/raid1/www/Hosts/bankrupt/TCR

/raid1/www/Hosts/bankrupt/TCR_Public/061024.mbx T R O U B L E D C O M P A N Y R E P O R T E R Tuesday, October 24, 2006, Vol. 10, No. 253 Headlines 1900 M RESTAURANT: IRS Properly Rejected Offer in Compromise ACURA PHARMA: Bridge Lenders Extend Maturity Date to December 1 ADELPHIA COMMS: Metropolitan Edison, et al. Want Claims Allowed ADELPHIA COMMS: Santa Monica Seeks Court Okay to Century Payments ADDISON-DAVIS: Case Summary & 20 Largest Unsecured Creditors AEARO TECHNOLOGIES: Moody's Assigns Loss-Given-Default Rating AES CORP: Files $40-Million Lawsuit Against Alstom in Delaware ALLIANCE LAUNDRY: Moody's Assigns Loss-Given-Default Rating ALLIS-CHALMERS ENERGY: Buys Petro Rentals for $29.8 Mil. in Cash AMERIVEST PROPERTIES: Sells Hampton Court Property for $17 Mil. AMR CORP: Earns $15 Million in 2006 Third Quarter AOH-GOLF: Moody's Pares Ba1 Rating on Series 2003 Series C Bonds ARMSTRONG WORLD: Discloses Distribution Amount for Class 6 Claims ARMSTRONG WORLD: Registers 5,349,000 Shares of Common Stock BANYAN CORPORATION: Posts $912,154 Net Loss in Qtr. Ended June 30 BEXAR COUNTY: Moody's Holds Ba3 Rating on Sub. Series 2001 B Bonds BLACK BULL: Stops Quartz Operations to Restructure Company BLOUNT INC: Moody's Assigns Loss-Given-Default Rating BROWN JORDAN: Extends $105 Million Private Exchange Offer BUILDING MATERIALS: Moody's Assigns Ba2 Rating to New $850MM Loan CALPINE CORP: Wants to Sell Siemens Turbines for $48 Million CALPINE CORP: Can Assume Channel Energy Lease Agreements CAPITAL TRUST: Moody's Cuts Sub. Series 2003 C Bonds Rating to Ba2 CELLNET TECHNOLOGY: Moody's Assigns Loss-Given-Default Rating CENTURY CENTRE: Case Summary & 33 Largest Unsecured Creditors CINCINNATI BELL: Moody's Lifts Speculative Grade Liquidity Rating CIMATEC ENVIRONMENTAL: To Restate Annual and Quarterly Financials CLIENTLOGIC CORP: Inks $450 Million Merger Deal with SITEL COLLINS & AIKMAN: Halts Plastinc Parts Shipments to Ford COMPLETE PRODUCTION: Completes Eight Company Buyout Totaling $75MM CONTINENTAL AIRLINES: Earns $237 Million in Quarter Ended Sept. 30 CORUS GROUP: Board of Directors Okays Tata Steel's Takeover Bid COUDERT BROTHERS: Gets Okay to Hire Klestadt & Winters as Counsel COUDERT BROTHERS: U.S. Trustee Picks Five-Member Creditors' Panel CUMMINS INC: Inks $126 Million Joint Venture Pact with Beiqi Foton DANA CORP: Inks Pact Resolving $1.7 Mil. Pension Payment to PBGC DANA CORP: U.S. Trustee Says 2nd Motion on Burns' Fee is Defective DELPHI CORP: Court OKs Houlihan as Equity Panel Financial Advisor DESERT POWER: Case Summary & 67 Largest Unsecured Creditors DS WATERS: Moody's Puts B1 Rating on Proposed $180MM Sr. Facility EDUCATION MANAGEMENT: Revenues Rise 14.8% Year-Over-Year in 2005 ELECTRICAL COMPONENTS: Moody's Assigns Loss-Given-Default Rating FEDERAL-MOGUL: Asks Court to OK $500 Mil. Pneumo Claims Settlement FEDERAL-MOGUL: Wants to Recapitalize Non-Debtor Subsidiaries FEDDERS NORTH: Moody's Assigns Loss-Given-Default Rating FOAMEX INT'L: Agrees with Equity Holders on Terms of Amended Plan FOAMEX INT'L: Wants Incentive Plan Approved for Salaried Employees FORD MOTOR: Moody's Says Weak Results Consistent with B3 Rating FORD MOTOR: S&P Places B Rated Sr. Unsec. Debt on Negative Watch FORD MOTOR: Fitch Puts Negative Watch on B+ Rated Sr. Unsec. Debt FRONTIER LEASING: Subservicer Default Cues Moody's Ratings Review GLOBAL HOME: Hires Pricewaterhousecoopers to Provide Tax Services GLOBAL HOME: Court Okays Plante to Audit 401(k) and Pension Plans GOODMAN GLOBAL: Moody's Assigns Loss-Given-Default Rating GREENWOOD RACING: Moody's Puts B2 Rating on $265 Million Term Loan GUARDIAN TECHNOLOGIES: Gets $1.1 Million Direct Investments GWS NURSERY: Case Summary & 20 Largest Unsecured Creditors IMPAC CMB: Moody's Confirms Ba2 Rating on Class B4 Certificates HOLLINGER INC: Reports $30.9 Million Cash on Hand at September 15 HOME FRAGRANCE: Voluntary Chapter 11 Case Summary INTERSTATE BAKERIES: ABA Wants Reference Removed from Bankr. Court INTERSTATE BAKERIES: Agrees With JPMorgan to Defer Ch. 5 Actions ISTANA HIGH: S&P Rates $2.55 Million Class E Notes at BB+ JC PROJECT: Case Summary & Two Largest Unsecured Creditors JORAN REALTY: Case Summary & 10 Largest Unsecured Creditors JOSEPHINE KAMPER: Case Summary & 20 Largest Unsecured Creditors JULIE FEVRE: Case Summary & Six Largest Unsecured Creditors KAMINI SHAHANI: Case Summary & Three Largest Unsecured Creditors KENNETH TOBEY: Case Summary & 19 Largest Unsecured Creditors LAKE AT LAS VEGAS: Moody's Places B2 Corp. Family Rating on Review LE GOURMET: Wants Bankruptcy Services as Claims and Noticing Agent LOOMIS SAYLES: S&P Rates $15 Million Class E Notes at BB LOUISIANA LOCAL: Moody's Cuts Rating on Junior 2003 Bonds to Ba1 LUXELL TECH: Creditors Accept Proposed Restructuring Plan MEDIMEDIA USA: Moody's Junks Rating on $150 Million Senior Notes MILWAUKEE NOTIONS: Case Summary & Nine Largest Unsecured Creditors MINDREADY SOLUTIONS: Earns $8.6 Million in Second Quarter of 2006 MORTGAGEIT TRUST: Good Credit Support Cues S&P to Affirm Ratings MSDWMC OWNER: Moody's Puts on Watch Caa2 Rated $4.6 Million Notes MSGI SECURITY: Faces NASDAQ Delisting, Must Comply Within 15 Days NATIONAL GAS: Brings In Neal Bradsher as Financial Consultant NATIONAL LAMPOON: Appoints Duncan Murray to its Board of Directors NORTHWEST PIPELINE: Moody's Assigns Loss-Given-Default Ratings NUTRAQUEST INC: Exclusive-Filing Period Extended Until November 8 OAKLEIGH APARTMENTS: Moody's Lowers Rating on Junior Bonds to Ba1 ORION HEALTHCORP: Extends First & Second Notes Maturity to Nov. 30 PELTS & SKINS: Files Amended Schedules of Assets and Liabilities PATH 1: Posts $1.78 Million 2006 Second Quarter Net Loss RAMP SERIES: S&P Cuts Rating on Class M-3 Certs. & Puts Neg. Watch RAPID PAYROLL: Court Approves Winthrop as Bankruptcy Counsel RED MOUNTAIN: Fitch Holds B Rating on $1.6 Million Certificates REYNOLDS AND REYNOLDS: Partners with First Advantage CREDCO REYNOLDS & REYNOLDS: S&P Cuts Rating on $520 Million Loan to B- ROBERT REYNOLDS: Case Summary & Seven Largest Unsecured Creditors ROTEC INDUSTRIES: Court Okays Young Conaway as Bankruptcy Counsel SAACO SERIES: S&P Holds BB+ Rating on Class M-10 Certificates SATELLITE ENTERPRISES: Earns $298,000 in 2006 Second Quarter SILICON GRAPHICS: Court OKs Pact Allowing Horrock to Pursue Claim SOLO CUP: Posts $299.4 Million Net Loss for 2006 Second Quarter STRUCTURED ASSET: Moody's Confirms Ba2 Rating on Class B4 Certs. STURGIS MICHIGAN: S&P Upgrades Rating on System Bonds to BB+ SUSSER HOLDINGS: Moody's Lifts Rating on $170 Million Senior Notes TARGUS GROUP: Names Michael Hoopis as Chief Executive Officer TCW LEVERAGED: Fitch Junks Rating on $21.1 Million Class E Notes THERMAL NORTH: Moody's Cuts Rating on $226 Million Term Loan to B1 THOMAS EQUIPMENT: Hires M. Luther as Chief Restructuring Officer TIME AMERICA: Semple & Cooper Raises Going Concern Doubt TRIAD HOSPITALS: Lowers Third Quarter Earnings Expectation TRUE NORTH: Gets Conditional TSX Approval for C3 Online Purchase TYRINGHAM HOLDINGS: Marcus Santoro Hired as Panel's Local Counsel TYRINGHAM HOLDINGS: Panel Hires Consensus as Financial Advisors UNIVERSAL COMPRESSION: Moody's Puts Ba1 Rating on $500MM Sr. Loan USEC INC: Restores $150 Million Availability to Credit Facility VTEX ENERGY: Board Appoints Marshall Smith as CEO and Chairman WACHOVIA AUTO: Moody's Rates $30 Million Class E Notes at Ba2 WACHOVIA AUTO: S&P Rates $30 Million Class E Notes at BB WACHOVIA AUTO: Fitch Rates $30 Million Class E Notes at BB WACHOVIA BANK: Fitch Holds Low-B Ratings on 6 Certificate Classes WACHOVIA BANK: Fitch Holds BB Rating on $5 Million Class MS Certs. WERNER LADDER: Court Extends Lease Decision Period to January 8 WESTERN APARTMENT: Gets $25,000 Interim Cash Collateral Access WINDSOR QUALITY: S&P Rates $260 Million Senior Loan at B+ WILLIAMS INDUSTRIES: McGladrey & Pullen Raises Going Concern Doubt WILLIAMS PARTNERS: Moody's Assigns Loss-Given-Default Ratings WORLDCOM INC: Richard Drew Seeks Summary Judgment on Claim 11468 WORLDCOM: Court Bars Carrubbas, et. al's Actions to Pursue Claims XILLIX TECH: Receives Hercules' Demand Letter for Loan Repayment * Large Companies with Insolvent Balance Sheets ********* 1900 M RESTAURANT: IRS Properly Rejected Offer in Compromise ------------------------------------------------------------ 1900 M Restaurant Associates Inc. is a restaurant operating in the District of Columbia under the tradename "Rumors." On April 9, 2003, 1900 M Restaurant filed a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code (Bankr. D.C. Case No. 03-00717). The restaurant's significant liabilities were taxes owed to the District and the Internal Revenue Service. On January 26, 2004, while under Chapter 11 protection, the Debtor submitted an offer-in-compromise to the IRS on IRS Form 656, pursuant to 26 U.S.C. Sec. 7122. An OIC is an offer submitted by a taxpayer to pay less than what is owed in federal taxes. On February 6, 2005, the IRS returned the offer, saying it was nonprocessable under IRS procedures because the IRS cannot accept for review any OICs from taxpayers with open, pending bankruptcy cases. Further, the Debtor had not filed several tax returns, the liability for which was the subject of the offer. When the offer was returned as nonprocessable, 1900 M filed suit in the bankruptcy court (Bankr. D.C. Adv. Pro. No. 04-10059) for a declaratory judgment that IRS' policy violated the anti- discrimination provisions under 11 U.S.C. Sec. 525(a). The Debtor asked the bankruptcy court to compel the IRS, pursuant to 11 U.S.C. Sec. 105, to consider the OIC -- not to approve and accept the offer, but to merely consider it. The parties filed cross motions for summary judgment. By an order dated January 24, 2005, the Honorable S. Martin Teel, Jr., granted the United States' motion for summary judgment and dismissed the action. See 319 B.R. 302 (Bankr. D.C. 2005). The bankruptcy court held that Sec. 525(a) does not apply to the IRS' refusal to consider an OIC submitted under Sec. 7122 during the pendency of a bankruptcy case. Id. at 305. Specifically, Judge Teel determined that a debtor's "right to submit an offer-in-compromise" is not a "license, permit, charter, or franchise" within the ordinary meanings of those words. Id. Further, the court found that it is not a grant either within any of the ordinary meanings of that word. Id. Then the court turned to the question of whether Sec. 105(a) provides an alternative means to compel the government to consider the OIC. After examining the legislative history of Sec. 105(a), the court held that Sec. 105(a) is similar to the All Writs Statute, 28 U.S.C. Sec. 1651. Id. at 306. Judge Teel concluded that to the extent that the debtor seeks to compel performance of an alleged duty, the relief the debtor seeks is in the nature of mandamus. Id. The court held that the debtor failed to meet the requirements of a writ of mandamus. Id. The Debtor appealed to the U.S. District Court for the District of Columbia (Civ. Action No. 05-570), arguing that the Bankruptcy Court: (1) erred as a matter of law in determining that 11 U.S.C. Sec. 525(a) does not apply to the IRS when it refused to consider an OIC under 26 U.S.C. Sec. 7122 during the pendency of a bankruptcy case; and (2) erred as a matter of law in determining that 11 U.S.C. Sec. 105 is not available to compel the IRS to consider appellant's OIC. In a decision published at 2006 WL 2708681, the Honorable Emmet G. Sullivan agrees with the legal conclusions and the result reached by the bankruptcy court, and, therefore, affirms the bankruptcy court's Order. Judge Sullivan holds that (1) in refusing to process the debtor's offer to compromise its federal tax liability based solely upon fact that it had filed for bankruptcy, the IRS did not act adversely on any license, permit, charter, franchise, or other similar grant in violation of anti-discrimination provision of the Code; (2) the court could not exercise its authority to enter "necessary or appropriate" orders in order to compel the IRS to consider offer-in-compromise; and (3) the debtor-taxpayer failed to establish any clear duty on part of the IRS to act, as required for entry of writ of mandamus. ACURA PHARMA: Bridge Lenders Extend Maturity Date to December 1 --------------------------------------------------------------- Acura Pharmaceuticals Inc. secured gross proceeds of $620,000 under a term loan agreement with Essex Woodlands Health Ventures V, L.P., Care Capital Investments II, L.P., Care Capital Offshore Investments II, L.P., Galen Partners III, L.P., Galen Partners International III, L.P. and Galen Employee Fund III, L.P. Coincident with this Loan, the Bridge Lenders have agreed to change the maturity date on all previous bridge loans to Dec. 1, 2006 from Nov. 1, 2006. The Loan bears an annual interest rate of 10%, is secured by a lien on all assets of the Company and its subsidiary, matures on Dec. 1, 2006 and is senior to all other Company debt. The Loan permits the funding of additional cash amounts subject to agreement by the Company and the Bridge Lenders. No assurance can be given, however, that any additional funding will be advanced to the Company under the terms of the Loan. In addition, the Bridge Lenders have agreed to accept in satisfaction of the next interest payment due under the bridge loans a number of shares of Common Stock of the Company based on the average of the closing bid and asked prices of the Common Stock for the five trading days immediately preceding the interest payment date. Including the Loan disclosed on Oct. 20, 2006, the Company has a total of $6.744 million in bridge loans outstanding and due on Dec. 1, 2006 and the Company has agreed that the lenders under its bridge loan agreements may rollover all or any portion of the principal and accrued interest outstanding under loans made under such agreements into the Company's next equity financing of at least ten million dollars, subject to certain exceptions. The Company will utilize the net proceeds from the Loan to continue funding product development and licensing activities relating to OxyADF tablets and other product candidates utilizing its Aversion(r) Technology. Cash Reserves Update The Company estimates that its current cash reserves, including the net proceeds from the Loan, will fund product development and licensing activities through mid-November 2006. To continue operating thereafter, the Company must raise additional financing or enter into appropriate collaboration agreements with third parties providing for cash payments to the Company. No assurance can be given that the Company will be successful in obtaining any such financing or in securing collaborative agreements with third parties on acceptable terms, if at all, or if secured, that such financing or collaborative agreements will provide for payments to the Company sufficient to continue funding operations. In the absence of such financing or third-party collaborative agreements, the Company will be required to scale back or terminate operations and/or seek protection under applicable bankruptcy laws. About Acura Pharmaceuticals Headquartered in Palatine, Illinois, Acura Pharmaceuticals, Inc. (OTCBB:ACUR) -- http://www.acurapharm.com/-- is a specialty pharmaceutical company engaged in research, development and manufacture of innovative and proprietary abuse deterrent, abuse resistant and tamper resistant formulations intended for use in orally administered opioid-containing prescription analgesic products. Acura is actively collaborating with contract research organizations for laboratory and clinical evaluation and testing of product candidates formulated with its Aversion(R) Technology. Going Concern Doubt As reported in the Troubled Company Reporter on Aug. 8, 2006, BDO Seidman, LLP, expressed substantial doubt about Acura Pharmaceuticals' ability to continue as a going concern after auditing the Company's 2005 financial statements. The auditing firm pointed to the Company's recurring losses from operations and net capital deficiency at Dec. 31, 2005. ADELPHIA COMMS: Metropolitan Edison, et al. Want Claims Allowed --------------------------------------------------------------- Metropolitan Edison Company; Pennsylvania Electric Company; Toledo Edison Company; Ohio Edison Company; Pennsylvania Power Company; and the Illuminating Company, also known as the Cleveland Electric Illuminating Company, ask the U.S. Bankruptcy Court for the Southern District of New York to allow their administrative expense claim against Adelphia Communications Corporation and its debtor-affiliates for: (1) $2,438,302, including but not limited to at least $392,693 against Parnassos in favor of Penelec, for amounts owing under the Agreements; and (2) an unliquidated amount, including but not limited to at least $1,073 against the JV Debtors in favor of Ohio Edison, for all postpetition amounts owing on Metropolitan Edison, et al.'s utility accounts with the ACOM Debtor through July 31, 2006. Metropolitan Edison, et al., also ask the Court to direct the ACOM Debtors to promptly pay the amounts. Metropolitan Edison, et al., were parties to numerous pole attachment/joint use agreements with the ACOM Debtors, including Parnassos, LP. Metropolitan Edison, et al., provided joint use services to the ACOM Debtors after its filing for chapter 11 protection through the Effective Date of the Third Modified Fourth Amended Joint Plan of Reorganization for the Century-TCI Debtors and the Parnassos Debtors, when the Joint Use Agreements were assigned to Time Warner Cable NY, LLC, or Comcast Corporation. Pursuant to pleadings and notices filed and served by the ACOM Debtors, Penelec and Parnassos were parties to one of the Joint Use Agreement dated September 1, 1987. Metropolitan Edison, et al., reported that the amount due and owing to them for services provided under the Agreements from the Date the Debtors filed for chapter 11 protection to the Effective Date totals $2,438,302. Based on Metropolitan Edison, et al.'s records and representations of the ACOM Debtors' counsel regarding the applicable Adelphia counterparties to the Joint Use Agreements, of the $2,438,302, at least $392,693 is due and owing to Penelec from Parnassos. Jil Mazer-Marino, Esq., at Rosen Slome Marder LLP, in Uniondale, New York, however, notes that that Metropolitan Edison, et al., have been unable to determine from their own records, who the applicable Debtor counterparty is to each of the Joint Use Agreements. Metropolitan Edison, et al., have asked the ACOM Debtors to identify the applicable Debtor counterparty to various of the Joint Use Agreements as of July 30, 2006. While ACOM Debtors' counsel has advised that the ACOM Debtors are diligently working on the request, as of September 13, 2006, the ACOM Debtors have not provided the information, Ms. Mazer-Marino relates. In addition, Metropolitan Edison, et al., had provided postpetition electric utility service to the ACOM Debtors on numerous accounts through the Effective Date. Based their records, only 29 accounts appear to be service accounts of any of the JV Debtors. The aggregate amount owing on those 29 accounts for service provided by Ohio Edison to the JV Debtors from the Date the Debtors filed for chapter 11 protection to the Effective Date is $1,073. Metropolitan Edison, et al., believe that the ACOM Debtors routinely failed to update the customer names or provide correct customer names on many utility service accounts. Thus, Metropolitan Edison, et al., are unable to identify with any certainty which Adelphia entity is the customer on the various utility accounts with the Debtors. Ms. Mazer-Marino relates that the total amounts owing on all of Metropolitan Edison, et al., utility service accounts with the Debtors have not yet been determined. Metropolitan Edison, et al., are still in the process of calculating the final bills for the accounts. Due to the large number of accounts at issue and certain limitations with their billing system, they are unable to finalize the accounts through the Effective Date until they have determined which service accounts have been assigned to Time Warner and which ones have been assigned to Comcast. Metropolitan Edison, et al., are diligently working with their contacts at each company to determine the information. 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 Cablevision Associates of Radnor, L.P., and 20 of its affiliates, collectively known as Rigas Manged Entities, are entities that were previously held or controlled by members of the Rigas family. In March 2006, the rights and titles to these entities were transferred to certain subsidiaries of Adelphia Cablevision, LLC. The RME Debtors filed for chapter 11 protection on March 31, 2006 (Bankr. S.D.N.Y. Case Nos. 06-10622 through 06-10642). Their cases are jointly administered under Adelphia Communications and its debtor-affiliates chapter 11 cases. (Adelphia Bankruptcy News, Issue No. 149; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000) ADELPHIA COMMS: Santa Monica Seeks Court Okay to Century Payments ----------------------------------------------------------------- The city of Santa Monica, California, asks the U.S. Bankruptcy Court for the Southern District of New York to preserve its rights to receive administrative expense priority payments to remedy the defaults under the Franchise it issued to Century-TCI California, L.P. Prior to Adelphia Communications Corporation and its debtor- affiliates' filing for chapter 11 protection, Santa Monica granted Century-TCI California, a franchise to own, operate and maintain a cable television system within the boundaries of Santa Monica. In resolution of several disputes between the Santa Monica and Century-TCI, the parties entered into a settlement agreement dated Jan. 30, 2006, which provides, among others, for the assumption of the Franchise. Santa Monica did not waive any defaults arising on or after July 1, 2005, and the period from Jan. 1, 1999 to June 30, 2005, related to the payment of franchise fees, utility users, or business license taxes or fees. Santa Monica has commenced an audit of the Franchise for the period of July 1, 2005, through June 30, 2006. Though the audit has not been completed, based on a preliminary review, Santa Monica believes that there are defaults under the Franchise arising during the period from July 1, 2005, and before July 31, 2006, effective date of the Third Modified Fourth Amended Joint Plan of Reorganization for the Century-TCI Debtors and the Parnassos Debtors. Eric D. Winston, Esq., at Stutman, Treister & Glatt, in Los Angeles, California, informs the Court that prior audits routinely revealed that Century-TCI had failed to satisfy certain obligations arising under the Franchise Agreements. Mr. Winston notes that the JV Plan and its related confirmation order dated June 29, 2006, require Santa Monica to file administrative expense claims within 45 days after the JV Plan's Effective Date. Failure to timely submit an Administrative Expense Claim may result in the forfeiture of the claims. 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 Cablevision Associates of Radnor, L.P., and 20 of its affiliates, collectively known as Rigas Manged Entities, are entities that were previously held or controlled by members of the Rigas family. In March 2006, the rights and titles to these entities were transferred to certain subsidiaries of Adelphia Cablevision, LLC. The RME Debtors filed for chapter 11 protection on March 31, 2006 (Bankr. S.D.N.Y. Case Nos. 06-10622 through 06-10642). Their cases are jointly administered under Adelphia Communications and its debtor-affiliates chapter 11 cases. (Adelphia Bankruptcy News, Issue No. 149; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000) ADDISON-DAVIS: Case Summary & 20 Largest Unsecured Creditors ------------------------------------------------------------ Debtor: Addison-Davis Diagnostics Inc. aka QT 5 Inc. 143 Triunfo Canyon Road, Suite 104 Westlake Village, CA 91361 Bankruptcy Case No.: 06-11790 Type of Business: The Debtor is a distributor of drug-screening solutions and cancer screening products. See http://www.addisondavis.com/ The Debtor's chief executive officer, Charles Miseroy, filed for chapter 11 protection on August 24, 2004 (Bankr. C.D. Calif. Case No. 04-28494). Chapter 11 Petition Date: October 5, 2006 Court: Central District Of California (San Fernando Valley) Judge: Maureen Tighe Debtor's Counsel: William H. Brownstein, Esq. Willaim H. Brownstein & Associates, P.C. 1250 Sixth Street, Suite 205 Santa Monica, CA 90401 Tel: (310) 458-0048 Fax: (310) 576-3581 Total Assets: $16,205 Total Debts: $4,551,053 Debtor's 20 Largest Unsecured Creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ Alpha Capital AG Convertible $1,103,208 Lettstrasse 32 Debentures Furstentum 9490 Vaduz, Liechtenstein AJW Offshore, Ltd. Convertible $762,555 P.O. Box 32021 SMB Debentures Grand Cayman, Cayman Islands BWI AJW Qualified Partners, LLC Convertible $734,624 1044 Northern Boulevard Debentures Suite 302 Roslyn, NY 11576 AJW Partners, LLC Convertible $311,748 1044 Northern Boulevard Debentures Suite 302 Roslyn, NY 11576 Osher Capital Inc. Convertible $245,083 5 Sansberry Lane Debentures Spring Valley, NY 10977 Whalhaven Capital Fund Ltd. Convertible $190,000 Debentures Impact Displays, Inc. Displays $180,000 Gray Cary Ware & Freidenrich LLP Attorney Fees $142,285 Richardson & Patel LLP Attorney Fees $112,500 Ellis International Ltd. Convertible $102,782 Debentures Robert Pautch Unsecured Loan $101,500 Bristol Investment Fund, Ltd. Convertible $62,586 Fred DeLuca Unsecured Loan $56,073 New Millennium Capital Convertible $55,739 Debentures Kessler & Associates Accounting $52,283 Ace Investors, LLC Convertible $44,177 Debentures Sichenzia Ross Friedman Attorney Fees $40,535 Ference LLP Tele Pacific Communications Telephone System $35,484 McDermott, Will and Emery Attorney Fees $31,309 McDaniel & Chusid, LLP Attorney Fees $22,610 AEARO TECHNOLOGIES: Moody's Assigns Loss-Given-Default Rating ------------------------------------------------------------- In connection with Moody's Investors Service's implementation of its new Probability-of-Default and Loss-Given-Default rating methodology for the U.S. manufacturing sector, the rating agency confirmed its B2 Corporate Family Rating for Aearo Technologies, Inc., as well as its Caa1 rating on the company's $170 million Senior 2nd Lien Secured Term Loan due 2013. The debentures were assigned an LGD5 rating suggesting noteholders will experience an 86% loss in the event of default. Additionally, Moody's revised its probability-of-default ratings and assigned loss-given-default ratings on these loans and bond debt obligations of the company: Projected Old POD New POD LGD Loss-Given Debt Issue Rating Rating Default ---------- ------- ------- ------ ---------- $60m Sr. 1st lien sec revolver due 2012 B2 B1 LGD3 36% $340m Sr. 1st lien sec TLB due 2013 B2 B1 LGD3 36% Moody's explains that current long-term credit ratings are opinions about expected credit loss which incorporate both the likelihood of default and the expected loss in the event of default. The LGD rating methodology will disaggregate these two key assessments in long-term ratings. The LGD rating methodology will also enhance the consistency in Moody's notching practices across industries and will improve the transparency and accuracy of Moody's ratings as Moody's research has shown that credit losses on bank loans have tended to be lower than those for similarly rated bonds. Probability-of-default ratings are assigned only to issuers, not specific debt instruments, and use the standard Moody's alpha- numeric scale. They express Moody's opinion of the likelihood that any entity within a corporate family will default on any of its debt obligations. Loss-given-default assessments are assigned to individual rated debt issues -- loans, bonds, and preferred stock. Moody's opinion of expected loss are expressed as a percent of principal and accrued interest at the resolution of the default, with assessments ranging from LGD1 (loss anticipated to be 0% to 9%) to LGD6 (loss anticipated to be 90% to 100%). Headquartered in Indianapolis, Indiana, Aearo Technologies Inc. -- http://www.aearo.com-- makes and sells personal protection equipment in more than 70 countries under brand names such as AOSafety, E-A-R, Peltor, and SafeWaze. Products include earplugs, goggles, face shields, respirators, hard hats, safety clothing, first-aid kits, and communication. Safety products account for about three-quarters of the company's sales. Aearo also sells safety prescription eyewear and makes energy-absorbing foams that control noise, vibration, and shock. AES CORP: Files $40-Million Lawsuit Against Alstom in Delaware -------------------------------------------------------------- AES Corp. is seeking $40 million from Alstom SA, a French firm, in a trial of a warranty dispute that started in a federal court in Delaware on Monday, Bloomberg reports. Bloomberg notes that a unit of AES Corp. filed a lawsuit against Alstom Power Inc. in 2004, claiming that the latter breached contract over corrosion in pollution-control systems at an $800 million coal-fired power plant in Guyama, Puerto Rico. The report says that Dane H. Butswinkas, the legal representative of AES Corp., told the jurors on Monday that parts of the 454- megawatt plant, which uses steam to generate electricity, rusted to bits in a year after it started operating in 2002. Meanwhile, John Anthony Wolf, Alstom's attorney, said that AES Corp. failed to maintain and run the equipment properly and that AES Corp. is seeking exaggerated damages for problems that were self-inflicted, Bloomberg relates. Dane H. Butswinkas can be reached at: Williams & Connolly LLP 725 Twelfth St., N.W. Washington, DC 20005 Phone: 202-434-5110 Fax: 202-434-5029 E-mail: dbutswinkas@wc.com John Anthony Wolf can be reached at: Ober Kaler 120 East Baltimore Street Suite 800 Baltimore, MD 21202-1643 Phone: (410) 347-7346 Fax: (410) 230-7272 About the Company The AES Corporation -- http://www.aes.com-- and its subsidiaries engage in the generation and distribution of electric power. It generates power for sale to utilities and other wholesale customers, as well as operates utilities that distribute power to retail, commercial, industrial, and governmental customers through integrated transmission and distribution systems. The company operates through three segments: Contract Generation, Competitive Supply, and Regulated Utilities * * * As reported in the Troubled Company Reporter on Oct. 16, 2006, Moody's Investors Service affirmed its B1 Corporate Family Rating for AES Corporation in connection with the implementation of its new Probability-of-Default and Loss-Given-Default rating methodology. Additionally, Moody's revised its probability-of- default ratings and assigned loss-given-default ratings on the company's loans and bond debt obligations including the B1 rating on its senior unsecured notes 7.75% due 2014, which was also given an LGD4 loss-given default rating, suggesting noteholders will experience a 55% loss in the event of a default. ALLIANCE LAUNDRY: Moody's Assigns Loss-Given-Default Rating ----------------------------------------------------------- In connection with Moody's Investors Service's implementation of its new Probability-of-Default and Loss-Given-Default rating methodology for the U.S. manufacturing sector, the rating agency confirmed its B1 Corporate Family Rating for Alliance Laundry Systems, as well as its B3 rating on the company's $150 million 8.5% Senior Unsecured Subordinate Notes Due 2013. The facilities were assigned an LGD5 rating suggesting noteholders will experience an 84% loss in the event of default. Additionally, Moody's revised its probability-of-default ratings and assigned loss-given-default ratings on these loans and bond debt obligations of the company: Projected Old POD New POD LGD Loss-Given Debt Issue Rating Rating Rating Default ---------- ------- ------- ------ ---------- $55m Sr. Sec. bank facility due 2011 (Rev.) B1 Ba3 LGD3 32% $235m Sr. Sec. bank facility due 2012 B1 Ba3 LGD3 32% Moody's explains that current long-term credit ratings are opinions about expected credit loss which incorporate both the likelihood of default and the expected loss in the event of default. The LGD rating methodology will disaggregate these two key assessments in long-term ratings. The LGD rating methodology will also enhance the consistency in Moody's notching practices across industries and will improve the transparency and accuracy of Moody's ratings as Moody's research has shown that credit losses on bank loans have tended to be lower than those for similarly rated bonds. Probability-of-default ratings are assigned only to issuers, not specific debt instruments, and use the standard Moody's alpha- numeric scale. They express Moody's opinion of the likelihood that any entity within a corporate family will default on any of its debt obligations. Loss-given-default assessments are assigned to individual rated debt issues -- loans, bonds, and preferred stock. Moody's opinion of expected loss are expressed as a percent of principal and accrued interest at the resolution of the default, with assessments ranging from LGD1 (loss anticipated to be 0% to 9%) to LGD6 (loss anticipated to be 90% to 100%). Headquartered in Marianna, Florida, Alliance Laundry Systems LLC delivers laundry products and services. ALLIS-CHALMERS ENERGY: Buys Petro Rentals for $29.8 Mil. in Cash ---------------------------------------------------------------- Allis-Chalmers Energy Inc. acquired Petro Rentals Inc. for approximately $29.8 million in cash, including the payment of approximately $9.5 million of debt, and 246,761 shares of the Company's common stock. The Company says that the acquisition was funded with cash on hand remaining from its recent equity and debt securities offerings. Based on Petro Rentals' unaudited financial statements, its EBITDA for the eight-month period ended Aug. 31, 2006 was approximately $4.9 million. Micki Hidayatallah, chairman and chief executive officer, stated, "The acquisition of Petro Rentals helps us to realize one of our primary objectives of creating a better balance between our drilling-related and production-rental activities. We expect Petro Rentals' coiled tubing division to complement our Production Services segment, which already had two coiled tubing units before this acquisition. With the Petro Rentals acquisition and the additional coiled tubing units on order, we expect to have a total of eight coiled tubing units and 14 capillary tubing units by December 31. With a projected utilization rate of 50%, we are very optimistic about this portfolio of coiled and capillary tubing units contributing significantly to our financial performance. With current estimates of capital expenditures by the E&P companies increasing in 2007 at a rate greater than 15% we feel that Petro Rentals will sustain its EBITDA run rate and through efficient utilization of the new coiled tubing units should increase its EBITDA contribution to Allis-Chalmers Energy to over $11 million." About Petro Rentals Based in Broussard, Louisiana, Petro Rentals Inc. provides a variety of rental tools and equipment and services that are vital throughout the life of a well, from drilling through plugging and abandonment, with an emphasis on production related equipment and services. With division offices in Broussard, Houma and Arcadia, Louisiana and Alvin, Texas, Petro Rentals serves both onshore and offshore markets. About Allis-Chalmers Energy Based in Houston, Texas, Allis-Chalmers Energy Inc. (AMEX: ALY) -- http://www.alchenergy.com/-- provides oilfield services and equipment to the oil and gas exploration and development companies primarily in Texas, Louisiana, New Mexico, Colorado, and Oklahoma; offshore in the United States Gulf of Mexico; and offshore and onshore in Mexico. The company offers directional drilling, compressed air drilling, casing and tubing, rental tools, and production services. * * * As reported in the Troubled Company Reporter on Sept. 27, 2006, Moody's Investors Service in connection with the implementation of its new Probability-of-Default and Loss-Given-Default rating methodology for the oilfield service and refining and marketing sector, confirmed its B3 Corporate Family Rating for Allis- Chalmers Energy Inc. Moody's also affirmed its B3 rating on the company's 9% Senior Unsecured Guaranteed Global Notes Due 2014, and assigned the debentures an LGD4 rating suggesting a projected loss-given default of 54%. As reported in the Troubled Company Reporter on July 31, 2006, Standard & Poor's Ratings Services affirmed its 'B-' rating on Allis-Chalmers Energy Inc.'s proposed $80 million senior notes issuance due 2014. The notes are being offered as additional notes under the indenture to which the company issued $160 million of notes in January 2006. At the same time, Standard & Poor's affirmed the 'B-' corporate credit rating on the company. The outlook is stable. AMERIVEST PROPERTIES: Sells Hampton Court Property for $17 Mil. --------------------------------------------------------------- AmeriVest Properties Inc. completed the sale of its Hampton Court office building in Dallas, Texas, for $17 million to Koll/PER LLC. This is the fifth closing under the July 17, 2006, purchase and sale agreement with Koll/PER. Additional closings will be scheduled as loan assumption approvals are received from AmeriVest's mortgage lenders and other traditional closing activities are completed. The estimated cash proceeds of approximately $9 million, after assignment of the first mortgage, closing costs and adjustments, will be accumulated with other proceeds and made available, subject to the expenses and other costs of the Company, for distribution to shareholders under the plan of liquidation approved by AmeriVest shareholders. The Board of Directors of AmeriVest has not yet established any dates for the payment of liquidating distributions. There can be no assurance with respect to the timing or amount of any distribution or distributions to be made by AmeriVest, or that any other closings will occur under the purchase and sale agreement or otherwise. About AmeriVest Properties Headquartered in Denver, Colorado, AmeriVest Properties Inc. (AMEX: AMV) -- http://www.amvproperties.com/-- provides Smart Space for Small Business(TM) in Denver, Phoenix, and Dallas through the acquisition, repositioning and operation of multi- tenant office buildings in those markets. * * * As reported in the Troubled Company Reporter on June 5, 2006, AmeriVest Properties Inc.'s stockholders approved a Plan of Liquidation at its annual meeting. Under the Plan, the Company's remaining 12 office properties will be sold on an orderly basis and proceeds distributed to stockholders. All 12 properties are listed with Trammell Crow Company and the sales process is being managed through Trammell Crow's Denver office. Detailed information regarding the properties was released to over 4,000 prospective purchasers on May 1, 2006. AMR CORP: Earns $15 Million in 2006 Third Quarter ------------------------------------------------- AMR Corporation, the parent company of American Airlines Inc., reported a net profit of $15 million for the third quarter of 2006. The results include a $99 million non-cash charge in Other Income (Expense) to reduce the book value of certain outstanding fuel hedge contracts. Excluding the special item, the Company's profit was $114 million. The Company's net loss was $153 million in the third quarter of last year. Excluding the $58 million net negative impact of two special items, the net loss in the third quarter of 2005 was $95 million. "We are pleased to report a profit for the third quarter, which represents the first time in nearly six years that we have recorded a profit in two consecutive quarters," Gerard Arpey, chairman and chief executive officer, said. "These results show continuing improvements in the Company's core business operations, even in the face of new challenges. But we also have more hard work ahead of us as we build a company that is better positioned for long-term success." The Company reported third quarter consolidated revenues of $5.8 billion, an increase of 6.6% from $5.5 billion for the same period last year. In the third quarter, Other revenues increased 13.3% year over year to $333 million. The Company estimates that the London security threat in August reduced revenues in August and September by more than $50 million. American Airlines' mainline load factor was 81.7% during the third quarter. Yield increased 7% compared to the third quarter of 2005, and passenger revenue per available seat mile for the third quarter increased 7.7% year over year. American's mainline cost per available seat mile in the quarter was up 3.8% year over year and excluding fuel and special items, the airline's unit cost for the third quarter increased 1% year over year. "While falling fuel prices provide significant benefits to our company, fuel prices remain at historically high levels and continue to be volatile," Mr. Arpey said. "That's a reminder that we must continue our efforts to conserve fuel and reduce other expenses." The Company says that it regularly uses fuel hedging instruments, including options and collars, to dampen the impact of volatile fuel prices. The Company's fuel hedging activities reduced fuel expenses by $300 million during the period from 2003 through 2005, and have reduced year-to-date 2006 fuel expense by $66 million. Cash and short-term investment balance of the Company was $5.5 billion, including a restricted balance of $464 million, at the end of the third quarter of 2006. In addition to making scheduled principal payments of $1.1 billion, the Company said that it has repurchased approximately $128 million of debt since January 2006 and depending on market conditions, cash position and other considerations, may from time to time redeem or repurchase its debt or take other steps to reduce its debt or lease obligations. The Company disclosed that it continues to execute on the strategy laid out in its Turnaround Plan by working together with employees to identify ways to reduce costs, grow revenues, improve the customer experience and simplify its operations, which included: -- The signing, in September, of a 5-year service agreement with the U.S. Postal Service potentially worth $500 million in revenue to American, the largest single contract ever awarded to the its Cargo division. -- The setting, also in September, by a team of Transport Workers Union employees at American line maintenance bases and management of a goal to obtain $95 million of annual value creation for the airline by the end of 2008. The announcement followed more than $1 billion in similar goals set previously by maintenance employees at the Company's Tulsa, Kansas City and Fort Worth maintenance bases. The Company also disclosed that in continuing efforts to bolster its international business, American in July filed an application with the United States Department of Transportation to operate daily nonstop service between Dallas/Fort Worth International Airport and Bejing, China, starting in March 2007. The Company further disclosed that the collaboration over the past several years between management, unions and employees helped produce a positive result in August, when Congress passed a bill that enhances the Company's ability to fund its pension obligations. Mr. Arpey noted that the Company was able to contribute $104 million to its various defined benefit pension plans since the end of the second quarter, bringing its total 2006 contributions to the plans to $223 million through Oct. 13, 2006. American Airlines -- http://www.AA.com/-- is the world's largest airline. American, American Eagle and the AmericanConnection regional airlines serve more than 250 cities in over 40 countries with more than 3,800 daily flights. The combined network fleet numbers more than 1,000 aircraft. American Airlines is a founding member of the oneworld Alliance, whose members serve more than 600 destinations in over 135 countries and territories. At Dec. 31, 2005, AMR Corporation's equity deficit doubled to $1.478 billion from a $581 million deficit from Dec. 31, 2004. * * * Standard & Poor's Ratings Services, effective June 6, 2006, placed its ratings on AMR Corp. (B-/Watch Pos/B-3) and subsidiary American Airlines Inc. (B-/Watch Pos/--) on CreditWatch with positive implication. AOH-GOLF: Moody's Pares Ba1 Rating on Series 2003 Series C Bonds ---------------------------------------------------------------- Moody's Investors Service downgraded the rating on Capital Trust Agency's Multifamily Housing Revenue Bonds (American Opportunities for Housing - Golf Villas, Rivermill and Village Square Apartments) Senior Series 2003A and Senior Series 2003B Taxable Bonds to Ba1 from Baa2, and the rating on the Subordinate Series 2003 Series C Bonds to Ba2 from Ba1. The bonds have been issued through the Capital Trust Agency, Florida. This rating action affects $15.0 million of Senior Bonds and $985,000 of Subordinate Bonds outstanding. The outlook has been changed to stable from negative. The downgrade is based on revenue volatility and lower than expected debt service coverage. Along with this transaction, the issuer also issued Junior Subordinated Series 2003D bonds which are not rated by Moody's. Legal security. The bonds are secured by the revenues and mortgages from three cross-collateralized properties - Golf Villas, Rivermill and Village Square Apartments, as well as funds and investments pledged to the trustee pursuant to the indenture as security for the bonds. The Series A and B bonds have a first lien on all program funds and are paid first in the monthly flow of funds. The Subordinate Series C bonds are to be paid before the Junior Subordinate Series D bonds. A payment default on the Series C Subordinate and Series D Junior Subordinate bonds can only trigger a default if the Series A and B bonds are retired first. Excess funds can only be released annually from the indenture if a 1.40 times debt service coverage ratio is met for the Series A and B Senior bonds, 1.30 times for the Series C Subordinate bonds and 1.10 for the Series D Junior Subordinate bonds. The debt service reserve fund is set at maximum annual debt service for the Series A and B bonds to provide ample coverage in the event of liquidity difficulties. Interest rate derivatives: None Strengths. -- Ability of the projects to maintain adequate debt service coverage without tapping debt service reserves between 2004 and 2006 coverage despite significant damage to the Golf Villas property caused by Hurricane Ivan in 2004 and Hurricane Dennis in 2005. -- Physical occupancy of 96% for both the Golf Villas and Village Square properties as of the month of September 2006. Challenges. -- Debt service coverage has been volatile and remains below the coverage projected at bond closing of 1.40 for Senior debt and 1.30 for Subordinate C debt. The coverage as of the December 31, 2005 audit was 1.08 and 1.00 for Senior and Subordinate debt. While a review of unaudited operating statements for a rolling 12 months ending August 2006 shows improvement to 1.28 and 1.19 for Senior and Subordinate debt, this still is below the unaudited coverage of 1.31 and 1.22 demonstrated in July of 2005. -- The Rivermill property continues to demonstrate uneven performance, with economic occupancy at 89% for the rolling 12 months ending August 2006, 92% for the rolling 12 months as of July 2005 and 87% as of August 2004. The outlook on the bonds is stable, reflecting the improved occupancy rates Golf Village property in the last 12 months and the relatively stable performance of the other two properties. Moody's believes that the cross-collateralized nature of the three properties will allow the overall deal to maintain adequate debt service coverage levels even if individual properties demonstrate uneven performance over time. What could change the rating - up * Sustained, improved physical and economic occupancy rates and debt service coverage levels over time. What could change the rating - down * A substantial decrease in occupancy rates and/or debt service coverage levels. ARMSTRONG WORLD: Discloses Distribution Amount for Class 6 Claims ----------------------------------------------------------------- Armstrong World Industries Inc. disclosed the amount of the initial distributions it expects to make to general unsecured creditors under its Chapter 11 plan. Specifically, distributions to holders of allowed unsecured claims falling in Class 6 was scheduled to start on Oct. 17, 2006, pursuant to its Court- approved "Fourth Amended Plan of Reorganization, as Modified," dated Feb. 21, 2006. The Company says that per $10,000 of the Class 6 claims, an initial distribution of 116 Common Shares of reorganized Armstrong World Industries and approximately $2,435 in cash are expected. The initial distributions exclude approximately $11 million of cash and 538,000 shares that are reserved from distribution due to disputed unsecured claims in Class 6. A total of 19,418,520 shares and approximately $407 million of cash will be distributed to creditors in Class 6 under the Plan. Separately, in discharge of all of its present and future asbestos-related personal injury claims, on October 2, the Company issued under the Plan 36,981,480 Common Shares to the Armstrong World Industries, Inc. Asbestos Personal Injury Settlement Trust and by October 17 will distribute to the Trust approximately $738 million in cash, representing the portion of cash distributions to which the Trust is entitled under the Plan. All present and future asbestos-related personal injury claims must be asserted against, and will be resolved by, the Trust, and such claims may not be asserted against the Company. Under the Plan, payments to unsecured creditors having allowed claims of $10,000 or less (or who have reduced their claims to $10,000) began on October 2. The creditors receive distributions entirely in cash in an amount equal to approximately 75% of their allowed claims. The cash amount to be distributed to Class 6 creditors and the Trust includes "Available Cash" as defined in the Plan and $775 million of the cash proceeds expected from $800 million of term loans that the Company