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/raid1/www/Hosts/bankrupt/TCR_Public/070528.mbx T R O U B L E D C O M P A N Y R E P O R T E R Monday, May 28, 2007, Vol. 11, No. 125 Headlines ADVANCED MEDICAL: Mulls Competing Offer for Bausch & Lomb ADVANCED MEDICAL: B&L Acquisition Cues S&P's Developing Watch ADVOCACY & RESOURCES: Can Sell 52-Acre Property to XI Properties AGRICORE UNITED: Archer Daniels Tenders All Voting Common Shares AIRTRAN HOLDINGS: Re-Elects Biggins, Fornaro and Michas to Board ALASKA COMMS: Balance Sheet Upside Down by $29 Mil. at March 31 AMTROL INC: Court Confirms First Amended Plan of Reorganization AMERICAN TOWER: Seeks $1.25 Billion Revolving Credit Refinancing ARGENT SECURITIES: S&P Cuts Rating on Class M-11 Certs. to D ARVANA INC: Posts $520,124 Net Loss in Quarter Ended March 31 ASARCO LLC: Wants To Employ Grant Thornton as Auditors ASARCO LLC: Selects Patton Boggs as Special Counsel ATARI INC: Cutting 20% of Workforce Including Administrative Jobs ATARI INC: Appoints Arturo Rodriquez as CFO on an Interim Basis BAUSCH & LOMB: Advanced Medical May Compete w/ Warburg Pincus' Bid BCE INC: Hospitals of Ontario Joins Cerberus in Buyout Bid BIOMET INC: Moody's Junks Rating on $1.015 Bil. Unsecured Notes BIOMET INC: High Debt Leverage Cues S&P's B+ Credit Rating BION ENVIRONMENTAL: Closes Settlement Pact with TCMP3 Partners BLAST ENERGY: Files Chapter 11 Plan of Reorganization in Texas BOULDER SPECIALTY: Closes Merger Agreement with GFA Holdings CALPINE CORP: Inks Prelim Settlement Pact with Canadian Units CALPINE CORP: Turns to Deloitte Financial for Accounting Services CALPINE CORP: Appoints Sarah Novosel as Senior Vice President CELL THERAPEUTICS: March 31 Balance Sheet Upside-Down by $106.9 MM CENTRAL GARDEN: First Quarter Net Sales Widen to $485.7 Million CENTRAL PARKING: Moody's Cuts Corporate Family Rating to B2 COMFORCE CORP: Partially Redeems $10 Million of 12% Senior Notes COMM 2007: Moody's Puts Low-B Ratings on Four Security Classes COMMERCIAL MORTGAGE: Moody's Junks Rating on Two Cert. Classes COMSTOCK HOMEBUILDING: Weak Performance Cues S&P to Cut Rating COMVERSE TECHNOLOGY: Nasdaq Delists Common Stock CONSECO INC: Amends Credit Deal, Hires Banc of America as Arranger CONSUMERS TRUST: Recovers $3.2MM From Court OK'd Settlement Pact COVENTRY HEALTH: Earns $121.7 Million in First Quarter 2007 CRESCENT REAL: Moody's Holds B1 Rating on Senior Unsecured Notes DELHAIZE AMERICA: Moody's Lifts Sr. Unsec. Debt Rating to Baa3 DRAGON PHARMACEUTICAL: Earns $850,052 in Quarter Ended March 31 DSLA MORTGAGE: S&P Affirms 'B' Rating on Class B-5 Certificates DUBOIS GENERAL: Case Summary & 18 Largest Unsecured Creditors EPICOR SOFTWARE: Earns $4.4 Million in First Qtr. Ended March 31 FIRST FRANKLIN: S&P Lowers Ratings on 34 Classes FREESCALE SEMICON: Moody's Holds Ratings, Shifts Outlook to Neg. FUSION TELECOM: Posts $2.8 Million Net Loss in Qtr Ended March 31 GAP INC: Names Patrick Robinson as Executive Vice Pres. of Design GENERAL MOTORS: May Sell Allison Transmission to Boost Liquidity GENERAL MOTORS: SEC Inquiry May Need Restatement of Prior Results GENERAL MOTORS: In Talks w/ Investors About Delphi's Chap. 11 Exit GENERAL MOTORS: Gets $4.1 Bil. Secured Credit Facility Commitments GENERAL MOTORS: Moody's Junks Rating on $1.1 Bil. Debt Securities GENERAL MOTORS: S&P Rates Proposed $1.1BB Convertible Bonds at B- GLOBAL BEVERAGE: Posts $355,859 Net Loss in Quarter Ended March 31 GOLDEN NUGGET: S&P Lowers Corporate Credit Rating to B+ from BB- HANCOCK FABRICS: Asks Court OK on Continued Use of Cash Collateral HANCOCK FABRICS: May Employ Houlihan Lokey as Financial Advisor HEMOSOL CORP: CCAA Protection Further Extended Until Thursday HEWETT'S ISLAND: S&P Rates $16 Million Class E Notes at BB HINES HORTICULTURE: Delays Form 10-Q Filing, Gets Nasdaq Notice HOUSTON EXPLORATION: Gets Consents for 7% Sr. Subor. Note Offering HOVNANIAN ENTERPRISES: S&P Revises Outlook to Negative from Stable IMPART MEDIA: Posts $1.94 Million Net Loss in Qtr Ended March 31 INNOVATIVE TECH: Case Summary & 20 Largest Unsecured Creditors INTRALINKS INC: Moody's Assigns B3 Corporate Family Rating INTREPID TECHNOLOGY: Posts $489,231 Net Loss in Qtr Ended March 31 IVOICE INC: Earns $74,763 in First Quarter Ended March 31 JED OIL: Offers to Acquire All Shares of Caribou Resources K&F INDUSTRIES: Posts $108,952,000 Sales in First Quarter 2007 KIMBALL HILL: Weak Profitability Cues S&P's Negative Outlook KYPHON INC: Incurs First Quarter 2007 Net Loss of $22.6 Million LIONEL LLC: Plan Proposes to Pay General Unsecured Claims in Full MARIE CORP: Case Summary & Seven Largest Unsecured Creditors MCDERMOTT INT'L: Steady Performance Cues S&P to Lift Ratings to BB MOBILE MINI: Earns $12.7 Million in First Quarter Ended March 31 MOUNT ZION: Case Summary & 12 Largest Unsecured Creditors MPS GROUP: Earns $17.4 Million in Three Months Ending March 31 NANO SUPERLATTICE: Earns $2,675 in First Quarter Ended March 31 NEW CENTURY: Mulls Paying Additional Customer Obligations NEW CENTURY: Seeks OK to Grant Loan Buyers Adequate Protection NEW CENTURY: S&P Lowers Rating on 2003-2 Class M-4 Certs. to BB NEW WORLD: Moody's Assigns B2 Corporate Family Rating NEW WORLD: High Debt Leverage Cues S&P's 'B' Corp. Credit Rating NORTH AMERICAN: Wants Plan Solicitation Period Moved to Sept. 30 NORTH AMERICAN: Court Finds Hartford's Arguments 'Superfluous' NORTH AMERICAN: Wants Settlement Agreement w/ Mellon Bank Approved PACIFIC LUMBER: La Salle Seeks Court Nod for Assignment of Debt PACIFIC LUMBER: Wants to Spend $2,035,000 for Scotia Town Project PAYLESS SHOESOURCE: Moody's May Cut Low-B Ratings After Review PETROL OIL: Posts $1,787,207 Net Loss in Quarter Ended March 31 PINNACLE ENTERTAINMENT: Earns $2.9 Million in Qtr. Ended March 31 PORTRAIT CORP: Waiting Period on CPI Corp.'s Acquisition Expires RP JOHNSON: Case Summary & Five Largest Unsecured Creditors RURAL CELLULAR: Launches $115 Million Senior Sub. Notes Offering RURAL/METRO CORP: March 31 Balance Sheet Upside-Down by $95.5 Mil. SALOMON HOME: S&P Lowers Ratings on Two Classes of Certificates SHUMATE INDUSTRIES: Posts $909,175 Net Loss in Qtr Ended March 31 SPECTRUM BRANDS: Names Kent Hussey as Chief Executive Officer SPEEDWAY MOTORSPORTS: S&P Lifts Corporate Credit to BB+ from BB ST. MARY: Plans to Register Issuance of $288 Million Senior Notes STRUCTURED ADJUSTABLE: S&P Junks Rating on Class M7 Certificates STRUCTURED ASSET: Monthly Losses Cue S&P to Cut Ratings to 'BB' SUPRESTA LLC: Modest Sales Cue S&P to Lift Ratings to B+ from B UNITY WIRELESS: Post $2,555,307 Net Loss in Quarter Ended March 31 UNIVERSITY HEIGHTS: Ct. Extends Plan-Filing Period Until July 30 USG CORP: To Close Wallboard Units For Two High-Tech Plants USG CORP: To Exchange $500,000,000 Of 6.30% Senior Notes VIANT HOLDINGS: Moody's Places Corporate Family Rating at B2 VIANT HOLDINGS: S&P Rates Proposed $325MM Sr. Bank Facilities at B VIEWCAST CORP: March 31 Balance Sheet Upside-Down by $318,310 VILLAGEEDOCS INC: Posts $502,762 Net Loss in Qtr Ended March 31 VISIPHOR CORP: Completes Private Placement of 8% Secured Debenture VITAMIN SHOPPE: $150 Million IPO Cues S&P's Positive Watch VOIP INC: Posts $13.5 Million Net Loss in Quarter Ended March 31 WESCORP ENERGY: Posts $1,720,591 Net Loss in Qtr Ended March 31 WIDEOPENWEST FINANCE: Moody's Cuts Corporate Family Rating to B3 WIDEOPENWEST FINANCE: S&P Cuts Corporate Credit Rating to B- WILLIAM LYON: S&P Holds Ratings and Says Outlook is Negative WIZZARD SOFTWARE: Posts $1.4 Mil. Net Loss in Qtr Ended March 31 WORLDGATE COMMUNICATIONS: Amends Existing Cornell Debentures * Fried Frank Adds Ghassan Atiyah to Washington's Financing Dept. * Goldsmith Agio Names Jason Cohen as VP of Restructuring Practice * BOND PRICING: For the Week of May 21 - May 25, 2007 ********* ADVANCED MEDICAL: Mulls Competing Offer for Bausch & Lomb --------------------------------------------------------- Advanced Medical Optics Inc. expressed interest in exploring an offer for Bausch & Lomb Inc. following the eye-care company's announcement of an agreement to be acquired by private-equity firm Warburg Pincus subject to higher and better offers, Jon Kamp and Keith J. Winstein of The Wall Street Journal report. Advanced Medical has been looking at Bausch's $710 million lens business and $658 million eye-drug line to add to its portfolio of eye-care products, WSJ relates, citing a person familiar with the matter. According to WSJ's source, Advanced Medical believes a deal between the two companies would offer significant cost synergies, something a private-equity firm cannot offer. Warburg Pincus Deal About two weeks ago, Bausch & Lomb agreed to be merged with affiliates of Warburg Pincus in a transaction valued at approximately $4.5 billion, including approximately $830 million of debt. Under the terms of the agreement, affiliates of Warburg Pincus will acquire all of the outstanding shares of Bausch & Lomb common stock for $65 per share in cash. This represents a premium of approximately 26% over the volume weighted average price of Bausch & Lomb's shares for 30 days prior to press reports of rumors regarding a potential acquisition of the company. Bausch & Lomb's Board of Directors, following the recommendation of a Special Committee composed entirely of independent directors, has unanimously approved the agreement and recommends that Bausch & Lomb shareholders approve the merger. Morgan Stanley & Co. Incorporated is acting as financial advisor to the Special Committee of the Bausch & Lomb Board of Directors and has delivered a fairness opinion. Wachtell Lipton Rosen & Katz is acting as legal counsel to the Special Committee in the transaction. Banc of America, Citi, Credit Suisse and JPMorgan served as the financial advisors to Warburg Pincus, and Cleary Gottlieb Steen & Hamilton LLP is acting as legal advisor to Warburg Pincus. About Advanced Medical Based in Santa Ana, California, Advanced Medical Optics, Inc. (NYSE: EYE) -- http://www.amo-inc.com/-- develops, manufactures and markets ophthalmic surgical and contact lens care products. AMO employs approximately 3,600 worldwide. The company has operations in 24 countries and markets products in 60 countries including Puerto Rico and Brazil. ADVANCED MEDICAL: B&L Acquisition Cues S&P's Developing Watch ------------------------------------------------------------- Standard & Poor's Ratings Services placed its ratings on Advanced Medical Optics Inc. on CreditWatch with developing implications, given the company's announced interest to acquire Bausch & Lomb Inc. (B&L; BB+/Watch Neg/--). On May 16, Bausch & Lomb entered into a definitive merger agreement with Warbug Pincus in a takeover valued at $4.5 billion (including about $830 billion of assumed debt). Under the agreement, B&L has 50 calendar days to solicit superior proposals, and Advanced Medical Optics has indicated that the offer extended by Warburg Pincus undervalues B&L. "The CreditWatch action reflects the potential for Advanced Medical Optics to be upgraded or downgraded depending on several factors," explained Standard & Poor's credit analyst Cheryl Richer. "If the acquisition is financed with a conservative mixture of debt and equity, that and the prospect of a more diverse portfolio of eye care products could result in an upgrade. However, a material increase in debt leverage could result in a downgrade." In addition, S&P anticipate that Advanced Medical Optics may divest a portion of the portfolio; while the company has publicly expressed interest in the contact lens business, it has also stated publicly that it has no interest in eye care pharmaceuticals. If Advanced Medical Optics is ultimately successful, S&P will evaluate the structure and financing of the transaction to determine the ratings outcome. ADVOCACY & RESOURCES: Can Sell 52-Acre Property to XI Properties ---------------------------------------------------------------- Michael E. Collins, the Chapter 11 Trustee for Advocacy and Resources Corporation's bankruptcy case, obtained permission from the U.S. Bankruptcy Court for the Middle District of Tennessee to sell the Debtor's 52 acres of real property, free and clear of liens. The Trustee told the Court that XI Properties intends to buy the property for $576,400. Additionally, the Debtor will pay XI Properties a "break-up fee" of $28,820, if the Court approves a sale to a buyer other than XI Properties. The Trustee asserted that the property located in Putnam County, Tennessee, is not necessary to the Debtor's operations. The Trustee said that the sale of the property will surely benefit the Debtor and its creditors. Headquartered in Cookeville, Tennessee, Advocacy and Resources Corporation is a non-profit corporation that manufactures food products for feeding programs operated by the U.S. Government. Customers include the U.S. Department of Agriculture, the Department of Defense, and other private distribution firms. The company filed for chapter 11 protection on June 20, 2006 (Bankr. M.D. Tenn. Case No. 06-03067). Michael E. Collins, Esq., serves as Chapter 11 Trustee. Manier & Herod PC represents Mr. Collins. When the Debtor filed for chapter 11 protection, it estimated assets and debts between $10 million and $50 million. AGRICORE UNITED: Archer Daniels Tenders All Voting Common Shares ---------------------------------------------------------------- Agricore United Ltd. disclosed that Archer Daniels Midland Company has tendered all of the limited voting common shares, that it beneficially owns or controls to the revised take-over bid made on May 17, 2007, by Saskatchewan Wheat Pool Inc. for all of the outstanding Common Shares for CDN$20.50 in cash per Common Share. In accordance with the terms of the Revised SWP Offer, the tendering of ADM's Common Shares to the Revised SWP Offer constitutes the granting of a proxy to vote for the continuance of AU under the Canada Business Corporations Act and the plan of arrangement involving, AU, holders of Common Shares and Saskatchewan Wheat Pool Inc. under the Canada Business Corporations Act. ADM has tendered all of the Common Shares to the Revised SWP Offer and will vote for the Continuance and the Arrangement in accordance with ADM's existing contractual arrangements with AU. Headquartered in Decatur, Illinois, Archer Daniels Midland Company (NYSE: ADM) -- http://www.admworld.com/-- beneficially owns or controls 16,635,497 Common Shares, representing approximately 28% of Agricore United's outstanding common shares. About Agricore United Ltd Based in Winnipeg, Canada, United Grain Growers Limited, dba Agricore United Ltd. (TSX: AU) -- http://www.agricoreunited.com/- - is a moderate size agribusiness, with operations in grain handling, the production and sale of crop production inputs, animal feed, and the extension of financial services to the western Canadian agricultural community. Agricore United's revenues for the fiscal year ended Oct. 31, 2006 were nearly CDN$3 billion. * * * As reported in the Troubled Company Reporter on May 21, 2007, Moody's Investors Service stated that the company's Ba3 corporate family rating and other ratings were placed on review for possible downgrade on April 19, 2007, when Agricore United had accepted a revised all cash bid from privately held James Richardson International Limited. Agricore United's speculative grade liquidity rating of SGL-2 is not on review. AIRTRAN HOLDINGS: Re-Elects Biggins, Fornaro and Michas to Board ---------------------------------------------------------------- AirTran Holdings Inc., the parent company of AirTran Airways, announced that shareholders, including those at the annual shareholders meeting held on May 23, 2007, in Williamsburg, Virginia, had re-elected three members -- J. Veronica Biggins, Robert L. Fornaro, and Alexis P. Michas -- to the Board of Directors, the terms of which will expire in 2010. "We are extremely pleased that shareholders overwhelmingly agree with the direction and leadership that these three Board members have provided AirTran," AirTran Airways Chairman and CEO Joe Leonard, said. "I have the utmost confidence they will continue to uphold our commitment to provide low fares, outstanding service, and shareholder value." AirTran Airways, Inc. (NYSE: AAI) -- http://www.airtran.com/-- operates over 600 daily flights to 50 destinations. The airline's hub is at Hartsfield-Jackson Atlanta International Airport, where it is the second largest carrier. AirTran Airways recently added the fuel-efficient Boeing 737-700 aircraft to create America's youngest all-Boeing fleet. The airline is also the first carrier to install XM Satellite Radio on a commercial aircraft and the only airline with Business Class and XM Satellite Radio on every flight. * * * As reported in the Troubled Company Reporter on Dec. 15, 2006, Standard & Poor's Ratings Services affirmed its ratings on AirTran Holdings Inc. and its primary operating subsidiary, AirTran Airways Inc., including the 'B-' corporate credit rating on AirTran Holdings. As reported in the Troubled Company Reporter on Nov. 23, 2006, Moody's Investors Service confirmed its B3 Corporate Family Rating for AirTran Holdings Inc. and its Caa1 rating on the company's 7.0% Guaranteed Convertible Notes Due July 1, 2023, in connection with its implementation of its Probability-of-Default and Loss- Given-Default rating methodology for the Transportation sector. Moody's also assigned an LGD6 rating to those loans, suggesting noteholders will experience a 91% loss in the event of a default. ALASKA COMMS: Balance Sheet Upside Down by $29 Mil. at March 31 --------------------------------------------------------------- In its financial statements for the quarter ended March 31, 2007, Alaska Communications Systems Group Inc. reported total assets of $551,033,000, total liabilities of $579,979,000, and a total stockholders' deficit of $28,946,000 as of March 31, 2007, compared to $562,321,000 in total assets, $587,010,000 in total liabilities, and a stockholders' deficit of $24,689,000 at Dec. 31, 2006. The company earned $7,565,000 in net income on $90,573,000 of total operating revenues for the quarter ended March 31, 2007, compared to a net loss of $8,372,000 on $82,642,000 of total revenues in the same prior year period. The comparison also shows total revenues increased by 9.6% from the same quarter of 2006. "Our market position, strong business fundamentals and track record of execution continue to contribute to superior financial performance, growing cash flows and a strengthened balance sheet," said Liane Pelletier, ACS president, chief executive officer and chair. "First quarter performance delivered year-over-year revenue growth of 10 percent and EBITDA growth of 15 percent fueled by our wireless and data offerings. Given first quarter performance, we are increasing annual guidance today for revenue, EBITDA and wireless capital expenditures." David Wilson, ACS senior vice president and chief financial officer, said, "Wireless continues to drive significant top and bottom line expansion; wireless revenue grew 29.5 percent over the prior year with subscribers and average revenue per user (ARPU) growing by 15.4 percent and 5.8 percent, respectively, and foreign roaming revenue increasing 74.7 percent to $3.2 million. In addition to strong wireless revenue performance, wireline revenue increased marginally to $58.8 million from $58.1 million in the prior year quarter." "The strength of our revenue performance, coupled with stringent cost containment driven by process improvement, delivered exceptional cash flow performance. Net cash provided by operating activities increased to $27.8 million from $15.2 million in the prior year quarter, which included $8.9 million in debt redemption charges and accrued interest settlements. After giving effect to these debt settlement cash outflows, cash from operations increased over 15 percent," added Wilson. 2007 Business Outlook For 2007, ACS is increasing its revenue, EBITDA and wireless growth capital expenditure guidance. Revenues are now expected to be in the range of $360 million to $370 million versus prior guidance of $350 million to $360 million. EBITDA is expected to be in the range of $120 million to $124 million versus prior guidance of $118 million to $122 million, while capital expenditures are expected to be approximately $46 million versus prior guidance of approximately $42 million. ACS is reaffirming its maintenance capital expenditure guidance at approximately $37 million and the increase in guidance is solely attributable to wireless, primarily related to customer-driven wireless footprint expansion, and is funded by excess cash it expects to generate in 2007. ACS is reaffirming its cash interest expense guidance which is expected to be approximately $27 million. The guidance presented is exclusive of ACS' strategic investment. Strategic Investment Pelletier stated, "Building on the company's track record of extracting profitable growth from the Alaska market, ACS is looking to extend and enhance its proven business model with a strategic investment in a fiber facility between Alaska and the Pacific Northwest, positioning ACS to more effectively compete for an estimated $200 million in existing carrier, enterprise and government demand, serve burgeoning broadband growth, and benefit from favorable macroeconomic trends in Alaska. We believe this investment would allow ACS to capture the full value of its wireline and wireless Alaska infrastructure and enable ACS to continue to deliver best-in-class growth. ACS is completing a very detailed feasibility study and project plan for the fiber and we look forward to providing additional insight on today's conference call including estimates of an up front investment cost of $75 million to $90 million, annual cash costs, inclusive of financing costs, of $10 million to $12 million, and a commercial launch date of early 2009." Wilson added, "We are well positioned from a liquidity standpoint, exiting the quarter with $37.8 million in cash and restricted cash. We also have adequate debt capacity to finance our strategic investment having reduced our net leverage ratio by over a turn since year-end 2004 to 3.2 times. ACS remains committed to its current dividend and management believes the strategic investment can further expand future cash flow per share." About Alaska Communications Alaska Communications Systems Group Inc. (Nasdaq: ALSK) -- http://www.alsk.com/-- is an integrated communications provider in Alaska, offering local telephone service, wireless, long distance, data, and Internet services to business and residential customers throughout Alaska. AMTROL INC: Court Confirms First Amended Plan of Reorganization --------------------------------------------------------------- The Honorable Kevin Gross of the U.S. Bankruptcy Court for the District of Delaware confirmed the First Amended Joint Chapter 11 Plan of Reorganization of Amtrol Inc., its debtor-affiliates, and the Official Committee of Unsecured Creditors. Pursuant to the Plan, the holders of more than 98% of its Senior Subordinated Notes, led by Newport Global Advisors, voted in favor of the Plan and will convert their Notes into equity in the reorganized Company as part of the restructuring, thereby reducing the company's debt by approximately 45% and greatly improving its long-term financial stability. The Plan received 100% approval by the holders of the Notes with less than 2% of the holders of the Notes electing to receive cash in exchange for their Notes. "We are very pleased with the confirmation of the Plan and the unanimous vote of the holders of the Notes which we believe is an endorsement of the company's businesses and prospects. Converting more than 98% of the value of the Notes to equity will give the Company much greater flexibility in pursuing its strategic objectives," said Larry T. Guillemette, Chairman and CEO of the company. Since the filing in December 2006, AMTROL has continued to operate in the normal course of business and has experienced no disruptions during the Chapter 11 reorganization process. All of the company's manufacturing and distribution facilities have remained open and have continued to serve customers in the normal course. The company's foreign operations have not been involved in the bankruptcy cases. The company anticipates closing on an exit financing facility arranged by Merrill Lynch and Credit Suisse during the first week of June 2007. About Amtrol Inc. Based in West Warwick, Rhode Island, Amtrol Inc. -- http://www.amtrol.com/-- manufactures and markets water storage and pressure control products, water heaters and cylinders. The company's major products include pressure tanks used in well water, hydronic heating and potable hot water applications, indirect-fired water heaters, and both LPG and disposable refrigerant gas cylinders. The company and three of its affiliates filed for chapter 11 protection on Dec. 18, 2006 (Bankr. D. Del. Lead Case No. 06-11446). Douglas Gray, Esq., Stuart J. Brown, Esq., and William E. Chipman Jr., Esq., at Edwards Angell Palmer & Dodge LLP, represent the Debtors. The Debtor's financial advisor is Miller Buckfire & Co., LLC. Kara Hammond Coyle, Esq., and Pauline K. Morgan, Esq., at Young Conaway Stargatt & Taylor LLP, represent the Official Committee of Unsecured Creditors. As of Apr. 1, 2006, the Debtors' consolidated financial condition showed $229,270,000 in total assets and $235,802,000 in total debts. Amtrol and its debtor affiliates recently obtained Court permission to employ Huron Consulting Services LLC to provide fresh start reporting and valuation services. AMERICAN TOWER: Seeks $1.25 Billion Revolving Credit Refinancing ---------------------------------------------------------------- American Tower Corporation is seeking to refinance the existing senior secured credit facilities at the American Tower operating company level with its new senior unsecured credit facility. The proposed new credit facility is expected to consist of a $1.25 billion revolving credit facility. The company is in the process of requesting commitments from a group of lenders for the new credit facility, and is seeking to have the new credit facility in place before the end of the second quarter of 2007. The new credit facility would be subject to satisfactory lender commitments, negotiation, execution and delivery of definitive loan documentation and various other conditions. The company expects to use borrowings under the new credit facility in part to repay all amounts outstanding under the existing operating company credit facilities, under which approximately $1 billion in principal amount is currently outstanding. The balance of the new credit facility would be available for general corporate purposes, including purchases of shares of the Company's Class A common stock. About American Tower Based in Boston, Massachusetts, American Tower Corporation (NYSE: AMT) -- http://www.americantower.com/-- is an independent owner, operator and developer of broadcast and wireless communications sites in the U.S., Mexico and Brazil. American Tower owns and operates over 22,000 sites and manages about 2,000 revenue producing rooftop and tower sites. * * * As reported in the Troubled Company Reporter on Feb. 16, 2007, Moody's Investors Service upgraded the corporate family rating of American Tower Corporation to Ba1 from Ba2, and affirmed the company's SGL-1 liquidity rating. The outlook is stable. ARGENT SECURITIES: S&P Cuts Rating on Class M-11 Certs. to D ------------------------------------------------------------ Standard & Poor's Ratings Services lowered its ratings on the class M-10 and M-11 certificates from Argent Securities Inc.'s series 2004-PW1 to 'BB' from 'BB+' and to 'D' from 'CCC', respectively. The rating on the class M-10 certificates remains on CreditWatch, where it was placed with negative implications July 5, 2006. In addition, S&P affirmed its ratings on the remaining classes from this transaction. The lowered ratings and CreditWatch placement reflect monthly realized losses that have continued to exceed monthly excess interest. During the previous six remittance periods, realized losses have exceeded excess interest by approximately 4.40x. The failure of excess interest to cover monthly losses has resulted in a complete erosion of overcollateralization and a principal write- down to the class M-11 certificates. As of the April 2007 distribution date, realized losses have reduced the balance of the class M-11 certificates by $330,000. Serious delinquencies (90-plus days, foreclosures, and REOs) represent 18.59% of the current pool balance, while cumulative realized losses represent 2.44% of the original pool balance. The affirmations are based on credit support percentages that are sufficient to maintain the current ratings. Credit support for this transaction is provided through a combination of excess spread, O/C, and subordination. The underlying collateral consists of conventional, fully amortizing, adjustable- and fixed-rate mortgage loans secured by first liens on one- to four-family residential properties. Rating Lowered and Remaining on Creditwatch Negative Argent Securities Inc. Asset-backed certificates series 2004-PW1 Rating ------ Class To From ----- -- ----- M-10 BB/Watch Neg BB+/Watch Neg. Rating Lowered Argent Securities Inc. Asset-backed certificates series 2004-PW1 Rating ------ Class To From ----- -- ---- M-11 D CCC Ratings Affirmed Argent Securities Inc. Asset-backed certificates series 2004-PW1 Class Rating ----- ------ M-1 AA+ M-2 AA M-3 AA- M-4 A+ M-5 A M-6 A- M-7 BBB+ M-8 BBB M-9 BBB- ARVANA INC: Posts $520,124 Net Loss in Quarter Ended March 31 ------------------------------------------------------------- Arvana Inc. reported a net loss of $520,124 for the first quarter ended March 31, 2007, compared with a net loss of $350,841 for the same period in 2006. Revenues were $1,716,220 for the quarter ended March 31, 2007. The company did not generate any revenues during the period prior to the acquisition of Hallotel. The substantial majority of the revenues generated to date are from the Hallotel long distance pre-select and wholesale carrier business. The majority of the loss in the quarter ended March 31, 2007, related to the stock-based compensation expense of $463,600 as well as increased administration expenses associated with the development of the VOIP telephone services business. At March 31, 2007, the company's balance sheet showed $5,461,318 in total assets, $3,725,280 in total liabilities, and $1,736,038 in total stockholders' equity. The company's balance sheet at March 31, 2007, also showed strained liquidity with $2,176,662 in total current assets available to pay $3,669,498 in total current liabilities. Full-text copies of the company's consolidated financial statements for the quarter ended March 31, 2007, are available for free at http://researcharchives.com/t/s?202e Going Concern Doubt Dohan and Company P.A., in Miami, expressed substantial doubt about Arvana Inc.'s ability to continue as a going concern after auditing the company's consolidated financial statements for the years ended Dec. 31, 2006, and 2005. The auditing firm reported that the company has suffered recurring losses from operation, has used, rather than provided, cash from operations and has an accumulated deficit of $18,235,538. The company anticipates continuing to rely on equity sales of its shares of common stock in order to continue to fund its business operations. About Arvana Inc. Arvana Inc. (OTC BB: ARVI.OB), through its operating subsidiary Hallotel Deutschland GmbH, is engaged in the telecommunications industry. Hallotel is a German based telecommunications service provider that is focused on the provision of long distance telephone calls between Germany, Austria, Switzerland and Turkey. Hallotel has been in operations since August 2000, and was acquired by the company on Aug. 23, 2006. ASARCO LLC: Wants To Employ Grant Thornton as Auditors ------------------------------------------------------ ASARCO LLC and its debtor-affiliates ask permission from the U.S. Bankruptcy Court for the Southern District of Texas to employ Grant Thornton LLP as auditors. ASARCO LLC's DIP Financing requires the company to engage the services of a nationally recognized firm for the audit of the 2006 accounts, James R. Prince, Esq., at Baker Botts LLP, in Dallas, Texas, tells the Court. Grant Thornton will audit the consolidated balance sheet of ASARCO and its subsidiaries as of Dec. 31, 2006, and the consolidated earnings, changes in members' equity and cash flows for the year then ended. In addition, Grant Thornton will audit the consolidated balance sheet of Silver Bell Mining, LLC, as of Dec. 31, 2006. Silver Bell is a company that is 75% owned by AR Silver Bell, Inc., which in turn is ASARCO's wholly owned subsidiary. ASARCO will pay for Grant Thornton's services based on the firm's customary hourly rates ranging from $160 to $500 per hour, plus actual costs and expenses. Based on ASARCO's records, the total estimated fees for the ASARCO audit will range from $700,000 to $800,000 and fees for Silver Bell audit will range from $50,000 to $75,000, Mr. Prince says. Should fees exceed the range of estimates, Grant Thornton has agreed to bill all hours incurred thereafter at $213 per hour. If ASARCO does not employ Grant Thornton to do the ASARCO audit for the 2007 financial statements, ASARCO will reimburse $150,000 to Grant Thornton for the time expended in reviewing the Debtors' accounting records. Edward O'Brien, Esq., a partner at Grant Thornton, assures the Court that his firm does not represent any interest adverse to the Debtors and their estates and is a "disinterested person" as the term is defined under Section 101(14) of the Bankruptcy Code. About ASARCO LLC Based in Tucson, Arizona, ASARCO LLC -- http://www.asarco.com/-- is an integrated copper mining, smelting and refining company. Grupo Mexico S.A. de C.V. is ASARCO's ultimate parent. The Company filed for chapter 11 protection on Aug. 9, 2005 (Bankr. S.D. Tex. Case No. 05-21207). James R. Prince, Esq., Jack L. Kinzie, Esq., and Eric A. Soderlund, Esq., at Baker Botts L.L.P., and Nathaniel Peter Holzer, Esq., Shelby A. Jordan, Esq., and Harlin C. Womble, Esq., at Jordan, Hyden, Womble & Culbreth, P.C., represent the Debtor in its restructuring efforts. Lehman Brothers Inc. provides the ASARCO with financial advisory services And investment banking services. Paul M. Singer, Esq., James C. McCarroll, Esq., and Derek J. Baker, Esq., at Reed Smith LLP give legal advice to the Official Committee of Unsecured Creditors and David J. Beckman at FTI Consulting, Inc., gives financial advisory services to the Committee. When the Debtor filed for protection from its creditors, it listed $600 million in total assets and $1 billion in total debts. The Debtor has five affiliates that filed for chapter 11 protection on April 11, 2005 (Bankr. S.D. Tex. Case Nos. 05-20521 through 05-20525). They are Lac d'Amiante Du Quebec Ltee, CAPCO Pipe Company, Inc., Cement Asbestos Products Company, Lake Asbestos of Quebec, Ltd., and LAQ Canada, Ltd. Details about their asbestos-driven chapter 11 filings have appeared in the Troubled Company Reporter since Apr. 18, 2005. Encycle/Texas, Inc. (Bankr. S.D. Tex. Case No. 05-21304), Encycle, Inc., and ASARCO Consulting, Inc. (Bankr. S.D. Tex. Case No. 05-21346) also filed for chapter 11 protection, and ASARCO has asked that the three subsidiary cases be jointly administered with its chapter 11 case. On Oct. 24, 2005, Encycle/Texas' case was converted to a Chapter 7 liquidation proceeding. The Court appointed Michael Boudloche as Encycle/Texas, Inc.'s Chapter 7 Trustee. Michael B. Schmidt, Esq., and John Vardeman, Esq., at Law Offices of Michael B. Schmidt represent the Chapter 7 Trustee. ASARCO's affiliates, AR Sacaton LLC, Southern Peru Holdings LLC, and ASARCO Exploration Company Inc., filed for chapter 11 protection on Dec. 12, 2006 (Bankr. S.D. Tex. Case No. 06-20774 to 06-20776). The Debtors' exclusive period to file a plan expires on Aug. 9, 2007. (ASARCO Bankruptcy News, Issue No. 46; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000) ASARCO LLC: Selects Patton Boggs as Special Counsel --------------------------------------------------- ASARCO LLC and its debtor-affiliates ask authority from the U.S. Bankruptcy Court for the Southern District of Texas to employ Patton Boggs LLP as its special counsel nunc pro tunc to Aug. 9, 2006. Patton Boggs has represented ASARCO for several years, and has continued to provide legal services to ASARCO as an ordinary course professional in its Chapter 11 case. However, Patton Boggs' monthly fees have in the past exceeded the $20,000 per month rolling average to which OCPs are limited and it is anticipated that the firm's monthly fees for the foreseeable future will continue to exceed the limit, James R. Prince, Esq., at Baker Botts LLP, in Dallas, Texas, informs the Court. For this reason, it is necessary to retain Patton Boggs pursuant to a separate retention application, ASARCO said. Specifically, wants to hire Patton Boggs to represent and advise the Debtors with respect to compliance matters under the rules and regulations of the Mine Safety and Health Administration and the Occupational Safety and Health Administration and other related areas of the law. ASARCO will pay Patton Boggs for its services according to the firm's customary rates: Designation Hourly Rate ----------- ----------- Partners $275 - $800 Counsel $275 - $800 Associates $180 - $380 Paralegals $50 - $210 Prior to the Debtors' bankruptcy filing, the firm had rendered services to ASARCO that have not yet been billed or that have not yet been paid, Mark N. Savit, a partner at Patton Boggs, informs the Court. The amount owing for those services is $134,867. Patton Boggs' claim for those services has now been transferred to Liquidity Solutions, Inc., according to Mr. Savit. Mr. Savit assures the Court that Patton Boggs does not have or represent any interest adverse to the Debtors for matters for which it is contemplated to be retained as special counsel. About ASARCO LLC Based in Tucson, Arizona, ASARCO LLC -- http://www.asarco.com/-- is an integrated copper mining, smelting and refining company. Grupo Mexico S.A. de C.V. is ASARCO's ultimate parent. The Company filed for chapter 11 protection on Aug. 9, 2005 (Bankr. S.D. Tex. Case No. 05-21207). James R. Prince, Esq., Jack L. Kinzie, Esq., and Eric A. Soderlund, Esq., at Baker Botts L.L.P., and Nathaniel Peter Holzer, Esq., Shelby A. Jordan, Esq., and Harlin C. Womble, Esq., at Jordan, Hyden, Womble & Culbreth, P.C., represent the Debtor in its restructuring efforts. Lehman Brothers Inc. provides the ASARCO with financial advisory services And investment banking services. Paul M. Singer, Esq., James C. McCarroll, Esq., and Derek J. Baker, Esq., at Reed Smith LLP give legal advice to the Official Committee of Unsecured Creditors and David J. Beckman at FTI Consulting, Inc., gives financial advisory services to the Committee. When the Debtor filed for protection from its creditors, it listed $600 million in total assets and $1 billion in total debts. The Debtor has five affiliates that filed for chapter 11 protection on April 11, 2005 (Bankr. S.D. Tex. Case Nos. 05-20521 through 05-20525). They are Lac d'Amiante Du Quebec Ltee, CAPCO Pipe Company, Inc., Cement Asbestos Products Company, Lake Asbestos of Quebec, Ltd., and LAQ Canada, Ltd. Details about their asbestos-driven chapter 11 filings have appeared in the Troubled Company Reporter since Apr. 18, 2005. Encycle/Texas, Inc. (Bankr. S.D. Tex. Case No. 05-21304), Encycle, Inc., and ASARCO Consulting, Inc. (Bankr. S.D. Tex. Case No. 05-21346) also filed for chapter 11 protection, and ASARCO has asked that the three subsidiary cases be jointly administered with its chapter 11 case. On Oct. 24, 2005, Encycle/Texas' case was converted to a Chapter 7 liquidation proceeding. The Court appointed Michael Boudloche as Encycle/Texas, Inc.'s Chapter 7 Trustee. Michael B. Schmidt, Esq., and John Vardeman, Esq., at Law Offices of Michael B. Schmidt represent the Chapter 7 Trustee. ASARCO's affiliates, AR Sacaton LLC, Southern Peru Holdings LLC, and ASARCO Exploration Company Inc., filed for chapter 11 protection on Dec. 12, 2006 (Bankr. S.D. Tex. Case No. 06-20774 to 06-20776). The Debtors' exclusive period to file a plan expires on Aug. 9, 2007. (ASARCO Bankruptcy News, Issue No. 46; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000) ATARI INC: Cutting 20% of Workforce Including Administrative Jobs ----------------------------------------------------------------- Atari Inc. disclosed a reorganization of its general and administrative functions. The reorganization plan reduces Atari's total workforce by approximately 20%, which includes a reduction of administrative workforce of approximately 26%. This plan was approved by the Board of Directors on April 10, 2007 and communication to employees was completed on April 30, 2007. The company anticipates the workforce reductions to be completed by July 31, 2007 and will record a restructuring charge during fiscal 2008 of approximately $800,000 to $1.1 million. "We expect that the reorganization will continue to reduce Atari's general and administrative cost," David Pierce, President and Chief Executive Office of Atari, Inc., stated. "These actions, though difficult, are a significant first step in reorganizing Atari and demonstrate our commitment to restoring shareholder value." Headquartered in New York City Atari, Inc. (Nasdaq: ATAR) -- http://www.atari.com/-- is a third-party publisher of interactive entertainment software in the U.S that develops interactive games for all platforms. The company's 1,000+ titles include franchises such as The Matrix(TM) (Enter The Matrix and The Matrix: Path of Neo), and Test Drive(R); and mass-market and children's franchises such as Nickelodeon's Blue's Clues(TM) and Dora the Explorer(TM), and Dragon Ball Z(R). Atari Inc. is a majority-owned subsidiary of France-based Infogrames Entertainment SA (Euronext - ISIN: FR-0000052573), an interactive games publisher in Europe. Going Concern Doubt As reported in the Troubled Company Reporter on July 3, 2006, Deloitte & Touche LLP expressed substantial doubt about Atari, Inc.'s ability to continue as a going concern after auditing the Company's financial statements for the for the fiscal years ended March 31, 2006 and 2005. The auditing firm pointed to Atari's significant operating losses and the expiration of its line of credit facility. ATARI INC: Appoints Arturo Rodriquez as CFO on an Interim Basis --------------------------------------------------------------- Atari Inc.'s Board of Directors elected, on a interim basis, Arturo Rodriguez as acting Chief Financial Officer on May 16, 2007. The company disclosed that Mr. Rodriquez currently holds the company's vice president position. David R. Pierce, Atari's president and chief executive officer, said that Mr. Rodriquez will continue to serve as vice president while he holds the position of acting CFO. Mr. Rodriguez joined the company in June 2000, as Senior Manager of Financial Reporting, Mr. Pierce added. Since then, Mr. Rodriquez has held the positions of Director of Accounting and Financial Reporting, Assistant Controller-Accounting and Financial Reporting and Vice President of Accounting and Financial Reporting. New York-based Atari, Inc. (Nasdaq: ATAR) -- http://www.atari.com/ -- develops interactive games for all platforms and is one of the largest third-party publishers of interactive entertainment software in the U.S. The Company's 1,000+ titles include franchises such as The Matrix(TM) (Enter The Matrix and The Matrix: Path of Neo), and Test Drive(R); and mass-market and children's franchises such as Nickelodeon's Blue's Clues(TM) and Dora the Explorer(TM), and Dragon Ball Z(R). Atari Inc. is a majority-owned subsidiary of France-based Infogrames Entertainment SA (Euronext - ISIN: FR-0000052573), an interactive games publisher in Europe. Going Concern Doubt As reported in the Troubled Company Reporter on July 3, 2006, Deloitte & Touche LLP expressed substantial doubt about Atari, Inc.'s ability to continue as a going concern after auditing the Company's financial statements for the for the fiscal years ended March 31, 2006 and 2005. The auditing firm pointed to Atari's significant operating losses and the expiration of its line of credit facility. BAUSCH & LOMB: Advanced Medical May Compete w/ Warburg Pincus' Bid ------------------------------------------------------------------ Advanced Medical Optics Inc. expressed interest in exploring an offer for Bausch & Lomb Inc. following the eye-care company's announcement of an agreement to be acquired by private-equity firm Warburg Pincus subject to higher and better offers, Jon Kamp and Keith J. Winstein of The Wall Street Journal report. Advanced Medical has been looking at Bausch's $710 million lens business and $658 million eye-drug line to add to its portfolio of eye-care products, WSJ relates, citing a person familiar with the matter. According to WSJ's source, Advanced Medical believes a deal between the two companies would offer significant cost synergies, something a private-equity firm cannot offer. Warburg Pincus Deal About two weeks ago, Bausch & Lomb agreed to be merged with affiliates of Warburg Pincus in a transaction valued at approximately $4.5 billion, including approximately $830 million of debt. Under the terms of the agreement, affiliates of Warburg Pincus will acquire all of the outstanding shares of Bausch & Lomb common stock for $65 per share in cash. This represents a premium of approximately 26% over the volume weighted average price of Bausch & Lomb's shares for 30 days prior to press reports of rumors regarding a potential acquisition of the company. Bausch & Lomb's Board of Directors, following the recommendation of a Special Committee composed entirely of independent directors, has unanimously approved the agreement and recommends that Bausch & Lomb shareholders approve the merger. Morgan Stanley & Co. Incorporated is acting as financial advisor to the Special Committee of the Bausch & Lomb Board of Directors and has delivered a fairness opinion. Wachtell Lipton Rosen & Katz is acting as legal counsel to the Special Committee in the transaction. Banc of America, Citi, Credit Suisse and JPMorgan served as the financial advisors to Warburg Pincus, and Cleary Gottlieb Steen & Hamilton LLP is acting as legal advisor to Warburg Pincus. Rating Agencies Take Action The Warburg Pincus Deal prompted Standard & Poor's Ratings Services to lower its ratings on Bausch & Lomb and placed them on CreditWatch with negative implications. Among others, S&P lowered the company's corporate credit rating to 'BB+' from 'BBB'. According to S&P, even if the transaction is not consummated, management's willingness to aggressively increase leverage to this extent is not commensurate with an investment-grade rating. Additionally, Moody's