/raid1/www/Hosts/bankrupt/TCR_Public/071210.mbx
T R O U B L E D C O M P A N Y R E P O R T E R
Monday, December 10, 2007, Vol. 11, No. 292
Headlines
13825 HOWARD ROAD: Case Summary & Five Largest Unsecured Creditors
ACTIVISION INC: ViVendi Deal Prompts S&P's Positive CreditWatch
ADVANCE AUTO: Aggressive Financial Policy Cues S&P's Neg. Outlook
ADVANCE AUTO: Moody's Rates $200MM Unsecured Term Loan at Ba1
AFFIRMATIVE INSURANCE: S&P Affirms 'BB' Credit Rating
AIR INSPIRED: Case Summary & 20 Largest Unsecured Creditors
AIRTRAX INC: Says Restatement Cues Delayed 10QSB Filing
ALLIS-CHALMERS: S&P Holds 'B' Rating and Revises Outlook to Pos.
ALTRA INDUSTRIAL: S&P Affirms 'B' Rating and Revises Outlook
AMACORE GROUP: Sept. 30 Balance Sheet Upside-Down by $1.4 Million
AMERICAN MEDIA: S&P Affirms Junk Corporate Credit Rating
AMERICAN REPROGRAPHICS: Completes $350 Million Credit Refinancing
ATLANTIC EXPRESS: S&P Holds All Ratings and Revises Outlook
BANKRUPTCY MANAGEMENT: Weak Performance Cues S&P to Cut Rating
BARCLAYS CAPITAL: S&P Retains BB+ Rating Under Developing Watch
BARNERT HOSPITAL: Withdraws $5 Million DIP Financing Pact with NHC
BEARINGPOINT INC: Sept. 30 Balance Sheet Upside-Down by $362 Mil.
BIO-KEY INT'L: Sept. 30 Balance Sheet Upside-Down by $2 Million
BIOVAIL CORP: S&P Lowers Corporate Credit Rating to BB from BB+
BISON PARK: Case Summary & Six Largest Unsecured Creditors
BLACK GAMING: Moody's Affirms B3 Corporate Family Rating
BLACKHAWK AUTOMOTIVE: Wants Auction Sale Set for February 2008
BLAST ENERGY: Files 2nd Amended Chapter 11 Plan of Reorganization
BLAST ENERGY: Sept. 30 Balance Sheet Upside-Down by $5,062,379
BRIAN BEITEL: Case Summary & 13 Largest Unsecured Creditors
CAMBIUM LEARNING: Weak Performance Cues S&P's Negative Watch
CENVEO INC: Good Profitability Cues S&P to Lift Rating to BB-
CHASE COMMERCIAL: Fitch Holds 'B-' Rating on $8.1MM Certificates
CHRYSLER LLC: S&P Retains 'B' Rating and Revises RR to 3
CITADEL BROADCASTING: S&P Revises Outlook to Stable from Positive
CLAYTON HOLDINGS: Impairement Charge Cues S&P's Neg. Outlook
CKE RESTAURANTS: Refranchising Continues; Sells 30 Restaurants
COACH AMERICA: Moody's Cuts Corp. Family Rating to B3 from B2
COHR HOLDINGS: S&P Holds 'B' Rating and Revises Outlook to Neg.
CONSTELLATION BRANDS: Commences Exchange Offer for $700MM Notes
CONSTELLATION COPPER: Obtains Verbal Waiver on $3.8 Million Dues
CULLIGAN INT'L: Fiscal Results Cue S&P's Negative CreditWatch
D&E COMMS: S&P Holds 'BB-' Rating and Revises Outlook to Stable
DB KEY: Plan Allocates 10% Sale Carve Out for Unsecured Claims
DB KEY: Court Sets Disclosure Statement Hearing on January 7
DEL LABORATORIES: Parent Inks Merger Deal with Coty Inc.
DELTA FINANCIAL: Job Cuts Follow Bankruptcy Announcement
DYNAMIC LEISURE: Sept. 30 Balance Sheet Upside-Down by $7.9 Mil.
EBERHARDT CONST: Case Summary & 18 Largest Unsecured Creditors
ELECTRONIC DATA: Buyback Program Does Not Affect Moody's Rating
ENVIRONMENTAL ENERGY: Posts $2.8 Million Net Loss in Third Quarter
FEDDERS CORP: Taps Roux Associates as Environmental Consultant
FESTIVAL FUN: S&P Removes 'B' Rating from Developing Watch
FIRSTBANK PUERTO: S&P Affirms 'BB+' Counterparty Credit Rating
FIRST MAGNUS: Pima County Wants Tax Payment from Tucson Asset Sale
FIRST MAGNUS: Removes Sale of $61 Mil. Loans Under Revised Plan
FORD MOTOR: American Jaguar Dealers Prefer Sale to U.S. Bidder
FORD MOTOR: U.K. Marques' Final Bidders are Tata, Mahindra & OEP
FOUR STAR: Voluntary Chapter 11 Case Summary
FREESCALE SEMICONDUCTOR: Moody's Cuts Ratings with Neg. Outlook
GAP INC.: November 2007 Net Sales Up 11 Percent at $1.54 Billion
GILBERT TUSCANY: Voluntary Chapter 11 Case Summary
GLOBAL CASH: S&P Places 'BB-' Rating Under Negative Watch
GLOBAL GEOPHYSICAL: S&P Affirms 'B-' Corporate Credit Rating
GOODYEAR TIRE: Noteholders Tender $346 Million Convertible Notes
GREEN TREE: Poor Performance Cues S&P to Downgrade 19 Ratings
HINES NURSERIES: Moody's Cuts Family Rating to Caa2 from Caa1
HOLOGIC INC: S&P Assigns 'B' Rating on $1.5BB Convertible Notes
INDYMAC BANCORP: Seeking More Cash Despite Strong Capital Cushion
INSTANT WEB: S&P Holds 'B' Rating and Revises Outlook to Neg.
INTERDENT INC: Weak Liquidity Cues S&P to Junk Rating
IPG INC: Moody's Lifts Debt and CF Ratings with Stable Outlook
JEFFREY'S COURT: Case Summary & 19 Largest Unsecured Creditors
LEGENDS GAMING: S&P Rates $220MM Secured Note Offering at B
LEVITT AND SONS: Gets Court Nod to Abandon BOA Collateral
LEVITZ FURNITURE: AICCO Withdraws Request to Cancel Policies
LEVITZ FURNITURE: Committee Wants J.H. Cohn as Financial Advisor
LEVITZ FURNITURE: Court OKs $53.5 Mil. Buy Pact with Hilco Group
LEVITZ FURNITURE: DeCoro USA Demands $1.7 Million Goods Returned
LIMITED BRANDS: Reports November 2007 Net Sales of $858 Million
MATTRESS GALLERY: Sells South California Stores to Ortho Mattress
MEZZ CAP: Fitch Affirms 'B-' Rating on $778,000 Class H Certs.
MIAMI BEACH HEALTH: Fitch Holds 'BB+' Rating on $268MM Bonds
MONROE COUNTY HOSPITAL: S&P Cuts Rating on S.2006 Bonds to BB+
MOVIE GALLERY: Committee Wants to Employ CRG as Financial Advisor
MOVIE GALLERY: Panel Hires Imperial Capital as Financial Advisor
MRS PIZZA: Case Summary & 13 Largest Unsecured Creditors
NATIONSTAR: Moody's Downgrades Ratings on 14 Tranches
NEUMANN HOMES: Committee Taps Paul Hastings as Counsel
NEUMANN HOMES: Court Approves Epiq as Claims and Noticing Agent
NEUMANN HOMES: Court Approves Skadden Arps as Bankruptcy Counsel
NORTH AMERICAN ENERGY: S&P Lifts Ratings with Stable Outlook
OCTANS CDO: Trustee BoNY Issues Notice of Default on Seven Notes
OPTION ONCE: Moody's Lowers Ratings on 45 Tranches
PALM INC: Second Quarter Revenues to Fall Short of Expectations
PCI GAMING: S&P Assigns 'BB-' Ratings with Stable Outlook
PERFORMANCE TRANS: Clear Thinking Wants All Documents Produced
PLASTECH ENGINEERED: S&P Puts 'B+' Rating Under Negative Watch
POLY-PACIFIC INT'L: Posts CDN$895,420 Net Loss in Third Quarter
POPE & TALBOT: Court Approves Stalking Horse Purchase Agreement
POPE & TALBOT: Panel Asks Court to Deny Proposed DIP Financing
POPE & TALBOT: US Trustee Objects to Pulp Business Sale Procedures
QUECHAN TRIBE: Fitch Assigns 'BB-' Initial Issuer Rating
RASC: Moody's Downgrades Ratings on 26 Tranches
REDDI BRAKE: Sept. 30 Balance Sheet Upside-Down by $816,179
REMY WORLDWIDE: Wants Court to Close 27 Bankruptcy Cases
REVLON CONSUMER: Proposed $170MM Loan Cues S&P's Dev. Watch
RG GLOBAL: Sept. 30 Balance Sheet Upside-Down by $5.2 Million
RIVERSIDE CASINO: S&P Lifts Corp. Credit Rating to B+ from B
RJO HOLDINGS: Reduced Cash Flow Cues S&P to Junk Ratings
ROADHOUSE GRILL: Panel Wants Mesirow as Financial Advisor
ROCKFORD PRODUCTS: Wants Case Converted to Chap. 7 Liquidation
SHAW GROUP: Earns $645,000 in 2007 Fourth Quarter Ended Aug. 31
SMARTIRE SYSTEMS: Inks Two Financing Deals w/ Xentenial Holdings
SOLUTIA INC: S&P Rates Proposed $1.2BB Sr. Secured Loan at B+
SOUTHERN ARIZONA: Case Summary & 14 Largest Unsecured Creditors
SPX CORP: Moody's Rates $500 Million Sr. Unsecured Notes at Ba2
ST CHARLES: S&P Lowers Rating to B- from BBB- on GO Bonds
TABS 2006-6: Moody's Cuts Rating on $950MM Notes to B1 from A3
TABS 2007-7: Moody's Chips Rating on $1.31BB Notes to B1 from A1
TELESAT CANADA: Note Redemption Cues S&P to Withdraw Ratings
TTM TECHNOLOGIES: S&P Lifts Bank Loan Rating to BB+ from BB
U.S. ANTIMONY: Posts $13,974 Net Loss in Third Quarter
UBS MORTGAGE: Fitch Rates Class B Certificates at BB
UNITED HERITAGE: Gets Nasdaq Notice on Stock Equity Non-Compliance
US STEEL: S&P Rates $400 Million Senior Unsecured Notes at BB+
VERIFONE INC: Financial Restatement Cues S&P's Negative Outlook
WASHINGTON MUTUAL: Moody' Slices Ratings on 14 Tranches
WORLDWIDE BIOTECH: Earns $147,099 in Third Quarter Ended Sept. 30
* Chadbourne & Parke's Clara Krivoy Named President of VAAUS
* Fitch Believes 2008 Credit and Operating Trends Remain Stable
* Fitch Believes Cable MSOs Will Add Revenue Generating Units
* Fitch Believes Framework Can Help Reduce Risk on Subprime Loss
* Fitch Believes Media & Entertainment Ratings Will Remain Stable
* Fitch Do Not Expect Fresh Produce Sectors to Offset 100% of Cost
* Fitch Expects 2008 Agribusiness Ratings Will Remain Stable
* Fitch Expects Consumer Products Cos Will Be Pressured in 2008
* Fitch Expects Packaged Foods Companies to Remain Stable in 2008
* Fitch Expects Slowing Economy Will Constrain Restaurant Sales
* Fitch Expects Telecom Operators to Experience Revenue Growth
* Fitch Presents Global Pharmaceutical R&D Pipeline 3Q Report
* Fitch's Rating Outlook for Semiconductor Industry is Stable
* Fitch Withdraws FS Ratings That Don't Meet Criteria
* Moody's Cited Insufficient Use of Loan Modifications
* Moody's Global S-GD Rate Drifted Lower in November
* Moody's Says Housing Market Is In The Midst of Worst Downturn
* Moody's Says Pressures Stems from 2006 RI Jury Verdict
* Moody's Says US Cable-TV Industry's Outlook Remains Stable
* BOND PRICING: For the Week of Dec. 3 -- Dec. 7, 200
*********
13825 HOWARD ROAD: Case Summary & Five Largest Unsecured Creditors
------------------------------------------------------------------
Debtor: 13825 Howard Road, L.L.C.
13825 Howard Road
Dayton, MD 21036
Bankruptcy Case No.: 07-22382
Chapter 11 Petition Date: December 6, 2007
Court: District of Maryland (Baltimore)
Judge: Robert A. Gordon
Debtor's Counsel: David Daneman, Esq.
Bishop, Daneman & Simpson, L.L.C.
2 North Charles Street, Suite 500
Baltimore, MD 21201
Tel: (410) 385-5383
Total Assets: $2,850,000
Total Debts: $3,154,287
Debtor's Five Largest Unsecured Creditors:
Entity Nature of Claim Claim Amount
------ --------------- ------------
Gregory and Ronda Carpenter $914,000
13825 Howard Road
Dayton, Maryland
Howard County $12,764
Director of Finance
P.O. Box 3370
Covey Construction Co., Inc. $8,768
P.O. Box 254
Dayton, MD 21036
Joseph L. Mayne Well Drilling $4,410
Duron Paints & Wallcoverings $963
ACTIVISION INC: ViVendi Deal Prompts S&P's Positive CreditWatch
---------------------------------------------------------------
Standard & Poor's Ratings Services placed its 'BB-' corporate
credit rating on Activision Inc. on CreditWatch with positive
implications, indicating the potential for an upward rating
action, based on Activision's definitive agreement to combine with
Vivendi Games, a unit of Vivendi S.A. (BBB/Stable/A-2).
"Upon the close of the transaction, Vivendi will own 52% of the
new entity, Activision Blizzard, which will continue to be a
publicly traded company," elaborated Standard & Poor's credit
analyst Andy Liu.
Some well-known video game franchises owned by Activision include
Guitar Hero, Tony Hawk, and Call of Duty. Vivendi Games owns
Crash Bandicoot, Spyro, and World of Warcraft (the most popular
massive multiplayer online game). Activision Blizzard will have
one of the most diversified portfolios of
interactive entertainment assets in the video game industry. The
transaction is expected to be complete in the first half of
calendar 2008 and is subject to the approval of Activision's
shareholders and the satisfaction of customary closing conditions
and regulatory approvals.
When Activision Blizzard finalizes its capital structure, Standard
& Poor's will assess the company's operations, liquidity, and debt
service capability in resolving the CreditWatch listing. Another
factor that will be very important to S&P's consideration will be
Vivendi's implicit or explicit commitment to credit quality at
Activision Blizzard.
ADVANCE AUTO: Aggressive Financial Policy Cues S&P's Neg. Outlook
-----------------------------------------------------------------
Standard & Poor's Ratings Services revised its outlook on Advance
Auto Parts Inc. to negative from stable. This action reflects the
company's more aggressive financial policy; Advance Auto just
signed a new $200 million term loan due
2011 and plans to use proceeds to repurchase shares. The term
loan is not rated by Standard & Poor's. S&P also affirmed the
Roanoke, Virginia-based company's current 'BB+' corporate credit
rating.
"The outlook reflects more aggressive financial policy during a
more challenging auto part aftermarket environment and pro forma
credit metrics that will be weak for current ratings," said
Standard & Poor's credit analyst Stella Kapur.
ADVANCE AUTO: Moody's Rates $200MM Unsecured Term Loan at Ba1
--------------------------------------------------------------
Moody's Investors Service affirmed the Ba1 corporate family rating
of Advance Auto Parts, Inc., and assigned a Ba1 rating to its new
$200 million senior unsecured term loan. The Probability of
Default rating was downgraded to Ba2 from Ba1. The outlook is
positive. The SGL-2 speculative grade liquidity rating was also
affirmed.
The Ba1 corporate family rating reflects Advance's solid franchise
and operating model, tempered by its regional concentration in the
eastern United States. It has done a credible job of competing
effectively by focusing on improving its retail positioning with
fresher stores and superior customer service. Its commercial
business continues to broaden and improve, which serves to
leverage the cost base already in place with its retail stores.
Credit metrics are -- for the most part -- low investment grade
according to Moody's Global Retail Rating Methodology, with the
unsecured credit facilities exhibiting investment grade features.
The rating and positive outlook already incorporate Moody's
expectation for a modest uptick in leverage which will result from
the new term loan, proceeds from which will be utilized for share
repurchases. The spread between the Baa3 rating indicated by the
rating methodology grid and the company's actual Ba1 rating
reflects Moody's concern with respect to potential changes in
business strategy that may result from the change in CEO, as well
as the company's adoption of a more aggressive financial policy.
In addition, while not dramatic, operating performance has been
slightly softer for the last three quarters, likely due to high
fuel prices and other macroeconomic factors.
The downgrade of the Probability of Default rating to Ba2 from Ba1
reflects the change to 65% from 50% in the expected family
recovery rate used under Moody's Loss Given Default methodology
given that the company's debt now consists entirely of bank debt
which is expected to exhibit higher recovery under default
situations generally. This rating change is not a reflection of
any change in the company's fundamental credit characteristics.
The SGL-2 speculative grade liquidity rating, representing good
liquidity, reflects Moody's expectation that Advance will be
largely able to self-fund substantially all of its working capital
requirements from internal sources with only modest reliance on
the revolving credit facility.
Rating actions taken include:
Ratings affirmed:
-- Corporate family rating at Ba1,
-- Speculative grade liquidity rating at SGL-2.
Rating downgraded:
-- Probability of Default rating to Ba2 from Ba1
Rating assigned:
-- Senior unsecured term loan at Ba1 (LGD3, 38%).
Advance Auto Parts, Inc is headquartered in Roanoke, Virginia, and
is the parent company of Advance Stores Company, Inc., which
operates the second largest U.S. auto parts retail chain with
3,228 stores and revenues of $4.8 billion at LTM October 6, 2007.
AFFIRMATIVE INSURANCE: S&P Affirms 'BB' Credit Rating
-----------------------------------------------------
Standard & Poor's Ratings Services affirmed its 'BB' counterparty
credit and financial strength ratings on Affirmative Insurance Co.
and its subsidiary, Insura Property & Casualty Insurance Co. In
addition, Standard & Poor's affirmed its 'B' counterparty credit
rating on Affirmative Insurance
Holdings Inc. At the same time, Standard & Poor's revised its
outlook on all these companies to negative from stable.
"The outlook revision reflects our view that Affirmative, a
producer and provider of nonstandard auto insurance policies to
individual consumers, will continue to face challenges," said
Standard & Poor's credit analyst Tom Thun. "These challenges
include increasing competition as the market continues to soften
in an industry that exhibits low barriers to entry and a cyclical
nature." In addition Standard & Poor's believes management will
continue over the next year to be challenged building,
consolidating, and migrating business system platforms into an
effective business tool. Because of this, Standard & Poor's
remains concerned that management's focus will be restricted in
developing its market scale and position over the next year.
Partially mitigating the weaknesses is an experienced management
team. The management team is knowledgeable and maintains the
expertise to effectively run the company's current operations.
The company's capitalization
is strong, though Standard & Poor's believes capital will continue
to be needed over the longer term to sufficiently provide an
operating cushion as the market softens and rates begin to
pressure earnings.
Standard & Poor's believes that nonstandard auto rates will
continue to decrease in the company's core markets as competitors
begin to pressure pricing. It is expect that the market pressures
will not significantly impact the company's underwriting
performance. Further, it is expected the company
maintain its interest coverage ratio and leverage ratio for each
quarter as defined by its debt covenants at 3.0x and 4.25x,
respectively. As of the first half of 2007, these ratios were
4.57x and 3.73x, respectively.
Standard & Poor's expects the group's capital adequacy to remain
strong quantitatively and for its competitive position to
deteriorate slightly. Standard & Poor's will be monitoring the
company's efforts in improving its operating controls and business
system platforms over the next six months and will evaluate the
company's progress regarding this. In addition, underwriting
performance as measured by the combined ratio is expected to
remain at or less than 98% for 2007 and through 2008. If the
company cannot fully meet these expectations, Standard & Poor's
might lower the rating by a notch or more. If the expectations
are met and the prospects are good for a continuation of the same,
Standard & Poor's will consider revising the outlook to stable.
AIR INSPIRED: Case Summary & 20 Largest Unsecured Creditors
-----------------------------------------------------------
Lead Debtor: Air Inspired Home Medical Equipment
and Respiratory Solutions LLC
dba CPAPNOW
13809 So Casper St., Suite A
Glenpool, OK 74033
Bankruptcy Case No.: 07-12416
Type of Business: The company provides home medical
equipment.
Chapter 11 Petition Date: December 6, 2007
Court: Northern District of Oklahoma (Tulsa)
Judge: Terrence L. Michael
Debtor's Counsel: Patrick J. Malloy, III, Esq.
Malloy Law Firm, P.C.
111 West 5th St., Suite 700
Tulsa, OK 74103-4261
Tel: (918) 747-3491
Fax: (918) 743-6103
Estimated Assets: $500,000 to $1 million
Estimated Debts: $1 million to $10 million
Debtor's 20 Largest Unsecured Creditors:
Entity Nature of Claim Claim Amount
------ --------------- ------------
ResMed inventory $36,704
Attn: Krista Ross
8300 Bissonnette, Suite 640
Houston, TX 77074
Tel: (800) 424-0737
Fisher & Pakel inventory $33,268
22982 Alcalde Drive, Suite 101
Laguna Hills, CA 92653
Tel: (800) 446-3908
Pawnee Leasing inventory $25,634
Attn: Karlyce L. Beshears
700 Centre Ave.
Fort Collins, CO 80526
Respironics inventory $25,233
Chase Auto Financial 2007 escape; value $25,033
of security: $13,530
NetBank/Charter Capital inventory $22,002
Ford Credit 2006 van; value $18,423
of security: $11,000
American Express trade debt $14,501
Dickies inventory $11,698
Dell Financial lease $10,671
Gulf South Medical Supply inventory $9,691
Chase credit card $9,557
Accounting Principals trade debt $9,134
McKesson Medical-Surgical inventory $8,832
Wrigth Express Fleet fuel $8,657
Drummond Law Firm legal fees $8,209
Lowe's credit card $7,919
Newport Medical inventory $7,843
GF Health Products Inc. inventory $7,740
Medline inventory $7,402
AIRTRAX INC: Says Restatement Cues Delayed 10QSB Filing
-------------------------------------------------------
Airtrax Inc. said in a press statement that the delayed filing of
its form 10QSB for the period ending Sept. 30, 2007, was caused by
an accounting requirement to restate certain prior financial
statements, beginning in 2004.
The restatement of prior period financial statements and the
related roll forward of information dating back to 2004, is the
result of the incorrect accounting for certain derivative
financial instruments issued in connection with prior convertible
debt and equity financings.
The company is in the process of restating these financial
reports: Form 10KSB for the year ending periods of Dec. 31, 2004,
2005 and 2006, together with Form 10QSB for the quarter ending
periods of March 31, 2005, June 30, 2005, Sept. 30, 2005, March
31, 2006, June 30, 2006, Sept. 30, 2006, March 31, 2007, and June
30, 2007.
Once completed the restatements are anticipated to properly
reflect the company's financial position prior to the three month
period ending Sept. 30, 2007.
The restatements will result in non-cash and non-operational
related charges to earnings/losses. Subsequent to the filing of
the 10QSB for the period ending on Sept. 30, the company will file
the restated reports with the SEC.
It is anticipated that Airtrax's form 10QSB for the period ending
September 30 will be filed this week, and subsequently the 'E'
will be removed from the ticker symbol and it will revert back to
'AITX'.
About Airtrax Inc
Headquartered in Blackwood, New Jersey, Airtrax Inc. (AITX.OB) --
http://www.airtrax.com/-- developst omni-directional vehicles for
material handling applications in the United States. The company
also develops related components, including the shaped wheels,
motors, and frames.
Going Concern Doubt
Robert G. Jeffrey, Certified Public Accountant, expressed
substantial doubt about Airtrax's ability to continue
as a going concern after it audited the company's financial
statements for the year ended March 31, 2007. The auditing
firm pointed to the company's working capital deficiency of
$3.3 million and accumulated deficit of $29.8 million. In
addition, the firm disclosed that the company has a continuing
record of losses.
ALLIS-CHALMERS: S&P Holds 'B' Rating and Revises Outlook to Pos.
----------------------------------------------------------------
Standard & Poor's Ratings Services revised its outlook on Allis-
Chalmers Energy Inc. to positive from stable and affirmed its 'B'
corporate credit rating on the company.
"The revised outlook reflects Allis' improved scale and scope and
management's adherence to its stated financial policy," said
Standard & Poor's credit analyst Amy Eddy.
Since the initial rating was assigned, Allis has diversified its
service offerings and expanded internationally. Still, the
speculative-grade rating on Allis also reflects the integration
risk associated with this growth strategy, the company's small
size, and the highly cyclical nature of the oilfield services
industry.
Allis is a small, rapidly growing oilfield services company
operating primarily in Texas, Louisiana, and Argentina.
ALTRA INDUSTRIAL: S&P Affirms 'B' Rating and Revises Outlook
------------------------------------------------------------
Standard & Poor's Ratings Services revised its outlook on Quincy,
Massachussetts-based Altra Industrial Motion Inc. to positive from
stable. At the same time, S&P affirmed the 'B' corporate credit
rating and other ratings on the company.
"The outlook revision reflects improved credit measures following
debt reduction resulting from a stock offering and continued
improvement in operating performance," said Standard & Poor's
credit analyst Sarah Wyeth. "It also reflects the potential for
less aggressive financial policies now that the company's private
equity sponsor has sold its ownership." The improvement in
measures also comes despite the recent acquisition of TB Wood's
Corp. for $94 million.
The speculative-grade ratings on the manufacturer of mechanical
power transmission products reflect its vulnerable business risk
profile and highly leveraged financial profile. The ratings also
reflect the company's historically high but improving
indebtedness, its weak margins, and the fragmented, cyclical, and
highly competitive nature of the industry. However, the ratings
also take into account the company's leading positions in niche
segments, strong brand names, and good customer, geographic, and
end-market diversity.
S&P could upgrade the company one notch in the near term if it
maintains better-than-expected credit measures and more moderate
financial policies.
AMACORE GROUP: Sept. 30 Balance Sheet Upside-Down by $1.4 Million
-----------------------------------------------------------------
The Amacore Group Inc.'s consolidated balance sheet at Sept. 30,
2007, showed $2.9 million in total assets and $4.3 million in
total liabilities, resulting in a $1.4 million total shareholders'
deficit.
The company's consolidated balance sheet at Sept. 30, 2007, also
showed strained liquidity with $2.3 million in total current
assets available to pay $4.3 million in total current liabilities.
The company reported a net loss of $1.2 million on sales of
$215,005 for the third quarter ended Sept. 30, 2007, compared with
a net loss of $49,033 on sales of $93,549 in the same period last
year.
Operating expenses for the three months ended Sept. 30, 2007, were
$1.3 million, versus $595,921 for the same period of 2006.
As of Sept. 30, 2006, the company redeemed the convertible notes
that had been determined to be derivative financial instruments,
which resulted in the recording of a gain on extinguishment of
debt of $493,695. There were no derivative financial instruments
as of Sept. 30, 2007.
Full-text copies of the company's consolidated financial
statements for the quarter ended Sept. 30, 2007, are available for
free at http://researcharchives.com/t/s?261f
Going Concern Doubt
The Amacore Group Inc. has sustained operating losses in recent
years. Further for the nine months ended Sept. 30, 2007, The
Amacore Group had negative working capital of approximately
$2,006,073, a net loss of $7,841,882 and has incurred substantial
losses in previous years resulting in an accumulated deficit of
approximately $63,000,000. These factors raise substantial doubt
about the ability of The Amacore Group to continue as a going
concern.
About The Amacore Group Inc.
Headquartered in Tampa, Fla., The Amacore Group Inc. (OTC BB:
ACGI) -- http://www.amacoregroup.com/-- offers healthcare
solutions to families, individuals, small and large employer
groups, and association markets through a wide array of unique
products, benefits and services created for the Consumer Driven
Healthcare market.
AMERICAN MEDIA: S&P Affirms Junk Corporate Credit Rating
--------------------------------------------------------
Standard & Poor's Ratings Services affirmed its 'CCC+' corporate
credit rating on American Media Operations Inc. and raised the
rating on the company's senior secured bank loan to 'B' from 'B-'.
At the same time, S&P removed the ratings from CreditWatch with
negative implications, where they were placed on Feb. 21, 2006,
based on the company's delay in filing its financial statements.
The outlook is developing.
The rating action is based on the company's filing of its past due
financial statements and third-quarter SEC Form 10-Q within the
required window of time, alleviating Standard & Poor's prior
concern that a continued delay in filing could have lead to an
imminent event of default. "The developing outlook," said
Standard & Poor's credit analyst Hal F. Diamond, "reflects our
uncertainty regarding the company's liquidity amid tightening
covenants and refinancing risk within the next two years, but also
the possibility of credit profile improvement in the event the
company does complete a refinancing."
AMERICAN REPROGRAPHICS: Completes $350 Million Credit Refinancing
-----------------------------------------------------------------
American Reprographics Company has completed the refinancing of
its existing credit facilities. The company's new senior secured
credit facilities consist of a five-year $275 million term loan
and a five-year $75 million revolving credit facility, both
increases from the company's $264 million outstanding term loan
and $30 million revolving credit facility.
The new facilities were priced at LIBOR plus 175 basis points and
were provided by a syndicate of international banks led by J.P.
Morgan Securities Inc. and Wachovia Capital Markets LLC, as Joint
Lead Arrangers and Joint Bookrunners, and Bank of America and
Wells Fargo, as Documentation Agents.
The refinancing is expected to provide American Reprographics
Company with greater financial flexibility while allowing for a
continuation of the company's strategic acquisition program. The
new agreement also is structured to allow the Company to pursue
stock repurchases of up to $200 million, subject to certain
financial conditions, primarily with proceeds from permitted
subordinated debt.
"We are extremely pleased with this outcome," K. "Suri"
Suriyakumar, president and CEO of American Reprographics Company,
stated. "At a time when the credit markets are tough and market
conditions are volatile, increasing the size of our facilities
with such attractive terms is a testament to the underlying
strength of our business. Moreover, the fact that some of the
world's leading banks have stamped their approval on these
facilities after extensive due diligence and a thorough review of
our financials is very gratifying."
"Our previous credit agreement contained restrictions that
prohibited the company from engaging in any stock repurchase
transactions," Mr. Suriyakumar also noted. "ARC has been
authorized to repurchase up to $150 million of its common shares,
and the new agreement provides us opportunities to do so,
primarily by issuing subordinated debt."
"Substantially increasing our credit facility provides more
financial flexibility for future growth initiatives," said
Jonathan Mather, chief financial officer of American Reprographics
Company. "We are pleased with the pricing of this loan relative
to today's tight credit market, well as Standard & Poor's improved
rating of investment grade BBB- and Moody's rating of Ba2 on the
new facilities."
About American Reprographics Company
Based in Walnut Creek, California, American Reprographics Company
(NYSE:ARP) -- http://www.e-arc.com/-- is providing business-to-
business document management technology and services to the
architectural, engineering and construction, or AEC industries.
The company provides these services to companies in non-AEC
industries, such as technology, financial services, retail,
entertainment, and food and hospitality, which also require
sophisticated document management services. American Reprographics
Company provides its core services through its suite of
reprographics technology products, a network of more than 300
locally-branded reprographics service centers across the U.S., and
on-site at more than 4,000 customer locations. The company's
service centers are arranged in a hub and satellite structure and
are digitally connected as a cohesive network, allowing the
provision of services both locally and nationally to more than
140,000 active customers.
* * *
As reported in the Troubled Company Reporter on Nov. 16, 2007,
Moody's Investors Service assigned these ratings on American
Reprographics Company: (i) $75 million senior secured first lien
revolver due 2012, Ba2 (LGD2, 22%); and (ii) $275 million senior
secured first lien term loan due 2012, Ba2 (LGD2, 22%).
Moody's affirmed these ratings: (i) corporate family rating, at
Ba3; and probability of default rating, at B1. The outlook has
been changed to stable from positive.
ATLANTIC EXPRESS: S&P Holds All Ratings and Revises Outlook
-----------------------------------------------------------
Standard & Poor's Ratings Services revised its outlook on Atlantic
Express Transportation Corp. to negative from stable. S&P
affirmed all ratings, including the 'B-' long-term corporate
credit rating.
"The outlook revision is based on weakening of the company's
financial performance and credit metrics over the past six
months," said Standard & Poor's credit analyst Funmi Afonja. "The
company's earnings and cash flow have been negatively affected by
lower revenues, rising fuel prices at a time when the company does
not hedge for its fuel cost, and higher labor costs trends that
are likely to continue over the next 6 to 12 months."
Ratings on New York City-based Atlantic Express Transportation
Corp. reflect the company's highly leveraged financial profile,
significant customer concentration, vulnerability to rising fuel
prices, and labor cost increases. Atlantic Express derives just
over half of its revenues from the New York City Department of
Education. The contract with the DOE, which was extended in June
2005 and runs through June 2010, includes full annual CPI
increases that cover only a portion of fuel price increases.
Weaker-than-expected operating performance coupled with higher
capital expenditures and debt service requirements have tightened
Atlantic Express's liquidity position and weakened credit metrics.
At Sept. 30, 2007, funds from operations to debt was 5.2% and debt
to EBITDA was 7.9x, compared with 7.2% and 6.9x at June 30, 2007,
respectively. Continuing revenue declines or cost increases could
weaken credit metrics further. Cost pressures led Atlantic
Express to seek bankruptcy court protection in 2002. The company
emerged from bankruptcy in 2003.
Atlantic Express is one of the larger providers of school bus
transportation in the U.S. and the leading provider in New York
City. School bus services account for about 89% of revenues. The
company also provides paratransit services for physically and
mentally disabled passengers and other services, including express
commuter lines and tour buses.
Atlantic Express's liquidity is limited but should be adequate to
meet debt service requirements over at least the next year. The
company relies primarily on internally generated cash and its line
of credit to meet liquidity requirements, although it has also
recently tapped into additional sources of liquidity, including
sale-leaseback transactions.
The company's financial profile has weakened as a result of rising
fuel prices, higher labor costs, and liquidity constraints. A
further material weakening would likely result in a downgrade.
S&P consider an outlook revision to stable unlikely unless costs
or revenues were to recover.
BANKRUPTCY MANAGEMENT: Weak Performance Cues S&P to Cut Rating
--------------------------------------------------------------
Standard & Poor's Ratings Services lowered its corporate credit
rating on Irvine, California-based Bankruptcy Management Solutions
Inc. to 'B-' from 'B'. The downgrade reflects the company's
weakened operating performance and debt protection metrics, due to
challenging industry conditions. The outlook is stable.
"The ratings on BMS reflect the company's leveraged financial
profile, narrow business focus, and declining revenue base," said
Standard & Poor's credit analyst Molly Toll-Reed.
BMS provides bankruptcy trustees in the U.S. with a comprehensive
solution set, including hardware, software, and services, enabling
the complete management of bankruptcy cases. The company's
revenue generation, and corresponding profitability, are linked
directly to the amount of bankruptcy funds held in the custody of
trustees, who are contractually obligated to deposit their cash
balances with a depository institution selected by BMS. Recent
dislocations in short-term interest rates have hurt the company's
interest income on its investment portfolio, but we expect that
dislocation to be minimized by the company's hedging activities.
In the 12 months ended Sept. 30, 2007, BMS' EBITDA declined 12%
from the comparable period. Given the much weaker-than-expected
profitability, financial leverage is high for the rating.
Including the senior unsecured payment-in-kind notes at the
holding company, total debt to EBITDA is approximately 10x.
BARCLAYS CAPITAL: S&P Retains BB+ Rating Under Developing Watch
---------------------------------------------------------------
Standard & Poor's Ratings Services raised its ratings on two
classes of Barclays Capital Commercial Real Estate LLC Grantor
Trust certificates from TERRA LNR I Ltd. and removed them
from CreditWatch, where they were placed with developing
implications on Nov. 8, 2007. Four other ratings remain on
CreditWatch developing.
The raised ratings are due to the payoff of the largest loan, West
Park Master Planned Community, which will be reflected in the next
remittance report. With the payoff of Westpark, the class B and C
certificate balances will be retired, and the class D certificate
balance will be reduced. Standard & Poor's is currently
evaluating the collateral performance of the two remaining
projects, Potomac Yards and Stetson Valley. In addition, S&P are
reviewing the impact that the Nov. 2, 2007, downgrades of Centex
Corp. (BBB-/Negative/A-3), Lennar Corp. (BB+/Negative/--), and
Pulte Homes Inc. (BB+/Negative/--) could have on those companies'
ability to meet their required financial guarantees. The ratings
on the certificates from TERRA LNR 1 Ltd. depend partially on the
ratings on these three companies, which provide two types of
financial guarantees to the loan collateral.
S&P will resolve the four remaining CreditWatch placements
affecting the TERRA LNR I Ltd. certificates once S&P complete its
evaluation.
Ratings Raised and Removed from Creditwatch Developing
TERRA LNR 1 Ltd.
Barclays Capital Commercial Real Estate LLC
Grantor Trust certificates
Rating
------
Class To From
----- -- ----
B AAA AA/Watch Dev
C AAA A/Watch Dev
Ratings Remaining on Creditwatch Developing
TERRA LNR 1 Ltd.
Barclays Capital Commercial Real Estate LLC
Grantor Trust certificates
Class Rating
----- ------
D A-/Watch Dev
E BBB/Watch Dev
F BBB-/Watch Dev
G BB+/Watch Dev
Other Outstanding Ratings
TERRA LNR 1 Ltd.
Barclays Capital Commercial Real Estate LLC
Grantor Trust certificates
Class Rating
----- ------
A-1 AAA
A-2 AAA
BARNERT HOSPITAL: Withdraws $5 Million DIP Financing Pact with NHC
------------------------------------------------------------------
Nathan and Miriam Barnert Memorial Hospital Association dba
Barnert Hospital has withdrawn, without prejudice, its request for
approval of a debtor-in-possession financing agreement with
Northern Healthcare Capital LLC.
The Debtor did not state any reasons for withdrawing the request.
A hearing to consider approval of the Debtor's request has been
set on Dec. 6, 2007, at 10:00 a.m.
On Nov. 9, 2007, Northern Healthcare agreed to provide the Debtor
with up to $5 million of revolving credit facility. Interest on
the loan is 4.25% per annum.
The proposed lending facility was to be structured initially as a
sub-limit for advances of up to a maximum of $2,500,000.
The funds was intended to pay the Debtor's bankruptcy expenses.
As adequate protection for NHC, the Debtor proposed to grant NHC
a senior and priming lien on all of the Debtor's accounts and
account related intangibles.
Nathan and Miriam Barnert Memorial Hospital Association, dba
Barnert Hospital, owns and operates a 256 bed general acute
care community hospital located at 680 Broadway in Paterson,
New Jersey. The company filed for chapter 11 protection on
Aug. 15, 2007 (Bankr. D. N.J. Case No. 07-21631). David J. Adler,
Esq., at McCarter & English, LLP, represents the Debtor in its
restructuring efforts. Warren J. Martin Jr., Esq. and John S.
Mairo, Esq., at Porzio Bromberg & Newman, P.C., represent the
Official Committee of Unsecured Creditors in this case. Donlin
Recano & Company Inc. is the Debtor's claims, noticing, and
balloting agent. The Debtor's schedules reflect total assets
of $46,600,967 and total liabilities of $61,303,505.
BEARINGPOINT INC: Sept. 30 Balance Sheet Upside-Down by $362 Mil.
-----------------------------------------------------------------
Bearingpoint Inc. reported financial results for the quarter ended
Sept. 30, 2007.
At Sept. 30, 2007, the company's balance sheet total assets of
$116.0 million and total liabilities of $2.4 billion, resulting in
a stockholders' deficit of $362.5 million.
The company reported a net loss of $68.0 million on $861.8 million
revenues for the quarter ended Sept. 30, 2007, compared with a net
loss of $29.6 million on $843.2 million revenues for the quarter
ended Sept. 30, 2006.
The change in net loss was primarily attributable to:
* a decrease in gross profit of $26.3 million;
* an increase in interest expense of $8.9 million in the third
quarter of 2007, due to interest attributable to our 2007
Credit Facility; and
* an increase in income tax expense of $11.6 million in the
third quarter of 2007.
The increase in net loss was partially offset by a decrease in
SG&A expenses of $13.0 million in the third quarter of 2007.
Nine Months Financial Results
During the nine months ended Sept. 30, 2007, the company realized
a net loss of $193.7 million, representing an increase of
$88.5 million over a net loss of $105.2 million during the nine
months ended Sept. 30, 2006. This change in net loss was
primarily attributable to:
* a decrease in gross profit of $41.8 million;
* the recognition of $38.0 million in other income in the first
quarter of 2006 in connection with insurance settlement
payments made on behalf of the company in connection with the
settlement of our contract with Hawaiian Telcom
Communications, Inc.;
* an increase in interest expense of $17.6 million in the nine
months ended Sept. 30, 2007, due to interest attributable
to our 2007 Credit Facility and the acceleration of debt
issuance costs resulting from the termination of the 2005
Credit Facility; and
* an increase in income tax expense of $11.8 million in the
nine months ended Sept. 30, 2007.
The increase in net loss was partially offset by a decrease in
SG&A expenses of $26.3 million in the nine months ended Sept. 30,
2007.
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.
BIO-KEY INT'L: Sept. 30 Balance Sheet Upside-Down by $2 Million
---------------------------------------------------------------
BIO-key International Inc.'s consolidated balance sheet at
Sept. 30, 2007, showed $13.7 million in total assets, $9.3 million
in total liabilities, and $6.4 million in redeemable convertible
preferred stock, resulting in a $2.0 million total shareholders'
equity.
The company reported a net loss of $1.2 million on revenues of
$2.2 million for the third quarter ended Sept. 30, 2007, compared
with a net loss of $6.2 million on revenues of $3.0 million in the
same period last year.
The net loss amount in the 2006 period included $5.5 million from
the extinguishment of convertible debt.
Third quarter 2007 revenue from continuing operations was impacted
primarily by delays in specific follow-on orders from several of
the company's Law Enforcement customers.
Going Concern Doubt
As reported in the Troubled Company Reporter on April 4, 2007,
Carlin, Charron, & Rosen LLP expressed substantial doubt about
BIO-Key International Inc.'s ability to continue as a going
concern after auditing the company's financial statements as of
the year ended Dec. 31, 2006. The auditing firm pointed to the
company's substantial net losses in recent years and accumulated
deficit of $53,842,000 at Dec. 31, 2006.
About BIO-Key International
Headquartered in Wall, N.J., BIO-key International Inc. (OTC BB:
BKYI) -- http://www.bio-key.com/-- develops and delivers
advanced identification solutions and information services to law
enforcement departments, public safety agencies, government and
private sector customers.
BIOVAIL CORP: S&P Lowers Corporate Credit Rating to BB from BB+
---------------------------------------------------------------
Standard & Poor's Ratings Services lowered its long-term corporate
credit rating on Mississauga, Ontario-based Biovail Corp. to 'BB'
from 'BB+'. At the same time, S&P affirmed the
'BBB-' senior secured debt rating, while the recovery rating
remains unchanged at '1', indicating an expectation of very high
(90%-100%) recovery in the event of a payment default. The
outlook is stable.
"The downgrade reflects a weakening of the business risk profile
caused by delays in obtaining FDA approval for the new salt
formulation of Wellbutrin XL, increased generic competition in
many product categories, and limited new revenue drivers expected
from the product pipeline in the medium term," said Standard &
Poor's credit analyst Maude Tremblay. The company is considering
acquisitions to strengthen its business and technology base;
however, a significant acquisition would likely weaken the
company's credit protection measures thus offsetting the
improvement to the company's business risk profile.
The ratings reflect the challenges facing the company's drug
franchise, namely increased generic competition for key products
and product approval delays, limited new revenue drivers from the
product pipeline expected before 2010, an aggressive dividend
policy, and several ongoing regulatory inquiries yet to be
resolved. These factors are partially offset by solid credit
protection measures for the ratings as well as ample liquidity and
free operating cash flow generation.
Biovail is a specialty pharmaceutical company engaged in the
development, manufacture, sale, and marketing of medications using
advanced drug delivery technologies to develop enhanced
formulations of approved compounds and controlled-release generic
products. The company focuses primarily on three
major therapeutic areas: cardiovascular, central nervous system,
and pain management. Biovail's products are sold largely through
marketing partnerships in the U.S. and through Biovail
Pharmaceuticals Canada in Canada.
The stable outlook incorporates Biovail's significant financial
capacity to conduct acquisitions or licensing deals, strong free
cash flows, and S&P's belief that the company will approach
acquisitions in a measured fashion. S&P could revise the outlook
to negative if increased generic competition results in a
significant deterioration in the company's free operating cash
flow generation. Alternatively, S&P would review the ratings if
acquisitions resulted in material changes to the company's credit
protection measures. Standard & Poor's believes that the various
regulatory inquiries currently under way will be settled without
financial damages material enough to affect these credit
protection measures. There is little upside potential to the
ratings at this time given the uncertainty surrounding the
company's revenue stream in the medium term.
BISON PARK: Case Summary & Six Largest Unsecured Creditors
----------------------------------------------------------
Debtor: Bison Park Development, L.L.C.
fka Bison Development Company, L.L.C.
c/o Jonathan A. Margolies
Shughart Thomson & Kilroy, P.C.
120 West 12th Street
Kansas City, MO 64105
Tel: (816) 421-3355
Bankruptcy Case No.: 07-22754
Chapter 11 Petition Date: December 6, 2007
Court: District of Kansas (Kansas City)
Debtor's Counsel: Jonathan A. Margolies
Shughart Thomson & Kilroy, P.C.
120 West 12th Street, Suite 1500
Twelve Wyandotte Plaza
Kansas City, MO 64105
Tel: (816) 374-0551
Fax: (816) 374-0509
Total Assets: $2,716,926
Total Debts: $1,566,287
Debtor's Six Largest Unsecured Creditors:
Entity Nature of Claim Claim Amount
------ --------------- ------------
August Ruf loans $499,832
9055 Clare Road
Lenexa, KS 66227
Troy Ruf loans $215,110
10334 Manor Road
Lenexa, KS 66227
Alexander Construction Co., loans $70,528
Inc.
9055 Clare Road
Lenexa, KS 66227
Dorothy D. McDonald loan $10,000
Technical Design Services trade debt $9,750
The Examiner trade debt $1,767
BLACK GAMING: Moody's Affirms B3 Corporate Family Rating
--------------------------------------------------------
Moody's Investors Service revised Black Gaming, LLC's rating
outlook to negative from stable and lowered the company's
speculative grade liquidity rating to SGL-4 from SGL-3. Black
Gaming's B3 corporate family, B3 probability of default, B2 senior
secured debt and Caa2 senior subordinated debt ratings were
affirmed. However, in accordance with Moody's Loss Given Default
methodology, the point estimates for the senior secured debt were
revised to (LGD-3, 40%) from (LGD-3, 43%) and the point estimates
for the senior subordinated debt were revised to (LGD-5, 88%) from
(LGD-5, 89%).
The negative rating outlook reflects lower third quarter revenues
along with the expectation that the fourth quarter will experience
a similar trend. This trend will make it more difficult for the
company to reduce its already high leverage, debt/EBITDA for the
latest 12 month period ended Sep. 30, 2007 was approximately 9.0
times, and unless the company's cost cutting plans are successful
and significant enough, the company may need to draw its remaining
revolver availability. Currently, the company has $5.5 million
available on its $15 million revolver.
The downgrade of the Black Gaming's speculative grade liquidity
rating to SGL-4 from SGL-3 considers that, in addition to negative
operating trends, its revolver expires in the next twelve months.
Given the small size and super senior ranking of the revolver,
Moody's does not expect the company will be unable to refinance
the facility. However, for SGL purposes, Moody's treats all debt
maturities coming due within the next 12 months as a current cash
obligation, and does not assume a successful refinancing will
occur.
The affirmation of Black Gaming's B3 corporate family rating
acknowledges that, despite the company's high leverage and near-
term liquidity challenges, it is expected to meet the most
restrictive financial covenant contained in its bank credit
agreement, the minimum EBITDA requirement, which along with the
maximum capital expenditure covenant, was modified pursuant to a
recent covenant amendment. However, further deterioration of
operating results could result in a downgrade. Ratings could also
be lowered in the near-term if it appears that the company may not
be able to refinance its revolving credit facility on favorable
terms.
Moody's prior rating action related to Black Gaming occurred on
Oct. 27, 2006 with the affirmation the company's B3 corporate
family rating and stable outlook
Black Gaming owns and operates the CasaBlanca, the Oasis, and the
Virgin River casino/hotels in Mesquite, Nevada, which are located
approximately 80 miles north of Las Vegas, Nevada. The company
also owns the Mesquite Star, a non-operating casino property that
is currently being used as a special events center. Net revenues
for the 12-month period ended Sep. 30, 2007 were $161 million.
BLACKHAWK AUTOMOTIVE: Wants Auction Sale Set for February 2008
--------------------------------------------------------------
Blackhawk Automotive Plastics Inc. seeks authority from the
U.S. Bankruptcy Court for the Northern District of Ohio to
sell its business at auction in late February 2008, Bill
Rochelle of Bloomberg News reports.
According to Bloomberg, the Debtor proposed a bid deadline
of Feb. 29, 2008.
The sale of the Debtor's assets is required by a $3.7 million
postpetition financing agreement it signed with certain
lenders, Bloomberg relates.
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.
BLAST ENERGY: Files 2nd Amended Chapter 11 Plan of Reorganization
-----------------------------------------------------------------
Blast Energy Services Inc. and Eagle Domestic Drilling Operations
LLC delivered to the United States Bankruptcy Court for the
Southern District of Texas a Second Amended Chapter 11 Plan of
Reorganization dated Dec. 3, 2007.
As reported in the Troubled Company Reporter on Dec. 6, 2007,
the Hon. Jeff Bohm deferred the hearing to consider confirmation
of the Debtors' Joint Plan to Jan. 30, 2008, at 9:00 a.m.
The plan confirmation hearing was previously scheduled on Nov. 28,
2007.
As reported in the Troubled Company Reporter on Oct. 22, 2007,
Judge Bohm approved the Amended Disclosure Statement explaining
the Debtors' Plan citing that it contained "adequate information"
as required by Section 1125 of the Bankruptcy Code.
Treatment of Claims
Under the Second Amended Plan, Administrative Claims will be paid
in full and in cash on the effective date.
Each holder of Priority Tax Claims, if any, will be paid in equal
annual installments of principal and interest.
Class 1 Allowed Priority Claims, totaling approximately $40,000,
are expected to recover 100% of their allowed claim amounts either
in cash or through a lesser treatment agreed to in writing.
Laurus Master Fund Ltd.'s secured claim will be fully satisfied
by:
a) transfer of rigs pursuant to a settlement agreement and a
related sale order; and
b) payment of $2,100,000 pursuant to a settlement agreement
and a related sale order.
Berg McAfee Companies LLC's $1,120,000 estimated secured claim
will be fully satisfied by issuance to Berg McAfee of a new three
year note in the amount of $1,120,000 with an annual interest rate
of 8%, with interest payable at the end of the term in Reorganized
Blast Common Stock, and with a principal conversion right
exercisable at Berg McAfee's election.
Other secured claims, will, at the Debtors' option, either:
a) be paid in cash in full;
b) receive, without representation or warranty, the collateral
securing its claim; or
c) receive a note, secured by a lien securing its allowed
secured claim.
Holders of Convenience Claims against both Debtors will receive,
in full and final satisfaction of their claim, cash on the
distribution date equal to 75% of the allowed claim amounts.
Except to the extent that a holder of an Allowed Class 8 Unsecured
Claim has agreed to receive other lesser treatment, such holder
will receive on the Effective Date in full and final satisfaction
of its Claim Cash equal to 100% of such holder's Allowed Unsecured
Claim, provided, however, that if such Claim is not Allowed on the
Effective Date, then payment will be made on the Distribution
Date.
Second Bridge LLC's 900,000 shares of Blast common stock will, on
the effective date, be purchased by Reorganized Blast for $900.
Each holder of Allowed Unsecured Directors' Claim will be
converted to Blast common stock at the rate of $ 0.20 per share.
This class of claims in the Plan was created at the request of the
Official Committee of Unsecured Creditors and informally has been
consented to by each member of the Debtors' Board of Directors.
All interests in the Debtors will be retained by the holders in
the current form.
About Blast Energy Services
Headquartered in Houston, Blast Energy Services and its debtor-
affiliate Eagle Domestic Drilling Operations LLC --
http://www.blastenergyservices.com/-- owns and contracts land
drilling rigs to third parties. The Debtor also provides services
relating to drilling rig operations.
Blast Energy owns and develops abrasive jetting intellectual
property, technology and equipment providing downhole production
enhancement and drilling solutions, and satellite broadband access
for Internet, data, email, applications, VoIP and video streaming
as energy industry management tools providing real-time
supervisory control and data acquisition.
The company filed for Chapter 11 protection on Jan. 19, 2007
(Bankr. S.D. Tex. Case No. 07-30424 and 07-30426). H. Rey
Stroube, III, Esq., represent the Debtors. The Official Committee
of Unsecured Creditors is represented by Alan D. Halperin, Esq.,
at Halperin Battaglia Raicht LLP. When the Debtor filed for
protection from its creditors, it listed total assets of
$63,500,851 and total debts of $51,019,486.
BLAST ENERGY: Sept. 30 Balance Sheet Upside-Down by $5,062,379
--------------------------------------------------------------
Blast Energy Services Inc.'s consolidated balance sheet at
Sept. 30, 2007, showed $2,975,499 in total assets and $8,037,878
in total liabilities, resulting in a $5,062,379 total
stockholders' deficit.
At Sept. 30, 2007, the company's consolidated balance sheet also
showed strained liquidity with $933,828 in total current assets
available to pay $8,037,878 in total current liabilities.
The company reported a net loss of $605,947 on total revenue of
$80,151 for the third quarter ended Sept. 30, 2007, compared with
a net loss of $3,161,763 on total revenue of $251,714 in the same
period of 2006.
Full-text copies of the company's consolidated financial
statements for the quarter ended Sept. 30, 2007, are available for
free at http://researcharchives.com/t/s?262e
About Blast Energy Services
Headquartered in Houston, Blast Energy Services and its debtor-
affiliate Eagle Domestic Drilling Operations LLC --
http://www.blastenergyservices.com/-- owns and contracts land
drilling rigs to third parties. The Debtor also provides services
relating to drilling rig operations.
Blast Energy owns and develops abrasive jetting intellectual
property, technology and equipment providing downhole production
enhancement and drilling solutions, and satellite broadband access
for Internet, data, email, applications, VoIP and video streaming
as energy industry management tools providing real-time
supervisory control and data acquisition.
The company filed for Chapter 11 protection on Jan. 19, 2007
(Bankr. S.D. Tex. Case No. 07-30424 and 07-30426). H. Rey
Stroube, III, Esq., represent the Debtors. The Official Committee
of Unsecured Creditors is represented by Alan D. Halperin, Esq.,
at Halperin Battaglia Raicht LLP. When the Debtor filed for
protection from its creditors, it listed total assets of
$63,500,851 and total debts of $51,019,486.
BRIAN BEITEL: Case Summary & 13 Largest Unsecured Creditors
-----------------------------------------------------------
Debtor: Brian A. Beitel
1505 Mountain Spring Circle
Huntsville, AL 35801
Bankruptcy Case No.: 07-83267
Chapter 11 Petition Date: December 5, 2007
Court: Northern District of Alabama (Decatur)
Judge: Jack Caddell
Debtor's Counsel: Kevin D. Heard, Esq.
Heard & Associates, L.L.C.
307 Clinton Avenue West, Suite 310
Huntsville, AL 35801
Tel: (256) 535-0817
Fax: (256) 535-0818
Total Assets: $624,498
Total Debts: $2,941,153
Debtor's 13 Largest Unsecured Creditors:
Entity Nature of Claim Claim Amount
------ --------------- ------------
Internal Revenue Serice 2003, 2004 and $874,587
A.C.S. Suppot 2005 1040 tax
P.O. Box 57 returns
Bensalem, PA 19020-0057 tax lien filed
1040 Tax Returns $874,587
for 2003, 2004 and
2005
O.C.A., Inc. Judgment Claim $668,000
c/o Ryan K. Cochran
511 Union Street Suite 2700
Nashville, TN 37219
SouthTrust Mortgage 1505 Mountain $488,451
P.O. Box 11407 Spring Circle
Birmingham, AL 35246 Huntsville,
Alabama 35801;
value of security:
$720,000; value of
senior lien:
$419,578
Chase Visa open account $16,969
American Express $5,661
Target Visa open account $5,575
Capital One open account $3,042
Bank of Vernon $1,570
Huntsville Utilities $996
Nesbitt & Associates $750
Pitney Bowes Credit Corp. $600
Verizion Wireless phone service $326
Network Solutions $35
CAMBIUM LEARNING: Weak Performance Cues S&P's Negative Watch
------------------------------------------------------------
Standard & Poor's Ratings Services placed its 'B' corporate credit
rating and 'B+' bank loan rating on Cambium Learning Inc. on
CreditWatch with negative implications. Natick, Massachussetts-
based Cambium Learning had total debt of $186 million at Sept. 30,
2007.
"The CreditWatch listing reflects the company's weakening
operating performance and rising debt leverage," said Standard &
Poor's credit analyst Hal F. Diamond, "which could jeopardize the
company's ability to comply with its bank debt covenant levels if
sustained."
CENVEO INC: Good Profitability Cues S&P to Lift Rating to BB-
-------------------------------------------------------------
Standard & Poor's Ratings Services raised its ratings on Cenveo
Inc. The corporate credit rating was raised to 'BB-' from 'B+'.
The rating outlook is stable.
"The upgrade reflects strong improvements in profitability and
cash flow generation, increased cash flow diversity as a result of
acquisitions, and success in integrating acquisitions and
achieving synergies from those acquisitions," said Standard &
Poor's credit analyst Melissa Long.
Cenveo has experienced some decline in revenues from its legacy
business in 2007, primarily due to plant closures. However,
Standard & Poor's expects that the company will continue to
improve operating performance at the EBITDA line, generating in
excess of $300 million in EBITDA in 2008. Pro forma for the 2006
acquisition of Rx Label Technology Corp. and the 2007 acquisitions
of Cadmus Communications Corp., Printegra Corp., Madison/Graham
ColorGraphics Inc., and Commercial Envelope Manufacturing Co.
Inc., S&P estimate Cenveo had total lease-adjusted debt to EBITDA
(excluding integration synergies) of 5.2x at September 2007.
Including $30 million in expected synergies from the integration
of these acquisitions, total lease-adjusted debt to EBITDA was in
the high-4x area.
The 'BB-' rating reflects Stamford, Conn.-based Cenveo's high
leverage pro forma for recent acquisitions, the likelihood of more
debt-financed acquisitions in the intermediate term, and
participation in highly competitive and fragmented markets. These
factors are somewhat offset by operating improvements in 2006 and
the expectation for continued growth in profitability and cash
flow generation.
CHASE COMMERCIAL: Fitch Holds 'B-' Rating on $8.1MM Certificates
----------------------------------------------------------------
Fitch Ratings affirmed Chase Commercial Mortgage Securities
Corp.'s commercial mortgage pass-through certificates, series
1997-2 as:
-- Interest only class X at 'AAA';
-- $10.4 million class D at 'AAA';
-- $12.2 million class E at 'AAA';
-- $48.8 million class F at 'AAA';
-- $6.1 million class G at 'AA+';
-- $12.2 million class H at 'BB+';
-- $8.1 million class I at 'B-'.
The $4.8 million class J certificates are not rated by Fitch.
Classes A-1, A-2, B and C are paid in full.
Affirmations are due to the stable performance and the large
percentage of defeased loans remaining in the pool. As of the
November 2007 distribution date, the pool's aggregate collateral
balance has been reduced 87.4%, to $102.6 million from $814
million. Since the distribution date, six of the defeased loans
and six of the non-defeased loans paid off at maturity.
Three loans recently transferred to the special servicer, as they
did not pay off at their Dec. 1, maturity. Fitch will continue to
monitor the progress of the loans in special servicing.
Thirteen loans remain outstanding, three of which are defeased
(13.7%). The remaining loans are all amortizing and interest
rates range from 7.20% to 8.98%.
The largest remaining loan (18.3%) in the transaction is a 239,179
square foot retail center located in Norwalk, California. The
loan is scheduled to mature in November 2012. The most recent
occupancy reported is 84.5% as of September 2007.