is arranging in lieu of issuing notes under the Plan. The term loans are in addition to a $300 million revolving credit facility already established, which is currently undrawn and will be available to support the Company's ongoing liquidity needs. The Company also disclosed that its Common Shares have been approved for listing on the New York Stock Exchange under the ticker symbol "AWI." Trading on the NYSE is expected to commence on a "when issued" basis, and "regular way" trading is anticipated to begin on a date to be announced by the New York Stock Exchange. "We are pleased to return to the New York Stock Exchange, where Armstrong first began trading on July 17, 1935," F. Nicholas Grasberger III, senior vice president and chief financial officer, said. "This is the renewal of a long and rewarding relationship between Armstrong and the NYSE." "We are pleased to welcome back Armstrong World Industries to our family of NYSE-listed companies, resuming our 70-plus year partnership with the company," John A. Thain, NYSE Group, Inc. chief executive officer, said. "We look forward to serving Armstrong World Industries and its shareholders, and providing the company with superior market quality and brand visibility." Based 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 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 Company and its affiliates 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. The Bankruptcy Court confirmed AWI's plan on Nov. 18, 2003. The District Court Judge Robreno confirmed AWI's Modified Plan on Aug. 14, 2006. The Clerk entered the formal written confirmation order on Aug. 18, 2006. The Company's "Fourth Amended Plan of Reorganization, as Modified," has become effective and AWI has emerged from Chapter 11. (Armstrong Bankruptcy News, Issue No. 103; Bankruptcy Creditors' Service,Inc., http://bankrupt.com/newsstand/or 215/945-7000). * * * As reported in the Troubled Company Reporter on Oct. 9, 2006 Standard & Poor's Ratings Services raised its corporate credit rating on Armstrong World Industries Inc. to 'BB' from 'D', following the Company's emergence from bankruptcy on Oct. 2, 2006. The outlook is stable. ARMSTRONG WORLD: Registers 5,349,000 Shares of Common Stock ----------------------------------------------------------- Walter T. Gangl, Deputy General Counsel and Assistant Secretary of Armstrong World Industries, Inc., discloses in a regulatory filing with the Securities and Exchange Commission that the Company has registered 5,349,000 shares of common stock to be issued to officers and key employees in accordance with its 2006 Long-Term Incentive Plan. The maximum offering price for each share is $35, for an aggregate offering price of $187,215,000. The Company paid a $20,032 registration fee. Based 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 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 Company and its affiliates 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. The Bankruptcy Court confirmed AWI's plan on Nov. 18, 2003. The District Court Judge Robreno confirmed AWI's Modified Plan on Aug. 14, 2006. The Clerk entered the formal written confirmation order on Aug. 18, 2006. The Company's "Fourth Amended Plan of Reorganization, as Modified," has become effective and AWI has emerged from Chapter 11. (Armstrong Bankruptcy News, Issue No. 103; Bankruptcy Creditors' Service,Inc., http://bankrupt.com/newsstand/or 215/945-7000). * * * As reported in the Troubled Company Reporter on Oct. 9, 2006 Standard & Poor's Ratings Services raised its corporate credit rating on Armstrong World Industries Inc. to 'BB' from 'D', following the Company's emergence from bankruptcy on Oct. 2, 2006. The outlook is stable. BANYAN CORPORATION: Posts $912,154 Net Loss in Qtr. Ended June 30 ----------------------------------------------------------------- Banyan Corp. reported a net loss of $912,154 for the three-month period ended June 30, 2006, compared to a net loss of $1,701,053 for the equivalent period in the prior year, resulting in an accumulated deficit of $18,927,092. Total revenues generated by the company amounted to $1,594,882 for the three-month period ended June 30, 2006, compared to $290,230 for the same period in the prior year. At June 30, 2006, the company's balance sheet showed $6,332,710 in total assets and $5,650,663 in total liabilities, leaving $682,047 in stockholders' equity. A full-text copy of the company's annual report is available for free at http://researcharchives.com/t/s?13c7 Going Concern Doubt As reported in the Troubled Company Reporter on May 17, 2006, Schwartz Levitsky Feldman LLP, Chartered Accountants, raised substantial doubt about Banyan Corporation's ability to continue as a going concern after auditing the Company's consolidated financial statements for the year ended Dec. 31, 2005. The auditor pointed to the company's recurring losses from operations, negative working capital, and stockholders' deficit. About Banyan Banyan Corporation is a holding company focused on investing in and building a network of subsidiaries engaged in diagnostic testing, the franchising of Chiropractic USA branded chiropractic clinics, providing practice development training and assistance to chiropractors, and offering franchise support and related services to franchisees. BEXAR COUNTY: Moody's Holds Ba3 Rating on Sub. Series 2001 B Bonds ------------------------------------------------------------------ Moody's Investors Services downgraded the rating on Bexar County Housing Finance Corporation Housing Revenue Bonds Senior Series 2001 from Baa3 to Ba1 and has affirmed the Ba3 rating on the Subordinate Series 2001 B. The outlook is changed to stable from negative. The Junior Subordinate Series C bonds are not rated. The rating downgrade on the Series A bonds reflects continued financial deterioration of the project. Moody's believes the Ba3 rating on the subordinate 2001B series already incorporates the risks associated with current levels of debt service coverage. Legal security: -- The bonds are secured by a lien on and pledge and assignment of a security interest in the Trust Estate. Interest Rate derivatives: -- none Credit strengths: -- Fully funded debt service reserve funds for both the Series A and B bonds. Nob Hill Apartments Project, a 368 unit multi-family rental property is located approximately 8 miles north of the San Antonio central business district with good access to the city's principal traffic arteries. Property is managed by the Lynd Management Company, which has a strong background in managing affordable housing properties throughout Texas. Credit challenges: -- Financial performance remains challenging. While there was some improvement in FY 2005 as compared to FY 2004, Moody's has reviewed rolling 12 month unaudited financial statements from September 2005-August 2006, which show further deterioration in rental revenues and growth in expenses. In FY 2005, debt service coverage was 1.35x on the senior bonds and 1.21x on the subordinate and senior bonds combined, as compared to 1.26x and 1.13x, respectively for 2006. Debt service coverage ratio calculations include the required deposit into the repair and replacement fund, as outlined in the Trust Indenture. Occupancy is down to 82% in October 2006 from 91% in August 2005. Turnover also remains high at approximately 70% for August 2006. The property manager partially attributes the low occupancy rate to a change in the credit approval system used by Nob Hill Apartments. The project converted from a manual credit approval system to an online system that applied higher credit standards to tenant applicants. As a result, the applications of viable tenants who would have been accepted in the past were denied. Nob Hill has reverted back to the manual credit approval process and is seeing an initial improvement in occupancy levels, with over 35 leases signed during the last two weeks of September. The project hopes to return to 90% occupancy by November 2006, and expects occupancy rates to stabilize at an average of 93% for the fourth quarter 2006. According to the Trustee, the reserve and replacement fund is currently underfunded by approximately $20,000, as recent project cash flows have been insufficient to cover the entire required monthly amount. The bonds are secured by a single asset, the Nob Hill property, which has an inherent risk due to lack of greater diversification of revenues. Outlook The outlook for the bonds has been changed to stable from negative. The stable outlook reflects Moody's belief that the project will continue to perform close to current levels, with some expectation of improved occupancy over the medium-term. What could change the rating- up -- Improvement in occupancy rates, leading to increased rental revenue and growth in NOI and debt service coverage. What could change the rating- down -- Further deterioration in debt service coverage; tapping any of the debt service reserve funds. BLACK BULL: Stops Quartz Operations to Restructure Company ---------------------------------------------------------- Black Bull Resources Inc. decided to temporarily cease quartz processing operations at its East Kemptville, Nova Scotia mine site. The company is taking this action in order to conserve cash resources and focus expenditures on developing a new sales strategy, securing financing, adding new equipment to improve plant and feedstock utilization, and broaden the diversity of products the plant can produce. Additionally, the company announced a management restructuring which will include the closure of its Halifax office and consolidation of its management functions in Shelburne. The management changes include elimination of certain positions including the VP Operations role and others as well as restructuring compensation arrangements with the staff that will remain in the employ of the company. Joseph MacDonald, outgoing Interim CEO, said, "We regret the impact of the interruption in production on our customers and of course we regret deeply the impact of layoffs and position eliminations on our hourly and management personnel and the local community. We believe, however, that cessation of processing operations is unavoidable in the short term to conserve cash and rethink our product strategy and sales coverage in the marketplace." The operations closure is planned for Oct. 27, 2006, and will last for an undetermined period. During the closure, the company will retain core management staff who will continue to focus on developing an alternative strategy and building an order book to support a future financing and re- opening of the mine and processing site. Robert Cudmore, CFO, agreed to act as Interim CEO as well as CFO effective Oct. 16, 2006, and will report to the board of directors in that capacity during this transition period. Joseph MacDonald and Richard Shearer, both directors of the company, will lead the development of alternative strategy options for the Board to consider within a 60-day period. Following receipt and consideration of their report, and subject to a new financing, the Board will announce the plans for the future development of the company. Fiscal 2006 Results In its interim, annual financial statements for the fiscal year ended June 30, 2006, Black Bull reports that it had not yet achieved profitable operations and has incurred significant operating losses over the past eight fiscal quarters including $2,110,141 in the current fiscal year to date. The company's management notes that, if the trend continues, the current working capital is not sufficient to sustain itself for the next 12 months. In addition, the company requires a capital expansion to increase plant utilization and product quality to reach levels for profitable operations. The company must obtain additional financing to complete the capital project and maintain sufficient working capital to reach profitable operations from the Scotia White quartz operations and other potential mineral developments. A full-text copy of the company's fiscal year 2006 financial report is available for free at: http://researcharchives.com/t/s?13db About Black Bull Based in Shelburne, Nova Scotia, Black Bull Resources Inc. (TSX VENTURE:BBS) -- http://www.blackbullresources.com/-- is a Canadian mining company that operates the White Rock Mine near Shelburne. The mine produces a bright-white, high-purity quartz, marketed under the Scotia White trademark which is used in a range of value-added, specialty products. The White Rock Property also contains an identified resource of kaolin and mica which the company plans to further develop. BLOUNT INC: Moody's Assigns Loss-Given-Default Rating ----------------------------------------------------- In connection with Moody's Investors Service's implementation of its new Probability-of-Default and Loss-Given-Default rating methodology for the U.S. manufacturing sector, the rating agency confirmed its Ba3 Corporate Family Rating for Blount, Incorporated, as well as its B2 rating on the company's $175 million 8.875% Senior Subordinate Notes Due 2012. The notes were assigned an LGD5 rating suggesting noteholders will experience an 86% loss in the event of default. Additionally, Moody's revised its probability-of-default ratings and assigned loss-given-default ratings on these loans and bond debt obligations of the company: Projected Old POD New POD LGD Loss-Given Debt Issue Rating Rating Rating Default ---------- ------- ------- ------ ---------- $150 Million Sr. Sec. Revolver due 2009 Ba3 Ba1 LGD2 27% $150 Million Sr. Sec. Term Loan due 2010 Ba3 Ba1 LGD2 27% Moody's explains that current long-term credit ratings are opinions about expected credit loss which incorporate both the likelihood of default and the expected loss in the event of default. The LGD rating methodology will disaggregate these two key assessments in long-term ratings. The LGD rating methodology will also enhance the consistency in Moody's notching practices across industries and will improve the transparency and accuracy of Moody's ratings as Moody's research has shown that credit losses on bank loans have tended to be lower than those for similarly rated bonds. Probability-of-default ratings are assigned only to issuers, not specific debt instruments, and use the standard Moody's alpha- numeric scale. They express Moody's opinion of the likelihood that any entity within a corporate family will default on any of its debt obligations. Loss-given-default assessments are assigned to individual rated debt issues -- loans, bonds, and preferred stock. Moody's opinion of expected loss are expressed as a percent of principal and accrued interest at the resolution of the default, with assessments ranging from LGD1 (loss anticipated to be 0% to 9%) to LGD6 (loss anticipated to be 90% to 100%). Headquartered in Portland, Oregon, Blount, Incorporated,- http://www.blount.com- manufactures equipment, accessories, and replacement parts to the forestry, yard care, and general contractor industries worldwide. BROWN JORDAN: Extends $105 Million Private Exchange Offer --------------------------------------------------------- Brown Jordan International Inc. extended certain provisions of a private exchange offer being conducted as part of a proposed restructuring of the Company. The private exchange offer will expire at 5:00 p.m., New York City time, today, Oct. 24, 2006, unless further extended by the Company. As of 5:00 p.m., New York City time, on Oct. 20, 2006, approximately $105 million in aggregate principal amount of the Senior Subordinated Notes had been tendered and not withdrawn as part of the private exchange offer. All other terms and conditions of the private exchange offer, as previously extended, will remain in full force and effect. Headquartered in a Florida, Brown Jordan International Inc. engages in design, marketing, manufacturing and distribution of indoor and outdoor furniture, * * * Brown Jordan's Sept. 24, 2004 balance sheet showed a $60,865,000 total stockholder's deficit compared to a stockholders' deficit of $37,689,000 at Dec. 31, 2003. BUILDING MATERIALS: Moody's Assigns Ba2 Rating to New $850MM Loan ----------------------------------------------------------------- Moody's Investors Service affirmed Building Materials Holding Corporation's Ba2 corporate family rating and has assigned it a Ba3 probability-of-default rating. In addition, Moody's assigned a Ba2 rating and an LGD3 (41%) rate to BMHC's new $850 million First Lien Bank Credit Facility. The outlook remains stable. The Ba2 rating reflects BMHC's strong balance sheet, low financial leverage and healthy liquidity profile. BMHC's leading position in the building materials and residential construction services markets, and its geographic diversification serve to support the rating as well. Moody's expects BMHC to maintain low adjusted debt to EBITDA leverage and strong EBIT to interest coverage, which at June 30, 2006 stood at 1.6x and 10.3x respectively. The company's SelectBuild division generates approximately $1.9 billion of revenues and $209 million of EBITDA (prior to corporate overhead allocation), while its BMC West division generates $1.6 billion and EBITDA of $168 million (prior to corporate overhead allocation). The above strengths offset Moody's concerns over a slowing residential home building and renovation market, as well as ongoing acquisition and integration risks. The stable outlook reflects BMHC's ability to aggressively manage its variable expenses, including hourly labor, as a partial mitigant to a slowing housing market, as well as strong credit metrics for the rating category. While Moody's anticipates weak housing prices and demand over the next eighteen months, it recognizes that the longer term outlook for growth remains positive. BMHC, a Fortune 1000 company, is one of the providers of residential construction services and building materials in the United States. CALPINE CORP: Wants to Sell Siemens Turbines for $48 Million ------------------------------------------------------------ Calpine Corp. and its debtor-affiliates ask the U.S. Bankruptcy Court for the Southern District of New York to: (a) approve the proposed bidding procedures to govern the sale of four Siemens Power Generation Model Econopac combustion turbines; (b) approve the proposed break-up fee; and (c) schedule a sale hearing to consider the sale of the Siemens Turbines. The Debtors also ask the Court to approve the purchase agreement they entered into with Consorcio Pacific or other asset purchase agreement with the successful bidder at the auction. The Siemens Power Generation Model Econopac combustion turbines are surplus equipment and remain unused and in storage in North Las Vegas, Nevada, and Charlotte, North Carolina, Bennett L. Spiegel, Esq., at Kirkland & Ellis LLP, in New York, tells the Court. Mr. Spiegel adds that the Debtors also do not have any prospective projects in which the Turbines are likely to be utilized in the near future. As part of their business operations, the Debtors engaged marketing and sale efforts to dispose of the Siemens Turbines. Mr. Spiegel relates that since the Petition Date, the Debtors have received offers for the Turbines from several interested purchasers. Some of the Offers sought to purchase multiple turbines, while others sought to purchase both turbines and other equipment in bulk. After a review of the Offers, the Debtors, in consultation with the Official Committee of Unsecured Creditors and the Unofficial Committee of Second Lien Debtholders, determined that the Offer proposed by Consorcio Pacific Rim Energy Yucal Placer HTE is the highest and best offer. Consequently, the Debtors and Consorcio Pacific entered into a Purchase and Sale Agreement, which provides that: (a) Consorcio Pacific will pay the Debtors $48,000,000, in the aggregate, for the four Turbines; (b) After signing the PSA, Consorcio Pacific will deliver a $4,800,000 deposit to the Union Bank of California to be held in an escrow account; (c) The assets include, among other things, the four Siemens turbines, and all equipment and materials, written contracts, books and records related to them. Each of the four turbine packages consists of a generator, a combustion turbine and other miscellaneous related equipment; (d) Consorcio Pacific will pay all excise taxes imposed by any government authority with respect to the sale of the Turbines; (e) In the event of a material loss or damage to the Turbines, the Debtors will report to Consorcio Pacific that material loss in detail. If the Material Loss is up to $1,000,000 on one Turbine Or up to $2,000,000 in the aggregate for all Turbines, Consorcio Pacific will proceed to Closing on all Turbines that have not suffered a material loss and the Debtors will have to repair or replace the loss on any Affected Turbine. If the Debtors are unable to repair the Affected Turbine, Consorcio Pacific will have the right to elect not to purchase the Unrepaired Turbine. If the Material Loss is greater than $1,000,000 on one Turbine and up to $2,000,000 in the aggregate for all Turbines, Consorcio Pacific will have the right to decline purchase of the Turbines; (f) The Debtors will maintain and store the Turbines until the applicable Closing; (g) Consorcio Pacific will have the sole responsibility of procuring any missing items if the missing item costs less than $10,000. If the missing item costs more than $10,000, the Debtors will have to procure that missing item; (h) If the Debtors enter into an alternative transaction with another bidder other than Consorcio Pacific, Consorcio Pacific will receive a $880,000 Break-Up Fee. The payment of the Break-Up Fee will constitute an allowed administrative expense of the Debtors' estate, and will be paid from the deposit or other proceeds of the Alternative Transaction. A full-text copy of the Consorsio Pacific PSA is available for free at http://ResearchArchives.com/t/s?13d8 The Debtors believe that the proposed sale of the Turbines to Consorcio Pacific, subject to a market test through the Auction, will serve to maximize the value received for the Turbines. The Buyer will be determined through an auction governed by uniform bidding procedures. To be deemed a "Qualifying Bidder," each potential bidder must deliver to Calpine Corporation, with copies to the Creditors Committee, the Second Lien Debtholders Committee and the Official Committee of Equity Security Holders, a written offer not later than 3:00 p.m., on Nov. 10, 2006. The written offer, among other things, must state the Bidder's offer to purchase the GE Turbine and must state that the Bidder is financially capable of consummating the transactions contemplated by modified definitive documents. Interested bidders must submit initial overbids of at least $400,000 in excess of the purchase price and the Break-Up Fee. The Auction requires that the four Siemens Turbines be sold as one lot. Thus, individual competing bidders will not have the opportunity to submit bids for less than all four Turbines. If the Debtors receive one or more Qualifying Bids, an Auction will be held on Nov. 14, 2006, at the offices of Kirkland & Ellis, LLP, located at the Citigroup Center, 153 East 53rd Street, in New York. Subsequent overbid amounts at the Auction must be in increments of at least $100,000. If no Qualifying Bid is received, a sale hearing to consider the sale of the Siemens Turbines to Consorcio Pacific will take place on Nov. 15, 2006. The Back-up Bidder is required to keep its bid open and irrevocable until December 20, 2006, or until the closing of the sale transaction to the Prevailing Bidder unless there is a Material Loss of the Turbines. Headquartered in San Jose, California, Calpine Corporation (OTC Pink Sheets: CPNLQ) -- http://www.calpine.com/-- supplies customers and communities with electricity from clean, efficient, natural gas-fired and geothermal power plants. Calpine owns, leases and operates integrated systems of plants in 21 U.S. states and in three Canadian provinces. Its customized products and services include wholesale and retail electricity, gas turbine components and services, energy management and a wide range of power plant engineering, construction and maintenance and operational services. The Company filed for chapter 11 protection on Dec. 20, 2005 (Bankr. S.D.N.Y. Lead Case No. 05-60200). Richard M. Cieri, Esq., Matthew A. Cantor, Esq., Edward Sassower, Esq., and Robert G. Burns, Esq., Kirkland & Ellis LLP represent the Debtors in their restructuring efforts. Michael S. Stamer, Esq., at Akin Gump Strauss Hauer & Feld LLP, represents the Official Committee of Unsecured Creditors. As of Dec. 19, 2005, the Debtors listed $26,628,755,663 in total assets and $22,535,577,121 in total liabilities. (Calpine Bankruptcy News, Issue No. 28; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000) CALPINE CORP: Can Assume Channel Energy Lease Agreements -------------------------------------------------------- The Honorable Burton R. Lifland of the U.S. Bankruptcy Court for the Southern District of New York authorized Calpine Corp. and its debtor-affiliates to assume lease agreements between Channel Energy Center LP and Lyondell-Citgo Refining, L.P. The Court further ruled that the parties set cure amounts for the agreements. Debtor Channel Energy, operates and maintains a 531-megawatt gas-fired combined cycle cogeneration power plant located near Houston, Texas. In January 2000, Channel Energy entered into a Development and Construction Agreement with Lyondell-Citgo, whereby Channel Energy agreed to construct, own and operate the Channel Facility on LCR's refinery in Houston. Simultaneously, the Debtors and Channel Energy entered into a series of other agreements, whereby: -- Channel Energy would lease the real property on which the Channel Facility is located pursuant to a ground lease, and operate the Facility to supply electricity, steam, clarified water, and treated water to LCR; and -- LCR would supply raw water, refinery gas, and certain facility services to the Channel Facility. The parties also entered into an Operating Lease, whereby Channel Energy lease certain equipment to LCR for LCR's use for its industrial operations. The Channel Agreements are summarized as: Date of Counterparty Agreement Description Agreement ------------ --------------------- --------- Lyondell-Citgo Amended & Restated Ground Lease 03/30/01 Refining L.P. and Easement Agreement Lyondell-Citgo Operating Lease Agreement 01/25/00 Refining L.P. Lyondell-Citgo Development Construction, 01/25/00 Refining L.P. Operation & Maintenance Agreement Lyondell-Citgo Facility Services Agreement 01/25/00 Refining L.P. Lyondell-Citgo Energy Services Agreement 01/25/00 Refining L.P. In June 2006, the Debtors sought the Court's permission to assume the Ground Lease and the Operating Lease Agreement, Bennett L. Spiegel, Esq., at Kirkland & Ellis LLP, in New York, recounts. LCR argued that all of the Channel Agreements must be assumed concurrently with the Channel Leases. The parties subsequently agreed to extend the time by which the Debtors may assume or reject the Channel Leases to Oct. 16, 2006. After having had the opportunity to evaluate the Channel Leases as well as the significance of the Channel Facility to their business operations, the Debtors have determined that each of the Channel Agreements are critical to the operation of the Channel Facility, and accordingly, their ongoing reorganization, Mr. Spiegel informs the Court. Mr. Spiegel assures the Court that the Debtors have adequate financial capacity to service the obligations under the Channel Agreements. The Debtors have access to a $2,000,000,000 DIP credit facility and the present value of cash flows to equity from the project is estimated to range between $127,000,000 to $302,000,000 on a pre-tax basis, Mr. Spiegel elaborates. Through the year 2016, the project is estimated to produce more than $224,000,000 in positive cash flow on a pre-tax basis. Also, through the year 2016, the pre-tax cash flow after covering the aggregate annual obligations under the Channel Agreements is forecasted to be at least $15,000,000 per year, Mr. Spiegel adds. The Debtors have evaluated the amounts necessary to cure each of the Channel Agreements, Mr. Spiegel notes. The Debtors assert that there are no known defaults under the Channel Agreements as of Sept. 29, 2006, and thus, the aggregate Cure Amount is zero. "The obligations under Channel Agreements, including the Cure Amounts, are nominal compared to the value that the Debtors derive from the operation of the Channel Facility," Mr. Spiegel emphasizes. "The Debtors expect that they will not require any funds under the DIP financing facility to meet those obligations going forward." Headquartered in San Jose, California, Calpine Corporation (OTC Pink Sheets: CPNLQ) -- http://www.calpine.com/-- supplies customers and communities with electricity from clean, efficient, natural gas-fired and geothermal power plants. Calpine owns, leases and operates integrated systems of plants in 21 U.S. states and in three Canadian provinces. Its customized products and services include wholesale and retail electricity, gas turbine components and services, energy management and a wide range of power plant engineering, construction and maintenance and operational services. The Company filed for chapter 11 protection on Dec. 20, 2005 (Bankr. S.D.N.Y. Lead Case No. 05-60200). Richard M. Cieri, Esq., Matthew A. Cantor, Esq., Edward Sassower, Esq., and Robert G. Burns, Esq., Kirkland & Ellis LLP represent the Debtors in their restructuring efforts. Michael S. Stamer, Esq., at Akin Gump Strauss Hauer & Feld LLP, represents the Official Committee of Unsecured Creditors. As of Dec. 19, 2005, the Debtors listed $26,628,755,663 in total assets and $22,535,577,121 in total liabilities. (Calpine Bankruptcy News, Issue No. 28; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000) CAPITAL TRUST: Moody's Cuts Sub. Series 2003 C Bonds Rating to Ba2 ------------------------------------------------------------------ Moody's Investors Service downgraded the rating on Capital Trust Agency's Multifamily Housing Revenue Bonds (American Opportunities for Housing -- Golf Villas, Rivermill and Village Square Apartments) Senior Series 2003A and Senior Series 2003B Taxable Bonds to Ba1 from Baa2, and the rating on the Subordinate Series 2003 Series C Bonds to Ba2 from Ba1. The bonds have been issued through the Capital Trust Agency, Florida. This rating action affects $15.0 million of Senior Bonds and $985,000 of Subordinate Bonds outstanding. The outlook has been changed to stable from negative. The downgrade is based on revenue volatility and lower than expected debt service coverage. Along with this transaction, the issuer also issued Junior Subordinated Series 2003D bonds which are not rated by Moody's. Legal security. The bonds are secured by the revenues and mortgages from three cross-collateralized properties - Golf Villas, Rivermill and Village Square Apartments, as well as funds and investments pledged to the trustee pursuant to the indenture as security for the bonds. The Series A and B bonds have a first lien on all program funds and are paid first in the monthly flow of funds. The Subordinate Series C bonds are to be paid before the Junior Subordinate Series D bonds. A payment default on the Series C Subordinate and Series D Junior Subordinate bonds can only trigger a default if the Series A and B bonds are retired first. Excess funds can only be released annually from the indenture if a 1.40 times debt service coverage ratio is met for the Series A and B Senior bonds, 1.30 times for the Series C Subordinate bonds and 1.10 for the Series D Junior Subordinate bonds. The debt service reserve fund is set at maximum annual debt service for the Series A and B bonds to provide ample coverage in the event of liquidity difficulties. Interest rate derivatives: None Strengths. -- Ability of the projects to maintain adequate debt service coverage without tapping debt service reserves between 2004 and 2006 coverage despite significant damage to the Golf Villas property caused by Hurricane Ivan in 2004 and Hurricane Dennis in 2005. -- Physical occupancy of 96% for both the Golf Villas and Village Square properties as of the month of September 2006. Challenges. -- Debt service coverage has been volatile and remains below the coverage projected at bond closing of 1.40 for Senior debt and 1.30 for Subordinate C debt. The coverage as of the December 31, 2005 audit was 1.08 and 1.00 for Senior and Subordinate debt. While a review of unaudited operating statements for a rolling 12 months ending August 2006 shows improvement to 1.28 and 1.19 for Senior and Subordinate debt, this still is below the unaudited coverage of 1.31 and 1.22 demonstrated in July of 2005. -- The Rivermill property continues to demonstrate uneven performance, with economic occupancy at 89% for the rolling 12 months ending August 2006, 92% for the rolling 12 months as of July 2005 and 87% as of August 2004. The outlook on the bonds is stable, reflecting the improved occupancy rates Golf Village property in the last 12 months and the relatively stable performance of the other two properties. Moody's believes that the cross-collateralized nature of the three properties will allow the overall deal to maintain adequate debt service coverage levels even if individual properties demonstrate uneven performance over time. What could change the rating - up * Sustained, improved physical and economic occupancy rates and debt service coverage levels over time. What could change the rating - down * A substantial decrease in occupancy rates and/or debt service coverage levels. CELLNET TECHNOLOGY: Moody's Assigns Loss-Given-Default Rating ------------------------------------------------------------- In connection with Moody's Investors Service's implementation of its new Probability-of-Default and Loss-Given-Default rating methodology for the U.S. manufacturing sector, the rating agency confirmed its B2 Corporate Family Rating for Cellnet Technology, Incorporated, as well as revise its rating on the company's $100 million Senior Secured 2nd Lien Term Loan due 2013 to Caa1 from B3. The loans were assigned an LGD5 rating suggesting creditors will experience an 88% loss in the event of default. Additionally, Moody's revised its probability-of-default ratings and assigned loss-given-default ratings on these loans and bond debt obligations of the company: Projected Old POD New POD LGD Loss-Given Debt Issue Rating Rating Rating Default ---------- ------- ------- ------ ---------- $30 Million Sr. Sec. Revolver due 2010 B2 B1 LGD3 36% $250 Million Sr. Sec. Term Loan B due 2012 B2 B1 LGD3 36% Moody's explains that current long-term credit ratings are opinions about expected credit loss which incorporate both the likelihood of default and the expected loss in the event of default. The LGD rating methodology will disaggregate these two key assessments in long-term ratings. The LGD rating methodology will also enhance the consistency in Moody's notching practices across industries and will improve the transparency and accuracy of Moody's ratings as Moody's research has shown that credit losses on bank loans have tended to be lower than those for similarly rated bonds. Probability-of-default ratings are assigned only to issuers, not specific debt instruments, and use the standard Moody's alpha- numeric scale. They express Moody's opinion of the likelihood that any entity within a corporate family will default on any of its debt obligations. Loss-given-default assessments are assigned to individual rated debt issues -- loans, bonds, and preferred stock. Moody's opinion of expected loss are expressed as a percent of principal and accrued interest at the resolution of the default, with assessments ranging from LGD1 (loss anticipated to be 0% to 9%) to LGD6 (loss anticipated to be 90% to 100%). Headquartered in Alpharetta, Georgia, Cellnet Technology - http://www.cellnet.com- provides fixed data communication networks to the electric, gas, and water utility industries. CENTURY CENTRE: Case Summary & 33 Largest Unsecured Creditors ------------------------------------------------------------- Debtor: Century Centre L.P. 1200 Lovell Place Erie, PA 16503 Bankruptcy Case No.: 06-11342 Debtor-affiliate filing separate chapter 11 petition: Entity Case No. ------ -------- Stephen B. McGarvey LLC 06-11343 Type of Business: The Debtors' affiliate, Lovell Place L.P., filed for chapter 11 protection on October 15, 2005 (Bankr. W.D. Pa. Case No. 05-15114). Chapter 11 Petition Date: October 20, 2006 Court: Western District of Pennsylvania (Erie) Debtor's Counsel: Guy C. Fustine, Esq. Knox McLaughlin Gornall & Sennett, P.C. 120 West Tenth Street Erie, PA 16501 Tel: (814) 459-2800 Fax: (814) 453-4530 Estimated Assets: $1 Million to $100 Million Estimated Debts: $1 Million to $100 Million A. Century Centre, L.P.'s 20 Largest Unsecured Creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ Ciminelli Real Estate Corp. Asset Management $120,979 Centerpointe Corp. Fee Park 350 Essjay Road Williamsville, NY 14221 URS Corp. Tenant $89,354 640 Ellicott Street Buffalo, NY 14203 Apollo Housing Capital Asset Management $65,106 600 Superior Avenue Fee Cleveland, OH 44114 Contract Specialist Int. Vendor $37,357 Statler Tower, Suite 1380 Buffalo, NY 14202 Hausser & Taylor Accounting Fees $36,400 P.O. Box 71062 Cleveland, OH 44191 J.R. Militello Real Estate $24,226 Commissions MLP Plumbing & Mechanical, Inc. Vendor $17,612 Kahn KLeinman Yanowitz Legal Fees $17,544 American Express Tax Vendor $14,330 Wackenhut Corp. Vendor $11,842 A.M. Carpet Services Inc. Vendor $8,004 Bates Landscaping and Vendor $7,703 Maintenance H & M Plumbing & Mechanic Vendor $6,225 Brady Electric Vendor $5,934 DC SnowPlowing Vendor $5,824 Mike Wexler & Associates Vendor $5,079 United Services Ltd. Vendor $3,880 Millington Lockwood, Inc. Vendor $2,695 Trautman Associates Vendor $2,075 Elevator Maintenance of Buffalo Vendor $2,041 B. Stephen B. McGarvey LLC's 13 Largest Unsecured Creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ Sahlem's Roofing & Siding Vendor $36,942 3920 Taylor Road Orchard Park, NY 14127 Colucci & Gallaher, P.C. Legal Fees $24,323 2000 Liberty Building 424 Main Street Buffalo, NY 14202 NYSERDA Vendor $4,960 17 Columbia Circle Albany, NY 12203 R.L. Sonnenberger Vendor $4,500 60 Niagara Street Buffalo, NY 14202 Ciminelli Real Estate Corp. Asset Management $4,487 Center Point Corp. Fee Park 350 Essjay Road Williamsville, NY 14221 United Services Ltd. Vendor $3,920 Crowner King Architects Professional Fees $3,881 Bates Landscaping and Vendor $2,554 Maintenance Hill, Barth & King LLC Accounting $1,171 Ferguson Electric Service Vendor $677 Bijou Caf, Vendor $434 Tri-R Cooling & Heating Vendor $389 G & R Tent Rental Vendor $229 CINCINNATI BELL: Moody's Lifts Speculative Grade Liquidity Rating ----------------------------------------------------------------- Moody's upgraded the speculative grade liquidity rating of Cincinnati Bell Inc. to SGL-1 from SGL-2 reflecting improved prospects of cash accumulation and stable cash flow from operations. The SGL-1 rating reflects the company's very good liquidity, which Moody's believes is sufficient to fund the company's obligations in the coming twelve months, primarily relying on its free cash flow and cash-on-hand. At 2Q 2006, CBB had cash and cash-equivalents of $27 million, which Moody's expects to grow to $115 million by the end of 2Q 2007. Moody's expects CBB to generate cash flow from operations of about $330 million over the next four quarters, as the company's operating profits are expected to remain stable in its core wireline and wireless segments. Excluding special projects, the company expects to spend about 12% of its revenues in capital expenditures, which will lead to a run-rate free cash flow generation of about $30-$40 million per quarter. Moody's also notes that the company will spend an additional $30 million during 3Q 2006 as a result of its successful bids in the recent FCC wireless spectrum auctions. The company may also undertake capital spending in its other businesses, but Moody's does not expect these projects to materially alter its liquidity profile. In 1Q 2006, CBB concluded purchasing the remaining 19.9% interest in the company's joint venture with Cingular Wireless for $83 million in cash, which was partly funded by drawing down on the company's revolver. Since that time, the company has been repaying the revolver balances, such that $12 million was still outstanding under the revolver as of 2Q 2006. At June 30, 2006, CBB had access to $231 million of the $250 million revolving credit facility. Given CBB's free cash flow generation, Moody's expects the company to repay the rest of the revolver outstandings by the end of 2006, and not tap the revolving credit facility in the normal course of its operations. The company does not have any significant debt maturities or debt amortization during 2007. CBB's credit facility is governed by the financial covenants which include consolidated total leverage, consolidated senior leverage, consolidated interest coverage and consolidated fixed charge ratios. Moody's believes the company will have ample cushion in its operating performance to meet these covenants over the coming twelve months. Moody's also notes CBB's pension obligations had a deficiency of $60 million as of Dec. 31, 2006. The rating agency expects the company to reduce the deficiency over the next two to three years in anticipation of the recently enacted federal pension regulations becoming effective, although this is not expected to have an impact on the company's immediate liquidity. CBB has few monetizable assets that are not integral to its network. Cincinnati Bell Inc. headquartered in Cincinnati, Ohio, has a corporate family rating of Ba3 with a stable outlook and is a fully integrated telephone company with operations in Ohio, Kentucky, and Indiana. Revenues for the trailing twelve months ending 2Q 2006 were $1.2 billion. CIMATEC ENVIRONMENTAL: To Restate Annual and Quarterly Financials ---------------------------------------------------------------- Cimatec Environmental Engineering Inc. will restate and refile its consolidated financial statements for the year ended Dec. 31, 2005, as well as its interim financial statements for the first and second fiscal quarters of 2006. The financial results will be restated primarily to correct the calculations relating to stock option expenses and for accounting for warrants issued by Cimatec in 2005. It is anticipated that there will be a material increase in the amount of stock option expenses, but the exact amount has yet to be determined. The restatements will not affect Cimatec's cash position. The restatement adjustments were identified primarily through discussions with the Ontario Securities Commission. Subject principally to the audit of these adjustments to Cimatec's consolidated financial statements by its auditors, Cimatec currently expects revisions to its previously reported 2005 financial results to negatively impact on net earnings/loss by approximately $300,000. The previously filed 2005 consolidated financial statements of Cimatec and the auditors' report thereon should not be relied upon, nor should the previously filed 2006 three and six month financial statements. Cimatec will also revise and refile its Management Discussion and Analyses relating to the periods. About Cimatec Environmental Cimatec Environmental Engineering Inc. (TSX VENTURE:CEG) researches, develops and manufactures advanced electronic air filtration technology for the residential and commercial Indoor Air Quality marketplace in North America. * * * At June 30, 2006, the Company's balance sheet showed a stockholders' deficit of $1,544,937, compared to a deficit of $1,266,615 at Dec. 31, 2005. CLIENTLOGIC CORP: Inks $450 Million Merger Deal with SITEL ---------------------------------------------------------- ClientLogic and SITEL have entered into a definitive merger agreement. Under the terms of the agreement, a newly formed subsidiary of ClientLogic will merge with SITEL and pay $4.05 per share in cash for all of the outstanding common stock of SITEL. The Board of Directors of each company has unanimously approved the transaction. The transaction is expected to be completed in the first quarter of 2007 and is subject to customary closing conditions, including approval of SITEL's shareholders and regulatory clearances. SITEL's Board of Directors has recommended to SITEL's shareholders that they vote in favor of the transaction. Approximately 19.9% of the outstanding common stock of SITEL is subject to voting agreements which require such shares to be voted in favor of the merger. SITEL has agreed to pay a termination fee to ClientLogic should the transaction not close due to certain circumstances. ClientLogic will fund the transaction with the proceeds of a committed loan facility. The transaction values SITEL at approximately $450 million. Commenting on the pending transaction, Jim Lynch, Chairman and CEO of SITEL Corporation, said, "Our board and our financial advisor Citigroup reviewed numerous opportunities while searching for strategic alternatives that would create the greatest value for our shareholders. Based on this review, it was clear to SITEL's board that the offer from ClientLogic represents the best alternative to create significant shareholder value." The $4.05 to be paid in cash in the merger for each SITEL share represents a 33% premium to the volume-weighted average SITEL share price for the 30-trading day period ending October 11. The combined entity will continue to be named ClientLogic Corporation, and will have approximately 65,000 employees across 28 countries. Dave Garner will be Chief Executive Officer of the combined entity. "Growing market demand for bigger, more complex customer-care BPO solutions requires larger service providers with increased geographic presence, capacity and service capabilities", said Dave Garner, President and CEO of ClientLogic. "Our mission will be to deliver the BPO industry's highest-quality services, while providing our clients with the strategic insight, scale and diversity of offerings to guarantee success." The combination of ClientLogic and SITEL will create a company with revenue of over $1.7 billion, and one of the most diverse client bases, service offerings, and geographic footprint in the industry. The combined entity will offer clients world-class options for onshore, nearshore and offshore customer care solutions, in over 145 facilities throughout the Americas, EMEA and Asia Pacific. Citigroup Global Capital Markets is acting as financial advisor to SITEL and has provided a fairness opinion in connection with the transaction. Davis Polk & Wardwell and Faegre & Benson are acting as legal counsel to SITEL in connection with the transaction. Goldman, Sachs & Co. is acting as financial advisor to ClientLogic. Mayer, Brown, Rowe & Maw LLP and Oppenheimer Wolff & Donnelly LLP are acting as legal counsel to ClientLogic in connection with the transaction. About SITEL Corp. SITEL Corp. -- http://www.sitel.com/-- provides outsourced customer support services. SITEL designs and improves customer contact models across its clients' customer acquisition, retention, and development cycles. SITEL has over 42,000 employees in 101 global contact centers located in 26 countries. About ClientLogic ClientLogic Corp. -- http://www.clientlogic.com/-- is a business process outsourcing provider in the customer care and back office processing industries. ClientLogic's footprint spans 49 facilities in 13 countries throughout North America, Europe, Africa, Central America and Asia. * * * As reported in the Troubled Company Reporter on Oct. 23, 2006, Standard & Poor's Rating Services placed its 'B' corporate credit rating on Nashville, Tennessee-based ClientLogic Corp. on CreditWatch with positive implications. COLLINS & AIKMAN: Halts Plastinc Parts Shipments to Ford -------------------------------------------------------- Collins & Aikman Corp., an auto parts supplier operating under bankruptcy court protection, stopped shipping carpet, instrument panels and other plastic parts to Ford Motor Co.'s plant in Hermosillo, Mexico, when the two firms got into a pricing dispute, the Associated Press reports. According to AP, Ford Motor was forced to shut down for one shift assembly lines that create Ford Fusion, Mercury Milan and Lincoln MKZ midsize cars. Paul Wood, Ford Motor's spokesperson, told AP that the company had to close down work on a shift that started at 11 p.m. on Friday last week and ended at 6 a.m. on Saturday. Parts shipments resumed for the next shift, and production was resumed after Ford Motor gave Collins & Aikman the price increase it demanded. The shutdown occurred though Ford Motor had reached agreement with Collins & Aikman on about 90% of the disagreement, including the price raise, AP says, citing Mr. Wood. A spokesperson of Ford Motor told AP that the stoppage of the deliveries irreparably harmed the company's relationship with Collins & Aikman. The halt in the deliveries was an "unprecedented conduct" for a supplier, AP says, citing Ford Motor. AP underscores that the delivery stoppage emphasizes the tension between parts manufacturers and automakers as the Big Three continue to press suppliers for cost reductions in the face of intense competition from Asian car firms. The report says that the stoppage of the deliveries also cost Ford Motor some 400 vehicles. Ford Motor, however, told AP that it will be able to make up the 400 vehicles at the Hermosillo plant. Paul Macher -- the chief executive officer of Collins & Aikman -- and Mary Ann Wright, the firm's vice president of engineering and design, are former Ford Motor executives. Mr. Macher and Ms. Wright should know the impact of the decision to cease shipments to Ford Motor, AP says, citing Mr. Wood. Mr. Wood told AP, "Given their decades of auto industry experience and their decades of experience at Ford, they know full well what happens to a relationship when a supplier disrupts a customer's production or even threatens to do so." Collins & Aikman hopes to continue supplying parts for Ford Motor, AP notes, citing David Youngman, the spokesperson of Collins & Aikman. Mr. Youngman told AP, "We value our long-standing relationship with Ford and look forward to building upon our