T R O U B L E D C O M P A N Y R E P O R T E R Wednesday, December 19, 2007, Vol. 11, No. 300 Headlines 24 HOUR FITNESS: Weak Operations Prompt S&P's Negative Outlook AEGIS ASSET-BACKED: Moody's Downgrades 27 Certificates' Ratings ALL AMERICAN: Insufficient Bid Offers Could Lead to Foreclosure AMERICAN ACHIEVEMENT: Moody's Junks Ratings on Senior PIK Notes AMERICAN HOME: Four Tranches' Ratings Downgraded by Moody's AMERICAN NATURAL: Files Amended Sept. 30, 2006 Quarterly Report AMORTIZING RESIDENTIAL: S&P Cuts Ratings on 33 Certificates AON CORP: Moody's Affirms Preferred Shelf's (P)Ba1 Rating ATLANTIC MARINE: Moody's Holds Ratings on Increased Senior Loan AURIGA LABS: Sells Stesso Pharmaceuticals to Malibu for $6 Million BANDY INCORPORATED: Case Summary & 19 Largest Unsecured Creditors BANC OF AMERICA: Fitch Downgrades Ratings on 12 Cert. Classes BARNERT HOSPITAL: Seeks April 2 Extension of Plan Filing Deadline BEAR STEARNS: S&P Lowers Ratings on Six Securities Classes BELVEDERE TRUST: Receives Notice of Default from Merrill Lynch BIG FINANCE: Files Schedules of Assets and Liabilities BUILDERS FIRSTSOURCE: Secures New $350 Million Debt Facility CA INC: Fitch Affirms 'BB+' Issuer Default Rating CALPINE CORP: Decreases Exit Facility to $7.6 Billion CELL THERAPEUTICS: Issues $23.25 Million of New 5.75% Senior Notes CENTRIX FINANCIAL: Disclosure Statement Hearing Set for January 9 CHESAPEAKE ENERGY: Moody's Cuts Unsecured Note's Ratings to Ba3 CHICAGO H&S: Committee Can Hire Polsinelli Shalton as Counsel CHL MORTGAGE: Moody's Cuts Ratings Due to Delinquency CHRYSLER LLC: In Talks with Nissan Motor on Bilateral Supply Deal CLEAR CHANNEL: Launches Tender Offer for $750 Mil. of Sr. Notes CLEVELAND ATHLETIC: Club Members Give Thumbs Up on Ch. 11 Filing COMPTON PETROLEUM: Mulls Strategic Options for Shareholder Benefit CONSTELLATION BRANDS: Completes $885MM Buyout of Fortune Brands CORPUS CHRISTI: Court Approves Thompson & Knight as Counsel CORPUS CHRISTI: Liberty Trust to Own 80% of Equity Under Plan CSFB ABS: S&P Downgrades Ratings on Four Certificate Classes CWABS INC: S&P Junks Ratings on Class M-1 and M-2 Securities CWALT INC: Moody's Downgrades Ratings on 62 2006 Tranches CWALT INC: Moody's Lower Ratings on 18 2005 Tranches DFC HEL: Reduction in Credit Enhancement Cues S&P to Cut Ratings DUNMORE HOMES: Panel Wants Stone Mitigation Sale Ruling Deferred EAGLEPICHER CORP: S&P Junks Rating on $70 Million Secured Loan EMPORIA PREFERRED: Stable Performance Cues Fitch to Hold Ratings ENRON CORP: Gets $25 Mil. from Deutsche Bank Under Settlement Pact EPICOR SOFTWARE: NSB Buy Won't Impact Ratings, Moody's Says EURAMAX INT'L: Weakness in Sales Cue Moody's to Revise Outlook FEDERAL-MOGUL: Plan's Effective Date Set for December 27 FIELDSTONE MORTGAGE: Can Access Up to $3.8MM in C-BASS DIP Funds FIRST FRANKLIN: S&P Lowers Rating on Two 2002-FFA Certificates FIRST FRANKLIN: S&P Lowers Ratings on Four 2003-FF5 Certificates FIRST HORIZON: Fitch Junks Ratings on 11 Certificate Classes GENERAL MOTORS: Commodity Costs Spark Price Increase on 2008 Cars GENERAL MOTORS: Begins 1st Phase of UAW Special Attrition Program GENERAL MOTORS: Lay-Offs 800 Tonawanda Workers Before Schedule GENESCO INC: Poor Performance Cues S&P's Ratings Downgrades GILBERT SPILMAN: Case Summary & Largest Unsecured Creditor GR PROPERTIES: Case Summary & Nine Largest Unsecured Creditors GS MORTGAGE: S&P Affirms BB+ Rating on Class L Certificates GREENPOINT MORTGAGE: Moody's Lower Ratings on 10 Tranches HARBORVIEW MORTGAGE: Delinquency Cues Moody's to Cut Ratings HELIX ENERGY: Considers Private Offering of $500 Mil. Sr. Notes HIGDON FURNITURE: Court Approves Edwin Rude as Bankruptcy Counsel HIGDON FURNITURE: Files Schedules of Assets and Liabilities HIGDON FURNITURE: U.S. Trustee Won't Appoint Creditors' Panel HIGHLANDS INSURANCE: Chapter 15 Petition Summary HIGHRIDGE ABS: Moody's Downgrades Ratings on Eight Notes ICAHN ENTERPRISES: S&P Upgrades Ratings from BB+ to BBB- ICONIX BRAND: Completes $60 Million Buyout of Nike's Starter(R) IMPERIAL PETROLEUM: Oct. 31 Balance Sheet Upside-Down by $8.0 Mil. JUPITER HIGH: Moody's Junks Ratings on Four Notes Classes LEHMAN XS: Delinquency Prompts Moody's to Downgrade Ratings LID LTD: Plan Mulls Three Treatments of Four Secured Claims LUMINENT MORTGAGE: Moody's Cut Ratings on 12 Tranches MEDICALCV INC: Oct. 31 Balance Sheet Upside-Down by $2 Million MORTGAGEIT TRUST: Moody's Downgrades Ratings on Two Tranches MOST HOME: Oct. 31 Balance Sheet Upside-Down by $1.5 Million NASDAQ STOCK: S&P's Retains BB Rating on Positive CreditWatch NATIONAL COAL: S&P Raises Rating on $55 Million Senior Notes NEWCASTLE MORTGAGE: Moody's Downgrades Ratings on Seven Tranches NOVASTAR MORTGAGE: Four Loan Classes' Ratings Lowered by S&P NWT URANIUM: Gets Notice of Default from Azimut Exploration NWT URANIUM: Balks at Third Party's Unsolicited Buy Offer ORIENTAL TRADING: S&P Lowers Ratings to B- with Stable Outlook ORION DIVERSIFIED: Posts $69,818 Net Loss in Qtr. Ended Oct. 31 PERFORMANCE PROPERTIES: Case Summary & 12 Largest Unsec. Creditors PERKINS & MARIE: S&P Junks Ratings with Negative Outlook PETRO ACQUISITIONS: Frost Brown Employed as Bankruptcy Counsel PETRO ACQUISITIONS: Richard Nelson Named as Chapter 11 Trustee PETRO ACQUISITIONS: Committee Taps Wood & Lamping as Counsel PHILADELPHIA AUTHORITY: Fiscal Stress Cues S&P to Cut Ratings PHILLIPS-VAN HEUSEN: Good Performance Cues Moody's to Hold Ratings PIKE NURSERY: Panel Wants Aurora Management as Financial Advisor PIKE NURSERY: Panel Wants to Hire Powell Goldstein as Co-Counsel PIKE NURSERY: Wants to Hire A&M Securities as Financial Advisor PLAINS EXPLORATION: Divesting $1.75 Bil. Properties to OPC & XTO PRICELINE.COM INC: S&P Puts B+ Rating under Positive CreditWatch PRUDENTIAL AMERICANA: Court Approves Lewis and Roca as Counsel PRUDENTIAL AMERICANA: Has Until December 27 to File Schedules PRUDENTIAL AMERICANA: Section 341(a) Meeting Set for January 4 PUREDEPTH INC: Posts $2.3 Million Net Loss in Qtr. Ended Oct. 31 QUAKER FABRIC: Has Until March 13 to Remove Civil Actions QUALIFIED EXCHANGE: Files Schedules of Assets and Liabilities QUEBECOR WORLD: Jacques Mallette Succeeds Wes Lucas as CEO RALI: Moody's Downgrades Ratings on 17 Tranches RITCHIE (IRELAND): Wants Ownership of Insurance Files Determined SAGITTARIUS BRANDS: S&P Revises Outlook to Negative from Stable SECURITIZED ASSET: S&P Downgrades Ratings on Four Classes SENTINEL MANAGEMENT: Has Until June 13 to File Chapter 11 Plan SMK SPEEDY: Court Approves Sale of Assets to Forum Leaseholds SOFA EXPRESS: Wants Clear Thinking as Financial Advisor SOFA EXPRESS: Taps BMC Group as Notice and Claims Agent ST BERNARD: S&P Upgrades Ratings on Sales Tax Revenue Debt ST MARY: Selling Oil & Gas Assets to Abraxas Energy for $140MM SYNOVA HEALTHCARE: Case Summary & 20 Largest Unsecured Creditors TED LEROY: Seeks Protection from Creditors Under CCAA TERWIN MORTGAGE: S&P Junks Rating on Class B-3 Certificates TKD DEVELOPMENT: Voluntary Chapter 11 Case Summary TRAVELOGIX INC: Case Summary & 19 Largest Unsecured Creditors TRUMP ENTERTAINMENT: Moody's Review Ratings for Possible Downgrade UNISYS CORP: Calls for the Redemption of 7-7/8% Senior Notes VALLEY HEALTH: Bankruptcy Filing Prompts S&P's Junk Ratings VOUGHT AIRCRAFT: Moody's Affirm Ratings with Negative Outlook WESTLAKE CHEMICAL: Completes Issuance of $250 Million Bonds WOLF HOLLOW: S&P Cuts Ratings on Senior Secured Bank Facility ZUNI MORTGAGE: Moody's Downgrade Ratings on Three Tranches * Fitch Believes Actions By Bank Sponsors Are Pos. to Investors * Moody's Says 35 Debt Issuers Have "Weak" SGL Ratings * Team Legal Offers Flat Fee on All Ch. 7 Consumer Bankruptcies * Beard Audio Conferences Presents * Upcoming Meetings, Conferences and Seminars ********* 24 HOUR FITNESS: Weak Operations Prompt S&P's Negative Outlook -------------------------------------------------------------- Standard & Poor's Ratings Services revised its outlook on 24 Hour Fitness Worldwide Inc. to negative from stable. "T[he] rating action is based on weak club operations as a result of the soft economy and the costs of the new club-level managers," explained Standard & Poor's credit analyst Andy Liu. The company's cushion of compliance with its bank covenant has narrowed as well. The 'B' corporate credit rating is affirmed. The ratings on 24 Hour Fitness Worldwide Inc. reflect the company's aggressive growth strategy, its high financial risk, and the competitive pressures in the fitness club industry. The company's geographic diversity and market-leading club clusters in several metropolitan areas partially offset these considerations. San Ramon, Calif.