CHRYSLER LLC: S&P Retains 'B' Rating and Revises RR to 3
--------------------------------------------------------
Standard & Poor's Ratings Services revised its recovery rating on
Chrysler's $2 billion senior secured second-lien term loan due
2014. The issue-level rating on this debt remains unchanged at
'B', and the recovery rating was revised to '3', indicating an
expectation for meaningful (50% to 70%) recovery in the event of a
payment default, from '4'.
Both the issue-level and recovery ratings on Chrysler's $7 billion
first-lien term loan due 2013 remain unchanged. The issue-level
rating on this debt is 'BB-' with a recovery rating of '1',
indicating an expectation for very high (90% to 100%)
recovery in the event of a payment default.
"The revised recovery rating on the second-lien debt reflects
Chrysler's reduction of outstanding borrowings under the first-
lien term loan to $7.0 billion from $7.5 billion, using $500
million of cash that was previously restricted at DaimlerChrysler
Financial Services Americas LLC," said Standard
& Poor's recovery analyst Olen Honeyman.
The 'B' corporate credit rating on Chrysler reflects the wide-
ranging challenges the company faces in North America, where the
vast majority of its automotive operations are located.
Ratings List
Ratings Affirmed
Chrysler LLC
Corporate Credit Rating B/Negative/--
First-Lien Loan BB-
Recovery Rating 1
Recovery Rating Revised
To From
-- ----
Second-Lien Loan B B
Recovery Rating 3 4
CITADEL BROADCASTING: S&P Revises Outlook to Stable from Positive
-----------------------------------------------------------------
Standard & Poor's Rating Services revised its outlook on Las
Vegas, Nevada-based Citadel Broadcasting Corp. to stable from
positive.
"The outlook revision reflects the company's disappointing third-
quarter results, primarily related to the newly acquired ABC Radio
stations, and our expectation that Citadel faces a longer-term
path to improving profitability at these stations," explained
Standard & Poor's credit analyst Michael Altberg.
S&P expect that the company's lower 2008 EBITDA guidance, in
addition to uncertainty surrounding delays in potential asset
sales in a tight credit market, will preclude Citadel from
deleveraging significantly over the intermediate term.
The ratings on Citadel reflect high debt leverage following the
June 2007 acquisition of ABC Radio, competition from larger radio
operators in the majority of its markets, transition risk
associated with the integration of ABC assets, and the potential
for advertising spending volatility. Citadel's good geographic
diversity and competitive positions in midsize and large radio
markets, high margin and free cash flow generation ability,
historical success in integrating stations and improving their
profitability, and track record of reducing debt leverage and
maintaining a flexible balance sheet partially offset these
factors.
CLAYTON HOLDINGS: Impairement Charge Cues S&P's Neg. Outlook
------------------------------------------------------------
Standard & Poor's Ratings Services revised its outlook on Shelton,
Connecticut-based Clayton Holdings Inc. to negative from stable.
The action follows the continued turmoil in the
subprime mortgage loan and securitization markets and the
company's announcement of an impairment charge to its goodwill and
other intangible assets and long-lived assets. Ratings on the
company, including the 'B+' corporate credit rating, are affirmed.
The company will record the impairment charge to its goodwill and
other intangibles and long-lived assets in its 2007 audited
financials statements. The charge currently is estimated to be
$75 million-$100 million.
"The rating reflects Clayton's narrow business profile,
significant exposure to macroeconomic factors that affect mortgage
origination and securitization, and noncontractual revenue
streams," said Standard & Poor's credit analyst David Tsui. "These
factors are offset partially by long-standing relationships with
top MBS originators, a good competitive
position, and conservative leverage levels for the rating."
Clayton is a service provider to buyers and sellers of, and
investors in, nonconforming loans and nonagency MBS securities.
CKE RESTAURANTS: Refranchising Continues; Sells 30 Restaurants
--------------------------------------------------------------
CKE Restaurants Inc. disclosed the sale of 30 restaurants as part
of its ongoing strategic refranchising program that was originally
disclosed in April 2007. The initiative is expected to involve
approximately 200 Hardee's restaurant locations in a number of
markets across the Midwest and Southeast.
To date, the company has sold 136 restaurants to franchisees and
secured commitments for 59 new franchise restaurants under
development agreements for those markets.
The company completed the sale of 30 restaurants in the
Kansas City market, including Topeka, Kansas and St. Joseph,
Missouri, to Rising Stars LLC. The franchisees purchasing the
restaurants, Steve Rosenfield and Buddy Brown, operate Hardee's
restaurants in Georgia, Montana and Wyoming, well as Carl's Jr.
restaurant locations in Colorado.
With the purchase of these additional restaurants, Rosenfield and
Brown now own more than 100 restaurants under the Hardee's and
Carl's Jr. flag. Rising Stars has also committed to build 15 new
Hardee's restaurant locations in the Kansas City market.
"Buddy and I are excited to increase our ownership in Hardee's
with the purchase of 30 units in the Kansas City market," said
franchisee Steve Rosenfield. "We believe the brand is well-
positioned for future success and look forward to developing
additional units over the coming years."
"We are very pleased to continue our strategic refranchising
program with the sale of 30 restaurants in Kansas City to Rising
Stars LLC," Andrew F. Puzder, the company's president and chief
executive officer, commented. "Steve and Buddy were the first
franchisees to acquire Hardee's restaurants under the
refranchising program we started in April, and the purchase of
these additional units reaffirms their commitment to the brand."
"This transaction allows us to further concentrate our focus on
growing our core markets, while at the same time accelerating unit
development in our franchise markets," Mr. Puzder added. "In
addition, our refranchising efforts lower our capital requirements
and increase our free cash flow. We look forward to continuing to
secure additional refranchising and development commitments in our
Hardee's footprint, and to the brand's continued growth."
As of the end of its fiscal 2008 second quarter, CKE Restaurants
Inc., through its subsidiaries, had a total of 3,036 franchised,
licensed or company-operated restaurants in 42 states and in 13
countries, including 1,111 Carl's Jr. restaurants and 1,909
Hardee's restaurants.
About CKE Restaurants
Headquartered in Carpinteria, California, CKE Restaurants Inc.
(NYSE: CKR) -- http://www.ckr.com/-- operates some of the most
popular U.S. regional brands in quick-service and fast-casual
dining, including the Carl's Jr.(R), Hardee's(R), La Salsa Fresh
Mexican Grill(R) and Green Burrito(R) restaurant brands.
As of the end of its fiscal 2008 second quarter, CKE Restaurants
Inc., through its subsidiaries, had a total of 3,036 franchised,
licensed or company-operated restaurants in 42 states and in 13
countries, including 1,111 Carl's Jr. restaurants and 1,909
Hardee's restaurants.
* * *
As reported in the Troubled Company Reporter on Troubled Company
on Sept. 10, 2007, Standard & Poor's Ratings Services revised its
outlook on CKE Restaurants Inc. to negative from stable. At the
same time, S&P affirmed all the ratings, including the 'BB-'
corporate credit rating, on the company.
COACH AMERICA: Moody's Cuts Corp. Family Rating to B3 from B2
-------------------------------------------------------------
Moody's Investors Service downgraded its debt ratings of Coach
America Holdings, Inc.; Corporate Family and Probability of
Default, each to B3 from B2, senior secured first lien to B2 from
B1 and senior secured second lien to Caa2 from Caa1. The rating
outlook is negative.
The downgrades were prompted by the weak operating results
recorded since the closing of the acquisition. Margins and EBITDA
in the third quarter of 2007 were meaningfully below the run rates
expected at the time Moody's initially rated Coach America. This
lower current earnings capacity could threaten Coach America's
ability to meet the de-levering contemplated by the acquisition
business case that supported the initial assignment of the B2 CFR
in the event the new management team is not able to meaningfully
improve the company's profitability.
The B3 CFR reflects the high leverage and very weak EBIT to
Interest coverage that has resulted from the recent poor operating
results. However, Moody's believes the new management team has
identified actions to reverse the recent very poor operating
performance and strengthen credit metrics above the current weak
levels. Coach America's revenue base remains intact and benefits
from high proportions of contracted or chartered business. The
company also maintains strong market positions in its markets.
The challenge lies in the inherited cost structure and management
culture, both of which the new management team has committed to
change. According to the company, the highly decentralized
management structure, inadequate planning, and incentive-based
compensation systems that promoted short-term profits are no
longer appropriate for the company's current scale nor for the
higher leverage. These factors resulted in mis-priced contracts,
poor equipment utilization and a failure to achieve expected
economies of scale, each of which contributed to about breakeven
EBIT performance and weak cash flow generation since the closing
of the acquisition. The new management team has outlined a number
of strategies to improve the company's profits and cash flows as
early as the fourth quarter of 2007 and has begun to execute its
plans.
Liquidity is adequate and supports the B3 rating. Moody's expects
that cash flow from operations should improve through 2008 because
of improved working capital management, yield management and asset
utilization and from expense reductions. Free cash flow could also
benefit from meaningfully lower planned capital expenditures in
2008.
The negative outlook reflects Moody's concern that absent
successful implementation of the improvement plan, Coach America's
metrics could fall to levels no longer supportive of the B3
rating. High fuel costs could affect profits in the company's Per
Capita business, and though not yet tested, weaker overall U.S.
economic activity could pressure demand in the company's other
segments. This could prevent the planned improvement of earnings
and operating cash flows needed to ensure the company's ability to
meet its debt service commitments over the intermediate term. The
ratings could be downgraded if EBIT margin does not improve
sequentially quarter to quarter starting in the first quarter of
2008 or if the ratio of FFO plus Interest to Interest remains
below 1.8 times.
Moody's believes that sustained borrowings on the revolver of
above $5 million would indicate that operating cash flows are not
recovering as planned, which could also prompt a downgrade.
Additionally, a debt-funded acquisition taken on while executing
the restructuring plans could also result in a downgrade. The
outlook could be changed to stable if positive free cash flow was
sustained and, such free cash flow was applied to debt reduction,
or if Debt to EBITDA was sustained below 5.5 times and EBIT to
Interest was sustained above 1.5 times.
Downgrades:
Issuer: Coach America Holdings, Inc.
-- Corporate Family Rating, Downgraded to B3 from B2
-- Probability of Default Rating, Downgraded to B3 from B2
-- First Lien Senior Secured Bank Credit Facility, Downgraded
to B2 from B1
-- Second Lien Senior Secured Bank Credit Facility,
Downgraded to Caa2 from Caa1
LGD Assessments:
Issuer: Coach America Holdings, Inc.
-- First Lien Senior Secured Bank Credit Facility, to 37 -
LGD3 from 40 - LGD3
-- Second Lien Senior Secured Bank Credit Facility, to 86 -
LGD5 from 89 - LGD5
Outlook Actions:
Issuer: Coach America Holdings, Inc.
-- Outlook, Changed To Negative From Stable
Coach America Holdings, Inc. headquartered in Dallas, Texas, is
the largest charter bus operator and second largest motorcoach
services provider in the U.S.
COHR HOLDINGS: S&P Holds 'B' Rating and Revises Outlook to Neg.
---------------------------------------------------------------
Standard & Poor's Ratings Services revised its rating outlook on
Cohr Holdings Inc. (doing business as Masterplan Inc.) to negative
from stable. At the same time, Standard & Poor's affirmed its
ratings, including the 'B' corporate credit rating, on Masterplan.
The outlook revision reflects the company's weak operating
performance, which has been below S&P's expectations, and its
concern that the weak results could limit revolver availability
because of covenant requirements.
"The low-speculative-grade ratings reflect Masterplan's relatively
concentrated customer base, short success record, and highly
leveraged financial profile, resulting from its early-2007
acquisition by Berkshire Partners," said Standard & Poor's credit
analyst David Peknay.
Positive business factors, however, include predictable revenues
due to the capitated nature of its contracts, and good potential
for continued new customer growth because of its competitive
advantages against other players in a fragmented field.
Masterplan maintains and repairs health care equipment. The
equipment serviced includes diagnostic imaging equipment such as
CT, MRIs, ultrasound, and biomedical equipment such as patient
monitoring devices and infusion pumps. The company also sells
refurbished parts to existing companies and third parties. Its
service business generates 90% of its revenue, and parts sales
provide 10%. Masterplan's contractual relationships with its
customers are capitated, and provide more than 90% of its revenue.
CONSTELLATION BRANDS: Commences Exchange Offer for $700MM Notes
---------------------------------------------------------------
Constellation Brands Inc. has commenced an offer to exchange
$700 million principal amount of its 7.25% Senior Notes due 2017,
which are registered under the Securities Act of 1933 for all
$700 million of its currently outstanding 7.25% Senior Notes due
2017, which have not been registered under the Securities Act of
1933.
The company said it will not receive any proceeds from the
exchange offer, nor will its debt level change as a result of the
exchange offer.
The terms of the Exchange Notes and the Original Notes are
substantially identical in all material respects.
The exchange offer will be open for acceptance until 5:00 p.m.,
New York City time, on Jan. 7, 2008, unless extended. Persons
with questions regarding the exchange offer should contact the
exchange agent, The Bank of New York Trust Company, N.A., at 212-
815-2742.
A copy of the prospectus for the exchange offer and related letter
of transmittal, included in the registration statement, may be
obtained by writing to investor relations, at:
Constellation Brands Inc.
Suite 300, 370 Woodcliff Drive
Fairport, NY 14450
About Constellation Brands
Headquartered in Fairport, New York, Constellation Brands Inc.
(NYSE:STZ) -- http://www.cbrands.com/-- is a producer and
marketer of beverage alcohol in the wine, spirits and imported
beer categories, with market presence in the U.S., Canada, U.K.,
Australia and New Zealand. The company has more than 250 brands
in its portfolio, sales in 150 countries and operates
approximately 60 wineries, distilleries and distribution
facilities.
* * *
As reported in the Troubled Company Reporter on Dec. 3, 2007,
Fitch Ratings assigned a 'BB-' rating to a note registered by
Constellation Brands Inc. to fund the purchase price of Beam Wine
Estates Inc., a subsidiary of Fortune Brands Inc: $500 million
8.375% senior unsecured note due Dec. 15, 2014. The rating
outlook is Negative.
CONSTELLATION COPPER: Obtains Verbal Waiver on $3.8 Million Dues
----------------------------------------------------------------
Constellation Copper Corporation said that negotiations with the
counterparty on the company's forward sales contracts continue to
progress but have not yet been finalized.
The company has obtained a verbal temporary waiver of the payments
that were due on Nov. 2, 2007, and Dec. 4, 2007, while the
negotiations continue. The aggregate amount of the payments is
approximately $3.8 million.
On Nov. 9, 2007, the company indicated that it would not be filing
its third quarter unaudited financial statements by the required
filing date under applicable Canadian securities laws. The
company is providing an update in accordance with CSA Staff Notice
57-301 Failing to File Financial Statements on Time - Management
Cease Trade Orders. In accordance with Appendix B of CSA Policy
57-301:
1. The company advises that other than as disclosed in this
press release and its press release dated Nov. 30, 2007,
there is no material change in the information contained
in the notice of default dated Nov. 9, 2007 and the
default status report dated Nov. 23, 2007.
2. The company expects to file its interim financial
statements for its third quarter ended Sept. 30, 2007, on
or before Jan. 14, 2008 as originally contemplated.
3. The company advises that there are no other financial
statements that are not expected to be filed within the
time period set out by the security regulatory
authorities.
4. The company advises that there is no other material
information concerning the affairs of the company that
has not been generally disclosed.
5. The company intends to satisfy the provisions of CSA
57-301 Appendix B Default Status Reports on a bi-weekly
basis as long as it remains in default of the financial
statement filing requirement.
About Constellation Copper
Constellation Copper Corporation (CCU: TSX)--
http://www.constellationcopper.com/-- evaluates and develops
mineral properties in the United States and Mexico. The company
holds its properties primarily through three of its wholly owned
subsidiaries, Lisbon Valley Mining Co. LLC, Minera Terrazas S.A.
de C.V. and San Javier del Cobre S.A. de C.V. LVMC operates the
Lisbon Valley copper mine, which comprises three main deposits:
Sentinel, Centennial and GTO, plus the Cashin satellite deposit,
with reserves and resources totalling +50 million tons and grading
an average 0.48% copper. Minera Terrazas holds the Company\u2019s
interest in the Terrazas zinc-copper project located in north-
central Mexico. The property has a total resource of 90 million
tonnes grading 1.37% zinc and 0.32% copper in two adjacent
deposits. San Javier del Cobre S.A. de C.V. holds the company's
interest in the San Javier copper property located in northwestern
Mexico.
CULLIGAN INT'L: Fiscal Results Cue S&P's Negative CreditWatch
-------------------------------------------------------------
Standard & Poor's Ratings Services placed its ratings on water
services provider Culligan International Co., including the 'B'
long-term corporate credit rating, on CreditWatch with negative
implications. The CreditWatch placement indicates that S&P could
lower or affirm the ratings following the completion of S&P's
review. Total debt outstanding at the company was about $825.6
million as of Sept. 30, 2007.
"The CreditWatch placement follows year-to-date fiscal 2007
operating results below our expectations resulting from weak year-
to-date organic growth and operating inefficiencies associated
with the implementation of a new third-party distribution center
during the second and third quarters," said
Standard & Poor's credit analyst Kenneth Shea. As a result,
credit protection measures are weaker than expected. For the 12
months ended Sept. 30, 2007, lease-adjusted total debt to EBITDA
leverage exceeded 8x, compared with pro forma 2006 lease-adjusted
leverage of about 7x following Culligan's May 2007 leveraged
recapitalization, which included a debt-financed $374.8 million
shareholder dividend (including Clayton, Dubilier, and Rice,
Culligan's financial sponsor and largest shareholder).
Although near-term liquidity concerns are partly mitigated by the
covenant-lite features of the company's credit facilities,
Culligan's leverage remains at very high levels. As of Sept. 30,
2007, Culligan had about $39.7 million in cash and more than $100
million available on its revolving credit facility due 2012.
S&P's analysis will focus on Rosemont, Illinois-based Culligan's
expected operating performance, its ability to reduce debt, and
the company's long-term prospects for its operating segments.
D&E COMMS: S&P Holds 'BB-' Rating and Revises Outlook to Stable
---------------------------------------------------------------
Standard & Poor's Ratings Services revised the outlook on Ephrata,
Pennsylvania-based D&E Communications Inc. to stable from
negative, and affirmed its ratings, including the 'BB-'
corporate credit rating. Total debt as of Sept. 30, 2007, was
about $200 million.
D&E, which operates three rural local exchange carriers in central
and eastern Pennsylvania and a small competitive local exchange
carrier business in seven edge-out markets, has been able to limit
access-line losses despite competition and modestly increase
discretionary cash flow. "As a result, we now expect the company
to maintain credit metrics consistent with the current rating,"
said Standard & Poor's credit analyst Naveen Sarma.
D&E faces some degree of telephony competition from mostly
smaller, second-tier cable operators. While these operators have
launched their own competitive telephone products on a limited
basis, S&P do not expect them to gain significant market share
over the medium term partly because of the
start-up nature of their offerings. In addition, S&P expect D&E
to be able to counter with a triple play bundle of telephone,
high-speed data, and video services. D&E's annual access-line
losses have been in the mid-3% area (3.5% in the third quarter of
2007), compared with about 5%-7% for local telephone operators in
larger, more competitive markets.
The ratings on D&E reflect stagnant revenue trends because of
continuing access-line losses to cable telephony and wireless
substitution, mature industry conditions, small company size,
limited geographic diversity, and some exposure to the high-risk
CLEC business. Tempering factors include the company's RLEC
position as the dominant provider of telephone services in its
markets, growth potential from data services, and moderate
leverage.
DB KEY: Plan Allocates 10% Sale Carve Out for Unsecured Claims
--------------------------------------------------------------
D.B. Key Largo LLC submitted to the U.S. Bankruptcy Court for the
Southern District of Florida its disclosure statement and plan of
liquidation.
Treatment of Claims
Under the plan, the Debtor proposes that holders of allowed
administrative claims will be paid in full and in cash. The
Debtor currently estimates administrative claims in the amount of
$60,000 through confirmation of the plan, excluding fees incurred
by auctioneer, which will be paid at the closing of the sale.
Holders of priority tax claims will be paid in full in deferred
cash payments on a monthly basis beginning on the later of: (i)
the effective date; (ii) within 20 days after the date the claim
is allowed and continuing over a period not to exceed six years
after the assessment of the claim, of a value, as of the effective
date, equal to the allowed amount of the claim plus interest at
prime rate.
Prior to bankruptcy, the Monroe County Tax Collector assessed real
property taxes against the Debtor's property in the amount of
$81,251 for 2006. The Debtor anticipates that the total real
property taxes that will be due and payable as of Feb. 1, 2008
auction will be $154,449.
The United States Trustee fees will be paid as required no earlier
than 11 days of the entry of confirmation order.
Class 1 claim will consist of allowed secured claim of Philrich of
Key Largo LLC, which will be satisfied through the proceeds of the
sale of the Debtor's property.
Class 2 claims will consist of allowed secured claims of the MAMC
Lenders, less the agreed 10% carve out. The secured claims of the
MAMC Lenders total $7,350,000 and have been scheduled by the
Debtor as undisputed. Class 2 claims will be satisfied through
the proceeds of the sale of the Debtor's property.
Class 3 claims consist of the allowed claims of general unsecured
creditors and MAMC deficiency claims, if any. Distribution to the
holders of class 3 claims will be in the form of the carve out
along with remaining net proceeds from the sale of the property
after the full payment of: (i) administrative claims; (ii)
priority claims; (iii) U.S. Trustee fees; (iv) class 1; and (v)
class 2 claims.
The Debtor approximates that after the resolution of claims
objections, the total allowed general unsecured claims will not
exceed $650,000, including deficiency claims of the MAMC Lenders.
Class 4 claims will consist of allowed subordinated claims.
Class 5 interests of equity holders will consist of membership
interests in the Debtor and distribution on account of the
interests from net sale proceeds will be made only after full
payment of claims 1 through 4.
Classes 2 and 3 claims and class 5 interests are impaired and are
entitled to vote on the plan.
Sources of Funds
Based on the Debtor's schedules, its primary asset is a real
property valued at $10 million.
The plan is predicated upon the sale of the Debtor's property by
auction to be conducted by Fisher Auction Co., Inc., auctioneer,
on Feb. 1, 2008. The bid deadline for the auction is Jan. 30,
2008.
The Debtor also has receivables from affiliated entities in the
aggregate amount of $381,839. However, the Debtor does not
believe that the receivables have any value or are collectible.
Carve Out for Unsecured Creditors
Subsequent to the bankruptcy filing, the Debtor negotiated with
its MAMC lenders for obtaining a carve out from the net proceeds
of the sale of its property that would otherwise be distributed to
MAMC to be distributed to the Debtor's unsecured creditors.
MAMC Lenders have agreed to a 10% carve out from the distribution
of net proceeds from the sale of property to be distributed to
holders of allowed class 3 claims.
About D.B. Key Largo
Coconut Grove, Florida-based D.B. Key Largo LLC owns and manages
real estate. The company filed for chapter 11 bankruptcy
protection on Sept. 28, 2007 (Bankr. S.D. Fl. Case No. 07-18127).
Lisa M. Schiller, Esq., and Mark S. Roher, Esq., at Rice, Pugatch,
Robinson & Schiller PA represent the Debtor in its restructuring
efforts. The U.S. Trustee has not appointed members to the
Official Committee of Unsecured Creditors in this case. The
Debtor's schedules disclosed total assets of $10,382,165 and total
liabilities of $14,090,922.
DB KEY: Court Sets Disclosure Statement Hearing on January 7
------------------------------------------------------------
The U.S. Bankruptcy Court for the Southern District of Florida has
scheduled a hearing at 10:30 a.m., on Jan. 7, 2008, to consider
approval of the disclosure statement explaining D.B. Key Largo
LLC's plan of liquidation.
The hearing will be held at 51 Southwest, First Avenue, Room 1409
in Miami, Florida.
At the disclosure statement hearing, the Court will also set a
deadline for filing objections to the disclosure statement and
direct the proponents of the plan to serve related notices.
Coconut Grove, Florida-based D.B. Key Largo LLC owns and manages
real estate. The company filed for chapter 11 bankruptcy
protection on Sept. 28, 2007 (Bankr. S.D. Fl. Case No. 07-18127).
Lisa M. Schiller, Esq., and Mark S. Roher, Esq., at Rice, Pugatch,
Robinson & Schiller PA represent the Debtor in its restructuring
efforts. The U.S. Trustee has not appointed members to the
Official Committee of Unsecured Creditors in this case. The
Debtor's schedules disclosed total assets of $10,382,165 and total
liabilities of $14,090,922.
DEL LABORATORIES: Parent Inks Merger Deal with Coty Inc.
--------------------------------------------------------
DLI Holding Corp., the parent company of Del Laboratories Inc.,
has entered into a merger agreement with Coty Inc.
Under the terms of the agreement, all operations of DLI Holding
will be merged with Coty.
The acquisition further enhances COTY BEAUTY'S flourishing
fragrance, color and skincare portfolio, through the addition of
leading brands, such as Sally Hansen, N.Y.C. New York Color, La
Cross, Orajel and Dermarest.
Furthermore, the acquisition also brings Coty closer to its quest
of becoming a $5 billion beauty company.
"We view the acquisition of DLI Holding Corp. as a natural
extension of our strategy to offer a unique portfolio of brands
that produce some of the strongest consumer franchises around the
world," said Bernd Beetz, chief executive officer, Coty Inc.
"Del's established, well-regarded portfolio of quality products
mesh well with our core offerings, and their strong presence in
North America complements COTY BEAUTY and Coty's international
strength."
Charles J. Hinkaty, President and CEO of Del Laboratories Inc.
said "As our exceptional management team has guided Del through a
sustained period of organic growth, cost reduction, supply chain
enhancement, and international expansion, we sought an ownership
structure that would enable us to continue to build upon the
organization's many growth opportunities."
Financial terms of the transaction were not disclosed. Coty,
which employs more than 8,500 people worldwide, ended the 2007
fiscal year with net sales of $3.3 billion.
Upon closing, Del Laboratories and DLI Holding, which are
principally owned by investment funds associated with Kelso &
Company LP, will become wholly owned subsidiaries of Coty.
The consummation of the merger is subject to customary closing
conditions, including Hart-Scott-Rodino clearance. The merger is
expected to close by Dec. 31, 2007.
Atlas Strategic Advisors LLC served as financial advisor and
Debevoise & Plimpton LLP served as legal advisor to DLI Holding.
Bear, Stearns & Co. Inc. and J.P. Morgan Securities Inc. provided
additional advice to DLI Holding. Covington & Burling LLP served
as legal advisor to Coty Inc.
About Coty Inc.
Coty Inc. -- http://www.coty.com/-- was created in Paris in 1904
by Francois Coty who is credited with founding the modern
fragrance industry. Coty Inc. is a fragrance company with annual
net sales of $3.3 billion. Coty Inc. has developed a portfolio of
notable brands and delivers its innovative products to consumers
in 91 markets worldwide.
The COTY PRESTIGE brand portfolio is distributed in prestige and
ultra-prestige stores and includes BABY PHAT, CALVIN KLEIN,
CERRUTI, CHLOE, CHOPARD, DAVIDOFF, JENNIFER LOPEZ, JETTE JOOP, JIL
SANDER, JOOP!, KARL LAGERFELD, KENNETH COLE, L.A.M.B. FRAGRANCE BY
GWEN STEFANI, LANCASTER, MARC JACOBS, NAUTICA, NIKOS, PHAT FARM,
SARAH JESSICA PARKER, VERA WANG and VIVIENNE WESTWOOD.
The COTY BEAUTY brand portfolio is more widely distributed and
includes ADIDAS, ASPEN, ASTOR, CELINE DION, CHUPA CHUPS, DAVID and
VICTORIA BECKHAM, DESPERATE HOUSEWIVES, ESPRIT, EXCLAMATION,
JOVAN, KATE MOSS, KYLIE MINOGUE, MISS SIXTY, MISS SPORTY, PIERRE
CARDIN*, RIMMEL, SHANIA TWAIN, STETSON, TONINO LAMBORGHINI
and VANILLA FIELDS.
Coty and Puig have a strategic partnership for the distribution of
the perfume lines of NINA RICCI, CAROLINA HERRERA, PRADA, PACO
RABANNE, and COMME DES GARCONS in the U.S. and Canada.
About Del Laboratories
Del Laboratories Inc., -- http://www.dellabs.com/-- based in
Uniondale, New York, manufactures and markets cosmetic and over-
the-counter pharmaceutical products. Del's cosmetic products
consist primarily of nail color, nail treatment, bleaches and
depilatories, beauty implements and value cosmetics sold under the
Sally Hansen, La Cross, and N.Y.C. New York Color brandnames.
Pharmaceutical products include oral analgesics, children's
toothpaste and sore throat relief and other specialty OTC products
and are sold under the Orajel, Dermarest and Gentle Naturals brand
names. Del's reported revenues of approximately $450 million for
the 12 months ended June 30, 2007
* * *
As reported in the Troubled Company Reporter on Oct. 24, 2007,
Moody's Investors Service affirmed all of the ratings of Del
Laboratories Inc., but changed the outlook to stable from
negative. Ratings affirmed include B3 corporate family rating and
Caa2 rating on $175 million 8% senior subordinated notes due 2012.
DELTA FINANCIAL: Job Cuts Follow Bankruptcy Announcement
--------------------------------------------------------
About 40 employees of Delta Financial Corporation left the company
a day after a likely bankruptcy filing was announced, Trading
Markets reports.
In spite of the bad news, the laid off employees complimented the
company and camaraderie among the staff, TM says.
Guy Cecala, Inside Mortgage Finance Publications' publisher,
told TM that Delta was just a "victim of the abuses of other
subprime lenders."
TM relates that according to Irwin Kellner, North Shore Bank
economist, Delta's fate is just a glimpse of the collapsing
housing market.
Delta officers were not available to give comments, TM adds.
Bankruptcy Announcement
As reported in the Troubled Company Reporter on Dec. 7, 2007,
Delta Financial Corporation provided an update on Dec. 6, 2007, of
its financial condition and current plans, including a possible
filing of chapter 11 bankruptcy and an event of default under its
warehouse facilities.
The company said that on Nov. 15, 2007, it had entered into a
letter of intent with an affiliate of Angelo, Gordon & Co., AG
Special Situation Corp. However, the company said it does not
expect to be able to consummate the transaction with Angelo
Gordon.
On Dec. 5, 2007, the company received reservation of rights
notices from its warehouse lenders indicating that events
of default have occurred under the warehouse facilities and the
standstill agreement. The warehouse facilities is subject to
conditions, which include that the AGSSC letter of intent must
remain in full force.
The company does not believe that it will be able to continue as a
going concern. The company presently intends to file shortly for
protection under the federal bankruptcy code.
About Delta Financial
Founded in 1982, Delta Financial Corporation (NASDAQ: DFC) --
http://www.deltafinancial.com/-- is a Woodbury, New York-based
specialty consumer finance company that originates, securitizes
and sells non-conforming mortgage loans.
DYNAMIC LEISURE: Sept. 30 Balance Sheet Upside-Down by $7.9 Mil.
----------------------------------------------------------------
Dynamic Leisure Corp.'s consolidated balance sheet at Sept. 30,
2007, showed $9.2 million in total assets and $17.1 million in
total liabilities, resulting in a $7.9 million total shareholders'
deficit.
The company's consolidated balance sheet at Sept. 30, 2007, also
showed strained liquidity with $1.2 million in total current
assets available to pay $16.4 million in total current
liabilities.
The company reported net income of $3.4 million on total revenues
of $2.2 million for the third quarter ended Sept. 30, 2007,
compared with a net loss of $2.6 million on total revenues of
$1.3 million in the same period last year.
The net income for the quarter ended Sept. 30, 2007, includes
non-cash income from warrant and option liability revaluation of
$7.4 million. This compares with non-cash income from warrant and
option liability revaluation of $817,101 during the third quarter
of 2006.
Full-text copies of the company's consolidated financial
statements for the quarter ended Sept. 30, 2007, are available for
free at http://researcharchives.com/t/s?261e
Going Concern Doubt
Salberg & Company P.A., in Boca Raton, Fla., expressed substantial
doubt about Dynamic Leisure Corp.'s ability to continue as a going
concern after completing its audit of the company's consolidated
financial statements for the year ended Dec. 31, 2006. The
auditing firm reported that the company had a net loss of
$11,009,388, used net cash in operations of $2,720,651 for the
year ended Dec. 31, 2006, and a working capital deficiency and
stockholders deficit of $12,095,860 and $6,264,853, respectively,
at Dec. 31, 2006.
In addition, the company is in default on convertible promissory
notes totaling $1,482,500 and unsecured promissory notes of
$156,434 as of Nov. 19, 2007.
About Dynamic Leisure Corporation
Headquartered in Tampa, Fla., Dynamic Leisure Corporation (OTC BB:
DYLI) -- http://www.dylicorp.com/-- with offices in New York City
and London, England, is a wholesaler and online international
technology-based leisure travel packager. The company provides
competitively priced worldwide vacation travel packages directly
to the consumer, travel agencies and other travel resellers.
EBERHARDT CONST: Case Summary & 18 Largest Unsecured Creditors
--------------------------------------------------------------
Debtor: Eberhardt Construction, Inc.
fka Eberhardt Grantham Contracting, Inc.
Post Office Box 949
Chickamauga, GA 30707
Bankruptcy Case No.: 07-15335
Type of Business: The Debtor is a construction company.
Chapter 11 Petition Date: December 6, 2007
Court: Eastern District of Tennessee (Chattanooga)
Debtor's Counsel: Harold L North, Jr., Esq.
Chambliss, Bahner & Stophel, P.C.
1000 Tallan Building
Two Union Square
Chattanooga, TN 37402
Tel: (423) 756-3000
Fax: (423) 265-9574
Estimated Assets: $100,000 to $1 Million
Estimated Debts: $1 Million to $100 Million
Debtor's list of its 18 Largest Unsecured Creditors:
Entity Nature of Claim Claim Amount
------ --------------- ------------
Internal Revenue Service 2007 941 1st, 2nd and $126,182
Atlanta, GA 39901 3rd Quarter Taxes
Metro Materials Materials $95,369
2480 Pleasantdale Road
Doraville, GA 30340
Grantham, Marilyn and Oliver Loan $83,260
524 lake Place Drive
Lavonia, GA 30553
Mullins Bros. Paving Materials $46,568
Washington Mutual Bank Line of Credit $45,758
Suntrust Bank Line of Credit $42,462
BB&T Equipment Finance Deficiency for Repossessed $39,813
Dump Truck
Ready Mix USA $31,713
C.W. Matthews $26,886
Hanke, Wanda and Boyd Loan $25,372
Hays & Potter AIG Insurance/Workers $18,809
Compensation
Wachovia Deficiency for Repossessed $18,779
Vehicle
Georgia Department of Labor 2007 1st, 2nd and 3rd $18,118
Quarter Unemployment
Taxes
Walker Concrete $17,266
First Equity Credit Card $13,324
Citi Business Card Credit Card $13,020
Chase Bank USA GM Business Credit Card $11,643
GMAC Deficiency for $11,438
Repossessed Dump Truck
ELECTRONIC DATA: Buyback Program Does Not Affect Moody's Rating
---------------------------------------------------------------
Moody's commented that Electronic Data System's Ba1 long term
rating and positive rating outlook are unaffected by EDS'
Dec. 4, 2007 announcement that its board has authorized a new
$1 billion share buyback program to be executed over the next
eighteen months. The company's large cash balance and Moody's
expectations for continued improvements in operating performance
and free cash flow generation, as well as management's commitment
to limit share repurchases within free cash flow, support the Ba1
rating and positive outlook.
EDS remains a leader in I/T outsourcing with good organic revenue
growth and profitability. The company is expected to maintain
strong liquidity from internal and external sources providing good
financial flexibility. The company's rating and positive rating
outlook are supported by its size and breadth, as measured by its
geographic diversification, as well as its ample pretax income and
free cash flow.
Moody's expects the company's management will be prudent in
administering the share buyback program, such that share
repurchases are done in accordance with free cash flow generation
and may be suspended or slowed if capital is needed to be
allocated elsewhere to fund other possible business investment
needs.
As of the quarter ended September 2007, EDS' cash and short term
investments totaled $3.1 billion as compared to total debt of
$3.3 billion, with the nearest maturity of $700 million due in
October 2009 ($700 million 7.125% senior notes due). EDS also has
access to a $1 billion five year revolving credit facility
maturing June 2011. There are no outstanding borrowings under the
credit facility at September 2007 and Moody's does not expect any
usage over the next twelve months. This revolver allows for
drawings without having to represent no material adverse change
and has two financial covenants, a leverage ratio of 3.0 times
measured by debt to EBITDA and an EBITDA to interest expense
coverage ratio of 3.0 times. At September 30, 2007, the company's
leverage ratio and interest coverage ratio, as measured under the
definitions of the facility, were 1.12x and 13.01x, respectively.
Moody's expects the company will remain in compliance with these
financial covenants for at least the next twelve months.
Headquartered in Plano, Texas, Electronic Data Systems Corporation
is a leading provider of I/T services worldwide.
ENVIRONMENTAL ENERGY: Posts $2.8 Million Net Loss in Third Quarter
------------------------------------------------------------------
Environmental Energy Services Inc. reported a net loss of
$2.8 million on revenues of $58,152 for the third quarter ended
Sept. 30, 2007, compared with net income of $7.3 million on
revenues of $59,632 in the same period in 2006.
The company's revenues result from payments received under a
royalty agreement that expires in the first quarter of 2008.
The company reported a loss from operations during the three
months ended Sept. 30, 2007, of $507,116, as compared to a loss
from operations of $217,874 during the three months ended
Sept. 30, 2006. The increase in loss from operations was
primarily attributable to increased general and administrative
expenses.
In 2007, the company recorded a loss of $3.2 million from the sale
of an undivided 75% interest in its working interests in the
Fayetteville Shale field. In 2007, the company recorded other
income of $843,861 attributable to the minority owner's share of
the loss incurred by Blaze during the period.
In 2006, the company recorded a gain of $7.7 million from the
conversion of $10,000,000 of loans into an overriding royalty
interest in a portion of the Fayetteville Shale field and warrants
issued by the company.
The company reported a comprehensive loss of $2.8 million during
the three months ended Sept. 30, 2007, as compared to
comprehensive income of $5.4 million during the three months ended
Sept. 30, 2006. In the three months ended Sept. 30, 2006, the
company recorded an unrealized loss of $1.9 million from changes
in the market value of its interest in Wastech common stock. In
2007, the company reported its interest in Wastech under the
equity method, and therefore did not record gain or loss as a
result of changes in the market value of its interest in Wastech.
At Sept. 30, 2007, the consolidated balance sheet showed
$18.7 million in total assets, $10.4 million in total liabilities,
$2.2 million in minority interest in consolidated subsidiary, and
$6.1 million in total stockholders' equity.
The company's consolidated balance sheet at Sept. 30, 2007, also
showed strained liquidity with $8.5 million in total current
assets available to pay $10.4 million in total current
liabilities.
Full-text copies of the company's consolidated financial
statements for the quarter ended Sept. 30, 2007, are available for
free at http://researcharchives.com/t/s?2629
Going Concern Doubt
As reported in the Troubled Company Reporter on May 10, 2007,
Turner Jones & Associates PLLC, in Vienna, Virginia, expressed
substantial doubt about Environmental Energy Services Inc.'s
ability to continue as a going concern after auditing the
company's financial statements for the year ended Dec. 31, 2006.
The auditor reported that the company's operating activities,
except collection on a royalty agreement, have ceased. Without
substantial input of equity capital, the company will not be able
to resume meaningful revenue-producing activities.
About Environmental Energy
Headquartered in Boise, Idaho, Environmental Energy Services Inc.
(Other OTC: EESV.PK) -- http://www.eesvinc.com/ -- is an oil and
gas exploration, development and production company. During
fiscal 2006, the company acquired oil and gas leases in Arkansas,
Louisiana, Oklahoma and Alaska. Its largest property to date is a
working interest in over 45,000 acres of leases in the
Fayetteville Shale Field in Arkansas.
FEDDERS CORP: Taps Roux Associates as Environmental Consultant
--------------------------------------------------------------
Fedders Corp. and its debtor-affiliates ask the United States
Bankruptcy Court for the District of Delaware for permission to
employ Roux Associates as environmental consultant, nunc pro tunc
to Nov. 15, 2007.
The Debtors tell the Court that Roux Associates will provide
environmental consulation and management services in connection
with the Debtors' investigation and potential remediation of the
990 and 1040 properties located at Spruce Street in Trenton, New
Jersey.
Specifically, Roux Associates will:
a) with respect to the 1040 property:
-- draft a preliminary assestment report which identifies
potential areas of concern;
-- install permanet monitoring wells to be used for sampling
ground water;
-- conduct a BEE to determine the potential need for further
ecological evaluation activities; and
-- prepare letter report summarizing Roux Associates'
investigation to determine whether additional remediation
activitiees are required.
b) with respect to the 990 property:
-- draft a preliminary assestment report which identifies
potential areas of concern;
-- conduct additional soil and ground water sampling based
on the findings of the PA report;
-- peform vapor intrusion investigation;
-- perform baseline ecological evaluation to determine the
need for further evaluation activities;
-- conduct ground water sampling from existing monitoring
weels;
-- prepare site investigation/remedial investigation report
for submission to New Jersey Department of Environmental
Protection concerning compliance with its soil and ground
water standards;
-- dispose sampled ground water and excess soil cutting;
-- conduct site meeting with NJDEP to discuss remedial
alternatives consdered by the Debtors;
-- evaluate remedial alternative; and
-- prepare revised remedial action work plan for submission
to NJDEP for approval of the proposed site remediation.
The firm's professionals bill between $60 and $275 per hour for
this engagement.
To the best of the Debtors' knowledge the firm is a "disinterested
person" as defined in Section 101(14) of the Bankruptcy Court.
Based in Liberty Corner, New Jersey, Fedders Corporation --
http://www.fedders.com/-- manufactures and markets air
treatment products, including air conditioners, air cleaners,
dehumidifiers, and humidifiers.
The company filed for Chapter 11 protection on Aug. 22, 2007,
(Bankr. D. Del. Case No. 07-11182). Its debtor-affiliates
filed for separate Chapter 11 cases. Norman L. Pernick, Esq. of
Saul, Ewing, Remick & Saul LLP represents the Debtors in their
restructuring efforts. The Debtors have selected Logan &
Company Inc. as claims and noticing agent. The U.S. Trustee for
region 3 has appointed an Official Committee of Unsecured
Creditors on this case. When the Debtors filed for protection
from its creditors, it listed total assets of US$186,300,000 and
total debts of US$322,000,000.
The company has production facilities in the United States in
Illinois, North Carolina, New Mexico, and Texas and
international production facilities in the Philippines, China
and India.
FESTIVAL FUN: S&P Removes 'B' Rating from Developing Watch
----------------------------------------------------------
Standard & Poor's Ratings Services removed its ratings, including
its 'B' corporate credit rating, on Festival Fun Parks LLC from
CreditWatch with developing implications, where
they were placed on Aug. 27, 2007. S&P then withdrew the ratings,
based on the lack of adequate consolidated financial information
following the acquisition of the company by Madrid-based Parques
Reunidos S.A. for about $330 million.
FIRSTBANK PUERTO: S&P Affirms 'BB+' Counterparty Credit Rating
--------------------------------------------------------------
Standard & Poor's Ratings Services affirmed the 'BB+' long-term
counterparty credit rating on FirstBank Puerto Rico, a banking
subsidiary of First BanCorp (financial holding company; not
rated). At the same time, S&P removed the rating from CreditWatch
with negative implications, where it was placed Oct. 3, 2005. The
outlook is stable.
S&P placed the rating on CreditWatch after FirstBank announced a
number of senior management changes that came at a time when it
was already under an informal inquiry related to accounting
issues. Subsequently, in December 2005, bank announced that it
would restate four years of financial reporting as a result of
reviewing the accounting for certain purchased mortgage loans that
were originated by other financial institutions, which didn't meet
the criteria for a true sale under SFAS No. 140 for the third-
party financial institutions (Doral Financial Corp. and R&G
Financial) that sold the mortgage loans to First BanCorp. The
restatement caused the capital ratios of FirstBank to fall
slightly below the regulatory well-capitalized definition, which
resulted in the downgrade to 'BB+' from 'BBB-' while the
CreditWatch negative placement was maintained.
The review forced First BanCorp to reclassify $3.8 billion of
mortgage loans to commercial loans secured by mortgages to Doral
and R&G and to restate four years (2000-2004) of financial
statements.
As S&P expected, the restatement resulted in numerous material
weaknesses in internal controls. First BanCorp is now current on
its financial reporting and the SEC investigation, which is
settled, has had no impact on the franchise.
"The rating on FirstBank reflects the company's strong market
position in Puerto Rico and improved adjusted capital ratios,"
said Standard & Poor's credit analyst Lidia Parfeniuk. This in
part is offset by weakening credit quality metrics reflecting
FirstBank's challenged operating markets, which translate into
higher provisions for loan losses and affects profitability
growth. S&P see credit quality as the main risk facing the
company in the near future although we do not expect significant
credit quality deterioration. The rating also considers
FirstBank's heavy reliance on wholesale funding sources and its
geographically concentrated business in Puerto Rico.
S&P see FirstBank's profitability metrics, which are distinctly
below historically robust levels, remaining under pressure from
rising provisions for loan losses and slower loan origination as
lending standards tighten reflecting recessionary conditions in
Puerto Rico and a weakening Florida footprint. Offsetting these
challenges are the decreasing pressure on net interest margins
from easing interest rates and the expectation of a lower cost
base as a number of one-time items that affected profitability in
the recent past are not likely to be repeated.
The outlook is stable. Now that FirstBank is in a position to
refocus on its corporate strategy, S&P expect to see effective
execution on financial objectives, including improved internal
capital generation, in the medium term. S&P caution that further
weaknesses in credit quality and pressure on
profitability beyond S&P's expectations would result in a negative
outlook or even a downgrade.
FIRST MAGNUS: Pima County Wants Tax Payment from Tucson Asset Sale
------------------------------------------------------------------
Pima County asks the U.S. Bankruptcy Court for the District of
Arizona to deny First Magnus Financial Corporation's request to
sell its Tucson real property unless Pima County is assured
payment for taxes due.
The Debtor previously sought Court authority to sell about 105,979
square feet of real property located in the City of Tucson, Pima
County, State of Arizona, for $1,600,000 to Rynoke, LLC, or to a
party providing the highest bid for the property at an auction.
As of the bankruptcy filing, the Debtor owes $323,740 in tax claim
to Pima County, including post-petition interest at a statutory
rate of 16%, according to German Yusufov, Deputy County Attorney
for Pima County.
Mr. Yusufov says the claim is secured by a first priority
statutory lien on the property proposed to be sold, which, under
Arizona law, may not be removed until all taxes and interest have
been paid.
"The Debtor's request does not provide for the payment of the
outstanding tax liability from the sale proceeds, and states that
there are no interests in or claims against the property to be
sold," Mr. Yusufov points out.
Mr. Yusufov says that the Debtor's request should be denied
unless it is amended to provide that Pima County's liens should
attach to the sale proceeds and that the Debtor pays in full its
outstanding tax liability, including the interest rate, from the
sale proceeds at the closing.
About First Magnus
Based in Tucson, Arizona, First Magnus Financial Corporation --
http://www.firstmagnus.com/-- purchases and sells prime and
Alt-A mortgage loans secured by one-to-four unit residences.
The company filed for chapter 11 protection on Aug. 21, 2007
(Bankr. D. Ariz. Case No.: 07-01578). John R. Clemency, Esq., at
Greenberg Traurig LLP serves as the counsel for the Debtor. The
Official Committee of Unsecured Creditors has selected the firm
Warner Stevens LLP as its counsel. When the Debtor filed for
bankruptcy, it listed total assets of $942,109,860 and total debts
of $812,533,046.
The Debtor's exclusive period to file a plan expires on Dec. 19,
2007. (First Magnus Bankruptcy News, Issue No. 13; Bankruptcy
Creditors' Service Inc. http://bankrupt.com/newsstand/or
215/945-7000).
FIRST MAGNUS: Removes Sale of $61 Mil. Loans Under Revised Plan
---------------------------------------------------------------
First Magnus Financial Corporation filed with the U.S. Bankruptcy
Court for the District of Arizona its proposed revision to its
First Amended Plan of Liquidation and accompanying Disclosure
Statement, to, among other things, address or take into account
certain concerns raised by parties-in-interest, modify the
classification and treatment of claims under the Plan; and provide
for recent developments in the company and its Chapter 11 case.
The Second Amended Plan and Disclosure Statement remove the sale
of certain encumbered loans to Steel Mountain Capital Management
LLC for $61,000,000 among the list of proposed sale of certain
assets. The current version of the Plan, however, provides that
the Debtor "has pursued and completed certain sales of loans in
the ordinary course of business at prices at or above the then
prevailing for such assets." First Magnus added that "all such
sales have been with full notice to, and in cooperation with, the
relevant Warehouse Lenders."
The Second Amended Plan also provides that the Debtor has filed a
response to, and has contested the claims raised in, the WARN Act
complaint filed by several of its former employees. The former
employees, on Aug. 30, 2007, had filed a complaint seeking
class certification and damage -- 60 days of wages -- under the
WARN Act (29 U.S.C. Section 2104).
Moreover, the Second Amended Plan provides that the Warehouse
Lenders -- which include UBS Real Estate Securities Inc.,
Countrywide, Washington Mutual and Merrill Lynch -- and other
creditors dispute that there is any legal or equitable basis for
a surcharge of their respective collateral. Countrywide contends
that the applicable facts and law do not support a surcharge
against it collateral because (a) First Magnus is contractually
obligated to perform the servicing of the loans, (b) First Magnus
is already compensated for the servicing of the loans, (c) First
Magnus has been unable to consummate a sale of the loans to date.
First Magnus, however, disputes Countrywide's contentions.
Treatment of Claims
The Second Amended Plan provides that Allowed Administrative
Expense and Priority Tax claims are not classified under the Plan
and are not entitled to vote on the Plan.
Holders of Allowed Priority Non-Tax Claims (Class 1), Allowed
Secured Claims (Class 2), Allowed General Unsecured Claims (Class
3), Allowed Rejection Damage Claims (Class 4), the Claims of Wamu
under the Wamu EPA Agreement and the Wamu Commercial Paper
Agreement (Class 5), Allowed Claims of Repo Participants under
Repurchase Agreements (Class 6) are impaired by the Plan and are
entitled to vote to accept or reject the Plan. Each subclass of
Class 2 will be treated as a separate class of Claims for
balloting purposes.
As for payment of the allowed administrative expense claims, the
Liquidating Trustee may pay all fees and costs of professional
persons not previously considered by the Bankruptcy Court,
without the latter's approval, if the Effective Date occurs
within the 30 days after the Confirmation Date.
Meanwhile, if there are no sufficient funds in the Dividend Fund
to pay Priority Non-Tax Claims in full on the Effective Date, the
Liquidating Trust will pay the claims at an interest rate of 5%
per annum on the Effective Date or dates as it is determined by
the Liquidating Trustee that sufficient fund is available to make
the payments, provided that the Liquidating Trustee, in its
discretion, may make partial payments after the Effective Date.
In the proposed revision, the Debtor included DocuSafe Phoenix,
Inc., and Maricopa County Treasurer among the holders of Secured
Claims. These parties-in-interest previously objected to the
Debtor's First Amended Disclosure Statement.
DocuSafe had complained that the Disclosure Statement did not
provide adequate information about the treatment of its claims
under the Plan, while Maricopa County had demanded for the
Disclosure Statement's amendment to provide that its claims along
with the interest rate will be paid.
The Debtor also disclosed that WNS of North America expects
rejection damages of $15,000,000 -- from the $30,000,000 estimate
provided for in the First Amended Plan -- however, the Debtor,
continues to dispute that WNS will have a rejection damage claim
anywhere near the asserted amount.
Plan Execution
The Debtor added these provisions under the Plan:
(1) The Plan will be consummated and distributions will be
made by the Liquidating Trust out of the Dividend Fund
pursuant to the terms of the Plan and the Liquidating
Trust Agreement.
(2) The Liquidating Trust will not have a term greater than
five years from its date of creation, unless extended
with the approval of the Bankruptcy Court, solely to
implement the Plan.
(3) After the Effective Date, the Liquidating Trust is
authorized to transfer to the Litigation Trust any
claims or cause of action constituting an Estate Claim
for any reason whatsoever in the discretion of the
Liquidating Trustee, after consultation with the
Advisory Board, for prosecution by the Litigation Trust.
The proposed revision further provides that the Litigation
Trustee, on behalf of the Litigation Trust, will be further
empowered to effect all actions and execute all agreements,
instruments, and other documents necessary to perform its duties
under the Plan, among others.
The proposed revision also provides that the Advisory Board may
retain and compensate professionals to assist in performing its
duties and obligations without Court approval.
About First Magnus
Based in Tucson, Arizona, First Magnus Financial Corporation --
http://www.firstmagnus.com/-- purchases and sells prime and
Alt-A mortgage loans secured by one-to-four unit residences.
The company filed for chapter 11 protection on Aug. 21, 2007
(Bankr. D. Ariz. Case No.: 07-01578). John R. Clemency, Esq., at
Greenberg Traurig LLP serves as the counsel for the Debtor. The
Official Committee of Unsecured Creditors has selected the firm
Warner Stevens LLP as its counsel. When the Debtor filed for
bankruptcy, it listed total assets of $942,109,860 and total debts
of $812,533,046.
The Debtor's exclusive period to file a plan expires on Dec. 19,
2007. (First Magnus Bankruptcy News, Issue No. 13; Bankruptcy
Creditors' Service Inc. http://bankrupt.com/newsstand/or
215/945-7000).
FORD MOTOR: American Jaguar Dealers Prefer Sale to U.S. Bidder
--------------------------------------------------------------
American dealers of Ford Motor Company's Premier Automotive Brand,
Jaguar, have expressed preference over U.S. group, J.P. Morgan
Chase & Co.'s One Equity Partners LLC, bidding over the luxury car
unit, Stephen Power in Frankfurt and Eric Bellman in Mumbai of the
Wall Street Journal report.
Ken Gorin, chairman of the Jaguar Business Operations Council,
says he is wary over the perception on Jaguar if owned by
companies out of India, such as final bidders Tata Motors Ltd. and
Mahindra & Mahindra Ltd., WSJ relates. Although, he insists that
the particularity is on the unique image projection of Jaguar as a
luxury brand, and not on the management capabilities of the Indian
bidders.
The choice of U.S. dealers, WSJ relates, may have something to do
with Jacques Nasser, managing director of One Equity Partners.
Mr. Nasser was Ford's CEO from 1999 to 2001, who advocated the
investment on Ford's Europeam luxury brands.
As reported in the Troubled Company Reporter on Nov. 13, 2007,
Ford continues to explore in greater detail the potential sale of
its Premier Automotive Group brands, Jaguar and Land Rover, with
interested parties and anticipates these discussions will
culminate in an agreement no later than early next year.
In early September 2007, Tata Motors, Mahindra & Mahindra and One
Equity Partners, led by former Ford CEO Jacques Nasser, have
advanced into the second round of Ford's auction process for its
Jaguar and Land Rover marques.
Headquartered in Dearborn, Michigan, Ford Motor Co. (NYSE: F) --
http://www.ford.com/-- manufactures or distributes automobiles in
200 markets across six continents. With about 260,000 employees
and about 100 plants worldwide, the company's core and affiliated
automotive brands include Ford, Jaguar, Land Rover, Lincoln,
Mercury, Volvo, Aston Martin, and Mazda. The company provides
financial services through Ford Motor Credit Company.
The company has operations in Japan in the Asia Pacific region.
In Europe, the company maintains a presence in Sweden, and the
United Kingdom. The company also distributes its brands in
various Latin American regions, including Argentina and Brazil.
* * *
As reported in the Troubled Company Reporter on Nov. 19, 2007,
Moody's Investors Service affirmed the long-term ratings of Ford
Motor Company (B3 Corporate Family Rating, Ba3 senior secured,
Caa1 senior unsecured, and B3 probability of default), but changed
the rating outlook to Stable from Negative and raised the
company's Speculative Grade Liquidity rating to SGL-1 from SGL-3.
Moody's also affirmed Ford Motor Credit Company's B1 senior
unsecured rating, and changed the outlook to Stable from Negative.
These rating actions follow Ford's announcement of the details of
the newly ratified four-year labor agreement with the UAW.
FORD MOTOR: U.K. Marques' Final Bidders are Tata, Mahindra & OEP
----------------------------------------------------------------
Tata Motors Ltd., Mahindra & Mahindra Ltd. and One Equity Partners
LLC have submitted their final bids for Ford's Motor Company's
British Marques brands, according to various reports.
Sources say that there are speculations that the sale is likely to
range from $1.5 billion to $2 billion.
As reported in the Troubled Company Reporter on Oct. 1, 2007,
Terra Firma Capital Partners Limited joined the bid for Ford's
Jaguar and Land Rover brands.
Previously reported on Sept. 27, 2007, Ford's British Marques
still has four potential buyers left after two Indian firms,
Mahindra & Mahindra and Cerberus Capital Management LP, quit the
buying race. Citing Reuters, the TCR further names the four
remaining suitors as Ripplewood Holdings LLC, Tata Motors Limited,
TPG Capital L.P. also known as Texas Pacific Group, and One Equity
Partners LLC, but these firms are yet to complete the due
diligence.
In early September 2007, Tata Motors, Mahindra & Mahindra and One
Equity Partners, led by former Ford CEO Jacques Nasser, have
advanced into the second round of Ford's auction process for its
Jaguar and Land Rover marques.
Headquartered in Dearborn, Michigan, Ford Motor Co. (NYSE: F) --
http://www.ford.com/-- manufactures or distributes automobiles in
200 markets across six continents. With about 260,000 employees
and about 100 plants worldwide, the company's core and affiliated
automotive brands include Ford, Jaguar, Land Rover, Lincoln,
Mercury, Volvo, Aston Martin, and Mazda. The company provides
financial services through Ford Motor Credit Company.
The company has operations in Japan in the Asia Pacific region.
In Europe, the company maintains a presence in Sweden, and the
United Kingdom. The company also distributes its brands in
various Latin American regions, including Argentina and Brazil.
* * *
As reported in the Troubled Company Reporter on Nov. 19, 2007,
Moody's Investors Service affirmed the long-term ratings of Ford
Motor Company (B3 Corporate Family Rating, Ba3 senior secured,
Caa1 senior unsecured, and B3 probability of default), but changed
the rating outlook to Stable from Negative and raised the
company's Speculative Grade Liquidity rating to SGL-1 from SGL-3.
Moody's also affirmed Ford Motor Credit Company's B1 senior
unsecured rating, and changed the outlook to Stable from Negative.
These rating actions follow Ford's announcement of the details of
the newly ratified four-year labor agreement with the UAW.
FOUR STAR: Voluntary Chapter 11 Case Summary
--------------------------------------------
Debtor: Four Star Homes, Inc.
4047 Equity Drive
Washington, PA 15301
Bankruptcy Case No.: 07-27727
Chapter 11 Petition Date: December 6, 2007
Court: Western District of Pennsylvania (Pittsburgh)
Debtor's Counsel: Marjorie M. Malkin, Esq.
Day, Brzustowicz & Malkin, P.C.
3821 Washington Road
McMurray, PA 15317
Tel: (724) 942-3789
Fax: (724) 942-3791
Estimated Assets: Unknown
Estimated Debts: Unknown
The Debtor did not file a list of its largest unsecured creditors.
FREESCALE SEMICONDUCTOR: Moody's Cuts Ratings with Neg. Outlook
---------------------------------------------------------------
Moody's Investors Service lowered the ratings of Freescale
Semiconductor, Inc. and maintained the negative outlook. Moody's
also affirmed the speculative grade liquidity rating at SGL-1.
This concludes the review for possible downgrade that was
initiated on Oct. 24, 2007.
The downgrade to B1 reflects Freescale's weakened credit profile
evidenced by continued high financial leverage, reduced capacity
utilization levels and lower earnings prospects over the near
term. It also incorporates Moody's expectations of: (i) continued
weakness in the company's wireless segment, which accounts for
roughly one third of Freescale's revenues; (ii) moderating demand
in the company's networking segment (approximately 22% of
revenues) due to subdued North American wireline and wireless
infrastructure spending as the large communications equipment
providers continue to delay purchases amid network consolidation;
(iii) lackluster revenue growth in the transportation segment; and
(iv) long product lead times before semiconductor design win
activity transitions to the production phase and contributes to
margins and earnings.
