T R O U B L E D C O M P A N Y R E P O R T E R Wednesday, December 5, 2007, Vol. 11, No. 288 Headlines 1031 TAX GROUP: Extra Expenses Tied to Mr. Okun's Yacht 1031 TAX GROUP: Sale Protocol on Transferred Assets Proposed 1755 AQUA: Court Approves Scott Alan Orth as Counsel ACA ABS: Increased Expected Loss Cues Moody's Ratings Downgrades ACE SECURITIES: Moody's Lowers Ratings on Two Cert. Classes to B2 ADAMS SQUARE: Moody's Lowers Rating on $342MM Senior Swap to B3 ADELPHIA COMMUNICATIONS: Court Awards Comcast $9 Million AEGIS ASSET: Moody's Downgrades Ratings on 20 Cert. Classes AEGIS MORTGAGE: Countrywide Wants Stay Lifted to Pursue Actions AEGIS MORTGAGE: BoNY Wants Stay Lifted to Pursue Civil Actions AFFILIATED COMPUTER: Fitch Removes Ratings from Negative Watch AMERICAN MEDIA: Sept. 30 Balance Sheet Upside-Down by $355 Million AMERISOURCEBERGEN: Extends Long-Term Tie-Up with Medco Health ASC INC: Plan Proponents Have Until Feb. 1 to Settle Disputes ASHTON WOODS: Moody's Cuts Corp. Family Rating to B3 from B2 BEA CBO: Fitch Retains Junk Rating on $20MM Class A-3 Notes BEAR STEARNS: Moody's Lowers Ratings on 41 Certificate Classes BEAR STEARNS: Stable Performance Cues Fitch to Affirm Ratings BEARINGPOINT INC: Board Names F. Edwin Harbach as CEO and Pres. BLACKHAWK AUTOMOTIVE: Court OKs Morris-Anderson as Fin'l Advisor BLACKHAWK AUTOMOTIVE: Can Hire W.Y. Campbell as Investment Banker BLACKHAWK AUTOMOTIVE: Court Approves Equipment Buy Pact w/ Stopol BOYS DAY OUT: Voluntary Chapter 11 Case Summary C-BASS MORTGAGE: Moody's Cuts Rating on Cl. M-4 Certificates to B1 CALPINE CORP: Various Parties Object to Plan Confirmation CALPINE CORP: Wants to Liquidate $144.25 Million ULC1 Notes CALUMET LUBRICANTS: Moody's Rates $385 Million Term Loan at B1 CAMPBELL RESOURCES: MSV Resources Completes Obligations to Lenders CATHOLIC CHURCH: Davenport Inks $37 Mil. Settlement with Victims CENTERSTAGING CORP: Sept. 30 Balance Sheet Upside-Down by $15.8 MM CHINA HEALTH: Posts $141,918 Net Loss in Third Quarter CHRYSLER LLC: Downsizing Plan Effectuates, Salaried Workers Leave CITGO PETROLEUM: Moody's Rates Revenue Bonds at Ba1 CLEAR CHANNEL: Gets FCC Approval for $1.3 Bil. Sale to Newport TV CLEAR CHANNEL: Provides Update on Bain Capital/THLP Merger CLEAR CHANNEL: Paying $0.1875 Quarterly Dividend January 15 COINSTAR INC: Moody's Withdraws Ba2 Corporate Family Rating COLUMBIA AIRCRAFT: Completes Asset Sale to Textron's Cessna COUNTRYWIDE FINANCIAL: CEO Mozilo Says Bankruptcy Not Likely CSFB ADJUSTABLE: Moody's Downgrades Ratings on 14 Tranches CWABS: Moody's Cuts Ratings on Two Cert. Classes to Ba1 from A3 EXCELLENCY INVESTMENT: Has Equity Deficit of $7.9 Mil. at Sept. 30 FAIRFAX FINANCIAL: Fitch Lifts Issuer Default Rating to BB+ FEDDERS CORPORATION: Wants March 4, 2008 Set as Claims Bar Date FIRST MAGNUS: Wants Court to Vacate Order Rejecting Trinity Deals FIRST MAGNUS: Countrywide, et al., Balk at Disclosure Statement FREEDOM COMMS: Weak Performance Cues Moody's to Cut Rating to Ba3 FREMONT HOME: Moody's Cuts Rating on Class SL-A Certs. to B3 GDSP SHIVA: Voluntary Chapter 11 Case Summary GIGABEAM CORP: Posts $4,120,967 Net Loss in Third Quarter GOODYEAR TIRE: James A. Firestone Elected to Goodyear Board GREEN TREE: Fitch Holds Junk Ratings as Part of Surveillance GROWERS DIRECT: Posts $2,464,180 Net Loss in Third Quarter GUAM ECONOMIC: Fitch Will Rate $439,680 Series 2007C Bonds at BB HANCOCK FABRICS: Wants Until May 30 to File Chapter 11 Plan HANCOCK FABRICS: Court Okays Claims Resolution Procedures HOVNANIAN ENT: Ends $20 Million Redevelopment Project at Wildwood INTERACTIVE TV: Sept. 30 Balance Sheet Upside-Down by $14 Million INTERNATIONAL NORCENT: Wants February 19 Set as Claims Bar Date INTERNATIONAL NORCENT: Taps Connoly as Special Litigation Counsel INTERSTATE BAKERIES: Plea for Details of Teamster Pact Denied INTERSTATE BAKERIES: Wants DIP Financing Maturity Extended INTERSTATE HOTELS: Completes $118 Million Buyout of Three Hotels ISLE OF CAPRI: Posts $24.6 Million Net Loss in 2008 Second Quarter J CREW OPERATING: Strong Performance Cues Moody's to Lift Rating JP MORGAN: Fitch Affirms 'B-' Rating on $5.2MM Class N Certs. KIMBALL HILL: Moody's Lowers All Ratings with Negative Outlook LE-NATURE'S: Files Second Amended Disclosure Statement and Plan LE-NATURE'S: Hearing on 2nd Amended Disclosure Statement is Jan. 3 LONG BEACH: Moody's Cuts Rating on Cl. A-1 Certs. to Ba1 from A3 LYNN KASEL: Case Summary & 11 Largest Unsecured Creditors MASTR SECOND: Low Credit Enhancement Cues Moody's to Cut Ratings MCMILLIN COS: Moody's Junks Ratings with Negative Outlook MERRILL LYNCH: Moody's Downgrades Ratings on 43 Tranches MIDTOWN MANOR: Case Summary & 21 Largest Unsecured Creditors MITCHELL DEUTSCH: Voluntary Chapter 11 Case Summary MONEY CENTERS: Sept. 30 Balance Sheet Upside-Down by $6.8 Million MORGAN STANLEY: Fitch Holds 'B' Rating on $7.9MM Class K Certs. MORGAN STANLEY: Fitch Holds 'BB-' Rating on $9.5MM Class H Certs MORGAN STANLEY: Moody's Cuts Rating on Cl. B4 Certs. to C from Ca MORTGAGE LENDERS: Has Until February 4 to Remove Actions NATCO INT'L: Sept. 30 Balance Sheet Upside-Down by $1,056,256 NEW CENTURY: Moody's Lowers Rating on Cl. A-2b Certs. to Ba1 NOMURA ASSET: Moody's Junks Ratings on 19 Certificate Classes NOVASTAR MORTGAGE: Moody's Downgrades Ratings on Nine Classes OPTIGENEX INC: Sept. 30 Balance Sheet Upside-Down by $5,958,008 OWENS CORNING: Court Approves Settlement Pact with Ohio PAMPELONNE CDO: Moody's Junks Rating on Four Note Classes PERFORMANCE TRANS: Taps FTI Consulting as Financial Advisor PERFORMANCE TRANS: Taps Sitrick as Communications Consultants PERFORMANCE TRANS: Wants Imperial Capital as Investment Banker PILGRIM'S PRIDE: Paying Quarterly Dividend on December 14 POPE & TALBOT: Asks B.C. Court for Authority to Sell Surplus Lands POPE & TALBOT: Wants to Implement Cross-Border Insolvency Protocol POPE & TALBOT: Selects KPMG LLP as Independent Auditor PROJECT FUNDING: Moody's Lowers Rating on $537.08MM Notes to Ba2 QWEST COMMS: Fitch Affirms 'BB' Issuer Default Rating RAFAELLA APPAREL: Moody's Holds B1 CFR and Revises Outlook RENT-A-CENTER: To Close 280 Stores as Part of Consolidation Plan RENT-A-CENTER: Earns $25 Million in Quarter Ended September 30 REUNION INDUSTRIES: Inks $15 Million DIP Pact with Wachovia RHODES COMPANIES: Moody's Puts Ca Rating on Sr. Secured Loan ROUGE INDUSTRIES: Has Until January 18 to File Liquidating Plan SALANDER-O'REILLY: Sotheby's Wants to Auction 29 Art Pieces SECURITIZED ASSET: Moody's Lowers Ratings on 41 Tranches SOLAR STAMPING: Court Converts Reorganization Case to Chapter 7 SOLUTIA INC: Noteholders to Appeal Ruling on Claim SPRINGWOOD CLIFFS: Case Summary & 30 Largest Unsecured Creditors STANLEY-MARTIN: Moody's Junks Corporate Family Rating SVI MEDIA: Sept. 30 Balance Sheet Upside-Down by $18.6 Million TABS 2006-5: Moody's Cuts Rating on $950MM Notes to Ba2 from A3 TENNECO INC: Completes Partial Offering of 10-1/4% Senior Notes THOMAS EDWARDS: Voluntary Chapter 11 Case Summary THORPE INSULATION: Futures Representative Wants Fergus as Counsel THORPE INSULATION: Futures Rep Wants Hamilton as Consultant TRUMP ENTERTAINMENT: Earns $6.6 Million in Quarter Ended Sept. 30 TRUMP ENTERTAINMENT: CFO & EVP Dale Black To Resign on Dec. 14 UAP HOLDING: Selling Stake to Agrium Inc. Through Tender Offer UAP HOLDING: $2.65 Bil. Agrium Deal Cues Moody's Ratings Review UNIVERSAL ENERGY: Posts $4,319,107 Net Loss in Third Quarter VERIFONE HOLDINGS: To Restate Financial Statements in Prior Qtrs. VESCOR DEVELOPMENT: U.S. Trustee Can Appoint Chapter 11 Trustee WATERFORD EQUITIES: Wants to Hire Moses & Singer as Counsel WATERFORD EQUITIES: Taps Wiggin and Dana as Special Counsel WILLIAM LYON: Negative Cash Flow Cues Moody's Ratings Downgrades WILLIAM WORTHY: Voluntary Chapter 11 Case Summary XEROX CORP: Names New Senior Leadership in North America YOUR BLACK MUSLIM: NCK LLC Wins Auction With $1,052,000 Offer * Euler Hermes Says Credit Index Shows Economic Contraction * Mintz Levin Forms Group to Address Subprime Market Crisis * Fitch Says Neg. Performance in RMBS and SF CDO Leads to EOD * Fitch Says Real Estate Loan CDO Delinquencies Increased * Fitch Says US Paper Industry Was Stymied By Housing Downturn * Moody's Lowers Ratings on Six Rated Homebuilders Companies * Upcoming Meetings, Conferences and Seminars ********* 1031 TAX GROUP: Extra Expenses Tied to Mr. Okun's Yacht ------------------------------------------------------- Gerard A. McHale, Jr., the Chapter 11 Trustee for The 1031 Tax Group LLC and its debtor-affiliates, is seeking authority from the U.S. Bankruptcy Court for the Southern District of New York to pay for additional expenses tied to a yacht transferred to the Debtors by their former executive, Edward H. Okun, according to Bill Rochelle of Bloomberg News. Bloomberg relates that the cost includes payment of: -- $24,000 a month for the crew on the yacht; -- $17,400 a month for insurance; and -- $42,000 in past-due rent on the dock for the yacht. Headquartered in Richmond, Virginia, The 1031 Tax Group LLC -- http://www.ixg1031.com/-- is a privately held consolidated group of qualified intermediaries created to service real property exchanges under Section 1031 of the Internal Revenue Code. The company and 15 of its affiliates filed for Chapter 11 protection on May 14, 2007 (Bankr. S.D.N.Y. Case No. 07-11447 through 07-11462). Paul Traub, Esq., Norman N. Kinel, Esq., and Steven E. Fox, Esq., at Dreier LLP, represent the Debtors in their restructuring efforts. The Debtors selected Kurtzman Carson Consultants LLC as their claims agent. Thomas J. Weber, Esq., Melanie L. Cyganowski, Esq., and Allen G. Kadish, Esq., at Greenberg Traurig, LLP, represent the Official Committee of Unsecured Creditors. As of Sept. 30, 2007, the Debtors had total assets of $164,231,012 and total liabilities of $168,126,294, resulting in a total stockholders' deficit of $3,895,282. Gerard A. McHale, Jr., was appointed as the Debtors' Chapter 11 trustee on Oct. 25, 2007. Jonathan L. Flaxer, Esq., at Golenbock Eiseman Assor Bell & Peskoe LLP represents Mr. McHale. 1031 TAX GROUP: Sale Protocol on Transferred Assets Proposed ------------------------------------------------------------ Gerard A. McHale, Jr., the Chapter 11 Trustee for The 1031 Tax Group LLC and its debtor-affiliates, seeks the U.S. Bankruptcy Court for the Southern District of New York's approval of a proposed procedure for the sale of the assets acquired from the Debtors' former executive, Edward H. Okun. Specifically, Mr. McHale proposes: -- a sale of individual assets for amounts of $10,000 or less, subject to an overall cap of $50,000 upon three business days' notice to the United States Trustee and the Official Committee of Unsecured Creditors; -- that upon notification, if the U.S. Trustee or the Committee objects within that three businesse days, then the Chap. 11 Trustee will not proceed with the proposed sale, and may seek approval of the sale before the Court; -- sale of an older model Dodge Intrepid car for $1,000 to a ready buyer; and -- sale of a trailer at an annual race car-related auction in Indiana. As reported in the Troubled Company Reporter on Oct. 29, 2007, the Court approved an agreement entered into by the 1031, its debtor-affiliates, the Official Committee of Unsecured Creditors, and Mr. Okun, which provides for the transfer of al of Mr. Okun's assets to the Debtors. Under the agreement, the assets to be transferred won't include: -- two automobiles retained for Mr. Okun's personal use; -- Mr. Okun's residence at 394 South Hibiscus Drive in Miami, Florida; -- Mr. Okun's residence at 39 and 49 Aaron Road in Wolfeboro, New Hampshire; and -- customary and usual contents of Mr. Okun's residences (but excluding any property not of a personal nature). The assets subject of the transfer are tied to a series of unsecured promissory notes Mr. Okun had issued to the Debtors during the course of the Debtors' business. The aggregate principal amount of the notes is approximately $130 million with approximately $18.8 million in accrued, unpaid interest as of Sept. 30, 2007, which interest amount increases at the approximate rate of $1.5 million per month. According to the Debtors, the notes are among the few remaining assets in their estate. The Debtors contended that the agreement is the most efficient way to achieve maximum creditor recovery and contemplate that the operation and eventual liquidation of the assets would form the structural underpinning of a plan of liquidation they may file later. Headquartered in Richmond, Virginia, The 1031 Tax Group LLC -- http://www.ixg1031.com/-- is a privately held consolidated group of qualified intermediaries created to service real property exchanges under Section 1031 of the Internal Revenue Code. The company and 15 of its affiliates filed for Chapter 11 protection on May 14, 2007 (Bankr. S.D.N.Y. Case No. 07-11447 through 07-11462). Paul Traub, Esq., Norman N. Kinel, Esq., and Steven E. Fox, Esq., at Dreier LLP, represent the Debtors in their restructuring efforts. The Debtors selected Kurtzman Carson Consultants LLC as their claims agent. Thomas J. Weber, Esq., Melanie L. Cyganowski, Esq., and Allen G. Kadish, Esq., at Greenberg Traurig, LLP, represent the Official Committee of Unsecured Creditors. As of Sept. 30, 2007, the Debtors had total assets of $164,231,012 and total liabilities of $168,126,294, resulting in a total stockholders' deficit of $3,895,282. Gerard A. McHale, Jr., was appointed as the Debtors' Chapter 11 trustee on Oct. 25, 2007. Jonathan L. Flaxer, Esq., at Golenbock Eiseman Assor Bell & Peskoe LLP represents Mr. McHale. 