Investors Service said it will continue its review of Bausch & Lomb's ratings for possible downgrade, including the company's Ba1 Corporate Family rating. Sidney Matti, an analyst at Moody's, stated that, "The review for possible downgrade will focus primarily on the company's post- acquisition capital structure and the likelihood that BOL's post- acquisition credit metrics would fall below the 'Ba' rating category." Furthermore, Fitch maintained its Negative Rating Watch on Bausch & Lomb emphasizing that the transaction would significantly increase leverage and likely result in a multiple-notch downgrade. Fitch also warns that the transaction would result in an Issuer Default Rating of no higher than 'BB-'. About Bausch & Lomb Headquartered in Rochester, New York, Bausch & Lomb Inc. (NYSE: BOL) -- http://www.bausch.com/-- develops, manufactures, and markets eye health products, including contact lenses, contact lens care solutions, and ophthalmic surgical and pharmaceutical products. The company is organized into three geographic segments: the Americas; Europe, Middle East, and Africa; and Asia (including operations in India, Australia, China, Hong Kong, Japan, Korea, Malaysia, the Philippines, Singapore, Taiwan and Thailand). In Latin America, the company has operations in Brazil and Mexico. BCE INC: Hospitals of Ontario Joins Cerberus in Buyout Bid ---------------------------------------------------------- Hospitals of Ontario Pension Plan has been recruited by Cerberus Capital Management in the equity firm's bid for BCE Inc., Bloomberg reports. Citing Andy Moysiuk, a managing partner at Cerberus, Bloomberg relates that Hospitals of Ontario had committed equity and inked a non-disclosure agreement. The amount of equity however, was not disclosed. As reported in the Troubled Company Reporter on May 24, 2007, the company disclosed that a consortium that includes Cerberus and a group of Canadian investors entered into talks on taking the company private. According to Bloomberg other parties who have expressed interest is a group led by the Canada Pension Plan Investment Board and the Ontario Teachers' Pension Plan. Kohlberg Kravis Roberts & Co., another equity firm is with the Canada Pension group. The Ontario Teachers' group is the company's largest shareholder. Headquartered in Montreal, Canada, Bell Canada International Inc. (TSX, NYSE: BCE) (NEX:BI.H) -- http://www.bci.ca/-- provides a suite of communication services to residential and business customers in Canada. Under the Bell brand, the company's services include local, long distance and wireless phone services, high- speed and wireless Internet access, IP-broadband services, information and communications technology services and direct-to- home satellite and VDSL television services. Other BCE businesses include Canada's premier media company, Bell Globemedia, and Telesat Canada, a pioneer and world leader in satellite operations and systems management. The company is operating under a Plan of Arrangement approved by the Ontario Superior Court of Justice, pursuant to which BCI intends to monetize its assets in an orderly fashion and resolve outstanding claims against it in an expeditious manner with the ultimate objective of distributing the net proceeds to its shareholders and dissolving the company. BIOMET INC: Moody's Junks Rating on $1.015 Bil. Unsecured Notes --------------------------------------------------------------- Moody's Investors Service assigned a (P)B2 Corporate Family Rating to Biomet, Inc. The rating agency also assigned provisional ratings to proposed bank credit facilities and notes to be used in a leveraged transaction in which a private equity consortium, consisting of the Blackstone Group, Goldman Sachs Capital Partners, Kohlberg Kravis Roberts and TPG will purchase Biomet for cash and common stock totaling approximately $11 billion. At the same time, Moody's assigned a speculative grade liquidity rating of SGL-2. The rating outlook is negative. The ratings are provisional, subject to the closing of the transaction and receipt and review of final documentation. Moody's anticipates that the closing will occur prior to July 1, 2007. Ratings assigned: * Biomet, Inc. -- Corporate Family Rating at (P)B2; -- $350 Million Asset backed revolver at (P)Ba2, (LGD2, 14%); -- $400 Million Secured cash flow revolver at (P)B1, (LGD3, 36%); -- $3.6 Billion Secured term loan at (P)B1, (LGD3, 36%); -- $775 Million Unsecured senior notes at (P)B3, (LGD4, 63%); -- $775 Million Unsecured PIK option notes at (P)B3, (LGD4, 63%); -- $1.015 Billion Unsecured subordinated notes at (P)Caa1, (LGD6, 93%); -- PDR at B2; and -- SGL-2. Moody's believes that Biomet's very high leverage and weak financial strength and financial policy ratios - some of which are positioned at the low-end of the "Caa" category - are a key credit risk. In particular, interest coverage is negligible and the ability to repay debt with cash flow is extremely limited. Further, the absence of financial covenants in the proposed bank agreements provides less protection to creditors. However, in our opinion, the presence of external liquidity sources as well as equity sponsors that have committed significant capital provide greater assurance that a default is unlikely within the next twelve months. As a result, Moody's believes that the (P)B2 Corporate Family Rating is appropriate even though leverage (estimated at about 8.5 times pro forma Debt/ EBITDA based on twelve months ended Feb. 28, 2007 unaudited financial statements) and coverage measures (estimated at 1.2 times pro forma EBITA/interest) are more consistent with lower ratings. The methodology implied rating under Moody's Global Methodology for the Medical Products & Device Industry based on pro-forma unaudited financial statements for the twelve months ended Feb. 28, 2007 is a "B1". However, we believe that this degree of leverage is not fully captured under the methodology. Diana Lee, a Senior Credit Officer at Moody's said, "The ratings incorporate our view that industry demand for orthopedic products is generally stable, providing an offset to an extraordinarily leveraged balance sheet. The ratings assume that Biomet will focus on de-leveraging over the next several years." The rating outlook is negative, which reflects Biomet's weak position in the B2 category due primarily to Moody's concerns regarding extremely high debt levels. Moody's believes that the company will need to see operating improvements as well as grow at industry rates in order to meaningfully de-leverage over the next 12-24 months. The negative outlook also reflects the pending restatement of the company's financial statements. Moody's understands that based on preliminary information, the restatements are expected to be immaterial compared to fiscal 2006 cash flow from operations. We believe, however, that until the matter is fully resolved, there remains some uncertainty with regard to Biomet's financial performance. Biomet's SGL-2 rating reflects our expectation that despite weak free cash flow, the company's liquidity should be solid, supported by external liquidity. Following the transaction, Biomet is expected to have about $750 million of capacity under two secured bank revolvers. Biomet, Inc, based in Warsaw, Indiana, is one of the leading manufacturers of orthopedic implants, specializing in reconstructive devices. BIOMET INC: High Debt Leverage Cues S&P's B+ Credit Rating ---------------------------------------------------------- Standard & Poor's Ratings Services assigned its 'B+' corporate credit rating to Warsaw, Indiana-based Biomet Inc. The outlook is stable. At the same time, Standard & Poor's assigned its bank loan and recovery ratings to Biomet's proposed financing, consisting of a $350 million asset-backed revolving credit facility due June 2013, a $400 million secured cash flow revolving credit facility due June 2013, and a $3.6 billion secured term loan B due December 2014. The $350 million credit facility is rated 'BB-', with a recovery rating of '1', indicating high expectation of full recovery in the event of a payment default. The $400 million credit facility and the term loan B are rated 'B+', with a recovery rating of '3', indicating expectation of meaningful recovery (50%-80%) in the event of a payment default. In addition, S&P assigned 'B-' ratings to the company's proposed $775 million senior notes, $775 million senior payment-in-kind (PIK) toggle notes, and $1.015 billion senior subordinated notes. "The ratings on Biomet reflect a satisfactory business risk profile that is largely offset by high debt leverage; debt to EBITDA will be about 8x as a result of a sponsor buyout," explained Standard & Poor's credit analyst Jesse Juliano. "Given expectations of only moderate cash flow (relative to $6 billion of debt), the company's ability to deleverage, to a great extent, will be a function of its ability to increase EBITDA over the next several years." BION ENVIRONMENTAL: Closes Settlement Pact with TCMP3 Partners -------------------------------------------------------------- Bion Environmental Technologies Inc. completed the settlement documents with regard to a class action lawsuit by TCMP3 Partners, LLP in the Court of Chancery in the State of Delaware. Under the agreement, Bion Environment, Bion Dairy Corporation and Mark Smith will pay $165,000, through insurance, into a settlement fund. They will also pay $405,000 to the settlement fund. The payments are due upon entry of a scheduling order by the Court for approval of the settlement. The settlement is subject to court approval. As part of the settlement reached in the TCMP Litigation, Bion Environment and its majority owned subsidiary Centerpoint Corporation, and Bion's shareholders filed an action against Comtech Group, Inc., OAM S.p.A and others in the Court of Chancery in the State of Delaware, along with a stipulated settlement of the litigation. Under to that settlement, Comtech Group and OAM will deliver to the Shareholder Class: a. 144,240 shares of Bion common stock; b. a warrant to purchase 100,000 shares of Bion's common stock; and c. 140,000 shares of the common stock of Centerpoint Corporation. Additionally, Comtech Group and OAM will assign to Bion and Centerpoint all of their rights to any proceeds of an escrow established from the sale of Centerpoint's assets to Aprilia S.p.A. and any proceeds from litigation related to the transaction with Aprilia. As part of the settlement, one of the other defendants will pay $150,000 into a settlement fund, through insurance. Of the amount, Bion Environment will expect receive $85,000 and Centerpoint will receive $20,000. About Bion Environmental Bion Environmental Technologies Inc. -- http://www.biontech.com/ -- is currently focused on the completion of the development of applications of its second-generation technology which provides solutions for environmentally sound clean-up of the waste streams of large-scale "confined animal feeding operations" (CAFO's) and creates economic opportunities for integration of renewable energy production, ethanol production, sustainable animal husbandry and organic soil/fertilizer and feed production. * * * As reported in the Troubled Company Reporter on April 27, 2007, Bion Environmental Technologies Inc.'s balance sheet at March 31, 2007, showed $1,122,237 in total assets and $5,274,112 in total liabilities, resulting in a $4,151,875 total stockholders' deficit. BLAST ENERGY: Files Chapter 11 Plan of Reorganization in Texas -------------------------------------------------------------- Blast Energy Services Inc. and its debtor-affiliate, Eagle Domestic Drilling Operations LLC, filed with the United States Bankruptcy Court for the Southern District of Texas a Joint Chapter 11 Plan of Reorganization. The Debtors tells the Court that their estates will not be substantively consolidated and all obligations to holders of claims will be the liability of either Blast Energy or Eagle Domestic. Treatment of Claims Under the Plan, Holders of Priority Claims will be paid in full, in cash. The Secured Claim of Laurus Master Fund Ltd. will receive $2,100,000 under the terms of the settlement agreement, and oil and gas rigs owned by Eagle Domestic Drilling Operations LLC. On the effective date, Secured Claims of Berg McAfee Companies LLC will receive 5,600,000 shares of Blast common stock. At the Debtors' option, Secured Claims will receive, either: i. cash; ii. the collateral of the claim; and iii. note, secured by a lien. Eagle Convenience and Blast Convenience Claims will receive cash, on the distribution date, equal to 75% of its allowed claim. On the distribution date, Eagle Unsecured Claims will receive one of these options: Option 1: -- cash equal to 10% of the holder's allowed claim; -- Eagle Junior Secured Note equal to 90% of holder's allowed claim; -- payments on the Eagle Junior Secured Note will be made in accordance with the terms outlined in the Plan; and -- At the confirmation hearing, Blast will appoint a collateral agent to administer the lien securing the payment of the Eagle Junior Secured Note and the right of unsecured creditors. Option 2: -- conversion of the unsecured claim to Blast common stock at the rate of $0.2 per share; -- holders will receive shares of Blast common stock on or before 30 days after the distribution date; and -- no interest in the Eagle Junior Secured Note. On the distribution date, Blast Unsecured Claims will receive one of these options: Option 1: -- cash equal to 10% of the holder's allowed claim; -- Blast Junior Secured Note equal to 90% of holder's allowed claim; -- payments on the Blast Junior Secured Note will be made in accordance with the terms outlined in the Plan; and -- At the confirmation hearing, Blast will appoint a collateral agent to administer the lien securing the payment of the Eagle Junior Secured Note and the right of unsecured creditors. Option 2: -- conversion of the unsecured claim to Blast common stock at the rate of $0.2 per share; -- holders will receive shares of Blast common stock on or before 30 days after the distribution date; and -- no interest in the Blast Junior Secured Note. Second Bridge LLC Interest, totaling 900,000 shares, will be purchased by the reorganized Debtors for $900. The repurchased shares will be returned to treasury. Equity Interest Holders will be issued new share of Blast common stock under the Plan. A full-text copy of the Chapter 11 Plan of Reorganization is available for a fee at: http://www.researcharchives.com/bin/download?id=070524034339 About Blast Energy Services Headquartered in Houston, Blast Energy Services and its debtor-affiliate Eagle Domestic Drilling Operations LLC -- http://www.blastenergyservices.com/-- owns and contracts land drilling rigs to third parties. The Debtor also provides services relating to drilling rig operations. Blast Energy owns and develops abrasive jetting intellectual property, technology and equipment providing downhole production enhancement and drilling solutions, and satellite broadband access for Internet, data, email, applications, VoIP and video streaming as energy industry management tools providing real-time supervisory control and data acquisition. The company filed for Chapter 11 protection on Jan. 19, 2007 (Bankr. S.D. Tx. Case No. 07-30424). H. Rey Stroube, III, Esq., represent the Debtors. The Official Committee of Unsecured Creditors represented by Alan D Halperin, Esq., at Halperin Battaglia Raicht LLP. When the Debtor filed for protection from its creditors, it estimated assets of $63,500,851 and debts of $51,019,486. BOULDER SPECIALTY: Closes Merger Agreement with GFA Holdings ------------------------------------------------------------ Boulder Specialty Brands Inc. has completed its acquisition of GFA Holdings Inc., the owner of GFA Brands Inc., maker of Smart Balance(R) and Earth Balance(R) heart-healthy food products and other established brands. The combined company has adopted the name Smart Balance Inc., and intends to apply for listing on NASDAQ under the symbol SMBL. "The company is pleased to have completed this transaction, and it sees significant opportunities to build Smart Balance and Earth Balance's heart-healthy brands into powerhouses across several food categories," Stephen B. Hughes, chairman & chief executive officer of Smart Balance, said. "This represents a significant first step in the company's strategy to be a leading marketer of healthy and organic brands targeting two of the trends in the global food and beverage market. Working together, the company will leverage its management team's skills and expertise in the categories in which Smart Balance and Earth Balance compete well as its brand building experience," Mr. Hughes said. Smart Balance Inc. will be headquartered in New Jersey with an office in Boulder, Colorado. Employees of both companies are expected to remain with Smart Balance. Smart Balance markets various foods under the Smart Balance(R), Earth Balance(R), Smart Beat(R) and other brand names. The company is a licensee of Brandeis University for its patented oil blend to help improve HDL/LDL cholesterol ratios. About Boulder Specialty Brands Headquartered in Cresskill, New Jersey, Boulder Specialty Brands Inc. -- http://www.boulderspecialtybrands.com/-- (OTCBB: BDSBU, BDSB, BDSBW) is a special purpose acquisition corporation, formed to acquire a lower middle market food & beverage company/brands. * * * As reported in the Troubled Company Reporter on May 21, 2007, Standard & Poor's Ratings Services assigned its 'B-' corporate credit rating to Boulder Specialty Brands Inc. At the same time, Standard & Poor's assigned its 'B-' bank loan and '2' recovery ratings to Boulder's proposed $140 million senior secured, first- lien credit facility, and its 'CCC' bank loan and '5' recovery ratings to Boulder's proposed $40 million senior secured, second- lien term loan. The outlook is negative. CALPINE CORP: Inks Prelim Settlement Pact with Canadian Units ------------------------------------------------------------- Calpine Corporation disclosed in a regulatory filing with the Securities and Exchange Commission that it has reached a preliminary settlement with certain of its Canadian subsidiaries that are applicants in separate insolvency proceedings pending in Canada. The salient terms of the preliminary settlement are: (a) Calpine Corp. will withdraw, with prejudice, its partial objection to Claim No. 5742, filed by HSBC Bank USA, National Association, the indenture trustee for the notes issued by Calpine Canada Energy Finance ULCI. (b) The U.S. Debtors will retain their equity interests in the Canadian Debtors, including, without limitation, for purposes of distributions in the Canadian Companies' Creditors Arrangement Act Proceedings. (c) Claim Nos. 4493 and 4442 and Calpine Canada Resources Company's intercompany claim against ULCI for $9,865,040 will be assigned to the U.S. Debtors. (d) Claim No. 4448 will be allowed as a non-subordinated general unsecured claim for $232,000,000 against the U.S. Debtors. (e) Manufacturers and Traders Trust Company, as indenture trustee to the notes issued by Calpine Canada Energy Finance ULC II, will have an allowed general unsecured claim for approximately GBP14,925,929 as of April 15, 2007, against ULCII. (f) ULCII will have one allowed general unsecured claim against CCRC in an amount required to allow ULCII to pay the Allowed ULCII Indenture Trustee Claim and any other allowed claims against ULCII in full. (g) The ULCII Indenture Trustee will have one allowed general unsecured claim for $361,660,821 against Calpine Corp. (h) The fraudulent transfer complaint related to the Greenfield Project will be dismissed with prejudice and without costs in exchange for an allowed, postpetition administrative expense priority claim for $15,000,000 in favor of Calpine Energy Services Canada Partnership against Calpine Corp. (i) Calpine Corp. will have an allowed first ranking charge of $90,000,000 against CCRC on the net proceeds of the sale of the ULCI Senior Notes. Charles B. Clark, Jr., Calpine Corp.'s senior vice president and chief accounting officer, says the settlement is still subject to definitive documentation and approval of the United States Bankruptcy Court for the Southern District of New York and the Alberta Court of Queen's Bench and Calpine's board of directors and certain other creditor approvals. A copy of the preliminary settlement between the U.S. and Canadian Debtors is available for free at: http://ResearchArchives.com/t/s?2010 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. 49 Bankruptcy Creditors' Service Inc. http://bankrupt.com/newsstand/or 215/945-7000). Calpine Corp. has until June 20, 2007, to file a plan, and until Aug. 20, 2007, to solicit acceptances of that plan. CALPINE CORP: Turns to Deloitte Financial for Accounting Services ----------------------------------------------------------------- Calpine Corporation and its debtor-affiliates seek the U.S. Bankruptcy Court for the Southern District of New York's authority to employ Deloitte Financial Advisory Services LLP, to perform accounting services related to their emergence from Chapter 11, nunc pro tunc to March 21, 2007. The Debtors tell the Court that they have spent the past several months developing a plan of reorganization that they believe will lead to a successful emergence from their Chapter 11 cases. Due to the large and complex nature of their businesses, the Debtors have sought assistance from Deloitte FAS to: (a) determine the accounting effects of the reorganization; (b) revaluate their assets and liabilities under applicable fresh-start accounting rules; (c) record the resulting transactions in their books; and (d) determine other necessary, emergence-related external reporting disclosures in conformity with applicable accounting standards. David R. Seligman, Esq., at Kirkland & Ellis LLP, in New York, says Deloitte FAS will deliver fresh-start accounting services in five phases: Phase 1 - Deloitte FAS will gain a high-level understanding of the Debtors' existing accounting environment, processes, systems and controls with respect to fresh-start issues and requirements, and develop an action plan by outlining tasks and the preliminary timeline of efforts to be completed for emergence from the bankruptcy cases. Phase 2 - Deloitte FAS will assist the Debtors in the design of the processes and tools that will be required to complete the fresh-start accounting. Phase 3 - Deloitte FAS will assist the Debtors in the development, testing and verification the processes and systems utilities required to support the implementation of fresh-start accounting. Phase 4 - The objective of the implementation phase is to record the plan effects and fresh-start adjustments to determine the predecessor entity final income statement and successor entity opening balance sheet needed for consolidated and separate entity reporting purposes. Phase 5 - Deloitte FAS will assist the Debtors' management in the preparation of accounting information and disclosures in support of public financial filings like for 10Ks and 10Qs and other company financial statements. In addition, Deloitte Consulting, LLP, an affiliate of Deloitte FAS, will act as a subcontractor to Deloitte FAS to assist in the implementation aspects of the fresh-start accounting services. The Debtors will pay Deloitte FAS a $1,500,000 fixed fee for services the firm will render during the first two phases. The Fixed Fee excludes non-working travel time incurred during the performance of the contemplated services, David R. Seligman, Esq., at Kirkland & Ellis LLP, in New York, tells the Court. For work done in phases three to five, the Debtors will pay Deloitte FAS its customary hourly rates: Professional Hourly Rates ------------ ------------ Partner/Principal/Director $600 to $725 Senior Manager $480 to $580 Manager $380 to $500 Senior Staff $275 to $375 Staff $175 to $250 Paraprofessional $75 The Debtors will also reimburse Deloitte FAS for any actual and necessary expenses. For additional services Deloitte FAS will perform, the Debtors will pay each Deloitte professional involved according to these rates: Professional Hourly Rates ------------ ------------ Partner/Principal/Director $545 to $620 Senior Manager $435 to $495 Manager $325 to $375 Senior Staff $275 to $325 Staff $175 to $250 Kirk Blair, a partner at Deloitte FAS, assures the Court that his firm does not represent any interest adverse to the Debtors and their estates, and is a "disinterested person" as the term is defined in Section 101(14) of the Bankruptcy Code. Mr. Blair discloses that Deloitte FAS is an affiliate of Deloitte Tax, LLP, who has provided prepetition tax services to the Debtors and has received approximately $4,924,455 within the 90- day period before the Petition Date. As of the Petition Date, the Debtors owe Deloitte Tax $1,995. However, Deloitte Tax is not seeking recovery of that amount, Mr. Blair tells the Court. Deloitte & Touche, LLP, an affiliate of Deloitte FAS, has also provided prepetition attest services to the Debtors and has received $84,483 within the 90-day period before the Petition Date. No amount is owing to Deloitte & Touche as of the Petition Date, Mr. Blair says. About Calpine Corporation 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. 49 Bankruptcy Creditors' Service Inc. http://bankrupt.com/newsstand/or 215/945-7000). Calpine Corp. has until June 20, 2007, to file a plan, and until Aug. 20, 2007, to solicit acceptances of that plan. CALPINE CORP: Appoints Sarah Novosel as Senior Vice President ------------------------------------------------------------- Calpine Corporation has named Sarah Novosel Senior Vice President-Government Affairs and Managing Counsel to lead Calpine's Washington, D.C. office and to continue to direct Calpine's federal regulatory practice before the Federal Energy Regulatory Commission and other federal agencies. "Sarah is a premier Washington energy attorney with significant knowledge of regulatory law and experience both in private practice and as a regulatory lawyer for several major energy companies. We are pleased to have Sarah assume management of the Washington office, which plays a critical role in the company's strategic initiatives," stated Robert P. May, Calpine's Chief Executive Officer. Ms. Novosel has been practicing energy law for more than 15 years and joined Calpine in April 2004 as Senior Regulatory Counsel. She began her career in 1991 with the law firm of Bracewell & Patterson in Washington, D.C., focusing on natural gas restructuring issues for local distribution companies and natural gas marketing clients. In 1996, with FERC's issuance of its electric transmission open access rule, Ms. Novosel directed her practice to electric regulation issues for power marketing and generation companies. A graduate of the University of Maryland with a bachelor's degree in Government and Politics, she earned her law degree from Georgetown University Law Center. About Calpine Corporation 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. 49 Bankruptcy Creditors' Service Inc. http://bankrupt.com/newsstand/or 215/945-7000). Calpine Corp. has until June 20, 2007, to file a plan, and until Aug. 20, 2007, to solicit acceptances of that plan. CELL THERAPEUTICS: March 31 Balance Sheet Upside-Down by $106.9 MM ------------------------------------------------------------------ Cell Therapeutics Inc. reported financial results for the first quarter ended March 31, 2007, with a stockholders' deficit of $106.9 million, from total assets of $94.3 million, total liabilities of $195.4 million, and Series A 3% Convertible Preferred Stock of $5.8 million. For the three months ended March 31, 2007, the company had $26.1 million net loss on $20,000 total revenues, as compared with $51.9 million net loss on $20,000 total revenues for the three months ended March 31, 2006. Net loss attributable to common shareholders for the quarter totaled $28.7 million versus a net loss attributable to common shareholders of $51.9 million for the quarter ended March 31, 2006. Total operating expenses for the quarter totaled $23.6 million compared to $26.5 million for the comparable period in 2006. The company ended the quarter with about $48.7 million in cash and cash equivalents, securities available-for-sale, and interest receivable, before taking into account gross proceeds of $37.2 million received from the recent convertible preferred stock and warrants offering and payment of a $10.6 million settlement expense in April 2007. Cash and cash equivalents, securities available-for-sale and interest receivable are about $48.7 million as of March 31, 2007. In addition, in April 2007, the company closed a Series B 3% convertible preferred stock and common stock warrant financing generating proceeds of about $34.9 million, net of placement agency fees. Also in April 2007, the company made a payment of $10.6 million in the settlement of its litigation with the U.S. Attorney's Office, or USAO, which amount includes interest accrued from the date of reaching agreement in principle with the USAO until the date the payment was made. The company expects that the net amount will not be sufficient to fund operations for the next 12 months. A full-text copy of the company's first quarter 2007 report is available for free at http://ResearchArchives.com/t/s?2008 "CTI is focused on re-entering the blood-related cancer market. The Company will look at acquiring one or more near-term products that could re-establish our commercial efforts in anticipation of a potential pixantrone NDA in 2008, depending on interim results from our pivotal trial later this year," said James A. Bianco, M.D., president and chief executive officer of CTI. "With the planned expansion of pixantrone pivotal studies into indolent NHL, the initiation of a gender-specific trial in lung cancer with XYOTAX, and the exciting prospects of Aequus and our pre-clinical programs, 2007 promises to be a very exciting year for repositioning the company for growth." Recent Highlights -- Raised about $57.2 million from two convertible preferred stock and warrant offerings, $20 million and $37.2 million gross proceeds, for each; -- Announced plans to form a new spin-off company, Aequus BioPharma Inc. to develop a Genetic Polymer(TM) technology that was created at CTI to speed the manufacture, development and commercialization of novel biopharmaceuticals including follow-on biologics and siRNA; -- Submitted a protocol under Special Protocol Assessment guidelines to the U.S. Food and Drug Administration for a pivotal clinical trial, known as PIX303, for pixantrone combination chemotherapy in patients with indolent non- Hodgkin's lymphoma; -- Submitted protocols under SPA guidelines to FDA for two pivotal clinical trials, known as PGT306 and PGT307, for XYOTAX(TM), paclitaxel poliglumex, in women with lung cancer who have not received prior chemotherapy; -- Reported on preliminary results in an investigator- sponsored phase II study of XYOTAX(TM) in patients with taxane-resistant androgen independent prostate cancer showing 'encouraging' major responses, which were presented at a medical conference in February; -- Effected a one-for-four reverse stock split of common stock in an attempt to bring the capital structure and balance sheet in line with other pre-commercial stage companies and make the stock more available to a wider cross section of institutional fund investors; -- Received approval in a special meeting of shareholders to amend and restate the company's articles of incorporation to increase the number of authorized shares; the current authorized shares are 100 million of common stock and 10 million of preferred stock; and -- Settled government claims, arising from an investigation dating to 2004, of allegations regarding alleged overpayments by Medicare to doctors who prescribed the anti-cancer drug, TRISENOX, with a full release from liability and no admission of wrongdoing by CTI; CTI filed suit against the Lash Group alleging that it provided CTI negligent professional advice about Medicare reimbursements which created this liability. About Cell Therapeutics Headquartered in Seattle, Cell Therapeutics Inc. (NasdaqGM: CTIC) -- http://cticseattle.com/-- is a biopharmaceutical company committed to developing an integrated portfolio of oncology products aimed at making cancer more treatable. The company's balance sheet at Dec. 31, 2006, showed $101.8 million in total assets and $203.4 million in total liabilities, resulting in a $101.6 million total stockholders' deficit. CENTRAL GARDEN: First Quarter Net Sales Widen to $485.7 Million --------------------------------------------------------------- Central Garden & Pet Company reported net sales of $485.7 million, an increase of 21% from $401.3 million in the comparable fiscal 2006 period. Income from operations for the quarter increased 1% to $46.2 million from $45.7 million in the year ago period. The company reported net income for the quarter of $21.5 million, compared to net income of $26.2 million in the year ago period. Branded product sales increased 25%. Sales of other manufacturers' products increased 2%. Organic sales increased 11%. Depreciation and amortization for the quarter was $7.4 million compared to $6 million in the year ago period. As of March 31, 2007, the company listed $1.7 billion in total assets, $976.2 million in total liabilities, $1.3 million in minority interest, and $755.9 million in total stockholders' equity. The primary cash flows for the six months ended March 31, 2007, were $115.9 million of cash used in operating activities and $45.9 million of cash used in investing activities partially offset by $147.9 million provided by financing activities. At March 31, 2007, the company's total debt outstanding was $713.2 million compared to $655.8 million at March 25, 2006, due to acquisitions and increased seasonal working capital requirements. The company believes that cash flows from operating activities, funds available under its revolving credit facility, and arrangements with suppliers will be adequate to fund its presently anticipated working capital requirements for the foreseeable future. It anticipates capital expenditures to be about $40 million for fiscal 2007. A full-text copy of the company's first quarter 2007 report is available for free at http://ResearchArchives.com/t/s?1ffb "Our continued focus on new product innovation supported by our brand building initiatives, contribution from acquisitions completed in fiscal 2006, and favorable early season weather conditions drove our strong sales performance," noted Glenn Novotny, president and chief executive officer of Central Garden & Pet. "Operating income and margins continued to be adversely impacted primarily by higher grain costs related to our wild bird feed operations. In addition, higher interest expense associated with recent acquisitions and a higher tax rate than prior year further impacted net income." Results for Six Months For the six months ending March 31, 2007 of fiscal 2007, the company reported net sales of $803 million, an increase of 16% from $694 million in the comparable 2006 period. Income from operations for the period decreased 6% to $52.2 million. Net income for the first six-month period decreased 36% to $18.5 million from $28.8 million in the year ago period. Branded product sales increased 21% while sales of other manufacturers' products declined 4%. Depreciation and amortization for the first six month period was $14.3 million compared to $11.2 million in the year ago period. "We are reiterating our sales and earnings guidance for the year," concluded Mr. Novotny. "However, we are closely watching the performance of our Garden business, which experienced lower than anticipated sales in April, and the continued volatility of the grain cost environment." About Central Garden Headquartered in Walnut Creek, California, Central Garden & Pet Company (NASDAQ: CENT) -- http://www.central.com/-- markets and produces branded products for the lawn & garden and pet supplies markets. Products are sold to specialty independent and mass retailers. The company also provides a host of other regional and application-specific garden and pet brands and supplies. The company has approximately 5,000 employees, primarily in North America and Europe. * * * Central Garden and Pet Company carries Moody's Investors Service's Ba3 corporate family rating. Additionally, Moody's held the company's Ba2 probability-of-default rating on the company's $350 million senior secured revolver. CENTRAL PARKING: Moody's Cuts Corporate Family Rating to B2 ----------------------------------------------------------- Moody's Investors Service converted the provisional credit facility ratings of KCPC Acquisition, Inc. into definitive ratings in connection with the recently completed leveraged buyout of Central Parking Corporation. Concurrently, Moody's withdrew the ratings on CPC's former bank credit facility, downgraded the Corporate Family Rating and Probability of Default Rating of CPC to B2 and affirmed the B2 rating on the convertible trust issued preferred securities issued by the Central Parking Finance Trust. This rating action concludes a review for possible downgrade initiated on Feb. 22, 2007. The rating outlook is stable. KCPC established an escrow account in connection with the closing of the buyout to fund the expected conversion of the TIPS into cash consideration. Moody's expects to withdraw the ratings on the TIPS in the near term upon the conversion of substantially all of the TIPS for cash consideration. However, if a material amount of TIPS remain outstanding, then Moody's expects to lower the TIPS rating to Caa1. Moody's expects to withdraw the Corporate Family Rating and Probability of Default Rating of CPC in the near term. Moody's converted these provisional ratings of KCPC into definitive ratings: -- $80 million 6 year first lien revolving credit facility, to Ba2 (LGD2, 20%) from (P)Ba2 (LGD2, 19%); -- $235 million 7 year first lien term loan facility, to Ba2 (LGD 2, 20%) from (P)Ba2 (LGD2, 19%); -- $55 million 7 year first lien synthetic letter of credit facility, to Ba2 (LGD2, 20%) from (P)Ba2 (LGD2, 19%); -- $50 million 7.5 year second lien term loan facility, to B2 (LGD4, 53%) from (P)B2 (LGD4, 51%); and -- Corporate Family Rating, to B2 from (P)B2. These rating actions were taken with respect to Central Parking Corporation: -- Downgraded Corporate Family Rating, to B2 from Ba3; -- Downgraded Probability of Default Rating, to B2 from Ba3; -- Affirmed $78 million 5.25% convertible trust issued preferred securities (issued by the Central Parking Finance Trust), B2 (LGD6, 93%); -- Withdrew $225 million senior secured revolving credit facility due 2008, rated Baa3 (LGD2, 15%); and -- Withdrew $74 million senior secured term loan facility due 2010, rated Baa3 (LGD2, 15%). Central Parking Corporation, headquartered in Nashville, Tennessee, is a leading provider of parking and transportation- related services. As of Dec. 31, 2006, the Company operated more than 3,100 parking facilities containing approximately 1.5 million spaces at locations in 37 states, the District of Columbia, Canada, Puerto Rico, Chile, Colombia, Peru, the United Kingdom, the Republic of Ireland, Spain, Greece, Italy and Switzerland. Revenues for the 12-month period ended Dec. 31, 2006 were about $1.1 billion. COMFORCE CORP: Partially Redeems $10 Million of 12% Senior Notes ---------------------------------------------------------------- COMFORCE Corporation has requested Wilmington Trust to send a notice of partial redemption in order to redeem, on June 28, 2007, $10 million principal amount of the 12% Senior Notes due Dec. 1, 2010, at a redemption price equal to 103% of the principal amount, plus accrued interest from June 1, 2007, to the scheduled redemption date. The total redemption price, including accrued interest, will be $10.39 million. COMFORCE expects to utilize loan proceeds under its bank credit facility to effect this partial redemption of its Senior Notes on the scheduled redemption date. Only Senior Notes held by holders selected for redemption are being redeemed. Upon completion of this partial redemption, $12.89 million of the company's 12% Senior Notes will remain outstanding. "The company is pleased to have the opportunity to complete this redemption and further lower its interest expenses," John Fanning, chairman and chief executive officer of COMFORCE, said. "Subject to satisfying all conditions under the company's bank credit facility, the company intends to use proceeds under this facility to redeem $10 million principal amount of Senior Notes. When the redemption is completed, the company's public debt will stand at $12.9 million as compared to $138.8 million as of June 2000. The company has worked hard to achieve these results and I commend the company's executive team in attaining significant savings in its interest expense and improving the company's capital structure." About COMFORCE Corporation Headquartered in Woodbury, New York, COMFORCE Corporation (Amex: CFS) -- http://www.comforce.com-- is a provider of outsourced staffing management services that enable Fortune 1000 companies and other large employers to consolidate, automate and manage staffing, compliance and oversight processes for their contingent workforces. The company also provides specialty staffing, consulting and other outsourcing services to Fortune 1000 companies and other large employers for their healthcare support services, technical and engineering, information technology, telecommunications and other staffing needs. The company operates in three segments: (i) Human Capital Management Services, provides consulting services for managing the contingent workforce through its PRO Unlimited(R) subsidiary; (ii) Staff Augmentation provides healthcare support services, including RightSourcing(R) Vendor Management Services, Technical, Information Technology and other staffing services; and (iii) Financial Outsourcing Services provides funding and back office support services to independent consulting and staffing companies. * * * At April 1, 2007, the company's balance sheet showed total assets of $190.7 million, total liabilities of $205.1 million, resulting to a total stockholders' deficit of $14.4 million. COMM 2007: Moody's Puts Low-B Ratings on Four Security Classes -------------------------------------------------------------- Moody's Investors Service assigned definitive ratings to securities issued by COMM 2007-FL14 Mortgage Pass-Through Certficates. The provisional ratings issued on April 23, 2007 have been replaced with these definitive ratings: -- Class A-1, $1,291,365,000, rated Aaa; -- Class X-1 $2,159,024,377*, rated Aaa; -- Class X-2, $2,159,024,377*, rated Aaa; -- Class X-3-DB, $2,350,300,000*, rated Aaa; -- Class X-3-SG, $156,474,502*, rated Aaa; -- Class X-4, $2,159,024,377*, rated Aaa; -- Class X-5-DB, $0*, rated Aaa; -- Class X-5-SG, $0*, rated Aaa; -- Class A-J, $430,456,000, rated Aaa; -- Class B, $91,758,000, rated Aa1; -- Class C, $75,566,000, rated Aa2; -- Class D, $64,771,000, rated Aa3; -- Class E, $64,771,000, rated A1; -- Class F, $64,771,000, rated A2; -- Class G, $21,590,000, rated A3; -- Class H, $21,590,000, rated Baa1; -- Class J, $13,494,000, rated Baa2; -- Class K, $18,892,377, rated Baa3; -- Class MKL1 $63,000,000, rated Baa1; -- Class MKL2 $55,000,000, rated Baa2; -- Class MKL3, $54,000,000, rated Baa3; -- Class GLB1, $16,000,000, rated Baa2; -- Class GLB2, $21,000,000, rated Baa3; -- Class GLB3, $25,000,000, rated NR; -- Class GLB4, $13,000,000, rated Ba1; -- Class AOA1, $12,000,000, rated Baa2; -- Class AOA2, $11,000,000, rated Baa3; -- Class AOA3, $15,000,000, rated NR; -- Class AOA4, $15,000,000, rated Ba2; -- Class PG1, $4,000,000, rated Baa1; -- Class PG2, $6,000,000, rated Baa2; -- Class PG3, $6,000,000, rated Baa3; -- Class PG4, $5,400,000, rated Ba1; -- Class PH1, $4,444,000, rated Baa1; -- Class PH2, $4,000,000, rated Baa2; -- Class PH3, $5,000,000, rated Baa3; -- Class CA1, $2,500,000, rated Baa2; -- Class CA2, $1,500,000, rated Baa3; -- Class CA3, $1,000,000, rated Ba1; -- Class SA1, $7,906,125, rated Baa3. *Approximate notional amount Moody's has withdrawn the provisional ratings of these classes of certificates: -- Class SA2, $2,500,000, WR; -- Class SA3, $6,000,000, WR. COMMERCIAL MORTGAGE: Moody's Junks Rating on Two Cert. Classes -------------------------------------------------------------- Moody's Investors Service upgraded the ratings of six classes and affirmed the ratings of nine classes of Commercial Mortgage Acceptance Corp., Commercial Mortgage Pass-Through Certificates, Series 1999-C1: -- Class A-2, $364,098,902, affirmed at Aaa; -- Class X, Notional, affirmed at Aaa; -- Class B, $33,021,000, affirmed at Aaa; -- Class C, $34,856,000, affirmed at Aaa; -- Class D, $11,007,000, affirmed at Aaa; -- Class E, $23,848,000, upgraded to Aaa from A1; -- Class F, $12,842,000, upgraded to Aaa from A3; -- Class G, $1,834,000, upgraded to Aa1 from Baa1; -- Class H, $12,842,000, upgraded to A1 from Baa3; -- Class J, $20,179,000, upgraded to Baa3 from Ba2; -- Class K, $5,504,000, upgraded to Ba2 from Ba3; -- Class L, $7,338,000, affirmed at B1; -- Class M, $9,172,000, affirmed at B2; -- Class N, $5,504,000, affirmed at Caa1; and -- Class O, $3,669,000, affirmed at Caa3. As of the May 15, 2007 distribution date, the transaction's aggregate certificate balance has decreased by approximately 24.8% to $552.0 million from $733.8 million at securitization. The Certificates are collateralized by 199 mortgage loans ranging in size from less than 1.0% to 5.3% of the pool, with the top 10 loans representing 22.2% of the pool. Thirty-seven loans representing 32.9% of the pool have defeased and are collateralized by U.S. Government securities. Four loans have been liquidated from the trust, resulting in an aggregate realized loss of approximately $2.9 million. One loan, representing less than 1.0% of the pool, is in special servicing. Moody's estimates a loss of approximately $2.5 million for the specially serviced loan. Forty-six loans, representing 19.1% of the pool, are on the master servicer's watchlist. Moody's was provided with year-end 2005 and partial-year 2006 operating results for approximately 96.0% and 83.7%, respectively, of the pool. Moody's weighted average loan to value ratio is 72.6%, compared to 84.2% at Moody's last full review in October 2005 and compared to 86.3% at securitization. Moody's is upgrading Classes E, F, G, H, J and K is due to increased credit support, defeasance and improved overall pool performance. The top three non-defeased loans represent 4.5% of the outstanding pool balance. The largest loan is the Patriot Apartments Loan ($9.1 million - 1.7%), which is secured by a 320 unit multifamily complex located in El Paso Texas. Moody's LTV is 64.1%, compared to 71.4% at last review. The second largest loan is the Place Apartments Loan ($7.9 million -- 1.4%), which