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/raid1/www/Hosts/bankrupt/TCR_Public/080716.mbx T R O U B L E D C O M P A N Y R E P O R T E R Wednesday, July 16, 2008, Vol. 12, No. 168 Headlines 26-01 ASTORIA: Taps Robinson Brog as General Counsel AGILENT TECHNOLOGIES: Moody's Affirms Ratings; Outlook Positive AIRTRAN HOLDINGS: Moody's Cuts Corporate Family Rating to Caa2 AMERICAN COLOR: Files Chapter 11 Petition to Pursue Vertis Merger AMERICAN COLOR: Case Summary & 30 Largest Unsecured Creditors AQUILA INC: S&P Lifts Corporate Credit Rating to 'BBB' from 'BB-' ATA AIRLINES: Wants Plan Filing Deadline Extended to Feb. 26 ATARI INC: JH Cohn Expresses Going Concern Doubt ATTENTUS CDO: Fitch's 'B' Notes Rating Placed Under Negative Watch ATTENTUS CDO: Fitch Places 'B-' Notes Rating Under Negative Watch ATTENTUS CDO: Portfolio Credit Concerns Cue Fitch's Negative Watch BERING CDO: Fitch Downgrades Ratings on Seven Classes of Notes BHM TECHNOLOGIES: Committee Wants to Retain Jaffe as Counsel BHM TECHNOLOGIES: Court Approves White & Case as Counsel BHM TECHNOLOGIES: Court Approves Pepper Hamilton as Counsel BHM TECHNOLOGIES: Wants Rothschild as Advisor Despite Objection BHM TECHNOLOGIES: Varnum Responds to U.S. Trustee's Objection BRASCAN REAL ESTATE: Moody's Affirms Ratings of 5 Classes of Notes BSML INC: Brent Knudsen Resigns as Board Director BAOSHINN CORP: Dominic K.F. Chan Expresses Going Concern Doubt CALPINE CORP: Promotes Andres Walker to Vice President CAVIATA LLC: Taps Cecilia L. Rosenauer Ltd. as Bankruptcy Counsel CHEVY CHASE: Moody's Rates Additional Tranches on 2007-2 Certs. CLEARLY CANADIAN: KPMG LLP Expresses Going Concern Doubt CLOVERIE PLC: Fitch Cuts Ratng to CC from A- on Poor Collateral CLOVERIE PLC: Collateral Deterioration Cues Fitch to Junk Rating CLOVERIE PLC: Fitch Slashes Rating on $15MM Class A Notes to 'CC' CLOVERIE PLC: Fitch Cuts $15MM Class B Notes Rating to CC from BB+ CLOVERIE PLC: Fitch Lowers Ratings to CCC from BBB- on $10MM Notes CLOVERIE PLC: Fitch Junks $10MM Notes Rating; Removes Neg. Watch CLOVERIE PLC: Fitch Junks $40MM Notes Rating; Removes Neg. Watch COOPER TIRE: Moody's Affirms B2 Ratings; Changes Outlook to Stable CRANSTON II: Section 341(a) Meeting Set for July 29 CRANSTON II: Can Employ Avrum J. Rosen PLLC as Attorney CRANSTON II: Taps CobbCorp LLC as Professional Business Broker CROSSWINDS AT VERMILLION: Case Summary & 11 Largest Creditors CWCAPITAL COBALT: Moody's Affirms Ba2 Rating of Notes DRI CORP: Secures Financing Initiatives with PNC Bank and BHC DYNCORP INT'L: Prices $125MM Offering of 9-1/2% Senior Sub. Notes DYNCORP INT'L: S&P Holds 'B' Rating on Proposed $445MM Notes Issue EARTHFIRST TECH: Gets Interim Nod to Employ Gulf Atlantic as CRO EARTHFIRST TECH: Gets Interim Nod to Employ J&B as Counsel EKBERG STUCCO: Case Summary & 20 Largest Unsecured Creditors FEC RESOURCES: Posts $5.95M Net Loss for Year Ended Dec. 31, 2007 FIRST FRANKLIN: Moody's Revises Rating to Consider Loss Allocation FOUNDATIONS INC: Taps SulmeyerKupetz as General Bankruptcy Counsel GATEHOUSE MEDIA: Debt Woes to Likely Cue Liquidation or Bankruptcy GENERAL MOTORS: To Bolster Liquidity by $15 Bil. Through 2009 GENERAL MOTORS: S&P Retains Negative Watch After Cost Reductions GPS INDUSTRIES: Board Elects Hogan and Sole as Directors GRAND ISLAND TOWNHOMES: Voluntary Chapter 11 Case Summary HANNA PROPERTIES: Case Summary & Seven Largest Unsecured Creditors HEXION SPECIALTY: Huntsman Acquisition Gets EU Conditional Nod HOLLINGER INC: Receives Securities Cease Trade Order from OSC HOOSIER TRADEWINDS: Case Summary & 20 Largest Unsecured Creditors INDYMAC BANCORP: Bank Shutdown Prompts Fitch's Default Rating INDYMAC BANCORP: S&P Puts D Rtng After Unit Placed in Receivership IRVINE SENSORS: Issues 150,000 Shares to Financial Advisory Firm IXI MOBILE: Gemini Entities & Yossi Sela Own 15.51% Equity Stake IXI MOBILE: March 31 Balance Sheet Upside-Down by $586,000 JONES ESTATE: Case Summary & Six Largest Unsecured Creditors KINGSWAY FINANCIAL: A.M. Best Cuts Issuer Credit Rating to 'bb-' KODIAK CDO: Fitch Puts Three Low-B Ratings Under Negative Watch KODIAK CDO: Fitch Puts 'B' Rating on $35MM Notes on Neg. Watch LEINER HEALTH: Completes $371 Million Sale of Assets to NBTY Inc. LE-NATURE'S INC: Court Confirms Panels' Amended Chapter 11 Plan LUMINENT MORTGAGE: Needs to Pay $182MM Under Repurchase Agreement MCCLATCHY COMPANY: Debt Woes Could Cue Liquidation or Chapter 11 MISTRAL PHARMA: Court Extends Time to Make Proposal to Creditors ML-CFC COMMERCIAL: S&P Junks Ratings on Two Certificate Classes MORGAN STANLEY TRUST: S&P Cuts Ratings on Six Certificate Classes MSC 2006-SRR1: Moody's Affirms Ratings of 17 Classes of Notes MW JOHNSON: Files Schedules of Assets and Liabilities NANOGEN INC: Stockholders Approve Debt Restructuring Proposal NATIONAL RESIDENTIAL: Case Summary & One Unsecured Creditor NBTY INC: Completes $371MM Acquisition of Leiner Health Assets WESTERN NONWOVENS: Case Summary & 35 Largest Unsecured Creditors OAKRIDGE HOMES: Sec. 341(a) Meeting Set for July 24 PALM RIDGE: Sec. 341(a) Meeting Set for August 4 PIERRE FOODS: Files for Bankruptcy, Obtains $35MM Oaktree Facility PIERRE HOLDING: Case Summary & 30 Largest Unsecured Creditors PIERRE FOODS: Bankruptcy Filing Cues S&P's Default Ratings RESTRUCTURED ASSET: S&P Lifts $25MM Certs. Rating to AA from BB+ RIVER ELKS: Sec. 341(a) Meeting Set for July 29 SERVICE CORP: S&P's 'BB' Rating Unmoved by Stewart Offer SPECTRUM BRANDS: Fitch's Rating Unmoved by Terminated Salton Deal TABERNA PREFERRED: Fitch Places Three Notes Rating on Neg. Watch TABERNA PREFERRED: S&P Puts Rating on $46.08MM Notes at Neg. Watch TABERNA PREFERRED: Fitch Puts Five Low-B Ratings Under Neg. Watch TABERNA PREFERRED: Portfolio Credit Worries Cue Fitch's Neg. Watch TABERNA PREFERRED: Fitch Places 'BB-' Ratings Under Negative Watch TABERNA PREFERRED: Fitch Puts 'BB' Notes Rating Under Neg. Watch TENNESSEE OUTDOORS: Case Summary & 20 Largest Unsecured Creditors TRES PALACIOS: Moody's Withdraws B1 Corporate Family Rating TRIBUNE CO: Publisher, Top Editor Resign as Shakeups Continue TSC ARTEFFECTS: Case Summary & Five Largest Unsecured Creditors UNITED RENTALS: Waives Indices Condition in Dutch Auction Offer VEGA CAPITAL: Moody's Assigns Ba3 Rating to $63MM Notes VERTIS INC: Noteholders Support Plan; Files Chapter 11 Petition VERTIS HOLDINGS: Case Summary & 30 Largest Unsecured Creditors WATER PIK: S&P Withdraws All Ratings at Company's Request WCI COMMUNITIES: Not in Restructuring Talks With Affiliates WHITEHALL JEWELERS: Court Approves Auction but Junks Break-Up Fee * A.M. Best Holds Ratings of 30 Health Maintenance Groups * Fitch: US Equipment Lease ABS Remains Stable Despite Weakness * Fitch Says High Jet Fuel Prices, Waning Demand Pressure Airlines * Fitch: Loan Maturity Default Factors in High Loan Delinquencies * S&P Lists Publishing Cos. Exposed to Liquidity Pressures * S&P Says US States Affected by Credit-Market Disruptions * Upcoming Meetings, Conferences and Seminars ********* 26-01 ASTORIA: Taps Robinson Brog as General Counsel ---------------------------------------------------- 26-01 Astoria Development LLC seeks the authority of the U.S. Bankruptcy Court for the Eastern District of New York to employ Robinson Brog Leinwand Greene Genovese & Gluck P.C. as its general counsel. As the Debtor's general, Robinson Brog will advise the Debtor with respect to its powers and duties under the Bankruptcy Code, as well as assist the Debtor in the preparation of a plan of reorganization, including the filing of necessary motions and other legal documents. Prior to bankruptcy filing, the Debtor received an initial retainer and filing fee in the total amount of $25,000 from Imprimerie Et Accessories Universel Inc., which is owned by Judith Grunbaum, the Debtor's sole managing member. As compensation for their services, the firm's professionals bill: Hourly Rate ----------- Partners $300-$495 Associates $250-$300 Paralegals $110-$185 Robert R. Leinwand, Esq., a shareholder at Robinson Brog, assures the Court that the firm does not hold or represent any interest adverse to the Debtor or its estate, and that the firm is a "disinterested person" as that term is defined in Section 101(14) of the Bankruptcy Code. Based in Astoria, N.Y., 26-01 Astoria Development LLC is involved in real estate development. The company filed for Chapter 11 protection on June 19, 2008 (E.D. N.Y. Case No. 08-43900). When the Debtor filed for protection from its creditors, it listed total assets of $15,250,000 and total debts of $9,979,439. AGILENT TECHNOLOGIES: Moody's Affirms Ratings; Outlook Positive --------------------------------------------------------------- Moody's Investors Service affirmed the existing ratings of Agilent Technologies, Inc. and revised the outlook to positive. The positive outlook reflects Agilent Technologies' continued execution of its business model and solid financial performance. It also incorporates the company's strong demonstration of improved revenue growth in conjunction with higher margins driven by new product introductions, increased market penetration and favorable product mix, as well as diversification of revenue sources and end markets, continued cost containment, and minimal restructuring charges. The outlook incorporates our expectations that Agilent Technologies' electronic measurement business, which accounts for roughly 62% of total revenues, will demonstrate growth and operating margin characteristics at least comparable to its business segment peers. Although the company's financial measures are more indicative of a Baa3 rating, Moody's remains concerned that sluggish order growth in the EM business and a potential slowdown in Asian markets could impact Agilent Technologies' financial performance later this year and in early 2009. Moody's notes that Agilent Technologies' Asian sales account for nearly 40% of net revenues. The Ba1 CFR also incorporates financial policies that are shareholder-friendly. Moody's expects the company to remain aggressive in share buybacks, especially given the amount of excess balance sheet cash and since a portion of senior management compensation continues to be based on relative share price performance. The rating agency cited that the positive outlook factors in the expectation that Agilent Technologies will manage annual share repurchases within its generation of annual free cash flow plus excess cash balances above $1.3 billion, while maintaining debt to EBITDA of no more than 2 -- 2.5x on an as reported basis. Historically, Agilent Technologies' share buybacks have ranged from $2-4 billion per annum. Finally, the Ba1 CFR incorporates the potential for leveraging event risk given the company's penchant to supplement growth through external means. As world economies continue to show signs of deceleration, Agilent Technologies may fall short of its 10% revenue growth target, which could result in more reliance on acquisitions, albeit this would be a departure from Agilent Technologies' current strategy. The combination of these factors constrains the CFR at Ba1. How the company manages share repurchases and acquisitions during a period of weaker operating performance will be an important factor in Moody's analysis of Agilent Technologies' ratings. If there is no dramatic deterioration in operating performance over the next 6-9 months in conjunction with a likely slowing of Asian economies, and if Agilent Technologies is able to demonstrate financial policies that are consistent with the rating agency's expectations, without materially impacting financial leverage, Moody's could upgrade the rating. The company's SGL-1 rating reflects very good liquidity, which is driven by Agilent Technologies' $1.7 billion of unrestricted cash and short-term investments and Moody's expectations for positive FCF generation over the next 12-18 months. Following completion of the $2 billion share repurchase program in fiscal 2009, Moody's expects that Agilent Technologies will maintain cash balances of around $1.3 billion or more plus continued access to a $300 million multi-year committed unsecured credit facility. Additional liquidity support is derived from our expectation that FCF generation will remain robust through cycles given that operating performance continues to remain solid. Moody's expects that the bulk of FCF is likely to be used for small, tuck-in acquisitions and remaining share repurchases, thereby limiting further cash buildup. These ratings were affirmed: -- Corporate Family Rating -- Ba1 -- Probability of Default Rating -- Ba1 -- $600 million Senior Unsecured Notes due 2017 -- Ba1 (LGD-4, 52%) -- Speculative Grade Liquidity -- SGL-1 Headquartered in Santa Clara, California, Agilent Technologies, Inc. is a leading measurement technology company serving the communications, electronics, life sciences and chemical analysis industries. Net revenues and EBITDA for 12 months ended April 30, 2008 were $5.7 billion and $1.1 billion, respectively. AIRTRAN HOLDINGS: Moody's Cuts Corporate Family Rating to Caa2 -------------------------------------------------------------- Moody's Investors Service downgraded the Corporate Family Rating of AirTran Holdings, Inc. to Caa2 from B3 and lowered the ratings of its outstanding corporate debt instruments and Enhanced Equipment Trust Certificates. The company's Speculative Grade Liquidity Rating is SGL-4. The outlook was changed to negative from stable. The rating actions were prompted by the expectation that AirTran Holdings' financial performance will continue to deteriorate as a result of the difficult operating environment affecting the airline industry. AirTran Holdings is a low cost carrier, but in the face of persistent high fuel costs the company will incur cash operating losses during 2008. Cash operating losses,in conjunction with scheduled debt maturities and capital expenditures, will cause a material deterioration in the company's cash position. AirTran Holdings is pursuing several initiatives to contain cash losses, including capacity reductions, cost cutting initiatives and deferrals of scheduled aircraft deliveries. Yet even with these initiatives, a combination of deteriorating economic conditions and sustained high fuel costs are likely to preclude a return of financial metrics supportive of a rating above the Caa range in the near term. The SGL-4 Speculative Grade Liquidity Rating reflects that AirTran Holdings' liquidity could become increasingly constrained if current industry conditions persist. AirTran Holdings is expected to continue to generate negative cash flow from operations and in the face of scheduled debt maturities and capital spending obligations the company's modest cash balance could erode over the coming year. Even with the $135 million provided by a concurrent equity/convertible debt issuance completed in the 2nd quarter of 2008, the company will see a significant erosion of liquidity. The company's plans to sell up to 10 aircraft in 2008 could provide some incremental liquidity, but the gain on the sales could be limited if demand for aircraft begins to weaken. Although AirTran Holdings is currently in compliance with the covenants contained in its credit card processing agreements, the company's credit card processing banks have the right to increase the credit card holdback under certain circumstances, which would increase AirTran Holdings' cash requirements. AirTran Holdings has no unused lines of credit available and substantially all of its assets are encumbered. The rating actions on the Series 1999-1 Pass Through Certificates consider AirTran Holdings' heightened credit risk in the current environment. The aircraft securing the transaction are Boeing 717 jets. While the aircraft are well suited for AirTran Holdings' operations, there are only a few airlines globally that operate fleets that include the aircraft. Consequently, secondary market values of the aircraft could be volatile in the event that aircraft leases were not affirmed in the event of an AirTran Holdings bankruptcy. Current market values suggest an adequate margin of protection for the A tranche of the EETC, collateral coverage on junior tranches is more marginal. The EETC ratings also consider the availability of liquidity facilities to meet interest payments for 18 months in the event of a default by AirTran Holdings. The negative outlook reflects Moody's expectation of continued deterioration in AirTran Holdings' key credit metrics, such as interest coverage and leverage during 2008, due primarily to high fuel costs and a weakening economic environment. Unless fuel cost pressures abate, the company could see a continued deterioration in financial performance beyond the negative operating profits and earnings seen during the first quarter of 2008. AirTran Holdings' rating could be lowered if cash declines to less than $300 million, if the company generates sustained negative cash flow from operations or if the company has sustained operating losses or if the risk of breaching any financial covenants increases meaningfully. AirTran Holdings' rating outlook could be stabilized with sustained increases to revenues or reduced non-fuel costs, or a sustained decline in fuel costs that increases cash from operations and enables the company to satisfy maturing debt and capital spending requirements from existing cash reserves and cash from operations. Downgrades: Issuer: AirTran Airways, Inc. -- Senior Secured Enhanced Equipment Trust, Downgraded to a range of Caa2 to B1 from a range of B3 to Ba1 Issuer: AirTran Holdings, Inc -- Probability of Default Rating, Downgraded to Caa2 from B3 -- Corporate Family Rating, Downgraded to Caa2 from B3 -- Multiple Seniority Shelf, Downgraded to (P)Ca from (P)Caa2 -- Senior Unsecured Conv./Exch. Bond/Debenture, Downgraded to a range of Ca, LGD6, 93% from a range of Caa2, LGD6, 91% Assignments: Issuer: AirTran Holdings, Inc -- Speculative Grade Liquidity Rating, Assigned SGL-4 Outlook Actions: Issuer: AirTran Airways, Inc. -- Outlook, Changed To Negative From Stable Issuer: AirTran Holdings, Inc -- Outlook, Changed To Negative From Stable AirTran Holdings, Inc., which conducts its operations through its wholly owned subsidiary AirTran Airways, Inc. is a low cost airline that provides service to locations throughout the eastern U.S. AMERICAN COLOR: Files Chapter 11 Petition to Pursue Vertis Merger ----------------------------------------------------------------- American Color Graphics, Inc. filed voluntary petitions for reorganization under chapter 11 of the Bankruptcy Code, accompanied by a pre-packaged plan of reorganization, the terms and conditions of which have been accepted by its noteholders. This action is a part of the merger agreement and comprehensive restructuring plans jointly announced by Vertis Communications and American Color on May 22, 2008. The restructuring and merger are intended to improve the combined company's financial strength and expand the scope of products and services offered to its customers. More than 99.9% in dollar amount that voted and 95.3% in number of the holders of American Color's 10% senior second secured notes due 2010 that voted in favor of the plan. Approximately 100% in dollar amount and 100% in number of holders of Vertis' 9.75% senior secured second lien notes due 2009, 98.6% in dollar amount and 98.3% in number of holders of Vertis' 10.875% senior Notes due 2009, and 100% in dollar amount and 100% in number of holders of Vertis' 13.5% senior subordinated notes due 2009 voted to approve the Vertis plan. To implement the restructuring plan and consummate the merger, both American Color Graphics and Vertis Communications are launching pre-packaged chapter 11 proceedings expected to be completed in about 60 days. ACG's CCAA (Canada) Filing Because the merger includes American Color's Canadian operations, the company has also applied to the Superior Court of Justice in Ontario for an order that recognizes the chapter 11 proceedings as "foreign proceedings" under Section 18.6 of the Companies' Creditors Arrangement Act. "We are extremely pleased with the tremendous progress that has been made to date. We remain on track to complete the merger later this summer," said Steve Dyott, chairman and CEO of American Color. "[These] actions and the resulting merger with Vertis will allow both companies to achieve a more appropriate capital structure, better position us to meet the challenges of our industry, and make an exciting array of new opportunities available to our customers." BofA's $135 Million DIP Fund American Color also said that it has received a commitment for up to $135 million in debtor-in-possession (DIP) financing from Bank of America. The company will seek authority to access these funds at the "first day" hearing. "This financing should assure our suppliers and customers that we have more than adequate financial resources to continue operating in the ordinary course of business during the chapter 11 proceedings," Mr. Dyott said. American Color emphasized that it will be operating as usual and continuing to serve and support its customers without interruption throughout the pre-packaged chapter 11 proceedings and that employees' schedules will not be affected. Moreover, the terms of the pre-packaged plan of reorganization already agreed to by the company's noteholders call for all trade creditors, suppliers and customers to be paid in full. To ensure that its customers and suppliers are unaffected by the chapter 11 proceedings, American Color is seeking immediate Court authorization during its "first day" hearing to continue paying them in the ordinary course of business. Terms of Prepackaged Plan Under other key terms of the prepackaged reorganization plans, holders of American Color's 10% notes and Vertis notes will be exchanging their notes for an aggregate of $550 million in new Vertis notes and substantially all the new equity in the combined company. The consensual financial restructurings will reduce the combined company's debt obligations (including off-balance sheet accounts receivable facilities and approximately $248 million of Vertis Holdings mezzanine notes) by approximately $1 billion before transaction fees and expenses. The merger will integrate American Color's eight offset and flexographic print manufacturing sites, one Total Market Coverage facility, numerous managed service sites, and six premedia facilities into Vertis. The combination of American Color's operations and capabilities with Vertis Communications' advertising insert production, premedia, direct marketing, and media placement capabilities will offer clients an expanded range of services and access to even greater combined production capacity. American Color filed its voluntary petitions for reorganization under chapter 11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy Court for the District of Delaware in Wilmington. Vertis filed its voluntary petitions for reorganization under Chapter 11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy Court for the District of Delaware in Wilmington as well. "We look forward to quickly and successfully completing this last phase of our restructuring so that we may embark on the next chapter of our history. Together as one company, with a significantly strengthened capital structure and even greater ability to respond to our customers' needs, we will be uniquely positioned to compete in today's challenging and ever-changing environment," Mr. Dyott concluded. As reported by the Troubled Company Reporter on June 3, 2008, Vertis Inc., American Color Graphics and their noteholders entered into restructuring agreements pursuant to which the companies and consenting noteholders have agreed to consummate the restructuring through prepackaged chapter 11 plans of reorganization for each company in order to more efficiently exchange the notes. About Vertis Headquartered in Baltimore, Vertis Inc. dba Vertis Communications -- http://www.vertisinc.com/-- is a provider of print advertising and direct marketing solutions to America's retail and consumer services companies. At Dec. 31, 2007, the company's consolidated balance sheet showed $528.2 million in total assets and $1.403 billion in total liabilities, resulting in a $875.1 million total stockholders' deficit. Going Concern Doubt Deloitte & Touche LLP, in Baltimore, Maryland, expressed substantial doubt about Vertis Inc.'s ability to continue as a going concern after auditing the company's consolidated financial statements for the years ended Dec. 31, 2007, and 2006. The auditing firm said that the company has incurred recurring net losses and is experiencing difficulty in generating sufficient cash flow to meet its obligations and sustain its operations. * * * As reported in the Troubled Company Reporter on May 29, 2008, Moody's Investors Service has affirmed the Ca corporate family rating for Vertis Inc., while changing the probability of default rating to Ca from Ca/LD, after the company's statement of a merger with American Color Graphics Inc. coupled with a comprehensive restructuring plan. About American Color American Color Graphics Inc. -- http://www.americancolor.com/-- is one of North America's largest and most experienced full service premedia and print companies, with eight print locations across the continent, six regional premedia centers, photography studios nationwide and a growing roster of customer managed service sites. The company provides solutions and services such as asset management, photography, and digital workflow solutions that improve the effectiveness of advertising and drive revenues for their customers. AMERICAN COLOR: Case Summary & 30 Largest Unsecured Creditors ------------------------------------------------------------- Lead Debtor: ACG Holdings, Inc. 100 Winners Circle Brentwood, TN 37027 aka Digiscope aka American Color Print aka AC Studios aka American Color Packaging aka ACG Canada aka American Color Graphics, Inc. aka ACG Holdings, Inc. aka American Images of North America, Inc. aka Sullivan Marketing, Inc. aka Digiscope, Inc. aka American Color Premedia aka Sullivan Media Corporation aka American Color Graphics aka American Color Bankruptcy Case No.: 08-11467 Debtor-affiliates filing separate Chapter 11 petitions: Entity Case No. ------ -------- American Color Graphics, Inc. 08-11468 American Images of North America, Inc. 08-11471 Sullivan Marketing, Inc. 08-11472 Sullivan Media Corporation 08-11474 Type of Business: ACG Holdings, Inc. is a Delaware corporation and the ultimate parent company of each of the subsidiaries. The subsidiaries are one of the leading printers of advertising inserts and newspaper products in the United States developed from a business that commenced operations in 1926. They also are one of the most technologically advanced providers of premedia services in the country. They conduct their print processes at their eight print plants, seven of which are in the United States and one of which is in Canada. Their revenue for the 12-month period ended Dec. 31, 2007, was approximately $429.4 million. As of the petition date, the subsidiaries employ approximately 1,984 employees, including approximately 169 employees in ACG�s Canadian print plant. Chapter 11 Petition Date: July 15, 2008 Court: District of Delaware (Delaware) Judge: Christopher S. Sontchi Debtors' Counsel: Pauline K. Morgan, Esq. Email: bankfilings@ycst.com Young, Conaway, Stargatt & Taylor 1000 W. Street, 17th Floor P.O. Box 391 Wilmington, DE 19899-0391 Tel: (302) 571-6600 Fax: (302) 571-1253 Sean T. Greecher ,Esq. Email: bankfilings@ycst.com Young, Conaway, Stargatt & Taylor The Brandywine Building 1000 West Street, 17th Floor Wilmington, DE 19801 Tel: (302) 571-6600 http://www.ycst.com/ ACG Holdings, Inc.'s Financial Condition: Estimated Assets: $100 million to $500 million Estimated Debts: $500 million to $1 billion Debtors' Consolidated List of 30 Largest Unsecured Creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ Abitibi Bowater Trade Creditor $6,412,536 Consolidated, Inc. 1587 208th Street Bayside, NY 11360 Tel: (914) 548-2346 Fax: (718) 281-1323 Attn: John Ovanessian Sun Chemical Corporation Trade Creditor $3,944,087 135 W. Lake Street Northlake, IL 60164 Tel: (708) 236-3838 Fax: (708) 236-3905 Attn: Chris Parrilli Kempf Paper Corporation Trade Creditor $1,406,137 3145 Columbia Ave., North East Minneapolis, MN 55418 Tel: (800) 343-1681 Fax: (612) 781-9249 Attn: Julie Backley Athens Paper Trade Creditor $910,679 1898 Elm Tree Drive Nashville, TN 37210 Tel: (615) 874-5349 Fax: (615) 889-5477 Attn: Harold Sparks Pitman Company Trade Creditor $634,862 721 Union Blvd. Totowa, NJ 07512-2207 Tel: (973) 812-0400 Fax: (800) 323-8499 Attn: Eileen Mezzo E.R. Smith Associates Trade Creditor $501,122 83 Tom Harvey Road Westerly, RI 02891 Tel: (401) 348-4000 Fax: (401) 348-4049 Attn: Frank Andalaro, President INX International Ink Trade Creditor $474,208 150 N. Martingale, Ste. 700 Schaumburg, IL 60173 Tel: (800) 631-7956 Fax: (847) 969-9758 Attn: Rick Clendenning Sylacauga Utilities BD Trade Creditor $435,048 P.O. Box 207 Sylacauga, AL 35150 Tel: (205) 249-8501 Fax: (205) 249-1015 Attn: John Ham, Finance Director MacDermid Graphics Trade Creditor $316,952 P.O. Box 538336 Atlanta, GA 30353 Tel: (800) 348-7201 Fax: (888) 784-8258 Attn: Chuck Wallace Litco International Trade Creditor $251,475 One Litco Drive Vienna, OH 44473 Tel: (330) 539-5433 Fax: (330) 539-5388 Attn: Joe Morella Day International Inc. Trade Creditor $244,970 4180 W. 160th Street Cleveland, OH 44135 Tel: (800) 321-1618 Fax: (216) 267-2905 Attn: Ted Fournier Shakopee Public Utility Trade Creditor $240,929 255 Sarazin Street Shakopee, MN 55379 Tel: (612) 445-1988 Fax: (952) 445-7767 Attn: Tami Patrick Con-Way Freight Trade Creditor $222,744 135 S. LaSalle, Dept. 2493 Chicago, IL 60674 Tel: (800) 421-4007 Fax: (734) 214-5650 Attn: Gary Hanson United Parcel Service Trade Creditor $221,625 28013 Network Place Chicago, IL 60673 Tel: (800) 333-7400 Fax: (404) 828-6562 Attn: Teri McClure Gasmark Trade Creditor $216,902 One Meridian Blvd., Ste. 2C01 Wyomissing, PA 19610 Tel: (610) 373-7999 Fax: (610) 374-4288 Attn: Mark Kauffman Rycoline Products Trade Creditor $216,902 5540 N. Northwest Highway Chicago, IL 60630 Tel: (773) 775-6755 Fax: (773) 775-9414 Attn: Kevin Yeazell Ink International Ink Company Trade Creditor $203,000 3257 Middle Road Dunkirk, NY 14048 Tel: (716) 366-6010 Fax: (847) 969-7958 Attn: Joanna Bach Met-Ed Trade Creditor $176,755 P.O. Box 3687 Akron, OH 44309 Tel: (800) 545-7741 Fax: (330) 315-8664 Attn: Accounts Payable Ohio Edison Trade Creditor $173,605 P.O. Box 3637 Akron, OH 44309-3637 Tel: (800) 633-4766 Fax: (330) 315-8664 Attn: Anthony Alexander Canadian Niagara Power, LTD Trade Creditor $163,470 1130 Bertie Street P.O. Box 1218 Fort Erie, ON L2A 5Y2 Canada Tel: (905) 871-0330 Fax: (905) 871-8772 Attn: Glen King, VP Finance Bengal Converting Trade Creditor $158,650 901 Industrial Highway Eddystone, PA 19022 Tel: (610) 940-1080 Fax: (610) 941-7174 Attn: Scott Korn Alliant Energy Trade Creditor $136,956 4902 N. Biltmore Lane Madison, WI 53718 Tel: (800) 255-4268 Fax: (608) 458-0100 Attn: William Harvey, CEO New Page Corporation (Coated) Trade Creditor $133,623 2386 Collections Center Drive Chicago, IL 60693 Tel: (715) 422-3985 Fax: (800) 987-5276 Attn: Deborah Easley Heidelberg USA Inc. Trade Creditor $128,073 P.O. Box 845180 Dallas, TX 75284 Tel: (800) 437-7388 Fax: (800) 841-7765 Attn: Thomas Topp, SVP Finance CDW Computer Centers, Inc. Trade Creditor $125,469 P.O. Box 75723 Chicago, IL 60675 Tel: (847) 465-6000 Fax: (847) 465-6800 Attn: Ryan Kearns E I DuPont De Nemours & Co. Trade Creditor $122,368 P.O. Box 7247-6532 Philadelphia, PA 19170 Tel: (800) 345-9999 Fax: (302) 992-3345 Attn: Dave Griffith Metroland Trade Creditor $107,820 10 Tempo Ave. Wellowdale, ON M2H 2N8 Canada Tel: (416) 493-1300 Fax: (416) 493-0623 Attn: Steve Renaud Northern Freight Brokerage Trade Creditor $95,078 13261 310th Street New Prague, MN 5607 Tel: (507) 744-5536 Fax: (507) 477-4104 Attn: Laura Duede ALG Direct Trade Creditor $77,885 745 Dillon Drive Wood Dale, IL 60191 Tel: (708) 544-9450 Fax: (708) 544-9463 Attn: J. Rosser Centerpoint Energy Trade Creditor $75,326 1111 Louisiana St. Houston, TX 77002 Tel: (713) 207-1111 Fax: (713) 207-3169 Attn: Brent Casmey AQUILA INC: S&P Lifts Corporate Credit Rating to 'BBB' from 'BB-' ----------------------------------------------------------------- Standard & Poor's Ratings Services affirmed the 'BBB' corporate credit rating on Great Plains Energy Inc. and removed it from CreditWatch with negative implications. At the same time, S&P affirmed 'BBB-' corporate credit rating on Black Hills Corp. In addition, Standard & Poor's raised the corporate credit rating on Aquila Inc. to 'BBB' from 'BB-' and removed it from CreditWatch with positive implications. S&P also raised the short-term corporate credit rating on Kansas City Power and Light Inc. to 'A-2' from 'A-3'. The long-term ratings on KCP&L, including the 'BBB' corporate credit rating, were affirmed and removed from CreditWatch with negative implications. The outlook on Great Plains, KCP&L, Balck Hills, and Aquila is stable. Kansas City-based Great Plains Energy has about $2.8 billion of debt outstanding. The rating actions follow the completion of Great Plains' merger with Aquila for approximately $1.5 billion in cash and stock and Black Hills' purchase of Aquila's non-Missouri assets for approximately $940 million. The ratings reflect the consolidated company's excellent business profile and the aggressive financial profile. The excellent business profile reflects management's strategy to expand by increasing its regulated electric assets. This includes the acquisition of regulated assets (Aquila), the building of regulated assets (comprehensive energy plan), and the sale of non- core, unregulated assets (Strategic Energy). In June 2008, Great Plains completed the sale of Strategic Energy, which had exposed Great Plains to counterparty credit, market, customer demand, and weather-related risks. Removing these risks greatly enhanced the merged company's business profile. A second factor that strengthens the business profile of the merged company is the overall improved regulatory environments of both Kansas and Missouri. Some of the recent significant regulatory authorizations include a monthly fuel adjustment clause for KCP&L in Kansas, a monthly fuel adjustment clause for Aquila in Missouri, and accelerated depreciation for KCP&L in both Kansas and Missouri. ATA AIRLINES: Wants Plan Filing Deadline Extended to Feb. 26 ------------------------------------------------------------ ATA Airlines, Inc., asks the U.S. Bankruptcy Court for the Southern District of Indiana for additional time to prepare and file its Chapter 11 plan, saying it needs to settle a labor dispute with its employees before it could propose a plan. The airline wants the deadline for filing its plan stretched to February 26, 2009, and for soliciting acceptances of that plan to April 27, 2009. Terry Hall, Esq., at Baker & Daniels LLP, in Indianapolis, Indiana, says the resolution of the lawsuits filed against the airline would determine the status and amount of the claims, which is essential for the plan's formulation. ATA Airlines faces five lawsuits for alleged violations of the Worker Adjustment and Restraining Notification Act. The airline allegedly committed violations after it laid off its employees without 60 days' advance notice as required by the WARN Act. The lawsuits were filed by the Transport Workers Union of America, the Association of Flight Attendants-CWA, the Air Line Pilots Association International, the International Association of Machinists & Aerospace Workers AFL-CIO, and former employee Kevin Batman. The WARN Act lawsuits are set for trial in early February 2009. "Considering the early stages of this Chapter 11 case, as well as the complexity of the labor issues to be resolved and the timing of certain related litigation, neither [ATA Airlines] nor any other party-in-interest is likely to be in a position to formulate, promulgate and build consensus for a plan of liquidation before February 26, 2009," Ms. Hall further says. "Pursuant to Section 1121(d)(1) of the Bankruptcy Code, the Court may, upon a demonstration of cause, extend the Debtor's Exclusive Periods," Ms. Hall reminds the Court. The Court will convene a hearing to consider the proposed extension on July 21, 2008. About ATA Airlines Headquartered in Indianapolis, Indiana, ATA Airlines, Inc., is a diversified passenger airline operating in two principal business lines -- a low cost carrier providing scheduled passenger service that leverages a code share agreement with Southwest Airlines; and a charter operator that focused primarily on providing charter service to the U.S. government and military. ATA is a wholly owned subsidiary of New ATA Acquisition, Inc. -- a wholly owned subsidiary of New ATA Investment, Inc., which in turn, is a wholly owned subsidiary of Global Aero Logistics Inc. ATA Acquisition also owns another holding company subsidiary, World Air Holdings, Inc., which it acquired through merger on August 14, 2007. World Air Holdings owns and operates two other airlines, North American Airlines and World Airways. ATA Airlines and its affiliates filed for chapter 11 protection on Oct. 26, 2004 (Bankr. S.D. Ind. Case Nos. 04-19866, 04-19868 through 04-19874). The Honorable Basil H. Lorch III confirmed the Debtors' plan of reorganization on Jan. 31, 2006. The Debtors' emerged from bankruptcy on Feb. 28, 2006. Global Aero Logistics acquired certain of ATA's operations after its first bankruptcy. The remaining ATA affiliates that were not substantively consolidated in the company's first bankruptcy case were sold or otherwise liquidated. ATA Airlines filed for Chapter 22 on April 2, 2008 (Bankr. S.D. Ind. Case No. 08-03675), citing the unexpected cancellation of a key contract for ATA's military charter business, which made it impossible for ATA to obtain additional capital to sustain its operations or restructure the business. ATA discontinued all operations subsequent to the bankruptcy filing. ATA's Chapter 22 bankruptcy petition lists assets and liabilities each in the range of $100 million to $500 million. The Debtor is represented in its Chapter 22 case by Haynes and Boone, LLP, and Baker & Daniels, LLP, as bankruptcy counsel. The United States Trustee for Region 10 appointed five members to the Official Committee of Unsecured Creditors. Otterbourg, Steindler, Houston & Rosen, P.C., serves as bankruptcy counsel to the Committee. FTI Consulting, Inc., acts as the panel's financial advisors. The Debtor has until July 31, 2008, to exclusively file their bankruptcy plan. (ATA Airlines Bankruptcy News, Issue No. 86; Bankruptcy Creditors' Services Inc. http://bankrupt.com/newsstand/or 215/945-7000). ATARI INC: JH Cohn Expresses Going Concern Doubt ------------------------------------------------ J.H. Cohn LLP raised substantial doubt about Atari, Inc.'s ability to continue as a going concern after it audited the company's financial statements for the year ended March 31, 2008. The auditor pointed to the company's significant operating losses. Management Statement During fiscal 2007, the company sold a number of intellectual properties and development facilities in order to obtain cash to fund its operations. During 2007, the company raised around $35.0 million through the sale of the rights to the Driver games and certain other intellectual property, and the sale of the company's Reflections Interactive Ltd. and Shiny Entertainment studios. By the end of fiscal 2007, the company did not own any development studios. The reduction in the company's development activities has significantly reduced the number of games the company publish. During fiscal 2008, the company's revenues from publishing activities were $69.8 million, compared with $104.7 million during fiscal 2007. For the year ended March 31, 2007, the company had an operating loss of $77.6 million, which included a charge of $54.1 million for the impairment of the company's goodwill, which is related to the company's publishing unit. For the year ended March 31, 2008, the company incurred an operating loss of around $21.9 million. The company has taken significant steps to reduce its costs such as the May 2007 and November 2007 workforce reduction of around 20% and 30%, respectively. The company's ability to deliver products on time depends in good part on developers' ability to meet completion schedules. Further, the company's releases in fiscal 2008 were even fewer than the company's releases in fiscal 2007. In addition, most of the company's releases for fiscal 2008 were focused on the holiday season. As a result the company's cash needs have become more seasonal and the company faces significant cash requirements to fund its working capital needs. Although, transactions provided cash financing that should meet the company's need through the company's fiscal 2009 second quarter (i.e., the quarter ending Sept. 30, 2008), management continues to pursue other options to meet the company's working capital cash requirements but there is no guarantee that the company will be able to do so, if the proposed transaction in which majority stockholder, Infogrames Entertainment S.A., would acquire the company is not completed. Historically, the company have relied on IESA to provide limited financial support, through loans or, in recent years, through purchases of assets. However, IESA has its own financial needs, and its ability to fund its subsidiaries' operations, including the company's, is limited. Therefore, there can be no assurance the company will ultimately receive any funding from IESA, if the proposed transaction in which IESA would acquire Atari is not completed. The company continues to explore various alternatives to improve the company's financial position and secure other sources of financing which could include raising equity, forming both operational and financial strategic partnerships, entering into new arrangements to license intellectual property, and selling, licensing or sub-licensing selected owned intellectual property and licensed rights. The company continues to examine the reduction of working capital requirements to further conserve cash and may need to take additional actions in the near-term, which may include additional personnel reductions. Financials The company posted a net loss of $23,646,000 on net revenues of $80,131,000 for the year ended March 31, 2008, as compared with a net loss of $69,711,000 on net revenues of $122,285,000 in the prior year. At March 31, 2008, the company's consolidated balance sheet showed $33,433,000 in total assets and $53,845,000 in total liabilities, resulting in $20,412,000 stockholders' deficit. The company's consolidated balance sheet at March 31, 2008, also showed strained liquidity with $25,076,000 in total current assets available to pay $37,872,000 in total current liabilities. A full-text copy of the company's 2008 annual report is available for free at http://ResearchArchives.com/t/s?2f44 About Atari Inc. New York City-based Atari Inc. is a publisher of video game software that is distributed throughout the world and a distributor of video game software in North America. Most of the products it publishes and distributes are games developed by or for Infogrames Entertainment S.A., or IESA, a French corporation listed on Euronext, which owns approximately 51% of its stock. Atari has offices in Brazil, the United Kingdom and Japan. ATTENTUS CDO: Fitch's 'B' Notes Rating Placed Under Negative Watch ------------------------------------------------------------------ Fitch Ratings has placed these notes of Attentus CDO I, Ltd./LLC on Rating Watch Negative: -- $35,553,821 class C-2A 'B'; -- $30,503,025 class C-2B 'B'. Attentus I is a managed collateralized debt obligation supported by a portfolio of trust preferred securities and subordinated debt issued by subsidiaries of real estate investment trusts, real estate operating companies, homebuilders and specialty finance companies, as well as senior debt securities and commercial mortgage-backed securities. Of the total portfolio, approximately 53.5% is comprised of trust preferred securities and subordinated debt, approximately 38.9% of senior debt securities and 7.7% of CMBS. The collateral was selected and is monitored by Attentus Management Group LLC. Fitch's rating actions reflect heightened concern related to continued negative portfolio credit migration, as well as the reduction of the total collateral balance as a result of one credit risk sale. Based on Fitch's public and shadow ratings, the average credit quality of Attentus I migrated to the 'B-/CCC+' range from the 'B/B-' range at the time of Fitch's last review, which continues to fail transaction's weighted average rating factor covenant. Currently, 31.7% of the portfolio is publicly or shadow rated 'CCC+' or below as compared to 28.2% at last review. Approximately 22% of the portfolio has experienced negative rating migration since Fitch's last review and 16.7% of the underlying collateral is currently on Rating Watch Negative or has a Negative Rating Outlook. One asset representing $19 million was sold from the portfolio via a credit risk sale, incurring a principal loss to the transaction of $13.7 million. Additionally, one security, which was previously classified as defaulted, underwent a distressed debt exchange increasing its notional to $23.4 million from $19 million. While the notional amount of this security increased, Fitch views it as highly speculative. Trustee-reported asset defaults, along with the reduction of the total collateral balance, have caused the failure of the class C, class D and class E overcollateralization tests. Furthermore, Attentus I is currently failing the class A/B, class C, class D and class E interest coverage tests. As of the last payment date, approximately $2.1 million of interest proceeds were diverted to pay down the principal of the class A-1 notes due to the breach of the class C OC test. Attentus I currently has four assets deemed to be in default per the transaction's trustee report, representing approximately 9.3% of the portfolio. All four exposures were treated as defaulted for the purposes of Fitch's previous review of the transaction. Given the rapidly evolving credit pressures facing mortgage REITs and homebuilders, Fitch treated exposures rated or shadow rated 'CC' or lower as defaulted with 100% severity in an effort to anticipate future collateral defaults. As announced on July 1, 2008, Fitch is in the process of examining its default probability assumptions with respect to assets with maturities in excess of 10 years. Resolution of the current Rating Watch Negative status will consider the potential implications of a revised term structure of default probabilities for long-dated assets, as well as any additional credit migration with respect to the underlying portfolio, or any further credit risk sales undertaken by the asset manager. Absent changes to Fitch's default probability assumptions or further collateral deterioration or credit risk sales, the ratings of the class C-2A and C-2B notes will likely be downgraded to the 'CC' rating category. The ratings of the class C-2A and C-2B notes address the likelihood that investors will receive ultimate and compensating interest payments, as per the governing documents, as well as the aggregate principal amount by the stated maturity date. Periodic payments on the notes are distributed on a quarterly basis in February, May, August and November until the stated maturity on May 10, 2036. ATTENTUS CDO: Fitch Places 'B-' Notes Rating Under Negative Watch ----------------------------------------------------------------- Fitch Ratings has placed these notes of Attentus CDO II Ltd./LLC on Rating Watch Negative: -- $60,000,000 class A-2 'A+'; -- $55,000,000 class A-3A 'A-'; -- $5,000,000 class A-3B 'A-'; -- $20,000,000 class B 'BBB'; -- $32,480,733 class C 'B+'; -- $29,965,353 class D 'B-'. Attentus II is a managed collateralized debt obligation supported by a portfolio of trust preferred securities and subordinated debt issued by subsidiaries of real estate investment trusts, real estate operating companies, homebuilders and specialty finance companies, as well as senior debt securities and commercial mortgage-backed securities. Of the total portfolio, approximately 50.1% is comprised of trust preferred securities and subordinated debt, approximately 37.9% of senior debt securities and 12% of CMBS and CMBS CDOs. The collateral was selected and is monitored by Attentus Management Group LLC. Fitch's rating actions reflect heightened concern related to continued negative portfolio credit migration as well as additional default activity. While the 'AAA' rating assigned to the $230.2 million class A-1 notes has not been placed on Rating Watch Negative, Fitch would highlight that this analytical conclusion is based upon the financial guaranty insurance policy provided by Assured Guaranty Corp. (insurer financial strength rated 'AAA' by Fitch) with respect to this class. Without giving effect to this insurance policy, the class A-1 notes would likely be exposed to negative rating action as well. Based on Fitch's public and shadow ratings, the average credit quality of Attentus II migrated to the 'B-/CCC+' range from the 