/raid1/www/Hosts/bankrupt/TCR

/raid1/www/Hosts/bankrupt/TCR_Public/091211.mbx T R O U B L E D C O M P A N Y R E P O R T E R Friday, December 11, 2009, Vol. 13, No. 342 Headlines 337 AMHERST STREET: Case Summary & 9 Largest Unsecured Creditors 57 MARKET STREET LLC: Case Summary & 6 Largest Unsecured Creditors ABUNDANT RENEWABLE: Helix Wants to Buy Assets; Files Reorg. Plan ACE CASH: S&P Downgrades Ratings on Senior Facility to 'B+' ALLIANT TECHSYSTEMS: Fitch Says Risks Remain in Sector AMADO BAUTISTA GUTANG: Voluntary Chapter 11 Case Summary AMBAC FINANCIAL: Fails to Meet NYSE's $1 Per Share Requirement AMERICAN FAMILY: Unresolved Lawsuit Cues Chapter 11 Filing AMERICAN INT'L: Treasury Says It May Not Get Full Investment AMN HEALTHCARE: S&P Assigns 'BB' Rating on $185 Mil. Facility ANTHRACITE CAPITAL: Delisting Cues Default Under Senior Notes ARCLIN US: Modified Plan Confirmed by Court ART ADVANCE: Quebec Court OKs Amended Distribution Plan APPLIED SOLAR: Sees Chapter 7 Conversion After Assets Sold AVENTINE RENEWABLE: Files Noteholders-Supported Ch. 11 Plan AVISTAR COMMUNICATIONS: Registers 12.5MM Shares Under 2009 Plan AXIANT LLC: NCO Group Cancels Contract for Assets BERNARD MADOFF: Banque Jacob Safra Seeks to Dismiss Picard Suit BERRY PLASTICS: Completes Acquisition of Pliant Corp. BI-LO LLC: Rejects Delhaize Bid, Opts for Stand-Alone Plan BLUEHIPPO FUNDING: Wants Case Converted to Chapter 7 Liquidation BLUMENTHAL PRINT: To Liquidate Assets; Leaves 160 Jobless BOMBARDIER INC: Fitch Says Sector's Outlook Steady, Risks Remain BUCKHEAD COMMUNITY: Receivership to Cue Lenders' Default Notice CANADIAN SUPERIOR ENERGY: Coughlin Stoia Files Class Suit CASCADE GRAIN: Ethanol Plant Sold to JH Kelly for $15MM CASCADES INC: Moody's Assigns 'Ba3' Rating on US$250 Mil. Notes CASCADES INC: S&P Assigns 'B+' Rating on US$250 Mil. Senior Notes CATHOLIC CHURCH: Wilmington Wants Withdrawals in Pooled Account CATHOLIC CHURCH: Wilmington's Schedules and Statement CATHOLIC CHURCH: Judge Perris Closes Portland's Bankruptcy Case CCS MEDICAL: Goes to Auction as Judge Nixes Prepacked Plan CEDAR FUNDING: Attorney Wants Trustee Fees' Deferred CHRYSLER LLC: Treasury Admits May Not Get Full Investment CIB MARINE: To Hold Teleconference for Shareholders December 18 CIT GROUP: Nancy Foster to Leave Exec. VP Post December 31 CIT GROUP: Proposes FTI Consulting as Financial Advisors CIT GROUP: Emerges from Bankruptcy; Shares Start Trading on NYSE CIT GROUP: Files Registration Statement for New Common Stock CIT GROUP: Foster Quits as EVP and Chief Credit & Risk Officer CITIGROUP INC: Discloses Stake in Various Funds CITIGROUP INC: To Issue Notes Tied to S&P GSCI Natural Gas Excess COLONIAL BANCGROUP: Creditors Want Chapter 7, Trustee COLONIAL BANCGROUP: Seeks Court Nod to Access Non-Deposits CONGOLEUM CORP: Ongoing Talks With Insurer Cue Plan Delay CONSECO INC: Projects $145MM to $170MM Operating Income in 2010 CONSECO INC: Seeks Amendments to Senior Credit Facility Covenants CONTINENTAL AIRLINES: S&P Assigns 'CCC+' Rating on $230 Mil. Notes COREL CORP: Vector Acquires 3.0MM Shares; Raises Stake to 97% COYOTES HOCKEY: Ex-Owner Slams Ch. 7 Conversion Bid DECODE GENETICS: Creditors Attack DIP Financing DOLLAR THRIFTY: Expects EBITDA Hike to $83MM to $88M in 2009 EDGE PETROLEUM: Objections to Ch. 11 Plan Pile Up EDGEN MURRAY: Moody's Assigns 'Caa1' Rating on $465 Mil. Notes ENRON CORP: Richardson Stoops Want Ruling on Injunction Claim ENRON CORP: Savings Plan Can Recover Error Payments ERIC N REYBURN: Court Sets January 25 as Claims Bar Date ESCADA AG: US Unit Proposes Follick as Customs Counsel ESCADA AG: US Unit Proposes PwC as Independent Auditor FIRST BREVARD: Case Summary & 7 Largest Unsecured Creditors FLOWSERVE: Fitch Says Rating Trends Stable FONTAINEBLEAU LV: Judge Disallows Credit Bid for 63-Story Project FOUR FIVE INVESTMENTS: Voluntary Chapter 11 Case Summary FRIEDE GOLDMAN: Claim Litigation Didn't Waive Arbitration Right GENERATION BRANDS: Court Sets Jan. 15 Confirmation Hearing GENERATION BRANDS: Receives Approval of First Day Motions GENERAL GROWTH: 32 Affiliates Join as Proponents of Ch. 11 Plan GENERAL GROWTH: Dillard's Inc. Objects to Plan Confirmation GENERAL GROWTH: Proposes to Declare & Pay $101MM in Dividends GENERAL MOTORS: New GM Returns $140MM Treasury Loan GENERAL MOTORS: Treasury Says It May Not Get Full Investment GENOIL INC: Elliott Davis Discloses 10.2% Equity Stake GEORGIA GULF: Moody's Assigns 'B3' Rating on $500 Mil. Notes GHOST TOWN: Failed to Pay 2-Week Worth of Salaries Before Closing GOODMAN GLOBAL: Moody's Rates $320 Mil. Senior Notes at 'B3' GPX INTERNATIONAL: Expects Assets Sale to Close This Year GRAOCH ASSOCIATES #66: Case Summary & 20 Largest Unsec. Creditors GREATER ATLANTIC FINANCIAL: May File After Bank Takeover GRUBB & ELLIS: Nets $4.1MM in Sale of 12% Convertible Preferreds GUARANTY FINANCIAL: Wants to Have Until March 22 to Propose Plan HAMPSHIRE GROUP: Norman Pessin Discloses 7.27% Equity Stake HAMPSHIRE GROUP: Names Peter Woodward to Board of Directors HEADLEE MANAGEMENT: Files for Chapter 11 to Reorganize Finances HOUSE OF DAVID: Case Summary & 3 Largest Unsecured Creditors INDIANA TROOPERS: Files For Bankruptcy Protection INKSTOP INC: Court Orders Liquidation Sales JEFFREY SHOTKOSKI: Denial of Final Decree was Appropriate in Case JOHN NICOTHODES: Case Summary & 7 Largest Unsecured Creditors JOY MUKHERJI: Business as Usual Despite Chapter 11 Filing KRISPY KREME: KK Mexico Posts $487,000 Net Loss for Nov. 1 Qtr KRISPY KREME: KKSF Incurs Defaults Under Credit Facilities KRISPY KREME: Kremeworks Lenders Grant Covenant Waiver KRISPY KREME: Reports $2,388,000 Net Loss for Nov. 1 Quarter KROPP EQUIPMENT: Wants to Access Standard Bank's Cash Collateral KROPP EQUIPMENT: Sec. 341 Creditors Meeting Set for Jan. 8 KROPP EQUIPMENT: Taps Daniel L. Freeland as Bankr. Counsel LATSHAW DRILLING: Gets Final Nod to Obtain $500,000 F&M Loan LAZY DAYS': Prepack Plan Confirmed in Less than Five Weeks LEHMAN BROTHERS: Gets Approval of Deal With LB RE Financing LEHMAN BROTHERS: Gets Nod to Transfer Assets of 2 Trust Companies LEHMAN BROTHERS: Chubb Allowed to Pay Litigation Costs LEHMAN BROTHERS: Gets Nod to Set Process to Restructure Loan Terms LEHMAN BROTHERS: LBSF Has Nod to Sell Swap Stake to Goldman LEHMAN BROTHERS: Wants to Compel Norton Gold to Honor Contract LEHMAN BROTHERS: Court OKs Barclays Deal on Transfer of PIM Assets LENNY DYKSTRA: Patrizzi & Co. to Auction Off Watch and Trophies LEXINGTON PRECISION: Hearing Set on Rival Plans' Disclosure Docs LODGENET INTERACTIVE: Reaffirms Fourth Quarter 2009 Guidance LOUISIANA FILM: Faces Trustee's Chapter 7 Liquidation Plea LYONDELL CHEMICAL: Akzo Nobel Wants to File Counterclaims LYONDELL CHEMICAL: Begins Filing Omnibus Claims Objections LYONDELL CHEMICAL: Has Nod to Hire SEG as Accounting Consultant LYONDELL CHEMICAL: Review of Reclamation Issues Bifurcated LYONDELL CHEMICAL: Committee Prepares Reliance-Backed Plan MAJESTIC STAR: Cash Collateral Use Expires December 18 MCDERMOTT INTERNATIONAL: S&P Puts 'BB+' Rating on Negative Watch MCSTAIN ENTERPRISES: Court Dismisses Chapter 11 Bankruptcy Case MERIDIAN RESOURCE: Fortis Extends Forbearance Until December 14 METRO-GOLDWYN-MAYER: Forbearance on Debt Extended; Mulled Sale MICHAEL KHUONG TO: Case Summary & 20 Largest Unsecured Creditors MICHAEL STUP: Case Summary & 11 Largest Unsecured Creditors NATIONAL BEEF: S&P Puts 'B+' Ratings on CreditWatch Positive NATIONAL HOME: Files for Chapter 11 Bankruptcy NCI BUILDING: Reports $748.4 Million Fiscal Year Net Loss NCI BUILDING: To Redeem 2.125% Convertible Sr. Sub Notes Due 2024 NELSON EDUCATION: Moody's Corrects Ratings on Four Senior Loans NEW ENERGY SYSTEMS: Completes Acquisition of Anytone NII HOLDINGS: Moody's Upgrades Corporate Family Rating to 'B1' NOVELOS THERAPEUTICS: Delays Effective Date of Resale Prospectus ORLEANS HOMEBUILDERS: 10-Q Delay Cues NYSE Non-Compliance Notice PEANUT CORP: Officers, Trustee Settle Defense Funds Dispute PENN TRAFFIC: Court Pushes Base Price Hearing to December 15 PENN TRAFFIC: Inks Comprehensive Agency Pact with Liquidator Group PILGRIM'S PRIDE: Judge Lynn to Confirm Chapter 11 Plan PILGRIM'S PRIDE: Addresses Plan Confirmation Objection PILGRIM'S PRIDE: Gets Jan. 31 Extension of DIP Loans PLIANT CORP: Emerges From Bankruptcy as Berry Plastics Unit PLUG POWER: Receives NASDAQ Non-Compliance Notice PROTOSTAR LTD: SES Offers $185MM Cash for Protostar II RADIENT PHARMACEUTICALS: Alpha Capital Holds 6.633% Equity Stake RADLAX GATEWAY: Court to Consider Transfer of Case on December 23 RANCHER ENERGY: Court Okays New Month to Month Lease with Landlord S & K FAMOUS: Court Confirms Plan; Unsec. Claims Get 6% Recovery SAND TECHNOLOGY: Posts Net Loss for Fifth Consecutive Year SANDRIDGE ENERGY: Moody's Assigns 'B3' Rating on $400 Mil. Notes SANDRIDGE ENERGY: S&P Raises Corporate Credit Rating to 'B+' SEMGROUP LP: Consummates Plan, Exits Chapter 11 SIX FLAGS: LACSD Wants to Compel Assumption of Contract SIX FLAGS: To Seal Reports on Non-Debtor Park SIX FLAGS: Wants to Seal Exit Financing Fee Letters SMURFIT-STONE: PwC Charges $2.3 Mil. for Feb. to June Work SMURFIT-STONE: M. Jackson Disposed of 19,800 Shares of Stock SMURFIT-STONE: Monitor Supports Edmonton Sale SMURFIT-STONE: Claims Up from 40s to 60s in November Trading SPANSION INC: Creditors Aim To File Own Ch. 11 Plan SPRINT NEXTEL: Directly Owns 48,924,061 iPCS Common Shares SPX CORPORATION: Fitch Says Rating Trends Stable STERLING MINING: Minco Silver Submits US$12.5-Mil. Offer STERLING MINING: Plan Allocates $500,000 for Unsec. Creditors TAYLOR BEAN: Will County Treasurer Works to Help Homeowners TEXTRON INC: Fitch Says Rating Trends Stable TEXTRON INC: Fitch Says Sector's Outlook Steady, Risks Remain TRADEWINDS AIRLINES: Not in Default on $30MM Loan, Court Ruled TRANSDIGM GROUP: Fitch Says Sector's Outlook Steady, Risks Remain TRIBUNE CO: Plan Exclusivity Extended Until February TRONOX INC: Inks Exit Financing Letters With Goldman & GECC TRONOX INC: Professionals Reduce April to Aug Fees by $434,000 TRUE TEMPER: Wins Confirmation of Modified Plan TVI CORP: Wins Confirmation of Reorganization Plan UNITED MARITIME: S&P Assigns Corporate Credit Rating at 'B' US CONCRETE: Wisconsin Investment Board Dumps Equity Stake UTGR INC: Taps John McLaughlin to Supervise Twin River Operations UTSTARCOM INC: Green Quits as Human Resources & Real Estate Head UTSTARCOM INC: Shah Capital Management Discloses 6.25% Stake VERMILLION INC: Disclosure Statement Approved for Voting VIRGIN MOBILE: Cancels Registration of Class A Common Stock VISION FOODS: Case Summary & 4 Largest Unsecured Creditors WABASH NATIONAL: Zachman Quits as SVP & Chief Operating Officer WORLDSPACE INC: Has Until January 31 to File Chapter 11 Plan YMCA OF DUTCHESS COUNTY: Files in Poughkeepsie, New York YOUNG MENS CHRISTIAN: Case Summary & 20 Largest Unsec. Creditors YRC WORLDWIDE: Gets NASDAQ Exception in Debt for Equity Exchange YRC WORLDWIDE: Has Significant Support for Debt-For-Equity Offers * Commercial Mortgage Defaults Rise to 3.4% in Quarter * Fitch Reports Improved High Yield Default Outlook; Risks Linger * Fitch Reports Steady Outlook Aerospace & Defense; Risks Remain * Fitch Says Rating Trends Stable for Diversified Industrials * Lawmakers Revise Creditor Haircut For Failing Banks * SIPC Chief Struggles with Madoff Claims * Barnes & Thornburg Brings Bankruptcy Pro to Atlanta * Scott Slaby Joins McDonald Hopkins as IP Associate * BOOK REVIEW: Unique Value - The Secret of All Great Business Strategies ********* 337 AMHERST STREET: Case Summary & 9 Largest Unsecured Creditors ---------------------------------------------------------------- Debtor: 337 Amherst Street, LLC 253 Main Street Nashua, NH 03060 Bankruptcy Case No.: 09-14820 Chapter 11 Petition Date: December 9, 2009 Court: United States Bankruptcy Court District of New Hampshire Live Database (Manchester) Debtor's Counsel: Robert L. O'Brien, Esq. DeBruyckere Roth & Associates, PLLC 231 Sutton Street, Suite 1B North Andover, MA 01845 Tel: (603) 459-9965 Fax: (603) 250-0822 Email: robjd@mail2firm.com Estimated Assets: $1,000,001 to $10,000,000 Estimated Debts: $1,000,001 to $10,000,000 A full-text copy of the Debtor's petition, including a list of its 9 largest unsecured creditors, is available for free at: http://bankrupt.com/misc/nhb09-14820.pdf The petition was signed by Vatche Manoukian, manager of the Company. 57 MARKET STREET LLC: Case Summary & 6 Largest Unsecured Creditors ------------------------------------------------------------------ Debtor: 57 Market Street LLC 15456 Ventura Blvd, Ste 302 Sherman Oaks, CA 91403 Bankruptcy Case No.: 09-26620 Chapter 11 Petition Date: December 9, 2009 Court: United States Bankruptcy Court Central District of California (San Fernando Valley) Judge: Geraldine Mund Debtor's Counsel: M Jonathan Hayes, Esq. Law Office of M Jonathan Hayes 9700 Reseda Bl., Ste201 Northridge, CA 91324 Tel: (818) 882-5600 Fax: (818) 882-5610 Email: jhayes@polarisnet.net Estimated Assets: $1,000,001 to $10,000,000 Estimated Debts: $1,000,001 to $10,000,000 A full-text copy of the Debtor's petition, including a list of its 6 largest unsecured creditors, is available for free at: http://bankrupt.com/misc/cacb09-26620.pdf The petition was signed by Alex M. Martinez, managing member of the Company. ABUNDANT RENEWABLE: Helix Wants to Buy Assets; Files Reorg. Plan ---------------------------------------------------------------- Nathalie Weinstein at Daily Journal of Commerce reports that Helix Wind submitted with the U.S. Bankruptcy Court in Oregon its reorganization plan, which includes using $345,000 to pay off some of the debt incurred by Abundant Renewable Energy, LLC's principals, to Oregon's bankruptcy court. DJC relates that Helix Wind wants to acquire ARE. According to DJC, no hearing date was set for the proposal. DJC quoted Greg Price, ARE's sales and marketing manager, as saying, "Helix has to raise between $5 million and $6 million. There's always a chance it won't work out, but we have confidence they will be able to raise the money." DJC states that Helix Wind hired financial investment firm Dominick & Dominick of New York to pursue financing options for the purchase. Helix Wind Corp. -- http://www.helixwind.com/-- a global renewable energy company, is engaged in the design, manufacturing and sale of small wind vertical axis turbine designed to generate 300W, 1kW, 2.0kW, 4.0kW, and 50kW of clean, renewable electricity. Abundant Renewable Energy, LLC, based in Newberg, Oregon, filed for bankruptcy on March 26, 2009 (Bankr. D. Ore. Case No. 09-32025). Judge Elizabeth L. Perris presides over the case. Richard S. Ross, Esq., at Law Office of Richard S. Ross, in Vancouver, Washington, serves as Debtor's counsel. The Debtor listed assets below $50,000 and debts ranging from $1,000,001 to $10,000,000. ACE CASH: S&P Downgrades Ratings on Senior Facility to 'B+' ----------------------------------------------------------- Standard & Poor's Ratings Services said that it lowered its rating on ACE Cash Express Inc.'s senior-secured credit facility to 'B+' from 'BB-' and revised its recovery rating to '3', indicating S&P's expectation of a meaningful (50% to 70%) recovery in the event of a payment default. At the same time, S&P affirmed its 'B+' long-term counterparty credit rating and revised its outlook on ACE to negative from stable. "The rating action on ACE's senior-secured credit facility is based on a downwards revision of the cash-flow estimates S&P uses in its recovery analysis. In particular, S&P incorporated more significant declines in cash flow than had previously been modeled into its simulated default scenario," said Standard & Poor's credit analyst Rian M. Pressman, CFA. S&P used an enterprise value approach to analyze the lenders' recovery prospects, given the likelihood that the business would retain value as an operating entity in the event of a bankruptcy. S&P believes that if ACE were to default, its business model would continue to retain value given its expansive geographic footprint and strong market positions in payday lending/check cashing. As a result, S&P believes lenders would achieve the greatest recovery value through reorganization rather than through liquidation. The negative outlook is driven by potential legislative actions in Arizona and Ohio related to short-term consumer loans that may reduce ACE's earnings from those states. (At June 30, 2009, about 6.1% and 2.7% of ACE's company-owned stores were located in Arizona and Ohio, respectively.) The existing law authorizing payday lending in Arizona expires on July 1, 2010. It is unclear if legislative efforts to renew the existing law will be successful. In Ohio, legislation was introduced in the House of Representatives in June 2009 to close what legislators view as loopholes to the Short-Term Loan Act. S&P believes this legislation has a reasonable chance of being passed in the next six months, which would render short-term consumer lending unprofitable in Ohio. The negative outlook is primarily based on the company's exposure to consumer lending in Arizona and Ohio. S&P could lower the rating if adverse legislative actions in these states pressure coverage metrics, which are currently weak for the rating. S&P will revise the outlook to stable if coverage levels are maintained at adequate levels. ALLIANT TECHSYSTEMS: Fitch Says Risks Remain in Sector ------------------------------------------------------ Credit quality in the U.S. commercial aerospace industry will remain under pressure in 2010, while the U.S. defense sector is likely to experience more stability, according to Fitch Ratings. Fitch expects deliveries in all commercial aerospace original equipment segments to decline in 2010, but aftermarket sales should begin to improve modestly. Defense spending will continue to grow in the low single digits. 'Beyond 2010 the industry faces some key issues: likely additional production cuts at Boeing and Airbus, and possible declines in U.S. Department of Defense modernization spending,' said Craig Fraser, Managing Director at Fitch. 'Rating upgrades are unlikely in 2010, and downgrades remain a risk for some commercial aerospace companies.' Credit metrics for many A&D companies deteriorated in 2009, but they are likely to be steady in 2010. Profits and cash flows could be helped by improvement in the high-margin aftermarket, the full-year impact of 2009 cost reductions, and defense growth, but they will be held back by higher pension expense and weak commercial OE markets. Fitch says liquidity remains strong after improving in 2009 because of lower share repurchases and some opportunistic debt issuance, but the company expects cash deployment will increase during 2010, particularly for acquisitions and pension contributions. Key risks for the sector include the weak global economic recovery, exogenous shocks (terrorism, disease pandemic, etc.), large U.S. government deficits, and execution on new programs. The 787 program remains a continuing source of risk for Boeing and its suppliers. Flight hours and airline traffic have moved off of cyclical lows, but they remain at depressed levels. A general risk is that some production rates have not been revised downward materially despite the weak economy. Fitch does not expect that financing availability will be a limit on aircraft deliveries in 2010, although some concerns remain in the aircraft finance business. Longer-term, Fitch considers the commercial outlook solid because of large backlogs and the need to build aerospace infrastructure in developing regions. Commercial Aerospace: These expectations for key commercial aerospace segments are incorporated into Fitch's forecasts: -- Large Commercial Aircraft: Fitch expects LCA deliveries from Boeing and Airbus will decline approximately 5% in 2010 to 920 aircraft, with revenues down 5%-10%. These estimates incorporate the announced production cuts for the A320 family (down two aircraft per month) and B777 (down almost 30%), but they exclude possible 787 deliveries (discussed below). Fitch believes there is a strong chance of additional production cuts, but these are more likely to take place in 2011. Long manufacturing lead times, advance payment requirements, and indications of sold-out 2010 production schedules support the argument against additional cuts next year, unless they are announced in the next few months to take effect at the end of 2010. Fitch's forecasts will include additional 5%-15% cuts beginning in 2011. Fitch forecasts the additional LCA production reductions in 2011 because of a moderate global economic recovery, airline capacity reductions in 2008 and 2009, substantial airline losses, and deliveries that are exceeding typical aircraft retirements. However, the eventual production declines should be moderate relative to prior LCA cycles as a result of large backlogs, production restraint since the last downturn, some remaining overbooking in the delivery plans, and the geographic diversity of the customer base. In addition, the long-term nature of aircraft assets, as well as operating cost savings, provide incentive for customers to continue taking delivery of aircraft despite cyclically weak airline traffic. If the projected production cuts are managed with sufficient lead time, both the manufacturers and the supply base should be able to adjust their cost structures in time to prevent deterioration of their credit profiles. Fitch expects LCA orders to be low in 2010 and 2011, a continuation of the trend in 2009, in which there have been only 287 net orders through November compared to 867 deliveries during the same period. There were 142 cancellations through November, and Boeing has indicated that it had approximately 215 deferrals in the first three quarters. Low orders are not a credit concern given that Boeing and Airbus had a combined backlog of 6,849 aircraft at the end of November, equal to more than seven years of production at estimated 2010 rates. Excluding 787 and A350 backlogs, the industry still has almost six years worth of orders. Boeing's 787 program will continue to be a key concern for the LCA sector and its supply base in 2010. If Boeing meets its current schedule, Fitch estimates the company could deliver 10-15 787s in late 2010, but there is considerable risk to the schedule, including an aggressive flight testing program, certification, and the production ramp-up. Boeing will be building 787s through the flight testing program, exposing the company to the risk of reworking some aircraft if problems are discovered during the flight tests. Uncertainty over customer penalties and supplier claims add to the 787s risks. Through November, the 787 accounted for the bulk of Boeing's order cancellations (83 out of 111), although the company still has 840 firm orders for the aircraft. -- Commercial Aftermarket/Services: The commercial aftermarket will likely be the first part of the aerospace industry to recover from the downturn. Fitch forecasts aftermarket spending will be flat to up 5% in 2010, with a weak first half offset by an improved second half. The expected economic rebound should drive airline traffic growth and eventually will lead to rising flight hours and capacity, which are the primary drivers of aftermarket spending. Some inventory rebuilding and completion of deferred maintenance should also help the aftermarket recover in 2010. Business jet utilization has also been improving off of a low base, which will aid aftermarket spending in that sector. Fitch's general concern for the aftermarket is that current conditions are still very weak, with many companies reporting double digit declines year-over-year in the third quarter. Some capacity metrics are still negative despite indications of increased airline traffic. Fitch will have more conviction on the outlook for this sector once capacity starts to increase. Companies with healthy exposures to this high-margin segment include Goodrich, Honeywell, Rockwell Collins, Transdigm, and United Technologies. -- The business jet market was the worst commercial aerospace sector in 2009, suffering a rapid and severe downturn. Industry deliveries fell 38% through September, and Fitch expects a 35%-40% unit decline for the year, with revenues likely down 25%-30%. An eventual peak-to-trough unit decline of 50% or more for the industry is not out of the question, and Fitch expects aircraft deliveries to fall another 5%-10% in 2010 from 2009 levels. The large unit declines result from hundreds of order cancellations and the failure of light jet manufacturer Eclipse Aviation. Although utilization rates have started to rise and corporate profits have turned up, Fitch expects continued weakness in the sector because utilization rates are still well below peak levels and the corporate profit improvement is largely due to cost cutting. This sector will continue to be volatile because of the discretionary nature of the product, the availability of numerous substitute forms of travel, and the relationship to corporate profits. A key development in the sector in the past five years has been strong orders from outside North America, and these international orders could be the catalyst for an upturn beyond 2010. Manufacturers in this sector include Bombardier, Dassault Aviation, Embraer, General Dynamics, Hawker Beechcraft, and Textron, as well as key suppliers such as Honeywell. -- The regional aircraft market (regional jets and turboprops) has many of the same drivers as the LCA market, but it has lower backlogs. Orders so far in 2009 have been weak, and the outlook for this sector is negative for 2010. Regional jets deliveries from Bombardier and Embraer will probably fall about 15% in 2009 and at least 15% in 2010, excluding possible deliveries from new entrants in the market. Fitch estimates that turboprop deliveries from Bombardier and ATR (a joint venture between EADS and Finmeccanica) will rise modestly in 2009, but they will likely decline 5% in 2010. New entrants into the regional jet market remain an important part of the sector's outlook, and in 2010 the market will likely see the initial deliveries of Sukhoi's Superjet 100 and China's ARJ21. Defense: High U.S. DoD spending levels continue to support defense sector credit quality, and the outlook is still favorable in the near term because spending in fiscal year 2010 will continue to rise. The core DoD budget should grow approximately 4% in FY2010, and modernization spending (procurement plus R&D), the most relevant part of the budget for defense contractors, should be up 2%-3%. Fitch believes that FY2010 is probably the peak in modernization spending, and there are several risks to monitor in FY2011 and beyond. These include the Obama Administration's first full budget in FY2011, the Quadrennial Defense Review, and the large projected federal budget deficits in FY2009-FY2011. In addition to spending levels, some other changes proposed by the new administration could have a detrimental impact on defense contractors, including acquisition reform and the 'insourcing' of services previously contracted out by the DoD. Fitch believes core modernization spending could decline 1%-2% in FY2011, although the overall core budget could rise. The FY2011 budget and QDR will likely continue the changes the Obama administration introduced in the current year's budget, and Fitch is not anticipating any dramatic shifts. Fitch expects supplemental spending that supports operations in Iraq and Afghanistan will fall over the next several years, but for several reasons the decline will be gradual, and the supplemental spending will not disappear. Spending related to Iraq will be down, but spending in Afghanistan will increase. Some security spending by the U.S. in Iraq will likely be replaced by Iraqi government spending, which could continue to be a source of revenues to U.S. contractors. Finally, the DoD will need to refurbish or replace some equipment and material that is in poor condition or left in Iraq. Given the strong credit metrics and liquidity at most of the leading defense contractors, ratings in the sector are unlikely to be pressured by modest declines in modernization spending. Program execution and cash deployment probably present greater risks. Defense company backlogs fell in the first three quarters of 2009 due to some program cancellations, although orders in the fourth quarter could reverse some of the decline. Liquidity and Cash Deployment: Strong liquidity and financial flexibility helped the North American A&D industry withstand the difficult economy in 2009, and the industry even improved its liquidity position in the past 12 months, although at the expense of increasing total debt to $60 billion from $55 billion. At the end of the third quarter the top 15 A&D companies rated by Fitch in North America had $35 billion in cash compared to approximately $5 billion in current debt maturities and short-term debt. The only material credit facilities set to expire in 2010 (GD, L-3, and RTN) have already been replaced. Many companies in the sector pulled back on discretionary expenditures in 2009 (share repurchases fell $10 billion, for example) in the interests of building liquidity. With stabilization appearing in some parts of the A&D sector, Fitch expects greater cash deployment in 2010. Acquisition activity began to increase in the past quarter, and Fitch expects this will continue in 2010. Share repurchases and dividend increases will likely rise as well. Higher pension contributions will be another use of cash in 2010. The A&D sector has seven of the largest 25 pension plans in corporate America, and some are significantly underfunded. The situation is mitigated for defense contractors, which get some recovery of pension costs in government contracts. Harmonization of Cost Accounting Standards and the Pension Protection Act is something to watch during 2010. In Fitch's view, Boeing will have the most significant liquidity pressures in 2010. Delays in the 787 and 747-8 programs over the past 18 months have negatively affected Boeing's credit quality because of inventory build-up, delayed advance payments, and higher development expenses. Cash flow pressures will likely persist into 2011 due to continued inventory build-up in support of initial 787 deliveries. Although free cash flow will probably be positive in 2009, Fitch believes that break-even or negative free cash flow is possible in 2010 depending on the ultimate schedule for 787 deliveries, production rates on other aircraft models, and the company's working capital management, which has been good in 2009 considering the 787 inventory pressures and reduced advances because of lower orders. Aircraft Finance: Fitch does not expect that financing availability will be a limit on aircraft deliveries in 2010, although some concerns remain in the aircraft finance business. The aircraft finance market was not as bad as feared in 2009, and Fitch expects this trend to continue because credit markets have improved and lower forecasted aircraft deliveries will mean a lower financing requirement than in 2009. Fitch projects funding requirements will be $60-$65 billion for LCA and regional aircraft in 2010, about $5 billion lower than in 2009. An additional $10-$15 billion could be needed for business jets, also down versus 2009. Concerns in the aircraft finance market include the damaged business models of some large aircraft lessors, the exit of some banks from the market, and indications that pre-delivery payment financing was difficult for some airlines in 2009. Several factors offset these concerns, including strong support from export credit agencies, the emergence of some regional financial players in the market, better capital markets activity in the past few months, and the ability of Boeing and Airbus to provide customer financing. Fitch estimates that ECAs could support approximately 25% of LCA deliveries in 2009, illustrating the benefit the industry has received from indirect government support. It looks like Boeing and Airbus will finance less than $2 billion of new aircraft in 2009, leaving the companies with the capacity to help customers in 2010 if needed. New aircraft serve as attractive lending collateral due to the mobility of the assets, operating efficiency compared to previous aircraft generations, and unique treatment in bankruptcy in some jurisdictions. The comments above apply to new aircraft financing, not refinancings of existing debt. Fitch estimates that there will be $14 billion of maturing airline debt in the U.S. alone in 2010- 2011. Economic Assumptions: Underpinning Fitch's A&D outlook is the firm's most recent global economic outlook, which as of October 2009 calls for global GDP to shrink 2.8% in 2009, followed by global growth recovery to 2% in 2010 and 2.7% in 2011. GDP should rise, but from a low base, and expansion will be weak relative to previous recoveries. There is some uncertainty in 2011 due to likely tightening of monetary and fiscal stimulus. Fitch expects GDP to grow 6.5% in the BRIC countries (Brazil, Russia, India, China) in 2010. Although global GDP looks set to return to positive growth, the absolute level of GDP is low and, in the U.S., it is possible that GDP may not return to the 2008 level until 2011. Fitch's specific A&D assumptions include no recovery in 2010 other than early cycle parts such as aftermarket. Late cycle segments such as original equipment will continue to be weak, showing some volume declines, although nowhere near as dramatic as in 2009 or in the last downturn that began in 2001. A more detailed report on the global 2010 aerospace & defense industry outlook will be available on the Fitch Ratings Web site at 'www.fitchratings.com' in January. Fitch-rated issuers and their current Issuer Default Ratings in the North American aerospace/defense sector: -- Alliant Techsystems Inc. (ATK) ('BB'; Outlook Stable); -- Boeing Company (BA) ('A+'; Outlook Negative); -- Bombardier Inc. (BBD/B) ('BB+'; Outlook Negative); -- General Dynamics Corporation (GD) ('A'; Outlook Stable); -- Goodrich Corporation (GR) ('BBB+'; Outlook Stable); -- Honeywell International Inc. (HON) ('A'; Outlook Negative); -- ITT Corporation (ITT) ('A-'; Outlook Stable) -- L-3 Communications Corporation (LLL) ('BBB-'; Outlook Stable); -- Lockheed Martin Corporation (LMT) ('A-'; Outlook Stable); -- Northrop Grumman Corporation (NOC) ('BBB+'; Outlook Stable); -- Raytheon Company (RTN) ('A-'; Outlook Stable); -- Rockwell Collins, Inc. (COL) ('A'; Outlook Stable); -- Textron Inc. (TXT) ('BB+'; Outlook Negative); -- Transdigm Group (TDG) ('B'; Outlook Stable); -- United Technologies Corporation (UTC) ('A+'; Outlook Stable). AMADO BAUTISTA GUTANG: Voluntary Chapter 11 Case Summary -------------------------------------------------------- Joint Debtors: Amado Bautista Gutang Esperanza Cases Gutang 3233 Sun Splash Drive Tucson, AZ 85713 Bankruptcy Case No.: 09-31832 Chapter 11 Petition Date: December 9, 2009 Court: United States Bankruptcy Court District of Arizona (Tucson) Debtors' Counsel: Nasser U. Abujbarah, Esq. The Law Offices Of Nasser U. Abujbarah 10654 N. 32nd St Phoenix, AZ 85028 Tel: (602) 493-2586 Fax: (602) 923-3458 Email: NUALegal@yahoo.com Estimated Assets: $1,000,001 to $10,000,000 Estimated Debts: $500,001 to $1,000,000 The Debtors did not file a list of their 20 largest unsecured creditors when they filed their petition. The petition was signed by the Joint Debtors. AMBAC FINANCIAL: Fails to Meet NYSE's $1 Per Share Requirement -------------------------------------------------------------- Ambac Financial Group, Inc., on December 9 said that the New York Stock Exchange has notified the Company that it has fallen below the NYSE's continued listing standard relating to the price of its common stock. The NYSE requires that the average closing price of a listed Company's common stock be above $1.00 per share over a consecutive 30 trading-day period. As of December 8, 2009, the date of the NYSE notice, the 30 trading-day average closing price of Ambac's common stock was $0.94 per share. Under the NYSE's rules, Ambac has six months from the date of the NYSE notice to bring its share price and 30 trading-day average share price back above $1.00 in order to avoid the delisting of its shares. During this period, Ambac's common stock will continue to be traded on the NYSE, subject to Ambac's compliance with other NYSE continued listing requirements. As required by the NYSE, in order to maintain the listing of its common shares, Ambac will notify the NYSE within 10 business days of receipt of the non-compliance notice of its intent to cure the price deficiency. About Ambac Ambac Financial Group, Inc., headquartered in New York City, is a holding company whose affiliates provide financial guarantees and financial services to clients in both the public and private sectors around the world. Ambac's principal operating subsidiary, Ambac Assurance Corporation, a guarantor of public finance and structured finance obligations, has a Caa2 rating (developing outlook) from Moody's Investors Service, Inc. and a CC rating (outlook developing) from Standard & Poor's Ratings Services. Ambac Financial Group, Inc. common stock is listed on the New York Stock Exchange (ticker symbol ABK). AMERICAN FAMILY: Unresolved Lawsuit Cues Chapter 11 Filing ---------------------------------------------------------- American Family Entertainment Center made a voluntary filing under Chapter 11 due to an unresolved multi-million dollar construction lawsuit, Larry Hilliard, staff writer at the Gaffney Ledger, reported. American Family Entertainment Center owns and operates an entertainment facility. AMERICAN INT'L: Treasury Says It May Not Get Full Investment ------------------------------------------------------------ Dow Jones Newswires' Meena Thiruvengadam reports that U.S. Treasury Secretary Timothy Geithner this week told the Congressional Oversight Panel, one of several entities overseeing the Troubled Asset Relief Program, there is a significant likelihood "we will not be repaid for the full value of our investments in AIG, GM, and Chrysler." Dow Jones notes the Treasury in fiscal year 2009 alone estimated its losses on capital provided to those firms to be near $61 billion. According to a report released by the Government Accountability Office -- and reported by the Troubled Company Reporter on November 10, 2009 -- the Treasury provided $81.1 billion aid to the U.S. auto industry, of which $62 billion was provided to Chrysler Group and GM to help the auto makers in their restructuring. In return, the government agency received 9.85% equity in Chrysler, 60.8% equity and $2.1 billion in preferred stock in GM, and $13.8 billion in debt obligations between the auto makers. GAO estimated that the equity value of Chrysler Group necessary to recoup investment must be $54.8 billion while GM would need to be worth $66.9 billion. The agency also assumed that $5.4 billion that was lent to Chrysler and $986 million to GM would not be repaid. "Treasury is unlikely to recover the entirety of its investment in Chrysler or GM, given that the companies' values would have to grow substantially above what they have been in the past," GAO said in its 41-page report. In September 2008, AIG experienced a liquidity crunch when its credit ratings were downgraded below "AA" levels by Standard & Poor's, Moody's Investors Service and Fitch Ratings. On September 16, 2008, the Federal Reserve Bank created an $85 billion credit facility to enable AIG to meet increased collateral obligations consequent to the ratings downgrade, in exchange for the issuance of a stock warrant to the Fed for 79.9% of the equity of AIG. The credit facility was eventually increased to as much as $182.5 billion. AIG has sold a number of its subsidiaries and other assets to pay down loans received from the U.S. government, and continues to seek buyers of its assets. According to Dow Jones' Darrell A. Hughes and Ms. Thiruvengadam, Mr. Geithner said in letters to U.S. lawmakers, the Obama administration would extend the $700 billion financial-sector bailout from its scheduled Dec. 31 expiration but limit new spending to such areas as housing and small business. The report relates Mr. Geithner said the financial sector has stabilized, but the government needs to have funds available through next October. those aimed at job creation. The report notes that President Barack Obama on Tuesday said the White House would use an additional $50 billion in TARP funds to help small businesses get credit. "While we are extending the $700 billion program, we do not expect to deploy more than $550 billion," Mr. Geithner said, Dow Jones reports. He added the U.S. would seek to exit its TARP investments "as soon as practicable." About AIG Based in New York, American International Group, Inc., is the leading international insurance organization with operation in more than 130 countries and jurisdictions. AIG companies serve commercial, institutional and individual customers through the most extensive worldwide property-casualty and life insurance networks of any insurer. In addition, AIG companies are leading providers of retirement services, financial services and asset management around the world. AIG's common stock is listed on the New York Stock Exchange, as well as the stock exchanges in Ireland and Tokyo. About Chrysler Group LLC Headquartered in Auburn Hills, Michigan, Chrysler Group LLC, formed in 2009 from a global strategic alliance with Fiat Group, produces Chrysler, Jeep, Ram, Dodge, Mopar and Global Electric Motorcars (GEM) brand vehicles and products. Chrysler LLC and 24 affiliates on April 30 sought Chapter 11 protection from creditors (Bankr. S.D.N.Y (Mega-case), Lead Case No. 09-50002). Chrysler hired Jones Day, as lead counsel; Togut Segal & Segal LLP, as conflicts counsel; Capstone Advisory Group LLC, and Greenhill & Co. LLC, for financial advisory services; and Epiq Bankruptcy Solutions LLC, as its claims agent. Chrysler has changed its corporate name to Old CarCo following its sale to a Fiat-owned company. As of December 31, 2008, Chrysler had $39,336,000,000 in assets and $55,233,000,000 in debts. Chrysler had $1.9 billion in cash at that time. In connection with the bankruptcy filing, Chrysler reached an agreement with Fiat SpA, the U.S. and Canadian governments and other key constituents regarding a transaction under Section 363 of the Bankruptcy Code that would effect an alliance between Chrysler and Italian automobile manufacturer Fiat. Under the terms approved by the Bankruptcy Court, the company formerly known as Chrysler LLC on June 10, 2009, formally sold substantially all of its assets, without certain debts and liabilities, to a new company that will operate as Chrysler Group LLC. Fiat has a 20 percent equity interest in Chrysler Group. Bankruptcy Creditors' Service, Inc., publishes Chrysler Bankruptcy News. The newsletter tracks the Chapter 11 proceedings of Chrysler LLC and its debtor-affiliates. (http://bankrupt.com/newsstand/or 215/945-7000) About General Motors General Motors Company -- http://www.gm.com/-- is one of the world's largest automakers, tracing its roots back to 1908. With its global headquarters in Detroit, GM employs 209,000 people in every major region of the world and does business in some 140 countries. GM and its strategic partners produce cars and trucks in 34 countries, and sell and service these vehicles through these brands: Buick, Cadillac, Chevrolet, GMC, GM Daewoo, Holden, Opel, Vauxhall and Wuling. GM's largest national market is the United States, followed by China, Brazil, the United Kingdom, Canada, Russia and Germany. GM's OnStar subsidiary is the industry leader in vehicle safety, security and information services. GM acquired its operations from General Motors Company, n/k/a Motors Liquidation Company, on July 10, 2009, pursuant to a sale under Section 363 of the Bankruptcy Code. Motors Liquidation or Old GM is the subject of a pending Chapter 11 reorganization case before the U.S. Bankruptcy Court for the Southern District of New York. At September 30, 2009, GM had $107.45 billion in total assets against $135.60 billion in total liabilities. About Motors Liquidation General Motors Corporation and three of its affiliates filed for Chapter 11 protection on June 1, 2009 (Bankr. S.D.N.Y. Lead Case No. 09-50026). General Motors changed its name to Motors Liquidation Co. following the sale of its key assets to a company 60.8% owned by the U.S. Government. The Honorable Robert E. Gerber presides over the Chapter 11 cases. Harvey R. Miller, Esq., Stephen Karotkin, Esq., and Joseph H. Smolinsky, Esq., at Weil, Gotshal & Manges LLP, assist the Debtors in their restructuring efforts. Al Koch at AP Services, LLC, an affiliate of AlixPartners, LLP, serves as the Chief Executive Officer for Motors Liquidation Company. GM is also represented by Jenner & Block LLP and Honigman Miller Schwartz and Cohn LLP as counsel. Cravath, Swaine, & Moore LLP is providing legal advice to the GM Board of Directors. GM's financial advisors are Morgan Stanley, Evercore Partners and the Blackstone Group LLP. Bankruptcy Creditors' Service, Inc., publishes General Motors Bankruptcy News. The newsletter tracks the Chapter 11 proceeding undertaken by General Motors Corp. and its various affiliates. (http://bankrupt.com/newsstand/or 215/945-7000) AMN HEALTHCARE: S&P Assigns 'BB' Rating on $185 Mil. Facility ------------------------------------------------------------- Standard & Poor's Rating Services said that it assigned its 'BB' rating to San Diego, California-based AMN Healthcare Inc.'s proposed $185 million bank facility, consisting of a $110 million term loan and a $75 million revolving credit facility. S&P affirmed its corporate credit rating of 'BB-'; the rating outlook is stable. While the refinancing extends maturities, eases scheduled amortization payments, and provides covenant relief, S&P expects AMN's operating environment to remain very weak in the near term. Proceeds of the financing will be used to repay the $77 million outstanding balance on the company's term loan, cash collateralize about $22 million of letters of credit, and fund transaction fees and expenses. "The rating on AMN Healthcare Inc., a subsidiary of AMN Healthcare Services Inc., reflects the health staffing company's weak business risk profile, given its narrow operating focus in a competitive and highly cyclical field, the recent decline in demand for outsourced labor from hospital clients, and the variable supply of travel nurses," said Standard & Poor's credit analyst Rivka Gertzulin. Although AMN's revenue in the third quarter of 2009 declined about 47% over the 2008 period, operating margins have remained relatively stable as the company has reduced its variable costs. Moreover, the company has used its significant free cash flow in 2009, mostly generated from working capital (accounts receivable), to repay debt. As a result, the company's significant financial risk profile is commensurate with the rating. ANTHRACITE CAPITAL: Delisting Cues Default Under Senior Notes ------------------------------------------------------------- Richard M. Shea, President and Chief Operating Officer of Anthracite Capital, Inc., reports that events of default have occurred on the outstanding $43.5 million aggregate principal amount of 1.25%-to-7.22% Senior Notes due 2016, $7.5 million aggregate principal amount of 1.25%-to-7.20% Senior Notes due 2016 and $26.4 million aggregate principal amount of 1.25%-to-7.772%- to-Floating Rate Senior Notes