/raid1/www/Hosts/bankrupt/TCR

/raid1/www/Hosts/bankrupt/TCR_Public/080804.mbx T R O U B L E D C O M P A N Y R E P O R T E R Monday, August 4, 2008, Vol. 12, No. 184 Headlines AFC ENTERPRISES: Moody's Assigns SGL-3 Liquidity Rating ALLIED WASTE: Earns $111.4 Million in 2008 Second Quarter AMERICAN AXLE: S&P Lowers Corp. Credit and Debt Ratings to 'B+' AMERISTAR CASINOS: Has Ba3 CFR; Gets SGL-3 from Moody's ATLANTIC MARINE: Moody's Cuts Corporate Family Rating to B2 AUSTIN CONVENTION: S&P Affirms $95MM 2006B Revenue Bonds at 'BB' BARNERT HOSPITAL: Court Approves Amended Disclosure Statement BAXL TECHNOLOGIES: Case Summary & 20 Largest Unsecured Creditors BCE INC: Moody's Assigns B1 Corporate Family Rating to NewCo BDB MANAGEMENT: Case Conversion Hearing Slated for August 18 BEST BRANDS: S&P's 'CCC' Rating Unaffected by Covenant Violation BIRCH MOUNTAIN: Will Need Investors' Funding if Sale Option Fails BOYD GAMING: Suspends Echelon Construction on Financial Woes BUFFETS HOLDINGS: Can Sell Ohio, Kentucky Properties BUFFETS HOLDINGS: Wants Confidential Pact With Realty Approved BUFFETS HOLDINGS: Taps PricewaterhouseCoopers as Tax Advisor BUILDING MATL'S: At Fitch's Neg. Watch on Likely Covenant Breach BURNSIDE AVENUE: Files for Chapter 11 Bankruptcy in Manhattan BURNSIDE AVENUE: Voluntary Chapter 11 Case Summary C32-1 INTERAIR: Voluntary Chapter 11 Case Summary CAROL FERRI: Voluntary Chapter 11 Case Summary CELL THERAPEUTICS: Selling $12MM Shares to Midsummer Investment CENTENNIAL COMMS: May 31 Balance Sheet Upside-Down By $1.0 Billion CHRYSLER LLC: Surpasses Second Quarter Financial Objectives CHRYSLER LLC: July 2008 U.S. Sales Down 29% at 98,109 Units CHRYSLER LLC: Arm Completes Renewal of $24BB Annual Financing CIPRICO INC: Gives In to Nasdaq Delisting and Suspension of Stocks COINMACH SERVICE: S&P Rates $825MM Credit Facility 'B+' COLUMBUS LOAN: Moody's Hikes Class C Notes Rating to Aaa from Ba1 COMMUNITY HEALTH: Earns $47.9 Million in 2008 Second Quarter CREDIT SUISSE: Fitch Affirms 'B+' Rating on $7.5MM Class L Certs. DAE AVIATION: Moody's Affirms Caa2 Rating on $325MM Unsec. Notes DELTA AIR: Pilots Vote on Northwest Merger Through August 11 DELTA AIR: NWA Merger to Hit Smaller Ports First, Critics Say DENNY'S CORP: June 25 Balance Sheet Upside-Down by $172 Million DEUTSCHE BANK: Moody's Junks Ratings of 70 Classes of Notes DOYLE MOORE: Voluntary Chapter 11 Case Summary ENESCO GROUP: Judge Goldgar Converts Case to Chapter 7 Liquidation ENESCO GROUP: David Brown Named as Chapter 7 Trustee EXKELL: Case Summary & 20 Largest Unsecured Creditors FGIC CORP: Fitch Junks Rating on $325MM of 6% Senior Notes FIRST HORIZON: Moody's Cuts Classes II-A-1 and II-A-2 to B1 FIRST PRIORITY: Operations Closed; SunTrust Gets Insured Deposits FORD MOTOR: Terminates Lighting Biz Sale Contract with Meridian GENERAL MOTORS: Incurs $15.5BB 2008 Second Quarter Prelim Net Loss GENERAL MOTORS: Financial Arm Posts $2.5BB Prelim Second Qtr. Loss GLOBAL DEHUMIDIFICATION: Voluntary Chapter 11 Case Summary GMAC LLC: Posts Prelim Second Quarter Net Loss of $2.5 Billion GSAA HOME: Moody's Junks Ratings on 31 Classes of Securities GSAMP MORTGAGE: Moody's Downgrades Class B-4 Rating to Caa2 HANOVER INSURANCE: Moody's Affirms FAFLIC Unit's Ba1 Rating HARRAH'S ENTERTAINMENT: Bill's Casino Fires 28 Workers HOMETOWN COMMERCIAL: Fitch Assigns 'DR6' Ratings; Removes Watch HUDSON MEZZANINE: Moody's Junks Rating of 3 Classes of 2042 Notes HUNTSMAN CORP: Earns $23.7 Million in 2008 Second Quarter INCYTE CORP: June 30 Balance Sheet Upside-Down by $237.2 Million INDYMAC BANCORP: Files Chapter 7 Protection in California INDYMAC BANCORP: Voluntary Chapter 7 Case Summary INN OF THE MOUNTAIN: Moody's Affirms B3 Corp. Family Ratings INNOPHOS INC: S&P Lifts Corporate Credit Rating to 'B+' from 'B' INSTANT WEB: Moody's Cuts Sr. Sec. 2nd Lien Term Loan to Caa2 INTERSTATE BAKERIES: Withdraws Bid for Incentive Plan Approval I/OMAGIC CORP: Dismisses Swenson Advisors as Public Accountant ISP CHEMCO: S&P Changes Outlook to Positive on Stable Performance JACOBS ENTERTAINMENT: Moody's Sees High Covenant Violation Risk JACUZZI BRANDS: S&P Cuts Credit Rating to B- & Loan Rating to CCC+ JEFFERSON COUNTY: Payment Deadline on $3.2BB Debt Moved to Nov. 17 JEFFERSON COUNTY: Moody's Downgrades $270,000,000 Debt to Ba3 JOURNAL REGISTER: Moody's Downgrades PDR to D, CFR to Ca JP MORGAN: Fitch Holds 'BB-' Rating on $4MM Class H Certificates JP MORGAN: Moody's Cuts Rating of $1.7MM Cl. P Securities to Caa1 INTERACTIVE INTERACTIVE: Balance Sheet Upside-Down by $72.3MM KATHERINE TIMBLIN: Voluntary Chapter 11 Case Summary KESHNET INTER: Voluntary Chapter 11 Case Summary KIMBALL HILL: Inks Pact to Let Wachovia to File Consolidated Claim KNIGHT COMMERCE: Seeks Bankruptcy Protection Under Chapter 11 LANTANA MENDOCINO: Personal Assets Sold Off by WestLB AG LEINER HEALTH: Has Until September 30 to File Chapter 11 Plan LEVITZ FURNITURE: Settles Long-Running Feud with Wohl/Anaheim LEVITZ FURNITURE: May Hire Oliver Wyman as Actuarial Consultant LEVITZ FURNITURE: Enters Into a Settlement Pact with WFNNB LEVITZ FURNITURE: Sets Off $304,638 Debt Owed to DFS Services LEXINGTON PRECISION: Has Until October 28 to File Chapter 11 Plan MAJESTIC STAR: Moody's Cuts CFR to Caa2, Sees Weak Liquidity MARINER HEALTH: Georgia Appeals Court Upholds $10MM PwC Ruling MEADE INSTRUMENTS: BofA Grants Waiver for Covenant Violations MERIDIAN AUTOMOTIVE: Asks Court to Close Chapter 11 Cases MERIDIAN AUTOMOTIVE: Ford Terminates Lighting Biz Sale Contract MERITAGE HOMES: Moody's Assigns SGL-2 Rating; CFR is B1 MERVYNS LLC: Gets Interim Approval of $465,000,000 DIP Financing MRV COMMUNICATIONS: Says Review Continues, Restatement Likely NETWORK COMMUNICATIONS: Moody's Assigns SGL-3; Outlook Negative NEWBURY STREET: Moody's Rates $50.6MM Notes Due 2053 Caa3 NORTHWEST AIRLINES: Pilots Vote on Delta Merger Through August 11 NORTHWEST AIRLINES: Merger to Hit Smaller Ports First, Critics Say NORTHWEST AIRLINES: Court Approves Settlement with M. Foret NORTHWEST AIRLINES: CFO Disposes of 10,886 Common Shares NORTHWEST AIRLINES: Posts $377MM Net Loss in Second Quarter 2008 NOVASTAR FINANCIAL: Files Suit Against HQ Building Owner OK LUMBER: Case Summary & 20 Largest Unsecured Creditors PACIFIC LUMBER: Emerges from Chapter 11 on July 30 PACIFIC LUMBER: BoNY Appeals Confirmation Order to District Court PACIFIC LUMBER: Asks Court to Compel Enforcement of Conf. Order PHOENIX LABS: Voluntary Chapter 11 Case Summary PHOENIX 2002-1: Moody's Downgrades Class C Euronotes to Ba3 POLYMER GROUP: S&P Trims Corp. Credit Rating to 'B+' from 'BB-' PREMIER PROPERTIES: Founder's Personal Assets for Auction Aug. 9 QUEBECOR WORLD: CCAA Stay Extended Until September 30 QUEBECOR WORLD: Ernst & Young Provides CCAA Status Report QUEBECOR WORLD: Committee Revised After Cellmark's Resignation QUEBECOR WORLD: Panel Taps Lowenstein Sandler as Conflicts Counsel RAD RESTAURANTS: Voluntary Chapter 11 Case Summary RAINBOW VEGAS: Voluntary Chapter 11 Case Summary RESIDENTIAL CAPITAL: GMAC LLC Posts Prelim $2.5BB Prelim Net Loss RESIDENTIAL CAPITAL: S&P's 'CCC+' Rtng Unmoved by $1.9BB Net Loss RITCHIE RISK: Disclosure Statement OK'd; Plan Hearing Set Sept. 11 SEA CONTAINERS: Files Joint Ch. 11 Plan and Disclosure Statement SEA CONTAINERS: Discloses Classification & Treatment of Claims SEMGROUP LP: Taps Richards Layton as Bankruptcy Co-Counsel SEMGROUP LP: Wants to Hire Hall Estill as Special Counsel SEMGROUP LP: Organizational Meeting to Form Panel Held August 1 SOMERSET MEDICAL: Moody's Affirms Ba2 Rating on Series 2003 Bonds STANFIELD/RMF: Moody's Hikes 3 Classes of Notes to Baa2 from B1 SUN-TIMES MEDIA: Polar Securities Declares 10.7% Equity Stake TANSY LTD: Voluntary Chapter 11 Case Summary THOMAS MECHANICAL: Case Summary & 20 Largest Unsecured Creditors TIMBERWOLF I: Moody's Junks Ratings of 2011 and 2039 FR Notes TIMOTHY BARNETT: Case Summary & Six Largest Unsecured Creditors TRONOX INC: Earnings Decline Prompts S&P to Junk Credit Rating UNI-MARTS LLC: Files Schedules of Assets And Liabilities US AIRWAYS: Incurs $567MM Net Loss in Second Quarter Ended June 30 US AIRWAYS: Registers 6,700,000 Shares for Equity Incentive Plan US AIRWAYS: Wellington Management Discloses 4.53% Stake US AIRWAYS: Pilots Group Presses for Probe on Fueling Practices US AIRWAYS: Inks Maintenance Pact with IAE; Ends Two Flights VERANO CCS: Moody's Rates $180MM Mezzanine Notes Due 2016 B2 VIE SALON: Voluntary Chapter 11 Case Summary VINTAGE PROPS: Halts Scheduled Passenger Operations VISTEON CORP: June 30 Balance Sheet Upside-Down by $207 Million WELLMAN INC: Beefs Up Chapter 11 Plan and Disclosure Statement WELLMAN INC: Claims Classification & Treatment Under Ch. 11 Plan WELLMAN INC: To Use $205MM Exit Financing to Pay Admin. Claims WESCOLD INC: Case Summary & 20 Largest Unsecured Creditors WHITING PETROLEUM: S&P Holds 'BB-' Rating; Revises Outlook to Pos. WINDSOR QUALITY: Moody's Lowers Corporate Family Rating to B1 * Fitch Updates Q-IFS Rtngs on 564 Property/Casualty Insurance Cos * S&P: Defaults in the US to Escalate Through the Rest of 2008 * S&P Says Slowing Economic Conditions Pressure S&P 500 * S&P Puts Default Ratings on 32 Classes of Notes * Cadwalader Axes 96 Real Estate Finance and Securitizations Jobs * BOND PRICING: For the Week of July 28, 2008 to August 1, 2008 ********* AFC ENTERPRISES: Moody's Assigns SGL-3 Liquidity Rating ------------------------------------------------------- Moody's Investors Service assigned a Speculative Grade Liquidity rating of SGL-3 to AFC Enterprises, Inc., indicating Moody's belief that the company should maintain adequate liquidity over the upcoming four quarters. In Moody's view, AFC's solid internal cash flow generation should provide sufficient liquidity to cover working capital and planned capital spending over the next twelve months, despite expected softening revenues and EBITDA generation in the foreseeable future in part due to the challenging operating environment for restaurant industry in the US. In addition, the company recently announced its strategic plan of re-franchising all its sixty seven company-owned locations, which could materially alter its business and financial profile. Moody's anticipates that AFC's cash flow should continue to be adequate irrespective of whether the divesture transpires or not. Further, the SGL-3 also incorporates Moody's view that the company's access to the $60 million revolver (expires in May 2010) could be limited by its financial covenants, cushion under which would become modest as these covenants tighten through the next twelve months (such as its maximum leverage ratio 3.50 times in July 2008 to 3.25 times in October 2008 to 3.00 times in April 2009). Moody's also notes that the company has recently become more aggressive in share buyback, although recognizing it has maintained a balanced financial discipline over the past few years. AFC bought back $49 million worth of stock in the past twelve months ended April 20, 2008, partially funded by increased borrowing under its revolver. The liquidity rating is sensitive to AFC's financial policy regarding the use of refranchising proceeds ($38 million to $42 million as expected by the company) as well as the pace of share buyback program. The SGL-3 rating could be under downward pressure if the company were to buy back shares more aggressively that could result in a delay in de-levering the balance sheet, and/or the cushion under its financial covenants were to erode that the access to its revolver became encumbered. For a more detailed discussion on AFC's SGL rating, please refer to an updated credit opinion on Moody's.com. AFC Enterprises, Inc., headquartered in Atlanta, Georgia, owns, operates and franchises Popeyes Chicken & Biscuits (Popeyes) quick service restaurants. AFC currently has a Corporate Family Rating of B1 with a stable outlook. ALLIED WASTE: Earns $111.4 Million in 2008 Second Quarter --------------------------------------------------------- Allied Waste Industries Inc. reported Wednesday financial results for its second quarter and six months ended June 30, 2008. For the quarter, income from continuing operations increased 22% to $111.4 million. Prior year income from continuing operations was $91.0 million. Total revenue for the second quarter was $1.58 billion, an increase of $35.0 million, or 2.2%, over $1.55 billion in the second quarter 2007. Higher revenue for the quarter benefited from a 6.9% increase in average price, of which 280 basis points were associated with the company's fuel recovery fee, partially offset by a 4.8% decrease in volumes. Lower volumes for the quarter primarily reflect the impact of U.S. economic conditions. "We continue to perform well against our long-term strategies that drive profitable growth, margin expansion, strategic pricing and greater financial returns, while successfully adjusting our day- to-day operations to the economic conditions which have remained very challenging," said John Zillmer, chairman and chief executive officer. "Our management and operating leadership appreciate that we are involved in an exciting merger opportunity with Republic Services, but we remain focused on achieving our 2008 financial goals and on driving greater efficiencies in every area of the business." Second quarter operating income before depreciation and amortization, loss from divestitures and asset impairments, or EBITDA, inclusive of $9.0 million of merger-related costs, increased 7.9% to $453.4 million, compared with $420.1 million last year. EBITDA as a percentage of revenue increased 160 basis points to 28.7%, or 29.3% excluding merger-related costs, compared with 27.1% for the same period last year. For the quarter, operating costs as a percentage of revenue dropped 90 basis points as the company benefited from ongoing initiatives to lower expenses and drive greater efficiencies throughout its operations. Operating costs in the second quarter also benefited from savings associated with the company's improved safety and claims experience, and from a favorable resolution of an environmental matter. EBITDA margins for the quarter also benefited from company actions to control SG&A expenses, which decreased $15.7 million from the prior year, and declined as a percentage of revenue to 9.3% from 10.6% last year." "Our ability to maintain strong pricing and to control costs in response to a slowing economy has been critical to sustaining Allied's excellent operating and financial results," said Don Slager, president and chief operating officer. "Even after adjusting for significantly higher fuel costs, which were essentially offset through our fuel recovery fee, we were able to lower operating expenses as a percentage of revenue by 90 basis points and SG&A spending by an additional 130 basis points. These are important achievements and attest to the focus with which our managers are operating the business." Cash flow from operations in the second quarter 2008 was $317.4 million, compared with $373.0 million in the comparable quarter last year, as higher operating income was offset primarily by increases in working capital. Free cash flow for the second quarter was $112.6 million, compared with prior year free cash flow of $234.4 million reflecting lower cash flow from operations and the timing of capital expenditures which were heavier in the second quarter of 2008. For the six-month period ended June 30, 2008, Allied Waste's revenues were $3.07 billion, as strong pricing drove a $74.4 million increase over the prior year. Operating income for the period increased 6.7% to $543.8 million, inclusive of $32.8 million of merger-related costs, losses from divestitures and asset impairments. Income from continuing operations was $184.0 million for the first half of 2008, compared with $125.3 million for the first half of 2007. Merger Update During the quarter, Allied Waste and Republic Services Inc. announced that their Boards of Directors unanimously approved a definitive merger agreement between the two companies. The $6.24 billion stock deal merger, which is expected to generate at least $150.0 million in annual integration synergies, will strengthen the national service platform of the companies and link collection, transfer, recycling and disposal operations into an efficient network spanning 40 states and serving 13 million customers. The merger is expected to close in the fourth quarter of 2008. "The merger of Allied Waste and Republic will generate tremendous benefits for employees, customers and shareholders of both companies," said Mr. Zillmer. "Our organizations are working closely on a comprehensive integration program that will help ensure the businesses come together seamlessly and realize all the operating and financial gains inherent in this powerful combination." Balance Sheet At June 30, 2008, the company's consolidated balance sheet showed $13.94 billion in total assets, $9.83 billion in total liabilities, and $4.11 billion in total stockholders' equity. The company's consolidated balance sheet at June 30, 2008, also showed strained liquidity with $1.05 billion in total current assets available to pay $1.87 billion in total current liabilities. About Allied Waste Based in Phoenix, Arizona, Allied Waste Industries Inc. (NYSE: AW) -- http://www.alliedwaste.com/and http://www.disposal.com/-- provides waste collection, transfer, recycling and disposal services to millions of residential, commercial and industrial customers in over 100 major markets spanning 38 states and Puerto Rico. * * * As reported in the Troubled Company Reporter on June 25, 2008, Fitch Ratings placed the ratings of Allied Waste Industries Inc. on Rating Watch Positive, including the company's CCC+/RR6 Senior subordinated rating, following the announcement that the company intends to merge with Republic Services Inc. AMERICAN AXLE: S&P Lowers Corp. Credit and Debt Ratings to 'B+' --------------------------------------------------------------- Standard & Poor's Ratings Services lowered its corporate credit rating on Detroit-based American Axle Manufacturing & Holdings Inc. to 'B+' from 'BB-'. The outlook is negative. At the same time, S&P lowered its issue-level ratings on American Axle's unsecured debt to 'B+' from 'BB-'. The recovery rating of '3', indicating an expectation of meaningful (50% to 70%) recovery in the event of a payment default, was not changed. "The downgrade and negative outlook reflect our view that Axle's credit measures will deteriorate even more than we previously expected in the face of a very challenging North American market for light trucks, which represent most of American Axle's sales," said Standard & Poor's credit analyst Lawrence Orlowski. Management expects 2008 revenue to fall 30% from 2007 levels; S&P believes the revenue decline could be larger. The U.S. economy is weak as a result of falling housing prices and tightening credit standards, thereby dampening consumer confidence and overall demand. In addition, all automakers are taking steps to permanently reduce light-truck production over the next few years in favor of increasing capacity for passenger cars. S&P expects U.S. light-vehicle sales to be 14.4 million units in 2008, the lowest in 15 years and down sharply from 16.1 million units in 2007. S&P expects sales to fall further in 2009, to about 14.1 million units, as the economy remains weak and housing prices and consumers' access to credit remain under pressure. S&P estimates that there is a 20% chance that auto sales in 2008 and 2009 could plummet to 13.6 million and 11.7 million units, respectively, which would present an overwhelming challenge for the Michigan-based automakers and auto suppliers. But even in the absence of that scenario, the shift in demand away from light trucks is the most immediate challenge for American Axle. Higher energy prices have accelerated the ongoing shift in consumer preferences away from full-size pickup trucks and SUVs. During the past few months, industrywide sales of SUVs plunged from the previous year's levels--down 32.5% in the first six months of 2008. The drop in June was even more severe--39.8%. S&P believes industrywide demand for SUVs has been permanently reduced, caused recently by high gasoline prices. Tempering these challenges are the substantial cost benefits to be realized over the next 18 months from the new contract with the United Auto Workers. American Axle's new labor agreement reduces the all-in wage costs by more than 50%; defined benefit plans are frozen and replaced by defined contribution plans; and health care expenses are shared with employees through premium sharing, higher deductibles, and co-pays. In addition, the agreement gives the company better operational flexibility: For instance, job classifications are reduced substantially, there is a no-strike provision, and an employee must work 40 hours in a week before overtime pay is allowed. Furthermore, the long-term lay-off pool, under which laid-off workers are paid near full wage, is capped at $18 million and ends once this amount is reached. As a result of these actions, as well as planned cuts in the salaried workforce, management expects structural cost reductions to exceed $350 million in 2009. In accordance with the terms of the new agreement, workers at the original U.S. locations will be able to choose from six buyout and retirement offers. Those not choosing one will be subject to an involuntary program. The company believes the entire cost of these transitional programs to be $400 million to $450 million. General Motors Corp. will reimburse American Axle for an important portion of costs to implement the contract. Still, the ratings on American Axle reflect the risks associated with the company's heavy dependence on GM's SUVs and pickup trucks, its relatively narrow product range, and its exposure to cyclical and competitive markets. Competitive challenges facing GM and Chrysler LLC, including declining production volumes for some of the vehicles American Axle serves, continue to hurt the company's business. Moreover, S&P believes the customer shift away from SUVs is permanent, which may thwart American Axle's efforts to improve profitability. Therefore, a severe cyclical industry downturn could easily offset the benefits from the company's significantly reduced cost structure. The outlook is negative. S&P expects 2008 to be a weak year for American Axle's sales and profitability because of the effect of the strike on first-and second-quarter results, lower light-truck production volumes from GM in the third and fourth quarters, and costs associated with employee buyout and wage reduction programs. EBITDA margins may fall to single digits in 2008, but S&P expects some improvement in 2009 as the company begins to realize some cost savings from the new contract and workforce reductions. However, a major risk is the permanent fall in demand for light trucks that challenges management's ability to optimize production capacity. If EBITDA margins do not improve to more than 10% in 2009, S&P believes free operating cash flow will remain negative in 2009, which could prompt us to lower the rating. Prior to 2009, any reduction in American Axle's liquidity, such as a substantial depletion in borrowing availability under its revolving facility or concerns about future covenants, would trigger a downgrade. On the other hand, S&P could revise its outlook to stable if American Axle capitalizes on cost savings and industry conditions improve, but this is not likely this year. AMERISTAR CASINOS: Has Ba3 CFR; Gets SGL-3 from Moody's ------------------------------------------------------- Moody's Investors Service assigned an SGL-3 Speculative Grade Liquidity rating to Ameristar Casinos, Inc. The SGL-3 indicates adequate liquidity. Ameristar has a Ba3 Corporate Family Rating and stable rating outlook. Rating assigned: Speculative Grade Liquidity Rating of SGL-3 Ameristar's SGL-3 considers that the company has modest cushion with respect to its senior leverage covenant. Additionally, while the amount of the company's $1.4 billion revolving loan facility available for borrowing is currently about $170 million, its ability to borrow under the revolver is currently limited to less than $50 million because of the senior leverage ratio covenant. As of March 31, 2008, Ameristar was required to maintain a leverage ratio, defined as consolidated debt/EBITDA, of no more than 6.25 times, and a senior leverage ratio, defined as senior debt/EBITDA of no more than 5.25 times. Although the company's consolidated debt/EBITDA calculation for the latest 12-months ended March 31, 2008 was well within the total leverage covenant limit, at about 5.1 times, the cushion in the company's reported senior leverage covenant was considerably less. Senior debt/EBITDA for the 12-month period ended March 31, 2008 was also 5.1 times. Despite the limited covenant cushion and revolver availability, Ameristar is expected to generate positive cash flow after interest, taxes, cash common dividends and maintenance expenditures during the next 12-months. However, after considering development capital expenditures, the company will likely have a free cash flow deficit. Ameristar recently completed its $265 million expansion in St. Louis, Missouri, and a majority of its $100 million expansion in Vicksburg, Mississippi, but still has significant development related capital expenditures during the next 12-month period, most of which is related to the completion of the Black Hawk, Colorado expansion. Separately, Ameristar delayed its Council Bluffs, Iowa expansion indefinitely. Moody's expects Ameristar will eventually term out a portion of its outstanding revolver in an effort to improve its liquidity. However, capital markets uncertainty at this time may make it difficult for the company to accomplish this under favorable terms. To the extent Ameristar does term out a portion of its revolver, materially improves its revolver availability and senior leverage covenant cushion, and becomes free cash flow positive, its Speculative Grade Liquidity rating could improve to SGL-2. Ameristar Casinos, Inc. (NASDAQNM: ASCA) owns and operates eight hotel/casinos in six markets. The company's portfolio of casinos consists of: Ameristar St. Charles (St. Louis market); Ameristar Kansas City; Ameristar Council Bluffs (Omaha market); Ameristar Vicksburg; Ameristar Black Hawk (Denver market); Resorts East Chicago (East Chicago market) and Cactus Petes and the Horseshu in Jackpot, Nevada (Idaho market). Ameristar reported net revenues of approximately $1.14 billion for the latest 12-month period ended March 31, 2008. ATLANTIC MARINE: Moody's Cuts Corporate Family Rating to B2 ----------------------------------------------------------- Moody's Investors Service has downgraded the corporate family rating of Atlantic Marine Holding Company to B2 from B1 and changed the ratings outlook to stable from negative. The downgrade reflects lower than expected revenues and EBITDA margin for the first half of 2008 combined with the company's small size, dependence on large, critical orders, and increased leverage from approximately $130 million of dividends paid and preferred stock redeemed since the beginning of 2007. The lower than expected EBITDA for the first half of 2008 resulted from the late start of a large vessel fabrication project and lower than expected gross margin on another key fabrication project. Atlantic Marine's B2 corporate family rating reflects the company's small revenue base, heavy dependence on large ship repair and fabrication contracts, combined with the inherent cyclicality in its sales level, operating margins and cash flow generation. Incorporated in the B2 rating is an expectation for positive near-term demand, in part due to high oil exploration activity which increases the need for commercial vessel fabrication and MROC work. The stable outlook reflects the company's sustained backlog level since 2007, an adequate liquidity profile, and an expectation that revenue and EBITDA margin levels will improve in the second half of 2008 due to resolved work delays, recent orders and contract bids pending. The stable outlook also contemplates that Atlantic Marine's private equity owner, J.F. Lehman and Company, may continue a financial policy of dividends following earnings growth such that should credit metrics become relatively strong for the B2 rating, debt could likely be increased to help fund returns to shareholders. In addition to the corporate family rating, the following rating changes have occurred: Probability of default to B3 from B2 $45.0 million first lien revolving credit facility due 2013 to B2 LGD 3, 36% from B1 LGD 3, 36% $185.1 million first lien term loan due 2014 to B2 LGD 3, 26% from B1 LGD 3, 36% For further information please refer to the credit opinion on moodys.com Atlantic Marine Holding Company, headquartered in Jacksonville, FL, is a provider of ship maintenance, repair, overhaul, and conversion and marine fabrication services for U.S. Navy, government, commercial and offshore oil and gas industry vessels. The company operates two full service shipyards in Jacksonville, FL, and Mobile, AL, as well as a third smaller facility at Naval Station Mayport (FL). AUSTIN CONVENTION: S&P Affirms $95MM 2006B Revenue Bonds at 'BB' ---------------------------------------------------------------- Standard & Poor's Ratings Services placed its 'BBB-' rating on Austin Convention Center Enterprises Inc.'s $165 million first- tier revenue bonds series 2006A on CreditWatch with negative implications. The Creditwatch placement reflects the bonds' ties to the ratings on XL Capital Assurance Inc. (BBB-/Watch Neg/--), which provides the surety for the bonds and a portion of the debt service reserve fund. At the same time, S&P affirmed the 'BB' rating on the $95.17 million second-tier revenue bonds series 2006B. The outlook on the second-tier bonds is stable. The '1' recovery rating assigned to the first-tier debt reflects expectations of very high recovery (90%-100%) if a payment default occurs, while the '5' recovery rating assigned to the second-tier debt indicates modest recovery (10%-30%). The bonds are secured by the hotel's net revenues. The 2006 series proceeds refunded the majority of the 2001 series bonds, which were used to build the 800-room convention center headquarters hotel in downtown Austin, Texas. The hotel has been operating since its opening on Dec. 27, 2003 and reached a stabilized occupancy of more than 76% in 2007. S&P could downgrade the first-tier bonds if liquidity goes lower than the current levels and if additional reserves were not available to replace the surety policy. The stable outlook on the second-tier bonds is based on hotel operations meeting their projected financial performance. S&P could lower the ratings or revise the outlook to negative if coverage levels are lower than projections due to a prolonged economic slowdown, or other competitive factors that reduce net hotel revenues. In addition, S&P could downgrade the first-tier bonds if liquidity is lower than the current levels. "A successful track record of financial performance well in excess of forecasts and debt amortization significantly above forecast levels could result in a rating upgrade," said Standard & Poor's credit analyst Jodi Hecht. BARNERT HOSPITAL: Court Approves Amended Disclosure Statement ------------------------------------------------------------- The Hon. Donald H. Steckroth of the U.S. Bankruptcy Court for the District of New Jersey approved an amended disclosure statement explaining an amended Chapter 11 plan of liquidation filed by Nathan and Miriam Barnert Memorial Hospital Association dba Barnert Hospital on July 28, 2008. The Court held that the amended disclosure statement contains adequate information with the meaning of Section 1125 of the Bankruptcy Code. A hearing is set for Sept. 23, 2008, at 2:00 p.m., to consider confirmation of the Debtor's plan. Objections, if any, are due Sept. 16, 2008. The Court also approved procedures the Debtor proposed for tabulation and solicitation of Plan votes. The deadline for voting on the Plan is Sept. 16, 2008. Overview of the Plan The amended plan proposes an orderly liquidation of the Debtor's assets and provides that all collected funds will be paid to creditors on account of their claims. Pursuant to the Plan, a liquidating trustee will be appointed to wind-down all of the Debtor's assets and pursue all causes of action. As reported in the Troubled Company Reporter on March 10, 2008, the Debtor sold substantially all of its assets to Community Healthcare Associates LLC, which topped Hospital Associates LLC, the stalking horse bidder. The Debtor will pay $350,000 as break- up fee to Hospital Associates. Under the asset purchase agreement dated Feb. 15, 2008, the purchased assets are comprised of: -- assumption by Community Healthcare of the assumed liabilities; -- purchase note $6,000,000 as initial principal payment plus the amount of the financed receivables secured by the guaranty and the new mortgage; -- unencumbered asset payment; and -- aggregate of Community Healthcare's share of the transfer taxes, if any, and other payment obligations. The amended plan classifies interests against and claims in the Debtors in five classes. The classification of interests and claims are: Class Type of Claims ----- -------------- 1 non-tax and tax priority claims 2 secured claim of United States Department of Housing and Urban Development 3 secured claim of General Electric 4 general unsecured claims 5 claims of owners Under the amended plan, holders of administrative and priority tax claims will be paid in an amount equal to their all allowed claims on the plan's effective date. There is a $596,627 in unpaid administrative claims as of June 30, 2008. Holders of Class 1 non-tax and tax priority claims, totaling $415,207, will be paid after the plan's effective date. The Debtor has potential liability of at most $16,000 for unsecured tax priority claims. In connection with the sale of the Debtor's assets to Community Healthcare, secured creditor United States Department of Housing and Urban Development has agreed to receive: -- $6,000,000 to be paid by Community Healthcare; -- the payment by Community Healthcare for the accounts receivable of the Debtor; -- retention of all cash held by HUD in the debt reserve fund; -- the remaining proceeds of the DSH settlement; and -- the net proceeds of certain appeals or actions filed by the Debtor seeking retroactive reimbursement rates for services provided against various third parties. HUD is expected to lose at least $5,000,000 after it receives the payment. Nevertheless, HUD agreed to waive any further claims against the Debtor's estate. Class 3 secured claims of General Electric will have a deficiency claim, which will be treated as Class 4 claim. The Debtor has surrendered collateral to General Electric. Holders of Class 4 general unsecured claims, totaling $24,143,895, will receive a pro rata share of the liquidation proceeds and the sale carve-out fund on the distribution date, at the option of the liquidating trustee. Class 5 claims of owner will be dissolved on the plan's effective date. Holders will not receive any distribution. A full-text copy of the Purchase Agreement date Feb. 15, 2008, is available for free at: http://ResearchArchives.com/t/s?28dd A full-text copy of the Debtor's amended disclosure statement is available for free at: http://ResearchArchives.com/t/s?3056 A full-text copy of the Debtor's amended Chapter 11 plan of liquidation is available for free at: http://ResearchArchives.com/t/s?3057 Nathan and Miriam Barnert Memorial Hospital Association, dba Barnert Hospital -- http://www.barnerthospital.com/-- owns and operates a 256 bed general acute care community hospital located at 680 Broadway in Paterson, New Jersey. The company filed for chapter 11 protection on Aug. 15, 2007 (Bankr. D. N.J. Case No.07-21631). David J. Adler, Esq., at McCarter & English, LLP, represents the Debtor in its restructuring efforts. Warren J. Martin Jr., Esq. and John S. Mairo, Esq., at Porzio Bromberg & Newman, P.C., represent the Official Committee of Unsecured Creditors in this case. Donlin Recano & Company Inc. is the Debtor's claims, noticing, and balloting agent. The Debtor's schedules reflect total assets of $46,600,967 and total liabilities of $61,303,505. BAXL TECHNOLOGIES: Case Summary & 20 Largest Unsecured Creditors ---------------------------------------------------------------- Debtor: BAXL Technologies, Inc. 6 Berkshire Boulevard Berkshire Corporate Park Bethel, CT 06801 Bankruptcy Case No.: 08-50689 Type of Business: The Debtor provides broadcasting services. See: http://www.baxl.net Chapter 11 Petition Date: July 31, 2008 Court: District of Connecticut (Bridgeport) Judge: Alan H.W. Shiff Debtors' Counsel: James Berman, Esq. (jberman@zeislaw.com) Zeisler and Zeisler 558 Clinton Avenue P.O. Box 3186 Bridgeport, CT 06605 Tel: (203) 368-4234 Fax: (203) 367-9678 http://www.zeislaw.com/ Estimated Assets: $1 million to $10 million Estimated Debts: $1 million to $10 million A list of the Debtor's largest unsecured creditors is available for free at: http://bankrupt.com/misc/connb08-50689.pdf BCE INC: Moody's Assigns B1 Corporate Family Rating to NewCo ------------------------------------------------------------ Moody's Investors Service provided updated ratings' guidance for those debt instruments issued by Bell Canada that will remain outstanding subsequent to the acquisition of its parent company, BCE Inc. by a private equity consortium. "Moody's view is that the post-closing entity will have a corporate family rating of B1" said Moody's Vice President/Senior Credit Officer, Bill Wolfe. Based on the B1 CFR, Wolfe also noted that "Bell Canada's existing senior unsecured debt would be rated Ba1 and its subordinated notes would be rated B3." Wolfe also noted that the prospective rating outcomes are subject to a number of assumptions, and are in the middle of the guidance ranges that were previously provided. Pending resolution of the acquisition transaction, BCE and Bell Canada have a combined $8.3 billion of debt instruments on review for possible downgrade (approximately $5.0 billion of $8.3 billion total will remain outstanding after the acquisition). The review was initiated on April 17, 2007, when BCE announced that its board had entered into non-exclusive discussions with a specific group of investors regarding the possible acquisition of the company. Wolfe said that "Moody's expects to conclude the rating review shortly before the going-private transaction closes. We also expect to publish ratings on the approximately $34 billion of acquisition debt at the same time." BCE has indicated that closing will occur on or before December 11, 2008. Moody's does not take rating actions prompted by a major corporate event until the event is nearly certain. "Our thesis has not altered from last October when we first provided guidance concerning post-closing ratings," said Wolfe. "However, with the passage of time, execution risks have been dramatically reduced. In particular, the recent announcements that all regulatory approvals had been received and financing had been firmed-up were important milestones that gave us much more confidence that the transaction will close. This prompted us to update our guidance, and since we expect future cash flow to remain fairly stable, we were able to narrow the guidance to a single point from a three notch range." The interest carry on the post-acquisition debt will leave the company with very little free cash flow with which to reduce debt. More importantly, the company's cash flow stream will be difficult to grow. Wolfe noted that "BCE has a large franchise with a relatively diverse product offering featuring wire-line based telephony and Internet service, and wireless telephony and video services. In aggregate, however, since the product offering features proportionately high exposure to declining legacy businesses and low exposure to higher growth areas, prospects to grow cash flow are challenged. In addition, customer service and product quality have not been historic strengths. Further, competition among telecommunications service providers is quite complex, balancing inter-relationships among network quality, customer service, hardware variety and features, price, and complimentary products offered as part of a bundle. The resulting market shares and profit rates reflect the relative trade-offs that consumers have made at a point in time. Given its existing technology and since none of the company's competitors are weak, it will be difficult for BCE's value proposition to be repositioned. Based on prior observations, we think it will be two to three years before repositioning actions will have a tangible impact. That time frame coincides with when we think the impact of new competitors that have purchased spectrum from the Canadian Government will be felt. It also potentially coincides with the need to deploy additional resources towards a subsequent spectrum auction. Consequently, we see BCE as having little capability of growing its cash flow stream by more than the market and its competitors will allow. While we expect some costs to be taken out, forecasted cash flow is not expected to be dramatically different from what is observed today. The significant change is the debt level. When the expected debt level is accounted for, the CFR is expected to be B1." Moody's review of current and prospective ratings for BCE Inc. and Bell Canada is detailed in a Credit Opinion and Analysis. BCE Inc. (BCE) is a holding company that owns all of Bell Canada (Bell), Canada's largest telecommunication services company. Both firms are based in MontrÃ©al, QuÃ©bec, Canada. BCE is the subject of an acquisition agreement in which the company will be acquired by a special purpose company formed by a private equity consortium comprised of Ontario Teachers' Pension Plan (Teachers), Providence Equity Partners Inc. (Providence), Madison Dearborn Partners, LLC (MDP), and Merrill Lynch Global Private Equity (Merrill Lynch). The approximately C$50 billion transaction was approved by BCE's common and preferred shareholders on September 21, 2007. The transaction is expected to close on or before December 11, 2008. BDB MANAGEMENT: Case Conversion Hearing Slated for August 18 ------------------------------------------------------------ The Hon. Thomas Carlson of the U.S. Bankruptcy Court for the Northern District of California will hold a hearing on Aug. 18, 2008, to consider a motion by the Brandenburg creditors to convert the chapter 11 case of BDB Management LLC and its debtor- affiliates to a chapter 7 liquidation proceeding, Terry Brennan of The Deal says. Eric Brandenburg Separate Property Trust of San Jose filed a $450,000 claim, and Karen Brandenburg of San Jose and the Brandenburg Revocable Trust of San Jose each filed $250,000 claims against the Debtors' assets, The Deal notes. As reported in the Troubled Company Reporter on July 9, 2008, the Brandenburgs, who hold around $2.3 million in unsecured claims against the Debtors, related that the Debtors have no ongoing business operations, no employees, customers, or vendors, and that the Debtors' only listed asset is stock held in an account at Merriman Curhan Ford Co. valued at more than $1.3 million. The Brandenburgs contended that there is a high likelihood that the estate will suffer substantial, continuing loss, and that there is no real possibility for the Debtors' estates to be rehabilitated. The Brandenburgs asserted that proceeding under chapter 7 is in the Debtors' best interests since it is necessary to properly collect the estates' assets and to avoid inherent conflicts between the interest of the parent debtor, BDB Management LLC, and its affiliate, BDB Management III LLC. They further related that the conflicts between these estates are especially acute because a single trustee has been appointed for all three of the estates. Converting the Debtors' cases will result in the appointment of a new trustee who can proceed without conflicting loyalties and with full concentration on the interests of the Debtor, said the Brandenburgs. About BDB Management Menlo Park, California-based BDB Management LLC and its affiliates filed for Chapter 11 protection on June 7, 2008 (Bankr. N.D. Calif. Lead Case No. 08-31001). William J. del Biaggio, III, an interest holder of the companies, filed for personal chapter 11 bankruptcy on June 6, 2008. Judith Whitman, Esq., at Diemer Whitman and Cardosi LLP, represents the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $50 million to $100 million in estimated assets and $50 million to $100 million in estimated debts. The TCR said on July 9, 2008, that Sara L. Kistler, acting U.S. Trustee for Region 17, had appointed R. Todd Nelson as the chapter 11 trustee in BDB Management LLC and its debtor- affiliates' bankruptcy cases. Sand Hill Capital Partners III, the investment fund Mr. Del Biaggio co-founded, filed for chapter 7 bankruptcy. Sand Hill disclosed $10.6 million in debts. Established in 1996, Sand Hill Capital has four debt funds under management, of which two are actively investing. Sand Hill has provided debt financing and equity co-investing in multiple portfolio companies of top-tier venture capital firms, including Broadcom, a semiconductor company specializing in VoIP, wireless networking, and broadband communications solutions; Commerce One, a provider of On-Demand Supplier Relationship Management solutions and The Open Supplier Network; IBahn, a provider of secure broadband-to-go at premium hospitality locations; and Odwalla, maker of fruit drinks and snacks. BEST BRANDS: S&P's 'CCC' Rating Unaffected by Covenant Violation ---------------------------------------------------------------- Standard & Poor's Ratings Services said that its ratings and outlook on Minnetonka, Minnesota-based Best Brands Corp. (CCC/Negative/--) remain unchanged following the company's disclosure that it violated its financial covenant compliance under its first-lien bank credit agreement for the second-quarter ended June 28, 2008. Financial results have been weaker than expected due to high commodity costs which have been only partially offset by price increases and cost reduction efforts. Best Brands had about $2.6 million in cash on its balance sheet as of June 28, 2008 and currently has access to its $30 million revolver ($16.4 million was borrowed as of June 28, 2008). However, SP are concerned about the company's liquidity, and it could lower the ratings if the company cannot obtain a waiver and bank amendment in a timely and cost-effective manner, given current market conditions. BIRCH MOUNTAIN: Will Need Investors' Funding if Sale Option Fails ----------------------------------------------------------------- As reported in the Troubled Company Reporter on July 28, 2008, Birch Mountain Resources Ltd. disclosed that the special committee of independent directors and its board of directors have determined that it is necessary to pursue an immediate sale of the company to unlock maximum value for its shareholders. In a news statement, Birch Mountain related that in the event the immediate sales process does not achieve an acceptable price, it intends to work with its stakeholders to recapitalize the balance sheet to improve liquidity and permit delivery of the business plan. The company related that the lack of liquidity has compressed Birch Mountain's share price to a level significantly below its underlying value. On July 7, 2008, TCR said that Birch Mountain has not made the scheduled June 30, 2008, interest payment to the holders of the Convertible Unsecured Subordinate Debentures. As a consequence of the company being in breach of a financial covenant under its senior secured credit facility, lender Tricap Partners Ltd., has exercised its right under the loan agreement to direct The Trustee, Computershare Trust Company of Canada, not to make the scheduled interest payment on the Debentures until further notice from the Lender. The Trustee has issued a notice of default to the company under the trust indenture. As a consequence, the Trustee may, on behalf of the holders of the Debentures, declare the principal amount and the accrued amount of interest to be due and payable. Alternatively, the Trustee may waive the event of default upon such terms and conditions that the Holders may prescribe. The principal amount of the Debentures is $34,500,000. The amount of interest due as of June 30, 2008, was $1,035,000. About Birch Mountain Headquartered in Calgary, Canada, Birch Mountain Resources Ltd. (TSX and AMEX: BMD) -- http://www.birchmountain.com/-- operates the Muskeg Valley Quarry, an early production stage limestone quarry that produces limestone aggregate products for sale to customers in the Athabasca Oil Sands region of northeastern Alberta. The company is engaged in the regulatory approval process for the Hammerstone Project which will expand the Muskeg Valley Quarry and add an integrated limestone processing complex to provide manufactured limestone-based products such as quicklime, as well as related environmental services such as spent lime re-calcining. Going Concern Doubt Birch Mountain Resources Ltd. disclosed in its report on Form 6-K which was filed with the U.S. Securities and Exchange Commission on May 20, 2008, that the company currently has insufficient revenue to meet its yearly operating and capital requirements. The company has incurred operating losses since its inception in 1995, and as of March 31, 2008, has an accumulated deficit of C$48.2 million. Losses are from costs incurred in the early operation and development of the Muskeg Valley Quarry and the Hammerstone Project, exploration of mineral opportunities and mineral technology research. Future operating losses may occur as a result of the continued operation of the Muskeg Valley Quarry and development of the Hammerstone Project. The company has a working capital balance at March 31, 2008, of C$2.1 million, a decrease of approximately C$5.5 million from Dec. 31, 2007. The company has formally engaged RBC Capital Markets to assist in the evaluation of strategic alternatives, which includes discussing debt and equity strategies for its immediate and medium term capital needs. To the extent the company raises additional capital by issuing equity or convertible debt securities, ownership dilution to shareholders will result. The company believes these factors raise substantial doubt about the company's ability to continue as a going concern. BOYD GAMING: Suspends Echelon Construction on Financial Woes ------------------------------------------------------------ Boyd Gaming Corporation said it will delay construction of the Echelon project on the Las Vegas Strip due to the difficult environment surrounding the capital markets and the challenging economic conditions. The company expects to resume construction in three to four quarters, assuming credit market conditions and the economic outlook improves. According to The Wall Street Journal, the Echelon project was slated to open in 2010 with nearly 5,000 hotel rooms, five hotels, two live entertainment theaters, and a shopping district. The Echelon was expected to reign as the tourist-oriented Strip, WSJ adds. WSJ related that the problem originated from Morgans Hotel Group's inability to secure $950 million in financing for the hotels. Separately, Boyd has already committed to funding $3.3 billion of the project through a credit facility, which has been drawn down by about $500 million so far, WSJ stated. In a press statement, the company said it is in discussions with Morgans and General Growth Properties to modify its existing agreements, as both joint venture parties remain interested in Echelon. The delay will allow its joint ventures with Morgans and GGP the opportunity to secure financing under more favorable conditions at a later date. It also provides additional time for its joint venture with GGP, the High Street retail promenade, to take advantage of an improved leasing environment, once economic conditions moderate. Morgans said it will evaluate future proposals to revive the joint venture, WSJ related. By delaying, the company said, it will be able to better manage the timing of the construction of the aspects of Echelon and ensure that they do not outpace the construction of the joint venture components. This delay will also give the company time to focus on restoring momentum in our core business, and for consumers in general, to regain their footing and confidence. Keith Smith, president and chief executive officer of Boyd Gaming, commented: "The current economic climate is unprecedented in recent years. While we remain enthusiastic about the long-term prospects for the Las Vegas market and Echelon, this is the right decision for our company at this time. This decision is not a reflection of the merits of the project, nor the accomplishments of our professional development team, but rather the challenges we, and many other businesses, face in today's uncertain business climate. According to WSJ, the news came as a measurable relief to investors; Boyd stock shot up 20% to $12.01 on August 1 in New York Stock Exchange composite trading and many analysts praised the move. WSJ citing David Katz, Oppenheimer gambling analyst, said the suspension must significantly decrease Boyd's risk profile in the near term. WSJ noted that Boyd's second-quarter net income fell nearly 2% to $21.7 million from $22.1 million a year earlier, while the company's revenue fell 10% to $460.8 million. As of June 30, 2008, the company said it has incurred approximately $500 million of capitalized costs related to the overall project. Key financial statistics for the three months ended June 30, 2008, includes: -- June 30 debt balance: $2.5 billion -- June 30 cash: $148.7 million -- Dividends paid in the quarter: $13.2 million -- Maintenance capital expenditures during the quarter: $22.9 million -- Expansion capital expenditures during the quarter: $222.5 million -- Capitalized interest during the quarter: $7.9 million -- Cash distribution to the Company from Borgata in the quarter: $4.9 million -- June 30 debt balance at Borgata: $746.4 million The company's board of directors has authorized an amendment to the existing share repurchase program to increase the amount of common stock available to be repurchased to $100 million. The board also suspended its quarterly dividend program, which the company believed was not adequately valued in the share price at recent trading levels. Statement by Morgans Hotel Morgans Hotel Group Co. issued a statement regarding the announcement by Boyd Gaming Corporation that it will delay the entire Echelon project due to the difficult environment surrounding today's capital markets and current economic conditions. In January 2006, MHG entered into a 50/50 joint venture with Boyd to develop a Mondrian and Delano within Boyd's Echelon development on the Las Vegas strip. MHG announced on July 1, 2008, that the deadline to obtain construction financing for the Echelon project was extended to September 15, 2008. Given Boyd's announcement and the difficulties in the credit markets, MHG believes that the joint venture will be unable to secure financing at favorable rates and conditions by September 15, 2008. MHG does not intend to further extend the joint venture agreement on its current terms but expects to evaluate future proposals relating to the project with Boyd. About Boyd Gaming Headquartered in Las Vegas, Boyd Gaming Corporation (NYSE: BYD) -- http://www.boydgaming.com/ -- is a diversified owner and operator of 17 gaming entertainment properties located in Nevada, New Jersey, Mississippi, Illinois, Indiana, Louisiana, and Florida. The company is also developing Echelon, a world-class destination resort on the Las Vegas Strip, expected to open in the third quarter 2010. * * * As reported in the Troubled Company Reporter on June 30, 2008, Standard & Poor's Ratings Services revised its rating outlook on Boyd Gaming Corp. to negative from stable. Ratings, on the company, including the 'BB' corporate credit rating, were affirmed. BUFFETS HOLDINGS: Can Sell Ohio, Kentucky Properties ---------------------------------------------------- The United States Bankruptcy Court for the District of Delaware authorized Buffets Holdings Inc. and its debtor-affiliates to sell on an "as is", "where is" basis, the nonresidential real properties located at: i) 2551 E. Tiffin Avenue, Findlay, Ohio; ii) 1415 Niles Courtland Road, SE, Niles, Ohio; and iii) 701 Red Mile Road, Lexington, Kentucky. As reported in the Troubled Company Reporter on July 7, 2008, the Debtors also wanted to sell, along with the Findlay and Lexington Properties, certain equipment which are "of no use to the Debtors and a burden to their estates." Pauline K. Morgan, Esq., at Young Conaway Stargatt & Taylor, LLP in Wilmington, Delaware, told the Court the Debtors have identified the purchasers of the three properties and the properties' agents. The purchase price of the properties had also been determined by the Debtors. In light of these developments, the Debtors asked the Court that the sale be made free and clear of any liens, claims and encumbrances, and that they be allowed to pay, out of the proceeds of the sales, the commissions of local real estate brokers and other customary fees and expenses in connection with the sale of the Properties, Ms. Morgan related. According to Ms. Morgan, the Debtors hired an experienced national real estate consultant to develop a marketing plan for the properties whose combined marketing efforts with the Local Brokers produced purchasers, and resulted in the Debtors executing the Sale Contracts for the three properties. Details of the Sale contracts include: (1) The Findlay Property : 2551 E. Tiffin Avenue Findlay, Ohio Purchase Price : $1,800,000 Purchaser : Grindstone Properties, LLC Execution Date : Feb. 25, 2008 Local Broker : J.R. Finney Real Estate Company Attn: J. Robert Finney Broker's Commission : $72,000 (2) The Niles Property : 1415 Niles Courtland Road SE, Niles, Ohio Purchase price : $900,000 Purchaser : Napstak, LLC Attn: Alex Patel Execution Date : Mar. 11, 2008 Local Broker (1) : Terra National Real Estate Group Attn: Jack Barson (2) : JDHoliday Associates Brokers' Commission(1) : $22,500 (2) : 22,000 (3) The Lexington Property : 701 Red Mile Road Lexington, Kentucky Purchase Price : $1,050,000 Purchaser : Sirius Equity partners, LLC Execution Date : May 9, 2008 Local Broker : Prudential CRES Commercial Real Estate Brokers' Commission : $52,500 As these properties were marketed by skilled commercial real estate brokers, the Debtors believed that the prices under the Sale Contracts reflect the true and reasonable market values of the properties. The properties, being not a core component of the Debtors' long-range business strategy are an economic burden, Ms. Morgan says. The elimination of the liabilities associated with the Properties and the value to be realized by the estates through the sale of these properties is beneficial to the Debtors, their estates and creditors, Ms. Morgan tells the Court. The Debtors will sell the properties free and clear of liens, claims or encumbrances, pursuant to Section 363(f) of the Bankruptcy Code which authorizes the sale of a property free and clear of lien, claims or encumbrances if: (i) applicable non-bankruptcy law permits the sale of the property free and clear of interest; (ii) the lienholder or claimholder consents; (iii) the interest is a lien and the price at which the property is to be sold is greater than the aggregate value of all liens on the property; (iv) the interest is a bona fide dispute; or (v) the entity could be compelled, in a legal or equitable proceeding, to accept a money satisfaction of the interest. The Debtors noted that the Sale Contracts are results of arm's- length negotiations in which all parties acted in good faith. About Buffets Holdings Headquartered in Eagan, Minnesota, Buffets Holdings Inc. -- http://www.buffet.com/-- is the parent company of Buffets, Inc., which operates 626 restaurants in 39 states, comprised of 615 steak-buffet restaurants and eleven Tahoe Joe's Famous Steakhouse restaurants, and franchises sixteen steak-buffet restaurants in six states. The restaurants are principally operated under the Old Country Buffet, HomeTown Buffet, Ryan's and Fire Mountain brands. Buffets, Inc. employs approximately 37,000 team members and serves approximately 200 million customers annually. The company and all of its subsidiaries filed Chapter 11 protection on Jan. 22, 2008 (Bankr. D. Del. Case Nos. 08-10141 to 08-10158). Joseph M. Barry, Esq., and Pauline K. Morgan, Esq., at Young Conaway Stargatt & Taylor LLP, represent the Debtors in their restructuring efforts. The Debtors selected Epiq Bankruptcy Solutions LLC as claims and balloting agent. The U.S Trustee for Region 3 appointed seven creditors to serve on an Official Committee of Unsecured Creditors. The Committee selected Otterbourg Steindler Houston & Rosen PC as counsel. The Debtors' balance sheet as of Sept. 19, 2007, showed total assets of $963,538,000 and total liabilities of $1,156,262,000. As reported in the Troubled Company Reporter on Feb. 26, 2008, the Court granted on February 22, 2008, final approval of the Debtors' debtor-in-possession credit facility, consisting of $85 million of new funding and $200 million carried over from the company's prepetition credit facility. (Buffets Holdings Bankruptcy News, Issue No. 19; Bankruptcy Creditors' Service Inc., http://bankrupt.com/newsstand/or 215/945-7000). * * * As reported in the Troubled Company Reporter on June 16, 2008, the Court further extended exclusive periods of the Debtors to (a) file a Chapter 11 Plan through and including Sept. 30, 2008, and (b) solicit acceptances of a plan through and including Dec. 1, 2008. BUFFETS HOLDINGS: Wants Confidential Pact With Realty Approved -------------------------------------------------------------- Buffets Holding Inc. and its debtor-affiliates ask the United States Bankruptcy Court for the District of Delaware to approve a confidential stipulation among: (i) Realty Income Taxes Properties, LP, Realty Income Pennsylvania Properties Trust and Crease Net Lease, Inc., as landlords, (ii) Fire Mountain Restaurants, LLC, and Ryan's Restaurant Group, Inc., as tenants, and (iii) Buffets, Inc., as guarantor. Pauline K. Morgan, Esq., at Young Conaway Stargatt & Taylor LLP, in Wilmington, Delaware, tells the Court that on November 1, 2006, Buffets acquired Ryan's Restaurant Group, and financed the acquisition through, among other things, a secured credit facility with Credit Suisse and a sale-lease back financing facility extended by Drawbridge Opportunities Fund, LP and its affiliate, Fortress Investment Group, LLC. At the time the merger was consummated, Buffets, Ryan's and Fortress entered into a $567,000,000 sale and leaseback financing relating to approximately 275 Ryan's brand restaurants and seven Buffets brand restaurants. A total of 105 restaurant locations sold in the 2006 SLB Transaction were later transferred to the Landlords from Fortress and are leased back to either Fire Mountain or Ryan's Restaurants and operate as a Ryan's brand restaurant pursuant to 105 individual leases, Ms. Morgan recalls. Prior to the Petition Date, the Debtors, together with their employed court-approved professionals and advisors, carefully analyzed the leases to determine whether assuming or rejecting these would be in the best interest of the Debtors and their creditors. The Debtors have diligently continued their analysis of each of their leases, taking into consideration the restaurant operating performance, competition within the geographical market, rent and other material terms under the leases, the condition of buildings, and other factors to consider with respect to each restaurant location, Ms. Morgan notes. Based on an analysis of the factors, the Debtors have rejected 64 leases, assigned seven leases to third parties and terminated three leases pursuant to various court orders. Using this analysis, the Debtors further investigated each of the Realty Income Leases and determined that some Restaurant locations were not suitable for assumption without lease concessions. This resulted in the Debtors' substantive negotiations with the Landlords to determine if the Realty Income Leases could be restructured in a manner that would permit the Debtors to maintain the locations. After significant negotiations, Buffets, Fire Mountains and Ryan's Restaurant have agreed to enter into a confidential stipulation with Realty Income. The stipulation provides, among others: (1) the Debtors will enter into an amendment to each Realty Income Lease which provides the Debtors either (a) a reduction of rent and an early expiration of the initial lease term, or (b) an early expiration of the initial lease term; (2) the Fire Mountains and Ryan's Restaurant must agree that the amendment and assumption of every Realty Income Lease is a condition precedent to the amendment and assumption of every other Realty Income Lease; (3) if the Debtors reject a Realty Income Lease without the consent of the Landlords, the stipulation and the amendments to the lease will be deemed void ab initio, and the parties return to the status quo ante position as if the stipulation had never been entered, and Fire Mountains Restaurant and Ryan's Restaurant must repay the savings actually achieved under the amendments to the Lease, and Realty income is entitled to a rejection damage claim pursuant to Section 503(b)(7) of the Bankruptcy Code with respect to any rejected Realty Income Lease; (4) Realty Income will have non-priority general unsecured claims in these Debtors' bankruptcy cases with respect to the Leases: Debtor Claim Amount ------ ------------ Buffets, Inc. $9,000,000 Fire Mountain 8,575,000 Ryan's Restaurant 425,000 The maximum aggregate amount distributable to Realty Income under any or all of these claims will be $9,000,000; (5) a cure amount of $66,959 is payable with the Debtors' assumption of the Realty Income Leases, together with the payment of all currently due but unpaid taxes, plus all accrued interest and penalties; (6) the parties must maintain confidentiality of the details underlying the stipulation and the negotiations that lead to it, revealing them only to the extent and to persons required to obtain an order approving the assumption of the Realty Income Leases, including the Committee and Administrative Agent under the Debtors' postpetition credit facility subject to their existing confidentiality agreements with the Debtors. The Debtors, with Realty Income's support, further seek the Court's approval to file under seal the 105 individual lease amendments. Both the Debtors and Realty Income ask the Court to rule that the Amendments to the Leases remain under seal and not be made available to anyone except to the Office of the United States Trustee, the Official Committee of Unsecured Creditors and its advisors and counsel, the Administrative Agent for the Debtors' postpetition lenders and its advisors and counsel, or others as provided for in the stipulation or upon further Court order. Realty Income's Statement Realty Income Corporation, The Monthly Dividend Company(R), has reached an agreement with Buffets Holdings for the continued lease of all of its properties. Under the terms of the agreement, all 105 of the leases, 104 owned by Realty Income and one owned by Crest Net Lease, Inc., will be assumed and continue to be operated by Buffets. Rents will be modified, for the 104 Realty Income properties, from an annualized rent of $22,400,000 to $19,400,000 or 87% of previous rents. In addition, rents are to increase 2% annually. Currently the 104 properties represent approximately 6.8% of Realty Income's annualized lease revenue. Subsequent to the execution of this agreement, it is anticipated that Buffets will continue to be the Company's largest tenant and will represent approximately 5.9% of Realty Income's annualized lease revenue. Realty Income further stated that the results of these negotiations are consistent with the projections used in the Company's previous earnings guidance and, there is no change in earnings guidance based on this agreement. The agreement has been filed with the Court for approval at a future date and is subject to the requirements of the code. Realty Income, The Monthly Dividend Company(R), is a New York Stock Exchange real estate company dedicated to providing shareholders with dependable monthly income. To date the Company has paid 455 consecutive common stock monthly dividends throughout its 39-year operating history. The monthly income is supported by the cash flow from over 2,300 retail properties owned under long-term lease agreements with leading regional and national retail chains. The Company is an active buyer of net- leased retail properties nationwide. About Buffets Holdings Headquartered in Eagan, Minnesota, Buffets Holdings Inc. -- http://www.buffet.com/-- is the parent company of Buffets, Inc., which operates 626 restaurants in 39 states, comprised of 615 steak-buffet restaurants and eleven Tahoe Joe's Famous Steakhouse restaurants, and franchises sixteen steak-buffet restaurants in six states. The restaurants are principally operated under the Old Country Buffet, HomeTown Buffet, Ryan's and Fire Mountain brands. Buffets, Inc. employs approximately 37,000 team members and serves approximately 200 million customers annually. The company and all of its subsidiaries filed Chapter 11 protection on Jan. 22, 2008 (Bankr. D. Del. Case Nos. 08-10141 to 08-10158). Joseph M. Barry, Esq., and Pauline K. Morgan, Esq., at Young Conaway Stargatt & Taylor LLP, represent the Debtors in their restructuring efforts. The Debtors selected Epiq Bankruptcy Solutions LLC as claims and balloting agent. The U.S Trustee for Region 3 appointed seven creditors to serve on an Official Committee of Unsecured Creditors. The Committee selected Otterbourg Steindler Houston & Rosen PC as counsel. The Debtors' balance sheet as of Sept. 19, 2007, showed total assets of $963,538,000 and total liabilities of $1,156,262,000. As reported in the Troubled Company Reporter on Feb. 26, 2008, the Court granted on February 22, 2008, final approval of the Debtors' debtor-in-possession credit facility, consisting of $85 million of new funding and $200 million carried over from the company's prepetition credit facility. (Buffets Holdings Bankruptcy News, Issue No. 18; Bankruptcy Creditors' Service Inc., http://bankrupt.com/newsstand/or 215/945-7000). * * * As reported in the Troubled Company Reporter on June 16, 2008, the Court further extended exclusive periods of the Debtors to (a) file a Chapter 11 Plan through and including Sept. 30, 2008, and (b) solicit acceptances of a plan through and including Dec. 1, 2008. BUFFETS HOLDINGS: Taps PricewaterhouseCoopers as Tax Advisor ------------------------------------------------------------ Buffets Holdings Inc. and its debtor-affiliates ask the United States Bankruptcy Court for the District of Delaware for permission to employ PricewaterhouseCoopers as their tax advisor. Sean T. Greecher, Esq., at Young Conaway Stargatt & Taylor, LLP in Wilmington, Delaware, tells the Court that the Debtors require the services of an experienced tax advisor who is familiar with the Debtors' business and operations, their industry, and the Chapter 11 process. Mr. Greecher relates that PwC has served as the Debtors' tax advisor since 2004, and has developed a great deal of institutional knowledge, and an intimate understanding of the Debtors' business, finances, operations, systems and capital structure. The Debtors, Mr. Greecher says, understand that PwC has wealth of experience in providing accounting, tax and advisory services in restructuring and reorganizations and has an excellent reputation for services it has rendered in large and complex Chapter 11 cases on behalf of debtors and creditors throughout the united States. The Debtors, Mr. Greecher adds, believe that PwC is well-suited and uniquely qualified to serve as the Debtors' tax advisor in their Chapter 11 cases. Aside from providing tax compliance and consulting services to the Debtors, PWC will also: * estimate the amount of cancellation of indebtedness income that would be realized by the Debtors; * identify federal and state tax attributes and any limitations imposed upon them for the Debtors; * analyze the capital structure of Buffets; * to the extent necessary, determine Buffets' tax basis in its assets, including in stock of subsidiaries; * prepare a model that illustrates relevant tax consequences of proposed plans or reorganization; and * provide other tax assistance on an "as requested" basis. For its services, PwC will be compensated based on its hourly rates: Professional Hourly Rate ------------ ----------- Partner $675 Director/Senior manager 585 Manager 485 Senior Associate 385 Associate 275 The firm will also be reimbursed of its necessary, reasonable out-of-pocket expenses incurred in providing the services. The Debtors will provide limited indemnity to PwC as is customary and reasonable. Jeffrey J. Bjustrom, a partner at PwC, assures the Court that PwC is a "disinterested" person as that term is defined in Section 101(14) of the Bankruptcy Code, and does not hold or represent an interest adverse to the Debtors within the meaning of Section 327(a). About Buffets Holdings Headquartered in Eagan, Minnesota, Buffets Holdings Inc. -- http://www.buffet.com/-- is the parent company of Buffets, Inc., which operates 626 restaurants in 39 states, comprised of 615 steak-buffet restaurants and eleven Tahoe Joe's Famous Steakhouse restaurants, and franchises sixteen steak-buffet restaurants in six states. The restaurants are principally operated under the Old Country Buffet, HomeTown Buffet, Ryan's and Fire Mountain brands. Buffets, Inc. employs approximately 37,000 team members and serves approximately 200 million customers annually. The company and all of its subsidiaries filed Chapter 11 protection on Jan. 22, 2008 (Bankr. D. Del. Case Nos. 08-10141 to 08-10158). Joseph M. Barry, Esq., and Pauline K. Morgan, Esq., at Young Conaway Stargatt & Taylor LLP, represent the Debtors in their restructuring efforts. The Debtors selected Epiq Bankruptcy Solutions LLC as claims and balloting agent. The U.S Trustee for Region 3 appointed seven creditors to serve on an Official Committee of Unsecured Creditors. The Committee selected Otterbourg Steindler Houston & Rosen PC as counsel. The Debtors' balance sheet as of Sept. 19, 2007, showed total assets of $963,538,000 and total liabilities of $1,156,262,000. As reported in the Troubled Company Reporter on Feb. 26, 2008, the Court granted on February 22, 2008, final approval of the Debtors' debtor-in-possession credit facility, consisting of $85 million of new funding and $200 million carried over from the company's prepetition credit facility. (Buffets Holdings Bankruptcy News, Issue No. 19; Bankruptcy Creditors' Service Inc., http://bankrupt.com/newsstand/or 215/945-7000). * * * As reported in the Troubled Company Reporter on June 16, 2008, the Court further extended exclusive periods of the Debtors to (a) file a Chapter 11 Plan through and including Sept. 30, 2008, and (b) solicit acceptances of a plan through and including Dec. 1, 2008. BUILDING MATL'S: At Fitch's Neg. Watch on Likely Covenant Breach ---------------------------------------------------------------- Fitch Ratings has placed Building Materials Holding Corporation's ratings on Rating Watch Negative following the company's announcement that it is likely to be out of compliance with certain covenants under its bank credit facilities. These ratings are affected: -- Issuer Default Rating 'B'; -- Senior secured debt 'B+/RR3'. The Rating Watch Negative reflects BMHC's exposure to liquidity risk given ongoing discussions with its bank group regarding a temporary waiver as well as regarding a permanent amendment to its existing syndicated credit facilities. The company announced that based on preliminary evaluation of financial information for its second quarter ended June 30, 2008, BMHC was out of compliance with financial covenants relating to its minimum net worth and earnings before interest, taxes, depreciation and amortization requirements. As of July 28, 2008, there were $29 million outstanding under the revolver and $340 million outstanding on the term loan. Resolution of the Rating Watch Negative will be based in part on the company's ability to negotiate a new bank credit facility. Fitch will review the terms and conditions of the new agreement, including the amount of funds the company can access under it. Fitch will also review the company's financial operating prospects and liquidity for the remainder of 2008 and into 2009 and take that into consideration in resolving the Watch status. The company's financial results have been adversely affected by the meaningful multi-year downturn in the homebuilding market, especially as the large public builders sharply reduced production of new homes to balance supply with demand. BMHC's revenues fell 36.6% during the first quarter of fiscal year 2008 while gross margins for the quarter declined 220 basis points to 17.5% compared to 19.7% during the same period in 2007. In response to the housing downturn, BMHC is unifying and streamlining its operations, shutting down a number of underperforming businesses, reducing capital expenditures and deferring discretionary capital spending, and reducing SG&A expenses by consolidating business infrastructure and optimizing its staffing levels. Fitch expects that BMHC's margins and credit metrics will continue to be under pressure as the housing environment remains difficult for the remainder of the year and into next year. In 2008, Fitch projects that total and single family starts will decline 29.4% and 35.2%, respectively. BMHC is one of the largest providers of building materials and residential construction services in the United States. The company serves the homebuilding industry through two recognized brands: as BMC West, the company distributes building materials and manufacture building components for professional builders and contractors in the western and southern states; as SelectBuild, it provides construction services to high-volume production homebuilders in key markets across the country. BURNSIDE AVENUE: Files for Chapter 11 Bankruptcy in Manhattan ------------------------------------------------------------- Christopher Scinta at Bloomberg News reports that Burnside Avenue Stores Inc. and 26 of its affiliates filed voluntary petitions under Chapter 11 of the Bankruptcy Code before the United States Bankruptcy Court for the Southern District of New York. According to Bloomberg, company president Scott Dwek blamed an ill-fated expansion program into the Midwest, higher rents on new stores, and declining sale for the filing. In connection with the filing, the company is planning to close some of its unprofitable stores, the report notes. The company listed assets of $13 million and debts of $18 million, Bloomberg says. The company owes $844,028 in claims to unsecured creditor Nucci International from New York, the report adds. The company lost roughly $10 million in 2007 on sales of $37.4 million, relates Bloomberg, citing papers filed with the Court. Burnside Avenue, the report relates, has joined other retailers including Linens 'n Things Inc., Mervyn's LLC, and Steve & Barry's LLC who sought relief under Chapter 11 of the Bankruptcy Code as consumers reduce spending in the midst of soaring energy costs and declining home values. Headquartered in Bronx, New York, Burnside Avenue Lot Stores Inc. operates discount stores in 64 locations. BURNSIDE AVENUE: Voluntary Chapter 11 Case Summary -------------------------------------------------- Lead Debtor: Burnside Avenue Lot Stores, Inc. dba Lot Stores 18 East Burnside Ave. Bronx, NY 10453 Bankruptcy Case No.: 08-41898 Debtor-affiliates filing separate Chapter 11 petitions: Entity Case No. ------ -------- Burnside Avenue Lot Stores, Inc. 08-12988 138th Street Lot Stores, Inc. 08-12989 Castle Hill Lot Stores, Inc. 08-12990 125th Street Lot Stores, Inc. 08-12991 Castle Center Lot Stores, Inc. 08-12992 Lenox Avenue Lot Stores, Inc. 08-12993 Retail Hub Family Place, Inc. 08-12994 Lot Stores Management Company, Inc. 08-12995 Lot Stores, Inc. 08-12996 Albert Dweck Distributors, Inc. 08-12997 Avon Avenue Lot Stores, Inc. 08-12998 155 Main Street Lot Stores, Inc. 08-12999 Lot Stores of Roebling Center, Inc. 08-13000 Old Colony Lot Stores, Inc. 08-13002 Atlantic Avenue Lot Stores, Inc. 08-13004 Lot Stores of Strawberry Square, Inc. 08-13005 Front Street Lot Stores, Inc. 08-13006 Lot Stores of North Philadelphia, Inc. 08-13008 Imperial Plaza Lot Stores, Inc. 08-13009 Woodland Village Lot Stores, Inc. 08-13010 1211 Lot Stores, Inc. 08-13011 Overbrook Plaza Lot Stores, Inc. 08-13012 Westside Shopping Center Lot Stores, Inc. 08-13013 Beltway Plaza Lot Stores, Inc. 08-13014 East Over Lot Stores, Inc. 08-13015 East River Lot Stores, Inc. 08-13016 Lot Stores of H Street Connection, Inc. 08-13017 Type of business: The Debtors own and operate department stores. Chapter 11 Petition Date: July 31, 2008 Court: Southern District of New York (Manhattan) Judge: James M. Peck Debtors' Counsel: Kevin J. Nash, Esq. Email: FinkGold@aol.com Finkel Goldstein Rosenbloom Nash, LLP 26 Broadway, Ste. 711 New York, NY 10004 Tel: (212) 344-2929 Fax: (212) 422-6836 Burnside Avenue Lot Stores, Inc's Financial Condition: Estimated Assets: $100,000,000 to $500,000,000 Estimated Debts: $10,000,000 to $50,000,000 The company listed assets of $13 million and debts of $18 million, Bloomberg News says. C32-1 INTERAIR: Voluntary Chapter 11 Case Summary ------------------------------------------------- Debtor: C32-1 Interair Commerce Center, LLC c/o Marc S. Stern 1825 NW 65th St. Seattle, WA 98117 Bankruptcy Case No.: 08-14867 Chapter 11 Petition Date: July 31, 2008 Court: Western District of Washington (Seattle) Debtors' Counsel: Marc S. Stern, Esq. (marc@hutzbah.com) 1825 NW 65th St. Seattle, WA 98117 Te: (206) 448-7996 http://www.hutzbahlaw.com/ Total Assets: $8,000,000 Total Debts: $8,744,594 The Debtor does not have any creditors who are not insiders. CAROL FERRI: Voluntary Chapter 11 Case Summary ---------------------------------------------- Debtor: Carol Ferri 4124 Macaw Las Cruces, NM 88001 Bankruptcy Case No.: 08-12399 Chapter 11 Petition Date: July 25, 2008 Court: New Mexico (Albuquerque) Judge: Mark B. McFeeley Debtor's Counsel: R. Trey Arvizu, III, Esq. (arvizulawoffices@qwestoffice.net) PO Box 1479 Las Cruces, NM 88004-1479 Tel: (575) 527-8600 Fax: (575) 527-1199 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/NMb08-12399.pdf CELL THERAPEUTICS: Selling $12MM Shares to Midsummer Investment --------------------------------------------------------------- Cell Therapeutics Inc. entered into an equity line of credit agreement with Midsummer Investment Ltd. for the sale of up to $12 million of common stock over time. The stock would be issued upon exercise of a warrant pursuant to the terms of the agreement. The company has the right to raise cash under the agreement for shares of the company's common stock on a periodic basis. The number and price per share of each issuance are determined by a contractual formula based on the trading volume and a discount to the volume weighted average price of the company's common stock, as reported by the Milan Stock Exchange, over a preceding period of trading days. The first draw under the agreement is expected to take place in August 2008, and the agreement contemplates that additional draws, subject to customary closing conditions, will occur until the warrant is exercised in full or the company elects to suspend future closings under the agreement. The company can choose to reactivate the line of credit after any such suspension. A prospectus supplement relating to the common stock to be issued in respect of the agreement was filed with Securities and Exchange Commission. Copies of the prospectus supplement and accompanying base prospectus may be obtained directly from: Cell Therapeutics Inc. 501 Elliott Avenue West, Suite 400 Seattle, WA 98119 About Cell Therapeutics Headquartered in Seattle, Cell Therapeutics Inc. -- http://www.CellTherapeutics.com/-- is a biopharmaceutical company committed to developing an integrated portfolio of oncology products aimed at making cancer more treatable. As reported in the Troubled company Reporter on May 20, 2008, Cell Therapeutics Inc.'s consolidated balance sheet at March 31, 2008, showed $78.6 million in total assets, $192.8 million in total liabilities, and $9.9 million in no par value preferred stock, resulting in a $124.1 million total stockholders' deficit. Going Concern Doubt Stonefield Josephson Inc. in Los Angeles, California, expressed substantial doubt about Cell Therapeutics Inc.'s ability to continue as a going concern after auditing company's financial statements for the year ended Dec. 31, 2007. The auditing firm reported that the company has substantial monetary liabilities in excess of monetary assets as of Dec. 31, 2007, including approximately $19.8 million of convertible subordinated notes and senior subordinated notes which mature in June 2008. The company has incurred losses since inception and expects to generate losses from operations for at least the next couple of years primarily due to research and development costs for Zevalin, OPAXIO (paclitaxel poliglumex), pixantrone, and brostallicin. The company said that its $15.3 million in cash and cash equivalents, securities available-for-sales, as of March 31, 2008, even with the $5.0 million additional financing from a second offering of securities to the purchaser of the Series E preferred stock and 13.5% convertible senior notes, will not sufficient to fund the company's planned operations for the next twelve months as well as repay approximately $10.7 million in principal due on its convertible subordinated and senior subordinated notes in June 2008. CENTENNIAL COMMS: May 31 Balance Sheet Upside-Down By $1.0 Billion ------------------------------------------------------------------ Centennial Communications Corp.'s consolidated balance sheet at May 31, 2008, showed $1.38 billion in total assets, $2.42 billion in total liabilities, and $4.9 million in minority interest in subsidiaries, resulting in a $1.04 billion stockholders' deficit. For the full year, the company reported income from continuing operations of $28.0 million, as compared to income from continuing operations of $7.0 million for fiscal year 2007. Including discontinued operations, net income was $25.1 million for the fiscal year ended May 31, 2008, compared to a net loss of $31.6 million for the fiscal year ended May 31, 2007. Centennial reported full-year 2008 consolidated revenue from continuing operations of $1.00 billion, which included $550.7 million from U.S. wireless and $450.7 million from Puerto Rico operations. The company's fiscal 2008 consolidated adjusted operating income from continuing operations was $404.1 million, an increase of 11 percent versus the adjusted 2007 fiscal year. At May 31, 2008, the company had total liquidity of $255.2 million, consisting of cash and cash equivalents totaling $105.2 million and approximately $150.0 million available under its revolving credit facility. Additionally, at May 31, 2008, the company had restricted cash of $6.5 million, which is held in escrow as the result of a reciprocal escrow agreement with one of its customers. The company ended fiscal 2008 with net debt of $1.90 billion, a decrease of $46.3 million from the end of fiscal 2007. Fourth Quarter Results The company reported income from continuing operations of $13.6 million for the fiscal fourth quarter of 2008 as compared to income from continuing operations of $5.9 million in the fiscal fourth quarter of 2007. Including discontinued operations, net income was $12.9 million for the 2008 fiscal fourth quarter compared to $5.2 million in the 2007 fiscal fourth quarter. Consolidated adjusted operating income from continuing operations for the fiscal fourth quarter was $109.0 million, as compared to $98.1 million for the adjusted prior-year quarter. For comparison, the company's fiscal 2007 financial results have been adjusted to reflect the Universal Service Fund (USF) charge in the period to which it relates. "In the U.S., we move into fiscal 2009 with a high-quality customer base that supports strong retail cash flow growth," said Michael J. Small, Centennial's chief executive officer. "We'll continue to invest in our network, retail distribution presence and front-line Associates to showcase our strengths." Small continued, "In Puerto Rico, we've introduced new unlimited rate plans to give our customers a full menu of choices, and we'll make targeted investments in fiscal 2009 to fortify a good competitive position by emphasizing our premium brand with customers who are heavy users of wireless service. We're also leveraging our strong collection of assets in the residential and enterprise markets to capitalize on emerging bandwidth growth in a way that very few players can." Centennial reported fiscal fourth-quarter consolidated revenue from continuing operations of $258.7 million, which included $142.5 million from U.S. wireless and $116.2 million from Puerto Rico operations. Consolidated revenue from continuing operations grew 9 percent versus the adjusted fiscal fourth quarter of 2007. The company ended the quarter with 1,092,600 total wireless subscribers, which compares to 1,049,600 for the year-ago quarter and 1,086,300 for the previous quarter ended Feb. 29, 2008. The company reported 582,200 total access lines and equivalents at the end of the fiscal fourth quarter, which compares to 502,100 for the year-ago quarter. Full-text copies of the company's consolidated financial statements for the year ended May 31, 2008, are available for free at http://researcharchives.com/t/s?3058 About Centennial Communications Based in Wall, New Jersey, Centennial Communications Corp. (Nasdaq: CYCL) - http://www.centennialwireless.com/-- provides regional wireless and integrated communications services in the United States and the Puerto Rico with approximately 1.1 million wireless subscribers and 582,200 access lines and equivalents. The US business owns and operates wireless networks in the Midwest and Southeast covering parts of six states. Centennial's Puerto Rico business owns and operates wireless networks in Puerto Rico and the U.S. Virgin Islands and provides facilities-based integrated voice, data and Internet solutions. Welsh, Carson, Anderson & Stowe is a significant shareholder of Centennial. * * * Centennial Communications Corp. continues to carry Moody's Investor Services' 'Caa1' senior unsecured debt rating, which was placed in September 2006. As reported in the Troubled Company Reporter on Aug. 1, 2008, Standard & Poor's Ratings Services said its credit ratings and outlook on Centennial Communications Corp. (B/Stable/--) are not immediately affected by the company's recent announcement that it has conducted a strategic review and is considering separating its Puerto Rican operations from its U.S. operations. CHRYSLER LLC: Surpasses Second Quarter Financial Objectives ----------------------------------------------------------- Ron Kolka, executive vice president and chief financial officer of Chrysler LLC said it is ahead of its operational plan and it continues to perform ahead of its financial plan for the second quarter and first half of 2008, in spite of the severe economic and industry challenges. In a press statement, the company said that as of June 30, 2008, it has Cash/Marketable Securities of $11.7 billion, including $2.3 billion in Restricted Cash and excluding $2.3 billion in VEBA assets, ahead of its plan and down slightly from year-end 2007. As well, for the six months ended June 30, 2008, Chrysler posted an EBITDA of approximately $1.1 billion, ahead of plan. According to The Wall Street Journal, the public disclosure is a rarity since Chrysler isn't required to share any financial data. WSJ, citing Jim Press, Chrysler president, said the company wanted to tell the real story amid speculations that circulate about the company. Chrysler's holdings, WSJ indicated, included $2.3 billion in restricted cash, excluding $2.3 billion in its retirement fund assets. In a statement, Mr. Kolka added that Chrysler's negative product mix, largely driven by trucks and SUVs, was off-set in the first half with a positive mix which includes the effects from substantially reduced fleet sales; the effects of new products -- the all-new Chrysler and Dodge minivans, Dodge Journey and Jeep Liberty and the elimination of unprofitable models (Chrysler PT Cruiser Convertible, Pacifica and Crossfire and the Dodge Magnum). About Chrysler LLC Based in Auburn Hills, Michigan, Chrysler LLC -- http://www.chrysler.com/-- a unit of Cerberus Capital Management LP, produces Chrysler, Jeep(R), Dodge and Mopar(R) brand vehicles and products. The company has dealers worldwide, including Canada, Mexico, U.S., Germany, France, U.K., Argentina, Brazil, Venezuela, China, Japan and Australia. * * * As reported in the Troubled Company Reporter on Aug 1, 2008, Standard & Poor's Ratings Services lowered the ratings on General Motors Corp., Ford Motor Co., and Chrysler LLC, all to 'B-' from 'B'. The ratings on GM and Ford were removed from CreditWatch with negative implications, where they had been placed on June 20, 2008. Chrysler will remain on CreditWatch pending the renewal of certain bank lines at DaimlerChrysler Financial Services Americas LLC, which S&P expects to be completed in the next few days. If the bank lines are renewed as expected, S&P would affirms the ratings on Chrysler and DCFS and remove them from CreditWatch. On July 31, 2008, TCR said that Fitch Ratings has downgraded the Issuer Default Rating of Chrysler LLC to 'CCC' from 'B-'. The Rating Outlook is Negative. The downgrade reflects Chrysler's restricted access to economic retail financing for its vehicles, which is expected to result in a further step-down in retail volumes. Lack of competitive financing is also expected to result in more costly subvention payments and other forms of sales incentives. Fitch is also concerned with the state of the securitization market and the ability of the automakers to access this market on an economic basis over the near term, given the steep drop in residual values, higher default rates, higher loss severity being experienced and jittery capital markets. CHRYSLER LLC: July 2008 U.S. Sales Down 29% at 98,109 Units ----------------------------------------------------------- Chrysler LLC reported total July 2008 U.S. sales of 98,109 units, which is 29% below the same period last year. Total July sales reflect a continued contraction of the market of pickup trucks and SUV sales and reductions in fleet sales. The company's recently completed "Let's Refuel America $2.99 Gas Guarantee" promotion boosted showroom traffic and helped sales of Chrysler's newest highly fuel-efficient vehicles throughout the three-month program period. "We are writing a new chapter in the auto industry story as customers, dealers and companies adjust to a changing environment," Jim Press, Chrysler LLC Vice Chairman and President, said. "There are many changes taking place that give us at the new Chrysler cause for optimism. In the short term, our 2009 model year vehicles with value packages will soon be arriving in dealerships, and our August incentive packages are the best deals of the year, helping to make owning as affordable as leasing. "Within the product lineup, our leadership in minivans is well- timed as consumers look for fuel-efficient alternatives to larger SUVs. Two new fuel-saving hybrid SUVs, the Dodge Durango and Chrysler Aspen will soon be hitting the streets. The Dodge Journey and Jeep(R) Patriot are gaining more customers on the appeal of fuel efficiency and affordability. And the success of cars like the Dodge Avenger, Charger and Challenger shows that customers still want their cars to stand out from the crowd. Lastly, this fall we come to market with our best new pickup truck ever — the 2009 Dodge Ram." July Highlights The Chrysler Town & Country posted a 24% increase with 8,070 sales versus July 2007 sales of 6,513 units. With room for seven passengers, and the industry-exclusive Swivel 'n Go(TM) seating system, the Chrysler Town & Country could be considered as a fuel- efficient alternative to a full-sized SUV. Town & Country sales in July helped drive total minivan sales up 5%. Total long-wheel- base minivan retail sales increased 21% in July. The Jeep Patriot continues to gain traction in the market, offering excellent fuel economy, interior flexibility and utility at a great value. Total sales of 3,451 were up 4% versus last year due to consumer interest in the company's most fuel-efficient vehicles. Additionally, Jeep Patriot 2008 year-to-date sales increased 119%, with 40,135 total sales when compared with July 2007 year-to-date sales of 18,286 units. Response to sales promotions of the Dodge Ram helped lesson the impact of slow pickup truck demand. Dodge Ram pickup sales were down 27% (21,328 units) versus 2007 sales of 29,312, but sales increased 32% when compared with June 2008 sales of 16,149 units. The Dodge Avenger sedan continued with good performance with 4,318 units sold, up 2% when compared with July 2007 sales of 4,213. The highly anticipated all-new Dodge Challenger SRT8(R) hit the streets in July with excitement and solid sales results (2,895 units sold). The return of the iconic Dodge Challenger combines unmistakable design cues reminiscent of the original Challenger with world-class performance making it the hottest vehicle on the streets this summer. In total, 3,990 Dodge Challengers have been delivered to customers. The company finished the month with 409,331 units of inventory, or a 108-day supply. As part of a planned reduction in manufacturing and capacity, inventory is down 12% compared with July 2007 when it totaled 464,875 units. About Chrysler LLC Based in Auburn Hills, Michigan, Chrysler LLC -- http://www.chrysler.com/-- a unit of Cerberus Capital Management LP, produces Chrysler, Jeep(R), Dodge and Mopar(R) brand vehicles and products. The company has dealers worldwide, including Canada, Mexico, U.S., Germany, France, U.K., Argentina, Brazil, Venezuela, China, Japan and Australia. * * * As reported in the Troubled Company Reporter on Aug. 1, 2008, Standard & Poor's Ratings Services lowered the ratings on General Motors Corp., Ford Motor Co., and Chrysler LLC, all to 'B-' from 'B'. The ratings on GM and Ford were removed from CreditWatch with negative implications, where they had been placed on June 20, 2008. Chrysler will remain on CreditWatch pending the renewal of certain bank lines at DaimlerChrysler Financial Services Americas LLC, which S&P expects to be completed in the next few days. If the bank lines are renewed as expected, S&P would affirms the ratings on Chrysler and DCFS and remove them from CreditWatch. As reported in the Troubled Company Reporter June 24, 2008, Moody's Investors Service affirmed the B3 Corporate Family Rating and Probability of Default Rating of Chrysler LLC, but changed the outlook to negative from stable. The change in outlook reflects the increasingly challenging environment faced by Chrysler as the outlook for US vehicle demand falls, and as high fuel costs drive US consumers away from light trucks and SUVs, and toward more fuel efficient vehicles. As reported in the Troubled Company Reporter on May 9, 2008, Fitch Ratings downgraded the Issuer Default Rating of Chrysler LLC to 'B' from 'B+', with a Negative Rating Outlook. Fitch has also downgraded the senior secured bank facilities, including senior secured first-lien bank loan to 'BB/RR1' from 'BB+/RR1'; and senior secured second-lien bank loan to 'CCC+/RR6' from 'BB+/RR1'. The recovery rating on the second lien was also downgraded from 'BB+/RR1' to 'CCC+/RR6' based on lower asset value assumptions and associated recoveries in the event of a stress scenario. CHRYSLER LLC: Arm Completes Renewal of $24BB Annual Financing ------------------------------------------------------------- Chrysler Financial, the subsidiary of Chrysler LLC, has completed the renewal of its annual credit facilities. The $24 billion credit facilities provide funding for the company's dealer and consumer financial services products. Originally, the company was seeking a renewal of its conduit credit facilities in the amount of $30 billion. Chrysler Financial reduced the amount required due to conditions in the credit markets and changes in the company's retail strategy. "We are pleased with the completion of our credit facilities renewal and the continuing confidence in our company demonstrated by the banking community," Tom Gilman, executive vice chairman - Chrysler Financial, said. "90% of all banks that were part of the original conduit participated in the renewal. The liquidity provided by these facilities will enable us to support our dealers and their retail customers." "I would like to thank our investors who have continued to support us through the renewal,' Mr. Gilman added. "And, I would like to acknowledge the skilled leadership of Citi, JPMorgan and the Royal Bank of Scotland who led the syndication of the loan facilities and partnered with us to manage such a large transaction." "Getting this world-class financing done in this market is a validation of Chrysler Financial and Chrysler, their management and their strategic plans," James B. Lee, Jr., vice chairman of JPMorgan, said. "The depth and breadth of participation in this transaction was impressive, particularly in the current market environment," said Chad Leat, chairman of Citi's Alternative Asset Group. About Chrysler Financial and Chrysler LLC Chrysler Financial -- http://corp.chryslerfinancial.com/-- offers automotive financial products and services to both dealers and consumers of Chrysler, Jeep(R) and Dodge vehicles in the U.S., Canada, Mexico and Venezuela. In addition it offers vehicle wholesale and retail financing to more than 3,600 Chrysler, Jeep and Dodge dealers. Nearly three million drivers in the United States benefits the financing of Chrysler Financial. Chrysler Financial has an employee base of 4,000 and supports a portfolio of $70 billion. Headquartered in Auburn Hills, Michigan, Chrysler LLC -- http://www.chrysler.com/-- a unit of Cerberus Capital Management LP, produces Chrysler, Jeep(R), Dodge and Mopar(R) brand vehicles and products. The company has dealers worldwide, including Canada, Mexico, U.S., Germany, France, U.K., Argentina, Brazil, Venezuela, China, Japan and Australia. * * * As reported in the Troubled Company Reporter on Aug 1, 2008, Standard & Poor's Ratings Services lowered the ratings on General Motors Corp., Ford Motor Co., and Chrysler LLC, all to 'B-' from 'B'. The ratings on GM and Ford were removed from CreditWatch with negative implications, where they had been placed on June 20, 2008. Chrysler will remain on CreditWatch pending the renewal of certain bank lines at DaimlerChrysler Financial Services Americas LLC, which S&P expects to be completed in the next few days. If the bank lines are renewed as expected, S&P would affirms the ratings on Chrysler and DCFS and remove them from CreditWatch. On July 31, 2008, TCR stated that Fitch Ratings has downgraded the Issuer Default Rating of Chrysler LLC to 'CCC' from 'B-'. The rating outlook is negative. The downgrade reflects Chrysler's restricted access to economic retail financing for its vehicles, which is expected to result in a further step-down in retail volumes. Lack of competitive financing is also expected to result in more costly subvention payments and other forms of sales incentives. Fitch is also concerned with the state of the securitization market and the ability of the automakers to access this market on an economic basis over the near term, given the steep drop in residual values, higher default rates, higher loss severity being experienced and jittery capital markets. CIPRICO INC: Gives In to Nasdaq Delisting and Suspension of Stocks ------------------------------------------------------------------ Ciprico Inc. received a letter on July 30, 2008, from the Nasdaq Stock Market stating that the Nasdaq Listing Qualifications Hearings Panel has determined to delist the company's shares from the Nasdaq Stock Market and will suspend trading of those shares at the open of business today, August 1, 2008. In addition to the company's Nasdaq listing violations, the filing for protection under Chapter 11 of the U.S. Bankruptcy Code served as a basis for delisting the company's securities. As reported in the Troubled Company Reporter on July 30, 2008, Ciprico Inc. filed a voluntary petition under Chapter 11 of the Bankruptcy Code before the U.S. Bankruptcy Court for the District of Minnesota due to slow sales. It is presently evaluating other alternatives to maximize the value of its assets. The company stated that it does not intend to incur additional costs to appeal the Panel's decision. About Ciprico Headquartered in Minneapolis, Minnesota, Ciprico Inc. (NASDAQ: CPCI) -- http://www.ciprico.com-- provides software to information techonolgy servers, workstations and digital media workflows. COINMACH SERVICE: S&P Rates $825MM Credit Facility 'B+' ------------------------------------------------------- Standard & Poor's Ratings Services assigned its 'B' corporate credit rating to Plainview, New York-based Coinmach Service Corp. The outlook is negative. At the same time, S&P assigned a 'B+' rating to the company's senior secured $825 million credit facility, which includes a $50 million revolving credit facility due 2013, a $725 million term loan B due 2014, and a $50 million delayed-draw term loan facility due 2014, one notch above the corporate credit rating, and a recovery rating of '2'. S&P also assigned a 'CCC+' rating to the company's $175 million senior unsecured and $225 million senior subordinated interim-loan facilities due 2008, two notches below the corporate credit rating, and a recovery rating of '6'. As of March 31, 2008, CSC had about $1.17 billion of debt. The ratings on CSC reflect its very highly leveraged financial profile following its acquisition by Babcock & Brown Ltd. in November 2007, and its significant cash flow requirements to fund capital expenditures and interest. The company's relatively stable and predictable cash flows mitigate these factors. CSC, through its operating company Coinmach Corp., is the leading supplier of outsourced laundry services for multifamily housing properties in the highly fragmented North American market, with a strong presence in the Northeast, Mid-Atlantic, Southwest, and Southeast regions. "The negative outlook on CSC reflects our concerns about the company's ability to reduce its very high debt leverage and maintain adequate liquidity," said Standard & Poor's credit analyst Christopher Johnson. Although management expects to improve the company's financial profile over the intermediate term, we could lower the ratings if leverage increases to about 8.5x and/or the amount of covenant cushion significantly tightens, which would constrain the company's liquidity position. "If, however, the company can reduce leverage to about 8x, we could revise the outlook to stable," he continued. COLUMBUS LOAN: Moody's Hikes Class C Notes Rating to Aaa from Ba1 ----------------------------------------------------------------- Moody's Investors Service has upgraded the ratings on these notes issued by Columbus Loan Funding Ltd.: Class Description: U.S. $11,500,000 Class C Floating Rate Senior Subordinate Notes Due 2012 Prior Rating: Ba1 Current Rating: Aaa According to Moody's, this rating action is a result of the pay down of the Class C notes and related improvement in the Class C Principal Coverage Test. The transaction's underlying collateral pool consists primarily of Senior Secured Loans. Additionally, Moody's has withdrawn the ratings on the following notes: Class Description: U.S. $27,500,000 Class A-II Floating Rate Senior Subordinate Notes Due 2012 Prior Rating: Aaa Current Rating: WR Class Description: U.S. $10,000,000 Class A-III Floating Rate Senior Subordinate Notes Due 2012 Prior Rating: Aaa Current Rating: WR Class Description: U.S. $41,750,000 Class B Floating Rate Senior Subordinate Notes Due 2012 Prior Rating: Aa3 Current Rating: WR According to Moody's, the withdrawal of the ratings is a result of the Class A-II, Class A-III, and Class B notes being redeemed in full. COMMUNITY HEALTH: Earns $47.9 Million in 2008 Second Quarter ------------------------------------------------------------ Community Health Systems Inc. disclosed on Monday its financial and operating results for the second quarter and six months ended June 30, 2008. Net income decreased 10.9 percent to $47.9 million for the three months ended June 30, 2008, compared with $53.8 million for the same period last year. Net operating revenues for the three months ended June 30, 2008, totaled $2.7 billion, a 124.6 percent increase compared with $1.2 billion for the same period last year. Income from continuing operations was $49.8 million for the three months ended June 30, 2008, compared with $53.6 million for the same period last year. Adjusted EBITDA for the three months ended June 30, 2008, was $368.5 million, compared with $168.9 million for the same period last year, representing a 118.2 percent increase. Adjusted EBITDA is EBITDA adjusted to exclude discontinued operations, loss from early extinguishment of debt and minority interest in earnings. Net cash provided by operating activities for the three months ended June 30, 2008, was $407.9 million, compared with $95.6 million for the same period last year. The consolidated financial results for the three months ended June 30, 2008, reflect a 101.3 percent increase in total admissions compared with the same period last year. This increase is primarily attributable to the expansion of the company's hospital portfolio in 2007. On a same-store basis, admissions increased 2.3 percent and adjusted admissions increased 2.4 percent, compared with the same period last year. On a same-store basis, net operating revenues increased 4.9 percent, compared with the same period last year. Six Months Results Net operating revenues for the six months ended June 30, 2008, totaled $5.4 billion, a 130.3 percent increase compared with $2.4 billion for the same period last year. Income from continuing operations was $101.2 million for the six months ended June 30, 2008, compared with $110.8 million for the same period last year. Net income was $108.0 million for the six months ended June 30, 2008, compared with $108.1 million for the same period last year. Adjusted EBITDA for the six months ended June 30, 2008, was $751.7 million, compared with $339.1 million for the same period last year, representing a 121.6 percent increase. Net cash provided by operating activities for the six months ended June 30, 2008, was $416.8 million, compared with $216.0 million for the same period last year. The consolidated financial results for the six months ended June 30, 2008, reflect a 106.3 percent increase in total admissions compared with the same period last year. This increase is primarily attributable to the expansion of the company's hospital portfolio in 2007. On a same-store basis, both admissions and adjusted admissions increased 3.1 percent, compared with the same period last year. On a same-store basis, net operating revenues increased 5.3 percent, compared with the same period last year. Commenting on the results, Wayne T. Smith, chairman, president and chief executive officer of Community Health Systems Inc. stated, "Community Health Systems delivered a solid operating performance for the second quarter of 2008. These results reflect consistent execution of our strategy and our continued progress with respect to the integration of the significant number of facilities acquired in 2007. "We are pleased with the overall trends in our business during the second quarter with strong same-store growth metrics as well as efficient expense management. Our hospitals are well positioned in each of their respective markets, and are geographically diversified, which minimizes our operating risk as no one state represents a disproportionately greater percentage of our total revenues or earnings. We believe we have a business model in place that has proven, over time, to enhance the operating performance at both our existing and acquired facilities. This model has enabled us to continue to meet our objectives in today's hospital industry operating environment. "As we continue to integrate our recently acquired hospitals, we are focused on the further expansion of our business model to drive improved returns on these assets," added Smith. "We are pleased with our progress through this transition period and will continue to identify operating synergies including reduced marketing and supply costs, targeted physician recruiting, centralized managed care negotiations and a more efficient allocation of capital. We believe we have significant opportunities for continued improvement in the second half of 2008. Above all, we remain focused on delivering value to both our shareholders and the communities we serve." Balance Sheet At June 30, 2008, the company's consolidated balance sheet showed $13.3 billion in total assets, $11.2 billion in total liabilities, $320.6 million in minority interest, and $1.8 billion in total stockholders' equity. About Community Health Located in the Nashville, Tennessee, suburb of Franklin, Community Health Systems Inc. (NYSE: CYH) -- http://www.chs.net/-- operates general acute care hospitals in non-urban and mid-size markets throughout the country. Through its subsidiaries, the company currently owns, leases or operates 117 hospitals in 28 states with an aggregate of approximately 17,000 licensed beds. Its hospitals offer a broad range of inpatient and surgical services, outpatient treatment and skilled nursing care. In addition, through its QHR subsidiary, the company provides management and consulting services to over 160 independent non-affiliated general acute care hospitals located throughout the United States. * * * As reported in the Troubled Company Reporter on July 21, 2008, Fitch Ratings affirmed Community Health Systems Inc.'s Issuer Default Rating at 'B', Secured Bank Credit Facility at 'BB-/RR2', and Senior Unsecured Notes at 'CCC+/RR6'. The Rating Outlook is Stable. CREDIT SUISSE: Fitch Affirms 'B+' Rating on $7.5MM Class L Certs. ----------------------------------------------------------------- Fitch Ratings affirmed Credit Suisse First Boston Mortgage Securities Corp.'s commercial mortgage pass-through certificates, series 2001-CK1, as: -- $461.8 million class A-3 at 'AAA'; -- Interest-only class A-X at 'AAA'; -- Interest-only class A-Y at 'AAA'; -- Interest-only class A-CP at 'AAA'; -- $42.9 million class B at 'AAA'; -- $45.4 million class C at 'AAA'; -- $12.6 million class D at 'AAA'; -- $12.6 million class E at 'AAA'; -- $20.2 million class F at 'AAA'; -- $17.7 million class G at 'AA+'; -- $17.5 million class H at 'A-'; -- $27.4 million class J at 'BB+'; -- $7.5 million class K at 'BB'; -- $7.5 million class L at 'B+'. Fitch does not rate classes M, N, and O. The class A-1 and A-2 certificates have paid in full. The rating affirmations are the result of minimal reduction of the pool collateral balance and stable performance since the last Fitch rating action. As of the July 2008 distribution date, the pool has paid down 29.7%, to $700.6 million from $997.1 million at issuance. Forty-one loans (45.1%) have defeased since issuance. Fitch has identified 15 loans (13.7%) as Fitch Loans of Concern, which include two loans in special servicing (4.5%). The largest specially serviced loan (3.1%) was originally a portfolio of four cross-collateralized, cross-defaulted multifamily buildings located in Texas and Indiana. The portfolio transferred to special servicing in August 2006 due to technical default because of weak performance and existence of significant deferred maintenance. Of the three of the assets that are located in Texas (Houston, Arlington and Amarillo), the Arlington and Amarillo properties have been sold. The remaining property in Texas is currently 38% occupied and is being marketed for sale. One property is located in Indianapolis, Indiana and the special servicer is working to foreclose on this asset. Losses on this specially serviced loan are anticipated to be fully absorbed by the nonrated class O. The second specially serviced loan (1.4%) is secured by two office buildings in Clayton, Missouri. The loan is current and losses are not expected at this time. The largest loan in the pool, Stonewood Center Mall (10.5%), maintains its investment grade shadow rating. The loan is secured by the leasehold interest in a 929,792 square foot regional retail mall in Downey, California. As of March 2008, occupancy was 98% compared to 94% at issuance and the anticipated repayment date is Dec. 11, 2010. There is minimal short-term maturity risk as no loans mature in 2008 and one loan (0.2%) matures in 2009. The majority of the non-defeased loans (40.5%) mature in 2010 and 2011. DAE AVIATION: Moody's Affirms Caa2 Rating on $325MM Unsec. Notes ---------------------------------------------------------------- Moody's Investors Service affirmed DAE Aviation Holdings, Inc.'s Corporate Family and Probability of Default Ratings of B3 but lowered the rating outlook to negative from stable. At the same time, the rating agency upgraded the rating on the company's secured bank credit facilities to B1 from B2 and affirmed the Caa2 rating on the company's senior unsecured notes. At the end of February 2008, DAE Aviation sold its fixed base operations for roughly $435 million and applied some $355 million of proceeds to reduce bank indebtedness ($280 million against an asset sale bridge loan and additional pay-downs of $75 million to secured term loans). Although there has been a reduction in aggregate indebtedness, pro forma metrics provided by the continuing maintenance, repair and overhaul and other business units reflect ongoing extensive leverage, weak interest coverage and negative free cash flow and remain representative of the B3 Corporate Family Rating category. The actions on facility ratings flow from changes in recovery expectations on the company's debt structure. By reducing the level of senior secured indebtedness, recovery rates on the smaller remaining amount of secured debt improve. Similarly, with less senior debt above their claims, the senior unsecured notes are also expected to benefit from higher recovery rates. However, the change was not significant enough to affect the rating of the notes. The change in outlook stems from the performance of the continuing businesses to date (consisting principally of the MRO operations) which is seen as modestly below earlier expectations and could be subject to additional pressure from developments in the North American aviation industry. DAE Aviation has yet to generate free cash flow from its continuing operations. Some of that negative free cash flow would be attributable to the carrying costs of the investment in Landmark Aviation's FBO business; but not all. The company will have some exposure to North American based airlines which operate regional jets whose engines are serviced by the company's MRO network and who have announced fleet capacity reductions. These reductions are concentrated in older aircraft with seating capacity of 50 or fewer passengers which tend to be less fuel efficient but may require more frequent maintenance and repair services. But, the bulk of DAE Aviation's MRO activity remains in servicing business and military aircraft. Despite some near term challenges, the MRO sector is expected to grow over time and the company's position as an authorized provider of OEM aftermarket services and diversification across multiple engine platforms should benefit from these trends. The negative outlook incorporates some uncertainty as to when and how the outcome of these countervailing issues will be resolved. Similarly, covenant compliance headroom could diminish over the next year unless the performance of the MRO operations improves to offset the impact of contributions from the FBO business rolling-off, potentially adversely affecting the company's liquidity profile. Ratings affirmed with updated Loss Given Default assessments: Corporate Family, B3 Probability of Default, B3 $325 million senior unsecured notes, Caa2 (LGD-5, 82%) Ratings upgraded with updated Loss Given Default assessments: $100 million secured revolving credit to B1 (LGD-3, 30%) from B2 (LGD-3, 35%) $479 million secured term loans to B1 (LGD-3, 30%) from B2 (LGD-3, 35%) The last rating action was on July 10, 2007 at which time initial ratings were assigned. DAE Aviation Holdings, Inc., headquartered in Winnipeg, Manitoba, is a 100%-owned subsidiary of Dubai Aerospace Enterprises LTD, and is a leading provider of maintenance, repair and overhaul, and aircraft completion & modification services to the regional, business, military and general aviation industries. The company was formed in 2007 through the acquisition of the MRO and FBOs of Standard Aero Holdings, Inc. and Piedmont/Hawthorne Holdings, Inc. (d/b/a Landmark Aviation) which was valued at approximately $1.9 billion. Annual revenue of the continuing MRO businesses is approximately $1.5 billion. DELTA AIR: Pilots Vote on Northwest Merger Through August 11 ------------------------------------------------------------ Pilots of Delta Airlines Inc. and Northwest Airlines, Inc., began voting July 14, 2008, on a joint labor agreement that will essentially govern the terms of employment of both carrier's pilots groups upon the closing of the Delta-Northwest merger, the Atlanta Journal-Constitution reports. Voting ends Aug. 11, 2008. Voting results will be determined separately as the pilot groups are represented by separate units of the Air Line Pilots Association, AJC says. The Tentative Agreement provides for, among others, Delta's agreement to issue shares of its common stock equal to (i) 3.5% of the fully-diluted shares outstanding of Delta to Delta pilots; and (ii) 2.38% of the fully-diluted shares outstanding of Delta to Northwest pilots, when the merger closes. According to AJC, the Northwest pilots union informed its members of certain meetings it held with Delta pilots in Chicago, Illinois, to continue talks on the integration of their seniority lists. Absent an agreement within the 30-day negotiating period, Delta and Northwest pilot groups will go into binding arbitration to establish a combined seniority list in November 2008, says the report. About Northwest Airlines Northwest Airlines Corp. (NYSE: NWA) -- http://www.nwa.com/-- is the world's fourth largest airline with hubs at Detroit, Minneapolis/St. Paul, Memphis, Tokyo and Amsterdam, and about 1,400 daily departures. Northwest is a member of SkyTeam, an airline alliance that offers customers one of the world's most extensive global networks. Northwest and its travel partners serve more than 1000 cities in excess of 160 countries on six continents. Northwest and its travel partners serve more than 1000 cities in excess of 160 countries on six continents, including Italy, Spain, Japan, China, Venezuela and Argentina. The company and 12 affiliates filed for chapter 11 protection on Sept. 14, 2005 (Bankr. S.D.N.Y. Lead Case No. 05-17930). Bruce R. Zirinsky, Esq., and Gregory M. Petrick, Esq., at Cadwalader, Wickersham & Taft LLP in New York, and Mark C. Ellenberg, Esq., at Cadwalader, Wickersham & Taft LLP in Washington, represent the Debtors in their restructuring efforts. The Official Committee of Unsecured Creditors has retained Scott L. Hazan, Esq., at Otterbourg, Steindler, Houston & Rosen, P.C. as its bankruptcy counsel in the Debtors' chapter 11 cases. When the Debtors filed for bankruptcy, they listed $14.4 billion in total assets and $17.9 billion in total debts. On Jan. 12, 2007, the Debtors filed with the Court their chapter 11 plan. On Feb. 15, 2007, the Debtors filed an amended plan and disclosure statement. The Court approved the adequacy of the Debtors' amended disclosure statement on March 26, 2007. On May 21, 2007, the Court confirmed the Debtors' amended plan. That amended plan took effect May 31, 2007. (Northwest Airlines Bankruptcy News, Issue No. 97; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000). * * * As reported in the Troubled Company Reporter on July 29, 2008, Standard & Poor's Ratings Services lowered its ratings on Northwest Airlines Corp. and subsidiary Northwest Airlines Inc. (both rated B/Negative/--), including lowering the long-term corporate credit ratings on both entities to 'B' from 'B+', and removed the ratings from CreditWatch, where they had been placed with negative implications April 15, 2008. The outlook is negative. The downgrade reflects expected losses and reduced or negative operating cash flow caused by high fuel prices. S&P also lowered our ratings on enhanced equipment trust certificates, in some cases by more than one notch. About Delta Air Based in Atlanta, Georgia, Delta Air Lines Inc. (NYSE:DAL) -- http://www.delta.com/-- is the world's second-largest airline in terms of passengers carried and the leading U.S. carrier across the Atlantic, offering daily flights to 328 destinations in 56 countries on Delta, Song, Delta Shuttle, the Delta Connection carriers and its worldwide partners. Delta flies to Argentina, Australia and the United Kingdom, among others. The company and 18 affiliates filed for chapter 11 protection on Sept. 14, 2005 (Bankr. S.D.N.Y. Lead Case No. 05-17923). Marshall S. Huebner, Esq., at Davis Polk & Wardwell, represents the Debtors in their restructuring efforts. Timothy R. Coleman at The Blackstone Group L.P. provides the Debtors with financial advice. Daniel H. Golden, Esq., and Lisa G. Beckerman, Esq., at Akin Gump Strauss Hauer & Feld LLP, provide the Official Committee of Unsecured Creditors with legal advice. John McKenna, Jr., at Houlihan Lokey Howard & Zukin Capital and James S. Feltman at Mesirow Financial Consulting, LLC, serve as the Committee's financial advisors. The Debtors filed a chapter 11 plan of reorganization and disclosure statement explaining that plan on Dec. 19, 2007. On Jan. 19, 2007, they filed revisions to the plan and disclosure statement, and submitted further revisions to the plan on Feb. 2, 2007. On Feb. 7, 2007, the Court approved the Debtors' disclosure statement. In April 25, 2007, the Court confirmed the Debtors' plan. That plan became effective on April 30, 2007. The Court entered a final decree closing 17 cases on Sept. 26, 2007. (Delta Air Lines Bankruptcy News; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000). DELTA AIR: NWA Merger to Hit Smaller Ports First, Critics Say ------------------------------------------------------------- Even before Northwest Airlines Corp. and Delta Air Lines Inc. confirmed their merger plan in April of this year, critics have already noted that smaller airports would be the first casualties after the consolidation, John Welbes at TwinCities.com remarks. Delta has been discontinuing flights between cities in its network, but denies that the cuts are connected with the proposed tie up, Mr. Welbes states. Delta insists that the flight trimming is part of a "parking program" ensuing from escalating oil costs, Mr. Welbes discloses. Nevertheless, Delta's capacity cuts hint at what's in store for regional airports after the merger, Mr. Welbes avers. "This will be the lowest amount of service that we've had in the last four years," said Debbie Gulliver, travel manager at Michigan State University in Lansing, Michigan, reports TwinCities.com. Delta will be exiting Lansing come September 1, according to Mr. Welbes. Northwest currently controls about 55% of the market at the Lansing airport, Mr. Welbes points out. Apart from Lansing, Delta has begun pulling out of other markets where Northwest has a presence, including Green Bay, Wisconsin; State College, Pennsylvania; Toledo, Ohio and Sioux Falls, South Dakota. Northwest reported in its second quarter results that its capacity reductions will not affect its service to any cities; however, frequency of flights to certain markets will be reduced. In the end, Delta might end up holding on to more of its flights than Northwest, due to Northwest's older fleet and higher maintenance costs, Mr. Welbes says. Despite this, Northwest's operational performance for the summer of 2008 is a complete turnaround from that of last year's, when the carrier canceled as many as 100 flights in a day, due to problems in pilot staffing, the Star Tribune relates. Consequently, Northwest and its pilots union agreed to implement new work rules which reduced pilots' flight hours and providing them an incentive of 150% of their pay rate for flying more than 80 hours a month. U.S. airlines are continuing to battle spiraling fuel prices which almost doubled from a year ago, causing losses in almost all of the major airlines for the second quarter of 2008, says Mr. Welbes. Specifically, United Airlines, Inc., posted the largest loss of $2.7 billion; American Airlines was hit by $1.4 billion; Delta Air Lines lost $1.04 billion, US Airways dropped $567 million and Northwest Airlines, posted a $377 million loss. The least hurt was Continental Airlines, which lost $3 million. About Northwest Airlines Northwest Airlines Corp. (NYSE: NWA) -- http://www.nwa.com/-- is the world's fourth largest airline with hubs at Detroit, Minneapolis/St. Paul, Memphis, Tokyo and Amsterdam, and about 1,400 daily departures. Northwest is a member of SkyTeam, an airline alliance that offers customers one of the world's most extensive global networks. Northwest and its travel partners serve more than 1000 cities in excess of 160 countries on six continents. Northwest and its travel partners serve more than 1000 cities in excess of 160 countries on six continents, including Italy, Spain, Japan, China, Venezuela and Argentina. The company and 12 affiliates filed for chapter 11 protection on Sept. 14, 2005 (Bankr. S.D.N.Y. Lead Case No. 05-17930). Bruce R. Zirinsky, Esq., and Gregory M. Petrick, Esq., at Cadwalader, Wickersham & Taft LLP in New York, and Mark C. Ellenberg, Esq., at Cadwalader, Wickersham & Taft LLP in Washington, represent the Debtors in their restructuring efforts. The Official Committee of Unsecured Creditors has retained Scott L. Hazan, Esq., at Otterbourg, Steindler, Houston & Rosen, P.C. as its bankruptcy counsel in the Debtors' chapter 11 cases. When the Debtors filed for bankruptcy, they listed $14.4 billion in total assets and $17.9 billion in total debts. On Jan. 12, 2007, the Debtors filed with the Court their chapter 11 plan. On Feb. 15, 2007, the Debtors filed an amended plan and disclosure statement. The Court approved the adequacy of the Debtors' amended disclosure statement on March 26, 2007. On May 21, 2007, the Court confirmed the Debtors' amended plan. That amended plan took effect May 31, 2007. (Northwest Airlines Bankruptcy News, Issue No. 97; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000). * * * As reported in the Troubled Company Reporter on July 29, 2008, Standard & Poor's Ratings Services lowered its ratings on Northwest Airlines Corp. and subsidiary Northwest Airlines Inc. (both rated B/Negative/--), including lowering the long-term corporate credit ratings on both entities to 'B' from 'B+', and removed the ratings from CreditWatch, where they had been placed with negative implications April 15, 2008. The outlook is negative. The downgrade reflects expected losses and reduced or negative operating cash flow caused by high fuel prices. S&P also lowered our ratings on enhanced equipment trust certificates, in some cases by more than one notch. About Delta Air Based in Atlanta, Georgia, Delta Air Lines Inc. (NYSE:DAL) -- http://www.delta.com/-- is the world's second-largest airline in terms of passengers carried and the leading U.S. carrier across the Atlantic, offering daily flights to 328 destinations in 56 countries on Delta, Song, Delta Shuttle, the Delta Connection carriers and its worldwide partners. Delta flies to Argentina, Australia and the United Kingdom, among others. The company and 18 affiliates filed for chapter 11 protection on Sept. 14, 2005 (Bankr. S.D.N.Y. Lead Case No. 05-17923). Marshall S. Huebner, Esq., at Davis Polk & Wardwell, represents the Debtors in their restructuring efforts. Timothy R. Coleman at The Blackstone Group L.P. provides the Debtors with financial advice. Daniel H. Golden, Esq., and Lisa G. Beckerman, Esq., at Akin Gump Strauss Hauer & Feld LLP, provide the Official Committee of Unsecured Creditors with legal advice. John McKenna, Jr., at Houlihan Lokey Howard & Zukin Capital and James S. Feltman at Mesirow Financial Consulting, LLC, serve as the Committee's financial advisors. The Debtors filed a chapter 11 plan of reorganization and disclosure statement explaining that plan on Dec. 19, 2007. On Jan. 19, 2007, they filed revisions to the plan and disclosure statement, and submitted further revisions to the plan on Feb. 2, 2007. On Feb. 7, 2007, the Court approved the Debtors' disclosure statement. In April 25, 2007, the Court confirmed the Debtors' plan. That plan became effective on April 30, 2007. The Court entered a final decree closing 17 cases on Sept. 26, 2007. (Delta Air Lines Bankruptcy News; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000). DENNY'S CORP: June 25 Balance Sheet Upside-Down by $172 Million --------------------------------------------------------------- Denny's Corporation reported Tuesday results for its second quarter ended June 25, 2008. At June 25, 2008, the company's consolidated balance sheet showed $354.7 million in total assets and $526.7 million in total liabilities, resulting in a $172.0 million stockholders' deficit. The company's consolidated balance sheet at June 25, 2008, also showed strained liquidity with $42.1 million in total assets available to pay $115.5 million in total current liabilities. The company said it is able to operate with a substantial working capital deficit because (1) restaurant operations and most food service operations are conducted primarily on a cash (and cash equivalent) basis with a low level of accounts receivable, (2) rapid turnover allows a limited investment in inventories, and (3) accounts payable for food, beverages and supplies usually become due after the receipt of cash from the related sales. Net income for the second quarter was $3.2 million, a decrease of $7.4 million compared with prior year net income of $10.6 million. Adjusted income before taxes for the second quarter was $5.7 million, an increase of $4.2 million compared with prior year income of $1.5 million. This measure, which is used as an internal profitability metric, excludes restructuring charges, exit costs, impairment charges, asset sale gains, share-based compensation, other nonoperating expenses and income taxes. For the second quarter of 2008, Denny's reported total operating revenue, including company restaurant sales and franchise revenue, of $190.3 million compared with $240.9 million in the prior year quarter. Company restaurant sales decreased $55.1 million due primarily to 141 fewer equivalent company restaurants compared with the prior year quarter resulting from the sale of company restaurants to franchisees under the Franchise Growth Initiative. During the second quarter, Denny's opened two new company restaurants, closed one and sold 20 to franchisee operators. Company restaurant operating margin (as a percentage of company restaurant sales) for the second quarter was 12.5%, an increase of 0.9 percentage points compared with the same period last year. Product costs for the second quarter decreased 1.9 percentage points to 23.9% of sales due primarily to favorable menu mix and menu price increases. Payroll and benefit costs increased 0.2 percentage points to 42.3% of sales as a result of higher group insurance and management staffing costs partially offset by improved crew labor efficiency and menu price increases. Utility expenses increased 0.3 percentage points to 4.9% of sales due primarily to higher natural gas costs. Franchise revenue in the second quarter increased $4.4 million, or 20%, to $27.0 million due primarily to an increase of 146 equivalent franchise restaurants compared with the prior year period. The growth in franchise revenue included a $3.0 million increase in occupancy revenue, a $1.6 million increase in royalties partially offset by a $200,000 decrease in franchise fees. Franchise operating margin increased by $2.8 million, or 18%, to $18.5 million in the second quarter as higher franchise revenue offset a $1.6 million increase in franchise costs, primarily franchise occupancy costs. Franchise operating margin was 68.5% as a percentage of franchise and license revenue. During the second quarter, Denny’s franchisees opened two new restaurants, closed eight and purchased 20 company restaurants. Nelson Marchioli, president and chief executive officer, stated, "We are pleased to report greater operating margins and strong core earnings growth despite the difficult consumer and cost environment. The strategic actions we have taken to optimize our business model, increase profitability and reduce debt are evident in our improving results. The growing contribution of our higher margin franchise operations along with margin improvements in our company restaurants have allowed us to raise our income guidance for 2008. "While we expect the challenge of reduced consumer spending to continue impacting our sales, we are encouraged by the reception to our new products and promotions. Our brand and marketing teams are delivering compelling new menu items along with aggressive new promotional campaigns to build profitable and sustainable sales growth. Through our strategic initiatives and day-to-day execution in our restaurants, we expect continued financial performance improvements as well as enhanced shareholder value over time." General and administrative expenses for the second quarter declined $1.6 million from the same period last year resulting primarily from reduced staffing and other compensation expenses. Depreciation and amortization expense for the second quarter declined by $2.6 million compared with the prior year period primarily as a result of the sale of restaurant and real estate assets over the past year. Operating gains, losses and other charges, net, which reflect restructuring charges, exit costs, impairment charges and gains or losses on the sale of assets, decreased $15.1 million in the quarter due primarily to a $10.3 million decrease in gains on the sale of restaurants and a $4.5 million increase in severance and other restructuring charges attributable to the redesign of Denny's organizational structure as it transitions to a franchise-focused business model. Operating income for the second quarter decreased $12.8 million to $10.5 million due primarily to the decrease in gains on the sale of restaurants and the increase in restructuring charges compared with the prior year period. Excluding gains, losses, and other charges in both periods, operating income increased $2.3 million despite a $50.7 million decrease in total operating revenue due primarily to the sale of company restaurants. Interest expense for the second quarter decreased $2.1 million, or approximately 19%, to $8.9 million as a result of a $97.2 million reduction in debt from the prior year period. Other nonoperating income increased $1.4 million in the second quarter due primarily to changes in the fair value of Denny's $100.0 million interest rate swap. Franchise Growth Initiative (FGI) Denny's continues its strategic initiative to increase franchise restaurant development through the sale of certain company restaurants. During the second quarter, the company sold 20 restaurants to seven franchisee operators under FGI, bringing the number of company restaurants sold year-to-date to 41 and the number sold since the program began in early 2007 to 171. Additionally, over the last 18 months Denny's has signed development agreements for 136 new restaurants, 14 of which have opened, yielding a current development pipeline of 122 new restaurants. Denny's ended the second quarter of 2008 with a system mix of 77% franchised and licensed restaurants and 23% company restaurants compared with 66% franchised and licensed restaurants and 34% company restaurants before the FGI program began in 2007. The 41 company restaurants sold in 2008 generated net sale proceeds of $22.0 million of which $16.4 million was received in cash during the first half of the year. $3.2 million of the sales proceeds were received in cash subsequent to the quarter end and were included in accounts receivable on the second quarter balance sheet. Additionally, $2.4 million of the sale proceeds were received in the form of notes receivable. The majority of the cash proceeds were used to reduce debt by $15.4 million during the first half of 2008. Business Outlook Mark Wolfinger, executive vice president, chief administrative officer and chief financial officer, stated, "While our sales expectations for the year remain cautious due to the economic pressures on our customers, we will continue to focus on profitable sales drivers, lowering our operating costs and increasing our organizational efficiency. As a result of higher earnings the past two quarters and our expectation for continued income growth through the remainder of the year, we are increasing our guidance for adjusted income before taxes in 2008 to $13.0 to $17 million, an increase of 25% to 60% over the 2007 result." Liquidity and Capital Resources The comany's credit facility consists of a $50.0 million revolving credit facility (including up to $10 million for a revolving letter of credit facility), a $137.0 million term loan and an additional $37.0 million letter of credit facility. At June 25, 2008, the company had outstanding letters of credit of $35.3 million (comprised of $35.0 million under the letter of credit facility and $300,000 under the revolving facility). There were no revolving loans outstanding at June 25, 2008. These balances result in availability of $2.0 million under the letter of credit facility and $49.7 million under the revolving facility. The revolving facility matures on Dec. 15, 2011. The term loan and the $37 million letter of credit facility mature on March 31, 2012. The credit facility is guaranteed by Denny's Corporation and its other subsidiaries and is secured by substantially all of the assets of Denny's and its subsidiaries. In addition, the credit facility is secured by first-priority mortgages on 119 company- owned real estate assets. Full-text copies of the company's consolidated financial statements for the quarter ended June 25, 2008, are available for free at http://researcharchives.com/t/s?3044 About Denny's Corp. Headquartered in Spartanburg, South Carolina, Denny's Corporation (Nasdaq: DENN) -- http://www.dennys.com/-- is a full-service family restaurant chain, consisting of 354 company- owned units and 1,191 franchised and licensed units, with operations in the United States, Canada, Costa Rica, Guam, Mexico, New Zealand and Puerto Rico. DEUTSCHE BANK: Moody's Junks Ratings of 70 Classes of Notes ----------------------------------------------------------- Moody's Investors Service has downgraded the ratings of 177 tranches from 19 Alt-A transactions issued by Deutsche Bank. Eighteen downgraded tranches remain on review for possible downgrade. Additionally, 27 senior tranches were confirmed at Aaa. The collateral backing these transactions consists primarily of first-lien, fixed and adjustable-rate, Alt-A mortgage loans. 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. Certain tranches were confirmed due to additional enhancement provided by structural features. The actions are a result of Moody's on-going review process. Complete rating actions are: Issuer: Deutsche Alt-A Securities, Inc. Mortgage Loan Trust Series 2005-6 Cl. I-A-1, Downgraded to A1 from Aaa Cl. I-A-3, Downgraded to A1 from Aaa Cl. I-A-5, Downgraded to A1 from Aaa Cl. I-A-6, Downgraded to A1 from Aaa Cl. I-A-7, Downgraded to A1 from Aaa Cl. I-A-PO, Downgraded to A1 from Aaa Cl. II-A-1, Downgraded to A1 from Aaa Cl. II-A-2, Downgraded to A1 from Aaa Cl. II-A-PO, Downgraded to A1 from Aaa Cl. II-A-3, Downgraded to Aa2 from Aaa Cl. I-A-8, Downgraded to A2 from Aa1 Cl. II-A-4, Downgraded to A2 from Aa1 Issuer: Deutsche Alt-A Securities Mortgage Loan Trust, Series 2006-AR4 Cl. A-1, Downgraded to Aa2 from Aaa Cl. A-2, Downgraded to Aa2 from Aaa Cl. A-3, Downgraded to Ba2 from Aaa Cl. M-1, Downgraded to B3 from B2; Placed Under Review for further Possible Downgrade Cl. M-2, Downgraded to Ca from B3 Cl. M-3, Downgraded to Ca from B3 Cl. M-4, Downgraded to Ca from B3 Cl. M-5, Downgraded to Ca from B3 Cl. M-6, Downgraded to Ca from B3 Issuer: Deutsche Alt-A Securities Mortgage Loan Trust, Series 2006-AR5 Cl. I-A-1, Downgraded to Baa1 from Aaa Cl. I-A-2, Downgraded to Aa2 from Aaa Cl. I-A-3, Downgraded to Baa1 from Aaa Cl. I-A-4, Downgraded to B3 from Aaa; Placed Under Review for further Possible Downgrade Cl. II-1A, Downgraded to A1 from Aaa Cl. II-2A, Downgraded to A1 from Aaa Cl. II-3A, Downgraded to A2 from Aaa Cl. II-X1, Downgraded to A1 from Aaa Cl. II-X2, Downgraded to A1 from Aaa Cl. II-PO, Downgraded to A1 from Aaa Cl. I-M-1, Downgraded to Ca from B3 Cl. I-M-2, Downgraded to Ca from B3 Cl. I-M-3, Downgraded to Ca from Caa1 Cl. I-M-4, Downgraded to Ca from Caa1 Cl. I-M-5, Downgraded to Ca from Caa1 Cl. I-M-6, Downgraded to Ca from Caa1 Issuer: Deutsche Alt-A Securities Mortgage Loan Trust, Series 2007-1 Cl. I-A-1, Downgraded to Aa1 from Aaa Cl. I-A-2, Downgraded to Aa3 from Aaa Cl. I-A-3A, Downgraded to A1 from Aaa Cl. I-A-3B, Downgraded to A1 from Aaa Cl. I-A-3C, Downgraded to A1 from Aaa Cl. I-A-4B, Downgraded to A2 from Aaa Cl. II-A-1, Downgraded to Aa3 from Aaa Cl. A-5, Downgraded to Ba3 from Aaa Cl. M-1, Downgraded to B3 from B1; Placed Under Review for further Possible Downgrade Cl. M-2, Downgraded to Caa2 from B1 Cl. M-3, Downgraded to Ca from B1 Cl. M-4, Downgraded to Ca from B2 Cl. M-5, Downgraded to Ca from B3 Issuer: Deutsche Alt-A Securities Mortgage Loan Trust, Series 2007-2 Cl. I-A-2, Downgraded to Baa3 from Aaa Cl. II-A-2, Downgraded to Baa3 from Aaa Cl. M-1, Downgraded to Ba2 from A1 Cl. M-2, Downgraded to B1 from Baa1 Cl. M-3, Downgraded to B1 from Baa2; Placed Under Review for further Possible Downgrade Cl. M-4, Downgraded to B2 from Ba1; Placed Under Review for further Possible Downgrade Cl. M-5, Downgraded to B3 from Ba3; Placed Under Review for further Possible Downgrade Cl. M-6, Downgraded to Caa1 from B1; Placed Under Review for further Possible Downgrade Cl. M-7, Downgraded to Ca from B1 Cl. M-8, Downgraded to Ca from B1 Cl. M-9, Downgraded to Ca from B1 Issuer: Deutsche Alt-A Securities Mortgage Loan Trust, Series 2007-AR2 Cl. A-1, Confirmed at Aaa Cl. A-2, Downgraded to Baa2 from Aaa Cl. A-3, Downgraded to Ba3 from Aaa Cl. A-4, Confirmed at Aaa Cl. A-5, Confirmed at Aaa Cl. A-6, Downgraded to Baa2 from Aaa Cl. A-7, Downgraded to Baa2 from Aaa Cl. M-2, Downgraded to Ca from B3 Cl. M-3, Downgraded to Ca from Caa1 Cl. M-4, Downgraded to Ca from Caa1 Cl. M-5, Downgraded to Ca from Caa1 Issuer: Deutsche Alt-A Securities Mortgage Loan Trust, Series 2007-BAR1 Cl. A-1, Downgraded to Aa2 from Aaa Cl. A-2, Downgraded to A1 from Aaa Cl. A-3, Downgraded to Ba1 from Aaa Cl. A-4, Downgraded to Ba2 from Aaa Cl. A-5, Downgraded to B3 from Aaa; Placed Under Review for further Possible Downgrade Cl. M-1, Downgraded to Caa1 from Aa1 Cl. M-2, Downgraded to Caa2 from Aa2 Cl. M-3, Downgraded to Caa3 from Aa3 Cl. M-4, Downgraded to Ca from Baa3 Cl. M-5, Downgraded to Ca from Ba2 Cl. M-6, Downgraded to Ca from Ba3 Cl. M-7, Downgraded to Ca from B2 Cl. M-8, Downgraded to Ca from Caa1 Cl. M-9, Downgraded to Ca from Caa3 Issuer: Deutsche Alt-A Securities, Inc. Mortgage Loan Trust Series 2006-AF1 Cl. A-5, Downgraded to A1 from Aaa Cl. M-5, Downgraded to Ca from B3 Cl. M-6, Downgraded to Ca from B3 Issuer: Deutsche Alt-A Securities, Inc. Mortgage Loan Trust Series 2006-AR1 Cl. I-A-2, Downgraded to Aa2 from Aaa Cl. I-A-3, Downgraded to Aa3 from Aaa Cl. I-A-4, Downgraded to Ba3 from Aaa Cl. I-M-1, Downgraded to B2 from Ba1; Placed Under Review for further Possible Downgrade Cl. I-M-3, Downgraded to Ca from B3 Cl. I-M-4, Downgraded to Ca from B3 Cl. I-M-5, Downgraded to Ca from B3 Cl. I-M-6, Downgraded to Ca from Caa1 Issuer: Deutsche Alt-A Securities, Inc. Mortgage Loan Trust Series 2006-AR2 Cl. A-1-1, Confirmed at Aaa Cl. A-1-2, Confirmed at Aaa Cl. A-2, Downgraded to Baa2 from Aaa Cl. M-5, Downgraded to Ca from B3 Cl. M-6, Downgraded to Ca from B3 Issuer: Deutsche Alt-A Securities, Inc. Mortgage Loan Trust Series 2006-AR3 Cl. A-1, Downgraded to Baa1 from Aaa Cl. A-2, Downgraded to Baa1 from Aaa Cl. A-3, Downgraded to A1 from Aaa Cl. A-4, Downgraded to A2 from Aaa Cl. A-5, Downgraded to A3 from Aaa Cl. A-6, Downgraded to Baa2 from Aaa Cl. A-7, Downgraded to B3 from Aaa; Placed Under Review for further Possible Downgrade Cl. M-1, Downgraded to Ca from B3 Cl. M-2, Downgraded to Ca from B3 Cl. M-3, Downgraded to Ca from Caa1 Cl. M-4, Downgraded to Ca from Caa1 Issuer: Deutsche Alt-A Securities, Inc. Mortgage Loan Trust Series 2006-AR6 Cl. A-1, Confirmed at Aaa Cl. A-2, Downgraded to Aa1 from Aaa Cl. A-3, Downgraded to Aa1 from Aaa Cl. A-4, Downgraded to A2 from Aaa Cl. A-5, Downgraded to A3 from Aaa Cl. A-6, Confirmed at Aaa Cl. A-7, Downgraded to A3 from Aaa Cl. A-8, Downgraded to Ba3 from Aaa Cl. M-1, Downgraded to B3 from B2; Placed Under Review for further Possible Downgrade Cl. M-2, Downgraded to Ca from B3 Cl. M-3, Downgraded to Ca from B3 Cl. M-4, Downgraded to Ca from B3 Cl. M-5, Downgraded to Ca from B3 Cl. M-6, Downgraded to Ca from Caa1 Issuer: Deutsche Alt-A Securities, Inc. Mortgage Loan Trust Series 2007-AR1 Cl. A-1, Downgraded to Baa1 from Aaa Cl. A-2, Downgraded to Baa1 from Aaa Cl. A-3A, Downgraded to Aa2 from Aaa Cl. A-3B, Confirmed at Aaa Cl. A-3C, Downgraded to Aa3 from Aaa Cl. A-4, Downgraded to Baa1 from Aaa Cl. A-5, Downgraded to Baa2 from Aaa Cl. A-6, Downgraded to B1 from Aaa; Placed Under Review for further Possible Downgrade Cl. M-1, Downgraded to B3 from B2; Placed Under Review for further Possible Downgrade Cl. M-2, Downgraded to Ca from B3 Cl. M-3, Downgraded to Ca from B3 Cl. M-4, Downgraded to Ca from B3 Issuer: Deutsche Alt-A Securities, Inc. Mortgage Loan Trust Series 2007-AR3 Cl. II-A-1, Downgraded to Aa3 from Aaa Cl. II-A-2A, Confirmed at Aaa Cl. II-A-2B, Confirmed at Aaa Cl. II-A-3, Downgraded to A2 from Aaa Cl. II-A-4, Downgraded to A1 from Aaa Cl. II-A-5, Downgraded to Aa1 from Aaa Cl. II-A-6, Downgraded to A2 from Aaa Cl. II-A-7, Downgraded to Ba3 from Aaa Cl. I-M-1, Downgraded to Ca from B3 Cl. I-M-2, Downgraded to Ca from B3 Cl. II-M-2, Downgraded to B3 from B2; Placed Under Review for further Possible Downgrade Cl. II-M-3, Downgraded to Ca from B3 Cl. II-M-4, Downgraded to Ca from B3 Cl. II-M-5, Downgraded to Ca from B3 Issuer: Deutsche Alt-B Securities Mortgage Loan Trust, Series 2006-AB1 Cl. A-1-A, Downgraded to Baa1 from Aaa Cl. A-1-B, Downgraded to Baa1 from Aaa Cl. A-1-C, Downgraded to Baa2 from Aaa Cl. A-4, Downgraded to Baa2 from Aaa Cl. A-X-2, Downgraded to Baa2 from Aaa Cl. A-2-A, Confirmed at Aaa Cl. A-2-B, Downgraded to Baa2 from Aaa Cl. A-2-C, Downgraded to Baa2 from Aaa Cl. A-2-D, Downgraded to Baa2 from Aaa Cl. A-X, Confirmed at Aaa Issuer: Deutsche Alt-B Securities Mortgage Loan Trust, Series 2006-AB4 Cl. A-1A, Confirmed at Aaa Cl. A-1B-1, Confirmed at Aaa Cl. A-1C, Downgraded to Aa1 from Aaa Cl. A-2, Downgraded to Baa2 from Aaa Cl. A-3, Downgraded to Baa2 from Aaa Cl. A-3A-1, Downgraded to Aa2 from Aaa Cl. A-4B, Downgraded to Baa3 from Aaa Cl. A-4C, Downgraded to Baa3 from Aaa Cl. A-6A-1, Confirmed at Aaa Cl. A-6A-2, Confirmed at Aaa Cl. M-5, Downgraded to Ca from B3 Cl. M-6, Downgraded to Ca from B3 Cl. M-7, Downgraded to Ca from B3 Cl. M-8, Downgraded to Ca from B3 Cl. M-9, Downgraded to Ca from Caa1 Cl. M-10, Downgraded to Ca from Caa1 Issuer: Deutsche Alt-B Securities Mortgage Loan Trust, Series 2007-AB1 Cl. A-1, Downgraded to A1 from Aaa Cl. AI-1, Downgraded to A1 from Aaa Cl. X, Downgraded to A1 from Aaa Cl. PO, Downgraded to B2 from Aaa; Placed Under Review for further Possible Downgrade Cl. A-2, Downgraded to B3 from Aaa; Placed Under Review for further Possible Downgrade Cl. AI-2, Downgraded to B3 from Aaa; Placed Under Review for further Possible Downgrade Cl. B-1, Downgraded to Caa2 from B2 Issuer: Deutsche Alt-B Securities, Inc. Mortgage Loan Trust Series 2006-AB2 Cl. A-1, Confirmed at Aaa Cl. A-2, Confirmed at Aaa Cl. A-3, Confirmed at Aaa Cl. A-5B, Confirmed at Aaa Cl. A-8, Confirmed at Aaa Cl. M-5, Downgraded to Ca from B3 Cl. M-6, Downgraded to Ca from B3 Issuer: Deutsche Alt-B Securities, Inc. Mortgage Loan Trust Series 2006-AB3 Cl. A-1, Confirmed at Aaa Cl. A-2, Confirmed at Aaa Cl. A-3, Confirmed at Aaa Cl. A-5B, Confirmed at Aaa Cl. A-7, Confirmed at Aaa Cl. A-8, Confirmed at Aaa Cl. M-1, Downgraded to B2 from Ba3; Placed Under Review for further Possible Downgrade Cl. M-4, Downgraded to Ca from B3 Cl. M-5, Downgraded to Ca from B3 Cl. M-6, Downgraded to Ca from B3 Cl. M-7, Downgraded to Ca from Caa1 A list of these actions including CUSIP identifiers may be found at http://ResearchArchives.com/t/s?304 DOYLE MOORE: Voluntary Chapter 11 Case Summary ---------------------------------------------- Debtor: Doyle David Moore dba Black Gold Transport P.O. Box 1196 Kermit, WV 25674 Bankruptcy Case No.: 08-20705 Chapter 11 Petition Date: July 25, 2008 Court: Southern District of West Virginia (Charleston) Debtor's Counsel: Joseph W. Caldwell, Esq. (joecaldwell@verizon.net) Caldwell & Riffee P. O. Box 4427 Charleston, WV 25364-4427 Tel: (304) 925-2100 Fax: (304) 925-2193 Estimated Assets: $1 million to $10 million Estimated Debts: $1 million to $10 million A list of the Debtor's largest unsecured creditors is available for free at http://bankrupt.com/misc/WVsb08-20705.pdf ENESCO GROUP: Judge Goldgar Converts Case to Chapter 7 Liquidation ------------------------------------------------------------------ The Hon. A. Benjamin Goldgar converted the chapter 11 case of Enesco Group, Inc., and its debtor-affiliates to a chapter 7 liquidation proceeding at the behest of William T. Neary, the U.S. Trustee for Region 11. The U.S. Trustee pointed to the Court that there is diminution of the Debtors' estates and the absence of a reasonable likelihood of rehabilitation. Judge Goldgar directed that the Debtors will: a. on or before Aug. 4, 2008, account for and turn over to the Court-appointed chapter 7 trustee all records and property of the estate under its custody and control; b. on or before Aug. 12, 2008, file schedules of all unpaid debts incurred after the commencement of the chapter 11 case; c. on or before Aug. 28, 2008, file a final report and account; d. within 15 days after the entry of the case conversion order, or July 28, 2008, file the statement and schedules, if these documents have not already been filed. The Court designated Marie Eisenbach Graul to perform the acts the Debtors are required by the case conversion order. The Court will conduct a status hearing on Oct. 1, 2008, at 10:00 a.m., to determine whether the Debtors and designated person have complied to the order. About Enesco Group Based in Itasca, Illinois, Enesco Group, Inc. -- http://www.enesco.com/-- is a producer of giftware, and home and garden decor products. Enesco's product lines include some of the world's most recognizable brands, including Disney, Heartwood Creek, Nickelodeon, Cherished Teddies, Lilliput Lane, Border Fine Arts, among others. Enesco distributes products to a wide array of specialty gift retailers, home decor boutiques and direct mail retailers, as well as mass-market chains. The company serves markets operating in Europe, particularly in the United Kingdom and France, as well in the Asia Pacific in Australia and Hong Kong. The company also has Latin-American operations in Mexico. Enesco Group and its two affiliates, Enesco International Ltd. and Gregg Manufacturing, Inc., filed for chapter 11 protection on Jan. 12, 2007 (Bankr. N.D. Ill. Lead Case No. 07-00565). Shaw Gussis Fishman Glantz Wolfson & Tow and Skadden, Arps, Slate, Meagher & Flom LLP, represent the Debtors. Epiq Bankruptcy Solutions, LLC, acts as the Debtors' claims and noticing agent. Brad Berish, Esq., at Adelman & Gettleman, Ltd., and Nancy A. Peterman, Esq., at Greenberg Traurig LLP, represent the Official Committee of Unsecured Creditors as bankruptcy counsel. In its schedules, Enesco disclosed total assets of $61,879,068 and total debts of $231,510,180. ENESCO GROUP: David Brown Named as Chapter 7 Trustee ---------------------------------------------------- William T. Neary, the U.S. Trustee for Region 11, appointed David R. Brown as the chapter 7 trustee to oversee the liquidation of Enesco Group, Inc., and its debtor-affiliates' bankruptcy estates. Judge A. Benjamin Goldgar entered an order converting the Debtors' chapter 11 case to a chapter 7 liquidation proceeding. About Enesco Group Based in Itasca, Illinois, Enesco Group, Inc. -- http://www.enesco.com/-- is a producer of giftware, and home and garden decor products. Enesco's product lines include some of the world's most recognizable brands, including Disney, Heartwood Creek, Nickelodeon, Cherished Teddies, Lilliput Lane, Border Fine Arts, among others. Enesco distributes products to a wide array of specialty gift retailers, home decor boutiques and direct mail retailers, as well as mass-market chains. The company serves markets operating in Europe, particularly in the United Kingdom and France, as well in the Asia Pacific in Australia and Hong Kong. The company also has Latin-American operations in Mexico. Enesco Group and its two affiliates, Enesco International Ltd. and Gregg Manufacturing, Inc., filed for chapter 11 protection on Jan. 12, 2007 (Bankr. N.D. Ill. Lead Case No. 07-00565). Shaw Gussis Fishman Glantz Wolfson & Tow and Skadden, Arps, Slate, Meagher & Flom LLP, represent the Debtors. Epiq Bankruptcy Solutions, LLC, acts as the Debtors' claims and noticing agent. Brad Berish, Esq., at Adelman & Gettleman, Ltd., and Nancy A. Peterman, Esq., at Greenberg Traurig LLP, represent the Official Committee of Unsecured Creditors as bankruptcy counsel. In its schedules, Enesco disclosed total assets of $61,879,068 and total debts of $231,510,180. EXKELL: Case Summary & 20 Largest Unsecured Creditors ----------------------------------------------------- Debtor: Exkell, Inc. dba Rock N Rocks 111 Franklin St. Clarksville, TN 37040 Bankruptcy Case No.: 08-06698 Chapter 11 Petition Date: July 31, 2008 Court: Middle District of Tennessee (Nashville) Judge: Marian F Harrison Debtor's Counsel: Steven L. Lefkovitz, Esq. Email: Stevelefkovitz@aol.com Lefkovitz & Lefkovitz 618 Church St., Ste. 410 Nashville, TN 37219 Tel: (615) 256-8300 Fax: (615) 250-4926 Total Assets: $879,682 Total Debts: $1,180,543 A copy of 's petition is available for free at: FGIC CORP: Fitch Junks Rating on $325MM of 6% Senior Notes ---------------------------------------------------------- Fitch Ratings has downgraded these ratings on FGIC Corporation and its financial guaranty insurance subsidiaries Financial Guaranty Insurance Company and FGIC UK Ltd. as shown below: FGIC FGIC UK Ltd. -- Insurer financial strength to 'CCC' from 'BBB'. Fitch has placed these ratings on Rating Watch Evolving. FGIC Corp. -- Long-term Issuer to 'CCC-' from 'BB'; -- $325 million of 6% senior notes due Jan. 15, 2034 to 'CCC-' from 'BB'. Fitch has placed these ratings on Rating Watch Negative. The rating action is based on Fitch's expectation that FGIC will experience further credit deterioration on its book of business backed by residential mortgage-backed securities. This deterioration could lead to further additions in loss reserves which will increase the possibility that FGIC could become subjected to some form of regulatory intervention. Moreover, as of March 31, 2008 FGIC would have negative statutory capital if not for the $600 million 'contingent gain' the company recognized related to a structured finance CDO transaction, known as Havenrock II, that is currently being disputed in court. Fitch continues to monitor developments with respect to this dispute for potential implications to the financial condition of FGIC. In the event that some form of regulatory intervention were to occur, FGIC's exposure to credit derivatives would be subject to immediate termination with its outstanding counterparties. In this scenario, FGIC would be required to settle the CDS contracts at their current market value; a level that Fitch believes is considerably greater than the company's existing claims-paying resources. Given the heightened risk of regulatory intervention, and FGIC's inability to date to raise additional third-party capital, either from its existing owners or externally, it is likely the company will need to pursue the commutation of some of its most capital intensive exposures, namely SF CDOs underwritten in CDS form. Such options are more likely given the precedent set by the recently announced commutation of several SF CDO contracts between Security Capital Assurance Ltd. and Merrill Lynch & Co., Inc. The Rating Watch Evolving reflects: -- The uncertainty noted above related to the outcome of the Havenrock II dispute, and the potential for either favorable or negative outcomes; -- Fitch's expectation for higher RMBS loss reserves in the next several quarters; -- Ongoing negotiations with external reinsurance providers that could ultimately improve certain policyholder positions; and -- Rating implications tied to Fitch's ultimate viewpoint related to the nature of the negotiations surrounding probable commutations. Given FGIC's greatly weakened financial condition, Fitch would evaluate any commutation to judge whether it was 'distressed' and viewed as an economic default per Fitch's rating methodology. The Rating Watch Negative on FGIC Corp.'s long-term issuer and senior unsecured debt ratings reflects Fitch's expectation that if FGIC's financial condition continues to deteriorate and triggers some form of regulatory intervention, regulators will likely prevent FGIC from paying dividends to FGIC Corp. in order to service its debt or other holding company operating expenses. Fitch will comment on the impact of the downgrade of FGIC's IFS rating on the ratings of securities insured by FGIC in a separate release. FGIC Corp. is a U.S. holding company whose primary operating financial guaranty subsidiaries are FGIC and FGIC U.K Ltd. For March 31, 2008, FGIC Corp. reported consolidated assets under Generally Accepted Accounting Principles of $6.7 billion and shareholders' equity of approximately $548 million. On an aggregated basis, net par outstanding for FGIC totaled $308 billion as of March 31, 2008. FIRST HORIZON: Moody's Cuts Classes II-A-1 and II-A-2 to B1 ----------------------------------------------------------- Moody's Investors Service has downgraded the ratings of 42 tranches from 14 Alt-A transactions issued by First Horizon. Additionally, 4 senior tranches were confirmed at Aaa. The collateral backing these transactions consists primarily of first- lien, fixed and adjustable-rate, Alt-A mortgage loans. 