'B+/B' range at the time of Fitch's last review, which continues to fail transaction's weighted average rating factor covenant. Currently, 34.1% of the portfolio is publicly or shadow rated 'CCC+' or below as compared to 26.2% at last review. Approximately 25.1% of the portfolio has experienced negative rating migration since Fitch's last review and 22.1% of the underlying collateral is currently on Rating Watch Negative or has a Negative Rating Outlook. One security, which was previously classified as defaulted, underwent a distressed debt exchange increasing its notional to $23.4 million from $18.8 million. While the notional amount of this security increased, Fitch views it as highly speculative. Trustee-reported asset defaults have caused the failure of the class A, class, B, class C, class D, class E and class F overcollateralization tests. Furthermore, Attentus II is currently failing the class C, class D, class E and class F interest coverage tests. As of the last payment date, approximately $2 million of interest proceeds were diverted to pay down the principal of the class A-1 notes due to the breach of the class B OC test. Attentus II currently has seven assets deemed to be in default per the transaction's trustee report, representing approximately 22.4% of the portfolio. Six of the seven exposures were treated as defaulted for the purposes of Fitch's previous review of the transaction. Given the rapidly evolving credit pressures facing mortgage REITs and homebuilders, Fitch treated exposures rated or shadow rated 'CC' or lower as defaulted with 100% severity in an effort to anticipate future collateral defaults. As announced on July 1, 2008, Fitch is in the process of examining its default probability assumptions with respect to assets with maturities in excess of 10 years. Resolution of the current Rating Watch Negative status will consider the potential implications of a revised term structure of default probabilities for long-dated assets, as well as any additional credit migration with respect to the underlying portfolio, or any credit risk sales undertaken by the asset manager. Absent changes to Fitch's default probability assumptions or further collateral deterioration or credit risk sales, the ratings of the class A-2 notes will likely remain within the 'A' rating category, the class A-3A and A-3B notes will likely be downgraded to the 'BBB' rating category, the class B notes will likely be downgraded to the 'BB' rating category, the class C notes will likely be downgraded to the 'B' rating category and the class D notes will likely be downgraded to the 'CCC' rating category. The ratings of the class A-1, A-2, A-3A and A-3B notes address the likelihood that investors will receive full and timely payments of interest, as per the governing documents, as well as the aggregate principal amount by the stated maturity date. The ratings of the class B, C and D notes address the likelihood that investors will receive ultimate and compensating interest payments, as per the governing documents, as well as the aggregate principal amount by the stated maturity date. Periodic payments on the notes are distributed on a quarterly basis in January, April, July and October until the stated maturity on Oct. 9, 2041. ATTENTUS CDO: Portfolio Credit Concerns Cue Fitch's Negative Watch ------------------------------------------------------------------ Fitch Ratings has placed these notes of Attentus CDO III Ltd./LLC on Rating Watch Negative: -- $100,000,000 class A-2 'AA'; -- $34,000,000 class B 'A-'; -- $16,000,000 class C-1 'BB+'; -- $15,000,000 class C-2 'BB+'; -- $10,000,000 class D 'BB'. Attentus III is a managed collateralized debt obligation supported by a portfolio of trust preferred securities and subordinated debt issued by subsidiaries of real estate investment trusts, real estate operating companies, homebuilders and specialty finance companies, as well as senior debt securities, commercial mortgage- backed securities and commercial real estate CDOs. Of the total portfolio, approximately 39.7% is comprised of trust preferred securities and subordinated debt, approximately 50.5% of senior debt securities and 9.9% of CMBS and CRE CDOs. The collateral was selected and is monitored by Attentus Management Group LLC. Fitch's rating actions reflect heightened concern related to continued negative portfolio credit migration. While the 'AAA' rating assigned to the $100 million class A-1B notes has not been placed on Rating Watch Negative, Fitch would highlight that this analytical conclusion is based upon the financial guaranty insurance policy provided by Assured Guaranty Corp. (insurer financial strength rated 'AAA' by Fitch) with respect to this class. Without giving effect to this insurance policy, the class A-1B notes would likely be exposed to negative rating action as well. Based on Fitch's public and shadow ratings, the average credit quality of Attentus III migrated to the 'B/B-' range from the 'BB- /B+' range at the time of Fitch's last review, which continues to fail transaction's weighted average rating factor covenant. Currently, 22.7% of the portfolio is publicly or shadow rated 'CCC+' or below as compared to 18.2% at last review. Approximately 27% of the portfolio has experienced negative rating migration since Fitch's last review and 27.9% of the underlying collateral is currently on Rating Watch Negative or has a Negative Rating Outlook. Two securities, which were previously classified as defaulted, underwent a distressed debt exchange increasing their notional amounts to $15.63 million from $12.50 million and to $7.6 million from $6.1 million, respectively. While the notional amounts of these securities increased, Fitch views them as highly speculative. Trustee-reported asset defaults have caused the failure of the class E and class F overcollateralization tests. As of the last payment date, approximately $1.2 million of interest proceeds were diverted to pay down the principal of the class A-1A notes due to the breach of the class E OC test. Attentus III currently has six assets deemed to be in default per the transaction's trustee report, representing approximately 10.4% of the portfolio. All six of the exposures were treated as defaulted for the purposes of Fitch's previous review of the transaction. Given the rapidly evolving credit pressures facing mortgage REITs and homebuilders, Fitch treated exposures rated or shadow rated 'CC' or lower as defaulted with 100% severity in an effort to anticipate future collateral defaults. As announced on July 1, 2008, Fitch is in the process of examining its default probability assumptions with respect to assets with maturities in excess of 10 years. Resolution of the current Rating Watch Negative status will consider the potential implications of a revised term structure of default probabilities for long-dated assets, as well as any additional credit migration with respect to the underlying portfolio, or any credit risk sales undertaken by the asset manager. Absent changes to Fitch's default probability assumptions or further collateral deterioration or credit risk sales, the ratings of the classes of notes placed on Rating Watch Negative will likely be downgraded as follows: class A-2 notes to the 'A' rating category; class B notes to the 'BBB' rating category; class C-1 and C-2 to the 'BB' rating category; and class D notes to the 'B' rating category. The ratings of the class A-1B and A-2 notes address the likelihood that investors will receive full and timely payments of interest, as per the governing documents, as well as the aggregate principal amount by the stated maturity date. The ratings of the class B, C-1, C-2 and D notes address the likelihood that investors will receive ultimate and compensating interest payments, as per the governing documents, as well as the aggregate principal amount by the stated maturity date. Periodic payments on the notes are distributed on a quarterly basis in January, April, July and October until the stated maturity on Oct. 11, 2042. BERING CDO: Fitch Downgrades Ratings on Seven Classes of Notes -------------------------------------------------------------- Fitch Ratings has downgraded and removed from Rating Watch Negative seven classes of notes issued by Bering CDO I, Ltd. These rating actions are effective immediately: -- $169,488,597 Class A-1S1 to 'B' from 'A'; -- $93,000,000 Class A-1S2 to 'CCC' from 'BBB'; -- $42,000,000 Class A-1J to 'CC' from 'BBB-; -- $40,000,000 Class A-2 to 'CC' from 'BB'; -- $14,286,839 Class A-3 to 'C' from 'B'; -- $16,086,072 Class B to 'C' from 'CCC'; -- $4,290,836 Class C to 'C' from 'CC'. Bering is a collateralized debt obligation that closed on Aug. 15, 2006 and is managed by Terwin Money Management, LLC. Bering's reinvestment period ends in October 2010; however, due to overcollateralization test failures the deal has become static. Bering's portfolio is composed primarily of Alternative-A residential mortgage-backed securities (44.9%), subprime RMBS (29.1%), prime RMBS (24%), and structured finance CDOs (2%). Subprime RMBS of the 2005 and 2006 vintages account for approximately 19.4% and 9.7% of the portfolio, respectively. Alt- A RMBS of the 2005, 2006 and 2007 vintages represent approximately 31.9%, 9.5% and 3.5% of the portfolio, respectively. Fitch's rating actions reflect the significant collateral deterioration within the portfolio, specifically subprime RMBS, Alt-A RMBS and SF CDOs with underlying exposure to subprime RMBS. Since November 2007, approximately 59.2% of the portfolio has been downgraded, with 10.3% of the portfolio currently on Rating Watch Negative. The collateral deterioration has caused each of the class A-2, A- 3, and B OC tests and the class C interest diversion test to fall below 100% and fail their respective triggers. The failures of these tests are diverting interest proceeds that would otherwise be payable to the class A-3, B and C notes, to pay down class A- 1S1 notes. Consistent with the current ratings, Fitch expects the class A-3, B and C notes to receive only capitalized interest payments in the future with no ultimate principal recovery. The classes are removed from Rating Watch as Fitch believes further negative migration in the portfolio will have a lesser impact on these classes. Additionally, Fitch is reviewing its SF CDO approach and will comment separately on any changes and potential rating impact at a later date. The ratings of the class A-1S1, A-1S2, A-1J and A-2 notes address the likelihood that investors will receive full and timely payments of interest, as per the transaction's governing documents, as well as the stated balance of principal by the legal final maturity date. The ratings of the class A-3, B and C notes address the likelihood that investors will receive ultimate and compensating interest payments, as per the transaction's governing documents, as well as the stated balance of principal by the legal final maturity date. BHM TECHNOLOGIES: Committee Wants to Retain Jaffe as Counsel ------------------------------------------------------------ The Official Committee of Unsecured Creditors of BHM Technologies Holdings, Inc., and its debtor-subsidiaries seeks the approval of the United States Bankruptcy Court for the Western District of Michigan on its selection of Jaffe, Raitt, Heuer & Weiss, P.C., as counsel. Martin Seward, chairman of the Creditors Committee, says the panel has selected Jaffe as counsel because of the firm's extensive general experience and knowledge, and its recognized expertise in the field of debtor's and creditors' rights, business reorganizations under Chapter 11 of the Bankruptcy Code, and unsecured creditors committees' rights and duties. Jaffe will assist the Committee in fulfilling the functions described in Section 1103(c) of the Bankruptcy Code and other functions as may be required or permitted of the Committee pursuant to the Bankruptcy Code. Judith Greenstone Miller, Esq., a member of the firm, says his firm does not hold or represent an interest adverse to the Debtors' estate in the matters upon which Jaffe is to be employed. Jaffe will charge the Debtors' estates at its standard hourly rates and will seek reimbursement of necessary out-of-pocket expenses. The firm's standard rates are: Professional Position Hourly Rate ------------ -------- ----------- Jay L. Welford Partner $385 Thomas E. Coughlin Partner 335 Judith Greenstone Miller Partner 360 Louis P. Rochkind Partner 455 Richard Kruger Partner 285 Alicia Schehr Partner 250 Paige Barr Associate 200 Paul Hage Associate 185 Maureen E. Chapman Paralegal 160 Jaffe will apply to the Court for allowance of compensation and reimbursement of expenses in accordance with applicable provisions of the Bankruptcy Code, Federal Rules of Bankruptcy Procedure, local rules and orders of this Court. Headquartered in Ionia, Michigan, BHM Technologies Holdings Inc.-- http://www.browncorp.com/--manufactures and sells automobile parts including air bags and electrical systems. It has manufacturing facilites in Mexico and operates under Brown Corp. BHM Technologies Holdings, Inc. and 14 affiliates filed separate voluntary petitions under Chapter 11 on May 19, 2008 (Bankr. W.D. Mich. Lead Case No. 08-04413). Hannah Mufson McCollum, Esq., Kay Standridge Kress, Esq., Robert S. Hertzberg, Esq., and Leon R. Barson, Esq. of Pepper Hamilton LLP, represent the Debtors in their restructuring efforts. When the Debtors filed for bankruptcy, it listed estimated assets and debts to be both between US$100 million and US$500 million. The Debtors have until Sept. 16, 2008, to exclusively file their bankruptcy plan. (BHM Technologies Bankruptcy News, Issue No. 7; Bankruptcy Creditors' Service Inc., http://bankrupt.com/newsstand/ or 215/945-7000) BHM TECHNOLOGIES: Court Approves White & Case as Counsel -------------------------------------------------------- The United States Bankruptcy Court for the Western District of Michigan approved the request of BHM Technologies Holdings, Inc. and its debtor-subsidiaries to hire White & Case LLP as their special litigation counsel. Dwight Healy, Esq., member at White & Case states that his firm and the United States Trustee have negotiated a resolution of the Trustee's objection to the firm's retention. Mr. Healy says that the U.S. Trustee has agreed to withdraw its objection to the Application provided that White & Case agrees that it will: a) run a conflict search on all parties listed in the Debtors' or Debtors' related schedule or are entitled to notice in any of the Debtors' cases; b) disclose any connections with such parties in a further supplemental declaration; c) not repeat any such connected parties in matters relating to these cases; and d) charge one-half its standard hourly rates for non-working travel time. Mr. Healy adds that White & Case has agreed to the U.S. Trustee's terms. Headquartered in Ionia, Michigan, BHM Technologies Holdings Inc.-- http://www.browncorp.com/-- manufactures and sells automobile parts including air bags and electrical systems. It has manufacturing facilites in Mexico and operates under Brown Corp. BHM Technologies Holdings, Inc. and 14 affiliates filed separate voluntary petitions under Chapter 11 on May 19, 2008 (Bankr. W.D. Mich. Lead Case No. 08-04413). Hannah Mufson McCollum, Esq., Kay Standridge Kress, Esq., Robert S. Hertzberg, Esq., and Leon R. Barson, Esq. of Pepper Hamilton LLP, represent the Debtors in their restructuring efforts. When the Debtors filed for bankruptcy, it listed estimated assets of $100 million and $500 million and estimated debts of $100 million and $500 million. The Debtors have until Sept. 16, 2008, to exclusively file their bankruptcy plan. (BHM Technologies Bankruptcy News, Issue No. 7; Bankruptcy Creditors' Service Inc., http://bankrupt.com/newsstand/ or 215/945-7000) BHM TECHNOLOGIES: Court Approves Pepper Hamilton as Counsel ----------------------------------------------------------- The United States Bankruptcy Court for the Western District of Michigan approved the request of BHM Technologies Holdings, Inc. and its debtor-subsidiaries to hire Pepper Hamilton LLP. Robert S. Hertzberg, Esq., partner at Pepper Hamilton, and co- chair of the firm's Corporate Reorganization and Bankruptcy Practice Group, says the firm engaged in discussions with the Office of the U.S. Trustee. They have agreed that: a. Pepper will review its client database with respect to all of the Debtors' scheduled creditors, except that Pepper will not review its client database with respect to the Debtors' employees, who may be scheduled creditors. b. Pepper has agreed to charge one half of its normal billing rates for non-working travel. c. Pepper will not represent any party other than the Debtors in the Debtors' bankruptcy cases. The conflicts check identified about 20 parties-in-interest that Pepper Hamilton previously or presently has provided services. The firm, however, assures the Court that Pepper Hamilton's representation of those parties were in matters unrelated to the Debtors' cases. Headquartered in Ionia, Michigan, BHM Technologies Holdings Inc.-- http://www.browncorp.com/--manufactures and sells automobile parts including air bags and electrical systems. It has manufacturing facilites in Mexico and operates under Brown Corp. BHM Technologies Holdings, Inc. and 14 affiliates filed separate voluntary petitions under Chapter 11 on May 19, 2008 (Bankr. W.D. Mich. Lead Case No. 08-04413). Hannah Mufson McCollum, Esq., Kay Standridge Kress, Esq., Robert S. Hertzberg, Esq., and Leon R. Barson, Esq. of Pepper Hamilton LLP, represent the Debtors in their restructuring efforts. When the Debtors filed for bankruptcy, it listed estimated assets of between $100 million and $500 million and debts of between US$100 million and US$500 million. The Debtors have until Sept. 16, 2008, to exclusively file their bankruptcy plan. (BHM Technologies Bankruptcy News, Issue No. 7; Bankruptcy Creditors' Service Inc., http://bankrupt.com/newsstand/ or 215/945-7000) BHM TECHNOLOGIES: Wants Rothschild as Advisor Despite Objection ------------------------------------------------------------- BHM Technologies Holdings, Inc., its debtor-subsidiaries and Rothschild Inc., in a joint response, ask the United States Bankruptcy Court for the Western District of Michigan to approve the application of the firm as their investment banker and financial advisor, despite objections by the U.S. Trustee, Lehman Commercial Paper, Inc., and the Official Committee of Unsecured Creditors. Proposed counsel for the Debtors, Leon R. Barson, Esq., at Pepper Hamilton LLP, in Philadelphia Pennsylvania, relates Rothschild was instrumental in negotiating the plan of reorganization agreed upon by the Debtors, the Debtors' equity sponsor and the Debtors' first- and second-lien lenders contemplated by the term sheet and support agreement, the "Term Sheet" that resulted in the Debtors' smooth landing into Chapter 11. Rothschild was the primary point person for negotiations with the Debtors' various constituents. Although the Debtors and their largest constituents have entered into the Term Sheet, Rothschild's assistance is still necessary for the successful confirmation and consummation of the proposed plan of reorganization, Mr. Barson relates. Most importantly, Rothschild is assisting the Debtors with finding exit financing, an important task that requires the expertise of investment bankers familiar with restructurings of this type. Mr. Barson adds Rothschild also continues to act as the primary negotiator for the Debtors with respect to the Debtors' first-and second-lien lenders and the Committee with respect to plan- related issues. Rothschild has unique knowledge concerning the Debtors, their businesses and their ongoing effort to restructure that is central to those continuing projects and would be difficult, if not impossible, to duplicate in a timely manner. Lehman's objection is an attempt to extract concessions from Rothschild after accepting the benefit of the firm's services both before and after the Debtors commenced the Chapter 11 cases. Lehman is aware of Rothschild's role in the Debtors' restructuring, having interacted with Rothschild in connection with the development and negotiation of the Term Sheet and having approved a budget that included Rothschild's fees in connection with the Debtors' debtor-in-possession financing. Rothschild services are necessary and are not duplicative of the services provided by AlixPartners LLP, and the terms of Rothschild's retention are reasonable in all respects. Each of the objections raised by Lehman, the Committee and the U.S. Trustee is without merit and should be overruled in its entirety. According to Mr. Barson, Lehman has waived its right to object to Rothschild's retention and fees. He notes that Lehman has long been aware of Rothschild's role in this restructuring, having interacted with Rothschild in connection with the development and negotiation of the Term Sheet since March 3, 2008. According to him, not once during the months since Lehman became aware of the Rothschild's engagement did Lehman express any objection to, or concern with, the fees of the firm. It notes that the DIP Agreement, for which Lehman is a party, provides for the full payment of Rothschild's fees. Mark Thompson, Esq., at Simpson Thacher & Bartlett LLP, counsel to Lehman, refutes the Debtors' claim that Lehman did not express any objection to Lehman's fees. Mr. Thompson says that on multiple occasions, both prepetition and postpetition, he has to personally express to the Debtors' counsel, Lehman's objection and the lenders for whom it acts as administrative agent, to the fees being sought by Rothschild. Mr. Thompson also said Lehman previously conveyed to the Debtors' representatives that Lehman will object to the retention and compensation of Rothschild because there was considerable dissatisfaction among the lenders with the way Rothschild had performed its services since the inception of its engagement. Headquartered in Ionia, Michigan, BHM Technologies Holdings Inc.-- http://www.browncorp.com/--manufactures and sells automobile parts including air bags and electrical systems. It has manufacturing facilites in Mexico and operates under Brown Corp. BHM Technologies Holdings, Inc. and 14 affiliates filed separate voluntary petitions under Chapter 11 on May 19, 2008 (Bankr. W.D. Mich. Lead Case No. 08-04413). Hannah Mufson McCollum, Esq., Kay Standridge Kress, Esq., Robert S. Hertzberg, Esq., and Leon R. Barson, Esq. of Pepper Hamilton LLP, represent the Debtors in their restructuring efforts. When the Debtors filed for bankruptcy, it listed estimated assets of between $100 million and $500 million and debts of between US$100 million and US$500 million. The Debtors have until Sept. 16, 2008, to exclusively file their bankruptcy plan. (BHM Technologies Bankruptcy News, Issue No. 7; Bankruptcy Creditors' Service Inc., http://bankrupt.com/newsstand/ or 215/945-7000) BHM TECHNOLOGIES: Varnum Responds to U.S. Trustee's Objection ------------------------------------------------------------- Mary Kay Shaver, Esq., at Varnum, Riddering, Schmidt & Howlett LLP, says that on June 17, 2008, representatives for Varnum, Pepper Hamilton LLP, and Habbo Fokkena, United States Trustee for Region 9, held a meeting and discussed the issues raised by the Trustee. BHM Technologies Holdings, Inc., and its debtor-subsidiaries are seeking permission from the United States Bankruptcy Court for the Western District of Michigan to hire Varnum, Riddering as their corporate counsel and conflicts counsel. The Trustee objects to Varnum, Riddering for these reasons: (1) Varnum has been retained as conflicts counsel, but neither the Pepper Hamilton LLP application nor the Varnum application contain an explanation of what would constitute a conflict that would be referred to Varnum. (2) Varnum did not run conflicts checks against all parties- in-interest in the Chapter 11 cases. (3) According to the affidavit, Varnum has 40 current and 41 former clients who are connected with BHM's case. These are more connections than Pepper Hamilton has. The U.S. Trustee requests more time to explore with the Debtors and its attorneys, how Varnum could be conflicts counsel given its number of potential conflicts. (4) On May 7, 2008, BHM sued the former shareholders and directors of BHM, alleging that the current BHM was misled about the value of BHM so that BHM paid "millions" of dollars too much for BHM. According to the Varnum affidavit, it is possible that Varnum represented these defendants; but Varnum no longer represents these persons. The U.S. Trustee believes the defendants are currently represented by Law Weathers but does not know whether these defendants are in fact the same clients that Varnum formerly represented, and if so, when this representation ceased and what Varnum's role was in this litigation. (5) Varnum owns Varnum Consulting, which is not currently employed by the Debtors nor is a creditor. Varnum's affidavit leaves open the possibility that Varnum Consulting has done work for the Debtors in the past and has been paid in full. (6) Once the U.S. Trustee understands the scope of Varnum's anticipated duties, it would request additional time to review the proposed fees with the Official Committee of Unsecured Creditors and its counsel. Ms. Shaver relates that it has settled concerns by the U.S. Trustee on: (i) Varnum's role as conflicts counsel; (ii) the firm's proposed fees, by, among other things, charging one-half of its normal hourly fee for non- working travel time; (iii) whether the firm's unit Varnum Consulting performed work for the Debtors prepetition; and (iv) Conflicts check against all parties-in-interest in the Chapter 11 cases. Michael Wooldridge, Esq., a member of Varnum, relates that the firm has performed conflicts check with potential parties-in- interest, the firm has determined that no engagement with interest parties has involved either the billing of fees in excess of 0.5% of Varnum's annual fees billed, or that, in the aggregate for any affiliated group of entities, exceeds 1% of Varnum's annual fees billed. With respect to concerns of potential conflict of interest due to Varnum's prior representation of the former shareholders of BHM Technologies, LLC, in the sale of BHM Technologies' company interests to BHM Technologies Holdings, Inc., Ms. Shaver recounts that Varnum began representing The Brown Corporation of America, a predecessor to BHM Technologies Holdings, Inc., in 1992. The firm continued to represent The Brown Corporation of America after its merger with Midwest Stamping & Manufacturing Co., in 2005. In 2006, Morton Welding Holdings, Inc., Heckethorn Holdings, Inc. and The Brown Corporation of America became wholly-owned subsidiaries of BHM Technologies, LLC. BHM Technologies' company interests were sold to BHM Holdings pursuant to the Purchase Agreement. On August 22, 2007, BHM Holdings gave notice to the Former Shareholders of an indemnification claim under the Purchase Agreement, and the Former Shareholders asked Varnum to represent them. Varnum had not performed legal services for BHM Holdings, and was given consent to represent the Former Shareholders in negotiations with BHM Holdings. Ms. Shaver says that in its representation, Varnum drafted the Former Shareholders' initial response to the Indemnification Claim, briefly reviewed information voluntarily provided by BHM Holdings to the Former Shareholders, assisted the Former Shareholders with the negotiation of a tolling agreement, drafted a supplemental response to the Indemnification Claim and prepared a memorandum for the Former Shareholders. Ms. Shaver adds that once it became apparent that BHM Holdings was going to be a Debtor in these cases, and prior to the filing of the petitions, Varnum and the Former Shareholders concluded the engagement and the Former Shareholders engaged the firm, Law, Weathers & Richardson. After the representation was concluded and Law, Weathers & Richardson was engaged, BHM Holdings filed a complaint against the Former Shareholders. Varnum has no role in this litigation and will not represent the Former Shareholders against BHM Holdings or BHM Holdings against the Former Shareholders. Varnum submits that there is no actual or potential conflict arising from its representation of the Former Shareholders. Headquartered in Ionia, Michigan, BHM Technologies Holdings Inc.-- http://www.browncorp.com/--manufactures and sells automobile parts including air bags and electrical systems. It has manufacturing facilites in Mexico and operates under Brown Corp. BHM Technologies Holdings, Inc. and 14 affiliates filed separate voluntary petitions under Chapter 11 on May 19, 2008 (Bankr. W.D. Mich. Lead Case No. 08-04413). Hannah Mufson McCollum, Esq., Kay Standridge Kress, Esq., Robert S. Hertzberg, Esq., and Leon R. Barson, Esq. of Pepper Hamilton LLP, represent the Debtors in their restructuring efforts. When the Debtors filed for bankruptcy, it listed estimated assets of between $100 million and $500 million and debts of between $100 million and $500 million. The Debtors have until Sept. 16, 2008, to exclusively file their bankruptcy plan. (BHM Technologies Bankruptcy News, Issue No. 7; Bankruptcy Creditors' Service Inc., http://bankrupt.com/newsstand/ or 215/945-7000) BRASCAN REAL ESTATE: Moody's Affirms Ratings of 5 Classes of Notes ------------------------------------------------------------------ Moody's Investors Service affirmed the ratings of five classes of Notes issued by Brascan Real Estate CDO 2004-1 as: -- Class A, $153,000,000, Floating Rate Notes Due 2040, affirmed at Aaa -- Class B, $32,350,000, Floating Rate Notes Due 2040, affirmed at Aa2 -- Class C, $18,750,000, Floating Rate Notes Due 2040, affirmed at A3 -- Class D, $13,530,000, Floating Rate Notes Due 2040, affirmed at Baa3 -- Class E, $13,500,000, Floating Rate Notes Due 2040, affirmed at Ba2 Moody's is affirming the transaction due to overall stable pool performance based on the Trustee Report on June 30, 2008 and information from the Collateral Manager. Brascan Real Estate CDO 2004-1 is a collateralized debt obligation backed primarily by CMBS collateral and a portfolio of commercial real estate B-notes. As of the June 30, 2008 report date, the transaction's aggregate bond balance has decreased to $262.7 million from $300.7 million as of the Effective Date. The ramp-up period ended on March 14, 2005. At present, the transaction is in compliance with all applicable coverage tests. However, the transaction is currently not in compliance with two of the collateral quality tests: "Herfindahl Diversity Score" has a minimum threshold of 23.8 and the current value is 20.0; "Collateral Debt Securities with a Moody's Rating below B2" has a maximum threshold of 0% and the current value is 0.76%. The impact of the aforementioned failures on the current ratings was offset by the 12.6% reduction in the outstanding bond balance. The rating actions reflect Moody's evaluation of the expected loss associated with each class of Notes based on the deal structure, level of subordination under the notes and the credit quality of the underlying collateral pool. BSML INC: Brent Knudsen Resigns as Board Director ------------------------------------------------- Brent Knudsen resigned from his position as a director of BSML, Inc. Mr. Knudsen has been a director of the company since Dec. 10, 2007. Mr. Knudsen is the Managing Partner of Partnership Capital Growth Advisors, a leading advisor/investor in the areas of healthy, active and sustainable living, and licensed FINRA/SIPC broker dealer. Prior to founding PCGA, Mr. Knudsen was an original partner at North Castle Partners, the leading private equity firm targeting investments in the area of healthy living & aging, where he led investments in areas including spas, fitness clubs and nutrition. Prior to joining North Castle Partners in 1998, Mr. Knudsen founded, built, operated and advised growth businesses in the area of healthy/active living, including Golf Web, Bell Sports, and the Full Force Division of Specialized Bicycle Components. Earlier Mr. Knudsen was at Bain & Company, focusing primarily in the area of health care strategy and mergers & acquisitions. Mr. Knudsen received a B.A. from the University of Utah, a J.D. from Georgetown Law School, and was a Visiting Scholar at Harvard Law and Business Schools. He currently serves on various private and public boards, including Planet Organic Health Corporation (POHC) and is chairman of the Pepperdine University Seaver Board of Visitors. Based in Walnut Creek, California, BSML Inc. (NasdaqCM: BSML) -- http://www.britesmile.com/-- markets teeth whitening technology and manages BriteSmile Professional Teeth Whitening Centers. BSML Inc.'s consolidated financial statements at March 29, 2008, showed $7,654,000 in total assets and $9,362,000 in total liabilities, resulting in a $1,708,000 total stockholders' deficit. Going Concern Doubt Stonefield Josephson Inc., in Los Angeles, California, expressed substantial doubt about BSML Inc.'s ability to continue as a going concern after auditing the company's consolidated financial statements for the year ended Dec. 29, 2007. To date, the company has yet to achieve profitability. The company has an accumulated deficit of $177,199,000 and working capital deficiency of $4,968,000 as of March 29, 2008. The company's net loss and net cash used by operating activities were $576,000 and $3,990,000, respectively, for the thirteen weeks ended March 29, 2008. BAOSHINN CORP: Dominic K.F. Chan Expresses Going Concern Doubt -------------------------------------------------------------- Dominic K.F. Chan & Co. raised substantial doubt about the ability of Baoshinn Corporation to continue as a going concern after it audited the company's financial statements for the year ended March 31, 2008. The auditor pointed to the Company's recurring net losses. The company posted a net loss of $324,942 on total revenues of $37,616,276 for the year ended March 31, 2008, as compared with net loss of $268,117 on total revenues of $32,080,684 in the prior year. At March 31, 2008, the company's balance sheet showed $2,736,898 in total assets, $2,003,860 in total liabilities, and $733,038 in total stockholders' equity. A full-text copy of the company's 2008 annual report is available for free at http://ResearchArchives.com/t/s?2f76 About Baoshinn Corporation Baoshinn Corporation was incorporated under the laws of the State of Nevada on September 9, 2005, under the name of JML Holdings, Inc. The company was formed as a "blind pool" or "blank check" company whose business plan was to seek to acquire a business opportunity through completion of a merger, exchange of stock, or other similar type of transaction. Prior to its identification of Bao Shinn International Express as an acquisition target, its only business activity was organizational activities. BSIE is headquartered in Hong Kong and was established in 2002 to offer extended travel services primarily focused on wholesale businesses and corporate clients. Through the Hong Kongs subsidiary, Baoshinn is a ticket consolidator of major international airlines, including Thai Airways, Eva Airways, Dragon Air, Air China, China Southern Airlines and China Eastern Airlines. The company provides travel services such as ticketing, hotel and accommodation arrangements, tour packages, incentive tours and group sightseeing services to customers located in Hong Kong and Mainland China. CALPINE CORP: Promotes Andres Walker to Vice President ------------------------------------------------------ Calpine Corporation promoted Andre Walker to vice president, finance and investor relations. In this role, Mr. Walker's responsibilities will include managing investor relations, while continuing his current corporate finance responsibilities. "[Mr. Walker's] significant industry and company knowledge, along with his diverse experience, uniquely qualify him for this position. His addition to the investor relations team will dramatically enhance our relationship with external stakeholders. Meanwhile, Mr. Walker will continue to deliver shareholder value through his role in our corporate finance group," said Zamir Rauf, interim Chief Financial Officer. Mr. Walker joined the company in 1999, serving in various capacities in finance, business development, asset management and sales. Prior to joining Calpine, he held several positions at Air Liquide America. Mr. Walker holds a bachelor's of science degree in chemical engineering from The University of Texas at Austin. About Calpine Corporation 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. On Dec. 19, 2007, the Court confirmed the Debtors' Plan. The Amended Plan was deemed effective as of January 31, 2008. CAVIATA LLC: Taps Cecilia L. Rosenauer Ltd. as Bankruptcy Counsel ----------------------------------------------------------------- Caviata LLC asks the U.S. Bankruptcy Court for the District of Nevada for permission to employ Cecilia L. Rosenauer, Ltd. as its bankruptcy counsel. Cecilia L. Rosenauer, Ltd. will mainly advise the Debtor of its rights and obligations under the Bankruptcy Code and assist in the preparation of a plan of reorganization and disclosure statement. Cecilia L. Rosenauer, Ltd. received a $25,000 general retainer which was paid by Madonna and John Beal, members of the Debtor, from their personal funds. Subject to the Court's approval, Cecilia L. Rosenauer, Ltd.'s professionals shall be compensated at these hourly rates: Cecilia L. Rosenauer, Esq. $350 Contract Attorneys $200 Legal Assistants $95 Cecilia L. Rosenauer, Esq., the president and sole shareholder of Cecilia L. Rosenauer, Ltd., assures the Court that her firm neither holds or represents any interest adverse to the Debtor or its estate, and that the firm is a "disinterested person" as that term is defined in Sec. 101(14) of the Bankruptcy Code. Based in Sparks, Nev., Caviata LLC filed for Chapter 11 on June 16, 2008 (D. Nev. Case No. 08-50964). When the Debtor filed for protection from its creditors, it listed estimated assets of between $10 million and $50 million and estimated debts of between $10 million and $50 million. CHEVY CHASE: Moody's Rates Additional Tranches on 2007-2 Certs. --------------------------------------------------------------- Rating actions for Chevy Chase Funding LLC, Mortgage-Backed Certificates, Series 2007-2 appeared incorrectly in the July 1, 2008 press statement. Three tranches should be added to the rating actions on Chevy Chase Funding LLC, Mortgage-Backed Certificates, Series 2007-2. The ratings on Cl. A-1, Cl. A-1I, and Cl. A-1NA should be on review for possible downgrade. Revised release: Moody's Investors Service has downgraded the ratings of 70 tranches from 12 Option ARM transactions originated by Chevy Chase. Thirteen tranches remain on review for possible further downgrade. Additionally, 21 tranches were placed on review for possible downgrade. The collateral backing these transactions consists primarily of first-lien, adjustable-rate, negatively amortizing Alt-A mortgage loans. The ratings were downgraded, in general, based on higher than anticipated rates of delinquency, foreclosure, and REO in the underlying collateral relative to credit enhancement levels. The actions are a result of Moody's on-going review process. Complete rating actions are: Issuer: Chevy Chase Funding LLC, Mortgage-Backed Certificates, Series 2005-2 -- Cl. IO, Placed on Review for Possible Downgrade, currently Aaa -- Cl. B-3, Downgraded to Baa2 from A3 -- Cl. B-4, Downgraded to B2 from Ba2 -- Cl. B-5, Downgraded to Caa2 from B2 Issuer: Chevy Chase Funding LLC, Mortgage-Backed Certificates, Series 2005-3 -- Cl. IO, Placed on Review for Possible Downgrade, currently Aaa -- Cl. B-5, Downgraded to Ca from B2 Issuer: Chevy Chase Funding LLC, Mortgage-Backed Certificates, Series 2005-4 -- Cl. IO, Placed on Review for Possible Downgrade, currently Aaa -- Cl. B-3, Downgraded to Baa2 from Baa1 -- Cl. B-4, Downgraded to Caa2 from Ba1 -- Cl. B-5, Downgraded to Ca from B2 Issuer: Chevy Chase Funding LLC, Mortgage-Backed Certificates, Series 2005-B -- Cl. IO, Placed on Review for Possible Downgrade, currently Aaa -- Cl. B-4, Downgraded to Caa1 from Ba2 -- Cl. B-5, Downgraded to Ca from B2 Issuer: Chevy Chase Funding LLC, Mortgage-Backed Certificates, Series 2005-C -- Cl. IO, Placed on Review for Possible Downgrade, currently Aaa -- Cl. B-4, Downgraded to B2 from Ba2 -- Cl. B-5, Downgraded to Ca from B2 Issuer: Chevy Chase Funding LLC, Mortgage-Backed Certificates, Series 2006-1 -- Cl. IO, Placed on Review for Possible Downgrade, currently Aaa -- Cl. B-2, Downgraded to A2 from Aa2 -- Cl. B-2I, Downgraded to A2 from Aa2 -- Cl. B-2NA, Downgraded to A2 from Aa2 -- Cl. B-3, Downgraded to B1 from A2 -- Cl. B-4, Downgraded to Ca from Baa3 -- Cl. B-5, Downgraded to Ca from B2 Issuer: Chevy Chase Funding LLC, Mortgage-Backed Certificates, Series 2006-2 -- Cl. IO, Placed on Review for Possible Downgrade, currently Aaa -- Cl. NIO, Placed on Review for Possible Downgrade, currently Aaa -- Cl. B-1, Downgraded to Aa3 from Aa1 -- Cl. B-1I, Downgraded to Aa3 from Aa1 -- Cl. B-1NA, Downgraded to Aa3 from Aa1 -- Cl. B-2, Downgraded to Ba2 from Aa3 -- Cl. B-2I, Downgraded to Ba2 from Aa3 -- Cl. B-2NA, Downgraded to Ba2 from Aa3 -- Cl. B-3, Downgraded to B3 from A2; Placed Under Review for further Possible Downgrade -- Cl. B-4, Downgraded to Ca from Baa3 -- Cl. B-5, Downgraded to Ca from B2 Issuer: Chevy Chase Funding LLC, Mortgage-Backed Certificates, Series 2006-3 -- Cl. IO, Placed on Review for Possible Downgrade, currently Aaa -- Cl. NIO, Placed on Review for Possible Downgrade, currently Aaa -- Cl. B-1, Downgraded to A1 from Aaa -- Cl. B-1I, Downgraded to A1 from Aaa -- Cl. B-1NA, Downgraded to A1 from Aaa -- Cl. B-2, Downgraded to Ba2 from Aa2 -- Cl. B-2I, Downgraded to Ba2 from Aa2 -- Cl. B-2NA, Downgraded to Ba2 from Aa2 -- Cl. B-3, Downgraded to B2 from A2; Placed Under Review for further Possible Downgrade -- Cl. B-3I, Downgraded to B2 from A2; Placed Under Review for further Possible Downgrade -- Cl. B-3NA, Downgraded to B2 from A2; Placed Under Review for further Possible Downgrade -- Cl. B-4, Downgraded to Ca from Baa3 -- Cl. B-5, Downgraded to Ca from B2 Issuer: Chevy Chase Funding LLC, Mortgage-Backed Certificates, Series 2006-4 -- Cl. IO, Placed on Review for Possible Downgrade, currently Aaa -- Cl. NIO, Placed on Review for Possible Downgrade, currently Aaa -- Cl. B-1, Downgraded to Baa2 from Aaa -- Cl. B-1I, Downgraded to Baa2 from Aaa -- Cl. B-1NA, Downgraded to Baa2 from Aaa -- Cl. B-2, Downgraded to B1 from Aa2 -- Cl. B-2I, Downgraded to B1 from Aa2 -- Cl. B-2NA, Downgraded to B1 from Aa2 -- Cl. B-3, Downgraded to B3 from A2; Placed Under Review for further Possible Downgrade -- Cl. B-3I, Downgraded to B3 from A2; Placed Under Review for further Possible Downgrade -- Cl. B-3NA, Downgraded to B3 from A2; Placed Under Review for further Possible Downgrade -- Cl. B-4, Downgraded to Ca from Baa3 -- Cl. B-5, Downgraded to Ca from B2 Issuer: Chevy Chase Funding LLC, Mortgage-Backed Certificates, Series 2007-1 -- Cl. IO, Placed on Review for Possible Downgrade, currently Aaa -- Cl. NIO, Placed on Review for Possible Downgrade, currently Aaa -- Cl. B-1, Downgraded to Baa1 from Aaa -- Cl. B-1I, Downgraded to Baa1 from Aaa -- Cl. B-1NA, Downgraded to Baa1 from Aaa -- Cl. B-2, Downgraded to Ba3 from Aa2 -- Cl. B-2I, Downgraded to Ba3 from Aa2 -- Cl. B-2NA, Downgraded to Ba3 from Aa2 -- Cl. B-3, Downgraded to Caa1 from A2; Placed Under Review for further Possible Downgrade -- Cl. B-3I, Downgraded to Caa1 from A2; Placed Under Review for further Possible Downgrade -- Cl. B-3NA, Downgraded to Caa1 from A2; Placed Under Review for further Possible Downgrade -- Cl. B-4, Downgraded to Ca from Baa3 -- Cl. B-5, Downgraded to Ca from B2 Issuer: Chevy Chase Funding LLC, Mortgage-Backed Certificates, Series 2007-2 -- Cl. A-1, Placed on Review for Possible Downgrade, currently Aaa -- Cl. A-1I, Placed on Review for Possible Downgrade, currently Aaa -- Cl. A-NA, Placed on Review for Possible Downgrade, currently Aaa -- Cl. IO, Placed on Review for Possible Downgrade, currently Aaa -- Cl. A-2, Placed on Review for Possible Downgrade, currently Aaa -- Cl. NIO, Placed on Review for Possible Downgrade, currently Aaa -- Cl. A-2I, Placed on Review for Possible Downgrade, currently Aaa -- Cl. B-1, Downgraded to Ba3 from Aaa -- Cl. B-1NA, Downgraded to Ba3 from Aaa -- Cl. B-1I, Downgraded to Ba3 from Aaa -- Cl. B-2, Downgraded to B2 from Aa2 -- Cl. B-2I, Downgraded to B2 from Aa2 -- Cl. B-2NA, Downgraded to B2 from Aa2 -- Cl. B-3, Downgraded to Caa1 from A1; Placed Under Review for further Possible Downgrade -- Cl. B-3I, Downgraded to Caa1 from A1; Placed Under Review for further Possible Downgrade -- Cl. B-3NA, Downgraded to Caa1 from A1; Placed Under Review for further Possible Downgrade -- Cl. B-4, Downgraded to Ca from Baa3 -- Cl. B-5, Downgraded to Ca from B2 CLEARLY CANADIAN: KPMG LLP Expresses Going Concern Doubt -------------------------------------------------------- KPMG LLP in Vancouver, Canada, raised substantial doubt about Clearly Canadian Beverage Corporation's ability to continue as a going concern after it audited the company's financial statements for the year ended Dec. 31, 2007. The auditor reported that the company has suffered recurring losses from operations and has insufficient working capital to meet its planned business objectives. The company had a loss for the year ended Dec. 31, 2007. At Dec. 31, 2007, it has working capital of $7,625,000 and an accumulated deficit of $89,913,000. Operations for the year ended Dec. 31, 2007, have been funded primarily from cash reserves raised by the issuance of capital stock and convertible notes. Management is of the opinion that its cash and cash equivalents of $8,700,000 at Dec. 31, 2007, will provide sufficient working capital to meet the company's cash requirements until the fourth quarter of 2008. Since January 2007, the company had raised nearly $13,690,000 of debt and equity financing to fund working capital requirements. Management has continued to take steps to try to improve the company's financial results and cash flow, which includes pursuing equity financing to fund working capital requirements. The company's ability to continue operations is contingent on its ability to obtain financing. Management believes that it will be able to secure the necessary financing, however, there is no assurance that management will be successful in achieving these objectives. The company posted a net loss of $12,796,000 on total sales of $10,623,000 for the year ended Dec. 31, 2007, as compared with a net loss of $8,247,000 on total sales of $7,462,000 in the prior year. Operating losses were $13,117,000 for the year ended Dec. 31, 2007, compared with $7,392,000 for the year ended Dec. 31, 2006. The company will likely incur additional losses for fiscal 2008. Balance Sheet At Dec. 31, 2007, the company's balance sheet showed $22,178,000 in total assets, $9,955,000 in total liabilities, and $12,223,000 in total stockholders' equity. The company's consolidated balance sheet at Dec. 31, 2007, showed $11,983,000 in total current assets and $4,358,000 in total current liabilities. A full-text copy of the company's 2007 annual report is available for free at http://ResearchArchives.com/t/s?2f77 Results of Operations Sales were $10,623,000 for the twelve months ended Dec. 31, 2007, compared with $7,462,000 for the twelve months ended Dec. 31, 2006, an increase of 42% or $3,161,000. The overall increase in sales was a result of the addition of $3,896,000 in sales from the company's healthy snack division (acquired in February 2007 through the acquisition of DMR Food Corporation) and $1,124,000 in sales from its organic baby product division (acquired in May 2007 through the acquisition of My Organic Baby, Inc.). Sales for the twelve months ended Dec. 31, 2007, from the beverage division were $5,603,000 compared with $7,462,000 for the same period last year, a decrease of $1,859,000 or 24.9%. The decrease in beverage sales is attributable to the decline in sales of the 14oz flavoured sparkling water by 36% due to the increase in competition and product alternatives in the marketplace. Also the decline can be attributed to the non-carbonated, non-branded water beverage, which was influenced materially by the size of orders from a major customer. However, sales from the company's new beverage products including our 1 Litre sparking flavoured format and our new Enhanced Waters, grew 342% for the twelve months ended Dec. 31, 2007, compared with the same period in 2006. the company expects sales of its new beverage product offerings to continue to grow. Cost of sales expenses were $9,212,000 for the twelve months ended Dec. 31, 2007, compared with $5,677,000 for the same period last year, an increase of $3,535,000. The net of sales less cost of sales, being the gross profit margin percentage, decreased to 13.2% for the twelve months ended Dec. 31, 2007, from 23.9% for the twelve months ended December 31, 2006, a decrease of 10.7%. The decrease in gross profit margin is a result of a number of factors. First, lower margins can be attributed to the continued integration of the new healthy snack and organic baby product business units with the company's beverage units. The healthy snack unit has lower gross profit margin percentages