also reduce our offshore risks." On a pro forma basis, the sale of 50% interest in Pogo's Gulf of Mexico assets and the nearly simultaneous acquisition of Latigo's oil and gas assets in the Permian Basin and Texas panhandle are expected to: * increase Pogo's total proven oil and gas reserves by more than 6% to 2,174 billion cubic feet of natural gas equivalent; * extend Pogo's indicated reserves life to over 10 years; * add over 400 development and exploration drilling locations to Pogo's inventory; and * complement an existing core operating area for Pogo with the addition of a significant amount of underdeveloped acreage. The company expects to record a pre-tax gain in the second quarter from the sale of approximately $300 million. Additionally, Pogo expects to incur a pre-tax non-cash charge of approximately $10 million to $15 million related to certain of Pogo's current Gulf of Mexico hedges, which no longer qualify for hedge accounting treatment. About Pogo Producing Headquartered in Houston, Texas, Pogo Producing Company (NYSE: PPP) -- http://www.pogoproducing.com/-- explores for, develops and produces oil and natural gas. Pogo owns approximately 4,000,000 gross leasehold acres in major oil and gas provinces in North America, 3,119,000 acres in New Zealand and 1,480,000 acres in Vietnam. * * * As reported on the Troubled Company Reporter on June 2, 2006, Moody's Investors Service assigned a B2 rating to Pogo Producing Company's pending $400 million of seven year senior subordinated notes. Note proceeds would fund the majority of Pogo's pending $750 million acquisition of Latigo Petroleum. Moody's also affirmed Pogo's Ba3 corporate family rating, existing B2 senior subordinated note ratings, and the stable rating outlook. As reported in the Troubled Company Reporter on June 2, 2006, Standard & Poor's Ratings Services assigned its 'B+' rating to oil and gas exploration and production company Pogo Producing Co.'s proposed $400 million senior subordinated notes due 2013. Proceeds from the note offering will be used to repay senior debt that was used to finance its recent acquisition of Latigo Petroleum Inc. The outlook is negative. As of March 31, 2006, Houston, Texas-based Pogo had $1.6 billion of debt outstanding. POGO PRODUCING: Prices $450 Million of 7-7/8% Senior Sub. Notes --------------------------------------------------------------- Pogo Producing Company priced a private offering of $450 million of 7-7/8% Senior Subordinated Notes due 2013. Pogo intends to use net proceeds from the sale of the notes to repay senior debt, a portion of which was used to finance the recent acquisition of Latigo Petroleum, Inc. Pogo expects to close the sale of the notes on June 6, 2006, subject to satisfaction of customary closing conditions. The notes have not been registered under the Securities Act of 1933, as amended, or any state securities laws and, unless so registered, may not be offered or sold in the United States except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and applicable state securities laws. About Pogo Producing Headquartered in Houston, Texas, Pogo Producing Company (NYSE: PPP) -- http://www.pogoproducing.com/-- explores for, develops and produces oil and natural gas. Pogo owns approximately 4,000,000 gross leasehold acres in major oil and gas provinces in North America, 3,119,000 acres in New Zealand and 1,480,000 acres in Vietnam. * * * As reported on the Troubled Company Reporter on June 2, 2006, Moody's Investors Service assigned a B2 rating to Pogo Producing Company's pending $400 million of seven year senior subordinated notes. Note proceeds would fund the majority of Pogo's pending $750 million acquisition of Latigo Petroleum. Moody's also affirmed Pogo's Ba3 corporate family rating, existing B2 senior subordinated note ratings, and the stable rating outlook. As reported in the Troubled Company Reporter on June 2, 2006, Standard & Poor's Ratings Services assigned its 'B+' rating to oil and gas exploration and production company Pogo Producing Co.'s proposed $400 million senior subordinated notes due 2013. Proceeds from the note offering will be used to repay senior debt that was used to finance its recent acquisition of Latigo Petroleum Inc. The outlook is negative. As of March 31, 2006, Houston, Texas-based Pogo had $1.6 billion of debt outstanding. PROTOCALL TECHNOLOGIES: Founder Bruce Newman Assumes CEO Post ------------------------------------------------------------- Protocall Technologies Incorporated disclosed that Bruce Newman, the company founder and a member of the board of directors, has assumed the post of President and Chief Executive Officer, effective immediately. Mr. Newman succeeds former Chief Executive Officer Donald J. Hoffmann, who will continue in an advisory capacity with Protocall. "As the leader in digital on-demand technology for retailers, Protocall is poised to take advantage of substantial opportunities for new growth and Bruce has the experience and vision to capitalize on these new growth areas," Peter Greenfield, chairman of the board of directors for Protocall, said. "We are fortunate that Don has agreed to remain available to us as an advisor as we move into a new phase for the company." Develop Opportunities in Entertainment DVD Market Protocall, whose TitleMatch(TM) system offers the ability for retailers to have 100% in-stock availability from a virtual inventory of compact disks, digital video disks and digital media products, intends to build on its success in the retail software market by focusing on developing opportunities for entertainment DVDs, including movies, television shows and music. "I am very excited about returning to the day-to-day management of Protocall, as we move toward several new and very promising business opportunities with DVD movies and TV content," Mr. Newman said. "Our technology offers cost efficiencies for retailers and content owners, and more choice and availability for the consumer." Protocall currently has licensing agreements with more than 200 software publishers covering more than 1,200 titles and is actively working with a number of major movie studios to offer their television and movie content through the TitleMatch system, Mr. Newman said. "We see substantial opportunities for new growth in the entertainment DVD market," Mr. Newman stated. "Our experience with virtual inventory systems in the software market has demonstrated the significant opportunity that our on-demand system offers our retail clients and content owners. We now intend to focus our efforts on taking full advantage of the possibilities offered by the entertainment market." Protocall's TitleMatch virtual inventory system enables walk-in and Internet retailers, as well as, content owners, to increase product availability at the point of sale while reducing their dependence on physical inventories, one of the industry's largest cost categories. Mr. Newman has over 20 years of hands-on entrepreneurial experience in building successful, high margin technology companies. In 1998, he founded Protocall Technologies Incorporated, which developed the world's first secure electronic delivery system for on-demand production of fully packaged digital media products. Mr. Newman served as President and Chief Executive Officer of Protocall until June 2005, and now reassumes both those positions in addition to serving on the company's board of directors. During Mr. Newman's earlier tenure at Protocall, he assembled the company's management, product development, operations and sales teams; managed equity financings; and secured first-time ever licensing agreements from Symantec, Intuit, Corel, Atari, Vivendi Universal and many other software companies to reproduce their products at point-of-sale locations. Additionally, Mr. Newman structured first-time electronic distribution deals with CompUSA and other major resellers. Prior to Protocall, Mr. Newman founded a software distribution company that became one of the world's largest niche distributors of high-end font software products to the book publishing and professional design industries. Mr. Newman is an inventor of record on two U.S. patents in the area of electronic product delivery and co-author of a book on computer typeface software for professional users. First Quarter Financials Protocall is now in the process of completing its' first quarter report ended March 31, 2006, and expects it to be filed within the next two weeks. Based in Commack, New York, Protocall Technologies Incorporated (OTCBB: PCLI.OB) -- http://www.protocall.com/-- is the innovator of on-demand digital content distribution. Its flagship product line, the SoftwareToGo(R) electronic delivery system, is the industry's standard for on-site production of brand name software media, for both traditional and Web "e-Tailers." Protocall provides retailers and software publishers with specialized systems programming, digital rights management and electronic merchandising services for front and back-end fulfillment operations. PROTOCALL TECHNOLOGIES: Eisner LLP Raises Going Concern Doubt ------------------------------------------------------------- Eisner LLP in New York raised substantial doubt about Protocall Technologies Incorporated'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 insignificant revenues, losses since inception, accumulated deficit, and dependence on funds generated from the sale of common stock and loans. The Company reported a $5,154,005 net loss on $505,512 of net sales for the year ended Dec. 31, 2005. At Dec. 31, 2005, the Company's balance sheet showed $1,190,684 in total assets and $3,380,565 in total liabilities, resulting in a $2,189,881 stockholders' deficit. The Company's Dec. 31 balance sheet also showed strained liquidity with $557,042 in total current assets available to pay $2,340,206 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?ae9 Securities Purchase Agreements The Company entered into a securities purchase agreement in September 2005 with an investor in a private placement exempt from the registration requirements under the Securities Act of 1933, as amended. The Company sold 2,380,952 shares of common stock, par value $0.001 per share, at $.336 per share, and warrants to purchase up to 2,380,952 shares of its common stock, for a total of $800,000 ($715,260 net of finder's fee and various other expenses). The Company used the net proceeds of the private offering primarily for funding working capital. In December 2005, the Company entered into a series of securities purchase agreements with investors in private placements exempt from the registration requirements under the Securities Act of 1933, as amended. The Company sold 3,441,314 shares of common stock, par value $0.001 per share, at prices ranging from $.173 to $.128 per share, and warrants to purchase up to 1,720,657 shares of its common stock, for a total of $550,000. The Company used the net proceeds of the private offering primarily for funding working capital. Based in Commack, New York, Protocall Technologies Incorporated (OTCBB: PCLI.OB) -- http://www.protocall.com/-- is the innovator of on-demand digital content distribution. Its flagship product line, the SoftwareToGo(R) electronic delivery system, is the industry's standard for on-site production of brand name software media, for both traditional and Web "e-Tailers." Protocall provides retailers and software publishers with specialized systems programming, digital rights management and electronic merchandising services for front and back-end fulfillment operations. Q COMM: Posts $1.8 Mil. Net Loss in 2006 1st Fiscal Quarter ----------------------------------------------------------- Q Comm International, Inc., filed its first quarter financial statements for the three months ended March 31, 2006, with the Securities and Exchange Commission on May 22, 2006. The Company reported a $1,802,512 net loss on $13,399,260 of sales for the three months ended March 31, 2006. At March 31, 2006, the Company's balance sheet showed $6,947,130 in total assets, $1,824,004 in total liabilities and $5,132,216 of 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?ae1 Going Concern Doubt Hansen, Barnett & Maxwell, Salt Lake City, Utah, expressed substantial doubt about Q Comm International's ability to continue as a going concern after it audited the Company's financial statements for the fiscal years ended Dec. 31, 2005 and 2004. The auditing firm pointed to the recurring losses from operations and accumulated deficit. About Q Comm Q Comm International is a prepaid transaction processor that electronically distributes prepaid products from service providers to the point of sale. Q Comm offers proprietary prepaid transaction processing platforms, support of various point-of- sale(POS) terminals, product management, merchandising, customer support and engineering. Q Comm's solutions are currently used by wireless carriers or mobile operators, telecom distributors, and various retailers to sell a wide range of prepaid products and services including prepaid wireless or prepaid mobile, prepaid phone cards, prepaid dial tone and prepaid bank cards, such as prepaid MasterCard. QWEST COMMS: March 31 Working Capital Deficit Tops $923 Million --------------------------------------------------------------- Qwest Communications International Inc. reported $88 million of net income on $3.5 billion of revenues for the three months ended March 31, 2006, compared to $57 million of net income on $3.4 million