is secured by a 230 unit multifamily property located in Fort Myers, Florida. Moody's LTV is 84.7%, compared to 99.6% at last review. The third largest loan is the Phoenix Apartments Loan ($7.6 million - 1.4%), which is secured by a 336 unit multifamily property located in El Paso, Texas. Moody's LTV is 73.5%, compared to 75.5% at last review. COMSTOCK HOMEBUILDING: Weak Performance Cues S&P to Cut Rating -------------------------------------------------------------- Standard & Poor's Ratings Services lowered its corporate credit rating on Comstock Homebuilding Cos. Inc. to 'B' from 'B+'. The outlook remains negative. "The rating action reflects Comstock's weak first-quarter performance, a strained financial profile, and the continued competitive conditions that characterize the company's primary housing markets," explained Standard & Poor's credit analyst Lisa Sarajian. Comstock currently has no rated debt securities outstanding. Leverage levels will be high until Comstock's Eclipse project--a complex and sizable 465-unit, two-tower condo development in Arlington, Virginia--is completed. Moreover, quarterly cash flow is likely to remain volatile as the company works to monetize some assets while selectively investing for improved performance within its non-Washington, D.C. area communities. Standard & Poor's would lower the rating further if market conditions worsen, inhibiting management's deleveraging efforts. However, S&P would revise the outlook back to stable, and potentially raise the rating, upon the repayment of the Eclipse loan and a return to modest, but sustainable, profitability. COMVERSE TECHNOLOGY: Nasdaq Delists Common Stock ------------------------------------------------ Comverse Technology Inc. reported that the Nasdaq Stock Market would delist its common stock. Comverse Technology's stock was suspended on Feb. 1, 2007, and has not traded on NASDAQ since that time. NASDAQ will file a Form 25 with the Securities and Exchange Commission to complete the delisting. The delisting becomes effective ten days after the Form 25 is filed. Comverse Technology Inc., -- http://www.cmvt.com/-- (Pink Sheets: CMVT.PK) through its Comverse Inc. subsidiary, provides software and systems enabling network-based multimedia enhanced communication and billing services. The company's Total Communication portfolio includes value-added messaging, personalized data and content-based services, and real-time converged billing solutions. Over 500 communication and content service providers in more than 130 countries use Comverse products to generate revenues, strengthen customer loyalty and improve operational efficiency. Other Comverse Technology subsidiaries include: Verint Systems (VRNT.PK), which provides analytic software-based solutions for communications interception, networked video security and business intelligence; and Ulticom (ULCM.PK), which provides service enabling signaling software for wireline, wireless and Internet communications. * * * As reported in the Troubled Company Reporter on Feb. 5, 2007, Standard & Poor's Ratings Services kept its 'BB-' corporate credit and senior unsecured debt ratings on New York-based Comverse Technology Inc. on CreditWatch with negative implications, where they were placed on March 15, 2006. CONSECO INC: Amends Credit Deal, Hires Banc of America as Arranger ------------------------------------------------------------------ Conseco Inc. has engaged Banc of America Securities LLC and J.P. Morgan Securities Inc. to act as lead arrangers and joint bookrunners in connection with the amendment of its senior secured Credit Agreement, which has a remaining outstanding balance of $671.6 million. The amendment is expected to provide for: a) a $200 million increase in the principal amount of the facility; and b) a revised financial covenants which would allow the company to repurchase up to $300 million of its common stock over the life of the facility. The proceeds of approximately $200 million will be used for general corporate purposes including the repurchase of Conseco common stock and the strengthening of the capital of the company's insurance subsidiaries. Headquartered in Carmel, Indiana, Conseco Inc. (NYSE:CNO) -- http://www.conseco.com/-- is a holding company for a group of insurance companies operating throughout the United States that develop, market and administer supplemental health insurance, annuity, individual life insurance and other insurance products. The company operates in two segments, Bankers Life and Conseco Insurance Group, and a third segment comprised of businesses in run-off, which includes blocks of business that the company no longer markets or underwrites and are managed separately from its other businesses. The company also has a corporate segment which consists of holding company activities and certain noninsurance company businesses that are not related to its operating segments. * * * Fitch Rating affirmed the 'BB+' Issuer Default rating. The company's preferred Stocks carry Moody's Investors Service's 'B3' rating and its long-term local issuer credit carry Standard and Poor's 'BB-' rating. CONSUMERS TRUST: Recovers $3.2MM From Court OK'd Settlement Pact ---------------------------------------------------------------- The Honorable Robert E. Gerber of the U.S. Bankruptcy Court for the Southern District of New York approved the settlement agreement between The Consumers Trust, and David Rubin and Henry Lan, the Receivers for the Debtor, its Official Committee of Unsecured Creditors, Richard Caplan, Caplans Solicitors, and Wesley Harrison. The proposed settlement and compromise was reached by the parties in connection with the discovery of the breach of trust under English law committed by the Debtor's solicitor trustees. The settlement agreement will provide the estate with a recovery of $3,200,000 in cash, and prevents the parties from further pursuing litigation and incurring substantial collection costs. As reported in the Troubled Company Reporter on Mar 3, 2006, Judge Gerber had authorized Debtor and the Creditors' Committee to examine, pursuant to Rule 2004 of the Federal Rules of Bankruptcy Procedure: -- Richard Caplan, Wesley Harrison, Andrew Davis and Dennis Bonley; -- Caplans Solicitors and the Davis Bonley accounting firm; -- Consumer Promotions, Inc., and its principal, James P. Rigsby; -- CP Promotions Ltd.; -- Eurofinance SA and its principal Adrian Roman; -- Robin Wertheimer, Esq.; -- Aaron J. Racine, Esq., and his law firm Monaco, Sanders, Gotfredson, Racine & Barber, LC; -- James R. Hobbs, Esq., and his law firm Wyrsch Hobbs & Mirakian, PC; and -- GT Enterprises, Inc. The Committee and the Debtor, through David Rubin and Henry Lan -- Receivers appointed by order of the High Court of Justice, Chancery Division in the United Kingdom -- had investigated the Rule 2004 parties to gain a clear and accurate understanding of the Debtor's business and financial affairs, and to determine if there are additional assets, including potential causes of action, to satisfy the claim of creditors. The Receivers told the Court that the Rule 2004 parties are effectively the owners, operators, attorneys, management and sales agents of a sales promotion program launched by the Debtor in 2002. Subsequently, the counsel for the Debtor and the Committee traveled to London to examine, under Rule 2004, Consumers Trust's accountant trustees and solicitor trustees. The Debtor and the Committee found out that: * Mr. Caplan and Harrison et al., the solicitor trustees, had committed breaches of trust under English law, including authorizing the Debtor to pay $1,850,000 in trust funds to settle a Missouri action, without the requisite legal authority under the trust deed creating the Consumers Trust; and * the solicitor trustees failed to independently determine the adequacy of the trust funds maintained by the Debtor to pay the claims of consumers who had sued the Trust before. The solicitor trustees have not admitted any wrongdoing in connection with the settlement. About The Consumers' Trust Based in London, England, The Consumers Trust filed for Chapter 11 protection on Dec. 5, 2005 (Bankr. S.D.N.Y. Case No. 05-60155). Jeff J. Friedman, Esq., at Katten Muchin Rosenman LLP, represents the Debtor in its restructuring efforts. The Debtor hired Fraser Milner Casgrain LLP to represent it in its ancillary proceeding in Canada under the Canadian Companies' Arrangement Act. David Rubin & Partners is the Debtor's financial advisor. David L. Barrack, Esq., at Fulbright & Jaworski L.L.P represents the Official Committee of Unsecured Creditors. When the Debtor filed for protection from its creditors, it estimated between $1 million to $10 million in total assets and more than $100 million in total debts. COVENTRY HEALTH: Earns $121.7 Million in First Quarter 2007 ----------------------------------------------------------- Coventry Health Care Inc. reported operating revenues totaling $2.2 billion for the quarter ended March 31, 2007. First quarter net earnings were $121.7 million. The company had total operating revenues of $1.9 billion and net earnings of $121 million for the first quarter ended March 31, 2006. "We are right on track for another year of strong growth in revenue and earnings per share," said Dale B. Wolf, chief executive officer of Coventry. "In the first three months of the year we announced a meaningful acquisition, repurchased four million shares, refinanced debt at favorable rates, and successfully launched Medicare PFFS. We were able to accomplish all of these things while continuing to deliver the strong operational and financial results you have come to expect." First Quarter Highlights * Revenues up 15.4% from the prior year quarter; * Selling, General & Administrative expenses were 16.5% of operating revenues, an improvement of 40 basis points from the prior year quarter; * Share repurchase of 4 million shares at a cost of $221.3 million; * Announced Concentra workers' compensation services acquisition; * Called and retired $170.5 million 8.125% 2012 senior notes; * Placed $400 million of 10-year senior notes at a coupon rate of 5.95%; and * GAAP cash flows from operations were $483.6 million. Adjusted for the timing of Medicare-related payments, cash flows from operations were $215.6 million or 177% of net income. As of March 31, 2007, the company had total assets of $6.3 billion, total liabilities of $3.4 billion, and total stockholders' equity of $2.9 billion. The company's cash and investments, consisting of cash and cash equivalents and short-term and long-term investments, but excluding deposits of $54.9 million restricted under state regulations, increased $500.3 million to $3.2 billion at March 31, 2007, from $2.7 billion at Dec. 31, 2006. A full-text copy of the company's first quarter 2007 report is available for free at http://ResearchArchives.com/t/s?2016 Consolidated Guidance Details The company's second quarter 2007 guidance includes total revenues of $2.3 billion to $2.4 billion and its 2007 full year guidance includes consolidated revenues of $9.2 billion to $9.5 billion. Projected capital expenditures in 2007 of about $65 million to $70 million consist primarily of computer hardware, software and other equipment. About Coventry Headquartered in Bethesda, Maryland, Coventry Health Care, Inc. (NYSE: CVH) -- http://www.cvty.com/-- is a national managed health care company operating health plans, insurance companies, network rental/managed care and workers' compensation services companies. Coventry provides a full range of risk and fee-based managed care products and services, including HMO, PPO, POS, Medicare Advantage, Medicare Prescription Drug Plans, Medicaid, Workers' Compensation services and Network Rental to a broad cross section of individuals, employer and government-funded groups, government agencies, and other insurance carriers and administrators in all 50 states as well as the District of Columbia and Puerto Rico. * * * Coventry Health Care presently carries Moody's Ba1 long-term corporate family rating, bank loan debt rating, and senior unsecured debt rating. CRESCENT REAL: Moody's Holds B1 Rating on Senior Unsecured Notes ---------------------------------------------------------------- Moody's Investors Service affirmed the B1 senior and B3 preferred ratings of the Crescent Real Estate Equities LP and Crescent Real Estate Equities Company, respectively, with a stable outlook. Crescent has agreed to be acquired by Morgan Stanley Real Estate in a transaction valued at approximately $6.5 billion, including liabilities to be assumed by MSRE. The transaction requires shareholder approval and is expected to close in the third quarter of 2007. According to Moody's, any additional risk introduced by the merger agreement is reflected in the ratings. Crescent has met with some success in executing its 2007 strategic plan, whereby it would divest non-core assets and operate as a REIT focused on the ownership and operation of office properties in select markets. Proceeds from sales were slated to strengthen Crescent's balance sheet and increase liquidity. Moody's expects that asset sales will continue under MSRE's ownership and in the interim. Moody's also expects that all rated securities will be redeemed or liquidated by or soon after the close of the transaction, at which time Moody's would expect to withdraw the ratings. These ratings were affirmed with a stable outlook: -- Crescent Real Estate Equities Company -- B3 preferred; (P)B3 preferred shelf; -- Crescent Real Estate Equities LP -- B1 senior unsecured. Crescent Real Estate Equities Company (NYSE:CEI) is a REIT headquartered in Fort Worth, Texas, USA and owns and manages a portfolio of 70 office buildings through its subsidiaries and joint ventures in markets across the USA, with a major concentration in Texas. Crescent also holds investments in resort residential developments, destination resorts, spas and temperature-controlled logistics. Morgan Stanley Real Estate has acquired $121.5 billion of real estate assets worldwide since 1991 and currently manages $55.6 billion in real estate assets on behalf of its clients as well as $26.7 billion in public real estate securities. DELHAIZE AMERICA: Moody's Lifts Sr. Unsec. Debt Rating to Baa3 -------------------------------------------------------------- Moody's Investors Service upgraded Delhaize America's senior unsecured debt rating to Baa3 from Ba1 based on the implementation of cross-guarantees between Delhaize America and its Baa3-rated parent, Etablissements Delhaize Freres et CIE "Le Lion". Delhaize America's corporate family and probability of default ratings have also been raised to Baa3 from Ba1; these ratings will be withdrawn, as will the LGD Assessment. The effect of the cross- guarantees is to establish pari passu treatment of the debt of Delhaize America and its parent. The outlook is stable. Ratings upgraded: -- Corporate Family Rating to Baa3 from Ba1; -- Probability of Default Rating to Baa3 from Ba1; and -- Senior unsecured and medium term notes to Baa3 from Ba1 LGD4 (61%). Delhaize Group's Baa3 rating is underpinned by the company's low business risk, as evidenced by the company's high share of food products, its low cash flow seasonality, each quarter's operating cash flow representing less than 40% of the annual operating cash flow. The rating also factors in the relatively good geographic diversification: Delhaize Group is anchored on two home markets, the U.S. and Belgium, which together represent more than 90% of group's revenues. It also has a profitable, albeit much smaller presence in Greece, Romania, and Indonesia. The Baa3 rating also incorporates Delhaize Group's scale as evidenced by its $18 billion in revenues, in line with the US retail operations of Ahold (Ba1, positive outlook), Sainsbury's (Baa3), or Morrison's (Baa2, negative outlook), and competitive positioning and strategy to achieve leading positions in the key markets it has selected, i.e. be number one, two or a strong number three in each market where it operates. In the competitive Belgium market, which account for 22% of group's revenues, Delhaize ranks second behind Colruyt a price-oriented supermarket chain with more than 25% market share, and in the US (which represents 71% of group's revenues), where in general the top 5 food retailers control half of the market (versus approximately 90% in Europe), Delhaize formats are in general well positioned in the very competitive supermarket environment. Moody's moreover positively views the fact that the company made selected divestitures over the recent past (e.g. Slovakia and the Czech Republic, Food Lion Thailand in 2004, Shop N Save in Singapore), and pursued bolt-on acquisitions to fill in a geographical gap (Cash Fresh in 2005), to enter an adjacent market (Victory in Massachussetts), or to gain new expertise (Harveys in the US). Delhaize Group's Baa3 rating takes account of the fact that since the acquisition of Hannaford, the company has had one of the highest margins in the supermarket industry (driven by the performance of Food Lion and Hannaford), despite the recent burden of the Sweetbay conversion program. In Europe, the company's operating margin is in line with Carrefour (A2) but lags behind best in class European retailers such as Tesco (A1) whose operating margin consistently exceeds 5%. Delhaize Group's Baa3 rating factors in a relatively conservative financial policy, with some limited bolt-on acquisitions, aimed at filling a geographical gap, which the company can integrate within a 1 to 2 year period. Moody's also expects Delhaize Group's liquidity to remain satisfactory. It is underpinned by a $500 million, five-year facility which contains two covenants, for which there is sufficient leeway, and four bilateral credit facilities totalling EUR275 million. The uncommitted lines are not taken into account in our liquidity analysis. Moody's expects that capital expenditures will remain at a healthy percentage of depreciation in the intermediate term, given the above-mentioned market renewal programs. The total amount of stores renewed by the end of 2007 will amount to 500 or 40% of the total number of stores currently operated. Moreover, we note that the company has accelerated its store openings, with almost 100 new stores opened in 2006, and more than 120 planned for 2007 across the countries where the group operates. The rating outlook is stable, reflecting Moody's anticipation that: (i) Delhaize Group will maintain its operating margin at least at the current level in the U.S. and in Europe, and that (ii) the group's credit metrics will improve further from FYE2006 and will remain well anchored in the Baa3 range, with retained cash flow to net debt in the high teens and debt to Ebitda comfortably below 4, both ratios being adjusted in accordance with Moody's adjustments. Headquartered in Salisbury, North Carolina, Delhaize America operates about 1544 supermarkets under the Banners Food Lion,Hannaford, Kash n" Karry, Sweetbay, And Harveys along the Eastern United States. Delhaize America is wholly owned by Belgium's Delhaize Group, and accounts for the majority of group sales, earnings, and debt. Headquartered in Belgium, Delhaize Group is a food retailer which operates 2,636 stores in eight countries and recorded sales revenues of EUR18.6 billion and net income of EUR364.9 million in 2005. DRAGON PHARMACEUTICAL: Earns $850,052 in Quarter Ended March 31 --------------------------------------------------------------- Dragon Pharmaceutical Inc. reported net income of $850,052 for the first quarter ended March 31, 2007, compared with net income of $1,093,514 for the same period last year. Dragon reported sales of $17.33 million for the quarter ended March 31, 2007, an increase of 32% compared to sales of $13.15 million for the same period of 2006. The sales increase was primarily driven by the growth of sales from the Chemical Division and Pharma Division, which increased by 31% and 73%, respectively. The gross profit and gross margin increased to $4.06 million and 23.44% as compared to $2.63 million and 19.99% for the same period of 2006. Operating income was $1.79 million in the first quarter of 2007, representing a 785% increase as compared to $202,490 for the same period of 2006. During the first quarter ended March 31, 2007, the company recognized a net other expense of $777,000 which represented primarily interest expense, compared to other income for the quarter ended March 31, 2006, of $573,000 which was mainly due to the sale of the European EPO project for $1 million. "Competition eliminated many ambitions on expansion and new investment in our products sector," said Mr. Yanlin Han, chairman and chief executive officer of the company. "We did not find any new competitors in the business in 2006 and first quarter of 2007, therefore we are confident that our business will grow under the restored market condition in China. Meanwhile, as the leading exporter from China, we are excited to see our company being one of the companies who can leverage our manufacturing advantages from China to the international markets." "China based manufacturers have become global market leaders in other pharmaceutical chemicals such as Vitamin C and Penicillin," said Mr. Han, "and we are working towards a similar successful story." At March 31, 2007, the company's balance sheet showed $88.1 million in total assets, $47.9 million in total liabilities, and $40.2 million in total stockholders' equity. The company's balance sheet at March 31, 2007, also showed strained liquidity with $22.2 million in total current assets available to pay $38.7 million in total current liabilities. Full-text copies of the company's consolidated financial statements for the quarter ended March 31, 2007, are available for free at http://researcharchives.com/t/s?2004 Going Concern Doubt Ernst & Young LLP in Vancouver, Canada, expressed substantial doubt about Dragon Pharmaceuticals Inc.'s ability to continue as a going concern after auditing the company's financial statements for the years ended Dec. 31, 2006, and 2005. The auditing firm pointed to the company's recurring working capital deficiency. About Dragon Pharmaceutical Headquartered in Vancouver, Canada, Dragon Pharmaceutical Inc. (OTC BB: DRUG.OB) -- http://www.dragonpharma.com/-- is an international pharmaceutical company with production facilities located in China. The company now has 47 drugs approved by the Chinese SFDA. The company has three key business units consisting of a Chemical Division for manufacturing bulk active pharmaceutical ingredient (API) and pharmaceutical intermediates, a Pharma Division for manufacturing formulated generic drugs with a focus on Cephalosporin antibiotics and freeze-dry injectables, and a Biotech Division for manufacturing biologics, currently Erythropoietin or EPO. DSLA MORTGAGE: S&P Affirms 'B' Rating on Class B-5 Certificates --------------------------------------------------------------- Standard & Poor's Ratings Services raised its ratings on 11 classes of mortgage-backed certificates from four transactions issued by DSLA Mortgage Loan Trust. In addition, S&P affirmed its ratings on 148 classes from various DSLA Mortgage Loan Trust transactions. The upgrades reflect a significant increase in credit support due to paydown of the senior classes, combined with the shifting interest structure of the transactions. The series with raised ratings have paid down to less than 46% of their original pool sizes. Projected credit support percentages range from 1.62x to 2.43x the levels associated with the higher rating categories, which is sufficient to support the certificates at the higher rating levels. Severely delinquent loans (90-plus days, foreclosures, and REOs) range from 0.81% (series 2004-AR3) to 1.77% (series 2004-AR2). These transactions have no cumulative losses. The affirmations are based on credit support percentages that are sufficient to maintain the current ratings on the certificates. Credit support for these transactions is provided by subordination. Additionally, series 2004-AR1, 2004-AR2, 2005-AR2, 2005-AR3, 2005-AR5, 2005-AR6, 2006-AR1, and 2006-AR2 benefit from bond insurance policies issued by either AMBAC Assurance Corp. or Financial Security Assurance Inc., each of which has a 'AAA' financial strength rating. As of the April 2007 distribution date, total delinquencies ranged between 1.30% and 4.99% of the current pool balances. The mortgage loans have experienced minimal realized losses. The underlying collateral for these transactions consists mostly of option ARM, first-lien, residential mortgage loans. Ratings Raised DSLA Mortgage Loan Trust Rating ------ Series Class To From ------ ----- -- ---- 2004-AR1 B-1 AA+ AA 2004-AR1 B-2 A+ A 2004-AR1 B-3 BBB+ BBB 2004-AR2 B-1 AA+ AA 2004-AR2 B-2 A+ A 2004-AR3 B-1 AA+ AA 2004-AR3 B-2 A+ A 2004-AR3 B-3 BBB+ BBB 2004-AR3 B-4 BB+ BB 2004-AR4 B-1 AA+ AA 2004-AR4 B-2 A+ A Ratings Affirmed DSLA Mortgage Loan Trust Series Class Rating ------ ----- ------ 2004-AR1 A-1A,A-1B,A-2A,A-2B,X-1 AAA 2004-AR1 X-2,A-R AAA 2004-AR1 B-4 BB 2004-AR1 B-5 B 2004-AR2 A-1A,A-1B,A-2A,A-2B,X-1 AAA 2004-AR2 X-2,A-R AAA 2004-AR2 B-3 BBB 2004-AR2 B-4 BB 2004-AR2 B-5 B 2004-AR3 1-A1A,1-A1B,2-A1,2-A2A AAA 2004-AR3 2-A2B,X,A-R AAA 2004-AR3 B-5 B 2004-AR4 1-A1A,2-A1A,2-A1B,2-A2A AAA 2004-AR4 2-A2B,X-1,X-2,A-R AAA 2004-AR4 B-3 BBB 2004-AR4 B-4 BB 2004-AR4 B-5 B 2005-AR1 1-A,2-A-1A,2-A2B,2-A2 AAA 2005-AR1 X-1,X-2,A-R AAA 2005-AR1 B-1 AA 2005-AR1 B-2 A 2005-AR1 B-3 BBB 2005-AR1 B-4 BB 2005-AR1 B-5 B 2005-AR2 1-A,2-A1A,2-A1B,2-A1C AAA 2005-AR2 2-A2,X-1,X-2,PO,A-R AAA 2005-AR2 B-1 AA 2005-AR2 B-2 A 2005-AR2 B-3 BBB 2005-AR2 B-4 BB 2005-AR2 B-5 B 2005-AR3 1-A,2-A1A,2-A1B,2-A1C AAA 2005-AR3 2-A2,X-1,X-2,PO,A-R AAA 2005-AR3 B-1 AA 2005-AR3 B-2 A 2005-AR3 B-3 BBB 2005-AR3 B-4 BBB- 2005-AR3 B-5 BB 2005-AR3 B-6 B 2005-AR4 1-A,2-A1A,2-A1B,2-A1C AAA 2005-AR4 2-A1D,2-A-2,X-1,X-2 AAA 2005-AR4 PO,A-R AAA 2005-AR4 B-1 AA 2005-AR4 B-2 A 2005-AR4 B-3 BBB 2005-AR4 B-4 BBB- 2005-AR4 B-5 BB 2005-AR4 B-6 B 2005-AR5 1-A1A,1-A1-B,2-A1-A AAA 2005-AR5 2-A1-B,X-1,X-2,PO,A-R AAA 2005-AR5 B-1 AA+ 2005-AR5 B-2 AA- 2005-AR5 B-3 BBB+ 2005-AR5 B-4 BBB 2005-AR5 B-5 BB 2005-AR5 B-6 B 2005-AR6 1A-1A,1A-1B,2A-1A,2A-1B AAA 2005-AR6 2A-1C AAA 2005-AR6 M-1 AA 2005-AR6 M-2 A 2005-AR6 M-3 BBB 2005-AR6 M-4 BBB- 2005-AR6 M-5 BB+ 2005-AR6 M-6 BB 2006-AR1 1A-1A,1A-1B,2A-1A,2A-1B AAA 2006-AR1 2A-1C AAA 2006-AR1 M1 AA+ 2006-AR1 M2 AA 2006-AR1 M3 AA- 2006-AR1 M4 A+ 2006-AR1 M5 A 2006-AR1 M6 A- 2006-AR1 M7 BBB+ 2006-AR1 M8 BBB 2006-AR1 M9 BBB- 2006-AR1 M10 BB+ 2006-AR2 1A-1A,1A-1B,2A-1A,2A-1B1 AAA 2006-AR2 2A-1B2,2A-1B3,2A-1C AAA 2006-AR2 M-1 AA+ 2006-AR2 M-2 AA 2006-AR2 M-3 AA- 2006-AR2 M-4 A+ 2006-AR2 M-5 A- 2006-AR2 M-6 BBB+ DUBOIS GENERAL: Case Summary & 18 Largest Unsecured Creditors ------------------------------------------------------------- Debtor: Dubois General Store, Inc. dba Dubois Mercantile P.O. Box 1008 Dubois, WY 82513 Bankruptcy Case No.: 07-20321 Type of Business: The Debtor owns and operates a general merchandise store. Chapter 11 Petition Date: May 23, 2007 Court: District of Wyoming (Cheyenne) Judge: Peter J. McNiff Debtor's Counsel: Paul Hunter, Esq. 2616 Central Avenue Cheyenne, WY 82001 Tel: (307) 637-0212 Total Assets: $2,021,700 Total Debts: $1,053,740 Debtor's 18 Largest Unsecured Creditors: Entity Claim Amount ------ ------------ Wells Fargo Business Line $65,000 Business Direct P.O. Box 29746, MAC #S4101-050 Phoenix, AZ 85038-9746 Mike Baust $49,000 13301 Old Florida Circle Hudson, FL 34669 Roper Apparel & Footwear $14,000 14707 East 2nd Avenue Aurora, CO 80011 South Dakota Gold Co. $9,500 Columbia Sportswear $6,500 Mazmania, Inc. $4,900 V.F. Jeanwear $4,000 W.P.S. $2,500 Business Financial Services $2,500 Lucky Stars $2,000 Fashion West Acc. $2,000 Richmond Apparel Group $2,000 The Mountain $1,800 Fairfield Glove Line $1,600 Downeast Concepts $1,600 Richland Yellowstone $1,400 Aurora World $1,300 R.H.E. Hatco, Inc. $1,200 EPICOR SOFTWARE: Earns $4.4 Million in First Qtr. Ended March 31 ---------------------------------------------------------------- Epicor Software Corporation recorded a net income of $4.4 million for the three months ended March 31, 2007, as compared with a net income of $4.6 million for the three months ended March 31, 2006. Total revenues for the first quarter of fiscal year 2007 increased 20% to 101.3 million, as compared with $84.5 million in the first quarter of fiscal year 2006. Net license revenue was $22 million in the first quarter of fiscal year 2007, compared to $19.3 million in the first quarter of fiscal year 2006. Consulting revenue was $32.7 million in the first quarter of fiscal year 2007, as compared with $25 million in the first quarter 2006. Maintenance revenue during the first quarter of fiscal year 2007 was $39.1 million, as compared with $36.2 million in the first quarter 2006 partly driven by a 94% customer retention rate. Hardware and other revenue for the first quarter of fiscal year 2007 was $7.5 million, up from $4 million in the prior year's first quarter. As of March 31, 2007, the company's balance sheet listed total assets of $44.8 million, total liabilities of $226.6 million, and total stockholders' equity of $214.2 million. Liquidity and Capital Resources As of March 31, 2007, the company's principal sources of liquidity included cash and cash equivalents of $75.5 million and unused borrowing capacity of $99.8 million under its senior revolving credit facility. The company's operations provided $6 million in cash during the three months ended March 31, 2007. As of March 31, 2007, the company had $1.6 million in cash obligations for severance costs, lease terminations and other costs related to the company's restructurings. These obligations are expected to be paid through August 2009 and the company believes these obligations will be funded from existing cash reserves and cash generated from continuing operations. The company's working capital excluding deferred revenue is $130.2 million. The company believes this is a relevant measurement of working capital as deferred revenue is an obligation for services not cash. The cost of providing these services is generally fixed in nature and ranges from 21% to 24% of the related revenues. On May 8, 2007, the company closed the offering of $230 million aggregate principal amount of 2.375% convertible senior notes due 2027. The company estimates that the net proceeds from this offering, including the exercise in full of the underwriters' over allotment option, will be about $222.3 million after deducting the underwriters' discounts and commissions and estimated offering expenses. On May 8, 2007, the company used about $94 million of the proceeds to repay in full its term loan outstanding under its credit facility. The balance of the net proceeds will be used for working capital, capital expenditures and other general corporate purposes. A full-text copy of the company's first quarter 2007 report is available for free at http://ResearchArchives.com/t/s?200c About Epicor Software Corporation Headquartered in Irvine, California, Epicor Software Corporation (Nasdaq: EPIC) -- http://www.epicor.com/-- is dedicated to providing integrated enterprise resource planning, customer relationship management and supply chain management software solutions to mid-market companies around the world. Founded in 1984, the company serves over 20,000 customers in more than 140 countries, providing solutions in over 30 languages. The company leverages innovative technologies like Web services in developing end-to-end, industry-specific solutions for manufacturing, distribution, enterprise service automation, retail and hospitality that enable companies to immediately drive efficiency throughout business operations and build competitive advantage. With the scalability and flexibility to support long-term growth, Epicor's solutions are complemented by a full range of services, providing a single point of accountability to promote rapid return on investment and low total cost of ownership. Epicor is a registered trademark of Epicor Software Corporation. Other trademarks referenced are the property of their respective owners. * * * As reported in the Troubled Company Reporter on May 21, 2007, Standard & Poor's Rating Services affirmed its 'BB-' corporate credit rating and stable outlook on Epicor Software Corp. At the same time, Standard & Poor's affirmed its 'BB-' bank loan rating on Epicor's $100 million senior secured revolving credit facility and revised the recovery rating to '2' from '3', reflecting its expectation for substantial (80%-100%) recovery of principal in the event of a payment default. Standard & Poor's also assigned its 'B+' rating to Epicor's recently issued $230 million senior unsecured convertible notes. FIRST FRANKLIN: S&P Lowers Ratings on 34 Classes ------------------------------------------------ Standard & Poor's Ratings Services lowered its ratings on 34 classes of mortgage-backed securities from several First Franklin Mortgage Loan Trust transactions. Of the lowered ratings, 14 were placed on CreditWatch with negative implications, 14 remain on CreditWatch, four were removed from CreditWatch with negative implications, and two were simply lowered. In addition, S&P placed its ratings on three other classes on CreditWatch negative and affirmed 86 other First Franklin Mortgage Loan Trust ratings. The lowered ratings and CreditWatch placements reflect pool performance that has allowed credit enhancement to decline. Over the past six months, monthly losses have generally exceeded the monthly excess interest amounts in these deals, causing the overcollateralization percentages to fall below their targets. In addition, the current delinquency levels suggest that this trend could continue. Currently, 90-plus-day delinquencies (including REOs and foreclosures) range from 5.98% (series 2005-FFA) to 31.78% (series 2004-FFH1). Cumulative losses range from 0.45% (series 2003-FF3) to 3.32% (series 2005-FFA). Standard & Poor's will closely monitor the performance of the transactions with ratings on CreditWatch. If monthly losses decline to a point at which they no longer outpace monthly excess interest, and the level of O/C has not been further eroded, S&P will affirm these ratings and remove them from CreditWatch. Conversely, if losses continue to outpace excess interest, and the levels of O/C continue to decline, S&P will take further negative rating actions. S&P removed four ratings from CreditWatch because they were lowered to 'CCC'. According to Standard & Poor's surveillance practices, classes of certificates or notes from RMBS transactions with ratings lower than 'B-' are no longer eligible to be on CreditWatch negative. The rating affirmations reflect credit support percentages that are sufficient to maintain the current ratings on the securities. Credit support for all of these transactions is provided by a combination of excess spread, O/C, and subordination. The underlying collateral in these transactions comprise pools of fixed- and adjustable-rate mortgage loans secured by first and second liens on one- to four-family residential properties. The transactions denoted with an "H" in the series number consist of first-lien mortgages with LTVs that are generally higher than 90%. These mortgages were originated or purchased by First Franklin Financial Corp. in accordance with guidelines that target borrowers with less-than-perfect credit histories. The guidelines are intended to assess both the borrowers' ability to repay the loan and the adequacy of the value of the property securing the mortgage. Ratings Lowered And Remaining On Creditwatch Negative First Franklin Mortgage Loan Trust Rating ------ Series Class To From ------ ----- -- ---- 2001-FF2 M-2 B/Watch Neg BB/Watch Neg 2002-FF2 M-2 BB/Watch Neg BBB/Watch Neg 2002-FF2 M-3 B/Watch Neg BB/Watch Neg 2003-FFH1 M-2 BBB/Watch Neg A/Watch Neg 2003-FFH1 M-3 BB/Watch Neg BBB-/Watch Neg 2003-FFH1 M-4 B/Watch Neg BB/Watch Neg 2003-FFH2 M-3 BBB/Watch Neg A-/Watch Neg 2003-FFH2 M-4 BB-/Watch Neg BB/Watch Neg 2003-FFH2 M-5 B/Watch Neg BB-/Watch Neg 2004-FFH1 M-6 BBB-/Watch Neg A-/Watch Neg 2004-FFH1 M-7 BB/Watch Neg BBB-/Watch Neg 2004-FFH1 M-8 B/Watch Neg BB/Watch Neg 2004-FFH1 M-9 B-/Watch Neg BB-/Watch Neg 2004-FFH3 B-2 B/Watch Neg BB/Watch Neg Ratings Lowered and Placed on Creditwatch Negative First Franklin Mortgage Loan Trust Rating ------ Series Class To From ------ ----- -- ----- 2003-FF1 M-3F, M-3V BB/Watch Neg BBB+ 2003-FF1 M-4 BB-/Watch Neg BBB 2003-FF3 M-2 BBB/Watch Neg A 2003-FF3 M-3 BBB-/Watch Neg A- 2003-FF3 M-4 BB-/Watch Neg BBB+ 2003-FF3 B B/Watch Neg BBB 2003-FF4 M-3 BBB/Watch Neg A- 2003-FF4 M-4 BBB-/Watch Neg BBB+ 2003-FF4 M-5 BB/Watch Neg BBB 2003-FF4 M-6 BB-/Watch Neg BBB- 2004-FFH1 M-5 BBB/Watch Neg A 2005-FFA B-4 BB-/Watch Neg BB+ 2005-FFA B-5 B/Watch Neg BB+ Ratings Lowered And Removed From Creditwatch Negative First Franklin Mortgage Loan Trust Rating ------ Series Class To From ------ ----- -- ---- 2003-FFB B-1 CCC B/Watch Neg 2003-FFB B-2 CCC B-/Watch Neg 2004-FFH2 B-2 CCC B/Watch Neg 2004-FF7 B CCC BB/Watch Neg Ratings Lowered First Franklin Mortgage Loan Trust Rating ------ Series Class To From ------ ----- -- ---- 2003-FFH1 M-6 D CCC 2003-FFH2 B D CCC Ratings Placed On Creditwatch Negative First Franklin Mortgage Loan Trust Rating ------ Series Class To From ------ ----- -- ---- 2004-FFH2 B-1 BB+/Watch Neg BB+ 2004-FF3 B-2 BBB/Watch Neg BBB 2004-FF3 B-3 BB+/Watch Neg BB+ Ratings Affirmed First Franklin Mortgage Loan Trust Series Class Rating ------ ----- ------ 2001-FF2 A-1, A-2, M-1 AAA 2003-FFB M-1 AA 2003-FFB M-2 A 2002-FF2 A-1, A-2 AAA 2002-FF2 M-1 AA 2003-FF1 A-1, A-2 AAA 2003-FF1 M-1 AA 2003-FF1 M-2 A 2003-FFH1 M-1 AA 2003-FFH2 M-1A, M-1B AA 2003-FFH2 M-2 A 2003-FF3 1-A, 2-A2, A-IO AAA 2003-FF3 M-1 AA 2003-FF4 A-1, A-2, A-3, A-4 AAA 2003-FF4 M-1 AA 2003-FF4 M-2 A 2004-FFH1 M-1 AA+ 2004-FFH1 M-2 AA 2004-FFH1 M-3 AA- 2004-FFH1 M-4 A+ 2004-FFH2 A-1, A-3, A-4 AAA 2004-FFH2 M-1 AA+ 2004-FFH2 M-2 AA 2004-FFH2 M-3 AA- 2004-FFH2 M-4 A+ 2004-FFH2 M-5 A 2004-FFH2 M-6 A- 2004-FFH2 M-7 BBB+ 2004-FFH2 M-8 BBB 2004-FFH2 M-9 BBB- 2004-FFH3 I-A1, I-A2, II-A2, II-A3, II-A4 AAA 2004-FFH3 M-1 AA+ 2004-FFH3 M-2 AA 2004-FFH3 M-3 AA- 2004-FFH3 M-4 A+ 2004-FFH3 M-5 A 2004-FFH3 M-6 A- 2004-FFH3 M-7 BBB+ 2004-FFH3 M-8 BBB 2004-FFH3 M-9 BBB- 2004-FFH3 B-1 BB+ 2004-FF3 A-1 AAA 2004-FF3 M-1 AA+ 2004-FF3 M-2 A+ 2004-FF3 M-3 A 2004-FF3 M-4 A- 2004-FF3 B-1 BBB+ 2004-FF7 A-1, A-2, A-3, A-4, A-5 AAA 2004-FF7 M-1 AA+ 2004-FF7 M-2 AA 2004-FF7 M-3 AA- 2004-FF7 M-4 A+ 2004-FF7 M-5 A 2004-FF7 M-6, M-7 A- 2004-FF7 M-8 BBB+ 2004-FF7 M-9 BBB 2005-FFA A-1, A-2B AAA 2005-FFA M-1 AA 2005-FFA M-2 A+ 2005-FFA M-3 A 2005-FFA M-4 A- 2005-FFA B-1 BBB+ 2005-FFA B-2 BBB 2005-FFA B-3 BBB- FREESCALE SEMICON: Moody's Holds Ratings, Shifts Outlook to Neg. ---------------------------------------------------------------- Moody's Investors Service affirmed the ratings of Freescale Semiconductor Inc. and changed the outlook to negative. The negative outlook was prompted by Freescale's lower-than- expected first quarter revenue and EBITDA. Operating performance weakness stems principally from reduced wireless semiconductor shipments as a result of lower cellular demand at its former parent and largest customer, Motorola. Motorola, which accounts for nearly 25% of Freescale's revenues, witnessed margin erosion, sustained a net loss and lost 5 points of market share to 17% in the first quarter 2007. In assigning Freescale's Ba3 corporate family rating last November, Moody's noted the rating was constrained by the company's high Motorola content, which we viewed as a credit negative, and that upward ratings pressure was contingent on a broadening of its product offering and customer base within the wireless segment. Given the wireless inventory build and Motorola's current woes, Freescale will be challenged to expand its wireless customer base in a timely manner to alleviate reduced volumes at Motorola -- which lowered guidance for 2007 -- and the negative impact it could have on Freescale's revenues, profitability and cash flow generation. Downward pressure on the rating could materialize to the extent revenues in the Wireless and Mobile Solutions segment fails to recover in the second half of the year resulting in materially weaker-than-anticipated EBIT or total debt/EBITDA (Moody's adjusted) above 5.5x. Following the $17.6 billion leveraged buyout and recapitalization in December 2006, Freescale became one of the more highly leveraged semiconductor companies. With nearly $9.8 billion gross debt, the ratings reflect significant debt leverage and reduced financial flexibility, which is magnified by Freescale's limited track record as a standalone company and lack of historical performance during a downturn. The ratings and outlook also took into account our expectation that Freescale would reduce leverage over the near-to-intermediate term through strong levels of free cash flow generation. However, with the sudden reversal in Motorola's fortunes resulting in Freescale's generation of negative free cash flow in Q107, Moody's now believes free cash flow in 2007 will be below our previous estimate of $350 million. Consequently, we no longer anticipate Freescale's financial leverage (Moody's adjusted total debt/EBITDA) to decline to 4.6x by the end of 2007, which was factored in the previously assigned stable outlook, but to remain in the 5.0 -- 5.5x range, delaying leverage reduction. Moody's continues to believe Freescale: (i) has strong market leadership positions and a rich product portfolio comprising breadth and depth of technology; (ii) benefits from a diversified revenue base with exposure to the relatively stable and less volatile transportation and networking segments which tend to exhibit slower growth prospects and longer product life cycles than the wireless space; (iii) could benefit from its near-sole source provider status for baseband and power management ICs in Motorola's new line-up of handsets and its status as a RF transceiver supplier in newly-launched mobile devices from both RIM and Motorola, to the extent consumer uptake materializes; (iv) is positioned to benefit from increasing content in existing mobile OEM customer platforms as design solicitations are won and shipments ramp; (v) has considerably improved its operating leverage since the Motorola spin-off; and (vi) has a defensive operating model that allows it to quickly reduce expenses and capex in response to weak market conditions. Moody's notes the company also has the ability to suspend cash interest payments on roughly 16% of its outstanding debt through the use of a toggle PIK structure on $1.5 billion of senior notes, which would help to preserve cash flow in a soft operating environment. With nearly $640 million of cash and access to a $750 million undrawn revolver, liquidity remains solid. These ratings/assessments were affirmed: -- Corporate Family Rating (New) -- Ba3; -- Probability of Default Rating -- Ba3; -- $750 Million Senior Secured Revolving Credit Facility due 2012 -- Baa3 (LGD-2, 16%); -- $3.50 Billion Senior Secured Term Loan B Facility due 2013 -- Baa3 (LGD-2, 16%); -- $2.85 Billion Senior Unsecured Notes due 2014 -- B1 (LGD-4, 63%); -- $1.50 Billion Senior Unsecured Toggle Notes due 2014 -- B1 (LGD-4, 63%); -- $1.60 Billion Senior Subordinated Unsecured Notes due 2016 -- B2 (LGD-6, 91%); and -- Speculative Grade Liquidity Rating -- SGL-1. Headquartered in Austin, TX, Freescale Semiconductor, Inc. designs and manufactures embedded semiconductors for the transportation, networking and wireless markets. The company was separated from Motorola via IPO in July 2004 and taken private in a LBO in December 2006. Revenues for the twelve months ended March 31, 2007 were $6.2 billion. FUSION TELECOM: Posts $2.8 Million Net Loss in Qtr Ended March 31 ----------------------------------------------------------------- Fusion Telecommunications International Inc. reported a net loss of $2.8 million on revenues of $13.2 million for the first quarter ended March 31, 2007, compared with a net loss of $3 million on revenues of $9.5 million for the same period in 2006. Revenues for Voice to Carriers increased $4.5 million or 53.1%, to $12.8 million during the three months ended March 31, 2007, from $8.3 million during the three months ended March 31, 2006. The increase in revenues was the result of an increase in voice traffic as well as an increase in rates compared to the same quarter of 2006. Revenues for Consumers, Corporations and Other decreased $800,000 or 62.3% to $400,000 during the three months ended March 31, 2007, from $1.2 million during the three months ended March 31, 2006. This decrease was mainly due to technical difficulties encountered in the development of the Efonica retail services platform, which held back the growth in this service and also due to the cancellation of a government contract and the loss of one customer's Internet circuit. Consolidated cost of revenues increased $3.5 million or 40.4% to $12.1 million during the three months ended March 31, 2007, from $8.6 million during the three months ended March 31, 2006. Operating loss decreased $200,000 or 7.0% to a loss of $2.8 million during the three months ended March 31, 2007, from a loss of $3 million during the three months ended March 31, 2006. During the first quarter of 2006, total other income was $61,748, compared to total other expense of $47,438 for the first quarter of 2007. At March 31, 2007, the company's balance sheet showed $23.6 million in total assets, $12.8 million in total liabilities, and $10.8 million in total stockholders' equity. The company's balance sheet at March 31, 2007, also showed strained liquidity with $6.7 million in total current assets available to pay $12.1 million in total current liabilities. Full-text copies of the company's consolidated financial statements for the quarter ended March 31, 2007, are available for free at http://researcharchives.com/t/s?1ffa Going Concern Doubt Rothstein, Kass & Company P.C., in Roseland, N. J., expressed substantial doubt about Fusion Telecommunications International Inc.'s ability to continue as a going concern after auditing the company's consolidated financial statements for the years ended Dec. 31, 2006, and 2005. The auditing firm pointed to the company's negative cash flow from operations, net losses since inception, and limited capital to fund future operations. About Fusion Telecommunications Fusion Telecommunications International Inc. (AMEX: FSN) -- http://www.fusiontel.com/-- delivers a full range of advanced IP- based services to corporations, consumers and carriers worldwide. Fusion's Efonica-branded VoIP products and services, which focus primarily on Asia, the Middle East, Africa and Latin America, have over one million subscribers from more than 100 countries. GAP INC: Names Patrick Robinson as Executive Vice Pres. of Design ----------------------------------------------------------------- Gap