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. Certain tranches were confirmed due to additional enhancement provided by structural features. The actions described below are a result of Moody's on-going review process. Complete rating actions are: Issuer: First Horizon Alternative Mortgage Securities Trust 2005- AA11 Cl. I-A-1, Downgraded to A1 from Aaa Cl. II-A-1, Downgraded to A2 from Aaa Issuer: First Horizon Alternative Mortgage Securities Trust 2005- AA7 Cl. I-A-2, Downgraded to Aa3 from Aaa Cl. II-A-2, Downgraded to Aa3 from Aaa Issuer: First Horizon Alternative Mortgage Securities Trust 2005- AA9 Cl. I-A-1, Downgraded to A1 from Aaa Cl. II-A-1, Downgraded to Aa3 from Aaa Cl. III-A-1, Downgraded to Aa3 from Aaa Issuer: First Horizon Mortgage Securities Trust 2005-AA12 Cl. I-A-2, Downgraded to A1 from Aaa Cl. II-A-1, Downgraded to A1 from Aaa Cl. III-A-2, Downgraded to A1 from Aaa Issuer: First Horizon Alternative Mortgage Securities Trust 2006- AA1 Cl. I-A-2, Downgraded to A2 from Aa1 Cl. II-A-2, Downgraded to A2 from Aaa Issuer: First Horizon Alternative Mortgage Securities Trust 2006- AA2 Cl. II-A-2, Downgraded to Baa2 from Aa1 Issuer: First Horizon Alternative Mortgage Securities Trust 2006- AA3 Cl. A-2, Downgraded to Baa2 from Aa1 Issuer: First Horizon Alternative Mortgage Securities Trust 2006- AA4 Cl. I-A-1, Downgraded to Aa1 from Aaa Cl. I-A-2, Downgraded to Aa1 from Aaa Cl. IV-AIO, Confirmed at Aaa Cl. 2IO3, Confirmed at Aaa Cl. 2AB3, Downgraded to Aa2 from Aa1 Cl. IV-A-2, Downgraded to Aa2 from Aa1 Issuer: First Horizon Alternative Mortgage Securities Trust 2006- AA7 Cl. A-1, Downgraded to Aa3 from Aaa Cl. A-2, Downgraded to Ba3 from Aa1 Issuer: First Horizon Alternative Mortgage Securities Trust 2006- FA3 Cl. A-1, Downgraded to Aa1 from Aaa Cl. A-2, Downgraded to Aa1 from Aaa Cl. A-3, Downgraded to Aa1 from Aaa Cl. A-4, Downgraded to Aa1 from Aaa Cl. A-5, Downgraded to Aa1 from Aaa Cl. A-7, Downgraded to Aa2 from Aa1 Cl. A-9, Downgraded to Aa1 from Aaa Cl. A-10, Downgraded to Aa2 from Aa1 Cl. A-11, Downgraded to Aa1 from Aaa Cl. A-12, Downgraded to Aa1 from Aaa Cl. A-13, Downgraded to Aa1 from Aaa Cl. A-PO, Downgraded to Aa1 from Aaa Issuer: First Horizon Alternative Mortgage Securities Trust 2006- FA8 Cl. I-A-6, Downgraded to Aa3 from Aa1 Issuer: First Horizon Alternative Mortgage Securities Trust 2007- AA2 Cl. I-A-1, Downgraded to Aa2 from Aaa Cl. I-A-2, Downgraded to Ba3 from Aaa Cl. I-A-3, Downgraded to Aa2 from Aaa Cl. II-A-1, Downgraded to B1 from Aaa Cl. II-A-2, Downgraded to B1 from Aaa Issuer: First Horizon Alternative Mortgage Securities Trust 2007- FA2 Cl. I-A-4, Confirmed at Aaa Issuer: First Horizon Alternative Mortgage Securities Trust 2007- FA3 Cl. A-8, Confirmed at Aaa Cl. A-9, Downgraded to Baa3 from Aa1 Cl. A-10, Downgraded to Baa3 from Aa1 A list of these actions including CUSIP identifiers may be found at http://ResearchArchives.com/t/s?3043 FIRST PRIORITY: Operations Closed; SunTrust Gets Insured Deposits ----------------------------------------------------------------- First Priority Bank was closed Friday by the Commissioner of the Florida Office of Financial Regulation, and the Federal Deposit Insurance Corporation was named receiver. To protect the depositors, the FDIC entered into a purchase and assumption agreement with SunTrust Bank Inc. to assume the insured deposits of First Priority. The six branches of First Priority will reopen on Monday as branches of SunTrust Bank. Depositors of the failed bank will automatically become depositors of SunTrust. Deposits will continue to be insured by the FDIC, so there is no need for customers to change their banking relationship to retain their deposit insurance coverage. For the time being, however, customers of both banks should use their existing branches until SunTrust can fully integrate the deposit records of First Priority. Over the weekend, customers of First Priority can access their money by writing checks or using ATM or debit cards. Checks drawn on the bank will continue to be processed. Loan customers should continue to make their payments as usual. As of June 30 2008, First Priority had total assets of $259 million and total deposits of $227 million. At the time of closing, there were approximately $13 million in uninsured deposits held in approximately 840 accounts that potentially exceeded the insurance limits. This amount is an estimate that is likely to change once the FDIC obtains additional information from these customers. Customers with accounts in excess of $100,000 should contact the FDIC toll free at 1-800-837-0215 to set up an appointment to discuss their deposits. This phone number will be operational this evening until 9:00 p.m. EDT; on Saturday from 8:00 a.m. to 8:00 p.m. EDT; and on Sunday and thereafter from 8:00 a.m. to 6:00 p.m. EDT. In addition to continued access to their insured deposits, depositors of First Priority with amounts exceeding the insurance limits will receive a payment of 50 percent of their uninsured balance from the FDIC as receiver. The FDIC will mail these payments directly to the customers early next week; the amounts will not appear in their account balances at SunTrust Bank. SunTrust agreed to assume the insured deposits for no premium. In addition to assuming the failed bank's insured deposits, SunTrust Bank will purchase approximately $42 million of the failed bank's assets. The assets are comprised mainly of cash, cash equivalents and securities. The FDIC, however, entered into a separate agreement with LNV Corporation, Plano, Texas, to purchase $14 million in First Priority's assets. LNV Corporation is a subsidiary of Beal Bank Nevada, Las Vegas, Nevada. The FDIC will retain the remaining assets for later disposition. The cost to the FDIC's Deposit Insurance Fund is estimated to be $72 million. First Priority is the first bank to fail in Florida since Guaranty National Bank, Tallahassee, on March 12, 2004. This year, a total of eight FDIC-insured institutions have been closed. Three other banks have failed since July 2008: Bank Location Closing Date ---- -------- ------------ First Heritage Bank, NA Newport Beach, California July 25, 2008 First National Bank of Reno, Nevada July 25, 2008 Nevada IndyMac Bank Pasadena, California July 11, 2008 The FDIC has been appointed receiver for these banks. About FDIC Congress created the Federal Deposit Insurance Corporation in 1933 to restore public confidence in the nation's banking system. The FDIC insures deposits at the nation's 8,494 banks and savings associations and it promotes the safety and soundness of these institutions by identifying, monitoring and addressing risks to which they are exposed. On the Net: http://www.fdic.gov/ About SunTrust Bank Headquartered in Atlanta, Georgia, SunTrust Banks, Inc., provides deposit, credit, trust, and investment services to businesses and institutional clients. The bank also provides mortgage banking, brokerage, investment management, equipment leasing, and capital market services. According to its webite, the bank has total assets of $179 billion as of March 31, 2008. On the Net:https://www.suntrust.com/ About First Priority Headquartered in Bradenton, Florida, First Priority Bank, a wholly owned subsidiary of First Priority Financial Corp., provides financial management to averaged size businesses and individuals as well. The bank is a is a Pennsylvania state-chartered and FDIC insured. On the Net: http://www.fpbank.com/ FORD MOTOR: Terminates Lighting Biz Sale Contract with Meridian --------------------------------------------------------------- Meridian Automotive Systems, Inc., said Ford Motor Company and its affiliate, Automotive Components Holdings, LLC, terminated a Memorandum of Understanding, pursuant to which Meridian will purchase ACH's Sandusky, Ohio, automotive lighting facility. According to Meridian, ACH and Ford said that it will not be possible to sell the Sandusky lighting business on the terms under the MOU because of the "significant changes in the overall business environment, including recent reductions in projected industry volumes." "The decision by ACH and Ford to terminate the MOU is understandable, but is disappointing to all of us," Richard E. Newsted, Meridian's president and chief executive officer, said. "We would reconsider this opportunity should business conditions improve. Of course, we remain committed to our lighting customers and will continue to serve them from our world-class manufacturing facilities located in Grand Rapids, Michigan and Muzquiz, Coahuila, Mexico." The deal was contingent on reaching a new and long-term contract with the United Autoworkers that would reduce operating costs at the plant. Kevin Furr, president of UAW Local 1216, related to the Sandusky Register that Meridian's backing out will have a positive impact on the Sandusky plant. "We feel that Meridian was not a good purchaser for our plant, relative to the employees and the community," Sandusky Register quoted Mr. Furr as saying. Meridian is currently a defendant in a lawsuit filed in the U.S. District Court for the Southern District of Ohio by the United Steelworkers on behalf of Meridian's workers at its Jackson, Ohio facility. The USW alleged that Meridian violated the Workers Adjustment and Retraining Notification Act when the company failed to notify Union-represented employees of its intent to close the Jackson plant 60 days before the actions were executed. Reuters related that the now-terminated sale had been part of a push by Ford to unload the money-losing assets of its former Visteon Corp. subsidiary. In the past 18 months, Ford has announced a series of deals to sell off plants it took back from Visteon as part of a bailout that was completed in 2005, Reuters added. About Meridian Automotive Systems Headquartered in Dearborn, Mich., Meridian Automotive Systems Inc. -- http://www.meridianautosystems.com/-- supplies technologically advanced front and rear end modules, lighting, exterior composites, console modules, instrument panels and other interior systems to automobile and truck manufacturers. Meridian operates 22 plants in the United States, Canada and Mexico, supplying Original Equipment Manufacturers and major Tier One parts suppliers. The Company and its debtor-affiliates filed for chapter 11 protection on April 26, 2005 (Bankr. D. Del. Case Nos. 05-11168 through 05-11176). James F. Conlan, Esq., Larry J. Nyhan, Esq., Paul S. Caruso, Esq., and Bojan Guzina, Esq., at Sidley Austin Brown & Wood LLP, and Robert S. Brady, Esq., Edmon L. Morton, Esq., Edward J. Kosmowski, Esq., and Ian S. Fredericks, Esq., at Young Conaway Stargatt & Taylor, LLP, represent the Debtors in their restructuring efforts. Eric E. Sagerman, Esq., at Winston & Strawn LLP represents the Official Committee of Unsecured Creditors. The Committee also hired Ian Connor Bifferato, Esq., at Bifferato, Gentilotti, Biden & Balick, P.A., to prosecute an adversary proceeding against Meridian's First Lien Lenders and Second Lien Lenders to invalidate their liens. When the Debtors filed for protection from their creditors, they listed $530 million in total assets and approximately $815 million in total liabilities. The Hon. Mary Walrath confirmed Meridian's Revised Fourth Amended Reorganization Plan on Dec. 6, 2006. The company emerged from chapter 11 protection on Dec. 29, 2006. (Meridian Bankruptcy News, Issue No. 62; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000). About Ford Motor Headquartered in Dearborn, Michigan, Ford Motor Co. (NYSE: F) -- http://www.ford.com/-- manufactures or distributes automobiles in 200 markets across six continents. With about 260,000 employees and about 100 plants worldwide, the company's core and affiliated automotive brands include Ford, Jaguar, Land Rover, Lincoln, Mercury, Volvo, Aston Martin, and Mazda. The company provides financial services through Ford Motor Credit Company. The company has operations in Japan in the Asia Pacific region. In Europe, the company maintains a presence in Sweden, and the United Kingdom. The company also distributes its brands in various Latin-American regions, including Argentina and Brazil. * * * As reported in the Troubled Company Reporter on Dec. 12, 2006, Standard & Poor's Ratings Services affirmed its 'B' bank loan and '2' recovery ratings on Ford Motor Co. As reported in the Troubled Company Reporter on Dec. 7, 2006, Fitch Ratings downgraded Ford Motor Company's senior unsecured ratings to 'B-/RR5' from 'B/RR4'. As reported in the Troubled Company Reporter on Dec. 6, 2006, Moody's Investors Service assigned a Caa1, LGD4, 62% rating to Ford Motor Company's $3-billion of senior convertible notes due 2036. GENERAL MOTORS: Incurs $15.5BB 2008 Second Quarter Prelim Net Loss ------------------------------------------------------------------ General Motors Corp. reported its financial results for the second quarter of 2008, which include significant charges and special items. The reported net loss was $15.5 billion or $27.33 per share for the second quarter, including these charges and special items, compared with net income from continuing operations of $784 million or $1.37 per share in the second quarter of 2007. On an adjusted basis, GM posted a net loss of $6.3 billion or $11.21 per share, compared with net income from continuing operations of $1.3 billion or $2.29 per share in the same period last year. GM previously disclosed that it anticipated a significant second quarter loss, driven in large part by costs associated with the American Axle and Manufacturing Holdings Inc. and local U.S. strikes, and charges related to the successful U.S. hourly attrition program, actions to reduce North American truck capacity, Delphi and other matters. The operating and liquidity actions announced on July 15 contemplated weak second quarter results and a continued unfavorable U.S. environment. The company has outlined a strong cadence of product, powertrain, capacity and liquidity actions over the past 60 days, to realign the business with current U.S. economic and auto market conditions, and position the company for profitable global growth. Some of those actions include cessation of production at four truck plants, shift reductions at two truck plants, the addition of shifts at two car plants, announcement of the new Chevrolet global small car program and next generation Chevrolet Aveo compact car, introduction of a high-efficiency 4-cylinder engine for U.S. application, salaried headcount reductions and compensation actions, deferral of certain payments to the UAW VEBA, suspension of the dividend on common stock, reductions in sales and marketing budgets, the strategic review of the Hummer brand and production funding approval for the Chevrolet Volt extended range electric vehicle. "As our recent product, capacity and liquidity actions clearly demonstrate, we are reacting rapidly to the challenges facing the U.S. economy and auto market, and we continue to take the aggressive steps necessary to transform our U.S. operations," said GM Chairman and CEO Rick Wagoner. "We have the right plan for GM, driven by great products, building strong brands, fuel-economy technology leadership and taking full advantage of global growth opportunities." GM's second quarter results were primarily driven by several factors: significant losses in GM North America (GMNA) due to continuing U.S. industry volume declines and shifts in vehicle mix, the long strike at American Axle and large lease-related charges; a number of special charges associated with GM's ongoing restructuring actions; continued losses at GMAC Financial Services (GMAC) and updated estimates regarding recoveries and expectations of assumed benefit obligations in the Delphi bankruptcy. GM recorded $9.1 billion of special items, predominantly non-cash in nature for the current quarter or near-term periods, which include: * $3.3 billion relating to the 2008 GMNA hourly special attrition program; * $2.8 billion adjustment to the Delphi reserve; * $1.1 billion GMNA restructuring and capacity related costs; * $1.3 billion impairment of GM's equity interest in GMAC; * $340 million Canadian Auto Workers contract-related accounting charges; and * $197 million related to settlement of the strike at American Axle. In addition, the GMNA adjusted net income results reflect a $1.6 billion charge related to lower residual values for off-lease vehicles. The total impact of declining residual values in GM's second quarter earnings was $2.0 billion, including impairments of lease assets at both GMAC and GM. Revenue for the second quarter was $38.2 billion, down from $46.7 billion in the year-ago quarter, which is more than accounted for by the decline in GMNA revenues. Combined revenues for the GM Europe (GME), GM Asia Pacific (GMAP) and GM Latin America, Africa and Middle East (GMLAAM) regions were $20.8 billion, up $1.7 billion over the same period 2007. GM reports its automotive operations and regional results on an earnings-before-tax basis, with taxes reported on a total corporate basis. GM Automotive Operations The second quarter adjusted automotive loss of $4.0 billion ($9.1 billion reported) reflects the losses in GMNA driven largely by volume declines including the impact of the American Axle and local strikes as well as adjustments to lease vehicle residual reserves. In addition, GMAP results were negatively impacted by adjustments relating to hedge accounting. The losses were partially offset by exceptionally strong performance in the GMLAAM region and continued profitability in GME. The loss compares with adjusted automotive earnings from continuing operations of $1 billion in the second quarter of 2007 (reported earnings of $803 million). GM sold 2.29 million vehicles worldwide in the second quarter, down 5% year over year. Sales in GMNA were down 20%, or 236,000 units versus the year-ago period, while sales outside of North America grew by 10% or 116,000 units. A record 65% of GM unit sales for the second quarter were outside the United States. Global market share was 12.3%, down 0.9% due to weakness in North America. GMNA revenue for the second quarter was $19.8 billion, down from $29.7 billion in the year-ago period. The decline was largely attributable to a markedly weaker U.S. auto market and lost production due to the work stoppage at American Axle, and at several GM facilities in May and June. Although volume overall was down 20%, some of GM's most recently launched cars and crossovers continue to sell especially well, including the Chevrolet Malibu and Cadillac CTS, up 113% and 33%, respectively, over the year-ago period. GMNA adjusted results reflect significantly lower volume resulting from overall industry deterioration, continued dealer stock reductions, the negative impact of industry segment shifts, model/option mix and an increase to lease vehicle residual reserves related to declining residual values. The results also reflect favorable structural and net material cost performance and pension/OPEB/manufacturing savings. GME achieved record second-quarter sales of 590,000 units, driven by 48% sales growth in Russia and exceptional performance of the Chevrolet brand, which saw a 19% increase in sales to 137,000 units and record market share of 2.2% in the second quarter. Material and structural cost performance improved during the quarter. However, unfavorable exchange rates and an economic slowdown in key markets including Spain, Italy and the U.K. had a significant impact on earnings. Improved mix, net pricing and material cost performance along with strong sales performance in key markets helped GMLAAM to improve its year-over-year earnings before tax by over 50%, to $445 million. Volume for the region was up nearly 18% over 2007, and quarterly sales records were set in Brazil, Chile, Egypt and North Africa. The second quarter earnings for GMAP reflect a $285 million pretax accounting charge related to adjusting prior FAS133 hedge accounting, partially offset by gains in India and Thailand, and improved operating performance at Australia's Holden. GMAC On a standalone basis, GMAC reported a net loss of $2.5 billion for the second quarter 2008. Affecting results were continuing large losses at Residential Capital, LLC related to asset sales, valuation adjustments and loan loss provisions, as well as a $716 million pre-tax impairment of lease assets in the automotive finance business as a result of lower used vehicle prices, particularly for SUVs. These items were partially offset by profitable results in the insurance and international auto finance businesses. GM reported an adjusted loss of $1.2 billion for the quarter attributable to GMAC, as a result of its 49% equity interest. Following a first quarter impairment against its investment in GMAC, GM conducted further analysis in the second quarter to determine if additional impairments were required based on current fair value estimates. Factors considered include continued deterioration in the mortgage and consumer credit markets and a more challenging North American automotive financing environment. As a result, GM recorded impairment charges totaling $1.3 billion against its common and preferred equity interests in GMAC. Cash and Liquidity Reflecting the non-cash nature of many of the charges recorded in GM's reported second-quarter results, cash, marketable securities, and readily-available assets of the Voluntary Employees' Beneficiary Association trust totaled $21.0 billion on June 30, 2008, down from $23.9 billion on March 31, 2008. The change in liquidity reflects negative adjusted operating cash flow of $3.6 billion in the second quarter 2008, driven primarily by weaker results in GMNA. As of June 30, including undrawn, committed U.S. credit facilities of approximately $5 billion, GM has access to approximately $26 billion in liquidity. In July, GM provided notice to draw $1 billion under its secured revolving loan facility. As disclosed in the Troubled Company Reporter on July 16, 2008, GM is taking operating and related actions to improve cash flow by approximately $10 billion through the end of 2009. In addition, the company has outlined plans to raise approximately $5 billion through capital markets activities and asset sales. GM is confident that these initiatives, along with its current cash position and $4-5 billion of committed U.S. credit lines, will provide the company with ample liquidity to meet its operational needs through 2009. The loss is GM's third largest in its 100-year history, various reports say. Detroit Free Press' Katie Merx relates that investors were unfazed by GM's loss and that cuts are under way soften impact of blow on the automaker's shares. GM's second-quarter loss pushed the $8.7-billion second-quarter loss Ford reported down to fourth place "in the annals of miserable quarters," according to Ms. Merx. GM, she says, now owns the top three spots, including its $39 billion loss in the third quarter in 2007 and its $21 billion loss in the first quarter in 1992. 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. General Motors Latin America, Africa and Middle East, with headquarters in Miramar, Florida, is one of GM's four regional business units. GM LAAM employs approximately 37,000 people in 18 countries and has manufacturing facilities in Argentina, Brazil, Colombia, Ecuador, Egypt, Kenya, South Africa and Venezuela. GM LAAM markets vehicles under the Buick, Cadillac, Chevrolet, GMC, Hummer, Isuzu, Opel, Saab and Suzuki brands. 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 disclosed in the Troubled Company Reporter on Aug. 1, 2008, Standard & Poor's Ratings Services lowered the ratings on General Motors Corp., Ford Motor Co., and Chrysler LLC, all to 'B-' from 'B'. The ratings on GM and Ford were removed from CreditWatch with negative implications, where they had been placed on June 20, 2008. Chrysler will remain on CreditWatch pending the renewal of certain bank lines at DaimlerChrysler Financial Services Americas LLC, which S&P expects to be completed in the next few days. If the bank lines are renewed as expected, S&P would affirms the ratings on Chrysler and DCFS and remove them from CreditWatch. 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. GENERAL MOTORS: Financial Arm Posts $2.5BB Prelim Second Qtr. Loss ------------------------------------------------------------------ GMAC LLC's wholly owned subsidiary GMAC Financial Services reported a 2008 second quarter net loss of $2.5 billion, compared to net income of $293 million in the second quarter of 2007. Affecting results in the quarter were a $716 million impairment of vehicle operating lease assets in the automotive finance business as a result of declining vehicle sales and lower used vehicle prices for certain segments, as well as significant losses at Residential Capital, LLC related to asset sales, valuation adjustments, and loan loss provisions. These items were partially offset by profitable results in the insurance and international auto finance businesses. "A soft economic environment and continued volatility in the mortgage and credit markets have significantly affected results for the second quarter," GMAC Chief Executive Officer Alvaro G. de Molina said. "While conditions such as higher fuel prices and weaker consumer credit prove to be headwinds, we continue to aggressively manage through this economic disruption to position GMAC for longer-term success. "Despite the current obstacles, we are encouraged by some key wins such as successfully completing our global refinancing and bond exchange, preserving long-term ownership of GMAC Bank, and de- risking the balance sheet at ResCap. There is still more to do and the management team is committed to taking the steps needed to ensure a solid foundation for the company, including continued realignment and streamlining of the mortgage business and better optimization of the risk and reward model in auto financing." Second Quarter Net Income/(Loss) ($ in millions) Q208 Q207 Change ---- ---- ------ Global Automotive Finance ($717) $395 ($1,112) Insurance 135 131 4 ResCap (1,860) (254) (1,606) Other(1) (40) 21 (61) Net Income/(Loss) ($2,482) $293 ($2,775) (1) Includes Commercial Finance operating segment, 21% ownership of former commercial mortgage unit and other corporate activities. Liquidity and Capital GMAC's consolidated cash and cash equivalents were $14.3 billion as of June 30, 2008, down slightly from the cash balance of $14.8 billion at March 31, 2008. Of these total balances, ResCap's cash and cash equivalents balance was $6.6 billion at quarter-end, up from $4.2 billion at March 31, 2008. The change in consolidated cash is related to repayment of GMAC and ResCap debt maturities, offset by new secured funding, lower asset levels and growth in deposits at GMAC Bank. In June, GMAC and ResCap announced a comprehensive series of transactions, which included extending key bank facilities, increasing the amount of available funding and further enhancing liquidity positions. The transactions included: -- GMAC obtaining a new, globally syndicated $11.4 billion secured revolving credit facility with a multi-year maturity which steps down to $7.9 billion after two years, and renewing the one-year, syndicated commercial paper back-up facility, New Center Asset Trust, in the amount of $10 billion. -- ResCap extending for one year the maturity on substantially all of its bilateral bank facilities totaling approximately $11.6 billion and obtaining a new $2.5 billion syndicated whole loan repurchase facility. -- ResCap executing private exchange and cash tender offers for U.S. dollar equivalent of $14.0 billion in aggregate principal amount of its outstanding debt, thereby reducing debt outstanding by $2.9 billion in principal and extending maturities. -- GMAC providing a $3.5 billion two-year senior secured credit facility to ResCap, which includes $750 million of first loss protection from General Motors Corp. and Cerberus ResCap Financing LLC, an affiliate of FIM Holdings LLC. -- Significantly reducing ResCap's tangible net worth covenants related to its credit facilities from the previous level of $5.4 billion to $250 million (excluding GMAC Bank) with consolidated liquidity of $750 million. During the second quarter, GMAC and certain affiliates of Cerberus disclosed approximately $2.4 billion of intended actions to support ResCap's near term liquidity. In addition, GMAC contributed to ResCap approximately $250 million (principal amount) of ResCap debt, which was subsequently retired. In exchange for the capital contribution, GMAC received additional shares of ResCap preferred equity equal to the market value of the debt as of March 31, 2008. As of June 30, 2008, ResCap's total equity base was $4.1 billion. The Federal Deposit Insurance Corporation granted a 10-year extension of GMAC Bank's current ownership on July 21, 2008. This action enables GMAC to strengthen the bank over the long-term, which is an important source of funding for mortgage and automotive financing activities. Global Automotive Finance GMAC's global automotive finance business reported a net loss of $717 million in the second quarter of 2008, compared to net income of $395 million in the year-ago period. Weaker performance was primarily driven by a $716 million pre-tax impairment on operating leases in the North American operation, which more than offset profits in the international business. In measuring the accounting impairment, the company was able to consider expected cash flows from various arrangements with General Motors Corp., including approximately $750 million related to the risk-sharing arrangement; approximately $800 million related to the residual support program; and approximately $350 of residual-related settlement payments. Additional factors affecting results were an increase in the provision for credit losses due to loss severity and lower gains on sales. The North American lease portfolio included approximately $30 billion in assets as of June 30, 2008 with approximately $12 billion in sport-utility vehicle leases, $6 billion in truck leases and $12 billion in car leases. The impairment of operating leases resulted from the sharp decline in demand and used vehicle sale prices for sport-utility vehicles and trucks in the U.S. and Canada, which has affected GMAC's remarketing proceeds for these vehicles. As a result of these market trends, GMAC is taking steps to reduce the volume of new lease originations in the U.S. The company will also discontinue the SmartBuy balloon contract program, suspend all incentivized lease programs in Canada and increase pricing and returns on other lending activities. GMAC's lease portfolio outside of North America has not experienced the same decrease in market value. New vehicle financing originations for the second quarter of 2008 decreased to $12.4 billion of retail and lease contracts from $14.0 billion in the second quarter of 2007, due to lower industry sales levels in North America. Credit losses have increased in the second quarter of 2008 to 1.40% of managed retail assets, versus 0.92% in the second quarter of 2007. The sharp increase is related to the current trends in used vehicle prices, which drove higher loss severity. While losses trended up, delinquencies decreased in the second quarter of 2008 to 2.30% of managed retail assets, versus 2.46% in the prior year period. The decrease reflects the recent measures taken to tighten underwriting criteria and increased customer servicing activities as the U.S. economy remains weak. Insurance GMAC's insurance business recorded net income of $135 million, up slightly from net income of $131 million in the second quarter of 2007. Results primarily reflect a non-recurring tax benefit, which offset higher weather-related losses. The insurance investment portfolio was $7.1 billion at June 30, 2008, compared to $7.4 billion at June 30, 2007. The decrease in the portfolio is due primarily to the repayment of intercompany loans related to the funding of the Provident Insurance acquisition. The majority of the investment portfolio is in fixed income securities with less than 10 percent invested in equity securities. In July, GMAC's plan to dividend 100 percent of the voting interest in the insurance business to GMAC's shareholders was completed. GMAC continues to hold 100 percent of the economic interest in GMAC Insurance. This action was taken in the interest of maintaining the current financial strength rating and, therefore, preserving the value of the operation. Real Estate Finance ResCap reported a net loss of $1.9 billion for the second quarter of 2008, compared to a net loss of $254 million in the year-ago period. Results are primarily attributable to significant losses from asset sales as ResCap reduced the size and risk of its balance sheet and higher loan loss provisions due to continued deterioration in certain European markets. Partially offsetting losses was a $647 million gain recognized from ResCap's tender offer and the retirement of debt. ResCap continues to implement an aggressive realignment of its business amid a vastly changing mortgage market, despite the negative impact to short-term earnings. Recent actions include significantly reducing the size and risk of its balance sheet, originating only mortgages with market liquidity, winding down the business lending portfolio, leveraging the world-class servicing platform, and continuing to rationalize the cost base. ResCap's U.S. residential finance business is beginning to stabilize as the company reduces balance sheet risk and continues to realign operations. While prime conforming loan production decreased modestly year-over-year with $12.2 billion in the second quarter of 2008 versus $12.7 billion in the year- ago period, production of higher-margin government loans increased to $3.8 billion this quarter compared to $800 million in the second quarter of 2007. In addition, operating expense targets were achieved. The international mortgage business experienced a decline in net income in the second quarter related to illiquidity in the global capital markets and the continued weakening of consumer credit in key markets. This drove significant realized and unrealized losses on loans held for sale. As a result of the market environment, ResCap has currently suspended all production outside of the U.S. with the exception of Canadian insured loans. The business lending operations also experienced continued pressure in the second quarter related to the decline in home sales and residential real estate values. Outlook GMAC continues to manage through a softer economic environment and a global market disruption with significant actions geared toward achieving longer-term financial health. Recent actions include: -- Stabilizing liquidity by refinancing bank lines, extending debt maturities, and preserving long-term ownership of GMAC Bank; -- Significantly reducing ResCap's balance sheet; -- Taking steps to increase pricing and improve returns for all automotive leasing and lending activities; -- Reducing the volume of new lease originations in the U.S. and suspending all incentivized lease programs in Canada; -- Executing a plan to preserve the value of the insurance business; and -- Leveraging the proven servicing platforms in mortgage and auto finance to mitigate frequency and severity of losses. Looking ahead, the company is focused on executing strategies that restore profitability and longer-term financial health including improving funding costs, evaluating opportunities to shed non-core operations, and taking steps that move GMAC toward an independent, bank-funded lender and servicer. About GMAC LLC GMAC LLC -- http://www.gmacfs.com/-- formerly General Motors Acceptance Corporation, is a global, diversified financial services company that operates in approximately 40 countries in automotive finance, real estate finance, insurance and other commercial businesses. GMAC was established in 1919 and employs approximately 26,700 people worldwide. GMAC Financial Services is in turn wholly owned by GMAC LLC. Cerberus Capital Management LP led a group of investors that bought a 51% stake in GMAC LLC from General Motors Corp. in December 2006 for $14 billion. 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. General Motors Latin America, Africa and Middle East, with headquarters in Miramar, Florida, is one of GM's four regional business units. GM LAAM employs approximately 37,000 people in 18 countries and has manufacturing facilities in Argentina, Brazil, Colombia, Ecuador, Egypt, Kenya, South Africa and Venezuela. GM LAAM markets vehicles under the Buick, Cadillac, Chevrolet, GMC, Hummer, Isuzu, Opel, Saab and Suzuki brands. 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. GLOBAL DEHUMIDIFICATION: Voluntary Chapter 11 Case Summary ---------------------------------------------------------- Debtor: Global Dehumidification Solutions, Inc. 2620 Leah Dr. Columbia, TN 38401 Bankruptcy Case No.: 08-06697 Chapter 11 Petition Date: July 31, 2008 Court: Middle District of Tennessee (Columbia) Judge: George C. Paine, II Debtor's Counsel: Robin Bicket White, Esq. Email: rbw@mglaw.net Mglaw, PLLC 2525 W. End Ave., Ste. 1475 Nashville, TN 37203 Tel: (615) 846-8000 Fax: (615) 846-9000 http://www.mglaw.net Estimated Assets: $1,000,000 to $10,000,000 Estimated Debts: $1,000,000 to $10,000,000 The Debtor did not file a list of its largest unsecured creditors. GMAC LLC: Posts Prelim Second Quarter Net Loss of $2.5 Billion -------------------------------------------------------------- GMAC LLC's wholly owned subsidiary GMAC Financial Services reported a 2008 second quarter net loss of $2.5 billion, compared to net income of $293 million in the second quarter of 2007. Affecting results in the quarter were a $716 million impairment of vehicle operating lease assets in the automotive finance business as a result of declining vehicle sales and lower used vehicle prices for certain segments, as well as significant losses at Residential Capital, LLC related to asset sales, valuation adjustments, and loan loss provisions. These items were partially offset by profitable results in the insurance and international auto finance businesses. "A soft economic environment and continued volatility in the mortgage and credit markets have significantly affected results for the second quarter," GMAC Chief Executive Officer Alvaro G. de Molina said. "While conditions such as higher fuel prices and weaker consumer credit prove to be headwinds, we continue to aggressively manage through this economic disruption to position GMAC for longer-term success. "Despite the current obstacles, we are encouraged by some key wins such as successfully completing our global refinancing and bond exchange, preserving long-term ownership of GMAC Bank, and de- risking the balance sheet at ResCap. There is still more to do and the management team is committed to taking the steps needed to ensure a solid foundation for the company, including continued realignment and streamlining of the mortgage business and better optimization of the risk and reward model in auto financing." Second Quarter Net Income/(Loss) ($ in millions) Q208 Q207 Change ---- ---- ------ Global Automotive Finance ($717) $395 ($1,112) Insurance 135 131 4 ResCap (1,860) (254) (1,606) Other(1) (40) 21 (61) Net Income/(Loss) ($2,482) $293 ($2,775) (1) Includes Commercial Finance operating segment, 21% ownership of former commercial mortgage unit and other corporate activities. Liquidity and Capital GMAC's consolidated cash and cash equivalents were $14.3 billion as of June 30, 2008, down slightly from the cash balance of $14.8 billion at March 31, 2008. Of these total balances, ResCap's cash and cash equivalents balance was $6.6 billion at quarter-end, up from $4.2 billion at March 31, 2008. The change in consolidated cash is related to repayment of GMAC and ResCap debt maturities, offset by new secured funding, lower asset levels and growth in deposits at GMAC Bank. In June, GMAC and ResCap announced a comprehensive series of transactions, which included extending key bank facilities, increasing the amount of available funding and further enhancing liquidity positions. The transactions included: -- GMAC obtaining a new, globally syndicated $11.4 billion secured revolving credit facility with a multi-year maturity which steps down to $7.9 billion after two years, and renewing the one-year, syndicated commercial paper back-up facility, New Center Asset Trust, in the amount of $10 billion. -- ResCap extending for one year the maturity on substantially all of its bilateral bank facilities totaling approximately $11.6 billion and obtaining a new $2.5 billion syndicated whole loan repurchase facility. -- ResCap executing private exchange and cash tender offers for U.S. dollar equivalent of $14.0 billion in aggregate principal amount of its outstanding debt, thereby reducing debt outstanding by $2.9 billion in principal and extending maturities. -- GMAC providing a $3.5 billion two-year senior secured credit facility to ResCap, which includes $750 million of first loss protection from General Motors Corp. and Cerberus ResCap Financing LLC, an affiliate of FIM Holdings LLC. -- Significantly reducing ResCap's tangible net worth covenants related to its credit facilities from the previous level of $5.4 billion to $250 million (excluding GMAC Bank) with consolidated liquidity of $750 million. During the second quarter, GMAC and certain affiliates of Cerberus disclosed approximately $2.4 billion of intended actions to support ResCap's near term liquidity. In addition, GMAC contributed to ResCap approximately $250 million (principal amount) of ResCap debt, which was subsequently retired. In exchange for the capital contribution, GMAC received additional shares of ResCap preferred equity equal to the market value of the debt as of March 31, 2008. As of June 30, 2008, ResCap's total equity base was $4.1 billion. The Federal Deposit Insurance Corporation granted a 10-year extension of GMAC Bank's current ownership on July 21, 2008. This action enables GMAC to strengthen the bank over the long-term, which is an important source of funding for mortgage and automotive financing activities. Global Automotive Finance GMAC's global automotive finance business reported a net loss of $717 million in the second quarter of 2008, compared to net income of $395 million in the year-ago period. Weaker performance was primarily driven by a $716 million pre-tax impairment on operating leases in the North American operation, which more than offset profits in the international business. In measuring the accounting impairment, the company was able to consider expected cash flows from various arrangements with General Motors Corp., including approximately $750 million related to the risk-sharing arrangement; approximately $800 million related to the residual support program; and approximately $350 of residual-related settlement payments. Additional factors affecting results were an increase in the provision for credit losses due to loss severity and lower gains on sales. The North American lease portfolio included approximately $30 billion in assets as of June 30, 2008 with approximately $12 billion in sport-utility vehicle leases, $6 billion in truck leases and $12 billion in car leases. The impairment of operating leases resulted from the sharp decline in demand and used vehicle sale prices for sport-utility vehicles and trucks in the U.S. and Canada, which has affected GMAC's remarketing proceeds for these vehicles. As a result of these market trends, GMAC is taking steps to reduce the volume of new lease originations in the U.S. The company will also discontinue the SmartBuy balloon contract program, suspend all incentivized lease programs in Canada and increase pricing and returns on other lending activities. GMAC's lease portfolio outside of North America has not experienced the same decrease in market value. New vehicle financing originations for the second quarter of 2008 decreased to $12.4 billion of retail and lease contracts from $14.0 billion in the second quarter of 2007, due to lower industry sales levels in North America. Credit losses have increased in the second quarter of 2008 to 1.40% of managed retail assets, versus 0.92% in the second quarter of 2007. The sharp increase is related to the current trends in used vehicle prices, which drove higher loss severity. While losses trended up, delinquencies decreased in the second quarter of 2008 to 2.30% of managed retail assets, versus 2.46% in the prior year period. The decrease reflects the recent measures taken to tighten underwriting criteria and increased customer servicing activities as the U.S. economy remains weak. Insurance GMAC's insurance business recorded net income of $135 million, up slightly from net income of $131 million in the second quarter of 2007. Results primarily reflect a non-recurring tax benefit, which offset higher weather-related losses. The insurance investment portfolio was $7.1 billion at June 30, 2008, compared to $7.4 billion at June 30, 2007. The decrease in the portfolio is due primarily to the repayment of intercompany loans related to the funding of the Provident Insurance acquisition. The majority of the investment portfolio is in fixed income securities with less than 10 percent invested in equity securities. In July, GMAC's plan to dividend 100 percent of the voting interest in the insurance business to GMAC's shareholders was completed. GMAC continues to hold 100 percent of the economic interest in GMAC Insurance. This action was taken in the interest of maintaining the current financial strength rating and, therefore, preserving the value of the operation. Real Estate Finance ResCap reported a net loss of $1.9 billion for the second quarter of 2008, compared to a net loss of $254 million in the year-ago period. Results are primarily attributable to significant losses from asset sales as ResCap reduced the size and risk of its balance sheet and higher loan loss provisions due to continued deterioration in certain European markets. Partially offsetting losses was a $647 million gain recognized from ResCap's tender offer and the retirement of debt. ResCap continues to implement an aggressive realignment of its business amid a vastly changing mortgage market, despite the negative impact to short-term earnings. Recent actions include significantly reducing the size and risk of its balance sheet, originating only mortgages with market liquidity, winding down the business lending portfolio, leveraging the world-class servicing platform, and continuing to rationalize the cost base. ResCap's U.S. residential finance business is beginning to stabilize as the company reduces balance sheet risk and continues to realign operations. While prime conforming loan production decreased modestly year-over-year with $12.2 billion in the second quarter of 2008 versus $12.7 billion in the year- ago period, production of higher-margin government loans increased to $3.8 billion this quarter compared to $800 million in the second quarter of 2007. In addition, operating expense targets were achieved. The international mortgage business experienced a decline in net income in the second quarter related to illiquidity in the global capital markets and the continued weakening of consumer credit in key markets. This drove significant realized and unrealized losses on loans held for sale. As a result of the market environment, ResCap has currently suspended all production outside of the U.S. with the exception of Canadian insured loans. The business lending operations also experienced continued pressure in the second quarter related to the decline in home sales and residential real estate values. Outlook GMAC continues to manage through a softer economic environment and a global market disruption with significant actions geared toward achieving longer-term financial health. Recent actions include: -- Stabilizing liquidity by refinancing bank lines, extending debt maturities, and preserving long-term ownership of GMAC Bank; -- Significantly reducing ResCap's balance sheet; -- Taking steps to increase pricing and improve returns for all automotive leasing and lending activities; -- Reducing the volume of new lease originations in the U.S. and suspending all incentivized lease programs in Canada; -- Executing a plan to preserve the value of the insurance business; and -- Leveraging the proven servicing platforms in mortgage and auto finance to mitigate frequency and severity of losses. Looking ahead, the company is focused on executing strategies that restore profitability and longer-term financial health including improving funding costs, evaluating opportunities to shed non-core operations, and taking steps that move GMAC toward an independent, bank-funded lender and servicer. About GMAC LLC GMAC LLC -- http://www.gmacfs.com/-- formerly General Motors Acceptance Corporation, is a global, diversified financial services company that operates in approximately 40 countries in automotive finance, real estate finance, insurance and other commercial businesses. GMAC was established in 1919 and employs approximately 26,700 people worldwide. GMAC Financial Services is in turn wholly owned by GMAC LLC. Cerberus Capital Management LP led a group of investors that bought a 51% stake in GMAC LLC from General Motors Corp. in December 2006 for $14 billion. * * * As reported by the Troubled Company Reporter on June 4, 2008, Fitch Ratings has downgraded the long-term Issuer Default Rating of GMAC LLC and related subsidiaries to 'BB-' from 'BB'. Fitch has also downgraded GMAC's unsecured long-term ratings to 'B+' from 'BB-', reflecting the potential for reduced recovery in a default scenario should the company encumber assets. Additionally, Fitch has affirmed the 'B' short-term ratings. The Rating Outlook remains Negative. As reported in the Troubled Company Reporter on April 25, 2008, Moody's Investors Service downgraded GMAC LLC's senior rating to B2 from B1; the rating remains on review for further possible downgrade. This action follows Moody's rating downgrade of ResCap LLC, GMAC's wholly owned residential mortgage unit, to Caa1 from B2. GSAA HOME: Moody's Junks Ratings on 31 Classes of Securities ------------------------------------------------------------ Moody's Investors Service has downgraded the ratings of 108 tranches from 16 Alt-A transactions issued by GSAA. Nine tranches remain on review for possible further downgrade. Additionally, 13 senior tranches were confirmed at Aaa. The collateral backing these transactions consists primarily of first-lien, fixed and adjustable-rate, Alt-A mortgage loans. 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. Certain tranches were confirmed due to additional enhancement provided by structural features. The actions are a result of Moody's on-going review process. Complete rating actions are: Issuer: GSAA Home Equity Trust Asset Backed Certificates Series 2005-12 Cl. B-1, Downgraded to Baa3 from Baa1 Cl. B-2, Downgraded to B1 from Ba1 Cl. B-3, Downgraded to Ca from B3 Cl. B-4, Downgraded to Ca from Caa3 Issuer: GSAA Home Equity Trust 2005-14 Cl. 1A2, Downgraded to Aa2 from Aaa Cl. 2A2, Downgraded to Aa3 from Aaa Cl. 2A4, Downgraded to A1 from Aaa Cl. M-6, Downgraded to Ca from B3 Issuer: GSAA Home Equity Trust 2005-15 Cl. 1A2, Downgraded to Aa1 from Aaa Cl. 2A1, Downgraded to Aa3 from Aaa Cl. 2A2, Downgraded to A1 from Aaa Cl. 2A4, Downgraded to A1 from Aaa Cl. B-1, Downgraded to Ca from B3 Cl. M-1, Downgraded to A3 from Aa3 Cl. M-2, Downgraded to Baa2 from A2 Cl. M-3, Downgraded to Baa3 from Baa1 Issuer: GSAA Home Equity Trust 2006-1 Cl. A-1, Downgraded to Aa1 from Aaa Cl. A-2, Downgraded to Aa3 from Aaa Cl. A-4, Downgraded to A1 from Aaa Cl. M-1, Downgraded to Baa2 from Baa1 Cl. M-5, Downgraded to Ca from B3 Issuer: GSAA Home Equity Trust 2006-9 Cl. A-2, Downgraded to Aa2 from Aaa Cl. A-3, Downgraded to Aa3 from Aaa Cl. A-4-B, Downgraded to A2 from Aaa Cl. M-4, Downgraded to Ca from B3 Cl. M-5, Downgraded to Ca from B3 Issuer: GSAA Home Equity Trust 2006-14 Cl. A-1, Downgraded to Aa3 from Aaa Cl. A-2, Downgraded to Baa1 from Aaa Cl. A-3A, Confirmed at Aaa Cl. A-3B, Downgraded to Ba1 from Aaa Cl. M-3, Downgraded to Ca from B3 Cl. M-4, Downgraded to Ca from B3 Issuer: GSAA Home Equity Trust 2006-16, Asset-Backed Certificates, Series 2006-16 Cl. A-1, Downgraded to Aa2 from Aaa Cl. A-2, Downgraded to Aa3 from Aaa Cl. A-3-B, Downgraded to A1 from Aaa Cl. M-1, Downgraded to Baa1 from A1 Cl. B-1, Downgraded to Ca from B3 Cl. M-5, Downgraded to Ca from B3 Issuer: GSAA Home Equity Trust 2006-17 Cl. A-1, Downgraded to Aa3 from Aaa Cl. A-2, Downgraded to Baa1 from Aaa Cl. A-3A, Confirmed at Aaa Cl. A-3B, Downgraded to Ba1 from Aaa Cl. M-4, Downgraded to Ca from B3 Cl. M-5, Downgraded to Ca from B3 Cl. M-6, Downgraded to Ca from Caa1 Issuer: GSAA Home Equity Trust 2006-19 Cl. A-1, Downgraded to Aa3 from Aaa Cl. A-2, Downgraded to Baa1 from Aaa Cl. A-3-A, Confirmed at Aaa Cl. A-3-B, Downgraded to Ba1 from Aaa Cl. M-1, Downgraded to B1 from Ba3; Placed Under Review for further Possible Downgrade Cl. M-4, Downgraded to Ca from B3 Cl. M-5, Downgraded to Ca from B3 Cl. M-6, Downgraded to Ca from B3 Cl. B-1, Downgraded to Ca from Caa1 Issuer: GSAA Home Equity Trust 2006-20 Cl. A4A, Confirmed at Aaa Cl. A4B, Downgraded to Baa3 from Aaa Cl. 1A1, Downgraded to A1 from Aaa Cl. 1A2, Downgraded to Baa3 from Aaa Cl. 2A1A, Confirmed at Aaa Cl. 2A1B, Downgraded to Aa1 from Aaa Cl. B-1, Downgraded to Ca from B3 Cl. M-4, Downgraded to B3 from B2; Placed Under Review for further Possible Downgrade Cl. M-5, Downgraded to Ca from B3 Issuer: GSAA Home Equity Trust 2007-1 Cl. A4B, Downgraded to A3 from Aaa Cl. 1A1, Downgraded to A1 from Aaa Cl. 1A2, Downgraded to A3 from Aaa Cl. 2A1B, Downgraded to Aa1 from Aaa Cl. M1, Downgraded to Baa2 from A2 Cl. M5, Downgraded to B3 from B2; Placed Under Review for further Possible Downgrade Cl. M6, Downgraded to Ca from B3 Issuer: GSAA Home Equity Trust 2007-2 Cl. AF2, Downgraded to Aa3 from Aaa Cl. AF3, Downgraded to A2 from Aaa Cl. AF4B, Downgraded to A3 from Aaa Cl. AF5A, Confirmed at Aaa Cl. AF5B, Downgraded to A3 from Aaa Cl. AF6A, Confirmed at Aaa Cl. AF6B, Downgraded to A2 from Aaa Cl. AV1, Downgraded to Aa2 from Aaa Cl. M1, Downgraded to Baa2 from A2 Cl. M2, Downgraded to Ba1 from Baa3 Cl. M6, Downgraded to B3 from B2; Placed Under Review for further Possible Downgrade Issuer: GSAA Home Equity Trust 2007-3 Cl. A4A, Downgraded to Aa3 from Aaa Cl. A4B, Downgraded to Baa3 from Aaa Cl. 1A1A, Downgraded to Aa2 from Aaa Cl. 1A1B, Downgraded to Baa3 from Aaa Cl. 1A2, Downgraded to Baa3 from Aaa Cl. 2A1A, Confirmed at Aaa Cl. 2A1B, Downgraded to Aa3 from Aaa Cl. B-1, Downgraded to Ca from B3 Cl. M-1, Downgraded to B1 from Ba1 Cl. M-3, Downgraded to B3 from B2; Placed Under Review for further Possible Downgrade Cl. M-4, Downgraded to B3 from B2; Placed Under Review for further Possible Downgrade Cl. M-5, Downgraded to Ca from B3 Cl. M-6, Downgraded to Ca from B3 Issuer: GSAA Home Equity Trust 2007-4 Cl. A-1, Downgraded to Baa2 from Aaa Cl. A-2, Downgraded to Baa3 from Aaa Cl. A-3B, Downgraded to Ba1 from Aaa Cl. M-1, Downgraded to B1 from Baa3 Cl. M-2, Downgraded to B3 from B1; Placed Under Review for further Possible Downgrade Cl. M-3, Downgraded to B3 from B1; Placed Under Review for further Possible Downgrade Cl. M-4, Downgraded to Ca from B2 Cl. M-5, Downgraded to Ca from B2 Cl. M-6, Downgraded to Ca from B3 Issuer: GSAA Home Equity Trust 2007-5 Cl. 2A1A, Confirmed at Aaa Cl. 2A1B, Downgraded to Baa2 from Aaa Cl. 2A2A, Confirmed at Aaa Cl. 2A2B, Downgraded to Baa2 from Aaa Cl. 2A3A, Confirmed at Aaa Cl. 2A3B, Downgraded to Baa3 from Aaa Cl. 2M5, Downgraded to Ca from B2 Cl. 2M6, Downgraded to Ca from B3 Issuer: GSAA Home Equity Trust 2007-6 Cl. A4, Downgraded to Aa1 from Aaa Cl. A5, Downgraded to Ba1 from Aaa Cl. 1A1, Downgraded to Aa1 from Aaa Cl. 1A2, Downgraded to Aa1 from Aaa Cl. 2A1, Confirmed at Aaa Cl. 3A1A, Confirmed at Aaa Cl. 3A1B, Downgraded to Ba2 from Aaa Cl. M4, Downgraded to B3 from B2; Placed Under Review for further Possible Downgrade Cl. M5, Downgraded to Ca from B3 Cl. M6, Downgraded to Ca from B3 GSAMP MORTGAGE: Moody's Downgrades Class B-4 Rating to Caa2 ----------------------------------------------------------- Moody's Investors Service has downgraded 5 certificates from 2 GSAMP Mortgage Loan Trust transactions issued in 2002 and 2004. The transactions are primarily backed by first-lien fixed and adjustable-rate subprime mortgage loans. The downgrades are due to low current credit enhancement levels relative to current pool projected losses. Pool factors for both deals are less than 20%. Moody's Investors Service is also publishing the underlying rating on two insured notes identified below. The ratings on securities that are guaranteed or "wrapped" by a financial guarantor is the higher of a) the rating of the guarantor or b) the published underlying rating. The underlying ratings reflect the intrinsic credit quality of the notes in the absence of the guarantee. The current ratings on the below notes are consistent with Moody's practice of rating insured securities at the higher of the guarantor's insurance financial strength rating and any underlying rating that is public. Complete rating actions are: Issuer: GSAMP Trust 2002-HE2 Cl. A1 currently Aa3 Financial Guarantor: Ambac Assurance Corporation (Aa3, negative outlook) Underlying Rating: A3 Cl. A2 currently Aa3 Financial Guarantor: Ambac Assurance Corporation (Aa3, negative outlook) Underlying Rating: A3 Cl. B-2, Downgraded to Baa3 from Baa2 Issuer: GSAMP Trust 2004-HE2 Cl. B-1, Downgraded to Ba2 from Baa1 Cl. B-2, Downgraded to B1 from Baa2 Cl. B-3, Downgraded to B3 from Baa3 Cl. B-4, Downgrade to Caa2 from B3 HANOVER INSURANCE: Moody's Affirms FAFLIC Unit's Ba1 Rating ----------------------------------------------------------- Moody's Investors Service has affirmed the ratings of The Hanover Insurance Group (NYSE: THG; senior debt at Baa3) and Hanover Insurance Company (insurance financial strength (IFS) at A3) with a stable outlook, following the company's announcement that it has reached an agreement to sell its discontinued life insurance subsidiary, First Allmerica Financial Life Insurance Company (FAFLIC), to Commonwealth Annuity and Life Insurance Company (CALIC), a Goldman Sachs Company. In the same action, Moody's has placed the Ba1 insurance financial strength rating of FAFLIC on review for possible upgrade. According to the rating agency, the sale of FAFLIC is only expected to have a modest impact on THG's capital adequacy and profitability. However, the sale would allow THG to monetize the capital in this run-off business, which otherwise could only be released through occasional dividends approved by insurance regulators. Sale proceeds are expected to increase holding company cash by a projected amount of $220 million (albeit the final purchase price will be determined at closing). Moody's expects the holding company to maintain sufficient cash to cover twice the sum of interest expense and common dividends, or roughly $120 million. Under the terms of the agreement, CALIC, part of the Goldman Sachs Insurance Group, will acquire the common stock of FAFLIC from THG. Moody's review of FAFLIC's Ba1 IFS rating will focus on the explicit support provided by Goldman Sachs and their intentions to extend the existing keepwell on CALIC to FAFLIC. A failure to close the deal would likely result in the confirmation of FAFLIC's rating. The last rating action on THG occurred on January 28, 2008, when Moody's upgraded the senior debt rating to Baa3 and the insurance financial strength rating of Hanover Insurance Company to A3. These ratings have been affirmed with a stable outlook: The Hanover Insurance Group, Inc. -- senior unsecured debt rating at Baa3; AFC Capital Trust I -- preferred stock rating at Ba1; Hanover Insurance Co. -- insurance financial strength at A3. These ratings have been placed on review for upgrade: First Allmerica Financial Life Insurance Co. -- insurance financial strength at Ba1; short-term insurance financial strength at NP (Not Prime). This commercial paper rating has been withdrawn because the program is no longer in effect: The Hanover Insurance Group, Inc. -- commercial paper rating of Prime-3 withdrawn. The Hanover Insurance Group (NYSE: THG), formerly Allmerica Financial Corporation, is a holding company for its insurance subsidiaries, which collectively rank among the top 35 property and casualty insurers in the United States. THG operates as The Hanover Insurance Company, except in Michigan and other Midwest states where it does business as Citizens Insurance Company of America. It offers a range of property and casualty insurance products to individuals and business owners through its network of over 2,000 independent agents. For full year 2007, THG reported net premiums written of $2.4 billion and net income of $253 million. As of December 31, 2007, shareholders' equity was $2.3 billion. FAFLIC is the run-off life insurance subsidiary of THG. For the year ended December 31, 2007, FAFLIC reported statutory net income of $17 million, up from $13 million in the year ago period. As of the end 2007, FAFLIC had statutory capital and surplus of $164 million. Moody's insurance financial strength ratings are opinions of the ability of insurance companies to repay punctually senior policyholder claims and obligations. HARRAH'S ENTERTAINMENT: Bill's Casino Fires 28 Workers ------------------------------------------------------ Bill's Casino Lake Tahoe, a Nevada unit of Harrah's Entertainment, Inc., terminated 28 table-game dealers due to economic slump and lower revenue, various reports say. Spokespersons, John Packer and Gary Thompson, said that money generated by Bill's Casino wasn't enough to meet operational needs as customers gambling expenditures dwindle, according to the reports. Two of Harrah's Entertainment units -- Lake Tahoe Horizon Casino, now known as Horizon Casino, and Montbleu Resort Casino & Spa -- have filed for chapter 11 bankruptcy, The Sacramento Bee relates. Horizon and Montbleu were sold to Columbia Sussex in 1990. The Bee adds that the financial problem of Bill's Casino will worsen when Shingle Springs Band of Miwok Indians opens its Red Hawk Casino this year. Jerry Bindel, South Lake Tahoe Lodging Association president, commented that Bill' Casino doesn't have an inn, the Bee writes. Since most of the casino's clients are day trippers, they are prone to play at Indian casinos, the Bee quotes Mr. Bindel as saying. Bill's Casino is named after the founder of Harrah's Entertainment, Bill Harrah. About Harrah's Entertainment Harrah's Entertainment, Inc. -- http://www.harrahs.com-- provides branded casino entertainment with about 85,000 workers. Since its beginning in Reno, Nevada, more than 70 years ago, Harrah's has grown through development of new properties, expansions and acquisitions, and now owns or manages casinos on four continents. The company's properties operate primarily under the Harrah's, Caesars and Horseshoe brand names; Harrah's also owns the London Clubs International family of casinos and the World Series of Poker. It has casinos in Arizona, California, Illinois, Indiana, Iowa, Louisiana, Mississippi, Missouri, Nevada, New Jersey, North Carolina and Pennsylvania. It also has casinos in Uruguay and in Ontario, Canada. On Jan. 28, 2008, Harrah's Entertainment was acquired by affiliates of private-equity firms TPG Capital and Apollo Global Management. * * * The Troubled Company Reporter related on July 7, 2008, that Standard & Poor's Ratings Services revised its rating outlook on Las Vegas-based Harrah's Entertainment Inc. and its wholly owned subsidiary, Harrah's Operating Co. Inc., to negative from stable. At the same time, S&P affirmed the 'B+' corporate credit rating on each entity. The TCR said on July 21, 2008, that Moody's Investors Service downgraded Harrah's Entertainment Inc.'s (HET) Corporate Family Rating to B3 from B2 and affirmed its Speculative Grade Liquidity Rating at SGL-3. Moody's also downgraded various classes of debt issued by Harrah's Operating Company, Inc. (HOC) including its senior secured guaranteed bank revolving and term loan credit facilities each to Ba3 from Ba2, senior unsecured parent and operating company guaranteed notes to Caa1 from B3, senior unsecured parent only guaranteed notes to Caa2 from Caa1, and senior subordinated notes to Caa2 from Caa1. HOC is a wholly- owned direct subsidiary of HET. The rating outlook is stable. HOMETOWN COMMERCIAL: Fitch Assigns 'DR6' Ratings; Removes Watch --------------------------------------------------------------- Fitch downgraded, assigned Distressed Recovery ratings, and removes from Rating Watch Negative these classes in the Hometown Commercial Capital Trust 2006-1 and Hometown 2007-1 commercial small balance transactions, as: Hometown 2006-1: -- $105.5 million class A to 'AA-' from 'AAA'; -- $3.4 million class B to 'A-'from 'AA'; -- $1.7 million class C to 'BBB+' from 'AA-'; -- $3.2 million class D to 'BB+' from 'A'; -- $4.3 million class E to 'C/DR6' from 'BBB+'; -- $1.5 million class F to 'C/DR6' from 'BBB'; -- $1.9 million class G to 'C/DR6' from 'BBB-'; -- $1.1 million class H to 'C/DR6' from 'BB+'; -- $560,000 class J to 'C/DR6' from 'BB'; -- $746,000 class K to C/DR6' from 'BB-'; -- $372,000 class L to 'C/DR6' from 'B+'; -- $560,000 class M to 'C/DR6' from 'B'; -- $559,000 class N to C/DR6' from 'B-'. Hometown 2007-1: -- $123 million class A to 'AA' from 'AAA'; -- $3.3 million class B to 'A' from 'AA'; -- $4.6 million class C to 'BBB' from 'A'; -- $3.9 million class D to 'B' from 'BBB+'; -- $1.5 million class E to 'CCC/DR1' from 'BBB'; -- $1.8 million class F to C/DR6 ' from 'BBB-'; -- $1.1 million class G to 'C/DR6' from 'BB+'; -- $553,000 class H to 'C/DR6' from 'BB'; -- $738,000 class J to 'C/DR6' from 'BB-'; -- $368,000 class K to C/DR6' from 'B+'; -- $554,000 class L to 'C/DR6' from 'B'; -- $737,000 class M to 'C/DR6' from 'B-'. Fitch also affirmed this class: in Hometown 2006-1: -- Interest-only class X at 'AAA'. The $2.5 million Class O is not rated by Fitch. Fitch also affirmed this class in Hometown 2007-1: -- Interest-only class X at 'AAA'. The $3.3 million class N is not rated by Fitch. The downgrades and assignments of distressed recovery ratings are the result of expected losses on loans currently in special servicing and a large concentration of loans that Fitch has identified as loans of concern. The losses Fitch has calculated are significant and occurring earlier in the seasoning of both transactions than expected. Fitch's loss expectations are based on recent valuations provided by the special servicers. The large number of downgrades is due to the thin tranche size of the lower classes. The transactions are small balance CMBS with loan sizes ranging from $960,000 to $14.4 million and are highly concentrated with the top 10 loans representing 50% and 39.1% respectively. Approximately 82.5% of loans in the 2006-1 transaction and 83.6% of loans in the 2007-1 transaction are full recourse to the sponsor. The largest loan (11.2%) in the Hometown 2006-1 transaction is expected to incur a loss. Losses are also expected on the top three loans (15%) in the Hometown 2007-1 transaction. Hometown 2006-1 has 6 loans (24.3%) and Hometown 2007-1 has 9 loans (27.9%) currently in special servicing. The loans are secured by multifamily properties located in Nashville, Madison and Chattanooga, Tennessee. Six of the specially serviced loans between the two transactions have the same the sponsor, Steven Green. The sponsor is no longer able to operate the properties and has put them up for sale as part of a larger portfolio sale totaling 24 assets. The special servicer is currently negotiating contracts to sell the assets. Several of the specially serviced properties have significant deferred maintenance issues. HUDSON MEZZANINE: Moody's Junks Rating of 3 Classes of 2042 Notes ----------------------------------------------------------------- Moody's Investors Service downgraded ratings of three classes of notes issued by and the rating assigned to a swap agreement entered into by Hudson Mezzanine Funding 2006-1 Ltd., and left on review for possible further downgrade one of the ratings. In addition, Moody's placed on review for possible downgrade the rating of one class of Notes without lowering the rating. The rating action is: Class Description: U.S. $37,000,000 Class S Floating Rate Notes Due 2012 Prior Rating: Aaa Current Rating: Aaa, on review for possible downgrade Class Description: U.S. $1,200,000,000 Senior Swap Prior Rating: Ba3, on review for possible downgrade Current Rating: Caa3, on review for possible downgrade Class Description: U.S.$ 110,000,000 Class A-f Floating Rate Notes due 2042 Prior Rating: B3, on review for possible downgrade Current Rating: Ca Class Description: U.S. $120,000,000 Class A-b Floating Rate Notes due 2042 Prior Rating: B3, on review for possible downgrade Current Rating: Ca Class Description: U.S. $230,000,000 Class B Floating Rate Notes due 2042 Prior Rating: Caa3, on review for possible downgrade Current Rating: Ca The rating downgrade actions reflect deterioration in the credit quality of the underlying portfolio, as well as the occurrence, as reported by the Trustee on July 22, 2008, of an event of default caused by a default in the payment of interest on the Class B Notes when due and payable and a continuation of such default for a period of seven days, as described in Section 5.1(a) of the Indenture dated December 5, 2006. Hudson Mezzanine Funding 2006-1, Ltd. is a collateralized debt obligation backed primarily by a portfolio of structured finance securities. As provided in Article V of the Indenture during the occurrence and continuance of an Event of Default, certain parties to the transaction may be entitled to direct the Trustee to take particular actions with respect to the Collateral and the Notes. The rating downgrades taken today reflect the increased expected loss associated with each tranche. Losses are attributed to diminished credit quality on the underlying portfolio. The severity of losses of certain tranches may be different, however, depending on the timing and choice of remedy to be pursued following the event of default. Because of this uncertainty, the ratings assigned to Class S Notes and to the Senior Swap remain on review for possible further action. HUNTSMAN CORP: Earns $23.7 Million in 2008 Second Quarter --------------------------------------------------------- Huntsman Corp. reported on Wednesday its financial results for the second quarter ended June 30, 2008. Net income for the second quarter of 2008 was $23.7 million as compared to a net loss of $70.9 million for the same period in 2007 and compared to $7.3 million for the first quarter of 2008. Revenues for the second quarter of 2008 were $2.89 billion, an increase of 17% as compared to $2.47 billion for the second quarter of 2007 and an increase of 14% as compared to $2.54 billion for the first quarter of 2008. Revenues increased in all of the company's segments primarily due to higher average selling prices, while sales volumes were higher in Polyurethanes. Adjusted net income from continuing operations for the second quarter of 2008 was $19.9 million as compared to $83.8 million for the same period in 2007 and $16.9 million for the first quarter of 2008. Adjusted EBITDA from continuing operations for the second quarter of 2008 was $209.8 million as compared to $246.4 million for the same period in 2007 and compared to $188.3 million for the first quarter of 2008. Peter R. Huntsman, Hunstman Corp.'s president and chief executive officer, stated: "I am very pleased with our results in the second quarter. Adjusted EBITDA was $209.8 million, an increase of 11% as compared to the first quarter results. This increase in profitability was achieved in spite of a challenging raw material environment and the continued decline in the value of the U.S. dollar. Sales volumes were strong in all of our divisions, with total volumes in our Polyurethanes division up by 14%, in Materials & Effects up 7%, in Performance Products up 13%, and in Pigments up 9%, all relative to the first quarter of 2008. "As we look forward to the second half of 2008, we are encouraged by the recent moderation in crude oil and natural gas prices that we have seen in the past several weeks. This, together with the aggressive actions we have recently taken to increase our selling prices, is expected to result in further opportunities to increase margins in many of our products. We expect that Adjusted EBITDA in the second half of the year will be stronger than the results in both the first half of 2008 and the second half of 2007." For the three months ended June 30, 2008, EBITDA was $210.2 million as compared to $22.6 million in the same period in 2007. Liquidity, Capital Resources and Outstanding Debt As of June 30, 2008, the company had approximately $579.0 million in cash and unused borrowing capacity. During the three months ended June 30, 2008, adjusted net working capital increased approximately $86.0 million, which together with the company's capital spending and certain investments in foreign joint ventures, including its ethyleneamines manufacturing joint venture in Jubail, Saudi Arabia, resulted in higher debt levels at June 30, 2008, as compared to March 31, 2008. For the three months ended June 30, 2008, total capital expenditures were approximately $115.0 million as compared to approximately $178.0 million for the same period in 2007. Lower spending attributable to the rebuild of the fire damaged Port Arthur, Texas olefins facility which was sold in the fourth quarter of 2007, has been partially offset by higher spending on various other projects, including the company's maleic anhydride expansion at its Geismar, Louisiana site. The company said it expects to spend approximately $440.0 million on capital expenditures in 2008. At June 30, 2008, the company had total debt of $3.95 billion, compared to total debt of $3.57 billion at Dec. 31, 2007. Update on Merger With Hexion On June 18, 2008, Hexion Specialty Chemicals Inc. filed a lawsuit in Delaware seeking to avoid its obligations under the merger agreement. Huntsman strongly disagrees with allegations outlined in this lawsuit. A trial is scheduled to begin on Sept. 8, 2008, to adjudicate these allegations. On June 23, 2008, Huntsman filed a lawsuit in Texas against Apollo Management, L.P. and its principals Leon Black and Joshua Harris for fraud and tortious interference with its merger with Hexion, an entity owned by an affiliate of Apollo. On June 30, 2008, the European Commission approved the proposed merger between Hexion and Huntsman contingent on, among other things, divestment of a portion of Hexion's global specialty epoxy resins business to a purchaser approved by the European Commission. Huntsman said that with this conditional approval of the European Commission, all significant regulatory approvals related to the merger other than FTC approval have now been received. On July 4, 2008, Huntsman's board of directors voted unanimously to exercise its right to extend the merger agreement. The termination date under the merger agreement is now Oct. 2, 2008. About Huntsman Corp. 