of revenues for the same period in 2005. At March 31, 2006, the Company's balance sheet showed $21.1 billion in total assets and $24.2 billion in total liabilities, resulting in a $3 billion equity deficit. The Company's March 31 balance sheet also showed strained liquidity with $3 billion in total current assets available to pay $3.9 billion in total current liabilities coming due within the next 12 months. A full-text copy of the Company's Quarterly Report is available for free at http://researcharchives.com/t/s?aee Qwest Communications International Inc. -- http://www.qwest.com/ -- is a leading provider of high-speed Internet, data, video and voice services. With approximately 40,000 employees, Qwest is committed to the "Spirit of Service" and providing world-class services that exceed customers' expectations for quality, value and reliability. * * * As reported in the Troubled Company Reporter on Nov. 17, 2005, Fitch has upgraded and removed from Rating Watch Positive Qwest Communications International, Inc.'s Issuer Default Rating to 'B+' from 'B'. Fitch also upgraded specific issue ratings and recovery ratings assigned to Qwest and its wholly owned subsidiaries, including upgrading the senior unsecured debt rating assigned to Qwest Corporation to 'BB+' from 'BB'. In addition, Fitch revised the Rating Outlook to Positive from Stable. REFCO INC: Can Assumes and Assign Fifth Avenue Lease to Undertow ---------------------------------------------------------------- The U.S. Bankruptcy Court for the Southern District of New York gave Refco Inc., and its debtor-affiliates authority to assume and assign to Undertow Holdings, LLC, a real estate sub-lease for property located at 461 Fifth Avenue in New York. J. Gregory Milmoe, Esq., at Skadden, Arps, Slate, Meagher & Flom LLP, in New York, relates that Refco Group Ltd., LLC, leases real property located on the 21st floor of the Fifth Avenue building from GMAC Commercial Finance, LLC, for $26,064 per month. GMAC in turn leases the Premises from 461 Fifth Avenue Associates, L.L.C., pursuant to a lease dated March 8, 2001. The Sublease currently expires April 30, 2008. Prior to filing for bankruptcy, the Premises was utilized by Refco Trading Services, a business unit associated with Refco LLC, and Breakwater, an independent volume trading business supervised by Mark Schneider, a former Refco employee. In December 2005, Refco Trading ceased its operations and its personnel vacated the Premises. Shortly after filing for bankruptcy, Undertow Holdings acquired the Breakwater business conducted at the Premises. Mr. Schneider, whose employment with the Debtors terminated on February 28, 2006, manages the Breakwater operations at the Premises on Undertow's behalf. Mr. Milmoe states that no cure would be required prior to the assignment of the Sublease to Undertow Holdings. Upon the assignment, the Debtors and Undertow Holdings will consummate the sale of various furniture and other equipment owned by the Debtors at the Premises for a $10,000 cash consideration. The Debtors believe that the assumption and assignment of the Sublease will relieve them from incurring about $350,000 in damages arising from a rejection of the Sublease. About Refco Inc Based in New York, New York, Refco Inc. -- http://www.refco.com/ -- is a diversified financial services organization with operations in 14 countries and an extensive global institutional and retail client base. Refco's worldwide subsidiaries are members of principal U.S. and international exchanges, and are among the most active members of futures exchanges in Chicago, New York, London and Singapore. In addition to its futures brokerage activities, Refco is a major broker of cash market products, including foreign exchange, foreign exchange options, government securities, domestic and international equities, emerging market debt, and OTC financial and commodity products. Refco is one of the largest global clearing firms for derivatives. The Company and 23 of its affiliates filed for chapter 11 protection on Oct. 17, 2005 (Bankr. S.D.N.Y. Case No. 05-60006). J. Gregory Milmoe, Esq., at Skadden, Arps, Slate, Meagher & Flom LLP, represent the Debtors in their restructuring efforts. Luc A. Despins, Esq., at Milbank, Tweed, Hadley & McCloy LLP, represents the Official Committee of Unsecured Creditors. Refco reported $16.5 billion in assets and $16.8 billion in debts to the Bankruptcy Court on the first day of its chapter 11 cases. Refco LLC, an affiliate, filed for chapter 7 protection on Nov. 25, 2005 (Bankr. S.D.N.Y. Case No. 05-60134). Refco, LLC, is a regulated commodity futures company that has businesses in the United States, London, Asia and Canada. Refco, LLC, filed for bankruptcy protection in order to consummate the sale of substantially all of its assets to Man Financial Inc., a wholly owned subsidiary of Man Group plc. Three more affiliates of Refco, Westminster-Refco Management LLC, Refco Managed Futures LLC, and Lind-Waldock Securities LLC, filed for chapter 11 protection on June 6, 2006 (Bankr. S.D.N.Y. Case Nos. 06-11260 through 06-11262). (Refco Bankruptcy News, Issue No. 31; Bankruptcy Creditors' Service, Inc., 215/945-7000). REFCO INC: Chap. 11 Trustee Withdraws Request to Hire Klee Tuchin ----------------------------------------------------------------- Marc S. Kirschner, the Chapter 11 trustee for the estate of Refco Capital Markets, Ltd., informed the U.S. Bankruptcy Court for the Southern District of New York that he is withdrawing his request to employ Klee, Tuchin, Bogdanoff & Stern LLP, as his special bankruptcy counsel for the limited purposes of analyzing factual information being investigated by other law firms and financial advisers THE RCM Trustee tells the Court that Klee Tuchin has advised him that a possible conflict exists in respect of its proposed representation for which the firm initially believed applicable waiver arrangements were in place. To avoid any dispute, Klee Tuchin has asked the RCM Trustee to withdraw the Application. The RCM Trustee says that he will seek to retain a replacement counsel for the purposes provided in the Application. Based in New York, New York, Refco Inc. -- http://www.refco.com/ -- is a diversified financial services organization with operations in 14 countries and an extensive global institutional and retail client base. Refco's worldwide subsidiaries are members of principal U.S. and international exchanges, and are among the most active members of futures exchanges in Chicago, New York, London and Singapore. In addition to its futures brokerage activities, Refco is a major broker of cash market products, including foreign exchange, foreign exchange options, government securities, domestic and international equities, emerging market debt, and OTC financial and commodity products. Refco is one of the largest global clearing firms for derivatives. The Company and 23 of its affiliates filed for chapter 11 protection on Oct. 17, 2005 (Bankr. S.D.N.Y. Case No. 05-60006). J. Gregory Milmoe, Esq., at Skadden, Arps, Slate, Meagher & Flom LLP, represent the Debtors in their restructuring efforts. Luc A. Despins, Esq., at Milbank, Tweed, Hadley & McCloy LLP, represents the Official Committee of Unsecured Creditors. Refco reported $16.5 billion in assets and $16.8 billion in debts to the Bankruptcy Court on the first day of its chapter 11 cases. Refco LLC, an affiliate, filed for chapter 7 protection on Nov. 25, 2005 (Bankr. S.D.N.Y. Case No. 05-60134). Refco, LLC, is a regulated commodity futures company that has businesses in the United States, London, Asia and Canada. Refco, LLC, filed for bankruptcy protection in order to consummate the sale of substantially all of its assets to Man Financial Inc., a wholly owned subsidiary of Man Group plc. Three more affiliates of Refco, Westminster-Refco Management LLC, Refco Managed Futures LLC, and Lind-Waldock Securities LLC, filed for chapter 11 protection on June 6, 2006 (Bankr. S.D.N.Y. Case Nos. 06-11260 through 06-11262). (Refco Bankruptcy News, Issue No. 31; Bankruptcy Creditors' Service, Inc., 215/945-7000). SATELLITE ENTERPRISES: Meyler & Company Raises Going Concern Doubt ------------------------------------------------------------------ Meyler & Company, LLC, in Middletown, New Jersey, raised substantial doubt about Satellite Enterprises 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 losses since inception, negative working capital, stockholders' deficiency, and need for additional financing. The Company reported a $2,617,485 net loss on $1,671,954 of net sales for the year ended Dec. 31, 2005. At Dec. 31, 2005, the Company's balance sheet showed [$2,430,933] in total assets and $5,018,526 in total liabilities, resulting in a $2,587,593 stockholders' deficit. The Company's Dec. 31 balance sheet also showed strained liquidity with $398,169 in total current assets available to pay $1,792,398 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?aed Based in Westport, Connecticut, Satellite Enterprises Corp. (OTCBB: SNWP) -- http://www.satellitenewspapers.com/-- receives, distributes and sells newspaper data, whick can be printed via an automated free-standing KiOSK(TM). The Company also has a A user- friendly software application, CLiENT, which can print a single copy or bulk quantity at any given time. SEARS CANADA: DBRS Reviews BB Rating on Revolving Term Facility --------------------------------------------------------------- Dominion Bond Rating Service confirmed that the ratings for Sears Canada Inc. remain "Under Review with Developing Implications", as majority shareholder Sears Holdings Corporation has not articulated a clear future financial strategy for Sears Canada. * Unsecured Debentures Under Review - Developing BB * Revolving Term Facility Under Review - Developing BB * Non-Revolving Term Facility Under Review - Developing BB Sears Holdings announced that it will purchase the shares of Sears Canada that it does not presently hold and will convert Sears Canada into a private company. DBRS is concerned that the privatization will result in a more aggressive financial posture for Sears Canada, including the potential for large upstream payments to Sears Holdings. It remains possible, however, that Sears Canada will be allowed to retain cash and improve the financial profile of the business. In addition to concerns over ownership, Sears Canada's ratings remain constrained by the increasing dependence on the highly cyclical retailing business. Previously, Sears Canada enjoyed strong and stable cash flows from its financial services division. That division was sold in late F2005, with all proceeds distributed to shareholders. Under the sale terms, Sears Canada will receive ongoing revenue; however, the magnitude and consistency of those revenues remain to be proven. The Company's credit profile is significantly weakened from previous years, due to the uncertain cash flow and because Sears Canada has reduced the size and the quality of the asset base of the business, with no corresponding decrease in debt. The sale of the financial services division also eliminated a source of liquidity. Earnings from continuing operations remain constrained within a narrow band, as Sears Canada has been unable to increase revenues or profitability. Notwithstanding these concerns, Sears Canada has substantial strengths including dominant position in appliance retailing, where the company has market share of approximately 30%. In addition, Sears Canada enjoys a strong reputation for consistent quality and customer service. Sears Canada also benefits from the relationship with Sears Holdings, which brings additional clout in areas such as purchasing, product development, and advertising. Improvement in ratings will require evidence that Sears Canada can generate improved and sustainable profits and cash flows, as well as evidence that the balance sheet will not be further eroded. In addition, Sears will need to demonstrate that interests of debt holders will receive due consideration. SAINT VINCENTS: Can Use Sun Life's Collateral Until August 2 ------------------------------------------------------------ At Saint Vincents Catholic Medical Centers of New York and its debtor-affiliates' request and with the consent of Sun Life Assurance Company of Canada and Sun Life Assurance Company of Canada (U.S.), the U.S. Bankruptcy Court for the Southern District of New York extends the Termination Date for the Debtors' use of the Sun Life Cash Collateral through and including August 2, 2006. On July 1, 2006, and August 1, 2006, the Debtors will pay to Sun Life a $368,404 monthly interest due under the Loan Documents. As reported in the Troubled Company Reporter, Saint Vincent Catholic Medical Centers of New York issued $78.3 million in promissory notes to the order of Sun Life Assurance Company of Canada and Sun Life Assurance Company of Canada (U.S.) prior to its bankruptcy filing. The Promissory Notes are secured by first priority liens to the Debtors' various properties. RCG Cash Collateral Also Extended The Debtors and First American Title Insurance Company agree to extend the Debtors' use of the RCG Cash Collateral, through and including June 30, 2006. Headquartered in New York, New York, Saint Vincents Catholic Medical Centers of New York -- http://www.svcmc.org/-- the largest Catholic healthcare providers in New York State, operate hospitals, health centers, nursing homes and a home health agency. The hospital group consists of seven