Inc. has appointed Patrick Robinson as executive vice president of design for Gap Adult and Gapbody. Mr. Robinson, 40, will oversee all elements of design for Gap women's and men's apparel, accessories and intimates lines in North America. He will report to Marka Hansen, president of Gap North America, and Gary Muto, president, Gap Adult and gapbody, and begin in his new role on May 29. "Patrick brings broad experience, from high-end fashion to mass market retail, demonstrating his versatility to interpret and create fresh, clean designs true to the Gap brand aesthetic," said Ms. Hansen. "We believe his skills and experience with some of the most respected apparel labels in the world will be great assets to Gap brand." Mr. Robinson joins Gap from Paco Rabanne in Paris, where he has been artistic director since 2005. Most recently, he designed a limited-edition collection for Target's GO International initiative. Prior to his tenure at Paco Rabanne, Mr. Robinson held senior design and leadership roles at Perry Ellis and Anne Klein. Mr. Robinson served as the design director at Le Collezioni White Label by Giorgio Armani from 1990 to 1994. Mr. Robinson is a graduate of the Parsons School of Design, was chosen one of Vogue magazine's 100 rising stars in 1996 and has been a member of the Council of Fashion Designers of America since 1994. About Gap Inc. Headquartered in San Francisco, California, Gap Inc. (NYSE: GPS) -- http://www.gapinc.com/-- is an international specialty retailer offering clothing, accessories and personal care products for men, women, children and babies under the Gap, Banana Republic, Old Navy, Forth & Towne and Piperlime brand names. Gap Inc. operates more than 3,100 stores in the United States, the United Kingdom, Canada, France, Ireland and Japan. In addition, Gap Inc. is expanding its international presence with franchise agreements for Gap and Banana Republic in Southeast Asia and the Middle East. * * * As reported in the Troubled Company Reporter on Feb. 7, 2007, Moody's Investors Service downgraded Gap Inc. senior unsecured notes to Ba1 and assigned a corporate family rating of Ba1 and speculative grade liquidity rating of SGL-1. The rating outlook is stable. GENERAL MOTORS: May Sell Allison Transmission to Boost Liquidity ---------------------------------------------------------------- General Motors Corporation said last week in a regulatory filing with the Securities and Exchange Commission that it is considering measures to strengthen liquidity and focus on its core business of designing, manufacturing, and selling cars and light trucks globally. Among other items, GM said it is currently discussing the potential sale of its Allison Transmission business with a number of potential buyers. GM management believes that a sale of Allison Transmission is probable, subject to union, regulatory, and other approvals. GM has provided unaudited pro forma financial information reflecting Allison Transmission's assets and liabilities as held for sale as of March 31, 2007, and reporting its operations as discontinued for the three months ended March 31, 2007 and 2006, and for the years ended December 31, 2006, 2005, and 2004. A full-text copy of the pro forma financial information is available for free at http://researcharchives.com/t/s?2038 General Motors Corp. (NYSE: GM) -- http://www.gm.com/-- the world's largest automaker, has been the global industry sales leader since 1931. Founded in 1908, GM employs about 317,000 people around the world. It has manufacturing operations in 32 countries. General Motors has Asia-Pacific operations in India, China, Indonesia, Japan, the Philippines, among others. It has locations in European countries including Belgium, Austria, and France. In Latin-America, the company maintains locations in Argentina, Brazil, Chile, Colombia, Ecuador, Venezuela, Paraguay and Uruguay. * * * As reported in the Troubled Company Reporter on May 25, 2007, Fitch Ratings downgraded General Motors Corporation's ratings including the company's 'B/RR4' rated senior unsecured debt to 'B-/RR5'. GM's Issuer Default Rating remains at 'B' and is still on Fitch's Negative Rating Watch. GENERAL MOTORS: SEC Inquiry May Need Restatement of Prior Results ----------------------------------------------------------------- General Motors Corporation said it received a document request from the U.S. Securities and Exchange Commission relating to the company's disclosure in its most recent Annual Report on Form 10-K regarding the restatement of its previously filed financial statements in connection with GM's accounting for certain foreign exchange contracts and commodities contracts in accordance with SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended (SFAS No. 133). According to GM, it continues to cooperate on this and all other SEC matters and is preparing to provide the requested information. Additionally, GMAC received a letter from the SEC's Division of Corporation Finance on its 2005 Annual Report on Form 10-K and subsequent filings pertaining to hedging relationship testing methodologies and consideration of credit ratings in assessing hedge effectiveness for purposes of SFAS No. 133. GM said GMAC advised the company that they continue to work with the SEC on these matters. GM notes that a negative outcome could require the company to restate prior financial results. General Motors Corp. (NYSE: GM) -- http://www.gm.com/-- the world's largest automaker, has been the global industry sales leader since 1931. Founded in 1908, GM employs about 317,000 people around the world. It has manufacturing operations in 32 countries. General Motors has Asia-Pacific operations in India, China, Indonesia, Japan, the Philippines, among others. It has locations in European countries including Belgium, Austria, and France. In Latin-America, the company maintains locations in Argentina, Brazil, Chile, Colombia, Ecuador, Venezuela, Paraguay and Uruguay. * * * As reported in the Troubled Company Reporter on May 25, 2007, Fitch Ratings downgraded General Motors Corporation's ratings including the company's 'B/RR4' rated senior unsecured debt to 'B-/RR5'. GM's Issuer Default Rating remains at 'B' and is still on Fitch's Negative Rating Watch. GENERAL MOTORS: In Talks w/ Investors About Delphi's Chap. 11 Exit ------------------------------------------------------------------ General Motors Corporation said it continues to negotiate with Delphi Corporation and certain potential investors in Delphi regarding arrangements that would permit Delphi to emerge from bankruptcy proceedings. GM anticipates that the arrangements contemplated by the framework support agreement among Delphi, GM, and potential investors, described in the Current Report on Form 8-K dated Dec. 18, 2006, and subsequent filings by GM, will be modified to reflect a number of items, including the withdrawal of Cerberus Capital Management as a plan investor. GM currently expects that under the modified agreement the consideration it would receive upon the termination of Delphi's bankruptcy proceedings would not materially differ from previous arrangements described by GM, although the composition may be altered. General Motors has received proposals from Delphi and from the United Auto Workers Union regarding support to be provided by GM as part of Delphi's restructuring, and believes that the proposals provide a basis for continuing productive negotiations. GM intends to update its estimate of contingent exposures related to Delphi as appropriate to reflect the outcome of all negotiations. Based on the current status of all the negotiations, GM believes it is appropriate to update the previously disclosed range of contingent exposures between $6 billion and $7.5 billion to approximately $7 billion. GM currently expects to reimburse Delphi for certain labor expenses with an initial payment of up to approximately $500 million when it emerges from bankruptcy, and provide annual labor-related payments between $300 million and $400 million and annual transitional payments of approximately $100 million. The total amount of the contingent liability and the specific amounts and periods that such subsidies would be paid, are still subject to negotiation. GM continues to expect that the cost of these reimbursements will be more than offset in the long term by its savings from reductions to the $2 billion price penalty it now pays Delphi annually for systems, components, and parts. General Motors Corp. (NYSE: GM) -- http://www.gm.com/-- the world's largest automaker, has been the global industry sales leader since 1931. Founded in 1908, GM employs about 317,000 people around the world. It has manufacturing operations in 32 countries. General Motors has Asia-Pacific operations in India, China, Indonesia, Japan, the Philippines, among others. It has locations in European countries including Belgium, Austria, and France. In Latin-America, the company maintains locations in Argentina, Brazil, Chile, Colombia, Ecuador, Venezuela, Paraguay and Uruguay. * * * As reported in the Troubled Company Reporter on May 25, 2007, Fitch Ratings downgraded General Motors Corporation's ratings including the company's 'B/RR4' rated senior unsecured debt to 'B-/RR5'. GM's Issuer Default Rating remains at 'B' and is still on Fitch's Negative Rating Watch. GENERAL MOTORS: Gets $4.1 Bil. Secured Credit Facility Commitments ------------------------------------------------------------------ General Motors Corporation disclosed in a regulatory filing with the Securities and Exchange Commission that as of May 22, 2007, the company had obtained non-binding lender commitments to provide a secured revolving credit facility in an aggregate principal amount of approximately $4.1 billion. GM anticipates that the facility will be secured by GM's common equity interest in GMAC LLC and will mature 364 days after the date that the definitive agreements are executed. According to GM, the credit facility could be used for general corporate purposes, including working capital needs. The commitments are subject to a number of conditions, including negotiation of definitive agreements. Consequently, GM said there can be no assurance that it will ultimately enter into the contemplated credit facility, and if the transaction to establish the facility is successfully closed, GM's ability to borrow under the facility will be subject to customary conditions and limitations. Fitch Takes Action Fitch Ratings downgraded GM's senior unsecured debt rating to 'B- /RR5' from 'B/RR4' and placed GM's 'B' Issuer Default Rating under Negative Watch along with other outstanding ratings following the company's announcement that it will be raising $4.1 billion in secured financing. According to Fitch, the $4.1 billion 364-day facility, to be secured by GM's common equity holdings in GMAC, will be assigned a rating of 'BB/RR1'. Fitch states that the downgrade action reflects increase in debt levels and the resulting reduced recovery expectations for senior unsecured debt holders. GM Amends Proposed Underwriting Pacts On March 18, 2004, General Motors filed a post-effective amendment to its registration statement on Form S-3 (File #333-108532). Exhibit 1(a) to that registration statement contained a form of proposed Underwriting Agreement of GM relating to Debt Securities (including form of Delayed Delivery Contract) and Exhibit 1(b) contained a form of proposed Underwriting Agreement of GM relating to Convertible Debt Securities. GM said it has amended each of the forms. A revised form of the proposed Underwriting Agreement relating to debt securities is available for free at: http://researcharchives.com/t/s?2039 A revised form of the proposed Underwriting Agreement relating to convertible debt securities is available for free at: http://researcharchives.com/t/s?203b About General Motors Corp. General Motors Corp. (NYSE: GM) -- http://www.gm.com/-- the world's largest automaker, has been the global industry sales leader since 1931. Founded in 1908, GM employs about 317,000 people around the world. It has manufacturing operations in 32 countries. General Motors has Asia-Pacific operations in India, China, Indonesia, Japan, the Philippines, among others. It has locations in European countries including Belgium, Austria, and France. In Latin-America, the company maintains locations in Argentina, Brazil, Chile, Colombia, Ecuador, Venezuela, Paraguay and Uruguay. GENERAL MOTORS: Moody's Junks Rating on $1.1 Bil. Debt Securities ----------------------------------------------------------------- Moody's Investors Service assigned a Caa1 (LGD4, 58%) to the $1.1 billion of convertible debt securities of General Motors Corporation, and a Ba3 (LGD1, 6%) rating to the company's proposed $4.1 billion, 364 day credit facility that would be secured by its 49% ownership in GMAC LLC. Moody's also affirmed GM's B3 Corporate Family Rating and B3 Probability of Default Rating, and maintained its SGL-3 Speculative Grade Liquidity Rating. The rating outlook remains negative. The proposed transactions would build GM's available liquidity to about $36 billion, consisting of $26 billion in cash and short-term VEBA balances, $8.6 billion in secured credit facilities, and $1.5 billion in additional committed lines. "Despite this considerable level of liquidity, we think that it's very prudent for GM to continue to build its liquidity because of the sizable cash drain it could face in hammering out workable labor agreements with the UAW and in contending with North American consumer demand that continues to move away from large trucks and SUVs," said Bruce Clark, Senior Vice President and lead auto analyst for Moody's. The greatest near-term risk facing GM is the large cash drain that could result if the company's operations were to be disrupted by a prolonged UAW work stoppage associated with either the reorganization process taking place at Delphi or with the automakers' labor negotiations that will take place this fall. "A shut down of GM production because of any impasse with the UAW could cause a huge drain of cash for the company over a very short period, and gives rise to the company's current efforts to build excess liquidity," Clark said. Aside from any potential strike risks, GM also faces the prospect of making large cash payments in connection with simply reaching an accord with the unions. GM may have to make a contribution to help bridge the remaining gap between the UAW and Delphi management regarding the level of wage and benefit programs necessary for Delphi to emerge from bankruptcy protection. However, the rating agency's major concern is with the potential cost to GM of reaching its own labor agreement in September. "It's unlikely that GM will be able to establish a viable long- term business model unless it achieves major work rule and health care relief as part of the new contract," Clark said. The company is currently burdened with $5 billion in annual health care expenses and a $47 billion health care-related OPEB liability. "As part of its September negotiations, GM could have to write a very large check in order to get meaningful healthcare and work rule relief," he said, adding that "the long term benefits of the relief would likely be sizable, but the company might have to pay a lot up front in order to get it." Once GM gets past the hurdles with the UAW, it then has to contend with a challenging North American operating environment. A softening in overall consumer demand for new vehicles or a shift away from the company's profitable T900 trucks and SUVs could contribute to a significant reduction in profitability during 2007 and operating losses in 2008. Because of these risks, Moody's continues to maintain a negative outlook on the company's B3 Corporate Family Rating. Stabilization of the rating outlook would require a resolution of labor issues and a stabilization of market share that enables the company to establish and sustain adequate profitability and cash flow in its North American operations. In the near term, any evidence of labor disruptions or erosion of liquidity could lead to a downward rating adjustment. Despite large cash balances, Moody's continues to regard the company's overall liquidity profile as being consistent with an SGL-3 Speculative Grade Liquidity Rating. The potential cash calls that could arise from labor disruptions or settlements over the coming months could present a degree of volatility in liquidity that is more appropriately reflected in the SGL-3 rating. Moody's acknowledges the company's strong efforts in bolstering liquidity, which should provide a degree of credit stability should labor negotiations not progress smoothly. Should the company achieve a favorable resolution of its labor negotiations while maintaining a strong liquidity profile, the Speculative Grade Liquidity Rating could be raised. General Motors Corp. (NYSE: GM) -- http://www.gm.com/-- the world's largest automaker, has been the global industry sales leader since 1931. Founded in 1908, GM employs about 317,000 people around the world. It has manufacturing operations in 32 countries. General Motors has Asia-Pacific operations in India, China, Indonesia, Japan, the Philippines, among others. It has locations in European countries including Belgium, Austria, and France. In Latin-America, the company maintains locations in Argentina, Brazil, Chile, Colombia, Ecuador, Venezuela, Paraguay and Uruguay. GENERAL MOTORS: S&P Rates Proposed $1.1BB Convertible Bonds at B- ----------------------------------------------------------------- Standard & Poor's Ratings Services assigned its 'B-' rating to General Motors Corp.'s (GM; B/Negative/B-3) proposed $1.1 billion senior unsecured convertible bonds due June 1, 2009. Proceeds will be used to replenish cash balances. GM has used cash recently to retire a $1.1 billion convertible bond put to the company in March and to make a $1.0 billion cash payment to 49%-owned GMAC LLC, helping to shore up GMAC's capital and liquidity following the close of the sale of a majority stake to an investor group. GM also announced it has commitments for a $4.1 billion 364-day secured revolving credit agreement, collateralized by a pledge of its common interest in GMAC stock. These transactions will bolster GM's existing liquidity position. As of March 31, 2007--after the GMAC payment--GM had $24.7 billion of cash and readily available short-term VEBA funds. GM also has a $4.48 billion secured revolving credit agreement expiring 2011, backed by a separate collateral package. That facility has a provision stating that in the event of a labor strike or a labor- related work stoppage constituting a "material production event period," total revolving credit facility outstandings cannot exceed $3.5 billion, and revolver outstandings combined with any bank overdraft agreements cannot exceed $4.5 billion. Although GM has now raised its estimate of the initial and ongoing costs to resolve its exposure to bankrupt former unit Delphi Corp., S&P still expect the comprehensive costs of a consensual, rather than court-imposed, resolution of the Delphi situation to be well within the scope of GM's liquidity, and such an outcome is reflected in its rating. Ratings List General Motors Corp. Corporate credit rating B/Negative/B-3 Rating Assigned $1.1B senior unsecured convertible bonds B- GLOBAL BEVERAGE: Posts $355,859 Net Loss in Quarter Ended March 31 ------------------------------------------------------------------ Global Beverage Solutions Inc. reported a net loss of $355,859 for the first quarter ended March 31, 2007, compared with a net loss of $106,212 for the same period last year. During the 2006 quarter the company reported interest income from portfolio companies of $3,436 and management fees from portfolio companies of $6,000. The company had no revenue during the 2007 period. During the three months ended March 31, 2007, total expenses increased $240,211, or 208%, to $355,859 from $115,648 in the prior year period. Officer and employee compensation increased $56,095. Professional fees increased $91,489 mainly resulting from the acquisition of Beverage Network of Maryland Inc. on Feb. 23, 2007, and Aqua Maestro Inc. on March 29, 2007. The company recorded interest expense in the amount of $66,042 in the 2007 period and had no interest in the 2006 period. All debt has been added during the last 12 months. The company recognized $20,225 in amortization of the intrinsic value of the common stock options in 2007. There were no options outstanding during the 2006 period. At March 31, 2007, the company had $17,228,089 in total assets, $4,556,836 in total liabilities, and $12,671,253 in net assets. During the 2007 period, total assets increased $15,652,143 and total liabilities increased $3,070,286, a net increase of $12,581,857. The principal increase in assets was the increase in investments of $15,581,192. The principal increase in liabilities was the increase in notes payable of $3,053,582. Full-text copies of the company's financial statements for the quarter ended March 31, 2007, are available for free at: http://researcharchives.com/t/s?2014 Going Concern Doubt Turner, Stone & Company LLP in Dallas, expressed substantial doubt about Global Beverage Solutions Inc.'s ability to continue as a going concern after auditing the company's financial statements for the years ended Dec. 31, 2006, and 2005. The auditing firm reported that the company has generated limited revenues and has incurred losses totaling $16,963,728 for the period from Aug. 26, 2002, through Dec. 31, 2006. The company currently estimates it will require a total of approximately $1,800,000 to meet its operating cash flow requirements and its currently committed follow-on investments for the balance of 2007. As of March 31, 2007, the company had an accumulated deficit totaling $17,319,587. About Global Beverage Headquartered in Plantation, Fla., GlobaL Beverage Solutions Inc. (OTC BB: GBVS.OB) -- http://www.globalbeveragesolutions.com/-- is a business development company organized pursuant to applicable provisions of the Investment Company Act of 1940. The company primarily focuses on manufacturing, distribution and sales of unique beverages globally. GOLDEN NUGGET: S&P Lowers Corporate Credit Rating to B+ from BB- ---------------------------------------------------------------- Standard & Poor's Ratings Services lowered its ratings, including the corporate credit rating, on Las Vegas-based Golden Nugget Inc. to 'B+' from 'BB-'. In addition, the ratings for Golden Nugget will remain on CreditWatch with negative implications, where they were placed on March 16, 2007. Concurrently, S&P assigned its loan and recovery ratings to Golden Nugget's planned $425 million senior secured credit facilities. The first-lien credit facility is rated 'BB-' with a recovery rating of '1', indicating the expectation for full recovery of principal in the event of a payment default. The second-lien credit facility is rated 'B' with a recovery rating of '3', indicating the expectation for meaningful (50%-80%) recovery of principal in the event of a payment default. All bank loan ratings are on CreditWatch with negative implications. "The ratings on Golden Nugget remain on CreditWatch with negative implications because of the ability of noteholders to accelerate payment as a result of parent Landry's Restaurants Inc.'s financial reporting delay," said Standard & Poor's credit analyst Guido DeAscanis III. Golden Nugget is not a bankruptcy-remote subsidiary, so the potential for acceleration at the parent level has implications for this operating subsidiary. "Once the company is current with its filings and in good standing with its debtholders, it is likely that the ratings will be removed from CreditWatch and that the outlook will be stabilized." HANCOCK FABRICS: Asks Court OK on Continued Use of Cash Collateral ------------------------------------------------------------------ Hancock Fabrics Inc. and its debtor affiliates ask the United States Bankruptcy Court for the District of Delaware for approval of their continued use of cash collateral. Robert J. Dehney, Esq., at Morris, Nichols, Arsht & Tunnell LLP, in Wilmington, Delaware, asserts that the Debtors will require the ability to use cash and the proceeds of existing accounts receivable and inventory to maintain the operations of their businesses and preserve their value as going concerns. These essential items, however, constitute part of the Prepetition Collateral, and therefore, may not be used in support of the Debtors' ongoing business activities absent compliance with Section 363(c)(2) of the Bankruptcy Code. As reported in the Troubled Company Reporter on March 27, 2007, the Debtors obtained pre-petition financing under a Loan and Security Agreement, dated June 29, 2005, as amended, with Wachovia Bank, N.A. The Prepetition Loan Agreement provides the Debtors with a five-year commitment for borrowings up to $110,000,000. The Loan Agreement also contemplates the issuance of letters of credit aggregating up to $25,000,000, provided total borrowings do not exceed $110,000,000. Mr. Dehney relates that the Debtors recently entered into a Loan and Security Agreement with Ableco Finance LLC, and certain lenders to borrow up to $17,500,000 to fund their working capital needs. The Debtors' obligations to Ableco are secured by valid and perfected liens and security interests in all of the Collateral. The Debtors are currently seeking Court approval of the Ableco Loan. The Ableco Lenders and the Existing DIP Lenders, including Wachovia Bank N.A, as agent under the Exiting DIP Loan, have consented to the Debtors' use of cash collateral, Mr. Dehney tells the Court. About Hancock Fabrics Headquartered in Baldwyn, Mississippi, Hancock Fabrics Inc. (OTC: HKFIQ) -- http://www.hancockfabrics.com/ -- is a specialty retailer of a wide selection of fashion and home decorating textiles, sewing accessories, needlecraft supplies and sewing machines. Hancock Fabrics is one of the largest fabric retailers in the United States, currently operating approximately 400 retail stores in approximately 40 states. The company employs approximately 7,500 people on a full-time and part-time basis. Most of the company's employees work in its retail stores, or in field management to support its retail stores. The company and 6 of its debtor-affiliates filed for chapter 11 protection on March 21, 2007 (Bankr. D. Del. Lead Case No. 07-10353). Robert J. Dehney, Esq., at Morris, Nichols, Arsht & Tunnell, represent the Debtors. When the Debtors filed for protection from their creditors, they listed $241,873,900 in total assets and 161,412,000 in total liabilities. The Debtors exclusive period to file a chapter 11 plan expires on July 19, 2007. (Hancock Fabric Bankruptcy News, Issue No. 8, http://bankrupt.com/newsstand/or 215/945-7000). HANCOCK FABRICS: May Employ Houlihan Lokey as Financial Advisor --------------------------------------------------------------- The United States Bankruptcy Court for the District of Delaware has given Hancock Fabrics Inc. and its debtor-affiliates permission to employ Houlihan Lokey Howard & Zukin Capita Inc. as their financial advisor and investment banker, nunc pro tunc to the March 21, 2007, with certain modifications to the Engagement Agreement. As reported in the Troubled Company Reporter on April 2, 2007, Jane F. Aggers, president and chief executive officer of Hancock Fabrics Inc., told the Court that Debtors selected Houlihan Lokey because of the firm's substantial knowledge of the Debtors' financial and operational condition during the firm's prepetition representation of the Debtors, which knowledge may help the Debtors and the firm expedite execution of potential transactions. Houlihan Lokey will serve as the Debtors' financial advisor and investment banker until the earlier of (i) the Debtors' decision to terminate the firm for cause, which decision will be made in consultation with the Official Committee of Unsecured Creditors, or (ii) consummation of a sale or restructuring transaction. Houlihan Lokey's fees and expenses will be paid in the amounts Stated in the Engagement Agreement, provided that: (1) the Debtors' payment of Houlihan Lokey's fees and expenses will be subject to the Court's interim compensation order; (2) in lieu of the Sale Transaction, Plan Fee and Restructuring Transaction, Houlihan Lokey will receive either the Minimum Sale Transaction Fee or the Minimum Restructuring Transaction Fee, plus the Success Fee, on these terms and conditions: * Houlihan Lokey will receive a $1,000,000 Minimum Sale Transaction Fee, payable upon consummation of a Sale Transaction in cash out of the sale proceeds and as a cost of that transaction; or * if no Sale Transaction is consummated and no fee is paid, Houlihan Lokey will receive $1,000,000, payable in cash upon the effective date of a Chapter 11 plan of reorganization; plus * Houlihan Lokey will be entitled to a success fee equal to 2% of recoveries to holders of allowed priority and general unsecured claims, plus 4% of the first $35,000,000 in recoveries to holders of allowed equity claims, plus 5% of all additional recoveries to allowed equity claimholders, payable upon the Plan effective date, dismissal of a Chapter 11 case, or other exit from bankruptcy; (3) in case the Debtors want to have Houlihan Lokey continue acting as their financial advisor and investment banker after closing of a Sale Transaction, Houlihan will receive a $100,000 monthly fee; (4) if the Debtors want Houlihan Lokey to assist them in the sale of any remaining assets after a sale transaction, the firm will be paid an additional $250,000 fee for each subsequent Sale Transaction; (5) in the event the general unsecured creditors do not receive at least a 70% distribution on their allowed claims, the Minimum Sale Transaction Fee or the Restructuring Fee will be reduced by $250,000; (6) Houlihan Lokey will apply 50% of the Monthly Fees earned from and after the Petition Date, or to be paid under the Engagement Agreement, to the Transaction Fee or Success Fee before the Debtors pay the fee; (7) the Debtors will pay Houlihan Lokey $225,000 payable in respect of the Court-approved Wachovia DIP; (8) the Debtors will pay Houlihan Lokey 2.75% of the gross proceeds provided under the DIP less the sum of $300,000, representing 50% credits of the Earned Fees paid to the firm before the Petition Date; (9) the Debtors will reimburse Houlihan Lokey for any reasonable out-of-pocket expenses, subject to review by all parties-in-interest; (10) the definition of the Sale Transaction is amended to exclude non-going liquidations of the Debtors' inventory and leasehold interests; and (11) the definition of Transaction Fees is amended to include the Minimum Sale Transaction Fee, Minimum Restructuring Transaction Fee, Additional Sale Transaction Fee, and Success Fee. Judge Shannon ruled that the total fees paid or to be paid to Houlihan Lokey will remain capped at $4,500,000. The U.S. Trustee will also be permitted to review the Monthly Fees, provided that neither the number of hours spent by Houlihan Lokey's personnel during any given monthly period, nor the amount of other fees paid to the firm, will be bases alone for any objection by the U.S. Trustee as to the reasonableness of the Monthly Fees. In addition to Houlihan Lokey's right to the escrow and payment of its fees from the Debtors' Professional Fee Escrow, it will be granted a separate carve-out of $600,000 to secure payment of any fees, including Transaction Fees that are indefeasibly paid from the funds maintained in the Debtors' Professional Escrow Account. All the changes and amendments to the Engagement Agreement were made at the Committee's request, with consent from the Debtors. As the Debtors' financial advisor and investment banker, Houlihan Lokey will assist and advise the Debtors with the analysis, evaluation, pursuit and effectuation of any financing, sale or restructuring transaction. Specifically, the firm is expected to: (a) assist the Debtors in the development, preparation and distribution of selected information, documents and other materials to create interest in and to consummate any transaction, including, if appropriate, assist the Debtors in the preparation of an offering memorandum; (b) assist prospective investors or purchasers, solicit and evaluate indications of interest and proposals regarding any transaction from current and potential lenders, equity investors, acquirers, and strategic partners; (c) assist the Debtors in the development, structuring, negotiation and implementation of any transaction, including, among other things, assist the Debtors with due diligence investigations and participate as their representative in negotiations with creditors and other parties involved in any transaction; (d) provide the Board of Directors and senior management of the Debtors regular updates regarding the marketing processes and discussions with investors; (e) assist the Debtors in valuing their estates, assets and operations, provided that any real estate or fixed asset proposal will be undertaken by outside appraisers separately employed; (f) provide expert advice and testimony regarding financial matters related to any transaction; and (g) advise and attend meetings of the Board, creditor groups, official constituencies and other interested parties. Before the Petition Date, Houlihan Lokey received $600,000, which have been fully earned, from the Debtors. About 50% of the Earned Fees will be credited against the closing of a loan with Cerberus Capital Management LP, or a replacement DIP facility, Robert J. Dehney, Esq., at Morris, Nichols, Arsht & Tunnell LLP, in Wilmington, Delaware, the Debtors' proposed counsel, told the Court. Charles C. Reardon, senior vice president of Houlihan Lokey, assured the Court that his firm does not represent any interest adverse to the Debtors and their estates, and is a "disinterested person" as the term is defined under Section 101(14) of the Bankruptcy Code. About Hancock Fabrics Headquartered in Baldwyn, Mississippi, Hancock Fabrics Inc. (OTC: HKFIQ) -- http://www.hancockfabrics.com/-- is a specialty retailer of a wide selection of fashion and home decorating textiles, sewing accessories, needlecraft supplies and sewing machines. Hancock Fabrics is one of the largest fabric retailers in the United States, currently operating approximately 400 retail stores in approximately 40 states. The company employs approximately 7,500 people on a full-time and part-time basis. Most of the company's employees work in its retail stores, or in field management to support its retail stores. The company and 6 of its debtor-affiliates filed for chapter 11 protection on March 21, 2007 (Bankr. D. Del. Lead Case No. 07-10353). Robert J. Dehney, Esq., at Morris, Nichols, Arsht & Tunnell, represent the Debtors. When the Debtors filed for protection from their creditors, they listed $241,873,900 in total assets and 161,412,000 in total liabilities. The Debtors exclusive period to file a chapter 11 plan expires on July 19, 2007. (Hancock Fabric Bankruptcy News, Issue No. 8, http://bankrupt.com/newsstand/or 215/945-7000). HEMOSOL CORP: CCAA Protection Further Extended Until Thursday ------------------------------------------------------------- PricewaterhouseCoopers Inc. in its capacity as interim receiver of the assets, property and undertaking of Hemosol Corp. and its affiliate Hemosol LP disclosed that on Thursday, May 24, 2007 the Ontario Superior Court of Justice granted a further extension of the stay of proceedings against Hemosol. The current Companies' Creditors Arrangement Act stay of proceedings will now expire on May 31, 2007. The further extension will allow negotiations to continue between the Interim Receiver and Hemosol's existing primary secured creditor, Catalyst Fund Limited Partnership II and between Catalyst and certain stakeholders, with a view to concluding a transaction for the sale of the assets and business of Hemosol to Catalyst. Hemosol Corp. (NASDAQ: HMSLQ, TSX: HML) -- http://www.hemosol.com/ -- is an integrated biopharmaceutical developer and manufacturer of biologics, particularly blood-related protein based therapeutics. Information on Hemosol's restructuring is available at http://www.pwc.com/ca/eng/about/svcs/brs/hemosol.html/ Hemosol Corp. and Hemosol LP filed a Notice of Intention to Make a Proposal Pursuant to Section 50.4 (1) of the Bankruptcy and Insolvency Act on Nov. 24, 2005. The company had defaulted in the payment of interest under its $20 million credit facility. Hemosol said that it would require additional capital to continue as a going concern and is in discussions with its secured creditors with respect to its current financial position. On Dec. 5, 2005, PricewaterhouseCoopers Inc. was appointed interim receiver of the companies. HEWETT'S ISLAND: S&P Rates $16 Million Class E Notes at BB ---------------------------------------------------------- Standard & Poor's Ratings Services assigned its preliminary ratings to Hewett's Island CLO VI Ltd./Hewett's Island CLO VI LLC's $380 million floating-rate notes due 2019. The preliminary ratings are based on information as of May 24, 2007. Subsequent information may result in the assignment of final ratings that differ from the preliminary ratings. The preliminary ratings reflect: -- The credit enhancement provided to each class of notes through the subordination of cash flows to the more junior classes and subordinated notes; -- The transaction's cash flow structure, which has been subjected to various stresses requested by Standard & Poor's; -- The collateral manager's experience; and -- The transaction's legal structure, including the issuer's bankruptcy remoteness. Preliminary Ratings Assigned Hewett's Island CLO VI Ltd./Hewett's Island CLO VI LLC Class Rating Amount ----- ------ ------ A-R* AAA $50,000,000 A-T AAA $255,500,000 B AA $27,500,000 C A $15,500,000 D BBB $15,500,000 E BB $16,000,000 Subordinated notes NR $33,000,000 *Includes aggregate undrawn amounts. NR-Not rated. HINES HORTICULTURE: Delays Form 10-Q Filing, Gets Nasdaq Notice --------------------------------------------------------------- Hines Horticulture Inc. filed Form 12(b)-25 with the Securities and Exchange Commission on May 16, 2007, indicating that it would be unable to timely file its Form 10-Q for the period ended March 31, 2007. On May 17, 2007, Hines received a Nasdaq Staff Determination Letter indicating that Hines is not in compliance with the filing requirements for continued listing set forth in Marketplace Rule 4310(c)(14) and that Hines' failure to file the Form 10-Q serves as an additional basis for the delisting of Hines' securities from The Nasdaq Global Market. Hines received a Staff Determination Letter from NASDAQ on April 18, 2007, due to the delay in the filing of the company's Annual Report on Form 10-K for the year ended Dec. 31, 2006. In response to the Staff Determination Letter received on April 18, 2007, Hines requested a hearing before a NASDAQ Listing Qualifications Panel, which had the effect of staying the delisting of the company's securities pending the hearing and a decision by the Panel. The hearing is scheduled for June 7, 2007. There can be no assurance that the Panel will grant Hines' request for continued listing as a result of the hearing. Hines disclosed that it issued consolidated financial statements for the fiscal years ended Dec. 31, 2004 and 2005, the interim periods contained therein, and the first, second and third fiscal quarters of 2006 should no longer be relied upon and will be restated as set forth in greater detail in Hines' Form 8-K filed with the SEC on May 7, 2007. Hines is endeavoring to become current in its filings under the Securities Exchange Act of 1934 as soon as practicable. About Hines Horticulture Headquartered in Irvine, California, Hines Horticulture Inc. (NASDAQ: HORT) -- http://www.hineshorticulture.com/-- operates commercial nurseries in North America, producing a broad assortment of container grown plants. Hines Horticulture sells nursery products primarily to the retail segment, which includes premium independent garden centers, as well as leading home centers and mass merchandisers, such as Home Depot, Lowe's and Wal-Mart. * * * Hines Horticulture Inc.'s long term foreign and local issuer credit carry Standard and Poor's 'B-' rating. HOUSTON EXPLORATION: Gets Consents for 7% Sr. Subor. Note Offering ------------------------------------------------------------------ The Houston Exploration Company received last week tenders and consents from holders representing a majority of the aggregate principal amount of its outstanding 7% Senior Subordinated Notes due 2013, of its cash tender offer and consent solicitation for the notes. The company said that it intends to execute a supplemental indenture to the indenture governing the Notes to, among other things, eliminate substantially all of the restrictive covenants and to modify certain of the events of default and other provisions in the indenture. The Supplemental Indenture will not become operative until a majority in aggregate principal amount of the outstanding Notes have been accepted for purchase by Houston Exploration pursuant to the terms and conditions of Houston Exploration's Offer to Purchase and Consent Solicitation Statement dated May 2, 2007. The company states that its obligation to accept for purchase, and to pay for, any Notes pursuant to the Offer is conditioned upon, among other things, the satisfaction or waiver of all conditions to completion of the previously announced merger of Houston Exploration with and into Forest Oil Corporation. The consideration to be paid by Houston Exploration for each $1,000 principal amount of Notes tendered and accepted for payment pursuant to the Offer is $1,010, plus accrued and unpaid interest up to, but not including, the date of payment for such Notes. In addition, a consent payment in the amount of $2.50 per $1,000 principal amount of Notes will be paid to those holders who consent to the proposed amendments prior to the Consent Expiration. The company said that those Holders who consent to the proposed amendments will be required to tender their Notes. Holders who tender their Notes after the Consent Expiration but before the Expiration Time will not receive the consent payment. The company disclosed that its offer will expire at 5:00 p.m. Eastern time on June 5, 2007, unless extended or terminated by Houston Exploration. Payments to holders will occur on the business date Houston Exploration selects after satisfaction or waiver of the conditions to the Offer, which is expected to be June 6, 2007, assuming the Expiration Time is not extended at the company's sole discretion. The company said that any notes not tendered and purchased pursuant to the offer will remain outstanding and the holders thereof will be subject to the terms of the Supplemental Indenture even though they did not consent to the amendments. About The Houston Exploration Company Headquartered in Houston, The Houston Exploration Company (NYSE: THX) -- http://www.houstonexploration.com/-- is an independent natural gas and crude oil producer engaged in the development, exploitation, exploration and acquisition of natural gas and crude oil properties. The company's operations are focused in South Texas, the Arkoma Basin, East Texas, and the Rocky Mountains. * * * As reported in the Troubled Company Reporter on Jan. 10, 2007, Moody's Investors Service affirmed The Houston Exploration Company's 'Ba3' corporate family rating. HOVNANIAN ENTERPRISES: S&P Revises Outlook to Negative from Stable ------------------------------------------------------------------ Standard & Poor's Ratings Services revised its outlook on Hovnanian Enterprises Inc. to negative from stable. At the same time, S&P affirmed the 'BB' issuer credit and senior unsecured debt ratings, the 'B+' senior subordinated debt rating, and the 'B' preferred stock rating. The affirmations affected $2.2 billion of rated securities. "The outlook revision reflects steady interest coverage deterioration due to the sharp housing market downturn, as well as the potential for further erosion resulting from a protracted or deeper downcycle combined with Hovnanian's investment in community expansion during 2007," explained Standard & Poor's credit analyst George Skoufis. "Despite these issues, the company's diverse product platform, moderate leverage profile, and seasoned management continue to support the ratings." Standard & Poor's views Hovnanian's community growth to be risky in light of the sustained homebuilding weakness and future uncertainty, as it could put added pressure on fixed-charge coverage and liquidity if current conditions persist or deteriorate further. S&P will lower the ratings on Hovnanian if a housing recovery is delayed or further exacerbated by tighter mortgage lending standards or higher foreclosures, resulting in weaker operating performance and greater-than-expected deterioration of the company's financial profile. S&P would revise the outlook back to stable if the homebuilding sector stabilizes and key credit metrics improve. IMPART MEDIA: Posts $1.94 Million Net Loss in Qtr Ended March 31 ---------------------------------------------------------------- Impart Media Group Inc. reported a net loss of $1.94 million for the first quarter ended March 31, 2007, compared with a net loss of $2.73 million in the first quarter of 2006. Revenue was $2.18 million for the first quarter of 2007, compared with revenue of $1.22 million during the first quarter of 2006, representing a 78% increase year over year. The revenue increase was due to expanded shipments of Impart IQ mini equipment and the sales success of direct-to-consumer advertising. The decrease in net loss for the 2007 first quarter was primarily attributable to the increased revenue and gross margin, plus decreases in operating expenses and interest expense. Joe F. Martinez, Impart's chief executive officer said, "We are on track for a great year in 2007. We have directed all of our internal and strategic resources and energies towards our sales objective in reaching $18 to $21 million in revenue this year as originally forecasted. Our direct response business unit had a remarkable quarter under Michael Medico's leadership with continued new business penetration." Mr. Martinez concluded, "Over the last year my priorities were on the funding of our company and fixing the accounting, compliance reporting and other internal organizational matters. My focus for the next three quarters is solely on our sales efforts by continuing to build on the sales team we have in place today and adding where necessary to create the most aggressive and successful sales force in the industry. Significantly, we continue to build strategic partnerships with influential players in the out-of-home advertising market sector to offer the most compelling solutions to our clients." At March 31, 2007, the company's balance sheet showed $17.05 million