-based 24 Hour Fitness, with nearly 400 clubs, is one of the largest fitness club operators in the U.S. Its footprint of mid-market fitness clubs extends from the West Coast to the Southeast, with a significant concentration in California. AEGIS ASSET-BACKED: Moody's Downgrades 27 Certificates' Ratings --------------------------------------------------------------- Moody's Investors Service has downgraded twenty seven classes of certificates from four deals issued by Aegis Asset-Backed Securities Trust in 2005. The actions are based on the analysis of the credit enhancement provided by subordination, overcollateralization and excess spread relative to expected losses. A high pipeline of seriously delinquent loans has caused the protection available to those tranches to be diminished. Losses have eroded the overcollateralization, leaving the rated bonds less protected. As of November 2007, OC in Aegis Asset Backed Securities Trust, Mortgage Pass-Through Certificates, Series 2005-2 and 2005-3 was below target. As of November 2007, Aegis Asset Backed Securities Trust, Mortgage Pass-Through Certificates, Series 2005-4 had no dollar amount of overcollateralization for a required overcollateralization of $5.5MM Class B-7 took $430,845 of cumulative losses. Aegis Asset Backed Securities Trust, Mortgage Pass-Through Certificates, Series 2005-5 had no OC for a balance of $73,571,786 in Foreclosure and $50,124,842 in REO. Class B-7 took $522,762 of cumulative losses. These deals will stepdown in 2008 if they pass the triggers. The deals are backed by subprime, fixed and adjustable-rate mortgage loans. Complete rating actions are as follows: Issuer: Aegis Asset Backed Securities Trust 2005-2 -- Cl. M4, Downgraded to A3 from A1 -- Cl. M5, Downgraded to Baa2 from A2 -- Cl. M6, Downgraded to Ba1 from A3 -- Cl. B1, Downgraded to Ba3 from Baa1 -- Cl. B2, Downgraded to B2 from Baa2 -- Cl. B3, Downgraded to Caa1 from Baa3 Issuer: Aegis Asset Backed Securities Trust 2005-3 -- Cl. M5, Downgraded to Baa1 from A2 -- Cl. M6, Downgraded to Baa2 from A3 -- Cl. B1, Downgraded to Ba1 from Baa1 -- Cl. B2, Downgraded to B1 from Baa2 -- Cl. B3, Downgraded to B2 from Baa3 Issuer: Aegis Asset Backed Securities Trust 2005-4 -- Cl. M6, Downgraded to Baa2 from A3 -- Cl. B1, Downgraded to Ba1 from Baa1 -- Cl. B2, Downgraded to Ba3 from Baa2 -- Cl. B3, Downgraded to B2 from Baa3 -- Cl. B4, Downgraded to Caa3 from Ba3 -- Cl. B5, Downgraded to Ca from B1 Issuer: Aegis Asset Backed Securities Trust 2005-5 -- Cl. M2, Downgraded to A1 from Aa2 -- Cl. M3, Downgraded to A3 from Aa3 -- Cl. M4, Downgraded to Baa2 from A1 -- Cl. M5, Downgraded to Ba1 from A2 -- Cl. M6, Downgraded to Ba3 from A3 -- Cl. B1, Downgraded to B3 from Baa1 -- Cl. B2, Downgraded to Caa2 from Ba1 -- Cl. B3, Downgraded to Caa3 from Ba3 -- Cl. B4, Downgraded to Ca from B2 -- Cl. B5, Downgraded to C from Caa1 ALL AMERICAN: Insufficient Bid Offers Could Lead to Foreclosure --------------------------------------------------------------- The trustee overseeing the liquidation of All American Bottled Water Corp. has received three bids for the company's brewery plant, which are well below the market value, paving the way for a possible foreclosure, Christian Hill of The Olympian reports. According to The Olympian, the Hon. Paul J. Snyder of the U.S. Bankruptcy Court for the Western District Washington in Tacoma permitted the foreclosure of the property if the bankruptcy trustee cannot negotiate a sale within three weeks. According to the report, Bar K Inc. of Lafayette, Calif., the lender who financed the sale of the property in 2004, is in line for a foreclosure sale of the plant. All American Bottled Water Corp. bought the brewery plant from Miller Brewing Co. in 2004. The company eventually landed in bankruptcy in 2006 after three creditors filed involuntary petition against it (Bankr. W.D. Wash. Case No. 06-43133). AMERICAN ACHIEVEMENT: Moody's Junks Ratings on Senior PIK Notes --------------------------------------------------------------- Moody's Investors Service downgraded American Achievement Group Holding Corp.'s corporate family rating to B3 from B2, and its senior PIK notes to Caa2 from Caa1. Moody's also downgraded subsidiaries AAC Group Holding Corp. senior discount notes to Caa1 from B3, and American Achievement Corporation's senior subordinated notes to B2 from B1 and its senior secured credit facilities to Ba3 from Ba2. All entities are collectively referred to as "AAC." The rating action was prompted by AAC's weak credit metrics for the ratings category. In the press release dated June 6, 2006, Moody's stated that the B2 rating reflected the expectation that the company would improve debt-to-EBITDA to below 7.0 times in the twelve months following the issuance of the senior PIK notes. However, debt-to-EBITDA stood at 8.4 times (applying Moody's standard analytical adjustments) for the twelve months ended August 25, 2007. Moody's is also concerned that the rapid accretion of the discount notes will challenge the company's ability to restore credit metrics to levels that are supportive of a higher ratings level. The ratings outlook is stable. Historically, AAC has been successful expanding its operating margins despite modest growth rates, reflecting the benefit of its ongoing productivity initiatives and cost reduction activities. Moody's had expected this trend to continue following the issuance of the senior PIK notes in June 2006, thus allowing the company to improve its credit profile. However, AAC's EBITDA declined modestly for fiscal 2007 from the prior year. The rating is supported by the company's adequate liquidity and the likelihood for improved operating performance in fiscal 2008, largely due to the shutdown of the achievement publications segment (which had an operating loss in fiscal 2007). Moody's also notes that ring segment operating margins continue to hold up well despite volatile gold prices. Ratings downgraded: - American Achievement Group Holding Corp. -- Corporate family rating, to B3 from B2; -- Probability-of-default rating, to B3 from B2; -- $176 million (current value) senior PIK notes due 2012, to Caa2 (LGD5, 87%) from Caa1 (LGD5, 89%). - AAC Group Holding Corp. -- $118 million (current value) senior discount notes due 2012, to Caa1 (LGD4, 63%) from B3 (LGD4, 69%). - American Achievement Corporation -- $150 million senior subordinated notes due 2012, to B2 (LGD3, 34%) from B1 (LGD3, 41%); -- $40 million senior secured revolving credit facility due 2010, to Ba3 (LGD1, 7%) from Ba2 (LGD1, 9%); -- $87 million senior secured term loan due 2011, Ba3 (LGD1, 7%) from Ba2 (LGD1, 9%). AAC's B3 corporate rating is primarily driven by its high leverage, inadequate coverage of interest expense, its small scale, narrow product focus on yearbooks and class rings, and some regional concentration in the Southern U.S. The rating also considers the company's aggressive financial policy given its emphasis on debt-financed distributions to its owners. Notwithstanding these risks, the rating is supported by AAC's substantial market shares in each of its niche product segments, its high customer retention rates, good operating margins, and its highly efficient manufacturing footprint. The rating is further supported by AAC's large network of exclusive independent sales representatives and its ability to meet the high requirements of its customers under narrow production and delivery timeframes, that serves as a substantial barrier to entry. The stable outlook reflects Moody's expectation that AAC will improve its operating performance and continue to generate positive cash flow that is applied to debt reduction, such that debt to EBITDA improves from current levels and EBITA interest coverage remains close to 1.0 times. The outlook also reflects Moody's expectation that the company will maintain adequate liquidity, including compliance with the covenants governing its credit facilities. Headquartered in Austin, Texas, American Achievement Corporation is a leading provider of school-related affinity products and services. The company holds strong market shares in each of its product segments - yearbooks, class rings, and graduation products. The company reported sales of $316 million for the twelve months ended August 25, 2007. AMERICAN HOME: Four Tranches' Ratings Downgraded by Moody's ----------------------------------------------------------- Moody's Investors Service has downgraded the ratings of four tranches from one transaction issued by American Home Mortgage Assets Trust in 2006. The collateral backing these classes consists of primarily first lien, adjustable-rate negative amortizing Alt-A mortgage loans. The ratings were downgraded and placed under review for downgrade based on higher than anticipated rates of delinquency, foreclosure, and REO in the underlying collateral relative to credit enhancement levels. In its analysis Moody's has also applied its published methodology updates to the non delinquent portion of the transactions. Issuer: American Home Mortgage Assets Trust 2006-6 -- Cl. M-7, Downgraded to Baa3, previously Baa1, -- Cl. M-8, Downgraded to Ba1, previously Baa2, -- Cl. M-9, Downgraded to Ba2, previously Baa3, -- Cl. B-1, Downgraded to B2, previously Ba2. AMERICAN NATURAL: Files Amended Sept. 30, 2006 Quarterly Report --------------------------------------------------------------- American Natural Energy Corp. filed on Dec. 14, 2007, an amendment to its Form 10-QSB/A for the quarter ended Sept. 30, 2006. The company had previously filed a Form 10-QSB for that quarter on Nov. 20, 2006. However, that filing was not reviewed by an independent public accountant as required under Securities and Exchange Commission rules because of the company's severe liquidity problem at that time. According to the company, the review wasn't conducted since it was facing severe liquidity problem and shortage of working capital which resulted in the company being unable to pay its independent accounting firm. The interim financial statements included in the amendment have been reviewed by Malone & Bailey PC, which the company engaged on July 16, 2007. The company reported a net loss of $765,676 on revenues of $323,355 for the third quarter ended Sept. 30, 2006, compared with a net loss of $1.1 million on revenues of $387,581 in the same period in 2005. At Sept. 30, 2006, the company's consolidated financial statements showed $7.9 million in total assets and $22.8 million in total liabilities, resulting in a $14.9 million total stockholders' deficit. The company's consolidated financial statements at Sept. 30, 2006, also showed strained liquidity with $1.2 million in total current assets available to pay $21.5 million in total current liabilities. Full-text copies of the company's consolidated financial statements for the quarter ended Sept. 30, 2006, are available for free at http://researcharchives.com/t/s?2670 2005 Going Concern Doubt PricewaterhouseCoopers LLP, in Tulsa, Okla., expressed substantial doubt about American Natural Energy Corp.'s ability to continue as a going concern after auditing the company's consolidated financial statements for the years ended Dec. 31, 2005, and 2004. The auditing firm pointed to the company's working capital deficiency