due 2017 of Anthracite Capital as a result of the commencement of the delisting procedures by the New York Stock Exchange on -- and the suspension of listing on the NYSE of -- the Company's common stock. As reported by the Troubled Company Reporter, NYSE on December 1, 2009, announced the immediate suspension of listing on the NYSE of these equity securities of Anthracite Capital: -- common stock (ticker symbol: AHR); -- 9.375% Series C Cumulative Redeemable Preferred Stock (ticker symbol: AHR PR C); and -- 8.25% Series D Cumulative Redeemable Preferred Stock (ticker symbol: AHR PR D). NYSE Regulation, Inc., determined the Company was no longer suitable for listing in light of the abnormally low price of the Company's common stock after the Company's December 1 announcement that discussed defaults and cross-defaults on certain of its unsecured and secured debt obligations. The Company's common stock closed at $0.24 with a resultant market capitalization of $22.6 million on December 1, 2009. Under the indentures governing the Senior Notes, while the events of default are continuing, the trustee or the holders of at least 25% in aggregate principal amount of any of the three series of the outstanding Senior Notes may, by a written notice to the Company, declare the principal amount of such series of Senior Notes to be immediately due and payable. To date, the Company has not received any written notice of acceleration. Furthermore, as a result of the Delisting, holders of roughly $39 million aggregate principal amount of the Company's outstanding 11.75% Convertible Senior Notes due 2027 may request the Company to repurchase in cash in whole or in part the Convertible Notes at a price set pursuant to the indenture governing the Convertible Notes. The Company does not anticipate being able to meet such repurchase obligations. If the Company were to fail to provide a written notice to the holders of the Convertible Notes setting forth details of repurchase within 15 days after the Delisting, or repurchase any Convertible Notes upon request, an event of default would occur under the indenture governing the Convertible Notes. Default Anthracite Capital did not make interest payments, when due on October 30, 2009, on its outstanding $13.75 million aggregate principal amount of 7.22% Senior Notes due 2016, its outstanding $28 million aggregate principal amount of 7.772%-to-floating rate Senior Notes due 2017 and its outstanding $37.5 million aggregate principal amount of 8.1275%-to-floating rate Senior Notes due 2017. Under the indentures governing the Senior Notes, the continuance of an interest payment default for a period of 30 days constitutes an event of default. The Company failed to make the interest payments on the Senior Notes within this 30-day period. As a result, an event of default occurred and is continuing under each of the indentures governing the Senior Notes. The Company said the events of default have triggered cross- default provisions in the Company's secured bank facilities and its credit facility with BlackRock Holdco 2, Inc., and, if any debt were accelerated, would trigger a cross-acceleration provision in the Company's convertible notes indenture. If acceleration were to occur, the Company would not have sufficient liquid assets available to repay such indebtedness and, unless the Company were able to obtain additional capital resources or waivers, the Company would be unable to continue to fund its operations or continue its business. The Company also said one of its secured bank lenders, Deutsche Bank, whose loans to the Company were made under a repurchase agreement, has informally indicated to the Company that it intends to exercise its remedy of taking the collateral under the repurchase agreement. Under the repurchase agreement, Deutsche Bank must give the Company at least five business days' written notice before it may exercise this remedy. As of December 1, the Company has not received any such written notice from Deutsche Bank. Approximately $58 million principal amount of indebtedness remains outstanding under the Company's repurchase facility with Deutsche Bank. The Company is discussing the events of default and situation with certain of its creditors, but there can be no assurance that such discussions will result in the continuing operations of the Company. The Company said December 1 the cash flows from substantially all of its assets are being diverted to a cash management account for the benefit of the Company's secured bank lenders due to the continuation of the Company's default on amortization payments required under such secured bank facilities. Management's assessment of the Company's liabilities and the current market value of the Company's assets suggests that, in the event of a reorganization or liquidation of the Company in the near term, shareholders would not receive any value and the value received by the Company's unsecured creditors would be minimal. About Anthracite Capital Anthracite Capital, Inc. is a specialty finance company focused on investments in high yield commercial real estate loans and related securities. Anthracite is externally managed by BlackRock Financial Management, Inc., which is a subsidiary of BlackRock, Inc., one of the largest publicly traded investment management firms in the United States with approximately $1.435 trillion in global assets under management at September 30, 2009. BlackRock Realty Advisors, Inc., another subsidiary of BlackRock, provides real estate equity and other real estate-related products and services in a variety of strategies to meet the needs of institutional investors. At September 30, 2009, the Company had $2,601,125,000 in total assets against $2,064,290,000 in total liabilities, $23,237,000 in 12% Series E-1 Cumulative Convertible Redeemable Preferred Stock, and $23,237,000 in 12% Series E-2 Cumulative Convertible Redeemable Preferred Stock, resulting in stockholders' equity of $490,361,000. ARCLIN US: Modified Plan Confirmed by Court ------------------------------------------- Bill Rochelle at Bloomberg News reports that the reorganization plan for Arclin US Holdings Inc. was approved in a Dec. 8 confirmation order after the plan was modified to provide a distribution to unsecured creditors who were to receive nothing under the original version for their $9.6 million in claims. To mollify opposition from unsecured creditors who were deemed to have voted "no," the Plan was modified to create a $600,000 fund for distribution to unsecured creditors. Secured creditor can't participate as unsecured creditors on account of their deficiency claims. Under the Plan, holders of $204 million in first-lien debt are receiving 97% of the new stock plus a new $60 million term loan. The plan will reduce funded debt to $60 million from $234 million. First-lien creditors were projected to recover 88.4 percent. Second-lien lenders owed $30 million have a "gift" from the first- lien creditors in the form of 3% of the new stock plus warrants for a predicted 40.4% recovery. About Arclin US Holdings, Inc. Based in Mississauga, Ontario, Arclin is a leading provider of innovative bonding and surfacing solutions for the building and construction, engineered materials and natural resource markets. Arclin provides bonding solutions for a number of applications including wood based panels, engineered wood, non-wovens and paper impregnation. As a world leader in paper overlays technology, Arclin provides high value surfacing solutions for decorative panels, building products and industrial specialty applications for North American and export markets. Arclin's U.S. companies -- Arclin US Holdnigs, Inc.; Marmorandum LLC; Arclin Chemicals Holding Inc.; Arclin Industries U.S.A., Inc; Arclin Fort Smith Inc., Arclin U.S.A. Inc.; and Arclin Surfaces Inc. -- filed voluntary petitions for Chapter 11 on July 27, 2009 (Bankr. D. Del. Lead Case No. 09-12628). Frederick Brian Rosner, Esq., at Messana Rosner & Stern, LLP, serves as counsel for the Debtors. Dechert LLP is co-counsel while Alvarez & Marsal securities LLC is the investment banker. Kurtzman Carson Consultants LLC serves as claims and noticing agent. The petition says that Arclin US's assets and debts are between $100,000,001 and $500,000,000. Arclin's Canadian companies also made a filing with the Ontario Superior Court of Justice and have obtained an Initial Order authorizing Arclin to reorganize under the Companies' Creditors Arrangement Act. Ernst & Young serves as CCAA monitor. Arclin's subsidiaries in Mexico are not included in the filings. The Mexican affiliates -- Arclin Mexican Holdings S.A. de C.V., Arclin Mexico S.A. de C.V., and Arclin Operadora S.A. de C.V. -- are not subject to any insolvency proceedings. ART ADVANCE: Quebec Court OKs Amended Distribution Plan ------------------------------------------------------- ART Advanced Research Technologies Inc. said the Quebec Superior Court approved the amended proposal filed by ART under the Bankruptcy and Insolvency Act. The Proposal provides for, among other terms, the distribution of the sum of $375,000 to the unsecured creditors as well as a reorganization of ART's equity pursuant to Section 191 of the Canada Business Corporations Act. The transactions contemplated by the Proposal including the Reorganization are expected to be implemented and effective by December 11, 2009. In consideration of the transactions contemplated under the Proposal, Dorsky Worldwide Corp. settled the claims of secured creditors of ART totaling close to $5 million and paid $375,000 to be used by ART to pay a distribution to its unsecured creditors. Upon the implementation of the Proposal and Reorganization, all existing common and preferred shares and other equity of ART will be automatically cancelled, without payment or compensation to the holders of such shares and equity, in accordance with the terms of the Court approved Proposal. This announcement follows the announcement made on December 7, 2009 that the unsecured creditors of ART voted unanimously in support of its Proposal under the BIA, as amended, at a meeting of Unsecured Creditors held that day. About ART Advanced Research Canada-based ART Advanced Research Technologies Inc. -- http://www.art.ca/-- is a leader in molecular imaging products for the healthcare and pharmaceutical industries. ART has developed products in medical imaging, medical diagnostics, disease research, and drug discovery with the goal of bringing new and better treatments to patients faster. ART's shares are listed on the TSX under the ticker symbol ARA. * * * ART Advanced announced November 2 it filed a notice of intention to make a proposal to its creditors under the Bankruptcy and Insolvency Act with KPMG Inc. in order to provide the company with the liquidity it requires to pursue its solicitation process. ART was also authorized pursuant to an order of the Quebec Superior Court to enter into a loan agreement with Dorsky Worldwide Corp. for interim financing in an amount of up to $1,200,000. APPLIED SOLAR: Sees Chapter 7 Conversion After Assets Sold ---------------------------------------------------------- ASI Liquidating Co., formerly Applied Solar, Inc., anticipates that its Chapter 11 bankruptcy case currently pending in the U.S. Bankruptcy Court for the District of Delaware will be converted to a Chapter 7 case in the near future, after which time a Chapter 7 Trustee will be responsible for overseeing the liquidation of ASI Liquidating Co. The Company has previously completed the sale of substantially all of its assets to an affiliate of The Quercus Trust, which affiliate is operating these assets under the name "Applied Solar." The remaining assets of the Company consist primarily of cash received in the Asset Sale, in an amount that is not sufficient to pay all of its creditors in full. As a result, it is anticipated that the stockholders of ASI Liquidating Co. will not receive any disbursement in connection with the liquidation of ASI Liquidating Co. About Applied Solar Inc. Applied Solar, Inc., a Nevada Corporation, is a "next-generation" solar energy company. The Company develops, commercializes and licenses clean energy solutions, innovative solar products and energy management applications. Applied Solar was formerly known as Barnabus Energy Inc., Barnabus Enterprises Inc. and Open Energy Corporation. Applied Solar Inc. and its affiliate Solar Communities I LLC filed for Chapter 11 on July 24 (Bankr. D. Del. Lead Case No. 09-12623). Katherine J. Clayton, Esq., represents the Debtors as counsel. In its petition, the Debtor listed between $1 million and $10 million in assets, and between $10 million and $50 million in debts. Chapter 11 debtor Applied Solar is now known ASI Liquidating Co., following the 11 U.S.C. Sec. 363 sale of its assets to The Quercus Trust. AVENTINE RENEWABLE: Files Noteholders-Supported Ch. 11 Plan ----------------------------------------------------------- Aventine Renewable Energy Holdings, Inc., et al., filed with the U.S. Bankruptcy Court for the District of Delaware a proposed Chapter 11 plan of reorganization and accompanying disclosure statement. The Debtors will begin soliciting votes on the Plan following approval of the adequacy of the information in the Disclosure Statement. According to the Disclosure Statement, the Plan is supported by holders of 70% of the prepetition unsecured notes who will backstop the offering of secured notes used to fund the Plan. The Plan contemplates (i) payment in full in cash either on or after the effective date to holders of allowed (a) administrative claims, (b) fee claims, (c) priority tax claims, (d) DIP financing claims, (e) other priority claims, and (f) prepetition secured credit facility claims; (ii) to holders of the Kiewit Mt. Vernon secured claim, the Kiewit Aurora West secured claim and other secured claims, either reinstatement of such claims, a cash payment or payments, or return of the collateral securing such allowed other secured claims; (iii) to holders of prepetition unsecured notes claims and general unsecured claims, a pro rata distribution of the unsecured claims stock pool allocable to the debtor against which such claims are allowed; (iv) to holders of convenience class claims, a cash payment equal to 35% of the allowed amount of such claims; (v) to holders of equity interests in are holdings, the issuance of the warrants; and (vi) no recovery to holders of equity interests in the subsidiaries. In no event will claim holders be entitled to receive value in excess of the allowed amount of their claims. Holders of the $315.5 million in unsecured notes and unsecured creditors owed $15 million will receive their pro rata share of 80% of the new stock. Upon emergence from Chapter 11, the reorganized Debtors will issue $105 million in notes that will be secured by senior liens on all of the reorganized Debtors' assets and used to fund distributions under the plan as well as the reorganized Debtors' working capital needs post-emergence. The reorganized Debtors will also enter into a $20 million secured asset-based lending facility after the effective date which will be used to fund liquidity and working capital needs post-emergence. The hearing to approve the Disclosure Statement is set for Jan. 13. The confirmation hearing for approval of the Plan is tentatively scheduled for Feb. 24. Means of Implementation 1. Entry into Exit Financing: (a) Senior secured notes will be issued by the Reorganized ARE Holdings and guaranteed by each of the Reorganized ARE Holdings' then existing domestic subsidiaries. (b) Holders of allowed prepetition unsecured notes will be entitled to subscribe and acquire their pro rata share of (i) $105,000,000 in aggregate principal amount of the senior secured notes, and (ii) the shares of noteholder new equity. (c) The Backstop Purchasers agreed to backstop senior secured notes offering. (d) ABL credit facility will be closed. The amount borrowed under the facility will be used to fund the Reorganized Debtors' working capital needs after the effective date. 2. Allocation of new ARE Holdings common stock and issuance of new subsidiary equity interests. 3. Substantive consolidation and merger of ARE LLC into ARE Holdings. A full-text copy of the Disclosure Statement is available for free at http://bankrupt.com/misc/AventineRenewable_DS.pdf A full-text copy of the Chapter 11 Plan is available for free at: http://bankrupt.com/misc/AventineRenewable_Ch11Plan.pdf About Aventine Renewable Pekin, Illinois-based Aventine Renewable Energy Holdings, Inc. (Pink Sheets: AVRNQ) -- http://www.aventinerei.com/-- is a producer and marketer of ethanol to many leading energy companies in the United States. In addition to ethanol, Aventine also produces distillers grains, corn gluten meal, corn gluten feed, corn germ and brewers' yeast. The Company and all of its direct and indirect subsidiaries filed for Chapter 11 on April 7, 2009 (Bankr. D. Del. Lead Case No. 09-11214). Joel A. Waite, Esq., and Ryan M. Bartley, Esq., at Young, Conaway, Stargatt & Taylor, serves as bankruptcy counsel to the Debtors. Davis Polk & Wardwell is special tax counsel and Houlihan, Lokey, Howard & Zukin, Inc., is the financial advisor. Garden City Group, Inc., has been engaged as claims agent. Donald J. Detweiler, Esq., at Greenberg Traurig, LLP, serves as counsel to the official committee of unsecured creditors. When it filed for bankruptcy protection from its creditors, Aventine Renewable listed between $100 million and $500 million each in assets and debts. AVISTAR COMMUNICATIONS: Registers 12.5MM Shares Under 2009 Plan --------------------------------------------------------------- Stockholders of Avistar Communications Corporation on November 16, 2009, approved the 2009 Equity Incentive Plan, which replaced the Company's 2000 Stock Option Plan. On December 8, 2009, 20 calendar days after the mailing of an Information Statement related to the 2009 Plan to the Company's stockholders, the 2009 Plan became effective. The total number of shares reserved for issuance under the 2009 Plan is 12,543,791 shares of the Company's common stock. Accordingly the Company filed a Registration Statement on Form S-8 to register the 12,543,791 shares of common stock. The 12,543,791 shares being registered under this Registration Statement include (i) 2,508,325 shares of the Company's common stock previously reserved for issuance under the 2000 Plan but not subject to outstanding options under such plan, which have been moved to the 2009 Plan, and (ii) up to 10,035,466 shares that may be added to the 2009 Plan in the future (A) as shares reserved for issuance under the 2000 Plan and subject to options or similar awards issued under such plan expire or otherwise terminate without being exercised in full or are forfeited to or repurchased by the Company, or (B) pursuant to the automatic annual increase provisions under the 2009 Plan. About Avistar Communications Headquartered in San Mateo, California, Avistar Communications Corporation (Nasdaq: AVSR) -- http://www.avistar.com/-- holds a portfolio of 80 patents for inventions in video and network technology and licenses IP to videoconferencing, rich-media services, public networking and related industries. Current licensees include Sony Corporation, Sony Computer Entertainment Inc. (SCEI), Polycom Inc., Tandberg ASA, Radvision Ltd. and Emblaze-VCON. At September 30, 2009, the Company had $2.4 million in total assets, including $382,000 in cash and cash equivalents, against $14.9 million in total liabilities, resulting in stockholders' deficit of $12.5 million. As reported by the Troubled Company Reporter on August 25, 2009, the Company said it was in discussions with the remaining holders of its 4.5%Convertible Subordinated Secured Notes to convert the Notes into shares of common stock in January 2010 or extend the term of the Notes. The Nasdaq Stock Market, LLC, has determined to remove from listing the common stock of Avistar, effective at the open of business on August 31, 2009. Based on a review of information provided by the Company, Exchange Staff determined that the Company no longer qualified for listing on the Exchange as it failed to comply with Rule 5505(b)(2). AXIANT LLC: NCO Group Cancels Contract for Assets ------------------------------------------------- NCO Group Inc. will not start the auction but may still join the bidding for the assets of Axiant LLC. NCO Group terminated its proposal to acquire Axiant LLC, saying it will continue to pursue the asset sale in the bankruptcy process, according to a report by Patrick Lunsford at insideARM. The parties were in talks for a stalking horse bid by NCO Group of $2 million plus the assumption of liabilities. Unless it was outbid at a January 25 auction, NCO Group would have been required to buy the assets at the contracted price. If it was outbid, NCO Group, as stalking horse, would be entitled to a break-up fee. Axiant had previously said that it was still in negotiations with the proposed stalking horse bidder. It said that it will pursue an open auction if negotiations don't result to a definitive contract. Axiant contemplates a January 20, 2010 deadline for bids. The auction will be held January 25 and the sale hearing two days later, on January 27. Closing is targeted to occur February 9. The Court will consider approval of the proposed bidding process on December 14. About Axiant LLC Huntersville, North Carolina-based Axiant, LLC, aka MBSolutions LLC, filed for Chapter 11 bankruptcy protection on November 20, 2009 (Bankr. D. Delaware Case No. 09-14118). Michael R. Nestor, Esq., and Pilar G. Kraman, Esq., at Young Conaway Stargatt & Taylor, LLP, assist the Company in its restructuring effort. The Company listed $10,000,001 to $50,000,000 in assets and $10,000,001 to $50,000,000 in liabilities. BERNARD MADOFF: Banque Jacob Safra Seeks to Dismiss Picard Suit --------------------------------------------------------------- According to Bill Rochelle at Bloomberg News, Banque Jacob Safra (Gibraltar) Ltd. said it was merely a conduit and should be dismissed from a lawsuit filed by Irving H. Picard, the trustee for Bernard L. Madoff Investment Securities Inc., against the bank's customer Vizcaya Partners. Bloomberg relates that, separately, the trustee is objecting to the 8,500 claims filed by investors in so-called feeder funds that in turn invested in the Madoff Ponzi scheme. The trustee contends that the feeder funds are the holders of the claims and the investors aren't entitled to have individual claims against the Madoff firm. Mr. Rochelle said in an earlier report that Mr. Picard might end up suing Carl Shapiro, a philanthropist who claims he lost $545 million in the Ponzi scheme. Saying he might sue for $1 billion in fake profits, Mr. Picard said the facts represented by Mr. Shapiro's lawyers aren't the same that the trustee's staff worked up in their own investigation. About Bernard L. Madoff Bernard L. Madoff Investment Securities LLC and Bernard L. Madoff orchestrated the largest Ponzi scheme in history, with losses topping US$50 billion. On December 15, 2008, the Honorable Louis A. Stanton of the U.S. District Court for the Southern District of New York granted the application of the Securities Investor Protection Corporation for a decree adjudicating that the customers of BLMIS are in need of the protection afforded by the Securities Investor Protection Act of 1970. The District Court's Protective Order (i) appointed Irving H. Picard, Esq., as trustee for the liquidation of BLMIS, (ii) appointed Baker & Hostetler LLP as his counsel, and (iii) removed the SIPA Liquidation proceeding to the Bankruptcy Court (Bankr. S.D.N.Y. Adv. Pro. No. 08-01789) (Lifland, J.). On April 13, 2009, former BLMIS clients filed an involuntary Chapter 7 bankruptcy petition against Bernard Madoff (Bankr. S.D.N.Y. 09-11893). The case is before Hon. Burton Lifland. The petitioning creditors -- Blumenthal & Associates Florida General Partnership, Martin Rappaport Charitable Remainder Unitrust, Martin Rappaport, Marc Cherno, and Steven Morganstern -- assert $64 million in claims against Mr. Madoff based on the balances contained in the last statements they got from BLMIS. On April 14, 2009, Grant Thornton UK LLP as receiver placed Madoff Securities International Limited in London under bankruptcy protection pursuant to Chapter 15 of the U.S. Bankruptcy Code (Bankr. S.D. Fla. 09-16751). The Chapter 15 case was later transferred to Manhattan. In June 2009, Judge Lifland approved the consolidation of the Madoff SIPA proceedings and the bankruptcy case. Judge Denny Chin of the U.S. District Court for the Southern District of New York on June 29, 2009, sentenced Mr. Madoff to 150 years of life imprisonment for defrauding investors in United States v. Madoff, No. 09-CR-213 (S.D.N.Y.). BERRY PLASTICS: Completes Acquisition of Pliant Corp. ----------------------------------------------------- Berry Plastics Corporation said December 3, 2009, it has completed the acquisition of 100% of the common stock of Pliant Corporation for an acquisition purchase price of $561 million. Pliant emerged from bankruptcy effective December 3, 2009, and became a wholly owned direct subsidiary of Berry. The acquisition was funded with the proceeds from the private placement of notes in October. As reported by the Troubled Company Reporter, Berry Plastics on October 29, 2009, said it would issue, through its two newly formed, wholly owned subsidiaries: -- $370 million of first priority senior secured notes due 2015; and -- $250 million of second priority senior secured notes due 2014. The First Priority Notes will bear interest at a rate of 8-1/4% payable semiannually, in cash in arrears, on May 15 and November 15 of each year, commencing May 15, 2010 and will mature on November 15, 2015. The Second Priority Notes will bear interest at a rate of 8-7/8% payable semiannually, in cash in arrears, on March 15 and September 15 of each year, commencing March 15, 2010, and will mature on September 15, 2014. The newly acquired business will be operated as Berry's Specialty Films Division and will be run by R. David Corey, the former Chief Operating Officer of Pliant. Berry's current Flexible Films Division will now be known as the Film Products Division. A full-text copy of Berry's disclosure on Form 8-K filed with the Securities and Exchange Commission is available at no charge at: http://ResearchArchives.com/t/s?4b79 About Pliant Corp Headquartered in Schaumburg, Illinois, Pliant Corporation produces value-added film and flexible packaging products for personal care, medical, food, industrial and agricultural markets. Pliant operates 16 manufacturing facilities around the world, and employs approximately 2,800 people with annual net sales of $900 million for the 12 months ended September 30, 2009. Barclays Capital acted as the exclusive financial advisor to Apollo Management, Graham Partners and Berry Plastics in conjunction with the Pliant restructuring process. Pliant and 10 of its affiliates filed for Chapter 11 protection on January 3, 2006 (Bankr. D. Del. Lead Case No. 06-10001). James F. Conlan, Esq., at Sidley Austin LLP, and Edmon L. Morton, Esq., and Robert S. Brady, Esq., at Young, Conaway, Stargatt & Taylor, represented the Debtors in their restructuring efforts. The Debtors tapped McMillan Binch Mendelsohn LLP, as Canadian counsel. As of September 30, 2005, the Company had $604.3 million in total assets and $1.19 billion in total debts. The Debtors emerged from Chapter 11 on July 19, 2006. Pliant Corp. and its affiliates again filed for Chapter 11 after reaching terms of a pre-packaged restructuring plan. The voluntary petitions were filed February 11, 2009 (Bank. D. Del. Case Nos. 09-10443 through 09-10451). The Hon. Mary F. Walrath presides over the cases. Jessica C.K. Boelter, Esq., at Sidley Austin LLP, in Chicago, Illinois, and Edmon L. Morton, Esq., at Robert S. Brady, Esq., at Young Conaway Stargatt & Taylor, LLP, in Wilmington, Delaware, provide bankruptcy counsel to the Debtors. Epiq Bankruptcy Solutions LLC acts as claims and noticing agent. The U.S. Trustee for Region 3 appointed five creditors to serve on an official committee of unsecured creditors. The Creditors Committee selected Lowenstein Sandler PC as its counsel. As of September 30, 2008, the Debtors had $688.6 million in total assets and $1.03 billion in total debts. About Berry Plastics Berry Plastics Corporation manufactures and markets plastic packaging products, plastic film products, specialty adhesives and coated products. At June 27, 2009 the Company had 64 production and manufacturing facilities, with 58 located in the United States. Berry is a wholly-owned subsidiary of Berry Plastics Group, Inc. Berry Group is primarily owned by affiliates of Apollo Management, L.P. and Graham Partners. Berry, through its wholly owned subsidiaries operates in four primary segments: Rigid Open Top, Rigid Closed Top, Flexible Films, and Tapes/Coatings. The Company's customers are located principally throughout the United States, without significant concentration in any one region or with any one customer. At September 26, 2009, the Company had total assets of $4.401 billion against total liabilities of $4.079 billion, resulting in stockholders' equity of $321.7 million. Berry Plastics reported a net loss of $26.2 million for the fiscal year ended September 26, 2009, from a net loss of $101.1 million for fiscal year ended September 27, 2008, and net loss of $116.2 million for fiscal year ended September 27, 2008. * * * As reported by the Troubled Company Reporter on June 10, 2009, Standard & Poor's Ratings Services raised its corporate credit rating on Berry Plastics Group to 'B-' from 'SD' and the senior unsecured debt rating to 'CCC' from 'D'. The recovery ratings on Group's senior unsecured debt remain unchanged at '6', indicating S&P's expectation for negligible recovery (0% to 10%) in a payment default. S&P affirmed all its ratings on Group's wholly owned operating subsidiary Berry Plastics Corp. The outlook is stable. BI-LO LLC: Rejects Delhaize Bid, Opts for Stand-Alone Plan ---------------------------------------------------------- Scuttlebiz's Tim Rausch relates that BI-LO LLC rejected the offer of Food Lion's Belgian-based owner, Delhaize, to pay $425 million for most of the Company, and decided to complete its Chapter 11 bankruptcy proceeding with its own plan of reorganization. Delhaize offer had raised some questions about whether BI-LO's stores would close after all become Food Lions. As reported by the Troubled Company Reporter on Nov. 24, 2009, the Company has filed a proposed Chapter plan, which is funded by a $150 million new equity investment from Lone Star Funds and $200 million in debt. About BI-LO Headquartered in Mauldin, South Carolina, BI-LO LLC operates 214 supermarkets in South Carolina, North Carolina, Georgia and Tennessee and employs approximately 15,500 people. Dallas-based Lone Star Funds bought the business in 2005 from Koninklijke Ahold NV, the Dutch supermarket operator. Lone Star also owns Bruno's Supermarkets LLC, a chain of 66 stores that filed under Chapter 11 in February in Birmingham, Alabama. BI-LO and its affiliates filed for Chapter 11 bankruptcy protection on March 23, 2009 (Bankr. D. S.C. Case No. 09-02140). George B. Cauthen, Esq., Frank B. Knowlton, Esq., at Nelson Mullins Riley & Scarborough, L.L.P; Josiah M. Daniel, III, Esq., Katherine D. Grissel, Esq., at Vinson & Elkins L.L.P. in Dallas; and Dov Kleiner, Esq., Alexandra S. Kelly, Esq., at Vinson & Elkins L.L.P., in New York, serve as counsel. Kurtzman Carson Consultants LLC serves as notice and claims agent. BI-LO listed between $100 million and $500 million each in assets and debts. BLUEHIPPO FUNDING: Wants Case Converted to Chapter 7 Liquidation ---------------------------------------------------------------- Barely more than two weeks after voluntarily filing for chapter 11 protection, BlueHippo Funding, LLC and its affiliates has filed a motion requesting that their bankruptcy cases be converted to chapter 7 liquidation cases. NetDockets says the motion is the apparent result of an order entered on December 2 by Judge Kevin Gross. BlueHippo had sought a preliminary injunction and temporary restraining order against its automated clearing house processor, Checkgateway LLC, which it asserted was wrongfully holding funds of BlueHippo and the other debtors. Judge Gross denied the motion for a preliminary injunction and TRO, and refused to direct Checkgateway to turn over the disputed funds to the Debtors. According to NetDockets, BlueHippo said without those funds, it lacks sufficient funding "to satisfy administrative expenses that will continue to accrue if these cases are maintained in chapter 11." BlueHippo said it has no choice but to seek conversion of the cases and liquidate under chapter 7. BlueHippo Funding LLC is a direct marketer of computers to consumers with poor credit records. The company generated $33.1 million in sales during 2008 and $21.5 million through September this year. NetDockets says BlueHippo described itself as offering customers with poor credit "an effective alternative way . . . to purchase computers and other electronic equipment." However, its business practices had been the subject of class action lawsuits and legal action by the Federal Trade Commission. The net loss this year is $1.8 million. BlueHippo is owned by Joseph K. Rensin. BlueHippo Funding LLC and several affiliates filed for Chapter 11 on November 23, 2009. The case is In re Distinctive Call Response LLC, 09-14154, U.S. Bankruptcy Court, District of Delaware (Wilmington). Eric Michael Sutty, Esq., at Fox Rothschild LLP, in Wilmington, Delaware, represents the Debtors. BlueHippo said it has assets of $10 million while debt is $12.1 million. BLUMENTHAL PRINT: To Liquidate Assets; Leaves 160 Jobless --------------------------------------------------------- Gary Evans at Furniture Today says Blumenthal Print Works Inc. is closing its business after 80 years of operations, leaving about 30 employees in its headquarters and 130 workers at its jacquard plant in Marion, South Carolina, without jobs. As reported by the TCR on Dec. 3, the Company has been compelled to liquidate after the Bankruptcy Court allowed the secured lender Whitney National Bank to foreclose its plant and most other property. Blumenthal Print Works -- http://www.blumenthalprintworks.com/-- operated a home furnishing and decorative fabric company. The Company and its affiliate, Blumenthal Mills, Inc., sold jacquard, circular knits and velours. The Company filed for Chapter 11 protection on Oct. 20, 2008 (Bankr. E.D. La. Case No. 08-12532). Blumenthal Mills also filed for Chapter 11 protection. Bernard H. Berins, Esq., and Jan Marie Hayden, Esq., at Heller Draper Hayden Patrick & Horn LLC, assist the Debtors in their restructuring effort. The Debtors each listed assets of $1 million to $10 million and debts of $10 million to $50 million in their petitions. BOMBARDIER INC: Fitch Says Sector's Outlook Steady, Risks Remain ---------------------------------------------------------------- Credit quality in the U.S. commercial aerospace industry will remain under pressure in 2010, while the U.S. defense sector is likely to experience more stability, according to Fitch Ratings. Fitch expects deliveries in all commercial aerospace original equipment segments to decline in 2010, but aftermarket sales should begin to improve modestly. Defense spending will continue to grow in the low single digits. 'Beyond 2010 the industry faces some key issues: likely additional production cuts at Boeing and Airbus, and possible declines in U.S. Department of Defense modernization spending,' said Craig Fraser, Managing Director at Fitch. 'Rating upgrades are unlikely in 2010, and downgrades remain a risk for some commercial aerospace companies.' Credit metrics for many A&D companies deteriorated in 2009, but they are likely to be steady in 2010. Profits and cash flows could be helped by improvement in the high-margin aftermarket, the full-year impact of 2009 cost reductions, and defense growth, but they will be held back by higher pension expense and weak commercial OE markets. Fitch says liquidity remains strong after improving in 2009 because of lower share repurchases and some opportunistic debt issuance, but the company expects cash deployment will increase during 2010, particularly for acquisitions and pension contributions. Key risks for the sector include the weak global economic recovery, exogenous shocks (terrorism, disease pandemic, etc.), large U.S. government deficits, and execution on new programs. The 787 program remains a continuing source of risk for Boeing and its suppliers. Flight hours and airline traffic have moved off of cyclical lows, but they remain at depressed levels. A general risk is that some production rates have not been revised downward materially despite the weak economy. Fitch does not expect that financing availability will be a limit on aircraft deliveries in 2010, although some concerns remain in the aircraft finance business. Longer-term, Fitch considers the commercial outlook solid because of large backlogs and the need to build aerospace infrastructure in developing regions. Commercial Aerospace: These expectations for key commercial aerospace segments are incorporated into Fitch's forecasts: -- Large Commercial Aircraft: Fitch expects LCA deliveries from Boeing and Airbus will decline approximately 5% in 2010 to 920 aircraft, with revenues down 5%-10%. These estimates incorporate the announced production cuts for the A320 family (down two aircraft per month) and B777 (down almost 30%), but they exclude possible 787 deliveries (discussed below). Fitch believes there is a strong chance of additional production cuts, but these are more likely to take place in 2011. Long manufacturing lead times, advance payment requirements, and indications of sold-out 2010 production schedules support the argument against additional cuts next year, unless they are announced in the next few months to take effect at the end of 2010. Fitch's forecasts will include additional 5%-15% cuts beginning in 2011. Fitch forecasts the additional LCA production reductions in 2011 because of a moderate global economic recovery, airline capacity reductions in 2008 and 2009, substantial airline losses, and deliveries that are exceeding typical aircraft retirements. However, the eventual production declines should be moderate relative to prior LCA cycles as a result of large backlogs, production restraint since the last downturn, some remaining overbooking in the delivery plans, and the geographic diversity of the customer base. In addition, the long-term nature of aircraft assets, as well as operating cost savings, provide incentive for customers to continue taking delivery of aircraft despite cyclically weak airline traffic. If the projected production cuts are managed with sufficient lead time, both the manufacturers and the supply base should be able to adjust their cost structures in time to prevent deterioration of their credit profiles. Fitch expects LCA orders to be low in 2010 and 2011, a continuation of the trend in 2009, in which there have been only 287 net orders through November compared to 867 deliveries during the same period. There were 142 cancellations through November, and Boeing has indicated that it had approximately 215 deferrals in the first three quarters. Low orders are not a credit concern given that Boeing and Airbus had a combined backlog of 6,849 aircraft at the end of November, equal to more than seven years of production at estimated 2010 rates. Excluding 787 and A350 backlogs, the industry still has almost six years worth of orders. Boeing's 787 program will continue to be a key concern for the LCA sector and its supply base in 2010. If Boeing meets its current schedule, Fitch estimates the company could deliver 10-15 787s in late 2010, but there is considerable risk to the schedule, including an aggressive flight testing program, certification, and the production ramp-up. Boeing will be building 787s through the flight testing program, exposing the company to the risk of reworking some aircraft if problems are discovered during the flight tests. Uncertainty over customer penalties and supplier claims add to the 787s risks. Through November, the 787 accounted for the bulk of Boeing's order cancellations (83 out of 111), although the company still has 840 firm orders for the aircraft. -- Commercial Aftermarket/Services: The commercial aftermarket will likely be the first part of the aerospace industry to recover from the downturn. Fitch forecasts aftermarket spending will be flat to up 5% in 2010, with a weak first half offset by an improved second half. The expected economic rebound should drive airline traffic growth and eventually will lead to rising flight hours and capacity, which are the primary drivers of aftermarket spending. Some inventory rebuilding and completion of deferred maintenance should also help the aftermarket recover in 2010. Business jet utilization has also been improving off of a low base, which will aid aftermarket spending in that sector. Fitch's general concern for the aftermarket is that current conditions are still very weak, with many companies reporting double digit declines year-over-year in the third quarter. Some capacity metrics are still negative despite indications of increased airline traffic. Fitch will have more conviction on the outlook for this sector once capacity starts to increase. Companies with healthy exposures to this high-margin segment include Goodrich, Honeywell, Rockwell Collins, Transdigm, and United Technologies. -- The business jet market was the worst commercial aerospace sector in 2009, suffering a rapid and severe downturn. Industry deliveries fell 38% through September, and Fitch expects a 35%-40% unit decline for the year, with revenues likely down 25%-30%. An eventual peak-to-trough unit decline of 50% or more for the industry is not out of the question, and Fitch expects aircraft deliveries to fall another 5%-10% in 2010 from 2009 levels. The large unit declines result from hundreds of order cancellations and the failure of light jet manufacturer Eclipse Aviation. Although utilization rates have started to rise and corporate profits have turned up, Fitch expects continued weakness in the sector because utilization rates are still well below peak levels and the corporate profit improvement is largely due to cost cutting. This sector will continue to be volatile because of the discretionary nature of the product, the availability of numerous substitute forms of travel, and the relationship to corporate profits. A key development in the sector in the past five years has been strong orders from outside North America, and these international orders could be the catalyst for an upturn beyond 2010. Manufacturers in this sector include Bombardier, Dassault Aviation, Embraer, General Dynamics, Hawker Beechcraft, and Textron, as well as key suppliers such as Honeywell. -- The regional aircraft market (regional jets and turboprops) has many of the same drivers as the LCA market, but it has lower backlogs. Orders so far in 2009 have been weak, and the outlook for this sector is negative for 2010. Regional jets deliveries from Bombardier and Embraer will probably fall about 15% in 2009 and at least 15% in 2010, excluding possible deliveries from new entrants in the market. Fitch estimates that turboprop deliveries from Bombardier and ATR (a joint venture between EADS and Finmeccanica) will rise modestly in 2009, but they will likely decline 5% in 2010. New entrants into the regional jet market remain an important part of the sector's outlook, and in 2010 the market will likely see the initial deliveries of Sukhoi's Superjet 100 and China's ARJ21. Defense: High U.S. DoD spending levels continue to support defense sector credit quality, and the outlook is still favorable in the near term because spending in fiscal year 2010 will continue to rise. The core DoD budget should grow approximately 4% in FY2010, and modernization spending (procurement plus R&D), the most relevant part of the budget for defense contractors, should be up 2%-3%. Fitch believes that FY2010 is probably the peak in modernization spending, and there are several risks to monitor in FY2011 and beyond. These include the Obama Administration's first full budget in FY2011, the Quadrennial Defense Review, and the large projected federal budget deficits in FY2009-FY2011. In addition to spending levels, some other changes proposed by the new administration could have a detrimental impact on defense contractors, including acquisition reform and the 'insourcing' of services previously contracted out by the DoD. Fitch believes core modernization spending could decline 1%-2% in FY2011, although the overall core budget could rise. The FY2011 budget and QDR will likely continue the changes the Obama administration introduced in the current year's budget, and Fitch is not anticipating any dramatic shifts. Fitch expects supplemental spending that supports operations in Iraq and Afghanistan will fall over the next several years, but for several reasons the decline will be gradual, and the supplemental spending will not disappear. Spending related to Iraq will be down, but spending in Afghanistan will increase. Some security spending by the U.S. in Iraq will likely be replaced by Iraqi government spending, which could continue to be a source of revenues to U.S. contractors. Finally, the DoD will need to refurbish or replace some equipment and material that is in poor condition or left in Iraq. Given the strong credit metrics and liquidity at most of the leading defense contractors, ratings in the sector are unlikely to be pressured by modest declines in modernization spending. Program execution and cash deployment probably present greater risks. Defense company backlogs fell in the first three quarters of 2009 due to some program cancellations, although orders in the fourth quarter could reverse some of the decline. Liquidity and Cash Deployment: Strong liquidity and financial flexibility helped the North American A&D industry withstand the difficult economy in 2009, and the industry even improved its liquidity position in the past 12 months, although at the expense of increasing total debt to $60 billion from $55 billion. At the end of the third quarter the top 15 A&D companies rated by Fitch in North America had $35 billion in cash compared to approximately $5 billion in current debt maturities and short-term debt. The only material credit facilities set to expire in 2010 (GD, L-3, and RTN) have already been replaced. Many companies in the sector pulled back on discretionary expenditures in 2009 (share repurchases fell $10 billion, for example) in the interests of building liquidity. With stabilization appearing in some parts of the A&D sector, Fitch expects greater cash deployment in 2010. Acquisition activity began to increase in the past quarter, and Fitch expects this will continue in 2010. Share repurchases and dividend increases will likely rise as well. Higher pension contributions will be another use of cash in 2010. The A&D sector has seven of the largest 25 pension plans in corporate America, and some are significantly underfunded. The situation is mitigated for defense contractors, which get some recovery of pension costs in government contracts. Harmonization of Cost Accounting Standards and the Pension Protection Act is