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/raid1/www/Hosts/bankrupt/TCR_Public/060714.mbx T R O U B L E D C O M P A N Y R E P O R T E R Friday, July 14, 2006, Vol. 10, No. 166 Headlines ADELPHIA COMMS: Gets FCC Nod on Asset Sale to Time Warner-Comcast ADELPHIA COMMS: SPCP Group Wants Multi-Million Claim Allowed AIRBASE SERVICES: Wants Edgar Wyngaarde Employment Pact Rejected AIRBASE SERVICES: Ch. 11 Trustee Hires Lain Faulker as Accountant AIR CANADA: Douglas Stanley Named as Mediator and Arbitrator ALLIED HOLDINGS: More Trustees Dispute Insurance Pact Liabilities AMC ENTERTAINMENT: High Leverage Prompts S&P's Negative Watch AMERIQUEST MORTGAGE: S&P Cuts Ratings on Two Certificate Classes AMES DEPARTMENT: Administrative Claimholders Demand Update AMES DEPARTMENT: LFD Will Appeal Bankr. Court's Summary Judgment AMHERST TECH: Birfam will Prepare Tax Returns for Ch. 7 Trustee AMHERST TECH: Rule 2004 Test of Keeper of the Records of CSI OK'd ARMSTRONG WORLD: Court Approves Travelers Settlement Agreement ARMSTRONG WORLD: Bear Stearns Assigns $16M Claims to Fimat, et al. AVITAR INC: March 31 Balance Sheet Upside-Down by $6.25 Million BOWNE & CO: Chairman and CEO Philip Kucera Retiring in December BROOK MAYS: First Act Gets $16.7 Million Settlement from Insurers CABLEVISION SYSTEMS: Rainbow Unit Obtains $800MM Credit Facility CALIFORNIA THEATRE: Case Summary & Seven Largest Unsec. Creditors CALPINE CORP: Court Implores Calpine-Rosetta Resolution on Leases CARDTRONICS INC: Financial Report Filing Cues S&P's Stable Outlook CATHOLIC CHURCH: District Ct. Receives Appellants' Opening Briefs CATHOLIC CHURCH: Court Rejects Robert Fleming's $4-Million Claim COMM 2004-RS1: Fitch Affirms Low-B Ratings on $8.74 Million Notes CONSUMERS ENERGY: Fitch Comments on Nuclear Plant Sale to Entergy CSFB ABS: S&P Junks Rating on Series 2001-HE25 & 2002-HE4 Certs. CSFB MORTGAGE: S&P's Rating on Class I-M-3 Certs. Tumbles to D DANA CORP: Wants Court to Approve Burns, et al. Employment Pacts DANA CORP: To Set Off $7 Mil. Against Bendix Spicer's Obligation DATALOGIC INT'L: Selling Certain Assets to Huron for $700,000 DAVITA INC: Mark Harrison to Serve as CFO Effective September 1 DELPHI CORP: Incurs $2.4 Billion Net Loss in 2005 DELPHI CORP: Court Gives Final Nod on Jefferies as Panel's Advisor DELTA AIR: Files Family-Care Savings Plan 2005 Annual Report DELTA AIR: Gets Court Nod to Reject 14 Embraer Aircraft Leases DELTA FUNDING: S&P's Rating on Class B Certificates Tumbles to D DIGICEL LTD: Strong Market Position Cues Moody's to Hold B1 Rating ELINEAR INC: Lopez Blevins Raises Going Concern Doubt ELINEAR INC: Signs Letter of Intent to Acquire SweetWater EOXAN LLC: Voluntary Chapter 11 Case Summary EYE CARE: HVHC Merger Prompts S&P to Remove Developing Watch FALCON AIR: Wants Crisis Management as Limited Financial Advisor FALCON AIR: Wants Pierre Murphy as Special DOT Counsel FAMILY RESORTS: Case Summary & Nine Largest Unsecured Creditors GREAT PANTHER: Company Says It's Now in "Best Shape" Ever GREENMAN TECH: Laurus Extends $16 Million Credit Facility GSR DEVELOPMENT: Case Summary & 20 Largest Unsecured Creditors HEXION SPECIALTY: Exchanging $150MM of Notes for Registered Bonds HVHC INC: S&P Rates Proposed $155 Mil. Senior Debt Facility at BB INCO LTD: Expects to Receive CA$353MM from Common Shares Issue INDIANTOWN COGEN: S&P Holds BB+ Rating on $630 Million Bonds INEX PHARMACEUTICALS: Revises Tekmira Pharma Spin Out Plans INTEGRATED HEALTH: Will Pay $6.9MM Quarterly Fees to U.S. Trustee IPAYMENT INC: $75 Million Issuance Prompts S&P's Negative Watch JACKSON COUNTY: S&P Says $19.736 Million Bonds Has Stable Outlook JP MORGAN: Fitch Holds Low-B Ratings on $63.3 Million Class Certs. KAISER ALUMINUM: Inks New Employment Pacts with CEO and CFO KAISER ALUMINUM: Five Trusts Created Following Bankruptcy Exit KB HOME: Moody's Affirms Ba2 Senior Subordinated Debt Rating KOCH V HANKINS: Case Summary & Largest Unsecured Creditor LAIDLAW INT'L: Tenders Offer for up to 15 Million Common Shares LAND O'LAKES: Acquires 697,350 of Golden Oval's Class B Units LEVI STRAUSS: May 28 Stockholders' Deficit Narrows to $1.1 Billion LEVITZ HOME: Court OKs PLVTZ's Assumption of Lease 20309 & 30603 LEVITZ HOME: Withdraws Request for Arroyo Grande Lease Rejection MAGMA CDO: Moody's Places Ba2 Rating for $14.5MM Notes on Watch MERRILL LYNCH: Fitch Holds Low-B Ratings on $24.6 Mil. Securities MORGAN STANLEY: S&P Puts Low-B Ratings on $24 Million Certificates NATIONAL ENERGY: TGP Opposes Plea to Exclude 2003 Valuation Docs NATIONAL ENERGY: Hoffman, et al. Want Compensation Claims Allowed NAUTILUS RMBS: Fitch Rates $5 Million Class C Interest Notes at BB NEW CENTURY: Credit Enhancement Prompts Moody's to Upgrade Ratings NEWPARK RESOURCES: Restatements Cue S&P to Retain Negative Watch NOMURA ASSET: Fitch Lifts Rating on $42.8 Mil. Class Certificates NORTHWEST AIRLINES: Wants General Electric Agreement Approved NORTHWEST AIRLINES: PBGC Objects to Sale of 10 Aircraft to Omni OCCAM NETWORKS: June 25 Stockholders' Deficit Narrows to $17.3MM NOVELIS INC: Extends Consent Request for Senior Notes to July 19 ONEIDA LTD: Board to Review Acquisition Proposal from Shareholders ONEIDA: Equity Panel Members Can Trade Securities Under Protocol OWENS CORNING: Court Approves Praxair Settlement Agreement OWENS CORNING: District Court Won't Dismiss Northwest Suit PHAR-MOR INC: Ct. Rules L/C Excess Proceeds Part of Bankr. Estate PREMIUM PAPERS: Smart Papers Implements Employee Retention Plan PROCARE AUTOMOTIVE: Has Until Oct. 2 to File Chapter 11 Plan PULL'R HOLDINGS: First Meeting of Creditors Slated for July 18 PULL'R HOLDINGS: Hires Robinson Diamant as Bankruptcy Counsel RAPID PAYROLL: Creditors Panel Taps Winthrop as Bankr. Counsel REFCO INC: Official Committee Wants Seat in Fee Panel REFCO INC: Meridian IT Wants Decision on Smartnet Maintenance Pact REVLON CONSUMER: Wants Bank Credit Pact Raised by $75 Million REVLON CONSUMER: Poor Performance Prompts S&P's Negative Outlook ROEDIGER INC: Case Summary & 20 Largest Unsecured Creditors SAINT VINCENTS: Modifies Terms of Sun Life Escrow Agreement SAINT VINCENTS: Wants to Sell Two Lots in King and Queen Counties SEROLOGICALS CORP: Merger Completion Cues S&P to Withdraw Ratings SILICON GRAPHICS: Morgan Lewis Wants to Hire CRA as Consultants SILICON GRAPHICS: Valuation Analysis Under First Amended Plan STELLAR FUNDING: S&P Puts Class A-3 Notes on Positive Watch STONY HILL: S&P Places BB-Rated Notes on Negative Watch THERMADYNE HOLDINGS: Reports Unaudited and Restated Financials TRANSAX INTERNATIONAL: Amends 2006 and 2005 Financial Statements UNITED ENERGY: Court Approves Hoyer Hoyer as Bankruptcy Counsel UNITED ENERGY: Files Schedules of Assets and Liabilities U.S. CONCRETE: Completes Private Placement of 8-3/8% Senior Notes U.S. CONCRETE: Completes $165 Million Alberta & Alliance Purchase USG CORP: Extends Deadline to Exercise Stock Rights to July 27 USG CORP: Court Won't Stay McDowell's Action Against Contractor U.S. TELEPACIFIC: Moody's Rates Proposed $205 Mil. Loan at B2 VENETO LLC: Case Summary & 20 Largest Unsecured Creditors VERSO PAPER: S&P Rates $300 Million Senior Subor. Notes at B- WCI COMMUNITIES: Order Declines Prompt S&P's Negative Outlook WINN-DIXIE: Rejects Sanderson Farms Supply Pact Effective June 30 WORLDCOM INC: M. Jordan Wants Court to Allow His $8 Million Claim WORLDCOM INC: Teleserve Wants $7 Mil. Claim Allowed as Class 6A W.R. GRACE: Renews Fight with Asbestos Panels over Exclusivity W.R. GRACE: Graham Objects to Asbestos PI Questionnaire * Robert Gold Joins DLA Piper's New York Office as Partner * Thacher Proffitt Names Two New Counsel in Mexico City Office * BOOK REVIEW: Why Companies Fail: Strategies for Detecting, Avoiding, and Profiting from Bankruptcy ********* ADELPHIA COMMS: Gets FCC Nod on Asset Sale to Time Warner-Comcast ----------------------------------------------------------------- The Federal Communications Commission approved the sale of substantially all of the cable systems and assets of Adelphia Communications Corporation to Time Warner Inc. and Comcast Corporation, the exchange of certain cable systems and assets between affiliates or subsidiaries of Time Warner and Comcast, and the redemption of Comcast's interests in Time Warner Cable and Time Warner Entertainment Company. As reported in the Troubled Company Reporter, the FCC held a public meeting yesterday, to consider approval of Adelphia Communication Corporation's sale of substantially all its assets to Time Warner, Inc., and Comcast Corporation. In reaching its decision, the FCC found that the transactions, as conditioned, serve the public interest and comply with all applicable statutes and Commission rules. The Commission also found that the potential public interest harms of the transactions, as conditioned, are outweighed by the potential public interest benefits. With respect to benefits, the Commission determined that subscribers would benefit from the resolution of the Adelphia bankruptcy proceeding in the form of new investment and upgrades to the network. Additionally, the transactions would accelerate deployment of Voice-Over-Internet Protocol and other advanced video services, such as local Video on Demand programming, to subscribers. With respect to the potential harms, the Commission found that the proposed transactions may increase the likelihood of harm in markets in which Time Warner or Comcast has, or may in the future have, an ownership interest in Regional Sports Networks. The Commission imposed remedial conditions, the same as those imposed in the News Corp.-Hughes order to address its concerns. The Commission adopted further conditions to ensure that the transactions will not harm the supply of programming to Multichannel Video Programming Distributors. Specifically, the Commission adopted a condition allowing unaffiliated RSNs unable to reach a carriage agreement with Time Warner or Comcast to seek commercial arbitration. In addition, the Commission adopted a condition allowing unaffiliated programmers unable to reach a leased access agreement with Time Warner or Comcast to seek commercial arbitration. About Adelphia Communications Based in Coudersport, Pa., Adelphia Communications Corporation (OTC: ADELQ) -- http://www.adelphia.com/-- is a cable television company, serving customers in 30 states and Puerto Rico, and offers analog and digital video services, high-speed Internet access and other advanced services over its broadband networks. The Company and its more than 200 affiliates filed for Chapter 11 protection in the Southern District of New York on June 25, 2002. Those cases are jointly administered under case number 02-41729. Willkie Farr & Gallagher represents the ACOM Debtors. PricewaterhouseCoopers serves as the Debtors' financial advisor. Kasowitz, Benson, Torres & Friedman, LLP, and Klee, Tuchin, Bogdanoff & Stern LLP represent the Official Committee of Unsecured Creditors. ADELPHIA COMMS: SPCP Group Wants Multi-Million Claim Allowed ------------------------------------------------------------ SPCP Group, L.L.C., asks the U.S. Bankruptcy Court for the Southern District of New York to reconsider the disallowance of a portion of Claim Nos. 4712 and 4714, which reduced the claims from $43,946,110 to $28,302,507. On November 4, 2003, Fox News Network, L.L.C., assigned $27,825,531 of its claims to SPCP Group, L.L.C. Fox initially had claims totaling $45,171,054 against the ACOM Debtors. The parties agreed: -- to give each other notice if objections are filed against the Claims; -- that Fox had an obligation to respond to any objection to the Claims; and -- that SPCP had no obligation to defend any objection to the Claims. In November 2005, Adelphia Communications Corporation and its debtor-affiliates asked the Court to reduce and reclassify: -- Claim No. 4713 as an unsecured claim for $2,335,005, and -- Claim No. 4714 as an unsecured claim for $25,967,502. According to Brian Jarmain, the SPCP employee assigned to monitor the Claims, his failure to take action on the Debtors' objection was not willful. "I simply, albeit mistakenly, believed that the Claims Objection did not apply to any portion of the Claims other than the Allowed Amount. Certainly, had I been aware that there was an additional portion of the Claims that were retained by Fox and subject to the Claims Objection, I would have contacted them immediately upon its receipt." In December 2005, the Court sustained ACOM's Claims Objection. On April 28, 2006, Fox's counsel informed SPCP that the actual amount of the Claims is $34,290,420 and not the allowed amount of $28,428,357. Fox alleged damages for $5,862,062, the difference between the net claim and the allowed claim. Eric Snyder, Esq., at Siller Wilk LLP, in New York, relates that since April 28, 2006, the ACOM Debtors, Fox and SPCP have been addressing the extent of the damages asserted by Fox and a potential resolution. Mr. Snyder relates that Fox has informed SPCP that it has no objection to the Reconsideration Motion. Mr. Snyder asserts that SPCP's failure to respond to the Claims Objection was the result of excusable neglect because SPCP did not willfully ignore the Claims Objection. According to Mr. Snyder, SPCP has a legally supportable defense to the Claims Objection. The Court needs to look no further than Fox's April 28th letter for proof that a meritorious defense to the Claims Objection exists, Mr. Snyder says. Mr. Snyder assures the Court that there will be no prejudice to the ACOM Debtors or their creditors if the Reconsideration Motion is granted. Based in Coudersport, Pa., Adelphia Communications Corporation (OTC: ADELQ) -- http://www.adelphia.com/-- is the fifth-largest cable television company in the country. Adelphia serves customers in 30 states and Puerto Rico, and offers analog and digital video services, high-speed Internet access and other advanced services over its broadband networks. The Company and its more than 200 affiliates filed for Chapter 11 protection in the Southern District of New York on June 25, 2002. Those cases are jointly administered under case number 02-41729. Willkie Farr & Gallagher represents the ACOM Debtors. PricewaterhouseCoopers serves as the Debtors' financial advisor. Kasowitz, Benson, Torres & Friedman, LLP, and Klee, Tuchin, Bogdanoff & Stern LLP represent the Official Committee of Unsecured Creditors. (Adelphia Bankruptcy News, Issue No. 139; Bankruptcy Creditors' Service, Inc., 215/945-7000) AIRBASE SERVICES: Wants Edgar Wyngaarde Employment Pact Rejected ---------------------------------------------------------------- Dennis Faulker, the Chapter 11 Trustee for Airbase Services, Inc., asks the Honorable D. Michael Lynn of the U.S. Bankruptcy Court for the Northern District of Texas in Fort Worth for permission to reject an employment agreement between the Debtor and Edgar Wyngaarde, as of June 30, 2006. The Debtor hired Mr. Wyngaarde on Oct. 25, 2005, as its U.S. Controller. Under the employment agreement, Mr. Wyngaarde is entitled to an $8,000 monthly salary. The Debtor has sold substantially all of its assets to Regent Aerospace Corp. Regent Aerospace has orally notified the Chapter 11 Trustee that it does not intend to employ Mr. Wyngaarde. The Debtor says that it is current on its payments to Mr. Wyngaarde. Mark J. Petrocchi, Esq., at Goodrich Postnikoff Albertson & Petrocchi, LLP, said that no hearing will be conducted on this motion unless a written response is filed with the Clerk of the Bankruptcy Court on or before July 24, 2006,. Headquartered in Grand Prairie, Texas, Airbase Services, Inc. -- http://www.airbaseservices.com/-- maintains and repairs a wide range of cargo equipment and cabin interior designs for commercial airlines, and provides maintenance and management services for the airline industry. Due to bankruptcies filed by several of its airline customers, the Company filed for bankruptcy protection on May 1, 2006 (Bankr. N.D. Tex. Case. No. 06-41231). The Court approved the appointment of Dennis Faulkner as Chapter 11 Trustee in the Debtor's chapter 11 case on May 3, 2006. Mark J. Petrocchi, Esq., at Goodrich Postnikoff Albertson & Petrocchi, LLP, represents the Trustee. No Official Committee of Unsecured Creditors has been appointed in the Debtor's case. In its schedules of assets and liabilities, the Debtor listed $12,628,078 in total assets and $28,311,883 in total liabilities. AIRBASE SERVICES: Ch. 11 Trustee Hires Lain Faulker as Accountant ----------------------------------------------------------------- The Honorable D. Michael Lynn of the U.S. Bankruptcy Court for the Northern District of Texas in Fort Worth approved on a final basis the retention of Lain, Faulker & Co., P.C., as accountant and financial advisor to Dennis Faulker, the Chapter 11 Trustee for Airbase Services, Inc. As reported in the Troubled Company Reporter on May 24, 2006, Lain Faulker will: a) assist the Chapter 11 Trustee in the analysis of the Debtor's financial position, assets, and liabilities; b) assist the Chapter 11 Trustee in the preparation of the Debtor's Schedules and Statement of Financial Affairs; c) assist the Chapter 11 Trustee in the examination of proofs of claim filed against the Debtor to determine whether any asserted claims are objectionable or otherwise improper; d) assist the Chapter 11 Trustee in the accounting of all receipts and disbursements from the estate and the preparation of all necessary reports in relation thereto; e) assist the Chapter 11 Trustee in the development of the Plan of Reorganization or Liquidation and in the preparation of an accompanying Disclosure Statement, any amendments to the Plan or Disclosure Statement, and any related agreements and documents; f) assist the Chapter Trustee in the preparation of a final report and final accounting of the administration of the estate; g) advise the Chapter 11 Trustee in connection with any potential sale of assets; h) assist the Chapter 11 Trustee in the analysis of tax and taxation issues and in the filing of any necessary information regarding taxes as is required by Section 1106(a)(6) of the U.S. Bankruptcy Code; i) testify at hearings and trials as to one or more of the matters set forth above as determined to be necessary and appropriate; and j) perform all other accounting services and provide all other financial advice to the Chapter 11 Trustee in connection with this Chapter 11 case as may be required or necessary. Mr. Faulker disclosed that the Firm's professionals bill: Professional Hourly Rate ------------ ----------- Shareholders $305 - $345 Senior Accountants $200 - $240 Staff Accountants $120 - $185 Accounting Clerk $55 - $75 D. Keith Enger, an accountant and business advisor at Lain Faulker, assured the Court that the firm does not hold or represent any interest adverse to the Debtor's estate and is disinterested as the term is defined in Section 101(14) of the Bankruptcy Code. Headquartered in Grand Prairie, Texas, Airbase Services, Inc. -- http://www.airbaseservices.com/-- maintains and repairs a wide range of cargo equipment and cabin interior designs for commercial airlines, and provides maintenance and management services for the airline industry. Due to bankruptcies filed by several of its airline customers, the Company filed for bankruptcy protection on May 1, 2006 (Bankr. N.D. Tex. Case. No. 06-41231). The Court approved the appointment of Dennis Faulkner as Chapter 11 Trustee in the Debtor's chapter 11 case on May 3, 2006. Mark J. Petrocchi, Esq., at Goodrich Postnikoff Albertson & Petrocchi, LLP, represents the Trustee. No Official Committee of Unsecured Creditors has been appointed in the Debtor's case. In its schedules of assets and liabilities, the Debtor listed $12,628,078 in total assets and $28,311,883 in total liabilities. AIR CANADA: Douglas Stanley Named as Mediator and Arbitrator ------------------------------------------------------------ Former New Brunswick Deputy Minister of Labour Douglas Stanley, Q.C. has been selected to act as the mediator and arbitrator between the Air Canada Pilots Association and Air Canada. A timetable has been set for the talks, with the first meeting to take place on August 21, 2006. If Mr. Stanley is unable to mediate a settlement, arbitration hearings will begin on September 18, 2006. "We are pleased to have Mr. Stanley acting as the mediator and arbitrator," says Capt. Kent Wilson, president of ACPA. "His track record is one of fairness and we know that our case will be judged on its merits." In addition to his role as deputy minister, Mr. Stanley also chaired the Public Service Labour Relations Board of N.B. and the Construction Industry Panel of the Industrial Relations Board of N.B. Mr. Stanley currently heads up the Workplace Health, Safety and Compensation Commission of New Brunswick and has had a mediation-arbitration practice in Ontario for several years. "Our case will prove that the company has the financial ability to begin to restore our wage rates to where they should be. It's also another way of acknowledging the sacrifices we made to help Air Canada return from the brink of bankruptcy," Mr. Wilson adds. The parties will submit proposals on the scope of the re-opener to Mr. Stanley by August 16, 2006. Once the parameters of the process have been set at the August 21 meeting, Mr. Stanley will attempt to mediate a settlement. Failing that, a settlement will be imposed on the association and the company following the hearings starting on September 18. The wage and pension re-opener process was established as an opportunity for Air Canada employee groups to begin the process of recouping concessions made during the Companies Creditors Arrangement Act process. The association and the company met only three times before heading to arbitration. Air Canada emerged from bankruptcy protection in Sept. 2004. Since then, the company has posted consecutive quarterly profits and 27 months of record load factors. Air Canada Pilots Association is the largest professional pilot group in Canada, representing 3,100 pilots who operate Air Canada's mainline fleet. About Air Canada Air Canada -- http://www.aircanada.com/-- together with Air Canada Jazz and other business units of parent company ACE Aviation Holdings Inc., provides scheduled and charter air transportation for passengers and cargo to more than 150 destinations, vacation packages to over 90 destinations, as well as maintenance, ground handling and training services to other airlines. Canada's flag carrier is recognized as a leader in the global air transportation market by pursuing a strategy based on value-added customer service, technical excellence and passenger safety. * * * As reported in the Troubled Company Reporter on April 24, 2006, Standard & Poor's Ratings Services raised the long-term corporate credit rating on ACE Aviation Holdings Inc. to 'B+' from 'B', while affirming the 'B' long-term corporate credit rating on its wholly owned subsidiary, Air Canada. The outlook on both entities remains stable. ALLIED HOLDINGS: More Trustees Dispute Insurance Pact Liabilities ----------------------------------------------------------------- Trustees Cherry B. Rutland, Charles W. Burge, H. Anthony McCullar, Linda B. Rutland, and Guy W. Rutland, III, ask the U.S. Bankruptcy Court for the Northern District of Georgia to: * dismiss Allied Holdings, Inc., and its debtor-affiliates' complaint; * determine that Allied Holdings, Inc., is not entitled to its interest in the insurance policies; and * determine that they are entitled to recoup from the Debtors' interest in the insurance policies for damages suffered by their insurance trusts due to Allied's default. The Trustees, excluding Mr. Rutland, further ask the Court to drop one of the Defendants or sever the Debtors' claims into two separate adversary proceedings. Ms. Cherry Rutland and Messrs. Burge and McCullar are trustees of the AR-JA-AR Trust and Ms. Linda Rutland and Mr. McCullar are trustees of the GWR Insurance Trust. Messrs. McCullar and Burge are trustees of the RJR/CBR Insurance Trust. Mr. McCullar is also trustee of the GWR, III/LBR Insurance Trust. Mr. Rutland is trustee of the Guy IV Family Trust. Debtors' Complaint The Debtors had asked the Court to declare that: (1) these agreements terminated as of July 31, 2005: * BFW Split-Dollar Insurance Agreement, * Poole Split-Dollar Agreement, * RJR/CBR Split-Dollar Insurance Agreement, * GWR,III/LBR Split-Dollar Insurance Agreement, * AR-JA-AR Split-Dollar Insurance Agreement, and * AMP Split-Dollar Insurance Agreement. (2) they are presently entitled to receive their interest in the proceeds of these Policies calculated as of July 31, 2005: * BFW Policies, * Poole Policies, * RJR/CBR Policies, * GWR,III/LBR Policies, * AR-JA-AR Policies, and * AMP Policies. (3) they are presently entitled to obtain loans or other withdrawals from the Policies to the extent of their interest in the Policies. The Debtors further asked the Court to compel the Trustees to: -- surrender the Policies and turnover the Debtors' interest in the Policies; and -- repay all postpetition loans against the cash value of the Policies to the extent that the loans are greater than the equity cushion in cash value of the Policies. Rebecca C. Poole and Donna D. Glenn, as trustees of the Poole Split-Dollar Insurance Agreement, and Ms. Glenn as trustee of the AMP Family Insurance Trust Agreement, had previously asked the Court to dismiss the adversary proceeding commenced by the Debtors. New Trustee Responses Representing the New Trustees, Gus H. Small, Esq., at Cohen Pollock Merlin & Small, P.C., in Atlanta, Georgia, argues that: -- the Debtors' complaint fails to state a claim against the Trustees on which relief may be granted; -- the adversary proceeding is not a core proceeding pursuant to Section 157(b)(2) of the Judiciary Code; -- Allied breached the insurance agreements by failing to make the required premium payments; -- the Debtors are not entitled to receive reimbursement for the premiums Allied paid until within 30 days of the earlier to occur of the death of the insured or the surrender of the insurance policy, neither of which has occurred; and -- the Debtors are not entitled to "interest" and the net surrender value of the policies. Furthermore, Mr. Small contends that, except for the action against Mr. Rutland, the Debtors' complaint contains a mis-joinder of parties because: (a) the claims asserted against the Trustees of the AR-JA-AR Trust do not arise out of the same transaction or occurrence as do the claims asserted against the Trustees of the GWR Insurance Trust; and (b) the claims asserted against the Trustees of the RJR/CBR Insurance Trust do not arise out of the same transaction or occurrence as do the claims asserted against the Trustee of the GWR, III/LBR Insurance Trust. Mr. Small says because the Debtors breached the Insurance Agreements by failing to make premium payments as required, the Debtors damaged the Insurance Trusts -- in an amount which will be proven at trial -- by reducing: (i) the earnings in the variable life policies; (ii) the cash values of the ordinary life policies; and (iii) the death benefits of all the policies. Allied Replies to Counterclaims Allied Holdings, Inc., asks the Court to dismiss the counterclaims filed by: * Guy W. Rutland, III, as trustee of the Guy IV Family Trust; * Cherry B. Rutland, Charles W. Burge, and H. Anthony McCullar, as trustees of the GWR Insurance Trust; and * H. Anthony McCullar and Charles W. Burge, as trustees of the RJR/CBR Insurance Trust, and H. Anthony McCullar, as trustee of the GWR, III/LBR Insurance Trust. Jeffrey W. Kelley, Esq., at Troutman Sanders LLP, in Atlanta, Georgia, argues that the Trustees: -- failed to state claims in their counterclaim on which relief may be granted; -- mistakenly designated a defense as a counterclaim; -- seek relief that is barred due to their failure to file a proof of claim on or prior to the claims bar date; -- are barred from seeking their alleged remedy of recoupment because the requisite identity of transactions does not exist; -- are barred from asserting claims for damages to the extent they failed to mitigate their alleged damages; -- have defenses that are barred by force majeure; and -- are not entitled to recover any of the relief set forth in the ad damnum clause of their counterclaims. Hence, the Debtors further ask the Court to enter a judgment in their favor as to all counts in the Counterclaim. Headquartered in Decatur, Georgia, Allied Holdings, Inc. -- 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. 25; Bankruptcy Creditors' Service, Inc., 215/945-7000) AMC ENTERTAINMENT: High Leverage Prompts S&P's Negative Watch ------------------------------------------------------------- Standard & Poor's Ratings Services placed its ratings on AMC Entertainment Inc., including the 'B' corporate credit rating, on CreditWatch with negative implications, based on the company's high leverage and S&P's expectations that it will be difficult to bring leverage down consistent with the timeline that S&P's rating had originally anticipated. The Kansas City, Missouri-headquartered movie chain, which is analyzed on a consolidated basis with its parent company, Marquee Holdings Inc. (B/Watch Neg/--), had $2.5 billion in debt and nearly $3 billion in present value of operating lease obligations as of March 30, 2006. "The company will likely be unable to improve its credit profile very meaningfully over the next year," said Standard & Poor's credit analyst Tulip Lim. Standard & Poor's expects to reevaluate business prospects and potential moves that could bring leverage reduction back on track. S&P believes that the downside rating potential is limited to one notch. AMERIQUEST MORTGAGE: S&P Cuts Ratings on Two Certificate Classes ---------------------------------------------------------------- Standard & Poor's Ratings Services lowered its ratings on two classes of mortgage pass-through certificates from series 2002-3 and 2002-C issued by Ameriquest Mortgage Securities Inc. Additionally, these ratings remain on CreditWatch with negative implications, where they were placed May 9, 2006. At the same time, ratings on four classes from the two series are affirmed. The downgrades and continued CreditWatch placements reflect the adverse performance of the collateral pools backing these transactions. During the past 12 months, monthly net losses have outpaced monthly excess interest by more than 100%, on average. As a result, overcollateralization for each of these transactions is below its target. Furthermore, cash flow projections indicate that monthly net losses will continue to exceed monthly excess spread, thus, further eroding the o/c for each transaction. As of the June 2006 remittance period, total delinquencies were 28.64% for series 2002-3 and 26.29% for series 2002-C. Cumulative realized losses were 2.15% for series 2002-3 and 1.73% for series 2002-C. In addition, the transactions have paid down to about 10% of their original pool balances. Standard & Poor's will continue to closely monitor the performance of these transactions with ratings on CreditWatch negative. If losses decline to a point where they no longer outpace excess interest, and the level of overcollateralization has not been further eroded, the ratings on these classes will be affirmed and removed from CreditWatch negative. Conversely, if losses continue to outpace excess interest, further downgrades can be expected. The affirmed ratings reflect adequate actual and projected credit support percentages and the shifting interest structure of the transactions. Credit support is provided by subordination, o/c, and excess spread. The collateral consists of 30-year, adjustable-rate, fully amortizing, subprime mortgage loans secured by first liens on one- to four-family residential properties. Ratings Lowered and Remain Creditwatch Negative Ameriquest Mortgage Securities Inc. Mortgage pass-through certificates Rating ------ Series Class To From ------ ----- -- ---- 2002-3 M-4 B/Watch Neg BB/Watch Neg 2002-C M-2 B/Watch Neg BB/Watch Neg Ratings Affirmed Ameriquest Mortgage Securities Inc. Mortgage pass-through certificates Series Class Rating ------ ----- ------ 2002-3 M-1 AAA 2002-3 M-2 A+ 2002-3 M-3 BBB 2002-C M-1 BBB AMES DEPARTMENT: Administrative Claimholders Demand Update ---------------------------------------------------------- The U.S. Bankruptcy Court for the Southern District of New York issued a notice in November 2003, offering to purchase administrative expense claims, which also indicated a range of projected final recovery rates for holders of administrative claims. In December 2004, the Debtors issued a letter to its executive officers who did not sell their severance claims stating that future severance distributions would be issued when the Company's funds exceed $10,000,000. Non-officer employees received 40%, and the officers received 25%, of their severance at the time they were released from employment. Officers received a subsequent payment equal to 15% of total severance on February 3, 2005. Catherine Berey, a holder of an administrative expense claim, relates that since that time, there has been no communication related to the status of the Debtors' bankruptcy case. Accordingly, Ms. Berey and other holders of administrative expense claims -- David Covitz and James Varholl -- seek information from the Court regarding: * the current status of the Debtors' Chapter 11 case; * validity of the recovery rate of administrative claims projected in the November 2003 Court memo; * the projected time frame for interim and final severance distributions and likely recovery rate for any interim distributions; and * direction on the preferred method of communication for former employees to find out the status of the case in the future. The administrative expense claimholders holders aver that the request for information is reasonable and warranted given the length of time that has passed since any communication has been distributed. Ames Department Stores filed for chapter 11 protection on Aug. 20, 2001 (Bankr. S.D.N.Y. Case No. 01-42217). Albert Togut, Esq., Frank A. Oswald, Esq. at Togut, Segal & Segal LLP and Martin J. Bienenstock, Esq., and Warren T. Buhle, Esq., at Weil, Gotshal & Manges LLP represent the Debtors in their restructuring efforts. When the Company filed for protection from their creditors, they listed $1,901,573,000 in assets and $1,558,410,000 in liabilities. (AMES Bankruptcy News, Issue No. 81; Bankruptcy Creditors' Service, Inc., 215/945-7000) AMES DEPARTMENT: LFD Will Appeal Bankr. Court's Summary Judgment ---------------------------------------------------------------- LFD Operating, Inc., notifies the U.S. Bankruptcy Court for the Southern District of New York that it will take an appeal to the U.S. District Court for the Southern District of New York from Judge Gonzales' Orders: -- granting summary judgment in favor of General Electric Capital Corporation, dismissing LFD's adversary proceeding with prejudice; and -- denying LFD's motion for abstention and to remand the action to the State Court. LFD wants the District Court to review whether the Bankruptcy Court erred when: (1) it denied LFD's motion to abstain and remand the proceeding to the State Court where it was originally filed; and (2) it granted GE Capital's Motion for Summary Judgment. As reported in the Troubled Company Reporter on June 16, 2006, Judge Gonzalez grants summary judgment in favor of GE Capital, dismissing the three causes of action asserted by LFD, particularly: (1) the cause of action for money "had and received"; (2) the cause of action for "accounting"; and (3) the cause of action for "conversion". LFD has conceded to the Court's summary judgment with respect the accounting and conversion causes of action. Ames Department Stores filed for chapter 11 protection on Aug. 20, 2001 (Bankr. S.D.N.Y. Case No. 01-42217). Albert Togut, Esq., Frank A. Oswald, Esq. at Togut, Segal & Segal LLP and Martin J. Bienenstock, Esq., and Warren T. Buhle, Esq., at Weil, Gotshal & Manges LLP represent the Debtors in their restructuring efforts. When the Company filed for protection from their creditors, they listed $1,901,573,000 in assets and $1,558,410,000 in liabilities. (AMES Bankruptcy News, Issue No. 81; Bankruptcy Creditors' Service, Inc., 215/945-7000) AMHERST TECH: Birfam will Prepare Tax Returns for Ch. 7 Trustee --------------------------------------------------------------- The Honorable Michael Deasy of the U.S. Bankruptcy Court for the District of New Hampshire in Manchester authorized Olga L. Bogdanov, the Chapter 7 Trustee appointed in the liquidation proceedings of Amherst Technologies, LLC, and its debtor- affiliates, to employ Birfam Two, LLC. Birfam Two will prepare pre-conversion sales tax returns for the Debtors' bankruptcy estates. On Oct. 21, 2005, the Court converted the Debtors chapter 11 cases into liquidation proceedings under chapter 7 of the Bankruptcy Code. Prior to the Conversion Date, the Debtors failed to file sales tax returns in approximately 40 states for postpetition pre- conversion sales. The Chapter 7 Trustee believes that the Birfam's employment is in the best interests of the bankruptcy estate because: (a) Birfam's principal has substantial experience in preparing sales tax returns for the Debtors; and (b) the Chapter 7 Trustee was advised by her accountants, Verdolino Lowey, P.C., that the cost will be greater if it will prepare the sales tax returns . Gerald Birin, Birfam's principal, formerly served as the Executive Chairman of the Debtors, and one of his duties was to oversee the preparation of sales tax returns for the Debtors. Birfam will be paid a $15,000 flat fee, payable upon the Chapter 7 Trustee's receipt and review of all prepared pre-conversion sales tax returns for the Debtors. Mr. Birin assures the Court that the Firm does not represent any interest adverse to the Debtors' estates and is disinterested as that term is defined in Sections 101(14) and 327(a) of the Bankruptcy Code. Headquartered in Merrimack, New Hampshire, Amherst Technologies, LLC, offers enterprise class solutions including wired and wireless networking, server and storage optimization implementations, document management solutions, IT lifecycle solutions, Microsoft solutions, physical security and surveillance and complex configured systems. The Company and its debtor- affiliates filed for chapter 11 protection on July 20, 2005 (Bankr. D. N.H. Case No. 05-12831). Daniel W. Sklar, Esq., and Peter N. Tamposi, Esq., at Nixon Peabody LLP represented the Debtors. Douglas McGill, Esq., and Robert K. Malone, Esq., at Drinker, Biddle & Reath, LLP, represented the Official Committee of Unsecured Creditors. When the Debtors filed for protection from their creditors, they estimated assets and debts between $10 million to $50 million. On Oct. 21, 2005, the Court converted the Debtors chapter 11 cases into liquidation proceedings under chapter 7 of the Bankruptcy Code. Olga L. Bognadov, Esq., the Chapter 7 Trustee, is represented by Robert A. White, Esq., at Murtha Cullina LLP. AMHERST TECH: Rule 2004 Test of Keeper of the Records of CSI OK'd ----------------------------------------------------------------- The Honorable Michael Deasy of the U.S. Bankruptcy Court for the District of New Hampshire in Manchester authorized Olga L. Bogdanov, the Chapter 7 Trustee appointed in the liquidation proceedings of Amherst Technologies, LLC, and its debtor- affiliates, to examine the Keeper of the Records of Computer Solutions International, pursuant to Rule 2004 of the Federal Rules of Bankruptcy Procedure. CSI provided installation and servicing of computer products for Amherst's customers pursuant to an agreement dated July 9, 2004. Under the agreement, Amherst was entitled to a rebate equal to 2% of the net amounts billed to and paid by Amherst customers. The Trustee requires the testimony under oath of the Keeper of the Records of CSI to determine the exact amount due to the Debtors. Headquartered in Merrimack, New Hampshire, Amherst Technologies, LLC, offers enterprise class solutions including wired and wireless networking, server and storage optimization implementations, document management solutions, IT lifecycle solutions, Microsoft solutions, physical security and surveillance and complex configured systems. The Company and its debtor- affiliates filed for chapter 11 protection on July 20, 2005 (Bankr. D. N.H. Case No. 05-12831). Daniel W. Sklar, Esq., and Peter N. Tamposi, Esq., at Nixon Peabody LLP represented the Debtors. Douglas McGill, Esq., and Robert K. Malone, Esq., at Drinker, Biddle & Reath, LLP, represented the Official Committee of Unsecured Creditors. When the Debtors filed for protection from their creditors, they estimated assets and debts between $10 million to $50 million. On Oct. 21, 2005, the Court converted the Debtors chapter 11 cases into liquidation proceedings under chapter 7 of the Bankruptcy Code. Olga L. Bognadov, Esq., the Chapter 7 Trustee, is represented by Robert A. White, Esq., at Murtha Cullina LLP. ARMSTRONG WORLD: Court Approves Travelers Settlement Agreement -------------------------------------------------------------- The U.S. Bankruptcy Court for the District of Delaware approved a settlement agreement among Armstrong World Industries, Inc., and its debtor-affiliates and Travelers Casualty and Surety Company, The Travelers Indemnity Company, and the Travelers Insurance Company. The Travelers entities issued primary and excess liability policies, including primary comprehensive general liability policies, to Armstrong World and Armstrong Contracting and Supply Corporation from 1958 to 1969. Armstrong Contracting was Armstrong's wholly owned subsidiary formed in 1950s. Armstrong Contracting later changed its name to ACandS, after its employees purchased and took over management of the company. Pursuant to several agreements among parties in the 1980s: * Travelers agreed that the Shared Primary Travelers Policies provide indemnity limits aggregating $80,000,000, plus defense costs, for Asbestos Related Bodily Injury Claims that are not within the products or completed operations hazards; and * AWI and Travelers also agreed that the insurer's $80,000,000 indemnity payment is subject to certain annual payment caps. Additionally, on May 28, 1998, AWI and Travelers executed an Agreement of Compromise, Settlement and Release with respect to AWI's claims for insurance coverage for Non-Products Claims. Jason Madron, Esq., at Richards, Layton & Finger, P.A., in Wilmington, Delaware, relates that Travelers has been billed $33,793,167 for indemnity payments, plus $850,810 for defense costs, under the Shared Primary Travelers Policies with respect to Non-Products Claims against AWI. Travelers has paid $17,997,423 of the total billed amount and defense costs. With respect to Non-Products Claims against ACandS that were resolved through April 2001, Travelers has been billed $41,277,576 as indemnity payments, plus defense costs under the Shared Primary Travelers Policies. Travelers has paid both indemnity and defense amounts. Interpleader Action and Other Disputes On March 28, 2001, Travelers Casualty and Surety Company and the Travelers Indemnity Company filed a complaint against both AWI and ACandS for interpleader in AWI's Chapter 11 case, in connection with several disputes among the parties concerning their rights and obligations with respect to the Shared Primary Travelers Policies and the related proceeds. Among others, AWI and ACandS dispute: -- amounts previously billed to or paid by Travelers for Non- Products Claims under the Shared Primary Travelers Policies. -- their rights with respect to the remaining indemnity limits for Non-Products Claims under the Shared Primary Travelers Policies that have not yet been billed to or paid by Travelers. Moreover, Travelers believes that, of the $16,646,554 in indemnity costs billed by AWI to the Shared Primary Travelers Policies that has not been paid by Travelers, $9,211,137 of indemnity costs and $328,815 of related defense costs have been over-billed. Travelers has not paid the remaining $7,435,417 in indemnity costs billed by AWI to the Shared Primary Travelers Policies because of the disputes between AWI and ACandS. Mr. Madron notes that AWI has provided Travelers with a calculation prepared by Peterson Consulting, dated Nov. 12, 2004, which provides that, if the $9,211,137 in indemnity over-billings was reallocated to AWI policies in accordance with the 1998 Agreement: (1) $1,404,186 would be reallocated to the Shared Primary Travelers Policies that have remaining unexhausted aggregate limits for Non-Products Claims; (2) $988,955 would be reallocated to other primary policies issued to AWI by Travelers that have unexhausted aggregate limits for Non-Products Claims; and (3) the remaining $6,817,997 would be reallocated to other AWI policies not issued by Travelers. Mr. Madron notes that the Peterson Reallocation Calculation also indicates that, if the $328,815 in over-billed defense costs was reallocated to AWI policies in accordance with 1998 Agreement, $85,429 would be reallocated to: -- the Shared Primary Travelers Policies that have remaining unexhausted aggregate limits for Non-Products Claims; or -- other primary policies issued to AWI by Travelers that have unexhausted aggregate limits for Non-Product Claims. Mr. Madron says it would result to $243,386 in net-over billed defense. Travelers Settlement Agreement To resolve their dispute, the Debtors ask Judge Fitzgerald to approve a Stipulation of Settlement and Order they entered into with ACandS, Inc., and the Travelers insurers. A full-text copy of the Travelers Settlement Agreement dated June 15, 2006, is available for free at: http://ResearchArchives.com/t/s?da0 The principal terms of the Travelers Settlement Agreement are: (a) The Interpleader Action will be dismissed with prejudice; (b) Travelers will pay AWI $9,505,172 as full and complete satisfaction of all claim and defense billings by AWI through and including November 2000; (c) The Travelers Settlement Payment will apply against the Annual Caps, and nothing in the Travelers Settlement Agreement is meant to increase, alter, or change application of the Annual Caps; (d) AWI and Travelers agree that: (1) all Annual Caps prior to the Effective Date are deemed exhausted; and (2) payment of the Travelers Settlement Payment will (i) exhaust the Annual Cap applicable to the Agreement Year in which it is paid and (ii) reduce the Annual Cap applicable to the immediately following Agreement Year by an amount which is the difference between the Travelers Settlement Payment and the amount applied to exhaust the Amoral Cap in the prior Agreement Year; (e) The remaining limits of liability for Non-Products Claims on the Shared Primary Travelers Policies equals $12,736,209. The Remaining Non-Products Claims Limits will be reserved exclusively for AWI and made available to pay claims that may be billed by AWI or any trust created by any AWI plan of reorganization in accordance with the Shared Primary Travelers Policies, applicable settlement agreements, and judgments; (f) ACandS, including, any trust established pursuant to any plan of reorganization in ACandS' Chapter 11 case, will not be entitled to any portion of the Remaining Non- Products Claims Limits; (g) AWI agrees to pay ACandS $2,464,628 within three business days after receipt of the Travelers Settlement Payment; and (g) On the Effective Date, AWI, ACandS, and Travelers agree to release each other with respect to all claims arising out of or relating to the Shared Polices with respect to Asbestos Related Bodily Injury Claims. About Armstrong World Headquartered in Lancaster, Pennsylvania, Armstrong World Industries, Inc. -- http://www.armstrong.com/-- the major operating