hospitals located throughout Brooklyn, Queens, Manhattan, and Staten Island, along with four nursing homes and a home health care agency. The Company and six of its affiliates filed for chapter 11 protection on July 5, 2005 (Bankr. S.D.N.Y. Case No. 05-14945 through 05-14951). Gary Ravert, Esq., and Stephen B. Selbst, Esq., at McDermott Will & Emery, LLP, filed the Debtors' chapter 11 cases. On Sept. 12, 2005, John J. Rapisardi, Esq., at Weil, Gotshal & Manges LLP took over representing the Debtors in their restructuring efforts. Martin G. Bunin, Esq., at Thelen Reid & Priest LLP, represents the Official Committee of Unsecured Creditors. As of Apr. 30, 2005, the Debtors listed $972 million in total assets and $1 billion in total debts. (Saint Vincent Bankruptcy News, Issue No. 27; Bankruptcy Creditors' Service, Inc., 215/945-7000) SILICON GRAPHICS: Final DIP Hearing Rescheduled to June 20 ---------------------------------------------------------- The U.S. Bankruptcy Court for the Southern District of New York grants Silicon Graphics, Inc., and its debtor-affiliates' request for a bridge order and overrules the objections that have not been withdrawn. The DIP Loan Amendment is approved and the DIP Loans are extended on an interim basis. The Debtors are authorized to borrow an additional $5,000,000. Thus, on an interim basis, the Debtors can borrow up to $28,000,000 under the DIP Agreement. Any additional DIP Loans borrowed will be entitled to all of the approved protections and remedies. The Court rescheduled the Final DIP Hearing to June 20, 2006, at 10:00 a.m. Debtors Amend Interim DIP Agreement As reported in the Troubled Company Reporter on Monday, the Debtors have been exploring a $130 million postpetition financing arrangement. The Debtors have also engaged in discussions with certain parties- in-interest to resolve issues regarding various aspects of the $70,000,000 DIP Financing Arrangement, Stephen A. Youngman, Esq., at Weil, Gotshal & Manges LLP, in New York, relates. The Debtors have determined that it is in the best interests of all parties-in-interest to adjourn the Final DIP Hearing on the $70,000,000 DIP Financing Arrangement to June 15, 2006, to allow for more time to engage in further discussions. Mr. Youngman notes that during the continued interim period, the Debtors require additional liquidity for the operation of their business pending the rescheduled Final DIP Hearing. To address this concern, Quadrangle Master Funding Ltd., Watershed Technology Holdings, LLC, and Encore Fund, L.P., have agreed to: -- a modification of the availability of the Term Loans under the DIP Loan Agreement and the Term Loan Availability Dates to permit the Debtors to borrow an additional $5,000,000 prior to the entry of the Final DIP Order; -- amend certain provisions of the $70,000,000 DIP Loan Agreement, including sections relating to the Debtors' financial covenants and the definition of Permitted Liens to clarify that the $70,000,000 DIP Financing Arrangement does not prime certain existing liens; and -- extend the date by which the Debtors must obtain entry of the Final DIP Order to June 20, 2006. The Debtors and the DIP Lenders have also agreed to an amended budget and amended schedules relating to financial statements, reports and certificates. A copy of the Amended Interim DIP Loan Agreement is available for free at http://researcharchives.com/t/s?a62 Headquartered in Mountain View, California, Silicon Graphics, Inc. (OTC: SGID) -- http://www.sgi.com/-- offers high-performance computing. SGI helps customers solve their computing challenges, whether it's sharing images to aid in brain surgery, finding oil more efficiently, studying global climate, providing technologies for homeland security and defense, enabling the transition from analog to digital broadcasting, or helping enterprises manage large data. The Debtor and 13 of its affiliates filed for chapter 11 protection on May 8, 2006 (Bankr. S.D.N.Y. Case Nos. 06-10977 through 06-10990). Gary Holtzer, Esq., and Shai Y. Waisman, Esq., at Weil Gotshal & Manges LLP, represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed total assets of $369,416,815 and total debts of $664,268,602. (Silicon Graphics Bankruptcy News, Issue No. 6; Bankruptcy Creditors' Service, Inc., 215/945-7000) SILICON GRAPHICS: Inks Lease Settlement Pact with Three Landlords ----------------------------------------------------------------- To resolve their dispute, Silicon Graphics, Inc., and its debtor- affiliates entered into a settlement agreement with the landlords of three nonresidential real property leases located in Mountain View, California: Lease Landlord Location ----- -------- -------- CTC-A WXIII/Crittenden Realty 1200 Crittenden Lane A/B, L.L.C. CTC-C/D WXIII/Crittenden Realty C, 1400 Crittenden Lane L.L.C., and WXIII/Crittenden and 1500 Crittenden Realty D, L.L.C. Lane ATC WXIII/Amphitheatre 1600 Amphitheatre Realty, L.L.C. Parkway According to Lynn P. Harrison 3rd, Esq., at Curtis, Mallet- Prevost, Colt & Mosle LLP, in New York, under the terms of the Settlement, the Debtors are vacating unoccupied space -- resulting in significant savings to the estates -- and keeping space under the CTC-A Lease until no later than Nov. 30, 2006, which space is necessary to their reorganization efforts. The Settlement further provides for the immediate reduction of rent obligations owed by Silicon Graphics, Inc., and return of portions of the Letters of Credit securing the Leases, both of which ameliorate the Debtors' liquidity situation and increase the value of the estate. The salient terms of the Settlement are: a. As of the Closing Date, the ATC Lease is terminated and deemed rejected, the ATC Premises will be returned to the ATC Landlord, the ATC Landlord will draw $24,550,000 on ATC Letter of Credit and return the remainder to SGI. Other than the draw on the ATC Letter of Credit, the Debtors will not be liable for any damages arising from termination of the ATC Lease. b. As of the Closing Date, SGI will deliver floors 2, 3 and 4 of the CTC-C Premises and floors 3 and 4 of the CTC-D Premises to CTC-C Landlord and CTC-D Landlord in accordance with the Term Sheet, and the CTC-C/D Letter of Credit will be reduced by 62.5% to $2,250,000. The Debtors waive any claim to the $1,750,000 lease modification payment paid by Debtors with respect to the March 24, 2004, amendment to the CTC-C/D Lease. c. After the Closing Date, and no later than June 30, 2006, SGI will deliver the remainder of the CTC-C Premises and the CTC-D Premises to CTC-C Landlord and CTC-D Landlord in accordance with the Term Sheet. By SGI's return, the CTC- C/D Letter of Credit and a cash security deposit for $265,000 will be returned to SGI and the CTC-C/D Lease will be terminated and deemed rejected. The Debtors will not be liable for any damages arising from termination of the CTC- C/D Lease. d. SGI will remain in possession of the CTC-A Premises after the Closing Date, and SGI agrees to pay of a proportional amount of rent under the CTC-A Lease for each floor of the CTC-A Premises that it possesses until the time as each floor is vacated. By a floor being vacated and returned to the CTC-A Landlord, rent stops accruing for the floor. By SGI vacating the entirety of the CTC-A Premises, the CTC-A Letter of Credit will be returned to SGI, and the CTC-A Lease will be terminated and deemed rejected. SGI agrees that it will vacate the entirety of the CTC-A Premises no later than November 30, 2006. The Debtors will not be liable for any damages arising from termination of the CTC- A Lease. e. To the extent that it remains in possession of floors at the CTC-A Premises, the CTC-C Premises and/or the CTC-D Premises more than a month beyond the date on which it is required to vacate them, SGI's rent obligations increase at a rate of 50% per month. f. The parties will execute mutual releases for claims related to Leases and Letters of Credit effective on Closing Date. All releases are to exclude obligations created or that are intended to survive as a result of the Definitive Agreements. The releases will include all successors and assigns. g. The deadline for closing of the settlement is June 30, 2006, unless the parties agree to extend. h. The Settlement is conditioned on: (1) approval by the Bankruptcy Court of the Term Sheet by final, non-appealable order not subject to a stay; (2) that no draws have been made on any of the Letters of Credit between the date and the closing date; (3) occurrence of the Closing Date; (4) written approval by the Landlords' existing mortgage lenders and return by the lenders of any of the Letters of Credit held by them; (5) execution and delivery by Landlords and Google, Inc., of a purchase agreement providing for the sale of Landlords' leasehold interests in the ATC Premises, the CTC-A Premises, the CTC-C Premises and the CTC-D Premises and receipt by Landlords from Google, Inc., within two days after a deposit; (6) delivery by SGI to Google, Inc., of the letter of credit securing the sublease of the ATC Premises; (7) delivery to the Debtors by Google, Inc., of an acknowledgement that the termination of the ATC Lease will not violate Google, Inc.'s sublease; and (8) compliance with applicable law. A copy of the Settlement Agreement is available for free at http://researcharchives.com/t/s?aab Mr. Harrison says resolution of the Letter of Credit Adversary Proceeding through the Settlement would (i) eliminate significant litigation risk involving the Letters of Credit, (ii) return significant value to the SGI estate, and (iii) free up $15,000,000 in additional liquidity. In addition, the Settlement would provide the Debtors with the opportunity to preserve financial resources and administer their estates without the distraction and cost of additional litigation. The Debtors, thus, ask the Court to approve their Settlement Agreement with the Landlords in its entirety. Headquartered in Mountain View, California, Silicon Graphics, Inc. (OTC: SGID) -- http://www.sgi.com/-- offers high-performance computing. SGI helps customers solve their computing challenges, whether it's sharing images to aid in brain surgery, finding oil more efficiently, studying global climate, providing technologies for homeland security and defense, enabling the transition from analog to digital broadcasting, or helping enterprises manage large data. The Debtor and 13 of its affiliates filed for chapter 11 protection on May 8, 2006 (Bankr. S.D.N.Y. Case Nos. 06-10977 through 06-10990). Gary Holtzer, Esq., and Shai Y. Waisman, Esq., at Weil Gotshal & Manges LLP, represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed total assets of $369,416,815 and total debts of $664,268,602. (Silicon Graphics Bankruptcy News, Issue No. 5; Bankruptcy Creditors' Service, Inc., 215/945-7000) SKNM INC: Case Summary & 20 Largest Unsecured Creditors ------------------------------------------------------- Debtor: SKNM, Inc. 12214 East Main Road North East, Pennsylvania 16428 Bankruptcy Case No.: 06-10630 Chapter 11 Petition Date: June 6, 2006 Court: Western District of Pennsylvania (Erie) Debtor's Counsel: Lawrence C. Bolla, Esq. Quinn Buseck Leemhuis Toohey & Kroto Inc. 2222 West Grandview Boulevard Erie, Pennsylvania 16506-4508 Tel: (814) 833-2222 Estimated Assets: Less than $50,000 Estimated Debts: $1 Million to $10 Million Debtor's 20 Largest Unsecured Creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ Independence Bank $1,169,402 1370 South County Trail East Greenwich, RI 02818 Erie Petroleum Corp. $76,000 1501 Greengarden Erie, PA 16505 North East Fueling Corp. $37,906 PA Department of Revenue Sales and Use Taxes $27,080 Tank Storage $9,904 North East Township Taxes $9,596 Hartford $7,609 Erie Water Works Utility Bills $7,430 National Fuel Gas Utility Bills $4,838 Maplevale $3,800 U.S. Foods $3,700 PA Department of Revenue Taxes $3,300 TruckStop Direct $2,500 Verizon Utility Bills $2,450 Liberty $2,374 Sopus $2,342 Transcore $1,946 Reinholds Ice Cream $1,388 Bridgestone $1,193 Vine Oil & Gas $1,159 SOLUTIA INC: Ad Hoc Panel Says Disclosure Statement is Inadequate ----------------------------------------------------------------- The Ad Hoc Committee of Solutia Noteholders asks the U.S. Bankruptcy Court for the Southern District of New York deny approval of the Disclosure Statement explaining Solutia, Inc., and its debtor-affiliates' Plan of Reorganization. The Committee consists of holders and managers, acting on behalf of entities holding not less than $308,000,000, or 68.4%, of the Notes issued by Solutia, Inc. Bennett J. Murphy, Esq., at Hennigan, Bennett & Dorman LLP, in Los Angeles, California, points out that the Debtors' Plan of Reorganization does not disclose what the Debtors will do if the Indenture Trustee succeeds in its Adversary Proceeding against Solutia. The Plan assumes that the Court will dismiss the Adversary Proceeding. There is no meaningful disclosure in the Disclosure Statement about the issues in the Adversary Proceeding, and nothing at all about the nature of the potential amendments, Mr. Murphy notes. Mr. Murphy argues that the Disclosure Statement should not be approved because: (1) proceeding to confirmation at this point in time is futile; (2) it is apparent that the Plan will not comply with Section 1129(a) of the Bankruptcy Code due to the Debtors' inability to establish that the Global Settlement is fair and equitable; and (3) the Disclosure Statement does not provide adequate information regarding