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. At March 31, 2008, the company's consolidated balance sheet showed $8.68 billion in total assets, $6.71 billion in total liabilities, $32.1 million in minority interests, and $1.94 billion in total stockholders' equity. * * * As reported in the Troubled Company Reporter on June 24, 2008, Moody's Investors Service reiterated that the debt ratings and the corporate family ratings (CFR -- Ba3) for Huntsman Corporation and Huntsman International LLC, a subsidiary of Huntsman remain under review for possible downgrade. This follows the announcement by Hexion Specialty Chemicals and Apollo in which Hexion/Apollo claim they would not be required to consummate the previously announced merger agreement between the two companies. INCYTE CORP: June 30 Balance Sheet Upside-Down by $237.2 Million ---------------------------------------------------------------- Incyte Corporation disclosed Tuesday its financial results for the second quarter ended June 30, 2008 and reported continued progress in several lead clinical programs. At June 30, 2008, the company's consolidated balance sheet showed $204.7 million in total assets and $441.9 million in total liabilities, resulting in a $237.2 million stockholders' deficit. The net loss for the quarter ended June 30, 2008 was $45.6 million, as compared to $18.4 million for the same period in 2007. The net loss for the six months ended June 30, 2008 was $85.7 million, as compared to $40.6 million for the same period in 2007. Included in the net loss for the quarter and the six months ended June 30, 2008, was $3.9 million and $7.3 million, respectively, of non-cash expense related to the impact of expensing share-based payments, including employee stock options, as compared to $2.6 million and $4.8 million, respectively, for the same periods in 2007. Total revenues for the quarter ended June 30, 2008 were $614,000 as compared to $10.6 million for the same period in 2007. Revenues for the six months ended June 30, 2008 were $1.9 million, as compared to $18.0 million for the same period in 2007. The decrease was primarily the result of revenues recognized in 2007 under the company's collaborative research and license agreement with Pfizer. The company said it does not expect to generate product sales from its drug discovery and development efforts for several years. Research and development expenses for the quarter ended June 30, 2008, were $38.1 million as compared to $23.3 million for the same period last year. Research and development expenses for the six months ended June 30, 2008, were $71.1 million, as compared to $47.2 million for the same period last year. The increase in research and development expenses resulted from the growth and advancement of the company's clinical pipeline. Selling, general and administrative expenses for the quarter and the six months ended June 30, 2008, were $4.1 million and $8.5 million, respectively, as compared to $3.5 million and $7.2 million, respectively, for the same periods in 2007. Interest income for the quarter and the six months ended June 30, 2008, was $1.4 million and $3.5 million, respectively, as compared to $3.7 million and $7.8 million, respectively, for the same periods in 2007. Interest expense for the quarter and the six months ended June 30, 2008, was $6.2 million and $12.4 million, respectively, as compared to $6.0 million and $11.9 million, respectively, for the same periods in 2007. Included in interest expense for the quarter and the six months ended June 30, 2008, was $2.2 million and $4.3 million, respectively, of non-cash charges to amortize the original issue discount of the company's 3 1/2% Convertible Senior Notes. Paul Friedman, M.D., president and chief executive officer of Incyte, stated, "During the second quarter, we presented clinical findings at several scientific conferences from our ongoing Phase II trials demonstrating that our lead JAK inhibitor compound, INCB18424, was well tolerated and provided rapid and profound effects in patients with myelofibrosis and rheumatoid arthritis. Additionally, we continue to see encouraging efficacy results in psoriasis patients using the topical formulation of INCB18424. "We also presented clinical results from a 28-day Phase IIa trial with INCB13739 demonstrating that oral treatment with this 11beta- HSD1 inhibitor significantly improved insulin sensitivity and decreased plasma cholesterol levels in patients with type 2 diabetes. These results suggest that INCB13739 may be more effective in addressing a broad range of metabolic risk factors than existing diabetes therapies. "We expect to make substantial clinical progress this year and next, which will include results from ongoing Phase II trials with INCB18424 in myelofibrosis, polycythemia vera and essential thrombocythemia, rheumatoid arthritis and psoriasis, the ongoing Phase IIb trial for our HSD1-inhibitor and a Phase IIa trial with our HM74a agonist." Cash Position/Debt As of June 30, 2008, cash, short-term and long-term marketable securities totaled $188.0 million, compared to $257.3 million as of Dec. 31, 2007. During the six months ended June 30, 2008, the company used $69.3 million in cash and marketable securities. Cash use guidance of $132.0 to $142.0 million for 2008 remains unchanged. As of June 30, 2008, the aggregate principal amount of total consolidated debt was $421.8 million. Full-text copies of the company's consolidated financial statements for the quarter ended June 30, 2008, are available for free at http://researcharchives.com/t/s?3045 About Incyte Corp. Based in Wilmington, Delaware, Incyte Corporation (Nasdaq: INCY) -- http://www.incyte.com/-- is a drug discovery and development company focused on developing proprietary small molecule drugs to treat serious unmet medical needs. Incyte's pipeline includes multiple compounds in Phase I and Phase II development for oncology, inflammation and diabetes. INDYMAC BANCORP: Files Chapter 7 Protection in California --------------------------------------------------------- Bloomberg News reported that IndyMac Bancorp Inc. filed for Chapter 7 Bankruptcy protection with the U.S. Bankruptcy Court for Central District of California (Bankr. Case No. 08-21752). According to Bloomberg, the liquidation of Indymac Bancorp's remaining assets came three weeks after its bank was seized by U.S. regulators and put under the management of the Federal Deposit Insurance Corporation. IndyMac, once the second- largest U.S. independent mortgage lender, Bloomberg noted, has $32.01 billion in assets as of July 11. Bloomberg, citing court documents, stated that IndyMac's liabilities are between $100 million and $500 million. IndyMac said it has fewer than 50 creditors, including accounting firm Ernst & Young LLP, law firm Alston & Bird, and JPMorgan Chase & Co. and other banks, none of the outstanding claims were listed, Bloomberg indicated. IndyMac Federal Bank FSB's Statement In a press statement, IndyMac Federal Bank FSB fka IndyMac Bank, the former subsidiary of IndyMac Bancorp related that this action has no effect on its operations. Other than a similarity of name, IndyMac Federal Bank has no relationship, nor does it share any employees, with IndyMac Bancorp. "The statement by the former holding company of IndyMac Bank has no impact on IndyMac Federal Bank or its customers," John Bovenzi, IndyMac Federal Bank CEO, said. "Our customers will continue to receive the same value and personal service they have come to expect from IndyMac, which, due to its FDIC backing is one of the safest banks in America and a great place for our customers to keep their funds." IndyMac Federal Bank remains under the FDIC's conservatorship and, as such, is backed by the FDIC's approximately $53 billion deposit insurance fund, which is further backstopped by the full faith and credit of the U.S. government. In a July 31 regulatory filing, Indymac stated that it expects that the Bankruptcy Court will appoint a bankruptcy trustee promptly. Alston & Bird LLP represents the company in this bankruptcy case. The company, according to Bloomberg, proposed that its first creditor meeting be held on Aug. 28. About IndyMac Bancorp Inc. Based in Pasadena, California, IndyMac Bancorp Inc. (NYSE:IMB) -- http://www.indymacbank.com/-- is the holding company for IndyMac Bank FSB, a hybrid thrift/mortgage bank that originated mortgages in all 50 states of the United States. Through its hybrid thrift- mortgage bank business model, IndyMac designed, manufactured, and distributing cost-efficient financing for the acquisition, development, and improvement of single-family homes. IndyMac also provided financing secured by single-family homes to facilitate consumers' personal financial goals and strategically invests in single-family mortgage-related assets. * * * As reported by the Troubled Company Reporter on July 11, 2008, Standard & Poor's Ratings Services lowered its rating on Indymac Bancorp and its subsidiaries, including lowering the counterparty credit rating on Indymac, to 'CCC/C' from 'B/C'. "We took this action because we believe that Indymac's weakened financial profile and exposure to deteriorating housing markets leaves its creditworthiness severely impaired," said Standard & Poor's credit analyst Robert B. Hoban, Jr. On July 9, the TCR said Fitch Ratings downgraded the long-term Issuer Default Ratings of Indymac Bancorp to 'CC' from 'B-'; and the long-term Issuer Default Ratings of Indymac Bank FSB to 'CCC' from 'B'. The downgrade follows IMB's disclosure that, according to its regulators, the bank is no longer 'well capitalized'. Concurrent with this rating action, Fitch has removed all ratings from Rating Watch Negative. The Rating Outlook is Negative for IMB. As reported in the Troubled Company Reporter on Feb. 22, 2008, Standard & Poor's Ratings Services lowered its ratings on five classes of asset-backed certificates from IndyMac Bank FSB's series SPMD 2002-A and SPMD 2002-B. Concurrently, S&P removed three of the lowered ratings from CreditWatch with negative implications. Additionally, S&P affirmed its ratings on the remaining classes from these two series. INDYMAC BANCORP: Voluntary Chapter 7 Case Summary ------------------------------------------------- Debtor: Indymac Bancorp Inc. Attn: Edwin Woodsome Orrick, Harrington & Sutcliffe, LLP 777 South Figueroa Street, Suite 3200 Los Angeles, CA 90017 Bankruptcy Case No.: 08-21752 Chapter 7 Petition Date: July 31, 2008 Court: Central District of California (Los Angeles) Judge: Sheri Bluebond Debtor's Counsel: Dean G. Rallis, Jr., Esq. 333 S. Hope Street, 16th Floor Los Angeles, CA 90071 Tel: (213) 576-1100 email: drallis@wbcounsel.com John C. Weitnauer, Esq. 1201 W. Peachtree Street Atlanta, GA 30309-3424 Tel: (404) 881-7000 Estimated Assets: $50 million to $100 million Estimated Debts: $100 million to $500 million INN OF THE MOUNTAIN: Moody's Affirms B3 Corp. Family Ratings ------------------------------------------------------------ Moody's Investors Service changed the rating outlook for Inn of the Mountain Gods Resorts and Casino to negative from stable, based on the expectation that the recent deterioration in EBITDA could continue in the current fiscal year due to economic challenges. IMGRC's B3 corporate family, B3 probability of default and B3 senior notes ratings were affirmed. IMGRC's operating performance deteriorated in the second half of the fiscal year ended April 30, 2008 due largely to a lack of snowfall negatively impacting the ski resort and indirectly the casino facility, as well as operating disruptions caused by high management turnover. Moody's believes that weak consumer spending and lower leisure travel budgets could hurt EBITDA in the near term, given IMGRC's reliance on tourist traffic and visitation of regional patrons from a radius in excess of 100 miles. The rating agency also cautions that IMGRC's EBITDA to interest coverage of approximately 1.4 times as of April 30, 2008 provides limited leeway in the B3 rating category. Further decline in operating performance to the extent that EBITDA would not cover anymore debt service obligations and maintenance capital expenditures could result in a rating downgrade. Ratings affirmed: B3 corporate family rating B3 probability of default rating B3 senior unsecured notes rating (LGD assessment revised to LGD4/52% from LGD4/54%) IMGRC includes all of the resort enterprises of the Mescalero Apache Tribe, a federally recognized Indian tribe with approximately 4,400 members on a 725-square mile reservation located in the Sacramento Mountains in south-central New Mexico. IMGRC comprises a small locals-oriented casino, a resort hotel and casino and the second largest ski resort in New Mexico. Net revenues for the fiscal year ended April 30, 2008 were $124.4 million. INNOPHOS INC: S&P Lifts Corporate Credit Rating to 'B+' from 'B' ---------------------------------------------------------------- Standard & Poor's Ratings Services raised its ratings on Innophos Inc., including its corporate credit rating to 'B+' from 'B'. The outlook is positive. The Cranbury, New Jersey-based company had total reported debt of approximately $398 million at March 31, 2008. "The upgrade reflects Innophos' improved operating performance and stronger financial risk profile, along with our expectation that profitability should continue to fare well in the near term," said Standard & Poor's credit analyst James Siahaan. Despite substantial increases in its raw material costs, Innophos has successfully raised prices multiple times this year, and has benefited from relatively consistent demand for its products. The company is likely to continue to derive considerable revenue and earnings growth during the next two years. The ratings on Innophos, a manufacturer of specialty phosphates, reflect the company's moderate sales base of about $700 million, its narrow product line in a niche, mature market, and highly leveraged financial risk profile. These negatives are partially offset by the company's solid position in the production of specialty phosphates, good operating margins, strengthening cash flow protection measures, and the potential for additional debt reduction from discretionary cash flows. The outlook is positive. The company's ability to sustain price levels and derive profits during this cyclical upturn, as well as its ability to mitigate higher raw material costs will be key to supporting modestly higher ratings. S&P expects Innophos to exhibit meaningful improvement in internal funds generation during the near term. S&P could raise the ratings if the company continues to demonstrate solid performance, adheres to financial policies that do not weaken the capital structure, and successfully refinances its senior credit facility that matures in 2009. However, S&P could revise the outlook to stable or negative or lower the ratings if pricing and margins undergo significant and unexpected compression, if volumes in the company's typically steady consumer non-discretionary markets decline, and if expected credit metrics at the current rating cannot be maintained. INSTANT WEB: Moody's Cuts Sr. Sec. 2nd Lien Term Loan to Caa2 ------------------------------------------------------------- Moody's Investors Service downgraded the corporate family and probability of default ratings for Instant Web, Inc. to B3 from B2 and changed the outlook to negative. The downgrade reflects expectations for deterioration over the next several quarters such that Instant Web is unlikely to achieve the necessary improvement to sustain a B2 credit profile. Instant Web faces pressure from softening end markets, especially in financial services, that will likely adversely impact operating results until the sector recovers. Instant Web recently announced the closure of its facility in Long Island, New York, and relocation of business from that facility to its existing operations in North Carolina and Minnesota. While Moody's believes IWCO will realize cost savings from this action, it indicates that mail volumes and revenue will be much lower than previously expected. The negative outlook incorporates concerns over the potential for continued declines. A summary of today's actions follows. Instant Web, Inc. ....Probability of Default Rating, Downgraded to B3 from B2 ....Corporate Family Rating, Downgraded to B3 from B2 ....Senior Secured Second Lien Term Loan, Downgraded to Caa2, LGD6, 93% from Caa1 ....Senior Secured First Lien Credit Facility, B1, LGD3, 32% ....Outlook, Changed To Negative From Stable The B3 corporate family rating reflects high financial risk, including debt-to-EBITDA of approximately 8 times and negative free cash flow, customer concentration, and lack of scale. Instant Web's compelling business model and favorable long term trends in direct mail support its ratings. However, shifting consumer debt profiles may adversely impact the willingness of the credit card business to attract new customers in the current market environment, and Instant Web derives a large portion of its revenue from financial services companies. Adequate liquidity also supports the rating. Headquartered in Chanhassen, Minnesota, Instant Web, Inc. a wholly-owned subsidiary of parent holding company IWCO Direct Holdings, Inc., provides its clients an integrated package of direct mail production services, including print, envelope, plastic, mailing, and data services. The company is the largest commingler of standard mail in North America with revenues of approximately $300 million in 2007. INTERSTATE BAKERIES: Withdraws Bid for Incentive Plan Approval -------------------------------------------------------------- Interstate Bakeries Corp. and its debtor-affiliates informed the U.S. Bankruptcy Court for the Western District of Missouri and parties-in-interest, on July 17, 2008, that it has withdrawn its request seeking permission to implement the IBC Management Incentive Plan for Fiscal Year 2008. The Debtors proposed the 2008 Incentive Plan -- which covered the business plan year period from June 3, 2007 through May 31, 2008 -- to incentivize IBC's top 520 salaried employees with designated annual rewards based upon a specified percentage of their base salaries. The rewards were limited to a maximum amount of between 5% and 10% of the base salaries of the Debtors' employees. The proposed 2008 Incentive Plan would award an aggregate of $6,000,000 in bonuses to employees, where approximately 31% or $1,800,000 of the total awards was allocated to a group of 17 individuals, of which four were designated to receive $892,000. Rewards under the 2008 Incentive Plan will not be granted to any employee "unless IBC meets or exceeds the company EBITDA Target", which was drawn from the Business Plan. The Official Committee of Unsecured Creditors objected to the proposed Incentive Plan, arguing that it was "unfair and unreasonable," as it qualified only a limited pool of management employees. The International Brotherhood of Teamsters said IBC's proposed bonus program lacked a legitimate business justification because "[the Debtors'] Plan of Reorganization -- dependent on a deal with IBT, which will not occur -- cannot be confirmed." The Debtors did not disclose the reason for the withdrawal of their request. Headquartered in Kansas City, Missouri, Interstate Bakeries Corporation is a wholesale baker and distributor of fresh-baked bread and sweet goods, under various national brand names, including Wonder(R), Baker's Inn(R), Merita(R), Hostess(R) and Drake's(R). Currently, IBC employs more than 25,000 people and operates 45 bakeries, as well as approximately 800 distribution centers and approximately 800 bakery outlets throughout the country. The company and eight of its subsidiaries and affiliates filed for chapter 11 protection on Sept. 22, 2004 (Bankr. W.D. Mo. Case No. 04-45814). J. Eric Ivester, Esq., and Samuel S. Ory, Esq., at Skadden, Arps, Slate, Meagher & Flom LLP, represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $1,626,425,000 in total assets and $1,321,713,000 (excluding the $100,000,000 issue of 6% senior subordinated convertible notes due Aug. 15, 2014) in total debts. The Debtors' filed their Chapter 11 Plan and Disclosure Statement on Nov. 5, 2007. Their exclusive period to file a chapter 11 plan expired on November 8. On Jan. 25, 2008, the Debtors filed their First Amended Plan and Disclosure Statement. On Jan. 30, 2008, the Debtors received Court approval of the First Amended Disclosure Statement. IBC confirmed that it has not received any qualifying alternative proposals for funding its plan of reorganization in accordance with the Court-approved alternative proposal procedures. As a result, no auction was held on Jan. 22, 2008, as would have been required under those procedures. The deadline for submission of alternative proposals was Jan. 15, 2008. A new plan filing deadline was set for June 30, 2008; no plan was filed as of that date. (Interstate Bakeries Bankruptcy News, Issue No. 103; Bankruptcy Creditors' Service Inc., http://bankrupt.com/newsstand/or 215/945-7000). I/OMAGIC CORP: Dismisses Swenson Advisors as Public Accountant -------------------------------------------------------------- I/OMagic Corporation disclosed, on July 11, 2008, the dismissal of Swenson Advisors, LLP, the independent registered public accounting firm that was engaged as the company's principal accountant to audit the company's consolidated financial statement. The initial Form 8-K inadvertently identified a dismissal date of July 7, 2008; however, although the company provided formal notice of dismissal to Swenson on July 7, 2008, its Audit Committee first approved the dismissal of Swenson on June 27, 2008 and subsequently executed written resolutions concerning the dismissal effective as of July 1, 2008. In addition, the Initial Form 8-K reported the engagement of Simon & Edward, LLP, as the company's new independent registered public accounting firm on July 7, 2008; however, although the company intended to engage Simon & Edward on July 7, 2008 -- the same day the company formally notified Swenson of its dismissal -- I/OMagic's Audit Committee first approved the engagement of Simon & Edward on June 27, 2008, but at that time it had not formally engaged Simon & Edward through the execution of an engagement letter. The company formally engaged Simon & Edward through the execution of an engagement letter on July 21, 2008. Accordingly, the company hereby amend and restate the Initial Form 8-K: (a) On June 27, 2008, the company dismissed Swenson, and on July 7, 2008, the company formally notified Swenson of its dismissal. The decision to change the company's independent registered public accounting firm was approved by its Audit Committee. The reason for the change was to allow the company to engage an alternative firm that it believes has adequate resources to provide the company with the auditing and tax services it requires on a more cost-effective basis. Except as to going concern qualifications, the audit reports of Swenson on the company's consolidated financial statements and consolidated financial statement schedules as of and for the years ended December 31, 2006 and 2007 did not contain any adverse opinion or disclaimer of opinion, nor were they qualified as to uncertainty, audit scope or accounting principles. During the years ended December 31, 2006 and 2007 and the subsequent interim period through July 7, 2008, there were no disagreements with Swenson on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedures which disagreements, if not resolved to Swenson's satisfaction, would have caused Swenson to make reference to the subject matter of the disagreement in connection with its opinion. About I/OMagic Corp. Headquartered in Irvine, California, I/OMagic Corp. (OTC BB: IOMG) -- http://www.iomagic.com/-- sells data storage products, televisions, most of which are high-definition televisions, or HDTVs, utilizing liquid crystal display, or LCD, technology, and other consumer electronics products. Going Concern Doubt As reported in the Troubled Company Reporter on April 23, 2008, Swenson Advisors, LLP, in San Diego, Calif., expressed substantial doubt about I/OMagic Corp.'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 significant operating losses, has serious liquidity concerns, and may require additional financing in the foreseeable future. At March 31, 2008, the company had cash and cash equivalents of $357,042 and as of May 16, 2008, the company had only $827,524 of cash on hand. Accordingly, the company is presently experiencing a lack of liquidity and may have insufficient liquidity to fund its operations for the next twelve months. If the company's net losses continue or increase, the company said it could experience significant additional shortages of liquidity and its ability to purchase inventory and to operate its business may be significantly impaired, which could lead to further declines in its results of operations and financial condition. ISP CHEMCO: S&P Changes Outlook to Positive on Stable Performance ----------------------------------------------------------------- Standard & Poor's Ratings Services revised its outlook on ISP Chemco LLC to positive from stable. S&P affirmed all the ratings including the 'B+' corporate credit rating. The outlook revision reflects very stable operating performance, and better than expected earnings and cash flow in the current challenging cost and economic environment. "We expect cash flow protection and other key ratios to remain at about current levels, with operating cash flow and cash on hand used to fund bolt-on acquisitions or moderate dividends," said Standard & poor's credit analyst Cynthia Werneth. Total debt outstanding at March 30, 2008 (adjusted to include about $100 million of off-balance-sheet accounts receivable and operating lease financing and unfunded postretirement obligations) was about $1.35 billion. The ratings on ISP Chemco reflect its highly leveraged financial profile and the risks associated with private ownership. These factors are partially mitigated by the company's satisfactory business position as a global producer of specialty and industrial chemicals. Annual sales are about $1.6 billion. Wayne, New Jersey-based ISP Chemco's credit quality is supported by its diverse portfolio of specialty chemicals, which make up more than 70% of its revenues and an even greater proportion of operating income. The company's remaining sales are from industrial chemicals. The positive outlook points to the potential for a one-notch upgrade during the next few quarters if credit metrics remain at about current levels, with funds from operations, after estimated tax liability, to adjusted total debt approaching 15%. S&P would also expect any dividends, meaningful-sized acquisitions, or resolution of the outstanding tax matter to be financed with free cash flow and cash on hand. Despite some uncertainties regarding financial policies, S&P gives considerable weight to ISP Chemco's investment-grade business risk profile and relative earnings stability. On the contrary, S&P would revise the outlook to stable if an increase in debt or deterioration in operating results seems likely to push FFO to debt down toward 10%. If this ratio were to drop to and remain below 10%, S&P would lower the ratings. JACOBS ENTERTAINMENT: Moody's Sees High Covenant Violation Risk --------------------------------------------------------------- Moody's Investors Service assigned a Speculative Grade Liquidity rating of SGL-4 to Jacobs Entertainment Inc., reflecting the high risk of financial covenant violation in the next twelve months. While internal cash flow and the degree of availability under the revolver could be commensurate with an adequate liquidity, Moody's believes that the risk of covenant breach justifies a more conservative assessment. Moody's anticipates that the company's cash flow from operations and cash balances should cover capital expenditures, distributions to stockholders and land acquisitions in the coming year. Additionally, the rating agency does not expect borrowings under the revolver to significantly increase in the next twelve months from a peak reached in June 2008 after a coupon payment on the senior unsecured notes, although EBITDA is expected to remain constrained by a challenging market environment. However, Moody's believes that the company could have too limited leeway under its net senior secured leverage covenant. The risk of violation is particularly high in the first quarter of 2009 when the step down comes into effect. For more information on JEI's SGL analysis, please refer to the credit opinion on Moodys.com. JEI is an owner and operator of gaming and pari-mutuel wagering facilities with properties located in Colorado, Nevada, Louisiana and Virginia. Net revenues for the twelve-month period ended March 31, 2008 were approximately $352 million. JACUZZI BRANDS: S&P Cuts Credit Rating to B- & Loan Rating to CCC+ ------------------------------------------------------------------ Standard & Poor's Ratings Services lowered its corporate credit rating on Jacuzzi Brands Corp. to 'B-' from 'B'. At the same time, S&P lowered the ratings on the company's $170 million first- lien term loan and $15 million synthetic letter of credit facility to 'CCC+' from 'B' and revised the recovery rating to '5', indicating S&P's expectation for modest (10%-30%) recovery in the event of a payment default. Similarly, the rating on Jacuzzi's $150 million second-lien term loan was lowered to 'CCC' from 'B-' and the recovery rating was changed to '6', indicating negligible (0%-10%) recovery in the event of a payment default. The outlook is negative. "The lower ratings reflect our assessment that as a result of the ongoing challenging operating conditions due to the weak U.S. economy and continued housing downturn, demand for the company's discretionary bath and spa products will continue to decline in the near term," said Standard & Poor's credit analyst Thomas Nadramia. As a result, operating performance will likely be weaker than expected, resulting in a deterioration to credit metrics to a level that S&P would consider to be weak for the current rating. While the company's near-term liquidity position seems adequate given its availability under bank credit lines, the payment-in- kind period on its $150 million second-lien term loan expires in October 2009, thus requiring approximately $15 million to $17 million in additional interest servicing costs at current rates at that time. The ratings on Jacuzzi reflect very competitive industry conditions, overall industry cyclicality, the relatively narrow focus of the company's principal product lines, weak operating margins, and very aggressive financial leverage. The ratings also reflect the benefits of strong brand names, including Jacuzzi and Sundance, and geographic diversity--50% of sales now come from products sold outside the U.S. The outlook is negative. Given current operating conditions, S&P expects Jacuzzi's operating performance will continue to be negatively affected in the near term because we expect repair and remodeling spending to continue to soften. S&P could lower ratings further if operating performance does not stabilize in the near-to-intermediate term, resulting in a further weakening in credit measures. In addition, S&P are concerned that without a significant improvement in the operating environment over the next 12 months, the company's ability to meet its requirements to pay cash interest once again on its second-lien debt will be difficult. Although unlikely in the near term, S&P could revise the outlook to stable if the company reverses recent sales and margin deterioration and meaningfully improves credit metrics and interest coverage. JEFFERSON COUNTY: Payment Deadline on $3.2BB Debt Moved to Nov. 17 ------------------------------------------------------------------ Jefferson County on Friday reached an agreement with creditors to extend payment on a $3.2 billion sewer debt until Nov. 17, 2008, reports say. A $100 million payment on the debt was supposedly due Friday, Aug. 1. As part of agreement, the county will pay creditors $44 million of principal. XL Capital Assurance, the bond insurance unit of Security Capital Assurance and a major bond insurer for Jefferson County, would pay $35 million of the principal, county commission President Bettye Fine Collins said, according to a report by Melinda Dickinson of Reuters. Jefferson County has $4.6 billion in overall debt, including $3.2 billion in sewer bonds. The county was required to post a collateral on interest-rate swaps tied to the bonds after a series of downgrades on the debt. The Aug. 1 agreement was the fourth extension with creditors since the county failed to make a payment on April 1. The county's major creditors include investment banks JPMorgan Chase, Goldman Sachs and Lehman Brothers. Two of the firms that guarantee to make the payments on Jefferson County's sewer bonds in the event of default were FGIC Corp. and XL Capital Assurance Inc. FGIC insured $1.56 billion of Jefferson County auction-rate securities, and XL Capital backed $397 million of the bonds. XLCA said that as of June 2, 2008, the Company's exposure to Jefferson County was $810 million, net of reinsurance. XLCA has not established any loss reserves at this time in connection with Jefferson County. Restructuring Proposal The proposed plan to pay the $3.2 billion sewer debt has these main parts: -- an extension to an existing one-cent sales tax due to expire in the next five years that is expected to generate $663 million; -- an expansion of the occupational tax that is expected to generate $38 million; and -- the use of the sewer revenue, generating $1.9 billion, to pay down debt. In addition, should this proposed revenue generation plans fail, property taxes will be raised to generate more funds to cover the shortfall. A copy of the plan is available at http://bankrupt.com/misc/sewer_restructuring_plan.pdf Majority of the Jefferson County Commission are opposed to the plan. The Commission will vote on Tuesday whether to ask Gov. Bob Riley to call a special session to allow state legislators to consider the new proposal. Voters still have to approve the proposal in a statewide referendum Nov. 4. On Friday, county leaders will disclose the proposals to the public and invite taxpayers to comment on the proposals. Citigroup Replaces Goldman Sachs as Adviser Citigroup Inc. was appointed as part of a new banking team advising Jefferson County after Goldman Sachs Group. Inc. refused to take the job, Martin Z. Braun and William Selway at Bloomberg News reported. As reported by the Troubled Company Reporter on July 9, 2008, the Jefferson County Commission dismissed current advisers Porter, White & Co., Merrill Lynch & Co., and Birmingham law firm Bradley Arant Rose & White as negotiators in their debt restructuring effort. They hired as replacement, Goldman, Sachs & Co.; Birmingham investment bank Sterne, Agee & Leach Inc. and Memphis-based investment firm Morgan Keegan & Co. About Jefferson County Jefferson County has its seat in Birmingham. It has a population of 660,000. It ended its 2006 fiscal year with a $42.6 million general fund balance, according to Standard & Poor's. Patrick Darby, a lawyer with the Birmingham firm of Bradley Arant Rose & White, represents Jefferson County. Porter, White & Co. in Birmingham is the county's financial adviser. A bankruptcy by Jefferson County stands to be the largest municipal bankruptcy in U.S. history. * * * As reported by the Troubled Company Reporter on June 10, 2008, Standard & Poor's Ratings Services' ratings on Jefferson County, Ala.'s series 1997A, series 2001A, series 2003 B-1-A through 2003 B-1-E, and series 2003 C-1 through 2003 C-10 sewer system revenue bonds ('CCC' underlying rating [SPUR]) remain on CreditWatch with developing implications. On April 1, 2008, Standard & Poor's lowered its SPUR on the county's variable-rate demand series 2003 B-2 through 2003 B-7 sewer revenue refunding warrants to 'D' from 'CCC' due to the sewer system's failure to make a principal payment on the bank warrants when due on April 1, 2008, in accordance with the terms of the standby warrant purchase agreement. As reported by the TCR on July 22, 2008, Moody's Investors Service's continues to review the Caa3 rating on Jefferson County's (AL) $3.2 billion in outstanding sewer revenue warrants for possible downgrade. JEFFERSON COUNTY: Moody's Downgrades $270,000,000 Debt to Ba3 ------------------------------------------------------------- Moody's Investors Service has downgraded to Ba3 from Baa1 the rating on Jefferson County's (AL) $270 million in outstanding general obligation debt. At this time, Moody's has also downgraded: to B1 from Baa2 the county's $86.7 million in outstanding lease revenue warrants issued through the Jefferson County Public Building Authority; to B1 from Baa2 the county's $996.8 million in limited obligation school warrants secured by sales taxes; to B1 from Baa1 the rating on $20.3 million in special tax bonds issued by the Birmingham-Jefferson Civic Center Authority (BJCCA) partially secured by the county's occupational tax; and to B1 from Baa2 the rating on $40.86 million in debt issued by BJCCA partially secured by a beverage tax and lodging tax levied and the collected by the county. The sewer revenue bonds continue to be rated Caa3, on review for possible downgrade. Downgrade of the general obligation and other non-sewer debt reflects the county's lack of progress toward a resolution of the sewer system financial crisis, heightening the risk that it will pursue a bankruptcy filing. The downgrade also reflects the failure of the county to approve an extension on the existing forbearance agreements with the liquidity banks and bond insurers prior to their expiration, which now requires the county pay approximately $106 million to the liquidity banks. Moody's expects that the county will not make that payment; were the county to make the payment, it would significantly deplete available resources of the sewer system. It is Moody's belief that the county's failure to agree upon a plan for a solution to the sewer system's financial crisis in a timely fashion is inconsistent with an investment grade rating on the general credit quality of the county. Moody's believes the heightened risk that the county will file for bankruptcy further weakens credit quality and raises questions about how non-sewer obligations may be treated in a bankruptcy. Finally, Moody's believes that the county's failure to agree to the extension in a timely manner, thus avoiding a non-payment on the bank bonds, indicates additional weakness to the overall credit quality of the county. Given the lack of history of municipal bankruptcy, Moody's is unable to determine what county revenues, assets and debt obligations could be affected by bankruptcy proceedings, and the downgrades of Moody's ratings on the non-sewer obligations reflects Moody's concern that a bankruptcy filing could weaken the county's ability to meet its debt backed by pledges of the general obligation, lease revenue, and various dedicated taxes. While each of these securities could be affected by a bankruptcy, Moody's believes the general obligation remains the strongest pledge available to a municipality. Accordingly, the sales tax, lease revenue and other special tax obligations are lowered one notch lower than the G.O. debt, to B1. Moody's has downgraded the BJCCA bonds secured by the county's pledge of $10 million annually from its occupational tax, as well as the City of Birmingham's (G.O. rated Aa3) $3 million payments from its occupational tax, to the same level as the general obligation debt. The county's obligation to support this debt ends in December 2008, with only one county payment of $5 million remaining. Although a bankruptcy filing could disrupt these remaining payments, Moody's believes the disruption of the occupation tax bonds would be short-lived given the limited timeframe remaining on the county's obligation. JOURNAL REGISTER: Moody's Downgrades PDR to D, CFR to Ca -------------------------------------------------------- Moody's Investors Service has downgraded Journal Register Company's Probability of Default rating to D from Caa3 and its Corporate Family rating to Ca from Caa2. The rating outlook is stable. Moody's plans to withdraw all of Journal Register's ratings shortly. Details of the rating actions are: Ratings downgraded: Senior secured revolving credit facility due 2012 - to Ca, LGD3, 49% from Caa2, LGD3, 34% Senior secured term loan A due 2012 - to Ca, LGD3, 49% from Caa2, LGD3, 34% Corporate Family Rating - to Ca from Caa2 Probability of Default Rating - to D from Caa3 The rating outlook is stable. The downgrade of the Probability of Default rating to D reflects Moody's opinion that the forbearance agreement which Journal Register recently concluded whereby interest will now be paid-in- kind vs. in cash as originally stipulated with its lenders is tantamount to an event of default. The downgrade of the Corporate Family rating to Ca from Caa2 and the increase in the LGD point estimates incorporate Moody's view that Journal Register's debt holders are now expected to realize only an average recovery level in the event of a recapitalization, bankruptcy filing or other restructuring scenario given currently very weak market conditions, as opposed to an above average recovery expectation previously given the fully secured all bank debt capital structure. On July 25, 2008, Journal Register announced that it had entered into a forbearance agreement with its lenders. According to the terms of the forbearance agreement, for the period from July 24, 2008 through October 31, 2008, interest under the company's senior secured credit agreement will accrue but not be paid. The agreement also suspended lender commitments to make further extensions of credit during the forbearance period. Prior to the conclusion of the forbearance agreement, Moody's considered that the continuing deterioration of Journal Register's business, its weak cash flow and squeezed liquidity had already placed the company in jeopardy of breaching its financial covenants and thereby defaulting under its credit agreement. Journal Register reports the entire $640 million balance of its senior secured debt as a current liability, causing its current liabilities to substantially exceed its current assets, representing an insolvent credit profile. In this context, Moody's considers that the forbearance agreement (permitting Journal Register to make non-cash payment of its interest obligations through the end of October 2008) effectively constitutes an interest payment default. Journal Register Company is a leading US newspaper publishing company. Based in Yardley Pennsylvania, the company recorded sales of $451 million for the LTM period ended March 31, 2008. JP MORGAN: Fitch Holds 'BB-' Rating on $4MM Class H Certificates ---------------------------------------------------------------- Fitch Ratings upgraded J.P. Morgan Commercial Mortgage Finance Corp.'s mortgage pass-through certificates, series 1999-C7, as: -- $38.1 million class F to 'AA' from 'A'. Additionally, Fitch affirmed these classes: -- Interest-only class X at 'AAA'; -- $22.7 million class B at 'AAA'; -- $40.1 million class C at 'AAA'. -- $52.1 million class D at 'AAA'; -- $12.0 million class E at 'AAA'; -- $26.0 million class G at 'BB'; -- $4.0 million class H at 'BB-'. Fitch does not rate the $23.4 million class NR certificates. The class A-1 and A-2 certificates have paid in full. The upgrade reflects increased credit enhancement due to scheduled amortization and loan payoffs since last review of 16.8%. As of the July 2008 distribution date, the pool's aggregate balance has been reduced 72.7%, to $218.4 million from $801.4 million at issuance. Two loans (25.6%), including the largest loan in the pool, have defeased. One asset (3.3%) has been in special servicing since 2003 and real estate-owned since 2004. The loan is secured by 107,052 sf of office space in Ridgeland, Mississippi, a Jackson-area suburb. The properties consist of two office buildings, one of which needed significant repairs. The special servicer is working to lease up vacant space and is marketing the properties for sale. Recent valuations of the asset indicate losses upon liquidation. Thirty-one (85.2%) of the remaining 51 loans in the transaction have an anticipated repayment date in either 2008 or 2009. These include the two defeased loans (25.6%). The 49 non-defeased loans have a year-end 2007 weighted average DSCR of 1.71x. JP MORGAN: Moody's Cuts Rating of $1.7MM Cl. P Securities to Caa1 ----------------------------------------------------------------- Moody's Investors Service upgraded the ratings of six classes, downgraded two classes and affirmed 12 classes of J.P. Morgan Chase Commercial Mortgage Securities Corp., Commercial Mortgage Pass-Through Certificates, Series 2003-C1: -Class A-1, $126,963,263, affirmed at Aaa -Class A-2, $595,147,000, affirmed at Aaa -Class X-1, Notional, affirmed at Aaa -Class X-2, Notional, affirmed at Aaa -Class B, $34,700,000, affirmed at Aaa -Class C, $10,676,000, affirmed at Aaa -Class D, $32,031,000, upgraded to Aaa from Aa2 -Class E, $14,680,000, upgraded to Aa3 from A1 -Class F, $17,350,000, upgraded to A2 from A3 -Class G, $17,350,000, affirmed at Baa2 -Class H, $12,011,000, affirmed at Baa3 -Class J, $16,015,000, affirmed at Ba1 -Class K, $10,677,000, affirmed at Ba2 -Class L, $6,673,000, affirmed at Ba3 -Class M, $8,007,000, affirmed at B1 -Class N, $4,004,000, downgraded to B3 from B2 -Class P, $1,776,000, downgraded to Caa1 from B3 -Class CM-1, $2,156,331, upgraded to A3 from Baa1 -Class CM-2, $3,965,729, upgraded to Baa1 from Baa2 -Class CM-3, $3,965,729, upgraded to Baa2 from Baa3 Moody's upgraded Classes D, E and F due to increased defeasance and credit enhancement. The upgrade of Classes CM-1, CM-2 and CM- 3 is due to the improved performance of the Concord Mills Loan. Moody's downgraded Classes M and N due to concerns about the Crossroads Mall and increased dispersion. According to Moody's analysis, 15.9% of the pool has a loan to value ratio greater than 100.0%, compared to 8.5% at last review and 2.7% at securitization. As of the July 14, 2008 distribution date, the transaction's aggregate principal balance has decreased by approximately 13.3% to $943.6 million from $1.09 billion at securitization. The Certificates are collateralized by 95 loans, ranging in size from less than 1.0% to 15.8% of the pool, with the top ten loans representing 57.2% of the pool. The pool includes two loans with investment grade underlying ratings, which represent 27.4% of the pool. Twenty-four loans, representing 21.4% of the pool, have defeased and are collateralized by U.S. Government securities. One loan has been liquidated from the pool, resulting in a $5.0 million realized loss. Currently there are no loans in special servicing. Eleven loans, representing 13.2% of the pool, are on the master servicer's watchlist. The master servicer's watchlist includes loans which meet certain portfolio review guidelines established as part of the Commercial Mortgage Securities Association's monthly reporting package. As part of Moody's ongoing monitoring of a transaction, Moody's reviews the watchlist to assess which loans have material issues that could impact performance. Not all loans on the watchlist are delinquent or have significant issues. Moody's was provided with year-end 2007 operating results for 85.9% of the pool. Moody's weighted average LTV ratio for the conduit component is 89.4% compared to 85.4% at Moody's last full review in April 2006 and 90.6% at securitization. The largest loan with an underlying rating is the Concord Mills Loan ($148.5 million -- 15.8%), which represents the pooled component of a $168.0 million mortgage loan. The loan is secured by a 1.3 million square foot regional mall located 15 miles north of Charlotte in Concord, North Carolina. Major tenants include Bass Pro Outdoor World, Burlington Coat Factory and TJ Maxx. The in-line shops were 89.0% occupied as of March 2008, compared to 100.0% at last review. Despite the decline in occupancy, financial performance has improved since securitization due to increased revenues and amortization. The loan sponsor is the Simon Property Group. The non-pooled component is held within the trust and is the security for non-pooled Classes CM-1, CM-2 and CM-3. Moody's current underlying ratings of the pooled and non-pooled loans are A2 and Baa2, respectively, compared to A3 and Baa3 at last review. The second loan with an underlying rating is the Bishops Gate Loan ($35.0 million -- 3.7%), which is secured by two office buildings totaling 484,000 square feet located in Mt. Laurel, New Jersey. The collateral is 100.0% leased to PHH Mortgage (formerly Cendant Mortgage), a subsidiary of PHH Corporation (Moody's senior unsecured rating Baa3; negative outlook). The lease to PHH Mortgage is triple net expiring in December 2022. The loan matures in January 2013. Moody's current underlying rating is A3, the same as at last review. The top three conduit exposures represent 11.8% of the pool. The largest conduit exposure is the Crossroads Mall Loan ($41.4 million - 4.4%), which is secured by the borrower's interest in a 858,000 square foot regional mall located in Omaha, Nebraska. The mall is anchored by Dillard's, Sears and Target. The Target store was constructed in 2006 and is a replacement for Younkers, which originally served as the mall's third anchor. Dillards has announced plans to close their store in August, 2008. The store has operated as a clearance center since January 2008. The in-line space was 61.0% occupied as of March 2008 compared to 66.0% at last review. The mall has been impacted by competition from two other malls located within nine miles of the property. The loan is on the servicer's watchlist due to low occupancy. The loan sponsor is Simon Property Group. Moody's LTV is significantly in excess of 100.0% compared to 98.8% at last review. The second largest conduit exposure is the Crossways/Newington Portfolio ($41.0 million -- 4.4%), which consists of two cross- collateralized loans secured by two industrial/office buildings totaling 812,000 square feet. Both properties are located in Virginia. The two properties were 89.0% occupied as of March 2008 compared to 99.0% at last review. Moody's LTV is 77.4% compared to 79.8% at last review. The third largest conduit exposure is the Somerset Shoppes Loan ($27.9 million -- 3.0%), which is secured by a 187,000 square foot community shopping center located in Boca Raton, Florida. Major tenants include T.J. Maxx, Michaels and Loehmans. The center was 92.0% occupied as of March 2008 compared to 95.0% at last review. Moody's LTV is 88.3% compared to 93.5% at last review. INTERACTIVE INTERACTIVE: Balance Sheet Upside-Down by $72.3MM ------------------------------------------------------------- LodgeNet Interactive Corporation disclosed Tuesday its financial results for the second quarter ended June 30, 2008. At June 30, 2008, the company's consolidated balance sheet showed $656.5 million in total assets and $728.8 million in total liabilities, resulting in a $72.3 million stockholders' deficit. The company reported a net loss of $7.5 million for the second quarter of 2008, compared to a net loss of $34.0 million in the prior year quarter. For the current quarter, the net loss included $3.7 million of acquisition related costs for restructuring, integration, and amortization of acquired intangibles. Excluding acquisition and financing related items, net loss was $3.7 million compared to a net loss of $6.5 million for the same period of 2007. Total revenue for the second quarter of 2008 was $137.3 million, an increase of $2.4 million or 1.8%, compared to the second quarter of 2007. The growth in revenue was primarily driven by an increase in revenue from Hotel Services and System Sales. The average monthly total revenue per room increased 0.8% to $24.65 for the second quarter of 2008 compared to $24.45 for the second quarter of 2007. "While the macroeconomic environment was challenging during the quarter, the continued implementation of our strategic business plan generally offset those impacts, producing greater revenue, adjusted operating cash flow, and adjusted net free cash flow as compared to last year," said Scott C. Petersen, LodgeNet president and chief executive officer. "We generated $12.4 million of adjusted net free cash flow during the quarter, up from a negative $1.0 million during the first quarter of 2008," said Gary H. Ritondaro, LodgeNet's chief financial officer. "As a result, we were in a position to reduce our long-term debt by $13.6 million in the quarter. We ended the second quarter with a consolidated debt leverage ratio of 4.31 times total debt, a meaningful improvement over the 4.45 ratio that we had at the end of the first quarter." Interest expense was $10.5 million in the current quarter versus $11.6 million in the second quarter of 2007. The decrease resulted from the change in weighted average long-term debt, which decreased to $623.1 million during the second quarter of 2008 from $627.7 million in the second quarter of 2007. The annualized interest rate decreased to 6.7% for the second quarter of 2008 versus 7.4% for the second quarter 2007. For the second quarter of 2008, cash provided by operating activities, excluding $1.6 million of cash used for integration and restructuring related activities, was $32.2 million. Cash used for property and equipment additions, including growth related capital, was $19.8 million. During the quarter, the company made the required term B payment of $1.6 million and in addition it made a $5.0 million prepayment against the Term B portion of the credit facility and a payment of $7.0 million to repay the then outstanding borrowing under the credit revolver. About LodgeNet Interactive Based in Sioux Falls, South Dakota, LodgeNet Interactive Corp. (Nasdaq: LNET) -- http://www.lodgenet.com/-- provided media and connectivity solutions designed to meet the unique needs of hospitality, healthcare and other guest-based businesses. LodgeNet Interactive serves more than 1.9 million hotel rooms representing 9,900 hotel properties worldwide in addition to healthcare facilities throughout the United States. The company's services include: Interactive Television Solutions, Broadband Internet Solutions, Content Solutions, Professional Solutions and Advertising Media Solutions. LodgeNet Interactive Corporation owns and operates businesses under the industry leading brands: LodgeNet, LodgeNetRX, and The Hotel Networks. * * * As reported in the Troubled Company Reporter on June 17, 2008, Standard & Poor's Ratings Services placed its ratings, including the 'B+' corporate credit rating, on LodgeNet Interactive Corp. on CreditWatch with negative implications. KATHERINE TIMBLIN: Voluntary Chapter 11 Case Summary ---------------------------------------------------- Debtor: Katherine Rae Timblin 207 Osprey Roost Road Sandpoint, ID 83864 Bankruptcy Case No.: 08-20467 Chapter 11 Petition Date: July 28, 2008 Court: District of Idaho (Coeur dAlene) Judge: Terry L. Myers Debtor's Counsel: Bruce A. Anderson, Esq. (baafiling@ejame.com) 1400 Northwood Center Court #C Coeur d'Alene, ID 83814 Tel: (208) 667-2900 Fax: (208) 667-2150 Estimated Assets: $1 million to $10 million Estimated Debts: $1 million to $10 million A list of the Debtor's largest unsecured creditors is available for free at http://bankrupt.com/misc/IDb08-20467.pdf KESHNET INTER: Voluntary Chapter 11 Case Summary -------------------------------------------- Debtor: The Keshet Inter Vivos Trust 1835 East Hallandale Beach Boulevard #299 Hallandale, FL 33009 Bankruptcy Case No.: 08-20580 Related Information: Sharon Yehuda, trustee, filed the petition on the Debtor's behalf. Chapter 11 Petition Date: July 29, 2008 Court: Southern District of Florida (Fort Lauderdale) Judge: Raymond B. Ray Debtor's Counsel: John A Moffa, Esq. (trusteeattorney@gmail.com) 7771 West Oakland Park Boulevard #141 Sunrise, FL 33351 Tel: (954) 634-4733 Fax: 954-634-4741 Estimated Assets: $1 million to $10 million Estimated Debts: $1 million to $10 million A list of the Debtor's largest unsecured creditors is available for free at http://bankrupt.com/misc/FLb08-20580.pdf KIMBALL HILL: Inks Pact to Let Wachovia to File Consolidated Claim ------------------------------------------------------------------ Kimball Hill Inc. and its debtor-affiliates, and certain prepetition lenders agreed to allow Wachovia Bank N.A., to file a consolidated proof of claim on account of certain guaranties. Prior to the date of bankruptcy, the Debtors entered into a Credit Agreement dated July 20, 2005, with Kyle Acquisition Group, LLC, Wachovia Bank, National Association, and certain other lenders. Debtors Kimball Hill, Inc., and Kimball Hill Homes Nevada, Inc., executed and delivered a Limited Guaranty, Repayment Guaranty, and Completion Guaranty, for the benefit of the Lenders and other holders of secured obligation, in connection with the prepetition credit facility. The parties stipulate that Wachovia Bank is authorized to file one master proof of claim in the bankruptcy proceeding of Kimball Hill, Inc., on behalf of itself, the Lenders and other holders of secured obligations on account of all claims arising under the Guaranties. Upon the filing of a Master Proof of Claim in the Debtors' lead case, Wachovia Bank, the Lenders and the other Holders of Secured Obligations will be deemed to have filed individually a proof of claim against each of the Debtors that are guarantors in the Guaranties. Wachovia Bank need not attach supporting documents to any Master Proof of Claim it will file, so long as the claim include a list those documents. Upon the request of the Debtors or any other party-in-interest, however, the listed documents will be provided within three business days. The Master Proof of Claim also need not specifically identify the individual lenders or other holders of secured obligations in the Master Proof of Claim or attribute any portion of the Claims to any individual lenders or other holder. However, upon the request of the Debtors, Wachovia Bank will provide those information to the Debtors within a reasonable time. About Kimball Hill Based in Rolling Meadow, Illinois, Kimball Hill Inc. -- http://www.kimballhillhomes.com/-- is one of the largest privately-owned homebuilders and one of the 30 largest homebuilders in the United States, as measured by home deliveries and revenues. The company designs, builds and markets single- family detached, single-family attached and multi-family homes. The company currently operate within 12 markets, including, among others, Chicago, Dallas, Ft. Worth, Houston, Las Vegas, Sacramento and Tampa, in five regions: Florida, the Midwest, Nevada, the Pacific Coast and Texas. Kimball Hill, Inc. and 29 of its affiliates filed for Chapter 11 protection on April 23, 2008 (Bankr. N.D. Ill. Lead Case No. 08- 10095). Ray C. Schrock, Esq., at Kirkland & Ellis LLP, represents the Debtors in their restructuring efforts. The Debtors' consolidated financial condition as of Dec. 31, 2007 reflected total assets of $795,473,000 and total debts $631,867,000. The Debtors have until Aug. 21, 2008, to exclusively file a bankruptcy plan. (Kimball Hill Bankruptcy News, Issue No. 9; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000). KNIGHT COMMERCE: Seeks Bankruptcy Protection Under Chapter 11 ------------------------------------------------------------- Jeff Ostrowski of PalmBeachPost.com reports that Knight Commerce Center Inc. filed a voluntary petition under Chapter 11 of the Bankruptcy Code. According to PalmBeachPost.com, the company listed assets and debt of between $10 million and $50 million each. Company head, Bill Knight, owes at least $100,335 in taxes to Palm Beach County Tax Collector, the report notes. Last year, the company faced foreclosure filed by Florida Community Bank of Immokalee after it failed to pay its loan since May 2007, Mr. Ostrowski says. Knight Commerce owns NexStore gas station and deli in Boca Raton, Florida. LANTANA MENDOCINO: Personal Assets Sold Off by WestLB AG -------------------------------------------------------- WestLB AG, New York branch held a public auction of the personal property of Lantana Mendocino LLC on July 28, 2008, at the Mendocino County Courthouse, 100 North State Street in Ukiah, California. The sold property consists of certain UCC financing statements 52719962 and 52720051 filed with the Delaware Secretary of State in relation to the operation of The Heritage House hotel in Little River, California. Further information regarding the sale and the collateral may be obtained from counsel for secured party, Michael Rupe, Esq., at Muchin Rosenman LLP located at 575 Madison Avenue in New York, telephone numbers, (212) 940-8518. Lantana Mendocino LLC is a Delaware limited liability company. LEINER HEALTH: Has Until September 30 to File Chapter 11 Plan ------------------------------------------------------------- The United States Bankruptcy Court for the District of Delaware extended the exclusive periods of Leiner Health Products Inc. and its debtor-affiliates to: a) file a Chapter 11 plan until Sept. 30, 2008, and b) solicit acceptances of that plan until Nov. 30, 2008. As reported in the Troubled Company Reporter on July 18, 2008, the requested extension will enable the Debtors to negotiate and formulate a Chapter 11 plan of liquidation as they continue to resolve creditors' claims and any litigation with respect to the claims. Separately, the Debtors entered into an agreement with the Official Committee of Unsecured Creditors and certain financial institution to resolve, among other things: -- the amount of the claims of the Debtors' prepetition secured lenders; -- the payment of a portion of the (i) claims of the prepetition secured lenders' claim and (ii) sale bonuses to the Debtors' management under the asset sale incentive program before confirmation of a Chapter 11 plan; and -- the reserve of $8 million of the sale bonuses provided for under the asset sale incentive program for the unsecured creditors' recoveries. About Leiner Health Based in Carson, California, Leiner Health Products Inc. -- http://www.leiner.com/-- manufactures and supplies 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 its 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. The Committee selects Saul Ewing LLP as its counsel. 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. LEVITZ FURNITURE: Settles Long-Running Feud with Wohl/Anaheim ------------------------------------------------------------- The U.S. Bankruptcy Court for the Southern District of New York approved a stipulation resolving a long-running dispute over tenancy issue among Levitz Furniture Inc., nka PVLTZ Inc., its debtor-affiliates, and Wohl/Anaheim, LLC. The Debtors and Wohl/Anaheim negotiated and inked the stipulation on June 23, 2008, under which the parties agreed to release each other from all claims. The Lease On Feb. 7, 1979, Elden W. Bainbridge, as Trustee under a Declaration of Trust dated June 13, 1968 and Gold Key Furniture, Inc. entered into a lease for commercial real property in a retail shopping center located at 1000 N. Tustin Avenue, in Anaheim, California. After a series of amendments, subleases and assignments, the Lease passed to successors-in-interest Wohl/Anaheim, as landlord, and Levitz Furniture Corporation, as tenant. The term of the Lease ends on July 31, 2009, at which time the tenant has an option to extend the term for a period of five years. On Oct. 11, 2005, Levitz and its affiliated debtor entities filed Chapter 11 petitions. Through its bankruptcy case, Levitz and its affiliates effected a sale of substantially all of their assets to PLVTZ and the Pride Capital Group, dba Great American Group. The bankruptcy court presiding over the Levitz bankruptcy cases approved the sale pursuant to an order entered on December 14, 2005. Pursuant to the Sale Order, PLVTZ was authorized to purchase all of Levitz's rights to designate the ultimate assignee of Levitz's rights to several leases, including the Lease. The Sale Order also provided that PLVTZ must exercise its Designation Rights before May 31, 2006. Prior to May 31, 2006, Levitz filed a motion approving the assumption and assignment of certain real property leases, including the Lease. Under the Motion, Levitz sought to assume the Lease and assign it to PLVTZ. Wohl/Anaheim objected to the Levitz Motion and argued that PLVTZ could not provide adequate assurance of future performance under the Lease. Before the bankruptcy court presiding over the Levitz bankruptcy cases ruled on the Levitz Motion as it pertained to Wohl/Anaheim's objection, on March 28, 2008, the Court entered an order dismissing the Levitz bankruptcy cases without reserving jurisdiction to decide whether to approve the assignment of the Lease to PLVTZ. Since PLVTZ designated itself as assignee of the Lease until October 2007, a period of approximately 15 months, PLVTZ paid to Wohl/Anaheim amounts equal to the base rent and common area maintenance charges payable under the Lease. Throughout this period, and until February 2008, PLVTZ occupied the Premises and operated a furniture store. Consequently, PLVTZ filed for Chapter 11 on Nov. 8, 2007. Lift Stay Motion In May 2008, Wohl/Anaheim asked the Court to issue an order (i) directing immediate payment of postpetition expenses; and (ii) lifting the automatic stay to permit Wohl/Anaheim to proceed with "Unlawful Detainer Proceedings". In the alternative, Wohl/Anaheim asked the Court to compel abandonment of PLVTZ's conditional interest in the Lease. The Lift Stay Motion contends that: (1) given the financial condition of PLVTZ, even if the bankruptcy court presiding over the Levitz bankruptcy case had not dismissed that case, it would be an abuse of the court's discretion to approve the assumption of the Lease by Levitz and its assignment to PLVTZ; (2) PLVTZ never had anything more than a prospective conditional interest in the Lease; and (3) PLVTZ would have to pay at least $276,572 to cure the arrearages which accrued prior to Levitz's bankruptcy filing and prior to PLVTZ's own bankruptcy filing. PLVTZ objected to the Lift Stay Motion arguing that Wohl/Anaheim did not provide proof to support its assertion. The Debtor told the Court that it is prepared to present expert testimony that its interest in the property at issue has substantial value to the estate and is not burdensome. Under the court-approved stipulation, the parties agreed that Wohl/Anaheim will to remit $100,000 to the Debtor's counsel tasked to deposit and hold the fund in trust in a segregated account. Upon payment, the Debtor will forfeit possession of the Anaheim Property, and the Motion to Lift Stay filed will be dismissed as moot. Moreover, PLVTZ will allow Wohl access to the Premises to show the Premises to prospective tenants and to perform whatever cleanup or make whatever repairs Wohl deems necessary in its reasonable discretion and all costs incurred by Wohl in connection with the cleanup or repairs will be solely at its expense. At its sole cost and expense, PLVTZ will keep the Premises insured and will pay all utility costs and other expenses to maintain the Premises in the same manner and to the same extent as required under the Lease through June 30, 2008. About Levitz Furniture/PVLTZ Based in New York City, Levitz Furniture Inc., nka PVLTZ Inc. -- http://www.levitz.com/-- is a specialty retailer of furniture, bedding and home furnishings in the United States. It has 76 locations in major metropolitan areas, principally in the Northeast and on the West Coast of the United States. Levitz Furniture Inc. and 11 affiliates filed for chapter 11 on Sept. 5, 1997. In December 2000, the Court confirmed the Debtors' Plan and Levitz emerged from chapter 11 on February 2001. Levitz Home Furnishings Inc. was created as the new holding company as a result of the emergence. Levitz Home Furnishings and 12 affiliates filed for chapter 11 protection on Oct. 11, 2005 (Bankr. S.D.N.Y. Lead Case No. 05- 45189). In their second filing, the Debtors disclosed about $245 million in total assets and $456 million in total debts. Nicholas M. Miller, Esq., and Richard H. Engman, Esq., at Jones Day represented the Debtors. Jeffrey L. Cohen, Esq., Jay R. Indyke, Esq., and Cathy Hershcopf, Esq., at Cooley Godward Kronish LLP served as counsel to the Official Committee of Unsecured Creditors. During this period, the Debtors closed around 35 stores in the Northeast, California, Minnesota and Arizona. PLVTZ Inc., a company created by Prentice Capital Management LP, and Great American Group purchased substantially all the assets of Levitz Home Furnishings in December 2005. Initially, Prentice owned all of the equity interests in PLVTZ. On July 6, 2007, PLVTZ was converted into a Delaware corporation, and Harbinger Capital Partners Special Situations Fund, LP, Harbinger Capital Partners Master Fund I, Ltd., and their affiliates became minority shareholders. Great American's stake in the acquisition was in running the going-out-of-business sales for some 27 Levitz units. PLVTZ, dba Levitz Furniture, continued to face decline in financial performance since December 2005. Liquidity issues and the inability to obtain additional capital prompted PLVTZ to seek protection under chapter 11 on Nov. 8, 2007 (Bankr. S.D.N.Y. Lead Case No. 07-13532). Paul D. Leake, Esq., and Brad B. Erens, Esq., at Jones Day represents the Debtors in their restructuring efforts. Kurtzman Carson Consultants LLC serves as the Debtors' claims and noticing agent. The Debtor's schedules show total assets of $123,842,190 and total liabilities of $76,421,661. The Debtors' exclusive period to file a chapter 11 plan expired on March 7, 2008. On March 28, 2008, the Court dismissed the chapter 11 cases of Levitz II (Levitz Home Furnishings Inc., and its remaining six debtor-affiliates). (Levitz Bankruptcy News, Issue No. 42; Bankruptcy Creditors' Service Inc., http://bankrupt.com/newsstand/or 215/945-7000). LEVITZ FURNITURE: May Hire Oliver Wyman as Actuarial Consultant --------------------------------------------------------------- PLVTZInc., fka Levitz Furniture Inc., obtained authority from the U.S. Bankruptcy Court for the Southern District of New York to employ Oliver Wyman Actuarial Consulting Inc., as its actuarial consultant nunc pro tunc to May 28, 2008. The Troubled Company Reporter said on June 25, 2008, the Debtor selected Oliver Wyman, a global management consulting firm, because of the firm's broad experience in actuarial consulting services to property and casualty insurance companies, investors and brokerage firms, among others. The Debtor said it believes that Oliver Wyman is well qualified to perform these services, to assist it in its Chapter 11 proceeding. Oliver Wyman is expected to familiarize itself with the business, operations, properties and financial condition of the Debtor, and provide actuarial services including: (a) assisting the Debtor in determining outstanding liabilities on its workers' compensation insurance programs; (b) valuing the unpaid cost of workers' compensation claims with dates of loss during a specified time period; (c) assisting the Debtor in assessing and determining the reasonability of collateral requirements; and (e) rendering other actuarial consulting services as may from time to time be agreed upon by the parties. Oliver Wyman will be compensated on an hourly basis at these hourly rates: Scott J. Lefkowitz, FCAS, MAAA, FCA $600 Other Fully Credentialed Actuaries $525 Associate Actuaries $450 Consulting Technicians $300 Analysts $225 Administrative $65 The firm will also be reimbursed for reasonable, actual, out of pocket expenditures. Scott Lefkowitz, a director at Oliver Wyman, assured the court that his firm does not hold or represent any interest adverse to the Debtor, and is a "disinterested person," as defined in Section 101(14) of the Bankruptcy Code, as modified by Section 1107(b). About Levitz Furniture/PVLTZ Based in New York City, Levitz Furniture Inc., nka PVLTZ Inc. -- http://www.levitz.com/-- is a specialty retailer of furniture, bedding and home furnishings in the United States. It has 76 locations in major metropolitan areas, principally in the Northeast and on the West Coast of the United States. Levitz Furniture Inc. and 11 affiliates filed for chapter 11 on Sept. 5, 1997. In December 2000, the Court confirmed the Debtors' Plan and Levitz emerged from chapter 11 on February 2001. Levitz Home Furnishings Inc. was created as the new holding company as a result of the emergence. Levitz Home Furnishings and 12 affiliates filed for chapter 11 protection on Oct. 11, 2005 (Bankr. S.D.N.Y. Lead Case No. 05- 45189). In their second filing, the Debtors disclosed about $245 million in total assets and $456 million in total debts. Nicholas M. Miller, Esq., and Richard H. Engman, Esq., at Jones Day represented the Debtors. Jeffrey L. Cohen, Esq., Jay R. Indyke, Esq., and Cathy Hershcopf, Esq., at Cooley Godward Kronish LLP served as counsel to the Official Committee of Unsecured Creditors. During this period, the Debtors closed around 35 stores in the Northeast, California, Minnesota and Arizona. PLVTZ Inc., a company created by Prentice Capital Management LP, and Great American Group purchased substantially all the assets of Levitz Home Furnishings in December 2005. Initially, Prentice owned all of the equity interests in PLVTZ. On July 6, 2007, PLVTZ was converted into a Delaware corporation, and Harbinger Capital Partners Special Situations Fund, LP, Harbinger Capital Partners Master Fund I, Ltd., and their affiliates became minority shareholders. Great American's stake in the acquisition was in running the going-out-of-business sales for some 27 Levitz units. PLVTZ, dba Levitz Furniture, continued to face decline in financial performance since December 2005. Liquidity issues and the inability to obtain additional capital prompted PLVTZ to seek protection under chapter 11 on Nov. 8, 2007 (Bankr. S.D.N.Y. Lead Case No. 07-13532). Paul D. Leake, Esq., and Brad B. Erens, Esq., at Jones Day represents the Debtors in their restructuring efforts. Kurtzman Carson Consultants LLC serves as the Debtors' claims and noticing agent. The Debtor's schedules show total assets of $123,842,190 and total liabilities of $76,421,661. The Debtors' exclusive period to file a chapter 11 plan expired on March 7, 2008. On March 28, 2008, the Court dismissed the chapter 11 cases of Levitz II (Levitz Home Furnishings Inc., and its remaining six debtor-affiliates). (Levitz Bankruptcy News, Issue No. 42; Bankruptcy Creditors' Service Inc., http://bankrupt.com/newsstand/or 215/945-7000). LEVITZ FURNITURE: Enters Into a Settlement Pact with WFNNB ---------------------------------------------------------- To avoid costly litigation, Levitz Furniture Inc., nka PVLTZ Inc., and World Financial Network National Bank ask the U.S. Bankruptcy Court for the Southern District of New York to approve their stipulation resolving the bank's administrative claim for $1,892,587. The claim represents payment of World Financial's fee for processing postpetition chargebacks for the Debtor. It consists of $1,590,447 and $287,000, stemming from chargebacks of sales before and after the bankruptcy filing. Pursuant to the stipulation dated dated July 9, 2008, World Financial will have an allowed administrative claim for $100,000, to be paid by the Debtor within five days after approval of the stipulation. The administrative claim constitutes settlement of the $287,000. Meanwhile, the $1,590,447 is allowed as an unsecured claim against the Debtor. The parties agreed that the balance of $1,892,587 is not entitled to administrative expense status. The Troubled Company Reporter had related that the parties signed a BankCard agreement dated Nov. 8, 2002, under which WFNNB agreed to process the Visa and MasterCard credit card transactions between the Debtor and its customers. The types of transactions WFNNB processes for the Debtor include credit card purchases and deposits and refunds, which facilitates the transfer of funds between the customer's credit card bank and the Debtor. WFNNB also processes chargebacks for the Debtor, and has the right to charge back any amounts if the Debtor fails to comply with the BankCard Agreement or the rules set by the credit card companies. Thus, when the Debtor takes prepayments or deposits on merchandise and fails to deliver the product, the customer is entitled to a chargeback, and the Debtor is ultimately responsible for paying the chargeback. WFNNB is entitled to collect a fee for processing each chargeback. On behalf of WFNNB, Philip C. Dublin, Esq., at Akin Gump Strauss Hauer & Feld LLP, in New York, related that WFNNB is required to respond to a chargeback within 30 days under the rules of the credit card companies. WFNNB invoiced the Debtor more than $15,140, for the services it rendered after the Petition Date. The Bank also identified: (i) about $1,590,447 worth of chargebacks that it processed for the Debtor postpetition; and (ii) about $287,000 in additional chargebacks that the Debtor considers invalid due to lack of supporting evidence and alleged customer fraud, among other things. About Levitz Furniture/PVLTZ Based in New York City, Levitz Furniture Inc., nka PVLTZ Inc. -- http://www.levitz.com/-- is a specialty retailer of furniture, bedding and home furnishings in the United States. It has 76 locations in major metropolitan areas, principally in the Northeast and on the West Coast of the United States. Levitz Furniture Inc. and 11 affiliates filed for chapter 11 on Sept. 5, 1997. In December 2000, the Court confirmed the Debtors' Plan and Levitz emerged from chapter 11 on February 2001. Levitz Home Furnishings Inc. was created as the new holding company as a result of the emergence. Levitz Home Furnishings and 12 affiliates filed for chapter 11 protection on Oct. 11, 2005 (Bankr. S.D.N.Y. Lead Case No. 05- 45189). In their second filing, the Debtors disclosed about $245 million in total assets and $456 million in total debts. Nicholas M. Miller, Esq., and Richard H. Engman, Esq., at Jones Day represented the Debtors. Jeffrey L. Cohen, Esq., Jay R. Indyke, Esq., and Cathy Hershcopf, Esq., at Cooley Godward Kronish LLP served as counsel to the Official Committee of Unsecured Creditors. During this period, the Debtors closed around 35 stores in the Northeast, California, Minnesota and Arizona. PLVTZ Inc., a company created by Prentice Capital Management LP, and Great American Group purchased substantially all the assets of Levitz Home Furnishings in December 2005. Initially, Prentice owned all of the equity interests in PLVTZ. On July 6, 2007, PLVTZ was converted into a Delaware corporation, and Harbinger Capital Partners Special Situations Fund, LP, Harbinger Capital Partners Master Fund I, Ltd., and their affiliates became minority shareholders. Great American's stake in the acquisition was in running the going-out-of-business sales for some 27 Levitz units. PLVTZ, dba Levitz Furniture, continued to face decline in financial performance since December 2005. Liquidity issues and the inability to obtain additional capital prompted PLVTZ to seek protection under chapter 11 on Nov. 8, 2007 (Bankr. S.D.N.Y. Lead Case No. 07-13532). Paul D. Leake, Esq., and Brad B. Erens, Esq., at Jones Day represents the Debtors in their restructuring efforts. Kurtzman Carson Consultants LLC serves as the Debtors' claims and noticing agent. The Debtor's schedules show total assets of $123,842,190 and total liabilities of $76,421,661. The Debtors' exclusive period to file a chapter 11 plan expired on March 7, 2008. On March 28, 2008, the Court dismissed the chapter 11 cases of Levitz II (Levitz Home Furnishings Inc., and its remaining six debtor-affiliates). (Levitz Bankruptcy News, Issue No. 42; Bankruptcy Creditors' Service Inc., http://bankrupt.com/newsstand/or 215/945-7000). LEVITZ FURNITURE: Sets Off $304,638 Debt Owed to DFS Services ------------------------------------------------------------- Levitz Furniture, Inc., nka PLVTZ, Inc., and DFS Services LLC, asked the U.S. Bankruptcy Court for the Southern District of New York to approve their stipulation permitting DFS to exercise its rights of set-off. The stipulation dated July 8, 2008, allows DFS to set off $304,638, owed to it by the Debtor against the $571,015, held in the reserve account. In return, DFS will return to the Debtor $266,377 of the reserve fund within 10 days after the stipulation becomes final and non-appealable. The reserve fund was put up to secure payment to DFS for administering the sale transaction between the Debtor and its customers who purchased its merchandise through cards. About $341,617 of the reserve fund secures DFS' proof of claim against the Debtor. The stipulation further provides that DFS' proof of claim will be deemed paid and expunged without further court order, and that the parties will release each other from all claims following the set-off. About Levitz Furniture/PVLTZ Based in New York City, Levitz Furniture Inc., nka PVLTZ Inc. -- http://www.levitz.com/-- is a specialty retailer of furniture, bedding and home furnishings in the United States. It has 76 locations in major metropolitan areas, principally in the Northeast and on the West Coast of the United States. Levitz Furniture Inc. and 11 affiliates filed for chapter 11 on Sept. 5, 1997. In December 2000, the Court confirmed the Debtors' Plan and Levitz emerged from chapter 11 on February 2001. Levitz Home Furnishings Inc. was created as the new holding company as a result of the emergence. Levitz Home Furnishings and 12 affiliates filed for chapter 11 protection on Oct. 11, 2005 (Bankr. S.D.N.Y. Lead Case No. 05- 45189). In their second filing, the Debtors disclosed about $245 million in total assets and $456 million in total debts. Nicholas M. Miller, Esq., and Richard H. Engman, Esq., at Jones Day represented the Debtors. Jeffrey L. Cohen, Esq., Jay R. Indyke, Esq., and Cathy Hershcopf, Esq., at Cooley Godward Kronish LLP served as counsel to the Official Committee of Unsecured Creditors. During this period, the Debtors closed around 35 stores in the Northeast, California, Minnesota and Arizona. PLVTZ Inc., a company created by Prentice Capital Management LP, and Great American Group purchased substantially all the assets of Levitz Home Furnishings in December 2005. Initially, Prentice owned all of the equity interests in PLVTZ. On July 6, 2007, PLVTZ was converted into a Delaware corporation, and Harbinger Capital Partners Special Situations Fund, LP, Harbinger Capital Partners Master Fund I, Ltd., and their affiliates became minority shareholders. Great American's stake in the acquisition was in running the going-out-of-business sales for some 27 Levitz units. PLVTZ, dba Levitz Furniture, continued to face decline in financial performance since December 2005. Liquidity issues and the inability to obtain additional capital prompted PLVTZ to seek protection under chapter 11 on Nov. 8, 2007 (Bankr. S.D.N.Y. Lead Case No. 07-13532). Paul D. Leake, Esq., and Brad B. Erens, Esq., at Jones Day represents the Debtors in their restructuring efforts. Kurtzman Carson Consultants LLC serves as the Debtors' claims and noticing agent. The Debtor's schedules show total assets of $123,842,190 and total liabilities of $76,421,661. The Debtors' exclusive period to file a chapter 11 plan expired on March 7, 2008. On March 28, 2008, the Court dismissed the chapter 11 cases of Levitz II (Levitz Home Furnishings Inc., and its remaining six debtor-affiliates). (Levitz Bankruptcy News, Issue No. 42; Bankruptcy Creditors' Service Inc., http://bankrupt.com/newsstand/or 215/945-7000). LEXINGTON PRECISION: Has Until October 28 to File Chapter 11 Plan ----------------------------------------------------------------- The Hon. Martin Glenn of the United States Bankruptcy Court for the Southern District of New York further extended the exclusive periods of Lexington Precision Corp. and Lexington Rubber Group, Inc. to: a) file a Chapter 11 plan Oct. 28, 2008, and b) solicit acceptances of that plan until Dec. 27, 2008. The Court notes that the Debtors are taking the necessary steps to move the reorganization process by providing to the Official Committee of Unsecured Creditors with financial projection to evaluate a proposed Chapter 11 plan. The financial projection was available to the Committee on July 15, 2008. As reported in the Troubled Company Reporter on July 3, 2008, the Committee asked the Court for permission to file its own Chapter 11 plan on ground that the Debtors are not protecting their creditors' interests. The exclusivity extension will enable the Debtors and Committee to assess and test the financial projection whether the panel can support a proposed plan of reorganization. The Court believes that the parties are in a position to undertake serious plan negotiations by September 2008. The Debtors' exclusive periods to file a Chapter 11 plan expired on July 30, 2008. About Lexington Precision Headquartered in New York City, Lexington Precision Corp. -- http://www.lexingtonprecision.com/-- manufactures tight-tolerance rubber and metal components for use in medical, automotive, and industrial applications. As of Feb. 29, 2008, the companies employed about 651 regular and 22 temporary personnel. The company and its affiliate, Lexington Rubber Group Inc., filed for Chapter 11 protection on April 1, 2008 (Bankr. S.D.N.Y. Lead Case No.08-11153). Richard P. Krasnow, Esq., at Weil, Gotshal & Manges, represents the Debtors in their restructuring efforts. The Debtors selected Epiq Bankruptcy Solutions LLC as claims agent. The U.S. Trustee for Region 2 appointed seven creditors to serve on an Official Committee of Unsecured Creditors. When the Debtors filed for protection against their creditors, they listed total assets of $52,730,000 and total debts of $88,705,000. MAJESTIC STAR: Moody's Cuts CFR to Caa2, Sees Weak Liquidity ------------------------------------------------------------ Moody's Investors Service lowered the ratings of Majestic HoldCo, LLC and The Majestic Star Casino, LLC. These ratings, originally placed on review for downgrade on April 29, 2008, remain on review for further possible downgrade. At the same time, Moody's assigned Majestic HoldCo, LLC an SGL-4 Speculative Grade Liquidity Rating indicating weak liquidity. Majestic HoldCo, LLC ratings lowered and kept on review for further possible downgrade: Corporate Family Rating to Caa2 from B3 Probability of Default Rating to Caa2 from B3 $55 million 12% discount notes due 2011 to Ca from Caa2 The Majestic Star Casino, LLC ratings lowered and kept on review for further possible downgrade: $300 million first lien senior secured notes due 2010 to Caa1 from B2 $200 million second lien senior secured notes due 2011 to Caa3 from Caa2 The downgrade incorporates a combination of factors that will continue to negatively impact Majestic Star's ability to service its debt over the next twelve months. These factors include intense competition in all of the gaming markets in which Majestic Star operates, a smoking ban in casinos that went into effect in Colorado on January 1, 2008, volatile capital markets, continued weakness in the economy, and significant leverage. Debt/EBITDA for the latest 12-month period ended March 31, 2008 was about 9 times and has been increasing steadily since fiscal year 2006. The review for further possible downgrade is based on Moody's concern that enhancements to existing facilities of competitors in northwest Indiana and Black Hawk, Colorado will significantly heighten the level of competition in those markets. On a combined basis, these two markets account for 75% of Majestic Star's consolidated net revenue. Majestic Star's limited ability to invest lessens its competitive position and could lead to a more rapid decline in cash flows and further increase the company's already significant leverage. Key to the review will be an evaluation of the near-term impact on Majestic Star from Harrah's renovation and expansion of its Horseshoe Casino