While Freescale maintains relatively high gross and operating
margins as well as very good liquidity, the negative outlook
reflects Moody's concerns regarding the difficult end market and
customer conditions, which have negatively impacted EBITDA and
free cash flow levels. This has delayed leverage reduction,
causing debt and credit protection measures to migrate to levels
more comparable to mid single-B rated peers. The negative outlook
captures Moody's view that Freescale will be challenged to reduce
leverage to under 6.0x EBITDA on a sustained basis over the next
twelve months. It also takes into consideration the company's
thin interest coverage and reduced financial flexibility, which is
magnified by diminished operating cash flow, a limited track
record as a standalone company and lack of historical performance
during a downturn.
The ratings could experience downward pressure if end market
demand weakens further or remains soft for a protracted period
resulting in lower-than-anticipated operating cash flow, weak free
cash flow generation, Moody's adjusted debt to EBITDA above 6.0x
for an extended period and/or erosion of liquidity sources.
The B1 rating recognizes Moody's view that Freescale: (i)
maintains strong market leadership positions and a rich product
portfolio comprising breadth and depth of technology; (ii)
benefits from a diversified revenue base with exposure to the
relatively stable and less volatile transportation and networking
segments which tend to exhibit slower growth prospects but longer
product life cycles than the wireless space; (iii) could benefit
from its near-sole source provider status for baseband and power
management ICs in Motorola's recent line-up of handsets and its
status as a RF transceiver supplier in newly-launched mobile
devices from both RIM and Motorola, to the extent consumer uptake
materializes; (iv) is positioned to benefit longer-term from
increasing content in existing mobile OEM customer platforms as
design solicitations are won (especially in 3G) and shipments
ramp; (v) has considerably improved its operating efficiency since
the Motorola spin-off and has taken steps to reduce operating
costs in the challenging business environment; and (vi) has a
defensive operating model that allows it to quickly reduce
expenses and capex in response to weak market conditions.
The SGL-1 rating reflects the company's very good liquidity in
spite of diminished internal cash generation. LTM free cash flow
has declined to levels well-below Moody's expectations. Over the
next twelve months, Moody's anticipates free cash flow to remain
below 2% of total debt and EBITDA interest coverage to remain
under 2.0x. Moody's expect this to be driven by: (i) weak
operating cash generation given its expectations of continued
softness in Freescale's addressable end markets; and (ii) sizeable
interest payments (approximately $800 million per year). The
company's depressed cash flow is offset by strong balance sheet
liquidity consisting of cash and short-term investments totaling
$772 million (as of September 2007) and potential cash proceeds of
$200 -- $300 million from asset sales. The SGL-1 rating also
incorporates the company's ability to suspend roughly $137 million
of cash interest payments through the use of a PIK toggle
structure on $1.5 billion of senior notes.
However, Moody's notes that continued weakness in internal cash
generation could force the company to draw down on its cash
balance and/or credit facilities, which would place downward
pressure on the liquidity rating. Presently, external liquidity
remains solid through an undrawn $750 million revolver that
expires in 2012. The bank credit facilities contain a financial
covenant that subjects Freescale to a first-lien secured debt
incurrence test. The company currently has sufficient headroom
under this covenant and full access to the revolver.
These ratings were downgraded:
-- Corporate Family Rating (New) to B1 from Ba3
-- Probability of Default Rating to B1 from Ba3
-- $750 Million Senior Secured Revolving Credit Facility due
2012 to Ba1 (LGD-2, 17%) from Baa3 (LGD-2, 16%)
-- $3.50 Billion Senior Secured Term Loan B Facility due 2013
to Ba1 (LGD-2, 17%) from Baa3 (LGD-2, 16%)
-- $2.35 Billion Senior Unsecured Notes due 2014 to B2 (LGD-
4, 65%) from B1 (LGD-4, 63%)
-- $500 Million Senior Unsecured Floating Rate Notes due 2014
to B2 (LGD-4, 65%) from B1 (LGD-4, 63%)
-- $1.50 Billion Senior Unsecured Toggle Notes due 2014 to B2
(LGD-4, 65%) from B1 (LGD-4, 63%)
-- $1.60 Billion Senior Subordinated Unsecured Notes due 2016
to B3 (LGD-6, 92%) from B2 (LGD-6, 91%)
This rating was affirmed:
-- Speculative Grade Liquidity Rating - SGL-1
Headquartered in Austin, Texas, Freescale Semiconductor, Inc.
designs and manufactures embedded semiconductors for the
transportation, networking and wireless markets. The company was
separated from Motorola via IPO in July 2004 and taken private in
a leveraged buyout in December 2006. Revenues for the twelve
months ended Sept. 28, 2007 were $5.8 billion.
GAP INC.: November 2007 Net Sales Up 11 Percent at $1.54 Billion
----------------------------------------------------------------
Gap Inc. reported net sales of $1.54 billion for the four-week
period ended Dec. 1, 2007, which represents an 11% increase
compared with net sales of $1.39 billion for the four-week period
ended Nov. 25, 2006. Due to the 53rd week in fiscal year 2006,
November 2007 comparable store sales are compared with the four-
week period ended Dec. 2, 2006. On this basis, the company's
comparable store sales for November 2007 were flat compared with
an 8% decrease in November 2006.
Comparable store sales by division for November 2007 were:
* Gap North America: positive 1% versus negative 7% last year;
* Banana Republic North America: positive 4% versus negative 1%
last year;
* Old Navy North America: negative 3% versus negative 10% last
year; and
* International: positive 1% versus negative 8% last year.
"While we were pleased with our sales performance in November, the
most important month of the quarter, December, remains ahead of
us," Sabrina Simmons, executive vice president, finance and acting
chief financial officer, Gap Inc. said. "As a result, we are
maintaining our earnings outlook for the full year."
Year-to-date net sales of $12.63 billion for the 43 weeks ended
Dec. 1, 2007, increased 2% compared with net sales of $12.40
billion for the 43 weeks ended Nov. 25, 2006. Due to the 53rd
week in fiscal year 2006, fiscal year 2007 year-to-date comparable
store sales are compared with the 43 week period ended Dec. 2,
2006. On this basis, the company's year-to-date comparable store
sales decreased 4%, compared with a 7% decrease in the prior year.
The company will report December sales on Jan. 10, 2008.
Headquartered in San Francisco, California, Gap Inc. (NYSE: GPS) -
- http://www.gapinc.com/-- is an international specialty retailer
offering clothing, accessories and personal care products for men,
women, children and babies under the Gap, Banana Republic, Old
Navy, Forth & Towne and Piperlime brand names. Gap Inc. operates
more than 3,100 stores in the United States, the United Kingdom,
Canada, France, Ireland and Japan. In addition, Gap Inc. is
expanding its international presence with franchise agreements for
Gap and Banana Republic in Southeast Asia and the Middle East.
* * *
The company continues to carry Fitch's BB+ Issuer Default Rating.
The company also carries Standard & Poor's Ratings Services' BB+
corporate credit rating.
GILBERT TUSCANY: Voluntary Chapter 11 Case Summary
--------------------------------------------------
Debtor: Gilbert Tuscany Village, L.L.C.
2152 South Vineyard, Suite 106
Mesa, AZ 85210
Bankruptcy Case No.: 07-06605
Chapter 11 Petition Date: December 6, 2007
Court: District of Arizona (Phoenix)
Debtor's Counsel: Dewain D. Fox, Esq.
Fennemore Craig, P.C.
3003 North Central Avenue, Suite 2600
Phoenix, AZ 85012-2913
Tel: (602) 916-5475
Fax: (602) 916-5675
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.
GLOBAL CASH: S&P Places 'BB-' Rating Under Negative Watch
---------------------------------------------------------
Standard & Poor's Ratings Services placed its ratings for Global
Cash Access Inc., including the 'BB-' corporate credit rating, on
CreditWatch with negative implications. The CreditWatch listing
follows the company's announcement that it is delaying the filing
of its Form 10-Q for the quarter ended Sept. 30, 2007, pending the
conclusion of an internal investigation being conducted under the
direction of an independent committee of its board of directors.
Global Cash Access has not indicated the nature of the
investigation and is currently unable to predict the timing of its
conclusion.
"The CreditWatch listing reflects uncertainty regarding the timing
of the company's ability to file its Form 10-Q, as well as our
inability to determine the potential impact of any findings of the
investigation," said Standard & Poor's credit analyst David Tsui.
"The ratings could be lowered if the delayed filing triggers any
liquidity events, or if the investigation's conclusion has a
material impact on credit quality. If it becomes clear that the
investigation is not material and Global Cash Access files its
financial statements without any adverse impact from the late
filing, we would affirm the ratings and remove them from
CreditWatch."
GLOBAL GEOPHYSICAL: S&P Affirms 'B-' Corporate Credit Rating
------------------------------------------------------------
Standard & Poor's Ratings Services affirmed its 'B-' corporate
credit rating to Houston, Texas-based seismic company Global
Geophysical Services Inc.
At the same time, S&P assigned its 'B' senior secured rating and
'2' recovery rating, indicating expectation of substantial (70%-
90%) recovery in the event of a payment default, to Global's
proposed $30 million first-lien senior secured revolving credit
facility and $120 million first-lien senior secured term facility.
S&P assigned a 'B-' senior secured rating and '4' recovery rating,
indicating expectation of average (30%-50%) recovery in the event
of a payment default, to Global's proposed $50 million second-lien
senior secured term facility.
The outlook is stable. Pro forma for the pending bank loans,
Global is expected to have $177.2 million in adjusted debt,
including capital lease obligations. Proceeds of the new loans
will be used to refinance the company's outstanding debt, fund
capital expenditures, and buy back shares.
"The ratings on Global reflect the company's participation in the
cyclical land seismic acquisition business, its small size and
short operating history, and its highly leveraged financial
profile," said Standard & Poor's credit analyst Aniki Saha-
Yannopoulos.
The ratings also incorporate Standard & Poor's concerns about cash
flow stability through the oil and gas spending cycle despite a
favorable near-term industry outlook. The company's backlog of
data acquisition projects and its experienced management team
partially mitigate these weaknesses.
GOODYEAR TIRE: Noteholders Tender $346 Million Convertible Notes
----------------------------------------------------------------
The Goodyear Tire & Rubber Company disclosed the results of a
offer to exchange its outstanding 4% Convertible Senior Notes due
June 15, 2034, for a cash payment and shares of its common stock.
Noteholders tendered approximately $346 million aggregate
principal amount of convertible notes in exchange for
approximately 28.7 million shares of common stock plus a total
cash payment of approximately $23 million. Approximately 99% of
the principal amount of the outstanding convertible notes was
tendered in the exchange offer. A total of approximately
$4 million principal amount of convertible notes remains
outstanding.
"This successful exchange offer eliminates approximately $346
million in debt from our balance sheet and reduces our annual
interest expense by approximately $14 million," W. Mark Schmitz,
executive vice president and chief financial officer, said. "This
exchange is another step in our debt reduction process and helps
us move closer to our next stage metrics."
The exchange offer, which expired at 5 p.m. New York City time on
Dec. 5, 2007, allowed note holders to receive the same number of
shares of Goodyear's common stock as they would have received upon
conversion of the convertible notes in accordance with their
current terms, plus a cash payment, including accrued and unpaid
interest.
The exchange offer was made pursuant to a prospectus, dated
Nov. 30, 2007, contained in a registration statement filed by
Goodyear with the Securities and Exchange Commission, which was
declared effective on Nov. 20, 2007. Copies of the prospectus
contained in the registration statement may be obtained from the
exchange agent:
Wells Fargo Bank, N.A.
Corporate Trust Operations
Sixth and Marquette, MAC N0303-121
Minneapolis, Minn. 55479
Telephone (800) 344-5128
Headquartered in Akron, Ohio, The Goodyear Tire & Rubber Company
(NYSE: GT) -- http://www.goodyear.com/-- is the world's largest
tire company. The company manufactures tires, engineered rubber
products and chemicals in more than 90 facilities in 28
countries. Goodyear's operations are located in Argentina,
Austria, Chile, Colombia, France, Italy, Guatemala, Jamaica,
Peru, Russia, among others. Goodyear employs more than 80,000
people worldwide.
* * *
In June 2007, Standard & Poor's Ratings Services raised its
ratings on Goodyear Tire & Rubber Co., including its corporate
credit rating to 'BB-' from 'B+'. These ratings still apply as of
Dec. 4, 2007.
GREEN TREE: Poor Performance Cues S&P to Downgrade 19 Ratings
-------------------------------------------------------------
Standard & Poor's Ratings Services lowered its ratings on 19
classes and affirmed its ratings on 127 classes from various
manufactured housing transactions related to Green Tree Servicing
LLC.
The lowered ratings reflect the continued poor performance of the
underlying pools of manufactured housing contracts and the
resulting deterioration in credit enhancement since Standard &
Poor's last reviewed these transactions.
The high levels of losses have significantly depleted credit
support for Green Tree's manufactured housing transactions. Most
of these transactions have experienced principal write downs on
their subordinate classes and, in many cases, on their mezzanine
classes as well.
The affirmed ratings reflect sufficient credit enhancement
available to support the classes at their current rating levels.
Although projected lifetime cumulative net losses for all of the
transactions currently exceed original expectations, credit
enhancement levels in some of the earlier vintages continues to
provide adequate protection from losses.
Ratings Lowered
Green Tree Financial Corp. Man Hsg Trust 1995-5
Rating
------
Class To From
----- -- ----
B-1 BB- BB
Green Tree Financial Corp. Man Hsg Trust 1996-2
Rating
------
Class To From
----- -- ----
M-1 B+ BB-
Green Tree Financial Corp. Man Hsg Trust 1996-3
Rating
------
Class To From
----- -- ----
M-1 CCC+ B+
Green Tree Financial Corp. Man Hsg Trust 1996-4
Rating
------
Class To From
----- -- ----
M-1 CCC B-
Green Tree Financial Corp. Man Hsg Trust 1996-5
Rating
------
Class To From
----- -- ----
M-1 CCC+ B-
Green Tree Financial Corp. Man Hsg Trust 1996-6
Rating
------
Class To From
----- -- ----
M-1 B- B
Green Tree Financial Corp. Man Hsg Trust 1996-7
Rating
------
Class To From
----- -- ----
M-1 B+ BB-
Green Tree Financial Corp. Man Hsg Trust 1996-9
Rating
------
Class To From
----- -- ----
M-1 B- BB-
Green Tree Financial Corp. Man Hsg Trust 1998-2
Rating
------
Class To From
----- -- ----
M-1 CCC- CCC
Green Tree Financial Corp. Man Hsg Trust 1998-3
Rating
------
Class To From
----- -- ----
M-1 CCC- CCC
Manufactured Housing Sr/Sub Pass-Thru Trust 1999-3
Rating
------
Class To From
----- -- ----
M-1 CCC- CCC
Manufactured Hsg contract Sr/Sub Pass-thru Certs Ser 2000-2
Rating
------
Class To From
----- -- ----
A-5 CCC- CCC
A-6 CCC- CCC
Manufactured Hsg contract Sr/Sub Pass-thru Certs Ser 2000-4
Rating
------
Class To From
----- -- ----
A-5 CCC- CCC
A-5 CCC- CCC
Manufactured Hsg contract Sr/Sub Pass-thru Certs Ser 2000-5
Rating
------
Class To From
----- -- ----
A-6 CCC- CCC
A-7 CCC- CCC
Manufactured Housing Contract Sr/Sub Pass-Thru Certs Series
2001-2
Rating
------
Class To From
----- -- ----
M-1 CCC- CCC
Conseco Manufactured Housing Contract Sr/Sub Pass-Thru Certs
Series 2001-3
Rating
------
Class To From
----- -- ----
M-1 CCC- CCC
Ratings Affirmed
Green Tree Financial Corp. Man Hsg Trust 1995-2
Class Rating
----- ------
M-1 AAA
B-1 BBB
Green Tree Financial Corp. Man Hsg Trust 1995-3
Class Rating
----- ------
M-1 AAA
B-1 BBB-
Green Tree Financial Corp. Man Hsg Trust 1995-4
Class Rating
----- ------
M-1 A
B-1 B-
Green Tree Financial Corp. Man Hsg Trust 1995-5
Class Rating
----- ------
A-6 AAA
M-1 AA+
Green Tree Financial Corp. Man Hsg Trust 1995-6
Class Rating
----- ------
A-5 AAA
A-6 AAA
M-1 A-
B-1 B
Green Tree Financial Corp. Man Hsg Trust 1995-7
Class Rating
----- ------
A-5 AAA
A-6 AAA
M-1 A+
B-1 B-
Green Tree Financial Corp. Man Hsg Trust 1995-8
Class Rating
----- ------
A-6 AAA
M-1 AA
B-1 B-
Green Tree Financial Corp. Man Hsg Trust 1995-9
Class Rating
----- ------
A-6 AAA
M-1 BBB+
B-1 B-
Green Tree Financial Corp. Man Hsg Trust 1995-10
Class Rating
----- ------
A-6 AAA
M-1 AA-
B-1 B
Green Tree Financial Corp. Man Hsg Trust 1996-1
Class Rating
----- ------
A-4 AAA
A-5 AAA
M-1 BBB
B-1 CCC
Green Tree Financial Corp. Man Hsg Trust 1996-2
Class Rating
----- ------
A-4 AAA
A-5 AAA
B-1 CCC-
Green Tree Financial Corp. Man Hsg Trust 1996-3
Class Rating
----- ------
A-5 AAA
A-6 AAA
B-1 CCC-
Green Tree Financial Corp. Man Hsg Trust 1996-4
Class Rating
----- ------
A-6 AA
A-7 AA
B-1 CCC-
Green Tree Financial Corp. Man Hsg Trust 1996-5
Class Rating
----- ------
A-6 AAA
A-7 AAA
Green Tree Financial Corp. Man Hsg Trust 1996-6
Class Rating
----- ------
A-6 AAA
B-1 CCC-
Green Tree Financial Corp. Man Hsg Trust 1996-7
Class Rating
----- ------
A-6 AAA
B-1 CCC-
Green Tree Financial Corp. Man Hsg Trust 1996-8
Class Rating
----- ------
A-6 AAA
A-7 AAA
M-1 B-
Green Tree Financial Corp. Man Hsg Trust 1996-9
Class Rating
----- ------
A-5 AAA
A-6 AAA
Green Tree Financial Corp. Man Hsg Trust 1996-10
Class Rating
----- ------
A-5 AAA
A-6 AAA
M-1 B+
B-1 CCC-
Green Tree Financial Corp. Man Hsg Trust 1997-4
Class Rating
----- ------
A-5 AA
A-6 AA
A-7 AA
M-1 B-
Green Tree Financial Corp. Man Hsg Trust 1997-6
Class Rating
----- ------
A-6 A+
A-7 A+
A-8 A+
A-9 A+
A-10 A+
M-1 CCC+
Green Tree Financial Corp. Man Hsg Trust 1997-7
Class Rating
----- ------
A-6 A+
A-7 A+
A-8 A+
A-9 A+
A-10 A+
M-1 CCC+
Green Tree Financial Corp. Man Hsg Trust 1997-8
Class Rating
----- ------
A-1 A+
M-1 CCC+
Green Tree Financial Corp. Man Hsg Trust 1998-2
Class Rating
----- ------
A-5 BBB
A-6 BBB
Green Tree Financial Corp. Man Hsg Trust 1998-3
Class Rating
----- ------
A-5 BBB
A-6 BBB
Green Tree Financial Corp. Man Hsg Trust 1998-5
Class Rating
----- ------
A-1 BBB+
M-1 CCC
Green Tree Financial Corp. Man Hsg Trust 1998-6
Class Rating
----- ------
A-7 BBB
A-8 BBB
M-1 CCC
M-2 CCC-
Green Tree Financial Corp. Man Hsg Trust 1998-8
Class Rating
----- ------
A-1 BB+
M-1 CCC
M-2 CCC-
Manufactured Housing Sr/Sub Pass-Thru Trust 1999-1
Class Rating
----- ------
A-5 B-
A-6 B-
A-7 B-
M-1 CCC
M-2 CCC-
Manufactured Housing Sr/Sub Pass-Thru Trust 1999-2
Class Rating
----- ------
A-4 B-
A-5 B-
A-6 B-
A-7 B-
M-1 CCC
M-2 CCC-
Manufactured Housing Sr/Sub Pass-Thru Trust 1999-3
Class Rating
----- ------
A-6 B-
A-7 B-
A-8 B-
A-9 B-
Manufactured Housing Sr/Sub Pass-Thru Trust 1999-4
Class Rating
----- ------
A-6 CCC
A-7 CCC
A-8 CCC
A-9 CCC
Manufactured Housing Sr/Sub Pass-Thru Trust 1999-5
Class Rating
----- ------
A-5 CCC
A-6 CCC
Manufactured Housing Contract Sr/Sub Pass-Thru Tr 1999-6
Class Rating
----- ------
A-1 CCC
Conseco MH Senior/Subordinate Pass-Through Trust 2000-3
Class Rating
----- ------
A CCC
M-1 CCC-
Manufactured Hsg Contract Sr/Sub Pass-thru Certs Ser 2000-6
Class Rating
----- ------
A-5 B-
Manufactured Hsg Contract Sr/Sub Pass-Thru Certs Ser 2001-1
Class Rating
----- ------
A-5 B-
Manufactured Hsg Contract Sr/Sub Pass-Thru Certs Ser 2001-2
Class Rating
----- ------
A AAA
Manufactured Housing Contract Sr/Sub Pass-Thru Certs Series
2001-3
Class Rating
----- ------
A-4 B-
Manufactured Housing Contract Sr/Sub Pass-Thru Certs Series
2001-4
Class Rating
----- ------
A-4 B-
M-1 CCC
M-2 CCC-
Manufactured Housing Contract Sr/Sub Pass-Through Certificates
Series 2002-1
Class Rating
----- ------
A-1 BB+
M-1-A CCC+
M-1-F CCC+
M-2 CCC-
B-1 CC
Manufactured Housing Contract Sr/Sub Pass-Through Certificates
Series 2002-2
Class Rating
----- ------
A-2 BB+
A-IO AAA
M-1 B-
M-2 CCC
B-1 CCC-
HINES NURSERIES: Moody's Cuts Family Rating to Caa2 from Caa1
-------------------------------------------------------------
Moody's Investors Service lowered Hines Nurseries, Inc.'s
corporate family rating to Caa2 from Caa1 and the rating on its
senior unsecured notes to Caa3 from Caa2. The downgrade reflects
a reversal in the trend of improving profitability given a
significant decline in operating income for the quarter ended
Sept. 30, 2007 over the same period last year. Moody's had
expected an improvement in operating performance for fiscal 2007
versus the prior year, although this now appears less likely. The
rating action also considers ongoing business challenges that may
prevent the company from meaningfully improving profitability
levels, including intense pricing pressure in its markets, and its
exposure to volatile raw material prices. More recently, the
company has experienced lower replenishment orders from its key
customers.
Therefore, Moody's has increased concerns over the potential for
default via a company initiated debt restructuring. Moody's notes
that Hines' recently announced that it retained the services of
Miller Buckfire & Co., LLC and Kirkland & Ellis LLP to assist
management and the board of directors in evaluating the company's
strategic alternatives. Notwithstanding these risks, Moody's notes
the company's adequate liquidity position that has been supported
by recent asset sales. The ratings outlook was revised to
negative from stable.
These ratings were downgraded:
-- Corporate family rating to Caa2 from Caa1;
-- Probability-of-default rating to Caa2 from Caa1;
-- $175 million senior unsecured rating to Caa3 (LGD4, 68%)
from Caa2 (LGD5, 71%).
Hines' Caa2 rating is driven by the company's extremely weak
financial metrics, inadequate interest coverage, continued
negative cash flows, and limited financial flexibility. The
rating also considers the inherent volatility in the company's
revenues and earnings given the highly seasonal and competitive
commercial nursery industry. Moody's notes a change to a pay-by-
scan approach by Hines' largest customer combined with heightened
competitive activity from regional participants has significantly
increased the operating risks of the company's core business.
The negative ratings outlook reflects Moody's concern that
challenging market conditions will continue to pressure
Hines'operating performance, resulting in the likelihood for
continued weak credit metrics.
Headquartered in Irvine, California, Hines Nurseries, Inc is the
largest commercial nursery operator in the United States. The
company recorded sales of $229 million for the twelve months ended
September 30, 2007.
HOLOGIC INC: S&P Assigns 'B' Rating on $1.5BB Convertible Notes
---------------------------------------------------------------
Standard & Poor's Rating Services took these actions:
Assigned its preliminary 'BB-' senior unsecured, preliminary 'B'
subordinated and 'preliminary B-' preferred stock ratings to
Bedford, Massachussetts-based Hologic Inc.' mixed WKSI shelf
filing; Assigned its 'B' rating to the company's $1.5 billion of
convertible senior notes which were issued as a drawdown to the
shelf; and Affirmed the corporate credit rating of 'BB-'.
The outlook is stable. The convertible senior note rating is two
notches below the corporate credit rating of 'BB-' to reflect its
structural subordination and disadvantaged position in recovery.
Hologic will use the proceeds of the senior convertible notes to
repay its $1.25 billion term loan X facility, and a portion of its
$500 million term loan B facility. These facilities provided a
portion of the financing needed to fund the October 22, 2007
$6.0 billion acquisition of Cytyc Corp. Cytyc's Pap tests and
abnormal uterine bleeding treatments complement Hologic's
mammography, osteoporosis, and breast biopsy franchises, creating
a leading player in the women's health care market. Initially,
S&P estimate that lease-adjusted debt leverage will be high, at
about 5x. However, the expected continued rapid growth of high-
margined products should generate the free cash flow that could
reduce borrowings markedly over the next two years.
"The ratings reflect Hologic's initially high leverage, short
track record of success, challenge to integrate this acquisition
of Cytyc, and strong positions in attractive specialty medical
markets," said Standard & Poor's credit analyst David Lugg. This
transforming transaction almost doubled the size of Hologic,
bringing additional product and geographic breadth. The combined
company's specialty surgical and diagnostic products focus on the
medical needs of women, a market characterized by limited
competition from a few, but very large, firms and some exposure to
reimbursement challenges. Technological innovation that produces
products with greater accuracy and ease-of-use is a key to success
in this market.
INDYMAC BANCORP: Seeking More Cash Despite Strong Capital Cushion
-----------------------------------------------------------------
IndyMac Bancorp Inc. Chief Executive Officer Michael W. Perry
disclosed in a regulatory filing with the Securities and Exchange
Commission that the company is considering a variety of capital
raising alternatives, including potentially raising capital
through some sort of convertible debt or preferred offering that
is privately placed with one or more investors.
Mr. Perry's statement was in response to a shareholder suggestion
which said that "the repurchasing of shares [by Indymac] at these
deflated prices would send an even stronger message, not just
about the viability if IMB, but about how it feels about itself as
a sound investment. Later, as footing is regained and profit
realized, the raising of more capital from additional offerings
can resume."
In his response, Mr. Perry further said that given the declining
home sales and prices and rising delinquencies and foreclosures,
the company suffered a loss in the 3rd quarter and will suffer a
loss in the 4th quarter.
"At present, while I do expect to continue to narrow our loss each
quarter...it is difficult to predict when we will return to
profitability. Hopefully, if all goes well, we can return to
modest profitability sometime in the 2nd half of 2008," he noted.
In this environment, Mr. Perry explained, maintaining strong
capital and liquidity levels is paramount. So, unfortunately, not
only are we not in a position to repurchase shares...even though
we have a strong capital cushion today...we are looking to raise
additional capital right now.
"I know it is counterintuitive, but in this present
environment...the best way to preserve (and eventually grow)
shareholder value is to maintain strong capital levels and
liquidity...even if that results in some short-term dilution," he
added.
About IndyMac Bancorp
Headquartered in Pasadena, Calif., IndyMac Bancorp Inc. (NYSE:
IMB) -- http://www.indymacbank.com/-- is the holding company for
IndyMac Bank F.S.B., the 7th largest savings and loan and the 2nd
largest independent mortgage lender in the United States.
IndyMac Bank, operating as a hybrid thrift/mortgage banker,
provides financing for the acquisition, development, and
improvement of single-family homes. IndyMac also provides
financing secured by single-family homes and other banking
products to facilitate consumers' personal financial goals.
Indymac Bancorp, Inc. is a residential mortgage originator and
servicer located in Pasadena, California.
* * *
As reported in the Troubled Company Reporter on Dec. 3, 2007,
Moody's downgraded Indymac Bank F.S.B.'s long-term deposit rating
to Ba1 from Baa3 and its short-term deposit rating to not prime
from P-3. Indymac Bancorp, Inc.'s issuer rating was downgraded to
Ba2 from Ba1. The thrift's D+ bank financial strength rating and
all other long term ratings remain under review for possible
downgrade. Moody's said that the downgrade reflects the
significant deterioration in the quality of Indymac's loan
portfolios and continuing concerns regarding franchise impairment.
INSTANT WEB: S&P Holds 'B' Rating and Revises Outlook to Neg.
-------------------------------------------------------------
Standard & Poor's Ratings Services revised its rating outlook on
Instant Web Inc. to negative from stable. Ratings on the company,
including the 'B' corporate credit rating, were affirmed.
"The outlook revision reflects weaker-than-expected revenue and
EBITDA, stemming from softness in volumes from certain of the
company's financial services customers," explained Standard &
Poor's credit analyst Ariel Silverberg. "Given current weakness
in the financial services sector, we are concerned that these
negative trends may continue at least through the first half of
2008, leading to further declines in EBITDA and a weakening of
credit measures."
Instant Web is a wholly owned subsidiary of IWCO Direct Inc., and
it is a private company, so it does not publicly disclose its
financial statements. Pro forma adjusted debt to EBITDA and
EBITDA interest coverage are weak for the rating. Credit measures
may weaken somewhat further in early 2008 given
operating trends. Notwithstanding weakness in top-line growth,
Instant Web's operating margin has remained relatively flat as the
company continues to efficiently allocate production and reduce
costs at its plants, particularly at its New York facility.
The 'B' rating reflects Instant Web's high pro forma debt
leverage, the expectation for an aggressive financial policy given
ownership by a private equity firm, the company's narrow business
focus in a competitive operating environment, and customer
concentration. These factors are somewhat offset by
Instant Web's good position in direct mail, supported by its full
service model, and its track record of new customer wins and
increased customer penetration.
INTERDENT INC: Weak Liquidity Cues S&P to Junk Rating
-----------------------------------------------------
Standard & Poor's Rating Services lowered its corporate credit
rating on dental practice management services provider InterDent
Inc., the parent company of InterDent Service Corp., to 'CCC' from
'B-'. The outlook is negative.
At the same time, Standard & Poor's lowered its senior secured
debt rating on InterDent Service Corp.'s $80 million second-lien
senior secured notes due in 2011 to 'CCC-' from 'B-'. The
recovery rating was revised to '5', indicating the expectation for
modest (10% to 30%) recovery in the event of a payment default,
from '4'.
"The downgrade reflects increased concern regarding the company's
very weak liquidity position, as well as deteriorating operating
margins," said Standard & Poor's credit analyst Rivka Gertzulin.
Despite some growth in revenues in the past two quarters,
InterDent experienced weaker-than-expected operating performance
due to a number of reasons, including increased consulting and
management fees, low dentist utilization, continued dentist
turnover (mid-30% area), increased dental supply and lab costs,
increased health care expenses, and restructuring costs.
Liquidity, which already was stretched at year-end 2006, suffered
further as a result of these problems; the company consumed $1.6
million and $2.9 million of cash in the quarter ending Sept. 30,
2007 and year to date, respectively.
The rating on InterDent reflects the company's challenging
operating circumstances, highly leveraged financial profile, and
tight liquidity, which limits management's ability to adequately
invest in the business. The company also remains vulnerable to
the overall consumer spending environment, since a significant
portion of the services provided by InterDent is discretionary.
IPG INC: Moody's Lifts Debt and CF Ratings with Stable Outlook
--------------------------------------------------------------
Moody's Investors Service upgraded the long-term debt and
corporate family rating of IPG (US) Inc. as well as the senior
subordinated notes of Intertape Polymer US Inc. The outlook was
revised to stable from review, direction uncertain. In a related
action, Moody's upgraded the company's speculative grade liquidity
rating to SGL-3 from SGL-4. The upgrade was prompted by the
company's improved liquidity position and the fact that senior
management has been successful in stabilizing the company's
operating performance since the second half of 2006. On Oct. 4,
2007, the company successfully completed a shareholder rights
offering netting approximately $60.9 million in additional equity
funding. The entire proceeds were used to reduce long-term debt.
The B2 corporate family rating reflects the company's improved
operating performance (adjusted operating margins of approximately
6.3% from 3.0% in late 2006), positive free cash flow, and lower
leverage (adjusted debt to EBITDA of approximately 3.8x from
5.2x). Additional factors that support the ratings include
product breadth, the company's estimated market share for several
of its product lines within the tapes sector, a reasonable track
record of passing through higher raw material costs to customers,
and its recent cost saving initiatives.
At the same time, the B2 rating considers that the company has
demonstrated limited top-line growth, a high percentage of
commodity products versus innovative products, the potential for
additional near-term declines in certain product demand, and
exposure to fluctuating raw material costs. Based on the
company's recent operating trends, management will need to
continue executing cost savings initiatives to improve
profitability over the near-term. Even with the progress that has
been made, Moody's believes that a combination of a slowdown in
the economy, raw material cost pressures, and competitive
pressures could continue to adversely impact the company's
operating performance.
The speculative grade liquidity rating was upgraded to SGL-3 from
SGL-4 because Moody's believes the company's liquidity position
will continue to improve over the near-term. Moody's expects that
the company will be able to internally fund most of its cash
requirements, including capital expenditures and working capital
needs. In addition, Moody's anticipates that covenant and
revolver availability will remain acceptable and that possible
restrictions or the need to renegotiate covenants is not likely in
the near-term.
Moody's notes, however, that IPG (US) Inc. amended its credit
facilities in August of 2007 but did not request changes to its
financial covenant ratios. The amendment accommodated the costs
of the strategic alternative process in the covenant calculations;
however, the company's interest coverage ratio will tighten
several times during 2008. Moody's will continue to monitor the
company's financial covenant compliance on an ongoing basis.
The stable outlook reflects restored operating margins and
positive free cash flow metrics (adjusted RCF-Capex/Debt of 5-8%).
In addition, the outlook represents an improved liquidity position
because of the additional cushion under its financial covenants.
Although the Board is reviewing the company's senior management
structure, the management team has addressed its strategic and
financial strategies going forward. Moody's believes a sustained
deterioration in operating performance (operating margins of less
than 3%) or credit metrics (negative free cash flow) due to
declines in product demand, or other operational issues, or the
inability to remain in compliance with its financial covenant
could result in a downgrade of the ratings. Conversely, the
ratings could be raised if the company continues to generate
savings from additional cost reduction efforts, restores operating
margins and credit metrics back to levels generated prior to the
second half of 2006, and successfully resolves its CEO succession
plan.
The most recent prior rating action occurred on Aug. 2, 2007.
Moody's placed IPG (US) Inc.'s ratings under review, direction
uncertain, pending the refinancing of its bank agreement and
compliance with its financial covenants.
Upgrades:
Issuer: IPG (US) Inc.
-- Corporate Family Rating, Upgraded to B2 from B3
-- Senior Secured Bank Credit Facility, Upgraded to Ba3
(LGD2, 25%) from B1
-- Speculative Grade Liquidity Rating, Upgraded to SGL-3 from
SGL-4
Issuer: Intertape Polymer US Inc.
-- Senior Subordinated Regular Bond/Debenture, Upgraded to
Caa1 (LGD5, 77%) from Caa2
The outlook is stable.
Intertape Polymer Group Inc., a parent company of IPG (US) Inc.
and Intertape Polymer US Inc., is a manufacturer and marketer of
adhesive tapes, specialty tapes, plastic films and engineered
coated products. The company is headquartered in Bradenton,
Florida.
JEFFREY'S COURT: Case Summary & 19 Largest Unsecured Creditors
--------------------------------------------------------------
Debtor: Jeffrey's Court, L.L.C.
1000 North Green Valley Parkway, Suite 300-147
Henderson, NV 89074
Bankruptcy Case No.: 07-18148
Chapter 11 Petition Date: December 6, 2007
Court: District of Nevada (Las Vegas)
Debtor's Counsel: Terry V. Leavitt, Esq.
601 South 6th Street
Las Vegas, NV 89101
Tel: (702) 385-7444
Fax: (702) 385-1178
Estimated Assets: $1 Million to $10 Million
Estimated Debts: $1 Million to $10 Million
Debtor's 19 Largest Unsecured Creditors:
Entity Nature of Claim Claim Amount
------ --------------- ------------
Aurora Investments, L.P. $500,000
2710 Harbor Hills Lane
Las Vegas, NV 89117
Roni Amid Lawsuit A551264 $250,000
630 Trade Center Drive
Las Vegas, NV 89119
Virgin Advertising
151 East Warm Springs Road
Las Vegas, NV 89119
Las Vegas Real Estate $220,000
Services
1700 West Horizon Ridge,
Suite 202
Henderson, NV 89012
1st Source Reality $200,000
Howard Covert Business Debt $175,000
J.M.K. Investments, Ltd. $160,000
Maurice Fink $150,000
Merlin Investments II, Inc. $150,000
Billy Shope Jr. Revocable $100,000
Trust
Daniel H. Kim $100,000
Brouwers Family L.P. $100,000
First Savings Bank $100,000
Ray A. and Katrina M. $50,000
Pahlmann
Blue Tipping Group Business Debt $47,500
Clark County Treasurer Property Taxes $44,079
C.A.P. Investors $30,000
Dan and Teri Nelson $25,000
Jarrod Gorzalski $25,000
Property Image Management, $25,000
L.L.C.
LEGENDS GAMING: S&P Rates $220MM Secured Note Offering at B
-----------------------------------------------------------
Standard & Poor's Ratings Services assigned its issue-level and
recovery ratings to the proposed $220 million senior secured note
offering due 2012 to be issued by Legends Gaming, LLC and
subsidiary Legends Finance Corp. The notes were rated 'B' with a
recovery rating of '3', indicating that lenders can expect
meaningful (50% to 70%) recovery in the event of a payment
default. Proceeds will be used to repay Legends' existing senior
credit facility, as well as for fees and expenses. Concurrent
with the note issuance, Legends is planning on entering into a $15
million revolving credit facility, which S&P anticipate will be
undrawn at close.
At the same time, S&P affirmed the 'B' corporate credit rating on
the company. The rating outlook is stable.
"The rating reflects Frankfort, Illinois-based Legends Gaming's
high debt levels, small portfolio of gaming properties, and
competitive environments in both markets in which it operates,"
said Standard & Poor's credit analyst Ariel Silverberg.
The company's two facilities are located in Vicksburg, Mississippi
and Bossier City, Louisiana; both are branded as "DiamondJacks."
Following August 2006, performance has been below initial
expectations, in part due to delays in initiating its marketing
program, as well as from a greater-than-expected level of capital
expenditures, primarily relating to property maintenance at the
Bossier City property. Construction at
the Bossier City facility had a negative impact on operating
performance throughout the second quarter and most of the third
quarter of 2007. Operating performance in the first nine months
of 2007, however, compares somewhat favorably to the same period
in 2005, primarily as a result of increases in revenue and
operating performance at the Vicksburg property. This property
has been successful in retaining its Jackson, Mississippi customer
base even after competitors' post-hurricane reopenings.
LEVITT AND SONS: Gets Court Nod to Abandon BOA Collateral
---------------------------------------------------------
The Honorable Raymond B. Ray of the U.S. Bankruptcy Court for the
Southern District of Florida authorized Levitt and Sons LLC and
certain of its debtor-affiliates to abandon the Bank of America
collateral.
Judge Ray terminated the automatic stay with respect to the BOA
Abandoned Collateral. BOA and any other party asserting a lien
against or an interest in the BOA Abandoned Collateral may enforce
or assert such lien or interest under applicable non-bankruptcy
law.
As reported in the Troubled Company Reporter on Nov. 23, 2007, BOA
provided a $125,000,000 revolving line of credit to the borrowers,
pursuant to a credit facility dated as of Oct. 6, 2005, as amended
from time to time, among BOA, as lender; Levitt & Sons and GC LLC,
as borrowers; and Levitt & Sons at Hawk's Haven, LLC, Levitt &
Sons at Hunter's Creek, LLC, Levitt & Sons of Lake County, LLC,
Levitt & Sons of Seminole County, LLC, Levitt & Sons of Osceola
County, LLC, and Levitt & Sons of Flagler County, LLC, as
guarantors.
In addition, pursuant to an Aug. 9, 2005 credit facility, as
amended, among KeyBank, as lender; Levitt & Sons, as borrower;
and Levitt & Sons at Tradition, LLC, Levitt & Sons of Hernando
County, LLC, and Levitt & Sons of Lee County, as guarantors,
KeyBank provided a $125,000,000 revolving acquisition and
development loan to the borrower.
As of Sept. 30, 2007:
(a) borrowings under the BOA Credit Facility, which is secured
by mortgage liens on the real property owned by the BOA
Guarantors, totaled approximately $103,000,000, plus
interests, costs and attorneys' fees; and
(b) borrowings under the KeyBank Credit Facility, which is
secured by, inter alia, first priority mortgage liens on
the real property owned by the KeyBank Guarantors, totaled
approximately $95,000,000, plus interests, costs and
attorneys fees.
The BOA and KeyBank Debtors insisted that the Court should
authorize them to abandon their right, title and interest in all
of the banks' Collateral, including their right title and
interest in the properties pursuant to Section 554(a) of the
Bankruptcy Code.
The abandonment of the BOA Abandoned Collateral will be deemed a
satisfaction of any secured claim asserted against the collateral
without prejudice to the right of BOA or any other putative
secured creditor to assert an unsecured deficiency claim against
the estates and the objections, offsets and defenses of the
Debtors.
Previous Objections
A) Cascades at Saratosa
The Cascades at Saratosa is a housing development presently under
construction by one of the Debtors' subsidiaries in Manatee
County, Florida. Approximately 82% of the units in the
development have been sold, with the remaining lots owned by the
developer.
The existing homeowners in the development have formed a Cascades
at Saratosa Transition Committee to begin negotiations with
Levitt and Sons, LLC, for a smooth and efficient transfer of
control to the homeowners.
The Debtors sought to abandon various properties subject to
liens in favor of Wachovia Bank, N.A., one of which is the
Cascades at Saratosa development. The Debtors also sought to
abandon all property in favor of Wachovia, including all rights,
title and interest in the subject properties.
David W. Langley, Esq., at David W. Langley, P.A., in Plantation,
Florida, argued that there were many other issues involved in the
abandonment and turnover of LAS' assets, including:
(a) orderly turnover of control of the Homeowner's
Association from LAS to the Transition Committee;
(b) payment of the shortfall in the operating budget for the
Homeowner's Association by the Debtor until turnover;
(c) assessment of the outstanding lots presently held by the
Debtor; and
(d) the turnover of books and records and other documents by
LAS concerning the operations of the Homeowner's
Association.
An immediate abandonment of the Debtor's interest in the Cascades
at Saratosa Development would significantly impact the existing
homeowners and put their safely and welfare at risk, Mr. Langley
told Judge Ray.
The Transition Committee requested LAS to take certain actions
before abandoning their interest in the Cascades at Saratosa
Development, including:
-- turnover of all books and records of the operations of the
Homeowners' Association from its inception to date to the
Transition Committee;
-- account for all monies spent by the developer in the
operations of the Homeowners' Association from its
inception to date, and of monies owed; and
-- resolution of the procedure for takeover of the management
of the Homeowners' Association by the homeowners.
Due to the Debtor's inability to reach the 980% threshold and its
apparent lack of interest in maintaining the Cascades at
Saratosa, the Transition Committee also asked the Court to compel
the turnover of control of the Cascades at Saratosa Residents'
Association, Inc., by LAS to the homeowners.
Turn over of control of the Homeowner's Association of Cascades
at Saratosa is mandated by statute and contract to take place
when 90% of the units have been sold, Mr. Langley relates. The
developer is no longer offering units for sale in the ordinary
course of business and should no longer exercise control over the
operations of the Association, he added.
Mr. Langley stated that following turnover of control of the
Association, the Debtor must comply with Florida Statute
720.307(3) concerning turn over of information, which provides,
among other things, that at the time the members are entitled to
elect at least a majority of the board of directors if the
homeowners' association, the developer will, at its expense,
within no more than 90 days deliver certain documents to the
board, including:
-- all deeds to common property owned by the association;
-- the original of the association's declarations of
covenants and restrictions;
-- a certified copy of the articles of incorporation of the
association;
-- a copy of the bylaws;
-- the books and records of the association; and
-- policies, rules and regulations, if any, which have been
adopted.
Wachovia Seeks to Lift Stay with Respect to Collateral
In an abundance of caution, Wachovia asked Judge Ray to modify or
terminate the automatic stay to permit Wachovia to exercise all
of its statutory and contractual rights and remedies in and to
the real and personal property securing the obligations of the
Wachovia Debtors, including:
-- taking possession and control of the collateral;
-- seeking the appointment of a receiver in state court to
manage the Wachovia Collateral; and
-- foreclosing the Wachovia Collateral.
Wachovia also asked Judge Ray to make certain project documents
available to Wachovia for review and copying as soon as
practicable, with Wachovia to pay the reasonable expenses
incurred.
Wachovia is in negotiations with the Debtors concerning the
extension of postpetition financing to the Debtors. Wachovia and
the Debtors have agreed that if no debtor-in-possession financing
is in place by Dec. 19, 2007, the Debtors will pursue their
previously filed motion to abandon the Wachovia Collateral. If a
consensual resolution has not been reached with the Debtors on or
before December 19, Wachovia intends to prosecute its Stay Motion
at the December 19 omnibus hearing.
As previously reported, Wachovia, as lender, and LAS, as
borrower, are parties to certain Revolving Land Acquisition,
Development and Residential Construction Borrowing Base Facility
Agreement, dated Jan. 5, 2006, pursuant to which Wachovia
agreed to make available to LAS a revolving line of credit in a
principal amount not exceeding $100,000,000.
The Original LAS Credit Agreement was amended on May 31, 2006,
among other things, to increase the stated principal amount
available to be drawn under the revolving line of credit to
$125,000,000 -- LAS Loan. As of the bankruptcy filing date, the
outstanding indebtedness owing on the LAS Loan totaled
$103,893,248, exclusive of unearned interest, accruing charges
and also certain prepetition charges.
Wachovia, LAS and Levitt and Sons at World Golf Village, LLC, are
parties to a certain construction loan agreement, dated September
29, 2004, as amended -- World Golf Loan Agreement. Pursuant to
the terms of the World Golf Loan Agreement, Wachovia made
available a revolving line of credit in a principal amount not
exceeding $26,500,000. As of the Debtors' bankruptcy filing, the
outstanding indebtedness owing on the World Golf Loan totaled
$4,424,878, exclusive of unearned interest, accruing charges and
also certain prepetition charges.
Wachovia, LAS, Levitt and Sons of Manatee County, LLC, and
Bellagio by Levitt and Sons, LLC, are parties to a certain
construction loan agreement, dated September 5, 2002 -- Bellagio
Loan Agreement. Pursuant to the terms of the Bellagio Loan
Agreement, Wachovia made available a revolving line of credit in
an aggregate principal amount not exceeding $30,000,000. The
outstanding indebtedness owing on the Bellagio Loan totaled
$9,795,609, exclusive of unearned interest, accruing charges and
also certain prepetition charges.
Robert N. Gilbert, Esq., at Carlton Fields, P.A., in West Palm
Beach, Florida, related that the Debtors' abandonment motion with
respect to the Wachovia Collateral state that they have no
intention of reorganizing but, instead, intend to pursue an
orderly wind down and liquidation of the Debtors' assets.
Because the Debtors do not intend to reorganize, the Wachovia
Collateral is not necessary to an effective reorganization.
Grounds exist to modify the stay for cause pursuant to Section
362(d)(1) of the Bankruptcy Code, because Wachovia's interest in
the Wachovia Collateral is not adequately protected, Mr. Gilbert
asserted.
Wachovia maintained that it holds a perfected security interest in
certain cash of the Debtors under the terms of certain mortgages.
Mr. Gilbert further clarified that Wachovia do not seek relief
from the automatic stay with regard to the Cash.
About Levitt and Sons
Based in Fort Lauderdale, Florida, Levitt and Sons LLC --
http://www.levittandsons.com/-- is the homebuilding subsidiary of
Levitt Corporation (NYSE:LEV). Levitt Corp. --
http://www.levittcorporation.com/-- together with its
subsidiaries, operates as a homebuilding and real estate
development company in the southeastern United States. The
company operates in two divisions, homebuilding and land. The
homebuilding division primarily develops single and multi-family
homes for adults and families in Florida, Georgia, Tennessee, and
South Carolina. The land division engages in the development of
master-planned communities in Florida and South Carolina.
Levitt and Sons LLC and 38 of its homebuilding affiliates filed
for Chapter 11 protection on Nov. 9, 2007 (Bankr. S.D. Fla. Lead
Case No. 07-19845). Paul Singerman, Esq. and Jordi Guso, Esq., at
Berger Singerman, P.A., represent the Debtors in their
restructuring efforts. The Debtors chose AP Services, LLC as
their crisis managers, and Kurtzman Carson Consultants, LLC as
their claims and noticing agent. Levitt Corp., the parent
company, is not included in the bankruptcy filing.
The Debtors' latest consolidated financial condition as of
Sept. 30, 2007 reflect total assets of $900,392,000, and total
liabilities of $780,969,000. (Levitt and Sons Bankruptcy News,
Issue No. 6; Bankruptcy Creditors' Service Inc.;
http://bankrupt.com/newsstand/or 215/945-7000)
LEVITZ FURNITURE: AICCO Withdraws Request to Cancel Policies
------------------------------------------------------------
AICCO Inc. withdrew its request filed on Nov. 19, 2007, with the
U.S. Bankruptcy Court for the Southern District of New York to
lift an automatic stay in order to cancel the insurance policies
funded by the finance premium agreements it had with PLVTZ Inc.,
dba Levitz Furniture Inc.
AICCO did not disclose the reason for the withdrawal.
As reported in the Troubled Company Reporter on Dec. 3, 2007,
AICCO asked the Court to declare that it has a validly perfected
security interest in certain collateral; declare
that service of its request is deemed notice of intent to cancel
the insurance policies, if necessary; and declare that it may
exercise all its remedies under the premium finance agreements,
including recovery of attorney's fees.
AICCO said that an expedited hearing to consider its request is
needed so that it may not be reduced to an undersecured creditor
on or about Dec. 13,2007.
According to AICCO, its security is declining at a rate of $6,512
a day and no adequate protection has been provided.
About Levitz Furniture
Based in New York City, Levitz Furniture Inc., nka PVLTZ Inc. --
http://www.levitz.com/-- is a specialty retailer of furniture,
bedding and home furnishings in the United States. It has 76
locations in major metropolitan areas, principally in the
Northeast and on the West Coast of the United States.
Levitz Furniture Inc. and 11 affiliates filed for chapter 11 on
Sept. 5, 1997. In December 2000, the Court confirmed the Debtors'
Plan and Levitz emerged from chapter 11 on February 2001. Levitz
Home Furnishings Inc. was created as the new holding company as a
result of the emergence.
Levitz Home Furnishings and 12 affiliates filed for chapter 11
protection on Oct. 11, 2005 (Bankr. S.D.N.Y. Lead Case No. 05-
45189). In their second filing, the Debtors disclosed about
$245 million in total assets and $456 million in total debts.
Nicholas M. Miller, Esq., and Richard H. Engman, Esq., at Jones
Day represented the Debtors. Jeffrey L. Cohen, Esq., Jay R.
Indyke, Esq., and Cathy Hershcopf, Esq., at Cooley Godward Kronish
LLP served as counsel to the Official Committee of Unsecured
Creditors. During this period, the Debtors closed around 35
stores in the Northeast, California, Minnesota and Arizona.
PLVTZ Inc., a company created by Prentice Capital Management LP,
and Great American Group purchased substantially all the assets of
Levitz Home Furnishings in December 2005. Initially, Prentice
owned all of the equity interests in PLVTZ. On July 6, 2007,
PLVTZ was converted into a Delaware corporation, and Harbinger
Capital Partners Special Situations Fund, LP, Harbinger Capital
Partners Master Fund I, Ltd., and their affiliates became minority
shareholders. Great American's stake in the acquisition was in
running the going-out-of-business sales for some 27 Levitz units.
PLVTZ, dba Levitz Furniture, continued to face decline in
financial performance since December 2005. Liquidity issues and
the inability to obtain additional capital prompted PLVTZ to seek
protection under chapter 11 on Nov. 8, 2007 (Bankr. S.D.N.Y. Lead
Case No. 07-13532). Paul D. Leake, Esq., and Brad B. Erens, Esq.,
at Jones Day represents the Debtors in their restructuring
efforts. Kurtzman Carson Consultants LLC serves as the
Debtors' claims and noticing agent. PLVTZ's balance sheet at
Sept. 30. 2007, showed total assets of $177,883,000 and total
liabilities of $152,476,000. The Debtors' exclusive period to
file a chapter 11 plan expires on March 7, 2008. (Levitz
Bankruptcy News, Issue No. 32; Bankruptcy Creditors' Service Inc.,
http://bankrupt.com/newsstand/or 215/945-7000).
LEVITZ FURNITURE: Committee Wants J.H. Cohn as Financial Advisor
----------------------------------------------------------------
The Official Committee of Unsecured Creditors of PLVTZ Inc., dba
Levitz Furniture Inc., seeks the U.S. Bankruptcy Court for the
Southern District of New York's authority to retain J.H. Cohn LLP,
as its financial advisors and forensic accountants effective as of
Nov. 16, 2007.
J.H. Cohn is expected to:
(1) review the reasonableness of the cash collateral
arrangement as to its cost to the Debtor and the
likelihood that the Debtor will be able to comply with the
terms of the Court's order approving the retention;
(2) analyze and review key motions to strategic case issues;
(3) understand the Debtor's corporate structure;
(4) assess the Debtor's short-term and wind-down budgets;
(5) establish reporting procedures that will allow for the
monitoring of the Debtor's sales and wind-down activities;
(6) develop and evaluate alternative sale strategies;
(7) prepare dividend analysis to determine potential return to
unsecured creditors;
(8) scrutinize proposed sale transactions, including the
assumption or rejection of executory contracts;
(9) perform four-wall analysis, if applicable, and lease value
analysis;
(10) identify, analyze and investigate transactions with non-
debtor entities and other parties;
(11) monitor the Debtor's weekly operating results,
availability and borrowing base certificates, if
applicable;
(12) monitor the sales process and supplement list of potential
buyers;
(13) analyze the Debtor's budget to actual results on an
ongoing basis for reasonableness and cost control;
(14) communicate findings to the Creditors Committee;
(15) perform forensic accounting procedures, as directed by the
Creditors Committee;
(16) assist the Creditors Committee in negotiating the key
terms of a Plan of Reorganization or Plan of Liquidation;
(17) review the nature and origin of other claims asserted
against the Debtor; and
(18) render assistance as the Creditors Committee and its
counsel may deem necessary.
J.H. Cohn will be paid on an hourly basis, and reimbursed for
expenses incurred related to any work undertaken. The firm's
customary hourly rates are:
Designation Rate
----------- ----
Senior Partner $595
Partner $550
Director $450
Senior Manager $425
Manager $410
Senior Accountant $300
Staff $220
Paraprofessional $140
Clifford A. Zucker, CPA, a member at J.H. Cohn, in Edison, New
Jersey, assures the Court that his firm is a disinterested person
within the meaning of Section 101(14) of the Bankruptcy Code.
The firm can be reached at:
J.H. Cohn LLP
1212 Avenue of the Americas, 12th Floor
New York, NY 10036
Tel: (212) 297-0400
Fax: (212) 922-0913
http://www.jhcohn.com/
About Levitz Furniture
Based in New York City, Levitz Furniture Inc., nka PVLTZ Inc. --
http://www.levitz.com/-- is a specialty retailer of furniture,
bedding and home furnishings in the United States. It has 76
locations in major metropolitan areas, principally in the
Northeast and on the West Coast of the United States.
Levitz Furniture Inc. and 11 affiliates filed for chapter 11 on
Sept. 5, 1997. In December 2000, the Court confirmed the Debtors'
Plan and Levitz emerged from chapter 11 on February 2001. Levitz
Home Furnishings Inc. was created as the new holding company as a
result of the emergence.
Levitz Home Furnishings and 12 affiliates filed for chapter 11
protection on Oct. 11, 2005 (Bankr. S.D.N.Y. Lead Case No. 05-
45189). In their second filing, the Debtors disclosed about
$245 million in total assets and $456 million in total debts.
Nicholas M. Miller, Esq., and Richard H. Engman, Esq., at Jones
Day represented the Debtors. Jeffrey L. Cohen, Esq., Jay R.
Indyke, Esq., and Cathy Hershcopf, Esq., at Cooley Godward Kronish
LLP served as counsel to the Official Committee of Unsecured
Creditors. During this period, the Debtors closed around 35
stores in the Northeast, California, Minnesota and Arizona.
PLVTZ Inc., a company created by Prentice Capital Management LP,
and Great American Group purchased substantially all the assets of
Levitz Home Furnishings in December 2005. Initially, Prentice
owned all of the equity interests in PLVTZ. On July 6, 2007,
PLVTZ was converted into a Delaware corporation, and Harbinger
Capital Partners Special Situations Fund, LP, Harbinger Capital
Partners Master Fund I, Ltd., and their affiliates became minority
shareholders. Great American's stake in the acquisition was in
running the going-out-of-business sales for some 27 Levitz units.
PLVTZ, dba Levitz Furniture, continued to face decline in
financial performance since December 2005. Liquidity issues and
the inability to obtain additional capital prompted PLVTZ to seek
protection under chapter 11 on Nov. 8, 2007 (Bankr. S.D.N.Y. Lead
Case No. 07-13532). Paul D. Leake, Esq., and Brad B. Erens, Esq.,
at Jones Day represents the Debtors in their restructuring
efforts. Kurtzman Carson Consultants LLC serves as the
Debtors' claims and noticing agent. PLVTZ's balance sheet at
Sept. 30. 2007, showed total assets of $177,883,000 and total
liabilities of $152,476,000. The Debtors' exclusive period to
file a chapter 11 plan expires on March 7, 2008. (Levitz
Bankruptcy News, Issue No. 32; Bankruptcy Creditors' Service Inc.,
http://bankrupt.com/newsstand/or 215/945-7000).
LEVITZ FURNITURE: Court OKs $53.5 Mil. Buy Pact with Hilco Group
----------------------------------------------------------------
Judge Gerber for the U.S. Bankruptcy Court for the Southern
District of New York gave PLVTZ Inc., dba Levitz Furniture Inc.,
authority to sell substantially all of its assets to Hilco
Merchant Resources LLC; HRE Holdings LLC; Tiger Capital Group,
LLC; SB Capital Group LLC; Planned Furniture Promotions Inc.; and
Kimco Realty Services Inc., pursuant to an asset purchase
agreement.
At the auction held Nov. 28, 2007, Hilco was designated as
the stalking horse bidder. The Debtor -- with the approval of
the Official Committee of Unsecured Creditors and the Debtor's
prepetition lender, General Electric Capital Corporation --
accepted the Hilco Group joint-venture's bid for the assets.
Hilco Asset Purchase Agreement
The Court-approved APA between the Debtor, Hilco Group, and GECC,
as lender, provides, among other things, that Hilco Group will
purchase from the Debtor the assets free and clear of liens.
The Hilco Group will pay the Debtor $53,500,000 in cash. In the
event that the aggregate cost value of the Merchandise is greater
than $60,000,000 or less than $57,000,000, the Cash Component
will be adjusted.
Hilco Group will act as the Debtor's exclusive agent for
disposing all of the merchandise at the Debtor's retail store and
conducting a "going-out-of-business".
Hilco Group was to pay the Debtor 90% of the Cash Component, or
$48,150,000, plus a minimum augment fee for $500,000 on Dec. 5,
2007.
Sale Guidelines
The Court authorized the Debtor and Hilco Group to conduct the
Sales pursuant to the APA and certain sale guidelines. Under the
Sale Guidelines, the sale term was to commence at each store on
Dec. 5, 2007, and terminate on March 31, 2008.
A full-text copy of the Hilco Group APA is available for free at
http://ResearchArchives.com/t/s?2621
A schedule of the Closing Locations are available for free at
http://ResearchArchives.com/t/s?2622
About Levitz Furniture
Based in New York City, Levitz Furniture Inc., nka PVLTZ Inc. --
http://www.levitz.com/-- is a specialty retailer of furniture,
bedding and home furnishings in the United States. It has 76
locations in major metropolitan areas, principally in the
Northeast and on the West Coast of the United States.