and accumulated deficit at Dec. 31, 2005. About American Natural Based in Tulsa, Oklahoma, American Natural Energy Corporation (TSX Venture: ANR.U) -- http://www.annrg.com/-- was formed in January 2001 to focus on the acquisition, development and exploitation of oil and natural gas reserves. ANEC's objective is to grow an oil and natural gas reserve base through development, exploitation and exploration drilling within the current and future boundaries of its St. Charles Parish, Louisiana properties, including its ExxonMobil Joint Development area. AMORTIZING RESIDENTIAL: S&P Cuts Ratings on 33 Certificates ----------------------------------------------------------- Standard & Poor's Ratings Services lowered its ratings on 33 classes of mortgage pass-through certificates issued by 10 Amortizing Residential Collateral Trust transactions. S&P removed 11 of the lowered ratings from CreditWatch with negative implications. Furthermore, two ratings from an additional transaction remain on CreditWatch with negative implications. Finally, S&P affirmed its ratings on the remaining classes from these and three additional Amortizing Residential Collateral Trust deals (see list). The downgrades reflect realized losses that have exceeded monthly excess interest cash flow, thereby reducing overcollateralization (O/C). As a result, O/C for the downgraded transactions has fallen to the following levels (series: O/C amount ($); % of target, O/C target ($)): -- 2001-BC5: $377,297; 26.1%; $1,448,111; -- 2001-BC6: $2,960,744; 69.1%; $4,282,011; -- 2002-BC1: $5,270,968; 67.3%; $7,836,196; -- 2002-BC3: $1,361,468; 68.7%; $1,982,533; -- 2002-BC5: $2,514,243; 50.1%; $5,015,812; -- 2002-BC6: $844,514; 24.6%; $3,432,275; -- 2002-BC7: $971,019; 29.3%; $3,310,137; -- 2002-BC8: $2,237,932; 35.3%; $6,343,090; -- 2002-BC9: $1,437,281; 42.7%; $3,369,395; and -- 2004-1: $0; 0%; $2,991,254. Our loss projections indicate that the current performance trends may further compromise credit support for the downgraded classes. The transactions with lowered ratings have sizeable loan amounts that are severely delinquent (90-plus-days, foreclosures, and REOs), which suggests that the unfavorable performance trends are likely to continue. The severe delinquencies relative to O/C are as follows (series: severe delinquency amount ($), % of current pool balance, multiple of O/C): -- 2001-BC5: $5.825 million; 29.02%; 15.4x; -- 2001-BC6: $9.818 million; 26.18%; 3.3x; -- 2002-BC1: $24.271 million; 24.71%; 4.6x; -- 2002-BC3: $9.957 million; 19.45%; 7.3x; -- 2002-BC5: $7.927 million; 19.51%; 3.2x; -- 2002-BC6: $13.866 million; 20.71%; 16.4x; -- 2002-BC7: $13.427 million; 32.52%; 13.8x; -- 2002-BC8: $17.577 million; 22.76%; 7.9x; -- 2002-BC9: $12.540 million; 30.53%; 8.7x; and -- 2004-1: $17.897 million; 13.24%; Not applicable ($0 in O/C). As of the November 2007 remittance report, cumulative realized losses for the downgraded deals were as follows (series: realized loss ($), % of original pool balance): -- 2001-BC5: $13,643,735; 2.36%; -- 2001-BC6: $20,790,855; 2.43%; -- 2002-BC1: $31,466,212; 2.01%; -- 2002-BC3: $11,150,256; 1.41%; -- 2002-BC5: $19,339,152; 2.31%; -- 2002-BC6: $27,119,017; 2.22%; -- 2002-BC7: $21,198,350; 2.56%; -- 2002-BC8: $25,077,559; 1.98%; -- 2002-BC9: $12,714,488; 1.89%; and -- 2004-1: $10,567,501; 1.77%. S&P removed the ratings on five classes from CreditWatch negative because we lowered them to 'CCC'. According to Standard & Poor's surveillance practices, ratings lower than 'B-' on classes of certificates or notes from RMBS transactions are not eligible to be on CreditWatch negative. The downgrade of class M1 from series 2002-BC7 reflects realized losses that have consistently outpaced excess interest, which has decreased credit support levels for the class since we upgraded it to 'AAA' from 'AA+' on March 21, 2005. As a result, O/C for series 2002-BC7 has dropped to $971,019, compared with a target of $3,310,137. Additionally, the class has subordination of $6,123,522. The ratings on classes M3 and B1 from series 2002-BC4 remain CreditWatch with negative implications because the transaction has O/C of $1,897,324, down from a target of $3,325,460. This transaction has $7.113 million in loans that are severely delinquent or 16.26% of the current pool balance, and the series has an O/C multiple of 2.14x. Standard & Poor's will continue to closely monitor the performance of this transaction. If monthly losses decline to a point at which they no longer outpace monthly excess interest and the level of O/C has not been further eroded, S&P will affirm the ratings and remove them from CreditWatch. Conversely, if losses continue to outpace excess interest and the levels of O/C continue to decline, S&P will take further negative rating actions. Standard and Poor's lowered six additional ratings and removed them from CreditWatch negative because S&P believes they have credit support levels that are sufficient to maintain the lowered ratings. The affirmations reflect credit support levels that are sufficient to maintain the current ratings. Subordination, O/C, and excess interest cash flow provide credit support for these transactions. Additionally, series 2001-BC1, 2002-B10, 2002-BC2, 2001-BC5, 2002-BC3, 2002-BC6, 2002-BC8, 2002- BC9, 2002-BC6, 2002-BC1, and 2002-BC7 benefit from loan-level primary mortgage insurance policies issued by either PMI Mortgage Insurance Co. ('AA' financial strength rating {FSR}); Radian Guaranty Inc. ('AA' FSR); or Mortgage Guaranty Insurance Corp. (MGIC; 'AA-' FSR). The collateral for these series consists of 30-year subprime, fixed- or adjustable-rate mortgage loans that are secured by first liens on one- to four-family residential properties. Ratings Lowered and Removed from CreditWatch Negative Amortizing Residential Collateral Trust Rating ------ Series Class To From ------ ----- --- ---- 2001-BC5 M1 CCC B/Watch Neg 2002-BC5 M3 BB BBB/Watch Neg 2002-BC7 M5 B- BBB/Watch Neg 2002-BC7 M6 B- BBB-/Watch Neg 2002-BC7 B1 CCC BB/Watch Neg 2002-BC7 B2 CCC B/Watch Neg 2002-BC7 B3 CCC B/Watch Neg 2002-BC8 M3 B- BB/Watch Neg 2002-BC8 M4 CCC BB-/Watch Neg 2002-BC9 M4 B BB/Watch Neg 2002-BC9 B B- BB-/Watch Neg Ratings Lowered Amortizing Residential Collateral Trust Rating ------- Series Class To From ------ ----- --- ---- 2001-BC6 M1 BBB AA+ 2001-BC6 M2 B A 2002-BC1 M1 AA AA+ 2002-BC1 M2 BB A 2002-BC1 B BB- BBB 2002-BC3 M1 AA AA+ 2002-BC3 M2 B A+ 2002-BC3 B1 CCC BBB- 2002-BC6 M1 BBB AA+ 2002-BC6 M2 B A+ 2002-BC6 M3 CCC BB 2002-BC6 B CCC B 2002-BC7 M1 AA+ AAA 2002-BC7 M2 BB AA+ 2002-BC7 M3 B+ AA 2002-BC7 M4 B AA- 2002-BC8 M1 AA AA+ 2002-BC8 M2 B+ A+ 2002-BC9 M2 A A+ 2002-BC9 M3 BB BBB+ 2004-1 M9 CCC B 2004-1 B1 D CCC Ratings Remaining on CreditWatch Negative Amortizing Residential Collateral Trust Series Class Rating ------ ----- ------- 2002-BC4 M3 BBB/Watch Neg 2002-BC4 B1 BB-/Watch Neg Ratings Affirmed Amortizing Residential Collateral Trust Series Class Rating ------ ----- ------- 2001-BC1 A1 AAA 2001-BC1 M1 A 2001-BC5 A-1 AAA 2001-BC5 M2 CCC 2001-BC6 A AAA 2002-BC1 A AAA 2002-BC2 A AAA 2002-BC2 M1 AA+ 2002-BC3 A AAA 2002-BC4 A AAA 2002-BC4 M1 AA+ 2002-BC4 M2 A+ 2002-BC5 M1 AAA 2002-BC5 M2 AA- 2002-BC6 A1, A2, A4 AAA 2002-BC7 A1 AAA 2002-BC8 A1, A3 AAA 2002-BC9 M1 AA+ 2002-BC10 A4 AAA 2002-BC10 M1 B 2002-BC10 M2 CCC 2002-BC10 M3 CCC 2004-1 A5 AAA 2004-1 M1 AA+ 2004-1 M2 AA 2004-1 M3 AA- 2004-1 M4 A+ 2004-1 M6 A- 2004-1 M7 BBB+ 2004-1 M8 BB+ AON CORP: Moody's Affirms Preferred Shelf's (P)Ba1 Rating --------------------------------------------------------- Moody's Investors Service has placed the insurance financial strength ratings of Combined Insurance Company of America (CICA -- long-term IFSR at A3, short-term IFSR at Prime-2) on review for possible upgrade. Moody's has also affirmed the ratings of CICA's parent company, Aon Corporation (NYSE: AOC -- senior unsecured debt at Baa2), while maintaining a positive rating outlook for Aon. These rating actions follow the announcement that Aon has agreed to sell CICA to ACE Limited (NYSE: ACE -- senior unsecured shelf rated (P)A3) for cash consideration of $2.4 billion. Aon has also agreed to sell its subsidiary, Sterling Life Insurance Company, to Munich Reinsurance Company (IFSR of Aa3) for cash consideration of $352 million. Aon expects to take a one-time cash dividend of $325 million from CICA prior to closing these transactions. The Sterling transaction is expected to be completed by the end of the first quarter of 2008 and the CICA transaction by the end of the second quarter of 2008. CICA and Sterling are the main components of Aon's Insurance Underwriting segment, which has been subject to a strategic review by Aon since July 2007. For Aon, the proposed transactions are expected to generate after- tax cash proceeds and dividends of approximately $2.6 billion, subject to certain transaction costs and adjustments. In conjunction with the sale announcement, Aon has increased its existing share repurchase authorization by $2.6 billion, bringing the total dollar amount currently available for share repurchases to about $2.8 billion. According to Moody's, CICA's ratings reflect its unique franchise in the specialized market for individual accident and health insurance, its relatively stable liability structure, its profitable core business, and its sound capitalization. Partially mitigating these strengths is the mature nature of the company's core A&H business. Moody's said that the review for possible upgrade will focus on CICA's strategic fit within ACE's A&H operations, the insurer's ultimate asset profile and capital structure, and any financial support that may be provided by ACE. The rating agency said that Aon's ratings reflect its strong market presence and its expertise in providing risk management solutions to middle-market, national and global clients. The ratings also reflect the firm's broad geographic and product diversification. These strengths are tempered by Aon's