relationship in the future, once this issue is behind us." Mr. Youngman said that losing Ford Motor's business amounts to about 25% of Collins & Aikman's production, AP states. About Ford Motor Headquartered in Dearborn, Michigan, Ford Motor Company -- http://www.ford.com/-- manufactures and distributes automobiles in 200 markets across six continents. With more than 324,000 employees worldwide, the company's core and affiliated automotive brands include Aston Martin, Ford, Jaguar, Land Rover, Lincoln, Mazda, Mercury and Volvo. Its automotive-related services include Ford Motor Credit Company and The Hertz Corporation. About Collins & Aikman Headquartered in Troy, Michigan, Collins & Aikman Corporation -- http://www.collinsaikman.com/-- is a global leader in cockpit modules and automotive floor and acoustic systems and is a leading supplier of instrument panels, automotive fabric, plastic-based trim, and convertible top systems. The Company has a workforce of approximately 23,000 and a network of more than 100 technical centers, sales offices and manufacturing sites in 17 countries throughout the world. The Company and its debtor-affiliates filed for chapter 11 protection on May 17, 2005 (Bankr. E.D. Mich. Case No. 05-55927). Richard M. Cieri, Esq., at Kirkland & Ellis LLP, represents C&A in its restructuring. Lazard Freres & Co., LLC, provides the Debtor with investment banking services. Michael S. Stammer, Esq., at Akin Gump Strauss Hauer & Feld LLP, represents the Official Committee of Unsecured Creditors Committee. When the Debtors filed for protection from their creditors, they listed $3,196,700,000 in total assets and $2,856,600,000 in total debts. COMPLETE PRODUCTION: Completes Eight Company Buyout Totaling $75MM ------------------------------------------------------------------ Complete Production Services Inc. completed eight acquisitions since Aug. 15, 2006, to further strengthen its position as one of North America's leading oilfield service providers. The acquired companies provide services that are integral to the completion of wells and production of hydrocarbons and include well servicing, fluid handling, artificial lift systems and fishing and rental services in key basins of North America. The combined purchase price of the eight companies was about $75 million, which consisted of cash and approximately 38,000 shares of Complete common stock. The combined trailing 12-month estimated revenue and EBITDA of the acquired businesses was approximately $60 million and $20 million respectively. These transactions bring the aggregate investment in acquisitions since the company's Initial Public Offering in April to more than $200 million. The transactions included: -- A provider of fishing and rental services in eastern Oklahoma and western Arkansas which will add to Complete's Fayetteville Shale operations; -- A manufacturer of artificial lift systems that are complementary to the proprietary Pacemaker PlungerT currently offered by Complete; -- Two completion fluids providers in the Denver-Julesburg Basin in Colorado that fit well with our Rocky Mountain Completion and Production Services Division; -- An operation in the Forth Worth Basin of North Texas that drills wells to source water used for hydraulic fractures in the Barnett Shale. This business will strengthen Complete's current water well-drilling business in the Barnett Shale area; -- A provider of well servicing and fluid handling services in southeast Texas that provides Complete with a new growth platform in an area adjacent to current operations; -- A provider of logistics services in the Great Green River Basin in Wyoming that is highly complementary to Complete's existing businesses in the area; -- A fluid handling and related services business in south central Oklahoma that strengthens the company's operations in the area. "These transactions continue our strategy of growing our presence in key North American basins via both organic growth and acquisition of quality companies that provide additional organic growth opportunities," said Joe Winkler, chief executive officer of Complete. "We are excited to have these operations as part of the team at Complete." Additionally, Complete amended its existing Senior Secured Credit Agreement and increased its revolving credit facility to $340 million from $200 million. The increase in the facility will be used for general corporate purposes. Complete Production Services, Inc. provides completion, production and drilling services and products to the oil and gas industry in many of the most active basins throughout North America. * * * As reported on the Troubled Company Reporter, Oct. 6, 2006, Standard & Poor's Ratings Services raised its corporate credit rating on oilfield service provider Complete Production Services to 'B+' from 'B'. The outlook is stable. CONTINENTAL AIRLINES: Earns $237 Million in Quarter Ended Sept. 30 ------------------------------------------------------------------ Continental Airlines reported third quarter 2006 net income of $237 million, which includes a $92 million gain on the sale of a portion of the its investment in Copa Airlines. Excluding net special charges of $1 million and the $92 million Copa gain, the Company's net income was $146 million. Operating income for the third quarter was $192 million, an $83 million improvement over the same period of 2005. Results for the third quarter of 2006 also include a $42 million accrual for employee profit sharing, bringing the cumulative accrued profit sharing pool to over $100 million. The Company also reported that passenger revenue for the quarter increased 17.1% or $471 million over the same period in 2005, to $3.2 billion, with double digit percentage growth in each mainline geographic region and in regional jet operations. Consolidated revenue per available seat mile for the quarter increased 7.4% year-over-year. Mainline fuel costs for the quarter increased $174 million over the third quarter of 2005, primarily due to a 17.8% increase in fuel prices compared to the same period last year. The Company ended the third quarter with approximately $2.5 billion in unrestricted cash and short-term investments. During the third quarter, the Company recorded net special charges of $1 million consisting of an $8 million settlement charge related to lump-sum payments to retiring pilots and a $7 million reduction of previous charges related to permanently grounded MD- 80 aircraft. Fuel Efficiency Program The Company disclosed that it has signed an agreement to acquire winglets for 37 of its 737-500 and 11 of its long-range 737-300 aircraft, with installation beginning in 2007. The company has already completed the installation of winglets on its entire fleet of 737-700s and -800s and plans to finish the installation of winglets on its entire 757-200 fleet in the fourth quarter of 2006. When the installations are complete, the Company will operate 230 narrowbody aircraft outfitted with winglets. Winglets lower drag and improve aerodynamic efficiency, which can reduce fuel consumption by up to 5%. The Company has disclosed that it converted 12 existing orders for Boeing 737 Next Generation aircraft into orders for 12 new Boeing 737-900ERs, expected to be delivered in 2008. Pension Plans During the quarter the Company contributed $79 million to its pension plans and an additional $70 million to the plans in October. The contributions bring its 2006 pension contributions to $246 million. Since the beginning of 2002, the Company has contributed more than $1.1 billion to its pension plans. Credit Facility and New Contract The Company also disclosed that it has amended its $350 million loan facility, secured by substantially all of its Pacific operations, which lowered the interest rate and is expected to save the Company approximately $6 million annually. The Company further disclosed that it was awarded a $258 million, five-year mail contract with the U.S. Postal Service effective Sept. 30, 2006. The contract includes Priority, First Class and Express mail products within the U.S. and Puerto Rico. Continental Airlines Inc. (NYSE: CAL) -- http://continental.com/ -- is an airline. Continental, together with Continental Express and Continental Connection, has more than 3,200 daily departures throughout the Americas, Europe and Asia, serving 154 domestic and 138 international destinations. More than 400 additional points are served via SkyTeam alliance airlines. With more than 43,000 employees, Continental has hubs serving New York, Houston, Cleveland and Guam, and together with Continental Express, carries approximately 61 million passengers per year. Continental consistently earns awards and critical acclaim for both its operation and its corporate culture. * * * As reported in the Troubled Company Reporter on May 29, 2006, Standard & Poor's Ratings Services assigned its 'AAA' preliminary rating to Continental Airlines Inc.'s (B/Negative/B-3) $190 million Class G pass-through certificates, and its 'B+' preliminary rating to the $130 million Class B pass-through certificates. As reported in the Troubled Company Reporter on May 26, 2006, Moody's Investors Service assigned Aaa rating to the Class G Certificates and B1 rating to the Class B Certificates of Continental Airlines, Inc.'s 2006-1 Pass Through Trusts Pass Through Certificates, Series 2006-1. CORUS GROUP: Board of Directors Okays Tata Steel's Takeover Bid --------------------------------------------------------------- The boards of Tata Steel and Corus agreed on the terms of the recommended acquisition of the entire issued and to be issued share capital of Corus at a price of 455 pence in cash for each Corus Share, valuing Corus at GBP4.3 billion. Tata Steel is India's largest private sector steel company with 2005/06 revenues of $5 billion and crude steel production of 5.3 million tons across India and South-East Asia. It is a vertically integrated manufacturer and is one of the world's most profitable and value creating steel companies. Tata Sons, Tata Steel and other Tata companies had combined revenues in 2005/06 of approximately $22 billion. Tata Sons' current investments are valued at approximately $50 billion. Corus is Europe's's second largest steel producer with revenues in 2005 of GBP9.2 billion and crude steel production of 18.2 million tons, primarily in the U.K. and the Netherlands. The combination is strategically compelling, creating a vertically integrated global steel group: -- fifth largest global steel producer with pro forma crude steel production of 23.5 million tons in 2005; -- high quality, low cost, attractive growth platform in Asia combined with a leading European steel player; -- high value-added product mix and strong market positions in automotive, construction and packaging; -- a more resilient business model and a strong platform for further growth; -- a strong and committed combined management team; and -- a common business culture and shared values. The price of 455 pence per Corus Share represents: -- on an enterprise value basis, a multiple of approximately 7.9 times underlying EBITDA from continuing operations for the twelve months to July 1, 2006, (excluding, inter alia, the non-recurring pension credit of GBP96 million) and a multiple of approximately 5.4 times underlying EBITDA from continuing operations for the year ended Dec. 31, 2005; and -- a premium of approximately 26.2% to the average closing mid-market price of 360.5 pence per Corus Share for the twelve months ended Oct. 4, 2006, being the last business day prior to the announcement by Tata Steel that it was evaluating various opportunities including Corus. Tata Steel has held constructive and satisfactory discussions with Corus' two main U.K. pension schemes and has offered: -- to fund upfront the IAS 19 deficit on the Corus Engineering Steels Pension Scheme by paying GBP126 million into the scheme; and -- to increase the contribution rate on the British Steel Pension Scheme from 10% to 12%. until March 31, 2009. The Acquisition will be made by Tata Steel U.K., a wholly-owned indirect subsidiary of Tata Steel, and will be implemented by way of a scheme of arrangement under section 425 of the Companies Act 1985. The Corus Directors, who have been so advised by Credit Suisse (as lead financial adviser), JPMorgan Cazenove and HSBC (as independent financial adviser for the purposes of Rule 3 of the City Code), consider the terms of the Acquisition to be fair and reasonable, so far as Corus Shareholders are concerned. Accordingly, the Corus Directors intend to unanimously recommend that Corus Shareholders vote in favor of the Scheme as they have undertaken to do in respect of their own beneficial holdings of Corus Shares, representing approximately 0.1%. of the existing share capital of Corus. In providing their advice, Credit Suisse, JPMorgan Cazenove and HSBC have taken into account the commercial assessments of the Corus Directors. "This proposed acquisition represents a defining moment for Tata Steel and is entirely consistent with our strategy of growth through international expansion," Ratan Tata, Chairman of Tata Steel, said. "Corus and Tata Steel are companies with long, proud histories. We have compatible cultures of commitment to stakeholders and complementary strengths in technology, efficiency, product mix and geographical spread. Together we will be even better equipped to remain at the leading edge of the fast changing steel industry." "This offer from Tata Steel reflects the substantial value created for Corus shareholders since the placing and open offer and launch of our "Restoring Success" program in 2003," Jim Leng, Chairman of Corus, said. "In the middle of last year, my board agreed a strategic way forward for Corus to seek access to low cost production and high growth markets. Consistent with this, the Company held talks with a number of parties from Brazil, Russia and India. This transaction represents the culmination of these talks. "This combination with Tata, for Corus shareholders and employees alike, represents the right partner at the right time at the right price and on the right terms. This creates a well balanced company, strategically well placed to compete in an increasingly competitive global environment." A full-text copy of Corus Group-Tata Steel joint statement on the agreed takeover is available free-of-charge at: http://researcharchives.com/t/s?13c4 About Tata Steel Headquartered in Mumbai, India, Tata Steel -- http://www.tatasteel.com/ -- is Asia's first and India's largest private sector steel company. Tata Steel is among the lowest cost producers of steel in the world and one of the few select steel companies in the world that is EVA+ (Economic Value Added). It is a small steel producer by global standards, but has the backing of the giant Tata Group, one of India's largest companies with interests as diverse as carmaking, communications, tea and oil. About Corus Group Corus Group plc, fka British Steel, was formed when the UK privatized its major steelworks in 1988. It then changed its name to Corus Group after acquiring most of Dutch rival Koninklijke Hoogovens. Corus makes coated and uncoated strip products, sections and plates, wire rod, engineering steels, and semi- finished carbon steel products. It also manufactures primary aluminum products. Customers include companies in the automotive, construction, engineering, and household-product manufacturing industries. * * * In May 2006, Moody's Investors Service upgraded Corus Group plc's corporate family rating to Ba2. Moody's also upgraded its ratings on the company's senior unsecured and supported unsecured obligations to B1 and senior secured bank facility to Ba1. In March 2006, Standard & Poor's Ratings Services placed its 'BB-' long-term corporate credit rating for Corus Group on CreditWatch. At the same time, Fitch Ratings changed Corus Group's outlook to Positive from Stable and affirmed its Issuer Default Rating at BB- following the company's announcement of its 2005 results and plan to dispose its aluminum business for EUR826 million. COUDERT BROTHERS: Gets Okay to Hire Klestadt & Winters as Counsel ----------------------------------------------------------------- The U.S. Bankruptcy Court for the Southern District of New York allowed Coudert Brothers LLP to employ Klestadt & Winters LLP, as its bankruptcy counsel, nunc pro tunc to Sept. 22, 2006. As reported in the Troubled Company Reporter on Oct. 3, 2006, Klestadt & Winters will: (a) perform all appropriate services as the Debtor's counsel, including, without limitation, advising and representing the Debtor, and preparing all necessary documents on behalf of the Debtor; (b) take all necessary actions to protect and preserve the Debtor's estate during the chapter 11 case, including the prosecution of actions by the Debtor, the defense of any actions commenced against the Debtor in the context of the chapter 11 case, negotiations concerning all litigation in which the Debtor is involved, and objecting to claims filed against the estate; (c) prepare on behalf of the Debtor, as debtor-in-possession, all necessary motions, applications, answers, orders, reports, and papers in connection with the administration of its chapter 11 case; (d) provide counsel to the Debtor with regard to its rights and obligations as a debtor-in-possession; and (e) perform all other necessary legal services. Tracy L. Klestadt, a partner at Klestadt & Winters, told the Court that he will bill $475 per hour for this engagement. Mr. Klestadt disclosed that the firm's other professionals bill: Professional Designation Hourly Rate ------------ ----------- ----------- Jon Yard Arnason, Esq. Of Counsel $450 Donald E. Watnick, Esq. Of counsel $425 Ian R. Winters, Esq. Partner $395 John Jureller, Esq. Partner $375 Sean Southard, Esq. Partner $325 Stacy Bush, Esq. Associate $300 Brendan Scott, Esq. Associate $225 Sarah E. Megna, Esq. Associate $175 Suzanne C. Furst, Esq. Associate $150 Mr. Klestadt further disclosed that paralegals of the firm bill $125 per hour. Mr. Klestadt assured the Court that his firm is a "disinterested person" as that term is defined in Section 101(14) of the Bankruptcy Code. Coudert Brothers LLP was an international law firm specializing in complex cross border transactions and dispute resolution. The Debtor filed for Chapter 11 protection on Sept. 22, 2006 (Bankr. S.D.N.Y. Case No. 06-12226). In its schedules of assets and debts, Coudert listed total assets of $29,968,033 and total debts of $18,261,380. The Debtor's exclusive period to file a chapter 11 plan expires on Jan. 20, 2007. COUDERT BROTHERS: U.S. Trustee Picks Five-Member Creditors' Panel ----------------------------------------------------------------- Diana G. Adams, the U.S. Trustee for Region 2, appointed five creditors to serve on an Official Committee of Unsecured Creditors in Coudert Brothers LLP's chapter 11 case: 1. De Lage Landen Financial Services, Inc. Attn: Lawrence Levin 1111 Old Eagle School Road Wayne, PA 19087 Phone: (610) 386-3458 2. Statek Corporation Attn: Margaritha Werren, Director 510 N. Main Street Orange, CA 92868 Phone: (714) 639-7810 3. Lyman Garden Apartments, LLC c/o Ronald Rus, Esq. Rus, Miliband & Smith, APC 2600 Michelson Drive, Seventh Floor Irvine, CA 92612 Phone: (949) 752-7100 4. The San Francisco Cannery, LLC Attn: Christopher Martin 2801 Leavenworth Street San Francisco, CA 94133 Phone: (415) 781-8494 5. DC-1627 Eve Street Limited Partnership Attn: Matthew H. Koritz, Esq. c/o Equity Office Properties Trust Two North Riverside Plaza, Suite 2100 Chicago, IL 60606 Phone: (312) 466-3445 Official creditors' committees have the right to employ legal and accounting professionals and financial advisors, at the Debtors' expense. They may investigate the Debtors' business and financial affairs. Importantly, official committees serve as fiduciaries to the general population of creditors they represent. Those committees will also attempt to negotiate the terms of a consensual chapter 11 plan -- almost always subject to the terms of strict confidentiality agreements with the Debtors and other core parties-in-interest. If negotiations break down, the Committee may ask the Bankruptcy Court to replace management with an independent trustee. If the Committee concludes reorganization of the Debtors is impossible, the Committee will urge the Bankruptcy Court to convert the Chapter 11 cases to a liquidation proceeding. Coudert Brothers LLP was an international law firm specializing in complex cross border transactions and dispute resolution. The Debtor filed for Chapter 11 protection on Sept. 22, 2006 (Bankr. S.D.N.Y. Case No. 06-12226). John E. Jureller, Jr., Esq., and Tracy L. Klestadt, Esq., at Klestadt & Winters, LLP, represents the Debtor in its restructuring efforts. In its schedules of assets and debts, Coudert listed total assets of $29,968,033 and total debts of $18,261,380. The Debtor's exclusive period to file a chapter 11 plan expires on Jan. 20, 2007. CUMMINS INC: Inks $126 Million Joint Venture Pact with Beiqi Foton ------------------------------------------------------------------ Cummins Inc. signed an agreement with Beiqi Foton Motor Company to form an equally owned joint venture company, Beijing Foton Cummins Engine Company Limited, to produce two types of the Company's light-duty, high-performance diesel engines in Beijing. The engines primarily will be used in light-duty commercial trucks, pickup trucks, multipurpose and sport utility vehicles, including certain types of marine, small construction equipment and industrial applications. The Company and Beiqi Foton will initially invest a combined $126 million into BFCEC. The joint venture plant will have an annual capacity of 400,000 units and will produce the Company's 2.8-liter and 3.8-liter clean diesel engines, which will meet stringent on-highway and off- highway emission standards worldwide, including Euro IV and above. BFCEC is scheduled to begin production in 2008. "This joint venture provides Cummins with the opportunity to enter an exciting new market with the support of a well-respected partner," Joe Loughrey, president and chief operating officer, said. "These new products represent the Company's latest efforts to expand its presence in the important China market, where Cummins has enjoyed considerable success over the years." "Foton Motor is a strong player in China's commercial vehicle industry, while Cummins is a global power leader," Wang Jinyu, Beiqi Foton president, said. "The cooperation between the two powerhouses will bring us a win-win relationship." BFCEC represents a further expansion of the Company's product line in China, where it already is a foreign producer of heavy-duty and mid-range diesel engines. The Company says that it currently operates more than 20 facilities in China, including nine manufacturing sites and BFCEC will be the 10th. About Foton Motor Headquartered in Beijing, China, Beiqi Foton Motor Co. Ltd. -- http://www.foton.com.cn/-- produces commercial vehicles and a maker of light-duty trucks in China. Foton's product line includes trucks with payload under 35 tons, light bus, SUV, pickup truck, medium and large buses. The Company has 28,000 employees. About Cummins Inc. Headquartered in Columbus, Indiana, Cummins Inc. (NYSE: CMI) -- http://www.cummins.com/-- designs, manufactures, distributes and services engines and related technologies, including fuel systems, controls, air handling, filtration, emission solutions and electrical power generation systems. Cummins serves customers in more than 160 countries through its network of 550 Company- owned and independent distributor facilities and more than 5,000 dealer locations. * * * Cummins' Junior Convertible Subordinated Debentures carry Fitch's 'BB' rating with a stable outlook. As reported in the Troubled Company Reporter on May 11, 2006, Moody's Investors Service raised Cummins' convertible preferred stock rating to Ba1 from Ba2 and withdrew the company's SGL-1 Speculative Grade Liquidity rating and its Ba1 Corporate Family Rating. DANA CORP: Inks Pact Resolving $1.7 Mil. Pension Payment to PBGC ---------------------------------------------------------------- Dana Corporation and some of its debtor-affiliates are parties to collective bargaining agreements with unions representing certain of their employees. In connection with the CBAs and as part of their benefit programs for certain non-union employees, the Debtors maintain defined benefit pension plans and are required to make periodic payments of premiums to the Pension Benefit Guaranty Corporation. The next premiums to be paid to the PBGC for the 2006 calendar year, totaling $1,746,741, were due on Oct. 15, 2006. The Debtors desire to make the October 15 Premium Payment, to the extent not paid directly by the Pension Plans, and will seek reimbursement for the October 15 Premium Payment from the Pension Plan, as applicable. The Official Committee of Unsecured Creditors asserts that some or all of the October 15 Premium Payment is a prepetition obligation. Accordingly, in a stipulation approved by the U.S. Bankruptcy Court for the Southern District of New York, the Debtors and the Committee agree that: (a) the Debtors, with the Committee's consent, will make the October 15 Premium Payment, to the extent not paid directly by the Pension Plans, and will seek reimbursement of the October 15 Premium Payment from the Pension Plans, as applicable; and (b) neither the making of the October 15 Premium Payment, nor any party's consent, is construed as a waiver of any party's right to challenge the Debtors' ability to make any future premium payment. About Dana Corporation Toledo, Ohio-based Dana Corp. -- 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. Fried, Frank, Harris, Shriver & Jacobson, LLP serves as counsel to the Official Committee of Equity Security Holders. Stahl Cowen Crowley, LLC serves as counsel to the Official Committee of Non-Union Retirees. 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. 23; Bankruptcy Creditors' Service Inc., http://bankrupt.com/newsstand/or 215/945-7000) DANA CORP: U.S. Trustee Says 2nd Motion on Burns' Fee is Defective ------------------------------------------------------------------ Dana Corporation and its debtor-affiliates previously asked the U.S. Bankruptcy Court for the Southern District of New York to reconsider and clarify certain provisions of its Order denying the proposed compensation for Michael Burns, Dana's president and chief executive officer, and five key executives of his core management team. The Debtors complained that the Order did not directly address the supplement they filed on Sept. 4, 2006. Diana G. Adams, acting United States Trustee for Region 2, argues that the Debtors' Motion to Reconsider the Court's order denying the proposed compensation for Michael Burns and five other Senior Executives is procedurally and substantively defective. "It does not seek reconsideration. It seeks advisory opinions from the Court," Greg M. Zipes, Esq., in New York, points out. Mr. Zipes contends that because the Debtors do not like the Court's conclusions, they now seek the Court's guidance on how to frame a proposal that the Court will approve. The Debtors cannot use Rules 9023 and 9024 of the Federal Rules of Bankruptcy Procedure to justify their request. The proper procedure is for the Debtors to restructure their proposal and file another motion seeking approval of executive compensation, or seek that relief in a plan of reorganization, Mr. Zipes asserts. Mr. Zipes emphasizes that the "only proper ground on which a party may move to re-argue an unambiguous order is that the court overlooked 'matters or controlling decisions,' which, had they been considered, might reasonably have altered the result reached by the court." However, the Reconsideration Motion is devoid of controlling law overlooked by the Court, Mr. Zipes notes. In fact, there is no law at all cited to in the Reconsideration Motion. Rule 9024, on the other hand, should be applied only in "extraordinary circumstances" and the Debtors make no attempt to explain how the statute applies, Mr. Zipes says. There was no clerical mistake or any other reason to justify extraordinary relief sought under the statute. Accordingly, the U.S. Trustee asks the Court to deny the Debtors' Reconsideration Motion. Retirees Committee Supports The Official Committee of Non-Union Retirees contends that the Debtors' Motion is neither a motion for clarification nor for reconsideration. "It is just a plea for the Court to do an about-face and change its mind or, if not, to tell the Debtors how they can get what they want in a way that can pass muster with the Court," Trent P. Cornell, Esq., at Stahl Cowen Crowley, LLC, in Chicago, Illinois, asserts. The Retiree Committee says that it is not blind to the importance of a strong management team. The timing and impact of the initial KERP motion was, and is, however, incredibly inappropriate and wholly unnecessary, Mr. Cornell argues. The Debtors' justification for the retention and severance plan has largely been predicated on the notion that Mr. Burns and his key executives will readily leave for greener pastures if they are not granted extravagant bonuses beyond the already existing salary and bonus structure they are eligible for as senior management, Mr. Cornell says. The Retiree Committee desires to see the Debtors emerge as a strong and viable enterprise that will prosper in the future. However, the Retiree Committee argues that ignoring controlling laws in a dogged effort to disproportionately benefit a select few people to the detriment of whole groups is not the way to realize the goals Mr. Burns alluded to in a letter he sent to approximately 28,000 retirees. Mr. Burns stated in his letter that "our ultimate goal is to restructure Dana's businesses, operations, and costs in a way that will permit Dana to prosper for decades to come." Cooperation, fairness and undoubtedly, some sacrifice will achieve those goals, the Retiree Committee asserts. Mr. Cornell points out that in their Reconsideration Motion, the Debtors simply submitted a list of bullet points seeking a "how- to" guide on permissible KERP drafting. "It is not the Court's burden to envision the myriad different compensation packages or differing factual circumstances under which it would consider a future proposed plan to be acceptable," Mr. Cornell maintains. "It is the Debtors' obligation to explore those issues, work with the varying constituencies to seek an accord and to bring the specifics of any new proposed compensation plan to the Court's attention to determine whether it meets the applicable legal criteria." Thus, the Retirees Committee asks the Court to deny the Debtors' Reconsideration Motion. About Dana Corporation Toledo, Ohio-based Dana Corp. -- 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. Fried, Frank, Harris, Shriver & Jacobson, LLP serves as counsel to the Official Committee of Equity Security Holders. Stahl Cowen Crowley, LLC serves as counsel to the Official Committee of Non-Union Retirees. 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. 23; Bankruptcy Creditors' Service Inc., http://bankrupt.com/newsstand/or 215/945-7000) DELPHI CORP: Court OKs Houlihan as Equity Panel Financial Advisor ----------------------------------------------------------------- The U.S. Bankruptcy Court for the Southern District of New York authorized The Official Committee of Equity Security Holders appointed in Delphi Corporation and its debtor-affiliates' bankruptcy cases to retain Houlihan Lokey Howard & Zukin Capital, Inc., as its financial advisor, nunc pro tunc to July 31, 2006. Houlihan Lokey will: (a) assist the Equity Committee in analyzing matters relating to Delphi Corp.'s transformation of its workforce and the impact on Delphi on a pro forma basis including: (1) the Debtors' efforts to modify or reject collective bargaining agreements and retiree benefits under Sections 1113 and 1114 of the Bankruptcy Code; (2) the Debtors' attrition programs, including any future attrition or buydown programs; and (3) the resulting costs and claims of the labor transformation efforts and programs, including assistance in evaluating the company's financial models; (b) assist the Equity Committee in analyzing matters relating to the relationship and business arrangements between Delphi and General Motors Corporation; and (c) assist the Equity Committee in analyzing matters relating to Delphi's efforts to divest material property or business and the impact on Delphi on a pro forma basis, including the proposed transaction and cash flow impacts. Houlihan Lokey will be paid a $175,000 monthly cash advisory fee and reimbursement of expenses incurred in connection with its employment. Troy, Mich.-based Delphi Corporation -- http://www.delphi.com/-- is the single largest global supplier of vehicle electronics, transportation components, integrated systems and modules, and other electronic technology. The Company's technology and products are present in more than 75 million vehicles on the road worldwide. The Company filed for chapter 11 protection on Oct. 8, 2005 (Bankr. S.D.N.Y. Lead Case No. 05-44481). John Wm. Butler Jr., Esq., John K. Lyons, Esq., and Ron E. Meisler, Esq., at Skadden, Arps, Slate, Meagher & Flom LLP, 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. 44; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000) DESERT POWER: Case Summary & 67 Largest Unsecured Creditors ----------------------------------------------------------- Lead Debtor: Desert Power LP c/o CSC Services of Nevada, Inc. 2603 Augusta Drive, #880 Houston, TX 77057 Bankruptcy Case No.: 06-50777 Debtor affiliates filing separate chapter 11 petitions: Entity Case No. ------ -------- Desert Power LLC 06-50778 DP Leasing Co., L.L.C. 06-50779 Rowley Thermal Energy, L.L.C. 06-50780 Type of Business: The Debtor owns an electrical plant. Chapter 11 Petition Date: October 23, 2006 Court: District of Nevada (Reno) Judge: Gregg W. Zive Debtor's Counsel: Kaaran E. Thomas, Esq. Mcdonald Carano Wilson LLP 100 W. Liberty St., 10th Floor Reno, NV 89505 Tel: (775) 788-2000 Estimated Assets Estimated Debts ---------------- --------------- Desert Power LP $1 Million to $1 Million to $100 Million $100 Million Desert Power LLC $100,000 to $1 Million to $1 Million $100 Million DP Leasing Co., L.L.C. $1 Million to $1 Million to $100 Million $100 Million Rowley Thermal Energy, $0 to $50,000 $1 Million to L.L.C. $100 Million A. Desert Power LP's 43 Largest Unsecured Creditors: Entity Claim Amount ------ ------------ LaSalle Bank $28,750,000 Attn: Neil Binova P.O. Box A3041 Chicago, IL 60690 Tel: (212) 251-3673 PCE Contractors, Inc. $5,115,111 Attn: Bob Rob 13544 Eads Road Prairieville, LA 70769 Tel: (225) 677-9100 DQ Holdings, LLC $2,140,299 Attn: Charles M. Darling, IV 2603 Augusta Drive, Ste. 880 Houston, TX 77057 Tel: (713) 572-2244 Sega Inc. $652,395 Attn: John Brown P.O. Box 801107 Kansas City, MO 64180 Tel: (913) 681-2881 CeCo Building Systems $506,115 Attn: Accounting Department P.O. Box 72 Mount Pleasant, IA 52641 Tel: (319) 385-8001 Layne Christensen Company $299,716 Attn: Accounting Department 1707 South 4490 West Salt Lake City, UT 84104 Tel: (801) 972-3333 Sulzer Hickham, Inc. $297,543 Attn: Warren Holmes 11518 Old La Porte Road La Porte, TX 77571 Tel: (713) 567-2700 Sanders Morris Harris $280,000 Attn: Ben T. Morris 600 Travis, Ste. 3100 Houston, TX 77002 Tel: (713) 224-3100 The Atlantic Group $275,975 5426 Robin Hood Road Norfolk, VA 23513 DQ Power, LLC $234,000 Taurus Power Control $181,638 Utah Fabricators $149,389 Professional Technologies $125,985 ICS - Control System, Inc. $109,677 Aerofin Corporation $93,568 Parr Waddoups Brown Gee Loveless $70,054 Columbia TecTank $65,291 Higgott Kane $37,898 Paul Anderson Consultants $35,114 SchiffHardin LLP $34,717 Sargent & Lundy, LLC $30,000 KE Burgman, USA, Inc. $27,198 Paul Plath - E3 $26,945 Margolis Phipps & Wright $25,195 Pannell Kerr Foster $24,888 ChemTreat, Inc. $22,552 PIC Energy Servies, Inc. $17,109 Global Power Generation $16,203 Wilson Fulkerson LLP $16,168 National Power Services $15,034 Williams & Hunt $14,878 H.R. Wagstaff Co. $11,392 Dewey Ballantine LLP $11,203 Trinity Turbines $9,700 Callister Nebeker & McCollough $8,709 AON Risk Services, Inc. $7,500 Bush & Gudgell, Inc. $5,500 AQUA Engineering, Inc. $3,808 Ray Quinney & Nebeker $2,998 American Equipment $2,766 Gas Turbine Material Associates $1,500 Holme Roberts & Owen $394 ProEnergy Services LLC Unknown B. Desert Power LLC's 3 Largest Unsecured Creditors: Entity Claim Amount ------ ------------ Sanders Morris Harris, Inc. $306,025 Attn: Ben T. Morris 600 Travis 3100 JP Morgan Chase Tower Houston, TX 77002 Tel: (713) 224-3100 Margolis Phipps & Wright $10,560 Attn: Tommy Wright 1400 Post Oak Boulevard, Ste. 900 Houston, TX 77057 Tel: (713) 625-3500 LaSalle Bank, N.A. Unknown Attn: Stephanie Acheson VP Private Distribution 135 South LaSalle St., Ste. 1458 Chicago, IL 60603 Tel: (312) 904-2227 C. DP Leasing Co., L.L.C.'s 20 Largest Unsecured Creditors: Entity Claim Amount ------ ------------ EvapTech, Inc. $567,882 Attn: Don Dobney 8331 Nieman Road Lenexa, KS 66214 Tel: (816) 896-1395 Aquatech International Corp. $457,298 c/o Christopher S. Hill, Esq. Kirton & McConkie 60 East South Temple, Ste. 1800 Tel: (801) 328-3600 FlowServe Pump Division $262,136 Attn: Accounting Department Industriestrasse B/6 A 2345 Brunn am Gebirge Austria Tel: 43-223-631530 Allied Power Group $127,759 PowerHouse Equipment $123,630 FlowServe, US Inc. $121,881 Express Technologies $106,650 Chillco, Inc. $86,250 FWT, Inc. $78,562 CK Construction & Services Corp. $73,767 Dis-Tran Package Substation, LLC $51,622 Turner Electric, LLC $32,813 Graham Corporation $23,353 Kimre $21,000 Weir Valve $17,990 Turbo Machine Technologies, Inc. $17,411 API Heat Transfer $12,245 Hughes Machine $10,661 Turbine Services, Ltd. $3,689 LaSalle Bank, N.A. Unknown Attn: Stephanie Acheson VP Private Distribution 135 South LaSalle St., Ste. 1458 Chicago, IL 60603 Tel: (312) 904-2227 D. Rowley Thermal Energy, L.L.C.'s Largest Unsecured Creditor: Entity Claim Amount ------ ------------ LaSalle Bank, N.A. Unknown Attn: Stephanie Acheson VP Private Distribution 135 South LaSalle St., Ste. 1458 Chicago, IL 60603 Tel: (312) 904-2227 DS WATERS: Moody's Puts B1 Rating on Proposed $180MM Sr. Facility ----------------------------------------------------------------- Moody's Investors Service assigned a B1 rating to the proposed senior secured credit facilities of DS Waters of America Inc. the surviving entity of DS Waters of America, LP after its conversion into a C-corporation, following the company's refinancing of existing bank facilities. Moody's also moved the corporate family rating to DS Waters from its former location at DS Waters Enterprises, LP and upgraded the rating to B2 from B3. The $80 million asset backed revolver is not rated. The ratings are subject to a review of the final financing documentation. The rating outlook remains positive. The ratings of the proposed facilities reflect both the overall probability of default of the company, to which Moody's assigned a PDR of B3 and a loss given default of LGD2 for both the term loan and revolving facilities. The ratings reflect DS Waters' improved financial flexibility and short-term liquidity as a result of the proposed refinancing and the continued improvement in the company's financial and operating profile since we last upgraded the rating in August 2006. The new credit facilities are expected to have lower interest rates, resulting in considerable saving in interest expense. Another benefit of the refinancing is modest amortization on the term loan at only 1% for the next five years. Additionally, the refinancing will eliminate the high-coupon PIK notes and any likelihood of a reinstatement of accrued interest related to these notes. Year to date, the company continued to improve its operating efficiency and cash flow generation as evidenced by much improved credit metrics. Since the beginning of the year, DS Waters has reduced debt by over $70 million, - including the $20 million pre- payment on August 10 - through a combination of improved cash flow and the monetization of a large receivable ($35 million in proceeds) from Groupe Danone. Despite the improvements, DS Waters' ratings are constrained by the ongoing challenges in home-office delivery of water (HOD), including limited pricing flexibility due to ongoing significant competition and still declining customer base and volumes. Also constraining the ratings is the rather limited track record of free cash flow generation and sustained earnings improvement following the sale of the company in November 2005 and the lack of full year audited financial statements. The ratings outlook remains positive reflecting Moody's expectation of further improvement in profitability and cash flow generation throughout the intermediate term principally as a result of ongoing cost cutting efforts and stabilization of declines in HOD customers -- the company's largest business segment, and also due to the lowered debt service costs. The ratings outlook could revert to stable should the company's recovery efforts stall or if there were any meaningful increases in debt or uses of cash for acquisitions, dividends or otherwise, or further increases in capital spending outside of current expectations. An upgrade could result from further stabilization and growth in the customer base and additional improvement in margins, profitability and cash flow. Quantitatively, the company would need to show sustained improvement in credit metrics (using Moody's standard analytic adjustments) with EBITA margin reaching 10%, interest coverage approaching 3.0x, and free cash flow to debt exceeding 9%. These are the rating actions: * DS Waters of America, Inc. (former DS Waters of America, LP) -- $20 million 5-year senior secured revolving credit facility, due 2011, B1 (LGD2, 29.7%) -- $180 million 6-year senior secured term loan credit facility, due 2012, B1 (LGD2, 29.7%) -- Corporate Family rating B2 -- Probability of Default Rating B3 -- Rating outlook Positive These ratings will be withdrawn upon closing of the proposed refinancing: * DS Waters Enterprises, LP -- Corporate Family Rating B3 -- $245 million senior secured credit facility B2 DS Waters Enterprises, LP is a leading U.S. provider of a range of water products including 5 gallon and 3 gallon returnable bottles, 2.5 gallon and 1 gallon high density polyethylene bottles, individual serving or polyethylene terephthalate bottles, water dispensers, filtration products, and other ancillary items such as coffee, food products, cups, and stirrers. The company was originally formed in 2003 by the combination of the home-office water delivery businesses of Groupe Danone and Suntory Limited, and was sold to investment fund Kelso and new executive management in November 2005. Revenue in 2005 was an estimated $780 million. EDUCATION MANAGEMENT: Revenues Rise 14.8% Year-Over-Year in 2005 ---------------------------------------------------------------- Education Management Corporation reported its financial results for the three and twelve months ended June 30, 2006. On a combined basis for the fourth quarter of fiscal 2006, net revenues rose 14.4% to $292 million from the fourth quarter of fiscal 2005. For the twelve months ended June 30, 2006, net revenues rose 14.8% to $1.1 billion from fiscal 2005 with net income of $80.7 million. John R. McKernan, Jr., Chairman and CEO of Education Management, commented, "Through the hard-work and dedication of our employees, we were able to report another year of solid financial results while also completing the acquisition of the company by our new owners in a timely fashion. As a privately-held company, we look forward to continuing our consistent financial performance while also investing in our business to serve even more students." On June 1, 2006, a consortium of investors acquired Education Management Corporation in a transaction valued at approximately $3.4 billion. Under the terms of the merger agreement, the shareholders of Education Management Corporation received $43.00 per share in cash. The principal investors in Education Management are Providence Equity Partners, Goldman Sachs Capital Partners and Leeds Equity Partners. Education Management Corporation contributed substantially all of its assets and liabilities to Education Management LLC in connection with the closing of the merger agreement. Financial Highlights -- combined revenues for the three months ended June 30, 2006 increased 14.4% to $292 million, compared to $255.3 million for the same period a year ago. For the twelve months ended June 30, 2006, combined revenues rose 14.8% to a record $1.1 billion, compared to $1.0 billion for the comparable twelve-month period last year. This increase was impacted by a 9.8% increase in average total student enrollment and an approximate 6% increase in tuition rates during the twelve months ended June 30, 2006. -- for the fiscal fourth quarter of 2006, net income decreased from $19.6 million in the prior year period to a net loss of $21.2 million. Fiscal fourth quarter combined EBITDA decreased 86% to $7.3 million from $52.1 million for the same period a year ago. Fiscal fourth quarter of 2006 included incremental equity compensation and transaction- related costs totaling $49.6 million. Excluding these items, combined EBITDA would have increased 9.2% from the fourth quarter of fiscal 2005 to the fourth quarter of fiscal 2006. -- for fiscal 2006, net income decreased 20.6% from fiscal 2005 to $80.7 million. Fiscal 2006 combined EBITDA decreased 12.5% to $221 million from $252.7 million for the same period a year ago. Fiscal 2006 included incremental equity compensation and transaction-related expenses totaling $70.9 million, and fiscal 2005 included a $15.7 million non-cash cumulative adjustment as a reduction to rent expense for changes in lease accounting. Excluding these items, combined EBITDA would have increased 23.1%. -- on a combined basis Adjusted EBITDA was $293.1 million for fiscal 2006. -- at June 30, 2006, Education Management had cash and cash equivalents of $263.3 million as compared to $172.0 million at June 30, 2005. Outstanding borrowings on our revolving credit facility totaled $160 million at June 30, 2006. -- on a combined basis, cash flow from operations for the twelve month period ended June 30, 2006 was $279.3 million compared to $192.5 million in fiscal 2005. -- on a cash-basis, combined capital expenditures were $65.6 million, or 5.6% of combined revenue for the twelve months ended June 30, 2006 compared to $74.9 million, or 7.3% of revenue, in fiscal 2005. The Company expect capital expenditures during fiscal 2007 to be more in line with fiscal 2005 as a percentage of revenue. Student Enrollment At the start of the current Summer quarter (first quarter of fiscal 2007), total enrollment was approximately 65,800 students, a 10.2% increase from the same time last year. Same-school enrollment (schools owned for one year or more) increased 9.6% to approximately 65,500 students. Students enrolled in fully online programs* increased 63.6% to over 4,600 students. 