in total assets, $13.71 million in total liabilities, and $3.34 million in total stockholders' equity. The company's balance sheet at March 31, 2007, also showed strained liquidity with $8,958,247 in total assets available to pay $13,498,334 in total current liabilities. Full-text copies of the company's consolidated financial statements for the quarter ended March 31, 2007, are available for free at http://researcharchives.com/t/s?2023 Going Concern Doubt As reported in the Troubled Company Reporter on April 20, 2007, Peterson Sullivan PLLC expressed substantial doubt about the Impart Media Group Inc.'s ability to continue as a going concern after auditing the company's consolidated financial statements for the years ended Dec. 31, 2006, an 2005. The auditing firm pointed to the company's recurring losses. About Impart Media Based in Seattle, Impart Media Group Inc. (OTC BB: IMMG.OB) -- http://www.Impartmedia.com/-- provides end-to-end information networks, transactional kiosks, digital signage solutions, and direct-to-consumer advertising. INNOVATIVE TECH: Case Summary & 20 Largest Unsecured Creditors -------------------------------------------------------------- Debtor: Innovative Technology Application, Inc. 6551 Loisdale Court, Suite 800 Springfield, VA 22150 Bankruptcy Case No.: 07-11324 Type of Business: The Debtor is a Federal contractor that specializes in knowledge management and counterterrorism consulting products and services. See http://www.itapages.com/default.htm Chapter 11 Petition Date: May 24, 2007 Court: Eastern District of Virginia (Alexandria) Judge: Robert G. Mayer Debtor's Counsel: Stephen E. Leach, Esq. Leach Travell Britt, P.C. 8270 Greensboro Drive, Suite 1050 McLean, VA 22102 Tel: (703) 584-8902 Fax: (703) 584-8901 Estimated Assets: $1 Million to $100 Million Estimated Debts: $1 Million to $100 Million Debtor's 20 Largest Unsecured Creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ Provident Bank bank loan; value $7,048,825 P.O. Box 2394 of security: Baltimore, MD 21203-2394 $1,750,000 Matthew Marcy judgment $1,612,289 626 Central Admiral Drive, Unit 214 Annapolis, MD 21401 Robert Truston judgment $1,612,289 626 Central Admiral Drive, Unit 214 Annapolis, MD 21401 Rick Knezek judgment $1,612,289 626 Central Admiral Drive, Unit 214 Annapolis, MD 21401 Robert O. Tyler, Esq. claim of $1,397,426 Tyler, Bartl, Gorman & bankrupcy Ramsdell, P.L.C. estate of 700 South Washington Street, Nolan Adams Suite 216 Alexandria, VA 22314 McGuireWoods, L.L.P. legal fees $546,604 901 East Cary Street Attention: Accounts Receivable Richmond, VA 23286-0645 Veridian $171,558 American Express credit card $169,621 Anchor Marine & Industrial trade debt $117,740 Neri Group Via Livorno trade debt $116,924 Fried Companies, Inc. office rent $106,698 Mercedes-Benz Credit Corp. vehicle leases $95,233 Fullerton Kingstowne K.V.P. office rent $65,614 McLean Contracting Co. trade debt $65,219 County of Fairfax taxes $62,887 G.M.A.C. lease $45,370 Zuckerman Spaeder, L.L.P. unpaid fees $42,071 Jaguar Credit lease $41,817 Lee Wayne Corp. trade debt $37,798 Chryst Brothers $27,939 INTRALINKS INC: Moody's Assigns B3 Corporate Family Rating ---------------------------------------------------------- Moody's Investors Service assigned IntraLinks Inc. a first time B3 corporate family rating and a stable rating outlook. Moody's also assigned a first time B1 rating to the company's first lien credit facilities ($100 million term loan, due 2014, $50 million PIK toggle term loan, due 2014, and $15 million revolving credit facility, expires 2013) and a Caa1 rating to its $50 million second lien term loan, due 2014. On April 27, 2007, IntraLinks signed a definitive agreement to be acquired by the private equity firms TA Associates and Rho Capital. The transaction is expected to close in June 2007. IntraLinks' B3 corporate family rating reflects the company's leadership position in the online workspace services market, modest size and profitability, and high financial leverage. The company's high business line concentration along with its solid geographic diversification are collectively similar to business services peers rated Ba3. At the same time, IntraLinks' small size profitability and high financial leverage are similar to Caa-rated business services peers, contributing to the company's overall B3 corporate family rating. The stable rating outlook reflects Moody's expectation that the company will maintain market share, continue solid revenue growth and improve profitability in fiscal 2007. What Could Change the Rating - Up IntraLinks B3 rating could experience upward rating pressure if the company were to continue to demonstrate strong top line growth, improve operating margins and reduce debt, such that debt to EBITDA and interest coverage were to be sustained at 7.0 times or less and at least 1.5 times, respectively. What Could Change the Rating - Down IntraLinks' B3 rating could experience downward rating pressure if its revenues or operating profits were to decline on a twelve month basis or there were to be a large dividend distribution to its equity sponsors such that the company's ratio of free cash flow to debt were to decline to the low single digits or less. Ratings assigned: -- Corporate family rating -- B3; -- Probability of default rating -- B3; -- $15 million revolving credit facility (expires 2013) -- B1, LGD2, 25%; -- $100 million first lien term loan (due 2014) -- B1, LGD2, 25%; -- $50 million first lien PIK toggle term loan (due 2014) -- B1, LGD2, 25%; and -- $50 million second lien term loan (due 2014) - Caa1, LGD4, 66%. With about $96 million of revenues for the 12 months ended March 31, 2007, IntraLinks Inc., headquartered in New York, NY, is a leading provider of online workspaces, including secure document exchange, for financial services, life sciences, and other corporate markets. INTREPID TECHNOLOGY: Posts $489,231 Net Loss in Qtr Ended March 31 ------------------------------------------------------------------ Intrepid Technology & Resources Inc. reported a net loss of $489,231 on net revenues of $48,437 for the third quarter ended March 31, 2007, compared with a net loss of $485,817 on net revenues of $97,592 for the same period ended March 31, 2006. The decrease in revenues was mainly the result of decreased sales of contracted "work for others" over the corresponding period of one year ago. The company's current principal focus is on the completion of the expansion and construction of its two major Biogas fuels facilities. Both facilities are scheduled to be in full operation by June 2007, with revenue streams beginning shortly thereafter. For the three months ended March 31, 2007, general and administrative and research and development expenses were $97,891 compared to $490,326 for the same quarter ended March 31, 2006. This 80% decrease was largely the result of more G&A costs being allocated to the digester assets currently under construction. The company recognized a loss on embedded derivative liability of $384,252 during the quarter ended March 31, 2007. This loss is related to the convertible debenture issued to Cornell Capital Partners LP on March 23, 2007. At March 31, 2007, the company's balance sheet showed $14,186,896 in total assets, $12,051,690 in total liabilities, and $2,135,206 in total stockholders' equity. Full-text copies of the company's consolidated financial statements for the quarter ended March 31, 2007, are available for free at http://researcharchives.com/t/s?2006 Going Concern Doubt As reported in the Troubled Company Reporter on Oct. 31, 2006, Jones Simkins P.C., in Logan, Utah, expressed substantial doubt about Intrepid Technology & Resources Inc.'s ability to continue as a going concern after auditing the company's consolidated financial statements for the years ended June 30, 2006, and 2005. The auditor pointed to the company's loss, negative working capital, negative cash flows from operations. At March 31, 2007, the company's balance sheet showed improved liquidity with current assets of $3,590,801 available to pay $2,159,474 in total current liabilities. During the nine months ended March 31, 2007, the company used net cash of $526,232 for operating activities compared to $1,116,731 of net cash used in operating activities for the 2006 period. The decrease of cash used by operating activities is due mainly to the reduced net loss for the nine month period ended March 31, 2007. About Intrepid Technology Intrepid Technology and Resources Inc. (OTC BB: IESV.OB) -- http://www.intrepid21.com/-- is an Idaho-based, publicly traded company specializing in development of biofuel production projects. Biofuels of consideration are primarily biogas (methane from processing animal waste), with considerations for ethanol and biodiesel. IVOICE INC: Earns $74,763 in First Quarter Ended March 31 --------------------------------------------------------- iVoice Inc. reported net income of $74,763 on net sales of $323,653 for the first quarter ended March 31, 2007, compared with a net loss of $682,797 on net sales of $993 for the same period in 2006. Total operating expenses for the three months ended March 31, 2007, and 2006, were $536,010 and $664,980, respectively, for an overall decrease of $128,970. Total other income for the three months ended March 31, 2007, was $343,060. This total was primarily comprised of $1,345,187 gain on revaluation of the derivatives and $138,317 of interest income which was offset by $912,236 of amortization of the discount on debt, $132,552 of accrued interest expense on the Cornell notes and other debt, and $95,804 loss on sales of marketable securities. Total other income (expense) for the three months ended March 31, 2006, was an expense of $17,714. At March 31, 2007, the company's balance sheet showed $11,942,904 in total assets, $8,758,209 in total liabilities, and $3,184,695 in total stockholders' equity. Full-text copies of the company's consolidated financial statements for the quarter ended March 31, 2007, are available for free at http://researcharchives.com/t/s?2024 Going Concern Doubt Bagell, Josephs, Levine & Company LLC, in Gibbsboro, N. J., expressed substantial doubt about iVoice Inc.'s ability to continue as a going concern after auditing the company's consolidated financial statements for the years ended Dec. 31, 2006, and 2005. The auditing firm reported that the company incurred substantial accumulated deficits, has an obligation to deliver an indeterminable amount of common stock due on derivative liabilities and has completed the process of spinning out their subsidiaries. The company continues to search for potential merger candidates with or without compatible technology and products, which management feels may make financing more appealing to potential investors. About iVoice Inc. iVoice Inc. (OTC BB: IVOI.OB) -- http://www.ivoice.com/ -- develops and licenses proprietary speech enabled technologies and applications that it holds patents for. In the last 36 months, the company has spun-off four subsidiaries through special dividends to its shareholders. JED OIL: Offers to Acquire All Shares of Caribou Resources ---------------------------------------------------------- JED Oil Inc. has made an offer to Caribou Resources Corp. to acquire all of its shares and settle with its creditors. JED's offer consists of payment in full in cash to the major secured creditor of approximately $26.7 million, plus to any creditors with security in priority to the major secured creditor; cash of approximately $345,500 plus 5 million common shares to the unsecured creditors totaling approximately $17.7 million, and up to 4 million common shares for the acquisition of all of the 39 to 40 million shares of Caribou on the basis of one common share of JED for every 10 shares of Caribou held. JED has delivered approximately $185,000 as a deposit with its offer. JED has also filed a business plan with the American Stock Exchange assuming completion of the acquisition of Caribou, and making other assumptions about current negotiations with the holders of its preferred shares and convertible notes and the sale of mature assets. Under this plan, JED would be profitable by the end of 2007 and back in compliance with the continuous listing requirements of AMEX. JED's plan also provides for JED's compliance with AMEX requirements based on its current drilling opportunities, if the Caribou transaction is not completed. "The proposed Caribou transaction is an opportunity for JED to add both substantial production and additional drilling opportunities," stated James Rundell, President of JED. "We hope our offer to Caribou and its creditors is accepted, but it is a complex transaction with a lot of required approvals. If this transaction is not completed, we look to accomplish the same results somewhat more slowly with several smaller transactions." Caribou had filed for protection under the Canadian Companies' Creditors Arrangement Act. Under the CCAA procedure, the Caribou offer must be selected as the best offer for the creditors by the Court of Queen's Bench, which is scheduled to hear applications on Friday, May 25, 2007, and by Caribou. The offer must then also be approved by Caribou's creditors and Caribou's shareholders. The issuance by JED of up to 9 million common shares is also subject to the approval of JED's common shareholders under the rules of the AMEX. The settlement with Caribou creditors will be effected under a Plan of Arrangement under the CCAA, and the acquisition of the shares of Caribou will be effected under a Plan of Arrangement under the Business Corporations Act (Alberta), which would also be an element of the Plan of Arrangement under the CCAA. An Information Circular with detailed information will be mailed to JED and Caribou shareholders. Following completion of the transactions, Caribou would either become a wholly owned subsidiary of JED, or would amalgamate with or be acquired by a wholly owned subsidiary or affiliate of JED. JED Oil has also been advised that the holders of a substantial majority of its Series B Preferred shares have verbally agreed to amend the terms of the shares to move the maturity date from Feb. 1, 2007 to Feb. 1, 2010 and decrease the price at which the shares can be converted to common shares from $16.00 to $3.50. These amendments are subject to the approval of the holders of JED's common shares and Series B preferred shares, each voting as a class. It is proposed that these special resolutions be presented at the same special meeting called for JED's common shareholders to approve the issuance of common shares for the Caribou acquisition. About Caribou Resources Based in Calgary, Canada, Caribou Resources Corp. (TSX VENTURE:CBU) -- http://www.cariboures.com/-- is a full cycle exploration and development company primarily focused on exploring for natural gas in Northern Alberta, and oil and natural gas in Central Alberta. With a mix of oil and gas prospects, the company is committed to creating shareholder value by conducting exploration and development activities in a highly focused area. In January 2007, Caribou filed for protection under the Canadian Companies' Creditors Arrangement Act. About JED Oil Based in Didsbury, Alberta, JED Oil Inc. (AMEX: JDO) -- http://www.jedoil.com/-- is an oil and natural gas company that commenced operations in the second quarter of 2004 and has begun to develop and operate oil and natural gas properties principally in western Canada and the United States. * * * In JED Oil Inc.'s annual financial statements for the year ended Dec. 31, 2006, Ernst & Young LLP, at Calgary, Canada, raised substantial doubt about the company's ability to continue as a going concern. The auditor pointed to the company's substantial net loss, negative cash flow from operations, and a working capital and stockholders' deficiency at Dec. 31, 2006. The company had $36,015,655 in total assets, $78,266,519 in total liabilities, and a stockholders' deficit of $42,250,864 at Dec. 31, 2006. K&F INDUSTRIES: Posts $108,952,000 Sales in First Quarter 2007 -------------------------------------------------------------- K&F Industries Inc. reported net sales for the three months ended March 31, 2007, totaled $108,952,000, reflecting an increase of $17,890,000, compared with $91,062,000 for the same period in the prior year. This increase was due to higher sales at Aircraft Braking Systems of $13,921,000 and at Engineered Fabrics of $3,969,000. Net income for the three months ended March 31, 2007, was $8,829,000, as compared with $10,301,000 for the three months ended March 31, 2006. As of March 31, 2007, the company listed $1,437,984,000 in total assets, $1,036,326,000 in total liabilities, and $401,658,000 in total stockholders' equity. Liquidity and Capital Resources The company's cash and cash equivalents totaled $12,350,000 at March 31, 2007, compared with $16,347,000 at Dec. 31, 2006. Total debt was $704,627,000 at March 31, 2007, and $710,000,000 at Dec. 31, 2006. The company repaid $10,000,000 of its senior term loans during the three months ended March 31, 2007. The company also had capital lease obligations of $11,000,000 at March 31, 2007, and Dec. 31, 2006, respectively. The company had $49,500,000 available to borrow under its $50,000,000 revolving credit facility. At March 31, 2007, the company had outstanding $315,000,000 of 7-3/4% notes, $382 million of variable rate indebtedness, which had a weighted average interest rate of 7.32% and $7,600,000 of variable rate notes payable, which had a weighted average interest rate of 7.22%. A full-text copy of the company's first quarter 2007 report is available for free at http://ResearchArchives.com/t/s?201c Merger Agreement with Meggitt On March 5, 2007, K&F Industries Holdings Inc., the parent company of K&F entered into a definitive Merger Agreement with Meggitt-USA Inc., the wholly owned U.S. subsidiary of Meggitt PLC, a United Kingdom company pursuant to which K&F will be merged with and into a newly formed acquisition subsidiary wholly owned by Meggitt. About K&F Industries Headquartered in White Plains, New York, K&F Industries Inc. (NYSE: KFI) -- http://www.kandfindustries.com/-- manufactures wheels, brakes and brake control systems for commercial transport, general aviation and military aircraft and produces aircraft fuel tanks, de-icing equipment and specialty coated fabrics used for storage, shipping, environmental and rescue applications for commercial and military use. * * * As reported in the Troubled Company Reporter on Mar. 9, 2007, Standard & Poor's Ratings Services placed its ratings, including the 'B+' corporate credit rating, on K&F Industries Inc. on CreditWatch with positive implications. KIMBALL HILL: Weak Profitability Cues S&P's Negative Outlook ------------------------------------------------------------ Standard & Poor's Ratings Services revised its outlook on Kimball Hill Inc. to negative from stable. At the same time, S&P affirmed all existing ratings. The rating actions affect $203 million of rated debt. "The outlook revision reflects the company's weak profitability due to higher incentives, rising costs, inventory impairments, and lot option writedowns," said credit analyst Elizabeth Campbell. "We expect these issues to continue pressuring debt coverage metrics in 2007 and likely into 2008, given the currently weak housing conditions and our expectation for a prolonged recovery for the sector." S&P expect the company's slim profit margins and debt service coverage measures to be further stressed over the next several quarters as the housing market struggles to reach a cyclical floor. Despite reasonable recent new order volume, Kimball Hill has a relatively modest backlog, and it remains unclear whether the company's recent material decline in cancellation rates is sustainable. S&P would lower its ratings if Kimball Hill's new orders, cancellation rates, or impairment charges weaken considerably. However, S&P would revise its outlook to stable once it is clear that margins and/or sales are strengthening and sustainable, which would enable the return to previously sound credit metrics. KYPHON INC: Incurs First Quarter 2007 Net Loss of $22.6 Million --------------------------------------------------------------- Kyphon Inc. reported a net loss of $22.6 million for the first quarter ended March 31, 2007, as compared with net income of $8.5 million for the same period a year ago. The company's worldwide net sales totaled $128.1 million, which includes $18.1 million of X-STOP(R) Interspinous Process Decompression, IPD(R), product sales from the St. Francis Medical Technologies Inc. acquisition that closed on Jan. 18, 2007. Total product sales increased 40%, or 38% at constant foreign currency exchange rates, compared to the $91.4 million in net sales reported for the first quarter of 2006. As of March 31, 2007, the company had total assets of $926.4 million, total liabilities of $619.9 million, and total stockholders' equity of $306.5 million. The company's retained earnings at March 31, 2007, were $35.4 million, which is about $23.2 million lower at Dec. 31, 2006. The company held $79.7 million in cash and cash equivalents and zero short-term investments at the end of the first quarter 2007. It held $81.9 million and $120.2 million in cash and cash equivalents and short-term investments at the end of the fourth quarter 2006. A full-text copy of the company's first quarter 2007 report is available for free at http://ResearchArchives.com/t/s?2012 X-STOP IPD Acquisition In January 2007, the company acquired rights to the X-STOP(R) IPD(R) technology, a proprietary technology platform for the treatment of lumbar spinal stenosis, through the company's acquisition of St. Francis, a privately held company in Alameda, California. The total estimated purchase price, excluding transaction costs, of about $725.3 million comprised $525.3 million in cash upon closing, plus additional revenue-based contingent payments of up to $200 million payable in either cash or a combination of cash and stock, at Kyphon's election. "We are pleased with our strong execution this quarter and the focus that was maintained on our core spinal fracture management and repair business while integrating the X-STOP(R) IPD(R) system obtained through our St. Francis acquisition," said Richard Mott, president and chief executive officer of Kyphon. "We made excellent progress in assimilating St. Francis' operations into Kyphon's and undertaking clinical initiatives designed to support long term procedural adoption and adequate facility and physician reimbursement for the X-STOP(R) IPD(R) technology. Furthermore, as device competition increases in the vertebral compression fracture market, we believe the ability of balloon kyphoplasty to achieve deformity correction coupled with the growing body of clinical data for the procedure remain key considerations for many clinicians in selecting the appropriate treatment for their spinal fracture patients. We believe we are well positioned for future growth through our focus on restoring spinal function through minimally invasive therapies," Mr. Mott concluded. During the first quarter of 2007: * Kyphon completed enrollment for its Japan registry trial for its balloon kyphoplasty inflatable bone tamps and bone cement. This represents a critical milestone for obtaining regulatory approval in this key market with an estimated half-million fractures each year due to osteoporosis. * The health insurance company Aetna Inc. published national coverage for kyphoplasty. Aetna's membership represents over 30 million covered lives, more than 767,000 health care professionals, and more than 453,000 primary care physicians at over 4,400 hospitals. * Kyphon successfully closed a $400 million offering of convertible senior notes. The proceeds, together with revolver borrowings, were used to retire the $425 million senior secured term loan incurred to complete the acquisition of SFMT. * Kyphon launched its Aperius(TM) PercLID(TM) system for the treatment of mild to moderate lumber spinal stenosis in select European markets. The device received the CE Mark in October 2006 and is a percutaneous solution used by spine specialists in treating LSS. * Kyphon early concluded enrollment of patients in its European BEST, Biomaterials Effectiveness and Safety in Trauma, clinical trial for its KyphOs(TM) FS calcium phosphate material in treating vertebral compression fractures caused by trauma. The clinical trial investigators determined that the interim analysis after enrolling 51 patients showed highly statistically and clinically significant improvement in pain in addition to having a high safety profile. The company is preparing to initiate market launch activities of KyphOs(TM) FS in select European countries in the second half of 2007. * Kyphon initiated enrollment in a pilot multi-center, prospective, single-arm clinical study evaluating its Discyphor(TM) Catheter for the F.A.D.(TM) procedure versus provocative discography. The SODA, Study Of Disc Anaesthesia, study is expected to enroll up to 100 patients in up to 15 sites and is designed to measure the proportion of positive disc levels registered after provocative discography differing from that after the F.A.D.(TM) procedure. * Kyphon enrolled 23 patients in its Caf,, CAncer Fracture Evaluation, study bringing the total cumulative enrollment to 75 patients. This multi-center, randomized, controlled study designed to evaluate balloon kyphoplasty versus non- surgical management in patients suffering vertebral compression fractures due to cancer is intended to enroll up to 200 patients. * Kyphon enrolled 30 patients in its KAVIAR, Kyphoplasty And Vertebroplasty In the Augmentation and Restoration of Vertebral Body Compression Fractures, study, bringing the total cumulative enrollment to 45 patients. This multi- center, randomized, controlled study is designed to evaluate balloon kyphoplasty against vertebroplasty on a number of endpoints and is intended to enroll up to 1,234 patients. For the full-year 2007, net sales are targeted to increase approximately 40% to 43% versus 2006 to $570-$585 million. For the second quarter of 2007, the company anticipates worldwide net sales of $137 million to $142 million, which represents an increase of 36% to 41% versus the second quarter of 2006. About Kyphon Inc. Kyphon Inc. develops and markets medical devices designed to restore spinal function and diagnose low back pain using minimally invasive technologies. The company's products are used in balloon kyphoplasty for the treatment of spinal fractures caused by osteoporosis or cancer, and in the Functional Anaesthetic Discography procedure for diagnosing low back pain due to degenerative disc disease. The company has expanded into lumbar spinal stenosis treatment following their recent acquisition of St. Francis. * * * As reported in the Troubled Company Reporter on Feb. 13, 2007, Moody's Investors Service upgraded the rating of Kyphon Inc.'s $300 million senior secured revolver to Ba1 from B1 following the issuance of $400 million in convertible senior unsecured notes. LIONEL LLC: Plan Proposes to Pay General Unsecured Claims in Full ----------------------------------------------------------------- Lionel LLC and its debtor-affiliate Liontech Company filed with the United States Bankruptcy Court for the Southern District of New York a Disclosure Statement explaining their Chapter 11 Plan of Reorganization. Treatment of Claims Under the Plan, Secured, Other Priority, and General Unsecured Claims will be paid in full, in cash, plus postpetition interest on the distribution date. Holders of Intercompany Claims will be reinstated on the effective date. All existing Liontech Common Stock Interest will be retained by the reorganized Lionel. Holders of Existing Lionel Membership Interest will be also be retained, but, subject to potential dilution resulting from the exercise of the management options, if issued, and issuance of new Lionel membership interest to the new equity investor. A full-text copy of the Disclosure Statement is available for a fee at: http://webadmin.bankrupt.com/cgi- bin/researcharchives/radmin?action=doc&op=view&docid=070524041646 Headquartered in Chesterfield, Michigan, Lionel LLC -- http://www.lionel.com/-- markets model train products, including steam and die engines, rolling stock, operating and non-operating accessories, track, transformers and electronic control devices. The Company filed for chapter 11 protection on Nov. 15, 2004 (Bankr. S.D.N.Y. Case No. 04-17324). Abbey Walsh, Esq., at O'Melveny & Myers LLP; and Adam Craig Harris, Esq., and Adam L. Hirsch, Esq., at Schulte Roth & Zabel LLP represent the Debtor in its restructuring efforts. David M. LeMay, Esq., and Francisco Vazquez, Esq., at Chadbourne & Parke, LLP, represented the Official Committee of Unsecured Creditors. When the Company filed for protection from its creditors, it estimated assets between $10 million and $50 million and estimated debts more than $50 million. MARIE CORP: Case Summary & Seven Largest Unsecured Creditors ------------------------------------------------------------ Debtor: Marie Corporation dba Marie's RV and Mobil Home Park 67500 Jones Road Cathedral City, CA 92234 Tel: (760) 200-1265 Bankruptcy Case No.: 07-12881. Type of Business: The Debtor owns and operates a park. Chapter 11 Petition Date: May 24, 2007 Court: Central District Of California (Riverside) Debtor's Counsel: William H. Brownstein, Esq. 1250 Sixth Street, Suite 205 Santa Monica, CA 90401 Tel: (310) 458-0048 Fax: (310) 576-3581 Total Assets: $4,000,000 Total Debts: $1,455,167 Debtor's Seven Largest Unsecured Creditors: Entity Claim Amount ------ ------------ Kohl Corp. $500,000 21 Buckingham Way Rancho Mirage, CA 92270 David Lee Baron, Esq. $25,000 Slovak Baron & Empey, L.L.P. 1800 East Tahquitz Canyon Way Palm Springs, CA 92262-7104 Cove Electric $24,000 77-824 Wildcat Drive Palm Desert, CA 92211 Verizon $11,167 Southern California Edison $3,000 Southern California Gas Co. $1,200 State of California $800 Franchise Tax Board Special Procedures MCDERMOTT INT'L: Steady Performance Cues S&P to Lift Ratings to BB ------------------------------------------------------------------ Standard & Poor's Ratings Services raised its corporate credit rating on diversified energy services provider McDermott International Inc. and its subsidiaries, J. Ray McDermott S.A. and The Babcock & Wilcox Co., to 'BB' from 'B+'. The outlook is stable. In addition, S&P raised the rating on B&W's senior secured bank debt to 'BB+' from 'B+', upgraded J. Ray's senior secured bank debt to 'BB' from 'B+', revised the recovery rating on B&W's debt to '1' from '3', and left the recovery rating on J. Ray's debt unchanged at '3'. The '1' recovery rating indicates a high expectation of full (100%) recovery in the event of a payment default, and the '3' recovery rating indicates an expectation of meaningful (50%-80%) recovery). "Driving the upgrades were strong performance at J. Ray, steady performance at B&W and BWX Technologies, debt reduction, and near closure on B&W's asbestos litigation," said Standard & Poor's credit analyst David Lundberg. "The rating on McDermott reflects a consolidated rating methodology for McDermott and its subsidiaries," Mr. Lundberg said. McDermott's business risk profile is considered weak. The highly cyclical and competitive marine construction business at J. Ray is partially offset by the more stable businesses at B&W and BWXT. B&W primarily constructs boilers and environmental equipment for coal-fired power plants, while BWXT provides nuclear components for the U.S. government and manages several sites for the U.S. Department of Energy. With only limited debt outstanding, McDermott's credit measures are strong for the rating, and some degree of cushion exists if the company increases debt to finance any potential future acquisitions. The outlook is stable. S&P expect B&W and BWXT to continue to generate stable levels of cash flow. S&P expect J. Ray's near- term performance to be strong, but believe that its cash flows will be volatile and possibly fall sharply if capital expenditures in the oil and gas sector decline. Given that debt levels are currently low, the current rating has some cushion for higher debt. That said, S&P would expect McDermott's credit ratios to remain somewhat stronger than our industrial 'BB' medians, given J. Ray's cyclicality and the current point in the cycle. A significant increase in debt, worse-than-expected operating performance, or evidence of increased risk-taking at J. Ray could result in negative rating actions. A positive rating action is unlikely at this juncture. S&P would likely need to observe management's ability to steer J. Ray through a more pronounced downturn before consideration of any further upgrades. MOBILE MINI: Earns $12.7 Million in First Quarter Ended March 31 ---------------------------------------------------------------- Mobile Mini Inc. reported record financial results for the first quarter ended March 31, 2007. First quarter 2007 versus first quarter 2006 results were: -- Total revenues increased 29.4% to $73 million from $56.4 million; -- Lease revenues increased 28.2% to $66.1 million from $51.5 million; -- Lease revenues comprised 90.5% of total revenues as compared to 91.3% during the 2006 first quarter; -- Net income increased 54.8% to $12.7 million as compared to $8.2 million; and -- Operating margin increased to 36.7% from 35.3%. Other First Quarter Highlights -- Internal growth remained strong at 15.4% in the first quarter of 2007; the internal growth rate was 15.6% during the fourth quarter of 2006; -- The average utilization rate was 79% versus 80.1% during the first quarter of 2006; -- The lease fleet grew 28.5% to about 152,200 units at March 31, 2007 as compared to about 118,400 units at March 31, 2006; -- Yield was about 0.5% ahead of last year's first quarter. Excluding European locations, yield was up 5.1% as compared to the 2006 first quarter; and -- The average number of units on rent increased 27.6% to about 119,700 from about 93,800 in the first quarter of 2006. As of March 31, 2007, the company reported total assets of $935.9 million, total liabilities of $480 million, and total stockholders' equity of $455.8 million. The company held cash and cash equivalents of $2.4 million at March 31, 2007. At Dec. 31, 2006, the company had a $350 million senior secured revolving line of credit with a group of lenders which was scheduled to mature in February 2011. On May 7, 2007, the company amended its revolving line of credit to increase from $350 million to $425 million the maximum amount the company can borrow under the line of credit and extended the expiration date to May 7, 2012. The company has the right under the credit agreement, at its option and without lenders' consent, to further increase the maximum borrowing limit to $500 million, during the term of the agreement. In May 2007, the company retired over 99% of its outstanding 9.5% Senior Notes and issued $150 million of 6.875% Senior Notes due 2015. As of May 8, 2007, borrowings outstanding under the company's credit facility were about $187.3 million. A full-text copy of the company's first quarter 2007 report is available for free at http://ResearchArchives.com/t/s?1ffd Lawrence Trachtenberg, executive vice president & chief financial officer, noted, "In recent weeks, we have taken action to reduce interest expense, provide lower cost of capital and, in general, further strengthen our financial position. We have tendered for $97.5 million of our 9.5% Senior Notes and are replacing them with $150 million of 6-7/8% Senior Notes. As previously reported, these notes will be sold to the initial purchasers at 99.548% of par value, less discounts and commissions. Closing of these transactions is expected on May 7, 2007, subject to customary closing conditions. Also, next week, we will be finalizing an amended revolving line of credit which increases the maximum amount we may borrow from $350 million to $425 million. We also will have the right to increase the maximum borrowing limit to $500 million. The new credit facility will have a scheduled maturity date of May 7, 2012." About Mobile Mini Based in Tempe, Arizona, Mobile Mini Inc. (Nasdaq: MINI) -- http://www.mobilemini.com/-- designs and manufactures portable steel storage containers, portable offices, telecommunication shelters and a variety of delivery systems. The company markets, services and distributes its products through a network of company-owned branch locations in the U.S., Canada, the UK and The Netherlands and over 1,950 dedicated employees. * * * As reported in the Troubled Company Reporter on April 25, 2007, Standard & Poor's Ratings Services assigned a 'BB-' rating to Mobile Mini Inc.'s $125 million senior unsecured notes due 2015. At the same time, S&P affirmed its ratings on Mobile Mini, including the 'BB' corporate credit rating. The outlook was revised to positive from stable. MOUNT ZION: Case Summary & 12 Largest Unsecured Creditors --------------------------------------------------------- Debtor: Mount Zion Missionary Baptist Church 1895 Del Rosa Avenue San Bernardino, CA 92411 Bankruptcy Case No.: 07-12883 Chapter 11 Petition Date: May 24, 2007 Court: Central District Of California (Riverside) Judge: Peter Carroll Debtor's Counsel: Greta S. Curtis, Esq. 3701 Wilshire Boulevard, Suite 1025 Los Angeles, CA 90010 Tel: (213) 351-9583 Estimated Assets: $1 Million to $100 Million Estimated Debts: $1 Million to $100 Million Debtor's 12 Largest Unsecured Creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ Peter J. Sargologos value of $1,272,000 5732 Melrose Avenue security: Los Angeles, CA 90038 $242,000 Dan Z. Bochner deed of trust $814,000 P.O. Box 10809 value of Beverly Hills, CA 90213 security: $2,200,000 Terry Elliott wages $61,000 3909 San Gabriel Court San Bernardino, CA 92404 loan to church $32,000 Mary Rouse loan to church $30,000 James Marshall loan to church $10,000 Florenda Reed loan to church $10,000 Preston Hammond loan to church $6,000 Hosea Moore, Jr. wages $4,000 loan to church $1,000 Floyd Thomas loan to church $3,000 Stanis Askew loan to church $2,000 Hazel Washington loan to church $2,000 Pamela Huntsman loan to church $1,000 MPS GROUP: Earns $17.4 Million in Three Months Ending March 31 -------------------------------------------------------------- MPS Group, Inc. reported financial results for the first quarter ended March 31, 2007. The company reported a net income of $17.4 million in three months ended March 31, 2007, compared to the past year, which had a net income of $16 million. Revenue was $510 million, up 16% versus the first quarter of 2006. Gross profit was $140 million, up 19% versus the first quarter of 2006. During the first quarter, the company generated operating cash flow of $10 million. At the close of the first quarter, the company had a cash balance of $115 million, short-term investments of $40 million and no borrowings outstanding under its $250 million credit facility. MPS Group intends to use cash on hand primarily to invest in strategic acquisitions designed to enhance its service delivery network and establish new specialty lines of business. The company also intends to use cash on hand to buy back its common stock. During the first quarter of 2007, MPS Group expended $11 million to buy back its common stock. Currently, $35 million remains on the Company's stock buyback authorization. "We were pleased with our results for the quarter and with the consistent performance across all of our business units," Timothy Payne, MPS Chief Executive Officer, stated. "In particular, we are encouraged by the activity we are seeing in our North American Professional Services units. We continue to anticipate solid demand for our services in 2007, so we are hiring new sales and recruiting staff and investing in training." "We continue to get positive feedback from both clients and business units regarding the outlook for the rest of the year," Robert Crouch, MPS Chief Financial Officer, added. "Therefore, we believe the investments we made during the first quarter will benefit us throughout 2007. We expect second quarter 2007 revenue and diluted net income per common share to be in the range of $520 million to $530 million and $0.19 to $0.21, respectively." At March 31, 2007, the company's balance sheet showed total assets of $1.1 billion and total liabilities of $201 million, resulting in a $975 million stockholders' equity. Headquartered in Jacksonville, Florida, MPS Group Inc. (NYSE:MPS) -- http://www.mpsgroup.com/-- provides staffing, consulting, and solutions in the disciplines of information technology, finance and accounting, law, engineering, and healthcare. MPS Group delivers its services to government entities and businesses in virtually all industries throughout the United States, Canada, the United Kingdom, and Europe. * * * Standard & Poor's assigned BB- long-term foreign and local issuer credit ratings to MPS Group Inc. on November 2002. NANO SUPERLATTICE: Earns $2,675 in First Quarter Ended March 31 --------------------------------------------------------------- Nano Superlattice Technology Inc. reported net income of $2,675 on net sales of $2,003,958 for the first quarter ended March 31, 2007, compared with a net loss of $299,331 on net sales of $2,317,904 for the same period a year ago. Income from operations for the three months ended March 31, 2007, was $57,626 as compared to an operating loss of $244,778 for the three months ended March 31, 2006. This change was primarily the result of the significant decrease in general and administrative expenses during the three months ended March 31, 2007. During the three months ended March 31, 2007, net cash used in operations was $271,731. Net cash used in investing activities was $21,634 for equipment purchases, and net cash provided by financing activities was $100,891, which consisted of repayment of loans, partially offset by new borrowings. At March 31, 2007, the company's balance sheet showed $13,260,430 in total assets, $8,467,874 in total liabilities, $99,086 in minority interest, and $4,693,470 in total stockholders' equity. The company's balance sheet at March 31, 2007, also showed strained liquidity with $5,250,910 in total current assets available to pay $6,636,072 in total current liabilities. Full-text copies of the company's consolidated financial statements for the quarter ended March 31, 2007, are available for free at http://researcharchives.com/t/s?2005 Default on Line of Credit The company is currently in default of its line of credit because the Arc Bond Sputtering Machine which was pledged to collateralize its line of credit with a Taiwan Bank, was later sold to a third party, in violation of the credit agreement. Since the equipment sold was leased back from the third party, the company is also in default of the lease-back agreement. Going Concern Doubt Simon & Edward LLP in City of Industry, Calif., expressed substantial doubt about Nano Superlattice Technology Inc.'s ability to continue as a going concern after auditing the company's consolidated financial statements for the quarter ended March 31, 2007. The auditing firm reported that the company continued to experience working capital insufficiency. About Nano Superlattice Nano Superlattice Technology Inc. (OTC BB: NSLT) -- is engaged in the coating of tools and components with nano structured PVD coatings for the semiconductor, precision machinery and telecommunication industries. Nano utilizes Arc Bond Sputtering and Superlattice technology to apply multi-layers of super-hard elemental coatings on an array of precision products to achieve a variety of physical properties. NEW CENTURY: Mulls Paying Additional Customer Obligations --------------------------------------------------------- On the day they filed for bankruptcy, New Century Financial Corporation and its debtor-affiliates obtained permission from the U.S. Bankruptcy Court for the District of Delaware to continue certain prepetition services they provide to their customers, including, but not limited to a consumer restitution plan, the funding of manufactured home loans under a program regulated by the Federal Housing Authority and transferring pipeline loans to other lenders or brokers. The Court capped the amounts paid under the Consumer Restitution Plan at $90,000 and amounts paid under the Manufactured Home Loan Funding at $2,500,000. The Debtors have identified additional customer programs that are necessary to retain their licenses during the transition of their businesses to the purchaser of their loan servicing platform. In this regard, the Debtors seek the Court's permission to: (a) perform and honor their prepetition obligations related to the Customer Programs as they see fit; and (b) continue, renew, replace, implement new, or terminate the Customer Programs as they see fit, in the ordinary course of business. Consumer Restitution Plan The intent of the Consumer Restitution Plan is to order to mitigate the damages to customers after the Warehouse Lenders ceased providing funding for loans originated by the Debtors. Prior to the cutoff, certain customers had entered into agreements and paid fees to the Debtors, including, but not limited to, appraisal fees, fees for credit reports, lock, and application fees, in anticipation of receiving mortgage loans. The Consumer Restitution Plan proposes to make whole the customers who were damaged as a result of the Debtors' liquidity crisis. Fees received from the customers are in an escrow account so that refund checks may be generated for the customers. In addition, the Debtors propose to set up an escrow account to make equitable restitution payments to the customers who closed a loan with the Debtors and who either received inferior funding from an alternative lender or who were not able to obtain any alternative loan. The Debtors seek authority to continue paying amounts that arise under the Consumer Restitution Plan in excess of $90,000. As of the beginning of May 2007, the Debtors have received requests for an additional $15,000 but believe refund requests will be ongoing. The Debtors want authority to pay up to an additional $50,000 under the Consumer Restitution Plan. FHA and VA Insurance Prior to April 2, 2007, the Debtors funded loans sponsored by the Department of Housing and Urban Development and Department of Veterans Affairs. FHA and VA require the Debtors to meet strict fee and underwriting guidelines to secure FHA or VA insurance or guarantees. In the ordinary course of business, FHA and VA audit the fees charged by the Debtors to borrowers for FHA and VA loans. If the audit concludes that the Debtors charged fees outside of the guidelines, the Debtors must return the fees to the customer or FHA or VA may not insure or guarantee the loan. FHA and VA recently notified the Debtors that they must refund roughly $6,500 for fees charged. The Debtors anticipate additional refund demands from FHA and VA. Escrow Holdbacks In the ordinary course of the Debtors' origination business, the Debtors routinely held back a portion of the funds loaned to a customer for the purchase of property in escrow with the closing agent. Generally the escrowed amounts are earmarked for construction improvements or upgrades that the seller has agreed to complete in the purchase contract. The escrow agent would hold the escrowed amounts until the Debtors would direct the escrow agent to release the funds, generally when the construction was completed and inspected to the Debtors' satisfaction. While the Debtors believe that escrowed amounts are generally not property of the estate, out of an abundance of caution, the Debtors request authority to return escrowed amounts to the borrower. The Debtors have already received requests for roughly $40,000 for escrowed amounts. State Regulatory Audit Refunds State Regulators routinely audit loans originated in prior years by the Debtors. During the audits, the state may conclude that the Debtor has charged an unallowable fee under state law. In those instances, the state directs the Debtors to refund unallowable fees charged by Debtors to borrowers. Compliance with the audits is necessary for the Debtors to maintain their licenses in certain states. About New Century Founded in 1995, Irvine, Calif.