moderate, albeit improving, operating margins and by widespread rate softening in the property & casualty insurance market. Moody's further noted that the planned asset sales will initially reduce Aon's operating income and its business diversification. Nevertheless, the rating agency believes that Aon will remain well diversified across its continuing business segments -- Risk and Insurance Brokerage Services, and Consulting -- and across geographic regions. Aon's positive rating outlook also incorporates Moody's expectation that the company will maintain good financial flexibility and liquidity, despite the increase in its share repurchase authorization. These ratings have been placed on review for possible upgrade: -- Combined Insurance Company of America -- long-term insurance financial strength at A3, -- short-term insurance financial strength at Prime-2. These ratings have been affirmed with a positive outlook: -- Aon Corporation -- senior unsecured debt at Baa2, -- senior unsecured shelf at (P)Baa2; -- subordinated shelf at (P)Baa3; -- preferred shelf at (P)Ba1; -- Aon Finance N.S.1, ULC -- backed senior unsecured debt at Baa2; -- Aon Capital Trust A -- backed preferred securities at Baa3. These rating has been affirmed with a stable outlook: -- Aon Corporation -- short-term rating for commercial paper at Prime-2. Moody's last rating action on CICA took place on July 19, 2007, when its rating outlook was changed to stable from positive. Moody's last rating action on Aon took place on June 19, 2006, when provisional ratings were assigned to the company's unlimited universal shelf registration. CICA, headquartered in Chicago, Illinois, primarily offers low- cost, modest-benefit supplemental accident, disability, health and life insurance in the U.S. and Canada (where it is a leading provider), and also in Western Europe, Australia, New Zealand, and Thailand. Sterling sells Medicare Advantage and Medicare Supplement products, including Medicare Part D prescription drug plans in the U.S. CICA reported statutory net admitted assets of $3.2 billion and adjusted statutory capital of $967 million as of September 30, 2007. Aon, also based in Chicago, is a global professional services firm with subsidiaries offering risk management services, insurance and reinsurance brokerage, human capital and management consulting, and specialty insurance underwriting through some 500 offices in more than 120 countries. Aon reported total revenue of $7.3 billion and net income of $657 million through the first nine months of 2007. Stockholders' equity was $5.6 billion as of Sept. 30, 2007. ATLANTIC MARINE: Moody's Holds Ratings on Increased Senior Loan --------------------------------------------------------------- Moody's Investors Service has affirmed the ratings of Atlantic Marine Holding Company and changed the outlook to negative from stable. The outlook change follows Atlantic Marine's announcement that it will fund a $68.5 million dividend by increasing outstandings under its senior secured term loan to $185 million from $149 million and by drawing cash on hand by $34 million. Ratings affirmed: -- Corporate Family Rating at B1 -- Probability of Default at B2 -- Senior Secured Revolving Credit Facility at B1 LGD3, 36% -- Senior Secured Term Loan at B1 LGD3, 36% Atlantic Marine's B1 rating reflects the company's small revenue base, its heavy dependence on large ship repair contracts from the U.S. Government, and the inherent volatility in its sales level, operating margins, and cash flow generation. Despite the increase in debt associated with the planned dividend, credit metrics are on par for the B1 rating due to better than expected performance and better utilization of the company's Mobile, Alabama facility. Moody's also cites positive demand characteristics in the U.S. government and commercial ship repair sector as being further supportive of the ratings. The improved throughput at the Mobile facility coupled with the company's increased backlog from several pending orders, bodes well for 2008 earnings. The change in the rating outlook to negative from stable reflects Moody's concern over a more aggressive financial strategy that is reflected in Atlantic Marine's decision to quickly increase leverage in anticipation of more robust operating performance during 2008. Although the current outlook for 2008 is favorable, Moody's believes that Alantic Marine's operating performance is highly vulnerable to the cancellation of large contracts or to any softening in demand levels. Moreover, in March of 2007 Atlantic Marine amended its senior secured credit facility to increase the size of its term loan by $50 million to $170 million which, along with cash on hand, funded redemption of $62 million of preferred stock and a $7 million dividend. The additional $68.5 million dividend and related term loan increase now planned reflects a financial policy more likely to impede rapid debt reduction in the future without continuing, strong operating results. This financial policy, combined with the performance volatility inherent in being a small operator who has relatively high customer concentration and large, critical orders, will more likely expose the ratings to downward pressure should revenues, margins or cash flows fall short of expectation. The ratings would be subject to downward revision if EBITDA margins were to decline materially below 20%, if the ratio of debt to EBITDA was to be expected in the high 3.0 times range or if annual free cash flow of less than $10 million was to be expected. Beyond the senior secured term loan amendment sought, Atlantic Marine will seek to amend its senior secured revolving credit facility to increase the commitment size to $45 million from $40 million. Moody's notes that the amount of cash on hand and availability under the revolving credit facility should be adequate to support seasonal working capital requirements during the coming quarters. Although presently adequate, the company's liquidity profile is not particularly robust and could be strained if the operating environment and earning levels erode. Any narrowing of liquidity measures would add further downward ratings pressure. Atlantic Marine Holding Company, headquartered in Jacksonville, FL, is a provider of ship maintenance, repair, overhaul, and conversion services for U.S. Navy, government, commercial and offshore oil and gas industry vessels. The company operates two full service shipyards in Jacksonville, Fla., and Mobile, Ala., as well as a third smaller facility at Naval Station Mayport. AURIGA LABS: Sells Stesso Pharmaceuticals to Malibu for $6 Million ------------------------------------------------------------------ Auriga Laboratories Inc. disclosed in a regulatory filing with the Securities and Exchange Commission that it sold its wholly owned subsidiary, Stesso Pharmaceuticals LLC, to Malibu Pharma Inc. for $6 million. Stesso holds the license rights to sell and title to inventory of products Extendryl(R), Levall(R), and Dura-vent(TM). Malibu executed and delivered to the company a promissory note for $6 million. The company was granted a 270-day option to repurchase Stesso for 150% of the purchase price. In addition, for a period of two years, Malibu will reimburse the company for sales commissions paid to its independent sales representatives for sale of the Products. The promissory note is for a term of three years with an annual interest rate of 8%, with interest payments to the company beginning after the first year. Malibu must pay the company 70% of its total net revenue collected from sales of the Products during the first 2 calendar quarters of 2008, which shall be applied toward principal on the note. Beginning in the first calendar quarter after payment in full of all principal and interest on the note, Malibu must pay 5% of its net revenue collected from sales of Products by Stesso to the company. A copy of the purchase agreement and promissory note are available for free at http://researcharchives.com/t/s?266c About Auriga Laboratories Based in Norcross, Ga., Auriga Laboratories Inc. (OTC BB: ARGA) -- http://www.aurigalabs.com/-- is a specialty pharmaceutical company building an industry changing commission- based sales model targeting over 2000 filled territories by 2009. The company's high-growth business model combines driving revenues through a variable cost commission-based sales structure, acquisition and development of FDA approved products, all of which are designed to enhance its growing direct relationships with physicians nationwide. Auriga's current product portfolio includes 27 marketed products and 6 products in development covering various therapeutic categories. Going Concern Doubt As reported in the Troubled Company Reporter on April 3, 2007, Williams & Webster P.S., in Spokane, Wash., expressed substantial doubt about Auriga Laboratories Inc.'s ability to continue as a going concern after auditing the company's consolidated financial statements for the year ended Dec. 31, 2006. The auditor pointed to the company's substantial operating losses since inception, negative working capital, and limited cash resources. BANDY INCORPORATED: Case Summary & 19 Largest Unsecured Creditors -------------------------------------------------------- Debtor: Bandy Incorporated dba Total Mattress Company dba King Koil Mid-South P.O. Box 51213 Bowling Green, KY 42102-5513 Bankruptcy Case No.: 07-11515 Type of Business: The Debtor manufactures mattresses and bedsprings. Chapter 11 Petition Date: December 17, 2007 Court: Western District of Kentucky (Bowling Green) Judge: Joan A. Lloyd Debtor's Counsel: Scott A. Bachert, Esq. Harned, Bachert & Denton, LLP 324 East 10th Street P.O. Box 1270 Bowling Green, KY 42102 Tel: (270) 782-3938 Fax: 270-781-4737 http://www.hbd-law.com/ Total Assets: $2,555,651 Total Debts: $2,896,142 Debtor's 19 Largest Unsecured Creditors: Entity Claim Amount ------ ------------ M&J T Investments $267,069 