the pending dispute between Solutia and the Noteholders and how its outcome would affect the Plan. The Disclosure Statement and the Plan are futile because the Debtors lack a commitment to the necessary exit financing to consummate a Plan, Mr. Murphy asserts. Furthermore, the Disclosure Statement do not provide adequate information concerning certain claims against the estate, particularly the claims filed by Monsanto Corporation and Pharmacia Company. The Debtors only stated that Monsanto and Pharmacia's claims are excluded from the estimated amount of the Allowed Claims because those Claims are being resolved pursuant to the Global Settlements. To evaluate the fairness of the proposed Settlement, the creditors need to know the value and basis of the claims being settled, Mr. Murphy maintains. More importantly, adequate information is needed for hypothetical investors to make an informed judgment on the Plan. The Plan and the Disclosure Statement also failed to establish that the proposed Global Settlement is fair and equitable. "The Disclosure Statement should describe in reasonable detail the issues to be litigated in the absence of settlement, the range of probable outcomes in litigation, and the value being provided to and by the settling parties," Mr. Murphy emphasizes. Instead, the Disclosure Statement offers selected information on a limited subset of the issues, and is utterly opaque on basic questions about the value of the deal to Monsanto, Pharmacia and the estate, Mr. Murphy says. Headquartered in St. Louis, Missouri, Solutia, Inc. -- http://www.solutia.com/-- with its subsidiaries, make and sell a variety of high-performance chemical-based materials used in a broad range of consumer and industrial applications. The Company filed for chapter 11 protection on December 17, 2003 (Bankr. S.D.N.Y. Case No. 03-17949). When the Debtors filed for protection from their creditors, they listed $2,854,000,000 in assets and $3,223,000,000 in debts. Solutia is represented by Richard M. Cieri, Esq., at Kirkland & Ellis. Daniel H. Golden, Esq., Ira S. Dizengoff, Esq., and Russel J. Reid, Esq., at Akin Gump Strauss Hauer & Feld LLP represent the Official Committee of Unsecured Creditors, and Derron S. Slonecker at Houlihan Lokey Howard & Zukin Capital provides the Creditors' Committee with financial advice. (Solutia Bankruptcy News, Issue No. 61; Bankruptcy Creditors' Service, Inc., 215/945-7000) THICKSTUN BROS: Litigation with Encompass Services Continues ------------------------------------------------------------ The U.S. Bankruptcy Appellate Panel for the Sixth Circuit told the U.S. Bankruptcy Court for the Southern District of Ohio that it has continuing post-confirmation jurisdiction to interpret the provisions of a Chapter 11 plan confirmed by Thickstun Brothers Equipment Co., Inc., and to determine whether the Plan preserved the debtor's right to challenge a claim asserted by Encompass Services Corporation in bankruptcy despite Thickstun's failure to file any formal objection to Encompass' proof of claim. Thickstun Brothers Equipment Co., Inc., and Encompass Services Corporation, fka Reliable Mechanical, Inc., hold claims against each other stemming from alleged breaches of a construction contract at the Rickenbacker Air National Guard Base near Columbus, Ohio. In December 1997, Encompass initiated litigation of its claims against the Debtor and the Debtor's surety in the Circuit Court of Jefferson County, Kentucky. The Debtor filed a counterclaim against Encompass in the Kentucky litigation. In January 2000, the Debtor also filed a so-called Miller Act action against Encompass' surety in the United States District Court for the Southern District of Ohio. The 6th Cir. BAP's Opinion is published at 2006 WL 1506712. Thickstun has filed for chapter 11 protection twice; this appeal arises out of its first chapter 11 filing. Thickstun Bros. Equipment Co., Inc., installs, maintains and repairs tanks. Thickstun filed for chapter 11 protection on August 8, 2003 (Bankr. S.D. Ohio Case No. 03-61982). The Debtor filed its first amended plan of reorganization on April 8, 2004, and the bankruptcy court entered an order confirming the Plan on June 17, 2004. Thickstun filed a second chapter 11 petition on July 5, 2005 (Bankr. S.D. Ohio Case No. 05-61638). Michael D. Bornstein, Esq., at Ricketts Co. LPA, represents the Debtor in its restructuring. TOMBALL CENTER: Case Summary & Largest Unsecured Creditor --------------------------------------------------------- Debtor: The Tomball Center Inc. 3702 FM 1960 West, Suite S Houston, Texas 77068 Bankruptcy Case No.: 06-32508 Chapter 11 Petition Date: June 6, 2006 Court: Southern District of Texas (Houston) Judge: Karen K. Brown Debtor's Counsel: William F. Harmeyer, Esq. William F. Harmeyer & Associates, P.C. 7322 Southwest Freeway, Suite 475 Houston, Texas 77074 Tel: (713) 270-5552 Fax: (713) 270-7128 Estimated Assets: $1 Million to $10 Million Estimated Debts: $1 Million to $10 Million Debtor's Largest Unsecured Creditor: Entity Claim Amount ------ ------------ Wells Fargo Bank, N.A. $6,948,929 c/o LNR Partners, Inc. 1601 Washington Avenue Suite 700 Miami Beach, FL 33139 Tel: (305) 695-5600 TOWER AUTOMOTIVE: Wants Court to Deny Fuji Dietec's Request ----------------------------------------------------------- Tower Automotive, Inc., and its debtor-affiliates ask the United States Bankruptcy Court for the Southern District of New York to: (a) find that Fuji Dietec Corporation has no valid security interest in the Customer Dies; and (b) dismiss Fuji Dietec's request with prejudice. As reported in the Troubled Company Reporter on May 30, 2006, Fuji Dietec asked the Court to lift the automatic stay in the Debtors' chapter 11 cases to allow it to repossess the Fuji Tooling. Fuji Dietec also asked the Court to direct the Debtors to: (a) return the Fuji Tooling to Fuji Dietec; or (b) alternatively, provide adequate protection to Fuji Dietec for the use and diminution in value of the Fuji Tooling if they are to stay in the Debtors' possession. Debtors Object Anup Sathy, Esq., at Kirkland & Ellis LLP, in Chicago, Illinois, relates that for several years prior to the Petition Date, the Debtors, from time to time, issued purchase orders to Fuji Dietec and its Japanese affiliate, Fuji Technica, Inc., for the production and delivery of dies to be used in their manufacturing operations. Dies, like those produced by Fuji Dietec, were and are used by the Debtors to manufacture automotive components for different programs for the Debtors' customers, including DaimlerChrysler, General Motors, Nissan, and Ford Motor Company. The Debtors' customers, in the ordinary course of business, advance funds toward, or reimburse the Debtors for, the purchase and associated costs of procuring and using dies. The Debtors then hold a temporary possessory interest in the Customer Dies, while the customer retains title. This was the case with the Customer Dies subject to Fuji Dietec's request, Mr. Sathy tells the Court. The total value for the various tooling programs covered by the Purchase Orders exceeded $64,000,000. The Debtors have paid Fuji more than $51,000,000 for the related Customer Dies. Mr. Sathy explains that the Debtors did not pay Fuji the amounts that Fuji Dietec is claiming it is owed because of the quality and delivery issues, which caused the Debtors to incur millions of dollars in out-of-pocket expenses. Mr. Sathy contends that Fuji Dietec's basis for a security interest is completely unsubstantiated because: (a) The property at issue does not belong to Fuji Dietec. (b) The Debtors issued the Purchase Orders to Fuji Technica for the manufacture of the Customer Dies. Fuji Technica is a separate and foreign entity organized under the laws of Japan, which did not conduct business in the state of Michigan. Fuji Dietec is a separate corporate entity originally organized under the laws of the state of Michigan, which according to the state of Michigan's Corporation Division Records, was effectively dissolved as of March 31, 2006. (c) The Michigan Act does not apply to create any liens in the Customer Dies. All of the Customer Dies were manufactured in Japan. The Michigan Act cannot apply to create lien rights in the Customer Dies: * built in Japan by a foreign company; and * in favor of Fuji Dietec, who is not even a party to the Purchase Orders. (d) Assuming arguendo that the Michigan Act applies: * any lien claims by Fuji Dietec or Fuji Technica in the Customer Dies belonging to Nissan are invalid because neither party properly recorded its complete name, street address, city and state on the Customer Dies; and * neither Fuji Dietec nor Fuji Technica filed or properly filed its UCC-1 filings. The very substantive basis for the purported claim against the Debtors is wholly without merit, Mr. Sathy further contends. About Tower Automotive Headquartered in Grand Rapids, Michigan, Tower Automotive, Inc. -- http://www.towerautomotive.com/-- is a global designer and producer of vehicle structural components and assemblies used by every major automotive original equipment manufacturer, including BMW, DaimlerChrysler, Fiat, Ford, GM, Honda, Hyundai/Kia, Nissan, Toyota, Volkswagen and Volvo. Products include body structures and assemblies, lower vehicle frames and structures, chassis modules and systems, and suspension components. The Company and 25 of its debtor-affiliates filed voluntary chapter 11 petitions on Feb. 2, 2005 (Bankr. S.D.N.Y. Case No. 05-10576 through 05-10601). James H.M. Sprayregen, Esq., Ryan B. Bennett, Esq., Anup Sathy, Esq., Jason D. Horwitz, Esq., and Ross M. Kwasteniet, Esq., at Kirkland & Ellis, LLP, represent the Debtors in their restructuring efforts. Ira S. Dizengoff, Esq., at Akin Gump Strauss Hauer & Feld LLP, represents the Official Committee of Unsecured Creditors. When the Debtors filed for protection from their creditors, they listed $787,948,000 in total assets and $1,306,949,000 in total debts. (Tower Automotive Bankruptcy News, Issue No. 35; Bankruptcy Creditors' Service, Inc., 215/945-7000). TRANSPORT IND: Moody's Holds Senior Secured Debt Rating at B2 ------------------------------------------------------------- Moody's Investors Service affirmed the debt ratings of Transport Industries L.P., senior secured at B2; and changed the outlook to stable. The affirmation reflects Moody's assessment of TI's credit profile pro-forma for the proposed $40 million increase to the existing term loan facility and an amendment to the permitted acquisitions basket of the credit facility, which will permit up to $100 million of acquisitions, up from $80 million prior to the amendment. The ratings consider Moody's belief that TI will continue to pursue acquisitions in a manner that will not cause a meaningful deterioration in leverage and coverage metrics. The rating also considers the risks of integration and execution that acquirers typically confront compounded somewhat by the cyclicality of the transportation sector, the current point in the economic cycle, and the challenges in managing increasingly larger operations. The rating is supported by expected positive free cash flow and a business model in which revenues are supported by long-standing relationships with certain key grocery retailers. While the ratings analysis considers the potential demand on cash from the mandatorily redeemable preferred shares due 2010 issued by TI's ultimate parent, Transport Industries Holdings, Inc., Moody's did not include this obligation or the related non-cash interest expense when calculating TI's leverage and coverage metrics. Moody's expects that TI will continue to pursue acquisitions in each of its segments. TI closed seven acquisitions since May 2004, taking annual revenues to $811 million in 2005 from $342 million in 2003. Debt / EBITDA improved to 6.7% from 4.4% and EBIT / Interest coverage declined to 0.9 times from 1.5 times over this same period. A key consideration of the effect of TI's acquisition strategy on the ratings will be TI's ability to remain a rational bidder, evidenced by modest purchase multiples, particularly during the upside of the cycle when sellers typically can command a premium relative to sales timed during business cycle troughs. Once TI utilizes the add-on term loan, TI's total debt on a pro forma basis at March 31, 2006, will increase to approximately $558 million. TI's pro forma balance sheet will continue to be characterized by few fixed assets and a substantial amount of goodwill. Net fixed assets of $43 million at March 31, 2006 represent only 12% of total assets of $353 million; goodwill and other intangibles represent approximately 48% of total assets, reflecting the effects of the company's acquisition activity, which has focused on asset light businesses. Moody's notes that TI's dedicated services business model, which relies on access to owner/operators to provide tractors to its grocery trucking business rather than outright ownership of this equipment, implies limited asset coverage for the senior secured facilities and low likely recovery levels for debt holders in the event of default. As a result, the B2 rating of the senior secured bank facility is at the same level as the Corporate Family Rating. TI, along with the transportation sector, has benefited from the current cyclical strength in the U.S. and global economies. TI will be affected by an economic downturn; however, Moody's believes that the extent or severity of this impact could be