1755 AQUA: Court Approves Scott Alan Orth as Counsel ---------------------------------------------------- 1755 Aqua Vista II LLC obtained authority from the U.S. Bankruptcy Court for the Southern District of Florida to employ the Law Offices of Scott Alan Orth, PA, as its counsel. Scott Orth will: a. advise the Debtor with respect to its powers and duties as debtors and the continued management of business operations; b. advise the Debtor with respect to its responsibilities in complying with the United States Trustee's operating guidelines and reporting requirements and with the rules of the Court; c. prepare motions, pleadings, orders, applications adversary proceedings, and other legal documents necessary in the administration of the case; d. protect the interest of the Debtor in all matters pending before the Court; and e. represent the Debtor in negotiations with its creditors in the preparation of sale papers and a chapter 11 plan. The Debtor has agreed to pay Scott Alan on an hourly basis: Professional Rate ------------ ---- Scott Orth, Esq. $325 John Penson, Esq. $265 Other attorneys and paralegals will render services to the Debtor as needed. The Debtor related to the Court that its principal has paid Mr. Orth a $10,000 retainer. The the best of the Debtor's knowledge, Scott Orth does not represent any interest adverse to it or its estate. The firm can be reached at: Scott Alan Orth, Esq. The Law Offices of Scott Alan Orth, PA 9999 Northeast, 2 Avenue #204 Miami Shores, FL 33138 Tel: (305) 757-3300 About 1755 Aqua Vista North Miami, Florida-based 1755 Aqua Vista II LLC owns and develops real estate in North Bay Village in Miami-Dade County, Florida. The Debtor filed for chapter 11 bankruptcy on Oct. 24, 2007 (Bankr. S.D. Fl. Case No. 07-19056). Scott Alan Orth, Esq. at The Law Offices of Scott Alan Orth, PA, represents the Debtor in its restructuring efforts. North Bay Village Investment Trust LLC, formerly Peninsula Bank, is the Debtor's largest secured creditor with an $8 million claim under a final judgment of mortgage foreclosure issued by the Miami-Dade Circuit Court. North Bay holds a first priority lien on the Debtor's real property. James B. Miller, Esq., is North Bay's counsel. The Debtor's schedules show total assets of $14,000,000 and total liabilities of $6,140,958. ACA ABS: Increased Expected Loss Cues Moody's Ratings Downgrades ---------------------------------------------------------------- Moody's Investors Service downgraded ratings of six classes of notes issued by ACA ABS 2007-1, Ltd. and left on review for possible further downgrade ratings of three of these classes of notes. The notes affected by these rating action are as: Class Description: $930,000,000 Class A1S Variable Funding Senior Secured Floating Rate Notes Due 2047 -- Prior Rating: A1, on review for possible downgrade -- Current Rating: Ba3, on review for possible downgrade Class Description: $125,000,000 Class A1J Senior Secured Floating Rate Notes Due 2047 -- Prior Rating: A3, on review for possible downgrade -- Current Rating: Caa1, on review for possible downgrade Class Description: $198,000,000 Class A2 Senior Secured Floating Rate Notes Due 2047 -- Prior Rating: Baa3, on review for possible downgrade -- Current Rating: Caa2, on review for possible downgrade Class Description: $72,000,000 Class A3 Secured Deferrable Interest Floating Rate Notes Due 2047 -- Prior Rating: Caa1, on review for possible downgrade -- Current Rating: Ca Class Description: $30,000,000 Class B1 Mezzanine Secured Deferrable Interest Floating Rate Notes Due 2047 -- Prior Rating: Caa2, on review for possible downgrade -- Current Rating: Ca Class Description: $40,000,000 Class B2 Mezzanine Secured Deferrable Interest Floating Rate Notes Due 2047 -- Prior Rating: Caa3, on review for possible downgrade -- Current Rating: Ca The rating actions reflect severe deterioration in the credit quality of the underlying portfolio, as well as the occurrence, as reported by the Trustee on Nov. 15, 2007, of an event of default caused by a failure of the Senior Adjusted Credit Ratio to equal or exceed 100%, as required under Section 5.1(h) of the Indenture dated Mar. 8, 2007. ACA ABS 2007-1, Ltd is a collateralized debt obligation backed primarily by a portfolio of RMBS and CDO securities. Recent ratings downgrades on the underlying portfolio caused ratings-based haircuts to affect the calculation of overcollateralization. Thus, the Senior Adjusted Credit Ratio failed to meet the required level. As provided in Article V of the Indenture during the occurrence and continuance of an Event of Default, holders of Notes may be entitled to direct the Trustee to take particular actions with respect to the Collateral Debt Securities and the Notes. The rating downgrades taken reflect the increased expected loss associated with each tranche. Losses are attributed to diminished credit quality on the underlying portfolio. The expected losses of certain tranches may be different, however, depending on the timing and choice of remedy to be pursued by certain Noteholders. Because of this uncertainty, the Class A1S, Class A1J and the Class A2 Notes remain on review for possible downgrade pending the receipt of definitive information. ACE SECURITIES: Moody's Lowers Ratings on Two Cert. Classes to B2 ----------------------------------------------------------------- Moody's Investors Service has downgraded 34 certificates and placed on review for possible downgrade eight certificates from five transactions issued by Ace Securities Corp. Home Equity Loan Trust. All transactions are backed by second lien loans. The certificates were downgraded and placed on review for possible downgrade because the bonds' credit enhancement levels, including excess spread and subordination, were too low compared to the current projected loss numbers at the previous rating levels. Substantial pool losses over the last few months in many of the deals have continued to erode credit enhancement available to the mezzanine and senior certificates. Despite the large amount of write-offs due to losses, delinquency pipelines have remained high as borrowers continue to default. The actions reflect Moody's expectation that the significant delinquency pipelines will have a further negative impact on the credit support for the senior and mezzanine certificates. Complete rating actions are: Issuer: ACE Securities Corp. Home Equity Loan Trust, Series 2006- ASL1 -- Cl. M-3, Placed on Review for Possible Downgrade, currently Aa3 -- Cl. M-4, Downgraded to Baa1 from A1 -- Cl. M-5, Downgraded to Baa2 from A2 -- Cl. M-6, Downgraded to Ba1 from A3 -- Cl. M-7, Downgraded to Ba3 from Baa1 -- Cl. M-8, Downgraded to B3 from Ba1 -- Cl. M-9, Downgraded to Caa2 from Ba2 -- Cl. M-10, Downgraded to Ca from B2 Issuer: ACE Securities Corp. Home Equity Loan Trust, Series 2006- SL1 -- Cl. M-2, Placed on Review for Possible Downgrade, currently Aa2 -- Cl. M-3, Downgraded to Baa3 from A2 -- Cl. M-4, Downgraded to Ba3 from Baa1 -- Cl. M-5, Downgraded to Caa1 from Ba1 -- Cl. M-6, Downgraded to Ca from Ba3 -- Cl. M-7, Downgraded to C from B3 -- Cl. M-8, Downgraded to C from Ca Issuer: ACE Securities Corp. Home Equity Loan Trust, Series 2006- SL2 -- Cl. A, Downgraded to Baa3 from A1 -- Cl. M-1, Downgraded to Ba3 from Baa1 -- Cl. M-2A, Downgraded to Caa1 from Ba1 -- Cl. M-2B, Downgraded to Caa1 from Ba1 -- Cl. M-3, Downgraded to Ca from Ba3 -- Cl. M-4, Downgraded to C from B1 -- Cl. M-5, Downgraded to C from Ca Issuer: ACE Securities Corp. Home Equity Loan Trust, Series 2006- SL3 -- Cl. A-1, Placed on Review for Possible Downgrade, currently Aaa -- Cl. A-2, Placed on Review for Possible Downgrade, currently Aaa -- Cl. M-1, Placed on Review for Possible Downgrade, currently Aa1 -- Cl. M-2, Downgraded to Baa3 from A2 -- Cl. M-3, Downgraded to Ba3 from Baa1 -- Cl. M-4, Downgraded to B2 from Baa2 -- Cl. M-5, Downgraded to Ca from Baa3 -- Cl. M-6, Downgraded to C from Ba1 -- Cl. M-7, Downgraded to C from B1 -- Cl. M-8, Downgraded to C from Ca Issuer: ACE Securities Corp. Home Equity Loan Trust, Series 2006- SL4 -- Cl. M-1, Placed on Review for Possible Downgrade, currently Aa1 -- Cl. M-2, Placed on Review for Possible Downgrade, currently Aa2 -- Cl. M-3, Placed on Review for Possible Downgrade, currently Aa3 -- Cl. M-4, Downgraded to Baa3 from A1 -- Cl. M-5, Downgraded to Ba2 from A2 -- Cl. M-6, Downgraded to B2 from A3 -- Cl. M-7, Downgraded to Caa2 from Baa1 -- Cl. M-8, Downgraded to Ca from Ba1 -- Cl. M-9, Downgraded to C from B1 -- Cl. M-10, Downgraded to C from Ca ADAMS SQUARE: Moody's Lowers Rating on $342MM Senior Swap to B3 --------------------------------------------------------------- Moody's Investors Service downgraded and left on review for possible further downgrade the rating of a super senior swap transaction entered into by Adams Square Funding I, Ltd. as: (1) $342,000,000 Super Senior Swap Transaction * Prior Rating: Ba2, on review for possible downgrade * Current rating: B3, on review for possible downgrade The rating addresses the likelihood that, and the extent to which, Adams Square Funding I, Ltd. as seller of protection, will receive Floating Payments from and be required to pay Fixed Payments to the buyer of protection. The rating action reflects severe deterioration in the credit quality of the underlying portfolio, as well as the occurrence on Oct. 12, 2007, as reported by the Trustee on Oct. 18, 2007, of an event of default caused by a failure of the Class A Overcollateralization Ratio to equal or exceed 100%, as required under Section 5.1(h) of the Indenture dated December 15, 2006. Adams Square Funding I, Ltd. is a hybrid collateralized debt obligation backed primarily by a portfolio of RMBS securities, CDO securities and synthetic securities in the form of credit default swaps. Reference obligations for the credit default swaps are RMBS and CDO securities. Recent ratings downgrades on the underlying portfolio caused ratings-based haircuts to affect the calculation of overcollateralization. Thus the Class A Overcollateralization Ratio failed to meet the required level. As provided in Article V of the Indenture during the occurrence and continuance of an Event of Default, holders of Notes may be entitled to direct the Trustee to take particular actions with respect to the Collateral Debt Securities and the Notes. In this regard, Moody's has received notification from the Trustee that the Supersenior Swap Counterparty has directed the Trustee to liquidate Cash Assets and terminate Credit Default Swaps existing under the Indenture. The rating downgrade taken today reflects the increased expected loss associated with each tranche. Losses are attributed to diminished credit quality on the underlying portfolio. The expected losses of certain tranches may be different, however, depending on the outcome of the liquidation. Because of this uncertainty, the ratings assigned by Moody's to the Super Senior Swap Transaction, Class A Notes, Class B-1 Notes and Class B-2 Notes remain on review for possible downgrade pending the receipt of definitive information. ADELPHIA COMMUNICATIONS: Court Awards Comcast $9 Million -------------------------------------------------------- The U.S. Bankruptcy Court for the Southern District of New York awarded Comcast Corp. $9,000,000 in lieu of all distributions to which Comcast would otherwise have been entitled to under Reorganized Adelphia