than the other businesses, however, it also has lower selling and marketing expenses associated with its business. Second, the beverage unit is encountering higher costs in raw materials and increases in fuel surcharges resulting in increases in costs of goods sold. Finally, there were one time charges associated with obsolete inventory and a product recall. About Clearly Canadian Based in Vancouver, B.C., Clearly Canadian Beverage Corporation (OTC BB: CCBEF.OB CL) -- http://www.clearly.ca/-- markets premium alternative beverages, including Clearly Canadian(R) sparklingflavoured waters and Clearly Canadian dailyEnergy, dailyVitamin and dailyHydration Natural Enhanced Waters which are distributed in the United States, Canada and various other countries. Clearly Canadian's recent acquisition of DMR Food Corporation and My Organic Baby Inc. marks the company's debut into organic and natural products with a full line of organic baby and toddler foods under the brand names My Organic Baby and My Organic Toddler and a wide range of dried fruit and nut snacks offerings from SunRidge Farms, Naturalife, Sweet Selections, Simply by Nature and Glengrove Organics brands. CLOVERIE PLC: Fitch Cuts Ratng to CC from A- on Poor Collateral --------------------------------------------------------------- Fitch Ratings has downgraded and removed from Rating Watch Negative the sole class of notes issued by Cloverie Plc 2005-78. These rating action is effective immediately: -- $15,000,000 class S-2 notes to 'CC' from 'A-'. Fitch originally placed Cloverie 2005-78 on Rating Watch Negative on Feb. 27. Cloverie 2005-78 is a partially funded, static synthetic collateralized debt obligation that closed in November 2005. The transaction represents leveraged exposure to a diversified portfolio of asset-backed securities. The note proceeds from the class S-2 notes collateralize a credit default swap with Citigroup Global Markets Limited as the Swap Counterparty. A modified 'Pay- As-You-Go' template is utilized to define the terms of the credit default swap. Cloverie 2005-78 has a reference portfolio comprised primarily of subprime residential mortgage-backed securities bonds (73.6%), commercial mortgage-backed securities bonds (8.2%), and other structured finance assets. All of the subprime RMBS bonds are of the 2005 vintage. Fitch's rating action reflects the significant collateral deterioration within the portfolio, specifically with respect to subprime RMBS collateral. Since November 2007, 71.8% of the portfolio has been downgraded, with 5% of the portfolio currently on Rating Watch Negative. Exposure to assets rated 'CCC+' and below is 34.5% of the portfolio compared to the class S-2 attachment point of 13.84%. Fitch's Weighted Average Rating Factor (WARF) has increased from 5.3 at last review in November 2007 to 29.0 currently. Over 69.6% of the reference portfolio is currently rated below investment grade. The attachment point on the class S-2 notes has increased to 13.84% from 13% originally due to the capital structure de- levering as a result of asset amortization. However, this remains well below the current 'CCC' rating loss rate. The class S-2 note is removed from Rating Watch as Fitch believes further negative migration in the portfolio will have a lesser impact on the class. Additionally, Fitch is reviewing its SF CDO approach and will comment separately on any changes and potential rating impact at a later date. The rating of the class S-2 note addresses the likelihood that investors will receive full and timely payments of interest, as per the transaction's governing documents, as well as the stated balance of principal by the legal final maturity date. CLOVERIE PLC: Collateral Deterioration Cues Fitch to Junk Rating ---------------------------------------------------------------- Fitch Ratings has downgraded and removed from Rating Watch Negative the sole class of notes issued by Cloverie Plc 2005-79. These rating action is effective immediately: -- $15,000,000 class S-4 notes to 'CC' from 'BBB'. Fitch originally placed Cloverie 2005-79 on Rating Watch Negative on Feb. 27. Cloverie 2005-79 is a partially funded, static synthetic collateralized debt obligation that closed in November 2005. The transaction represents leveraged exposure to a diversified portfolio of asset-backed securities. The note proceeds from the class S-4 notes collateralize a credit default swap with Citigroup Global Markets Limited as the Swap Counterparty. A modified 'Pay- As-You-Go' template is utilized to define the terms of the credit default swap. Cloverie 2005-79 has a reference portfolio comprised primarily of subprime residential mortgage-backed securities bonds (73.6%), commercial mortgage-backed securities bonds (8.2%), and other structured finance assets. All of the subprime RMBS bonds are of the 2005 vintage. Fitch's rating action reflects the significant collateral deterioration within the portfolio, specifically with respect to subprime RMBS collateral. Since November 2007, 71.8% of the portfolio has been downgraded, with 5% of the portfolio currently on Rating Watch Negative. Exposure to assets rated 'CCC+' and below is 34.5% of the portfolio compared to the class S-4 attachment point of 9.58%. Fitch's Weighted Average Rating Factor has increased from 5.3 at last review in November 2007 to 29.0 currently. Over 69.6% of the reference portfolio is currently rated below investment grade. The attachment point on the class S-4 notes has increased to 9.58% from 9% originally due to the capital structure de-levering as a result of asset amortization. However, this remains well below the current 'CCC' rating loss rate. The class S-4 note is removed from Rating Watch as Fitch believes further negative migration in the portfolio will have a lesser impact on the class. Additionally, Fitch is reviewing its SF CDO approach and will comment separately on any changes and potential rating impact at a later date. The rating of the class S-4 note addresses the likelihood that investors will receive full and timely payments of interest, as per the transaction's governing documents, as well as the stated balance of principal by the legal final maturity date. CLOVERIE PLC: Fitch Slashes Rating on $15MM Class A Notes to 'CC' ----------------------------------------------------------------- Fitch Ratings has downgraded and removed from Rating Watch Negative the sole class of notes issued by Cloverie Plc 2005-80. These rating action is effective immediately: -- $15,000,000 class A notes to 'CC' from 'BBB-'. Fitch originally placed Cloverie 2005-80 on Rating Watch Negative on Feb. 27. Cloverie 2005-80 is a partially funded, static synthetic collateralized debt obligation that closed in November 2005. The transaction represents leveraged exposure to a diversified portfolio of asset-backed securities. The note proceeds from the class A notes collateralize a credit default swap with Citigroup Global Markets Limited as the Swap Counterparty. A modified 'Pay- As-You-Go' template is utilized to define the terms of the credit default swap. Cloverie 2005-80 has a reference portfolio comprised primarily of subprime residential mortgage-backed securities bonds (73.6%), commercial mortgage-backed securities bonds (8.2%), and other structured finance assets. All of the subprime RMBS bonds are of the 2005 vintage. Fitch's rating action reflects the significant collateral deterioration within the portfolio, specifically with respect to subprime RMBS collateral. Since November 2007, 71.8% of the portfolio has been downgraded, with 5% of the portfolio currently on Rating Watch Negative. Exposure to assets rated 'CCC+' and below is 34.5% of the portfolio compared to the class A attachment point of 7.45%. Fitch's Weighted Average Rating Factor has increased from 5.3 at last review in November 2007 to 29.0 currently. Over 69.6% of the reference portfolio is currently rated below investment grade. The attachment point on the class A notes has increased to 7.45% from 7% originally due to the capital structure de-levering as a result of asset amortization. However, this remains well below the current 'CCC' rating loss rate. The class A note is removed from Rating Watch as Fitch believes further negative migration in the portfolio will have a lesser impact on the class. Additionally, Fitch is reviewing its SF CDO approach and will comment separately on any changes and potential rating impact at a later date. The rating of the class A note addresses the likelihood that investors will receive full and timely payments of interest, as per the transaction's governing documents, as well as the stated balance of principal by the legal final maturity date. CLOVERIE PLC: Fitch Cuts $15MM Class B Notes Rating to CC from BB+ ------------------------------------------------------------------ Fitch Ratings has downgraded and removed from Rating Watch Negative the sole class of notes issued by Cloverie Plc 2005-81. These rating action is effective immediately: -- $15,000,000 class B notes to 'CC' from 'BB+'. Fitch originally placed Cloverie 2005-81 on Rating Watch Negative on Feb. 27. Cloverie 2005-81 is a partially funded, static synthetic collateralized debt obligation that closed in November 2005. The transaction represents leveraged exposure to a diversified portfolio of asset-backed securities. The note proceeds from the class B notes collateralize a credit default swap with Citigroup Global Markets Limited as the Swap Counterparty. A modified 'Pay- As-You-Go' template is utilized to define the terms of the credit default swap. Cloverie 2005-81 has a reference portfolio comprised primarily of subprime residential mortgage-backed securities bonds (73.6%), commercial mortgage-backed securities bonds (8.2%), and other structured finance assets. All of the subprime RMBS bonds are of the 2005 vintage. Fitch's rating action reflects the significant collateral deterioration within the portfolio, specifically with respect to subprime RMBS collateral. Since November 2007, 71.8% of the portfolio has been downgraded, with 5% of the portfolio currently on Rating Watch Negative. Exposure to assets rated 'CCC+' and below is 34.5% of the portfolio compared to the class B attachment point of 5.32%. Fitch's Weighted Average Rating Factor has increased from 5.3 at last review in November 2007 to 29.0 currently. Over 69.6% of the reference portfolio is currently rated below investment grade. The attachment point on the class B notes has increased to 5.32% from 5% originally due to the capital structure de-levering as a result of asset amortization. However, this remains well below the current 'CCC' rating loss rate. The class B note is removed from Rating Watch as Fitch believes further negative migration in the portfolio will have a lesser impact on the class. Additionally, Fitch is reviewing its SF CDO approach and will comment separately on any changes and potential rating impact at a later date. The rating of the class B note addresses the likelihood that investors will receive full and timely payments of interest, as per the transaction's governing documents, as well as the stated balance of principal by the legal final maturity date. CLOVERIE PLC: Fitch Lowers Ratings to CCC from BBB- on $10MM Notes ------------------------------------------------------------------ Fitch Ratings has downgraded and removed from Rating Watch Negative the sole class of notes issued by Cloverie Plc 2006-1. These rating action is effective immediately: -- $10,000,000 class A notes downgraded to 'CCC' from 'BBB-'. Fitch originally placed Cloverie 2006-1 on Rating Watch Negative on Feb. 27. Cloverie 2006-1 is a partially funded, static synthetic collateralized debt obligation that closed in January 2006. The transaction represents leveraged exposure to a diversified portfolio of asset-backed securities. The note proceeds from the class A notes collateralize a credit default swap with Citigroup Global Markets Limited as the Swap Counterparty. A modified 'Pay- As-You-Go' template is utilized to define the terms of the credit default swap. Cloverie 2006-1 has a reference portfolio comprised primarily of subprime residential mortgage-backed securities bonds (49.3%), Alternative-A RMBS (20.8%), and other structured finance assets. Subprime RMBS bonds of the pre-2005 and 2005 vintages account for approximately 27.1% and 22.3% of the portfolio, respectively. Likewise, Alt-A RMBS of the pre-2005 and 2005 vintages represent approximately 15.6% and 5.3% of the portfolio, respectively. Fitch's rating action reflects the significant collateral deterioration within the portfolio, specifically with respect to subprime RMBS and Alt-A RMBS collateral. Since November 2007, 37.9% of the portfolio has been downgraded net of upgrades, with 5.8% of the portfolio currently on Rating Watch Negative. Exposure to assets rated 'CCC+' and below is 16.9% of the portfolio compared to the class A attachment point of 17.17%. Over 36.3% of the reference portfolio is rated below investment grade. Fitch's Weighted Average Rating Factor has increased from 9.7 at last review in November 2007 to 17.5 currently. The attachment point on the class A notes has increased to 17.17% from 11.50% originally due to the capital structure de-levering as a result of asset amortization. The attachment point is currently greater than the 'CCC' rating loss rate and thus has positive cushion to that rating level. The class A note is removed from Rating Watch as Fitch believes further negative migration in the portfolio will have a lesser impact on the class. Additionally, Fitch is reviewing its SF CDO approach and will comment separately on any changes and potential rating impact at a later date. The rating of the class A note addresses the likelihood that investors will receive full and timely payments of interest, as per the transaction's governing documents, as well as the stated balance of principal by the legal final maturity date. CLOVERIE PLC: Fitch Junks $10MM Notes Rating; Removes Neg. Watch ---------------------------------------------------------------- Fitch Ratings has downgraded and removed from Rating Watch Negative the sole class of notes issued by Cloverie Plc 2006-2. These rating action is effective immediately: -- $10,000,000 class B notes downgraded to 'CC' from 'BB'. Fitch originally placed Cloverie 2006-2 on Rating Watch Negative on Feb. 27. Cloverie 2006-2 is a partially funded, static synthetic collateralized debt obligation that closed in January 2006. The transaction represents leveraged exposure to a diversified portfolio of asset-backed securities. The note proceeds from the class B notes collateralize a credit default swap with Citigroup Global Markets Limited as the Swap Counterparty. A modified 'Pay- As-You-Go' template is utilized to define the terms of the credit default swap. Cloverie 2006-2 has a reference portfolio comprised primarily of subprime residential mortgage-backed securities bonds (49.3%), Alternative-A RMBS (20.8%), and other structured finance assets. Subprime RMBS bonds of the pre-2005 and 2005 vintages account for approximately 27.1% and 22.3% of the portfolio, respectively. Likewise, Alt-A RMBS of the pre-2005 and 2005 vintages represent approximately 15.6% and 5.3% of the portfolio, respectively. Fitch's rating action reflects the significant collateral deterioration within the portfolio, specifically with respect to subprime RMBS and Alt-A RMBS collateral. Since November 2007, 37.9% of the portfolio has been downgraded net of upgrades, with 5.8% of the portfolio currently on Rating Watch Negative. Exposure to assets rated 'CCC+' and below is 16.9% of the portfolio compared to the class B attachment point of 12.69%. Over 36.3% of the reference portfolio is rated below investment grade. Fitch's Weighted Average Rating Factor has increased from 9.7 at last review in November 2007 to 17.5 currently. The attachment point on the class B notes has increased to 12.69% from 8.50% originally due to the capital structure de-levering as a result of asset amortization. However, this remains below the current 'CCC' rating loss rate. The class B note is removed from Rating Watch as Fitch believes further negative migration in the portfolio will have a lesser impact on the class. Additionally, Fitch is reviewing its SF CDO approach and will comment separately on any changes and potential rating impact at a later date. The rating of the class B note addresses the likelihood that investors will receive full and timely payments of interest, as per the transaction's governing documents, as well as the stated balance of principal by the legal final maturity date. CLOVERIE PLC: Fitch Junks $40MM Notes Rating; Removes Neg. Watch ---------------------------------------------------------------- Fitch Ratings has downgraded and removed from Rating Watch Negative the sole class of notes issued by Cloverie Plc 2006-3. These rating action is effective immediately: -- $40,000,000 class D notes to 'CC' from 'B-'. Fitch originally place Cloverie 2006-3 on Rating Watch Negative on Feb. 27. Cloverie 2006-3 is a partially funded, static synthetic collateralized debt obligation that closed in January 2006. The transaction represents leveraged exposure to a diversified portfolio of asset-backed securities. The note proceeds from the class D notes collateralize a credit default swap with Citigroup Global Markets Limited as the Swap Counterparty. A modified 'Pay- As-You-Go' template is utilized to define the terms of the credit default swap. Cloverie 2006-3 has a reference portfolio comprised primarily of subprime residential mortgage-backed securities bonds (49.3%), Alternative-A RMBS (20.8%), and other structured finance assets. Subprime RMBS bonds of the pre-2005 and 2005 vintages account for approximately 27.1% and 22.3% of the portfolio, respectively. Likewise, Alt-A RMBS of the pre-2005 and 2005 vintages represent approximately 15.6% and 5.3% of the portfolio, respectively. Fitch's rating action reflects the significant collateral deterioration within the portfolio, specifically with respect to subprime RMBS and Alt-A RMBS collateral. Since November 2007, 37.9% of the portfolio has been downgraded net of upgrades, with 5.8% of the portfolio currently on Rating Watch Negative. Exposure to assets rated 'CCC+' and below is 16.9% of the portfolio compared to the class D attachment point of 6.35%. Over 36.3% of the reference portfolio is rated below investment grade. Fitch's Weighted Average Rating Factor has increased from 9.7 at last review in November 2007 to 17.5 currently. The attachment point on the class D notes has increased to 6.35% from 4.25% originally due to the capital structure de-levering as a result of asset amortization. However, this remains well below the current 'CCC' rating loss rate. The class D note is removed from Rating Watch as Fitch believes further negative migration in the portfolio will have a lesser impact on the class. Additionally, Fitch is reviewing its SF CDO approach and will comment separately on any changes and potential rating impact at a later date. The rating of the class D note addresses the likelihood that investors will receive full and timely payments of interest, as per the transaction's governing documents, as well as the stated balance of principal by the legal final maturity date. COOPER TIRE: Moody's Affirms B2 Ratings; Changes Outlook to Stable ------------------------------------------------------------------ Moody's Investors Service affirmed Cooper Tire & Rubber Company's Corporate Family and Probability of Default Ratings at B2; lowered the ratings of the unsecured notes to B3 from B2; and changed the company's outlook to stable from positive. The company's Speculative Grade Liquidity Rating remains at SGL-2. The change in outlook to stable incorporates the company's recent statement of production cuts at its North American facilities during the second quarter of 2008 due to decreased demand and projected shortages of certain raw materials. Higher gasoline prices dampened consumer driving trends in 2008 resulting in lower miles driven and thus lower demand for replacement tires. This trend is expected to continue at least over the near-term. As such, Cooper Tire's credit metrics are expected to continue to soften through 2008. However, at some point replacement demand is expected to recover due to pent up demand and consumer safety concerns. The likelihood of this eventual rebound is incorporated in the B2 Corporate Family Rating. Cooper Tire continues to move production to lower cost regions with a recent investment statement in Mexico. Further expectations of continuing market deterioration in North America beyond the near-term would result in a lowering of the outlook or ratings. The downgrade of the ratings for the unsecured notes to B3 results from lower distressed recovery expectations given current domestic economic conditions and the notes' position below the secured asset based revolving credit facility. Cooper Tire's Speculative Grade Liquidity rating of SGL-2 continues to represent good liquidity over the next 12 months. At March 31, 2008 the company had $315 million of cash, cash equivalents, and short term investments on its balance sheet. Current industry pressures will likely result in negative free cash flow for 2008. However, the company exercised its put option associated with its investment in Kumho Tire Co., Inc. in March 2008 and intends to monetize this investment, which was valued at about $107 million as of March 31, 2008. There are no financial covenants under the company's $200 million asset based revolver nor the $125 million accounts receivable securitization facility. As of March 31, 2008, Cooper Tire had additional borrowing capacity of $297.8 million under the combined asset based revolver and accounts receivable securitization facility. Cooper also has some ability to develop incremental alternate liquidity under the lien baskets of its unsecured notes. Ratings affirmed: -- Corporate Family Rating, B2 -- Probability of Default, B2 -- Speculative Grade Liquidity, SGL-2 -- Shelf filing for preferred stock at (P)Caa1 LGD6 97% Ratings lowered: -- Senior Unsecured Notes to B3, LGD4 66% from B2, LGD4, 56% -- Shelf filing for unsecured notes, to (P)B3, LGD4 66% from (P)B2 ,LGD4, 56% The last rating action was on Aug. 17, 2007 at which time the outlook was changed to positive from stable. Cooper Tire's revolving credit facility is not rated. Headquartered in Findlay, Ohio, Cooper Tire & Rubber Company is the 4th largest tire manufacturer in North America and is focused on replacement markets for passenger cars and light & medium duty trucks. Revenues in 2007 were approximately $2.9 billion. CRANSTON II: Section 341(a) Meeting Set for July 29 --------------------------------------------------- The United States Trustee for Region 2 will convene a meeting of Cranston II, LLC's creditors at 3:00 p.m., on July 29, 2008, at the Office of the United States Trustee, 80 Broad Street, Fourth Floor, New York, N.Y. This is the first meeting of creditors required under Section 341(a) of the Bankruptcy Code in all bankruptcy cases. All creditors are invited, but not required, to attend. This meeting of creditors offers the one opportunity in a bankruptcy proceeding for creditors to question a responsible officer of the Debtor under oath about his financial affairs and operations that would be of interest to the general body of creditors. Based in Bal Harbour, Fla., Cranston II, LLC and its debtor affiliate, Cranston Acquisition, LLC, filed for Chapter 11 on June 17, 2008 (S.D. N.Y. Case No. 08-12271). Avrum J. Rosen, Esq., represents the Debtors as counsel. When the Debtors filed for protection from their creditors, they listed total assets of $32,006,000 and total debts of $12,070,890. CRANSTON II: Can Employ Avrum J. Rosen PLLC as Attorney -------------------------------------------------------- The U.S. Bankruptcy Court for the Southern District of New York granted permission to Cranston II, LLC and its debtor-affiliate, Cranston Acquisition, LLC, to employ The Law Offices of Avrum J. Rosen, PLLC as their attorney, nunc pro tunc to June 17, 2008. The Law Offices of Avrum J. Rosen, PLLC will advise the Debtors of their rights and duties, oversee preparation of necessary reports, conduct all appropriate investigation or litigation, and perform any necessary duty in aid of the administration of the Debtors' estates. Compensation will be paid to The Law Offices of Avrum J. Rosen, PLLC at its customary rate of $425 per hour. Partner time will be billed at $300-$425 per hour, while associate time will be billed at the hourly rate of $250-$350. Avrum J. Rosen, Esq., a member of The Law Offices of Avrum J. Rosen, PLLC, assured the Court that his firm neither holds nor represents any interest adverse to the Debtors or their estates, and that the firm is a "disinterested person" as defined in Sec. 101(14) of the Bankruptcy Code. Based in Bal Harbour, Fla., Cranston II, LLC and its debtor affiliate, Cranston Acquisition, LLC, filed for Chapter 11 on June 17, 2008 (S.D. N.Y. Case No. 08-12271). When the Debtors filed for protection from their creditors, they listed total assets of $32,006,000 and total debts of $12,070,890. CRANSTON II: Taps CobbCorp LLC as Professional Business Broker -------------------------------------------------------------- Cranston II, LLC and its debtor-affiliate, Cranston Acquisition, LLC, ask the U.S. Bankruptcy Court for the Southern District of New York, for authority to retain CobbCorp., LLC, as their professional business broker. CobbCorp, LLC will assist the Debtors in selling and marketing their television station KMCC-TV, licensed to Laughlin, Nevada. The Debtors propose to pay CobbCorp, LLC a commission of 5% of the first $3,000,000, 2% of each additional dollar up to $10,000,000 and 1% on the balance with a minimum commission fee of $100,000, subject to notice and a hearing before the Court. Brian Cobb, the president of CobbCorp, LLC, assures the Court that his firm does not hold or represent any interest adverse to the Debtors or their estates, and that the firm is a "disinterested person" within the meaning of Sec. 101(14) of the Bankruptcy Code. Based in Bal Harbour, Fla., Cranston II, LLC and its debtor affiliate, Cranston Acquisition, LLC, filed for Chapter 11 on June 17, 2008 (S.D. N.Y. Case No. 08-12271). Avrum J. Rosen, Esq., represents the Debtors as counsel. When the Debtors filed for protection from their creditors, they listed total assets of $32,006,000 and total debts of $12,070,890. CWCAPITAL COBALT: Moody's Affirms Ba2 Rating of Notes ----------------------------------------------------- Moody's Investors Service affirmed the ratings of 14 classes of Notes issued by CWCapital Cobalt II, Ltd. as: -- Class A-1A, $270,800,000, Floating Rate Notes Due 2050, affirmed at Aaa -- Class A-1AR, Up to $100,000,000, Revolving Floating Rate Notes Due 2050, affirmed at Aaa -- Class A-1B, $41,200,000, Floating Rate Notes Due 2050, affirmed at Aaa --Class A-2A, $51,530,000, Floating Rate Notes Due 2050, affirmed at Aaa -- Class A-2B, $51,530,000, Floating Rate Notes Due 2050, affirmed at Aaa -- Class B, $46,760,000, Floating Rate Notes Due 2050, affirmed at Aa2 -- Class C, $25,340,000, Floating Rate Capitalized Interest Notes Due 2050, affirmed at A1 -- Class D, $11,345,000, Floating Rate Capitalized Interest Notes Due 2050, affirmed at A2 -- Class E, $11,345,000, Floating Rate Capitalized Interest Notes Due 2050, affirmed at A3 -- Class F, $11,345,000, Floating Rate Capitalized Interest Notes Due 2050, affirmed at Baa1 -- Class G, $14,910,000, Floating Rate Capitalized Interest Notes Due 2050, affirmed at Baa2 -- Class H, $12,390,000, Floating Rate Capitalized Interest Notes Due 2050, affirmed at Baa3 -- Class J, $10,570,000, Floating Rate Capitalized Interest Notes Due 2050, affirmed at Ba1 -- Class K, $12,000,000, Floating Rate Capitalized Interest Notes Due 2050, affirmed at Ba2 Moody's is affirming this transaction due to overall stable pool performance based on the Trustee Report on June 30, 2008 and information from the Collateral Manager. CWCapital Cobalt II Ltd. is a collateralized debt obligation backed primarily by a portfolio of CMBS Securities, Whole Loans, B-Notes, Mezzanine Loans and CRE CDO Securities. As of the June 30, 2008 distribution date, the transaction's aggregate bond balance is $700.0 million, the same as at issuance. The ramp-up period ended on April 10, 2007 and the reinvestment period ends on April 10, 2011. The rating actions reflect Moody's evaluation of the expected loss associated with each class of Notes based on the level of subordination under the notes and the credit quality of the underlying collateral pool. The transaction is in compliance with all applicable collateral quality and coverage tests. DRI CORP: Secures Financing Initiatives with PNC Bank and BHC ------------------------------------------------------------- DRI Corp. secured new U.S. loan agreements with PNC Bank, National Association and BHC Interim Funding III, L.P., and expanded its existing European banking relationship with Svenska Handelsbanken AB. "We believe that our three new financing initiatives provide an appropriate working capital foundation for our 2008 to 2010 business plans as currently positioned, and enhance the Company's ability to better manage cash resources between the U.S. and Europe," David L. Turney, the company's Chairman, President, and Chief Executive Officer, said. "The agreements have been reached and substantially executed, and we expect final closing and funding actions to occur; the details of each of these credit facilities will be fully disclosed in separate Form 8-K filings." New U.S. Senior Lender The company entered into a revolving credit agreement with PNC Bank, National Association on June 30, 2008. The three-year agreement -- a revolving credit line of up to $8 million subject to formula-derived availability based on inventory and accounts receivable -- replaces the company's present $6 million U.S. senior lender relationship with Laurus Master Fund, Ltd., which expired June 30, 2008. This credit facility includes performance covenants and other provisions related to payment and pre-payment, generally considered by management to be usual and customary for this type of financing. PNC Bank, National Association is a subsidiary of The PNC Financial Services Group, Inc., one of the nation's largest diversified financial services organizations providing retail and business banking; specialized services for corporations and government entities, including corporate banking, real estate finance and asset-based lending; wealth management; asset management; and global fund services. New Subordinated Lender The Company entered into a subordinated loan agreement with Brooks, Houghton & Company, Inc.'s BHC Interim Funding III, L.P. on June 30, 2008. The three-year, $5 million loan under this agreement provides additional working capital to fund the growth in both the company's domestic and international operations over the next three years according to present business plans. In connection with the execution of this loan agreement, the company granted BHC a five-year warrant to purchase up to 350,000 shares of TBUS Common Stock at a 5% premium to market (five-day volume weighted average). This credit facility includes performance covenants and other provisions related to payment and pre-payment, generally considered by management to be usual and customary for this type of financing. BHC Interim Funding, L.P. is the investment arm of Brooks, Houghton & Company, Inc. and specializes in making investments in middle market companies. The firm typically provides mezzanine and bridge capital for acquisitions or recapitalizations; to finance profitable growth or expansion; to augment working capital; and to enable time sensitive opportunities. It primarily invests in manufacturing, distribution, and business services companies based in United States. Brooks Houghton & Company was formed in 1989 and is based in New York City, with an additional office at Stamford, Connecticut. Existing European Credit Facilities The company has reached agreement with Svenska Handelsbanken AB, its existing banking relationship in Gothenburg, Sweden, to expand existing European working capital credit facilities, subject to formula-derived availability based partially on inventory and accounts receivable for a revolver component that, in combination with term loans, brings the facility maximum to a total of approximately $6.4 million as compared to the prior similar line maximum of approximately $3.2 million. While the company's original European banking relationship was not at the end of term, DRI management believed it advisable to update the relationship at the same time that the U.S. side of the company's debt structure was addressed to provide additional working capital to meet the expected growth of the Company's international operations. FY 2008 Earnings Forecast Update "Regarding the company's previously announced fiscal year 2008 guidance of $68 million to $70 million in revenue and earnings per diluted share of 14 cents to 17 cents, management is comfortable projecting earnings per share to be at the upper end of that range and expects the second quarter 2008 results to be consistent with such outlook," Mr. Turney said. About DRI Corp. Headquartered in Dallas, Texas, DRI Corporation (Nasdaq: TBUS) -- http://www.digrec.com/-- through its business units and wholly owned subsidiaries, manufactures, sells, and services information technology and surveillance technology products either directly or through manufacturers' representatives or distributors. Customers include municipalities, regional transportation districts, federal, state and local departments of transportation, and bus manufacturers. The company markets primarily to customers located in North and South America, Far East, Middle East, Asia, Australia, and Europe. Going Concern Doubt PricewaterhouseCoopers LLP, in Raleigh, North Carolina, expressed substantial doubt about DRI Corp.'s ability to continue as a going concern after auditing the company's consolidated financial statements for the year ended Dec. 31, 2007. The auditing firm reported that the company has insufficient cash resources to make payment in full on the outstanding balance of the domestic line of credit which matures June 30, 2008. The company has executed term sheets with potential lenders for the refinancing of the domestic line of credit and such lenders are in the process of performing due diligence reviews of the company's financial records and operations. DYNCORP INT'L: Prices $125MM Offering of 9-1/2% Senior Sub. Notes ----------------------------------------------------------------- DynCorp International LLC and its subsidiary DIV Capital Corporation priced its $125 million in aggregate principal amount of additional 9-1/2% senior subordinated notes due 2013. The senior subordinated notes are to be issued under the issuers' existing senior subordinated notes indenture. DynCorp intends to use the net proceeds from the private placement to repay in part borrowings under its existing senior secured credit facility. Concurrently with the closing of the offering, DynCorp intends to enter into a new senior secured credit facility under which it intends to refinance the remainder of the balance under its existing senior secured credit facility. Headquartered in Falls Church, Virginia, DynCorp International Inc. (NYSE: DCP) -- http://www.dyn-intl.com/-- through its operating company DynCorp International LLC, is a provider of specialized mission-critical technical services, mostly to civilian and military government agencies. It operates major programs in law enforcement training and support, security services, base operations, aviation services and operations, and logistics support worldwide. DynCorp has approximately 14,600 employees worldwide. DYNCORP INT'L: S&P Holds 'B' Rating on Proposed $445MM Notes Issue ------------------------------------------------------------------ Standard & Poor's Ratings Services affirmed its issue-level ratings on DynCorp International LLC's subordinated notes, following the announcement that the company proposes to increase the size of the issue to $445 million (of which $417 million is outstanding), from $320 million (of which $292 million is outstanding) through a $125 million add-on offering. The notes are rated 'B', two notches below the corporate credit rating on DynCorp. The recovery rating on the notes remains unchanged at '6', indicating expectations of a negligible (0%-10%) recovery in the event of payment default. DIV Capital Corp., which does not have any operations or material assets, is a coissuer of the notes. The proceeds from the new notes and a proposed new credit facility will be used to refinance the existing credit facility; S&P will withdraw the ratings on the existing credit facility when the transaction closes. "The 'BB-' corporate credit rating on DynCorp International reflects limited contract diversity; a weak, but improving, financial profile; the risky nature of some of its operations, and possible changes in U.S. foreign policy under a new President," said Standard & Poor's credit analyst Christopher DeNicolo. The ratings benefit somewhat from the firm's leading market positions, high demand for its services, and a fairly stable revenue base. DynCorp International is a leading provider of defense technical services and government outsourced solutions. The outlook is positive. The expected significant increase in revenues and earnings from the ramp-up of several key contracts, as well as generally positive prospects for key markets, is likely to result in improving credit protection measures. S&P could raise the ratings if DynCorp International's debt to EBITDA falls below 3x and funds from operations to debt increases to about 25% in the next year. S&P could revise the outlook to stable if funding for key programs declines or leverage increases materially to fund new contracts or acquisitions. S&P will evaluate the impact on DynCorp from any changes in U.S. defense or foreign policy, especially regarding Iraq, after the new Presidential administration takes office in early 2009. Ratings List DynCorp International LLC Corporate Credit Rating BB-/Positive/-- Senior Sec. Credit Facility BB+ Recovery Rating 1 Ratings Affirmed DynCorp International LLC Subordinated B Recovery Rating 6 EARTHFIRST TECH: Gets Interim Nod to Employ Gulf Atlantic as CRO ---------------------------------------------------------------- The United States Bankruptcy Court for the Middle District of Florida granted EarthFirst Technologies Incorporated interim authority to employ Gulf Atlantic Capital Corporation to provide restructuring management services with Ted Gumienny serving aa chief restructuring officer. Since May 29, 2008, Mr. Ted Gumienny and Gulf Atlantic have assumed the day-to-day management responsibilities for the Debtor. Prior to the commencement of this case, the United States District Court for the Middle District of Florida by order dated May 6, 2008 appointed a receiver for the Debtor and all affiliated debtors, except SolarDiesel Corporation. The order was entered in the case of Calliope Capital Corporation v. EarthFirst Technologies, Incorporated, Electric Machinery Enterprises, Inc., EarthFirst Resources, Inc., World Environmental Solutions Company, Inc., EarthFirst Investments, Inc., EM Enterprise Resources, Inc., EME Modular Structures, Inc., Prime Power Design, Inc., f/k/a Prime Power Residential, Inc., Electric Supply of Tampa, Inc., and CNC Associates, Inc., Case No.: 8:08-cv-00219-EAK- TBM. Calliope is the successor to Laurus Master Funds, Ltd., a significant creditor to the Debtors. It asserts liens on and security interests in substantially all of the Debtors' assets. By the consent of the parties, the receiver was discharged and the receivership order was abated so the bankruptcy case could be commenced. As part of the agreement to abate the receivership order and discharge the receiver, the Debtors agreed to: a) employ Ted Gumienny of Gulf Atlantic Corporation as chief restructuring officer with full authority to manage the Debtor's business, including all matters related to this bankruptcy case, and b) file the Debtors' chapter 11 cases by June 3, 2008 (extended by agreement to June 13, 2008). The CRO took operative control of the Debtor's business and assets immediately thereafter. Gulf Atlantic and Mr. Ted Gumienny, Gulf Atlantic's founder and president, will have the combined sole and absolute power and authority of the chief executive officer, chief operating officer, chief financial officer, and the chief restructuring officer of the Debtor for all purposes; including, without limitation other powers and authorities, which are described in more detail in the CRO Agreement. The CRO shall also negotiate on behalf of the Debtor with Calliope Capital Corp. for the formulation and proposal of a consensual plan of reorganization. As compensation for his services, Mr. Ted Gumienny bills at $350 per hour, while other Gulf Atlantic personnel bills at the hourly rates currently ranging from $250 to $350. Under the CRO Agreement, the Debtor shall indemnify and hold harmless Gulf Atlantic and Mr. Ted Gumienny to the same extent as the most favorable indemnification the Debtor extends to its officers or directors. Mr. Ted Gumienny assured the Court that he and his firm neither hold nor represent any interest adverse to the Debtors or their estates, and that he and the firm are disinterested persons as required under Sec. 327(a) of the Bankruptcy Code. For the period May 27, 2008, through June 12, 2008, Gulf Atlantic received payment of $29,461,25 for pre-petition fees and costs. The Debtors also advanced a $50,000 retainer. The retainer and $20,000 of the pre-petition fees and costs were funded through loans to the Debtors by U.S. Sustainable Energy Corp., an entity related to the Debtors and one of the Debtors' largest creditors. About EarthFirst Technologies Based in Tampa, Florida., EarthFirst Technologies Incorporated -- http://www.earthfirsttech.com/-- is a specialized holding company that owns subsidiaries engaged in researching, developing and commercializing technologies for the production of alternative fuel sources and the destruction and remediation of liquid and solid waste, and in supplying electrical constracting services internationally. David S. Jennis, Esq., at Jennis & Bowen, P.L., represents the Debtors as bankruptcy counsel. The company and eight (8) of its debtor-affiliates filed for Chapter 11 protection on June 13, 2008 (M.D. Fla. Lead Case No. 08-08639). At Dec. 31, 2007, EarthFirst Technologies Incorporated had total assets of $5,948,257 and total debts of $22,363,279. EARTHFIRST TECH: Gets Interim Nod to Employ J&B as Counsel ---------------------------------------------------------- The U.S. Bankruptcy Court for the Middle District of Florida granted interim authority to EarthFirst Technologies Incorporated to employ Jennis & Bowen, P.L. as its counsel, nunc pro tunc to the petition date. As the Debtor's counsel, J&B will mainly advise the Debtor pertaining to its rights and obligations as debtor-in-possession and assist in the preparation and filing of a plan of reorganization and disclosure statement. The Debtor did not provide a schedule of compensation to be paid to J&B's professionals in its employment application to the Court. To the best of Debtor's knowledge, the members and associates of J&B have disclosed all connections with the Debtor, its creditors or any other parties-in-interest, or the respective attorneys, in the declaration of David S. Jennis, Esq., one of the firm's lead bankruptcy attorneys. Based in Tampa, Florida., EarthFirst Technologies Incorporated -- http://www.earthfirsttech.com/--is a specialized holding company that owns subsidiaries engaged in researching, developing and commercializing technologies for the production of alternative fuel sources and the destruction and remediation of liquid and solid waste, and in supplying electrical constracting services internationally. The company and eight (8) of its debtor- affiliates filed for Chapter 11 protection on June 13, 2008 (M.D. Fla. Lead Case No. 08-08639). At Dec. 31, 2007, EarthFirst Technologies Incorporated had total assets of $5,948,257 and total debts of $22,363,279. EKBERG STUCCO: Case Summary & 20 Largest Unsecured Creditors ------------------------------------------------------------ Debtor: Ekberg Stucco, Inc. P.O. Box 471355 Lake Monroe, FL 32747 Bankruptcy Case No.: 08-05849 Type of Business: The Debtor is a wall and ceiling contractor. The company also provides services that includes multi-family, mid-rise office buildings, high- rise buildings, retail shopping, medical and educational facilities and industrial distribution facilities. See http://www.ekbrg.com/ Chapter 11 Petition Date: July 11, 2008 Court: Middle District of Florida (Orlando) Judge: Arthur B. Briskman Debtor's Counsel: Richard B Webber, II, Esq. E-mail: rwebber@zkslawfirm.com Zimmerman Kiser & Sutcliffe PA 315 E. Robinson St., Ste. 600 Orlando, FL 32801 Tel: (407) 425-7010 Fax: (407) 425-2747 http://www.zkslawfirm.com/ Estimated Assets: $500,000 to $1 million Estimated Debts: $1 million to $10 million A list of the Debtor's 20 largest unsecured creditors is available for free at: http://bankrupt.com/misc/flmb08-05849.pdf FEC RESOURCES: Posts $5.95M Net Loss for Year Ended Dec. 31, 2007 ----------------------------------------------------------------- FEC Resources, Inc., reported a comprehensive loss of CDN$5,946,541 on interest income of CDN$2,556 for the year ended Dec. 31, 2007, compared with comprehensive loss of CDN$3,263,966 on interest income of CDN$29,050 in the same period ended Dec. 31, 2006. the company's working capital at Dec. 31, 2007, was CDN$705,839 versus a deficit at Dec. 31, 2006, of CDN$3,153,000 and shareholders' equity was CDN$8,623,000 compared with CDN$9,617,000 at Dec. 31, 2006. During 2006, the company raised GBP1,400,000 pounds through the issue of convertible debentures to fund its ongoing operations and development. These debentures matured on Dec. 20, 2007, and interest was calculated at 10% per annum. The debentures are secured by FEP shares. The first year's interest was payable in advance on the closing date and the second year's interest was payable in arrears on the maturity date. The company paid the first year's interest. At any time after Aug. 2, 2006, and before or on the maturity date, and provided the debt had not been fully repaid, the holder has the right to convert all or any portion of the convertible indebtedness owing to it as at the date of election into the company's common shares, the number of such shares to be based on the 10-day average closing bid price of the shares prior to the date of the debenture being issued. The holder will also receive a cash bonus of the common shares for conversion for the amount calculated as one-half of the difference between the FEP share price on the date of the debenture being issued and the FEP share price on the date of maturity or conversion, i.e. the FEP share price at the date of conversion or maturity minus the FEP share price on issuance of debenture multiplied by 50%. The debenture is secured by way of a charge over the shares of FEP held by the company totaling 200% of the principal amount invested. On maturity, all of the debenture holders chose the cash repayment of principal and interest plus 25% of the outstanding principal as a bonus for not converting into shares. the company completed a private placement prior to year-end and paid the entire amount outstanding on Jan. 2, 2008. In May 2005, the company issued convertible debentures totaling CDN$1,223,000 (US$970,000). Each debenture bears simple interest at the rate of 10% per annum and matures at the earliest of full repayment or April 30, 2010. The debentures were sold in units of US$10 with US$5 warrants. Each debenture was convertible into the company's common shares at US$0.05 per share or shares of FEP at US$1.923 per share. Each warrant was convertible into common shares of FEP at US$1.923 per share. During the year-ended Dec. 31, 2006, upon agreement with the various debenture holders, the debenture was amended whereby the holder could choose to either receive a payment of principal, interest and a twenty-four percent (24%) premium to the face value of the debenture or the holder could convert the debenture, interest, and warrants into shares at US$0.05 per share. In the event the holder chose the option to receive payment and the company could not pay by Oct. 31, 2006, 12.5% per annum interest would be added to the amounts outstanding until paid. The debenture holders chose to receive payment rather than convert into shares, and on Nov. 24, 2006, the company paid the outstanding interest and premium plus one half of the outstanding principal of the debenture leaving US$485,000 outstanding, accruing further interest at 12.5% per annum. In late Dec. 2007, the company paid the full balance including outstanding interest of US$67,000. According to the management, working capital is insufficient to meet the company's present requirements, however, if necessary, the company will sell FEP shares to meet its working capital needs since they are a publicly traded company. Cash used in operating