mitigated by two factors. The aggregate share of total company revenues in the truckload management, truckload brokerage and distribution logistics segments, which could increase before the onset of the next downturn. Moody's estimates that these businesses accounted for approximately 35% of total revenues in 2005. Earnings from these segments are more highly exposed to an economic downturn although operating costs are more variable. Additionally, a significant portion of the company's revenues is related to dedicated closed- loop transport of grocery products. In Moody's view, the potential inelastic demand for groceries could potentially mitigate any deterioration in consolidated results in a downturn, given that TI fulfills an integral part of the distribution chains of its grocery customers. However, both of these effects are somewhat difficult to gauge given TI's relatively short operating history and since the dedicated closed- loop transport operations have yet to experience a cyclical downturn. The B2 rating assigned to the senior secured credit facilities, which is the same as the Corporate Family Rating, continues to reflect the preponderance of senior debt represented by these facilities in the company's capital structure. The $333 million in total remaining commitments provided by these facilities is senior to only a small amount of seller notes and the Preferred Equity. The rated facilities consist of a $70 million revolver due September 2010 and term loans aggregating $275 million of original borrowings due September 2011. Moody's does not consider the Preferred Equity issued by TI Holding's Inc. a key rating driver over the near term, since this obligation would be the most junior if consolidated with TI's capital structure. Additionally, interest accrues up to the maturity date on December 14, 2010 if not paid in cash and the structure of the senior secured credit facility restricts the payment of dividends by TI as long as Consolidated Leverage remains above 3.0 times. Current consolidated leverage calculated according to the terms of the facility is 3.8x. In addition, according to the company, TI Holdings, Inc. is not required to retire the obligation upon maturity; rather interest would continue to accrue at a higher rate if not retired by the due date. However, Moody's notes that the ratings of the secured facilities could be affected in the future if it becomes likely that TI Holdings, Inc. seeks to obtain inappropriate amounts of cash from TI. The stable outlook reflects Moody's expectation that TI will continue to pursue leveraged acquisitions; however, Moody's believes transactions will be of a tuck-in nature and of relatively manageable size that will not significantly increase leverage or significantly increase integration and execution risks rather than those of a transformational nature. The effect, if any, on the ratings will depend on the relative leverage in a transaction and the increased risk from the complexity in integrating unique characteristics of a particular acquisition, particularly if TI seeks to expand into a segment outside of its traditional operations. Ratings would be subject to downward revision if TI were to make a significant acquisition or other acquisitions for lower value but at inappropriately high EBITDA multiples. The loss of a major closed-loop dedicated transportation customer would also pressure the ratings downwards as would the sacrifice of margins in attempts to retain existing business or in search of top line growth. A downgrade may ensue if Debt / EBITDA rises above 7.0 times, if EBIT/interest coverage were to be sustained below 1.0 times, or if negative free cash flow were to be sustained over the intermediate term. There is little upward rating pressure over the near to intermediate term. Moody's believes that TI will continue to execute its strategy of growth by acquisition and will favor financing these acquisitions with debt, which will offset improvements in leverage due to pay downs of debt with excess cash flow. Over the longer term, ratings could be revised upwards if TI were to cease making acquisitions and decrease Debt / EBITDA to below 3.0x with a commensurate improvement in EBIT / Interest coverage to above 2.5x. However, Moody's notes that attaining this level of leverage, would release TI from the restrictions on its ability to pay dividends to its parent, Transport Industries Holdings, L.P., whose direct parent is TI Holdings, Inc. Under this scenario, which could potentially arise prior to the maturity of the senior secured revolver and term loans, the potential would exist for cash to be transferred from TI, resulting in a deterioration in liquidity as the maturity date of the senior secured facilities nears. Outlook Actions: Issuer: Transport Industries, L.P. * Outlook, Changed To Stable From Negative Transport Industries, L.P., headquartered in Dallas, Texas, is the leading third party provider of single-source, dedicated "closed loop" transportation services to the food retail and distribution industry through its Dedicated Transport Services business. The company also provides non-asset-based freight transportation through its Truckload Management Services segment, and warehouse and distribution logistics services through its Distribution Services segment. TI is a wholly-owned subsidiary of Transport Industries Holdings, L.P. UGS CAPITAL: Moody's Puts Rating on Proposed $300MM Notes at Caa1 ----------------------------------------------------------------- Moody's Investors Service assigned a Caa1 rating to UGS Corp.'s proposed $300 million offering of holding company paid-in-kind notes through its UGS Capital Corp II holding company. Existing first lien and subordinated notes ratings were affirmed at B1 and B3, respectively. Due to the substantial increase in financial leverage subsequent to the issuance of the proposed notes, Moody's downgraded UGS' corporate family rating to B2 from B1. The ratings outlook is stable. The downgrade of the corporate family rating to B2 from B1 reflects the significant increase of UGS' financial leverage as measured by debt-to-EBITDA and the resulting reduction in financial flexibility. The company's core businesses have performed well and are expected to continue to grow profitably. However, the increased in financial leverage is more consistent with a B2 corporate family rating. The B2 corporate family rating reflects the company's strong market position with its broad product offering of a full suite of product lifecycle management software, its high financial leverage as measured by debt to EBITDA less capital expenditures, and its modest returns on assets and strong EBITDA margins. UGS has a long history of recurring revenues derived from providing mission critical software and services to a large customers base from various industry segments. The stable outlook reflects Moody's expectation that the company will continue to grow profitably and maintain or grow its market share. The outlook also reflects the expectation that any acquisitions over the near term will not materially increase leverage. The affirmation of the B1 rating for the first lien senior secured credit facilities reflects the continued expectation of full collateral coverage in a distress scenario. Given the absence of incremental senior debt at the operating company, the B3 rating of the subordinated notes was affirmed. The assignment of a Caa1 rating for the proposed HoldCo notes reflects the structural subordination of these notes to the debt of the operating company. Moody's took These ratings actions: * Assigned Caa1 rating to the proposed $300 million senior unsecured bonds, due 2011, at UGS Capital Corp. II * Affirmed B1 rating $725 million senior secured term loan, due 2011, at UGS * Affirmed B1 rating $125 million senior secured revolving credit facility, due 2010, at UGS * Affirmed B3 rating $550 million senior subordinated notes, due 2012, at UGS * Lowered corporate family rating to B2 from B1 The ratings outlook is stable. The assigned rating is subject to Moody's review of final documentation. UGS Corp., headquartered in Plano, Texas, is a provider of product lifecycle management software. For the twelve months ended March 31, 2006 revenues were $1.2 billion. UNITED RENTALS: Fitch Affirms Low-B Issuer Default & Debt Ratings ----------------------------------------------------------------- Fitch affirmed the ratings of United Rentals, Inc. and its principal operating subsidiary, United Rentals (North America), Inc., and removed them from Rating Watch Negative where they were placed on July 14, 2005. Approximately $2.9 billion of debt is affected by this action. The Rating Outlook for URI and URNA is Stable. Fitch's current ratings for URI and URNA are: United Rentals, Inc.: -- Issuer Default Rating 'BB-' United Rentals (North America), Inc. (Guaranteed by United Rentals, Inc.): -- Issuer Default Rating 'BB-' -- Senior secured bank debt 'BB' -- Senior unsecured debt 'BB-' -- Subordinated debt 'B' The affirmation primarily reflects URI's filing of restated financial statements. With the filing of 10-Ks for 2004 and 2005 on March 31, 2006, and the 10-Q for the first quarter of 2006 on May 9, 2006, the company is now current on all financial filings. The delay in the filing of the 2004 10-K reflected a need to: a) review matters relating to an Securities and Exchange inquiry of the company; b) complete work on an income tax restatement; c) complete the evaluation and testing of internal controls required by Sarbanes-Oxley section 404; and d) conduct additional testing of its self insurance reserves in 2004 and prior periods. The ratings reflect: * the company's strong market position in the North American equipment rental sector; * solid operating cash flow; and * improving profitability. Concerns include: * weak risk adjusted capitalization; * volatility of operating earnings; and * pending outcome of the SEC investigation. As a result of favorable economic conditions and an increase in nonresidential construction activity over the last three years, URI's overall financial performance has steadily improved. Over the past three fiscal years, CAGR of revenue and EBITDA equaled 11% and 19%, respectively. Consequently, the continued improvement in EBITDA over the last two years has resulted in lower overall financial leverage (total debt including convertible debentures divided by EBITDA and excluding goodwill impairment). Leverage has fallen from 4.42x at Dec. 31, 2003, to 2.97x at Dec. 31, 2005. However, overall leverage remains relatively high if URI's equipment reinvestment requirements are netted from EBITDA. However, the SEC investigation remains ongoing and has not yet been resolved. Based on recent discussions with URI's senior management, they remain fully cooperative and are hopeful that resolution of the investigation will occur sometime in 2006. In light of the restatement and Sarbanes-Oxley related issues, the company has taken measures to improve overall financial controls, including appointing new senior management in key financial management positions. Notwithstanding, it is Fitch's opinion that additional work is required to address the outstanding material deficiency. Based on the improved financial performance and profitability during the last two years, URI's overall capital structure and liquidity have improved slightly since Fitch's initial rating review was completed in the fall of 2004. However, due to the significant amount of goodwill, overall capitalization remains relatively weak. Goodwill was slightly more than common equity on Mar. 31, 2006. Rating factors that would generate positive rating momentum include: * a final resolution to the SEC investigation that does not materially alter the company's financial profile, further strengthening of internal controls; * consistent profitability and generation of free cashflow throughout the business cycle; and * lower leverage as measured by total debt as a multiple of cashflow after net equipment replacement and other recurring capital expenditures. Based in Greenwich, Connecticut, URI is the largest equipment rental company in the world as measured by equipment fleet and rental revenue. US MICROBICS: Posts $722,230 Net Loss in 2006 1st Fiscal Quarter ---------------------------------------------------------------- U.S. Microbics Inc., filed its first quarter financial statements for the three months ended March 31, 2006, with the Securities and Exchange Commission on May 18, 2006. The Company reported an $722,230 net loss on $306,320 of revenues for the three months ended March 31, 2006. At March 31, 2006, the Company's balance sheet showed $618,277 in total assets, $1,858,449 in total liabilities, and $5,832,998 in minority interest, resulting in a $7,073,170 stockholders' deficit. The Company's March 31 balance sheet also showed strained liquidity with $367,791 in total current assets available to pay $1,858,449 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?a81 Going Concern Doubt Russell Bedford Stefanou Mirchandani, LLP, in McLean, Virginia, raised substantial doubt about U.S. Microbics Inc.'s ability to continue as a going concern after auditing the Company's consolidated financial statements for the years ended September 30, 2005 and 2004. The auditor pointed to the Company's difficulty in generating sufficient cash flow to meet its obligations and sustain its operations. About U.S. Microbics Headquartered in