Communications Corp.'s First Modified Fifth Amended Joint Plan of Reorganization on account of: -- the Retained Claims as defined in the April 20, 2005 Asset Purchase Agreement, as amended, between Adelphia Communications Corp. and Comcast; and -- Comcast's Claim Nos. 16336, 16337, 16342, 16343, 16344, and 16345 related to three joint ventures between the ACOM Debtors, on the one hand, and Comcast, TCI Adelphia Holdings, LLC, and TCI California Holdings, LLC, on the other hand. The Comcast Joint Venture Claims will be deemed Allowed Subsidiary Debtor Other Unsecured Claims under the Plan, the Court clarifies. Comcast, along with Time Warner Cable, acquired substantially all of ACOM's assets in July 2006 for approximately $12.5 billion in cash and approximately 16% of the equity of Time Warner's cable subsidiary. With the exception of any claims under the Comcast APA, the ACOM Debtors and and the Adelphia Recovery Trust are deemed to have released any and all claims against the Joint Ventures, TCI Adelphia Holdings, and TCI California Holdings that arose on or prior to November 26, 2007. The Reorganized ACOM Debtors had objected to more than 100 claims filed by Comcast, asserting that the Comcast Claims: -- are not reflected in their books and records; -- do not contain adequate information or documentation supporting the claim amounts; or -- are duplicative to other claims. About Adelphia Comms Based in Coudersport, Pennsylvania, Adelphia Communications Corporation (OTC: ADELQ) -- http://www.adelphia.com/-- is a cable television company. Adelphia serves customers in 30 states and Puerto Rico, and offers analog and digital video services, Internet access and other advanced services over its broadband networks. The company and its more than 200 affiliates filed for Chapter 11 protection in the Southern District of New York on June 25, 2002. Those cases are jointly administered under case number 02-41729. Willkie Farr & Gallagher represents the Debtors in their restructuring efforts. PricewaterhouseCoopers serves as the Debtors' financial advisor. Kasowitz, Benson, Torres & Friedman, LLP, and Klee, Tuchin, Bogdanoff & Stern LLP represent the Official Committee of Unsecured Creditors. Adelphia Cablevision Associates of Radnor, L.P., and 20 of its affiliates, collectively known as Rigas Manged Entities, are entities that were previously held or controlled by members of the Rigas family. In March 2006, the rights and titles to these entities were transferred to certain subsidiaries of Adelphia Cablevision LLC. The RME Debtors filed for chapter 11 protection on March 31, 2006 (Bankr. S.D.N.Y. Case Nos. 06-10622 through 06-10642). Their cases are jointly administered under Adelphia Communications and its debtor-affiliates' chapter 11 cases. The Bankruptcy Court confirmed the Debtors' Modified Fifth Amended Joint Chapter 11 Plan of Reorganization on Jan. 5, 2007. That plan became effective on Feb. 13, 2007. (Adelphia Bankruptcy News, Issue No. 180; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000). AEGIS ASSET: Moody's Downgrades Ratings on 20 Cert. Classes ----------------------------------------------------------- Moody's downgrades twenty two classes of certificates from six deals issued by Aegis Asset-Backed Securities Trust in 2004 and 2005. Moody's Investors Service has downgraded twenty two classes of certificates from six deals issued by Aegis Asset-Backed Securities Trust. The actions are based on the analysis of the credit enhancement provided by subordination, overcollateralization and excess spread relative to expected losses. The transactions are backed by subprime, fixed and adjustable-rate mortgage loans. These deals have already stepped down except for Aegis Asset- Backed Securities Trust, Series 2004-6 and 2005-1 which will step down in December and March if they pass performance triggers. The deals that have already stepped down have also lost credit enhancement provided by subordination due to stepdown. For all deals, losses have already begun to erode the overcollateralization leaving the rated bonds less protected. Complete rating actions are: Issuer: Aegis Asset-Backed Securities Trust, Mortgage Pass-Through Certificates, Series 2004-1 -- Class M-3, downgraded from A3 to Baa2; -- Class B-1, downgraded from Baa1 to Ba2; -- Class B-2, downgraded from Baa2 to B3; -- Class B-3, downgraded from B3 to Ca; Issuer: Aegis Asset-Backed Securities Trust, Mortgage Pass-Through Certificates, Series 2004-2 -- Class M-3, downgraded from A3 to Baa2; -- Class B-1, downgraded from Baa1 to Ba1; -- Class B-2, downgraded from Baa2 to B1; -- Class B-3, downgraded from Baa3 to Caa1; Issuer: Aegis Asset-Backed Securities Trust, Mortgage Pass-Through Certificates, Series 2004-3 -- Class M-3, downgraded from A3 to Baa2; -- Class B-1, downgraded from Baa1 to Ba1; -- Class B-2, downgraded from Baa2 to B1; -- Class B-3, downgraded from Baa3 to B3; Issuer: Aegis Asset-Backed Securities Trust, Mortgage Pass-Through Certificates, Series 2004-5 -- Class M-3, downgraded from A3 to Baa3; -- Class B-1, downgraded from Baa1 to Ba1; -- Class B-2, downgraded from Baa2 to Ba3; -- Class B-3, downgraded from Baa3 to B3; Issuer: Aegis Asset-Backed Securities Trust, Mortgage Pass-Through Certificates, Series 2004-6 -- Class B-2, downgraded from Baa2 to Ba1; -- Class B-3, downgraded from Baa3 to Ba2; Issuer: Aegis Asset-Backed Securities Trust, Mortgage Pass-Through Certificates, Series 2005-1 -- Class M-6, downgraded from A3 to Baa2; -- Class B-1, downgraded from Baa1 to Baa3; -- Class B-2, downgraded from Baa2 to Ba1; -- Class B-3, downgraded from Baa3 to Ba3. AEGIS MORTGAGE: Countrywide Wants Stay Lifted to Pursue Actions --------------------------------------------------------------- Countrywide Home Loans Inc. asks the U.S. Bankruptcy Court for the District of Delaware to lift the automatic stay so that it may exercise its rights on four more real properties in California. The properties are located at: -- 647 Wheeler Street in Santa Rosa; -- 6524 Trailride Way in Citrus Heights; -- 1323 Dunning Drive in Laguna Beach; and -- 6062 East Spring Street in Long Beach. Countrywide is currently the holder of the notes and mortgage executed by the borrowers with respect to the properties. The notes and mortgage were first delivered by the borrowers to Aegis Wholesale Corporation and Express Capital Lending, and were later transferred to Countrywide. The borrowers defaulted on their payment obligation, according to Countrywide. Based on estimates by brokers, the value of the properties ranges from $380,000 to $1,330,000, before deducting costs of sale, broker's fees, and other fees that might be incurred in the liquidation of the properties. Headquartered in Houston, Texas, Aegis Mortgage Corporation -- http://www.aegismtg.com/-- offers a variety of mortgage loan products to brokers through its subsidiaries. The company together with 10 affiliates filed for chapter 11 protection on Aug. 13, 2007 (Bankr. D. Del. Case No. 07-11119) Curtis A. Hehn, Esq., James E. O'Neill, Esq., Laura Davis Jones, Esq., and Timothy P. Cairns, Esq., at Pachulski, Stang, Ziehl, & Jones, L.L.P., serve as counsel to the Debtors. The Official Committee of Unsecured Creditors is represented by Landis Rath & Cobb LLP. In schedules filed with the Court, Aegis disclosed total assets of $138,265,342 and total debts of $4,125,470. The Debtors' exclusive period to file a plan expires on Dec. 11, 2007. (Aegis Bankruptcy News, Issue No. 12, Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000). AEGIS MORTGAGE: BoNY Wants Stay Lifted to Pursue Civil Actions -------------------------------------------------------------- Bank of New York, as Trustee c/o Countrywide Home Loans, asks the U.S. Bankruptcy Court for the District of Delaware to lift the automatic stay so that it may exercise its rights on two more real properties located at: (i) 8750 Buckeye Court in Fontana, California, and (ii) 21 Stony Point Road, in Clinton, Connecticut. BoNY is the holder of the notes and mortgage executed by the borrowers with respect to the properties. The notes and mortgage were first delivered by the borrowers to Aegis Wholesale Corporation and America's Wholesale Lender, which were later transferred to BoNY. The borrowers are presently in default of their payment obligation, according to BoNY. Based on estimate by a broker, the value of the Fontana property is worth about $340,000, before deducting costs of sale, broker's fees, and other fees that might be incurred in the liquidation of the property. Headquartered in Houston, Texas, Aegis Mortgage Corporation -- http://www.aegismtg.com/-- offers a variety of mortgage loan products to brokers through its subsidiaries. The company together with 10 affiliates filed for chapter 11 protection on Aug. 13, 2007 (Bankr. D. Del. Case No. 07-11119) Curtis A. Hehn, Esq., James E. O'Neill, Esq., Laura Davis Jones, Esq., and Timothy P. Cairns, Esq., at Pachulski, Stang, Ziehl, & Jones, L.L.P., serve as counsel to the Debtors. The Official Committee of Unsecured Creditors is represented by Landis Rath & Cobb LLP. In schedules filed with the Court, Aegis disclosed total assets of $138,265,342 and total debts of $4,125,470. The Debtors' exclusive period to file a plan expires on Dec. 11, 2007. (Aegis Bankruptcy News, Issue No. 12, Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000). AFFILIATED COMPUTER: Fitch Removes Ratings from Negative Watch -------------------------------------------------------------- Fitch Ratings has removed Affiliated Computer Services, Inc. from Rating Watch Negative and affirmed these ratings: -- Issuer Default Rating 'BB'; -- Senior secured revolving credit facility at 'BB'; -- Senior secured term loan at 'BB'; -- Senior notes at 'BB-'. The Rating Outlook is Stable. Approximately $3.4 billion of debt, including the $1 billion revolving credit facility, is affected by Fitch's action. Fitch's removal of ACS from Rating Watch Negative reflects the conclusion of the company's review of strategic alternatives, which ultimately resulted in no modification of the existing capital structure attributable to a leveraged buyout or other change of ownership. The ratings are supported by ACS': -- Consistent free cash flow due to a significant recurring revenue base from long-term outsourcing contracts (85% of total revenue); -- Diverse business lines, several of which are insulated or countercyclical to U.S. economic growth, with minimal exposure (5%-10% of revenue) to discretionary IT spending, such as consulting; -- Solid growth prospects for the business process outsourcing services market (75% of total revenue); -- Established and geographically diverse offshore delivery model that reduces the effect of currency fluctuations and/or salary inflation in individual offshore markets; and -- Material and sustained improvement in renewal rates. Rating concerns continue to center on: -- The lack of visibility with respect to ACS' long-term capital structure plans, which could include further debt- financed stock buybacks; -- ACS' acquisitive nature, which could be debt-financed going forward; -- Decline of new commercial contract bookings (60% of revenues), which fell approximately 30% year-over-year for the latest 12 months ended Sept. 30, 2007; -- The ongoing Securities and Exchange Commission and Department of Justice investigations, and several derivative lawsuits, all of which relate to the company's timing of historical stock option grants. The ratings may be downgraded in the event of: -- Aggressive resumption of debt-financed share buybacks. Although Fitch believes some flexibility exists in the current ratings for incremental debt-financed share repurchases, full utilization of the company's remaining $2 billion uncommitted term loan accordion feature to buy back shares would lead to negative rating actions. -- A material reduction of liquidity if the pending court decision rules that ACS' failure to timely file its 10-K for fiscal year 2006 constitutes an event of default for the senior notes; and -- Continued declines in new commercial contract bookings. The ratings may be upgraded in the event of: -- Greater company transparency with respect to long-term capital structure targets; -- Material debt reduction; and -- Strong and sustainable growth of free cash flow. The rating of 'BB-' for the senior notes incorporates the fact that the secured credit facilities have the sole rights to ACS' accounts receivable, which represented approximately 23% of total assets and 46% of