subsidiary of Armstrong Holdings, Inc., designs, manufactures and sells interior floor coverings and ceiling systems, around the world. The Company and its debtor-affiliates filed for chapter 11 protection on December 6, 2000 (Bankr. Del. Case No. 00-04469). Stephen Karotkin, Esq., at Weil, Gotshal & Manges LLP, and Russell C. Silberglied, Esq., at Richards, Layton & Finger, P.A., represent the Debtors in their restructuring efforts. The Debtors tapped the Feinberg Group for analysis, evaluation, and treatment of personal injury asbestos claims. Mark Felger, Esq. and David Carickhoff, Esq., at Cozen and O'Connor, and Robert Drain, Esq., Andrew Rosenberg, Esq., and Alexander Rohan, Esq., at Paul, Weiss, Rifkind, Wharton & Garrison, represent the Official Committee of Unsecured Creditors. The Creditors Committee tapped Houlihan Lokey for financial and investment advice. The Official Committee of Asbestos Personal Injury Claimant hired Ashby & Geddes as counsel. When the Debtors filed for protection from their creditors, they listed $4,032,200,000 in total assets and $3,296,900,000 in liabilities. (Armstrong Bankruptcy News, Issue Nos. 95 & 97; Bankruptcy Creditors' Service, Inc., 215/945-7000) ARMSTRONG WORLD: Bear Stearns Assigns $16M Claims to Fimat, et al. ------------------------------------------------------------------ Bear, Stearns & Co., Inc., notifies the U.S. Bankruptcy Court for the District of Delaware that it has transferred portions of its claims in Armstrong World Industries, Inc., and its debtor- affiliates to: Transferee Claim No. Claim Amount ---------- --------- ------------ Fimat USA L.L.C. 3069 $7,295 Fimat USA L.L.C. 3723 1,113,728 Fimat USA L.L.C. 4738 11,463 King Street Capital, L.P. 2765KB 5,002,187 King Street Capital, Ltd. 2765KB 9,926,214 King Street Institutional, Ltd. 2765KB 703,433 About Armstrong World Headquartered in Lancaster, Pennsylvania, Armstrong World Industries, Inc. -- http://www.armstrong.com/-- the major operating subsidiary of Armstrong Holdings, Inc., designs, manufactures and sells interior floor coverings and ceiling systems, around the world. The Company and its debtor-affiliates filed for chapter 11 protection on December 6, 2000 (Bankr. Del. Case No. 00-04469). Stephen Karotkin, Esq., at Weil, Gotshal & Manges LLP, and Russell C. Silberglied, Esq., at Richards, Layton & Finger, P.A., represent the Debtors in their restructuring efforts. The Debtors tapped the Feinberg Group for analysis, evaluation, and treatment of personal injury asbestos claims. Mark Felger, Esq. and David Carickhoff, Esq., at Cozen and O'Connor, and Robert Drain, Esq., Andrew Rosenberg, Esq., and Alexander Rohan, Esq., at Paul, Weiss, Rifkind, Wharton & Garrison, represent the Official Committee of Unsecured Creditors. The Creditors Committee tapped Houlihan Lokey for financial and investment advice. The Official Committee of Asbestos Personal Injury Claimant hired Ashby & Geddes as counsel. When the Debtors filed for protection from their creditors, they listed $4,032,200,000 in total assets and $3,296,900,000 in liabilities. (Armstrong Bankruptcy News, Issue No. 95; Bankruptcy Creditors' Service, Inc., 215/945-7000) AVITAR INC: March 31 Balance Sheet Upside-Down by $6.25 Million --------------------------------------------------------------- Avitar, Inc., reported a $1,034,986 net loss for the three months ended March 31, 2006, compared to net loss of $286,175 for the three months ended March 31, 2005. For the six months ended March 31, 2006, the company had a net loss of $1,926,915 versus a net loss of $1,629,065 for the corresponding period in fiscal 2005. At March 31, 2006, the Company's balance sheet showed total assets of $2,087,104, total liabilities of $5,417,362, $2,920,649 in redeemable convertible and convertible preferred stock and a stockholders' deficit of $6,250,907. The Company's March 31 balance sheet also disclosed a working capital deficit with $1,106,176 in total current assets and $3,518,532 in total current liabilities. The Company had an accumulated deficit of $55,436,856 at March 31. A full-text copy of the regulatory filing is available for free at http://ResearchArchives.com/t/s?d8c Going Concern Doubt BDO Seidman, LLP, expressed substantial doubt about Avitar, Inc.'s ability to continue as a going concern after it audited the Company's financial statements for the fiscal year ended Sept. 30, 2005. The auditing firm pointed to the Company's recurring losses from operations and working capital and stockholder deficits as of Sept. 30, 2005. About Avitar Inc Avitar, Inc. -- http://www.avitarinc.com/-- develops, manufactures and markets innovative and proprietary medical products. Their field includes the oral fluid diagnostic market, the disease and clinical testing market, and customized polyurethane applications used in the wound dressing industry. Avitar manufactures ORALscreen(R), the world's first non-invasive, rapid, onsite oral fluid test for drugs-of-abuse, as well as HYDRASORB(R), an absorbent topical dressing for moderate to heavy exudating wounds. Avitar is also developing diagnostic strategies for disease and clinical testing in the estimated $25 billion in- vitro diagnostics market. Conditions targeted include influenza, diabetes, and pregnancy. BOWNE & CO: Chairman and CEO Philip Kucera Retiring in December --------------------------------------------------------------- Bowne & Co., Inc., disclosed that its Chairman and Chief Executive Officer, Philip E. Kucera, intends to retire from the Company effective December 31, 2006. David J. Shea, the Company's current President and Chief Operating Officer, will replace Mr. Kucera. Mr. Kucera joined Bowne as Senior Vice President and General Counsel in December 1998 and was appointed Chief Executive Officer in May 2004 and Chairman in May 2005. The Company disclosed that he will continue to serve as a member of its Board of Directors. "It's been a real pleasure working alongside Phil," said Mr. Shea. "We will continue to implement our strategy of focusing on our core businesses, and we're well-positioned to drive revenue and earnings growth in each of our businesses. It will be a privilege to guide the company during these exciting times." The Company said that Mr. Shea has held a number of leadership positions at Bowne since joining the Company in 1998 and was named its President and Chief Operating Officer in October 2004. Based in New York City, Bowne & Co., Inc. (NYSE: BNE) -- http://www.bowne.com/-- is a printing company which specializes in financial documents such as prospectuses, annual and interim reports, and other paperwork required by the SEC. Bowne also handles electronic filings via the SEC's EDGAR system and provides electronic distribution and high-volume mailing services. The financial printing business accounts for the bulk of the company's sales. Bowne also offers marketing and business communications services and litigation support software. * * * As reported in the Troubled Company Reporter on Feb. 8, 2006, Moody's Investors Service affirmed the rating on Bowne & Co., Inc.'s $75 million Convertible Subordinated Debentures due 2033 at B2 and affirmed Bowne's Corporate Family Ba3 rating. Moody's changed the outlook to positive from stable. BROOK MAYS: First Act Gets $16.7 Million Settlement from Insurers ----------------------------------------------------------------- First Act Inc. received $16.7 million from the insurers for Brook Mays Music to settle a civil lawsuit filed in 2003 against the Dallas, Texas musical instrument retailer and rental company. A unanimous 2005 jury verdict issued in the U.S. District Court for Massachusetts found Brook Mays liable for making false advertising statements about First Act and that Brook Mays interfered with First Act's contracts and business relationships. The original jury award was for $20.7 million in damages. First Act's Chairman of the Board, Bernard Chiu, approved the settlement. About First Act Based in Boston, Massachusetts, First Act Inc., is a musical products Company. First Act's Studio for Artists designs and builds custom guitars for professional musicians. First Act's Concert Series(TM) offers band students a comprehensive range of instrument choices while First Act's line for teens and adults includes a wide range of guitars, drums, hand percussion, and accessories. First Act's Discovery(TM) line of instruments gives young children a musical head start. About Brook Mays Headquartered in Dallas, Texas, Brook Mays Music Company -- http://www.brookmays.com/-- is a full-line musical instrument retailer in the U.S. It offers a broad range of educational services, complete instrument repair and overhaul facilities and operates a rental program for musical instruments. The Company filed for chapter 11 protection on July 11, 2006 (Bankr. N.D. Tex. Case No. 06-32816). Marcus Alan Helt, Esq., and Michael S. Haynes, Esq., at Gardere Wynne Sewell LLP, represent the Debtor. The Recovery Group, Inc., serves as the Debtor's financial advisor while Houlihan Lokey Howard and Zukin Capital, Inc., acts as restructuring advisor. The Debtor has selected Kurtzman Carson Consultants LLC as its Notice, Claims and Balloting Agent. When it filed for bankruptcy, the Debtor estimated its assets at $10 million to $50 million and its debts at $50 million to $100 million. CABLEVISION SYSTEMS: Rainbow Unit Obtains $800MM Credit Facility ---------------------------------------------------------------- Rainbow National Services LLC, an indirect wholly owned subsidiary of Cablevision Systems Corporation and CSC Holdings, Inc., entered into a Credit Agreement, providing for an $800 million senior secured credit facility, on July 5, 2006. The credit facility consists of a $500 million Term Loan A Facility and a $300 million revolving credit facility. The lenders are JPMorgan Chase Bank as Administrative Agent and Letter of Credit Issuer, JP Morgan Securities and Banc of America Securities as Joint Lead Arrangers and Book Runners, Bank of America as Syndication Agent, and Credit Suisse, CitiCorp N.A. and Wachovia Bank as Co-Documentation Agents. As of July 5, 2006, the entire $500 million Term Loan A and $10 million under the revolving credit facility had been borrowed. Rainbow National used the $510 million and approximately $88 million of additional available cash to repay all of its outstanding borrowings under a previous credit facility and to pay expenses incurred in connection with the Credit Agreement. The interest rate under the Credit Agreement varies. The Term Loan A is to be repaid in quarterly installments until June 30, 2013. Headquartered in Manhattan, Cablevision Systems Corp. (NYSE: CVC) -- http://www.cablevision.com/-- provides cable TV service to about 3 million customers in and around New York City. The firm has upgraded its network and services to include digital cable, movies-on-demand, and VoIP telephony. It also operates business communications service provider Cablevision Lightpath and regional sports channels. Cablevision controls Madison Square Garden, the New York Knicks and the New York Rangers, plus Radio City Music Hall. Cablevision pulled plans to spin off its cable network unit, Rainbow Media Holdings, and instead closed that company's money-losing satellite TV assets. Chairman Charles Dolan and his family control Cablevision. At Mar. 31, 2006, Cablevision System Corp.'s balance sheet showed a $2,517,442,000 stockholders' deficit compared to a $2,468,766,000 deficit at Dec. 31, 2005. * * * As reported in the Troubled Company Reporter on July 4, 2006, Dominion Bond Rating Service confirmed the ratings of Cablevision Systems Corporation and its wholly owned financing subsidiary, CSC Holdings, Inc. at B (low) and BB (low)/B (high), respectively. All trends are Stable. * Bank Debt Confirmed BB (low) * Senior Notes and Debentures Confirmed B (high) * Senior Notes Confirmed B (low) Stb CALIFORNIA THEATRE: Case Summary & Seven Largest Unsec. Creditors ----------------------------------------------------------------- Debtor: California Theatre Investment Group, LLC 428 "C" Street, Apartment 306 San Diego, California 92101 Bankruptcy Case No.: 06-01793 Chapter 11 Petition Date: July 12, 2006 Court: Southern District of California (San Diego) Judge: Louise DeCarl Adler Debtor's Counsel: Alan Vanderhoff, Esq. Vanderhoff Law Group 701 B Street, Suite 1000 San Diego, California 92101 Tel: (619) 299-2050 Fax: (619) 239-6554 Estimated Assets: $10 Million to $50 Million Estimated Debts: $1 Million to $10 Million Debtor's Seven Largest Unsecured Creditors: Entity Claim Amount ------ ------------ James Massery $290,000 4351 Oxford La Mesa, CA 91941 Sullivan Hill Lewin Rez & Engel $218,860 550 West C Street, Suite 1500 San Diego, CA 92101 Steve Laber $139,000 101 La Cresta Trail El Cajon, CA 92019 Robert DePhilippis $120,000 518 Davidson Street Chula Vista, CA 91910 Gaylin Leth $71,000 Real Estate Inside Track 2550 fifth Avenue, 7th Floor San Diego, 92102 Franchise Tax Board $971 Cushman & Wakefield $625 CALPINE CORP: Court Implores Calpine-Rosetta Resolution on Leases ----------------------------------------------------------------- The U.S. Bankruptcy Court for the Southern District of New York, at a hearing on July 12, 2006, in Calpine Corporation's bankruptcy case took these steps: * In response to an objection filed by the Department of Justice and asserted by the California State Lands Commission that the Debtors' Motion to Assume Non-Residential Leases and Set Cure Amounts, did not allow adequate time for an appropriate response, the Debtors withdrew from the list of Oil and Gas Leases that were the subject of the Motion those leases issued by the United States (and managed by the Department of Interior) and the State of California (and managed by the California State Lands Commission). The Debtors and Department of Justice agreed to an extension of the existing deadline to assume such Oil and Gas Leases under Section 365, to the extent the Oil and Gas Leases are leases subject to Section 365. The effect of these actions is to render the objection of Rosetta Resources Inc. inapplicable at this time. * The Court also encouraged Calpine and Rosetta to arrive at a business solution to all remaining issues including $68 million payable to Calpine for conveyance of the cured consent properties, Calpine's execution of various documents under its "further assurances" obligations as necessary to resolve any outstanding issues applicable to certain other properties purchased by Rosetta, and final agreement regarding $12 million in other true-up obligations that may be payable to Calpine, as required by the July 2005 sale agreements pursuant to which Rosetta purchased the properties. Although no specific ruling was issued addressing any of Rosetta's rights or claims, Rosetta is nonetheless pleased with the Court's actions and anticipates working with Calpine on a priority basis toward resolution of unresolved conveyance of properties and post closing adjustments under the Purchase and Sale Agreement. About Rosetta Resources Based in Houston, Texas, Rosetta Resources Inc. (NASDAQ: ROSE) -- http://www.rosettaresources.com/-- is an independent oil and gas company engaged in acquisition, exploration, development and production of oil and gas properties in North America. The Company's operations are concentrated in the Sacramento Basin of California, South Texas, the Gulf of Mexico and the Rocky Mountains. Rosetta is a Delaware corporation. 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. CARDTRONICS INC: Financial Report Filing Cues S&P's Stable Outlook ------------------------------------------------------------------ Standard & Poor's Ratings Services revised its outlook on Houston, Texas-based Cardtronics Inc. to stable from negative, following the company's completion of financial reports as required by its credit agreements. The company is now in full compliance of all terms and conditions of these agreements. The corporate credit rating is affirmed at 'B+', and the subordinated debt is affirmed at 'B-'. "The ratings reflect Cardtronics Inc.'s short operating history and growth initiatives in a mature and consolidating industry; high leverage; and aggressive capital spending," said Standard & Poor's credit analyst Lucy Patricola. These factors partly are offset by its leading position in the U.S. as an independent ATM provider, and its recurring revenue streams. Cardtronics owns about 45% of its network of approximately 26,000 ATMs in the U.S., and provides services for the balance. Cardtronics' ATMs are located in nonbanking sites, typically convenience locations such as grocery stores, drugstores and retailers, in the U.S. and the U.K. Contracts run for five to seven years, providing stable and recurring revenue streams. The company's top 15 customers account for 35% of revenues. Total lease adjusted debt is about $276 million as of March 31, 2006. CATHOLIC CHURCH: District Ct. Receives Appellants' Opening Briefs ----------------------------------------------------------------- The Archdiocese of Portland in Oregon, certain parishes and other parties-in-interest took an appeal from Judge Elizabeth Perris Perris' rulings relating to the property of the estate dispute to the U.S. District Court for the District of Oregon. The Appellants filed their opening briefs on June 20, 2006. The Tort Claimants Committee's response is due July 21, 2006. The Appellants' reply briefs are due August 21, 2006. All parties ask the District Court for oral arguments. District Court Judge Michael W. Mosman received three opening briefs from the Appellants: (1) Parish Class, Committee of Catholic Parishes, Parishioners and Interested Parties; (2) Friends of Regis High School, Regis High School Foundation, Central Catholic High School Alumni Association and Central Catholic High School Parents Association; (3) Marist High School Foundation, Marist High School Parents and Alumni Service Club; and (3) the Portland Archdiocese. Marist High School's opening brief was submitted to the District Court in the conventional, hard copy format. It may be viewed in the Clerk's Office where the file is maintained. The Appellants ask Judge Mosman to reverse Judge Perris' rulings and remand the matters to the U.S. Bankruptcy Court for the District of Oregon for further proceedings. Opening Briefs A. Portland Archdiocese After wrongly determining that parishes are mere branch offices of the Archdiocese, the Bankruptcy Court ignored the law permitting a charitable corporation trustee to hold property in trust for a portion of its charitable mission, Howard M. Levine, Esq., at Sussman Shank LLP, in Portland, Oregon, tells the District Court. The Oregon statutes have, since 1872, protected the role of church law for religious corporations, including the Archdiocese, Mr. Levine relates. Oregon religious corporation statutes and Canon Law both indicate that the Archdiocese holds property in trust for the Parishes. Mr. Levine asserts that the Bankruptcy Court also either ignored or misconstrued the statutes in constructing that Canon Law is relevant only "internally" but not as to the Archdiocese's "external" dealings. The Archdiocese's Articles of Incorporation, the Oregon statutes governing nonprofit religious corporations, and the hundreds of pages of declarations submitted by the Parish Appellants leave no doubt that the Archdiocese holds legal title to the "Test Properties" in charitable trust, Mr. Levine reiterates. Mr. Levine relates that the Bankruptcy Court struck as irrelevant evidence certain text from Archbishop John G. Vlazny's declaration, which establishes that the Archbishop's powers are permanently defined and limited by Canon Law. The Archbishop, as the canonical steward for the Archdiocese and the Parishes, is charged with ensuring that canonical norms are observed. Canon Law states that the Archbishop has no power to own the Parishes' property. Hence, Mr. Levine points out that the definition and limitation of the Archbishop's power by Canon Law is relevant to determine whether: * the church office holder who "becomes" a corporation sole has power to hold a fee simple interest in the Parishes' property; or * the Archdiocese, similar to the Archbishop's role as canonical steward, holds legal title to the property in charitable trust for the benefit of the Parishes. Archbishop Vlazny's declaration, according to Mr. Levine, forms the foundation for the Archdiocese's Canon Law and religious freedom arguments. It is critical to an understanding how Canon Law permeates the religious, civil, operational and functional aspects of the Archdiocese. To have stricken it or disregarded it as irrelevant is to treat the Archdiocese as just another debtor, no different than a "tire dealership." Mr. Levine asserts that the Bankruptcy Court committed legal errors relating to the First Amendment doctrine of Church autonomy in: (1) finding, contrary to law and evidence, that ownership of property by Catholic institutions is unrelated to Catholic doctrine; (2) refusing to consider Canon Law, despite analogous cases from the U.S. Supreme Court and other sources; (3) creating an "external dispute exception" to the First Amendment; and (4) exceeding its jurisdiction by effectively rearranging the polity of the Catholic Church in western Oregon. Among other things, the Bankruptcy Court's application of Sections 541 and 544(a)(3) of the Bankruptcy Code violates the Religious Freedom Restoration Act, Mr. Levine says. Judge Perris erroneously believed that the RFRA does not apply to the Bankruptcy Code provisions that incorporate state law. The Bankruptcy Court's errors also infected its "substantial burden" analysis, when it ruled that the Archdiocese and the Parishes have not shown that applying Section 541(a) would substantially burden their exercise of religion, Mr. Levine asserts. A full-text copy of Portland's Opening Brief is available for free at http://researcharchives.com/t/s?dad B. Parishioners Committee, et al. The Bankruptcy Court concluded that Section 544(a)(3) of the Bankruptcy Code operated to void the unrecorded religious trust interests in the test properties. The Bankruptcy Court declared that the Test Properties were available to satisfy the claims of creditors of the Archdiocese free and clear of the interest of any third party, including those of the Parish Appellants. Douglas R. Pahl, Esq., at Perkins Coie LLP, in Portland, Oregon, attorney for the Parishioners Committee, et al., asserts that Section 544(a)(3) voids parish interests only where a purchaser of the properties would not be subject to inquiry or constructive notice of other interests in the property under Oregon law. However, a reasonable and prudent purchaser of the properties would be on notice that other interests exist, and would be required to inquire into the nature of those other interests, Mr. Pahl contends. Among other things, Mr. Pahl points out that by looking at the deeds of the property, a reasonable and prudent purchaser would inquire into the scope of the Archdiocese's authority. That purchaser would also be on notice of other possible interests based on a review of Oregon's Corporation Code and the Archdiocese's Articles of Incorporation. The active use and maintenance of the properties by the Parish Appellants would likewise prompt a reasonable purchaser to inquire into the scope of a parish's interest in the property, Mr. Pahl adds. Public knowledge prior to the bankruptcy filing puts purchasers on notice of the Parish Appellants' interests. A full-text copy of the Parish Appellants' Brief is available for free at http://researcharchives.com/t/s?dae C. Regis High School Brad T. Summers, Esq., at Ball Janik LLP, in Portland, Oregon, relates that the Regis property is a 35-acre property with buildings for classrooms, administrative offices, a library, a gymnasium and activities center and other facilities associated with the operation of a high school. According to Mr. Summers, the men who formed Catholic Educational Corporation acquired the Regis property for the express purpose of founding a school. After acquiring the Regis property and transferring it to the Archdiocese, the Corporation was dissolved. Mr. Summers tells Judge Mossman that the Archdiocese holds legal title to the Regis property, but it does not hold equitable title. The property is held in charitable trust for the benefit of present and prospective students and parents of students who wish to have their children attend a Catholic high school in the Santiam area. That equitable interest, Mr. Summers contends, is excluded from property of the Archdiocese's estate under Section 541(d). To the extent that the District Court finds that the Regis property is not held in an express charitable trust, it is held in a resulting trust, Mr. Summers argues. A resulting trust occurs whenever circumstances surrounding the disposition of property raise an inference that the transferor did not intend that the transferee would take a beneficial interest in the property, Mr. Summers explains. When the Catholic Educational Corporation transferred the Regis property, it intended that the property must be used for a Catholic high school, Mr. Summers reiterates. That same evidence also establishes the basis for a resulting trust. The Bankruptcy Court held that the Archdiocese takes free of any trust interest in the Regis property by operation of the Section 544(a)(3). Section 544(a)(3) states that a trustee has the rights and powers of, and may avoid any transfer of property of the debtor that is voidable by, a bona fide purchaser of real property from the debtor, against whom applicable law permits such a transfer to be perfected. State law defines the powers of a bona fide purchaser for purposes of Section 544(a)(3). Mr. Summers notes that under Oregon law, a prospective purchaser takes subject to inquiry notice. There is no question that a prospective purchaser who made inquiry at the Petition Date would have learned of the trust interest in the Regis property, Mr. Summers asserts. Any purchaser who inquired of the record titleholder would have learned from the Archdiocese that the property was held in trust. A full-text copy of the Regis Parties' Opening Brief is available for free at http://researcharchives.com/t/s?daf The Archdiocese of Portland in Oregon filed for chapter 11 protection (Bankr. Ore. Case No. 04-37154) on July 6, 2004. Thomas W. Stilley, Esq., and William N. Stiles, Esq., at Sussman Shank LLP, represent the Portland Archdiocese in its restructuring efforts. Albert N. Kennedy, Esq., at Tonkon Torp, LLP, represents the Official Tort Claimants Committee in Portland, and scores of abuse victims are represented by other lawyers. David A. Foraker serves as the Future Claimants Representative appointed in the Archdiocese of Portland's Chapter 11 case. In its Schedules of Assets and Liabilities filed with the Court on July 30, 2004, the Portland Archdiocese reports $19,251,558 in assets and $373,015,566 in liabilities. (Catholic Church Bankruptcy News, Issue No. 64; Bankruptcy Creditors' Service, Inc., 215/945-7000) CATHOLIC CHURCH: Court Rejects Robert Fleming's $4-Million Claim ---------------------------------------------------------------- The Hon. Elizabeth Perris of the U.S. Bankruptcy Court for the District of Oregon disallows Claim No. 186 asserted by Robert Fleming. As reported in the Troubled Company Reporter on June 28, 2006, the Court ruled that Claim No. 189 amended and superseded Claim No. 186. Mr. Fleming sought payment of $4,000,000 for non- economic damages and $50,000 for economic damages. The Archdiocese of Portland in Oregon asked the Court to disallow the Fleming claims: (a) because they are barred by the statute of limitations; and (b) under the doctrine of in pari delicto, as a result of Mr. Fleming's attempt to defraud the Court in preparation for his child abuse claim. Tiffany A. Harris, Esq., at Schwabe, Williamson & Wyatt, P.C., in Portland, Oregon, contends that Mr. Fleming knew or should have known of the existence of his legal "injury" in 1998, when Mr. Fleming told his psychologist, a Dr. Roundtree, about the sexual abuse. Hence, the Claims have expired a year before he filed his lawsuit in 2002. Ms. Harris also alleges that Mr. Fleming committed fraud by asking Dr. Roundtree to "make an adjustment to the date" in his chart notes in preparation for his lawsuit against the Archdiocese, knowing that his claims are subject to a three-year statute of limitations. The Archdiocese of Portland in Oregon filed for chapter 11 protection (Bankr. Ore. Case No. 04-37154) on July 6, 2004. Thomas W. Stilley, Esq., and William N. Stiles, Esq., at Sussman Shank LLP, represent the Portland Archdiocese in its restructuring efforts. Albert N. Kennedy, Esq., at Tonkon Torp, LLP, represents the Official Tort Claimants Committee in Portland, and scores of abuse victims are represented by other lawyers. David A. Foraker serves as the Future Claimants Representative appointed in the Archdiocese of Portland's Chapter 11 case. In its Schedules of Assets and Liabilities filed with the Court on July 30, 2004, the Portland Archdiocese reports $19,251,558 in assets and $373,015,566 in liabilities. (Catholic Church Bankruptcy News, Issue No. 64; Bankruptcy Creditors' Service, Inc., 215/945-7000) COMM 2004-RS1: Fitch Affirms Low-B Ratings on $8.74 Million Notes ----------------------------------------------------------------- Fitch affirms 17 classes of the notes issued by COMM 2004-RS1, Ltd.: --$220,482,888 class A Notes at 'AAA'; --Interest only classes XP, IO-1, IO-2 at 'AAA'; --$39,020,000 class B-1 Notes at 'AA'; --$41,298,000 class B-2 Notes at 'AA'; --$13,386,000 class C Notes at 'AA-'; --$12,955,000 class D Notes at 'A'; --$4,318,000 class E Notes at 'A-'; --$3,023,000 class F Notes at 'BBB+'; --$2,056,000 class G Notes at 'BBB-'; --$2,176,000 class H Notes at 'BB+'; --$725,000 class J Notes at 'BB'; --$1,313,000 class K Notes at 'BB-'; --$1,520,000 class L Notes at 'B+'; --$622,000 class M Notes at 'B'; --$2,384,528 class N Notes at 'B-'. COMM 2004, which closed November 4, 2004, is supported by a static pool of commercial mortgage-backed securities (24.7%), and Re- REMIC (75.3%) securities. Deutsche Bank selected the initial collateral and serves as the collateral administrator. Based on the stable performance of the underlying collateral, Fitch affirms all rated liabilities issued by COMM 2004-RS1. The weighted average rating factor has stayed the same at 2.46 ('A-'/'BBB+'). There are no overcollateralization or interest coverage tests performed on this portfolio as it is a straight pass-through deal. There are currently no defaulted assets in the portfolio. The ratings of the classes A, B-1, and B-2 notes address the likelihood that investors will receive full and timely payments of interest, as per the governing documents, as well as the stated balance of principal by the legal final maturity date. The ratings of the classes D, E, F, G, H, J, K, L, M, and N notes address the likelihood that investors will receive ultimate and compensating interest payments, as per the governing documents, as well as the stated balance of principal by the legal final maturity date. The ratings of the classes XP and IO notes only address the likelihood of receiving interest payments while principal on the related certificates remains outstanding. Fitch will continue to monitor and review this transaction for future rating adjustments. CONSUMERS ENERGY: Fitch Comments on Nuclear Plant Sale to Entergy ----------------------------------------------------------------- Consumers Energy Co., on July 12, 2006, reached an agreement to sell its 798-megawatt Palisades nuclear plant to Entergy Corp. for $380 million. This announcement is not anticipated to have an immediate effect on Consumers' ratings or Stable Outlook. The Issuer Default Rating of Consumers is 'BB-'. The $380 million purchase price represents $242 million for the plant, $83 million in nuclear fuel and $55 million in related assets. Consumers plans to use the proceeds from the sale to reduce debt and for other general corporate purposes. However, the final purchase price will be subject to several adjustments at closing, primarily related to decommissioning funds. The sale transaction is subject to several approvals, including the Federal Energy Regulatory Commission, the Nuclear Regulatory Commission, the Michigan Public Service Commission, and other regulatory and state agencies. The transaction is targeted to close in the first quarter of 2007. Fitch notes that the sale is a positive development for Consumers, which announced its intention to divest of the plant in late 2005. The utility will no longer have the operating or financial risks of owning a nuclear power plant, particularly since Palisades has experienced performance difficulties in the past. Additionally, Consumers will continue to benefit from the low cost of the output from Palisades through a 15-year purchase power agreement. The total price for energy and capacity is fixed according to a schedule allowing for monthly and annual shaping. The PPA is unit contingent with guarantees for minimum capacity factor performance levels during the peak summer months of July and August and associated penalties capped at a pre-specified amount. Entergy is considering a modest uprate of the capacity of Palisades. The PPA does not cover output associated with uprates. Consumers, the principle subsidiary of CMS Energy, is a combination electric and natural gas utility that serves more than three million electric and gas customers in Michigan. CSFB ABS: S&P Junks Rating on Series 2001-HE25 & 2002-HE4 Certs. ---------------------------------------------------------------- Standard & Poor's Ratings Services lowered its ratings on six classes from six series of mortgage pass-through certificates issued by CSFB ABS Trust. These ratings remain on CreditWatch negative, where they were placed March 10, 2006. Additionally, the ratings on two classes from two CSFB ABS Trust series are lowered an placed on CreditWatch with negative implications and the ratings on two other classes are lowered to 'CCC' and removed from CreditWatch negative. In addition, ratings on two other classes are placed on CreditWatch with negative implications. The ratings on the remaining 26 classes from the affected CSFB ABS Trust series are affirmed. The ratings on the 10 downgraded classes with ratings placed on CreditWatch negative and the ratings on the two classes that are placed on CreditWatch negative reflect the adverse performance of the collateral pools backing these transactions. During the past 12 months, monthly net losses have outpaced monthly excess interest by more than 100%, on average. As a result, overcollateralization for each of these transactions is below its target. Furthermore, cash flow projections indicate that monthly net losses will continue to exceed monthly excess spread, further eroding the o/c for each transaction. As of the June 2006 remittance period, total delinquencies ranged from 13.70% for series 2002-HE4 (fixed loan group) to 40.87% for series 2001-HE22. Cumulative realized losses ranged from 2.03% for series 2002-1 to 4.12% for series 2001-HE20. In addition, the transactions have paid down to below 15% of their original pool balances. Standard & Poor's will continue to closely monitor the performance of the transactions with ratings on CreditWatch negative. If losses decline to a point where they no longer outpace excess interest, and the level of o/c improves, the ratings on these classes will be affirmed and removed from CreditWatch negative. Conversely, if losses continue to outpace excess interest, further downgrades can be expected. The affirmed ratings reflect adequate actual and projected credit support percentages and the shifting interest structure of the transactions. The collateral consists primarily of 30-year, fixed- and adjustable-rate, subprime mortgage loans secured by first liens on one- to four-family residential properties. Ratings Lowered and Placed on Creditwatch Negative CSFB ABS Trust Mortgage pass-through certificates Rating ------ Series Class To From ------ ----- -- ---- 2001-HE25 M-2 A/Watch Neg AA 2001-HE22 M-2 A/Watch Neg AA- Ratings Lowered and Remain on Creditwatch Negative CSFB ABS Trust Mortgage pass-through certificates Rating ------ Series Class To From ------ ----- -- ---- 2001-HE16 B BB/Watch Neg BBB-/Watch Neg 2001-HE20 B B/Watch Neg BB-/Watch Neg 2001-HE22 B B/Watch Neg BB-/Watch Neg 2001-HE25 B CCC BB-/Watch Neg 2001-HE30 B-F B/Watch Neg BB/Watch Neg 2002-HE4 B-F CCC BB/Watch Neg 2002-HE11 B-1 BB/Watch Neg BBB-/Watch Neg CSFB Home Equity Asset Trust 2002-1 Home Equity Pass-Through Certificates Series 2002-1 Rating ------ Series Class To From ------ ----- -- ---- 2002-1 B-1 BB/Watch Neg BBB-/Watch Neg Ratings Placed on Creditwatch Negative CSFB ABS Trust Mortgage Pass-Through Certificates Rating ------ Series Class To From ------ ----- -- ---- 2001-HE16 M-2 A/Watch Neg A 2002-HE4 M-F-2 A/Watch Neg A Ratings Affirmed CSFB ABS Trust Mortgage Pass-Through Certificates Series Class Rating ------ ----- ------ 2001-HE16 A AAA 2001-HE16 M-1 AA+ 2001-HE20 A-1, A-IO, M-1 AAA 2001-HE20 M-2 AA 2001-HE22 A-1, A-IO, M-1 AAA 2001-HE25 A-1, A-IO, M-1 AAA 2001-HE30 A-F AAA 2001-HE30 M-F-1 AA+ 2001-HE30 M-F-2 A+ 2002-HE4 A-F AAA 2002-HE4 M-F-1 AA+ 2002-HE11 A-2, A-3 AAA 2002-HE11 M-1 AA+ 2002-HE11 M-2 A+ CSFB Home Equity Asset Trust 2002-1 Home Equity Pass-Through Certificates Series 2002-1 Class Rating ----- ------ A-2, A-3, A-4 AAA M-1 AA+ M-2 A+ CSFB MORTGAGE: S&P's Rating on Class I-M-3 Certs. Tumbles to D -------------------------------------------------------------- Standard & Poor's Ratings Services lowered its rating on class I-M-3 from loan group one from Credit Suisse First Boston Mortgage Securities Corp.'s series 2002-22 to 'D' from 'B' and removed from CreditWatch negative, where it was placed Jan. 12, 2006. At the same time ratings are affirmed on four other classes from this transaction. The rating on class I-M-3 is lowered to 'D' from 'B' because the class incurred a $55,829 principal write-down during the May 2006 remittance period. The principal write-down occurred because the transaction has experienced more than $300,000 in losses, completely eroding available overcollateralization. Before May 2006, the last time this transaction incurred any losses was in December of 2004. As of the June 2006 distribution report, total delinquencies for loan group one were approximately 22% and realized losses were 0.93%. Approximately 4.59% of the loan group's principal balance remains. The collateral for this transaction consists of 30-year, fixed- or adjustable-rate, first- or second-lien mortgage loans secured by one-to-four family residential properties. Credit support is provided by subordination. Rating Lowered and Off Creditwatch Negative Credit Suisse First Boston Mortgage Securities Corp. Mortgage pass-through certificates series 2002-22 loan group 1 Rating ------ Class To From ----- -- ---- I-M-3 D B/Watch Neg Ratings Affirmed Credit Suisse First Boston Mortgage Securities Corp. Mortgage pass-through certificates series 2002-22 loan group 1 Class Rating ----- ------ I-A-5, I-PP AAA I-M-1 AA I-M-2 A+ DANA CORP: Wants Court to Approve Burns, et al. Employment Pacts ---------------------------------------------------------------- Dana Corp. and its debtor-affiliates ask the U.S. Bankruptcy Court for the Southern District of New York to: (a) enter into employment agreements with Michael J. Burns, Dana Corporation's president and chief executive officer, and five senior executives of Mr. Burns' core management team: 1. Paul E. Miller, 2. Thomas R. Stone, 3. Nick L. Stanage, 4. Michael L. DeBacker, and 5. Ralf Goettel, and (b) assume certain change of control agreements with three of the Senior Executives, as amended. The Debtors also ask the Court to determine that on a postpetition basis, the term insider, as defined in Section 101(31) of the Bankruptcy Code, only applies to: (i) their current employees, Mr. Burns and the Executives; and (ii) any person who serves as their director at the time of inquiry. A. Michael J. Burns Effective as of March 1, 2004, Dana's Board of Directors named Mr. Burns as chief executive officer, a position in which he continues to serve. Mr. Burns earned a bachelor's degree in Mechanical Engineering from the General Motors Institute in 1975 and a master's degree in Business Administration from The Wharton School of the University of Pennsylvania in 1979. He spent 34 years at General Motors, then later joined the GM Treasurer's Office in New York, eventually as the director of Overseas Financial Analysis. Mr. Burns also served with Delphi Electronics. In 1998, Mr. Burns was named president of GM Europe with around $25,000,000,000 in sales. B. Paul Miller Mr. Miller joined Dana as the vice president of Purchasing to: -- assist in centralizing the purchasing and facility review function across all Dana businesses on a worldwide basis in order to establish orderly supply chain management as well as contain or reduce the costs associated with Dana's revenues; and -- accelerate the change from a highly decentralized facility- based management structure to a centralized, cost effective yet product-focused operation. Mr. Miller also assumed responsibility for all supplier quality, real estate, physical plants globally and global logistics. He is responsible for 75% of the Dana Companies' global expenditures. Mr. Miller, a graduate of Indiana University of Pennsylvania, has more than 25 years of combined experience at Delphi Corporation and GM. C. Thomas R. Stone Mr. Stone joined Dana in June 2005 as president of Dana's Traction Group. Mr. Stone assumed global responsibility for Dana's axle manufacturing and assembly operations. He earned a Bachelor of Science degree in Science from Purdue University, a Master's Degree in Business Administration from Indiana University and completed the Harvard University Advanced Management Program. D. Nick Stanage Mr. Stanage has been the president of Dana's Heavy Vehicle Products and a member of Dana's Executive Committee since December 2005. He joined Dana in August 2005 as vice president and general manager of the Commercial Vehicle Group. He earned his undergraduate degree in Mechanical Engineering at Western Michigan University and his master's degree in Business Administration from the University of Notre Dame. He is a graduate of the executive leadership program at the American Graduate School of International Management. E. Michael L. DeBacker Mr. DeBacker has been a vice president of Dana since 1994 and the general counsel and secretary since 2000. He is also Dana's chief compliance officer and manages Dana's Risk Management, Environmental Services, Government Affairs and Corporate Communications Departments. Mr. DeBacker, who earned a bachelor's degree and Juris Doctor from Washburn University, is the longest serving of the senior executives and his historical knowledge of the company is vital to understanding the Debtors' historic business relationships as well as in assessing the thousands of issues and claims that will arise in their cases. Importantly, Mr. DeBacker is responsible for addressing Dana's asbestos issues. F. Ralf Goettel Mr. Goettel now leads two business lines on a worldwide basis, and also serves as the senior executive of all Dana's operations in Europe. Mr. Goettel is a graduate of the Technical University of Aachen, Germany where he earned a degree in Mechanical Engineering with specialization in combustion engine development. Corinne Ball, Esq., at Jones Day, in New York, relates that during the Chapter 11 process, the management team will be called upon to negotiate with bondholders, labor, retirees, vendors and equity holders. The Debtors and each of Mr. Burns and the Executives will enter into postpetition employment agreements on these terms: (a) Term: Two years from the date the Court approves the Agreements. The term is automatically renewable for successive six-month terms unless notice of intent not to renew is given by either party prior to any renewal term. (b) Compensation and Benefits: Total Annual Completion Executive Base Salary 2006 Bonus Bonus --------- ----------- ---------- ---------- M. Burns $1,035,000 $2,070,000 $6,020,000 P. Miller 375,000 450,000 1,120,000 T. Stone 440,000 528,000 800,000 M. DeBacker 405,000 486,000 800,000 R. Goetel 385,000 385,000 800,000 N. Stanage 336,000 336,000 800,000 Mr. Burns and the Executives are eligible for an annual cash incentive bonus under the Dana Corporation Annual Incentive Plan. The Completion Bonus is payable in the event of a Successful Emergence. It will be paid in two installments: -- 50%, within 30 days following a Successful Emergence, and -- 50%, within 30 days following the six-month anniversary of the Successful Emergence date provided that the senior executive remains employed by Dana on the six- month anniversary date or has been terminated without cause or resigned for good reason between the Successful Emergence date and the six-month anniversary date. Mr. Burns will be eligible to participate in Dana's defined contribution retirement plan and welfare benefit plans and to receive other fringe benefits at the same level as other officers of the company. Each Executive will be entitled to participate in company-sponsored retirement savings plans at the same level as Dana's other senior officers, and in all Dana's employee benefit programs for its senior executives. Dana will assume the Change of Control Agreements, as amended, of Messrs. Burns, Miller and DeBacker, which provide for protection for a period of three years following a change of control that occurs in connection with a Successful Emergence. (c) Involuntary Termination of Employment Without Cause or Resignation for Good Reason: In a pre-successful emergence, Mr. Burns and each Executive will receive their base salary and Annual Bonus at target for the remainder of the contract term payable as a lump sum, a pro-rata portion of their Completion Bonus and continuation of benefits in accordance with the terms of the policies for other terminated employees. Mr. Burns will also be entitled to receive a pro-rata portion of his Annual Bonus at target for the time worked during the applicable performance period and payable as a lump sum. In a post-successful emergence, Mr. Burns and each Executive will receive the base salary and Annual Bonus at target for the year in which the termination occurs multiplied by two and payable in a lump sum as well as any outstanding unpaid Completion Bonus. Mr. Burns will also receive a pro-rata portion of his Annual Bonus at target for the time worked during the applicable performance period and continuation of benefits in accordance with the terms of the applicable employee benefit plan, any previously deferred compensation, deferred supplemental retirement benefits, accrued vacation pay, continued medical, dental, disability and life insurance benefits for two years following the termination or the longer period as any plan, program, practice or policy may provide. Each Executive will receive continued pension, health and welfare benefits for two years or until the Executive reaches age 65, whichever is sooner. (d) Death: The estate of Mr. Burns or the Executives will receive their base salary through the end of the month, the pro-rata portion of the Annual Bonus per the AIP terms, and the pro-rata portion of the Completion Bonus through the date of death. (e) Voluntary Termination Without Good Reason/Termination For Cause: Mr. Burns and each Executive will forfeit liquidated damages, severance, unpaid proceeds of the Completion Bonus and the Annual Bonus. They may receive accrued but unpaid salary, vacation pay and vested benefits. (f) Non-Compete Clause: Neither Mr. Burns nor any Executive will engage in Competition for the remainder of the term of the Agreements upon termination for any reason. Following a Successful Emergence, the non-compete clause applies for a two-year period upon a termination of their employment without cause or a resignation for good reason. (g) Indemnification: The Debtors will provide indemnification to Mr. Burns to the fullest extent permitted by law and the Debtors' articles of incorporation and bylaws. A full-text copy of the Senior Executives' Employment Pacts is available for free at http://researcharchives.com/t/s?d9d 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. 