114 Corporate Court Bowling Green, KY 42103 Leggett & Platt $249,602 #1 Leggett Road Carthage, MO 64836 Nu-Foam Products, Inc. $226,738 230 South Elizabeth Street Spencerville, OH 45887 Comfort Solutions $192,506 John and Tressia Bandy $127,249 BLR $98,400 Carpenter Co. $54,666 Global Non Wovens $45,488 Bekaert Textiles USA Inc. $43,071 Comfuel $39,493 ISO Poly Films Inc. $37,340 Great Lakes Forest Products Inc. $24,558 OHM Systems Inc. $20,266 AEP Industries Inc. $20,248 USF Holland $18,947 Hanes Industries $17,473 Bechik Products Inc. $17,185 Global Textile Alliance $14,477 Mid South Adhesives Inc. $12,841 BANC OF AMERICA: Fitch Downgrades Ratings on 12 Cert. Classes ------------------------------------------------------------- Fitch Ratings has taken these rating actions on the Banc of America Alternative Loan Trust mortgage pass-through certificates listed below: Series ALT 2003-10 Groups 1 - 4: -- Classes 1-A-1, 1-IO, 1-PO, 2-A-1 to 2-A-4, 2-IO, 2-PO, 3-A-1, 3-IO, 3-PO, 4-A-1 to 4-A-3, 4-IO and 4-PO affirmed at 'AAA'; -- Class 30-B1 affirmed at 'AA'; -- Class 30-B2 affirmed at 'A'; -- Class 30-B3 affirmed at 'BBB'; -- Class 30-B4 affirmed at 'BB'; -- Class 30-B5, rated 'B', placed on Rating Watch Negative. Series ALT 2003-10 Groups 5 & 6: -- Classes 5-A-1, 5-A-2, 5-IO, 5-PO, 6-A-1 to 6-A-3, 6-IO and 6-PO affirmed at 'AAA'; -- Class 15-B1 affirmed at 'AA'; -- Class 15-B2 affirmed at 'A'; -- Class 15-B3, rated 'BBB', placed on Rating Watch Negative; -- Class 15-B4 downgraded to 'B' from 'BB'; -- Class 15-B5 downgraded to 'C/DR5' from 'B'. Series ALT 2004-2 Groups 1 - 3: -- Classes 1-A-1, 1-IO, 1-PO, 2-A-1 to 2-A-7, 2-IO, 2-PO, 3-A-1, 3-IO, 3-PO and 30-B-IO affirmed at 'AAA'; -- Class 30-B1 affirmed at 'AA'; -- Class 30-B2 affirmed at 'A'; -- Class 30-B3 affirmed at 'BBB'; -- Class 30-B4 affirmed at 'BB'; -- Class 30-B5 affirmed at 'B'. Series ALT 2004-2 Groups 4 & 5: -- Classes 4-A-1, 4-IO, 4-PO, 5-A-1, 5-IO and 5-PO affirmed at 'AAA'; -- Class 15-B1 affirmed at 'AA'; -- Class 15-B2 affirmed at 'A'; -- Class 15-B3 affirmed at 'BBB'; -- Class 15-B4 affirmed at 'BB'; -- Class 15-B5 downgraded to 'CCC/DR2' from 'B' and removed from Rating Watch Negative. Series ALT 2004-11 Groups 1 & 2: -- Classes 1-CB-1, 1-CB-IO, 1-X-PO, 2-CB-1, 2-CB-2, 2-CB-IO and 2-X-PO affirmed at 'AAA'; -- Class 30-B1 affirmed at 'AA'; -- Class 30-B2 affirmed at 'A'; -- Class 30-B3 affirmed at 'BBB'; -- Class 30-B4 downgraded to 'B+' from 'BB'; -- Class 30-B5 downgraded to 'C/DR4' from 'B'. Series ALT 2004-11 Groups 3 & 4: -- Classes 3-A-1, 3-15-IO, 3-15-PO, 3-X-PO, 4-A-1, 4-15-IO, F4-15-PO and 4-X-PO affirmed at 'AAA'; -- Class 15-B1 affirmed at 'AA'; -- Class 15-B2 affirmed at 'A'; -- Class 15-B3 affirmed at 'BBB'; -- Class 15-B4 affirmed at 'BB'; -- Class 15-B5, rated 'B', placed on Rating Watch Negative. Series ALT 2005-8: -- Classes 1-CB-1 to 1-CB-6, 1-CB-R, 2-CB-1, 3-CB-1, 4-A-1, 5-A-1, 15-IO, CB-IO and A-PO affirmed at 'AAA'; -- Class B1 affirmed at 'AA'; -- Class B2 affirmed at 'A'; -- Class B3 downgraded to 'BBB-' from 'BBB'; -- Class B4 downgraded to 'B+' from 'BB'; -- Class B5 downgraded to 'C/DR4' from 'B'. Series ALT 2006-9: -- Classes A-1 to A-4, 1-CB-1, 1-CB-R, 2-NC-1, CB-IO, NC-IO, and 30-PO affirmed at 'AAA'; -- Class B1 affirmed at 'AA'; -- Class B2 downgraded to 'A-' from 'A'; -- Class B3 downgraded to 'BB' from 'BBB'; -- Class B4 downgraded to 'B' from 'BB' and placed on Rating Watch Negative; -- Class B5 downgraded to 'C/DR5' from 'B'. The affirmations reflect satisfactory credit enhancement relationships to future loss expectations and affect approximately $1.15 billion in outstanding certificates as of the November 2007 distribution date. The downgraded classes total approximately $13.6 million and the classes placed on Rating Watch Negative total approximately $3.1 million. These rating actions reflect the deterioration of CE relative to future expected losses. The underlying collateral in these transactions consists of fixed- rate, fully-amortizing mortgage loans secured by first liens on one- to four-family residential properties. Bank of America, N.A. (rated 'RPS1' by Fitch for ALT-A transactions) is the servicer for these loans. These transactions are seasoned from a range of 11months (ALT 2006-9) to 48 months (ALT 2003-10). The pool factors range from 48% to 89%. The 90+ delinquencies range from 0% (ALT 2004-2 Groups 4 & 5) to 2.47% (ALT 2006-9) of current collateral balances. The cumulative losses range from 0% (ALT 2006-9) to 0.09% (ALT 2003-10 Groups 5 & 6) of original collateral balances. BARNERT HOSPITAL: Seeks April 2 Extension of Plan Filing Deadline ----------------------------------------------------------------- Nathan and Miriam Barnert Memorial Hospital Association dba Barnert Hospital asks the United States Bankruptcy Court for the District of New Jersey to extend its exclusive periods to: a) file a plan until April 2, 2008; and b) solicit acceptances of that plan until June 1, 2008. The Debtor's exclusive period to file a plan expired on Dec. 13, 2007. The Debtor says it needs additional time to complete negotiations with creditors and prospective buyers in connection with a sale of the Debtor's assets. "If such negotiations come to fruition, the Debtor will require time to prepare and file pleadings to proceed with a court- approved auction and sale of assets," David J. Adler, Esq., at McCarter & English LLP relates. In addition, the Debtor tells the Court that the sale of its assets is necessary in the formulation of a plan of reorganization as well as in its exit from Chapter 11. The hearing to consider the Debtor's request has been set for 10:00 a.m. on Jan. 8, 2008. 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. BEAR STEARNS: S&P Lowers Ratings on Six Securities Classes ---------------------------------------------------------- Standard & Poor's Ratings Services lowered its ratings on six classes of mortgage-backed securities issued from Bear Stearns Asset Backed Securities I Trust's series 2003-HE1, 2004-HE1, and 2005-HE9. Concurrently, S&P affirmed its ratings on the remaining 21 classes from these transaction. The downgrades reflect a reduction in credit enhancement caused by monthly realized losses. Monthly realized losses for the three series with lowered ratings have consistently exceeded excess interest during the past six months. As of the November remittance date, average monthly losses have outpaced excess spread by 4.6x, 3.1x, and 1.8x for series 2003-HE1, 2004-HE1, and 2005-HE9, respectively. Severe delinquencies (90-plus days, foreclosures and REOs), as a percentage of the current pool balances, are 9.35%, 11.13%, and 22.64% for series 2003-HE1, 2004-HE1, and 2005-HE9, respectively. The overcollateralization level for each transaction is below its target. The affirmations reflect sufficient credit enhancement for the current ratings. The classes with affirmed ratings have actual and projected credit support percentages that are in line with their original levels. Subordination, O/C, and excess spread provide credit support for these transactions. Series 2003-ABF1 is also supported by bond insurance. The class A certificates from this series are insured by Financial Security Assurance Inc. ('AAA' financial strength rating), while the class M certificates are insured by Radian Asset Insurance ('AA' financial strength rating). The collateral for series 2003-HE1, 2004-HE1, and 2005-HE9 originally consisted primarily of fixed- and adjustable-rate mortgage loans secured by first and second liens on one- to four- family residential properties. The collateral for series 2003- ABF1 originally consisted of fixed-rate, business- and consumer-purpose home equity loans secured by first- or second-lien mortgages or deeds of trust on residential properties. Ratings Lowered Bear Stearns Asset Backed Securities I Trust Rating ------- Series Class To From ------ ----- -- ---- 2003-HE1 M-4 BB BBB+ 2003-HE1 M-5 B BBB 2003-HE1 M-6 CCC BBB- 2004-HE1 M-5 BB BBB 2004-HE1 M-6 B BBB- 2005-HE9 M-5 BBB- BBB Ratings Affirmed Bear Stearns Asset Backed Securities I Trust Series Class Rating ------ ----- ------- 2003-ABF1 A, M AAA 2003-HE1 M-1 AA 2003-HE1 M-2 A 2003-HE1 M-3 A- 2004-HE1 M-1 AA 2004-HE1 M-2 A 2004-HE1 M-3 A- 2004-HE1 M-4 BBB+ 2005-HE9 I-A-1, I-A-2, I-A-3 AAA 2005-HE9 II-A-1, II-A-2, M-1 AAA 2005-HE9 M-2 AA 2005-HE9 M-3 AA- 2005-HE9 M-4 A 2005-HE9 M-6 BB 2005-HE9 M-7 B 2005-HE9 M-8 CCC BELVEDERE TRUST: Receives Notice of Default from Merrill Lynch -------------------------------------------------------------- Belvedere Trust Mortgage Corporation, a wholly owned subsidiary of Anworth Mortgage Asset Corporation, received a Notice of Default from Merrill, Lynch, Pierce, Fenner & Smith Incorporated on Dec. 13, 2007, relative to a repurchase agreement balance of approximately $3.1 million secured by non-Agency mortgage-backed securities with a collateral value claimed to be approximately $1.1 million. According to the Anworth's website, Belvedere Trust is being accounted for as a discontinued operation. In addition, on Dec. 12, 2007, Belvedere's custodian, Citigroup Global Markets Inc., notified Belvedere that its custody account had a negative balance of approximately $6.5 million based on liabilities related to certain non-Agency mortgage-backed securities held at Citi. Belvedere believes that the custodian will make a claim against Belvedere for payment of the negative balance. Belvedere intends to contest such claim. Anworth said that it is neither a co-party to nor a guarantor of Belvedere's repurchase agreements or claims against Belvedere. Anworth further said it will write-off the remainder of approximately $7 million of its investment in Belvedere during the fourth quarter ended Dec. 31, 2007. About Anworth Mortgage Headquartered in Santa Monica, Calif., Anworth Mortgage Asset Corporation (NYSE:ANH) -- http://www.anworth.com/-- is a mortgage real estate investment trust which invests in mortgage