tangible assets as of Sept. 30, 2007, despite the notes being equally and ratably secured with the senior secured credit facilities under the terms of the related indenture. The credit facility is secured by a first priority perfected pledge of all notes owned by the borrowers and guarantors, all capital stock of predominantly all domestic subsidiaries and certain foreign subsidiaries of ACS, and a first priority perfected security interest in all other assets owned by ACS, including tangible and intangible assets. As of June 30, 2007, the financial covenant ratios contained in the credit facility, which are based on a quarterly schedule that becomes more restrictive over time relative to the amount of covenant adjusted debt outstanding, consist of bank-defined maximum consolidated senior leverage ratio of 3 times, maximum consolidated total leverage ratio of 4x and interest coverage covenant of 4.5x. Fitch estimates leverage (total debt/operating EBITDA) declined slightly year-over-year to 2.3x as of Sept. 30, 2007 from 2.5x due to growth in operating EBITDA. Fitch estimates interest coverage (operating EBITDA/ gross interest expense) declined to 5.8x for the LTM ended Sept. 30, 2007 compared with nearly 10x in the year-ago period due to increased interest expense from higher average debt levels. Fitch believes ACS' liquidity is adequate and was supported by approximately $246 million of cash at Sept. 30, 2007 and $818 million of availability on its $1 billion secured revolving credit facility expiring 2012. The credit facility also includes an uncommitted accordion feature enabling ACS to increase the size of the revolver by up to $750 million for general corporate purposes under certain circumstances. Liquidity is further supported by ACS' consistent free cash flow, which increased to $378 million in fiscal 2007 despite increased interest expense. Total debt as of Sept. 30, 2007 was approximately $2.4 billion, consisting primarily of $1.8 billion of secured term loans due 2013 and $250 million of senior notes due in June 2010 and June 2015. ACS' near-term debt maturities are manageable as the next material debt obligations of $275 million occur in fiscal year 2010. However, if ACS' failure to timely file its 10-K for fiscal 2006 is ruled an event of default by the court, Fitch believes ACS will utilize its $1 billion revolver to refinance the $500 million of senior notes that would become immediately due at par value plus accrued interest. AMERICAN MEDIA: Sept. 30 Balance Sheet Upside-Down by $355 Million ------------------------------------------------------------------ American Media Operations Inc. released its financial results for the quarter ended Sept. 30, 2007. At Sept. 30, 2007, the company's balance sheet total assets of $969.2 million and total liabilities of $1.3 billion, resulting in a stockholders' deficit of $355.0 million. Deficit at March 31, 2007, was $334.4 million. The company reported a net loss of $17.7 million in the three months ended Sept. 30, 2007, compared with a net loss of $4.3 million for the same period last year. Total operating revenue was $131.9 million and $124.8 million for the fiscal quarters ended Sept. 30, 2007 and 2006, respectively, representing an increase in revenue of $7.1 million, or 5.7%. The increase was primarily attributable to a $5.1 million increase in the company's Women's Health and Fitness Publications, a $4.0 million increase in the company's Corporate/Other segment and a $400,000 increase in net operating revenues relating to its Distribution Services. These items were partially offset by a $2.0 million decrease in the company's Celebrity Publications and a $500,000 decrease in its Tabloid Publications. Total operating revenue was $253.0 million and $239.3 million for the two fiscal quarters ended Sept. 30, 2007 and 2006, respectively, representing an increase in revenue of $13.7 million, or 5.7%. The increase was primarily attributable to a $900,000 increase in the company's Celebrity Publications, a $6.8 million increase in its Women's Health and Fitness Publications, a $5.6 million increase in its Corporate/Other segment and a $900,000 increase in net operating revenues relating to its Distribution Services. Liquidity and Capital Resources The company's primary sources of liquidity are cash generated from operations and amounts available to be borrowed under its credit agreement dated as of Jan. 30, 2006. As of Sept. 30, 2007, the company had cash and cash equivalents of $54.5 million, $60.0 million outstanding on the revolving credit facility under the 2006 Credit Agreement (which represents the full amount available to be borrowed under the revolving credit facility), and a working capital deficit of $3.7 million. The decrease in working capital deficit of $14.1 million from $17.8 million at March 31, 2007 to $3.7 million at Sept. 30, 2007, primarily resulted from: (i) a $7.2 million decrease in accrued interest, which occurred because the 2006 Credit Agreement requires it to pay interest at least every 90 days, or sooner if its interest lock-in period is less than 90 days, which increased the amount of cash interest paid during the two fiscal quarters ended Sept. 30, 2007, (ii) a $5.9 million increase in trade receivables primarily as a result of the increase in its advertising revenues, (iii) a $4.3 million decrease in current accrued expenses and other liabilities, (iv) a $1.3 million decrease in accounts payable, and (v) a $1.8 million increase in prepaid expenses and other current assets. These items were partially offset by a $5.9 million decrease in cash and cash equivalents. American Media Headquartered in Boca Raton, Florida, American Media Operations Inc., publishes celebrity, health and fitness, and Spanish language magazines, including Star, Shape, Men's Fitness, Fit Pregnancy, Natural Health, and The National Enquirer. AMI also owns Distribution Services Inc. * * * American Media Operations Inc. carries Moody's Investors Service's B2 ratings on the company's $60 million Senior Secured Revolving Credit Facility Due 2012 and $450 million Senior Secured Term Loan Due 2013. It also carries Moody's Caa3 ratings on its $150 million 8.875% Senior Subordinated Notes Due 2011 and $400 million 10.25% Senior Subordinated Notes Due 2009. AMERISOURCEBERGEN: Extends Long-Term Tie-Up with Medco Health ------------------------------------------------------------- AmerisourceBergen Corporation has signed a letter of intent with Medco Health Solutions Inc. confirming the selection of AmerisourceBergen as Medco's prime vendor for PBM mail-order wholesaler services, pending the completion of a new five-year contract. AmerisourceBergen's current five-year contract with Medco was due to end March 31, 2008. In fiscal year 2007, the Medco contract represented approximately 8% of AmerisourceBergen's $61.6 billion of operating revenue and approximately 90% of its $4.4 billion bulk revenue. "We are very excited about continuing our relationship with Medco, the nation's leading pharmacy benefit manager, and providing them with even more value and service," R. David Yost, AmerisourceBergen President and Chief Executive Officer, said. AmerisourceBergen also continues to expect fiscal 2008 diluted earnings per share to be in the range of $2.77 to $2.95. The diluted earnings per share range represents an increase of approximately 13% to 20% over the $2.46 earnings per share from continuing operations for fiscal year 2007, which excludes the $0.09 benefit from special items and the $0.08 contribution from PharMerica Long-Term Care, a business spun off July 31, 2007. As the Company indicated in early November when it announced expectations for fiscal year 2008, the December quarter remains the most difficult quarter of the 2008 fiscal year due to the comparison with the very strong December quarter in the previous year. Operating revenue growth in the December quarter is expected to be below the 5% to 7% range expected for the entire 2008 fiscal year due to the negative impact from lower sales of anemia pharmaceuticals, the loss of a large specialty customer because of its acquisition by a competitor, and the company's loss of a large retail customer in January 2007. AmerisourceBergen expects diluted earnings per share in the December quarter of fiscal 2008 to be similar to the same quarter last fiscal year, which was $0.62, excluding the impact of special items and the contribution from PharMerica Long-Term Care, due primarily to the anticipated shift of price increases by a major branded pharmaceutical manufacturer from the December to the March quarter, as well as fewer generic launches and a slower flu season compared with last year's December quarter. "With the strong March quarter ahead, the anniversary of the slowdown in anemia drug sales later in the fiscal year, the increase in new generic launches in the second half of the fiscal year, and the continued benefit from our stock repurchase program, we continue to expect to have a strong fiscal 2008 with diluted earnings per share 13 percent to 20 percent ahead of last year," Mr. Yost said. About AmerisourceBergen Headquartered in Valley Forge, Pennsylvania, AmerisourceBergen Corporation (NYSE:ABC) -- http://www.amerisourcebergen.com/-- is one of the pharmaceutical services companies serving the United States, Canada and selected global markets. AmerisourceBergen's service solutions range from pharmacy automation and pharmaceutical packaging to pharmacy services for skilled nursing and assisted living facilities, reimbursement and pharmaceutical consulting services, and physician education. AmerisourceBergen employs more than 14,000 people. * * * To date, AmerisourceBergen still holds Moody's Investor Services' Ba1 long term corporate family and Ba1 probability of default ratings. The outlook is positive. ASC INC: Plan Proponents Have Until Feb. 1 to Settle Disputes ------------------------------------------------------------- The proponents of three competing Chapter 11 plans for ASC Inc. have until Feb. 1, 2008, to complete a mediation process with regards to their disputes, Bill Rochelle of Bloomberg News reports. ASC Inc. first filed its plan but further extension of its exclusive plan filing period was denied by the U.S. Bankruptcy Court for the Eastern District of Michigan. ASC's parent, American Specialty Cars Holdings Inc., and the Official Committee of Unsecured Creditors subsequently filed separate plans. The results of the mediation process will determine the fate of the Debtor's bankruptcy case. Headquartered in Southgate, Michigan, ASC Incorporated -- http://www.ascglobal.com/-- is a supplier of highly engineered roof systems and of design services for the world's automakers. The company filed for Chapter 11 protection on May 2, 2007, (Bankr. E.D. Mich. Case No. 07-48680). Gary H. Cunningham, Esq. and Sean M. Walsh, Esq. at Giarmarco, Mullins & Horton P.C. represent the Debtor in its restructuring efforts. Christopher Grosman, Esq., at Carson Fischer, P.L.C., represents the Official Committee of Unsecured Creditors. When the Debtor filed for protection from its creditors, it listed assets and debts from $1 million to $100 million. ASHTON WOODS: Moody's Cuts Corp. Family Rating to B3 from B2 ------------------------------------------------------------ Moody's Investors Service lowered the ratings of Ashton Woods USA, LLC, including the company's corporate family rating to B3 from B2 and senior subordinated notes ratings to Caa2 from Caa1. The ratings outlook is negative. The downgrade and negative outlook reflect Moody's expectation that: (i) the macro housing environment will remain unsupportive into 2009, with any recovery likely to be very measured at first, thus prolonging the company's underperformance on key financial metrics vs. prior expectations; (ii) covenant compliance could become problematic in 2008; and (iii) the company's relatively small size and scale and somewhat limited geographic, product and price point diversity exacerbate the risk of localized down cycles. Going forward, the company's outlook could stabilize if Moody's were to project the company's cash flow to become robust and permit substantial debt paydown. The ratings could decline further if Moody's were to expect the following: (i) the company to have difficulties in obtaining covenant amendments, if needed; (ii) adjusted debt leverage to increase above 65% in fiscal 2008; or (iii) cash flow generation on a trailing twelve month basis to turn negative. These ratings were