15; Bankruptcy Creditors' Service, Inc., 215/945-7000). The Debtors' consolidated balance sheet at March 31, 2006, showed a $456,000,000 total shareholder' equity resulting from total assets of $7,788,000,000 and total liabilities of $7,332,000,000. DANA CORP: To Set Off $7 Mil. Against Bendix Spicer's Obligation ---------------------------------------------------------------- Dana Corp. advises the U.S. Bankruptcy Court for the Southern District of New York that it will set off $7,239,169 against Bendix Spicer Foundation Brake LLC's obligation. The set off is pursuant to Dana and its debtor-affiliates' Set-off Procedures duly approved by the Court and subject to these terms: (1) The Set-off Cap is reduced from $3,000,000 to $2,000,000; and (2) The Official Committee of Unsecured Creditors will have five days after receipt of notice to object to a proposed set-off between a Debtor and an Affiliate involving an aggregate amount exceeding $250,000. Dana purchases parts from Bendix Spicer under existing commercial agreements. Corinne Ball, Esq., at Jones Day, in New York, relates that as of the Petition Date, Dana owed Bendix Spicer $7,239,169 on account of those purchases. Bendix Spicer also purchases parts from Dana under existing commercial agreements. As of the Petition Date, Bendix Spicer owed Dana $11,299,780, comprising of: -- $348,595 for goods the Dana sold to it; and -- $10,951,185 with respect to the service provided and amounts paid by Dana that are reimbursable by Bendix Spicer pursuant to certain agreements between the parties. The Set-Off will result in a net creditor obligation of $4,060,610 by Bendix Spicer to Dana. Pursuant to the Set-Off, Bendix Spicer agrees that its claim will be satisfied in full, and the Net Obligation will be satisfied to Dana by netting amounts payable by Dana to Bendix Spicer effective on the Court's approval of the Set-off Notice. 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. 15; Bankruptcy Creditors' Service, Inc., 215/945-7000). The Debtors' consolidated balance sheet at March 31, 2006, showed a $456,000,000 total shareholder' equity resulting from total assets of $7,788,000,000 and total liabilities of $7,332,000,000. DATALOGIC INT'L: Selling Certain Assets to Huron for $700,000 ------------------------------------------------------------- DataLogic International, Inc. and its wholly owned subsidiary IPN Communications, Inc., has entered into a $700,000 Asset Purchase Agreement with Huron Holdings, Inc. The Company disclosed that pursuant to the Asset Purchase Agreement, they will sell to Huron: (a) approximately 700 units of its Panther Trak asset tracking device and related inventory; and (b) certain other assets related to DataLogic's small fleet/sub-prime lending market operations, including its BounceGPS trademark and existing customer relationships. The Company will also license to Huron, on a non-exclusive basis, certain of their asset tracking device and asset management solution technologies. The Company received from Huron $450,000 in cash and a $250,000 promissory note for the sale. The promissory note has a term of two years and bears interest at 9% per annum. The Company further said that Huron also assumed certain liabilities related to DataLogic's small fleet/sub-prime lending market operations. The Company will receive a royalty stream equal to 2% of net revenue from Huron's sales of asset tracking devices based on the licensed technology and 5% of net revenue from Huron's sales of asset management solutions based on the licensed technology. Amendment to Term Note with Laurus DataLogic also disclosed that on June 30, 2006 it entered into an amendment to its secured term note with Laurus Master Fund, Ltd. The amendment incorporates Laurus' consent to the transactions contemplated by the Asset Purchase Agreement with Huron. The Company also agreed to prepay $225,000 of the outstanding principal amount of the term note held by Laurus, pursuant to the amendment. DataLogic International, Inc. (OTCBB: DLGI) -- http://www.dlgi.com/-- is a technology and professional services company providing a wide range of consulting services and communication solutions like GPS based mobile asset tracking, secured mobile communications and VoIP. The Company also provides Information Technology outsourcing and private label communication solutions. DataLogic's customers include U.S. and international governmental agencies as well as a variety of international commercial organizations. Going Concern Doubt As reported in the Troubled Company Reporter on May 17, 2006, Corbin & Company, LLP, in Irvine, California, raised substantial doubt about DataLogic International, Inc.'s ability to continue as a going concern after auditing the Company's consolidated financial statements for the year ended Dec. 31, 2005. The auditing firm pointed to the Company's recurring losses and need to establish profitable operations. DAVITA INC: Mark Harrison to Serve as CFO Effective September 1 --------------------------------------------------------------- DaVita Inc. reported its entry into an employment agreement, effective September 1, 2006, with Mark G. Harrison, who will serve as the Company's Chief Financial Officer. The Company will pay Mr. Harrison an annual base salary of $500,000. Mr. Harrison is entitled to a starting bonus in the amount of $52,000 and is eligible to receive a performance bonus. The Company will also pay Mr. Harrison an additional $75,000 per year, less withholdings, for the first three years after he relocates to California to assist him with the cost of housing in California. Mr. Harrison will, further, receive a grant of an option to purchase 125,000 shares of the Company's common stock at an exercise price equal to the closing price of the stock on such date. The option has a five-year term. In addition, Mr. Harrison will receive, on Sept. 1, 2006, 31,250 shares of restricted stock units, which will vest over a five-year period, one-third vesting on each of the third, fourth and fifth anniversary of the grant date. Headquartered in El Segundo, California, DaVita, Inc. (NYSE: DVA) -- http://www.davita.com-- operates a chain of dialysis centers in the US. DaVita has more than 1,200 centers in nearly 40 states and Washington, DC; the centers provide dialysis and related services to patients suffering from chronic kidney failure. The firm also provides home-based dialysis and pre- and postoperative kidney transplant care, as well as inpatient dialysis services in some 795 hospitals. Subsidiary DaVita Clinical Research conducts clinical trials for devices and drugs in the renal-related field for pharmaceutical and medical device firms. * * * The Company's 6-5/8% Senior Notes due Mar. 15, 2013 carries Standard & Poor's Ratings Services' B rating. DELPHI CORP: Incurs $2.4 Billion Net Loss in 2005 ------------------------------------------------- Delphi Corp. released its fourth quarter and calendar year 2005 financial results and filed its 2005 Annual Report on Form 10-K. Fourth Quarter 2005 Financial Results: * Revenue of $6.8 billion, down from $7 billion in Q4 2004. * Non-GM revenue for the quarter was $3.7 billion, up 7% from $3.4 billion in Q4 2004 (up 9% excluding the effects of foreign exchange rates), representing 54 percent of Q4 revenues. Non-GM growth was again offset by a 14% year-over-year decline in GM revenues. * GAAP net loss of $828 million, compared to Q4 2004 net loss of $4.9 billion. Included in the Q4 2005 net loss was $589 million of non-cash impairment charges related to long-lived assets, goodwill and intangible assets. * GAAP cash flow from operations was $763 million, up 9% from $698 million in Q4 2004. Cash used in operations was positively impacted by prepetition supplier payments being stayed. Calendar Year 2005 Financial Results: * Revenue of $26.9 billion, down from $28.6 billion in 2004. * Non-GM revenue of $14.1 billion, up 7% from $13.2 billion in CY 2004 (up 6% excluding the effects of foreign exchange rates). For the year, 52% of revenues came from customers other than GM. In 2005, GM revenues declined $2.6 billion or 17% year-over-year. * GAAP net loss for the year of $2.4 billion, compared to 2004 CY net loss of $4.8 billion. Included in the CY 2005 net loss was $629 million of non-cash impairment charges related to long-lived assets, goodwill and intangible assets. Delphi's net loss reflects revenue decreases and related pricing pressures stemming from a substantial reduction in GM's North American vehicle production, coupled with continued increased commodity costs. * GAAP cash flow from operations was $154 million, down from $1.5 billion in CY 2004. The lower cash flow from operations resulted from the significantly increased losses from U.S. operations, excluding non-cash charges. * In 2005, Delphi contributed $635 million to its U.S. pension plans. The company's 2005 return on pension fund investments was 13 percent, or $1.1 billion. Delphi's U.S. under-funded pension plan status as of December 31, 2005, was $4.1 billion as compared to $4.3 billion at December 31, 2004. * Delphi's year-end 2005 OPEB obligation was $9.6 billion, the same as at December 31, 2004, as increases in the OPEB liability resulting from lower interest rates and health care inflation were offset by reductions resulting from an amendment to the salaried OPEB plan to limit benefits payable to participants eligible for Medicare. A full-text copy of Delphi's Form 10-K report filed with the Securities and Exchange Commission is available for free at: http://researcharchives.com/t/s?da8 Based in Troy, Mich., Delphi Corp. -- http://www.delphi.com/ -- is the single largest global supplier of vehicle electronics, transportation components, integrated systems and modules, and other electronic technology. The Company's technology and products are present in more than 75 million vehicles on the road worldwide. The Company filed for chapter 11 protection on Oct. 8, 2005 (Bankr. S.D.N.Y. Lead Case No. 05-44481). John Wm. Butler Jr., Esq., John K. Lyons, Esq., and Ron E. Meisler, Esq., at Skadden, Arps, Slate, Meagher & Flom LLP, represent the Debtors in their restructuring efforts. Robert J. Rosenberg, Esq., Mitchell A. Seider, Esq., and Mark A. Broude, Esq., at Latham & Watkins LLP, represents the Official Committee of Unsecured Creditors. As of Aug. 31, 2005, the Debtors' balance sheet showed $17,098,734,530 in total assets and $22,166,280,476 in total debts. (Delphi Bankruptcy News, Issue No. 32; Bankruptcy Creditors' Service, Inc., 215/945-7000) DELPHI CORP: Court Gives Final Nod on Jefferies as Panel's Advisor ------------------------------------------------------------------ The U.S. Bankruptcy Court for the Southern District of New York approved, on a final basis, the request of Delphi Corporation and its debtor-affiliates' Official Committee of Unsecured Creditors to retain Jefferies & Company, Inc., as its investment banker and financial advisor. As reported in the Troubled Company Reporter on March 7, 2006, Jefferies will: (a) provide a valuation of the Debtors' enterprise value, on a consolidated and division basis; (b) provide a pricing of any securities to be issued in the Restructuring, as well as evaluation of the terms of any securities; (c) evaluate any financing proposed as part of the Restructuring; (d) assist and advise the Committee in examining and analyzing any potential or proposed strategy for restructuring or adjusting the Debtors' outstanding indebtedness, labor costs or capital structure; (e) provide an analysis of restructuring proposals from various constituencies; (f) assist and advise the Committee in evaluating and analyzing the proposed implementation of a Restructuring; and (g) render other investment banking services as may from time to time be agreed. The Committee has asked for, and Jefferies has agreed to, additional conditions and procedures in connection with the allowance and payment of compensation and the reimbursement of expenses sought. The Additional Procedures, which are substantially the same as those negotiated with the U.S. Trustee and recently approved by the court in PSINet Inc., et al., Case No. 01-13213 (Bankr. S.D.N.Y. July 11, 2001), provide that: a. the fees and expenses will in all cases be subject to Court approval under Section 328(a) of the Bankruptcy Code, as incorporated in Section 330 of the Bankruptcy Code; b. all fees will be paid to Jefferies on an interim basis only in accordance with Court-established procedures for the compensation of professionals; and c. any fees or expenses paid to Jefferies but disapproved by the Court will be promptly returned by Jefferies to the Debtors' estates. Jefferies' fees, as presented in the Committee's original application, remain the same. Based in Troy, Mich., Delphi Corp. -- http://www.delphi.com/ -- is the single largest global supplier of vehicle electronics, transportation components, integrated systems and modules, and other electronic technology. The Company's technology and products are present in more than 75 million vehicles on the road worldwide. The Company filed for chapter 11 protection on Oct. 8, 2005 (Bankr. S.D.N.Y. Lead Case No. 05-44481). John Wm. Butler Jr., Esq., John K. Lyons, Esq., and Ron E. Meisler, Esq., at Skadden, Arps, Slate, Meagher & Flom LLP, represent the Debtors in their restructuring efforts. Robert J. Rosenberg, Esq., Mitchell A. Seider, Esq., and Mark A. Broude, Esq., at Latham & Watkins LLP, represents the Official Committee of Unsecured Creditors. As of Aug. 31, 2005, the Debtors' balance sheet showed $17,098,734,530 in total assets and $22,166,280,476 in total debts. (Delphi Bankruptcy News, Issue No. 29; Bankruptcy Creditors' Service, Inc., 215/945-7000) DELTA AIR: Files Family-Care Savings Plan 2005 Annual Report ------------------------------------------------------------ Delta Air Lines, Inc., has filed its 2005 annual report regarding its Delta Family-Care Savings Plan on Form 11-K with the Securities and Exchange Commission. Esther L. Hammond, chair of the Administrative Committee of Delta, says that Delta's bankruptcy proceedings will have a minimal effect, if any, on the Plan. Delta has continued to fund the Plan and has obtained authorization from the Court to do so. Substantially all Delta, Delta Technology, LLC, and Song, LLC, personnel who are paid on the United States domestic payroll or employed in the Commonwealth of Puerto Rico are eligible to participate in the Plan. The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974, as amended, and is intended to qualify under Section 404(c) of ERISA. Deloitte & Touche LLP audited the statements of net assets available for benefits of the Plan as of December 31, 2005 and 2004, and the related statement of changes in net assets available for benefits for the year ended December 31, 2005. A full-text copy of the Delta Family-Care Savings Plan's Annual Report is available for free at: http://ResearchArchives.com/t/s?d89 DELTA FAMILY-CARE SAVINGS PLAN Statement of Net Assets Available for Benefits As of December 31, 2005 ASSETS Investment in Master Trust $3,799,476,000 Investments, at fair value $6,121,000 Participant Loans $62,183,000 --------------- Total Investments 3,867,780,000 Receivables: Employee contributions 8,148,000 Participant contributions 187,000 --------------- Total receivables 8,335,000 --------------- Total assets 3,876,115,000 LIABILITIES Employee Stock Ownership Plan (ESOP) Notes: Current 22,719,000 Noncurrent 106,054,000 Interest payable 5,215,000 Other payables 2,933,000 --------------- Total assets available for benefits $3,739,194,000 =============== DELTA FAMILY-CARE SAVINGS PLAN Statement of Changes in Net Assets Available for Benefits For the year ended December 31, 2005 Contributions: Participant $214,163,000 Employer 90,424,000 Investment Income: Investment income from Master Trust (32,922,000) Net depreciation in investments' fair value (94,604,000) Interest on participant loans 5,874,000 Allocation of Shares, at fair value -- Benefits Paid to Participants (940,929,000) Interfund Transfers -- Administrative Expenses (2,442,000) Interest Expense on ESOP Notes (6,506,000) --------------- Net Decrease ($766,942,000) Net Assets Available for Benefits: Beginning of year 4,506,136,000 --------------- End of Year 3,739,194,000 =============== About Delta Air Lines Headquartered in Atlanta, Georgia, Delta Air Lines -- http://www.delta.com/-- is the world's second-largest airline in terms of passengers carried and the leading U.S. carrier across the Atlantic, offering daily flights to 502 destinations in 88 countries on Delta, Song, Delta Shuttle, the Delta Connection carriers and its worldwide partners. The Company and 18 affiliates filed for chapter 11 protection on Sept. 14, 2005 (Bankr. S.D.N.Y. Lead Case No. 05-17923). Marshall S. Huebner, Esq., at Davis Polk & Wardwell, represents the Debtors in their restructuring efforts. 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. 36; Bankruptcy Creditors' Service, Inc., 215/945-7000). DELTA AIR: Gets Court Nod to Reject 14 Embraer Aircraft Leases -------------------------------------------------------------- The U.S. Bankruptcy Court for the Southern District of New York gave Delta Air Lines, Inc., and its debtor-affiliates permission to reject the leases of 14 Embraer EMB-120 aircraft and their related engines, propellers, and other specified equipment, effective as of June 28, 2006. With respect to the aircraft bearing Tail Nos. N259CA, N257CA, N267CA and N268CA, the Court directs the Debtors to: (1) deliver the aircraft with the engines attached to the airframes and their related records and equipment to, or otherwise make available for retrieval by, the applicable lessor or aircraft party by the Effective Date; and (2) continue to maintain, insure and pay the storage costs relating to the aircraft equipment for a period ending the earlier of: -- July 29, 2006; and -- the date that the lessor or other aircraft party takes possession of the aircraft equipment. Judge Hardin directs the Debtors to deliver records and documents relating to the 10 remaining aircraft, their engines, propellers and other related equipment to the applicable Lessor on, or as soon as reasonably practicable after, the Effective Date. As reported in the Troubled Company Reporter on June 12, 2006,the leases consist of: Tail No. Aircraft Parties -------- ---------------- N205CA Boeing Capital Corporation, as owner participant. N241CA BCC, as owner participant. N243CA BCC, as owner participant; and Orix Orion Corporation, as head lessor. N244CA BCC, as lessor; and Orix Orion, as head lessor. N254CA Boeing Capital, lessor; and SBL Management Company, Limited, head lessor. N255CA BCC, as owner participant; and SBL Management, as head lessor. N256CA BCC, as owner participant. N266CA National City Leasing Corporation, as owner participant. N258CA Key Equipment Finance, as owner participant; Wilmington Trust Company, as indenture trustee; Wells Fargo Bank Northwest, National Association Corporate Trust Services, as owner trustee; NMB Lease N.V., ING Bank N.V. Dublin Branch, and ING Lease Nederland B.V., as lenders. N264CA NCLC, as owner participant; Wilmington Trust, as indenture trustee; Wells Fargo, as owner trustee; NMB Lease N.V., ING Bank, and ING Lease, as lenders. N267CA NCLC, as owner participant; Wilmington Trust, as indenture trustee; Wells Fargo, as owner trustee; NMB Lease N.V., ING Bank, and ING Lease, as lenders. N268CA NCLC, as owner participant; Wilmington Trust, as indenture trustee; Wells Fargo, as owner trustee; NMB Lease, ING Bank, and ING Lease, as lenders. N257CA UnionBanCal Leasing Corporation, as owner participant; Wilmington Trust, as indenture trustee; Wells Fargo, as owner trustee/voting trustee; NMB Lease, ING Bank, and ING Lease, as lenders. N259CA UnionBanCal, as owner participant; Wilmington Trust, as indenture trustee; Wells Fargo, as owner trustee/voting trustee; NMB Lease, ING Bank, and ING Lease, as lenders. About Delta Air 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. 36; Bankruptcy Creditors' Service, Inc., 215/945-7000). DELTA FUNDING: S&P's Rating on Class B Certificates Tumbles to D ---------------------------------------------------------------- Standard & Poor's Ratings Services lowered its rating on the class B certificates issued by Delta Funding Home Equity Loan Trust 1999-2 to 'D' from 'CCC'. At the same time, ratings are affirmed on the remaining classes from the same transaction. The lowered rating reflects: -- The depletion of overcollateralization, resulting in a cumulative principal write-down of $503,524 to the class B certificates; -- Realized losses that consistently outpace excess interest cash flow; -- Serious delinquencies (90-plus days, foreclosure, and REO) that have averaged 22.07% in the past six months; and -- A loss trend that we expect will continue in the near term, which may cause additional principal write-downs to the class B certificates. Standard & Poor's will continue to monitor the performance of the transaction to ensure that the ratings assigned to the other classes accurately reflect the risks associated with this security. The affirmations reflect sufficient levels of credit support to maintain the current ratings, despite the high level of delinquencies. To date, cumulative realized losses, as a percentage of original pool balance, total 4.86% ($20,430,786). Now that overcollateralization has been depleted, credit support for class B is provided by excess interest. The other classes receive credit support from excess interest and subordination. The collateral for this transaction consists of fixed- and adjustable-rate home equity first- and second-lien loans secured by one- to four-family residential properties. Rating Lowered Delta Funding Home Equity Loan Trust 1999-2 Asset-backed certificates Rating ------ Class To From ----- -- ---- B D CCC Ratings Affirmed Delta Funding Home Equity Loan Trust 1999-2 Asset-backed certificates Class Rating ----- ------ A-1A AAA A-6F AAA A-7F AAA M-1 AA M-2 A DIGICEL LTD: Strong Market Position Cues Moody's to Hold B1 Rating ------------------------------------------------------------------ Moody's Investors Service assigned a B3 senior unsecured rating to the $150 million add-on Notes offering of Digicel Limited and affirmed Digicel's existing B3 senior unsecured and B1 Corporate Family Ratings. The outlook has been changed to stable from positive. The outlook change to stable reflects Moody's opinion that Digicel's execution risks have increased following its plans to raise EBITDA leverage by approximately three quarters of a turn and consume a significant amount of cash over the next year in pursuit of accelerating new market growth opportunities. As a result, Moody's believes the company's ratings are no longer likely to move higher during this time period. The B1 Corporate Family Rating reflects Digicel's strong market position as the largest wireless telecommunications carrier in the Caribbean as well as its successful track record at gaining significant market share and producing solid operating results relatively quickly after new markets are launched. The rating also incorporates an increase in restricted group EBITDA-based leverage to just over 4 times and the fact that the incremental debt proceeds are not being used within the restricted group. Finally, although Moody's expects the company to consume a significant amount of cash in fiscal 2007, we also expect continued strong operating momentum, coupled with reduced capital expenditure requirements in its mature markets. This should enable the company's restricted group to improve its free cash flow to debt and debt to EBITDA to roughly 6% and 3.5 times respectively by the end of fiscal 2008. Outlook Actions: Issuer: Digicel Limited * Outlook, Changed To Stable From Positive Headquartered in Hamilton, Bermuda, Digicel is the largest provider of wireless telecommunication services in the Caribbean with approximately 1.9 million subscribers as at March 31, 2006. ELINEAR INC: Lopez Blevins Raises Going Concern Doubt ----------------------------------------------------- Lopez, Blevins, Bork & Associates, LLP, in Houston, Texas, raised substantial doubt about eLinear, Inc.'s ability to continue as a going concern after auditing the Company's consolidated financial statements for the year ended Dec. 31, 2005. The auditor pointed to the Company's recurring operating losses and need to raise additional financing in order to satisfy its vendors and other creditors and execute its business plan. The Company reported a $7,580,457 net loss on $29,750,817 of total revenues for the year ended Dec. 31, 2005, compared to a $3,847,346 net loss on $24,065,753 of total revenues for the same period in 2004. At Dec. 31, 2005, the Company's balance sheet showed $8,748,883 in total assets, $11,172,999 in total liabilities, and $80,225 in minority interest, resulting in a $2,504,341 stockholders' deficit. The Company's Dec. 31 balance sheet also showed strained liquidity with $6,917,870 in total current assets available to pay $9,687,910 in total current liabilities coming due within the next 12 months. Laurus Notes In February 2004, the Company obtained a secured revolving note with Laurus Master Fund, Ltd. Under the terms of the agreement, the Company can borrow up to $5,000,000 at an annual interest rate of prime plus 0.75% (with a minimum rate of 4.75%). The agreement contains a $3,000,000 line of credit revolver and a $2,000,000 term note. In the event of default, Laurus may require the Company to pay the principal balance and interest on the notes will automatically be increased by 5%. The company is potentially in technical default of the Laurus notes, but is in negotiations with Laurus to resolve the potential default without penalty to the Company. No default has been asserted by Laurus. A full-text copy of the Company's annual report is available for free at http://ResearchArchives.com/t/s?da7 Based in Houston, Texas, eLinear, Inc. (AMEX: ELU) -- http://www.elinear.com/-- is a communications, security and compliance company providing integrated technology solutions including information and physical security, IP Telephony and network and storage solutions infrastructure. The Company's customers are Fortune 2000 and small to medium sized business organizations. As of Dec. 31, 2005, eLinear had four wholly owned subsidiaries, NetView Technologies, Inc., NewBridge Technologies, Inc., TanSeco Systems, Inc. and UTEK Corporation and a 51% interest in eLinear Middle East FZ, LLC. ELINEAR INC: Signs Letter of Intent to Acquire SweetWater --------------------------------------------------------- eLinear, Inc., signed a Letter of Intent to acquire the operating assets of SweetWater Security Systems, LLC. eLinear will issue 25,000,000 shares of its common stock from authorized but unissued shares for certain assets of SweetWater. SweetWater's assets to be purchased includes certain accounts receivable, equipment, inventory and up to $3 million in cash. "The SweetWater acquisition is a big step forward in our efforts to expand our offerings of advanced security design and implementation," Tommy Allen, chief executive officer of eLinear, stated. "This acquisition is synergistic by bringing together eLinear's expertise in cutting edge network design and SweetWater's success in wireless security technology. Our intent is to expand the SweetWater technology into commercial applications with our large and enterprise accounts." "This acquisition is part of the new management team's goal to accelerate our growth and to achieve profitability," Mike Hardy, president and chief financial officer of eLinear, added. "In addition to growing gross profit, cost cutting is ongoing at every level. These efforts should provide the combined companies with the tools and vehicle to continue our growth with the goal of delivering an enhanced value proposition to shareholders." "We are excited to be able to grow our company by combining with a leader that has a market-driven, entrepreneurial approach to the technology services business," Donald Bresina, chief executive officer of SweetWater Security Systems, stated. "Combining our history of success in closing large high profile engagements with eLinear's team of professionals in design and installation should give us a distinct competitive advantage. Operating as part of a public vehicle will enable us to gather the resources to continue our growth rate." The transaction will be subject to the signing of a definitive agreement, satisfaction of standard closing conditions by both parties, and approval by eLinear shareholders. It is contemplated that Don Bresina will be added to the eLinear Board of Directors at closing. SEC and AMEX Compliance eLinear believes that it has addressed certain reporting issues with the Securities and Exchange Commission and the American Stock Exchange by filing required restatements of financial statements previously filed for periods in calendar years 2004 and 2005 and by filing its Form 10-QSB for the quarter ended Sept. 30, 2005, and its Form 10-KSB for the year ended Dec. 31, 2005. The company expects to file its Form 10-QSB for March 31, 2006, soon in its efforts to regain compliance with the timely reporting requirements of the AMEX Company Guide. About SweetWater Based in Houston, Texas, SweetWater Security Systems, LLC, provides complex wireless video security systems for Public Housing Projects throughout the Southeastern United States. SweetWater primarily operates in Louisiana, Mississippi, Alabama, and Tennessee and has completed over $3 million in projects to date. Sweetwater has a substantial pipeline of future business opportunities. About eLinear Based in Houston, Texas, eLinear, Inc. (AMEX: ELU) -- http://www.elinear.com/-- is a communications, security and compliance company providing integrated technology solutions including information and physical security, IP Telephony and network and storage solutions infrastructure. The Company's customers are Fortune 2000 and small to medium sized business organizations. As of Dec. 31, 2005, eLinear had four wholly owned subsidiaries, NetView Technologies, Inc., NewBridge Technologies, Inc., TanSeco Systems, Inc. and UTEK Corporation and a 51% interest in eLinear Middle East FZ, LLC. EOXAN LLC: Voluntary Chapter 11 Case Summary -------------------------------------------- Debtor: Eoxan, LLC 938 Linden Avenue P.O. Box 1027 South San Francisco, California 94083-1027 Bankruptcy Case No.: 06-30576 Type of Business: The Debtor is a real estate investor and developer. Chapter 11 Petition Date: July 12, 2006 Court: Northern District of California (San Francisco) Judge: Thomas E. Carlson Debtor's Counsel: Randall Crane, Esq. 180 Grand Avenue, Suite 1550 Oakland, California 94612 Tel: (510) 465-4606 Total Assets: $2,500,000 Total Debts: $1,500,000 The Debtor does not have any creditors who are not insiders. EYE CARE: HVHC Merger Prompts S&P to Remove Developing Watch ------------------------------------------------------------ Standard & Poor's Ratings Services affirmed its ratings, including its 'B' corporate credit rating, on San Antonio, Texas-based Eye Care Centers of America Inc. All ratings are removed from CreditWatch, where they were placed with developing implications on May 3, 2006. The outlook is positive. The company's total funded debt outstanding was $315 million as of April 1, 2006. "The rating affirmation is based on our expectations that ECCA's financial profile will remain largely unchanged following its acquisition by HVHC," said Standard & Poor's credit analyst Ana Lai. HVHC Inc. (BB/Stable/--) is a wholly owned subsidiary of Highmark Inc. (A/Stable/--), a provider of health care services in Pennsylvania. HVHC is a for-profit holding company that provides vision services and sells related merchandise through its wholly owned subsidiaries, primarily Davis Vision Inc. and Viva Optique Inc. ECCA entered into a merger agreement with HVHC in May 2006. The merger transaction, valued at $622.6 million, has been approved by the board of directors of both companies and is expected to close in the third quarter of 2006. Although ECCA will become a subsidiary of HVHC following the acquisition, each subsidiary will have its own financing with no cross guarantees, and with restrictions on dividends. Both HVHC and ECCA debt are also nonrecourse to the parent company Highmark. In addition, S&P believes that the degree of parent support will be limited despite its acquisition by a subsidiary of a company with a stronger credit profile. The positive outlook reflects our expectation that potential synergies under HVHC's ownership could lead to sales and earnings growth over time. Purchasing costs synergies and overhead expense savings are expected to contribute to modest margin improvements. In addition, ECCA could benefit from additional revenues from the inflow of Davis managed care customers into ECCA stores. FALCON AIR: Wants Crisis Management as Limited Financial Advisor ---------------------------------------------------------------- Falcon Air Express, Inc., and MAJEL Aircraft Leasing Corp. ask the Honorable A. Jay Cristol of the U.S. Bankruptcy Court for the Southern District of Florida in Miami for authority to employ Alan L. Goldberg and the firm of Crisis Management, Inc., as their limited financial advisors, nunc pro tunc to May 25, 2006. Crisis Management will: (a) assist the Debtors in the preparation of their Schedules and Statements of Financial Affairs; (b) assist in the preparation of debtor-in-possession reports, and (c) assist in the expeditious settlement of claims. Mr. Goldberg, the president of Crisis Management, disclosed that the Firm's hourly rates range from $65 for paraprofessionals to $250 for principals. Mr. Goldberg assures the Court that Crisis Management, Inc., does not hold nor represent interest adverse to the Debtors, their Estates, or their creditors in the matters upon which the Firm is to be employed. Headquartered in Miami, Florida, Falcon Air Express, Inc. -- http://www.falconairexpress.net/-- is a small and low-cost airline company that provides charter service and renders foreign and U.S. carriers sub-services on schedules routes. The Debtor and its affiliate, MAJEL Aircraft Leasing Corp., filed for chapter 11 protection on May 10, 2006 (Bankr. S.D. Fla. Case Nos. 06-11877 & 06-11878). Brian G. Rich, Esq., at Berger Singerman, P.A., represents the Debtors in their restructuring efforts. Peter D. Russin, Esq., and Michael S. Budwick, Esq., at Meland Russin & Budwick, P.A., represent the Official Committee of Unsecured Creditors. When the Debtors filed for protection from their creditors, they estimated assets and debts between $10 million and $50 million. FALCON AIR: Wants Pierre Murphy as Special DOT Counsel ------------------------------------------------------ Falcon Air Express, Inc., and MAJEL Aircraft Leasing Corp. ask the Honorable A. Jay Cristol of the U.S. Bankruptcy Court for the Southern District of Florida in Miami for authority to employ Pierre E. Murphy, Esq., and the Law Offices of Pierre E. Murphy, as their special counsel, nunc pro tunc to May 10, 2006. Mr. Murphy and the Firm will provide legal services in connection with issues relating to the Department of Transportation. The Debtors want Mr. Murphy and the Firm to continue their services as the Debtors' special DOT counsel. The Debtors say that duplication of effort and delay would result if their bankruptcy counsel, Berger Singerman, P.A., will take over matters that Murphy's firm previously handled. Mr. Murphy bills at $375 per hour. Mr. Murphy assures the Court that he and his firm do not hold or represent interest adverse to the Debtors, their Estates, or their creditors in the matters upon which they will be engaged, and they are disinterested as required by Section 327(e) of the Bankruptcy Code. Headquartered in Miami, Florida, Falcon Air Express, Inc. -- http://www.falconairexpress.net/-- is a small and low-cost airline company that provides charter service and renders foreign and U.S. carriers sub-services on schedules routes. The Debtor and its affiliate, MAJEL Aircraft Leasing Corp., filed for chapter 11 protection on May 10, 2006 (Bankr. S.D. Fla. Case Nos. 06-11877 & 06-11878). Brian G. Rich, Esq., at Berger Singerman, P.A., represents the Debtors in their restructuring efforts. Peter D. Russin, Esq., and Michael S. Budwick, Esq., at Meland Russin & Budwick, P.A., represent the Official Committee of Unsecured Creditors. When the Debtors filed for protection from their creditors, they estimated assets and debts between $10 million and $50 million. FAMILY RESORTS: Case Summary & Nine Largest Unsecured Creditors --------------------------------------------------------------- Debtor: Family Resorts and Marina, Inc. dba South Beach Resort fka Lindy's Beach Resort 8620 East Bayshore Road Marblehead, Ohio 43440 Bankruptcy Case No.: 06-31720 Debtor-affiliates filing separate chapter 11 petitions: Entity Case No. ------ -------- Frontwaters Restaurant and Brewing Co. 06-31721 Type of Business: The Debtors operate a restaurant and serve fine wine and liquor. Chapter 11 Petition Date: July 12, 2006 Court: Northern District of Ohio (Toledo) Judge: Richard L. Speer Debtors' Counsel: Scott H. Scharf, Esq. Margulies & Levinson, LLP 30100 Chagrin Boulevard, Suite 250 Cleveland, Ohio 44124 Tel: (216) 514-2225 Fax: (216) 514-3142 Total Assets Total Debts ------------ ----------- Family Resorts and $142,500 $3,977,169 Marina, Inc. Frontwaters Restaurant and $258,500 $2,649,526 Brewing Co. A. Family Resorts and Marina, Inc.'s Six Largest Unsecured Creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ The Croghan Colonial Bank Real Property - $2,300,000 323 Croghan Street Loan #1 Fremont, OH 43420 Real Property - $100,100 Loan #2 Real Property - $315,000 Loan #3 First National Bank of Real Property and $1,200,000 Bellevue 120 North Street Bellevue, OH 44811 Huntington National Bank Settlement Agreement $34,000 120 Madison Avenue Port Clinton, OH 43452 National City Bank Goods Purchased $21,493 Chase Goods Purchased $4,076 Treasurer of Ottawa County Real Property Unknown B. Frontwaters Restaurant and Brewing Co.'s Three Largest Unsecured Creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ The Croghan Colonial Bank Blanket Lien $315,000 323 Croghan Street Fremont, OH 43420 Mark R. Tantari, Esq. Tel: (419) 321-6444 Huntington National Bank Settlement Agreement $34,000 120 Madison Avenue Port Clinton, OH 43452 Toledo Elevator and Machine Co. Services $526 221 North Detroit Avenue Toledo, OH 43607 GREAT PANTHER: Company Says It's Now in "Best Shape" Ever --------------------------------------------------------- In a Memo dated July 13, 2006, Kaare Foy, Executive Chairman and Chief Financial Officer for Great Panther Resources Limited, says the Company "has never been in a better financial condition in its 26 year history, than it is now." As reported in yesterday's edition of the Troubled Company Reporter, KPMG LLP raised substantial doubt about Great Panther's ability to continue as a going concern after completing its review of the company's financial statements for the year ending Dec. 31, 2005. Subsequent to that date, the Company raised gross cash proceeds of approximately $5,600,000 from the exercise of warrants and options, closed a $2.02 million convertible loan private placement and also raised gross cash proceeds of $15,000,000 through a private placement transaction. "Having just closed a $10 million dollar underwritten placement which was over-subscribed by an additional $5 million, Great Panther has never been in a more sound and liquid financial condition," Mr. Foy says. Mr. Foy provides these additional facts about how well the company is doing in his July 13 Memo: A. Producing Properties * The Company has 100% ownership of the Santa Fe Silver-Gold Mines in Guanajuato Mexico, with no NSR. Property includes the Valenciana Mine, once described at the "richest silver mine in the world", a 1,200 tonne per day mill on site, increasing production having recommenced during June 2006 following refurbishing of the plant. * Great Panther also has 100% ownership of the high grade Topia Silver Mine in Durango, Mexico, with no NSR, past production of over 15 million ounces of silver and a 200 tonne per day mill on site, where mining recommenced in September 2005, and production recommenced during November 2005. B. Exploration Properties * Virimoa Project, Mexico: Option to acquire 100% of the 148-hectare Virimoa Gold Property near the Topia Silver Mine. * San Antonio Gold Project, Mexico: Option to acquire 100%, over 10,000 hectares, high grade veins and lower grade zone with bulk tonnage potential. * Km 66 Project: Signed Letter of Intent for an option to acquire a 100% interest in the Km 66 Project in eastern Durango State, Mexico, consisting of 17 concessions comprising 3,508 hectares and which hosts significant silver-lead-zinc-gold mineralization with excellent potential for a large bulk tonnage deposit. C. Debt: * Other than a Cdn. $2,020,000 convertible debenture which matures in 2010, the Company has no debt, no lines of credit, does not hedge its production at this time, and its minimal payables are current or better. D. Cash on Hand is in excess of $14 million. E. Market * There is currently a world-wide bull market for the Company's main products of silver and gold, as well as its copper, lead and zinc by-products. A full-text copy of the Company's latest annual report is available for free at http://ResearchArchives.com/t/s?d96 Great Panther Resources Limited, through its acquisition of the Topia and Guanajuato Mines in Mexico, has transformed itself from a company that was exclusively focused on mineral exploration to a company involved in the mining of precious and base metals. GREENMAN TECH: Laurus Extends $16 Million Credit Facility --------------------------------------------------------- GreenMan Technologies, Inc. and its subsidiaries GreenMan Technologies of Iowa, Inc. and GreenMan Technologies of Minnesota, Inc. entered into a $16 million credit facility with Laurus Master Fund, Ltd., on June 30, 2006. The credit facility consists of a $5 million non-convertible secured revolving note and an $11 million secured non-convertible term note. The credit facility will not convertible into shares of GreenMan's capital stock. The Revolving Note has a term of three years with an interest rate on any outstanding amounts at the prime rate published in The Wall Street Journal plus 2.00%, minimum of 8%. The Term Loan has a maturity date of June 30, 2009 and bears interest at the prime rate published in The Wall Street Journal plus 2.00% with a minimum rate of 8%. Interest on the loan is payable monthly commencing August 1, 2006. Principal will be amortized over the term of the loan, commencing on July 2, 2007. The Minimum monthly principal payments will be: Period Minimum Payment ------ --------------- Jul 2, 2007 through June 2008 $150,000 July 2008 through June 2009 $400,000 The balance of the principal shall be payable on the maturity date. GreenMan and Laurus Fund also agreed to an excess cash flow repayment of up to a maximum of 25% of the Debtors' net operating cash at the end of each fiscal year ended Sept. 30. The Debtor also issued to Laurus Funds a warrant to purchase up to 3,586,429 aggregate shares of its common stock at $0.01 per share exercise price. Laurus Funds agreed that it will not be permitted to sell any Common Stock, acquired upon exercise of the warrant, in excess of 10% of the aggregate numbers of shares of the common stock traded on such trading day. The Debtor limits the amount of common stock that Laurus Funds may hold at no more than 4.99% of its outstanding capital stock. The Debtor's obligations under the Credit Facility are secured by a first priority security interest in all assets of the Companies, including pledges of the capital stock of GreenMan Technologies of Minnesota, Inc. and GreenMan Technologies of Iowa, Inc. Headquartered in Lynnfield, Massachusetts, GreenMan Technologies, Inc., markets scrap granular tires in the United States. The company's products are used as a tire-derived fuel used by pulp and paper producers. Going Concern Doubt As reported in the Troubled Company Reporter on June 6, 2006, Wolf & Company, PC, in Boston, Massachusetts, raised substantial doubt about GreenMan Technologies Inc.'s ability to continue as a going concern after auditing the Company's consolidated financial statements for the year ended Sept. 30, 2005. The auditor pointed to the Company's losses from operations and working capital deficiency of $8,667,886 at September 30, 2005. GSR DEVELOPMENT: Case Summary & 20 Largest Unsecured Creditors -------------------------------------------------------------- Debtor: GSR Development, LLC 5708 Manatee Avenue West Bradenton, Florida 34209 Bankruptcy Case No.: 06-03489 Type of Business: The Debtor is a real estate developer. See http://www.gsrdevelopment.com/ Chapter 11 Petition Date: July 13, 2006 Court: Middle District of Florida (Tampa) Debtor's Counsel: Richard C. Prosser, Esq. Stichter, Riedel, Blain & Prosser P.A. 110 East Madison Street, Suite 200 Tampa, Florida 33602 Tel: (813) 229-0144 Fax: (813) 229-1811 Estimated Assets: $10 Million to $50 Million Estimated Debts: $10 Million to $50 Million Debtor's 20 Largest Unsecured Creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ Kent Davis $600,000 519 58th Street Holmes Beach, FL Patricia Hart $535,500 315 North Causeway, A301 New Smyrna Beach, FL 32169 Melvin and Carol Yudofsky $441,667 516 Key Royale Drive Bradenton Beach, FL 34217 Fred & Phyllis Fechner $250,000 4707 4th Avenue Drive East Bradenton, FL 34208 Manatee County Tax 2005 Real Estate $198,768 Collector Taxes P.O. Box 25300 Bradenton, FL 34206 Dale George $119,900 ASD, Inc. $111,668 Bruce Perez $98,555 Delta Engineering and $84,000 Inspection, Inc. Banks Engineering, Inc. $74,621 Carlton Fields $66,658 Sherry Gray $62,618 Merritt Fineout $46,686 M.T. & Dorothy Owens $45,967 Karen Day $45,000 Deborah & Patrick Dorsey $38,000 Amerson Landscape, Inc. $31,200 Cynthia Graeff $27,500 Christian Huth $25,364 Gold Bank Visa $23,407 HEXION SPECIALTY: Exchanging $150MM of Notes for Registered Bonds ----------------------------------------------------------------- Hexion Specialty Chemicals Inc. is offering to exchange up to $150,000,000 aggregate principal amount of its registered Second- Priority Senior Secured Floating Rate Notes Due 2010, issued on May 20, 2005, for new notes with the same terms but are freely tradable. The Company has not yet set a date for the expiration of the offer. The terms of the exchange notes are identical to the terms of the old notes in all material respects, except for the elimination of some transfer restrictions, registration rights and additional interest provisions relating to the old notes. The Company agreed to file a registration statement relating to an offer to exchange the old notes for exchange notes under a registration