something to watch during 2010. In Fitch's view, Boeing will have the most significant liquidity pressures in 2010. Delays in the 787 and 747-8 programs over the past 18 months have negatively affected Boeing's credit quality because of inventory build-up, delayed advance payments, and higher development expenses. Cash flow pressures will likely persist into 2011 due to continued inventory build-up in support of initial 787 deliveries. Although free cash flow will probably be positive in 2009, Fitch believes that break-even or negative free cash flow is possible in 2010 depending on the ultimate schedule for 787 deliveries, production rates on other aircraft models, and the company's working capital management, which has been good in 2009 considering the 787 inventory pressures and reduced advances because of lower orders. Aircraft Finance: Fitch does not expect that financing availability will be a limit on aircraft deliveries in 2010, although some concerns remain in the aircraft finance business. The aircraft finance market was not as bad as feared in 2009, and Fitch expects this trend to continue because credit markets have improved and lower forecasted aircraft deliveries will mean a lower financing requirement than in 2009. Fitch projects funding requirements will be $60-$65 billion for LCA and regional aircraft in 2010, about $5 billion lower than in 2009. An additional $10-$15 billion could be needed for business jets, also down versus 2009. Concerns in the aircraft finance market include the damaged business models of some large aircraft lessors, the exit of some banks from the market, and indications that pre-delivery payment financing was difficult for some airlines in 2009. Several factors offset these concerns, including strong support from export credit agencies, the emergence of some regional financial players in the market, better capital markets activity in the past few months, and the ability of Boeing and Airbus to provide customer financing. Fitch estimates that ECAs could support approximately 25% of LCA deliveries in 2009, illustrating the benefit the industry has received from indirect government support. It looks like Boeing and Airbus will finance less than $2 billion of new aircraft in 2009, leaving the companies with the capacity to help customers in 2010 if needed. New aircraft serve as attractive lending collateral due to the mobility of the assets, operating efficiency compared to previous aircraft generations, and unique treatment in bankruptcy in some jurisdictions. The comments above apply to new aircraft financing, not refinancings of existing debt. Fitch estimates that there will be $14 billion of maturing airline debt in the U.S. alone in 2010- 2011. Economic Assumptions: Underpinning Fitch's A&D outlook is the firm's most recent global economic outlook, which as of October 2009 calls for global GDP to shrink 2.8% in 2009, followed by global growth recovery to 2% in 2010 and 2.7% in 2011. GDP should rise, but from a low base, and expansion will be weak relative to previous recoveries. There is some uncertainty in 2011 due to likely tightening of monetary and fiscal stimulus. Fitch expects GDP to grow 6.5% in the BRIC countries (Brazil, Russia, India, China) in 2010. Although global GDP looks set to return to positive growth, the absolute level of GDP is low and, in the U.S., it is possible that GDP may not return to the 2008 level until 2011. Fitch's specific A&D assumptions include no recovery in 2010 other than early cycle parts such as aftermarket. Late cycle segments such as original equipment will continue to be weak, showing some volume declines, although nowhere near as dramatic as in 2009 or in the last downturn that began in 2001. A more detailed report on the global 2010 aerospace & defense industry outlook will be available on the Fitch Ratings Web site at 'www.fitchratings.com' in January. Fitch-rated issuers and their current Issuer Default Ratings in the North American aerospace/defense sector: -- Alliant Techsystems Inc. (ATK) ('BB'; Outlook Stable); -- Boeing Company (BA) ('A+'; Outlook Negative); -- Bombardier Inc. (BBD/B) ('BB+'; Outlook Negative); -- General Dynamics Corporation (GD) ('A'; Outlook Stable); -- Goodrich Corporation (GR) ('BBB+'; Outlook Stable); -- Honeywell International Inc. (HON) ('A'; Outlook Negative); -- ITT Corporation (ITT) ('A-'; Outlook Stable) -- L-3 Communications Corporation (LLL) ('BBB-'; Outlook Stable); -- Lockheed Martin Corporation (LMT) ('A-'; Outlook Stable); -- Northrop Grumman Corporation (NOC) ('BBB+'; Outlook Stable); -- Raytheon Company (RTN) ('A-'; Outlook Stable); -- Rockwell Collins, Inc. (COL) ('A'; Outlook Stable); -- Textron Inc. (TXT) ('BB+'; Outlook Negative); -- Transdigm Group (TDG) ('B'; Outlook Stable); -- United Technologies Corporation (UTC) ('A+'; Outlook Stable). BUCKHEAD COMMUNITY: Receivership to Cue Lenders' Default Notice --------------------------------------------------------------- Buckhead Community Bancorp, Inc., disclosed in a regulatory filing that in connection with the receivership of The Buckhead Community Bank, its wholly owned commercial banking subsidiary, both the Company and the Bank expect to receive notices, from substantially all of the counterparties -- including, without limitation, lenders -- to the Company's or the Bank's material agreements, of alleged events of default under those agreements, and of those counterparties' intentions to terminate those agreements or accelerate the Company's or the Bank's performance of those agreements. The Company or the Bank may dispute certain of those notices. However, in the event of a default by the Company or the Bank under one or more of those material agreements, or in the event of the termination of one or more of the material agreements, the Company's or the Bank's financial and other obligations under such agreements may be accelerated. The Company or the Bank may be subject to penalties under those agreements and also may suffer cross-default claims from counterparties under the Company's or the Bank's other agreements. As reported by the Troubled Company Reporter, the Georgia Department of Banking and Finance on December 4, 2009, closed Buckhead Community and the Federal Deposit Insurance Corporation was named as the receiver of the Bank. The Company's principal asset is the common stock that it owns in the Bank, and, as a result of the closure of the Bank, the Company has very limited remaining tangible assets. As the owner of all of the capital stock of the Bank, the Company would be entitled to the net recoveries, if any, following the liquidation or sale of the Bank or its assets by the FDIC. However, at this time, the Company is unable to provide any assurance that any recovery will be realized by the Company or the timing of any such recovery. In connection with the closure of the Bank, the FDIC entered into a purchase and assumption agreement with State Bank and Trust Company of Macon, Georgia, pursuant to which State Bank assumed the deposits of the Bank. Accordingly, depositors of the Bank, including those with deposits in excess of the FDIC's insurance limits, will automatically become depositors of State Bank for the full amount of their deposits, and they will continue to have uninterrupted access to their deposits. Depositors 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. The Bank's seven offices reopened December 7, 2009, as branches of State Bank. However, for a period of time, customers of both banks should continue to use their existing locations until State Bank can fully integrate the deposit records of the Bank. State Bank purchased essentially all of the Bank's assets, which totaled approximately $874.0 million as of November 6, 2009, and entered into a loss-share transaction with the FDIC with respect to approximately $692 million of the Bank's assets. To date, no other entity or newly chartered bank has been involved in the process of closing and unwinding the Bank. The management teams of the Company and the Bank have been working closely with the Georgia Department, the FDIC and State Bank to make the transition as smooth as possible for the Bank's customers. The Buckhead Community Bank is the 125th FDIC-insured institution to fail in the nation this year, and the 22nd in Georgia. CANADIAN SUPERIOR ENERGY: Coughlin Stoia Files Class Suit --------------------------------------------------------- Coughlin Stoia Geller Rudman & Robbins LLP disclosed that a class action has been commenced in the United States District Court for the Southern District of New York on behalf of purchasers of the common stock of Canadian Superior Energy Inc. between January 14, 2008, and February 17, 2009, inclusive, seeking to pursue remedies under the Securities Exchange Act of 1934. Canadian Superior is not named in this action as a defendant as it sought protection under Canadian bankruptcy and reorganization laws and has since reorganized. The complaint charges certain of Canadian Superior's former executives with violations of the Exchange Act. Canadian Superior engages in the exploration for, acquisition, development, and production of petroleum and natural gas, and liquefied natural gas projects primarily in western Canada, offshore Nova Scotia, offshore Trinidad and Tobago, the United States, and North Africa. The complaint alleges that, throughout the Class Period, defendants failed to disclose material adverse facts about the Company's true financial condition, business and prospects. On August 16, 2007, Canadian Superior and Challenger Energy jointly issued a press release announcing that BG International Limited entered into a farm-in agreement and joint operating agreement with Canadian Superior to participate in the exploration drilling and development of the Intrepid Block 5(c) (the "Joint Venture"). Specifically, the complaint alleges that defendants failed to disclose: (i) that the discovered reserves for Intrepid Block 5(c) were below the economic threshold for development; (ii) that Canadian Superior had notified BG of its intention to commence a corporate sale in November 2008 so that it could overcome the financial constraints that were preventing it from meeting its funding obligations under the Joint Operating Agreement; (iii) that Canadian Superior had violated the terms of the Joint Operating Agreement with BG, thus potentially endangering its interest in the Joint Venture; (iv) that Canadian Superior failed to timely pay Maersk, the drilling operator, and potentially other contractors, thereby jeopardizing the operation of the Joint Venture; and (v) as a result of the foregoing, defendants lacked a reasonable basis for their positive statements about the Company, its prospects and earnings growth. On February 12, 2009, Canadian Superior issued a press releasing announcing the "appointment, upon the application of BG of an interim Receiver of its participating interest in Intrepid Block 5(c). Pursuant to the Court Order, the Receiver, in conjunction with BG, will operate the property and conduct the flow testing of the Endeavour well which Canadian Superior believes will validate its operations to date." In response this announcement, shares of the Company's stock fell $0.40 per share, or 44%, from a close of $0.90 per share on February 11, 2009, the last trading date before the announcement, to close at $0.50 per share, on extremely heavy trading volume. On February 17, 2009, Canadian Superior announced that it had received a demand letter from the Canadian Western Bank for repayment of all amounts outstanding under Canadian Superior's $45 million credit facility with the bank by February 23, 2009. The Company also announced that it was in discussions with alternative lenders. In response to this announcement, shares of the Company's stock fell $0.16 per share, or 30%, from a close of $0.54 per share on February 13, 2009, the last trading date before the announcement, to close at $0.38 per share, on extremely heavy trading volume. Plaintiff seeks to recover damages on behalf of all purchasers of Canadian Superior common stock during the Class Period. The plaintiff is represented by Coughlin Stoia, which has expertise in prosecuting investor class actions and extensive experience in actions involving financial fraud. Coughlin Stoia, a 190-lawyer firm with offices in San Diego, San Francisco, Los Angeles, New York, Boca Raton, Washington, D.C., Philadelphia and Atlanta, is active in major litigations pending in federal and state courts throughout the United States and has taken a leading role in many important actions on behalf of defrauded investors, consumers, and companies, as well as victims of human rights violations. The Coughlin Stoia Web site (http://www.csgrr.com)has more information about the firm. CASCADE GRAIN: Ethanol Plant Sold to JH Kelly for $15MM ------------------------------------------------------- The Bankruptcy Court approved the Chapter 7 sale of Cascade Grain's Clatskanie ethanol plant to JH Kelly LLC of Longview, Washington, for $15 million. JH Kelly, who built the Company's plant, was the only bidder for the facility. According to Bill Rochelle at Bloomberg, the sale contract calls for Kelly to pay $15 million, including a so-called credit bid as much as $11.5 million. The remainder is cash, with $3 million going to other secured creditors plus $400,000 to the bankruptcy trustee. According to Portland Business Journal, the state of Oregon has a secured claim of $20 million. Because secured claims total $120 million, the state will recover about $500,000, the report said. The book value of the plant was $177 million. Experts testified that the market value ranged between $18 million and $55 million. Cascade Grain Products LLC -- http://www.cascadegrain.com/-- is a member of a family of companies ultimately controlled by Berggruen Holdings Ltd. Cascade Grain Products has a 113.4-million gallon ethanol plant in Oregon. Cascade Grain Products filed for Chapter 11 on January 28, 2009 (Bankr. D. Ore. Case No. 09-30508). Douglas R. Pahl, Esq., at Perkins Coie LLP, represents the Debtor. The petition says that assets and debts range $100 million to $500 million. The U.S. Bankruptcy Court for the District of Oregon converted Cascade Grain's Chapter 11 reorganization case to Chapter 7 liquidation. CASCADES INC: Moody's Assigns 'Ba3' Rating on US$250 Mil. Notes --------------------------------------------------------------- Moody's Investors Service assigned a Ba3 rating to Cascades Inc.'s proposed US$250 million senior notes due 2020. The rating outlook is stable. The expected use of proceeds from the note offering is to partially fund the tender offer of Cascades 7.25% and 6.75% senior notes maturing in 2013. The new notes will be unsecured and will rank equally in right of payment with all of the company's existing senior unsecured indebtedness. The proposed notes will rank behind the company's senior secured bank facility (rated Baa3) and will be rated one notch below the corporate family rating, in accordance with Moody's loss-given-default methodology. Cascades' Ba2 corporate family rating reflects the diversity derived from its containerboard, boxboard, specialty packaging and tissue businesses, the relatively stable margins of these products, the improved financial performance of the boxboard segment, and the company's vertically integrated operations. Offsetting these strengths are the company's lack of geographic diversification, exposure to the strong Canadian dollar, volatile input costs and the company's tendency to conduct relatively small debt-financed acquisitions. The company's SGL-2 liquidity rating reflects expectations of continued positive free cash flow generation, the company's borrowing capacity under its committed bank lines, expectations of ongoing compliance with financial covenants, no significant near term debt maturities, and strong alternative liquidity potential from assets sales. The stable rating reflects Moody's expectations that the company's improved financial and operating performance will be sustained as economic conditions improve. Assignments: Issuer: Cascades Inc. -- Senior Unsecured Regular Bond/Debenture, Assigned Ba3 Moody's last rating action on Cascades was on November 18, 2009, when Moody's assigned a Ba3 rating to the company's proposed senior notes due 2016 and 2017. Headquartered in Kingsey Falls, Quebec, Cascades is a predominantly North American producer of recycled boxboard, containerboard, and specialty packaging and tissue products. CASCADES INC: S&P Assigns 'B+' Rating on US$250 Mil. Senior Notes ----------------------------------------------------------------- Standard & Poor's Ratings Services said it assigned its issue- level and recovery ratings to Cascades Inc.'s US$250 million senior unsecured notes. S&P rates the notes 'B+' (one notch below the corporate credit rating on Cascades), with a recovery rating of '5', indicating S&P's expectations of modest recovery (10%-30%) in the event of payment default. "The 'BB-' corporate credit rating on Cascades reflects what S&P view as the company's good market position in consolidated markets, a diverse revenue stream, and vertical integration," said Standard & Poor's credit analyst Jatinder Mall. These risks are partially mitigated, in S&P's opinion, by what S&P view as the company's high debt levels, recent history of lower profitability, and exposure to cyclical boxboard and containerboard prices and volumes. The stable outlook reflects recent improvement in credit metrics and S&P's expectations that Cascades' profitability will improve in the next 12 months. Standard & Poor's could lower the ratings if increasing fiber and energy costs lead to lower EBITDA generation, placing pressure on credit metrics and resulting in a leverage ratio of more than 5x. On the other hand, an upgrade would probably require Cascades to pay down debt and demonstrate its ability to sustain a leverage ratio of about 3.5x-4.0x. Ratings List Cascades Inc. Corporate credit rating BB-/Stable/-- Rating Assigned US$250 million senior unsecured notes B+ Recovery rating 5 CATHOLIC CHURCH: Wilmington Wants Withdrawals in Pooled Account --------------------------------------------------------------- The Catholic Diocese of Wilmington, Inc., asks the U.S. Bankruptcy Court for the District of Delaware to issue: (a) an interim order, pursuant to Sections 345(b), 363 and 105(a) of the Bankruptcy Code: -- authorizing certain withdrawals from a pooled investment account for the benefit of the Diocese and certain pooled investors; -- granting a further waiver of the deposit guidelines of Section 345(b) on an interim basis; and -- scheduling a final hearing on their request; and (b) a final order: -- authorizing the continued use of the pooled investment program and the processing of withdrawal requests from pooled investors in the ordinary course; -- waiving the deposit guidelines of Section 345 on a final basis; and -- authorizing the Diocese to take all actions necessary or appropriate to transfer possession of Pooled Investment Funds to one or more non-debtor fiduciaries. The request concerns a pooled investment account held by The Bank of New York Mellon, as custodian, pursuant to a custody agreement with the Diocese. The Diocese maintains the custodial account on behalf of itself and certain non-debtor parishes and other Catholic entities, which mutually benefit from the aggregation of their investment capital and the sharing of overhead and transaction costs. The Diocese processes all deposits into, and withdrawals from, the account on behalf of the pooled investors, and maintains books and records detailing each investor's sub-account balances, allocated gain or loss, and allocated costs and expenses. As of September 30, 2009, the value of the Diocese's assets in the account was approximately $44.2 million. The value of the non- debtors' assets in the account was approximately $76.2 million. James L. Patton, Jr., Esq., at Young Conaway Stargatt & Taylor, LLP, in Wilmington, Delaware, contends that it is not reasonably disputable that the Diocese has no interest in assets contributed by non-debtors to the pooled investment account. Accordingly, he says, those assets are not property of the Diocese's bankruptcy estate. However, he notes, even if the assets were property of the estate, the Diocese would be permitted to process withdrawal requests made in the ordinary course of business in accordance with the Diocese's historical practices and consistent with the practices of other diocesan "pooled investment" programs in the United States of America. Notwithstanding the fact, the Diocese did not seek relief with respect to the pooled investment account in its first-day pleadings, save for seeking an interim waiver of the deposit requirements of Section 345, Mr. Patton asserts. To alleviate any other concerns about the pooled investment program the Court or any parties-in-interest may have had, the Diocese agreed on the record of the first-day hearing in the case not to make any deposits into or withdrawals from the pooled investment account for at least 30 days absent a Court order. The voluntary freeze on the pooled investment account was a temporary solution to avoid unnecessary controversy while permitting an official committee of unsecured creditors time to get organized and to perform due diligence. The freeze, however, cannot continue indefinitely because substantially all the liquid assets and working capital of the Diocese and certain of the non- debtor pooled investors are tied up in the pooled investment account, Mr. Patton contends. He adds that continued inability to access amounts held in the pooled investment fund will prejudice these entities, their ministries, and the communities and individuals they serve. Particularly vulnerable is Catholic Charities, Inc., which provides critical social services to families and individuals in Delaware and Maryland, including residential care of severely emotionally disturbed children, residential care of pregnant or newly parenting minors and their infants, intensive outpatient mental health treatment to emotionally disturbed children and their families, routine outpatient mental health treatment and addiction counseling, residential care to homeless adults, and emergency financial assistance to individuals and families in crisis, Mr. Patton reveals. Although the Diocese would be within its rights to resume ordinary course transfers into and out of the pooled investment account following expiration of its self-imposed, 30-day moratorium, the custodian for the pooled investment account has expressed concern about permitting any transfers from the account and has indicated it may freeze the account, including any trading within the investment funds, pending further Court order, Mr. Patton tells the Court. Thus, he says, the Diocese needs at least interim relief from the Court to make certain withdrawals from the pooled investment account and to process certain withdrawal requests from non-debtor pooled investors so as to avoid undue harm. With respect to the Diocese's assets in the pooled investment account, the United States Trustee has expressed concern that the account does not comply with the requirements of Section 345. The Diocese believes the pooled investment account will yield the maximum reasonable net return on the Diocese's liquid assets, and that a final waiver of the Section 345 deposit requirements would be appropriate. Nevertheless, Mr. Patton avers, even if the Court were to determine that a final waiver is inappropriate, the Diocese is dubious that liquidating and transitioning approximately $44.2 million of diversified investments into a money market account or other 345-compliant investment vehicle could be accomplished prior to expiration of the current interim waiver. Thus, he explains, the Diocese will need a further interim waiver of the Section 345 deposit requirements to afford it time to work through these issues with the United States Trustee and the Official Committee of Unsecured Creditors. Beyond their immediate need to access their liquid assets and working capital, the non-debtor pooled investors have expressed concern that requests for withdrawals from the pooled investment account may be delayed by the bankruptcy process going forward, Mr. Patton relates. The Diocese believes the long-term solution with respect to the pooled investment account may be to transition administration from the Diocese to a non-debtor fiduciary that can provide the non- debtor pooled investors more direct access to their funds while at the same time preserving the benefits of a single, aggregated investment pool. One solution, which the Diocese had considered prepetition is to transfer the pooled investors' interests in the pooled investment account to one or more holding entities that will have a direct contractual relationship with the custodian, thus permitting non-debtors to make deposits and withdrawals without interference by the bankruptcy process and without implicating the Diocese's cash management system. Obviously, Mr. Patton notes, the long-term solution will require input from the U.S. Trustee and the Creditors Committee, among others. Accordingly, the Dioceses seek relief in two stages: (a) interim relief that will alleviate the immediate concerns of the Diocese, the non-debtor pooled investors, and the custodian by permitting limited transactions pending a hearing on full notice to all parties-in-interest; and (b) final relief including a permanent Section 345 waiver, authorization to process deposits and withdrawal requests of non-debtors, and authorization to take actions necessary and appropriate to allow the administration of the pooled investment program to be transitioned to a non-debtor fiduciary. Catholic Charities, Inc., Siena Hall, Inc., Children's Home, Inc., Seton Villa, Inc., Catholic Cemeteries, Inc., Diocese of Wilmington Schools, Incorporated, and the Catholic Diocese Foundation join in and support the Diocese's request. Creditors Object The Official Committee of Unsecured Creditors, Jacobs & Crumplar, P.A., and The Neuberger Firm, P.A., which firms represent many unsecured creditors asserting a personal injury claim against the Diocese, and the Bank of New York Mellon separately filed objections against the request. The Creditors Committee argues that the relief sought concerns the primary monetary issue in the bankruptcy case -- which is what assets are available to satisfy the claims of abuse victims. The Creditors Committee and the two firms contend that if the Court permits the proposed withdrawal, the economic heart of the case would be destroyed. The Bank of New York asks for certain languages for addition to the proposed form of order of the request, including its release from liability for processing any withdrawal requests from the Diocese. * * * The Court granted the request on an interim basis, following a shortened notice period. Prior to the entry of the interim order, the Official Committee of Unsecured Creditors asked the Court to reconsider the shortened notice period with respect to the request. The Creditors Committee asserted that its professionals cannot meaningfully review and analyze the thousands of pages of documents that have now been made available by the Diocese relating to the request. Jacobs & Crumplar, P.A., and The Neuberger Firm, P.A., join in the Creditors Committee's request for reconsideration. Catholic Charities, et al., objected to the Creditors Committee's request. Subject to the terms of the Custody Agreement, Judge Sontchi authorized the Diocese to make withdrawals from the pooled investment account and to process withdrawal requests of non- debtor pooled investors without further Court order, up to these applicable amounts: Pooled Investor Aggregate Cap --------------- ------------- Diocese $5,400,000 Charities 214,038 Foundation 150,000 Cemeteries 75,000 Siena Hall 34,266 Children's Home 31,656 Seton Villa 25,040 Catholic Youth - DOW Schools - Parish Corporations - Judge Sontchi also authorized the Diocese to continue to invest and deposit funds into the pooled investment account in accordance with its prepetition practices, without the need for a bond or other collateral as required by Section 345(b), and the entities with which the Diocese's pooled investment funds are deposited and invested will be excused from full compliance with the requirements of Section 345(b) until 45 days following the docketing of a final order directing compliance with Section 345(b) as to specific accounts following the second interim hearing on the relief requested. The request's second interim hearing is currently set for January 4, 2010. About the Diocese of Wilmington The Diocese of Wilmington covers Delaware and the Eastern Shore of Maryland and serves about 230,000 Catholics. The Delaware diocese is the seventh Roman Catholic diocese to file for Chapter 11 protection to deal with lawsuits for sexual abuse. Previous filings were by the dioceses in Spokane, Washington; Portland, Oregon; Tucson, Arizona; Davenport, Iowa, Fairbanks, Alaska; and San Diego, California. The bankruptcy filing automatically stayed eight consecutive abuse trials scheduled in Delaware scheduled to begin October 19. There are 131 cases filed against the Diocese, with 30 scheduled for trial. The Diocese filed for Chapter 11 on Oct. 18, 2009 (Bankr. D. Del. Case No. 09-13560). Attorneys at Young Conaway Stargatt & Taylor, LLP, serve as counsel to the Diocese. The Ramaekers Group, LLC is the financial advisor. The petition says assets range $50,000,001 to $100,000,000 while debts are between $100,000,001 to $500,000,000. (Catholic Church Bankruptcy News; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000). CATHOLIC CHURCH: Wilmington's Schedules and Statement ----------------------------------------------------- A. Real Property St. Thomas More Oratory $313,195 Office building 243,535 Donated personal residence 207,500 Others 342,411 B. Personal Property B.1 Cash on Hand 1,165 B.2 Bank Accounts Operating Account 778,523 Others 165,225 B.3 Security Deposits - B.4 Household goods 6,000 B.5 Book, artwork and collectibles 2,000 B.6 Wearing apparel - B.7 Furs and jewelry Unknown B.8 Firearms and other equipment - B.9 Insurance Policies - B.10 Annuities - B.11 Interests in an education IRA - B.12 Interests in pension plans 401(k) Plan - B.13 Stock and Interests 15,274,875 B.14 Interests in partnerships/joint ventures B.15 Government and corporate bonds - B.16 Accounts Receivable 2,034,917 B.17 Alimony - B.18 Other Liquidated Debts Owing Debtor - B.19 Equitable or future interests - B.20 Interests in estate death benefit plan Undetermined B.21 Other Contingent and Unliquidated Claims B.22 Patents, copyrights, and others - B.23 Licenses, franchises & other intangibles - B.24 Customer lists or other compilations - B.25 Vehicles 50,600 B.26 Boats, motors and accessories - B.27 Aircraft and accessories - B.28 Office Equipment, furnishings & supplies 37,345 B.29 Equipment and Supplies for Business - B.30 Inventory - B.31 Animals - B.32 Crops - B.33 Farming equipment and implements - B.34 Farm supplies, chemicals, and feed - B.35 Other Personal Property - TOTAL SCHEDULED ASSETS $19,457,294 ========================================================== C. Property Claimed None D. Creditors Holding Secured Claims $0 E. Creditors Holding Unsecured Priority Claims 0 F. Creditors Holding Unsecured Nonpriority Claims CDOW Lay Pensioners 64,366,743 CDOW Priest Pensioners 14,465,156 Others 11,219,936 TOTAL SCHEDULED LIABILITIES $90,051,835 ========================================================== Statement of Financial Affairs Joseph P. Corsini, chief financial officer and treasurer of the Catholic Diocese of Wilmington, Inc., discloses that the Diocese earned income from assessments and annual appeal during the two years immediately preceding 2009: Date Total Amount ---- ------------ Fiscal Year Ended $3,869,750 2009 Assessments Fiscal Year Ended 3,810,000 2008 Assessments Fiscal Year Ended 3,846,175 2009 Annual Appeal Fiscal Year Ended 3,856,502 2008 Annual Appeal Within the 90 days immediately preceding the Petition Date, the Diocese paid certain vendors and professionals, Mr. Corsini says. Among the largest creditors, whom the Diocese paid within 90 days before the Petition Date, are: Creditor Date Paid Amount -------- --------- ------ Young Conaway Stargatt 08/25/09 $557,181 & Taylor LLP Waldorf & Associates 08/27/09 421,323 Young Conaway Stargatt 10/16/09 400,000 & Taylor LLP Young Conaway Stargatt 09/17/09 386,825 & Taylor LLP The Diocese also paid certain creditors, who are insiders, within a year prior to the Petition Date: Creditor Date Paid Amount -------- --------- ------ Joseph P. Corsini Various $156,517 Rev. W. Francis Malooly Various 67,999 Mgsr. Joseph F. Rebman Various 940 Mgsr. J. Thomas Cini Various 473 The Diocese discloses that it is a party to a number of lawsuits before the Superior Court of the State of Delaware within a year before the commencement of its bankruptcy case. A list of proceedings against the Diocese is available for free at http://bankrupt.com/misc/Wilmington_List_PendingLawsuits.pdf The Diocese made gifts or charitable contributions to certain parishes and missions within one year immediately preceding the Petition Date. A list of gifts and contributions made is available for free at: http://bankrupt.com/misc/Wilmington_Gifts_Contributions_Made.pdf During the past 12 months, in the ordinary course of business, Mr. Corsini relates that the Diocese paid two professionals, who provided services relating to debt counseling and bankruptcy preparation: (i) Young Conaway Stargatt & Taylor LLP for $304,451, and (ii) The Raemakers Group, LLC, for $171,404. Mr. Corsini further reveals that the Diocese holds or controls these properties for another person or entity: Name of Owner Description Value ------------- ----------- ----- Various parishes and Non-Debtor Pooled $76,226,331 other affiliated Investment Assets Catholic corporations Catholic Diocese of Restricted Pooled 28,900,850 Wilmington, Inc. Investment Assets Catholic Diocese of Other Restricted 136,490 Wilmington, Inc. Assets Rule 2015.3 Report The Catholic Diocese of Wilmington, Inc., filed with the U.S. Bankruptcy Court for the District of Delaware a report on the value, operations and profitability of those entities in which the bankruptcy estate holds a substantial or controlling interest, as required by Rule 2015.3 of the Federal Rules of Bankruptcy Procedure. Reverend Monsignor J. Thomas Cini, the Diocese's secretary and vicar general of administration, discloses that the Diocese's bankruptcy estate holds a 100% beneficial ownership in each of three Delaware statutory trusts: (1) Catholic Diocese of Wilmington Fund; (2) Catholic Diocese of Wilmington Affiliates Fund; and (3) Catholic Diocese of Wilmington Parish Fund. The prepetition Trusts were established for purposes of holding certain pooled investment funds, Mr. Cini says. He adds that the Trusts have no assets and do not carry on any business operations. About the Diocese of Wilmington The Diocese of Wilmington covers Delaware and the Eastern Shore of Maryland and serves about 230,000 Catholics. The Delaware diocese is the seventh Roman Catholic diocese to file for Chapter 11 protection to deal with lawsuits for sexual abuse. Previous filings were by the dioceses in Spokane, Washington; Portland, Oregon; Tucson, Arizona; Davenport, Iowa, Fairbanks, Alaska; and San Diego, California. The bankruptcy filing automatically stayed eight consecutive abuse trials scheduled in Delaware scheduled to begin October 19. There are 131 cases filed against the Diocese, with 30 scheduled for trial. The Diocese filed for Chapter 11 on Oct. 18, 2009 (Bankr. D. Del. Case No. 09-13560). Attorneys at Young Conaway Stargatt & Taylor, LLP, serve as counsel to the Diocese. The Ramaekers Group, LLC is the financial advisor. The petition says assets range $50,000,001 to $100,000,000 while debts are between $100,000,001 to $500,000,000. (Catholic Church Bankruptcy News; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000). CATHOLIC CHURCH: Judge Perris Closes Portland's Bankruptcy Case --------------------------------------------------------------- Judge Elizabeth L. Perris ruled that the Archdiocese's Chapter 11 case is closed effective December 16, 2009, unless, on or before December 15, an interested party files an objection to the closing. To recall, the bankruptcy case of the Archdiocese of Portland in Oregon was reopened on February 15, 2009, for the limited purpose of resolving Erin K. Olson's request to unseal Docket Nos. 4765 and 4766, and the Archdiocese's request to appoint a special master and alternative request to defer protective order issue pending outcome of arbitration, and request to preserve confidentiality. On July 13, 2009, those requests were resolved by the Bankruptcy Court's entry of its order lifting protective order, lifting the seal on filed documents, and authorizing the release of deposition transcripts. Father M. and Father D. subsequently filed a notice of appeal of the Lift Order, and also a request to extend time for filing notice of appeal. On August 11, 2009, the Bankruptcy Court entered its order allowing request to extend. The appeal is currently pending in the United States District Court for the District of Oregon. On November 20, 2009, the record on appeal was transmitted to the District Court, and no further proceedings in the bankruptcy case are either necessary or required, the Court held. About Archdiocese of Portland The Archdiocese of Portland in Oregon filed for Chapter 11 protection (Bankr. Ore. Case No. 04-37154) on July 6, 2004. Thomas W. Stilley, Esq., and William N. Stiles, Esq., at Sussman Shank LLP, represent the Portland Archdiocese in its restructuring efforts. Albert N. Kennedy, Esq., at Tonkon Torp, LLP, represents the Official Tort Claimants Committee in Portland, and scores of abuse victims are represented by other lawyers. David A. Foraker serves as the Future Claimants Representative appointed in the Archdiocese of Portland's Chapter 11 case. In its Schedules of Assets and Liabilities filed with the Court on July 30, 2004, the Portland Archdiocese reports $19,251,558 in assets and $373,015,566 in liabilities. The Court approved the Debtor's disclosure statement explaining its Second Amended Joint Plan of Reorganization on February 27, 2007. (Catholic Church Bankruptcy News; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000). CCS MEDICAL: Goes to Auction as Judge Nixes Prepacked Plan ---------------------------------------------------------- CCS Medical Inc. will conduct an auction for its assets on February 15 after its prepackaged Chapter 11 plan failed to win confirmation from the Bankruptcy Court. CCS Medical negotiated a plan before the Chapter 11 filing in July that would have converted $350 million of first-lien debt into all of the new stock and $200 million in new notes. The projected recovery on the first-lien claims was between 66% and 82%. Second lien-lenders and other lower ranked creditors won't receive anything. According to Bill Rochelle at Bloomberg News, the holders of $110 million in second-lien debt persuaded the bankruptcy judge not to approve the plan during confirmation hearings in October. The judge decided that the company had failed to prove the Company was worth less than $350 million, and thereby justifying wiping out all creditors aside from the first-lien lenders. The report relates that at the confirmation hearings, the Company's expert said the business was worth no more than $286 million, according to a court filing by CCS. The expert for the second-lien creditors estimated the value was as high as $500 million. To resolve the question of what the company is worth, CCS prevailed on the judge to set up auction and sale procedures. The bidding procedures, among other things, provide that interested parties are required to submit a letter of intent on or before January 11, 2010, at 11:59 p.m. (EST). The deadline for qualified parties to submit qualifying bids is February 8, 2010 at 4:00 p.m. (EST). If qualifying bids are received, an auction will take place on February 15, 2010, at the offices of the Company's legal counsel Willkie Farr & Gallagher LLP in New York. A hearing to approve the sale would then occur on February 17, 2010, which the Company expects would allow for a conclusion of its restructuring within the following weeks. About CCS Medical Founded in 1994, CCS Medical Inc. -- http://www.ccsmed.com/-- has become a leading provider of medical supplies. CCS Medical assists patients that need diabetes test strips, insulin pumps, urological supplies, ostomy supplies, advanced wound care dressings and prescription drugs. Clear Water, Florida-based CCS Medical specializes in providing a convenient way for patients to receive supplies for their chronic illnesses in a manner that saves them time and money. CCS Medical, along with its affiliates, filed for Chapter 11 on July 8, 2009 (Bankr. D. Del. Case No. 09-12390). At the time of the filing, CCS Medical said that it had assets of $100 million to $500 million against debts of $500 million to $1 billion. Attorneys at Young Conaway Stargatt & Taylor, LLP, represent the Debtors. Willkie Farr & Gallagher LLP serves as co-counsel to the Debtors. Goldman, Sachs & Co., serves as investment banker and Alvarez & Marsal Healthcare Industry Group, LLC, as restructuring advisor. Epiq Bankruptcy Solutions LLC is claims agent. CEDAR FUNDING: Attorney Wants Trustee Fees' Deferred ---------------------------------------------------- Cecily Dumas, attorney of trustee Todd Neilson in the bankruptcy proceeding of Cedar Funding, requested an indefinite delay of Mr. Neilson's plea for $1.7 million professional fees because the estate doesn't have enough unrestricted assets at present, says Larry Parsons, staff writer at Monterey County The Herald. Monterey, California-based Cedar Funding Inc. -- http://www.cedarfundinginc.com/-- was a mortgage lender. It filed a Chapter 11 petition on May 26, 2008 (Bankr. N.D. Calif. Case No. 08-52709). Judge Marilyn Morgan presides over the case. Cecily A. Dumas, Esq., at Friedman, Dumas and Springwater, in San Francisco, represents the Debtor, and R. Todd Neilson serves as the Chapter 11 Trustee. Cedar Funding, Inc., accepted many millions of dollars from hundreds of individuals who believed they were acquiring fractional interests in loans that were secured by real property. Many more invested with CFI through a related entity, Cedar Funding Mortgage Fund LLP, that acquired fractional interests in the name of the Fund. CFI failed to record assignments of its deeds of trust that would have provided security interests to most of its investors, including the Fund. The Debtor estimated assets of less than $50,000 and debts of $100 million to $500 million in its Chapter 11 petition. CHRYSLER LLC: Treasury Admits May Not Get Full Investment --------------------------------------------------------- Dow Jones Newswires' Meena Thiruvengadam reports that U.S. Treasury Secretary Timothy Geithner this week told the Congressional Oversight Panel, one of several entities overseeing the Troubled Asset Relief Program, there is a significant likelihood "we will not be repaid for the full value of our investments in AIG, GM, and Chrysler." Dow Jones notes the Treasury in fiscal year 2009 alone estimated its losses on capital provided to those firms to be near $61 billion. According to a report released by the Government Accountability Office -- and reported by the Troubled Company Reporter on November 10, 2009 -- the Treasury provided $81.1 billion aid to the U.S. auto industry, of which $62 billion was provided to Chrysler Group and GM to help the auto makers in their restructuring. In return, the government agency received 9.85% equity in Chrysler, 60.8% equity and $2.1 billion in preferred stock in GM, and $13.8 billion in debt obligations between the auto makers. GAO estimated that the equity value of Chrysler Group necessary to recoup investment must be $54.8 billion while GM would need to be worth $66.9 billion. The agency also assumed that $5.4 billion that was lent to Chrysler and $986 million to GM would not be repaid. "Treasury is unlikely to recover the entirety of its investment in Chrysler or GM, given that the companies' values would have to grow substantially above what they have been in the past," GAO said in its 41-page report. In September 2008, AIG experienced a liquidity crunch when its credit ratings were downgraded below "AA" levels by Standard & Poor's, Moody's Investors Service and Fitch Ratings. On September 16, 2008, the Federal Reserve Bank created an $85 billion credit facility to enable AIG to meet increased collateral obligations consequent to the ratings downgrade, in exchange for the issuance of a stock warrant to the Fed for 79.9% of the equity of AIG. The credit facility was eventually increased to as much as $182.5 billion. AIG has sold a number of its subsidiaries and other assets to pay down loans received from the U.S. government, and continues to seek buyers of its assets. According to Dow Jones' Darrell A. Hughes and Ms. Thiruvengadam, Mr. Geithner said in letters to U.S. lawmakers, the Obama administration would extend the $700 billion financial-sector bailout from its scheduled Dec. 31 expiration but limit new spending to such areas as housing and small business. The report relates Mr. Geithner said the financial sector has stabilized, but the government needs to have funds available through next October. those aimed at job creation. The report notes that President Barack Obama on Tuesday said the White House would use an additional $50 billion in TARP funds to help small businesses get credit. "While we are extending the $700 billion program, we do not expect to deploy more than $550 billion," Mr. Geithner said, Dow Jones reports. He added the U.S. would seek to exit its TARP investments "as soon as practicable." About AIG Based in New York, American International Group, Inc., is the leading international insurance organization with operation in more than 130 countries and jurisdictions. AIG companies serve commercial, institutional and individual customers through the most extensive worldwide property-casualty and life insurance networks of any insurer. In addition, AIG companies are leading providers of retirement services, financial services and asset management around the world. AIG's common stock is listed on the New York Stock Exchange, as well as the stock exchanges in Ireland and Tokyo. About Chrysler Group LLC Headquartered in Auburn Hills, Michigan, Chrysler Group LLC, formed in 2009 from a global strategic alliance with Fiat Group, produces Chrysler, Jeep, Ram, Dodge, Mopar and Global Electric Motorcars (GEM) brand vehicles and products. Chrysler LLC and 24 affiliates on April 30 sought Chapter 11 protection from creditors (Bankr. S.D.N.Y (Mega-case), Lead Case No. 09-50002). Chrysler hired Jones Day, as lead counsel; Togut Segal & Segal LLP, as conflicts counsel; Capstone Advisory Group LLC, and Greenhill & Co. LLC, for financial advisory services; and Epiq Bankruptcy Solutions LLC, as its claims agent. Chrysler has changed its corporate name to Old CarCo following its sale to a Fiat-owned company. As of December 31, 2008, Chrysler had $39,336,000,000 in assets and $55,233,000,000 in debts. Chrysler had $1.9 billion in cash at that time. In connection with the bankruptcy filing, Chrysler reached