Levitz Furniture Inc. and 11 affiliates filed for chapter 11 on
Sept. 5, 1997. In December 2000, the Court confirmed the Debtors'
Plan and Levitz emerged from chapter 11 on February 2001. Levitz
Home Furnishings Inc. was created as the new holding company as a
result of the emergence.
Levitz Home Furnishings and 12 affiliates filed for chapter 11
protection on Oct. 11, 2005 (Bankr. S.D.N.Y. Lead Case No. 05-
45189). In their second filing, the Debtors disclosed about
$245 million in total assets and $456 million in total debts.
Nicholas M. Miller, Esq., and Richard H. Engman, Esq., at Jones
Day represented the Debtors. Jeffrey L. Cohen, Esq., Jay R.
Indyke, Esq., and Cathy Hershcopf, Esq., at Cooley Godward Kronish
LLP served as counsel to the Official Committee of Unsecured
Creditors. During this period, the Debtors closed around 35
stores in the Northeast, California, Minnesota and Arizona.
PLVTZ Inc., a company created by Prentice Capital Management LP,
and Great American Group purchased substantially all the assets of
Levitz Home Furnishings in December 2005. Initially, Prentice
owned all of the equity interests in PLVTZ. On July 6, 2007,
PLVTZ was converted into a Delaware corporation, and Harbinger
Capital Partners Special Situations Fund, LP, Harbinger Capital
Partners Master Fund I, Ltd., and their affiliates became minority
shareholders. Great American's stake in the acquisition was in
running the going-out-of-business sales for some 27 Levitz units.
PLVTZ, dba Levitz Furniture, continued to face decline in
financial performance since December 2005. Liquidity issues and
the inability to obtain additional capital prompted PLVTZ to seek
protection under chapter 11 on Nov. 8, 2007 (Bankr. S.D.N.Y. Lead
Case No. 07-13532). Paul D. Leake, Esq., and Brad B. Erens, Esq.,
at Jones Day represents the Debtors in their restructuring
efforts. Kurtzman Carson Consultants LLC serves as the
Debtors' claims and noticing agent. PLVTZ's balance sheet at
Sept. 30. 2007, showed total assets of $177,883,000 and total
liabilities of $152,476,000. The Debtors' exclusive period to
file a chapter 11 plan expires on March 7, 2008. (Levitz
Bankruptcy News, Issue No. 32; Bankruptcy Creditors' Service Inc.,
http://bankrupt.com/newsstand/or 215/945-7000).
LEVITZ FURNITURE: DeCoro USA Demands $1.7 Million Goods Returned
----------------------------------------------------------------
DeCoro USA Ltd. seeks the U.S. Bankruptcy Court for the Southern
District of New York's authority to reclaim goods worth about
$1,768,875, which it delivered to PLVTZ Inc., dba Levitz Furniture
Inc., before the bankruptcy filing.
DeCoro USA says that it should be permitted to reclaim the
goods since it has satisfied the statutory elements for a
valid reclamation claim:
-- the goods were sold to the Debtor in the ordinary course of
DeCoro's business;
-- the Debtor was insolvent at the time the goods were
received; and
-- the Debtor received the goods within 45 days before the
bankruptcy filing.
About DeCoro USA
DeCoro USA Ltd. manufactures home furnishings and wholesales
products to PLVTZ Inc. and other clients.
About Levitz Furniture
Based in New York City, Levitz Furniture Inc., nka PVLTZ Inc. --
http://www.levitz.com/-- is a specialty retailer of furniture,
bedding and home furnishings in the United States. It has 76
locations in major metropolitan areas, principally in the
Northeast and on the West Coast of the United States.
Levitz Furniture Inc. and 11 affiliates filed for chapter 11 on
Sept. 5, 1997. In December 2000, the Court confirmed the Debtors'
Plan and Levitz emerged from chapter 11 on February 2001. Levitz
Home Furnishings Inc. was created as the new holding company as a
result of the emergence.
Levitz Home Furnishings and 12 affiliates filed for chapter 11
protection on Oct. 11, 2005 (Bankr. S.D.N.Y. Lead Case No. 05-
45189). In their second filing, the Debtors disclosed about
$245 million in total assets and $456 million in total debts.
Nicholas M. Miller, Esq., and Richard H. Engman, Esq., at Jones
Day represented the Debtors. Jeffrey L. Cohen, Esq., Jay R.
Indyke, Esq., and Cathy Hershcopf, Esq., at Cooley Godward Kronish
LLP served as counsel to the Official Committee of Unsecured
Creditors. During this period, the Debtors closed around 35
stores in the Northeast, California, Minnesota and Arizona.
PLVTZ Inc., a company created by Prentice Capital Management LP,
and Great American Group purchased substantially all the assets of
Levitz Home Furnishings in December 2005. Initially, Prentice
owned all of the equity interests in PLVTZ. On July 6, 2007,
PLVTZ was converted into a Delaware corporation, and Harbinger
Capital Partners Special Situations Fund, LP, Harbinger Capital
Partners Master Fund I, Ltd., and their affiliates became minority
shareholders. Great American's stake in the acquisition was in
running the going-out-of-business sales for some 27 Levitz units.
PLVTZ, dba Levitz Furniture, continued to face decline in
financial performance since December 2005. Liquidity issues and
the inability to obtain additional capital prompted PLVTZ to seek
protection under chapter 11 on Nov. 8, 2007 (Bankr. S.D.N.Y. Lead
Case No. 07-13532). Paul D. Leake, Esq., and Brad B. Erens, Esq.,
at Jones Day represents the Debtors in their restructuring
efforts. Kurtzman Carson Consultants LLC serves as the
Debtors' claims and noticing agent. PLVTZ's balance sheet at
Sept. 30. 2007, showed total assets of $177,883,000 and total
liabilities of $152,476,000. The Debtors' exclusive period to
file a chapter 11 plan expires on March 7, 2008. (Levitz
Bankruptcy News, Issue No. 32; Bankruptcy Creditors' Service Inc.,
http://bankrupt.com/newsstand/or 215/945-7000).
LIMITED BRANDS: Reports November 2007 Net Sales of $858 Million
---------------------------------------------------------------
Limited Brands Inc. reported that comparable store sales for the
four weeks ended Dec. 1, 2007, decreased 7% compared to the four
weeks ended Dec. 2, 2006. The company reported net sales of
$858.7 million for the four weeks ended Dec. 1, 2007, compared
to sales of $937.7 million for the four weeks ended Nov. 25,
2006.
The company reported flat comparable store sales for the 43 weeks
ended Dec. 1, 2007. Net sales were $7.717 billion compared to net
sales of $7.584 billion last year.
Net sales 2007 include Express sales through July 6, 2007, the
closing date of the sale of a majority interest to affiliates of
Golden Gate Capital, and Limited Stores sales through Aug. 3,
2007, the closing date of the transfer of a majority interest to
affiliates of Sun Capital Partners.
Limited Brands (NYSE: LTD) through Victoria's Secret, Bath & Body
Works, C.O. Bigelow, Limited Stores, La Senza, White Barn Candle
Co., Henri Bendel and Diva London, presently operates 3,140
specialty stores. The company's products are also available
online at http://www.VictoriasSecret.com/
http://www.BathandBodyWorks.com/http://www.LaSenza.com/
* * *
Moody's Investors Service lowered both the long term and short
term ratings of Limited Brands Inc. with a stable outlook in July
2007. Moody's downgraded these ratings: Senior unsecured to Baa3
from Baa2; Senior unsecured shelf at to (P)Baa3 from (P)Baa2;
Subordinated shelf at to (P)Ba1 from (P)Baa3; Preferred shelf at
to (P)Ba2 from (P)Ba1; Commercial paper to Prime-3 from Prime-2.
MATTRESS GALLERY: Sells South California Stores to Ortho Mattress
-----------------------------------------------------------------
Ortho Mattress Inc. has acquired the assets of Gallery Corp. dba
Mattress Gallery stores in Southern California. With the addition
of the Mattress Gallery stores, Ortho now operates more than 90
stores in the region and in the Midwest.
"We look forward to welcoming our new employees from Gallery and
are excited about our greatly expanded prospects in today's
dynamic retail environment," Kenneth Karmin, CEO of Ortho
Mattress, noted.
Ortho and its affiliates have been on the move in recent weeks.
Last month, High Street Holdings (which holds 100% of Ortho's
equity interest), disclosed it had acquired more than 3% of the
shares of Airsprung Furniture Group plc, a furniture and mattress
manufacturer headquartered in Wiltshire, England.
Reached in Delaware where he closed the Gallery acquisition, Mr.
Karmin commented that, "Our task at hand is to integrate our new
Gallery assets; when we've accomplished that project, you may be
sure that we'll be actively making new investments as enticing
opportunities present themselves."
Headquartered in Commerce, California, Gallery Corp. dba Mattress
Gallery filed for Chapter 11 protection on Nov. 1, 2007 (Bankr.
D. Del. Case No. 07-11628). Donald J. Detweiler, Esq., and Sandra
G.M. Selzer, Esq., at Greenberg Traurig LLP represent the Debtor
in its restructuring efforts. Kurtzman Carson Consultants is the
Debtor's claim agent. The Official Committee of Unsecured
Creditors selected Klehr, Harrison, Harvey, Branzburg & Ellers LLP
as its counsel. When the Debtor filed for protection from its
creditors, it listed total assets and debts between $1 million and
$100 million.
MEZZ CAP: Fitch Affirms 'B-' Rating on $778,000 Class H Certs.
--------------------------------------------------------------
Fitch Ratings has affirmed Mezz Cap's commercial mortgage pass-
through certificates, series 2006-C4, as:
-- $63.8 million class A at 'AAA';
-- Interest-only class X at 'AAA';
-- $2.2 million class B at 'AA';
-- $2.2 million class C at 'A';
-- $3.6 million class D at 'BBB';
-- $1.2 million class E at 'BBB-';
-- $2.6 million class F at 'BB';
-- $6.9 million class G at 'B';
-- $778,000 class H at 'B-'.
Fitch does not rate the $5.5 million class J certificates.
The affirmations reflect stable performance and minimal pay down
since issuance. The transaction closed on December 12, 2006 and
year end 2006 financials were not required. As of the November
2007 remittance report, the pool's aggregate certificate balance
has decreased 0.2% to $88.7 million from $88.9 million at
issuance. Two loans (0.7%) are currently in special servicing.
Fitch's expected losses will be absorbed by the non-rated class J.
The mortgage loans consist of two notes: the A note (or senior
component) which is not included in this trust's mortgage assets,
and the B note. The B notes in this pool consist of subordinate
interests in the first mortgage loans. All loans are secured by
traditional commercial real estate property types and are subject
to standard intercreditor agreements that limit the rights and
remedies of the B note holder in the event of default and upon
refinancing. In a default, the B notes are subject to higher loss
severity due to their subordinate positions.
The larger specially serviced loan (0.6%) is collateralized by an
office property in Orlando, Florida, and is 90 days delinquent.
The property transferred to the special servicer in August 2007
due to imminent default as a result of chronic payment
delinquency. The note has been accelerated and the special
servicer is in the process of appointing a receiver.
The smaller specially serviced loan (0.1%) is collateralized by a
multifamily property in LaMarque, Texas, and is 60 days
delinquent. The loan transferred to the special servicer in
September 2007 due to imminent default. A new property management
firm was installed with the borrower's consent and the special
servicer is currently pursuing foreclosure.
MIAMI BEACH HEALTH: Fitch Holds 'BB+' Rating on $268MM Bonds
------------------------------------------------------------
Fitch Ratings has affirmed at 'BB+' approximately $268 million of
Miami Beach Health Facilities Authority's hospital revenue bonds
issued on behalf of Mount Sinai Medical Center of Florida. The
Rating Outlook is revised to Negative from Positive.
The Rating Outlook revision to Negative is warranted by the weak
and declining operating performance and utilization trends. MSMC
ended fiscal 2006 below Fitch's expectations - approximately
$10 million short of budget - and results through the nine months
ended Sept. 30, 2007 indicate continued poor performance, due
primarily to declining utilization and ongoing investments in
physician practices. The most significant volume loss has been in
cardiac services and is largely due to increased competition for
this high-margin service in the Miami area.
MSMC plans to recapture lost volume by recruiting physicians in
targeted specialties, expanding on medical staff employment, and
opening new outpatient facilities in neighboring communities,
including a freestanding emergency department in Aventura and two
primary care cardiology satellites. Fitch views these strategies
as difficult to implement, particularly the efforts to recapture
lost cardiac volume from competitor hospitals that are part of two
larger for-profit healthcare systems (Tenet's Palmetto General
Hospital and HCA's Aventura Hospital). Fitch will closely monitor
the results of MSMC's initiatives over the next several months.
Continuing losses of patient service volumes to competing
facilities and failure to stabilize operating performance could
result in a rating downgrade.
The rating affirmation reflects the relative flexibility offered
by MSMC's liquidity levels of $124.9 million, or 111.6 Days Cash
on Hand, as of Sept. 30, 2007. This includes $41.4 million in
unrestricted assets of the MSMC Foundation. The Foundation's
successful development efforts demonstrate ongoing community
support for MSMC. The Foundation will transfer $10 million to
MSMC in 2007 ($7.5 million has already been realized), and another
$10 million transfer is budgeted for fiscal 2008. Gifts and
donations should be enough to offset these transfers as overall
Foundation assets are expected to remain relatively stable through
the end of 2007 at just over $100 million.
The rating also reflects sound management practices including
quarterly reporting for investors, aggressive revenue cycle
management, and a focus on cost controls. Days in accounts
receivable was a low 38 days for the nine months ending
Sept. 30, 2007. MSMC has reined in expenses this year with
results through Sept. 30 showing total expenses of
$356.4 million, $2.5 million below fiscal 2006 through the same
period. These measures, along with along with several one-time
cash infusions also contributed to MSMC's liquidity base.
Primary credit concerns include deteriorating financial
performance driven by declining utilization and investment in
physician employment, future capital needs, and a high debt
burden. MSMC ended fiscal 2006 with a $12.9 million loss from
operations (negative 2.8% operating margin) and a $7.8 million
bottom line loss (negative 1.6% excess margin), excluding the
Foundation transfer. Through Sept. 30, fiscal 2007 results show a
slight improvement with a $6.2 million bottom line loss (negative
1.8% operating margin), excluding the Foundation transfer.
However, these results also include the benefit of $2.7 million in
one-time benefits such as insurance and FEMA payments for
hurricane expenses from 2005, and cost report settlements for
1995-97. After a slight up tick in fiscal 2006, utilization
plummeted in fiscal 2007 with results through Sept. 30 showing
admissions down 10% from fiscal 2006 year to date. The most
significant losses were in the cardiac service lines, including
open heart surgeries, cardiac catheterizations and angioplasties,
which declined 31%.
MSMC's plan for a new surgical tower is on hold pending the sale
of the Miami Heart Institute property, whose proceeds are to be
used to fund a substantial portion of the tower project. The sale
is made more difficult due to rezoning proposals being considered
by the city of Miami Beach, which may limit the future use of the
MHI site. The city's final decision could have an adverse effect
on the value of the MHI property, which in turn may impact the
feasibility of the tower project. In general, MSMC's capital
needs continue to grow with an average age of plant of 11.5 years
at fiscal 2006 year-end. MSMC's debt burden is already high with
Maximum Annual Debt Service representing 4.9% of revenues.
MSMC is a teaching hospital consisting of 955 licensed beds (780
staffed) and is the only health care provider in Miami Beach,
Florida. MSMC had total operating revenue of $468 million in
2006. The Foundation has an unconditional guaranty on MSMC's
outstanding debt. MSMC covenants to provide annual and quarterly
disclosure to bondholders. Quarterly disclosure is excellent, and
it includes management discussion and analysis, a balance sheet,
income statement, cash flow statement, and utilization statistics.
MSMC also conducts quarterly conference calls for investors.
MONROE COUNTY HOSPITAL: S&P Cuts Rating on S.2006 Bonds to BB+
--------------------------------------------------------------
Standard & Poor's Rating Services lowered its rating on Monroe
County Hospital Finance Authority, Michigan's series 2006 bonds,
issued for Mercy Memorial Hospital Corp. Obligated Group, to 'BB+'
from 'BBB-', reflecting unexpected substantial operating losses,
which have weakened the balance sheet, and the recent announcement
of the departure of the CEO. The outlook is negative.
"The negative outlook reflects our uncertainty about Mercy
Memorial's ability to turn around operations and the change of
management," said Standard & Poor's credit analyst Jessica
Goldman. "If financial operating results remain challenged and
the balance sheet is further damaged, an additional downward
rating action is possible."
More specifically, the rating reflects the system's operating loss
in excess of $10 million for the fiscal year-ended June 30, 2007;
soft volumes, evidenced by a decline of inpatient volume and
surgeries; and an ongoing search for a replacement CEO.
A lower rating is precluded at this time because of the solid
balance sheet, characterized by 123 days' cash on hand and a cash-
to-debt ratio of 105% for fiscal 2007; and dominant business
position with market share of 67% in Monroe.
The lowered rating affects about $48.9 million in rated debt.
MOVIE GALLERY: Committee Wants to Employ CRG as Financial Advisor
-----------------------------------------------------------------
The Official Committee of Unsecured Creditors in Movie Gallery
Inc. and its debtor-affiliates' bankruptcy cases seeks authority
from the U.S. Bankruptcy Court for the Eastern District of
Virginia to retain CRG Partners Group, LLC as its financial
advisors and consultants, nunc pro tunc to Oct. 22, 2007.
The Committee finds that CRG is well qualified to render
financial and consultation services, including:
(a) preparing periodic reports and updates to the Committee
regarding the Debtors' status of postpetition operating
performance;
(b) assisting in the review of the Debtors' business plan and
restructuring initiatives;
(c) assisting in the review of the Debtors' evaluations with
respect to claims analysis, including, among others,
amounts, classifications and cost and benefit from the
affirmation of rejection of various non-residential
leases; and
(d) rendering other general business consulting assistance --
that are non-duplicative with the Debtors' other
professionals' services -- as deemed necessary by the
Committee or its counsel.
CRG will be paid based on its hourly rates:
Designation Hourly Rate
----------- -----------
Managing Partners $475 - $350
Partners $415 - $450
Managing Directors $370 - $415
Directors $275 - $350
Consultants $275 - $300
CRG will also be paid (i) 50% of its hourly rates for travel
time, (ii) $125 per hour for the firm's administrative support
services, and (iii) reimbursement for out-of-pocket expenses
incurred.
T. Scott Avila, a managing partner at CRG, assures the Court that
his firm has no prior connection with the Debtors, their
creditors or any other parties-in-interest. CRG is a
"disinterested person" as that term is defined in Section 101(14)
of the Bankruptcy Code, and does not represent an interest
adverse to the Debtors' estates.
About Movie Gallery
Based in Dothan, Alabama, Movie Gallery Inc. --
http://www.moviegallery.com/-- is a home entertainment specialty
retailer. The company owns and operates 4,600 retail stores that
rent and sell DVDs, videocassettes and video games.
The company and its debtor-affiliates filed for Chapter 11
protection on Oct. 16, 2007 (Bankr. E.D. Va. Case Nos. 07-33849 to
07-33853. Anup Sathy, Esq., Marc J. Carmel, Esq., and Richard M.
Cieri, Esq., at Kirkland & Ellis LLP, represent the Debtors.
Michael A. Condyles, Esq., and Peter J. Barrett, Esq., at Kutak
Rock LLP, is the Debtors' local counsel. The Debtors' claims &
balloting agent is Kutzman Carson Consultants LLC. When the
Debtors' filed for protection from their creditors, they listed
total assets of $891,993,000 and total liabilities of
$1,419,215,000.
The Official Committee of Unsecured Creditors has selected Robert
J. Feinstein, Esq., James I. Stang, Esq., Robert B. Orgel, Esq.,
and Brad Godshall, Esq., at Pachulski Stang Ziehl & Jones LLP, as
its lead counsel, and Brian F. Kenney, Esq., at Miles &
Stockbridge PC, as its local counsel. (Movie Gallery Bankruptcy
News, Issue No. 10; Bankruptcy Creditors' Service Inc.;
http://bankrupt.com/newsstand/or 215/945-7000)
The Debtors' spokeswoman Meaghan Repko said that the Plan will not
be filed before November 27, and the company does not expect to
exit bankruptcy protection before the second quarter of 2008.
MOVIE GALLERY: Panel Hires Imperial Capital as Financial Advisor
----------------------------------------------------------------
The Official Committee of Unsecured Creditors in Movie Gallery,
Inc. and its debtor-affiliates' bankruptcy cases obtained
authority from the U.S. Bankruptcy Court for the Southern District
of Florida to retain Imperial Capital LLC as its financial
advisor.
Imperial Capital is expected to:
a. advise, to the extent it relates to the capital
restructuring plan, the Committee regarding the Debtors'
business plans, cash flow forecasts and financial
projections;
b. advise the Committee with respect to available capital
restructuring, sale and financing alternatives including
but not limited to a Debtor-in-Possession facility,
including recommending specific courses of action and
assisting with the design, structuring and negotiation of
alternative restructuring or transaction structures;
c. advise, to the extent it relates to the capital
restructuring plan, the Committee regarding financial
information prepared by the Debtors, and in its
coordination of communication with interested parties and
their advisors;
d. assist and advise the Committee and its counsel in the
development, evaluation and documentation of any plan,
financing or strategic transactions and strategic
alternatives for recovery, and the consideration that is to
be provided to unsecured creditors under them; and
e. provide testimony in the bankruptcy court in connection
with the services.
The Committee executed an engagement letter on Oct. 22, 2007,
to employ Imperial. According to the Engagement Letter, Imperial
will receive:
a. $125,000 as a flat monthly advisory fee;
b. a prorated monthly fee for October 2007;
c. monthly reimbursement for reasonable out-of-pocket expenses
incurred in connection with the services. These expenses
include, but are not limited to, reasonable attorney's fees
and expenses, travel, out-of-town accommodations, ground
transportation and meals, overnight delivery, database
access charges, and telephone, facsimile, postage, printing
and duplication costs, document materials and similar
items; and
d. $2,000,000 as a transaction fee, payable upon closing of a
restructuring as defined in the Engagement Letter at the
Committee's discretion.
The Debtors will indemnify and hold Imperial harmless, and
provide contribution against the liabilities arising out of, or
in connection with, the retention of Imperial by the Committee,
except for losses, claims, damages or liabilities incurred that
are determined to have primarily resulted from bad faith, breach
of fiduciary duty or gross negligence.
The parties' Engagement Letter also contains a forum selection
provision governing any disputes that may arise with respect to
Imperial's provision of services to the Committee, except for
indemnification claims. The forum selection provision requires
any disputes relating to Imperial's provision of services be
resolved by pending AAA arbitration in New York.
Paul Aronzon, a managing director and executive vice president of
Imperial, assured the Court that his firm does not represent any
interest adverse to the Debtors' estates or their creditors, and
is disinterested within the meaning of Sections 327(a), 328 and
1103(b) of the Bankruptcy Code.
About Movie Gallery
Based in Dothan, Alabama, Movie Gallery Inc. --
http://www.moviegallery.com/-- is a home entertainment specialty
retailer. The company owns and operates 4,600 retail stores that
rent and sell DVDs, videocassettes and video games.
The company and its debtor-affiliates filed for Chapter 11
protection on Oct. 16, 2007 (Bankr. E.D. Va. Case Nos. 07-33849 to
07-33853. Anup Sathy, Esq., Marc J. Carmel, Esq., and Richard M.
Cieri, Esq., at Kirkland & Ellis LLP, represent the Debtors.
Michael A. Condyles, Esq., and Peter J. Barrett, Esq., at Kutak
Rock LLP, is the Debtors' local counsel. The Debtors' claims &
balloting agent is Kutzman Carson Consultants LLC. When the
Debtors' filed for protection from their creditors, they listed
total assets of $891,993,000 and total liabilities of
$1,419,215,000.
The Official Committee of Unsecured Creditors has selected Robert
J. Feinstein, Esq., James I. Stang, Esq., Robert B. Orgel, Esq.,
and Brad Godshall, Esq., at Pachulski Stang Ziehl & Jones LLP, as
its lead counsel, and Brian F. Kenney, Esq., at Miles &
Stockbridge PC, as its local counsel. (Movie Gallery Bankruptcy
News, Issue No. 10; Bankruptcy Creditors' Service Inc.;
http://bankrupt.com/newsstand/or 215/945-7000)
The Debtors' spokeswoman Meaghan Repko said that the Plan will not
be filed before November 27, and the company does not expect to
exit bankruptcy protection before the second quarter of 2008.
MRS PIZZA: Case Summary & 13 Largest Unsecured Creditors
--------------------------------------------------------
Lead Debtor: M.R.S. Pizza Inc.
aka AW Martin Seglin
1164 Idaho Ave.
Escondido, CA 92027
Bankruptcy Case No.: 07-18092
Chapter 11 Petition Date: December 5, 2007
Court: Central District Of California (Riverside)
Judge: David N. Naugle
Debtor's Counsel: Robert B Rosenstein, Esq.
Rosenstein & Hitzeman AAPLC
28600 Mercedes Street., Suite 100
Temecula, CA 92590
Tel: (951) 296-3888
Fax: (951) 296-3889
http://www.rosenhitz.com/
Estimated Assets: $10,000 to $100,000
Estimated Debts: $1 million to $100 million
Debtor's 13 Largest Unsecured Creditors:
Entity Nature of Claim Claim Amount
------ --------------- ------------
Bank of America operational expenses $71,257
P.O. Box 15726
Wilmington, DE 19886-5726
Martin Seglin unpaid payroll $28,800
1164 Idaho Ave.
Escondido, CA 92027
Washington Mutual credit line $26,578
P.O. Box 78065
Phoenix, AZ 85062
State Board of Equalization $26,482
AT&T cash advances $20,474
Advanta $17,650
American Express operational expenses $16,270
Citi Cards $9,216
Summit Management lease for store $6,506
Chase Card $4,088
American Express Blue cash advances $3,736
Domino's Pizza Corp. LLC royalties $2,522
Emercon Construction Inc. services $2,500
NATIONSTAR: Moody's Downgrades Ratings on 14 Tranches
-----------------------------------------------------
Moody's Investors Service has downgraded the ratings of 14
tranches from 3 transactions issued by Nationstar in 2007.
Additionally, 2 downgraded tranches remain on review for possible
further downgrade. The collateral backing these classes consists
of primarily first lien, fixed and adjustable-rate, subprime
mortgage loans.
In its analysis, Moody's has combined its published methodology
updates as of July 13, 2007 to the non delinquent portion of the
transactions. Collateral backing these transactions is also
experiencing higher than anticipated rates of delinquency,
foreclosure, and REO relative to credit enhancement levels.
Complete list of Rating Actions:
Issuer: Nationstar Home Equity Loan Asset-Backed Certificates,
Series 2007-C
-- Cl. M-6, Downgraded to Baa1, previously A3,
-- Cl. M-7, Downgraded to Baa2, previously Baa1,
-- Cl. M-8, Downgraded to Ba1, previously Baa2,
-- Cl. M-9, Downgraded to B1, previously Baa3,
-- Cl. M-10, Downgraded to Caa2, previously Ba1.
Issuer: Nationstar Home Equity Loan Trust 2007-A
-- Cl. M-6, Downgraded to Baa1, previously A3,
-- Cl. M-7, Downgraded to Baa2, previously Baa1,
-- Cl. M-8, Downgraded to Baa3, previously Baa2,
-- Cl. M-9, Downgraded to Ba2, previously Baa3,
-- Cl. M-10, Downgraded to B3 on review for possible further
downgrade, previously Ba1.
Issuer: Nationstar Home Equity Loan Trust 2007-B
-- Cl. M-6, Downgraded to A3, previously A2,
-- Cl. M-7, Downgraded to Baa3, previously A3,
-- Cl. M-8, Downgraded to Ba3, previously Baa1,
-- Cl. M-9, Downgraded to B3 on review for possible further
downgrade, previously Baa2.
NEUMANN HOMES: Committee Taps Paul Hastings as Counsel
------------------------------------------------------
The Official Committee of Unsecured Creditors of Neumann Homes
Inc. and its debtor-affiliates seeks authority from the United
States Bankruptcy Court for the Northern District of Illinois to
employ Paul, Hastings, Janofsky & Walker LLP as its counsel, nunc
pro tunc to Nov. 7, 2007.
The Creditors Committee selected Paul Hastings because of its
expertise on bankruptcy and restructuring, finance, labor and
employment, litigation, real estate, among others.
As the Creditors Committee's counsel, the firm is expected to:
(a) advise the Creditors Committee concerning its rights,
powers and duties under Section 1103 of the Bankruptcy
Code;
(b) give advice concerning the administration of the
Debtors' Chapter 11 cases;
(c) advise the Creditors Committee concerning any efforts by
the Debtors or other parties to collect and recover
property beneficial to the estates;
(d) give counsel in connection with the formulation,
negotiation, and confirmation of a plan or plans of
reorganization or liquidation and related documents;
(e) review the nature, validity, and priority of liens
asserted against the Debtors' property and advise the
Creditors Committee concerning the liens' enforceability;
(f) investigate, if necessary, any actions pursuant to
Sections 542-550 and 553 of the Bankruptcy Code;
(g) prepare legal documents, review financial and other
reports filed in the cases on behalf of the Creditors
Committee;
(h) give advice concerning, and prepare responses to, motions,
applications, notices, among others, that may be filed in
the cases;
(i) advise and assist the Creditors Committee in connection
with the disposition of the bankruptcy estates' property;
(j) advise and assist the Creditors Committee concerning
proposed executory contract and unexpired lease
assumptions, assumptions and assignments, and rejections;
(k) assist in claims analysis and resolution matters;
(l) commence and conduct litigation necessary to assert rights
on behalf of the Creditors Committee; and
(m) perform other legal services.
Paul Hastings will be paid on an hourly basis, plus reimbursement
of out-of-pocket expenses incurred related to any work
undertaken.
Paul E. Harner, Esq., at Paul Hastings assures the Court that the
firm does not hold or represent any interest adverse to the
Committee or any other parties-in-interest. He adds that the
firm is a disinterested person as that phrase is defined in
Section 101(14).
Headquartered in Warrenville, Illinois, Neumann Homes Inc. --
http://www.neumannhomes.com/-- develops and builds residential
real estate throughout the Midwest and West US. The company is
active in the Chicago area, southeastern Wisconsin, Colorado, and
Michigan. The company have built more than 11,000 homes in some
150 residential communities. The company offer formal business
training to employees through classes, seminars, and computer-
based training.
The company filed for Chapter 11 protection on Nov. 1, 2007
(Bankr. N.D. Ill. Case No. 07-20412). George Panagakis, Esq., at
Skadded, Arps, Slate, Meagher & Flom L.L.P., was selected by the
Debtors to represent them in these cases. When the Debtors filed
for protection against its creditors, they listed assets and debts
of more than $100 million.
(Neumann Bankruptcy News, Issue No. 6; Bankruptcy Creditors'
Services Inc. http://bankrupt.com/newsstand/or 215/945-7000).
NEUMANN HOMES: Court Approves Epiq as Claims and Noticing Agent
---------------------------------------------------------------
Neumann Homes Inc. and its debtor-affiliates obtained the United
States Bankruptcy Court for the Northern District of Illinois'
authority to employ Epiq Bankruptcy Solutions LLC as their claims,
noticing and solicitation agent.
As reported in the Troubled Company Reporter on Nov. 27, 2007,
Epiq agreed to provide the Debtors services on these terms and
conditions stated in bankruptcy services agreement:
a) The Debtors should make monthly payments to Epiq.
b) Epiq reserves the right to increase its charges or rates
annually on January 2nd of each year. However, if the
increases exceed 10%, Epiq will be required to give
60 days prior written notice to the Debtors.
c) The Debtors should pay to Epiq all taxes, including sales,
use and excise taxes, but not personal property or income
taxes.
d) The Debtors should pay to Epiq any actual charges as a
result of the Debtors' error or omission.
e) In the event of termination due to the Debtors' default,
the Debtors should be liable for all amounts then owing.
f) Upon the Court's approval of the agreement, the Debtors
should pay Epiq a retainer for $25,000.
g) Epiq reserves all property rights in and to all materials,
concepts, know-how, techniques, programs, systems and
other information.
h) Any data, programs, storage media or other materials
furnished by the Debtors may be retained by Epiq until the
services are paid for, or until the agreement is
terminated with the services having been paid for in full.
i) Epiq makes no representations or expressed and implied
warranties.
The agreement also provided that the Debtors should indemnify and
hold Epiq, its affiliates and others harmless from and against
losses, claims, damages, liabilities, costs, among others, as a
result of Epiq's rendering of services.
The agreement further provided that, at the Debtors' request,
Epiq should be authorized to establish accounts with financial
institutions in the name of and as agent for the Debtors. If
certain financial products are provided to the Debtors pursuant
to Epiq's agreement with these financial institutions, Epiq may
receive compensation from the institutions for those services.
Headquartered in Warrenville, Illinois, Neumann Homes Inc. --
http://www.neumannhomes.com/-- develops and builds residential
real estate throughout the Midwest and West US. The company is
active in the Chicago area, southeastern Wisconsin, Colorado, and
Michigan. The company have built more than 11,000 homes in some
150 residential communities. The company offer formal business
training to employees through classes, seminars, and computer-
based training.
The company filed for Chapter 11 protection on Nov. 1, 2007
(Bankr. N.D. Ill. Case No. 07-20412). George Panagakis, Esq., at
Skadded, Arps, Slate, Meagher & Flom L.L.P., was selected by the
Debtors to represent them in these cases. When the Debtors filed
for protection against its creditors, they listed assets and debts
of more than $100 million.
(Neumann Bankruptcy News, Issue No. 6; Bankruptcy Creditors'
Services Inc. http://bankrupt.com/newsstand/or 215/945-7000).
NEUMANN HOMES: Court Approves Skadden Arps as Bankruptcy Counsel
----------------------------------------------------------------
Neumann Homes Inc. and its debtor-affiliates obtained authority
from the United States Bankruptcy Court for the Northern District
of Illinois to employ Skadden, Arps, Slate, Meagher and Flom LLP
and its affiliated law practice entities, as their primary
bankruptcy counsel as of Nov. 1, 2007.
As reported in the Troubled Company Reporter on Nov. 27, 2007,
Skadden Arps is expected to:
a) advise the Debtors with respect to their powers and
duties as debtors and debtors-in-possession in the
continued management and operation of their businesses
and properties;
b) attend meetings and negotiate with the creditors'
representatives and other parties-in-interest, advise and
consult on the conduct of the Chapter 11 cases;
c) take all necessary action to protect and preserve the
Debtors' estates, including the prosecution of actions on
their behalf, the defense of any actions commenced
against the estates, among others;
d) prepare legal documents on behalf of the Debtors;
e) protect the interests of the estates before the Court,
any appellate courts, and the U.S. Trustee; and
f) provide other necessary legal services and advice to the
Debtors.
The firm would be compensated on an hourly basis, plus
reimbursement of expenses incurred for any related works
undertaken. The firm's hourly rates range from $680 to $950
for partners and counsel, and $340 to $765 for counsel, special
counsel and associates.
The firm received a prepetition retainer for $280,000, however,
it is less than the costs the firm incurred in representing the
Debtors before the Initial Petition Date. Accordingly, Skadden
does not have any post-petition retainer remaining.
George N. Panagakis, Esq., at Skadden, in Chicago, Illinois,
assured the Court that the firm does not have any connection with
any of the Debtors or parties-in-interest. He adds that Skadden
is a "disinterested person" as that phrase is defined in Section
101(14) of the Bankruptcy Code, as modified by Section 1107(b).
Headquartered in Warrenville, Illinois, Neumann Homes Inc. --
http://www.neumannhomes.com/-- develops and builds residential
real estate throughout the Midwest and West US. The company is
active in the Chicago area, southeastern Wisconsin, Colorado, and
Michigan. The company have built more than 11,000 homes in some
150 residential communities. The company offer formal business
training to employees through classes, seminars, and computer-
based training.
The company filed for Chapter 11 protection on Nov. 1, 2007
(Bankr. N.D. Ill. Case No. 07-20412). George Panagakis, Esq., at
Skadded, Arps, Slate, Meagher & Flom L.L.P., was selected by the
Debtors to represent them in these cases. When the Debtors filed
for protection against its creditors, they listed assets and debts
of more than $100 million.
(Neumann Bankruptcy News, Issue No. 6; Bankruptcy Creditors'
Services Inc. http://bankrupt.com/newsstand/or 215/945-7000).
NORTH AMERICAN ENERGY: S&P Lifts Ratings with Stable Outlook
------------------------------------------------------------
Standard & Poor's Ratings Services raised its long-term corporate
credit rating on Edmonton, Alberta-based North American Energy
Partners Inc. to 'B+' from 'B', and its senior unsecured debt
rating to 'B-' from 'CCC+', following a review of the company's
current and prospective business risk and financial risk profiles.
The outlook is stable.
"Our decision to raise the ratings is based on NAEP's much
improved financial profile following its November 2006 IPO, and
our expectations that the company will sustain its improved
financial risk profile and continued momentum in EBITDA
generation," said Standard & Poor's credit analyst Jamie
Koutsoukis. "We expect this should improve the company's
financial flexibility and liquidity," Ms. Koutsoukis added.
S&P have factored this expected strengthening in NAEP's financial
performance infiscal 2008 and 2009 into its 'B+' rating on the
company. "Based on the company's competitive position and the
nature of the industries where it operates, we believe there is
very little opportunity for its credit profile to strengthen
beyond the ratings level without significant improvement to the
financial risk profile," Ms. Koutsoukis said.
The stable outlook reflects S&P's expectation that NAEP will
internally fund its interest obligations and both its maintenance
and growth capital spending program in the coming fiscal year.
S&P also expect that the company will continue to strengthen its
financial risk profile, albeit within the rating level, through
growth in revenues and cash flow generation. If NAEP materially
outspends internally generated cash flow or suffers a material
deterioration in its financial risk profile, a negative rating
action could occur. Given NAEP's business mix and competitive
nature of the industries where it operates, a further positive
rating action is unlikely in the near to
medium term with its current financial risk profile. Nevertheless,
S&P could raise the ratings if NAEP were to materially reduce its
leverage and improve cash flow protection measures.
OCTANS CDO: Trustee BoNY Issues Notice of Default on Seven Notes
----------------------------------------------------------------
The Bank of New York Trust Company, National Association, as
trustee, notified the various holders of the notes issued by
Octans III CDO Ltd. and Octans CDO III Corp. that an event of
default on the notes has occurred under an indenture dated as of
Dec. 6, 2006.
The holders of the notes were:
Class CUSIP* ISIN* CUSIP* ISIN*
Designation Rule 144A Rule 144A Reg. S Reg. S
----------- --------- ------------ --------- ------
Class A-1 67572LAA8 US67572LAA89 G6742PAA5 USG6742PAA50
Class A-2 67572LAB6 US67572LAB62 G6742PAB3 USG6742PAB34
Class B 67572LAC4 US67572LAC46 G6742PAC1 USG6742PAC17
Class C 67572LAD2 US67572LAD29 G6742PAD9 USG6742PAD99
Class D 67572MAB4 US67572MAB46 G6742UAB2 USG6742UAB29
Class E 67572MAC2 US67572MAC29 G6742UAC0 USG6742UAC02
Sub. Notes 67572MAA6 US67572MAA62 G6742UAA4
Pursuant to Section 6.2 of the indenture, BoNY provided notice of
an event of default under Section 5.1(h) of the indenture because
on the determination date occurring on Dec. 3, 2007,
(a) the net outstanding portfolio balance on the determination
date plus the MVS Account Excess as of the determination date was
less than (b) the sum of the remaining unfunded notional amount
plus the outstanding swap counterparty amount plus the aggregate
outstanding amount of the Class A notes.
According to BoNY, if an event of default occurs and is
continuing, a majority of the controlling class may direct the
trustee, by notice to the co-issuers and the trustee, to:
(a) declare the principal of all of the secured notes to be
immediately due and payable, and upon any declaration
the principal, together with all accrued and unpaid
interest, and other amounts payable under the indenture,
including any senior loan swap installment, will become
immediately due and payable; and
(b) terminate the reinvestment period.
BoNY added that so long as the event of default is continuing, a
majority of the controlling class have the right under the
indenture to direct the trustee with respect to the exercise of
any right, remedy, trust or power under the indenture, provided
that satisfactory indemnity must be provided to the trustee.
Pursuant to Section 5.5 of the indenture, the trustee will retain
the collateral securing the secured notes intact, collect the
proceeds and apply payments, net of all costs of enforcement and
collection incurred by the trustee, and deposits and maintain all
accounts in respect of the collateral and the secured notes in
accordance with the priority of payments and the provisions of
Sections 10, 12 and 13 of the indenture until the conditions
precedent specified in Section 5.5 of the indenture to the sale of
the collateral have been met.
This notice of event of default constitutes the notice required by
Sections 5.5 and 6.2 of the indenture and Section 7.2 of the
subordinated note issuing and paying agency agreement.
Interested parties may send inquiries to Lisa Ferrara at (713)
483-6317 or at Lisa.R.Ferrara@bankofny.com
BoNY serves as trustee and subordinated note issuing and paying
agent.
Co-issuers of the notes may be reached at:
Octans III CDO, Ltd., as Issuer
c/o Maples Finance Limited,
P.O. Box 1093GT
Boundary Hall Cricket Square
Georgetown, Grand Cayman, Cayman Islands
Fax: (345) 945-7100
Octans III CDO, Corp., as Co-Issuer
c/o Donald J. Puglisi
850 Library Avenue, Suite 204
Newark, DE 19711
Fax: (302) 738-7210
Interested parties may contact the collateral manager at:
Harding Advisory LLC
2 World Financial Center, 36th Floor
225 Liberty Street
New York, NY 10281
OPTION ONCE: Moody's Lowers Ratings on 45 Tranches
--------------------------------------------------
Moody's Investors Service has downgraded the ratings of 45
tranches and placed on review for possible downgrade 10 tranches
from 8 transactions issued by Option Once Mortgage Loan Trust in
2007. Additionally, one downgraded tranche remains on review for
possible further downgrade. The collateral backing these classes
consists of primarily first lien, fixed and adjustable-rate,
subprime mortgage loans.
In its analysis, Moody's has combined its published methodology
updates as of July 13, 2007 to the non delinquent portion of the
transactions. Collateral backing these transactions is also
experiencing higher than anticipated rates of delinquency,
foreclosure, and REO relative to credit enhancement levels.
Complete list of Rating Actions:
Issuer: Option One Mortgage Loan Trust 2007-1
-- Cl. M-3 Currently Aa3 on review for possible downgrade,
-- Cl. M-4, Downgraded to A2, previously A1,
-- Cl. M-5, Downgraded to Baa1, previously A2,
-- Cl. M-6, Downgraded to Ba1, previously A3,
-- Cl. M-7, Downgraded to B1, previously Baa1,
-- Cl. M-8, Downgraded to B3 on review for possible further
downgrade, previously Baa2,
-- Cl. M-9, Downgraded to Ca, previously Baa3,
-- Cl. M-10, Downgraded to C, previously Ba1,
-- Cl. M-11, Downgraded to C, previously Ba2.
Issuer: Option One Mortgage Loan Trust 2007-2
-- Cl. M-1 Currently Aa1 on review for possible downgrade,
-- Cl. M-2 Currently Aa2 on review for possible downgrade,
-- Cl. M-3 Currently Aa3 on review for possible downgrade,
-- Cl. M-4, Downgraded to Baa2, previously A1,
-- Cl. M-5, Downgraded to Ba1, previously A2,
-- Cl. M-6, Downgraded to B2, previously A3,
-- Cl. M-7, Downgraded to Caa2, previously Baa1,
-- Cl. M-8, Downgraded to Ca, previously Baa2,
-- Cl. M-9, Downgraded to C, previously Baa3.
Issuer: Option One Mortgage Loan Trust 2007-3
-- Cl. M-4 Currently Aa3 on review for possible downgrade,
-- Cl. M-5, Downgraded to A2, previously A1,
-- Cl. M-6, Downgraded to Baa1, previously A2,
-- Cl. M-7, Downgraded to Ba2, previously A3,
-- Cl. M-8, Downgraded to B1, previously A3,
-- Cl. M-9, Downgraded to Caa2, previously Baa1.
Issuer: Option One Mortgage Loan Trust 2007-4
-- Cl. M-4 Currently Aa3 on review for possible downgrade,
-- Cl. M-5, Downgraded to A2, previously A1,
-- Cl. M-6, Downgraded to Baa1, previously A2,
-- Cl. M-7, Downgraded to Ba1, previously A3,
-- Cl. M-8, Downgraded to B2, previously Baa1,
-- Cl. M-9, Downgraded to Ca, previously Baa2.
Issuer: Option One Mortgage Loan Trust 2007-5
-- Cl. M-3 Currently Aa2 on review for possible downgrade,
-- Cl. M-4 Currently Aa3 on review for possible downgrade,
-- Cl. M-5, Downgraded to A2, previously A1,
-- Cl. M-6, Downgraded to Baa1, previously A2,
-- Cl. M-7, Downgraded to Ba3, previously A3,
-- Cl. M-8, Downgraded to B2, previously Baa1,
-- Cl. M-9, Downgraded to Caa1, previously Baa2.
Issuer: Option One Mortgage Loan Trust 2007-6
-- Cl. M-5, Downgraded to A3, previously A2,
-- Cl. M-6, Downgraded to Baa2, previously A3,
-- Cl. M-7, Downgraded to Ba2, previously Baa1,
-- Cl. M-8, Downgraded to B1, previously Baa2,
-- Cl. M-9, Downgraded to B2, previously Baa3,
-- Cl. M-10, Downgraded to Ca, previously Ba1.
Issuer: Option One Mortgage Loan Trust 2007-CP1
-- Cl. M-3 Currently Aa3 on review for possible downgrade,
-- Cl. M-4, Downgraded to A2, previously A1,
-- Cl. M-5, Downgraded to Baa2, previously A2,
-- Cl. M-6, Downgraded to Ba2, previously A2,
-- Cl. M-7, Downgraded to B3, previously A3,
-- Cl. M-8, Downgraded to Ca, previously Baa1,
-- Cl. M-9, Downgraded to C, previously Baa2.
Issuer: Option One Mortgage Loan Trust 2007-FXD2
-- Cl. M-6, Downgraded to Baa1, previously A3,
-- Cl. M-7, Downgraded to Baa3, previously Baa1,
-- Cl. M-8, Downgraded to Ba1, previously Baa2,
-- Cl. M-9, Downgraded to Ba3, previously Baa3.
PALM INC: Second Quarter Revenues to Fall Short of Expectations
---------------------------------------------------------------
Palm Inc. reported Thursday preliminary financial results for the
second quarter of fiscal year 2008, ended Nov. 30. Full results
will be reported on Dec. 18.
Based on preliminary financial data, Palm expects revenue to be in
the range of $345 million to $350 million for the second quarter
of fiscal year 2008. This compares with earlier guidance of
$370 million to $380 million provided Oct. 1, when Palm reported
its first quarter fiscal year 2008 results. The revenue shortfall
is primarily due to a delay in shipping a product that the company
had previously expected to have certified within the quarter.
Gross margin is expected to be in the range of 29.3 to 29.8
percent on a GAAP basis and 29.5 to 30.0 percent on a non-GAAP
basis, compared with earlier guidance of 33.3 percent to 33.8
percent on a GAAP basis and 33.5 percent to 34.0 percent on a non-
GAAP basis. The gross margin reflects an unforeseen increase in
warranty repair expenses during the quarter, a shift in product
mix that included higher-than-expected shipments of Palm(R)
Centro(TM) smartphones and the delayed product shipment.
Operating expenses are expected to be in the range of $146 million
to $149 million on a GAAP basis and $121 million to $124 million
on a non-GAAP basis.
Loss per diluted share is expected to be in the range of $0.22 to
$0.24 on a GAAP basis and $0.08 to $0.10 on a non-GAAP basis.
Loss per diluted share has been calculated on a GAAP and non-GAAP
basis utilizing an estimated 40 percent effective tax rate. The
determination of the effective tax rate for the second quarter of
fiscal year 2008 will likely vary from the 40 percent utilized in
these calculations and will be included in the full results
announced on Dec. 18.
"We are disappointed that we did not get a key product certified
for delivery in the quarter, but we are focused on realizing the
long-term benefits and opportunities that inspired our transaction
with Elevation Partners. We are pleased with recent improvements
in our product delivery engine, the early success of Palm Centro,
and the significant progress we've made on our strategic
platform," said Ed Colligan, Palm president and chief executive
officer.
About Palm Inc.
Headquartered in Sunnyvale, Calif., Palm Inc. (NasdaqGS: PALM)
-- http://palm.com/-- provides mobile computing solutions --
including Palm(R) Treo(TM) and Centro(TM) smartphones, Palm
handhelds, services and accessories. Palm products are sold
through select Internet, retail, reseller and wireless operator
channels throughout the world, and at Palm Retail Stores and Palm
online stores.
* * *
In July 2007, Moody's placed the company's long-term corporate
family rating and probability of default rating at B1, and bank
loan debt rating at Ba3. These ratings still hold to date. The
outlook is stable.
Standard & Poor's placed the company's long-term foreign and
local issuer credits at B which still hold to date. The outlook
is stable.
PCI GAMING: S&P Assigns 'BB-' Ratings with Stable Outlook
---------------------------------------------------------
Standard & Poor's Ratings Services assigned its 'BB-' issuer
credit rating to PCI Gaming Authority. The rating outlook is
stable. PCI is an unincorporated instrumentality of the Alabama-
based Poarch Band of Creek Indians.
At the same time, Standard & Poor's assigned its 'BB-' rating to
PCI's $185 million senior secured multi-draw term loan. The
facility will be guaranteed by Creek Indian Enterprises
Development Authority, a political subdivision of the tribe that
owns the Tallapoosa Entertainment Center. Proceeds from the
issue, along with cash flows from existing properties, will be
used to help fund the development and construction of the
Wind Creek Atmore Casino and Hotel, which will replace the tribe's
existing facility in Atmore, Alabama.
"The 'BB-' rating reflects limited geographic diversity and the
location of the tribe's three casinos in central and southern
Alabama, which offers weaker demographics relative to many other
gaming markets," said Standard & Poor's credit analyst Melissa
Long. "In addition, the rating reflects our concern regarding the
level of returns that will be generated by the Wind Creek Atmore
project. Limited competition in the vicinity of Montgomery,
relatively stable cash flow generation from existing gaming
facilities, an adequate construction contingency, and moderate
debt leverage for the rating partially temper the previously
mentioned negative factors."
Given its private company status, PCI does not publicly disclose
financial information. However, pro forma leverage is good for
the rating, and current EBITDA margins compare favorably to other
Native American gaming operations (partly because the operations
have minimal amenities and no revenue share payments are made to
the state given the Class II gaming
product). Furthermore, S&P expect that the tribe will continue to
maintain a debt leverage profile consistent with the current
rating even if returns from the Wind Creek Atmore casino
disappoint.
PERFORMANCE TRANS: Clear Thinking Wants All Documents Produced
--------------------------------------------------------------
Clear Thinking Group LLC asks the U.S. Bankruptcy Court for the
Western District of New York to compel Performance Transportation
Services Inc. and its debtor-affiliates to produce all outstanding
documents and information by Dec. 14, 2007.
Clear Thinking is the trustee appointed to oversee the liquidation
of the Debtors' estate in its first bankruptcy filing on Jan. 25,
2006.
Clear Thinking also asks the Court to find that certain vendors
are not ordinary course vendors and may be subject to a
preference demand by the Liquidating Trustee.
On April 24, 2007, Beth Ann Bivona, Esq., at Damon & Morey LLP, in
Buffalo, New York, relates that Clear Thinking asked the Court to
direct the Debtors to produce documents for inspection and
copying; and told the Court they requested on Feb. 8, 2007, and on
several times, information and supporting documentation on:
(a) checks, within two years of the Debtors' prior bankruptcy
filing;
(b) check registers, within two years of the Debtors' prior
bankruptcy filing;
(c) wire transfers, within two years of the Debtors' prior
bankruptcy filing;
(d) invoice payment histories for two years before the Debtors'
prior bankruptcy filing;
(e) open invoices at time of the Debtors' prior bankruptcy
filing;
(f) any communication to, with, or by the Debtors in the
years prior to the bankruptcy filing relating to
payments, workout, collection, threatened or actual
lawsuits on the accounts; and
(g) debit memoranda.
Ms. Bivona relates that the Court directed the Debtors to produce
the documents. However, the Debtors have not produced all of the
documents. Clear Thinking has made numerous follow up request for
the documents, and it was agreed by counsel that the documents
would be produced in summary form first until further detail is
requested.
Ms. Bivona says some of the documents were provided to Clear
Thinking just before the PTS II bankruptcy filing. However,
checks evidencing payment to various specified vendors are not
provided until now. Ms. Bivona asserts it is imperative that
Clear Thinking receive the Documents soon as possible so that it
may complete its analysis of the more than 2,200 payment made
during the preference period.
Clear Thinking must commence all preference actions regarding the
payments no later than Jan. 25, 2008, Ms. Bivona says.
Ms. Bivona also asks the Court to order the preservation of the
Debtors' records for Clear Thinking. Clear Thinking is concerned
regarding accessibility of the documents if a sale, contemplated
by the Debtors' second bankruptcy case, of the business occurs,
Ms. Bivona explains.
Clear Thinking disputes the Debtors' designation of certain
vendors as ordinary course vendors because of the limited
contract or no contract with the Debtors postpetition and post-
confirmation. Clear Thinking seeks the Court's clarification of
the Plan as to authority to make preference demands or commence
adversary proceedings against vendors.
Ms. Bivona points out that of the more than 600 accounts
identified as potential preference defendants, the Debtors have
only consented to lawsuit against 29 defendants. The Debtors
have assert that approximately 618 account are "ordinary course,"
says Ms. Bivona.
A hearing to consider the Liquidating Trustee's request has
been set for Dec. 13, 2007.
About Performance Transportation
Performance Transportation Services Inc. is the second largest
transporter of new automobiles, sport-utility vehicles and light
trucks in North America, and operates under three key
transportation business lines including: E. and L. Transport,
Hadley Auto Transport and Leaseway Motorcar Transport.
The company and 13 of its affiliates previously filed for Chapter
11 protection on Jan. 25, 2006 (Bankr. W.D.N.Y. Lead Case No. 06-
00107). The Court confirmed the Debtors' plan on Dec. 21, 2006,
and that plan became effective on Jan. 29, 2007. Garry M. Graber,
Esq. of Hodgson, Russ LLP and Tobias S. Keller, Esq. of Jones Day
represented the Debtors in their retructuring efforts. When the
Debtor filed for protection from their creditors it reported more
than $100,000,000 in total assets. It also disclosed owing more
than $100,000,000 to at most 10,000 creditors, including $708,679
to Broadspire and $282,949 to General Motors of Canada Limited.
The company and its debtor-affiliates filed their second Chapter
11 bankruptcy on Nov. 19, 2007 (Bankr. W.D.N.Y. Case Nos: 07-04746
thru 07-04760). Tobias S. Keller, Esq., at Jones Day, represents
the Debtors. Garry M. Graber, Esq., at Hodgson, Russ LLP, serve
as the Debtors' local counsel. The Debtors' claims & balloting
agent is Kutzman Carson Consultants LLC. (Performance Bankruptcy
News, Issue No. 33; Bankruptcy Creditors' Services Inc.;
http://bankrupt.com/newsstand/or 215/945-7000).
PLASTECH ENGINEERED: S&P Puts 'B+' Rating Under Negative Watch
--------------------------------------------------------------
Standard & Poor's Ratings Services placed its 'B+' corporate
credit rating on privately held Plastech Engineered Products Inc.
on CreditWatch with negative implications. "The CreditWatch
listing reflects our intention to review the Plastech corporate
credit rating, based on our expectations that credit protection
measures will remain under pressure in the near term and that
liquidity could decrease because of weak production volumes,
adverse product mix, and challenges in reducing costs," said
Standard & Poor's credit analyst Nancy
Messer.
Total balance-sheet debt was $488 million at Sept. 30, 2007.
Dearborn, Michigan-based Plastech is a manufacturer of automotive
parts, primarily injection-molded plastic components for vehicle
interiors.
To resolve the CreditWatch listing, we plan to meet with Plastech
management and assess the company's prospective credit profile in
light of the business and financial challenges that the company
faces.
POLY-PACIFIC INT'L: Posts CDN$895,420 Net Loss in Third Quarter
---------------------------------------------------------------
Poly-Pacific International Inc. reported a net loss of CDN$895,420
on CDN$-0- of sales for the third quarter ended Sept. 30, 2007,
compared with a net loss of CDN$507,794 on sales of CDN$297,831 in
the corresponding period last year.
Due to constraints on its working capital and legal disputes with
certain transport and freight companies, the company had zero
sales during the third quarter ended Sept. 30, 2007. In addition,
the company closed its Everwood operations at Dec. 31, 2006, and
thus did not have any sales of agricultural posts in 2007 as
compared to the same period in 2006.
Overall, operating expenses were CDN$662,773 for the third quarter
ended Sept. 30, 2007, compared to CDN$348,678 for the third
quarter period ended Sept. 30, 2006.
At Sept. 30, 2007, the company's consolidated balance sheet showed
CDN$1,881,231 in total assets, CDN$1,744,837 in total liabilities,
and CDN$136,394 in total stockholders' equity.
The company's consolidated balance sheet at Sept. 30, 2007, also
showed strained liquidity with CDN$1,062,545 in total current
assets available to pay CDN$1,744,837 in total current
liabilities.
Going Concern Doubt
Collins Barrow Edmonton LLP, in Edmonton, Alberta, expressed
substantial doubt about Poly-Pacific International Inc.'s ability
to continue as a going concern after auditing the company's
financial statements for the years ended Dec. 31, 2006, and 2005.
The auditor pointed to the company's recurring losses from
operations and net working capital deficiency.
About Poly-Pacific International Inc.
Based in Edmonton, Alberta, Poly-Pacific International Inc. -
http://www.poly-pacific.com/-- (TSX: PMB.V)(BERLIN: AOLGDN)
(OTC BB: PLYPF)(FRANKFURT: POZ) is an innovator in eco-friendly
solutions to Industrial waste by-products. The company is
actively pursuing the reclamation of industrial polymer fibre
throughout North American landfill sites.
POPE & TALBOT: Court Approves Stalking Horse Purchase Agreement
---------------------------------------------------------------
The Hon. Christoher S. Sontchi of the United States Bankruptcy
Court for the District of Delaware approved in all respects the
stalking horse purchase agreement Pope & Talbot Inc. and its
debtor-affiliates entered into with International Forest Products
Limited, for the sale of certain of their Wood Products Business
Assets and the assumption of certain related liabilities.
As reported in the Troubled Company Reporter on Nov. 30, 2007,
Pope & Talbot Inc. and its debtor-affiliates conducted an
extensive search for a qualified buyer of their assets, and
determined that the binding proposal submitted by Interfor was the
highest and best offer received for their assets employed in the
Wood Products Business.
In the event the U.S. Bankruptcy Court and the British Columbia
Supreme Court overseeing the Debtors' CCAA proceedings approve a
bid other than that of Interfor or the Debtors withdraw the Sale
Procedures Motion and subsequently liquidate or dispose of their
Wood Products Business Assets, Judge Sontchi authorizes the
Debtors to pay Interfor:
* a $3,000,000 break-up fee, if the Purchaser is not in
material breach of the Stalking Horse APA; and
* its reasonable out-of-pocket expenses, in an amount not to
exceed $700,000, incurred in connection with the
contemplated transactions under the Stalking Horse APA,
provided that certain creditor representatives will have the
opportunity to review and dispute the reasonableness of the
expense.
The U.S.Bankruptcy Court also approved in its entirety the
Debtors' proposed bidding procedures for the sale of its Wood
Products Business Assets, including:
(1) the submission, consideration, qualification and
acceptance of Qualified Overbids submitted to the Debtors;
(2) the Auction; and
(3) the identification and determination of the Successful Bid
and the Back-Up Bid.
The Auction will be held on Dec. 19, 2007, at 10:00 a.m. New
York time, at the Lexington Avenue, New York office of the
Debtors' counsel.
The U.S. Bankruptcy Court will convene a hearing to approve the
proposed Sale of the Debtors' Wood Products Business Assets on
Jan. 7, 2008, at 2:00 p.m. prevailing Eastern time.
Any objections to the Proposed Approval Order must be filed on or
before Dec. 28, 2007, at 4:00 p.m. prevailing Eastern time.
Judge Sontchi directs the Debtors to serve the Cure Cost Notice
in connection with the assumption and assignment of certain
contracts. Objections to the Cure Cost Notice must be filed on
or before Dec. 18, 2007, at 4:00 p.m. prevailing Eastern
time.