rights agreement with the initial purchasers of the old notes. The Company was also required to consummate the exchange offer on or before March 16, 2006. Because the exchange offer was not consummated on March 16, the Company incurred additional interest expense in the aggregate amount of approximately $350,000. Hexion will not receive any cash proceeds from the issuance of the exchange notes. Net proceeds of the offering of the old notes amounted to $141 million. The proceeds from the old notes were used to repay amounts outstanding under the Company's bridge loan facility. A full-text copy of the Registration Statement is available for free at http://researcharchives.com/t/s?da3 About Hexion Specialty Based in Columbus, Ohio, Hexion Specialty Chemicals Inc. -- http://hexionchem.com/-- makes thermosetting resins (or thermosets). Thermosets add a desired quality (heat resistance, gloss, adhesion) to a number of different paints and adhesives. Hexion also makes formaldehyde and other forest product resins, epoxy resins, and raw materials for coatings and inks. The Company has 86 manufacturing and distribution facilities in 18 countries. * * * As reported in the Troubled Company Reporter on May 4, 2006, Standard & Poor's Ratings Services assigned its 'B+' rating and its recovery rating of '3' to Hexion Specialty's $1.675 billion senior secured term loan and synthetic letter of credit facilities. The rating on the existing $225 million revolving credit facility was lowered to 'B+' with a recovery rating of '3', from 'BB-' with a recovery rating of '1', to reflect the similar security package as the new term loan and synthetic letter of credit facility. The ratings on the existing senior second secured notes were raised to 'B', with a recovery rating of '3', from 'B-' with a recovery rating of '5'. The ratings on the senior second secured notes reflect the amount of priority claims of the revolving facility and the first-lien term loan lenders. At the same time, Standard & Poor's affirmed its 'B+' corporate credit rating on Hexion and revised the outlook to stable from negative. HVHC INC: S&P Rates Proposed $155 Mil. Senior Debt Facility at BB ----------------------------------------------------------------- Standard & Poor's Ratings Services assigned its 'BB' counterparty credit rating to HVHC Inc. The outlook is stable. At the same time, Standard & Poor's assigned its 'BB' bank loan rating and '3' recovery rating to HVHC's proposed $155.0 million senior secured credit facility due in 2013 and $25 million revolving credit facility due in 2011. The '3' recovery rating indicates the expectation for a meaningful (50%-80%) recovery of principal in the event of a payment default. The bank loan ratings are based on preliminary documentation. "The counterparty credit rating on HVHC Inc. reflects that HVHC operates in an increasingly competitive and promotional optical retail industry, maintains average balance sheet quality (moderately high debt leverage and high level of goodwill and intangibles), and is exposed to integration risks associated with its proposed Eye Care Centers of America Inc. (B/Positive/--) acquisition," explained Standard & Poor's credit analyst James Sung. Offsetting these negatives are its adequate competitive position, favorable industry fundamentals and demographic trends, and good earnings profile. HVHC, a wholly owned subsidiary of Highmark Inc. (A/Stable/--), is a for-profit holding company that provides vision services and sells related merchandise through its wholly owned subsidiaries, primarily Davis Vision Inc. and Viva Optique Inc. Standard & Poor's considers HVHC's group status within the Highmark Inc. organization to not be strategically important; however, given Highmark's ability to contribute capital to HVHC, and the enhanced competitive position of combined Highmark and HVHC/ECCA operations, HVHC receives one rating notch of support because of its group status. Highmark's capital support of HVHC, however, is limited, as Pennsylvania insurance regulations limit its investment in noninsurance subsidiaries, such as HVHC, to 10% of total admitted statutory assets as of the prior year end. As of year-end 2005, Highmark had net admitted statutory assets of $4.7 billion. HVHC will use the proceeds from the senior secured credit facilities primarily to finance its proposed acquisition of ECCA. HVHC entered into a merger agreement with ECCA in May 2006. The merger transaction has been approved by the board of directors of both companies and is expected to close in the third quarter of 2006. Although ECCA will become a subsidiary of HVHC following the completion of the acquisition, each subsidiary will have its own financing with no cross guarantees, and with restrictions on dividends. Both HVHC and ECCA debt are also nonrecourse to the parent company Highmark. HVHC will be acquiring ECCA for $305.0 million plus the assumption of debt in a transaction valued at $622.6 million. HVHC is financing the transaction via: * $225.0 million in cash contributed by Highmark Inc., * $9.5 million in HVHC cash, and * the $180 million in new senior secured facilities ($155 million, seven-year term loan B; undrawn $25 million, five- year revolver). This financing will also be used to retire $75 million in an existing HVHC credit facility. ECCA's capital structure will remain the same. The selling parties are Moulin Holdings, Golden Gate Capital, and members of ECCA management. HVHC is expected to grow revenues by about 13%-14% in 2006, excluding ECCA results, or by 54% in 2006, including ECCA results. Vision managed care membership growth is expected to benefit from Davis Vision's recent letter of intent to agree to offer vision benefits to members of a large Blue Cross Blue Shield Plan. In addition, Davis Vision is expected to enter into a contract with the Blue Cross Blue Shield Assoc. to function as the exclusive vendor on behalf of the BCBSA and the Blue Cross Blue Shield Plans for the new Federal Employee Program vision benefits contract. The contract is subject to negotiation and completion of a definitive agreement. The total estimated members associated with the awarding of both contracts is about 1.3 million for 2007. On a consolidated basis, HVHC is expected to generate EBITDA of $83 million in 2006 and $140 million in 2007, with EBITDA margins of about 12% and 14%, respectively. Debt/EBITDA, including ECCA, is expected to increase to 5.4x in 2006, but improve to 2.8x in 2007. EBITDA interest coverage, including ECCA, is expected to be about 3.3x-3.4x for 2006 and 2007. Standard & Poor's will conduct surveillance on HVHC's financials, inclusive and exclusive of ECCA. Significant improvement in debt leverage and coverage ratios, and the realization of vertical integration synergies associated with a successful integration of HVHC and ECCA operations, would likely have positive outlook implications for both HVHC and ECCA's credit ratings. INCO LTD: Expects to Receive CA$353MM from Common Shares Issue -------------------------------------------------------------- Inco Limited filed a registration statement on Form F-10 with the Securities and Exchange Commission registering the distribution of up to 5,872,324 Common Shares of the Company issuable upon the exercise of Inco Common Share purchase warrants. Each warrant entitles the holder to purchase one Common Share of the Company at an exercise price of CA$30, or a U.S. dollar equivalent, until 5:00 p.m., Toronto time, on Aug. 21, 2006. The issue of the Underlying Common Shares will result in cash proceeds to the Company equal to the amount of the Exercise Price for each Underlying Common Share issued. Assuming no adjustment is made to the Exercise Price and all of the Warrants are exercised prior to their August 21, 2006 expiry date, the total proceeds to the Company would be CA$353,197,350, or $316,500,145 based on the June 29, 2006 Bank of Canada noon exchange rate of CA$1 = $0.8961. The proceeds of the distribution will be used for general corporate purposes, including ongoing expenditures for the Company's development projects. A full-text copy of the registration statement is available for free at http://researcharchives.com/t/s?da6 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. INDIANTOWN COGEN: S&P Holds BB+ Rating on $630 Million Bonds ------------------------------------------------------------ Standard & Poor's Ratings Services affirmed its 'BB+' rating on Indiantown Cogeneration Funding Corp.'s (Indiantown Cogen) $505 million first mortgage bonds due 2020 ($375.4 million outstanding) and $125 million tax-exempt bonds due 2025, and revised the outlook to negative from stable. Indiantown Cogen is a 330 MW pulverized-coal-fired cogeneration facility in Martin County, Florida, that has a purchase-power agreement with Florida Power & Light Co. for the entire electric capacity and energy output of the project. "The outlook revision reflects our increasing concerns over the project's continuing mismatch between its energy payments received from FP&L and its actual coal costs, which leads to low debt service coverage ratios," said Standard & Poor's credit analyst Elif Acar. The dispute over how to resolve the mismatch is in litigation with FP&L, and prospects for a timely resolution are uncertain. The DSCRs are not expected to show significant improvement in 2006. Margins are at further risk due to the price reopening mechanism in the project's coal supply agreement in December 2007. The mechanism exposes the project to market coal price negotiations with no guarantee of a matching increase in its energy payment index. Also, prices under current agreements are below current market. The rating on Indiantown Cogen further reflects these risks: * Out-of-market PPA with FP&L; * Capacity payments at $276 per kilowatt-year are high in relation to current market prices, providing FP&L with incentive to frustrate the contract; * Higher fuel and fuel-related expenses compared with levels before 2001; and * Higher-than-originally-projected operating and maintenance costs. Indiantown Cogen's O&M costs have increased since initial projections, partly due to higher expenses for parts and labor, contributing to lower-than-originally-projected DSCRs. These factors support the credit rating: * The dispatch factor has increased steadily and has been above 85% for the past few years, partially due to growth in the Florida service territory for the past four years. Therefore, FP&L's all-in costs have decreased to a range of 7.5 cents to 8.2 cents per kilowatt-hour. * There is a cost sharing mechanism in the PPA, whereby the excess of actual energy costs over energy payments are shared 60/40 with FP&L (40% being FP&L's share) up to 10% of the total energy payment amount. * In the event the actual energy cost and the total of the monthly energy payments for an agreement year differ by more than 4%, then the PPA provides that FP&L and Indiantown Cogen will annually adjust the unit energy payment cost to better reflect actual energy cost. However, FP&L and Indiantown Cogen are in dispute over how to apply this mechanism. It has been demonstrated that timely resolution of this matter is difficult for Indiantown because the PPA is silent as to what happens if the two parties cannot agree. The low coverage ratios; continuing mismatch between energy revenues and fuel costs; and uncertainty regarding fuel costs after 2007 have led to a negative outlook. If the project is not able to resolve the energy revenue/coal cost mismatch adjustment issue with FP&L in a timely manner, margins will be at risk, especially after the fixed-coal-price period is over, and ratings may be lowered. The outlook would be revised to stable if an agreement is reached that provides for stable margins for the foreseeable future. INEX PHARMACEUTICALS: Revises Tekmira Pharma Spin Out Plans ----------------------------------------------------------- Inex Pharmaceuticals Corporation will revise its Plan of Arrangement for spinning out Tekmira Pharmaceuticals Corporation in order to further increase the value of the spinout for INEX shareholders and to fulfill a commitment made under a debt purchase and settlement agreement with the previous holders of certain convertible promissory notes. Timothy M. Ruane, President and Chief Executive Officer of INEX, said INEX common shareholders would own 100% of Tekmira under the new reorganization and Tekmira would own 100% of INEX's technology, cash, products and partnership alliances. "Our shareholders will benefit from owning 100% of Tekmira and will still have an equity position in INEX," Ruane said. "Tekmira will be debt free and have a diversified product portfolio including the significant partnerships with Hana Biosciences, Inc. and Alnylam Pharmaceuticals, Inc. We believe this provides much greater value to our shareholders than our previous Tekmira spin- out plans." Under the previous plan of arrangement that was approved 98.3% by a shareholder vote January 26, 2006, INEX's Targeted Immunotherapy technology platform and associated products and some cash were to be transferred to Tekmira and 69% of Tekmira shares were to be distributed to INEX common shareholders. Highlights of the revised Plan of Arrangement: - All of the pharmaceutical assets from INEX's two technology platforms, Targeted Chemotherapy and Targeted Immunotherapy, would be transferred to Tekmira; - All of INEX's cash would be transferred to Tekmira; - INEX's pharmaceutical partnerships with Hana Biosciences, Inc. and Alnylam Pharmaceuticals, Inc. would be transferred to Tekmira; - 100% of Tekmira shares would be distributed to INEX common shareholders; and - INEX's current management team and employees will join Tekmira and assume the same positions they occupy in INEX. Completion of this revised plan would allow INEX, having no pharmaceutical assets, to complete a financing with an investor group led by Sheldon Reid, a co-founder of Energy Capitol Resources Ltd. The Investor Group will invest up to $5.6 million in INEX by way of convertible debentures. Upon conversion of the debenture following the completion of the reorganization, the Investor Group will hold 100% of non-voting shares in INEX and 80% of the total number of shares outstanding. Therefore, current INEX common shareholders will own 20% of the equity of INEX after the spin-out of Tekmira. The Investor Group plans to raise additional capital and acquire a new business for INEX. The money received by INEX as part of the corporate reorganization will be paid to the previous holders of INEX's convertible debt as per the note purchase and settlement agreement announced June 20, 2006. The conditions to closing the reorganization and the spin-out of Tekmira include the completion of due diligence by the Investor Group, the transfer of all assets and liabilities to Tekmira, and approvals from shareholders, the Toronto Stock Exchange and the Supreme Court of British Columbia. INEX anticipates mailing an information circular to shareholders in August 2006 and intends to complete a shareholder meeting in September 2006. About Inex Based in Vancouver, Canada, Inex Pharmaceuticals Corporation (TSX: IEX) -- http://www.inexpharma.com/-- is a biopharmaceutical company developing and commercializing proprietary drugs and drug delivery systems to improve the treatment of cancer. At Dec. 31, 2005, the Company's balance sheet showed a CDN$21.4 million total shareholders' deficiency, compared to CDN$12.6 deficiency at Dec. 31, 2004. INTEGRATED HEALTH: Will Pay $6.9MM Quarterly Fees to U.S. Trustee ----------------------------------------------------------------- Pursuant to an agreed order presented by the U.S. Trustee and IHS Liquidating LLC, the U.S. Bankruptcy Court for the District of Delaware orders that: (1) the U.S. Trustee's request, with respect to IHS Liquidating and Integrated Health Services, Inc., is withdrawn with prejudice; and (2) IHS Liquidating to pay $6,900,000 of accrued Quarterly Fees to the U.S. Trustee. As reported in the Troubled Company Reporter on Nov 10, 2005, Kelly Beaudin Stapleton, the U.S. Trustee for Region 3, asked the U.S. Bankruptcy Court for the District of Delaware to: (a) compel the Debtors to properly report disbursements in accordance with Section 1930(a)(6) and prevailing and controlling case law; (b) direct the Debtors to provide the internal expense allocation information they promised to maintain, and which they are required to provide to the U.S. Trustee, so that the U.S. Trustee can determine the actual expenses paid on each Debtor's behalf by IHS; and (c) direct the Debtors to pay additional quarterly fees consistent with the Debtors' actual disbursements and Section 1930(a)(6). Pursuant to Section 1930(a)(6) of the Judiciary Procedures Code, each of Integrated Health Services, Inc., and its debtor- affiliates are required to pay the United States Trustee a quarterly fee for each quarter for the duration of their Chapter 11 cases. The quarterly fees are calculated upon "disbursements," and range from a minimum of $250, when disbursements total less than $15,000, to a maximum of $10,000, when disbursements total $5,000,000 or more. Ms. Stapleton explained that "disbursements" for purposes of calculating the IHS Debtors' quarterly fees include, among other things, all payments of the expenses of operating the IHS Debtors' businesses. Integrated Health Services, Inc. -- http://www.ihs-inc.com/-- operated local and regional networks that provide post-acute care from 1,500 locations in 47 states. The Company and its 437 debtor-affiliates filed for chapter 11 protection on February 2, 2000 (Bankr. Del. Case No. 00-00389). Rotech Medical Corporation and its direct and indirect debtor-subsidiaries broke away from IHS and emerged under their own plan of reorganization on March 26, 2002. Abe Briarwood Corp. bought substantially all of IHS' assets in 2003. The Court confirmed IHS' Chapter 11 Plan on May 12, 2003, and that plan took effect September 9, 2003. Michael J. Crames, Esq., Arthur Steinberg, Esq., and Mark D. Rosenberg, Esq., at Kaye, Scholer, Fierman, Hays & Handler, LLP, represent the IHS Debtors. On September 30, 1999, the Debtors listed $3,595,614,000 in consolidated assets and $4,123,876,000 in consolidated debts. (Integrated Health Bankruptcy News, Issue No. 106; Bankruptcy Creditors' Service, Inc., 215/945-7000) IPAYMENT INC: $75 Million Issuance Prompts S&P's Negative Watch --------------------------------------------------------------- Standard & Poor's Ratings Services revised its outlook on Nashville, Tennessee-based iPayment, Inc. to negative from stable, following the issuance of a $75 million fixed return instrument at iPayment Investors, LP, a holding company two levels up from the borrower. The corporate credit rating is affirmed at 'B' and all other ratings are affirmed. The proceeds from the offering will be used to fund a special dividend to the equity owners of iPayment Investors. iPayment is a processor of credit-card transactions for small businesses. The company's present portfolio consists of about 140,000 merchants, generating about $25 billion of sales volume and revenue to iPayment of $702 million. "The ratings reflect the company's narrow product portfolio, short operating history at its current level, significant reliance on outsourcing for key functions, and high leverage," said Standard & Poor's credit analyst Lucy Patricola. These factors partly are offset by its niche market position in the very large and competitive credit card processing industry and expected moderate cash flow. iPayment is a very small participant in its industry, representing approximately 2% of existing merchant locations and processing 1% of volume. The company has grown rapidly through acquisition to its current portfolio of 140,000 merchants, nearly doubling in volume processed every year for the last three years. The company experiences about a 15% annual attrition rate -- measured by volume -- because of business failure, merchant displacement from a competitor, or termination, requiring constant replenishment of the base. While new account activations are substantial industry- wide, iPayment needs to secure a larger percentage of these new accounts, compared with one year ago, in order to maintain its current position. Additionally, the quality of the new accounts must be maintained in order to sustain the company's low merchant- loss history. JACKSON COUNTY: S&P Says $19.736 Million Bonds Has Stable Outlook ----------------------------------------------------------------- Standard & Poor's Ratings Services revised its rating outlook to stable from positive on Jackson County Memorial Hospital Authority, Oklahoma's $19.735 million series 1994 bonds, issued for Jackson County Memorial Hospital. In addition, Standard & Poor's affirmed its 'BB' rating on Jackson's series 1994 bonds. The revised outlook is based on volume declines and weaker financial results. S&P says that For purposes of this analysis, JCMH Health Care Corp.'s financial information, balance sheet and operations, has been included, as JCMH Health Care Corp.'s and JCMH's operations are intertwined and the hospital has access to JCMH Health Care Corp.'s unrestricted funds. "JCMH saw incremental improvements in both financial performance and balance sheet growth in fiscal 2005," Standard & Poor's credit analyst Kevin Holloran said. "However, volume declines in fiscal 2005, which have continued into fiscal 2006, and weaker financial results for the first nine months of fiscal 2006 are, on balance, more stable than positive, and resulted in the return to a stable outlook at the existing 'BB' rating level." "We expect JCMH to show more modest operating and excess margins in fiscal 2006 due to discernible volume reductions and the expectation of additional capital spending for construction of a cancer center on the Jackson campus," he added. Factors supporting the long-term rating include strengthened operational liquidity, improved operating and excess income levels in fiscal 2005, and dominant market position, capturing more than 70% of the market, despite recent declines in patient activity. JCMH is a 101-staffed-bed hospital, serving Jackson County (the primary service area, with a population of about 27,000), as well as four surrounding counties. JP MORGAN: Fitch Holds Low-B Ratings on $63.3 Million Class Certs. ------------------------------------------------------------------ Fitch Ratings affirms these JP Morgan Chase commercial mortgage pass-through certificates, series 2005-LDP2: -- $85.3 million class A-1 at 'AAA'; -- $552.5 million class A-1A at 'AAA'; -- $257.1 million class A-2 at 'AAA'; -- $367.4 million class A-3 at 'AAA'; -- $122.7 million class A-3A at 'AAA'; -- $561.3 million class A-4 at 'AAA' -- $123.4 million class A-SB at 'AAA'; -- $247.9 million class A-M at 'AAA'; -- $216 million class A-MFL at 'AAA'; -- $8.5 million class A-J at 'AAA'; -- Interest-only class X-1 at 'AAA'; -- Interest-only class X-2 at 'AAA'; -- $18.6 million class B at 'AA+'; -- $41 million class C at 'AA'; -- $26.1 million class D at 'AA-'; -- $26.1 million class E at 'A+'; -- $29.8 million class F at 'A'; -- $26.1 million class G at 'A-'; -- $44.7 million class H at 'BBB+'; -- $29.8 million class J at 'BBB'; -- $37.2 million class K at 'BBB-'; -- $11.2 million class L at 'BB+'; -- $14.9 million class M at 'BB'; -- $11.2 million class N at 'BB-'; -- $7.4 million class O at 'B+'; -- $7.4 million class P at 'B'; -- $11.2 million class Q at 'B-'. Fitch does not rate the $37.2 million class NR. The affirmations reflect stable performance and minimal paydown since issuance. As of the June 2006 reporting period, the transaction has paid down 0.5% to $2.96 billion from $2.98 billion. Currently there are three specially serviced loans (1.2%). The largest specially serviced loan (0.7%) is secured by an office property in Farmington Hills, MI and is current. The loan transferred to special servicing in May 2006 due to imminent default. The property's single tenant declared bankruptcy and subsequently vacated the property after rejecting its lease. The special servicer is assessing its options with regard to workout strategies. Fitch projects losses upon liquidation, which will be absorbed by the NR class. The second largest specially serviced loan (0.4%) is collateralized by a multifamily property in Indianapolis, Indiana and is current. The loan transferred to special servicing in April 2006 due to non-monetary default. The partners of the borrowing entity are in dispute, which is interfering with property management. The special servicer is attempting to mediate and resolve the conflict between the partners. Fitch is closely monitoring the performance of the third largest loan (3%), which is secured by a regional mall in New Orleans, Louisiana. The property suffered damage due to Hurricane Katrina and post-Katrina civil disturbances. The borrower anticipates that repairs to the property should be completed by November 2006. Many of the in-line stores have already re-opened. The borrower has received insurance reimbursements for property damage and business interruption, which are being held in escrow by the servicer. The fourth largest loan (3%) is an office property in Bronx, New York, which is still in the process of stabilization. Due to the property still being in lease-up phase at origination, the borrower posted a $23 million earn-out reserve and a $5.5 million free rent tenant improvement/leasing commissions (TI/LC) reserve at securitization. The TI/LC reserve has been gradually drawn down, and the earn-out reserve is scheduled to be released when the property passes certain minimum performance criteria. Year-end 2005 occupancy has increased to 84% from 59% at origination. There is one investment-grade credit-assessed loan in the pool, the Russ Building (2%). It is secured by a 509,368-square foot office building located in the Financial District submarket of San Francisco, California. The Fitch YE 2005 stressed debt service coverage ratio increased to 1.30 times (x) from 1.27x at issuance. YE 2005 occupancy remained unchanged from issuance at 87%. The Fitch stressed DSCR for the loan is calculated based on a Fitch adjusted net cash flow and a stressed debt service based on the current loan balance and a hypothetical mortgage constant. KAISER ALUMINUM: Inks New Employment Pacts with CEO and CFO ----------------------------------------------------------- Kaiser Aluminum Corp, on July 6, 2006, entered into new Employment Agreements with Jack A. Hockema, its President, Chief Executive Officer and also a member of its Board of Directors, and Joseph P. Bellino, its Executive Vice President and Chief Financial Officer. Employment Agreement with Jack A. Hockema The Company and Jack A. Hockema, on July 6, 2006, entered into an employment agreement, pursuant to which Mr. Hockema will continue his duties as President and Chief Executive Officer of the Company and certain its subsidiaries. The Company will pay Mr. Hockema an initial base salary of $730,000 and an annual short-term incentive target equal to 68.5% of his base salary. The CEO will also receive an initial long- term incentive grant of 185,000 restricted shares of Common Stock on July 6, 2006 and starting in 2007, annual equity awards with an economic value of 165% of his base salary. The grants will provide for full vesting at retirement. Mr. Hockema is also entitled to severance and change-in-control benefits. The initial term of the CEO's Employment Agreement is 5 years and will be automatically renewed and extended for one-year periods. Mr. Hockema will also participate in the various retirement and benefit plans for salaried employees. Employment Agreement with Joseph P. Bellino The Company and Joseph P. Bellino, on July 6, 2006, entered into an employment agreement, pursuant to which Mr. Bellino will continue his duties as Executive Vice President and Chief Financial Officer of the Company and certain of its subsidiaries. The Company will pay Mr. Bellino an initial base salary of $350,000 and have an annual short-term incentive target equal to 50% of his base salary. For 2006, Mr. Bellino's short-term incentive award will not be prorated. The employment agreement also provides the CFO an initial long-term incentive grant of 15,000 restricted shares of Common Stock on July 6, 2006 and starting in 2007, annual equity awards with an economic value of $450,000. Mr. Bellino will also be entitled to severance and change-in-control benefits. The initial term of the Bellino Employment Agreement is through May 15, 2009 and will be automatically renewed and extended for one-year periods. Mr. Bellino will also participate in the various retirement and benefit plans for salaried employees and be reimbursed for the cost of relocation and certain temporary living expenses. Indemnification Agreements The Company, as contemplated by its reorganization plan, entered into indemnification agreements with each of its directors and executive officers on July 6, 2006. The provisions obligate the Company to: (a) indemnify, defend and hold harmless the director or officer to the fullest extent permitted or required by Delaware law, except that, subject to certain exceptions, the director or officer will be indemnified with respect to a claim initiated by such director or officer against the Company or any other director or officer of the Company only if the Company has joined in or consented to the initiation of such claim; (b) advance prior to the final disposition of any indemnifiable claim any and all expenses relating to, arising out of or resulting from any indemnifiable claim paid or incurred by the director or officer or which the director or officer determines is reasonably likely to be paid or incurred by him or her; and (c) utilize commercially reasonable efforts to cause to be maintained in effect policies of directors' and officers' liability insurance providing coverage that is at least substantially comparable in scope and amount to that provided by the Company's policies of directors' and officers' liability insurance at the time the parties enter into such indemnification agreement. Headquartered in Foothill Ranch, California, Kaiser Aluminum Corporation -- http://www.kaiseraluminum.com/-- is a leading producer of fabricated aluminum products for aerospace and high- strength, general engineering, automotive, and custom industrial applications. The Company, along with its Jamaican subsidiaries -- Alpart Jamaica Inc. and Kaiser Jamaica Corporation -- filed for chapter 11 protection on Feb. 12, 2002 (Bankr. Del. Case No. 02-10429), and has sold off a number of its commodity businesses during course of its cases. Corinne Ball, Esq., at Jones Day, represents the Debtors in their restructuring efforts. Lazard Freres & Co. serves as the Debtors' financial advisor. Lisa G. Beckerman, Esq., H. Rey Stroube, III, Esq., and Henry J. Kaim, Esq., at Akin, Gump, Strauss, Hauer & Feld, LLP, and William P. Bowden, Esq., at Ashby & Geddes represent the Debtors' Official Committee of Unsecured Creditors. The Debtors' Chapter 11 Plan became effective on July 6, 2006. On June 30, 2004, the Debtors listed US$1.619 billion in assets and US$3.396 billion in debts. KAISER ALUMINUM: Five Trusts Created Following Bankruptcy Exit -------------------------------------------------------------- The joint Plan of Reorganization of Kaiser Aluminum Corporation, Kaiser Aluminum & Chemical Corporation and their affiliates, became effective on July 6, 2006 and was substantially consummated. The Company emerged from chapter 11 with the consummation of the Plan. On the Plan's effective date these trusts were created: (a) Asbestos PI Trust - to assume the liabilities of KACC and its affiliates for all asbestos personal injury claims and to process and pay such claims; (b) Silica PI trust - to assume the liabilities of KACC and its affiliates for all silica personal injury claims and to process and pay such claims; (c) CTPV PI Trust - to assume the liabilities of KACC and its affiliates for all coal tar patch volatiles personal injury claims and to process and pay such claims; (d) a trust to assume the liabilities of KACC and its affiliates for all noise-induced hearing loss personal injury claims and to process and pay such claims; and (e) Funding Vehicle Trust - to handle insurance coverage litigation and settlements and to provide funding to the PI Trusts. After creating the Trusts, the Company and its affiliates transferred the following assets to the Funding Vehicle Trust, the Asbestos PI Trust and the Silica PI Trust: (1) $13 million in cash less amounts advanced prior to the effective date and the Personal Injury insurance assets were transferred to the Funding Vehicle Trust. (2) 94% of the capital stock of a corporation that produces modest rental income, was transferred to the Asbestos PI Trust; and (3) the remaining 6% of the capital stock of such corporation was transferred to the Silica PI Trust. On the Effective Date, the Asbestos PI Trust received 70.5% and the Silica PI Trust received 4.5% of a prepetition claim of Kaiser Finance Corporation, a former subsidiary of KACC, which has been dissolved, against KACC in the amount of $1.106 billion. As of the Effective Date, injunctions had been entered prohibiting any person from pursuing any Channeled Personal Injury Claims against the Company or any of its affiliates. Pursuant to the Plan, the Company cancelled, without consideration, all common stock issued and outstanding immediately prior to the Effective Date and issued 20.0 million shares of Common Stock, on the Effective Date, for distribution to holders of claims against the Company and its debtor affiliates. After the Company gave effect to sale transactions effected prior to the Effective Date, a trust that provides benefits for eligible retirees of KACC received 8,809,900, or 44.0%, of the shares of Common Stock issued pursuant to the Plan. No other person or entity is expected to receive more than 5% of the shares of Common Stock issued pursuant to the Plan. Headquartered in Foothill Ranch, California, Kaiser Aluminum Corporation -- http://www.kaiseraluminum.com/-- is a leading producer of fabricated aluminum products for aerospace and high- strength, general engineering, automotive, and custom industrial applications. The Company filed for chapter 11 protection on Feb. 12, 2002 (Bankr. Del. Case No. 02-10429), and has sold off a number of its commodity businesses during course of its cases. Corinne Ball, Esq., at Jones Day, represents the Debtors in their restructuring efforts. Lazard Freres & Co. serves as the Debtors' financial advisor. Lisa G. Beckerman, Esq., H. Rey Stroube, III, Esq., and Henry J. Kaim, Esq., at Akin, Gump, Strauss, Hauer & Feld, LLP, and William P. Bowden, Esq., at Ashby & Geddes represent the Debtors' Official Committee of Unsecured Creditors. The Debtors' Chapter 11 Plan became effective on July 6, 2006. On June 30, 2004, the Debtors listed $1.619 billion in assets and $3.396 billion in debts. KB HOME: Moody's Affirms Ba2 Senior Subordinated Debt Rating ------------------------------------------------------------ Moody's Investors Service affirmed all of the ratings of KB Home, including its Corporate Family Rating of Ba1, senior debt rating of Ba1, and senior subordinated debt rating of Ba2. The rating outlook is revised to stable, from positive. The outlook revision reflects Moody's expectation that KB Home will not reduce debt leverage to investment grade levels in the near-to-intermediate future and that other concerns, principally share repurchases, remain a higher priority for the company at the current time. The rating affirmations incorporate the company's leading share position in many of the markets that it serves, successful track record both in de novo expansions and in integrating numerous acquisitions, and its long and successful history through various housing cycles. However, the ratings also consider the financial and integration risks that accompany an aggressive expansion strategy, the still-sizable concentration of land inventory values and profits in California, the growing proportion of profits coming out of one market-Las Vegas, and the historically large share repurchase program. The current housing slowdown, during which Moody's expects earnings-based metrics to weaken, calls into question management's commitment to attaining and maintaining an investment grade balance sheet. Management has responded effectively to the slowdown thus far. That is, the company is buying far less land than earlier projected, slowing down community openings, attempting to cut costs in numerous other ways, and should soon begin to generate appreciable free cash flow. It is the use of this free cash flow that presents the problem. Rather than delevering, KB Home is using the bulk of the free cash flow to repurchase shares. Four million have been repurchased thus far this fiscal year, with authorization of up to an additional six million shares still remaining. Moody's places a great deal of emphasis on balance sheet strength in the homebuilding industry, in large part for these reasons: 1) Homebuilders view themselves as growth companies, although still subject to cycles. Given their enormous working capital requirements, homebuilding companies constantly need expansion capital, which means big balance sheets. For every $1 of equity capital removed through share repurchases, however, homebuilders are in effect removing $2 of growth capital, given average debt levels of about 50%. 2) Simply put, an investment grade company, or one aspiring to become investment grade, cannot engage in actions that decapitalize its balance sheet. To do so means the company is deliberately rendering itself less able to endure a shock to its balance sheet, which an investment grade company must be able to withstand without unduly impairing its credit profile. 3) Moody's has been expecting a slowdown in the housing industry for some time and recognizes that performance metrics, i.e., earnings-based ratios such as margins, interest coverage, and returns, will inevitably deteriorate from their recent peaks. So long as they don't decline to levels far below what current ratings imply and don't stay at substandard levels for too long, Moody's is comfortable that most homebuilders' ratings will remain intact. It is the behavior-based metric, i.e., debt, that is most within management's control and most illustrative of the importance that management places on its current ratings or desired ratings. Engaging in sizable share repurchases at the expense of strengthening the balance sheet during a downturn would seem to indicate that management does not believe that current ratings, and most certainly not higher ratings, are important to their business model. Going forward, consideration for further improvement in KB Home's ratings will depend largely on management's capital structure discipline. Moody's would view positively a permanent reduction in reported debt to the 40% - 45% level and to adjusted debt to between 45% - 50%. Factors that could stress the ratings and outlook going forward include a sizable increase in the size and pace of share repurchases, a large impairment charge, and a major acquisition involving large amounts of issued or assumed debt that would cause reported debt leverage to exceed 55%. Founded in 1957 and headquartered in Los Angeles, California, KB Home is one of America's largest homebuilders, with domestic operating divisions in the following regions and states: West Coast -- California; Southwest -- Arizona, Nevada and New Mexico; Central -- Colorado, Illinois, Indiana and Texas; and Southeast -- Florida, Georgia, North Carolina and South Carolina. Kaufman & Broad S.A., the company's 49%-owned subsidiary, is one of the largest homebuilders in France. KB Home's fiscal 2005 revenues and net income were $9.4 billion and $842 million, respectively. KOCH V HANKINS: Case Summary & Largest Unsecured Creditor --------------------------------------------------------- Debtor: Koch v Hankins Judgment Creditor Trust c/o 1226 Tarapin Lane Lincoln, California 95648 Bankruptcy Case No.: 06-02112 Chapter 11 Petition Date: July 12, 2006 Court: District of Arizona (Phoenix) Debtor's Counsel: Randy Nussbaum, Esq. Jaburg & Wilk, P.C. 14500 North Northsight Boulevard, Suite 116 Scottsdale, Arizona 85260 Tel: (480) 609-0011 Fax: (480) 609-0016 Estimated Assets: $1 Million to $10 Million Estimated Debts: $1 Million to $10 Million Debtor's Largest Unsecured Creditor: Entity Nature of Claim Claim Amount ------ --------------- ------------ Edward J. Hankins et al Claim for attorneys' $3,000,000 c/o Gary Garfinkle, Esq. Fees in Alameda County 1205 Via Gabarda Superior Court Case Lafayette, CA 94549 Nos. 137685-6 and Tel: (925) 932-3737 140136-9 LAIDLAW INT'L: Tenders Offer for up to 15 Million Common Shares ---------------------------------------------------------------- Laidlaw International, Inc., disclosed on July 10, 2006, that it commenced a modified Dutch Auction tender offer for up to 15,000,000 shares of its common stock and will make open market stock repurchases after the tender, with proceeds from a new $500 million term debt facility. The tender offer gives shareholders the opportunity to tender some or all of their shares at a price not less than $25.50 per share or more than $28.50 per share. The tender offer will expire on August 7, 2006. "We set out to achieve a more balanced debt to equity ratio with our balance sheet," said Kevin Benson, President and Chief Executive Officer of Laidlaw International, Inc. "After a thorough review, we concluded that a leverage ratio of approximately 1.7x EBITDA is appropriate for Laidlaw and is consistent with our overall operating philosophies. The new debt will enable us to execute a sizable stock repurchase plan and return capital to our shareholders." The dealer managers for the offer are Morgan Stanley & Co. Inc. and UBS Securities LLC. Questions concerning the tender offer may be directed to Morgan Stanley & Co. Inc. at (866) 818-4954 and UBS Securities LLC at (212) 821-2100. D. F. King & Co., Inc. is the information agent for the tender offer and any questions concerning the tender offer or requests for copies of the Offer to Purchase, Letter of Transmittal and related documents should be directed to D. F. King & Co., Inc. by calling (212) 269-5550 or (800) 290-6427. Headquartered in Arlington, Texas, Laidlaw, Inc., now known as Laidlaw International, Inc. (NYSE:LI) -- http://www.laidlaw.com/- - is North America's #1 bus operator. Laidlaw's school buses transport more than 2 million students daily, and its Transit and Tour Services division provides daily city transportation through more than 200 contracts in the US and Canada. Laidlaw filed for chapter 11 protection on June 28, 2001 (Bankr. W.D.N.Y. Case No. 01-14099). Garry M. Graber, Esq., at Hodgson Russ LLP, represents the Debtors. Laidlaw International emerged from bankruptcy on June 23, 2003. * * * As reported in the Troubled Company Reporter on July 11, 2006, Moody's Investors Service affirms ratings of Laidlaw International Inc., -- Corporate Family at Ba2 -- following the company's announcement of a $500 million debt-financed share repurchase program. In a related action, Moody's assigned a Ba2 rating to a new senior secured term loan. The rating outlook is stable. LAND O'LAKES: Acquires 697,350 of Golden Oval's Class B Units ------------------------------------------------------------- Land O'Lakes, Inc., acquired 697,350 Class B Units of Golden Oval Eggs, LLC, in connection with the May 2006 sale of the liquid egg processing assets of the Egg Products Division of MoArk LLC to Golden Oval. MoArk, LLC, is a wholly owned subsidiary of Land O'Lakes. Land O'Lakes, Inc. acquired the Class B Units for investment purposes. The Class B Units constitute 100% of Golden Oval's Class B Units issued and outstanding as of June 30, 2006. The Certificate of Designation relating to the Class B Units provides that each Class B Unit is convertible at any time into one Class A Unit at the election of the holder. Therefore, as of June 30, 2006, Land O'Lakes is the beneficial owner of 12.9% of Golden Oval's Class A Units, based upon 4,702,677 Class A Units outstanding as of April 14, 2006. Part of the purchase price for MoArk assets sold to Golden Oval was paid in the form of a Subordinated Promissory Note dated June 30, 2006, in the original principal amount of $17,000,000. In connection with the asset sale transaction, Golden Oval also issued to Land O'Lakes a Class B Purchase Warrant for the purchase of Class B Units equal to 10% of all of Golden Oval's issued and outstanding units. The Warrant will only become exercisable in the event any amounts remain due and owing to the holder of the Subordinated Note as of July 1, 2009. The Warrant will expire on July 1, 2011 and has an exercise price of $0.01 per Class B Unit. If the Subordinate Note has been paid in full at any time prior to July 1, 2009, the Warrant will be void ab initio. Land O'Lakes, Inc. has sole voting and dispositive power with respect to the Class B Units. Headquartered in Arden Hills, Minnesota, Land O'Lakes, Inc. -- http://www.landolakesinc.com/-- is a national farmer-owned food and agricultural cooperative with annual sales of more than $7 billion. Land O'Lakes does business in all fifty states and more than fifty countries. It is a leading marketer of a full line of dairy-based consumer, foodservice and food ingredient products across the United States; serves its international customers with a variety of food and animal feed ingredients; and provides farmers and ranchers with an extensive line of agricultural supplies (feed, seed, crop nutrients and crop protection products) and services. * * * As reported in the Troubled Company Reporter on Nov. 21, 2005, Moody's Investors Service upgraded Land O'Lakes, Inc.'s long-term ratings (corporate family rating to B1 from B2) with a positive rating outlook and affirmed the cooperative's SGL-2 speculative grade liquidity rating. Ratings upgraded are: Land O'Lakes, Inc.: * $200 million senior secured revolving credit facility to Ba3 from B1 * $175 million 9.0% senior secured 2nd lien notes to B1 from B2 * $350 million 8.75% senior unsecured notes to B2 from B3 * Corporate family rating to B1 from B2 Land O'Lakes Capital Trust I: * $191 million 7.45% capital securities to B3 from Caa1 Ratings affirmed are: Land O'Lakes, Inc.: * Speculative grade liquidity rating at SGL-2. LEVI STRAUSS: May 28 Stockholders' Deficit Narrows to $1.1 Billion ------------------------------------------------------------------ Levi Strauss & Co. delivered its second quarter financial statements for the three months ended May 28, 2006, to the Securities and Exchange Commission on July 11, 2006. Net revenues for the second quarter were $953 million compared to $962 million for the same quarter in 2005, approximately a 1% decrease on a reported basis and flat on a constant-currency basis. Net revenue reflects lower European and U.S. Levi Strauss Signature(R) brand sales, largely offset by increased U.S. Dockers(R) and U.S. Levi's(R) sales and continuing growth in the Asia Pacific business. Net income for the second quarter increased 50% to $40 million compared to net income of $27 million in the same quarter of 2005. The improvement was primarily due to a $32 million discrete income tax benefit recognized during the second quarter of 2006, a $10 million decrease in loss on early extinguishments of debt during the 2006 period and lower interest expense, partially offset by lower operating income. "We made good progress during the quarter," Phil Marineau, chief executive officer said. "Revenues stabilized and our net income improved. Looking at the