assets including mortgage pass-through certificates, collateralized mortgage obligations, mortgage loans and other real estate securities. Anworth generates income for distribution to stockholders primarily based on the difference between the yield on its mortgage assets and the cost of its borrowings. About Belvedere Trust Belvedere Trust Mortgage Corporation was formed in 2003 to acquire and own mortgage loans on high-quality, residential homes, purchased and owned by people with an excellent credit history. Belvedere Trust invests in residential mortgage loans and home equity lines that meet its investment criteria. The company also securitizes its mortgage loans as a way of financing them in the capital markets. Belvedere Trust invests primarily in jumbo mortgage loans that finance the more desirable homes in the higher-end of the market and generally provide attractive returns for its investors. The company's portfolio is diversified, consisting of loans of various types, primarily adjustable-rate mortgages. The loans are located throughout the United States. The company is a 100%-owned subsidiary of Anworth Mortgage and is organized as a real estate investment trust. BIG FINANCE: Files Schedules of Assets and Liabilities ------------------------------------------------------ BIG Finance and Insurance Services Inc. submitted to the U.S. Bankruptcy Court for the Central District of California its schedules of assets and liabilities, disclosing: Name of Schedule Assets Liabilities ---------------- ---------- ----------- A. Real Property B. Personal Property $1,000,821 C. Property Claimed as Exempt D. Creditors Holding $180,000 Secured Claims E. Creditors Holding 391,337 Unsecured Priority Claims F. Creditors Holding 33,462,813 Unsecured Nonpriority Claims ---------- ----------- TOTAL $1,000,821 $34,034,150 Laguna Niguel, California-based BIG Finance and Insurance Services Inc. is a personal credit financial institution. The Debtor filed for chapter 11 protection on Oct. 31, 2007 (Bankr. C.D. Calif. Case No. 07-13634). Adam M. Starr, Esq., at Greenberg Traurig LLP represents the Debtor in its restructuring efforts. BUILDERS FIRSTSOURCE: Secures New $350 Million Debt Facility ------------------------------------------------------------ Builders FirstSource Inc. entered into a new $350 million revolving credit facility jointly arranged by Wachovia Capital Markets LLC and UBS Investment Bank with a consortium of banks led by Wachovia Bank N.A. as Administrative Agent. Also participating in the facility was General Electric Capital Corporation. "We believe this credit facility further enhances our liquidity and will enable us to better manage our business through the difficult housing environment," Floyd Sherman, chief executive officer, said. "Our current borrowing capacity under the agreement is approximately $150 million, which coupled with our cash on hand provides over $250 million of liquidity." The facility provides for a $350 million revolving credit line which is available for working capital and general corporate purposes. The available borrowing capacity, or borrowing base, is derived primarily from a percentage of the company's eligible accounts receivable and inventory, as defined by the agreement. Direct borrowings under the facility bear interest at a margin over a base rate or the Eurodollar rate. Loans are secured by substantially all assets of the company, accounts receivable and inventory, and are guaranteed by the company and certain of its subsidiaries. The facility, which is scheduled to mature approximately five years from the execution of the agreement, replaces the company's existing $110 million long-term revolver, which was scheduled to mature in February 2010, and its $15 million pre-funded letter of credit facility, which was scheduled to mature in August 2011. About Builders FirstSource Headquartered in Dallas, Texas, Builders FirstSource Inc. (Nasdaq: BLDR) -- http://www.bldr.com/-- is a supplier and manufacturer of structural and related building products for residential new construction. The company operates in 13 states, principally in the southern and eastern United States, and has 68 distribution centers and 61 manufacturing facilities, many of which are located on the same premises as its distribution facilities. Manufacturing facilities include plants that manufacture roof and floor trusses, wall panels, stairs, aluminum and vinyl windows, custom millwork and pre-hung doors. Builders FirstSource also distributes windows, interior and exterior doors, dimensional lumber and lumber sheet goods, millwork and other building products. * * * Moody's Investor Service placed Builders FirstSource Inc.'s probability of default rating at 'B1' in September 2006. The rating still hold to date with a negative outlook. CA INC: Fitch Affirms 'BB+' Issuer Default Rating ------------------------------------------------- Fitch Ratings has affirmed these ratings of CA, Inc.: -- Issuer Default Rating at 'BB+'; -- Senior unsecured revolving credit facility at 'BB+'; -- Senior unsecured debt at 'BB+'. Additionally, Fitch has revised the Rating Outlook on CA to Stable from Negative. Fitch's actions affect approximately $2.8 billion of total debt, including the company's $1.0 billion RCF. The Stable Rating Outlook reflects CA's consistent operating and financial performance and Fitch's expectation that the company would utilize its financial flexibility provided by excess cash and free cash flow to finance any intermediate acquisition, dividends or share buyback activity. Fitch believes that significant near-term acquisition activity appears limited given management's current focus on integrating previous acquisitions and improving operating efficiency. Also considered in revising the Rating Outlook to Stable is CA's successful refinancing and extension of its RCF to August 2012 and CA's progress in resolving outstanding accounting issues, including complete resolution of all material weaknesses. Positive rating actions could occur if: -- No significant capital structure changes occur over the next year with a commitment to limit acquisition and share buybacks to excess cash on hand and free cash flow; -- Credit protection measures trend positively through growth in operating profits and/or debt reduction; -- CA's recurring revenue model limits the potential financial stress from a less favorable macro-economic environment, particularly in the U.S., which accounted for approximately 54% of the company's total revenue over the last twelve months. Negative rating actions could occur if: -- CA's financial performance declines materially in the event of an economic downturn in the U.S., particularly for the financial services vertical, indicating a less resilient business model relative to Fitch's expectations; -- Significant debt-financed acquisitions with considerable integration risk and/or unrelated to core business. Ratings concerns center on a slowing and more challenging mainframe market, the likelihood for additional albeit less significant restructuring costs, and strong competition from larger companies with strong financial flexibility. Fitch believes the company's lack of participation in the software industry's ongoing consolidation activity could constrain longer term revenue growth rates. The ratings continue to be supported by CA's: i) solid recurring revenue profile, driven by the high barriers to entry with significant 'switching' costs associated with the software industry; ii) consistent annual free cash flow approximating $750 million to $1 billion; and iii) size, diversity, and quality of the company's installed base (approximately 98% of Fortune 500) and depth of product line. Credit protection measures remain solid for the rating category and Fitch expects that they will remain flat over the intermediate term. Total debt to cash flow from operations was 2 times for the latest twelve months ended Sept. 30, 2007, compared to 2.4x for the fiscal year ended March 31, 2007, and 1.3x for fiscal year 2006. Fitch believes liquidity at Sept. 30, 2007 was solid and supported by: i) approximately $1.9 billion of cash and cash equivalents (approximately 66% overseas); ii) $1 billion senior unsecured RCF due August 2012, of which approximately $250 million is undrawn and available; and iii) aforementioned consistent annual free cash flow. Free cash flow for fiscal year 2008 ending March 31, 2008 is anticipated to be adversely impacted by cash restructuring and higher cash tax payments but should increase going forward as the company's restructuring initiatives begin to translate into higher profitability and capital spending on the company's global SAP implementation trends downward. Total debt as of Sept. 30, 2007 was approximately $2.6 billion, consisting primarily of: i) $750 million of borrowings outstanding under the company's RCF; ii) $350 million senior notes due April 2008; iii) $460 million convertible senior notes due 2009; iv) $500 million senior notes due 2009; and v) $500 million senior notes due 2014. CALPINE CORP: Decreases Exit Facility to $7.6 Billion ----------------------------------------------------- Calpine Corp. and its debtor-affiliates, and the consortium of lenders composed of Goldman Sachs Credit Partners L.P., Credit Suisse, Credit Suisse Securities (USA) LLC, Deutsche Bank Securities Inc., Deutsche Bank Trust Company Americas, and Morgan Stanley Senior Funding, Inc., authority from the U.S. Bankruptcy Court for the Southern District of New York to decrease the principal amount of the exit facility financing to $7,600,000,000. The Amended Exit Facility will consist of: -- $4,000,000,000 of existing DIP conversion facility, -- $2,300,000,000 senior secured Tranche B term loan, -- $1,000,000,000 senior secured revolving debt, and -- $300,000,000 of bridge loan debt. The Debtors and the Exit Facility Arrangers also agreed to extend the time by which the Debtors must close their