No provision in the Bidding Procedures Order, Judge Sontchi held,
will be deemed to constitute the consent of the Secured Lenders
or the Official Committee of Unsecured Creditors to any bid and
will not impair the ability of the Secured Lenders to act as
Qualifying Bidders.
The Debtors are not subject to any stay in the implementation,
enforcement or realization of the Bidding Procedures Order, the
U.S. Bankruptcy Court clarified.
Monitor's Comments on Business Sale
In its third report to the British Columbia Supreme Court,
PricewaterhouseCoopers Inc., as monitor of the proceedings
commenced by Pope & Talbot Ltd. and its subsidiaries under the
Companies' Creditors Arrangement Act, believes that the Debtors'
proposed bidding procedures support a sales process that should
maximize realizations.
The Monitor considers the restricted bidding timeline acceptable.
The Monitor believes that the market in both Canada and the U.S.
for the Wood Products Business has been adequately canvassed,
with any interested parties having had sufficient opportunity to
participate and to conduct due diligence, in a way that it can
reasonably be expected to comply with the timeframes established
by the Debtors.
The Monitor is satisfied that, on balance and under the present
circumstances, the Interfor APA was the best offer available to
the Debtors and is appropriate as a stalking horse bid.
About Pope & Talbot
Headquartered in Portland, Oregon, Pope & Talbot Inc. (Other OTC:
PTBT.PK) -- http://www.poptal.com/-- is a pulp and wood products
business. Pope & Talbot was founded in 1849 and produces market
pulp and softwood lumber at mills in the US and Canada. Markets
for the company's products include the US, Europe, Canada, South
America and the Pacific Rim.
The company and its U.S. and Canadian subsidiaries applied for
protection under the Companies' Creditors Arrangement Act of
Canada on Oct. 28, 2007. The Debtors' CCAA Stay expires
on Jan. 16, 2008.
The company and fourteen of its debtor-affiliates filed for
Chapter 11 protection on Nov. 19, 2007 (Bankr. D. Del. Lead Case
No. 07-11738). Laura Davis Jones, Esq. at Pachulski, Stang,
Ziehl & Jones L.L.P. is Debtors' proposed bankruptcy counsel.
When the Debtors filed for bankruptcy, they listed total assets of
$681,960,000 and total debts of $601,090,000.
The Debtors' exclusive period to file a plan expires on March 18,
2008.
Pope & Talbot Pulp Sales Europe, LLC, a subsidiary, on Nov. 21,
2007, filed an application for relief under Belgian bankruptcy
laws in the commercial court in Brussels. If the Belgian court
grants Pope & Talbot Europe's application, it is expected it will
be liquidated through the bankruptcy proceeding. (Pope & Talbot
Bankruptcy News, Issue No. 8; Bankruptcy Creditors' Service Inc.,
http://bankrupt.com/newsstand/or 215/945-7000).
POPE & TALBOT: Panel Asks Court to Deny Proposed DIP Financing
--------------------------------------------------------------
The Official Committee of Unsecured Creditors in Pope & Talbot
Inc. and its debtor-affiliates bankruptcy cases asks the United
States Bankruptcy Court for the District of Delaware to deny
the Debtors' proposed DIP Financing, or in the alternative, to
make modifications to accommodate its objections.
The Creditors Committee is concerned that the Debtors' proposed
DIP financing prejudices the rights and interests of unsecured
creditors.
Both prior to and since the commencement of the Debtors' Chapter
11 cases, the actions of the Debtors' secured lenders have been
motivated by one central, unwavering and inappropriate goal of
forcing a liquidation of the Debtors' assets at the expense of
the Debtors' other creditor constituents, Jason W. Staib, Esq.,
at Blank Rome LLP, in Wilmington, Delaware, the Creditors
Committee's proposed counsel, contends.
The Lenders, Mr. Staib argues, used the breach of a financial
covenant under a certain prepetition credit agreement "to attempt
to force a fire sale process" for the Debtors' businesses and to
obtain more than $3,300,000 in fees through a series of short
term forbearance agreements.
"The Debtors' DIP Financing Motion seek to effectuate a sale
process that will provide unsecured creditors with less than two
months to formulate and finalize a viable restructuring plan, and
this limited time will effectively foreclose certain
restructuring alternatives and may dictate the terms of a plan of
reorganization," Mr. Staib says.
It is likely that a reorganization of the Debtors' pulp business
will yield significantly more value to unsecured creditors than
will "an immediate forced liquidation, according to Mr. Staib.
Thus, he avers, there is no justification for the Lenders'
attempt to co-opt the process and conduct a "fire sale" of the
Debtors' assets on an unreasonable timetable.
Moreover, he adds, the Lender's "offensive" efforts in limiting
the Creditors' Committee's ability to fulfill its fiduciary
duties is evidenced by these provisions in the DIP Agreement:
(i) It will be an event of default if the Creditors
Committee's professionals, in conjunction with the
Debtors' professionals, expend more than a projected
amount set forth in the DIP budget; and
(ii) Expenses incurred by the Creditors Committee in excess of
the projected amount may not get paid.
In light of those provisions, the Creditors Committee will be
forced to decide between either (x) protecting the interests of
unsecured creditors, or (y) creating an event of default, which
would allow the DIP Lenders to foreclose on the Debtors' assets,
Mr. Staib tells the Court.
Given the Debtors' demonstrated inability to push back on the
Lenders, the parties-in-interest look to the Court to help ensure
that the Lenders are not permitted to trample the rights and
interests of unsecured creditors and other constituencies in the
Debtors' cases, Mr. Staib tells the Hon. Christopher S. Sontchi.
The Creditors Committee maintains that the apparent lack of a
financing alternative does not entitle a secured lender to obtain
provisions in a DIP agreement that severely prejudices the rights
and interests of unsecured creditors.
As reported in the Troubled Company Reporter on Nov. 27, 2007,
the Debtors entered into a DIP Loan Agreement dated Nov. 19, 2007,
with Wells Fargo Financial Corporation Canada, as administrative
agent, Ableco Finance LLC, as collateral agent; and certain other
lenders, for a DIP facility aggregating $89,062,301. The Court
granted Debtors, on an interim basis, to borrow up to $68,000,000.
Headquartered in Portland, Oregon, Pope & Talbot Inc. (Other OTC:
PTBT.PK) -- http://www.poptal.com/-- is a pulp and wood products
business. Pope & Talbot was founded in 1849 and produces market
pulp and softwood lumber at mills in the US and Canada. Markets
for the company's products include the US, Europe, Canada, South
America and the Pacific Rim.
The company and its U.S. and Canadian subsidiaries applied for
protection under the Companies' Creditors Arrangement Act of
Canada on Oct. 28, 2007. The Debtors' CCAA Stay expires
on Jan. 16, 2008.
The company and fourteen of its debtor-affiliates filed for
Chapter 11 protection on Nov. 19, 2007 (Bankr. D. Del. Lead Case
No. 07-11738). Laura Davis Jones, Esq. at Pachulski, Stang,
Ziehl & Jones L.L.P. is Debtors' proposed bankruptcy counsel.
When the Debtors filed for bankruptcy, they listed total assets of
$681,960,000 and total debts of $601,090,000.
The Debtors' exclusive period to file a plan expires on March 18,
2008.
Pope & Talbot Pulp Sales Europe, LLC, a subsidiary, on Nov. 21,
2007, filed an application for relief under Belgian bankruptcy
laws in the commercial court in Brussels. If the Belgian court
grants Pope & Talbot Europe's application, it is expected it will
be liquidated through the bankruptcy proceeding. (Pope & Talbot
Bankruptcy News, Issue No. 8; Bankruptcy Creditors' Service Inc.,
http://bankrupt.com/newsstand/or 215/945-7000).
POPE & TALBOT: US Trustee Objects to Pulp Business Sale Procedures
------------------------------------------------------------------
Kelly Beaudin Stapleton, the United States Trustee for Region 3,
asks the United States Bankrupty Court to deny Pope & Talbot Inc.
and its debtor-affiliates' proposed sale procedures for the sale
of their pulp business assets to the extent that they seek
conditional approval of the proposed bid protections for a
subsequently-selected stalking horse bidder.
Two of the Debtors' pulp business assets are in British Columbia
and one is in Oregon. The Debtors received four or five binding
proposals, during the week of Oct. 8, 2007, for the sale of
substantially all of their assets including the Pulp Business
Assets, and they have determined that a sale through their
proposed bidding procedures will enable them to obtain the highest
or best offer for the Pulp Business Assets.
Having the proposed bid protections outlined in the Pulp Business
Bidding Procedures is inappropriate and misleads prospective
stalking horse bidders into believing that the amounts have been
pre-approved by the Court, William K. Harrington, Esq., trial
attorney for the U.S. Trustee, contends.
Moreover, Mr. Harrington elaborates, the expedited time periods
proposed by the Debtors for approval of the Pulp Business Bidding
Procedures and Sale do not provide creditors with sufficient
time:
* to evaluate the proposed Sale, or the propriety of
liquidating the assets at this juncture; or
* for potential purchasers to perform due diligence with
respect to the Sale.
The U.S. Trustee asks the Debtors to confirm that it is their
burden to address any and all issues related to consumer privacy
under Section 363(b)(1) of the Bankruptcy Code, and consumer
fraud under Section 363(o) of the Bankruptcy Code, through any
order seeking approval of a Sale.
Creditors Committee
Similar to the U.S. Trustee's Objection, Jason W. Staib, Esq., at
Blank Rome LLP, in Wilmington, Delaware, the Official Committee of
Unsecured Creditors' proposed counsel, asserts that the proposed
Pulp Business Bidding Procedures "unnecessarily invite excessive"
stalking horse protections, as they suggest that the bidders "will
be entitled to a break-up fee of up to 3.5% and reimbursement of
out-of-pocket expenses up to $700,000."
Against this backdrop, the Creditors Committee asks the Court to
revise the Pulp Business Bidding Procedures by:
* extending the dates and deadlines in the Bidding Procedures
by 60 days;
* deleting any reference to the amounts and types of stalking
horse protections the Debtors are willing to grant; and
* allow its participation in any sale process.
The Official Committee of Unsecured Creditors believes that in
contrast to the Debtors' wood products business, the Debtors'
pulp business has positive EBITDA, Mr. Staib tells the Hon.
Christopher S. Sontchi.
Moreover, the pulp market has shown steady improvements due to
the closure of several Canadian and U.S. pulp mills and solid
pulp demand, including an emerging demand for pulp in Asia, Mr.
Staib notes.
"Based on long-term supply and demand trends, the Debtors
estimate that the price for pulp will continue to be strong," Mr.
Staib points out. They, however, have been unable to find a
stalking horse bidder for the pulp business, he notes.
The proposed sale process for the Debtors' Pulp Business, Mr.
Staib contends, is intended solely to allow their secured lenders
to either (i) obtain immediate and enhanced recoveries; or (ii)
grab the Debtors' assets "on the cheap".
According to Mr. Staib, based on preliminary information the
Creditors Committee have received to date, it is likely that:
(a) a reorganization of the Debtors' pulp business will yield
significantly more value to unsecured creditors than will
"an immediate forced liquidation"; and
(b) the Debtors' Pulp Business is able to sustain its
operations with minimal financing needs.
"The already inappropriate milestone requirements" set forth in
the Debtors' proposed Pulp Business Bidding Procedures are "even
more egregious" when considered in light of the Debtors'
acknowledgment that they remain weeks away from completing a
preliminary business plan for a stand-alone pulp business, Mr.
Staib tells the Court.
The Debtors and Lenders, Mr. Staib states, seek to effectuate a
process that will provide unsecured creditors with less than two
months to formulate and finalize a viable restructuring plan.
"This limited time will effectively foreclose certain
restructuring alternatives and may dictate the terms of a plan of
reorganization," he says.
Canadian Debtors' Proposed
Bidding Procedures For Pulp Business
The Canadian Debtors filed with the British Columbia Supreme
Court on December 4, 2007, a set of proposed bidding procedures
for the sale of their Pulp Business, identical in form and
content as the Chapter 11-proposed Pulp Business Bidding
Procedures.
Attached to the Bidding Procedures filed with the British
Columbia Supreme Court was an affidavit by Harold N. Stanton,
president and chief executive officer of Pope & Talbot Inc.
According to Mr. Stanton, the Canadian Debtors, through their
financial advisor and investment banker, Rothschild Inc.,
received a binding proposal for the sale of their assets,
including the Pulp Business, in October 2007. The Canadian
Debtors, however, decided not to enter into an asset purchase
agreement contemplated by the Binding Proposal, because they have
determined that only their Bidding Procedures will enable them to
obtain the highest or best offer for the Pulp Business Assets.
About Pope & Talbot
Headquartered in Portland, Oregon, Pope & Talbot Inc. (Other OTC:
PTBT.PK) -- http://www.poptal.com/-- is a pulp and wood products
business. Pope & Talbot was founded in 1849 and produces market
pulp and softwood lumber at mills in the US and Canada. Markets
for the company's products include the US, Europe, Canada, South
America and the Pacific Rim.
The company and its U.S. and Canadian subsidiaries applied for
protection under the Companies' Creditors Arrangement Act of
Canada on Oct. 28, 2007. The Debtors' CCAA Stay expires
on Jan. 16, 2008.
The company and fourteen of its debtor-affiliates filed for
Chapter 11 protection on Nov. 19, 2007 (Bankr. D. Del. Lead Case
No. 07-11738). Laura Davis Jones, Esq. at Pachulski, Stang,
Ziehl & Jones L.L.P. is Debtors' proposed bankruptcy counsel.
When the Debtors filed for bankruptcy, they listed total assets of
$681,960,000 and total debts of $601,090,000.
The Debtors' exclusive period to file a plan expires on March 18,
2008.
Pope & Talbot Pulp Sales Europe, LLC, a subsidiary, on Nov. 21,
2007, filed an application for relief under Belgian bankruptcy
laws in the commercial court in Brussels. If the Belgian court
grants Pope & Talbot Europe's application, it is expected it will
be liquidated through the bankruptcy proceeding. (Pope & Talbot
Bankruptcy News, Issue No. 8; Bankruptcy Creditors' Service Inc.,
http://bankrupt.com/newsstand/or 215/945-7000).
QUECHAN TRIBE: Fitch Assigns 'BB-' Initial Issuer Rating
--------------------------------------------------------
Fitch Ratings has assigned an initial rating to The Quechan Tribe
of the Fort Yuma Indian Reservation's governmental project bonds
and assigned an initial issuer rating as:
-- Governmental Project Bonds Series 2007 (Tax-Exempt) 'BB-'
-- Issuer Rating 'BB-'.
The Rating Outlook is Stable.
Approximately $45 million governmental project bonds are expected
to price via negotiation with JP Morgan and are due Dec. 1, 2027.
The bonds are subject to monthly mandatory sinking fund payments
sufficient to amortize the bonds by maturity. Quechan expects to
issue approximately $160 million of gaming enterprise revenue
bonds in January 2008. Fitch expects to assign a rating to the
gaming enterprise issue closer to its sale date.
The 'BB-' issuer rating for the Quechan Tribe is supported by the
stable operating performance of its existing casino operations,
which are the tribe's main economic driver and primary source of
cash flows. The tribe currently operates two casinos, located on
adjacent parcels of land straddling the Arizona/California border,
which have a history of producing strong and stable cash flows.
The governmental project bonds are an unsecured general obligation
of the Tribe, payable from all available net assets and
subordinate to the interests of senior obligations, which will
include the gaming enterprise revenue bonds. Available net asset
will largely be comprised of cash flows of the gaming operation
after debt service on the gaming enterprise revenue bonds.
Quechan is issuing debt to construct a replacement facility for
its current California casino. The project represents a
significant expansion and upgrade from the existing facilities,
which offer a limited set of amenities, and cater mostly to a
local market. The expanded facility will benefit from a prime
location on I-8, a major east/west transportation route, and
approximately one mile from the U.S./Mexico Andrade Border
crossing. The project will provide a level of diversification
that is lacking in the existing operations, enabling the tribe to
attract a broader market segment at the new facility. There will
be no business disruption during construction, as the project site
is located approximately eight miles from the existing facilities,
both of which will remain open during construction.
Based on fiscal 2008 projected gaming enterprise earnings before
interest, taxes, depreciation and amortization at the current
facilities, and pro forma for the $205 million in total issuance
anticipated, debt to EBITDA is expected to peak at 4.1 times.
Following the realization of cash flows of the California casino
project, debt-to-EBITDA is expected to normalize at roughly 2.9x
in fiscal 2011.
Fitch notes that Quechan is uniquely positioned in relation to
regulatory risk relative to other Native American gaming issuers
in that it operates facilities under compacts with two states. In
addition, the competitive environment is somewhat more favorable
for the Quechan than for other Native American gaming operators in
the Southern California market, with only one competitor located
within a 75 miles radius and no other tribe with trust lands
located along I-8 until the closet competitor facilities, located
110 miles west.
Offsetting the strengths in Quechan's credit profile are concerns
including the limited experience of the current management team.
Fitch believes that the current management team lacks the depth of
experience to effectively manage the new casino and resort, which
will include a much more intensive offering of both gaming and
non-gaming amenities, as well as a hotel property. Quechan
recognizes this issue and has developed a plan to put in place a
new management team prior to project opening.
Of additional concern, the demographic profile of the target
market indicates a relatively low income consumer. The clientele
of the existing facilities includes residents of the primary
market area, which encompasses a 75 mile radius from Yuma,
Arizona, as well as winter residents of Yuma. Given the higher
quality and associated higher price point of the planned
California casino amenities, Fitch believes that the success of
the project somewhat depends on management's ability to broaden
the target market. In order to accomplish this, Quechan plan to
market the new property to a wider area, believing the improved
amenities will draw tourists from the San Diego area, and the
superior location will allow for increased capture of traffic and
pedestrian flow from the Andrade border crossing and I-8.
There have been political difficulties related to the location of
the California casino project. A group of tribal members have
protested the location of the project because they believe it is
culturally significant ground and should not be developed. If the
construction is delayed by legal action, the tribe could continue
to operate at the current California facility, producing adequate
cash flows to cover debt service, but failure to complete
development of the project by Dec. 1, 2009 would be an event of
default under the gaming enterprise Indenture, which could cause
an acceleration of principal payment. This may require Quechan to
re-finance the gaming enterprise bonds. Fitch believes Quechan
would have the ability to successfully re-finance the debt given
the previously noted strength of cash flows of the existing
operations.
RASC: Moody's Downgrades Ratings on 26 Tranches
-----------------------------------------------
Moody's Investors Service has downgraded the ratings of 26
tranches and placed on review for possible downgrade the ratings
of 8 tranches from 4 transactions issued by RASC in 2007.
Additionally, 2 downgraded tranches remain on review for possible
further downgrade. The collateral backing these classes consists
of primarily first lien, fixed and adjustable-rate, subprime
mortgage loans.
In its analysis, Moody's has combined its published methodology
updates as of July 13, 2007 to the non delinquent portion of the
transactions. Collateral backing these transactions is also
experiencing higher than anticipated rates of delinquency,
foreclosure, and REO relative to credit enhancement levels.
Complete list of Rating Actions:
Issuer: RASC Series 2007-KS1 Trust
-- Cl. M-2S Currently Aa2 on review for possible downgrade,
-- Cl. M-3S Currently Aa3 on review for possible downgrade,
-- Cl. M-4, Downgraded to A3, previously A1,
-- Cl. M-5, Downgraded to Baa2, previously A2,
-- Cl. M-6, Downgraded to Ba1, previously A3,
-- Cl. M-7, Downgraded to B1, previously Baa1,
-- Cl. M-8, Downgraded to B3, previously Baa2,
-- Cl. M-9, Downgraded to Ca, previously Baa3,
-- Cl. B, Downgraded to C, previously Ba1.
Issuer: RASC Series 2007-KS2 Trust
-- Cl. M-2 Currently Aa2 on review for possible downgrade,
-- Cl. M-3 Currently Aa3 on review for possible downgrade,
-- Cl. M-4, Downgraded to A3, previously A1,
-- Cl. M-5, Downgraded to Baa2, previously A2,
-- Cl. M-6, Downgraded to Ba2, previously A3,
-- Cl. M-7, Downgraded to B1, previously Baa1,
-- Cl. M-8, Downgraded to B2, previously Baa2,
-- Cl. M-9, Downgraded to C, previously Baa3,
-- Cl. M-10, Downgraded to C, previously Ba1.
Issuer: RASC Series 2007-KS3 Trust
-- Cl. M-2S Currently Aa2 on review for possible downgrade,
-- Cl. M-3S Currently Aa3 on review for possible downgrade,
-- Cl. M-4, Downgraded to A2, previously A1,
-- Cl. M-5, Downgraded to Baa2, previously A2,
-- Cl. M-6, Downgraded to Baa3, previously A3,
-- Cl. M-7, Downgraded to Ba3, previously Baa1,
-- Cl. M-8, Downgraded to B3 on review for possible further
downgrade, previously Baa2,
-- Cl. M-9, Downgraded to Ca, previously Baa3.
Issuer: RASC Series 2007-KS4 Trust
-- Cl. M-2S Currently Aa2 on review for possible downgrade,
-- Cl. M-3S Currently Aa2 on review for possible downgrade,
-- Cl. M-4, Downgraded to A2, previously A1,
-- Cl. M-5, Downgraded to Baa2, previously A2,
-- Cl. M-6, Downgraded to Baa3, previously A3,
-- Cl. M-7, Downgraded to Ba3, previously Baa1,
-- Cl. M-8, Downgraded to B3 on review for possible further
downgrade, previously Baa2,
-- Cl. M-9, Downgraded to Ca, previously Baa3.
REDDI BRAKE: Sept. 30 Balance Sheet Upside-Down by $816,179
-----------------------------------------------------------
Reddi Brake Supply Corp.'s consolidated balance sheet at Sept. 30,
2007, showed $9.6 million in total assets and $10.4 million in
total liabilities, resulting in a $816,179 total shareholders'
deficit.
At Sept. 30, 2007, the company's consolidated balance sheet also
showed strained liquidity with $263,953 in total current assets
available to pay $10.2 million in total current liabilities.
The company reported a net loss of $848,674 on coal sales of
$1.1 million for the third quarter ended Sept. 30, 2007, compared
with a net loss of $339,907 on coal sales of $1.5 million in the
same period last year.
Revenue for the nine months ended Sept. 30, 2007, totaled
$3.3 million, a 19.5% drop from the $4.0 revenue from the first
nine months of operations in 2006. Net loss for the first nine
months of 2007 was $1.7 million, versus a net loss of
$1.9 million a year ago.
Revenues were less in both periods in 2007 because the company did
not mine and sell as much coal in the 2007 periods as it did in
the 2006 periods.
Expenses in the three month period ended Sept. 30, 2007, totaled
$1.8 million, a 5.6% increase over the expenses in the same period
in 2006 of $1.7 million.
Total costs and expenses in the nine month period ended Sept. 30,
2007, were $5.4 million, a 7.5% drop from the total costs and
expenses in first nine months in 2006 of $5.8 million.
Full-text copies of the company's consolidated financial
statements for the quarter ended Sept. 30, 2007, are available for
free at http://researcharchives.com/t/s?2623
Going Concern Doubt
Madsen & Associates CPA's Inc., in Salt Lake City, expressed
substantial doubt about Reddi Brake Supply Corp.'s ability to
continue as a going concern after completing its audit of the
company's consolidated financial statements for the year ended
June 30, 2007. The auditing firm reported that the company will
need additional working capital for its planned activity and to
service its debt.
Subsequent to Sept. 30, 2007, the company's wholly owned
subsidiary, Hidden Splendor Resources, filed a Chapter 11 petition
in the United States Bankruptcy Court for the District of Nevada.
About Reddi Brake
Based in Salt Lake City, Reddi Brake Supply Corp. (OTC BB: RDDI)
is a coal mining company located in Helper, Utah. The company
operates a coal mine that covers approximately 1,288 acres. Daily
coal production is delivered to a coal brokerage company at the
mine site.
REMY WORLDWIDE: Wants Court to Close 27 Bankruptcy Cases
--------------------------------------------------------
Remy Worldwide Holdings Inc. and its debtor-affiliates ask the
U.S. Bankruptcy Court for the District of Delaware to enter a
final decree closing the Chapter 11 cases of 27 Reorganized
Debtors, pursuant to Section 350(a) of the Bankruptcy Code:
Entity Case No.
------ --------
Ballantrae Corporation 07-11482
HSG I, Inc. 07-11483
HSG II, Inc. 07-11484
International Fuel Systems, Inc. 07-11485
iPower Technologies, Inc. 07-11486
M. & M. Knopf Auto Parts, L.L.C. 07-11487
Marine Corporation of America 07-11488
NABCO, Inc. 07-11489
Power Investments Marine, Inc. 07-11490
Power Investments, Inc. 07-11491
Powrbilt Products, Inc. 07-11492
Publitech, Inc. 07-11493
Reman Holdings, L.L.C. 07-11494
Remy Alternators, Inc. 07-11495
Remy India Holdings, Inc. 07-11496
Remy International Holdings, Inc. 07-11498
Remy Korea Holdings, LLC 07-11499
Remy Logistics, L.L.C. 07-11500
Remy Powertrain, L.P. 07-11501
Remy Reman, L.L.C. 07-11502
Remy Sales, Inc. 07-11503
Remy, Inc. 07-11504
Unit Parts Company 07-11505
Western Reman Industrial , Inc. 07-11506
Western Reman Industrial, LLC 07-11507
World Wide Automotive, L.L.C. 07-11508
World Wide Automotive Distributors, Inc. 07-11509
Section 350(a) provides that after an estate is fully
administered and the court has discharged the trustee, a court,
on motion of a party in interest, may grant a final decree
closing a chapter 11 case.
An estate is fully administered when its Chapter 11 plan has been
confirmed and the estate dissolves, Douglas P. Bartner, Esq., at
Shearman & Sterling LLP, in New York, points out.
Mr. Bartner reminds the Court that the Debtors' Joint Prepackaged
Plan of Reorganization was confirmed on Nov. 20, 2007. All
documents and agreements necessary to implement and complete the
Plan have been executed in accordance with the Plans' and
Confirmation Order's terms, he avers.
The Plan became effective Dec. 6, 2007. The Reorganized Debtors
have substantially consummated the Plan and all of the
distributions, Mr. Bartner continues. There are no deposit
requirements in the Plan. The property required to be transferred
under the Plan will have been substantially transferred in that
all anticipated distributions will have been made and, to the
extent required, the Reorganized Debtors will have assumed the
management of the property dealt with by the Plan.
Finally, the Debtors, other than Remy International, have no
remaining motions, contested matters or adversary proceedings by
or against them pending before the Court, Mr. Bartner relates.
The Debtors also ask the Court to rule that upon entry of a final
decree, the caption of the Debtors' Chapter 11 cases be modified
to reflect the closing of the Chapter 11 case of each Reorganized
Debtor other than Remy International:
The Reorganized Debtors, except Remy International, will file a
final report for their Chapter 11 cases pursuant to Local
Delaware Bankruptcy Rule 5009-1(c) without delay.
The Court will convene a hearing on Dec. 20, 2007, to consider the
Debtors' request.
Based in Anderson, Indiana, Remy Worldwide Holdings Inc. acts as
a holding company of all the outstanding capital stock of Remy
International Inc. Remy International -- http://www.remyinc.com/
-- manufactures, remanufactures and distributes Delco Remy brand
heavy-duty systems and Remy brand starters and alternators,
locomotive products and hybrid power technology. The company
also provides a worldwide component core-exchange service for
automobiles, light trucks, medium and heavy-duty trucks and
other heavy-duty, off-road and industrial applications. Remy
has operations in the United Kingdom, Mexico and Korea, among
others.
The company and its debtor-affiliates filed for Chapter 11
protection on Oct. 8, 2007 (Bankr. D. Del. Cases No. 07-11481 to
07-11509). Douglas P. Bartner, Esq., Fredric Sosnick, Esq., and
Michael H. Torkin, Esq., at Shearman & Sterling LLP, represent
the Debtors' in their restructuring efforts. Pauline K. Morgan,
Esq., Edmon L. Morton, Esq., and Kenneth J. Enos, Esq., at Young
Conaway Stargatt & Taylor, LLP, serve as co-counsels to the
Debtors. The Debtors' claims agent is Kurtzman Carson
Consultants LLC and their restructuring advisor is AlixPartners,
LLC. Greenbert Traurig, LLP is the Debtors' special corporate
advisory and litigation counsel, and Ernst & Young LLP their
accountant, auditor and tax services provider.
At Sept. 30, 2006, Remy Worldwide's balance sheet showed total
assets of $919,736,000 and total liabilities of $1,265,648,000.
(Remy Bankruptcy News, Issue No. 9; Bankruptcy Creditors' Service,
Inc., http://bankrupt.com/newsstand/or 215/945-7000).
REVLON CONSUMER: Proposed $170MM Loan Cues S&P's Dev. Watch
-----------------------------------------------------------
Standard & Poor's Ratings Services revised its outlook on New York
City-based Revlon Consumer Products Corp. to developing from
negative, following the announcement of its proposed $170 million
senior subordinated term loan (unrated) from MacAndrews
& Forbes, Revlon's majority shareholder. Existing ratings on
Revlon were affirmed, including its 'CCC+' corporate credit
rating.
"The outlook revision reflects Revlon's substantially reduced
near-term refinancing risk as a result of the pending
transaction," said Standard & Poor's credit analyst Mark Salierno.
"However, the developing outlook also
reflects our continued concern regarding Revlon's historically
volatile performance, its lack of positive free cash flow
generation, and its substantial debt burden."
The ratings on Revlon reflect the company's participation in the
highly competitive mass-market cosmetics industry, its highly
leveraged capital structure, and its historically inconsistent
operating performance.
RG GLOBAL: Sept. 30 Balance Sheet Upside-Down by $5.2 Million
-------------------------------------------------------------
RG Global Lifestyles Inc.'s consolidated balance sheet at
Sept. 30, 2007, showed $7.0 million in total assets, $12.2 million
in total liabilities, and $25,318 in minority interest in
subsidiary, resulting in a $5.2 million total stockholders'
deficit.
At Sept. 30, 2007, the company's consolidated balance sheet also
showed strained liquidity with $1.3 million in total current
assets available to pay $12.2 million in total current
liabilities.
The company reported net income of $1.7 million on total revenues
of $537,644 for the second quarter ended Sept. 30, 2007, compared
with a net loss of $3.4 million on $-0- of revenues in the same
period last year.
During the quarter ended Sept. 30, 2007, the company's primary
source of revenues was sales of its water treatment technology
which accounted for $469,049 of total revenues. Sales of OC
energy drink products represented $68,595 of total revenues.
Total operating expenses increased to $1.2 million during the
three months ended Sept. 30, 2007, from total operating expenses
of $565,688 in the comparable period a year ago.
Other income increased to $2.9 million for the three months ended
Sept. 30, 2007, from other expense of $2.8 million in the second
quarter of 2006. The increase in other income during the quarter
ended Sept. 30, 2007, was directly attributed to a change in the
fair value of warrants issued in connection with convertible notes
and the fair value of the beneficial conversion feature of the
secured convertible notes. During the quarters ended Sept. 30,
2007, and 2006, change in the fair value of derivative liabilities
were a gain of $3.6 million and a loss of $2.0 million,
respectively.
Full-text copies of the company's consolidated financial
statements for the quarter ended Sept. 30, 2007, are available for
free at http://researcharchives.com/t/s?261d
Going Concern Doubt
McKennon Wilson & Morgan LLP, in Irvine, California, expressed
substantial doubt about RG Global Lifestyles Inc.'s ability to
continue as a going concern after auditing the company's
consolidated financial statements for the year ended March 31,
2007. The auditing firm reported that the company has incurred
losses, has used cash in operating activities and has a
significant stockholders' deficit.
About RG Global
Headquartered in Rancho Santa Margarita, Calif., RG Global
Lifestyles Inc. (OTC BB: RGBL) -- http://www.rgglife.com/ --
develops and markets bottled beverages and innovative technologies
for water purification and wastewater treatment.
RIVERSIDE CASINO: S&P Lifts Corp. Credit Rating to B+ from B
------------------------------------------------------------
Standard & Poor's Ratings Services raised its corporate credit
rating on Riverside Casino & Golf Resort LLC to 'B+' from 'B'.
The rating outlook is stable. Riverside is the operating
subsidiary of parent company Washington County Casino Resort LLC.
At the same time, Standard & Poor's Ratings Services raised its
issue-level rating on Riverside's $110 million senior secured
facilities to 'BB' from 'BB-'. The recovery rating on this
secured debt remains at '1', indicating the expectation for very
high (90% to 100%) recovery in the event of a payment default.
"The ratings upgrade reflects our view that Riverside will
continue to generate revenue and EBITDA at levels sufficient to
keep credit measures in line with the new rating," said Standard &
Poor's credit analyst Ariel Silverberg.
According to the Iowa Racing and Gaming Commission, the company
generated $86.2 million of gross gaming revenue in its first 12
months of operation, beginning September 2006, which is in line
with S&Ps's expectations. (Because WCCR is a private company, it
does not publicly disclose its financial information.) After
modifications to its cost structure during Riverside's first year
of operations, relating mostly to marketing and payroll, expenses
are currently at a run rate that reflects adequate levels of
EBITDA and cash flow generation to meet near-term commitments at
coverage levels that are in line with the new rating. S&P expect
the current level of EBITDA to continue, which may be used for
modest debt reduction going forward, and an overall improvement in
credit measures.
The 'B+' rating on Riverside, Iowa-based Riverside is based on the
company's narrow business position as the operator of a single
casino and the expected slow growth rate of gaming revenues in its
market. This is somewhat tempered by the company's modestly
leveraged capital structure and limited competition within 50
miles of the facility.
RJO HOLDINGS: Reduced Cash Flow Cues S&P to Junk Ratings
--------------------------------------------------------
Standard & Poor's Ratings Services lowered its long-term
counterparty credit rating on RJO Holdings Corp. to 'CCC+' from
'B-'. At the same time, S&P lowered its issue rating on RJOH's
$50 million revolving credit facility to 'CCC+' from 'B-'
(recovery rating stays at '4'); the rating on its senior-secured,
$385 million first-lien facility was lowered to 'CCC+' from 'B-'
(recovery rating '4', 30%-50% recovery in a default scenario); and
the rating on the senior-secured, $150 million second-lien
facility was lowered to 'CCC-' from 'CCC' (recovery rating '6',
0%-10% recovery). S&P assigned a negative outlook
because S&P see the potential for the issuer's credit fundamentals
to further deteriorate within the next few quarters. At the same
time, S&P have withdrawn its ratings at the company's request.
"The rating actions result from several factors, which include
reduced operating cash flows in the third quarter, realized and
expected losses on marketable securities, a decline in excess net
capital, and reduced liquidity, as a result of the drawdown of $50
million in borrowings under the company's revolving credit
facility. Specifically, S&P understand that a significant
proportion of the borrowings under the revolving credit facility
were downstreamed to its regulated subsidiary, R.J. O'Brien &
Associates, to maintain regulatory capital. S&P expect interest
expenses to increase modestly, given the outstanding borrowings
under the revolving credit facility. As such, S&P see increased
pressure on the company's ability to service its outstanding debt
balances and make scheduled debt repayments," said Standard &
Poor's credit analyst Robert Hansen.
ROADHOUSE GRILL: Panel Wants Mesirow as Financial Advisor
---------------------------------------------------------
The Official Committee of Unsecured Creditors appointed in the
bankruptcy cases of Roadhouse Grill Inc. and its debtor-affiliate,
R.H.G. Acquisition Corp., asks permission from the U.S. Bankruptcy
Court for the Southern District of Florida to employ Mesirow
Financial Consulting LLC as their financial advisor.
Mesirow Financial will:
a. assist in the review of reports or filings as required by
the Bankruptcy Court or the Office of the United States
Trustee, including, but not limited to, schedules of assets
and liabilities, statements of financial affairs and monthly
operating reports;
b. review the Debtor's financial information, including, but
not limited to, analyses of cash receipts and disbursements,
financial statement items and proposed transactions for
which Bankruptcy Court approval is sought;
c. review and analyze of the reporting regarding cash
collateral and any debtor-in-possession financing
arrangements and budgets;
d. evaluate potential employee retention and severance plans;
e. assist with identifying and implementing potential cost
containment opportunities;
f. assist with identifying and implementing asset redeployment
opportunities;
g. analyze assumption and rejection issues regarding executory
contracts and leases;
h. review and analyze the Debtor's proposed business plans and
the business and financial condition of the Debtor
generally;
i. assist in evaluating reorganization strategy and
alternatives available to the creditors;
j. review the Debtor's financial projections and assumptions;
k. prepare enterprise, asset and liquidation valuations;
l. assist in preparing documents necessary for confirmation;
m. advise and assist to the Committee in negotiations and
meetings with the Debtor and the bank lenders;
n. advise and assist on the tax consequences of proposed plans
of reorganization;
o. assits with the claims resolution procedures, including, but
not limited to, analyses of creditors' claims by type and
entity;
p. provides litigation consulting services and expert witness
testimony regarding confirmation issues, avoidance actions
or other matters; and
q. other such functions as requested by the Committee or its
counsel to assist the Committee in this Chapter 11 case.
The Committee's counsel, Paul J. Battista, Esq., tells the Court
that the Firm's professionals bill:
Professionals Hourly Rates
------------- ------------
Senior Managing Director $650 - $690
Managing Director $650 - $690
Director $650 - $690
Senior Vice-President $550 - $620
Vice President $450 - $520
Senior Associate $350 - $420
Associate $190 - $290
Paraprofessional $150
To the best of the Committee's knowledge and based upon the
Feltman Affidavit, MFC is a "disinterested person" as that term is
defined in section 101(14) of the Bankruptcy Code.
To the best of the Committee's knowledge, MFC does not hold or
represent an interest adverse to the estate with respect to the
matter on which MFC will be employed, in accordance with section
1103(b) of the Bankruptcy Code.
Headquartered in Palm Beach, Florida, Roadhouse Grill, Inc. --
http://www.roadhousegrill.com/-- owned 57 restaurants and
franchised 12 branches to five other companies. The company and
its affiliate, R.H.G. Acquisition Corp., filed for chapter 11
protection on Oct. 8, 2007 (Bankr. S.D. Fla. Case Nos. 07-18410
and 07-18414). The Debtors are represented by Kelley & Fulton
P.A. Paul J. Battista, Esq., and Genovese, Joblove, and Battista,
P.A., serve as counsel to the Official Committee of Unsecured
Creditors. The Debtors' schedules listed total assets of
$5,209,124 and total liabilities of $21,671,484.
ROCKFORD PRODUCTS: Wants Case Converted to Chap. 7 Liquidation
--------------------------------------------------------------
Rockford Products Corp. is asking the U.S. Bankruptcy Court
for the Northern District of Illinois to convert its chapter
11 case into one under chapter 7, Bill Rochelle of Bloomberg
News reports.
The Debtor sold most of its assets in September and November
and the sale proceeds all went to secured creditors, Bloomberg
relates.
The Debtor intends to liquidate its "minimal assets" under
chapter 7.
Rockford Products Corporation, -- http://www.rockfordproducts.com/
and http://www.rockfordinternational.com/-- originally formed in
1929, manufactures, sources and distributes high quality, cold
formed steel components, fasteners and other related products to
Tier 1 and 2 suppliers to automobile manufacturers, the automotive
aftermarket and non-automotive customers. Most of Rockford
Products' manufacturing and distribution operations are located in
Rockford, Illinois, where Rockford Products leases three
facilities with a combined area of 988,000 square feet. Rockford
Products currently has 516 employees. Annual revenues for
Rockford Products amounted to around $100 million in fiscal 2006.
The Debtor and its debtor-affiliate, Rockford Products Global
Services Inc., filed Chapter 11 bankruptcy protection on July 25,
2007 (Bankr. N.D. Ill. Case No. 07-71768 and 07-71769). Thomas J.
Augspurger, Esq. at LeBoeuf, Lamb, Greene & MacRae LLP represents
the Debtors in their restructuring efforts. BMC Group act as the
Debtors' claims, noticing, and balloting agent. Lawyers at
Greenberg Traurig LLP serve as counsel to the Official Committee
of Unsecured Creditors. The Debtors schedules disclose total
assets of $49,002,753 and total liabilities of $40,438,278.
SHAW GROUP: Earns $645,000 in 2007 Fourth Quarter Ended Aug. 31
---------------------------------------------------------------
The Shaw Group Inc. reported financial results for its fourth
quarter and fiscal year ended Aug. 31, 2007. Net income for the
three months ended Aug. 31, 2007, inclusive of its investment in
Westinghouse, was $645,000. Excluding the Westinghouse segment,
net income was $36.9 million. In comparison, for the three months
ended Aug. 31, 2006, which was prior to the Westinghouse
investment, Shaw reported net income of $13.3 million.
Earnings before interest expense, income taxes, depreciation and
amortization for the three months ended Aug. 31, 2007, including
the Westinghouse segment, were $13.4 million. These results
included a $52 million pre-tax and non-cash foreign exchange
translation loss on the company's Japanese Yen denominated debt
that partially funded the investment in Westinghouse. Excluding
the Westinghouse segment, fourth quarter 2007 EBITDA was
$64.2 million compared to fourth quarter 2006 EBITDA of $30.1
million. Revenues for the fourth quarter 2007 were $1.6 billion
compared to $1.2 billion in the prior year quarter, a 40%
increase. Shaw generated approximately $176 million in operating
cash flow during the fourth quarter of 2007 as compared to
$162 million in the fourth quarter 2006. The company's global
cash balance at Aug. 31, 2007, exceeded $360 million.
For the fiscal year ended Aug. 31, 2007, inclusive of its
investment in Westinghouse, Shaw reported a net loss of
$19.0 million. Excluding the Westinghouse segment, fiscal year
2007 net income was $19.4 million. For the fiscal year ended
Aug. 31, 2006, Shaw reported net income of $50.2 million.
For the fiscal year ended Aug. 31, 2007, EBITDA including the
Westinghouse segment was $59.6 million and $92.1 million excluding
the Westinghouse segment. Fiscal year ended Aug. 31, 2006, EBITDA
was $124.1 million. Revenues for fiscal year 2007 were
$5.7 billion compared to $4.8 billion in fiscal year 2006, a 20%
increase. Shaw generated $461.0 million of operating cash flow in
fiscal year 2007, compared to a net use of cash in operating
activities of $94.5 million in fiscal year 2006.
Shaw booked nearly $11 billion in new awards during fiscal year
2007 and its backlog of unfilled orders at Aug. 31, 2007, rose to
a record $14.3 billion, up 57% from approximately $9.1 billion at
Aug. 31, 2006.
"Global demand and economic expansion in the markets we service
for power generation capacity, petrochemicals and refined products
continue to drive Shaw's considerable growth," J.M. Bernhard Jr.,
Shaw's chairman, president and chief executive officer, said.
"New contract awards for air quality and emissions control work,
plus new clean coal generation power projects, together with our
nuclear projects, provided the basis for our Power Group growth.
During 2007, we booked our first major nuclear power project in
China and are working on the study phase of several proposed U.S.-
based nuclear power projects.
"The Energy and Chemicals Group benefited from increased demand
for chemical and petrochemical production and refinery capacity in
the Middle East and Asia Pacific. Demand for our fabrication and
manufacturing services is stronger as most power plants, oil
refineries, petrochemical and chemical plants require significant
quantities of piping. In response to the global demand of our
customers, we are building our largest facility worldwide in
Matamoros, Mexico, and anticipate output to begin in the second
half of fiscal year 2008.
"Our Maintenance segment also continues to perform well from
current customers expanding existing contracts and from sustained
strong demand at an increasing number of new locations. Based on
our record backlog, we anticipate seeing continued growth in our
revenues and earnings and anticipate strong operating cash flow
during fiscal year 2008 as we execute our major power, chemical
and petrochemical contracts."
At Sept. 30, 2007, the company's balance sheet showed total assets
of $3.8 billion and total liabilities of $2.6 billion, resulting
in a stockholders' equity of $1.2 billion.
About Shaw Group
Based in Baton Rouge, Louisiana, The Shaw Group Inc. (NYSE: SGR)
-- http://www.shawgrp.com/-- provides services to the
environmental, infrastructure and homeland security markets,
including consulting, engineering, construction, remediation and
facilities management services to governmental and commercial
customers. It is also a vertically integrated provider of
engineering, procurement, pipe fabrication, construction and
maintenance services to the power and process industries. The
company segregates its business activities into four operating
segments: Environmental & Infrastructure; Energy & Chemicals;
Maintenance, and Fabrication, Manufacturing & Distribution. In
January 2005, the company sold substantially all of the assets of
its Shaw Power Technologies, Inc. and Shaw Power Technologies
International, Ltd. units to Siemens Power Transmission and
Distribution Inc., a unit of Siemens AG.
The company has operations in Chile, China, Malaysia, the United
Kingdom and, Venezuela, among others.
* * *
Standard & Poor's Ratings Services affirmed its 'BB' corporate
credit rating on The Shaw Group Inc. and removed it from
CreditWatch, where it was placed with negative implications in
October 2006. S&P said the outlook is stable.
In addition, 'BB' senior secured debt rating was affirmed after
the $100 million increase to the company's revolving credit
facility.
SMARTIRE SYSTEMS: Inks Two Financing Deals w/ Xentenial Holdings
----------------------------------------------------------------
SmarTire Systems Inc. has entered into two financing agreements
with Xentenial Holdings Limited, a subsidiary of Yorkville
Advisors LLC, formerly Cornell Capital Partners LP.
On Nov. 19, 2007, SmarTire Systems entered into a securities
purchase agreement with Xentenial Holdings, in which Xentenial
agreed to purchase from the company a secured convertible
debenture for an aggregate face amount of $96,500. The company
received net proceeds of $85,000 after payment of a
structuring/due diligence fee $11,500 to Yorkville Advisors.
On Nov. 30, 2007, the company entered into a securities purchase
agreement with Xentenial Holdings Limited in which Xentenial
agreed to purchase from the company one or more secured
convertible debentures for an aggregate face amount of up to
$1.15 million.
Pursuant to the securities purchase agreement, Xentenial purchased
one secured convertible debenture for $422,000 and was issued
225 million five year warrants exercisable into shares of its
common stock at $0.0298 per share.
The securities purchase agreement gives Xentenial the ability,
subject to the company's agreement, to purchase one or more
additional secured convertible debentures for the remaining
balance of up to $728,000 within six months or until May 30, 2008.
The company has agreed that it will also issue up to
420 million five year share purchase warrants exercisable into
shares of its common stock at $0.0298 per share. The company
received net proceeds of $350,000 on Nov. 30, 2007, after paying a
$42,000 monitoring fee and a $30,000 structuring due diligence fee
to Yorkville Advisors LLC.
The $96,500 and $422,000 secured convertible debentures that the
company sold to Xentenial mature on Nov. 19, 2010, and
Nov. 30, 2010. Interest will accrue on the outstanding principal
balance at an annual rate equal to 10%. Interest will be
calculated on the basis of a 365-day year and the actual number of
days elapsed, to the extent permitted by applicable law. Interest
is to be paid on the maturity date in cash or shares of the
company's common stock at its option.
The convertible debentures are convertible, in whole or in part,
into shares of the company's common stock at the then effective
conversion price. The conversion price in effect on any conversion
date shall be equal to the lesser of:
-- $0.0573 or;
-- 80% of the lowest volume weighted average price of
common stock during the 30 trading days immediately
preceding the conversion date as quoted by Bloomberg, LP.
SmarTire intends to use the net proceeds of this financing
offering for general corporate purposes, including working
capital.
"We are extremely pleased that Yorkville has demonstrated its
continued support of strategy and vision and we anticipate
receiving the balance of the funding within the next thirty to
forty-five days," Jeff Finkelstein, SmarTire CFO, said.
About SmarTire Systems
Headquartered in Richmond, British Columbia, Canada, SmarTire
Systems Inc. (OTC BB: SMTR.OB) -- http://smartire.com/-- develops
and markets technically advanced tire pressure monitoring systems
for the transportation and automotive industries that monitor tire
pressure and tire temperature. Its TPMSs are designed for
improved vehicle safety, performance, reliability and fuel
efficiency. The company has three wholly owned subsidiaries:
SmarTire Technologies Inc., SmarTire USA Inc. and SmarTire Europe
Limited.
Going Concern Doubt
As reported in the Troubled Company Reporter on July 4, 2007,
BDO Dunwoody LLP, in Vancouver, Canada, conducted its audit of
SmarTire Systems Inc.'s consolidated financial statements for the
year ended July 31, 2006, in accordance with Canadian reporting
standards which do not permit a reference to such events and
conditions which cast substantial doubt about a company's ability
to continue as a going concern when these are adequately disclosed
in the financial statements.
The company has incurred recurring operating losses and has a
deficit of $104 million as at July 31, 2006. The ability of the
company to continue as a going concern is in substantial doubt and
is dependent on achieving profitable operations, and obtaining the
necessary financing in order to achieve profitable operations.
SOLUTIA INC: S&P Rates Proposed $1.2BB Sr. Secured Loan at B+
-------------------------------------------------------------
Standard & Poor's Ratings Services assigned its 'B+' loan rating
to Solutia Inc.'s (D/--/--) proposed $1.2 billion senior secured
term loan and a '3' recovery rating, indicating the likelihood of
a meaningful (50%-70%) recovery of principal in the event of a
payment default. The ratings are based on preliminary terms and
conditions.
S&P also assigned its 'B-' rating to the company's proposed $400
million unsecured notes.
Solutia will use proceeds from the proposed term loan, unsecured
notes, an unrated $400 million asset-backed revolving credit
facility, and a $250 million rights equity issue to pay certain
creditors upon emergence from bankruptcy, including creditors at a
Belgium-based subsidiary, Solutia Europe
S.A./N.V. (B/Developing/B). S&P expect to withdraw its ratings on
Solutia Europe when creditors of that company are paid down as
planned. Proceeds will also be used to meet funding shortfalls in
employee benefit liabilities.
Total adjusted debt, pro forma for the transaction, including the
present value of capitalized operating leases, tax-adjusted
unfunded employee benefits, and tax-adjusted environmental
reserves, is estimated at $2.1 billion for the fiscal year ended
Dec. 31, 2007.
Standard & Poor's expects to assign its 'B+' corporate credit
rating to Solutia if the company and its subsidiaries emerge from
Chapter 11 bankruptcy proceedings in early 2008 as planned. S&P
expect the outlook to be stable.
"The ratings reflect Solutia's highly leveraged financial profile
and its low margins," said Standard & Poor's credit analyst Paul
Kurias. Solutia's business mix includes a large commodity-
oriented nylon segment that is somewhat vulnerable to economic and
cyclical downturns and volatility in raw material, transportation,
and energy costs. These risks are tempered by
meaningful contributions of relatively stable specialty businesses
in the company's portfolio, good market shares in most businesses,
geographic diversity, and an ongoing portfolio restructuring
effort aimed at improving the company's cost competitiveness and
profitability.
SOUTHERN ARIZONA: Case Summary & 14 Largest Unsecured Creditors
---------------------------------------------------------------
Lead Debtor: Southern Arizona Recovery Systems, L.L.C.
6005 South Belvedere Avenue
Tucson, AZ 85706
Bankruptcy Case No.: 07-02491
Debtor-affiliates filing separate Chapter 11 petitions:
Entity Case No.
------ --------
Canyon Capital Partners, L.L.C. 07-02493
Type of Business: The Debtors provide transportation services.
Chapter 11 Petition Date: December 6, 2007
Court: District of Arizona (Tucson)
Judge: Eileen W. Hollowell
Debtors' Counsel: Eric Slocum Sparks, Esq.
110 South Church Avenue, Suite 2270
Tuczon, AZ 85701
Tel: (520) 623-8330
Fax: (520) 623-9157
Estimated Assets Estimated Debts
---------------- ---------------
Southern Arizona Recovery Less than $1 Million to
Systems, L.L.C. $10,000 $10 Million
Canyon Capital Partners, Less than $1 Million to
L.L.C. $10,000 $10 Million
A. Southern Arizona Recovery Systems, LLC's 12 Largest
Unsecured Creditors:
Entity Nature of Claim Claim Amount
------ --------------- ------------
S.A.R.S., Inc. equipment $1,754,000
6991 North Solaz Tercero rent/purchase
Tucson, AZ 85718 C.B. note
Dyers Goodwill $1,406,000
Dyers 10 year $600,000
property lease
Cactus Auto Transport, Inc. Delany Goodwill $396,000
P.O. Box 90498
C.B. note on $271,000
equipment equity
3rd party equipment $190,000
leases
3rd party pick $12,000
up truck note
Empire Southwest trade debt- $67,658
P.O. Box 29879 vehicle repairs
Phoenix, AZ 85038
Toltec Tire & Service trade debt $25,419
Peterbilt trade debt- $19,976
truck repairs
and parts
Sprint trade debt- $8,837
cell phone
service
G.C.R. Tucson Truck Tire trade debt $6,595
Center
C.F. Bender trade debt $5,459
Kelly Services trade debt $3,034
Lubemaster trade debt $2,779
Louise Smitty lease remote $2,400
yard rental
Circle B Transportation Corp. trade debt $2,300
B. Canyon Capital Partners, LLC's Two Largest Unsecured Creditors:
Entity Nature of Claim Claim Amount
------ --------------- ------------
S.A.R.S., Inc. equipment $1,754,000
6991 North Solaz Tercero rent/purchase
Tucson, AZ 85718 C.B. note
Dyers Goodwill $1,406,000
Dyers 10 year $600,000
property lease
Cactus Auto Transport, Inc. Goodwill: Phil $396,000
& Paula Delany
C.B. note on $271,000
equipment equity
3rd party equipment $190,000
leases
3rd party pick $12,000
up truck note
SPX CORP: Moody's Rates $500 Million Sr. Unsecured Notes at Ba2
---------------------------------------------------------------
Moody's Investors Service assigned a Ba2 rating to SPX
Corporation's $500 million senior unsecured notes, the proceeds of
which would be used to acquire APV. At the same time, Moody's
affirmed the company's Ba1 corporate family rating. The outlook
remains stable.
SPX plans to acquire APV from Invensys PLC for $510 million, using
a combination of cash on hand and proceeds from the proposed $500
million senior unsecured notes. APV is expected to give SPX an
additional $800 million in revenues and about $50 million in
EBITDA on a trailing annualized basis. The 10 times acquisition
multiple is relatively high for a manufacturing acquisition and
SPX will need to focus on improving APV's operations to justify
the cost. However, Moody's believes that the operational
advantages derived from APV will allow SPX to carry the additional
debt from the acquisition without increased credit risk. A global
manufacturer of processed equipment and engineered solutions
primarily for the sanitation market, APV will become part of SPX's
flow technology business.
SPX's Ba1 corporate family rating reflects the company's diverse
product offering and extensive global footprint. SPX continues to
streamline into three core business segments, and Moody's expects
SPX's improving operating efficiencies, as well as its prudent
financial policies, will enable the company to maintain a solid
Ba1 credit profile under the key rating factors in Moody's Heavy
Manufacturing Methodology. Moody's anticipates SPX to continue to
benefit from revenue growth as demand for its end products remains
robust over the intermediate term. Moody's also expects SPX to
pursue a conservative financial strategy characterized by debt
reductions.
Major credit challenges include the ongoing cyclicality of SPX's
end markets. The company also operates in highly competitive
industries with only moderate barriers to entry. In addition,
SPX's industrial products and services business is non core but
accounts for 17% of revenues on a pro forma basis, creating
uncertainty over its final disposition and cash flows. As it
integrates APV, SPX could continue to pursue smaller acquisitions,
possibly requiring even more incremental capital investments.
The ratings for the senior unsecured notes reflect both the
overall probability of default of the company, to which Moody's
assigns a PDR of Ba1, and a loss given default of LGD 5. The Ba2
rating assigned to the $500 million senior unsecured notes is pari
passu to the other unsecured notes and are the most junior
committed credit facilities in SPX's capital structure.
These ratings/assessments were affected by this action:
-- Corporate family rating affirmed at Ba1;
-- Probability of default rating affirmed at Ba1;
-- $21.3 million senior unsecured notes due 2011 at Ba2
(LGD5, 74%) from Ba2 (LGD5, 80%);
-- $28.2 million senior unsecured notes due 2013 at Ba2
(LGD5, 74%) from Ba2 (LGD5, 80%); and,
-- $500 million senior unsecured notes due 2014 assigned at
Ba2 (LGD5, 74%).
The company's speculative grade liquidity rating of SGL-1 is
unchanged.
SPX Corporation, headquartered in Charlotte, North Carolina, is a
global, multi-industry company providing a diverse array of
products and services across its four business segments: thermal
equipment and services, flow technology, test and measurement, and
industrial products and services. Revenues for the twelve months
ended September 30, 2007 totaled about $4.6 billion.
ST CHARLES: S&P Lowers Rating to B- from BBB- on GO Bonds
---------------------------------------------------------
Standard & Poor's Ratings Services lowered to 'B-' from 'BBB-' its
ratings on St. Charles Parish Hospital Services District No. 1,
Louisiana's GO bonds. The outlook was also revised to negative.
The downgrade reflects a criteria change in Standard & Poor's
approach to tax-secured hospital districts. In cases where the
underlying strength of the hospital district is considered deeply
speculative, the rating will be increasingly driven by the
hospital's financial and operating profile. Operational risk is a
credit concern to the extent that pledged revenues may be
interrupted due to bankruptcy protection or diversion to
operations. This includes GO bonds with an unlimited ad valorem
tax pledge approved by voters to pay debt service.
More specifically the downgrade reflects the district's
precipitously weak liquidity, highlighted by unrestricted cash and
investments equaling about two-days' cash on hand and less than 5%
outstanding long-term debt as of the last audit (fiscal 2006,
dated July 31, 2006). Current interim financial results for
fiscal 2007 (unaudited July 31, 2007) are weaker than expected and
are also expected to be weaker than fiscal 2006 results. In
addition, the district has issued substantial short-term debt over
the past three fiscal years to fund operational activities, while
inpatient volume declined in fiscal 2007 (down 15% year over
year). This is especially troubling in light of the district's
limited population base and inherent risks in the district's small
size (net patient revenue of about $20 million).
"The negative outlook reflects our expectation that liquidity will
remain at the current unsatisfactory level for the near term,
however, if their new inpatient facility is successful, it may
result in the district's breakeven or better financial performance
in fiscal 2008, potentially bolstering the credit's liquidity
position incrementally," said Standard & Poor's credit analyst
Kevin Holloran. "An increase in balance sheet strength will be
necessary for any future positive rating actions on the credit,"
Mr. Holloran added. "Conversely, should the district have a
problematic transition into their new facility and further weaken
an already precipitously weak financial profile, additional
downgrades are possible," he concluded.
The district's overwhelmingly light liquidity effectively limits
day-to-day operational activities and provides virtually no
financial flexibility, further limiting the district while in the
midst of a relatively lengthy and sizeable capital expansion.
The bonds are secured by an annual ad valorem tax millage on all
taxable property within the district, which is coterminous with
St. Charles Parish, La., secures the bonds. There is some credit
stability conveyed by the district's limited tax rate flexibility
on the millage, and because of a maintenance and operations tax
pledge that flows through the hospital and can be used for
operations and/or debt service.
TABS 2006-6: Moody's Cuts Rating on $950MM Notes to B1 from A3
--------------------------------------------------------------
Moody's Investors Service downgraded, and left on review for
possible further downgrade, ratings of two classes of notes issued
by TABS 2006-6, Ltd. The notes affected by the rating action are:
Class Description: $950,000,000 Class A1S Variable Funding Senior
Secured Floating Rate Notes Due 2047
-- Prior Rating: A3, on review for possible downgrade
-- Current Rating: B1, on review for possible downgrade
Class Description: $175,000,000 Class A1J Senior
Secured Floating Rate Notes Due 2047
-- Prior Rating: Baa3, on review for possible downgrade
-- Current Rating: Caa1, on review for possible downgrade
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. 16, 2007, of an event of default
caused by a failure of the Senior Credit Test to be satisfied, as
required under Section 5.1(h) of the Indenture dated Nov. 16,
2006.
TABS 2006-6, 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 Credit Test failed.
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 severity of
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 and Class
A1J Notes remain on review for possible downgrade.