business regionally, I'm particularly pleased with the growth in our U.S. business. We continue to transform our European business, and I'm optimistic that the region's revenue trends will improve during the balance of the year. And the Asia Pacific business continued its strong revenue and profit performance." Second-Quarter 2006 Results -- Gross profit decreased 4% to $438 million compared to $455 million in the second quarter of 2005. Gross margin was 46.0% of revenues for the second quarter of 2006 compared to 47.4% of revenues in the same period last year. The reduced gross margin in the 2006 period was primarily due to Europe and the U.S. Levi's(R) and Dockers(R) brands as a result of changes in sales mix, increased investment in products and higher sales allowances to support customers' marketing efforts, partially offset by an improvement in the margin for the U.S. Levi Strauss Signature(R) brand; -- Selling, general and administrative expenses increased 3% or $9 million to $317 million in the second quarter of 2006 from $308 million in same period of 2005. Higher SG&A expenses in the 2006 period were primarily attributable to higher selling expense associated with new company-operated Levi's(R) Stores in Europe and the United States, the impact of reversing a litigation reserve in the second quarter of 2005, and additional long-term incentive compensation expense during the 2006 period. These increases were partially offset by lower advertising and promotion expenses and lower distribution costs; -- Operating income for the quarter decreased $30 million to $115 million compared to $145 million in the second quarter of 2005. The decrease was primarily driven by lower operating income in Europe due to lower net sales and higher SG&A, partially offset by increased operating income in the U.S. Levi Strauss Signature(R), Asia Pacific and Mexico/Canada businesses. -- Interest expense for the second quarter of 2006 decreased 7% to $62 million compared to $66 million in the prior year period. The decrease was primarily attributable to lower interest rates and lower average debt balances during the 2006 quarter; and -- Income tax for the quarter was a $17 million benefit compared to a $9 million expense in the 2005 period. The income tax benefit in the 2006 period is primarily attributable to the recognition of a $32 million discrete tax benefit arising from a change in subsidiary structure. The company expects the estimated annual effective income tax rate for Fiscal Year 2006 to be 42% compared to an actual annual rate of 45% in 2005. "I'm encouraged by our growth in North America and Asia and our progress in Europe," Hans Ploos van Amstel, chief financial officer, said. "We continue to deliver strong margins while investing in our business. This, together with our working capital improvement, continues to yield strong free cash flow, which remains our key focus." Deficit At May 28, 2006, the Company's balance sheet showed $2,824,919,000 in total assets and $3,946,639,000 in total liabilities, resulting in a $1,121,720,000 stockholders' deficit. The Company also had a $106,436,000 accumulated deficit at May 28, 2006. Full-text copies of the Company's second quarter financials for 2006 are available for free at http://ResearchArchives.com/t/s?d9f Levi Strauss & Co. is one of the world's leading branded apparel companies, with sales in more than 110 countries. Levi Strauss designs and markets jeans and jeans-related pants, casual and dress pants, tops, jackets and related accessories for men, women and children under its Levi's(R), Dockers(R) and Levi Strauss Signature(R) brands. Levi Strauss also licenses its trademarks in various countries throughout the world for accessories, pants, tops, footwear, home and other products. * * * As reported in the Troubled Company Reporter on March 10, 2006, Fitch affirmed the ratings on Levi Strauss & Co.'s Issuer Default Rating at 'B-'; $650 million asset-based loan at 'BB-/RR1'; and $1.8 billion unsecured notes at 'B/RR3'. Fitch also expects to rate Levi's new senior unsecured notes at 'B/RR3'. In addition, Fitch withdrew its 'BB-/RR1' ratings on Levi's $500 million senior secured term loan. The rating outlook is stable. As reported in the Troubled Company Reporter on March 10, 2006, Moody's Investors Service upgraded Levi Strauss & Co.'s corporate family rating to B2 from Caa1; senior secured debt rating to B1 from B3; and senior unsecured debt rating to B3 from Caa2. Moody's said the outlook is stable. As reported in the Troubled Company Reporter on March 10, 2006, Standard & Poor's Ratings Services assigned its 'B-' rating to Levi Strauss & Co.'s $470 million senior notes due 2016 and euro- denominated 8.625% senior notes due 2013. At the same time, S&P affirmed its ratings on the Company's long-term corporate credit rating at 'B-'. S&P said the outlook is stable. LEVITZ HOME: Court OKs PLVTZ's Assumption of Lease 20309 & 30603 ---------------------------------------------------------------- PLVTZ, LLC, and Pride Capital Group, dba Great American Group, as purchasers of substantially all of Levitz Home Furnishings, Inc., and its debtor-affiliates' assets, provided the Debtors with Lease Assumption Notices for 31 store leases, as reported in the Troubled Company Reporter on May 18, 2006. The Debtors sought authority from the U.S. Bankruptcy Court for the Southern District of New York to assume and assign these leases to PLVTZ and pay the cure amounts: Store# Address Landlord Cure Amount ------ ------- -------- ----------- 10204 New York, 125th Street Gateway $50,653 New York Ventures LLC 20106 Bridgewater, Jerome & Joan Leflien & $19,004 New Jersey Joseph & Joan Leflein 20309 Eatontown, Gage II Family Limited $19,528 New Jersey Partnership 30502 Irvine, Spectrum V Management $0 California (Klaff Realty, L.P. as paying agent), and SJRD - Spectrum V Partners 30203 Los Angeles, Walter N. Marks (Klaff $0 California Realty, L.P. as paying agent), and Helms Hall of Fame 20505 Yonkers, Acklinis Original $127,958 New York Building, L.L.C. 30205 Arroyo Grande, Waddell Family Trust $20,650 California 40203 San Carlos, Brittan Corners $99,230 California Shopping Center, LLC, 101 San Carlos Partners, c/o Davila Group, Inc. 40304 Pleasanton, Excel Realty Trust, and $55,977 California New Plan Excel Realty Trust, Inc. 40404 Rohnert Park, Commercial Realty $107,966 California Group, Inc. 40504 Phoenix, Red Mountain West $105,038 Arizona Properties, Inc., and RMRGJFL Portfolio, LLC, c/o Red Mountain West Properties, Inc. 10202 New York, Consolidated Edison of $0 New York New York, Inc. 10402 Mohegan Lake, Galileo Cortlandt LLC, $61,842 New York ERT Australian Management, LP. 10702 Jersey City, Inland Mid-Atlantic $0 New Jersey Management #150 Inland Southeast Jersey City, LLC, c/o Inland Mid-Atlantic Management Corp., 10801 Brick, Inland Mid-Atlantic $40,860 New Jersey Management #152 Inland Southeast Jersey City, LLC, c/o Inland Mid-Atlantic Management Corp., 20202 Garden City, Feinco, LLC, c/o Buy $128,100 New Jersey Buy Baby 20203 Nesconset, KIMCO Realty $0 New York Corporation, and PL Smithtown, LLC, c/o Kimco Realty Corp. 20506 Staten Island, MRP Family Holdings, $0 New York LLC 30103 Victorville, Carol H. Rodman, $15,486 California Trustee, and Hillary S. Gilson 30503 Corona, KIMCO Realty Corp. $107,840 California 30603 Silverdale, Silverdale Ridgetop, $9,753 Washington LLC, and SRW Properties, LLC 30604 Tacoma, Krausz Enterprises, $48,307 Washington Krausz FT One, LP, c/o The Krausz Companies 30605 Tukwila, Klaff Realty, L.P., $130,167 Washington Levitz Tukwila, LLC, c/o Klaff Realty LP 30702 Portland, Sears, Roebuck & $26,371 Oregon Company 40302 Fresno, Lowenberg Corporation $36,549 California 40305 Stockton, Krausz Enterprises, $40,190 California Krausz FT One, LP, c/o The Krausz Companies 40403 Pinole, Krausz Enterprises, $12,934 California Krausz FT One, LP, c/o The Krausz Companies 40501 Glendale, KIMCO Realty $0 Arizona Corporation, and PL Smithtown, LLC, c/o Kimco Realty Corp. 40503 North Phoenix, Louise Partners, c/o $50,322 Arizona Richard E. Caruso, Inc. 40601 Henderson, KIMCO Realty $59,624 Nevada Corporation, and PL Smithtown, LLC, c/o Kimco Realty Corp. 71201 Clackamas, Clackamas Commerce $16,925 Oregon Center The Court grants the Debtors' request with respect Store No. 20309 located in Eatontown, New Jersey, and Store No. 30603 located in Silverdale, Washington. Judge Lifland rules that with regards: (a) Store No. 20309, PLVTZ, LLC will: -- be liable for the $37,913 cure amount; -- pay or otherwise satisfy a mechanics' lien for $27,310, as well as all accrued interest and penalties of the lien against the Premises, and PLVTZ will later use its best efforts to release the Mechanics Lien; -- notify Gage II Family Limited Partnership if there should be any subcontractor, mechanic, materialman, vendor, provider, or contractor providing any services or any work, labor or services or materials in connection with the Premises; and -- provide Gage II with monthly gross sales reports in accordance with the terms of the Lease. Gage II waives any prior noncompliance by the Debtors or PLVTZ with any Lease provisions requiring monthly gross sales reports; and (b) Store No. 30603, PLVTZ will be liable for the $15,753 cure amount. PLVTZ will take responsibility and provide timely payment for all amounts due, if any, to Racanelli Construction Company, Inc., or its affiliates, agents or subcontractors, whether contracted for or performed pre- or post-assignment. Headquartered in Woodbury, New York, Levitz Home Furnishings, Inc. -- http://www.levitz.com/-- is a leading specialty retailer of furniture in the United States with 121 locations in major metropolitan areas principally the Northeast and on the West Coast of the United States. The Company and its 12 affiliates filed for chapter 11 protection on Oct. 11, 2005 (Bank. S.D.N.Y. Lead Case No. 05-45189). David G. Heiman, Esq., and Richard Engman, Esq., at Jones Day, represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they reported $245 million in assets and $456 million in debts. Jay R. Indyke, Esq., at Kronish Lieb Weiner & Hellman LLP represents the Official Committee of Unsecured Creditors. Levitz sold substantially all of its assets to Prentice Capital on Dec. 19, 2005. (Levitz Bankruptcy News, Issue No. 16; Bankruptcy Creditors' Service, Inc., 215/945-7000) LEVITZ HOME: Withdraws Request for Arroyo Grande Lease Rejection ---------------------------------------------------------------- Nicholas M. Miller, Esq., at Jones Day, in New York, notifies the U.S. Bankruptcy Court for the Southern District of New York that Levitz Home Furnishings, Inc., and its debtor-affiliates will reject the lease for Store No. 30205 located in Arroyo Grande, California, effective as of August 21, 2006. The Debtors will abandon their interest in any personal property located at the premises. Waddell Family Trust is the landlord for Store No. 30205. Headquartered in Woodbury, New York, Levitz Home Furnishings, Inc. -- http://www.levitz.com/-- is a leading specialty retailer of furniture in the United States with 121 locations in major metropolitan areas principally the Northeast and on the West Coast of the United States. The Company and its 12 affiliates filed for chapter 11 protection on Oct. 11, 2005 (Bank. S.D.N.Y. Lead Case No. 05-45189). David G. Heiman, Esq., and Richard Engman, Esq., at Jones Day, represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they reported $245 million in assets and $456 million in debts. Jay R. Indyke, Esq., at Kronish Lieb Weiner & Hellman LLP represents the Official Committee of Unsecured Creditors. Levitz sold substantially all of its assets to Prentice Capital on Dec. 19, 2005. (Levitz Bankruptcy News, Issue No. 16; Bankruptcy Creditors' Service, Inc., 215/945-7000) MAGMA CDO: Moody's Places Ba2 Rating for $14.5MM Notes on Watch --------------------------------------------------------------- Moody's Investors Service placed these notes issued by Magma CDO Ltd. on watch for possible downgrade: * $4,000,000 Class B-1 Subordinate Fixed Rate Notes Due 2012 Prior Rating: Baa2 Current Rating: Baa2 * $20,000,000 Class B-2 Subordinate Floating Rate Notes Due 2012 Prior Rating: Baa2 Current Rating: Baa2 * $14,500,000 Class C Second Subordinate Fixed Rate Notes Due 2012 Prior Rating: Ba2 Current Rating: Ba2 According to Moody's, the rating actions are the results of deterioration in the credit quality of the transaction's underlying collateral pool, as well as the occurrence of asset defaults and par loss. MERRILL LYNCH: Fitch Holds Low-B Ratings on $24.6 Mil. Securities ----------------------------------------------------------------- Fitch Ratings affirms these Merrill Lynch Mortgage Trust commercial mortgage securities 2004-MKB1: -- $34.9 million class A-1 at 'AAA'; -- $379.8 million class A-2 at 'AAA'; -- $65 million class A-3 at 'AAA'; -- $169.7 million class A-4 at 'AAA'; -- $155.8 million class A-1A at 'AAA'; -- Interest only (IO) class XC at 'AAA'; -- Interest only (IO) class XP at 'AAA'; -- $26.9 million class B at 'AA'; -- $11.0 million class C at 'AA-'; -- $25.7 million class D at 'A'; -- $11.0 million class E at 'A-'; -- $13.5 million class F at 'BBB+'; -- $12.2 million class G at 'BBB'; -- $11.0 million class H at 'BBB-'; -- $3.7 million class J at 'BB+'; -- $4.9 million class K at 'BB'; -- $4.9 million class L at 'BB-'; -- $4.9 million class M at 'B+'; -- $2.5 million class N at 'B'; -- $3.7 million class P at 'B-'. Fitch does not rate the $13.5 million class Q. The affirmations are the result of stable performance and minimal paydown since issuance. As of the June 2006 distribution date, the pool's aggregate principal balance has decreased 2.6% to $954.6 million from $979.9 million at issuance. There is currently one specially serviced loan (2.9%). The loan is secured by a 410-unit multifamily property in State College, Pennsylvania and is current. The loan transferred to special servicing in December 2005 due to imminent default. The loan is in the process of being assumed with the sale contingent upon the proposed buyer funding a nine month debt service reserve and 125% of the costs of immediate repair. The loan is expected to return to the master servicer following the assumption. Fitch maintains investment grade credit assessments on the Great Mall of the Bay Area (15.8%) and Galileo Pool #2 (5.7%). The Fitch stressed debt service coverage ratio (DSCR) is calculated based on a Fitch adjusted net cash flow and a stressed debt service based on the current loan balance and a hypothetical mortgage constant. The Great Mall of the Bay Area secured by a 1.3 million square foot (sf) retail mall located in Milpitas, California. The whole loan is divided into an A-note and B-note, of which the A-note was contributed to this transaction. The year-end 2005 Fitch stressed DSCR declined to 1.28 times (x) compared with 1.38x at issuance due to increased vacancy costs in 2005. However, mall occupancy has improved to 88.2% as of March 2006 compared with 81% at issuance. Galileo Pool #2 is comprised of 13 retail centers, located in eight states. Since issuance, one property has been released and replaced with the expansion of another property. The YE 2005 Fitch stressed DSCR is 1.88x. The weighted average YE 2005 occupancy is 96.8%. MORGAN STANLEY: S&P Puts Low-B Ratings on $24 Million Certificates ------------------------------------------------------------------ Standard & Poor's Ratings Services assigned its preliminary ratings to Morgan Stanley Capital I Trust 2006-TOP23's $1.6 billion commercial mortgage pass-through certificates series 2006-TOP23. The preliminary ratings are based on information as of July 12, 2006. Subsequent information may result in the assignment of final ratings that differ from the preliminary ratings. The preliminary ratings reflect the credit support provided by the subordinate classes of certificates, the liquidity provided by the trustee, the economics of the underlying loans, and the geographic and property type diversity of the loans. Class A-1, A-2, A-3, A- AB, A-4, A-M, and A-J are currently being offered publicly. Standard & Poor's analysis determined that, on a weighted average basis, the pool has a debt service coverage of 1.68x, a beginning LTV of 88.9%, and an ending LTV of 80.7%. A copy of Standard & Poor's complete presale report for this transaction can be found on RatingsDirect, Standard & Poor's Web- based credit analysis system, at http://www.ratingsdirect.com/ The presale can also be found on Standard & Poor's Web site at http://www.standardandpoors.com/Select Credit Ratings, and then find the article under Presale Credit Reports. Preliminary Ratings Assigned Morgan Stanley Capital I Trust 2006-TOP23 Preliminary Recommended credit Class Rating amount support(%) ----- ------ ----------- ------------------ A-1 AAA $94,221,000 27.000 A-2 AAA $151,830,000 27.000 A-3 AAA $43,600,000 27.000 A-AB AAA $76,320,000 27.000 A-4 AAA $812,132,000 27.000 A-M AAA $161,384,000 17.000 A-J AAA $112,969,000 10.000 B AA $32,276,000 8.000 C AA- $16,139,000 7.000 D A $26,225,000 5.375 E A- $14,121,000 4.500 F BBB+ $12,104,000 3.750 G BBB $14,121,000 2.875 H BBB- $10,086,000 2.250 J BB+ $4,035,000 2.000 K BB $4,034,000 1.750 L BB- $6,052,000 1.375 M B+ $4,035,000 1.125 N B $2,017,000 1.000 O B- $4,035,000 0.750 P NR $12,104,192 N/A X* AAA $1,613,840,192 N/A * Interest-only class with a notional amount. N/A -- Not applicable. NATIONAL ENERGY: TGP Opposes Plea to Exclude 2003 Valuation Docs ---------------------------------------------------------------- Tennessee Gas Pipeline, Co., opposes USGen New England, Inc.'s request to exclude the testimony and exhibits relating to USGen's determination to reject its gas transportation agreements with TGP. TGP's damages constitute the difference between USGen's payment obligations and the market value of that capacity at the time of breach, Kenneth W. Irvin, Esq., at McDermott, Will & Emery LLP, in Washington, D.C, notes, citing Miga v. Jensen, 96 S.W.3d 207, 214 (Tex. 2002). USGen elected to reject the Gas Transportation Agreements based, in part, on the analysis conducted by its expert, David O'Keefe, and other USGen employees and consultants about the value of the Contracts. USGen determined that its payment obligations exceeded the market value of the Contracts by over $30,000,000 and that there are cheaper alternatives for obtaining gas in the Northeast, Mr. Irvin notes. He asserts that USGen's analysis: -- is probative of TGP's rejection damages; and -- disproves USGen's claim that the rejected capacity will be completely resold through the full term of the Contracts. TGP also disputes USGen's contention that the USGen valuation analysis is irrelevant because they solely apply to the value of the capacity in the hands of USGen. If the rejected capacity had no value to USGen because the payment obligations exceeded market value and cheaper alternatives existed, then other shippers will not have any interest in the capacity, Mr. Irvin contends. Mr. O'Keefe has recently stated in an affidavit that the USGen valuations were purely intrinsic and included no element of extrinsic value. Mr. O'Keefe's statement, however, contradicts his deposition testimony that USGen's valuation model looked at intrinsic value and any extrinsic or option value, Mr. Irvin points out. Even if the USGen rejection analysis considered only intrinsic value, Mr. O'Keefe's deposition testimony is relevant to the value of the rejected capacity at the time of breach, Mr. Irvin asserts. He notes that USGen has admitted that it measured intrinsic value based on the price at which gas will likely be purchased and sold at different points and the variable costs of transporting the gas between the points, which is the basis differential between USGen's delivery point in Wright, New York, and its receipt point in Mendon, Massachusetts. TGP also asks the U.S. Bankruptcy Court for the Middle District of Maryland to prohibit Mr. O'Keefe from testifying on matters which USGen invoked privilege and refused discovery. USGen Reacts Gordon A. Coffee, Esq., at Winston & Strawn LLP in Washington, D.C., argues that Miga v. Jensen has no application in the dispute because every decision relied upon the ruling involved the breach of an agreement to deliver goods on a certain date. The Miga ruling has nothing to do with the rejection claim dispute because it involves the extent to which TGP has mitigated its damages to date, and the extent to which it is likely to continue its successful mitigation through the remainder of the Contracts' term, Mr. Coffee asserts. USGen clarifies that Mr. O'Keefe, in his deposition, noted that the valuation models he employed in 2003 contain formulas designed to capture extrinsic values. But in performing valuations of the Contracts, USGen set the extrinsic value at zero because it believed there was no extrinsic value that it could monetize. During Mr. O'Keefe's deposition, TGP asked questions about activities he undertook while at USGen, including analyses he prepared of USGen's contracts with TGP prior to USGen's rejection of the Gas Transportation Agreements in September 2003. USGen argues that the pre-rejection analyses are irrelevant of whether TGP was able to resell the USGen turnback capacity after September 2003. Nevertheless, USGen still allowed Mr. O'Keefe to answer all questions during the deposition posed by TGP's counsel regarding the analyses. USGen notes that it did not proffer Mr. O'Keefe as an expert or witness under Rule 30(b)(6) of the Federal Rules of Civil Procedure, but it was TGP that chose to depose Mr. O'Keefe as a fact witness. USGen objects to TGP's suggestion that it improperly asserted privilege during Mr. O'Keefe's deposition. USGen insists that it will not put Mr. O'Keefe on the stand at trial to testify about the analyses he conducted at the behest of USGen's counsel. As witness for USGen, Mr. O'Keefe will testify: (1) about his recent monitoring of TGP's electronic bulletin board and TGP's open seasons as well as knowledge of other gas pipelines; (2) in contrasting TGP's posting practices with other pipelines he has reviewed and about long-term contracts in existence on pipelines upstream of Wright, New York, which is the receipt point for the USGen contracts with TGP; and (3) regarding statements of TGP about market conditions in New England and New York and projected sales. USGen reiterates that Mr. O'Keefe's testimony is both relevant and probative and the Court should deny TGP's request to limit his testimony. TGP Northeast Expansion Relevant, says USGen TGP's objection to several USGen exhibits that relate to TGP's New England Pipeline Expansion Project is moot and without merit, Mr. Coffee asserts. Mr. Coffee notes that the parties agreed at the June 15, 2006 pretrial that relevance objections are preserved for the trial. TGP has recently completed plans to expand the capacity of its New England Pipeline, including the Pipeline on which USGen purchased capacity. TGP has firm contracts for that expanded capacity for many years into the future, in excess of 100,000 decatherms per day. TGP had the ability to include existing units of capacity in the New England expansion project, Mr. Coffee asserts. Had it rolled some or all of the USGen turnback capacity into its New England expansion project, that capacity would today be under contract for many years at rates in excess of the payments called for under USGen's contracts with TGP. Consequently, TGP's damages, as a matter of law, would be reduced to little or nothing, Mr. Coffee contends. TPG objected to the inclusion of the New England Expansion exhibits on grounds that USGen's expert, Thomas Norris, failed to assign a specific dollar value to the mitigation that TGP could have achieved had it reserved USGen's capacity for the expansion. Regardless of whether Mr. Norris intends to assign a specific dollar value to arguably inadequate mitigation efforts, the adequacy of TGP's efforts to mitigate damages is relevant to the fact that Mr. Norris' calculation of the actual mitigation is conservative, Mr. Coffee asserts. Mr. Norris' difficulty in putting an exact dollar figure on the amount of additional capacity that TGP could have sold by discounting does not undermine the relevance of his testimony, Mr. Coffee maintains. USGen intends to use several e-mail exchanges between TGP and its customers and press releases containing statements attributed to TGP officials. TGP contends that the e-mail exchanges and the press releases are inadmissible on grounds that they are hearsay. USGen, however, insists that the e-mail exchanges between TGP and its customers reflecting their demand for capacity on TGP's New England Pipeline are admissible because they show the customers' state of mind. Statements by TGP officials regarding likely future demand growth in the Northeast are significant admissions if true, and are relevant to TGP's state of mind whether true or not, Mr. Coffee argues. USGen also intends to use as exhibits pipeline companies' Internet postings printouts, which, according to TGP, are irrelevant and contains hearsay. The fact that pipeline companies do postings of available gas transportation capacity is relevant to TGP's opportunity to mitigate its damages for the future years of the USGen contracts, Mr. Coffee asserts. TGP also objects to USGen's designations from the depositions of TGP witnesses on the grounds of relevancy and admissibility. Some of the transcript segments of the depositions discuss TGP's practice of discounting other portions of its network and not discounting the New England portions that encompass the USGen capacity. USGen asserts that TGP's refusal to discount the USGen capacity is relevant because it emphasizes the existence and extent of demand for the capacity and also the conservatism of Mr. Norris's analysis of TGP's mitigation. Moreover, the Northeast expansion project is directly relevant to the likelihood of future sales by TGP, as it demonstrates that demand for capacity on TGP's New England pipeline substantially exceeds supply. Accordingly, USGen asks the Court to deny TGP's Exclusion Request in its entirety. TGP Replaces Dr. Lukens TGP informs the Court that Dr. Jay Lukens, its expert in connection with the computation of TGP's rejection damage claims, has recently been diagnosed with a serious illness. The illness makes it impossible for Dr. Lukens to testify at a trial or in a de bene esse deposition, Mr. Irvin relates. Accordingly, TGP asks the Court for leave substitute Greg W. Hopper for Dr. Lukens as its damages expert for the trial of USGen's objection to TGP's rejection damage claim. Mr. Irvin relates that TGP will be unfairly prejudiced if it is not allowed to substitute Dr. Lukens with Mr. Hopper, who is an expert with technical and specialized experience and knowledge of the pipeline industry and natural gas markets. The Court, according to Mr. Irvin, can also rely on Mr. Hopper's opinion, which is based on his Masters of Business Administration training and his experience with the natural gas markets, as well as relevant facts and data to assist it in determining facts in issue. TGP assures the Court that Mr. Hopper, a colleague of Dr. Lukens with Lukens Energy Group, will not be advancing new evidence or theories. In accord with Dr. Lukens' reports and deposition testimony, Mr. Hopper will offer his opinion of the total amount of TGP's damages before mitigation and the amount by which the figure should be reduced to account for appropriate mitigation credits. Mr. Hopper will also offer his opinion as to the proper discount rate to apply in the Court's determination of the net present value of TGP's damages. Because Mr. Hopper will not be advancing new evidence or theories, TGP believes that USGen will suffer no prejudice by his substitution for Dr. Lukens. USGen consents to TGP's request provided that Mr. Hopper will not be allowed to testify to opinions, or grounds for opinions, that differ from the opinions and grounds already put forward by Dr. Lukens in his reports and deposition testimony. Parties' Joint Status Report At pretrial conference held on June 15, 2006, the Court requested the parties to attempt to resolve all outstanding issues relating to their objections to exhibits and deposition designations. The parties have agreed, among others, that: -- all foundation objections will be resolved at the trial; -- TGP withdraws its hearsay objections with respect to its employee e-mails where the employee is acting within the scope of the employee's duties; -- based on a preliminary review of USGen's proposed replacement exhibits, TGP withdraws its objections concerning the completeness of the exhibits; and -- USGen will stipulate that Mr. Norris' report does not reflect USGen's position with respect to mitigation. * * * Judge Mannes denies USGen's request that the July 17, 2006 trial be continued or stayed until October 15, 2006. The trial regarding USGen's objection to TGP's rejection damage claims will commence on July 17, as scheduled. About National Energy Headquartered in Bethesda, Maryland, PG&E National Energy Group, Inc. -- http://www.pge.com/-- (n/k/a National Energy & Gas Transmission, Inc.) develops, builds, owns and operates electric generating and natural gas pipeline facilities and provides energy trading, marketing and risk-management services. The Company filed for Chapter 11 protection on July 8, 2003 (Bankr. D. Md. Case No. 03-30459). Matthew A. Feldman, Esq., Shelley C. Chapman, Esq., and Carollynn H.G. Callari, Esq., at Willkie Farr & Gallagher represent the Debtors in their restructuring efforts. When the Company filed for protection from its creditors, it listed $7,613,000,000 in assets and $9,062,000,000 in debts. NEGT received bankruptcy court approval of its reorganization plan in May 2004, and emerged from bankruptcy on Oct. 29, 2004. (PG&E National Bankruptcy News, Issue No. 62; Bankruptcy Creditors' Service, Inc., 215/945-7000) NATIONAL ENERGY: Hoffman, et al. Want Compensation Claims Allowed ----------------------------------------------------------------- Adam Mirick, Adam Hoffman and Beniot Vallieres ask the U.S. Bankruptcy Court for the Middle District of Maryland to enter a summary judgment in their favor in connection with NEGT Energy Trading Holdings Corporation and National Energy & Gas Transmission, Inc.'s requests to reduce their claims. In March 2002, Messrs. Mirick, Hoffman and Vallieres were awarded supplemental compensation for their performance for the prior year. Pursuant to an agreement, payment for the wages was deferred until October 2003. The Claimants were terminated from their employment with the Debtors in March 2003. Because by October 2003 the Debtors had declared bankruptcy, the Debtors argue that they did not improperly withhold the Claimants' wages under the Maryland Wage Payment and Collection Law. Neil L. Henrichsen, Esq., at Henrichsen Siegel, P.L.L.C., in Washington, D.C., argues that the Agreement only applied if the Claimants were still employed and not if they were terminated. The Debtors also assert that, so long as there is a "bona fide dispute" as to when the wages should have been paid, an employer does not violate the MWPCL. The "bona fide dispute" question under the MWPCL concerns "whether there is a legitimate dispute over the validity of the claim or the amount that is owing," Mr. Henrichsen notes, citing Medex, 372 Md. at 43, 811 A.2d at 306. The facts concerning the Debtors' obligation to pay the 2001 wages earned by Claimants are not in dispute, he asserts. Under MWPCL, wages are to be paid promptly after they are earned and that an employer does not have unilateral authority to defer payment, Mr. Henrichsen notes, citing Medex v. McCabe, 372 Md. 28, 42, 811 A.2d 297, 306 (2002), and Rogers v. Savings First Mortgage, LLC, 362 F.Supp.2d 624, 642-43 (D. Md. 2005). The Claimants also dispute the Debtors' allegations that they cannot recover statutory damages under the MWPCL because this is a bankruptcy case. There is no federal bankruptcy law preemption that prohibits an award of statutory damages under the MWPCL, Mr. Henrichsen contends. The Debtors argue that bankruptcy courts are prohibited from making punitive damage awards. Under the MWPCL, an employee may recover withheld wages and an additional "amount not exceeding 3 times the wage" if the employer's withholding was "not as a result of a bona fide dispute." At the outset, the Debtors' argument is flawed because statutory damages under the MWPCL are not necessarily punitive, Mr. Henrichsen contends. The Debtors failed to cite Judge Mannes' conclusion that "claims made under the MWPCL are not necessarily punitive damages claims." The Maryland Legislature recognized that recovery of only unpaid wages under the MWPCL "may not begin to compensate for those consequential losses" of the employee. "The additional amount, though at least partially punitive in nature, may also have a compensatory element to it, especially in a wage-withholding case," the Court of Appeals of Maryland held in Admiral Mortgage, 357 Md. at 549, 745 A.2d at 1034. Because the Claimants like other MWPCL plaintiffs would have difficulty proving their consequential losses with certainty, an award of statutory damages is both compensatory and available, Mr. Henrichsen maintains. The Debtors' argument is also flawed because, contrary to their assertion, the law does not prohibit bankruptcy courts from awarding punitive damages, Mr. Henrichsen points out. In In re A.H. Robins Co., 89 B.R. 555, 559 (E.D.Va. 1988), the court stressed that the Bankruptcy Code does not prohibit punitive damages claims. Because they have not been paid several hundreds of thousands of dollars that they earned and have been owed since 2001, the Claimants believe an award of statutory damages under the MWPCL would be largely compensatory. Nonetheless, the Claimants are entitled to seek and the U.S. Bankruptcy Court for the Middle District of Maryland has authority to award MWPCL statutory damages even if some portion of the award is also punitive, Mr. Henrichsen maintains. About National Energy Headquartered in Bethesda, Maryland, PG&E National Energy Group, Inc. -- http://www.pge.com/-- (n/k/a National Energy & Gas Transmission, Inc.) develops, builds, owns and operates electric generating and natural gas pipeline facilities and provides energy trading, marketing and risk-management services. The Company filed for Chapter 11 protection on July 8, 2003 (Bankr. D. Md. Case No. 03-30459). Matthew A. Feldman, Esq., Shelley C. Chapman, Esq., and Carollynn H.G. Callari, Esq., at Willkie Farr & Gallagher represent the Debtors in their restructuring efforts. When the Company filed for protection from its creditors, it listed $7,613,000,000 in assets and $9,062,000,000 in debts. NEGT received bankruptcy court approval of its reorganization plan in May 2004, and emerged from bankruptcy on Oct. 29, 2004. (PG&E National Bankruptcy News, Issue No. 62; Bankruptcy Creditors' Service, Inc., 215/945-7000) NAUTILUS RMBS: Fitch Rates $5 Million Class C Interest Notes at BB ------------------------------------------------------------------ Fitch Ratings assigns these ratings to Nautilus RMBS CDO III, Ltd. and Nautilus RMBS CDO III, LLC.: -- $260,000,000 class A-1S floating-rate notes due June 2046 'AAA'; -- $46,000,000 class A-1J floating-rate notes due June 2046 'AAA'; -- $34,000,000 class A-2 floating-rate notes due June 2046 'AA'; -- $4,000,000 class A-3F fixed-rate deferrable interest notes due June 2046 'A'; -- $14,500,000 class A-3V floating-rate deferrable interest notes due June 2046 'A' -- $16,500,000 class B floating-rate deferrable interest notes due June 2046 'BBB'; -- $5,000,000 class C floating-rate deferrable interest notes due June 2046 'BB'. Nautilus III is a cash flow collateralized debt obligation managed by RCG Helm, LLC. The ratings of the class A-1S notes, A-1J notes, and A-2 notes address the likelihood that investors will receive full and timely payments of interest, as per the governing documents, as well as the aggregate outstanding amount of principal by the stated maturity date. The ratings of the class A-3F notes, A-3V notes, B notes, and C notes address the likelihood that investors will receive ultimate interest payments, as per the governing documents, as well as the aggregate outstanding amount of principal by the stated maturity date. The ratings are based upon the credit quality of the underlying assets, 100% of which will be purchased by the transaction's close, in addition to credit enhancement provided by support from subordinated notes, excess spread and protections incorporated in the structure. Proceeds from the issuance will be invested in a static portfolio of residential mortgage-backed securities, consisting primarily of prime RMBS. The collateral supporting the structure will have a Fitch weighted average rating factor of 3.63 ('BBB/BBB+'). The collateral manager may sell defaulted, credit-risk, credit improved, and equity securities at any time. RCG Helm LLC will select and monitor the assets in the Nautilus III portfolio. RCG is a wholly owned subsidiary of Ramius Capital Group, LLC, a privately owned investment management firm. Both RCG and Ramius are Securities and Exchange Commission-registered investment advisors. Ramius, headquartered in New York, was founded in 1994 and currently maintains offices in London, Vienna, Munich, Hong Kong and Tokyo. The company's investment clients include U.S. and international institutions and private investors. Ramius, through several subsidiaries manages absolute-return portfolios totaling $7.4 billion. These portfolios include $2.9 billion in multi-strategy funds, $1.1 billion in single-strategy funds, and $3.3 billion in multi-manager funds. Assets under management include $264 million in firm capital. Nautilus RMBS CDO III, Ltd. is a Cayman Islands exempted company. Nautilus RMBS CDO III LLC is a Delaware limited liability company. NEW CENTURY: Credit Enhancement Prompts Moody's to Upgrade Ratings ------------------------------------------------------------------ Moody's Investors Service upgraded twenty-eight certificates from thirteen deals originated by New Century Mortgage Corporation. The transactions, issued in 2003, are backed by first lien adjustable- and fixed-rate subprime mortgage loans. The upgrades are based on the level of credit enhancement provided by the excess spread, overcollateralization, and the subordinate classes. The projected pipeline losses are not expected to significantly affect the credit support for these certificates. The seasoning of the loans and lower pool factors reduce loss volatility. The most subordinate classes from six transactions originated by New Century Mortgage Corporation have been downgraded based on existing credit enhancement levels being low given the current projected losses on the underlying pools. The pools have taken losses and pipeline loss could cause erosion of the overcollateralization. Additionally, Moody's confirmed the ratings on three certificates that had been previously placed under review for possible downgrade. Moody's complete rating actions: Upgrades: Issuer: Asset Backed Securities Corporation * Series 2003-HE1; Class M1, current rating Aa2, upgraded to Aaa * Series 2003-HE1; Class M2, current rating A2, upgraded to Aa3 * Series 2003-HE2; Class M1, current rating Aa2, upgraded to Aaa * Series 2003-HE2; Class M2, current rating A2, upgraded to Aa3 Issuer: ABSC Home Equity Loan Trust * Series 2003-HE3; Class M1, current rating Aa2, upgraded to Aa1 * Series 2003-HE3; Class M2, current rating A2, upgraded to Aa3 Issuer: GSAMP 2003-NC1 Trust * Class M-1, current rating Aa2, upgraded to Aaa * Class M-2, current rating A2, upgraded to Aa2 * Class B-1, current rating Baa2, upgraded to A2 Issuer: Morgan Stanley Dean Witter Capital I Inc. * Series 2003-NC1; Class M-1, current rating Aa2, upgraded to Aa1 * Series 2003-NC1; Class M-2, current rating A2, upgraded to Aa3 * Series 2003-NC2; Class M-1, current rating Aa2, upgraded to Aaa * Series 2003-NC2; Class M-2, current rating A2, upgraded to Aa2 * Series 2003-NC3; Class M-1, current rating Aa2, upgraded to Aa1 * Series 2003-NC3; Class M-2, current rating A2, upgraded to Aa3 Issuer: Morgan Stanley Capital I Inc. * Series 2003-NC4; Class M-1, current rating Aa2, upgraded to Aaa * Series 2003-NC4; Class M-2, current rating A2, upgraded to Aa2 * Series 2003-NC4; Class M-3, current rating A3, upgraded to A1 Issuer: Morgan Stanley ABS Capital I Inc. * Series 2003-NC5; Class M-1, current rating Aa2, upgraded to Aaa * Series 2003-NC5; Class M-2, current rating A2, upgraded to Aa3 * Series 2003-NC6; Class M-1, current rating Aa2, upgraded to Aa1 * Series 2003-NC6; Class M-2, current rating A2, upgraded to Aa3 Issuer: New Century Home Equity Loan Trust * Series 2003-1; Class M-1, current rating Aa2, upgraded to Aaa * Series 2003-1; Class M-2, current rating A2, upgraded to Aa2 * Series 2003-2; Class M-1, current rating Aa2, upgraded to Aa1 * Series 2003-2; Class M-2, current rating A2, upgraded to Aa3 * Series 2003-3; Class M-1, current rating Aa2, upgraded to Aa1 * Series 2003-3; Class M-2, current rating A2, upgraded to Aa3 Downgrades: Issuer: Asset Backed Securities Corporation * Series 2002-HE2; Class B, current rating Baa2, downgraded to B2 * Series 2003-HE1; Class M4, current rating Baa3, downgraded to B2 Issuer: Morgan Stanley Dean Witter Capital I Inc * Series 2001-NC3; Class B-1, current rating Baa3, downgraded to Ba1 * Series 2002-NC1; Class B-1, current rating Baa2, downgraded to Ba1 * Series 2002-NC2; Class B-1, current rating Baa2, downgraded to Ba1 * Series 2002-HE1; Class B-2, current rating Baa3, downgraded to Ba1 Confirmed: Issuer: ABSC Home Equity Loan Trust * Series 2003-HE3; Class M3, confirmed at A3 Issuer: New Century Home Equity Loan Trust * Series 2003-1; Class M-3, confirmed at Baa2 * Series 2003-3; Class M-3, confirmed at A3 NEWPARK RESOURCES: Restatements Cue S&P to Retain Negative Watch ---------------------------------------------------------------- Standard & Poor's Ratings Services said that its 'BB-' corporate credit rating on oilfield services company Newpark Resources Inc. remains on CreditWatch with negative implications following the company's announcement that it will restate the financial filings for the previous five years and further delay filing statements for the first quarter of 2006. "Newpark's ability to file these statements is crucial to maintaining the current ratings," said Standard & Poor's credit analyst Ben Tsocanos. "Conversely, findings of material or widespread accounting problems, extended delays in the process, or deterioration in relations with its credit counterparties would almost certainly lead to a downgrade," said Mr. Tsocanos. The rating on Newpark was placed on CreditWatch on April 17, 2006, after the company announced that it had put its CFO and certain other personnel on administrative leave pending an internal examination of accounting irregularities. The investigation determined that a subsidiary of Newpark had made improper payments to a supplier and that Newpark failed to account for related transactions appropriately. The company expects to make the necessary accounting adjustments in restated financial filings. Following the completion of the investigation, management terminated the employment of the CFO and former CEO. Standard & Poor's expects to revisit the CreditWatch listing following the filing of restated financial statements, or by the end of September in the event that filing is delayed. The CreditWatch listing for Newpark reflects the likelihood that ratings will be either affirmed or lowered in the near term. NOMURA ASSET: Fitch Lifts Rating on $42.8 Mil. Class Certificates ----------------------------------------------------------------- Fitch Ratings upgrades these class of Nomura Asset Securitization Corp.'s commercial mortgage pass-through certificates, series 1995-MD III: -- $42.8 million class B-1 to 'AAA' from 'BB'. In addition, Fitch affirms rating on: -- Interest-only class A-3CS at 'AAA'; -- $564,106 class A-4 at 'AAA'. Fitch does not rate classes B-2, B-3, B-4A, B-4B, and B-4C. The upgrade is due primarily to the final resolution of the Grand Cayman loan, in which losses were passed through to the trust with the July 2006 remittance report. The workout of the loan resulted in paydown of $24.7 million to class A-4 and a loss of $5.5 million that was absorbed by classes B-3, B-4A, B-4B and B-4C. Of the remaining three loans in the transaction, two of them, the Hagan B loan (40.5%) and the One Bayfront Plaza loan (31.2%), have been fully defeased. The sole remaining non-defeased loan, the Larkin Portfolio (28.3%) remains at the special servicer. The loan is secured by four full-service hotels in Colorado, Texas and Montana, which are real estate owned. At this time, Fitch expects that the loan will be resolved with no losses to the trust. However, in the event that the loan were to sustain losses, there is sufficient credit enhancement to protect the Fitch rated classes. NORTHWEST AIRLINES: Wants General Electric Agreement Approved ------------------------------------------------------------- Northwest Airlines, Inc., seeks the U.S. Bankruptcy Court for the Southern District of New York's permission to enter into, and perform under, the Letter of Agreement with General Electric Capital Corporation pursuant to Sections 105(a) and 363(b) of the Bankruptcy Code. Prior to filing for bankruptcy, Northwest Airlines leased an aircraft bearing Tail No. N665US pursuant to a Lease Agreement [NW 1989 E] dated September 8, 1989, with The First National Bank of Boston, as owner trustee and as lessor. U.S. Bank National Association is successor-in-interest to The First National Bank of Boston. General Electric Capital Corporation is the owner participant holding the beneficial interest in the aircraft. On November 14, 2005, Northwest Airlines and The Bank of New York, as mortgagee, entered into a Restructuring Of Leveraged Lease For Aircraft N665US & Summary of Terms and Conditions, which sets forth an agreement in principle for a restructuring of the agreements relating to the aircraft. Among other things, the Term Sheet, which was approved by the Court on December 15, 2005, provides that: -- rent will be reduced; -- the term of the existing lease will be modified to coincide with scheduled heavy airframe maintenance; and -- maintenance requirements, return conditions, and self-insurance provisions will be revised favorably for the Debtor. The Debtor and General Electric are parties to a Tax Indemnity Agreement [NW 1989 E] dated September 8, 1989, pursuant to which the Debtor agreed to indemnify General Electric, as the aircraft's owner participant, for certain tax events. Mark C. Ellenberg, Esq., at Cadwalader, Wickersham & Taft LLP, in New York, relates that, as part of the restructuring contemplated by the Term Sheet, General Electric's interest in the trust estate, excluding the Tax Indemnity Agreement and the other reserved rights, must be transferred to BNY so that it can cause the aircraft to be leased to the Debtor on the terms described in the Term Sheet. The transfer may be accomplished either through foreclosure by BNY, or through an assignment and assumption from General Electric to BNY. Seabury Group / Seabury Transportation Advisors LLC's senior vice president, Gregory S. Ethier, asserts that an assignment from General Electric to BNY would be more beneficial to the Debtor than a foreclosure, as foreclosure would impose certain temporary operational constraints upon the Debtor that would result in lost revenue. According to Mr. Ethier, the Aircraft, a Boeing 747-400, is currently in continuous use by Northwest Airlines on its overseas routes. Its foreclosure would require the Debtor to temporarily cease international flying of the aircraft while title to the aircraft is transferred. In certain circumstances, the Debtor could also be required to fly the aircraft to a foreign jurisdiction at the time of foreclosure through a non-revenue generating flight in order to reduce potential tax consequences of the foreclosure, Mr. Ethier relates. Accordingly, Northwest Airlines has requested that General Electric assign its interests in the trust that holds title to the aircraft to the Mortgagee in lieu of foreclosure, which assignment would not require that the title to the aircraft be changed. However, Mr. Ethier continues, under the Tax Indemnity Agreement, a foreclosure of General Electric's interests by BNY may be more beneficial to General Electric than an assignment of its interests. Accordingly, to induce General Electric to assign its interests in the trust that holds title to the aircraft to BNY in lieu of foreclosure, the Debtor proposes to enter into a Letter Agreement with GE. The LOA provides that: -- for all purposes of the Tax Indemnity Agreement, the transfer from General Electric to BNY will be deemed to constitute a foreclosure; -- in respect of the transfer to BNY, General Electric will have whatever damages and claims against the Debtor under the Tax Indemnity Agreement that General Electric would have had, had the transfer in fact constituted a foreclosure. About Northwest Airlines Northwest Airlines Corp. (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. 