in Hammond, Indiana that is scheduled to open next month. The facility is expected to more than double the size of their existing facility, making it the largest gaming establishment in the greater Chicago area. The SGL-4 Speculative Grade Liquidity anticipates that a significant portion of Majestic Star's liquidity could be absorbed during the next twelve months by further declines in operating cash flow. This could materially impact the company's ability to obtain waivers, if necessary, under its credit facility. It could also affect the company's ability to make its October 2008 and April 2009 scheduled interest payments. The Majestic Star Casino, LLC directly and indirectly owns and operates riverboat casinos in Gary, Indiana; Tunica, Mississippi; and Black Hawk, Colorado. Majestic HoldCo, LLC owns 100% of The Majestic Star Casino, LLC. Consolidated net revenue for the period ended March 31, 2008 was about $355 million. MARINER HEALTH: Georgia Appeals Court Upholds $10MM PwC Ruling -------------------------------------------------------------- The state of Georgia Court of Appeals affirmed a $10,000,000 verdict against PricewaterhouseCoopers, LLP, for negligent misrepresentation in a series of financial audits related to the merger of nursing-home companies Convalescent Services, Inc. and Mariner Health Group, Inc. William R. Bassett, Esq., at Smith Bassett Purcell & Koenig, as trustee for the Charlotte R. Kellett Irrevocable Trust, as Trustee for the Samuel B. Kellett, Jr. Irrevocable Trust, as Trustee for the Stiles A. Kellett, III Irrevocable Trust and as Trustee for the Barbara K. Kellett Irrevocable Trust, Kellett Family Partners, L.P. f/k/a Kellett Partners, L.P., Samuel B. Kellett, Stiles A. Kellett, Jr. and SSK Partners, L.P., filed an action in 2002 before the Superior Court of Cobb County, Georgia, against PwC, as successor to Coopers & Lybrand, LLP, and several former officers of Mariner Health Group based on claims arising out of MHG's acquisition of Convalescent Services, Inc. in 1995. The plaintiffs in the Cobb County action sought damages in excess of $200,000,000. Stephen Taub at CFO.com, citing an Atlanta Constitution report, relates that the merger deal included primarily Mariner stock and cash. The Kelletts, Mr. Taub says, claimed that they lost more than $120,000,000 on the deal as a result of Mariner's bankruptcy filing in 2000. According to Mr. Taub, citing a Fulton County Daily Report, the plaintiffs had asserted that they never would have agreed to the deal had Coopers, two of its audit partners, and Mariner CEO Stratton disclosed Mariner's financial problems. The Individual Defendants added MHG as a third-party defendant in the Cobb County action seeking to recover on indemnification claims. In November 2003, the Individual Defendants dismissed MHG without prejudice from the Cobb County action. Mr. Taub relates that in February 2007, the accounting firm was cleared on charges of civil fraud and racketeering; a PwC partner and three former Mariner executives were also absolved of various charges. The Cobb County jury later returned a $10,000,000 verdict against PwC for negligently misrepresenting certain material. PwC took an appeal, contending the trial court erred in denying its motion for a directed verdict and for judgment notwithstanding the verdict. PwC argued that Mr. Bassett failed to offer any evidence on an essential element of the negligent misrepresentation claim, specifically, that he actually and justifiably relied on Coopers' alleged misrepresentations about the financial condition of a corporation in which the trusts invested. PwC further argued there was no evidence that Coopers' alleged fraud debarred or deterred Mr. Bassett from bringing the action within the statutory limitation period and, therefore, the action was untimely. According to Mr. Taub, the appeals court ruled that: "The evidence authorized the jury to find that Coopers' partners knew that potential investors like the Kelletts would rely on Coopers' audits and 'clean' opinions regarding Mariner's financial condition. The evidence further authorized the jury to find that, in the process of evaluating the proposed merger throughout 1994, when the Kelletts were serving as the trusts' trustees, they actually and justifiably relied on Coopers' opinions regarding Mariner's financial condition. . . . Thus, when Bassett took over as the trustee in June 1995, the trusts (in the persons of the Kelletts) had already been misled by Coopers' misconduct." A spokesman for PwC did not immediately return a call seeking comment, Mr. Taub says. MEADE INSTRUMENTS: BofA Grants Waiver for Covenant Violations ------------------------------------------------------------- Meade Instruments Corp. signed a Sixteenth Amendment to its Amended and Restated Credit Agreement with its primary lender, Bank of America N.A. Under the Sixteenth Amendment, Bank of America N.A. waived the company's non-compliance with certain covenants under the credit agreement. "We are pleased that Bank of America continues to be a supportive partner to the company," Steve Muellner, president and chief executive officer of Meade, said. "We are now in compliance with the covenants of the credit agreement. Combined with the recent balance sheet improvements, we have the cash to reinvest in the core business, fund our restructuring efforts and underwrite future growth initiatives. " The Sixteenth Amendment makes these key changes to the credit agreement: 1) reduces the revolver line amount from $15 million to $12 million at Nov. 30, 2008; and $10 million at Dec. 31, 2008; 2) decreases certain amounts of collateral to be used in the borrowing base calculations; and 3) sets minimum EBITDA, tangible net worth and capital expenditure requirements measured on a monthly basis and sets minimum fixed charge coverage ratio covenants. About Meade Instruments Based in Irvine, California, Meade Instruments Corp. (Nasdaq GM: MEAD) -- http://www.meade.com/-- is a designer and manufacturer of optical products including telescopes and accessories for the beginning to serious amateur astronomer. The company distributes its products worldwide through a network of specialty retailers, mass merchandisers and domestic and foreign distributors. Going Concern Doubt Moss Adams LLP, in Irvine, California, expressed substantial doubt about Meade Instruments Corp.'s ability to continue as a going concern after auditing the company's consolidated financial statements for the year ended Feb. 29, 2008. The auditing firm pointed to the company's declining revenues, recurring losses from operations and accumulated deficit. MERIDIAN AUTOMOTIVE: Asks Court to Close Chapter 11 Cases --------------------------------------------------------- The U.S. Bankruptcy Court for the District of Delaware entered a final decree order in October 2007 closing the Chapter 11 cases of Meridian Automotive Systems-Composites Operations, Inc., and its eight debtor-affiliates. In December 2007, the bankruptcy cases were re-opened solely to allow the Court to consider the settlement agreement entered into by the Reorganized Debtors and Plastech Engineered Products, Inc. Robert S. Bradey, Esq., at Young Conaway Stargatt & Taylor, LLP, in Wilmington, Delaware, Meridian's counsel, asserts that it is rightful to close the Reorganized Debtors' Chapter 11 cases since: (a) the Reorganized Debtors' estates have been fully administered and substantially consummated; (b) the order confirming the Debtors' bankruptcy plan has become final and the Effective Date of the Plan has occurred; (c) there are no deposit requirements in the Plan; (d) the property required to be transferred under the Plan has been transferred and the Reorganized Debtors have assumed the management of the property dealt with by the Plan; (e) distributions to be made pursuant to the Plan will be made by the litigation trust in accordance with the terms of the Litigation Trust Agreement; (f) the Debtors have no remaining motions, contested matters or adversary proceedings by or against them pending before the Court; and (g) all expenses arising from the administration of the Debtors' estates, including court fees, U.S. Trustee fees, professional fees, and expenses, have been paid. Mr. Bradey relates that Plastech has withdrawn its certification of counsel in support of entry of a vacatur order. Plastech is currently undergoing bankruptcy proceedings before the U.S. Eastern District of Michigan (Detroit), Southern Division. In addition, the Reorganized Debtors have paid Sherwin Williams Company's administrative claim, which was filed in March 2008. In light of these, the Reorganized Debtors ask the Court to enter a final decree closing their Chapter 11 cases pursuant to Section 350 of the Bankruptcy Code and Rule 3022 of the Federal Rules of Bankruptcy Procedures: Case No. Debtor Entity -------- ------------- 05-11168 Meridian Automotive Systems-Composites Operations, Inc. 05-11169 Meridian Automotive Systems, Inc. 05-11170 Meridian Automotive Systems-Angola Operations, Inc. 05-11171 Meridian Automotive Systems-Construction, Inc. 05-11172 Meridian Automotive Systems-Detroit Operations, Inc. 05-11173 Meridian Automotive Systems-Grand Rapids Operation Inc. 05-11174 Meridian Automotive Systems-Heavy Truck Operations Inc. 05-11175 Meridian Automotive Systems-Shreveport Operations, Inc. 05-11176 Meridian Automotive Systems-Mexico Operations, LLC Headquartered in Dearborn, Mich., Meridian Automotive Systems Inc. -- http://www.meridianautosystems.com/-- supplies technologically advanced front and rear end modules, lighting, exterior composites, console modules, instrument panels and other interior systems to automobile and truck manufacturers. Meridian operates 22 plants in the United States, Canada and Mexico, supplying Original Equipment Manufacturers and major Tier One parts suppliers. The Company and its debtor-affiliates filed for chapter 11 protection on April 26, 2005 (Bankr. D. Del. Case Nos. 05-11168 through 05-11176). James F. Conlan, Esq., Larry J. Nyhan, Esq., Paul S. Caruso, Esq., and Bojan Guzina, Esq., at Sidley Austin Brown & Wood LLP, and Robert S. Brady, Esq., Edmon L. Morton, Esq., Edward J. Kosmowski, Esq., and Ian S. Fredericks, Esq., at Young Conaway Stargatt & Taylor, LLP, represent the Debtors in their restructuring efforts. Eric E. Sagerman, Esq., at Winston & Strawn LLP represents the Official Committee of Unsecured Creditors. The Committee also hired Ian Connor Bifferato, Esq., at Bifferato, Gentilotti, Biden & Balick, P.A., to prosecute an adversary proceeding against Meridian's First Lien Lenders and Second Lien Lenders to invalidate their liens. When the Debtors filed for protection from their creditors, they listed $530 million in total assets and approximately $815 million in total liabilities. The Hon. Mary Walrath confirmed Meridian's Revised Fourth Amended Reorganization Plan on Dec. 6, 2006. The company emerged from chapter 11 protection on Dec. 29, 2006. (Meridian Bankruptcy News, Issue No. 62; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000). MERIDIAN AUTOMOTIVE: Ford Terminates Lighting Biz Sale Contract --------------------------------------------------------------- Meridian Automotive Systems, Inc., said Ford Motor Company and its affiliate, Automotive Components Holdings, LLC, terminated a Memorandum of Understanding, pursuant to which Meridian will purchase ACH's Sandusky, Ohio, automotive lighting facility. According to Meridian, ACH and Ford said that it will not be possible to sell the Sandusky lighting business on the terms under the MOU because of the "significant changes in the overall business environment, including recent reductions in projected industry volumes." "The decision by ACH and Ford to terminate the MOU is understandable, but is disappointing to all of us," Richard E. Newsted, Meridian's president and chief executive officer, said. "We would reconsider this opportunity should business conditions improve. Of course, we remain committed to our lighting customers and will continue to serve them from our world-class manufacturing facilities located in Grand Rapids, Michigan and Muzquiz, Coahuila, Mexico." The deal was contingent on reaching a new and long-term contract with the United Autoworkers that would reduce operating costs at the plant. Kevin Furr, president of UAW Local 1216, related to the Sandusky Register that Meridian's backing out will have a positive impact on the Sandusky plant. "We feel that Meridian was not a good purchaser for our plant, relative to the employees and the community," Sandusky Register quoted Mr. Furr as saying. Meridian is currently a defendant in a lawsuit filed in the U.S. District Court for the Southern District of Ohio by the United Steelworkers on behalf of Meridian's workers at its Jackson, Ohio facility. The USW alleged that Meridian violated the Workers Adjustment and Retraining Notification Act when the company failed to notify Union-represented employees of its intent to close the Jackson plant 60 days before the actions were executed. Reuters related that the now-terminated sale had been part of a push by Ford to unload the money-losing assets of its former Visteon Corp. subsidiary. In the past 18 months, Ford has announced a series of deals to sell off plants it took back from Visteon as part of a bailout that was completed in 2005, Reuters added. About Ford Motor Headquartered in Dearborn, Michigan, Ford Motor Co. (NYSE: F) -- http://www.ford.com/-- manufactures or distributes automobiles in 200 markets across six continents. With about 260,000 employees and about 100 plants worldwide, the company's core and affiliated automotive brands include Ford, Jaguar, Land Rover, Lincoln, Mercury, Volvo, Aston Martin, and Mazda. The company provides financial services through Ford Motor Credit Company. The company has operations in Japan in the Asia Pacific region. In Europe, the company maintains a presence in Sweden, and the United Kingdom. The company also distributes its brands in various Latin-American regions, including Argentina and Brazil. * * * As reported in the Troubled Company Reporter on Dec. 12, 2006, Standard & Poor's Ratings Services affirmed its 'B' bank loan and '2' recovery ratings on Ford Motor Co. As reported in the Troubled Company Reporter on Dec. 7, 2006, Fitch Ratings downgraded Ford Motor Company's senior unsecured ratings to 'B-/RR5' from 'B/RR4'. As reported in the Troubled Company Reporter on Dec. 6, 2006, Moody's Investors Service assigned a Caa1, LGD4, 62% rating to Ford Motor Company's $3-billion of senior convertible notes due 2036. About Meridian Automotive Systems Headquartered in Dearborn, Mich., Meridian Automotive Systems Inc. -- http://www.meridianautosystems.com/-- supplies technologically advanced front and rear end modules, lighting, exterior composites, console modules, instrument panels and other interior systems to automobile and truck manufacturers. Meridian operates 22 plants in the United States, Canada and Mexico, supplying Original Equipment Manufacturers and major Tier One parts suppliers. The Company and its debtor-affiliates filed for chapter 11 protection on April 26, 2005 (Bankr. D. Del. Case Nos. 05-11168 through 05-11176). James F. Conlan, Esq., Larry J. Nyhan, Esq., Paul S. Caruso, Esq., and Bojan Guzina, Esq., at Sidley Austin Brown & Wood LLP, and Robert S. Brady, Esq., Edmon L. Morton, Esq., Edward J. Kosmowski, Esq., and Ian S. Fredericks, Esq., at Young Conaway Stargatt & Taylor, LLP, represent the Debtors in their restructuring efforts. Eric E. Sagerman, Esq., at Winston & Strawn LLP represents the Official Committee of Unsecured Creditors. The Committee also hired Ian Connor Bifferato, Esq., at Bifferato, Gentilotti, Biden & Balick, P.A., to prosecute an adversary proceeding against Meridian's First Lien Lenders and Second Lien Lenders to invalidate their liens. When the Debtors filed for protection from their creditors, they listed $530 million in total assets and approximately $815 million in total liabilities. The Hon. Mary Walrath confirmed Meridian's Revised Fourth Amended Reorganization Plan on Dec. 6, 2006. The company emerged from chapter 11 protection on Dec. 29, 2006. (Meridian Bankruptcy News, Issue No. 62; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000). MERITAGE HOMES: Moody's Assigns SGL-2 Rating; CFR is B1 ------------------------------------------------------- Moody's Investors Service assigned a speculative grade liquidity rating of SGL-2 to Meritage Homes Corporation. The SGL-2 rating indicates good liquidity for the next 12 months, and takes into consideration Meritage's internal and external liquidity, covenant compliance, and access to alternative liquidity sources. Meritage was one of the last publicly rated homebuilders to turn cash flow positive on a trailing twelve month basis, having turned the corner on this basis for the first time as of the quarter ended March 31, 2008, after three consecutive quarters of positive cash flow beginning the third quarter of 2007. For the first half of 2008, the company has generated approximately $102 million of cash flow from operations, and Moody's currently anticipates the company to generate an additional $100 million in the second half of 2008, with inventory reduction being the main driver of this positive cash flow generation. The company has been able to build cash and pay its revolver balance down to zero, both from its positive cash flow generation and from the approximately $83 million of proceeds from its recent common stock offering. The company's second quarter-end cash balance was $115 million compared to $26 million in the first quarter. Meritage's total liquidity, comprised of cash and revolver availability, stood at $408 million at the end of second quarter 2008. In July 2008, Meritage amended its senior unsecured revolving credit facility, easing the interest coverage, debt leverage and tangible net worth covenants, and providing for relief from potential FAS 109 charges to impair deferred tax assets. The facility's size, in turn, was reduced to $500 million from $800 million. If equity falls below $500 million, the revolver's size will be permanently reduced by the amount of the shortfall, up to a maximum of a $100 million reduction. Shareholders' equity at June 30, 2008 was approximately $747 million. Moody's notes that the amended facility has a tighter borrowing base calculation. Meritage does not possess easy-to-monetize assets, such as a large base of accounts receivable or equipment, which could be sold in the event cash needed to be raised quickly. The company could sell land parcels to assuage liquidity pressures; however, it is possible that these land sales would be at a loss. Meritage's corporate family rating is B1, and the ratings outlook is negative. MERVYNS LLC: Gets Interim Approval of $465,000,000 DIP Financing ---------------------------------------------------------------- The U.S. Bankruptcy Court for the District of Delaware approved all of Mervyns LLC first day motions. The company received interim Bankruptcy Court approval of its $465 million debtor-in- possession financing facility, provided by Wachovia Capital Finance Corporation (Western) as agent. The company will use the interim DIP financing and cash generated from its operations to continue to pay vendors and to provide operational and financial stability as it proceeds with its restructuring. The final DIP hearing is scheduled for Aug. 26, 2008. In connection with the interim approval of its DIP financing facility, Mervyns also reached an agreement with its existing lenders on the terms of the consensual use of its cash collateral during the company's Chapter 11 cases. The company also received Bankruptcy Court approval to, among other things, pay pre-petition employee wages, health benefits, and other employee obligations during its restructuring under Chapter 11. Additionally, the company is authorized to pay ordinary course post-petition expenses and to continue to honor all of its current customer policies regarding merchandise returns and all of its outstanding gift cards and loyalty programs without seeking further Bankruptcy Court approval. "With the Bankruptcy Court's prompt approval of our DIP financing and first day motions, we are moving forward with our reorganization under Chapter 11 while maintaining normal operations in our stores," John Goodman, chief executive officer of Mervyns, said. "We are pleased that we can continue to serve our customers and purchase goods and services from our vendors as we seek to implement strategies to restructure our operations, strengthen our balance sheet and position Mervyns to compete more effectively." About Mervyns LLC Headquartered in the San Francisco Bay Area, Mervyns LLC -- http://www.mervyns.com/-- provides a mix of top national brands and exclusive private labels. Mervyns has 176 locations in seven states. Mervyns stores have an average of 80,000 retail square feet, smaller than most other mid-tier retailers and easier to shop, and are located primarily in regional malls, community shopping centers, and freestanding sites. The Debtor and its debtor-affiliates filed for Chapter 11 protection on July 29, 2008, (Bankr. D. Del. Lead Case No.: 08- 11586). Howard S. Beltzer, Esq., and Wendy S. Walker, Esq., at Morgan Lewis & Bockius LLP, and Mark D. Collins, Esq., Daniel J. DeFranceschi, Esq., Christopher M. Samis, Esq. and L. Katherine Good, Esq., at Richards Layton & Finger P.A., represent the Debtors in their restructuring efforts. Kurtzman Carson Consultants LLC is the Debtors' claims agent. The Debtors' financial advisor is Miller Buckfire & Co. LLC. Mervyn's LLC has estimated assets of $500,000,000 to $1,000,000,000 and estimated debts of $500,000,000 to $1,000,000,000 when it filed for bankruptcy. MRV COMMUNICATIONS: Says Review Continues, Restatement Likely ------------------------------------------------------------- MRV Communications Inc. disclosed that the internal review of the special committee appointed by its board of directors is ongoing and the adjustments to MRV's historical financial statements have yet to be determined. On June 5, 2008, MRV's board of directors appointed a special committee of independent directors to conduct an internal review relating to the company's historical stock option grant practices and related accounting and MRV's accounting for earn-outs and profit sharing in two European subsidiaries. The review of MRV's stock option grant practices was prompted by the determination of management that accounting measurement dates for certain stock option grants differ from the measurement dates used for the awards. As a result, the company expects to restate its financial statements to record the effects of additional non-cash compensation expenses and has determined that financial statements and the related reports of MRV's independent public accountants, earnings press releases, and similar communications issued by MRV should not be relied upon as a consequence of the pending restatement of its historical financial statements. MRV Communications also reported selected preliminary financial results for its second quarter and six months ended June 30, 2008. The company stated that financial results, comparative information from 2007 and 2008, have been included to provide a context in which to assess MRV's performance for the current periods, and any related disclosure regarding trends and guidance, must be considered preliminary and subject to change, and such changes, if made, could be material. Revenue for the second quarter of 2008 was $147.6 million, above guidance and an increase of 45% over revenue of $102 million in the second quarter of 2007. Growth was driven by a 28% increase in the network equipment segment, a 17% increase in the network integration segment and 112% in the optical components segment. Revenue for the six months ended June 30, 2008, was $273.2 million, an increase of 43% from the six months ended June 30, 2007. The company related that MRV Network Equipment segment posted the strongest growth in recent history and its best quarter ever with $33.6 million in revenue, compared with $26.4 million in the same quarter of the previous year. For the quarter ended June 30, 2008, MRV Network Integration reported $61.6 million in revenue and Optical Components reported $56.2 million in revenue. "We are very pleased with our achievement of obtaining significant growth while improving the health of our operational structure," Noam Lotan, president and chief executive officer of MRV, commented. "Growth was driven by both our fiber optic group and strong growth for our network equipment division, which traditionally has been our higher margin business segment. We have an innovative product roadmap specifically focused on carrier access and aggregation, packet optical transport and wireless backhaul, which is clearly supporting our mission and contributing to our success." "We remain committed and focused on our strategy to generate above-market revenue growth while improving our operating performance in order to drive results to the bottom line," added Mr. Lotan. At June 30, 2008, MRV had combined cash, cash equivalents, time deposits and short-term and long-term marketable securities of $79.0 million, compared with $82.2 million at the end of the first quarter of 2008. As a result of the on-going review and the expected restatement, the company is not able to present its detailed GAAP financial results for the quarter or six months ended June 30, 2008, or comment on the progress of the review. The company does not expect the Special Committee's review to be completed in time for the company to file its Quarterly Report on Form 10-Q for the quarter just ended by the SEC deadline of Aug. 11, 2008, or within the five-day extension period provided by the SEC's rules and accordingly does not expect that it will be filing the form necessary to obtain the extension. After the completion of the Special Committee's review, the company intends to file its Form 10-Q for the quarter ended June 30, 2008. Third Quarter of 2008 Outlook MRV estimates that revenue for the third quarter of 2008 will be in the range of $139 million to $144 million or 20% to 24% year- over-year growth. About MRV Communications Inc. Headquartered in Chatsworth, California, MRV Communications Inc. -- http://www.mrv.com/and http//www.sourcephotonics.com/ -- (Nasdaq:MRVC) provides network equipment and services, and optical components. MRV's network equipment business provides equipment used by commercial customers, governments and telecommunications service providers, and includes switches, routers, physical layer products and out-of-band management products well as specialized networking products for aerospace, defense and other applications including voice and cellular communication. MRV markets and sells its products worldwide through a variety of channels, including a dedicated direct sales force, manufacturers' representatives, value-added-resellers, distributors and systems integrators. MRV also has operations in Europe that provide network system design, integration and distribution services that include products manufactured by third-party vendors, well as internally developed and manufactured products. The company's optical components business, operating under the Source Photonics brand, includes Source Photonics Inc. and Fiberxon Inc., both wholly owned subsidiaries of MRV. Publicly traded since 1992. NETWORK COMMUNICATIONS: Moody's Assigns SGL-3; Outlook Negative --------------------------------------------------------------- Moody's affirmed all existing ratings of Network Communications, Inc., including its B1 Corporate Family Rating, while assigning a first time liquidity rating of SGL-3. The rating outlook was changed to negative from stable to reflect the general macroeconomic outlook as well as industry-wide trends within the US housing industry. Moody's is concerned that the current housing downtown could be protracted and lead to additional deterioration in NCI's operating results. Double digit revenue growth and solid performance in the Apartment Finder publication have only partially offset the significant shortfall realized in the last several quarters by The Real Estate Book, NCI's largest brand. Moody's assigned a Speculative Grade Liquidity rating of SGL-3 to NCI, indicating Moody's expectation that the company's liquidity will be adequate over the next twelve months. Internally generated cash flow should be sufficient to fund working capital fluctuations, capital expenditures, earnout payments and debt amortization requirements. The $35 million revolver was undrawn at the quarter ended June 22, 2008 and Moody's projects that any revolver drawings made for seasonal working capital needs will be repaid within a short time period. Moody's also expects NCI to be in compliance with its covenants in the next three quarters with potential tightness in the interest coverage covenant in June 2009, when the minimum ratio is scheduled to step-up. The B1 CFR reflects NCI's leading market position within its industry niche, the brand value of its flagship publications, and the partial hedge resulting from the diversification of the company's revenues among the Rental & Leasing, Resale & New Sales, and Remodeling & Home Improvement space. Because of continued weakness in Resale & New Sales advertising volumes and escalating paper and distribution costs, management implemented significant cost containment measures during FY08. As a result, Moody's projects free cash flow to remain positive in FY09 and interest coverage to be solid for the rating category, despite very high leverage. These ratings (assessments) have been affirmed: $35 million first lien revolver due 2010, Ba1 (LGD2, 13%) $76 million first lien term loan due 2012, Ba1 (LGD2, 13%) $175 million senior unsecured notes due 2013, B2 (LGD4, 63%) from (LGD4, 65%) Corporate Family Rating, B1 Probability of Default Rating, B1 The following rating was assigned: Speculative Grade Liquidity Rating, SGL-3 The $36 million senior subordinated payment-in-kind notes issued by NCI's parent, Gallarus Media Holdings, Inc., are not rated by Moody's. Network Communications, Inc., headquartered in Lawrenceville, Georgia, is a leading publisher of printed and online real estate information in North America. For the twelve months ended June 22, 2008, the company generated revenues of $219 million. NEWBURY STREET: Moody's Rates $50.6MM Notes Due 2053 Caa3 --------------------------------------------------------- Moody's Investors Service has downgraded the ratings of three classes of notes issued by Newbury Street CDO, Ltd., and left them on review for possible further downgrade: Class Description: U.S. $1,000,000,000 Class A-1 First Priority Senior Secured Floating Rate Delayed Draw Notes due 2053 Prior Rating: Aa1, on review for possible downgrade Current Rating: Aa3, on review for possible downgrade Class Description: U.S. $800,000,000 Class A-2 Second Priority Senior Secured Floating Rate Notes Due 2053 Prior Rating: Ba2, on review for possible downgrade Current Rating: B1, on review for possible downgrade Class Description: U.S. $50,625,000 Class A-3 Third Priority Senior Secured Floating Rate Notes Due 2053 Prior Rating: Caa2, on review for possible downgrade Current Rating: Caa3, on review for possible downgrade Newbury Street CDO, Ltd. is a collateralized debt obligation backed primarily by a portfolio of structured finance securities. On March 4, 2008 the transaction experienced an event of default caused by a failure of the Class A Sequential Pay Ratio to be greater than or equal to the required amount set forth in Section 5.1(i) of the Indenture dated March 8, 2007. That event of default is continuing. The rating actions taken today reflect continuing deterioration in the credit quality of the underlying portfolio and the increased expected loss associated with the transaction. Losses are attributed to diminished credit quality on the underlying portfolio. As provided in Article V of the Indenture during the occurrence and continuance of an Event of Default, the Controlling Class may be entitled to direct the Trustee to take particular actions with respect to the Collateral. The severity of losses may depend on the timing and choice of remedy to be pursued by the Controlling Class. Because of this uncertainty, the ratings of Classes A-1, A- 2 and A-3 Notes issued by Newbury Street CDO, Ltd. are on review for possible further action. NORTHWEST AIRLINES: Pilots Vote on Delta Merger Through August 11 ----------------------------------------------------------------- Pilots of Delta Airlines Inc. and Northwest Airlines, Inc., began voting July 14, 2008, on a joint labor agreement that will essentially govern the terms of employment of both carrier's pilots groups upon the closing of the Delta-Northwest merger, the Atlanta Journal-Constitution reports. Voting ends Aug. 11, 2008. Voting results will be determined separately as the pilot groups are represented by separate units of the Air Line Pilots Association, AJC says. The Tentative Agreement provides for, among others, Delta's agreement to issue shares of its common stock equal to (i) 3.5% of the fully-diluted shares outstanding of Delta to Delta pilots; and (ii) 2.38% of the fully-diluted shares outstanding of Delta to Northwest pilots, when the merger closes. According to AJC, the Northwest pilots union informed its members of certain meetings it held with Delta pilots in Chicago, Illinois, to continue talks on the integration of their seniority lists. Absent an agreement within the 30-day negotiating period, Delta and Northwest pilot groups will go into binding arbitration to establish a combined seniority list in November 2008, says the report. About Delta Air Based in Atlanta, Georgia, Delta Air Lines Inc. (NYSE:DAL) -- http://www.delta.com/-- is the world's second-largest airline in terms of passengers carried and the leading U.S. carrier across the Atlantic, offering daily flights to 328 destinations in 56 countries on Delta, Song, Delta Shuttle, the Delta Connection carriers and its worldwide partners. Delta flies to Argentina, Australia and the United Kingdom, among others. The company and 18 affiliates filed for chapter 11 protection on Sept. 14, 2005 (Bankr. S.D.N.Y. Lead Case No. 05-17923). Marshall S. Huebner, Esq., at Davis Polk & Wardwell, represents the Debtors in their restructuring efforts. Timothy R. Coleman at The Blackstone Group L.P. provides the Debtors with financial advice. Daniel H. Golden, Esq., and Lisa G. Beckerman, Esq., at Akin Gump Strauss Hauer & Feld LLP, provide the Official Committee of Unsecured Creditors with legal advice. John McKenna, Jr., at Houlihan Lokey Howard & Zukin Capital and James S. Feltman at Mesirow Financial Consulting, LLC, serve as the Committee's financial advisors. The Debtors filed a chapter 11 plan of reorganization and disclosure statement explaining that plan on Dec. 19, 2007. On Jan. 19, 2007, they filed revisions to the plan and disclosure statement, and submitted further revisions to the plan on Feb. 2, 2007. On Feb. 7, 2007, the Court approved the Debtors' disclosure statement. In April 25, 2007, the Court confirmed the Debtors' plan. That plan became effective on April 30, 2007. The Court entered a final decree closing 17 cases on Sept. 26, 2007. (Delta Air Lines Bankruptcy News; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000). About Northwest Airlines Northwest Airlines Corp. (NYSE: NWA) -- http://www.nwa.com/-- is the world's fourth largest airline with hubs at Detroit, Minneapolis/St. Paul, Memphis, Tokyo and Amsterdam, and about 1,400 daily departures. Northwest is a member of SkyTeam, an airline alliance that offers customers one of the world's most extensive global networks. Northwest and its travel partners serve more than 1000 cities in excess of 160 countries on six continents. Northwest and its travel partners serve more than 1000 cities in excess of 160 countries on six continents, including Italy, Spain, Japan, China, Venezuela and Argentina. The company and 12 affiliates filed for chapter 11 protection on Sept. 14, 2005 (Bankr. S.D.N.Y. Lead Case No. 05-17930). Bruce R. Zirinsky, Esq., and Gregory M. Petrick, Esq., at Cadwalader, Wickersham & Taft LLP in New York, and Mark C. Ellenberg, Esq., at Cadwalader, Wickersham & Taft LLP in Washington, represent the Debtors in their restructuring efforts. The Official Committee of Unsecured Creditors has retained Scott L. Hazan, Esq., at Otterbourg, Steindler, Houston & Rosen, P.C. as its bankruptcy counsel in the Debtors' chapter 11 cases. When the Debtors filed for bankruptcy, they listed $14.4 billion in total assets and $17.9 billion in total debts. On Jan. 12, 2007, the Debtors filed with the Court their chapter 11 plan. On Feb. 15, 2007, the Debtors filed an amended plan and disclosure statement. The Court approved the adequacy of the Debtors' amended disclosure statement on March 26, 2007. On May 21, 2007, the Court confirmed the Debtors' amended plan. That amended plan took effect May 31, 2007. (Northwest Airlines Bankruptcy News, Issue No. 97; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000). * * * As reported in the Troubled Company Reporter on July 29, 2008, Standard & Poor's Ratings Services lowered its ratings on Northwest Airlines Corp. and subsidiary Northwest Airlines Inc. (both rated B/Negative/--), including lowering the long-term corporate credit ratings on both entities to 'B' from 'B+', and removed the ratings from CreditWatch, where they had been placed with negative implications April 15, 2008. The outlook is negative. The downgrade reflects expected losses and reduced or negative operating cash flow caused by high fuel prices. S&P also lowered our ratings on enhanced equipment trust certificates, in some cases by more than one notch. NORTHWEST AIRLINES: Merger to Hit Smaller Ports First, Critics Say ------------------------------------------------------------------ Even before Northwest Airlines Corp. and Delta Air Lines Inc. confirmed their merger plan in April of this year, critics have already noted that smaller airports would be the first casualties after the consolidation, John Welbes at TwinCities.com remarks. Delta has been discontinuing flights between cities in its network, but denies that the cuts are connected with the proposed tie up, Mr. Welbes states. Delta insists that the flight trimming is part of a "parking program" ensuing from escalating oil costs, Mr. Welbes discloses. Nevertheless, Delta's capacity cuts hint at what's in store for regional airports after the merger, Mr. Welbes avers. "This will be the lowest amount of service that we've had in the last four years," said Debbie Gulliver, travel manager at Michigan State University in Lansing, Michigan, reports TwinCities.com. Delta will be exiting Lansing come September 1, according to Mr. Welbes. Northwest currently controls about 55% of the market at the Lansing airport, Mr. Welbes points out. Apart from Lansing, Delta has begun pulling out of other markets where Northwest has a presence, including Green Bay, Wisconsin; State College, Pennsylvania; Toledo, Ohio and Sioux Falls, South Dakota. Northwest reported in its second quarter results that its capacity reductions will not affect its service to any cities; however, frequency of flights to certain markets will be reduced. In the end, Delta might end up holding on to more of its flights than Northwest, due to Northwest's older fleet and higher maintenance costs, Mr. Welbes says. Despite this, Northwest's operational performance for the summer of 2008 is a complete turnaround from that of last year's, when the carrier canceled as many as 100 flights in a day, due to problems in pilot staffing, the Star Tribune relates. Consequently, Northwest and its pilots union agreed to implement new work rules which reduced pilots' flight hours and providing them an incentive of 150% of their pay rate for flying more than 80 hours a month. U.S. airlines are continuing to battle spiraling fuel prices which almost doubled from a year ago, causing losses in almost all of the major airlines for the second quarter of 2008, says Mr. Welbes. Specifically, United Airlines, Inc., posted the largest loss of $2.7 billion; American Airlines was hit by $1.4 billion; Delta Air Lines lost $1.04 billion, US Airways dropped $567 million and Northwest Airlines, posted a $377 million loss. The least hurt was Continental Airlines, which lost $3 million. About Northwest Airlines Northwest Airlines Corp. (NYSE: NWA) -- http://www.nwa.com/-- is the world's fourth largest airline with hubs at Detroit, Minneapolis/St. Paul, Memphis, Tokyo and Amsterdam, and about 1,400 daily departures. Northwest is a member of SkyTeam, an airline alliance that offers customers one of the world's most extensive global networks. Northwest and its travel partners serve more than 1000 cities in excess of 160 countries on six continents. Northwest and its travel partners serve more than 1000 cities in excess of 160 countries on six continents, including Italy, Spain, Japan, China, Venezuela and Argentina. The company and 12 affiliates filed for chapter 11 protection on Sept. 14, 2005 (Bankr. S.D.N.Y. Lead Case No. 05-17930). Bruce R. Zirinsky, Esq., and Gregory M. Petrick, Esq., at Cadwalader, Wickersham & Taft LLP in New York, and Mark C. Ellenberg, Esq., at Cadwalader, Wickersham & Taft LLP in Washington, represent the Debtors in their restructuring efforts. The Official Committee of Unsecured Creditors has retained Scott L. Hazan, Esq., at Otterbourg, Steindler, Houston & Rosen, P.C. as its bankruptcy counsel in the Debtors' chapter 11 cases. When the Debtors filed for bankruptcy, they listed $14.4 billion in total assets and $17.9 billion in total debts. On Jan. 12, 2007, the Debtors filed with the Court their chapter 11 plan. On Feb. 15, 2007, the Debtors filed an amended plan and disclosure statement. The Court approved the adequacy of the Debtors' amended disclosure statement on March 26, 2007. On May 21, 2007, the Court confirmed the Debtors' amended plan. That amended plan took effect May 31, 2007. (Northwest Airlines Bankruptcy News, Issue No. 97; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000). * * * As reported in the Troubled Company Reporter on July 29, 2008, Standard & Poor's Ratings Services lowered its ratings on Northwest Airlines Corp. and subsidiary Northwest Airlines Inc. (both rated B/Negative/--), including lowering the long-term corporate credit ratings on both entities to 'B' from 'B+', and removed the ratings from CreditWatch, where they had been placed with negative implications April 15, 2008. The outlook is negative. The downgrade reflects expected losses and reduced or negative operating cash flow caused by high fuel prices. S&P also lowered our ratings on enhanced equipment trust certificates, in some cases by more than one notch. NORTHWEST AIRLINES: Court Approves Settlement with M. Foret ----------------------------------------------------------- Northwest Airlines Corporation and its debtor-affiliates obtained approval from the U.S. Bankruptcy Court for the Southern District of New York on a settlement with Mickey Foret, a former executive vice president and chief financial officer of Northwest Airlines, Inc. and chairman and chief executive officer of Northwest Airlines Cargo, Inc. As said by the Troubled Company Reporter on July 2, 2008, the parties engaged in arm's-length negotiations to resolve all of the Claims filed by Mr. Foret and Aviation Consultants. The terms of the settlement agreement include: (a) Mr. Foret and his spouse will receive airline pass travel privileges, and will be eligible for certain group medical coverage benefits; (b) Aviation Consultant's rejection damages claim relating to the Consulting Agreement will be reduced and allowed for $1,020,000, with all its other Claims to be expunged; and (c) Mr. Foret's rights to indemnification pursuant the Plan will not be altered. About Northwest Airlines Northwest Airlines Corp. (NYSE: NWA) -- http://www.nwa.com/-- is the world's fourth largest airline with hubs at Detroit, Minneapolis/St. Paul, Memphis, Tokyo and Amsterdam, and about 1,400 daily departures. Northwest is a member of SkyTeam, an airline alliance that offers customers one of the world's most extensive global networks. Northwest and its travel partners serve more than 1000 cities in excess of 160 countries on six continents. Northwest and its travel partners serve more than 1000 cities in excess of 160 countries on six continents, including Italy, Spain, Japan, China, Venezuela and Argentina. The company and 12 affiliates filed for chapter 11 protection on Sept. 14, 2005 (Bankr. S.D.N.Y. Lead Case No. 05-17930). Bruce R. Zirinsky, Esq., and Gregory M. Petrick, Esq., at Cadwalader, Wickersham & Taft LLP in New York, and Mark C. Ellenberg, Esq., at Cadwalader, Wickersham & Taft LLP in Washington, represent the Debtors in their restructuring efforts. The Official Committee of Unsecured Creditors has retained Scott L. Hazan, Esq., at Otterbourg, Steindler, Houston & Rosen, P.C. as its bankruptcy counsel in the Debtors' chapter 11 cases. When the Debtors filed for bankruptcy, they listed $14.4 billion in total assets and $17.9 billion in total debts. On Jan. 12, 2007, the Debtors filed with the Court their chapter 11 plan. On Feb. 15, 2007, the Debtors filed an amended plan and disclosure statement. The Court approved the adequacy of the Debtors' amended disclosure statement on March 26, 2007. On May 21, 2007, the Court confirmed the Debtors' amended plan. That amended plan took effect May 31, 2007. (Northwest Airlines Bankruptcy News, Issue No. 97; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000). * * * As reported in the Troubled Company Reporter on July 29, 2008, Standard & Poor's Ratings Services lowered its ratings on Northwest Airlines Corp. and subsidiary Northwest Airlines Inc. (both rated B/Negative/--), including lowering the long-term corporate credit ratings on both entities to 'B' from 'B+', and removed the ratings from CreditWatch, where they had been placed with negative implications April 15, 2008. The outlook is negative. The downgrade reflects expected losses and reduced or negative operating cash flow caused by high fuel prices. S&P also lowered our ratings on enhanced equipment trust certificates, in some cases by more than one notch. NORTHWEST AIRLINES: CFO Disposes of 10,886 Common Shares -------------------------------------------------------- In a regulatory filing with the U.S. Securities and Exchange Commission dated July 25, 2008, David M. Davis, executive vice president and chief financial officer of Northwest Airlines Corp., reported that on July 23, he disposed of 10,886 shares of Northwest common stock at $10 per share. Mr. Davis disclosed that he is deemed to beneficially own 197,296 shares of Northwest common stock after the transaction. According to the SEC report, the shares were sold by Mr. Davis pursuant to a Rule 10b5-1 trading plan dated May 29, 2008. About Northwest Airlines Northwest Airlines Corp. (NYSE: NWA) -- http://www.nwa.com/-- is the world's fourth largest airline with hubs at Detroit, Minneapolis/St. Paul, Memphis, Tokyo and Amsterdam, and about 1,400 daily departures. Northwest is a member of SkyTeam, an airline alliance that offers customers one of the world's most extensive global networks. Northwest and its travel partners serve more than 1000 cities in excess of 160 countries on six continents. Northwest and its travel partners serve more than 1000 cities in excess of 160 countries on six continents, including Italy, Spain, Japan, China, Venezuela and Argentina. The company and 12 affiliates filed for chapter 11 protection on Sept. 14, 2005 (Bankr. S.D.N.Y. Lead Case No. 05-17930). Bruce R. Zirinsky, Esq., and Gregory M. Petrick, Esq., at Cadwalader, Wickersham & Taft LLP in New York, and Mark C. Ellenberg, Esq., at Cadwalader, Wickersham & Taft LLP in Washington, represent the Debtors in their restructuring efforts. The Official Committee of Unsecured Creditors has retained Scott L. Hazan, Esq., at Otterbourg, Steindler, Houston & Rosen, P.C. as its bankruptcy counsel in the Debtors' chapter 11 cases. When the Debtors filed for bankruptcy, they listed $14.4 billion in total assets and $17.9 billion in total debts. On Jan. 12, 2007, the Debtors filed with the Court their chapter 11 plan. On Feb. 15, 2007, the Debtors filed an amended plan and disclosure statement. The Court approved the adequacy of the Debtors' amended disclosure statement on March 26, 2007. On May 21, 2007, the Court confirmed the Debtors' amended plan. That amended plan took effect May 31, 2007. (Northwest Airlines Bankruptcy News, Issue No. 97; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000). * * * As reported in the Troubled Company Reporter on July 29, 2008, Standard & Poor's Ratings Services lowered its ratings on Northwest Airlines Corp. and subsidiary Northwest Airlines Inc. (both rated B/Negative/--), including lowering the long-term corporate credit ratings on both entities to 'B' from 'B+', and removed the ratings from CreditWatch, where they had been placed with negative implications April 15, 2008. The outlook is negative. The downgrade reflects expected losses and reduced or negative operating cash flow caused by high fuel prices. S&P also lowered our ratings on enhanced equipment trust certificates, in some cases by more than one notch. NORTHWEST AIRLINES: Posts $377MM Net Loss in Second Quarter 2008 ---------------------------------------------------------------- Northwest Airlines Corporation reported a second quarter 2008 net loss of $377 million, or $1.43 per share. Reported results include a net non-cash impairment charge of $547 million and a $250 million gain associated with marking-to-market out-of-period fuel hedges. These results compare to the second quarter of 2007 when Northwest reported net income of $2.1 billion, which included $1.9 billion related to reorganization items. Excluding the net non-cash impairment charge, Northwest reported second quarter 2008 net income of $170 million versus the second quarter of 2007 when the airline reported net income of $205 million before the impact of reorganization items. Excluding taxes and out-of-period mark-to-market adjustments on fuel hedges, Northwest paid $3.45 per gallon for jet fuel in the second quarter compared to $2.04 a gallon in the second quarter of 2007, an increase of 69.3 percent. Northwest's total fuel costs, excluding out-of-period hedge gains, increased by $637 million versus the prior year. In commenting on second quarter results, Doug Steenland, Northwest's president and chief executive officer said, "The unprecedented run-up in oil prices continues to pose great challenges for Northwest Airlines and the entire airline industry. In response, we have acted swiftly to reduce capacity, preserve liquidity, aggressively manage our costs and grow revenue through fare actions and additional fees and charges." Northwest and Delta Progress Toward DOJ Approval and Integration; Merger Expected to Close in 4th Quarter 2008 In April, Northwest announced an agreement to merge with Delta Air Lines. This merger is even more compelling in the current environment and brings together two airlines that have both successfully restructured and have unique and non-replicable assets. Since the merger announcement, integration planning teams comprised of leaders from both Northwest and Delta have been created. These teams are making significant progress in the efforts to integrate the two carriers after the merger closes, which is expected to occur in the 4th quarter of 2008. Since the merger announcement in April, these progress have been made: -- Joint pilot contract. Northwest and Delta announced that, subject to ratification, a joint pilot agreement that includes full seniority integration will be in place by the close of the merger. -- Combined Corporate Leadership Team. Northwest and Delta recently announced the Senior Leadership team that will lead the new combined carrier when the merger is closed. Additionally, key Northwest and Delta leaders were identified who will continue to lead the two teams as the two airlines transition to a single operating certificate over the next 18-24 months. -- Shareholder approval vote. It was announced that the shareholder approval vote for the merger will take place at Northwest's annual meeting on September 25th. -- Increased annual synergies estimate. Northwest and Delta increased to $2.0 billion the estimate of annualized steady-state synergies created by the merger. -- Decreased one-time transition costs. The estimated one- time transition costs of the merger have been reduced to approximately $600 million. Mr. Steenland said, "When we first contemplated this merger at the end of 2007, as oil was approaching $100 a barrel, we knew then that the right transaction would better position us to cope with the fuel challenges that lay ahead. Based on our due diligence, this deal met all the tests of the right transaction - one that would benefit our employees, customers, shareholders and communities over the long-term. Now, given the current fuel environment, the merger makes even more sense as the resulting synergies and cost-savings will better allow the combined carrier to manage through these challenges as a stronger, global competitor." Upon completion of the transaction, the merged carrier will benefit from among the following competitive advantages: a global, end-to-end network with little overlap; proven joint venture relationships across the Trans-Atlantic; a strong balance sheet and competitive cost structure; significant revenue and cost synergies; manageable integration costs and the harmonious integration of employee groups. Mr. Steenland concluded, "Unlike previous airline mergers, Northwest-Delta is a merger of choice. Northwest and Delta are the two strongest network airlines, with the strongest balance sheets, liquidity positions and best-in-class cost structures in the industry." Second Quarter Financial Overview Operating Revenues Northwest's operating revenues for the second quarter rose to $3.6 billion, up 12.4% from last year. Consolidated passenger revenue increased by 10.0% versus the second quarter 2007 to $3.1 billion on 3.6% more available seat miles (ASMs), resulting in a 6.1% improvement in revenue per available seat mile (RASM). This revenue growth was among the best in the industry during the quarter. Excluding the impact of fresh-start accounting, consolidated RASM increased 4.7%. Mainline passenger revenue increased by 5.4% versus the second quarter 2007 to $2.6 billion on 0.1% more mainline available seat miles (ASMs), resulting in a 5.3% improvement in revenue per available seat mile (RASM) and a 0.1 percentage point increase in load factor. Excluding the impact of fresh-start accounting, mainline RASM increased 3.8%. Commenting on the airline's revenue performance, Tim Griffin, Northwest's executive vice president of marketing and distribution said, "Northwest continues to deliver strong revenue performance. The airline achieved a length-of-haul adjusted domestic RASM that is 111.4% of the industry average based on the most recent comparative data available." Griffin added, "We are encouraged by the unit revenue growth we experienced during the quarter. Additional unit revenue growth is expected due in part to the capacity reductions previously announced, which will help to offset higher fuel expenses." Operating Expenses Second quarter operating expenses of $3.3 billion, excluding the net non-cash impairment charge, were up $504 million, or 17.8% year-over-year as the result of the $637 million increase in year-over-year fuel expense. Excluding fuel costs, the gain associated with marking-to-market out-of-period fuel hedges, and the net non-cash impairment charge, operating expenses increased by $123 million year-over-year. For the quarter, Northwest's mainline unit costs per available seat mile (CASM), excluding fuel and non-recurring items, increased 4.7% year-over-year, which was favorable to prior guidance. The increase was primarily due to the continued impact of non-cash emergence-related items and integration expenses related to the merger with Delta. Excluding the impact of these items, second quarter CASM excluding fuel increased 1.0%. Dave Davis, Northwest's executive vice-president and chief financial officer, said, "Our strong second quarter ex-fuel CASM performance demonstrates Northwest's continued focus on prudent cost control." Fuel continues to be Northwest's single largest cost, representing 43.7 percent of the company's second quarter operating expenses, excluding the net non-cash impairment charge and out-of-period mark-to-market adjustments on fuel hedges. Northwest had previously hedged approximately 40 percent of its fuel exposure for the quarter and realized $43 million in value from settled fuel hedge contracts during the quarter. As of July 21st, Northwest has hedged approximately 63% of its third quarter requirements, 56% of its fourth quarter requirements and 215 of its first quarter 2009 fuel requirements. $547 Million Non-cash Accounting Charge Northwest finalized the goodwill impairment testing that resulted in the $3.9 billion charge reflected in the first quarter of 2008. As a result, it was determined that an additional net non-cash impairment charge of $547 million was required. Strong Total Cash Position of $3.7 billion Northwest ended the quarter with $3.3 billion in unrestricted cash and $424 million in restricted cash. The restricted cash balance includes a funded tax trust of $255 million that was established in 2002. On July 15th, Northwest closed a financing of unencumbered aircraft and engines that generated approximately $180 million in additional liquidity. These proceeds will be reflected in Northwest's third quarter ending cash balance. In addressing Northwest's liquidity, Davis said, "Despite the significant year-over-year increase in fuel related expenses during the quarter, Northwest has maintained among the strongest liquidity positions in the industry. Including the value of Northwest's funded tax trust that was established in 2002, the airline's quarter ending liquidity was $3.5 billion, or 26.6% of trailing 12 months revenue." Northwest's Continued Response to Extraordinary Fuel Costs In response to the record increases in fuel-related costs, during the second quarter, Northwest announced these initiatives: 1. Fourth Quarter 2008 Capacity, Fleet and Personnel Reductions -- Capacity Reductions. Northwest will reduce its fourth quarter 2008 system mainline capacity (domestic and international) 8.5 percent - 9.5 percent versus the fourth quarter of 2007. -- Fleet Changes. As a result of the reduced capacity, Northwest is removing a combination of 14 B757s and Airbus narrowbody aircraft from the fleet. In addition, the DC9 fleet will be reduced from 94 aircraft at the start of 2008 to 61 aircraft (20 DC9-30s and 41 DC9-40s/50s) by year-end. The airline also continues to take delivery of its 76- seat regional aircraft. The 76-seat fleet, which will grow to 36 Embraer EMB-175s and 36 Bombardier CRJ900s by year-end, is approximately 30 percent more fuel efficient than the DC9s. -- Personnel Reductions. As a result of the fuel price driven flight reductions, Northwest is reducing its frontline and management personnel by 2,500. All Northwest employee groups will be affected. The reductions are being achieved first through a variety of voluntary programs including early-out programs, voluntary leaves, work rule modifications and attrition. Furloughs will be employed if voluntary means fail to achieve the targeted reductions. 2. Revenue Enhancements/Fees Expect to Generate $250 million to $300 million annually -- Fees for Checked Bags. Northwest matched competitors' plans to charge $15 for the customer's first checked bag. The new policy applies to tickets sold on or after July 10, for travel starting August 28, throughout the United States as well as travel between the U.S. and Canada. Northwest also charges $25 for a second checked bag and $100 for the third and subsequent additional checked bags. Frequent flier elites are exempt from the policy, along with full-fare coach passengers. -- Fees for Award Tickets. Northwest also implemented a fuel-related service fee for WorldPerks(R) award tickets. For WorldPerks(R) Award tickets issued in North America on or after September 15, 2008, Northwest will charge $25 for domestic tickets, $50 for Trans-Atlantic tickets, and $100 for Trans- Pacific travel. -- Fees for Ticket Changes. Northwest also increased fees for ticket changes. Starting July 9, the fee for domestic non-refundable ticket changes increased from $100 to $150. International ticket change fees increased by an additional $50 to $150 per ticket, depending on class of service and other restrictions. About Northwest Airlines Northwest Airlines Corp. (NYSE: NWA) -- http://www.nwa.com/-- is the world's fourth largest airline with hubs at Detroit, Minneapolis/St. Paul, Memphis, Tokyo and Amsterdam, and about 1,400 daily departures. Northwest is a member of SkyTeam, an airline alliance that offers customers one of the world's most extensive global networks. Northwest and its travel partners serve more than 1000 cities in excess of 160 countries on six continents. Northwest and its travel partners serve more than 1000 cities in excess of 160 countries on six continents, including Italy, Spain, Japan, China, Venezuela and Argentina. The company and 12 affiliates filed for chapter 11 protection on Sept. 14, 2005 (Bankr. S.D.N.Y. Lead Case No. 05-17930). Bruce R. Zirinsky, Esq., and Gregory M. Petrick, Esq., at Cadwalader, Wickersham & Taft LLP in New York, and Mark C. Ellenberg, Esq., at Cadwalader, Wickersham & Taft LLP in Washington, represent the Debtors in their restructuring efforts. The Official Committee of Unsecured Creditors has retained Scott L. Hazan, Esq., at Otterbourg, Steindler, Houston & Rosen, P.C. as its bankruptcy counsel in the Debtors' chapter 11 cases. When the Debtors filed for bankruptcy, they listed $14.4 billion in total assets and $17.9 billion in total debts. On Jan. 12, 2007, the Debtors filed with the Court their chapter 11 plan. On Feb. 15, 2007, the Debtors filed an amended plan and disclosure statement. The Court approved the adequacy of the Debtors' amended disclosure statement on March 26, 2007. On May 21, 2007, the Court confirmed the Debtors' amended plan. That amended plan took effect May 31, 2007. (Northwest Airlines Bankruptcy News, Issue No. 97; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000). * * * As reported in the Troubled Company Reporter on July 29, 2008, Standard & Poor's Ratings Services lowered its ratings on Northwest Airlines Corp. and subsidiary Northwest Airlines Inc. (both rated B/Negative/--), including lowering the long-term corporate credit ratings on both entities to 'B' from 'B+', and removed the ratings from CreditWatch, where they had been placed with negative implications April 15, 2008. The outlook is negative. The downgrade reflects expected losses and reduced or negative operating cash flow caused by high fuel prices. S&P also lowered our ratings on enhanced equipment trust certificates, in some cases by more than one notch. NOVASTAR FINANCIAL: Files Suit Against HQ Building Owner -------------------------------------------------------- Kansas City Business Journal reports that NovaStar Financial Inc. commenced a lawsuit against EHMD LLC -- the owner of its headquarters at 8140 Ward Parkway, Kansas City -- for raising direct expenses NovaStar incurred even though the number of employees it kept at the office dropped in 2007 due to subprime mortgage-related woes. The lawsuit was filed before the Jackson County Circuit Court on Wednesday. According to Business Journal, direct expenses, as defined in the parties' lease, are costs that exceed the monthly base rent to cover the tenant's percentage of expenditures like building maintenance, repair, janitorial service, security, lawn care, trash removal, utilities and other costs. NovaStar, in its lawsuit, indicated that it now has less than 40 employees at the building, from 550 in July 2007, Business Journal says. NovaStar said EHMD raised its 2007 direct expenses more than $150,000 from the year before, even though the company's employee count started dwindling in 2007, Business Journal says. NovaStar also alleges that maintenance and repair cost charges were 50% higher in 2008 than in 2007, the report adds. An attorney for EHMD could not immediately be reached for comment, Business Journal notes. NovaStar seeks an accounting of the direct expenses and accuses EHMD of breach of contract, according to Business Journal. The lawsuit does not specify how much NovaStar seeks in total damages, the report notes. About NovaStar Headquartered in Kansas City, Missouri, NovaStar Financial Inc. (NYSE: NFI) -- http://www.novastarmortgage.com/-- prior to significant changes in its business during 2007 and the first quarter of 2008, the company originated, purchased, securitized, sold, invested in and serviced residential nonconforming mortgage loans and mortgage backed securities. The company retained, through its mortgage securities investment portfolio, significant interests in the nonconforming loans it originated and purchased, and through its servicing platform, serviced all of the loans in which it retained interests. During 2007 and early 2008, the company discontinued its mortgage lending operations and sold its mortgage servicing rights which subsequently resulted in the abandonment of its servicing operations. Historically, the company had elected to be taxed as a REIT under the Code. During 2007, the company announced that it would not be able to pay a dividend on its common stock with respect to its 2006 taxable income, and as a result, its status as a REIT terminated retroactive to Jan. 1, 2006. Novastar Financial Inc.'s consolidated balance sheet at March 31, 2008, showed $2.7 billion in total assets, $3.2 billion in total liabilities, and $494.5 million in total stockholders' deficit. * * * As reported in the Troubled Company Reporter on April 4, 2008, Deloitte & Touche LLP, in Kansas City, Missouri, expressed substantial doubt about Novastar Financial 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 pointed to the company's deficit in shareholders' equity, the disruption in the credit markets and related liquidity issues, the sale of its loan servicing operations and the decision to cease all of its mortgage lending operations. OK LUMBER: Case Summary & 20 Largest Unsecured Creditors -------------------------------------------------------- Debtor: OK Lumber Co., Inc. 272 Illinois St. Fairbanks, AK 99701 Bankruptcy Case No.: 08-00451 Type of Business: The Debtor owns and manages a hardware store. See http://www.www.okace.com/ Chapter 11 Petition Date: July 31, 2008 Court: District of Alaska (Fairbanks) Judge: Donald MacDonald IV Debtor's Counsel: Alfred Dovbish, Esq. 98 Main St., Ste. 216 Tiburon, CA 94920 Tel: (415) 924-0808 Estimated Assets: $1,000,000 to $10,000,000 Estimated Debts: $1,000,000 to $10,000,000 A copy of OK Lumber Co's petition is available for free at: http://bankrupt.com/misc/akb08-00451.pdf PACIFIC LUMBER: Emerges from Chapter 11 on July 30 -------------------------------------------------- The Pacific Lumber Company, Scotia Pacific Company LLC, Scotia Development LLC, Britt Lumber Co., Inc., Salmon Creek LLC, and Scotia Inn Inc. emerged from bankruptcy protection on July 30, 2008. The effective date of the Modified First Amended Joint Plan of Reorganization for the restructuring of the PALCO Entities occurred on July 30, the Plan Proponents informed parties-in- interest in a notice to the U.S. Bankruptcy Court for the Southern District of Texas. The Marathon/Mendocino Plan contemplates the transfer of the PALCO and Scopac assets, on the plan effective date, to Marathon and Mendocino in exchange for certain amounts, including the provision of more than $500 million to the timber noteholders. MRC fulfilled the remaining condition for the Plan to become effective as it "paid [on July 30] more than $550 million to creditors to gain control of 210,000 acres of Humboldt County timberlands and a sawmill by Pacific Lumber," The Associated Press reports. The 130-year old timber company will soon be turned over to MRC, marking an end to its 18-month bankruptcy case. The PALCO name will be changed to Humboldt Redwood Co. under MRC's management, AP relates. "We are going to manage the forest and cut down some trees . . . but we'll be doing it in a way that's sustainable that balances the health of the forest with the health of the business," AP quotes MRC Chairman Sandy Dean as saying. Humboldt Redwood Co. intends to extend jobs to 275 to 300 PALCO employees, according to AP. The PALCO Entities filed for bankruptcy in January 2007. Several competing plans for the PALCO reorganization were considered by the Court. In the end, it was the Marathon/Mendocino Plan that the Court confirmed on July 8, 2008. Several parties, including the Bank of New York Trust Company, N.A, as Indenture Trustee for the Timber Notes, Scopac, certain noteholders, and certain California State Agencies Bank previously took appeals of the Confirmation Order and sought a stay pending the resolution of the appeals. The Appellants also sought to have the Court of Appeals for the Fifth Circuit to directly review the appeal. Both the Bankruptcy Court and the Fifth Circuit, however, denied the imposition of a stay to delay any implementation of the Confirmation Order. As of the Effective Date, the confirmed Plan is binding on the PALCO Entities and any creditor or equity security holder of the PALCO Entities. Pursuant to the Effective Date and the confirmed Marathon/Mendocino Plan: (a) a party seeking claims arising from the rejection of executory contracts or unexpired leases or arising from administrative expenses have until August 29, 2008, to file a proof of claim for those claims; and (b) any professional retained in the Debtors' Chapter 11 cases has until September 29, 2008, to file a final application for the allowance of fees for services rendered and reimbursement of expenses incurred through the Effective Date. Proofs of claim must be filed by mail with the Reorganized Debtors' Balloting and Claims Agent at: Logan & Company, Inc. 546 Valley Road Upper Montclair, New Jersey 07043 Proofs of Claim must also be served on counsel for the PALCO Entities, the Marathon/Mendocino Plan Proponents, the PLC Litigation Trustee, and the SPC Litigation Trustee. Claims not filed before the Bar Dates for Rejection Claims, Administrative Expense Claims and Professional Claims will be forever barred and will not be enforceable against the PALCO Entities. Plan Supplements The Marathon Plan Proponents have further amended their Plan Supplements on July 25, which included an amended list of executory contracts and unexpired leases to be assumed under the Plan, estimated cure costs and the deletion of certain contracts and leases from the original schedule. A full-text copy of the Amended Schedule is available for free at http://bankrupt.com/misc/PALCO_PlanSupAmendedSched.pdf A list of the Additional Contracts & Leases is available for free at http://bankrupt.com/misc/PALCO_PlanSupAdlContracts.pdf A list of the Deleted Contracts and Leases is available for free at http://bankrupt.com/misc/PALCO_PlanSupDelContracts.pdf BoNY's Statement The Bank of New York Mellon Trust Company, N.A., formerly known as The Bank of New York Trust Company N.A. and as Timber Notes Indenture Trustee, tells the Court that it does not seek any further relief from the Court or any hearing regarding the Notice of Effective Date. In a Court filing dated July 30, the Indenture Trustee, however, makes clear that it reserves all of its rights and remedies to avoid an assertion by any party that its failure to respond should be taken as waiver of any of its right to assert any issue related to the Confirmation Order and the Effective Date Notice. BoNY has a pending appeal of the Confirmation Order before the Fifth Circuit. About Pacific Lumber Based in Oakland, California, The Pacific Lumber Company -- http://www.palco.com/-- and its subsidiaries operate in several principal areas of the forest products industry, including the growing and harvesting of redwood and Douglas-fir timber, the milling of logs into lumber and the manufacture of lumber into a variety of finished products. Scotia Pacific Company LLC, Scotia Development LLC, Britt Lumber Co., Inc., Salmon Creek LLC and Scotia Inn Inc. are wholly owned subsidiaries of Pacific Lumber. Scotia Pacific, Pacific Lumber's largest operating subsidiary, was established in 1993, in conjunction with a securitization transaction pursuant to which the vast majority of Pacific Lumber's timberlands were transferred to Scotia Pacific, and Scotia Pacific issued Timber Collateralized Notes secured by substantially all of Scotia Pacific's assets, including the timberlands. Pacific Lumber, Scotia Pacific, and four other subsidiaries filed for chapter 11 protection on Jan. 18, 2007 (Bankr. S.D. Tex. Case Nos. 07-20027 through 07-20032). Jack L. Kinzie, Esq., at Baker Botts LLP, is Pacific Lumber's lead counsel. Nathaniel Peter Holzer, Esq., Harlin C. Womble, Jr., Esq., and Shelby A. Jordan, Esq., at Jordan Hyden Womble Culbreth & Holzer PC, is Pacific Lumber's co-counsel. Kathryn A. Coleman, Esq., and Eric J. Fromme, Esq., at Gibson, Dunn & Crutcher LLP, acts as Scotia Pacific's lead counsel. Kyung S. Lee, Esq., Esq., at Diamond McCarthy LLP is Scotia Pacific's co-counsel, replacing Porter & Hedges LLP. John D. Fiero, Esq., at Pachulski Stang Ziehl & Jones LLP, represents the Official Committee of Unsecured Creditors. When Pacific Lumber filed for protection from its creditors, it listed estimated assets and debts of more than $100 million. Scotia Pacific listed total assets of $932,000,000 and total debts of $765,978,335. The Debtors filed their Joint Plan of Reorganization on Sept. 30, 2007, which was amended on Dec. 20, 2007. Four other parties-in- interest have filed competing plans for the Debtors -- The Bank of New York Trust Company, N.A., as Indenture Trustee for the Timber Notes; the Official Committee of Unsecured Creditors; Marathon Structured Finance Fund L.P, the Debtors' DIP Lender and Agent under the DIP Credit Facility; and the Heartlands Commission, which represents the tribal members of the Bear River Band of Rohnerville Rancheria and PALCO employees. On July 8, 2008 the Court confirmed the Modified First Amended Joint Plan of Reorganization With Technical Modifications for the Debtors proposed by Marathon Structured Finance Fund L.P., Mendocino Redwood Company, LLC, and the Official Committee of Unsecured Creditors. The Debtors' exclusive plan filing period expired on Feb. 29, 2008. (Scotia/Pacific Lumber Bankruptcy News, Issue No. 66; http://bankrupt.com/newsstand/or 215/945-7000). PACIFIC LUMBER: BoNY Appeals Confirmation Order to District Court ----------------------------------------------------------------- The Bank of New York Trust Company, N.A., as Indenture Trustee for the Timber Noteholders; Scotia Pacific Company LLC; and Noteholders Scotia Redwood Foundation, Inc., Angelo, Gordon & Co. L.P., Aurelius Capital Management, L.P., Davidson Kempner Capital Management, LLC and CSG Investments, Inc., notified the U.S. Bankruptcy Court for the Southern District of Texas, Corpus Christi Division, that they have taken separate appeals to the U.S. District Court for the Southern District of Texas from the Hon. Richard Schmidt's order dated July 8, 2008: -- confirming the Modified First Amended Joint Plan of Reorganization filed by plan proponents Marathon Structured Finance Fund L.P., Mendocino Redwood Company, LLC and the Official Committee of Unsecured Creditors; -- denying confirmation of the First Amended Chapter 11 Plan for Scopac as proposed by BoNY; and -- denying BoNY's request for the appointment of a Chapter 11 trustee. Among other things, the Appellants want the District Court to review whether Judge Schmidt erred in entering the Confirmation Order: (a) citing that the Marathon/Mendocino Plan "discriminates unfairly" and is not "fair and equitable" and thus, fails to comply with the requirements set forth in Section 1129(b)(2)(A) of the Bankruptcy Code; (b) citing that the novel "cash out" theory proposed in the Marathon/Mendocino Plan and accepted by the Bankruptcy Court fails to provide BoNY with the indubitable equivalent of its secured claim as required by Section 1129(b)(2)(A)(iii); (c) based on the cramdown provisions of Section 1129(b)(2)(A) through a combination of cash, purportedly as the indubitable equivalent of BoNY's collateral, and the retention of its lien on Scopac's interest in the Headwaters Litigation, purportedly "securing" BoNY's unsecured deficiency claim; (d) concluding that the Marathon/Mendocino Plan was a "transfer" rather than a sale; (e) citing that the Marathon/Mendocino Plan transfers the value of Scopac's assets to Mendocino for a pre-determined price without first paying Scopac's secured and unsecured creditors, and without subjecting that transfer to a market test; and (f) after the Plan Proponents made material modifications to the Marathon/Mendocino Plan without re-soliciting votes on the Plan. Pending a final ruling of their appeals, the Appellants asked the Bankruptcy Court to stay the Confirmation Order. BoNY asserted that granting a stay pending appeal is appropriate since (1) there is a substantial likelihood of success on the merits of its Appeal; (2) there will be irreparable injury if the stay is not granted; (3) the granting of a stay will not substantially harm other parties; and (4) the granting of the stay would serve the public interest. BoNY contended that unlike the Marathon/Mendocino Plan, its proposed competing Plan meets all of the requirements of Section 1129 and provides that Scopac's assets would be sold through an open, competitive auction process, with a "stalking horse" bid of $603 million as the floor, rather than $517 million as the ceiling as proposed by the Marathon/Mendocino Plan Proponents. The Confirmation Order was the result of numerous other errors that are reversible on appeal, Zack A. Clement, Esq., at Fulbright & Jaworski LLP, in Houston, Texas, argued, on BoNY's behalf. He pointed out that Judge Schmidt confirmed the Marathon/Mendocino Plan based on the vote of: * a single secured creditor, Bank of America, NT&SA, the holder of a $36.37 million secured claim who accepted both Plans and was indifferent as between the two plans; and * a separate "trade" class consisting of less than $250,000 in voted claims against Scopac. Scopac, for its part, insisted that a stay pending Appeal would protect the Debtors' creditors against the risk that Mendocino decides not to consummate the Marathon/Mendocino Plan; the appeal is unsuccessful; and creditors who would have received payments under the Marathon/Mendocino Plan are damaged as a result. Fifth Circuit Appeal The Appellants also sought permission to appeal the Confirmation Order directly to U.S. Court of Appeals for the Fifth Circuit. On BoNY's behalf, Zack A. Clement, Esq., at Fulbright & Jaworski LLP, in Houston, Texas, noted that recent amendments to Section 158(d) of the Judiciary and Judicial Procedures Code provides for a direct appeal to the Court of Appeals from a bankruptcy court or district court, if the bankruptcy court or district court certifies that either (i) the order involves a question of law as to which there is no controlling decision or involves a matter of public importance; (ii) the order involves a question of law requiring resolution of conflicting decisions; or (iii) an immediate appeal from the order may materially advance the progress of the case. The Appellants maintained that all these circumstances are present in their request. Among other things, the Appellants asserted that the Confirmation Order fundamentally contravened decades of well-settled bankruptcy jurisprudence and overlooked the irremediable flaws and legal inadequacies inherent in the Marathon/Mendocino Plan, which creates a conflict on several key questions of law. The Appellants believe that a decision from the Fifth Circuit will instill a sense of confidence in the Confirmation Order, or its reversal, that will effectively end the contentious litigation in the Debtors' bankruptcy cases. Marathon, et al., Talk Back Marathon, Mendocino, the Creditors Committee, the California Resources Agency, the California Department of Forestry and Fire Protection, the California Department of Fish and Game, the California Wildlife Conservation Board, the California Regional Water Quality Control Board, North Coast Region, and the State Water Resources Control Board disputed that BoNY was not able to prove that it will suffer irreparable harm if it did not obtain a stay pending Appeal. "[T]his alone compelled denial of BoNY's Motion," the Marathon Parties and the California State Agencies averred. The Marathon Parties further contended that BoNY failed to meet a single criteria of Section 158(b) and thus, does not merit certification to appeal directly to the Fifth Circuit. On Marathon and Mendocino's behalf, John D. Penn, Esq., at Haynes and Boone LLP, in Fort Worth, Texas, argued that the Appeals and the Stay Request represent yet another attempt by BoNY to sabotage implementation of the Marathon/Mendocino Plan and force the Debtors into liquidation despite the overwhelming rejection of the BoNY Plan by creditors. Stay Request Denied The Hon. Richard Schmidt denied the Apellants' request for a Stay Pending Appeal on July 15, 2008, but stayed the finality of the Confirmation Order to allow