an agreement with Fiat SpA, the U.S. and Canadian governments and other key constituents regarding a transaction under Section 363 of the Bankruptcy Code that would effect an alliance between Chrysler and Italian automobile manufacturer Fiat. Under the terms approved by the Bankruptcy Court, the company formerly known as Chrysler LLC on June 10, 2009, formally sold substantially all of its assets, without certain debts and liabilities, to a new company that will operate as Chrysler Group LLC. Fiat has a 20 percent equity interest in Chrysler Group. Bankruptcy Creditors' Service, Inc., publishes Chrysler Bankruptcy News. The newsletter tracks the Chapter 11 proceedings of Chrysler LLC and its debtor-affiliates. (http://bankrupt.com/newsstand/or 215/945-7000) About General Motors General Motors Company -- http://www.gm.com/-- is one of the world's largest automakers, tracing its roots back to 1908. With its global headquarters in Detroit, GM employs 209,000 people in every major region of the world and does business in some 140 countries. GM and its strategic partners produce cars and trucks in 34 countries, and sell and service these vehicles through these brands: Buick, Cadillac, Chevrolet, GMC, GM Daewoo, Holden, Opel, Vauxhall and Wuling. GM's largest national market is the United States, followed by China, Brazil, the United Kingdom, Canada, Russia and Germany. GM's OnStar subsidiary is the industry leader in vehicle safety, security and information services. GM acquired its operations from General Motors Company, n/k/a Motors Liquidation Company, on July 10, 2009, pursuant to a sale under Section 363 of the Bankruptcy Code. Motors Liquidation or Old GM is the subject of a pending Chapter 11 reorganization case before the U.S. Bankruptcy Court for the Southern District of New York. At September 30, 2009, GM had $107.45 billion in total assets against $135.60 billion in total liabilities. About Motors Liquidation General Motors Corporation and three of its affiliates filed for Chapter 11 protection on June 1, 2009 (Bankr. S.D.N.Y. Lead Case No. 09-50026). General Motors changed its name to Motors Liquidation Co. following the sale of its key assets to a company 60.8% owned by the U.S. Government. The Honorable Robert E. Gerber presides over the Chapter 11 cases. Harvey R. Miller, Esq., Stephen Karotkin, Esq., and Joseph H. Smolinsky, Esq., at Weil, Gotshal & Manges LLP, assist the Debtors in their restructuring efforts. Al Koch at AP Services, LLC, an affiliate of AlixPartners, LLP, serves as the Chief Executive Officer for Motors Liquidation Company. GM is also represented by Jenner & Block LLP and Honigman Miller Schwartz and Cohn LLP as counsel. Cravath, Swaine, & Moore LLP is providing legal advice to the GM Board of Directors. GM's financial advisors are Morgan Stanley, Evercore Partners and the Blackstone Group LLP. Bankruptcy Creditors' Service, Inc., publishes General Motors Bankruptcy News. The newsletter tracks the Chapter 11 proceeding undertaken by General Motors Corp. and its various affiliates. (http://bankrupt.com/newsstand/or 215/945-7000) CIB MARINE: To Hold Teleconference for Shareholders December 18 --------------------------------------------------------------- CIB Marine Bancshares Inc. will hold on Dec. 18, 2009, at 11:00 a.m., an informational teleconference for its shareholders to provide a general update on the status of the Company and the bank, as well as discuss the current status of its efforts to restructure its debt and plans. Joseph P. Hickey, Jr., president and chief executive of the company, said the company was unable to hold an annual shareholder meeting this year due to the timing of the plan of reorganization. Mr. Hickey noted that the company will need to wait until its 2009 annual report on Form 10-K as been filed with the Securities and Exchange Commission before it can schedule it next annual meeting of shareholders, which it expect to hold in late spring of next year. CIB Marine Bancshares, Inc. (PINKSHEETS: CIBH) -- http://www.cibmarine.com/-- is a one-bank holding company with 17 banking offices in central Illinois, Wisconsin, Indiana, and Arizona. CIB Marine Bancshares is asking holders of its trust preferred securities to give advance approval of a pre-packaged plan of reorganization under Chapter 11 of the Bankruptcy Code that would involve conversion of their debt securities to preferred stock. Under the Plan of Reorganization, roughly $105.3 million of high- interest cumulative indebtedness would be exchanged for 55,624 shares of Series A 7% fixed rate perpetual noncumulative preferred stock with a stated value of $1,000 per share and 4,376 shares of Series B 7% fixed rate convertible perpetual preferred stock with a stated value of $1,000 per share. Each share of CIB Marine's Series B Preferred would be convertible into 4,000 shares of the Company's common stock only upon the consummation of a merger transaction involving the company. The Company Preferred would have no stated redemption date and holders could never force the Company to redeem it. According to the Troubled Company Reporter on Nov. 2, 2009, CIB Marine Bancshares, Inc. disclosed that the federal bankruptcy court has confirmed the company's pre-packaged plan of reorganization under Chapter 11 of the United States Bankruptcy Code. CIT GROUP: Nancy Foster to Leave Exec. VP Post December 31 ---------------------------------------------------------- In a regulatory filing with the Securities and Exchange Commission, CIT Group, Inc., disclosed that on December 1, 2009, Nancy J. Foster notified the Company that she was resigning as Executive Vice President and Chief Credit & Risk Officer at the Company effective December 31. Ms. Foster is working with the Company to facilitate a transition of her responsibilities and plans to start her own consulting practice based in New York, according to CIT Senior Vice President and Chief Compliance Officer James P. Shanahan. About CIT Group CIT Group Inc. (NYSE: CIT) -- http://www.cit.com/-- is a bank holding company with more than $60 billion in finance and leasing assets that provides financial products and advisory services to small and middle market businesses. Operating in more than 50 countries across 30 industries, CIT provides an unparalleled combination of relationship, intellectual and financial capital to its customers worldwide. CIT maintains leadership positions in small business and middle market lending, retail finance, aerospace, equipment and rail leasing, and vendor finance. Founded in 1908 and headquartered in New York City, CIT is a member of the Fortune 500. CIT Group Inc. and affiliate CIT Group Funding Company of Delaware LLC announced a Chapter 11 filing on November 1, 2009 (Bankr. S.D.N.Y. Case No. 09-16565). Evercore Partners, Morgan Stanley and FTI Consulting are the Company's financial advisors and Skadden, Arps, Slate, Meagher & Flom LLP is legal counsel in connection with the restructuring plan. Sullivan & Cromwell is legal advisor to CIT's Board of Directors. CIT Group on November 1 announced that, with the overwhelming support of its debtholders, the Board of Directors voted to proceed with the prepackaged plan of reorganization for CIT Group Inc. and a subsidiary that will restructure the Company's debt and streamline its capital structure. None of CIT's operating subsidiaries, including CIT Bank, a Utah state bank, were ncluded in the filings. At September 30, 2009, CIT Group had $69,188,600,000 in total assets against $64,067,700,000. As of June 30, 2009, CIT Group had total assets of $71,019,200,000 against total debts of $64,901,200,000. Bankruptcy Creditors' Service, Inc., publishes CIT Group Bankruptcy News. The newsletter tracks the Chapter 11 proceedings of CIT Group Inc. (http://bankrupt.com/newsstand/or 215/945- 7000) CIT GROUP: Proposes FTI Consulting as Financial Advisors -------------------------------------------------------- CIT Group Inc. and seeks the Court's authority to employ FTI Consulting, Inc., as financial advisors, nunc pro tunc to the Petition Date. Eric Mandelbaum, senior vice president and deputy general counsel at CIT, relates that since July 2009, FTI has provided financial advisory to the Company and is therefore ideally positioned to serve as their financial advisors because of the institutional knowledge it has developed regarding the Debtors' finance, operations and systems. Moreover, FTI enjoys a wealth of experience and excellent reputation for services in large and complex Chapter 11 cases. As the Debtors' financial advisor, FTI will assist in areas of reporting and communications, claims, operations and liquidity and other restructuring services. Pursuant to an Engagement Agreement, FTI will specifically provide: (a) assistance to the Debtors in the preparation of financial related disclosures, including the Schedules of Assets and Liabilities, the Statement of Financial Affairs and Monthly Operating Reports; (b) assistance with the development and implementation of a supplier communication center; (c) assistance in the preparation of financial information for distribution to creditors and others, including, but not limited to, cash flow projections and budgets, cash receipts and disbursement analysis, analysis of various asset and liability accounts, and analysis of proposed transactions for which Court approval is sought; (d) assistance with the identification of executory contracts and leases and performance of cost and benefit evaluations with respect to the affirmation or rejection of each; (e) analysis of creditor claims by type, entity and individual claim, including assistance with development of databases, as necessary, to track those claims; (f) assistance in the evaluation and analysis of avoidance actions, including fraudulent conveyances and preferential transfers; (g) litigation advisory services with respect to accounting and tax matters, along with expert witness testimony on case-related issues as required by the Debtors; (h) assistance regarding the Company's ongoing operations, including identification of areas of potential cost savings, including overhead and operating expense reductions and efficiency improvements; (i) assistance with the identification and implementation of short-term cash management procedures; (j) assistance and advice to the Debtors with respect to the identification of core business assets and the disposition of assets or liquidation of unprofitable operations; (k) assistance with assessing the liquidity impact of transferring various platforms into the bank; (l) services to support the efficient transition of control from the existing Board of Directors to the newly constituted Board of Directors; (m) assistance in the preparation of information and analysis necessary for the confirmation of the Plan; (n) advisory assistance in connection with the development and implementation of key employee incentive and other critical employee benefit programs; and (o) render other general business consulting or other assistance as Debtors' management or counsel may deem necessary that are consistent with the role of a financial advisor and not duplicative of services provided by other professionals in the Chapter 11 cases. The Debtors will pay FTI's professionals in accordance with these hourly rates: Professional Hourly Rate ------------ ----------- Senior Managing Director $710-$825 Directors/Managing Directors $520-$685 Consultant/Senior Consultants $255-$480 Administrative/Paraprofessionals $105-$210 The Debtors will also reimburse FTI for its necessary out-of- pocket expenses. At the conclusion of FTI's engagement, the Debtors will consider, in their sole discretion, an Incentive Fee based upon FTI's contribution to the successful restructuring of the Debtors. "CIT Group Inc. and FTI have not yet finalized an agreement on the terms and conditions of this Incentive Fee, but pursuant to a letter agreement dated October 31, 2009, they have agreed to do so by December 31, 2009," Mr. Mandelbaum specified. Robert J. Duffy, senior managing consultant at FTI, related that during the 90-day period prior to the Petition Date, his firm received $5,004,965 from the Debtors for prepetition professional services performed and expenses incurred. Furthermore, FTI's current estimate is that it has received unapplied advance payments from the Debtors in excess of prepetition billings in the amount of $2,000,000. As agreed between the Debtors and FTI, the Advanced Payment will not be used compensate FTI for its prepetition services and expenses, which (i) will be held and applied against its final postpetition billing, and (ii) will not be placed in a separate account. Mr. Duffy assures Judge Gropper that FTI is a "disinterested person" as that term is defined in Section 101(14) of the Bankruptcy Code, as modified by Section 1107(b). About CIT Group CIT Group Inc. (NYSE: CIT) -- http://www.cit.com/-- is a bank holding company with more than $60 billion in finance and leasing assets that provides financial products and advisory services to small and middle market businesses. Operating in more than 50 countries across 30 industries, CIT provides an unparalleled combination of relationship, intellectual and financial capital to its customers worldwide. CIT maintains leadership positions in small business and middle market lending, retail finance, aerospace, equipment and rail leasing, and vendor finance. Founded in 1908 and headquartered in New York City, CIT is a member of the Fortune 500. CIT Group Inc. and affiliate CIT Group Funding Company of Delaware LLC announced a Chapter 11 filing on November 1, 2009 (Bankr. S.D.N.Y. Case No. 09-16565). Evercore Partners, Morgan Stanley and FTI Consulting are the Company's financial advisors and Skadden, Arps, Slate, Meagher & Flom LLP is legal counsel in connection with the restructuring plan. Sullivan & Cromwell is legal advisor to CIT's Board of Directors. CIT Group on November 1 announced that, with the overwhelming support of its debtholders, the Board of Directors voted to proceed with the prepackaged plan of reorganization for CIT Group Inc. and a subsidiary that will restructure the Company's debt and streamline its capital structure. None of CIT's operating subsidiaries, including CIT Bank, a Utah state bank, were ncluded in the filings. At September 30, 2009, CIT Group had $69,188,600,000 in total assets against $64,067,700,000. As of June 30, 2009, CIT Group had total assets of $71,019,200,000 against total debts of $64,901,200,000. Bankruptcy Creditors' Service, Inc., publishes CIT Group Bankruptcy News. The newsletter tracks the Chapter 11 proceedings of CIT Group Inc. (http://bankrupt.com/newsstand/or 215/945-7000) CIT GROUP: Emerges from Bankruptcy; Shares Start Trading on NYSE ---------------------------------------------------------------- CIT Group Inc. on Thursday confirmed it has emerged from bankruptcy having satisfied all of the conditions required to consummate the prepackaged Plan of Reorganization. The distribution of CIT's new debt and equity securities has taken place in accordance with the Company's confirmed Plan and the new common stock has commenced trading on the New York Stock Exchange under the symbol "CIT." Additional information can be found in the Investor Relations section of the Company's Web site, http://www.cit.com/or by calling the Restructuring Information Line at 866-967-1786 (toll- free) or 310-751-2686. CIT Group Inc. (NYSE: CIT) -- http://www.cit.com/-- is a bank holding company with more than $60 billion in finance and leasing assets that provides financial products and advisory services to small and middle market businesses. Operating in more than 50 countries across 30 industries, CIT provides an unparalleled combination of relationship, intellectual and financial capital to its customers worldwide. CIT maintains leadership positions in small business and middle market lending, retail finance, aerospace, equipment and rail leasing, and vendor finance. Founded in 1908 and headquartered in New York City, CIT is a member of the Fortune 500. CIT Group Inc. and affiliate CIT Group Funding Company of Delaware LLC announced a Chapter 11 filing on November 1, 2009 (Bankr. S.D.N.Y. Case No. 09-16565). Evercore Partners, Morgan Stanley and FTI Consulting are the Company's financial advisors and Skadden, Arps, Slate, Meagher & Flom LLP is legal counsel in connection with the restructuring plan. Sullivan & Cromwell is legal advisor to CIT's Board of Directors. CIT Group on November 1 announced that, with the overwhelming support of its debtholders, the Board of Directors voted to proceed with the prepackaged plan of reorganization for CIT Group Inc. and a subsidiary that will restructure the Company's debt and streamline its capital structure. None of CIT's operating subsidiaries, including CIT Bank, a Utah state bank, were included in the filings. On December 8, the Court confirmed the Debtors' prepackaged plan. At September 30, 2009, CIT Group had $69,188,600,000 in total assets against $64,067,700,000. As of June 30, 2009, CIT Group had total assets of $71,019,200,000 against total debts of $64,901,200,000. Bankruptcy Creditors' Service, Inc., publishes CIT Group Bankruptcy News. The newsletter tracks the Chapter 11 proceedings of CIT Group Inc. (http://bankrupt.com/newsstand/or 215/945-7000) CIT GROUP: Files Registration Statement for New Common Stock ------------------------------------------------------------ CIT Group Inc. on December 9 filed a registration statement to register under Section 12(b) of the Securities Exchange Act of 1934 common stock, par value $0.01 per share, of the Company being issued pursuant to the Debtors' prepackaged plan upon the filing with the State of Delaware of the Company's Third Amended and Restated Certificate of Incorporation. The Common Stock replaces the Company's prior common stock which was registered under Section 12(b) of the Act (which prior common stock was canceled as of the effective time of the Prepackaged Plan). As reported by the Troubled Company Reporter, on December 8, 2009, the United States Bankruptcy Court for the Southern District of New York confirmed the Modified Second Amended Prepackaged Plan of Reorganization of CIT Group and CIT Group Funding Company of Delaware LLC. As of the Confirmation Date, the Company's Third Amended and Restated Certificate of Incorporation provided for 600,000,000 shares of authorized New Common Stock, of which 200,000,000 shares of New Common Stock will be issued on the Effective Date, and 100,000,000 shares of authorized new preferred stock, par value $0.01 per share, of which no shares will be issued on the Effective Date. The Company has reserved 10,526,316 shares for future issuance under the Amended and Restated CIT Group Inc. Long-Term Incentive Plan. In addition, in the event that the conditions to issuance of New Common Stock on account of the contingent value rights allocated under the Plan are satisfied on the 60th day following the Effective Date, the Company may issue a substantial number of additional shares of New Common Stock. The Company will not make any distribution of New Common Stock on account of the contingent value rights if such conditions are not satisfied on the 60th day following the Effective Date. Pursuant to the Certificate, CIT's authorized capital stock consists of: (1) 600,000,000 shares of Common Stock and (2) 100,000,000 shares of preferred stock, par value $0.01 per share Each share of Common Stock entitles the holder thereof to one vote on all matters, including the election of directors, and, except as otherwise required by law or provided in any resolution adopted by our board of directors with respect to any series of preferred stock, the holders of the shares of Common Stock will possess all voting power. The Certificate does not provide for cumulative voting in the election of directors. Approval of these three matters requires the vote of holders of 66-2/3% of CIT's outstanding capital stock entitled to vote in the election of directors: (1) amending, repealing or adopting of by- laws by the stockholders; (2) removing directors (which is permitted for cause only); and (3) amending, repealing or adopting any provision that is inconsistent with certain provisions of CIT's certificate of incorporation. The holders of Common Stock do not have any preemptive rights. There are no subscription, redemption, conversion or sinking fund provisions with respect to the common stock. CIT Restricts Sale of Shares To protect certain tax attributes of the Company following emergence from bankruptcy, the Certificate imposes certain restrictions on the transfer of the Common Stock. During the Restriction Period, unless approved by the Board in accordance with the procedures set forth in the Certificate, any attempted transfer of Common Stock shall be prohibited and void ab initio to the extent that, as a result of such transfer (or any series of transfers of which such transfer is a part), either (i) any person or group of persons shall become "5% shareholder" of the Company (as defined in Treasury Regulation Section 1.382-2T(g)) or (ii) the ownership interest in the Company of any 5% shareholder will be increased. Nothing in the Tax Attribute Preservation Provision will prevent a person from transferring Common Stock to a new or existing "public group" of the Company, as defined in Treasury Regulation Section 1.382-2T(f)(13) or any successor regulation. The period during which the transfer restrictions apply will commence on the date of confirmation of the Prepackaged Plan and will generally remain in effect until the earlier of (a) 45 days after the second anniversary of the date of confirmation, and (b) the date that the Board determines that (1) the consummation of the Prepackaged Plan did not satisfy the requirements of section 382(1)(5) of the Internal Revenue Code or treatment under that section of the Internal Revenue Code is not in the best interest of the Company, (2) an ownership change, as defined under the Internal Revenue Code, would not result in a substantial limitation on the ability of the Company to use otherwise available tax attributes, or (3) no significant value attributable to such tax benefits would be preserved by continuing the transfer restrictions. Material Features of Confirmed Plan The material features of the Plan include: -- Each holder of certain senior notes issued by Delaware Funding (formerly know as CIT Group Funding Company of Canada) will receive its pro rata share of five series of 10.25% Series B Second-Priority Secured Notes maturing in each year from 2013 through 2017 issued by Delaware Funding. -- Each electing holder of certain long-dated senior unsecured notes and each holder of certain senior unsecured notes will receive its pro rata share of five series of 7.0% Series A Second-Priority Secured Notes maturing in each year from 2013 through 2017 issued by the Company and a specified percentage of the Company's new common stock, par value $0.01 per share. -- Each non-electing holder of certain long-dated senior unsecured notes will have its current claim reinstated and will retain its current note. -- Each holder of a claim arising under certain specified term loan agreements and credit agreements will receive its pro rata share of Series A Notes issued by the Company and a specified percentage of the New Common Stock. -- Each holder of certain specified subordinated notes and junior subordinated notes will receive its pro rata share of a specified percentage of the New Common Stock plus contingent value rights. -- Holders of equity interests in the Company shall have such equity interests cancelled, terminated and extinguished; however, holders of shares of the Company's preferred stock will receive contingent value rights. -- The Company's Board of Directors -- which as of November 1, 2009 had nine members and as of December 8, 2009, had eight members -- has determined, and the Plan provides, that the appropriate size of the Board after the effective date of the plan would be 13 directors: (a) five of whom will consist of individuals who were serving as directors on November 1, 2009, (b) four of whom will be nominees proposed to the Nominating and Governance Committee of the Board by the steering committee of certain of the Company's lenders, (c) three of whom will be nominees proposed to the N&GC by the Company's noteholders (other than members of the Steering Committee) owning more than 1% of the aggregate outstanding principal amount of the Company's bonds and unsecured bank debt claims and (d) one of whom will be the Company's Chief Executive Officer. At the request of and in cooperation with the Steering Committee, the Company has engaged Spencer Stuart, an internationally recognized director search firm, to assist the N&GC in identifying, interviewing and selecting Steering Committee nominees. Spencer Stuart will identify candidates who are independent of the Company, not affiliated with, or representatives of, any of the members of the Steering Committee or the One-Percent Holders, and who possess the qualifications, skills and experience specified by the N&GC. The candidates that are approved by the N&GC will be submitted to the full Board for consideration for appointment with such appointment being subject to the review of the Federal Reserve Bank of New York. To the extent the N&GC, the Board or the Federal Reserve does not approve Steering Committee Nominees (whether such event occurs pre- or post-Effective Date), the Steering Committee shall be permitted to submit additional candidates to the N&GC until four members of the Board are Steering Committee Nominees. As of October 31, 2009, the Company had 404,730,758 shares of common stock issued and outstanding. As of September 30, 2009, the Company had issued and outstanding 14,000,000 shares of Series A Preferred Stock, 1,500,000 shares of Series B Preferred Stock, 11,500,000 shares of Series C Preferred Stock and 2,330,000 shares of Series D Preferred Stock. All of the outstanding shares of the Company's common and preferred stock will be cancelled as of the Effective Date. About CIT Group CIT Group Inc. (NYSE: CIT) -- http://www.cit.com/-- is a bank holding company with more than $60 billion in finance and leasing assets that provides financial products and advisory services to small and middle market businesses. Operating in more than 50 countries across 30 industries, CIT provides an unparalleled combination of relationship, intellectual and financial capital to its customers worldwide. CIT maintains leadership positions in small business and middle market lending, retail finance, aerospace, equipment and rail leasing, and vendor finance. Founded in 1908 and headquartered in New York City, CIT is a member of the Fortune 500. CIT Group Inc. and affiliate CIT Group Funding Company of Delaware LLC announced a Chapter 11 filing on November 1, 2009 (Bankr. S.D.N.Y. Case No. 09-16565). Evercore Partners, Morgan Stanley and FTI Consulting are the Company's financial advisors and Skadden, Arps, Slate, Meagher & Flom LLP is legal counsel in connection with the restructuring plan. Sullivan & Cromwell is legal advisor to CIT's Board of Directors. CIT Group on November 1 announced that, with the overwhelming support of its debtholders, the Board of Directors voted to proceed with the prepackaged plan of reorganization for CIT Group Inc. and a subsidiary that will restructure the Company's debt and streamline its capital structure. None of CIT's operating subsidiaries, including CIT Bank, a Utah state bank, were included in the filings. On December 8, the Court confirmed the Debtors' prepackaged plan. At September 30, 2009, CIT Group had $69,188,600,000 in total assets against $64,067,700,000. As of June 30, 2009, CIT Group had total assets of $71,019,200,000 against total debts of $64,901,200,000. Bankruptcy Creditors' Service, Inc., publishes CIT Group Bankruptcy News. The newsletter tracks the Chapter 11 proceedings of CIT Group Inc. (http://bankrupt.com/newsstand/or 215/945-7000) CIT GROUP: Foster Quits as EVP and Chief Credit & Risk Officer -------------------------------------------------------------- CIT Group Inc. reports that on December 1, 2009, Nancy J. Foster notified the Company that she was resigning as Executive Vice President and Chief Credit & Risk Officer effective December 31, 2009. Ms. Foster is working with the Company to facilitate a transition of her responsibilities. Ms. Foster plans to start her own consulting practice based in New York. CIT Group Inc. (NYSE: CIT) -- http://www.cit.com/-- is a bank holding company with more than $60 billion in finance and leasing assets that provides financial products and advisory services to small and middle market businesses. Operating in more than 50 countries across 30 industries, CIT provides an unparalleled combination of relationship, intellectual and financial capital to its customers worldwide. CIT maintains leadership positions in small business and middle market lending, retail finance, aerospace, equipment and rail leasing, and vendor finance. Founded in 1908 and headquartered in New York City, CIT is a member of the Fortune 500. CIT Group Inc. and affiliate CIT Group Funding Company of Delaware LLC announced a Chapter 11 filing on November 1, 2009 (Bankr. S.D.N.Y. Case No. 09-16565). Evercore Partners, Morgan Stanley and FTI Consulting are the Company's financial advisors and Skadden, Arps, Slate, Meagher & Flom LLP is legal counsel in connection with the restructuring plan. Sullivan & Cromwell is legal advisor to CIT's Board of Directors. CIT Group on November 1 announced that, with the overwhelming support of its debtholders, the Board of Directors voted to proceed with the prepackaged plan of reorganization for CIT Group Inc. and a subsidiary that will restructure the Company's debt and streamline its capital structure. None of CIT's operating subsidiaries, including CIT Bank, a Utah state bank, were included in the filings. On December 8, the Court confirmed the Debtors' prepackaged plan. At September 30, 2009, CIT Group had $69,188,600,000 in total assets against $64,067,700,000. As of June 30, 2009, CIT Group had total assets of $71,019,200,000 against total debts of $64,901,200,000. Bankruptcy Creditors' Service, Inc., publishes CIT Group Bankruptcy News. The newsletter tracks the Chapter 11 proceedings of CIT Group Inc. (http://bankrupt.com/newsstand/or 215/945-7000) CITIGROUP INC: Discloses Stake in Various Funds ----------------------------------------------- Citigroup Global Markets Inc.; Citigroup Financial Products Inc.; Citigroup Global Markets Holdings Inc.; and Citigroup Inc. disclosed: -- holding 955 units or roughly 10.3% of Auction Rate Preferreds of BLACKROCK CREDIT ALLOCATION INCOME TRUST IV f/k/a "BLACKROCK PREFERRED & EQUITY ADVANTAGE TRUST"; -- holding 649 units or roughly 8.03% of Auction Rate Preferreds of NUVEEN INSURED DIVIDEND ADVANTAGE MUNICIPAL FUND; -- no longer hold Auction Rate Preferreds of NUVEEN VIRGINIA DIVIDEND ADVANTAGE MUNICIPAL FUND 2; -- holding 397 units or roughly 11.4% of Auction Rate Preferreds of NUVEEN MICHIGAN QUALITY INCOME MUNICIPAL FUND INC. -- holding 872 units or roughly 13.6% of Auction Rate Preferreds of NUVEEN INSURED TAX FREE ADVANTAGE MUNICIPAL FUND About Citigroup Inc. Based in New York, Citigroup Inc. (NYSE: C) -- is a global diversified financial services holding company whose businesses provide a broad range of financial services to consumer and corporate customers. Citigroup has roughly 200 million customer accounts and does business in more than 140 countries. Citigroup's businesses are aligned in three reporting segments: (i) Citicorp, which consists of Regional Consumer Banking (in North America, EMEA, Asia, and Latin America) and the Institutional Clients Group (Securities and Banking, including the Private Bank, and Transaction Services); (ii) Citi Holdings, which consists of Brokerage and Asset Management, Local Consumer Lending, and a Special Asset Pool; and (iii) Corporate/Other. As reported in the Troubled Company Reporter on November 25, 2008, the U.S. government entered into an agreement with Citigroup to provide a package of guarantees, liquidity access, and capital. The U.S. Treasury and the Federal Deposit Insurance Corporation agreed to provide protection against the possibility of unusually large losses on an asset pool of roughly $306 billion of loans and securities backed by residential and commercial real estate and other such assets, which will remain on Citigroup's balance sheet. As a fee for this arrangement, Citigroup issued preferred shares to the Treasury and FDIC. The Federal Reserve agreed to backstop residual risk in the asset pool through a non-recourse loan. Citigroup, the third-biggest U.S. bank, received $45 billion in bailout aid. Other bailed-out banks, including Bank of America Corp., Wells Fargo & Co., have pledged to repay TARP money. JPMorgan Chase & Co., Goldman Sachs Group Inc. and Morgan Stanley, repaid TARP funds in June. Citigroup is selling assets to repay the bailout funds. Citigroup is one of the banks that, according to results of the government's stress test, need more capital. CITIGROUP INC: To Issue Notes Tied to S&P GSCI Natural Gas Excess ----------------------------------------------------------------- Citigroup Inc. and Citigroup Funding Inc. on December 8 filed with the Securities and Exchange Commission documents relating to Citi Funding's planned issuance of Buffer Notes Based Upon the S&P GSCI(TM) Natural Gas Excess Return Index Due 2012, at $10.00 per Note. A full-text copy of the Preliminary Pricing Supplement is available at no charge at http://ResearchArchives.com/t/s?4b7a A full-text copy of the Issuer Free Writing Prospectus is available at no charge at http://ResearchArchives.com/t/s?4b7b On December 10, 2009, Citigroup filed a "Client Strategy Guide: December 2009 Offerings". A full-text copy of the Guide is available at no charge at http://ResearchArchives.com/t/s?4b7c About Citigroup Inc. Based in New York, Citigroup Inc. (NYSE: C) -- is a global diversified financial services holding company whose businesses provide a broad range of financial services to consumer and corporate customers. Citigroup has roughly 200 million customer accounts and does business in more than 140 countries. Citigroup's businesses are aligned in three reporting segments: (i) Citicorp, which consists of Regional Consumer Banking (in North America, EMEA, Asia, and Latin America) and the Institutional Clients Group (Securities and Banking, including the Private Bank, and Transaction Services); (ii) Citi Holdings, which consists of Brokerage and Asset Management, Local Consumer Lending, and a Special Asset Pool; and (iii) Corporate/Other. As reported in the Troubled Company Reporter on November 25, 2008, the U.S. government entered into an agreement with Citigroup to provide a package of guarantees, liquidity access, and capital. The U.S. Treasury and the Federal Deposit Insurance Corporation agreed to provide protection against the possibility of unusually large losses on an asset pool of roughly $306 billion of loans and securities backed by residential and commercial real estate and other such assets, which will remain on Citigroup's balance sheet. As a fee for this arrangement, Citigroup issued preferred shares to the Treasury and FDIC. The Federal Reserve agreed to backstop residual risk in the asset pool through a non-recourse loan. Citigroup, the third-biggest U.S. bank, received $45 billion in bailout aid. Other bailed-out banks, including Bank of America Corp., Wells Fargo & Co., have pledged to repay TARP money. JPMorgan Chase & Co., Goldman Sachs Group Inc. and Morgan Stanley, repaid TARP funds in June. Citigroup is selling assets to repay the bailout funds. Citigroup is one of the banks that, according to results of the government's stress test, need more capital. COLONIAL BANCGROUP: Creditors Want Chapter 7, Trustee ----------------------------------------------------- A group of Colonial BancGroup Inc. creditors has asked the bankruptcy judge to convert the failed bank holding company's Chapter 11 case to Chapter 7, saying that there was no way to reorganize the Company and that liquidating it with the help of a trustee would yield more returns for creditors, according to Law360. Colonial BancGroup has just filed a motion to access cash collateral to continue funding its four-month old Chapter 11 case. Earlier in the case, the bankruptcy court authorized using $1.43 million in cash from one of several bank accounts holding a total of $38.4 million. Alabama taxing authorities, Branch Banking & Trust Co., and the FDIC all claim security interests in the deposit accounts. Headquartered in Montgomery, Alabama, The Colonial BancGroup, Inc. (NYSE: CNB) was holding company to Colonial Bank, N.A, its banking subsidiary. Colonial bank -- http://www.colonialbank.com/ -- operated 354 branches in Florida, Alabama, Georgia, Nevada and Texas with over $26 billion in assets. On August 14, 2009, Colonial Bank was seized by regulators and the Federal Deposit Insurance Corporation was named receiver. The FDIC sold most of the assets to Branch Banking and Trust, Winston-Salem, North Carolina. BB&T acquired $22 billion in assets and assumed $20 billion in deposits of the Bank. Colonial BancGroup filed for Chapter 11 bankruptcy protection on August 25, 2009 (Bankr. M.D. Ala. Case No. 09-32303). W. Clark Watson, Esq., at Balch & Bingham LLP and Rufus T. Dorsey IV, Esq., at Parker Hudson Rainer & Dobbs LLP, assist the Company in its restructuring effort. The Company listed $45,000,000 in assets and $380,000,000 in debts in its bankruptcy filing. COLONIAL BANCGROUP: Seeks Court Nod to Access Non-Deposits ---------------------------------------------------------- The Colonial BancGroup, Inc., is asking the U.S. Bankruptcy Court for the Middle District of Alabama for permission to: -- use cash from sources other than the deposits to supplement the use of cash collateral; and -- grant replacement liens as adequate protection to the affected creditor. The Debtor requires additional cash collateral to pay: (a) monthly operating and bankruptcy expenses; and (b) professional fees and expenses. The Debtor won use cash representing collateral for secured lenders' claims. Alabama taxing authorities, Branch Banking & Trust Co., and the FDIC all claim security interests in Colonial's deposit accounts: a) The State of Alabama Department of Revenue -- $9,000,000 which was revised to a sum less than $7 million. b) BB&T -- $24,027,299 which amount remains on deposit with BB&T under prior orders of the Court and the Debtor does not seek to make any change in the status quo as to the funds; and c) The FDIC-Receiver -- asserts a security interest in and a right of offset with respect to the deposits that is duplicative of the lien asserted by BB&T in the deposits and is based upon the same Security Agreement asserted by BB&T as the basis of its claim. Headquartered in Montgomery, Alabama, The Colonial BancGroup, Inc. (NYSE: CNB) was holding company to Colonial Bank, N.A, its banking subsidiary. Colonial bank -- http://www.colonialbank.com/ -- operated 354 branches in Florida, Alabama, Georgia, Nevada and Texas with over $26 billion in assets. On August 14, 2009, Colonial Bank was seized by regulators and the Federal Deposit Insurance Corporation was named receiver. The FDIC sold most of the assets to Branch Banking and Trust, Winston-Salem, North Carolina. BB&T acquired $22 billion in assets and assumed $20 billion in deposits of the Bank. Colonial BancGroup filed for Chapter 11 bankruptcy protection on August 25, 2009 (Bankr. M.D. Ala. Case No. 09-32303). W. Clark Watson, Esq., at Balch & Bingham LLP and Rufus T. Dorsey IV, Esq., at Parker Hudson Rainer & Dobbs LLP, assist the Company in its restructuring effort. The Company listed $45,000,000 in assets and $380,000,000 in debts in its bankruptcy filing. CONGOLEUM CORP: Ongoing Talks With Insurer Cue Plan Delay --------------------------------------------------------- Congoleum Corporation requested the U.S. District Court for the District of New Jersey, which is now presiding over its bankruptcy case to adjourn the hearing on the disclosure statement with respect to its proposed plan of reorganization filed in October. Congoleum wants the hearing postponed to a date in the first two weeks of January to be determined by the District Court. The request was made jointly with the other plan proponents, the Official Committee of Bondholders and the Asbestos Claimants' Committee, and the request was granted by the District Court. Roger S. Marcus, Chairman of the Board, commented, "We are actively engaged in settlement negotiations with the insurers that have not previously settled their coverage disputes with us. If successful, the terms of any further settlements will be described in the disclosure statement. Given the progress that has been made in recent weeks, we and the other plan proponents felt it was prudent to delay briefly the hearing to allow time for the negotiations to run their course and permit the disclosure statement to reflect their outcome. We are encouraged by these developments and continue to hope that we could see a plan confirmed in the first half of 2010." As reported by the TCR on Oct. 27, 2009, Congoleum Corp. filed with the U.S. District Court for the District of New Jersey a Second Amended Joint Plan of Reorganization and an explanatory disclosure statement on October 22. The confirmation hearings are scheduled to commence on March 29, 2010. Congoleum filed the Second Amended Plan, at the behest of the District Court. After reversing an order by the bankruptcy court that denied confirmation of Congoleum's plan and dismissing the chapter 11 case, the District Court directed the Debtors to file a new plan of reorganization that would provide for court review of the payments made to claimants' counsel and requested briefing on additional confirmation issues. In general, the Second Amended Plan provides, among other things, for the issuance of injunctions under section 524(g) of the Bankruptcy Code that result in the channeling of all asbestos related liabilities of the Company into a Plan Trust. The Second Amended Plan also provides for the issuance of 50.1% of the shares of newly created Congoleum common stock to the trust, and 49.9% of the shares of newly created Congoleum common stock to the holders of allowed senior note claims. A copy of the Second Amended Plan is available for free at: http://bankrupt.com/misc/Congoleum_Plan_Oct09.pdf A copy of the Disclosure Statement is available for free at: http://bankrupt.com/misc/Congoleum_DiscStatement_Oct09.pdf About Congoleum Corp. Based in Mercerville, New Jersey, Congoleum Corporation (OTC: CGMC) -- http://www.congoleum.com/-- manufactures and sells resilient sheet and tile floor covering products with a wide variety of product features, designs and colors. The Company filed for Chapter 11 protection on December 31, 2003 (Bankr. D. N.J. Case No. 03-51524) as a means to resolve claims asserted against it related to the use of asbestos in its products decades ago. Richard L. Epling, Esq., Robin L. Spear, Esq., and Kerry A. Brennan, Esq., at Pillsbury Winthrop Shaw Pittman LLP, and Paul S. Hollander, Esq., and James L. DeLuca, Esq., at Okin, Hollander & DeLuca, LLP, represent the Debtors. The Asbestos Claimants' Committee is represented by Peter Van N. Lockwood, Esq., and Ronald Reinsel, Esq., at Caplin & Drysdale, Chtd. The Bondholders' Committee is represented by Michael S. Stamer, Esq., and James R. Savin, Esq., at Akin Gump Strauss Hauer & Feld LLP. Nancy Isaacson, Esq., at Goldstein Isaacson, PC, represents the Official Committee of Unsecured Creditors. R. Scott Williams, Esq., at Haskell Slaughter Young & Rediker, LLC, the Court-appointed Futures Claimants Representative, is represented by Roger Frankel, Esq., Richard Wyron, Esq., and Jonathan P. Guy, Esq., at Orrick Herrington & Sutcliffe LLP, and Stephen B. Ravin, Esq., at Forman Holt Eliades & Ravin LLC. American Biltrite, Inc. (AMEX: ABL), which owns 55% of Congoleum, is represented by Matthew Ward, Esq., Mark S. Chehi, Esq., Christopher S. Chow, Esq., and Matthew P. Ward, Esq., at Skadden Arps Slate Meagher & Flom. Various entities have filed bankruptcy plans for the Debtors. In February 2008, the legal representative for future asbestos- related claimants; the asbestos claimants' committee; the official Committee of holders of the Company's 8-5/8 % Senior Notes due August 1, 2008; and Congoleum jointly filed a joint plan of reorganization. Various objections to the Joint Plan were filed. In June 2008, the Bankruptcy Court issued a ruling that the Joint Plan was not legally confirmable. In August 2008, the Bondholders' Committee, the ACC, the FCR, representatives of holders of prepetition settlements and Congoleum entered into a term sheet describing the proposed material terms of a new plan of reorganization and a settlement of avoidance litigation with respect to prepetition claim settlement. Certain insurers and a large bondholder filed objections to the Litigation Settlement or reserved their rights to object to confirmation of the Amended Joint Plan. The Bankruptcy Court approved the Litigation Settlement in October 2008. The Amended Joint Plan was filed in November 2008. In January 2009, certain insurers filed a motion for summary judgment seeking denial of confirmation of the Amended Joint Plan. On February 26, 2009, the Bankruptcy Court rendered an opinion denying confirmation of the Amended Joint Plan. Moreover, the Bankruptcy Court dismissed Congoleum's bankruptcy case. On February 27, 2009, Congoleum and the Bondholders' Committee appealed the Order of Dismissal and the ruling denying plan confirmation to the U.S. District Court for the District of New Jersey. The District Court overturned the dismissal order, and assumed jurisdiction of the bankruptcy proceedings. CONSECO INC: Projects $145MM to $170MM Operating Income in 2010 --------------------------------------------------------------- On Tuesday, Conseco, Inc., provided its outlook for earnings for the full year 2010. The Company said it projects net operating income of between $145 million and $170 million in 2010. "With all of the capital management actions we have taken over the last year and the changes in the financial markets, providing information regarding our operating income outlook at this time is important," said Conseco CEO Jim Prieur. Net operating income is a non-GAAP measure commonly used in the life insurance industry. This measure is defined by the Company as net income applicable to common stock before net realized investment gains or losses (net of related amortization and taxes) and the change in valuation allowance for deferred income taxes. Management of the Company says it uses this measure to evaluate performance because realized investment gains or losses and the change in the valuation allowance for deferred income taxes can be affected by events that are unrelated to the Company's underlying fundamentals. The pre-tax operating income (loss) of the Company's segments in 2010 are projected to be as follows: -- Bankers Life $200 - $225 million -- Conseco Insurance Group $110 - $125 million -- Colonial Penn $24 - $30 million -- Corporate $(43) - $(47) million The projection assumes the continuation of the current interest rate environment in 2010, which, absent a change in the level and shape of the yield curve, will continue to negatively impact