financing from January 31 to February 7, 2008. Richard M. Cieri, Esq., at Kirkland & Ellis, LLP, in New York, relates that the amendments are a result of arms'-length negotiations between the Debtors and the Exit Facility Arrangers. The Exit Facility Arrangers raised their concerns regarding the Debtors' ability to meet the closing conditions, including the financial covenants, under the original $8,000,000,000 Exit Facility agreement. Mr. Cieri states that the amendment is necessary given that the Exit Facility is among the most valuable assets of the Debtors' estates and is the bedrock on which their Plan of Reorganization is built. Mr. Cieri adds that the Amended Exit Facility provides key benefits to the Debtors, including, giving them additional room to meet their Consolidated Leverage Ratio, Consolidated Interest Coverage Ratio, and Consolidated Senior Leverage Ratio tests on a pro forma basis. The revisions and clarifications in the Amended Exit Facility promote covenant compliance, operational flexibility, and financing stability, both at the Debtors' exit from Chapter 11 and going forward, Mr. Cieri continues. A copy of the Amended Exit Facility is available for free at: http://bankrupt.com/misc/calpine_Dec13ExitFacility.pdf The Debtors have also sought and obtained the Court's permission to file under seal an amended Fee Letter, which contains information regarding the structure and allocation among lenders and arrangers of the fees relating to the Amended Exit Facility. The Official Committee of Unsecured Creditors said in a statement filed with the Court that it supports the approval of the Amended Exit Facility because it will provide the Debtors with sufficient financing to emerge from Chapter 11, repay certain prepetition secured debt and operate their businesses in the ordinary course post-bankruptcy. About Calpine Based in San Jose, California, Calpine Corporation (OTC Pink Sheets: CPNLQ) -- http://www.calpine.com/-- supplies customers and communities with electricity from clean, efficient, natural gas-fired and geothermal power plants. Calpine owns, leases and operates integrated systems of plants in 21 U.S. states and in three Canadian provinces. Its customized products and services include wholesale and retail electricity, gas turbine components and services, energy management and a wide range of power plant engineering, construction and maintenance and operational services. The company and its affiliates filed for chapter 11 protection on Dec. 20, 2005 (Bankr. S.D.N.Y. Lead Case No. 05-60200). Richard M. Cieri, Esq., Matthew A. Cantor, Esq., Edward Sassower, Esq., and Robert G. Burns, Esq., Kirkland & Ellis LLP represent the Debtors in their restructuring efforts. Michael S. Stamer, Esq., at Akin Gump Strauss Hauer & Feld LLP, represents the Official Committee of Unsecured Creditors. As of Aug. 31, 2007, the Debtors disclosed total assets of $18,467,000,000, total liabilities not subject to compromise of $11,207,000,000, total liabilities subject to compromise of $15,354,000,000 and stockholders' deficit of $8,102,000,000. On Feb. 3, 2006, two more affiliates, Geysers Power Company, LLC, and Silverado Geothermal Resources, Inc., filed voluntary chapter 11 petitions (Bankr. S.D.N.Y. Case Nos. 06-10197 and 06-10198). On Sept. 20, 2007, Santa Rosa Energy Center, LLC, another affiliate, also filed a voluntary chapter 11 petition (Bankr. S.D.N.Y. Case No. 07-12967). On June 20, 2007, the Debtors filed their Chapter 11 Plan and Disclosure Statement. On Aug. 27, 2007, the Debtors filed their Amended Plan and Disclosure Statement. Calpine filed a Second Amended Plan on Sept. 19, 2007 and on Sept. 24, 2007, filed a Third Amended Plan. On Sept. 25, 2007, the Court approved the adequacy of the Debtors' Disclosure Statement and entered a written order on September 26. The hearing to consider confirmation of that Plan has been adjourned to today, Dec. 19, 2007. (Calpine Bankruptcy News, Issue No. 76; Bankruptcy Creditors' Service Inc.; http://bankrupt.com/newsstand/or 215/945-7000). CELL THERAPEUTICS: Issues $23.25 Million of New 5.75% Senior Notes ------------------------------------------------------------------ Cell Therapeutics Inc. issued approximately $23.25 million of its new 5.75% Convertible Senior Notes due 2011 and 5,459,574 shares of its common stock, no par value in exchange for approximately $10.5 million of its outstanding 5.75% Convertible Senior Subordinated Notes due 2008 and approximately $25.6 of its outstanding 5.75% Convertible Subordinated Notes due 2008. The New Notes and Common Stock were issued in a private placement exempt from the registration requirements of the Securities Act of 1933, as amended. Approximately $19.8 million in Senior Subordinated Notes and Subordinated Notes remain outstanding and mature in June 2008. The New Notes bear interest at 5.75% per annum and are convertible for shares of CTI common stock at the rate of 333.33 shares per $1,000 principal amount of New Notes, which is equivalent to an initial conversion price of approximately $3 per share. The New Notes rank equal in right of payment with all existing and future senior indebtedness of CTI, including the Corporation's 6.75% Convertible Senior Notes due 2010 and 7.5% Convertible Senior Notes due 2011, and rank senior in right of payment to the corporation's outstanding Senior Subordinated Notes, Subordinated Notes and 4% Convertible Senior Subordinated Notes due 2010. About Cell Therapeutics Based in Seattle, Cell Therapeutics Inc. (NasdaqGM: CTIC) -- http://cticseattle.com/-- is a biopharmaceutical company committed to developing an integrated portfolio of oncology products aimed at making cancer more treatable. * * * As reported in the Troubled Company Reporter on Nov. 15, 2007, Cell Therapeutics Inc.'s consolidated balance sheet at Sept. 30, 2007, showed $84.9 million in total assets, $180.8 million in total liabilities, and 149,000 in minority interest in subsidiary, resulting in a $119.3 million total shareholders' deficit. CENTRIX FINANCIAL: Disclosure Statement Hearing Set for January 9 ----------------------------------------------------------------- The Hon. Elizabeth E. Brown of the U.S. Bankruptcy Court for the District of Colorado set hearing at 1:30 p.m., on Jan. 9, 2008, to consider the adequacy of the Disclosure Statement explaining the Liquidating Chapter 11 Plan filed by Centrix Financial, LLC, and its debtor-affiliates and the Official Committee of Unsecured Creditors. Under the Plan, Administrative Tax Claims totaling $3.3 million and Priority Tax Claims totaling $13,000 will be paid in full. The Debtors disclose that along with the Committee, they have identified potential claims in excess of $100 million against the Debtors' former CEO, Robert Sutton, and various other parties, based among other things on fraud and breach of duty to Debtors and their creditors. The Plan Proponents say that the claims against Sutton and other non-debtor insiders and entities are critical assets of the Debtors' estates since they will be used to pay unsecured claims. Holders of Subordinated Claims, the Plan Proponents say, will receive nothing under the Plan. On the effective date, equity interests will be terminated and cancelled and holders will not receive anything under the Plan. Headquartered in Reno, Nevada, Centrix Financial LLC provides subprime auto loans. Centrix and its affiliates filed separate Chapter 11 petitions on Sept. 19, 2006 (Bankr. Dist. Nev. Lead Case No. 06-50631). CMGN LLC, one of the affiliates, filed its Chapter 11 petition on Sept. 4, 2006 (Bankr. Dist. Nev. Case No:06-50631). Three of Centrix Financial's creditors, IFC Credit Corporation, Suntrust Leasing, and Wells Fargo Equipment Finance, had filed involuntary chapter 11 petition against the Debtors on Sept. 15, 2006 (Bankr. Dist. Colo. Case No. 06-16403). The Creditors assert they are owed more than $4.6 million. Lee M. Kutner, Esq., at Kutner Miller, P.C., and David von Gunten, Esq., at Von Gunten Law LLC, represent the creditor petitioners. The Debtors' cases has been consolidated and transferred on Sept. 27, 2006 (Bankr. Dist. Colo. Lead Case No. 06-16403). Craig D. Hansen, Esq., Thomas J. Salerno, Esq., and Sean T. Cork, Esq., at Squire, Sanders & Dempsey, L.L.P.; and Lawrence Bass, Esq., and Elizabeth K. Flaagan, Esq., at Holme Roberts & Owen LLP, represent the Debtors. The Official Committee of Unsecured Creditors is represented by Douglas W. Jessop, Esq., and Kerstin E. Kass, Esq., at Jessop & Company, P.C., and Michael P. Richman, Esq., at Foley & Lardner LLP. Kurtzman Carson Consultants LLC is the Debtors' claims agent. In schedules filed with the Court, Centrix Financial disclosed total assets of $23,928,171 and total debts of $109,189,359. CHESAPEAKE ENERGY: Moody's Cuts Unsecured Note's Ratings to Ba3 --------------------------------------------------------------- Moody's Investors Service reduced Chesapeake Energy's senior unsecured note ratings from Ba2 (LGD 4; 60%) to Ba3 (LGD 4; 61%) and confirmed its Ba2 corporate family, Baa3 hedge facility, and Ba2 probability of default ratings. Moody's also assigned a negative rating outlook and reduced the speculative grade liquidity rating from SGL-2 to SGL-3, pending review of CHK's year-end 2007 SFAS 69 data, operating trends at the time, and the evolving nature of its asset monetization activity. Execution of CHK's asset monetizations may move the liquidity rating back to SGL-2. These actions conclude a review for downgrade begun November 20, 2007. Natural gas focused CHK is the largest independent U.S. natural gas producer and third largest overall. The CFR confirmation stems from its particularly large reserve and acreage scale; multiple core basin diversification and intensity; widely diversified geologic risk; production growth trajectory, up by over 22% since fourth quarter 2006, and large visible drilling inventory across the sophisticated-to-low risk spectrum; a durable