2006 2005 Percentage Summer Summer Change ------ ------ ---------- Total enrollment 65,800 59,700 10.2% Same-school enrollment (owned for 1 year or more) 65,500 59,700 9.6% Students enrolled in fully online programs* 4,600 2,800 63.6% * In addition, at the start of the current Summer quarter, approximately 900 Art Institute and South University on-ground students were taking 100% of their coursework online. The Company's quarterly revenues and income fluctuate primarily as a result of the pattern of student enrollments. Student enrollment at the Art Institute schools has typically peaked in the fall (fiscal second quarter), when the largest number of recent high school and college graduates traditionally begin post- secondary education programs. The first quarter is typically the lowest revenue recognition quarter due to student vacations. The seasonality of our business has decreased over the last several years due to an increased percentage of students at our schools enrolling in bachelor's and graduate degree programs. Headquartered in Pittsburgh, Pennsylvania, Education Management Corporation -- http://www.edmc.com/-- operates about 70 schools across North America offering certifications as well as associate through doctoral degrees in fields such as graphic design, health sciences, and Web site administration. The Company's education institutions boast a total student enrollment of more than 72,000. The company's 30 Art Institutes offer degrees and diplomas in creative fields such as culinary arts, design, fashion, and media arts. In 2006, Providence Equity Partners and Goldman Sachs Capital Partners bought EDMC for about $3.4 billion. * * * Moody's Investors Service assigned a B2 Corporate Family Rating to Education Management Corporation on May 9, 2006. As reported in the Troubled Company Reporter on May 16, 2006, Standard & Poor's Ratings Services assigned its 'B' corporate credit rating and stable outlook to Education Management LLC. Standard & Poor's also assigned its 'CCC+' ratings to the company's $320 million senior unsecured notes due 2014 and $440 million senior subordinated notes due 2016. ELECTRICAL COMPONENTS: Moody's Assigns Loss-Given-Default Rating ---------------------------------------------------------------- In connection with Moody's Investors Service's implementation of its new Probability-of-Default and Loss-Given-Default rating methodology for the U.S. manufacturing sector, the rating agency confirmed its B1 Corporate Family Rating for Electrical Components International Holdings Company, as well as its B3 rating on the company's $60 million second-lien secured term loan due 2014. Those debentures were assigned an LGD5 rating suggesting lenders will experience a 84% loss in the event of default. Additionally, Moody's revised its probability-of-default ratings and assigned loss-given-default ratings on these loans and bond debt obligations of the company: Projected Old POD New POD LGD Loss-Given Debt Issue Rating Rating Rating Default ---------- ------- ------- ------ ---------- $35 Million Sr. First-Lien Sec. Revolver due 2012 B1 Ba3 LGD3 36% $155 Million Sr. First-Lien Sec. Term Loan due 2013 B1 Ba3 LGD3 36% Moody's explains that current long-term credit ratings are opinions about expected credit loss which incorporate both the likelihood of default and the expected loss in the event of default. The LGD rating methodology will disaggregate these two key assessments in long-term ratings. The LGD rating methodology will also enhance the consistency in Moody's notching practices across industries and will improve the transparency and accuracy of Moody's ratings as Moody's research has shown that credit losses on bank loans have tended to be lower than those for similarly rated bonds. Probability-of-default ratings are assigned only to issuers, not specific debt instruments, and use the standard Moody's alpha- numeric scale. They express Moody's opinion of the likelihood that any entity within a corporate family will default on any of its debt obligations. Loss-given-default assessments are assigned to individual rated debt issues -- loans, bonds, and preferred stock. Moody's opinion of expected loss are expressed as a percent of principal and accrued interest at the resolution of the default, with assessments ranging from LGD1 (loss anticipated to be 0% to 9%) to LGD6 (loss anticipated to be 90% to 100%). Electrical Components International Holdings Company -- http://www.electricalcomponentsinternational.com/-- manufactures wire harnesses and leads for traditional and specialty markets, complex harness sub-assemblies, radiant glass heaters, power cords and we have contract manufacturing capabilities. FEDERAL-MOGUL: Asks Court to OK $500 Mil. Pneumo Claims Settlement ------------------------------------------------------------------ Federal-Mogul Corp., its affiliates, the Asbestos Claimants Committee, and the Legal Representative of Futures Asbestos Claimants ask the U.S. Bankruptcy Court for the District of Delaware to approve an alternative settlement with certain Pneumo Parties to resolve approximately $500 million in filed claims against the Debtors' estates. The Pneumo Parties consist of: * Cooper Industries, Ltd., and Cooper Industries, LLC, as successor by merger to Cooper Industries, Inc.; * PCT International Holdings, Inc.; and * Pneumo Abex, LLC, as successor by merger to Pneumo Abex Corp. The Debtors, et al., and the Pneumo Parties have compromised and settled their disputes and entered into a global settlement on certain terms and conditions set forth in a Term Sheet, executed as of July 6, 2006. James L. Patton, Jr., Esq., at Young Conaway Stargatt & Taylor LLP, in Wilmington, Delaware, relates that the Term Sheet incorporates alternative settlement structures referred to as "Plan A" and "Plan B." Plan A will be included in, and implemented only through, the confirmation of the Debtors' Third Amended Plan of Reorganization. If confirmed, Plan A will control the settlement between the Pneumo Parties and the Debtors, et al. Under Plan A, the Pneumo Parties will pay $756 million, consisting of a $256 million cash payment and a $500 million promissory note payable in 25 annual installments of $20 million, and contribute proceeds of insurance rights and other assets to a certain trust. In exchange, the Pneumo Parties will be included in a class of "Protected Parties" under the Plan's channeling injunction. The Debtors, et al., anticipate filing amendments to the Third Amended Plan, incorporating the Plan A portion of the Term Sheet in the near future. Plan B is a back-up alternative for resolution of the Pneumo Parties disputes so that the Third Amended Plan can be promptly confirmed and go effective, even if Plan A is not implemented. Plan B will only be implemented in the event that Plan A is not confirmed or otherwise successfully implemented. According to Mr. Patton, the Plan B Settlement Agreement resolves significant objections to confirmation of the Third Amended Plan from Cooper, Pneumo Abex and other Pneumo Parties, as well as their votes rejecting the Plan. The Agreement represents the results of the Debtors, et al.'s thorough investigation of, among other things: -- each party's rights and obligations; -- the magnitude of direct and indirect asbestos-related claims filed by the Pneumo Parties against the Debtors; and -- the amount of insurance available to satisfy those claims. Mr. Patton relates that the Pneumo Asbestos Claims arise from: (i) a 1994 Asset Purchase Agreement, in which Wagner Electric Co., purchased all of the assets comprising the "Friction Products Division" from Pneumo Abex; and (2) a 1998 Purchase and Sale Agreement, in which Federal- Mogul acquired all of the stock of and other equity interests in Moog Automotive Products, Inc., Wagner's successor, and certain other Cooper subsidiaries from Cooper. Under Plan B, Cooper will receive $138 million and Pneumo Abex will receive $2 million in cash, in full and complete settlement and satisfaction of the Pneumo Protected Parties' claims or causes of action against the Debtors and their non-Debtor affiliates. Upon the Plan B Payment, the Pneumo Parties and the Debtors will exchange mutual general releases. The Pneumo Parties also agree to vote in favor of the Third Amended Plan. Furthermore, Cooper and Federal-Mogul Products, Inc., will enter into an agreement modifying their rights under a 2004 Partitioning Agreement, providing that, under Plan B, Cooper will relinquish its right to consent to certain settlements of the "Subject Policies," with proceeds of any settlements being shared 80% to F-M Products and 20% to Cooper. Cooper will retain its rights to submit claims under the Subject Policies not settled in that fashion in accordance with the existing Partitioning Agreement. Mr. Patton maintains that the Plan B Settlement Agreement resolves years of mounting litigation between the Debtors, et al., and Cooper, including a pending appeal before the U.S. Court of Appeals for the Third Circuit. The Debtors, et al., assure the Court that the Agreement is in the best interests of all creditors and, hence, should be approved in its entirety. The Debtors, et al., also tells the Court that the Official Committee of Unsecured Creditors, the Official Committee of Equity Security Holders, and the administrative agent for the Debtors' lenders prior to filing for chapter 11 protection do not object to the proposed Agreement. A full-text copy of the Plan B Settlement Agreement is available at no charge at http://ResearchArchives.com/t/s?13c5 Headquartered in Southfield, Michigan, Federal-Mogul Corporation -- http://www.federal-mogul.com/-- is an automotive parts company with worldwide revenue of some $6 billion. The Company filed for chapter 11 protection on Oct. 1, 2001 (Bankr. Del. Case No. 01- 10582). Lawrence J. Nyhan Esq., James F. Conlan Esq., and Kevin T. Lantry Esq., at Sidley Austin Brown & Wood, and Laura Davis Jones Esq., at Pachulski, Stang, Ziehl, Young, Jones & Weintraub, P.C., represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $10.15 billion in assets and $8.86 billion in liabilities. Federal-Mogul Corp.'s U.K. affiliate, Turner & Newall, is based at Dudley Hill, Bradford. Peter D. Wolfson, Esq., at Sonnenschein Nath & Rosenthal; and Charlene D. Davis, Esq., Ashley B. Stitzer, Esq., and Eric M. Sutty, Esq., at The Bayard Firm represent the Official Committee of Unsecured Creditors. (Federal-Mogul Bankruptcy News, Issue No. 114; Bankruptcy Creditors' Service Inc., http://bankrupt.com/newsstand/or 215/945-7000) FEDERAL-MOGUL: Wants to Recapitalize Non-Debtor Subsidiaries ------------------------------------------------------------ Federal-Mogul Corporation and its debtor-affiliates ask the U.S. Bankruptcy Court for the District of Delaware to approve the recapitalization of Federal-Mogul, S.A., and Federal-Mogul Holding Italy S.r.L., to provide the entities with necessary adjustments to their balance sheets to maintain their status as going concerns. The Restructuring Entities are wholly owned non-debtor subsidiaries of Debtor FM International, LLC, and make up the bulk of operations of Federal-Mogul Corp. and its worldwide family of companies in France and Italy. By improving the balance sheets of the Restructuring Entities through elimination of large debts currently on their books, the Recapitalizations will restore confidence in the Restructuring Entities' outside business partners; suppliers currently refusing to extend credit terms; and customers who have been withholding new business and threatening to re-source production if the Restructuring Entities do not improve their financial situations, James E. O'Neill, Esq., at Pachulski, Stang, Ziehl, Young, Jones & Weintraub LLP, in Wilmington, Delaware, explains. Mr. O'Neill notes that the recapitalizations will have an economically neutral impact on the Debtor's overall net worth and will not involve the actual movement of any of the Debtors' cash. Nevertheless, the interests of certain Debtors are implicated by the Recapitalizations. Restructured Notes A financial restructuring of F-M France and F-M Italy outside of any formal reorganization proceedings in either of those countries has been considered desirable by the Debtor for some time, Mr. O'Neill relates. Treatment of certain restructured notes, which comprise the largest liabilities of both F-M France and F-M Italy, has figured prominently in those plans. The Restructured Notes were created between 1998 and 2001 to fund transfers of certain businesses within the Debtor following its acquisition of T&N Limited and its subsidiaries in 1998. Specifically, three sets of intercompany notes were issued to T&N and its indirect subsidiaries as part of the integration of the T&N businesses into the Debtor: (1) the August 1998 French Notes totaling $294.7 million and a third note issued by F-M France in June 1999, which are the subject of the French Recap, and an additional note for $26.25 million; (2) a $139.5 million intercompany loan note issued in May 2001, a portion of which is intended to be the subject of the Italian Recap; and (3) two notes of Federal-Mogul Holding Deutschland GmbH, a non-Debtor subsidiary, in the original aggregate amount of approximately $467 million, both of which were issued in July 1998. Until the end of 2005, disagreements between the Debtors and certain T&N administrators concerning the overall terms of the U.K. restructuring prevented the Debtors from including the Restructured Notes as part of any consensual restructuring of F-M France and F-M Italy. The administrators of the U.K. Debtors' cases, who considered the Intercompany Notes to be among the easily saleable assets of the U.K. Debtors, began to market the Intercompany Notes for sale in mid-2005 and entered into an agreement to sell the Intercompany Notes to a third party in August 2005. Subsequently, the Administrators, the Debtor, T&N, and the co- proponents of the Debtors' Plan of Reorganization and other parties entered into a global settlement of outstanding issues concerning the U.K. Debtors' restructuring. Under the U.K. Global Settlement, the Debtors could make an offer to acquire the Intercompany Notes by paying the Administrators an amount equal to the difference between: -- the cash then held by the Administrators; and -- the amount considered by the Administrators as necessary to fund company voluntary arrangements and schemes of arrangement for the U.K. Debtors to allow them to emerge from the U.K. proceedings. In late December 2005, the Debtor and Federal-Mogul (Continental European Operations) Limited, a wholly owned non- Debtor subsidiary of Federal-Mogul, acquired the Intercompany Notes. The French Notes were transferred to the Debtor, and the Italian and German Notes were transferred to F-M CEO. F-M France Recapitalization F-M France serves as the holding company for several French Federal-Mogul operations, consisting of 10 manufacturing facilities and an after-market distribution center. The French Subs supply pistons, rings, engine bearings and bushings, sintered parts, friction material for brakes, and sealing products. French Original Equipment Manufacturer customers, including Renault and PSA Peugot-Citroen, also require the French Subs to serve as their primary contact for sales, engineering and customer service on behalf of all Federal-Mogul's European operations. Mr. O'Neill states that F-M France has made annual interest payments of $21.25 million as required by the French Acquisition Notes. Meanwhile, F-M France only receives, on average, up to $5 million in annual dividends from the French Subs. As a result, it has been experiencing on-going losses of up to $15 million per year since 1998, Mr. O'Neill relates. In addition, the French Subs' operating results forced F-M France to depreciate the $383.75 million book value of its investment in the French Subs by $207.5 million to approximately $176.25 million over the last eight years. The proposed Recapitalization of F-M France involves the exchange for equity in F-M France of approximately 84% of the $268.45 million owed under two intercompany loan notes by F-M France to the Debtor. Specifically, Mr. O'Neill explains that the $225.3 million owed under the French Notes to the Debtor, plus $12.29 million relating to interest accrued under the French Notes through September 2006, will be exchanged for a 100% equity stake in F-M France. In conjunction with the exchange of part of the French Notes, F-M International's equity interest in F-M France will be canceled. The cancellation is supported by valuations conducted by Jefferies & Company, Inc., the financial advisor for the Official Committee of Unsecured Creditors, showing that the equity in F-M France currently has no value. The French Recap must be completed by December 2006 to avoid the possibility of a statutory liquidation under French law. The French Recap will strengthen F-M France's balance sheet enabling it to obtain financing from third parties and improve its debt-to-equity ratio from a negative ratio to a positive one of less than one. In addition, the improvement of F-M France's financial position will remove a statutory bar to the entity being able to deduct, for French tax purposes, the amount of interest payable on the remaining French Acquisition Notes in 2007, which will confer a near-term financial benefit of approximately $9 million to F-M France. Italian Recap F-M Italy serves as the holding company for Federal-Mogul Operations Italy S.r.L. F-M Italy's sister companies -- Federal- Mogul Ignition S.r.L. and Federal-Mogul Filtration Products S.r.L. -- primarily produce ignition products and wipers. The Debtor's Italian operations consist of eight manufacturing facilities and after-market distribution center. The primary OEM customers are Fiat/Iveco, with additional sales to companies like BMW, Audi and Renault. The F-M Ignition Italy and F-M Filtration businesses are dependent on the Debtor's other non-Italian entities for technology, distribution and support. According to Mr. O'Neill, the proposed restructuring of F-M Italy's current capital structure contemplates the exchange of 50% of the Italian Note for 100% of shares in F-M Italy followed by its two-step consolidation with F-M Ignition Italy, F-M Filtration Products S.r.L., and F-M Operations Italy. Immediately before the consolidation, the Italian Note will be transferred by F-M CEO to a newly formed U.S. limited liability company in return for an indirect equity interest in F-M LLC. In addition, 50% of the Italian Note will be exchanged for a 100% equity interest in FM Italy. As with the French Recap, the existing equity interest in F-M Italy will be canceled. The cancellation is supported by the valuation conducted by Jefferies showing that the equity in F-M Italy has currently no value. Mr. O'Neill explains that the subsequent consolidation of the F-M Italian Entities, to be consummated in accordance with Italian law, will involve two mergers resulting in all of the Debtor's Italian operations being merged into F-M Italy: (i) F-M Ignition Italy and its wholly owned subsidiary, F-M Filtration, will be merged into F-M Italy; and (ii) F-M Operations Italy, a wholly owned subsidiary of F-M Italy, will then merge into F-M Italy. The current shareholders of F-M Ignition Italy, each of whom is a direct or indirect subsidiary of the Debtor, are: * Debtor F-M International, with a 51.79% current interest; * Debtor Federal-Mogul Ignition Company, with an 18.93% interest; and * non-Debtor Federal-Mogul Netherlands BV, which is currently wholly owned by F-M Ignition U.S., with a 29.28% interest. To facilitate the consolidation of the Debtor's Italian operations and to streamline the resulting ownership structure, F-M International and F-M Ignition U.S. will indirectly transfer their interests in F-M Ignition Italy and F-M Netherlands to F-M LLC via a newly formed non-Debtor Federal-Mogul Dutch entity. In exchange, F-M International and F-M Ignition U.S. will receive commensurate equity holdings in F-M Dutch NewCo, which holdings together with that of the Debtor will constitute 100% of the equity in F-M Dutch NewCo. As a result of the consolidation of the F-M Italian Entities, F-M International and F-M Ignition U.S. will be granted indirect equity interests in the reconstituted F-M Italy proportionate to the value of their current holdings in F-M Ignition Italy, adjusted to reflect the fact that: (x) those new equity interests will be in F-M Italy, a consolidated entity encompassing three businesses as a result of the Italian Recap; (y) the intended partial exchange of part of the Italian Note for equity; and (z) any changes in valuations of the F-M Italian Entities at the time the consolidation is consummated. The Debtors also want the Italian Recap completed before the end of 2006 to comply with Italian law and preserve certain tax benefits. Otherwise, among other things, statutory auditors will be unable to give F-M Italy a going-concern opinion for 2006 that could conceivably result in F-M Italy's compulsory liquidation under Italian law. Headquartered in Southfield, Michigan, Federal-Mogul Corporation -- http://www.federal-mogul.com/-- is an automotive parts company with worldwide revenue of some $6 billion. The Company filed for chapter 11 protection on Oct. 1, 2001 (Bankr. Del. Case No. 01- 10582). Lawrence J. Nyhan Esq., James F. Conlan Esq., and Kevin T. Lantry Esq., at Sidley Austin Brown & Wood, and Laura Davis Jones Esq., at Pachulski, Stang, Ziehl, Young, Jones & Weintraub, P.C., represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $10.15 billion in assets and $8.86 billion in liabilities. Federal-Mogul Corp.'s U.K. affiliate, Turner & Newall, is based at Dudley Hill, Bradford. Peter D. Wolfson, Esq., at Sonnenschein Nath & Rosenthal; and Charlene D. Davis, Esq., Ashley B. Stitzer, Esq., and Eric M. Sutty, Esq., at The Bayard Firm represent the Official Committee of Unsecured Creditors. (Federal-Mogul Bankruptcy News, Issue No. 114; Bankruptcy Creditors' Service Inc., http://bankrupt.com/newsstand/or 215/945-7000) FEDDERS NORTH: Moody's Assigns Loss-Given-Default Rating -------------------------------------------------------- In connection with Moody's Investors Service's implementation of its new Probability-of-Default and Loss-Given-Default rating methodology for the U.S. manufacturing sector, the rating agency affirmed its Caa1 Corporate Family Rating for Fedders North America, Inc., as well as revised the rating on the company's $155 million 9.875% senior subordinate notes due 2014 to Caa2 from Caa3. Those debentures were assigned an LGD5 rating suggesting that noteholders will experience a 73% loss in the event of a default. Moody's explains that current long-term credit ratings are opinions about expected credit loss which incorporate both the likelihood of default and the expected loss in the event of default. The LGD rating methodology will disaggregate these two key assessments in long-term ratings. The LGD rating methodology will also enhance the consistency in Moody's notching practices across industries and will improve the transparency and accuracy of Moody's ratings as Moody's research has shown that credit losses on bank loans have tended to be lower than those for similarly rated bonds. Probability-of-default ratings are assigned only to issuers, not specific debt instruments, and use the standard Moody's alpha- numeric scale. They express Moody's opinion of the likelihood that any entity within a corporate family will default on any of its debt obligations. Loss-given-default assessments are assigned to individual rated debt issues -- loans, bonds, and preferred stock. Moody's opinion of expected loss are expressed as a percent of principal and accrued interest at the resolution of the default, with assessments ranging from LGD1 (loss anticipated to be 0% to 9%) to LGD6 (loss anticipated to be 90% to 100%). Headquartered in Liberty Corner, New Jersey, Fedders North America, Incorporated - http://www.fedders.com- provides air conditioning and other air treatment products for commercial and residential applications to markets worldwide. Product lines include residential central air conditioning systems, including condensing units, air handlers, gas furnaces, air cleaners, and humidifiers, as well as rooftop, vertical and horizontal packaged air conditioners and heat pumps for commercial, residential and telecommunications applications and also, appliance air treatment products. FOAMEX INT'L: Agrees with Equity Holders on Terms of Amended Plan ----------------------------------------------------------------- In a regulatory filing with the Securities and Exchange Commission, Foamex International Inc., Foamex L.P., and Foamex Capital Corporation, disclose that as part of their equity commitment with their five existing shareholders, the parties reached agreement on the principal terms of an amended plan of reorganization. The existing shareholders are: (1) D. E. Shaw Laminar Portfolios, L.L.C., (2) Goldman, Sachs & Co., (3) Par IV Master Fund, Ltd., (4) Sunrise Partners Limited Partnership, and (5) Sigma Capital Associates, LLC, The First Amended Plan will treat claims and interests in this manner: (a) Full payment in cash will be made to holders of allowed claims based on the Debtors' Senior Secured Notes and Senior Subordinated Notes; (b) Other allowed unsecured claims will be satisfied in full in cash; (c) Allowed administrative claims, Priority Tax Claims, DIP Financing Claims, Other Priority Claims and Other Secured Claims will be satisfied in full in cash or, with respect to Other Secured Claims, as otherwise provided in the term sheet; (d) Existing preferred stock will be converted into common stock on the Effective Date of the Amended Plan; (e) Existing common stock will remain outstanding after the Effective Date, but will be subject to dilution as a result of the issuance of additional common stock pursuant to the rights offering and, if exercised, the call option, and any common stock to be issued under the proposed Management Incentive Plan and the existing Key Employee Retention Program or upon exercise of any stock options; (f) Holders of common equity interests -- other than common stock -- , including any options, warrants or rights to acquire the same, will retain their interests; Pursuant to the First Amended Plan, the Significant Equityholders will have the right to nominate four members of the reorganized Foamex International's Board of Directors. The Board of Directors will also include one independent director, as well as Foamex International's Chief Executive Officer and its General Counsel. The officers of the Reorganized Company will be substantially the same as the existing officers of Foamex International. Raymond E. Mabus, Jr., will remain as Foamex International's president and chief executive officer. A full-text copy of the First Amended Plan term sheet is available for free at http://researcharchives.com/t/s?13d2 Headquartered in Linwood, Pa., Foamex International Inc. -- http://www.foamex.com/-- is the world's leading producer of comfort cushioning for bedding, furniture, carpet cushion and automotive markets. The Company also manufactures high- performance polymers for diverse applications in the industrial, aerospace, defense, electronics and computer industries. The Company and eight affiliates filed for chapter 11 protection on Sept. 19, 2005 (Bankr. Del. Case Nos. 05-12685 through 05-12693). Attorneys at Paul, Weiss, Rifkind, Wharton & Garrison LLP, represent the Debtors in their restructuring efforts. Houlihan, Lokey, Howard and Zukin and O'Melveny & Myers LLP are advising the ad hoc committee of Senior Secured Noteholders. Kenneth A. Rosen, Esq., and Sharon L. Levine, Esq., at Lowenstein Sandler PC and Donald J. Detweiler, Esq., at Saul Ewings, LP, represent the Official Committee of Unsecured Creditors. As of July 3, 2005, the Debtors reported $620,826,000 in total assets and $744,757,000 in total debts. (Foamex International Bankruptcy News, Issue No. 29; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000) FOAMEX INT'L: Wants Incentive Plan Approved for Salaried Employees ------------------------------------------------------------------ Foamex International Inc. and its debtor-affiliates ask the U.S. Bankruptcy Court for the District of Delaware to approve their 2006 incentive plan for salaried employees pursuant to Sections 363(b)(1) and 105(a) of the Bankruptcy Code. Pauline K. Morgan, Esq., at Young Conaway Stargatt & Taylor, LLP, in Wilmington, Delaware, recounts that the Debtors have had in place a salaried incentive plan. To motivate the Salaried Employees to help the Debtors achieve certain targeted performance goals -- typically measured by corporate-level EBITDA and operating profit by strategic business unit -- a portion of the Salaried Employees' compensation were tied to the Debtors' and their SBUs' achievement of the performance goals. However, employee compensation has suffered along with the Debtors' financial performance, and the Debtors have been unable to achieve the financial goals they targeted in recent salaried incentive plans. As a result, the Debtors have not paid a competitive bonus to their Salaried Employees since 2001. In addition, the Debtors have not awarded across-the-board merit pay increases for three years. The Debtors' inability to reward fully their employees' hard work and dedication during the last five years has rendered their Salaried Employees' total compensation packages uncompetitive which, in turn, has hindered their ability to fully incentivize their employees and to attract and retain talented workers, Ms. Morgan relates. The Debtors have taken steps in the past to address the retention issues. Most notably, in November 2005, the Debtors obtained Court approval of their key employee retention plan, which provides for retention payments to a group of employees whose continued service is particularly important to the Debtors' successful reorganization. However, the KERP is limited in scope, covering only 77 of the Debtors' Salaried Employees, or approximately 2% of the Debtors' domestic employees. Hence, the vast majority of the Salaried Employees gave not received any meaningful incentive compensation or other bonus for the better part of five years, Ms. Morgan avers. Ms. Morgan tells the Court that the Debtors require an incentive plan for 2006. The Debtors are on pace, thus far, to have a successful year and their Salaried Employees deserve much of the credit. To now deprive the Salaried Employees of the opportunity to earn a bonus this year, at a time when the Debtors' performance has been exceptionally strong, would severely damage employee motivation and morale and could result in a dramatic increase in employee turnover, Ms. Morgan asserts. The Debtors' proposal is modeled largely on the plans adopted in prior years with some slight modifications based on input the Debtors received from their compensation consultants, Bright Tree Consulting Group; and Thomas Hudgins, the chairman of the compensation committee of the Debtors' board of directors. In light of the Debtors' present situation, Bright Tree Consulting recommended that the Debtors must achieve 95% of their target EBITDA before the Salaried Employees can earn the minimum payouts under the proposed Incentive Plan. "This differs from the 90% used in prior years and takes account of the fact that, with much of the year already behind us, a 95% threshold makes achievement of the minimum payout under the proposed Incentive Plan more challenging," Ms. Morgan points out. The Debtors' projected EBITDA for 2006, upon which the 2006 incentive award is premised, has increased from the $89,000,000 figure reflected in the Original Disclosure Statement, to $151,000,000. Ms. Morgan notes that had the $89,000,000 figure been used as the incentive plan benchmark, full incentive payments to the Salaried Employees would be virtually guaranteed. To now deprive the Salaried Employees of the opportunity to earn a bonus based on this new, substantially higher, EBITDA target would be to render the Debtors' employees victims of their own success and hard work, she asserts. The Debtors estimate that the cost of the Incentive Plan should be $5,800,000 if they earn $151,000,000 of EBITDA and each SBU Performance Goal is achieved. At that level, the Debtors would need to earn $156,800,000 for Salaried Employees to receive 100% payouts. The cost of the Incentive Plan is lower at the 25% payout level - - approximately $1,400,000 -- and higher at the 200% payout level -- approximately $11,700,000. If the Debtors are unable to self- fund a portion of the Incentive Plan, payments made to Salaried Employees will be ratably reduced based on the amount of the funding shortfall. The Compensation Committee has approved the Incentive Plan. Certain of the Debtors' significant equity holders that collectively own approximately 53% of Foamex International Common Stock have also conveyed their support for the Incentive Plan. The Terms of the Incentive Plan The proposed Incentive Plan provides for a variable cash award to each of the Debtors' Salaried Employees contingent upon the Debtors' achievement of certain targeted EBITDA performance goals for fiscal year 2006. The amount earned by a Salaried Employee under the proposed Incentive Plan is largely a product of four components: (1) the Debtors' overall performance, as measured by EBIDTA for 2006; (2) the Salaried Employee's base salary, referred to in the proposed Incentive Plan as "Incentive Eligible Earnings;" (3) the percentage of base salary that is eligible to be awarded as a bonus; and (4) if the Salaried Employee works in one of the Debtors' SBUs, the SBU's achievement of its target operating profit for 2006. A. Corporate Performance Goals For fiscal year 2006, the Debtors have established an overall Corporate Performance Goal of $151,000,000 of EBITDA, net of the cost of the proposed Incentive Plan, for the Salaried Employees to receive 100% of their proposed Incentive Plan payments. Salaried Employees will still be eligible to receive payment if the Debtors achieve at least more than $143,500,000, or 95% of target EBITDA. The chart illustrates the various payout percentages at different EBITDA levels for the Debtors: Percent of Plan EBITDA Dollars (MM) Payout Percent --------------- ------------------- -------------- 95.0% $143.5 25% 95.3% $144.0 30% 96.0% $145.0 40% 96.7% $146.0 50% 97.3% $147.0 60% 98.0% $148.0 70% 98.7% $149.0 80% 99.3% $150.0 90% 100.0% $151.0 100% 101.0% $152.5 110% 102.0% $154.0 120% 103.0% $155.5 130% 104.0% $157.0 140% 105.0% $158.6 150% 106.0% $160.1 160% 107.0% $161.6 170% 108.0% $163.1 180% 109.0% $164.6 190% 110.0% $166.1 200% B. Target Percentages Pursuant to the Incentive Plan, each of the Salaried Employees is placed into one of eight groups depending on his or her position with the Debtors, and each group has attributed to it a specified Target Percentage. The Target Percentage for each of the groups is: Target Group No. Position Percentage --------- -------- ---------- 1 Chief Administrative Officer 50% 2 Executive Vice President 45% 3 Senior Vice President 35% 4 Vice President 30% 5 Corporate Director 25% 6 Plant Manager 25% 7 Corporate Manager 15% 8 Select Salaried Employees 8% 9 All other Salaried Employees 4% If the Debtors achieve at least $143,500,000 of EBITDA and a Salaried Employee's SBU achieves or exceeds its SBU Performance Goal, the Incentive Plan payment to the Employee is computed by multiplying the Employee's base salary by the Target Percentage and the Payout Percent. If either (i) the Debtors achieve $151,000,000 of EBITDA or (ii) a Salaried Employee's SBU achieves its SBU Performance Goal, the Employee's Incentive Plan payment is calculated by multiplying her Target Percentage by her base salary and dividing the amount by %2. D. Miscellaneous Provisions Payments under the Incentive Plan will be made within seven days after the Debtors have determined whether they have achieved their Corporate and SBU Performance Goals. In the case of the Debtors' six most senior executives, one-half of their Incentive Plan payment is payable only if the Debtors achieve at least $146,000,000 of EBITDA, net of the cost of the Incentive Plan, which ensures that the Debtors' other Salaried Employees would be eligible for at least a 50% payout under the Incentive Plan. All distributions and calculations are based on a percentage of each Salaried Employee's base salary in effect at the inception of the Incentive Plan, exclusive of any payments made to Salaried Employees under the KERP. If an Employee's individual performance is unsatisfactory, payments under the Incentive Plan may be adjusted or forfeited at the discretion of senior management. Finally, if an Employee is not employed by the Debtors on the date that an Incentive Plan payment is to be made, then the Employee will not be entitled to receive his or her Incentive Plan payment or any portion thereof. Headquartered in Linwood, Pa., Foamex International Inc. -- http://www.foamex.com/-- is the world's leading producer of comfort cushioning for bedding, furniture, carpet cushion and automotive markets. The Company also manufactures high- performance polymers for diverse applications in the industrial, aerospace, defense, electronics and computer industries. The Company and eight affiliates filed for chapter 11 protection on Sept. 19, 2005 (Bankr. Del. Case Nos. 05-12685 through 05-12693). Attorneys at Paul, Weiss, Rifkind, Wharton & Garrison LLP, represent the Debtors in their restructuring efforts. Houlihan, Lokey, Howard and Zukin and O'Melveny & Myers LLP are advising the ad hoc committee of Senior Secured Noteholders. Kenneth A. Rosen, Esq., and Sharon L. Levine, Esq., at Lowenstein Sandler PC and Donald J. Detweiler, Esq., at Saul Ewings, LP, represent the Official Committee of Unsecured Creditors. As of July 3, 2005, the Debtors reported $620,826,000 in total assets and $744,757,000 in total debts. (Foamex International Bankruptcy News, Issue No. 29; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000) FORD MOTOR: Moody's Says Weak Results Consistent with B3 Rating --------------------------------------------------------------- Moody's Investors Service disclosed that Ford's very weak third quarter performance, with automotive operations generating a pre-tax loss of $1.8 billion and a negative operating cash flow of $3 billion, was consistent with the expectations which led to the September 19 downgrade of the company's long-term rating to B3. "Ford's rating at B3 anticipated further weakness in financial results as indicated by the company's need to accelerate its restructuring initiatives. Nevertheless, Ford's outlook remains negative." said Bruce Clark, senior vice president and lead auto industry analyst at Moody's "The key to Ford's Way Forward restructuring plan is to reduce capacity by buying out 25,000 to 30,000 hourly employees and to shift its product line toward cars and more fuel efficient vehicles," Clark said "The problem is that the financial benefits of the program don't begin to kick in until 2009," he added. "This means that even if things go according to plan, Ford will likely burn through a significant amount of cash during 2006 and 2007. The rate of cash consumption could improve in 2008, but cash flow could still be negative in that year." At September 30th, Ford had over $23 billion in cash and equivalents. However, Ford needs several billion in cash to run its day to day operations. Consequently, the amount of funds currently available to cover operating losses and restructuring requirements is sizable, but it is not the full $23 billion to which Ford has access. "If Ford hits its cost reduction, market share and new product introduction objectives, the company's cash resources should be adequate to cover uses through 2007," Clark said. "But, things could start to get tight in 2008 if operating cash flow is still negative. In fact, the company's liquidity position could become stressed prior to 2008 if the operating environment is more difficult than planned. This could happen if the economy slows, if there is any kind of work stoppage associated with the 2007 UAW negotiations, or if the already weak financial position of the supplier base erodes further." The significant level of cash consumption that Ford will face during 2007 and 2008, and the potential strain that this will place on the company's liquidity contributed to Moody's September downgrade of Ford's Speculative Grade Liquidity rating to SGL-3 from SGL-1. Ford has reported its decision to consider accessing the secured debt market in order to bolster its cash position. "Given the extended time frame of the Way Forward restructuring plan and the level of cash that may be required through 2008, it will be important for Ford to increase its cash position in order to provide an adequate liquidity cushion," Clark said. "If Ford can't boost its liquidity through accessing the secured debt market, through asset sales or through some other strategic alternatives, there could be further pressure on its long-term and SGL ratings." Should Ford issue secured debt for the purpose of building liquidity, there would likely be no adverse impact on the company's B3 corporate family rating. However, consistent with the analytic framework contained in Moody's Probability of Default and Loss Given Default Methodology dated August 2006, the rating of any secured borrowings by Ford would likely be one or more notches higher than the B3 corporate family rating. In contrast, the rating of the company's unsecured obligations would be subject to a downgrade from current levels. Ford reported that it would have to restate its quarterly and annual financials back to 2001 due to errors in the application of "the short-cut method" promulgated under Statement of Financial Accounting Standard 133 in connection with the accounting for certain hedging transactions. As a result, Ford expects earnings for 2002 to improve materially; the impact on years 2003 through 2006 has not yet been assessed. The company also anticipates that there will be no cash impact and that the necessary restatements for all years will be made in time to permit a timely filing of its third quarter 10Q. In a March 2006 Special Comment on SFAS 133 Moody's noted that many recent restatements by other companies arising from SFAS 133 reflect technical misinterpretations of the accounting rules which do not alter the economic substance of the transactions. On the matter of Ford's restatement Clark said, "Moody's wouldn't view Ford's restatement as a negative credit event as long as the company's auditors make no determination of a Material Weakness with respect to Ford's ongoing hedge accounting, there is no delay in the filing of the company's financial statements, and no other accounting issues arise in conjunction with this restatement." FORD MOTOR: S&P Places B Rated Sr. Unsec. Debt on Negative Watch ---------------------------------------------------------------- Standard & Poor's Ratings Services placed its 'B' senior unsecured debt issue ratings on Ford Motor Co. on CreditWatch with negative implications. At the same time, S&P affirmed all other ratings on Ford, Ford Motor Credit Co., and related entities, except the rating on Ford Motor Co. Capital Trust II 6.5% cumulative convertible trust preferred securities, which was lowered to 'CCC-' from 'CCC.' The CreditWatch placement of the automaker's unsecured issues reflects the potential for unsecured creditors to be disadvantaged if Ford were to incur a material amount of secured borrowings. Ford announced Monday that it is considering a range of measures to help it fund operating losses and restructuring plans while preserving cash and short-term VEBA trust balances at or near current levels of about $20 billion. The Ford announcement said these measures could include the negotiation of secured credit facilities. If this occurs, "The rating on Ford's senior unsecured debt could be lowered by up to two notches below the corporate credit rating ('B')," said Standard & Poor's credit analyst Robert Schulz, "reflecting the unsecured debt's disadvantaged recovery prospects in the event of a bankruptcy by Ford." We will monitor ongoing developments and resolve the CreditWatch once Ford's financing plans have been finalized. The downgrade of Ford's Capital Trust II 6.5% cumulative convertible trust preferred securities reflects S&P's view that, in the wake of Ford's recent elimination of its common stock dividend, the risk of a payment deferral by Ford on its trust preferred securities is heightened, as the company seeks to conserve liquidity in light of ongoing negative cash flows. Ford itself has not indicated any intention to defer dividends on its trust preferred securities. S&P would view such a deferral as a default on the issue, under our rating definitions. Separately, the ratings on Ford and related entities are not immediately affected by the company's announcement that it will delay release of financial statements for the third quarter of 2006 and restate results dating back to 2001. The restatements are required because accounting for certain derivatives used to hedge interest rate risk at Ford Credit did not comply with Statement of Financial Accounting Standards No. 133 on derivatives and hedging activities. Actual cash flow or the risk-management economics of the derivative transactions are not affected by the restatements, and S&P does not expect the delay or restatements to adversely affect Ford's or Ford Credit's access to their unsecured bank credit lines. However, S&P would reassess its views if the accounting restatement process were to uncover additional issues or raise broader concerns about the strength of Ford's internal controls or risk-management practices, if additional restatements result in a prolonged financial reporting delay, or if liquidity were to be adversely affected. Ford's third-quarter financial results, excluding the effect of the restatements, showed further deterioration in automotive results, which S&P expects to continue through the end of 2006. North American operations reported a $2.0 billion loss in the latest quarter, excluding $3.7 billion in special items, compared with a loss of $1.2 billion in the third quarter of 2005. FORD MOTOR: Fitch Puts Negative Watch on B+ Rated Sr. Unsec. Debt ----------------------------------------------------------------- Fitch Ratings has placed Ford Motor Company's 'B+/RR3' senior unsecured debt on Rating Watch Negative reflecting Ford's intent to raise secured financing that would impair the position of unsecured debtholders. Under Fitch's recovery rating scenario it was estimated that unsecured holders would recover approximately 68% in a bankruptcy scenario, equating to a Recovery Rating of 'RR3' (50-70% recovery). Fitch will review the size, structure and collateral of the secured financing facility to determine the effect on outstanding unsecured debt. Fitch's Issuer Default Ratings of 'B' for both Ford and Ford Motor Credit Company are unaffected at this time, but could be reviewed if accounting issues prevent the timely filing of third quarter financial statements. Secured financing will serve to boost Ford's liquidity and provide incremental resources and time to continue its extended restructuring program. Negative cash flow from operating losses, restructuring costs and working capital outflows in 2006 is expected to exceed $8 billion. Continuing market share and revenue declines in 2007, and the delayed effect of the employee reduction programs indicate that cash outflow could be at a similar level in 2007. Given the very large working capital financing requirements in North America, as well as tax- disadvantaged overseas cash holdings, Fitch believes that consolidated cash holdings below $15 billion could raise the level of concern among suppliers and customers. At the end of the third quarter total cash, marketable securities, loaned securities, and short-term VEBA was approximately $23.6 billion. Stabilization of Ford's revenue performance in 2007 is unlikely, given production cutbacks, a slowing economy, enhanced competition in the critical pickup segment, and lack of new impact products. Ford has shown some progress in the passenger car market, but this progress will not be sufficient to offset the steep declines in volume and profitability from mid-size and large SUV's, and pickups. Near-term improvement in operating results will need to be driven largely by reductions in Ford's cost structure, which is expected to occur gradually, but steadily throughout 2007. A decline in commodity prices could benefit margin performance over the long-term, but is expected to provide little relief well into 2007. Severely stressed conditions in the supply base provide little opportunity to reduce supplier costs, but instead present the potential for higher costs, financial support, and supply-chain disruptions. Ford continues to spend aggressively on employee buyout programs, although the completion of the hourly buyout program will extend to the third quarter of 2007, deferring full realization of the cost savings. Ford's relatively young workforce will make buyouts a more expensive proposition than at General Motors, but could also result in a better mix of employees that would exit without retiree pension and health care benefits. A successful buyout program would also accelerate the restructuring, re-sourcing and closure of facilities at uncompetitive ACH facilities. Longer-term, the re-opening of the UAW contract in September 2007 will represent a critical event in establishing Ford's ability to establish a long-term, competitive cost structure. Asset sales are expected to be limited, and challenging to complete. Recently announced intentions to sell Aston-Martin and APCO, would provide modest proceeds to apply to restructuring efforts. Fitch places the following debt on Rating Watch Negative: Ford -- Senior unsecured 'B+/RR3'. These ratings are unaffected by Fitch's action and currently maintain a Negative Rating Outlook: Ford -- Issuer Default Rating 'B'. Ford Credit -- Issuer Default Rating 'B'. Fitch's Recovery Ratings, introduced in 2005, are a relative indicator of creditor recovery on a given obligation in the event of a default. FRONTIER LEASING: Subservicer Default Cues Moody's Ratings Review ----------------------------------------------------------------- Moody's Investors Service placed on review for possible downgrade the ratings of seven classes of notes issued in three small ticket equipment securitizations sponsored by Frontier Leasing Corp. Following the discovery of improper advances made by a subservicer, Frontier has written off affected leases in the pools. As a consequence, the servicing reports for the Sept. 30, 2006 cutoff date show an increase in defaults and lower credit enhancement compared to the August 2006 reporting period. The receivables previously serviced by the subservicer are now serviced by Frontier pursuant to the subservicer event of default provisions. These are the rating actions: * Issuer: Frontier Equipment Receivables Trust 2002-1 -- Class A Receivables-Backed Certificates, rated A1, on review for possible downgrade -- Class B Receivables-Backed Certificates, rated Baa3, on review for possible downgrade -- Class C Receivables-Backed Certificates, rated Ba3, on review for possible downgrade * Issuer: Frontier Equipment Receivables Trust 2004-1 -- Class A Receivables-Backed Certificates, rated Baa2, on review for possible downgrade -- Class B Receivables-Backed Certificates, rated Ba2, on review for possible downgrade -- Class C Receivables-Backed Certificates, rated B1, on review for possible downgrade * Issuer: Frontier Funding Company V, LLC -- Class B Receivables-Backed Certificates, rated Ba2, on review for possible downgrade As of the Sept. 30, 2006 cutoff date, the pool factor in the 2002-1 securitization was approximately 9.43% and the cumulative net default rate was 3.61%. Credit support for the notes included overcollateralization and subordination. Overcollateralization amounted to 5.94% of the current pool balance. The Class A notes benefit from the subordination of the Class B and C notes, respectively 10.76% and 2.39% of the current pool balance. The Class B notes benefit from the subordination of Class C. As certain triggers were hit during the reporting period, the reserve account has been used to partially redeem Class A notes, and the dedicated reserve account for Class C to partially redeem Class C notes. As of the Sept. 30, 2006 cutoff date, the pool factor in the 2004-1 securitization was approximately 31.98% and the cumulative net default rate was 4.35%. The notes were undercollateralized by an amount equal to 0.38% of the current pool balance. The Class A notes benefit from the subordination of the Class B and C notes, respectively 10.51% and 2.33% of the current pool balance. The Class B notes benefit from the subordination of Class C. As certain triggers were hit during the reporting period, the reserve account has been used to partially redeem Class A notes, and the dedicated reserve account for Class C to partially redeem Class C notes. As of the Sept. 30, 2006 cutoff date, the pool factor in the Funding Company V securitization was approximately 81.71% and the cumulative net default rate was 4.65%. Class B notes benefit from overcollateralization, which amounted to 5.07% of the current pool balance. As certain triggers were hit during the reporting period, the reserve account has been used