30; Bankruptcy Creditors' Service, Inc., 215/945-7000). NORTHWEST AIRLINES: PBGC Objects to Sale of 10 Aircraft to Omni --------------------------------------------------------------- Northwest Airlines, Inc., asked the U.S. Bankruptcy Court for the Southern District of New York to authorize its sale of six McDonnell Douglas DC-10-30 aircraft to Omni Air International, Inc., and file the Sale Agreement under seal. Prior to filing for bankruptcy, Northwest Airlines was indebted to its pension plans in the aggregate principal amount of $370,936,877, plus all accrued but unpaid interest and fees, expenses, charges and other obligations. When it filed for bankruptcy, Northwest ceased making payments with respect to the secured pension obligations. The Pension Benefit Guaranty Corporation received a first priority lien on the Aircraft constituting the PBGC First Lien Collateral in relation to Northwest's application to the Internal Revenue Service for waivers of its minimum funding obligations for its pension plans. The PBGC properly perfected that lien and its other liens granted. In a Court-approved stipulation, Northwest Airlines agreed to make certain interest payments with respect to the secured pension obligations and reimburse certain related fees and costs incurred by the PBGC. However, more than $370,000,000 principal balance and other amounts owed by Northwest remain outstanding. Moreover, the stipulation has expired by its terms. The PBGC and Northwest have engaged in discussions and, the PBGC believes, have reached an agreement in principle to extend and modify the First Stipulation. Philip D. Anker, Esq., in Washington, D.C., notes that the Debtor's proposed order provides that the proceeds of the sale of the PBGC First Lien Collateral will be deposited "into an escrow account" to be governed by a second stipulation granting adequate protection to the PBGC under their payment agreement dated July 25, 2003, and certain related security agreements. Mr. Anker notes that there is still no Second Stipulation in effect. Accordingly, the PBGC objects to the Debtors' request unless Northwest's proposed order is modified to provide that PBGC's first priority lien will attach to the Sale Proceeds, with the same validity, priority, force, and effect as it currently has on the PBGC First Lien Collateral. About Northwest Airlines Northwest Airlines Corp. (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. 30; Bankruptcy Creditors' Service, Inc., 215/945-7000). OCCAM NETWORKS: June 25 Stockholders' Deficit Narrows to $17.3MM ---------------------------------------------------------------- Occam Networks Inc. reported results for the second quarter of 2006, which ended June 25, 2006. The company reported quarterly revenue of $16.2 million, posting its third consecutive quarter of operating profits and its eighth consecutive new revenue record. Second quarter 2006 revenues represented an increase of 14% over the first quarter of 2006, and an 86% increase over the same second quarter of 2005. "We had an outstanding quarter -- we significantly expanded our customer base to more than 170 customers and again we increased quarterly operating profits," Bob Howard-Anderson, president and chief executive officer of Occam Networks, said. "We continue to strengthen and grow the company in a focused and strategic manner as we aim to remain profitable while we expand our business. We've strengthened our board and added several exciting new products to our product line and our efforts are paying off with industry recognition for our products and the leadership role we play in the industry." During the second quarter of 2006, Occam appointed Brian Strom, former president and chief executive officer of SureWest Communications, to its Board of Directors. Other highlights of the quarter included: -- Launched the BLC 6314 10 GigE Transport and Optical Line Termination Blade, which adds dual 10 Gigabit Optical Ethernet and multiple 1 Gigabit Ethernet interfaces to the Occam BLC 6000 System; -- Launched the ONT 2300 Series of optical network terminals. These ONTs are designed to deliver superior Triple Play services and to provide Telcos with multiple service models for active fiber deployments that meet the requirements of any type of FTTP installation from brownfield to Greenfield; and -- Broadband Trends reported that the company was second in terms of percentage increase in its worldwide DSL port shipments in the first quarter of 2006. Financials The Company earned $358,000 of net income for the second quarter ended June 25, 2006, compared to a $2,570,000 net loss for the same period in 2005. At June 25, 2006, the Company's balance sheet showed $32,642,000 in total assets, $13,644,000 in total liabilities, and $36,390,000 in redeemable preferred stock, resulting in a $17,392,000 stockholders' deficit. The Company also had a $108,373,000 accumulated deficit at June 25, 2006. Based in Santa Barbara, Calif., Occam Networks Inc. (OTCBB:OCNW) -- http://www.occamnetworks.com/-- develops and markets innovative Broadband Loop Carrier networking equipment that enable telephone companies to deliver voice, data and video services. Based on Ethernet and Internet Protocol technologies, Occam's equipment allows telecommunications service providers to profitably deliver traditional phone services, as well as advanced voice-over-IP, residential and business broadband, and digital television services through a single, all-packet access network. NOVELIS INC: Extends Consent Request for Senior Notes to July 19 ---------------------------------------------------------------- Novelis Inc. is extending the expiration date in connection with its previously announced consent solicitation relating to its 7- 1/4% Senior Notes due 2015 (CUSIP Nos. 67000XAA4, C6780CAA1 and 67000XAB2) in order to allow holders additional time to deliver their consents. The consent solicitation, which was scheduled to expire at 5:00 p.m., New York City time, on Wednesday, July 12, 2006, will now expire at 5:00 p.m., New York City time, on Wednesday, July 19, 2006, unless extended to a later time or date. Novelis is soliciting consents to proposed amendments to the indenture pursuant to which the Notes were issued that would give Novelis until December 31, 2006, to become current in its reporting obligations and a waiver of any and all defaults caused by its not timely filing certain reports with the Securities and Exchange Commission. Upon the terms and subject to the conditions of the consent solicitation, holders of record as of 5:00 p.m., New York City time, on June 21, 2006, who validly deliver and do not revoke their consents prior to the Expiration Date, will receive an initial consent fee for each $1,000 in principal amount of Notes with respect to which consents are received equal to the product of $15.00 multiplied by a fraction, the numerator of which is the aggregate principal amount of Notes outstanding on the Expiration Date and the denominator of which is the aggregate principal amount of Notes as to which Novelis received and accepted consents. If Novelis has not filed its Annual Report on Form 10-K for the year ended December 31, 2005, with the SEC by 5:30 p.m., New York City time, on September 30, 2006, Novelis will pay to these holders an additional $5.00 for each $1,000.00 in principal amount of Notes as to which Novelis has received and accepted consents. These consent fees are collectively referred to as the "Consent Fees." The effectiveness of the proposed amendments and waiver and the payment of the Consent Fees are subject to the receipt of valid consents that are not revoked in respect of at least a majority of the aggregate principal amount outstanding of the Notes. Holders of the Notes may revoke their consents at any time before the proposed amendments and waiver become effective, but upon receipt by Novelis of the consents of a majority of holders of the Notes the waiver will become effective, a supplemental indenture setting forth the amendments will be executed and consents may no longer be revoked unless Novelis fails to pay holders the Consent Fees. Citigroup Corporate and Investment Banking is serving as the solicitation agent for the consent solicitation. Questions regarding the consent solicitation may be directed to Citigroup Corporate and Investment Banking at (800) 558-3745 (toll-free) or (212) 723-6106. The information agent for the consent solicitation is Global Bondholder Services Corporation. Requests for copies of the Consent Solicitation Statement and related documents may be directed to Global Bondholder Services Corporation at (866) 794-2200 (toll- free) or (212) 430-3774. About Novelis Based in Atlanta, Georgia, Novelis Inc. (NYSE: NVL) (TSX: NVL) -- http://www.novelis.com/-- provides customers with a regional supply of technologically sophisticated rolled aluminum products throughout Asia, Europe, North America, and South America. The company operates in 11 countries and has approximately 13,000 employees. Through its advanced production capabilities, the company supplies aluminum sheet and foil to the automotive and transportation, beverage and food packaging, construction and industrial, and printing markets. * * * As reported in the Troubled Company Reporter on May 18, 2006, Moody's Investors Service placed the ratings of Novelis Inc., and its subsidiary, Novelis Corporation, under review for possible downgrade. In a related rating action, Moody's changed Novelis Inc's speculative grade liquidity rating to SGL-3 from SGL-2. Novelis Corporation's Ba2 senior secured bank credit facility rating was placed on review for possible downgrade. Novelis Inc.'s Ba3 corporate family rating; Ba2 senior secured bank credit facility and B1 senior unsecured regular bond/debenture were placed on review for possible downgrade. ONEIDA LTD: Board to Review Acquisition Proposal from Shareholders ------------------------------------------------------------------ Oneida Ltd. received an unsolicited proposal from DE Shaw Laminar Portfolios, L.L.C. and Xerion Capital Partners, both current Oneida shareholders, to acquire the company. Oneida's Board of Directors will consult with its legal and financial advisors and carefully review the proposal; however, a definitive agreement has not been reached at this time and no assurance can be given that such an agreement will take place. "It is gratifying to see that Oneida's business plan has drawn interest from two substantial current shareholders," said Oneida Chairman Christopher H. Smith. "The Board noted that the proposal expressed support for Oneida's plan of reorganization and its current management team. We will give the proposal thorough and fair consideration." Oneida expects to continue its confirmation hearing in U.S. Bankruptcy Court for the Southern District of New York as planned. The company remains on track to complete its confirmation hearing process shortly and, depending on the outcome of its review of the acquisition proposal, hopes to be in a position to emerge from bankruptcy in the near future. About Oneida Headquartered in Oneida, New York, Oneida Ltd. (OTC: ONEI) -- http://www.oneida.com/-- manufactures stainless steel and silverplated flatware for both the Consumer and Foodservice industries, and supplies dinnerware to the foodservice industry. Oneida also supplies a variety of crystal, glassware and metal serveware for the tabletop industries. The Company and its 8 debtor-affiliates filed for Chapter 11 protection on March 19, 2006 (Bankr. S.D. N.Y. Case Nos. 06-10489 through 06-10496). Douglas P. Bartner, Esq., at Shearman & Sterling LLP represents the Debtors. Credit Suisse Securities (USA) LLC is the Debtors' financial advisor. Scott L. Hazan, Esq., and Lorenzo Marinuzzi, Esq., at Otterbourg, Steindler, Houston & Rosen, P.C., represent the Official Committee of Unsecured Creditors. Robert J. Stark, Esq., at Brown Rudnick Berlack Israels LLP represents the Official Committee of Equity Security Holders. When the Debtors filed for protection from their creditors, they listed $305,329,000 in total assets and $332,227,000 in total debts. On May 12, 2006, Judge Gropper approved the Debtors' disclosure statement. ONEIDA: Equity Panel Members Can Trade Securities Under Protocol ---------------------------------------------------------------- The Honorable Allan L. Gropper of the U.S. Bankruptcy Court for the Southern District of New York approved the proposed information blocking procedures and permitted trading of Oneida Ltd.'s securities. The Official Committee of Equity Security Holders appointed in the chapter 11 cases of Oneida and its debtor-affiliates proposed the procedures, seeking the Court's determination that those Equity Committee members, acting in any capacity and engaged in the trading of securities for others or for its own account as a regular part of their business will not violate their fiduciary duties as Equity Committee members by trading in the Debtors' debt or equity securities or other claims or interests during the pendency of the Debtors' cases, provided that any Securities Trading Committee Member carrying out those trades establishes, effectively implements and strictly adheres to the information blocking policies and procedures. Robert J. Stark, Esq., at, Brown Rudnick Berlack Israels LLP, in Manhattan told the Court that a "Screening Wall" refers to a procedure established by an institution to isolate its trading activities from its activities as a member of the Equity Committee. A Screening Wall includes, among other things, features as the employment of different personnel to perform each function, physical separation of the office and file space, procedures for locking Committee-related files, separate telephone and facsimile lines for each function, and special procedures for the delivery and posting of telephone messages. Those procedures prevent the Securities Trading Committee Member's trading personnel from use or misuse of non-public information obtained by Securities Trading Committee Member's personnel engaged in Committee-related activities and also precludes Committee Personnel from receiving inappropriate information regarding the Securities Trading Committee Member's trading in Securities in advance of those trades. Although members of the Equity Committee owe fiduciary duties to the Debtors' equity holders, the Securities Trading Committee Members also have fiduciary duties to maximize returns to their clients through trading in the Debtors' Securities. Thus, if a Securities Trading Committee Member is barred from trading the Debtors' Securities during the pendency of these Chapter 11 Cases because of its duties to other equity holders, it may risk the loss of a beneficial investment opportunity for its clients and therefore may breach the fiduciary duty to those clients. Alternatively, if a Securities Trading Committee Member resigns from the Equity Committee, its interests may be compromised by virtue of taking a less active role in the reorganization process. Securities Trading Committee Members should not be forced to choose between serving on the Equity Committee and risking the loss of beneficial investment opportunities or foregoing service on the Equity Committee and possibly compromising its responsibilities by taking a less active role in the reorganization process. A full-text copy of the equity trading procedures is available for free at http://ResearchArchives.com/t/s?d9b Based in Oneida, New York, Oneida Ltd. -- http://www.oneida.com/ -- is the world's largest manufacturer of stainless steel and silverplated flatware for both the Consumer and Foodservice industries, and the largest supplier of dinnerware to the foodservice industry. Oneida is also a leading supplier of a variety of crystal, glassware and metal serveware for the tabletop industries. The Company and its 8 debtor-affiliates filed for Chapter 11 protection on March 19, 2006 (Bankr. S.D. N.Y. Case Nos. 06-10489 through 06-10496). Douglas P. Bartner, Esq., at Shearman & Sterling LLP represents the Debtors. Credit Suisse Securities (USA) LLC is the Debtors' financial advisor. Scott L. Hazan, Esq., and Lorenzo Marinuzzi, Esq., at Otterbourg, Steindler, Houston & Rosen, P.C., represent the Official Committee of Unsecured Creditors. Robert J. Stark, Esq., at Brown Rudnick Berlack Israels LLP represents the Official Committee of Equity Security Holders. When the Debtors filed for protection from their creditors, they listed $305,329,000 in total assets and $332,227,000 in total debts. On May 12, 2006, Judge Gropper approved the Debtors' disclosure statement. OWENS CORNING: Court Approves Praxair Settlement Agreement ---------------------------------------------------------- Owens Corning and its debtor-affiliates obtained the U.S. Bankruptcy Court for the District of Delaware's approval for a settlement agreement related to compromise of property damage claims asserted by Praxair, Inc., against the Debtors. Praxair filed two Property Damage Claims against the Debtors: -- Claim No. 7860 against Owens Corning, Inc., for $200,000; and -- Claim No. 7856 against Fibreboard Corporation for $75,000. The Debtors objected to the Praxair Claims. To resolve the Claims without further litigation, Praxair and the Debtors entered into the Settlement Agreement. The parties agree that: a. Claim No. 7860 will be allowed as a general unsecured non- priority claim for $5,000, which amount will be paid as a convenience class claim; b. Claim No. 7856 will be allowed as a general unsecured non- priority claim for $5,000, which amount will be paid in full by Fibreboard's property damage insurers on the Initial Distribution Date; and c. Praxair will release Owens Corning and Fibreboard from any liability associated with the Claims. AIG Member Companies, Fibreboard's property damage insurer, accepts the terms of the Settlement. Owens Corning (OTC: OWENQ.OB) -- http://www.owenscorning.com/-- manufactures fiberglass insulation, roofing materials, vinyl windows and siding, patio doors, rain gutters and downspouts. Headquartered in Toledo, Ohio, the Company filed for chapter 11 protection on Oct. 5, 2000 (Bankr. Del. Case. No. 00-03837). Norman L. Pernick, Esq., at Saul Ewing LLP, represents the Debtors. Elihu Inselbuch, Esq., at Caplin & Drysdale, Chartered, represents the Official Committee of Asbestos Creditors. James J. McMonagle serves as the Legal Representative for Future Claimants and is represented by Edmund M. Emrich, Esq., at Kaye Scholer LLP. (Owens Corning Bankruptcy News, Issue No. 135; Bankruptcy Creditors' Service, Inc., 215/945-7000) OWENS CORNING: District Court Won't Dismiss Northwest Suit ---------------------------------------------------------- The U.S. District Court for the District of Oregon denies Owens Corning's request to dismiss a complaint filed by Northwest Environmental Defense Center, Oregon Center for Environmental Health, and Sierra Club against the Debtor. In the complaint, Northwest, et al., asked the District Court for declaratory and injunctive relief, civil penalties, plus their costs and attorney's fees. Northwest, et al., alleged that Owens Corning is constructing a polystyrene foam insulation manufacturing facility in Gresham, Oregon, without obtaining a required preconstruction permit in violation of Section 165(a) of the Clean Air Act. Furthermore, they asserted that Owens Corning's construction is violating provisions of the Oregon State Implementation Plan that require any facility that will emit more than 100 tons per year of a regulated air pollutant to obtain an Air Contaminant Discharge Permit prior to construction. After commencement of the District Court Action, the Plaintiffs entered into a stipulation with the Debtor. Northwest, et al., agreed not to seek a preliminary injunction and Owens Corning agreed to halt construction pending issuance of a state Air Contaminant Discharge Permit for the facility. However, the parties still disputed whether: -- construction was undertaken without one or more required permits; -- Owens Corning's facility is subject to those permit requirements; and -- civil penalties should be imposed, and, if so, the amount and disposition of those penalties. Owens Corning argued that Northwest, et al., lack standing. In the alternative, the Debtor sought to strike those portions of the complaint that sought more than one day's civil penalties. Owens Corning also sought dismissal of Northwest, et al.'s First Claim on the ground that they can state a claim, if any, only under state rather than federal law. "The present case is easily distinguishable," U.S. Magistrate Judge John Jelderks declares. "Plaintiffs have identified concrete injuries flowing from the challenged conduct, and explained how they would benefit from a favorable decision." The District Court rejects the Debtor's lack of standing contention because, among others, the challenged conduct is the commencement of construction without the required permit, while the ultimate harm can result only from operation of the plant once construction is completed. Hence, the District Court rules that Northwest, et al., have standing to prosecute the claims set forth in the Complaint. Moreover, the District Court declares that, if the Debtor unlawfully constructed the facility without first obtaining a required preconstruction permit, then its liability for civil penalties is not capped at "one day." The District Court finds it unclear why the Debtor sought dismissal of the First Claim on the ground that state substantive law, rather than federal, is controlling once a State Implementation Plan has been enacted. Accordingly, the District Court denies the request for now, with leave to revisit the issue if events warrant. Judge Jelderks declined to decide on "this question in a vacuum," with no facts or context, and no reason to believe that the determination will materially affect the rights of the parties. Federal law sets a floor, that is, the minimum requirements that must be met, Judge Jelderks says. A State may voluntarily impose substantive requirements that are more restrictive than what federal law would require, but not less restrictive, Judge Jelderks explains, citing F. Grad, 1 TREATISE ON ENVIRONMENTAL LAW at 2-112.31 (1999). The District Court finds it difficult to see how Owens Corning will derive any benefit from insisting that the court apply State standards that, by definition, must be at least as restrictive as the federal standards. Northwest, et al., already have a parallel claim invoking the state standards, Judge Jelderks points out. A full-text copy of the 33-page District Court opinion is available for free at http://ResearchArchives.com/t/s?da1 Owens Corning (OTC: OWENQ.OB) -- http://www.owenscorning.com/-- manufactures fiberglass insulation, roofing materials, vinyl windows and siding, patio doors, rain gutters and downspouts. Headquartered in Toledo, Ohio, the Company filed for chapter 11 protection on Oct. 5, 2000 (Bankr. Del. Case. No. 00-03837). Norman L. Pernick, Esq., at Saul Ewing LLP, represents the Debtors. Elihu Inselbuch, Esq., at Caplin & Drysdale, Chartered, represents the Official Committee of Asbestos Creditors. James J. McMonagle serves as the Legal Representative for Future Claimants and is represented by Edmund M. Emrich, Esq., at Kaye Scholer LLP. (Owens Corning Bankruptcy News, Issue No. 135; Bankruptcy Creditors' Service, Inc., 215/945-7000) PHAR-MOR INC: Ct. Rules L/C Excess Proceeds Part of Bankr. Estate ----------------------------------------------------------------- Phar-Mor, Inc., commenced an adversary proceeding against Florida Self-Insurers Guaranty Association, Inc., seeking to obtain an accounting and to compel turnover of certain excess proceeds of an $880,000 letter of credit. Florida Self-Insurers moved to dismiss Phar-Mor's motion, arguing: a) the Bankruptcy Court lacks subject matter jurisdiction pursuant to Section 541 of the Bankruptcy Code; and b) Phar-Mor failed to state a claim upon which relief can be granted. In a decision published at 2005 WL 4132536, the Honorable Kay J. Woods of the U.S. Bankruptcy Court for the Northern District of Ohio ruled against Florida Self-Insurers and affirmed that excess proceeds of the letter of credit were part of the bankruptcy estate. Workers' Compensation Obligations Phar-Mor operated a chain of discount drugstores in various states. From March 1986 to March 1996, Phar-Mor was self-insured for workers' compensation exposure in Florida. As a self-insured employer, Phar-Mor was required to post a letter of credit to assure performance of its insurance obligations. Because of this requirement, Phar-Mor obtained, for the benefit of Florida Self- Insurers, an $880,000 letter of credit from Fleet National Bank. AIG Insurance served as the administrator and excess insurance carrier for Phar-Mor's workers' compensation claims in Florida. After Phar-Mor's bankruptcy filing, AIG failed to pay one of Phar- Mor's workers' compensation claims because of an error. Florida Self-Insurers assumed payment of that compensation claim by drawing down the entire amount of the $880,000 letter of credit. Phar-Mor subsequently discontinued payment of workers' compensation claims in Florida. There are currently eight unresolved compensation claims against Phar-Mor that fall within its self-insured retention obligation. Florida Self-Insurers is holding on to the excess proceeds of the letter of credit to ensure full payment of these pending claims. Phar-Mor wants to recover the excess proceeds of the letter of credit and has presented an actuarial report estimating the maximum recovery due on the unresolved claims at $322,000. Court Ruling In its motion to dismiss, Florida Self-Insurers argued that the letter of credit was not property of the bankruptcy estate. Judge Woods agreed with Florida Self-Insurers' contention. However, she emphasized that in Phar-Mor's adversary proceeding, the Court is not dealing with a letter of credit but rather with the proceeds of the letter of credit. Judge Woods said Florida Self-Insurers is only entitled to obtain sufficient proceeds from the letter of credit to satisfy Phar- Mor's obligations. Consequently, any excess amount from the letter of credit belongs to Phar-Mor and is property of the estate. Because excess proceeds from a letter of credit are property of the estate, Judge Woods concluded that the Court has jurisdiction over Phar-Mor's complaint. The Court also disagreed with Florida Self-Insurers' allegation that Phar-Mor failed to state a cognizable claim in its complaint regarding the excess proceeds. In fact, Judge Woods pointed out that Florida Self-Insurers admits to holding only a possessory right to the excess proceeds and not an ownership right. According to Judge Woods, this admission demonstrates Florida Self-Insurers' agreement to return any excess proceeds to Phar- Mor. Judge Woods adds that Phar-Mor's allegations, stated in its complaint, are sufficient to state claim for an accounting and turnover of any excess proceeds. About Phar-Mor Phar-Mor, Inc., operated a chain of discount retail drugstores. Phar-Mor and its eight operating subsidiaries sought protection from their creditors under Chapter 11 of the Bankruptcy Code on Sept. 24, 2001 (Bankr. S.D. Ohio Case Nos.: 01-44007 through 01- 44015) The Court entered an order confirming the Debtors' First Amended Joint Plan of Liquidation on March 13, 2003. Michael Gallo, Esq., at Nadler, Nadler and Burdman, represents Phar-Mor. PREMIUM PAPERS: Smart Papers Implements Employee Retention Plan --------------------------------------------------------------- The U.S. Bankruptcy Court for the District of Delaware allowed Smart Papers LLC, a Premium Papers Holdco, LLC debtor-affiliate to adopt and implement an incentive and retention plan for some of Smart Papers' employees. The Retention/Incentive Plan provides that eligible employees will receive a lump sum payment payable in two equal installments. Half of the lump sum payment has already been distributed. The remaining half will be paid 15 days after the sale closes. If an eligible employee resigns, he or she will not get the incentive. The Debtors estimate that the Plan will cost around $109,000. Since the Debtors filed for bankruptcy, they have worked towards stabilizing their business, maintaining good relationships with their vendors and customers and preparing for a potential sale or all or substantially all of their assets. In addition, Smart Papers is in the process of negotiating with potential buyers to maximize the value of their estates. As is typical with most chapter 11 debtors, the bankruptcy process has proven to be a stressful time for the Debtors' employees. The uncertainty surrounding the Debtors' cases, the closing of a certain facility and the substantial reduction in workforce has given rise to very real and personal concerns on the part of the Debtors' employees regarding their financial well-being and the stability of their employment. As the sale process continues, Smart Papers' employees will naturally become more anxious about their employment status. To address those concerns, the Debtors wanted to implement initiatives to ensure that certain employees who have been determined to be crucial to the Smart Papers' remaining operations and sale efforts will remain employed with Smart Papers over the critical coming months, to preserve and enhance the value of Smart Papers' estate and to ensure that Smart Papers' business remains operational. Headquartered in Hamilton, Ohio, Premium Papers Holdco, LLC, -- http://www.smartpapers.com/-- is an independent manufacturer and marketer of a wide variety of premium coated and uncoated printing papers, such as Kromekote, Knightkote, and Carnival. The Company and its debtor-affiliates, SMART Papers LLC and PF Papers LLC, filed for chapter 11 protection on March 21, 2006 (Bankr. D. Del.Case No. 06-10269). Ian S. Fredericks, Esq., at Young, Conaway, Stargatt & Taylor, LLP, represents the Debtors. When the Debtors filed for protection from their creditors, they listed unknown estimated assets and $10 million to $50 million estimated debts. PROCARE AUTOMOTIVE: Has Until Oct. 2 to File Chapter 11 Plan ------------------------------------------------------------ The U.S. Bankruptcy Court for the Northern District of Ohio extended, until Oct. 2, 2006, the period within which ProCare Automotive Service Solutions, LLC, has the exclusive right to file a chapter 11 plan. The Court also extended the Debtor's period to solicit acceptances of that plan to Sept. 5, 2006. The Debtor had devoted a significant amount of its time towards the closing of the sale of substantially all of its assets to Monro Muffler Brake, Inc. With the closure of the sale on April 29, 2006, the Debtor says it can now focus on the process of winding up its affairs, which includes the filing of a plan of liquidation. Based in Independence, Ohio, ProCare Automotive Service Solutions, LLC -- http://www.procareauto.com/-- offers maintenance and repair services to all makes and models of foreign, domestic, light truck, and commercial-fleet vehicles. ProCare operates 82 retail locations in eight metropolitan areas throughout three states. The Debtor filed for chapter 11 protection on March 5, 2006 (Bankr. N.D. Ohio Case No. 06-10605). Alan R. Lepene, Esq., Jeremy M. Campana, Esq., and Sean A. Gordon, Esq., at Thompson Hine LLP, represent the Debtor. Scott N. Opincar, Esq., at McDonald Hopkins Co., LPA, represents the Official Committee of Unsecured Creditors. Joseph M. Geraghty at Conway MacKenzie & Dunleavy gives financial advisory services to the Committee. When the Debtor filed for protection from its creditors, it estimated assets and debts between $10 million and $50 million. PULL'R HOLDINGS: First Meeting of Creditors Slated for July 18 -------------------------------------------------------------- The U.S. Trustee for Region 16 set the meeting of Pull'R Holdings LLC's creditors at 10:00 a.m., on July 18, 2006, at Room 2610, 725 S. Figueroa St., in Los Angeles, California. This is the first meeting of creditors required in all bankruptcy cases under Section 341(a) of the Bankruptcy Code. All creditors are invited, but not required, to attend. This Meeting of Creditors offers the one opportunity in a bankruptcy proceeding for creditors to question a responsible officer of the Debtor under oath about the company's financial affairs and operations that would be of interest to the general body of creditors. Headquartered in Santa Fe Springs, California, Pull'R Holdings LLC -- http://www.pullr.com/-- sell contractors' equipment and tools. They are known for brands such as Bucket Boss, Dead On Tools, and the Maasdam Pow'R-Pull line. The Company and its affiliate, Maasdam Pow'r Pull Inc., filed for bankruptcy protection on April 27, 2006 (Bankr. C.D. Calif. Case No. 06-11669). Lawrence Diamant, Esq., at Robinson, Diamant & Wolkowitz, APC, represent the Debtors in their restructuring efforts. An Official Committee of Unsecured Creditors has not yet been appointed. When the Debtors filed for bankruptcy, they reported $1 million to $10 million in total assets and $10 million to $50 million in total debts. PULL'R HOLDINGS: Hires Robinson Diamant as Bankruptcy Counsel ------------------------------------------------------------- The Hon. Richard M. Neiter of the U.S. Bankruptcy Court for the Central District of California gave Pull'R Holdings LLC permission to employ Robinson, Diamant & Wolkowitz, as its bankruptcy counsel. As reported in the Troubled Company Reporter on May 29, 2006, Robinson Diamant is expected to: a. provide the Debtor with legal advice and guidance with respect to its powers, duties, rights and obligations as a debtor-in-possession; b. assist in the preparation of a plan of reorganization, a disclosure statement for that plan, and all legal documents necessary; and c. perform additional legal services as required in the Debtor's chapter 11 case. Philip A. Gasteier, Esq., a member at Robinson Diamant, told the Court that he bills $495 per hour for his services. Mr. Gasteier disclosed that the Firm's attorneys and paralegals bill: Professional Hourly Rate ------------ ----------- Lawrence A. Diamant, Esq. $535 Edward M. Wolkowitz, Esq. $520 Irving M. Gross, Esq. $495 Douglas D. Kappler, Esq. $475 Sandford L. Frey, Esq. $490 Timothy J. Yoo, Esq. $445 Robyn B. Sokol, Esq. $430 Jeremy W. faith Esq. $340 Carmela Maria Z. Tan, Esq. $280 Todd A. Frealy, Esq. $280 Melanie C. Scott, Esq. $185 Yves Derac $175 Myrna R. Richardson $175 Ann Sokolowski $175 Mr. Gasteier assured the Court that his firm is disinterested as that term is defined in Section 101(14) of the Bankruptcy Code. Headquartered in Santa Fe Springs, California, Pull'R Holdings LLC -- http://www.pullr.com/-- sell contractors' equipment and tools. They are known for brands such as Bucket Boss, Dead On Tools, and the Maasdam Pow'R-Pull line. The Company and its affiliate, Maasdam Pow'r Pull Inc., filed for bankruptcy protection on April 27, 2006 (Bankr. C.D. Calif. Case No. 06-11669). Lawrence Diamant, Esq., at Robinson, Diamant & Wolkowitz, APC, represent the Debtors in their restructuring efforts. An Official Committee of Unsecured Creditors has not yet been appointed. When the Debtors filed for bankruptcy, they reported $1 million to $10 million in total assets and $10 million to $50 million in total debts. RAPID PAYROLL: Creditors Panel Taps Winthrop as Bankr. Counsel -------------------------------------------------------------- The Official Committee of Unsecured Creditors in Rapid Payroll, Inc.'s chapter 11 case asks the U.S. Bankruptcy Court for the Central District of California for authority to retain Winthrop Couchot Professional Corp. as its counsel, nunc pro tunc to May 22, 2006. Winthrop Couchot will: a) provide legal advice with respect to the Committee's duties, responsibilities and powers in the bankruptcy proceeding; b) assist the Committee in investigating the acts, conduct, assets, liabilities and financial condition of the Debtor and its insiders and affiliates; c) provide the Committee with legal advice and representation with respect to the negotiations, confirmation and implementation of a chapter 11 plan; d) provide the Committee with legal advice with respect to the distributions of the Debtor's assets, the prosecution of claims against various third parties, and any other matters relevant to the Debtor's case, or the formulation of a plan of reorganization in the bankruptcy proceedings; e) provide the Committee with legal advice and representation, if appropriate, with respect to the appointment of a trustee or examiner; and f) provide the Committee with legal advice and representation in any other legal proceeding, whether adversary or otherwise, involving the interests represented by the Committee. Winthrop Couchot shareholder Marc J. Winthrop, Esq., says he bills $565 per hour for his services, while the Firm's other professionals involved in the Debtor's case and their hourly rates are: Professional Hourly Rate ------------ ----------- Robert E. Opera $550 Sean A. O'Keefe $550 Paul J. Couchot $525 Richard H, Golubow $395 Peter W. Lianides $395 Garrick A. Hollander $375 William J. Wall $295 Legal Assistants: P.J. Marksbury $190 Joan Ann Murphy $190 Legal Assistant Associates $80 - $150 Mr. Winthorp assures the Court that the Firm does not hold any interest adverse to the Debtor and is "disinterested" as that term is defined in Sec. 101(14) of the Bankruptcy Code. Headquartered in Orange, California, Rapid Payroll Inc. fka Olsen Computer Systems, was in the business of licensing payroll processing software called Rapidpay and providing maintenance, support and updates for the software to its licensees. The Company was later acquired in November 1996 by Paychex, Inc. Rapid Payroll filed for chapter 11 protection on May 4, 2006 (Bankr. C.D. Calif. Case No. 06-10631). The firm of Robinson, Diamant & Wolkowitz, APC serves as the Debtor's counsel. On June 28, 2006, the Court authorized the Debtor to hire the firm of Irell & Manella LLP as its special litigation counsel through and including August 31, 2006. When the Debtor filed for protection from its creditors, it estimated assets between $1 million and $10 million and estimated debts between $10 million and $50 million. REFCO INC: Official Committee Wants Seat in Fee Panel ----------------------------------------------------- The Official Committee of Unsecured Creditors appointed in Refco, Inc., and its debtor-affiliates chapter 11 cases, supports the fee containment goals the Fee Protocol seeks to promote. However, the Committee cannot support approval of the Fee Protocol in its current form for three reasons: (i) It places disproportionate voting power with respect to the fee review process in the hands of fee earners, not creditors; (ii) The Committee, and not the Fee Protocol, should decide which of the Committee's members should serve on the Fee Committee; and (iii) The Debtors' contentions notwithstanding, the Fee Committee should have standing to appear and object at fee application hearings. The Committee suggests that the Debtors amend the Fee Protocol by providing that: 1. at least two of the five voting seats on the Fee Committee -- and thus appropriate voting power with respect to important Fee Committee decisions -- will be granted to the Creditors Committee members; 2. the Creditors Committee alone will decide which of its members occupy seats on the Fee Committee; and 3. the Fee Committee will have the power to speak with the single voice, greater efficiency, and enhanced authority that standing to appear at fee hearings confers. The Creditors Committee can only support approval of the Fee Protocol to the extent it is amended to address the concerns raised, Luc A. Despins, Esq., at Milbank, Tweed, Hadley & McCloy LLP, in New York, tells the Honorable Robert Drain of the United States Bankruptcy Court for the Southern District of New York. VR Global Partners, L.P.; Paton Holdings Ltd.; VR Capital Group Ltd.; and VR Argentina Recovery Fund, Ltd.; and Premier Bank International N.V. support the Creditors Committee's arguments. VR Global is co-chairperson of the Creditors Committee. Premier Bank is a Committee member. About Refco Inc. Based in 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. Albert Togut, the chapter 7 trustee, is represented by Togut, Segal & Segal LLP. On April 13, 2006, the Court appointed Marc S. Kirschner as Refco Capital Markets Ltd.'s chapter 11 trustee. Mr. Kirschner is represented by Bingham McCutchen LLP. RCM is Refco's operating subsidiary based in Bermuda. 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. 34; Bankruptcy Creditors' Service, Inc., 215/945-7000). REFCO INC: Meridian IT Wants Decision on Smartnet Maintenance Pact ------------------------------------------------------------------ Meridian IT Solutions asks the U.S. Bankruptcy Court for the Southern District of New York to compel and Refco Inc. and its debtor-affiliates to assume or reject the Smartnet Maintenance Contract, pursuant to Section 365(d)(2) of the Bankruptcy Code. In the alternative, pursuant to Section 362(d), Meridian wants the automatic stay lifted so it may terminate the agreement and instruct its vendor to cease providing services to the Debtors. Meridian also asks the Court to require the Debtors to provide adequate protection of its property interests in the contract by requiring payments pursuant to Sections 363(e) and 361. Meridian IT and the Debtors are parties to a Smartnet Maintenance Contract -- a one-year, prepaid contract. Meridian, through its third-party vendor, performs ongoing repair and maintenance for various of the Debtors' IT equipment. The parties renewed the Maintenance Contract on Sept. 16, 2005. The Debtors' purchase order called for a total cost of $328,325. In reliance upon the purchase order, Meridian pre-paid its vendor the entire sum of its contract, Michael T. Conway, Esq., at Lazare Potter Giacovas & Kranjac LLP, in New York, relates. When Refco filed for bankruptcy, Meridian received from the Debtors a check for $304,447, representing payment in full of the revised contract price. However, the Debtors stopped payment on the check the next day. As a consequence, Mr. Conway says, Meridian's vendor has been paid in full for the one-year maintenance agreement and has been performing critical maintenance services for the Debtors. However, Meridian has never been paid for those services. Mr. Conway notes that the Debtors have made no current payments to Meridian since the Petition Date, despite Meridian's many requests. The Debtors have yet to assume or reject the Maintenance Contract. They have taken no steps to do so. Mr. Conway also argues that Meridian is entitled to an administrative claim under Section 503(b)(1)(A) in the full contractual amount for all postpetition services provided pursuant to the contract. About Refco Inc. Based in 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. Albert Togut, the chapter 7 trustee, is represented by Togut, Segal & Segal LLP. On April 13, 2006, the Court appointed Marc S. Kirschner as Refco Capital Markets Ltd.'s chapter 11 trustee. Mr. Kirschner is represented by Bingham McCutchen LLP. RCM is Refco's operating subsidiary based in Bermuda. 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. 