activities for the year was CDN$417,000 versus CDN$1,658,000 for the same period in 2006 mainly as a result of the differences in the company's operations. Cash provided by investing activities was CDN$426,000 for the year ended Dec. 31, 2007, versus cash used in investing activities of CDN$6,000 in the same period in 2006. The increase was mainly a result of the proceeds from the sale of investments of CDN$623,000 being offset by funding for the Lascogon exploration work program in the amount of CDN$208,000 in 2007 versus proceeds from the sale of investments of CDN$1,359,000 being used for acquisition of investments in the amount of CDN$1,380,000 in 2006. Cash provided by financing activities was CDN$3,788,000 for the year versus cash provided of CDN$1,024,000 for the year ending December 31, 2006. The cash raised during 2006 was from the balance of the GBP1,400,000 debenture funds received subsequent to Dec. 31, 2005, whereas in 2007, a repayment was made on part of the GBP1,400,000 debentures outstanding and the US$485,000 balance of a previous debenture plus outstanding interest was also paid off from funds raised by way of a private placement of CDN$4,982,000 completed just prior to year-end. In order to fully earn a forty percent (40%) interest in the joint venture with PGI, the company was required to fund a total of US$1,000,000 of the work program by October 2006, which was completed. In order to maintain the forty percent (40%) interest the company was required to pay for forty percent (40%) of the 2007 work program or its position could be diluted. At Dec. 31, 2007, the company owed US$134,000 and had not contributed any funds to the 2008 work program. In an attempt to conserve cash resources, the company was in discussions on ways to continue to hold its interest without being diluted however this matter has not been resolved at this time. At Dec. 31, 2007, the company's balance sheet showed CDN$12,167,904 in total assets, CDN$3,544,364 in total liabilities, and CDN$8,623,540 in total stockholders' equity. A full-text copy of the company's 2007 annual report is available for free at http://ResearchArchives.com/t/s?2f7d About FEC Resources FEC Resources Inc. (OTC BB: FECOF.OB) -- http://fecresources.com/ -- is and independent oil and gas exploration and development company which owns 32.04% of Forum Energy PLC, a UK company incorporated in April 2005 through the consolidation of the Philippine assets of Forum Energy Corp. and Sterling Energy Plc of the UK. FIRST FRANKLIN: Moody's Revises Rating to Consider Loss Allocation ------------------------------------------------------------------ Moody's Investors Service downgraded two mortgage securitizations issued by First Franklin Mortgage Loan Trust. This action is a correction to an April 2008 rating action where certain specific features of the cash waterfall and loss allocation were not fully accounted for. Tranche A-3 and A-4 of First Franklin Mortgage Loan Trust 2006- FF15 were incorrectly listed as downgraded, and class A-5 has been downgraded to Aa1. From First Franklin Mortgage Loan Trust 2006- FF17, Classes A-3 and A-4 were incorrectly listed as downgraded, the class A-5 has been downgraded to Aa3. Revised release: Moody's Investors Service has downgraded the ratings of 282 tranches from 30 subprime RMBS transactions issued by First Franklin. Eighty-nine downgraded tranches remain on review for possible further downgrade. The collateral backing these transactions consists primarily of first-lien, fixed and adjustable-rate, subprime residential mortgage loans. The ratings were downgraded, in general, based on higher than anticipated rates of delinquency, foreclosure, and REO in the underlying collateral relative to credit enhancement levels. The actions are a result of Moody's on-going surveillance process. Complete rating actions are: Issuer: First Franklin Mortgage Loan Trust 2005-FF11 -- Cl. M-5, Downgraded to Baa2 from Baa1 -- Cl. M-6, Downgraded to Ba1 from Baa2 -- Cl. B-1, Downgraded to B1 from Baa3 -- Cl. B-2, Downgraded to B2 from Ba1; Placed Under Review for further Possible Downgrade -- Cl. B-3, Downgraded to B3 from Ba2; Placed Under Review for further Possible Downgrade Issuer: First Franklin Mortgage Loan Trust 2005-FF12 -- Cl. M-3, Downgraded to A1 from Aa3 -- Cl. M-4, Downgraded to A3 from A1 -- Cl. M-5, Downgraded to Baa3 from A2 -- Cl. M-6, Downgraded to B1 from A3 -- Cl. B-1, Downgraded to B2 from Baa1; Placed Under Review for further Possible Downgrade -- Cl. B-2, Downgraded to B3 from Baa2; Placed Under Review for further Possible Downgrade -- Cl. B-3, Downgraded to Caa1 from Baa3 Issuer: First Franklin Mortgage Loan Trust 2005-FF7 -- Cl. M-6, Downgraded to Baa1 from A3 -- Cl. M-7, Downgraded to Ba2 from Baa1 -- Cl. M-8, Downgraded to B2 from Baa2; Placed Under Review for further Possible Downgrade -- Cl. M-9, Downgraded to Caa1 from Baa3 Issuer: First Franklin Mortgage Loan Trust 2005-FF8 -- Cl. M-3, Downgraded to Baa1 from A2 -- Cl. M-4, Downgraded to Ba1 from A3 -- Cl. B-1, Downgraded to B2 from Baa1; Placed Under Review for further Possible Downgrade -- Cl. B-2, Downgraded to B3 from Baa2; Placed Under Review for further Possible Downgrade -- Cl. B-3, Downgraded to Caa1 from Baa3 -- Cl. B-4, Downgraded to Caa2 from Ba1 Issuer: First Franklin Mortgage Loan Trust 2005-FFH3 -- Cl. M-4, Downgraded to A1 from Aa3 -- Cl. M-5, Downgraded to Baa1 from A1 -- Cl. M-6, Downgraded to Ba3 from A2 -- Cl. M-7, Downgraded to B2 from A3; Placed Under Review for further Possible Downgrade -- Cl. M-8, Downgraded to Caa1 from Baa1 -- Cl. M-9, Downgraded to Caa2 from Baa2 -- Cl. M-10, Downgraded to Caa2 from Baa3 -- Cl. B-1, Downgraded to Caa3 from Ba1 -- Cl. B-2, Downgraded to Ca from Ba2 Issuer: First Franklin Mortgage Loan Trust 2005-FFH4 -- Cl. M-3, Downgraded to A1 from Aa2 -- Cl. M-4, Downgraded to Baa1 from Aa3 -- Cl. M-5, Downgraded to Ba2 from A1 -- Cl. M-6, Downgraded to B1 from A2; Placed Under Review for further Possible Downgrade -- Cl. M-7, Downgraded to B2 from A3; Placed Under Review for further Possible Downgrade -- Cl. M-8, Downgraded to B3 from Baa1; Placed Under Review for further Possible Downgrade -- Cl. M-9, Downgraded to Caa1 from Baa2 -- Cl. M-10, Downgraded to Caa2 from Baa3 -- Cl. B-1, Downgraded to Caa3 from Ba1 -- Cl. B-2, Downgraded to Ca from Ba2 Issuer: First Franklin Mortgage Loan Trust 2006-FF1 -- Cl. M-5, Downgraded to Baa1 from A2 -- Cl. M-6, Downgraded to Ba2 from A3 -- Cl. M-7, Downgraded to B2 from Baa2; Placed Under Review for further Possible Downgrade -- Cl. M-8, Downgraded to B3 from Baa3; Placed Under Review for further Possible Downgrade -- Cl. M-9, Downgraded to Caa1 from Ba1 -- Cl. M-10, Downgraded to Caa2 from Ba3 -- Cl. M-11, Downgraded to Caa3 from B3 Issuer: First Franklin Mortgage Loan Trust 2006-FF10 -- Cl. M1, Downgraded to A3 from Aa1 -- Cl. M2, Downgraded to B1 from Aa2 -- Cl. M3, Downgraded to B2 from Aa3; Placed Under Review for further Possible Downgrade -- Cl. M4, Downgraded to B3 from A3; Placed Under Review for further Possible Downgrade -- Cl. M5, Downgraded to Caa1 from Baa2 -- Cl. M6, Downgraded to Caa2 from Ba2 -- Cl. M7, Downgraded to Caa3 from B3 -- Cl. M8, Downgraded to Ca from B3 Issuer: First Franklin Mortgage Loan Trust 2006-FF11 -- Cl. I-A-1, Downgraded to Aa2 from Aaa -- Cl. I-A-2, Downgraded to A2 from Aaa -- Cl. II-A-2, Downgraded to Aa2 from Aaa -- Cl. II-A-3, Downgraded to Baa1 from Aaa -- Cl. II-A-4, Downgraded to Baa2 from Aaa -- Cl. M-1, Downgraded to B1 from Aa1; Placed Under Review for further Possible Downgrade -- Cl. M-2, Downgraded to B2 from Aa2; Placed Under Review for further Possible Downgrade -- Cl. M-3, Downgraded to B3 from Aa3; Placed Under Review for further Possible Downgrade -- Cl. M-4, Downgraded to Caa1 from Baa2 -- Cl. M-5, Downgraded to Caa2 from Ba2 -- Cl. M-6, Downgraded to Caa3 from B2 -- Cl. M-7, Downgraded to Ca from B3 -- Cl. M-8, Downgraded to Ca from Caa3 Issuer: First Franklin Mortgage Loan Trust 2006-FF12 -- Cl. A5, Downgraded to Aa2 from Aaa -- Cl. M1, Downgraded to Ba1 from Aa1 -- Cl. M2, Downgraded to B1 from Aa2; Placed Under Review for further Possible Downgrade -- Cl. M3, Downgraded to B2 from Aa3; Placed Under Review for further Possible Downgrade -- Cl. M4, Downgraded to B3 from Baa1; Placed Under Review for further Possible Downgrade -- Cl. M5, Downgraded to Caa1 from Ba1 -- Cl. M6, Downgraded to Caa2 from Ba3 -- Cl. M7, Downgraded to Caa3 from B3 -- Cl. M8, Downgraded to Ca from B3 -- Cl. M9, Downgraded to Ca from Caa3 Issuer: First Franklin Mortgage Loan Trust 2006-FF13 -- Cl. A-2B, Downgraded to Aa2 from Aaa -- Cl. A-2C, Downgraded to Aa3 from Aaa -- Cl. A-2D, Downgraded to A1 from Aaa -- Cl. M-1, Downgraded to Ba2 from Aa1 -- Cl. M-2, Downgraded to B1 from Aa2; Placed Under Review for further Possible Downgrade -- Cl. M-3, Downgraded to B2 from Aa3; Placed Under Review for further Possible Downgrade -- Cl. M-4, Downgraded to B3 from A3; Placed Under Review for further Possible Downgrade -- Cl. M-5, Downgraded to Caa1 from Baa3 -- Cl. M-6, Downgraded to Caa2 from Ba2 -- Cl. M-7, Downgraded to Caa3 from B3 -- Cl. M-8, Downgraded to Ca from B3 -- Cl. M-9, Downgraded to Ca from B3 -- Cl. B-1, Downgraded to Ca from Caa3 Issuer: First Franklin Mortgage Loan Trust 2006-FF14 -- Cl. A2, Downgraded to Aa1 from Aaa -- Cl. A4, Downgraded to Aa2 from Aaa -- Cl. A5, Downgraded to A1 from Aaa -- Cl. A6, Downgraded to A3 from Aaa -- Cl. M1, Downgraded to B1 from Aa1; Placed Under Review for further Possible Downgrade -- Cl. M2, Downgraded to B2 from Aa2; Placed Under Review for further Possible Downgrade -- Cl. M3, Downgraded to B3 from Aa3; Placed Under Review for further Possible Downgrade -- Cl. M4, Downgraded to Caa1 from Baa1 -- Cl. M5, Downgraded to Caa2 from Ba1 -- Cl. M6, Downgraded to Caa3 from Ba3 -- Cl. M7, Downgraded to Ca from B3 -- Cl. M8, Downgraded to Ca from B3 -- Cl. M9, Downgraded to C from Caa3 Issuer: First Franklin Mortgage Loan Trust 2006-FF15 -- Cl. A5, Downgraded to Aa1 from Aaa -- Cl. A6, Downgraded to Baa1 from Aaa -- Cl. M1, Downgraded to B1 from Aa1; Placed Under Review for further Possible Downgrade -- Cl. M2, Downgraded to B2 from Aa2; Placed Under Review for further Possible Downgrade -- Cl. M3, Downgraded to B3 from Aa3; Placed Under Review for further Possible Downgrade -- Cl. M4, Downgraded to Caa1 from Ba1 -- Cl. M5, Downgraded to Caa2 from Ba3 -- Cl. M6, Downgraded to Caa3 from B3 -- Cl. M7, Downgraded to Ca from Caa1 -- Cl. M8, Downgraded to Ca from Caa2 -- Cl. M9, Downgraded to C from Ca Issuer: First Franklin Mortgage Loan Trust 2006-FF16 -- Cl. II-A2, Downgraded to Aa2 from Aaa -- Cl. II-A3, Downgraded to Baa2 from Aaa -- Cl. II-A4, Downgraded to Baa3 from Aaa -- Cl. M-1, Downgraded to B1 from Aa1; Placed Under Review for further Possible Downgrade -- Cl. M-2, Downgraded to B2 from Aa2; Placed Under Review for further Possible Downgrade -- Cl. M-3, Downgraded to B3 from Aa3; Placed Under Review for further Possible Downgrade -- Cl. M-4, Downgraded to Caa1 from Baa3 -- Cl. M-5, Downgraded to Caa2 from Ba3 -- Cl. M-6, Downgraded to Caa3 from B3 -- Cl. M-7, Downgraded to Ca from Caa1 -- Cl. M-8, Downgraded to Ca from Caa2 -- Cl. M-9, Downgraded to C from Ca Issuer: First Franklin Mortgage Loan Trust 2006-FF17 -- Cl. A2, Downgraded to Aa1 from Aaa -- Cl. A5, Downgraded to Aa3 from Aaa -- Cl. A6, Downgraded to Ba1 from Aaa -- Cl. M1, Downgraded to B1 from Aa1; Placed Under Review for further Possible Downgrade -- Cl. M2, Downgraded to B2 from Aa2; Placed Under Review for further Possible Downgrade -- Cl. M3, Downgraded to B3 from Aa3; Placed Under Review for further Possible Downgrade -- Cl. M4, Downgraded to Caa1 from Baa3 -- Cl. M5, Downgraded to Caa2 from Ba3 -- Cl. M6, Downgraded to Caa3 from B3 -- Cl. M7, Downgraded to Ca from Caa1 -- Cl. M8, Downgraded to Ca from Caa2 -- Cl. M9, Downgraded to C from Ca Issuer: First Franklin Mortgage Loan Trust 2006-FF18 -- Cl. A-2C, Downgraded to Aa2 from Aaa -- Cl. A-2D, Downgraded to A1 from Aaa -- Cl. M-1, Downgraded to Ba2 from Aa1 -- Cl. M-2, Downgraded to Ba3 from Aa2; Placed Under Review for further Possible Downgrade -- Cl. M-3, Downgraded to B1 from Aa3; Placed Under Review for further Possible Downgrade -- Cl. M-4, Downgraded to B2 from Baa1; Placed Under Review for further Possible Downgrade -- Cl. M-5, Downgraded to B3 from Ba1; Placed Under Review for further Possible Downgrade -- Cl. M-6, Downgraded to Caa2 from Ba3 -- Cl. B-1, Downgraded to Caa2 from B3 -- Cl. B-2, Downgraded to Caa3 from B3 -- Cl. B-3, Downgraded to Ca from Caa1 Issuer: First Franklin Mortgage Loan Trust 2006-FF3 -- Cl. M-3, Downgraded to Baa1 from Aa3 -- Cl. M-4, Downgraded to Ba2 from A1 -- Cl. M-5, Downgraded to B2 from A3; Placed Under Review for further Possible Downgrade -- Cl. M-6, Downgraded to B3 from Baa1; Placed Under Review for further Possible Downgrade -- Cl. M-7, Downgraded to Caa1 from Ba1 -- Cl. M-8, Downgraded to Caa2 from Ba3 -- Cl. M-9, Downgraded to Caa3 from B2 -- Cl. B-1, Downgraded to Ca from B3 Issuer: First Franklin Mortgage Loan Trust 2006-FF4 -- Cl. M-2, Downgraded to A2 from Aa2 -- Cl. M-3, Downgraded to Ba1 from Aa3 -- Cl. M-4, Downgraded to B1 from A1; Placed Under Review for further Possible Downgrade -- Cl. M-5, Downgraded to B2 from A3; Placed Under Review for further Possible Downgrade -- Cl. M-6, Downgraded to B3 from Baa2; Placed Under Review for further Possible Downgrade -- Cl. M-7, Downgraded to Caa1 from Ba2 -- Cl. M-8, Downgraded to Caa2 from B2 -- Cl. B-1, Downgraded to Caa3 from B3 Issuer: First Franklin Mortgage Loan Trust 2006-FF5 -- Cl. M-2, Downgraded to Ba1 from Aa2 -- Cl. M-3, Downgraded to B1 from Aa3; Placed Under Review for further Possible Downgrade -- Cl. M-4, Downgraded to B2 from A3; Placed Under Review for further Possible Downgrade -- Cl. M-5, Downgraded to B3 from Baa2; Placed Under Review for further Possible Downgrade -- Cl. M-6, Downgraded to Caa2 from Ba2 -- Cl. M-7, Downgraded to Caa3 from B3 -- Cl. M-8, Downgraded to Ca from Caa3 Issuer: First Franklin Mortgage Loan Trust 2006-FF6 -- Cl. M-1, Downgraded to Baa2 from Aa2 -- Cl. M-2, Downgraded to B2 from Baa1; Placed Under Review for further Possible Downgrade -- Cl. M-3, Downgraded to B3 from Baa2; Placed Under Review for further Possible Downgrade -- Cl. M-4, Downgraded to Caa1 from Ba3 -- Cl. M-5, Downgraded to Caa2 from B3 -- Cl. M-6, Downgraded to Caa3 from B3 Issuer: First Franklin Mortgage Loan Trust 2006-FF7 -- Cl. M-1, Downgraded to Baa1 from Aa1 -- Cl. M-2, Downgraded to B1 from Aa2; Placed Under Review for further Possible Downgrade -- Cl. M-3, Downgraded to B2 from Aa3; Placed Under Review for further Possible Downgrade -- Cl. M-4, Downgraded to B3 from Baa1; Placed Under Review for further Possible Downgrade -- Cl. M-5, Downgraded to Caa1 from Ba1 -- Cl. M-6, Downgraded to Caa3 from Ba3 -- Cl. M-7, Downgraded to Ca from B3 Issuer: First Franklin Mortgage Loan Trust 2006-FF8 -- Cl. M-2, Downgraded to Baa1 from Aa2 -- Cl. M-3, Downgraded to Ba2 from Aa3 -- Cl. M-4, Downgraded to B1 from A2; Placed Under Review for further Possible Downgrade -- Cl. M-5, Downgraded to B2 from Baa1; Placed Under Review for further Possible Downgrade -- Cl. M-6, Downgraded to B3 from Baa3; Placed Under Review for further Possible Downgrade -- Cl. M-7, Downgraded to Caa1 from B1 -- Cl. M-8, Downgraded to Caa2 from B3 -- Cl. M-9, Downgraded to Caa3 from B3 Issuer: First Franklin Mortgage Loan Trust 2006-FF9 -- Cl. II-A-4, Downgraded to Aa2 from Aaa -- Cl. M-1, Downgraded to Baa3 from Aa1 -- Cl. M-2, Downgraded to B1 from Aa2; Placed Under Review for further Possible Downgrade -- Cl. M-3, Downgraded to B2 from Aa3; Placed Under Review for further Possible Downgrade -- Cl. M-4, Downgraded to B3 from Ba1; Placed Under Review for further Possible Downgrade -- Cl. M-5, Downgraded to Caa1 from B3 -- Cl. M-6, Downgraded to Caa2 from B3 Issuer: First Franklin Mortgage Loan Trust 2006-FFH1 -- Cl. M-4, Downgraded to A1 from Aa3 -- Cl. M-5, Downgraded to Baa2 from A1 -- Cl. M-6, Downgraded to Ba3 from A2 -- Cl. M-7, Downgraded to B2 from A3; Placed Under Review for further Possible Downgrade -- Cl. M-8, Downgraded to B3 from Baa2; Placed Under Review for further Possible Downgrade -- Cl. M-9, Downgraded to Caa1 from Baa3 -- Cl. M-10, Downgraded to Caa3 from Ba3 Issuer: First Franklin Mortgage Loan Trust 2007-FF1 -- Cl. A-2C, Downgraded to Aa1 from Aaa -- Cl. A-2D, Downgraded to Aa3 from Aaa -- Cl. M-1, Downgraded to Baa3 from Aa1 -- Cl. M-2, Downgraded to B1 from Aa2; Placed Under Review for further Possible Downgrade -- Cl. M-3, Downgraded to B2 from Aa3; Placed Under Review for further Possible Downgrade -- Cl. M-4, Downgraded to B3 from A3; Placed Under Review for further Possible Downgrade -- Cl. M-5, Downgraded to Caa1 from Baa1 -- Cl. M-6, Downgraded to Caa2 from Ba2 -- Cl. B-1, Downgraded to Caa3 from B2 -- Cl. B-2, Downgraded to Ca from Caa1 Issuer: First Franklin Mortgage Loan Trust Mortgage Loan Asset- Backed Certificates, Series 2007-FF2 -- Cl. A-1, Downgraded to A3 from Aaa -- Cl. A-2A, Downgraded to Aa2 from Aaa -- Cl. A-2B, Downgraded to Baa2 from Aaa -- Cl. A-2C, Downgraded to Baa3 from Aaa -- Cl. A-2D, Downgraded to Ba1 from Aaa -- Cl. M-1, Downgraded to B1 from Aa1; Placed Under Review for further Possible Downgrade -- Cl. M-2, Downgraded to B2 from Aa2; Placed Under Review for further Possible Downgrade -- Cl. M-3, Downgraded to B3 from Aa3; Placed Under Review for further Possible Downgrade -- Cl. M-4, Downgraded to Caa2 from Ba1 -- Cl. M-5, Downgraded to Caa3 from B1 -- Cl. M-6, Downgraded to Ca from Caa3 Issuer: Merrill Lynch First Franklin Mortgage Loan Trust, Series 2007-1 -- Cl. A-1, Downgraded to A2 from Aaa -- Cl. A-2A, Downgraded to Aa2 from Aaa -- Cl. A-2B, Downgraded to Baa2 from Aaa -- Cl. A-2C, Downgraded to Baa3 from Aaa -- Cl. A-2D, Downgraded to Ba1 from Aaa -- Cl. M-1, Downgraded to B1 from Aa1; Placed Under Review for further Possible Downgrade -- Cl. M-2, Downgraded to B2 from Aa2; Placed Under Review for further Possible Downgrade -- Cl. M-3, Downgraded to B3 from Aa3; Placed Under Review for further Possible Downgrade -- Cl. M-4, Downgraded to Caa2 from Baa2 -- Cl. M-5, Downgraded to Caa3 from Ba1 -- Cl. M-6, Downgraded to Ca from Ba3 -- Cl. B-1, Downgraded to Ca from B3 -- Cl. B-2, Downgraded to Ca from Caa2 -- Cl. B-3, Downgraded to C from Ca Issuer: Merrill Lynch First Franklin Mortgage Loan Trust, Series 2007-2 -- Cl. A-2C, Downgraded to Aa1 from Aaa -- Cl. A-2D, Downgraded to Aa3 from Aaa -- Cl. M-1, Downgraded to Baa3 from Aa1 -- Cl. M-2, Downgraded to B1 from Aa2; Placed Under Review for further Possible Downgrade -- Cl. M-3, Downgraded to B1 from Aa3; Placed Under Review for further Possible Downgrade -- Cl. M-4, Downgraded to B2 from A1; Placed Under Review for further Possible Downgrade -- Cl. M-5, Downgraded to B3 from A3; Placed Under Review for further Possible Downgrade -- Cl. M-6, Downgraded to Caa1 from Baa1 -- Cl. B-1, Downgraded to Caa2 from Baa3 -- Cl. B-2, Downgraded to Caa3 from Ba1 -- Cl. B-3, Downgraded to Ca from B1 Issuer: Merrill Lynch First Franklin Mortgage Loan Trust, Series 2007-3 -- Cl. M-1-1, Downgraded to A3 from Aa1 -- Cl. M-1-2, Downgraded to A3 from Aa1 -- Cl. M-2-1, Downgraded to Ba3 from Aa2; Placed Under Review for further Possible Downgrade -- Cl. M-2-2, Downgraded to Ba3 from Aa2; Placed Under Review for further Possible Downgrade -- Cl. M-3-1, Downgraded to B1 from Aa3; Placed Under Review for further Possible Downgrade -- Cl. M-3-2, Downgraded to B1 from Aa3; Placed Under Review for further Possible Downgrade -- Cl. M-4-1, Downgraded to B2 from A1; Placed Under Review for further Possible Downgrade -- Cl. M-4-2, Downgraded to B2 from A1; Placed Under Review for further Possible Downgrade -- Cl. M-5, Downgraded to B3 from A2; Placed Under Review for further Possible Downgrade -- Cl. M-6, Downgraded to B3 from Baa1; Placed Under Review for further Possible Downgrade -- Cl. B-1, Downgraded to Caa1 from Baa2 -- Cl. B-2, Downgraded to Caa2 from Ba1 -- Cl. B-3, Downgraded to Caa3 from B1 Issuer: Merrill Lynch First Franklin Mortgage Loan Trust, Series 2007-4 -- Cl. 2-A3, Downgraded to Aa1 from Aaa -- Cl. 2-A4, Downgraded to Aa3 from Aaa -- Cl. 1-M1, Downgraded to Ba1 from Aa1 -- Cl. 1-M2, Downgraded to Ba3 from Aa2; Placed Under Review for further Possible Downgrade -- Cl. 1-M3, Downgraded to B1 from Aa3; Placed Under Review for further Possible Downgrade -- Cl. 2-M1, Downgraded to Ba1 from Aa1 -- Cl. 2-M2, Downgraded to Ba3 from Aa2; Placed Under Review for further Possible Downgrade -- Cl. 2-M3, Downgraded to B1 from Aa3; Placed Under Review for further Possible Downgrade -- Cl. M4, Downgraded to B2 from A1; Placed Under Review for further Possible Downgrade -- Cl. M5, Downgraded to B3 from A2; Placed Under Review for further Possible Downgrade -- Cl. M6, Downgraded to B3 from Baa1; Placed Under Review for further Possible Downgrade -- Cl. B1, Downgraded to Caa1 from Baa2 -- Cl. B2, Downgraded to Caa2 from Baa3 -- Cl. B3, Downgraded to Caa3 from Ba2 FOUNDATIONS INC: Taps SulmeyerKupetz as General Bankruptcy Counsel ------------------------------------------------------------------ Foundations Inc., formerly Foundations, LLC, seeks the permission of the U.S. Bankruptcy Court for the Cental District of California to employ SulmeyerKupetz, P.C. as its general bankruptcy counsel. SulmeyerKupetz, P.C. will act on the Debtor's behalf in any and all bankruptcy law matters that may arise in the course of its case, and to advise it in order that it may properly comply with the Bankruptcy Code, the Bankruptcy Rules, the Local Bankruptcy Rules, and the requirements of the United States Trustee. Prior to bankruptcy filing, SulmeyerKupetz, P.C. received a $50,000 retainer from the Debtor, of which a balance of $43,964.04 remains as of the petition date, as an advance against fees and costs to be rendered during the pendency of the Debtor's bankruptcy case. To the best of the Debtor's knowledge, SulmeyerKupetz, P.C. neither holds nor represents any interest materially adverse to the Debtor or its estate, and that the firm is disinterested as required by Sec. 327(a) of the Bankruptcy Code. SulmeyerKupetz, P.C.'s professionals currently bill: Hourly Rate ----------- Members and Senior Counsel $375-$650 Of Counsel $410-$420 Associates $310-$350 Based in Newport Coast, Calif., Foundations Inc., formerly Foundations, LLC, filed for Chapter 11 on June 12, 2008 (C.D. Calif. Case No. 08-13321). Foundations Inc.'s debtor affiliate, Crown Plaza Development LLC, filed a separate Chapter 11 petition on Feb. 20, 2008 (C.D. Case No. 08-10776). When the Debtor filed for bankruptcy protection from its creditors, it listed estimated assets of between $10 million and $50 million, and estimated debts of $1 million and $10 million. GATEHOUSE MEDIA: Debt Woes to Likely Cue Liquidation or Bankruptcy ------------------------------------------------------------------ Gatehouse Media Inc. could hit debt service problems that could force the company to sell properties or file for Chapter 11 protection, Douglas McIntyre of 24/7 Wall Street reports. According to the report, Gatehouse is one of the companies that are at high risk for not making it another year due to the big debt loads it took in buying newspaper properties and seeing operating income chopped by falling sales. The report states Gatehouse shares sank as low as $1.11 in the last few days. The report also relates that the company's 52-week high is $19. Gatehouse is troubled with a high dividend and $1.3 billion in long-term debt. Mr. McIntyre says that the newspaper company has gone from being in a tight spot to being candidate for liquidation. However, the company stated in its May 9, 2008, regulatory filing that it was in compliance with all debt covenants for the period ended at March 30, 2008. At March 30, 2008, GateHouse Media Inc.'s balance sheet showed total assets of $4,006,070,000, total liabilities of $3,596,766,000 and total stockholders' equity of $409,304 million. About GateHouse Media Inc. Headquartered in Fairport, New York, GateHouse Media Inc. (NYSE:GHS) -- http://www.gatehousemedia.com/-- is a publisher of locally based print and online media in the United States. The company\u2019s products include 101 daily newspapers with total paid circulation of approximately 906,000; 282 weekly newspapers (published up to three times per week) with total paid circulation of approximately 606,000 and total free circulation of approximately 905,000; 132 shoppers (generally advertising-only publications) with total circulation of approximately 2.3 million; more than 250 locally focused Websites, which extend its franchises onto the Internet, and seven yellow page directories with a distribution of approximately 810,000 that covers a population of approximately two million people. The company also produces publications that address specific local market interests, as recreation, sports, healthcare and real estate. GateHouse operates in five geographic regions: Northeast, Western, Northern Midwest, Southern Midwest and Atlantic. * * * As reported in the Troubled Company Reporter on May 13, 2008, Standard & Poor's Ratings Services placed its ratings for GateHouse Media Operating Inc., including the 'B+' corporate credit rating, on CreditWatch with negative implications. GENERAL MOTORS: To Bolster Liquidity by $15 Bil. Through 2009 ------------------------------------------------------------- General Motors Corp. said it is taking further steps to adapt its business to rapidly changing market conditions, marked by the weak U.S. economy, record high fuel prices, shifts in consumer vehicle preferences, and the lowest U.S. industry sales volumes in a decade. "We are responding aggressively to the challenges of today's U.S. auto market," said GM Chairman and CEO, G. Richard Wagner, Jr. "We will continue to take the steps necessary to align our business structure with the lower vehicle sales volumes and shifts in sales mix. We remain committed to bringing to market great products that target changing consumer preferences for more fuel- efficient vehicles." Mr. Wagoner noted that 11 of GM's 13 most recent major U.S. product launches, and 18 of its next 19 launches, are cars and crossovers, which are key growth areas. "Today's actions, combined with those of the past several years, position us not only to survive this tough period in the U.S., but to come out of it as a lean, strong and successful company," Mr. Wagoner said. For liquidity planning purposes, GM is using assumptions of U.S. light vehicle industry volumes of 14.0 million units in 2008-2009 which are significantly below trend. Other planning assumptions include lower U.S. share of approximately 21 percent and continued elevated average oil price estimates ranging from $130 to $150 per barrel by 2009. Based on those assumptions, GM is taking actions to further reduce structural cost, and generate cash, with the goal of maximizing liquidity. GM Has Ample Liquidity to Fund 2008 Costs At the end of the first quarter 2008, GM had liquidity of $23.9 billion, with access to U.S. credit facilities of an additional $7 billion. While the company has ample liquidity to meet its 2008 funding requirements, it is taking additional measures to bolster liquidity to protect against a prolonged U.S. downturn. The actions include a combination of operating and related actions, as well as asset sales and capital market activities. The cumulative impact on cash through 2009 is projected to be approximately $15 billion: Cash Impact Through Year End 2009 Operating and Other Actions ~$10 billion Asset sales ~$2-4 billion Capital markets activities ~$2-3 billion --------------- Total ~$15 billion $10 Bil. in Cash Improvements By End of 2009 Through a number of internal operating changes and other actions, GM expects to generate approximately $10 billion of cumulative cash improvements by the end of 2009, versus original plans. Estimated Reductions Internal Operating Changes and Other Actions ---------- -------------------------------------------- $1.5 billion GM plans further salaried headcount reductions in in benefits the U.S. and Canada in the 2008 calendar year, reduction in which will be achieved through normal attrition, 2009 early retirements, mutual separation programs and other separation tools. In addition, health care coverage for U.S. salaried retirees over 65 will be eliminated, effective January 1, 2009. Affected retirees and surviving spouses will receive a pension increase from GM's over funded U.S. salaried plan to help offset costs of Medicare and supplemental coverage. And there will be no new base compensation increases for U.S. and Canadian salaried employees for the remainder of 2008 and 2009. Beyond these moves, which also impact GM executives, additional actions are being taken. There will be no annual discretionary cash bonuses for the company's executive group in 2008. With the elimination of the annual cash bonus, combined with GM's long-term incentives which are driven by GM stock price performance to assure alignment with its stockholders, GM's executive group will have a significant reduction in their cash compensation opportunity for 2008. For the company's top executive officers, it represents a reduction in their cash compensation opportunity of 75 to 84 percent. These benefit changes, salaried headcount reductions and other related savings will result in an estimated reduction in cash costs of more than 20 percent, or $1.5 billion in 2009. $2.5 billion Additional structural cost reductions of structural approximately $2.5 billion are expected in cost cuts GM North America. The reductions will be in 2009; partially achieved through further adjustments $6-7 billion in truck capacity and related component, by 2010 stamping and powertrain capacity in response to lower U.S. industry volume. Truck capacity is expected to be reduced by 300,000 units by the end of 2009, half of which is from acceleration of prior announced actions, and half from new capacity actions. In addition, GM will reduce and consolidate sales and marketing budgets, with a focus on protecting launch products and brand advertising. Engineering spending in 2008 and 2009 will be held at 2006-2007 levels, substantially lower than original plans. These operating actions, combined with the benefits of the 2007 GM-UAW labor agreement, are targeted to reduce North American structural cost from $33.2 billion in 2007 to approximately $26-$27 billion in 2010, a reduction of $6-7 billion. $1.5 billion GM is revising its capital spending plan and Capital reducing approximately $1.5 billion in Expenditure expenditures versus prior plans. Capital Reductions expenditures are now estimated to total $7 billion in 2009 versus prior plans of $8.5 billion. The figures do not include the $1 billion in capital spending planned in both 2008 and 2009 in China, which is self-funded by the GM joint ventures, to support growth in that market. A major part of the reductions is related to the delay of the next generation large pickup and SUV program, as well as V-8 engine development and associated capacity. Spending for non-product programs will also be significantly reduced, while powertrain spending will be increased to support the development of alternative propulsion and fuel economy technologies and small displacement engines. The revised 2009 capital spending plan is higher than the average capital expenditures in 2005-2007, excluding large pickup and SUV-related spending. Excluding China, GM expects capital expenditures to run in the $7-7.5 billion range beyond 2009. $2.0 billion GM said aggressive actions are being taken to working cap improve working capital by approximately improvements $2 billion in North America and Europe, primarily related to the reduction of raw material, work- in-progress and finished goods inventory levels as well as lean inventory practices at parts warehouses. $1.7 billion GM will defer approximately $1.7 billion of VEBA payment payments that had been scheduled to be made to a deferrals temporary asset account over the balance of 2008 and 2009 for the establishment of the new UAW VEBA. $0.8 billion The GM Board of Directors has decided to suspend Dividend future dividends on common stock, effective Suspension immediately, which is expected to improve liquidity by approximately $800 million through 2009. Up to $7 Bil. in Asset Sales, Financing Activities In addition to the operating changes and other actions, GM expects to raise additional liquidity of $4-$7 billion through asset sales and financing activities. Target Amount Details on Company's Plan ------ ------------------------- $2-4 billion GM is undertaking a broad global assessment of its in sales assets for possible sale or monetization, which is expected to generate approximately $2-$4 billion of additional liquidity. The company believes there is significant liquidity potential from asset sales, without impacting the strategic direction of the company. Outside advisors are currently engaged in evaluating alternatives. A strategic analysis of the Hummer brand is underway, and GM is continuing to focus on profit improvement initiatives across all remaining GM brands. $2-3 billion GM will continue to opportunistically access in financing global markets to raise additional liquidity. The company is initially targeting at least $2-3 billion of financing. The company has gross unencumbered assets of over $20 billion, which could support a significant secured debt offering, or multiple offerings, that would far exceed the initial target. Examples of such assets include stock of foreign subsidiaries, brands, stake in GMAC, and real estate. GM said the outlined actions comprehend the anticipated impact of second quarter results, which the company plans to announce in the near future. GM anticipates it will report a significant second quarter loss, driven in part by the previously disclosed negative impact of the American Axle and local union strikes in North America, as well as the continued weakness in the U.S. auto market and adverse vehicle segment mix. In addition, the company expects to record significant charges or expenses related to its previously announced hourly attrition program in the U.S., the recently announced North American truck capacity actions, valuation of GMAC stock, lease assets, Delphi recoveries, the American Axle settlement, the Canadian labor contract, and others. GM is highly confident that the initiatives, in conjunction with the current cash position and its $4-5 billion of committed U.S. credit lines, will provide the company with ample liquidity to meet its operational needs through 2009. "The actions announced today are difficult decisions, but necessary to respond to the current auto market conditions," said Mr. Wagoner. "Even under conservative planning scenarios, GM is well-positioned to withstand the U.S. market downturn and emerge a stronger company. We have a solid position in the rapidly growing emerging markets, a global operating framework that allows us to respond to changes in the U.S. market, a commitment to technology leadership, and an ever stronger and competitive product line-up." A full-text copy of GM's fact sheet related to its turnaround plan is available at no charge at: http://ResearchArchives.com/t/s?2f82 Mr. Wagoner, Frederick A. Henderson, GM's President and Chief Operating Officer and Ray G. Young, GM's Executive Vice President and Chief Financial Officer, gave a presentation for the media and securities analysts entitled "Aligning the Business with Current Market Conditions" on July 15. A full-text copy of that presentation is available at no charge at: http://ResearchArchives.com/t/s?2f83 About General Motors Headquartered in Detroit, Michigan, General Motors Corp. (NYSE: GM) -- http://www.gm.com/-- was founded in 1908. GM employs about 266,000 people around the world and manufactures cars and trucks in 35 countries. In 2007, nearly 9.37 million GM cars and trucks were sold globally under the following brands: Buick, Cadillac, Chevrolet, GMC, GM Daewoo, Holden, HUMMER, Opel, Pontiac, Saab, Saturn, Vauxhall and Wuling. GM's OnStar subsidiary is the industry leader in vehicle safety, security and information services. At March 31, 2008, GM's balance sheet showed total assets of $145,741,000,000 and total debts of $186,784,000,000, resulting in a stockholders' deficit of $41,043,000,000. Deficit, at Dec. 31, 2007, and March 31, 2007, was $37,094,000,000 and $4,558,000,000, respectively. * * * As reported in the Troubled Company Reporter on June 24, 2008, DBRS has placed the ratings of General Motors Corporation and General Motors of Canada Limited Under Review with Negative Implications. The rating action reflects the structural deterioration of the company's operations in North America brought on by high oil prices and a slowing U.S. economy. Standard & Poor's Ratings Services is placing its corporate credit ratings on the three U.S. automakers, General Motors Corp., Ford Motor Co., and Chrysler LLC, on CreditWatch with negative implications, citing the need to evaluate the financial damage being inflicted by deteriorating U.S. industry conditions--largely as a result of high gasoline prices. Included in the CreditWatch placement are the finance units Ford Motor Credit Co. and DaimlerChrysler Financial Services Americas LLC, as well as GM's 49%-owned finance affiliate GMAC LLC. As related in the Troubled Company Reporter on June 5, 2008, Standard & Poor's Ratings Services said that its ratings on General Motors Corp. (B/Negative/B-3) are not immediately affected by the company's announcement that it will cease production at four North American truck plants over the next two years. These closures are in response to the re-energized shift in consumer demand away from light trucks. GM previously said only one shift was being eliminated at each of the four truck plants. Production is being increased at plants producing small and midsize cars, but the cash contribution margin from these smaller vehicles is far less than that of light trucks. GENERAL MOTORS: S&P Retains Negative Watch After Cost Reductions ---------------------------------------------------------------- Standard & Poor's Ratings Services said that its 'B' corporate credit and senior unsecured debt ratings and 'BB-' senior secured debt rating on General Motors Corp. remain on CreditWatch with negative implications, where they were placed June 20, 2008. The update follows GM's announcement of a series of cost reductions and other initiatives aimed at saving $10 billion in cash from operations by the end of 2009. GM also announced plans to obtain $4 billion to $7 billion in cash from capital market transactions and asset sales. "We view these announcements as being absolutely necessary steps for maintaining liquidity," said Standard & Poor's credit analyst Robert Schulz, "given the magnitude of the company's expected cash use caused by currently dismal market conditions in the U.S. automotive market." Still, execution timing is considerable, and most of the benefits from cost reductions will be reaped throughout the course of 2009. GM's focus is to preserve adequate liquidity for the next 18 months and continue to attempt to align its cost structure with the North American light-vehicle market, which appears to have been permanently altered by high gas prices. The continuing CreditWatch review, which S&P are also undertaking with Ford Motor Co. and Chrysler LLC, reflects its concerns about the financial damage being inflicted by deteriorating U.S. industry conditions-largely as a result of high gasoline prices. The difficulty GM and the other Michigan-based automakers are having in anticipating the pace of market deterioration--and the likely prolonged tenor of the downturn--has led to another round of announcements of cost reductions and actions to bolster liquidity. These follow other aggressive cost-saving measures taken during the past several years that have proved insufficient. S&P will review GM's business and financial prospects, including liquidity, in light of GM's announcement, and the general U.S. and global automotive industry conditions to resolve the CreditWatch review. GM currently has adequate liquidity through at least the end of 2008--$23.9 billion of unrestricted cash and short-term investments at March 31, 2008, and an unused $4.48 billion bank facility and significant unencumbered assets. S&P intend to resolve the CreditWatch reviews on GM, Ford, and Chrysler by the end of July. Given the severe risks created by weak prospects for U.S. auto demand for the rest of 2008 and for 2009, the possibility of a downgrade of more than one notch cannot be dismissed for any of the companies. GM to Bolster Liquidity by $15 Billion through 2009 * Operating and related actions to generate approximately $10 billion in cash improvements * More than 20 percent reduction in salaried employment cash costs * Dividend on common stock suspended * Asset sales and capital market activities to raise $4-7 billion of additional liquidity (NYSE: GM) today GENERAL MOTORS: General Motors Corp. said it is taking further steps to adapt its business to rapidly changing market conditions, marked by the weak U.S. economy, record high fuel prices, shifts in consumer vehicle preferences, and the lowest U.S. industry sales volumes in a decade. "We are responding aggressively to the challenges of today's U.S. auto market," said GM Chairman and CEO, Rick Wagoner. "We will continue to take the steps necessary to align our business structure with the lower vehicle sales volumes and shifts in sales mix. We remain committed to bringing to market great products that target changing consumer preferences for more fuel-efficient vehicles." Mr. Wagoner noted that 11 of GM's 13 most recent major U.S. product launches, and 18 of its next 19 launches, are cars and crossovers, which are key growth areas. "Today's actions, combined with those of the past several years, position us not only to survive this tough period in the U.S., but to come out of it as a lean, strong and successful company," Wagoner said. For liquidity planning purposes, GM is using assumptions of U.S. light vehicle industry volumes of 14.0 million units in 2008-2009 which are significantly below trend. Other planning assumptions include lower U.S. share of approximately 21 percent and continued elevated average oil price estimates ranging from $130 to $150 per barrel by 2009. Based on those assumptions, GM is taking actions to further reduce structural cost, and generate cash, with the goal of maximizing liquidity. Ample Liquidity to Fund 2008 Costs At the end of the first quarter 2008, GM had liquidity of $23.9 billion, with access to U.S. credit facilities of an additional $7 billion. While the company has ample liquidity to meet its 2008 funding requirements, it is taking additional measures to bolster liquidity to protect against a prolonged U.S. downturn. The actions include a combination of operating and related actions, as well as asset sales and capital market activities. The cumulative impact on cash through 2009 is projected to be approximately $15 billion. $10 Bil. in Cash Improvements By End of 2009 Through a number of internal operating changes and other actions, GM expects to generate approximately $10 billion of cumulative cash improvements by the end of 2009, versus original plans. * GM plans further salaried headcount reductions in the U.S. and Canada in the 2008 calendar year, which will be achieved through normal attrition, early retirements, mutual separation programs and other separation tools. In addition, health care coverage for U.S. salaried retirees over 65 will be eliminated, effective January 1, 2009. Affected retirees and surviving spouses will receive a pension increase from GM's over funded U.S. salaried plan to help offset costs of Medicare and supplemental coverage. And there will be no new base compensation increases for U.S. and Canadian salaried employees for the remainder of 2008 and 2009. Beyond these moves, which also impact GM executives, additional actions are being taken. There will be no annual discretionary cash bonuses for the company's executive group in 2008. With the elimination of the annual cash bonus, combined with GM's long-term incentives which are driven by GM stock price performance to assure alignment with its stockholders, GM's executive group will have a significant reduction in their cash compensation opportunity for 2008. For the company's top executive officers, it represents a reduction in their cash compensation opportunity of 75 to 84 percent. These benefit changes, salaried headcount reductions and other related savings will result in an estimated reduction in cash costs of more than 20 percent, or $1.5 billion in 2009. * Additional structural cost reductions of approximately $2.5 billion are expected in GM North America (GMNA). The reductions will be partially achieved through further adjustments in truck capacity and related component, stamping and powertrain capacity in response to lower U.S. industry volume. Truck capacity is expected to be reduced by 300,000 units by the end of 2009, half of which is from acceleration of prior announced actions, and half from new capacity actions. In addition, GM will reduce and consolidate sales and marketing budgets, with a focus on protecting launch products and brand advertising. Engineering spending in 2008 and 2009 will be held at 2006-2007 levels, substantially lower than original plans. These operating actions, combined with the benefits of the 2007 GM-UAW labor agreement, are targeted to reduce North American structural cost from $33.2 billion in 2007 to approximately $26-27 billion in 2010, a reduction of $6-7 billion. * GM is revising its capital spending plan and reducing approximately $1.5 billion in expenditures versus prior plans. Capital expenditures are now estimated to total $7 billion in 2009 versus prior plans of $8.5 billion (these figures do not include the $1 billion in capital spending planned in both 2008 and 2009 in China, which is self-funded by the GM joint ventures, to support growth in that market). A major part of the reductions is related to the delay of the next generation large pickup and SUV program, as well as V-8 engine development and associated capacity. Spending for non-product programs will also be significantly reduced, while powertrain spending will be increased to support the development of alternative propulsion and fuel economy technologies and small displacement engines. The revised 2009 capital spending plan is higher than the average capital expenditures in 2005-2007, excluding large pickup and SUV-related spending. Excluding China, GM expects capital expenditures to run in the $7-7.5 billion range beyond 2009. * Aggressive actions are being taken to improve working capital by approximately $2 billion in North America and Europe, primarily related to the reduction of raw material, work-in-progress and finished goods inventory levels as well as lean inventory practices at parts warehouses. * GM will defer approximately $1.7 billion of payments that had been scheduled to be made to a temporary asset account over the balance of 2008 and 2009 for the establishment of the new UAW VEBA. * The GM Board of Directors has decided to suspend future dividends on common stock, effective immediately, which is expected to improve liquidity by approximately $800 million through 2009. Asset Sales and Financing Activities In addition to the operating changes and other actions, GM expects to raise additional liquidity of $4-7 billion through asset sales and financing activities. * GM is undertaking a broad global assessment of its assets for possible sale or monetization, which is expected to generate approximately $2-4 billion of additional liquidity. The company believes there is significant liquidity potential from asset sales, without impacting the strategic direction of the company. Outside advisors are currently engaged in evaluating alternatives. A strategic analysis of the Hummer brand is underway, and GM is continuing to focus on profit improvement initiatives across all remaining GM brands. * GM will continue to opportunistically access global markets to raise additional liquidity. The company is initially targeting at least $2-3 billion of financing. The company has gross unencumbered assets of over $20 billion, which could support a significant secured debt offering, or multiple offerings, that would far exceed the initial target. Examples of such assets include stock of foreign subsidiaries, brands, stake in GMAC, and real estate. Actions outlined today comprehend the anticipated impact of second quarter results, which the company plans to announce in the near future. GM anticipates it will report a significant second quarter loss, driven in part by the previously disclosed negative impact of the American Axle and local union strikes in North America, as well as the continued weakness in the U.S. auto market and adverse vehicle segment mix. In addition, the company expects to record significant charges or expenses related to its previously announced hourly attrition program in the U.S., the recently announced North American truck capacity actions, valuation of GMAC stock, lease assets, Delphi recoveries, the American Axle settlement, the Canadian labor contract, and others. GM is highly confident that the initiatives announced today, in conjunction