TABS 2007-7: Moody's Chips Rating on $1.31BB Notes to B1 from A1
----------------------------------------------------------------
Moody's Investors Service downgraded ratings of seven classes of
notes issued by TABS 2007-7, Ltd. and left on review for possible
further downgrade ratings of three of these classes of notes. The
rating of one class of notes is left on review for possible
further action, direction uncertain. The notes affected by the
rating action are:
Class Description: $1,310,000,000 Class A1S Variable Funding
Senior Secured Floating Rate Notes Due 2047
-- Prior Rating: A1, on review for possible downgrade
-- Current Rating: B1, on review for possible downgrade
Class Description: $352,500,000 Class A1J Senior Secured Floating
Rate Notes Due 2047
-- Prior Rating: Baa3, on review for possible downgrade
-- Current Rating: B3, on review for possible downgrade
Class Description: $240,000,000 Class A2 Senior Secured Floating
Rate Notes Due 2047
-- Prior Rating: Ba2, on review for possible downgrade
-- Current Rating: Caa2, on review for possible downgrade
Class Description: $80,000,000 Class A3 Secured Deferrable
Interest Floating Rate Notes Due 2047
-- Prior Rating: B2, on review for possible downgrade
-- Current Rating: Ca
Class Description: $20,000,000 Class B1 Mezzanine Secured
Deferrable Interest Floating Rate Notes Due 2047
-- Prior Rating: Caa1, on review for possible downgrade
-- Current Rating: Ca
Class Description: $77,500,000 Class B2 Mezzanine Secured
Deferrable Interest Floating Rate Notes Due 2047
-- Prior Rating: Caa2, on review for possible downgrade
-- Current Rating: Ca
Class Description: $47,500,000 Class B3 Mezzanine Secured
Deferrable Interest Floating Rate Notes Due 2047
-- Prior Rating: Caa3, on review for possible downgrade
-- Current Rating: Ca
Class Description: $65,550,000 Class X Senior Secured Fixed Rate
Notes Due 2013
-- Prior Rating: A1, on review for possible downgrade
-- Current Rating: A1, on review with direction uncertain
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. 9, 2007, of an event of default
caused by a failure of the Senior Credit Test to be satisfied, as
required under Section 5.1(h) of the Indenture dated Mar. 20,
2007.
TABS 2007-7, 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 Credit Test 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 severity of
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 ratings assigned to
Class X, Class A1S, Class A1J and the Class A2 Notes remain on
review for possible further rating action.
TELESAT CANADA: Note Redemption Cues S&P to Withdraw Ratings
------------------------------------------------------------
Standard & Poor's Ratings Services withdrew its ratings on Telesat
Canada. The company has redeemed its CDN$125 million 8.2% senior
unsecured notes outstanding. The debt redemption resolves the
CreditWatch with negative implications status that resulted when
parent BCE Inc. (BB-/Watch Neg/--) agreed to sell Telesat Canada
to a joint venture formed between New York-based Loral Space &
Communications Inc. (not rated) and Montreal-based Public Sector
Pension Investment Board (AAA/Stable/A-1+).
TTM TECHNOLOGIES: S&P Lifts Bank Loan Rating to BB+ from BB
-----------------------------------------------------------
Standard & Poor's Ratings Services revised its outlook on TTM
Technologies Inc. to positive from stable. The outlook revision
is based on TTM's rapid reduction of debt incurred to
acquire the printed circuit group business from Tyco International
and a smooth integration process. At the same time, we raised our
bank loan ratings on TTM's $240 million first-lien bank facility.
S&P raised its senior secured bank loan rating to 'BB+' from 'BB'.
S&P revised its recovery rating on the loan to '1' from '2'; the
'1' rating indicates the expectation for very high (0%-100%)
recovery in the event of a payment default. S&P affirmed the 'BB-
' long-term corporate credit rating. Santa Ana, California-based
TTM manufactures printed circuit boards.
"The ratings reflect challenges associated with very difficult
industry conditions for the electronic manufacturing service
sector and a short operating track record following the Tyco
acquisition," said Standard & Poor's credit analyst Lucy
Patricola. "These factors are partially offset by TTM's
niche position as a manufacturer of both quick-turn and low-volume
PCBs and light leverage for the rating."
The U.S.-based PCB industry has experienced a significant
contraction as production has migrated to low cost regions.
Currently, about 10% of the global market for PCB revenue is
produced in the U.S., with a focus on high-complexity, low-volume
production, prototype boards, and PCBs used in military
applications. Following its acquisition of the Tyco business, TTM
is the largest U.S.-based manufacturer, with a respectable market
presence in aerospace and defense, representing about 32% of
September quarter revenues. Still, the company's networking and
communications end markets account for 40%
of revenues. TTM derives the balance of its revenues from its
computing and medical/industrial/instrumentation units. Despite
TTM's leading overall market share in the U.S., the industry
remains fragmented, with hundreds of small manufacturers.
Leverage has been reduced since the acquisition because of about
$100 million of prepayments on the term loan, pro forma for
reductions following the September quarter. Sources of the
prepayments include cash flow and cash on hand. Pro forma for the
prepayments, leverage is about 1.1x. The rating provides room to
accommodate the company's growth strategy, up to debt to EBITDA of
about 3x. TTM is seeking to expand capacity in China, most likely
through acquisition.
S&P would consider a rating upgrade if the company continues its
solid operating performance over the next year, establishing a
stronger track record as a larger company. S&P could revise the
outlook back to stable if cyclicality
exceeded expectations or if the company experienced significant
customer defections. S&P would also revise the outlook and
possibly the rating if the company pursued a growth strategy that
caused leverage to exceed 3x.
U.S. ANTIMONY: Posts $13,974 Net Loss in Third Quarter
------------------------------------------------------
United States Antimony Corp. reported a net loss of $13,974 on
revenues of $1,306,214 for the third quarter ended Sept. 30, 2007,
compared with a net loss of $32,760 on revenues of $1,165,444 in
the same period last year.
The decrease in the loss for the third quarter of 2007 compared to
the similar period of 2006 is primarily due to gain on sale of
mining interests.
Total revenues from antimony product sales for the third quarter
of 2007 were $980,196 compared with $780,917 for the comparable
quarter of 2006, an increase of $199,279. During the three-month
period ended Sept. 30, 2007, 56% of the company's revenues from
antimony product sales were from sales to one customer.
Total revenue from sales of zeolite products during the third
quarter of 2007 were $326,018, compared with the same quarter
sales in 2006 of $384,527. The decrease in revenue for the third
quarter of 2007 compared to the same quarter of 2006 was primarily
due to the decrease in the average sales price of $27.42 per ton
sold during the third quarter of 2007.
At Sept. 30, 2007, the company's consolidated balance sheet showed
$3,275,449 in total assets, $2,132,900 in total liabilities, and
$1,142,549 in total stockholders' equity.
The company's consolidated balance sheet at Sept. 30, 2007, also
showed strained liquidity with $523,487 in total current assets
available to pay $1,555,468 in total current liabilities.
Full-text copies of the company's consolidated financial
statements for the quarter ended Sept. 30, 2007, are available for
free at http://researcharchives.com/t/s?262f
Going Concern Doubt
DeCoria, Maichel & Teague, P.S., in Spokane, Washington,
expressed substantial doubt about United States Antimony's ability
to continue as a going concern after auditing the company's
consolidated financial statements for the year ended Dec. 31,
2006, and 2005. The auditing firm pointed to the company's
negative working capital and accumulated deficit.
About United States Antimony
Headquartered in Thompson Falls, Mont., United States Antimony
Corporation (OTC BB: UAMY) -- http://www.usantimony.com/--
engages in the production and sale of antimony and zeolite
products in the United States.
UBS MORTGAGE: Fitch Rates Class B Certificates at BB
----------------------------------------------------
Fitch has taken rating actions on these three UBS Mortgage Asset
Securitization Transactions Specialized Loan Trust mortgage pass-
through certificates:
Series 2005-1
-- Class A affirmed at 'AAA';
-- Class M-1 affirmed at 'AA';
-- Class M-2 affirmed at 'A';
-- Class M-3 affirmed at 'BBB';
-- Class M-4 rated 'BBB-', placed on Rating Watch Negative;
-- Class B rated 'BB' placed on Rating Watch Negative.
Series 2005-2
-- Class A affirmed at 'AAA';
-- Class M-1 affirmed at 'AA+';
-- Class M-2 affirmed at 'AA';
-- Class M-3 affirmed at 'A';
-- Class M-4 affirmed at 'BBB+';
-- Class M-5 affirmed at 'BBB';
-- Class M-6 affirmed at 'BBB-';
-- Class B affirmed at 'BB'.
Series 2005-3
-- Class A affirmed at 'AAA';
-- Class M-1 affirmed at 'AA';
-- Class M-2 affirmed at 'A';
-- Class M-3 rated 'BBB+, placed on Rating Watch Negative;
-- Class M-4 rated 'BBB', placed on Rating Watch Negative;
-- Class M-5 downgraded to 'BB' from 'BBB-';
-- Class B downgraded to 'B' from 'BB'.
The affirmations affect approximately $138.1 million of the
outstanding certificates and reflect a stable relationship between
credit enhancement and expected loss. The downgrades, affecting
approximately $2.6 million, are the result of deterioration in the
relationship between CE and expected losses. Approximately $6.3
million of outstanding certificates were placed on Rating Watch
Negative.
Series 2005-1 and 2005-3 have experienced monthly losses that have
exceeded excess spread in at least five of the last six months,
causing overcollateralization amounts to be below their targets.
These transactions have serious delinquencies (loans delinquent
more than 60 days, inclusive of loans in foreclosure, bankruptcy,
and real estate owned) of 23.06% and 24.61%, respectively, and
current cumulative losses of 1.29% and 1.54%, respectively. Fitch
will closely monitor the movement of delinquent loans through the
pipeline over the next six months before taking action on those
bonds placed on Rating Watch Negative.
The collateral of the above transactions primarily consists of
fixed-rate and adjustable-rate mortgage loans secured by first and
second liens on one- to four-family residential properties. The
loans were acquired by UBS from various originators and are
serviced by various servicers. The collateral initially included
delinquent loans, performing bankruptcy loans, foreclosure loans,
and loans that have had prior delinquencies. Wells Fargo Bank,
N.A., rated 'RMS1' by Fitch, is the master servicer for all of the
above transactions.
UNITED HERITAGE: Gets Nasdaq Notice on Stock Equity Non-Compliance
------------------------------------------------------------------
United Heritage Corporation received a letter from The Nasdaq
Stock Market noting its failure to comply with Marketplace Rule
4310(c)(3) which requires the company to have a minimum of
$2.5 million in stockholders' equity or $35 million market value
of listed securities or $500,000 of net income from continuing
operations for the completed fiscal year or two of the three
completed fiscal years.
On Nov. 14, 2007, the company filed its quarterly report on Form
10-QSB for the quarter ended Sept. 30, 2007, indicating that the
company had shareholders' equity of $2,254,444.
The letter indicated that trading of the company's common stock
will be suspended at the opening of business on Dec. 11, 2007,
unless the company appeals this determination. The company has
requested a hearing to appeal the determination to the Nasdaq
Listing Qualifications Panel, which has been set for Jan. 17,
2008.
There can be no assurance that the Panel will grant the company's
request for continued listing.
On Nov. 29, 2007, the company disclosed the placement of units
consisting of common stock and warrants having a value of
$600,000. On Dec. 5, 2007, the company amended its 10-QSB for the
quarter ended Sept. 30, 2007, to reflect this investment as a
subsequent event and to show the pro-forma effect of the offering
proceeds on its cash and shareholders' equity.
The company has also retained the services of two professionals
from Calgary to actively pursue the timely development of its
medium crude project in Edwards County, Texas. Consequently, the
company intends to begin securing the necessary financing to begin
Phase 1 of the pilot project, which it anticipates closing by year
end.
The company is hopeful that these steps will provide The Nasdaq
Stock Market with the assurance it needs that the company can stay
in compliance with Marketplace Rule 4310(c)(3).
About United Heritage
Headquartered in Midland, Texas, United Heritage Corporation
(NasdaqCM: UHCP) -- http://www.unitedheritagecorp.com/-- is an
independent producer of natural gas and crude oil based in
Midland, Texas. The company produces from properties it leases in
Texas. Lothian Oil Inc., formerly the company's largest
shareholder, provided the company with the funds to operate from
November 2005 until it declared bankruptcy on June 13, 2007.
Going Concern Doubt
As reported in the Troubled Company Reporter on Nov. 19, 2007,
Weaver and Tidwell L.L.P., in Fort Worth, Texas, expressed
substantial doubt about United Heritage Corp.'s ability to
continue as a going concern after auditing the company's
consolidated financial statements for the years ended March 31,
2007, and 2006. The auditing form reported that the company sold
all of its proved reserves in 2006 and currently does not have
significant revenue producing assets. In addition, the auditing
firm said that the company has limited capital resources and it's
majority shareholder who was financing the company's development
filed for bankruptcy subsequent to March 31, 2007.
US STEEL: S&P Rates $400 Million Senior Unsecured Notes at BB+
--------------------------------------------------------------
Standard & Poor's Ratings Services assigned its 'BB+' senior
unsecured rating to the proposed offering of up to $400 million in
senior unsecured notes due Feb. 1, 2018, of United States Steel
Corp. (BB+/Negative/--). These notes are being issued under the
company's unlimited shelf registration filed on
March 5, 2007.
Proceeds from the issuance are expected to be used to refinance a
one-year bridge loan incurred in connection with the acquisition
of Stelco Inc. Pro forma for this transaction and other related
financings associated with the Stelco transaction, U.S. Steel has
about $6.3 billion in debt adjusted for operating leases and
postretirement obligations.
Ratings on U.S. Steel reflect the integrated steel producer's
capital-intensive operations, exposure to highly cyclical and
competitive markets, increased input costs, a high degree of
operating leverage and aggressive financial leverage, including
underfunded postretirement benefit obligations. Ratings also
reflect the company's good liquidity, value-added product mix,
good scope and breadth of product and operations, and benefits
from its backward integration into iron ore and coke production.
Ratings List
United States Steel Corp.
Corporate Credit Rating BB+/Negative/--
Rating Assigned
$400 mil. sr unscrd nts (proposed) BB+
VERIFONE INC: Financial Restatement Cues S&P's Negative Outlook
---------------------------------------------------------------
Standard & Poor's Ratings Services revised its outlook on San
Jose, California-based VeriFone Inc. to negative from positive,
following the announcement that the company will restate its
previously issued, unaudited interim consolidated financial
statements for the quarters ended January, April, and July 2007.
Ratings on the company, including the 'BB-' corporate credit
rating, were affirmed.
The company announced that it will restate previous financial
statements because of errors in accounting related to the
valuation of in-transit inventory and allocation of manufacturing
and distribution overhead to inventory. Both of these affect the
company's reported cost of revenues. VeriFone currently expects
to file the amended quarterly reports, together with its fiscal
2007 (October year-end) audited financial statements, in January
2008.
"The ratings reflect the company's moderate debt leverage and
acquisitive growth strategies," said Standard & Poor's credit
analyst David Tsui. "These factors are offset partially by
VeriFone's leading position in the niche market for electronic
payment solutions and its diversified customer and market base."
VeriFone designs, markets, and services system solutions that
enable secure electronic payments.
WASHINGTON MUTUAL: Moody' Slices Ratings on 14 Tranches
-------------------------------------------------------
Moody's Investors Service has downgraded the ratings of and placed
on review for possible downgrade the ratings of 14 tranches from 6
transactions issued by Washington Mutual in 2007. Additionally,
four downgraded tranches remain on review for possible further
downgrade. The collateral backing these classes consists of
primarily first lien, fixed and adjustable-rate, subprime mortgage
loans.
In its analysis, Moody's has combined its published methodology
updates as of July 13, 2007 to the non delinquent portion of the
transactions. Collateral backing these transactions is also
experiencing higher than anticipated rates of delinquency,
foreclosure, and REO relative to credit enhancement levels.
Complete list of Rating Actions:
Issuer: WaMu Asset-Backed Certificates, WaMu Series 2007-HE1 Trust
-- Cl. I-A Currently Aaa on review for possible downgrade,
-- Cl. II-A3 Currently Aaa on review for possible downgrade,
-- Cl. II-A4 Currently Aaa on review for possible downgrade,
-- Cl. M-1 Currently Aa1 on review for possible downgrade,
-- Cl. M-2 Currently Aa2 on review for possible downgrade,
-- Cl. M-3 Currently Aa3 on review for possible downgrade,
-- Cl. M-4, Downgraded to Ba2, previously A1,
-- Cl. M-5, Downgraded to B2, previously A2,
-- Cl. M-6, Downgraded to B3* on review for possible further
downgrade, previously A3,
-- Cl. M-7, Downgraded to Caa2, previously Baa1,
-- Cl. M-8, Downgraded to Ca, previously Baa2,
-- Cl. M-9, Downgraded to C, previously Baa3,
-- Cl. B-1, Downgraded to C, previously Ba1,
-- Cl. B-2, Downgraded to C, previously Ba2.
Issuer: WaMu Asset-Backed Certificates, WaMu Series 2007-HE2 Trust
-- Cl. M-1 Currently Aa1 on review for possible downgrade,
-- Cl. M-2 Currently Aa2 on review for possible downgrade,
-- Cl. M-3 Currently Aa3 on review for possible downgrade,
-- Cl. M-4, Downgraded to A3, previously A1,
-- Cl. M-5, Downgraded to Baa3, previously A2,
-- Cl. M-6, Downgraded to Ba2, previously A3,
-- Cl. M-7, Downgraded to B2, previously Baa1,
-- Cl. M-8, Downgraded to Ca, previously Baa2,
-- Cl. M-9, Downgraded to C, previously Baa3.
Issuer: WaMu Asset-Backed Certificates, WaMu Series 2007-HE3 Trust
-- Cl. M-4, Downgraded to A2, previously A1,
-- Cl. M-5, Downgraded to Baa1, previously A2,
-- Cl. M-6, Downgraded to Ba1, previously A3,
-- Cl. M-7, Downgraded to B1, previously Baa1,
-- Cl. M-8, Downgraded to B3* on review for possible further
downgrade, previously Baa2,
-- Cl. M-9, Downgraded to Caa2, previously Baa3.
Issuer: WaMu Asset-Backed Certificates, WaMu Series 2007-HE4 Trust
-- Cl. M-6, Downgraded to Baa1, previously A3,
-- Cl. M-7, Downgraded to Ba1, previously Baa1,
-- Cl. M-8, Downgraded to B1, previously Baa2,
-- Cl. M-9, Downgraded to B3* on review for possible further
downgrade, previously Baa3,
-- Cl. B, Downgraded to Caa2, previously Ba1.
Issuer: Washington Mutual Asset-Backed Certificates, WMABS Series
2007-HE1 Trust
-- Cl. M-2 Currently Aa2 on review for possible downgrade,
-- Cl. M-3 Currently Aa3 on review for possible downgrade,
-- Cl. M-4, Downgraded to Baa1, previously A1,
-- Cl. M-5, Downgraded to Ba1, previously A2,
-- Cl. M-6, Downgraded to B1, previously A3,
-- Cl. M-7, Downgraded to Caa2, previously Baa1,
-- Cl. M-8, Downgraded to Ca, previously Baa2,
-- Cl. M-9, Downgraded to C, previously Baa3,
-- Cl. B-1, Downgraded to C, previously Ba1,
-- Cl. B-2, Downgraded to C, previously Ba2.
Issuer: Washington Mutual Asset-Backed Certificates, WMABS Series
2007-HE2 Trust
-- Cl. M-1 Currently Aa1 on review for possible downgrade,
-- Cl. M-2 Currently Aa2 on review for possible downgrade,
-- Cl. M-3 Currently Aa3 on review for possible downgrade,
-- Cl. M-4, Downgraded to Baa3, previously A1,
-- Cl. M-5, Downgraded to Ba3, previously A2,
-- Cl. M-6, Downgraded to B3* on review for possible further
downgrade, previously A3,
-- Cl. M-7, Downgraded to Caa3, previously Baa1,
-- Cl. M-8, Downgraded to C, previously Baa2,
-- Cl. M-9, Downgraded to C, previously Baa3.
WORLDWIDE BIOTECH: Earns $147,099 in Third Quarter Ended Sept. 30
-----------------------------------------------------------------
Worldwide Biotech & Pharmaceuticals Company reported net income of
$147,099 for the third quarter ended Sept. 30, 2007, compared with
a net loss of $433,709 in the same period in 2006.
For the three months ended Sept. 30, 2007, revenues were $39,936
as compared to $126,428 for the three months ended Sept. 30, 2006,
a decrease of $86,492 attributable to lower revenues generated
from Hua Yang, a majority owned subsidiary.
For the three months ended Sept. 30, 2007, total operating
expenses were $142,205 as compared to $425,566 for the three
months ended Sept. 30, 2006, a decrease of $283,361, or
approximately 66.6%.
For the three months ended Sept. 30, 2007, the company incurred
professional fees of $10,775 as compared to $43,629 for the three
months ended Sept. 30, 2006, a decrease of $32,854, or 75.3%.
Stock-based compensation expense was $-0- for the three months
ended Sept. 30, 2007, from $199,500 for the three months ended
Sept. 30, 2006.
For the three months ended Sept. 30, 2007, general and
administrative expenses were $117,604 as compared to $171,481 for
the three months ended Sept. 30, 2006, a decrease of $53,877, or
approximately 31.4%. The decrease was attributable to the
consolidation of Hua Yang and Ze An that reduced certain general
and administrative expenses.
For the three months ended Sept. 30, 2007, the company received
government grants of $285,218, which is included in other income.
At Sept. 30, 2007, the company's consolidated balance sheet showed
$6.6 million in total assets, $6.3 million in total liabilities,
and $227,053 in total stockholders' equity.
The company's consolidated balance sheet at Sept. 30, 2007, also
showed strained liquidity with $794,256 in total current assets
available to pay $6.0 millionin total current liabilities.
Full-text copies of the company's consolidated financial
statements for the quarter ended Sept. 30, 2007, are available for
free at http://researcharchives.com/t/s?2620
Going Concern Doubt
Zhong Yi (Hong Kong) C.P.A. Company Limited, in Hong Kong,
expressed substantial doubt about Worldwide Biotech &
Pharmaceutical Co.'s ability to continue as a going concern after
auditing the company's consolidated financial statements as of the
year ended Dec. 31, 2006. The auditing firm pointed to the
company's substantial losses and working capital deficit.
About Worldwide Biotech
Worldwide Biotech & Pharmaceuticals Company (OTC BB: WWBP.OB) was
incorporated in Delaware in 1961. On Dec. 16, 2004, the company
reorganized with Yangling Daiying Biotech & Pharmaceutical Group
Co. Ltd., located at Yangling High-tech Agricultural Demonstration
Zone, P.R. China. The company operates its business mainly
through its wholly-owned subsidiary, Daiying and its subsidiaries
in P.R. China. The company focuses on research and development,
manufacture and distribution of in vitro diagnostics, human
vaccine, biomedicines, traditional Chinese medicines, synthetic
medicines and medical devices with frontier technologies and great
potentials.
* Chadbourne & Parke's Clara Krivoy Named President of VAAUS
------------------------------------------------------------
Clara Krivoy, Chadbourne & Parke LLP's Latin America counsel based
in the New York office, was named president of the Venezuelan
American Association of the United States. She will be the first
woman to serve as the president of the association, which was
founded in 1936.
"I am very pleased to accept this position with a group that plays
a vital role in strengthening the business relationship between
Venezuela and the United Sates," Ms. Krivoy, who has been a member
of the organization's board of directors," said.
Based in New York, VAAUS is a non-profit organization that
promotes investment and commerce between Venezuela and the United
States, with a membership of international business executives,
financiers and professionals. VAAUS meetings feature
presentations by private sector leaders, government ministers and
heads of state on Venezuelan economic and
political topics and trends. Chadbourne frequently co-sponsors
and hosts events at the firm's Rockefeller Center office.
"We are delighted to welcome Clara Krivoy as president of the New
York-based Venezuelan American Association, which just celebrated
its 72nd anniversary," Maria Baquerizo, executive president and
CEO of VAAUS. "We are confident that under Clara's leadership the
Association will thrive. I am sure her vision, commitment and
strong qualities will help us further promote deeper economic,
social and cultural understanding between the two nations."
A native of Venezuela, Ms. Krivoy focuses her practice on
corporate and securities law. She has represented domestic and
foreign clients in various public debt and equity offerings, debt
and equity offerings pursuant to Regulation 144A and Regulation S,
mergers and acquisitions, debt and capital restructuring, bank
lending, joint ventures, venture capital
investments, structuring and organizing start-up companies,
financings by early stage companies, private placements and the
establishment of American Depositary Receipt programs.
About Chadbourne & Parke LLP
Headquartered in New York City, Chadbourne & Parke LLP --
http://www.chadbourne.com/-- is a law firm that provides a full
range of legal services, including mergers and acquisitions,
securities, project finance, private funds, corporate finance,
energy, communications and technology, commercial and products
liability litigation, securities litigation and regulatory
enforcement, special investigations and litigation, intellectual
property, antitrust, domestic and international tax, insurance and
reinsurance, environmental, real estate, bankruptcy and financial
restructuring, employment law and ERISA, trusts and estates and
government contract matters. Major geographical areas of
concentration include Central and Eastern Europe, Russia and the
CIS, and Latin America. The firm has offices in New York,
Washington, DC, Los Angeles, Houston, Moscow, St. Petersburg,
Warsaw (through a Polish partnership), Kyiv, Almaty, Tashkent,
Beijing, and a multinational partnership, Chadbourne & Parke, in
London.
* Fitch Believes 2008 Credit and Operating Trends Remain Stable
---------------------------------------------------------------
Fitch believes 2008 credit and operating trends will remain stable
for most U.S. information technology sectors, except for
electronic manufacturing services, which has a negative outlook.
Total industry debt is expected to increase in 2008 exceeding a
10-year high again, surpassing $190 billion. The technology
industry overall is expected to continue to achieve growth in
excess of U.S. gross domestic product for 2008, with many
companies benefiting from strong international growth amplified by
the weak U.S. dollar. Fitch has a cautious bias to this view
(particularly for less geographically diverse companies) as U.S.
growth could be constrained by the financial services vertical,
which is the worldwide leader in terms of IT spending. Fitch
estimates that any significant decline in IT spending by financial
services companies could reduce the U.S. growth rates by more than
100 basis points, with the hardware sector being most affected.
2008 Credit Outlook:
Technology companies' balance sheets are strong and industry
financial flexibility remains healthy. Cash positions are near
$250 billion, essentially flat since year-end 2004, and free cash
flow has increased the last few years with expectations that it
will be flat in 2008 with pressured profitability offsetting top-
line growth. Credit concerns for the industry center on potential
debt issuance, primarily for acquisitions and increased share
buybacks due to difficulties accessing offshore cash in a tax-
efficient manner, weakening credit protection measures mostly from
higher industry debt levels, and, although declining, event risk
of companies considering alternative capital structures. In 2008
Fitch believes the maturing technology industry will continue to
experience strong acquisition activity from strategic buyers,
particularly for the software and IT Services sectors, and
potentially, though less likely, the EMS sector. Event risk
around leveraged buyout activity has subsided for the intermediate
term.
Debt Levels Increasing:
Total industry debt is expected to increase again in 2008,
surpassing $190 billion and exceeding the 10-year high set in
2007. Fitch believes a majority of 2008 technology debt issuance
will be driven by three main factors: 1) many technology companies
have exhausted their U.S.-based excess cash balances for share
repurchases or acquisitions and are examining issuing debt in the
U.S. to support share repurchases and other activities, as
overseas cash levels continue to increase, 2) debt-financed
acquisitions, and 3) new issuers who have historically had zero
debt and are continuously examining their capital structures.
Debt refinancings will also drive debt issuance, as the industry
has approximately $20 billion of debt maturities in 2008. Fitch
believes excess cash and free cash flow will continue to be used
aggressively for stock buybacks, which are on pace to increase
more than 10% in 2007 to approximately $90 billion.
Liquidity Remains Strong:
Liquidity for the U.S. technology sector is generally very solid
due to high cash balances and strong free cash flow, despite the
lack of significant U.S.-based cash for some companies. Several
companies accessed the capital markets during the favorable
liquidity environment to extend revolver expirations and refinance
maturing bonds. The few companies with weak operating liquidity
are generally in that position due to exposure to the capital-
intensive semiconductor industry or because of self-inflicted
financial policy decisions that have resulted in a significant
portion of cash flows being dedicated to interest expense.
However, Fitch believes these challenged companies do not have any
material maturities coming due until after 2010, minimizing near-
term liquidity issues.
Ratings Momentum:
Fitch believes the majority of rating actions for the U.S.
technology sector in 2008 will occur in the IT Services and EMS
sectors. The credit outlook for IT Services is generally stable,
as Fitch's coverage currently includes companies with positive and
negative Outlooks, all of which Fitch believes will be resolved in
2008. Increased share buybacks, potentially debt-financed
acquisitions, and event risk of altered capital structures are all
credit concerns for 2008. Fitch continues to focus primarily on
the quality and sustainability of free cash flow and investment
requirements for contract signings. EMS is the one and only
sector where Fitch has a negative outlook for 2008 due to
continued operational challenges and increasing competitive
threats. These companies are the most likely to experience
weakened operating and credit profiles, potentially leading to
negative rating actions. Opportunities for meaningful debt
reduction appear unlikely, although EMS companies have been able
to generate free cash flow from working capital in a declining
revenue environment.
2008 Market Outlook:
The technology industry's revenue base is clearly correlated to
general economic conditions, although some sectors have a stronger
ability to withstand a downturn than others. For example, most IT
services - with the exception of the consulting and systems
integration business - and software companies receive a
significant amount of relatively predictable recurring revenue and
free cash flow from long-term contracts and/or maintenance
streams, resulting in a stronger capability to withstand an
economic downturn. Sectors such as EMS and IT distributors would
clearly be affected by an economic downturn from a profitability
standpoint, but this decline has historically been offset by
working capital improvements.
Market indications and industry trends suggest the worldwide IT
spending environment will remain stable in 2008 with mid- to low-
single-digit growth expected. Growth will likely be led by the
approximately $800 billion IT services and software sectors with
hardware being most challenged to achieve growth due to pricing
pressures as unit demand remains healthy. While worldwide growth
is stable, Fitch believes declining macroeconomic trends in the
U.S. (Fitch forecasts 1.7% expansion in 2008) could pressure the
sector and participants that lack geographic revenue diversity.
The combination of relatively high energy costs and a pressured
housing market may potentially lower consumer discretionary
spending on technology products. The small and medium business
market remains a source of growth and strong focus of the IT
industry.
Sector Outlooks:
IT Services (Stable Outlook)-
The 2008 operating and credit outlooks for the IT services
industry are stable, despite company-specific issues influencing
the credit outlooks for a few companies. Fitch believes
acquisition activity by strategic buyers in the IT services
industry will accelerate in 2008 due to pent-up demand,
potentially replacing share repurchases as the primary use of
cash. As the vast majority of companies within Fitch's rating
coverage have dramatically scaled their offshore delivery
resources, Fitch believes future acquisitions will primarily be
designed to diversify service line mix or add capabilities in
targeted vertical markets.
The stable operating outlook is driven by expectations of total IT
services market growth in the mid-single digits supported by a
healthy pipeline of transactions particularly from the government
sector. However, Fitch remains cautious about growth, due to
increasing economic uncertainty in the U.S. which could dampen
demand for consulting services. Also, commercial outsourcing
signings will continue to be pressured by the increasing
competitiveness and scope of services offered by India-based
vendors, escalating commercial demand for lower-priced offshore
services, and greater use of multi-sourcing. Although, the long-
term nature of outsourcing and infrastructure services contracts
result in a recurring revenue base and consistent cash-generation
even in a lower growth environment.
Hardware (Stable Outlook)-
The 2008 credit and operating outlooks for the hardware sector are
generally stable with a potentially negative bias for less
diversified hardware manufacturers, with respect to product
portfolio, industry concentration and/or geographic perspective,
due to uncertainty associated with the economic environment,
particularly in the U.S. Fitch expects hardware revenue growth in
the low-single-digit range for 2008. Commercial hardware spending
in the U.S. could also be constrained by the financial services
vertical, which is the worldwide leader in terms of IT spending.
The turmoil in the financial services sector poses downside risk
to the server market in 2008, since it accounted for nearly 25% of
worldwide server revenue in 2006, according to Gartner. The three
server vendors with the greatest exposure to the financial
services vertical includes IBM (45% share of financial services
total server revenue in 2006), Hewlett-Packard (27%) and Sun
Microsystems (9%). Acquisition activity is expected to continue
as companies seek to diversify into higher-margin, recurring
revenue offerings such as software and IT services.
Fitch believes worldwide personal computer unit demand will
moderate slightly from 2007, but remain solid, growing at
approximately 10% in 2008 versus expected growth of approximately
12% in 2007. Fitch expects PC demand in 2008 to be driven by the
continued shift to notebooks from desktops and solid demand from
consumers and emerging markets. Fitch believes the PC market is
increasingly reliant on emerging markets for growth, as U.S.
demand, which accounts for approximately 27% of worldwide unit
sales, will likely moderate in 2008. Worldwide server unit growth
could slow in 2008 due to enterprises' implementation of
virtualization and multi-core processors in the data center.
Fitch expects total worldwide revenues from commercial disk
storage systems to increase in the mid-single-digit range for 2008
and revenues from consumer-oriented storage products to grow in
excess of the commercial growth rate due to expansion of
consumers' digital rich media portfolios.
Semiconductors (Stable Outlook)-
Fitch's 2008 outlook for the semiconductor industry is stable,
mostly driven by the aforementioned expectation of solid unit
growth for PCs and mobile handsets. As the semiconductor industry
continues to expand its total available market while pursuing a
lower-capital-intensive profile, Fitch believes the industry will
experience less volatility and relatively more predictable free
cash flow. Similar to the overall technology industry, Fitch
expects several semiconductor companies will continue to evaluate
their mostly equity-dominated capital structures as potential
opportunities to alter these balance sheet profiles, via debt-
financed acquisition activity and/or potential stock buyback
actions. From a business and operating profile standpoint,
semiconductor companies continue to be subject to the highest
technology risk within the technology industry.
Fitch believes the global semiconductor industry will grow in the
low-single-digit range in 2008, following modest revenue growth
for 2007. Embedded in Fitch's expectations are that unit demand
will remain solid, semiconductor content within an ever widening
range of applications will continue expanding, and increasing
consumer spending in developing economies will partially offset
slower spending anticipated in the U.S. and Western Europe.
However, offsetting Fitch's expectations for solid unit demand are
significant pricing pressures, excess manufacturing capacity for
the memory segments, which aggressively added capacity in 2007 to
meet strong NAND demand, and slightly elevated inventory levels,
which will weigh on otherwise solid growth drivers.
IT Distributors (Stable Outlook)-
Fitch expects the credit profiles of the IT distributors to remain
fairly stable in 2008 with the potential for modest debt issuance
offset by continued growth in EBITDA and free cash flow. Lower
growth expectations for semiconductors and IT equipment could test
the distributors' ability to manage cyclical downturns
particularly in regard to the semiconductor exposure at Arrow and
Avnet. Fitch believes that since the last industry downturn in
2002, the distributors' increased diversification, geographically
and by end-market, as well as improved inventory management
systems, should reduce the variability in results going forward.
With no meaningful industry maturities in 2008, Fitch expects debt
issuance to be driven by further acquisition activity and
potentially some shareholder-friendly actions, which Fitch expects
would become increasingly likely if the stocks of the distributors
are affected negatively by broader market concerns. Acquisitions
will likely continue to be a priority, continuing a trend of
consolidating market share and international expansion.
Fitch expects Anixter (rated 'BB+', with a Stable Outlook) to
continue to demonstrate strong results although negative
macroeconomic trends could limit organic growth rates in 2008.
However, slower growth should drive higher free cash flow which
would help mitigate any need for additional borrowings due to
acquisitions or shareholder-friendly actions. Tech Data (rated
'BB+', with a Stable Outlook) has achieved improved operating
results in recent quarters including strong free cash flow trends
which, if continued into 2008, could lead to positive rating
actions.
EMS (Negative Outlook)-
Fitch's negative credit outlook on the EMS industry largely
reflects continued operational challenges in addition to continued
event risk, arising from additional consolidation or acquisitions
to bolster vertical integration capabilities. End-market demand
trends remain positive, despite a pressured economy, as OEMs
outsource additional manufacturing particularly in non-traditional
industries such as defense, automobile components and medical
instruments. However, Fitch expects profitability in the EMS
market to remain challenged by continuing competitive pressures
from both Asian ODMs entering traditional EMS markets and EMS
vendors forgoing typical margins to fill excess manufacturing
capacity. Although 2008 could prove to be a turning point for the
industry if Flextronics' acquisition of Solectron reduces a
significant part of the overhang from excess manufacturing
capacity leading to a more stable pricing environment. Debt
issuance in 2007 was driven primarily by acquisition activity,
which will likely continue to be the primary driver in 2008.
Flextronics' (rated 'BB+', with a Negative Outlook) ratings could
be stabilized if it succeeds in integrating Solectron's
operations, improves profitability and uses the expected resulting
free cash flow to reduce the incremental $2 billion in debt which
partially financed the acquisition. Celestica (rated 'B+', with a
Negative Outlook) and Sanmina (rated 'B+', with a Negative
Outlook) are both expected to face continued operational
challenges but could utilize positive free cash flow, particularly
resulting from reduced working capital requirements, to reduce
debt which could lead to a stabilization of the ratings.
Communications Equipment (Stable Outlook)-
Fitch believes credit profiles for the global communications
equipment providers will be stable in 2008 with the expectation
that wireless spending will essentially be flat to slightly up due
to subscriber growth and technology upgrades, while wireline
spending will be flat. Fitch's overall market view on the medium-
term outlook for the communications equipment sector is cautiously
stable with relatively flat to slight growth in expenditure
expected in developed markets, while emerging territories such as
Latin America, China and India will continue to see sizeable
investment in infrastructure over the next 2-3 years. Near-term
visibility has weakened however, with concerns over carrier
consolidation in developed markets and geopolitical uncertainty in
some emerging markets affecting the outlook for investment in
2008.
General trends across both the developed and emerging markets
include convergence and multi-media, with these developments
offering the prospect of continued investment in equipment spend.
However, uncertainties remain, including the potential for more
efficient use of existing spectrum, which could reduce the need
for capacity- and/or expansion-related investment. While Fitch
believes communications investment is driven primarily by
strategic considerations, current economic uncertainties and
credit conditions could slow investment in 2008. Fitch does not,
however, draw parallels with the spending crisis of 2001, while
investment postponements should lead to pent-up demand in 2009.
Financial Services: (Stable Outlook)-
Fitch's outlook on the payment processing industry is stable,
balanced by continued modest organic growth with increased debt
issuance, primarily related to merger and acquisition activity.
Fitch expects modest revenue growth in the mid to high-single
digits over the next several years, driven by general economic
growth and a continued transition toward a higher mix of
electronic payment transactions. Given the fragmented market
share across much of the payment processing sector, Fitch expects
continued acquisition activity. In addition, share repurchase
programs financed primarily through the use of free cash flow
remain a significant part of most companies' capital allocation
strategy reflecting the high free cash flow nature of the
financial model for most of the companies in this sector.
The Fitch full special report 'Segmenting Technology Risk: Strong
Liquidity, Stable Operating Trends Mitigate U.S. Tech Concerns in
2008,' will be published in early January 2008.
A list of Fitch-rated issuers and their current Issuer Default
Ratings in the U.S. technology sector:
IT Services/Software:
-- Affiliated Computer Services, Inc. ('BB'; Outlook Stable);
-- CA Inc. ('BB+'; Outlook Negative);
-- Computer Sciences Corp. ('A-'; Outlook Stable);
-- Convergys Corp. ('BBB'; Outlook Stable);
-- Electronic Data Systems Corp. ('BBB-'; Outlook Positive);
-- International Business Machines Corp. ('A+'; Outlook
Stable);
-- Oracle Corp. ('A'; Outlook Stable);
-- SunGard Data Systems Inc. ('B'; Outlook Stable);
-- Unisys Corp. ('BB-'; Outlook Negative).
Hardware:
-- Dell Inc. ('A'; Outlook Stable);
-- Hewlett-Packard Company ('A+'; Outlook Stable);
-- Eastman Kodak Company ('B'; Outlook Negative);
-- Seagate Technology HDD Holdings ('BBB-'; Outlook Stable);
-- Sun Microsystems, Inc. ('BBB-'; Outlook Stable);
-- Xerox Corporation ('BBB-'; Outlook Stable).
Semiconductors:
-- Advanced Micro Devices, Inc. ('B'; Outlook Negative);
-- Freescale Semiconductor, Inc. ('B+'; Outlook Stable);
-- International Rectifier Corp. ('BB'; Rating Watch
Negative);
-- Spansion Inc. ('B-'; Outlook Negative);
-- Texas Instruments Incorporated ('A+'; Outlook Stable).
IT Distributors:
-- Anixter Inc. ('BB+'; Outlook Stable);
-- Anixter International Inc. ('BB+'; Outlook Stable);
-- Arrow Electronics, Inc. ('BBB-'; Outlook Stable);
-- Avnet, Inc. ('BBB-'; Outlook Stable);
-- Ingram Micro Inc. ('BBB-'; Outlook Stable);
-- TechData Corporation ('BB+'; Outlook Stable).
Electronics Manufacturing Services (EMS):
-- Celestica Inc. ('B+'; Outlook Negative);
-- Flextronics International Ltd. ('BB+'; Outlook Negative);
-- Jabil Circuit, Inc. ('BB+'; Outlook Stable);
-- Sanmina-SCI Corp. ('B+'; Outlook Negative).
Electronics/Communications Equipment:
-- Agilent Technologies Inc. ('BBB-'; Outlook Stable)
-- Corning Incorporated ('BBB+'; Outlook Stable);
-- Motorola, Inc. ('BBB+'; Outlook Negative);
-- Nokia Corporation ('A+'; Rating Watch Negative);
-- Telefonaktiebolaget LM Ericsson ('BBB+'; Outlook Stable);
-- Tyco Electronics Ltd. ('BBB'; Outlook Stable).
Financial Services/Other:
-- Fidelity National Information Services ('BB'; Outlook
Stable);
-- Fidelity Sedgwick Holdings, Inc. ('B'; Outlook Stable);
-- First Data Corp. ('B+'; Outlook Stable);
-- H&R Block Inc. ('BBB+'; Rating Watch Negative)
-- Moneygram International Inc. ('BBB-'; Rating Watch
Negative);
-- The Western Union Company ('A-'; Outlook Stable).
* Fitch Believes Cable MSOs Will Add Revenue Generating Units
-------------------------------------------------------------
Fitch Ratings believes that a combination of increased competition
from local exchange companies, high penetration levels of cable
modem and digital television services and a difficult housing
market will lead to slowing overall revenue and, to a lesser
extent, cash flow growth for U.S. cable multiple system operators
in 2008. This will be partially offset by strong growth in
telephony services and advertising. Continued strong generation
of cash flow and free cash flow along with manageable leverage
should lead to a stable rating outlook for cable MSOs in 2008.
Fitch believes that the cable MSOs will add over 11.5 million new
revenue generating units in 2007, which represents a growth of
approximately 12% compared to the prior year. However, Fitch
forecasts that new RGU additions in 2008 will fall below 11
million. Fitch anticipates that the growth in telephony
subscribers, which should grow from approximately 40% of total new
RGUs in 2007 to 45% in 2008, will not offset slowing growth from
cable modem and digital television services or basic subscriber
losses. Fitch also believes that the cable industry will lose
nearly 1.5% of its basic subscribers to increased local exchange
carrier and satellite competition. The impact of competition on
basic subscribers will be more pronounced in 2008, in part due to
continued weak new home growth and more effective product
offerings from competitors.
While digital television subscribers are expected to grow in 2008
due to higher penetration rates of high definition television and
digital video recorders, the pace will slow compared to 2007.
Fitch expects digital television to reach a penetration rate of
approximately 60% by year-end 2007 representing an annual increase
of approximately 600 basis points compared to 2006.
Additionally, Fitch anticipates that digital television
penetration will increase to approximately 64% in 2008. Fitch
believes that cable modem service growth will continue in the
near-term, but capturing incremental penetration amounts will be
increasingly difficult and will require refining product
positioning and pricing going forward into the future. Cable MSOs
have begun to tailor new low price, low speed cable modem tiers to
target specific market segments. Fitch notes that this strategy
has the potential to negatively impact cable modem average revenue
per user and margin. Fitch believes that the total of new cable
modem subscribers will fall modestly in 2008 compared to 2007.
As a result of slowing new RGU additions, Fitch expects that
revenue growth for the cable MSO industry will slow to a high
single digit rate in 2008. Beyond slowing new RGU levels
impacting revenue growth, Fitch believes that annual price
increases will be more tempered than in the past due to
competition. Although Fitch does not expect cable operators to
compete with price in 2008 and as a result expects that ARPU
should still grow in the low double digit range, Fitch does
believe that cable operators will spend more heavily on
advertising and marketing to differentiate their services and
could increase promotional offerings, which will put negative
pressure on EBITDA growth. One offset to competitive pressure on
EBITDA is the expectation that high margin advertising revenue
should grow in the low-to-mid teen range reflecting the impact of
the 2008 election year. With that in mind, Fitch believes that
cable MSO operators will generate high single digit EBITDA growth
in 2008.
Capital spending in 2007 was approximately 20% higher than 2006,
but Fitch believes it will be flat in 2008 compared with 2007.
Since capital spending is largely success-based, slowing RGU
growth should lead to lower customer premise equipment spending.
However, continued plant investment to support new revenue
opportunities -- such as commercial services -- will likely offset
any CPE capital spending savings. Subsequently, Fitch believes
that free cash flow generation in 2008 will be flat with 2007.
Fitch also expects that cable MSOs will continue to return nearly
all of their free cash flow to equity shareholders in 2008,
primarily through share repurchases. Fitch believes that
acquisition risk in 2008 will be low with activity most likely
focused on trades to improve subscriber clustering.
Generally, Fitch believes that credit ratings for cable MSOs
should be stable in 2008, although there could be some modest
weakening within some ratings with the changing competitive
landscape. Recovery ratings, which apply to speculative grade
operators, should remain relatively stable as the value of
underlying assets should remain solid as they continue to be
supported by strong operational metrics and continued system
investment. Fitch notes that speculative grade cable MSOs
increased the proportion of secured debt within their capital
structures in 2007 by a material amount, but Fitch expects this
mix of secured and unsecured debt to be stable in 2008 as bank and
bond lending becomes more balanced.
-- Cablevision Systems Corp. ('B+', Negative Outlook)
-- Charter Communications, Inc. ('CCC', Stable Outlook)
-- Comcast Corp. ('BBB+', Stable Outlook)
-- Cox Communications, Inc. ('BBB-', Positive Outlook)
-- DIRECTV Holdings, LLC ('BB', Stable Outlook)
-- Echostar Communications Corp. ('BB-', Stable Outlook)
-- Insight Communications Company, Inc. ('B+', Rating Watch
Negative)
-- Intelsat, Ltd. ('B', Rating Watch Negative)
-- Mediacom Communications Corp. ('B', Stable Outlook)
-- Rogers Communications, Inc. ('BBB-', Positive Outlook)
-- Time Warner Cable ('BBB', Stable Outlook)
* Fitch Believes Framework Can Help Reduce Risk on Subprime Loss
----------------------------------------------------------------
The Bush Administration endorsed a securitization industry
framework to assist homeowners with adjustable-rate mortgages, to
avoid mortgage default and foreclosure. The framework is
described in a document published by the American Securitization
Forum. This document describes a voluntary program under which
mortgage servicers can identify loans, which are good candidates
for refinancing, as well as loans that might be eligible for a
'streamlined' modification process.
The framework proposes that a streamlined modification would
consist of a five-year mortgage rate 'freeze'. Loans that are not
recommended for streamlined modification would be subject to the
servicer's standard loss mitigation procedures, which include
modification. Additionally, the framework details a recommended
set of data reports on modified loans that servicers should
provide.
Credit Implications:
Fitch Ratings believes that on balance, by mitigating the impact
of ARM resets on borrower default rates, the framework can help to
reduce the risk of principal loss on senior subprime RMBS.
Increased refinancing opportunities via FHA and other programs are
also important to stabilizing default rates. The implications for
subordinated RMBS classes are unclear, as they may be exposed to a
complex interaction of variables that can be difficult to analyze.
Implementation of the proposed data reporting will aid analysis of
the impact of streamlined modifications, and analysis of loan
modifications generally.
Analyzing the implications of the program on subprime RMBS
requires making a number of projections, including these:
-- The percentage of borrowers eligible for streamlined
modification;
-- The percentage of that group that will accept a modification;
-- The level and timing of defaults among modified loans.
-- The percentage of borrowers that will refinance;
If substantial number of borrowers prove to be eligible for
streamlined modification and accept the five-year fixed rate, this
should lead to lower default and loss rates than might be
expected, if borrowers incurred a large payment increase at ARM
reset. A major concern regarding the large-scale conversion to
five-year fixed-rates is that excess interest within RMBS will
decrease. Excess interest is an important source of credit
enhancement which compensates for loss of cash flow due to
mortgage losses. Uncertainty around the benefit of loan
modifications is centered on the relative reduction in loss,
versus reduction in excess interest that could be incurred. On
balance, Fitch believes that stabilization of loss rates can
outweigh excess interest reduction when analyzing the impact on
senior RMBS. Greater refinancing opportunity can also help senior
bond performance, as it will cause those bonds to prepay and
reduce the risk of principal loss.
For subordinated RMBS, excess interest is a much greater component
of credit enhancement, and in some instances only substantially
lower loss rates would offset a reduction in excess interest.
Fitch also notes that extensive use of rate 'freezing' will lead
to lower collateral weighted average coupon, which in turn could
lead to more extensive Available Funds Cap interest shortfalls.
AFC shortfall risk is not addressed by Fitch's credit ratings.
Other risk factors to be considered include the likelihood of very
slow prepayment rates for modified loans, given the lack of
attractive refinancing alternatives. While this may, in part,
offset the impact of reduced excess interest, it also means that
those modified loans, which do eventually default, may do so much
later in the life of the deal when excess interest is reduced, and
potentially, home prices have declined more severely. These
factors could lead to greater loss upon mortgage default than
might otherwise have been the case, particularly in light of the
five-year rate 'freeze' proposed in the framework. On the
positive side, five years does provide borrowers with substantial
time to grow income and otherwise prepare for the first rate
adjustment.
Fitch will analyze the potential impact of the framework and
provide commentary on how its affects will be incorporated into
surveillance of subprime RMBS.
* Fitch Believes Media & Entertainment Ratings Will Remain Stable
-----------------------------------------------------------------
Against the backdrop of Fitch's expectations for modestly
decelerating nominal and real GDP growth (3.7% and 1.7% growth,
respectively), Fitch believes that on a debt weighted basis, Media
& Entertainment ratings will remain stable on average in 2008.
Two key considerations underlie Fitch's Stable Outlook.
First, some deterioration is expected in the broader economy.
Slowing job growth, lower consumer confidence, high energy prices
and issues in the housing sector could 1) weigh negatively on
discretionary consumer spending and 2) cause some marketers to
curtail advertising spending. However, consumer spending weakness
is not expected to be significant enough to materially negatively
affect the credit profiles of non-advertising related sub-sectors
(Music, Theme Parks, Commercial Printing, and Movie Studios and
Exhibitors). In terms of advertising-supported media, Moody's
expect some bi-furcation as sub-segments more exposed to local
advertising (Newspapers, Radio, Yellowpages, Outdoor, TV
Broadcasting Affiliates) are expected to feel more pressure than
sub-segments that derive a higher proportion of ad revenue from
national advertising (TV Networks, Cable Networks, Magazines).
Fitch expects healthy political and Olympic spending to overcome
pressure in the Auto and Financial Services categories to drive
overall U.S. ad spending for the year around 4%.
Secondly, the ratings on the media conglomerates that issue a
significant proportion of Media & Entertainment industry debt are
expected to remain broadly unchanged as key operating fundamentals
and financial policies should remain stable. Fitch believes
geographic and product diversification (coupled with strong
liquidity) moderate the volatility of consolidated cash flow and
afford the conglomerates the flexibility to adapt as end-markets
evolve. Because of the favorable cash flow dynamics of their
businesses, these companies have the flexibility to address the
secular challenges facing their businesses, return capital to
shareholders, make prudent acquisitions and endure a cyclical
downturn in several units concurrently while keeping their credit
profiles intact. Fitch is cognizant that event risk for the
conglomerates can increase with stock price pressure and that
stock prices have not sustained the same trajectory in 2007 that
they did in 2006. A more dramatic slowdown in the economy could
drag down consumer spending, advertising and media stock prices
which could potentially pressure credit profiles.
Secular Challenges:
Traditional media is expected to continue to cede share of overall
spending as advertisers continue to experiment with and become
more comfortable with emerging and alternative mediums. The
momentum of this shift should be maintained over the next several
years.
However, Fitch is cognizant that advertisers appear willing to pay
even higher premiums than we previously expected for audiences
that are either 1) aggregated or 2) highly engaged. The upfront
markets of the past few years were supposed to reflect the shift
of power from broadcasters to advertisers. However, scatter
pricing has been solid even in the face of weaker ratings, which
appears to indicate that advertisers and their media buyers still
value the efficiency associated with broadcasting's aggregation
capabilities.
In terms of audience engagement, Cost Per Thousand rates for
select online video pre-roll ads on certain web sites have
reportedly been even higher than premium rates charged for prime
time broadcasting. Fitch does not put too much weight in these
figures as they are certainly affected by near-term availability
of inventory which should increase. However, these figures
emphasize our belief that although advertisers are likely to be
more discerning given the wider selection of ad mediums, they are
also likely to pay a premium for professional, targeted high-
engagement inventory. Moody's believe that some traditional media
companies are in a solid position to produce the type of content
that should allow them to capture some of these premium ad
dollars.
While marketers have enhanced their focus on targeting,
measurability and return on investment, Fitch believes changes to
audience measurement metrics have made it difficult thus far for
advertisers and media buyers to justify more dramatic changes to
their media mix. Measurement continues to evolve within key
mediums: Nielsen's People Meter introduction followed by
commercial (C+3) ratings for TV and cable broadcasting; Arbitron's
delayed Portable People Meter for radio; total audience vs.
circulation for newspapers; syndicated usage data for Yellowpages;
page views vs. total sessions and total time spent for online; and
vehicles passed vs. specific traffic counts and patterns for
outdoor. 2008 will likely be another transition year, but as the
data from these initiatives becomes more widely available and
trusted over the next several years, the information could support
more share shifts among ad mediums, potentially to the detriment
of traditional media.
High Fixed Costs/Unions:
With the changing dynamics in TV network, network affiliate,
newspaper and radio broadcasting businesses, cost controls and
realignments have been a significant focus for management teams.
Media companies do not have much discretion over significant
portions of their cost structures meaning that much of the cost
cutting is focused on the labor component. While there are
opportunities in this area, Fitch remains cautious that labor
costs for many of these companies could be difficult to reduce
going forward as union affiliations could obstruct the timeliness
and magnitude of cost actions. The Writers Guild of America
strike and actions/statements by unions at several newspaper
companies are evidence that media unions could play a role in
credit profiles of certain companies going forward. Contracts for
the Screen Actors Guild and Directors Guild of America expire in
mid-2008. Fitch believes a protracted strike of all three unions
could materially impact revenue streams of many of the companies
within the media & entertainment sector.
Event Risk:
Event risk has not necessarily diminished; it just may take
different forms in 2008. Stock price performance has generally
been lackluster, but with the more turbulent credit markets, Fitch
believes that companies that did not already pursue highly
leveraged buyouts are less likely to pursue those types of
transactions in this funding environment. However, shareholders
will likely continue to place pressures on companies and at
current interest rate levels, leveraged buy-backs and leveraged
acquisitions will still pose some risk to media company ratings in
2008. Also, leveraging and non-leveraging de-consolidations like
Belo and E.W. Scripps announced in 2007 are possible.
Evaluating event risk continues to be complicated by corporate
governance issues related to controlling shareholders and
influential external owners. Fitch recognizes that in the recent
past, certain owners have abruptly changed their publicly stated
positions on corporate structure topics to the detriment of
bondholders. This emphasizes the need to look beyond public
statements and focus on managements' incentive to maintain a
particular leverage target or rating commitment given other
pressures they may face.
Fitch does not expect regulatory issues to pose any material event
risk in 2008. Issues continue to be under review due to the 2004
remanding of previous Federal Communications Commission media
ownership rules. Media ownership rules currently being reviewed
by the FCC and other distribution and content issues could receive
greater clarity from the commission in 2008. While the outcome of
the reviews remains unclear Fitch believes any potential revisions
will have minimal risk of credit quality deterioration for the
companies in the portfolio.
Sub-Sector Outlooks (listed by level of concern)
Advertising Supported:
Newspapers and Terrestrial Radio (Negative Outlooks)
Much of the risk for the media sector is likely to continue to be
concentrated within the newspaper and radio sub-sectors. Fitch
expects newspaper industry revenues to be negative in 2008 as both
price and volume will be under pressure within each of the four
components of newspaper companies' main revenue streams:
circulation and local, classified, and national advertising.
There may not be as much relief from newsprint costs in 2008 as
there was in 2007 and it could be difficult to offset revenue
declines with labor-related cost cuts.
We expect radio industry revenues to be flat to down slightly in
2008 as pricing pressures could be partially offset by a larger
piece of political advertising than what the industry has
experienced in the past due to tightened inventory on the TV side.
Fitch believes any real traction from HD Radio will occur post
2008 and even then, inventory over-supply issues could arise.
There are less variable costs at radio stations compared to
newspapers, but radio operators have margins as much as 2 times
higher, no unionized workforces, and convert a higher percentage
of EBITDA to free cashflow giving them more cushion to endure the
secular challenges.
Stock prices have been down significantly for the past several
years in both sub-segments and there does not appear to be a
catalyst for the pressured revenue picture to reverse itself,
meaning that management teams could be under more acute pressure
in 2008 to attempt to boost their stock prices through financial
policy revisions.
Broadcasting Affiliates (Stable Outlook)
Ad inventory levels will be relatively stable, but political
spending should increase demand and drive up pricing for
affiliates, however weakness in the auto and financial advertising
categories have tempered our revenue growth expectations down
somewhat to the mid-to-high single digit range. Retransmission
fees and continued efforts by affiliates to steal share from
newspapers and radio in their local markets should provide some
revenue upside in 2008. Fitch expects the networks to continue to
embrace video-on-demand opportunities on their own in 2008. While
Fitch do not expect any material impact in 2008 from increased
usage of time-shifting technologies Fitch will continue to monitor
its impact on promotions and lead-ins to the late night news.
Companies will likely continue to focus on expenses by attempting
to eliminate redundant costs from station portfolios. Margins
should expand but Fitch reminds investors that 2008 headline
operating metrics may mask longer-term industry challenges. 2009
could be a very weak year for companies that do not remain sharply
focused on these secular issues in 2008. A prolonged WGA strike
into the back half of 2008 would weigh negatively on credit
profiles as broadcast affiliates do sell ad time on national
network shows and rely on primetime network viewers as lead-ins to
late night news.
Magazines (Stable Outlook)
Given their exposure to digital substitution, as an industry,
magazines have held up better than Fitch has expected. This
performance appears to indicate the value advertisers place in the
medium's targeting capabilities and reach. According to
Publishers Information Bureau, industry volume were down slightly
through first nine months of 2007 (pressured by technology, home
furnishings, financial, automotive and apparel categories), while
rate-card reported revenue was up mid-single digits. These
results reflect the pressures in news and business titles while
the publishers continue to introduce new niche titles. Companies
have been aggressive at cutting costs and shuttering poorly
performing titles. The proliferation of ad inventory in the
broader print and online space will continue to pressure revenue.
Magazines have generally lagged other mediums in development and
execution of online strategies and while Fitch' s 2008 outlook is
stable, Fitch is cautious regarding the long term prospects for
the magazine industry.
Broadcast Networks (Stable Outlook)
Fitch expects viewership to continue to slowly erode, but
political and Olympic ad spending should tighten available
inventory and help networks boost price. Given the healthy
scatter market, networks could neutralize and possibly reverse the
gradual shift in power toward advertisers in upfront negotiations.
Fitch expects the Networks to continue to explore and experiment
with digital opportunities and VOD. Negotiations with the WGA
will likely get meaningful headlines and could have an impact on
credit profiles if there were a prolonged strike into the second
quarter of 2008.
Yellowpages (Stable Outlook)
Incumbent publishers will likely continue to see erosion in the
advertiser base and may have difficulty offsetting volume declines
with price increases, particularly in local markets that are
experiencing significant housing weakness. The surge of
independents appears to have moderated at least partially
reflecting market saturation. Fitch believes print directory
publishers can be complimentary to online publishers and 2008 will
be an important year in demonstrating the growth and economics of
web-based initiatives. Costs will not likely be a focus, but with
flat to slightly down revenue there could be continued pressure on
stock prices and increased event risk in the form of potential
changes in financial policies.