changed: -- Corporate Family Rating lowered to B3 from B2; -- Probability of Default Rating lowered to B3 from B2; -- Senior Subordinated Notes, lowered to Caa2 (LGD-5, 87%) from Caa1 (LGD-5, 87%). Begun in 1989, headquartered in Roswell, Georgia, and privately- owned by six Canadian families, Ashton Woods USA, LLC builds single-family detached homes, townhomes, and stacked-flat condominiums, with operations in seven U.S. cities. Homebuilding revenues and total pretax income for the trailing twelve month period ended Aug. 31, 2007 were $522 million and $2.6 million, respectively. BEA CBO: Fitch Retains Junk Rating on $20MM Class A-3 Notes ----------------------------------------------------------- Fitch has affirmed two classes of notes issued by BEA CBO 1998-2 Ltd. These rating actions are effective immediately: -- $5,602,773 class A-1 notes affirmed at 'AAA'; -- $8,816,791 class A-2 notes affirmed at 'AAA'; -- $20,000,000 class A-3 notes remain at 'C/DR5.' BEA 2 is a collateralized debt obligation that closed on Dec. 3, 1998 and is managed by Credit Suisse Asset Management. BEA 2 exited its revolving period in 2003 and now has a static portfolio composed primarily of high yield bonds. BEA 2 has been in an event of default since 2002 when the overcollateralization ratio fell below 90.0%. The class A-1 and A-2 notes are insured by Financial Security Assurance Inc., which is rated 'AAA' by Fitch. The affirmations are the result of Fitch's regular review process. Since the last rating action on May 10, 2005, the A-1 and A-2 notes have continued to pay down, and the A-3 notes have continued to defer interest due to the event of default. The credit quality of the collateral has declined such that currently about 42% of the collateral pool is made up of defaulted assets, versus 35% at last review. The class A OC ratio has declined to 47.6% from 84.5%. Additionally, assets rated 'CCC' or lower represented approximately 55%, of the collateral pool. The ratings on the class A-1, A-2 and A-3 notes address the likelihood that investors will receive full and timely payments of interest, as per the governing documents, as well as the stated balance of principal by the legal final maturity date. BEAR STEARNS: Moody's Lowers Ratings on 41 Certificate Classes -------------------------------------------------------------- Moody's Investors Service has downgraded 41 certificates and placed on review for possible downgrade nine certificates from six transactions issued by Bear Stearns Mortgage Funding Trust. All transactions are backed by second lien loans. The certificates were downgraded and placed on review for possible downgrade because the bonds' credit enhancement levels, including excess spread and subordination, were too low compared to the current projected loss numbers at the previous rating levels. Substantial pool losses over the last few months have continued to erode credit enhancement available to the mezzanine and senior certificates. Despite the large amount of write-offs due to losses, delinquency pipelines have remained high as borrowers continue to default. The actions reflect Moody's expectation that the significant delinquency pipelines will have a further negative impact on the credit support for the senior and mezzanine certificates. Complete rating actions are: Issuer: Bear Stearns Mortgage Funding Trust 2006-SL1 -- Cl. A, Placed on Review for Possible Downgrade, currently Aa3 -- Cl. M-1, Downgraded to Ba1 from A2 -- Cl. M-2, Downgraded to Caa2 from Baa2 -- Cl. M-3, Downgraded to Ca from Ba1 -- Cl. M-4, Downgraded to C from Ba3 -- Cl. M-5, Downgraded to C from Ca Issuer: Bear Stearns Mortgage Funding Trust 2006-SL2 -- Cl. A, Placed on Review for Possible Downgrade, currently Aa1 -- Cl. M-1, Downgraded to Baa3 from A1 -- Cl. M-2, Downgraded to B2 from A2 -- Cl. M-3, Downgraded to Ca from Baa1 -- Cl. M-4, Downgraded to C from Baa3 -- Cl. M-5, Downgraded to C from Ba3 -- Cl. M-6, Downgraded to C from Ca Issuer: Bear Stearns Mortgage Funding Trust 2006-SL3 -- Cl. A, Placed on Review for Possible Downgrade, currently Aa2 -- Cl. M-1, Downgraded to Baa2 from A1 -- Cl. M-2, Downgraded to B1 from A2 -- Cl. M-3, Downgraded to Caa2 from Baa1 -- Cl. M-4, Downgraded to C from Baa3 -- Cl. M-5, Downgraded to C from Ba1 -- Cl. M-6, Downgraded to C from B1 -- Cl. B-1, Downgraded to C from Ca Issuer: Bear Stearns Mortgage Funding Trust 2006-SL4 -- Cl. A, Placed on Review for Possible Downgrade, currently Aa1 -- Cl. M-1, Placed on Review for Possible Downgrade, currently Aa3 -- Cl. M-2, Downgraded to Ba1 from A1 -- Cl. M-3, Downgraded to B2 from A2 -- Cl. M-4, Downgraded to Ca from Baa2 -- Cl. M-5, Downgraded to C from Baa3 -- Cl. M-6, Downgraded to C from Ba1 -- Cl. B-1, Downgraded to C from B3 Issuer: Bear Stearns Mortgage Funding Trust 2006-SL5 -- Cl. I-A, Placed on Review for Possible Downgrade, currently Aa2 -- Cl. II-A, Placed on Review for Possible Downgrade, currently Aa2 -- Cl. M-1, Downgraded to Baa2 from A1 -- Cl. M-2, Downgraded to Ba2 from A2 -- Cl. M-3, Downgraded to B2 from A3 -- Cl. M-4, Downgraded to Caa2 from Baa2 -- Cl. M-5, Downgraded to Ca from Baa3 -- Cl. M-6, Downgraded to C from Ba1 -- Cl. B-1, Downgraded to C from Ba2 -- Cl. B-2, Downgraded to C from B3 Issuer: Bear Stearns Mortgage Funding Trust 2006-SL6 -- Cl. I-A, Placed on Review for Possible Downgrade, currently Aa2 -- Cl. II-A, Placed on Review for Possible Downgrade, currently Aa2 -- Cl. M-1, Downgraded to Baa1 from A1 -- Cl. M-2, Downgraded to Baa3 from A2 -- Cl. M-3, Downgraded to B1 from A3 -- Cl. M-4, Downgraded to Caa1 from Baa2 -- Cl. M-5, Downgraded to Caa3 from Baa3 -- Cl. M-6, Downgraded to Ca from Ba1 -- Cl. B-1, Downgraded to C from Ba2 -- Cl. B-2, Downgraded to C from Ba3 -- Cl. B-3, Downgraded to C from Caa1 BEAR STEARNS: Stable Performance Cues Fitch to Affirm Ratings ------------------------------------------------------------- Fitch Ratings has affirmed Bear Stearns Commercial Mortgage Securities Inc., commercial mortgage pass-through certificates, series 2000-WF1, as : -- $33.2 million class A-1 at 'AAA'; -- $455.0 million class A-2 at 'AAA'; -- Interest-only class X at 'AAA'; -- $31.1 million class B at 'AAA'; -- $35.5 million class C at 'AAA'; -- $8.9 million class D at 'AAA'; -- $26.6 million class E at 'AAA'; -- $8.9 million class F at 'AAA'; -- $15.5 million class G at 'A+'; -- $13.3 million class H at 'BBB+'. -- $6.7 million class I at 'BBB-'; -- $5.6 million class J at 'BB'; -- $8.9 million class K at 'B'; -- $3.3 million class L at 'B-'. Fitch does not rate the $3.3 million class M. The rating affirmations are the result of stable performance of the remaining pool. As of the October 2007 distribution date, the pool's aggregate principle balance has decreased 26% to $655.8 million at issuance. In total 58 loans (53.5%) have defeased, including the largest loan in the pool, 650 Townsend Center (8.3%). There are currently no loans in special servicing. 2.25% of the transaction is scheduled to mature in 2008 and 30.8% matures in 2009. The largest Fitch Loan of Concern (1.44%) is a multifamily property located in Durham, North Carolina. The property is located in the Research Triangle submarket which has suffered from low occupancy and concessions. The year end, servicer reported debt service coverage ratio is .67 and the June 2007 occupancy was 89%. BEARINGPOINT INC: Board Names F. Edwin Harbach as CEO and Pres. --------------------------------------------------------------- BearingPoint Inc.'s board of directors has named Ed Harbach as president and chief executive officer and a member of the board of directors. Mr. Harbach, who has more than 28 years of experience in the consulting industry, has been the company's president and chief operating officer since Jan. 2007. Harry L. You, who was chief executive officer since March 2005, is leaving the company to pursue other opportunities and will be succeeded by Mr. Harbach. Mr. You led BearingPoint through an important period of rebuilding and improved financial management. The company also filed its third-quarter Form 10-Q making it current and up-to-date in its periodic filings with the Securities and Exchange Commission. "BearingPoint continues to make great progress," Roderick McGeary, chairman of the board, stated. "Harry helped to build the financial foundation necessary to position us for future success. The board and Harry agreed that this is the perfect time for a change in leadership. We are thrilled that Ed will lead the company into the next, critical phase of achieving strategic and operational excellence." "Ed has extensive experience in the consulting industry, and has already brought great value to BearingPoint as the leader of its day-to-day operations," Mr. McGeary added. "With his proven ability to tackle operational challenges, drive business results and increase client satisfaction, Ed will be instrumental in helping us make the final push on our business turnaround and execute our strategy for long-term growth." "Ed"s appointment reflects the board's determination that the best way for the company to create value for its shareholders, clients and employees is by intensifying our focus on operations -- and leveraging the full scale and scope of our global business, including continuing to own and operate our European practice as an important part of our consolidated business," Mr. McGeary continued. "Ed will pursue this strategy with a focused and disciplined approach to driving profitable growth, building the company's cash flow and strengthening the balance sheet." "I am very enthusiastic about taking on the chief executive role." Mr. Harbach stated. "I have worked in the consulting business for my entire career and I am confident that our Company can create long-term value for shareholders. BearingPoint has world-class people and a solid customer base with great potential. I look forward to working with the Board, our management team and our global employee base to operate the company efficiently and to continue to establish BearingPoint as one of the world's premier management technology and consulting firms." Prior to his role as president and chief operating officer of BearingPoint, Mr. Harbach served as a managing partner and member of the leadership team at Accenture and held key client-facing and executive positions throughout the organization. In addition to leading global client relationships with several Fortune 100 companies, Mr. Harbach served as chief information officer and managing partner, client satisfaction and quality, and also served as turnaround leader on a number of critical client and organizational assignments in multiple geographic regions. "We thank Harry for his hard work and important contributions to BearingPoint over the last three years," Mr. McGeary added. "Harry's leadership has been important, particularly in building a strong foundation to bring current the company's financial reporting, strengthen the balance sheet and resolve a significant number of serious financial, compliance, legal and other issues which existed when he arrived. On behalf of the Board and management team, we wish him well in his future endeavors." "I am delighted that we have been able to get current and I look forward to pursuing other opportunities, Mr. You stated. "It has been a privilege working with the many talented people throughout BearingPoint over the past three years." "I am proud of the progress the company has made," Mr. You continued. "It is a real testament to our franchise and to the tenacity of our people. I have known Ed for several years and am confident in his abilities to lead BearingPoint into the future." About BearingPoint Inc. Headquartered in McLean, Virginia, BearingPoint Inc. (NYSE:BE) -- http://www.BearingPoint.com/-- is a provider of management and technology consulting services to Global 2000 companies and government organizations in 60 countries. The firm has more than 17,000 employees focusing on the Public Services, Financial Services and Commercial Services industries. BearingPoint professionals have built a reputation for knowing what it takes to help clients achieve their goals, and working closely with them to get the job done. The company's service offerings are designed to help its clients generate revenue, increase cost-effectiveness, manage regulatory compliance, integrate information and transition to "next-generation" technology. * * * Moody's Investor Service placed BearingPoint Inc.'s long term corporate family rating at 'B2' in December 2006 and its