investment income and margins. The foregoing amounts also reflect the impact of the previously announced transactions with Wilton Re involving (1) the reinsurance, effective January 1, 2009, of a block of life insurance policies in the Conseco Insurance Group segment, which had pre-tax operating income in the first half of 2009 of approximately $3.8 million per quarter before overhead; and (2) the reinsurance, to be effective October 1, 2009, of 50% of a block of life insurance policies in the Bankers Life segment, which had pre-tax operating income before overhead on the portion of the block being reinsured of approximately $2 million in the third quarter of 2009. In addition, the expenses in conjunction with the previously announced merger of three of the Company's insurance subsidiaries, which are expected to be approximately $6 million, are included in the corporate segment projection. After giving effect to the items described above and the issuance of additional shares in the previously announced proposed public offering of common stock, the Company expects net operating income of between $0.60 and $0.70 per basic share and between $0.55 and $0.65 per diluted share in 2010. These projections are based on currently available information and a number of assumptions, including the impact of the current interest rate environment, that the Company believes are reasonable as of the date of this press release. About Conseco Inc. Headquartered in Carmel, Indiana, Conseco Inc. (NYSE: CNO) -- http://www.conseco.com/-- is the holding company for a group of insurance companies operating throughout the United States that develop, market and administer supplemental health insurance, annuity, individual life insurance and other insurance products. The company became the successor to Conseco Inc. (Old Conseco), in connection with its bankruptcy reorganization. CNO focuses on serving the senior and middle-income markets. The company sells its products through three distribution channels: career agents, professional independent producers and direct marketing. CNO operates through its segments, which includes Bankers Life, Conseco Insurance Group, Colonial Penn, other business in run-off and corporate operations. * * * Moody's Investors Service has affirmed the ratings of Conseco, Inc. (senior bank facility at Caa1) and its insurance subsidiaries (insurance financial strength at Ba2) and changed the outlook to positive from negative. Standard & Poor's Ratings Services said that it affirmed its 'CCC' counterparty credit rating on Conseco Inc. and the 'BB-' financial strength ratings on Conseco's insurance subsidiaries. S&P revised the outlook to stable from negative. CONSECO INC: Seeks Amendments to Senior Credit Facility Covenants ----------------------------------------------------------------- Conseco, Inc. reported Tuesday that it is seeking an amendment to its senior credit facility. The amendment would become effective upon the closing of the Company's previously announced proposed public offering of common stock. "This amendment would provide additional covenant margin over the next two years, allowing us greater focus on profitably growing our business segments and increasing shareholder value," said Conseco CFO Ed Bonach. The changes to the senior credit facility being sought would include: -- the minimum risk-based capital ratio requirement would remain at 200% through December 31, 2010, and would increase to 225% for 2011 and 250% for 2012 (the risk-based capital requirement is currently scheduled to return to 250% after June 30, 2010); -- the required minimum level of statutory capital and surplus would remain at $1.1 billion through December 31, 2010, and would increase to $1.2 billion for 2011 and $1.3 billion for 2012 (the required minimum level of statutory capital and surplus is currently scheduled to return to $1.27 billion after June 30, 2010); -- the interest coverage ratio requirement would remain at 1.5x through December 31, 2010, and would increase to 1.75x for 2011 and 2.0x for 2012 (the interest coverage ratio requirement is currently scheduled to return to 2.0x after June 30, 2010); and -- the debt to total capital ratio requirement would remain at 32.5% through December 31, 2009, and would change to 30.0% thereafter (the debt to total capital ratio requirement is currently scheduled to return to 30.0% after June 30, 2010). In exchange for the covenant relief, Conseco would agree to pay $150 million of the first $200 million of net proceeds from its proposed public offering of common stock to the lenders and, in addition, to pay 50% of any net proceeds in excess of $200 million from the offering. The credit facility currently requires the Company to pay 50% of the net proceeds of any equity issuance to the lenders. The amendment would modify the Company's principal repayment schedule to eliminate any principal payments in 2010 and provides for principal payments of $35 million in 2011, $40 million in 2012 and $40 million in 2013. The Company currently is required to make principal repayments equal to 1% of the initial principal balance each year, subject to certain adjustments, and to make additional principal repayments from excess cash flow. The current principal balance of the senior credit facility is $817.8 million, and the senior credit facility matures in October 2013. The amendment would also provide that the 1% payment in kind, or PIK, interest that has accrued since March 30, 2009, as an addition to the principal balance under the senior credit facility would be replaced with a payment of an equal amount of cash interest. The amount of accrued PIK interest (expected to be approximately $6 million) would be paid in cash when the amendment becomes effective. The deletion of the 1% PIK interest and the payment of an equal amount of cash interest would not impact reported interest expense. The amendment would become effective on the date, on or before January 15, 2010, (unless extended by the agent for the lenders), on which the Company makes the principal payment described above from the net proceeds of the public offering of the common stock. In connection with the amendment, Conseco would expect to incur approximately $2.3 million of fees and expenses and to write off approximately $1 million of unamortized debt issuance costs. As reported in the Troubled Company Reporter on November 27, 2009, Conseco Inc. filed a registration statement on Form S-1 for the proposed sale to the public of the Company's common stock, par value $0.01 per share (and associated preferred stock purchase rights), with a proposed aggregate offering price of $230,000,000. The Company disclosed that the proposed sale will commence as soon as practicable after the registration statement is declared effective. A full-text copy of the Company's Form S-1 is available for free at http://researcharchives.com/t/s?4a8c About Conseco Inc. Headquartered in Carmel, Indiana, Conseco Inc. (NYSE: CNO) -- http://www.conseco.com/-- is the holding company for a group of insurance companies operating throughout the United States that develop, market and administer supplemental health insurance, annuity, individual life insurance and other insurance products. The company became the successor to Conseco Inc. (Old Conseco), in connection with its bankruptcy reorganization. CNO focuses on serving the senior and middle-income markets. The company sells its products through three distribution channels: career agents, professional independent producers and direct marketing. CNO operates through its segments, which includes Bankers Life, Conseco Insurance Group, Colonial Penn, other business in run-off and corporate operations. * * * Moody's Investors Service has affirmed the ratings of Conseco, Inc. (senior bank facility at Caa1) and its insurance subsidiaries (insurance financial strength at Ba2) and changed the outlook to positive from negative. Standard & Poor's Ratings Services said that it affirmed its 'CCC' counterparty credit rating on Conseco Inc. and the 'BB-' financial strength ratings on Conseco's insurance subsidiaries. S&P revised the outlook to stable from negative. CONTINENTAL AIRLINES: S&P Assigns 'CCC+' Rating on $230 Mil. Notes ------------------------------------------------------------------ Standard & Poor's Ratings Services assigned its 'CCC+' rating to Continental Airlines Inc.'s $230 million 4.5% convertible notes due 2015, two notches lower than the company's 'B' corporate credit rating. S&P also assigned a '6' recovery rating, indicating negligible (0%-10%) recovery of principal in a payment default scenario. The ratings on Houston-based Continental reflect its participation in the high-risk airline industry and a heavy debt and lease burden, but also better-than-average operating performance among its peer large U.S. hub and spoke airlines. S&P expects Continental to maintain adequate liquidity over the next several quarters, despite an expected prolonged weak, albeit improving, travel environment, so long as fuel prices do not increase significantly. If these conditions deteriorate, causing unrestricted cash and short-term investments to consistently fall below $2 billion (cash levels fluctuate somewhat with seasonal ticket purchasing patterns, with the end of the second quarter near the high point and the end of the fourth quarter near the low point), S&P could lower the ratings. Ratings List Continental Airlines Inc. Corporate credit rating B/Negative/-- New Ratings Assigned $230 million convertible notes due 2015 CCC+ Recovery rating 6 COREL CORP: Vector Acquires 3.0MM Shares; Raises Stake to 97% ------------------------------------------------------------- Corel Holdings, L.P., Vector Capital Partners II International, Ltd. and Alexander R. Slusky disclosed that they have acquired 3,076,078 shares of common stock of Corel Corporation that were tendered in a subsequent offering period through December 4, 2009. The subsequent offering period expired at 12:00 midnight, New York City time, on December 4, 2009. Based on information provided by CIBC Mellon Trust Company, the Depositary for the Offer, as of the expiration of the subsequent offering period, approximately 3,076,078 Shares were validly tendered during the subsequent offering period, and when included with the 4,542,389 Shares tendered in the initial offering period, resulted in an aggregate of 7,618,467 Shares tendered pursuant to the Offer. Vector Capital has accepted for payment all Shares validly tendered, and payment for such Shares will be made promptly in accordance with the terms of the Offer. Vector Capital disclosed it beneficially owns 25,316,282 shares -- or roughly 97.2% -- of Corel Common Stock. Vector Capital anticipates completing a subsequent acquisition transaction to acquire all outstanding Shares not owned by Vector Capital and its affiliates at the same price per share as it paid in the Offer. Vector Capital expects that the subsequent acquisition transaction will close in February 2010. Following the subsequent acquisition transaction, Vector Capital will take steps to de-register Corel as a public company and to thereby cause the Company to become a private company owned by Vector Capital. About Vector Capital Vector Capital -- http://www.vectorcapital.com/-- is a private equity firm specializing in spinouts, buyouts and recapitalizations of established technology businesses. Vector Capital identifies and pursues these complex investments in both the private and public markets. Vector Capital actively partners with management teams to devise and execute new financial and business strategies that materially improve the competitive standing of these businesses and enhance their value for employees, customers and shareholders. Among Vector Capital's notable investments are LANDesk Software, Savi Technology, SafeNet, Precise Software Solutions, Printronix, Register.com, Tripos and Watchguard Technologies. About Corel Corp. Corel Corp. (NASDAQ:CREL) (TSX:CRE) -- http://www.corel.com/-- is one of the world's top software companies with more than 100 million active users in over 75 countries. The Company provides high quality, affordable and easy-to-use Graphics and Productivity and Digital Media software. The Company's products are sold through a scalable distribution platform comprised of Original Equipment Manufacturers (OEMs), the Company's global e- Stores, and the Company's international network of resellers and retail vendors. The Company's product portfolio includes CorelDRAW(R) Graphics Suite, Corel(R) Paint Shop Pro(R) Photo, Corel(R) Painter(TM), VideoStudio(R), WinDVD(R), Corel(R) WordPerfect(R) Office and WinZip(R). The Company's global headquarters are in Ottawa, Canada, with major offices in the United States, United Kingdom, Germany, China, Taiwan, and Japan. At August 31, 2009, the Company had $189.7 million in total assets against $199.7 million in total liabilities, resulting in $10.0 million in shareholders' deficit. Corel's working capital deficiency at August 31, 2009, was $10.5 million, an increase of $7.7 million from the November 30, 2008, working capital deficiency of $2.8 million. * * * As reported by the Troubled Company Reporter on November 3, 2009, Standard & Poor's Ratings Services lowered its long-term corporate credit ratings on Ottawa-based packaged software provider Corel Corp. to 'B-' from 'B'. S&P also lowered the issue-level rating on the company's senior secured credit facility by one notch to 'B-' from 'B'. The '3' recovery rating on the debt is unchanged. COYOTES HOCKEY: Ex-Owner Slams Ch. 7 Conversion Bid ---------------------------------------------------- Law360 reports that the former owner of the Phoenix Coyotes hockey team blasted a bid by the city of Glendale, Ariz., to convert the Chapter 11 case to a Chapter 7, echoing the Debtors and unsecured creditors' belief that the city is trying to wriggle out of having its bankruptcy claim estimated. The former owners of the National Hockey League's Phoenix Coyotes have filed a Chapter 11 plan of liquidation, to rebuff a call to convert the proceedings to Chapter 7. The Debtor says that conversion would merely prolong the wind-down and eat away at the liquidation trust proposed for the unsecured creditors. Dewey Ranch Hockey LLC, Arena Management Group, LLC, Coyotes Holdings, LLC, and Coyotes Hockey, LLC -- owners and affiliates of the Phoenix Coyotes National Hockey League team -- filed for Chapter 11 protection (Bankr. D. Ariz. Case No. 09-09488) on May 5, 2009. The Debtors are represented by Thomas J. Salerno, Esq., at Squire, Sanders & Dempsey, LLP, in Phoenix, and estimate their assets and liabilities are between $100 million and $500 million. In November 2009, Judge Redfield T. Baum approved the sale of the Phoenix Coyotes to the National Hockey League, which had bought the team to quash a plan by bidder Jim Balsillie's to move the team to Ontario, Canada. Coyotes was sent to Chapter 11 to effectuate a sale by owner Jerry Moyes to Mr. Balsillie. DECODE GENETICS: Creditors Attack DIP Financing ----------------------------------------------- Creditors are blasting deCode Genetics Inc.'s debtor-in-possession financing agreement with stalking horse bidder Saga Investments LLC, alleging that the agreement is self-serving and attempts to block the unsecured creditors from involvement by limiting their professional compensation allowance, according to Law360. DeCODE genetics, Inc., has sought the approval of the U.S. Bankruptcy Court for the District of Delaware to convene an auction where Saga would be lead bidder for its most valuable assets, including equity interests of its subsidiary ehf and other assets related to the operations of ehf and its wholly-owned Icelandic subsidiary including compounds DG041, DG051, and DG071. Under a stalking horse agreement, the stalking horse bidder Saga - - a Delaware limited liability company formed by Polaris Venture Partners and ARCH Venture Partners to acquire ehf and assts of the Debtor related to Icelandic operations -- will (i) pay to the Debtor the Base Cash Price, which will be the greater of the $11 million or the Loan Amount; (ii) pay to the Debtor the Additional Cash Price, which consists of 25% of the net cash proceeds from the sale, license, or other monetization of the Purchased Compounds received within 24 months after the Closing ate minus $3 million; and (iii) will convey to the Debtor the Non- Cash Price, which is non-voting junior convertible, non-redeemable preferred membership interests in the Stalking Horse Bidder with a non-participating liquidation preference of $7,153,845 in the aggregate. The Debtor is seeking that a deadline for the submission of bids be set for December 17, 2009, at 5:00 p.m., and that the auction be held on December 21, 2009, at 10:00 a.m. The Debtor is also asking that the sale hearing be scheduled for December 22, 2009. The Debtor also proposes a December 15, 2009 deadline for objecting to approval of the proposed sale. About deCODE Genetics deCODE Genetics Inc. is a global leader in analysing and understanding the human genome. deCODE has identified key variations in the sequence of the genome conferring increased risk of major public health challenges from cardiovascular disease to cancer, and employs its gene discovery engine to develop DNA-based tests to assess individual risk of common diseases; to license its tests and intellectual property to partners; and to provide comprehensive, leading- edge contract services to companies and research institutions around the globe. The Company was founded in 1996 and is headquartered in Reykjavik, Iceland. deCODE's balance sheet at June 30, 2009, showed total assets of US$69.85 million and total liabilities of US$313.92 million, resulting in a stockholders' deficit of US$244.07 million. The Company filed for Chapter 11 on November 16, 2009 (Bankr. D. Del. Case No. 09-14063). The petition listed assets of US$69.9 million against debt of US$314 million. Liabilities include US$230 million on 3.5 percent senior convertible notes. DOLLAR THRIFTY: Expects EBITDA Hike to $83MM to $88M in 2009 ------------------------------------------------------------ Dollar Thrifty Automotive Group, Inc., provided an update on its outlook for the fourth quarter and full year of 2009. The Company announced that it expects fourth quarter Corporate Adjusted EBITDA to be within a range of $10 million to $15 million, up significantly from a loss of $43.4 million in the comparable quarter of 2008. Based on these expected results, the Company's full year 2009 Corporate Adjusted EBITDA would range from $83 million to $88 million, up from a loss of $2.3 million in 2008. The Company confirmed its prior guidance of an 8 to 10 percent decline in rental revenues for the full year of 2009 compared to 2008. "Our strategy for 2009 involved a significant number of actions to return the Company to profitability while navigating through the significant challenges of the current economic downturn. We are very pleased with how the company has performed during 2009 and the way the year is ending. We believe the success of the actions taken in 2009, combined with our recent equity offering, position the Company well for 2010 and beyond," said Scott L. Thompson, Chief Executive Officer and President. "We greatly appreciate the support that we received in 2009 from our manufacturer partners, our lenders and our employees as we worked to significantly change the Company's direction and competitive position," said Thompson. The above data relating to the fourth quarter results are preliminary estimates based on information available at this time, and will be updated in conjunction with the Company's fourth quarter earnings release. About Dollar Thrifty Automotive Dollar Thrifty Automotive Group, Inc. is headquartered in Tulsa, Oklahoma. Driven by the mission "Value Every Time," the Company's brands, Dollar Rent A Car and Thrifty Car Rental, serve value- conscious travelers in over 70 countries. Dollar and Thrifty have over 600 corporate and franchised locations in the United States and Canada, operating in virtually all of the top U.S. and Canadian airport markets. The Company's approximately 6,400 employees are located mainly in North America, but global service capabilities exist through an expanding international franchise network. In November 2009, Standard & Poor's Ratings Services raised its corporate credit rating of Dollar Thrifty to 'B-' from 'CCC', in light of the Company's improved operating and financial performance that began in mid-2009. Moody's Investors Service also upgraded Dollar Thrifty's Probability of Default Rating to 'B3' from 'Caa2' and Corporate Family Rating to 'B3' from 'Caa3'. EDGE PETROLEUM: Objections to Ch. 11 Plan Pile Up ------------------------------------------------- Law360 reports that the trustee overseeing Edge Petroleum Corp.'s prepackaged Chapter 11 case and the Texas Comptroller of Public Accounts have filed objections to the energy company's proposed plan, alleging that it gives too much weight to Company insiders and fails to account for certain tax claims. Edge Petroleum will present the plan for confirmation and the results of an auction for all assets on December 11. The reorganization plan is built upon the sale of the Company's assets. The Chapter 11 plan and sale are supported by the holders of at least two-thirds of the $227.5 million debt under the secured credit agreement, according to Edge. The disclosure statement says the secured lenders are to receive almost all proceeds from the sale and Edge's cash. The lenders are to make a $350,000 "gift" to be shared by unsecured creditors. In addition, unsecured creditors can receive collections from preference suits. The "gift" and lawsuit collections may be used also to pay expenses of the Chapter 11 case. Edge Petroleum received the Bankruptcy Court's approval to auction off its assets on December 7. It has signed a certain Purchase and Sale Agreement dated September 30, 2009 with PGP Gas Supply Pool No. 3, who will purchase the assets for $191 million absent higher and better bids at the auction. About Edge Petroleum Edge Petroleum Corporation (Nasdaq:EPEX) (Nasdaq:EPEXP) is a Houston-based independent energy company that focuses its exploration, production and marketing activities in selected onshore basins of the United States. At September 30, 2009, the Company had total assets of $247.5 million, total liabilities of $244.2 million, and a stockholders' deficit of $3.3 million. Edge Petroleum filed for Chapter 11 on October 2, 2009 (Bankr. S.D. Tex. Case No. 09-20644). The Company has retained Akin Gump Strauss Hauer and Feld as legal counsel, Jordan, Hyden, Womble, Culbreth & Holzer, P.C., as local counsel, and Parkman Whaling LLC as financial advisor. Kurtzman Carson Consultants LLC serves as claims and notice agent. EDGEN MURRAY: Moody's Assigns 'Caa1' Rating on $465 Mil. Notes -------------------------------------------------------------- Moody's Investors Service assigned a Caa1 rating to Edgen Murray Corporation's proposed offering of $465 million of senior secured notes due 2016 and affirmed the company's other ratings. While the business outlook for the company is expected to be challenging over the next year, Moody's changed Edgen Murray's rating outlook to stable from negative due to the fact that the proposed note offering will eliminate the company's most stringent debt covenants and, therefore, improve its financial flexibility as it navigates through a period of weakness in the energy and construction markets. Net proceeds of the proposed note offering, along with cash on hand, will be used to repay the company's first lien and second lien term loans. Edgen Murray's B3 corporate family rating reflects its high leverage, exposure to highly cyclical end markets, relatively small size, negligible tangible assets, and declining profitability as energy-related investments slow. Moody's expect project and maintenance spending in the energy industry will remain weak for much of 2010. Furthermore, intense competition for new orders is likely to keep the company's operating margin low even after oil and gas drilling and capital budgets recover. Edgen Murray's rating is supported by the company's global presence, solid position in niche markets within the oil and gas industry, and the countercyclical nature of its working capital investment, which results in cash inflows when demand falls. Prospective for the senior secured note offering, the stable rating outlook reflects Edgen Murray's adequate liquidity over the next 12 to 18 months and Moody's expectation that oil and gas activity levels and spending for energy projects will begin to pick up in the second half of 2010, providing a degree of relief to the company's otherwise weak debt protection measures. This rating was assigned: For Edgen Murray Corporation -- Caa1 (LGD4, 61%) for the proposed $465 million senior secured notes due 2016 These ratings were affirmed: For Edgen Murray II, L.P. -- B3 corporate family rating -- B3 probability of default rating For Edgen Murray Corporation -- Caa1 for the first lien term loan due 2014 -- Caa1 for the second lien term loan due 2015 The term loan ratings will be withdrawn at the conclusion of the financing. Moody's last rating action for Edgen Murray was on September 29, 2009, when its ratings were downgraded by one notch, and the outlook was changed to negative from stable. Edgen Murray's ratings have been assigned by evaluating factors that Moody's believes are relevant to the company's risk profile, such as the company's (i) business risk and competitive position compared with others within the industry; (ii) capital structure and financial risk; (iii) projected performance over the near to intermediate term; and (iv) management's track record and tolerance for risk. These attributes were compared against other issuers both within and outside Edgen Murray's core industry; Edgen Murray's ratings are believed to be comparable to those of other issuers with similar credit risk. Edgen Murray, headquartered in Baton Rouge, Louisiana, is a distributor of carbon steel and alloy products for use primarily in specialized applications in the energy and niche industrial segments. The company operates on a global basis, with approximately one-third of its sales generated outside of the Americas, and has distribution centers in five countries to facilitate timely deliveries to companies and contractors engaged in the development of new energy infrastructure projects and the maintenance of existing facilities. In the twelve months ended September 30, 2009, Edgen Murray had sales of $968 million. The company is owned by Jefferies Capital Partners, certain co- investors and members of senior management. ENRON CORP: Richardson Stoops Want Ruling on Injunction Claim ------------------------------------------------------------- Richardson, Stoops, Richardson & Ward asks the U.S. District Court for the Southern District of Texas to grant a summary judgment against The Regents of the University of California on its permanent injunction claim because law does not recognize the type of absolute immunity that must exist to garner that broad relief. To recall, the Regents plead that it is entitled to garner for its lawyers broad-sweeping, permanent injunctive relief under the All Writs Act based on the narrow exceptions found in the Anti- Injunction Act. Richardson Stoops asserts that the All Writs Act provides that federal courts "may issue all writs necessary or appropriate in aid of their respective jurisdiction and agreeable to the usages and principles of law." However, Richardson Stoops notes, the Anti-Injunction Act serves as a check on the authority recognized by the All Writs Act. Richardson Stoop relates that under the Anti-Injunction Act, an injunction halting a state court proceeding is inappropriate, except where one of three exceptions is met: (a) Congress passed an Act expressly authorizing the anti-suit injunction; (b) The anti-suit injunction is necessary in aid of a federal court's jurisdiction; or (c) An anti-suit injunction must issue to protect or effectuate a federal court's judgments. Raul H. Suazo, Esq., at Martin, Disiere, Jefferson & Wisdom, LLP, in Houston, Texas, avers that the injunction proceedings are no longer about temporarily delaying Richardson Stoops' right to proceed against the California Defendants; rather, it is about permanently depriving Richardson Stoops of its right to a jury trial to supposedly protect a case that is coming to an end. According to Mr. Suazo, a permanent injunction will immunize tortfeasors and actually encourage larger law firms to breach agreements or perpetrate wrongs against smaller law firms who will have no ability to present those wrongs to a jury. "Given the criminal convictions and disbarments associated with the California Defendants, it is obvious that law firms engaged in securities fraud classes should not be given such broad protections that are actually disallowed by binding United States Supreme Court and Fifth Circuit authority," Mr. Suazo asserts. In a separate filing, Richardson Stoops seeks the Court's authority to take a deposition of Christopher Patti, in-house counsel for The Regents of the University of California, regarding The Regents' pending motion to obtain a permanent injunction against Richardson Stoops. Pursuant to Rule 26(c)(1)(A), The Regents seeks a protective order quashing Richardson Stoops' deposition notice and forbidding Richardson Stoops from taking Mr. Patti's deposition. According to The Regents, Richardson Stoops' deposition notice requests discovery from the same client it allegedly served by its purported work on the Newby Case in violation of Basic Principles of Professional Responsibility. The Regents adds that any discovery Richardson Stoops might seek via an oral deposition of Mr. Patti is irrelevant to whether the Court should grant a permanent injunction against Richardson Stoops. Accordingly, if the Court were to allow Mr. Patti's deposition to proceed, The Regents request an appropriate protective order that: (a) bars any inquiry concerning The Regents' privileged communications with any of its counsel; (b) prohibits any inquiry concerning The Regents' work product strategy to address Richardson Stoops' lawsuit or any similar lawsuit; and (c) requires the deposition be taken in California, where Mr. Patti resides and works. The Regents Respond In reply to the Motion, the Regents ask the District Court to deny Richardson Stoops' Motion for Summary Judgment arguing that the motion takes a new tack on the firm's strategy of trying to recast its California state court lawsuit as something other than an attempt to relitigate the Newby fee award. The Regents add that Richardson Stoops' new tack is to deflect attention from the realities of its state court lawsuit by attacking The Regents as "savvy institutional investors trying to block a modestly sized law firm from litigating its intentional tort claim" when "there is truly nothing at stake" for The Regents. Moreover, The Regents aver that none of the arguments in Richardson Stoops' Motion for Summary Judgment are new. In a subsequent filing, the Regents tell the Court that in accordance with its settlement with Richardson Stoops and as a result of the dismissal of Richardson Stoops' California lawsuit, it is withdrawing all of its pending applications and supplemental applications for permanent injunctive relief and Motion to Quash. In addition, the Regents ask the Court to dissolve the preliminary injunction issued against Richardson Stoops. Richardson Stoops asserts that the Regents are required to particularize their assertion of the attorney-client or work product privilege and prove their case with respect to each specific document or communication allegedly falling within the realm of these privileges as to allow Richardson Stoops and the Court to assess the assertion. Thus, Richardson Stoops asks the Court to direct The Regents to respond to its interrogatories, request for production, and request for admissions. About Enron Corp. Based in Houston, Texas, Enron Corporation filed for Chapter 11 protection on December 2, 2001 (Bankr. S.D.N.Y. Case No. 01-16033) following controversy over accounting procedures, which caused Enron's stock price and credit rating to drop sharply. Enron hired lawyers at Togut Segal & Segal LLP; Weil, Gotshal & Manges LLP, Venable; Cadwalader, Wickersham & Taft, LLP for its bankruptcy case. The Official Committee of Unsecured Creditors in the case tapped lawyers at Milbank, Tweed, Hadley & McCloy LLP. The Debtors filed their Chapter Plan and Disclosure Statement on July 11, 2003. On January 9, 2004, they filed their fifth Amended Plan and on the same day the Court approved the adequacy of the Disclosure Statement. On July 15, 2004, the Court confirmed the Debtors' Modified Fifth Amended Plan and that plan was declared effective on November 17, 2004. After the approval of the Plan, the new board of directors decided to change the name of Enron Corp. to Enron Creditors Recovery Corp. to reflect the current corporate purpose. ECRC's sole mission is to reorganize and liquidate certain of the operations and assets of the "pre-bankruptcy" Enron for the benefit of creditors. ECRC has been involved in the MegaClaims Litigation, an action against 11 major banks and financial institutions that ECRC believes contributed to Enron's collapse; the Commercial Paper Litigation, an action involving the recovery of payments made to commercial paper dealers; and the Equity Transactions Litigation, which ECRC filed against Lehman Brothers Holdings, Inc., UBS AG, Credit Suisse and Bear Stearns to recover payments made to the four banks on transactions involving Enron's stock while the company was insolvent. (Enron Bankruptcy News; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000). ENRON CORP: Savings Plan Can Recover Error Payments --------------------------------------------------- Judge Melinda Harmon of the U.S. District Court for the Southern District of Texas has ordered that Enron Corp. Savings Plan is entitled to recover from EOG Resources, Inc., Savings Plan the full amount of the Title allocation overpayments that EOG Savings Plan received in error. Based in Houston, Texas, Enron Corporation filed for Chapter 11 protection on December 2, 2001 (Bankr. S.D.N.Y. Case No. 01-16033) following controversy over accounting procedures, which caused Enron's stock price and credit rating to drop sharply. Enron hired lawyers at Togut Segal & Segal LLP; Weil, Gotshal & Manges LLP, Venable; Cadwalader, Wickersham & Taft, LLP for its bankruptcy case. The Official Committee of Unsecured Creditors in the case tapped lawyers at Milbank, Tweed, Hadley & McCloy LLP. The Debtors filed their Chapter Plan and Disclosure Statement on July 11, 2003. On January 9, 2004, they filed their fifth Amended Plan and on the same day the Court approved the adequacy of the Disclosure Statement. On July 15, 2004, the Court confirmed the Debtors' Modified Fifth Amended Plan and that plan was declared effective on November 17, 2004. After the approval of the Plan, the new board of directors decided to change the name of Enron Corp. to Enron Creditors Recovery Corp. to reflect the current corporate purpose. ECRC's sole mission is to reorganize and liquidate certain of the operations and assets of the "pre-bankruptcy" Enron for the benefit of creditors. ECRC has been involved in the MegaClaims Litigation, an action against 11 major banks and financial institutions that ECRC believes contributed to Enron's collapse; the Commercial Paper Litigation, an action involving the recovery of payments made to commercial paper dealers; and the Equity Transactions Litigation, which ECRC filed against Lehman Brothers Holdings, Inc., UBS AG, Credit Suisse and Bear Stearns to recover payments made to the four banks on transactions involving Enron's stock while the company was insolvent. (Enron Bankruptcy News; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000). ERIC N REYBURN: Court Sets January 25 as Claims Bar Date -------------------------------------------------------- The Hon. Frank J. Bailey of the U.S. Bankruptcy Court for the District of Massachusetts has established 4:30 p.m. on January 25, 2010, as the deadline for individuals and entities to file proofs of claim against Eric N. Reyburn. Any individual or entity asserting a claim must file a proof of claim with the Clerk's office, U.S. Bankruptcy Court for the District of Massachusetts, John W. McCormack Post Office and Court House, 5 Post Office Square, Suite 1150, Boston, Massachusetts. Cambridge, Massachusetts-based Eric N. Reyburn aka Eric N. Reyburn, as Trustee and Beneficiary of Various Trusts filed for Chapter 11 on November 4, 2009 (Bankr. D. Mass. Case No. 09- 20683). The Stephen E. Shamban Law Offices, P.C. represents the Debtor in its restructuring efforts. In its petition, the Debtor listed assets and debts both ranging from $10,000,001 to $50,000,000. ESCADA AG: US Unit Proposes Follick as Customs Counsel ------------------------------------------------------ Escada (USA), Inc., seeks the Court's authority to employ Follick & Bessick, P.C., as its special customs counsel, nunc pro tunc to August 14, 2009. Gerald C. Bender, Esq., at O'Melveny & Myers LLP, in New York, relates that the Debtor requires legal representation in matters involving the laws and regulations promulgated by the U.S. Customs Service and its successor, U.S. Customs & Border Protection, in order to effectively contest a proposed action against the Debtor by U.S. Customs. Mr. Bender says that the Debtor is subject to a proposed customs assessment in an amount exceeding $10.8 million in additional duties, excluding any interest or penalties, with respect to a dispute with U.S. Customs concerning the Debtor's declaration of the dutiable value of certain goods that it imported into the United States based on the "first sale" or middleman prices of those goods that the Debtor purchased from its parent, Escada AG. According to Mr. Bender, Follick has provided legal services to the Debtor since May 1992 in matters concerning U.S. Customs, and has particularly been representing the Debtor with respect to contesting the proposed assessment in the Customs Dispute. Currently, the firm has an internal advice ruling request pending before the U.S. Customs Headquarters office in Washington, D.C., as well as a formal protest and application for further review pending at the port level. Thus, Follick is familiar with the Customs Dispute and the Debtor's customs matters generally, Mr. Bender notes. The firm is therefore ideally positioned to advise the Debtor on the Customs Matters in its Chapter 11 case, he avers. In addition, Follick has represented other clients before U.S. Customs and in the U.S. Court of International Trade, among other federal government agencies. Follick is thus familiar with specific issues that involve tariff classification and rates of duty, contesting increased duty assessments, valuation of goods, preparing and obtaining binding rulings, preparing internal advice requests, petitions against liquidated damages and penalty assessments, administrative forfeiture proceedings, contesting seizure cases, internal audit and compliance reviews, and responding to customs audits and investigations, Mr. Bender tells the Court. "The retention of the firm as special customs counsel will contribute greatly to the efficient administration of the Debtor's estate and the realization of the Debtor's objective of maximizing the value of its bankruptcy estate," Mr. Bender emphasizes. The Debtor will pay the Follick professionals based on these hourly rates: Professional Hourly Rate ------------ ----------- John A. Bessich, Lead Attorney $375 Suzanne Liberti McCaffery, Associate $250 Glenn H. Ripa, of Counsel $350 Paraprofessional $100 The Debtor also intends to reimburse Follick for the firm's necessary out-of-pocket expenses. The firm did not receive a retainer in connection with the proposed retention, according to Mr. Bender. John A. Bessich, Esq., sole shareholder at Follick, informed the Court that the Debtor owes his firm $7,521 for prepetition services. During the 90-day period preceding the Petition Date, Follick received payments for fees and expenses from the Debtor totaling $49,120. As of the Petition Date, Follick performed legal services for the Debtor and incurred expenses in the total unbilled amount of $17,037, Mr. Bessich adds. Mr. Bessich assures the Court that Follick does not a represent or hold any interest adverse to the Debtor or its estate. About Escada AG The ESCADA Group -- http://www.escada.com/-- is an international fashion group for women's apparel and accessories, which is active on the international luxury goods market. It has pursued a course of steady expansion since its founding in 1976 by Margaretha and Wolfgang Ley and today has 182 own shops and 225 franchise shops/corners in more than 60 countries. As of August 10, 2009, the Escada Group operated 176 owned stores and so-called shop in shops, of which 26 owned stores are located in the United States and operated by Escada (USA) Inc. and 2 stores are planned to be opened in the United States before year end. Escada Group products are also sold in 163 stores worldwide which are operated by franchisees. Escada Group had total assets of EUR322.2 million against total liabilities of 338.9 million as of April 30, 2009. Wholly owned subsidiary Escada (USA) Inc. filed for Chapter 11 on August 14, 2009 (Bankr. S.D.N.Y. Case No. 09-15008). Judge Stuart M. Bernstein handles the case. O'Melveny & Myers LLP has been tapped as bankruptcy counsel. Kurtzman Carson Consultants serves as claims and notice agent. Escada US listed US$50 million to US$100 million in assets and US$100 million to US$500 million in debts in its petition. Bankruptcy Creditors' Service, Inc., publishes Escada USA Bankruptcy News. The newsletter tracks the Chapter 11 proceedings of Escada USA, and the insolvency proceedings of ESCADA AG and its units. (http://bankrupt.com/newsstand/or 215/945-7000) ESCADA AG: US Unit Proposes PwC as Independent Auditor ------------------------------------------------------ By this application, Escada (USA), Inc., seeks the Court's permission to employ PricewaterhouseCoopers LLP, as its independent auditor, nunc pro tunc to October 9, 2009. The Debtor seeks to retain PwC because of the firm's extensive experience and qualifications in providing audit services in and out of bankruptcy. Furthermore, PwC is already very familiar with the Debtor's operations due to services it provided to the Debtor prior to the Petition Date, Gerald C. Bender, Esq., at O'Melveny & Myers LLP, in New York, relates. Specifically, the firm has performed annual audits of the Debtor's financial statements in the past and has obtained intimate knowledge of the Debtor's accounting policies and internal financial controls. Pursuant to the terms and conditions of the parties' Engagement Letter, the Debtor seeks to retain PwC to: (1) audit the financial statements of the Company at October 31, 2009, and for the year then ending; and (2) audit the International Accounting Standards Consolidation Questionnaire of Escada AG at October 31, 2009, and for the year then ending. The Debtor and PwC have agreed that the Audit Services will be provided based on a "fixed fee" structure, whereby the Debtor will pay PwC an estimated fee of $235,000. In the event additional fees are required as a result of the Debtor's failure to meet any of the requests contained in the agreement or the Debtor seeking non-routine services from PwC, PwC will inform the Debtor and provide estimates to the Debtor's management. The Debtor intends to pay for PwC's services based on these hourly rates: Professional Hourly Rate ------------ ----------- Partner $674 - $781 Sr. Manager $410 - $476 Manager $327 - $605 Senior Associate $201 - $294 Associate $107 - $157 The Debtor also intends to reimburse PwC for the firm's reasonable and necessary out-of-pocket expenses. Anthony S. Passaretti, Esq., a partner at PwC, discloses that during the 90-day period before the Petition Date, the Debtor paid PwC $188,690. As of the Petition Date, the Debtor owes PwC $95,553 for prepetition services. Upon approval of PwC's retention in the Debtor's Chapter 11 case, PwC will waive its right to receive any unpaid fees incurred prior to the Petition Date by the Debtor, Mr. Passaretti clarifies. Mr. Passaretti assures Judge Bernstein that PwC is a "disinterested person" as that term is defined under Section 101(14) of the Bankruptcy Code, as modified by Section 1107(b). About Escada AG The ESCADA Group -- http://www.escada.com/-- is an international fashion group for women's apparel and accessories, which is active on the international luxury goods market. It has pursued a course of steady expansion since its founding in 1976 by Margaretha and Wolfgang Ley and today has 182 own shops and 225 franchise shops/corners in more than 60 countries. As of August 10, 2009, the Escada Group operated 176 owned stores and so-called shop in shops, of which 26 owned stores are located in the United States and operated by Escada (USA) Inc. and 2 stores are planned to be opened in the United States before year end. Escada Group products are also sold in 163 stores worldwide which are operated by franchisees. Escada Group had total assets of EUR322.2 million against total liabilities of 338.9 million as of April 30, 2009. Wholly owned subsidiary Escada (USA) Inc. filed for Chapter 11 on August 14, 2009 (Bankr. S.D.N.Y. Case No. 09-15008). Judge Stuart M. Bernstein handles the case. O'Melveny & Myers LLP has been tapped as bankruptcy counsel. Kurtzman Carson Consultants serves as claims and notice agent. Escada US listed US$50 million to US$100 million in assets and US$100 million to US$500 million in debts in its petition. Bankruptcy Creditors' Service, Inc., publishes Escada USA Bankruptcy News. The newsletter tracks the Chapter 11 proceedings of Escada USA, and the insolvency proceedings of ESCADA AG and its units. (http://bankrupt.com/newsstand/or 215/945-7000) FIRST BREVARD: Case Summary & 7 Largest Unsecured Creditors ----------------------------------------------------------- Debtor: First Brevard Corporation PO Box 360163 Melbourne, FL 32935 Bankruptcy Case No.: 09-18764 Chapter 11 Petition Date: December 9, 2009 Court: United States Bankruptcy Court Middle District of Florida (Orlando) Debtor's Counsel: Michael Faro, Esq. Faro & Associates PA 150 Cocoa Isles Boulevard, Suite 404 Cocoa Beach, FL 32931 Tel: (321) 784-8158 Fax: (321) 784-8159 Email: faro.michael@gmail.com Estimated Assets: $1,000,001 to $10,000,000 Estimated Debts: $100,001 to $500,000 A full-text copy of the Debtor's petition, including a list of its 7 largest unsecured creditors, is available for free at: http://bankrupt.com/misc/flmb09-18764.pdf The petition was signed by P.L. Fekany, president/director of the Company. FLOWSERVE: Fitch Says Rating Trends Stable ------------------------------------------ According to Fitch Ratings, the number of negative rating actions for the U.S. Diversified Industrials sector is likely to be much lower in 2010 than in 2009 as rating trends are expected to stabilize. A return to economic growth across many regions, the gradual completion of restructuring and downsizing programs, focus by issuers on stronger balance sheets, and a more stable operating environment compared to the early phase of the global recession will all contribute to more stability next year. The pace of ratings downgrades in the broader U.S. corporate bond market slowed materially in the third quarter of 2009, which would be consistent with expectations for a slowly improving global economy and better performance by most companies in the diversified industrial sector. 