with the current cash position and its $4-5 billion of committed U.S. credit lines, will provide the company with ample liquidity to meet its operational needs through 2009. "The actions announced today are difficult decisions, but necessary to respond to the current auto market conditions," said Wagoner. "Even under conservative planning scenarios, GM is well- positioned to withstand the U.S. market downturn and emerge a stronger company. We have a solid position in the rapidly growing emerging markets, a global operating framework that allows us to respond to changes in the U.S. market, a commitment to technology leadership, and an ever stronger and competitive product line-up." GPS INDUSTRIES: Board Elects Hogan and Sole as Directors -------------------------------------------------------- At a meeting of the board of directors of GPS Industries, Inc. held on June 26, 2008, Declan Hogan and Tony Sole were elected as directors of the company. Pursuant to a Securities Purchase Agreement, dated as of Nov. 13, 2006, between the company, Great White Shark Enterprises, Inc. and Leisurecorp LLC, Messrs. Hogan and Sole are the directors designated by Leisurecorp to serve as "Preferred Directors" under the Certificate of Designation relating to the company's Series B Convertible Preferred Stock and are replacing Robert Linn and Geoff Hunter who resigned effective June 26, 2008, as Leisurecorp's designees. Mr. Sole was also elected as Chairman of the Board of Directors. The Board of Directors has not yet determined on which committees, if any, Mr. Hogan and Mr. Sole will serve. Other than being the designees of Leisurecorp to the Board of Directors under the Purchase Agreement, Mr. Hogan and Mr. Sole have not had any relationship with, or engaged in any transaction with the company during the past two years. From Jan. 2, 2007, Mr. Hogan has been Senior IT Manager for Istithmar Real Estate/Leisurecorp. From June 2000 to February 2008, Mr. Sole was the Chief Financial Officer of Dubai Aluminum Company Ltd., and since February 2008, Mr. Sole has been Chief Financial Officer of Leisurecorp. Effective June 26, 2008, Bart Collins resigned as Senior Executive Vice President of the company but remains as a director. Headquartered in Surrey, B.C. Canada, GPS Industries Inc. (OTC BB: GPSN.OB) -- http://www.gpsindustries.com/-- develops and markets GPS and Wi-Fi multimedia solutions to enable managers of golf facilities, resorts, and residential communities to improve operational efficiencies and generate significant new revenue streams. Sherb & Co., LLP, in New York, expressed substantial doubt about GPS Industries Inc.'s ability to continue as a going concern after auditing the company's consolidated financial statements for the year ended Dec. 31, 2007. The auditing firm reported that the company has incurred significant losses and has a working capital deficiency. GRAND ISLAND TOWNHOMES: Voluntary Chapter 11 Case Summary --------------------------------------------------------- Debtor: Grand Island Townhomes, LLC 2644 N. Kiowa Blvd. Lake Havasau City, AZ 86403 Bankruptcy Case No.: 08-08643 Type of Business: The Debtor provides luxury residential townhomes. See http://www.grandislandtownhomes.com/ Chapter 11 Petition Date: July 14, 2008 Court: District of Arizona (Yuma) Debtor's Counsel: Richard M. Lorenzen, Esq. Email: rlorenzen@perkinscoie.com Perkins Coie Brown & Bain, P.A. 2901 North Central Ave., Ste. 2000 Phoenix, AZ 85012-2788 Tel: (602) 351-8405 Fax: (602) 648-7077 http://www.perkinscoie.com/ Estimated Assets: $10,000,000 to $50,000,000 Estimated Debts: $1,000,000 to $10,000,000 The Debtor did not file a list of its largest unsecured creditors. HANNA PROPERTIES: Case Summary & Seven Largest Unsecured Creditors ------------------------------------------------------------------ Debtor: Hanna Properties Corp. 2515 E. Hanna Ave. Tampa, FL 33610 Bankruptcy Case No.: 08-10323 Type of Business: The Debtor is engaged in real estate. Chapter 11 Petition Date: July 11, 2008 Court: Middle District of Florida (Tampa) Debtor's Counsel: Leon A Williamson, Jr., Esq. E-mail: leonwill@gte.net 3012 U.S. Highway 301, North Ste. 900 Tampa, FL 33619 Tel: (813) 626-0444 Fax: (813) 626-8111 Estimated Assets: $1 million to $10 million Estimated Debts: $1 million to $10 million A list of the Debtor's seven largest unsecured creditors is available for free at: http://bankrupt.com/misc/flmb08-10323.pdf HEXION SPECIALTY: Huntsman Acquisition Gets EU Conditional Nod -------------------------------------------------------------- The European Commission issued a decision that would permit Hexion Specialty Chemicals, Inc.'s acquisition of Huntsman Corp., contingent on, among other things, divestment of a portion of the company's global specialty epoxy resins business to a purchaser approved by the European Commission. Background As reported by the Troubled Company Reporter on July 13, 2007, Huntsman agreed to a definitive merger agreement with Hexion Specialty, pursuant to a transaction with a total value of approximately $10.6 billion, including the assumption of debt. Under the terms of the agreement, Hexion will acquire all of the outstanding common stock of Huntsman for $28 per share in cash. The agreement also provides that the cash price per share to be paid by Hexion will increase at the rate of 8% per annum beginning 270 days from July 12, 2007. Huntsman has terminated the merger agreement with Basell AF believing that the Hexion transaction was a superior proposal. The Hexion deal was unanimously approved by the board of directors of Huntsman. The transaction is subject to customary closing conditions, including regulatory approval in the U.S. and in Europe, well as the approval of Huntsman shareholders. Entities controlled by MatlinPatterson and the Huntsman family and a Huntsman charitable trust, who collectively own approximately 57% of Huntsman's common stock, have agreed to vote in favor of the transaction. The transaction is not subject to a financing condition and commitments have been obtained by Hexion for all necessary debt financing from affiliates of Credit Suisse and Deutsche Bank AG. Hexion will have up to 12 months, subject to a 90 day extension by the Huntsman board under certain circumstances, to close the transaction. Merrill Lynch & Co. and Cowen and Company LLC acted as financial advisors to Huntsman. Vinson & Elkins L.L.P. and Shearman and Sterling LLP acted as legal advisors to Huntsman. The Delaware Court of Chancery has granted Huntsman Corporation's request to expedite the Court's review of Hexion Specialty Chemicals Inc.'s efforts to abandon Hexion's pending merger with Huntsman. The trial will begin on Sept. 8, 2008. Extension of Merger Termination Date On Jan. 29, 2008, the TCR reported that Hexion informed Huntsman that it will exercise its right to extend the termination date by 90 days from April 5 to July 4, 2008. On April 5, 2008, Hexion Specialty Chemicals Inc. exercised an option under its merger agreement with Huntsman Corporation dated as of July 12, 2007, extending the merger agreement termination date by 90 days, to July 4, 2008. The TCR related on July 3, 2008, Huntsman's board of directors, unanimously, provisionally authorized Huntsman Corp. to exercise its right to extend the merger agreement with Hexion Specialty by an additional 90 days to Oct. 2, 2008, as permitted by the terms of the merger agreement. Hexion's Lawsuit to Cancel Merger On June 19, the TCR reported that Hexion and related entities filed a suit in the Delaware Court of Chancery to cancel the agreement. Hexion said in the suit that it believes that the capital structure agreed to by Huntsman and Hexion for the combined company is no longer viable because of Huntsman's increased net debt and its lower than expected earnings. While both companies individually are solvent, Hexion believes that consummating the merger on the basis of the capital structure agreed to with Huntsman would render the combined company insolvent. Comments and Responses Hexion said that the company and Apollo Management L.P. received a letter from Peter Huntsman, Huntsman Corporation's president and CEO, stating that their actions were inconsistent with the terms of the merger agreement. Huntsman is violating its obligations to Huntsman Corp. by seeking to cancel the transaction, Bloomberg relates according to Mr. Huntsman. Mr. Huntsman reportedly stated that the actions appear to be a blatant attempt to deprive its shareholders of the benefits of the Merger Agreement that was agreed to nearly a year ago. Huntsman's Countersuit Reports say Huntsman has filed a countersuit against Apollo Management and two of its founders in Texas state court, alleging interference with its merger with Hexion Specialty Chemicals, an Apollo company. Huntsman is seeking a jury trial in Texas to determine liability for "actual damages exceeding USD 3 bn, plus exemplary damages," according to Plasteurope (Germany). In response, Hexion said: "It is unfortunate that Huntsman has chosen to file a baseless lawsuit against Apollo and to personally sue two of its principals. Huntsman's Texas suit violates a clear provision of the merger agreement which requires that any litigation be brought exclusively in the State of Delaware. As we alleged in our suit, primarily due to Huntsman's underperformance, we believe that consummating the merger on the basis of the capital structure agreed to with Huntsman would render the combined company insolvent. In fact, Huntsman's suit does not dispute that the combined company would be insolvent. We believe Huntsman's lawsuit is wholly without merit." About Huntsman Corporation Headquartered in Salt Lake City, Utah, Huntsman Corporation (NYSE:HUN) -- http://www.huntsman.com/-- is a manufacturer of differentiated chemical products and inorganic chemical products. The company operates in four segments: Polyurethanes, Materials and Effects, Performance Products and Pigments. Its products are used in a range of applications, including those in the adhesives, aerospace, automotive, construction products, durable and non- durable consumer products, electronics, medical, packaging, paints and coatings, power generation, refining, synthetic fiber, textile chemicals and dye industries. About Hexion Specialty Based in Columbus, Ohio, Hexion Specialty Chemicals Inc. -- http://www.hexionchem.com/-- is a producer of thermosetting resins, or thermosets. Thermosets are a critical ingredient in virtually all paints, coatings, glues and other adhesives produced for consumer or industrial uses. Hexion Specialty Chemicals is controlled by an affiliate of Apollo Management L.P. Hexion Specialty Chemicals Inc.'s balance sheet at March 31, 2008, showed the company had total assets of $4.2 billion and total liabilities of $5.5 billion, resulting in a shareholders' deficit of $1.3 billion. HOLLINGER INC: Receives Securities Cease Trade Order from OSC ------------------------------------------------------------- Hollinger Inc. disclosed that that the Ontario Securities Commission has provided it with a copy of the form of cease trade order to be issued by the OSC. The date upon which the cease trade order will be issued has not yet been determined. The cease trade order will apply to all securities of the company but will contain carve-outs to permit trades in the company's securities that are made: (i) in connection with proceedings under the Companies' Creditors Arrangement Act and approved by the Ontario Superior Court of Justice and, if required, related proceedings under the U.S. Bankruptcy Code and approved by the U.S. Bankruptcy Court; (ii) for nominal consideration for the purpose of permitting a holder to crystallize a tax loss; or (iii) by or to an entity that qualifies as an "accredited investor" as that term is defined under applicable Canadian securities laws. The company has also been advised by the Toronto Stock Exchange that, provided the consent is granted, the TSX will initiate a process that will lead to the delisting of the company's common shares and Series II preference shares from the TSX after the issuance of the cease trade order. The company and Ernst & Young Inc., its court-appointed Monitor, are prepared to consent to the issuance of the cease trade order and delisting provided that they are authorized to provide such consent by the Ontario Superior Court of Justice. The company will be requesting such authorization from the Court at a hearing scheduled for July 21, 2008. The cease trade order is being issued as a result of the company's previously announced determination, in the interests of reducing its costs for the benefit of its stakeholders, not to prepare and file annual audited financial statements and other annual disclosure documents in respect of the company's financial year ended March 31, 2008. Consequently, after June 30, 2008, the company has been in default of its continuous disclosure filing requirements under Canadian securities laws. Under the terms of the May 21, 2008, order issued pursuant to proceedings under the CCAA, the company is in the process of conducting a claims process for the company and its subsidiaries, Sugra Ltd. and 4322525 Canada Inc., and will also do so for its non-Applicant subsidiaries as part of their winding-up. Also, under the May 21, 2008, CCAA order, retired justice John D. Ground has been appointed as Litigation Trustee to administer the company's litigation assets, assisted by an Advisory Committee, and under the supervision of the Monitor and the CCAA court. Preliminary estimates prepared by the company, in conjunction with the Monitor, indicate that there is a significant risk that there will not be adequate recoveries from the company's assets for there to be any residual value for the Series II preference or common shareholders of the company. About Hollinger Inc. Based in Toronto, Ontario, Hollinger Inc. (TSX: HLG.C)(TSX: HLG.PR.B) -- http://www.hollingerinc.com/-- owns approximately 70.1% voting and 19.7% equity interest in Sun-Times Media Group Inc., formerly Hollinger International Inc., a media company with assets which include the Chicago Sun-Times newspaper and Suntimes.com and a number of community newspapers and websites serving communities in the Chicago area. The company, along with two affiliates, 4322525 Canada Inc. and Sugra Limited, filed separate Chapter 15 petitions on Aug. 1, 2007 (Bankr. D. Del. Case Nos. 07-11029 through 07-11031). Hollinger also initiated Court-supervised restructuring under the Companies' Creditors Arrangement Act (Canada) on the same day. Derek C. Abbott, Esq., and Kelly M. Dawson, Esq., at Morris, Nichols, Arsht & Tunnell LLP, represents the Debtors in their U.S. proceedings. As reported in the Troubled company Reporter on Feb. 22, 2008, Hollinger Inc.'s consolidated balance sheet at Dec. 31, 2007, showed C$79.8 million in total assets and C$219.3 million in total liabilities, resulting in a C$139.5 million total stockholders' deficit. HOOSIER TRADEWINDS: Case Summary & 20 Largest Unsecured Creditors ----------------------------------------------------------------- Debtor: Hoosier Tradewinds, Inc. c/o Jeffrey J. Graham Taft Stettinius & Hollister LLP One Indiana Square, Suite 3500 Indianapolis, IN 46204 Bankruptcy Case No.: 08-08099 Debtor-affiliates filing separate Chapter 11 petitions: Entity Case No. ------ -------- Tradewinds Logistics, Inc. 08-08101 Tradewinds Equipment, LLC 08-08102 Type of Business: Hoosier Tradewinds is a full service transportation company providing time-sensitive services to manufacturers, retailers and distribution centers throughout the country. See http://www.hoosiertradewinds.com/ Chapter 11 Petition Date: July 10, 2008 Court: Southern District of Indiana (Indianapolis) Judge: James K. Coachys Debtors' Counsel: Jeffrey J. Graham, Esq. (jgraham@taftlaw.com) Taft Stettinius & Hollister LLP One Indiana Square, Suite 3500 Indianapolis, IN 46204 Tel: (317) 713-3500 Fax: (317) 713-3699 Estimated Assets: $1,000,000 to $10,000,000 Estimated Debts: $1,000,000 to $10,000,000 Debtor's list of its 20 largest unsecured creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ American Express Credit Card $293,819 American Express/Coirp. Services Purchases AESC-P 20022 North 31st Avenue Mail CodeAZ-08-03-11 Phoenix, AZ 85027 Fleet-Tech Transportation Trade Debt $283,095 Services 100 Urban Center Drive, Suite 225 Birmingham, AL 35242 Stoops Freightliner Trade Debt $102,169 1851 West Thompson Road Indianapolis, IN 46217 TCH Trade Debt $102,051 Florida East Coast Railway Trade Debt $66,948 Chase Card Services Credit Card $41,024 BestPass Trade Debt $38,942 True North Companies Trade Debt $36,541 Don and Rays Trucking Inc. Trade Debt $30,754 TMW Systems Trade Debt $29,977 J&E Tire Center Inc. Trade Debt $14,151 Prepass Trade Debt $12,568 Methodist Occupational Trade Debt $11,887 Health Centers Trippak Express Trade Debt $10,939 Miles & Finch Trade Debt $9,709 Triple S of Indy, Inc. Trade Debt $9,018 Truckers B2B Gold Program Trade Debt $6,933 Peoplenet Trade Debt $6,718 Patrick J. Marks Trade Debt $6,438 Intestate Trailer & Equipment Trade Debt $5,489 INDYMAC BANCORP: Bank Shutdown Prompts Fitch's Default Rating ------------------------------------------------------------- Fitch Ratings has downgraded the long- and short-term Issuer Default Ratings of Indymac Bank FSB and Indymac Bancorp Inc. as: Indymac Bank FSB: -- Long-term IDR to 'D' from 'CCC'; -- Short-term IDR to 'D' from 'C'. Indymac Bancorp Inc. -- Long-term IDR to 'C' from 'CC'. The downgrade follows the Federal Deposit Insurance Corporation's announcement that the bank was closed by the Office of Thrift Supervision on July 11, 2008. The FDIC, as conservator will transfer insured deposits and substantially all the assets of Indymac Bank to IndyMac Federal Bank, FSB (assuming bank). As conservator, the FDIC will operate the assuming bank to maximize its value for a future sale to a healthy institution. Indymac Bank's 'F' Individual rating indicates the bank would have defaulted had it not been for regulatory intervention. Fitch has also downgraded and placed the ratings of the bank's parent, Indymac Bancorp Inc. on Rating Watch Negative. While the regulatory shutdown impacts Indymac Bank, Fitch believes that IMB will likely default or file for bankruptcy as the company's ability to meet financial obligations has deteriorated significantly. With respect to creditors, outstanding advances from the Federal Home Loan Bank of San Francisco to Indymac Bank totaled $10.1 billion and are fully secured by approximately $21.6 billion in mortgage loans. FHLB-SF has indicated that it will work with the FDIC in its administration of the new institution. Brokered deposits will be held by the FDIC and insured deposits of approximately $18 billion should recover 100% when the FDIC insurance determination is complete. Fitch believes that recovery prospects for uninsured depositors beyond the FDIC's 50% advance dividend is possible as uninsured depositors have priority claim over unsecured creditors. Fitch has revised Indymac Bank's Recovery Rating to 'RR3' from 'RR4', reflecting recovery in the range of 51-70%. Fitch anticipates non-deposit obligations and preferred shareholders to have minimal to no recovery. Fitch does not expect a sale or transaction resulting in the assumption of non-deposit obligations. Fitch will withdraw the ratings of Indymac Bank in approximately 30 days. Fitch has downgraded these ratings: Indymac Bank FSB: -- Long-term IDR to 'D' from 'CCC'; -- Short-term IDR to 'D' from 'C'; -- Short-term deposits to 'D' from 'C'; -- Individual to 'F' from 'E'. Indymac Bancorp Inc. -- Long-term IDR to 'C' from 'CC'. Fitch has also placed these ratings on Rating Watch Negative: Indymac Bancorp Inc. -- Long-term IDR 'C'; -- Short-term IDR 'C'; Additionally, Fitch has affirmed these ratings: Indymac Capital Trust I -- Preferred stock to at 'C'/RR6'. Indymac Bancorp Inc. -- Support at '5'; -- Support Floor at 'NF'; -- Individual 'E'. Indymac Bank FSB -- Preferred stock at 'C/RR6'. -- Support at '5'; -- Support Floor at 'NF'. Indymac Bank FSB's Support rating and Support Floor have also been withdrawn. Fitch has also revised this Recovery Rating: Indymac Bank FSB -- Long-term deposits revised to 'CCC/RR3' from 'CCC/RR4'. INDYMAC BANCORP: S&P Puts D Rtng After Unit Placed in Receivership ------------------------------------------------------------------ Standard & Poor's Ratings Services lowered its rating on Indymac Bancorp and its subsidiaries to 'D' in response to IndyMac Bank FSB being placed in receivership by the Office of Thrift Supervision. On July 11, 2008, the OTS closed IndyMac Bank and named the Federal Deposit Insurance Corp. as conservator. The FDIC transferred insured deposits and substantially all the assets to a successor institution, IndyMac Federal Bank FSB. "With the holding company now cut off from the bank and with only limited financial resources of its own, we believe that the holding company's financial position is greatly impaired, even if not yet technically insolvent," said Standard & Poor's credit analyst Robert B. Hoban, Jr. The OTS took this action after determining that IndyMac Bank's deteriorating financial profile left it in an "unsafe and unsound condition." Indymac's mounting financial stress from growing asset-quality problems and eroding capitalization was greatly exacerbated by a run on the bank by depositors during the past two weeks. This, coupled with the recent regulatory prohibition on Indymac's ability to accept brokered deposits, left Indymac without the liquidity necessary to continue operating. S&P believe that Indymac's large amount of secured FHLB advances, the regulatory depositor preference, and the prevailing poor market values for mortgage-related assets limit the likely recovery on the bank-level preferred stock. The holding company is likely to receive little from the ultimate dispossession of the bank, which leaves the holding company-level preferred stock's recovery prospects very limited. The FDIC will operate the new bank with a focus on preserving the value and banking services of the former Indymac Bank, while it seeks to sell the institution. Retail insured depositors have normal access to their accounts and the FDIC has declared that it will pay to uninsured depositors a special dividend of 50% of the amount of their uninsured deposits. When the insurance determination is complete, the FDIC will decide how much of the remaining other half of retail uninsured deposits is ultimately returned to depositors, and will pay off all brokered deposits. IRVINE SENSORS: Issues 150,000 Shares to Financial Advisory Firm ---------------------------------------------------------------- Since its last periodic report, Irvine Sensors Corp. issued 150,000 shares of common stock, on June 26, 2008, to an accredited investor, a financial advisory and investment banking firm that the company engaged to assist it to raise additional capital and to provide financial advisory services. The company also issued: (i) 100,000 shares of common stock to an accredited institutional investor upon such investor's conversion on May 14, 2008, of $30,000 of the stated value of the Series A-1 10% Cumulative Convertible Preferred Stock of the company and (ii) 200,000 shares of common stock to the same accredited institutional investor upon such investor's conversion on May 19, 2008, of $60,000 of the stated value of the Series A-1 Stock of the company. As a result of the issuance on June 26, 2008, the company has issued more than 1% of its outstanding shares of common stock in unregistered transactions in the aggregate since the last periodic report that it filed with the Securities and Exchange Commission. Based in Costa Mesa, California, Irvine Sensors Corporation (Nasdaq: IRSN) -- http://www.irvine-sensors.com/-- is a vision systems company engaged in the development and sale of miniaturized infrared and electro-optical cameras, image processors and stacked chip assemblies, the manufacture and sale of optical systems and equipment for military applications through its Optex subsidiary and research and development related to high density electronics, miniaturized sensors, optical interconnection technology, high speed network security, image processing and low- power analog and mixed-signal integrated circuits for diverse systems applications. Going Concern Doubt Grant Thornton LLP expressed substantial doubt about Irvine Sensors Corp.'s ability to continue as a going concern after auditing the company's financial statements for the year ended Sept. 30, 2007. The auditing firm reported that the company incurred net losses for the years ended Sept. 30, 2007, Oct. 1, 2006 and Oct. 2, 2005, respectively, and the company has working capital of only $1,799,100 at Sept. 30, 2007. IXI MOBILE: Gemini Entities & Yossi Sela Own 15.51% Equity Stake ---------------------------------------------------------------- The Gemini Entities beneficially own 3,487,895 shares of Common Stock and warrants to purchase 416,667 shares of Common Stock: (i) 2,491,636 shares of Common Stock and warrants to purchase 297,667 shares of Common Stock held by Gemini Israel III Limited Partnership, (ii) 29,761 shares of Common Stock and warrants to purchase 3,542 shares of Common Stock held by Gemini Partner Investors L.P., (iii) 454,219 shares of Common Stock and warrants to purchase 54,250 shares of Common Stock held by Gemini Israel III Parallel Fund Limited Partnership and (iv) 512,279 shares of Common Stock and warrants to purchase 61,208 shares of Common Stock held by Gemini Israel III Overflow Fund Limited Partnership. In addition, IXI Mobile Inc. director Yossi Sela holds stock options to purchase 4,167 shares of Common Stock; Mr. Sela disclaims beneficial ownership of these stock options except to the extent of his pecuniary interest. Together, Mr. Sela and the Gemini Entities have shared dispositive and voting power over 3,908,729 shares of Common Stock which represents 15.51% of the outstanding Common Stock as of May 15, 2008. On June 6, 2007, under an Agreement and Plan of Merger, IXI Mobile Inc. consummated a merger with IXI Mobile (USA), Inc. As a result, IXI Mobile (USA), Inc. became a wholly owned subsidiary of IXI Mobile Inc. At the closing of the merger, the stockholders of IXI Mobile (USA), Inc. were issued an aggregate of 6,553,709 shares of IXI Mobile Inc.'s Common Stock in exchange for all of their shares of common stock of IXI Mobile (USA), Inc. The Gemini Entities were stockholders of IXI Mobile (USA), Inc. Accordingly, the Gemini Entities acquired 2,793,450 shares of IXI Mobile Inc.'s Common Stock as a result of the merger. On Oct. 25, 2007, the Gemini Entities entered into an agreement IXI Mobile Inc. for the conversion of $2.5 million of outstanding principal amount of convertible debt held by the Gemini Entities at a conversion price of $3.60 per share. As a result of the Debt Conversion, the Gemini Entities were issued an aggregate of 694,444 shares of IXI Mobile Inc.'s Common Stock. Additionally, the Gemini Entities were issued warrants to purchase an aggregate of 416,667 shares of IXI Mobile Inc.'s Common Stock with an exercise price of $4.10 per share. The Warrants expire on Oct. 25, 2012. Headquartered in Belmont, California, IXI Mobile Inc. (OTC BB: IXMO.0B) -- http://www.ixi.com/-- provides devices and hosted services to mobile operators, mobile virtual network operators, and Internet service providers in a number of international markets. IXI MOBILE: March 31 Balance Sheet Upside-Down by $586,000 ---------------------------------------------------------- IXI Mobile, Inc. disclosed financial results for the quarter ended March 31, 2008. At March 31, 2008, the company's balance showed total assets of $34,728,000, and total liabilities of $35,314,000, resulting in a $586,000 stockholders' deficit. GAAP Results Revenue for the first quarter was $3.4 million, an increase of 9.7% over $3.1 million in the first quarter of 2007 and a decrease of 34.6% compared to revenue of $5.2 million in the fourth quarter of 2007. Gross margin (deficit) in the first quarter was 8.2% compared to 0.4% in the first quarter of 2007 and (35.2%) in the fourth quarter of 2007. Gross new Ogo subscriptions in the first quarter were approximately 14,000, bringing total Ogo net subscriber base at the end of the quarter to over 150,000. This total includes a reduction in the first quarter of 2008 of approximately 2,000 subscribers following receipt of subscriber deactivation notifications from our customers. Operating expenses (excluding costs of revenues) were $7.9 million in the first quarter of 2008, compared to $5.8 million in the first quarter of 2007 and $8.8 million in the fourth quarter of 2007. Operating loss for the quarter was $7.6 million, compared to $5.8 million for the first quarter of 2007 and $10.6 million for the fourth quarter of 2007. Net loss for the first quarter of 2008 was $8.7 million, compared to a net loss of $6.7 million for the first quarter of 2007 and $31.9 million for the fourth quarter of 2007. The company's net loss for the first quarter of 2008 included non-cash accounting expenses required to be recorded pursuant to GAAP of approximately $865,000 of financial expenses recorded mainly in connection with the amendment to the terms of its convertible bridge loan and $598,000 for stock-based compensation expenses for employees and consultants and expenses recorded in connection with the issuance of stock and incentive plans to management. Cash and cash equivalents totaled $12.6 million at March 31, 2008, compared to $17.3 million at Dec. 31, 2007. In addition to the company's financial results, we achieved certain recent highlights of our operations, including: * the company added approximately 14,000 gross new Ogo subscribers in the first quarter; * Ogo Average Selling Price in the first quarter of 2008 increased to $192 compared to $190 in the fourth quarter of 2007, reflecting a continued shift in product mix towards the Ogo2; and * Service ASP in the first quarter of 2008 increased to $2.40 per billed user per month compared to $2.30 per billed user per month in the fourth quarter of 2007. "We continue to grow revenue on a year-over-year basis through the addition of subscribers and improving ASPs on both the product and service sides," Amit Haller, Chief Executive Officer, said. "We made a great deal of strategic progress in 2007 and look forward to building upon that foundation as we move ahead in 2008. We have several carrier customers upon which to build and further grow Ogo's global presence. While we have a number of difficult challenges ahead, we hope to capitalize on the growth opportunities that we believe will continue to emerge as the market for low-cost mobile data solutions continues to take shape." Non-GAAP Results Gross margin in the first quarter of 2008 was 8.8% compared to 0.4% in the first quarter of 2007. The company's Non-GAAP consolidated results of operations for the first quarter of 2008 and for the first quarter of 2007 exclude non-cash accounting expenses required to be recorded pursuant to GAAP of approximately $865,000 and $0, respectively, of financial expenses recorded mainly in connection with the amendment to the terms of its convertible bridge loan and $598,000 and $72,000, respectively, for stock based compensation expenses for employees and consultants and expenses recorded in connection with the issuance of stock and incentive plans to management. The Non-GAAP operating loss for the first quarter of 2008 was $7.0 million, compared to $5.7 million in the first quarter of 2007 and an operating loss of $7.3 million for the fourth quarter of 2007. The Non-GAAP net loss for the first quarter of 2008 was $7.2 million compared to $6.7 million in the first quarter of 2007 and a net loss of $7.5 million in the fourth quarter of 2007. A full-text copy of the regulatory filing is available for free at http://ResearchArchives.com/t/s?2f7e About IXI Mobile Headquartered in Belmont, California, IXI Mobile Inc. (OTC BB: IXMO.0B) -- http://www.ixi.com/-- provides devices and hosted services to mobile operators, mobile virtual network operators, and Internet service providers in a number of international markets. JONES ESTATE: Case Summary & Six Largest Unsecured Creditors ------------------------------------------------------------ Debtor: Jones Estate Development, LLC 9915 S. Eastern Ave., Ste. 130 Las Vegas, NV 89183 Bankruptcy Case No.: 08-17524 Chapter 11 Petition Date: July 11, 2008 Court: District of Nevada (Las Vegas) Judge: Linda B. Riegle Debtor's Counsel: Michael J. Dawson, Esq. Email: mdawson@lvcoxmail.com 515 S. Third Street Las Vegas, NV 89101 Tel: (702) 384-1777 Estimated Assets: $1 million to $10 million Estimated Debts: $500,000 to $1 million A list of the Debtor's largest unsecured creditors is available for free at: http://bankrupt.com/misc/nvb08-17524.pdf KINGSWAY FINANCIAL: A.M. Best Cuts Issuer Credit Rating to 'bb-' ---------------------------------------------------------------- A.M. Best Co. has downgraded the issuer credit ratings to "bb-" from "bb" of Kingsway Financial Services Inc. (Mississauga, Ontario) and Kingsway America Inc. (Elk Grove Village, IL). Concurrently, A.M. Best has downgraded the financial strength ratings to B+(Good) from B++(Good) and the ICRs to "bbb-" from "bbb" for most of the subsidiaries of KFSI. Additionally, A.M. Best has downgraded all debt ratings of KAI and Kingsway General Partnership. All ratings have been removed from under review with negative implications and assigned a negative outlook, except where specified. On Dec. 18, 2007, the ratings were downgraded and placed under review with negative implications pending a corrective plan of action to improve risk-adjusted capitalization, operating performance and overall risk management. In the absence of a corrective action plan in-line with A.M. Best's expectations for the prior rating level, the ratings have been downgraded. Moreover, the rating downgrades are a result of KFSI's weakened risk-adjusted capitalization, unfavorable operating performance, which continued into first quarter 2008, soft market pricing and pressure from competitors for market share in KFSI's core non- standard auto, commercial auto and commercial trucking lines. In A.M. Best's opinion, capitalization is not expected to improve significantly in the near term and profitability also is expected to be below prior levels from diminishing revenues and soft market conditions. Furthermore, based on continuation in first quarter 2008, A.M. Best continues to be concerned about the adequacy of loss reserves, premium rates, management's risk appetite as well as overall organizational risk management. The FSR has been downgraded to B+(Good) from B++(Good) and the ICRs to "bbb-" from "bbb" for these subsidiaries of Kingsway Financial Services Inc.. -- American Service Insurance Company, Inc. -- Lincoln General Insurance Company. -- Mendota Insurance Company -- Southern United Fire Insurance Company -- Universal Casualty Company -- JEVCO Insurance Company -- Kingsway General Insurance Company -- Kingsway Reinsurance (Bermuda) Ltd. The FSR has been downgraded to B+(Good) from B++(Good) and the ICR to "bbb-" from "bbb" for Mendakota Insurance Company, a wholly owned subsidiary of Mendota Insurance Company. Mendakota is now group rated with its parent, Mendota Insurance Company. The FSR has been downgraded to B(Fair) from B++(Good) and the ICR to "bb" from "bbb" for York Fire & Casualty Insurance Company. The FSR has been downgraded to B-(Fair) from B(Fair) and the ICR to "bb-" from "bb" for Kingsway Reinsurance Corporation. The FSR has been downgraded to B(Fair) from B+(Good) and the ICR to "bb+" from "bbb-" for American Country Insurance Company. The outlook assigned to the FSR is stable, and the outlook assigned to the ICR is negative. The FSR of B+(Good) and ICR of "bbb-" have been affirmed for U.S. Security Insurance Company, Inc. These debt ratings have been downgraded: Kingsway America Inc.: -- to "bb-" from "bb" on USD 125 million 7.5% senior unsecured notes, due 2014 -- to "bb-" from "bb" on USD 74.1 million 7.12% senior unsecured notes, due 2015 Kingsway Financial Services Inc. (issued under Kingsway General Partnership): -- to "bb-" from "bb" on CAD 100 million 6% senior unsecured debentures, due 2012 All debt is unconditionally guaranteed by KFSI and KAI, and all the above ratings have been removed from under review with negative implications and assigned a negative outlook, except where specified. KODIAK CDO: Fitch Puts Three Low-B Ratings Under Negative Watch --------------------------------------------------------------- Fitch Ratings has placed these notes of Kodiak CDO I, LTD./INC. on Rating Watch Negative: -- $294,215,642 class A-1 'AA+'; -- $103,500,000 class A-2 'AA'; -- $83,000,000 class B 'A'; -- $30,000,000 class C 'A-'; -- $13,000,000 class D-1 'BBB-'; -- $5,000,000 class D-2 'BBB-'; -- $29,000,000 class D-3 'BBB-'; -- $5,169,437 class E-1 'BB'; -- $29,847,380 class E-2 'BB'; -- $7,360,456 class F 'B'. Kodiak I is a static collateralized debt obligation supported by a portfolio of trust preferred securities and subordinated debt issued by subsidiaries of real estate investment trusts, real estate operating companies, homebuilders and specialty finance companies, as well as senior debt securities and commercial mortgage-backed securities. Of the total portfolio, approximately 64% is comprised of trust preferred securities and subordinated debt, approximately 30.5% of senior debt securities and 5.5% of CMBS. The collateral was selected and is monitored by Kodiak Capital Management Company. Fitch's rating actions reflect heightened concern related to continued negative portfolio credit migration, as well as the reduction of the total collateral balance as a result of one credit risk sale since the last review. Based on Fitch's public and shadow ratings, the average credit quality of Kodiak I migrated to the 'B/B-' range from the 'B+/B' range at the time of Fitch's last review. Currently, 25.2% of the portfolio is publicly or shadow rated 'CCC+' or below as compared to 23.4% at last review. Approximately 12.6% of the portfolio has experienced negative rating migration since Fitch's last review and 25.2% of the underlying collateral is currently on Rating Watch Negative or has a Negative Rating Outlook. Since the last review, one asset representing $28.1 million was sold from the portfolio via a credit risk sale, incurring a principal loss to the transaction of $24.8 million. Additionally, one security, which was previously classified as defaulted, underwent a distressed debt exchange increasing its notional to $35.2 million from $28.1 million. While the notional amount of this security increased, Fitch views it as highly speculative. Trustee-reported asset defaults, along with the reduction of the total collateral balance, have caused the failure of the class D, class E, class F/G and class H overcollateralization tests. As of the last payment date, approximately $3 million of interest proceeds were diverted to pay down the principal of the class A-1 notes due to the breach of the class D OC test. Kodiak I currently has three assets deemed to be in default per the transaction's trustee report, representing approximately 13.3% of the portfolio. All three exposures were treated as defaulted for the purposes of Fitch's previous review of the transaction. Given the rapidly evolving credit pressures facing mortgage REITs and homebuilders, Fitch treated exposures rated or shadow rated 'CC' or lower as defaulted with 100% severity in an effort to anticipate future collateral defaults. As announced on July 1, 2008, Fitch is in the process of examining its default probability assumptions with respect to assets with maturities in excess of 10 years. Resolution of the current Rating Watch Negative status will consider the potential implications of a revised term structure of default probabilities for long-dated assets, as well as any additional credit migration with respect to the underlying portfolio, or any credit risk sales undertaken by the asset manager. Absent changes to Fitch's default probability assumptions or further collateral deterioration or credit risk sales, the ratings of the class A-1 notes will likely remain within the 'AA' rating category, the class A-2 notes will likely be downgraded to the 'A' rating category, the class B notes will remain within the 'A' rating category, the class C notes will likely be downgraded to the 'BBB' rating category, the class D notes will likely be downgraded to the 'BB' rating category, the class E notes will likely be downgraded to the 'B' rating category and the class F notes will likely be downgraded to the 'CCC' rating category. The ratings of the class A-1, A-2, and B notes address the likelihood that investors will receive full and timely payments of interest, as per the governing documents, as well as the aggregate principal amount by the stated maturity date. The ratings of the class C, D-1, D-2, D-3, E-1, E-2, and F notes address the likelihood that investors will receive ultimate and compensating interest payments, as per the governing documents, as well as the aggregate principal amount by the stated maturity date. Periodic payments on the notes are distributed on a quarterly basis in February, May, August and November until the stated maturity on Aug. 7, 2037. KODIAK CDO: Fitch Puts 'B' Rating on $35MM Notes on Neg. Watch -------------------------------------------------------------- Fitch Ratings has placed these notes of Kodiak CDO II, Ltd./Inc. on Rating Watch Negative: -- $333,497,602 class A-1 'AAA'; -- $53,000,000 class A-2 'AAA'; -- $80,000,000 class A-3 'A+'; -- $81,000,000 class B-1 'A'; -- $5,000,000 class B-2 'A'; -- $38,000,000 class C-1 'BBB+'; -- $2,000,000 class C-2 'BBB+'; -- $36,000,000 class D 'BB+'; -- $35,000,000 class E 'B'. Kodiak II is a managed collateralized debt obligation supported by a portfolio of trust preferred securities and subordinated debt issued by subsidiaries of real estate investment trusts, real estate operating companies, homebuilders and specialty finance companies, as well as senior debt securities, commercial mortgage- backed securities and CMBS CDOs. Of the total portfolio, approximately 65.6% is comprised of trust preferred securities and subordinated debt, approximately 24.1% of senior debt securities and 10.3% of CMBS and commercial real estate CDOs. The collateral was selected and is monitored by Kodiak Capital Management Company. Fitch's rating actions reflect heightened concern related to continued negative portfolio credit migration, as well as the reduction of the total collateral balance as a result of six credit risk sales since the last review. Based on Fitch's public and shadow ratings, the average credit quality of Kodiak II remains in the 'B+/B' range, although this measure understates the effect of credit risk sales undertaken by the asset manager. While credit risk sales are excluded from the calculation of the remaining portfolio's average credit quality, such sales have the effect of reducing the collateralization to all classes of notes. Currently, 12.11% of the portfolio is publicly or shadow rated 'CCC+' or below as compared to 6.9% at last review. Approximately 18.63% of the portfolio has experienced negative rating migration since Fitch's last review and 19.6% of the underlying collateral is currently on Rating Watch Negative or has a Negative Rating Outlook. Since the last review, one security underwent a distressed debt exchange decreasing its notional to $22.5 million from $28.1 million. In addition, six assets representing $66.7 million were sold from the portfolio via credit risk sales, incurring a principal loss to the transaction of $34.8 million. Trustee- reported asset defaults, along with the reduction of the total collateral balance, have caused the failure of the class F overcollateralization test. As of the last payment date, approximately $4.5 million of interest proceeds were diverted to pay down the principal of the class A-1 notes due to the breach of the class E and F OC tests. The class E OC test subsequently cured during the last payment date. Kodiak II currently has no assets deemed to be in default per the transaction's trustee report. However, given the rapidly evolving credit pressures facing mortgage REITs and homebuilders, Fitch will continue to treat exposures rated or shadow rated 'CC' or lower as defaulted with 100% severity in an effort to anticipate future collateral defaults. As announced on July 1, 2008, Fitch is in the process of examining its default probability assumptions with respect to assets with maturities in excess of 10 years. Resolution of the current Rating Watch Negative status will consider the potential implications of a revised term structure of default probabilities for long-dated assets, as well as any additional credit migration with respect to the underlying portfolio, or any credit risk sales undertaken by the asset manager. Absent changes to Fitch's default probability assumptions or further collateral deterioration or credit risk sales, the ratings of the class A-1 notes will likely be downgraded to the 'AA' rating category, the class A-2 notes will likely be downgraded to the 'AA' rating category, the class A-3 notes will remain within the 'A' rating category, the class B-1 and B-2 notes will likely remain within the 'A' rating category, the class C-1 and C-2 notes will likely remain within the 'BBB' rating category, the class D notes will likely remain within the 'BB' rating category and the class E notes will likely be downgraded to the 'CCC' rating category. The ratings of the class A-1, A-2, and A-3 notes address the likelihood that investors will receive full and timely payments of interest, as per the governing documents, as well as the aggregate principal amount by the stated maturity date. The ratings of the class B-1, B-2, C-1, C-2, D and E notes address the likelihood that investors will receive ultimate and compensating interest payments, as per the governing documents, as well as the aggregate principal amount by the stated maturity date. Periodic payments on the notes are distributed on a quarterly basis in February, May, August and November until the stated maturity on Nov. 7, 2042. LEINER HEALTH: Completes $371 Million Sale of Assets to NBTY Inc. ----------------------------------------------------------------- NBTY Inc. completed the purchase of substantially all of the assets of Leiner Health Products Inc. for approximately $371 million. The terms of the Asset Purchase Agreement provide for various working capital adjustments. As reported in the Troubled Company Reporter on June 16, 2008, the U.S. Bankruptcy Court for the District of Delaware authorized Leiner Health Products Inc. and its debtor-affiliates to sell substantially all of their assets to NBTY Acquisition LLC, including the assumption and assignment of certain executory contracts and unexpired leases. As reported in the Troubled Company Reporter on June 12, 2008, NBTY submitted the best and highest bid at an auction for the purchase of substantially all of its assets on June 9, 2008. NBTY is acquiring substantially all of Leiner's assets, including its U.S. store brand vitamins, minerals and supplements products as well as Vita Health Products Inc., Leiner's Canadian subsidiary. Moelis & Company LLC provided advisory services and Farrell Fritz, P.C. provided legal advice in connection with the acquisition. "The Leiner acquisition will further enhance our manufacturing capabilities and dominant market presence as the worldwide leader in the nutritional supplement industry," Scott Rudolph, NBTY chairman and CEO, said. "NBTY's history of successful strategic acquisitions reflects our commitment to generating growth, providing the highest quality service to our customers and increasing shareholder value." About NBTY Inc. NBTY Inc. (NYSE: NTY) -- http://www.NBTY.com/-- manufactures, markets and distributes line of quality nutritional supplements in the United States and throughout the world. Under a number of NBTY and third party brands, the company offers over 22,000 products. About Leiner Health Based in Carson, California, Leiner Health Products Inc. -- http://www.leiner.com/-- manufacture and supply store brand vitamins, minerals and nutritional supplements products, and over- the-counter pharmaceuticals in the US food, drug and mass merchant and warehouse club retail market. In addition to their primary VMS and OTC products, they provide contract manufacturing services. During the fiscal year ended March 31, 2007, the VMS business comprised approximately 61% of net sales. On March 20, 2007, they voluntarily suspended the production and distribution of all OTC products manufactured, packaged or tested at its facilities in the US. The company filed for Chapter 11 protection on March 10, 2008 (Bankr. D. Del. Lead Case No.08-10446). Jason M. Madron, Esq., and Mark D. Collins, Esq., at Richards, Layton & Finger, P.A., represent the Debtors. The Debtors selected Garden City Group Inc. as noticing, claims and balloting agent. The U.S. Trustee for Region 3 appointed creditors to serve on an Official Committee of Unsecured Creditors in these cases. As reported in the Troubled Company Reporter on April 10, 2008, the Debtors' schedules of assets and liabilities showed total