probability of default rating at 'B1' in September 2006. Both ratings still hold to date. BLACKHAWK AUTOMOTIVE: Court OKs Morris-Anderson as Fin'l Advisor ---------------------------------------------------------------- Blackhawk Automotive Plastics Inc. and Tier e Automotive Group Inc. obtained permission from the Honorable Judge Kay Woods of the U.S. Bankruptcy Court for the Northern District of Ohio to employ Morris-Anderson & Associates Ltd. as their financial advisor. Morris-Anderson will: a. install Domenic Aversa, a managing director of Morris- Anderson, as the Debtors' chief restructuring officer, who will bear senior responsibility for all of the Debtors' financial matters, including: i. monitoring compliance with the terms of the Debtors' postpetition financing; ii. reporting the Debtors' current and projected financial performance to the Debtors' postpetition lenders and any official committee of unsecured creditors appointed in the case; iii. controlling all disbursements of the Debtors' cash; and iv. working with the Debtors' senior management on developing and implementing strategies for the Debtors' reorganization or sale during the course of their chapter 11 case, including via possible formulation of a plan of reorganization or sale process; b. review the business and financial condition of the Debtors and, to the extent feasible, familiarize itself with the business operations, properties, financial conditions and prospects of the Debtors; c. advise the Debtors on the financial issues and options concerning potential refinancing, recapitalizations or other restructurings; d. develop and execute a strategic plan, which may include a refinancing, recapitalization or other restructuring of the Debtors; e. make appropriate presentations regarding the Debtors and their strategic alternatives to the Bank Group and specified trade creditors; f. assist the Debtors in preparing presentations, discussions and due diligence materials and in negotiations relating to a reorganization; g. make presentations to the Debtors' senior management and their boards of directors as to the status of negotiations or discussions regarding a reorganization; and h. provide other financial advisory and investment banking services as are customary for similar transactions. The Debtor will pay Morris-Anderson at these hourly rates: Professional Rate ------------ ---- Dan Dooley, Principal $450 Domenic Aversa, Managing Director $375 Robert Wanat, Consultant $300 Dick Schulter, Consultant $275 Daniel Wiggins, Consultant $275 During the 90-days prior to bankruptcy, the Debtor paid $150,000 security retainer to Morris-Anderson. The Debtors and the firm assure the Court that Morris-Anderson represent no interest adverse to the Debtors' estates. The firm can be reached at: Morris-Anderson & Associates Ltd. Domenic Aversa, Managing Director 55 West Monroe Street, Suite 2500 Chicago, IL 60603 http://www.morris-anderson.com/ About Blackhawk Automotive Salem, Ohio-based Blackhawk Automotive Plastics Inc., formerly Warren Molded/Custom Plastics, manufactures injection molded plastic products and motor vehicle parts and accessories. BAP's customers include General Motors, Delphi, Lear, Chrysler, Honda, Navistar, and Visteon. BAP employs about 1,574 workers domestically, and generated $136 million in sales in 2006. BAP owns Canadian subsidiary, Blackhawk Automotive Plastics Ltd. which operated a manufacturing facility in Ontario until Johnson Controls Inc. bought BAP Canada's assets in May 2005. BAP Canada's remaining assets consist primarily of net operating loss carryforwards for Canadian tax purposes. The NOLs had a book value of about $8.2 million as of December 2005. BAP also owns a plant in Upper Sandusky, Ohio, which ceased operations in 2006. The company filed for chapter 11 protection on Oct. 22, 2007 (Bankr. N.D. Ohio, Case No. 07-42671). Its parent company, Tier e Automotive Group Inc., filed a separate chapter 11 petition on the same day (Bankr. N.D. Ohio, Case No. 07-42673). Tier e acquired BAP from Worthington Industries Inc. in 1999. Tier e also owns 49% stake in Nescor Holdings Inc., a holding company for Nescor Plastics Corporation, also an automotive plastics supplier. William I. Kohn, Esq., David M. Neumann, Esq., Stuart A. Laven, Jr., Esq., at Benesch, Friedlander, Coplan & Aronoff LLP represent the Debtors in their restructuring efforts. Donlin Recano & Company Inc. will provide claims, noticing, balloting and distribution services for the Debtors. The Debtors schedules disclose total assets of $58,665,229 and total liabilities of $51,244,592. As of the bankruptcy filing, BAP's aggregate debt to its senior facility lenders was about $33 million. BLACKHAWK AUTOMOTIVE: Can Hire W.Y. Campbell as Investment Banker ----------------------------------------------------------------- The Honorable Judge Kay Woods of the U.S. Bankruptcy Court for the Northern District of Ohio gave Blackhawk Automotive Plastics Inc. and Tier e Automotive Group Inc. permission to employ W. Y. Campbell & Company as investment banker. W. Y. Campbell will assist and advise the Debtors with respect to: a. the definition of objectives related to value and terms of a potential asset sale under Section 363 of the Bankruptcy Code; b. the identification and demonstration of the Debtors' propriety attributes; c. the identification and solicitation of possible appropriate acquirers or merger partners; d. the preparation and distribution of confidentiality agreements and appropriate descriptive selling materials to prospective acquirers; e. the initiation of discussions and negotiations with prospective acquirers or merger partners; f. the structuring of the asset sale or other transaction involving the Debtors' businesses or assets; and g. the various details necessary to complete a successful transaction. The Debtors agree to pay W. Y. Campbell based on these charge schedule: a. an initial retainer of $75,000, payable upon commencement of the engagement; b. a monthly retainer of $30,000, payable on the first day of each month commencing Nov. 1, 2007, and continuing through the conclusion of the engagement; c. a success fee of 2% of the aggregate proceeds payable to the Debtors of an asset sale or other transaction; and d. aggregate retainers received by the firm will be deducted from aggregate success fees received and refunded to the Debtors, provided the firm's resulting net compensation is not less than the minimum success fee. To the best of the Debtors' knowledge, the firm does not hold or represent an interest adverse to the Debtors' estate. The firm can be reached at: Ty Clutterbuck, Managing Director W. Y. Campbell & Company One Woodward Avenue, 26th Floor Detroit, MI 48226 Tel: (313) 496-9000 Fax: (313) 496-9001 http://www.wycampbell.com/ About Blackhawk Automotive Salem, Ohio-based Blackhawk Automotive Plastics Inc., formerly Warren Molded/Custom Plastics, manufactures injection molded plastic products and motor vehicle parts and accessories. BAP's customers include General Motors, Delphi, Lear, Chrysler, Honda, Navistar, and Visteon. BAP employs about 1,574 workers domestically, and generated $136 million in sales in 2006. BAP owns Canadian subsidiary, Blackhawk Automotive Plastics Ltd. which operated a manufacturing facility in Ontario until Johnson Controls Inc. bought BAP Canada's assets in May 2005. BAP Canada's remaining assets consist primarily of net operating loss carryforwards for Canadian tax purposes. The NOLs had a book value of about $8.2 million as of December 2005. BAP also owns a plant in Upper Sandusky, Ohio, which ceased operations in 2006. The company filed for chapter 11 protection on Oct. 22, 2007 (Bankr. N.D. Ohio, Case No. 07-42671). Its parent company, Tier e Automotive Group Inc., filed a separate chapter 11 petition on the same day (Bankr. N.D. Ohio, Case No. 07-42673). Tier e acquired BAP from Worthington Industries Inc. in 1999. Tier e also owns 49% stake in Nescor Holdings Inc., a holding company for Nescor Plastics Corporation, also an automotive plastics supplier. William I. Kohn, Esq., David M. Neumann, Esq., Stuart A. Laven, Jr., Esq., at Benesch, Friedlander, Coplan & Aronoff LLP represent the Debtors in their restructuring efforts. Donlin Recano & Company Inc. will provide claims, noticing, balloting and distribution services for the Debtors. The Debtors schedules disclose total assets of $58,665,229 and total liabilities of $51,244,592. As of the bankruptcy filing, BAP's aggregate debt to its senior facility lenders was about $33 million. BLACKHAWK AUTOMOTIVE: Court Approves Equipment Buy Pact w/ Stopol ----------------------------------------------------------------- The Honorable Judge Kay Woods of the U.S. Bankruptcy Court for the Northern District of Ohio gave Blackhawk Automotive Plastics Inc. and Tier e Automotive Group Inc. permission to sell their equipment to Stopol Inc. pursuant to an equipment purchase agreement. The Debtors relate that under the EPA, Stopol has proposed to purchase two of the Debtors' equipment free of liens for $220,900, and that the Debtors' lenders and the customers have consented to the sale. Also under the EPA, Stopol will have an option to purchase two additional pieces of equipment for an aggregate price of $265,000 on or before Dec. 31, 2007. All of the equipment is subject to perfected senior security interests of the lenders and the customers under a debtor-in- possession financing. Thus, upon Court's approval, the Debtors will pay the proceeds of the sale to their lenders and customers in accordance with the terms in the DIP financing. About Blackhawk Automotive Salem, Ohio-based Blackhawk Automotive Plastics Inc., formerly Warren Molded/Custom Plastics, manufactures injection molded plastic products and motor vehicle parts and accessories. BAP's customers include General Motors, Delphi, Lear, Chrysler, Honda, Navistar, and Visteon. BAP employs about 1,574 workers domestically, and generated $136 million in sales in 2006. BAP owns Canadian subsidiary, Blackhawk Automotive Plastics Ltd. which operated a manufacturing facility in Ontario until Johnson Controls Inc. bought BAP Canada's assets in May 2005. BAP Canada's remaining assets consist primarily of net operating loss carryforwards for Canadian tax purposes. The NOLs had a book value of about $8.2 million as of December 2005. BAP also owns a plant in Upper Sandusky, Ohio, which ceased operations in 2006. The company filed for chapter 11 protection on Oct. 22, 2007 (Bankr. N.D. Ohio, Case No. 07-42671). Its parent company, Tier e Automotive Group Inc., filed a separate chapter 11 petition on the same day (Bankr. N.D. Ohio, Case No. 07-42673). Tier e acquired BAP from Worthington Industries Inc. in 1999. Tier e also owns 49% stake in Nescor Holdings Inc., a holding company for Nescor Plastics Corporation, also an automotive plastics supplier. William I. Kohn, Esq., David M. Neumann, Esq., Stuart A. Laven, Jr., Esq., at Benesch, Friedlander, Coplan & Aronoff LLP represent the Debtors in their restructuring efforts. Donlin Recano & Company Inc. will provide claims, noticing, balloting and distribution services for the Debtors. The Debtors schedules disclose total assets of $58,665,229 and total liabilities of $51,244,592. As of the bankruptcy filing, BAP's aggregate debt to its senior facility lenders was about $33 million. BOYS DAY OUT: Voluntary Chapter 11 Case Summary ----------------------------------------------- Debtor: Boys Day Out, L.P. 4601 Old Sheppard Place, Suite 100 Plano, TX 75093 Bankruptcy Case No.: 07-45402 Chapter 11 Petition Date: December 3, 2007 Court: Northern District of Texas Judge: Russell F. Nelms Debtor's Counsel: Julie C. McGrath, Esq. Forshey & Prostok, L.L.P. 777 Main Street, Suite 1290 Fort Worth, TX 76102 Tel: (817) 877-8855 Estimated Assets: $1 Million to $100 Million Estimated Debts: $1 Million to $100 Million The Debtor did not file a list of its largest unsecured creditors. C-BASS MORTGAGE: Moody's Cuts Rating on Cl. M-4 Certificates to B1 ------------------------------------------------------------------ Moody's Investors Service has downgraded 8 certificates and placed on review for possible downgrade four certificates from a transaction issued by C-Bass Mortgage Loan Asset-Backed Certificates. The transaction is backed by second lien loans. The certificates were downgraded because the bonds' credit enhancement levels, including excess spread and subordination were too low compared to the current projected loss numbers at the previous