-based New Century Financial Corporation (NYSE: NEW) -- http://www.ncen.com/-- is a real estate investment trust, providing mortgage products to borrowers nationwide through its operating subsidiaries, New Century Mortgage Corporation and Home123 Corporation. The company offers a broad range of mortgage products designed to meet the needs of all borrowers. The company and its debtor-affiliates filed for Chapter 11 protection on April 2, 2007 (Bankr. D. Del. Lead Case No. 07-10416). Suzzanne Uhland, Esq., Austin K. Barron, Esq., and Ana Acevedo, Esq., at O'Melveny & Myers LLP, and Mark D. Collins, Esq., Michael J. Merchant, Esq., and Jason M. Madron, Esq., at Richards, Layton & Finger, P.A., represent the Debtors. The Official Committee of Unsecured Creditors selected Hahn & Hessen as its bankruptcy counsel and Blank Rome LLP as its co-counsel. When the Debtors filed for bankruptcy, they listed total assets of $36,276,815 and total debts of $102,503,950. The Debtors' exclusive period to file a chapter 11 plan expires on July 31, 2007. (New Century Bankruptcy News, Issue No. 11; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000). The Debtors' exclusive period to file a plan expires on July 31, 2007. NEW CENTURY: Seeks OK to Grant Loan Buyers Adequate Protection -------------------------------------------------------------- New Century Financial Corporation and its debtor-affiliates ask the U.S. Bankruptcy Court for the District of Delaware for authority to provide adequate protection to counterparties to master repurchase agreements and to purchasers of loans originated by the Debtors who replaced the Debtors as servicer prior to April 2, 2007, with respect to collections received prepetition on loans in which they claim an interest. The Debtors funded their operations prepetition largely through a series of master repurchase agreements. The Debtors contracted to sell certain mortgage loans to the Repurchase Counterparties, coupled with the Debtors' agreement to repurchase the loans on a maturity date, an obligation to pay the Repurchase Counterparties a regular "Price Differential" and periodically to satisfy margin calls when the determined value of the mortgage loans subject to the Repurchase Agreement was less than the total repurchase obligations. The short-term facilities functioned much like standard secured revolving credit facilities with regular payments of interest and principal payments required to keep the facility within a borrowing base. Shortly before the Debtors' bankruptcy filing, the Repurchase Counterparties made margin calls in excess of $150,000,000, which the Debtors were unable to satisfy fully. Thereafter, the Repurchase Counterparties began restricting and ultimately ceased providing funding for loans originated by the Debtors. Each of the Repurchase Counterparties also declared the Debtors in default under its facility. As a result, many of the Repurchase Counterparties exercised remedies under their agreements with the Debtors, including asserting control of the cash flow from the mortgage loans subject to the Repurchase Agreements and in some instances crediting the asserted value of the mortgage loans against the Debtors' repurchase obligation or reselling the mortgage loans to third parties. The Repurchase Counterparties contend that they are entitled to special rights and privileges under Section 561 of the Bankruptcy Code, which allow them to realize on the mortgage loans without relief from the automatic stay. The Repurchase Counterparties also contend that the agreements required the Debtors to hold collections on the mortgage loans received prior to the Petition Date in trust. The Debtors assert that, in practice, for many years, they have received payments of regularly scheduled principal and interest on the mortgage loans subject to the Repurchase Agreements in their general corporate accounts with the acquiescence, if not the express understanding, of the Repurchase Counterparties. Monthly interest -- generally styled "Price Differentials" -- computed on the total amount of the repurchase obligations was paid to the Repurchase Counterparties, but the payments were generally less than the interest received on the mortgage loans, and the Debtors retained the spread. Since the Debtors' bankruptcy filing, some of the Repurchase Counterparties, including UBS Real Estate Securities Inc. and DB Structured Products Inc., have commenced adversary proceedings seeking, inter alia, that funds collected on mortgage loans prior to the exercise of their remedies, be held in trust and turned over to them. The Debtors have been working to reconcile the amounts at issue, Christopher M. Samis, Esq., at Richards, Layton & Finger, P.A., in Wilmington, Delaware, relates. The Debtors also have been attempting to work with the Repurchase Counterparties to maximize the amounts realized on the disposition of the loans that are subject to the Warehouse Loan Agreements. The Debtors have turned more than $27,400,000 to the Repurchase Counterparties since filing for bankruptcy. The Repurchase Counterparties have generally transferred servicing of the loans in which they assert an interest to a servicer other than the Debtors and have been controlling the cash collected on the mortgage loans for some time now. The Debtors have cooperated in the transfer. With respect to collections on mortgage loans that the Debtors received prior to the Petition Date, there could be serious issues as to whether the amounts, particularly collections of regular monthly principal and interest payments prior to the blockage of accounts, are either cash collateral or property of the estates, Mr. Samis tells Judge Carey. Certain of the Repurchase Counterparties assert that their Repurchase Agreements give them a basis to establish constructive trusts for the property -- that is, the money that was not held in trust as of the Petition Date should have been. This argument raises a number of legal and factual issues, including whether a constructive trust could be avoided and tracing supposed trust funds, Mr. Samis says. Tracing issues inherently pit lender against lender as they vie for the same funds held in the Debtors' general corporate accounts on the Petition Date, Mr. Samis points out. Mr. Samis also notes that prior to the Petition Date, the Debtors received some payments from borrowers under the underlying mortgage loans with respect to loans that had been sold to certain whole loan purchasers where the purchaser had replaced the Debtors as loan servicer. The funds were paid by the borrowers into the Debtors' general corporate accounts so similar Section 544 and tracing issues might arise with respect to the receipt of any funds the Debtors received prepetition, Mr. Samis says. To provide adequate protection to parties claiming an interest in property held by the Debtors on the Petition Date, and at the same time to allow the estates to proceed with the sale of their businesses so as to maximize distribution to whomever is entitled to it, and preserve the rights of the Debtors and the Committee to litigate, or to resolve consensually, the Debtors propose to grant Repurchase Counterparties and Loan Purchasers: -- a superadministrative priority granted under Section 507(b) senior to any administrative priorities under Section 503(b)(1) but junior to the superadministrative priority granted to the DIP Lenders; -- a lien junior to the liens granted to the DIP Lenders and any valid, unavoidable and existing liens on all assets of the estates other than First Lien Collateral defined in the DIP Loan Agreement; and -- once all obligations under the DIP Loan Agreement have been satisfied in full, a lien on all assets of the estates, subject to any existing valid, unavoidable and existing liens. The Adequate Protection Liens and Priorities will in all cases be subject to the Carve Out provided for in the DIP Loan Agreement, will not encumber avoiding powers or their proceeds, and will provide protection only to the extent that a Repurchase Counterparty or Loan Purchaser is determined to have a valid, unavoidable interest in property held by the Debtors as of the Petition Date. The determinations will be made as of the Petition Date so as to avoid any prejudice to Repurchase Counterparties or Loan Purchasers with respect to the use of the property since the Petition Date, Mr. Samis relates. The granting of Adequate Protection Liens and Priorities will also be without prejudice to the rights of the Debtors, the Committee and other appropriate parties-in-interest to challenge the entitlement of the recipients to adequate protection. The Debtors may provide other forms of adequate protection to Repurchase Counterparties and Loan Purchasers as sales of the Debtors' businesses are consummated, auctions of loans held by the Repurchase Counterparties proceed, reconciliations are completed and the issues at hand gain greater clarity. About New Century Founded in 1995, Irvine, Calif.-based New Century Financial Corporation (NYSE: NEW) -- http://www.ncen.com/-- is a real estate investment trust, providing mortgage products to borrowers nationwide through its operating subsidiaries, New Century Mortgage Corporation and Home123 Corporation. The company offers a broad range of mortgage products designed to meet the needs of all borrowers. The company and its debtor-affiliates filed for Chapter 11 protection on April 2, 2007 (Bankr. D. Del. Lead Case No. 07-10416). Suzzanne Uhland, Esq., Austin K. Barron, Esq., and Ana Acevedo, Esq., at O'Melveny & Myers LLP, and Mark D. Collins, Esq., Michael J. Merchant, Esq., and Jason M. Madron, Esq., at Richards, Layton & Finger, P.A., represent the Debtors. The Official Committee of Unsecured Creditors selected Hahn & Hessen as its bankruptcy counsel and Blank Rome LLP as its co-counsel. When the Debtors filed for bankruptcy, they listed total assets of $36,276,815 and total debts of $102,503,950. The Debtors' exclusive period to file a chapter 11 plan expires on July 31, 2007. (New Century Bankruptcy News, Issue No. 11; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000). The Debtors' exclusive period to file a plan expires on July 31, 2007. NEW CENTURY: S&P Lowers Rating on 2003-2 Class M-4 Certs. to BB --------------------------------------------------------------- Standard & Poor's Ratings Services lowered its rating on the class M-4 certificates from New Century Home Equity Loan Trust Series 2003-2 to 'BB' from 'BBB'. Concurrently, S&P placed its ratings on the class M-3 and M-4 certificates from this transaction on CreditWatch with negative implications. In addition, S&P affirmed its ratings on the remaining three classes. S&P's lowered rating and negative CreditWatch placements reflect monthly realized losses that have continued to exceed monthly excess interest. During the past six remittance periods, realized losses have exceeded excess interest by approximately 2.98x. The failure of excess interest to cover monthly losses has resulted in an erosion of overcollateralization. As of the April 2007 distribution date, O/C ($3,989,520) was below its target balance of $5,868,907 by approximately 36%. The current pool factor is 8.74%. Serious delinquencies (90-plus days, foreclosures, and REOs) represent 21.33% of the current pool balance, while cumulative realized losses represent 1.28% of the original pool balance. The affirmations are based on credit support percentages that are sufficient to maintain the current ratings. Credit support for this transaction is provided through a combination of excess spread, O/C, and subordination. The underlying collateral consists of conventional, fully amortizing, adjustable- and fixed-rate mortgage loans, which are secured by first liens on one- to four-family residential properties. Rating Lowered and Placed on Creditwatch Negative New Century Home Equity Loan Trust Series 2003-2 Rating ------ Class To From ----- -- ----- M-4 BB/Watch Neg. BBB Rating Placed on Creditwatch Negative New Century Home Equity Loan Trust Series 2003-2 Rating ------ Class To From ----- -- ---- M-3 A+/Watch Neg. A+ Ratings Affirmed New Century Home Equity Loan Trust Series 2003-2 Class Rating ----- ------ A-IO, M-1 AAA M-2 AA+ NEW WORLD: Moody's Assigns B2 Corporate Family Rating ----------------------------------------------------- Moody's Investors Service assigned a B2 corporate family rating and a B2 probability of default rating to New World Gaming Partners, Limited. A Ba3 (LGD3, 31%) was assigned to the company's CDN25 million 6-year first lien revolver, CDN575 million 7-year 1st lien term loan, and CDN115 million 7-year 1st lien delay draw term loan. A Caa1 (LGD5, 85%) was assigned to the company's CDN400 million 7.5 year 2nd lien term loan. The ratings outlook is stable. Proceeds from the new bank facilities will be used to partially fund the acquisition of casino assets owned by Gateway Casino Income Fund, Gateway Casinos, Inc. and Star of Fortune Gaming Management (B.C.) Corp. by New World Gaming, a newly created 50/50 joint venture between Publishing and Broadcasting Limited and Macquarie Bank Limited. Total consideration for the acquisition is about $1.3 billion. In addition to the CDN1.1 billion bank financing, the joint venture partners will each contribute CDN195 million to support the acquisition. The delay draw portion of the bank facility will be used to fund current capital expenditure initiatives. The ratings take into account New World Gaming's significant debt burden. Leverage as measured by total debt/EBITDA is expected to remain well over 7.0 times (x) during the next two years as a result of acquisition and expansion related debt. This figure includes a portion of the JV sponsors' $390 cash contribution that has been deemed a 'D' hybrid security, and excludes eligible capital recoveries. Debt/EBITDA including capital recoveries is also expected to remain above 7.0x over the next two years. The rating acknowledges that despite owning 8 operating casinos and one casino development, about 40% of the company's property-level pro forma cash flow will come from only one casino -- the Burnaby casino in Vancouver. Positive ratings consideration is given to the company's strong market position in the British Columbia market. On a combined basis, New World Gaming and Great Canadian Gaming (Ba3/stable) will have approximately 80% market share in British Columbia based on number of slots and tables. The stable ratings outlook considers the favorable cash flow impact from capital spending reimbursement programs as well as substantial barriers to entry. No new casino licenses are expected to be issued in British Columbia, Alberta, or Edmonton in the foreseeable future. Ratings improvement is limited at this time given the company's high leverage. Longer-term and sustainable debt/EBITDA below 6.0x would be required for the company to achieve higher ratings. Ratings could be negatively impacted by a slower than expected ramp-up of the company's CDN113 million Starlight Casino development which is scheduled to open in December 2007. New World Gaming Partners, Ltd, is a 50/50 joint venture between wholly-owned subsidiaries of Publishing and Broadcasting Limited and the Macquarie Group. Publishing and Broadcasting Limited is one of Australia's largest diversified media and entertainment groups. The Macquarie Group, which includes Macquarie Bank, an Australian investment bank, is a diversified financial services firm with global assets valued at over CDN163 billion. NEW WORLD: High Debt Leverage Cues S&P's 'B' Corp. Credit Rating ---------------------------------------------------------------- Standard & Poor's Ratings Services assigned its 'B' corporate credit rating to New World Gaming Partners Ltd. The rating outlook is stable. At the same time, Standard & Poor's assigned its loan and recovery ratings to the company's proposed secured financing, comprising CDN $715 million of first-lien debt (a CDN $25 million revolving credit facility due 2013, a CDN $575 million {$509 million} term loan B due 2014, and a C$115 million {$102 million} delayed-draw term loan due 2014) and a CDN $400 million ($354 million) second- lien term loan due 2015. The issue rating on the first-lien debt is 'B+' with a recovery rating of '1', indicating a high expectation for full recovery of principal in the event of a payment default. The issue rating on the second-lien facility is 'CCC+' with a recovery rating of '4', indicating the expectation for marginal (25%-50%) recovery of principal in the event of a payment default. Proceeds from the bank facilities will be used to fund the purchase of the casinos and assets owned by Gateway Casinos Income Fund, Gateway Casinos Inc., and Star of Fortune Gaming Management (collectively, Gateway Casinos) by Publishing and Broadcasting Ltd. (BBB+/Watch Neg/A-2) and Macquarie Bank Ltd. The sponsors will contribute CDN $390 million, of which about CDN $130 million will be equity and CDN $260 million will be structured as debt. However, the debt portion will be structured as junior to the bank facilities, with terms that are favorable to the first- and second-lien lenders. These include a 25-year term with no principal amortization; subordination both in right of payment and in the event of bankruptcy; the ability for interest to be paid in kind at the borrower's option or if not permitted to be paid in cash under the credit agreement; no material covenants or events of default; and no cross-default or acceleration provisions with the first- or second-lien obligations. As such, S&P view this instrument as providing a meaningful level of cushion for first- and second-lien lenders, and S&P's ratio calculations include this instrument as equity. In March 2007, Publishing and Broadcasting Ltd. and Macquarie Bank Ltd. entered into a 50/50 joint venture agreement to acquire the casinos and assets currently owned by the Gateway entities, and formed New World. New World will complete the acquisition through a public tender offer of GCIF's equity and convertible debentures and the refinancing of outstanding debt, and will purchase GCI, as well as the 50% stake in SoF not currently owned by GCI. Collectively, these entities own nine casinos: seven in British Columbia and two in Alberta. "The 'B' corporate credit rating reflects New World's very high pro forma debt leverage, a concentration of cash flows within two of its nine casinos, and potential construction and ramp-up related challenges associated with two of its Vancouver-based properties," said Standard & Poor's credit analyst Ariel Silverberg. "These factors are somewhat tempered by the company's historically high and stable margins, solid historical gaming revenue growth in its markets, and a stable regulatory environment, which limits competition and also provides for reimbursement of the majority of the company's capital expenditures over time." NORTH AMERICAN: Wants Plan Solicitation Period Moved to Sept. 30 ---------------------------------------------------------------- North American Refractories Company and its debtor-affiliates ask the Honorable Judith K. Fitzgerald of the U.S. Bankruptcy Court for the Western District of Pennsylvania to extend, until Sept. 30, 2007, the solicitation period wherein the Debtors can solicit acceptances of their Third Amended Plan of Reorganization. The Court took the confirmation of the Amended Plan under advisement after the conclusion of the confirmation hearing on March 16, 2007. However, the Debtors still request an extension of the Solicitation Period as a precautionary measure in order to protect the Debtors' reorganization. The Debtors say that such precautions are reasonable and prudent given the interrelationship between the bankruptcy case of Global Industrial Technologies Inc. and the NARCO Case, the multiple adjournments of the Confirmation Hearing, the Dec. 15, 2006 Amendment and supplemental solicitation in the GIT Case, and the time the Debtors require to obtain a final order of the Court confirming the Amended Plan. About NARCO Based in Pittsburgh, Pennsylvania, North American Refractories Company was engaged in the manufacture and non- retail sale of refractory bricks and related products. The company and its affiliates sought chapter 11 protection on January 4, 2002 (Bankr. W.D. Pa. Case No. 02-20198) after suffering a slump in the domestic economy and encountering an overwhelming number of claims from individuals asserting injuries or illnesses caused by exposure to products containing asbestos containing it manufactured. James J. Restivo, Jr., Esq., David Ziegler, Esq., and Brian T. Himmel, Esq., at Reed Smith LLP represents the Debtor. No Official Committee of Unsecured Creditors has been appointed in this case. When the Debtor filed for protection from its creditors, it listed $27,559,000,000 in assets and $18,634,000,000 in debts. Plan Update On Jan. 27, 2006, the Debtors filed their Combined Disclosure Statement accompanying the Amended Plan. On Jan. 30, 2006, the Court entered an order approving the Combined Disclosure Statement. The confirmation hearing on the Amended Plan commenced on June 5, 2006, was continued to October 26-27, 2006, continued again to Nov. 17, 2006, and continued again to March 16, 2007. At the conclusion of the Confirmation Hearing on March 16, 2007, the Court took the confirmation of the Amended Plan under advisement. Consequently, the Debtors may require additional time in order to finalize their reorganization. Classes that are impaired have voted to accept the Amended Plan by more than 50% in number and 2/3 in amount. With respect to the NARCO Asbestos Trust, the Amended Plan has been accepted by 95.88% of the voters holding 93.15% of the claims. NORTH AMERICAN: Court Finds Hartford's Arguments 'Superfluous' -------------------------------------------------------------- The Honorable Judith K. Fitzgerald of the U.S. Bankruptcy Court for the Western District of Pennsylvania declared stricken the notice of Hartford Insurance Entities regarding North American Refractories Company and its debtor-affiliates' Third Amended Plan of Reorganization. As reported in the Troubled Company Reporter on Apr. 19, 2007, Hartford Accident and Indemnity Company, First State Insurance Company, and Twin City Fire Insurance Company reiterated in their notice their objections to the Debtors' Third Amended Plan, asserting that the Debtors' Plan remain "virtually unexamined" and that the Hartford Entities were not permitted to conduct discovery on the Plan to see if it complies with the governing law. Additionally, the Hartford Entities cited the Court's recent opinions in Congoleum Corp. and Pittsburgh Corning Corp.'s bankruptcy cases, in support of its allegations. In the order, Judge Fitzgerald said that he was aware of these two opinions he had issued earlier, but stated that Hartford's notice regarding these opinions is "superfluous". The Debtors and Honeywell had reminded the Court that Hartford has no obvious interest in the case, since Hartford's alleged connection to the Debtors' chapter 11 case is as one of Honeywell's insurers, and that Honeywell's proposed obligation to fund NARCO's Plan is "completely independent" of Honeywell's insurance. About NARCO Based in Pittsburgh, Pennsylvania, North American Refractories Company was engaged in the manufacture and non- retail sale of refractory bricks and related products. The company and its affiliates sought chapter 11 protection on January 4, 2002 (Bankr. W.D. Pa. Case No. 02-20198) after suffering a slump in the domestic economy and encountering an overwhelming number of claims from individuals asserting injuries or illnesses caused by exposure to products containing asbestos containing it manufactured. James J. Restivo, Jr., Esq., David Ziegler, Esq., and Brian T. Himmel, Esq., at Reed Smith LLP represents the Debtor. No Official Committee of Unsecured Creditors has been appointed in this case. When the Debtor filed for protection from its creditors, it listed $27,559,000,000 in assets and $18,634,000,000 in debts. Plan Update On Jan. 27, 2006, the Debtors filed their Combined Disclosure Statement accompanying the Amended Plan. On Jan. 30, 2006, the Court entered an order approving the Combined Disclosure Statement. The confirmation hearing on the Amended Plan commenced on June 5, 2006, was continued to October 26-27, 2006, continued again to Nov. 17, 2006, and continued again to March 16, 2007. At the conclusion of the Confirmation Hearing on March 16, 2007, the Court took the confirmation of the Amended Plan under advisement. Consequently, the Debtors may require additional time in order to finalize their reorganization. Classes that are impaired have voted to accept the Amended Plan by more than 50% in number and 2/3 in amount. With respect to the NARCO Asbestos Trust, the Amended Plan has been accepted by 95.88% of the voters holding 93.15% of the claims. NORTH AMERICAN: Wants Settlement Agreement w/ Mellon Bank Approved ------------------------------------------------------------------ North American Refractories Company and its debtor-affiliates ask the U.S. Bankruptcy Court for the Western District of Pennsylvania to approve a settlement agreement between the Debtors and Mellon Bank, N.A., the collateral agent for the Debtors' prepetition senior lenders. Before their bankruptcy filing, the Debtors' 14 senior lenders, on behalf of Qualitech Steel Corporation, made payments to the Debtor for approximately $584,126. Each of the secured lenders was party to a June 1999 Credit Agreement, pursuant to which the senior lenders made secured loans to Qualitech. Mellon Bank commenced an adversary proceeding against the Debtors seeking to avoid and recover the $584,126 transfer. The Debtors argued that the Qualitech secured lenders did not timely file a proof of claim according to the bar date set by the Court. Following a series of arms' length negotiations, the parties have agreed to a compromise settlement wherein the Debtor has agreed that Qualitech shall have an allowed general unsecured claim for $70,000, and that the allowance of such claim shall constitute full satisfaction of any claims that have or could have been asserted on behalf of Qualitech against the Debtor. The Court is set to hear the settlement motion at 2:00 p.m., on June 22, 2007, at the U.S. Steel Tower, Courtroom A, 54th Floor, in Pittsburgh. About NARCO Based in Pittsburgh, Pennsylvania, North American Refractories Company was engaged in the manufacture and non- retail sale of refractory bricks and related products. The company and its affiliates sought chapter 11 protection on January 4, 2002 (Bankr. W.D. Pa. Case No. 02-20198) after suffering a slump in the domestic economy and encountering an overwhelming number of claims from individuals asserting injuries or illnesses caused by exposure to products containing asbestos containing it manufactured. James J. Restivo, Jr., Esq., David Ziegler, Esq., and Brian T. Himmel, Esq., at Reed Smith LLP represents the Debtor. No Official Committee of Unsecured Creditors has been appointed in this case. When the Debtor filed for protection from its creditors, it listed $27,559,000,000 in assets and $18,634,000,000 in debts. Plan Update On Jan. 27, 2006, the Debtors filed their Combined Disclosure Statement accompanying the Amended Plan. On Jan. 30, 2006, the Court entered an order approving the Combined Disclosure Statement. The confirmation hearing on the Amended Plan commenced on June 5, 2006, was continued to October 26-27, 2006, continued again to Nov. 17, 2006, and continued again to March 16, 2007. At the conclusion of the Confirmation Hearing on March 16, 2007, the Court took the confirmation of the Amended Plan under advisement. Consequently, the Debtors may require additional time in order to finalize their reorganization. Classes that are impaired have voted to accept the Amended Plan by more than 50% in number and 2/3 in amount. With respect to the NARCO Asbestos Trust, the Amended Plan has been accepted by 95.88% of the voters holding 93.15% of the claims. PACIFIC LUMBER: La Salle Seeks Court Nod for Assignment of Debt --------------------------------------------------------------- LaSalle Business Credit LLC and LaSalle Bank National Association informed the Hon. Judge Richard S. Schmidt of the United States Bankruptcy Court for the Southern District of Texas that it is seeking to transfer its claim against Pacific Lumber Company and its debtor-affiliates to CanPartners Investments IV LLC. Accordingly, the LaSalle Entities asks to issue a declaratory order in its favor with respect to: -- the assignment of its claims and liens; -- the duties and obligations of Marathon Structured Finance Fund L.P., as administrative agent, under a Revolving Credit Agreement it entered into with Debtors The Pacific Lumber Company and Britt Lumber Co., Inc., in July 2006; and -- Marathon's ongoing breach of contract and an action for damages concerning that breach. LaSalle also asks the Court for permission to transfer in full its claims against the Debtors to CanPartners without Marathon's consent. LaSalle further asks Judge Schmidt to: (a) declare that CanPartners is entitled to all rights in the liens and claims of LaSalle in the Debtors' main bankruptcy case following the authorized LaSalle claim transfer; or (b) in the alternative, grant it judgment against Marathon for breach of the Revolving Credit Agreement for all actual damages, including attorneys' fees and expenses. Subsequently, LaSalle filed a notice of dismissal with the Court with respect to its adversary proceeding against Marathon and the Debtors. LaSalle did not state its reasons for dismissing the Marathon Complaint. The LaSalle Entities became party to the July Credit Pact by an amendment to Revolving Credit Agreement and Guarantee and Collateral Agreement, dated Oct. 12, 2006, Henry J. Kaim, Esq., at Bracewell & Giuliani LLP, in Houston, Texas, relates. LaSalle now wants to exercise its right under the Revolving Credit Agreement to sell and assign its indebtedness to CanPartners. Under the Revolving Credit Agreement, the CanPartners Assignment is not final unless and until Marathon consents to the proposed assignment. Despite repeated requests from LaSalle, Marathon has refused to give its written consent to the CanPartners Assignment, according to Mr. Kaim. Instead, Marathon demanded receipt of information and documentation that is not relevant to the determination of a proposed lender's ability to assume LaSalle's financial obligations under the Revolving Credit Agreement, Mr. Kaim tells the Court. Counsel for CanPartners has promptly forwarded certain requested documentation to Marathon, Mr. Kaim notes. However, Marathon has persisted in its bad faith conduct by continuing to demand information irrelevant to the matter, Mr. Kaim says. Mr. Kaim asserts that Marathon's unreasonable withholding and delayed giving of consent to the CanPartners Assignment is in violation of the Revolving Credit Agreement. About Pacific Lumber Headquartered in Oakland, California, The Pacific Lumber Company -- http://www.palco.com/-- and its subsidiaries operate in several principal areas of the forest products industry, including the growing and harvesting of redwood and Douglas-fir timber, the milling of logs into lumber and the manufacture of lumber into a variety of finished products. Scotia Pacific Company LLC, Scotia Development LLC, Britt Lumber Co., Inc., Salmon Creek LLC and Scotia Inn Inc. are wholly owned subsidiaries of Pacific Lumber. Scotia Pacific, Pacific Lumber's largest operating subsidiary, was established in 1993, in conjunction with a securitization transaction pursuant to which the vast majority of Pacific Lumber's timberlands were transferred to Scotia Pacific, and Scotia Pacific issued Timber Collateralized Notes secured by substantially all of Scotia Pacific's assets, including the timberlands. Pacific Lumber, Scotia Pacific, and four other subsidiaries filed for chapter 11 protection on Jan. 18, 2007 (Bankr. S.D. Tex. Case Nos. 07-20027 through 07-20032). Jeffrey L. Schaffer, Esq., William J. Lafferty, Esq., and Gary M. Kaplan, Esq., at Howard Rice Nemerovski Canady Falk & Rabkin, A Professional Corporation is Pacific Lumber's lead counsel. Nathaniel Peter Holzer, Esq., Harlin C. Womble, Jr. , Esq., and Shelby A. Jordan, Esq., at Jordan Hyden Womble Culbreth & Holzer PC, is Pacific Lumber's co- counsel. Kathryn A. Coleman, Esq., and Eric J. Fromme, Esq., at Gibson, Dunn & Crutcher LLP, acts as Scotia Pacific's lead counsel. John F. Higgins, Esq., and James Matthew Vaughn, Esq., at Porter & Hedges LLP, is Scotia Pacific's co-counsel. When Pacific Lumber filed for protection from its creditors, it listed estimated assets and debts of more than $100 million. Scotia Pacific listed total assets of $932,000,000 and total debts of $765,978,335. The Debtors' exclusive period to file a chapter 11 plan expires on Sept. 18, 2007, as extended. The Debtors' exclusive period to solicit acceptances of that plan expires on Nov. 19, 2007. (Scotia/Pacific Lumber Bankruptcy News, Issue No. 16, http://bankrupt.com/newsstand/or 215/945-7000). PACIFIC LUMBER: Wants to Spend $2,035,000 for Scotia Town Project ----------------------------------------------------------------- Pacific Lumber Company asks the Hon. Judge Richard S. Schmidt of the United States Bankruptcy Court for the Southern District of Texas for permission to spend $1,850,000, plus an additional 10%, for a total of $2,035,000 through Dec. 31, 2007, for the Scotia Town Project, without the need for further Court approval. Pacific Lumber Company also asks the Court for permission to retain and pay various professionals to assist in planning and implementing the Project, without the need for individual applications and retention orders. Since the 1880s, Pacific Lumber Company has owned and operated Scotia, a town of approximately 800 inhabitants located at the Eel River Valley, in Southern Humboldt County, about 250 miles north of San Francisco. Scotia sits on a 420-acre undivided parcel. It has 274 homes, all of which are owned by PALCO and rented principally to current and former PALCO employees. In addition to acting as town-wide landlord, PALCO also manages and provides most of the town's utilities, infrastructure and public services. In 2005, PALCO engaged a team of consultants, and commissioned several studies regarding the feasibility of and requirements for a development project pertaining to the town of Scotia, Kevin J. Franta, Esq., at Jordan, Hyden, Womble, Culbreth, & Holzer, P.C., in Corpus Christi, Texas, relates. PALCO seeks to bring Scotia into the modern age through the Scotia Town Project. Under the Project, PALCO plans to develop a subdivision map that divides the existing 420-acre parcel into legally separate parcels. PALCO has initiated a series of preliminary meetings with government agencies, including Humboldt County and the Local Agency Formation Commission. PALCO recently submitted a formal petition in support of subdivision with more than the necessary signatures by Scotia residents, according to Mr. Franta. The Subdivision Petition is one of several submissions required for the Project's approval. Emphasis for 2007 will be on planning, completing required environmental impact studies and addressing various governmental requirements triggered by the proposed subdivision under the Project, Mr. Franta relates. Thus, PALCO also anticipates spending approximately $960,000, nearly one half of the total budget for professional fees over the life of the Project, in professional fees for the remainder of 2007. Under the Project, PALCO aims to, among others: -- upgrade most of Scotia's infrastructure, including construction and repair of the waste collection system, the wastewater treatment plant and the water distribution system, and repair of roads and rights of ways; -- transfer Scotia's electrical distribution facilities to Pacific Gas and Electric Company; and -- cause the Scotia Volunteer Fire Department to be publicly operated and funded. About $15,450,000 will be spent for capital costs of the Scotia Town Project. The Project Professionals that PALCO seeks to employ and their contemplated services are: Professional Services Fees ------------ -------- ---- SHN Consulting -perform environmental studies $188,000 Engineers and -assist PALCO in preparing the Geologists Inc. extensive application to LAFCo. to establish a Community Service District -oversee the major construction project on Scotia's aging infrastructure Jacobsen -rebuild the electrical 34,000 Engineering distribution system to bring the system to PG&E specifications URFER -provide services related to 8,000 Engineering distribution of natural gas services Downey Brand -provide legal services relating 122,000 to compliance with local and state laws concerning the subdivision of Scotia, the formation of a special district for provision of utility services to the new town of Scotia and the sale of certain properties Day Carter -provide legal services relating 7,000 Murphy LLP to conversion of the electrical distribution system from PALCO to PG&E Kelly O'Hern -perform surveying and 102,000 mapping services TBM and -evaluate the town's historic 25,000 Crandall resources as required by Arambulla California law Plan West -consult on the establishment 3,700 of a new fire district for Scotia The Project Professionals have all be involved in the Scotia Project in its planning stages and thus, are familiar with the project, Mr. Franta tells Judge Schmidt. Mr. Franta asserts that the Project will result in a significant economic gain to the Debtors' estates. In PALCO's estimation, the proceeds from the sale of the Scotia residences and commercial properties are substantially greater than the expected costs of the Project. About Pacific Lumber Headquartered in Oakland, California, The Pacific Lumber Company -- http://www.palco.com/-- and its subsidiaries operate in several principal areas of the forest products industry, including the growing and harvesting of redwood and Douglas-fir timber, the milling of logs into lumber and the manufacture of lumber into a variety of finished products. Scotia Pacific Company LLC, Scotia Development LLC, Britt Lumber Co., Inc., Salmon Creek LLC and Scotia Inn Inc. are wholly owned subsidiaries of Pacific Lumber. Scotia Pacific, Pacific Lumber's largest operating subsidiary, was established in 1993, in conjunction with a securitization transaction pursuant to which the vast majority of Pacific Lumber's timberlands were transferred to Scotia Pacific, and Scotia Pacific issued Timber Collateralized Notes secured by substantially all of Scotia Pacific's assets, including the timberlands. Pacific Lumber, Scotia Pacific, and four other subsidiaries filed for chapter 11 protection on Jan. 18, 2007 (Bankr. S.D. Tex. Case Nos. 07-20027 through 07-20032). Jeffrey L. Schaffer, Esq., William J. Lafferty, Esq., and Gary M. Kaplan, Esq., at Howard Rice Nemerovski Canady Falk & Rabkin, A Professional Corporation is Pacific Lumber's lead counsel. Nathaniel Peter Holzer, Esq., Harlin C. Womble, Jr. , Esq., and Shelby A. Jordan, Esq., at Jordan Hyden Womble Culbreth & Holzer PC, is Pacific Lumber's co- counsel. Kathryn A. Coleman, Esq., and Eric J. Fromme, Esq., at Gibson, Dunn & Crutcher LLP, acts as Scotia Pacific's lead counsel. John F. Higgins, Esq., and James Matthew Vaughn, Esq., at Porter & Hedges LLP, is Scotia Pacific's co-counsel. When Pacific Lumber filed for protection from its creditors, it listed estimated assets and debts of more than $100 million. Scotia Pacific listed total assets of $932,000,000 and total debts of $765,978,335. The Debtors' exclusive period to file a chapter 11 plan expires on Sept. 18, 2007, as extended. The Debtors' exclusive period to solicit acceptances of that plan expires on Nov. 19, 2007. (Scotia/Pacific Lumber Bankruptcy News, Issue No. 16, http://bankrupt.com/newsstand/or 215/945-7000). PAYLESS SHOESOURCE: Moody's May Cut Low-B Ratings After Review -------------------------------------------------------------- Moody's Investors Service placed the ratings of Payless Shoesource, Inc. on review for possible downgrade following the company's announcement on May 22, 2007 of its definitive agreement to acquire Stride Rite for approximately $800 million plus the assumption of Stride Rite debt, which currently consists of only borrowings under its revolver. Moody's notes that while the acquisition will provide Payless with a complementary stable of solid brands, the review for possible downgrade reflects the substantial amount of debt incurred to finance the transaction which will likely result in a deterioration of credit metrics. These ratings are placed on review for possible downgrade: -- Corporate family rating at Ba3; -- Probability of default rating at Ba3; -- $200 million 8.25% senior subordinated notes at B1; and -- LGD assessments are also subject to change. The all cash offer of $20.50 per share represents a 32% premium over Stride Rite's average stock price over the past 90 days. Concurrent with the closing of the transaction, Payless intends to rename the company Collective Brands, Inc., and, as a holding company, will operate three standalone business units. While a specific structure to finance the transaction has yet to be announced, the company has announced its intention to likely use approximately $200 million of its excess cash to finance the transaction, with the remaining amount, nearly 75%of the purchase price, financed with debt. In addition, the company has announced its intention to leave the $200 million 8.25% notes in place and has received commitments from both Citigroup and JPMorganChase to provide financing in the amount of $750 million in connection with the transaction. The review will focus on Payless's plans to integrate and grow the Stride Rite business unit, the post-acquisition capital structure and corresponding credit metrics, the combined company's ability to realize cost synergies and areas of leverage, as well as the company's future financial policies, including liquidity and acquisition appetite. Payless ShoeSource, Inc., headquartered in Topeka, Kansas, operates approximately 4,600 stores offering family footwear and accessories at affordable prices. Sales were $2.8 billion for the fiscal year ended Feb. 3, 2007. Stride Rite, headquartered in Lexington, MA, is a leading designer and marketer of high quality children's footwear in the United States. It is predominantly a wholesaler of footwear but also operates approximately 300 retail stores. Revenues for the fiscal year ended Dec. 1, 2006 were approximately $706.8 million. PETROL OIL: Posts $1,787,207 Net Loss in Quarter Ended March 31 --------------------------------------------------------------- Petrol Oil and Gas Inc. reported a net loss of $1,787,207 on revenue of $1,611,408 for the first quarter ended March 31, 2007, compared with a net loss of $1,835,196 on revenue of $1,216,025 for the same period in 2006. The increase in revenues is primarily the result of increased production, together with improved pricing after impact of the company's hedging activities. Net operating loss decreased to $698,954 for the three months ended March 31, 2007, versus a net operating loss of $1,144,876 for the three months ended March 31, 2006. The decrease in net operating loss for the first quarter of 2007 was primarily due to the 33% increase in revenues and an overall slight decrease in expenses. Interest expense for the three months ended March 31, 2007, was $1,088,253, an increase of $397,933, or 58%, from interest expense of $690,320 for the three months ended March 31, 2006. The increase in interest expense is primarily the result of increased financing. The decrease in net loss is primarily the result of increased revenues, offset by additional interest expense. At March 31, 2007, the company's balance sheet showed $33,264,175 in total assets, $28,588,238 in total liabilities, and $4,675,937 in total stockholders' equity. The company's balance sheet at March 31, 2007, also showed strained liquidity with $4,725,406 in total current assets available to pay $14,243,466 in total current liabilities. Full-text copies of the company's consolidated financial statements for the quarter ended March 31, 2007, are available for free at http://researcharchives.com/t/s?2029 Going Concern Doubt As reported in the Troubled Company Reporter on May 15, 2007, Weaver & Martin LLC, in Kansas, Mo., expressed substantial doubt about Petrol Oil & Gas Inc.'s ability to continue as a going concern after auditing the company's consolidated financial statements for the years ended Dec. 31, 2006, and 2005. The auditing firm reported that the company has suffered recurring losses from operations and is dependent upon the continued sale of its securities or obtaining debt financing for funds to meet its cash requirements. About Petrol Oil Headquartered in Overland Park, Kans., Petrol Oil and Gas Inc. (OTC BB: POIG) -- http://www.petroloilandgas.com/ -- is an independent energy exploration and development company with properties in the Cherokee and Forrest Basins along the Kansas and Missouri border. PINNACLE ENTERTAINMENT: Earns $2.9 Million in Qtr. Ended March 31 ----------------------------------------------------------------- Pinnacle Entertainment Inc. reported net income of $2.9 million, versus the prior-year quarter's net income of $13.5 million. Such results reflect significant pre-opening and development costs, non-cash charges related to stock compensation and losses from discontinued operations. For the first quarter of 2007, revenues were $232.8 million. The first quarter's results reflect the