Cable Networks (Stable Outlook)
Cable industry ad inventory has grown significantly over the past
several years, causing a deceleration of the decades-long increase
in ad dollars. Also, the shift of ad dollars toward alternative
mediums has negatively affected cable nets gains. Changes in
measurement may have some affect on certain channels, but in
general cable continues to be a targeted medium with significant
reach and will continue to gain share. Fitch expects the cable
networks to continue to embrace its VOD and digital strategies
which should provide some modest upside to revenue growth. Fitch
continues to believe that programming on the cable networks should
be less of a priority for DVR usage as it includes live news,
sporting events, off-network syndication, and shows that are
repeated throughout the day and week. Costs, cap ex and financial
policies should not be significant issues in 2008.
Outdoor (Stable Outlook)
Although Fitch expects some weakness in the local markets that
Outdoor advertisers serve, audiences are growing slightly and
prices remain relatively low. Regulation provides a meaningful
barrier to the creation of new inventory and digital boards
present opportunities to improve revenue growth and margins.
Fitch expects outdoor advertising could continue to grow in the 4-
8% range, outgrowing the economy and overall advertising spending
over the next several years and stealing share from more secularly
challenged traditional media. Outdoor advertising is a high
EBITDA margin and high free cash flow conversion business
positioning it well to endure an economic downturn.
Online (Stable Outlook)
Online advertising continues to grow rapidly but growth has
decelerated somewhat as it has become a larger portion of the ad
mix. The advent of ad networks and behavioral/contextual
targeting technologies could boost pricing on remnant ad inventory
that has proliferated over the past several years. Usage
measurement, penetration of online video and social networking
will be key themes in 2008.
Non-Advertising Supported:
Music (Stable Outlook)
Recognizing that the volatility of release schedules makes one-
year outlooks less relevant, Fitch expects the music industry to
continue to undergo significant structural changes in 2008 as they
evolve their strategies and cost structures to adapt to rapidly
evolving music consumption patterns and piracy. The stable
outlook is more reflective of the dominant market share of
industry participants and increasing acceptance of legitimate
online music sites and the early successes within the digital
music landscape. Fitch expects continued declines in shelf space
and physical sales to be partially offset by increases in digital
sales. Fitch will continue to monitor companies' execution of
360-deals and greater traction with mobile offerings and video
monetization.
Theme Parks (Stable Outlook)
Fitch recognizes that disruption in the housing market and high
energy costs could negatively affect discretionary consumer
spending in 2008. Theme park performance is highly susceptible to
cyclical factors, and if the economy slips into a recession, theme
park attendance could be negatively affected. In a full-fledged
downturn attendance could be down 10%-20%, pricing could slip
slightly and EBITDA would likely be down more than 2x the
percentage decline in revenue. Given the solid margins (mid-to-
high 20% range) and maintenance capital expenditures at around 5%
of revenue, Fitch would not expect theme parks to drop below
EBITDA less maintenance cap ex-breakeven in a downturn, but highly
leveraged companies (Six Flags) would not cover interest expense.
Movie Exhibitors (Stable Outlook)
While the outlook for the sector remains stable, Fitch believes
that exhibitor industry fundamentals are not as healthy as 2007
box office headline numbers might imply. In addition to modest
increases in attendance, exhibitors have driven their revenue by
price hikes and increases in concession spending. Fitch does not
believe that movie exhibitors can expect to maintain this pricing
power in years when film product is less robust given already high
prices, collapsing windows and competing alternatives for
consumer's time and disposable income.
Commercial Printing (Stable Outlook)
Due to overcapacity, fragmentation, customer and supplier
consolidation and technology advancements, Fitch expects pricing
to remain pressured. Industry growth will be challenged to keep
pace with nominal GDP growth, but larger better capitalized
operators should be able to at least keep pace with nominal GDP
growth organically by capturing share from smaller printers and
also through acquisition of smaller and relatively inexpensive
targets that could experience distress and come on the market in a
downturn. Fitch also believes there are still some opportunities
for printers that have made significant past acquisitions to
streamline/realign their cost structures. Fitch remain cognizant
that event risk is heightened among the slowest growth media sub-
sectors like commercial printing.
Movie Studios (Stable Outlook)
Fitch expects box office figures to be down from 2007 due to tough
comps that include several high-profile trilogies. Nevertheless,
Fitch expects 2008 to have its share of franchise releases that
should keep volume and box office revenues fairly healthy: The
Chronicles of Narnia (Disney), Star Trek (Viacom), Indiana Jones
(Viacom), Batman (Time Warner), The Mummy (Universal), The
Incredible Hulk (Universal), James Bond (MGM), and Madagascar
(Dreamworks Animation). In addition, the studios are expected to
release first time films of familiar Comic Book and TV hits), and
also have a number of features with high profile talent (Brad Pitt
(Viacom's Benjamin Button) and Angelina Jolie (Universal's
Wanted)). Fitch does not expect the recent credit crunch to
impact the slate of films released in 2008 as most co-financed
deals for release this year are already beyond production. A
prolonged WGA strike beyond the third quarter of 2008 would cause
some concern however it is partially mitigated for the
conglomerates as the movie studios typically account for less than
20% of overall company cash flows and costs are scaleable. Fitch
will monitor the negotiations between the studios and the DGA and
SAG as any strike by either of those entities would have a more
immediate impact on film production.
Ad Agencies (Stable Outlook)
Organic growth should exceed nominal GDP growth for the agencies
as advertising activity (and pricing to a lesser extent) should
benefit from the healthy national and global advertising
environment. Due to the scalability of their cost structures,
agency margins have proven resilient through advertising
downturns. Agencies will continue to focus on digital
opportunities, expanding their footprint in emerging markets, and
better coordinating the media buying/planning units with their
creative divisions.
Educational Publishing (Stable Outlook)
Healthy growth in demand should come from a favorable adoption
schedule, as well as other revenue streams. Pricing is expected
to remain stable as the industry is highly concentrated and there
are meaningful barriers to entry. There could be some share
shifts among the top three players as Education Media & Publishing
Group, formerly Houghton Mifflin Riverdeep Group, integrates its
Harcourt acquisition. Costs will also likely be a focus for EMPG
and less so for Pearson and McGraw Hill. Fitch expects some
smaller acquisition activity could continue but does not expect
major corporate actions in this space in 2008.
Diversified Media:
-- CBS Corporation ('BBB' Outlook Stable);
-- Cox Enterprises ('BBB-' Outlook Positive);
-- Liberty Media ('BB' Outlook Negative);
-- McGraw Hill Companies ('A+' Outlook Stable);
-- News Corporation ('BBB' Outlook Stable);
-- The Walt Disney Company ('A-' Outlook Stable);
-- Time Warner Inc.('BBB' Outlook Stable);
-- Viacom ('BBB' Outlook Stable).
Publishing, Printing, Radio, TV Broadcasting
-- Belo ('BB+' Rating Watch Negative);
-- Clear Channel ('BB-' Rating Watch Negative);
-- Cox Radio ('BBB-' Positive Outlook);
-- Dow Jones ('BBB+' Outlook Negative);
-- Hearst Argyle Television ('BBB-' Rating Watch Evolving);
-- McClatchy ('BB+' Outlook Stable);
-- R.H. Donnelley Corp ('B+' Outlook Stable);
-- R.R. Donnelley & Sons Co. ('BBB' Outlook Stable);
-- Tribune ('B+' Rating Watch Negative);
-- Univision Communications ('B' Outlook Stable).
Entertainment - Movie Exhibitors, Theme Parks, Music:
-- AMC Entertainment ('B' Outlook Stable);
-- Regal Entertainment ('B+' Outlook Stable);
-- Six Flags ('B-' Outlook Negative);
-- Warner Music Group ('BB-' Outlook Stable).
Business Products and Services, Ad Agencies:
-- Dun and Bradstreet ('A-' Outlook Stable);
-- Interpublic Group of Companies ('BB-' Outlook Stable);
-- Omnicom ('A-' Outlook Stable).
* Fitch Do Not Expect Fresh Produce Sectors to Offset 100% of Cost
------------------------------------------------------------------
Commodity protein producers and processors; such as Tyson Foods,
Inc., Smithfield Foods, Inc., Pilgrim's Pride Corp. and Hormel
Foods Corp., have been absorbing high feed grain costs in their
production operations and higher live animal procurement costs in
their processing businesses. Commodity fruits and vegetable
companies; such as Dole Foods Co., Chiquita Brands Intl, Inc. and
Fresh Del Monte Corp have had to adjust to excessive European
banana import tariffs and heightened fuel and packaging expenses.
In 2008, elevated operating costs will continue to pressure the
profitability of commodity food companies. While agricultural
commodity prices are determined by a number of factors, Fitch
anticipates that strong foreign grain exports and ethanol demand
will continue to support higher than normal feed grain prices.
Fresh produce companies could get some relief from a potential
reduction in the current European Union banana tariff. However,
their overall cost base will continue to exceed pre-2006 levels as
fuel and packaging costs remain high in the near-term.
Fitch does not expect participants in the protein and fresh
produce sectors of the food industry to have the ability to offset
100% of these costs with pricing. While consumers have been
experiencing above average food cost inflation of 3.5-4.5%,
commodity food companies have less pricing power than branded
packaged food companies due primarily to less product
differentiation. Most participants in the commodity food industry
have adapted a branded value-added strategy which includes higher
margin products in their portfolios. This strategy has been
limited by the ability of these companies to fund required
research and development, advertising and media spending and by
the value consumers place on these more expensive products.
For the most part, these challenging marketplace dynamics are
reflected in the ratings and outlooks for Fitch's universe of
coverage. Nonetheless, the continued difficult operating
environment, limited earnings visibility and lack of significant
debt reduction could result in moderate deterioration in credit
measures. Despite thin margins and minimal free cash flow,
liquidity is not expected to be an issue for any of the companies
in Fitch's universe.
Cash flow from operations should support scheduled debt payments,
which are minimal, and investments in capital expenditures. The
global protein industry is still relatively fragmented; therefore,
any excess cash flow along with revolver availability could be
used for small acquisitions. Nonetheless, less access to capital
combined with a challenging cost environment will prohibit the
larger scale debt-financed acquisitions seen in the past couple of
years.
Feed Costs Pressure Protein Industry
The price of corn and soybean meal, two primary ingredients in
animal feed, has increased over 80% and 40%, respectively since
the beginning of 2006. As of Nov. 30, 2007, spot prices were
approximately $3.80 per bushel and $290 per short ton. In 2008,
the protein industry is expected to bear another year of high feed
grain costs. The USDA currently expects 2008 corn and soybean
meal prices to average $3.40 per bushel and $250 per short ton,
respectively. Corn and soybean meal futures indicate prices will
average approximately $4.15 per bushel and $290 per ton,
respectively. Fitch anticipates that despite near record corn
crops, strong foreign grain exports and ethanol demand will prop
up feed grain prices.
The poultry processors are most at risk to heightened corn and
soybean meal prices because these ingredients can represent up to
a third of their variable costs. Tyson and Pilgrim's Pride both
estimate that every one cent change in corn prices affects costs
of good sold by approximately $3 million. As predominately fixed
cost businesses, these companies have little ability to offset
heightened feed costs without shutting down plant operations.
Nonetheless, in order to maintain strong capacity utilization and
market share, Fitch anticipates that the industry may continue to
increase production despite high feed grain costs. Unless there
is a significant increase in international demand, protein
producers will realize lower pricing and weakened margins.
Weak Beef Processing Margins
Fitch expects 2008 to be another tough year for beef processors,
due to their high fixed cost structure, the continued low supply
and high price of live cattle and relatively stable cut-out
values. The cyclical, or once cyclical, downturn in cattle on
feed since 2001 was compounded by droughts and Japanese export
restrictions since 2003. Additional factors impacting the supply
of cattle for slaughter include the naturally longer length of the
beef supply chain, restrictions on Canadian beef imports and the
cost/benefit decision of dairy cow slaughter versus milking as
dairy prices remain attractive.
Dairy prices will remain higher than normal in 2008 as dairy farms
continue to pass along elevated feed costs and dry milk exports to
China remains strong. Dairy prices, therefore, could support high
live cattle prices. Unlike commodity milk processors, such as
Dean Foods Company , which typically pass along changes in raw
milk costs to customers, beef processors will continue to bear the
burden of above normal live cattle prices. Relatively more
attractive prices for poultry, which is a substitute for beef,
increased incidences of E.coli contamination and continued
weakness in export demand will cap cut-out values in 2008. Beef
processing margins for companies, such as Tyson, will therefore
remain weak.
Pork Prices to Decline
Live hog prices are expected to moderate slightly towards the mid
$40 per hundredweight in 2008. As of Nov. 30, 2007, the national
price was approximately $51/cwt. This moderation will be due to
any increase in foreign export demand, particularly from China,
being offset by more production. Throughout 2007, there has been
an expectation that China will dramatically increase pork imports
from the U.S. This speculation is driven by significant growth in
Chinese pork consumption over the past several years and
relatively stagnant import growth.
Protein processors that purchase live hogs, such as Hormel and
Tyson, should benefit from moderately lower prices. As one of the
primary raw materials for its Refrigerated Foods and higher margin
Grocery Products segments, lower live hog costs should help
strengthen Hormel's overall profitability. A pull back in hog
prices, however, could hurt hog producers, such as Smithfield, who
are facing higher feed-related production costs. The combination
of elevated feed costs, across its vertically integrated pork,
turkey and beef segments, and lower pork prices is likely to slow
the pace of debt reduction for Smithfield.
End Market Price Realization Will Be Limited
Fitch anticipates that protein processors will have some level of
success passing on higher feed costs in 2008, due primarily to the
well publicized increase in corn and soybeans. However, Fitch
believes that if production increases and global demand remains
relatively stagnant, price increases will be muted. After the
2007 recovery in protein prices, particularly for chicken, average
prices for the commodity protein market are expected to be stable
to slightly positive. Absent any world-wide consumption fears
caused by animal disease or virus outbreaks; such as the highly
pathogenic avian influenza (HPAI) H5N1 which occurred in 2003 and
spread through 2006, no major supply/demand imbalances are
expected in 2008.
Domestic demand for animal proteins will probably not decline
materially on price increases because at 12% these proteins are
the largest single category of total food expenditures.
Additionally, fall/winter foodservice contract negotiations should
be supported by current market pricing and public awareness
regarding increased feed costs.
Foreign demand for U.S. proteins should be supported by the weak
U.S. dollar, which generally makes U.S. goods less expensive. The
USDA forecasts broiler meat exports to be relatively flat at 5.57
billion pounds in 2008. Pork exports, however, are expected to
increase 4.6% to 3.18 billion pounds and beef and veal exports are
anticipated to grow 19.1% to 1.71 billion pounds. Despite the
weak dollar, there is no concrete evidence pointing to further
easing of Japan's restrictions on beef imports. Beef exports
remain drastically below pre-December 2003 levels when Japan
banned U.S. imports due to risk of bovine spongiform
encephalopathy. In addition, Russia, the largest export market
for U.S. chicken and an important buyer of pork, recently banned
imports of poultry and pork from a number of U.S. facilities. The
ban is not expected to significantly disrupt chicken prices since
the plants banned only represent a portion of over 100 U.S.
poultry plants.
Fresh Produce Industry Cost Pressures
Bunker fuel prices have increased approximately 150% to
approximately $500/metric ton since 2005. As a derivative of
crude oil, this shipping fuel has risen in line with the price of
WTI (Western Texas Intermediate Crude Oil). While Fitch expects
crude oil prices to gradually revert to their long term mean of
$40/barrel over the intermediate term, near-term oil prices remain
elevated. Recent environmental concerns regarding bunker fuel
could place additional upward pressure on shipping costs for fresh
produce companies.
Packaging costs, specifically for the corrugated boxes used to
transport imported fresh fruits and vegetables, also remain
elevated as we enter 2008. Consolidation in the U.S. pulp and
paper industry, strong demand from China and energy prices have
kept linerboard prices high. As annual contracts expire, the
industry has successfully negotiated increased end market prices.
Fitch anticipates that prices will not decline until China expands
its internal production capacity later in 2008.
Since the 2006 implementation of the tariff-only quota-free banana
import regime, the multi-national fresh produce companies that
import bananas from Latin America have been subject to the one-
time 135% increase in banana tariffs. African, Caribbean and
Pacific banana producing countries are partially exempt from these
tariffs. Non-ACP countries have continued to pressure the E.U. to
reduce import tariffs for their bananas. In July, the E.U.
offered to cut import duties for Latin American bananas in order
to persuade these countries to drop international trade suits.
The proposal is to progressively reduce the tariff to around 123
Euro/ton over five years but the current rate could be increased
before this reduction begins. Non-ACP countries, however, insist
that the current proposal is not enough, arguing that any tariff
above the pre-2006 75 Euro/ton level is too punitive.
Following the 2006 implementation of the tariff-only quota-free
E.U. banana regime, which increased banana supply and depressed
prices, and E.coli outbreaks in spinach and bagged salads, the
fresh produce industry experienced pockets of weak pricing. In
2008, however, fresh produce companies could realize higher
pricing for these products. Recent data points indicate
potentially stronger European banana prices and improved demand
for bagged salads which should support increased product prices.
This is a list of Fitch-rated issuers and their current Issuer
Default Ratings in the U.S. Food sector:
-- Campbell Soup Co. ('A'; Outlook Stable);
-- ConAgra Foods, Inc. ('BBB'; Outlook Stable);
-- Del Monte Foods Company ('BB'; Outlook Stable);
-- Dole Food Company Inc. ('B-'; Outlook Negative);
-- Flowers Foods, Inc. ('BBB'; Outlook Stable);
-- General Mills, Inc. ('BBB+'; Outlook Negative)
-- H.J. Heinz Co. ('BBB'; Outlook Stable);
-- Hormel Foods Corp. ('A'; Outlook Stable);
-- Kellogg Company ('BBB+'; Outlook Positive);
-- Kraft Foods, Inc. ('BBB'; Outlook Stable);
-- Sara Lee Corp. ('BBB+'; Outlook Negative);
-- Tyson Foods, Inc. ('BBB-'; Outlook Negative).
* Fitch Expects 2008 Agribusiness Ratings Will Remain Stable
------------------------------------------------------------
Fitch Ratings expects most ratings for U.S. Agribusiness companies
to remain stable in 2008. This outlook is based on the companies'
well diversified product lines and geographic footprints.
Diversification tempers the severity of overall earnings
volatility that has occurred recently in certain product
categories such as ethanol.
The recent ascent of commodity prices has been driven by higher
demands for biofuels and rising consumption of protein in
developing countries. In general, agribusiness is experiencing
strong market conditions globally. While Fitch expects these
trends to continue into 2008, the oversupply of ethanol could
pressure earnings in that sector and result in an industry
shakeout among smaller, weaker firms.
According to the U.S. Department of Agriculture, elevated
commodity prices are anticipated to remain in 2008. Average
prices for wheat, corn, soybeans, soybean meal and soybean oil are
all expected to be well above their 10 year averages in 2007/2008,
and also above the already elevated prices incurred during
2006/2007. However, as planting expectations are established for
U.S. crops and the growing season progresses, prices for
agricultural commodities may moderate if it looks like the
harvests will be large. If plantings are below expectations or
weather negatively impacts the growing season, commodity prices
may continue to rise.
Working Capital & Liquidity:
The maintenance of significant liquidity is an important rating
factor for agribusiness companies because adverse weather
conditions, periodic disease outbreaks and changes in government
agricultural policies can have unforeseen negative effects on
earnings and cash flow. Readily Marketable Inventories, which are
highly liquid and hedged against price risk, provide an important
source of liquidity. Cash and marketable securities also enhance
liquidity. In addition to evaluating traditional credit measures,
Fitch's analysis of agribusiness companies takes into
consideration leverage ratios that exclude debt used to finance
RMI.
Working capital usage accelerated in 2007 along with the
escalation in many agricultural commodity prices. A large portion
of funds from operations has gone to support working capital
needs, leaving little or no cash flow from operations. The run-up
in grain costs has made carrying inventories more expensive.
Fitch does not foresee a return to historical average commodity
prices in the near term.
As agricultural commodity prices have risen, debt levels have
increased commensurately to finance those more expensive
inventories. Fitch expects that when agricultural commodity
prices stabilize or decline, debt levels should move accordingly.
A leveling off of prices should also moderate working capital
usage. However, with the structural changes that have occurred in
the industry, some commodity prices could continue to increase in
2008. This would further drive up debt used to finance working
capital and necessitate a review of the industry.
Earnings Expectations/Use of Cash Flow:
Earnings are often unpredictable for the agribusiness sector.
However, if current trends continue, diversification should
provide relatively stable overall results for the major
agribusiness companies. Solid results in core businesses such as
oilseeds processing and sweeteners should cushion the impact of
weak near-term earnings from ethanol processing and protein
businesses. However, if several segments concurrently generate
weak earnings, ratings may be reviewed.
Capital expenditures are likely to be a significant use of cash
flow for agribusiness processors as solid global growth provides
plentiful opportunities. In particular, Archer Daniels Midland
has outlined a multitude of projects, including new ethanol
capacity, co-generation, cocoa and PHA renewable plastics, in the
near term. However, if cash flow remains negative for
agribusiness companies due to prolonged commodity price increases,
some moderation in capital expenditures may occur.
Across the sector, small, bolt-on acquisitions in key geographic
areas or product categories are more likely than large
transformational acquisitions. Sugar ethanol and palm oil have
been mentioned as future growth areas for the major agribusiness
processors. Fitch would expect a large acquisition to be funded
with considerable equity in order to avoid a downgrade. This puts
Cargill, Inc. at a disadvantage since as a private company it is
more reliant on debt financing.
Ethanol Concerns:
Ethanol production expansion has been driven by high oil and
gasoline prices, as well as tax incentives for biofuels. However,
in the short term there are likely to be periods of oversupply
that pressure earnings. New capacity has come on line faster than
the supporting transportation and storage infrastructure. The
completion of new infrastructure and the passage of new
legislation expanding ethanol usage, if it occurs, will be
catalysts for further industry growth.
The United States became the world's largest producer of fuel
ethanol in 2006, followed by Brazil. According to the Renewable
Fuels Association, the U.S. ethanol industry produced a record 4.9
billion gallons of ethanol from 110 biorefineries in 2006. This
production was 25% higher than the production in 2005.
Ethanol production has ramped up tremendously over the past few
years, exceeding the minimum levels mandated by the current
Renewable Fuels Standard. The RFS mandates at least 7.5 billion
gallons of renewable fuels by 2012. According to the Renewable
Fuels Association, the United States is already approaching that
level, with 7.2 billion gallons of capacity available at 134
biorefineries as of November 2007. Another 77 facilities are
under construction or expansion for total projected capacity of
13.4 billion gallons. While a slowdown in plant construction has
begun, current capacity plus announced new capacity is approaching
ethanol blending levels that would be near 10% of the gasoline
market, or approximately 14 billion gallons annually. Longer
term, alternative sources of feedstocks for ethanol production
will need to be commercialized to reduce the need for corn.
Cellulosic ethanol, which uses plant material and agricultural
waste such as corn stalks and switchgrass, appears to be the
longer term solution.
The rise in ethanol production had resulted in tremendous
increases in distillers grains, which are coproducts of ethanol
production that are used predominantly to feed beef and dairy
cattle. Distillers grains are replacing some of the need for
traditional feed sources.
Ethanol Industry Consolidation:
Industry consolidation in ethanol production has already started
to occur. Just last week VeraSun Energy Corp. announced the
acquisition of rival ethanol processor US BioEnergy Corp. This
combination will create a formidable competitor of similar size to
ADM in ethanol processing. Further consolidation will likely
occur to improve efficiency and cost structures among ethanol
processors in this lower margin environment.
If low ethanol prices and excess supply continue, some smaller
facilities or less desirable locations could be shut down. The
best and most efficient locations could be acquired by the major
processors.
This is a list of Fitch-rated issuers and their current Issuer
Default Ratings in the U.S. Agribusiness sector.
-- Archer Daniels Midland Company ('A+'; Outlook Stable)
-- Bunge Limited ('BBB'; Outlook Stable)
-- Cargill, Incorporated ('A'; Outlook Stable)
-- Corn Products International, Inc. ('BBB'; Outlook Stable)
* Fitch Expects Consumer Products Cos Will Be Pressured in 2008
---------------------------------------------------------------
Fitch Ratings expects U.S. consumer products companies will be
pressured by weak economic trends in 2008 given expected poor
consumer spending and higher operating costs. Nonetheless,
companies are anticipated to offset these pressures through price
increases, cost reduction programs and a focus on growing
international operations. In addition, debt financed share
repurchase and acquisition activity are anticipated to decline.
As a result, Fitch's outlook for U.S. consumer products ratings is
stable.
Global economic prospects took a sizeable turn for the worse since
June 2007 with a deteriorating outlook in the U.S. and the impact
of the global credit shock. Fitch expects GDP growth for the
major industrialized economies to fall to an average of 1.8% in
2008 from an estimated 2.1% in 2007 with global GDP at 3% in 2008
versus an estimated 3.4% in 2007. In the U.S., tighter credit
conditions, housing woes, and a deteriorating labor market outlook
are likely to result in a broader slowdown in domestic demand.
Adding to the malaise, energy and commodity costs have continued
to escalate, reprising the pressures and behaviors seen since
2004. Thus, there is an expectation that consumer spending will
slow as income uncertainty rises, credit conditions tighten,
energy costs increase, and house prices fall. U.S. GDP is now
expected to be just 1.7% in 2008 - a downward revision of one
percentage point compared to Fitch's June 2007 forecast - with
consumption growing just 1%. The weaker dollar and slowdown in
import growth will help support GDP through a significant positive
contribution from net trade meaning that the U.S. will effectively
export some of its slowdown to the rest of the world. This could
provide a drag on international markets, which have been a strong
contributor to top line growth for U.S.-domiciled consumer
products multinational companies.
Industry participants will pull a number of levers to address the
economic and commodity environment and buttress top and bottom
line growth. When commodity costs escalated beyond the industry's
comfort level in 2004, cost reduction programs and pricing actions
were taken. Bolstering these actions, were ongoing product
innovations, further international market penetration and higher
levels of brand spending. Fitch expects that these actions will
continue with the industry currently focused on price increases
throughout 2008. However, it should be noted that the industry,
while continuing to be financially strong and mainly investment
grade, is a bit less sound than in 2004/2005 when it faced the
first bout of cost escalations but had the benefit of a strong
domestic economy. For the Fitch rated U.S. consumer products
companies plus Procter & Gamble as a group, free cash flow has
declined slightly to $9.7 billion for the last twelve months ended
Sept. 30, 2007 from $10.3 billion in 2004, debt has increased by
$27 billion, and leverage has grown to 1.9 times from 1.5x.
Fueling the increase in debt has been acquisitions, increased
dividend payouts, and share repurchases.
In 2008, while stock repurchase activity may see an up tick with
lower stock prices, Fitch does not anticipate the same magnitude
which caused several rating actions in 2007. In addition,
acquisitions did not play a meaningful part in top line growth for
the sector in 2007 nor are they projected to do so in 2008 except
for a potential Fortune Brands transaction for Vin & Sprit. Niche
purchases to support ongoing businesses or to enhance operations
may occur. Of note are the weakening dollar and the decline in
stock prices, which could be the impetus for non-U.S. companies to
combine with domestic companies.
With several rating actions taken in 2007, primarily on the
downside generally caused by large accelerated share repurchases,
ratings are not anticipated to change meaningfully as most
companies have Stable Rating Outlooks and the wherewithal to ride
out a slowing economy or even a downturn. The companies with
Negative Rating Outlooks are those experiencing rising margin
pressures or who have uncertain business profiles. Debt
maturities at about $1.8 billion are relatively low for the group,
thus debt issuance is not expected to be material in 2008.
Liquidity is adequate and cash flow is expected to remain strong
despite the economic slowdown.
Key 2008 Trends
Housing: Consumer spending on items related to housing turnover
such as appliances, hard goods, tools and other durable items are
expected to be down moderately as Fitch expects the housing
contraction will be more severe than earlier anticipated.
Affordability, excess supply and poor buyer psychology dominate
but tightening credit standards for potential home buyers is a key
issue as are mortgage rate resets. Excess home inventory is
troubling. In addition, declining home prices keep potential
buyers on the sidelines and limit home equity borrowing for
existing homeowners. Home equity borrowing has supplied funding
for repair/remodeling expenditures over the past couple of years.
Commodities: Overall, it will be a tough environment on the cost
front for the U.S. consumer products industry and margins are
expected to be affected as oil, as well as other commodities,
continue to be a wild card. Fitch expects that energy and
derivative prices will remain high but volatile and that producers
will attempt to push increased prices to buyers down the chain.
However, the industry has already begun instituting price
increases effective in 4Q07 or early in 2008, which when combined
with effective cost reduction and productivity programs and some
volume growth, should offset much of the pressure from commodity
prices during 2008.
International Market Penetration: International operations around
the globe have benefited consumer companies offsetting sluggish
domestic results. While it is expected that most major economies
around the world will experience a slowdown in economic growth in
2008, growth levels for these countries should exceed that of the
U.S. In particular, most domestic participants have been focused
on the emerging markets where they have been able to achieve
double-digit revenue growth. Fitch expects companies with high
levels of international operations to expect more than a 2%
addition to top line growth from foreign exchange.
Potential for increased regulation: Spurred by recalls in the toy
industry, which highlighted the long-neglected state of the
Consumer Product Safety Commission, one Senate bill and one House
bill have been proposed to address the issue of safety. The CPSC
has jurisdiction over 15 thousand types of consumer products,
mostly in the durables sectors. Of note and being closely
watched, is the progress of the Senate bill which increases the
penalties from a high of $1.8 million to
$100 million for a related series of violations of the Consumer
Product Safety Act and, more importantly, dramatically increases
corporate legal risk as companies can be sued by the attorney
general of every state separately. The House bill is more
business friendly, caps fines at $10 million and appears to have
bi-partisan support. Thus it appears to have support for
enactment in some form, creating an additional level of oversight
that may add a layer of costs.
Sector Outlooks
Household Products and Personal Care
This sector has stable revenues and margins and has been generally
recession proof. However, it appears that some domestic
subcategory growth rates are slowing but remain positive.
Nevertheless, absent sizeable acquisitions which are not
anticipated, the industry should see 2008 revenues increasing 3%-
8% buttressed by price increases, improved product mix from a
successful trade-up strategy, foreign exchange and international
market penetration. Growing at the high end of the range will be
those companies with significant international operations,
particularly developing markets. Companies such as Colgate, Avon,
Procter & Gamble and Estee Lauder who derive more than 50% of
revenues internationally should get the benefit of continued
market penetration and positive foreign exchange. Clorox, Church
and Dwight and Newell-Rubbermaid should be more challenged for top
line growth from an organic volume perspective given their higher
reliance on the U.S.
There are two sources of pressure on industry margins which will
continue into 2008: Increased energy and commodity costs and high
levels of spending to support brands. To garner consumer
attention in mature markets as well as launches in emerging ones,
industry participants are engaging in increasing levels of brand
support both at the trade level and with advertising. Increased
trade spending has a dilutive effect on net sales and dampens
margins.
Commodity costs, after stabilizing then declining in 2006 through
the first quarter of 2007 began escalating in mid 2007. In 3Q07,
several issuers reported that commodities had escalated above
their expectations. Most companies had cost savings and
productivity programs in place when commodity costs first began
escalating in 2004/2005. Except for Spectrum Brands whose
restructuring actions have involved integrating acquisitions, in
late 2004 through 2005 rated household products and personal care
companies in the sector announced $2.6 billion in restructuring
charges to lower their cost base by approximately $1.8 billion in
three years. Much of these programs were back-end loaded to take
full effect in the 2007-2009 timeframe, therefore the industry is
in good stead from a cost control perspective. However with
commodity prices escalating in the second half of 2007 it appeared
that the cost trajectory might outstrip existing restructuring
programs and the flurry of price increases taken in 2005. As a
result, most companies have announced that they will institute an
additional round of price increases effective immediately or
through early 2008.
What is noteworthy and a positive for the industry is that private
label prices are also keeping pace and that there does not appear
to be any material trade-down despite a slowing U.S. economy. As
a result, Fitch expects that while margins will be pressured as
there is a lag effect on pricing actions, the industry has the
tools in place to moderate the impact of increased spending for
brand support and commodities. However, if commodities continue
to escalate, the industry might have to undertake other
restructuring efforts and at some point, there might be a limit to
how much costs can be reduced before cutting into critical
operations.
Fitch expects that in 2008 industry participants will be focused
on operations and relatively less on shareholder friendly
activities. For the rated entities in this space, share
repurchases and dividends have risen at a 13% six-year compound
annual growth rate to $8.2 billion for the last twelve months
ended Sept. 30, 2007 from $3.8 billion in 2001. Despite expected
margin pressure and some added financial risk from recent debt
funded share repurchases, Fitch expects participants to manage to
their goal to maintain their investment grade ratings. For this
sector, Fitch does not expect marked changes in the ratings.
Toys
The industry has been plagued of late with recall notices for
excess lead paint, powerful magnets which can cause intestinal
rupture, chemicals which can metabolize into the 'date-rape' drug
and other hazards. The spate of recalls in the latter part of
2007 has resulted in increased testing and is also likely to
result in additional regulatory oversight. Going forward it is
most likely that the cost of increased testing will be passed on
to consumers. Of greater concern in the short term is a potential
for lower sales due to continuing negative headline risk. As a
result, the upcoming holiday season will provide valuable feedback
to the health of the global toy industry.
Mattel is currently has a Positive Rating Outlook based on its
disciplined financial policies, high liquidity and strong credit
protection measures. However, any indication of a more than
transitory negative impact on revenues due to recalls, will prompt
a review of the outlook. Hasbro, who has not had a recall
announcement, is on track for a record year in revenues and
profits aided by blockbuster movies releases. Unlike the past
where a high growth entertainment year was followed by a decline
in revenues in a non-entertainment year, Fitch expects that other
entertainment based properties will keep 2008 revenues at or near
the high levels seen in 2007. Both Hasbro and Mattel have very
strong financial metrics, a reasonably broad product portfolio and
benefit from strong international market growth. Viewing these
companies for the long term, which smoothes out volatility
particularly with movie releases, no change is expected in the
ratings during 2008.
Appliances and Home and Hardware:
2008 will be difficult with lower growth prospects for the U.S.
economy and a lingering poor housing environment. Residential
construction, which fell slightly in 2006 and is expected to be
down precipitously in 2007, will probably see another decline in
2008 although not of the same magnitude. In addition, the weak
housing market, where new home and existing home sales are
forecasted to decline further in 2008, will affect sales of
housing-related products including appliances, hardware and tools.
For the companies in this sector, repair/remodeling spending is
more important to overall results than residential construction.
Declining residential construction and housing turnover are
expected to drive spending for alterations and repairs down
modestly again in 2008. Non-residential spending and public
construction should continue to grow but at a slower rate than the
15% forecasted for 2007. Thus, revenue from domestic operations
for the industry will continue to be impacted. Somewhat
offsetting the hit to the top line will be some pricing actions,
innovative product introductions, and consumer purchases of less
discretionary items. Nonetheless, volumes are expected to be flat
to down for most of 2008 in the U.S. The appliance industry,
which is forecasted to suffer its second consecutive declining
year in 2007 and its largest decline since 1989, will face
considerable challenges in order to prevent another fall.
For the sector, high commodity costs have significantly affected
profits in 2007 despite planned price increases going into the
year. In 2008, selected pricing actions are expected to deflect
higher costs from commodity inflation more than they have in the
recent past. Also, productivity improvements, cost control and
product innovation should prevent a material hit to margins from
lingering higher raw material costs. While the domestic housing
slowdown will affect top and bottom line results, Fitch does not
expect earnings and cash flow to be dramatically affected.
Whirlpool has achieved substantial savings in 2007 from its
integration of Maytag, produced record results from its
international operations and continues to successfully introduce
innovative new products. Fortune Brands is benefiting from its
business diversification, targeted price increases and adherence
to efficient operating procedures. For Black & Decker, commercial
building activity, innovative new products providing a better mix
and superior pricing, productivity enhancements and growing
international operations are expected to mitigate the impact from
the domestic housing market.
Black & Decker, which has spent significantly to repurchase stock
since 2005, most likely will continue to purchase its stock. It
is expected that its management will remain prudent in the face of
current challenges. The company has room within its rating
category to borrow for tuck-in acquisitions or to partially fund
stock repurchases. Although Whirlpool has reinstituted its stock
repurchase program, it is expected to fund its repurchases with
internally generated funds. Significant debt issuance is not
expected in 2008 unless Fortune Brands acquires Vin & Sprit.
Companies within this sector have Stable Rating Outlooks, some
diversity of operations, solid international performance and
generally low leverage levels. All are expected to provide solid
cash flow despite the challenges each face in 2008. Fitch expects
credit fundamentals to remain fairly strong despite pressure on
the top line and on profitability. Thus, minimal rating actions
are anticipated in 2008.
Following is a list of Fitch-rated issuers and their current
Issuer Default Ratings and Rating Outlooks in the U.S. consumer
products sector.
Household Products and Personal Care:
-- Alberto-Culver ('BBB+'; Outlook Stable);
-- Avon Products, Inc ('A'; Outlook Negative);
-- The Clorox Company ('BBB'; Outlook Stable);
-- Colgate-Palmolive Co. ('AA-'; Outlook Stable);
-- Kimberly-Clark Corp. ('A'; Outlook Stable);
-- Newell Rubbermaid Inc. ('BBB'; Outlook Positive);
-- S.C. Johnson & Son, Inc. ('A-'; Outlook Stable);
-- Spectrum Brands, Inc. ('CCC'; Outlook Negative).
Toys:
-- Hasbro, Inc. ('BBB'; Outlook Stable);
-- Mattel, Inc. ('BBB'; Outlook Positive).
Appliances and Hardware:
-- The Black & Decker Corp. ('BBB'; Outlook Stable);
-- Fortune Brands, Inc. ('BBB+'; Outlook Stable);
-- Whirlpool Corp. ('BBB'; Outlook Stable).
* Fitch Expects Packaged Foods Companies to Remain Stable in 2008
-----------------------------------------------------------------
Fitch Ratings expects most credit ratings for the U.S. packaged
foods companies to remain stable in 2008 despite mounting input
cost pressure. Packaged food companies faced high input cost
inflation in 2007 and several have given even higher preliminary
input cost inflation guidance for 2008.
According to the U.S. Department of Agriculture, elevated
commodity prices are anticipated to remain in 2008. Average
prices for wheat, corn, soybeans, soybean meal and soybean oil are
all expected to be well above their 10-year averages in 2007-08,
and also above the already elevated prices incurred during 2006-
07. Solid domestic and global demand for dairy products combined
with tight global supplies has propped up dairy prices in 2007 and
will keep them relatively high in 2008. High diesel prices are
also impacting the packaged food companies.
Pricing actions and a mix shift toward higher margin products are
crucial in the coming year, since the industry is subject to cost
pressure that is difficult to completely offset with productivity
initiatives. If pricing actions cannot be achieved to the extent
desired by the packaged food companies, they are likely to see
margin deterioration in 2008. However, margin erosion is not
expected to affect credit ratings unless the companies' ratings
are already weak for the rating category.
The major packaged food companies have diversified product
portfolios and relatively stable consumption patterns for their
products. Despite high input cost inflation, a weak housing
market and a slowing economy, packaged food is non-discretionary.
Thus, these companies tend to exhibit stable operating earnings
and cash flow, as well as excess free cash flow.
Credit and Operating Profiles:
Many firms in the industry have become comfortable operating with
more leverage in their capital structures. Over the past several
years, credit ratings for several companies in this sector have
migrated down toward the mid-to-high-BBB level. Companies at the
'BBB' level may plan their financial strategies more
conservatively so as not to edge closer to the bottom level of
investment grade ratings and lose Tier 2 commercial paper ratings.
However, a few companies, such as Campbell Soup Company and
Kellogg Company, are maintaining more conservative capital
structures and stronger credit measures.
Limited growth opportunities have led to an increase in activities
to increase shareholder returns. As in 2007, Fitch again
anticipates many of the packaged food companies will enhance
shareholder returns by repurchasing shares and raising dividends.
For the third year in a row, debt reduction is not expected to be
a priority for most packaged food companies. Margin erosion
combined with more aggressive financial policies such as debt
financed share repurchases or acquisitions, could lead to rating
downgrades.
The companies covered in this report have ample liquidity for
their operations and financing needs. Upcoming debt maturities
are likely to be refinanced. Significant 2008 maturities include
$1.25 billion for General Mills, based on the put rights of the
holders. With a portion of the net proceeds from its debt
issuance, Kraft will partially refinance its EUR5.3 billion
interim bridge facility for the Groupe Danone global biscuits
acquisition with longer term debt.
Earnings:
Low to mid-single digit revenue growth is expected for most
companies in this sector. Price and mix will play a prevalent
role and will be necessary to help offset high input costs. While
volume is expected to be positive, products where demand is more
elastic could be negatively impacted by price increases.
Although the basket of commodity inputs varies by company, most
are facing higher costs for corn, wheat, soybeans, vegetable oils,
dairy and corn sweeteners. Del Monte Foods Company also faces
high fish cost for its tuna business and high input costs for pet
food. It will be difficult to maintain or grow operating margins
amid higher costs. However, some companies such as Kraft and Sara
Lee are aiming for higher margins in 2008 as the benefits of
significant savings from their restructuring unfold.
Competition is expected to remain intense. Companies with higher
margins such as General Mills, Kellogg, Campbell's and H.J. Heinz
Co. have greater ability to invest in their brands to preserve
market shares relative to competitors. Innovation is likely to
continue in the areas of perceived health and wellness,
convenience, and ethnic products. For example, recent product
launches have included reduced sodium soups, dairy products with
probiotics, and Asian dinner kits. Portion control packaging such
as 100-calorie packs has proliferated as consumers look for simple
ways to manage their weight.
Significant spending on consumer marketing is also likely to
continue in 2008. This spending is necessary to support core
categories as well as new products. Many packaged food companies
are planning to invest in consumer marketing at a faster rate than
sales growth in an effort to preserve and expand market share.
Furthermore, the industry is aiming for more focused trade
spending. Several companies have implemented systems to better
track the effectiveness of trade spending, which over time should
result in lower trade spending costs.
Restructuring, M&A and Activist Investors:
Periodic restructuring programs are common for the industry.
Several companies within the packaged foods sector have engaged in
significant restructuring programs over the past several years,
which are winding down. However, Fitch envisions further
restructuring may be necessary given the high cost environment.
Non-core divestitures were prevalent over the past few years, as
exemplified by Sara Lee and ConAgra Foods, Inc. To a lesser
extent, the divestiture of non-core assets is likely to continue
as companies focus on growing their core categories. Small bolt-
on acquisitions are also anticipated, most likely in higher margin
categories, in health and wellness, or in faster growing markets
outside the United States.
Fitch anticipates an increased likelihood of consolidation within
the industry in 2008. The last major round of consolidation was
in the early 2000's. As input cost inflation cuts into margins,
certain companies may plan to further cut costs by combining or
streamlining operations. Since leveraged buyout activity subsided
earlier this year, merger and acquisition activity will more
likely be conducted by strategic buyers. Risk of unwanted M&A
activity is minimized for companies with dual class share
structures with supervoting rights. Similarly, significant
foundation, trust and/or family ownership provides a strong
deterrent to an unwanted transaction.
Activist investor Nelson Peltz has acquired equity stakes in both
Heinz and Kraft through his investment vehicle Trian Fund
Management, L.P. Activist investors aim to effect change and
increase shareholder returns. Mr. Peltz and another ally were
elected to Heinz's Board of Directors last year after a long proxy
battle. While Heinz has continued its Superior Value and Growth
Strategy rather than following Peltz's more aggressive strategy,
there is risk to bondholders that at the completion of the current
plan at the end of this fiscal year a new more aggressive strategy
may be launched. In November 2007 Kraft appointed two new
Directors to its Board, selected by the company and supported for
nomination by Trian Partners. While it is unclear whether Mr.
Peltz influenced Kraft's decision to divest Post cereals, there
may be more non-core divestitures as the company continues to
focus on core categories. As long as activist investors maintain
their equity stakes, Fitch believes there is a heightened risk for
higher leverage for these companies.
Economic and Cost Pressures:
With the weak housing market and its negative ramifications on
consumer spending, there will be tightening of discretionary
spending. However, due to the non-discretionary nature of
packaged foods, there should be little negative impact overall.
In fact, there may be some positive benefit if consumers eat out
at restaurants less and instead cook more meals at home. The most
convenient, pre-packaged meals will benefit the most. However, it
is likely that cost sensitive consumers, particular those with
lower incomes, will trade down more often to private label
products from branded food items. This trading down will be more
prevalent for more commodity based and less differentiated foods
that have close private label substitutes.
As discussed throughout this report, input cost pressure is
anticipated across the sector in 2008. Some packaged food
companies already have stated that they expect the fourth quarter
of 2007 to have the highest cost increases so far this year.
Fitch expects this trend to continue at least for the first half
of 2008. Then, as planting expectations are established for U.S.
crops and the growing season progresses, prices for agricultural
commodities may moderate if it looks like the harvests will be
large. However, if plantings are below expectations or weather
negatively impacts the growing season, commodity prices may
continue to rise and put even more pressure on input costs for
packaged food companies.
There is typically several months lag between commodity price
changes and when they impact the financial results of the packaged
food companies. Each company will be impacted differently based
on its product portfolio, its hedging strategies and purchase
contract structures.
This is a list of Fitch-rated issuers and their current Issuer
Default Ratings in the U.S. Food sector.
-- Campbell Soup Co. ('A'; Outlook Stable);
-- ConAgra Foods, Inc. ('BBB'; Outlook Stable);
-- Del Monte Foods Company ('BB'; Outlook Stable);
-- Dole Food Company Inc. ('B-'; Outlook Negative);
-- Flowers Foods, Inc. ('BBB'; Outlook Stable);
-- General Mills, Inc. ('BBB+'; Outlook Negative);
-- H.J. Heinz Co. ('BBB'; Outlook Stable);
-- Hormel Foods Corp. ('A'; Outlook Stable);
-- Kellogg Company ('BBB+'; Outlook Positive);
-- Kraft Foods, Inc. ('BBB'; Outlook Stable);
-- Sara Lee Corp. ('BBB+'; Outlook Negative);
-- Tyson Foods, Inc. ('BBB-'; Outlook Negative).
* Fitch Expects Slowing Economy Will Constrain Restaurant Sales
---------------------------------------------------------------
Fitch Ratings expects that the slowing U.S economy and growing
pressure on consumer discretionary income will constrain sales
growth for the entire restaurant industry in 2008. Weak same
restaurant sales performance for the casual dining segment is
continuing and SRS growth for less economically sensitive quick-
service restaurants is expected to decelerate but remain positive.
Rising labor and food costs will continue to force the industry to
adjust to a higher level of inflation than experienced in the
past. In addition, greater competition for fewer dollars could
reduce the willingness of many restaurants to be more aggressive
with pricing. Stronger industry participants are attempting to
offset margin pressure with more profitable products or further
expansion into less competitive and faster growing international
markets.
Despite slower overall revenue growth, Fitch anticipates that 2008
will be a quieter year for restaurant bondholders. Shareholder
activism, debt-financed share repurchases and leveraged buy out
risk is expected to be less pervasive. Board of directors and
management teams are likely to focus more on navigating through a
difficult operating environment and less on returning cash to
shareholders.
Broad-Based Performance Challenges
Over the past couple of years, there was operating divergence in
the restaurant industry. Sales performance in the QSR segment
outperformed other segments of the restaurant industry because
fast food chains did a better job responding to changing consumer
preferences and due to growing pressure on consumer discretionary
income. As a result, consumers traded down to better values on
fast casual and quick service restaurant menus. In 2008, however,
Fitch expects the economic slowdown and reduced consumer spending
to pressure revenue growth for the entire restaurant industry.
Weaker overall revenue growth combined with food and labor cost
inflation will make 2008 a very challenging year. Same restaurant
sales performance for the casual dining industry is entering a
third year of sluggish growth and slower sales comparisons are
also expected in the QSR segment.
Despite easier SRS comparisons for most casual dining concepts,
top line pressure will continue due to competitive pricing as
restaurants increase the level of discounting in order to drive
traffic. Average check price could be pressured as consumers pull
back on higher margin alcoholic beverages and appetizers. Casual
diners, such as Red Lobster and Ruby Tuesday's, which have refined
their menus to offer better values or to attract more upscale
clientele could find that these strategies will become challenged
as the macroeconomic slowdown deepens. In general, consumers dine
out less frequently during tougher economic environments.
Quick service operators continue to prepare for more discerning
customers. Burger King has launched a value breakfast menu and
intends to add a $1 double cheeseburger to compete with McDonald's
and Wendy's iconic value burgers. McDonald's premium and
specialty coffee strategy could steal market share from premium
priced Starbuck's beverages.
Inflation will continue to be a concern for the restaurant
industry. Labor costs could rise for many companies as the
industry absorbs multi-year increases in the minimum wage. Food
and beverage costs, particularly for dairy and proteins, remain
elevated and packaging costs have impacted some QSR companies.
Nonetheless, Fitch anticipates that restaurants will generally be
less likely to significantly raise menu prices in 2008 because
they do not want to risk losing market share.
Competition to Limit Pricing
Fitch believes lower levels of price increases will occur in 2008
due to more competition. In 2008, the USDA projects food away
from home prices to increase 2.5%-3.5%, down from the 3%-4%
expected in 2007. Over the three years ended 2006, consumer price
inflation for food away from home increased at an average annual
rate of 3.1%. In 2007, the restaurant industry successfully
passed along a portion of their higher input costs to customers.
As consumers continue to pull back on discretionary spending,
however, restaurant companies will be more concerned with driving
traffic versus raising prices.
Increased competition is evidence by the recent up-tick in
promotional activity within the industry. Starbucks, the world's
dominant coffee retailer, launched its first national television
advertising campaign in order to increase traffic and respond to
market encroachment by McDonald's and Dunkin Donuts in the coffee
space. With increased competition and less consumer spending,
revenue growth will be more dependent on robust traffic trends and
higher margin products.
Focus on Higher Margin Products and Traffic Drivers
Over the past couple of years, healthier menu items including
salads, fruit options and those with zero grams of trans fat were
developed in order to help drive traffic and combat negative
health and obesity perceptions in the QSR industry. McDonald's
and Wendy's both rolled out increased salad varieties and fruit
options. Wendy's, YUM! Brand's Kentucky Fried Chicken and Darden
among many others announced the use of zero or minimum amounts of
trans fat frying oils in their menus.
In 2008, Fitch expects restaurants to launch more profitable
products focused more on added variety. Many of these products
will be limited time offers, which create buzz and help drive
traffic, and will not replace the permanent menu items. The QSR
segment will continue to focus on faster growing breakfast, coffee
and premium sandwich products. Burger King recently announced the
segments first Value Breakfast Menu which has ten items starting
at $1.00 each. As the first to establish a solid QSR breakfast
menu, McDonald's has added a larger premium sausage burrito option
called the McSkillet and has plans to add to a chicken biscuit
offering to its breakfast options in 2008. Dunkin Donuts is now
distributing a smaller 12 ounce version of its packaged coffee
through the retail grocery channel. Fitch anticipates that
breakfast efforts at YUM! Brand's Taco Bell could be put on the
backburner due to competitive pressure and continued efforts to
revitalize the brand in the U.S.
McDonald's expansion into high margin specialty coffees is
intended to capture more of the $30 billion U.S. coffee market
while further enhancing the company's overall snack options. The
snack wrap options rolled out in 2007 will be complemented over
the next couple of years with a variety of lattes and cappuccinos
which are expected to function as snacks. Menu items catered
towards snacking will help drive the late night meals day part.
Wendy's recently announced that phase two of its strategic growth
plan will include introducing products to re-energize its late
night business and capture snacking opportunities. Burger King is
currently expanding its day part traffic by extending hours of
operations across its system.
Credit Outlook Generally Stable
Credit risk is the primary concern of bondholders; however, Fitch
expects less market liquidity and more levered balance sheets to
make the event driven credit risk experienced over the past couple
of years to be less prevalent in 2008. During 2007, shareholder
activism was rampant, restaurants incurred more debt and future
discretionary cash flows were committed to equity holders in the
form of multiple year share repurchase programs.
In 2007, credit rating activity was abundant. The level of
downgrades outpaced upgrades three-to-one. Fitch downgraded
Brinker International, Inc. and YUM!Brands, Inc. because of debt-
financed share repurchase and Darden Restaurants, Inc. because of
its debt-financed acquisition of RARE Hospitality International,
Inc. Burger King Corporation was upgraded due to significant
improvement in the company's credit profile and financial
flexibility during the previous twelve months.
Going into 2008, Fitch views the credit outlook for the restaurant
industry as generally stable despite a weakening economy and
growing pressure on consumer spending. Food price inflation, high
gasoline prices and lofty winter heating bills will reduce
discretionary income. Credit statistics could weaken modestly due
to lower top line growth and potential margin pressure but Fitch
does not anticipate a large number of additional rating
downgrades. The Ratings Outlook for Fitch's universe of coverage
is currently stable.
Fewer Leveraged Transactions
Due to more restrictive lending and slowing commercial real estate
activity, aggressive debt-financed acquisitions, share repurchase
programs and one-time dividend payouts are expected to be less
prevalent in 2008. Increased use of change of control, ratings-
based coupon-step up provisions and material adverse change
clauses are likely to increase capital structure discipline in the
restaurant industry. These structural forms of bondholder
protection should also reduce shareholder activism in the
industry. Sale-leaseback activity could also slow due to weaker
property valuations.
Acquisition activity in 2006 and 2007 was fueled by the
availability of various forms of financing. In addition to
conventional bank facilities and unsecured bond issuance; secured
forms of financing included securitization of royalty based
franchised fees and intellectual brand property. As such, demand
was strong and acquisition multiples averaged a healthy 10 times-
12x cash flows. In 2008, a reduced number of qualified acquirers
and slower revenue growth will prolong the sales process and could
reduce acquisition multiples in the restaurant industry.
Restaurants currently for sale include; Wendy's and Brinker's
Romano Macaroni Grill. A recent lowering of acquisition multiples
indicates that the current supply of restaurants for sale could be
exceeding demand. Potential acquirers of Wendy's International,
Inc. have lowered bids for the nationally recognized chain and
IHOP acquired Applebee's International, Inc., the largest casual
dining restaurant in terms of units, at a below market rate of
approximately 9x. Sun Capital Partners, Inc. is estimated to have
paid mid-to-high single digit multiples for its recent purchase of
Boston Market from McDonald's and Smokey Bones Barbeque & Grill
from Darden.
This is a list of Fitch-rated issuers and their current Issuer
Default Ratings in the U.S. Restaurant Sector:
-- McDonald's Corporation ('A'; Outlook Stable);
-- Brinker International, Inc. ('BBB-'; Outlook Stable);
-- Burger King Corporation ('BB-'; Outlook Stable);
-- Darden Restaurants Inc., ('BBB'; Outlook Stable);
-- YUM! Brands Inc., ('BBB-'; Outlook Stable).
* Fitch Expects Telecom Operators to Experience Revenue Growth
--------------------------------------------------------------
Fitch Ratings expects that telecommunications operators on average
will experience modest revenue growth in 2008. Key sources for
growth in 2008 will include business and wireless services driven
by increasing data demand. Partially offsetting the expected
growth is intense competition for legacy wireline services and a
weak new home market, which negatively influences new residential
service demand. Nevertheless, Fitch believes positive revenue
growth, stable margins, relatively flat capital spending programs
and stable leverage levels will lead to a stable rating outlook
for the sector in 2008.
Fitch believes that revenues from business services will be a
source of growth for operators in 2008, as it was in 2007. The
enterprise and large-business customer segment should provide
operators with growth in 2008 as much of the pricing effect of
contract renewals present over the past couple years has worked
through the embedded base. Additionally, the growth of higher-
end, Internet Protocol based services has continued to be strong
and now represents a large portion of the revenue base for this
customer segment and will more effectively offset legacy voice
service revenue declines. Fitch expects that enterprise and
large-business revenues should grow in the low single digit range.
While this segment is somewhat susceptible to U.S. economic
growth, a material number of the customers are multinational and
will be more resilient to any potential U.S. economic softness.
Business revenues associated with small-to-mid size customers grew
at a mid-single digit rate in 2007, and 2008 could near the same
rate or slightly lower due to potentially softer economic growth.
This segment of the market is also a key focus of the cable
multiple system operators, but meaningful competition is still a
couple years away.
Fitch expects that wireless revenues and EBITDA will increase in
the high-single digit range in 2008 compared to approximately 11%
and 12%, respectively in 2007. Fitch expects that aggregate gross
additions will be approximately 68 million for the top six
operators in 2008, with prepaid subscribers increasing to 35% of
gross additions. Similarly, modestly higher churn, driven by a
growing prepaid customer mix, should lead to aggregate net
additions of approximately 17 million with post-paid subscribers
representing approximately 11 million of this total in 2008, which
would represent an approximate 15% reduction in net additions
compared to 2007. Strong data revenue growth remains paramount to
the stability of average revenue per user for the wireless
industry. Providing that operators can successfully shift
subscribers to third-generation handsets and data services,
aggregate data revenue could accelerate beyond the current $500
million quarterly increase to reach an annualized amount of $36
billion by yearend 2008. This growth in data revenue would
reflect that 3G users generate nearly double the ARPU of second-
generation customers. Fitch believes that wireless competition
will remain fierce and the forthcoming 700 MHz auction by the
Federal Communications Commission could ultimately introduce two
new entrants to the market in the next couple years further
intensifying this pressure.
In the consumer market, access line losses are again going to be
strongly impacted by competition from cable MSOs and wireless
substitution. Additionally, access line losses could experience
some upward movement due to the weak new home market reducing the
inflow of new access lines in 2008. In 2008, Fitch believes that
wireline operators could experience a modest increase in access
losses compared to 2007 or a level of 6-6.5 million access lines.
Rural market wireline operators could experience a growth in
access line declines in 2008 as cable MSOs have moved more widely
into these markets in 2007. Digital subscriber line additions
have begun to slow and this trend will continue in 2008 due to
increasing levels of penetration, but also the new low-tier roll-
out of cable MSO offerings, which had been a customer segment
marketed only by the wireline operators over the past few years.
Fitch expects that 2008 DSL new additions could be approximately
10-15% lower than the 2007 level, but that DSL ARPU will remain
stable. The relatively weaker growth in the consumer market in
2008 will have a greater impact on non-diversified wireline
operators, particularly in rural markets. In contrast, exposure to
the consumer segment for AT&T and Verizon is approximately 20% of
revenue due to a broad service portfolio that includes both
wireless and business services. AT&T and Verizon's consumer
segment continues to grow, benefited by their successful video
strategies. These wireline operators will have a combined video
customer base of approximately 1.2 million by yearend 2007 on
their wholly-owned network based video platforms. Fitch expects
that this total will more than double in 2008 and should reach
2.5-3.0 million total combined video customers. The growing
strength of the AT&T and Verizon video offerings will provide
support to their consumer market segment and allow them to compete
more effectively with cable MSOs bundling offerings.
While regulatory risk remains centered around Universal Service
Funding reform and from a longer-term perspective, switched access
reform, with 2008 an election year, it is probable that there will
not be any significant regulatory policy changes in the
forthcoming year. As has been the case in 2007, merger and
acquisition activity is expected to be prevalent in 2008. In
2007, both wireline and wireless acquisitions were announced and
Fitch believes prospects for continued consolidation remain as
competitive and regulatory developments continue to lend support
to the benefits of scale.
As a result of relative strength in the business and wireless
service segments, Fitch believes that telecommunications operators
will experience positive revenue growth in the low single digits
depending on their mix of services with wireless showing the
strongest growth and rural legacy voice services the weakest
growth. EBITDA margins should be stable in 2008 as operators
capture synergies associated with acquisition activity in 2007.
As a result, EBITDA should grow, on average, in the low single
digit range for operators, again depending on their revenue
sources with rural wireline operators the weakest attaining a flat
to slightly down EBITDA. Capital spending should be relatively
flat in 2008 compared to 2007 with slightly more wireless spending
associated with subscriber growth and technology upgrades and
wireline capital essentially flat. Free cash flow generation
should be flat in 2008 versus 2007 and leverage should also remain
relatively unchanged. As a result of these financial factors
coupled with the operational expectations, Fitch believes that
credit ratings for telecommunications operators should be stable
in 2008.
Recovery ratings, which apply to speculative grade issuers, are
expected to be stable, and could improve through consolidation.
Fitch does not expect the proportion of secured and unsecured debt
in the capital structures of the participants to change due to
relatively light maturities in 2008, and a generally balanced
approach to the funding of acquisitions through the use of secured
and unsecured debt.