the Appellants to seek further relief from the Fifth Circuit. The issues that the Appellants intend to raise on appeal were all raised and considered at the Confirmation Hearing, Judge Schmidt opined. The key issue during the Confirmation Hearing that resulted in confirmation of the Marathon/Mendocino Plan was the determination of the value of the Scopac Timberlands, Judge Schmidt noted. He emphasized that BoNY is being paid the present value of its secured claim in cash as that value was found by the Bankruptcy Court. The Bankruptcy Court found that an auction for the Scopac assets would not result in a higher recovery to BoNY than under the Marathon/Mendocino Plan. Any harm to BoNY is speculative and BoNY has not demonstrated irreparable harm absent a stay, Judge Schmidt stated. Moreover, the Bankruptcy Court disputed BoNY's argument that only harm to Scopac should be considered. "This is not correct," Judge Schmidt asserted. "The Confirmation Order and the Marathon/Mendocino Plan provide for reorganization of all of the Debtors and a stay of the Confirmation Order will therefore impact many parties, not just creditors of Scopac." If the Marathon/Mendocino Plan is stayed pending appeal, there is a substantial risk that Marathon and Mendocino may be unwilling or unable to proceed with the Plan at or before the conclusion of any appeal, Judge Schmidt said. Even if the Appellants are able to prove that a stay pending appeal is warranted, the Court would have condition a stay on BoNY providing some security for potential damages caused by the delay in consummating the Marathon/Mendocino Plan, Judge Schmidt averred. BoNY, he noted, will have to insure the continued operation of both PALCO and Scopac during the appeal by providing a $25 million DIP facility for Scopac, a $5 million DIP facility for PALCO, and a bond for $176 million. In light of the multitude of important public issues affected by the Confirmation Order which will impact a host of communities and the Plan confirmation being recognized as materially advancing a case to its conclusion, the Bankruptcy Court granted the Apellants' request for direct certification to pursue an appeal before the Fifth Circuit so that the parties can gain closure regarding the Confirmation Order. A full-text copy of the Bankruptcy Court's Findings of Fact and Conclusions of Law on the BoNY Parties' Stay Request Pending Appeal is available for free at: http://bankrupt.com/misc/PALCO_FindingsFactStayDenial.pdf BoNY Responds BoNY asserts that the law does not require an appealing party to imagine, and then secure, against any and all theoretical possibilities and hypothetical risks. If the Court extends BoNY' duty to post a security to incorporate speculative, albeit theoretically "possible" losses, the extension would constitute a significant departure from established law and would provide appellees precisely the type of "windfall" that courts have expressly instructed should not occur, BoNY contends. Fifth Circuit Decision In a separate report, Bloomberg News relate that a quorum of two out of three judges at the Fifth Circuit denied the Appellants stay request. The Fifth Circuit did not detail the explanation for the decision, according to the news source. The Fifth Circuit, however, granted the Appellants' request for an expedited review of the Appeal, Bloomberg said. About Pacific Lumber Based in Oakland, California, The Pacific Lumber Company -- http://www.palco.com/-- and its subsidiaries operate in several principal areas of the forest products industry, including the growing and harvesting of redwood and Douglas-fir timber, the milling of logs into lumber and the manufacture of lumber into a variety of finished products. Scotia Pacific Company LLC, Scotia Development LLC, Britt Lumber Co., Inc., Salmon Creek LLC and Scotia Inn Inc. are wholly owned subsidiaries of Pacific Lumber. Scotia Pacific, Pacific Lumber's largest operating subsidiary, was established in 1993, in conjunction with a securitization transaction pursuant to which the vast majority of Pacific Lumber's timberlands were transferred to Scotia Pacific, and Scotia Pacific issued Timber Collateralized Notes secured by substantially all of Scotia Pacific's assets, including the timberlands. Pacific Lumber, Scotia Pacific, and four other subsidiaries filed for chapter 11 protection on Jan. 18, 2007 (Bankr. S.D. Tex. Case Nos. 07-20027 through 07-20032). Jack L. Kinzie, Esq., at Baker Botts LLP, is Pacific Lumber's lead counsel. Nathaniel Peter Holzer, Esq., Harlin C. Womble, Jr., Esq., and Shelby A. Jordan, Esq., at Jordan Hyden Womble Culbreth & Holzer PC, is Pacific Lumber's co-counsel. Kathryn A. Coleman, Esq., and Eric J. Fromme, Esq., at Gibson, Dunn & Crutcher LLP, acts as Scotia Pacific's lead counsel. Kyung S. Lee, Esq., Esq., at Diamond McCarthy LLP is Scotia Pacific's co-counsel, replacing Porter & Hedges LLP. John D. Fiero, Esq., at Pachulski Stang Ziehl & Jones LLP, represents the Official Committee of Unsecured Creditors. When Pacific Lumber filed for protection from its creditors, it listed estimated assets and debts of more than $100 million. Scotia Pacific listed total assets of $932,000,000 and total debts of $765,978,335. The Debtors filed their Joint Plan of Reorganization on Sept. 30, 2007, which was amended on Dec. 20, 2007. Four other parties-in- interest have filed competing plans for the Debtors -- The Bank of New York Trust Company, N.A., as Indenture Trustee for the Timber Notes; the Official Committee of Unsecured Creditors; Marathon Structured Finance Fund L.P, the Debtors' DIP Lender and Agent under the DIP Credit Facility; and the Heartlands Commission, which represents the tribal members of the Bear River Band of Rohnerville Rancheria and PALCO employees. On July 8, 2008, the Court confirmed the Modified First Amended Joint Plan of Reorganization With Technical Modifications for the Debtors proposed by Marathon Structured Finance Fund L.P., Mendocino Redwood Company, LLC, and the Official Committee of Unsecured Creditors. The Debtors emerged from bankruptcy protection on July 30, 2008. The Debtors' exclusive plan filing period expired on Feb. 29, 2008. (Scotia/Pacific Lumber Bankruptcy News, Issue No. 66; http://bankrupt.com/newsstand/or 215/945-7000). PACIFIC LUMBER: Asks Court to Compel Enforcement of Conf. Order --------------------------------------------------------------- The Pacific Lumber Company, Mendocino Redwood Company LLC, Marathon Structured Finance Fund LLP, and the Official Committee of Unsecured Creditors ask the U.S. Bankruptcy Court for the Southern District of Texas to compel the Debtors to: (a) comply with the Bankruptcy Court Order confirming the Modified First Amended Joint Plan of Reorganization proposed by Marathon, Mendocino and the Creditors Committee; and (b) consummate the Marathon/Mendocino Plan. The PALCO Parties inform the Court that The Bank of New York Trust Company, N.A., as Indenture Trustee for the Timber Noteholders, and Scotia Pacific Company LLC have indicated that they will refuse to cooperate in any consummation of the Marathon/Mendocino Plan. Nathaniel Peter Holzer, Esq., at Jordan, Hyden, Womble, Culbreth & Holzer, P.C., in Corpus Christi, Texas, tells the Hon. Richard Schmidt that immediately after the U.S. Court of Appeals for the Fifth Circuit denied various parties' motions for stay pending appeal of the Confirmation Order, BoNY sent a letter asserting that despite the denial of the Stay Motions, the Marathon/Mendocino Plan cannot be consummated. BoNY contended that the definition of the term "Effective Date" in the Marathon/Mendocino Plan requires that the Confirmation Order be a Final Order and that the definition of "Final Order" requires that BoNY's appeals be exhausted. "That contention is meritless," Mr. Holzer argues. He maintains that the Confirmation Order expressly stated that it is a final order and that the Confirmation Order provides that it will govern in the event of any inconsistency with the Marathon/Mendocino Plan. "All parties understood that the Confirmation Order was a Final Order within the meaning of the MRC/Marathon Plan," Mr. Holzer points out. "[BoNY] is wrong in its assertion that the requirements for consummation of the MRC/Marathon Plan are not satisfied." BoNY Objects The express terms of the Marathon/Mendocino Plan unequivocally provide that the 'Effective Date' of that Plan will not occur so long as any appeal from the Confirmation Order remains pending, BoNY contends. On BoNY's behalf, William Greendyke, Esq., at Fulbright & Jaworski LLP, in Houston, Texas, notes that there are two requirements for the Effective Date to occur -- (1) there must be a Final Order confirming the plan, and (2) all conditions to the consummation of the Plan must have been satisfied or waived. "The Confirmation Order cannot be a Final Order if any appeal is pending," Mr. Greendyke emphasizes. In this light, BoNY asks the Court to deny the request of the PALCO Parties. Court's Ruling Judge Schmidt finds that the Marathon/Mendocino Plan and the Confirmation Order direct the Debtors, their estates, the Litigation Trusts, the Litigation Trust Boards, and the Litigation Trustees to take all necessary and appropriate steps and perform all necessary or appropriate acts to consummate the terms and conditions of the Marathon/Mendocino Plan. The parties are bound by the terms of the Confirmation Order and failure to abide by its terms risks contempt, Judge Schmidt opines. The Court clarifies that the Confirmation Order is no longer stayed at present time. If the Plan Proponents want to establish an effective date, they should do so by the means set out in the Plan, the Court notes. "If and when any party affirmatively refuses to act, the Court will take up enforcement requests," Judge Schmidt makes clear. The Court affirms that the Confirmation Order is a Final Order. Scopac in Contempt of Court, the PALCO Parties Assert The PALCO Parties informs Judge Schmidt that despite the Bankruptcy Court affirming that the Confirmation Order is a Final Order, Scopac refuses execute any documents in connection with the closing of the Marathon/Mendocino Plan. Scopac and its officers and directors have indicated that they will refuse to comply with the Court's Orders until the Fifth Circuit rules on their request for Stay Pending an Appeal, Nathaniel Peter Holzer, Esq., at Jordan Hyden, Womble & Culbreth, P.C., in Corpus Christi, Texas, relates. Scopac seems to have given itself a stay of the Court's Orders without any basis or judicial sanction, Mr. Holzer points out. Mr. Holzer notes that the Fifth Circuit has denied the Appellants' Motion for Stay Pending an Appeal. There can be no further basis to fail to comply with the orders of the Court, he points out. Against this backdrop, the PALCO Parties ask Judge Schmidt to hold Scopac in contempt of the Bankruptcy Court's Orders. Parties Stipulate Subsequently, to resolve their disputes, PALCO, Marathon, Mendocino and Scopac agree that: (1) Scopac and its officers and directors will deliver immediately all requested documents necessary to consummate, implement or effectuate the Marathon/Mendocino Plan; (2) Mendocino would hold the documents in escrow until July 29; (3) Scopac and its board of directors, officers, directors, employees will direct, authorize execute and deliver all applicable transfer documents in connection with the consummation of the Marathon/Mendocino Plan; and (4) In the event Scopac and its officers and directors fail to comply with the Stipulation, the Court will treat the non-compliance as contempt of the Court, and will entertain an immediate motion for sanctions against Scopac and its officers and directors. Judge Schmidt approves the parties' stipulation. About Pacific Lumber Based in Oakland, California, The Pacific Lumber Company -- http://www.palco.com/-- and its subsidiaries operate in several principal areas of the forest products industry, including the growing and harvesting of redwood and Douglas-fir timber, the milling of logs into lumber and the manufacture of lumber into a variety of finished products. Scotia Pacific Company LLC, Scotia Development LLC, Britt Lumber Co., Inc., Salmon Creek LLC and Scotia Inn Inc. are wholly owned subsidiaries of Pacific Lumber. Scotia Pacific, Pacific Lumber's largest operating subsidiary, was established in 1993, in conjunction with a securitization transaction pursuant to which the vast majority of Pacific Lumber's timberlands were transferred to Scotia Pacific, and Scotia Pacific issued Timber Collateralized Notes secured by substantially all of Scotia Pacific's assets, including the timberlands. Pacific Lumber, Scotia Pacific, and four other subsidiaries filed for chapter 11 protection on Jan. 18, 2007 (Bankr. S.D. Tex. Case Nos. 07-20027 through 07-20032). Jack L. Kinzie, Esq., at Baker Botts LLP, is Pacific Lumber's lead counsel. Nathaniel Peter Holzer, Esq., Harlin C. Womble, Jr., Esq., and Shelby A. Jordan, Esq., at Jordan Hyden Womble Culbreth & Holzer PC, is Pacific Lumber's co-counsel. Kathryn A. Coleman, Esq., and Eric J. Fromme, Esq., at Gibson, Dunn & Crutcher LLP, acts as Scotia Pacific's lead counsel. Kyung S. Lee, Esq., Esq., at Diamond McCarthy LLP is Scotia Pacific's co-counsel, replacing Porter & Hedges LLP. John D. Fiero, Esq., at Pachulski Stang Ziehl & Jones LLP, represents the Official Committee of Unsecured Creditors. When Pacific Lumber filed for protection from its creditors, it listed estimated assets and debts of more than $100 million. Scotia Pacific listed total assets of $932,000,000 and total debts of $765,978,335. The Debtors filed their Joint Plan of Reorganization on Sept. 30, 2007, which was amended on Dec. 20, 2007. Four other parties-in- interest have filed competing plans for the Debtors -- The Bank of New York Trust Company, N.A., as Indenture Trustee for the Timber Notes; the Official Committee of Unsecured Creditors; Marathon Structured Finance Fund L.P, the Debtors' DIP Lender and Agent under the DIP Credit Facility; and the Heartlands Commission, which represents the tribal members of the Bear River Band of Rohnerville Rancheria and PALCO employees. On July 8, 2008, the Court confirmed the Modified First Amended Joint Plan of Reorganization With Technical Modifications for the Debtors proposed by Marathon Structured Finance Fund L.P., Mendocino Redwood Company, LLC, and the Official Committee of Unsecured Creditors. The Debtors emerged from bankruptcy protection on July 30, 2008. The Debtors' exclusive plan filing period expired on Feb. 29, 2008. (Scotia/Pacific Lumber Bankruptcy News, Issue No. 66; http://bankrupt.com/newsstand/or 215/945-7000). PHOENIX LABS: Voluntary Chapter 11 Case Summary ----------------------------------------------- Debtor: Phoenix Labs Rising, LLC Attn: Forchelli, Curto, Crowe, Deegan, Schwartz, Mineo & Cohn, LLP 330 Old Country Rd. P.O. Box 31 Mineola, NY 11501 Tel: (516) 248-1700 Bankruptcy Case No.: 08-74063 Chapter 11 Petition Date: July 30, 2008 Court: Eastern District of New York (Central Islip) Judge: Alan S. Trust Debtor's Counsel: Gary M. Kushner, Esq. Email: gkushner@fcsmcc.com Forchelli, Curto, Crowe, Deegan, Schwartz, Mineo & Cohn, LLP 330 Old Country Rd. P.O. Box 31 Mineola, NY 11501 Tel: (516) 248-1700 Fax: (516) 248-1729 http://www.fcsmcc.com/ Estimated Assets: $1,000,000 to $10,000,000 Estimated Debts: $1,000,000 to $10,000,000 The Debtor did not file a list of its largest unsecured creditors. PHOENIX 2002-1: Moody's Downgrades Class C Euronotes to Ba3 ----------------------------------------------------------- Moody's Investors Service downgraded three classes of notes issued by Phoenix 2002-1. These rating actions are the result of negative credit migration in the underlying pool of corporate reference credits and AIG's downgrade to Aa3. Today's rating actions are: Phoenix 2002-1: (1) Series 1 USD 49,748,415 Floating Rate Euronotes Class A due 2010 Current Rating: Aa3 Prior Rating: Aa2, on review for downgrade (2) Series 1 USD 58,161,660 Floating Rate Euronotes Class B due 2010 Current Rating: A1 Prior Rating: Aa3, on review for downgrade (3) Series 1 USD 86,626,350 Floating Rate Euronotes Class C due 2010 Current Rating: Ba3 Prior Rating: Ba1, on review for downgrade POLYMER GROUP: S&P Trims Corp. Credit Rating to 'B+' from 'BB-' --------------------------------------------------------------- Standard & Poor's Ratings Services lowered its corporate credit rating on Polymer Group Inc. to 'B+' from 'BB-' and the rating on Polymer's senior secured bank loan to 'BB-' from 'BB'. The outlook is negative. "The downgrade reflects our expectation that the company will not be able to strengthen its financial profile to the level necessary to support the former ratings because of escalating raw material costs, difficult economic conditions, and competitive pricing in some markets," said Standard & Poor's credit analyst Cynthia Werneth. Although S&P are increasingly concerned about the effect of extraordinarily high raw material costs on liquidity, S&P believes that the company can continue to pass on those cost increases to customers with a lag and maintain sufficient liquidity by lowering capital spending. At March 29, 2008, total debt, adjusted to include capitalized operating leases and modest off-balance-sheet receivables financing and postretirement obligations, was about $460 million. The ratings on Charlotte, North Carolina-based Polymer Group reflect a vulnerable business risk profile and highly leveraged financial profile. S&P could lower the ratings if raw material cost inflation or other operating challenges cause liquidity to narrow to unacceptable levels. A downgrade could also result if operating performance deteriorates to the extent that the funds from operations to debt ratio drops to the 10% area, or if the company unexpectedly initiates acquisitions or shareholder rewards before the financial profile has strengthened. Conversely, S&P could revise the outlook to stable if operating performance stabilizes at about current levels and liquidity concerns abate. PREMIER PROPERTIES: Founder's Personal Assets for Auction Aug. 9 ---------------------------------------------------------------- The personal properties of Christopher P. White, founder of Bridgwater Falls Shopping Center developer, Premier Properties USA, will be auctioned at 8:00 a.m. to 10:00 a.m. on Aug. 9, 2008, at the Hamilton County Fairgrounds in Noblesville, Indiana, Trading Markets says. The assets for sale include Mr. White's Harley-Davidson bike, six Italian scooters, 22-foot pontoon boat, 15 flat panel televisions, and a 14-seater home theater, TM reports. The Troubled Company Reporter said on June 18, 2008, that Mr. White was charged with fraud and theft purportedly committed in January 2008. TM relates that he was captured on June 25, 2008. About Premier Properties Indianapolis-based Premier Properties USA -- http://www.ppusa.com/ -- is founded in 1993 and holds about $1 billion in real estate projects that are currently under development. Premier is the developer of Bridgwater Falls Shopping Center, -- http://www.shopbridgewaterfalls.com/-- a 635,000-square-foot, open-air "power village" center off Ohio Bypass 4 and Princeton Road in Hamilton, Ohio. Target, Dicks Sporting Goods, JCPenney, Best Buy, Old Navy, TJ Maxx, Bed Bath & Beyond, Books-A-Million, Michaels and PetSmart are some of Bridwater Falls' tenants. Additionally, the village at Bridgewater Falls, further enhances the center's draw with fashion shops, restaurants and entertainment features. The Debtor filed for chapter 11 bankruptcy protection on April 23, 2008 (Bankr. S.D. Ind. Case No. 08-04607). The Debtor faced an $80-million foreclosure action by Wachovia Bank. William J. Tucker, Esq., represents the Debtor. When it filed for bankruptcy, the Debtor reported estimated assets and debts between $1 million and $10 million. The Court converted the Debtor's chapter 11 case to a chapter 7 liquidation proceeding in May 2008. The Debtor's founder, Christopher P. White, was charged with fraud and theft on June 16, 2008. QUEBECOR WORLD: CCAA Stay Extended Until September 30 ----------------------------------------------------- Quebecor World Inc. and its debtor-affiliates sought and obtained extension of the Companies' Creditors Arrangement Act stay until Sept. 30, 2008, from the Quebec Superior Court of Justice. In support of the Applicants' request, Louis J. Gouin, Esq., at Ogilvy Renault, LLP, in Montreal, Canada, told the Canadian Court that the extension of the Stay Period is necessary for the Applicants to continue the discussions of their business plan with stakeholders and develop one or more restructuring plans to maximize long term value for the benefit of all stakeholders. Mr. Gouin assured the CCAA Court that no creditor will suffer any material prejudice by the extension of the Stay Period. He added that it is a condition precedent to the Applicants' financing under the DIP Documents that the Initial Order and stay, at all times, be in full force and effect. Ernst & Young Inc., the Court-appointed monitor of the CCAA Applicants, supported the Applicants' extension request. About Quebecor World Based in Montreal, Quebec, Quebecor World Inc. (TSX: IQW) (NYSE: IQW), -- http://www.quebecorworldinc.com/-- provides market solutions, including marketing and advertising activities, well as print solutions to retailers, branded goods companies, catalogers and to publishers of magazines, books and other printed media. It has 127 printing and related facilities located in North America, Europe, Latin America and Asia. In the United States, it has 82 facilities in 30 states, and is engaged in the printing of books, magazines, directories, retail inserts, catalogs and direct mail. The company has operations in Mexico, Brazil, Colombia, Chile, Peru, Argentina and the British Virgin Islands. Quebecor World and 53 of its subsidiaries, including those in Canada, filed a petition under the Companies' Creditors Arrangement Act before the Superior Court of Quebec, Commercial Division, in Montreal, Canada, on Jan. 20, 2008. The Honorable Justice Robert Mongeon oversees the CCAA case. Francois-David Pare, Esq., at Ogilvy Renault, LLP, represents the Company in the CCAA case. Ernst & Young Inc. was appointed as Monitor. On Jan. 21, 2008, Quebecor World (USA) Inc., its U.S. subsidiary, along with other U.S. affiliates, filed for chapter 11 bankruptcy on Jan. 21, 2008 (Bankr. S.D.N.Y Lead Case No. 08- 10152). Anthony D. Boccanfuso, Esq., at Arnold & Porter LLP represents the Debtors in their restructuring efforts. The Official Committee of Unsecured Creditors is represented by Akin Gump Strauss Hauer & Feld LLP. Based in Corby, Northamptonshire, Quebecor World PLC -- http://www.quebecorworldplc.com/-- is the U.K. subsidiary of Quebecor World Inc. that specializes in web offset magazines, catalogues and specialty print products for marketing and advertising campaigns. The company employs around 290 people. Quebecor PLC was placed into administration with Ian Best and David Duggins of Ernst & Young LLP appointed as joint administrators effective Jan. 28, 2008. As of Sept. 30, 2007, Quebecor World's unaudited consolidated balance sheet showed total assets of $5,554,900,000, total liabilities of $3,964,800,000, preferred shares of $175,900,000, and total shareholders' equity of $1,414,200,000. The Debtors have until Sept. 30, 2008, to file a plan of reorganization in the chapter 11 case. The Debtors' CCAA stay has been extended to Sept. 30, 2008. (Quebecor World Bankruptcy News, Issue No. 22; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000). QUEBECOR WORLD: Ernst & Young Provides CCAA Status Report --------------------------------------------------------- Ernst & Young, Inc., the Court-appointed monitor of Quebecor World Inc., and certain of its affiliates' reorganization proceedings under the Canadian Companies' Creditors Arrangement Act, filed reports to the Quebec Superior Court of Justice with respect to the activities of the companies and certain events occurring since May 2008. Stabilization of Operations The Monitor reported that the Applicants are finalizing the reconciliation of their prepetition trade liabilities. The analysis is ongoing as payments are issued in respect of the prepetition liabilities permitted by the U.S. Chapter 11 Proceedings, the receipt and investigation of certain 20-day administrative and reclamation claims, and clarification of certain consignment arrangements and the set-off rights claimed by certain customers must be taken into consideration. * Banking The Applicants are continuing their discussions with CIBC to widen the services offered by CIBC as well as explore alternative solutions to reduce the levels of redundant work being done by the Applicants' personnel. As of July 14, 2008, the Applicants have deposited $30,000,000, in the cash account at Bank of America to hold proceeds realized from the disposition of QW Memphis inventory held on site as of January 21, 2008. Certain services are being re-established with BofA, like automatic zero-balancing between the deposit lock box and concentration account; however, not all of the previously provided services have been re-established. Management continues to work with BofA to find ways to reduce the level of redundant manual work currently being done by the Companies' staff. * Intercompany Transactions According to E&Y, the intercompany transactions have largely been limited to the automatic centralized accounting transfer of accounts payable and accounts receivable funding of EUR19,000,000, for the Applicants' European operations, of which EUR5,700,000, was reimbursed from the proceeds of the sale of the European Operations and $6,000,000, to the Latin American affiliates as authorized by the Initial Order and the Final DIP Order. * Financial Statements and Reporting Issues The Applicants expect to be in a position to release their quarterly financial statements for the six-month period ended June 30, 2008, on August 12, 2008. The Applicants are also working to develop financial statements for each of the U.S. Debtors at specific points in time, as requested by the Official Committee of Unsecured Creditors. E&Y relates that an extensive analysis is required to allocate certain transactions that have not been pushed down to the legal entity level in the past as the Applicants have not historically prepared financial statements on an entity by entity basis. Management expects to deliver these financial statements with the Canadian Court by the end of July 2008. Restructuring Initiatives * Reclamation Claims The U.S. Debtors received a total of 68 reclamation claims having an aggregate face value of $73,900,000. The U.S. Debtors expect to complete their review of the reclamation claims received within a few weeks, the Monitor said. They will then seek to reach agreement with their reclamation creditors and prepare and submit appropriate stipulations to the U.S. Court allowing the valid claims. * Sale of Real Property or Equipment Before the Petition Date, the Applicants initiated various marketing efforts to dispose redundant assets, which became non- productive largely as a result of the closing of operations at certain facilities over time, including facilities in Montreal, Ottawa, Brookfield and Lincoln. The Monitor related that the Montreal and Ottawa facilities are currently sublet to parties outside of the Quebecor World Group. The Applicants will consult with the Committees and file motions to obtain the authorization to execute any transaction for the sale of real property or equipment. DIP Financing As of July 6, 2008, Quebecor World, Inc., drew C$27,000,000, under the Revolving Loan Facility to fund its Canadian operations. As of July 6, 2008, the U.S. Debtors had excess available unrestricted cash from the Term Loan Facility totaling $140,000,000. The imbalance between Canada and the U.S. creates unnecessary interest expense to the Canadian operations and an inefficient use of U.S. liquidity, the Monitor said. As of July 14, 2008, the Applicants have not been able to use the funds already drawn under the Term Loan Facility and allocated to the U.S. Debtors prior to using the Revolving Loan Facility. The Applicants intend to continue their discussions with the financial' advisors to the Committees to resolve the issue. Current Financial Performance & Cash Flow Forecast * Cash Flow Results for the 10-Week Period Ended July 6, 2008 For the ten weeks ended July 6, 2008, the consolidated North American operations of the Applicants produced positive cash flow of $17,000,000, which is approximately $108,000,000 better than that projected for the same period in the cash flow forecast prepared by the Applicants. The $108,000,000 favorable variance includes an additional $7,000,000 in drawings under the Revolving Loan Facility. The Monitor said that the Applicants' management advised that the favorable variance is attributable to a number of factors including (i) the sale of their European operations, (ii) higher than projected accounts receivable collections, (iii) drawings under the Revolving Loan Facility, and (iv) a deferral of the funding of the Latin American non-petitioners' financing requirements. A full-text copy of the Cash Flow Forecast is available for free at http://ResearchArchives.com/t/s?2feb * Cash Flow Forecast for the 13-Week Period Ending Oct. 5, 2008 To assist in assessing the Applicants' short term financial performance and ongoing financing requirements, they prepared a revised cash flow forecast for the 13-week period ending Oct. 5, 2008. The Monitor said the Applicants' management expects that the consolidated North American operations will incur negative cash flow of $71,000,000 for the period. The Applicants had an unrestricted cash balance of $140,000,000, on July 6, 2008. The liquidity available to the Applicants is currently $385,000,000, and is forecasted to be at least $315,000,000 throughout Sept. 30, 2008. The Monitor related that since Jan. 1, 2008, about $31,300,000 of professional fees have been reported as expenses to the income statement. Status of Latin American Operations According to the Monitor, the Applicants are working on a transfer of $4,000,000 to the Colombian operations, which would completely utilize the $10,000,000 basket for non-petitioner liabilities for the Latin American Group, but would not consume any of the additional $5,000,000 basket for non-petitioner liabilities that relate to the operations of non-petitioners other than for the European operations. The Monitor related that Quebecor World Bogota, S.A., received a notice from a lender indicating that its existing lines of credit of approximately $8,000,000 needed to be renewed as they were overdue. A proposal to renew $6,000,000 of the Colombia Loans under a five-year agreement is under discussion with the lender. To execute the renewal, the Colombia Loans need to be repaid in full by QW Bogota. To refund the Colombia Loans, the Applicants will need to transfer $8,000,000 to QW Bogota, of which $2,000,000 will be on a temporary basis. The $2,000,000 advance will be refunded to the Applicants with the proceeds of the new $6,000,000 loan. The transfer is expected to be made by the end of July 2008. The Applicants' legal counsel confirmed that, to the extent the $8,000,000 transfer to QW Bogota is made from funds permitted for Latin America from the $10,000,000, and $5,000,000, baskets, the transfer will not create any defaults with the Final DIP Order, the Monitor told the CCAA Court. Status of the European Operations The Applicants had transferred a total of EUR19,000,000, to finance their European Operations. Of this amount, EUR5,700,000, has been refunded as part of the gross proceeds of sale of certain of its European assets. Applicants' Business Plan The Monitor related that the Applicants organized a three-day presentation in early July 2008 of its five-year business plan, including the visit of two plants located near Philadelphia, in the United States. An overview of the Business Plan was presented and the details of the business plan for each of the major business segments were presented by the management of each of the business segments. Since receiving the Business Plan, the financial advisors to the Committee have been conducting due diligence on the Business Plan. E&Y said the delivery of the Business Plan has been completed early in the restructuring proceedings. The Monitor added that the Applicants require more time to work with the Ad Hoc Bond Committee and Bank Syndicate to establish terms in which representatives of each committee would sign confidentiality agreements and obtain confidential information for purposes of negotiating the terms of the restructuring plan. The Monitor told the CCAA Court that it has made progress with respect to the requests from advisors for the Committee to conduct a factual investigation of information concerning the status of the intercompany accounts of Quebecor World group. However, the Monitor said the work is not yet completed, due to a number of factors, including, the complexity of the corporate structure and the very high level of interaction between the affiliates, and the fact that the employees who could assist the Monitor in performing the review had a heavy workload requiring them to direct their attention to other high priority projects like preparing monthly operating reports and other financial statements. As the Monitor, however, issued an interim report on its findings, a copy of which is available for free at: http://ResearchArchives.com/t/s?2fed About Quebecor World Based in Montreal, Quebec, Quebecor World Inc. (TSX: IQW) (NYSE: IQW), -- http://www.quebecorworldinc.com/-- provides market solutions, including marketing and advertising activities, well as print solutions to retailers, branded goods companies, catalogers and to publishers of magazines, books and other printed media. It has 127 printing and related facilities located in North America, Europe, Latin America and Asia. In the United States, it has 82 facilities in 30 states, and is engaged in the printing of books, magazines, directories, retail inserts, catalogs and direct mail. The company has operations in Mexico, Brazil, Colombia, Chile, Peru, Argentina and the British Virgin Islands. Quebecor World and 53 of its subsidiaries, including those in Canada, filed a petition under the Companies' Creditors Arrangement Act before the Superior Court of Quebec, Commercial Division, in Montreal, Canada, on Jan. 20, 2008. The Honorable Justice Robert Mongeon oversees the CCAA case. Francois-David Pare, Esq., at Ogilvy Renault, LLP, represents the Company in the CCAA case. Ernst & Young Inc. was appointed as Monitor. On Jan. 21, 2008, Quebecor World (USA) Inc., its U.S. subsidiary, along with other U.S. affiliates, filed for chapter 11 bankruptcy on Jan. 21, 2008 (Bankr. S.D.N.Y Lead Case No. 08- 10152). Anthony D. Boccanfuso, Esq., at Arnold & Porter LLP represents the Debtors in their restructuring efforts. The Official Committee of Unsecured Creditors is represented by Akin Gump Strauss Hauer & Feld LLP. Based in Corby, Northamptonshire, Quebecor World PLC -- http://www.quebecorworldplc.com/-- is the U.K. subsidiary of Quebecor World Inc. that specializes in web offset magazines, catalogues and specialty print products for marketing and advertising campaigns. The company employs around 290 people. Quebecor PLC was placed into administration with Ian Best and David Duggins of Ernst & Young LLP appointed as joint administrators effective Jan. 28, 2008. As of Sept. 30, 2007, Quebecor World's unaudited consolidated balance sheet showed total assets of $5,554,900,000, total liabilities of $3,964,800,000, preferred shares of $175,900,000, and total shareholders' equity of $1,414,200,000. The Debtors have until Sept. 30, 2008, to file a plan of reorganization in the chapter 11 case. The Debtors' CCAA stay has been extended to Sept. 30, 2008. (Quebecor World Bankruptcy News, Issue No. 22; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000). QUEBECOR WORLD: Committee Revised After Cellmark's Resignation -------------------------------------------------------------- Diana G. Adams, the United States Trustee for Region 2, has amended the list of members of the Official Committee of Unsecured Creditors after the resignation of Cellmark Paper, Inc., and Catalyst Pulp & Paper Sales, Inc. The Committee is now composed of: (1) Wilmington Trust Company Attn: Suzanne Macdonald 520 Madison Avenue, 33rd floor New York, NY 10022 Tel: (212) 415-0500 (2) Pension Benefit Guaranty Corp. Attn: Suzanne Kelly 1200 K Street, NW Washington, DC 20005 Tel: (212) 326-4070 x6367 (3) The Bank of New York Mellon Attn: David M. Kerr 101 Barclay Street - 8 West New York, NY 10286 Tel: (212) 815-5650 (4) MEGTEC Systems Inc. Attn: Gregory R. Linn 830 Prosper Rd. De Pere, WI 54115 Tel: (920) 337-1568 (5) Abitibi Consolidated Sales Corp. Attn: Madeleine Fequiere 1155 Metcalfe Street, Suite 800 Montreal, Quebec H3B 5H2 CANADA Tel: (514) 394-3638 Official creditors' committees have the right to employ legal and accounting professionals and financial advisors, at the Debtors' expense. They may investigate the Debtors' business and financial affairs. Importantly, official committees serve as fiduciaries to the general population of creditors they represent. Those committees will also attempt to negotiate the terms of a consensual Chapter 11 plan -- almost always subject to the terms of strict confidentiality agreements with the Debtors and other core parties-in-interest. If negotiations break down, the Committee may ask the Bankruptcy Court to replace management with an independent trustee. If the Committee concludes reorganization of the Debtor is impossible, the Committee will urge the Bankruptcy Court to convert the Chapter 11 cases to a liquidation proceeding. About Quebecor World Based in Montreal, Quebec, Quebecor World Inc. (TSX: IQW) (NYSE: IQW), -- http://www.quebecorworldinc.com/-- provides market solutions, including marketing and advertising activities, well as print solutions to retailers, branded goods companies, catalogers and to publishers of magazines, books and other printed media. It has 127 printing and related facilities located in North America, Europe, Latin America and Asia. In the United States, it has 82 facilities in 30 states, and is engaged in the printing of books, magazines, directories, retail inserts, catalogs and direct mail. The company has operations in Mexico, Brazil, Colombia, Chile, Peru, Argentina and the British Virgin Islands. Quebecor World and 53 of its subsidiaries, including those in Canada, filed a petition under the Companies' Creditors Arrangement Act before the Superior Court of Quebec, Commercial Division, in Montreal, Canada, on Jan. 20, 2008. The Honorable Justice Robert Mongeon oversees the CCAA case. Francois-David Pare, Esq., at Ogilvy Renault, LLP, represents the Company in the CCAA case. Ernst & Young Inc. was appointed as Monitor. On Jan. 21, 2008, Quebecor World (USA) Inc., its U.S. subsidiary, along with other U.S. affiliates, filed for chapter 11 bankruptcy on Jan. 21, 2008 (Bankr. S.D.N.Y Lead Case No. 08- 10152). Anthony D. Boccanfuso, Esq., at Arnold & Porter LLP represents the Debtors in their restructuring efforts. The Official Committee of Unsecured Creditors is represented by Akin Gump Strauss Hauer & Feld LLP. Based in Corby, Northamptonshire, Quebecor World PLC -- http://www.quebecorworldplc.com/-- is the U.K. subsidiary of Quebecor World Inc. that specializes in web offset magazines, catalogues and specialty print products for marketing and advertising campaigns. The company employs around 290 people. Quebecor PLC was placed into administration with Ian Best and David Duggins of Ernst & Young LLP appointed as joint administrators effective Jan. 28, 2008. As of Sept. 30, 2007, Quebecor World's unaudited consolidated balance sheet showed total assets of $5,554,900,000, total liabilities of $3,964,800,000, preferred shares of $175,900,000, and total shareholders' equity of $1,414,200,000. The Debtors have until Sept. 30, 2008, to file a plan of reorganization in the chapter 11 case. The Debtors' CCAA stay has been extended to Sept. 30, 2008. (Quebecor World Bankruptcy News, Issue No. 22; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000). QUEBECOR WORLD: Panel Taps Lowenstein Sandler as Conflicts Counsel ------------------------------------------------------------------ The Official Committee of Unsecured Creditors sought the permission of the U.S. Bankruptcy Court for the Southern District of New York to retain Lowenstein Sandler PC as its conflicts counsel, nunc pro tunc June 30, 2008. Webb Stanley, director of risk management at Abitibi-Consolidated Sales Corp., and co-chairman of the Creditors' Committee, related that the Committee's lead counsel, Akin Gump Strauss Hauer & Feld, LLP, has advised the Committee that certain entities who may be defendants in avoidance actions to be filed by the Debtors are or were the firm's clients, thus giving rise to potential or actual conflicts. The Committee told the Court that it needs to retain Lowenstein Sandler to prosecute the Avoidance Actions against those defendants that Akin Gump represents, as well as with future matters where Akin Gump may have a conflict. As the Committee's conflicts counsel, Lowenstein Sandler is expected to: (a) provide legal advice as necessary with respect to the Committee's powers and duties; (b) assist the Committee in investigating potential claims in connection with the Debtors' Chapter 11 cases including claims related to the Avoidance Actions; (c) prepare on behalf of the Committee, as necessary, applications, motions, complaints, answers, orders, agreements and other legal papers in connection with the Chapter 11 cases; (d) appear in Court and other courts on behalf of the Committee to prosecute necessary motions, applications, complaints and other pleadings, and otherwise to protect the interests of the Debtors' unsecured creditors in instances where Akin Gump has a conflict; and (e) perform other legal services as may be required by the Committee. With respect to the Avoidance Actions, Akin Gump and Lowenstein Sandler will be working to jointly represent the Committee, Mr. Stanley said. Akin Gump and Lowenstein Sandler have advised the Committee that they will coordinate their activities to avoid any duplication of effort between the two law firms. Lowenstein Sandler's customary hourly rates are: Professional Hourly Rates ------------ ------------ Principals $400 - $765 Senior Counsel $310 - $520 Counsel $335 - $405 Associates $220 - $340 Paralegals and Assistants $120 - $195 Lowenstein Sandler will also seek reimbursement of actual and necessary expenses it will incur during its servicing. Kenneth A. Rosen, a member at Lowenstein Sandler, maintained that his firm is a "disinterested person" as the term is defined in Section 101(14) of the Bankruptcy Code, and that it does not represent any interest adverse to the Debtors or their estates. The U.S. Trustee has notified the Court that it does not have any objection to the retention application. About Quebecor World Based in Montreal, Quebec, Quebecor World Inc. (TSX: IQW) (NYSE: IQW), -- http://www.quebecorworldinc.com/-- provides market solutions, including marketing and advertising activities, well as print solutions to retailers, branded goods companies, catalogers and to publishers of magazines, books and other printed media. It has 127 printing and related facilities located in North America, Europe, Latin America and Asia. In the United States, it has 82 facilities in 30 states, and is engaged in the printing of books, magazines, directories, retail inserts, catalogs and direct mail. The company has operations in Mexico, Brazil, Colombia, Chile, Peru, Argentina and the British Virgin Islands. Quebecor World and 53 of its subsidiaries, including those in Canada, filed a petition under the Companies' Creditors Arrangement Act before the Superior Court of Quebec, Commercial Division, in Montreal, Canada, on Jan. 20, 2008. The Honorable Justice Robert Mongeon oversees the CCAA case. Francois-David Pare, Esq., at Ogilvy Renault, LLP, represents the Company in the CCAA case. Ernst & Young Inc. was appointed as Monitor. On Jan. 21, 2008, Quebecor World (USA) Inc., its U.S. subsidiary, along with other U.S. affiliates, filed for chapter 11 bankruptcy on Jan. 21, 2008 (Bankr. S.D.N.Y Lead Case No. 08- 10152). Anthony D. Boccanfuso, Esq., at Arnold & Porter LLP represents the Debtors in their restructuring efforts. The Official Committee of Unsecured Creditors is represented by Akin Gump Strauss Hauer & Feld LLP. Based in Corby, Northamptonshire, Quebecor World PLC -- http://www.quebecorworldplc.com/-- is the U.K. subsidiary of Quebecor World Inc. that specializes in web offset magazines, catalogues and specialty print products for marketing and advertising campaigns. The company employs around 290 people. Quebecor PLC was placed into administration with Ian Best and David Duggins of Ernst & Young LLP appointed as joint administrators effective Jan. 28, 2008. As of Sept. 30, 2007, Quebecor World's unaudited consolidated balance sheet showed total assets of $5,554,900,000, total liabilities of $3,964,800,000, preferred shares of $175,900,000, and total shareholders' equity of $1,414,200,000. The Debtors have until Sept. 30, 2008, to file a plan of reorganization in the chapter 11 case. The Debtors' CCAA stay has been extended to Sept. 30, 2008. (Quebecor World Bankruptcy News, Issue No. 22; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000). RAD RESTAURANTS: Voluntary Chapter 11 Case Summary -------------------------------------------------- Debtor: RAD Restaurants, Inc. 501 Red Robin Road Virginia Beach, VA 23451 Bankruptcy Case No.: 08-72516 Type of Business: Donald Monosam holds 5%, Ronald A. De Angelis VA holds 63%, Shawn Adams holds 10%, Thomas Elsner holds 10%, and William Cairns holds 12% in the Debtor. Related Information: William Cairns, president, filed the petition on the Debtor's behalf. Chapter 11 Petition Date: July 29, 2008 Court: Eastern District of Virginia (Norfolk) Judge: Stephen C. St. John Debtor's Counsel: Kelly Megan Barnhart Marcus Crowley & Liberatore, P.C. 1435 Crossways Boulevard, Suite 300 Chesapeake, VA 23320 Tel: (757) 333-4500 Fax: 757-333-4501 (kbarnhart@mclfirm.com) 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/VAeb08-72516.pdf RAINBOW VEGAS: Voluntary Chapter 11 Case Summary ------------------------------------------------ Debtor: Rainbow Vegas Hotel, L.P. 401 W. Imperial Hwy. La Habra, CA 90631 Tel: (714) 459-7514 Bankruptcy Case No.: 08-14464 Chapter 11 Petition Date: July 30, 2008 Court: Central District Of California (Santa Ana) Debtor's Counsel: Helen R Frazer, Esq. Email: hfrazer@aalrr.com Atkinson Andelson Loya Ruud & Romo 17871 Park Plaza Dr. Ste. 200 Cerritos, CA 90703 Tel: (562) 653-3417 Fax: (562) 653-3333 http://www.aalrr.com/ Total Assets: $2,600,000 Total Debts: $2,750,000 The Debtor did not file a list of its largest unsecured creditors. RESIDENTIAL CAPITAL: GMAC LLC Posts Prelim $2.5BB Prelim Net Loss ----------------------------------------------------------------- GMAC LLC's wholly owned subsidiary GMAC Financial Services reported a 2008 second quarter net loss of $2.5 billion, compared to net income of $293 million in the second quarter of 2007. Affecting results in the quarter were a $716 million impairment of vehicle operating lease assets in the automotive finance business as a result of declining vehicle sales and lower used vehicle prices for certain segments, as well as significant losses at Residential Capital, LLC related to asset sales, valuation adjustments, and loan loss provisions. These items were partially offset by profitable results in the insurance and international auto finance businesses. "A soft economic environment and continued volatility in the mortgage and credit markets have significantly affected results for the second quarter," GMAC Chief Executive Officer Alvaro G. de Molina said. "While conditions such as higher fuel prices and weaker consumer credit prove to be headwinds, we continue to aggressively manage through this economic disruption to position GMAC for longer-term success. "Despite the current obstacles, we are encouraged by some key wins such as successfully completing our global refinancing and bond exchange, preserving long-term ownership of GMAC Bank, and de- risking the balance sheet at ResCap. There is still more to do and the management team is committed to taking the steps needed to ensure a solid foundation for the company, including continued realignment and streamlining of the mortgage business and better optimization of the risk and reward model in auto financing." Second Quarter Net Income/(Loss) ($ in millions) Q208 Q207 Change ---- ---- ------ Global Automotive Finance ($717) $395 ($1,112) Insurance 135 131 4 ResCap (1,860) (254) (1,606) Other(1) (40) 21 (61) Net Income/(Loss) ($2,482) $293 ($2,775) (1) Includes Commercial Finance operating segment, 21% ownership of former commercial mortgage unit and other corporate activities. Liquidity and Capital GMAC's consolidated cash and cash equivalents were $14.3 billion as of June 30, 2008, down slightly from the cash balance of $14.8 billion at March 31, 2008. Of these total balances, ResCap's cash and cash equivalents balance was $6.6 billion at quarter-end, up from $4.2 billion at March 31, 2008. The change in consolidated cash is related to repayment of GMAC and ResCap debt maturities, offset by new secured funding, lower asset levels and growth in deposits at GMAC Bank. In June, GMAC and ResCap announced a comprehensive series of transactions, which included extending key bank facilities, increasing the amount of available funding and further enhancing liquidity positions. The transactions included: -- GMAC obtaining a new, globally syndicated $11.4 billion secured revolving credit facility with a multi-year maturity which steps down to $7.9 billion after two years, and renewing the one-year, syndicated commercial paper back-up facility, New Center Asset Trust, in the amount of $10 billion. -- ResCap extending for one year the maturity on substantially all of its bilateral bank facilities totaling approximately $11.6 billion and obtaining a new $2.5 billion syndicated whole loan repurchase facility. -- ResCap executing private exchange and cash tender offers for U.S. dollar equivalent of $14.0 billion in aggregate principal amount of its outstanding debt, thereby reducing debt outstanding by $2.9 billion in principal and extending maturities. -- GMAC providing a $3.5 billion two-year senior secured credit facility to ResCap, which includes $750 million of first loss protection from General Motors Corp. and Cerberus ResCap Financing LLC, an affiliate of FIM Holdings LLC. -- Significantly reducing ResCap's tangible net worth covenants related to its credit facilities from the previous level of $5.4 billion to $250 million (excluding GMAC Bank) with consolidated liquidity of $750 million. During the second quarter, GMAC and certain affiliates of Cerberus disclosed approximately $2.4 billion of intended actions to support ResCap's near term liquidity. In addition, GMAC contributed to ResCap approximately $250 million (principal amount) of ResCap debt, which was subsequently retired. In exchange for the capital contribution, GMAC received additional shares of ResCap preferred equity equal to the market value of the debt as of March 31, 2008. As of June 30, 2008, ResCap's total equity base was $4.1 billion. The Federal Deposit Insurance Corporation granted a 10-year extension of GMAC Bank's current ownership on July 21, 2008. This action enables GMAC to strengthen the bank over the long-term, which is an important source of funding for mortgage and automotive financing activities. Global Automotive Finance GMAC's global automotive finance business reported a net loss of $717 million in the second quarter of 2008, compared to net income of $395 million in the year-ago period. Weaker performance was primarily driven by a $716 million pre-tax impairment on operating leases in the North American operation, which more than offset profits in the international business. In measuring the accounting impairment, the company was able to consider expected cash flows from various arrangements with General Motors Corp., including approximately $750 million related to the risk-sharing arrangement; approximately $800 million related to the residual support program; and approximately $350 of residual-related settlement payments. Additional factors affecting results were an increase in the provision for credit losses due to loss severity and lower gains on sales. The North American lease portfolio included approximately $30 billion in assets as of June 30, 2008 with approximately $12 billion in sport-utility vehicle leases, $6 billion in truck leases and $12 billion in car leases. The impairment of operating leases resulted from the sharp decline in demand and used vehicle sale prices for sport-utility vehicles and trucks in the U.S. and Canada, which has affected GMAC's remarketing proceeds for these vehicles. As a result of these market trends, GMAC is taking steps to reduce the volume of new lease originations in the U.S. The company will also discontinue the SmartBuy balloon contract program, suspend all incentivized lease programs in Canada and increase pricing and returns on other lending activities. GMAC's lease portfolio outside of North America has not experienced the same decrease in market value. New vehicle financing originations for the second quarter of 2008 decreased to $12.4 billion of retail and lease contracts from $14.0 billion in the second quarter of 2007, due to lower industry sales levels in North America. Credit losses have increased in the second quarter of 2008 to 1.40% of managed retail assets, versus 0.92% in the second quarter of 2007. The sharp increase is related to the current trends in used vehicle prices, which drove higher loss severity. While losses trended up, delinquencies decreased in the second quarter of 2008 to 2.30% of managed retail assets, versus 2.46% in the prior year period. The decrease reflects the recent measures taken to tighten underwriting criteria and increased customer servicing activities as the U.S. economy remains weak. Insurance GMAC's insurance business recorded net income of $135 million, up slightly from net income of $131 million in the second quarter of 2007. Results primarily reflect a non-recurring tax benefit, which offset higher weather-related losses. The insurance investment portfolio was $7.1 billion at June 30, 2008, compared to $7.4 billion at June 30, 2007. The decrease in the portfolio is due primarily to the repayment of intercompany loans related to the funding of the Provident Insurance acquisition. The majority of the investment portfolio is in fixed income securities with less than 10 percent invested in equity securities. In July, GMAC's plan to dividend 100 percent of the voting interest in the insurance business to GMAC's shareholders was completed. GMAC continues to hold 100 percent of the economic interest in GMAC Insurance. This action was taken in the interest of maintaining the current financial strength rating and, therefore, preserving the value of the operation. Real Estate Finance ResCap reported a net loss of $1.9 billion for the second quarter of 2008, compared to a net loss of $254 million in the year-ago period. Results are primarily attributable to significant losses from asset sales as ResCap reduced the size and risk of its balance sheet and higher loan loss provisions due to continued deterioration in certain European markets. Partially offsetting losses was a $647 million gain recognized from ResCap's tender offer and the retirement of debt. ResCap continues to implement an aggressive realignment of its business amid a vastly changing mortgage market, despite the negative impact to short-term earnings. Recent actions include significantly reducing the size and risk of its balance sheet, originating only mortgages with market liquidity, winding down the business lending portfolio, leveraging the world-class servicing platform, and continuing to rationalize the cost base. ResCap's U.S. residential finance business is beginning to stabilize as the company reduces balance sheet risk and continues to realign operations. While prime conforming loan production decreased modestly year-over-year with $12.2 billion in the second quarter of 2008 versus $12.7 billion in the year- ago period, production of higher-margin government loans increased to $3.8 billion this quarter compared to $800 million in the second quarter of 2007. In addition, operating expense targets were achieved. The international mortgage business experienced a decline in net income in the second quarter related to illiquidity in the global capital markets and the continued weakening of consumer credit in key markets. This drove significant realized and unrealized losses on loans held for sale. As a result of the market environment, ResCap has currently suspended all production outside of the U.S. with the exception of Canadian insured loans. The business lending operations also experienced continued pressure in the second quarter related to the decline in home sales and residential real estate values. Outlook GMAC continues to manage through a softer economic environment and a global market disruption with significant actions geared toward achieving longer-term financial health. Recent actions include: -- Stabilizing liquidity by refinancing bank lines, extending debt maturities, and preserving long-term ownership of GMAC Bank; -- Significantly reducing ResCap's balance sheet; -- Taking steps to increase pricing and improve returns for all automotive leasing and lending activities; -- Reducing the volume of new lease originations in the U.S. and suspending all incentivized lease programs in Canada; -- Executing a plan to preserve the value of the insurance business; and -- Leveraging the proven servicing platforms in mortgage and auto finance to mitigate frequency and severity of losses. Looking ahead, the company is focused on executing strategies that restore profitability and longer-term financial health including improving funding costs, evaluating opportunities to shed non-core operations, and taking steps that move GMAC toward an independent, bank-funded lender and servicer. About GMAC LLC GMAC LLC -- http://www.gmacfs.com/-- formerly General Motors Acceptance Corporation, is a global, diversified financial services company that operates in approximately 40 countries in automotive finance, real estate finance, insurance and other commercial businesses. GMAC was established in 1919 and employs approximately 26,700 people worldwide. GMAC Financial Services is in turn wholly owned by GMAC LLC. Cerberus Capital Management LP led a group of investors that bought a 51% stake in GMAC LLC from General Motors Corp. in December 2006 for $14 billion. About ResCap Headquartered in Minneapolis, Minnesota, Residential Capital LLC -- http://www.rescapholdings.com/-- is the home mortgage unit of GMAC Financial Services, which is in turn wholly owned by GMAC LLC. * * * As disclosed in the Troubled Company Reporter on June 18, 2008, Moody's Investors Service assigned ratings of Caa2 and Caa3 to Residential Capital LLC (ResCap)'s senior secured and junior secured bonds, respectively. These bonds were issued as part of ResCap's bond exchange which was completed on June 4, 2008. The ratings of ResCap's unsecured senior debt and unsecured subordinate debt were affirmed at Ca and C, respectively. Ratings are under review for downgrade. Separately the senior unsecured rating of GMAC LLC was downgraded to B3 from B2 with a negative outlook. As disclosed in the Troubled Company Reporter on June 9, 2008, Fitch Ratings has downgraded Residential Capital LLC's long- and short-term Issuer Default Ratings to 'D' from 'C' following completion of the company's distressed debt exchange. Fitch has also removed ResCap from Rating Watch Negative, where it was originally placed on May 2. RESIDENTIAL CAPITAL: S&P's 'CCC+' Rtng Unmoved by $1.9BB Net Loss ----------------------------------------------------------------- Standard & Poor's Ratings Services said that Residential Capital LLC's (CCC+/Negative/C) quarterly results will not affect its ratings on the company. Residential Capital LLC reported a $1.9 billion net loss in second-quarter 2008, driven by losses on asset sales ($1.4 billion pretax) and higher provision and reserve charges ($591 million pretax). Although Residential Capital LLC has made significant strides in reducing risk and continues to do so, the scale and scope of the deterioration in the housing and mortgage markets have overwhelmed Residential Capital LLC's progress. Importantly, the company completed a debt exchange in the quarter and obtained, restructured, or renewed various debt or liquidity facilities. Covenants are consequently more accommodative than under previous agreements and the company's liquidity position is stabilized, as no material debt maturities occur until 2010. Although it results in relief for the company, S&P considers the transaction a distressed debt exchange. S&P expects pressures to continue in the housing and mortgage markets into 2009. S&P therefore anticipate Residential Capital LLC continuing to suffer from high levels of provisioning, impairment charges, and asset sale losses. S&P factored these considerations into our 'CCC+' rating assigned on July 15, 2008, following the downgrade to 'SD' (selective default as a result of the above mentioned distressed debt exchange) on June 4, 2008. RITCHIE RISK: Disclosure Statement OK'd; Plan Hearing Set Sept. 11 ------------------------------------------------------------------ The Hon. Burton Lifland of the U.S. Bankruptcy Court for the Southern District of New York on Wednesday, July 30, 2008, approved a disclosure statement explaining the modified liquidation plan filed by Ritchie Risk-Linked Strategies Trading (Ireland) Ltd. and Ritchie Risk-Linked Strategies Trading (Ireland) II Ltd., The Deal's Terry Brennan relates. The Deal says that distribution to creditors heavily depends on proceeds from future settlements. Under the plan, Ritchie I creditor ABN AMRO Bank NV will initially get an undisclosed amount of cash after the plan's effectivity, plus some of the proceeds from an ongoing policy rights lawsuit between the Debtors and co-investor, Coventry First LLC. Ritchie II's unsecured creditors will be paid from the Coventry suit proceeds on a pro rated basis. Judge Lifland has set Sept. 11, 2008, as confirmation hearing on the plan, according to The Deal. Feud with Coventry The Deal reports that the Debtors, together with ABN Amro Bank, and various creditors, are expected to sue Coventry over rights to secondary life-insurance policies. Based on the report, the Coventry suit is likely to be presented before the U.S. District Court for the Southern District of New York. The Deal adds that the Conventry suit is expected to be filed before the bankruptcy judge confirms the Debtors' plan. The plaintiffs in the Coventry suit are seeking the difference between $700.0 million for acquired policies and $452.5 million proceeds of the sale of the policies. The Troubled Company Reporter related on March 7, 2008, that the Hon. Denise Cote of the U.S. District Court for the Southern District of New York rejected a request of Ritchie I and Ritchie II to reconsider a dismissal of claims of breach of fiduciary duty, fraud, and RICO violations filed against Coventry in a February 29 hearing. Judge Cote granted Coventry First's request to dismiss these claims filed by the Debtors on the same day. As a result, all of Ritchie's claims against Coventry have been dismissed by the District Court. The only remaining issue to be resolved is a breach of contract claim. The TCR said on March 20, 2008, that this allegation has been voluntary withdrawn by the Debtors and the entire case has now been dismissed. The Deal notes that in May 2007, Ritchie Capital sued Coventry for a $2 billion fraud and breach of contract. About Ritchie Risk-Linked Based in Dublin, Ireland, Ritchie Risk-Linked Strategies Trading (Ireland) Ltd. and Ritchie Risk-Linked Strategies Trading (Ireland) II Ltd. -- http://www.ritchiecapital.com/-- are Dublin- based funds of hedge fund group Ritchie Capital Management. The Debtors were formed as special purpose vehicles to invest in life insurance policies in the life settlement market. The Debtors filed for chapter 11 protection on June 20, 2007 (Bankr. S.D.N.Y. Case Nos. 07-11906 and 07-11907). Allison H. Weiss, Esq., David D. Cleary, Esq., and Lewis S. Rosenbloom, Esq., at LeBoeuf, Lamb, Greene & MacRae, LLP represent the Debtors in their restructuring efforts. No Official Committee of Unsecured Creditors has been appointed to date. When the Debtors filed for bankruptcy, they listed estimated assets and debts of more than $100 million. About Ritchie Capital Headquartered in Lisle, Illinois, Ritchie Capital Management Ltd. -- http://www.ritchiecapital.com/-- is a private asset management firm founded in 1997 by former college football linebacker Thane Ritchie. The company has offices in New York and Menlo Park, California. SEA CONTAINERS: Files Joint Ch. 11 Plan and Disclosure Statement ---------------------------------------------------------------- Sea Containers Caribbean Inc., Sea Containers Ltd., and Sea Containers Services Ltd. delivered a joint plan of reorganization and disclosure statement to the U.S. Bankruptcy Court for the District of Delaware on July 31, 2008. The Plan contemplates the transfer of the Debtors' direct and indirect interests in their marine and land container leasing business to Newco, the entity to which SCL will transfer its remaining container interests, and certain additional consideration, in exchange for Newco (i) equity, and (ii) cash, which will be funded from an exit facility, that will be used for, among other things, repayment of the Debtors' DIP Facility. SCL's Container Interests include equity interests in SPC Holdings, Ltd., and SCL's indirect ownership of Classes A and B Quotas in GE SeaCo SRL, the joint-venture entity between SCL and General Electric Capital Corporation. The Newco Equity, which value derives in large part from the value of SCL's interests in GE SeaCo, will be subject to holdbacks and trusts set aside for certain claims, and will be distributed on a pro rata basis to holders of allowed claims. By lending its cash to Reorganized SCL, Newco will receive the Newco Repatriation Note from Reorganized SCL. Subject to any priority claims and the post-emergence costs, the Newco Repatriation Note will be payable by Reorganized SCL from proceeds received on account of certain intercompany claims and interests, and other property of the bankruptcy estates, including any residual value that reverts to Reorganized SCL from the trusts and reserves established under the Plan. Prior to the date of bankruptcy, the Debtors initiated a restructuring program, and divested themselves of various non- container-leasing businesses, which included passenger rail transportation, passenger ferry operation, and hotel operation. Subsequent to the bankruptcy filing, they continued their prepetition restructuring initiatives, including selling Non- Container-Leasing Businesses during the Chapter 11 cases. While SCL has completed a significant portion of the divestitures and asset sales, under the Plan, the Debtors expect to complete the sale of their remaining Non-Container-Leasing Businesses and wind- down and liquidate the remaining Non-Debtor Subsidiaries. The Debtors anticipate that, under the Plan, the assets of Newco primarily will consist of the Container Interests, causes of action relating to Container Interests, and a note issued to Newco for repayment of certain cash lent by Newco enabling the Reorganized SCL to repay the balance of the DIP Facility, and fund Reorganized SCL's wind-down costs. Establishment of Reserves To ensure that directors from Non-Debtor Subsidiary do not seek to enforce Intercompany Claims, the Plan contemplates the establishment of a Non-Debtor Subsidiary Reserve, which will be held by the Non-Debtor Subsidiary Trustees, and will consist of certain cash and Newco Equity that will be available to fund payments to certain currently known creditors of the Non-Debtor Subsidiaries. The Plan provides that any residual property other than Newco Equity from the reserve will revert to the Reorganized SCL, and, after payment of the Post-Emergence Costs, be used to pay down the Newco Repatriation Note. The Plan also contemplates the establishment of the Equalization Claim Reserve, which will be administered by the Equalization Trustees, to be used to satisfy any valid Equalization Claim and certain other employee claims related to equalization of the Pension Schemes. Any residual property other than Newco Equity from the Equalization Claim and Non-Debtor Subsidiary Reserves will revert to Reorganized SCL, and, after payment of the Post-Emergence Costs, will be applied to pay down the Newco Repatriation Note. Any residual Newco Equity contained in the reserves will be canceled. After distribution of Newco Equity, the Reorganized SCL will be wound-down and dissolved in accordance with Bermuda law, where SCL was incorporated, and the residual cash realizations, if any, after payment of the Newco Repatriation Note, will be distributed to the holders of Allowed Claims. U.K. and Bermuda Scheme of Arrangements In light of SCL being incorporated in Bermuda, and SCSL being registered under the laws of England & Wales, the Debtors determined that certain arrangements are necessary to ensure that their joint plan of reorganization can be implemented under the laws of Bermuda, and England & Wales. The Debtors note that the effectiveness of the Bermuda Scheme of Arrangement and the U.K. Scheme of Arrangement is a condition to consummation of the Plan. To recall, after commencement of the Chapter 11 cases, the Debtors filed winding-up proceedings in Bermuda, and the Supreme Court of Bermuda appointed John C. McKenna and Gareth H. Hughes to serve as joint provisional liquidators to monitor the general progress of the cases. To implement the Plan with respect to SCL, the Debtors will seek the approval of the Bermuda Scheme of Arrangement from the Bermuda Court. The arrangement, together with the Disclosure Statement and other materials, will be circulated to all of SCL's known unsecured creditors, except for any employees that have or may assert claims that give rise to equalization-related employee claims as these claims will not be compromised under the Bermuda Arrangement. The UK. Scheme of Arrangement, along with certain other measures, will ensure that the Pension Settlement and certain aspects of the Plan are implemented in the U.K. The U.K. Arrangement, along with schemes in relation to certain Non-Debtor Subsidiaries are necessary as a result of English regulatory requirements. The U.K. Arrangement, together with a separate explanatory statement will be submitted to the High Court of England & Wales for approval, and will be circulated to creditors, whose claims will be compromised under the U.K. Arrangement. Creditors under each of the Bermuda Scheme of Arrangement and the U.K. Scheme of Arrangement will receive the same treatment they received under the Plan. The Bermuda Scheme of Arrangement and the U.K. Scheme of Arrangement provide for distributions to Creditors on the same terms as the Plan. Newco Common Stock Certificates Newco intends to initially issue the Newco Equity in book entry form only, and will be deposited in the form of common stock certificates registered in the name of The Depository Trust Company. Holders of Allowed Claims may hold their beneficial interests in the Newco certificates directly through the Depository, or indirectly through organizations with accounts with the Depository, a limited-purpose trust company organized under the laws of the State New York, and a member of the Federal Reserve System. Ongoing Negotiations with Creditors Committees The Debtors and their two creditors committees -- the Official Committee of Unsecured Creditors of Sea Containers Ltd., and the Official Committee of Unsecured Creditors of Sea Containers Services Ltd. -- continue to discuss certain corporate governance matters with respect to Newco. The terms of the corporate governance will be reflected in the Plan supplement documents to filed prior to the Plan's confirmation, and certain additional documents may be prepared to reflect any potential resolutions. If confirmation issues are not resolved to the Creditors Committees' satisfaction, all parties reserve their rights, including the right to address them at the Confirmation Hearing. Pension Settlement and Implementation Under the Pension Settlement, which is in full and final satisfaction of all of the Pension Claims against SCL, SCSL, and the Non-Debtor Subsidiaries, the 1983 Pension Scheme will receive a $153,800,000 allowed unsecured claim against SCL, and the 1990 Pension Scheme will receive a $40,200,000 allowed unsecured claim against SCL, plus the establishment of an Equalization Claim Reserve on account of a $69,000,000 Equalization Claim. The Debtors expect that the Court will issue an opinion regarding the Pension Settlement shortly. They disclose that they have prepared the Plan and the Disclosure Statement assuming that the Court will approve the settlement. The Debtors believe that consummation of the Plan is highly unlikely absent settlement of the Pension Claims, and that under that circumstances, projected recoveries and actual distributions would be materially reduced from those reflected in the Disclosure Statement. Establishing Newco Prior to the Plan's effective date, the Debtors will take the steps necessary to form Newco as a valid and legally existing Bermudian corporation. Newco's specific formation documents will be included in the Plan Supplement. On the Effective Date, the Debtors will transfer and assign all rights, title, and interests in the Container Interests to Newco, free and clear of any claims or liens. After its establishment, Newco will issue all Newco Equity, certificates and other documents as required by the Plan. The Plan Administrator will be authorized to, among other things, distribute Newco Equity on a pro rata basis to holders of Allowed SCL Other Unsecured Claims and Holders of Allowed Pension Schemes Unsecured Claims. The board of directors of Newco will consist of seven members, provided that no director may be a person, whose appointment is prohibited under the terms of the GE SeaCo Framework Agreement. The Debtors will disclose in the Plan Supplement the identities and affiliations of any person proposed to serve as a board member of Newco, and the nature of compensation for any member of the board, who is an insider. After the Plan Effective Date, operation, management and control of Reorganized SCL will be the general responsibility of the Bermuda Court-appointed joint provisional liquidators, Messrs. McKenna and Hughes, pursuant to the Bermuda Scheme of Arrangement and Bermuda law. Reorganized SCSL will be managed by SCSL liquidators or administrators, which will take appropriate steps to implement the U.K. Scheme of Arrangement and liquidate Reorganized SCSL in accordance with English law. After the Effective Date, Reorganized SCC and Non-Debtor Subsidiaries will also be managed by their liquidators. Exit Facility On the Effective Date, Newco will enter into an exit facility (i) to obtain the funds necessary to acquire the Container Interests from SCL at fair value and to provide a loan to Reorganized SCL for the satisfaction of the DIP Facility, (ii) to pay expenses in connection with the Exit Facility, and (c) for working capital and capital expenditures. The Debtors note that they have not yet received a commitment with respect to the Exit Facility but they are engaged in extensive negotiations with regards the Facility, which terms remain subject to further negotiation and entry into a binding term sheet. Therefore, although they believe that they will be able to obtain the Exit Facility on acceptable terms, there can be no assurance that they will ultimately be able to do so, the Debtors further noted. The Exit Facility and the supporting documentation will be executed prior to the Effective Date. Confirmation of the Plan will be deemed approval of the Exit Facility, and authorization for Newco to enter into and execute Exit Facility documents. If the Debtors cannot secure exit financing, the Plan cannot be confirmed. Dissolution of the Non-Debtor Subsidiary Trust On the earlier of Dec. 31, 2010, or two days after the date when each Non-Debtor Subsidiary Trust Claimant has received its payment, the trust will be dissolved, and all the trust's remaining assets, excluding Newco Equity, will be transferred to the Reorganized SCL for payment of the Newco Repatriation Note and other distribution. All Newco Equity in the trust will be canceled. Schedules and Deadlines The Debtors have notified parties-in-interest that the Court will convene a hearing on Sept. 4, 2008, at 10:00 a.m., to consider approval of the Disclosure Statement. Parties have until August 28 to file objections to the Disclosure Statement's approval. The Debtors further note that the hearing to consider confirmation of their Plan will be on Nov. 10, 2008, with objections due on November 1. A full-text copy of the Debtors' Joint Plan of Reorganization is available for free at: http://researcharchives.com/t/s?305e A full-text copy of the Debtors' Joint Disclosure Statement is available for free at: http://researcharchives.com/t/s?305f About Sea Containers Based in Hamilton, Bermuda, Sea Containers Ltd. -- http://www.seacontainers.com/-- provides passenger and freight transport and marine container leasing. Registered in Bermuda, the company has regional operating offices in London, Genoa, New York, Rio de Janeiro, Sydney, and Singapore. The company is owned almost entirely by United States shareholders and its primary listing is on the New York Stock Exchange (SCRA and SCRB) since 1974. On Oct. 3, the company's common shares and senior notes were suspended from trading on the NYSE and NYSE Arca after the company's failure to file its 2005 annual report on Form 10-K and its quarterly reports on Form 10-Q during 2006 with the U.S. Securities and Exchange Commission. Through its GNER subsidiary, Sea Containers Passenger Transport operates Britain's fastest railway, the Great North Eastern Railway, linking England and Scotland. It also conducts ferry operations, serving Finland and Estonia as well as a commuter service between New York and New Jersey in the U.S. Sea Containers Ltd. and two subsidiaries filed for chapter 11 protection on Oct. 15, 2006 (Bankr. D. Del. Case No. 06-11156). Edmon L. Morton, Esq., Edwin J. Harron, Esq., Robert S. Brady, Esq., Sean Matthew Beach, Esq., and Sean T. Greecher, Esq., at Young, Conaway, Stargatt & Taylor, represent the Debtors in their restructuring efforts. The Official Committee of Unsecured Creditors and the Financial Members Sub-Committee of the Official Committee of Unsecured Creditors of Sea Containers Ltd. is represented by William H. Sudell, Jr., Esq., and Thomas F. Driscoll, Esq., at Morris, Nichols, Arsht & Tunnell LLP. Sea Containers Services, Ltd.'s Official Committee of Unsecured Creditors is represented by attorneys at Willkie Farr & Gallagher LLP. In its schedules filed with the Court, Sea Containers disclosed total assets of $62,400,718 and total liabilities of $1,545,384,083. (Sea Containers Bankruptcy News, Issue No. 46; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000) SEA CONTAINERS: Discloses Classification & Treatment of Claims -------------------------------------------------------------- Under the Joint Plan of Reorganization, all claims against the Sea Containers Ltd. and its debtor-affiliates, other than DIP Facility Claims, Administrative Claims and Priority Tax Claims, are classified into five classes: Estimated Class Description Recovery Plan Treatment ----- ------------ ------- -------------- 1 Other Secured 100% Paid in full, in cash Claims or satisfied in full by return of collateral 2A SCL Other 100% Paid in full in cash Priority Claims 2B SCL Other 47%-61% Pro Rata share of SCL Unsecured Claims unsecured distribution 2C SCL Pension 47%-61% Per Pension Settlement, Schemes Claims pro rata share of SCL unsecured distribution 3A SCSL Other 45%-60% Pro Rata share of SCL Unsecured Claims unsecured distribution 3B SCSL Pension 47%-61% Per Pension Settlement, Schemes Claims pro rata share of SCL unsecured distribution 4A SCC Pension 47%-61% Per Pension Settlement, Schemes Claims pro rata share of SCL unsecured distribution 4B SCC Interests 100% Reinstated under the Plan 5 SCL Common Stock N/A Not entitled to receive Interests any distribution or retain any property The holders of Allowed Claims in Classes 2B, 2C, 3A, 3B and 4A, which are impaired, are entitled to vote to accept or reject the Plan. Holders of Allowed Claims in Classes 1, 2A and 4B, which are not impaired, are deemed to accept the Plan and, therefore, are not entitled to vote on the Plan. Holders of claims in Class 5 will not receive any distribution under the Plan and are, therefore, deemed to reject the Plan. They are likewise not entitled to vote to accept of reject the Plan. The projected recoveries are based on certain assumptions contained in the Plan's recovery analysis, including an assumed value of Newco Equity of $323,000,000 to $403,000,000 in aggregate, based on commonly accepted valuation techniques. The range of recovery for holder of most Classes of