to partially redeem Class A notes. Frontier was founded in April of 1999 to originate and service equipment leases to a broad range of small-and medium sized businesses on a national level. The firm focuses primarily on the small-ticket sector of the equipment leasing market. Most leases range from $5,000 to $250,000, with an average transaction size of $40,000. The notes were sold in a privately negotiated transaction without registration under the Securities Act of 1933 under circumstances reasonably designed to preclude a distribution thereof in violation of the Act. The issuance has been designed to permit resale under Rule 144A. GLOBAL HOME: Hires Pricewaterhousecoopers to Provide Tax Services ----------------------------------------------------------------- The U.S. Bankruptcy Court for the District of Delaware gave Global Home Products LLC and its debtor-affiliates permission to employ Pricewaterhousecoopers LLP to provide tax services. Scope of Services The firm will provide an Ohio investment tax credit analysis in two phases: a) phase one: consist of high level review and calculation for additions during Jan. 1, 2005 through Dec. 31, 2005. b) phase two consist of: -- review of based period; -- detailed calculation of credit; -- preparation of credit attachment for the 2006 Ohio franchise tax report; -- filing of notice of intent to claim the manufacturer's credit for Jan. 1, 2005 through Dec. 31, 2005, if necessary; and -- potential plan tour for determination of qualifying assets. The firm will provide Ohio personal property tax return services, including, but not limited to: prepare and sign as preparer of the 2006 Ohio county return of taxable business property for Anchor Hocking Consumer Glass Operating Company LLC, Anchor Hocking Consumer Glass Corporation, Mirro Operating Company LLC and GHP Operating Company LLC. The firm will provide tax services, including, but not limited to: a) prepare and sign as preparer of the U.S. partnership income tax return, Form 1065, for the Debtors for the tax year starting Apr. 1, 2005 through Mar. 31, 2006; b) prepare and sign as preparer of required federal and state income tax returns for Apr. 1, 2005 through Mar. 31, 2006; c) prepare estimated tax payments and extensions due on or after the signing of the April 25 engagement letter in connection with the tax returns; and d) provide special tax services related to the preparation of the tax returns, including but not limited to, fixed assets depreciation, intangible asset amortization, accounting for differences in tax and audit year end, and state apportionment analysis. In addition, the Debtors tells the Court that, from time to time, it may ask the firm to perform tax advisory services outside of the scope mentioned. Compensation For Ohio investment credit analysis, the Debtors agreed to pay the firm $2,000 for completion for the first phase and $8,000 for phase two. The firm's billing rates for this service are: Professional Hourly Rate ------------ ----------- Partner $500 Director $380 Manager $325 Senior $210 Staff $140 For Ohio personal property tax return, the Debtors agreed to pay the firm for Anchor Hocking Consumer Glass Operating Company LLC between $6,000-$8,000; and Anchor Hocking Consumer Glass Corporation, Mirro Operating Company LLC, and GHP Operating Company LLC between $2,000-$3,000. The firm's billing rates for this service are: Professional Hourly Rate ------------ ----------- Partner $500 Director $380 Manager $325 Senior $210 Staff $140 For tax services, the Debtors have agreed to pay the firm $140,000 for this specific engagement. The firm's billing rates for this service are: Professional Hourly Rate ------------ ----------- Partner $500 Director $400 Manager $325 Senior $225 Staff $175 Robert C. Goldie assures that his firm does not hold any interest adverse to the Debtors' estates and is a "disinterested person" as that term is defined in Section 101(14) of the Bankruptcy Code. Mr. Goldie can be reached at: PricewaterhouseCoopers LLP 300 Madison Avenue, 24th Floor New York, New York 10017 Tel: (646) 471 4000 Fax: (646) 471 4444 http://www.pwcglobal.com/ Headquartered in Westerville, Ohio, Global Home Products, LLC -- http://www.anchorhocking.com/and http://www.burnesgroup.com/ -- sells houseware and home products and manufactures high quality glass products for consumers and the food services industry. The company also designs and markets photo frames, photo albums and related home decor products. The company and 16 of its affiliates, including Burnes Puerto Rico, Inc., and Mirro Puerto Rico, Inc., filed for Chapter 11 protection on April 10, 2006 (Bankr. D. Del. Case No. 06-10340). Laura Davis Jones, Esq., Bruce Grohsgal, Esq., James E. O'Neill, Esq., and Sandra G.M. Selzer, Esq., at Pachulski, Stang, Ziehl, Young, Jones & Weintraub LLP, represent the Debtors. Bruce Buechler, Esq., at Lowenstein Sandler, P.C., and David M. Fournier, Esq., at Pepper Hamilton LLP represent the Official Committee of Unsecured Creditors. Huron Consulting Group LLC gives financial advice to the Committee. When the company filed for protection from their creditors, they estimated assets between $50 million and $100 million and estimated debts of more than $100 million. GLOBAL HOME: Court Okays Plante to Audit 401(k) and Pension Plans ----------------------------------------------------------------- The Honorable Kevin Gross of the U.S. Bankruptcy Court for the District of Delaware gave Global Home Products LLC and its debtor- affiliates authority to employ Plante & Moran LLP, nunc pro tunc to May 15, 2006. As reported on the Troubled Company Reporter on Sept. 7, 2006, the Debtors sought Plante & Moran to audit its 401(K) and pension plans for certain Anchor Hocking employees. Plante & Moran had audited those 401(K) and pension plans in prior years. The Debtors are managers of the GHP Operating Company, LLC, 401(k) Savings Plan and GHP Operating Company, LLC, Pension Plan for Anchor Hocking Union Employees. Plante & Moran will audit the financial statements and supplemental schedules of the 401(k) Savings Plan and the Union Pension Plan for the year ended Dec. 31, 2005. The audited financial statements will be included in the Savings Plan's Form 5500 filing and Union Pension Plan's Form 5500 filing with the Department of Labor. As part of the audit, Plante & Moran will recommend any adjustments to the 401(k) Savings Plan's and Union Pension Plan's accounting records, and, to the extent necessary, will discuss with the Debtors any suggestion concerning the accounting records and financial affairs. David L. Scheffler, CPA, disclosed that the Firm will receive a fixed fee of $10,000 for the 401(k) Savings Plan Audit and a fixed fee of $11,500 for the Union Pension Plan Audit. Mr. Scheffler assured the Court that the Firm neither holds nor represents any interest adverse to the Debtors' estates and is disinterested as that term is defined in Section 101(14) of the Bankruptcy Code. Headquartered in Westerville, Ohio, Global Home Products, LLC -- http://www.anchorhocking.com/and http://www.burnesgroup.com/ -- sells houseware and home products and manufactures high quality glass products for consumers and the food services industry. The company also designs and markets photo frames, photo albums and related home decor products. The company and 16 of its affiliates, including Burnes Puerto Rico, Inc., and Mirro Puerto Rico, Inc., filed for Chapter 11 protection on Apr. 10, 2006 (Bankr. D. Del. Case No. 06-10340). Laura Davis Jones, Esq., Bruce Grohsgal, Esq., James E. O'Neill, Esq., and Sandra G.M. Selzer, Esq., at Pachulski, Stang, Ziehl, Young, Jones & Weintraub LLP, represent the Debtors. Bruce Buechler, Esq., at Lowenstein Sandler, P.C., represents the Official Committee Of Unsecured Creditors. When the company filed for protection from their creditors, they estimated assets between $50 million and $100 million and estimated debts of more than $100 million. GOODMAN GLOBAL: Moody's Assigns Loss-Given-Default Rating --------------------------------------------------------- In connection with Moody's Investors Service's implementation of its new Probability-of-Default and Loss-Given-Default rating methodology for the U.S. manufacturing sector, the rating agency confirmed its B1 Corporate Family Rating for Goodman Global Holdings, as well as its B3 rating on the company's $400 million 7.875% senior subordinate notes due 2012. Those debentures were assigned an LGD5 rating suggesting lenders will experience an 83% loss in the event of default. Additionally, Moody's revised its probability-of-default ratings and assigned loss-given-default ratings on these loans and bond debt obligations of the company: Projected Old POD New POD LGD Loss-Given Debt Issue Rating Rating Rating Default ---------- ------- ------- ------ ---------- $175 Million Sr. Sec. Revolver due 2010 B1 Ba2 LGD2 21% $350 Million Sr. Sec. TLC due 2011 B1 Ba2 LGD2 21% $250 Million Sr. Floating Rate Notes due 2012 B2 B1 LGD4 54% Moody's explains that current long-term credit ratings are opinions about expected credit loss which incorporate both the likelihood of default and the expected loss in the event of default. The LGD rating methodology will disaggregate these two key assessments in long-term ratings. The LGD rating methodology will also enhance the consistency in Moody's notching practices across industries and will improve the transparency and accuracy of Moody's ratings as Moody's research has shown that credit losses on bank loans have tended to be lower than those for similarly rated bonds. Probability-of-default ratings are assigned only to issuers, not specific debt instruments, and use the standard Moody's alpha- numeric scale. They express Moody's opinion of the likelihood that any entity within a corporate family will default on any of its debt obligations. Loss-given-default assessments are assigned to individual rated debt issues -- loans, bonds, and preferred stock. Moody's opinion of expected loss are expressed as a percent of principal and accrued interest at the resolution of the default, with assessments ranging from LGD1 (loss anticipated to be 0% to 9%) to LGD6 (loss anticipated to be 90% to 100%). Headquartered in Houston, Texas, Goodman Global Holdings, through its subsidiary Goodman Manufacturing Company, is engaged in the manufacture of ventilation and air conditioning products for residential and light commercial use. GREENWOOD RACING: Moody's Puts B2 Rating on $265 Million Term Loan ------------------------------------------------------------------ Moody's Investors Service assigned a B2 (LGD3, 33%) to Greenwood Racing Inc.'s $265 million 1st lien term loan. A B2 corporate family rating was also assigned. The associated loss given default rating is LGD3, 35%, and the probability of default rating is B3. The ratings outlook is stable. Proceeds from the new bank facility combined with internally generated cash flow will be used to renovate and add gaming space to the existing racetrack building, refinance existing debt, pay a license fee, and purchase slot machines. The term loan contains a $200 million accordion feature. All of Greenwood's material subsidiaries will be guarantors on the facility. The ratings consider the largely start-up nature of Greenwood's casino project, expected future competition, and unknown win per unit performance of the Pennsylvania gaming market which has no casino gaming history. The ratings also take into account the possibility that Greenwood may have to eventually build a permanent casino (as defined by Pennsylvania). Current plans are to renovate the first and third floors of the existing grandstand building. If the planned casino, scheduled to open in December 2006, does not achieve permanent status, Greenwood may have to construct a permanent facility by December 2008, and as a result, may have to draw on the term loan's $200 million accordion feature. Positive ratings consideration is given to the population density and favorable demographics of Greenwood's primary market area and the expectation that the casino will be constructed on time and on budget. It also acknowledges that the company is generating positive and meaningful cash flow from its two existing horse racing tracks. The stable ratings outlook acknowledges that Greenwood will be the only casino to be constructed in its north Philadelphia market area, but also recognizes that it will ultimately face competition from the two Class 2 casinos expected in Philadelphia. Ratings could improve if the project is completed as planned and initial ramp up occurs at a pace that meets or exceeds management's current projections. Material construction delays and/or a weak ramp-up could have a negative ratings impact. Greenwood Racing Inc. was recently approved to receive a Class 1 conditional Pennsylvania gaming license and will be constructing a casino within its existing thoroughbred racetrack building in Bensalem, Pennsylvania. GUARDIAN TECHNOLOGIES: Gets $1.1 Million Direct Investments ----------------------------------------------------------- Guardian Technologies International Inc. disclosed that during the period commencing Aug. 18, 2006 and completing Oct. 16, 2006, it accepted direct investments from four accredited investors of $1,100,000 and issued to the investors six-month convertible notes. In addition, the Company issued to the investors an aggregate of 1,100,000 warrants to purchase the Company's common stock with an exercise price of $1.60 per share. The warrants contain certain anti-dilution provisions, a cashless exercise provision, and piggyback registration rights. The conversion provision, of the convertible notes, provides that the outstanding principal and accrued interest can be converted as cash payment for the issued warrants. The warrants expire in August through October 2008. The Company also disclosed that during July 2006, it accepted direct investment from eight accredited investors of $821,208 and issued 513,255 shares of common stock. In addition, it also issued to the investors an aggregate of 128,314 warrants to purchase the Company's common stock, exercisable at a price of $3 per share. The warrants contain anti-dilution provisions, a cashless exercise provision, and piggyback registration rights commencing one year after the date of issuance. The warrants expire in July 2008. The notes and warrants were issued in reliance upon the exemption from the registration requirements set forth in Rule 506 under the Securities Act and Section 4(2) thereof, and may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements under the Securities Act. Based in Dulles, Virginia, Guardian Technologies International, Inc. -- http://www.guardiantechintl.com/-- designs and develops imaging informatics solutions for the healthcare, aviation and homeland security industries. The Company utilizes high- performance imaging technologies and advanced analytics to create integrated information management technology products and services that address critical problems in healthcare and homeland security for corporations and governmental agencies. Going Concern Doubt Goodman & Company, L.L.P., in Norfolk, Virginia, raised substantial doubt about Guardian Technologies International, Inc.'s ability to continue as a going concern after auditing the Company's financial statements for the years ended Dec. 31, 2005, and 2004. The auditor pointed to the Company's significant operating losses since inception and need for additional financing. GWS NURSERY: Case Summary & 20 Largest Unsecured Creditors ---------------------------------------------------------- Debtor: GWS Nursery and Supplies, Inc. 10120 Miller Way South Gate, CA 90280 Tel: (562) 806-6366 Bankruptcy Case No.: 06-15227 Type of Business: The Debtor operates a nursery. Chapter 11 Petition Date: October 17, 2006 Court: Central District Of California (Los Angeles) Judge: Samuel L. Bufford Debtor's Counsel: Lewis R. Landau, Esq. 23564 Calabasas Road, Suite 104 Calabasas, CA 91302 Tel: (888) 822-4340 Estimated Assets: $1 Million to $10 Million Estimated Debts: $1 Million to $10 Million Debtor's 20 Largest Unsecured Creditors: Entity Claim Amount ------ ------------ Wells Fargo Businessline $81,667 P.O. Box 348750 Sacramento, CA 95834 Peter L. Clinco, Esq. $20,000 1901 Avenue of the Stars, Suite 1100 Los Angeles, CA 90067 G.P. Resources $12,000 9501 South San Fe Avenue Rancho Dominguez, CA 90221 LA Department of Water and Power $6,093 Cost and Project Accounting, Room 450 Los Angeles, CA 90051 Pelican Bay Forrest Products $4,300 P.O. Box 6958 Bend, OR 97708 American Express $3,124 Greco Consulting & Equipment $3,000 City of South Gate (#1625601-20452) $1,642 City of South Gate (#1427101-19699) $1,193 Sprint $1,140 Volkswagen Credit $745 Toyota Financial Services $671 Accurate Compressor Service $365 Esquire Deposition Services $356 CET Engineering $350 Verizon $270 United Site Services $261 So-Cal Portable Restroom $221 Yamaha Golf Cars $135 American Horticulture Supply, Inc. $115 IMPAC CMB: Moody's Confirms Ba2 Rating on Class B4 Certificates --------------------------------------------------------------- Moody's Investors Service confirmed and upgraded a number of certificates from eight deals originated by Bear, Stearns & Co. Inc. The actions are based on the analysis of the credit enhancement provided by excess spread, overcollateralization, subordination, and mortgage insurance when applicable. These are Moody's rating actions: * Upgrade: * Issuer: Bear Stearns Asset Backed Securities Trust -- 2003-AC3, Class M-1, upgraded from Aa2 to Aa1, -- 2003-AC3, Class B-1, upgraded from Baa2 to Baa1 -- 2003-AC4, Class M-1, upgraded from Aa2 to Aaa -- 2003-AC4, Class M-2, upgraded from A2 to Aa2 -- 2003-AC4, Class BB, upgraded from Baa2 to A1 -- 2003-AC5, Class M-1, upgraded from Aa2 to Aaa -- 2003-AC5, Class M-2, upgraded from A2 to Aa3 -- 2003-AC5, Class B, upgraded from Baa2 to A1 -- 2003-AC6, Class A-3, upgraded from Aa1 to Aaa -- 2003-AC6, Class M-1, upgraded from Aa2 to Aaa -- 2003-AC6, Class M-2, upgraded from A2 to Aa2 -- 2003-AC6, Class BB, upgraded from Baa2 to A1 -- 2003-AC7, Class M-1, upgraded from Aa2 to Aaa -- 2003-AC7, Class M-2, upgraded from A2 to Aa3 -- 2003-AC7, Class B, upgraded from Baa2 to A3. * Issuer: Impac CMP Trust -- 2003-2F, Class M-1, upgraded from Aa2 to Aaa -- 2003-2F, Class M-2, upgraded from A2 to Aa2 -- 2003-2F, Class B, upgraded from Baa1 to A1 * Issuer: Impac Secured Assets Corporation -- 2003-1, Class M-1, upgraded from Aa2 to Aaa -- 2003-1, Class M-2, upgraded from A2 to Aa1 -- 2003-1, Class B, upgraded from Baa1 to A1 * Confirm: * Issuer: Bear Stearns Asset Backed Securities Trust -- 2003-AC3, Class M-2, rating confirmed at A2, -- 2003-AC3, Class M-3, rating confirmed at A2 * Issuer: Structure Asset Mortgage Investments Trust II -- 2003-AR4, Class B1, rating confirmed at Aa2, -- 2003-AR4, Class B2, rating confirmed at A2, -- 2003-AR4, Class B3, rating confirmed at Baa2, -- 2003-AR4, Class B4 rating confirmed at Ba2 HOLLINGER INC: Reports $30.9 Million Cash on Hand at September 15 ----------------------------------------------------------------- As of the close of business on Sept. 15, 2006, Hollinger Inc. and its subsidiaries -- other than Sun-Times Media Group Inc. and its subsidiaries -- had approximately $30.9 million of cash or cash equivalents on hand, including restricted cash. At that date, Hollinger owned, directly or indirectly, 782,923 shares of Class A Common Stock and 14,990,000 shares of Class B Common Stock of Sun-Times. Based on the Sept. 15, 2006, closing price of the shares of Class A Common Stock of Sun-Times on the NYSE of $7.33, the market value of Hollinger's direct and indirect holdings in Sun-Times was $115.6 million. All of Hollinger's direct and indirect interest in the shares of Class A Common Stock of Sun-Times is being held in escrow in support of future retractions of its Series II Preference Shares. All of Hollinger's direct and indirect interest in the shares of Class B Common Stock of Sun-Times is pledged as security in connection with the senior notes and the second senior notes. In addition to the cash or cash equivalents on hand, Hollinger has previously deposited approximately CDN$8.7 million in trust with the law firm of Aird & Berlis LLP, as trustee, in support of Hollinger's indemnification obligations to six former independent directors and two current officers. In addition, CDN$754,000 has been deposited in escrow with the law firm of Davies Ward Phillips & Vineberg LLP in support of the obligations of a certain Hollinger subsidiary. As of Sept. 15, 2006, there was approximately $109.9 million aggregate collateral securing the $78 million principal amount of the Senior Notes and the $15 million principal amount of the Second Senior Notes outstanding. Ravelston Receivership and CCAA Proceedings On April 20, 2005, the Court issued two orders by which The Ravelston Corporation Limited and Ravelston Management Inc. were: (i) placed in receivership pursuant to the Bankruptcy and Insolvency Act (Canada) and the Courts of Justice Act (Ontario); and (ii) granted protection pursuant to the Companies' Creditors Arrangement Act (Canada). Pursuant Ravelston Receivership and CCAA Proceedings, RSM Richter Inc. was appointed receiver and manager of all of the property, assets and undertakings of Ravelston and RMI. Ravelston holds approximately 16.5% of the outstanding Retractable Common Shares of Hollinger. On May 18, 2005, the Court further ordered that the Receivership Order and the CCAA Order be extended to include Argus Corporation Limited and its five subsidiary companies which collectively own, directly or indirectly, 61.8% of the outstanding Retractable Common Shares and approximately 4% of the Series II Preference Shares of Hollinger. On June 12, 2006, the Court appointed Richter as receiver and manager and interim receiver of all the property, assets and undertaking of Argent News Inc., a wholly owned subsidiary of Ravelston. The Ravelston Entities own, in aggregate, approximately 78% of the outstanding Retractable Common Shares and approximately 4% of the Series II Preference Shares of Hollinger. The Court has extended the stay of proceedings against the Ravelston Entities to Sept. 29, 2006. About Hollinger Inc. Hollinger Inc.'s (TSX: HLG.C)(TSX: HLG.PR.B) -- http://www.hollingerinc.com/-- principal asset is its 66.8% voting and 17.4% equity interest in Hollinger International, a newspaper publisher with assets, which include the Chicago Sun- Times and a large number of community newspapers in the Chicago area. Hollinger also owns a portfolio of commercial real estate in Canada. Litigation Risks Hollinger Inc. faces various court cases and investigations: (1) a consolidated class action complaint filed in Chicago, Illinois; (2) a class action lawsuit that was filed in the Saskatchewan Court of Queen's Bench on September 7, 2004; (3) a $425,000,000 fraud and damage suit filed in the State of Illinois by International; (4) a lawsuit seeking enforcement of a November 15, 2003, restructuring proposal to uphold a Shareholders' Rights Plan, a declaration that corporate by-laws were invalid and to prevent the closing of a certain transaction; (5) a lawsuit filed by International seeking injunctive relief for the return of documents of which it claims ownership; (6) a $5,000,000 damage action commenced by a lessor of an aircraft lease, in which Hollinger was the guarantor; (7) an action commenced by the United States Securities and Exchange Commission on November 15, 2004, seeking injunctive, monetary and other equitable relief; and (8) investigation by the enforcement division of the OSC. HOME FRAGRANCE: Voluntary Chapter 11 Case Summary ------------------------------------------------- Debtor: Home Fragrance Holdings, Inc. 411 North Sam Houston Parkway East, Suite 300 Houston, TX 77060 Tel: (713) 466-4600 Bankruptcy Case No.: 06-35661 Type of Business: The Debtor is a candle designer, manufacturer and wholesaler. See http://www.hfh.cc/ Chapter 11 Petition Date: October 23, 2006 Court: Southern District of Texas (Houston) Judge: Karen K. Brown Debtor's Counsel: Thomas H. Grace, Esq. Locke Liddell & Sapp LLP 600 Travis Street, Suite 2600 Houston, TX 77002 Tel: (713) 226-1377 Fax: (713) 223-3717 Estimated Assets: $1 Million to $100 Million Estimated Debts: $1 Million to $100 Million The Debtor did not file a list of its 20 largest unsecured creditors. INTERSTATE BAKERIES: ABA Wants Reference Removed from Bankr. Court ------------------------------------------------------------------ The American Bakers Association asks the U.S. District Court for the Western District of Missouri to withdraw the reference as to Interstate Bakeries and its debtor-affiliates' Adversary Proceeding from the Bankruptcy Court. Pending determination of the Withdrawal of the Reference Motion, the ABA asks the Bankruptcy Court to stay all proceedings related to the Complaint and the Debtors' objection to the ABA Plan's proof of claim. In the alternative, the ABA asks the Bankruptcy Court to extend the time to file a responsive pleading. Headquartered in Kansas City, Missouri, Interstate Bakeries Corporation is a wholesale baker and distributor of fresh baked bread and sweet goods, under various national brand names, including Wonder(R), Hostess(R), Dolly Madison(R), Baker's Inn(R), Merita(R) and Drake's(R). The Company employs approximately 32,000 in 54 bakeries, more than 1,000 distribution centers and 1,200 thrift stores throughout the U.S. The Company and seven of its debtor-affiliates filed for chapter 11 protection on September 22, 2004 (Bankr. W.D. Mo. Case No. 04-45814). J. Eric Ivester, Esq., and Samuel S. Ory, Esq., at Skadden, Arps, Slate, Meagher & Flom LLP, represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $1,626,425,000 in total assets and $1,321,713,000 (excluding the $100,000,000 issue of 6.0% senior subordinated convertible notes due Aug. 15, 2014, on Aug. 12, 2004) in total debts. (Interstate Bakeries Bankruptcy News, Issue No. 50; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000) INTERSTATE BAKERIES: Agrees With JPMorgan to Defer Ch. 5 Actions ---------------------------------------------------------------- Interstate Bakeries Corporation and its debtor-affiliates inform the U.S. Bankruptcy Court for the Western District of Missouri that they have not yet decided whether to pursue the Chapter 5 Causes of Action against JPMorgan Chase Bank, N.A., and other lenders with respect to the Amended and Restated Credit Agreement, dated April 25, 2002, in anticipation of, or in connection with, any proposed plan of reorganization. The Debtors say they will defer service of process under Rule 7004 of the Federal Rules of Bankruptcy Procedure and Rule 4 of the Federal Rules of Civil Procedure for the Complaint until a later time. The Debtors contend good cause exists for the Court to extend the time for service beyond the time period prescribed by Rule 4(m). The Debtors agree that any delivery to, or receipt by, JPMorgan and the Lenders and their counsel and advisors, of any copy of the Complaint before the Future Service Date will not constitute service. The Debtors, JPMorgan and the Lenders stipulate that: (1) receipt of the Complaint in any form, without a summons, by any of JPMorgan and the Lenders or their counsel, will not constitute service of process of the Complaint; and (2) none of JPMorgan and the Lenders will be required to answer or otherwise respond to the Complaint, unless and until the Debtors effect service of the Complaint, along with a summons. Headquartered in Kansas City, Missouri, Interstate Bakeries Corporation is a wholesale baker and distributor of fresh baked bread and sweet goods, under various national brand names, including Wonder(R), Hostess(R), Dolly Madison(R), Baker's Inn(R), Merita(R) and Drake's(R). The Company employs approximately 32,000 in 54 bakeries, more than 1,000 distribution centers and 1,200 thrift stores throughout the U.S. The Company and seven of its debtor-affiliates filed for chapter 11 protection on September 22, 2004 (Bankr. W.D. Mo. Case No. 04-45814). J. Eric Ivester, Esq., and Samuel S. Ory, Esq., at Skadden, Arps, Slate, Meagher & Flom LLP, represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $1,626,425,000 in total assets and $1,321,713,000 (excluding the $100,000,000 issue of 6.0% senior subordinated convertible notes due Aug. 15, 2014, on Aug. 12, 2004) in total debts. (Interstate Bakeries Bankruptcy News, Issue No. 50; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000) ISTANA HIGH: S&P Rates $2.55 Million Class E Notes at BB+ --------------------------------------------------------- Standard & Poor's Ratings Services assigned its preliminary ratings to Istana High Grade ABS CDO I Ltd./Istana High Grade ABS CDO I Corp.'s $994.55 million floating-rate notes due 2048. The preliminary ratings are based on information as of Oct. 20, 2006. Subsequent information may result in the assignment of final ratings that differ from the preliminary ratings. The preliminary ratings reflect: -- The expected commensurate level of credit support in the form of subordination to be provided by the notes junior to the respective classes; -- The cash flow structure, which was subjected to various stresses requested by Standard & Poor's; -- The experience of the collateral manager; -- The coverage of interest rate risks through hedge agreements; and -- The legal structure of the transaction, including the bankruptcy remoteness of the issuer. Preliminary Ratings Assigned Istana High Grade ABS CDO I Ltd./ Istana High Grade ABS CDO I Corp. Class Rating Amount ----- ------ ------ A-1 AAA $600,000,000 A-2 AAA $250,000,000 A-3 AAA $50,000,000 A-4 AAA $50,000,000 B AA $21,500,000 C A $13,000,000 D BBB $7,500,000 E BB+ $2,550,000 Preference shares NR $5,450,000 NR - Not rated. JC PROJECT: Case Summary & Two Largest Unsecured Creditors ---------------------------------------------------------- Debtor: JC Project, Inc. 7695 Harmony Grove Road Wellsville, PA 17365 Bankruptcy Case No.: 06-02347 Chapter 11 Petition Date: October 20, 2006 Court: Middle District of Pennsylvania (Harrisburg) Judge: Mary D. France Debtor's Counsel: Robert E. Chernicoff, Esq. Cunningham and Chernicoff P.C. 2320 North Second Street Harrisburg, PA 17110 Tel: (717) 238-6570 Fax: (717) 238-4809 Estimated Assets: $100,000 to $1 Million Estimated Debts: $1 Million to $100 Million Debtor's Two Largest Unsecured Creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ William Klinger Loan $300,000 7695 Harmony Grove Road Wellsville, PA 17365 Leon Haller Loan $20,000 1719 North Front Street Harrisburg, PA 17107 JORAN REALTY: Case Summary & 10 Largest Unsecured Creditors ----------------------------------------------------------- Debtor: Joran Realty NY Corp. dba Joran Realty Corp. dba Joran Realty Harder Hall dba Harder Hall Resort and Spa 5225 Collins Avenue, Suite 1406 Miami Beach, FL 33140 Bankruptcy Case No.: 06-15353 Type of Business: The Debtor operates the 102-room Harder Hall Resort & Spa. See http://www.harderhallresortandspa.com/ Chapter 11 Petition Date: October 20, 2006 Court: Southern District of Florida (Miami) Judge: Laurel M. Isicoff Debtor's Counsel: Brian S. Behar, Esq. Behar, Gutt & Glazer, P.A. 2999 Northeast 191 Street, 5th Floor Aventura, FL 33180 Tel: (305) 931-3771 Fax: (305) 931-3774 Estimated Assets: $1 Million to $10 Million Estimated Debts: $1 Million to $10 Million Debtor's 10 Largest Unsecured Creditors: Entity Claim Amount ------ ------------ City of Sebring $5,250,000 368 South Commerce Avenue Sebring, FL 33870 Atlantis Electrical $62,448 Services Corp. c/o Marlowe, McNabb & Stayton, P.A. 1560 West Cleveland Street Tampa, FL 33606 Home Depot $38,223 c/o PRO Consulting Services, Inc. Collections Division P.O. Box 66768 Houston, TX 77266 Edward Don & Company $20,056 Foodservice Equipment Division 2500 South Harlem Avenue North Riverside, IL 60546 Andrew Belew $15,000 936 Bear Island Circle West Palm Beach, FL 33409 Universal Engineering $9,050 Services, Inc. Star Scenic Supply $7,436 Bagwell Lumber Co. of $6,960 Avon Park, LLC HTFL, Inc. $4,280 Carleton Varney by the Yard $679 JOSEPHINE KAMPER: Case Summary & 20 Largest Unsecured Creditors --------------------------------------------------------------- Debtor: Josephine P. Kamper 4935 South Greenwood Avenue Chicago, IL 60615 Bankruptcy Case No.: 06-13526 Chapter 11 Petition Date: October 20, 2006 Court: Northern District of Illinois (Chicago) Judge: A. Benjamin Goldgar Debtor's Counsel: John J. Lynch, Esq. Serpe, Dizonno, Lynch & Associates LLP 801 Warrenville Road, Suite 560 Lisle, IL 60532 Tel: (630) 960-4700 Fax: (630) 960-4755 Estimated Assets: $0 to $50,000 Estimated Debts: $1 Million to $100 Million Debtor's 20 Largest Unsecured Creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ Litonmtgsv Mortgage $999,183 24 Greenway Plaza #712 (Unknown Houston, TX 77046 secured) Wilshirecc Mortgage $134,440 14523 SW Millikan Way (Unknown Ste. 200 secured) Beaverton, OR 97005 Sallie Mae Student Loan $103,443 1002 Arthur Drive PO# Smi0000013421 Lynn Haven, FL 32444 Saab Fin Automobile $22,364 17500 Chenal Pkwy, Suite 200 Little Rock, AR 72223 Hinsbrook Bank Consumer Credit $12,087 6262 S. Route 83 Willowbrook, IL 60514 US BANK Rl Consumer Credit $10,616 205 W. 4th Street 3rd Fl. Cincinnati, OH 45202 Wamu/Prvdn Consumer Credit $8,486 P.O. Box 9007 Pleasanton, CA 94566 Dsnb Macys Credit card $7,394 3039 Cornwallis Rd. purchases Durham, NC 27709 Hsbc Nv Credit card $6,962 Kierland One purchases 16430 N. Scottsdale Road Scottsdale, AZ 85254 Hsbc/Carsn Credit card $5,013 P.O. Box 10327 purchases Jackson, MS 39289 Cbusasears Credit card $3,652 133200 Smith Rd. purchases Cleveland, OH 44130 Sears/Cbsd Credit card $3,571 P.O. Box 6189 purchases Sioux Falls, SD 57117 Dsnb Macys Credit card $3,292 3039 Cornwallis Rd. purchases Durham, NC 27709 Cap 1 Bank Credit card $1,875 P.O. Box 85015 purchases Richmond, VA 23285 Cap 1 Bank Credit card $1,628 P.O. Box 85015 purchases Richmond, VA 23285 Bloomdsnb Credit card $1,487 911 Duke Blvd. purchases Mason, OH 45040 Lord Taylor Credit card $1,056 424 5th Avenue purchases New York, NY 10018 Players Vac Consumer Credit $1,025 2535 Kettner Bv San Diego, CA 92101 WF Finance Consumer Credit $664 9632 S. Roberts Rd. Hickory Hills, IL 60457 MRSI Medical Services $560 2250 E. Devon Ave., Ste. 352 Des Plaines, IL 60018 JULIE FEVRE: Case Summary & Six Largest Unsecured Creditors ----------------------------------------------------------- Debtor: Julie Marie Le Fevre 2 Westford Ladera Ranch, CA 92694 Bankruptcy Case No.: 06-11812 Chapter 11 Petition Date: October 11, 2006 Court: Central District Of California (Santa Ana) Judge: John E. Ryan Debtor's Counsel: Thomas J. Polis, Esq. Polis & Associates, APLC 19900 Macarthur Boulevard, Suite 960 Irvine, CA 92612-8420 Tel: (949) 862-0040 Estimated Assets: $1 Million to $100 Million Estimated Debts: $1 Million to $100 Million Debtor's Six Largest Unsecured Creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ CIT Bank Credit Card Purchase $14,695 715 South Metropolitan Avenue Oklahoma City, OKJ 73124-0330 Chase Credit Card Purchase $5,332 P.O. Box 94014 Palatine, IL 60094-4014 Discover Card Credit Card Purchase $4,693 P.O. Box 30395 Salt Lake City, UT 84130-0395 Michael Jones Dental Group Medical Bills $3,257 1401 Avocado, Suite 607 Newport Beach, CA 92660 Integrated Credit Solutions $1,251 18350 Mount Langley Street Suite 204 Fountain Valley, CA 92708 Martin H. Karasch, M.D. Medicals Bills $770 3182 Coast Highway, Suite 202 Laguna Beach, CA 92651 KAMINI SHAHANI: Case Summary & Three Largest Unsecured Creditors ---------------------------------------------------------------- Debtor: Kamini Shahani 608 Camino Grove Avenue Arcadia, CA 91006 Bankruptcy Case No.: 06-14532 Chapter 11 Petition Date: September 18, 2006 Court: Central District Of California (Los Angeles) Judge: Vincent P. Zurzolo Debtor's Counsel: Sanford L. Frey, Esq. Creim Macias Koenig & Frey LLP 633 West Fifth Street, 51st Floor Los Angeles, CA 90071 Tel: (213) 614-1944 Fax: (213) 614-1961 Estimated Assets: $500,000 to $1 Million Estimated Debts: $1 Million to $10 Million Debtor's Three Largest Unsecured Creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ Chase Credit Card $2,520 P.O. Box 15123 Wilmington, DE 19850 James Toledano, Esq. Attorney's Fees $79,271 200 East Sandpointe Avenue Suite 750 Santa Ana, CA 92707-5777 Richard V. Bellord Judgment $342,055 100 East Whitestone Unite 350 Cedar Park, TX 78613 KENNETH TOBEY: Case Summary & 19 Largest Unsecured Creditors ------------------------------------------------------------ Debtor: Kenneth I. Tobey, Inc. c/o PC General Management Company, Inc. 3039 Premiere Parkway, Suite 100 Duluth, GA 30097 Bankruptcy Case No.: 06-73286 Chapter 11 Petition Date: October 20, 2006 Court: Northern District of Georgia (Atlanta) Debtor's Counsel: Dale R.F. Goodman, Esq. Goodman & Goodman P.C. Suite 310 1801 Peachtree Street Northeast Atlanta, GA 30309-1895 Tel: (404) 237-0800 Estimated Assets: Less than $10,000 Estimated Debts: $1 Million to $10 Million Debtor's 19 Largest Unsecured Creditors: Entity Claim Amount ------ ------------ Canal Indemnity Company $867,480 400 East Stone Avenue Greenville, SC 29601 Atlantic Casualty Ins. Co. $207,200 400 Commerce Court Goldsboro, NC 27534 U.S. Liability Insurance Group $118,774 190 South Warner Road Wayne, PA 19087 Colony Mgt. Services, Inc. $92,200 9201 Forest Hills Avenue, Suite 200 Richmond, VA 23235 Founders Insurance Co. $65,884 1645 Birchwood Avenue Des Plaines, IL 60018 Shand Morahan & Co. Inc. $32,833 Vela Insurance Services, Inc. $32,381 Professional Indemnity Agency $28,737 U.S. Liability Insurance Co. $25,656 Lincoln General Insurance Co. $25,436 Berkshire Hathaway-Homestate $19,078 Scottsdale Insurance Co. $18,417 Mt. Vernon Fire & Marine $15,481 Lloyd's of London $11,614 Market SW $8,868 CNA $6,962 First Mercury Insurance $6,250 Premium Finance Specialists $5,290 Premium Finance Specialists $5,132 LAKE AT LAS VEGAS: Moody's Places B2 Corp. Family Rating on Review ------------------------------------------------------------------ Moody's puts on review all of the ratings of Lake at Las Vegas Joint Venture under review for possible downgrade, including its corporate family rating of B2 and the B2 rating on its senior secured bank credit facility, following indications that the much slower-than-expected absorption rates of lot sales may be causing difficulty in meeting certain of the company's financial covenants. Moody's review will focus on Lake at Las Vegas' ability to build and maintain liquidity in the face of a weak bulk lot sales environment and the willingness of its bank group to renegotiate its covenants (the most restrictive of which is the 2 times EBITDA to interest coverage test over a trailing twelve month period). The review will also focus on Lake at Las Vegas' ability to defer spending as well as its success in obtaining possible additional sources of capital, if needed, in order to meet its funding requirements in the face of reduced demand. Headquartered in Las Vegas, Nevada, Lake at Las Vegas Joint Venture and its co-borrower, LLV-1, LLC, own and operate the Lake Las Vegas Resort, a 3592-acre master planned residential and resort destination located 17 miles east of the Las Vegas strip. Total revenues and operating cash flow for 2005 were $135 million and $94 million. LE GOURMET: Wants Bankruptcy Services as Claims and Noticing Agent ------------------------------------------------------------------ Le Gourmet Chef Inc. asks the Honorable Donald H. Steckroth of the U.S. Bankruptcy Court for the District of New Jersey for authority to employ Bankruptcy Services LLC as its claims processing and noticing agent. Bankruptcy Services will: (a) prepare and serve required notices in the Debtor's Chapter 11 case, including: 1. notice of claims bar date (to the extent supplemental notice is necessary or appropriate); 2. notice of objections to claims and any applicable response deadlines; 3. notice of any hearings on a disclosure statement and confirmation of a plan of liquidation; and 4. other miscellaneous notices to any entities, as the Debtor or the Court deems necessary or appropriate for an orderly administration of the Debtor's Chapter 11 case; (b) at any time, upon request, satisfy the Bankruptcy Court that it has the capability to efficiently and effectively notice, docket and maintain proofs of claim and proofs of interests; (c) file with the Clerk's Office certificates or affidavits of service that include a copy of the particular notice involved, an alphabetical list of persons to whom the notice was mailed, and the date of mailing; (d) maintain copies of all proofs of claim and proofs of interest filed; (e) maintain official claims registers by docketing all proofs of claim and proofs of interest on claims registers, including these information; 1. the name and address of the claimant and any agent, if an agent filed the proof of claim or proof of interest; 2. the date received; 3. the claim number assigned; and 4. the asserted amount and classification of the claim; (f) implement necessary security measures to ensure the completeness and integrity of the claims register; (g) maintain all original proofs of claim in correct claim number order, in an environmentally secure area and protect the integrity of the original documents from theft and alteration; (h) transmit to the Clerk's Office a copy of the claims register on a regular basis; (i) maintain an up-to-date mailing list for all entities that have filed a proof of claim or proof of interest, which list will be available upon request of a party in interest or the Clerk's Office; (j) provide access to the public for examination of copies of the proofs of claim or interest during regular business hours; (k) record all transfers of claims pursuant to Bankruptcy Rule 3002(e) and provide notice of those transfers as required by Bankruptcy Rule 3001(e); and (l) comply promptly with further conditions and requirements as the Clerk's Office or the Court may at any time prescribe. Daniel C. McElhinney, a vice president of BSI, disclosed that the Firm's professionals bill: Designation Hourly Rate ----------- ----------- Senior Bankruptcy Consultant $225 - $295 Bankruptcy Consultant $185 - $225 IT Programming Consultant $140 - $190 Case Managers for Document and Data Review $125 - $175 Clerical Staff $40 - $60 Mr. McElhinney assures the Court that Bankruptcy Services represents no interest adverse to the Debtor or its estate and is disinterested as that term is defined in Section 101(14) of the Bankruptcy Code. Headquartered in Shrewsbury, New Jersey, Le Gourmet Chef, Inc., -- http://www.legourmetchef.com/-- was a retailer specializing in solutions for entertaining and gift giving. The Company filed for bankruptcy on Aug. 8, 2006 (Bankr. D. N.J. Case No. 06-17364). John DiIorio, Esq., at Shapiro & Croland, and Wendy G. Marcari, Esq., at Dreier LLP represent the Debtor. John K. Sherwood, Esq., and Kenneth Rosen, Esq., at Lowenstein Sandler, represents the Official Committee of Unsecured Creditors. When the Debtor filed for bankruptcy, the Debtor estimated its assets and debts at $10 million to $50 million. LOOMIS SAYLES: S&P Rates $15 Million Class E Notes at BB -------------------------------------------------------- Standard & Poor's Ratings Services assigned its preliminary ratings to Loomis Sayles CLO I Ltd./Loomis Sayles CLO I Corp.'s $372 million floating-rate notes due 2020. The preliminary ratings are based on information as of Oct. 20, 2006. Subsequent information may result in the assignment of final ratings that differ from the preliminary ratings. The preliminary ratings reflect: -- The expected commensurate level of credit support in the form of subordination to be provided by the notes junior to the respective classes; -- The cash flow structure, which was subjected to various stresses requested by Standard & Poor's; -- The experience of the collateral manager; and -- The legal structure of the transaction, including the bankruptcy remoteness of the issuer. Preliminary Ratings Assigned Loomis Sayles CLO I Ltd./ Loomis Sayles CLO I Corp. Class* Rating Amount ------ ------ ------ A AAA $296,000,000 B AA $20,000,000 C A $20,000,000 D BBB $21,000,000 E BB $15,000,000 Subordinated notes NR $28,000,000 * All classes of notes are secured, except for the subordinated securities. NR - Not rated. LOUISIANA LOCAL: Moody's Cuts Rating on Junior 2003 Bonds to Ba1 ---------------------------------------------------------------- Moody's Investors Service downgraded to Baa3 from Baa1 the ratings for Louisiana Local Government Environmental Facilities and Community Development Housing Revenue Bonds Senior Series 2003 A&B and downgraded to Ba1 from Baa3 the Junior 2003 C Series. The credit has been removed from Watchlist, but outlook is negative based on recent audited financial performance and conflicting information regarding both financial condition and management performance at the property. Legal security: -- Special obligation of the issuer. Bonds are secured by rental revenue and any funds pledged to bondholders under the trust indenture. Strengths: -- All Debt Service Reserve Funds have balances at their required amounts and monies are being held in a Guaranteed Investment Contract at 4.57%. -- The trustee reports surplus funds in excess of $29,000 as of October 2006 and a Reserve and Replacement account that is fully funded at $65,000. -- Strong legal structure requires a minimum of $10,000 held in surplus plus debt service coverage ratio of 1.4 before surplus monies may be released from indentured funds. -- Moody's Ecomony.com projects high employment growth for the city of Baton Rouge with per capita income that will remain below the US average. This will perhaps continue to bolster the attractiveness of affordable housing options in the area as single family homes continue to be just out of reach for most low-income residents. Challenges: -- Continued conflict between property owner and manager may impede effective oversight at Oakleigh Apartments in the long term. Moody's does not have a clear understanding as to the veracity of claims made with respect to this conflict and thus has no opinion on it. However, to the extent that the conflict remains unresolved, it poses a significant risk to the proper management and oversight of operating activities at the property. -- According to each of the last two audited financial statements for the fiscal years ending December 31, 2004 and 2005, debt service coverage on the senior tranche of bonds has been considerably below the underwritten 1.40; the ratio is calculated as 1.27 and 1.26 for 2004 and 2005, respectively. Although improvement in occupancy should bolster performance in 2006, the main driver of the lower than expected coverage numbers is large repair and maintenance costs. Moody's believes that part of this cost represents capital expenditures for the property, thus mitigating our concern about coverage to some extent. The Outlook has been changed to negative based on lower than expected audited performance. Further, disagreements at the property seem likely to continue over the near-term; a situation that could possibly hinder performance. What could change the rating - up: -- Improvement of debt service coverage ratio What could change the rating - down: -- Continued deterioration of coverage LUXELL TECH: Creditors Accept Proposed Restructuring Plan --------------------------------------------------------- The creditors of Luxell Technologies Inc. unanimously voted to accept the Company's proposed restructuring plan. The proposal remains subject to the approval of the Court. BDO Dunwoody Limited, which is acting as the trustee, was represented by Eugene Migus, CA, CIRP, Senior Vice President with BDO, who said he was pleased to see such an unusually high level of support for the Company's proposal and its future objectives. John MacDonald, Chairman of Luxell Technologies said that he was also "...encouraged that our restructuring proposal has received the acceptance of our creditors and that the Company can look forward to building value for the benefit of all of our stakeholders as this is what our new Board has been focused on since November 2005 when the new Board was appointed." Alec Couckuyt, CEO of Luxell said "...it was unfortunate that we have had to work with the uncertainty that was created by the proposal process during the last month and a half but now that we have secured the support of our creditors for our restructuring efforts, we can concentrate all of our efforts on the job at hand, building on the technology, the know-how and hi-value products which have been developed here over the years. I'm looking forward to our future. "This vote of confidence by our Creditors is an important endorsement of our restructuring efforts and combined with the unwavering support of our clients, suppliers and employees, this milestone forms a strong base to building a stronger new company." About Luxell Luxell Technologies Inc. (TSX: LUX) -- http://www.luxell.com/ http://www.aktelux.com/and http://www.luxellresearch.com/-- designs, manufactures and licenses flat panel display technologies and solutions for defence and avionics industries through its operating divisions Aktelux and Luxell Research. * * * As reported in the Troubled Company Reporter on Aug. 30, 2006, the Company sought new financing for $1 million to provide the Company with working capital as well as to fund C.O.D. payments to suppliers. The additional term debt is intended to provide holders of promissory notes with assurance that if the assets of the Company were sold they would not be prejudiced for having accepted the proposal. The Company is also examining the structuring of a further $5 million convertible debenture and what the terms and conditions of such additional financing would entail. MEDIMEDIA USA: Moody's Junks Rating on $150 Million Senior Notes ---------------------------------------------------------------- Moody's Investors Service assigned these first time ratings to MediMedia USA Inc: -- $50 million senior secured revolving credit facility, due 2012, assigned Ba3, LGD 2, 29% -- $200 million senior secured term loan, due 2013, assigned Ba3, LGD 2, 29% -- $150 million senior subordinated notes, due 2014, assigned Caa1, LGD 5, 83% -- Corporate