-- ALLTEL Corp. ('B', Stable Outlook)
-- American Tower Corp. ('BB+', Stable Outlook)
-- AT&T Inc. ('A', Stable Outlook)
-- BCE Inc. ('BB-', Rating Watch Negative)
-- Centennial Communications Corp. ('B-', Positive Outlook)
-- CenturyTel, Inc. ('BBB', Stable Outlook)
-- Cincinnati Bell, Inc. ('B+', Positive Outlook)
-- Citizens Communications ('BB', Stable Outlook)
-- Dobson Communications Corp. ('B-', Rating Watch Positive)
-- Embarq Corp. ('BBB-', Stable Outlook)
-- Intelsat, Ltd. ('B', Rating Watch Negative)
-- Level 3 Communications, Inc. ('B-', Stable Outlook)
-- Qwest Communications International, Inc. ('BB', Stable
Outlook)
-- Rogers Communications, Inc. ('BBB-', Positive Outlook)
-- Rural Cellular Corp. ('CCC', Rating Watch Positive)
-- Sprint Nextel Corp. ('BBB', Negative Outlook)
-- Telephone & Data Systems, Inc. ('BBB+', Stable Outlook)
-- TELUS Corp. ('BBB+', Stable Outlook)
-- Verizon Communications ('A+', Stable Outlook)
-- Windstream Corp. ('BB+', Stable Outlook)
* Fitch Presents Global Pharmaceutical R&D Pipeline 3Q Report
-------------------------------------------------------------
The Fitch Ratings global pharmaceutical team is presenting its
'Global Pharmaceutical R&D Pipeline' report for the third quarter.
The overview details the most current developments of late-stage
R&D brand name pharmaceutical projects of major drug developers
and provides details about relevant industry issues.
Successful R&D is more critical for the industry compared to
previous years, in order to mitigate exposure to potentially
dramatic intellectual property losses which will affect many
industry participants after the end of the decade.
The majority of marketing approvals could be seen in Europe during
the third quarter. The European Agency for the Evaluation of
Medicinal Product's marketing approvals doubled those of the Food
and Drug Administration, and included several potential
blockbuster pharmaceuticals. The lower number of U.S. approvals
reflects the heightened safety issues that continue to play into
regulatory decisions granting marketing authorization of new
pharmaceuticals.
On the other hand, first-time U.S. generic competition for major
products in the third quarter was limited to European names and
mainly hit GlaxoSmithKline's Coreg and Novartis' Lamisil.
In terms of sales growth, U.S. names were leading the third
quarter sales growth of 8.1% (up from 7% in the second quarter),
driven by Bristol-Myers Squibb (25%), Abbott Laboratories (20%)
and Eli Lilly (19%). The world's two largest pharmaceutical
companies, GlaxoSmithKline and Pfizer, saw a slight sales decline
driven by patent expiry in the third quarter.
The trend towards shareholder-friendly stances continued in the
third quarter, as demonstrated by the industry collectively paying
dividends of $8 billion and repurchasing common shares totaling
more than $11 billion. Credit concerns are heightened if the
shareholder-friendly trend is not accompanied by moderation of
acquisition activities.
* Fitch's Rating Outlook for Semiconductor Industry is Stable
-------------------------------------------------------------
Fitch's 2008 Rating Outlook for the semiconductor industry is
stable, mostly driven by the expectation of solid unit growth for
PCs and mobile handsets. As the semiconductor industry continues
to expand its total available market while pursuing a lower-
capital intensive profile, Fitch believes the industry will
experience less volatility and relatively more predictable free
cash flow. Consistent with the broader technology industry, Fitch
expects several semiconductor companies will continue to evaluate
potential opportunities to alter their mostly equity-dominated
capital structures via acquisition activity and/or potential debt-
financed stock buyback actions, resulting in additional technology
debt issuance. From a business and operating profile standpoint,
as well as within the context of Fitch's credit considerations,
semiconductor companies continue to be subject to the highest
technology risk within the technology industry.
Fitch believes the global semiconductor industry will grow in the
low single-digit range in 2008, following modest revenue growth
for 2007. Embedded into Fitch's expectations are that unit demand
- particularly for consumer electronics - will remain solid,
semiconductor content within an ever widening range of
applications will expand further, and increasing consumer spending
in developing economies will partially offset slower spending
anticipated in the U.S. and Western Europe. However, Fitch's
expectations for significant pricing pressures, excess
manufacturing capacity for the memory segments, which aggressively
added capacity in 2007 to meet strong NAND demand, and slightly
elevated inventory levels will weigh on otherwise solid growth
drivers. Book-to-bill and inventory metrics remain within
rationale ranges by historic standards, and Fitch believes any
potential correction is likely to be significantly less severe
than the more than 30% decline experienced in 2001.
Key Industry Trends
Several key trends impact Fitch's outlook for the semiconductor
industry in 2008:
Consumer Electronics:
Fitch believes that consumer electronics will continue to be
responsible for the majority of semiconductor unit growth in 2008.
Fitch also believes consumer electronics devices will be sold
increasingly into developing economies and, therefore, at lower
average selling price. As a result, efficiently bringing new
products to market is increasingly becoming the competitive
differentiator for original equipment manufacturers and prompting
semiconductor makers to use foundries for process development and
manufacturing, outsource back-end packaging and test, and form
research and development partnerships. Ultimately, Fitch expects
continued pressures on returns on investments will prompt long-
awaited consolidation in certain segments.
Increased use of foundries:
Fitch believes foundries will expand their share of global
integrated circuit production in 2008, due to the continued
increase in use of foundries by integrated device manufacturers -
albeit to varying degrees - and the rise of 'fables' semiconductor
suppliers. At the same time, Fitch expects foundries to gain a
more vital role in the semiconductor industry through the
development of next generation process technology, in addition to
accelerating the ramp of leading-edge wafer fabrication services
(such as 65nm) by converting more orders from older process
generations to advanced technologies. The increased use of
foundries by IDMs reduces ever more costly investments in
manufacturing capacity, particularly at the leading edge, and over
the longer-term should result in more stable and consistent free
cash flow available for alternative uses, including share
repurchases and acquisitions. Importantly, Fitch believes a
greater use of foundries will result in the maintenance of a
healthier supply and demand balance for the broader semiconductor
industry, as foundries consolidate a significant amount of capital
spending on leading-edge technology (required for cost effectively
manufacturing volume, highly standardized products), despite the
anticipation for a second consecutive year of reduction in foundry
capital spending in 2008.
Memory makers volatility:
Fitch believes memory makers, mainly large integrated electronics
companies who toggle between DRAM and NAND flash memory production
based upon relatively dynamic demand prospects, aggressively added
capacity in 2007 to meet strong demand for NAND in an increasing
number of applications (driven by increasing storage capacity).
Despite robust anticipated unit demand, Fitch believes memory
makers will be negatively impacted by excess supply in 2008.
Furthermore, because of significant competition in this highly
commoditized market and that the vast majority of production is
manufactured for use in consumer electronics devices, gross
margins will remain extremely thin, prompting ongoing significant
investments in leading-edge manufacturing capacity and ASP
reductions for consumer electronics.
Better inventory management:
Fitch believes the electronics supply chain will continue to be
disciplined in 2008, supporting continued stability within the
semiconductor market. Due to investments into more advanced
information systems, greater use of foundries and, as a result,
less uneven in-house utilization rates, and increased inventory
discipline by components distributors, the supply chain has become
more efficient in correcting pockets of excess inventory. While
inventory levels remain at the high end of acceptable ranges,
recent inventory corrections have been brought back into
equilibrium in one-to-two quarters, approximately half the time
that such corrections took historically.
Key Company Outlooks
* U.S.
Advanced Micro Devices Inc.: The Rating Outlook for AMD is
Negative due to Fitch's expectations for further erosion in the
company's competitive position and worsening financial flexibility
in 2008. Financial and operating performance for the fourth
calendar quarter of 2007 is a significant factor in determining
the long-term outlook for AMD. Fitch believes AMD's profitability
is likely to decline following ongoing delays in ramping next-
generation products across platforms and Intel's extension of an
already significant manufacturing advantage.
While microprocessor unit demand is expected to grow in excess of
10% in both 2007 and 2008 due to a strong PC unit demand
environment, Fitch believes AMD will be challenged to keep pace
with Intel's product roadmap over the near-term, likely resulting
in AMD's profitability deteriorating further in 2008 from already
pressured levels. Fitch anticipates AMD's operating EBITDA for
2007 will decline 75% from 2006 levels. At the same time, Fitch
expects Intel to use its manufacturing process technology lead
(believed to be one full process generation) to maintain
meaningful pricing pressures on AMD. Positively, profitability for
AMD should benefit from the company's headcount reductions during
2007.
As a result of competitive pressures and the resultant impact on
profitability, Fitch expects AMD's financial flexibility will
erode in 2008. Despite recently having received $608 million in
net proceeds via an equity investment from the government of Abu
Dhabi, Fitch expects AMD will likely need additional funding to
support ongoing annual capital spending, which Fitch anticipates
will remain in excess of $1 billion in 2008. Although AMD has
continually lowered expectations for capital expenditures in 2007,
Fitch believes the company will be challenged to meaningfully
further reduce ongoing capital spending for 2008 and beyond
without potentially jeopardizing supplier relationships with
certain original equipment manufacturers. In the near-term, the
company's capital spending reductions will aid short-term
liquidity. However, consistent with AMD announcing its intentions
to pursue an 'asset light' strategy, Fitch believes AMD will need
to expand outsourcing relationships in order to keep pace with
Intel's capabilities over the longer-term.
Freescale Semiconductor Inc.: Fitch's Stable Rating Outlook on
Freescale in 2008 is supported by the company's diversified end
market, customer, and product portfolios, proven manufacturing
outsourcing strategy, and leading market positions. While
Freescale's financial flexibility remains modest, the company's
free cash flow has exceeded Fitch's original post-LBO
expectations, due primarily to aggressive cost cutting. For 2008
Fitch expects Freescale's revenue growth will be essentially flat
and Motorola's (its largest customer representing approximately
25% of total sales) operating performance to only modestly and
gradually improve throughout the year.
Fitch believes negative rating actions could occur in 2008 if
Freescale's profitability meaningfully erodes, which is likely in
the absence of ongoing cost reductions (potential for research and
development sharing and consolidating manufacturing facilities) or
an improving mix, primarily higher margin analog and sensors
business. Fitch believes Freescale's greatest opportunity to
bolster free cash flow in 2008 will be to reduce its cash
conversion cycle, which increased 10 days to a Fitch-estimated 71
days for the latest 12 months ended
Sept. 28, 2007 from the prior year period. Fitch believes the
erosion in Freescale's working capital efficiency was primarily
due to excess Motorola inventory, which should be reduced over the
next couple of quarters.
Spansion Inc.: The Rating Outlook on Spansion remains Negative and
is driven by Fitch's expectations for continued pressure on the
company's financial flexibility. Financial and operating
performance for the fourth calendar quarter of 2007 is a
significant factor in determining the long-term outlook for
Spansion. Fitch believes Spansion could achieve break even
operating profitability in 2008 but will nonetheless continue to
burn cash, albeit at a modestly lower rate than the more than $1
billion of negative free cash flow for the latest 12 months ended
Sept. 30, 2007. Unit growth prospects remain solid for Spansion,
highlighted by a 1.3 times book-to-bill ratio exiting the third
calendar quarter of 2007 and share gains within the NOR flash
memory market due to leadership related to MirrorBit technology
platform. However, NAND memory's rapidly increasing storage
capacity continues to curtail revenue growth opportunities for NOR
(Spansion's primary market) in rapidly growing markets addressable
by both NAND and NOR solutions.
Despite Spansion's leading technology, Fitch remains concerned
with the company's inability to command premium pricing, although
price per bit trends turned positive in third quarter-2007 after
declining meaningfully throughout the preceding year. However,
Fitch anticipates Spansion's ramp of MirrorBit ORNAND products on
65nm from its recently opened 300mm manufacturing facility
(Spansion 1) will reduce its cost structure, providing a boost to
the company's profitability in 2008. Nonetheless, Fitch
anticipates Spansion will pursue additional financing in 2008,
given that liquidity is likely to be stressed given the company's
cash burn rate.
Texas Instruments Incorporated: Fitch's Rating Outlook on TI is
Stable and is also driven by the company's diversified end market,
customer, and product portfolios, proven manufacturing outsourcing
strategy, and leading market positions. TI's strong annual free
cash flow, expected to approximate $2 billion, and financial
flexibility also support the rating and stable outlook. Fitch
believes TI is an example of a company in the technology industry
that could issue debt to adjust its 100% equity-based capital
structure, given expectations for a less capital-intensive
operating model and, therefore, more consistent annual free cash
flow going forward.
Fitch believes the negative effect of continued ASP pressures
related to a lower mix of handset sales in 2008 will be mitigated
by solid growth rates of TI's highly profitable analog and mixed-
signal business, which represents approximately 40% of the
company's semiconductor sales and serves thousands of small
customers. Fitch believes TI's agreement to outsource the
development of next-generation process technology to long-term
foundry partner, TSMC, represents a next step in the evolution of
its hybrid manufacturing strategy and, if successful, will lower
capital spending requirements further. And while TI is
anticipated to lose some share at Nokia, as global handset makers
diversify their semiconductor suppliers, Fitch anticipates
potential share losses will not be significant, particularly given
expectations that Nokia will at least maintain its current share
of a growing global handset market, and be partially offset by
longer-term share gains at Motorola. Fitch's stable outlook for
TI in 2008 incorporates that TI will continue to aggressively
repurchase shares approximating annual free cash flow.
* Europe
STMicroelectronics NV: The Stable Outlook for STM remains solid
given the company's strong market positions in a number of
segments with relatively good demand fundamentals. STM is number
three worldwide in automotive ICs - which are forecast to enjoy
above average growth over the next three-to-four years. A number
three position in wireless communications has been strengthened in
2007 with a number of key partnership arrangements with Nokia.
STM continues to focus on restructuring its business portfolio,
via the announced flash memory joint venture with Intel, a key
step in improving available opportunities for this business and
reducing the stand alone risk from what is a quite challenging and
capital intensive segment. Fitch expects consolidated earnings
and cash flow will both benefit from the transfer of this business
to the joint venture in 2008.
Despite challenging operating conditions (particularly in first
half-2007) STM has performed well in 2007, and is on plan to meet
fiscal year targets. Cash flow performance has been solid, as the
company generated EUR270 million of free cash flow in the first
nine months of 2007 despite a significant increase in the 2007
dividend payment. Free cash flow largely accounts for an increase
in cash and marketable securities to EUR3 billion at the end of
the third quarter of 2007 and net cash to approximately EUR870
million. The rating is however unlikely to improve in the near-
term given relatively low operating margins compared with
international peers and the potential for increased acquisition
activity in 2008.
ASML Holdings NV: The Rating Outlook for ASML, the world's leading
manufacturer of lithography equipment, is Stable. ASML has built a
65% market share in an industry in which it has only two
competitors, Canon and Nikon, and believes that 70% market share
is within reach. With its equipment installed at around 90% of
fabrication plants worldwide it commands a significant pricing
premium to its competitors and is consistently the first to market
with next generation tools. With lithography representing an
increasing share of equipment investment, and a high degree of
flexibility in its cost structure, Fitch believes ASML is well-
placed to post solid earnings and cash flow through the cycle.
Despite the weak operating environment for many of its customers
in 2007 the company posted strong sales for the first nine months
of 2007, up 12% from the comparable year ago period, and with
fiscal year 2007 likely to be another record year. Demand from
the memory segment has been strong, despite the difficult
conditions in these markets, reflecting the fact that ASML sales
are driven by bit rather than end market growth. Fitch could
foresee upward pressure on the rating in the event of a robust set
of full fiscal year numbers, subject to any change in ASML's
financial policies.
* Asia
Taiwan Semiconductor Manufacturing Company Limited: Fitch's Rating
Outlook on TSMC in 2008 is Stable and is driven by the company's
broad product range, state-of-the-art technology, large production
capacity as well as integrated service for IC design and
manufacture that lead to its dominant market position and
strengthening customer relationships. The long-term growth
prospects of foundries, TSMC's ample financial flexibility and
consistent free cash flow mitigates Fitch's concern on its
reliance on outsourcing orders, continuous capital spending needs,
and operating volatility due to the industry's cyclical nature.
Fitch believes the negative effect of continued pricing pressures
related to industry competition and slow technology migration by
customers will be mitigated by continued growth for the overall
semiconductor market in 2008, more outsourcing orders from
integrated device manufacturers and its acquisition of eight-inch
facilities from Atmel Corporation to capture increasing
opportunities in consumer electronics application. More
conservative capital spending in 2008 is also likely to support
TSMC's capacity utilization and hence its profitability.
Fitch anticipates additional share repurchases by TSMC pursuant to
an agreed upon orderly reduction in Koninklijke Philips
Electronics N.V.'s equity interest in TSMC. Nevertheless, Fitch
believes TSMC's share buyback plans will have negligible negative
implications on TSMC's credit metrics due to expectations for
positive free cash flow and the maintenance of a net cash position
in 2008.
United Microelectronics Corporation: Fitch's Stable Rating Outlook
on UMC in 2008 is supported by the company's full range of
production capabilities, solid relationships with a diversified
and growing client base, and strong market position as the second-
largest dedicated foundry in the world. The increasing
outsourcing of wafer fabrication by semiconductor suppliers and
UMC's sound financial profile characterized by its strong cash
flow from operation and conservative capital structure mitigates
Fitch's concern on its reliance on outsourcing orders, capital
intensity resulting from significant requirement in capital
spending and R&D, and operating volatility related to the cyclical
nature of the semiconductor industry. Fitch believes the negative
impact of continued pressures on ASP related to slow technology
migration by customers and its narrowed technology edge against
competitors will be mitigated by strong unit growth of the overall
semiconductor market in 2008 than 2007, more outsourcing orders
from IDMs and its cooperation with Elpida Memory, Inc. in
developing next generation memory technology to bring to market
more advanced embedded memory system-on-chip solutions. Fitch
expects UMC to focus its operation on capacity utilization,
profitability and cash flow with significantly reduced capital
spending in 2008.
Fitch does not expect UMC to conduct similar shareholder friendly
action in 2008 in addition to annual dividends linked to regular
earning, in view of its research and development of advanced
process technologies and continued expansion of manufacturing
capacity, including its second 300mm wafer fabrication plant.
Hynix Semiconductor Inc.: Fitch's Rating Outlook for Hynix is
Stable, reflecting the company's strong position in the
semiconductor memory market, proven technology, efficient
production, and improved financial status. Hynix is the world's
second-largest DRAM maker and third-largest NAND flash memory
producer. Hynix has improved its cost-reduction capability and
maintained pace with the global memory chip technology migration
while maintaining a stable yield. Compared with competitors,
Hynix currently has a lower production cost and a leading edge
technology despite a lower installation ratio of 12-inch
fabrication facilities, which is assumed to be more than two times
more productive than eight-inch fabs. Nevertheless, Hynix is
facing tough challenges. The volatile DRAM and NAND flash memory
prices and large capital spending requirements for technological
migration are major business risks for Hynix. In addition, the
difficult pricing environment for NAND flash memory could result
in further margin compression.
Fitch currently has these Issuer Default Ratings for these
entities:
-- Advanced Micro Devices, Inc. ('B'; Outlook Negative);
-- ASML Holding N.V. ('BBB-'; Outlook Stable);
-- Chartered Semiconductor Manufacturing Limited ('BBB-';
Outlook Stable);
-- Freescale Semiconductor, Inc. ('B+'; Outlook Stable);
-- Fujitsu Limited ('BBB+'; Outlook Stable);
-- Hitachi, Ltd. ('A-'; Outlook Negative);
-- Hynix Semiconductor Inc. ('BB'; Outlook Stable);
-- International Rectifier Corp. ('BB'; Rating Watch
Negative);
-- LG Electronics Inc ('BBB-'; Outlook Stable);
-- NEC Corporation ('BBB'; Outlook Stable);
-- Samsung Electronics ('A+'; Outlook Stable);
-- Spansion Inc. ('B-'; Outlook Negative);
-- STMicroelectronics N.V. ('A-'; Outlook Stable);
-- Taiwan Semiconductor Manufacturing Company Limited ('A-';
Outlook Stable);
-- Texas Instruments Incorporated ('A+'; Outlook Stable);
-- Toshiba Corporation ('BBB'; Outlook Stable);
-- United Microelectronics Corp. ('BBB'; Outlook Stable).
* Fitch Withdraws FS Ratings That Don't Meet Criteria
-----------------------------------------------------
Fitch Ratings has withdrawn its quantitative insurer financial
strength (Q-IFS) ratings on various life insurance companies that
do not meet Fitch's criteria to be eligible to receive a Q-IFS
rating.
These ratings are withdrawn by Fitch:
Annuity & Life Reassurance America, Inc. (NAIC 62421)
-- Quantitative Insurer Financial Strength 'Bq';
Arkansas National Life Insurance Company (NAIC 72656)
-- Quantitative Insurer Financial Strength 'BBq';
Balboa Life Insurance Company (NAIC 68160)
-- Quantitative Insurer Financial Strength 'BBBq';
Commonwealth Dealers Life Insurance Company (NAIC 88374)
-- Quantitative Insurer Financial Strength 'BBBq';
Hawkeye Life Insurance Group, Inc. (NAIC 90255)
-- Quantitative Insurer Financial Strength 'BBq';
Trans National Life Insurance Company (NAIC 77704)
-- Quantitative Insurer Financial Strength 'Bbq';
* Moody's Cited Insufficient Use of Loan Modifications
------------------------------------------------------
Moody's has cited insufficient use of loan modifications, along
with underlying loan defaults and home price depreciation, as a
contributing factor to recent subprime RMBS downgrade actions.
Moody's believe that judicious use of loan modifications can be
beneficial to securitization trusts as a whole.
Based on Moody's recent servicer survey results, the number of
modifications to date has been relatively small. The proposed
framework seems to provide a reasonable approach for identifying
borrowers suitable for streamlined modifications and should
expedite the number of modifications going forward. Time will
tell how successful servicers are in identifying and modifying the
loans most appropriate for modification. The ability of servicers
to determine a borrower's eligibility for FHA Secure or other
refinancing options may vary, since a servicer's expertise
generally lies in servicing and not in underwriting. Larger
servicers with both servicing and origination arms may be better
equipped to manage this process.
Generally speaking, a higher level of interest rate modifications
should decrease delinquencies post reset, thereby also potentially
contributing to ratings stability for securities backed by
subprime collateral.
* Moody's Global S-GD Rate Drifted Lower in November
----------------------------------------------------
Moody's global speculative-grade default rate drifted lower in
November, ending the month at 1.0%, down from 1.1% in October,
Moody's Investors Service reported. The global default rate is at
its lowest level since December 1981 when it stood at 0.7%. It
has now declined approximately 40% from its 1.7% level at the
start of the year. A year ago, it stood at 1.9%.
"Currently low default rates reflect the easy credit conditions of
the past couple of years which allowed most issuers to refinance
on favorable terms, and strong economic growth which has allowed
issuers to make their debt service payments," says Moody's
Director of Corporate Default Research Kenneth Emery.
Moody's default rate forecasting model predicts that the global
speculative-grade default rate will rise sharply to 4.2% a year
from now after finishing this year at 1.2%. By November 2009, the
model forecasts the global default rate reaching 4.7%.
"Our baseline forecast incorporates a slowing U.S. economy in 2008
but no recession," adds Emery. "If a recession were to
materialize, default rates could increase to near double-digit
levels."
Consistent with upward pressure on default rates over the next
year, Moody's speculative-grade corporate distress index, which
measures the percentage of rated issuers that have debt trading at
distressed levels, reached over 10% in November, up from 7% last
month and its highest level in almost five years.
During November, the U.S. trailing 12-month-issuer weighted
speculative-grade default rate also edged lower, finishing at 1.0%
and down from 1.1% in October. The U.S. default rate continues to
be at its lowest level in over two decades, or since March 1982
when it also stood at 1.0%. On a year-over-year basis, the U.S.
default rate is down 46% from its November 2006 level of 1.9%
Moody's default rate forecasting model predicts that the U.S. rate
will stand at 4.7% a year from now.
In November there was only a single default among Moody's-rated
corporate issuers: American Color Graphics, Inc, a printing and
publishing company based in Tennessee. During November, note
holders representing more than 92.5% of the company's $280 million
senior second secured notes agreed to defer the 10% semi-interest
payment due December 15, 2007 to March 15, 2008.
Year-to-date, 17 Moody's-rated issuers have defaulted, fewer than
the 29 defaults in the comparable period in 2006.
Measured on a dollar volume basis, the global speculative-grade
bond default rate edged lower to 0.6% in November from 0.7% in
October. A year ago, the dollar-weighted global bond default rate
was significantly higher at 2.2%.
Among U.S. speculative-grade issuers, the dollar-weighted bond
default rate remained unchanged at 0.7% from October to November.
A year ago, the U.S. dollar-weighted bond default rate stood at
2.3%.
No Moody's-rated leverage loan issuers defaulted in November. The
trailing 12-month leveraged loan default rate fell from 0.3% in
October to 0.1% in November.
Moody's "November Default Report" is now available -- as are
Moody's other default research reports -- in the Ratings Analytics
section of Moodys.com.
* Moody's Says Housing Market Is In The Midst of Worst Downturn
---------------------------------------------------------------
The U.S. housing market, "awash in unsold inventory," and with
home prices already down more than 5% on a nationwide basis from
their peak two years ago, is in the midst of the worst downturn
since 1945, with measurable improvement not expected until 2010,
according to a new study by Moody's Economy.com.
Housing prices should reach a trough in early 2009, by which time
they will have fallen 12% nationally, according to the study,
which gathered data from 381 U.S. metropolitan areas. When prices
ultimately hit bottom, about 80 of those metro areas studied will
have experienced a double-digit, peak-to-trough price decline.
Home sales, which should be off some 40% from their peak, are
expected to bottom in early 2008.
"The housing market is unraveling," said Mark Zandi, the MEDC
chief economist and lead author of the study, adding, "The current
housing recession will ultimately be severe enough to be
characterized as a housing crash."
"The housing market will only find a bottom when significant
progress is made in working off this inventory," Zandi said,
adding, "this will require further severe cuts in new
construction, reducing supply, and much lower house prices, which
will ultimately restore affordability and thus demand."
Existing home sales already are down 30% from their 2005 peak, and
home prices are falling in all categories, from the high end to
the low.
The most serious prices declines (i.e., of more than 15% peak to
trough), are expected around Washington, D.C., and Detroit, and
throughout most of Arizona, California, Florida, and Nevada. The
rest of the Northeast Corridor, in addition to markets such as
Boise, Denver, and Salt Lake City, should experience declines
between 5% and 15%. The only exceptions are parts of the
Southeast, the farm belt, most of Texas, and sundry markets in the
Pacific Northwest.
The current study, titled "Aftershock: Housing in the Wake of the
Mortgage Meltdown," analyzes housing price data using Fiserv
Lending Solutions' Case-Shiller Indexes, which are widely regarded
as the most accurate available measure of home price trends.
The study released is a sequel to one that appeared in October
2006. The earlier study's call for falling national house prices
in 2007 was thought at the time to be a bold one. However, that
forecast now appears timid in light of recent events like the
collapse of the subprime mortgage market.
"The economy and housing market are now at a key inflection point,
which will determine how dark a scenario will unfold in coming
months," Zandi said. On the positive side, "most businesses
outside of housing are highly profitable and have sturdy balance
sheets." Other benefits are a weak dollar that has lifted exports
and, most important, "policymakers are fully engaged in
forestalling a more serious slowing in growth."
From a broad economic perspective, the most serious byproduct of
the housing downturn is declining consumer spending, the MEDC
study said. Homeowners, once able to obtain cash from their
formerly appreciating homes via mortgage equity withdrawal, are
running into difficulties, because MEW "is shutting down."
Obtaining a home equity loan to buy furniture or consolidate
credit card debt, for example, is now more problematic due to
falling home values and tightening lending standards. This credit
squeeze is exacerbated by the fact that people who use MEW for
cash tend to have very low savings rates. According to the MEDC
study, the nearly one-third of households that have taken out a
home equity line of credit have an estimated savings rate of -9%.
Caught without savings or additional home equity lines of credit,
the consumer may choose to slow his spending significantly and
thus precipitate a severe economic downturn.
* Moody's Says Pressures Stems from 2006 RI Jury Verdict
--------------------------------------------------------
Despite many recent successes and no direct cash impact to date,
there has been some negative credit pressure stemming from the
2006 Rhode Island jury verdict that found three manufacturers
responsible for creating a public nuisance by manufacturing lead
pigment contained in paint, says Moody's Investors Service in an
update report on lead paint litigation.
"The Feb. 22, 2006, ruling is having an impact on the financial
flexibility of certain issuers, especially those that are exposed
to the confidence-sensitive commercial paper market," says Moody's
Vice President William Reed. "The credit implications of the
Rhode Island case need to be considered on a case-by-case basis,"
says Reed.
"While the companies have been subject to headline risk related to
lead-based paint and pigment litigation, their ratings or outlooks
are unlikely to change based on the existing litigation until we
can determine that there is a greater likelihood that the ultimate
cash liability will be significant," adds Michael Zuccaro, Moody's
analyst and co-author of the report.
An abatement plan proposed by the Rhode Island attorney general in
September 2007 would require the three defendants - The Sherwin
Williams Company, NL Industries Inc. and Millennium Holdings LLC -
to conduct lead abatement in homes, schools, day care centers and
other facilities at a total cost estimated by the state of $2.4
billion over four years if accepted by the court. The three
companies have initiated appeals of both the original jury verdict
as well as the state's proposed abatement plan.
Until the Rhode Island verdict, lead-paint lawsuits on former
lead-paint manufacturers had at most negligible impact on credit
risk, given the success companies had in defending themselves in
court, says Moody's.
One major concern for credit, says Moody's, is possible follow-on
legal actions prompted by plaintiffs having success in a
particular legal jurisdiction.
"A final win, after appeals, in one state could embolden
plaintiffs in other jurisdictions, creating a snowball effect of
litigation," says Reed.
The full title of this Moody's Special Comment is "Lead Paint
Litigation Update-Proposed Rhode Island Abatement Plan poses
potential $2.4 billion liability."
* Moody's Says US Cable-TV Industry's Outlook Remains Stable
------------------------------------------------------------
The outlook for the US Cable-TV industry's credit ratings
continues to be stable as the successful first mover advantage
positioning, and benefits from increasing diversity of products
beyond video of the "triple play" package leads to strong
fundamentals, despite the gradually increasing competition from
phone companies, says Moody's Investors Service in a new report.
"The combination of all three products- video-high speed data-
voice services- coupled with the advantage of pushing all three
through a single infrastructure and in one installation is
extremely powerful," says Moody's Senior Vice President Neil
Begley.
However, Moody's positive view of the cable industry's robust
fundamentals is tempered by concern over the potentially
disruptive competitive threat posed by phone companies.
"The strengthening competitive force of the Regional Bell
Operating Companies, is the primary credit concern," says Begley.
"As a result of this competition we expect revenue growth in the
cable industry to slow over the intermediate term."
In addition, he says, pricing will become more aggressive and
subscriber-retention costs will rise, hurting profit margins and
limiting upward rating changes for most cable operators if they
don't reduce debt with free cash flow.
Moody's estimates that the RBOCs will complete much of their
targeted rebuild to be capable of providing of phone, cable TV and
high-speed Internet services by 2011. "By the end of 2010,
assuming only a 1% annual growth rate in homes passed by cable
networks, Moody's project that cable industry video penetration
will decline to 49% from 52%, but high-speed-data penetration will
increase to 35% from 28%, and voice penetration will increase to
22% from 11%," says Begley.
Overall, industry credit metrics have experienced favorable trends
over the past five years, but the burden of the leverage some
companies carry may hinder their ability to compete.
High levels of leverage makes it tough for speculative-grade cable
operators to invest in cable infrastructure and also leaves
companies with less money for customer service and on developing
advanced products like triple play, says Moody's.
Disruptive regulatory changes spurred by the FCC's Chairman Kevin
Martin, having the goals of improving service and maintaining if
not increasing the diversity of choices and ensuring affordable
prices, cannot be ruled out. Though, "we believe that all of this
is best accomplished, and will be met with the imminent
competition in the most populous regions of the US," says Begley.
The full title of this Moody's Industry Outlook is "U.S. Cable-TV
Outlook"
* BOND PRICING: For the Week of Dec. 3 -- Dec. 7, 2007
------------------------------------------------------
Issuer Coupon Maturity Price
------ ------ -------- -----
ABC Rail Product 10.500% 01/15/04 0
ABC Rail Product 10.500% 12/31/04 0
Alesco Financial 7.625% 05/15/27 66
Alltel Corp 6.800% 05/01/29 69
Ambac Inc 6.150% 02/15/37 68
Ambassadors Intl 3.750% 04/15/27 69
Amer & Forgn Pwr 5.000% 03/01/30 62
Amer Color Graph 10.000% 06/15/10 62
Amer Pad & Paper 13.000% 11/15/05 0
Americredit Corp 0.750% 09/15/11 59
Americredit Corp 0.750% 09/15/11 64
Americredit Corp 2.125% 09/15/13 59
Ames True Temper 10.000% 07/15/12 65
Antigenics 5.250% 02/01/25 62
Archibald Candy 10.000% 11/01/07 0
Arvinmeritor Inc 4.000% 02/15/27 71
Ashton Woods USA 9.500% 10/01/15 75
At Home Corp 4.750% 12/15/06 0
Ata Holdings 12.125% 06/15/10 0
Atherogenics Inc 1.500% 02/01/12 17
Atherogenics Inc 4.500% 03/01/11 36
Bank New England 8.750% 04/01/99 9
Bank New England 9.500% 02/15/96 14
Bank New England 9.875% 09/15/99 7
BankUnited Cap 3.125% 03/01/34 65
BBN Corp 6.000% 04/01/12 0
Bearingpoint Inc 2.750% 12/15/24 67
Beazer Homes USA 4.625% 06/15/24 72
Beazer Homes USA 6.500% 11/15/13 72
Beazer Homes USA 6.875% 07/15/15 71
Beazer Homes USA 8.125% 06/15/16 73
Beazer Homes USA 8.375% 04/15/12 74
Beazer Homes USA 8.625% 05/15/11 75
Borden Inc 7.875% 02/15/23 74
Bowater Inc 6.500% 06/15/13 69
Bowater Inc 9.375% 12/15/21 72
Buffets Inc 12.500% 11/01/14 47
Burlington North 3.200% 01/01/45 55
Calpine Gener Co 11.500% 04/01/11 3
Central Tractor 10.625% 04/01/07 0
Charming Shoppes 1.125% 05/01/14 72
Charter Comm Inc 6.500% 10/01/27 67
CIH 9.920% 04/01/14 62
CIH 10.000% 05/15/14 64
CIH 11.125 01/15/14 64
Clark Material 10.750% 11/15/06 0
Claire's Stores 9.250% 06/01/15 74
Claire's Stores 10.500% 06/01/17 62
Clear Channel 4.900% 05/15/15 75
Coinmach Service 11.000% 12/01/24 1
Collins & Aikman 10.750% 12/31/11 2
Columbia/HCA 7.500% 11/15/95 75
Complete Mgmt 8.000% 12/15/03 0
Compucredit 3.625% 05/30/25 55
CompuCredit 5.875% 11/30/35 49
Compudyne Corp 6.250% 01/15/11 75
Constar Intl 11.000% 12/01/12 70
Countrywide Cap 8.050 06/15/27 74
Countrywide Finl 4.500% 06/15/10 72
Countrywide Finl 5.800% 06/07/12 74
Countrywide Finl 6.000% 03/23/21 70
Countrywide Finl 6.000% 12/14/35 57
Countrywide Finl 6.250% 05/15/16 59
Countrywide Finl 6.300% 04/2836 56
Countrywide Home 4.000% 03/22/11 72
Countrywide Home 4.125% 09/15/09 75
Countrywide Home 6.000% 01/24/18 61
Countrywide Home 6.150% 06/25/29 58
Countrywide Home 6.200% 07/16/29 58
Crown Cork & Seal 7.500% 12/15/96 75
Curagen Corp 4.000% 02/15/11 71
Dana Corp 5.850% 01/15/15 72
Dana Corp 6.500% 03/01/09 74
Dana Corp 7.000% 03/15/28 72
Dana Corp 7.000% 03/01/29 73
Dana Corp 9.000% 08/15/11 70
Decode Genetics 3.500% 04/15/11 68
Decode Genetics 3.500% 04/15/11 67
Delta Air Lines 8.000% 12/01/15 66
Delta Mills Inc 9.625% 09/01/07 15
Delphi Corp 6.197% 11/15/33 33
Delphi Corp 6.500% 08/15/13 66
Delphi Corp 8.250% 10/15/33 36
Dura Operating 8.625% 04/15/12 28
Dura Operating 9.000% 05/01/09 1
Encysive Pharma 2.500% 03/15/12 52
Epix Medical Inc 3.000% 06/15/24 68
Exodus Comm Inc 11.625% 07/15/10 0
Fedders North Am 9.875% 03/01/14 8
Finlay Fine Jwly 8.375% 06/01/12 68
Finova Group 7.500% 11/15/09 17
Ford Motor Co 6.375% 02/01/29 68
Ford Motor Co 6.500% 08/01/18 72
Ford Motor Co 6.625% 02/15/28 66
Ford Motor Co 6.625% 10/01/28 66
Ford Motor Co 7.125% 11/15/25 67
Ford Motor Co 7.400% 11/01/46 66
Ford Motor Co 7.450% 07/16/31 74
Ford Motor Co 7.500% 08/01/26 70
Ford Motor Co 7.700% 05/15/97 67
Ford Motor Co 7.750% 06/15/43 68
Ford Motor Cred 5.650% 01/21/14 73
Ford Motor Cred 5.750% 01/21/14 75
Ford Motor cred 5.900% 02/20/14 73
Ford Motor Cred 6.000% 01/21/14 75
Ford Motor Cred 6.000% 03/20/14 74
Ford Motor Cred 6.000% 11/20/14 72
Ford Motor Cred 6.000% 11/20/14 75
Ford Motor Cred 6.000% 01/20/15 71
Ford Motor Cred 6.000% 02/20/15 75
Ford Motor Cred 6.050% 03/20/14 74
Ford Motor Cred 6.050% 02/20/15 70
Ford Motor Cred 6.100% 02/20/15 73
Ford Motor Cred 6.250% 03/20/15 75
Ford Motor Cred 6.300% 05/20/14 74
Ford Motor Cred 6.300% 05/20/14 74
Ford Motor Cred 6.500% 02/20/15 72
Ford Motor Cred 7.250% 07/20/17 73
Ford Motor Cred 7.250% 07/20/17 73
Ford Motor Cred 7.500% 08/20/32 72
General Motors 6.750% 05/01/28 69
General Motors 7.375% 05/23/48 69
General Motors 7.400% 09/01/25 72
Georgia Gulf Crp 10.750% 10/15/16 70
GMAC 5.250% 01/15/14 73
GMAC 5.350% 01/15/14 74
GMAC 5.700% 06/15/13 75
GMAC 5.700% 12/15/13 75
GMAC 5.850% 06/15/13 73
GMAC 5.850% 06/15/13 73
GMAC 5.850% 06/15/13 66
GMAC 5.900% 01/15/19 67
GMAC 5.900% 01/15/19 61
GMAC 5.900% 02/15/19 65
GMAC 5.900% 10/15/19 65
GMAC 6.000% 07/15/13 73
GMAC 6.000% 12/15/13 72
GMAC 6.000% 02/15/19 70
GMAC 6.000% 02/15/19 68
GMAC 6.000% 02/15/19 68
GMAC 6.000% 03/15/19 66
GMAC 6.000% 03/15/19 66
GMAC 6.000% 03/15/19 71
GMAC 6.000% 03/15/19 67
GMAC 6.000% 03/15/19 67
GMAC 6.000% 04/15/19 66
GMAC 6.000% 09/15/19 61
GMAC 6.000% 09/15/19 63
GMAC 6.050% 08/15/19 64
GMAC 6.050% 08/15/19 68
GMAC 6.050% 10/15/19 66
GMAC 6.100% 11/15/13 65
GMAC 6.100% 09/15/19 68
GMAC 6.125% 10/15/19 61
GMAC 6.150% 11/15/13 65
GMAC 6.150% 12/15/13 64
GMAC 6.150% 08/15/19 66
GMAC 6.150% 09/15/19 67
GMAC 6.150% 10/15/19 67
GMAC 6.200% 11/15/13 72
GMAC 6.200% 04/15/19 65
GMAC 6.250% 07/15/13 74
GMAC 6.250% 11/15/13 69
GMAC 6.250% 12/15/18 69
GMAC 6.250% 01/15/19 65
GMAC 6.250% 04/15/19 73
GMAC 6.250% 05/15/19 68
GMAC 6.250% 07/15/19 65
GMAC 6.300% 11/15/13 74
GMAC 6.300% 08/15/19 65
GMAC 6.300% 08/15/19 68
GMAC 6.350% 04/15/19 66
GMAC 6.350% 07/15/19 65
GMAC 6.350% 07/15/19 66
GMAC 6.375% 08/01/13 68
GMAC 6.400% 12/15/18 69
GMAC 6.400% 11/15/19 66
GMAC 6.400% 11/15/19 69
GMAC 6.500% 05/15/12 72
GMAC 6.500% 06/15/12 73
GMAC 6.500% 06/15/12 72
GMAC 6.500% 02/15/13 74
GMAC 6.500% 06/15/13 68
GMAC 6.500% 11/15/13 74
GMAC 6.500% 06/15/18 68
GMAC 6.500% 11/15/18 70
GMAC 6.500% 12/15/18 70
GMAC 6.500% 12/15/18 67
GMAC 6.500% 05/15/19 67
GMAC 6.500% 01/15/20 66
GMAC 6.500% 02/15/20 66
GMAC 6.550% 12/15/19 69
GMAC 6.600% 06/15/12 73
GMAC 6.600 06/15/12 73
GMAC 6.600% 08/15/16 72
GMAC 6.600% 05/15/18 68
GMAC 6.600% 06/15/19 68
GMAC 6.600% 06/15/19 68
GMAC 6.650% 06/15/18 67
GMAC 6.650% 10/15/18 70
GMAC 6.650% 10/15/18 71
GMAC 6.650% 02/15/20 69
GMAC 6.700% 07/15/12 73
GMAC 6.700% 05/15/14 73
GMAC 6.700% 06/15/14 73
GMAC 6.700% 06/15/18 71
GMAC 6.700% 06/15/18 69
GMAC 6.700% 11/15/18 67
GMAC 6.700% 06/15/19 71
GMAC 6.700% 12/15/19 70
GMAC 6.700% 06/15/14 72
GMAC 6.750% 07/15/16 72
GMAC 6.750% 08/15/16 72
GMAC 6.750% 09/15/16 74
GMAC 6.750% 06/15/17 72
GMAC 6.750% 03/15/18 68
GMAC 6.750% 07/15/18 71
GMAC 6.750% 09/15/18 71
GMAC 6.750% 10/15/18 71
GMAC 6.750% 11/15/18 68
GMAC 6.750% 05/15/19 66
GMAC 6.750% 05/15/19 67
GMAC 6.750% 06/15/19 72
GMAC 6.750% 06/15/19 72
GMAC 6.750% 03/15/20 71
GMAC 6.800% 09/15/18 68
GMAC 6.800% 10/15/18 69
GMAC 6.850% 05/15/18 72
GMAC 6.875% 08/15/16 74
GMAC 6.875% 07/15/18 72
GMAC 6.900% 06/15/17 73
GMAC 6.900% 07/15/18 72
GMAC 6.900% 08/15/19 71
GMAC 6.950% 06/15/17 74
GMAC 7.000% 07/15/12 74
GMAC 7.000% 06/15/17 75
GMAC 7.000% 07/15/17 71
GMAC 7.000% 02/15/18 74
GMAC 7.000% 02/15/18 69
GMAC 7.000% 02/15/18 67
GMAC 7.000% 03/15/18 73
GMAC 7.000% 05/15/18 73
GMAC 7.000% 08/15/18 70
GMAC 7.000% 09/15/18 69
GMAC 7.000% 02/15/21 71
GMAC 7.000% 09/15/21 66
GMAC 7.000% 09/15/21 68
GMAC 7.000% 06/15/22 68
GMAC 7.000% 11/15/23 71
GMAC 7.000% 11/15/24 72
GMAC 7.000% 11/15/24 70
GMAC 7.000% 11/15/24 66
GMAC 7.050% 03/15/18 73
GMAC 7.050% 03/15/18 74
GMAC 7.050% 04/15/18 73
GMAC 7.100% 07/15/12 74
GMAC 7.125% 10/15/17 74
GMAC 7.150% 07/15/12 75
GMAC 7.150% 09/15/18 73
GMAC 7.150% 01/15/25 65
GMAC 7.150% 03/15/25 66
GMAC 7.200% 10/15/17 75
GMAC 7.200% 10/15/17 73
GMAC 7.250% 09/15/17 75
GMAC 7.250% 09/15/17 73
GMAC 7.250% 01/15/18 74
GMAC 7.250% 04/15/18 73
GMAC 7.250% 04/15/18 75
GMAC 7.250% 08/15/18 74
GMAC 7.250% 08/15/18 71
GMAC 7.250% 09/15/18 74
GMAC 7.250% 01/15/25 73
GMAC 7.250% 02/15/25 69
GMAC 7.250% 03/15/25 68
GMAC 7.300% 12/15/17 73
GMAC 7.300% 01/15/18 75
GMAC 7.350% 04/15/18 73
GMAC 7.375% 11/15/16 73
GMAC 7.375% 04/15/18 71
GMAC 7.400% 12/15/17 73
GMAC 7.500% 11/15/17 74
GMAC 7.500% 03/15/25 74
GMAC 8.000% 11/15/17 73
GMAC 8.000% 03/15/25 72
GMAC 8.650% 08/15/15 70
Gulf States STL 13.500% 04/15/03 0
Harrahs Oper Co 5.625% 06/01/15 74
Harrahs Oper Co 5.750% 10/01/17 70
Headwaters Inc 2.500% 02/01/14 74
Herbst Gaming 7.000% 11/15/14 67
Herbst Gaming 8.125% 06/01/12 68
Hines Nurseries 10.250% 10/01/11 74
HNG Internorth 9.625% 03/15/06 19
Ion Media 11.000% 07/31/13 67
Iridium LLC/CAP 10.875% 07/15/05 2
Iridium LLC/CAP 11.250% 07/15/05 1
Iridium LLC/CAP 13.000% 07/15/05 2
Iridium LLC/CAP 14.000% 07/15/05 2
K Hovnanian Entr 6.000% 01/15/10 68
K Hovnanian Entr 6.250% 01/15/16 68
K Hovnanian Entr 6.250% 01/15/16 68
K Hovnanian Entr 6.375% 12/15/14 70
K Hovnanian Entr 6.500% 01/15/14 69
K Hovnanian Entr 7.500% 05/15/16 71
K Hovnanian Entr 7.750% 05/15/13 57
K Hovnanian Entr 8.625% 01/15/17 72
K Hovnanian Entr 8.875% 04/01/12 59
Kaiser Aluminum 9.875% 02/15/02 5
Kaiser Aluminum 12.750% 02/01/03 6
Kimball Hill Inc 10.500% 12/15/12 51
Kmart Corp 9.350% 01/02/20 5
Kmart Corp 9.780% 01/05/20 0
KMart Funding 8.800% 07/01/10 9
KMart Funding 9.440% 07/01/18 60
Knight Ridder 6.875% 03/15/29 74
Liberty Media 3.250% 03/15/31 75
Liberty Media 3.750% 02/15/30 58
Liberty Media 4.000% 11/15/29 64
Lifecare Holding 9.250% 08/15/13 59
LTV Corp 8.200% 09/15/07 0
Magna Entertainm 7.250% 12/15/09 74
McSaver Financl 7.400% 02/15/02 5
McSaver Financl 7.600% 08/01/07 5
McSaver Financl 7.875% 08/01/03 5
Meritage Homes 6.250% 03/15/15 71
Metaldyne Corp 11.000% 06/15/12 67
Morris Publish 7.000% 08/01/13 73
Mosler Inc 11.000% 04/15/03 0
Movie Gallery 11.000% 05/01/12 27
Mrs Fields 9.000% 03/15/11 74
Muzak LLC 9.875% 03/15/09 53
National Steel Corp 8.375% 08/01/06 0
Neff Corp 10.000% 06/01/15 60
New Orl Grt N RR 5.000% 07/01/32 61
Northern Pacific RY 3.000% 01/01/47 51
Northern Pacific RY 3.000% 01/01/47 51
Northpoint Comm 12.875% 02/15/10 0
Northwest Steel & Wire 9.500% 06/15/01 0
NTK Holdings Inc 10.750% 03/01/14 58
Nutritional Src 10.125% 08/01/09 5
Nuveen Invest 5.500% 09/15/15 70
Oakwood Homes 7.875% 03/01/04 13
Oakwood Homes 8.125% 03/01/09 3
Oscient Pharma 3.500% 04/15/11 58
Oscient Pharma 3.500% 04/15/11 55
Outboard Marine 9.125% 04/15/17 5
Pac-West Telecom 13.500% 02/01/09 1
Pac-West Telecom 13.500% 02/01/09 3
Pegasus Satellite 13.500% 03/01/07 0
Phelps Dodge 6.125% 03/15/34 71
Pixelworks Inc 1.750% 05/15/24 70
Polaroid Corp 11.500% 02/15/06 0
Pope & Talbot 8.375% 06/01/13 26
Pope & Talbot 8.375% 06/01/13 24
Portola Packagin 8.250% 02/01/12 75
Primus Telecom 3.750% 09/15/10 59
Primus Telecom 8.000% 01/15/14 53
Propex Fabrics 10.000% 12/01/12 34
PSInet Inc 10.000% 02/15/05 0
Pulte Homes Inc 6.000% 02/15/35 74
Radian Group 5.375% 06/15/15 74
Radnor Holdings 11.000% 03/15/10 0
Rayovac Corp 8.500% 10/01/13 67
Read-Rite Corp 6.500% 09/01/04 0
Realogy Corp 10.500% 04/15/14 73
Realogy Corp 12.375% 04/15/15 64
Residential Cap 6.000% 02/22/11 62
Residentail Cap 6.125% 11/21/08 75
Residential Cap 6.375% 06/30/10 63
Residential Cap 6.500% 06/01/12 61
Residential Cap 6.500% 04/17/13 61
Residential Cap 6.875% 06/30/15 61
Rite Aid Corp 7.700% 02/15/27 71
RJ Tower Corp. 12.000% 06/01/13 3
Saint Acquisition 12.500% 05/15/17 50
ServiceMaster Co 7.100% 03/01/18 70
ServiceMaster Co 7.250% 03/01/38 70
ServiceMaster Co 7.450% 08/15/27 66
Six Flags Inc 4.500% 05/15/15 70
Six Flags Inc 9.625% 06/01/14 71
Six Flags Inc 9.750% 04/15/13 73
SLM Corp 5.000% 06/15/28 74
SLM Corp 5.050% 03/15/23 73
SLM Corp 5.250% 03/15/19 71
SLM Corp 5.250% 03/15/28 73
SLM Corp 5.250% 12/15/28 71
SLM Corp 5.400% 03/15/30 68
SLM Corp 5.400% 06/15/30 70
SLM Corp 5.400% 06/15/30 67
SLM Corp 5.450% 12/15/20 74
SLM Corp 5.450% 06/15/28 70
SLM Corp 5.500% 06/15/29 69
SLM Corp 5.500% 06/15/29 71
SLM Corp 5.500% 03/15/30 71
SLM Corp 5.500% 06/15/30 68
SLM Corp 5.500% 12/15/30 71
SLM Corp 5.500% 12/15/30 70
SLM Corp 5.550% 03/15/29 74
SLM Corp 5.600% 03/15/29 70
SLM Corp 5.600% 06/15/29 75
SLM Corp 5.600% 12/15/29 69
SLM Corp 5.600% 12/15/29 72
SLM Corp 5.650% 03/15/29 73
SLM Corp 5.650% 03/15/29 70
SLM Corp 5.650% 12/15/29 69
SLM Corp 5.650% 12/15/29 71
SLM Corp 5.650% 09/15/30 74
SLM Corp 5.700% 03/15/29 67
SLM Corp 5.700% 03/15/29 70
SLM Corp 5.700% 03/15/29 70
SLM Corp 5.700% 12/15/29 75
SLM Corp 5.700% 03/15/30 70
SLM Corp 5.750% 03/15/29 73
SLM Corp 5.750% 03/15/29 73
SLM Corp 5.750% 03/15/29 72
SLM Corp 5.750% 06/15/29 72
SLM Corp 5.750% 09/15/29 69
SLM Corp 5.750% 09/15/29 74
SLM Corp 5.750% 12/15/29 71
SLM Corp 5.750% 12/15/29 72
SLM Corp 5.750% 12/15/29 73
SLM Corp 5.750% 12/15/29 69
SLM Corp 5.750% 03/15/30 70
SLM Corp 5.800% 12/15/29 70
SLM Corp 5.850% 09/15/29 74
SLM Corp 5.850% 09/15/29 71
SLM Corp 5.850% 12/15/31 73
SLM Corp 6.000% 06/15/26 74
SLM Corp 6.000% 06/15/26 74
SLM Corp 6.000% 12/15/28 75
SLM Corp 6.000% 06/15/29 70
SLM Corp 6.000% 06/15/29 75
SLM Corp 6.000% 06/15/29 75
SLM Corp 6.000% 09/15/29 72
SLM Corp 6.000% 09/15/29 73
SLM Corp 6.000% 12/15/31 72
SLM Corp 6.000% 12/15/31 75
SLM Corp 6.050% 12/15/31 71
SLM Corp 6.100% 12/15/31 72
SLM Corp 6.150% 09/15/29 75
SLM Corp 6.200% 12/15/31 70
SLM Corp 6.250% 06/15/29 75
SLM Corp 6.250% 09/15/29 73
SLM Corp 6.350% 09/15/31 75
SLM Corp 6.400% 09/15/31 75
SLM Corp 6.500% 09/15/31 74
Spacehab Inc 5.500% 10/15/10 54
Special Devices 11.375% 12/15/08 66
Spectrum Brands 7.375% 02/01/15 72
Standard Pac Corp 5.125% 04/01/09 69
Standard Pac corp 6.000% 10/01/12 43
Standard Pac Corp 6.250% 04/01/14 62
Standard Pacific 6.500% 08/15/10 66
Standard Pac Corp 6.875% 05/15/11 65
Standard Pac corp 7.000% 08/15/15 62
Standard Pacific 7.750% 03/15/13 63
Standard Pacific 9.250% 04/15/12 36
Stanley-Martin 9.750% 08/15/15 67
Station Casinos 6.625% 03/15/18 74
Tekni-Plex Inc 12.750% 06/15/10 54
Teligent Inc 11.500% 12/01/07 0
Tenet Healthcare 6.875% 11/15/31 73
Times Mirror Co 6.610% 09/15/27 58
Times Mirror Co 7.250% 03/01/13 72
Times Mirror Co 7.250% 11/15/96 58
Times Mirror-New 7.500% 07/01/23 62
Tom's Foods Inc 10.500% 11/01/04 1
Tousa Inc 7.500% 03/15/11 5
Tousa Inc 7.500% 01/15/15 3
Tousa Inc 9.000% 07/01/10 37
Tousa Inc 9.000% 07/01/10 37
Tousa Inc 10.375% 07/01/12 4
Toys R Us 7.375% 10/15/18 74
Trans Mfg Oper 11.250% 05/01/09 60
TransTexas Gas 15.000% 03/15/05 0
Tribune Co 5.250% 08/15/15 63
True Temper 8.375% 09/15/11 62
TXU Corp 6.500% 11/15/24 71
TXU Corp 6.550% 11/15/34 69
United Air Lines 9.200% 03/22/08 49
United Air Lines 9.350% 04/07/16 30
United Air Lines 9.560% 10/19/18 54
United Air Lines 10.020% 03/22/14 49
United Air Lines 10.850% 02/19/15 30
Universal Stand 8.250% 02/01/06 0
US Air Inc. 10.750% 01/15/49 0
US Air Inc. 10.900% 01/01/49 0
Venture Holdings 9.500% 07/01/05 0
Venture Holdings 11.000% 06/01/07 0
Venture Holdings 12.000% 06/01/09 0
Vertis Inc 10.875% 06/15/09 66
Vesta Insur Grp 8.750% 07/15/25 2
Vicorp Restaurant 10.500% 04/15/11 58
Wachovia Corp 9.250% 04/10/08 54
Wachovia Corp 15.500% 12/05/07 48
WCI Communities 4.000% 08/05/23 72
WCI Communities 6.625% 03/15/15 54
WCI Communities 7.875% 10/01/13 58
WCI Communities 9.125% 05/01/12 60
Webster Capital 7.650% 06/15/37 75
Westpoint Steven 7.875% 06/15/05 0
William Lyon 7.500% 02/15/14 57
William Lyon 7.625% 12/15/12 60
William Lyon 10.750% 04/01/13 60
Wimar Op LLC/Fin 9.625% 12/15/14 69
Wimar Op LLC/Fin 9.625% 12/15/14 69
Winstar Comm Inc 10.000% 03/15/08 0
Winstar Comm Inc 12.750% 04/15/10 0
Wornick Co 10.875% 07/15/11 69
Young Broadcasting 8.750% 01/15/14 73
Ziff Davis Media 12.000% 08/12/09 56
*********
Monday's edition of the TCR delivers a list of indicative prices
for bond issues that reportedly trade well below par. Prices are
obtained by TCR editors from a variety of outside sources during
the prior week we think are reliable. Those sources may not,
however, be complete or accurate. The Monday Bond Pricing table
is compiled on the Friday prior to publication. Prices reported
are not intended to reflect actual trades. Prices for actual
trades are probably different. Our objective is to share
information, not make markets in publicly traded securities.
Nothing in the TCR constitutes an offer or solicitation to buy or
sell any security of any kind. It is likely that some entity
affiliated with a TCR editor holds some position in the issuers'
public debt and equity securities about which we report.
Each Tuesday edition of the TCR contains a list of companies with
insolvent balance sheets whose shares trade higher than $3 per
share in public markets. At first glance, this list may look like
the definitive compilation of stocks that are ideal to sell short.
Don't be fooled. Assets, for example, reported at historical cost
net of depreciation may understate the true value of a firm's
assets. A company may establish reserves on its balance sheet for
liabilities that may never materialize. The prices at which
equity securities trade in public market are determined by more
than a balance sheet solvency test.
A list of Meetings, Conferences and Seminars appears in each
Wednesday's edition of the TCR. Submissions about insolvency-
related conferences are encouraged. Send announcements to
conferences@bankrupt.com/
On Thursdays, the TCR delivers a list of recently filed chapter 11
cases involving less than $1,000,000 in assets and liabilities
delivered to nation's bankruptcy courts. The list includes links
to freely downloadable images of these small-dollar petitions in
Acrobat PDF format.
Each Friday's edition of the TCR includes a review about a book of
interest to troubled company professionals. All titles are
available at your local bookstore or through Amazon.com. Go to
http://www.bankrupt.com/books/to order any title today.
Monthly Operating Reports are summarized in every Saturday edition
of the TCR.
For copies of court documents filed in the District of Delaware,
please contact Vito at Parcels, Inc., at 302-658-9911. For
bankruptcy documents filed in cases pending outside the District
of Delaware, contact Ken Troubh at Nationwide Research &
Consulting at 207/791-2852.
*********
S U B S C R I P T I O N I N F O R M A T I O N
Troubled Company Reporter is a daily newsletter co-published
by Bankruptcy Creditors' Service, Inc., Fairless Hills,
Pennsylvania, USA, and Beard Group, Inc., Frederick, Maryland,
USA. Marie Therese V. Profetana, Shimero R. Jainga, Ronald C. Sy,
Joel Anthony G. Lopez, Cecil R. Villacampa, Jason A. Nieva,
Melanie C. Pador, Ludivino Q. Climaco, Jr., Loyda I. Nartatez,
Tara Marie A. Martin, Joseph Medel C. Martirez, and Peter A.
Chapman, Editors.
Copyright 2007. All rights reserved. ISSN: 1520-9474.
This material is copyrighted and any commercial use, resale or
publication in any form (including e-mail forwarding, electronic
re-mailing and photocopying) is strictly prohibited without prior
written permission of the publishers. Information contained
herein is obtained from sources believed to be reliable, but is
not guaranteed.
The TCR subscription rate is $775 for 6 months delivered via e-
mail. Additional e-mail subscriptions for members of the same firm
for the term of the initial subscription or balance thereof are
$25 each. For subscription information, contact Christopher Beard
at 240/629-3300.
*** End of Transmission ***