rating levels. Substantial pool losses over the last few months have continued to erode credit enhancement available to the mezzanine and senior certificates. Despite the large amount of write-offs due to losses, the delinquency pipeline has remained high as borrowers continue to default. The actions reflect Moody's expectation that the significant delinquency pipeline will have a further negative impact on the credit support for the senior and mezzanine certificates. Complete rating actions are: Issuer: C-BASS Mortgage Loan Asset-Backed Certificates, Series 2006-SL1 -- Cl. A-1, Placed on Review for Possible Downgrade, currently Aaa -- Cl. A-2, Placed on Review for Possible Downgrade, currently Aaa -- Cl. A-3, Placed on Review for Possible Downgrade, currently Aaa -- Cl. M-1, Placed on Review for Possible Downgrade, currently Aa1 -- Cl. M-2, Downgraded to Baa3 from A1 -- Cl. M-3, Downgraded to Ba1 from A2 -- Cl. M-4, Downgraded to B1 from Baa1 -- Cl. M-5, Downgraded to B3 from Baa2 -- Cl. M-6, Downgraded to Caa1 from Baa3 -- Cl. B-1, Downgraded to Caa3 from Ba2 -- Cl. B-2, Downgraded to Ca from B2 -- Cl. B-3, Downgraded to C from Caa1 CALPINE CORP: Various Parties Object to Plan Confirmation --------------------------------------------------------- More than 40 parties-in-interest delivered to the U.S. Bankruptcy Court for the Southern District of New York their objections to the confirmation of Calpine Corporation's Fourth Amended Joint Plan of Reorganization, in time for the Nov. 30, 2007 confirmation objection deadline. The Plan will be presented for confirmation on December 17. Among the major Objecting Parties are: * the Official Committee of Equity Security Holders; * the Unofficial Committee of Second Lien Debtholders; * Wilmington Trust Company, solely in its capacity as collateral agent under the Collateral Trust and Intercreditor Agreement entered with Debtors Calpine Generating Company, LLC, and CalGen Finance Corp.; * a group of holders of the 7.75% Convertible Notes due 2015, composed of Davidson Kempner Capital Management, LLC, Highland Capital Management, LP, Jana Partners, LLC, and Longacre Fund Management, LLC; * Rosetta Resources Inc; * Portland Natural Gas Transmission System, Gas Transmission Northwest Corporation, TransCanada PipeLines Limited, and NOVA Gas Transmission Ltd.; * The Hawaii Structural Ironworkers Pension Trust Fund; * The Dow Chemical Company and its subsidiaries and affiliates; and * certain trade creditors. Other parties that filed Plan Confirmation Objections are: * ACE Group of Companies, * Ad Hoc Committee of CCFC Equity Holders, * Auburndale Holdings, LLC, and Pomifer Power Funding, LLC, * Block 59 Limited Partner, * California Energy Commission, * Cos-Mar Company, * Credit Suisse Cayman Islands Branch, * Duke Energy Trading and Marketing L.L.C., * County of Eastland, Texas, * Eastman Chemical Company, * Edinburg CISD, et al., * Enbridge Pipelines (Bamagas Intrastate), L.L.C., * Energy Transfer Fuel, LP, * James Phelps, * Louisiana Department of Revenue, * Merrill Lynch Commodities, Inc., * Nevada Power Company, * South Point Joint Venture, * Spectra Energy Corp., * The Bethpage Lenders, * U.S. Bank National Association, * UNBC Leasing, Inc., * Verizon Capital Corp., * Wisconsin Power and Light Company, and * Yellow Brick Road, LLC. (1) Equity Committee The Equity Committee tells Judge Lifland that the Plan has numerous deficiencies that makes it unconfirmable. Specifically, the Equity Committee points out that stakeholders have no way of determining before the Voting Deadline whether the Plan violates the "absolute priority rule" under Section 1129(b)(2) of the Bankruptcy Code and the "best interests test" under Section 1129(a)(7) because the valuation of reorganized Calpine is still undetermined. The Equity Committee asserts that the Plan violates the "absolute priority rule" by providing more than 100% recoveries to creditors as a result of various settlements of alleged makewhole and other claims. The panel adds that the Plan unfairly discriminates against equity holders by permitting holders of Section 510(b) subordinated securities claims, whose claims are pari-passu with the common stock holders, to receive a "double recovery." Furthermore, the Equity Committee notes that the Plan includes unlawful, non-consensual third-party releases that automatically bind parties who either vote for the Plan or fail to vote on the Plan. Gary L. Kaplan, Esq., at Fried, Frank, Harris, Shriver & Jacobson, LLP, in New York, says the Plan impermissibly entrenches Calpine's board of directors, chosen by the Debtors and the Official Committee of Unsecured Creditors without input or oversight by the Equity Committee, even though equity holders will likely receive a substantial portion of the New Calpine Common Stock. Mr. Kaplan states that the proposed Management and Director Equity Incentive Plan seeks to circumvent Section 503(c)'s prohibition of Key Employee Retention Plans by providing impermissible bonuses to senior executives through the Plan. The Plan also fails to properly account for the value of the Debtors' retained causes of action, hence, that value will inure to the benefit of unsecured creditors, awarding them well in excess of 100 cents on account of their claims, Mr. Kaplan further says. The Equity Committee maintains that the Plan cannot be confirmed because it was not filed in good faith. While the Debtors continue to state that they are neutral with respect to how the value of their estates is allocated among stakeholders, their conduct in prosecuting the valuation of their Plan shows that they are determined to try to provide creditors with a windfall and to wipe out billions of dollars of shareholder value, Mr. Kaplan says. (2) Second Lien Committee The Plan classifies the Second Lien Debt Claim as "unimpaired," which, the Second Lien Committee points out, means that the Second Lien Debtholders are deemed to accept the Plan on the premise that it provides the Debtholders with every right and every dollar to which they are legally, equitably and contractually entitled. Against this backdrop, the Second Lien Committee objects to the confirmation of the Plan because it fails to satisfy the Second Lien Debt Claim in full while simultaneously stripping the Second Lien Debtholders of the protections granted to them in the Second Lien Loan Agreements. The Second Lien Committee also objects to the Plan confirmation because it fails to provide for payment of all postpetition default and compounded interest and fees owed to the Second Lien Debtholders. Alan W. Kornberg, Esq., at Paul, Weiss, Rifkind, Wharton & Garrison, LLP, relates that at least two courts have held, and no case to the contrary has been found, that if a secured creditor is entitled to default and compound interest under its loan documents, Section 1124(1) requires payment of that interest for the secured creditors to be deemed unimpaired. Mr. Kornberg adds that the Second Lien Documents provide for payment to the Indenture Trustee, Administrative Agent and their advisors of the fees incurred in connection with the Debtors' default. The Plan must similarly provide for payments of those amounts if it is to treat the Second Lien Debt Claim as unimpaired. Mr. Kornberg also points out that, to the extent equity is a consideration, the Debtors have provided other classes of similarly situated secured creditors with all, or at least the overwhelming majority of, the postpetition default and compounded interest to which they are entitled: Creditors Default Interest Compounded Interest --------- ---------------- ------------------- CalGen First Approx. 85% of Not Applicable; Lien Lenders postpetition received current pay default interest interest throughout the Debtors' Chapter 11 cases MEP Pleasant Interest at - Hill Lenders default rate Aries Lenders Interest at Compound Interest default rate Furthermore, Mr. Kornberg notes that the Debtors may very well be solvent. The Debtors' valuation provides that equity holders may receive up to $195,000,000 worth of New Calpine Common Stock. The Equity Committee has asserted that there should be at least $3,800,000,000 of value distributable to equity holders. Bank of New York, in its capacity as successor administrative agent for the Second Lien Debtholders, also asserts that it is entitled to the payment of all costs, fees, charges and out-of- pocket expenses, including without limitation, the fees and costs incurred by its attorneys and advisors. Wilmington, as indenture trustee for the Second Lien Debtholders, supports the Second Lien Committee's contentions. (3) CalGen Loan Agents Wilmington Trust wants the Plan confirmation denied because it purports to release all liens that the Collateral Agent has on the CalGen Collateral. The Plan also purports to release all of the Guarantors and Obligors under the CalGen Loan Documents of any obligations arising under any guarantees. The release of those liens, according to Wilmington Trust, is in contravention of a Court Order and the CalGen Loan Documents, which explicitly call for those liens and guarantees to remain in place until after the claims of the CalGen Lenders are paid in full. Wilmington also opposes the confirmation because it improperly discharges the Debtors' continuing indemnification obligations to the Collateral Agent for all of its fees, costs, and expenses incurred in connection with its duties under the Collateral Trust Agreement. In a separate filing, Manufacturers & Traders Trust Company, as successor indenture trustee under the CalGen Loan Agreements, objects to the Plan's exculpation provision, which, if approved, would foreclose any opportunity the bank may otherwise have to seek recoveries against the exculpated non-debtor third parties for claims disallowed against the Debtors. M&T Bank asserts that the Court lacks judicial power to exculpate or release non-debtor third parties where, as with the Plan, exculpation is not necessary to confirm it. The exculpation of non-debtor third parties under circumstances that do not meet the test set forth by the U.S. Court of Appeals for the Second Circuit in In re Metromedia Fiber Network, would constitute an invalid exercise of judicial authority, the Bank further asserts. (4) Noteholders The 7.75% Convertible Note Holders object to the Plan to the extent that: * it does not clearly provide for payment in full on the Distribution Date to holders of Allowed Senior Note Claims of principal and interest accrued as of the Petition Date; * it does not clearly provide for the establishment of an escrow account for shares otherwise distributable to holders of Allowed Subordinated Note Claims sufficient to satisfy the amounts subject to the Subordination Dispute; and * may inadvertently impair any rights and claims of holders of Allowed Senior Note Claims with respect to the subordination provisions in the 7.75% Indenture. Another group of 7.75% Convertible Notes led by Harbinger Capital Partners Master Fund I, Ltd., assert, in a separate Court filing, that, pursuant to the terms of the 7.75% Indenture and the terms of the Plan, their Claims should include a claim for postpetition interest at the accrued default rate, as well as a claim for overdue interest, in accordance with applicable New York law. Certain beneficial owners or managers of entities of the 6% Convertible Notes due 2014, in another Court filing, object to the Plan confirmation because it classifies their claims under the same class as claims under notes that are not contractually subordinated to any other debt and are not entitled to the right to convert into a combination of cash and stock. That classification violates the requirement of Section 1122(a) that claims must be "substantially similar" to be placed in the same class, the 6% Noteholders' counsel, Dennis F. Dune, Esq., at Milbank, Tweed, Hadley & McCloy, LLP, in New York, asserts. Mr. Dune adds that the treatment of the 6% Noteholders' claims violates the "same treatment within a class" requirement of Section 1123(a)(4) because: (i) the Plan's failure to provide adequate reserves for certain of their claims would result in lesser distributions being made on those claims if they are allowed following an appeal than will be made on claims in the same class, which are allowed by Court order; and (ii) the Plan requires the 6% Noteholders to give up greater rights than other creditors in the same class to receive the same distributions. Certain Plan provisions relating to disputed claims