'Currently, Negative Rating Outlooks among diversified companies rated by Fitch significantly outnumber Positive Outlooks, but as issuers repair their credit profiles, Negative Outlooks could be revised to Stable and upgrades could increase,' said Eric Ause, Senior Director at Fitch. 'Positive rating actions would be expected to occur late in the credit cycle, possibly after 2010 as a return to stronger credit metrics may be slower than usual, which reflects the severity of the recent recession, simultaneous stresses in the credit markets that have pressured liquidity, and the potentially anemic pace of an economic rebound.' Issuers Expected to Rebuild Balance Sheets in 2010: Entering 2010, leverage is at relatively high levels for many diversified companies. Higher-than-normal leverage is not unusual at this stage of the credit cycle and is due largely to lower operating results. When operating results eventually improve, leverage can also be expected to improve. However, the recovery is anticipated to be slow which could hinder a return to lower leverage. This concern is partly mitigated by a trend towards managing balance sheets more conservatively in response to difficult capital markets and the evident value of liquidity. Several diversified companies issued meaningful amounts of equity in the first nine months of 2009 (GE, JCI, KMT, TXT), not including ETN which issued equity in 2008, and two issuers (GE, TXT) cut their dividends. Acquisition activity has been quiet but could increase in 2010, reflecting recent increases in valuations. Rebound in Operating Performance Expected to be Slow: Sales in 2010 for U.S. diversified companies are expected to improve slowly from trough levels reported during 2009, but the recovery from the recent recession could be fitful. Fitch anticipates that a full recovery will not occur until late-cycle sectors of the economy begin to revive, possibly as late as 2011. Underpinning Fitch's Diversified outlook is the firm's most recent global economic outlook, which as of October 2009 calls for global GDP to shrink 2.8% in 2009, the first time annual growth has been negative since WWII, followed by expected global growth recovery to 2% in 2010 and 2.7% in 2011. In the major advanced economies (MAEs) where diversified companies still conduct the bulk of their business, GDP is forecast to decline 3.7% in 2009 and return to a tepid growth rate of 1.2% in 2010. Fitch expects GDP to grow 6.5% in the BRIC countries (Brazil, Russia, India, China) in 2010. Although global GDP looks set to return to positive growth, the absolute level of GDP is low, and it is possible that in the U.S. GDP may not return to the 2008 level until 2011. Mixed Revenue Outlook: Diversified companies typically are composed of a mix of early-, mid- and late-cycle businesses. They also sell into diverse geographic end-markets. As a result, the pace at which sales recover will vary by issuer depending on each issuer's customer base. On a sequential basis, demand generally stopped falling by the third quarter of 2009. In many late-cycle markets, orders have stopped falling, although actual sales could decline for another quarter or two. Most issuers remain cautious about predicting the strength and timing of a rebound in sales. Normal economic signals are obscured by several factors: 1) inventory destocking earlier in 2009, followed by re-stocking which would represent a non-recurring boost to sales, 2) the U.S. cash-for- clunkers program that accelerated the replacement of older vehicles in the automotive sector, and 3) stimulus spending in China and cash-for-clunkers programs in Europe. Late-cycle businesses such as non-residential construction will remain weak well into 2010, offsetting improvements in early cycle businesses. In the aerospace sector, Fitch expects large commercial aircraft deliveries by Boeing and Airbus to decline approximately 5% (excluding potential 787 deliveries) from 2009, but there is a risk of additional production cuts, especially in 2011. However, high backlogs at Boeing and Airbus should buffer the expected decline. The aerospace aftermarket could show some improvement in late 2010 after declining sharply in 2009 due to a reduction in the number of flights and the cannibalization of parked planes by the airlines. Business jet deliveries appear likely to decline further in 2010 following a very weak year in 2009. Fitch expects business jet deliveries for all of 2009 to fall 35-40% from a cyclical peak in 2008, and a peak to trough decline of 50% would not be unrealistic. Diversified companies with material exposure to aerospace include GE, ETN, HON, TXT and UTX. Non-residential construction is expected to fall 12% in 2010 following a 16% decline in 2009 according to the American Institute of Architects' most recent Consensus Construction Forecast. It is possible that conditions could be weak well beyond 2010, depending on trends in vacancy rates and the availability of financing. Most diversified companies have some exposure to non-residential construction through electrical products (CBE, HUBB, ETN, TNB), controls and systems (HON, JCI), elevators (UTX), scaffolding (HSC) and a wide variety of other products and services. Some non-residential markets will benefit from expected spending related to stimulus and energy conservation projects, particularly institutional buildings for which the outlook is not as negative as it is for office, retail and industrial buildings. The U.S. market is expected to fare worse than other regions around the globe. Europe is also weak. Developing markets have largely performed better than developed markets and should return to normal growth more quickly. As the U.S. represents a large share of total non-residential construction, a protracted downturn in non-residential construction will temper the impact of improving results in other parts of the economy. Residential construction also is a significant market for diversified companies. The sector has shrunk so much over the past few years that there is not much downside risk. On the other hand, it is not clear how quickly the sector will recover given the large inventory of homes, a lack of liquidity affecting private financing, and declining valuations that leave many homeowners with negative equity. The outlook is more positive for shorter-cycle, consumption oriented businesses (services and parts) that should benefit from a resumption of stable economic activity. However, absolute sales levels are currently low and growth seems likely to be tepid as there are few end-markets where strong demand is expected. Sales growth could vary across sectors depending on their location in the capital investment chain. Sales of longer-lived parts and equipment may only recover gradually as existing production capacity and equipment is brought to full capacity or used up. Exceptions include certain energy and infrastructure markets. These markets are less directly tied to economic cycles than to long-term demand for energy and to demographic trends that affect public funding for water and transportation projects. Margins to Benefit from Cost Controls and Stabilizing Sales: During 2010 diversified companies can be expected to rebuild margins as they complete restructuring efforts and align costs with lower sales levels. Margin performance has varied widely in 2009. Some companies (UTX, TNB, FLS) reacted early or were able to take advantage of a variable cost structure to limit margin declines. In other cases, orders and sales dropped sharply, particularly in short-cycle businesses, contributing to temporary quarterly losses (KMT, ETN, JCI). Profitability typically was restored by the third quarter of 2009 when sales stopped falling at the rapid pace that occurred in the first half of the year. Although conditions should be more stable in 2010 than during 2009, demand remains weak and diversified companies will be challenged to balance the risk of excess capacity with the possible loss of market share when demand eventually improves. In late-cycle businesses, margins could remain under pressure well into 2010 until the recession runs its course. This concern is mitigated by a long order cycle, relative to short-cycle businesses, that helps smooth out production and reduce sales volatility. Cancellations by customers remain a risk, however, as does the availability of financing that often is an important factor in long-cycle projects. Government stimulus spending may limit these risks depending on where and when it is used. Other items could also affect margins in 2010. Raw material costs have fallen dramatically since peaking in 2008. However, some costs, such as oil and copper, have subsequently rebounded, highlighting volatility as an ongoing risk. In the near term, a weak economy can be expected to keep raw material costs at moderate levels. Pricing represents another risk. To date there has been limited pricing pressure, but it could increase as old contracts run off and as diversified companies and their customers continue to adjust to a period of low demand. Finally, pension expense could increase depending on market conditions. Any cash impact on pension contributions would appear to become more significant after 2010. Restructuring to Wind Down Gradually: As restructuring is gradually completed, margins in 2010 will be supported by lower costs and the absence of restructuring charges. Any increases in volume would also support margins through better absorption. Margins in 2010 may not increase to levels seen prior to the recession, but they should improve on a sequential basis compared to cyclical lows, many of which occurred in the second quarter of 2009. Steep sales declines in the first half of 2009 depressed operating margins, sometimes causing losses in certain businesses as capacity couldn't be reduced quickly enough to offset lower volumes. Temporary cost reductions were initiated by a large number of diversified companies during 2009 to protect profits and preserve liquidity. Their eventual reversal could partly negate the positive impact of restructuring. Some temporary cost reductions have already been reversed, but others remain in place and may not be reversed until economic conditions improve further. Temporary cuts included furloughs and reductions to compensation such as bonuses and 401(k) plans. Free Cash Flow Could Decline Modestly: Fitch anticipates that cash from operating activities in the near term may be only slightly lower than historical levels, relative to income. As explained above, aggressive restructuring has enabled many diversified companies to limit margin declines to modest levels. Working capital reductions have supported cash flow during 2009 as sales have fallen. Sales growth in 2010 could reverse this trend and require cash to be invested in working capital, but amounts likely would not be large given expectations for slow economic growth. Pension liabilities continue to be a concern. Although asset returns in 2009 have been favorable, interest rates remain low and may negate a portion of asset returns when net pension liabilities are calculated at the end of 2009. In many cases, required pension contributions in 2010 may remain low, but they could increase in subsequent years unless further strong asset returns and/or an increase in the discount rate help to reduce net pension liabilities. Fitch does not expect capital expenditures to increase substantially in 2010 compared to reduced levels in 2009. The primary driver is the lack of investment opportunities related to slow growth, although some issuers in 2009 reduced capital spending in an effort to preserve liquidity in the face of difficult conditions in the debt markets. As with working capital, any benefit to free cash flow would likely be reversed once sales improve and companies look to take advantage of internal growth opportunities. Uncertain Impact of Discretionary Expenditures: Acquisitions may become more common in 2010 as visibility into end-market demand improves further. Most diversified companies continue to maintain a list of potential acquisitions and could act quickly. Acquisition activity was relatively low in 2009 due to a focus by some issuers on preserving liquidity, the related issue of limited availability or high cost of financing, the unwillingness of sellers to accept low prices, and a priority on restructuring existing operations. Share repurchases could increase in 2010 but are not likely, in Fitch's view, to be nearly as substantial as in previous years. Issuers are focused on maintaining a strong balance sheet to offset the impact of weaker earnings, a lack of confidence in the availability of financing, and uncertainty about the economy. Even UTX and SPW, which are among the more consistent companies with respect to discretionary cash deployment, have scaled back share repurchases until conditions improve. Liquidity and Financing Expected to be Manageable: Disruptions in the capital markets during the past two years have faded but could have a long tail. Government support played a major role in stabilizing the capital markets and it continues to be important. Despite investor confidence that contributed to strong market returns during 2009, it is unclear to what degree the capital markets still depend on government support or how quickly government support will be phased out. Diversified companies sell into end-markets where financing may be needed to fund projects or large equipment. If the availability of financing continues to be problematic for customers of diversified companies, future sales could be negatively affected. Among the diversified companies rated by Fitch, financing continues to be available and liquidity concerns have been addressed successfully. The only exception was TXT's drawdown of its bank facilities in February 2009 as a defensive action to protect its liquidity while it proceeds with the wind-down of non- captive financing at Textron Financial. Even so, TXT was subsequently able to issue debt and equity. Although issuers are able to access the capital markets, there are concerns about market reliability. Issuers are likely to be less sensitive to conditions in the commercial paper market in 2010 than during the past one to two, largely because they have taken a more cautious approach to managing their balance sheets in response to the previous capital market disruptions. A number of issuers paid down commercial paper balances with proceeds from long-term debt or equity, while others paid down commercial paper as a way to reduce total debt and control leverage. Due to continuing uncertainty surrounding the capital markets, issuers could continue to look for opportunities to issue debt in 2010 while interest rates are favorable. Bank financing has become more restrictive, most notably when issuers look to renew revolving credit facilities that typically represent an important source of liquidity. Previous market losses and growing delinquencies that normally accompany recessions have pressured bank to improve their capitalization and reduce their risk exposure. As a result, banks are offering less favorable terms. In most cases, revolving credits are being renewed at lower amounts, shorter terms and higher pricing. If such terms don't eventually return toward previous levels, issuers may consider increasing their reliance on long-term debt and other sources of financing. Strategic Implications: The impact of the recession on credit metrics for certain issuers (ETN, JCI, TXT) has been exacerbated by a variety of factors such as acquisitions, end-market exposure, or strategic actions. Depending on the path of the economic recovery, more time than usual may be needed to return credit metrics to normal levels at these and other issuers similarly affected. Debt reduction can be expected to be a priority. However, a long-term risk is the possibility that it may be difficult to regain stronger credit metrics while at the same time funding strategically important activities such as acquisitions. As a result, there potentially could be a trade-off, at least in the short run, between profitability and competitiveness on one hand and, on the other hand, a strong balance sheet and financial flexibility. Issuers in the Diversified Industrial Sector: Fitch-rated issuers and their current Issuer Default Ratings in the U.S. diversified industrial sector: -- Cooper Industries (CBE) ('A'; Outlook Stable) -- Dover (DOV) ('A'; Outlook Negative) -- Eaton (ETN) ('A-'; Outlook Negative) -- Flowserve (FLS) ('BB+'; Outlook Positive) -- Fluor (FLR) ('A-'; Outlook Stable) -- Harsco (HSC) ('A-'; Outlook Stable) -- Honeywell (HON)('A'; Outlook Negative) -- Hubbell (HUBB) ('A'; Outlook Stable) -- IDEX (IEX) ('BBB+'; Outlook Stable) -- ITT Corporation (ITT) ('A-'; Outlook Stable) -- Johnson Controls (JCI)('BBB'; Outlook Stable) -- Kennametal (KMT) ('BBB-'; Outlook Negative) -- Parker-Hannifin (PH) ('A'; Outlook Stable) -- Rockwell Automation (ROK) ('A'; Outlook Negative) -- SPX Corporation (SPW) ('BB+; Outlook Stable) -- Textron (TXT) ('BB+'; Outlook Negative) -- Thomas & Betts (TNB) ('BBB'; Outlook Stable) -- Tyco International Ltd. (TYC) ('BBB+'; Outlook Stable) -- United Technologies (UTX) ('A+'; Outlook Stable) FONTAINEBLEAU LV: Judge Disallows Credit Bid for 63-Story Project ----------------------------------------------------------------- U.S. Bankruptcy Judge A. Jay Cristol has entered an opinion denying the holders of mechanics liens an opportunity to offer a credit bid -- instead of cash -- at a January 21 auction for Fontainebleau Las Vegas Holdings LLC's uncompleted 63-story project on the north end of the Las Vegas Strip. Judge Cristol said in his three-page opinion that the amount, validity and priority of the mechanics' lien claims are in doubt. Given insufficient time before the auction, Judge Cristol denied mechanics' lienholders the right to credit bid. Judge Cristol also said it wasn't feasible to allow even the first-lien creditors to credit bid in an auction against cash bidders. The Judge notes that not all secured lenders would credit bid even if they had the ability. At the Jan. 21 auction, the stalking horse bid of $156.5 million for the entire project will come from a company affiliated with Carl Icahn. The offer includes the assumption of $50 million in financing for the Chapter 11 case. Penn National Gaming Inc. was originally the lead bidder before it was replaced by the Icahn entity. Penn Treaty may still bid at the auction. About Fontainebleau Las Vegas Fontainebleau Las Vegas -- http://www.fontainebleau.com/-- is constructing a luxury resort, Fontainebleu Las Vegas, on the northern end of the Las Vegas Strip. Fontainebleau Las Vegas Holdings, LLC, Fontainebleau Las Vegas, LLC, Fontainebleau Las Vegas Capital Corp. filed for Chapter 11 protection on June 9, 2009 (Bankr. S.D. Fla. Lead Case No. 09-21481). Judge A. Jay Cristol presides over the Debtors' cases. Scott L Baena, Esq., at Bilzin Sumberg Baena Price & Axelrod LLP, represents the Debtors in their restructuring efforts. The Debtors' Financial Advisor are Moelis & Company LLC and Citadel Derivatives Group LLC. The Debtors' Special Litigation Counsel is David M. Friedman, Esq., at Kasowitz, Benson, Torres & Friedman LLP and the Debtors' Special Counsel is Jack J. Kessler, Esq., and Alan Rubin, Esq., at Buchanan Ingersoll & Rooney PC. The Debtors' Claims Agent is Kurtzman Carson Consulting LLC. Attorneys at Genovese Joblove & Battista, P.A., and Fox Rothschild, LLP, represent the Official Committee of Unsecured Creditors. As of June 9, 2009, Fontainebleau Las Vegas LLC listed more than $1 billion in debt and a similar amount in assets, while each of Fontainebleau Las Vegas Capital Corp. and Fontainebleau Las Vegas Holdings, LLC, listed less than $50,000 in assets and more than $1 billion in debts. Bankruptcy Creditors' Service, Inc., publishes Fontainebleau Bankruptcy News. The newsletter tracks the Chapter 11 proceedings of Fontainebleau Las Vegas Holdings, LLC, and its debtor- affiliates. (http://bankrupt.com/newsstand/or 215/945-7000) FOUR FIVE INVESTMENTS: Voluntary Chapter 11 Case Summary -------------------------------------------------------- Debtor: Four Five Investments LLC 9709 East Bajada Road Scottsdale, AZ 85262 Bankruptcy Case No.: 09-31767 Chapter 11 Petition Date: December 9, 2009 Court: United States Bankruptcy Court District of Arizona (Phoenix) Judge: Charles G. Case II Debtor's Counsel: Donald W. Powell, Esq. Carmichael & Powell, P.C. 7301 N. 16TH ST., #103 PHOENIX, AZ 85020 Tel: (602) 861-0777 Fax: (602) 870-0296 Email: d.powell@cplawfirm.com Estimated Assets: $1,000,001 to $10,000,000 Estimated Debts: $1,000,001 to $10,000,000 According to the schedules, the Company has assets of $2,673,244, and total debts of $4,776,913. The Debtor did not file a list of its 20 largest unsecured creditors when it filed its petition. The petition was signed by Stephen Ingrassia, managing member of the Company. FRIEDE GOLDMAN: Claim Litigation Didn't Waive Arbitration Right --------------------------------------------------------------- WestLaw reports that a creditor that had entered into a prepetition contract with the Chapter 11 debtor for construction of a ship did not waive its contractual right to arbitration on a claim arising from the debtor's alleged negligent design and construction of the vessel when, to protect its rights following commencement of the debtor's bankruptcy case, it filed a proof of claim prior to expiration of the claims deadline, responded to a claim objection, and apparently participated in some amount of discovery. The creditor, less than one month after filing its proof of claim, requested relief from the automatic stay to complete arbitration and clearly put the liquidating trustee appointed under the debtor's confirmed plan on notice that it would exercise its arbitration rights. The liquidating trustee made no showing of any prejudice or unfairness by virtue of any delay, expenses or damage to its position. In re The Consolidated FGH Liquidating Trust, --- B.R. ----, 2009 WL 3756921 (Bankr. S.D. Miss.). Headquartered in Gulfport, Mississippi, Friede Goldman Halter, Inc., was a world leader in the design and manufacture of equipment for the maritime and offshore energy industries. Friede Goldman and its debtor-affiliates filed for Chapter 11 protection on April 19, 2001 (Bankr. D. Miss. Case No. 01-52173). When the Debtors filed for chapter 11 protection, they listed assets totaling $802 million and liabilities totaling $704 million. The Bankruptcy Court confirmed the Debtors' Fourth Amended Joint Plan or Reorganization on Dec. 30, 2003. The Plan became effective on Jan. 13, 2004. A Liquidating Trust was created to liquidate the Debtors' assets, make distributions, and wind down the Debtors affairs. Oakridge Consulting, Inc., and Ocean Ridge Capital Advisors, L.L.C., were appointed as Liquidation Trustees. Douglas S. Draper, Esq., Leslie A. Collins, Esq., and Greta M. Brouphy, Esq., at Heller, Draper, Hayden, Patrick & Horn, LLC, represent the Liquidation Trustees. GENERATION BRANDS: Court Sets Jan. 15 Confirmation Hearing ---------------------------------------------------------- Bill Rochelle at Bloomberg reports that the Bankruptcy Court will convene a hearing on January 15 to consider (i) confirmation of the proposed prepackaged Chapter 11 plan of Generation Brands LLC and Quality Home Brands Holdings LLC and (ii) the disclosure statement and solicitation materials were adequate. The Debtors obtained the required votes for the Plan prior to the bankruptcy filing on December 4. The Plan will reduce debt by $150 million while giving 91.75% of the new stock to holders of $101 million in second-lien debt. The first-lien obligations are to be restructured as a cash-paying $125.6 million secured debt and a $105.5 million term loan paying interest with more notes. Unsecured creditors are to receive 7.5% of the new stock. The bankruptcy judge is allowing the company to pay trade suppliers in full even before the plan is confirmed. The Plan will be financed in part by $20 million in new preferred stock being purchased by the principal shareholder, Quad-C Management Inc. The bankruptcy judge set up a hearing on Dec. 23 for approval of $20 million in debtor-in-possession financing from existing lenders. In addition to the second-lien debt where Bank of New York serves as agent, liabilities include $239 million on a first-lien revolving credit and term loan with BNP Paribas as agent. The company also owes $54.7 million on 14.5 percent unsecured notes owing to Apollo Investment Corp. About Generation Brands Generation Brands is one of America's leading companies serving the lighting, electrical wholesale, home improvement, home decor, and building industries. The company has an outstanding portfolio of fashionable and functional lighting fixtures, ceiling fans, and decorative products that provide value and growth for its customers and end-users. Generation Brands LLC, along with affiliates that include Quality Home Brands Holdings LLC, filed for Chapter 11 on Dec. 4, 2009 (Bankr. D. Del. Lead Case No. 09-14312). The Company was advised in connection with its pre-packaged Chapter 11 financial reorganization by White & Case LLP and Barclays Capital. Generation Brands listed assets of $520 million and debt of $488 million. GENERATION BRANDS: Receives Approval of First Day Motions --------------------------------------------------------- Generation Brands disclosed that Judge Peter J. Walsh of the U.S. Bankruptcy Court in Wilmington, Delaware, on December 8 approved the Company's requests to permit it to continue working with its customers, suppliers and employees in the normal course. The Court also determined that it will hold a hearing to consider confirmation of the proposed pre-packaged plan of reorganization on January 15, 2010. If the plan is approved at the hearing, the Company expects to emerge from bankruptcy by the end of January. The Company received Court permission to pay its suppliers in the ordinary course of business, including with respect to goods and services provided before the December 4 Chapter 11 filing. The Company also said that it received Court authority to pay pre- petition employee wages and benefits and commissions to sales agents. The Company's various customer programs, including rebates, discounts and warranties, will continue as they always have. "We are pleased that the Court approved our first-day motions, ensuring that our customers, employees and suppliers will see no difference in our daily operations," said President and Chief Executive Officer T. Tracy Bilbrough. The Company said it received interim Court approval to use its cash collateral to fund its operating expenses. As previously announced, the Company received commitments for a $20 million debtor-in-possession (DIP) revolving credit facility which will provide the Company with additional liquidity during its brief restructuring period. The bankruptcy court will consider approval of the DIP financing on December 23, 2009. "With our confirmation hearing set for January 15, 2010, we are on track to successfully complete the restructuring of our balance sheet, eliminating more than $150 million of debt, and emerge from Chapter 11 by the end of January," Mr. Bilbrough concluded. The Company filed its voluntary petitions in the U.S. Bankruptcy Court for the District of Delaware in Wilmington. The Company was advised in connection with its pre-packaged Chapter 11 financial reorganization by White & Case LLP and Barclays Capital. About Generation Brands Generation Brands is one of America's leading companies serving the lighting, electrical wholesale, home improvement, home decor, and building industries. The company has an outstanding portfolio of fashionable and functional lighting fixtures, ceiling fans, and decorative products that provide value and growth for its customers and end-users. Generation Brands LLC, along with affiliates that include Quality Home Brands Holdings LLC, filed for Chapter 11 on Dec. 4, 2009 (Bankr. D. Del. Case No. 09-14315). The Company was advised in connection with its pre-packaged Chapter 11 financial reorganization by White & Case LLP and Barclays Capital. GENERAL GROWTH: 32 Affiliates Join as Proponents of Ch. 11 Plan --------------------------------------------------------------- Thirty-two more debtor affiliates of General Growth Properties, Inc., were added as proponents to the Joint Plan of Reorganization. The additional Plan Proponent Debtors are: * Bakersfield Mall LLC * Bakersfield Mall, Inc. * Bellis Fair Partners * Fashion Place Anchor Acquisition, LLC * Fashion Place, LLC * Gateway Overlook Business Trust * Gateway Overlook II Business Trust * GGP General II, Inc. * GGP-Lansing Mall, Inc. * GGP-Tucson Mall L.L.C. * Ho Retail Properties II Limited Partnership * Lancaster Trust * Lansing Mall Limited Partnership * Lincolnshire Commons, LLC * PARCIT-IIP Lancaster Venture * Parcity L.L.C. * Parcity Trust * Park City Holding, Inc. * PC Lancaster L.L.C. * PC Lancaster Trust * RASCAP Realty, Ltd. * Rouse SI Shopping Center, LLC * RS Properties Inc. * Stonestown Shopping Center Holding L.L.C. * Stonestown Shopping Center L.L.C. * Stonestown Shopping Center, L.P. * Tucson Anchor Acquisition, LLC * Valley Plaza Anchor Acquisition, LLC * Visalia Mall L.L.C. * Visalia Mall, L.P. * Champaign Market Place L.L.C. * Columbia Mall L.L.C. Supplements to Reorganization Plan In light of the addition of 32 Debtors as Plan Proponents, the Debtors, on December 8 and 9, 2009, supplemented the Disclosure Statement accompanying the Joint Plan of Reorganization. The Amended Disclosure Statement disclosed these matters: (1) Debtor GGP-Tucson Mall L.L.C. is a defendant to a litigation commenced by KLN Partners, LLC, et al. in an Arizona state court. On December 1, 2008, all of the claims were dismissed in the State Court Action except KLN's claims against GGP-Tucson. Discovery was underway at the time the Debtors' Chapter 11 cases were filed and an automatic stay went into effect pursuant to Section 362 of the Bankruptcy Code. (2) The merger, dissolution or consolidation of about 13 properties by the Subsequent Plan Debtors in conjunction with implementation of the Plan. A chart showing the 13 Properties' reorganization process is available for free at http://bankrupt.com/misc/ggp_13propreorgchart.pdf (3) There will be no structural changes to the two properties of Subsequent Plan Debtors Champaign Market Place L.L.C.'s and Columbia Mall L.L.C.'s ownership structure upon emergence. A chart showing the two properties' reorganization process is available for free at: http://bankrupt.com/misc/ggp_2propreorgchart.pdf (4) AEGON USA Realty Advisors; Capmark Finance, Inc.; Centerline Servicing, Inc.; CWCapital Asset Management LLC; J.E. Robert Company, Inc.; Helios AMC; ING Clarion; LNR Partners, Inc.; Midland Loan Services, Inc.; ORIX Capital Markets LLC; Pacific Life, or any successors, are identified as "Special Servicers." (5) The original coded organization chart, which depicts the current organizational structure of the GGP Group, as well as certain joint ventures in which the GGP Group holds ownership interests, was replaced. A copy of the Chart is available for free at: http://bankrupt.com/misc/ggp_am_codedorgchart.pdf Full-text copies of the First and Second Disclosure Statement Supplements are available for free at: * http://bankrupt.com/misc/ggp_1stDSSupp.pdf * http://bankrupt.com/misc/ggp_2ndDSSupp.pdf Financial Projections The Plan Debtors also presented to the Court on December 7, 2009, financial projections under the Plan. The Plan Debtors estimate that the total payments required under the Plan at emergence are $423.2 million. Of the $423.2 million, $315.8 million is associated with the mortgage and mezzanine debt restructuring, including extension fees, servicer fees and expenses, catch-up amortization payments, accrued interest, the funding of certain escrow and other expenses. A further $107.4 million is associated with distributions related to prepetition claims against the Plan Debtors. The Plan Debtors, according to Marcia L. Goldstein, Esq., at Weil, Gotshal & Manges LLP, in New York, are expected to fund these restructuring costs and Plan distributions predominately from funds generated by the Plan Debtors since the Petition Date, with additional support from excess liquidity of General Growth Properties Limited Partnership. In connection with negotiations between the Plan Debtors and the Secured Debt Holders, the Plan Debtors completed in August 2009 the preparation of long-term project-level financial projections, which were provided to the Secured Debt Holders and other key constituencies in the Debtors' Chapter 11 cases. Ms. Goldstein says the project-level projections show that the Plan Debtors will have cash flow well in excess of the amounts necessary to satisfy their principal and interest payments under the restructured secured loans and all other cash needs through 2014. However, she notes that the Plan Debtors' cash flow in 2010 is estimated to be $51.6 million less than their cash needs, due primarily to the $150 million pay-down of the secured debt on GGP Ala Moana L.L.C.'s property as negotiated as part of the restructuring of that entity's property level secured loan. GGP expects to fund this shortfall out of excess liquidity of GGP LP. The Ala Moana pay-down also can be deferred beyond 2010, she says. Ms. Goldstein adds that the consolidated cash forecast for the period December 2009 to December 2010 shows that GGP has sufficient cash to fund the Emergence Costs of the Plan Debtors as well as the estimated $51.6 million shortfall in 2010. On a pro forma basis including all estimated Emergence Costs and other payments required by the Plan, GGP projects it will have $192.3 million in cash available at the end of 2010. A table showing GGP's 13 Months Cash Forecast is available for free at http://bankrupt.com/misc/ggp_cashforecast.pdf Amended Plan Exhibits The Plan Debtors filed with the Court amended exhibits to their Plan: * December 8, 2009 amended list of executory contracts to be assumed under the Plan, available for free at: http://bankrupt.com/misc/ggp_dec9contractlist.pdf * amended schedule of contracts that have expired, available for free at: http://bankrupt.com/misc/ggp_dec9expiredpacts.pdf * December 9, 2009 amended schedule of executory contracts to be assumed under the Plan, available for free at: http://bankrupt.com/misc/ggp_dec9Acontractlist.pdf About General Growth Properties Based in Chicago, Illinois, General Growth Properties, Inc. -- http://www.ggp.com/-- is the second-largest U.S. mall owner, having ownership interest in, or management responsibility for, more than 200 regional shopping malls in 44 states, as well as ownership in master planned community developments and commercial office buildings. The Company's portfolio totals roughly 200 million square feet of retail space and includes more than 24,000 retail stores nationwide. General Growth is a self- administered and self-managed real estate investment trust. The Company's common stock is trading in the pink sheets under the symbol GGWPQ. General Growth Properties Inc. and its affiliates filed for Chapter 11 on April 16, 2009 (Bankr. S.D.N.Y., Case No. 09-11977). Marcia L. Goldstein, Esq., Gary T. Holtzer, Esq., Adam P. Strochak, Esq., and Stephen A. Youngman, Esq., at Weil, Gotshal & Manges LLP, have been tapped as bankruptcy counsel. Kirkland & Ellis LLP is co-counsel. Kurtzman Carson Consultants LLC has been engaged as claims agent. The Company also hired AlixPartners LLP as financial advisor and Miller Buckfire Co. LLC, as investment bankers. The Debtors disclosed $29,557,330,000 in assets and $27,293,734,000 in debts as of December 31, 2008. Bankruptcy Creditors' Service, Inc., publishes General Growth Bankruptcy News. The newsletter tracks the Chapter 11 proceeding undertaken by General Growth Properties Inc. and its various affiliates. (http://bankrupt.com/newsstand/or 215/945-7000) GENERAL GROWTH: Dillard's Inc. Objects to Plan Confirmation ----------------------------------------------------------- Dillard's Inc. and its affiliates complain that the Joint Plan of Reorganization of General Growth Properties Inc.'s units impairs their legal, equitable and contractual rights under their agreements with the Debtors. Dillard's asserts that, under those Agreements, the Debtors are required to, among others, satisfy all mechanic's liens against Dillard's premises, and indemnify and defend Dillard's from certain claims against Dillard's. Moreover, Dillard's notes that it may have claims against Debtors who are not Plan Debtors arising out of the Agreements. In assuming the Agreements, Dillard's asserts that the Plan Debtors cannot pick and choose which contractual provisions they will perform post-confirmation and which will be overridden by other provisions of the Joint Plan of Reorganization. Thus, Dillard's asks the Court to deny confirmation of the Plan unless the Plan is revised to preserve Dillard's rights. As reported by the TCR on Dec. 3, 2009, General Growth Properties has filed a plan of reorganization and related disclosure statement. The Plan is associated with roughly $9.7 billion of secured mortgage loans, as GGP has reached consensual agreements in principal with certain secured mortgage lenders. The Plan provides that all undisputed claims against the emerging debtors for prepetition goods and services will be paid in full. Confirmation of the plan of reorganization is currently scheduled for December 15, 2009. About General Growth Based in Chicago, Illinois, General Growth Properties, Inc. -- http://www.ggp.com/-- is the second-largest U.S. mall owner, having ownership interest in, or management responsibility for, more than 200 regional shopping malls in 44 states, as well as ownership in master planned community developments and commercial office buildings. The Company's portfolio totals roughly 200 million square feet of retail space and includes more than 24,000 retail stores nationwide. General Growth is a self- administered and self-managed real estate investment trust. The Company's common stock is trading in the pink sheets under the symbol GGWPQ. General Growth Properties Inc. and its affiliates filed for Chapter 11 on April 16, 2009 (Bankr. S.D.N.Y., Case No. 09-11977). Marcia L. Goldstein, Esq., Gary T. Holtzer, Esq., Adam P. Strochak, Esq., and Stephen A. Youngman, Esq., at Weil, Gotshal & Manges LLP, have been tapped as bankruptcy counsel. Kirkland & Ellis LLP is co-counsel. Kurtzman Carson Consultants LLC has been engaged as claims agent. The Company also hired AlixPartners LLP as financial advisor and Miller Buckfire Co. LLC, as investment bankers. The Debtors disclosed $29,557,330,000 in assets and $27,293,734,000 in debts as of December 31, 2008. Bankruptcy Creditors' Service, Inc., publishes General Growth Bankruptcy News. The newsletter tracks the Chapter 11 proceeding undertaken by General Growth Properties Inc. and its various affiliates. (http://bankrupt.com/newsstand/or 215/945-7000) GENERAL GROWTH: Proposes to Declare & Pay $101MM in Dividends ------------------------------------------------------------- General Growth Properties, Inc., operates as a self-managed real estate investment trust. REITs, pursuant to Section 856 of the Internal Revenue Code, as amended, are afforded unique and favorable income tax treatment. This unique status permits a REIT to avoid paying entity-level income taxes if it maintains its REIT status and makes certain distribution to shareholders, Marcia L. Goldstein, Esq., at Weil, Gotshal & Manges LLP, in New York, explains. The favorable tax status of a REIT as essentially a non-tax payer makes it attractive as an investment and is a significant driver of GGP's overall enterprise value, Ms. Goldstein tells the Court. Ms. Goldstein says GGP has maintained its status as a REIT and avoided having to pay entity level income taxes or the Excise Tax by distributing at least 100% of its taxable income to its shareholders in cash. However, current Internal Revenue Service guidance provides that a REIT's distribution of its taxable income for the purpose of maintaining its REIT status and avoiding entity level income taxes need not be satisfied solely in cash, she points out. GGP, by this motion, thus seeks the Court's authority to maintain its REIT status and avoid entity level income taxes and the Excise Tax by declaring and paying a dividend equal to 100% of its taxable income, which dividend will be paid partially with GGP common stock and partially with cash. Stockholders, Ms. Goldstein says, will be given an election to receive their dividend in either cash or common stock, subject to a 10% cap on the aggregate portion of the dividend to be paid in cash. GGP estimates its 2009 dividend obligation to be $101 million, of which $90.9 million will be paid in stock and $10.1 million in cash. Ms. Goldstein reiterates that the figure is a current estimate, and the Debtors are working diligently to prepare final numbers. She says it is possible that the amounts cited, including the Excise Tax, could vary by as much as 20-30%. Specifically, the Debtors seek the Court's authority: (i) to declare and make the dividends and distributions for the 2009 fiscal year to enable GGP to maintain its qualification as a REIT and to avoid payment of entity level income taxes and an Excise Tax; and (ii) for their directors and officers, as applicable, to take necessary steps to implement and effectuate the declaration and payment of the Dividend. Ms. Goldstein points out that the Debtors' business model, and the enterprise's attractiveness to all stakeholders on a going- forward basis, is predicated on GGP retaining its REIT qualification and avoiding entity level taxation. However, GGP's failure to satisfy its REIT-related dividend obligations by December 21, 2009, would cause it to incur an Excise Tax for $3,434,000, she says. GGP would then be obligated to pay the Excise Tax no later than March 15, 2010. The $3,434,000 tax penalty is on account of a $10,100,000 cash obligation that still would have to be paid by December 31, 2010, in order for GGP to maintain its REIT status, she asserts. Thus, the loss of GGP's REIT status would cause the Debtors to incur, based on current projections, several billion dollars in tax obligations for the tax years 2009 to 2013, she maintains. Ms. Goldstein adds that the Official Committee of Unsecured Creditors has informed the Debtors that it does not oppose the proposed Dividend declaration and payment provided that (i) none of the facts related to the proposed Dividend are altered prior to the entry of an order approving the Motion, and (ii) the cash component of the Dividend does not exceed 10% of GGP's aggregate REIT-related dividend obligation. Ms. Goldstein further discloses that the Debtors must declare the Dividend prior to December 31, 2009 and pay the same by January 29, 2010. Thus, the Debtors ask the Court that any order approving the Motion should be effective immediately by providing that the 14-day stay under Rule 6004(h) of the Federal Rules of Bankruptcy Procedure is waived. The Debtors further ask the Court to shorten notice with respect to the Dividend Motion, and consider the Dividend Motion at a hearing scheduled for December 18, 2009. About General Growth Properties Based in Chicago, Illinois, General Growth Properties, Inc. -- http://www.ggp.com/-- is the second-largest U.S. mall owner, having ownership interest in, or management responsibility for, more than 200 regional shopping malls in 44 states, as well as ownership in master planned community developments and commercial office buildings. The Company's portfolio totals roughly 200 million square feet of retail space and includes more than 24,000 retail stores nationwide. General Growth is a self- administered and self-managed real estate investment trust. The Company's common stock is trading in the pink sheets under the symbol GGWPQ. General Growth Properties Inc. and its affiliates filed for Chapter 11 on April 16, 2009 (Bankr. S.D.N.Y., Case No. 09-11977). Marcia L. Goldstein, Esq., Gary T. Holtzer, Esq., Adam P. Strochak, Esq., and Stephen A. Youngman, Esq., at Weil, Gotshal & Manges LLP, have been tapped as bankruptcy counsel. Kirkland & Ellis LLP is co-counsel. Kurtzman Carson Consultants LLC has been engaged as claims agent. The Company also hired AlixPartners LLP as financial advisor and Miller Buckfire Co. LLC, as investment bankers. The Debtors disclosed $29,557,330,000 in assets and $27,293,734,000 in debts as of December 31, 2008. Bankruptcy Creditors' Service, Inc., publishes General Growth Bankruptcy News. The newsletter tracks the Chapter 11 proceeding undertaken by General Growth Properties Inc. and its various affiliates. (http://bankrupt.com/newsstand/or 215/945-7000) GENERAL MOTORS: New GM Returns $140MM Treasury Loan --------------------------------------------------- General Motors Company returned $140 million of the $290 million received from the United States Department of the Treasury for payments to parts suppliers, The Associated Press reported on November 24, 2009. Originally, $2.5 billion was pledged to GM from the Treasury Department's bailout to support GM's suppliers, however, GM only received $290 million, AP explained. GM spokesperson Alan Adler disclosed that GM believes that it will only use $150 million, AP said. Mr. Adler further stated that GM's suppliers drew less money from an account administered by GM as GM's cash flow improved, AP added. About General Motors General Motors Company -- http://www.gm.com/-- is one of the world's largest automakers, tracing its roots back to 1908. With its global headquarters in Detroit, GM employs 209,000 people in every major region of the world and does business in some 140 countries. GM and its strategic partners produce cars and trucks in 34 countries, and sell and service these vehicles through these brands: Buick, Cadillac, Chevrolet, GMC, GM Daewoo, Holden, Opel, Vauxhall and Wuling. GM's largest national market is the United States, followed by China, Brazil, the United Kingdom, Canada, Russia and Germany. GM's OnStar subsidiary is the industry leader in vehicle safety, security and information services. GM acquired its operations from General Motors Company, n/k/a Motors Liquidation Company, on July 10, 2009, pursuant to a sale under Section 363 of the Bankruptcy Code. Motors Liquidation or Old GM is the subject of a pending Chapter 11 reorganization case before the U.S. Bankruptcy Court for the Southern District of New York. At September 30, 2009, GM had $107.45 billion in total assets against $135.60 billion in total liabilities. About Motors Liquidation General Motors Corporation and three of its affiliates filed for Chapter 11 protection on June 1, 2009 (Bankr. S.D.N.Y. Lead Case No. 09-50026). General Motors changed its name to Motors Liquidation Co. following the sale of its key assets to a company 60.8% owned by the U.S. Government. The Honorable Robert E. Gerber presides over the Chapter 11 cases. Harvey R. Miller, Esq., Stephen Karotkin, Esq., and Joseph H. Smolinsky, Esq., at Weil, Gotshal & Manges LLP, assist the Debtors in their restructuring efforts. Al Koch at AP Services, LLC, an affiliate of AlixPartners, LLP, serves as the Chief Executive Officer for Motors Liquidation Company. GM is also represented by Jenner & Block LLP and Honigman Miller Schwartz and Cohn LLP as counsel. Cravath, Swaine, & Moore LLP is providing legal advice to the GM Board of Directors. GM's financial advisors are Morgan Stanley, Evercore Partners and the Blackstone Group LLP. Bankruptcy Creditors' Service, Inc., publishes General Motors Bankruptcy News. The newsletter tracks the Chapter 11 proceeding undertaken by General Motors Corp. and its various affiliates. (http://bankrupt.com/newsstand/or 215/945-7000) GENERAL MOTORS: Treasury Says It May Not Get Full Investment ------------------------------------------------------------ Dow Jones Newswires' Meena Thiruvengadam reports that U.S. Treasury Secretary Timothy Geithner this week told the Congressional Oversight Panel, one of several entities overseeing the Troubled Asset Relief Program, there is a significant likelihood "we will not be repaid for the full value of our investments in AIG, GM, and Chrysler." Dow Jones notes the Treasury in fiscal year 2009 alone estimated its losses on capital provided to those firms to be near $61 billion. According to a report released by the Government Accountability Office -- and reported by the Troubled Company Reporter on November 10, 2009 -- the Treasury provided $81.1 billion aid to the U.S. auto industry, of which $62 billion was provided to Chrysler Group and GM to help the auto makers in their restructuring. In return, the government agency received 9.85% equity in Chrysler, 60.8% equity and $2.1 billion in preferred stock in GM, and $13.8 billion in debt obligations between the auto makers. GAO estimated that the equity value of Chrysler Group necessary to recoup investment must be $54.8 billion while GM would need to be worth $66.9 billion. The agency also assumed that $5.4 billion that was lent to Chrysler and $986 million to GM would not be repaid. "Treasury is unlikely to recover the entirety of its investment in Chrysler or GM, given that the companies' values would have to grow substantially above what they have been in the past," GAO said in its 41-page report. In September 2008, AIG experienced a liquidity crunch when its credit ratings were downgraded below "AA" levels by Standard & Poor's, Moody's Investors Service and Fitch Ratings. On September 16, 2008, the Federal Reserve Bank created an $85 billion credit facility to enable AIG to meet increased collateral obligations consequent to the ratings downgrade, in exchange for the issuance of a stock warrant to the Fed for 79.9% of the equity of AIG. The credit facility was eventually increased to as much as $182.5 billion. AIG has sold a number of its subsidiaries and other assets to pay down loans received from the U.S. government, and continues to seek buyers of its assets. According to Dow Jones' Darrell A. Hughes and Ms. Thiruvengadam, Mr. Geithner said in letters to U.S. lawmakers, the Obama administration would extend the $700 billion financial-sector bailout from its scheduled Dec. 31 expiration but limit new spending to such areas as housing and small business. The report relates Mr. Geithner said the financial sector has stabilized, but the government needs to have funds available through next October. those aimed at job creation. The report notes that President Barack Obama on Tuesday said the White House would use an additional $50 billion in TARP funds to help small businesses get credit. "While we are extending the $700 billion program, we do not expect to deploy more than $550 billion," Mr. Geithner said, Dow Jones reports. He added the U.S. would seek to exit its TARP investments "as soon as practicable." About AIG Based in New York, American International Group, Inc., is the leading international insurance organization with operation in more than 130 countries and jurisdictions. AIG companies serve commercial, institutional and individual customers through the most extensive worldwide property-casualty and life insurance networks of any insurer. In addition, AIG companies are leading providers of retirement services, financial services and asset management around the world. AIG's common stock is listed on the New York Stock Exchange, as well as the stock exchanges in Ireland and Tokyo. About Chrysler Group LLC Headquartered in Auburn Hills, Michigan, Chrysler Group LLC, formed in 2009 from a global strategic alliance with Fiat Group, produces Chrysler, Jeep, Ram, Dodge, Mopar and Global Electric Motorcars (GEM) brand vehicles and products. Chrysler LLC and 24 affiliates on April 30 sought Chapter 11 protection from creditors (Bankr. S.D.N.Y (Mega-case), Lead Case No. 09-50002). Chrysler hired Jones Day, as lead counsel; Togut Segal & Segal LLP, as conflicts counsel; Capstone Advisory Group LLC, and Greenhill & Co. LLC, for financial advisory services; and Epiq Bankruptcy Solutions LLC, as its claims agent. Chrysler has changed its corporate name to Old CarCo following its sale to a Fiat-owned company. As of December 31, 2008, Chrysler had $39,336,000,000 in assets and $55,233,000,000 in debts. Chrysler had $1.9 billion in cash at that time. In connection with the bankruptcy filing, Chrysler reached an agreement with Fiat SpA, the U.S. and Canadian governments and other key constituents regarding a transaction under Section 363 of the Bankruptcy Code that would effect an alliance between Chrysler and Italian automobile manufacturer Fiat. Under the terms approved by the Bankruptcy Court, the company formerly known as Chrysler LLC on June 10, 2009, formally sold substantially all of its assets, without certain debts and liabilities, to a new company that will operate as Chrysler Group LLC. Fiat has a 20 percent equity interest in Chrysler Group. Bankruptcy Creditors' Service, Inc., publishes Chrysler Bankruptcy News. The newsletter tracks the Chapter 11 proceedings of Chrysler LLC and its debtor-affiliates. (http://bankrupt.com/newsstand/or 215/945-7000) About General Motors General Motors Company -- http://www.gm.com/-- is one of the world's largest automakers, tracing its roots back to 1908. With its global headquarters in Detroit, GM employs 209,000 people in every major region of the world and does business in some 140 countries. GM and its strategic partners produce cars and trucks in 34 countries, and sell and service these vehicles through these brands: Buick, Cadillac, Chevrolet, GMC, GM Daewoo, Holden, Opel, Vauxhall and Wuling. GM's largest national market is the United States, followed by China, Brazil, the United Kingdom, Canada, Russia and Germany. GM's OnStar subsidiary is the industry leader in vehicle safety, security and information services. GM acquired its operations from General Motors Company, n/k/a Motors Liquidation Company, on July 10, 2009, pursuant to a sale under Section 363 of the Bankruptcy Code. Motors Liquidation or Old GM is the subject of a pending Chapter 11 reorganization case before the U.S. Bankruptcy Court for the Southern District of New York. At September 30, 2009, GM had $107.45 billion in total assets against $135.60 billion in total liabilities. About Motors Liquidation General Motors Corporation and three of its affiliates filed for Chapter 11 protection on June 1, 2009 (Bankr. S.D.N.Y. Lead Case No. 09-50026). General Motors changed its name to Motors Liquidation Co. following the sale of its key assets to a company 60.8% owned by the U.S. Government. The Honorable Robert E. Gerber presides over the Chapter 11 cases. Harvey R. Miller, Esq., Stephen Karotkin, Esq., and Joseph H. Smolinsky, Esq., at Weil, Gotshal & Manges LLP, assist the Debtors in their restructuring efforts. Al Koch at AP Services, LLC, an affiliate of AlixPartners, LLP, serves as the Chief Executive Officer for Motors Liquidation Company. GM is also represented by Jenner & Block LLP and Honigman Miller Schwartz and Cohn LLP as counsel. Cravath, Swaine, & Moore LLP is providing legal advice to the GM Board of Directors. GM's financial advisors are Morgan Stanley, Evercore Partners and the Blackstone Group LLP. Bankruptcy Creditors' Service, Inc., publishes General Motors Bankruptcy News. The newsletter tracks the Chapter 11 proceeding undertaken by General Motors Corp. and its various affiliates. (http://bankrupt.com/newsstand/or 215/945-7000) GENOIL INC: Elliott Davis Discloses 10.2% Equity Stake ------------------------------------------------------ Elliott Davis Investment Advisory Services, LLC, and Tyson Halsey, CFA, disclosed that they beneficially own 27,932,696 shares or roughly 10.2% of the common stock of GenOil Inc. at November 30, 2009. Genoil Inc. is a technology development company focused on providing innovative solutions to the oil and gas industry through the use of proprietary technologies. The Company's business activities are primarily directed to the development and commercialization of its upgrader technology, which is designed to economically convert heavy crude oil into light synthetic crude. The Company is listed on the TSX Venture Exchange under the symbol GNO as well as the Nasdaq OTC Bulletin Board using the symbol GNOLF.OB. At September 30, 2009, the Company had C$4,346,205 in total assets against C$2,363,706 in total current liabilities and C$169,167 in convertible note obligations, resulting in shareholders' equity of C$1,813,332. At September 30, 2009, the Company had accumulated deficit of C$66,561,206. As at September 30, 2009, the Company had incurred accumulated losses of C$66,561,206 (December 31, 2008 -- C$62,889,226) since inception. The Company said its ability to continue as a going concern is in substantial doubt and is dependent on achieving profitable operations, commercializing its upgrader technology, and obtaining the necessary financing to develop this technology further. The outcome of these matters cannot be predicted at this time. The Company will continue to review the prospects of raising additional debt and equity financing to support its operations until such time that its operations become self- sustaining, to fund its research and development activities and to ensure the realization of its assets and discharge of its liabilities. While the Company is expending its best efforts to achieve the plans, there is no assurance that any such activity will generate sufficient funds for future operations. The Company is not expected to be profitable during the ensuing 12 months and therefore must rely on securing additional funds from either issuance of debt or equity financing for cash consideration. GEORGIA GULF: Moody's Assigns 'B3' Rating on $500 Mil. Notes ------------------------------------------------------------ Moody's Investors Service assigned a B3 rating to $500 million senior secured notes due 2016 to be issued by Georgia Gulf Corporation. Proceeds will be used to repay GGC's senior secured revolver and term loan. Coincident with this refinancing, GGC will enter into a $300 million senior secured asset-backed revolving credit facility due 2013. The outlook is stable. Moody's also affirmed the GGC's other ratings (Corporate Family Rating of B2) and advised that the ratings on GGC's senior secured revolver and term loan would be withdrawn upon successful completion of this transaction. In addition, the LGD point estimates for the unsecured and subordinated notes will also be changed to reflect this refinancing upon the completion of the transaction. "The completion of the exchange offer and the bank amendment will provide Georgia Gulf with a sustainable capital structure and should enable it to navigate the current downturn, despite continuing uncertainty over the timing of a recovery in the housing and construction markets," stated John Rogers, Senior Vice President at Moody's. The notes are secured by a first-priority lien on substantially all of GGC's U.S. assets including equipment, real estate and stock of domestic subsidiaries, as well as 65% of the stock of its Canadian subsidiaries, subject to certain restrictions. The notes will have a second-priority lien on GGC's U.S. accounts receivable and inventory. The notes are notched below the corporate family rating due to the size of the ABL facility, weaker collateral package (relative to the ABL), and a very modest amount of unsecured debt and other liabilities. GGC's B2 CFR reflects the company's weak financial performance and uncertainty over the timing of a recovery in the US housing market. GGC has substantial leverage to a recovery in the US housing market and Moody's expects a dramatic improvement in financial metrics coincident with the housing rebound. However, earnings from its chlor alkali operations, which generated more profit than expected in the first half of 2009, are expected to experience a trough in 2010. The stable outlook assumes the decline in chlor alkali earnings is more than offset by the benefits from cost reduction efforts and that the reported four-quarter trailing EBITDA remains above $150 million. The trailing four-quarter metrics ending September 30, 2009 have improved significantly due to the debt for equity swap and a strong third quarter; Debt/EBITDA declined below 4.5x. If debt-to-EBITDA remains below 5.0x and Retained Cash Flow/Total Debt rises meaningfully above 10%, Moody's would consider the appropriateness of a higher rating. Conversely, any meaningful shortfall in EBITDA ($10 million or more) or increase in debt ($75 million or more) could prompt a negative outlook. Ratings assigned: Georgia Gulf Corporation -- Senior secured notes at B3, LGD4 (63%) The last rating action on Georgia Gulf Corporation was on July 30, 2009, when Moody's upgraded Georgia Gulf's ratings due to the debt-for-equity swap. Georgia Gulf Corporation, headquartered in Atlanta, Georgia, is a producer of commodity chemicals including chlorovinyls (chlorine, caustic soda, vinyl chloride monomer, polyvinyl chloride resins and vinyl compounds), PVC fabricated products (pipe, siding, window profiles, plastic lumber, etc.), and aromatics (cumene, phenol and acetone). GHOST TOWN: Failed to Pay 2-Week Worth of Salaries Before Closing ----------------------------------------------------------------- Becky Johnson, staff writer at Smokey Mountain News, Ghost Town in the Sky failed to pay employees for their final two weeks of work before shutting down for the winter. Chief executive officer Steve Shiver said the Company still plans to pay employees what they are owed, Ms. Johnson notes. Ghost Town Partners, LLC, operated Ghost Town in the Sky, an amusement park located in the Great Smoky Mountains in Maggie Valley, North Carolina. Ghost Town in the Sky -- http://www.ghosttowninthesky.com/-- featured staged gunfights, live music and shows, crafts, and food. Ghost Town Partners filed for Chapter 11 protection on March 11, 2009 (Bankr. W.D. N.C. Case No. 09-10271). David G. Gray, Esq., at Westall, Gray, Connolly & Davis, P.A., and William E. Cannon, Jr., at Brown, Ward & Haynes P.A., represent the Debtor in its restructuring efforts. In its bankruptcy petition, the Debtor listed total assets of $13,035,300 and total debts of $12,305,672. GOODMAN GLOBAL: Moody's Rates $320 Mil. Senior Notes at 'B3' ------------------------------------------------------------ Moody's has rated Goodman Global Group, Inc.'s new proposed $320 million senior unsecured holdco PIK note due 2014 B3 and has assigned a B1 Corporate Family Rating and Probability of Default to Goodman Global Group, Inc. The B1 CFR and PDR at the subsidiary Goodman Global, Inc., will be withdrawn at the close of the transaction. The rating on Goodman Global Inc.'s senior secured term loan due 2014 was affirmed at Ba3. The ratings outlook remains negative. The negative ratings outlook reflects the view that the weak economic environment may continue and considers the increased leverage from the contemplated $400 million dividend. The dividend is to be funded through a combination of the new $320 million senior unsecured holdco note and with existing cash on hand. As a result of the dividend, leverage is increasing by almost a full turn to approximately 4.7x LTM EBITDA. The company had recently been performing above Moody's expectations and its credit metrics were increasingly supportive of a stable ratings outlook. The B3 rating on the new $320 million senior unsecured holdco PIK note, two notches below the CFR, reflects its lack of guarantees and its structural subordination to the debt at Goodman Global Inc, its primary operating company. The debt is being issued by Goodman Global Group, Inc., the primary holding company which is owned by private equity firm Hellman & Friedman LLC. These ratings/assessments have been affected: Goodman Global Group, Inc. -- Corporate Family Rating, assigned B1; -- Probability of Default Rating, assigned B1; -- $320 senior discount notes due 2014, assigned B3 (LGD6, 92%). Goodman Global, Inc. -- $772 million (originally $800 million) senior secured term loan due 2014, affirmed at Ba3 (LGD3, 38%) from Ba3 (LGD3, 40%). The Corporate Family Rating and Probability of Default Rating at Goodman Global, Inc., will be withdrawn at the close of the transaction. The last rating action on Goodman Global, Inc., was on June 16, 2009, when the company's B1 CFR and PDF were affirmed and the outlook was changed to negative. Goodman, located in Houston, Texas, is a domestic manufacturer of heating, ventilation and air conditioning products for residential and commercial use. Total revenues for the LTM period through September 30, 2009, were approximately $1.8 billion. GPX INTERNATIONAL: Expects Assets Sale to Close This Year --------------------------------------------------------- GPX International Tire Corporation said it received approval from the Bankruptcy Court to complete the sale of its business in three discrete transactions that are expected to close prior to the end of the year, subject to closing conditions. All three buyers were the original stalking horse bidders. U.S. Bankruptcy Judge Joan N. Feeney approved these transactions: -- U.S. Assets -- GPX's U.S. operations will be sold to Alliance Tire Corporation. Alliance submitted the winning bid in an auction conducted after Titan International, Inc., submitted an alternative offer. Alliance will acquire the Company's U.S. operations, including its assets, customer relationships, warehouse footprint, world-wide rights to the Galaxy and Primex brands, the Company's medium radial truck distribution business and the Company's South African entity, GPX Tyre South Africa (Pty.). Alliance is a global leader specializing in the development, manufacture and sale of highly engineered agricultural, forestry, construction and earthmover tires worldwide. Alliance manufactures in Israel and has recently completed a state of the art factory in India. Alliance will continue to market Galaxy, Primex, other GPX brands, and medium radial truck tires to GPX's customer base. GPX customers will benefit from the complementary strengths of the Alliance and GPX product lines, particularly in the agricultural and construction tire segments. Alliance will continue to source products from GPX's valued network of manufacturers in China and elsewhere. The combination of the Alliance and GPX manufacturing resources provides Alliance with a large, diverse, and highly flexible global sourcing platform that is capable of providing competitive products in all segments of the off-the-road tire industry in North America and throughout the world. -- Canadian Transaction -- GPX's Canadian subsidiary, Dynamic Tire Corp., will be sold to a management buyout team led by Robert Sherkin and Peter Koszo. Under the terms of the transaction, the company's Canadian subsidiary will become a separate entity engaged in the sale and distribution in Canada of Galaxy and Primex brand off-the-road tires, the sale and distribution of medium radial truck and passenger car tires, and private label sourcing. Dynamic will continue to operate this business, purchase tires from longstanding suppliers and provide customers with a high level of customer service as it has done in the past. -- Solid Tire Transaction -- The Company's Solid Tire business, together with its Gorham, ME; Red Lion, PA; and Hebei, China manufacturing facilities will be sold to MITL Acquisition Company, which is capitalized by an investor group working in cooperation with management. The Solid Tire business will maintain manufacturing operations in the Maine, Pennsylvania and Hebei, China facilities in order to market the MaineTire, MITL, ITL and Brawler brands to its customers. "The court's approval of these transactions is an excellent outcome for the Company and its customers, vendors and employees," said Craig Steinke, GPX's chief executive officer. "We are excited to work with the three acquirers to close the transactions prior to the end of the year. In doing so, we will enable the continuation of quality and innovation inherent in GPX's brands while providing employment for over 95 percent of GPX's workforce." The Company anticipates that all three sales will close prior to December 31, 2009. About GPX International Tire GPX International Tire Corporation is one of the largest independent global providers of specialty "off-the-road" tires for the agricultural, construction, materials handling and transportation industries. GPX is a worldwide company, headquartered in Malden, Massachusetts, with operations in NorthAmerica, China, Canada, and Germany. A third generation family-owned business, GPX and its predecessor companies have been in business since 1922. GPX International filed for Chapter 11 on Oct. 26, 2009 (Bankr. D. Mass. Case No. 09-20170). GPX is represented in U.S. Bankruptcy Court by attorneys Harry Murphy of Hanify & King, P.C. as bankruptcy counsel and Peggy Farrell of Hinckley Allen & Snyder LLP as corporate counsel. TM Capital Corp. served as investment banker to GPX in connection with these transactions and Argus Management Corporation served as GPX's financial advisor. The petition says assets and debts range from $100 million to $500 million. GRAOCH ASSOCIATES #66: Case Summary & 20 Largest Unsec. Creditors ----------------------------------------------------------------- Debtor: Graoch Associates #66 Limited Partnership 750 Market Street Tacoma, WA 98402 Bankruptcy Case No.: 09-36309 Chapter 11 Petition Date: December 9, 2009 Court: United States Bankruptcy Court Western District of Kentucky (Louisville) Debtor's Counsel: Robert W. "Tad" Adams, III, Esq. 6004 Brownsboro Park Blvd., Suite A Louisville, KY 40207 Tel: (502) 895-8210 Email: rwa@tadamslaw.com Estimated Assets: $1,000,001 to $10,000,000 Estimated Debts: $1,000,001 to $10,000,000 A full-text copy of the Debtor's petition, including a list of its 20 largest unsecured creditors, is available for free at: http://bankrupt.com/misc/kywb09-36309.pdf The petition was signed by Gary M. Gray. GREATER ATLANTIC FINANCIAL: May File After Bank Takeover -------------------------------------------------------- Greater Atlantic Financial Corp., the holding company that owned Great Atlantic Bank, said December 9 in a regulatory filing that it was "highly likely" to cease operations, liquidate, or file bankruptcy. On December 4, 2009, Greater Atlantic Bank was closed by the Office of Thrift Supervision and the Federal Deposit Insurance Corporation was appointed as receiver of the Bank. On that same date, Sonabank, McLean, Virginia, acquired substantially all banking operations, including substantially all of the deposits, of the Bank and purchased most of the Bank's assets in a transaction facilitated by the FDIC. Greater Atlantic Financial's principal asset is its ownership of the common stock of the Bank and, as a result of the receivership of the Bank, the Company has very limited remaining tangible assets. As the owner of all of the capital stock of the Bank, the Company would be entitled to the net recoveries, if any, following the liquidation or sale of the Bank or its assets by the FDIC. However, at this time, the Company does not expect that it will realize any such recoveries. In connection with the receivership of the Bank, both the Company and the Bank expect to receive notices from substantially all of the counterparties to the Company's and/or Bank's material agreements, of alleged events of default under those agreements, and of those counterparties' intentions to terminate those agreements or accelerate the Company's and/or Bank's performance of those agreements. The Company and/or Bank may dispute certain of those notices. However, in the event of a default by the Company and/or Bank under one or more of those material agreements, or in the event of the termination of one or more of the material agreements, the Company and/or Bank may be subject to penalties under those agreements and also may suffer cross-default claims from counterparties under the Company's and/or Bank's other agreements. As a result of the Bank's receivership, it is highly likely that the Company will be required to cease operations and liquidate or seek bankruptcy protection. If the Company were to liquidate or seek bankruptcy protection, the Company believes that there would be no assets available to holders of the capital stock of the Company. About Greater Atlantic Greater Atlantic Financial Corp. is a savings and loan holding company whose principal activity is the ownership and management of Greater Atlantic Bank (GAB or the Bank). GAFC conducts its business through its wholly owned subsidiary, Greater Atlantic Bank (the Bank). It offers banking services to customers through its bank branches. The Company has two wholly owned subsidiaries: Greater Atlantic Capital Trust and Greater Atlantic Capital Trust I. GRUBB & ELLIS: Nets $4.1MM in Sale of 12% Convertible Preferreds ---------------------------------------------------------------- Grubb & Ellis Company reports that on November 25, 2009, the Company effected the sale of 40,800 shares of 12% cumulative participating perpetual convertible preferred stock, par value $0.01 per share, to various qualified institutional buyers and accredited investors for net proceeds of roughly $4.1 million. The sale constitutes a portion of the 45-day option to purchase up to an additional 100,000 shares of Preferred Stock granted to the initial purchaser in the Company's private placement of 900,000 shares of Preferred Stock. Each share of Preferred Stock is currently convertible into 31.322 shares of the Company's common stock, par value $0.01 per share, subject to adjustment as set forth in a Certificate of Powers, Designations, Preferences and Rights filed by the Company with the Secretary of State of the State of Delaware on November 4, 2009. The Preferred Stock was offered in reliance on exemptions from the registration requirements of the Securities Act of 1933, as amended that apply to offers and sales of securities that do not involve a public offering. As such, the Preferred Stock was offered and sold only to (i) "qualified institutional buyers" (as defined in Rule 144A under the Securities Act), (ii) to a limited number of institutional "accredited investors" (as defined in Rule 501(a)(1), (2), (3) or (7) of the Securities Act), and (iii) to a limited number of individual "accredited investors" (as defined in Rule 501(a)(4), (5) or (6) of the Securities Act). Resale of Preferreds, Common Shares Grubb & Ellis on December 7, 2009, filed with the Securities and Exchange Commission a Form S-1 Registration Statement under the Securities Act of 1933 to delay the effective date of the Registration Statement. The Registration Statement and accompanying prospectus relate to up to 125,000 shares of the Company's outstanding 12% Cumulative Participating Perpetual Convertible Preferred Stock, and up to 3,915,250 shares of the Company's common stock issuable upon conversion of the Company's 12% Preferred Stock that may be sold by selling stockholders. The selling stockholders acquired the shares of 12% Preferred Stock in a private placement. The Company said it is registering the offer and sale of the shares of 12% Preferred Stock and the shares of common stock to satisfy registration rights the Company has granted. The Company will not receive any of the proceeds from the sale of the shares of 12% Preferred Stock or shares of common stock by the selling stockholders. The Company has agreed to bear all expenses of registration of the common stock. The selling stockholders, or their transferees, pledgees, donees or other successors in interest, may sell their 12% Preferred Stock and shares of common stock issuable upon conversion of the 12% Preferred Stock. The Company will pay cumulative dividends on the 12% Preferred Stock from and including the date of original issuance in the amount of $12.00 per share each year, which is equivalent to 12% of the initial liquidation preference per share. Dividends on the Preferred Stock will be payable when, as and if declared, quarterly in arrears, on March 31, June 30, September 30 and December 31, beginning on December 31, 2009. In addition, in the event of any cash distribution to holders of the common stock, par value $0.01 per share, of the Company, holders of the 12% Preferred Stock will be entitled to participate in such distribution as if such holders had converted their shares of Preferred Stock into common stock. Generally, the Company may not redeem the 12% Preferred Stock before November 15, 2014. On or after November 15, 2014, the Company may, at its option, redeem the 12% Preferred Stock, in whole or in part, by paying an amount equal to 110% of the sum of the initial liquidation preference per share plus any accrued and unpaid dividends to and including the date of redemption. A full-text copy of the Registration Statement as amended is available at no charge at http://ResearchArchives.com/t/s?4b76 The Company will hold its Annual Meeting on December 17, 2009. Among the important agenda items at the Meeting is a proposal to amend the Certificate of Incorporation to authorize the increase of both common and preferred shares and a proposal to declassify the Board of Directors to conform with prevailing corporate governance practices. As reported by the Troubled Company Reporter, Grubb & Ellis on October 1, 2009, obtained an amendment to its senior secured revolving credit facility which, among other things, modifies and provides the Company an extension from September 30, 2009, to November 30, 2009, to (i) effect its recapitalization plan and in connection therewith to effect a prepayment of at least 72% of the Revolving Credit A Advances, and (ii) sell four commercial properties, including the two real estate assets that the Company had previously acquired on behalf of Grubb & Ellis Realty Advisors, Inc. About Grubb & Ellis Company Named to The Global Outsourcing 100(TM) in 2009 by the International Association of Outsourcing Professionals(TM), Santa Ana, California-based Grubb & Ellis Company (NYSE: GBE) -- http://www.grubb-ellis.com/-- claims to be one of the largest and most respected commercial real estate services and investment companies in the world. Its 6,000 professionals in more than 130 company- owned and affiliate offices draw from a unique platform of real estate services, practice groups and investment products to deliver comprehensive, integrated solutions to real estate owners, tenants and investors. Grubb & Ellis Company reported an upside-down balance sheet at September 30, 2009. The Company had total assets of $342,178,000 against total liabilities of $357,948,000 at September 30. The Company said stockholders' deficit attributable to Grubb & Ellis was $16,410,000; non-controlling interests were $640,000; and total deficit was $15,770,000 at September 30. GUARANTY FINANCIAL: Wants to Have Until March 22 to Propose Plan ---------------------------------------------------------------- Guaranty Financial Group Inc. and its debtor-affiliates ask the U.S. Bankruptcy Court for the Northern District of Texas to extend their exclusive periods in which to propose a Chapter 11 plan of reorganization and to solicit acceptances until March 22, 2010, and May 21, 2010, respectively. Absent an extension, the Debtors plan-filing period expires December 25. The Debtors relate that they must complete their investigation of potential causes of action against various third parties regarding the prepetition operations. The Debtors add that pursuant to an agreement, the Debtors agreed to submit a draft plan and disclosure statement to the Federal Deposit Insurance Corporation and Wilmington Trust by March 8, 2010, and to file their proposed plan and disclosure statement by March 22, 2010. Guaranty Financial Group Inc. -- http://www.guarantygroup.com/-- is based in Dallas, Texas. Guaranty Financial is a unitary savings and loan holding company. The Company's primary operating entities are Guaranty Bank and Guaranty Insurance Services, Inc. Guaranty Financial filed for bankruptcy after the Guaranty bank was seized by regulators and sent to receivership under the Federal Deposit Insurance Corporation. Before the bank was taken over, the balance sheet of the holding company had $15.4 billion in assets as of Sept. 30, 2008. Guaranty Financial together with affiliates filed for Chapter 11 on Aug. 27, 2009 (Bankr. N.D. Tex. Case No. 09-35582). Attorneys at Haynes & Boone, LLP, represent the Debtors. According to the schedules attached to its petition, the Company has assets of at least $24,295,000, and total debts of $323,413,428, including $305 million in trust preferred security. HAMPSHIRE GROUP: Norman Pessin Discloses 7.27% Equity Stake ----------------------------------------------------------- SEP IRA F/B/O Norman H. Pessin owns 398,000 shares of common stock of Hampshire Group, Limited, constituting 7.27% of the outstanding shares thereof. 2009 Restructuring Plan During July 2009, the Company initiated the final phase of its 2009 restructuring plan, which included executive level organizational changes and the consolidation of its Asian operations. As a result of this consolidation, the Company will reduce its global workforce by an additional 29%, bringing total 2009 personnel reductions to approximately 50% of first quarter 2009 staffing levels. The Company has said it is on track to complete the final phase of its 2009 restructuring plan by the end of 2009. At September 26, 2009, the Company had total assets of $99,108,000 against total liabilities of $51,101,000. About Hampshire Group Hampshire Group, Limited is a U.S. provider of women's and men's sweaters, wovens and knits, and a designer and marketer of branded apparel. Its customers include leading retailers such as JC Penney, Kohl's, Macy's, Belk's and Dillard's, for whom it provides trend-right, branded apparel. Hampshire's owned brands include Spring+Mercer(R), its "better" apparel line, Designers Originals(R), Hampshire's first brand and still a top-seller in department stores, as well as Mercer Street Studio(R), Requirements(R), and RQT(R). Hampshire also licenses the Geoffrey Beene(R) and Dockers(R) labels for men's sweaters, both of which are market leaders in their categories, and licenses JOE Joseph Abboud(R) for men's sportswear and Alexander Julian Colours(R) for men's tops. HAMPSHIRE GROUP: Names Peter Woodward to Board of Directors ----------------------------------------------------------- Hampshire Group, Limited, on December 7 announced the appointment of Peter Woodward to the Company's Board of Directors, effective immediately. Mr. Woodward has also become a member of the Company's Audit Committee. Mr. Woodward currently serves as Founder and Managing General Partner of MHW Capital Management, LLC, an investment firm specializing in large equity positions in public companies with strong balance sheets that are revitalizing their business plans. Prior to that, Mr. Woodward was Managing Director of Regan Fund Management, where spent more than 10 years managing investments ranging in size from $15 million to $150 million. Commenting on the appointment, Heath Golden, Chief Executive Officer said, "We are very pleased to welcome Peter to the Board. Not only does he bring a strong financial background, but Peter is also a shareholder, which is a constituency that was not previously represented on our Board. We look forward to Peter's counsel as we continue to drive growth across the business and maximize shareholder value." On December 2, 2009, Hampshire Group entered into a letter agreement with Mr. Woodward and MHW Capital Management, an investment fund controlled by Mr. Woodward. The Letter Agreement, among other things, restricts Mr. Woodward and MHW from engaging in an acquisition, directly or indirectly, alone or with another person, that results in MHW or its affiliates beneficially owning more than 14.9% of the common stock of the Company, negotiating or encouraging any corporate sale transaction involving the Company, engaging in the solicitation of proxies for the Company's securities, initiating a tender offer for the securities of the Company, seeking to call a meeting of the Company's stockholders or initiate any stockholder proposal, or forming or joining any "group" -- as defined in Section 13(d)(3) of the Securities Exchange Act of 1934, as amended -- with respect to the securities of the Company or any subsidiary thereof. The Letter Agreement grants the parties the right to seek specific performance and equitable relief in the event of a breach or threatened breach of the Letter Agreement by the other party. The Company also entered into an indemnification agreement with Mr. Woodward. Pursuant to Mr. Woodward's appointment to the Board, Mr. Woodward was granted 20,000 restricted shares of the Company's common stock under the Hampshire Group, Limited 2009 Stock Incentive Plan. 2,000 of the restricted shares will be subject to time-based vesting while 18,000 of the restricted shares will be subject to performance-based vesting. With respect to time-based vesting, the restricted shares will vest ratably on each March 31 of 2010 through 2013, subject to Mr. Woodward's continued service with the Company. With respect to performance-based vesting, 25% of the restricted shares will vest ratably on each March 31 of 2011 through 2014, provided that, as of each such vesting date, the Company's consolidated return on operating income for the preceding fiscal year has reached specified targets. In the event that the Company misses its target in a given year, the shares that would otherwise have vested in that year will be rolled forward to the next year and will vest simultaneously with the shares already allocated for that subsequent year should the Company exceed that year's target by an amount sufficient to cover the prior year's or years' cumulative shortfall. This rollover mechanism will permit shares to be carried forward over multiple years until the expiration of the Plan. Director Compensation Changes The Company also disclosed that on December 2, 2009, the Board unanimously approved changes to the annual cash compensation paid to the Company's non-employee directors. The Board lowered the amount of annual cash compensation of the Company's non-employee directors -- other than the Chairman of the Board and the Chairman of the Audit Committee of the Board -- from $80,000 to $60,000. The compensation will continue to be paid quarterly. The Chairman of the Board will continue to receive $80,000 in annual cash compensation. The Chairman of the Audit Committee of the Board will receive $65,000 in annual cash compensation. The changes to the annual cash compensation of the Company's non-employee directors will be effective as of January 1, 2010. 2009 Restructuring Plan During July 2009, the Company initiated the final phase of its 2009 restructuring plan, which included executive level organizational changes and the consolidation of its Asian operations. As a result of this consolidation, the Company will reduce its global workforce by an additional 29%, bringing total 2009 personnel reductions to approximately 50% of first quarter 2009 staffing levels. The Company has said it is on track to complete the final phase of its 2009 restructuring plan by the end of 2009. At September 26, 2009, the Company had total assets of $99,108,000 against total liabilities of $51,101,000. About Hampshire Group Hampshire Group, Limited is a U.S. provider of women's and men's sweaters, wovens and knits, and a designer and marketer of branded apparel. Its customers include leading retailers such as JC Penney, Kohl's, Macy's, Belk's and Dillard's, for whom it provides trend-right, branded apparel. Hampshire's owned brands include Spring+Mercer(R), its "better" apparel line, Designers Originals(R), Hampshire's first brand and still a top-seller in department stores, as well as Mercer Street Studio(R), Requirements(R), and RQT(R). Hampshire also licenses the Geoffrey Beene(R) and Dockers(R) labels for men's sweaters, both of which are market leaders in their categories, and licenses JOE Joseph Abboud(R) for men's sportswear and Alexander Julian Colours(R) for men's tops. HEADLEE MANAGEMENT: Files for Chapter 11 to Reorganize Finances --------------------------------------------------------------- Michael Levensohn at Times Herald-Record reports Headlee Management Corp. filed for Chapter 11 bankruptcy to reorganize its finances and continue operating its KFC restaurants. The filing was made after Bank of America commenced foreclosure actions against several of the Company's properties in New York and Connecticut. The Company added that KFC attempted to terminate three franchise agreements. Headlee Management Corp. operates 11 KFC restaurants and owns interest in Buffalo Wild Wings restaurants in Kingston, Alabama and Mississippi. HOUSE OF DAVID: Case Summary & 3 Largest Unsecured Creditors ------------------------------------------------------------ Debtor: The House Of David COGIC San Diego, CA aka House Of David Church Of God In Christ aka House Of David COGIC aka House Of David, COGIC aka HOD COGIC aka H. Dvd COGIC P.O. Box 740615 San Diego, CA 92174 Bankruptcy Case No.: 09-18898 Chapter 11 Petition Date: December 9, 2009 Court: United States Bankruptcy Court Southern District of California (San Diego) Judge: Chief Judge Peter W. Bowie Debtor's Counsel: Andrew H. Griffin, III, Esq. Law Office of Andrew H. Griffin, III 275 East Douglas, Suite 112 El Cajon, CA 92020 Tel: (619) 440-5000 Fax: (619) 440-5991 Email: Griffinlaw@mac.com Estimated Assets: $1,000,001 to $10,000,000 Estimated Debts: $1,000,001 to $10,000,000 According to the schedules, the Company has assets of $1,565,336 and total debts of $1,298,249. A full-text copy of the Debtor's petition, including a list of its 3 largest unsecured creditors, is available for free at: http://bankrupt.com/misc/casb09-18898.pdf The petition was signed by Sidney A. Buggs III, pastor and president of the Company. INDIANA TROOPERS: Files For Bankruptcy Protection ------------------------------------------------- The Associated Press reports The Indiana Troopers Association has filed for bankruptcy protection amid a court fight with telemarketing companies it hired for fundraising work. AP relates the group in February sued two Atlanta-based companies, claiming it had been defrauded of hundreds of thousands of dollars over the past few years. Campaign Resources Inc. and JAK Productions countersued, saying they had not been paid hundreds of thousands of dollars for work performed and that they had been defamed. Troopers association director Ernie Alder tells The Journal Gazette of Fort Wayne it has curtailed fundraising activities because of the lawsuits, AP says. The Angola-based troopers group supports a variety of police- related causes, such as a death benefit for officers killed in the line of duty, college scholarships and money to help troopers in emergencies, AP notes. INKSTOP INC: Court Orders Liquidation Sales ------------------------------------------- Cleveland, Ohio-based InkStop Stores, a nationwide retailer who abruptly locked employees out of stores in October, starts liquidation sale this week by court order to return money to creditors. Liquidation sales will be in Philadelphia, PA, Washington, DC, Cleveland, OH, Detroit, MI, Atlanta, GA, St. Louis, MO, Dallas, TX, and Denver, CO. Grand Rapids, Michigan-based Liquid Asset Partners and Chicago- based Solid Asset Solutions will run a liquidation sale of 150 Stores of Merchandise from 27 selected sale stores. The liquidation event will be the largest electronics sale this holiday to buy digital cameras, GPS's, MP3 players, computer gadgets and printer ink at liquidation prices. The bankruptcy court order directs Liquid Asset Partners LLC and Solid Asset Solutions LLC to sell millions of dollars of inventory and equipment owned by InkStop. The Liquidation firms are charged with the task of re-opening the sale sites in a very short few days. They cut deals with landlords and work with utility companies to get heat and electricity turned on. Some stores even hold sales without heat or electricity, due to delays with utility companies. The discounts in sale stores are 50% off or more starting Friday, December 11. "We truly feel for the employees and their families during this holiday," says Bill Melvin Jr., CEO of Liquid Asset Partners. "These stores were closed in an abrupt fashion and we've re- opening them quickly to try to save as much value as possible for all involved. We are open for liquidations in the selected stores and the customer response is tremendous!" The Bankruptcy Court order states that everything must be sold. Regardless of cost or loss, millions of dollars worth of inventory will be sold thru 27 locations. The Liquidation firms will be selling at enormous discounts, right from the start. Customers can buy ink for their printers as well as cameras, and gadgets for the computer fanatic. "These electronics represent a huge inventory to sell during the month of December. To make the sale successful we are prepared to deeply discount the inventory and sell everything in one month!" says Bill Melvin Jr., CEO of Liquid Asset Partners. "The market is very soft and we are prepared to deeply discount everything," Mr. Melvin says. "It's stacked high and we're selling it cheap. The public won't want to miss these deals". InkStop abruptly closed all of its 152 stores and laid off 456 employees on October 1, 2009. According to a November 15 article by Sasha M. Pardy posted at CoStar.com, InkStop said at that time the closures were temporary, giving the Company time to restructure and focus on its cash flow problems. On November 5, 2009, InkStop Inc. filed for Chapter 7 bankruptcy. According to The Plain Dealer in Cleveland, the Company said it owes too much money to reopen and will instead liquidate its assets and close for good. InkStop had told employees it hadn't paid their health care premiums for the past month and didn't have the money to issue their final paychecks. According to The Plain Dealer, the Company's board said via its 495-page Court filing that InkStop owes nearly $48.3 million to more than a 1,000 creditors. The Plain Dealer said board members chipped in the $20,379.97 in fees and expenses to file for bankruptcy. The Plain Dealer also said InkStop owes $1.1 million in wages, vacation pay and expense reimbursements to employees, including $63,804.17 owed to CEO and co-founder Dirk Kettlewell. InkStop is the subject of numerous lawsuits and legal complaints, including 95 evictions. Steven Davis, Esq., represents InkStop in the bankruptcy. According to the CoStar.com article, InkStop's bankruptcy is in stark contrast to an April 2009 Crain's article. At that time, Mr. Kettlewell said InkStop was benefiting from "not being involved in the banking thing," as its growth was fueled by more than $80 million in private equity funding from 150 investors worldwide that expected InkStop to grow into a large chain of 2,000 to 3,000 stores. According to Crain's, Mr. Kettlewell said he expected InkStop to become profitable later in 2009 "for the first time ever." The liquidation sale is going on now at 27 selected liquidation locations in Philadelphia, PA, Washington, DC, Cleveland, OH, Detroit, MI, Atlanta, GA, St. Louis, MO, Dallas, TX and Denver, CO markets. It is open to the public everyday until everything is sold. Hours of operation are 10 am till 7 pm Monday thru Saturday and 12 noon to 5 pm on Sunday. Buyers may view sale locations online at http://www.LiquidAssetPartners.com/ JEFFREY SHOTKOSKI: Denial of Final Decree was Appropriate in Case ----------------------------------------------------------------- WestLaw reports that in denying the Chapter 11 debtors' motion for entry of a final decree on the basis that the estate had not been "fully administered," the bankruptcy court neither made a clear error of judgment nor exceeded the bounds of permissible choice, the Eighth Circuit's Bankruptcy Appellate Panel (BAP) ruled. Plan payments had not yet been completed, and so the debtors had not received their discharge. The bankruptcy court was familiar with the facts and circumstances of the case and was aware, in particular, of the specific terms of the confirmed plan, which provided for the long-term repayment of several real estate and other loans totaling more than $1.7 million and eight classes of impaired claims. Whether an estate is "fully administered" falls within the discretion of the bankruptcy judge and is to be determined on a case-by-case basis, the BAP instructed. In re Shotkoski, ---B.R.