reserve life; production risk diversified across 37,500 producing wells; and supportive, though more moderate, natural gas prices. CHK continues its pattern of inducing conversion of convertible securities with its conversion of two series of convertible preferred stock to common. Since we assign a 50% debt basket to its cumulative preferred stock, that particular conversion reduces adjusted debt. However, ratings caution and the negative outlook results from CHK's multiple year ongoing surge in front end capital spending and debt relative to productive assets, at a time of reduced sector margins, and move to secured debt and asset backed funding to close the cash flow shortfall. Substantial hedge monetizations from fourth quarter 2006 through 2007 prevented leverage from being higher still. The negative outlook also reflects that much of its asset monetization and debt reduction plan appears, in Moody's view, to be debt or debt-like in nature, and that the operating cash flow shortfall after capital spending will remain high through 2009. CHK will monetize producing assets to fund very heavy growth capital spending. The reduced Ba3 note rating reflects expected sustained contractual subordination of the senior unsecured notes sufficient to notch the notes below the CFR under Moody's Loss Given Default notching methodology. The driver of rising contractual subordination has been a second half 2007 surge in secured bank revolver debt to fund capital spending well in excess of cash flow, with this pressure likely to continue through 2009, as well as CHK's expansion of its secured revolver to $3 billion. Depending on their terms and degree of debt characteristics, planned asset monetizations may or may not reduce contractual subordination, and they may remain in adjusted debt and leverage. CHK believes it holds a ten-year drilling inventory, assuming supportive natural gas and oil prices. CHK holds 12.5 million net acres of leasehold interests and its operations span most of the conventional and unconventional producing regions in the onshore lower 48 states, excluding the Rocky Mountains and points west. CHK holds leading positions in the Mid-Continent, Fort Worth Barnett Shale, Appalachia, Ark-La-Tex, Permian and Delaware Basins, and the Fayetteville Shale. In the past, one hallmark of CHK's funding strategy was its frequent refinancing of secured revolver debt with senior unsecured notes, convertible notes, and preferred and common stock. CHK's decision to cease tapping those markets for the foreseeable future brings a large shift in the proportion of secured versus unsecured debt, amply sufficient under LGD to notch the notes under the CFR. CHK intends to reduce a substantial proportion of secured debt with proceeds from asset monetizations though the pace and scale of that activity currently does not appear sufficient to stave off a notching of the notes. To the degree secured debt is brought back to historic much lower levels, the ratings notch could be removed to place the note rating at the then existing CFR. CHK is simultaneously sustaining a heavy capital program to meet organic growth targets conveyed to the market and a heavy multi- year acquisition program that, in recent years, contained a large proportion of high cost undeveloped and unproven acreage needing proportionally heavy investment several years before it can be proportionally productive. It also holds significant risk until sound productivity and full-cycle economics are assured. While the spending rate may arise from a desire to accelerate conversion of unproven acreage to production, it may also be due in part to mandatory spending deadlines in acquired acreage governing when CHK's activity must begin. Aggressive spending momentum continues in fourth quarter 2007. Though the pace of acquisitions is slowing, CHK spent over $1.8 billion in the first nine months of 2007 to acquire unproven acreage and over $700 million for proven reserves. This excludes 2007 organic capital outlays and a pending Barnett Shale acquisition of 2,000 net lease acres. CHK's balance sheet debt and adjusted debt escalated substantially faster than did funded proven developed reserves, total reserves, and production to ranges well exceeding expectations for a Ba2 issuer. Leverage on PD reserves rose from slightly over $8/boe at year-end 2005, to over $9/boe for 2006, and to the $11/boe range on fourth quarter debt and September 30, 2007 PD reserves. Adjusted debt plus future FAS 69 capital spending to bring proven non-producing reserves to production rose from the $9/boe range on 2005 proven reserves to well over $11/boe on Sept. 30, 2007 total reserves. Leverage on production rose substantially as well, while cash margins declined. Between year-end 2006 and September 30, 2007, balance sheet debt rose by roughly $3.5 billion and balance sheet debt plus capitalized leases increased approximately $4.0 billion. The combination of preferred stock, balance sheet debt, and moved from $9.9 billion at year-end 2006 to $13.9 billion by September 30, 2007. CHK's third quarter 2007 10-Q indicates that revolver borrowings had risen substantially again in fourth quarter 2007, dampening the impact of preferred stock conversions to common. The lowering of the liquidity rating from SGL-2 to SGL-3 reflects expected much higher revolver usage than in the past with $7 billion in 2008 capital spending and acquisitions expected versus an estimated roughly $5.5 billion in operating cash flow. Undrawn liquidity under the current revolver could be limited if CHK were unable to reduce bank borrowings with sufficient proceeds from its production monetization, debt proceeds from a potential private midstream MLP, and other possible cash generating activities. Should CHK's full asset monetization program proceed in 2008, Moody's believes that it would still carry secured revolver debt much higher than in the past. As back-up liquidity support, Moody's notes that a substantial minority proportion of CHK's reserve base has not yet been pledged to lenders and, subject to a current approximately $3.5 billion secured debt cap in its note indentures, would be available to support additional borrowings. Moody's also believes CHK has flexibility to materially reduce its capital spending program should it chose to do so. Conversely, the ratings could be stabilized if CHK is able to bring leverage to levels more compatible with the Ba2 rating and is able to continue generating robust production growth at competitive costs. However, the ratings could be further pressured if CHK is unable to reduce leverage on reserves from currently very high levels or if it demonstrates substantial erosion in cash margin coverage of its reserve replacement cost pattern. Chesapeake Energy is headquartered in Oklahoma City, Oklahoma. Approximately $840 million of debt securities affected. CHICAGO H&S: Committee Can Hire Polsinelli Shalton as Counsel ------------------------------------------------------------- The Official Committee of Unsecured Creditors of Chicago H&S Hotel Property LLC obtained permission from the U.S. Bankruptcy Court for the Northern District of Illinois to employ Polsinelli Shalton Flanigan Suelthaus P.C. as its bankruptcy counsel. Polsinelli Shalton is expected to: a. provide the Committee advice regarding its rights, duties and powers as an official committee of unsecured creditors; b. assist the Committee in the administration of the Chapter 11 Case and the exercise of oversight with respect to the Debtor's affairs including all issues from the Debtor's business and its relationship with the secured and unsecured creditors of its estate; c. appearances at Court and at statutory meetings of creditors to represent the interests of the Committee; d. provide the Committee advice regarding terms, conditions and documentation of financing agreements, cash collateral motions and orders, other motions and orders and related transactions; e. provide the Committee advice in connection with and participate in the and participate in the formulation, negotiation, drafting and promulgation of any potential sale of assets or businesses; f. investigate of the nature and validity of liens asserted against Debtor's assets and to advise the Committee concerning the enforceability of said liens; g. investigate of and provide advice to the Committee with respect to the taking of such actions as may be necessary to collect and, in accordance with the applicable law, recover property for the benefit of the estates; h. prepare and submit on behalf of the Committee of, among other things, various applications, motions, pleadings, orders, notices, schedules and other legal papers to be prepared and submitted in this case, and to review the financial and other reports filed herein; i. provide the Committee advice concerning and to prepare responses to applications, motions, pleadings, notices and other documents which may be filed and served herein; j. provide counsel to the Committee in connection with and participate in the formulation, negotiation, drafting and promulgation of a plan or plans of reorganization and related documents; k. review pending and other litigation and evaluate and advise the Committee concerning appropriate actions to be taken under the circumstances; and l. represent the Committee, and perform all other legal services for the Committee that may be necessary, in connection with the Debtor's bankruptcy proceeding. The Committee tells the Court that professionals of the firm will bill at these rates: Designation Hourly Rate ----------- ----------- Partners and Counsel $275 - $400 Associates $175 - $220 Paraprofessionals $90 - $100 To the best of the Committee's knowledge, the firm is a "disinterested person" as that term is defined in Section 101(14) of the Bankruptcy Code. The firm can be reached through: Gregory J. Jordan, Esq. Polsinelli Shalton Flanigan Suelthaus PC 180 North Stetson Avenue, Suite 4525 &n