34; Bankruptcy Creditors' Service, Inc., 215/945-7000). REVLON CONSUMER: Wants Bank Credit Pact Raised by $75 Million ------------------------------------------------------------- Revlon, Inc. disclosed that its wholly-owned operating subsidiary, Revlon Consumer Products Corporation, is seeking an amendment to its bank credit agreement, dated July 9, 2004, that would increase the existing $700 million term loan facility under the Credit Agreement by $75 million. The Company intends to use the net proceeds from the term loan add-on for general corporate purposes. While not required, the amendment would also reset the existing senior secured leverage ratio covenant (the ratio of RCPC's Senior Secured Debt to EBITDA, as each such term is defined in the Credit Agreement) at 5.5 to 1 through June 30, 2007, stepping down to 5.0 to 1 for the remaining term of the Credit Agreement. The amendment would also enable RCPC to exclude from the definition of EBITDA under the Credit Agreement up to $25 million of restructuring charges and charges for certain product returns or product discontinuances. The Credit Agreement's existing asset- based multi-currency facility would remain unchanged. As previously announced, Revlon currently intends to conduct a further $75 million equity issuance in late 2006 or early 2007, the net proceeds of which would be used to reduce RCPC's indebtedness. Also as previously announced, the backstop obligations of MacAndrews & Forbes, Revlon's principal shareholder, will remain in effect to ensure that Revlon issues an additional $75 million of equity by March 31, 2007, and the existing $87 million line of credit from MacAndrews & Forbes will remain available to RCPC through the completion of the $75 million equity issuance. The proposed credit agreement amendment is expected to be consummated in late July 2006, subject to market and other customary conditions, including receipt of consents from the appropriate lenders. About Revlon Revlon , Inc. (NYSE: REV) -- http://www.revloninc.com/-- is a worldwide cosmetics, skin care, fragrance, and personal care products company. The Company's vision is to deliver the promise of beauty through creating and developing the most consumer preferred brands. The Company's brands include Revlon(R), Almay(R), Vital Radiance(R), Ultima(R), Charlie(R), Flex(R), and Mitchum(R). REVLON CONSUMER: Poor Performance Prompts S&P's Negative Outlook ---------------------------------------------------------------- Standard & Poor's Ratings Services revised its outlook on New York-based Revlon Consumer Products Corp. to negative from stable, following its proposed $75 million add-on term loan, and affirmed its 'B-' rating and its recovery rating of '2' on Revlon's existing senior secured term loan facilities that will now total $775 million. The 'B-' bank loan rating remains at the same level as the corporate credit rating; this and the '2' recovery rating indicate that the secured lenders can expect substantial (80%- 100%) recovery of principal in the event of default. Net proceeds from the $75 million add-on term loan will be used for general corporate purposes. The bank loan rating and accompanying analysis are based on preliminary documentation and are subject to review once final documentation has been received. Existing ratings on the company, including its 'B-' corporate credit rating, have been affirmed. About $1.4 billion pro forma total debt will be outstanding at closing. "The outlook revision reflects our increased concerns about weak operating performance forecasted in 2006, notable challenges with the launch of Vital Radiance, underperformance of the Almay and Revlon brands, and the additional debt from the proposed transaction," said Standard & Poor's credit analyst Patrick Jeffrey. These events have led to greater uncertainty regarding the company's ability to improve performance and reduce leverage. The ratings on Revlon reflect its participation in the highly competitive mass-market cosmetics industry, high leverage, and inconsistent operating performance. These risks are somewhat mitigated by the company's leading position in the sector and improved liquidity. Revlon faces two significantly larger and financially stronger competitors with leading market positions: * L'Oreal S.A. (A-1+) with its Maybelline brand, and * Procter & Gamble Co. (AA-/Negative/A-1+) with its Cover Girl and Max Factor brands. ROEDIGER INC: Case Summary & 20 Largest Unsecured Creditors ----------------------------------------------------------- Debtor: Roediger, Inc. fka Roediger Pittsburgh, Inc. P.O. Box 1436 Washington, Pennsylvania 15301 Bankruptcy Case No.: 06-10734 Chapter 11 Petition Date: July 11, 2006 Court: District of Delaware (Delaware) Judge: Brendan Linehan Shannon Debtor's Counsel: Francis A. Monaco Jr., Esq. Monzack and Monaco, P.A. 1201 Orange Street, Suite 400 Wilmington, Delaware 19801 Tel: (302) 656-8162 Fax: (302) 656-2769 Estimated Assets: $500,000 to $1 Million Estimated Debts: $1 Million to $10 Million Debtor's 20 Largest Unsecured Creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ Graphic Equipment Corp. Trade Debt $524,041 55 Wester Avenue Metuchen, NJ 08840 Whittaker Builders, Inc. Trade Debt $310,475 355A Mid Rivers Mall Drive St. Peters, MO 63376 Allegheny Valley Bank Judgment $272,485 5137 Butler Street Pittsburgh, PA 15201 SBC Capital Services Trade Debt $245,000 Aka Ameritech Credit Corp. 13160 Collections Center Drive Chicago, IL 60693 Roediger Vakuum-Und Haustechnick Trade Debt $209,510 c/o James J. Dries 130 East Randolph Drive Chicago, IL 60601 Joseph T. Ryerson & Sons Inc. Trade Debt $139,478 Kappe Associates Trade Debt $138,953 Allison Park Industrial Complex Trade Debt $87,785 Ritter Industries, inc. Trade Debt $82,460 Templeton & Associates Trade Debt $77,702 Goble Sampson Trade Debt $61,918 CID Associates, Inc. Trade Debt $52,935 Technical Systems, Inc. Trade Debt $47,420 Madison Filter Trade Debt $41,959 Wilkinson Industrial Coatings Trade Debt $32,562 UGI Energy Services, Inc. Trade Debt $32,095 Spraying Systems Inc. Trade Debt $28,291 RTS Plastics Inc. Trade Debt $27,807 Arthur Bloom & Associates Trade Debt $26,916 Motion Industries, Inc. Trade Debt $26,664 SAINT VINCENTS: Modifies Terms of Sun Life Escrow Agreement ----------------------------------------------------------- St. Vincents Catholic Medical Centers of New York and Sun Life Assurance Company of Canada have agreed to modify and supplement the terms of their Escrow Agreement to provide for the release and payment of certain account funds. On February 11, 2005, Sun Life made a $30,000,000 loan to SVMC evidenced by certain notes and secured by a Mortgage and Security Agreement, covering real property owned by SVCMC located at 275 North Street in Harrison, New York. As additional security, SVCMC also entered into an escrow agreement with Sun Life and Northmarq Capital, Inc., as escrow agent, pursuant to which the Debtor delivered $1,000,000 to Northmarq for deposit into an escrow account. Under the terms of the Escrow Agreement, the Account was funded to assure the performance of, and payment for, certain environmental Remediation Work to the Mortgaged Property. The Escrow Agreement provided that so long as SVCMC is not in default under the Escrow Agreement, the Mortgage, the Notes or any of the Loan Documents, the funds in the Account could be released under the performance criteria and the time periods established. SVCMC is in default under the Agreement, the Mortgage, the Notes and the Loan Documents. The parties stipulate and agree that: (1) Prior to the release of any funds from the Account, SVCMC will provide Sun Life with: (a) evidence that the amounts to be released from the Account represent out-of-pocket expenses that are reasonable, necessary, and actually incurred to perform the Remediation Work; and (b) lien waivers from the providers of the Remediation Work. (2) Funds will be disbursed from the Account, in this manner: (a) Fifty percent of the Remediation Work will be deemed completed by SVCMC, and the Escrow Agent will release up to $450,000 from the Account to SVCMC, at that time SVCMC has provided Sun Life with evidence reasonably satisfactory to Sun Life that the 10,000-gallon USTs and all contaminated soil associated with those USTs have been excavated and removed from the Mortgaged Property. (b) One hundred percent of the Remediation Work will be deemed completed by SVCMC, and the Escrow Agent will release up to $450,000 from the Account to SVCMC, at the time SVCMC has provided Sun Life with evidence reasonably satisfactory to Sun Life that the installation of appropriate replacement fuel storage tanks for those 10,000-gallon USTs has been completed. (c) The conditions to release up to $100,000 remaining in the Account to SVCMC will be deemed to be satisfied when Sun Life receives a letter from the New York State Department of Environmental Conservation indicating that no further work is necessary at the Mortgaged Property. 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. 28 Bankruptcy Creditors' Service, Inc., 215/945-7000) SAINT VINCENTS: Wants to Sell Two Lots in King and Queen Counties ----------------------------------------------------------------- Saint Vincents Catholic Medical Centers of New York and its debtor-affiliates seek authority from the U.S. Bankruptcy Court for the Southern District of New York to sell two nonresidential real properties, free and clear of any liens, claims and encumbrances, and subject to higher or better bids: -- a vacant lot located at 177 Buffalo Avenue, Brooklyn, New York 11213, designated as Block 1363, Lot 6 on Kings County tax maps, to Farmer Property Corp.; and -- a parcel of nonresidential real property located at 160-24 79th Avenue, Flushing, New York 11366, and designated as Block 6831, Lot 112 on Queens County tax maps, to World Homes Group Inc. Sale of Lot 6 The Debtors negotiated a contract for sale of substantially all the real property associated with the closed St. Mary's Hospital Complex. Lot 6 was not included in the sale. The Debtors seek to sell Lot 6 separately. The Debtors' broker, Massey Knakal Realty Services, Inc., contacted more than 500 local developers it believed might be interested in Lot 6 and followed up with potential buyers. Ten offers were received from various developers, the highest of which was $195,000 that included a 5% deposit. Massey Knakal indicated that the deposit was low for the type of property being sold, and as a result raised questions about the ability of the bidder to close on the transaction. At Massey Knakal's advice, the Debtors determined that the $190,000 offer by Farmer Property, which included a 10% deposit, was the best offer. Saint Vincent Catholic Medical Centers then negotiated a contract of sale. Pursuant to the Contract of Sale, Farmer Property will buy and the Debtors will sell Lot 6 for $190,000, free and clear of all liens, claims and encumbrances. The purchase price will be paid by bank or certified check, or by wire transfer. Farmer Property paid $19,000 upon signing of the Contract of Sale. The purchaser will pay the remaining $171,000 at the closing of the sale. Sale of Lot 112 Lot 112, which is approximately 3,720 square feet, formerly served as a small parking lot for visitors to the podiatry clinic at the former St. Joseph's Hospital. SVCMC closed the hospital and sold substantially all of the related assets prior to the Petition Date. Lot 112 was not sold when St. Joseph's Hospital was closed. In November 2005, the Debtors initiated efforts to sell Lot 112. Massey Knakal contacted more than 3,000 local property owners, reached out to more than 350 local developers, and posted Lot 112 on its Web site. The broker received more than 30 offers to purchase Lot 112. After extensive good faith, arm's-length negotiations, the Debtors have agreed to sell, and World Homes has agreed to purchase, the Property for $407,000 -- nearly $100,000 more than the amount Massey Knakal specified in its promotional material as the initial asking price. The parties entered into a Contract of Sale, pursuant to which they agreed that the purchase price will be paid by World Homes in this manner: (i) $20,350, upon signing of the Contract of Sale; (ii) $20,350, within five days after World Homes' receipt of written notice that the Debtors have obtained all of the Required Approvals; and (iii) $366,300, at Closing. Sales are Warranted The effectiveness of the Contracts of Sale are subject to all required approvals from the Roman Catholic Church, SVCMC's Board of Directors, the Court, and the government, if any. Andrew M. Troop, Esq., at Weil, Gotshal & Manges LLP, in New York, asserts that the Debtors' request should be granted because the proposed sales will bring in cash to their estates while allowing them to dispose of properties for which they have no use. The Debtors believe that both Contracts of Sale are the best possible offer for the properties, and that a public auction process would entail delay and attendant expense with no real likelihood of additional benefit to their estates. The cost of an auction under the circumstances is not justified in light of the purchase price, Mr. Troop adds. According to Mr. Troop, General Electric Capital Corporation, which lien attaches to substantially all of the Debtors' property, holds the only lien on the Properties. SVCMC has received consent from GE Capital to sell the Properties free and clear of its lien. Mr. Troop relates that GE Capital has also agreed to allow SVCMC to retain the proceeds of the sale, and to reduce the amount available to SVCMC under the term loan portion of the Debtors' DIP financing. Consistent with the DIP Order, the agreement with GE Capital regarding the use of the proceeds from the sale of the Property has been provided to the Creditors' Committee for review. Counsel to the Creditors' Committee has requested that the agreement provide that SVCMC have the option either to retain the proceeds as described, or to pay down the term loan. SVCMC is pursuing this request with GE Capital, Mr. Troop says. The Debtors further ask the Court to determine that Farmer Property and World Homes are entitled to the protections of a good faith purchaser under Section 363(m) of the Bankruptcy Code. 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. 29 Bankruptcy Creditors' Service, Inc., 215/945-7000) SEROLOGICALS CORP: Merger Completion Cues S&P to Withdraw Ratings ----------------------------------------------------------------- Standard & Poor's Ratings Services withdrew its ratings on Serologicals Corp., including the 'B+' corporate credit rating, as the acquisition of the company by Millipore Corp. has been completed. Ratings List To From Serologicals Corp. Corporate credit rating NR B+/Watch Pos/-- Subordinated debt NR B-/Watch Pos Shelf debt Senior unsecured NR B+/Watch Pos (prelim) Preferred stock NR B-/Watch Pos (prelim) SILICON GRAPHICS: Morgan Lewis Wants to Hire CRA as Consultants --------------------------------------------------------------- Because of the nature of their operations and contemplated reorganization, Silicon Graphics, Inc., and its debtor-affiliates acknowledge that it is essential for Morgan, Lewis & Bockius LLP, their special intellectual counsel, to employ consultants. Pursuant to Section 328(a) of the Bankruptcy Code, the Debtors ask the U.S. Bankruptcy Court for the Southern District of New York to approve Morgan Lewis' retention of CRA International, Inc., as consultants, nunc pro tunc to the Petition Date. Barry Weinert, Esq., vice president, secretary and general counsel of Silicon Graphics, Inc., explains that CRA's selection is based on the Company's expertise and extensive knowledge in the field of intellectual property valuation. CRA also performed patent valuation work for the Debtors prior to the Petition Date. CRA is intimately familiar with the Debtors' portfolio and can complete its valuation quickly and efficiently, Mr. Weinert adds. As consultants for Morgan Lewis', CRA will provide analysis, advice, and an expert report, if necessary, with respect to the valuation of certain patents held by the Debtors. To the extent litigation arises with respect to patent issues, CRA will analyze and respond to testimony proffered and provide deposition or expert testimony. In exchange for its services, CRA will be paid based on its customary hourly rates: Presidents and Vice Presidents $400 to $815 Principals $360 to $580 Associate Principals $300 to $460 Senior Associates $250 to $400 Consulting Associates $225 to $310 Associates $185 to $275 Analysts $170 to $200 Other Support $105 The Debtors, and not Morgan Lewis, will be responsible for the payment of the fees and reimbursement of the expenses of CRA, which will not exceed $750,000. Prior to the Petition Date, CRA received from the Debtors a general retainer of $25,000, of which the balance remains $25,000. Jonathan D. Yellin, general counsel and vice president of the firm, assures the Court that his firm is a "disinterested person" as that term is defined in Section 101(14) of the Bankruptcy Code, as modified by Section 1107(b) of the Bankruptcy Code. CRA has no connection with the Debtors, their creditors, or other parties-in-interest, and does not hold or represent any interest adverse to the Debtors' estates, Mr. Yellin says. About Silicon Graphics 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. 8; Bankruptcy Creditors' Service, Inc., 215/945-7000) SILICON GRAPHICS: Valuation Analysis Under First Amended Plan ------------------------------------------------------------- At Silicon Graphics, Inc., and its debtor-affiliates' request, Bear, Stearns & Co., Inc., prepared a valuation analysis of the Debtors' businesses based on the Debtors' projected financial results and market conditions as of June 30, 2006. In preparing the valuation analysis, Bear Stearns: -- reviewed several of the Debtors' internal financial and operating data, and operating and financial forecasts, including the Projections; -- discussed with some of the Debtors' senior executives: * the Debtors' current operations and prospects; and * key assumptions related to the Projections; -- prepared discounted cash flow analyses based on the Projections, utilizing various discount rates and terminal value multiples; and -- considered: * the prevailing trading multiples of certain publicly traded companies in businesses reasonably comparable to the Debtors' operating businesses; * the transaction multiples of acquisitions involving companies in businesses reasonably comparable to the Debtors' operating businesses; * the indications of interest received from various third parties regarding a transaction with the Debtors; * the results of estimates of value for certain non-core assets, including non-core intellectual property and certain litigation claims, prepared by the Debtors' management and CRA International; and * the other analyses as Bear Stearns deemed necessary under the circumstances. Based on its analyses, Bear Stearns estimates the Debtors' total enterprise value to range from $210,000,000 to $275,000,000, with a mid-point value of $242,500,000. To calculate the implied reorganized equity value of the Reorganized Debtors, Bear Stearns reduced the mid-point TEV estimate by the pro forma net debt levels as of September 30, 2006, and the value of the Dynamic Random Access Memory Claims. Mid-point Reorganization Value ------------------------------ Reorganization Value $242,500,000 Less: Net Debt and Estimated Value of DRAM Claims 63,400,000 ------------ New Preferred and Common Equity Value $179,100,000 ============ About Silicon Graphics 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. 10; Bankruptcy Creditors' Service, Inc., 215/945-7000) STELLAR FUNDING: S&P Puts Class A-3 Notes on Positive Watch ----------------------------------------------------------- Standard & Poor's Ratings Services placed its rating on the class A-3 notes issued by Stellar Funding Ltd., a high-yield arbitrage CBO transaction managed by Guggenheim Investment Management LLC, on CreditWatch with positive implications. The CreditWatch placement reflects factors that have positively affected the credit enhancement available to support the notes since the ratings were previously lowered on Oct. 9, 2002. These factors include paydowns of approximately $34.396 million to the class A-3 notes since the October 2002 downgrade. Standard & Poor's will review the results of current cash flow runs generated for Stellar Funding Ltd. to determine the level of future defaults the rated tranches can withstand under various stressed default timing and interest rate scenarios, while still paying all of the interest and principal due on the notes. The results of these cash flow runs will be compared to the projected default performance of the performing assets in the collateral pool to determine whether the ratings currently assigned to the notes remain consistent with the credit enhancement available. Rating Placed on Creditwatch Positive Stellar Funding Ltd. Rating ------ Class To From ----- -- ---- A-3 CCC-/Watch Pos CCC- Other Outstanding Rating Stellar Funding Ltd. Class Rating ----- ------ A-4 CC Transaction Information Issuer: Stellar Funding Ltd. Co-issuer: Stellar Funding CBO Corp. Current manager: Guggenheim Investment Management LLC Underwriter: Credit Suisse First Boston Corp. Trustee: JPMorgan Chase Bank N.A. Transaction type: High-yield arbitrage CBO Tranche Initial Last Current Information Report Downgrade Action Date (MM/YYYY) 05/1999 10/2002 07/2006 Cl A-3 note rtg. AAA CCC- CCC-/Watch Pos Cl A-3 note bal. (mil. $) 207 172 137 Cl A-4 note rtg. A CC CC Cl A-4 note bal. (mil. $) 48 48 48 STONY HILL: S&P Places BB-Rated Notes on Negative Watch ------------------------------------------------------- Standard & Poor's Ratings Services placed its ratings on nine U.S. synthetic CDO tranches on CreditWatch with negative implications. At the same time, the rating on one tranche is affirmed and removed from CreditWatch negative. Stony Hill CDO SPC's Series 2005-1 SEG Notes currently carries S&P's BB rating. The ratings placed on CreditWatch negative reflect negative rating migration in their respective portfolios. The tranches with ratings placed on CreditWatch negative had SROCs (synthetic rated overcollateralization ratios) that fell below 100% during the month-end run. The tranches with ratings that were removed from Credit Watch Negative had ratings that were above 100% during the month-end run. Ratings List Greystone CDO SPC Series 2006-2 Rating ------ Class To From SROC(%) ----- -- ---- ------- A AA/Watch Neg AA 99.88 Mistletoe ORSO Trust 3 Rating ------ Class To From SROC(%) ----- -- ---- ------- 5 Cr Link A/Watch Neg A 99.14 Momentum CDO (Europe) Ltd. Series 2005-9 Rating ------ Class To From SROC(%) ----- -- ---- ------- Notes A-/Watch Neg A- 99.70 Morgan Stanley ACES SPC Series 2006-7 Rating ------ Class To From SROC(%) ----- -- ---- ------- IA AA+/Watch Neg AA+ 99.97 Morgan Stanley ACES SPC Series 2005-16 Rating ------ Class To From SROC(%) ----- -- ---- ------- Ser2005 A- A-/Watch Neg 100.01 REPACS Trust Series 2006 Mount Ventoux Rating ------ Class To From SROC(%) ----- -- ---- ------- Debt Units AAA/Watch Neg AAA 99.58 STEERS Credit Linked Trust Minoa Tranche Series 2006-1 Rating ------ Class To From SROC(%) ----- -- ---- ------- Trust Cert AA+/Watch Neg AA+ 99.72 Stony Hill CDO SPC Series 2005-1 SEG Rating ------ Class To From SROC(%) ----- -- ---- ------- Notes BB/Watch Neg BB 99.68 Toronto-Dominion Bank CAD 63,866,000 portfolio credit-linked notes Rating ------ Class To From SROC(%) ----- -- ---- ------- A BBB-/Watch Neg BBB- 99.51 Tribune Ltd. Series 26 Rating ------ Class To From SROC(%) ----- -- ---- ------- Aspen-B2 AA/Watch Neg AA 99.75 THERMADYNE HOLDINGS: Reports Unaudited and Restated Financials -------------------------------------------------------------- Thermadyne Holdings Corp. reported its unaudited results for the: -- first quarter ended March 31, 2006, -- fourth quarter ended Dec. 31, 2005, -- restated unaudited results for previously reported 2005 quarters, -- restated unaudited results for the twelve months ended Dec. 31, 2004, -- restated unaudited results for previously reported 2004 quarters, and -- restated unaudited results for the seven months ended Dec. 31, 2003. The Company does not expect any material changes from these unaudited results when it files its audited results with the Securities and Exchange Commission. These filings are expected to be made in the near future. Highlights -- Net sales growth trend continued in comparison to prior-year periods: * 5.7% in fourth-quarter 2005, * 7.1% for the year 2005, and * accelerating to 11.3% in the first-quarter 2006; -- Operating EBITDA of $13.0 million for the first-quarter 2006 was unchanged from the restated 2005 comparable-period and Operating EBITDA was $34.2 million in 2005 versus a restated $41.8 million in 2004; -- Significant cost savings and other operational improvements reduced the impact of sharply higher materials costs. Price increases, purposely delayed by the Company until it resolved on-time delivery problems in 2005, are being implemented to help reestablish gross profit levels; and -- Four non-core divestitures generated proceeds of $28.8 million, primarily used to fund working capital needs for the Company's growing operations and increase liquidity. Restatement The Company restated previously reported results for the first three quarters of 2005 and each quarter of 2004 and restated the seven months ended Dec. 31, 2003. The previously issued financial statements have been corrected for adjustments in accounting for income taxes, foreign currency translation and the accounting of certain foreign business units. The financial statement presentations have also been reclassified to separate the assets and the liabilities and the results of operations of the discontinued operations. Financial and Operating Review for First-Quarter 2006 Net sales in the first quarter of 2006 rose to $122.9 million, an increase of 11.3% from the same quarter of 2005. "The double-digit sales increase was driven by new product introductions, market share gains, price increases and solid growth in all geographic regions, particularly the key U.S. independent industrial channel and Latin America. We are pleased with the excellent demand for our higher margin gas equipment, arc accessories and plasma lines, reversing some of the weakness we experienced in these lines in 2005," Paul D. Melnuk, the Company's chairman and chief executive officer, commented. Year-to-year inflation was led by increases in copper and brass of 55% and 60%, respectively. These are key raw material inputs used in many of the Company's products. Margins were also impacted by the incremental production and handling costs in the TexMex operations related to achieving on-time delivery performance expectations of our customers. The Company expects operational gains will offset further commodity cost increases experienced in the second-quarter 2006, and product price increases to be instituted by the Company in August are targeted to regain lost gross profit. The year-to-year quarterly increase in gross profit was offset by a $1.0 million increase in selling, general and administrative costs due primarily to higher professional fees associated with Sarbanes-Oxley compliance and related control deficiency remediation efforts. Interest costs increased $1.1 million primarily related to higher interest rates, and income tax expenses increased by $1.8 million. As a result, the Company reported a $1.1 million loss from continuing operations for the first-quarter 2006 and a $600,000 loss from discontinued operations. This compares with income of $1.5 million from continuing operations and $600,000 income from discontinued operations in the restated comparable prior-year period. For the first quarter of 2006, the Company recognized a net loss including discontinued operations of $1.7 million versus restated net income of $2.0 million in the first-quarter 2005 period. Operating EBITDA from continuing operations (a non-GAAP measure described below) was $13.0 million in the first quarters of 2006 and 2005. Outlook for 2006 "Although sharply higher material cost inflation has limited our bottom-line progress, we have a good start in 2006 with an 11% sales gain in the first quarter and continuing top line strength in the second quarter," Mr. Melnuk commented. "We expect 2006 to show strong net sales growth, productivity gains, consistent on-time delivery at or near our 95% target and strengthening Operating EBITDA. Materials cost inflation, led by unprecedented increases in commodity prices experienced through much of the first half together with the additional professional fees incurred in connection with Sarbanes-Oxley compliance, related control deficiency remediation efforts and delayed financial filings have presented additional challenges for the year. "However, we have been able to execute initiatives that largely offset these higher costs such that we believe we will report an increase in Operating EBITDA this year. Further, we have announced a price increase effective Aug. 1, 2006, that should compensate for the higher costs," he added. "Beyond this, we continue to aggressively work a host of initiatives to increase sales and expand market share, improve customer service and reduce costs. Considerable progress has already been made and will continue in advancing our product and brand strategies, improving on-time delivery performance, expanding our low-cost country sourcing initiatives and increasing productivity," he said. "Needing to keep inventories at high levels to help address our on-time delivery problems of 2005, we purposely waited to target working capital improvements. We now have a dedicated team under the direction of a senior executive that is focused on a comprehensive effort to improve inventory turns on a sustainable basis. We expect this effort will begin to show meaningful results in the second half of 2006," he concluded. Financial and Operating Overview of 2005 Net sales in the fourth quarter of 2005 rose to $114.0 million, an increase of 5.7% from the same quarter of 2004 continuing the pattern of year-over-year quarterly sales growth in 2005. Gross profit was $29.5 million, or 25.8% of sales, in the fourth quarter of 2005 as compared with $28.9 million, or 26.8% of sales, in the prior-year restated fourth-quarter period. The 2005 fourth-quarter gross margin was reduced by material cost inflation of $8.5 million, which the Company had decided to absorb until it improved its production and delivery performance. For the fourth quarter of 2005, the Company incurred a total net loss of $23.5 million including the loss from discontinued operations of $13.4 million as compared to the restated total net loss in 2004 of $10 million including a loss from discontinued operations of $200,000. Operating EBITDA was $1.6 million in the fourth quarter of 2005 and $5.3 million in the fourth quarter of 2004 as restated. Net sales for 2005 increased 7.1% over the restated prior year despite the adverse impact delivery issues had on customer service levels reflecting strong underlying end user demand, accelerating new product introductions and price increases at the start of the year. "Without the results of our improvement initiatives, gross margins would have been materially lower given the inflation levels," Mr. Melnuk said. "However, margins could have been even better had we not experienced increased costs from expediting production to catch up on late deliveries nor purposely postponed price increases that would have offset some of the inflation until the end of the year when the disruption from delivery problems was solved," Mr. Melnuk continued. "While the financial results lagged our goals in 2005, we made substantial strides toward improving our long-term competitive position and profitability. During the year, we began implementing a strategy to better position our products in the market, based on three distinct product market segments. This strategy should give us broader market coverage and enhance customer service. "We also made significant investments in new product development that better position us for continued new product sales growth in 2006 and beyond. We have launched initiatives that have reduced costs to date and that we believe will significantly reduce costs over time, improving profitability and working capital efficiency in future periods. This includes the commencement of manufacturing in China through a joint venture and establishing a global sourcing and engineering base in Asia." Non-Core Businesses The Company divested two non-core businesses in December 2005 and another in March 2006 generating proceeds of $21.3 million. The Company utilized $4 million of these proceeds to acquire the minority interest in its South African non-core businesses and the remainder has been used to repay outstanding balances of the working capital facility. The 2005 consolidated financial results present these three divested operations (Genset, Soltec and Plant Hire) as discontinued operations. In April 2006, the Company sold TecMo, a small Italian subsidiary, for approximately $7.5 million. The proceeds were also used to repay outstanding balances of the working capital facility in the second quarter of 2006. TecMo was treated as a discontinued operation in the first-quarter 2006 and the prior year financial statements are also reclassified accordingly. "We have made excellent progress on our non-core business evaluation process, completing four sales to date generating proceeds of almost $29 million, which were used primarily to fund working capital needs for the Company's growing operations and increase liquidity. We are actively evaluating the remaining South African businesses and expect any additional divestitures to be completed in the third quarter enabling us to reduce debt and sharpen the focus on our core business lines," Mr. Melnuk stated. Cash Flow and Liquidity As of Dec. 31, 2005, the Company had reduced its net indebtedness by $11.4 million from the restated amounts as of Sept. 30, 2005. This was primarily the result of the sale of the Genset business unit, which provided an aggregate $12.3 million of cash and assumption of liabilities by the buyer. At Dec. 31, 2005, the Company had combined cash and availability under its Working Capital Facility of $28.5 million. As of March 31, 2006, net indebtedness had increased $10.5 million to $258 million as compared to the Dec. 31, 2005, level. This increase along with the $9.0 million of proceeds from the disposal of Soltec and Plant Hire funded working capital needs arising from increased levels of accounts receivables, seasonal payment obligations of interest and certain vendor payables and to purchase minority interest in the Company's South African business unit for $4.0 million. As of March 31, 2006, the Company had combined cash and availability under its Working Capital Facility of $28.0 million. As of June 30, 2006, the Company had combined cash and availability under its revolver of $38.0 million with the increase from prior periods attributable in part to the April 2006 sale of TecMo for approximately $7.5 million. Strengthened Operations Management Recently, two outstanding and experienced individuals have joined Thermadyne's manufacturing group to further accelerate progress in enhancing operational performance. Matthew J. Blake joined in April as the general manager of the Denton and Roanoke, Texas plants. Mr. Blake's background includes successful manufacturing turnarounds at Newell Rubbermaid and management experience with General Electric Company. He holds a B.S. in Mechanical Engineering, an M.S. in Engineering Global Operations Management and an M.B.A. Prior to his corporate management experience, Mr. Blake served six years as a U.S. Navy officer. In June, L.E. (Larry) Rybicki joined as Senior Vice President, Manufacturing Americas with overall responsibility for manufacturing operations in Brazil, Kentucky, Mexico and Texas. Just prior to joining Thermadyne, Mr. Rybicki worked for Thermadyne on a contract basis and was integral to the turnaround in the TexMex delivery performance. Previous employment includes 20 years with General Electric Company and 11 years with Emerson Electric. He comes to the Company as a seasoned manufacturing executive having held several diverse management positions as well as responsibility for the construction and start-up of manufacturing plants in the U.S., Mexico, Puerto Rico and Brazil. He holds a B.S. in Civil Engineering and a M.S. in Industrial Engineering. Consent of Extension to Complete Filings The Company does not expect any material changes from these unaudited results when it files its audited results with the SEC. However, because some uncertainties remain in completing the audit and the SEC reports for 2005 and the quarter ending March 31, 2006, the Company will commence discussions with the lenders and bondholders to obtain consent for a further extension of time to complete the filings. The Company also seeks consents for extension of time to submit audited financial statements to the Securities and Exchange Commission beyond July 19, 2006. Based in St. Louis, Missouri, Thermadyne Holdings Corporation (Pink Sheets: THMD) -- http://www.Thermadyne.com/-- is a global marketer of cutting and welding products and accessories under a variety of brand names including Victor(R), Tweco(R), Arcair(R), Thermal Dynamics(R), Thermal Arc(R), Stoody(R), and Cigweld(R). * * * As reported in the Troubled Company Reporter on March 21, 2006, Moody's Investors Service placed Thermadyne Holdings Corporation's Caa1 rating on $175 million 9.25% senior subordinated notes, due 2014, rated; and B2 Corporate Family Rating on review for possible downgrade. As reported in the Troubled Company Reporter on April 27, 2005, Standard & Poor's Ratings Services lowered its corporate credit rating on Thermadyne Holdings Corp. to 'B-' from 'B+', and subordinated debt rating to 'CCC' from 'B-'. S&P assigned a negative outlook at that time. TRANSAX INTERNATIONAL: Amends 2006 and 2005 Financial Statements ---------------------------------------------------------------- Transax International Limited filed with the Securities and Exchange Commission on July 10, 2006, its amended financial statements for: -- the second quarter ended June 30, 2005; -- the third quarter ended Sept. 30, 2005; -- the year ended Dec. 31, 2005; and -- the first quarter ended March 31, 2006. The Company's Statement of Operations showed: For the period ended ---------------------------------------------- Quarter Quarter Year Quarter 06/30/05 09/30/05 12/31/05 03/31/06 ---------- ---------- --------- ----------- Revenue $861,023 $948,993 $3,380,150 $981,058 Net (Loss) ($167,042) ($317,780) ($764,484) ($691,704) The Company's Balance Sheet showed: For the period ended ---------------------------------------------- Quarter Quarter Year Quarter 06/30/05 09/30/05 12/31/05 03/31/06 ---------- ---------- ---------- ---------- Current Assets $534,525 $535,898 $494,224 $691,719 Total Assets $1,771,040 $1,753,792 $1,693,656 $1,855,377 Current Liabilities $2,333,245 $2,547,470 $2,563,200 $3,350,909 Total Liabilities $3,289,652 $3,355,092 $3,321,296 $4,249,692 Total Stockholders' Equity $1,518,612 $1,601,300 $1,627,640 $2,394,315 Going Concern Doubt Moore Stephens, P.C., in New York, raised substantial doubt about Transax International Limited'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, and working capital and stockholders' deficiencies. Based in Miami, Florida, Transax International Limited (OTCBB: TNSX) -- http://www.transax.com/-- provides hospitals, physicians and health insurance companies using health information management systems to manage coding, compliance, abstracting and recording of management processes. The Company's subsidiaries, TDS Telecommunication Data Systems LTDA provides services in Brazil; Transax Australia Pty Ltd. provides those services in Australia; and Medlink Technologies, Inc., initiates research and development. UNITED ENERGY: Court Approves Hoyer Hoyer as Bankruptcy Counsel --------------------------------------------------------------- United Energy Coal, Inc., obtained authority from the U.S. Bankruptcy Court for the Northern District of West Virginia to employ Hoyer, Hoyer & Smith, PPLC, 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, as debtor-in-possession, all necessary motions, applications, answers, orders, reports and other legal papers; and c. perform all other legal services for the Debtor as 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 Jenelle L. Harper, Esq. $125 Paralegals $75 The Debtor discloses that it has paid the firm a $75,000 retainer. To the best of the Debtor's knowledge, the firm does not represent any interest adverse to it or its estate. The firm's attorneys can be reached at: Hoyer, Hoyer & Smith, PPLC 22 Capitol Street Charleston, West Virginia 25301 Tel: 304-344-9821 Fax: 304-344-9519 http://www.hhsmlaw.com/ Headquartered in Oakland, Maryland, United Energy Coal, Inc., filed for chapter 11 protection on May 31, 2006 (Bankr. N.D. W.Va. Case No. 06-00453). David A. Hoyer, Esq., at Hoyer, Hoyer & Smith, PLLC, represents the Debtor. When the Debtor filed for protection from its creditors, it listed total assets of $103,575,293 and total debts of total debts of $94,016,306. UNITED ENERGY: Files Schedules of Assets and Liabilities -------------------------------------------------------- United Energy Coal, Inc., delivered to the U.S. Bankruptcy Court for the Northern District of West Virginia its schedules of assets and liabilities, disclosing: Name of Schedule Assets Liabilities ---------------- ------ ----------- A. Real Property $618,970 B. Personal Property $103,057,286 C. Property Claimed as Exempt D. Creditors Holding Secured Claims $1,550,915 E. Creditors Holding Unsecured Priority Claims $79,592 F. Creditors Holding $93,524,617 Unsecured Nonpriority Claims ----------- ----------- Total $103,676,256 $95,155,124 Headquartered in Oakland, Maryland, United Energy Coal, Inc., filed for chapter 11 protection on May 31, 2006 (Bankr. N.D. W.Va. Case No. 06-00453). David A. Hoyer, Esq., at Hoyer, Hoyer & Smith, PLLC, represents the Debtor. When the Debtor filed for protection from its creditors, it listed total assets of $103,575,293 and total debts of total debts of $94,016,306. U.S. CONCRETE: Completes Private Placement of 8-3/8% Senior Notes ----------------------------------------------------------------- U.S. Concrete Inc. completed the private placement of $85 million aggregate principal amount of its 8-3/8% Senior Subordinated Notes due 2014 on July 5, 2006. Citigroup Global Markets Inc., Banc of America Securities LLC, Capital One Southcoast, Inc. and Comerica Securities, Inc, are the initial purchasers. The notes were priced at 98.26% of their principal amount and were issued under the First Supplemental Indenture dated as of July 5, 2006 with Wells Fargo Bank, National Association, as trustee. On June 29, 2006, U.S. Concrete entered into an amendment to its Credit Agreement with Citicorp North America Inc., as administrative agent, Bank of America, N.A., as syndication agent, JPMorgan Chase Bank, as documentation agent, and the lenders and issuers. The credit agreement amendment was to enable U.S. Concrete to make the $33 million loan to Atlas Investments relative to its acquisition of Alberta Investments and Alliance Haulers. On June 30, 2006, U.S. Concrete entered into an Amended and Restated Credit Agreement with Citicorp North America Inc., as administrative agent, Bank of America, N.A., as syndication agent, JPMorgan Chase Bank, as documentation agent, and the lenders and issuers. The Amendments will: (a) decrease the interest rate margins applicable to loans and commissions payable on letters of credit issued under the agreement by 25 basis points; (b) increase the maximum permitted leverage ratio applicable to the incurrence of additional subordinated indebtedness; (c) extend the scheduled termination date of the revolving credit commitments to March 2011 from March 2009; (d) release the real estate mortgages that secure the obligations under the agreement; (e) include a consent to the Alberta acquisition and the financing of that acquisition; and (f) decrease the commitment fee applicable to the unused portion of the facility by 12.5 basis points, to an annual rate of 0.25% of the average daily unused commitments. U.S. Concrete Inc. (NASDAQ: RMIX) -- http://www.us-concrete.com/ -- provides ready-mixed concrete and related concrete products and services to the construction industry in several major markets in the United States. The Company has 106 fixed and seven portable ready-mixed concrete plants, 10 pre-cast concrete plants, three concrete block plants and three aggregates quarries. During 2005, these facilities produced approximately 6.6 million cubic yards of ready-mixed concrete, 5.3 million eight-inch equivalent block units and 1.9 million tons of aggregates. * * * As reported in the Troubled Company Reporter on June 20, 2006, Standard & Poor's Ratings Services revised its outlook on Houston, Texas-based U.S. Concrete Inc. to positive from stable and affirmed its 'B+' corporate credit rating. U.S. CONCRETE: Completes $165 Million Alberta & Alliance Purchase ----------------------------------------------------------------- U.S. Concrete, Inc. completed its acquisition of all the outstanding equity interests in Alberta Investments, Inc. and Alliance Haulers on July 5, 2006. The purchase price for the acquisition was $165 million. The Stock Purchase Agreement by and among U.S. Concrete, Alberta Investments, Inc., Alliance Haulers, Inc., Atlas Concrete Inc. and Wild Rose Holdings, Ltd. was dated as of June 27, 2006, Under a related Promissory Note, dated July 3, 2006, U.S. Concrete made a loan of $33 million to Atlas Investments, Inc., a wholly owned subsidiary of Alberta Investments, to enable Alberta Investments to make a $33 million distribution to its parent entity. U.S. Concrete also entered into a Pledge and Security Agreement with Atlas Concrete, Wild Rose and Alberta Investments, which agreed to pledge all of their capital stock in entities involved in the acquisition transaction as security for the loan. At the closing of the acquisition, an amount equal to the loan was offset against the purchase price U.S. Concrete paid, and the pledgors' obligations under the Pledge and Security Agreement were terminated. U.S. Concrete Inc. (NASDAQ: RMIX) -- http://www.us-concrete.com/ -- provides ready-mixed concrete and related concrete products and services to the construction industry in several major markets in the United States. The Company has 106 fixed and seven portable ready-mixed concrete plants, 10 pre-cast concrete plants, three concrete block plants and three aggregates quarries. During 2005, these facilities produced approximately 6.6 million cubic yards of ready-mixed concrete, 5.3 million eight-inch equivalent block units and 1.9 million tons of aggregates. * * * As reported in the Troubled Company Reporter on June 20, 2006, Standard & Poor's Ratings Services revised its outlook on Houston, Texas-based U.S. Concrete Inc. to positive from stable and affirmed its 'B+' corporate credit rating. USG CORP: Extends Deadline to Exercise Stock Rights to July 27 -------------------------------------------------------------- In a further amendment to its registration statement covering certain rights and shares of common stock, USG Corporation discloses in a regulatory filing with the Securities and Exchange Commission that the exercise of rights expires at 5:00 p.m., on July 27, 2006, unless the exercise period is extended by the Company. USG Chairman and Chief Executive Officer William C. Foote states that shareholders who do not exercise or sell their rights before the expiration of the Rights Offering will lose any value represented by their rights. As previously reported, USG has scheduled June 30, 2006, as the record date for the Rights Offering. The Company intended to distribute at no charge to stockholders one transferable right for each share of common stock held on the record date. A full-text copy of USG's Fourth Amended Registration Statement is available at no charge at http://ResearchArchives.com/t/s?da4 A full-text copy of a Final Prospectus dated June 30, 2006, supplementing the Registration Statement is available at no charge at http://ResearchArchives.com/t/s?da5 Headquartered in Chicago, Illinois, USG Corporation -- http://www.usg.com/-- through its subsidiaries, is a leading manufacturer and distributor of building materials producing a wide range of products for use in new residential, new nonresidential and repair and remodel construction, as well as products used in certain industrial processes. The Company filed for chapter 11 protection on June 25, 2001 (Bankr. Del. Case No. 01-02094). David G. Heiman, Esq., Gus Kallergis, Esq., Brad B. Erens, Esq., Michelle M. Harner, Esq., Mark A. Cody, Esq., and Daniel B. Prieto, Esq., at Jones Day represent the Debtors in their restructuring efforts. Lewis Kruger, Esq., Kenneth Pasquale, Esq., and Denise Wildes, Esq., represent the Official Committee of Unsecured Creditors. Elihu Inselbuch, Esq., and peter Van N. Lockwood, Esq., at Caplin & Drysdale, Chartered, represent the Official Committee of Asbestos Personal Injury Claimants. Martin J. Bienenstock, Esq., Judy G. Z. Liu, Esq., Ralph I. Miller, Esq., and David A. Hickerson, Esq., at Weil Gotshal & Manges LLP represent the Statutory Committee of Equity Security Holders. Dean M. Trafelet is the Future Claimants Representative. Michael J. Crames, Esq., and Andrew A. Kress, Esq., at Kaye Scholer, LLP, represent the Future Claimants Representative. Scott Baena, Esq., and Jay Sakalo, Esq., at Bilzen Sumberg Baena Price & Axelrod LLP, represent the Asbestos Property Damage Claimants Committee. When the Debtors filed for protection from their creditors, they listed $3,252,000,000 in assets and $2,739,000,000 in debts. The Debtors emerged from bankruptcy protection on June 20, 2006. (USG Bankruptcy News, Issue No. 116; Bankruptcy Creditors' Service, Inc., 215/945-7000) USG CORP: Court Won't Stay McDowell's Action Against Contractor --------------------------------------------------------------- The U.S. Bankruptcy Court for the District of Delaware denied the request of USG Corporation and its debtor-affiliates for preliminary injunction to stay an action filed by McDowell Welding and Pipefitting, Inc., against United States Gypsum's