assets of $133,412,547 and total debts of $477,961,526. LE-NATURE'S INC: Court Confirms Panels' Amended Chapter 11 Plan --------------------------------------------------------------- The Hon. M. Bruce McCollough of the United States Bankruptcy Court for the Western District of Pennsylvania confirmed a second amended joint Chapter 11 plan of liquidation for Le-Nature's Inc. and its debtor-affiliates. The Plan was filed by the Official Committee of of Unsecured Creditor, together with the Ad Hoc Committee of Secured Lenders and the Ad Hoc Committee of Senior Subordinated Noteholders on April 9, 2008. On April 10, 2008, Judge McCollough held that the Committees' disclosure statement contains adequate information in accordance to Section 1125 of the Bankruptcy Code. The amended plan provides for the liquidation of the Debtors' assets including the investigation and prosecution of estate causes of action, by a liquidation trust to be performed under the amended plan and a liquidation trust agreement. According to Bloomberg News, the amended plan contains a settlement with, among other things: i) unsecured creditors, the holders of 48 percent of $150 million in subordinated notes, and ii) the holders of 62 percent of the $278 million in secured bank debt. The plan further provides that subordinated debt holders will recover nothing until secured creditors receive $110 million, the report says. The amended plan classifies interests against and claims in the Debtors in 6 classes. The classification of interests and claims are: Treatment of Interests and Claims Class Type of Claims Treatment ----- -------------- --------- 1 lenders secured impaired claims 2 other secured impaired claims 3 priority non-tax unimpaired claims 4A lenders unsecured impaired claims 4B general unsecured impaired claims 4C unsecured senior impaired subordinated notes claims 5 subordinated impaired litigation claims 6 interests The report relates that the secured creditors would receive almost everything under the plan in the event the Debtors do not recover anything beyond approximately $30 million in jewels confiscated by government investigators. However, a $129 million recovery would give subordinated debt holders 10 percent, with 46 percent for secured creditors and 17 percent for unsecured creditors, it notes. A full-text copy of the Committee's second amended joint Chapter 11 plan of reorganization is available for free at: http://ResearchArchives.com/t/s?2f7c About Le-Nature's Inc. Headquartered in Latrobe, Pennsylvania, Le-Nature's Inc. -- http://www.le-natures.com/-- makes bottled waters, teas, juices and nutritional drinks. Its brands include Kettle Brewed Ice Teas, Dazzler fruit juice drinks and lemonade, and AquaAde vitamin-enriched water. Four unsecured creditors of Le-Nature's filed an involuntary chapter 7 petition against the company on Nov. 1, 2006 (Bankr. W.D. Pa. Case No. 06-25454). On Nov. 6, 2006, two of Le-Nature's subsidiaries, Le-Nature's Holdings Inc., and Tea Systems International Inc., filed voluntary petitions for relief under chapter 11 of the Bankruptcy Code. Judge McCullough converted Le Nature's Inc.'s case to a chapter 11 proceeding. The Debtors' cases are jointly administered. The Debtors' schedules filed with the Court showed $40 million in total assets and $450 million in total liabilities. Douglas Anthony Campbell, Esq., Ronald B. Roteman, Esq., and Stanley Edward Levine, Esq., at Campbell & Levine, LLC, represents the Debtors in their restructuring efforts. The Court appointed R. Todd Neilson as Chapter 11 Trustee. Dean Z. Ziehl, Esq., Richard M. Pachulski, Esq., Stan Goldich, Esq., Ilan D. Scharf, Esq., and Debra Grassgreen, Esq., at Pachulski, Stang, Ziehl, Young, Jones & Weintraub LLP, represent the Chapter 11 Trustee. David K. Rudov, Esq., at Rudov & Stein, and S. Jason Teele, Esq., and Thomas A. Pitta, Esq. at Lowenstein Sandler PC, represent the Official Committee of Unsecured Creditors. Edward S. Weisfelner, Esq., Robert J. Stark, Esq., and Andrew Dash, Esq., at Brown Rudnick Berlack Israels LLP, and James G. McLean, Esq., at Manion McDonough & Lucas represent the Ad Hoc Committee of Secured Lenders. Thomas Moers Mayer, Esq., and Matthew J. Williams, Esq. at Kramer Levin Naftalis & Frankel LLP, represent the Ad Hoc Committee of Senior Subordinated Noteholders. LUMINENT MORTGAGE: Needs to Pay $182MM Under Repurchase Agreement ----------------------------------------------------------------- Luminent Mortgage Capital Inc. disclosed in a regulatory SEC filing Friday that a repurchase agreement lender that is an affiliate of Arco Capital Corporation Ltd., has declared an event of default to have occurred in respect of alleged failures by the company and its affiliates to deliver additional purchased securities or cash necessary to fulfill its obligations under a master repurchase agreement substantially in the form of the September 1996 version of that agreement published by The Bond Market Association. As a result, the repurchase date for reverse repurchase transactions by the company and its affiliates having an aggregate repurchase price of approximately $182.6 million, calculated as of July 11, 2008, were deemed by that repurchase agreement lender to have occurred, and that repurchase agreement lender demanded immediate payment by the company of that aggregate repurchase price. On July 11, 2008, an event of default was declared under the Amended and Restated Credit agreement dated Sept. 26, 2007, as amended. As a result of the declaration of the event of default, the lender declared the commitment under the credit agreement to be terminated and reduced to zero and declared the amount outstanding of $29.9 million under the agreement to be immediately due and payable including accrued interest thereon. In addition, this event of default declared under the master repurchase agreement caused a default to occur under the indenture relating to $90 million of the company's 8.125% Convertible Senior Notes due 2027, in respect of which those notes may be declared to be immediately due and payable. Due to defaults on senior securities the company is contractually prohibited from making interest payments on $92.8 million of junior subordinated notes. About Luminent Mortgage Headquartered in San Francisco, Luminent Mortgage Capital Inc. (OTC: LUMC) -- http://www.luminentcapital.com/-- is a real estate investment trust or REIT, which, together with its subsidiaries, has invested in two core mortgage investment strategies. Under its Residential Mortgage Credit strategy, the company invests in mortgage loans purchased from selected high-quality providers within certain established criteria as well as subordinated mortgage-backed securities and other asset-backed securities that have credit ratings below AAA. Under its Spread strategy, the company invests primarily in U.S. agency and other highly-rated single-family, adjustable-rate and hybrid adjustable-rate mortgage-backed securities. On March 28, 2008, the company disclosed its intention, subject to shareholder approval, to restructure the company from a REIT to a publicly-traded partnership or PTP. Going Concern Doubt Grant Thornton LLP, in Philadelphia, expressed substantial doubt about Luminent Mortgage Capital Inc.'s ability to continue as a going concern after auditing the company's consolidated financial statements for the year ended Dec. 31, 2007. Grant Thornton said Luminent Mortgage has lost $721.0 million for the year ended Dec. 31, 2007, which included $481.7 million in impairment losses on mortgage-backed securities. The company also recorded $21.3 million in corporate, state and U.S. federal income taxes due to its inability to meet the threshold for tax benefit recognition as it related to its qualification as a REIT. As reported in the Troubled Company Reporter on June 5, 2008, Luminent Mortgage's consolidated balance sheet at March 31, 2008, showed $3.8 billion in total assets, $4.0 billion in total liabilities, and $148,000 in minority interest, resulting in a $223.2 million total stockholders' deficit. MCCLATCHY COMPANY: Debt Woes Could Cue Liquidation or Chapter 11 ---------------------------------------------------------------- The McClatchy Company could hit debt service problems that could force the company to sell properties or file for Chapter 11 protection, Douglas McIntyre of 24/7 Wall Street reported. According to the report, McClatchy is one of the companies that are at high risk of not making it another year due to the big debt loads it took in buying newspaper properties and seeing operating income chopped by falling sales. In June, Bloomberg reported McClatchy plans to cut about 1,400 jobs, or 10% of its workforce, to save $70 million annually after a record drop in industrywide advertising sales. Mr. McIntyre stated McClatchy shares is down to $4.93 from a 52-week high of $28.65. Mr. McIntyre said that the newspaper company have gone from being in a tight spot to being candidates for liquidation. Yet, in the the company's May 9, 2008, regulatory filing, it stated that it is in compliance with the 2007 Credit Facility covenants as of March 31, 2008. It also stated that its balance sheet showed total assets of $1.8 billion, total liabilities of $1.4 billion and total stockholders' equity of about $400 million for the period ended March 31, 2008. About The McClatchy Company Headquartered in Sacramento, California, The McClatchy Company is the a newspaper company in the U.S., with 31 daily newspapers and approximately 50 non-dailies. McClatchy also owns McClatchy Interactive, Real Cities and equity investments in CareerBuilder, Classified Ventures, and other newspaper and online properties. * * * As reported in the Troubled Company Reporter on Apr 3, 2008, Moody's Investors Service downgraded The McClatchy Company's corporate family rating and probability of default rating to Ba3 from Ba2, and the rating on the senior unsecured notes to B1 from Ba3, concluding the review for downgrade initiated on Feb. 29, 2008. MISTRAL PHARMA: Court Extends Time to Make Proposal to Creditors ---------------------------------------------------------------- Mistral Pharma Inc. disclosed that the Superior Court of Quebec granted a motion for the company to extend the period within which it may file a proposal under the Bankruptcy and Insolvency Act. The company has until Aug. 25, 2008, to make a proposal to its creditors. As reported in the Troubled Company Reporter on June 16, 2008, Mistral Pharma filed a notice of intention to make a proposal to its creditors under the Bankruptcy and Insolvency Act. The extension will help the company to pursue ongoing negotiations concerning potential offers for its business and assets, and likely put forth a viable proposal to its creditors. The company has retained the firm of Demers Beaulne to act as trustee to the proposal. The company's creditors will be able to vote on the proposal at a meeting to be called within 21 days of the proposal's filing. If accepted by the creditors and ratified by the Court, the proposal is binding on all creditors. In order to be accepted, the company's proposal will need to be approved by creditors representing the majority in number and at least 66.66% in value of the company's debt. Pending the filing of the proposal, all claims of the company's creditors against the company are stayed. About Mistral Pharma Inc. Headquartered in Quebec, Canada, Mistral Pharma Inc. (TSX VENTURE:MIP) -- http://www.mistralpharma.com/-- is a pharmaceutical company engaged in scientific research and development to develop and commercialize drugs, which incorporate oral controlled-delivery technologies. The company is active in the reformulation and the commercialization of already-marketed drugs. Mistral uses its controlled release technologies in order to improve the efficacy, safety or dosing schedule of drugs. Notice of Default As reported in the Troubled Company Reporter on June 5, 2008, Mistral Pharma received a notice of default and a notice to enforce security from MMV Financial Inc., a senior secured creditor of the company. Pursuant to a credit agreement announced on Oct. 16, 2006, Mistral obtained a $1.5 million secured loan from MMV. As per the notice of default received, MMV requested the immediate payment of $1.3 million, on the basis that Mistral failed to effect a principal and interest payment due on May 31, 2008. As per the notice to enforce security, MMV advised the company that it reserves its rights to enforce its security, which can be effected only after the expiry of the 10-day period following the transmission of MMV's notice. Mistral's financial position does not allow it to effect the payment of $1.3 million as requested by MMV. ML-CFC COMMERCIAL: S&P Junks Ratings on Two Certificate Classes --------------------------------------------------------------- Standard & Poor's Ratings Services lowered its ratings on seven classes of commercial mortgage pass-through certificates from ML- CFC Commercial Mortgage Trust 2006-1. Concurrently, S&P affirmed its ratings on 18 classes from this transaction. The downgrades reflect the credit deterioration of the pool. Specifically, nine loans have reported debt service coverage below 1.0x, and the performance of two of the top 10 loans has weakened since issuance. The affirmed ratings reflect credit enhancement levels that provide adequate support through various stress scenarios. As of the June 12, 2008, remittance report, the collateral pool consisted of 147 loans with an aggregate trust balance of $2.108 billion, compared with 151 loans totaling $2.142 billion at issuance. The master servicer, Wachovia Bank N.A., reported financial information for 98% of the pool. Eighty-nine percent of the servicer-provided information was full-year or interim 2007 data. There are nine loans in the pool totaling $66 million (3%) with reported DSCs lower than 1.0x. These loans are secured by retail, office, multifamily, and industrial properties with an average balance of $7.3 million and have experienced an average decline in DSC of 32% since issuance. Standard & Poor's calculated a weighted average DSC of 1.72x for the pool, compared with 1.60x at issuance. There is one loan ($8.3 million) with the special servicer, Midland Loan Services Inc. (Midland). There are no delinquent loans in the pool, and the trust has experienced no losses to date. The top 10 loans secured by real estate have an aggregate outstanding balance of $970.6 million (46%) and a weighted average DSC of 2.21x, up from 1.85x at issuance. Despite the overall increase in DSC, two of the top 10 loans have experienced significant declines in DSC since issuance. These include Inglewood Park ($43.1 million, 2%) and Prince George Center II ($42.1 million, 2%), which had DSC declines of 32% and 16%, respectively. Prince George Center II is on the watchlist and is discussed below. The Inglewood Park loan reported occupancy of 69% as of March 31, 2008. The loan is the ninth-largest loan in the pool and is secured by a 536,197-sq.-ft. flex-industrial business park comprising seven properties in Upper Marlboro, Maryland. The properties were built between 1982 and 1987. This loan is not currently on the servicer's watchlist. Standard & Poor's reviewed property inspections provided by the master servicer for all of the assets underlying the top 10 exposures. Nine of the properties were characterized as "excellent," and one was characterized as "fair." Three loans in the pool had credit characteristics consistent with those of investment-grade obligations at issuance and continue to do so. Details of two of these loans, which are included in the top 10, are: -- The third-largest exposure in the pool is the Kenwood Towne Centre loan, which has a trust balance of $141.9 million and a whole-loan balance of $201.0 million. In addition to the trust balance, the whole loan includes a $59.1 million B note held outside the trust. The loan also includes mezzanine debt of $40.0 million secured by a pledge of equity interests in the borrower. The loan is collateralized by 867,504 sq. ft. of a 1,201,693-sq.-ft. regional mall in Cincinnati, Ohio. For the year ended Dec. 31, 2007, the DSC was 2.31x and occupancy was 99.6%. Standard & Poor's adjusted value for this loan is comparable to its level at issuance. -- The 60 State Street loan is the fourth-largest loan in the pool, with a trust balance of $130.0 million and a whole- loan balance of $180.0 million. In addition to the trust balance, the whole loan includes a $50.0 million B note held outside the trust. For the year ended Dec. 31, 2007, the DSC was 3.36x and occupancy was 97%. Standard & Poor's adjusted value for this loan is comparable to its level at issuance. There is currently one asset with the special servicer. The Virginia Eye Development loan ($8.3 million) is secured by a 34,070-sq.-ft. owner-occupied medical/surgery center. The special servicer has indicated that the issues with this loan have been resolved and that it expects to return the loan to the master servicer. Wachovia reported a watchlist of 26 loans ($309 million, 14%). The largest loan on the watchlist is the Lightstone Portfolio loan ($57.5 million, 3%), which is also the sixth-largest loan in the pool. The loan is secured by a portfolio of 11 retail properties totaling 1.35 million sq. ft. Six of the properties are in Pennsylvania, and five are in various locations in the Southeast. The loan appears on the watchlist because of ongoing deferred maintenance issues. Prince George Center II ($42.1 million, 2%) is the second-largest loan on the watchlist. The loan is secured by a 10-story, 394,578-sq.-ft. office building built in 1968 in Hyattsville, Maryland. The building is 100% occupied, primarily by the U.S. General Services Administration (GSA; 99% of NRA). The loan appears on the watchlist due to a low DSC. The decline in DSC is attributable to increased nonreimbursable expenses. The remaining loans are on the watchlist primarily because of low occupancy or declines in DSC since issuance. Standard & Poor's stressed the loans on the watchlist and the other loans with credit issues as part of its analysis. The resultant credit enhancement levels support the lowered and affirmed ratings. Ratings Lowered ML-CFC Commercial Mortgage Trust 2006-1 Commercial mortgage pass-through certificates Rating ------ Class To From Credit enhancement ----- -- ---- ------------------ H BB+ BBB- 2.92% J BB BB+ 2.67% K BB- BB 2.41% L B BB- 2.03% M B- B+ 1.90% N CCC+ B 1.52% P CCC B- 1.27% Ratings Affirmed ML-CFC Commercial Mortgage Trust 2006-1 Commercial mortgage pass-through certificates Class Rating Credit enhancement ----- ------ ------------------ A-1 AAA 30.48% A-2 AAA 30.48% A-3 AAA 30.48% A-3FL AAA 30.48% A-3B AAA 30.48% A-SB AAA 30.48% A-4 AAA 30.48% A-1A AAA 30.48% A-M AAA 20.32% AJ AAA 11.68% AN-FL AAA 11.68% B AA 9.27% C AA- 8.25% D A 6.86% E A- 6.10% F BBB+ 4.95% G BBB 4.19% X AAA N/A N/A -- Not applicable. MORGAN STANLEY TRUST: S&P Cuts Ratings on Six Certificate Classes ----------------------------------------------------------------- Standard & Poor's Ratings Services lowered its ratings on six classes of commercial mortgage pass-through certificates from Morgan Stanley Capital I Trust 2005-HQ5. Concurrently, S&P affirmed its ratings on the remaining classes from this transaction. The downgrades reflect the credit deterioration of the pool; specifically, eight loans have reported debt service coverage below 1.0x. In addition, Standard & Poor's expects a loss upon the disposition of one of the two loans currently with the special servicer. The affirmed ratings reflect credit enhancement levels that provide adequate support through various stress scenarios. As of the June 16, 2008, remittance report, the collateral pool consisted of 95 loans with an aggregate balance of $1.45 million, down from 96 loans with a balance of $1.53 billion at issuance. The master servicer, Midland Loan Services Inc. (Midland), reported financial information for 98% of the pool. Seventy percent of the servicer-provided information was full-year 2007 data, and 14.6% was interim-2007 data. There are eight loans in the pool, totaling $38.9 million (2.7%), that have reported DSCs lower than 1.0x. The loans are secured primarily by a variety of office, retail, and multifamily properties, with an average balance of $4.9 million and an average decline in DSC of 70% since issuance. Excluding defeased loans totaling $173.7 million (11.9%), Standard & Poor's calculated a weighted average DSC of 1.90x for the pool, up from 1.82x at issuance. There are two delinquent loans totaling $18.6 million (1.3%) with special servicers, CT Investment Management Co. LLC and CWCapital Asset Management LLC. To date, the trust has not experienced any losses. Details of the specially serviced loans are: -- The Richmond Square Mall loan ($14.2 million, 0.98%) is secured by a 306,326-sq.-ft. anchored retail center built in 1966 and renovated in 1997, in Richmond, Indiana. This property is also encumbered by a $4.7 million B note. The loan was transferred to the special servicer, CT Investment Management, as a result of fraud committed by Edward Okun, the original sponsor of the borrower, structured as a tenants-in-common entity. Although the fraud was related to another entity and Mr. Okun had only a fractional interest in the subject TIC asset (less than 1%), he served as the master tenant and property manager. The loan was transferred to special servicing when the bankruptcy trustee took ownership of all Okun's assets, including Investment Properties of America LLC, the property manager and owner of the master tenant. Since then, the management company has been replaced. In addition, the TIC entities and the bankruptcy trustee came to a settlement agreement, and an affiliate of Passco Cos. LLC assumed the master lease (pending bankruptcy court approval). The property is performing with a 95% occupancy rate, and as of Sept. 30, 2007, the property maintained a DSC of 1.63x. S&P expect the loan to be transferred back to the master servicer by September 2008. -- The Orchard Ridge Apartments loan ($4.4 million, 0.3%) is secured by a 248-unit multifamily property in Flint, Michigan, built in 1966 and renovated in 2002. The loan was transferred to CWCapital due to payment default. The special servicer and the borrower are still evaluating different strategies. There is a $2.45 million appraisal reduction amount in effect on this asset, and Standard & Poor's expects a loss upon its liquidation. Midland Loan Services Inc. reported a watchlist of 18 loans with an aggregate outstanding balance of $197.9 million (13.6%). The largest loan on the watchlist and the third-largest loan in the pool is the 1401 H Street loan. The loan is secured by a 353,219- sq.-ft. office building in downtown Washington, D.C. Midland placed the loan on its watchlist after stressing certain income and expenses items and applying a stressed constant to the loan, which resulted in the DSC falling below the minimum threshold of 1.05x. However, the actual DSC for full-year 2007 was 1.49x. While the property is currently 98% leased, the lease on the property's largest tenant, GSA Department of Justice ('AAA', 31.4% of net rentable area), expires in October of this year. The tenant is expected to sign an extension through May 2009 but may move at the end of the extension period. The top 10 loans have an aggregate outstanding balance of $791.7 million (54.4%) and a weighted average DSC of 2.14x, up from 2.02x at issuance. The third-largest loan is on the servicer's watchlist and was discussed above. Standard & Poor's reviewed property inspections provided by the master servicer for all of the assets underlying the top 10 exposures. One was characterized as "excellent," and the remaining properties were characterized as "good." The credit characteristics of the Well REF Portfolio, 111 Eighth Avenue, and Towne East Square Mall loans are consistent with those of investment-grade obligations. The credit characteristics of the Houston Center loan are no longer consistent with those of an investment-grade obligation. Details of these loans are: -- The largest exposure in the pool, the Wells REF portfolio, has a trust balance of $145.0 million and a whole-loan balance of $350 million. The whole loan consists of three pari passu notes, $145.0 million of which makes up 9.96% of the trust balance. The whole loan is secured by nine class A office properties totaling 2.9 million sq. ft. located across five states and the District of Columbia. Reported combined DSC was 3.71x as of year-end 2007, and occupancy was 100% as of January 2008, compared with a DSC of 3.55x and 100% occupancy at issuance. Standard & Poor's adjusted net cash flow for this loan is comparable to its level at issuance. -- The second-largest exposure in the pool, the Houston Center loan, has a trust balance of $119.7 million (8.2%) and a whole-loan balance of $269.7 million. The pari passu interest-only loan is secured by the fee interest in a 3.0 million-sq.-ft. office property in Houston, Texas. Occupancy was 95% as of Dec. 31, 2007, and the year-end 2007 DSC was 2.02x. Standard & Poor's adjusted value for this loan is down 14% since issuance, primarily because of higher operating expenses. -- The sixth-largest exposure in the pool, the 111 Eighth Avenue loan, has a trust balance of $72.9 million (5.0%) and an original whole-loan balance of $500.0 million. The A note currently totals $487.6 million and is split into five pari passu notes. There is also a $25 million B note and a $25 million nonpooled junior participation, both held outside the trust. The loan is collateralized by a first mortgage on a 16-story, 2.9 million-sq.-ft. office and telecom property in New York City. Occupancy was 100% as of Dec. 31, 2007, and the year-end 2007 DSC was 2.31x. Standard & Poor's adjusted NCF has increased 21.5% since issuance. -- The Towne East Square Mall loan is the third-largest loan in the pool with a balance of $63.4 million (4.4%). The loan is collateralized by 603,077 sq. ft. of a 1,171,048- sq.-ft. regional mall in Wichita, Kansas. Overall mall occupancy was 94% as of Dec. 31, 2007, and the year-end 2007 DSC was 1.35x. Standard & Poor's underwritten NCF has been stable since issuance. Standard & Poor's stressed the loans on the watchlist, along with other loans with credit issues, as part of its pool analysis. The resultant credit enhancement levels support the lowered and affirmed ratings. Ratings Lowered Morgan Stanley Capital I Trust 2005-HQ5 Commercial mortgage pass-through certificates Rating ------ Class To From Credit enhancement ----- -- ---- ------------------ K BB BB+ 2.75% L BB- BB 2.36% M B+ BB- 1.96% N B- B+ 1.70% O CCC+ B 1.57% P CCC B- 1.31% Ratings Affirmed Morgan Stanley Capital I Trust 2005-HQ5 Commercial mortgage pass-through certificates Class Rating Credit enhancement ----- ------ ------------------ A-1 AAA 20.94% A-2 AAA 20.94% A-3 AAA 20.94% A-AB AAA 20.94% A-4 AAA 20.94% A-J AAA 13.22% B AA 11.12% C AA- 9.81% D A+ 8.77% E A 7.59% F A- 6.54% G BBB+ 5.50% H BBB 4.58% J BBB- 3.14% X-1 AAA N/A X-2 AAA N/A N/A -- Not applicable. MSC 2006-SRR1: Moody's Affirms Ratings of 17 Classes of Notes ------------------------------------------------------------- Moody's Investors Service affirmed the ratings of 17 tranches of Notes issued by MSC 2006-SRR1 as: -- MSC 2006-SRR1-A2 Segregated Portfolio $100,750,000 Class A2 Variable Floating Rate Notes due 2046, affirmed at Aaa -- MSC 2006-SRR1-A2 Segregated Portfolio $5,303,000 Class A2-S Variable Floating Rate Notes due 2046, affirmed at Aa1 -- MSC 2006-SRR1-B Segregated Portfolio $60,450,000 Class B Variable Floating Rate Notes due 2046, affirmed at Aa2 -- MSC 2006-SRR1-B Segregated Portfolio $3,182,000 Class B-S Variable Floating Rate Notes due 2046, affirmed at Aa3 -- MSC 2006-SRR1-C Segregated Portfolio $40,300,000 Class C Variable Floating Rate Notes due 2046, affirmed at A2 -- MSC 2006-SRR1-C Segregated Portfolio $2,121,000 Class C-S Variable Floating Rate Notes due 2046, affirmed at A3 -- MSC 2006-SRR1-D Segregated Portfolio $21,700,000 Class D Variable Floating Rate Notes due 2046, affirmed at Baa1 -- MSC 2006-SRR1-D Segregated Portfolio $1,142,000 Class D-S Variable Floating Rate Notes due 2046, affirmed at Baa2 -- MSC 2006-SRR1-E Segregated Portfolio $12,400,000 Class E Variable Floating Rate Notes due 2046, affirmed at Baa2 -- MSC 2006-SRR1-E Segregated Portfolio $653,000 Class E-S Variable Floating Rate Notes due 2046, affirmed at Baa3 -- MSC 2006-SRR1-F Segregated Portfolio $13,175,000 Class F Variable Floating Rate Notes due 2046, affirmed at Baa3 -- MSC 2006-SRR1-F Segregated Portfolio $693,000 Class F-S Variable Floating Rate Notes due 2046, affirmed at Ba1 -- MSC 2006-SRR1-BIG Segregated Portfolio $11,625,000 Class G Variable Floating Rate Notes due 2046, affirmed at Ba1 -- MSC 2006-SRR1-BIG Segregated Portfolio $12,400,000 Class H Variable Floating Rate Notes due 2046, affirmed at Ba2 -- MSC 2006-SRR1-BIG Segregated Portfolio $10,850,000 Class J Variable Floating Rate Notes due 2046, affirmed at Ba3 -- MSC 2006-SRR1-BIG Segregated Portfolio $7,750,000 Class K Variable Floating Rate Notes due 2046, affirmed at B1 -- MSC 2006-SRR1-BIG Segregated Portfolio $7,750,000 Class L Variable Floating Rate Notes due 2046, affirmed at B2 Moody's is affirming the notes above due to overall stable pool performance. MSC 2006-SRR1 is a collateralized debt obligation backed by a portfolio of synthetic CMBS Securities. Currently, the transaction has an aggregate credit default swap notional amount of $620.0 million, the same as at issuance. The total return swap and credit default swap counterparty is Morgan Stanley Capital Services Inc., whose parent, Morgan Stanley's senior unsecured Aa3 rating is on watch for possible downgrade; short term is P-1; and outlook is stable. The reference portfolio of CMBS securities are from pools securitized in 2004 (21.0%), 2005 (51.6%), and 2006 (27.4%). The rating action reflects Moody's evaluation of the expected loss associated with the Notes based on the current credit quality on the underlying reference obligations considering the reduced time to maturity, and the senior unsecured ratings of the swap counterparty and the total return swap counterparty. MW JOHNSON: Files Schedules of Assets and Liabilities ----------------------------------------------------- M.W. Johnson Construction Inc. filed with the U.S. Bankruptcy Court for the District of Minnesota, their schedules of assets and liabilities, disclosing: Name of Schedule Assets Liabilities ---------------- ----------- ----------- A. Real Property $58,403,895 B. Personal Property 3,996,826 C. Property Claimed as Exempt D. Creditors Holding $51,574,592 Secured Claims E. Creditors Holding 101,013 Unsecured Priority Claims F. Creditors Holding 2,997,889 Unsecured Non-priority Claims ----------- ----------- TOTAL $62,400,721 $54,673,496 Lakeville, Minnesota-based M.W. Johnson Construction Inc. -- http://www.mwjohnson.com/-- and M.W. Johnson Construction of Florida Inc. are custom homebuilders. They filed their chapter 11 petition on June 13, 2008 (Bankr. D. Minn. Case Nos. 08-32874 and 08-32876). Judge Robert J. Kressel presides over the case. Michael L. Meyer, Esq., at Ravich Meyer Kirkman McGrath Nauman, represent the Debtors in their restructuring efforts. When the Debtors filed for bankruptcy, they listed estimated assets of between $50 million and $100 million and estimated debts of between $50 million and $100 million. NANOGEN INC: Stockholders Approve Debt Restructuring Proposal ------------------------------------------------------------- The stockholders of Nanogen, Inc. approved all the proposals presented for vote at the company's 2008 annual meeting of stockholders, including the proposal to approve and ratify the debt restructuring transaction completed in March 2008 in which the company exchanged an aggregate of $12,917,000 in principal amount of its 6.25% Senior Convertible Notes with the company's 9.75% Senior Secured Convertible Notes with an aggregate principal amount of $15,500,400, the issuance of shares of common stock of the company upon conversion of the notes and issuance of other securities of the company pursuant to the terms of the debt restructuring. A copy of the company's proxy statement, wherein the proposals presented and approved at the annual meeting are detailed, is available for free at http://ResearchArchives.com/t/s?2f7b San Diego, California-based Nanogen Inc. (NASDAQ: NGEN) -- http://www.nanogen.com/-- provides advanced diagnostic products. As of March 16, 2007, the company was developing several product lines that directly target specific markets within the advanced diagnostics field. Its diagnostic technologies focus on the identification of the nucleic acid sequences, gene variations and gene expressions associated with both genetic conditions and infectious diseases. Nanogen has four categories of advanced diagnostic technologies: molecular testing platforms molecular reagents point-of-care tests and advanced genetic markers. On Feb. 6, 2006, Nanogen acquired the rapid cardiac immunoassay point-of-care test business of Spectral Diagnostics Inc. The acquired products include rapid tests for levels of CKMB, Myoglobin and Troponin, all of which are frequently used in cardiac care. On May 1, 2006, it completed the acquisition of the diagnostics division of Amplimedical S.P.A. Going Concern Doubt Ernst & Young LLP, in San Diego, California, expressed substantial doubt about Nanogen Inc.'s ability to continue as a going concern after it audited the company's consolidated financial statements ended Dec. 31, 2007 and 2006 (restated). The auditing firm pointed to the company's recurring operating losses, working capital deficit and accumulated deficit of $400.6 million as of Dec. 31, 2007. NATIONAL RESIDENTIAL: Case Summary & One Unsecured Creditor ----------------------------------------------------------- Debtor: National Residential Communities, LLC 717 S. 8th St. Las Vegas, NV 89101 Bankruptcy Case No.: 08-17585 Chapter 11 Petition Date: July 11, 2008 Court: District of Nevada (Las Vegas) Judge: Bruce A. Markell Debtor's Counsel: Ryan J. Works, Esq. Email: rworks@mcdonaldcarano.com McDonald Carano Wilson LLP 2300 W. Sahara Ave., Ste. 1000 Las Vegas, NV 89102 Tel: (702) 873-4100 Fax: (702) 873-9966 http://mcdonaldcarano.com/ Estimated Assets: $1 million to $10 million Estimated Debts: $1 million to $10 million A list of the Debtor's largest unsecured creditor is available for free at: http://bankrupt.com/misc/nvb08-17585.pdf NBTY INC: Completes $371MM Acquisition of Leiner Health Assets -------------------------------------------------------------- NBTY Inc. completed the purchase of substantially all of the assets of Leiner Health Products Inc. for approximately $371 million. The terms of the Asset Purchase Agreement provide for various working capital adjustments. As reported in the Troubled Company Reporter on June 16, 2008, the U.S. Bankruptcy Court for the District of Delaware authorized Leiner Health Products Inc. and its debtor-affiliates to sell substantially all of their assets to NBTY Acquisition LLC, including the assumption and assignment of certain executory contracts and unexpired leases. As reported in the Troubled Company Reporter on June 12, 2008, NBTY submitted the best and highest bid at an auction for the purchase of substantially all of its assets on June 9, 2008. NBTY is acquiring substantially all of Leiner's assets, including its U.S. store brand vitamins, minerals and supplements products as well as Vita Health Products Inc., Leiner's Canadian subsidiary. Moelis & Company LLC provided advisory services and Farrell Fritz, P.C. provided legal advice in connection with the acquisition. "The Leiner acquisition will further enhance our manufacturing capabilities and dominant market presence as the worldwide leader in the nutritional supplement industry," Scott Rudolph, NBTY chairman and CEO, said. "NBTY's history of successful strategic acquisitions reflects our commitment to generating growth, providing the highest quality service to our customers and increasing shareholder value." About Leiner Health Based in Carson, California, Leiner Health Products Inc. -- http://www.leiner.com/-- manufacture and supply store brand vitamins, minerals and nutritional supplements products, and over- the-counter pharmaceuticals in the US food, drug and mass merchant and warehouse club retail market. In addition to their primary VMS and OTC products, they provide contract manufacturing services. During the fiscal year ended March 31, 2007, the VMS business comprised approximately 61% of net sales. On March 20, 2007, they voluntarily suspended the production and distribution of all OTC products manufactured, packaged or tested at its facilities in the US. ABOUT NBTY Inc. Headquartered in Bohemia, New York, NBTY Inc. (NYSE: NTY) -- http://www.NBTY.com/-- manufactures, markets and distributes line of quality nutritional supplements in the United States and throughout the world. Under a number of NBTY and third party brands, the company offers over 22,000 products. * * * As reported in the Troubled Company Reporter on June 4, 2008, Standard & Poor's Ratings Services said that there would be no immediate impact on NBTY Inc.'s (BB/Stable/--) ratings or outlook following the company's announcement that it entered into an Asset Purchase Agreement for the purchase of substantially all of the assets of Leiner Health Products Inc.(unrated). WESTERN NONWOVENS: Case Summary & 35 Largest Unsecured Creditors ---------------------------------------------------------------- Lead Debtor: Western Nonwovens, Inc. 966 E. Sandhill Avenue Carson, CA 90746 Bankruptcy Case No.: 08-11435 Debtor-affiliates filing separate Chapter 11 petitions: Entity Case No. ------ -------- Western Synthetic Fiber, Inc. 08-11436 Bonded Fiberloft, Inc. 08-11437 Reliance Products, Inc. 08-11438 Paltex Incorporated 08-11439 Mid-America Fiber Company, Inc. 08-11440 Florida Nonwovens, Inc. 08-11441 Utah Nonwovens, Inc. 08-11442 Type of Business: With nine manufacturing sites located throughout the country, the Lead Debtor operates two independent business divisions: Industrial Nonwovens Division: a dry-laid nonwoven manufacturer with thermal bond, resin bond, and needlepunch technologies deployed nationwide; and Performance Insulation Division: applies a unique continuous filament manufacturing process for producing insulation materials. See http://www.westernnonwovens.com/ Chapter 11 Petition Date: July 14, 2008 Court: District of Delaware (Delaware) Judge: Peter J. Walsh Debtors' Counsel: Laura Davis Jones, Esq. Email: ljones@pszjlaw.com Michael Seidl, Esq. Email: mseidl@pszyj.com Pachulski Stang Ziehl & Jones LLP 919 N. Market Street, 17th Floor Wilmington, DE 19899-8705 Tel: (302) 652-4100 Fax: (302) 652-4400 http://pszjlaw.com/ Western Nonwovens, Inc.'s Financial Condition: Estimated Assets: $1 million to $10 million Estimated Debts: $50 million to $100 million The Debtors' Consolidated List of 35 Largest Unsecured Creditors is available for free at: http://bankrupt.com/misc/deb08-11435.pdf OAKRIDGE HOMES: Sec. 341(a) Meeting Set for July 24 --------------------------------------------------- The United States Trustee for Region 16 will convene a meeting of Oakridge Homes, LLC's creditors at 1:00 p.m., on July 24, 2008, at 21051 Warner Center Lane, No. 105, Woodland Hills, Calif. This is the first meeting of creditors required under Section 341(a) of the Bankruptcy Code in all bankruptcy cases. All creditors are invited, but not required, to attend. This meeting of creditors offers the one opportunity in a bankruptcy proceeding for creditors to question a responsible officer of the Debtor under oath about his financial affairs and operations that would be of interest to the general body of creditors. Based in Valencia, Calif., Oakridge Homes, LLC is a homebuilder. The company filed for Chapter 11 on June 13, 2008 (C.D. Calif. Case No. 08-13977). Ron Bender, Esq., represents the Debtor as counsel. When the Debtor filed for bankruptcy protection, it listed estimated assets of between $10 million and $50 million, and estimated debts of between $10 million and $50 million. PALM RIDGE: Sec. 341(a) Meeting Set for August 4 ------------------------------------------------ The United States Trustee for Region 16 will convene a meeting of Palm Ridge, LLC's creditors at 2:30 p.m., on Aug. 4, 2008, at 3420 Twelfth Street, Room 10A, Riverside, Calif. This is the first meeting of creditors required under Section 341(a) of the Bankruptcy Code in all bankruptcy cases. All creditors are invited, but not required, to attend. This meeting of creditors offers the one opportunity in a bankruptcy proceeding for creditors to question a responsible officer of the Debtor under oath about his financial affairs and operations that would be of interest to the general body of creditors. Based in Palm Springs, Calif. Palm Ridge, LLC is engaged in the real estate business. The company filed a petition for Chapter 11 on June 23, 2008 (C.D. Calif. Case No. 08-17547). Shaun M. Murphy, Esq., at Slovak Baron & Empey LLP, represents the Debtor as counsel. When the Debtor filed for protection from its creditors, it listed estimated assets of between $10 million and $50 million, and estimated debts of between $10 million and $50 million. PIERRE FOODS: Files for Bankruptcy, Obtains $35MM Oaktree Facility ------------------------------------------------------------------ Pierre Foods, Inc. and its subsidiaries filed voluntary petitions under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the District of Delaware to restructure its debt. The company intends to work with all of its constituencies to reach mutually acceptable resolutions and to exit bankruptcy as expeditiously as possible. Pierre's operations are expected to continue as normal throughout the bankruptcy process and while the company executes on its reorganization plans. Christopher Scinta of Bloomberg News citing papers filed with the Court, says that the company listed assets of $500 million to $1 billion, and debts of $100 million to $500 million "As a result of rising raw material prices experienced throughout our industry, it is necessary for Pierre Foods to create a capital structure more appropriate for both our operations and the current marketplace," said Norbert Woodhams, Chief Executive Officer of Pierre Foods. "We have taken and will continue to take steps to strengthen and streamline operations and right-size Pierre's cost structure in order to avoid placing the burden of our inflated raw materials costs solely on our customers. After careful consideration of all available alternatives, the Company's Board of Directors determined that filing for Chapter 11 was a necessary and prudent step that allows us to operate our business without interruption while continuing to implement a debt restructuring in a controlled, Court-supervised environment." $35 Million Oaktree Financing In conjunction with the filing, the Company has received a commitment for up to $35 million of debtor-in-possession financing from certain funds managed by Oaktree Capital Management L.P. Upon court approval, the financing, combined with cash from operations, will be used to fund the Company's ongoing operations including payment of employee wages and benefits and payments to vendors for both goods and services provided during the Chapter 11 case. In addition, the Company has commenced restructuring discussions with affiliates of Oaktree that may involve the conversion of debt of the Company into equity through a plan of reorganization, which would result in material deleveraging of the Company's balance sheet. Several of the recent actions taken by the Company to improve its liquidity, conserve cash, optimize profitability and right-size its cost structure include supporting more efficient inventory management by eliminating product duplication and unprofitable product lines and implementing new strategies for increasing inventory turns; streamlining the Company's organizational structure and focusing on profitable business ventures; enhancing customer service; and investing in research to focus on supporting profitable initiatives for customers and employees. Mr. Woodhams continued, "Filing for Chapter 11 is never an easy decision, however, we view this process as an important step in our ongoing strategic restructuring. We expect to emerge from bankruptcy as a stronger, more competitive company, well positioned for growth and enhanced profitability. We are proud of the consistent quality of our products, our valued customer relationships and the high level of service we provide. Finally, we are grateful to all of our employees for their hard work, loyalty and dedication to Pierre Foods." Alvarez, Kurtzman On Board Pierre has retained Alvarez & Marsal, a restructuring and corporate advisory firm, to assist the Company throughout the restructuring process. Pierre has also employed Kurtzman Carson Consultants LLC as claims agent. Wachovia Payment Blockage Notice On July 7, 2008, Pierre received a notice from Wachovia Bank, National Association, as administrative agent, under the credit agreement dated June 30, 2004, among Pierre Merger Corp., as the initial borrower, Pierre, as the successor borrower, Wachovia, as administrative agent, swing line lender, an L/C issuer, and collateral agent, Wachovia Capital Markets, LLC and Banc of America Securities LLC, as joint lead arrangers and book-running managers, and the lenders party thereto of an event of default for non-payment of interest that became due and payable on June 30, 2008. As a result of the event of default under the credit Agreement, on July 8, 2008, Wachovia delivered a payment blockage notice to Pierre and U.S. Bank National Association, the trustee under its Indenture dated June 30, 2004, among Pierre, the Guarantors named therein and U.S. Bank National Association, as trustee. The payment blockage notice prohibits Pierre from making any payment or distribution of any of its assets on account of the obligations with respect to the senior subordinated notes issued under the Indenture or on account of the purchase, redemption or other acquisition of the notes, including, without limitation, the interest payment to the noteholders scheduled for July 15, 2008. Moody's 'Ca/LD' Rating Moody's Investors Service lowered the probability of default rating for Pierre to Ca/LD from Ca based on the fact that there is an Event of Default for non-payment of interest under Pierre Foods, Inc.'s bank credit agreement. The company's other long-term ratings, including its corporate family rating of Ca, are unchanged. LGD assessments are subject to adjustment. Pierre's speculative grade liquidity rating of SGL-4 is affirmed. All long-term ratings remain under review for possible downgrade. Rating lowered: -- Probability of default rating to Ca/LD from Ca Ratings unchanged: -- Corporate family rating at Ca -- $40 million senior secured revolving credit facility maturing 2009 at Caa3 -- $227 million senior secured term loan facility maturing 2010 at Caa3 -- $125 senior subordinated notes maturing 2012 at C Rating affirmed: Speculative Grade Liquidity rating at SGL-4 On July 7th, Pierre received a notice of an Event of Default from the agent for its syndicated bank agreement related to the non- payment of interest due on June 30, 2008. The lenders under the bank credit agreement have not accelerated the debt. However, on July 8th, the agent for the bank lenders delivered a Payment Blockage Notice to Pierre and to the Trustee under Pierre's June 30, 2004 senior subordinated indenture. The Payment Blockage Notice prohibits Pierre from making any payment or distribution of assets on account of the senior subordinated obligations, including the interest payment scheduled for July 15, 2008. Should Pierre not make the interest payment under its senior subordinated notes within the grace period, or should the bank lenders accelerate Pierre's bank debt, Moody's expects to lower the company's probability of default rating to D. In Moody's press release of July 1, 2008, Moody's expressed concern that, in the absence of restructured bank facilities that will allow the company to borrow under its revolving credit agreement or in the absence of new financing arrangements, Pierre's liquidity will continue to erode and it may have to file for bankruptcy protection. Pierre's SGL-4 rating incorporates the default under the bank agreement and the expected very weak operating profitability and liquidity over the next 12 months. Moody's continuing review will focus on Pierre's liquidity and on the potential for a sale of the company or a bankruptcy filing. Revenues for fiscal year ended March 1, 2008 were approximately $643 million. The company was purchased by Madison Dearborn Partners and certain members of Pierre's management on June 30, 2004. Standard & Poor's 'D' Rating Standard & Poor's Ratings Services lowered its ratings on Pierre. S&P lowered the corporate credit rating to 'D' from 'CCC+', and the rating on the senior secured bank loan to 'D' from 'B-'. At the same time, S&P lowered the rating on Pierre's senior subordinated notes to 'CC' from 'CCC-'. All ratings are removed from CreditWatch, where they were placed with developing implications on June 3, 2008, following a violation of