Carlsbad, California, U.S. Microbics, Inc. -- http://www.bugsatwork.com/-- is a business development and holding company that acquires, develops and deploys innovative environmental technologies for soil, groundwater and carbon remediation, air pollution reduction, modular drinking water systems and agriculture enhancement. VALOR COMMS: Windstream Merger Cues S&P to Hold Ratings on Watch ---------------------------------------------------------------- Standard & Poor's Ratings Services held its ratings on Valor Communications Group Inc., including the 'BB-' corporate credit rating, on CreditWatch, where they were placed with positive implications on Dec. 9, 2005. The listing followed the announcement that Valor will merge with the newly formed wireline company created by the spin-off of ALLTEL Corp.'s wireline business. The merged entity will be named Windstream Corp. Valor's existing bank debt, which totaled about $781 million at March 31, 2006, will be repaid, and $400 million of 7.75% senior unsecured notes will be assumed by the new company on a pari passu basis with Windstream's senior secured credit facilities. Upon completion of the spin-off and merger transactions, which are expected to close in July 2006, Standard & Poor's will raise its ratings on Valor's 7.75% notes due 2015 to 'BBB-' from 'B', and withdraw its corporate and bank loan ratings on the company. Valor is an Irving, Texas-based rural local exchange provider. Debt outstanding at March 31, 2006 totaled about $1.2 billion. VARIG S.A.: Preliminary Injunction Continued to June 13 ------------------------------------------------------- The Honorable Robert D. Drain of the U.S. Bankruptcy Court for the Southern District of New York modifies the preliminary injunction, in effect in VARIG, S.A., and its debtor-affiliates' bankruptcy case, to continue through and including June 13, 2006. Instead of addressing the request for conversion to a permanent injunction, Judge Drain extended the Preliminary Injunction in response to a supplement filed by VARIG, S.A., Foreign Representative Eduardo Zerwes on May 25, 2006. Pursuant to the Supplement, the Foreign Representative modified his conversion request to a continuation of the Preliminary Injunction in view of developments in the Foreign Proceedings. As previously reported, the Brazilian Court called for a meeting of the General Assembly of Creditors in Rio de Janeiro to obtain creditor approval of some modifications to the Judicial Recovery Plan and a proposal that would permit the sale of the Foreign Debtors' businesses as a going concern. On May 9, 2006, the General Assembly of Creditors accepted the Proposal and approved the modifications to the Recovery Plan to implement the Proposal, which modifications are reflected in a Consolidated Recovery Plan. The Foreign Debtors anticipate filing more supplements to the conversion request based on further developments in the Foreign Proceedings. Consolidated Recovery Plan The Consolidated Recovery Plan provides two options for potential acquirers to bid on the Foreign Debtors' businesses: 1. The first option provides for the sale of the entire air transportation operation of VARIG with the proceeds of the sale -- after repayment of a bridge loan or other financing arrangement -- to be paid towards the airline's ongoing operations and toward the payments required under the Recovery Plan. 2. The second option provides for the sale of VARIG's domestic or regional operations with the proceeds of the sale -- after repayment of a bridge loan or other financing arrangement -- to be applied to the then outstanding postpetition debts. The remainder will be injected into the airline's International operations and to make the payments required under the Recovery Plan. A full-text copy of a certified English translation of the Consolidated Recovery Plan is available for free at: http://bankrupt.com/misc/VarigConsolidatedRecoveryPlan.pdf Representative Addresses Objections Several parties objected to the conversion request are: -- Willis Lease Finance Corporation; -- Mitsui & Co. Ltd.; -- U.S. Bank National Association; -- Wells Fargo Bank Northwest, N.A. and Wells Fargo Bank National Association, as Trustees; -- International Lease Finance Corporation; -- Aircraft SPC-6, Inc.; -- The Boeing Company; -- Ansett Worldwide Aviation U.S.A., et al.; -- GATX Capital; -- the United States of America by the United States Attorney for the Southern District of New York; and -- The Port Authority of New York and New Jersey and Los Angeles World Airports. The Port Authority later withdrew its objection explaining that it had resolved issues with VARIG. On behalf of the Foreign Representative, Rick B. Antonoff, Esq., at Pillsbury Winthrop Shaw Pittman LLP, in New York, notes that the Objections all seek the same relief -- implementation of the Contingency Plan for the Orderly Return of Aircraft based on the Foreign Debtors' failure to remain current with its obligations under its aircraft leases. The Foreign Debtors do not dispute that they are in payment default with their lessors. However, based on the potential provision for payment and the protections of the Contingency Plan, Mr. Antonoff argues that granting the Objectors' requests now is unwarranted and would frustrate the Foreign Debtors' successful emergence from the Foreign Proceedings. The Foreign Representative asserts that the Consolidated Recovery Plan and the imminent prospect of a sale of all or part of the Foreign Debtors' businesses, as well as the protections granted by the Contingency Plan, warrant a continuation of the Preliminary Injunction. Mr. Antonoff further points out that nothing in the Preliminary Injunction Orders entered by U.S. Bankruptcy Court nor any of the orders entered by the Brazilian Court require the Foreign Debtors to voluntarily return aircraft pursuant to the Contingency Plan upon a default under a lease. Rather, he continues, the Contingency Plan was developed to be implemented in the event that the Foreign Debtors are required to liquidate. If the objecting lessors believe that the Foreign Proceedings have failed, the Foreign Representative suggests that they seek the Foreign Debtors' liquidation before the Brazilian Court. The Foreign Representative contends that it is for the Brazilian Court and not the U.S. Court to decide whether the Foreign Proceedings have failed, and to order liquidation. The objecting lessors must not be permitted to turn the Foreign Proceedings into a race to the U.S. courthouse, Mr. Antonoff argues. If the lessors are authorized to circumvent the Brazilian Proceedings by seeking relief in the U.S. Bankruptcy Court rather than the Brazilian Court, the Foreign Representative foresees a domino effect resulting in the collapse of the Foreign Debtors to the benefit of a select few creditors and to the severe detriment of thousands of others. "This is exactly the harm that Section 304 [of the Bankruptcy Code] was designed to prevent, Mr. Antonoff maintains. June 13 Hearing Judge Drain schedules a hearing on June 13, 2006, at 10:00 a.m., to consider the Foreign Representative's request for conversion to a permanent injunction, as it may be modified or supplemented, including by seeking a further extension of the Preliminary Injunction. On or before the June 13 hearing, the Court may, upon request of a lessor, determine whether to order the implementation of the Contingency Plan with respect to and to the extent of: a. any aircraft, engines or other equipment that is property of a lessor that is or is proposed to be sold, assigned or otherwise transferred by a Foreign Debtor to a third party without the lessors consent; or b. any aircraft or engine that is retained by a Foreign Debtor that is the property of a lessor where the Foreign Debtor is in default for nonpayment of rent or maintenance reserves first coming due after June 17, 2005, and not cured on or before January 13, 2006. Parties-in-interest have until tomorrow, June 9, 2006, to file objections to the continuation of the Preliminary Injunction or the entry of a Permanent Injunction. About VARIG Headquartered in Rio de Janeiro, Brazil, VARIG S.A. is Brazil's largest air carrier and the largest air carrier in Latin America. VARIG's principal business is the transportation of passengers and cargo by air on domestic routes within Brazil and on international routes between Brazil and North and South America, Europe and Asia. VARIG carries approximately 13 million passengers annually and employs approximately 11,456 full-time employees, of which approximately 133 are employed in the United States. The Company, along with two affiliates, filed for a judicial reorganization proceeding under the New Bankruptcy and Restructuring Law of Brazil on June 17, 2005, due to a competitive landscape, high fuel costs, cash flow deficit, and high operating leverage. The Debtors may be the first case under the new law, which took effect on June 9, 2005. Similar to a chapter 11 debtor-in-possession under the U.S. Bankruptcy Code, the Debtors remain in possession and control of their estate pending the Judicial Reorganization. Sergio Bermudes, Esq., at Escritorio de Advocacia Sergio Bermudes, represents the carrier in Brazil. Each of the Debtors' Boards of Directors authorized Vicente Cervo as foreign representative. In this capacity, Mr. Cervo filed a Sec. 304 petition on June 17, 2005 (Bankr. S.D.N.Y. Case Nos. 05-14400 and 05-14402). Rick B. Antonoff, Esq., at Pillsbury Winthrop Shaw Pittman LLP represents Mr. Cervo in the United States. As of March 31, 2005, the Debtors reported BRL2,979,309,000 in total assets and BRL9,474,930,000 in total debts. (VARIG Bankruptcy News, Issue No. 20; Bankruptcy Creditors' Service, Inc., 215/945-7000) VARIG S.A.: Promises to Pay ILFC Arrears by June 13 --------------------------------------------------- VARIG S.A. and its debtor-affiliates have conceded that they were in arrears to International Lease Finance Corporation for as much as $1,600,000. The Foreign Debtors agreed to: -- keep ILFC current for payments coming due between May 31, 2006, and June 13, 2006; and -- pay the Arrearages no later than June 13, 2006. Hence, Judge Drain orders the Foreign Debtors, to the extent funds are available, to pay ILFC amounts due for rent and maintenance reserves under the leases for the Aircraft between May 31 and June 13, no later than two days after the contractual due dates of the payments. The Foreign Debtors will pay ILFC the Arrearages and the Current Payments no later than June 12, 2006, if the payments will be taken first from the $75,000,000, which they will receive pursuant to a successful auction. Thus, even if the payment of the Arrearages and Current Payments is deferred until June 12, funds sufficient to pay the Arrearages and Current Payments will be applied to those obligations and not used to pay the Foreign Debtors' other obligations. In the event that the Foreign Debtors default in making those payments to ILFC, the Court directs VARIG, S.A., to promptly ground all ILFC Aircraft and return them according to the schedule set forth in the September 2005 Stipulation. Judge Drain makes it clear that, if necessary, he will order immediate compliance with the Stipulation and may enter coercive sanctions to insure compliance. Judge Drain grants ILFC's request to impose a $5,000 fine per day commencing on May 23, 2006. The fine is payable to ILFC until the Foreign Representative and the Foreign Debtors take appropriate action in Brazilian Courts to seek: -- the issuance of all necessary documents; and -- orders to permit the export of the 737 Aircraft. The Court allows ILFC to seek a hearing on its asserted compensatory damages, with respect to the Foreign Debtors' failure to properly return the 737 Aircraft, on appropriate notice. Judge Drain continues the hearing to June 13, 2006, to consider any other claims of non-compliance with the Stipulation. About VARIG Headquartered in Rio de Janeiro, Brazil, VARIG S.A. is Brazil's largest air carrier and the largest air carrier in Latin America. VARIG's principal business is the transportation of passengers and cargo by air on domestic routes within Brazil and on international routes between Brazil and North and South America, Europe and Asia. VARIG carries approximately 13 million passengers annually and employs approximately 11,456 full-time employees, of which approximately 133 are employed in the United States. The Company, along with two affiliates, filed for a judicial reorganization proceeding under the New Bankruptcy and Restructuring Law of Brazil on June 17, 2005, due to a competitive landscape, high fuel costs, cash flow deficit, and high operating leverage. The Debtors may be the first case under the new law, which took effect on June 9, 2005. Similar to a chapter 11 debtor-in-possession under the U.S. Bankruptcy Code, the Debtors remain in possession and control of their estate pending the Judicial Reorganization. Sergio Bermudes, Esq., at Escritorio de Advocacia Sergio Bermudes, represents the carrier in Brazil. Each of the Debtors' Boards of Directors authorized Vicente Cervo as foreign representative. In this capacity, Mr. Cervo filed a Sec. 304 petition on June 17, 2005 (Bankr. S.D.N.Y. Case Nos. 05-14400 and 05-14402). Rick B. Antonoff, Esq., at Pillsbury Winthrop Shaw Pittman LLP represents Mr. Cervo in the United States. As of March 31, 2005, the Debtors reported BRL2,979,309,000 in total assets and BRL9,474,930,000 in total debts. (VARIG Bankruptcy