benefit of the December 2006 acquisition of the President Riverboat Casino. For the 2006 first quarter, revenues were $234.1 million. The 2006 results included exceptional first quarter operating results at Boomtown New Orleans, which benefited from the temporary closure of many competitors in the New Orleans and Gulf Coast areas following the major hurricanes of 2005. The company's balance sheet as of March 31, 2007, had total assets of $2 billion, total liabilities of $1 billion, and total stockholders' equity of $965 million. Liquidity The company had about $441 million in cash, cash equivalents and restricted cash at March 31, 2007. Of the company's $1 billion bank credit facility, about $707 million remained unutilized as of March 31, 2007. The company's working capital was $364.1 million at March 31, 2007, versus $75.5 million at Dec. 31, 2006, the increase primarily attributed to the common stock offering completed in early 2007. In January 2007, the company completed the issuance of 11.5 million newly issued shares of common stock, resulting in net proceeds of about $353 million, $60 million of which was used to repay the company's revolver facility in February 2007. As of March 31, 2007, the company's debt consisted of $275 million of term loans under the credit facility, various letters of credit totaling about $18.3 million and two issues of senior subordinated indebtedness: $300 million aggregate principal amount of 8.25% senior subordinated notes due March 2012 and $135 million aggregate principal amount of 8.75% senior subordinated notes due October 2013. As of March 31, 2007, the company had a $1 billion bank credit facility, including a $625 million revolving credit facility and a $375 million term loan facility, which facilities mature in December of 2010 and 2011, respectively. A full-text copy of the company's first quarter 2007 report is available for free at http://ResearchArchives.com/t/s?1ffe "Our properties are continuing to perform well and posted solid overall results in the quarter," said Daniel R. Lee, chairman and chief executive officer of Pinnacle Entertainment Inc. "Just as important, we've made significant progress on our development pipeline. Both LumiSre Place and our hotel expansion at L'Auberge du Lac will be 'topping off' this month. We continue to work on the design of our Atlantic City project while preparing the project site. In Baton Rouge, we put more than 500 acres of land under contract and have announced plans for a creative mixed-use development anchored by a luxurious casino and championship golf course." About Pinnacle Entertainment Headquartered in Las Vegas, Nevada, Pinnacle Entertainment Inc. (NYSE: PNK) -- http://www.pnkinc.com/-- owns and operates casinos in Nevada, Louisiana, Indiana and Argentina, owns a hotel in Missouri, receives lease income from two card club casinos in the Los Angeles metropolitan area, has been licensed to operate a small casino in the Bahamas, and owns a casino site and has significant insurance claims related to a hurricane-damaged casino previously operated in Biloxi, Mississippi. Pinnacle opened a major casino resort in Lake Charles, Louisiana in May 2005 and a new replacement casino in Neuquen, Argentina in July 2005. * * * Pinnacle Entertainment Inc. carries Moody's Investors Service's B2 Corporate Family Rating. At the same time, the company carries Standard & Poor's Ratings Services 'BB-' rating and '1' recovery rating following Pinnacle's announcement of a $250 million senior secured bank facility add- on. PORTRAIT CORP: Waiting Period on CPI Corp.'s Acquisition Expires ---------------------------------------------------------------- The waiting period under the Hart-Scott-Rodino Antitrust Improvement Act of 1976 relating to CPI Corp.'s acquisition of substantially all of the operating assets of Portrait Corporation of America, Inc., has expired. Portrait Corp. had filed a motion with the U.S. Bankruptcy Court for the Southern District of New York seeking approval of the sale transaction with CPI. The hearing on that motion is scheduled for June 4, 2007. On May 21, 2007, the Official Committee of Unsecured Creditors appointed in PCA's Chapter 11 case filed a statement with the Court expressing its support for the sale transaction to CPI. The transaction is expected to close by the end of June 2007. About CPI Corp. CPI Corp. (NYSE: CPY) -- http://www.searsphotos.com/-- is a portrait photography company offering photography services in the United States, Puerto Rico and Canada through Sears Portrait Studios. About Portrait Corp. Portrait Corporation of America Inc. -- http://pcaintl.com/-- provides professional portrait photography products and services in North America. The Company operates portrait studios within Wal-Mart stores and Supercenters in the United States, Canada, Mexico, Germany, and the United Kingdom. The company also operates a modular traveling business providing portrait photography services in additional retail locations and to church congregations and other institutions. Portrait Corporation and its debtor-affiliates filed for Chapter 11 protection on Aug. 31, 2006 (Bankr S.D. N.Y. Case No. 06-22541). John H. Bae, Esq., at Cadwalader Wickersham & Taft LLP, represents the Debtors in their restructuring efforts. Berenson & Company LLC serves as the Debtors' Financial Advisor and Investment Banker. Kristopher M. Hansen, Esq., at Stroock & Stroock & Lavan LLP represents the Official Committee of Unsecured Creditors. Peter J. Solomon Company serves as financial advisor for the Committee. At June 30, 2006, the Debtor had total assets of $153,205,000 and liabilities of $372,124,000. RP JOHNSON: Case Summary & Five Largest Unsecured Creditors ----------------------------------------------------------- Debtor: R.P. Johnson Sons, Inc. aka R.P. Johnson Sons- Wythe Ren-All aka R.P. Johnson Sons, Inc. aka Wythe Rent-All P.O. Box 546 Wytheville, VA 24382 Bankruptcy Case No.: 07-70828 Type of Business: The Debtor sells golf carts in wholesale, provides electrical equipment repair & maintenance services, sells farm equipment & supplies in retail, and manufactures internal combustion engines. Chapter 11 Petition Date: May 24, 2007 Court: Western District of Virginia (Roanoke) Judge: William F. Stone, Jr. Debtor's Counsel: Robert Tayloe Copeland, Esq. Copeland & Bieger, P.C. P.O. Box 1296 Abingdon, VA 24212 Tel: (276) 628-9525 Fax: (276) 628-4711 Total Assets: $1,697,061 Total Debts: $3,173,765 Debtor's Five Largest Unsecured Creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ First Century Bank value of $368,100 P.O. Box 1559 secured value: Bluefield, WV 24701-1559 $1,442,900 John Deere Credit $25,000 P.O. Box 4450 Carol Stream, IL 60197 Embarq Yellow Pages $2,000 c/o R.H. Donnelley 8400 Innovation Way Chicago, IL 60682-0084 The Guardian $335 First Century Bank $1 RURAL CELLULAR: Launches $115 Million Senior Sub. Notes Offering ---------------------------------------------------------------- Rural Cellular Corporation it intends to offer $115.5 million aggregate principal amount of Senior Subordinated Floating Rate Notes due 2013. The company said that it plans to use the proceeds of the offering, together with cash on hand, to redeem all its $115.5 million, aggregate principal amount of 11-3/8% Senior Subordinated Debentures due 2010 and to pay accrued and unpaid interest therein. The company states that the securities have not been and will not be registered under the Securities Act of 1933 and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements. This communication shall not constitute an offer to sell or the solicitation of an offer to buy the securities. Based in Alexandria, Minnesota, Rural Cellular Corporation provides wireless telecommunication services to approximately 600 thousand retail subscribers in rural areas of the United States. * * * As reported in the Troubled Company Reporter on April 2, 2007, Moody's Investors Service placed all ratings of Rural Cellular Corporation's Corporate family rating at B3, $300 million 9.75% senior subordinate notes due 2010 at Caa2, $175 million senior subordinate FRN's due 2012 at Caa2 under review for possible downgrade. RURAL/METRO CORP: March 31 Balance Sheet Upside-Down by $95.5 Mil. ------------------------------------------------------------------ Rural/Metro Corporation's balance sheet as of March 31, 2007, showed total assets of $297.9 million, total liabilities of $390.8 million, minority interest of $2.6 million, and total stockholders' deficit of $95.5 million. The company reported a net loss for the third quarter ended March 31, 2007, of $2.8 million, as compared with a net loss of $4.1 million for the same prior-year period. The decrease was primarily due to higher expenses related to uncompensated care. Third quarter 2006 results included a loss of $4.6 million from discontinued operations. Consolidated net revenue for the third quarter was $116 million, as compared with $112.5 million for the same period of the prior year. Operating income for the third quarter was $4.2 million, compared to operating income of $9.5 million for the same prior-year period. The decrease was primarily related to increases in uncompensated care. A full-text copy of the company's third quarter 2007 report is available for free at http://ResearchArchives.com/t/s?2013 Results for Nine-Month Period Consolidated net revenue for the first nine months of fiscal 2007 increased 3.7%, or $12.5 million, to $349.8 million, as compared with $337.2 million for the same period of the prior year. Net income for the nine months was $287,000, as compared with net income of $2.3 million for the same prior-year period. Jack Brucker, president and chief executive officer, said, "We continue to drive solid growth within both of our business lines by increasing market share through same-service-area expansion efforts. Our contract renewal rate remains strong, and we were pleased to enter into a new contract during the third quarter to provide exclusive 911 emergency medical transportation services in Martinsville, Indiana, which is near our large base of operations in Indianapolis. "However, the costs of uncompensated care remained a key challenge," Mr. Brucker continued. "Our 911 emergency medical transports were up nearly 14% over the prior year, a portion of which we believe indicates greater utilization of public systems by patients who have no other safety net for medical care. We are working actively to implement initiatives that we believe will assist in our continued goal to reduce uncompensated care and are committed to staying ahead of the issue." As for the company's outlook, Mr. Brucker said, "It is our expectation that we will begin to see improvement related to these initiatives by the first quarter of fiscal 2008." Debt Refinancing Update The company disclosed that it anticipates refinancing all or a portion of its debt in March 2009, when the costs become significantly lower to tender for its current 9.875% Senior Subordinated Notes due in 2015 and 12.75% Senior Discount Notes due in 2016. Mr. Brucker said, "As we discussed during our last quarterly report, we have determined our initial evaluation of up to 24 months for a refinancing transaction remains our best choice. We have worked very closely with our financial advisors to consider all possible deleveraging strategies and have determined that a near-term, complete refinancing would result in approximately $40 million in penalties. Such a transaction at this time would not result in the deleveraging that we desire. "We are also very mindful that a debt refinancing targeting only our 12-3/4% Senior Discount Notes would require the consent of the holders of our 9-7/8% Senior Subordinated Notes due to their seniority. At this time, obtaining that consent would negatively affect the economic profile of such a transaction." Uncompensated Care For the three months ended March 31, 2007, uncompensated care as a percentage of gross revenue was 15.2%, or $31.3 million, compared to 13.7%, or $25.6 million for the same period of the prior year. For the nine months ended March 31, 2007, uncompensated care as a percentage of gross revenue was 14.6%, or $86.4 million, compared to 13.2%, or $71.8 million for the same prior-year period. "The largest portion of our uncompensated care on a year-to-date basis, 57%, relates to write-offs that are generated from self-pay accounts," Mr. Brucker explained. "Denials based on non-covered services under certain commercial insurance plans represent 20%, denied claims based on retrospective reviews of medical necessity established by each payer comprise 15%, and unpaid co-pay and deductible amounts for Medicare and commercially insured patients make up 8% of total uncompensated care." About Rural/Metro Corp. Headquartered in Scottsdale, Arizona, Rural/Metro Corp. -- http://www.ruralmetro.com/-- provides emergency and non-emergency medical transportation, fire protection, and other safety services in 23 states and about 400 communities throughout the U.S. * * * As reported in the Troubled Company Reporter on March 8, 2007, Moody's Investors Service placed a Caa1 rating to Rural/Metro Corp.'s $93.5 million, 12.75% senior discount notes, due 2016, and assigned a B2 Corporate Family Rating. SALOMON HOME: S&P Lowers Ratings on Two Classes of Certificates --------------------------------------------------------------- Standard & Poor's Ratings Services lowered its ratings on classes M-2 and M-3 from Salomon Home Equity Loan Trust Series 2002-WMC2. Both ratings remain on CreditWatch, where they were placed with negative implications on Feb. 22, 2007. In addition, S&P lowered its rating on the class B-2 certificates from Salomon Brothers Mortgage Securities VII Inc.'s 1998-AQ1 to 'BB' from 'BBB-'. The rating remains on CreditWatch, where it was placed with negative implications Nov. 21, 2006. Concurrently, S&P placed its 'BBB' rating on the class MV-4 certificates from Salomon Home Equity Loan Trust Series 2001-1 on CreditWatch negative. Lastly, S&P affirmed its ratings on the remaining classes from these transactions. S&P lowered its ratings on the classes from series 2001-1 and 2002-WMC2 and placed them on CreditWatch because of monthly realized losses that have continued to exceed monthly excess interest. The failure of excess interest to cover monthly losses has resulted in a continuing erosion of overcollateralization. During the past six remittance periods, average monthly losses have outpaced excess interest by approximately 3.75x for series 2001-1 (loan group 2) and 2.00x for series 2002-WMC2. As of the April 2007 distribution date, the transactions have paid down to less than 14% of their original issuance amounts. Severely delinquent loans (90-plus days, foreclosures, and REOs) were 13.93% for series 2001-1 (loan group 2) and 24.17% for series 2002-WMC2. Cumulative realized losses were 7.10% for series 2001-1 (loan group 2) and 2.27% for series 2002-WMC2. S&P lowered the rating on class B-2 from Salomon Brothers Mortgage Securities VII Inc.'s series 1998-AQ1 and placed it on CreditWatch because the current and projected credit support percentages are insufficient to maintain the previous rating. As of the April 2007 distribution date, credit support for the B-2 certificate was 3.85%, below the original credit enhancement level of 4.75%. The transaction has paid down to less than 4% of its original issuance amount. Severely delinquent loans represent 5.04% of the current pool balance, while cumulative realized losses represent 3.77% of the original pool balance. Standard & Poor's will continue to monitor the performance of these transactions. If delinquencies continue to translate into realized losses, S&P will likely take further negative ration actions on the affected classes. Conversely, if delinquencies are cured or liquidated at a low loss severity, S&P will affirm the ratings and remove them from CreditWatch. The affirmations are based on credit support percentages that are sufficient to maintain the current ratings. The collateral from these transactions consists of 30-year, fixed- and/or adjustable-rate, mortgage loans secured by first liens on residential properties. Ratings Lowered And Remaining On Creditwatch Salomon Home Equity Loan Trust Rating ------ Series Class To From ------ ----- -- ----- 2002-WMC2 M-2 BB+/Watch Neg A/Watch Neg 2002-WMC2 M-3 BB/Watch Neg BBB/Watch Neg Salomon Brothers Mortgage Securities VII Inc. Rating ------ Series Class To From ------ ----- -- ---- 1998-AQ1 B-2 BB/Watch Neg BBB-/Watch Neg Rating Placed On Creditwatch Negative Salomon Home Equity Loan Trust Rating ------ Series Class To From ------ ------ -- ---- 2001-1 MV-4 BBB/Watch Neg BBB Ratings Affirmed Salomon Home Equity Loan Trust Series Class Rating ------ ------ ------ 2001-1 AF-3 AAA 2001-1 MV-1 AA+ 2001-1 MF-1 AA 2001-1 MV-2 A 2001-1 MV-3 A- 2001-1 MF-2 BBB 2002-WMC2 M-1 AAA Salomon Brothers Mortgage Securities VII Inc. Series Class Rating ------ ----- ------ 1998-AQ1 A-5, A-6, A-7, XS-N, XS-T AAA 1998-AQ1 B-1 AA SHUMATE INDUSTRIES: Posts $909,175 Net Loss in Qtr Ended March 31 ----------------------------------------------------------------- Shumate Industries, Inc. reported a net loss of $909,175 on revenues of $2,448,488 for the first quarter ended March 31, 2007, compared with net income of $1,276,192 on revenues of $1,574,977 for the same period ended March 31, 2006. The net income for the first quarter ended March 31, 2006, included $2,000,000 in debt forgiveness income as a result of an amendment to the loan agreement with Stillwater National Bank. The company generated a gross profit of $832 thousand, with a gross profit margin of 34.0%, for the three months ended March 31, 2007, as compared to approximately $228 thousand for the same period last year. The company incurred an operating loss of $755 thousand for the three months ended March 31, 2007, an increase of approximately $267 thousand as compared to an operating loss of approximately $487 thousand for the three months ended March 31, 2006. Within the consolidated operating loss, the company incurred general corporate overhead expenses of approximately $542 thousand for the three months ended March 31, 2007. These general overhead expenses included approximately $166 thousand expense from non- cash stock and option awards associated with FASB 123R as well as increases in legal, audit and accounting, and other professional fees including Sarbanes-Oxley 404 consulting costs. Matthew Flemming, Shumate's chief financial officer commented, "Operating income in Shumate Machine was offset by an increase in scale-up and research and development expenditures in HVC as well as our corporate overhead expenses as we work to exploit our proprietary technology. While corporate partnering and business development milestones anticipated this year should give strong visibility of our Hemiwedge(R) technology, the company is also focused on increasing sales of its current products to offset R&D costs and significantly improve our future results." Larry Shumate, the company's chairman and chief executive officer stated, "We are pleased with the results of our legacy business, Shumate Machine Works, and its contribution to the company. We are also excited about the positive momentum with our new Hemiwedge(R) technology and believe we are going to have a great year from cartridge valve sales, anticipated sub sea licensing deals and conclusion of the development of the down hole valves used in drilling applications to be commercialized in early 2008. We anticipate that the visibility that our technology demonstrates this year in the marketplace will open up other additional business development activities." At March 31, 2007, the company's balance sheet showed $5,519,345 in total assets, $5,407,733 in total liabilities, and $111,612 in total stockholders' equity. Full-text copies of the company's consolidated financial statements for the quarter ended March 31, 2007, are available for free at http://researcharchives.com/t/s?201a Going Concern Doubt As reported in the Troubled Company Reporter on April 25, 2007, Malone & Bailey PC expressed substantial doubt about Shumate Industries Inc.'s ability to continue as a going concern after auditing the company's financial statements for the year ended Dec. 31, 2006. The auditing firm pointed to the company's recurring losses and accumulated deficit. About Shumate Industries Headquartered in Conroe, Texas, Shumate Industries Inc. (OTCBB: SHMT) -- http://www.shumateinc.com/ -- is a Texas-based, energy field services company that incorporates new technologies to bring products to market leveraging its existing infrastructure, expertise and customer channels. The company operates through two wholly owned subsidiaries, Shumate Machine Works, a contract machining and manufacturing division, and Hemiwedge Valve Corporation, a division formed to launch a proprietary new technology in a valve product line targeting flow control, sub-sea, down-hole and tar sands applications. SPECTRUM BRANDS: Names Kent Hussey as Chief Executive Officer ------------------------------------------------------------- Kent Hussey has been appointed Chief Executive Officer of Spectrum Brands, Inc. David Jones will step down as CEO but will continue to serve as non-executive Chairman of the Board of Directors until the end of fiscal year 2007 to assist in the management transition. Mr. Jones, 57, has served as CEO and Chairman since September 1996. Mr. Hussey, 61, most recently Vice Chairman and director, has previously served in the positions of President, Chief Operating Officer, and Chief Financial Officer. "Dave Jones has played a vital role in transforming Rayovac from a $400 million domestic consumer battery company to the $2.5 billion diversified global consumer products company that Spectrum Brands is today, Thomas Shepherd, Lead Director, said. "The Board respects Dave's decision to step down and appreciates his willingness to stay on through the transition period. We wish him success in his future endeavors." "I am extremely proud of all that Spectrum Brands has accomplished and, after managing the Company through recent challenging times, am comfortable leaving knowing that Spectrum Brands is well positioned for future growth and profitability," Mr. Jones said. "Kent is the ideal successor to lead Spectrum in the next phase of its evolution. He has worked alongside me in the management of the Company for more than 10 years and has been instrumental in guiding Spectrum's strategic, financial and operational initiatives as well as its M&A strategy. I am confident that Kent, and the rest of our executive team, will continue to execute on strategy and leverage Spectrum's portfolio of strong brands and global platform to build value for shareholders." "The many initiatives implemented over the past 18 months to revitalize our sales and improve profitability are beginning to show in our ongoing financial results; our recently announced second quarter performance gives me confidence we have turned the corner," Mr. Hussey said. "The corporate restructuring announced in January is on track and our second quarter results demonstrate that our business units are performing well under strong operational leadership teams. I have a long term commitment to Spectrum and will be fully focused on executing our strategy of improving operational performance while pursuing asset sales to reduce our leverage and interest burden." Mr. Hussey, who has over 37 years of management experience in the manufacturing and consumer products industries, has been a managing executive and director of Spectrum since 1996. Since January 2007, he has served as Vice Chairman, responsible for spearheading the strategic direction of the company and for corporate business development. He joined the company as Executive Vice President of Finance and Administration and Chief Financial Officer in October 1996, and served as President and Chief Operating Officer from April 1998 to January 2007. From 1994 to 1996, Mr. Hussey was Vice President and Chief Financial Officer of ECC International, a producer of industrial minerals and specialty chemicals. From 1991 to 1994, he served as Vice President of Finance and Chief Financial Officer of The Regina Company. Previously he held financial management positions at The Conair Group, Astechnologies, Inc. and United Technologies Corporation. Mr. Hussey currently serves as a director of American Woodmark Corporation and various privately-held companies. About Spectrum Brands Headquartered in Atlanta, Georgia, Spectrum Brands (NYSE: SPC) -- http://www.spectrumbrands.com/-- is a consumer products company and a supplier of batteries and portable lighting, lawn and garden care products, specialty pet supplies, shaving and grooming and personal care products, and household insecticides. Spectrum Brands' products are sold by the world's top 25 retailers and are available in more than one million stores in 120 countries around the world. The company has manufacturing and distribution facilities in China, Australia and New Zealand, and sales offices in Melbourne, Shanghai, and Singapore. * * * As reported in the Troubled Company Reporter on April 30, 2007, Fitch Ratings affirmed its ratings on Spectrum Brands, Inc., including, Issuer default rating 'CCC'; $1.6 billion 6-year Credit Agreement 'B/RR1'; $700 million 7 3/8% Senior Subordinated Note due 2015 'CCC-/RR5'; and $350 million 11.25% Variable Rate Toggle Interest pay-in-kind Senior Subordinated Note due 2013 'CCC-/RR5'. The Credit Agreement and Variable Rate Toggle Interest Note have relatively the same terms and conditions and are rated the same as the facilities being replaced. The Outlook remains Negative. SPEEDWAY MOTORSPORTS: S&P Lifts Corporate Credit to BB+ from BB --------------------------------------------------------------- Standard & Poor's Ratings Services raised its ratings on Speedway Motorsports Inc., including its corporate credit rating, to 'BB+' from 'BB'. At the same time, S&P raised the bank loan rating on the company's amended revolving credit facility to 'BBB-' from 'BB', one notch higher than the corporate credit rating on Speedway, and assigned it a recovery rating of '1'. A recovery rating of '1' indicates the expectation for full (100%) recovery in the event of a payment default. The amendment increased the size of the revolving credit agreement to $400 million from $250 million, and extended the maturity date to 2010 from 2008. The rating outlook is stable. ST. MARY: Plans to Register Issuance of $288 Million Senior Notes ----------------------------------------------------------------- St. Mary Land & Exploration Company intends to file a registration statement with the Securities and Exchange Commission to register under the Securities Act of 1933 its issued $287.5 million principal amount of 3.50% Senior Convertible Notes due 2027 and shares of St. Mary common stock which may become issuable upon conversion of the Notes, for resale by selling securityholders specified in the registration statement. The Notes were originally issued on April 4, 2007 in a private placement. St. Mary expects to file the registration statement on or about June 15, 2007. St. Mary will not receive any proceeds from the sale of the Notes or the common stock by selling securityholders. The registration of the Notes and conversion shares will be in accordance to the registration rights agreement requirements, entered into among the company and the initial purchasers of the Notes at the time the Notes were issued. The company expects that the registration statement will become effective upon filing with the SEC. In accordance with the registration rights agreement, in order for a holder of the Notes to be included in the registration statement at the time of effectiveness, such holders must furnish to the company certain information required by the registration rights agreement no later than five business days before the filing of the registration statement. About St. Mary Land & Exploration Based in Denver, Colorado, St. Mary Land & Exploration Company (NYSE: SM) -- http://www.stmaryland.com-- is engaged in the exploration, exploitation, development, acquisition, and production of natural gas and crude oil in five core areas in the United States. The company invests in oil and gas producing assets that provide a superior return on equity while preserving underlying capital, resulting in a return on equity to stockholders that reflects capital appreciation as well as the payment of cash dividends. * * * As reported in the Troubled Company Reporter on April 2, 2007, Standard & Poor's Ratings Services assigned its 'BB-' corporate credit rating to oil and gas exploration and production company St. Mary Land & Exploration Co. The outlook is stable. STRUCTURED ADJUSTABLE: S&P Junks Rating on Class M7 Certificates ---------------------------------------------------------------- Standard & Poor's Ratings Services lowered its rating on the class M7 residential mortgage-backed certificates from Structured Adjustable Rate Mortgage Loan Trust Series 2005-10 to 'CCC' from 'BB' and removed it from CreditWatch, where it was placed with negative implications on April 20, 2007. Concurrently, S&P lowered its rating on the class M6 certificates from the same transaction to 'BB' from 'BBB' and placed it on CreditWatch with negative implications. Additionally, S&P placed its 'BBB' rating on the class M5 certificates on CreditWatch negative and affirmed our ratings on all other classes from this transaction. The downgrades and the negative CreditWatch placements reflect the negative pool performance that has considerably lowered actual and projected credit support for the affected classes. Last month this transaction took a loss of $1,959,556, reducing its overcollateralization to 0.42% of its current pool principal balance, well below its target of 1.4% of the current pool balance. The delinquency pipeline remains robust, as severe delinquencies (90-plus-days, foreclosure, and REO) are at approximately 5.84% of the outstanding pool balance. Standard & Poor's will continue to closely monitor the performance of this transaction. If delinquencies decline and no additional significant losses are incurred, S&P will affirm the ratings and remove them from CreditWatch. Conversely, if this transaction incurs additional losses that are significant and the delinquencies remain high, S&P will take further negative rating actions. Credit support for this transaction is provided by subordination, excess interest, and overcollateralization. The underlying collateral backing the certificates consists of both fixed- and adjustable-rate first-lien mortgage loans that are secured by one- to four-family residential properties. Rating Lowered Structured Adjustable Rate Mortgage Loan Trust Series 2005-10 Residential mortgage-backed certificates Rating ------ Class To From ----- -- ---- M7 CCC BB/Watch Neg Rating Lowered and Placed on Creditwatch Negative Structured Adjustable Rate Mortgage Loan Trust Series 2005-10 Residential mortgage-backed certificates Rating ------ Class To From ----- -- ---- M6 BB/Watch Neg BBB Rating Placed On Creditwatch Negative Structured Adjustable Rate Mortgage Loan Trust Series 2005-10 Residential mortgage-backed certificates Rating ------ Class To From ----- -- ----- M5 BBB/Watch Neg BBB Ratings Affirmed Structured Adjustable Rate Mortgage Loan Trust Series 2005-10 Residential mortgage-backed certificates Class Rating ----- ------ A-IO, A1, A2 AAA M1, M2 AA M3, M4 A STRUCTURED ASSET: Monthly Losses Cue S&P to Cut Ratings to 'BB' --------------------------------------------------------------- Standard & Poor's Ratings Services lowered its ratings on classes B and M6 from Structured Asset Securities Corp. Mortgage Loan Trust's series 2005-GEL3 and the class B certificates from series 2004-GEL3 from the same issuer. At the same time, S&P removed the rating on class B from series 2005-GEL3 from CreditWatch negative because the rating was lowered to 'CCC'. According to Standard & Poor's surveillance practices, ratings lower than 'B-' on classes of certificates or notes from RMBS transactions are not eligible to be on CreditWatch negative. In addition, S&P placed the other two lowered ratings on CreditWatch negative. Concurrently, S&P affirmed the remaining ratings from these transactions. The lowered ratings and CreditWatch placements reflect monthly realized losses that have outpaced monthly excess spread. During the past three remittance periods, realized losses have outpaced excess interest by approximately 4.39x for series 2004-GEL3 and by approximately 3.66x for series 2005-GEL3. The failure of excess spread to cover monthly losses has caused overcollateralization deficiencies of approximately 65% for series 2004-GEL3 and 77% for series 2005-GEL3. As of the April 2007 distribution date, serious delinquencies (90-plus-days, foreclosures, and REOs) were 9.80% for series 2004-GEL3 and 17.58% for series 2005-GEL3. Cumulative realized losses were 1.71% for series 2004-GEL3 and 1.52% for series 2005-GEL3. Standard & Poor's will continue to monitor the performance of these transactions. If delinquencies continue to translate into realized losses that outpace excess interest, S&P will likely take further negative rating actions. Conversely, if excess interest is sufficient to cover monthly losses and overcollateralization rebuilds toward its target balances, S&P will affirm the ratings and remove them from CreditWatch. The affirmations are based on current and projected credit support percentages that are sufficient to maintain the current ratings. The pools were initially composed of fixed- and adjustable-rate mortgage loans. The mortgage loans are secured mostly by first liens on one- to four-family residential properties. A small percentage of the mortgage pools are composed of mortgage loans that are secured by second liens. Ratings Lowered and Placed on Creditwatch Negative Structured Asset Securities Corp. Mortgage Loan Trust Rating ------ Series Class To From ------ ----- -- ---- 2004-GEL3 B BB/Watch Neg BBB 2005-GEL3 M6 BB/Watch Neg BBB- Rating Lowered and Removed from Creditwatch Negative Structured Asset Securities Corp. Mortgage Loan Trust Rating ------ Series Class To From ------ ----- -- ---- 2005-GEL3 B CCC B/Watch Neg Ratings Affirmed Structured Asset Securities Corp. Mortgage Loan Trust Series Class Rating ------ ----- ------- 2004-GEL3 A AAA 2004-GEL3 M1 AA 2004-GEL3 M2 A 2005-GEL3 A, M1 AAA 2005-GEL3 M2 AA+ 2005-GEL3 M3 A+ 2005-GEL3 M4 A- 2005-GEL3 M5 BBB+ SUPRESTA LLC: Modest Sales Cue S&P to Lift Ratings to B+ from B --------------------------------------------------------------- Standard & Poor's Ratings Services raised its bank loan ratings on Supresta LLC to 'B+' from 'B' and revised the recovery ratings to '1' from '4'. The new ratings indicate our expectation that the senior secured creditors would receive full recovery of principal in a payment default. The upgrade was prompted in part by a reassessment of how the unpledged value of foreign subsidiaries would benefit the credit facilities. A pay down of a portion of the term loan -- to $121 million as of March 31, 2007, from $140 million initially -- using discretionary cash flows also contributed to the ratings improvements. (For the complete recovery analysis, see the The 'B' corporate credit rating and stable outlook on Supresta remain unchanged. "The ratings on Supresta reflect a modest sales base, a relatively narrow product line, vulnerability of earnings to raw material costs, very competitive conditions in the engineering resins' Asia-Pacific market, and aggressive debt leverage measures," said Standard & Poor's credit analyst Wesley E. Chinn. Ratings List Supresta LLC Corporate credit rating B/Stable/-- Revised Ratings To From -- ---- Revolving credit facility B+ B Recovery rating 1 4 Term loan B+ B Recovery rating 1 4 UNITY WIRELESS: Post $2,555,307 Net Loss in Quarter Ended March 31 ------------------------------------------------------------------ Unity Wireless Corporation reported a net loss of $2,555,307 on sales of $2,171,795 for the first quarter ended March 31, 2007, compared with a net loss of $2,574,805 on sales of $1,141,630 for the same period ended March 31, 2006. The net loss for the quarter ended March 31, 2007, includes $112,500 in share compensation expenses related to the Celletra Ltd. acquisition on Aug. 17, 2006. Results for the quarter ended March 31, 2006, included accretion of interest and loss on debt settlement of $1,615,965 for the three-month period ended March 31, 2006, related to the modification of the terms of the debentures which were issued in August 2004 and February 2005. No modification of debentures or warrants was made for the three-month period ended March 31, 2007. Gross margin increased to $639,556 or 29.45% of sales for the quarter ended March 31, 2007, compared to a gross margin of $260,334 or 22.80% of sales for the same period last year. The increase in gross margin is largely attributed to the increase in sales, efficiencies and cost savings with the centralization of manufacturing and procurement largely with one outsourced manufacturer, and efficiencies and cost savings with the centralization of the final testing of products in the company's China facility where the company has also been able to benefit from lower payroll costs. Research and development expenses for the three-month period ended March 31, 2007 were $743,725, an increase of $347,841 or 87.86%, from $395,884 for the three-month period ended March 31, 2006. This increase was primarily the result of supporting additional product opportunities related to the acquired companies. With the additional two new major product lines, and entering into new major markets such as India, Russia, and South East Asia, through the 2006 acquisition processes, sales and marketing expenses for the three-month period ended March 31, 2007 increased $361,458 to $519,756, an increase of $361,458, or 228.34%, from $158,298 for the three-month period ended March 31, 2006. Depreciation and amortization expenses for the three-month period ended March 31, 2007 were $868,686, an increase of $805,071, from $63,615 for the three-month period ended March 31, 2006. This increase was primarily due to $738,910 in amortization of intangible assets relating to the acquired companies in 2006. Interest expense for the three-month period ended March 31, 2007, increased by $151,638 to $236,898 from $85,260 for the three-month period ended March 31, 2006. This increase was primarily the result of the increase in interest expense from the issue of convertible debentures in February of 2006 and December of 2006. At March 31, 2007, the company's balance sheet showed $22,750,325 in total assets, $19,019,085 in total liabilities, and $3,731,240 in total stockholders' equity. The company's balance sheet at March 31, 2007, also showed strained liquidity with $6,540,791 in total current assets available to pay $13,267,834 in total current liabilities. Full-text copies of the company's consolidated financial statements for the quarter ended March 31, 2007, are available for free at http://researcharchives.com/t/s?201e Going Concern Doubt KPMG LLP, in Vancouver, Canada, expressed substantial doubt about Unity Wireless Corp.'s ability to continue as a going concern after auditing the company's consolidated financial statements for the years ended Dec. 31, 2006, and 2005. The auditing firm pointed to the company's recurring losses from operations. About Unity Wireless Headquartered in Burnaby, British Columbia, Canada, Unity Wireless Corp. (OTC BB: UTYW.OB) -- http://unitywireless.com/-- is a developer of key network components for wireless carriers and OEM sub-components for network infrastructure manufacturers. UNIVERSITY HEIGHTS: Ct. Extends Plan-Filing Period Until July 30 ---------------------------------------------------------------- The U.S. Bankruptcy Court for the Northern District of New York extended University Heights Association Inc.'s exclusive periods to: a) file a plan and disclosure statement until July 30, 2007, and b) solicit acceptances of that plan until Sept. 6, 2007. The Debtor's exclusive period to file a chapter 11 plan expired on March 30, 2007. The Debtor told the Court that at a Feb. 9, 2007 hearing, the Court denied Silverman Foundation's motion for a stay pending appeal of a sale order, which granted requests by the Debtor to assume leases and convey real property and to open the record. In the interest of attempting a settlement, the Debtor agreed not to convey these properties. The Debtor relates that all its efforts are directed to work out its dispute with the Silverman Foundation, since a plan of reorganization will not be possible if the issue of convey property will not be resolved. Headquartered in Albany, New York, University Heights Association Inc. -- http://www.universityheights.org/-- is composed of four educational institutions that aim to enhance the economic vitality and quality of life of its immediate community. The company filed for chapter 11 protection on Feb 13, 2006 (Bankr. N.D.N.Y. Case No. 06-10226). Judge Littlefield dismissed the Debtor's chapter 11 case due to bad faith filing. On Oct. 12, 2006, the Debtor filed a chapter 22 petition (Bankr. N.D.N.Y. Case No. 06-12672). Francis J. Smith, Esq., at McNamee, Lochner, Titus & Williams, PC, represents the Debtor in its second chapter 11 bankruptcy proceeding. No Official Committee of Unsecured Creditors has been appointed in the Debtor's chapter 11 case. When the Debtor filed its second bankruptcy, it estimated assets and liabilities between $10 million and $50 million. USG CORP: To Close Wallboard Units For Two High-Tech Plants ----------------------------------------------------------- USG Corporation reported that it will cease operations in its wallboard manufacturing units in the next year or two as it opens two high-technology plants to create efficiency in a market, according to BusinessWeek. USG declined to identify which units will be closed other than a 62-year-old plant in Norfolk, Virginia, where a new plant will open 10 feet away the summer, BusinessWeek reports. A second plant will open in 2008 in Washingtonville, Pennsylvania. BusinessWeek says the new plants run at twice the capacity -- 600 feet per minute -- as old ones. BusinessWeek reports that in the last 11 months, USG has shut down: i. 2,100,000,000 feet of wallboard capacity by cutting the hours plants run; and ii. 400,000,000 feet by shuttering two lines and laying off 400 hourly workers in Jacksonville, Florida, and Santa Fe Springs, California. Based in Chicago, Ill., USG Corporation -- http://www.usg.com/-- through its subsidiaries, manufactures and distributes building materials producing a wide range of products for use in new residential, new nonresidential and repair and remodel construction, as well as products used in certain industrial processes. The company filed for chapter 11 protection on June 25, 2001 (Bankr. Del. Case No. 01-02094). David G. Heiman, Esq., Gus Kallergis, Esq., Brad B. Erens, Esq., Michelle M. Harner, Esq., Mark A. Cody, Esq., and Daniel B. Prieto, Esq., at Jones Day represent the Debtors in their restructuring efforts. Lewis Kruger, Esq., Kenneth Pasquale, Esq., and Denise Wildes, Esq., represent the Official Committee of Unsecured Creditors. Elihu Inselbuch, Esq., and peter Van N. Lockwood, Esq., at Caplin & Drysdale, Chartered, represent the Official Committee of Asbestos Personal Injury Claimants. Martin J. Bienenstock, Esq., Judy G. Z. Liu, Esq., Ralph I. Miller, Esq., and David A. Hickerson, Esq., at Weil Gotshal & Manges LLP represent the Statutory Committee of Equity Security Holders. Dean M. Trafelet is the Future Claimants Representative. Michael J. Crames, Esq., and Andrew A. Kress, Esq., at Kaye Scholer, LLP, represent the Future Claimants Representative. Scott Baena, Esq., and Jay Sakalo, Esq., at Bilzen Sumberg Baena Price & Axelrod LLP, represent the Asbestos Property Damage Claimants Committee. When the Debtors filed for protection from their creditors, they listed $3,252,000,000 in assets and $2,739,000,000 in debts. The Debtors emerged from bankruptcy protection on June 20, 2006. (USG Bankruptcy News, Issue No. 133; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000). USG CORP: To Exchange $500,000,000 Of 6.30% Senior Notes -------------------------------------------------------- USG Corporation delivered to the Securities and Exchange Commission a prospectus in connection with its offer to exchange $500,000,000 in aggregate principal amount of 6.30% Senior Notes due 2016, which have been registered under the Securities Act of 1933, for $500,000,000 in outstanding unregistered 6.30% Senior Notes issued and sold in a private offering on Nov. 17, 2006. William C. Foote, USG's chairman and chief executive officer, said that the terms of the Exchange Notes to be issued are substantially identical to the terms of the Outstanding Notes, except that transfer restrictions and registration rights relating to the Outstanding Notes will not apply to the Exchange Notes. USG will pay interest on the Exchange Notes on May 15 and November 15 of each year, beginning on Nov. 15, 2007. The Exchange Notes will be USG's senior unsecured debt and will rank equally with all of the company's existing and future senior unsecured debt, Mr. Foote said. USG does not intend to list the Exchange Notes on any securities exchange or any automated quotation system, and no active market for the exchange notes is anticipated. The Exchange Offer is subject to certain customary conditions, which USG may waive, Mr. Foote added. The transaction is not conditioned upon any minimum principal amount of outstanding notes being tendered for exchange. USG currently expects that each of the conditions will be satisfied and that no waiver of any condition will be necessary. Moreover, USG disclosed that it will not receive any cash proceeds from the Exchange Offer. The Exchange Offer will expire at 5:00 p.m., New York City time, on June 4, 2007, unless extended by USG. Wells Fargo Bank, N.A., acts as the agent for the Exchange Offer. A full-text copy of the Prospectus, dated May 7, 2007, is available at no charge at: http://ResearchArchives.com/t/s?2011 Based in Chicago, Ill., USG Corporation -- http://www.usg.com/-- through its subsidiaries, manufactures and distributes building materials producing a wide range of products for use in new residential, new nonresidential and repair and remodel construction, as well as products used in certain industrial processes. The company filed for chapter 11 protection on June 25, 2001 (Bankr. Del. Case No. 01-02094). David G. Heiman, Esq., Gus Kallergis, Esq., Brad B. Erens, Esq., Michelle M. Harner, Esq., Mark A. Cody, Esq., and Daniel B. Prieto, Esq., at Jones Day represent the Debtors in their restructuring efforts. Lewis Kruger, Esq., Kenneth Pasquale, Esq., and Denise Wildes, Esq., represent the