the financial covenants under Pierre's bank credit agreement. "The downgrades follow Pierre's announcement that it was in default on its bank credit agreement for nonpayment of interest that was due and payable on June 30, 2008," said Standard & Poor's credit analyst Rick Joy. In addition, the company has received a payment blockage notice from its senior secured lenders as a result of the default, and will likely be unable to make the scheduled interest payment to its subordinated noteholders due on July 15, 2008. Should the company fail to make the scheduled interest payment on its subordinated note, S&P will lower the rating on these notes to 'D'. The recovery ratings on Pierre's secured issues are revised to '3' from '2', indicating S&P's expectation that the senior secured lenders can expect meaningful recovery (50%-70%). The recovery rating on Pierre's $125 million senior unsecured notes due 2012 remains a '6', indicating our expectation for negligible recovery (0%-10%). The company has stated that its senior secured lenders have not accelerated the repayment of indebtedness under the credit facility and the company is continuing to pursue and consider various strategic and restructuring alternatives. About Pierre Foods Headquartered in Cincinnati, Ohio, Pierre Foods Inc. -- http://www.pierrefoods.com-- manufactures and sells ready-to-cook and pre-cooked products. As reported in the Troubled Company Reporter on June 19, 2008, Pierre reported a $274.88 million working capital deficit, the difference between $146.48 million in current assets and $421.36 million in current liabilities, for the fiscal year ended March 1, 2008. * * * As reported in the Troubled Company Reporter on July 3, 2008, Moody's Investors Service lowered Pierre's long-term ratings, including its corporate family rating and probability of default rating to Ca from Caa2. All long-term ratings remain under review for further possible downgrade. LGD assessments are also subject to adjustment. This rating action is based on Moody's concern that, in the absence of restructured bank facilities that will allow the company to borrow under its revolving credit agreement or in the absence of new financing arrangements, Pierre's liquidity will continue to erode and it may have to file for bankruptcy protection. PIERRE HOLDING: Case Summary & 30 Largest Unsecured Creditors ------------------------------------------------------------- Lead Debtor: Pierre Holding Corp. aka Noble Power Partners, LLC 9990 Princeton Rd. Cincinnati, OH 45246 Bankruptcy Case No.: 08-11469 Debtor-affiliates filing separate Chapter 11 petitions: Entity Case No. ------ -------- Pierre Holding Corp. 08-11469 Chef's Pantry, Inc. 08-11473 Clovervale Farms, Inc. 08-11475 Clovervale Transportation, Inc. 08-11476 PF Management, Inc. 08-11477 Fresh Foods Properties, LLC 08-11478 Pierre Real Property, LLC 08-11479 Pierre Foods, Inc. 08-11480 Warfighter Foods, LLC 08-11481 Zartic, LLC 08-11482 Zartic Real Property, LLC 08-11483 Zar Tran, LLC 08-11486 Zar Tran Real Property, LLC 08-11487 Type of Business: The Debtors manufactures prepared meats. Chapter 11 Petition Date: July 15, 2008 Court: District of Delaware (Delaware) Judge: Kevin Gross Debtors' Counsel: Paul Noble Heath, Esq. Email: heath@rlf.com Richards, Layton & Finger One Rodney Square P.O. Box 551 Wilmington, DE 19899 Tel: (302) 651-7700 Fax: (302) 651-7701 http://www.rlf.com/ Pierre Holding Corp's Financial Condition: Estimated Assets: $500,000,000 to $1,000,000,000 Estimated Debts: $100,000,000 to $500,000,000 Debtors' Consolidated List of 30 Largest Unsecured Creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ U.S. National Bank Association notes $125,000,000 (Bond Trustee) Attn: Mr. Richard Prokosch 60 Livingston Ave. St. Paul, MN 55107 Tel: (651) 495-3918 Fax: (651) 495-8097 Interstate Warehouse trade $2,825,707 Distribution Attn: Larry Tippmann Tel: (513) 874-6500 Fax: (513) 874-6775 Archer Daniels Midland Co. trade $2,523,565 Attn: Ron Cardwell 4666 Fairies Pkwy. Decatur, IL 62525 Tel: (800) 637-5866 2319 (ext.) Eastern Poultry Distributors, trade $2,417,600 Inc. Attn: Henry Buzgon 2699 Stirling Rd., Ste. C407 Ft. Lauderdale, FL 33312 Tel: (954) 983-6211 Butler County Treasurer tax $1,593,752 Attn: Nancy Nix 315 High St., 10th Fl. P.O. Box 5002 Hamilton, OH 45011 Tel: (513) 887-3181 Fax: (513) 887-3172 Cargill, Inc. trade $1,019,825 P.O. Box 5762 Minneapolis, MN 55440 Tel: (800) 292-1690 Temple Inland trade $921,927 Attn: Brian Small 912 Nelbar St. Middletown, OH 45042 Tel: (513) 425-0830 Fax: (513) 425-0539 Biscayne Foods, Inc. trade $914,800 Attn: Stuart Appel 3200 N. Federal Hwy., Ste. 110 Boca Raton, FL 33431 Tel: (561) 391-2900 Fax: (561) 391-2670 United Sugars Corp. trade $619,671 Attn: K. Jacobs 524 C. Ave. Moorehead, MN 56560 Tel: (888) 391-7072 Fax: (218) 236-4306 Southeastern Mills, Inc. trade $475,809 Attn: Carolyn Simcox 1 Douglas St. Rome, GA 30161 Tel: (800) 334-4468 379 (ext.) Fax: (706) 378-8366 TJ Harkins BCB, Inc. trade $410,130 4584 Paysphere Circle Chicago, IL 60674 Tel: (630) 350-2345 Fax: (630) 350-2348 Texican Industrial Energy, LLC utilities $397,007 P.O. Box 1359 Tomball, TX 77377 Tel: (404) 231-1165 Duke Energy utilities $361,011 Attn: Dean Sprague P.O. Box 9001076 Louisville, KY 40290 Tel: (513) 287-4717 Golden Foods/Golden Brands trade $354,446 Dept. 8072 Carol Stream, IL 60122 Genesis Baking Co. trade $309,585 P.O. Box 348 Norwalk, OH 44857 Tel: (419) 663-6432 220 (ext.) Kraft Food Ingredients trade $284,633 22585 Network Place Chicago, IL 60673 Tel: (901) 381-6500 Genpak trade $268,841 285 Industrial Pkwy. S. Aurora, CN L4G3V8 Tel: (905) 727-0121 Fax: (905) 727-1066 Americraft Carton-Memphis trade $236,061 Echo Lake Farm Produce trade $229,480 Swift & Co. trade $213,992 BP Canada Energy Marketing utilities $208,336 Corp. Cryovac trade $204,000 Overton Distributors trade $201,650 Griffith Laboratories USA, trade $193,260 Inc. Butler County Environmental utilities $192,658 Services Land O Frost trade $186,369 Americold Logistics trade $181,505 Algood Food Co. trade $179,200 Skidmore Sales & Distributing trade $174,592 PIERRE FOODS: Bankruptcy Filing Cues S&P's Default Ratings ---------------------------------------------------------- Standard & Poor's Ratings Services lowered its rating on Pierre Foods Inc.'s (D/--/--) 9.875% senior subordinated notes due 2012 to 'D' from 'CC'. "The downgrade follows Pierre's announcement that it has voluntarily filed for protection under Chapter 11 of the U.S. Bankruptcy Code in Delaware," said Standard & Poor's credit analyst Rick Joy. The Cincinnati, Ohio-based company stated that it will continue to operate while it restructures its balance sheet. Certain funds managed by Oaktree Capital Management L.P. have agreed to provide Pierre with up to $35 million of debtor-in-possession financing, which is currently subject to court approval. The issue-level rating on Pierre's senior secured credit facility is 'D', the same level as the corporate credit rating on the company. The recovery ratings on this debt remains '3', indicating S&P's expectation that the senior secured lenders can expect meaningful recovery (50%-70%) in the reorganization process. The issue-level rating on the company's senior subordinated notes is 'D', the same level as the corporate credit rating. The recovery rating on this debt remains '6', indicating our expectation that the subordinated lenders can expect negligible recovery (0-10%) in the reorganization process. RESTRUCTURED ASSET: S&P Lifts $25MM Certs. Rating to AA from BB+ ---------------------------------------------------------------- Standard & Poor's Ratings Services raised its rating on Restructured Asset Securities with Enhanced Returns (RACERS) Series 2005-13-C Trust's $25 million series CFC certificates to 'AA' from 'BB+' and removed it from CreditWatch, where it was placed with developing implications on May 7, 2008. The rating action reflects the July 1, 2008, upgrades of Countrywide Financial Corp. and its affiliates and the removal of the ratings from CreditWatch with developing implications. Restructured Asset Securities with Enhanced Returns (RACERS) Series 2005-13-C Trust's series CFC certificates is a credit- linked note transaction. The rating on the certificates issued by the trust is based on the lower of (i) the rating assigned to the reference obligation for the class, Countrywide Home Loans Inc.'s 5.625% medium-term notes series K due July 15, 2009 ('AA'); and (ii) the rating assigned to the underlying securities: the $5 million Capital One Multi-Asset Execution Trust's class A notes (series 2003-3) ('AAA'); and (iii) the $20 million currently held in cash that may be invested in additional underlying securities subject to rating agency confirmation. RIVER ELKS: Sec. 341(a) Meeting Set for July 29 ----------------------------------------------- The United States Trustee for Region 14 will convene a meeting of River Elks, LLC's creditors at 2:30 p.m., on July 29, 2008, at the U.S. Trustee Meeting Room, 230 N. First Avenue, Suite 102, Phoenix, Ariz. This is the first meeting of creditors required under Section 341(a) of the Bankruptcy Code in all bankruptcy cases. All creditors are invited, but not required, to attend. This meeting of creditors offers the one opportunity in a bankruptcy proceeding for creditors to question a responsible officer of the Debtor under oath about his financial affairs and operations that would be of interest to the general body of creditors. Based in Scottsdale, Ariz., River Elks, LLC is a real estate developer. The company filed a petition for Chapter 11 on June 18, 2008 (D. Ariz. Case No. 08-07340). Joel F. Newell, Esq., at Carmichael & Powell, P.C., represents the Debtor as counsel. When the Debtor filed for protection from its creditors, it listed total assets of $12,580,050, and total debts of $9,053,589. SERVICE CORP: S&P's 'BB' Rating Unmoved by Stewart Offer -------------------------------------------------------- Standard & Poor's Ratings Services said that its ratings on Service Corp. International Inc. (BB/Stable/--) are not currently affected by its disclosure that its offer to acquire Stewart Enterprises Inc. (BB-/Stable/--) and request for access to perform due diligence was rejected by Stewart's management. At this point, S&P cannot discern if Stewart's management and the board of directors will ultimately grant Service Corp. access to information or accept its offer. The disclosure states that the offer would be for at least $9.50 a share, which would be a 35% premium over the 50-day average per share closing price. With access to information, Service Corp. believes that it will be able to increase its offer to a range of $10.25 to $11.25 per share, which represents a premium of 46% to 60% over the 50-day average closing price per share. The offer would be all cash. If Service Corp. enters into a definitive agreement with Stewart Enterprises, S&P would review the terms of the proposed transaction as they become available and respond to them as appropriate. SPECTRUM BRANDS: Fitch's Rating Unmoved by Terminated Salton Deal ----------------------------------------------------------------- Following the announcement that Spectrum Brands and Salton Inc has mutually agreed to terminate the definitive agreement for the sale of the Company's global pet supply business, Fitch Ratings takes no action on Spectrum. Fitch rates Spectrum as: -- Issuer Default Rating 'CCC'; -- $1 billion term loan B 'B/RR1' -- $225 million ABL 'B/RR1' -- EUR350 million term loan 'B/RR1' -- $700 million 7.4% senior sub note, 'CCC-/RR5' -- $2.9 million 8.5% senior sub note, 'CCC-/RR5' -- $347 million 11.25% variable rate toggle senior sub note, 'CCC-/RR5' The Rating Outlook is Negative. Fitch views the termination as basically credit neutral. The pet food segment represented approximately a third of Spectrum's EBITDA before corporate overhead and is a steady year-round performer which improves the company's earning quality. Furthermore, Fitch has noted earlier that while debt balances would have declined with the segment's sale, credit metrics on a pro-forma basis were only marginally improved. In the near-term Spectrum has enough liquidity to operate its business and service its debt. Fitch will continue reviewing Spectrum's performance going forward to gain a better understanding of the company, given that it remains focused on improving its capital structure. Spectrum is a global branded consumer products company with operations in seven product categories: consumer batteries; lawn and garden; pet supplies; electric shaving and grooming; household insect control; electric personal care products; and portable lighting. TABERNA PREFERRED: Fitch Places Three Notes Rating on Neg. Watch ---------------------------------------------------------------- Fitch Ratings has placed these notes of TABERNA Preferred Funding II, Ltd. on Rating Watch Negative: -- $75,898,603 class C-1 'B-'; -- $26,761,313 class C-2 'B-'; -- $15,455,354 class C-3 'B-'. Taberna II is a static collateralized debt obligation supported by a portfolio of trust preferred securities and subordinated debt issued by subsidiaries of real estate investment trusts, real estate operating companies, homebuilders and specialty finance companies, as well as commercial mortgage-backed securities. Of the total portfolio, approximately 96.9% is comprised of trust preferred securities and subordinated debt and approximately 3.1% of CMBS. The collateral was selected and is monitored by Taberna Capital Management LLC. Fitch's rating actions reflect heightened concern related to continued negative portfolio credit migration, as well as additional default activity. Based on Fitch's public and shadow ratings, the average credit quality of Taberna II remains in the 'B-/CCC+' range, although there has been negative credit migration since Fitch's last review. Currently, 45.3% of the portfolio is publicly or shadow rated 'CCC+' or below. Approximately 3.9% of the portfolio has experienced negative rating migration since Fitch's last review and 17.6% of the underlying collateral is currently on Rating Watch Negative or has a Negative Rating Outlook. Taberna II currently has seven assets deemed to be in default per the transaction's trustee report, representing approximately 20.7% of the portfolio. Six of the seven exposures were treated as defaulted for the purposes of Fitch's previous review of the transaction. Given the rapidly evolving credit pressures facing mortgage REITs and homebuilders, Fitch treated exposures rated or shadow rated 'CC' or lower as defaulted with 100% severity in an effort to anticipate future collateral defaults. Trustee-report asset defaults caused the failure of the class A/B, C, D, E and F overcollateralization tests. As of the last payment date, approximately $5.2 million of interest proceeds were diverted to pay down the principal of the class A-1A, A-1B and A-1C notes pro rata due to the breach of the class A/B OC test. As announced on July 1, 2008, Fitch is in the process of examining its default probability assumptions with respect to assets with maturities in excess of 10 years. Resolution of the current Rating Watch Negative status will consider the potential implications of a revised term structure of default probabilities for long-dated assets, as well as any additional credit migration with respect to the underlying portfolio, or any credit risk sales undertaken by the asset manager. Absent changes to Fitch's default probability assumptions or further collateral deterioration or credit risk sales, the ratings of the class C-1, C-2 and C-3 notes will likely be downgraded to the 'CCC' rating category. The ratings of the class C-1, C-2 and C-3 notes address the likelihood that investors will receive ultimate and compensating interest payments, as per the governing documents, as well as the aggregate principal amount by the stated maturity date. Periodic payments on the notes are distributed on a quarterly basis in February, May, August and November until the stated maturity on Nov. 5, 2035. TABERNA PREFERRED: S&P Puts Rating on $46.08MM Notes at Neg. Watch ------------------------------------------------------------------ Fitch Ratings has placed these notes of TABERNA Preferred Funding III, Ltd. on Rating Watch Negative: -- $36,933,179 class C-1 'BB'; -- $52,780,911 class C-2 'BB'; -- $46,080,796 class D 'B-'. Taberna III is a static collateralized debt obligation supported by a portfolio of trust preferred securities and subordinated debt issued by subsidiaries of real estate investment trusts, real estate operating companies, homebuilders and specialty finance companies, as well as commercial mortgage-backed securities. Of the total portfolio, approximately 96.9% is comprised of trust preferred securities and subordinated debt and approximately 3.1% of CMBS. The collateral was selected and is monitored by Taberna Capital Management LLC. Fitch's rating actions reflect heightened concern related to continued negative portfolio credit migration, as well as additional default activity. Based on Fitch's public and shadow ratings, the average credit quality of Taberna III remains in the 'B/B-' range, although there has been negative credit migration since Fitch's last review. Currently, 34.84% of the portfolio is publicly or shadow rated 'CCC+' or below. Approximately 5.2% of the portfolio has experienced negative rating migration since Fitch's last review and 3.8% of the portfolio has experienced positive rating migration. Approximately 14.8% of the underlying collateral is currently on Rating Watch Negative or has a Negative Rating Outlook. Taberna II currently has four assets deemed to be in default per the transaction's trustee report, representing approximately 15.2% of the portfolio. Two of the four exposures were treated as defaulted for the purposes of Fitch's previous review of the transaction. Given the rapidly evolving credit pressures facing mortgage REITs and homebuilders, Fitch treated exposures rated or shadow rated 'CC' or lower as defaulted with 100% severity in an effort to anticipate future collateral defaults. Trustee-reported asset defaults caused the failure of the class A/B, C, D and E overcollateralization tests. As of the last payment date, approximately $4.2 million of interest proceeds were diverted to pay down the principal of the class A-1A and A-1C notes pro rata due to the breach of the class A/B OC test. As announced on July 1, 2008, Fitch is in the process of examining its default probability assumptions with respect to assets with maturities in excess of 10 years. Resolution of the current Rating Watch Negative status will consider the potential implications of a revised term structure of default probabilities for long-dated assets, as well as any additional credit migration with respect to the underlying portfolio, or any credit risk sales undertaken by the asset manager. Absent changes to Fitch's default probability assumptions or further collateral deterioration or credit risk sales, the ratings of the class C-1 and C-2 notes will likely be downgraded to the 'B' rating category and the rating of the class D notes will likely be downgraded to the 'CCC' rating category. The ratings of the class C-1, C-2 and D notes address the likelihood that investors will receive ultimate and compensating interest payments, as per the governing documents, as well as the aggregate principal amount by the stated maturity date. Periodic payments on the notes are distributed on a quarterly basis in February, May, August and November until the stated maturity on Feb. 5, 2036. TABERNA PREFERRED: Fitch Puts Five Low-B Ratings Under Neg. Watch ----------------------------------------------------------------- Fitch Ratings has placed these notes of TABERNA PREFERRED FUNDING IV, LTD./Inc. on Rating Watch Negative: -- $303,535,490 class A-1 'AA+'; -- $50,000,000 class A-2 'AA-'; -- $20,000,000 class A-3 'A+'; -- $81,450,000 class B-1 'A'; -- $7,000,000 class B-2 'A'; -- $45,516,994 class C-1 'BB+'; -- $20,312,350 class C-2 'BB+'; -- $35,550,638 class C-3 'BB+'; -- $21,709,379 class D-1 'B-'; -- $13,505,980 class D-2 'B-. Taberna IV is a static collateralized debt obligation supported by a portfolio of trust preferred securities and subordinated debt issued by subsidiaries of real estate investment trusts, real estate operating companies, homebuilders and specialty finance companies, as well as senior debt securities and commercial mortgage-backed securities. Of the total portfolio, approximately 85.9% is comprised of trust preferred securities and subordinated debt, approximately 11.1% of senior debt securities and 3% of CMBS. The collateral was selected and is monitored by Taberna Capital Management LLC. Fitch's rating actions reflect heightened concern related to continued negative portfolio credit migration, as well as additional default activity. Based on Fitch's public and shadow ratings, the average credit quality of Taberna IV migrated to the 'B/B-' range from the 'B+/B' range at the time of Fitch's last review. Currently, 25.6% of the portfolio is currently publicly or shadow rated 'CCC+' or below as compared to 26.2% at last review. However, approximately 7.6% of the portfolio has experienced negative rating migration since Fitch's last review. In addition, 26.5% of the underlying collateral is currently on Rating Watch Negative or has a Negative Rating Outlook. Taberna IV currently has five assets deemed to be in default per the transaction's trustee report, representing approximately 15.0% of the portfolio. Three of the five exposures were treated as defaulted for the purposes of Fitch's review of the transaction. Given the rapidly evolving pressures facing mortgage REITs and homebuilders, Fitch treated exposures rated or shadow rated 'CC' or lower as defaulted with 100% severity in an effort to anticipate future collateral defaults. Trustee-reported asset defaults caused the failure of the class A/B, C, D and E overcollateralization tests. As of the last payment date, approximately $3.9 million of interest proceeds were diverted to pay down the principal of the class A-1 notes due to the breach of the class A/B OC test. As announced on July 1, 2008, Fitch is in the process of examining its default probability assumptions with respect to assets with maturities in excess of 10 years. Resolution of the current Rating Watch Negative status will consider the potential implications of a revised term structure of default probabilities for long-dated assets, as well as any additional credit migration with respect to the underlying portfolio, or any credit risk sales undertaken by the asset manager. Absent changes to Fitch's default probability assumptions or further collateral deterioration or credit risk sales, the ratings of the classes notes placed on Rating Watch Negative will likely be downgraded as follows: class A-1 and A-2 to the 'A' rating category; class A-3 to the 'BBB' rating category; class B-2 to the 'BB' rating category; class C-1, C-2 and C-3 to the 'B' rating category; and class D-1 and D-2 to the 'CCC' rating category. The ratings of the class A-1, A-2, A-3, B-1 and B-2 notes address the likelihood that investors will receive full and timely payments of interest, as per the governing documents, as well as the aggregate principal amount by the stated maturity date. The ratings of the class C-1, C-2, D-1 and D-2 notes address the likelihood that investors will receive ultimate and compensating interest payments, as per the governing documents, as well as the aggregate principal amount by the stated maturity date. Periodic payments on the notes are distributed on a quarterly basis in February, May, August and November until the stated maturity on May 5, 2036. TABERNA PREFERRED: Portfolio Credit Worries Cue Fitch's Neg. Watch ------------------------------------------------------------------ Fitch Ratings has placed these notes of TABERNA Preferred Funding V, LTD./Inc. on Rating Watch Negative: -- $96,290,408 class A-1LA 'AAA'; -- $240,726,021 class A-1LAD 'AAA'; -- $60,000,000 class A-1LB 'AA+'; -- $90,000,000 class A-2L 'A+'; -- $51,392,240 class A-3L 'B'; -- $36,148,183 class A-3FV 'B'; -- $25,831,501 class A-3FX 'B'. Taberna V is a static collateralized debt obligation supported by a portfolio of trust preferred securities and subordinated debt issued by subsidiaries of real estate investment trusts, real estate operating companies, homebuilders and specialty finance companies, as well as senior debt securities and commercial mortgage-backed securities. Of the total portfolio, approximately 89.2% is comprised of trust preferred securities and subordinated debt, approximately 3.8% of senior debt securities and 7.1% of CMBS. The collateral was selected and is monitored by Taberna Capital Management LLC. Fitch's rating actions reflect heightened concern related to continued negative portfolio credit migration, as well as additional default activity. Based on Fitch's public and shadow ratings, the average credit quality of Taberna V remains in 'B/B-' range since the time of Fitch's last review. Currently, 24.6% of the portfolio is publicly or shadow rated 'CCC+' or below as compared to 25.1% at last review. However, approximately 7.9% of the portfolio has experienced negative rating migration since Fitch's last review and 29.1% of the underlying collateral is currently on Rating Watch Negative or has a Negative Rating Outlook. Taberna V currently has five assets deemed to be in default per the transaction's trustee report, which totals $125.6 million or approximately 18.1% of the portfolio. Three of the five exposures were treated as defaulted for the purposes of Fitch's previous review of the transaction. Additionally, one security, which was previously classified as defaulted, underwent a distressed debt exchange increasing its notional to $32 million from $25.6 million. While the notional amount of this security increased, Fitch views it as highly speculative. Given the rapidly evolving credit pressures facing mortgage REITs and homebuilders, Fitch treated exposures rated or shadow rated 'CC' or lower as defaulted with 100% severity in an effort to anticipate future collateral defaults. Trustee-reported asset defaults caused the failure of the class A-2L, A-3, B-1L and B-2 overcollateralization tests. As of the last payment date, approximately $3.5 million of interest proceeds were diverted to pay down the principal of the class A-1LA and A-1LAD notes, pro rata, due to the breach of the class A/B OC test. . As announced on July 1, 2008, Fitch is in the process of examining its default probability assumptions with respect to assets with maturities in excess of 10 years. Resolution of the current Rating Watch Negative status will consider the potential implications of a revised term structure of default probabilities for long-dated assets, as well as any additional credit migration with respect to the underlying portfolio, or any credit risk sales undertaken by the asset manager. Absent changes to Fitch's default probability assumptions or further collateral deterioration or credit risk sales, the ratings of the classes of notes placed on Rating Watch Negative will likely be downgraded as follows: class A-1LA and A-1LAD to the 'AA' rating category; class A-1LB to the 'A' rating category; class A-2L to the 'BBB' rating category; and class A-3L, A-3FV and A-3FX to the 'CCC' rating category. The ratings of the class A-1LA, A-1LAD and A-1LB notes address the likelihood that investors will receive full and timely payments of interest, as per the governing documents, as well as the aggregate principal amount by the stated maturity date. The ratings of the class A-2L, A-3L, A-3FV and A-3FX notes address the likelihood that investors will receive ultimate and compensating interest payments, as per the governing documents, as well as the aggregate principal amount by the stated maturity date. Periodic payments on the notes are distributed on a quarterly basis in February, May, August and November until the stated maturity on Aug. 5, 2036. TABERNA PREFERRED: Fitch Places 'BB-' Ratings Under Negative Watch ------------------------------------------------------------------ Fitch Ratings has placed these notes of TABERNA Preferred Funding VI, LTD./Inc. on Rating Watch Negative: -- $97,000,000 class C 'BBB+'; -- $43,689,828 class D-1 'BB-'; -- $10,171,150 class D-2 'BB-'. Taberna VI is a managed collateralized debt obligation supported by a portfolio of trust preferred securities and subordinated debt issued by subsidiaries of real estate investment trusts, real estate operating companies, homebuilders and specialty finance companies, as well as senior debt securities and commercial mortgage-backed securities. Of the total portfolio, approximately 79% is comprised of trust preferred securities and subordinated debt, approximately 14.6% of senior debt securities and 6.4% of CMBS. The collateral was selected and is monitored by Taberna Capital Management LLC. Fitch's rating actions reflect heightened concern related to continued negative portfolio credit migration, as well as additional default activity. Based on Fitch's public and shadow ratings, the average credit quality of Taberna VI has migrated to the 'B/B-' range from the 'B+/B' range at the time of Fitch's last review. Currently, 24.1% of the portfolio is publicly or shadow rated 'CCC+' or below as compared to 25.7% at last review. However, approximately 13.7% of the portfolio has experienced negative rating migration since Fitch's last review and 27.5% of the underlying collateral is currently on Rating Watch Negative or has a Negative Rating Outlook. Taberna VI currently has four assets deemed to be in default per the transaction's trustee report, representing approximately 15.1% of the portfolio. Two of the four exposures were treated as defaulted for purposes of Fitch's previous review of the transaction. Additionally, one security, which was previously classified as defaulted, underwent a distressed debt exchange increasing its notional to $31.3 million from $25 million. While the notional amount of this security increased, Fitch views it as highly speculative. Given the rapidly evolving credit pressures facing mortgage REITs and homebuilders, Fitch treated exposures rated or shadow rated 'CC' or lower as defaulted with 100% severity in an effort to anticipate future collateral defaults. Trustee-reported asset defaults caused the failure of the class A/B/C, D, E and F overcollateralization tests. As of the last payment date, approximately $16.7 million of interest proceeds were diverted to pay down the principal of the class A-1A and A-1B notes, pro rata, due to the breach of the class A/B/C and D OC tests. As announced on July 1, 2008, Fitch is in the process of examining its default probability assumptions with respect to assets with maturities in excess of 10 years. Resolution of the current Rating Watch Negative status will consider the potential implications of a revised term structure of default probabilities for long-dated assets, as well as any additional credit migration with respect to the underlying portfolio, or any credit risk sales undertaken by the asset manager. Absent changes to Fitch's default probability assumptions or further collateral deterioration or credit risk sales, the ratings of the classes of notes placed on Rating Watch Negative will likely be downgraded as follows: class C to the 'BB' rating category; and class D-1 and D- 2 to the 'B' rating category. The ratings of the class C, D-1 and D-2 notes address the likelihood that investors will receive ultimate and compensating interest payments, as per the governing documents, as well as the aggregate principal amount by the stated maturity date. Periodic payments on the notes are distributed on a quarterly basis in February, May, August and November until the stated maturity on Dec. 5, 2036. TABERNA PREFERRED: Fitch Puts 'BB' Notes Rating Under Neg. Watch ---------------------------------------------------------------- Fitch Ratings has placed these notes of TABERNA Preferred Funding VII, LTD./Inc. (Taberna VII) on Rating Watch Negative: -- $120,000,000 class A-1LB 'AAA'; -- $25,000,000 class A-2LA 'AA'; -- $50,000,000 class A-2LB 'AA-'; -- $57,000,000 class A-3L 'BBB+'; -- $41,423,588 class B-1L 'BB'. Taberna VII is a managed collateralized debt obligation supported by a portfolio of trust preferred securities and subordinated debt issued by subsidiaries of real estate investment trusts, real estate operating companies, homebuilders and specialty finance companies, as well as senior debt securities, commercial mortgage- backed securities and commercial real estate loans. Of the total portfolio, approximately 69.6% is comprised of trust preferred securities and subordinated debt, approximately 20.8% of senior debt securities and 9.6% of CMBS and CRE loans. The collateral was selected and is monitored by Taberna Capital Management LLC. Fitch's rating actions reflect heightened concern related to continued negative portfolio credit migration, as well as additional default activity. Based on Fitch's public and shadow ratings, the average credit quality of Taberna VII has migrated to the 'B/B-' range from the 'B+/B' range at the time of Fitch's last review, which continues to fail the transaction's weighted average rating factor covenant. Currently, 22.7% of the portfolio is publicly or shadow rated 'CCC+' or below as compared to 18.2% at last review. Approximately 26.4% of the portfolio has experienced negative rating migration since Fitch's last review and 36.6% of the underlying collateral is currently on Rating Watch Negative or has a Negative Rating Outlook. Taberna VII currently has three assets deemed to be in default per the transaction's trustee report, representing approximately 9.4% of the portfolio. Two of the three exposures were treated as defaulted for the purposes of Fitch's previous review of the transaction. Additionally, one security, which was previously classified as defaulted, underwent a distressed debt exchange increasing its notional to $24.2 million from $19.4 million. While the notional amount of this security increased, Fitch views it as highly speculative. Given the rapidly evolving credit pressures facing mortgage REITs and homebuilders, Fitch treated exposures rated or shadow rated 'CC' or lower as defaulted with 100% severity in an effort to anticipate future collateral defaults. Trustee-report asset defaults caused the failure of the class A-3, B-1L and B-2L overcollateralization tests. As of the last payment date, approximately $2.5 million of interest proceeds were diverted to pay down the principal of the class A-1LA notes due to the breach of the class A-3L and B-1L OC tests. As announced on July 1, 2008, Fitch is in the process of examining its default probability assumptions with respect to assets with maturities in excess of 10 years. Resolution of the current Rating Watch Negative status will consider the potential implications of a revised term structure of default probabilities for long-dated assets, as well as any additional credit migration with respect to the underlying portfolio, or any credit risk sales undertaken by the asset manager. Absent changes to Fitch's default probability assumptions or further collateral deterioration or credit risk sales, the ratings of the classes of notes placed on Rating Watch Negative will likely be downgraded as: class A-1LB to the 'AA' rating category; class A-2LA to the 'A' rating category; class A-2LB to the 'BBB' rating category; class A-3L to the 'B' rating category and class B-1L to the 'CCC' rating category. The ratings of the class A-1LB and A-2LA notes address the likelihood that investors will receive full and timely payments of interest, as per the governing documents, as well as the aggregate principal amount by the stated maturity. The ratings of the class A-2LB, A-3L and B-1L notes address the likelihood that investors will receive ultimate and compensating interest payments, as per the governing documents, as well as the aggregate principal amount by the stated maturity date. Periodic payments on the notes are distributed on a quarterly basis in February, May, August and November until the stated maturity on Feb. 5, 2037. TENNESSEE OUTDOORS: Case Summary & 20 Largest Unsecured Creditors ----------------------------------------------------------------- Debtor: Tennessee Outdoors RV-Auto & Sports Center, LLC dba Tennessee Outdoors RV-Auto & ATV Center 116 TN Outdoors Dr. Crossville, TN 38555 Bankruptcy Case No.: 08-05984 Type of Business: The Debtor is a recreational vehicle dealer. See http://www.ctnoutdoors.com/ Chapter 11 Petition Date: July 14, 2008 Court: Middle District of Tennessee (Cookeville) Judge: George C. Paine II Debtor's Counsel: Steven L. Lefkovitz, Esq. Email: Stevelefkovitz@aol.com 618 Church St. Ste. 410 Nashville, TN 37219 Tel: (615) 256-8300 Fax: (615) 250-4926 Total Assets: $11,943,947 Total Debts: $9,056,135 Debtor's 20 Largest Unsecured Creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ Monaco Coach Corp. $21,241 91320 Coburg Ind. Coburg, OR 97408 AmSouth/Regions 6 computers & phone $15,000 2050 Pkwy. Office CR server; value of RCN4-Bankruptcy security: $5,000 Birmingham, AL 35244 Outpost CMNCTNS $8,700 2993 Tyrone Blvd. N. St. Peters, FL 33710 Coast Dist. Sys. $5,430 Coachmen RV Co. $5,000 CBS Outdoor $3,150 Staples Credit Plan $1,684 Best One Tire Svc. $1,431 Wurth USA $1,349 Fastenal Co. $1,300 Accident Fund $1,119 Autoglass of America $1,021 Club Car $893 East Penn Mfg. $867 Dutchmen Mfg. $808 Brown Insurance GRP $759 Hi Fi Village $716 King Controls $703 Lantz Equip. Repair $573 UPS $541 TRES PALACIOS: Moody's Withdraws B1 Corporate Family Rating ----------------------------------------------------------- Moody's Investors Service has withdrawn the ratings for Tres Palacios Gas Storage, L.L.C. due to the cancellation of the syndication of the proposed credit facilities rated on Jan. 24, 2008. TPGS has no rated debt at this time. The ratings being withdrawn are the B1 corporate family rating, the B1 probability of default rating and the B1 ratings on the proposed senior secured credit facilities that were to be comprised of a $100 senior secured term loan, a $285 million senior secured construction loan and a $50 million senior secured revolving loan. TPGS is developing a high-deliverability natural gas salt dome storage project in Matagorda County, Texas and is wholly owned by NGS Energy Fund, LP. TRIBUNE CO: Publisher, Top Editor Resign as Shakeups Continue ------------------------------------------------------------- The Wall Street Journal says top executives of Tribune Co.'s two biggest newspapers resigned, with the publication preparing to go through another round of layoffs and shrink the number of its printed pages. David Hiller, publisher of the Los Angeles Times, stepped down after nearly two years on the job, WSJ states. In that time, in an effort to impose tough cost cuts, he had pushed out two editors, Dean Baquet and James O'Shea, WSJ relates. Also Monday, Ann Marie Lipinski quit as editor of the Chicago Tribune, WSJ adds. WSJ, citing Ms. Lipinski, says the post is not the fit it once was and the new owners, referring to Tribune's new management led by chief executive Sam Zell, must have their own editor, compatible with their style and goals. According to WSJ, it is unclear when the decision was made about Mr. Hiller's departure. WSJ says it's possible Mr. Hiller didn't move quickly as management wanted to implement new cost cuts. WSJ, quoting Randy Michaels, Tribune's chief operating officer, said the company plans to name a publisher for the L.A. Times by the end of the summer. In the interim, he and Tribune's new chief administrative officer, will oversee operations, The Journal adds. Gerould W. Kern, a longtime Tribune employee, will succeed Ms. Lipinski as editor. About Tribune Co. Headquartered in Chicago, Illinois, Tribune Company (NYSE: TRB) -- http://www.tribune.com/-- is a media company, operating businesses in publishing, interactive and broadcasting. It reaches more than 80% of U.S. households and is the only media organization with newspapers, television stations and websites in the nation's top three markets. In publishing, Tribune's leading daily newspapers include the Los Angeles Times, Chicago Tribune, Newsday (Long Island, New York), The Sun (Baltimore), South Florida Sun-Sentinel, Orlando Sentinel and Hartford Courant. The company's broadcasting group operates 23 television stations, Superstation WGN on national cable, Chicago's WGN-AM and the Chicago Cubs baseball team. Tribune, like other newspaper outlets, is suffering a decline in publishing revenues due to online competition. Chicago Tribune media columnist Phil Rosenthal says the newspaper industry troubles are compounded at Tribune by the debt load Tribune took on late 2007 in going private -- an $8,200,000,000 transaction engineered by Sam Zell, who became the company's chairman and chief executive. Mr. Rosenthal says Tribue has major payment obligations due in 2008 and 2009. Mr. Zell, according to Mr. Rosenthal, has said the 2008 obligations should be covered through Cablevision Systems Corp.'s $650,000,000 deal to acquire control of Newsday, Tribune's paper in Long Island, as well as through a $300,000,000 asset- backed commercial paper facility with Barclays Bank PLC. Mr. Rosenthal says the planned sale of the Chicago Cubs and Wrigley Field is expected to help cover 2009 obligation. TSC ARTEFFECTS: Case Summary & Five Largest Unsecured Creditors --------------------------------------------------------------- Debtor: TSC Arteffects, Inc. 6130 Shiloh Road Alpharetta, GA 30005 Bankruptcy Case No.: 08-21859 Type of Business: The Debtor manufactures and sells footwear. Chapter 11 Petition Date: July 14, 2008 Court: Northern District of Georgia (Gainesville) Judge: Robert Brizendine Debtor's Counsel: Eric E. Thorstenberg, Esq. Eric E. Thorstenberg LLC 6065 Roswell Road, Northeast Suite 621 Atlanta, GA 30328 Tel: (404) 843-8491 Estimated Assets: $1,000,000 to $10,000,000 Estimated Debts: $1,000,000 to $10,000,000 Debtor's list of its five largest unsecured creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ Merrill Lynch Business Line of Credit $1,582,080 Financial Services Inc. Attn: Joseph A. Urciuoli, CEO 800 Scudders Mill Road Plainsboro, NJ 08536-1606 CH Robinson Worldwide Customs Fees $162,000 3800 North Camp Creek, Parkway Southwest Atlanta, GA 30344 Federal Express Shipping Charges $35,000 3875 Airways Module H3 Department 4634 Memphis, TN 38116 William G. Leonard, Esq. Legal Fees $30,000 Forsyth County Tax Commissioner Property Taxes $15,000 UNITED RENTALS: Waives Indices Condition in Dutch Auction Offer --------------------------------------------------------------- United Rentals Inc. will waive the condition to its modified Dutch auction tender offer that states the Dow Jones Industrial Average and the NASDAQ Composite Index do not decrease at any point by more than 10% from the close of trading on June 16, 2008. This condition was triggered as a result of declines in these market indices. The company commenced its tender offer, in which the company is offering to purchase up to 27,160,000 shares of its common stock at a price not less than $22 nor greater than $25 per share, on June 17, 2008. In connection with the waiver, the company has not revised the $22 to $25 tender offer price range. The tender offer is scheduled to expire at 5:00 p.m., Eastern Time, today, July 16, 2008, unless extended by the company. Tenders of shares must be made on or prior to the expiration of the tender offer and may be withdrawn at any time on or prior to the expiration of the tender offer, in each case in accordance with the procedures described in the tender offer materials. The tender offer is subject to a number of terms and conditions, but is not conditioned on receipt of financing or any minimum number of shares being tendered. In connection with the waiver of the market indices movement condition, the company also amended this condition so that it is only triggered in the future in the event specified market indices drop by more than 15% from the close of trading on June 16, 2008. The waiver of the market indices movement condition is not a waiver of any other condition or a waiver with respect to any other facts or circumstances. The tender offer remains subject to the satisfaction of the other conditions set forth in the tender offer materials, well as the company's right to amend the terms of the tender offer in the manner and upon the terms set forth in the tender offer materials. About United Rentals Headquartered in Greenwich, Connecticut, United Rentals Inc. (NYSE: URI) -- http://www.unitedrentals.com/ -- is an equipment rental company with an integrated network of over 690 rental locations in 48 states, 10 Canadian provinces and Mexico. The company's approximately 10,900 employees serve construction and industrial customers, utilities, municipalities, homeowners and others. The company offers for rent over 20,000 classes of rental equipment with a total original cost of $4.2 billion. * * * As reported in the Troubled Company Reporter on June 16, 2008, Fitch Ratings has affirmed the long-term issuer default rating for United Rentals (North America) Inc. at 'BB-' and downgraded parent company, United Rentals Inc. IDR to 'B+' from 'BB-'. Approximately $2.6 billion in debt was affected by this rating action. The rating action follows the company's statement that it had repurchased all of its preferred stock for $679 million and intends to repurchase 27.16 million shares of common stock. VEGA CAPITAL: Moody's Assigns Ba3 Rating to $63MM Notes ------------------------------------------------------- Moody's Investors Service assigned these ratings to notes issued by Vega Capital Ltd. -- A3 to the $21,000,000 Series 2008-1 Class A Principal At-Risk Variable Rate Notes due June 24, 2011; -- Baa2 to the $22,500,000 Series 2008-1 Class B Principal At-Risk Variable Rate Notes due June 24, 2011; -- Ba3 to the $63,900,000 Series 2008-I Class C Principal At-Risk Variable Rate Notes due June 24, 2011. Investors in the notes effectively provide reinsurance coverage to Swiss Reinsurance Company from five perils: certain hurricanes in the North Atlantic, certain windstorms in Europe, certain earthquakes in California, certain earthquakes in Japan, and certain typhoons in Japan. Moody's ratings of the notes address the ultimate cash receipt of all required interest and principal payments, as provided by the Notes' governing documents, and are based on the expected loss posed to the Noteholders, relative to the promise of receiving the present value of such payments. The ratings are based on Moody's analysis of the probability of occurrence of qualifying events, their timing, and the severity of losses experienced by investors should those events occur during the risk period. Moody's review of the transaction has included (i) extensive review of the technical basis, methodology, and historical data used to develop the probabilistic risk model used by EQECAT, Inc. for the analysis of potential losses and (ii) sensitivity analysis of critical parameters to the model. This review, together with a detailed analysis of the transaction's legal structure and the financial strength of the various parties to the transaction, provided Moody's with sufficient comfort that the resulting ratings adequately capture the risk to investors in these securities. CROSSWINDS AT VERMILLION: Case Summary & 11 Largest Creditors ------------------------------------------------------------- Debtor: Crosswinds at Vermillion, LLC 41050 Vincenti Court Novi, MI 48375 Bankruptcy Case No.: 08-31447 Chapter 11 Petition Date: July 14, 2008 Court: Western District of North Carolina (Charlotte) Debtors' Counsel: Travis W. Moon, Esq. (tmoon@lawhms.com) Hamilton Moon Stephens Steele Martin 2020 Charlotte Plaza 201 S. College Street Charlotte, NC 28244-2020 Tel: (704) 344-1117 Estimated Assets: $10 million to $50 million Estimated Debts: $10 million to $50 million Consolidated Debtors' List of 11 Largest Unsecured Creditors: Entity Claim Amount ------ ------------ Crosswinds National Inc. $240,000 22920 Venture Drive Novi, Michigan 48375 New Vermillion LLC $43,276 13815 Cinnabar Place Huntersville, North Carolina 28078 ForeSite Land Surveying $12,711 5950 Fairview Road, Suite 100 Charlotte, North Carolina 28210 Amicus Engineering $10,000 Interstate Seeding $6,918 D.J. Mullis Well Drilling $3,428 Grace Development $2,124 Porter's Construction $478 PBS&J Engineers $400 Isaacs $200 Dash Courier Service $49 VERTIS INC: Noteholders Support Plan; Files Chapter 11 Petition --------------------------------------------------------------- Vertis Inc., dba Vertis Communications, said that as a result of the strong support received for its prepackaged plan of reorganization, the company instituted the second phase of its strategy and commenced voluntary proceedings under chapter 11 of the U.S. Bankruptcy Code to seek confirmation of the plan. Once the plan becomes effective, Vertis will consummate its previously announced merger with American Color Graphics. A total of 100% in dollar amount and 100% in number of holders of Vertis' 9.75% senior secured second lien notes due 2009, 98.6% in dollar amount and 98.3% in number of holders of Vertis' 10.875% senior notes due 