Family Rating, assigned B2 -- Probability of Default Rating, assigned B2 Outlook is stable. The B2 Corporate Family rating reflects MediMedia's high leverage, continuing event risk, the relatively small scale of its business lines and dependence upon the healthcare and pharmaceutical sector spending for most of its business. However, the ratings recognize MediaMedia's good business model, the value of its brands, its long established relationships (with medical associations, hospitals, physicians, health plan providers and pharmaceutical companies), and its government certification as an approved pharmaceutical sampling business (both of which present formidable barriers to new entrants). In addition, ratings are supported by the growth, predictability, and cash flow conversion of MediaMedia's sales complemented by its low capital requirements. The stable outlook reflects the defensibility of the company's niche businesses, as well as an expectation of continuing top line and EBITDA growth, in combination with positive free cash flow generation. On October 5, 2006, the company was acquired by equity funds managed by Vestar Capital Management, in a transaction valued at $611 million (net of tax benefits), including approximately $265 million of cash equity ($88 million in common stock and $177 million in unrated preferred stock). Proceeds from the proposed debt will take out bridge financing incurred to partly fund the acquisition. The proposed transaction will substantially increase MediMedia's debt to $353 million from $121 million at the end of June 2006, resulting in 8.6 times LTM June 2006 EBITDA (calculated in accordance with Moody's standard global adjustments). This debt represents a fully leveraged profile, based upon a valuation of 8- 10 times EBITDA. Moody's expects that MediMedia will deploy its free cash flow generation to decrease debt, thereby resulting in a reduction of debt to EBITDA to approximately 7.4 times by the end of 2007. The Ba3 senior secured debt reflects an LGD 2 loss given default assessment as senior secured debt is secured by a pledge of substantially all of the company's assets and there is a significant amount of junior debt. The Caa1 rating of the senior subordinated notes reflects an LGD 5 loss given default assessment considering that the notes are subordinated to the secured credit facility. Senior secured lenders will receive upstream guarantees from substantially all operating subsidiaries, supported by a pledge of stock and a security interest in substantially all assets. Senior subordinated noteholders will receive subsidiary guarantees on a subordinated basis. Moody's considers that the company is weakly positioned within the B2 rating category and an inability to deleverage according to expectations could result in a downgrade. Headquartered in Chatham, New Jersey, MediMedia USA Inc. is a provider of patient education content and applications sponsored by pharmaceutical companies, employers, hospitals, health plans, physicians and patients. The company posted $245 million in revenue for the last twelve months ending June 2006. MILWAUKEE NOTIONS: Case Summary & Nine Largest Unsecured Creditors ------------------------------------------------------------------ Debtor: Milwaukee Notions, Inc. fka KRK Inc. of Racine fka Milwaukee Nations, Inc. 1006 Vine Street Union Grove, WI 53182 Bankruptcy Case No.: 06-25918 Type of Business: The Debtor is a Christian-based company owned and operated by the Kunstman family. It retails general merchandise and diabetic testing supplies. See http://www.milwaukeenotions.net/ Chapter 11 Petition Date: October 20, 2006 Court: Eastern District of Wisconsin (Milwaukee) Judge: Susan V. Kelley Debtor's Counsel: Albert Solochek, Esq. Howard, Solochek & Weber, S.C. 324 East Wisconsin Avenue Milwaukee, WI 53202 Tel: (414) 272-0760 Estimated Assets: $500,000 to $1 Million Estimated Debts: $10 Million to $50 Million Debtor's Nine Largest Unsecured Creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ Johnson & Johnson Injunction and $10,000,000 One Johnson & Johnson Plaza Damages New Brunswick, NJ 08933 LifeScan, Inc. Injunction and $10,000,000 1000 Gibraltar Drive Damages Milpitas, CA 95035 Quality King Trade Debt $13,323 2060 9th Avenue Ronkonkoma, NY 11779 Med Health Direct Trade Debt $12,134 4566 North Hiatus Road Sunrise, FL 33351 MC Distributors, LLC Trade Debt $10,000 2501 Northwest 34th Place Suite 35 Pompano Beach, FL 33069 CB Distributors, Inc. Trade Debt $6,419 JacMad, Inc. Trade Debt $3,663 CS Industries Trade Debt $1,520 P&G Associates Trade Debt $530 MINDREADY SOLUTIONS: Earns $8.6 Million in Second Quarter of 2006 ----------------------------------------------------------------- Mindready Solutions Inc. reported its financial results for the second quarter ended June 30, 2006. Sales for the second quarter of 2006 were $5 million, an increase of $800,000 compared with $4.2 million for the same period in 2005. This increase is mainly driven by: -- the sales generated by the businesses acquired during fiscal 2005, Specialized Test Engineering Inc. in Colorado and Radical Systems Inc. in Alabama, and -- the increase in sales generated by Mindready's subsidiary based in Northern Ireland. Operating losses before amortization of property and equipment, interest expense (income), exchange gains, stock-based compensation and non-recurring charges was $331,000 for the second quarter of 2006 compared with $35,000 for the corresponding period in 2005. The second quarter 2006, however, ended with net earnings of $8.6 million compared with a net loss of $296,000 for the corresponding period in 2005. These net earnings are due to the non-recurring gains related to the previously announced out-of- court settlement of all outstanding litigation and claims related to United Tri-Tech Corporation (UTTC). This settlement entailed the cancellation of $12 million of liabilities, which combined with other non recurring charges related to the UTTC situation had a positive impact of $9.6 million on net earnings for the second quarter after considering the tax impact By filing its second quarter 2006 results, Mindready confirms that the management ceases trade order, put in place and maintained since April 3, 2006, will be revoked by the regulatory authorities upon their final review and approval of the documents filed on SEDAR. "Publishing second quarter results makes us fully compliant with our filing requirements delayed by the problems with UTTC. Although these problems have taken considerable energies from our main operations, they are now behind us and our sole focus is now to grow revenues, continue to monitor our cost structure diligently, further develop high potential products and consider new acquisitions," president and chief executive officer Marc Lamy said. At June 30, 2006, the Company's balance sheet showed $14,907,000 in total assets, $9,154,000 in total liabilities, and $5,753,000 in total stockholders' equity. The Company had a $3,312,000 deficit at March 31, 2006. Mindready Solutions Inc. (TSX: MNY) -- http://www.mindready.com/ -- is a supplier of innovative solutions for test and embedded systems serving the aerospace & defense, automotive & transportation, and telecommunications markets from design to manufacturing. Some of Mindready's clients are Alcatel, Boeing, Faurecia, FlightSafety International, Lockheed Martin, Samsung, Nortel, Northrop Grumman, Rockwell Collins, and Visteon. MORTGAGEIT TRUST: Good Credit Support Cues S&P to Affirm Ratings ---------------------------------------------------------------- Standard & Poor's Ratings Services affirmed its ratings on 87 classes of certificates from nine series issued by MortgageIT Trust. The affirmations reflect sufficient actual and projected credit support percentages to maintain the current ratings. All of the transactions except series 2005-AR1 and 2006-1 receive credit support from subordination, overcollateralization, and, to a lesser extent, excess spread. As of the September 2006 remittance period, o/c percentages for the transactions were at or slightly below their targets, while cumulative loss percentages ranged from 0% to 0.02% of the original principal balances. Total delinquencies are low, ranging from 1.34% to 2.72% of the current principal balances. Series 2005-AR1 and 2006-1 both utilize a senior subordinate structure and are composed of negative amortization mortgage loans. These two transactions are less than 12 months seasoned and have not incurred any losses. Total delinquencies for series 2005-AR1 and 2006-1 are 2.75% and 2.64% of their original principal balances, respectively. The certificates from these transactions, except for series 2005- AR1 and 2006-1, are backed by a mix of prime jumbo and Alt-A adjustable-rate mortgage loans secured by first and second liens on one- to four family residential properties with terms no greater than 30 years. The collateral backing the certificates from series 2005-AR1 and 2006-1 consists of first-lien adjustable- rate, negative amortization loans secured by one- to four-family residential properties with terms to maturity of 40 years or less. Ratings Affirmed MortgageIT Trust Series Class Rating ------ ----- ------ 2004-1 A-1, A-2, M-1 AAA 2004-1 M-2 AA 2004-1 B-1 A 2004-1 B-2 BBB 2004-2 A-1, A-2, M-1 AAA 2004-2 M-2 AA 2004-2 B-1 A 2004-2 B-2 BBB 2005-1 1-A-1, 1-A-2, 2-A, I-M-1, 2-M-1 AAA 2005-1 1-M-2, 2-M-2 AA 2005-1 2-B-1 A+ 2005-1 1-B-1 A 2005-1 1-B-2 A- 2005-2 1-A-1, 1-A-2, 2-A, 1-M-1, 2-M-1 AAA 2005-2 1-M-2, 2-M-2 AA 2005-2 2-B-1 A+ 2005-2 1-B-1 A 2005-3 A-1, A-2, M-1 AAA 2005-3 M-2 AA+ 2005-3 M-3 AA 2005-3 M-4 AA- 2005-3 B-1 A 2005-3 B-2 BBB+ 2005-3 B-3 BBB 2005-4 A-1, M-1 AAA 2005-4 M-2 AA+ 2005-4 M-3 AA 2005-4 M-4 AA- 2005-4 B-1 A 2005-4 B-2 BBB+ 2005-4 B-3 BBB 2005-5 A-1, A-2, M-1 AAA 2005-5 M-2 AA+ 2005-5 M-3 AA 2005-5 M-4 AA- 2005-5 B A+ 2005-AR1 I-A-1, I-A-2, I-A-3, I-X-1, R AAA 2005-AR1 I-M-X, I-B-1 AA 2005-AR1 I-B-2 A+ 2005-AR1 I-B-3 BBB 2005-AR1 I-B-4 BB 2005-AR1 I-B-5 B 2006-1 1-A1, 1-A2, 1-X, AR, 2-A1A AAA 2006-1 2-A1B, 2-A1C, 2-X, 2-X-B, 2-PO AAA 2006-1 2-PO-B AAA 2006-1 1-B1, 2-B1 AA 2006-1 1-B2, 2-B2 A 2006-1 1-B3, 2-B3 BBB 2006-1 1-B4, 2-B4 BB 2006-1 1-B5, 2-B5 B MSDWMC OWNER: Moody's Puts on Watch Caa2 Rated $4.6 Million Notes ----------------------------------------------------------------- Moody's Investors Service puts on watch six classes of notes issued by MSDWMC Owner Trust 2000-F1 for possible downgrade. These are the rating actions: * Issuer: MSDWMC Owner Trust 2000-F1 -- $11,706,000 Class B Notes, rated A3, on review for possible downgrade -- $9,950,000 Class C Notes, rated Baa3, on review for possible downgrade -- $2,927,000 Class D Notes, rated Ba1, on review for possible downgrade -- $9,365,000 Class E Notes, rated B1, on review for possible downgrade -- $1,756,000 Class F Notes, rated B2, on review for possible downgrade -- $4,683,000 Class G Notes, rated Caa2, on review for possible downgrade The securitized loans were originated by Franchise Finance Corporation of America and Morgan Stanley Dean Witter Mortgage Capital. FFCA was acquired by GE Capital and is now GE Capital Franchise Finance. MSDWMC originated loans through American Commercial Capital. WFCC currently services the MSDWMC originated loans while GECFF is the servicer on FFCA originated loans. The ratings actions are a result of recent developments in the collateral pool, including losses realized in recent months, as well as further expected losses related to an obligor in receivership. The ratings review will focus on the degree to which these developments and other specially serviced loans might ultimately impact the credit quality of the Notes. The Class A notes are rated Aaa based on an insurance policy from MBIA Insurance Corporation and are not affected by the ratings action. MSGI SECURITY: Faces NASDAQ Delisting, Must Comply Within 15 Days ----------------------------------------------------------------- MSGI Security Solutions Inc. received a determination notice for immediate delisting the Company's shares. The notice was unexpected given recent conversations with NASDAQ listings qualification staff. The Company trading symbol was changed to MSGI.PK and is now trading over the pink sheets. MSGI intends to regain compliance with the minimum stockholders equity requirement within 15 days and plans to immediately file an appeal under NASDAQ Marketplace regulations. The Company is expecting to regain stockholders equity compliance through a two-step process, as follows: a) MSGI is currently negotiating a preferred equity instrument with creditors to reduce liabilities by approximately $4 million, thereby creating neutral stockholders equity; and b) MSGI is also negotiating an asset purchase transaction through a preferred equity instrument with a strategic business partner, which is expected to enable the Company to meet the $2.5 million stockholders equity requirement. The Company documented both transactions and plans to submit a pro-forma balance sheet to the NASDAQ demonstrating stockholders equity compliance within 15 days. "We are disappointed at this chain of events, as we have been working diligently to regain compliance," said Jeremy Barbera, chairman and CEO of MSGI. "Our inability to gain access to certain information from our former foreign subsidiary delayed our filing of a complete 10-K, which in turn delayed the final negotiation of the above-referenced transactions. The delisting notice, while very unfortunate, does not affect our ability to continue to implement our business model." MSGI and Hyundai Syscomm are in the process of completing several agreements as part of their new long-term relationship -- including a three year subcontracting deal, with related performance-driven warrants, for utilization in Southeast Asia beginning next month. The preliminary emphasis of this partnership will be focused on perimeter security for critical infrastructures and cross-border security in several countries. Details on the three-year subcontracting relationship will be announced next week. About MSGI Security Headquartered in New York City, MSGI Security Solutions, Inc. (Nasdaq: MSGI) -- http://www.msgisecurity.com/-- provides proprietary security products and services to commercial and governmental organizations worldwide, including the U.S. Department of Homeland Security and U.S. Department of Justice, with a focus on cutting-edge encryption technologies for surveillance, intelligence monitoring, and data protection. From its offices in the U.S. and Europe, the company serves the needs of counter-terrorism, public safety, and law enforcement agencies. Going Concern Doubt As reported in the Troubled Company Reporter on Oct. 26, 2005, Amper, Politzner & Mattia P.C. expressed substantial doubt about MSGI Security Solutions, Inc.'s ability to continue as a going concern after it audited the Company's financial statements for the fiscal year ended June 30, 2005. The auditing firm points to the Company's recurring losses from operations; negative cash flow from operations; and significant deficit in working capital. NATIONAL GAS: Brings In Neal Bradsher as Financial Consultant ------------------------------------------------------------- Richard M. Hutson II, the chapter 11 trustee appointed in National Gas Distributors LLC's bankruptcy case, obtained permission from the U.S. Bankruptcy Court for the Eastern District of North Carolina to employ James E. Neal and the firm Neal, Bradsher & Taylor PA as financial consultant and expert witness. Mr. Neal and his firm will provide the Debtor with additional litigation support services. Specifically, the firm will: a) review and analyze financial books and records to determine the assets and liabilities of the Debtor; b) review and analyze claims filed by the Debtor's creditors; c) review and analyze transactions between the Debtor and other parties to determine whether the transactions constitute preferential transfers or fraudulent conveyances, prepare expert reports regarding the analysis, and testify as needed with respect to any adversary proceeding involving the estate; and d) review and analyze the insolvency or inadequacy of capitalization of the Debtor and other activities and financial analysis as may be requested. Mr. Neal and other Neal Bradsher personnel initially expected to perform services under this engagement and their hourly billing rates are: Professional Hourly Rate ------------ ----------- James E. Neal $225 Gary C. Hull 200 Christopher A. Tikvart 165 Rod Soberano 100 Lani Perdue 100 Mr. Neal assures the Court that he and his firm does not hold any interest adverse to the Debtor's estate and are disinterested persons pursuant to Section 101(14) of the Bankruptcy Code. National Gas Distributors, LLC -- http://www.gaspartners.com/-- supplied natural gas, propane, and oil to industrial, municipal, military, and governmental facilities. As of mid-December 2005, the Company effectively ceased business operations due to inadequate remaining capital and its inability to arrange for the purchase and delivery of natural gas to its customers. The Company filed for bankruptcy on January 20, 2006 (Bankr. E.D.N.C. Case No. 06-00166). Ocie F. Murray, Jr., Esq., at Murray Craven & Inman LLP represented the Debtor in its restructuring efforts. Richard M. Hutson, II, serves as the Chapter 11 Trustee, and is represented by Emily C. Weatherford, Esq., and John A. Northen, Esq., at Northen Blue LLP. When the Debtor filed for bankruptcy, it estimated between $1 million to $10 million in assets and $10 million to $50 million in debts. NATIONAL LAMPOON: Appoints Duncan Murray to its Board of Directors ------------------------------------------------------------------ National Lampoon Inc. has appointed Duncan Murray to its board of directors. Mr. Murray replaces Ron Berger. From 1998 to his retirement in 2004, Mr. Murray served as vice president, Business and Legal Affairs, of Santa Monica based Transactional Marketing Partners, Inc., a direct response television consulting firm. Before joining TMP, from August 1986 through January of 2003, Mr. Murray served as the Company's vice president of Marketing and, prior to that, worked with The Walt Disney Company for 14 years in a variety of capacities including vice president Sales Administration for The Disney Channel and Director of Sales for Walt Disney Telecommunications Company. While at The Walt Disney Company, Mr. Murray was an integral part of the small team that created and launched The Disney Channel. During his tenure as vice president of Marketing for National Lampoon, he oversaw shareholder relations, published the final three issues of National Lampoon Magazine, and managed negotiations with Artisan Entertainment for attachment of the Company's name to the feature film National Lampoon's Van Wilder. Mr. Murray currently serves as a Director, Secretary and Treasurer of The Greenburg Family Foundation, a health issues-related philanthropic organization headquartered in Santa Monica and Palm Springs, California. The Board of Directors has made an affirmative determination that Mr. Murray is an independent director, as defined in section 121 of the Rules of the American Stock Exchange. Mr. Murray does not have, nor has he had during the past two years, a direct or indirect material interest in any transaction with the Company. National Lampoon, Inc. -- http://www.nationallampoon.com/-- (AMEX:NLN) fka J2 Communications, Inc., is active in a broad array of entertainment segments, including feature films, television programming, interactive entertainment, home video, audio CDs and book publishing. The Company owns interests in all major National Lampoon properties, including National Lampoon's Animal House, the National Lampoon Vacation series and National Lampoon's van Wilder. The National Lampoon Network serves over 600 colleges and universities throughout the U.S. and reaches as many as 4.8 million 18-to-24-year-old college students. It has four operating divisions: National Lampoon Network, Entertainment Division, Publishing Division and Licensing Division. J2 Communications, Inc., was engaged in the acquisition, production and distribution of videocassette programs for retail sale. In 1991, J2 acquired all of the outstanding shares of National Lampoon, Inc., and subsequent to J2's acquisition of NLI, it de-emphasized its videocassette business and publishing operations and began to focus on exploitation of the National Lampoon(TM) trademark. J2 reincorporated in Delaware under the name National Lampoon, Inc., in November 2002. Going Concern Doubt In its Form 10-Q filing for the quarter ended April 30, 2006, National Lampoon's management disclosed that the Company's net losses of $8,669,170 and $5,127,107 in the prior two years, net loss of $4,321,539 during the first nine months of the 2006 fiscal year, and accumulated deficit of $36,215,567 at April 30, 2006, raise concerns about its ability to continue as a going concern. NORTHWEST PIPELINE: Moody's Assigns Loss-Given-Default Ratings -------------------------------------------------------------- In connection with Moody's Investors Service's implementation of its new Probability-of-Default and Loss-Given-Default rating methodology for the broad energy midstream sector, encompassing companies that engage in the extraction, treating, transmission, distribution, and logistics for crude oil, natural gas, and other hydrocarbon products, the rating agency revised or held its probability-of-default ratings and assigned loss-given-default ratings on these loans and bond debt obligations issued by Northwest Pipeline Corporation: Projected Old POD New POD LGD Loss-Given Debt Issue Rating Rating Rating Default ---------- ------- ------- ------ ---------- 9% Sr. Unsec. Debentures due 2022 Ba1 Ba1 LGD3 35% 7.125% Sr. Unsec. Debentures due 2025 Ba1 Ba1 LGD3 35% 6.625% Sr. Unsec. Debentures due 2007 Ba1 Ba1 LGD3 35% 7% Sr. Unsec. Gtd. Global Notes due 2016 Ba1 Ba1 LGD3 35% 8.125% Sr. Unsec. Global Notes due 2010 Ba1 Ba1 LGD3 35% Sr. Unsec. Shelf (P)Ba1 (P)Ba1 LGD3 35% Moody's explains that current long-term credit ratings are opinions about expected credit loss, which incorporate both the likelihood of default and the expected loss in the event of default. The LGD rating methodology will disaggregate these two key assessments in long-term ratings. The LGD rating methodology will also enhance the consistency in Moody's notching practices across industries and will improve the transparency and accuracy of Moody's ratings as Moody's research has shown that credit losses on bank loans have tended to be lower than those for similarly rated bonds. Probability-of-default ratings are assigned only to issuers, not specific debt instruments, and use the standard Moody's alpha- numeric scale. They express Moody's opinion of the likelihood that any entity within a corporate family will default on any of its debt obligations. Loss-given-default assessments are assigned to individual rated debt issues -- loans, bonds, and preferred stock. Moody's opinion of expected loss are expressed as a percent of principal and accrued interest at the resolution of the default, with assessments ranging from LGD1 (loss anticipated to be 0% to 9%) to LGD6 (loss anticipated to be 90% to 100%). Based in Salt Lake City, Utah -- Northwest Pipeline Corporation's principal activity is to own and operate an interstate natural gas pipeline system, including facilities for mainline transmission and gas storage. NUTRAQUEST INC: Exclusive-Filing Period Extended Until November 8 ----------------------------------------------------------------- The Honorable Garrett E. Brown, Jr., of the U.S. District Court for the District of New Jersey extended Nutraquest Inc.'s exclusive period to file a plan of reorganization until Nov. 8, 2006. Judge Brown also extended the Debtor's exclusive period to solicit acceptances of that plan until Jan. 8, 2007. The Debtor filed Feb. 17, 2006, its plan of reorganization and the District Court approved June 1, 2006, the Debtor's disclosure statement for the Second Modified Plan of Reorganization. The mediation of the personal injury and wrongful death claims against the Debtor and non-debtor third parties has been successfully concluded. A total of 174 PI Claims have either been conditionally valued or dismissed. An agreement has been reached between the Debtor and certain of the non-debtor third parties to fund the conditionally valued claims. In addition to the PI Claims against the Debtor, there are a number of claims alleging false advertising against the Debtor and other defendants. The Advertising Claims were referred to mediation before the Honorable Nicholas J. Politan, U.S.D.J. (retired), and all except for the action commenced by the Federal Trade Commission have been resolved, subject to confirmation of the Debtor's Chapter 11 plan. Specifically, the parties have executed formal settlement agreements, obtained preliminary approval from the District Court, and provided class notice with respect to two class claims filed in the Debtor's bankruptcy case. A lawsuit brought by the California Attorney General and several California district attorneys has also been settled. The parties to the FTC action as to one product formerly distributed by the Debtor have reached an agreement in principle on monetary relief, but remain in final negotiations concerning certain of the remaining terms of a proposed settlement. Although the mediation of the Advertising Claims has proved extremely successful, the FTC action has not yet been settled. Certain important non-monetary terms remain unresolved and the resolution of the FTC action is a condition precedent to the Plan's effectiveness, as well as a condition precedent to the provision of funds under the Funding Agreement, critical to consummation of the Plan. Headquartered in Manasquan, New Jersey, Nutraquest, Inc., is the marketer of the ephedra-based weight loss supplement, Xenadrine RFA-1. The Company filed for chapter 11 protection on October 16, 2003 (Bankr. N.J. Case No. 03-44147). Andrea Dobin, Esq., and Simon Kimmelman, Esq., at Sterns & Weinroth, P.C., represent the Debtor in its restructuring efforts. Natalie D. Ramsey, Esq., at Montgomery, McCracken, Walker & Rhoads LLP represents the Official Committee of Unsecured Creditors. When the Company filed for protection from its creditors, it listed estimated assets of $10 million to $50 million and estimated debts of $50 million to $100 million. OAKLEIGH APARTMENTS: Moody's Lowers Rating on Junior Bonds to Ba1 ----------------------------------------------------------------- Moody's Investors Service downgraded to Baa3 from Baa1 the ratings for Louisiana Local Government Environmental Facilities and Community Development Housing Revenue Bonds Senior Series 2003 A&B and has downgraded to Ba1 from Baa3 the Junior 2003 C Series. The credit has been removed from Watchlist, but outlook is negative based on recent audited financial performance and conflicting information regarding both financial condition and management performance at the property. Legal security: -- Special obligation of the issuer. Bonds are secured by rental revenue and any funds pledged to bondholders under the trust indenture. Strengths: -- All Debt Service Reserve Funds have balances at their required amounts and monies are being held in a Guaranteed Investment Contract at 4.57%. -- The trustee reports surplus funds in excess of $29,000 as of October 2006 and a Reserve and Replacement account that is fully funded at $65,000. -- Strong legal structure requires a minimum of $10,000 held in surplus plus debt service coverage ratio of 1.4 before surplus monies may be released from indentured funds. -- Moody's Ecomony.com projects high employment growth for the city of Baton Rouge with per capita income that will remain below the US average. This will perhaps continue to bolster the attractiveness of affordable housing options in the area as single family homes continue to be just out of reach for most low-income residents. Challenges: -- Continued conflict between property owner and manager may impede effective oversight at Oakleigh Apartments in the long term. Moody's does not have a clear understanding as to the veracity of claims made with respect to this conflict and thus has no opinion on it. However, to the extent that the conflict remains unresolved, it poses a significant risk to the proper management and oversight of operating activities at the property. -- According to each of the last two audited financial statements for the fiscal years ending December 31, 2004 and 2005, debt service coverage on the senior tranche of bonds has been considerably below the underwritten 1.40; the ratio is calculated as 1.27 and 1.26 for 2004 and 2005, respectively. Although improvement in occupancy should bolster performance in 2006, the main driver of the lower than expected coverage numbers is large repair and maintenance costs. Moody's believes that part of this cost represents capital expenditures for the property, thus mitigating our concern about coverage to some extent. The Outlook has been changed to negative based on lower than expected audited performance. Further, disagreements at the property seem likely to continue over the near-term; a situation that could possibly hinder performance. What could change the rating - up: -- Improvement of debt service coverage ratio What could change the rating - down: -- Continued deterioration of coverage ORION HEALTHCORP: Extends First & Second Notes Maturity to Nov. 30 ------------------------------------------------------------------ Orion HealthCorp Inc. and Brantley IV executed the Third Amendment to the First and Second Note, extending the Notes' maturity date to Nov. 30, 2006. Brantley Partners IV, L.P., on March 16, 2005, loaned the Company an aggregate of $1,025,000 and the Company, on June 1, 2005, executed a convertible subordinated promissory note in the principal amount of $1,025,000, the "First Note", payable to Brantley IV to evidence the terms of the First Loan. On April 19, 2005, Brantley IV loaned the Company an additional $225,000. On June 1, 2005, the Company executed a second convertible subordinated promissory note in the principal amount of $225,000 payable to Brantley IV to evidence the terms of the Second Loan. The maturity dates of both First and Second Notes, through a series of amendments, were previously extended until Oct. 15, 2006. A full text-copy of the Third amendment to the Convertible Subordinated Promissory Notes may be viewed at no charge at http://ResearchArchives.com/t/s?13d0 About Brantley Brantley Partners -- http://www.brantleypartners.com-- is a private equity organization with offices in Ohio and California. Brantley's limited partners are primarily institutional investors including pension funds, insurance companies and banks. Brantley acts as an originator and lead investor in its investments. About Orion HealthCorp Orion HealthCorp, Inc. -- http://www.orionhealthcorp.com/-- provides complementary business services to physicians through three business units: SurgiCare, Inc., serving the freestanding ambulatory surgery center market; Integrated Physician Solutions, Inc., providing business services to pediatric practices and technology solutions to general and specialized medical practices; and Medical Billing Services, Inc., providing physician billing and collection services and practice management solutions to hospital-based physicians. Going Concern Doubt UHY Mann Frankfort Stein and Lipp CPAs, LLP, in Houston, Texas, raised substantial doubt about Orion HealthCorp's ability to continue as a going concern after auditing the Company's consolidated financial statements for the year ended Dec. 31, 2005. The auditor pointed to the Company's recurring losses from operations and negative cash flows. PELTS & SKINS: Files Amended Schedules of Assets and Liabilities ---------------------------------------------------------------- Pelts & Skins L.L.C. and its debtor-affiliate, PS Chez Sidney LLC, delivered to the U.S. Bankruptcy Court for the Eastern District of Louisiana in New Orleans their amended schedules of assets and liabilities, disclosing: Pelts & Skins L.L.C. -------------------- Name of Schedule Assets Liabilities ---------------- ------ ----------- A. Real Property $3,631,444 B. Personal Property $329,221 C. Property Claimed as Exempt D. Creditors Holding Secured Claims $12,628,254 E. Creditors Holding Unsecured Priority Claims $31,089 F. Creditors Holding Unsecured Nonpriority Claims $9,698,976 ------- ----------- Total $3,960,665 $22,358,320 PS Chez Sidney LLC ------------------ Name of Schedule Assets Liabilities ---------------- ------ ----------- A. Real Property $784,877 B. Personal Property $1,046,384 C. Property Claimed as Exempt D. Creditors Holding Secured Claims $10,663,998 E. Creditors Holding Unsecured Priority Claims $10,471 F. Creditors Holding Unsecured Nonpriority Claims $222,956 ---------- ----------- Total $1,831,261 $10,897,427 Headquartered in Covington, Louisiana, Pelts & Skins, L.L.C. -- http://www.pelts.com/-- produces, processes, and sells alligator skins to tanneries throughout the United States. The Company's subsidiary, PS Chez Sidney, LLC, distributes alligator meat packaged as Chef Penny's brand. The Company and its subsidiary filed for chapter 11 protection on Aug. 1, 2006 (Bankr. E.D. La. Case No. 06-10742). Douglas S. Draper, Esq., at Heller, Draper, Hayden, Patrick & Horn, L.L.C., represents the Debtor. When the Debtors filed for protection from their creditors, they estimated assets and debts between $10 million and $50 million. PATH 1: Posts $1.78 Million 2006 Second Quarter Net Loss -------------------------------------------------------- Path 1 Network Technologies Inc. has filed its second quarter financial statements for the three-month period ended June 30, 2006 with the Securities and Exchange Commission. The company posted a net loss of $1,784,000 from revenues of $826,000 for the quarter ended June 30, 2006. At June 30 2006, the Company's balance sheet showed $3,017,000 in total assets and $6,315,000 in total liabilities, resulting in a $3,298,000 stockholders' deficit. The Company's June 30,2006 balance sheet also showed strained liquidity with $1,913,000 in total current assets and $3,974,000 in total current liabilities. Full-text copies of the Company's financial statements for the three months ended June 30, 2006 are available for free at http://researcharchives.com/t/s?13cf Going Concern Doubt Swenson Advisors, LLP, in New York, raised substantial doubt about Path 1 Network Technologies Inc.'s ability to continue as a going concern after auditing the Company's consolidated financial statements for the year ended Dec. 31, 2005. The auditor pointed to the Company's operating losses and inability to raise additional capital. Path 1 Network Technologies Inc. provides a variety of software and services used for real-time, high-quality audio and video-on- demand distribution over Internet Protocol. Its Cx1000 broadcast video gateway is used to transmit and receive ASI and SDI video images over FastE and Gigabit Ethernet network interfaces. Paulson Capital owns almost 14% of the Company. RAMP SERIES: S&P Cuts Rating on Class M-3 Certs. & Puts Neg. Watch ------------------------------------------------------------------ Standard & Poor's Ratings Services raised its ratings on the M-1 classes from RAMP Series Trust's series 2002-RZ2 and 2002-RZ3. Concurrently, the ratings on the M-3 classes from the same transactions are lowered to 'BB' from 'BBB' and placed on CreditWatch with negative implications. In addition, ratings are affirmed on 137 classes issued by 17 RAMP Trust transactions with "RZ" suffixes. RAMP, Residential Asset Mortgage Products Inc., is an affiliate of Residential Funding Corp. The upgrades are based on the shifting interest structure of the transactions, which has caused the projected credit support to grow to at least 3.5x the levels associated with the higher ratings. Additionally, both transactions have paid down to less than 12% of their original pool balances, and the senior certificates have been paid down completely. Furthermore, both transactions with raised ratings are currently failing their delinquency triggers, thus preventing credit support from stepping down. The lowered ratings being placed on CreditWatch negative reflect collateral performance that has caused realized losses to exceed monthly excess interest cash flow. This has compromised overcollateralization and may lead to potential principal write-downs to the class M-3 certificates. The o/c amount for series 2002-RZ2 is $912,415, and nearly $5.4 million of the mortgage loans are considered severely delinquent (90-plus days, foreclosure, and REO). In the case of series 2002-RZ3, loss projections indicate that the current performance trend may result in a principal write-down to the M-3 class within 18 months. The o/c amount for series 2002-RZ3 is $2,272,086, versus $6,150,477 of mortgage loans in the severely delinquent category. Cumulative realized losses, as a percentage of the original pool balances, totaled 1.59% ($5,801,788) and 1.78% ($10,304,095) for series 2002-RZ2 and 2002-RZ3, respectively. Standard & Poor's will continue to closely monitor the performance of the transactions with ratings on CreditWatch negative to ensure that the ratings accurately reflect the risks associated with these securities. The affirmed ratings reflect sufficient levels of credit support to maintain the current ratings, despite moderate-to-high delinquencies. The affirmed ratings on the bond-insured transactions reflect the financial strength rating of Ambac Assurance Corp. Credit support for the RAMP Trust transactions is provided by subordination, excess spread, and overcollateralization. The underlying collateral for these transactions consists of first-lien fixed-rate high LTV loans secured by one- to four- family residential properties. Ratings Raised RAMP Trust Mortgage asset-backed pass-through certificates Rating ------ Series Class To From ------ ----- -- ---- 2002-RZ2 M-1 AAA AA+ 2002-RZ3 M-1 AA+ AA Ratings Lowered and Placed on Creditwatch Negative RAMP Trust Mortgage asset-backed pass-through certificates Rating ------ Series Class To From ------ ----- -- ---- 2002-RZ2 M-3 BB/Watch Neg BBB 2002-RZ3 M-3 BB/Watch Neg BBB Ratings Affirmed RAMP Trust Mortgage asset-backed pass-through certificates Series Class Rating ------ ----- ------ 2000-RZ1 A-3* AAA 2002-RZ2 M-2 A 2002-RZ3 M-2 A 2002-RZ4 A* AAA 2003-RZ1 A-I-4*, A-I-5*, A-I-6*, A-I-7* AAA 2003-RZ1 A-II* AAA 2003-RZ2 A-1* AAA 2003-RZ2 M-1 AA 2003-RZ2 M-2 A 2003-RZ2 M-3 BBB 2003-RZ3 A-4, A-5A, A-5B, A-6 AAA 2003-RZ3 M-1 AA 2003-RZ3 M-2 A 2003-RZ3 M-3 BBB 2003-RZ4 A-3, A-4, A-5, *A-6, A-7 AAA 2003-RZ4 M-1 AA 2003-RZ4 M-2 A 2003-RZ4 M-3 BBB 2003-RZ5 A-3, A-4, A-5, A-6-A, *A-6-B AAA 2003-RZ5 A-7, A-V AAA 2003-RZ5 M-1 AA 2003-RZ5 M-2 A 2003-RZ5 M-3 BBB 2004-RZ1 A-I-3, A-I-4, A-I-5, A-I-6 AAA 2004-RZ1 A-I-7, A-II AAA 2004-RZ1 M-1 AA 2004-RZ1 M-2 A 2004-RZ1 M-3 BBB+ 2004-RZ1 M-4 BBB 2004-RZ1 M-5 BBB- 2004-RZ2 A-I-3*, A-I-4*, A-I-5*, A-I-6* AAA 2004-RZ2 A-II* AAA 2004-RZ3 A-I-3, A-I-4, A-I-5, A-I-6 AAA 2004-RZ3 A-IO, A-II-1, A-II-2, A-II-3 AAA 2004-RZ3 M-I-1, M-II-1 AA 2004-RZ3 M-I-2, M-II-2 A 2004-RZ3 M-I-3, M-II-3 BBB+ 2004-RZ3 M-I-4, M-II-4 BBB 2004-RZ4 A-1, A-2, A-3 AAA 2004-RZ4 M-1 AA+ 2004-RZ4 M-2 AA- 2004-RZ4 M-3 A 2004-RZ4 M-4 A- 2004-RZ4 M-5 BBB+ 2004-RZ4 M-6 BBB 2004-RZ4 M-7 BBB- 2004-RZ4 B BB 2005-RZ1 A-1, A-2, A-3 AAA 2005-RZ1 M-1 AA+ 2005-RZ1 M-2 AA 2005-RZ1 M-3 AA- 2005-RZ1 M-4 A+ 2005-RZ1 M-5 A 2005-RZ1 M-6 A- 2005-RZ1 M-7 BBB+ 2005-RZ1 M-8 BBB 2005-RZ1 M-9 BBB- 2005-RZ1 B-1 BB+ 2005-RZ1 B-2 BB 2005-RZ1 B-3 BB- 2005-RZ2 A-I-1, A-I-2, A-I-3, A-I-4 AAA 2005-RZ2 A-II AAA 2005-RZ2 M-1 AA+ 2005-RZ2 M-2 AA 2005-RZ2 M-3 AA- 2005-RZ2 M-4 A+ 2005-RZ2 M-5 A- 2005-RZ2 M-6 BBB+ 2005-RZ2 M-7 BBB 2005-RZ2 M-8 BBB- 2005-RZ2 B-1 BB+ 2005-RZ2 B-2 BB 2005-RZ2 B-3 BB- 2005-RZ3 A-1, A-2, A-3 AAA 2005-RZ3 M-1, M-2 AA+ 2005-RZ3 M-3, M-4 AA 2005-RZ3 M-5 AA- 2005-RZ3 M-6 A+ 2005-RZ3 M-7, M-8 A 2005-RZ3 M-9 A- 2005-RZ3 M-10 BBB+ 2005-RZ4 A-1, A-2, A-3 AAA 2005-RZ4 M-1 AA+ 2005-RZ4 M-2 AA 2005-RZ4 M-3 AA- 2005-RZ4 M-4 A+ 2005-RZ4 M-5 A 2005-RZ4 M-6 A- 2005-RZ4 M-7 BBB+ 2005-RZ4 M-8 BBB 2005-RZ4 B BBB- * Denotes bond-insured classes with ratings that reflect the financial strength of the bond insurer. RAPID PAYROLL: Court Approves Winthrop as Bankruptcy Counsel ------------------------------------------------------------ The U.S. Bankruptcy Court for the Central District of California gave the Official Committee of Unsecured Creditors in Rapid Payroll, Inc.'s chapter 11 case, authority to retain Winthrop Couchot Professional Corp. as its counsel, nunc pro tunc to May 22, 2006. As reported on the Troubled Company Reporter on July 14, 2006, Winthrop Couchot is expected to: 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. Mr. Winthrop discloses that the firm's other professionals bill: 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 assured 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. RED MOUNTAIN: Fitch Holds B Rating on $1.6 Million Certificates --------------------------------------------------------------- Fitch Ratings affirms these Red Mountain Funding's commercial mortgage pass-through certificates, series 1995-1: -- Interest-only class I-3 at 'AAA'; -- $1.6 million class E at 'B'. Fitch also maintains the 'C/DR6' rating on the $1.3 million class F certificates. As of the September 2006 distribution report, the transaction's certificate balance has declined by 98% to $2.8 million from $146.1 million at issuance. The rating affirmation of class E is the result of improving loan performance offsetting the increased concentration, as one loan remains, which is secured by a health care property in Red Boiling Springs, Tennessee. Occupancy has been stable at approximately 84% since December 2005. The servicer reported a trailing 12 month debt service coverage ratio (DSCR) of 3.1 times (x) as of June 30, 2006, up from 1.90x at year-end 2005. The improvement is based on increases in the average rates for all payor types. The collateral net weighted averaged coupon rate, based on the one remaining loan's fixed interest rate, is less than the pass- through rate of the remaining bonds. Therefore, it is unlikely that class I-3, whose interest payment is calculated using the WAC, will receive any future payments. However, class I-3 is affirmed at 'AAA' given its priority in the deal's waterfall if interest were available in the future. REYNOLDS AND REYNOLDS: Partners with First Advantage CREDCO ----------------------------------------------------------- The Reynolds and Reynolds Company and First Advantage CREDCO are teaming to deliver pre-qualified consumer prospect leads to automobile dealerships in the United States, with which, dealerships can efficiently target in-market customers and sell more cars. The Company will provide a certified data interface that offers direct access between its CRM solution, Contact Management, and CREDCO's Lead Prospector Solutions. The Company will also provide a certified data interface to the customer relationship management providers in its Certified Interface, RCI, program. First Advantage CREDCO's Lead Prospector Solution provides dealers with consumer prospects from a broad consumer lead base that includes Internet, demographically-targeted, bankruptcy and subprime leads. The Company says that dealers can have the leads delivered directly to their Reynolds' Contact Management application, from a participating CRM vendor solution in the RCI program or request to have them sent in another manner to the dealership. "Our expanded relationship with Reynolds enables our mutual customers to get access to quality consumer leads in an efficient, secure manner," Kevin Clements, senior vice president of corporate development for First Advantage CREDCO, said. "With the Reynolds interface and the Lead Prospector Solutions, dealers can maximize their marketing campaign results and sales opportunities." Scot Eisenfelder, senior vice president of Marketing and Strategic Planning and Solutions Management, said, "Reynolds continually looks for ways to better serve our customers and this collaboration is an example of that. We continue to bring innovative products and services to dealers to help them better and more profitably sell cars and take care of customers." About First Advantage CREDCO First Advantage CREDCO, -- http://www.FADVCredco.com/-- a wholly owned subsidiary of First Advantage Corporation, provides specialty credit reports and services to the automotive industry. Additionally, First Advantage CREDCO provides the automotive industry with comprehensive identity verification and consumer lead solutions. About First Advantage Corp. Headquartered in St. Petersburg, Fla., First Advantage Corporation (Nasdaq: FADV) --http://www.FADV.com/-- provides consumer credit information in the automotive, mortgage and subprime markets; business credit information in the transportation industry; lead generation services; motor vehicle record reports; supply chain security consulting; employment background verifications; occupational health services; applicant tracking systems; recruiting solutions; skills and behavioral assessments; business tax consulting services; insurance fraud, corporate and litigation investigations; surveillance; computer forensics; electronic discovery; data recovery; due diligence reporting; resident screening; property management software; renters insurance and consumer location services. The Company has more than 4,100 employees in offices throughout the United States and abroad. About Reynolds The Reynolds and Reynolds Company (NYSE: REY) -- http://www.reyrey.com/-- provides dealer management systems in the U.S. and Canada. The Company's product, service and training solutions include retail Web and Customer Relationship Management solutions, e-learning and consulting services, documents, data management and integration, networking and support and leasing services. Reynolds serves automotive retailers and OEMs globally through its incadea solution and a worldwide partner network, as well as through its consulting practice. * * * As reported in the Troubled Company Reporter on Oct. 12, 2006 Moody's Investors Service, in connection with the implementation of its new Probability-of-Default and Loss-Given-Default rating methodology, confirmed its Ba1 Corporate Family Rating for The Reynolds and Reynolds Company and its Ba1 rating on the company's $130 million issue of Senior Unsecured MTN Program. Additionally, Moody's assigned an LGD4 rating to those bonds, suggesting noteholders will experience a 60% loss in the event of a default. As reported in the Troubled Company Reporter on Sept. 28, 2006 Standard & Poor's Ratings Services lowered its ratings on Reynolds & Reynolds Co., including its corporate credit rating to 'B+' from 'BBB'. In addition, Standard & Poor's removed the ratings from CreditWatch with negative implications where they were placed Aug. 9, 2006. The outlook is positive. REYNOLDS & REYNOLDS: S&P Cuts Rating on $520 Million Loan to B- --------------------------------------------------------------- Standard & Poor's Ratings Services affirmed its loan and recovery ratings on Dayton, Ohio-based Reynolds & Reynolds Co.'s first-lien bank facilities, which consist of a six-year, $75 million revolving credit facility, and a six-year, $1.640 billion term loan, which was increased from $1.485 billion. The facilities are rated 'BB-' (one notch above the corporate credit rating), with a recovery rating of '1', indicating the expectation for full recovery of principal by creditors in the event of a payment default. The second-lien facility, which consists of a seven-year, $520 million term loan, was notched down to 'B-' from 'B', and the recovery rating was revised to '5' from '3', reflecting lower recovery prospects driven by the increase in higher priority debt within the capital structure. The '5' recovery rating reflects our expectation of negligible (0%-25%) recovery of principal by creditors in the event of a payment default. The third-lien facility has been downsized to $250 million from $405 million, and the rating was affirmed at 'B-' with a recovery rating of '5', also reflecting our expectation of negligible (0%- 25%) recovery of principal by creditors in the event of a payment default. Proceeds from the facilities will be used to fund the acquisition of Reynolds & Reynolds by privately held and unrated Universal Computer Systems for about $2.8 billion, including the assumption of the company's debt. The merged company will operate under the Reynolds & Reynolds name. Ratings List Reynolds & Reynolds Co. Ratings Affirmed Corporate credit rating B+/Positive/-- First-lien facilities BB- (Recovery Rating: 1) Third-lien facility B- (Recovery Rating: 5) Rating Lowered To From Second-lien facility B- (RR: 5) B (RR: 3) ROBERT REYNOLDS: Case Summary & Seven Largest Unsecured Creditors ----------------------------------------------------------------- Debtor: Robert Reynolds fka College Properties 1636 Wyntre Brooke Drive York, PA 17403 Bankruptcy Case No.: 06-02372 Type of Business: The Debtor filed for chapter 11 protection on October 14, 2005 (Bankr. M.D. Pa. Case No. 05- 08948). Chapter 11 Petition Date: October 20, 2006 Court: Middle District of Pennsylvania (Harrisburg) Judge: Mary D. France Debtor's Counsel: Robert E. Chernicoff, Esq. Cunningham and Chernicoff P.C. 2320 North Second Street Harrisburg, PA 17110 Tel: (717) 238-6570 Fax: (717) 238-4809 Estimated Assets: $1 Million to $100 Million Estimated Debts: $1 Million to $100 Million Debtor's Seven Largest Unsecured Creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ MBNA America Business Expenses $70,980 P.O. Box 15137 Wilmington, DE 19886-5137 USAA Business Expenses $31,441 10750 McDermott Highway San Antonio, TX 78288 Columbia Gas Utility Bills $3,665 P.O. Box 830012 Baltimore, MD 21283-0012 LC Heim, Esq. Attorney Fees $1,853 345 East Market Street York, PA 17401 Regal Plumbing Utility Bills $1,611 711 McKenzie York, PA 17403 Axeel Plumbing Utility Bills $1,198 Kurt Blake, Esq. Attorney Fees $1,120 ROTEC INDUSTRIES: Court Okays Young Conaway as Bankruptcy Counsel ----------------------------------------------------------------- The U.S. Bankruptcy Court for the District of Delaware gave Rotec Industries, Inc., for permission to retain Young, Conaway, Stargatt & Taylor, LLP, as its bankruptcy counsel. As reported on Troubled Company Reporter, July 31, 2006,Young Conaway is expected to: a) provide legal advice with respect to the Debtor's powers and duties as debtor-in-possession in the continued operation of its business and management of its properties; b) prepare on behalf of the Debtor necessary applications, motions, answers, orders, reports and other legal papers; c) appear in Court and protect the interest of the Debtor before the Court; d) assist in the preparation and pursuit of confirmation of a plan and approval of a disclosure statement; and e) perform all other legal services for the Debtor which may be necessary and proper in this proceeding. Michael R. Nestor, Esq., a member at Young Conaway, will charge the Debtor $445 per hour for his services. Mr. Nestor disclosed the firm's principal counsel and paralegal that will represent the Debtor and their current hourly rates: Professional Hourly Rate ------------ ----------- Edward J. Kosmowski, Esq. $365 Kara Hammond Coyle, Esq. $255 Gregory J. Babcock, ESq. $215 Melissa Bertsch $115 Mr. Nestor assured the Court that his firm is a "disinterested person" as that term is defined in Section 101(14) of the Bankruptcy Code. Headquartered in Elmhurst, Illinois, Rotec Industries, Inc. -- http://www.rotec-usa.com/-- is an industry leader in concrete products and concrete placing technology & solutions. The company filed for chapter 11 protection on May 31, 2006 (Bankr. D. Del. Case No. 06-10542). Edward J. Kosmowski, Esq., at Young, Conaway, Stargatt & Taylor, LLP, represents the Debtor in its restructuring efforts. When the Debtor filed for protection from its creditors, it estimated assets and debts between $10 million and $50 million. SAACO SERIES: S&P Holds BB+ Rating on Class M-10 Certificates ------------------------------------------------------------- Standard & Poor's Ratings Services affirmed its ratings on 13 classes of residential mortgage-backed certificates from SAACO Series 2005-NC4 Trust. The affirmed ratings reflect adequate actual and projected credit support percentages that should be sufficient to maintain the certificates at their current rating levels. As of the September 2006 distribution date, total and severe delinquencies for this transaction totaled 5.79% and 3.23% of the current pool balance, respectively, and cumulative losses represent 0.01% of the original pool balance. Credit support for this transaction is derived from a combination of subordination, excess interest, and overcollateralization. The collateral backing the certificates is a pool of interest-only, adjustable-rate mortgage loans secured by first liens on one- to four-family residential properties. New Century Mortgage Corp. originated all of the loans. Ratings Affirmed SAACO Series 2005-NC4 Trust Class Rating ----- ------ A-1, A-2, A-3 AAA M-1 AA+ M-2, M-3 AA M-4 A+ M-5 A M-6 A- M-7 BBB+ M-8 BBB M-9 BBB- M-10 BB+ SATELLITE ENTERPRISES: Earns $298,000 in 2006 Second Quarter ------------------------------------------------------------ Satellite Enterprises Corp. has filed its second quarter financial statements for the three months ended June 30, 2006, with the Securities and Exchange Commission. The Company earned $297,531 of net income on $265,720 of net sales for the three months ended June 30, 2006, compared to a $375,355 net loss on $701,572 of net sales in last year's second quarter. On May 2, 2006, the company recognized a gain from discontinued operations of $471,322 when its wholly owned subsidiary Satellite Newspapers Suisse GMBH sold its interest in Satellite Newspaper Content B.V. and Satellite Newspaper Trading B.V., which accounted for the net income posted in the second quarter. At June 30 2006, the Company's balance sheet showed $2,751,684 in total assets and $5,235,526 in total liabilities, resulting in a $2,483,842 stockholders' deficit. The Company's June 30 balance sheet also showed strained liquidity with $789,160 in total current assets available to pay 1,524,497 in total current liabilities coming due within the next 12 months. Full-text copies of the Company's first quarter financial statements for the three months ended June 30, 2006, are available for free at http://researcharchives.com/t/s?13d4 Going Concern Doubt As reported in the Troubled Company Reporter on June 8, 2006, Meyler & Company, LLC, in Middletown, New Jersey, raised substantial doubt about Satellite Enterprises Corp.'s ability to continue as a going concern after auditing the Company's consolidated financial statements for the year ended Dec. 31, 2005. The auditor pointed to the Company's losses since inception, negative working capital, stockholders' deficiency, and need for additional financing. Based in Westport, Connecticut, Satellite Enterprises Corp. (OTCBB: SNWP) -- http://www.satellitenewspapers.com/-- receives, distributes and sells newspaper data, whick can be printed via an automated free-standing KiOSK(TM). The Company also has a user- friendly software application, CLiENT, which can print a single copy or bulk quantity at any given time. SILICON GRAPHICS: Court OKs Pact Allowing Horrock to Pursue Claim ----------------------------------------------------------------- The U.S. Bankruptcy Court for the Southern District of New York approved a stipulation between Silicon Graphics Inc. and Dr. Giles Horrocks allowing modified stay for Dr. Horrock to pursue personal injury claim. As reported in the Troubled Company Reporter on Oct. 10, 2006, Dr. Horrocks allegedly sustained personal injuries when a car driven by Heidi Racanelli -- an employee of Silicon Graphics, Inc. -- hit his bicycle. Since the Debtors maintain domestic auto liability insurance with Federal Insurance Company -- which coverage is limited to $1,000,000 per occurrence -- the Debtors and Dr. Horrocks stipulate that in return for Dr. Horrocks' agreement to waive any claims against the Debtors in their Chapter 11 cases, the automatic stay is modified solely to permit Dr. Horrocks to proceed against the Insurance Coverage. 