reserves, exculpation, injunctions against acts against non-Debtors and the effectiveness and binding nature of the Plan, violate the requirements of Section 1129(a)(3), Mr. Dune further asserts. HSBC Bank USA, N.A., as successor indenture trustee on behalf of the holders of the 7.625% Senior Notes due 2006, the 8.75% Senior Notes due 2007, the 7.75% Senior Notes due 2009, and the 6% Contingent Convertible Notes due 2014, among others, also oppose the Plan confirmation because it purports to disallow its allowed claims for reimbursement of its expenses and fees as indenture trustee in connection with the litigation of Disputed Claims. HSBC supports the 6% Noteholders' Plan confirmation objections. (5) Rosetta Resources Pursuant to the Plan, the Debtors will release the officers, directors, and certain outside professionals that they allege advised and assisted Calpine's board of directors and management in consummating the sale transaction to Rosetta Resources. Among other things, the effect of the proposed releases would be to release any claim they may have against the Released Parties in connection with the conception, structuring, review, approval, and implementation of the Rosetta Transaction, as well as the misguided decision to misuse the proceeds of the sale that caused Calpine to file for bankruptcy protection, John H. Bae, Esq., at Cadwalader, Wickersham & Taft, LLP, in New York, contends. If the Debtors believe their allegations to be well-founded, they are required to provide some business justification for their decision to provide a blanket release of the D&Os, Mr. Bae asserts. The Plan, however, provides no justification or explanation for the releases, he says. Thus, Rosetta objects to the Debtor Releases contained in the Plan and asks Judge Lifland to deny its confirmation unless and until the Debtors address Rosetta's objections. Rosetta also asks Judge Lifland to direct the Debtors to promptly produce responsive documents and a witness in accordance with the Rule 30(b)(6) notice Rosetta filed in the Adversary Proceeding. (6) Trade Creditors Certain trade creditors oppose the Plan confirmation to the extent that the contemplated governance profile for reorganized Calpine restrict their ability to freely transfer their shares. The Trade Creditors are: * LS Power Equity Advisors, LLC, and Liminus Management, LLC; * Harbinger Capital Partners Master Fund I, Ltd., and Harbinger Capital Partners Special Situations Fund L.P.; * ASM Capital, Hain Capital Group, LLC, and Sierra Liquidity Fund, LLC; * Liquidity Solutions, Inc.; and * Revenue Management. LS Power Equity and Harbinger point out that, depending on the Debtors' total enterprise value and the ultimate size of the pool of allowed claims, they may each own more than 10% of New Calpine Common Stock. Harbinger says it holds approximately $1,600,000,000, in claims against the Debtors, and under the Plan, expects to receive at least 18% of the stock of reorganized Calpine and will be the company's largest shareholder after the effective date of the Plan. The Trade Creditors note that the Plan fails to provide for registration rights for the shares they may receive, restricting their ability to freely trade the shares and thus depressing their value. Harbinger specifically contends that the Plan fails to establish a reserve to pay the additional claims asserted by the holders of Calpine's convertible notes, which will result in further illegal discrimination if those claims are deemed allowed following appeal. The Trade Creditors further believe that the Plan contains several additional corporate governance provisions that are detrimental to the future shareholders of reorganized Calpine. (7) Pipelines The Pipelines wants the Plan modified to protect their rights and insure their equitable treatment as creditors. Specifically, the Pipelines seek that: * the Debtors should be required to obtain the prior approval of the Federal Energy Regulatory Commission for their proposed rejection of the Pipelines' contracts; * the retained causes of action or claims by the Debtors against the Pipelines should be disallowed; * a judicial determination should be required before the Debtors can offset against any allowed claim; and * a reserve should be created so that sufficient stock may pay all of the Pipelines' claims in full, including those claims that are disputed. The Pipelines further asserts that the Debtors' Updated Valuation Analysis should be rejected in favor of the Creditors Committee's valuation analysis. (8) Hawaii Structural Fund The Hawaii Structural Ironworkers Pension Trust Fund wants the Plan confirmation denied to the extent that the Plan Injunction provisions permanently enjoin the litigation commenced by the Fund against the Debtors in the Superior Court in the state of California, county of Santa Clara. (9) Dow Chemical The Dow Chemical Company and its subsidiaries and affiliates, including Union Carbide Corporation, Dow Pipeline Company, Dow Hydrocarbons and Resources, LLC, and Dow Engineering Company, and the Debtors are parties to various purchase agreements for the sale of steam and electricity for the Debtors' facilities in Pittsburg, California; and Freeport, Texas. Dow Chemical objects to the Plan confirmation because it finds that certain of its provisions may somehow modify, alter, change or otherwise affect the restructured relationship it has with the Debtors. Dow Chemical is also concerned that its current and future relationships with the Debtors and their non-Debtor affiliates would be irreparably harmed if contracts and leases are deemed rejected without providing Dow with the requisite notice as what contracts and leases are being rejected. Dow Chemical seeks that if there are any inconsistencies between the agreements executed and approved by Court Order in connection with the Restructured Relationships and the Plan, the Plan Supplement, the Confirmation Order and the transactions contemplated by the Plan, the agreements and Orders relating to the Restructured Relationships must control. Dow Chemical also asks that it be provided with the requisite notice of the contracts or leases that the Debtors are rejecting under the Plan. James L. Bromley, Esq., at Cleary Gottlieb Steen & Hamilton, LLP, in New York, says that Dow Chemical's current and future relationships with the Calpine Parties could be irreparably harmed if the Dow contracts and leases are rejected prior notification. Mr. Bromley notes that the Plan requires the Debtors to perform under postpetition guarantees or guarantees identified in the Plan Supplement. As part of the restructuring of the Pittsburg and Freeport Relationships, Calpine re-executed certain guarantees in favor of Dow that are not listed in the Plan Supplement. Dow Chemical wants the Court to rule that Calpine is not released from any of its obligations under the re-executed guaranties and, in particular, Calpine's obligations as to any prepetition or postpetition claims that Dow Chemical may have against Freeport Energy Center, LP, a non-debtor subsidiary of Calpine. Dow Chemical further contends that the Plan violates Section 1129 because it does not comply with multiple provisions of the Bankruptcy Code including, but not limited to Sections 365, 524(e), 553, 1123(a)(4), 1123(b)(3)(B) and 1129(b). About Calpine Based 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 and its affiliates 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 Aug. 31, 2007, the Debtors disclosed total assets of $18,467,000,000, total liabilities not subject to compromise of $11,207,000,000, total liabilities subject to compromise of $15,354,000,000 and stockholders' deficit of $8,102,000,000. On Feb. 3, 2006, two more affiliates, Geysers Power Company, LLC, and Silverado Geothermal Resources, Inc., filed voluntary chapter 11 petitions (Bankr. S.D.N.Y. Case Nos. 06-10197 and 06-10198). On Sept. 20, 2007, Santa Rosa Energy Center, LLC, another affiliate, also filed a voluntary chapter 11 petition (Bankr. S.D.N.Y. Case No. 07-12967). On June 20, 2007, the Debtors filed their Chapter 11 Plan and Disclosure Statement. On Aug. 27, 2007, the Debtors filed their Amended Plan and Disclosure Statement. Calpine filed a Second Amended Plan on Sept. 19, 2007 and on Sept. 24, 2007, filed a Third Amended Plan. On Sept. 25, 2007, the Court approved the adequacy of the Debtors' Disclosure Statement and entered a written order on September 26. The hearing to consider confirmation of that Plan begins Dec. 17, 2007. (Calpine Bankruptcy News, Issue No. 73; Bankruptcy Creditors' Service Inc.; http://bankrupt.com/newsstand/or 215/945-7000). CALPINE CORP: Wants to Liquidate $144.25 Million ULC1 Notes ----------------------------------------------------------- Calpine Corporation and its debtor-affiliates currently hold, among other things, assets that are 8-1/2% Senior Notes due May 1, 2008, whose principal amount totals $144,250,000, issued by one of Calpine's Canadian affiliates reorganizing under the Canadian Companies' Creditors Arrangement Act, Calpine Canada Energy Finance ULC. The ULC1 Notes are currently held by Calpine Corp. and its Debtor affiliate Quintana Canada Holdings, LLC. Between 2003 and 2005, Calpine purchased certain of the 8-1/2% Senior Notes issued by ULC I. As of the date of its bankruptcy filing: -- approximately $134,250,000 principal amount of the ULC1 Notes were held by Calpine; -- approximately $10,000,000 principal amount of the ULC1 Notes were held by Quintana; and -- approximately $360,000,000 principal amount of the ULC1 Notes were held by another Canadian Debtor Calpine Canada Resources Company. The ULC1 Notes held by CCRC were recently marketed and sold in the CCAA Proceedings, with Lehman Brothers, Inc., acting as the initial purchaser and assisting in all aspects of the sale, David R. Seligman, Esq., at Kirkland & Ellis, LLP, in New York, relates. The sale of the CCRC ULC1 Notes resulted in a profit above par value, he adds. The U.S. Debtors believe that liquidating their ULC1 Note holdings is for their in their best interests since the market for distressed debt securities like the ULC1 Notes is currently advantageous. Also, Mr. Seligman says the Debtors may face adverse negative tax consequences if they do not liquidate their ULC1 Note holdings. The U.S. Debtors further believe that if Lehman Brothers acts as initial purchaser and assists in the sale and marketing of the remaining ULC1 Notes, they will have the opportunity to obtain a maximum sale price, given that Lehman Brothers is a global leader in the sale of distressed debt securities and is already familiar with the ULC1 Note market because of its involvement in the sale of the CCRC ULC1 Notes. Accordingly, the U.S. Debtors ask permission from the U.S. Bankruptcy Court for the Southern District of New York (i) to sell their ULC1 Notes to Lehman Brothers, as initial purchaser, and (ii) for Lehman Brothers to resell those Notes to the highest bidders to be selected pursuant to sale procedures. Sale Process The U.S. Debtors ask the Court to approve a sale structure for the ULC1 Notes. Pursuant to the Sale Structure, Lehman Brothers will act as the exclusive initial purchaser of the ULC1 Notes and will then immediately resell those Notes to eligible purchasers in a "Rule 144A" sale to "qualified institutional buyers," as those terms are defined in the U.S. Securities Act of 1933, and identified by Lehman Brothers in the context of a "book-building" process. To sell the Notes, Lehman Brothers intends to engage in a marketing process that will include a sales force "teach-in," a broad marketing process coordinated with the sales force and research departments and a book-building process to resell the Notes at the highest price. During the book-building process, investors place their order with a salesperson that provides the order to the manager. The manager then includes the bids in the "book" by price. Participants may submit multiple bids at increasing prices to maximize the probability of a successful bid. Mr. Seligman says a book-building process is customary for secondary sales of this type, and it is the preferred way of achieving the maximum price for the Notes. Other methods, like "bought deal," "back-stop," or "open auction" process, are not suitable under the circumstances, he adds. The U.S. Debtors believe that, given the amount of financial and operational information already available in the market, the marketing process is likely to take approximately three to five business days. To ensu