unsecured claims is based on various assumptions, including total assets available to pay the holders of approximately $331,000,000 to $431,000,000, and approximately $705,000,000 of final unsecured claims against Sea Containers Ltd., including a $69,000,000 Equalization Claim. The Debtors believe that the Plan is in the best interest of all of their creditors. The Debtors recommend that all holders of claims against, and interests in, the Debtors, whose votes are being solicited submit ballots to accept the Plan. About Sea Containers Based in Hamilton, Bermuda, Sea Containers Ltd. -- http://www.seacontainers.com/-- provides passenger and freight transport and marine container leasing. Registered in Bermuda, the company has regional operating offices in London, Genoa, New York, Rio de Janeiro, Sydney, and Singapore. The company is owned almost entirely by United States shareholders and its primary listing is on the New York Stock Exchange (SCRA and SCRB) since 1974. On Oct. 3, the company's common shares and senior notes were suspended from trading on the NYSE and NYSE Arca after the company's failure to file its 2005 annual report on Form 10-K and its quarterly reports on Form 10-Q during 2006 with the U.S. Securities and Exchange Commission. Through its GNER subsidiary, Sea Containers Passenger Transport operates Britain's fastest railway, the Great North Eastern Railway, linking England and Scotland. It also conducts ferry operations, serving Finland and Estonia as well as a commuter service between New York and New Jersey in the U.S. Sea Containers Ltd. and two subsidiaries filed for chapter 11 protection on Oct. 15, 2006 (Bankr. D. Del. Case No. 06-11156). Edmon L. Morton, Esq., Edwin J. Harron, Esq., Robert S. Brady, Esq., Sean Matthew Beach, Esq., and Sean T. Greecher, Esq., at Young, Conaway, Stargatt & Taylor, represent the Debtors in their restructuring efforts. The Official Committee of Unsecured Creditors and the Financial Members Sub-Committee of the Official Committee of Unsecured Creditors of Sea Containers Ltd. is represented by William H. Sudell, Jr., Esq., and Thomas F. Driscoll, Esq., at Morris, Nichols, Arsht & Tunnell LLP. Sea Containers Services, Ltd.'s Official Committee of Unsecured Creditors is represented by attorneys at Willkie Farr & Gallagher LLP. In its schedules filed with the Court, Sea Containers disclosed total assets of $62,400,718 and total liabilities of $1,545,384,083. (Sea Containers Bankruptcy News, Issue No. 46; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000) SEMGROUP LP: Taps Richards Layton as Bankruptcy Co-Counsel ---------------------------------------------------------- SemGroup L.P. sought authority from the U.S. Bankruptcy Court for the District of Delaware to employ Richards, Layton & Finger, P.A., as their bankruptcy co-counsel under an evergreen retainer, nunc pro tunc to the bankruptcy filing. Richards Layton had rendered legal services and advice to the Debtors since July 15, 2008, and has acquired knowledge of the Debtors' businesses, financial affairs, and capital structure, Terrence Ronan, SemGroup, L.P.'s acting president and chief executive officer, relates. The Debtors selected Richards Layton because of its experience and knowledge in the rights of debtors and creditors, and Chapter 11 business reorganizations. As the Debtors' co-counsel, Richards Layton will: (a) advise the Debtors of their rights, powers and duties as debtors and debtors-in-possession; (b) take all necessary action to protect and preserve the Debtors' estates, including the prosecution on behalf of the Debtors' estates, the defense of any actions commenced against those estates, negotiation of disputes, and the preparation of objections to claims filed against the estates; (c) prepare, on the Debtors' behalf, necessary motions, applications, answers, orders, reports and other legal papers necessary to the administration of the Debtors' estates; and (d) perform other necessary legal services in connection with the Debtors' Chapter 11 cases. The Debtors will pay these Richards Layton professionals according to their customary hourly rates: Professional Hourly Rate ------------ ----------- Mark D. Collins $600 John H. Knight $550 Maris J. Finnegan $300 L. Katherine Good $275 Ann Jerominski $185 The Debtors will also reimburse Richards Layton for any necessary out-of-pocket expenses the firm incurs while providing services for the Debtors. Prior to the bankruptcy filing, the Debtors had advanced $175,000 to Richards Layton as an evergreen retainer. John H. Knight, Esq., director at Richards Layton, stated that the members, counsel and associates of Richards Layton: -- do not have any connection with any of the Debtors, their affiliates, their creditors, or any other party in interest and their respective attorneys or accountants, the U.S. Trustee, the U.S. District Court for the District of Delaware, or any person employed in the said offices; -- are "disinterested persons" as the term is defined under Section 101(14) of the Bankruptcy Code; and -- do not represent any interest adverse to the Debtors and their estates. About SemGroup L.P. SemGroup L.P. -- http://www.semgrouplp.com/-- is a midstream service company providing the energy industry means to move products from the wellhead to the wholesale marketplace. SemGroup provides diversified services for end users and consumers of crude oil, natural gas, natural gas liquids, refined products and asphalt. Services include purchasing, selling, processing, transporting, terminaling and storing energy. SemGroup serves customers in the United States, Canada, Mexico, Wales, Switzerland and Vietnam. SemGroup L.P. and its debtor-affiliates filed for Chapter 11 protection on July 22, 2008 (Bankr. D. Del. Lead Case No. 08- 11525). These represent the Debtors' restructuring efforts: John H. Knight, Esq., L. Katherine Good, Esq. and Mark D. Collins, Esq. at Richards Layton & Finger; Harvey R. Miller, Esq., Michael P. Kessler, Esq. and Sherri L. Toub, Esq. at Weil, Gotshal & Manges LLP; and Martin A. Sosland, Esq. and Sylvia A. Mayer, Esq. at Weil Gotshal & Manges LLP. Kurtzman Carson Consultants L.L.C. is the Debtors' claims agent. The Debtors' financial advisors are The Blackstone Group L.P. and A.P. Services LLC. Margot B. Schonholtz, Esq., and Scott D. Talmadge, Esq., at Kaye Scholer LLP; and Laurie Selber Silverstein, Esq., at Potter Anderson & Corroon LLP, represent the Debtors' prepetition lenders. SemGroup L.P.'s affiliates, SemCAMS ULC and SemCanada Crude Company, sought protection under the Companies' Creditors Arrangement Act (Canada) on July 22, 2008. Ernst & Young, Inc. The CCAA stay expires on Aug. 20, 2008. SemGroup L.P.'s consolidated, unaudited financial conditions as of June 30, 2007, showed $5,429,038,000 in total assets and $5,033,214,000 in total debts. In their petition, they showed more than $1,000,000,000 in estimated total assets and more than $1,000,000,000 in total debts. (SemGoup Bankruptcy News, Issue No. 4; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000). * * * On July 25, 2008, the Troubled Company Reported that Fitch Ratings downgraded the ratings of SemGroup, L.P., SemCrude L.P, and SemCAMS Midstream Co. and simultaneously withdrawn all ratings. The withdrawn ratings include Issuer default Rating D assigned to SemGroup, L.P., SemCrude, L.P., and SemCAMS Midstream Co. Fitch Ratings has downgraded, removed from Rating Watch Negative, and simultaneously withdrawn (a) SemGroup, L.P.'s Senior unsecured to 'C' from'B/RR3'; (b) SemCrude L.P.'s Senior secured working capital facility to 'CCC' from 'BB-/RR1'; Senior secured revolving credit facility to 'CC' from 'B+/RR1'; and Senior secured term loan B to 'CC' from 'B+/RR1'; and (c) SemCAMS Midstream Co. (SemCAMS) Senior secured working capital facility to 'CCC' from 'BB-/RR1'; Senior secured revolving credit facility to 'CC' from 'B+/RR1'; and Senior secured term loan B to 'CC' from 'B+/RR1'. Also, Moody's Investors Service downgraded SemGroup, L.P.'s Corporate Family Rating to Ca from Caa2, its Probability of Default Rating to D from Caa3, its senior unsecured rating to C (LGD 5; 86%) from Ca (LGD 4; 69%), and its first secured bank facilities to Caa3 (LGD 3; 38%) from B3 (LGD 2; 21%). These actions affect rated cross guaranteed debt at parent SemGroup and its subsidiaries SemCams Holding Company and SemCrude, L.P. Further, Fitch Ratings lowered the Issuer Default Ratings of SemGroup, L.P., SemCrude L.P, and SemCAMS Midstream Co. to 'D' following the bankruptcy petition by SemGroup and most of units on July 22, 2008. These ratings are removed from Rating Watch where they were placed on July 17, 2008. The bank facility and securities ratings of SemGroup and units remain on Rating Watch Negative pending a review of the bankruptcy court petition. SEMGROUP LP: Wants to Hire Hall Estill as Special Counsel --------------------------------------------------------- SemGroup L.P. sought authority from the U.S. Bankruptcy Court for the District of Delaware to employ Hall, Estill, Hardwick, Gable, Golden & Nelson, P.C., as special corporate and litigation counsel, nunc pro tunc to the bankruptcy filing. The Debtors selected Hall Estill as special corporate and litigation counsel because of the firm's considerable experience in representing the Debtors in their general corporate, transactional and litigation matters. As the Debtors' counsel, Hall Estill will represent the Debtors with respect to their organizational structure, general business issues and governance issues, past, pending and future transactions and litigation, intercompany relationships and transactions, domestic and international patent, trademark, licensing and other intellectual property matters, tax and ERISA matters, and other regulatory and investigatory matters. The Debtors will pay the firm's professionals according to their customary hourly rates: Professional Hourly Rate ------------ ----------- Michael D. Cooke $375 W. Deke Canada $230 Genevieve L. Neff $200 Matthew T. Crook $200 Kenneth L. Hunt $350 Adam D. Grandon $180 Kyle D. Freeman $230 B. Kenneth Cox, Jr. $310 Richard Edmondson $350 Mark K. Blongewicz $310 Michael T. Keester $310 John F. Hiel, III $230 Michael D. Graves $375 Thomas A. Creekmore III $350 Steven W. Soule $285 Pamela H. Goldberg $280 Anthony J. Jorgensen $245 James M. Reed $335 Stuart E. Van De Wiele $225 Bonnie N. Hackler $230 John T Richer $200 The Hall Estill legal assistants charge between $130 to $140 per hour. Prior to the bankruptcy filing, the Debtors paid Hall Estill a retainer deposit of $200,000 for fees and $35,000 for expenses in connection with the firm's representation of the Debtors. Michael D. Cooke, Esq., at Hall Estill, assured the Court that the members, counsel and associates of his firm are "disinterested persons" as the term is defined under Section 101(14) of the Bankruptcy Code. About SemGroup L.P. SemGroup L.P. -- http://www.semgrouplp.com/-- is a midstream service company providing the energy industry means to move products from the wellhead to the wholesale marketplace. SemGroup provides diversified services for end users and consumers of crude oil, natural gas, natural gas liquids, refined products and asphalt. Services include purchasing, selling, processing, transporting, terminaling and storing energy. SemGroup serves customers in the United States, Canada, Mexico, Wales, Switzerland and Vietnam. SemGroup L.P. and its debtor affiliates filed for Chapter 11 protection on July 22, 2008 (Bankr. D. Del. Lead Case No. 08- 11525). These represent the Debtors' restructuring efforts: John H. Knight, Esq., L. Katherine Good, Esq. and Mark D. Collins, Esq. at Richards Layton & Finger; Harvey R. Miller, Esq., Michael P. Kessler, Esq. and Sherri L. Toub, Esq. at Weil, Gotshal & Manges LLP; and Martin A. Sosland, Esq. and Sylvia A. Mayer, Esq. at Weil Gotshal & Manges LLP. Kurtzman Carson Consultants L.L.C. is the Debtors' claims agent. The Debtors' financial advisors are The Blackstone Group L.P. and A.P. Services LLC. Margot B. Schonholtz, Esq., and Scott D. Talmadge, Esq., at Kaye Scholer LLP; and Laurie Selber Silverstein, Esq., at Potter Anderson & Corroon LLP, represent the Debtors' prepetition lenders. SemGroup L.P.'s affiliates, SemCAMS ULC and SemCanada Crude Company, sought protection under the Companies' Creditors Arrangement Act (Canada) on July 22, 2008. Ernst & Young, Inc. The CCAA stay expires on Aug. 20, 2008. SemGroup L.P.'s consolidated, unaudited financial conditions as of June 30, 2007, showed $5,429,038,000 in total assets and $5,033,214,000 in total debts. In their petition, they showed more than $1,000,000,000 in estimated total assets and more than $1,000,000,000 in total debts. (SemGoup Bankruptcy News, Issue No. 4; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000). * * * On July 25, 2008, the Troubled Company Reported that Fitch Ratings downgraded the ratings of SemGroup, L.P., SemCrude L.P, and SemCAMS Midstream Co. and simultaneously withdrawn all ratings. The withdrawn ratings include Issuer default Rating D assigned to SemGroup, L.P., SemCrude, L.P., and SemCAMS Midstream Co. Fitch Ratings has downgraded, removed from Rating Watch Negative, and simultaneously withdrawn (a) SemGroup, L.P.'s Senior unsecured to 'C' from'B/RR3'; (b) SemCrude L.P.'s Senior secured working capital facility to 'CCC' from 'BB-/RR1'; Senior secured revolving credit facility to 'CC' from 'B+/RR1'; and Senior secured term loan B to 'CC' from 'B+/RR1'; and (c) SemCAMS Midstream Co. (SemCAMS) Senior secured working capital facility to 'CCC' from 'BB-/RR1'; Senior secured revolving credit facility to 'CC' from 'B+/RR1'; and Senior secured term loan B to 'CC' from 'B+/RR1'. Also, Moody's Investors Service downgraded SemGroup, L.P.'s Corporate Family Rating to Ca from Caa2, its Probability of Default Rating to D from Caa3, its senior unsecured rating to C (LGD 5; 86%) from Ca (LGD 4; 69%), and its first secured bank facilities to Caa3 (LGD 3; 38%) from B3 (LGD 2; 21%). These actions affect rated cross guaranteed debt at parent SemGroup and its subsidiaries SemCams Holding Company and SemCrude, L.P. Further, Fitch Ratings lowered the Issuer Default Ratings of SemGroup, L.P., SemCrude L.P, and SemCAMS Midstream Co. to 'D' following the bankruptcy petition by SemGroup and most of units on July 22, 2008. These ratings are removed from Rating Watch where they were placed on July 17, 2008. The bank facility and securities ratings of SemGroup and units remain on Rating Watch Negative pending a review of the bankruptcy court petition. SEMGROUP LP: Organizational Meeting to Form Panel Held August 1 --------------------------------------------------------------- An organization meeting for the purpose of forming an official committee of unsecured creditors in the Chapter 11 cases of SemGroup, L.P., and its 24 debtor affiliates was held on August 1, 2008, at 1:00 p.m., at The Double Tree Hotel, located at 700 King Street, Salon K, in Wilmington, Delaware. The sole purpose of the meeting was to form a committee or committees of unsecured creditors in the Debtors' cases. No committee has been appointed as of press time. The organizational meeting is not the meeting of creditors pursuant to Section 341 of the Bankruptcy Code. A representative of the Debtor, however, may attend the Organizational Meeting, and provide background information regarding the bankruptcy cases. About SemGroup L.P. SemGroup L.P. -- http://www.semgrouplp.com/-- is a midstream service company providing the energy industry means to move products from the wellhead to the wholesale marketplace. SemGroup provides diversified services for end users and consumers of crude oil, natural gas, natural gas liquids, refined products and asphalt. Services include purchasing, selling, processing, transporting, terminaling and storing energy. SemGroup serves customers in the United States, Canada, Mexico, Wales, Switzerland and Vietnam. SemGroup L.P. and its debtor-affiliates filed for Chapter 11 protection on July 22, 2008 (Bankr. D. Del. Lead Case No. 08- 11525). These represent the Debtors' restructuring efforts: John H. Knight, Esq., L. Katherine Good, Esq. and Mark D. Collins, Esq. at Richards Layton & Finger; Harvey R. Miller, Esq., Michael P. Kessler, Esq. and Sherri L. Toub, Esq. at Weil, Gotshal & Manges LLP; and Martin A. Sosland, Esq. and Sylvia A. Mayer, Esq. at Weil Gotshal & Manges LLP. Kurtzman Carson Consultants L.L.C. is the Debtors' claims agent. The Debtors' financial advisors are The Blackstone Group L.P. and A.P. Services LLC. Margot B. Schonholtz, Esq., and Scott D. Talmadge, Esq., at Kaye Scholer LLP; and Laurie Selber Silverstein, Esq., at Potter Anderson & Corroon LLP, represent the Debtors' prepetition lenders. SemGroup L.P.'s affiliates, SemCAMS ULC and SemCanada Crude Company, sought protection under the Companies' Creditors Arrangement Act (Canada) on July 22, 2008. Ernst & Young, Inc. The CCAA stay expires on Aug. 20, 2008. SemGroup L.P.'s consolidated, unaudited financial conditions as of June 30, 2007, showed $5,429,038,000 in total assets and $5,033,214,000 in total debts. In their petition, they showed more than $1,000,000,000 in estimated total assets and more than $1,000,000,000 in total debts. (SemGoup Bankruptcy News; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000). * * * On July 25, 2008, the Troubled Company Reported that Fitch Ratings downgraded the ratings of SemGroup, L.P., SemCrude L.P, and SemCAMS Midstream Co. and simultaneously withdrawn all ratings. The withdrawn ratings include Issuer default Rating D assigned to SemGroup, L.P., SemCrude, L.P., and SemCAMS Midstream Co. Fitch Ratings has downgraded, removed from Rating Watch Negative, and simultaneously withdrawn (a) SemGroup, L.P.'s Senior unsecured to 'C' from'B/RR3'; (b) SemCrude L.P.'s Senior secured working capital facility to 'CCC' from 'BB-/RR1'; Senior secured revolving credit facility to 'CC' from 'B+/RR1'; and Senior secured term loan B to 'CC' from 'B+/RR1'; and (c) SemCAMS Midstream Co. (SemCAMS) Senior secured working capital facility to 'CCC' from 'BB-/RR1'; Senior secured revolving credit facility to 'CC' from 'B+/RR1'; and Senior secured term loan B to 'CC' from 'B+/RR1'. Also, Moody's Investors Service downgraded SemGroup, L.P.'s Corporate Family Rating to Ca from Caa2, its Probability of Default Rating to D from Caa3, its senior unsecured rating to C (LGD 5; 86%) from Ca (LGD 4; 69%), and its first secured bank facilities to Caa3 (LGD 3; 38%) from B3 (LGD 2; 21%). These actions affect rated cross guaranteed debt at parent SemGroup and its subsidiaries SemCams Holding Company and SemCrude, L.P. Further, Fitch Ratings lowered the Issuer Default Ratings of SemGroup, L.P., SemCrude L.P, and SemCAMS Midstream Co. to 'D' following the bankruptcy petition by SemGroup and most of units on July 22, 2008. These ratings are removed from Rating Watch where they were placed on July 17, 2008. The bank facility and securities ratings of SemGroup and units remain on Rating Watch Negative pending a review of the bankruptcy court petition. SOMERSET MEDICAL: Moody's Affirms Ba2 Rating on Series 2003 Bonds ----------------------------------------------------------------- Moody's Investors Service has affirmed the Ba2 rating assigned to Somerset Medical Center's outstanding Series 2003 bonds issued by the New Jersey Health Care Facilities Financing Authority. This update is in conjunction with annual surveillance and the refinancing out SMC's outstanding Series A (1994) bonds ($27.2 million) with approximately $26 million of VRDO bonds supported by a letter of credit from TD Bank, N.A. Moody's Investors Service has assigned a rating of Aa2/VMIG 1 to the Series 2008 (Variable Rate) Bonds based upon the letter of credit (LOC) provided by TD Bank, N.A.; the structure and legal protections of the transaction, which ensures timely payment of debt service and purchase price to bondholders; and Moody's evaluation of the credit quality of the bank issuing the letter of credit. Moody's currently rates TD Bank, N.A. Aa2 for its long-term obligations and Prime-1 for its short-term obligations. The rating outlook on TD Bank N.A. is stable. The affirmation of the rating and negative outlook, despite a very recent trend of improved financial performance and the addition of $10 million to its balance sheet from the sale of its cancer center, incorporates the introduction of put risk associated with the Series 2008 bonds combined with the weak liquidity of this single site hospital located in Somerville, NJ. LEGAL SECURITY: First mortgage on the medical center physical plant; Gross revenues pledge; Debt Service Reserve Fund. Cross default provisions for the 2008 bonds and 2003 bonds. Bank covenants match bond covenants for days cash on hand test and MADS coverage when consultant is required. However, an inability to meet the 1.0 times coverage test is an event of default under the letter of credit and an immediate termination of the bonds. INTEREST RATE DERIVATIVES: None following refunding of Series A bonds. STRENGTHS *Favorable geographic location and demographics in affluent Somerset County contribute to its dominant inpatient market share as the only hospital in the County *A modern and attractive physical plant that has been fully upgraded and should require modest routine capital investment through the intermediate term. Service enhancements have been made to the oncology program (new cancer center opened during 2006), sleep center program (largest program in tri-state area), wound care (including hyperbaric treatment), dedicated stroke unit, addition of intensivists to staff, and expansion of inpatient behavioral health service. *Sale of its cancer center retires $15 million of debt and adds $10 million of cash to balance sheet, although a lease of this space from the new owner will result in similar annual expenses. *Renegotiated managed care contracts included sizable rate increases that bring contracts to market rates over time. *Recent closure of Muhlenberg Hospital, located in the secondary service area, should provide for additional needed volume to SMC and help cover costs. Credentialing applications from current Muhlenberg physicians have increased. CHALLENGES *Inability to take advantage of its attractive location and position as the only hospital in Somerset County. Strategic initiatives and service line enhancements have been slow to demonstrate results that favorably impact bottom line performance. Competitive ambulatory centers opening in its market that are impacting financial performance and redirecting ambulatory surgical volume from SMC. *Historical inability to meet budgeted expectation from core operations due to annual extraordinary and unanticipated factors each year. *Inpatient volume decline of 3.3% in FY2007 offsets the improved revenue generated from renegotiated managed care contracts. Outpatient surgical volume declined by 17% in 2007 following the opening of a competing same day surgery center located nearby and surgeons who have chosen to be out of network. *Historically inconsistent and modest operating performance and cashflow culminated in large, $10 million operating loss for FY2007 (before investment income of $2.5 million) and 45% reduction in operating cashflow. Pressing need to increase cashflow to offset debt service requirements and MADS coverage. *Leveraged balance sheet highlighted by weak and declining days of cash on hand (43 days at FYE2007) required consultant to be hired since cash covenant (50 days of cash on hand) and MADS coverage test (1.1 times) not met; cash to debt is very weak at 30.1% (pro forma) and cash to puttable debt is a weak 1.3 times with modest excess liquidity. RECENT DEVELOPMENTS/RESULTS Fiscal 2007 was completed with a $10 million operating deficit before investment income of $2.5 million, which includes $6 million of additional third party reserves taken during the year. Nonetheless, even if these reserves were excluded, the performance in 2007 would mark a low point in operating performance over the last five years and materially increased from operating losses that hovered around $1.4 million. Volume is down materially on both an inpatient admissions (3.32% decline) and same day surgical volume (17.7% decline) compared to the prior year, contributing to the 41.7% decline in total cashflow for fiscal 2007. Volume has always been a critical issue for SMC given the high capital structure of the facility and the leveraged balance sheet it must support. Moody's and management expected better financial results in FY 2007 as a result of growth in clinical programs, physician development and the opening of emergency room that were expected to sufficiently offset the impact of a new ambulatory surgery center that opened in April 2007. Emergency room visits were up but did not translate into admissions as more of the volume was non-acute and ambulatory and did not ultimately require hospitalization. Increasing bad debt expense has also hindered improvement to financial performance. The volume declines were not offset by the double digit rate increases that went into effect during FY 2007 from United/Oxford, Aetna and Blue Cross. Surgical volume has also been impacted by SMC's surgeons who chose to remain out of network during the year. Outpatient volumes are expected to be further impacted during 2008 when another same day surgery center opens that is owned by SMC's neurosurgeons and orthopedists opens. Volume declines as a result of that facility's opening can be expected from the southern part of the service area which management expects to impact providers in New Brunswick more than at SMC due to the proximity to that facility. SMC is expecting to benefit from the imminent closure of Muhlenberg Regional Medical Center (MRMC). Already, applications to join its staff have increased from current Muhlenberg physicians and MRMC's chief operating officer has been hired by SMC to recruit additional physicians and aid in their transition to SMC. While SMC does not expect to gain the bulk of MRMC's 9,500 admissions, it has budgeted 500 admissions from MRMC to SMC beginning in the second half of the calendar year and expects 20- 30 of MRMC's physicians to become active admitters to SMC. SMC also owns the ambulance service that operates in MRMC's primary market which should result in increased transports from that service area to SMC. The sale of SMC's cancer center for $25 million to a health care REIT in a sale/leaseback transaction will reduce debt and add a much needed $10 million to unrestricted cash. Annual expenses will increase by $300 thousand but the reduction in debt improves some key debt ratios. Balance sheet measures have been weakening over the last two years, with cash declining to $26.5 million (43 days) from $32.8 million (including Foundation) at FYE 2006 due to operating performance, causing cash days to decline materially from 59.7 days at FYE06. SMC did not meet its 50 days cash on hand covenant at year end 2007 or its 1.10 times MADs coverage test and a consultant has been hired. The addition of $10 million from the proceeds of the cancer center improves days cash on hand to 60 days (pro forma) and improves cash-to-debt to 30.1% from a weak 19.4% at FYE07 when excluding the cancer center debt and adding the cash to the balance sheet. By refinancing its Series A bonds, SMC will be terminating its swaps, a favorable credit factor. The Letter of Credit from TD Bank , N.A. expires on August 7, 2013 unless extended and is sized for full principal plus 36 days of interest at the maximum rate applicable to the Bonds (12%). A debt service coverage ratio of 1.25 times and 50 days of cash on hand are the financial covenants included in the LOC. Failure to meet these tests is an event of default. Any purchase draw on the letter of credit must be repaid within 367 days of the draw date. Material adverse event covenant has been excluded as an event of default. Outlook The negative outlook, despite the positive impact of the sale of the cancer center on the balance sheet and early indications that operating performance is improving, is based on our need for the medical center to meet its budget, and incorporates the potential impact of put risk included in the 2008 bonds. The outlook will not be revised to stable until liquidity increases to higher levels and is maintained. What could change the rating--UP Trend of improving operating performance; balance sheet improvement that is sustained; trend of meeting expectations What could change the rating--DOWN Additional debt, inability to meet budgeted expectations, any reduction in liquidity, inability to reverse trend of operating deficits KEY INDICATORS Assumptions & Adjustments: -Based on financial statements for Somerset Medical Center -First number reflects audit year ended December 31, 2006 -Second number reflects audit year December 31, 2007 -Investment returns normalized at 6% unless otherwise noted *Inpatient admissions: 16,413; 15,868 *Total operating revenues: $211.7 million; $224.4 million *Moody's-adjusted net revenue available for debt service: $19.8 million; $11.5 million *Total debt outstanding: $141.6 million; $136.2 million *Maximum annual debt service (MADS): $12.142 million *MADS Coverage with reported investment income: 1.58 times; 1.0 times *Moody's-adjusted MADS Coverage with normalized investment income: 1.63 times; 0.93 times *Debt-to-cash flow: 10.62 times; 29.15 times *Days cash on hand: 59.7 days; 43.6 days *Cash-to-debt: 23.2%; 19.4% *Operating margin: (0.7) %; (4.5)% *Operating cash flow margin: 8.3%; 4.3% RATED DEBT (debt outstanding as of July 23, 2008) Series 2003, $81.39 million outstanding, Ba2 rating Series 2008, $26.0 million (preliminary), Ba2 rating STANFIELD/RMF: Moody's Hikes 3 Classes of Notes to Baa2 from B1 --------------------------------------------------------------- Moody's Investors Service has upgraded these notes issued by Stanfield / RMF Transatlantic CDO Ltd.: Class Description: U.S.$15,000,000 Class C Floating Rate Notes Due 2015 Prior Rating: A2 Current Rating: Aaa Class Description: U.S.$19,500,000 Class D-1 Floating Rate Notes Due 2015 Prior Rating: B1 Current Rating: Baa2 Class Description: U.S.$9,000,000 Class D-2 Floating Rate Target Yield Notes Due 2015 Prior Rating: B1 Current Rating: Baa2 Class Description: U.S.$5,000,000 Class D-3 Fixed Rate Target Yield Notes Due 2015 Prior Rating: B1 Current Rating: Baa2 In addition, Moody's has withdrawn the ratings on the following notes: Class Description: U.S.$512,000,000 Class A-1 Floating Rate Notes Due 2015 Prior Rating: Aaa Current Rating: WR Class Description: U.S.$50,000,000 Class A-2 Fixed Rate Notes Due 2015 Prior Rating: Aaa Current Rating: WR Class Description: U.S.$23,000,000 Class A-3 Floating Rate Notes Due 2015 Prior Rating: Aaa Current Rating: WR Class Description: U.S.$36,500,000 Class B-1 Floating Rate Notes Due 2015 Prior Rating: Aaa Current Rating: WR Class Description: U.S.$20,000,000 Class B-2 Fixed Rate Notes Due 2015 Prior Rating: Aaa Current Rating: WR According to Moody's, these rating actions are as a result of ongoing delevering of the transaction. SUN-TIMES MEDIA: Polar Securities Declares 10.7% Equity Stake ------------------------------------------------------------- Polar Securities Inc. beneficially owns 8,768,163 shares of the Sun-Times Media Group Inc. common stock, constituting approximately 10.7% of the shares of the common stock. South Pole Capital Master Fund beneficially owns 3,676,500 shares of the Sun-Times common stock, constituting approximately 4.4% of the Shares of the common stock outstanding. South Pole Capital LP beneficially owns 5,091,663 shares of the Sun-Times common stock, constituting approximately 6.2% of the Shares of the common stock outstanding. Polar Fund Management III Inc. beneficially owns 5,091,663 shares of the Sun-Times common stock, constituting approximately 6.2% of the shares of the common stock outstanding. Headquartered in Chicago, Sun-Times Media Group Inc. (NYSE: SVN) - - http://www.thesuntimesgroup.com/-- is dedicated to being the premier source of local news and information for the greater Chicago area. Its media properties include the Chicago Sun-Times and Suntimes.com as well as newspapers and Web sites serving more than 200 communities throughout the Chicago area. Based in Toronto, Ontario, Hollinger Inc. (TSX: HLG.C)(TSX: HLG.PR.B) -- http://www.hollingerinc.com/-- which owns approximately 70.1% voting and 19.7% equity interest in Sun-Times Media Group Inc., 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. As reported in the Troubled Company Reporter on April 3, 2008, Sun-Times Media Group Inc.'s consolidated balance sheet at Dec. 31, 2007, showed $791.6 million in total assets and $866.6 million in total liabilities, resulting in a total stockholders' deficit of $75.0 million. TANSY LTD: Voluntary Chapter 11 Case Summary -------------------------------------------- Debtor: Tansy Ltd. P.O. Box 50556 Santa Barbara, CA 93150 Bankruptcy Case No.: 08-11766 Related Information: Malcolm Levinthal, vice president and secretary, filed the petition on the Debtor's behalf. Chapter 11 Petition Date: July 28, 2008 Court: Central District Of California (Santa Barbara) Judge: Robin Riblet Debtor's Counsel: Stephen M. Feldman, Esq. 15915 Ventura Boulevard Suite 201 Encino, CA 91436 Tel: (818) 907-0334 Estimated Assets: $1 million to $10 million Estimated Debts: $500,000 to $1 million The Debtor did not file a list of its largest unsecured creditors. THOMAS MECHANICAL: Case Summary & 20 Largest Unsecured Creditors ---------------------------------------------------------------- Debtor: Thomas Mechanical Corp. 7115 N. Ave., Ste. 524 Oak Park, IL 60302 Bankruptcy Case No.: 08-00451 Chapter 11 Petition Date: July 30, 2008 Court: Northern District of Illinois (Chicago) Debtor's Counsel: Forrest L. Ingram, Esq. Email: fingram@fingramlaw.com 79 W. Monroe St., Ste. 900 Chicago, IL 60603 Tel: (312) 759-2838 Fax: (312) 759-0298 http://www.fingramlaw.com Total Assets: $261,303 Total Debts: $2,138,143 A copy of Thomas Mechanical Corp's petition is available for free at: http://bankrupt.com/misc/ilnb08-00451.pdf TIMBERWOLF I: Moody's Junks Ratings of 2011 and 2039 FR Notes ------------------------------------------------------------- Moody's Investors Service has downgraded the rating of two classes of notes issued by Timberwolf I, Ltd. and left one of these classes on review for further possible downgrade. The notes affected by today's rating action are: Class Description: U.S. $9,000,000 Class S-1 Floating Rate Notes Due 2011 Prior Rating: Aa2, on review for possible downgrade Current Rating: Caa1, on review for possible downgrade Class Description: U.S. $100,000,000 Class A-1a Floating Rate Notes Due 2039 Prior Rating: Caa2, on review for possible downgrade Current Rating: C The transaction experienced an Event of Default, as reported by the Trustee on March 10, 2008, caused by a default in the payment, when due and payable, of interest on the Class S-2 Notes, Class A Notes and Class B Notes, which default has continued for a period of seven days, as described in Section 5.1(a) of the Indenture dated March 27, 2007. This event of default is still continuing. Timberwolf I, Ltd. is a collateralized debt obligation backed entirely by a portfolio CDO securities and synthetic securities in the form of credit default swaps. Reference obligations for the credit default swaps CDO securities. As provided in Article 5 of the Indenture during the occurrence and continuance of an Event of Default, certain parties to the transaction may be entitled to direct the Trustee to take particular actions with respect to the Collateral Debt Securities and the Notes. In this regard the Trustee reports that a supramajority of the Controlling Class and the Cashflow Swap Counterparty have directed the Trustee to sell and liquidate all of the Collateral pursuant to the applicable provisions of the Indenture and that the Collateral has been sold and liquidated. The rating downgrade taken today reflects the increased expected loss associated with the Class S-1 and Class A-1a Notes. Losses are attributed to diminished credit quality on the underlying portfolio. TIMOTHY BARNETT: Case Summary & Six Largest Unsecured Creditors --------------------------------------------------------------- Debtor: Timothy Barnett Kimberly Barnett 6203 E. Cliffway Drive Orange, CA 92689 Bankruptcy Case No.: 08-14475 Chapter 11 Petition Date: July 30, 2008 Court: Central District Of California (Santa Ana) Judge: Robert N. Kwan Debtors' Counsel: Todd B Becker, Esq. (veloz@toddbeckerlaw.com) Law Offices of Todd B Becker 3750 E Anaheim St., Ste. 100 Long Beach, CA 90804 Tel: (562) 495-1500 Fax: (562) 494-8904 http://toddbeckerlaw.com/ Estimated Assets: $1 million to $10 million Estimated Debts: $1 million to $10 million A list of the Debtor's largest unsecured creditors is available for free at: http://bankrupt.com/misc/califcb08-14475.pdf TRONOX INC: Earnings Decline Prompts S&P to Junk Credit Rating -------------------------------------------------------------- Standard & Poor's Ratings Services lowered its ratings on chemical company Tronox Inc., including its corporate credit rating to 'CCC+' from 'B'. At the same time S&P placed the ratings on CreditWatch with negative implications. As of March 31, 2008, Tronox had about $800 million in debt. The downgrade follows Tronox's recent announcement of a significant decline in earnings for the quarter ended June 30, 2008 and increased concerns regarding the company's ability to comply with, or successfully amend, the financial covenants within its credit facilities. Based on the most recent quarter's results and ongoing difficult market conditions, S&P now believes that a breach of financial covenants is increasingly likely this year unless additional flexibility can be negotiated. The company's EBITDA declined to about $7 million for the quarter ended June 30, 2008 from about $30 million in the previous quarter, more than offsetting expected improvements to liquidity from a previous amendment to covenants. The earnings decline was driven by production problems in some plants, rising input costs, and weaknesses in demand. The overall market for titanium dioxide continues to be weak, with the potential to continue to negatively affect earnings and cash flow, although demand in the Asia-Pacific region is higher in 2008, and despite the fact that the company has instituted several price increases in the past few weeks, and resolved most of the production problems that affected earnings. Tronox also announced on its earnings call that it has appointed an investment bank to advise it on strategic alternatives, and that it has reclassified its long-term debt as current liabilities. The reclassification reflects the ongoing uncertainty in the TiO2 markets and management's inability to state with a high degree of confidence that the company will be able to meet tightening financial covenant requirements during the next year. The CreditWatch listing reflects the uncertainty associated with these recent disclosures and indicates that another downgrade is likely if operating performance and liquidity management does not improve, or if the outcome of the company's review of strategic alternatives results in actions with potentially negative implications for credit quality. S&P expects that the weak operating environment for TiO2 will offset potential benefits from the company's steps to improve operating efficiency and cash flow, including a cost-reduction and working capital improvement program, and the suspension of its dividend. The weakness in Tronox's operating environment is driven by the ongoing slowdown in a key end-market, the North American residential housing market, which has contributed to lower North American volumes and a less favorable pricing environment at a time of rapidly increasing costs for key inputs, including process chemicals. Although volumes in Tronox's Asia- Pacific markets have increased relative to the previous year, these increases have not offset weakness in Tronox's operating environment. S&P will resolve the CreditWatch within the next three months when it becomes clearer what steps the company plans to undertake as part of its strategic review and after it can reassess prospects for improving operating performance and access to the credit facilities. UNI-MARTS LLC: Files Schedules of Assets And Liabilities -------------------------------------------------------- Uni-Marts LLC and its debtor-affiliates delivered to the United States Bankruptcy Court for the District of Delaware their schedules of assets and liabilities disclosing: Name of Schedule Assets Liabilities ---------------- ----------- ----------- A. Real Property $ 3,559,405 B. Personal Property 45,837,412 C. Property Claimed as Exempt D. Creditors Holding $14,542,435 Secured Claims E. Creditors Holding 1,513,779 Unsecured Priority Claims F. Creditors Holding 51,661,178 Unsecured Nonpriority Claims ----------- ----------- TOTAL $49,396,817 $67,717,392 About Uni-Marts Headquartered in State College, Pennsylvania, Uni-Marts LLC sells consumer goods. The company and six of its affiliates filed for Chapter 11 protection on May 29, 2008 (Bankr. D. Del. Lead Case No.08-11037). Michael Gregory Wilson, Esq., at Hunton & Williams LLP represents the Debtors in their restructuring efforts. The Debtor selected Epiq Bankruptcy Solutions LLC as their claims, noticing and balloting agent. The U.S. Trustee for Region 3 appointed seven creditors to serve on an Official Committee of Unsecured Creditors. The Committee selected Blank Rome LLP as its counsel in these cases. US AIRWAYS: Incurs $567MM Net Loss in Second Quarter Ended June 30 ------------------------------------------------------------------ US Airways Group, Inc., on July 22, 2008, reported a net loss for its second quarter 2008 of $567 million, or $6.16 per share, compared to a net profit of $263 million, or $2.77 per diluted share for the same period last year. Excluding net special items of $466 million, the Company reported a net loss of $101 million, or $1.11 per share for its second quarter 2008. This compares to a net profit excluding special items of $261 million, or $2.74 per diluted share for the second quarter of 2007, which included $2 million of net special items. US Airways Chairman and CEO Doug Parker said, "Our second quarter results reflect the unprecedented rise in fuel prices that are impacting our industry. We are working diligently to reduce capacity and costs and execute on the new revenue programs recently announced by US Airways and other airlines. Despite our disappointing results, we are pleased with the early performance of our a la carte initiatives as we are seeing strong early sales in our Choice Seats program and encouraging revenue trends from our new first and second checked bag policies. We are also encouraged by our industry's response to the current economic environment. "On the liquidity front, we ended the quarter with a strong total cash and investments balance of $2.8 billion. While pleased with this position relative to our peers, in light of the industry environment, we are working productively with all of our stakeholders to further enhance liquidity. "Last but certainly not least, US Airways' operational turnaround has been nothing short of spectacular. Following six consecutive months of top-three finishes in on-time performance among the ten largest U.S. airlines, our team of 35,000 employees is to be congratulated. As a result of their hard work, US Airways is leading the major airlines in on-time performance in 2008," continued Parker. Revenue and Cost Comparisons Mainline passenger revenue per available seat mile (PRASM) in the second quarter was 11.42 cents, up 1.6% over the same period last year. Express PRASM was 20.60 cents, down 0.6% over the second quarter 2007. Total mainline and Express PRASM for US Airways Group was 12.96 cents, which was up 2.0% over the second quarter 2007 on a 0.9% increase in total available seat miles (ASMs). Mainline cost per available seat mile (CASM) was 15.33 cents, up 35.2 percent versus the same period last year on a decrease in mainline capacity of 0.7 percent versus the second quarter of 2007. The non-cash goodwill impairment contributed 3.21 cents, or 80 percent of the period-over-period CASM increase. Additionally, fuel expense continues to be a significant contributing factor to the CASM increase as the average mainline fuel price per gallon excluding realized gains/losses on fuel hedging instruments increased 69.2% year-over-year. Excluding fuel, unrealized and realized gains/losses on fuel hedging instruments, and net special items, mainline CASM was 8.32 cents, up 4.0% from the same period last year. Chief Financial Officer Derek Kerr stated, "Although our second quarter results reflect the staggering increase in the price of fuel, our fuel hedging strategy resulted in significant realized gains of $192 million during the quarter. Had the average price per gallon remained constant from the second quarter 2007, our total fuel expense, including realized gains/losses on fuel hedging instruments, would have been approximately $390 million lower. In addition, during the second quarter we also saw an increase in non-fuel unit costs that was primarily driven by higher engine maintenance expense as well as a reduction in mainline capacity of 0.7%." Liquidity As of June 30, 2008, the Company had $2.8 billion in total cash and investments, of which $2.3 billion was unrestricted. As previously announced, in order to preserve liquidity, US Airways has reduced its forecasted capital expenditure plan for 2008 by approximately $90 million since the beginning of the year. This brings the total 2008 estimated non-aircraft capital expenditures to $225 million. As of June 30, 2008, the company listed $8.0 billion in total assets, $7.4 billion in total liabilities, and $593 million in stockholders' equity. Capacity Reductions In response to the continued and unprecedented surge in oil prices, the airline will reduce its fourth quarter and 2009 capacity by an additional one to two percent on a year-over-year basis. The airline had previously planned on a three to five percent decrease in system capacity for both its fourth quarter 2008 and full-year 2009. Second Quarter Special Items During its second quarter, the company recognized $466 million of net special items. These special items included a non-cash accounting charge of $622 million to write off all of the goodwill created by the merger of US Airways Group, Inc. and America West Holdings Corporation in September 2005, a non-cash accounting charge of $18 million related to the decline in fair market value of certain spare parts associated with the company's Boeing 737 aircraft, $10 million in merger related transition costs, and a $6 million charge for lease return costs and lease cancellation penalties related to certain Airbus aircraft as a result of the fleet reductions announced in June 2008. These expenses were offset by a $190 million non-cash unrealized net gain associated with the change in fair value of the company's outstanding fuel hedge contracts. Notable Accomplishments People * Signed contracts with the airline's fleet service, maintenance training instructors, and mechanic-and-related employees represented by the International Association of Machinists and Aerospace Workers (IAM). US Airways now has ratified contracts with all 11,000 of its IAM- represented employees. * Distributed approximately $10 million over the first six months of 2008 to the airline's 35,000 employees through its Triple Play program, which measures US Airways' operational performance against the 10 largest U.S. airlines. Finance * Announced several significant changes to the airline's business model including the fourth quarter 2008 and full- year 2009 domestic mainline capacity reductions of six to eight percent and eight to ten percent, respectively. * Implemented an a la carte pricing strategy, which was originally expected to generate approximately $300 to $400 million annually in incremental revenue; the Company recently revised its estimates by $100 million based on positive results thus far. The Company now anticipates it will generate $400 to $500 million in incremental revenue on an annualized basis. Marketing * Introduced upgraded and enhanced Envoy (trans-Atlantic premium class) product with more personalized in-flight service, better-quality menus and greater choice. * Successfully began offering Choice Seats, where customers can reserve window and aisle seat assignments in the first few rows in the main cabin during web check-in for a small fee. * Signed new codeshare agreements with Swiss International Air Lines and Air China. The new agreements allow for more convenient connectivity options for US Airways customers to both Europe and Asia. * Introduced redesigned and updated flight attendant and airport customer service employee uniforms. Operations * For six consecutive months, US Airways has ranked as one of the top three airlines in on-time performance (among the 10 largest U.S. carriers). This includes three number one finishes in December, January and March. * Broke ground on a new, state-of-the-art, environmentally friendly, 58,000 square foot ground service equipment facility at Philadelphia International Airport. US Airways further notes it anticipates recording additional accounting charges in future quarters related to its capacity reductions, including severance and costs associated with fleet reductions. Mr. Kerr says as of July 14, 2008, US Airways was unable to reasonably estimate the amount and timing of these charges. A full-text copy of the Company's second quarter 2008 results on Form 10-Q is available for free at: http://ResearchArchives.com/t/s?3055 About US Airways Based in Tempe, Arizona, US Airways Group Inc.'s (NYSE: LCC) - http://www.usairways.com/-- primary business activity is the ownership of the common stock of US Airways, Inc., Allegheny Airlines, Inc., Piedmont Airlines, Inc., PSA Airlines, Inc., MidAtlantic Airways, Inc., US Airways Leasing and Sales, Inc., Material Services Company, Inc., and Airways Assurance Limited, LLC. Under a chapter 11 plan declared effective on March 31, 2003, USAir emerged from bankruptcy with the Retirement Systems of Alabama taking a 40% equity stake in the deleveraged carrier in exchange for $240 million infusion of new capital. US Airways and its subsidiaries filed another chapter 11 petition on Sept. 12, 2004 (Bankr. E.D. Va. Case No. 04-13820). Brian P. Leitch, Esq., Daniel M. Lewis, Esq., and Michael J. Canning, Esq., at Arnold & Porter LLP, and Lawrence E. Rifken, Esq., and Douglas M. Foley, Esq., at McGuireWoods LLP, represent the Debtors in their restructuring efforts. In the companies' second bankruptcy filing, they listed $8,805,972,000 in total assets and $8,702,437,000 in total debts. The Debtors' chapter 11 plan for its second bankruptcy filing became effective on Sept. 27, 2005. The Debtors completed their merger with America West on the same date. (US Airways Bankruptcy News, Issue No. 163; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000). * * * As reported in the Troubled Company Reporter on June 2, 2008, Fitch Ratings has downgraded the debt ratings of US Airways Group, Inc. as: Issuer Default Rating to 'CCC' from 'B-'; Secured term loan rating to 'B/RR1' From 'BB-/RR1'; and Senior unsecured rating to 'CC/RR6' from 'CCC/RR6'. Fitch's ratings apply to about $1.7 billion in outstanding debt. The Rating Outlook is Negative. The TCR said on July 24, 2008, that Moody's Investors Service downgraded the Corporate Family and Probability of Default Ratings of US Airways Group, Inc. to Caa1 from B3 and lowered the ratings of its outstanding corporate debt instruments and certain Enhanced Equipment Trust Certificates (EETC). Moody's lowered the Speculative Grade Liquidity Assessment to SGL-4 from SGL-3. The rating outlook is negative. US AIRWAYS: Registers 6,700,000 Shares for Equity Incentive Plan ---------------------------------------------------------------- In a regulatory filing with the U.S. Securities and Exchange Commission, Derek J. Kerr, senior vice president and chief financial officer of US Airways Group, Inc., disclosed that US Airways is registering with the SEC 6,700,000, shares of common stock pursuant to the US Airways Group, Inc., 2008 Equity Incentive Plan. US Airways may (i) issue an undetermined number of additional shares, or (ii) combine the shares being registered into an undetermined lesser number of shares, as a result of events like stock splits, stock dividends or similar transactions pursuant to the terms of the Plan, Mr. Kerr says. Mr. Kerr further disclosed that US Airways estimated the offering price for the shares pursuant to Rule 457(c) and (h) of the Securities Act of 1933, as amended, solely for the purpose of calculating the registration fee, and the Company based the Offering Price upon the average of the high and low prices of the Company's common stock on June 27, 2008, as quoted on the New York Stock Exchange. The purpose of the 2008 Incentive Plan is to further the long-term stability and financial success of US Airways and its related companies by attracting and retaining employees and other service providers through the use of cash and stock incentives, Mr. Kerr explained. US Airways believe that ownership of its common stock and the use of cash incentives will stimulate the efforts of its service providers upon whose judgment and interests US Airways are and will be largely dependent for the successful conduct of its business. The Company also believes that the awards will strengthen the desire of its service providers to remain with them and will further identify its interests with the interests of its shareholders. US Airways intend to use the 2008 Incentive Plan to grant stock incentives to compensate non-employee members of its Board of Directors. The 2008 Incentive Plan replaces and supersedes the US Airways Group, Inc., 2005 Equity Incentive Plan, effective as of September 27, 2005. Upon approval of the Plan by the Company's shareholders, no additional awards will be made under the 2005 Incentive Plan, although outstanding awards previously made under the 2005 Incentive Plan will continue to be governed by the terms and conditions of the 2005 Incentive Plan. US Airways forfeits shares that are subject to outstanding awards under the 2005 Incentive Plan that expire. Otherwise, the shares terminate. Unexercised shares may be subjected to new awards under the 2008 Incentive Plan. A full-text copy of the US Airways Group, Inc., 2008 Equity Incentive Plan is available for free at: http://ResearchArchives.com/t/s?3054 About US Airways Based in Tempe, Arizona, US Airways Group Inc.'s (NYSE: LCC) - http://www.usairways.com/-- primary business activity is the ownership of the common stock of US Airways, Inc., Allegheny Airlines, Inc., Piedmont Airlines, Inc., PSA Airlines, Inc., MidAtlantic Airways, Inc., US Airways Leasing and Sales, Inc., Material Services Company, Inc., and Airways Assurance Limited, LLC. Under a chapter 11 plan declared effective on March 31, 2003, USAir emerged from bankruptcy with the Retirement Systems of Alabama taking a 40% equity stake in the deleveraged carrier in exchange for $240 million infusion of new capital. US Airways and its subsidiaries filed another chapter 11 petition on Sept. 12, 2004 (Bankr. E.D. Va. Case No. 04-13820). Brian P. Leitch, Esq., Daniel M. Lewis, Esq., and Michael J. Canning, Esq., at Arnold & Porter LLP, and Lawrence E. Rifken, Esq., and Douglas M. Foley, Esq., at McGuireWoods LLP, represent the Debtors in their restructuring efforts. In the companies' second bankruptcy filing, they listed $8,805,972,000 in total assets and $8,702,437,000 in total debts. The Debtors' chapter 11 plan for its second bankruptcy filing became effective on Sept. 27, 2005. The Debtors completed their merger with America West on the same date. (US Airways Bankruptcy News, Issue No. 163; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000). * * * As reported in the Troubled Company Reporter on June 2, 2008, Fitch Ratings has downgraded the debt ratings of US Airways Group, Inc. as: Issuer Default Rating to 'CCC' from 'B-'; Secured term loan rating to 'B/RR1' From 'BB-/RR1'; and Senior unsecured rating to 'CC/RR6' from 'CCC/RR6'. Fitch's ratings apply to about $1.7 billion in outstanding debt. The Rating Outlook is Negative. The TCR said on July 24, 2008, that Moody's Investors Service downgraded the Corporate Family and Probability of Default Ratings of US Airways Group, Inc. to Caa1 from B3 and lowered the ratings of its outstanding corporate debt instruments and certain Enhanced Equipment Trust Certificates (EETC). Moody's lowered the Speculative Grade Liquidity Assessment to SGL-4 from SGL-3. The rating outlook is negative. US AIRWAYS: Wellington Management Discloses 4.53% Stake ------------------------------------------------------- In a regulatory filing with the U.S. Securities and Exchange Commission dated July 10, 2008, Wellington Management Company, LLP, disclosed that as of June 30, 2008, it beneficially owned 4,168,331, shares of US Airways Group, Inc.'s common stock representing 4.53% of the USAir Group shares outstanding. Wellington has shared voting power on 3,257,207 shares, and shared dispositive power on 4,168,331 shares. There are 92,173,934 total shares outstanding of US Airways Group, Inc.'s, common stock as of July 16, 2008. About US Airways Based in Tempe, Arizona, US Airways Group Inc.'s (NYSE: LCC) - http://www.usairways.com/-- primary business activity is the ownership of the common stock of US Airways, Inc., Allegheny Airlines, Inc., Piedmont Airlines, Inc., PSA Airlines, Inc., MidAtlantic Airways, Inc., US Airways Leasing and Sales, Inc., Material Services Company, Inc., and Airways Assurance Limited, LLC. Under a chapter 11 plan declared effective on March 31, 2003, USAir emerged from bankruptcy with the Retirement Systems of Alabama taking a 40% equity stake in the deleveraged carrier in exchange for $240 million infusion of new capital. US Airways and its subsidiaries filed another chapter 11 petition on Sept. 12, 2004 (Bankr. E.D. Va. Case No. 04-13820). Brian P. Leitch, Esq., Daniel M. Lewis, Esq., and Michael J. Canning, Esq., at Arnold & Porter LLP, and Lawrence E. Rifken, Esq., and Douglas M. Foley, Esq., at McGuireWoods LLP, represent the Debtors in their restructuring efforts. In the companies' second bankruptcy filing, they listed $8,805,972,000 in total assets and $8,702,437,000 in total debts. The Debtors' chapter 11 plan for its second bankruptcy filing became effective on Sept. 27, 2005. The Debtors completed their merger with America West on the same date. (US Airways Bankruptcy News, Issue No. 163; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000). * * * As reported in the Troubled Company Reporter on June 2, 2008, Fitch Ratings has downgraded the debt ratings of US Airways Group, Inc. as: Issuer Default Rating to 'CCC' from 'B-'; Secured term loan rating to 'B/RR1' From 'BB-/RR1'; and Senior unsecured rating to 'CC/RR6' from 'CCC/RR6'. Fitch's ratings apply to about $1.7 billion in outstanding debt. The Rating Outlook is Negative. The TCR said on July 24, 2008, that Moody's Investors Service downgraded the Corporate Family and Probability of Default Ratings of US Airways Group, Inc. to Caa1 from B3 and lowered the ratings of its outstanding corporate debt instruments and certain Enhanced Equipment Trust Certificates (EETC). Moody's lowered the Speculative Grade Liquidity Assessment to SGL-4 from SGL-3. The rating outlook is negative. US AIRWAYS: Pilots Group Presses for Probe on Fueling Practices --------------------------------------------------------------- Concerns over the adequacy of fueling practices at US Airways were raised on national news by allegations from the US Airline Pilots Association, which said that the airline was pressuring pilots to carry less fuel. USAPA said that the issue emerged when US Airways singled-out eight Senior Trans-Oceanic International Captains for mandatory "training," based on the Captains using their judgment to add additional fuel. USAPA considers this to be retaliatory discipline. USAPA stated that the affected pilots were targeted as a result of previous decisions to add fuel, and were called-in on their days off and subjected to hours of simulator work and classroom lectures; neither of which are part of any FAA approved US Airways Pilot Training Program. USAPA believes that the message being communicated to the US Airways pilots is that, if they request additional fuel, they will be subject to retaliatory discipline. USAPA President, Steve Bradford, said, "US Airways Pilots are seasoned professionals who are well aware of the fact that carrying fuel adds weight to the aircraft. But they also know that the FAA minimum fuel reserves are just that, a bare minimum, and akin to driving your car with the low fuel light flashing; few drivers would be comfortable with that situation." The US Airways Pilots believe that it is important for the public to realize that using just one gallon of the FAA minimum reserve fuel may cause a Pilot to declare a "Fuel Emergency." Air traffic delays, bad weather and unforeseen events are just some of the reasons why the FAA grants Captains the authority to decide how much fuel is carried on their aircraft. "It smacks of intimidation and harassment; a pilot training department should never be used as a tool for pilot discipline" said President Bradford. "If Management were really interested in fuel conservation, they would adopt the training for all pilots, not just a few. In our view, our pilots are being pressured into loading less fuel in order to avoid what we consider to be retaliatory discipline. We consider Management's attempt to influence pilots' safety-related decisions based on cost-considerations as setting a dangerous precedent for the airline industry." In a letter to the FAA dated July 16, 2008, USAPA requested a full investigation stating that they consider Management's actions a "dangerous intrusion on Captain's Authority which has the effect of eroding flight safety standards." USAPA represents over 5,000 US Airways pilots in seven domiciles across the United States. FAA and USAir Respond Federal Aviation Administration spokesman Les Dorr said FAA was aware of USAPA's charges against US Airways management and was looking into the issue, Max Jarman of The Arizona Republic reports. US Airways acknowledged the pilot's right to request additional fuel; however, the airline believed it was appropriate to ask the pilots to meet with the training department so they could study their experiences and see to it that the airline's guidelines are sufficient, The Arizona Republic says. About US Airways Based in Tempe, Arizona, US Airways Group Inc.'s (NYSE: LCC) - http://www.usairways.com/-- primary business activity is the ownership of the common stock of US Airways, Inc., Allegheny Airlines, Inc., Piedmont Airlines, Inc., PSA Airlines, Inc., MidAtlantic Airways, Inc., US Airways Leasing and Sales, Inc., Material Services Company, Inc., and Airways Assurance Limited, LLC. Under a chapter 11 plan declared effective on March 31, 2003, USAir emerged from bankruptcy with the Retirement Systems of Alabama taking a 40% equity stake in the deleveraged carrier in exchange for $240 million infusion of new capital. US Airways and its subsidiaries filed another chapter 11 petition on Sept. 12, 2004 (Bankr. E.D. Va. Case No. 04-13820). Brian P. Leitch, Esq., Daniel M. Lewis, Esq., and Michael J. Canning, Esq., at Arnold & Porter LLP, and Lawrence E. Rifken, Esq., and Douglas M. Foley, Esq., at McGuireWoods LLP, represent the Debtors in their restructuring efforts. In the companies' second bankruptcy filing, they listed $8,805,972,000 in total assets and $8,702,437,000 in total debts. The Debtors' chapter 11 plan for its second bankruptcy filing became effective on Sept. 27, 2005. The Debtors completed their merger with America West on the same date. (US Airways Bankruptcy News, Issue No. 163; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000). * * * As reported in the Troubled Company Reporter on June 2, 2008, Fitch Ratings has downgraded the debt ratings of US Airways Group, Inc. as: Issuer Default Rating to 'CCC' from 'B-'; Secured term loan rating to 'B/RR1' From 'BB-/RR1'; and Senior unsecured rating to 'CC/RR6' from 'CCC/RR6'. Fitch's ratings apply to about $1.7 billion in outstanding debt. The Rating Outlook is Negative. The TCR said on July 24, 2008, that Moody's Investors Service downgraded the Corporate Family and Probability of Default Ratings of US Airways Group, Inc. to Caa1 from B3 and lowered the ratings of its outstanding corporate debt instruments and certain Enhanced Equipment Trust Certificates (EETC). Moody's lowered the Speculative Grade Liquidity Assessment to SGL-4 from SGL-3. The rating outlook is negative. US AIRWAYS: Inks Maintenance Pact with IAE; Ends Two Flights ------------------------------------------------------------ According to Pittsburgh Business Times, US Airways Group Inc. inked a long-term maintenance agreement with IAE International Aero Engines, a multinational aero-engine consortium based in Connecticut. The pact, which covers engines used on the airline's fleet of Airbus A320 aircraft, will initially cover 74 V2500-A5 powered aircraft already in service and engines for 78 aircraft that US Airways ordered last year, says the report. The Agreement ends on 2032. Financial terms were not provided. "The V2500 offers significant advantages in terms of fuel burn and lowest total emissions, and IAE's comprehensive support package will ensure that we can maximize the associated benefits," said Hal Heule, US Airways' senior vice president of technical operations, reports the Pittsburgh Times. Meanwhile, Sacramento Business Journal says in line with the carrier's plan to cut domestic mainline capacity in the fourth quarter by 6 to 8% from year-earlier levels, US Airways will end its recently launched daily service to Charlotte from Sacramento International Airport on Aug. 18, 2008. The carrier will likewise end daily nonstop service to Panama City, Florida, starting Sept. 2, says the report. About US Airways Based in Tempe, Arizona, US Airways Group Inc.'s (NYSE: LCC) - http://www.usairways.com/-- primary business activity is the ownership of the common stock of US Airways, Inc., Allegheny Airlines, Inc., Piedmont Airlines, Inc., PSA Airlines, Inc., MidAtlantic Airways, Inc., US Airways Leasing and Sales, Inc., Material Services Company, Inc., and Airways Assurance Limited, LLC. Under a chapter 11 plan declared effective on March 31, 2003, USAir emerged from bankruptcy with the Retirement Systems of Alabama taking a 40% equity stake in the deleveraged carrier in exchange for $240 million infusion of new capital. US Airways and its subsidiaries filed another chapter 11 petition on Sept. 12, 2004 (Bankr. E.D. Va. Case No. 04-13820). Brian P. Leitch, Esq., Daniel M. Lewis, Esq., and Michael J. Canning, Esq., at Arnold & Porter LLP, and Lawrence E. Rifken, Esq., and Douglas M. Foley, Esq., at McGuireWoods LLP, represent the Debtors in their restructuring efforts. In the companies' second bankruptcy filing, they listed $8,805,972,000 in total assets and $8,702,437,000 in total debts. The Debtors' chapter 11 plan for its second bankruptcy filing became effective on Sept. 27, 2005. The Debtors completed their merger with America West on the same date. (US Airways Bankruptcy News, Issue No. 163; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000). * * * As reported in the Troubled Company Reporter on June 2, 2008, Fitch Ratings has downgraded the debt ratings of US Airways Group, Inc. as: Issuer Default Rating to 'CCC' from 'B-'; Secured term loan rating to 'B/RR1' From 'BB-/RR1'; and Senior unsecured rating to 'CC/RR6' from 'CCC/RR6'. Fitch's ratings apply to about $1.7 billion in outstanding debt. The Rating Outlook is Negative. The TCR said on July 24, 2008, that Moody's Investors Service downgraded the Corporate Family and Probability of Default Ratings of US Airways Group, Inc. to Caa1 from B3 and lowered the ratings of its outstanding corporate debt instruments and certain Enhanced Equipment Trust Certificates (EETC). Moody's lowered the Speculative Grade Liquidity Assessment to SGL-4 from SGL-3. The rating outlook is negative. VERANO CCS: Moody's Rates $180MM Mezzanine Notes Due 2016 B2 ------------------------------------------------------------ Moody's Investors Service has assigned these ratings to Notes issued by Verano CCS, Ltd.: A3 to the U.S. $1,352,600,000 Senior Notes due 2016; B2 to the U.S. $180,400,11011 Mezzanine Notes due 2016 The 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 Noteholders, relative to the promise of receiving the present value of such payments. The ratings reflect the risk of diminishment of cash flow from the underlying assets due to defaults, the safety of the transaction's legal structure, including the possibility of the Issuer being treated as a creditor upon a bankruptcy of a participating institution in respect of a participation , and the characteristics of the underlying assets. The ratings of the Notes may change as a result of any changes in the foregoing. The transaction is a static balance sheet CLO sponsored and arranged by Lehman Brothers Inc. VIE SALON: Voluntary Chapter 11 Case Summary -------------------------------------------- Debtor: Vie Salon and Spa, LLC 955 West Chandler Heights Road, Building C Chandler, AZ 85248 Bankruptcy Case No.: 08-09418 Related Information: Jennifer Wady, managing member, filed the petition on the Debtor's behalf. Chapter 11 Petition Date: July 28, 2008 Court: District of Arizona (Phoenix) Judge: Randolph J. Haines Debtor's Counsel: Donald W. Powell, Esq. Carmichael & Powell, P.C. 7301 North 16th Street, #103 Phoenix, AZ 85020 Tel: (602) 861-0777 Fax: (602) 870-0296 (d.powell@cplawfirm.com) Estimated Assets: $397,240 Estimated Debts: $2,647,322 A list of the Debtor's largest unsecured creditors is available for free at http://bankrupt.com/misc/AZb08-09418.pdf VINTAGE PROPS: Halts Scheduled Passenger Operations --------------------------------------------------- Vintage Props & Jets, Inc., ceased all scheduled passenger operations mid-July 2008. In a notice dated July 18, 2008, Vintage said that over the past few months, it has been faced with excruciating fuel prices and increased expenses from its scheduled passenger network. Vintage said its financial burdens have exceeded its ability to continue operations as usual. Bob Koslow at News-Journal Online says record-high fuel costs, rising business expenses and fewer travelers have forced Vintage Prop to abandon its twice-a-day flights between Daytona Beach International Airport and The Bahamas. "It is the plan of the company to seek reorganization and resume operations as soon as possible," Vintage said. About 40 employees lost jobs, News-Journal Online reports. The airline company said its current plan is to issue vouchers for all un-flown reservations. All passengers who currently are owed refunds or already been issued travel vouchers will be mailed written confirmation for the records. "We completely understand that this may be no consolation to [customers] at this current time," Vintage Props said. "However, until we are able to restructure, this is the best solution to record what the company owes [customers]." New Smyrna Beach, Florida-based Vintage Props & Jets had been flying to Abacos, an island in The Bahamas, for 16 years from various Florida airports, including Daytona Beach International Airport since 1999, according to News-Journal Online, citing airport officials. Vintage accounts for 70% of the airport's customs clearances, News-Journal Online says, citing Stephen Cooke, DBIA director of business development. Vintage also provided limited charter and cargo services. Vintage's president Tom Crevasse, News-Journal Online relates, said talks have stalled with a potential investment/buyer and that left him with few options. Mr. Crevasse, the report adds, said he had "exhausted" his checking and savings accounts, and mortgaged his home and property to keep the company going. News-Journal Online says Vintage is the second commercial carrier to halt flights at Daytona Beach. AirTran Airways ceased operations in May, the report says. VISTEON CORP: June 30 Balance Sheet Upside-Down by $207 Million --------------------------------------------------------------- Visteon Corporation's consolidated balance sheet at June 30, 2008, showed $7.02 billion in total assets, $6.93 billion in total liabilities, and $295.0 million in minority interests, resulting in a $207.0 million stockholders' deficit. The company reported a net loss of $42.0 million for the second quarter ended June 30, 2008. For second quarter 2007, Visteon reported a net loss of $67.0 million. Results for second quarter 2008 include $18.0 million of unreimbursed restructuring and other qualifying costs, $11.0 million of asset impairments and $49.0 million of income tax expense. Second quarter 2007 results included $11.0 million of asset impairments and $28.0 million of income tax expense. EBIT-R, which represents net (loss) income before net interest expense and provision for income taxes and excludes asset impairments, gains and losses on business divestitures and net unreimbursed restructuring expenses and other reimbursable costs, was $78.0 million, an improvement of $63.0 million over second quarter 2007. "Our second quarter and first half results demonstrate Visteon's geographic diversification, as we improved our financial performance despite a difficult North American market," said Donald J. Stebbins, president and chief executive officer. "We expanded gross margins by almost 50 percent and increased operating income nearly five-fold due to steady progress on our restructuring plan, our focus on reducing overhead costs and our drive to improve operational efficiency. We have also addressed our UK manufacturing losses through divestitures and commercial arrangements." Total sales for second quarter 2008 were $2.91 billion, a decrease of $69.0 million from the same period a year ago, including $17.0 million of lower services revenue. Second quarter 2008 total product sales were $2.78 billion, a decrease of $52.0 million from second quarter 2007. Divestitures and plant closures decreased product sales by $222.0 million, which was partially offset by favorable currency of $163.0 million. Lower production volumes in North America were offset by increases in Europe and Asia, reflecting Visteon's geographic diversification. Product gross margin for second quarter 2008 was $230.0 million, representing an increase of $76.0 million from the same period a year ago. This increase reflects net cost performance of $41.0 million and favorable currency of $43.0 million, partially offset by the impact of divestitures, plant closures and other items. For second quarter 2008, Visteon's operating income of $53.0 million was an improvement of $44.0 million from the same period in 2007. This improvement was driven by increased product gross margin, partially offset by unreimbursed restructuring and other qualifying costs and implementation costs associated with the company's overhead cost reduction initiative. Unreimbursed restructuring and other qualifying costs include $12.0 million related to the sale of the Swansea operation. Operating income for second quarter 2008 also included $7.0 million of asset impairment related to the Swansea sale. Cash provided by operating activities for second quarter 2008 was $133.0 million, $13.0 million lower than second quarter 2007. Capital expenditures for second quarter 2008 were $80.0 million, unchanged from the same period a year ago. Free cash flow for second quarter 2008 was $53.0 million, compared with $66.0 million in the same period of 2007. The decrease is attributable to net restructuring cash use, higher interest payments and other items, partially offset by improved trade working capital and changes in receivables sold under the company's securitization facility. During second quarter 2008, Visteon issued $206.0 million in aggregate principal amount of new 12.25 percent notes due in 2016 and repurchased $344.0 million of its 8.25 percent notes due in August 2010. This reduced the amount outstanding on the 2010 notes to $206.0 million. As of June 30, 2008, Visteon's cash balances totaled $1.51 billion compared with $1.76 billion as of Dec. 31, 2007, and total debt was $2.67 billion, approximately $180.0 million lower than year-end 2007. First Half 2008 For the first six months of 2008, Visteon narrowed its net loss by $73.0 million to $147.0 million. Total sales for first half 2008 of $5.77 billion were lower by $97.0 million from the same period 2007. Total product sales of $5.52 billion were $71.0 million lower. First half 2008 results include $41.0 million of restructuring expenses and other qualifying costs in excess of escrow account reimbursement and a $55.0 million increase in the company's tax provision. EBIT-R for first half 2008 increased $160.0 million over the first six months of 2007 to $129.0 million. Cash from operations was positive $7.0 million for the first six months of 2008, slightly below the $15.0 million reported in the same period a year ago. Capital expenditures of $154.0 million were $10.0 million higher than the first six months of 2007. Free cash flow was a use of $147.0 million for first half 2008, compared with $129.0 million for the same period the previous year. Restructuring and Divestitures Visteon continues to make solid progress implementing its three- year plan. During the second quarter, Visteon ceased production at its Bedford, Ind. facility, and closed two fuel tank facilities in Germany. Additionally in July, the company divested its Swansea, UK, facility and ceased production at its Concordia, Mo. facility. By completing the sale of its Swansea chassis manufacturing operation, effective July 7, Visteon divested its largest UK operation, which generated negative gross margin of approximately $40.0 million on sales of approximately $80.0 million during 2007. The company expects to record losses of approximately $47.0 million in connection with the sale, of which $32.0 million was recorded during second quarter 2008 - including $18.0 million of employee severance and termination benefits, $7.0 million of pension curtailment losses and $7.0 million of asset impairment. These losses were partially offset by $13.0 million of escrow account reimbursement. Visteon said it continues to address its remaining operations in the UK and commercial agreements are in place to address the operating losses at the company's other UK manufacturing facilities. To date, 27 of the 30 targeted facility actions — including nine during 2008 — have been accomplished. "Last fall we highlighted the significant losses in our UK operations and indicated it was our top priority to address these operations during 2008," Stebbins said. "With the sale of Swansea and the agreements reached regarding our other UK facilities, we are delivering on this commitment." In addition to the actions under the company's three-year plan, Visteon also announced that it will be closing its interiors facility in Durant, Miss., and will be consolidating that production in other facilities. In January Visteon stated it expects to generate cumulative savings of approximately $215.0 million over three years as part of its overhead cost- reduction initiative and remains on track to generate the expected savings. Full-text copies of the company's consolidated financial statements for the quarter ended June 30, 2008, are available for free at http://researcharchives.com/t/s?3053 About Visteon Corporation Headquartered in Van Buren Township, Michigan, Visteon Corporation (NYSE: VC) -- http://www.visteon.com/-- is an automotive supplier that designs, engineers and manufactures innovative climate, interior, electronic and lighting products for vehicle manufacturers, and also provides a range of products and services to aftermarket customers. The company also has corporate offices in Shanghai, China; and Kerpen, Germany; the company has facilities in 26 countries and employs approximately 38,500 people. * * * Fitch Ratings has affirmed Visteon Corporation's ratings as: (i) issuer default rating (IDR) at 'CCC'; (ii) senior secured bank facilities at 'B/RR1'; and (iii) unsecured notes at 'CC/RR6'. Fitch has also assigned a rating of 'CC/RR6' to Visteon's new 12.25% senior unsecured notes being issued as part of the company's debt exchange offer. The ratings cover approximately $2.8 billion in debt. The rating outlook is negative. WELLMAN INC: Beefs Up Chapter 11 Plan and Disclosure Statement -------------------------------------------------------------- Wellman Inc. and its affiliates filed with the U.S. Bankruptcy Court for the Southern District of New York revised versions of their Joint Plan of Reorganization, and attached disclosure statement explaining the terms of the Plan. The Revised Plan provides that first lien lenders are expected to 38.4% on account of their claims, while second lien lenders will receive 18.9%. The recovery of these lenders, however, may be adjusted depending the Court's determination of the first lien lenders' collateral. The Debtors say that any recovery of general unsecured creditors will depend on the success of the prosecution of their litigation claims. The Debtors primarily revised their Disclosure Statement in response to the issues raised by Eastman Chemical Company and Bank of New York, N.A. To recall, Eastman Chemical and BNY urged the Bankruptcy Court to deny approval of the Disclosure