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. Judge Lifland confirms the Debtors' Plan of Reorganization on Sept. 19, 2006. 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. 21; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000) SOLO CUP: Posts $299.4 Million Net Loss for 2006 Second Quarter --------------------------------------------------------------- Solo Cup Company has completed its review of accounting issues and has restated certain previously issued consolidated financial statements. The Company disclosed that it has filed its second quarter 2006 Form 10-Q and has satisfied the terms of the indenture for the its 8.5% senior subordinated notes due 2014. In addition, on Oct. 13, 2006, the Company concluded discussions with its lenders under its credit facilities and obtained a waiver and amendment through Jan. 2, 2007. "The restatement work was a rigorous and intense process that revealed certain material weaknesses in our financial controls and we are taking decisive steps to address those issues," Robert M. Korzenski, chief executive officer, said. "Importantly, this work renewed our confidence in the fundamentals of our business, reaffirmed the compelling strategic, operational and financial rationale of the Solo Cup/Sweetheart merger, and highlighted the quality and dedication of our employee team." For the thirteen weeks ended July 2, 2006, the Company reported net sales of $670.3 million, an increase of $23.4 million, or 3.6%, from net sales of $646.9 million, as restated, for the three months ended July 3, 2005. Gross profit for the thirteen weeks ended July 2, 2006, was $92 million, an increase of $9.8 million, or 12%, from gross profit of $82.1 million, as restated, for the comparable period in 2005. For the thirteen weeks ended July 2, 2006, the Company reported a net loss of $299.4 million, versus a net loss of $2.8 million, as restated, for the comparable period in 2005. The 2006 loss reflects a non-cash charge of $228.5 million for the impairment of goodwill and a non-cash charge of $105 million to income tax expense to increase the valuation allowance for deferred tax assets. Restatement of Previously Issued Financial Statements The Company, on Aug. 16, 2006, disclosed a temporary delay in the filing of its Form 10-Q with the SEC for the second quarter ended July 2, 2006, saying it would need additional time to complete an internal review initiated by Mr. Korzenski of issues regarding certain accounting practices and procedures related to the Company's second quarter of 2006 and prior periods. The internal review was led by Eric A. Simonsen, its interim chief financial officer, and its findings were discussed with KPMG LLP, the company's independent registered public accountants. The categories of restated items included in one or more of the company's restated consolidated financial statements include timely recognition of certain credits to customers, certain credits from vendors and certain accrued expenses; accrued payroll and other related costs; accrued freight; and inventory valuation. The aggregate change in operating income associated with the restatement was an increase of $3.2 million in the first quarter of 2006; a decrease of $19.7 million in full fiscal year 2005; a decrease of $8.2 million in full fiscal year 2004; a decrease of $7.1 million in full fiscal year 2003; a decrease of $900,000 in full fiscal year 2002; and an increase of $200,000 in full fiscal year 2001. The Company says that the restatement of its consolidated financial statements did not impact its cash balances. It currently has approximately $23 million of cash on hand and approximately $36 million of borrowing availability under the terms of its domestic revolving credit facility. Mr. Korzenski added: "It should be noted that we now have a new and very strong financial and accounting team; newly implemented accounting controls; and a strong organizational commitment at both the board and management levels to improved internal and external communication." Solo Cup Company, headquartered in Highland Park, Illinois, is one of the largest domestic manufacturers of disposable paper and plastic food and beverage containers used in the foodservice and retail consumer markets. Products include cups, lids, straws, napkins, cutlery, and plates. Net sales for the twelve months ended July 2, 2006 were approximately $2.5 billion. * * * As reported in the Troubled Company Reporter on Oct. 20, 2006 Moody's Investors Service is continuing the review for possible downgrade of Solo Cup Company first initiated on Aug. 16, 2006 and reiterated on Sept. 15, 2006. Although Solo Cup has met its obligation to file financial statements and has completed its previously announced review of accounting issues, Moody's continues to have concerns regarding liquidity and ongoing business strategy. Moody's expects to conclude the review by the end of January 2007. These ratings remain under Review for Possible Downgrade: -- $150 million senior secured revolving credit facility maturing Feb. 27, 2010, B2 -- $635 million senior secured term loan B due Feb. 27, 2011, B2 -- $80 million senior secured second lien term loan due Feb. 27, 2012, Caa1 -- $325 million 8.5% subordinated notes due Feb. 15, 2014, Caa2 STRUCTURED ASSET: Moody's Confirms Ba2 Rating on Class B4 Certs. ---------------------------------------------------------------- Moody's Investors Service confirmed and upgraded a number of certificates from eight deals originated by Bear, Stearns & Co. Inc. The actions are based on the analysis of the credit enhancement provided by excess spread, overcollateralization, subordination, and mortgage insurance when applicable. These are Moody's rating actions: * Upgrade: * Issuer: Bear Stearns Asset Backed Securities Trust -- 2003-AC3, Class M-1, upgraded from Aa2 to Aa1, -- 2003-AC3, Class B-1, upgraded from Baa2 to Baa1 -- 2003-AC4, Class M-1, upgraded from Aa2 to Aaa -- 2003-AC4, Class M-2, upgraded from A2 to Aa2 -- 2003-AC4, Class BB, upgraded from Baa2 to A1 -- 2003-AC5, Class M-1, upgraded from Aa2 to Aaa -- 2003-AC5, Class M-2, upgraded from A2 to Aa3 -- 2003-AC5, Class B, upgraded from Baa2 to A1 -- 2003-AC6, Class A-3, upgraded from Aa1 to Aaa -- 2003-AC6, Class M-1, upgraded from Aa2 to Aaa -- 2003-AC6, Class M-2, upgraded from A2 to Aa2 -- 2003-AC6, Class BB, upgraded from Baa2 to A1 -- 2003-AC7, Class M-1, upgraded from Aa2 to Aaa -- 2003-AC7, Class M-2, upgraded from A2 to Aa3 -- 2003-AC7, Class B, upgraded from Baa2 to A3. * Issuer: Impac CMP Trust -- 2003-2F, Class M-1, upgraded from Aa2 to Aaa -- 2003-2F, Class M-2, upgraded from A2 to Aa2 -- 2003-2F, Class B, upgraded from Baa1 to A1 * Issuer: Impac Secured Assets Corporation -- 2003-1, Class M-1, upgraded from Aa2 to Aaa -- 2003-1, Class M-2, upgraded from A2 to Aa1 -- 2003-1, Class B, upgraded from Baa1 to A1 * Confirm: * Issuer: Bear Stearns Asset Backed Securities Trust -- 2003-AC3, Class M-2, rating confirmed at A2, -- 2003-AC3, Class M-3, rating confirmed at A2 * Issuer: Structure Asset Mortgage Investments Trust II -- 2003-AR4, Class B1, rating confirmed at Aa2, -- 2003-AR4, Class B2, rating confirmed at A2, -- 2003-AR4, Class B3, rating confirmed at Baa2, -- 2003-AR4, Class B4 rating confirmed at Ba2 STURGIS MICHIGAN: S&P Upgrades Rating on System Bonds to BB+ ------------------------------------------------------------ Standard & Poor's Ratings Services has raised its rating on Sturgis, Michigan's water supply and distribution system bonds to 'BB+' from 'BB' due to the system's improving financial profile. The outlook is stable. "City management will need to maintain consistent watch over utility rates and capital needs if it is going to effectively manage the financial condition of the utility," said Standard & Poor's credit analyst Scott Garrigan. "While the water utility is projected to remain solvent with approved, annual rate increases through 2008, its exposure to adverse economic conditions remains high due to one industrial customer representing more than 20% of water revenues," he added. Because of the system's tight operations, any further deterioration in the water utility's financial position could result in downward rating action. The city will need to build its cash reserves and sustain debt service coverage for any additional positive rating action to occur. Additional rating factors include a small but stable customer base, adequate system capacity, and minimal legal provisions. From fiscal 2000-2003, financial indicators show a deterioration in the water utility's liquidity position. From the fiscal years ended Sept. 30, 2000 through 2003, the utility's unrestricted cash position decreased to $0 from $857,000. During that same time period, annual debt service coverage fluctuated from just 0.3x- 1.6x. Both 2004 and 2005 showed slight improvements to the water system's financial profile. Over that time, cash increased to $249,000 and net revenues covered annual debt service by 1.55x at the fiscal year ended Sept. 30, 2005. Expectations for 2006 show that net revenues should cover annual debt service by 1.26x, although cash balance estimates are unavailable. Sturgis' water system serves a total of 4,145 customers, 85% of which are residential; the base has remained stable for the past several years. However, the customer base is highly concentrated within one customer, Sturgis Foundry. The foundry currently represents approximately 20% of revenue and 25% of total water usage. Combined monthly water and sewer rates are currently $45.38 per $1,000 cubic feet, with the total rate increasing by 8.7% annually. SUSSER HOLDINGS: Moody's Lifts Rating on $170 Million Senior Notes ------------------------------------------------------------------ Moody's Investors Service upgraded all ratings of Sussers Holdings LLC. The upgrade of the long-term ratings is prompted by the initial public offering on Oct. 19, 2006, and the meaningful improvements in the company's balance sheet that will result from the company's intent to exercise its option to redeem $50 million of the senior notes at 110.625% at par with a portion of the proceeds. The upgrade of the speculative grade liquidity rating considers Moody's belief that the company will be able to cover the expected free cash flow deficit over the next four quarter using excess funds from the initial public offering. The rating outlook is stable. These are the rating actions: -- $170 million 10 5/8% senior unsecured notes (2013) to B2 (LGD 5, 73% LGD rate) from B3 (LGD 4, 69% LGD rate); -- Corporate family rating to B1 from B2; -- Default probability rating to B1 from B2; and the -- Speculative grade liquidity rating to SGL-2 from SGL-3. The senior unsecured note balance will decline to $120 million after the optional redemption. Moody's does not rate the $50 million secured revolving credit facility. Weighting down the corporate family rating at B1 are pro-forma credit metrics that remain relatively weak even after the expected debt reduction due to relatively low operating margins. The geographic concentration of the company's retail and wholesale operations and the intensely competitive nature of the convenience store industry, including from non-traditional gasoline retailers, also limit the ratings. Use of initial public offering proceeds for debt payment partially mitigates Moody's concerns about high leverage and low fixed charge coverage that arose following the December 2004 leveraged buyout. The ratings also recognize certain qualitative aspects of the company's franchise that have low investment grade or high non- investment characteristics such as the moderate cash flow seasonality, the company's important market position in and around South Texas, and the substantial asset value from real estate ownership. The stable rating outlook reflects Moody's expectation that the company's financial profile will progress as: -- front-end average unit volume and operating profit grow from appealing new products and development of the foodservice category; -- gasoline volume and cents per gallon profit remain healthy; and, -- a portion of discretionary cash flow is used to improve the balance sheet. The ratings are based on the expectation that recent high gasoline profitability will moderate over time. Over the longer term ratings could eventually move upward if financial flexibility sustainably strengthens such that EBIT coverage of interest expense approaches 2 times, leverage falls toward 5 times, and Free Cash to Debt rises to exceed 5%, if the system profitability expands from new store development and growth in comparable merchandise sales, and the company is able to maintain long-term gasoline profitability even as non-traditional competitors open additional fuel retailing locations. Ratings could fall if credit metrics weaken such that leverage rises above 6.5 times or EBIT to interest expense falls below 1 time, if free cash flow remains negative for reasons such as declines in operating profitability or weak returns on capital investment, or if non-traditional fuel retailers exert downward pricing pressure on gasoline profitability. Moody's has applied its new Probability-of-Default and Loss-Given- Default rating methodology to Susser. Moody's long-term credit ratings are opinions about expected credit loss which incorporate both the likelihood of default and the expected loss in the event of default. The LGD rating methodology disaggregates these two key assessments in long-term ratings. The LGD rating methodology also enhances the consistency in Moody's notching practices across industries and improves the transparency and accuracy of our ratings as our research has shown that credit losses on bank loans have tended to be lower than those for similarly rated bonds. Probability-of-default ratings are assigned only to issuers, not specific debt instruments, and use the standard Moody's alpha- numeric scale. They express Moody's opinion of the likelihood that any entity within a corporate family will default on any of its debt obligations. Loss-given-default assessments are assigned to individual rated debt issues -- loans, bonds, and preferred stock Moody's opinion of expected loss are expressed as a percent of principal and accrued interest at the resolution of the default, with assessments ranging from LGD1 (loss anticipated to be 0% - 9%) to LGD6 (loss anticipated to be 90% - 100%). Susser Holdings LLC, with headquarters of its operating subsidiary in Corpus Christi, Texas, operates 320 convenience stores in Texas and Oklahoma. The company also wholesales fuel to 352 independent retailers. Revenue for the twelve months ending July 2, 2006 was about $2.2 billion. TARGUS GROUP: Names Michael Hoopis as Chief Executive Officer ------------------------------------------------------------- Targus Group International Inc. appointed Michael P. Hoopis as its Chief Executive Officer effective Oct. 23, 2006. Howard Johnson, Chairman of the Board of Directors of Targus, and Timothy Mayhew, Managing Director of Fenway Partners, jointly commented: "We are delighted that Mike has joined Targus to provide the leadership and consumer products expertise necessary to lead the next phase of the company's development. Throughout his career, Mike has earned a strong reputation for successfully managing well-known consumer product companies including Black & Decker's Worldwide Household Products Group, Price Pfister Plumbing Products, Kwikset Security Hardware and most recently Water Pik Technologies. His ability to quickly develop and execute focused business plans in difficult competitive environments has led to consistent sales and profit improvements and significant increases in enterprise values." "Mike's proven leadership and strategic capabilities, coupled with his experience in global businesses, multiple channels of distribution, new product innovation and supply chain excellence will be invaluable to Targus as he manages the business to realize its tremendous potential" Messrs. Johnson and Mayhew continued. For the past seven years, Mr. Hoopis served as Water Pik's President and Chief Executive Officer. Mr. Hoopis was responsible for overseeing the spin-off and transition of Water Pik from a segment of Allegheny Teledyne to a public company in 1999. Prior to Water Pik, Mr. Hoopis held several management positions at Black & Decker from 1989-1998, including President of Worldwide Household Products, Price Pfister, Inc. and Kwikset Corporation. Prior to Black & Decker, Mr. Hoopis held several management positions with Beatrice Foods Inc. Mr. Hoopis earned his B.S. from the University of Rhode Island. The Company also reported that Victor C. Streufert will assume the position of Chief Financial Officer, Treasurer and Executive Vice President effective October 23, 2006, replacing John McAlpine who has left the company to pursue other opportunities. Messrs. Johnson and Mayhew commented: "With over 25 years of experience in key finance leadership roles, Vic's background in building world-class finance organizations and accelerating revenue and profit growth will be a critical element of Targus' ongoing success. We expect that Vic's unique blend of both public and private company experience will allow him to add significant value to Targus' finance, accounting and information systems efforts in the coming years." Most recently, Mr. Streufert was the Chief Financial Officer at Water Pik, where he worked closely with Mr. Hoopis in creating significant value. Under Messrs. Hoopis and Streufert's leadership, Water Pik's share price nearly quadrupled from the time of the spin-off to $27.75 at the time the company was sold. Prior to Water Pik, Mr. Streufert served as Senior Vice President of Finance and Administration and Chief Financial Officer of National Telephone & Communications, Inc., where he oversaw the finance, legal, and human resources departments from 1996-1998. In 1995 and 1996, he was Vice President of Finance and Chief Financial Officer of Pyxis Corporation where he refocused the company on earnings growth and completed the company's merger with Cardinal Health, Inc. From 1989-1995, he was Executive Vice President and Chief Financial Officer of American Health Properties, Inc., a $600 million NYSE-listed health care company. Prior to American Health Properties, Mr. Streufert held a variety of financial/accounting positions at Colgate Palmolive and American Hospital Supply Corporation. Mr. Streufert earned his M.B.A. from the University of Chicago and his B.A. in Economics from Valparaiso University. Eric Brenk, an advisor to Fenway Partners, served as interim CEO during a period of transition for the company and will return to his role at Fenway while continuing to work with Targus as a consultant. Korn/Ferry International completed the placement of Mr. Hoopis at Targus. Targus Group International, Inc., is owned by an investor group that includes Fenway Partners, a middle market private equity firm, the Howard Johnson family and Crimson Investments, a middle market investment firm. Based on Anaheim, California, Targus Group International Inc. -- http://www.targus.com/-- invented the notebook case and continues to advance the mobile accessories category with innovative and relevant solutions for mobile lifestyle. * * * As reported on the Troubled Company Reporter Sept. 20, 2006, Moody's Investors Service downgraded all ratings of Targus Group International, Inc. including the $230 million first-lien secured bank facilities B2 from B1 and $85 million second-lien secured term loan to Caa1 from B3. TCW LEVERAGED: Fitch Junks Rating on $21.1 Million Class E Notes ---------------------------------------------------------------- The junior subordinated participating notes issued by TCW Leveraged Income Trust IV, L.P. remain at 'CC/DR5'. This rating action is effective immediately: -- $21,187,790 class E junior subordinated participating notes remain at 'CC/DR5'. TCW LINC IV, a market value collateralized debt obligation that closed on May 16, 2000, and is managed by TCW Investment Management Company. On May 16, 2003, TCW LINC IV was out of compliance with its class E overcollateralization test. TCW was unable to cure the OC test in the 10 day cure period, which resulted in an event of default on June 3, 2003 as per the TCW LINC IV governing documents. Subsequent to the OC failure the class A, B, C and D notes were redeemed. Currently class E notes are the only outstanding class. As of the Sept. 29, 2006 valuation report the total market value of the assets was $21.4 million. Semi-liquid and illiquid investments account for 68% of the portfolio. This rating action is based on recovery estimates using both market value and discounted market value analysis. Fitch will continue to monitor and review this transaction for future rating adjustments. THERMAL NORTH: Moody's Cuts Rating on $226 Million Term Loan to B1 ------------------------------------------------------------------ Moody's Investors Service downgraded the existing senior secured credit facility ratings of Thermal North America Inc. from Ba3 to B1 and has assigned a B1 rating to the proposed new $370 million senior secured credit facilities consisting of a $305 million term loan facility due 2008, a $30 million synthetic letter of credit facility due 2008, and a $35 million revolving credit facility due 2008. The rating outlook remains stable. Proceeds from the proposed new facilities will be used to refinance Thermal's existing senior secured debt and finance the acquisition of "Thermal West" assets, as they are known, from Thermal's parent, Thermal North America Holdings, LLC. Thermal is wholly owned by a group of funds managed by Sowood Capital Management LP. We note the existing bank facilities are rated Ba3 and are under review for downgrade. This action concludes the review that commenced on September 26 which was precipitated by Moody's concern with Thermal obtaining an extension of its waiver for an earlier financial covenant violation. Thermal has since obtained this waiver through October 27, 2006. Upon closing of the proposed refinancing transaction, Moody's expects to withdraw all ratings assigned to Thermal's existing credit facilities. These are Moody's rating actions: -- $226 million senior secured term loan, due 2013, downgraded to B1 from Ba3 -- $35 million senior secured revolving credit facility, due 2011, downgraded to B1 from Ba3 -- $30 million senior secured synthetic letter of credit facility, due 2013, downgraded to B1 from Ba3 Assignments: -- $305 million senior secured term loan, due 2008 -- B1 -- $35 million senior secured revolving credit facility, due 2008 -- B1 -- $30 million senior secured synthetic letter of credit facility, due 2008 -- B1 The outlook is stable. The downgrade to a B1 rating reflects: -- the highly leveraged capital structure of Thermal upon closing of the transaction (expected pro-forma debt of approximately $323 million, including $18 million of non- recourse subsidiary level debt, but excluding the $30 million synthetic L/C represents a 6.7 times multiple of forecasted EBITDA of $48 million for 2006); -- a large near-term capital spending program that will need to be partially funded externally; the seasonality of cash flows; and, -- the significant refinancing risk that will exist in two years (2008) when the credit facility matures. More positively, the rating considers: -- the relatively stable, contractual nature of Thermal's cash flows; -- high barriers to entry; increased geographic diversity with the acquisition of the Thermal West assets; -- long-standing nature of the customer base; -- programs to stabilize certain operating and fuel costs (the $30 million synthetic letter of credit facility to be issued at closing is to back fuel commodity hedges); -- potential for incremental revenues and future de-leveraging as benefits of growth capital spending is realized over the next several years; -- senior secured claim on all assets not subject to regulation or other restrictions; and, -- the commitment of additional capital support from its owners, Sowood, in the form of a $30 million equity contribution agreement. Thermal's assets primarily provide direct heating and cooling systems, and to a lesser extent electrical service, to an array of institutional customers under mostly long-term contractual arrangements. The company's DHCS assets serve more than 1,050 customers, with universities, medical centers, property managers and local, state and federal government agencies representing a majority of the customer base. Many of these relationships have existed for decades, reflecting the energy delivery infrastructure that connects the customers to Thermal's assets. The B1 rating considers the relatively stable and predictable cash flow streams that are expected to be generated by Thermal's geographically diverse portfolio of DHCS assets. Although headquartered in Boston, Massachusetts, Thermal has operations located in Baltimore, Boston, Kansas City, Oklahoma City, Philadelphia, St. Louis, Trenton, and Tulsa, and, with the addition of Thermal West, Las Vegas and Los Angeles. Philadelphia, including the Gray's Ferry cogeneration plant, represents the single largest location, accounting for approximately 35% of Thermal's EBITDA generation. Concurrent with the closing of the bank facility, TNAH will contribute its Thermal West assets to Thermal and use approximately $58 million of the new facility to repay the debt utilized to initially fund the acquisition of these assets by TNAH in June 2006 from Sempra Energy for a purchase price of $86.4 million (implying an enterprise value 5.8 times its forecasted EBITDA for 2006 of $15 million). Thermal West will then become a wholly owned subsidiary of Thermal. The Thermal West assets are slightly less diverse as its largest customer, the Venetian Hotel and Casino, in Las Vegas, accounts for approximately 60% of Thermal West's EBITDA. Operationally, Thermal is viewed as having a relatively moderate level of business risk. Given the significant barriers to entry within the various DHCS service areas; there is generally only one DHCS in a given territory and its primary competition comes from self-generation by on-site systems, which are often difficult to install and costly to operate. Customer loss has been historically low (lost revenue has been less than 1% of annual revenue) and is most frequently caused by bankruptcy or building demolition. However, despite these "utility-like" business qualities, Thermal's customers are not completely captive; the larger customers can, from time to time, use their size as leverage to negotiate more attractive contract terms. Revenue from steam sales are expected to account for the majority of consolidated revenues with the remainder attributable to electricity, chilled water, and hot water. It is notable that approximately 18% of revenue is from capacity payments paid irrespective of usage. Although many customers are served under long term contracts, Moody's expects some ongoing variability in steam sales year-to-year due to changes in weather patterns. Warmer winter weather, particularly in the Northeast U.S., had a negative effect on operating results this year due to lower volumes of steam sold which contributed to the leverage covenant default incurred in the second quarter and the materially lower than expected operating results that will be registered in 2006. More than 90% of Thermal's consolidated revenues are derived from contracts that have fuel pass-through provisions or are subject to fuel cost adjustments based on indexes that approximate actual changes in fuel costs. This provides protection against volatility in the market price of fuel, primarily natural gas and fuel oil. Although Sowood has remained supportive with its additional interim equity injections to date and the planned $30 million equity contribution in 2008, the company remains highly leveraged and will remain so following this transaction. As noted above, debt to EBITDA is expected to be approximately 6.7 times at close. Total debt of $323 million at close is also expected to increase in the near term due to Thermal's very sizeable near-term growth capital expenditure program. The plan involves spending of approximately $54 million through from the second half of 2006 through 2007. This is in addition to forecasted maintenance spending of $33 million over the same period. As such, free cash flow will be negative and will need to funded with additional funds drawn under the revolver and additional equity contributed by Sowood. Thermal's immediate source of external liquidity will be its $35 million revolving credit facility. Given the short-term tenor of the bank agreement, refinancing risk is a significant concern in 2008. This concern is partially offset by the existence of an irrevocable $30 million equity commitment from Sowood Commodity Partners Fund IV. Under the terms of the agreement, Sowood pledges to contribute $30 million to repay borrowings 60 days before the maturity date in 2008. Additionally, the $30 million commitment will be used to cure any violation of financial covenants and to make any principal or interest payments prior to 60 days before maturity if needed. Borrowings under the credit agreement will be secured by all available assets. Assets not included in the security package include the regulated service areas of Philadelphia, Kansas City, and St. Louis, which together account for approximately 12% of annual EBITDA. The bank agreement has two financial covenants (Debt / EBITDA and EBITDA / interest) which become increasingly restrictive through maturity. The stable outlook reflects Moody's view that the relatively stable nature of Thermal's cash flows will continue uninterrupted with no significant customer losses. Cash flows are likely to increase as the company's large near-term capital spending program nears completion in 2007-2008 and incremental benefits are realized. However, given the projected free cash flow deficits expected in 2007 and the underlying refinancing risk associated with the October 2008 maturity, it is unlikely the rating will be upgraded in the near term. Trends that could lead Moody's to consider a downgrade would include events that have substantial negative impact on cash flow such as operating performance difficulties or the loss of key customers to an alternative steam source, such that leverage and interest cover metrics stress to the point where Thermal's funds from operations to debt ratio falls to the low single digits percentage range and FFO interest coverage falls below 2.0 times for a prolonged period. The B1 rating on the new credit facilities is predicated upon final documentation being consistent with Moody's current understanding of the transaction structure. Based in Boston, Massachusetts, Thermal North America, Inc., is wholly owned by a group of funds managed by Sowood Commodity Partners. It has district heating and cooling operations in nine states and projected 2006 pro-forma gross revenues of $344 million. THOMAS EQUIPMENT: Hires M. Luther as Chief Restructuring Officer ---------------------------------------------------------------- Thomas Equipment Inc. appointed Michael S. Luther as Chief Restructuring Officer and he will be responsible for leading all day-to-day operations of the company, effective immediately. Mr. Luther has been involved in corporate finance and merchant banking for 20 years. Most recently, Mr. Luther managed a hedge fund associated with Deutsche Bank and during his tenure Mr. Luther led combined transactions of over $1 billion, the most notable of which was the purchase of Alamo National Car Rental, acquired for roughly $4 billion by Cerberus Capital of New York. James E. Patty, President and Chief Executive Officer, and William Davis, Chief Operating Officer, have resigned as part of the next phase of Thomas' restructuring. Thomas' Board of Directors approved an undertaking by Thomas' Compensation Committee to work out separation agreements with both which fairly compensates each for their significant work for Thomas over recent months. Mr. Patty and Mr. Davis will provide Mr. Luther with transitional support. In addition, Mr. Patty is a Thomas Director and will remain on its Board of Directors. "The Board of Directors has appreciated all of the extremely hard work and long hours both James E. Patty and Dr. William Davis have put into the first phase of our restructuring," stated David Marks, Chairman of Thomas Equipment, Inc. "The Board of Directors believes that Mr. Luther is uniquely qualified to interface with Thomas' senior lenders, investors and creditors as the company moves towards the next phase of its restructuring and we expect he will be an extremely valuable part of our senior management team." "The company continues to face significant short-term challenges that must be overcome to successfully implement longer term strategic opportunities," stated Mr. Luther. "We will continue to push forward with the restructuring and I am very confident that we can emerge as a stronger and more vibrant company." About Thomas Equipment Headquartered in Milwaukee, Wisconsin, Thomas Equipment, Inc. (AMEX: THM) -- http://www.thomas-equipment.com/-- manufactures skid steer and mini skid steer loaders as well as attachments, mobile screening plants and six models of mini excavators. The Company distributes its products through a worldwide network of distributors and wholesalers. In addition, the Company's wholly owned subsidiaries manufacture specialty industrial and construction products, a complete line of potato harvesting and handling equipment, fluid power components, pneumatic and hydraulic systems, spiral wound metal gaskets, and packing material. At March 31, 2006, Thomas Equipment Inc.'s balance sheet showed a stockholders' deficit of $31,289,000, compared to a $67,129,000 deficit at June 30, 2005. TIME AMERICA: Semple & Cooper Raises Going Concern Doubt -------------------------------------------------------- Semple & Cooper LLP expressed substantial doubt about Time America Inc.'s ability to continue as a going concern after auditing the company's financial statements for the fiscal year ended June 30, 2006, citing as reasons the recurring losses from operations and net capital deficiency. The auditing firm further noted that to continue as a going concern, the Company will have to attract additional capital and control expenses to achieve profitable operations. Time America reported a net loss of $1,945,735 for the year ended June 30, 2006, as compared to a net loss of $2,020,394 the prior year. The company generated total revenues of $6,716,150 for fiscal 2006, compared to $6,082,238 in 2005. As of June 30, 2006, the company's balance sheet reflected total assets of $4,578,528 ($4,292,486 as of June 30, 2005), and total liabilities of $6,646,547 ($4,946,011 at June 30, 2005), resulting in a stockholders deficit of $11,940,015 at June 30, 2006 ($9,994,280 at June 30, 2005). A full-text copy of the company's annual report is available for free at http://ResearchArchives.com/t/s?13bf About Time America Time America, Inc. -- http://www.timeamerica.com/-- develops, manufactures and markets a line of time and labor management software and hardware products. These products are designed to improve productivity by automating time and attendance, workforce scheduling and management of labor resources. Target markets are small to mid-sized companies from 25 to 2,000 or more employees. Solutions are offered in a 100% web-based application service provider model, as well as client/server and PC-based application. TRIAD HOSPITALS: Lowers Third Quarter Earnings Expectation ---------------------------------------------------------- Triad Hospitals Inc. expects its financial results for the three months ended Septembrt 30, 2006, to reflect an increase of approximately $25 million pre-tax to the estimated allowance for doubtful accounts, resulting in a negative impact of approximately $0.18 on diluted earnings per share from continuing operations. The Company expects its provision for doubtful accounts for the quarter to be approximately 11.0-11.2% of revenue, vs. 7.3% in the third quarter of 2005 and 9.3% in the second quarter of 2006. As a result, the Company expects diluted EPS from continuing operations for the three months ended Sept. 30, 2006, to be approximately $0.46-0.47, below the current consensus expectation of $0.65. Since the fourth quarter of 2005, the Company has recorded an allowance for doubtful accounts based on a percentage of discounted self-pay receivables, using the historical collection rate for those receivables of approximately 38%. After updating its collection rate factors, the Company currently estimates that the collection rate is approximately 35%. In addition to the change in the collection rate, the Company's self-pay receivables have increased by approximately $38 million since the second quarter of 2006. As a result, the Company recorded an additional $25 million of allowance for doubtful accounts: $15 million (negative impact of $0.11 per diluted share) to true up its estimate of collection rates and $10 million (negative impact of $0.07 per diluted share) related to current trends in self-pay receivables. The Company is withdrawing its previously issued guidance for diluted EPS from continuing operations for 2006 and subsequent periods. The Company expects current trends in provision for doubtful accounts to continue for at least the near-term, which could negatively impact diluted EPS in the fourth quarter of 2006; the Company expects to issue updated guidance for 2006 in its third quarter earnings release and new guidance for 2007 and thereafter following completion of its strategic planning and budgeting process for 2007. Triad Hospitals, Inc. -- http://www.triadhospitals.com/-- owns and manages hospitals and ambulatory surgery centers in small cities and selected larger urban markets. The Company currently operates 52 hospitals (including one under construction) and 12 ambulatory surgery centers in 16 states with approximately 9,490 licensed beds. In addition, through its QHR subsidiary, the Company provides hospital management, consulting, and advisory services to more than 180 independent community hospitals and health systems throughout the United States. * * * As reported in the Troubled Company Reporter on Oct. 4, 2006, Moody's Investors Service confirmed its Ba3 Corporate Family Rating for Triad Hospitals, Inc., in connection with the implementation of its new Probability-of-Default and Loss-Given Default rating methodology for the U.S. Hospital and Long-term Care sectors. TRUE NORTH: Gets Conditional TSX Approval for C3 Online Purchase ---------------------------------------------------------------- True North Corporation received conditional approval from the TSX Venture Exchange dated Oct. 11, 2006 of its proposed acquisition of C3 Online Marketing Inc. Final approval of the Exchange is subject to the Corporation fulfilling all of the requirements of the Exchange on or before Nov. 22, 2006. The Corporation and C3 plan to close the Acquisition on Nov. 2, 2006. Pursuant to the terms of a share exchange agreement dated June 14, 2006, True North has agreed to acquire all of the issued and outstanding securities in the capital of C3 in exchange for 12,750,607 common shares in the capital of True North. In addition, True North will issue an additional 3,187,651 common shares to acquire an additional 800,000 common shares in the capital of C3 upon the exercise of 800,000 stock options. Each C3 Option is exercisable at a price of $0.01 per share. On the closing of the Acquisition, all of the C3 Options will be exercised and an aggregate of 800,000 shares in the capital of C3 will be issued to the option holders and True North will issue an additional 3,187,651 common shares to acquire the 800,000 C3 shares. In addition, True North will issue an additional 7,678,578 common shares in settlement of $1,075,001 in debt owed by True North to certain shareholders and creditors of True North and C3. A full-text copy of the Filing Statement, which contains full disclosure regarding the acquisition and the business of C3, is available for free at http://ResearchArchives.com/t/s?13d1 About C3 Online Marketing Headquartered in Toronto, Canada, C3 Online Marketing Inc. -- http://www.c3onlinemarketing.com/-- provides online solutions for marketers designed to attract and retain online relationships. About True North Headquartered in Mississauga, Ontario, True North Corporation (TSX: TN) -- http://www.truenorthcorp.ca/-- is an integrated marketing services company. TNC delivers services through two focus areas: Marketing Services & Sales Channel Support. At June 30, 2006, the Company's balance sheet showed a stockholders' deficit of $2,248,230, compared to deficit of $763,583 at Dec. 31, 2005. TYRINGHAM HOLDINGS: Marcus Santoro Hired as Panel's Local Counsel ----------------------------------------------------------------- The Official Committee of Unsecured Creditors in Tyringham Holdings Inc.'s chapter 11 case, obtained permission from the U.S. Bankruptcy Court for the Eastern District of Virginia to retain Marcus, Santoro & Kozak, P.C., as its local counsel. As reported in the Troubled Company Reporter on Oct. 2, 2006, Marcus Santoro will: a. advise the Committee with respect to its powers and duties under Section 1103 of the Bankruptcy Code; b. take all necessary action to preserve, protect and maximize the value of the Debtor's estate for the benefit of the Debtor's unsecured creditors, including but not limited to, investigating the acts, conduct, assets, liabilities, and financial condition of the Debtor, the operation of the Debtor's businesses and the desirability of the continuance of such business, and any other matter relevant to the case or to the formulation of a plan; c. prepare on behalf of the Committee motions, applications, answers, orders, reports and papers that may be necessary to the Committees interests in the Debtor's chapter 11 case; d. participate in the formulation of a plan as may be in the bests interests of the Committee and the unsecured creditors of the Debtor's estate; e. represent the Committee's interests with respect to the Debtor's efforts to obtain postpetition secured financing; f. advise the Committee in connection with any potential sale of assets; g. appear before the Court, any appellate courts, and the U.S. Trustee and protect the interests of the Committee and the value of the Debtor's estate before such courts and the U.S. Trustee; and h. perform all other services as may be required and in the interests of the creditors. Karen M. Crowley, Esq., a member at Marcus Santoro, told the Court that the attorneys at the firm bill between $150 and $310 per hour while paralegals bill between $75 and $90 per hour. Ms. Crowley assured the Court that her firm is a "disinterested person" as that term is defined in Section 101(14) of the Bankruptcy Code. Headquartered in Richmond, Virginia, Tyringham Holdings, Inc., sells premium brand name jewelry to a broad base of middle and upper income customers. The Company filed for chapter 11 protection on Sept. 6, 2006 (Bankr. E.D. Va. Case No. 06-32385). Charles A. Dale, III, Esq., at McCarter & English, LLP, represents the Debtor in its restructuring efforts. Scott L. Hazan, Esq., at Otterbourg, Steindler, Houston & Rosen, P.C., represents the Official Committee of Unsecured Creditors. At August 30, 2006, the Debtor disclosed that it had $25.0 million in total assets and $23.7 million in total debts. TYRINGHAM HOLDINGS: Panel Hires Consensus as Financial Advisors --------------------------------------------------------------- The U.S. Bankruptcy Court for the Eastern District of Virginia authorized the Official Committee of Unsecured Creditors in Tyringham Holdings, Inc.'s chapter 11 case, to retain Consensus Advisors LLC, as its financial advisors. Consensus Advisors will: (a) become familiar with, to the extent Consensus deems reasonably appropriate, and analyze the business, operations, properties, financial condition and prospects of the Company; (b) analyze the Company's financial liquidity and availability of assets to support DIP loans; (c) propose a list of parties to whom the businesses, separately or as a whole, may be sold