News, Issue No. 20; Bankruptcy Creditors' Service, Inc., 215/945-7000) VIRTRA SYSTEMS: March 31 Working Capital Deficit Tops $4.5 Million ------------------------------------------------------------------ VirTra Systems, Inc., delivered its first quarter financial statements for the three months ended March 31, 2006, to the Securities and Exchange Commission on May 25, 2006. The Company reported a $265,471 net loss on $558,652 of total revenues for the three months ended March 31, 2006. At March 31, 2006, the Company's balance sheet showed $1,551,394 in total assets and $4,997,430 in total liabilities, resulting in a $3,446,036 stockholders' deficit. The Company's March 31 balance sheet also showed strained liquidity with $421,923 in total current assets available to pay $4,995,571 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?ae6 Going Concern Doubt Ham Langston & Brezina, L.L.P., in Houston, Texas, raised substantial doubt about VirTra Systems, 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 recurring losses from operations, negative working capital, and stockholders' deficiency. Based in Arlington, Texas, VirTra Systems, Inc. (OTCBB: VTSI) -- http://www.virtrasystems.com/-- applies patented technology to produce the world's most advanced virtual reality systems and 3-D experiences. With proprietary 360-degree, interactive photorealistic technology, VirTra Systems constructs marksmanship, judgmental use-of-force, and situational awareness firearms training simulators for military branches like the U.S. Army and U.S. Air Force, and for domestic and international law enforcement agencies. VirTra Systems also produces custom advertising and promotional mobile marketing and experiential marketing systems utilizing the sensations of motion, touch, sound, and smell for clients like General Motors, Pennzoil, Red Baron Pizza, and the U.S. Army. VOCALSCAPE: Posts $493,269 Net Loss in 2006 1st Fiscal Qtr ---------------------------------------------------------- Vocalscape Networks, Inc., filed its first quarter financial statements for the three months ended March 31, 2006, with the Securities and Exchange Commission on May 22, 2006. The Company reported a $493,269 net loss on $100,967 of revenues for the three months ended March 31, 2006. At March 31, 2006, the Company's balance sheet showed $67,086 in total assets and $4,018,660 in total liabilities resulting in $3,951,574 stockholders' deficit. The Company's March 31 balance sheet also showed strained liquidity with $28,979 in total current assets available to pay $3,996,783 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?ac1 Going Concern Doubt Salberg & company, p.a., in Boca Raton, Florida, raised substantial doubt about Vocalscape Networks, 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 net loss, working capital deficit, and stockholders' deficit. About Vocalscape Vocalscape provides Voice over Internet Protocol (VoIP) software for local and international long distance communication. WHITE KNIGHT: Case Summary & 18 Largest Unsecured Creditors ----------------------------------------------------------- Debtor: White Knight Holdings, Inc. 700 St. John Street, Suite 301 Lafayette, Louisiana 70501 Tel: (318) 237-9965 Fax: (318) 235-5872 Bankruptcy Case No.: 06-50422 Debtor affiliates filing separate chapter 11 petitions: Entity Case No. ------ -------- White Knight Broadcasting, Inc. 06-50423 White Knight Broadcasting of Shreveport, Inc. 06-50424 White Knight Broadcasting of Baton Rouge, Inc. 06-50425 White Knight Broadcasting of Longview, Inc. 06-50426 White Knight Broadcasting of Natchez, Inc. 06-50427 Type of Business: The Debtors are media, television and broadcasting companies and operate around 23 TV stations together with Communications Corporation of America. White Knight Holdings filed for chapter 11 protection together with Communications Corporation of America (Bankr. W.D. La. Case No. 06-50410) and it subsidiaries, which are also media companies. White Knight Holdings and Communications Corporation have asked the Court to jointly administer their chapter 11 cases. White Knight Holdings have entered into commercial inventory agreements, joint sales agreements, and shared services agreements with Communications Corp. However, both entities are independent companies and are not affiliates of each other. Alvarez & Marsal, LLC, continue to provide restructuring management services to the Debtors. Chapter 11 Petition Date: June 7, 2006 Court: Western District of Louisiana (Lafayette/Opelousas) Judge: Gerald H. Schiff Debtors' Counsel: R. Patrick Vance, Esq. Matthew T. Brown, Esq. Jones, Walker, Waechter, Poitevent, Carrere & Denegre, LLP 201 St. Charles Avenue, 49th Floor New Orleans, Louisiana 70170-5100 Tel: (504) 582-8000 Fax: (504) 589-8216 Estimated Assets: Less than $50,000 Estimated Debts: $100,000 to $500,000 Debtor's 18 Largest Unsecured Creditors: Entity Claim Amount ------ ------------ Preston-Patterson Co., Inc. $101,845 P.O. Box 244 Conshohocken, PA 19428-0244 Fox Broadcasting Company $36,880 FBC c/o Bank of America 96616 Collection Center Drive Chicago, IL 60693 Fox Broadcasting $13,669 Bank of America/Ernst & Young 7576 Collection Center Drive Chicago, IL 60693 Continental TV $12,752 Millennium TV $9,219 Nielsen Media Research $4,873 Katz Media $4,096 Kingworld Productions $2,961 Clear Channel Broadcasting, Inc. $1,560 Dickstein Shapiro $1,436 Pillsbury Winthrop $1,416 Valero Marketing $1,212 SESAC $726 Harris Corporation $518 Fulton Radio Supply Co., Inc. $504 East Texas Copy Systems, Inc. $483 Office Depot Credit Plan $428 Audio-Video Distributors $397 WILD OATS: S&P Withdraws CCC+ Corp. Credit & Sr. Unsecured Ratings ------------------------------------------------------------------ Standard & Poor's Ratings Services withdrew its 'CCC+' corporate credit and senior unsecured ratings on Wild Oats Markets Inc. This rating(s) was initiated by Standard & Poor's. It may be based solely on publicly available information and may or may not involve the participation of the issuer's management. Standard & Poor's has used information from sources believed to be reliable, but does not guarantee the accuracy, adequacy, or completeness of any information used. WINDSTREAM CORP: S&P Rates Proposed $2.5 Billion Notes at BB- ------------------------------------------------------------- Standard & Poor's Rating Services assigned its 'BB+' corporate credit rating to Little Rock, Arkansas-based Windstream Corp., a company to be formed through the merger of Valor Communications Group Inc. with the wireline business to be spun off from ALLTEL Corp. The transaction is expected to close in July. The outlook is negative. At the same time, Windstream's proposed $3.3 billion senior secured credit facility was rated 'BBB-', one notch above the corporate credit rating, with a recovery rating of '1', indicating expectations for full (100%) recovery of principal in the event of a payment default. A 'BB-'rating was assigned to the company's proposed offering of $2.5 billion of unsecured notes, comprised of: * $1.7 billion of debt for debt exchange notes to be issued to ALLTEL; and * $800 million of notes that will be issued by Windstream in a subsequent offering. The unsecured notes are rated two notches below the corporate credit rating because of the significant amount of priority obligations, largely the bank facility. Proceeds from the transactions will be used to pay a $2.3 billion dividend to ALLTEL, refinance existing debt, and pay transaction fees. Debt outstanding at March 31, 2006, pro forma for the proposed transactions, totaled $5.5 billion. "The ratings on Windstream reflect an aggressive shareholder- oriented financial policy, accelerating competition from cable operators, flat to declining revenues from its mature local telephone business, and risks related to its transition to a stand-alone business," said Standard & Poor's credit analyst Susan Madison. Tempering factors include: * the company's position as the dominant provider of local and long distance telecom services in secondary and tertiary markets, which provides some limited insulation from competition, growth potential from data and Internet services; * its solid operating margin; and * moderate capital requirements. Windstream is a rural local exchange carrier providing voice and data communication services to about 3.4 million access lines located in 16 states in the midwestern and southeastern U.S. and parts of New York and Pennsylvania. XTO ENERGY: Acquires Peak Energy Resources for $105 Million ----------------------------------------------------------- XTO Energy Inc. agreed to purchase privately held Peak Energy Resources Inc., a Barnett Shale producer, for equity consideration of 2.555 million shares of XTO common stock, valued at approximately $105 million. This acquisition increases the Company's reserves and leasehold acreage in the Tier 1 and Tier 2 regions of the Barnett Shale play, predominantly in Hood, Parker and eastern Erath counties of Texas. XTO Energy's internal engineers estimate proved reserves to be 64 billion cubic feet (Bcf) of natural gas, 14% of which are proved developed. Additional potential is more than 200 Bcf of natural gas. Proved reserve estimates are based on the ownership of about 37,000 gross acres (33,000 net) with new well locations spaced at 100 acres. Development costs for the proved undeveloped reserves are estimated at $1.30 per thousand cubic feet (Mcf) of natural gas. The Company expects reserves of 1.0-1.5 Bcf for each new well at a cost of about $1.6 million. Production from the properties is expected to reach 10 million cubic feet per day (Mmcf/d) by the end of 2006 and more than 25 Mmcf/d in 2007. "Our strategy for investment in the Barnett Shale reflects our commitment to low operational risk and healthy economic returns," Bob R. Simpson, Chairman and Chief Executive Officer, stated. "Peak Energy offers XTO the opportunity to invest in the best non- core areas of the play where we anticipate the greatest potential. About 30% of the Peak Energy acreage is held-by- production with no lease expiration risk and, in total, expands our holdings to almost 200,000 net acres across the Barnett Shale play. Importantly, we have hand-picked our properties where drilling and economic results favor long-term development." "As in all of our regions, we continue to build out positions based on reservoir quality, production characteristics and attractive returns," Keith A. Hutton, President, said. "The Peak Energy purchase provides us with solid drilling acreage based on our technical assessment of well performance to date. The leasehold is primarily located in a thick section of the shale reservoir, ranging from 200 feet to 250 feet, and at a shallow average drilling depth of 4,600 feet. Per-well reserves may be less than those in the Core Area, but the gas composition is 25% richer, yielding price realizations $1 to $1.50 per Mcf higher than the Core. A well-designed infrastructure to handle gas production and water disposal is already in place. In addition, new pipelines are under construction to accommodate future development. XTO currently plans to drill 300 wells on the Peak properties and looks to expand further with 50-acre drilling locations in select areas." This transaction is expected to close on June 30, 2006. The booked acquisition cost will include customary non-cash adjustments, including a step-up for deferred income taxes. Lehman Brothers acted as the financial advisor to Peak Energy. Headquartered in Fort Worth, Texas, XTO Energy Inc. (NYSE: XTO) -- http://www.xtoenergy.com/-- is a domestic natural gas producer engaged in the acquisition, exploitation and development of quality, long-lived oil and natural gas properties in the United States. Its properties are concentrated in Texas, New Mexico, Arkansas, Oklahoma, Kansas, Wyoming, Colorado, Alaska, Utah, Louisiana and Mississippi. * * * As reported in the Troubled Company Reporter on March 28, 2006, Moody's Investors Service assigned Baa3 ratings to XTO Energy's $400 million 10-year senior note and $600 million 30-year senior note offerings. The new ratings are also under review for upgrade along with XTO's existing ratings that were placed on review Jan. 24, 2006. Other ratings under review for upgrade include XTO's existing Baa3 senior unsecured note ratings, Baa3 corporate family rating, prospective (P)Ba1 subordinated note shelf rating, and prospective (P)Ba2 preferred stock shelf rating. If XTO is upgraded, it would be by one rating notch. Moody's expects to complete the review within the next quarter. Y3K SECURE: March 31 Balance Sheet Upside Down by $11.2 Mil. ------------------------------------------------------------ Y3k Secure Enterprise Software, Inc., fka Ecuity Inc., filed its first quarter financial statements for the three months ended March 31, 2006, with the Securities and Exchange Commission on May 22, 2006. The Company reported a $2,251,868 net loss on $582,020 of revenues for the three months ended March 31, 2006. At March 31, 2006, the Company's balance sheet showed $1,827,083 in total assets and $13,034,327 in total liabilities, resulting in a $11,207,244 stockholders' deficit. The Company's March 31 balance sheet also showed strained liquidity with $492,702 in total current assets available to pay $8,817,487 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?ac2 Going Concern Doubt As reported in the Troubled Company Reporter on Dec. 9, 2005, De