2009 and 100% in dollar amount and 100% in number of holders of Vertis' 13.5% senior subordinated notes due 2009 voted to approve the plan. "[These] actions are a result of the noteholders' continuing strong support of our merger with American Color Graphics and financial restructuring plan," said Mike DuBose, chairman and CEO of Vertis. "The restructuring under the Plan will allow the company to dramatically reduce debt and interest cost, complete its reorganization and merger in just a few short months, and refocus investments into the business." Mr. DuBose added, "Building on the operational improvements initiated 18 months ago, this financial restructuring and merger is the next step in our turnaround strategy, which has gained tremendous support from stakeholders, employees, customers and vendor partners. The strong support of this plan should facilitate completing the restructuring and merger by late summer so we can immediately begin the implementation of our integration plans with American Color Graphics, allowing us to further leverage our combined best-in-class products, services and employees." Vertis anticipates it will receive court authority to pay employee wages and benefits without interruption and continue to pay trade creditors and suppliers in the ordinary course of business. The chapter 11 reorganization is expected to conclude in 60 days. The focal point of the plan is the agreement between Vertis and American Color Graphics, two of the largest printing and premedia companies in North America, to merge American Color's operations into Vertis' nationwide marketing and printing services platform. The merger will allow both companies to enrich their core manufacturing capabilities relevant to the production of advertising inserts and newspaper products. It will also enable them to make available an unprecedented scope of premedia and workflow solutions to their customers. GE's $380 Million DIP Fund In conjunction with the prepackaged chapter 11 cases, Vertis has obtained $380 million in debtor-in-possession financing from GE Commercial Finance. The DIP financing will provide the company with sufficient liquidity until the prepackaged plan is consummated. Vertis has also obtained commitments for $650 million in exit financing, which will become effective upon consummation of the prepackaged plan and fund the combined company's working capital needs. The company anticipates that the exit financing will consist of a $250 million senior secured revolving credit exit facility with GE and a $400 million exit facility with Morgan Stanley Senior Funding, Inc. ACG Files for Chapter 11 Bankruptcy American Color Graphics also commenced voluntary chapter 11 proceedings and filed its own prepackaged plan after more than 99.9% in dollar amount and 95.3% in number of its 10% senior secured second lien notes due 2010 that voted on the ACG plan voted to approve it. These consensual financial restructurings will reduce the combined company's debt obligations (including the off-balance sheet accounts receivable facility and approximately $248 million of Vertis Holdings Mezzanine Notes) by approximately $1 billion before transaction fees and expenses. The noteholders of Vertis and American Color Graphics will exchange their bonds for an aggregate of $550 million in new notes and substantially all of the new equity in the merged company. "The Plan filed today, once effective, should enable the new Vertis Communications to have a long and prosperous future," Mr. DuBose noted. "It's an exciting time for the company, our business partners, customers, suppliers and employees." Vertis filed its voluntary chapter 11 petitions and plan in the U.S. Bankruptcy Court for the District of Delaware in Wilmington, as did American Color Graphics. Information about the bankruptcy case can be found at http://www.vertisinc.com/Vertis_Reorganization As reported by the Troubled Company Reporter on June 3, 2008, Vertis Inc., American Color Graphics and their noteholders entered into restructuring agreements pursuant to which the companies and consenting noteholders have agreed to consummate the restructuring through prepackaged chapter 11 plans of reorganization for each company in order to more efficiently exchange the notes. About American Color American Color Graphics Inc. -- http://www.americancolor.com/-- is one of North America's largest and most experienced full service premedia and print companies, with eight print locations across the continent, six regional premedia centers, photography studios nationwide and a growing roster of customer managed service sites. The company provides solutions and services such as asset management, photography, and digital workflow solutions that improve the effectiveness of advertising and drive revenues for their customers. About Vertis Headquartered in Baltimore, Vertis Inc. dba Vertis Communications -- http://www.vertisinc.com/-- is a provider of print advertising and direct marketing solutions to America's retail and consumer services companies. At Dec. 31, 2007, the company's consolidated balance sheet showed $528.2 million in total assets and $1.403 billion in total liabilities, resulting in a $875.1 million total stockholders' deficit. Going Concern Doubt Deloitte & Touche LLP, in Baltimore, Maryland, expressed substantial doubt about Vertis Inc.'s ability to continue as a going concern after auditing the company's consolidated financial statements for the years ended Dec. 31, 2007, and 2006. The auditing firm said that the company has incurred recurring net losses and is experiencing difficulty in generating sufficient cash flow to meet its obligations and sustain its operations. * * * As reported in the Troubled Company Reporter on May 29, 2008, Moody's Investors Service has affirmed the Ca corporate family rating for Vertis Inc., while changing the probability of default rating to Ca from Ca/LD, after the company's statement of a merger with American Color Graphics Inc. coupled with a comprehensive restructuring plan. VERTIS HOLDINGS: Case Summary & 30 Largest Unsecured Creditors -------------------------------------------------------------- Debtor: Vertis Holdings, Inc. aka Big Flower Holdings, Inc. 250 West Pratt Street, 18th Floor Baltimore, MD 21201 Bankruptcy Case No.: 08-11460 Debtor-affiliates filing separate Chapter 11 petitions: Entity Case No. ------ -------- Vertis, Inc. 08-11461 Enteron Group, LLC 08-11462 Webcraft, LLC 08-11463 Vertis Mailing, LLC 08-11464 Webcraft Chemicals, LLC 08-11465 USA Direct, LLC 08-11466 Type of Business: Vertis Inc. is a premier provider of targeted advertising and marketing solutions to America's leading retail and consumer services companies. See http://www.vertisinc.com/ Chapter 11 Petition Date: July 15, 2008 Court: District of Delaware (Delaware) Judge: Christopher S. Sontchi Debtors' Counsel: Mark D. Collins, Esq. (collins@RLF.com) Michael Joseph Merchant, Esq. (merchant@rlf.com) Richards Layton & Finger, P.A. One Rodney Square P.O. Box 551 Wilmington, DE 19899 Tel: (302) 651-7700 Fax: (302) 651-7701 Estimated Assets: $500,000,000 to $1,000,000,000 Estimated Debts: More than $1,000,000,000 Debtors' list of its 30 largest unsecured creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ Bank of New York, as Indenture Unsecured Debt $372,203,125 Trusteee for the 10 7/8% Senior Notes Due 2009 101 Barclay Street New York, NY 10286 Attn: Corporate Trust Admin. TeleFax: (212) 896-7299, (212) 815-5704, (212) 815-5704 Emmet Marvin & Martin LLP Attn: Edward P. Zujkowski, Esq. 120 Broadway, 32nd Floor New York, NY 10271 Fax: (212) 238-3100 Bank of New York, as Indenture Unsecured Debt $318,258,640 Trusteee for the 13 1/2% Senior Subordinated Notes Due 2009 101 Barclay Street New York, NY 10286 Attn: Corporate Trust Admin. TeleFax: (212) 896-7299, (212) 815-5704, (212) 815-5704 Thomas H. Lee Foreign Mezzanine Debt $10,518,716 Fund IV-B L.P. c/o Thomas H. Lee Co. 100 Federal Street, 35th Floor Boston, MA 02110 Attn: Anthony J. DiNovi Scott M. Sperling Tel: (617) 227-1050 Fax: (617) 227-3514 Abitibi Consolidated Trade Debt $4,912,486 Attn: Colin Keeler 4 Gannett Drive White Plains, NY 10604-3408 Tel: (914) 640-8615 Fax: (914) 640-8917 Thomas H. Lee Foreign Mezzanine Debt $3,743,839 Fund IV L.P. c/o Thomas H. Lee Co. 100 Federal Street, 35th Floor Boston, MA 02110 Attn: Anthony J. DiNovi Scott M. Sperling Tel: (617) 227-1050 Fax: (617) 227-3514 Flint Ink Corp. Trade Debt $2,022,154 Attn: Mr. Mike Green 14909 North Beck Road Plymouth, MI 48170 Tel: (734) 781-4730 Fax: (732) 781-4790 Great-West Investors L.P. Mezzanine Debt $1,768,492 c/o Great-West Life & Annuity Insurance Company 8151 East Orchard Road, 3T2 Greenwood Village, CO 80111 Attn: Mark Corbett Thomas H. Lee Co. 100 Federal Street, 35th Floor Boston, MA 02110 Attn: Anthony J. DiNovi Scott M. Sperling Tel: (617) 227-1050 Fax: (617) 227-3514 Catalyst Paper Trade Debt $820,171 Attn: Mr. Thomas Crowley 2101 Fourth Avenue, Suite 1950 Seattle, WA 98121 Tel: (206) 838-2014 Fax: (206) 838-2071 THL Charitable Investment L.P. Mezzanine Debt $704,216 c/o Thomas H. Lee Co. 100 Federal Street, 35th Floor Boston, MA 02110 Attn: Anthony J. DiNovi Scott M. Sperling Tel: (617) 227-1050 Fax: (617) 227-3514 American Express Trade Debt $429,822 Attn: Melanie M. Sisler Tel: (877) 454-8031 P.O. Box 5543 McLean, VA 22103 American Eagle Paper Mills Trade Debt $388,532 Attn: Mr. John Fermer 1600 Pennsylvania Avenue Tyrone, PA 16686 Tel: (814) 684-6142 Fax: (814) 684-6166 Catalyst Direct Trade Debt $354,786 Attn: Mr. Marcelo Lanas 110 Marina Drive Rochester, NY 14626 Tel: (800) 453-8360 Fax: (585) 453-8361 C. Hunter Boll Mezzanine Debt $315,946 c/o Thomas H. Lee Co. 100 Federal Street, 35th Floor Boston, MA 02110 Attn: Anthony J. DiNovi Scott M. Sperling Tel: (617) 227-1050 Fax: (617) 227-3514 Warren C. Smith Jr. Mezzanine Debt $315,946 c/o Thomas H. Lee Co. 100 Federal Street, 35th Floor Boston, MA 02110 Attn: Anthony J. DiNovi Scott M. Sperling Tel: (617) 227-1050 Fax: (617) 227-3514 Myllykoski North America Trade Debt $260,428 Attn: Bendan Lesch 101 Merrit, 5th Floor Norwalk, CT 08651 Tel: (203) 858-8699, (203) 229-7414 Fax: (203) 229-7458 Pitman Company Trade Debt $216,810 Newpage Corporation Trade Debt $213,460 E.R. Smith Trade Debt $183,667 Goss International Trade Debt $160,428 United Parcel Service Trade Debt $152,925 MegTec Systems Inc. Trade Debt $131,781 Advanced Graphic Printing Trade Debt $112,815 McCoy Ltd. LLC Trade Debt $112,065 FedEx Freight Trade Debt $105,629 Suez Energy Resources Trade Debt $100,635 Liko Enterprises Co. Inc. Trade Debt $90,152 Beam Electric Company Inc. Trade Debt $85,800 Booklet Binding Inc. Trade Debt $82,698 Envelope 1 Trade Debt $79,841 Strongmail Systems Inc. Trade Debt $77,075 WATER PIK: S&P Withdraws All Ratings at Company's Request --------------------------------------------------------- Standard & Poor's Ratings Services withdrew all ratings on Fort Collins, Colorado-based Water Pik Inc., including its 'B-' corporate credit ratings. The ratings have been withdrawn at the company's request. WCI COMMUNITIES: Not in Restructuring Talks With Affiliates ----------------------------------------------------------- WCI Communities, Inc., said that, although it continues to review and evaluate alternative restructuring proposals, the company is not currently engaged in discussions with affiliates regarding such proposals. Accordingly, the Special Committee formed to review and evaluate any proposals from affiliates has been dissolved. As reported in the Troubled Company Reporter on Jun 23, 2008, the Board of Directors of WCI formed a Special Committee of disinterested members of the Board of Directors to review and evaluate alternative restructuring proposals that the company may receive from potential investors, including affiliates, on behalf of the Board and WCI. Don E. Ackerman, who will serve as Chairman of the committee, Charles E. Cobb, Jr., Hilliard M. Eure, III and Jonathan R. Macey comprised the Special Committee. The company also retained Lazard Freres & Co. LLC as its financial advisor to assist the company in developing various restructuring alternatives, which would include addressing its 4.0% Contingent Convertible Senior Subordinated Notes due 2023, which become puttable to the company at par on Aug. 5, 2008. On July 10, 2008, TCR reported that WCI commenced an exchange offer for all of its outstanding $125,000,000 4% Contingent Convertible Senior Subordinated Notes due 2023. WCI is offering to exchange $1,000 principal amount of new 16% senior secured notes due 2013 for each $1,000 principal amount of the Outstanding Notes. The exchange offer will expire at 12:00 midnight EDT on Aug. 4, 2008, unless extended or terminated by the company. Tendered notes may be withdrawn at any time prior to 12:00 midnight on the expiration date. WCI received notice on June 25 that certain holders of the company's 4.0% Subordinated Notes due 2023 intend to exercise their right to require the company to repurchase the Convertible Notes at a price of 100% of the principal amount on Aug. 5, 2008, plus any accrued interest. WCI said a holder of the Convertible Notes can exercise the option merely by providing written notice to the company from the opening of business on June 23, 2008, until the close of business on Aug. 4, 2008. About WCI Communities WCI Communities Inc. (NYSE: WCI) -- http://www.wcicommunities.com/ -- named America's Best Builder in 2004 by the National Association of Home Builders and Builder Magazine, has been creating amenity-rich, master-planned lifestyle communities since 1946. Florida-based WCI caters to primary, retirement, and second-home buyers in Florida, New York, New Jersey, Connecticut, Maryland and Virginia. The company offers traditional and tower home choices with prices from the high-$100,000s to more than $10.0 million and features a wide array of recreational amenities in its communities. In addition to homebuilding, WCI generates revenues from its Prudential Florida WCI Realty Division, and title businesses, and its recreational amenities, as well as through land sales and joint ventures. The company currently owns and controls developable land on which the company plans to build over 15,000 traditional and tower homes. The company operates in three principal business segments: Tower Homebuilding, Traditional Homebuilding, which includes sales of lots, and Real Estate Services, which includes real estate brokerage and title operations. * * * As disclosed in the Troubled Company Reporter on May 23, 2008, Standard & Poor's Ratings Services lowered its corporate credit rating on WCI Communities Inc. to 'CC' from 'CCC'. Concurrently, S&P lowered its ratings on $650 million of subordinated notes to 'C' from 'CC'. The outlook remains negative. WCI Communities Inc. still carries Moody's Investors Service's Caa2 corporate family and Caa3 senior subordinate ratings. Outlook is negative. Going Concern Doubt Ernst & Young LLP, in Miami, Florida, expressed substantial doubt about WCI Communities Inc.'s ability to continue as a going concern after auditing the company's consolidated financial statements for the year ended Dec. 31, 2007. Holders of the company's $125.0 million, 4.0% Contingent Convertible Senior Subordinated Notes due 2023 have an option of requiring the company to repurchase the convertible notes at a price of 100.0% of the principal amount on Aug. 5, 2008. Pursuant to certain amendments in the company's revolving credit facility and Senior Term Loan Agreement, the company will need to have sufficient liquidity after giving effect to, on a pro forma basis, the repurchase of the convertible notes. The company does not anticipate having sufficient liquidity to satisfy bank covenant liquidity tests. If the company is unable to obtain an amendment or waiver, issue exchange securities, or otherwise satisfy its obligations to repurchase the convertible otes, the convertible note holders would have the right to exercise remedies specified in the Indenture, including accelerating the maturity of the convertible notes, which would result in the acceleration of substantially all of the company's other outstanding indebtedness. In addition, if the company is determined to be in default on the convertible notes, it may be prohibited from drawing additional funds under the revolving credit facility, which could impair its ability to maintain sufficient working capital. WHITEHALL JEWELERS: Court Approves Auction but Junks Break-Up Fee ----------------------------------------------------------------- The Hon. Kevin Gross of the U.S. Bankruptcy Court for the District of Delaware approved the bidding procedures proposed by Whitehall Jewelers Holdings Inc. and its debtor-affiliates except the break- up fee, The Deal's Jamie Mason writes, citing Moses & Singer LLP, counsel to the Official Committee of Unsecured Creditors. The Troubled Company Reporter said on July 1, 2008, that the Debtors requested the Court, among others, for authority to enter into an asset purchase agreement with Great American Group LLC, Hudson Capital Partners LLC and Silverman Jeweler Consultants Inc.; and to approve payment of a break-up fee of $940,000 payable from the proceeds of a sale to or conducted by a competing bidder. Judge Gross found that the break-up fee wasn't set as an appropriate administrative expense and is not in the best interest of the estate, Mr. Kolod said, The Deal relates. The stalking horse bidder group may not participate in the auction after the break-up was denied, The Deal quotes Mr. Kolod as stating. The stalking horse bidders had agreed to pay the Debtors 55.5% of inventory valued between $169 million and $177 million, The Deal notes. Should the inventory's value fall between $138 million and $145 million, the stalking horse bidders will pay 53.5%, The Deal adds. With these agreement, the Debtors could get around $73.8 million to $98.2 million, The Deal suggests. The Committee said that the sale process won't maximize the value of the assets saying the sale is forced, The Deal notes. The Committee also asserted that the sale schedule is "unreasonably truncated," The Deal relates. Accord to The Deal, Mr. Kolod doesn't know whether the Debtor will look for another stalking horse bidder. Judge Gross scheduled the public sale for July 31, 2008, at 11:00 a.m. at the offices of Proskauer Rose LLP. A sale hearing is slated for Aug. 8, 2008, at 10:00 a.m. Objections to the sale are due Aug. 6, 2008, at 10:00 a.m. Bids are due either on July 27 or July 28, 2008. Due to the denial of the break-up fee, the initially set minimum bid of at least 2% higher than the stalking horse offered is canceled. Consigned Goods The Deal states that the disposal of the Debtor's $63 million consigned items has not been resolved yet. Judge Gross will decide on this matter at a July 24 hearing, according to a court document. Mr. Kolod said that Judge Gross allowed the Debtor to proceed with the sale amid uncertainties on the consignment good, The Deal notes. About Whitehall Jewelers Headquartered in Chicago, Illinois, Whitehall Jewelers Holdings, Inc. -- http://www.whitehalljewellers.com/-- own and operate 375 stores jewelry stores in 39 states. Whitehall is owned by hedge funds Prentice Capital Management and Millennium Partners LP, both of New York, and Holtzman Opportunity Fund LP of Wilkes-Barre, Pa. The company operates stores in regional and regional shopping malls under the names Whitehall and Lundstrom. The Debtors' retail stores operate under the names Whitehall (271 locations), Lundstrom (24 locations), Friedman's (56 locations, and Crescent (22 locations). As of June 23, 2008, the Debtors have about 2,852 workers. The company and its affiliates, Whitehall Jewelers Inc., filed for Chapter 11 protection on June 23, 2008 (Bankr. D. Del. Lead Case No. 08-11261). James E. O'Neill, Esq., Kathleen P. Makowski, Esq., and Laura Davis Jones, Esq., at Pachulski Stang Ziehl & Jones, LLP, and Scott K. Rutsky, Esq., at Proskauer Rose LLP, represent the Debtors in their restructuring efforts. The Debtors selected Epiq Bankruptcy Solutions LLC as their claims, noticing and balloting agent. Alan Kolod, Esq., at Moses & Singer LLP, represents The Official Committee of Unsecured Creditors. When the Debtors' filed for protection against their creditors, they listed total assets of total assets of $207,100,000 and total debts of $185,400,000. * A.M. Best Holds Ratings of 30 Health Maintenance Groups --------------------------------------------------------- A.M. Best Co. has affirmed the financial strength ratings and issuer credit ratings of 30 health maintenance organizations, downgraded nine FSRs and ICRs, upgraded eight FSRs and ICRs, assigned two FSRs and ICRs and withdrew one FSR and ICR. These ratings are based solely upon public information and present the most informed view A.M. Best can offer, short of an insurer participating in the full interactive rating process. A.M. Best uses the same rating scale and definitions as it does for its long-term financial strength interactive ratings but applies a pd modifier to ensure the user is aware of the more limited information basis for the rating. A.M. Best's HMO pd ratings will be released regularly over the next three months. Each month, A.M. Best will provide an update of the recent rating actions. A.M. Best has affirmed the FSRs and ICRs of these HMO companies: Company FSR ICR -- Aloha Care B+ (Good) "bbb-" -- CommunityCare HMO, Inc. C++ (Marginal) "b" -- DC Chartered Health Plan, Inc. B- (Fair) "bb-" -- Driscoll Children's Health Plan C- (Weak) "cc" -- Fallon Community Health Plan, Inc. B (Fair) "bb+" -- Florida Health Care Plan, Inc. B (Fair) "bb" -- Group Health Cooperative of South -- Central Wisconsin B+ (Good) "bbb-" -- Group Health Cooperative B++ (Good) "bbb" -- Group Health Cooperative of Eau Claire B- (Fair) "bb-" -- Health Alliance Plan of Michigan B++ (Good) "bbb" -- Health Plan of Michigan B- (Fair) "bb-" -- Health Plan of the Upper Ohio Valley, Inc. B (Fair) "bb" -- Health Right, Inc. C++ (Marginal) "b" -- HealthPlus of Michigan, Inc. B- (Fair) "bb-" -- HealthPlus Partners, Inc. C (Weak) "ccc" -- HMO of Northeastern Pennsylvania B (Fair) "bb" -- Managed Health, Inc. C++ (Marginal) "b+" -- McLaren Health Plan, Inc. B (Fair) "bb" -- Midwest Health Plan, Inc. B (Fair) "bb" -- New West Health Services C+ (Marginal) "b-" -- Physicians Plus Insurance CorporationB (Fair) "bb" -- Preferred Plus of Kansas, Inc. B- (Fair) "bb-" -- Security Health Plan of Wisconsin, Inc. B- (Fair) "bb-" -- SelectHealth, Inc. B+ (Good) "bbb-" -- Sharp Health Plan C++ (Marginal) "b" -- Tufts Associated Health Maintenance -- Organization, Inc. B (Fair) "bb" -- UTMB Health Plans, Inc. C++ (Marginal) "b" -- Vantage Health Plan, Inc. B- (Fair) "bb-" -- Virginia Premier Health Plan B- (Fair) "bb-" -- VIVA Health, Inc. C++ (Marginal) "b" A.M. Best has upgraded the FSRs and ICRs of these HMO companies: Company FSR ICR -- Athens Area Health Plan Select, Inc. C++ (Marginal) "b" -- El Paso First Health Plans C+ (Marginal) "b-" -- Inter Valley Health Plan, Inc. C (Weak) "ccc" -- Mount Carmel Health Plan, Inc. B++ (Good) "bbb" -- M-Plan, Inc. B (Fair) "bb" -- Neighborhood Health Plan, Inc. B (Fair) "bb" -- Seton Health Plan, Inc. B+ (Good) "bbb-" -- Upper Peninsula Health Plan, Inc. B- (Fair) "bb-" A.M. Best has downgraded the FSRs and ICRs of these HMO companies: Company FSR ICR -- Columbia United Providers, Inc. C+ (Marginal) "b-" -- Community Health Choice, Inc. C+ (Marginal) "b-" -- Community Health Plan of -- Washington, Inc. B (Fair) "bb" -- Cook Children's Health Plan C+ (Marginal) "b-" -- Inland Empire Health Plan C (Weak) "ccc" -- Preferred Health C (Weak) "ccc" -- PreferredOne Community -- Health Plan B- (Fair) "bb-" -- Santa Clara County C- (Weak) "cc" -- Scripps Clinic Health Plan -- Services, Inc. C- (Weak) "cc" A.M. Best has assigned an FSR and ICR to these HMO companies: Company FSR ICR -- PSO Health Services, LLC C (Weak) "ccc" -- WPS Health Plan, Inc. B- (Fair) "bb-" A.M. Best has withdrawn the FSR of B- (Fair) and ICR of "bb-"and assigned a category NR-5 (Not Formally Followed) to Physicians Health Plan of South Michigan, an HMO company. * Fitch: US Equipment Lease ABS Remains Stable Despite Weakness --------------------------------------------------------------- Delinquencies in U.S. equipment lease asset-backed securities remained stable in May despite continued economic weakness, according to Fitch Ratings. Fitch's 60 day+ index which tracks the performance of a portfolio of small/mid-ticket and heavy metal transactions increased only 4 basis points in May 2008 from the same point in 2007. Fitch expects delinquencies on the small/mid-ticket portfolio to continue to increase slightly over the remainder of the year and into 2009. However, overall transaction specific performance is expected to remain within Fitch's expectations, with cumulative net losses ranging from 1.50% to 5.00%. The heavy metal portfolio, on the other hand, continues to experience more pronounced weakening due to the decline in new housing starts and growing concerns related to the commercial real estate sector. In spite of the increasing delinquency trend, overall transaction specific performance remains within Fitch's expectations, resulting in sufficient credit enhancement support across transactions. Cumulative net losses are expected to fall in the range of 1.00% to 3.00% for the heavy metal portfolio. Performance Statistics In the small/mid-ticket portfolio, total delinquencies (30+ days) increased slightly to 2.51% from 2.42% in April 2008. However, the May 2008 delinquency rate is below the year-to-date average of 2.69%. In the heavy metal portfolio, 60+ day delinquencies were 1.03% compared to year-to-date average of 0.85%. . Given Fitch's expectations of steady asset performance declines, Fitch will continue to actively monitor its rated portfolio for any signs of significant deterioration. * Fitch Says High Jet Fuel Prices, Waning Demand Pressure Airlines ------------------------------------------------------------------ Record jet fuel prices and waning demand for air travel, particularly in North America and Western European markets, have placed increased pressure on many airlines, elevating the risk of default on leases and placing significant strain on values for certain aircraft types, according to Fitch Ratings. These stresses will result in declining asset performance in certain U.S. aircraft securitizations, leading Fitch to revise its asset performance outlook for aircraft securitizations to declining. Fitch has also revised its Rating Outlook for the sector to Negative, with downgrades expected to outpace upgrades over the next 12 months. 'Most at risk for negative rating action will be transactions with concentrations of older, less fuel efficient aircraft types and exposure to troubled US carriers,' said John Bella, Managing Director, Fitch Ratings. 'While Fitch expects the number of negative rating actions to increase, the magnitude of rating movements should be dampened by the higher stresses Fitch has applied following the previous value declines observed after Sept. 11, 2001.' These stresses are described in Fitch's August 2007 report, 'Global Criteria for Commercial Aircraft Operating Lease Securitizations'. Declines in airline profitability have resulted in plans for major capacity reductions, potential for fleet liquidations in concert with bankruptcy filings and, as a result, more grounded aircraft. These grounded aircraft, coupled with the record number of deliveries scheduled for the next several years could create a considerable shift in the supply and demand balance for commercial aircraft. As the available supply of un-utilized aircraft increases, lease rates and values for certain aircraft types will deteriorate. In addition, operating lease securitizations also risk increased frequency of default on existing leases made to lower tier operators. While there are evident risks facing aircraft operating lease securitization on the horizon, Fitch believes that negative rating actions will be limited in the near term as Fitch's rating criteria assumes cyclical downturns occur every five years during the term of a securitization. For more recent transactions Fitch's stresses assume deterioration akin to what was seen in 2002-2003, the most significant slump in aviation history. In addition, the long term nature of most securitized lease portfolios helps to protect them from short term cash flow deterioration. While crude oil prices have been elevated, the issue has been compounded for airlines as jet fuel 'crack spreads', essentially the cost to refine crude oil to jet fuel, have also skyrocketed in the past several months. All told, the price for a gallon of jet fuel, the airlines' largest operating cost has risen over 50% YTD. This pressure on airline profitability has been most acutely felt by US-based airlines which are further hindered by a weak US dollar. Recent bankruptcy and liquidation announcements of multiple smaller US carriers, including ATA and Skybus, evidence this pressure. The pull-back in air traffic is likely to further impact values and lease rates, particularly for older, less fuel efficient aircraft types. This concern is compounded by the record number of newer technology replacement aircraft expected to be delivered over the next several years Fitch will continue to review the aircraft lease securitizations it rates on a monthly basis to determine if these emerging trends are impacting performance to a degree commensurate with a Rating Watch or rating downgrade. * Fitch: Loan Maturity Default Factors in High Loan Delinquencies ----------------------------------------------------------------- The maturity default of one participated loan secured by a hotel/condominium development was the primary contributor to a higher U.S. commercial real estate loan CDO delinquency rate for June 2008, according to the latest CREL CDO Delinquency Index from Fitch Ratings. The index increased to 1.58% from last month's rate of 1.08%. The delinquency index includes loans that are 60 days or longer delinquent, matured balloon loans, and repurchased assets. The CREL CDO Delinquency Index of 1.58% is approximately four times the Fitch CMBS Delinquency Index of 0.39%. Although the CREL DI continues to be higher than the CMBS DI, it is not unexpected. Firstly, the assets securing the loans in a CREL CDO are either transitional in nature or highly leveraged. In addition, the CREL DI covers 35 transactions with 340 assets while the CMBS DI covers many more (500) transactions with significantly more (42,000) loans. As a result, because of the smaller number of loans in the index, one loan can have a big impact on the delinquency percentage. In fact, this month, one loan, contributed 38 basis points (bps) out of the 50 bps rise in the index. This newly matured loan is secured by a hotel/condominium development in South Florida. The whole loan was split into two pari-passu senior participations and two sequential junior participations. The two senior interests and one of the junior interests were contributed to three separate CREL CDOs. The credit enhancement for CREL CDO bonds generally reflects the higher inherent risk compared to CMBS: the average credit enhancement for CREL CDO bonds rated 'BBB-' is approximately five times that of similarly rated CMBS bonds. Of the 20 loans in the June 2008 CREL delinquency index, over one- third are land loans. It is generally acknowledged that land loans are expected to be more difficult to refinance in the capital constrained market. Fitch-rated CREL CDOs are rated with the expectation of higher default probabilities for land loans. Similarly, hotel loans, which make up the next highest property type in the index at 26% are also, in general, modeled with higher default probabilities. Two loans secured by retail properties make up the third largest component by property type at 20%. Fitch anticipates delinquencies in this category to increase given the current stress on the U.S. economy. Retail property loans represent approximately 6% of the CREL CDO loan universe. Fitch assumes 100% probability of default for loans which are 60+ days delinquent. As a result, continued increases in delinquencies will reduce the collateral managers' reinvestment cushions as the actual Fitch poolwide expected losses approach the Fitch PEL covenant. While rising delinquencies will reduce managers' reinvestment flexibility for some CREL CDOs, the transactions were originally rated to withstand some negative migration. The reductions in cushions due to CREL delinquencies at this point have not warranted the placement of any transaction on Rating Watch Negative. Fitch will continue to monitor the reinvestment cushion for individual CREL CDOs as delinquencies increase. While repurchases are a smaller percentage of the overall index compared to six months ago, asset managers continue to repurchase assets from their CDOs. For this reporting period, asset managers repurchased three assets (12 bps), including two from one CDO. The repurchased assets consist of a whole loan secured by a multifamily property and a mezzanine loan secured by an interest in an office property. Both of these loans were previously reported as 30 days or less delinquent in last month's CREL DI. In keeping with past trends, the third repurchased loan was a B- note secured by land intended for homesites. Repurchases of troubled loans are expected to be limited to the few issuers with liquidity remaining within their balance sheets. Repurchases of credit impaired assets are an important component of the index as their exclusion would overstate the performance of the CDOs. Although not included in the Index, 11 loans, representing 1.12% of the CREL CDO collateral were 30 days or less delinquent in June 2008. This statistic is up slightly from last month's total of 1.08%. Fitch views this delinquency bucket as a leading indicator for the delinquency index. The loans in the 30-day bucket have steadily increased since October 2007. Five rated assets were considered credit impaired; these assets, however, were not delinquent and not included in the Index. The decrease from last month's total of 12 credit impaired assets results from the disposition of seven U.S. subprime RMBS bonds from one CDO. These securities were sold by the CDO at a steep discount resulting in realized losses for the CDO. Fitch noted 20 reported loan extensions in June 2008, which is up from last month's total of 14. Approximately half of the extensions were a result of options contemplated at closing; while the other half were modifications from the original loan documents. These loan extensions continue to reflect the lower available liquidity for CRE loans, especially those typically found in CREL CDOs, which tend to be backed by transitional and/or highly leveraged CRE collateral. * S&P Lists Publishing Cos. Exposed to Liquidity Pressures ---------------------------------------------------------- Standard & Poor's Ratings Services highlighted 41 companies in the media and entertainment industry that are vulnerable to liquidity pressures in a prolonged credit crunch, especially if there is a recession. These issuers face a myriad of traps, including shrinking cash reserves, negative discretionary cash flow, asset sale obstacles, near-term debt maturities, lack of access to credit facilities, and covenant compliance hurdles, according to a report published on RatingsDirect titled, "Liquidity Pressures Confronting Media And Entertainment Issuers." "We believe that defaults will increase in the media and entertainment sector over the next two years," said Standard & Poor's credit analyst Hal F. Diamond, "as a result of the weakening economy, slowing discretionary consumer spending, tight credit availability, and the impact of those factors on profitability and liquidity." Many of the companies facing liquidity pressures are private equity-sponsored LBOs, which require high growth to service debt. However, a cyclical reduction in client marketing budgets is hurting advertising-dependent media companies, which have been steadily ceding market share to the Internet for the past few years. Banks are reluctant to lend, and the appetite of the public markets for new bond issuance for credits in the 'B' category or below is weak. "Asset sales are a reduced source of flexibility in prevailing credit conditions, which have also contributed to declining asset valuations," added Mr. Diamond. Financing for both financial buyers and speculative-grade companies is constrained. "Many strategic players are postponing acquiring assets in the hope that prices will drop as financially strained players become more desperate," he said. * S&P Says US States Affected by Credit-Market Disruptions ---------------------------------------------------------- U.S. states weren't immune to credit-market disruptions in the past year despite their generally solid credit profiles, Standard & Poor's Ratings Services said in its 2008 report card on the states. "Many states with auction-rate securities had to reposition or restructure their debt as demand in that market evaporated," said Standard & Poor's credit analyst Robin Prunty. "Fortunately, most states were relatively conservative with the structuring of their variable-rate securities and had proactively developed plans to reposition their debt with minimal financial impact up to this point." To date, more than $10 billion of state-related debt has been restructured. "The use of derivatives continues to be part of the overall debt strategy for many states and the disruptions in the credit markets have also caused a handful of states to terminate a number of their swaps," said Ms. Prunty in the article, "U.S. Public Finance Report Card: States Weather Credit-Market Disruptions, But Are Likely To Step Up Borrowing As Economy Slows." "For the next year, state budgets are likely to be strained because of revenue volatility amid the housing-market decline and a general economic slowdown," said Ms. Prunty. "This could ultimately lead to significantly higher debt issuance to meet budget requirements, a trend seen in prior downturns." For instance, California has already issued $3 billion of deficit bonds this year, and many states have increased their short-term borrowing for cash flow purposes, she said. * Upcoming Meetings, Conferences and Seminars --------------------------------------------- July 29, 2008 TURNAROUND MANAGEMENT ASSOCIATION Employment Issues Following Hurricanes & Disasters Centre Club, Tampa, Florida Contact: http://www.turnaround.org/ July 31 - Aug. 2, 2008 AMERICAN BANKRUPTCY INSTITUTE 4th Annual Mid-Atlantic Bankruptcy Workshop Hyatt Regency Chesapeake Bay Cambridge, Maryland Contact: http://www.abiworld.org/ Aug. 16-19, 2008 AMERICAN BANKRUPTCY INSTITUTE 13th Annual Southeast Bankruptcy Workshop Ritz-Carlton, Amelia Island, Florida Contact: http://www.abiworld.org/ Aug. 20-24, 2008 NATIONAL ASSOCIATION OF BANKRUPTCY JUDGES NABT Convention Captain Cook, Anchorage, Alaska Contact: http://www.nabt.com/ Aug. 26, 2008 TURNAROUND MANAGEMENT ASSOCIATION Do's and Don'ts of Investing in a Turnaround Citrus Club, Orlando, Florida Contact: http://www.turnaround.org// Sept. 4-5, 2008 AMERICAN BANKRUPTCY INSTITUTE Complex Financial Restructuring Program Four Seasons, Las Vegas, Nevada Contact: http://www.abiworld.org/ Sept. 4-6, 2008 AMERICAN BANKRUPTCY INSTITUTE Southwest Bankruptcy Conference Four Seasons, Las Vegas, Nevada Contact: http://www.abiworld.org/ Sept. 17, 2008 TURNAROUND MANAGEMENT ASSOCIATION Real Estate / Condo Restructuring Panel Marriott North, Fort Lauderdale, Florida Contact: http://www.turnaround.org// Sept. 24-26, 2008 INTERNATIONAL WOMEN'S INSOLVENCY & RESTRUCTURING CONFEDERATION IWIRC 15th Annual Fall Conference Scottsdale, Arizona Contact: http://www.ncbj.org/ Sept. 24-27, 2008 NATIONAL CONFERENCE OF BANKRUPTCY JUDGES National Conference of Bankruptcy Judges Desert Ridge Marriott, Scottsdale, Arizona Contact: http://www.iwirc.org/ Sept. 30, 2008 TURNAROUND MANAGEMENT ASSOCIATION Private Equity Panel Centre Club, Tampa, Florida Contact: http://www.turnaround.org// Oct. 9, 2008 TURNAROUND MANAGEMENT ASSOCIATION TMA Luncheon - Chapter 11 University Club, Jacksonville, Florida Contact: http://www.turnaround.org/ Oct. 28, 2008 TURNAROUND MANAGEMENT ASSOCIATION State of the Capital Markets Citrus Club, Orlando, Florida Contact: http://www.turnaround.org// Oct. 28-31, 2008 TURNAROUND MANAGEMENT ASSOCIATION TMA Annual Convention Marriott New Orleans, Louisiana Contact: 312-578-6900; http://www.turnaround.org/ Oct. 30 & 31, 2008 BEARD GROUP & RENAISSANCE AMERICAN CONFERENCES Physicians Agreements and Ventures Contact: 800-726-2524; 903-595-3800; http://www.renaissanceamerican.com/ Nov. 19, 2008 TURNAROUND MANAGEMENT ASSOCIATION Interaction Between Professionals in a Restructuring/Bankruptcy Bankers Club, Miami, Florida Contact: 312-578-6900; http://www.turnaround.org/ Dec. 3-5, 2008 AMERICAN BANKRUPTCY INSTITUTE 20th Annual Winter Leadership Conference Westin La Paloma Resort & Spa Tucson, Arizona Contact: http://www.abiworld.org/ July 16-19, 2009 AMERICAN BANKRUPTCY INSTITUTE Northeast Bankruptcy Conference Mt. Washington Inn Bretton Woods, New Hampshire Contact: http://www.abiworld.org/ Sept. 10-12, 2009 AMERICAN BANKRUPTCY INSTITUTE 17th Annual Southwest Bankruptcy Conference Hyatt Regency Lake Tahoe, Incline Village, Nevada Contact: http://www.abiworld.org/ Oct. 5-9, 2009 TURNAROUND MANAGEMENT ASSOCIATION TMA Annual Convention Marriott Desert Ridge, Phoenix, Arizona Contact: 312-578-6900; http://www.turnaround.org/ Dec. 3-5, 2009 AMERICAN BANKRUPTCY INSTITUTE 21st Annual Winter Leadership Conference La Quinta Resort & Spa, La Quinta, California Contact: 1-703-739-0800; http://www.abiworld.org/ Oct. 4-8, 2010 TURNAROUND MANAGEMENT ASSOCIATION TMA Annual Convention JW Marriott Grande Lakes, Orlando, Florida Contact: http://www.turnaround.org/ BEARD AUDIO CONFERENCES 2006 BACPA Library Audio Conference Recording Contact: 240-629-3300; http://www.beardaudioconferences.com BEARD AUDIO CONFERENCES BAPCPA One Year On: Lessons Learned and Outlook Audio Conference Recording Contact: 240-629-3300; http://www.beardaudioconferences.com/ BEARD AUDIO CONFERENCES Calpine's Chapter 11 Filing Audio Conference Recording Contact: 240-629-3300; http://www.beardaudioconferences.com/ BEARD AUDIO CONFERENCES Carve-Out Agreements for Unsecured Creditors Contact: 240-629-3300; http://www.beardaudioconferences.com/ BEARD AUDIO CONFERENCES Changes to Cross-Border Insolvencies Audio Conference Recording Contact: 240-629-3300; http://www.beardaudioconferences.com/ BEARD AUDIO CONFERENCES Changing Roles & Responsibilities of Creditors' Committees Audio Conference Recording Contact: 240-629-3300; http://www.beardaudioconferences.com/ BEARD AUDIO CONFERENCES Chinas New Enterprise Bankruptcy Law Contact: 240-629-3300; http://www.beardaudioconferences.com/ BEARD AUDIO CONFERENCES Clash of the Titans -- Bankruptcy vs. IP Rights Audio Conference Recording Contact: 240-629-3300; http://www.beardaudioconferences.com/ BEARD AUDIO CONFERENCES Coming Changes in Small Business Bankruptcy Audio Conference Recording Contact: 240-629-3300; http://www.beardaudioconferences.com/ BEARD AUDIO CONFERENCES Corporate Bankruptcy Bootcamp: A Nuts & Bolts Primer for Navigating the Restructuring Process Audio Conference Recording Contact: 240-629-3300; http://www.beardaudioconferences.com BEARD AUDIO CONFERENCES Dana's Chapter 11 Filing Audio Conference Recording Contact: 240-629-3300; http://www.beardaudioconferences.com/ BEARD AUDIO CONFERENCES Deepening Insolvency Widening Controversy: Current Risks, Latest Decisions Audio Conference Recording Contact: 240-629-3300; http://www.beardaudioconferences.com/ BEARD AUDIO CONFERENCES Diagnosing Problems in Troubled Companies Audio Conference Recording Contact: 240-629-3300; http://www.beardaudioconferences.com/ BEARD AUDIO CONFERENCES Distressed Claims Trading Audio Conference Recording Contact: 240-629-3300; http://www.beardaudioconferences.com/ BEARD AUDIO CONFERENCES Distressed Market Opportunities Audio Conference Recording Contact: 240-629-3300; http://www.beardaudioconferences.com/ BEARD AUDIO CONFERENCES Distressed Real Estate under BAPCPA Audio Conference Recording Contact: 240-629-3300; http://www.beardaudioconferences.com/ BEARD AUDIO CONFERENCES Employee Benefits and Executive Compensation under the New Code Audio Conference Recording Contact: 240-629-3300; http://www.beardaudioconferences.com/ BEARD AUDIO CONFERENCES Equitable Subordination and Recharacterization Audio Conference Recording Contact: 240-629-3300; http://www.beardaudioconferences.com/ BEARD AUDIO CONFERENCES Examining the Examiners: Pros and Cons of Using Examiners in Chapter 11 Proceedings Audio Conference Recording Contact: 240-629-3300; http://www.beardaudioconferences.com BEARD AUDIO CONFERENCES Fundamentals of Corporate Bankruptcy and Restructuring Audio Conference Recording Contact: 240-629-3300; http://www.beardaudioconferences.com/ BEARD AUDIO CONFERENCES Handling Complex Chapter 11 Restructuring Issues Audio Conference Recording Contact: 240-629-3300; http://www.beardaudioconferences.com/ BEARD AUDIO CONFERENCES Healthcare Bankruptcy Reforms Audio Conference Recording Contact: 240-629-3300; http://www.beardaudioconferences.com/ BEARD AUDIO CONFERENCES High-Yield Opportunities in Distressed Investing Audio Conference Recording Contact: 240-629-3300; http://www.beardaudioconferences.com/ BEARD AUDIO CONFERENCES Homestead Exemptions under BAPCPA Audio Conference Recording Contact: 240-629-3300; http://www.beardaudioconferences.com/ BEARD AUDIO CONFERENCES Hospitals in Crisis: The Insolvency Crisis Plaguing Hospitals Across the U.S. Audio Conference Recording Contact: 240-629-3300; http://www.beardaudioconferences.com/ BEARD AUDIO CONFERENCES IP Rights In Bankruptcy Audio Conference Recording Contact: 240-629-3300; http://www.beardaudioconferences.com/ BEARD AUDIO CONFERENCES KERPs and Bonuses under BAPCPA Audio Conference Recording Contact: 240-629-3300; http://www.beardaudioconferences.com/ BEARD AUDIO CONFERENCES New 'Red Flag' Identity Theft Rules Audio Conference Recording Contact: 240-629-3300; http://www.beardaudioconferences.com BEARD AUDIO CONFERENCES Non-Traditional Lenders and the Impact of Loan-to-Own Strategies on the Restructuring Process Contact: 240-629-3300; http://www.beardaudioconferences.com/ BEARD AUDIO CONFERENCES Partnerships in Bankruptcy: Unwinding The Deal Audio Conference Recording Contact: 240-629-3300; http://www.beardaudioconferences.com/ BEARD AUDIO CONFERENCES Privacy Rights, Protections & Pitfalls in Bankruptcy Audio Conference Recording Contact: 240-629-3300; http://www.beardaudioconferences.com/ BEARD AUDIO CONFERENCES Real Estate Bankruptcy Audio Conference Recording Contact: 240-629-3300; http://www.beardaudioconferences.com/ BEARD AUDIO CONFERENCES Reverse Mergersthe New IPO? Audio Conference Recording Contact: 240-629-3300; http://www.beardaudioconferences.com/ BEARD AUDIO CONFERENCES Second Lien Financings and Intercreditor Agreements Audio Conference Recording Contact: 240-629-3300; http://www.beardaudioconferences.com/ BEARD AUDIO CONFERENCES Surviving the Digital Deluge: Best Practices in E-Discovery and Records Management for Bankruptcy Practitioners and Litigators Audio Conference Recording Contact: 240-629-3300; http://www.beardaudioconferences.com/ BEARD AUDIO CONFERENCES Technology as a Competitive Advantage For Todays Legal Processes Audio Conference Recording Contact: 240-629-3300; http://www.beardaudioconferences.com/ BEARD AUDIO CONFERENCES The Battle of Green & Red: Effect of Bankruptcy on Obligations to Clean Up Contaminated Property Contact: 240-629-3300; http://www.beardaudioconferences.com/ BEARD AUDIO CONFERENCES The Subprime Sector Meltdown: Legal Developments and Latest Opportunities Contact: 240-629-3300; http://www.beardaudioconferences.com/ BEARD AUDIO CONFERENCES Twenty-Day Claims Audio Conference Recording Contact: 240-629-3300; http://www.beardaudioconferences.com/ BEARD AUDIO CONFERENCES Using Virtual Data Rooms to Expedite Corporate Restructuring Audio Conference Recording Contact: 240-629-3300; http://www.beardaudioconferences.com BEARD AUDIO CONFERENCES Using Virtual Data Rooms to Expedite M&A and Insolvency Proceedings Audio Conference Recording Contact: 240-629-3300; http://www.beardaudioconferences.com/ BEARD AUDIO CONFERENCES Validating Distressed Security Portfolios: Year-End Price Validation and Risk Assessment Audio Conference Recording Contact: 240-629-3300; http://www.beardaudioconferences.com/ BEARD AUDIO CONFERENCES When Tenants File -- A Landlord's BAPCPA Survival Guide Audio Conference Recording Contact: 240-629-3300; http://www.beardaudioconferences.com/ * * * The Meetings, Conferences and Seminars column appears in the Troubled Company Reporter each Wednesday. Submissions via e-mail to conferences@bankrupt.com are encouraged. ********* 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. Raphael M. Palomino, Shimero R. Jainga, Ronald C. Sy, Joel Anthony G. Lopez, Cecil R. Villacampa, Melanie C. Pador, Ludivino Q. Climaco, Jr., Loyda I. Nartatez, Tara Marie A. Martin, Joseph Medel C. Martirez, Ma. Cristina I. Canson, Christopher G. Patalinghug, and Peter A. Chapman, Editors. Copyright 2008. 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 ***