under the circumstance; (d) determine a range of values for the Company, its subsidiaries and affiliates on a hypothetical liquidation basis and, if requested, on an enterprise basis; (e) participate in the review and analysis of bids to acquire the Company or all or part of its assets; (f) participate in marketing of the Company's assets for sale, either as a whole or as separate parts; (g) advise the Company on financial and factual issues concerning capital structure priorities; (h) assist the Committee's counsel in developing support for Committee positions on preference and other avoidance actions, reclamation claims, consignment issues, subordination or recharacterization issues and/or other litigation matters; and (i) render other general bankruptcy and consulting services such as attending court hearings, if so requested, and identifying or evaluating strategies to maximize the value of the estate, including a sale, liquidation or other alternatives. The firm will charge the Debtor at a flat rate of $350 per hour for its services. In addition, if two professionals employed by the firm participate in meetings of more than four hours, the second employee's billing rate for any session will be $175 per hour. Michael A. O'Hara, a Consensus Advisors member, assures the Court that his firm does not represent any interest adverse to the Committee. Headquartered in Richmond, Virginia, Tyringham Holdings, Inc., sells premium brand name jewelry to a broad base of middle and upper income customers. The Company filed for chapter 11 protection on Sept. 6, 2006 (Bankr. E.D. Va. Case No. 06-32385). Charles A. Dale, III, Esq., at McCarter & English, LLP, represents the Debtor in its restructuring efforts. Scott L. Hazan, Esq., at Otterbourg, Steindler, Houston & Rosen, P.C., represents the Official Committee of Unsecured Creditors. At August 30, 2006, the Debtor disclosed that it had $25.0 million in total assets and $23.7 million in total debts. UNIVERSAL COMPRESSION: Moody's Puts Ba1 Rating on $500MM Sr. Loan ----------------------------------------------------------------- Moody's Investors Service assigned a Ba1, LGD 3 (36%) rating to Universal Compression Inc.'s $500 million senior secured bank credit facility. At the same time, Moody's affirmed Universal's Ba2 Corporate Family Rating, its Ba2 Probability of Default Rating and its B1, LGD5 (88%) ratings on its $175 million 7 1/4% Senior Notes. Universal Compression Inc. is a wholly owned subsidiary of Universal Compression Holdings Inc. Proceeds from the new credit facility are being used to refinance Universal's existing senior secured revolver and senior secured term loan. The outlook remains stable. Moody's will withdraw the ratings on the existing secured credit facilities once they have been repaid. Pete Speer, Moody's Vice President and Senior Analyst commented, "While Moody's has affirmed the stable outlook, the recent IPO of Universal Compression Partners creates uncertainties regarding the future capital structure and leverage profile of the combined enterprise which limits Universal's positive credit momentum and could pressure the ratings." Universal believes that the MLP structure of Universal Compression Partners, L.P. provides a lower cost of capital that could be utilized to accelerate growth of the domestic compression business. Moody's observes that UCLP adds the MLP constituency to the mix, an equity base that requires substantial and growing distributions. Universal intends to drop down its U.S. compression business into UCLP over time, which provides UCLP with a built-in growth profile. However, the compression business is untested in the MLP model and established MLP's are showing evidence of the strain of simultaneously growing their distributions, pursuing organic and acquisition growth, and maintaining their credit profile. The ratings could be pressured if the company incurs substantial leverage at UCLP in its drop down transactions without an appropriate reduction of leverage at Universal in order to maintain a reasonable combined leverage profile for the Ba2 rating. An aggressive use of UCLP debt to fund share buybacks at the Universal level or acquisitions could result in a negative outlook or downgrade. The Ba2 rating is supported by the company's leading position as the second largest natural gas compression services company in the world with 2.5 million horsepower as of June 2006, its recent pricing power and record fabrication backlog which has strengthened its earnings and cash flows, and its general reduction in leverage over recent years (LTM Debt/EBITDA of 3.1x and debt to capitalization of 43% at June 30, 2006). Universal's core contract compression business provides 85% of the company's gross margin and is very stable in comparison to other oil and gas related businesses. In addition to the uncertainties regarding the future capital structure and leverage profile, Universal's Ba2 Corporate Family Rating is restrained by the growth challenges in the domestic compression sector which necessitates the pursuit of growth in higher risk and more challenging foreign markets, the substantial capital expenditures required for expansions and acquisition event risk. USEC INC: Restores $150 Million Availability to Credit Facility --------------------------------------------------------------- USEC Inc. and its direct subsidiary, United States Enrichment Corporation, entered into an amendment to the Amended and Restated Revolving Credit Agreement with the lenders, JPMorgan Chase Bank, N.A., as administrative and collateral agent, and the other financial institutions as "agents". The Company's revolving credit facility is a $400 million asset- based credit facility and borrowings are subject to limitations based on established percentages of eligible accounts receivable and inventory. The revolving credit facility also contains reserve provisions that reduce the facility's availability periodically or restrict the use of borrowings. The Company said that the amendment modifies the treatment of a reserve referred to in the credit agreement as the "senior note reserve" tied to the aggregate amount of proceeds received by the Company from debt or equity offerings. Following the amendment, the reserve will be treated as a reserve against the Company's eligible inventory, rather than directly reducing availability. Which means that reserve will now reduce available borrowings under the revolving credit facility only at the time and to the extent that the Company does not have sufficient eligible inventory and accounts receivable available to cover the reserve and its other reserves. The Company's other reserves currently consist primarily of a reserve for its future obligations to the Department of Energy with respect to the turnover of the gaseous diffusion plants to them at the end of the term of the lease of the facilities. The Company also disclosed that the senior note reserve had previously been treated as a reserve against availability. Which meant that it directly reduced availability under the revolving credit facility regardless of the amount of its eligible inventory and other assets. The effect of the prior treatment was that, after July 19, 2006, the reserve reduced the availability under the Company's $400 million revolving credit facility by $150 million. Availability was approximately $214 million as of Sept. 30, 2006 with approximately $36 million in outstanding letters of credit and no borrowings. The amendment restored by $150 million the credit facility's current availability. Proceeds from any future debt or equity offerings, other than renewals or replacements of existing debt, will continue to reduce the amount of the senior note reserve, the Company further disclosed. A full text-copy of the Amendment may be viewed at no charge at http://ResearchArchives.com/t/s?13c9 Bethesda, Maryland-based USEC Inc. (NYSE:USU) is a global energy company that supplies enriched uranium fuel for commercial nuclear power plants. * * * As reported in the Troubled Company Reporter on June 30, 2006, Standard & Poor's Ratings Services lowered its corporate credit rating on USEC Inc. to 'B-' from 'B+'. At the same time, S&P lowered its senior unsecured rating on USEC's 6.75% senior notes due 2009 to 'CCC' from 'B-'. S&P said the outlook is negative. Moody's Investors Service downgraded the senior unsecured debt rating of USEC Inc. to B2 from Ba3. Moody's also downgraded the Corporate Family Rating to B1 from Ba2. VTEX ENERGY: Board Appoints Marshall Smith as CEO and Chairman -------------------------------------------------------------- VTEX Energy Inc.'s Board of Directors appointed Marshall A. Smith as its chief executive officer. Mr. Smith has over 30 years of experience in executive management of a Gulf Coast land drilling and workover company and in an exploration and production company. From 1989, Mr. Smith was a founding director of GulfWest Energy, Inc., during which he held the positions of chairman of the board, chief executive officer, president and director. Mr. Smith has most recently served as the president of ARCOA Oil & Gas, Inc., the general partner of ARCOA Energy Partners I, LP and ARCOA Energy Partners II, LP. In addition, Mr. Smith has previously worked with the Company in an advisory consultant role with a focus on strategic acquisitions and development of its oil and gas properties. The Company said that Mr. Smith was instrumental in its investment in all of the outstanding shares of Viking International Petroleum, LTD and the completion of an agreement on Aug. 7, 2006, of the contribution of the Company's shares in Viking to US Energy Overseas Investments, LLC, a subsidiary of U.S. Energy Systems, Inc., for consideration in the form of an equity position in Overseas which is convertible into common stock of U.S. Energy Systems. The Company also said that there are no family relationships between Mr. Smith and any of its other executive officers or directors. Election of Marshall Smith as Chairman On Oct. 10, 2006, the Company's Board of Directors, in connection with the Company's engagement of Mr. Smith as its chief executive officer, elected him as chairman of the Board. VTEX Energy, Inc. -- http://www.vtexenergy.com/-- explores for and produces oil and gas primarily in Louisiana and Texas. The company focuses on low-risk drilling developments, recompletions, and workovers, and has estimated proved preserves of 103,000 barrels of crude oil and 9.4 billion cu. ft. of natural gas. Going Concern Doubt Malone & Bailey, PC, expressed substantial doubt about VTEX Energy, Inc.'s ability to continue as a going concern after auditing the Company's financial statements for the fiscal year ended April 30, 2006. The auditing firm pointed to the Company's significant loss from operations in the current year, working capital deficit and default on certain debt instruments. WACHOVIA AUTO: Moody's Rates $30 Million Class E Notes at Ba2 ------------------------------------------------------------- Moody's Investors Service assigned definitive ratings of Prime-1, Aaa, Aa2, A1, Baa2 and Ba2 to eight classes of fixed rate notes issued by Wachovia Auto Loan Owner Trust 2006-2. The ratings of the Class A through Class E notes are based on the quality of the underlying automobile loans, the structure of the transaction, the amount of credit enhancement, the strength and expertise of Wachovia Bank, N.A., as master servicer and WFS Financial Inc as originator and subservicer. The Prime-1 rating of the Class A-1 money market notes is based primarily on the amount of liquidity from collections on the underlying receivables during the period prior to the notes' legal final maturity date. These are the rating actions: * Issuer: Wachovia Auto Loan Owner Trust 2006-2 -- $219,000,000 Class A-1 Notes, rated Prime-1 -- $378,000,000 Class A-2 Notes, rated Aaa -- $306,000,000 Class A-3 Notes, rated Aaa -- $135,000,000 Class A-4 Notes, rated Aaa -- $45,000,000 Class B Notes, rated Aa2 -- $48,000,000 Class C Notes, rated A1 -- $39,000,000 Class D Notes, rated Baa2 -- $30,000,000 Class E Notes, rated Ba2 This will be the second securitization involving WFS collateral since WFS, which is expected to be renamed Wachovia Dealer Services in 2007, was acquired by Wachovia in March 2006. WACHOVIA AUTO: S&P Rates $30 Million Class E Notes at BB -------------------------------------------------------- Standard & Poor's Ratings Services assigned its ratings to Wachovia Auto Loan Owner Trust 2006-2's $1.2 billion asset-backed notes. The ratings reflect: -- The credit support from the 13.50%, 9.75%, 5.75%, and 2.50% subordination for the class A, B, C, and D notes, respectively; -- A 0.25% reserve fund building to 0.50% of the initial pool balance; and -- Zero percent overcollateralization building to 1.00% of the current pool balance. The payment structure also features a reprioritization mechanism under which subordinate interest can be used to cover senior principal. Ratings Assigned Wachovia Auto Loan Owner Trust 2006-2 Class Rating Amount ----- ------ ------ A-1 A-1+ $219,000,000 A-2 AAA $378,000,000 A-3 AAA $306,000,000 A-4 AAA $135,000,000 B AA $45,000,000 C A $48,000,000 D BBB $39,000,000 E BB $30,000,000 WACHOVIA AUTO: Fitch Rates $30 Million Class E Notes at BB ---------------------------------------------------------- Fitch rates these Wachovia Auto Loan Owner Trust 2006-2 fixed-rate asset-backed notes as: -- $219,000,000 class A-1 'F1+'; -- $378,000,000 class A-2 'AAA'; -- $306,000,000 class A-3 'AAA'; -- $135,000,000 class A-4 'AAA'; -- $45,000,000 class B 'AA'; -- $48,000,000 class C 'A'; -- $39,000,000 class D 'BBB+'; -- $30,000,000 class E 'BB'. The securities are backed by a pool of new and used automobile and light-duty truck installment loans originated by WFS Financial Inc, a subsidiary of Wachovia Bank N.A. The expected ratings on the notes are based on the enhancement provided by subordination, over-collateralization, and a cash reserve account. The expected ratings also reflect the servicing capabilities of Wachovia, the high quality of retail auto receivables originated by WFS, and the sound legal and cash flow structures. Wachovia Auto Loan Owner Trust 2006-2 represents Wachovia's second securitization of WFS collateral subsequent to its purchase of Westcorp and its auto finance business, WFS. The class A notes have initial credit enhancement of 13.75%, consisting of 13.50% subordination, and a 0.25% reserve. The class B notes are supported by initial CE of 10.00% comprised of 9.75% subordination, and a 0.25% reserve. The class C notes have 6.00% CE (5.75% subordination and a 0.25% reserve), the class D notes have 2.75% initial CE (2.5% subordination and a 0.25% reserve) and class E notes have 0.25% initial CE (0.25% reserve). CE is expected to grow to 15.00% for Class A; 11.25% for class B, 7.25 for class C and 4.00% for class D and 1.5% for class E via accumulation of the cash reserve account to 0.50% of the initial pool balance and the growth of OC to 1.00% of the outstanding pool balance. Cash reserve floor is set to 0.50% of the initial pool balance while the floor for OC equals to 0.50%. As of the statistical cutoff date, the receivables had a weighted average APR of 12.42%. The weighted average original maturity of the pool was 67.0 months and the weighted average remaining term was 63.5 months resulting in approximately 3.5 months of collateral seasoning. The pool has a large concentration of receivables originated in California (34.02%). The next four largest state concentrations are Arizona (5.88%), Washington (5.75%), Texas (4.01%) and Nevada (3.14%). The exposure in California may subject the pool to potential regional economic downturns; however, the remaining portion of the pool is well diversified. Interest and principal are payable monthly, beginning Dec. 20, 2006. Additional structural protection is provided to senior noteholders through a shifting payment priority mechanism. In each distribution period, a test will be performed to calculate note collateralization amounts. If notes are undercollateralized, payments of interest to subordinate classes may be suspended and made available as principal to higher rated classes. Based upon a review of WFS's retail auto loan portfolio performance, prior WFS securitizations, and the composition of the assets in the securitized pool, Fitch expects Wachovia Auto Loan Owner Trust 2006-1 to perform consistent with recent securitizations. Through June 30, 2006, WFS's managed retail portfolio of approximately $13.9 billion had total delinquencies of 1.87%, and net chargeoffs of 1.28% (annualized). Both statistics were calculated as a percentage of the amount of contracts outstanding. WACHOVIA BANK: Fitch Holds Low-B Ratings on 6 Certificate Classes ----------------------------------------------------------------- Fitch Ratings affirms these classes of Wachovia Bank Commercial Mortgage Trust, series 2005-C20, commercial mortgage pass-through certificates as: -- $73.7 million class A-1 at 'AAA'; -- $148.1 million class A-2 at 'AAA', -- $366.4 million class A-3SF at 'AAA'; -- $218.5 million class A-4 at 'AAA'; -- $121.1 million class A-5 at 'AAA'; -- $218.8 million class A-6A at 'AAA'; -- $50 million class A-6B at 'AAA'; -- $176.1 million class A-PB at 'AAA'; -- $861.8 million class A-7 at 'AAA'; -- $317.5 million class A-1A at 'AAA'; -- $100 million class A-MFL at 'AAA'; -- $266.4 million class A-MFX at 'AAA'; -- $274.8 million class A-J at 'AAA'; -- Interest-only class X-P at 'AAA'; -- Interest -only class X-C at 'AAA'; -- $77.9 million class B at 'AA'; -- $27.5 million class C at 'AA-'; -- $68.7 million class D at 'A'; -- $41.2 million class E at 'A-'; -- $41.2 million class F at 'BBB+'; -- $32.1 million class G at 'BBB'; -- $41.2 million class H at 'BBB-'; -- $22.9 million class J at 'BB+'; -- $13.8 million class K at 'BB'; -- $13.8 million class L at 'BB-'; -- $9.2 million class M at 'B+'; -- $9.2 million class N at 'B'; -- $9.2 million class O at 'B-'. The $50.4 million class P is not rated by Fitch. The ratings affirmations are the result of stable performance and minimal paydown since issuance. As of the September 2006 remittance report, the transaction has paid down 0.4% to $3.65 billion from $3.66 billion at issuance. There are currently no specially serviced loans in this transaction. Five loans, Americas Mart (5.6%), 60 Hudson Street (4.4%), Westfield San Francisco Centre (1.6%), 101 Avenue of the Americas (1.6%), and JCS Studios (0.5%) maintain investment-grade credit assessments. The Americas Mart's (a 4,070,908 square-foot (sf) Merchandise Mart property in Atlanta, GA) year-end (YE) 2005 occupancy was 96% compared to 95.9% at issuance; 60 Hudson Street's (a 1,051,158 sf office property located in New York City) year-end 2005 occupancy was 77% compared to 78% at issuance. Westfield San Francisco Centre's (a 498,103 sf regional mall located in San Francisco, CA) year-end 2005 occupancy was 97.5 % compared to 99.2 % at issuance. For 101 Avenue of the Americas, a 411,097 sf office property located in New York, and JCS Studios, a 95,870 sf industrial property located in Brooklyn, NY, 2005 year-end occupancy remains stable at 100% since issuance. WACHOVIA BANK: Fitch Holds BB Rating on $5 Million Class MS Certs. ------------------------------------------------------------------ Fitch upgrades these Wachovia Bank Commercial Mortgage Trust, Series 2005-WHALE 5, commercial mortgage pass-through certificates as: -- $40.6 million Class C to 'AAA' from 'AA+'; -- $37.7 million Class D to 'AAA' from 'AA'; -- $14.7 million Class E to 'AAA' from 'AA-'; -- $14.6 million Class F to 'AA' from 'A+'; -- $14.6 million Class G to 'A+' from 'A'. In addition, these classes are affirmed: -- $121.5 million Class X-1A at 'AAA'; -- $269.5 million Class X-1B at 'AAA'; -- $67.5 million Class X-2, at 'AAA'; -- $84.0 million Class X-4, at 'AAA'; -- $96.8 million Class B at 'AAA'; -- $14.6 million Class H at 'A-'; -- $13.7 million Class J at 'BBB+'; -- $11.3 million Class K at 'BBB'; -- $10.8 million Class L at 'BBB-'; -- $5 million Class MS at 'BB'. Classes A-1, A-2, X-3, X-KHP1, X-KHP2, X-KHP3, KHP-1, KHP-2, KHP- 3, KHP-4, KHP-5, OKS, DP-1, DP-2, DP-3, and AG have paid in full. The upgrades are due to increased credit enhancement from the repayment of seven loans since issuance, Kyo-YA Hotel Pool, One Kendall Square, Denholtz Pool, Lightstone Pool 1, Alta Green, Embassy Suites -SEATAC, and the Radisson Lexington Hotel. Seven loans remain in the transaction, down from fourteen at issuance. As of the October 2006 distribution report, the pool's collateral balance has declined 78.8% to $274.5 million from $1.29 billion at issuance. Fitch reviewed year-end (YE) 2005 operating statement analysis reports and other performance information provided by the master servicer. The Fitch stressed debt service coverage ratio (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. All seven loans maintain their investment grade credit assessments. 2445 M Street (27.3%) is secured by a 296,017 sf office property located in Washington, DC. As of June 2006, the property remains 100% occupied. There is a $5 million non-pooled senior participation in this transaction. The pooled senior participation Fitch stressed DSCR as of YE 2005 is 1.21 times (x) from 1.34x at issuance. New Mexico Mall Pool (20%) is secured by two regional malls located in Las Cruces and Santa Fe, NM. Both malls are anchored by Sears. As of June 2006, the portfolio's total occupancy is 87%. The Fitch stressed DSCR as of YE 2005 is 1.28x from 1.35x at issuance. Dakota Square Mall (13.7%) is secured by a 673,311 regional mall located in Minot, ND. The mall is anchored by JC Penney's, Sears and Herbergers and shadow-anchored by Target. As of June 2006, the mall's total occupancy is 88%. The Fitch stressed DSCR as of YE 2005 is 1.30x from 1.36x at issuance. The remaining credit assessed loans, Chicago Place (8.7%), Gallery at Fulton (8.7%), Vasona Office Park (10.6%), and Lightstone Pool 2 (10.9%) have shown moderate declines in Fitch adjusted net cash flow (NCF). Fitch will continue to monitor the loans for further declines in performance. WERNER LADDER: Court Extends Lease Decision Period to January 8 --------------------------------------------------------------- Werner Holding Co. (DE), Inc., aka Werner Ladder Company, and its debtor-affiliates, obtained permission from the U.S. Bankruptcy Court for the District of Delaware to extend until Jan. 8, 2007, their Oct. 10, 2006 deadline to assume or reject their unexpired real property leases. Pursuant to Section 365(d) of the Bankruptcy Code, a bankruptcy court may, for "cause", approve a 90-day extension of the initial 120-day period within which a debtor-in-possession must assume or reject unexpired nonresidential real property leases. As reported in the Troubled Company Reporter on Sept. 25, 2006, Robert S. Brady, Esq., at Young, Conaway, Stargatt & Taylor, LLP in Wilmington, Delaware, explained that the Debtors' unexpired leases are spread throughout the country, including the leases associated with their manufacturing plant in Merced, California, three distribution centers, 10 warehouses, the corporate headquarters, and their sales offices. According to Mr. Brady, certain of the real property leases are important assets of the Debtors' estates, including the leases under the distribution network, which the Debtors are presently analyzing to assess the value of the leases to determine whether efficiencies can be generated to reduce the costs associated with the distribution network. The Debtors' distribution network accounts over $50,000,000 in costs each year. The Debtors believe that they will assume a majority of the real property leases and reject some of the leases relating to their warehouses. The Debtors, however, profess that an extension to the Lease Decision Period will give them more time to continue the process of restructuring their distribution network in an orderly manner and finish the analysis of the network. Further, the extension would afford the Debtors the ability to determine if there are any cost-saving opportunities that would enable them to increase the distribution network's overall efficiency; thus resulting in an increase of the Debtors' profitability. Mr. Brady assures the Court that the extension will not damage or prejudice the counterparties to the leases because the Debtors will perform all of their undisputed postpetition obligations under the leases in a timely fashion as required by Section 365(d)(3). Pursuant to Del. Bankr. L.R. 9006-2, the filing of the Debtors' request prior to the expiration of the 120-day period serves as an automatic extension of Lease Decision Period until the time the Court rules on the request. About Werner Ladder Headquartered in Greenville, Pennsylvania, Werner Co. -- http://www.wernerladder.com/-- manufactures and distributes ladders, climbing equipment and ladder accessories. The company and three of its affiliates filed for chapter 11 protection on June 12, 2006 (Bankr. D. Del. Case No. 06-10578). The firm of Willkie Farr & Gallagher LLP serves as the Debtors' counsel. Kara Hammond Coyle, Esq., Matthew Barry Lunn, Esq., and Robert S. Brady, Esq., Young, Conaway, Stargatt & Taylor, LLP, represents the Debtors as its co-counsel. The Debtors have retained Rothschild Inc. as their financial advisor. Greenberg Traurig LLP is counsel to the Official Committee of Unsecured Creditors. Jefferies & Co serves as the Committee's financial advisor. At March 31, 2006, the Debtors reported total assets of $201,042,000 and total debts of $473,447,000. (Werner Ladder Bankruptcy News, Issue No. 11; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000) WESTERN APARTMENT: Gets $25,000 Interim Cash Collateral Access -------------------------------------------------------------- The U.S. Bankruptcy Court for the District of Hawaii authorized Western Apartment Supply & Maintenance Company to use up to $25,000 of its lenders' cash collateral to pay upfront fees to potential refinancing lenders. The Court will continue the hearing on the Debtor's request at 10:30 a.m. on Dec. 11, 2006. The Debtor wants to use the cash collateral to pay deposits required to apply for and obtain refinancing loan from any of these interested lenders: 1. Summit Financial and Investment Group LLC; 2. BanCorp Capital; 3. ARCS Commerical Mortgage Co., LP; and 4. La Jolla Bank. Proceeds of the new loan will pay off the Debtor's outstanding debt with La Jolla Loans Inc. La Jolla Loan holds a first mortgage on the Debtor's interest in the Maui Oceanfront Inn as security for a $7,600,000 construction loan dated March 9, 2001. The refinancing terms also require that the refinancing lender's interests in the Maui Oceanfront Inn be in a prime position ahead of the interests of La Jolla, John Santero, Phoenix Asset Advisors, and Marc Hotels. The Debtor assures the Court that the standing of each of the secured creditors would be unaffected by the priming lien as La Jolla Loan's secured claim will be reduced by the entire proceeds of the new loan. About Western Apartment Based in San Diego, California, Western Apartment Supply & Maintenance previously filed for chapter 11 protection on Jan. 12, 2004 (Bankr. D. Hawaii Case NO. 04-00072). The case was dismissed on May 16, 2006. The Debtor filed its second chapter 11 petition on Apr. 18, 2006 (Bankr. S.D. Calif. Case No. 06-00821). When the Debtor filed for chapter 22, it listed total assets of $18,045,054 and total debts of $18,131,069. On June 30, 2006, at the request La Jolla Loans Inc., a secured creditor, the U.S. Bankruptcy Court for the Southern District of California transferred the Debtor's case to the U.S. Bankruptcy Court for the District of Hawaii on July 1, 2006 (Bankr. D. Hawaii Case No. 06-00459). John L. Smaha, Esq., at Smaha & Daley and Jerry Guben, Esq., at Reinwald, O'Connor & Playdon represent the Debtor. No Official Committee of Unsecured Creditors has been appointed in this case. WINDSOR QUALITY: S&P Rates $260 Million Senior Loan at B+ --------------------------------------------------------- Standard & Poor's Ratings Services assigned its bank loan and recovery ratings to Windsor Quality Food Company Ltd.'s (B+/Stable/--) $260 million senior secured credit facility. The facility consists of a $100 million five-year revolving credit facility and $160 million six-year term loan B, and is rated 'B+' (the same as the corporate credit rating on Windsor) with a recovery rating of '3', indicating the expectation for substantial (50%-80%) recovery of principal in the event of a payment default. Proceeds from the new credit facility will be used to refinance the prior $130 million (outstanding) credit facility and $85 million 13.75% subordinated notes (unrated). About $58 million is expected to be drawn on the $100 million revolver at close. The ratings are based on preliminary terms and are subject to review upon final documentation. Ratings for the company's existing $130 million credit facility will be withdrawn at closing of the refinancing. Ratings List Windsor Quality Food Company Limited Corporate credit rating B+/Stable/-- Rating Assigned $260 million bank financing B+ (Recovery Rating: 3) WILLIAMS INDUSTRIES: McGladrey & Pullen Raises Going Concern Doubt ------------------------------------------------------------------ McGladrey & Pullen, LLP, expressed substantial doubt about Williams Industries, Inc.'s ability to continue as a going concern after auditing the Company's financial statements for the fiscal years ended July 31, 2006 and 2005. The auditing firm pointed to the company's recurring losses from operations and its entry into a Forbearance Agreement with one of its primary lenders, which has accelerated certain debt. Williams Industries produced income of $93,000 on revenues of $42.1 million for the year ended July 31, 2006, compared to a loss of $11.4 million on revenues of $48.6 million for the year ended July 31, 2005. For the fourth quarter of the fiscal year, the company had revenue of $8 million with a profit of $13,000. Fiscal 2006 profitability is directly attributable to gains recognized on the sale of real estate. At July 31, 2006, the Company's balance sheet showed $30.1 million in total assets, $24.9 million in total liabilities, minority interests of $177,000, and approximately $4.9 million of stockholders' equity. Frank E. Williams, III, President and CEO, said that while he was pleased with the improvements, there is still substantial work to be done before the company achieves its potential. "The Board of Directors and management are in the process of evaluating all of the company's assets to make sure that we are maximizing value for the long-term benefit of the corporation and its shareholders," Mr. Williams said. A full-text copy of the Company's annual report is available for free at http://ResearchArchives.com/t/s?13de Forbearance Agreement Williams Industries' line of credit with United Bank of approximately $2.5 million matured on May 5, 2005. The Company subsequently received a Notice of Loan Defaults dated May 12, 2005. As a result of the notice, the debts to United Bank, aggregating approximately $5.4 million, were accelerated and remain due and payable in full. The Company entered into a Forbearance Agreement on June 30, 2005, providing for an initial forbearance period through Sept. 30, 2005, when a principal payment of $750,000 was due, and full payment not later than Feb. 28, 2006. On Sept. 30, 2005, the Company entered into a First Amendment to Forbearance Agreement, which modified the Forbearance Agreement to defer a portion of the principal payment and to extend the maturity of the remaining $4.7 million to March 6, 2006. On April 4, 2006, the Company entered into a Second Amendment to Forbearance Agreement. Under the second amendment: a) the Company made a payment of $250,000; b) the Company remitted $200,000 into a money market account to be drawn against to pay interest; c) the term of the Forbearance Agreement was extended through July 31, 2006; d) The Williams Family Limited Partnership increased the amount of its pledge of additional collateral by $758,000 in addition to $1 million pledged in the original agreement; e) Frank E. Williams, Jr., reaffirmed his personal guarantee of $242,000 of the Company's obligations to United Bank; f) the Company made an additional principal payment to the bank of $1 million by July 31, 2006, from the sale of land and extended the term of the Forbearance Agreement through Dec. 31, 2006. In addition, the Company's construction segment is in arrears on its payments under substantially all of its notes payable and leases, although, except as disclosed specifically, the lenders and lessors have not taken action to accelerate the indebtedness, foreclose on collateral or terminate the subject leases. About Williams Industries Williams Industries, Inc. -- http://www.wmsi.com/-- is a publicly owned specialty construction company in the Mid-Atlantic region. Its subsidiaries provide a range of services and products for the industrial, commercial and institutional construction markets. The construction and manufacturing services include: steel and precast concrete erection; miscellaneous metals installation; the fabrication of welded steel plate girders; rolled steel beams, and light structural and other metal products; the construction, repair and rehabilitation of bridges; and crane rental, heavy and specialized hauling and rigging. WILLIAMS PARTNERS: Moody's Assigns Loss-Given-Default Ratings ------------------------------------------------------------- In connection with Moody's Investors Service's implementation of its new Probability-of-Default and Loss-Given-Default rating methodology for the broad energy midstream sector, encompassing companies that engage in the extraction, treating, transmission, distribution, and logistics for crude oil, natural gas, and other hydrocarbon products, the rating agency affirmed its Ba3 corporate family rating on Williams Partners LP. At the same time, the rating agency affirmed its Ba3 probability- of-default rating on the Company's 7.5% Sr. Unsec. Global Notes due 2011 and attached an LGD4 rating on these notes, suggesting noteholders will experience a 67% loss in the event of a default. Moody's explains that current long-term credit ratings are opinions about expected credit loss, which incorporate both the likelihood of default and the expected loss in the event of default. The LGD rating methodology will disaggregate these two key assessments in long-term ratings. The LGD rating methodology will also enhance the consistency in Moody's notching practices across industries and will improve the transparency and accuracy of Moody's ratings as Moody's research has shown that credit losses on bank loans have tended to be lower than those for similarly rated bonds. Probability-of-default ratings are assigned only to issuers, not specific debt instruments, and use the standard Moody's alpha- numeric scale. They express Moody's opinion of the likelihood that any entity within a corporate family will default on any of its debt obligations. Loss-given-default assessments are assigned to individual rated debt issues -- loans, bonds, and preferred stock. Moody's opinion of expected loss are expressed as a percent of principal and accrued interest at the resolution of the default, with assessments ranging from LGD1 (loss anticipated to be 0% to 9%) to LGD6 (loss anticipated to be 90% to 100%). Headquartered in Tulsa, Oklahoma, Williams Partners L.P. -- http://www.williamslp.com/-- primarily gathers, transports and processes natural gas and fractionates and stores natural gas liquids. The general partner is Williams Partners GP LLC. WORLDCOM INC: Richard Drew Seeks Summary Judgment on Claim 11468 ---------------------------------------------------------------- Richard Drew, on behalf of himself and all others similarly situated, asks the U.S. Bankruptcy Court for the District of New York to grant it summary judgment with respect to Claim No. 11468. John E. Wall, Jr., Esq., in Dallas, Texas, asserts that summary judgment is proper because the facts demonstrate that MCI, Inc., was assessing and collecting "Federal Universal Service Fee" from Mr. Drew and other MCI customers on every bill for charges in excess of MCI/WorldCom's "filed tariff." Thus, the claims are subject to allowance pursuant to Section 502(b)(1) of the Bankruptcy Code. Mr. Wall relates that from January 1999 through July 1999, Mr. Drew was charged with a FUSF in an amount in which MCI was not authorized to assess under its Filed Tariff: Total Service Unauthorized FUSF Actual FUSF Month Usage Charge Assessment by MCI Charged ----- ------------ ----------------- ----------- January $4.24 $0.35 $0.35 February 33.37 2.00 2.00 March 40.62 2.44 2.44 April 21.62 1.30 1.30 May 41.57 2.49 2.49 June 38.17 2.29 2.29 July 0.66 0.05 0.05 Mr. Drew paid all the excessive charges in reliance of the Debtors' misrepresentations, Mr. Wall tells the Court. Mr. Wall maintains that MCI's conduct in collecting the FUSF constituted fraud and a violation of the Racketeer Influenced and Corrupt Organization Act. Class Certification Is Proper, Richard Drew Says In May 1999, in connection with the FUSF overcharges, Mr. Drew filed a purported class action petition in a Texas state court against MCI, seeking damages under various state tort theories of recovery. The Lawsuit was removed to the U.S. District Court for the Northern District of Texas in June 1999. The District Court did not certify the Lawsuit as a class action because MCI said that Mr. Drew must receive permission from the Federal Communications Commission to bring the action on behalf of the overcharged customers. After Mr. Drew filed with the FCC, MCI then asserted that FCC had no jurisdiction to grant class action claims, Mr. Wall notes. Accordingly, Mr. Drew asks the Bankruptcy Court to grant class certification of Claim No. 11468. Mr. Wall asserts that the putative class action satisfy the rules for class treatment set forth in Rule 7023 of the Federal Rules of Bankruptcy Procedure. Mr. Wall further asserts that the Class Action Certification is proper pursuant to Pursuant to Rules 23(a) and (b) of the Federal Rules of Civil Procedure. The putative class consists of all of the Debtors' customers who were charged a fee, which was deceptively entitled the Federal Universal Service Fee. The class consists of both business and residential customers who were billed for the FUSF during any month between June 15, 1995, and the Petition Date. Moreover, there could be millions of putative class members, Mr. Wall points out. Thus, joinder of all class members is impracticable. As the fraud violations were perpetuated through computer generated billing statements, which were mailed to MCI's customers, the putative class should be readily identifiable along with the amounts charged to each class member in excess of the actual filed tariff, Mr. Wall relates. Therefore, Mr. Drew anticipates that difficulties in management of the class should be minimal. Furthermore, Mr. Wall continues, the adjudication of separate claims by individuals would create a risk of inconsistent adjudications which would establish incompatible standards of conduct for MCI by reason of the fact that MCI could potentially charge or have charged different rates for what they misrepresent as the FUSF derived from the Filed Tariff. In addition, questions of law and fact are common to each member of the class. Specifically, the basis of the fraud claims stemmed from the MCI's alleged misrepresentation of the FUSF on the billing statements. Because the questions of law regarding fraud violations are the same for each potential class member, they predominate over any question affecting only individual members. Thus, a class action is a superior method for fairly and efficiently adjudicating the controversy, Mr. Wall contends. A class action also is a superior method of adjudicating the matter because Mr. Drew would fairly and adequately represent the class members, thus obviating the need for individuals to pursue their claims separately, Mr. Wall assures Judge Gonzalez. Mr. Drew has retained the Law Office of John E. Wall, Jr. to represent him and to maintain financial responsibility to fund the action. Arrangements for Mr. Drew's attorney's fees have been made based on a contingent fee basis. As the potential class members may number in the millions and the overcharges have occurred since 1997, the amount in controversy could easily reach $277,401,600, according to Mr. Wall. It is anticipated that class members will be notified by legal notice printed on postcards utilizing the Debtors' subscriber database. Notice costs should be paid by MCI because of its fraud and could easily be included in each bill sent to each customer, Mr. Wall asserts. In the alternative, Mr. Drew and counsel will pay for the notice. Mr. Wall clarifies that when Mr. Drew sought to withdraw the reference, Mr. Drew was not forum shopping, but rather sought to have a jury trial on the fraud to assess punitive damage. About WorldCom WorldCom, Inc., a Clinton, MS-based global communications company, filed for chapter 11 protection on July 21, 2002 (Bankr. S.D.N.Y. Case No. 02-13532). On March 31, 2002, WorldCom 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. On Jan. 6, 2006, MCI merged with Verizon Communications, Inc. MCI is now known as Verizon Business, a unit of Verizon Communications. (WorldCom Bankruptcy News, Issue No. 126; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000) WORLDCOM: Court Bars Carrubbas, et. al's Actions to Pursue Claims ----------------------------------------------------------------- WorldCom Inc. and its debtor-affiliates previously sought to bar the action brought by Benjamin and Elenora Carrubba and Richard and Melissa Brown, on behalf of themselves and a putative class of similarly situated landowners, in the U.S. District Court for the Southern District of Mississippi. The Carrubba Action sought tort damages, based on the use and installation of cables on the Plaintiffs' land, on theories of trespass, nuisance, and unjust enrichment and injunctive relief. The U.S. Bankruptcy Court for the District of New York notes that the Debtors' prepetition use of the fiber optic cable, assuming that it constitutes trespass and nuisance, gave rise to a prepetition right of payment. The "elements" of the asserted claims of trespass, nuisance, and unjust enrichment, and the "right to payment on the basis of those claims, were therefore established in the prepetition period, as the relationship of the parties in regards to that use did not alter prepetition to postpetition, the Honorable Arthur Gonzalez finds. Therefore, the Court concludes that the asserted tort claims are prepetition claims discharged upon confirmation of the Debtors' Plan of Reorganization. "The Carrubba Plaintiffs cannot escape the discharge of their claims by simply stating that they seek compensation only for the Debtors' activities in the postpetition period," Judge Gonzalez says. The Carrubba Plaintiffs had the opportunity pre-confirmation to file a proof of claim for damages but failed to do so, Judge Gonzalez notes. "[The Carrubba Plaintiffs] cannot therefore use the threat of an injunction to obtain a discharged debt now." The Court further concludes that the Carrubba Plaintiffs' due process rights were not and will not be violated by the enforcement of the Confirmation Order. The Court, however, declines to impose sanctions on the Carrubba Plaintiffs, equal to the legal fees incurred by the Debtors in responding to the Carrubba Action. Accordingly, Judge Gonzalez grants the Debtors' request, except to the extent that it seeks costs and attorneys' fees. The Court bars the Carrubbas and Browns from taking further action to prosecute their lawsuits to recover on those claims. The Court further directs the Carrubbas and the Browns to: -- cease any further acts to attempt to enforce their claims against the Debtors; and -- dismiss with prejudice all lawsuits against the Debtors to the extent that they remain pending. About WorldCom WorldCom, Inc., a Clinton, MS-based global communications company, filed for chapter 11 protection on July 21, 2002 (Bankr. S.D.N.Y. Case No. 02-13532). On March 31, 2002, WorldCom 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. On Jan. 6, 2006, MCI merged with Verizon Communications, Inc. MCI is now known as Verizon Business, a unit of Verizon Communications. (WorldCom Bankruptcy News, Issue No. 126; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000) XILLIX TECH: Receives Hercules' Demand Letter for Loan Repayment ---------------------------------------------------------------- Xillix Technologies Corp. received a demand letter from Hercules Technology Growth Capital Inc. for the repayment of a term loan, after the close of trading on Friday, October 13, 2006. The term loan was advanced by Hercules to the company's wholly owned subsidiary, Xillix US Ltd., pursuant to the loan agreement dated as of December 20, 2005, which loan is guaranteed by the company. Hercules has alleged that Xillix is in default under the Loan Agreement and related security agreement by reason of the occurrence of material adverse effects consisting of the company's failure to meet its internal forecasts of sales and EBITDA for August, 2006 and the fact that the company's total assets to liabilities ratio in August was less than 1.0 to 1.0. Hercules has demanded repayment of the loan in the amount of $4,091,034, plus interest from October 1st at a daily rate of $1,369 and a back end fee of $115,500, all by October 23, 2006. The loan was advanced by Hercules to Xillix US in December 2005, bears interest at the rate of 12.40% per annum, is repayable in equal blended monthly installments of principal and interest in the amount of $260,000 each, and is guaranteed by the company and secured by a security interest in all of the company's assets. In August 2006, Xillix had a number of discussions with Hercules regarding the restructuring of the loan, which on August 21, 2006 culminated in the execution of an amendment to the Loan Agreement, pursuant to which the company agreed to amend certain of the terms of the Loan, including the amount of the monthly payments, and paid the sum of $1 million to Hercules as a partial prepayment of principal. In exchange, Hercules agreed to waive certain claims which it otherwise may have had with respect to defaults under the Loan Agreement. Since August 2006, the company has continued to keep Hercules' apprised of developments in its business and has made all required payments and believes that it has complied with all of the covenants set out in the Loan Agreement. In view of the foregoing, the company is considering its response to Hercules' demand, and will take whatever steps are necessary to protect its intellectual property and other assets. About Xillix Xillix Technologies Corp. (TSX:XLX) -- http://www.xillix.com/-- is a Canadian medical device company and is known for using fluorescence endoscopy for improved cancer detection. The company's currently approved device, Onco-LIFETM, incorporates fluorescence and white-light endoscopy in a single device that has been developed for the detection and localization of lung and gastrointestinal cancers. Onco-LIFE is approved for sale in the United States for the lung application and in Europe, Canada and Australia for both lung and gastrointestinal applications. The company also recently developed a new product, LIFE LuminusTM, designed to allow fluorescence imaging of the colon using conventional video endoscope technology. * * * At June 30, 2006, Xillix Technologies reported a shareholders' deficit of $89,689,422. * Large Companies with Insolvent Balance Sheets ----------------------------------------------- Total Shareholders Total Working Equity Assets Capital Company Ticker ($MM) ($MM) ($MM) ------- ------ ------------ ------- -------- Abraxas Petro ABP (21) 132 (6) AFC Enterprises AFCE (46) 172 5 Alaska Comm Sys ALSK (17) 565 24 Alliance Imaging AIQ (23) 682 26 AMR Corp. AMR (514) 30,128 (1,202) Atherogenics Inc. AGIX (124) 211 165 Biomarin Pharmac BMRN 49 469 307 Blount International BLT (123) 465 126 CableVision System CVC (5,362) 9,715 395 Centennial Comm CYCL (1,062) 1,434 33 Cenveo Inc CVO 24 941 128 Choice Hotels CHH (118) 280 (58) Cincinnati Bell CBB (705) 1,893 18 Clorox Co. CLX (156) 3,616 (123) Cogdell Spencer CSA 126 370 N.A. Columbia Laborat CBRX 10 29 23 Compass Minerals CMP (63) 664 161 Crown Holdings I CCK 107 7,236 204 Crown Media HL CRWN (393) 1,018 133 Deluxe Corp DLX (90) 1,330 (235) Denny's Corporation DENN (258) 500 (68) Domino's Pizza DPZ (592) 360 (20) Echostar Comm DISH (512) 9,105 1,589 Emeritus Corp. ESC (111) 721 (28) Emisphere Tech EMIS 2 43 19 Empire Resorts I NYNY (26) 62 (3) Encysive Pharm ENCY (64) 93 56 Foster Wheeler FWLT (38) 2,224 (93) Gencorp Inc. GY (98) 1,017 (3) Graftech International GTI (166) 900 250 H&E Equipment HEES 226 707 22 I2 Technologies ITWO (54) 211 (9) ICOS Corp ICOS (36) 266 116 IMAX Corp IMAX (21) 244 33 Immersion Corp IMMR (20) 47 32 Incyte Corp INCY (55) 375 155 Indevus Pharma IDEV (147) 79 35 J Crew Group Inc. JCG (83) 362 101 Koppers Holdings KOP (95) 625 140 Kulicke & Soffa KLIC 65 398 230 Labopharm Inc. DDS (92) 143 105 Level 3 Comm. Inc. LVLT (33) 9,751 1,333 Ligand Pharm LGND (238) 286 (155) Lodgenet Entertainment LNET (62) 269 18 McDermott Int'l MDR 125 3,181 64 McMoran Exploration MMR (38) 439 (46) NPS Pharm Inc. NPSP (164) 248 168 New River Pharma NRPH 0 93 68 Omnova Solutions OMN (2) 366 71 ON Semiconductor ONNN (75) 1,423 279 Qwest Communication Q (2,826) 21,292 (2,542) Riviera Holdings RIV (29) 214 7 Rural Cellular RCCC (525) 1,441 151 Rural/Metro Corp. RURL (91) 299 45 Sepracor Inc. SEPR (109) 1,277 363 St. John Knits Inc. SJKI (52) 213 80 Sulphco Inc. SUF 25 34 12 Sun Healthcare SUNH 10 523 (34) Sun-Times Media SVN (261) 965 (324) Tivo Inc. TIVO (32) 132 10 USG Corp. USG (313) 5,657 (1,763) Vertrue Inc. VTRU (16) 443 (72) Weight Watchers WTW (110) 857 (72) WR Grace & Co. GRA (515) 3,612 929 ********* 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, Melvin C. Tabao, Rizande B. Delos Santos, Cherry A. Soriano-Baaclo, Ronald C. Sy, Jason A. Nieva, Lucilo M. Pinili, Jr., Tara Marie A. Martin, and Peter A. 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