Statement on grounds that it does not provide adequate information, which is required under Section 1125(a) of the Bankruptcy Code. Eastman Chemical complained the Debtors provided inaccurate information about their claims for infringement against the company while BNY, agent to lenders owed $185,000,000 as of the Petition Date, alleged the Debtors did not provide adequate information concerning their secured debt to the bank. Wellman has earlier sought the Court's determination that the BNY-led lenders, who assert first priority security interests in certain of the Debtors' assets, are undersecured. Jonathan Henes, Esq., at Kirkland & Ellis LLP, in New York, says the Debtors were able to resolve the objection of Eastman Chemical by agreeing on certain revisions to the Disclosure Statement. With respect to BNY, Mr. Henes says the Disclosure Statement now contains all critical terms of the Plan including a description of the valuation litigation in light of the revisions made. "The disclosure statement provides each type of information that courts have identified as adequate information in a manner that gives the holders of impaired claims the necessary information to make an informed judgment about the Plan," Mr. Henes says. He urges the Court to overrule BNY's objection to the Plan's feasibility saying the hearing to consider approval of the Disclosure Statement is not the appropriate forum to address the issue. Proposed Revisions The revised Disclosure Statement provides that under the Plan, the litigation against Eastman Chemical will not be held by the distribution trust. Proceeds of the cost and taxes of the litigation, however, will go to the distribution trust. The Debtors also changed the estimated amount of Wellman's infringement claims against Eastman Chemical from $60,000,000 to a range of $15,000,000 to $60,000,000 or more. Keith Phillips, chief financial officer of Wellman, says no distributions may be made from the trust if the Debtors do not succeed in prosecuting litigation claims. "Because interests in the distribution trust are the only consideration being distributed to holders of general unsecured claims, there is possibility that those holders will not receive any discovery," Mr. Phillips says, adding that a portion of the second lien lenders' recovery is also at risk. Pursuant to the Plan, 90% of the beneficial interests from the distribution trust will be issued to lenders owed $265,000,000 as of the Petition Date, and who hold a second lien on certain of the Debtors assets, while the remaining 10% will be issued to general unsecured creditors. Valuation Litigation According to Mr. Phillips, there is a potential litigation with the First Lien Lenders concerning the valuation of their collateral. The First Lien Lenders assert liens on certain of the Debtors' property, plant and equipment (PP&E), consisting of machinery, equipment and real estate located in the Debtors' plants in St. Louis, Mississippi, and in Darlington and Johnsonville, South Carolina. The PP&E serves as collateral for the $185,000,000 the Debtors loaned off under the First Lien Credit Agreement dated Feb. 10, 2004, with Bank of New York as administrative agent. Mr. Phillips says that under the Plan, Wellman will retain the PP&E and that holders of the First Lien Term Loan will receive a secured note with a present value equal to the value of their interest in the PP&E. The new first lien notes will be issued by reorganized Wellman for $70,000,000 and be secured by a first lien in the PP&E. The new first lien notes will mature 15 years after the effective date and pay interest at the rate of 11% per annum. Pursuant to the New First Lien Notes Agreement, reorganized Wellman will make total payments of principal and interest to the first lien lenders of $184,625,000. The present value of these payments will be $70,827,000. "If the first lien lenders object to the Plan, then Wellman may confirm the Plan so long as the first lien lenders retain their liens in the PP&E and Wellman makes cash payments to the first lien lenders equal to the amount of their secured claims," Mr. Phillips says. The results of the valuation litigation will determine the principal amount of the New First Lien Notes and consequently, the equity value of reorganized Wellman. If the Court determines that the value of the PP&E is greater than $70,827,000, the principal amount of the New First Lien Notes will be increased to the value of the PP&E, Mr. Phillips notes. Meanwhile, the equity value of reorganized Wellman will be reduced by the amount of the New First Lien Notes. "In the event the Debtors are not successful in the valuation litigation, and the Court adopts a higher valuation for the PP&E, the reorganized Debtors' equity value will be reduced on a dollar for dollar basis," Mr. Phillips points out. He adds that this would reduce recoveries for the Second Lien Lenders and holders of the Second Lien Term Loan debt signatory to the Backstop Commitment Agreement. The range of potential valuations for the PP&E is between $70,827,000 and $221,100,000. Party Valuation of PP&E ----- ----------------- Wellman $70,827,000 First Lien Lenders $158,660,000 to $221,100,00 Second Lien Lenders $74,301,000 First Lien Lenders 1111(b) Election The revised Disclosure Statement provides that a class of unsecured creditors may elect to have its entire claims treated as secured pursuant to Section 1111(b) of the Bankruptcy Code. In case an undersecured creditor makes an election, the sum of the stream of payments made to that creditor is (i) equal to the amount of its allowed secured claim, and (ii) has a present value equal to the value of the collateral on which it has a lien. Meanwhile, the First Lien Lenders are required to make their election within two days after the Court issues its ruling on the proposed valuation of the PP&E. In case the First Lien Lenders do not make the election, the new first lien notes will be modified. The maturity of the notes will be reduced from 15 years to a range of five to eight years with the same principal amount. In addition, the First Lien Lenders will have a secured claim for $70,827,000 and an unsecured deficiency claim for $113,798,000. The unsecured deficiency claim will be included in Class 4 (general unsecured claims). Consequently, any recovery to holders of general unsecured claims will be diluted. A full-text copy of the revised Disclosure Statement and Plan is available for free at: http://bankrupt.com/misc/WellmanRevisedDisclosureStatement.pdf About Wellman Headquartered in Fort Mill, South Carolina, Wellman Inc. ([OTC]: WMANQ.OB) -- http://www.wellmaninc.com/-- manufactures and markets packaging and engineering resins used in food and beverage packaging, apparel, home furnishings and automobiles. They manufacture resins and polyester staple fiber a three major production facilities. The company and its debtor-affiliates filed for Chapter 11 protection on Feb. 22, 2008 (Bankr. S.D. N.Y. Case No. 08-10595). Jonathan S. Henes, Esq., at Kirkland & Ellis, LLP, in New York City, represents the Debtors. Lazard Freres & Co., LLC, acts as the Debtors' financial advisors. The United States Trustee for Region 2 has appointed seven members to the Official Committee of Unsecured Creditors. Mark R. Somerstein, Esq., at Ropes & Gray LLP, serves as the Committee's bankruptcy counsel. FTI Consulting, Inc., acts as the panel's financial advisors. Wellman Inc., in its bankruptcy petition, listed total assets of $124,277,177 and total liabilities of $600,084,885, as of Dec. 31, 2007, on a stand-alone basis. Debtor-affiliate ALG, Inc., listed assets between $500 million and $1 billion on a stand-alone basis at the time of the bankruptcy filing. Debtor-affiliates Fiber Industries Inc., Prince Inc., and Wellman of Mississippi Inc., listed assets between $100 million and $500 million at the time of their bankruptcy filings. On a consolidated basis, Wellman Inc., and its debtor-affiliates listed $561,200,000 in total assets and $774,100,000 in liabilities as of March 31, 2008. (Wellman Bankruptcy News, Issue No. 19; Bankruptcy Creditors' Service Inc., http://bankrupt.com/newsstand/or 215/945-7000) WELLMAN INC: Claims Classification & Treatment Under Ch. 11 Plan ---------------------------------------------------------------- The July 25, 2008 version of Joint Chapter 11 Plan of Reorganization and attached Disclosure Statement of Wellman Inc. and its debtor-affiliates has identified the estimated recovery of holders of claims in Classes 2 and 3. The Debtors say that the recovery of unsecured creditors will depend on the success of the prosecution of the Debtors' litigation claims. Class Description Claim Treatment Recovery ----- ----------- --------------- ------- N/A DIP Facility Claims Repaid In full 100% N/A Admin. Claims Paid in full 100% N/A Priority Tax Claims Will be treated 100% Pursuant to 11 U.S.C. Section 1129(a)(9)(C) 1 Other Secured Claims Paid in full 100% (Unimpaired) 2 First Lien Term Receive pro rata share 38.4% Loan Claims of the note issued by reorganized Wellman pursuant to the New First Lien Note Agreement (Impaired) 3 Second Lien Term Receive pro rata share 18.9% Loan Claims of (i) 100% of new common stock; and (ii) 90% of the beneficial interests in the Distribution Trust (Impaired) 4 General Unsecured Receive pro rata share of Claims 10% of the beneficial N/A interests in the Distribution Trust (Impaired) 5 Old Preferred No distribution 0% Interests (Impaired) 6 Old Common No distribution 0% Interests (Impaired) 7 Intercompany Legal, equitable, and Interests contractual rights of N/A the holders will be unaltered (Unimpaired) The estimated 18.9% recovery by Second Lien Lenders assumes the conversion of the convertible Notes upon emergence and does not take into account any potential recovery from the Distribution Trust. The Debtors note that the sole source of potential recoveries for Holders of General Unsecured Claims in class4 is their pro rata share of the Distribution Trust which will include certain causes of action and the proceeds from their litigation against Eastman Chemical Company. Keith Phillips, chief financial officer of Wellman, says that no distributions may be made from the trust if the Debtors do not succeed in prosecuting litigation claims. "Because interests in the distribution trust are the only consideration being distributed to holders of general unsecured claims, there is possibility that those holders will not receive any discovery." About Wellman Headquartered in Fort Mill, South Carolina, Wellman Inc. ([OTC]: WMANQ.OB) -- http://www.wellmaninc.com/-- manufactures and markets packaging and engineering resins used in food and beverage packaging, apparel, home furnishings and automobiles. They manufacture resins and polyester staple fiber a three major production facilities. The company and its debtor-affiliates filed for Chapter 11 protection on Feb. 22, 2008 (Bankr. S.D. N.Y. Case No. 08-10595). Jonathan S. Henes, Esq., at Kirkland & Ellis, LLP, in New York City, represents the Debtors. Lazard Freres & Co., LLC, acts as the Debtors' financial advisors. The United States Trustee for Region 2 has appointed seven members to the Official Committee of Unsecured Creditors. Mark R. Somerstein, Esq., at Ropes & Gray LLP, serves as the Committee's bankruptcy counsel. FTI Consulting, Inc., acts as the panel's financial advisors. Wellman Inc., in its bankruptcy petition, listed total assets of $124,277,177 and total liabilities of $600,084,885, as of Dec. 31, 2007, on a stand-alone basis. Debtor-affiliate ALG, Inc., listed assets between $500 million and $1 billion on a stand-alone basis at the time of the bankruptcy filing. Debtor-affiliates Fiber Industries Inc., Prince Inc., and Wellman of Mississippi Inc., listed assets between $100 million and $500 million at the time of their bankruptcy filings. On a consolidated basis, Wellman Inc., and its debtor-affiliates listed $561,200,000 in total assets and $774,100,000 in liabilities as of March 31, 2008. (Wellman Bankruptcy News, Issue No. 19; Bankruptcy Creditors' Service Inc., http://bankrupt.com/newsstand/or 215/945-7000) WELLMAN INC: To Use $205MM Exit Financing to Pay Admin. Claims -------------------------------------------------------------- In their revised Joint Chapter 11 Plan of Reorganization and Disclosure Statement, filed July 25, 2008, Wellman, Inc., and its debtor-affiliates disclosed that they received indications of interest from five financing sources to fund their ongoing business operations as well as the distributions under the Plan. "The new credit facility is expected to be a $200,000,000 revolving facility with a first lien on accounts receivables and inventory. The Debtors anticipate a firm commitment from at least one financing source by July 30, 2008," Mr. Phillips reveals. The Debtors expect to receive $204,700,000 from their new credit facility and proceeds from their rights offering to pay off their DIP Credit Facility and other administrative claims: Sources and Uses of Cash at Emergence ($ in millions) Sources Uses ------- ---- New Credit Facility $124.7 DIP Credit Facility $115.7 Rights Offering Proceeds 80.0 Exit Facility Fees and Costs 8.0 Professional Fees 16.0 Cure Payments and Sec. 503(b)(9) claims 65.0 ------ ------ Total Sources $204.7 Total Uses $204.7 ====== ====== Wellman assumes it will emerge from bankruptcy at the end of September 2008. Following its emergence, Wellman expects to have 5,000,000 shares of stock outstanding, which 4,900,00 of new common stock, par value $0.001 per share, and 100,000 shares of preferred stock. About Wellman Headquartered in Fort Mill, South Carolina, Wellman Inc. ([OTC]: WMANQ.OB) -- http://www.wellmaninc.com/-- manufactures and markets packaging and engineering resins used in food and beverage packaging, apparel, home furnishings and automobiles. They manufacture resins and polyester staple fiber a three major production facilities. The company and its debtor-affiliates filed for Chapter 11 protection on Feb. 22, 2008 (Bankr. S.D. N.Y. Case No. 08-10595). Jonathan S. Henes, Esq., at Kirkland & Ellis, LLP, in New York City, represents the Debtors. Lazard Freres & Co., LLC, acts as the Debtors' financial advisors. The United States Trustee for Region 2 has appointed seven members to the Official Committee of Unsecured Creditors. Mark R. Somerstein, Esq., at Ropes & Gray LLP, serves as the Committee's bankruptcy counsel. FTI Consulting, Inc., acts as the panel's financial advisors. Wellman Inc., in its bankruptcy petition, listed total assets of $124,277,177 and total liabilities of $600,084,885, as of Dec. 31, 2007, on a stand-alone basis. Debtor-affiliate ALG, Inc., listed assets between $500 million and $1 billion on a stand-alone basis at the time of the bankruptcy filing. Debtor-affiliates Fiber Industries Inc., Prince Inc., and Wellman of Mississippi Inc., listed assets between $100 million and $500 million at the time of their bankruptcy filings. On a consolidated basis, Wellman Inc., and its debtor-affiliates listed $561,200,000 in total assets and $774,100,000 in liabilities as of March 31, 2008. (Wellman Bankruptcy News, Issue No. 19; Bankruptcy Creditors' Service Inc., http://bankrupt.com/newsstand/or 215/945-7000) WESCOLD INC: Case Summary & 20 Largest Unsecured Creditors ---------------------------------------------------------- Debtor: Wescold, Inc. dba W.E. Stone & Co. dba Western Engineers dba Wescold Engineered Products 4220 22nd Avenue West Seattle, WA 98199 Tel: (206) 284-5710 Bankruptcy Case No.: 08-14902 Type of Business: The Debtor makes and sells air conditioning and ventilation equipment. See: http://www.wescold.com Chapter 11 Petition Date: July 31, 2008 Court: Western District of Washington (Seattle) Debtors' Counsel: John R. Knapp, Jr., Esq. (jknapp@cairncross.com) Cairncross & Hempelmann PS 524 2nd Avenue, Ste. 500 Seattle, WA 98104-2323 Tel: (206) 587-0700 http://cairncross.com/ Estimated Assets: $1 million to $100 million Estimated Debts: $1 million to $100 million A list of the Debtor's largest unsecured creditors is available for free at: http://bankrupt.com/misc/waswb08-14902.pdf WHITING PETROLEUM: S&P Holds 'BB-' Rating; Revises Outlook to Pos. ------------------------------------------------------------------ Standard & Poor's Ratings Services revised its outlook on Whiting Petroleum Corp. to positive from stable and affirmed its 'BB-' corporate credit rating on the company. "The positive outlook reflects the company's improving production levels, our greater level of confidence surrounding the company's drilling program and its tertiary recovery projects, as well as expectations for strong near-term results given robust commodity prices," said Standard & Poor's credit analyst Amy Eddy. "The ratings also reflect the company's high lifting costs, weak reserve replacement metrics, and aggressive leverage," she continued. As of June 30, 2008, Denver, Colorado-based Whiting had more than $1.1 billion in total adjusted debt. The outlook on Whiting is positive. S&P could consider an upgrade in the next two to four quarters if the company successfully continues to execute on its plan of expanding production levels and profitably adding reserves. Conversely, S&P could revise the outlook to stable or negative if the operational performance suffers or if the company makes a materially leveraging acquisition. WINDSOR QUALITY: Moody's Lowers Corporate Family Rating to B1 ------------------------------------------------------------- Moody's Investors Service downgraded the ratings of Windsor Quality Food Company, Ltd., including its corporate family rating to B1 from Ba3, and its probability of default rating to B2 from B1. The rating outlook is stable. This rating action concluded the review for possible downgrade begun on May 8, 2008. Ratings lowered: Corporate family rating at B1 Probability of default rating at B2 $100 million senior secured revolving credit agreement expiring in November 2011 to B1 (LGD3, 38%) from Ba3 (LGD3,37%) $140 million senior secured term loan maturing in November 2012 to B1 (LGD3, 38%) from Ba3 (LGD3,37%) The downgrade is based on Moody's expectation that the continued increase in commodity prices, especially in grains and some proteins, will further erode Windsor's profit margins and the cushion under its bank covenants. In the first quarter of fiscal 2008, reported EBIT margin fell to 2.7%, down from 5% in the prior year. As a result, Windsor's credit metrics in fiscal 2008 are likely to trail those appropriate for its prior rating level. Windsor Quality Food Company, Ltd. is a privately held frozen food manufacturer based in Houston, Texas. The company's two major divisions are Windsor Foods, which specializes in ethnic and other frozen food categories (e.g., Italian, Asian, Mexican, and coated appetizers) sold through foodservice, consumer and industrial distribution channels; and Quality Sausage, which produces pre- cooked meats for industrial and foodservice channels. The company's sales for the twelve months ended April 5, 2008 were approximately $654 million. * Fitch Updates Q-IFS Rtngs on 564 Property/Casualty Insurance Cos ------------------------------------------------------------------ Fitch Ratings has updated its Quantitative Insurer Financial Strength ratings for 564 U.S. property/casualty insurance companies. At the same time, Fitch has assigned new Q-IFS ratings to 37 U.S. property/casualty insurers. -- Direct General Insurance Company of Mississippi (MS)/10889/'BBq'; -- Direct Insurance Company (TN)/37220/'BBBq'; -- Donegal Mutual Insurance Company (PA)/13692/'Aq'; -- Dorchester Mutual Fire Insurance Company (MA)/13706/'BBBq'; -- DTRIC Insurance Company, Limited (HI)/37265/'BBBq'; -- Eagle West Insurance Company (CA)/12890/'Aq'; -- Electric Insurance Company (MA)/21261/'BBBq'; -- EMC Property & Casualty Company (IA)/25186/'Aq'; -- Emcasco Insurance Company (IA)/21407/'Aq'; -- Employers Compensation Insurance Company (CA)/11512/'Aq'; -- Employers Insurance Company of Nevada (NV)/10640/'Aq'; -- Employers Mutual Casualty Company (IA)/21415/'Aq'; -- Erie & Niagra Insurance Association (NY)/10374/'BBBq'; -- Erie Insurance Company (PA)/26263/'Aq'; -- Erie Insurance Company of New York (NY)/16233/'Aq'; -- Erie Insurance Exchange (PA)/26271/'Aq'; -- Explorer Insurance Company (CA)/40029/'Aq'; -- Farm & City Insurance Company (IA)/11053/'Aq'; -- Farm Bureau General Insurance Company of Michigan (MI)/21547/'BBBq'; -- Farm Bureau Mutual Insurance Company of Arkansas, Inc. (AR)/13757/'BBBq'; -- Farm Bureau Town & Country Insurance Company of Missouri (MO)/26859/'BBBq'; -- Farm Family Casualty Insurance Company (NY)/13803/'Aq'; -- Farmers Automobile Insurance Association (IL)/24201/'Aq'; -- Farmers Casualty Company Mutual (IA)/13811/'Aq'; -- Farmers Mutual Fire Insurance Company of Salem County (NJ)/13854/'BBBq'; -- Farmers Mutual Hail Insurance Company of Iowa (IA)/13897/'Aq'; -- Farmers Mutual Insurance Company of Nebraska (NE)/13889/'Aq'; -- Farmers Union Mutual Insurance Company (ND)/32670/'BBBq'; -- FCCI Insurance Company (FL)/10178/'BBBq'; -- Federated Mutual Insurance Company (MN)/13935/'Aq'; -- Federated Rural Electric Insurance Exchange (KS)/11118/'Aq'; -- Federated Service Insurance Company (MN)/28304/'Aq'; -- FFVA Mutual Insurance Company (FL)/10385/'Aq'; -- Fidelity Mohawk Insurance Company (NJ)/15750/'Aq'; -- Financial Pacific Insurance Company (CA)/31453/'BBBq'; -- First Commercial Insurance Company (FL)/10347/'BBq'; -- First Dakota Indemnity Company (SD)/10351/'BBBq'; -- First Financial Insurance Company (IL)/11177/'Aq'; -- First Mercury Insurance Company (IL)/10657/'Aq'; -- Firstcomp Insurance Company (NE)/27626/'BBBq'; -- Fitchburg Mutual Insurance Company (MA)/13943/'BBBq'; -- Florida Farm Bureau Casualty Insurance Company (FL)/31216/'BBBq'; -- Florida Hospitality Mutual Insurance Company (FL)/10699/'BBBq'; -- Florists Mutual Insurance Company (IL)/13978/'BBBq'; -- FMI Insurance Company (NJ)/37699/'Aq'; -- Founders Insurance Company (IL)/14249/'BBBq'; -- Frankenmuth Mutual Insurance Company (MI)/13986/'Aq'; -- Franklin Mutual Insurance Company (NJ)/16454/'Aq'; -- Franklin Insurance Company (PA)/10728/'BBBq'; -- Fremont Insurance Company (MI)/13994/'BBBq'; -- Georgia Farm Bureau Mutual Insurance Company (GA)/14001/'BBBq'; -- GeoVera Insurance Company (CA)/10799/'Aq'; -- Geovera Specialty Insurance Company (CA)/10182/'Aq'; -- Germania Farm Mutual Insurance Association (TX)/29610/'BBBq'; -- Germania Insurance Company (TX)/36854/'BBBq'; -- Germantown Insurance Company (PA)/11282/'BBBq'; -- Germantown Mutual Insurance Company (WI)/14036/'BBBq'; -- Goodville Mutual Casualty Company (PA)/14044/'Aq'; -- Grain Dealers Mutual Insurance Company (IN)/22098/'BBq'; -- Grange Indemnity Insurance Company (OH)/10322/'Aq'; -- Grange Insurance Association (WA)/22101/'BBBq'; -- Grange Insurance Company of Michigan (OH)/11136/'Aq'; -- Grange Mutual Casualty Company (OH)/14060/'Aq'; -- Graphic Arts Mutual Insurance Company (NY)/25984/'Aq'; -- Gray Insurance Company (LA)/36307/'BBBq'; -- Greater New York Mutual Insurance Company (NY)/22187/'Aq'; -- Grinnell Mutual Reinsurance Company (IA)/14117/'Aq'; -- Grinnell Select Insurance Company (IA)/16144/'BBBq'; -- Guilford Insurance Company (IL)/10956/'Aq'; -- Gulf States Insurance Company (OK)/26808/'BBBq'; -- Hamilton Mutual Insurance Company (IA)/14125/'Aq'; -- Hastings Mutual Insurance Company (MI)/14176/'Aq'; -- Haulers Insurance Company, Inc. (TN)/31550/'BBBq'; -- Hawaii Employers Mutual Insurance Company (HI)/10781/'Aq'; -- Hingham Mutual Fire Insurance Company (MA)/14192/'BBq'; -- Hochheim Prairie Farm Mutual Insurance Association (TX)/31054/'BBBq'; -- Holyoke Mutual Insurance Company in Salem (MA)/14206/'Aq'; -- Home & Farm Insurance Company (IN)/17639/'BBBq'; -- Home-Owners Insurance Company (MI)/26638/'Aq'; -- Homesite Indemnity Company (KS)/20419/'BBBq'; -- Homesite Insurance Company (CT)/17221/'BBBq'; -- Homesite Insurance Company of California (CA)/11005/'BBBq'; -- Homesite Insurance Company of Pennsylvania (PA)/10745/'BBBq'; -- Homesite Insurance Company of the Midwest (ND)/13927/'BBBq'; -- Hospitals Insurance Company Inc (NY)/30317/'BBq'; -- Housing Authority Property Insurance, A Mutual Company (VT)/10069/'Aq'; -- Housing Authority Risk Retention Group, Inc. (VT)/26797/'BBBq'; -- IFA Insurance Company (NJ)/31062/'BBq'; -- Illinois Casualty Company (A Mutual Insurance Company) (IL)/15571/'BBBq'; -- Illinois Emcasco Insurance Company (IA)/32808/'Aq'; -- Imperial Fire & Casualty Insurance Company (LA)/44369/'BBBq'; -- IMT Insurance Company Mutual (IA)/14257/'Aq'; -- Independence American Insurance Company (DE)/26581/'BBq'; -- Independence Casualty & Surety Company (TX)/10024/'Aq'; -- Indiana Farmers Mutual Insurance Company (IN)/22624/'BBBq'; -- Indiana Lumbermens Mutual Insurance Company (IN)/14265/'BBBq'; -- Insurance Company of Greater New York (NY)/22195/'Aq'; -- Insurance Company of the West (CA)/27847/'Aq'; -- Integrity Mutual Insurance Company (WI)/14303/'Aq'; -- Interinsurance Exchange of the Automobile Club (CA)/15598/'Aq'; -- International Fidelity Insurance Company (NJ)/11592/'BBBq'; -- Iowa American Insurance Company (IA)/31577/'Aq'; -- Iowa Mutual Insurance Company (IA)/14338/'Aq'; -- Island Insurance Company, Limited (HI)/22845/'Aq'; -- Ismie Mutual Insurance Company (IL)/32921/'BBBq'; -- James River Insurance Company (OH)/12203/'Aq'; -- Jewelers Mutual Insurance Company (WI)/14354/'BBBq'; -- Kansas Medical Mutual Insurance Company (KS)/34703/'BBBq'; -- Kentucky Employers Mutual Insurance Authority (KY)/10320/'Aq'; -- Kentucky Farm Bureau Mutual Insurance Company (KY)/22993/'Aq'; -- Keystone Insurance Company (PA)/11681/'BBBq'; -- Lafayette Insurance Company (LA)/18295/'Aq'; -- Lawyers' Mutual Insurance Company (CA)/36706/'Aq'; -- Lemic Insurance Company (LA)/10708/'BBq'; -- Liberty American Insurance Company (FL)/10955/'Aq'; -- Liberty American Select Insurance Company, Inc. (FL)/32760/'Aq'; -- Lightning Rod Mutual Insurance Company (OH)/26123/'BBBq'; -- Lincoln General Insurance Company (PA)/33855/'BBq'; -- Lititz Mutual Insurance Company (PA)/14400/'BBBq'; -- Louisiana Farm Bureau Mutual Insurance Company (LA)/14427/'BBq'; -- Louisiana Workers Compensation Corporation (LA)/22350/'Aq'; -- Loya Insurance Company (TX)/11198/'BBBq'; -- Lumbermen's Underwriting Alliance - U.S. epperson underwriting co.,atty. (MO)/23108/'BBBq'; -- Madison Mutual Insurance Company (IL)/14443/'BBBq'; -- MAG Mutual Insurance Company (GA)/42617/'Aq'; -- Majestic Insurance Company (CA)/42269/'BBBq'; -- MCIC Vermont Inc. (A Risk Retention Group) (VT)/10697/'Bq'; -- Medical Insurance Exchange of California (CA)/32433/'BBBq'; -- Medical Liability Mutual Insurance Company (NY)/34231/'CCCq'; -- Medical Mutual Insurance Company of North Carolina (NC)/32522/'Aq'; -- Medical Mutual Liability Insurance Society of Maryland (MD)/32328/'BBBq'; -- Memberselect Insurance Company (MI)/21229/'BBBq'; -- Mercer Insurance Company (PA)/14478/'BBBq'; -- Mercer Insurance Company of New Jersey, Inc. (NJ)/43540/'BBBq'; -- Merchants Bonding Company (Mutual) (IA)/14494/'BBBq'; -- Meridian Citizens Mutual Insurance Company (IN)/10502/'Aq'; -- Merrimack Mutual Fire Insurance Company (MA)/19798/'Aq'; -- MHA Insurance Company (MI)/33111/'Aq'; -- Miami Mutual Insurance Company (OH)/16764/'BBBq'; -- Michigan Construction Industry Mutual Insurance Company (MI)/10998/'BBBq'; -- Michigan Millers Mutual Insurance Company (MI)/14508/'BBBq'; -- Middlesex Insurance Company (WI)/23434/'Aq'; -- Middlesex Mutual Assurance Company (CT)/14532/'Aq'; -- Midwest Family Mutual Insurance Company (MN)/23574/'BBBq'; -- Milbank Insurance Company (SD)/41653/'Aq'; -- Millers Capital Insurance Company (PA)/14575/'BBBq'; -- Minnesota Lawyers Mutual Insurance Company (MN)/42234/'BBBq'; -- Mississippi Farm Bureau Casualty Insurance Company (MS)/27669/'BBBq'; -- Missouri Employers Mutual Insurance Company (MO)/10191/'BBBq'; -- MMG Insurance Company (ME)/15997/'BBBq'; -- Monterey Insurance Company (CA)/23540/'Aq'; -- Motorists Mutual Insurance Company (OH)/14621/'Aq'; -- Mountain States Mutual Casualty Company (NM)/14648/'BBBq'; -- Mountain Valley Indemnity Company (NH)/10205/'BBBq'; -- Mountain West Farm Bureau Mutual Insurance Company (WY)/29440/'Aq'; -- Mutual Benefit Insurance Company (PA)/14664/'BBBq'; -- Mutual of Enumclaw Insurance Company (WA)/14761/'BBBq'; -- National American Insurance Company (OK)/23663/'BBBq'; -- National Lloyds Insurance Company (TX)/15474/'Aq'; -- National Mutual Insurance Company (OH)/20184/'BBBq'; -- National Security Fire & Casualty Company (AL)/12114/'BBBq'; -- NCMIC Insurance Company (IA)/15865/'Aq'; -- Nevada Capital Insurance Company (NV)/11165/'Aq'; -- New England Guaranty Insurance Company, Inc. (VT)/25852/'BBBq'; -- New Jersey Casualty Insurance Company (NJ)/10732/'BBBq'; -- New Jersey Manufacturers Insurance Company (NJ)/12122/'Aq'; -- New Jersey Re-Insurance Company (NJ)/35432/'Aq'; -- New London County Mutual Insurance Company (CT)/14826/'BBBq'; -- New Mexico Mutual Casualty Company (NM)/40627/'BBBq'; -- New York Central Mutual Fire Insurance Company (NY)/14834/'BBBq'; -- New York Municipal Insurance Reciprocal (NY)/20690/'BBBq'; -- Nodak Mutual Insurance Company (ND)/34592/'BBBq'; -- Norcal Mutual Insurance Company (CA)/33200/'BBBq'; -- Norfolk & Dedham Mutual Fire Insurance Company (MA)/23965/'BBBq'; -- North Carolina Farm Bureau Mutual Insurance Company (NC)/14842/'Aq'; -- North Star Mutual Insurance Company (MN)/14850/'Aq'; -- Nuclear Electric Insurance Limited (DE)/34215/'BBBq'; -- Occidental Fire & Casualty Company of North Carolina (NC)/23248/'BBBq'; -- Ocean Harbor Casualty Insurance Company (FL)/12360/'BBBq'; -- Ohio Farmers Insurance Company (OH)/24104/'Aq'; -- Ohio Indemnity Company (OH)/26565/'BBBq'; -- Oklahoma Farm Bureau Mutual Insurance Company (OK)/21563/'BBBq'; -- Old Guard Insurance Company (OH)/17558/'Aq'; -- Old United Casualty Company (KS)/37060/'Aq'; -- Ophthalmic Mutual Insurance Company (A Risk Retention Group) (VT)/44105/'Aq'; -- Oregon Mutual Insurance Company (OR)/14907/'BBBq'; -- Owners Insurance Company (OH)/32700/'Aq'; -- Pacific Select Property Insurance Company (CA)/10887/'Aq'; -- Pacific Specialty Insurance Company (CA)/37850/'Aq'; -- Palisades Safety & Insurance Association (NJ)/22050/'BBBq'; -- Paramount Insurance Company (NY)/40177/'BBBq'; -- Partners Mutual Insurance Company (WI)/13439/'BBq'; -- Patrons Oxford Insurance Company (ME)/28290/'Aq'; -- Pekin Insurance Company (IL)/24228/'Aq'; -- Pemco Insurance Company (WA)/18805/'BBBq'; -- Pemco Mutual Insurance Company (WA)/24341/'BBBq'; -- Peninsula Insurance Company (MD)/14958/'BBBq'; -- Penn Millers Insurance Company (PA)/14982/'BBBq'; -- Penn National Security Insurance Company (PA)/32441/'Aq'; -- Penn Patriot Insurance Company (VA)/10121/'Aq'; -- Penn-America Insurance Company (PA)/32859/'Aq'; -- Penn-Star Insurance Company (PA)/10673/'Aq'; -- Pennsylvania Lumbermens Mutual Insurance Company (PA)/14974/'Aq'; -- Pennsylvania National Mutual Casualty Insurance Company (PA)/14990/'Aq'; -- Permanent General Assurance Corporation (TN)/37648/'BBBq'; -- Permanent General Assurance Corporation of Ohio (OH)/22906/'BBBq'; -- Personal Service Insurance Company (PA)/12289/'BBq'; -- Pharmacists Mutual Insurance Company (IA)/13714/'BBBq'; -- Philadelphia Contributionship for the Insurance of Houses From Loss by Fire (The) (PA)/17930/'BBBq'; -- Philadelphia Contributionship Insurance Company (PA)/17914/'BBBq'; -- Philadelphia Indemnity Insurance Company (PA)/18058/'Aq'; -- Philadelphia Insurance Company (PA)/23850/'Aq'; -- Phoenix Indemnity Insurance Company (AZ)/34037/'BBBq'; -- Physicians Liability Insurance Company (OK)/39594/'CCCq'; -- Pioneer State Mutual Insurance Company (MI)/18309/'Aq'; -- Platte River Insurance Company (NE)/18619/'Aq'; -- Plymouth Rock Assurance Corporation (MA)/14737/'BBBq'; -- Pmslic Insurance Company (PA)/35114/'BBBq'; -- Podiatry Insurance Company of America, A Mutual Company (IL)/14460/'BBBq'; -- Preferred Mutual Insurance Company (NY)/15024/'BBBq'; -- Preferred Professional Insurance Company (NE)/36234/'BBBq'; -- Pre-Paid Legal Casualty, Inc. (OK)/37869/'BBBq'; -- Preserver Insurance Company (NJ)/15586/'BBBq'; -- PrInceton Insurance Company (NJ)/42226/'BBBq'; -- Proformance Insurance Company (NJ)/10100/'BBBq'; -- Property-Owners Insurance Company (IN)/32905/'Aq'; -- Protective Insurance Company (IN)/12416/'Aq'; -- Providence Mutual Fire Insurance Company (RI)/15040/'BBBq'; -- Public Service Mutual Insurance Company (NY)/15059/'BBBq'; -- Quincy Mutual Fire Insurance Company (MA)/15067/'Aq'; -- Ram Mutual Insurance Company (MN)/16330/'BBBq'; -- Republic Mutual Insurance Company (OH)/20192/'BBBq'; -- Republic-Franklin Insurance Company (OH)/12475/'Aq'; -- Residence Mutual Insurance Company (CA)/15776/'Aq'; -- Rider Insurance Company (NJ)/34509/'BBBq'; -- Rochdale Insurance Company (NY)/12491/'BBBq'; -- Rockford Mutual Insurance Company (IL)/27065/'BBBq'; -- Rockhill Insurance Company (AZ)/28053/'BBBq'; -- RSUI Indemnity Company (NH)/22314/'Aq'; -- Rural Mutual Insurance Company (WI)/15091/'Aq'; -- RVOS Farm Mutual Insurance Company (TX)/21733/'BBBq'; -- Safe Auto Insurance Company (OH)/25405/'BBBq'; -- Safety Indemnity Insurance Company (MA)/33618/'Aq'; -- Safety Insurance Company (MA)/39454/'Aq'; -- Safeway Direct Insurance Company (CA)/10939/'BBBq'; -- Safeway Insurance Company (IL)/12521/'BBBq'; -- Safeway Insurance Company of Alabama, Inc. (IL)/11223/'BBBq'; -- Safeway Insurance Company of Georgia (GA)/25640/'BBBq'; -- Safeway Insurance Company of Louisiana (LA)/10248/'BBBq'; -- Sagamore Insurance Company (IN)/40460/'BBBq'; -- SAIF Corporation (OR)/36196/'BBBq'; -- Secura Insurance, A Mutual Company (WI)/22543/'Aq'; -- Secura Supreme Insurance Company (WI)/10239/'Aq'; -- Security Mutual Insurance Company (NY)/15113/'BBq'; -- Select Risk Insurance Company (PA)/17752/'BBBq'; -- Seminole Casualty Insurance Company (FL)/33545/'BBq'; -- Sentry Insurance A Mutual Company (WI)/24988/'Aq'; -- Sentry Select Insurance Company (WI)/21180/'Aq'; -- Service Lloyds Insurance Company (TX)/43389/'Aq'; -- Shelter General Insurance Company (MO)/23361/'BBBq'; -- Shelter Mutual Insurance Company (MO)/23388/'Aq'; -- Society Insurance, A Mutual Company (WI)/15261/'BBBq'; -- Sonnenberg Mutual Insurance Association (OH)/10271/'BBBq'; -- Southeastern U.S. Captive Insurance, Inc. (GA)/11184/'Bq'; -- Southern Farm Bureau Casualty Insurance Company (MS)/18325/'Aq'; -- Southern General Insurance Company (GA)/37141/'BBq'; -- Southern Insurance Company of Virginia (VA)/26867/'BBBq'; -- Southern-Owners Insurance Company (MI)/10190/'Aq'; -- Standard Mutual Insurance Company (IL)/15199/'BBq'; -- State Auto Insurance Company of Ohio (OH)/11017/'Aq'; -- State Auto National Insurance Company (OH)/19530/'BBBq'; -- State Auto Property & Casualty Insurance Company (IA)/25127/'Aq'; -- State Automobile Mutual Insurance Company (OH)/25135/'Aq'; -- State Volunteer Mutual Insurance Company (TN)/33049/'BBBq'; -- Sterling Insurance Company (NY)/15210/'BBBq'; -- Stonetrust Commercial Insurance Company (LA)/11042/'BBBq'; -- Stonewood Insurance Company (NC)/11828/'Aq'; -- Stratford Insurance Company (NH)/40436/'Aq'; -- Strathmore Insurance Company (NY)/11024/'Aq'; -- SUA Insurance Company (IL)/40134/'BBBq'; -- Summit Insurance Company (CT)/37354/'BBBq'; -- Technology Insurance Company (NH)/42376/'Aq'; -- Tennessee Farmers Assurance Company (TN)/41220/'Aq'; -- Tennessee Farmers Mutual Insurance Company (TN)/15245/'Aq'; -- Texas Mutual Insurance Company (TX)/22945/'Aq'; -- Topa Insurance Company (CA)/18031/'BBBq'; -- Transguard Insurance Company of America, Inc. (IL)/28886/'BBBq'; -- Trustgard Insurance Company (OH)/40118/'Aq'; -- Tudor Insurance Company (NH)/37982/'Aq'; -- U.S. Security Insurance Company (FL)/21300/'BBq'; -- Ulico Casualty Company (DE)/37893/'BBBq'; -- Union Insurance Company of Providence (IA)/21423/'Aq'; -- Union Mutual Fire Insurance Company (VT)/25860/'BBBq'; -- United Automobile Insurance Company (FL)/35319/'BBq'; -- United Educators Insurance, A Reciprocal Risk Retention Group (VT)/10020/'Aq'; -- United Farm Family Insurance Company (NY)/29963/'Aq'; -- United Farm Family Mutual Insurance Company (IN)/15288/'BBBq'; -- United Fire & Casualty Co. (IA)/13021/'Aq'; -- United Fire & Indemnity Company (TX)/19496/'Aq'; -- United Fire Lloyds (TX)/43559/'Aq'; -- Universal Casualty Company (IL)/42862/'BBBq'; -- Utah Medical Insurance Association (UT)/36676/'BBBq'; -- Utica Mutual Insurance Company (NY)/25976/'Aq'; -- Utica National Assurance Company (NY)/10687/'Aq'; -- Utica National Insurance Company of Texas (TX)/43478/'Aq'; -- Vanliner Insurance Company (MO)/21172/'BBBq'; -- Vermont Mutual Insurance Company (VT)/26018/'Aq'; -- Viking Insurance Company of Wisconsin (WI)/13137/'Aq'; -- Vinings Insurance Company (SC)/16632/'Aq'; -- Virginia Farm Bureau Fire & Casualty Insurance Company (VA)/26026/'BBBq'; -- Virginia Farm Bureau Mutual Insurance Company (VA)/26034/'BBBq'; -- Virginia Farm Bureau Town & Country Insurance Company (VA)/10086/'BBBq'; -- Wawanesa General Insurance Company (CA)/10683/'BBBq'; -- Wawanesa Mutual Insurance Company (CA)/31526/'Aq'; -- West Bend Mutual Insurance Company (WI)/15350/'Aq'; -- Western General Insurance Company (CA)/27502/'BBq'; -- Western Mutual Insurance Company (CA)/13625/'Aq'; -- Western National Mutual Insurance Company (MN)/15377/'Aq'; -- Western Reserve Mutual Casualty Company (OH)/26131/'BBBq'; -- Western United Insurance Company (CA)/37770/'Aq'; -- Western World Insurance Company (NH)/13196/'Aq'; -- Westfield Insurance Company (OH)/24112/'Aq'; -- Westfield National Insurance Company (OH)/24120/'Aq'; -- Wilshire Insurance Company (NC)/13234/'BBBq'; -- Wilson Mutual Insurance Company (WI)/19950/'Aq'; -- Wisconsin Mutual Insurance Company (WI)/27022/'BBBq'; -- Wisconsin Reinsurance Corporation (WI)/30260/'BBBq'; -- Wolverine Mutual Insurance Company (MI)/15407/'BBq'; -- Workers Compensation Fund (UT)/10033/'Aq'; -- Workmen's Auto Insurance Company (CA)/13250/'BBq'; Fitch has withdrawn these Q-IFS ratings: Entity/NAIC Code/Prior Rating -- American Healthcare Indemnity Company (DE)/39152/'BBBq'; -- American Healthcare Specialty Insurance Company (AR)/38920/'BBBq'; -- American Mining Insurance Company (AL)/15911/'BBBq'; -- Argonaut Great Central Insurance Company (IL)/19860/'BBBq'; -- Argonaut Limited Risk Insurance Company (IL)/26409/'BBBq'; -- Argonaut-Midwest Insurance Company (IL)/19828/'BBBq'; -- Argonaut-Southwest Insurance Company (LA)/19844/'BBBq'; -- Builders Insurance Company, Inc. (NV)/11025/'BBq'; -- California Healthcare Insurance Company, Inc., A Risk Retention Group (HI)/44504/'BBBq'; -- Capital City Insurance Company, Inc. (SC)/30589/'BBBq'; -- Center Mutual Insurance Company (ND)/34606/'BBBq'; -- Community Hospital Alternative For Risk Transfer (A Reciprocal Risk Retention Group) (VT)/11259/'BBBq'; -- Golden Bear Insurance Company (CA)/39861/'BBBq'; -- Insurance Company of the Americas (FL)/33030/'BBBq'; -- Montpelier US Insurance Company (OK)/36838/'BBq'; -- Mountain States Indemnity Company (NM)/10177/'BBBq'; -- Nevada Mutual Insurance Company, Inc. (NV)/11260/'BBq'; -- North Pointe Insurance Company (MI)/27740/'BBq'; -- Nova Casualty Company (NY)/42552/'BBBq'; -- Oklahoma Farmers Union Mutual Insurance Company (OK)/41475/'BBBq'; -- Patriot Insurance Company (ME)/32069/'BBq'; -- Patrons Fire Insurance Company of Rhode Island (CT)/30937/'BBq'; -- SCPIE Indemnity Company (CA)/10352/'BBBq'; -- Seaworthy Insurance Company (MD)/37923/'BBBq'; -- Select Markets Insurance Company (IL)/19836/'BBBq'; -- St. Johns Insurance Company, Inc. (FL)/11844/'Bq'; -- State-Wide Insurance Company (NY)/25275/'BBBq'; -- Sutter Insurance Company (CA)/32107/'BBBq' * S&P: Defaults in the US to Escalate Through the Rest of 2008 -------------------------------------------------------------- Defaults in the U.S. have begun to climb visibly as expected, with 37 defaults in the first half of the year, said an article published by Standard & Poor's. The article, which is titled "U.S. Corporate Default Outlook: Corporate Hatchet Meter Kicks Into Motion (Premium)," says that this is almost equivalent to the combined 16 and 22 defaults in 2007 and 2006, respectively. If the six defaults in July through the 28th were included, the total for the year easily exceeds the total in the two prior years. "We expect defaults to continue to gain momentum through the rest of 2008 and 2009," said Diane Vazza, head of Standard & Poor's Global Fixed Income Research Group. "Given the prevailing high levels of market volatility, a material risk remains that defaults could be significantly more pronounced and severe, especially if this recession is deeper and longer than expected." Therefore, S&P simulates the default-rate impact under two alternative economic scenarios, one worse than the baseline and one better, both of which have an estimated 20% chance of occurring. In its baseline scenario (to which we've assigned a 60% probability), S&P expects the U.S. speculative-grade default rate to escalate to a mean forecast of 4.9% in the next 12 months (through June 2009). To reach the baseline forecast of 4.9%, 79 issuers must default in the next 12 months. Under S&P's two alternative economic scenarios, the pessimistic scenario yields a mean 12-month default rate of 8.5%, nearly double the long-term average of 4.4% but still below the peak of 10.8% in 2001-2002. The optimistic scenario yields an average default rate of 3.4%, below the long-term average. * S&P Says Slowing Economic Conditions Pressure S&P 500 ------------------------------------------------------- Slowing economic conditions and stress in capital markets have put pressure on earnings and raised the credit risk of the members in the S&P 500 index, according to an article published by Standard & Poor's. The article, which is titled "Credit Profile Of The S&P 500: More Credit Downgrades On The Horizon (Premium)," says that operating earnings per share for the S&P 500 fell to $16.60 in the first quarter of 2008 from $22.40 in the first quarter of 2007, a 26% decline. "Our macroeconomic research team expects operating earnings to decline to $79.40/share for the 2008 and $76 in 2009 from $82.5 in 2007," noted Diane Vazza, head of Standard & Poor's Global Fixed Income Research Group. However, earnings have been dragged down, principally in the financials, homebuilders, and automotive sectors. Excluding financials, homebuilders, automotives, and the high- performing energy sector reported earnings are on pace to increase 5.4% in the second quarter. "Nevertheless, the difficult economic and financial market environment has already caused a slight slide in credit quality," Ms. Vazza added. The number of downgrades in the first half of 2008 is almost double in the number of downgrades in the first half of 2007. * S&P Puts Default Ratings on 32 Classes of Notes ------------------------------------------------- Standard & Poor's Ratings Services lowered its ratings on 32 classes of notes from Careel Bay CDO Ltd., STACK 2005-2 Ltd., Static Residential CDO 2006-C Ltd., and Timberwolf I Ltd. following the liquidation of their portfolio collateral. Careel Bay CDO Ltd., STACK 2005-2 Ltd., and Static Residential CDO 2006-C Ltd. are all hybrid collateralized debt obligation transactions backed predominantly by mezzanine residential mortgage-backed securities, while Timberwolf I Ltd. is a hybrid CDO of structured finance CDO. The deals had previously experienced events of default and, subsequently, the controlling noteholders voted to accelerate the maturity of the notes and to liquidate the collateral assets. The downgrades follow notice from the trustees for the deals that the liquidation of the portfolio assets is complete and that the available proceeds have been distributed to the noteholders. The trustees have indicated that the proceeds of the liquidation for all four transactions were insufficient to pay down the balances of any of the notes in full. Rating Actions Rating ------ Transaction Class To From ----------- ----- -- ---- Careel Bay CDO Ltd. A1S D CCC-/Watch Neg Careel Bay CDO Ltd. A1J D CC Careel Bay CDO Ltd. A2 D CC Careel Bay CDO Ltd. A3 D CC Careel Bay CDO Ltd. B D CC Careel Bay CDO Ltd. C D CC STACK 2005-2 Ltd. A-1 D B- STACK 2005-2 Ltd. A-2 D B- STACK 2005-2 Ltd. B D CC STACK 2005-2 Ltd. C D CC STACK 2005-2 Ltd. D D CC STACK 2005-2 Ltd. E D CC STACK 2005-2 Ltd. F D CC STatic Residential CDO 2006-C Ltd. A-1a D CC STatic Residential CDO 2006-C Ltd. A-1b D CC STatic Residential CDO 2006-C Ltd. A-2 D CC STatic Residential CDO 2006-C Ltd. B-1 D CC STatic Residential CDO 2006-C Ltd. B-2 D CC STatic Residential CDO 2006-C Ltd. C D CC STatic Residential CDO 2006-C Ltd. D-1a D CC STatic Residential CDO 2006-C Ltd. D-1b D CC STatic Residential CDO 2006-C Ltd. D-2 D CC Timberwolf I Ltd. S-1 D B-/Watch Neg Timberwolf I Ltd. S-2 D CC Timberwolf I Ltd. A-1a D CCC-/Watch Neg Timberwolf I Ltd. A-1b D CC Timberwolf I Ltd. A-1c D CC Timberwolf I Ltd. A-1d D CC Timberwolf I Ltd. A-2 D CC Timberwolf I Ltd. B D CC Timberwolf I Ltd. C D CC Timberwolf I Ltd. D D CC * Cadwalader Axes 96 Real Estate Finance and Securitizations Jobs ----------------------------------------------------------------- Cadwalader Wickersham & Taft will terminate 96 salaried lawyers mostly in the real-estate finance and securitizations practices in the firm's offices in New York, Charlotte, North Carolina, Washington and London, various reports say. WSJ states that in January, Cadwalader also terminated 35 lawyers. According to Wall Street Journal, the job cut which included first-year associates to counsel, was the biggest that struck the legal society in this financial-markets downturn. Law firms that specialized in structured finance have slowed down in business after having bulked up and reaped profits from big deals during the five years, WSJ adds. Compared with the thousands of jobs that have been cut on Wall Street, the number of reported law-firm layoffs is small, but what made the layoffs notable was the job security that many equate with a legal career, WSJ points out. WSJ, citing Gregory A. Markel, the head of Cadwalader's litigation practice, says the 96 lawyers will get severance pay through the end of the year. By September, he said, the firm will have 580 lawyers, the same number it had in January 2006, WSJ adds. WSJ relates that Cadwalader isn't the only large firm to lay off lawyers this year. The Journal notes that in January, Clifford Chance LLP laid off six associates in its structured-finance group; in May, Sonnenschein Nath & Rosenthal LLP laid off 37 lawyers, consisting of partners and associates, saying demand was down for some of the company's practices, particularly real estate. About Cadwalader Wickersham Cadwalader, Wickersham & Taft LLP -- http://www.cadwalader.com/-- established in 1792, is one of the world's leading international law firms, with offices in New York, London, Charlotte, Washington and Beijing. Cadwalader serves a diverse client base, including many of the world's top financial institutions, undertaking business in more than 50 countries in six continents. The firm offers legal expertise in antitrust, banking, business fraud, corporate finance, corporate governance, environmental, healthcare, insolvency, insurance and reinsurance, intellectual property, litigation, mergers and acquisitions, private client, private equity, real estate, regulation, securitization, structured finance, and tax. * BOND PRICING: For the Week of July 28, 2008 to August 1, 2008 --------------------------------------------------------------- Issuer Coupon Maturity Bid Price ------ ------ -------- --------- ABC RAIL PRODUCT 10.500% 1/15/2004 0.00 ABC RAIL PRODUCT 10.500% 12/31/2004 99.98 ACCURIDE CORP 8.500% 2/1/2015 67.50 ADVANCED MED OPT 3.250% 8/1/2026 67.70 AIRTRAN HOLDING 5.500% 4/15/2015 67.58 AIRTRAN HOLDINGS 7.000% 7/1/2023 69.80 ALERIS INTL INC 10.000% 12/15/2016 73.54 ALESCO FINANCIAL 7.625% 5/15/2027 34.00 ALION SCIENCE 10.250% 2/1/2015 72.00 ALLEGIANCE TEL 11.750% 2/15/2008 0.00 ALLEGIANCE TEL 12.875% 5/15/2008 0.00 AMBAC INC 6.150% 2/7/2087 30.00 AMBASSADORS INTL 3.750% 4/15/2027 53.00 AMD 5.750% 8/15/2012 63.41 AMD 6.000% 5/1/2015 54.15 AMER & FORGN PWR 5.000% 3/1/2030 50.02 AMER AXLE & MFG 5.250% 2/11/2014 66.64 AMER AXLE & MFG 7.875% 3/1/2017 65.00 AMERICREDIT CORP 0.750% 9/15/2011 63.65 AMERICREDIT CORP 2.125% 9/15/2013 57.00 AMES TRUE TEMPER 10.000% 7/15/2012 58.25 AMR CORP 9.000% 8/1/2012 64.48 AMR CORP 9.000% 9/15/2016 63.75 AMR CORP 9.750% 8/15/2021 50.06 AMR CORP 9.800% 10/1/2021 59.50 AMR CORP 9.880% 6/15/2020 52.00 AMR CORP 10.000% 4/15/2021 59.00 AMR CORP 10.150% 5/15/2020 49.95 AMR CORP 10.200% 3/15/2020 52.63 AMR CORP 10.450% 3/10/2011 57.75 ANTIGENICS 5.250% 2/1/2025 61.50 ASBURY AUTO GRP 3.000% 9/15/2012 68.42 ASHTON WOODS USA 9.500% 10/1/2015 60.00 ASPECT MEDICAL 2.500% 6/15/2014 57.38 ATHEROGENICS INC 1.500% 2/1/2012 5.25 ATHEROGENICS INC 4.500% 3/1/2011 11.50 AVENTINE RENEW 10.000% 4/1/2017 65.50 AVIS BUDGET CAR 7.625% 5/15/2014 71.13 AVIS BUDGET CAR 7.750% 5/15/2016 66.00 BALLY TOTAL FITN 13.000% 7/15/2011 45.00 BANK NEW ENGLAND 8.750% 4/1/1999 8.00 BANK NEW ENGLAND 9.500% 2/15/1996 17.00 BANK NEW ENGLAND 9.875% 9/15/1999 6.62 BANKUNITED CAP 3.125% 3/1/2034 41.00 BB&T CAPT TR IV 6.820% 6/12/2057 69.00 BEAZER HOMES USA 6.500% 11/15/2013 71.00 BEAZER HOMES USA 6.875% 7/15/2015 66.65 BELL MICROPRODUC 3.750% 3/5/2024 70.00 BERRY PLASTICS 10.250% 3/1/2016 65.13 BON-TON DEPT STR 10.250% 3/15/2014 52.50 BORDEN INC 7.875% 2/15/2023 54.00 BORDEN INC 8.375% 4/15/2016 38.06 BORDEN INC 9.200% 3/15/2021 45.00 BOWATER INC 6.500% 6/15/2013 58.13 BOWATER INC 9.500% 10/15/2012 63.00 BOYD GAMING CORP 6.750% 4/15/2014 75.50 BOYD GAMING CORP 7.125% 2/1/2016 75.50 BRODER BROS CO 11.250% 10/15/2010 69.50 BUDGET GROUP INC 9.125% 4/1/2006 0.01 BUFFETS INC 12.500% 11/1/2014 4.50 BURLINGTON NORTH 3.200% 1/1/2045 48.16 CAPITALSOURCE 3.500% 7/15/2034 70.00 CAPITALSOURCE 4.000% 7/15/2034 68.50 CCH I LLC 9.920% 4/1/2014 54.00 CCH I LLC 10.000% 5/15/2014 52.75 CCH I LLC 11.125% 1/15/2014 53.00 CCH I/CCH I CP 11.000% 10/1/2015 76.25 CELL THERAPEUTIC 5.750% 12/15/2011 20.50 CHAMPION ENTERPR 2.750% 11/1/2037 49.46 CHARMING SHOPPES 1.125% 5/1/2014 66.43 CHARTER COMM HLD 11.125% 1/15/2011 56.16 CHARTER COMM HLD 11.750% 5/15/2011 65.00 CHARTER COMM LP 5.875% 11/16/2009 64.00 CHARTER COMM LP 6.500% 10/1/2027 42.00 CHENIERE ENERGY 2.250% 8/1/2012 30.00 CIT GROUP INC 5.125% 9/30/2014 71.00 CIT GROUP INC 5.200% 6/15/2015 54.20 CIT GROUP INC 5.400% 3/7/2013 72.50 CIT GROUP INC 5.400% 1/30/2016 71.75 CIT GROUP INC 5.650% 2/13/2017 72.00 CIT GROUP INC 5.800% 12/15/2016 62.00 CIT GROUP INC 5.850% 9/15/2016 71.00 CIT GROUP INC 5.850% 3/15/2022 53.00 CIT GROUP INC 5.900% 3/15/2022 51.51 CIT GROUP INC 5.950% 9/15/2016 56.00 CIT GROUP INC 5.950% 2/15/2017 68.58 CIT GROUP INC 6.000% 3/15/2016 59.88 CIT GROUP INC 6.000% 11/15/2016 59.48 CIT GROUP INC 6.000% 4/1/2036 65.73 CIT GROUP INC 6.050% 5/15/2013 67.50 CIT GROUP INC 6.050% 9/15/2016 57.05 CIT GROUP INC 6.100% 3/15/2067 44.50 CIT GROUP INC 6.150% 9/15/2021 55.46 CIT GROUP INC 6.250% 9/15/2021 56.00 CIT GROUP INC 6.250% 11/15/2021 52.85 CIT GROUP INC 7.250% 3/15/2013 68.68 CITIZENS UTIL CO 7.000% 11/1/2025 69.00 CITIZENS UTIL CO 7.050% 10/1/2046 65.71 CITIZENS UTIL CO 7.450% 7/1/2035 68.00 CLAIRE'S STORES 9.250% 6/1/2015 43.50 CLAIRE'S STORES 9.625% 6/1/2015 31.50 CLAIRE'S STORES 10.500% 6/1/2017 30.00 CLEAR CHANNEL 4.900% 5/15/2015 52.00 CLEAR CHANNEL 5.000% 3/15/2012 64.75 CLEAR CHANNEL 5.500% 9/15/2014 52.38 CLEAR CHANNEL 5.500% 12/15/2016 51.00 CLEAR CHANNEL 5.750% 1/15/2013 62.75 CLEAR CHANNEL 6.875% 6/15/2018 48.00 CLEAR CHANNEL 7.250% 10/15/2027 51.72 CMP SUSQUEHANNA 9.875% 5/15/2014 63.50 COGENT COMMUNICA 1.000% 6/15/2027 56.72 COLLINS & AIKMAN 10.750% 12/31/2011 0.00 COLUMBIA/HCA 7.500% 11/15/2095 69.00 COMERICA CAP TR 6.576% 2/20/2037 66.05 COMPLETE MGMT 8.000% 8/15/2003 99.98 COMPUCREDIT 3.625% 5/30/2025 45.00 COMPUCREDIT 5.875% 11/30/2035 39.00 CONSTAR INTL 11.000% 12/1/2012 49.75 CONSTELLATION BR 8.125% 1/15/2012 100.63 CONTL AIRLINES 8.750% 12/1/2011 71.10 DECODE GENETICS 3.500% 4/15/2011 32.10 DELPHI CORP 6.197% 11/15/2033 0.88 DELPHI CORP 6.500% 8/15/2013 12.88 DELPHI CORP 8.250% 10/15/2033 0.01 DELTA AIR LINES 8.000% 12/1/2015 35.00 DEX MEDIA INC 8.000% 11/15/2013 61.50 DILLARD DEPT STR 7.750% 5/15/2027 64.00 DIVA SYSTEMS 12.625% 3/1/2008 0.00 EPICOR SOFTWARE 2.375% 5/15/2027 67.12 EPIX MEDICAL INC 3.000% 6/15/2024 61.00 EQUISTAR CHEMICA 7.550% 2/15/2026 65.50 EXODUS COMM INC 4.750% 7/15/2008 0.00 EXPRESSJET HLDS 11.250% 8/1/2023 44.00 FEDDERS NORTH AM 9.875% 3/1/2014 1.43 FIBERTOWER CORP 9.000% 11/15/2012 69.00 FIFTH THIRD BANC 4.500% 6/1/2018 68.37 FIFTH THIRD CAP 6.500% 4/15/2037 64.50 FINLAY FINE JWLY 8.375% 6/1/2012 41.50 FINOVA GROUP 7.500% 11/15/2009 10.00 FIRST DATA CORP 4.700% 8/1/2013 43.00 FIRST DATA CORP 4.850% 10/1/2014 32.50 FIRST DATA CORP 4.950% 6/15/2015 40.10 FIRST DATA CORP 5.625% 11/1/2011 52.00 FIVE STAR QUALIT 3.750% 10/15/2026 64.72 FORD HOLDINGS 9.300% 3/1/2030 51.77 FORD HOLDINGS 9.375% 3/1/2020 55.69 FORD MOTOR CO 4.250% 12/15/2036 67.50 FORD MOTOR CO 6.375% 2/1/2029 40.00 FORD MOTOR CO 6.500% 8/1/2018 46.50 FORD MOTOR CO 6.625% 2/15/2028 45.00 FORD MOTOR CO 6.625% 10/1/2028 46.50 FORD MOTOR CO 7.125% 11/15/2025 50.00 FORD MOTOR CO 7.400% 11/1/2046 38.73 FORD MOTOR CO 7.450% 7/16/2031 48.50 FORD MOTOR CO 7.500% 8/1/2026 41.15 FORD MOTOR CO 7.700% 5/15/2097 38.56 FORD MOTOR CO 7.750% 6/15/2043 42.35 FORD MOTOR CO 8.875% 1/15/2022 53.32 FORD MOTOR CO 8.900% 1/15/2032 54.20 FORD MOTOR CO 9.215% 9/15/2021 53.25 FORD MOTOR CO 9.950% 2/15/2032 55.96 FORD MOTOR CO 9.980% 2/15/2047 51.25 FORD MOTOR CRED 5.000% 2/22/2011 68.46 FORD MOTOR CRED 5.200% 3/21/2011 66.94 FORD MOTOR CRED 5.250% 9/20/2011 66.97 FORD MOTOR CRED 5.300% 3/21/2011 64.00 FORD MOTOR CRED 5.350% 2/22/2011 67.83 FORD MOTOR CRED 5.400% 1/20/2011 69.52 FORD MOTOR CRED 5.400% 9/20/2011 63.19 FORD MOTOR CRED 5.400% 10/20/2011 64.03 FORD MOTOR CRED 5.400% 10/20/2011 66.50 FORD MOTOR CRED 5.450% 6/21/2010 69.00 FORD MOTOR CRED 5.450% 4/20/2011 69.18 FORD MOTOR CRED 5.450% 10/20/2011 67.23 FORD MOTOR CRED 5.500% 4/20/2011 67.65 FORD MOTOR CRED 5.500% 9/20/2011 64.03 FORD MOTOR CRED 5.500% 10/20/2011 64.92 FORD MOTOR CRED 5.550% 8/22/2011 64.60 FORD MOTOR CRED 5.600% 4/20/2011 66.05 FORD MOTOR CRED 5.600% 8/22/2011 66.15 FORD MOTOR CRED 5.600% 9/20/2011 67.40 FORD MOTOR CRED 5.600% 11/21/2011 64.39 FORD MOTOR CRED 5.600% 11/21/2011 59.25 FORD MOTOR CRED 5.650% 7/20/2011 63.94 FORD MOTOR CRED 5.650% 11/21/2011 68.08 FORD MOTOR CRED 5.650% 1/21/2014 51.80 FORD MOTOR CRED 5.700% 3/22/2010 69.78 FORD MOTOR CRED 5.700% 5/20/2011 69.00 FORD MOTOR CRED 5.700% 12/20/2011 62.97 FORD MOTOR CRED 5.750% 8/22/2011 68.43 FORD MOTOR CRED 5.750% 12/20/2011 63.08 FORD MOTOR CRED 5.750% 2/21/2012 66.45 FORD MOTOR CRED 5.750% 1/21/2014 50.80 FORD MOTOR CRED 5.750% 2/20/2014 57.86 FORD MOTOR CRED 5.750% 2/20/2014 56.66 FORD MOTOR CRED 5.800% 8/22/2011 65.00 FORD MOTOR CRED 5.850% 7/20/2011 67.77 FORD MOTOR CRED 5.850% 1/20/2012 65.28 FORD MOTOR CRED 5.900% 7/20/2011 67.03 FORD MOTOR CRED 5.900% 2/21/2012 65.17 FORD MOTOR CRED 5.900% 2/20/2014 53.30 FORD MOTOR CRED 6.000% 1/20/2012 64.18 FORD MOTOR CRED 6.000% 1/21/2014 59.02 FORD MOTOR CRED 6.000% 3/20/2014 58.61 FORD MOTOR CRED 6.000% 3/20/2014 65.87 FORD MOTOR CRED 6.000% 3/20/2014 47.88 FORD MOTOR CRED 6.000% 3/20/2014 53.11 FORD MOTOR CRED 6.000% 11/20/2014 48.00 FORD MOTOR CRED 6.000% 11/20/2014 53.41 FORD MOTOR CRED 6.000% 11/20/2014 50.50 FORD MOTOR CRED 6.000% 1/20/2015 52.62 FORD MOTOR CRED 6.000% 2/20/2015 47.73 FORD MOTOR CRED 6.050% 6/20/2011 67.13 FORD MOTOR CRED 6.050% 2/20/2014 54.00 FORD MOTOR CRED 6.050% 3/20/2014 53.01 FORD MOTOR CRED 6.050% 4/21/2014 49.50 FORD MOTOR CRED 6.050% 12/22/2014 51.18 FORD MOTOR CRED 6.050% 12/22/2014 54.67 FORD MOTOR CRED 6.050% 2/20/2015 47.88 FORD MOTOR CRED 6.100% 6/20/2011 68.00 FORD MOTOR CRED 6.100% 2/20/2015 51.12 FORD MOTOR CRED 6.150% 5/20/2011 67.67 FORD MOTOR CRED 6.150% 12/22/2014 50.55 FORD MOTOR CRED 6.150% 1/20/2015 58.00 FORD MOTOR CRED 6.200% 5/20/2011 69.04 FORD MOTOR CRED 6.200% 6/20/2011 69.69 FORD MOTOR CRED 6.200% 4/21/2014 53.00 FORD MOTOR CRED 6.200% 3/20/2015 55.00 FORD MOTOR CRED 6.250% 6/20/2011 68.44 FORD MOTOR CRED 6.250% 6/20/2011 68.75 FORD MOTOR CRED 6.250% 2/21/2012 64.10 FORD MOTOR CRED 6.250% 12/20/2013 60.00 FORD MOTOR CRED 6.250% 12/20/2013 56.97 FORD MOTOR CRED 6.250% 4/21/2014 54.16 FORD MOTOR CRED 6.250% 1/20/2015 48.00 FORD MOTOR CRED 6.250% 3/20/2015 55.00 FORD MOTOR CRED 6.300% 5/20/2014 51.70 FORD MOTOR CRED 6.300% 5/20/2014 49.74 FORD MOTOR CRED 6.350% 4/21/2014 53.00 FORD MOTOR CRED 6.500% 12/20/2013 59.01 FORD MOTOR CRED 6.500% 2/20/2015 57.20 FORD MOTOR CRED 6.500% 3/20/2015 54.00 FORD MOTOR CRED 6.520% 3/10/2013 52.79 FORD MOTOR CRED 6.550% 12/20/2013 63.91 FORD MOTOR CRED 6.550% 7/21/2014 53.04 FORD MOTOR CRED 6.600% 10/21/2013 55.80 FORD MOTOR CRED 6.650% 10/21/2013 53.48 FORD MOTOR CRED 6.650% 6/20/2014 58.25 FORD MOTOR CRED 6.750% 10/21/2013 60.79 FORD MOTOR CRED 6.750% 6/20/2014 57.25 FORD MOTOR CRED 6.800% 6/20/2014 55.00 FORD MOTOR CRED 6.800% 6/20/2014 53.00 FORD MOTOR CRED 6.800% 3/20/2015 50.70 FORD MOTOR CRED 6.850% 9/20/2013 58.65 FORD MOTOR CRED 6.850% 5/20/2014 51.52 FORD MOTOR CRED 6.850% 6/20/2014 57.06 FORD MOTOR CRED 6.950% 5/20/2014 55.88 FORD MOTOR CRED 7.000% 8/15/2012 59.00 FORD MOTOR CRED 7.000% 10/1/2013 68.00 FORD MOTOR CRED 7.050% 9/20/2013 58.00 FORD MOTOR CRED 7.100% 9/20/2013 63.55 FORD MOTOR CRED 7.100% 9/20/2013 57.85 FORD MOTOR CRED 7.250% 7/20/2017 80.40 FORD MOTOR CRED 7.300% 1/23/2012 66.44 FORD MOTOR CRED 7.300% 4/20/2015 51.16 FORD MOTOR CRED 7.350% 9/15/2015 59.44 FORD MOTOR CRED 7.400% 8/21/2017 59.18 FORD MOTOR CRED 7.550% 9/30/2015 98.84 FORD MOTOR CRED 7.900% 5/18/2015 62.71 FORD MOTOR CRED 8.000% 12/15/2016 69.00 FRANKLIN BANK 4.500% 5/1/2027 31.65 FREMONT GEN CORP 7.875% 3/17/2009 48.00 FRONTIER AIRLINE 5.000% 12/15/2025 25.00 GENERAL MOTORS 6.750% 5/1/2028 38.02 GENERAL MOTORS 7.125% 7/15/2013 51.85 GENERAL MOTORS 7.200% 1/15/2011 62.25 GENERAL MOTORS 7.375% 5/23/2048 41.15 GENERAL MOTORS 7.400% 9/1/2025 39.50 GENERAL MOTORS 7.700% 4/15/2016 49.70 GENERAL MOTORS 8.100% 6/15/2024 44.96 GENERAL MOTORS 8.250% 7/15/2023 47.00 GENERAL MOTORS 8.375% 7/15/2033 47.00 GENERAL MOTORS 8.800% 3/1/2021 44.00 GENERAL MOTORS 9.400% 7/15/2021 50.00 GEORGIA GULF CRP 10.750% 10/15/2016 52.50 GLOBAL INDUS LTD 2.750% 8/1/2027 66.59 GLOBALSTAR INC 5.750% 4/1/2028 66.25 GMAC 5.250% 1/15/2014 52.29 GMAC 5.350% 1/15/2014 42.08 GMAC 5.700% 6/15/2013 44.36 GMAC 5.700% 10/15/2013 49.73 GMAC 5.700% 12/15/2013 45.86 GMAC 5.750% 1/15/2014 54.68 GMAC 5.850% 5/15/2013 55.27 GMAC 5.850% 6/15/2013 44.00 GMAC 5.850% 6/15/2013 49.25 GMAC 5.850% 6/15/2013 46.49 GMAC 5.900% 12/15/2013 47.03 GMAC 5.900% 12/15/2013 48.25 GMAC 5.900% 1/15/2019 46.00 GMAC 5.900% 1/15/2019 39.50 GMAC 5.900% 2/15/2019 40.16 GMAC 5.900% 10/15/2019 46.00 GMAC 6.000% 1/15/2010 70.00 GMAC 6.000% 2/15/2010 69.12 GMAC 6.000% 7/15/2013 51.62 GMAC 6.000% 11/15/2013 45.00 GMAC 6.000% 12/15/2013 48.38 GMAC 6.000% 2/15/2019 40.20 GMAC 6.000% 2/15/2019 41.01 GMAC 6.000% 2/15/2019 41.10 GMAC 6.000% 3/15/2019 42.00 GMAC 6.000% 3/15/2019 41.50 GMAC 6.000% 3/15/2019 42.00 GMAC 6.000% 3/15/2019 39.00 GMAC 6.000% 3/15/2019 42.00 GMAC 6.000% 4/15/2019 41.05 GMAC 6.000% 9/15/2019 42.00 GMAC 6.000% 9/15/2019 41.05 GMAC 6.050% 3/15/2010 70.00 GMAC 6.050% 8/15/2019 44.75 GMAC 6.050% 8/15/2019 48.91 GMAC 6.050% 10/15/2019 40.50 GMAC 6.100% 11/15/2013 47.92 GMAC 6.100% 9/15/2019 42.00 GMAC 6.125% 10/15/2019 43.00 GMAC 6.150% 9/15/2013 79.98 GMAC 6.150% 11/15/2013 43.00 GMAC 6.150% 12/15/2013 46.58 GMAC 6.150% 8/15/2019 46.48 GMAC 6.150% 9/15/2019 44.00 GMAC 6.150% 10/15/2019 41.50 GMAC 6.200% 11/15/2013 51.00 GMAC 6.200% 4/15/2019 45.50 GMAC 6.250% 3/15/2013 52.00 GMAC 6.250% 7/15/2013 51.88 GMAC 6.250% 10/15/2013 42.00 GMAC 6.250% 11/15/2013 50.12 GMAC 6.250% 12/15/2018 49.14 GMAC 6.250% 1/15/2019 43.50 GMAC 6.250% 4/15/2019 44.00 GMAC 6.250% 5/15/2019 43.76 GMAC 6.250% 7/15/2019 42.00 GMAC 6.300% 3/15/2013 51.97 GMAC 6.300% 10/15/2013 51.00 GMAC 6.300% 11/15/2013 61.74 GMAC 6.300% 8/15/2019 45.00 GMAC 6.300% 8/15/2019 50.00 GMAC 6.350% 5/15/2013 44.66 GMAC 6.350% 4/15/2019 45.50 GMAC 6.350% 7/15/2019 45.00 GMAC 6.350% 7/15/2019 44.26 GMAC 6.375% 8/1/2013 51.00 GMAC 6.375% 1/15/2014 45.31 GMAC 6.400% 3/15/2013 50.65 GMAC 6.400% 12/15/2018 46.85 GMAC 6.400% 11/15/2019 43.00 GMAC 6.400% 11/15/2019 42.00 GMAC 6.450% 2/15/2013 52.11 GMAC 6.500% 7/15/2012 52.50 GMAC 6.500% 2/15/2013 52.75 GMAC 6.500% 3/15/2013 47.25 GMAC 6.500% 4/15/2013 49.25 GMAC 6.500% 5/15/2013 52.75 GMAC 6.500% 6/15/2013 43.00 GMAC 6.500% 8/15/2013 53.25 GMAC 6.500% 11/15/2013 43.80 GMAC 6.500% 6/15/2018 39.50 GMAC 6.500% 11/15/2018 46.00 GMAC 6.500% 12/15/2018 45.63 GMAC 6.500% 12/15/2018 44.50 GMAC 6.500% 5/15/2019 40.63 GMAC 6.500% 1/15/2020 46.46 GMAC 6.500% 2/15/2020 43.50 GMAC 6.550% 12/15/2019 46.06 GMAC 6.550% 12/15/2019 44.00 GMAC 6.600% 8/15/2016 42.00 GMAC 6.600% 5/15/2018 44.00 GMAC 6.600% 6/15/2019 44.05 GMAC 6.600% 6/15/2019 44.80 GMAC 6.625% 10/15/2011 58.11 GMAC 6.650% 2/15/2013 52.35 GMAC 6.650% 6/15/2018 44.00 GMAC 6.650% 10/15/2018 52.86 GMAC 6.650% 10/15/2018 44.00 GMAC 6.650% 2/15/2020 47.74 GMAC 6.700% 5/15/2014 40.82 GMAC 6.700% 5/15/2014 43.83 GMAC 6.700% 6/15/2014 47.84 GMAC 6.700% 8/15/2016 44.16 GMAC 6.700% 6/15/2018 39.44 GMAC 6.700% 6/15/2018 39.50 GMAC 6.700% 11/15/2018 46.43 GMAC 6.700% 6/15/2019 45.18 GMAC 6.700% 12/15/2019 42.75 GMAC 6.750% 9/15/2011 64.05 GMAC 6.750% 10/15/2011 60.64 GMAC 6.750% 10/15/2011 60.46 GMAC 6.750% 9/15/2012 50.50 GMAC 6.750% 9/15/2012 54.50 GMAC 6.750% 10/15/2012 50.14 GMAC 6.750% 4/15/2013 55.64 GMAC 6.750% 4/15/2013 50.70 GMAC 6.750% 6/15/2014 51.36 GMAC 6.750% 12/1/2014 55.00 GMAC 6.750% 7/15/2016 47.40 GMAC 6.750% 8/15/2016 42.00 GMAC 6.750% 9/15/2016 39.88 GMAC 6.750% 6/15/2017 51.87 GMAC 6.750% 3/15/2018 48.00 GMAC 6.750% 7/15/2018 43.85 GMAC 6.750% 9/15/2018 46.35 GMAC 6.750% 10/15/2018 42.00 GMAC 6.750% 11/15/2018 45.46 GMAC 6.750% 5/15/2019 45.56 GMAC 6.750% 5/15/2019 44.00 GMAC 6.750% 6/15/2019 44.00 GMAC 6.750% 6/15/2019 40.84 GMAC 6.750% 3/15/2020 42.73 GMAC 6.800% 2/15/2013 50.86 GMAC 6.800% 4/15/2013 51.23 GMAC 6.800% 9/15/2018 43.26 GMAC 6.800% 10/15/2018 45.00 GMAC 6.850% 5/15/2018 44.62 GMAC 6.875% 8/28/2012 59.00 GMAC 6.875% 10/15/2012 58.54 GMAC 6.875% 4/15/2013 47.59 GMAC 6.875% 8/15/2016 46.00 GMAC 6.875% 7/15/2018 41.25 GMAC 6.900% 6/15/2017 47.10 GMAC 6.900% 7/15/2018 46.00 GMAC 6.900% 8/15/2018 44.00 GMAC 6.950% 6/15/2017 48.75 GMAC 7.000% 10/15/2011 56.20 GMAC 7.000% 9/15/2012 51.00 GMAC 7.000% 10/15/2012 50.71 GMAC 7.000% 11/15/2012 50.11 GMAC 7.000% 12/15/2012 49.25 GMAC 7.000% 1/15/2013 49.61 GMAC 7.000% 6/15/2017 44.16 GMAC 7.000% 7/15/2017 42.40 GMAC 7.000% 2/15/2018 47.82 GMAC 7.000% 2/15/2018 43.49 GMAC 7.000% 2/15/2018 45.10 GMAC 7.000% 3/15/2018 41.58 GMAC 7.000% 5/15/2018 42.00 GMAC 7.000% 8/15/2018 38.91 GMAC 7.000% 9/15/2018 47.16 GMAC 7.000% 2/15/2021 45.00 GMAC 7.000% 9/15/2021 45.25 GMAC 7.000% 9/15/2021 45.70 GMAC 7.000% 6/15/2022 42.00 GMAC 7.000% 11/15/2023 40.35 GMAC 7.000% 11/15/2024 38.00 GMAC 7.000% 11/15/2024 42.75 GMAC 7.000% 11/15/2024 38.00 GMAC 7.050% 3/15/2018 45.11 GMAC 7.050% 3/15/2018 47.00 GMAC 7.050% 4/15/2018 39.50 GMAC 7.100% 9/15/2012 51.75 GMAC 7.100% 1/15/2013 61.74 GMAC 7.100% 1/15/2013 52.65 GMAC 7.125% 8/15/2012 57.47 GMAC 7.125% 12/15/2012 49.90 GMAC 7.125% 10/15/2017 50.00 GMAC 7.150% 11/15/2012 56.20 GMAC 7.150% 9/15/2018 42.00 GMAC 7.150% 1/15/2025 45.00 GMAC 7.150% 3/15/2025 51.00 GMAC 7.200% 10/15/2017 41.50 GMAC 7.200% 10/15/2017 43.00 GMAC 7.250% 8/15/2012 52.03 GMAC 7.250% 12/15/2012 62.65 GMAC 7.250% 12/15/2012 55.91 GMAC 7.250% 9/15/2017 42.58 GMAC 7.250% 9/15/2017 41.29 GMAC 7.250% 9/15/2017 39.12 GMAC 7.250% 9/15/2017 45.43 GMAC 7.250% 1/15/2018 49.94 GMAC 7.250% 4/15/2018 44.00 GMAC 7.250% 4/15/2018 46.00 GMAC 7.250% 8/15/2018 45.50 GMAC 7.250% 8/15/2018 40.00 GMAC 7.250% 9/15/2018 52.94 GMAC 7.250% 1/15/2025 41.00 GMAC 7.250% 2/15/2025 44.00 GMAC 7.250% 3/15/2025 44.00 GMAC 7.300% 12/15/2017 42.25 GMAC 7.300% 1/15/2018 47.82 GMAC 7.300% 1/15/2018 41.10 GMAC 7.350% 4/15/2018 40.59 GMAC 7.375% 11/15/2016 40.00 GMAC 7.375% 4/15/2018 43.00 GMAC 7.400% 12/15/2017 46.87 GMAC 7.500% 10/15/2012 50.85 GMAC 7.500% 11/15/2016 42.18 GMAC 7.500% 8/15/2017 46.45 GMAC 7.500% 11/15/2017 49.18 GMAC 7.500% 11/15/2017 41.58 GMAC 7.500% 12/15/2017 41.94 GMAC 7.500% 12/15/2017 59.95 GMAC 7.500% 3/15/2025 41.70 GMAC 7.625% 11/15/2012 49.79 GMAC 7.750% 10/15/2012 56.36 GMAC 7.750% 10/15/2017 49.91 GMAC 7.875% 11/15/2012 58.00 GMAC 8.000% 6/15/2010 66.25 GMAC 8.000% 8/15/2015 52.04 GMAC 8.000% 10/15/2017 46.50 GMAC 8.000% 11/15/2017 43.50 GMAC 8.000% 3/15/2025 48.78 GMAC 8.125% 11/15/2017 44.00 GMAC 8.250% 9/15/2012 56.36 GMAC 8.400% 8/15/2015 48.33 GMAC 8.650% 8/15/2015 47.38 GMAC 9.000% 7/15/2015 53.00 GMAC 9.000% 7/15/2020 48.44 GMAC 9.000% 7/15/2020 61.50 GMAC LLC 6.000% 4/1/2011 60.38 GMAC LLC 6.000% 12/15/2011 60.50 GMAC LLC 6.500% 5/15/2012 63.86 GMAC LLC 6.500% 6/15/2012 64.06 GMAC LLC 6.500% 6/15/2012 64.06 GMAC LLC 6.600% 6/15/2012 64.33 GMAC LLC 6.600% 6/15/2012 64.33 GMAC LLC 6.625% 5/15/2012 61.25 GMAC LLC 6.700% 7/15/2012 64.09 GMAC LLC 6.750% 7/15/2012 50.50 GMAC LLC 7.000% 7/15/2012 64.90 GMAC LLC 7.100% 7/15/2012 65.18 GMAC LLC 7.150% 7/15/2012 59.26 GOLDEN BOOKS PUB 10.750% 12/31/2004 0.01 HARRAHS OPER CO 5.375% 12/15/2013 56.00 HARRAHS OPER CO 5.625% 6/1/2015 46.52 HARRAHS OPER CO 5.750% 10/1/2017 47.50 HARRAHS OPER CO 6.500% 6/1/2016 49.00 HARRAHS OPER CO 8.000% 2/1/2011 60.10 HAWAIIAN TELCOM 9.750% 5/1/2013 38.20 HAWAIIAN TELCOM 12.500% 5/1/2015 21.50 HERBST GAMING 7.000% 11/15/2014 21.50 HERBST GAMING 8.125% 6/1/2012 23.50 HINES NURSERIES 10.250% 10/1/2011 53.38 HNG INTERNORTH 9.625% 3/15/2006 14.16 HUNTINGTON CAPIT 6.650% 5/15/2037 65.00 IDEARC INC 8.000% 11/15/2016 41.50 INDALEX HOLD 11.500% 2/1/2014 59.00 ION MEDIA 11.000% 7/31/2013 29.00 IRIDIUM LLC/CAP 10.875% 7/15/2005 0.72 IRIDIUM LLC/CAP 11.250% 7/15/2005 1.50 IRIDIUM LLC/CAP 13.000% 7/15/2005 0.72 IRIDIUM LLC/CAP 14.000% 7/15/2005 0.00 ISLE OF CAPRI 7.000% 3/1/2014 69.25 ISOLAGEN INC 3.500% 11/1/2024 9.50 ISTAR FINANCIAL 5.850% 3/15/2017 65.00 ISTAR FINANCIAL 5.875% 3/15/2016 69.50 JAZZ TECHNOLOGIE 8.000% 12/31/2011 69.13 JONES APPAREL 6.125% 11/15/2034 66.00 K HOVNANIAN ENTR 6.250% 1/15/2015 62.56 K HOVNANIAN ENTR 6.250% 1/15/2016 61.00 K HOVNANIAN ENTR 6.375% 12/15/2014 62.00 K HOVNANIAN ENTR 6.500% 1/15/2014 63.06 K HOVNANIAN ENTR 7.500% 5/15/2016 63.88 K HOVNANIAN ENTR 7.750% 5/15/2013 60.15 K HOVNANIAN ENTR 8.625% 1/15/2017 67.00 K HOVNANIAN ENTR 8.875% 4/1/2012 62.25 KAISER ALUMINUM 9.875% 2/15/2002 0.01 KAISER ALUMINUM 12.750% 2/1/2003 7.00 KELLSTROM INDS 5.500% 6/15/2003 0.01 KELLWOOD CO 7.625% 10/15/2017 62.50 KEMET CORP 2.250% 11/15/2026 41.81 KEYCORP CAP VII 5.700% 6/15/2035 75.00 KEYSTONE AUTO OP 9.750% 11/1/2013 43.50 KIMBALL HILL INC 10.500% 12/15/2012 1.00 KNIGHT RIDDER 4.625% 11/1/2014 69.50 KNIGHT RIDDER 5.750% 9/1/2017 57.00 KNIGHT RIDDER 6.875% 3/15/2029 48.87 KNIGHT RIDDER 7.150% 11/1/2027 66.26 KRATON POLYMERS 8.125% 1/15/2014 54.00 LAZYDAYS RV 11.750% 5/15/2012 60.00 LEHMAN BROS HLDG 4.800% 6/24/2023 57.94 LEHMAN BROS HLDG 5.000% 5/28/2023 58.60 LEHMAN BROS HLDG 5.000% 6/10/2023 59.40 LEHMAN BROS HLDG 5.000% 6/17/2023 62.58 LEHMAN BROS HLDG 5.100% 2/15/2020 68.13 LEHMAN BROS HLDG 5.200% 5/13/2020 67.24 LEHMAN BROS HLDG 5.250% 5/20/2023 58.50 LEHMAN BROS HLDG 5.350% 6/14/2030 60.26 LEHMAN BROS HLDG 5.375% 5/6/2023 61.80 LEHMAN BROS HLDG 5.400% 3/6/2020 64.63 LEHMAN BROS HLDG 5.400% 3/20/2020 67.29 LEHMAN BROS HLDG 5.400% 3/30/2029 56.86 LEHMAN BROS HLDG 5.400% 6/21/2030 56.50 LEHMAN BROS HLDG 5.450% 3/15/2025 56.22 LEHMAN BROS HLDG 5.450% 4/6/2029 53.88 LEHMAN BROS HLDG 5.450% 2/22/2030 55.94 LEHMAN BROS HLDG 5.450% 7/19/2030 51.50 LEHMAN BROS HLDG 5.450% 9/20/2030 55.50 LEHMAN BROS HLDG 5.500% 2/19/2018 67.03 LEHMAN BROS HLDG 5.500% 2/27/2020 67.11 LEHMAN BROS HLDG 5.500% 3/14/2023 64.57 LEHMAN BROS HLDG 5.500% 4/8/2023 63.61 LEHMAN BROS HLDG 5.500% 4/15/2023 60.00 LEHMAN BROS HLDG 5.500% 4/23/2023 57.92 LEHMAN BROS HLDG 5.500% 10/7/2023 62.00 LEHMAN BROS HLDG 5.500% 1/27/2029 66.93 LEHMAN BROS HLDG 5.500% 2/3/2029 60.53 LEHMAN BROS HLDG 5.500% 8/2/2030 60.00 LEHMAN BROS HLDG 5.550% 3/9/2029 56.88 LEHMAN BROS HLDG 5.550% 1/25/2030 60.37 LEHMAN BROS HLDG 5.550% 9/27/2030 54.29 LEHMAN BROS HLDG 5.550% 12/31/2034 51.78 LEHMAN BROS HLDG 5.600% 2/17/2029 55.96 LEHMAN BROS HLDG 5.600% 2/24/2029 59.80 LEHMAN BROS HLDG 5.600% 3/2/2029 57.38 LEHMAN BROS HLDG 5.600% 2/25/2030 54.50 LEHMAN BROS HLDG 5.600% 5/3/2030 54.63 LEHMAN BROS HLDG 5.625% 3/15/2030 59.32 LEHMAN BROS HLDG 5.650% 11/23/2029 58.66 LEHMAN BROS HLDG 5.650% 8/16/2030 60.28 LEHMAN BROS HLDG 5.700% 2/10/2029 60.08 LEHMAN BROS HLDG 5.700% 4/13/2029 65.73 LEHMAN BROS HLDG 5.700% 9/7/2029 55.61 LEHMAN BROS HLDG 5.700% 12/14/2029 57.01 LEHMAN BROS HLDG 5.750% 3/27/2023 62.75 LEHMAN BROS HLDG 5.750% 10/15/2023 65.89 LEHMAN BROS HLDG 5.750% 10/21/2023 66.35 LEHMAN BROS HLDG 5.750% 11/12/2023 61.75 LEHMAN BROS HLDG 5.750% 11/25/2023 64.00 LEHMAN BROS HLDG 5.750% 12/16/2028 68.85 LEHMAN BROS HLDG 5.750% 12/23/2028 59.55 LEHMAN BROS HLDG 5.750% 8/24/2029 62.00 LEHMAN BROS HLDG 5.750% 9/14/2029 59.32 LEHMAN BROS HLDG 5.750% 10/12/2029 62.47 LEHMAN BROS HLDG 5.750% 3/29/2030 54.14 LEHMAN BROS HLDG 5.800% 10/25/2030 60.31 LEHMAN BROS HLDG 5.900% 5/4/2029 66.00 LEHMAN BROS HLDG 5.900% 2/7/2031 58.50 LEHMAN BROS HLDG 5.950% 12/20/2030 69.63 LEHMAN BROS HLDG 6.000% 10/23/2028 66.38 LEHMAN BROS HLDG 6.000% 11/18/2028 58.40 LEHMAN BROS HLDG 6.000% 5/11/2029 62.72 LEHMAN BROS HLDG 6.000% 7/20/2029 60.91 LEHMAN BROS HLDG 6.000% 2/24/2036 59.08 LEHMAN BROS HLDG 6.100% 8/12/2023 67.14 LEHMAN BROS HLDG 6.200% 5/25/2029 65.88 LEHMAN BROS HLDG 6.250% 5/9/2031 60.50 LEHMAN BROS HLDG 7.000% 4/22/2038 68.20 LEHMAN BROS HLDG 7.250% 2/27/2038 69.92 LEINER HEALTH 11.000% 6/1/2012 10.00 LIBERTY MEDIA 3.250% 3/15/2031 63.00 LIBERTY MEDIA 3.500% 1/15/2031 45.00 LIBERTY MEDIA 3.750% 2/15/2030 50.60 LIBERTY MEDIA 4.000% 11/15/2029 56.00 LIFECARE HOLDING 9.250% 8/15/2013 60.00 MAGNA ENTERTAINM 7.250% 12/15/2009 47.00 MAGNA ENTERTAINM 8.550% 6/15/2010 52.00 MAJESTIC STAR 9.750% 1/15/2011 29.00 MANNKIND CORP 3.750% 12/15/2013 58.75 MASONITE CORP 11.000% 4/6/2015 37.88 MBIA INC 6.400% 8/15/2022 41.50 MBIA INC 6.625% 10/1/2028 50.27 MEDIANEWS GROUP 6.375% 4/1/2014 42.00 MEDIANEWS GROUP 6.875% 10/1/2013 42.00 MERIX CORP 4.000% 5/15/2013 50.50 MERRILL LYNCH 8.100% 6/4/2009 10.20 MERRILL LYNCH 10.000% 3/6/2009 20.85 MERRILL LYNCH 11.000% 4/28/2009 23.00 MERRILL LYNCH 11.860% 7/14/2009 8.55 MERRILL LYNCH 12.000% 3/26/2010 24.80 MERRILL LYNCH 12.100% 6/25/2009 9.98 METALDYNE CORP 10.000% 11/1/2013 48.00 METALDYNE CORP 11.000% 6/15/2012 25.25 MICRON TECH 1.875% 6/1/2014 63.81 MILLENNIUM AMER 7.625% 11/15/2026 49.00 MORGAN STANLEY 8.000% 7/20/2009 11.70 MORGAN STANLEY 10.000% 4/20/2009 17.50 MORGAN STANLEY 10.000% 5/20/2009 20.64 MORGAN STANLEY 12.000% 7/20/2009 10.55 MORRIS PUBLISH 7.000% 8/1/2013 53.00 MOVIE GALLERY 11.000% 5/1/2012 14.95 MRS FIELDS 9.000% 3/15/2011 61.50 MRS FIELDS 11.500% 3/15/2011 55.50 NATL CITY BANK 4.625% 5/1/2013 67.00 NATL CITY BANK 6.200% 12/15/2011 69.87 NATL CITY BANK 6.250% 3/15/2011 80.00 NATL CITY BK KEN 6.300% 2/15/2011 80.32 NATL CITY CORP 4.900% 1/15/2015 58.25 NATL CITY CORP 6.875% 5/15/2019 59.00 NATL FINANCIAL 0.750% 2/1/2012 64.58 NEFF CORP 10.000% 6/1/2015 36.50 NETWORK COMMUNIC 10.750% 12/1/2013 68.00 NETWORK EQUIPMNT 3.750% 12/15/2014 59.25 NEW ORL GRT N RR 5.000% 7/1/2032 57.97 NEW PLAN EXCEL 7.500% 7/30/2029 64.34 NEW PLAN REALTY 6.900% 2/15/2028 62.90 NEW PLAN REALTY 6.900% 2/15/2028 61.65 NEW PLAN REALTY 7.650% 11/2/2026 63.00 NEW PLAN REALTY 7.680% 11/2/2026 62.90 NEW PLAN REALTY 7.970% 8/14/2026 62.90 NEWARK GROUP INC 9.750% 3/15/2014 70.00 NORTEK INC 8.500% 9/1/2014 57.00 NORTH ATL TRADNG 9.250% 3/1/2012 55.00 NORTHERN PAC RY 3.000% 1/1/2047 47.99 NORTHERN PAC RY 3.000% 1/1/2047 52.00 NORTHWESTERN CRP 7.960% 12/21/2026 3.75 NORTHWST STL&WIR 9.500% 6/15/2001 0.00 NTK HOLDINGS INC 0.000% 3/1/2014 41.63 NUTRITIONAL SRC 10.125% 8/1/2009 12.50 NUVEEN INVEST 5.500% 9/15/2015 62.50 OAKWOOD HOMES 7.875% 3/1/2004 0.00 OAKWOOD HOMES 8.125% 3/1/2009 0.13 OSCIENT PHARM 3.500% 4/15/2011 34.75 OSI RESTAURANT 10.000% 6/15/2015 66.63 OSI RESTAURANT 10.000% 6/15/2015 62.84 OVERSTOCK.COM 3.750% 12/1/2011 63.50 PAC-WEST TELECOM 13.500% 2/1/2009 1.50 PACKAGING DYNAMI 10.000% 5/1/2016 67.31 PALM HARBOR 3.250% 5/15/2024 63.90 PANAMSAT CORP 9.000% 8/15/2014 65.02 PARK PLACE ENT 8.125% 5/15/2011 74.75 PEGASUS SATELLIT 9.750% 12/1/2006 0.13 PEGASUS SATELLIT 12.375% 8/1/2008 0.00 PIEDMONT AVIAT 10.250% 1/15/2049 0.00 PIERRE FOODS INC 9.875% 7/15/2012 8.00 PIXELWORKS INC 1.750% 5/15/2024 70.00 PLY GEM INDS 9.000% 2/15/2012 51.00 POPE & TALBOT 8.375% 6/1/2013 0.13 POPE & TALBOT 8.375% 6/1/2013 0.13 PORTOLA PACKAGIN 8.250% 2/1/2012 42.00 PRIMUS TELECOM 3.750% 9/15/2010 43.00 PRIMUS TELECOM 5.000% 6/30/2009 64.50 PRIMUS TELECOM 8.000% 1/15/2014 36.00 PROPEX FABRICS 10.000% 12/1/2012 0.00 PSINET INC 10.000% 2/15/2005 0.00 PSINET INC 11.500% 11/1/2008 0.01 QUALITY DISTRIBU 9.000% 11/15/2010 55.13 RADIAN GROUP 5.625% 2/15/2013 55.42 RADIAN GROUP 7.750% 6/1/2011 64.00 RADNOR HOLDINGS 11.000% 3/15/2010 0.00 RAFAELLA APPAREL 11.250% 6/15/2011 48.50 READER'S DIGEST 9.000% 2/15/2017 60.00 REALOGY CORP 10.500% 4/15/2014 64.00 REALOGY CORP 12.375% 4/15/2015 46.88 REGIONS FIN TR 6.625% 5/15/2047 47.00 RESIDENTIAL CAP 8.000% 2/22/2011 28.00 RESIDENTIAL CAP 8.375% 6/30/2010 30.50 RESIDENTIAL CAP 8.500% 6/1/2012 33.06 RESIDENTIAL CAP 8.500% 4/17/2013 27.45 RESIDENTIAL CAP 8.875% 6/30/2015 29.44 RESIDENTIAL CAP 9.625% 5/15/2015 40.22 RESTAURANT CO 10.000% 10/1/2013 59.75 RF MICRO DEVICES 1.000% 4/15/2014 69.40 RH DONNELLEY 6.875% 1/15/2013 47.75 RH DONNELLEY 6.875% 1/15/2013 47.75 RH DONNELLEY 6.875% 1/15/2013 48.25 RH DONNELLEY 8.875% 1/15/2016 48.00 RH DONNELLEY 8.875% 10/15/2017 47.00 RH DONNELLEY 8.875% 10/15/2017 48.16 RITE AID CORP 6.875% 8/15/2013 63.00 RITE AID CORP 6.875% 12/15/2028 46.80 RITE AID CORP 7.700% 2/15/2027 52.38 RITE AID CORP 8.625% 3/1/2015 64.50 RITE AID CORP 9.375% 12/15/2015 65.50 RITE AID CORP 9.500% 6/15/2017 65.00 RJ TOWER CORP 12.000% 6/1/2013 0.00 ROTECH HEALTHCA 9.500% 4/1/2012 65.42 SANDISK CORP 1.000% 5/15/2013 64.75 SEARS ROEBUCK AC 6.500% 12/1/2028 56.75 SEARS ROEBUCK AC 6.750% 1/15/2028 64.39 SERVICEMASTER CO 7.100% 3/1/2018 50.00 SERVICEMASTER CO 7.250% 3/1/2038 52.00 SERVICEMASTER CO 7.450% 8/15/2027 43.25 SIX FLAGS INC 4.500% 5/15/2015 40.00 SIX FLAGS INC 9.625% 6/1/2014 47.00 SIX FLAGS INC 9.750% 4/15/2013 51.50 SLM CORP 4.800% 12/15/2028 65.42 SLM CORP 5.000% 6/15/2019 59.39 SLM CORP 5.000% 6/15/2019 68.00 SLM CORP 5.000% 6/15/2028 67.49 SLM CORP 5.150% 12/15/2028 68.85 SLM CORP 5.190% 4/24/2019 69.04 SLM CORP 5.250% 3/15/2028 68.96 SLM CORP 5.250% 6/15/2028 61.14 SLM CORP 5.250% 12/15/2028 55.50 SLM CORP 5.300% 9/15/2030 57.00 SLM CORP 5.350% 6/15/2025 65.11 SLM CORP 5.350% 6/15/2028 55.00 SLM CORP 5.400% 3/15/2023 61.16 SLM CORP 5.400% 3/15/2030 60.36 SLM CORP 5.400% 6/15/2030 56.63 SLM CORP 5.400% 6/15/2030 57.97 SLM CORP 5.450% 3/15/2023 63.90 SLM CORP 5.500% 6/15/2019 69.21 SLM CORP 5.500% 9/15/2019 64.12 SLM CORP 5.500% 6/15/2029 58.72 SLM CORP 5.500% 6/15/2029 60.00 SLM CORP 5.500% 3/15/2030 58.56 SLM CORP 5.500% 3/15/2030 58.00 SLM CORP 5.500% 6/15/2030 60.93 SLM CORP 5.500% 12/15/2030 62.30 SLM CORP 5.500% 12/15/2030 60.48 SLM CORP 5.550% 6/15/2025 64.62 SLM CORP 5.550% 3/15/2028 55.00 SLM CORP 5.550% 3/15/2029 69.62 SLM CORP 5.600% 3/15/2018 66.16 SLM CORP 5.600% 3/15/2022 64.85 SLM CORP 5.600% 3/15/2024 59.89 SLM CORP 5.600% 12/15/2028 60.25 SLM CORP 5.600% 3/15/2029 67.45 SLM CORP 5.600% 6/15/2029 62.24 SLM CORP 5.600% 12/15/2029 59.00 SLM CORP 5.600% 12/15/2029 60.92 SLM CORP 5.625% 1/25/2025 65.54 SLM CORP 5.650% 6/15/2022 62.00 SLM CORP 5.650% 6/15/2022 68.54 SLM CORP 5.650% 3/15/2029 58.86 SLM CORP 5.650% 3/15/2029 58.32 SLM CORP 5.650% 12/15/2029 61.92 SLM CORP 5.650% 12/15/2029 63.72 SLM CORP 5.650% 12/15/2029 57.63 SLM CORP 5.650% 3/15/2030 60.15 SLM CORP 5.650% 9/15/2030 58.80 SLM CORP 5.650% 3/15/2032 62.69 SLM CORP 5.700% 3/15/2029 58.63 SLM CORP 5.700% 3/15/2029 59.83 SLM CORP 5.700% 3/15/2029 55.93 SLM CORP 5.700% 3/15/2029 58.73 SLM CORP 5.700% 3/15/2029 65.41 SLM CORP 5.700% 3/15/2029 60.00 SLM CORP 5.700% 3/15/2029 60.06 SLM CORP 5.700% 12/15/2029 62.69 SLM CORP 5.700% 3/15/2030 64.33 SLM CORP 5.700% 3/15/2032 63.14 SLM CORP 5.750% 3/15/2029 64.75 SLM CORP 5.750% 3/15/2029 61.55 SLM CORP 5.750% 3/15/2029 66.45 SLM CORP 5.750% 3/15/2029 60.51 SLM CORP 5.750% 3/15/2029 52.50 SLM CORP 5.750% 6/15/2029 62.25 SLM CORP 5.750% 6/15/2029 60.00 SLM CORP 5.750% 9/15/2029 59.53 SLM CORP 5.750% 12/15/2029 59.71 SLM CORP 5.750% 12/15/2029 62.18 SLM CORP 5.750% 12/15/2029 65.81 SLM CORP 5.750% 3/15/2030 64.41 SLM CORP 5.750% 3/15/2030 59.39 SLM CORP 5.750% 6/15/2032 58.91 SLM CORP 5.750% 6/15/2032 59.33 SLM CORP 5.800% 12/15/2028 65.38 SLM CORP 5.800% 3/15/2032 60.82 SLM CORP 5.800% 3/15/2032 64.03 SLM CORP 5.800% 3/15/2032 58.80 SLM CORP 5.850% 9/15/2029 66.00 SLM CORP 5.850% 12/15/2031 63.93 SLM CORP 5.850% 3/15/2032 56.50 SLM CORP 5.850% 3/15/2032 63.46 SLM CORP 5.850% 3/15/2032 64.48 SLM CORP 5.850% 6/15/2032 64.36 SLM CORP 5.850% 6/15/2032 64.36 SLM CORP 6.000% 6/15/2019 66.06 SLM CORP 6.000% 6/15/2019 68.52 SLM CORP 6.000% 6/15/2021 64.63 SLM CORP 6.000% 6/15/2021 65.73 SLM CORP 6.000% 6/15/2021 65.29 SLM CORP 6.000% 6/15/2026 67.64 SLM CORP 6.000% 6/15/2026 58.71 SLM CORP 6.000% 12/15/2026 61.96 SLM CORP 6.000% 12/15/2026 62.05 SLM CORP 6.000% 12/15/2026 69.45 SLM CORP 6.000% 12/15/2026 64.23 SLM CORP 6.000% 3/15/2027 59.49 SLM CORP 6.000% 12/15/2028 59.43 SLM CORP 6.000% 3/15/2029 61.50 SLM CORP 6.000% 6/15/2029 65.12 SLM CORP 6.000% 6/15/2029 65.39 SLM CORP 6.000% 6/15/2029 62.02 SLM CORP 6.000% 9/15/2029 66.56 SLM CORP 6.000% 9/15/2029 63.93 SLM CORP 6.000% 9/15/2029 59.85 SLM CORP 6.000% 6/15/2031 62.77 SLM CORP 6.000% 6/15/2031 63.60 SLM CORP 6.000% 12/15/2031 58.77 SLM CORP 6.000% 12/15/2031 61.86 SLM CORP 6.000% 12/15/2031 66.73 SLM CORP 6.000% 12/15/2031 63.55 SLM CORP 6.000% 3/15/2037 57.93 SLM CORP 6.000% 3/15/2037 57.09 SLM CORP 6.000% 3/15/2037 57.69 SLM CORP 6.050% 12/15/2026 62.84 SLM CORP 6.050% 12/15/2031 60.05 SLM CORP 6.100% 6/15/2021 64.24 SLM CORP 6.100% 12/15/2028 66.00 SLM CORP 6.100% 12/15/2031 60.01 SLM CORP 6.150% 9/15/2029 61.00 SLM CORP 6.200% 9/15/2026 62.76 SLM CORP 6.200% 12/15/2031 61.78 SLM CORP 6.250% 6/15/2029 58.50 SLM CORP 6.250% 6/15/2029 59.70 SLM CORP 6.250% 6/15/2029 63.32 SLM CORP 6.250% 9/15/2029 63.33 SLM CORP 6.250% 9/15/2029 62.66 SLM CORP 6.250% 9/15/2029 63.83 SLM CORP 6.300% 9/15/2031 61.90 SLM CORP 6.350% 9/15/2031 66.14 SLM CORP 6.350% 9/15/2031 55.00 SLM CORP 6.400% 9/15/2031 61.59 SLM CORP 6.450% 9/15/2031 68.67 SLM CORP 6.500% 9/15/2031 62.12 SPANSION LLC 11.250% 1/15/2016 63.24 SPECTRUM BRANDS 7.375% 2/1/2015 56.00 STANLEY-MARTIN 9.750% 8/15/2015 45.00 STATION CASINOS 6.000% 4/1/2012 67.50 STATION CASINOS 6.500% 2/1/2014 44.50 STATION CASINOS 6.625% 3/15/2018 41.25 STATION CASINOS 6.875% 3/1/2016 42.50 STATION CASINOS 7.750% 8/15/2016 65.75 SWIFT ENERGY CO 7.625% 7/15/2011 97.00 SWIFT TRANS CO 12.500% 5/15/2017 39.49 SYNOVUS FINL 5.125% 6/15/2017 83.63 TELIGENT INC 11.500% 12/1/2007 0.21 TELIGENT INC 11.500% 3/1/2008 0.21 THORNBURG MTG 8.000% 5/15/2013 66.88 TIMES MIRROR CO 6.610% 9/15/2027 32.02 TIMES MIRROR CO 7.250% 3/1/2013 38.00 TIMES MIRROR CO 7.250% 11/15/2096 32.14 TIMES MIRROR CO 7.500% 7/1/2023 39.99 TOM'S FOODS INC 10.500% 11/1/2004 0.39 TOUSA INC 7.500% 3/15/2011 7.25 TOUSA INC 7.500% 1/15/2015 6.75 TOUSA INC 9.000% 7/1/2010 53.00 TOUSA INC 9.000% 7/1/2010 60.25 TOUSA INC 10.375% 7/1/2012 6.75 TRANS MFG OPER 11.250% 5/1/2009 5.25 TRANS-LUX CORP 8.250% 3/1/2012 50.03 TRIAD ACQUIS 11.125% 5/1/2013 57.00 TRIBUNE CO 4.875% 8/15/2010 63.05 TRIBUNE CO 5.250% 8/15/2015 33.00 TRONOX WORLDWIDE 9.500% 12/1/2012 65.00 TRUE TEMPER 8.375% 9/15/2011 61.50 TRUMP ENTERTNMNT 8.500% 6/1/2015 48.00 UAL 1995 TRUST 9.020% 4/19/2012 40.00 UAL CORP 4.500% 6/30/2021 49.01 UAL CORP 5.000% 2/1/2021 46.00 US AIR INC 10.700% 1/15/2049 0.01 US LEASING INTL 6.000% 9/6/2011 65.00 US SHIPPING PART 13.000% 8/15/2014 60.00 USAUTOS TRUST 5.100% 3/3/2011 63.00 USEC INC 3.000% 10/1/2014 63.00 VENTURE HLDGS 9.500% 7/1/2005 0.13 VERASUN ENERGY 9.375% 6/1/2017 53.50 VERENIUM CORP 5.500% 4/1/2027 38.00 VERTIS INC 10.875% 6/15/2009 20.00 VICORP RESTAURNT 10.500% 4/15/2011 17.88 VION PHARM INC 7.750% 2/15/2012 52.50 VISTEON CORP 7.000% 3/10/2014 50.25 VISTEON CORP 12.250% 12/31/2016 69.76 WACHOVIA CAP III 5.800% 3/15/2042 56.25 WASH MUT BANK NV 5.125% 1/15/2015 57.00 WASH MUT BANK NV 5.650% 8/15/2014 64.63 WASH MUT BANK NV 5.950% 5/20/2013 70.50 WASH MUTUAL INC 4.625% 4/1/2014 52.00 WASH MUTUAL INC 5.250% 9/15/2017 57.58 WASH MUTUAL INC 5.500% 8/24/2011 71.50 WASH MUTUAL INC 7.250% 11/1/2017 54.75 WASH MUTUAL INC 8.250% 4/1/2010 67.00 WASH MUTUAL PFD 6.534% 03/29/49 30.96 WCI COMMUNITIES 4.000% 8/5/2023 65.00 WCI COMMUNITIES 6.625% 3/15/2015 40.00 WCI COMMUNITIES 7.875% 10/1/2013 40.00 WCI COMMUNITIES 9.125% 5/1/2012 37.50 WEBSTER CAPITAL 7.650% 6/15/2037 66.85 WEIRTON STEEL 10.750% 6/1/2005 99.98 WERNER HOLDINGS 10.000% 11/15/2007 0.00 WHEELING-PITT ST 5.000% 8/1/2011 60.00 WILLIAM LYON 7.500% 2/15/2014 41.00 WILLIAM LYON 7.625% 12/15/2012 40.00 WILLIAM LYON 10.750% 4/1/2013 45.21 WILLIAMS COS 7.500% 1/15/2031 101.25 WILLIAMS COS 7.750% 6/15/2031 106.00 WIMAR OP LLC/FIN 9.625% 12/15/2014 27.50 WINSTAR COMM INC 14.750% 4/15/2010 0.00 WITCO CORP 6.875% 2/1/2026 63.50 YANKEE ACQUISITI 9.750% 2/15/2017 57.50 YOUNG BROADCSTNG 8.750% 1/15/2014 43.50 YOUNG BROADCSTNG 10.000% 3/1/2011 50.50 ********* 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 ***