Official Committee of Unsecured Creditors. Elihu Inselbuch, Esq., and peter Van N. Lockwood, Esq., at Caplin & Drysdale, Chartered, represent the Official Committee of Asbestos Personal Injury Claimants. Martin J. Bienenstock, Esq., Judy G. Z. Liu, Esq., Ralph I. Miller, Esq., and David A. Hickerson, Esq., at Weil Gotshal & Manges LLP represent the Statutory Committee of Equity Security Holders. Dean M. Trafelet is the Future Claimants Representative. Michael J. Crames, Esq., and Andrew A. Kress, Esq., at Kaye Scholer, LLP, represent the Future Claimants Representative. Scott Baena, Esq., and Jay Sakalo, Esq., at Bilzen Sumberg Baena Price & Axelrod LLP, represent the Asbestos Property Damage Claimants Committee. When the Debtors filed for protection from their creditors, they listed $3,252,000,000 in assets and $2,739,000,000 in debts. The Debtors emerged from bankruptcy protection on June 20, 2006. (USG Bankruptcy News, Issue No. 133; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000). VIANT HOLDINGS: Moody's Places Corporate Family Rating at B2 ------------------------------------------------------------ Moody's Investors Service assigned first time ratings to Viant Holdings, Inc. including a B2 Corporate Family Rating, with a stable outlook. Viant, formerly a wholly owned subsidiary of Concentra (B1 Corporate Family Rating) operates the group health business that was formerly part of Concentra's managed care division. The B2 corporate family rating reflects the company's small size, high leverage, modest interest coverage, and minimal amount of cash flow relative to outstanding debt. Moody's is also concerned with the high level of customer concentration risk as the top ten customers account for over 50% of the company's revenues. Moody's does note that this risk is partially mitigated by lower customer turnover, long term customer relationships, a broader array of products and services, and high customer switching costs, including Electronic Data Interface links. The company also benefits from its ability to use its expertise and technology to lower medical costs and reduce administrative expenses for its clients. Despite its smaller size, Moody's anticipates that the company will be able to generate at least $20 million of operating cash flow due to high profit margins and little incremental investment in working capital. Based on minimal capital spending required to maintain the business, Moody's believes that a majority of the company's cash flow can be utilized to reduce outstanding debt and improve the company's credit metrics. The stable outlook incorporates Moody's assumptions that revenue will grow modestly and that the company will maintain stable EBITDA margins above 30% of revenues, translating into annual EBITDA of at least $70 million. Due to continued growth in EBITDA as well as the use of free cash flow to reduce outstanding debt, Moody's estimates that Viant's Debt/EBITDA will fall from the current range of 6.7 to 7.0 times in 2007 to a range of 5.4 to 5.7 times in 2009. Moody's also expects that the company will make only minor acquisitions to improve the breadth and depth of its network, product offerings, and customer base. However, Moody's does not believe that the company would pursue a 100% debt-financed acquisition that would prevent any improvement in its credit metrics. Moody's assigned these ratings: -- Corporate Family Rating - B2; -- Probability of Default Rating - B2; -- $50 million Senior Secured Revolver - Ba3 (LGD2, 29%); -- $275 million Senior Secured Term Loan B - Ba3 (LGD2, 29%); -- $185 million Senior Subordinated Exchange Notes - Caa1 (LGD5, 84%). The rating outlook is stable. Viant is a leading national provider of outsourced cost management services to the managed care industry. Viant offers a broad array of services that are designed to decrease medical and administrative costs for its customers. Founded in 1990, Viant's business currently serves over 475 customers comprised of large national and regional managed care companies, third party administrators, Taft-Hartley sponsored plans and government agencies including the Centers for Medicare and Medicaid Services. In 2006, Viant processed approximately 16 million medical bills totaling over $34 billion in billed charges and achieved gross customer savings of over $15 billion. VIANT HOLDINGS: S&P Rates Proposed $325MM Sr. Bank Facilities at B ------------------------------------------------------------------ Standard & Poor's Ratings Services assigned its 'B' corporate credit rating to service company Viant Holdings Inc. The rating outlook is stable. At the same time, S&P assigned its bank loan and recovery ratings to Naperville, Illinois-based Viant's proposed $325 million senior secured bank facilities, consisting of a $50 million revolving credit facility due 2013 and a $275 million term loan due 2014. The facilities are rated 'B' with a recovery rating of '3', indicating the expectation for meaningful recovery of principal in the event of a payment default. Standard & Poor's also assigned its 'CCC+' rating to Viant's $185 million senior subordinated exchange debt. The company will use the proceeds from the term loans and subordinated notes to finance its spin-off and recapitalization from Concentra Inc. (B+/WatchNeg). Pro forma debt outstanding for Viant will be $460 million. "The speculative-grade ratings on Viant reflect its lack of a track record as an independent company, narrow scope of services in a competitive industry, relatively concentrated customer base, and high debt burden," explained Standard & Poor's credit analyst David Peknay. "Viant's two largest customers account for more than one-third of its revenues." The company is subject to pricing risk as evidenced by price concessions that caused revenue declines. Although the company has not lost a key customer for several years, it is subject to the loss of customers that may decide to in-source services. The recapitalization transaction will result in lease-adjusted debt to EBITDA of more than 6.5x in 2007. S&P expect funds from operations to lease adjusted debt of only about 6% in 2007, and of less than 10% for several years. S&P believe the company could generate free cash flow of $10 million-$15 million per year, assuming no unexpected customer losses or pricing problems. With modest expectations for revenue growth from new contracts, leverage could fall below 6x by 2009, a measure consistent with the rating category. VIEWCAST CORP: March 31 Balance Sheet Upside-Down by $318,310 ------------------------------------------------------------- ViewCast Corporation listed total assets of $7,103,363, total liabilities of $7,421,673, and total stockholders' deficit of $318,310 as of March 31, 2007. The company also had strained liquidity with total current assets of $6,250,466 and total current liabilities of $2,224,675 as of March 31, 2007. The company's net sales increased 21% in the first quarter 2007 compared to the first quarter 2006. Net sales for the first quarter of 2007 were $3.5 million, as compared with $2.9 million in the first quarter of 2006. The increase in net sales was due to higher system revenue supplemented by a modest increase in capture card revenue. The company also reported net income of $254,640 during the first quarter. Driving the first quarter's positive financial results was a 58% increase in revenue from the Niagara(R) product line. Net income in the first quarter 2007, was a positive swing of $1.1 million, as compared with a net loss of $860,573 in the first quarter of 2006. Increased product sales, higher gross profit, decreased operating expenses, and lower interest rates on stockholder debt all helped ViewCast generate positive financial results during the first quarter 2007. A full-text copy of the company's first quarter 2007 report is available for free at http://ResearchArchives.com/t/s?1ff7 "As the market for Niagara(R) streaming encoding systems and Osprey(R) Video capture cards continues to grow, sales are accelerating at a brisk pace," said Dave Stoner, president and chief operating officer of ViewCast Corporation. "During the first quarter 2007, total sales increased 21% compared to the first quarter of 2006. Our Osprey product revenue was particularly strong from the Pacific Rim region during the quarter. Niagara systems sales are growing in part due to increased demand from value added resellers and OEM customers. Overall, product sales are strong, and we expect this trend to continue." About ViewCast ViewCast.com Inc., doing business as ViewCast Corporation, (OTC BB: VCST.OB) -- http://www.viewcast.com/-- develops and sells video and audio communications products for delivering media dynamically via a variety of network types and protocols. These products include Osprey(R) Video capture cards and Niagara(R) video encoders/servers, featuring Niagara SCX encoder management software and other related products. Organizations increasingly utilize high-quality, dynamic video and audio to quickly and easily connect with customers, employees, partners or students. ViewCast's products create, manage and deliver live and on-demand digital media in various formats to multiple wired or wireless connected devices. VILLAGEEDOCS INC: Posts $502,762 Net Loss in Qtr Ended March 31 --------------------------------------------------------------- VillageEDOCS Inc. reported a net loss of $502,762 on net sales of $3,820,210 for the first quarter ended March 31, 2007, compared with a net loss of $273,389 on net sales of $2,067,839 for the same period a year ago. The most significant factor in the increase in consolidated revenue during the first quarter of 2007 was the consolidation of the revenue of GSI on May 1, 2006. GSI contributed $1,418,874 in revenue during the quarter ended March 31, 2007. Gross profit for the three months ended March 31, 2007, increased 76% to $2,406,233 as compared to $1,363,727 for the 2006 quarter. Operating expenses for the three months ended March 31, 2007, increased 79% to $2,883,967 from the $1,610,400 reported in the 2006 quarter. Of the total increase of $1,273,567, $32,364 and $485,491 are attributable to increases in operating expenses of corporate and MVI, respectively, as offset by decreases of $199,230 and $88,929 from TBS, and Resolutions, respectively. In addition, GSI incurred $1,043,871 of operating expenses during the 2007 quarter. As a result of the foregoing, the company reported an operating loss for the three months ended March 31, 2007 of $477,734, compared to an operating loss of $246,673 for the three months ended March 31, 2006. At March 31, 2007, the company's balance sheet showed $15,155,266 in total assets, $5,439,845 in total liabilities, and $9,715,421 in total stockholders' equity. The company's balance sheet at March 31, 2007, also showed strained liquidity with $2,081,958 in total current assets available to pay $5,304,845 in total current liabilities. Full-text copies of the company's consolidated financial statements for the quarter ended March 31, 2007, are available for free at http://researcharchives.com/t/s?1ff9 Going Concern Doubt As reported in the Troubled Company Reporter on April 19, 2007, KMJ Corbin & Company LLP expressed substantial doubt about VillageEDOCS Inc.'s ability to continue as a going concern after auditing the company's financial statements for the years ended Dec. 31, 2006, and 2005. The auditing firm pointed to the company's recurring losses and a working capital deficit of $3.1 million. About VillageEDOCS VillageEDOCS Inc. (OTC BB: VEDO) -- http://www.villageedocs.com/ -- through its MessageVision subsidiary, provides comprehensive business-to-business business information delivery services and products for organizations with mission-critical needs, including major corporations, government agencies and non-profit organizations. Through its Tailored Business Systems subsidiary, the company provides accounting and billing solutions for county and local governments. Through its Resolutions subsidiary, VillageEDOCS provides products for document management, document imaging, electronic forms, document archiving, and e-mail archiving. Through its GoSolutions subsidiary, VillageEDOCS provides enhanced voice and data delivery services. VISIPHOR CORP: Completes Private Placement of 8% Secured Debenture ------------------------------------------------------------------ Visiphor Corporation completed a private placement with Quorum Secured Equity Trust of an 8% convertible secured debenture in the principal amount of CDN$100,000 maturing on Dec. 15, 2009, convertible, subject to certain adjustments, at the price of CDN$0.25 per common share. The company said that the proceeds of the debenture will be used to provide general working capital to finance the expansion of the Company's business. Also on May 16, 2007, the company said that it issued an amended and restated warrant certificate to Quorum, which amends an original performance warrant to purchase up to 2,350,000 common shares of the company at a price of CDN$0.30 per common share, originally issued to Quorum on July 14, 2006, to permit Quorum to purchase up to 2,350,000 common shares of the Company at a reduced price of Cdn$0.25 per common share. Also in connection with the issuance of the CDN$100,000 debenture, Roy Trivett, President, Chief Executive Officer and a director of the company, and Keith Kretschmer, a director of the company, have agreed to amend their agreements to postpone and subordinate outstanding bridge loans to the company in the amounts of CDN$85,000 and $400,000, respectively, to be subordinated to the Cdn$100,000 debenture held by Quorum, in addition to the debenture and warrant issued to Quorum in July 2006. A full-text copy Amended and Restated Warrant Certificate and Amended Postponement Agreements is available for free at http://ResearchArchives.com/t/s?2026 Going Concern Doubt The report of Grant Thornton LLP on the company's Dec. 31, 2006, financial statements includes an explanatory paragraph that indicates the financial statements are affected by conditions and events that cast substantial doubt on the company's ability to continue as a going concern. For the year ended Dec. 31, 2006, the company incurred a loss from operations of CDN$6,678,371 and a deficiency in operating cash flow of CDN$2,602,248. In addition, the company incurred significant operating losses and net utilization of cash in operations in all prior periods. About Visiphor Corp. Headquartered in Vancouver, Visiphor Corp. (OTC BB: VISRF.OB) (CDNX: VIS.V) -- http://www.visiphor.com/-- sells software products and services that deliver practical, rapidly deployable solutions that integrate business processes and databases. The company's solutions focus on disparate process and data management problems that exist in numerous verticals spanning government, energy, law enforcement, security, health care and financial services. VITAMIN SHOPPE: $150 Million IPO Cues S&P's Positive Watch ---------------------------------------------------------- Standard & Poor's Ratings Services placed its ratings on North Bergen, New Jersey-based Vitamin Shoppe Industries Inc., including its 'B' corporate credit rating, on CreditWatch with positive implications. The CreditWatch listing follows Vitamin Shoppe's S-1 filing with the SEC for an IPO of up to $150 million in common stock. Proceeds from the IPO and additional borrowings under a new term loan will be used to redeem the company's Series A preferred stock and to repurchase notes. If the transaction is successful, it could result in a meaningful improvement in the company's capital structure and enhance its flexibility. "We will resolve the CreditWatch listing after the IPO and a meeting with management to evaluate the company's business strategies and financial policies," said Standard & Poor's credit analyst Jackie E. Oberoi. VOIP INC: Posts $13.5 Million Net Loss in Quarter Ended March 31 ---------------------------------------------------------------- VoIP Inc. reported a net loss of $13.5 million on revenues of $3.2 million for the first quarter ended March 31, 2007, compared with a net loss of $13.8 million on revenues of $4.7 million for the same period 12 months ago. Revenues associated with the retail-based EasyTalk and Rocket VoIP products declined $1.1 million due to a related increased international competitive environment affecting revenues. Gross profit was $135 thousand for the quarter ended March 31, 2007, compared to a negative gross profit of $719,000 for the same period last year. Consolidated operating expenses increased to $8.3 million for the three months ended March 31, 2007, compared with consolidated operating expenses of $4.9 million for the three months ended March 31 2006. Compensation and related expenses accounted for $1.3 million of the decrease from 2006, primarily due to accelerated recognition of vested noncash stock and warrant compensation in the 2006 period pertaining to the employment termination of the company's former chief operating officer. Commissions and fees to third parties, and general and administrative services decreased $900,000 and $400,000, respectively, from 2006 to 2007, due primarily to higher stock for service awards in the 2006 period. Consolidated net other expenses increased to $9.4 million from $3.8 million for the three months ended March 31, 2006. Amortization of debt discounts increased $800,000 in 2007, reflecting significantly higher convertible note balances in 2007 used to finance the company's operations. Financing penalties and expenses increased by $1.9 million in 2007. At March 31, 2007, the company's balance sheet showed $39.9 million in total assets, $38.1 million in total liabilities, and $1.8 million in total stockholders' equity. The company's balance sheet at March 31, 2007, also showed strained liquidity with $1.5 million in total current assets available to pay $37.9 million in total current liabilities. Full-text copies of the company's consolidated financial statements for the quarter ended March 31, 2007, are available for free at http://researcharchives.com/t/s?2022 Going Concern Doubt Berkovits, Lago & Company LLP, in Fort Lauderdale, Fla., expressed substantial doubt about VoIP Inc.'s ability to continue as a going concern after auditing the company's consolidated financial statements for the years ended Dec. 31, 2006, and 2005. The auditing firm pointed to the company's dependence on outside financing, lack of sufficient working capital, and recurring losses. At March 31, 2007, the company's contractual obligations for debt, leases and capital expenditures totaled approximately $33.6 million. In addition, pursuant to the subscription agreements for the company's convertible notes, the company is liable for liquidated damages totaling $1,704,123 through March 31, 2007, and will continue to incur additional liquidated damages of $226,455 per month, until the required shares and warrants are registered. This is because certain registration statements that were filed by the company have since become either ineffective or withdrawn. The company needs to continue to raise additional debt or equity capital to provide the funds necessary to restructure or repay its debt obligations, meet its other contractual commitments, and continue its operations. About VoIP Based Altamonte Springs, Fla., VoIP Inc. (OTC BB: VOII.OB) -- http://www.voipinc.com/ -- provides turnkey Voice over Internet Protocol (VoIP) communications solutions for service providers, resellers and consumers worldwide. The company is also a certified Competitive Local Exchange Carrier (CLEC) and Inter Exchange Carrier (IXC). WESCORP ENERGY: Posts $1,720,591 Net Loss in Qtr Ended March 31 --------------------------------------------------------------- Wescorp Energy Inc. reported a net loss of $1,720,591 on revenues of $817,982 for the first quarter ended March 31, 2007, compared with a net loss of $583,007 on revenues of $1,079,343 for the same period ended March 31, 2006. The decrease in revenues is attributed to the decline in the price of natural gas, which has resulted in the customers of Flowstar Technologies Inc. to either defer or abandon plans to bring new wells into production. The increase in net loss for the quarter ended March 31, 2007, is due to the net effect of the decrease in gross profit of $122,149 and increases of $396,517 in operating expenses and a $617,672 penalty for late delivery of Stage 2 shares to the former shareholders of Vasjar. Operating expenses for the quarter ended March 31, 2007, were $1,491,021 versus $1,094,504 for the quarter ended March 31, 2006. Additions to the management team for Wescorp were the principal reasons for this increase. At March 31, 2007, the company's balance sheet showed $7,531,323 in total assets, $6,123,186 in total liabilities, and $1,408,137 in total stockholders' equity. The company's balance sheet at March 31, 2007, also showed strained liquidity with $2,581,595 in total current assets available to pay $6,055,150 in total current liabilities. Full-text copies of the company's consolidated financial statements for the quarter ended March 31, 2007, are available for free at http://researcharchives.com/t/s?1ff4 Going Concern Doubt Dale Matheson Carr-Hilton Labonte LLP, in Vancouver, Canada, expressed substantial doubt about Wescorp Energy Inc.'s ability to continue as a going concern after auditing the company's consolidated financial statements for the years ended Dec. 31, 2006, and 2005. The auditing firm reported that the company has not generated profits since its inception, has incurred losses in developing its business, and further losses are anticipated. The auditing firm added that the company requires additional funds to meet its obligations and the costs of its operations. About Wescorp Energy Headquartered in Somerset, N. J., Wescorp Energy Inc. (OTC BB: WSCE.OB) -- http://www.wescorpenergy.com/-- through its subsidiary Flowstar Technologies Inc. produces advanced natural gas and gas liquids measurement devices based on a proprietary Digital Chart Recorder and advanced turbine measurement technology. Flowstar DCR-based devices are self-contained, energy-efficient flow computers with turndown ratio of 40:1 or more for more precise flow measurements and volume calculations that are installed directly to the well-head. WIDEOPENWEST FINANCE: Moody's Cuts Corporate Family Rating to B3 ---------------------------------------------------------------- Moody's Investors Service downgraded WideOpenWest's corporate family rating to B3 from B2, following the announcement of a $400 million dividend financed with new debt. Moody's also downgraded WOW's probability of default rating to B3 from B2. In addition, Moody's assigned a B2, LGD3, 38% rating to the proposed first lien credit facility ($100 million revolver and $925 million term loan) and a Caa2, LGD5, 89% rating to the second lien loan ($285 million). The company's ratings outlook is stable. WOW's downgrade to a B3 corporate family rating reflects higher financial risk, evidenced by the high leverage, weak coverage of interest and capital expenditures and distribution well in excess of the company's equity pro forma the transaction. Moreover, in Moody's view, Avista Capital Partners (WOW's equity investor) may be more willing to assume financial risk going forward given the already sizable return (over 100% one year return on invested capital). Summary of action: Downgrades: * WideOpenWest Finance, LLC -- Corporate Family Rating, Downgraded to B3 from B2; -- Probability of Default Rating, Downgraded to B3 from B2. Assignments: -- Proposed First Lien Credit Facility B2, LGD3, 38%; -- Proposed Second Lien Loan Caa2, LGD5, 89%. Affirm to be withdrawn: -- Existing First Lien Credit Facility B1, LGD3, 41%; -- Existing Second Lien Loan Caa1, LGD6, 91%. WOW was acquired by Avista for a purchase price of $830 million in March of 2006, while the debt burden alone will be $1.2 billion following this transaction (one year later). Moody's also notes that WOW's position as an overbuilder magnifies the challenges of an increasingly competitive environment. However, WOW's upgraded, efficient network, expectations for a fairly rapid decline in leverage driven by good operating performance and growth opportunities, and management's strong track record support the ratings. WideOpenWest Finance, LLC (WOW) is a competitive broadband provider offering cable TV, high speed Internet services and telephony in competition with incumbent wireline providers of the same services in portions of Illinois, Michigan, and Ohio. The company also provides these services to residential and commercial customers in Indiana, following the completion of Sigecom acquisition in 2006. WOW's annual revenue is more than $375 million and it maintains headquarters in Englewood, Colorado. WIDEOPENWEST FINANCE: S&P Cuts Corporate Credit Rating to B- ------------------------------------------------------------ Standard & Poor's Ratings Services lowered its corporate credit rating on Englewood, Colorado-based cable overbuilder WideOpenWest Finance LLC to 'B-' from 'B' as a result of the company's proposed dividend recapitalization. The outlook is stable. Total debt is expected to be about $1.2 billion on an operating lease-adjusted basis as a result of the transaction. At the same time, S&P assigned the following ratings to WOW's proposed $1.3 billion aggregate facilities: -- A 'B-' bank loan rating was assigned to the $100 million senior secured first-lien revolver and $925 million senior secured first lien term loan. The recovery rating on both facilities is '4', indicating our expectation of marginal (25%-50%) recovery in the event of a payment default. -- A 'CCC' bank loan rating was assigned to the $285 million senior secured pay-in-kind toggle second-lien term loan, with a recovery rating of '5', indicating our expectation of negligible (0%-25%) recovery in the event of payment default. The second-lien term loan is rated two notches below the corporate credit rating, based on the significant amount of priority obligations from the first-lien term loan and revolver. The new bank loan ratings are based on preliminary documentation and subject to receipt of final information. Total proceeds of $1.2 billion will be used to pay a $400 million dividend to shareholders and refinance $790 million of existing debt. "The lowered rating reflects a significantly more aggressive financial policy, which will increase total debt to EBITDA to about 9.4x on an operating lease-adjusted basis, from 6.2x," said Standard & Poor's credit analyst Allyn Arden. The bank loan financing will likely defer prospects for positive discretionary cash flow generation for several years, although S&P note that WOW has the discretion to pay interest on the second-lien term loan in cash or in kind, which would enable it to reduce its cash interest expense should operating conditions deteriorate. WILLIAM LYON: S&P Holds Ratings and Says Outlook is Negative ------------------------------------------------------------ Standard & Poor's Ratings Services revised its outlook on William Lyon Homes to negative from stable. At the same time, S&P affirmed the 'B+' issuer credit and 'B' senior unsecured debt ratings on the company. The rating actions affect $550 million of senior unsecured notes. "The outlook revision reflects our expectation that the challenging housing environment will continue to pressure demand and margins throughout 2007, driving interest coverage lower," explained Standard & Poor's credit analyst George Skoufis. "Contributing to the stress on interest coverage is the company's community count expansion, which will result in higher debt levels over the coming quarters." William Lyon's homebuilding operations are fairly concentrated, with roughly 70% of 2006 homebuilding revenues generated in California. Market conditions are likely to remain challenging, which will negatively affect the company's more concentrated platform. As a result of these conditions, combined with the incurrence of higher debt levels to grow community count, interest coverage levels are expected to weaken considerably. Standard & Poor's will lower the ratings on the company if market conditions remain weak for an extended period of time and further pressure interest coverage and liquidity. Conversely, Standard & Poor's will revise the outlook back to stable if market conditions stabilize and interest coverage rebounds to 2x or higher, while the company also maintains adequate liquidity. WIZZARD SOFTWARE: Posts $1.4 Mil. Net Loss in Qtr Ended March 31 ---------------------------------------------------------------- Wizzard Software Corp. reported a net loss of $1.4 million on total revenues of $725,926 for the first quarter ended March 31, 2007, compared with a net loss of $558,199 on total revenues of $602,391 for the same period ended March 31, 2006. The increase in revenues for the first quarter of 2007 was due to increased revenues in the speech technology business, the talking pill bottle, and the addition of the Libsyn operation for the last month of the quarter. In the first quarter ended March 31, 2007, operating expenses totaled $1.5 million, which was an 89% increase from operating expenses of $773,633 in the first quarter of 2006. "Wizzard's overall revenues continue to grow and we expect that to carry on throughout 2007 and into 2008," said Chris Spencer, chief executive officer of Wizzard Software. "Our software sales were up by 40% and our podcasting business continues to see very strong demand for high quality commercial and independent niche content. As we begin to help our network publishers monetize their shows, we believe our revenue growth will accelerate substantially." At March 31, 2007, the company's balance sheet showed $20.5 million in total assets, $1.2 million in total liabilities, and $19.3 million in total stockholders' equity. Full-text copies of the company's consolidated financial statements for the quarter ended March 31, 2007, are available for free at http://researcharchives.com/t/s?1fff Going Concern Doubt Gregory & Associates LLC in Salt Lake City, expressed substantial doubt about Wizzard Software Corp.'s ability to continue as a going concern after auditing the company's consolidated financial statements for the year ended Dec. 31, 2006. The auditing firm reported that the company has not yet established profitable operations and has incurred significant losses since its inception. About Wizzard Software Headquartered in Pittsburgh, Wizzard Software Corp. (OTC BB: WIZD.OB) -- http://www.wizzardsoftware.com/-- develops and sells desktop and enterprise speech technology, speech recognition and text-to-speech programming tools, distributable engines, and speech related consulting services and support. It also develops talking prescription bill bottles and offers home healthcare services through its wholly owned subsidiary Interim Healthcare of Wyoming Inc. WORLDGATE COMMUNICATIONS: Amends Existing Cornell Debentures ------------------------------------------------------------ WorldGate Communications, Inc. has amended the terms of its Aug. 11, 2006 and Oct. 13, 2006 secured convertible debentures with Cornell Capital Partners. Worldgate Communications amended the debenture to: (1) remove the investor's ability, upon conversion of the debentures, to demand cash in lieu of shares of common stock; and (2) provide for the issuance of restrictive shares if there is no effective registration statement at the time of conversion. The terms of the convertible debentures were amended to permit the company to reclassify the derivative conversion option liability in the convertible debentures, resulting in the reclassification of approximately $4.3 million of debt to equity, in order to help the company regain compliance with Nasdaq Marketplace Rule 4310(c)(2)(B). On April 11, 2007, the company had received a notice from Nasdaq stating that the company does not comply with Marketplace Rule 4310(c)(2)(B). This rule requires the company to have a minimum of $2,500,000 in stockholders' equity, $35,000,000 market value of listed securities or $500,000 of net income from continuing operations for the most recently completed fiscal year or two of the three most recently completed fiscal years. On May 4, 2007 the company provided Nasdaq with a definitive plan to regain compliance. As part of this plan, among other elements, the company had indicated its intention to restructure the secured debentures to permit it to reclassify certain debt to equity. The amendment accomplishes this element of the plan submitted to Nasdaq. "Cornell's willingness to amend the debenture is a vote of confidence in WorldGate and indicates their willingness to take a longer term perspective on their investment," said Hal Krisbergh, Chairman and CEO of WorldGate Communications. About WorldGate Communications Based in Trevose, Pennsylvania, WorldGate Communications Inc. (NASDAQ: WGAT) -- http://www.wgate.com/-- designs, manufactures, and distributes the Ojo line of personal video phones. Ojo personal video phones offer real-time, two-way video communications with video messaging. Going Concern Doubt As reported in the Troubled Company Reporter on March 21, 2007, Marcum & Kliegman LLP, in Melville, New York, expressed substantial doubt about WorldGate Communications Inc.'s ability to continue as a going concern after auditing the company's consolidated financial statements for the years ended Dec. 31, 2006, and 2005. The auditing firm pointed to the company's recurring losses from operations and accumulated deficit of $247 million at Dec. 31, 2006. * Fried Frank Adds Ghassan Atiyah to Washington's Financing Dept. ----------------------------------------------------------------- Fried Frank Harris Shriver & Jacobson LLP disclosed that Ghassan "Gus" M. Atiyah will join the Firm as a corporate partner in the Financing practice in Washington. He was formerly at Hogan & Hartson LLP. "The firm is delighted to welcome Gus. Fried Frank's financing practice continues to grow at a very rapid rate. Gus has broad- based financing expertise that will serve the needs of this practice well," Valerie Ford Jacob, Fried Frank's chairperson, said. "The addition of Gus in the firm's Washington office also demonstrates the company's commitment to having the full configuration of practices present in each of its offices. He is a strong addition to the firm's corporate department and will provide support across a broad range of financing transactions and practices," Justin Spendlove, Fried Frank's managing partner added. Mr. Atiyah's practice focuses on all types of private finance transactions and private equity matters primarily representing private equity sponsors and portfolio companies in leveraged financing transactions. He has worked on numerous merger and acquisition transactions in a range of industries on behalf of private equity funds and hedge funds. Prior to joining Hogan & Hartson, Mr. Atiyah served as the general counsel for International Affairs at the National Bank of Kuwait in Kuwait. He began his legal career at Shearman & Sterling LLP in New York, as part of their banking and finance group. Mr. Atiyah received his JD, with honors, from Columbia Law School, where he was a Stone Scholar. He received his B.S.F.S., magna cum laude, from Georgetown University, School of Foreign Service. He is admitted to the bar in the District of Columbia and New York. About Fried Frank Harris Shriver & Jacobson Fried Frank Harris Shriver & Jacobson LLP -- http://www.friedfrank.com-- is an international law firm with more than 600 attorneys in offices in New York, Washington, D.C., London, Paris, Frankfurt and Hong Kong. Fried Frank lawyers regularly represent major investment banking firms, private equity houses and hedge funds, well as many of the largest companies in the world. The firm offers legal counsel on M&A, private equity, asset management, capital markets and corporate finance matters, white-collar criminal defense and civil litigation, securities regulation, compliance and enforcement, government contracts, environmental law and litigation, real estate, tax, bankruptcy, antitrust, benefits and compensation, intellectual property and technology, international trade, and trusts and estates. The firm has an association with Huen Wong & Co. in Hong Kong. * Goldsmith Agio Names Jason Cohen as VP of Restructuring Practice ------------------------------------------------------------------ Goldsmith Agio Helms has added Jason A. Cohen, Esq. as a Vice President in its Distressed Advisory and Restructuring practice. Mr. Cohen was formerly a special counsel in the Financial Restructuring Department of the law firm Cadwalader, Wickersham & Taft LLP. He will be based in Goldsmith Agio's New York City practice. Andrew Torgove, head of Goldsmith Agio Helms' Distressed Advisory and Restructuring practice, commented, "While we do not know when we will see a turn in the cycle, we are pleased to have Jason join us as we continue to build our practice group. Jason is a skilled advisor who brings more than 10 years of exceptional distressed advisory and restructuring experience to our team." "Goldsmith Agio Helms provides a unique opportunity to leverage the restructuring experience I gained while at Cadwalder. I am looking forward to contributing to the firm's results and relationship oriented culture," said Mr. Cohen. While with Cadwalader, Wickersham & Taft, Mr. Cohen represented debtors, creditors, official and unofficial committees and other parties in interest in numerous restructurings. Most recently, Mr. Cohen represented Pfizer Inc. in connection with the Chapter 11 case of Quigley Company, Inc. and Pharmacia Corporation in connection with the Chapter 11 case of Solutia Inc. Mr. Cohen also has represented certain Glencore International AG subsidiaries in connection with their restructuring of an Australian nickel and cobalt mine and Geneva Steel Company in its Chapter 11 case. Mr. Cohen also has represented unofficial bondholder committees in the Chapter 11 cases of Arch Wireless Communications, RSL Communications, Ltd., Pathmark Stores, Inc., TransTexas Gas Corp., and Florida Coast Paper Holding Co., as well as the official creditors' committees of Winstar Communication and Grove Worldwide. He also represented Burger King Corporation in connection with the restructuring of a number of its franchisees, including the Chapter 11 case of AmeriKing, Inc., Burger King's second largest franchisee. Mr. Cohen received his Bachelor of Arts from the University of Connecticut and Juris Doctor from Brooklyn Law School. Mr. Cohen is a member of the New York state bar. About Goldsmith Agio Goldsmith Agio Helms -- http://www.agio.com/-- is one of the nation's leading independent investment banking firms providing sophisticated corporate finance advisory services to middle-market businesses. The firm's services include mergers and acquisitions, private placements of debt and equity, distressed advisory and restructuring, and financial advisory and opinion services. The firm operates internationally from its offices in Minneapolis, New York, Chicago, Los Angeles, and Shanghai and through Agio International, a proprietary partnership of leading independent investment banks with offices in London, Edinburgh, Madrid, Milan, and Zurich. * BOND PRICING: For the Week of May 21 - May 25, 2007 ----------------------------------------------------- Issuer Coupon Maturity Price ------ ------ -------- ----- Allegiance Tel 11.750% 02/15/08 51 Allegiance Tel 12.875% 05/15/08 17 Amer & Forgn Pwr 5.000% 03/01/30 63 Antigenics 5.250% 02/01/25 74 Atherogenics Inc 1.500% 02/01/12 48 Atlantic Coast 6.000% 02/15/34 6 Bank New England 8.750% 04/01/99 9 Bank New England 9.500% 02/15/96 12 Bank New England 9.875% 09/15/99 9 Better Minerals 13.000% 09/15/09 70 Budget Group Inc 9.125% 04/01/06 0 Burlington North 3.200% 01/01/45 55 Calpine Corp 4.000% 12/26/06 70 Calpine Gener Co 11.500% 04/01/11 35 Cell Therapeutic 5.750% 06/15/08 74 CHS Electronics 9.875% 04/15/05 1 Collins & Aikman 10.750% 12/31/11 3 Color Tile Inc 10.750% 12/15/01 0 Dairy Mart Store 10.250% 03/15/04 0 Decode Genetics 3.500% 04/15/11 72 Decode Genetics 3.500% 04/15/11 71 Delco Remy Intl 9.375% 04/15/12 54 Delco Remy Intl 11.000% 05/01/09 54 Delta Mills Inc 9.625% 09/01/07 16 Deutsche Bank NY 8.500% 11/15/16 70 Diamond Triumph 9.250% 04/01/08 65 Dura Operating 8.625% 04/15/12 46 Dura Operating 9.000% 05/01/09 9 Dura Operating 9.000% 05/01/09 7 Empire Gas Corp 9.000% 12/31/07 1 Encysive Pharmacy 2.500% 03/15/12 72 Exodus Comm Inc 4.750% 07/15/08 0 Exodus Comm Inc 11.250% 07/01/08 0 Exodus Comm Inc 11.625% 07/15/10 0 Fedders North AM 9.875% 03/01/14 39 Finova Group 7.500% 11/15/09 23 Florsheim Group 12.750% 09/01/02 0 Ford Motor Co 6.375% 02/01/29 75 Ford Motor Co 6.625% 02/15/28 75 Global Health Sc 11.000% 05/01/08 8 Golden Books Pub 10.750% 12/31/04 0 Hills Stores Co 12.500% 07/01/03 0 Insight Health 9.875% 11/01/11 31 Iridium LLC/CAP 10.875% 07/15/05 22 Iridium LLC/CAP 11.250% 07/15/05 22 Iridium LLC/CAP 13.000% 07/15/05 22 Iridium LLC/CAP 14.000% 07/15/05 22 JTS Corp 5.250% 04/29/02 0 Kaiser Aluminum 9.875% 02/15/02 21 Kaiser Aluminum 12.750% 02/01/03 9 Kellstrom Inds 5.750% 10/15/02 0 Keystone Cons 9.625% 08/01/07 42 Kmart Corp 9.780% 01/05/20 10 Lehman Bros Hldng 10.000% 10/30/13 69 Liberty Media 3.750% 02/15/30 63 Liberty Media 4.000% 11/15/29 68 Lifecare Holding 9.250% 8/15/13 72 LTV Corp 8.200% 09/15/07 0 MacSaver Financl 7.400% 02/15/02 0 MacSaver Financl 7.875 08/01/03 2 Motorola Inc 5.220% 10/01/97 73 New Orl Grt N RR 5.000% 07/01/32 69 Nexprise Inc 6.000% 04/01/07 0 Northern Pacific RY 3.000% 01/01/47 54 Northern Pacific RY 3.000% 01/01/47 54 Northwest Airlns 6.625% 05/15/23 72 Northwest Airlns 7.625% 11/15/23 72 Northwest Airlns 7.875% 03/15/08 71 Northwst Stl&Wir 9.500% 06/15/01 0 NTK Holdings Inc 10.750% 03/01/14 74 Nutritional Src 10.125% 08/01/09 66 Oakwood Homes 7.875% 03/01/04 11 Oakwood Homes 8.125% 03/01/09 11 Outboard Marine 9.125% 04/15/17 1 Pac-West Telecom 13.500% 02/01/09 25 Pac-West Telecom 13.500% 02/01/09 10 Pegasus Satellite 9.625% 10/15/49 0 Pegasus Satellite 12.375% 08/01/08 0 Pegasus Satellite 12.500% 08/01/07 0 Phar-Mor Inc 11.720% 12/31/49 3 Piedmont Aviat 10.250% 01/15/49 0 Piedmont Aviat 10.250% 01/15/49 0 Piedmont Aviat 10.350% 03/28/11 2 Pixelworks Inc 1.750% 05/15/24 75 Polaroid Corp 6.750% 01/15/02 0 Polaroid Corp 7.250% 01/15/07 0 Polaroid Corp 11.500% 02/15/06 0 Primus Telecom 3.750% 09/15/10 63 Primus Telecom 8.000% 01/15/14 70 Radnor Holdings 11.000% 03/15/10 0 Read-Rite Corp 6.500% 09/01/04 0 RJ Tower Corp. 12.000% 06/01/13 7 SLM Corp 5.000% 12/15/28 73 Spacehab Inc 5.500% 10/15/10 55 Scott Cable Comm 16.000% 07/18/02 0 Times Mirror Co 7.250% 11/15/96 72 Tom's Food Inc 10.500% 11/01/04 2 Tousa Inc 7.500% 03/15/11 74 Tousa Inc 7.500% 01/15/15 70 United Air Lines 8.390 01/21/11 0 United Air Lines 10.110% 02/31/49 0 US Air Inc. 10.680% 06/27/08 14 US Air Inc. 10.700% 01/15/49 0 US Air Inc. 10.800% 01/01/49 0 US Air Inc. 10.900% 01/01/49 0 USAutos Trust 2.212% 03/03/11 7 Vesta Insurance Group 8.750% 07/15/25 4 Werner Holdings 10.000% 11/15/07 3 Westpoint Steven 7.875% 06/15/49 0 Wheeling-Pitt St 5.000% 08/01/11 70 Wheeling-Pitt St 6.000% 08/01/10 70 Winstar Comm Inc 10.000% 03/15/08 0 ********* Monday's edition of the TCR delivers a list of indicative prices for bond issues that reportedly trade well below par. Prices are obtained by TCR editors from a variety of outside sources during the prior week we think are reliable. Those sources may not, however, be complete or accurate. The Monday Bond Pricing table is compiled on the Friday prior to publication. Prices reported are not intended to reflect actual trades. Prices for actual trades are probably different. Our objective is to share information, not make markets in publicly traded securities. Nothing in the TCR constitutes an offer or solicitation to buy or sell any security of any kind. It is likely that some entity affiliated with a TCR editor holds some position in the issuers' public debt and equity securities about which we report. Each Tuesday edition of the TCR contains a list of companies with insolvent balance sheets whose shares trade higher than $3 per share in public markets. At first glance, this list may look like the definitive compilation of stocks that are ideal to sell short. Don't be fooled. Assets, for example, reported at historical cost net of depreciation may understate the true value of a firm's assets. A company may establish reserves on its balance sheet for liabilities that may never materialize. The prices at which equity securities trade in public market are determined by more than a balance sheet solvency test. A list of Meetings, Conferences and Seminars appears in each Wednesday's edition of the TCR. Submissions about insolvency- related conferences are encouraged. Send announcements to conferences@bankrupt.com/ On Thursdays, the TCR delivers a list of recently filed chapter 11 cases involving less than $1,000,000 in assets and liabilities delivered to nation's bankruptcy courts. The list includes links to freely downloadable images of these small-dollar petitions in Acrobat PDF format. Each Friday's edition of the TCR includes a review about a book of interest to troubled company professionals. All titles are available at your local bookstore or through Amazon.com. Go to http://www.bankrupt.com/books/to order any title today. Monthly Operating Reports are summarized in every Saturday edition of the TCR. For copies of court documents filed in the District of Delaware, please contact Vito at Parcels, Inc., at 302-658-9911. For bankruptcy documents filed in cases pending outside the District of Delaware, contact Ken Troubh at Nationwide Research & Consulting at 207/791-2852. ********* S U B S C R I P T I O N I N F O R M A T I O N Troubled Company Reporter is a daily newsletter co-published by Bankruptcy Creditors' Service, Inc., Fairless Hills, Pennsylvania, USA, and Beard Group, Inc., Frederick, Maryland, USA. Marie Therese V. Profetana, Shimero R. Jainga, Ronald C. Sy, Joel Anthony G. Lopez, Cecil R. Villacampa, Jason A. Nieva, Melanie C. Pador, Ludivino Q. Climaco, Jr., Loyda I. Nartatez, Tara Marie A. Martin, John Paul C. Canonigo, and Peter A. Chapman, Editors. Copyright 2007. All rights reserved. ISSN: 1520-9474. This material is copyrighted and any commercial use, resale or publication in any form (including e-mail forwarding, electronic re-mailing and photocopying) is strictly prohibited without prior written permission of the publishers. Information contained herein is obtained from sources believed to be reliable, but is not guaranteed. The TCR subscription rate is $775 for 6 months delivered via e- mail. Additional e-mail subscriptions for members of the same firm for the term of the initial subscription or balance thereof are $25 each. For subscription information, contact Christopher Beard at 240/629-3300. *** End of Transmission ***