general contractor, BE&K Construction Co., Inc., in Oregon State Circuit Court. The Debtors filed an initial complaint against McDowell in August 2002 seeking to extend the automatic stay to enjoin prosecution of the Oregon Action against BE&K for duration of the stay in effect on U.S. Gypsum's behalf. The Debtors asserted that an injunction is necessary to ensure that the purposes of automatic stay imposed by Section 362 of the Bankruptcy Code will not be frustrated by either: (i) subjecting U.S. Gypsum to the risk of collateral estoppel and to a potential diminution of its assets because of contractual reimbursement obligations and potential obligation to indemnify and defend BE&K based on agency allegations; or (ii) permitting a lawsuit, which involves claims that effectively force U.S. Gypsum to participate as the real party-in-interest, to proceed notwithstanding the automatic stay in effect as to U.S. Gypsum. McDowell opposed the Debtors' preliminary injunction request, arguing that there is no legitimate basis, procedural or substantive, to extend the automatic stay to shield BE&K from its independent liability to McDowell. The Bankruptcy Court denied the Debtors' preliminary injunction request. Subsequently, the Debtors dismissed the action voluntarily and without prejudice pursuant to Rule 7041(a)(1) of the Federal Rules of Bankruptcy Procedure. Two months later, the Debtors went back to the Bankruptcy Court to again seek preliminary injunction against McDowell. The Bankruptcy Court, however, did not find any merit in the Debtors' "renewed" preliminary injunction request. The Court held that the Debtors failed to cite adequate grounds to support the Renewed Motion. The Court deferred further consideration of the dispute. The Debtors and McDowell have stipulated to take no further action against each other or BE&K in the pending Oregon Action, other than in connection with: (a) outstanding written discovery propounded by McDowell to BE&K and any related responses or requests; (b) any reciprocal written discovery to be propounded by BE&K to McDowell; or (c) any pleading which may be filed by BE&K in response to the Second Complaint filed in the Oregon Action. The stipulation does not waive -- and expressly reserves -- all of the rights, claims and defenses of the Debtors, McDowell and BE&K in connection with the Preliminary Injunction Motion and the Oregon Action. As previously reported, the Debtors emerged from bankruptcy on June 20, 2006, following the confirmation and effectiveness of their First Amended Plan of Reorganization. Headquartered in Chicago, Illinois, USG Corporation -- http://www.usg.com/-- through its subsidiaries, is a leading manufacturer and distributor of building materials producing a wide range of products for use in new residential, new nonresidential and repair and remodel construction, as well as products used in certain industrial processes. The Company filed for chapter 11 protection on June 25, 2001 (Bankr. Del. Case No. 01-02094). David G. Heiman, Esq., Gus Kallergis, Esq., Brad B. Erens, Esq., Michelle M. Harner, Esq., Mark A. Cody, Esq., and Daniel B. Prieto, Esq., at Jones Day represent the Debtors in their restructuring efforts. Lewis Kruger, Esq., Kenneth Pasquale, Esq., and Denise Wildes, Esq., represent the Official Committee of Unsecured Creditors. Elihu Inselbuch, Esq., and peter Van N. Lockwood, Esq., at Caplin & Drysdale, Chartered, represent the Official Committee of Asbestos Personal Injury Claimants. Martin J. Bienenstock, Esq., Judy G. Z. Liu, Esq., Ralph I. Miller, Esq., and David A. Hickerson, Esq., at Weil Gotshal & Manges LLP represent the Statutory Committee of Equity Security Holders. Dean M. Trafelet is the Future Claimants Representative. Michael J. Crames, Esq., and Andrew A. Kress, Esq., at Kaye Scholer, LLP, represent the Future Claimants Representative. Scott Baena, Esq., and Jay Sakalo, Esq., at Bilzen Sumberg Baena Price & Axelrod LLP, represent the Asbestos Property Damage Claimants Committee. When the Debtors filed for protection from their creditors, they listed $3,252,000,000 in assets and $2,739,000,000 in debts. The Debtors emerged from bankruptcy protection on June 20, 2006. (USG Bankruptcy News, Issue No. 116; Bankruptcy Creditors' Service, Inc., 215/945-7000) U.S. TELEPACIFIC: Moody's Rates Proposed $205 Mil. Loan at B2 ------------------------------------------------------------- Moody's Investors Service assigned a B3 corporate family rating and a B2 rating for the proposed $30 million senior secured revolving credit facility and for the proposed $175 million first lien term loan facility at US TelePacific Corp. In addition, the company is seeking to raise $100 million in a 2nd lien term loan, which Moody's has not rated. The ratings outlook is stable. The bank facilities, along with $10 million in additional equity, will be used to fund the acquisition of Mpower Holding Corp. to create the largest competitive local exchange carrier in California and Nevada. Moody's assigned these ratings: Issuer: US TelePacific Corp. * Corporate Family Rating -- Assigned B3 * Senior Secured Revolving Credit Facility -- Assigned B2 * 1st Lien Term Loan -- Assigned B2 Outlook is Stable The B3 corporate family rating reflects TelePacific's financial risk, lack of free cash flow generation, challenging competitive position as a CLEC, the complexity of integrating the Mpower acquisition, and the potential for further acquisitions, which may postpone debt reduction. The ratings benefit from the company's emerging operating scale in California and Nevada and the expected EBITDA growth driven by merger synergies. The company's leverage is expected to be about 6 times 2006 EBITDA at closing, and is high relative to the CLECs that Moody's rates. In addition, the company does not expect to commence generating free cash flow until 2007. However, consistent with telecommunications industry trends, TelePacific has reached the inflection point in its operations where the existing customer base is covering the high fixed costs, and the incremental revenue is accretive to EBITDA at levels slightly below the company's 60% gross margin. The combination of TelePacific and Mpower 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 growth rate of businesses than the national average. Moody's expects TelePacific to drive cost synergies by headcount reduction, 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 that the company's growth plans and the reasonable likelihood of achieving merger synergies will drive free cash flow generation and deleveraging over the rating horizon. Given the challenges management will face in integrating the operations and achieving cost synergies, the ratings are somewhat prospective in nature. Should the company fail to quickly realize on the expected merger benefits, the outlook and the rating could come under downward pressure. TelePacific, headquartered in Los Angeles, California, is a CLEC serving over 800,000 access line equivalents, pro forma the acquisition of Mpower, of Pittsford, New York. VENETO LLC: Case Summary & 20 Largest Unsecured Creditors --------------------------------------------------------- Debtor: Veneto LLC fka L'Veneto LLC 70600 Country Club Drive Rancho Mirage, California 92270 Bankruptcy Case No.: 06-11744 Chapter 11 Petition Date: July 12, 2006 Court: Central District Of California (Riverside) Judge: Meredith A. Jury Debtor's Counsel: Jack F. Fitzmaurice, Esq. Fitzmaurice, Demergian & Palaganas 550 West "C" Street, Suite 1880 San Diego, California 92101 Tel: (619) 239-3015 Total Assets: $23,499,000 Total Debts: $11,443,889 Debtor's 20 Largest Unsecured Creditors: Entity ------ Breeze Air Conditioning, Inc. 75145 St. Charles Place Palm Desert, CA 92260 Classplan Premium Financing, Inc. P.O. Box 5146 Chino, CA 91708 Custom System Technologies 79469 Country Club Drive, Suite A Bermuda Dunes, CA 82201-1206 Desert Protection 1508 South Palm Canyon Drive Palm Springs, CA 92264 Essco Wholesale Electric 72232 Corporate Way Thousand Palms, CA 92276 First Insurance Funding Corporation 8075 Innovation Way Chicago, IL 60682-0080 Gabriel G. Calimlim 82076 Sundown Court Indio, CA 92201 Goeffrey L. Mehl 74372 Fairway Drive Palm Desert, CA 92260 JB Finish, Inc. 82750 Atlantic Avenue Indio, CA 92203 Jimmy Snedaker 67575 North Natoma Drive Cathedral City, CA 92234 Karlen Equipment 19881 Brookhurst Boulevard, Suite C-265 Huntington Beach, CA 92646 Mobile Modular P.O. Box 45043 San Francisco, CA 94145-0043 Narkweather Architects Charles Martin 73733 Highway 111 Palm Desert, CA 92260 Paul Allen Smith 74372 Fairway Drive Palm Desert, CA 92660 Reyes Construction P.O. Box 1011 Rancho Mirage, CA 92270 Scott Smith 74372 Fairway Drive Palm Desert, CA 92260 Shasta Fire Protection, Inc. 3584 La Compana Way Palm Springs, CA 92262 Southwest Plumbing P.O. Box 2006 Thousand Palms, CA 92276-2006 The Gas Company P.O. Box 2007 Monterey Park, CA 91756-0001 York Painting 79-691 Half Moon Bay Indio, CA 92201 VERSO PAPER: S&P Rates $300 Million Senior Subor. Notes at B- ------------------------------------------------------------- Standard & Poor's Ratings Services assigned its 'B+' corporate credit rating to Verso Paper Holdings LLC, a Memphis, Tennessee- based paper producer. The outlook is stable. At the same time, based on preliminary terms and conditions, Standard & Poor's assigned its 'BB' senior secured bank loan rating and '1' recovery rating to Verso's $485 million senior secured first-lien credit facilities. These ratings reflect an expectation of full recovery of principal in the event of a payment default. S&P also assigned a 'B+' senior secured debt rating and a recovery rating of '2' on Verso's $600 million senior secured second-lien notes due 2014 and a 'B-' on Verso's $300 million senior subordinated notes due 2016, both to be issued under Rule 144a with registration rights. The recovery rating indicates the likelihood of substantial (80%-100%) recovery of principal in the event of a payment default. Proceeds from the term loan and the notes and $290 million of equity will be used to finance the $1.4 billion acquisition by private equity firm Apollo Management LP of the coated and supercalendered paper businesses of International Paper Co. (BBB/Negative/A-3). Upon conclusion of this transaction, debt, including capitalized operating leases, at Verso will be $1.2 billion, with pro forma debt to projected 2006 adjusted EBITDA of more than 5.4x. "Reasonable near-term prospects for coated-paper markets should allow Verso to generate free cash flow. However, the company's capital structure will continue to be very aggressive because of its heavy debt burden, and limited organic growth opportunities exist in North America's highly cyclical and competitive coated- paper industry," said Standard & Poor's credit analyst John Kennedy. "We could revise the outlook to negative if there is no significant progress on debt reduction, if there is a loss in market share, or if raw material price increases result in a meaningful deterioration in Verso's credit measures or liquidity," Mr. Kennedy said. "We could revise the outlook to positive if Verso's capital structure becomes significantly less aggressive." WCI COMMUNITIES: Order Declines Prompt S&P's Negative Outlook ------------------------------------------------------------- Standard & Poor's Ratings Services affirmed its 'BB' corporate credit rating on WCI Communities Inc. and revised its outlook to negative from stable. Ratings are also affirmed on $650 million of subordinated notes. "The outlook revision follows several months of sharp order declines ensuing from a sharp increase in competing inventory in coastal Florida housing markets and more circumspect retirement and affluent homebuyers," said credit analyst James Fielding. "These conditions show no sign of abating in the near term and will negatively affect profitability and coverage measures over the next several quarters. WCI has also accelerated a share repurchase program that has the potential to modestly increase its above average debt levels." Mr. Fielding added that at this time, however, the rating remains supported by $1.2 billion of contracts receivable and historically low cancellation rates, as well as by an improved liquidity position that will benefit from positive free operating cash flow and a larger unsecured credit facility. The negative outlook reflects the substantially more competitive environment in which WCI is operating, which is expected to reduce net income over the next several quarters. The rating would be lowered if the dislocation in Florida's luxury housing segment were materially deeper than anticipated or if leverage levels rise as a consequence of aggressive share repurchases. Conversely, if debt levels are reduced and construction activity is scaled appropriately relative to market conditions, the outlook would return to stable. WINN-DIXIE: Rejects Sanderson Farms Supply Pact Effective June 30 ----------------------------------------------------------------- The U.S. Bankruptcy Court for the Middle District of Florida authorized Winn-Dixie Stores, Inc., and its debtor-affiliates to reject the Prepetition Supply Agreement between Winn-Dixie Procurement, Inc., and Sanderson Farms Inc., effective as of June 30, 2006. The Bankruptcy Court also approved: (i) Sanderson Farms' set-off of its prepetition general unsecured claim against the Debtors' accrued prepetition credits, both of which arise from the Prepetition Supply Agreement; and (ii) the resolution of Sanderson Farms' claims, including the waiver of all claims for rejection damages and all other claims, except for an agreed reclamation claim and any unpaid postpetition invoices. As reported in the Troubled Company Reporter on June 26, 2006, pursuant to a supply agreement dated July 1, 2003, between Winn-Dixie Procurement, Inc., and Sanderson Farms Inc., the Debtors have for several years purchased chicken and chicken- related products from Sanderson Farms. James H. Post, Esq., at Smith Hulsey & Busey, in Jacksonville, Florida, related that, although the Debtors want to continue their relationship with Sanderson Farms, the terms of the Prepetition Supply Agreement are no longer feasible, due, in part, to the reduction in the Debtors' store count. "In particular, the Prepetition Supply Agreement requires the Debtors to purchase 550,000,000 pounds of chicken, with the term of the agreement continuing until that requirement is satisfied. Thus, the reduced store count has operated to extend the term of the Prepetition Supply Agreement," Mr. Post noted. Moreover, Mr. Post continues, the Prepetition Supply Agreement contains a liquidated damages clause in the event it terminates before the required purchases are made. The Debtors have decided to reject the Prepetition Supply Agreement and to provide for a continuing relationship with Sanderson Farms on more favorable terms under a new ordinary course supply agreement. Sanderson Farms has agreed to this approach, Mr. Post relates, with the understanding that: (a) its reclamation claim, as previously agreed between the parties, will be for $529,509; (b) a portion of its prepetition general unsecured claim will be set off against prepetition credits accrued by the Debtors, and the balance of its general unsecured claim will be waived; and (c) any claims for rejection damages and all other claims -- except for the agreed reclamation claim and any unpaid postpetition invoices -- it has or may have had against the Debtors will be waived. Mr. Post added that Sanderson Farms has agreed that the new supply agreement, which will take effect upon the rejection of the Prepetition Supply Agreement, may be terminated by the Debtors without liability in the event their Chapter 11 plan of reorganization is not confirmed or does not become effective. Headquartered in Jacksonville, Florida, Winn-Dixie Stores, Inc. -- http://www.winn-dixie.com/-- is one of the nation's largest food retailers. The Company operates stores across the Southeastern United States and in the Bahamas and employs approximately 90,000 people. The Company, along with 23 of its U.S. subsidiaries, filed for chapter 11 protection on Feb. 21, 2005 (Bankr. S.D.N.Y. Case No. 05-11063, transferred Apr. 14, 2005, to Bankr. M.D. Fla. Case Nos. 05-03817 through 05-03840). D.J. Baker, Esq., at Skadden Arps Slate Meagher & Flom LLP, and Sarah Robinson Borders, Esq., and Brian C. Walsh, Esq., at King & Spalding LLP, represent the Debtors in their restructuring efforts. Paul P. Huffard at The Blackstone Group, LP, gives financial advisory services to the Debtors. Dennis F. Dunne, Esq., at Milbank, Tweed, Hadley & McCloy, LLP, and John B. Macdonald, Esq., at Akerman Senterfitt give legal advice to the Official Committee of Unsecured Creditors. Houlihan Lokey & Zukin Capital gives financial advisory services to the Committee. When the Debtors filed for protection from their creditors, they listed $2,235,557,000 in total assets and $1,870,785,000 in total debts. (Winn-Dixie Bankruptcy News, Issue No. 42; Bankruptcy Creditors' Service, Inc., 215/945-7000). WORLDCOM INC: M. Jordan Wants Court to Allow His $8 Million Claim ----------------------------------------------------------------- On July 10, 1995, Michael Jordan and WorldCom, Inc., and its debtor-affiliates entered into an endorsement agreement, which provided the Debtors a 10-year license to use Mr. Jordan's name, likeness and endorsement to advertise their telecommunications products and services. The Debtors rejected the Endorsement Agreement in July 2003, Jason M. Torf, Esq., at Schiff Hardin LLP, in Chicago, Illinois, relates. On August 14, 2003, Mr. Jordan filed Claim No. 36077 for $8,000,000. The Claim seeks payment of: (1) the $2,000,000 annual compensation payment that was due on June 30, 2002; and (2) the three $2,000,000 annual payments that were due on June 30 of 2003, 2004 and 2005, which, according to Mr. Torf, became liquidated after the Debtors' rejection of the Agreement. Subsequently, the Debtors objected to Mr. Jordan's Claim, asserting that: (1) the Agreement is an "employment contract" within the meaning of Section 502(b)(7) of the Bankruptcy Code. As a result, the amount of Mr. Jordan's Claim is capped by the Bankruptcy Code; and (2) Mr. Jordan had an obligation to mitigate his damages and he failed to do so. Mr. Torf asserts that the Agreement is not an "employment contract" within the meaning of Section 502(b)(7) because Mr. Jordan: -- ran his own business that was under his control; -- never had an office at the Debtors' location; -- was not eligible for benefit programs that were offered to the Debtors' principals; -- never had any amounts deducted from his consulting fees for taxes, insurance premiums or pension contributions; and -- was responsible for paying taxes on all amounts he received from the Debtors. The Endorsement Agreement specifically provides that "[Mr.] Jordan shall be treated as an independent contractor under the terms of this Agreement, and, accordingly, there shall be no withholding for tax purposes from any payment made by WorldCom to Jordan under the terms of this Agreement," Mr. Torf emphasizes. Mr. Torf argues that the Debtors' mitigation objection should be overruled and dismissed for three independent reasons: (1) The Debtors' breach of the Agreement did not make Mr. Jordan available to pursue other endorsement opportunities; (2) There is no evidence that Mr. Jordan could have entered into a substantially similar endorsement agreement after the Debtors' breach; and (3) Mr. Jordan acted reasonably when he decided not to pursue other endorsements after the Debtors' breach. Accordingly, Mr. Jordan asks the U.S. Bankruptcy Court for the District of New York to enter a summary judgment in his favor and allow Claim No. 36077 in full. Mr. Jordan also asks the Court to overrule and dismiss the Debtors' objection to his Claim. About WorldCom Headquartered in Clinton, Mississippi, WorldCom, Inc., now known as MCI -- http://www.worldcom.com/-- is a pre-eminent global communications provider, operating in more than 65 countries and maintaining one of the most expansive IP networks in the world. The Company filed for chapter 11 protection on July 21, 2002 (Bankr. S.D.N.Y. Case No. 02-13532). On March 31, 2002, the Debtors listed $103,803,000,000 in assets and $45,897,000,000 in debts. The Bankruptcy Court confirmed WorldCom's Plan on Oct. 31, 2003, and on Apr. 20, 2004, the company formally emerged from U.S. Chapter 11 protection as MCI, Inc. (WorldCom Bankruptcy News, Issue No. 121; Bankruptcy Creditors' Service, Inc., 215/945- 7000) WORLDCOM INC: Teleserve Wants $7 Mil. Claim Allowed as Class 6A --------------------------------------------------------------- On May 1, 2006, the U.S. Bankruptcy Court for the District of New York allowed Teleserve Systems, Inc.'s Claim No. 9449 for $7,366,101: (1) subject to WorldCom, Inc., and its debtor-affiliates' right to object to Teleserve's designation of the Allowed Claim as a Class 6A MCI Pre-merger Claim; and (2) payable after a determination by the Court or by stipulation between the parties of the proper classification of the Claim under the Debtor's confirmed Plan of Reorganization. Lee E. Woodard, Esq., at Harris Beach, PLLC, in Syracuse, New York, informs the Court that Teleserve timely submitted a written application for a Class 6A classification, replete with documentary evidence. "Teleserve clearly stated in its 6A Application that it relied on the separate credit of the Debtors." However, as of July 5, 2006, the Debtors have yet to act on its 6A Application, Mr. Woodward tells Judge Gonzalez. Accordingly, Teleserve asks the Court to: (a) allow its Claim a Class 6A classification; (b) direct the Debtors to pay Teleserve's costs, expenses and attorneys' fees; and (c) direct the Debtors to pay the interest on its Claim. Mr. Woodard asserts that the Debtors are well aware that Teleserve meets the 6A Classification requirements. Teleserve's breach of contract claims against the Debtors have been litigated since August 1995. Mr. Woodard contends that Teleserve has absolute right to receive Class 6A status based on five simple, incontrovertible facts: (1) In July 1993, Teleserve became a marketing agent for the Debtors; (2) In August 1995, Teleserve declared the Debtors in breach of their marketing agreements; (3) In September 1995, Teleserve attempted to arbitrate its breach of contract claims against the Debtors; (4) In October 1995, Teleserve commenced a lawsuit against the Debtors to obtain a judicially selected arbitration forum that could hear and determine its breach of contract claims against the Debtors; and (5) In February 1996, the Debtors terminated Teleserve's marketing agreements and put Teleserve out of business. About WorldCom Headquartered in Clinton, Mississippi, WorldCom, Inc., now known as MCI -- http://www.worldcom.com/-- is a pre-eminent global communications provider, operating in more than 65 countries and maintaining one of the most expansive IP networks in the world. The Company filed for chapter 11 protection on July 21, 2002 (Bankr. S.D.N.Y. Case No. 02-13532). On March 31, 2002, the Debtors listed $103,803,000,000 in assets and $45,897,000,000 in debts. The Bankruptcy Court confirmed WorldCom's Plan on Oct. 31, 2003, and on Apr. 20, 2004, the company formally emerged from U.S. Chapter 11 protection as MCI, Inc. (WorldCom Bankruptcy News, Issue No. 121; Bankruptcy Creditors' Service, Inc., 215/945- 7000) W.R. GRACE: Renews Fight with Asbestos Panels over Exclusivity -------------------------------------------------------------- At the June 19, 2006 omnibus hearing, W.R. Grace & Co., and its debtor-affiliates informed the U.S. Bankruptcy Court for the District of Delaware that there no longer appeared "to be any foothold for moving forward with any further [mediation] discussions." Despite that impasse, the Official Committee of Asbestos Personal Injury Claimants, the Official Committee of Asbestos Property Damage Claimants, and David T. Austern, the legal representative for future asbestos claimants in the Debtors' Chapter 11 cases, advised the Bankruptcy Court that the mediation was a partial success as it resulted in: -- an agreement between the Asbestos Constituents for allocation of distributions between personal injury and property damage claimants; and -- an agreement within the PD Committee concerning allocation of distributions under a plan between traditional property damage claimants and Zonolite Attic Insulation claimants. On the PI Committee's behalf, Marla Eskin, Esq., at Campbell & Levine, LLC, in Wilmington, Delaware, tells Judge Fitzgerald that the Debtors have failed to establish that "cause" exists to extend the exclusive periods to file and solicit acceptances of a plan of reorganization pursuant to Section 1121(d) of the Bankruptcy Code, considering that: (i) there has been no good faith progress toward filing a confirmable plan, and the Debtors' plan is patently unconfirmable; and (ii) termination of the Exclusive Periods will not cause material harm to the Debtors or their businesses. According to Ms. Eskin, there does not appear to be any significant dispute that the net distributable value of the Debtors' estate will be approximately $2,900,000,000. "Thus, if the [Bankruptcy] Court determines that asbestos liabilities alone exceed $2.9 billion, the debtors are hopelessly insolvent and, under the absolute priority rule, equity would be eliminated and unsecured creditors would share ratably without any entitlement to postpetition interest," Ms. Eskin says. While they are prepared to proceed with the estimation process until 2007, the Asbestos Constituents believe there is a better and more efficient way to bring the Debtors' cases to a conclusion, or at least increase the likelihood of an earlier conclusion. Ms. Eskin notes that this would require that the case management orders governing the estimation of the Debtors' personal injury and property damage liabilities be amended so that the Bankruptcy Court would first address the estimation of cancer claimants only. The Asbestos Constituents ascertain that a Cancers-Only Estimation could be concluded by December 2006 or January 2007, as opposed to an estimation of all asbestos claims, which is not likely to be completed until, at the earliest, of mid-2007. "A Cancers-Only Estimation would be a significantly shorter process because there are fewer claims, medical diagnoses are based [on] pathology, and there would be no diversion as a result of 'suspect' B-readers and other questions raised by the debtors relating to non-malignant claims," Ms. Eskin tells Judge Fitzgerald. Furthermore, Ms. Eskin asserts that the lengthy list of experts designated by the Debtors would be significantly reduced, which would shorten not only the discovery process, but also the Cancers-Only Estimation hearing itself by reducing the number of testifying experts. Ms. Eskin explains that the most significant benefit of a Cancers- Only Estimation is that if the estimate of the value of cancer claims exceeds the Debtors' "solvency number," then the Asbestos Constituents are prepared to agree to a pro rata allocation of assets with the commercial creditors based on the Cancers-Only Estimation results, without expending additional time and resources valuing non-malignant PI claims, traditional PD claims, and ZAI claims. If it turns out that the Cancers-Only Estimation results do not exceed the Debtors' "solvency number," no harm has been done, and the parties can proceed with the rest of the estimations, which the Asbestos Constituents are currently scheduled to do under the existing case management orders, Ms. Eskin points out. Accordingly, the Asbestos Constituents ask Judge Fitzgerald to permit their Cancers-Only Estimation proposal to proceed first and terminate the Debtors' Exclusive Periods. Grace Wants Plan Filing Delayed Until Estimation Wraps Up There is no alternative to litigating disputed issues of liability, James E. O'Neill, Esq., at Pachulski, Stang, Ziehl, Young, Jones & Weintraub LLP, in Wilmington, Delaware, argues. Mr. O'Neill avers that opening the Debtors' cases up to competing plans will serve no useful purpose and will delay progress toward resolution of the Debtors' cases. It may also serve to perpetuate an agreement among the asbestos committees that is wholly against public policy, violates the Bankruptcy Code, and would make any plan unconfirmable. Accordingly, the Debtors ask Judge Fitzgerald to extend their exclusive filing period through and including the conclusion of the estimation hearings and their exclusive solicitation period through and including an additional 60 days thereafter. Debtors Update Court on Claims Process Mr. O'Neill relates that since the Petition Date, the Debtors have sought a merits-based adjudication of their asbestos liabilities. While various reassignments of the Debtors' Chapter 11 cases deferred for several years the task of coming to grips with the asbestos liabilities, the District Court did recognize its duty to address the merits of that underlying liability. As a result of a bar date process of certain asbestos property damage claims, Mr. O'Neill says, the Debtors have been able to reduce between July 2005 and July 2006 the pending PD claims from 4,003 to 901, which include: -- 501 traditional U.S. claims; -- 291 Canadian PD claims, all filed by Speights & Runyan; and -- 109 "Category 2" claims for property damage allegedly resulting from the Debtors' mining, milling or processing operations. Section 502 of the Bankruptcy Code calls for a streamlined process to ascertain claim values. Based on the Debtors' work to date, Mr. O'Neill attests that the Bankruptcy Court is now in the position to address the core liability issues posed by the remaining claims, including statutes of limitations, product identification, and proof of hazard. He notes that testing the PD claims has led to an 80% reduction to date. Completing the merits-based process will further reduce the scope of claims that have demonstrable value. Asbestos Claimants' Approach According to Mr. O'Neill, two competing approaches to the estimation of the Debtors' asbestos personal injury claims have been presented to the Bankruptcy Court on numerous occasions. Mr. O'Neill relates that the Debtors propose estimation of their actual legal liability for PI claims. On the other hand, the asbestos claimants propose an estimation based solely on past settlement history. Mr. O'Neill states that Grace's proposal alone adheres to the basic rules of evidence and procedure incorporated in the Bankruptcy Code. Mr. O'Neill tells Judge Fitzgerald that the Asbestos Claimants Approach, which estimates future claims but ignores real liabilities, consists of four steps: A. Step 1: The Analysis begins with historical settlement rates and substitutes settlement for legal liability. Dr. Mark Peterson, the asbestos claimants' expert, accepts at face value the Debtors' historical settlement rates and values as basis for his estimates. Thus, Mr. O'Neill says, Dr. Peterson's approach does not depend on whether the claimants actually had exposure, whether that exposure was sufficient to cause disease, or whether they had a real disease. B. Steps 2-3: The analysis assumes that past settlement rates actually reflect disease rates and will continue to do so in the future. Dr. Peterson assumes that the historical rations between settled claims against W.R. Grace and Co. and the nationwide malignant disease trend will continue into the future. However, Dr. Peterson conceded that non- epidemiological factors play a big role in the decision to file a claim against a company. C. Step 4: Estimate of Grace's future claims. Mr. O'Neill says that Dr. Peterson mechanically takes historical rations between the number of settled claims against Grace and the number of nationwide malignant diseases, and applies those ratios to the future. Mr. O'Neill points out the alleged fatal flaws of the Asbestos Claimants Approach: (1) Settlement is substituted for liability. (2) There is not even an effort to demonstrate actual liability. (3) At the same time, settlement trends are assumed to follow disease trends, with the effect that claims against a company are assumed to stretch out for decades. (4) The disease trend that constitutes the backbone of the estimates relates to malignant disease, yet it is assumed with no support to govern non-malignant disease as well. Grace's Actual Liability Approach Mr. O'Neill tells Judge Fitzgerald that Grace's Approach seeks to: (i) estimate the number of claims pending against Grace as of the Petition Date that contain sufficient exposure, causation, and medical evidence to establish that there is legal liability; and (ii) use its estimate of the number of valid pending claims to show how, even if disease-based extrapolation is used, the future values fall far short of those advocated by the claimants. Mr. O'Neill contends that estimating the validity of Grace's pending claims is overwhelmingly likely to substantially reduce the scope of Grace's estimated liability for PI claims. Mr. O'Neill explains that out of Grace's pending claims, 30% allege a non-malignant disease, 4% allege a non-malignant disease, and Grace cannot determine the alleged disease for 66% of the claims. Grace's preliminary analysis indicates that less than 20% of the non-malignant claims allege a valid disease and less than 25% of the unknown claims will be able to allege a valid disease. In addition, based on Grace's preliminary analysis: -- less than 10% of the non-malignant claims will be able to allege real disease and Grace exposure sufficient to cause disease; -- less than 15% of the unknown claims will be able to allege real disease and Grace exposure sufficient to cause disease; and -- approximately 50% of the malignant claims will be unable to allege Grace exposure sufficient to cause disease. With respect to its actual liability for ZAI claims, Grace believes that it has proven that the disturbing ZAI does not pose an unreasonable risk. If any ZAI Claims survive the science trial process, the Debtors are prepared to have those claims estimated. Therefore, the Debtors ask the Bankruptcy Court to promptly rule on the science issues so that, if necessary, a ZAI estimation can proceed in conjunction with the traditional PD and PI estimation processes. About W.R. Grace Headquartered in Columbia, Maryland, W.R. Grace & Co. -- http://www.grace.com/-- supplies catalysts and silica products, especially construction chemicals and building materials, and container products globally. The Company and its debtor- affiliates filed for chapter 11 protection on April 2, 2001 (Bankr. D. Del. Case No. 01-01139). James H.M. Sprayregen, Esq., at Kirkland & Ellis, and Laura Davis Jones, Esq., at Pachulski, Stang, Ziehl, Young, Jones & Weintraub, P.C., represent the Debtors in their restructuring efforts. The Debtors hired Blackstone Group, L.P., for financial advice. PricewaterhouseCoopers LLP is the Debtors' accountant. Stroock & Stroock & Lavan LLP represent the Official Committee of Unsecured Creditors. The Creditors Committee tapped Capstone Corporate Recovery LLC for financial advice. David T. Austern, the legal representative of future asbestos personal injury claimants, is represented by Orrick Herrington & Sutcliffe LLP and Phillips Goldman & Spence, PA. Elihu Inselbuch, Esq., and Nathan D. Finch, Esq., at Caplin & Drysdale represent the Official Committee of Asbestos Personal Injury Claimants. The Asbestos Committee of Property Damage Claimants tapped Scott L. Baena, Esq., and Jay M. Sakalo, Esq., at Bilzin Sumberg Baena Price & Axelrod LLP to represent it. Lexecon, LLP, provided asbestos claims consulting services to the Official Committee of Equity Security Holders. W.R. GRACE: Graham Objects to Asbestos PI Questionnaire ------------------------------------------------------- William M. Graham, Esq., at Wallace & Graham P.A., in Salisbury, North Carolina, representing numerous claimants in the chapter 11 cases of W.R. Grace & Co. and its debtor-affiliates, complains that the W. R. Grace Asbestos Personal Injury Questionnaire requires production of information that is overly broad, unduly burdensome and costly. The burden and expense associated with responding to the Questionnaire greatly outweighs any potential benefit of the information sought to Grace. "The Questionnaire purports to require the production of very detailed biographical information, comprehensive medical records, work history records, litigation records and exposure documents on behalf of over 2,200 clients," Mr. Graham says. Mr. Graham notes that the Questionnaire would require that the information and supporting documents be produced within 90 days. The production of the required information would necessitate the review of possibly 100,000 or more documents from thousands of sources in a very short time frame. Without waiving that objection, Mr. Graham relates, the PI claimants will provide Grace appropriate identification information, asbestos-related medical diagnosis, and a complete work history or, in the alternative, a signed release authorizing Grace to obtain a copy of claimants' social security records. Mr. Graham argues that the Questionnaire seeks information that can be derived by Grace from a review of the documents submitted pursuant to the Questionnaire. He adds that the Questionnaire is oppressive and seeks information not calculated to reasonable lead to discoverable evidence. Furthermore, Mr. Graham objects to the Questionnaire because: -- it requires claimants to provide privileged information that is attorney-work product, or any information related to settlement negotiations or otherwise attorney-client privilege; and -- it requires information that can be obtained by Grace with substantially the same burden as it would be for claimants to provide the information. Walters & Kraus, LLP, representing various PI claimants, supports Mr. Graham's request. Walters & Kraus maintains that since state law governs creditors' claims, the information that would not be discoverable under state law is likewise not discoverable in Grace's proceeding. About W.R. Grace Headquartered in Columbia, Maryland, W.R. Grace & Co. -- http://www.grace.com/-- supplies catalysts and silica products, especially construction chemicals and building materials, and container products globally. The Company and its debtor- affiliates filed for chapter 11 protection on April 2, 2001 (Bankr. D. Del. Case No. 01-01139). James H.M. Sprayregen, Esq., at Kirkland & Ellis, and Laura Davis Jones, Esq., at Pachulski, Stang, Ziehl, Young, Jones & Weintraub, P.C., represent the Debtors in their restructuring efforts. The Debtors hired Blackstone Group, L.P., for financial advice. PricewaterhouseCoopers LLP is the Debtors' accountant. Stroock & Stroock & Lavan LLP represent the Official Committee of Unsecured Creditors. The Creditors Committee tapped Capstone Corporate Recovery LLC for financial advice. David T. Austern, the legal representative of future asbestos personal injury claimants, is represented by Orrick Herrington & Sutcliffe LLP and Phillips Goldman & Spence, PA. Elihu Inselbuch, Esq., and Nathan D. Finch, Esq., at Caplin & Drysdale represent the Official Committee of Asbestos Personal Injury Claimants. The Asbestos Committee of Property Damage Claimants tapped Scott L. Baena, Esq., and Jay M. Sakalo, Esq., at Bilzin Sumberg Baena Price & Axelrod LLP to represent it. Lexecon, LLP, provided asbestos claims consulting services to the Official Committee of Equity Security Holders. * Robert Gold Joins DLA Piper's New York Office as Partner ---------------------------------------------------------- DLA Piper Rudnick Gray Cary US LLP reported that Robert Gold, Esq., has joined the firm's Litigation practice group as a partner in the New York office. Gold was previously Of Counsel at Sullivan & Worcester. Over the course of his 35-year legal career, Mr. Gold has handled litigation in civil and criminal cases, as well as international litigation and arbitration. He has particular experience in white collar defense. He has also advised several multi-billion dollar financial institutions in crisis management and turnarounds. Mr. Gold began his career as a litigation attorney at Shea & Gould in 1971. From 1973 to 1977, he served as an Assistant U.S. Attorney in the criminal division of the U.S. Attorney's Office for the Southern District of New York in the Official Corruption Unit and in the Securities Fraud Unit. He also lectured in the Attorney General's Advocacy Institute from 1975 to 1976. Mr. Gold re-entered private practice in 1978, eventually returning to Shea & Gould in 1980 before forming Gold & Wachtel, where he served as co-managing partner. From 1998 to 2000, he worked with Louis Ranieri, chief executive officer of Ranieri & Company, assisting in crisis management and turnarounds. In 2001, he joined Alco Capital Partners and Abacus Advisors, as a principal, working on crisis management, liquidations and turnarounds. He later served as managing general partner for various bankruptcy investment partnerships. "Bob is a seasoned trial lawyer who has benefited from a dynamic mix of litigation experience, both in the public sector and in private practice," said Joseph Finnerty III, partner and chair of the New York litigation practice group. "We are pleased that he has joined the firm and we anticipate that he will contribute significantly to our corporate governance, commercial and white collar criminal defense practices." Gold earned both a J.D. and an M.B.A. from Cornell University in 1971. He received a B.A. from Columbia University in 1967. About DLA Piper Rudnick Gray Cary DLA Piper Rudnick Gray Cary US LLP -- http://www.dlapiper.com/-- has 3,100 lawyers and 59 offices in 22 countries throughout the U.S., U.K., continental Europe, Middle East and Asia. It has leading practices in commercial, corporate and finance, human resources, litigation, real estate, regulatory and legislative, and technology, media and communications. DLA Piper's Litigation practice has more than 600 litigation lawyers in the U.S. and 1,200 lawyers worldwide. DLA's trial and dispute resolution experience covers patent, class action, securities, antitrust, product liability, tax, government, real estate, and other areas of litigation. * Thacher Proffitt Names Two New Counsel in Mexico City Office -------------------------------------------------------------- Thacher Proffitt & Wood LLP, a 158-year- old law firm, reported that two new Counsel in the Firm -- Derek Woodhouse, Esq., has been promoted to Counsel effective April 26, 2006, and J. Anthony Girolami, Esq., joins the Firm as Counsel, effective June 19, 2006. Both Derek and Anthony are members of the Structured Finance Practice Group and reside in Thacher Proffitt's Mexico City office, Thacher Proffitt & Wood S.C. "We want to congratulate both Derek on his promotion and Anthony on joining the Firm," said Boris Otto, Mexico City's Office Managing Partner. "Derek is an experienced advisor of public- private partnerships, and will bring a sophisticated UK approach to Mexico's nascent PPS (projects for the provisions of services) programs. Anthony has considerable experience in the areas of infrastructure development and cross-border financings throughout Latin America. Both will add tremendously to our depth in structured finance in Latin America." Recently, Thacher Proffitt significantly broadened the scope of its Mexico City office by almost doubling its number of attorneys -- a group that includes Luis Enrique Graham, a prominent Latin American attorney -- in the areas of litigation, arbitration, bankruptcy and infrastructure. Derek Woodhouse has extensive experience advising public and private entities on energy and infrastructure projects in countries all over the world. He also advised the Mexican President's office and Ministry of Finance and Public Credit on the adoption of a new finance initiative which would allow private participation in the infrastructure projects traditionally reserved only for the public sector. In addition, he counseled the Communications and Transport Ministry on the design and implementation of the first road project under this program. Derek's background includes working in Mexico's federal government for over seven years in the energy sector, as well as in private practice in London for five years on both energy and infrastructure projects. In addition, he has worked extensively on public-private partnerships throughout Latin American and Europe. Derek received his JD equivalent at Escuela Libre de Derecho in 1996. He also received an international diploma from Harvard Institute for International Development in 1999, and completed a legal program at the International Law Institute, George Washington University, in 1997. Anthony Girolami represents clients in transactions involving the development, construction and financing of large scale infrastructure projects throughout Latin America, as well as lenders and borrowers in cross-border syndicated credit facilities. He has advised financial institutions, infrastructure developers and energy companies with the formation of joint ventures, project financings, engineering, procurement and construction contracts and restructurings. Before joining Thacher Proffitt, Anthony was with Shearman & Sterling, LLP, practicing in the Project Development and Finance Group in New York and Sao Paulo, Brazil. He also served as the Director of International Legal Affairs at Grupo ICA, S.A. de C.V., Mexico's largest infrastructure development company. Anthony received his JD from the University of San Diego School of Law, and his BA from the University of San Diego, magna cum laude. He is admitted to the California bar and the Orden dos Advogados in Brazil as a foreign legal consultant. About Thacher Proffitt & Wood LLP A law firm that focuses on the capital markets and financial services industries, Thacher Proffitt & Wood LLP -- http://www.tpw.com/-- advises domestic and global clients in a wide range of areas, including corporate and financial institutions law, securities, structured finance, investment funds, swaps and derivatives, cross-border transactions, real estate, commercial lending, insurance, admiralty and ship finance, litigation and dispute resolution, technology and intellectual property, executive compensation and employee benefits, taxation, trusts and estates, bankruptcy, reorganizations and restructurings. The Firm has approximately 300 lawyers with five offices located in New York City; Washington, DC; White Plains, New York; Summit, New Jersey; and Mexico City, Mexico. * BOOK REVIEW: Why Companies Fail: Strategies for Detecting, Avoiding, and Profiting from Bankruptcy ------------------------------------------------------------ Author: Harlan D. Platt Publisher: Beard Books Paperback: 147 Pages List Price: $34.95 Order your personal copy at http://amazon.com/exec/obidos/ASIN/1893122050/internetbankrupt Wondering what financial decisions could plummet your company's bottom line into the red? This revealing book is a straightforward presentation of the causes of business failure and the strategies for steering a troubled company away from the threat of bankruptcy and liquidation. Why Companies Fail identifies five major financial traps that can lead to failure, and each trap is illustrated with actual cases of well-known companies. Distressed companies are offered hope with examples of asset, liability, and corporate maneuvers that can help guide failing businesses to firmer ground. ********* 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, Robert Max Victor M. Quiblat II, Shimero R. 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 ***