Leon & Company, PA, expressed substantial doubt on Y3k Secure Enterprise Software Inc.'s ability to continue as a going concern after it audited the company's financial statements for the fiscal years ended June 30, 2005, and 2004. The auditing firm pointed to the company's current year losses from operations, net capital deficiency, and cumulative deficit at June 30, 2005. About Y3k Secure Y3k Secure Enterprise Software, Inc., is a facilities-based telecommunication carrier providing Voice over Internet Protocol service offerings as well as legacy telecommunication services. Ecuity currently provides VoIP services over FTTP including fiber to residences and businesses, VoIP over WiFi, Business VoIP Services including IP-PBX and IP-Centrix solutions, "SmartCall" VoIP services utilizing a downloadable soft-client on a customer's PC or other Windows compatible computing device, and conference calling. YOUTH & FAMILY: S&P Puts B Rating on Proposed $170MM Debt Facility ------------------------------------------------------------------ Standard & Poor's Ratings Services assigned its 'B' corporate credit rating, with a stable outlook, to Austin, Texas-based Youth & Family Centered Services Inc. At the same time, Standard & Poor's assigned its 'B' senior secured bank loan rating and its '2' recovery rating to YFCS' proposed $50 million revolving credit facility due in 2012 and its $120 million term loan B due in 2013, indicating the expectation for a substantial (80%-100%) recovery of principal in the event of a payment default. The company is the fourth-largest U.S. provider of child and adolescent health, education, and long-term support services. "The ratings reflect the company's narrow operating focus, its exposure to third-party reimbursement, the challenge to integrate the proposed acquisitions, and the potential for further acquisitions," said Standard & Poor's credit analyst Alain Pelanne. "These risks are partially offset by the company's local market leadership in treating difficult patient cases, the resulting higher margins relative to peers, its expanding service offerings, and the relatively stable reimbursement environment in recent years." Net of transaction expenses, the term loan will refinance existing debt of $76 million and fund the acquisition of Ascent Behavioral Health, a leading outpatient service provider to young children in Arkansas. YFCS intends to roll over existing mezzanine debt and to leave the revolving credit facility undrawn at closing. In the third quarter of 2006, YFCS is expected to acquire Psychsolutions Inc., a leading community-based provider of child behavioral services in Dade County, Florida, with available cash. * David Mitchell Joins Fried Frank as Partner in New York --------------------------------------------------------- David S. Mitchell has joined Fried, Frank, Harris, Shriver & Jacobson LLP as a partner in the Corporate Department. He joins Fried Frank from Cadwalader, Wickersham & Taft LLP where he was a partner in the Capital Markets Department. "We are delighted to welcome David to the firm. He is a highly regarded practitioner in commodities, futures and derivatives, areas which are very important to many of our clients," said Valerie Ford Jacob, Fried Frank's Chairperson. Mr. Mitchell provides regulatory, transactional and litigation advice to clients in connection with structuring transactions and funds, new product development, and regulatory, compliance and enforcement matters. His primary areas of practice include: * the structuring and regulatory analysis of complex derivatives and synthetic and structured products; * providing advice to derivatives businesses concerning managing and mitigating legal and regulatory risks of transactions, including securities and commodities laws and regulations; and * derivatives related regulatory and compliance advice relating to the business activities of a broker-dealer/futures commission merchant including assisting clients with regulatory agency and self regulatory organization examinations, investigations, and enforcement actions. "Our clients are increasingly involved in complex structured products and capital markets transactions, both in the United States and internationally. David's expertise is directly relevant to these areas," said Justin Spendlove, the firm's Managing Partner. Mr. Mitchell joined Cadwalader in 1983 from the Commodity Futures Trading Commission. He received his LL.M. from New York University School of Law, his J.D., magna cum laude, from New York Law School, where he was a member of the Law Review and his B.A., summa cum laude, Phi Beta Kappa, from City College. Mr. Mitchell has been named as a leading practitioner in Capital Markets: Derivatives by both Chambers Global: the World's Leading Lawyers for Business and Chambers USA: America's Leading Lawyers for Business. He is the author of numerous articles and regularly speaks before industry and professional groups on derivatives, futures, and securities regulation. Mr. Mitchell is a member of the Board of Editors of Futures & Derivatives Law Report and a member of the Board of Directors of the Futures Industry Association. Fried, Frank, Harris, Shriver & Jacobson LLP -- http://www.friedfrank.com/-- is a leading international law firm with more than 525 attorneys in offices in New York, Washington, D.C., London, Paris and Frankfurt. Fried Frank lawyers regularly represent major investment-banking firms, private equity houses and hedge funds, as well as many of the largest companies in the world. The firm offers legal counsel on M&A and corporate finance matters, white-collar criminal defense and civil litigation, securities regulation, compliance and enforcement, government contracts, real estate, tax, bankruptcy, antitrust, benefits and compensation, intellectual property and technology, international trade, and trusts and estates. * Larry Engel Joins Morrison & Foerster in San Francisco -------------------------------------------------------- Leading bankruptcy and workout lawyer Larry Engel has joined Morrison & Foerster as a partner in its San Francisco office. Mr. Engel has over 30 years of experience covering a broad range of legal disciplines applicable in transactions involving financially distressed businesses. Mr. Engel's practice focuses on bankruptcy, workouts, cross-border insolvency, restructurings, private equity and hedge fund distressed debt work, insurance insolvency, leveraged buyouts, and complex financings, including for real estate and other industries, as well as "commercial tech" outsourcing, and intellectual property transactions, including "bankruptcy proofing" licenses, technology ventures, and collaborations. He represents clients throughout the U.S. and abroad. Mr. Engel joins Morrison & Foerster from White & Case. "Larry's experience and abilities fit very well with our current Bankruptcy and Restructuring practice; his credentials and track record are exactly what clients are looking for," said Larren Nashelsky, Chair of the firm's Bankruptcy and Restructuring group. "Larry will be a tremendous addition to the Bankruptcy and Restructuring practice, and we are very pleased to welcome him to the firm," added Keith Wetmore, Chair of Morrison & Foerster. "We are delighted to have an attorney of Larry's caliber join the Bankruptcy and Restructuring practice at Morrison & Foerster," said Dan Leventhal, partner in the Financial Transactions group. "Larry and I were partners for many years at the Brobeck firm, he is a superb lawyer and I look forward to working with him again." "Morrison & Foerster provides an excellent platform for further developing my practice, and the firm's commitment to its core values of teamwork, excellence, and service to the community and the profession was of special interest to me," said Mr. Engel. "I am excited at the opportunity to help strengthen the firm's bankruptcy and restructuring practice domestically and internationally." Mr. Engel began his legal career at Brobeck, Phleger & Harrison in 1972 and stayed with the firm until its closure in January 2003. He received his J.D. from Northwestern University School of Law, cum laude, where he was the Executive Editor of the Northwestern University Law Review and a member of the Order of the Coif. He received his undergraduate degree from Northwestern University, magna cum laude and earned Phi Beta Kappa honors. Mr. Engel is a frequent lecturer and author for numerous business and legal organizations, including the Practising Law Institute, the ABI, the ABA, the State Bar of California, and the California Bankers Association. * 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 EHJ LLC Bankr. S.D. Ohio Case No. 06-11631 Chapter 11 Petition filed May 31, 2006 See http://bankrupt.com/misc/ohsb06-11631.pdf In re Intercoastal Leasing, Inc. Bankr. S.D. Tex. Case No. 06-32260 Chapter 11 Petition filed May 31, 2006 See http://bankrupt.com/misc/txsb06-32260.pdf In re Lee C. Alison Bankr. N.D. Ala. Case No. 06-80946 Chapter 11 Petition filed May 31, 2006 See http://bankrupt.com/misc/alnb06-80946.pdf In re Olympian Moving and Storage, Inc. Bankr. N.D. Ohio Case No. 06-12176 Chapter 11 Petition filed May 31, 2006 See http://bankrupt.com/misc/ohnb06-12176.pdf In re Andrew J. Hartpence Bankr. N.D. Ga. Case No. 06-66103 Chapter 11 Petition filed June 1, 2006 See http://bankrupt.com/misc/ganb06-66103.pdf In re B&D Commercial Fleet Management Services, L.L.C. Bankr. E.D. Va. Case No. 06-10582 Chapter 11 Petition filed June 1, 2006 See http://bankrupt.com/misc/vaeb06-10582.pdf In re Chesapeake Knife and Tool Company of D.C., Inc. Bankr. D. Md. Case No. 06-13130 Chapter 11 Petition filed June 1, 2006 See http://bankrupt.com/misc/mdb06-13130.pdf In re DSB, LLC Bankr. M.D. Tenn. Case No. 06-02704 Chapter 11 Petition filed June 1, 2006 See http://bankrupt.com/misc/tnmb06-02704.pdf In re Genley Transfer, Inc. Bankr. N.D. Ohio Case No. 06-12209 Chapter 11 Petition filed June 1, 2006 See http://bankrupt.com/misc/ohnb06-12209.pdf In re L & J Sheets Farms Bankr. N.D. Ind. Case No. 06-10828 Chapter 11 Petition filed June 1, 2006 See http://bankrupt.com/misc/innb06-10828.pdf In re Ponderosa Development, L.P. Bankr. E.D. Tex. Case No. 06-10210 Chapter 11 Petition filed June 1, 2006 See http://bankrupt.com/misc/txeb06-10210.pdf In re Rite Contracting Services, Inc. Bankr. S.D. Ill. Case No. 06-30848 Chapter 11 Petition filed June 1, 2006 See http://bankrupt.com/misc/ilsb06-30848.pdf In re 11730 Plaza America Deli, LLC Bankr. E.D. Va. Case No. 06-10584 Chapter 11 Petition filed June 2, 2006 See http://bankrupt.com/misc/vaeb06-10584.pdf In re Edward A. Coker, Jr. Bankr. W.D. Pa. Case No. 06-22518 Chapter 11 Petition filed June 2, 2006 See http://bankrupt.com/misc/pawb06-22518.pdf In re Phillip Iniguez Bankr. C.D. Calif. Case No. 06-10836 Chapter 11 Petition filed June 2, 2006 See http://bankrupt.com/misc/cacb06-10836.pdf In re Priscilla Dining in Art Restaurant, Inc. Bankr. W.D. Pa. Case No. 06-22524 Chapter 11 Petition filed June 2, 2006 See http://bankrupt.com/misc/pawb06-22524.pdf In re R.B. No. 2 Limited Partnership Bankr. W.D. Pa. Case No. 06-22517 Chapter 11 Petition filed June 2, 2006 See http://bankrupt.com/misc/pawb06-22517.pdf In re Rafael Andres Santos Suriel Bankr. D. P.R. Case No. 06-01755 Chapter 11 Petition filed June 2, 2006 See http://bankrupt.com/misc/prb06-01755.pdf In re Rocky Mountain Homecare, Inc. Bankr. D. Colo. Case No. 06-13279 Chapter 11 Petition filed June 2, 2006 See http://bankrupt.com/misc/cob06-13279.pdf In re Southern Pride Transportation, LLC Bankr. D. Conn. Case No. 06-20471 Chapter 11 Petition filed June 2, 2006 See http://bankrupt.com/misc/ctb06-20471.pdf In re R. Smith, LLC Bankr. D. Md. Case No. 06-13177 Chapter 11 Petition filed June 4, 2006 See http://bankrupt.com/misc/mdb06-13177.pdf In re 101 S. Shaver, L.L.C. Bankr. S.D. Tex. Case No. 06-32437 Chapter 11 Petition filed June 5, 2006 See http://bankrupt.com/misc/txsb06-32437.pdf In re AMRCO, INC. Bankr. W.D. Tex. Case No. 06-10856 Chapter 11 Petition filed June 5, 2006 See http://bankrupt.com/misc/txwb06-10856.pdf In re Cabalar Enterprises Bankr. C.D. Calif. Case No. 06-12383 Chapter 11 Petition filed June 5, 2006 See http://bankrupt.com/misc/cacb06-12383.pdf In re Club Cool Bankr. D. N.J. Case No. 06-14990 Chapter 11 Petition filed June 5, 2006 See http://bankrupt.com/misc/njb06-14990.pdf In re Collision Repair Service, Inc. Bankr. E.D. Calif. Case No. 06-90267 Chapter 11 Petition filed June 5, 2006 See http://bankrupt.com/misc/caeb06-90267.pdf In re David L. Hager Bankr. N.D. Tex. Case No. 06-41683 Chapter 11 Petition filed June 5, 2006 See http://bankrupt.com/misc/txnb06-41683.pdf In re Envirocor, Inc. Bankr. W.D. Pa. Case No. 06-22551 Chapter 11 Petition filed June 5, 2006 See http://bankrupt.com/misc/pawb06-22551.pdf In re Forms Corporation of America Bankr. N.D. Ill. Case No. 06-70946 Chapter 11 Petition filed June 5, 2006 See http://bankrupt.com/misc/ilnb06-70946.pdf In re Paul J. Tegeder Bankr. D. Nebr. Case No. 06-80767 Chapter 11 Petition filed June 5, 2006 See http://bankrupt.com/misc/neb06-80767.pdf In re Gregory Vernon Gonzales Bankr. M.D. Ga. Case No. 06-40371 Chapter 11 Petition filed June 6, 2006 See http://bankrupt.com/misc/gamb06-40371.pdf In re Holbrook Millennium Joint Venture, LLC Bankr. N.D. Tex. Case No. 06-32329 Chapter 11 Petition filed June 6, 2006 See http://bankrupt.com/misc/txnb06-32329.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 ***