----, 2009 WL 4042665 (8th Cir. BAP (S.D.)). Jeffrey Joseph Shotkoski and Constance Lynn Shotkoski own, manage and operate storage units and residential rental properties in South Dakota. Mr. and Mrs. Shotkoski filed a chapter 11 petition (Bankr. D. S.D. Case No. 07-40755) on Dec. 28, 2007, are represented by Clair R. Gerry, Esq. and Laura L. Kulm Ask, Esq., at Stuart, Gerry & Schlimgen in Sioux Falls, and estimated their assets and debts at $1 million to $10 million at the time of the filing. Their amended disclosure statement was approved by the bankruptcy court on July 2, 2008, and an order confirming plan was entered on September 16, 2008. When the Debtors requested entry of a final decree in Sept. 2009, the Honorable Charles L. Nail, Jr., denied the request, saying that Bankruptcy Rules 3020, 3021, and 3022 do not contemplate the closing of an individual's chapter 11 case until the administration of the case -- which would include entry of the debtor's discharge -- is complete. JOHN NICOTHODES: Case Summary & 7 Largest Unsecured Creditors ------------------------------------------------------------- Debtor: John S. Nicothodes 10991 Stallion Way Alta Loma, CA 91737 Bankruptcy Case No.: 09-39862 Chapter 11 Petition Date: December 9, 2009 Court: United States Bankruptcy Court Central District of California (Riverside) Debtor's Counsel: Franklin C. Adams, Esq. Best Best & Krieger LLP 3750 University Ave, Ste 400 Riverside, CA 92502 Tel: (951) 686-1450 Fax: (951) 686-3083 Email: franklin.adams@bbklaw.com Estimated Assets: $1,000,001 to $10,000,000 Estimated Debts: $1,000,001 to $10,000,000 According to the schedules, the Company has assets of $3,118,612 and total debts of $3,952,789. A full-text copy of Mr. Nicothodes' petition, including a list of his 7 largest unsecured creditors, is available for free at: http://bankrupt.com/misc/cacb09-39862.pdf The petition was signed by Mr. Nicothodes. JOY MUKHERJI: Business as Usual Despite Chapter 11 Filing --------------------------------------------------------- Joy Mukherji and Inderjit Kalia in October sought protection from their creditors in U.S. Bankruptcy Court in Santa Rosa, California, saying they owe creditors more than $10 million. The Debtors own Days Inn on Santa Rosa Avenue, a 104-room hotel. The property will stay open while they try to restructure their debt, said Ms. Mukherji, according to a report by The Press Democrat. "It's business as usual," she said. "We're paying all our bills." The filing came after business fell 40% during this year's economic slump, according to The Press Democrat's Steve Hart. Sonoma County hotel occupancy is down about 10% from last year, said Ken Fischang, who heads the county's Tourism Bureau, according to the report. The Debtors owe $6.5 million to Heritage Bank and Summit Bank. KRISPY KREME: KK Mexico Posts $487,000 Net Loss for Nov. 1 Qtr -------------------------------------------------------------- Krispy Kreme Mexico, S. de R.L. de C.V. reported a net loss of $487,000 for the fiscal third quarter ended November 1, 2009, from a net loss of $146,000 for the quarter ended November 2, 2008. Krispy Kreme Mexico posted a net loss of $606,000 for the nine months ended November 1, 2009, from a net loss of $411,000 for the nine months ended November 2, 2008. Krispy Kreme Doughnuts Inc. has a 30% interest in Krispy Kreme Mexico. KKDI said in a regulatory filing KK Mexico's operating results have been adversely affected by economic weakness in that country. The franchisee also has been adversely affected by a decline in the value of the country's currency relative to the U.S. dollar, which has made the cost of goods imported from the U.S. more expensive, and which has increased the amount of cash required to service the portion of the franchisee's debt that is denominated in U.S. dollars. KKDI said during the second quarter of fiscal 2010, management concluded that the decline in the value of the investment was other than temporary and, accordingly, KKDI recorded a charge of approximately $500,000 during that period to reduce the carrying value of the investment in KK Mexico to its estimated fair value of $700,000. During the nine months ended November 1, 2009, KKDI increased its bad debt reserve related to KK Mexico by approximately $500,000, of which approximately $120,000 and $380,000 is included in KK Supply Chain and International Franchise direct operating expenses, respectively; such reserve at November 1, 2009, is equal to the Company's aggregate receivables from this franchisee. About Krispy Kreme Based in Winston-Salem, North Carolina, Krispy Kreme Doughnuts Inc. (NYSE: KKD) -- http://www.KrispyKreme.com/-- is a retailer and wholesaler of doughnuts. The company's principal business, which began in 1937, is owning and franchising Krispy Kreme doughnut stores where over 20 varieties of doughnuts are made, sold and distributed and where a broad array of coffees and other beverages are offered. Kremeworks, LLC, which is 25%-owned by KKDI, has failed to comply with certain financial covenants related to its indebtedness, a portion of which matured, by its terms, in January 2009. Kremeworks has requested that the lender waive the loan defaults resulting from the covenant violations and refinance the maturing indebtedness. In the event the lender is unwilling to do so and declares the entire indebtedness immediately due and payable, the Company could be required to perform under its guarantee. Krispy Kreme Doughnuts said Kremeworks could have insufficient cash flows from its business to service the indebtedness even if it is refinanced, which might require capital contributions to Kremeworks by the Company and the majority owner of Kremeworks -- which has guarantees of the Kremeworks indebtedness roughly proportionate to those of the Company -- for Kremeworks to comply with the terms of the any new loan agreement. * * * As reported by the Troubled Company Reporter on September 30, 2009, Standard & Poor's Ratings Services revised its ratings outlook on Krispy Kreme Doughnuts to stable from negative. The outlook revision incorporates S&P's expectation that the company will have adequate liquidity in the near term based on S&P's expectation of its performance in the near term, its current cash position, and covenant cushion. S&P affirmed the 'B-' corporate credit rating. While the sales pressure will continue, S&P expects the declines to decelerate and profitability to somewhat stabilize or, at the very least, allow the company to remain covenant compliant in the current and next fiscal year. KRISPY KREME: KKSF Incurs Defaults Under Credit Facilities ---------------------------------------------------------- Krispy Kreme Doughnuts Inc. disclosed in a regulatory filing that current liabilities at November 1, 2009, include accruals for potential payments under loan guarantees of roughly $2.6 million related to Krispy Kreme of South Florida, LLC. KKSF incurred defaults with respect to certain credit agreements with its lenders, including agreements related to KKSF indebtedness guaranteed, in part, by the Company. In the first quarter of fiscal 2010, KKSF completed a transaction which resulted in KKDI's release from a lease guarantee for which KKDI's potential obligation was approximately $5.5 million, but which increased KKDI's guarantee of KKSF debt obligations by approximately $1.0 million. KKSF's unaudited revenues, operating income and net income based upon information provided by the franchisee were $2.6 million, $220,000, and $170,000, respectively, for the three months ended November 1, 2009 and $8.5 million, $1.3 million and $1.1 million, respectively, for the nine months then ended. About Krispy Kreme Based in Winston-Salem, North Carolina, Krispy Kreme Doughnuts Inc. (NYSE: KKD) -- http://www.KrispyKreme.com/-- is a retailer and wholesaler of doughnuts. The company's principal business, which began in 1937, is owning and franchising Krispy Kreme doughnut stores where over 20 varieties of doughnuts are made, sold and distributed and where a broad array of coffees and other beverages are offered. Kremeworks, LLC, which is 25%-owned by KKDI, has failed to comply with certain financial covenants related to its indebtedness, a portion of which matured, by its terms, in January 2009. Kremeworks has requested that the lender waive the loan defaults resulting from the covenant violations and refinance the maturing indebtedness. In the event the lender is unwilling to do so and declares the entire indebtedness immediately due and payable, the Company could be required to perform under its guarantee. Krispy Kreme Doughnuts said Kremeworks could have insufficient cash flows from its business to service the indebtedness even if it is refinanced, which might require capital contributions to Kremeworks by the Company and the majority owner of Kremeworks -- which has guarantees of the Kremeworks indebtedness roughly proportionate to those of the Company -- for Kremeworks to comply with the terms of the any new loan agreement. * * * As reported by the Troubled Company Reporter on September 30, 2009, Standard & Poor's Ratings Services revised its ratings outlook on Krispy Kreme Doughnuts to stable from negative. The outlook revision incorporates S&P's expectation that the company will have adequate liquidity in the near term based on S&P's expectation of its performance in the near term, its current cash position, and covenant cushion. S&P affirmed the 'B-' corporate credit rating. While the sales pressure will continue, S&P expects the declines to decelerate and profitability to somewhat stabilize or, at the very least, allow the company to remain covenant compliant in the current and next fiscal year. KRISPY KREME: Kremeworks Lenders Grant Covenant Waiver ------------------------------------------------------ Krispy Kreme Doughnuts Inc. has a 25% interest in Kremeworks, LLC, whose results of operations and operating cash flow have declined and, although Kremeworks has paid all interest, fees and scheduled amortization of principal due under its bank indebtedness, it failed to comply with certain financial covenants related to such indebtedness, a portion of which matured, by its terms, in January 2009. KKDI has guaranteed 20% of such indebtedness. During the third quarter of fiscal 2010, Kremeworks completed an amendment to its debt agreement which, among other things, waived the defaults related to the failure to comply with the financial covenants and extended the maturity of the indebtedness until July 2010. In connection with that amendment, KKDI and the majority owner of Kremeworks (which also is a guarantor of the indebtedness) made capital contributions to Kremeworks in the aggregate amount of $500,000, the proceeds of which were used to prepay a portion of the indebtedness. KKDI's portion of this capital contribution was $125,000. The aggregate amount of Kremeworks indebtedness as of November 1, 2009, was approximately $6.9 million, of which approximately $1.4 million is guaranteed by KKDI. The amendment also requires Kremeworks to make an additional prepayment of principal in the amount of $500,000 on or before December 31, 2009, which could necessitate additional capital contributions to Kremeworks. KKDI has a $900,000 note receivable from Kremeworks which is subordinate to the Kremeworks bank indebtedness. The note arose from cash advances made by the Company to Kremeworks in fiscal 2005 and earlier years. During the quarter ended November 2, 2008, KKDI established a reserve equal to the entire $900,000 balance of its note receivable in recognition of the uncertainty surrounding its ultimate collection. Kremeworks reported a net loss of $785,000 for the fiscal third quarter ended November 1, 2009, from a net loss of $807,000 for the quarter ended November 2, 2008. Kremeworks posted a net loss of $1,832,000 for the nine months ended November 1, 2009, from a net loss of $1,676,000 for the nine months ended November 2, 2008. About Krispy Kreme Based in Winston-Salem, North Carolina, Krispy Kreme Doughnuts Inc. (NYSE: KKD) -- http://www.KrispyKreme.com/-- is a retailer and wholesaler of doughnuts. The company's principal business, which began in 1937, is owning and franchising Krispy Kreme doughnut stores where over 20 varieties of doughnuts are made, sold and distributed and where a broad array of coffees and other beverages are offered. Kremeworks, LLC, which is 25%-owned by KKDI, has failed to comply with certain financial covenants related to its indebtedness, a portion of which matured, by its terms, in January 2009. Kremeworks has requested that the lender waive the loan defaults resulting from the covenant violations and refinance the maturing indebtedness. In the event the lender is unwilling to do so and declares the entire indebtedness immediately due and payable, the Company could be required to perform under its guarantee. Krispy Kreme Doughnuts said Kremeworks could have insufficient cash flows from its business to service the indebtedness even if it is refinanced, which might require capital contributions to Kremeworks by the Company and the majority owner of Kremeworks -- which has guarantees of the Kremeworks indebtedness roughly proportionate to those of the Company -- for Kremeworks to comply with the terms of the any new loan agreement. * * * As reported by the Troubled Company Reporter on September 30, 2009, Standard & Poor's Ratings Services revised its ratings outlook on Krispy Kreme Doughnuts to stable from negative. The outlook revision incorporates S&P's expectation that the company will have adequate liquidity in the near term based on S&P's expectation of its performance in the near term, its current cash position, and covenant cushion. S&P affirmed the 'B-' corporate credit rating. While the sales pressure will continue, S&P expects the declines to decelerate and profitability to somewhat stabilize or, at the very least, allow the company to remain covenant compliant in the current and next fiscal year. KRISPY KREME: Reports $2,388,000 Net Loss for Nov. 1 Quarter ------------------------------------------------------------ Krispy Kreme Doughnuts, Inc., reported lower net loss of $2,388,000 for the fiscal third quarter ended November 1, 2009, from a net loss of $5,885,000 for the quarter ended November 2, 2008. Krispy Kreme recorded a net loss of $677,000 for the nine months ended November 1, 2009, from a net loss of $3,758,000 for the nine months ended November 2, 2008. Revenues for the fiscal 2010 third quarter ended November 1, 2009, were $83,600,000 from $94,338,000 for the 2008 quarter. Revenues were $259,750,000 for the nine months ended November 1, 2009, from $292,216,000 for the year ago period. At September 30, 2009, the Company had total assets of $173,142,000, against total current liabilities of $40,430,000, long-term debt, less current maturities of $48,128,000, deferred income taxes of $106,000, and other long-term obligations of $23,619,000. At September 30, 2009, the Company had accumulated deficit of $303,810,000 and shareholders' equity of $60,859,000. The Company's Secured Credit Facilities are the Company's principal source of external financing. These facilities consist of a term loan having an outstanding principal balance of $48.8 million as of November 1, 2009, maturing in February 2014 and a $25 million revolving credit facility maturing in February 2013. Effective April 15, 2009, the Company executed amendments to the Secured Credit Facilities which, among other things, relaxed the interest coverage ratio covenant contained therein through fiscal 2012. In connection with the amendments, the Company prepaid $20 million of the principal balance outstanding under the term loan, paid fees of approximately $1.9 million, and agreed to increase the rate of interest on outstanding loans by 200 basis points annually. Any future amendments or waivers could result in additional fees or rate increases. Based on the Company's current working capital and its operating plans, management believes the Company will be able to comply with the amended financial covenants and be able to meet its projected operating, investing and financing cash requirements. During the three months ended November 1, 2009, the Company received $482,000 of cash proceeds from the bankruptcy estate of Freedom Rings, LLC, a former subsidiary which filed for bankruptcy in the third quarter of fiscal 2006. A full-text copy of the Company's quarterly report on Form 10-Q is available at no charge at http://ResearchArchives.com/t/s?4b75 About Krispy Kreme Based in Winston-Salem, North Carolina, Krispy Kreme Doughnuts Inc. (NYSE: KKD) -- http://www.KrispyKreme.com/-- is a retailer and wholesaler of doughnuts. The company's principal business, which began in 1937, is owning and franchising Krispy Kreme doughnut stores where over 20 varieties of doughnuts are made, sold and distributed and where a broad array of coffees and other beverages are offered. Kremeworks, LLC, which is 25%-owned by KKDI, has failed to comply with certain financial covenants related to its indebtedness, a portion of which matured, by its terms, in January 2009. Kremeworks has requested that the lender waive the loan defaults resulting from the covenant violations and refinance the maturing indebtedness. In the event the lender is unwilling to do so and declares the entire indebtedness immediately due and payable, the Company could be required to perform under its guarantee. Krispy Kreme Doughnuts said Kremeworks could have insufficient cash flows from its business to service the indebtedness even if it is refinanced, which might require capital contributions to Kremeworks by the Company and the majority owner of Kremeworks -- which has guarantees of the Kremeworks indebtedness roughly proportionate to those of the Company -- for Kremeworks to comply with the terms of the any new loan agreement. KROPP EQUIPMENT: Wants to Access Standard Bank's Cash Collateral ---------------------------------------------------------------- Kropp Equipment, Inc., seeks authority from the Hon. J. Philip Klingeberger of the U.S. Bankruptcy Court for the Northern District of Indiana to use Standard Bank's $6,437,000 in cash collateral securing their obligation to their prepetition lenders. The Debtor owes the Bank in the approximate amount of $1,020,000. Standard Bank asserts a blanket lien on the assets of the Debtor including deposit accounts, accounts receivable and proceeds. The Debtor believes that the value of the Bank's security interest in cash collateral is currently estimated at $240,000. Daniel L. Freeland, Esq., at Daniel L. Freeland & Associates, P.C., the proposed attorney for the Debtor, explains that the Debtor needs the money to fund its Chapter 11 case, pay suppliers and other parties. In exchange for using the cash collateral, the Debtors propose to grant the prepetition lenders a replacement lien on assets to the Bank and each secured creditor to the full extent of the value of that creditor's lien at the commencement of the case. Financial reports will be provided to the Bank and other secured creditors herein to provide ongoing information as to the status of operations, sales and the creation of post-petition accounts receivable. Banc of America Leasing & Capital, LLC (BALC) filed an objection to the use of cash collateral. Before the Debtor's bankruptcy filing, BALC filed a verified complaint against the Debtor and Albert Kropp in the Northern District Court of Illinois, due to their failure to make payment under two promissory notes related to the purchase of certain equipment. On November 17, 2009, a Writ of REplevin was entered by the district court directing the U.S. Marshal to take from the Debtor and Albert Kropp the equipment subject to the promissory notes as identified on Exhibit 1 of the Writ of Replevin, a copy of which is available for free at: http://bankrupt.com/misc/KROPPEQUIPMENT_Writ_of_Replevin.pdf On November 18, 2009, the Debtor confirmed that it isn't asserting any interest in BALC's equipment and that the Debtor isn't using the equipment. The Debtor says that the collateral it is seeking to use includes only collateral that Standard Bank has an undisputed first position. Schererville, Indiana-based Kropp Equipment, Inc., a Corporation, operates from its manufacturing facilities in the state. It was formed in 1998 with home offices in Schererville, Indiana. The Company filed for Chapter 11 bankruptcy protection on December 2, 2009 (Bankr. N.D. Ind. Case No. 09-25196). Daniel Freeland (EW), Esq., and Sheila A. Ramacci (JG), Esq., who have offices in Highland, Indiana, assist the Company in its restructuring effort. The Company listed $10,000,001 to $50,000,000 in assets and $10,000,001 to $50,000,000 in liabilities. KROPP EQUIPMENT: Sec. 341 Creditors Meeting Set for Jan. 8 ---------------------------------------------------------- The U.S. Trustee for Region 10 will convene a meeting of Kropp Equipment, Inc.'s creditors on January 8, 2010, at 9:00 a.m. at1st Floor, Suite 1700, Corner of Hohman Ave & Douglas St, Hammond, IN 46320. This is the first meeting of creditors required under Section 341(a) of the U.S. Bankruptcy Code in all bankruptcy cases. All creditors are invited, but not required, to attend. This Meeting of Creditors offers the one opportunity in a bankruptcy proceeding for creditors to question a responsible office of the Debtor under oath about the company's financial affairs and operations that would be of interest to the general body of creditors. Schererville, Indiana-based Kropp Equipment, Inc., a Corporation, filed for Chapter 11 bankruptcy protection on December 2, 2009 (Bankr. N.D. Ind. Case No. 09-25196). Daniel Freeland (EW), Esq., and Sheila A. Ramacci (JG), Esq., who have offices in Highland, Indiana, assist the Company in its restructuring effort. The Company listed $10,000,001 to $50,000,000 in assets and $10,000,001 to $50,000,000 in liabilities. KROPP EQUIPMENT: Taps Daniel L. Freeland as Bankr. Counsel ---------------------------------------------------------- Kropp Equipment, Inc., has sought the permission of the U.S. Bankruptcy Court for the Northern District of Indiana to employ Daniel L. Freeland & Associates, P.C., as bankruptcy counsel. Daniel L. Freeland & Associates will, among other things: (a) defend various complaints and motions for relief of stay filed by creditors of the Debtor and protect the Debtor's interest in various executory contracts; (b) prepare necessary applications, answers, orders, reports, and other legal papers; and (c) prepare and file Plans, Disclosures and other papers. Daniel L. Freeland & Associates will be paid based on the hourly rates of its professionals: Daniel L. Freeland $350 Associates $250-$180 Daniel L. Freeland, a shareholder in Daniel L. Freeland & Associates, assures the Court that the firm is a "disinterested person" as that term is defined in Section 101(14) of the Bankruptcy Code. Schererville, Indiana-based Kropp Equipment, Inc., a Corporation, filed for Chapter 11 bankruptcy protection on December 2, 2009 (Bankr. N.D. Ind. Case No. 09-25196). Daniel Freeland (EW), Esq., and Sheila A. Ramacci (JG), Esq., who have offices in Highland, Indiana, assist the Company in its restructuring effort. The Company listed $10,000,001 to $50,000,000 in assets and $10,000,001 to $50,000,000 in liabilities. LATSHAW DRILLING: Gets Final Nod to Obtain $500,000 F&M Loan ------------------------------------------------------------ The Hon Dana L. Rasure of the U.S. Bankruptcy Court for the Northern District of Oklahoma authorized, on a final basis, Latshaw Drilling Company, LLC to: -- obtain a $500,000 irrevocable secured letter of credit from The F&M Bank & Trust Company of Tulsa, Oklahoma; and -- grant a first priority lien and security interest as adequate protection to the lender. The Debtors will use the loan to fulfill its workers' compensation obligations incurred in its continued business operations and the deposit of a like sum in an insured certificates of deposit with the lender to secure the repayment of any funds drawn on the LC. The Debtor related that the terms of the LC are fair and reasonable and are supported by equivalent value and fair consideration in order to meet the requirements of its insurer, Zurich American Insurance Company to replace its older, more expensive policy issued prior to the petition date. Zurich requires a $500,000 letter of credit to secure its exposure for the $100,000 deductible on the policy. Tulsa, Oklahoma-based Latshaw Drilling Company LLC filed for Chapter 11 bankruptcy protection on November 11, 2009 (Bankr. N.D. Okla. Case No. 09-13572). Mark A. Craige, Esq., at MorrelSaffaCraige, PC, assists the Company in its restructuring effort. The Company listed $193,549,066 in assets and $77,940,788 in liabilities in its petition. LAZY DAYS': Prepack Plan Confirmed in Less than Five Weeks ---------------------------------------------------------- Bill Rochelle at Bloomberg News reports that Lazy Days' R.V. Center Inc. has an approved reorganization plan less than five weeks after beginning the prepackaged Chapter 11 case. The U.S. Bankruptcy Court for the District of Delaware signed a confirmation order on Dec. 8 approving the plan that was accepted by affected creditor classes before the bankruptcy filing on Nov. 5. According to the report, the reorganization was hashed out with holders of 82 percent of the $138 million in unsecured bonds that are being exchanged under the plan for the new stock. In addition to the bonds, Lazy Days' has $22 million in first-lien bank debt. The plan investors are providing $10 million in equity. In return, they receive senior convertible preferred stock. In addition, they provided $65 million in financing for the reorganization that rolls over after confirmation. Unsecured creditors are paid in full. About Lazydays Lazydays(R) -- http://www.BetterLazydays.com/-- was founded in 1976 with two travel trailers and $500. Today, the company's focus on unparalleled customer service has made Lazydays the largest single-site RV dealership in North America. Lazy Days' was acquired by Bruckmann Rosser Sherrill & Co. II LP in May 2004 in a $217 million transaction. The company has one mobile home and recreational vehicle sales and service center on 126 acres near Tampa, Florida. Lazy Days' R.V. Center Inc. filed for Chapter 11 on November 5 (Bankr. D. Del. Case No. 09-13911). The Company's legal advisor is Kirkland & Ellis LLP and its financial advisor is Macquarie Capital (USA) Inc. LEHMAN BROTHERS: Gets Approval of Deal With LB RE Financing ----------------------------------------------------------- Lehman Brothers Holdings Inc. and its affiliated debtors plan to ink a series of agreements with the administrators of LB RE Financing No. 3 Ltd. to maximize recovery from the U.K. company. In court papers, the Debtors sought and obtained approval of Judge James Peck of the U.S. Bankruptcy Court for the Southern District of New York to enter into agreements with LB RE to maximize potential recoveries from the company under a EURO 722,181,000 Class B Note due 2054. The note was issued by Excalibur Funding No. 1 PLC, a special purpose vehicle issuer LBHI created early last year to issue real estate backed commercial debt. Jacqueline Marcus, Esq., at Weil Gotshal & Manges LLP, in New York, says the proposed transaction would ensure LBHI to "maintain certain amounts of commercial advisory control" over the note, which is LB RE's only asset. This would enable LBHI to manage the note to improve recovery from LB RE and the amount available for distribution to LB RE's creditors including LBHI, she says. Based on LB RE's statement of affairs, which sets out the assets and liabilities of the company as of October 30, 2008, LBHI expects to receive distributions of about 98% of the amounts available for distribution by LB RE. This represents total claims of approximately $1.26 billion against LB RE, which is currently in administration proceedings in England and Wales. The proposed transaction would grant LBHI control over most of the decisions concerning the note that would put LBHI in a position to maximize recoveries. It would also secure LBHI's right to recover from LB RE amounts advanced to it with respect to the note in priority to any other claims of creditors, and give LBHI the right to acquire the note or LB RE's shares. The proposed transaction is comprised of: (i) an advisory agreement, under which LBHI will act as the exclusive commercial advisor to LB RE in relation to its rights and obligations as registered holder of the note; (ii) a power of attorney which LB RE has granted to LBHI so that LBHI can exercise its rights under the Advisory Agreement; (iii) a facilities agreement requiring LBHI to provide LB RE with an initial loan in the amount of the euro equivalent of GBP1,600,000 to fund certain costs in connection with the administration of LB RE, and further loans to the company; (iv) a letter of indemnity requiring LBHI to indemnify LB RE and the administrators against certain losses; and (v) a deed granting LBHI an option to acquire LB RE and the loans provided to it by LBHI under the Facilities Agreement as well as an option to acquire the note. Copies of the documents executed in connection with the proposed transaction are available for free at: http://bankrupt.com/misc/LehmanAdvisoryAgreement.pdf http://bankrupt.com/misc/LehmanPowerofAtty.pdf http://bankrupt.com/misc/LehmanFacilitiesAgreement.pdf http://bankrupt.com/misc/LehmanIndemnityLetter.pdf http://bankrupt.com/misc/LehmanOptionDeed.pdf About Lehman Brothers Lehman Brothers Holdings Inc. -- http://www.lehman.com/-- was the fourth largest investment bank in the United States. For more than 150 years, Lehman Brothers has been a leader in the global financial markets by serving the financial needs of corporations, governmental units, institutional clients and individuals worldwide. Lehman Brothers filed for Chapter 11 bankruptcy September 15, 2008 (Bankr. S.D.N.Y. Case No. 08-13555). Lehman's bankruptcy petition listed US$639 billion in assets and US$613 billion in debts, effectively making the firm's bankruptcy filing the largest in U.S. history. Several other affiliates followed thereafter. The Debtors' bankruptcy cases are handled by Judge James M. Peck. Harvey R. Miller, Esq., Richard P. Krasnow, Esq., Lori R. Fife, Esq., Shai Y. Waisman, Esq., and Jacqueline Marcus, Esq., at Weil, Gotshal & Manges, LLP, in New York, represent Lehman. Epiq Bankruptcy Solutions serves as claims and noticing agent. On September 19, 2008, the Honorable Gerard E. Lynch, Judge of the U.S. District Court for the Southern District of New York, entered an order commencing liquidation of Lehman Brothers, Inc., pursuant to the provisions of the Securities Investor Protection Act (Case No. 08-CIV-8119 (GEL)). James W. Giddens has been appointed as trustee for the SIPA liquidation of the business of LBI The Bankruptcy Court has approved Barclays Bank Plc's purchase of Lehman Brothers' North American investment banking and capital markets operations and supporting infrastructure for US$1.75 billion. Nomura Holdings Inc., the largest brokerage house in Japan, purchased LBHI's operations in Europe for US$2 plus the retention of most of employees. Nomura also bought Lehman's operations in the Asia Pacific for US$225 million. International Operations Collapse Lehman Brothers International (Europe), the principal UK trading company in the Lehman group, was placed into administration, together with Lehman Brothers Ltd, LB Holdings PLC and LB UK RE Holdings Ltd. Tony Lomas, Steven Pearson, Dan Schwarzmann and Mike Jervis, partners at PricewaterhouseCoopers LLP, have been appointed as joint administrators to Lehman Brothers International (Europe) on September 15, 2008. The joint administrators have been appointed to wind down the business. Lehman Brothers Japan Inc. and Lehman Brothers Holdings Japan Inc. filed for bankruptcy in the Tokyo District Court on September 16. Lehman Brothers Japan Inc. reported about JPY3.4 trillion (US$33 billion) in liabilities in its petition. Bankruptcy Creditors' Service, Inc., publishes Lehman Brothers Bankruptcy News. The newsletter tracks the Chapter 11 proceeding undertaken by Lehman Brothers Holdings, Inc., and other insolvency and bankruptcy proceedings undertaken by its affiliates. (http://bankrupt.com/newsstand/or 215/945-7000) LEHMAN BROTHERS: Gets Nod to Transfer Assets of 2 Trust Companies ----------------------------------------------------------------- Lehman Brothers Holdings Inc. and its affiliated debtors obtained approval of the U.S. Bankruptcy Court for the Southern District of New York to execute an agreement that would authorize the transfer of assets of LBHI's trust companies. The agreement known as the Assignment and Assumption Agreement authorizes Lehman Brothers Trust Company of Delaware and Lehman Brothers Trust Company N.A. to transfer some of their assets and obligations to the new trust companies formed by Neuberger Berman Group LLC. "The transactions contemplated in the agreement are beneficial to the Debtors because the profitability of the [Lehman trust companies] going forward is likely to be immaterial to the estate," says the Debtors' attorney, Alfredo Perez, Esq., at Weil Gotshal & Manges LLP, in Houston, Texas. He adds that the deal would also allow the Lehman trust companies to transfer and be relieved of some of their liabilities and to retain more assets than they would in a wind-down or liquidation. The Lehman trust companies were originally formed by Neuberger Berman Inc. and were bought by LBHI as part of its acquisition of Neuberger Berman Inc. in 2003. LBHI did not include the Lehman trust companies when it sold its investment management unit to Neuberger Berman Group early this year. Under the deal, Neuberger Berman Group requires LBHI to guarantee the Lehman trust companies' obligations and indemnify Neuberger Berman Group against certain liabilities. Neuberger Berman Group also requires LBHI to seek a court order providing that any amounts due from LBHI under the Assignment and Assumption Agreement are entitled to administrative priority over all other claims. According to Mr. Perez, LBHI would benefit from the deal since regulatory restrictions on the Lehman trust companies' capital would be lifted upon consummation of the deal. Mr. Perez points out that the trust companies would be able to dividend retained net assets to their parent company, Lehman Brothers Bancorp Inc., another subsidiary of LBHI. Bancorp, in turn, would be able to use the additional capital to satisfy its current and future obligations including those related to its two wholly-owned subsidiaries, Woodlands Commercial Bank and Aurora Bank FSB, he says. "To the extent Bancorp has additional assets at its disposal, it will require less inter-company funding from LBHI," Mr. Perez points out. Neuberger Berman Group's ownership of the Lehman trust companies would also be beneficial to LBHI and its units since they collectively own 49% of the common equity and 93% of the preferred equity in Neuberger Berman Group as a result of the sale of the investment management division, according to Mr. Perez. "Neuberger Berman Group's ultimate ownership of the trust companies is expected to enable Neuberger Berman Group to generate increased revenues and profits," Mr. Perez says. A full-text copy of the Assignment and Assumption Agreement is available for free at: http://bankrupt.com/misc/LehmanDealTrustCompanies.pdf The Court will hold a hearing on November 18, 2009, to consider approval of the Debtors' request. Creditors and other concerned parties have until November 13, 2009, to file their objections. About Lehman Brothers Lehman Brothers Holdings Inc. -- http://www.lehman.com/-- was the fourth largest investment bank in the United States. For more than 150 years, Lehman Brothers has been a leader in the global financial markets by serving the financial needs of corporations, governmental units, institutional clients and individuals worldwide. Lehman Brothers filed for Chapter 11 bankruptcy September 15, 2008 (Bankr. S.D.N.Y. Case No. 08-13555). Lehman's bankruptcy petition listed US$639 billion in assets and US$613 billion in debts, effectively making the firm's bankruptcy filing the largest in U.S. history. Several other affiliates followed thereafter. The Debtors' bankruptcy cases are handled by Judge James M. Peck. Harvey R. Miller, Esq., Richard P. Krasnow, Esq., Lori R. Fife, Esq., Shai Y. Waisman, Esq., and Jacqueline Marcus, Esq., at Weil, Gotshal & Manges, LLP, in New York, represent Lehman. Epiq Bankruptcy Solutions serves as claims and noticing agent. On September 19, 2008, the Honorable Gerard E. Lynch, Judge of the U.S. District Court for the Southern District of New York, entered an order commencing liquidation of Lehman Brothers, Inc., pursuant to the provisions of the Securities Investor Protection Act (Case No. 08-CIV-8119 (GEL)). James W. Giddens has been appointed as trustee for the SIPA liquidation of the business of LBI The Bankruptcy Court has approved Barclays Bank Plc's purchase of Lehman Brothers' North American investment banking and capital markets operations and supporting infrastructure for US$1.75 billion. Nomura Holdings Inc., the largest brokerage house in Japan, purchased LBHI's operations in Europe for US$2 plus the retention of most of employees. Nomura also bought Lehman's operations in the Asia Pacific for US$225 million. International Operations Collapse Lehman Brothers International (Europe), the principal UK trading company in the Lehman group, was placed into administration, together with Lehman Brothers Ltd, LB Holdings PLC and LB UK RE Holdings Ltd. Tony Lomas, Steven Pearson, Dan Schwarzmann and Mike Jervis, partners at PricewaterhouseCoopers LLP, have been appointed as joint administrators to Lehman Brothers International (Europe) on September 15, 2008. The joint administrators have been appointed to wind down the business. Lehman Brothers Japan Inc. and Lehman Brothers Holdings Japan Inc. filed for bankruptcy in the Tokyo District Court on September 16. Lehman Brothers Japan Inc. reported about JPY3.4 trillion (US$33 billion) in liabilities in its petition. Bankruptcy Creditors' Service, Inc., publishes Lehman Brothers Bankruptcy News. The newsletter tracks the Chapter 11 proceeding undertaken by Lehman Brothers Holdings, Inc., and other insolvency and bankruptcy proceedings undertaken by its affiliates. (http://bankrupt.com/newsstand/or 215/945-7000) LEHMAN BROTHERS: Chubb Allowed to Pay Litigation Costs ------------------------------------------------------ At the behest of Lehman Brothers Holdings Inc. and its affiliated debtors, the U.S. Bankruptcy Court for the Southern District of New York lifted the automatic stay to allow Federal Insurance Company (Chubb) to pay litigation costs that are covered under the company's insurance policy. Chubb covers loss including defense costs and expenses for claims made against the Debtors' directors, officers or employees during the period May 16, 2007 to May 16, 2008. The company's insurance policy provides up to $15 million in coverage. The Debtors' personnel are currently facing various legal cases, which include securities actions filed in both federal and state courts for wrongful acts allegedly committed by the personnel in connection with the securities issued by LBHI. The Debtors' personnel are also facing investigations commenced by the U.S. Department of Justice, the Securities and Exchange Commission, and the New Jersey Bureau of Securities to find out what caused the demise of the Debtors. Richard Krasnow, Esq., at Weil Gotshal & Manges LLP, in New York, says the payment would ensure the personnel's continued access to funding of additional defense cost in case the $20 million provided under the insurance policy issued by their primary insurer is exhausted. XL Specialty Insurance Company, the Debtors' primary insurer, issued directors and officers liability insurance policy that provides up to $20 million in coverage. The Debtors, however, anticipate that the $20 million of primary coverage would be exhausted by December 2009 or in early 2010 given the current state of the legal proceedings. "Confirming [Chubb's]) ability to pay such defense costs and fees is in the best interests of the Debtors' estates and creditors because, inter alia, it will avoid the possible collateral estoppel effect on the Debtors that could result if the individuals' inability to defend themselves were to give rise to judgments and findings that impacted direct claims against the Debtors," Mr. Krasnow says. About Lehman Brothers Lehman Brothers Holdings Inc. -- http://www.lehman.com/-- was the fourth largest investment bank in the United States. For more than 150 years, Lehman Brothers has been a leader in the global financial markets by serving the financial needs of corporations, governmental units, institutional clients and individuals worldwide. Lehman Brothers filed for Chapter 11 bankruptcy September 15, 2008 (Bankr. S.D.N.Y. Case No. 08-13555). Lehman's bankruptcy petition listed US$639 billion in assets and US$613 billion in debts, effectively making the firm's bankruptcy filing the largest in U.S. history. Several other affiliates followed thereafter. The Debtors' bankruptcy cases are handled by Judge James M. Peck. Harvey R. Miller, Esq., Richard P. Krasnow, Esq., Lori R. Fife, Esq., Shai Y. Waisman, Esq., and Jacqueline Marcus, Esq., at Weil, Gotshal & Manges, LLP, in New York, represent Lehman. Epiq Bankruptcy Solutions serves as claims and noticing agent. On September 19, 2008, the Honorable Gerard E. Lynch, Judge of the U.S. District Court for the Southern District of New York, entered an order commencing liquidation of Lehman Brothers, Inc., pursuant to the provisions of the Securities Investor Protection Act (Case No. 08-CIV-8119 (GEL)). James W. Giddens has been appointed as trustee for the SIPA liquidation of the business of LBI The Bankruptcy Court has approved Barclays Bank Plc's purchase of Lehman Brothers' North American investment banking and capital markets operations and supporting infrastructure for US$1.75 billion. Nomura Holdings Inc., the largest brokerage house in Japan, purchased LBHI's operations in Europe for US$2 plus the retention of most of employees. Nomura also bought Lehman's operations in the Asia Pacific for US$225 million. International Operations Collapse Lehman Brothers International (Europe), the principal UK trading company in the Lehman group, was placed into administration, together with Lehman Brothers Ltd, LB Holdings PLC and LB UK RE Holdings Ltd. Tony Lomas, Steven Pearson, Dan Schwarzmann and Mike Jervis, partners at PricewaterhouseCoopers LLP, have been appointed as joint administrators to Lehman Brothers International (Europe) on September 15, 2008. The joint administrators have been appointed to wind down the business. Lehman Brothers Japan Inc. and Lehman Brothers Holdings Japan Inc. filed for bankruptcy in the Tokyo District Court on September 16. Lehman Brothers Japan Inc. reported about JPY3.4 trillion (US$33 billion) in liabilities in its petition. Bankruptcy Creditors' Service, Inc., publishes Lehman Brothers Bankruptcy News. The newsletter tracks the Chapter 11 proceeding undertaken by Lehman Brothers Holdings, Inc., and other insolvency and bankruptcy proceedings undertaken by its affiliates. (http://bankrupt.com/newsstand/or 215/945-7000) LEHMAN BROTHERS: Gets Nod to Set Process to Restructure Loan Terms ------------------------------------------------------------------ Lehman Brothers Holdings Inc. and its affiliated debtors obtained approval of the U.S. Bankruptcy Court for the Southern District of New York to implement a process governing their real estate loan transactions. These transactions include (i) restructuring the terms of, (ii) making new or additional debt and equity investments in, and (iii) entering into settlements and compromises in connection with existing commercial mortgage loans and other loans either owned by the Debtors or in which the Debtors have debt, equity investment or other interest, in each case directly or indirectly in or secured by real property or interests. The Debtors propose these procedures: (1) The Debtors may enter into and consummate a Restructuring or Settlement that involves a Real Estate Investment having an aggregate Mark-to-Market Carrying Value of up to and including $10 million without further order of the Court or notice to or approval of any party. (2) The Debtors may enter into and consummate Real Estate Loan Transactions that involve a Real Estate Investment having an aggregate Mark-to-Market Carrying Value of greater than $10 million but less than or equal to $25 million, or the Debtors making a New Investment in an amount up to $5 million without further order of the Court or approval of or notice to any other party; provided the Debtors serve notice to the Official Committee of Unsecured Creditors of those Real Estate Loan Transactions as soon as practicable but in no event later than promptly following the closing of the transactions. (3) If a Real Estate Loan Transaction involves (i) a Real Estate Investment having an aggregate Mark-to- Market Carrying Value greater than $25 million but less than or equal to $100 million; (ii) the Debtors making a New Investment in an amount greater than $5 million but less than or equal to $25 million; (iii) a Restructuring of the Debtors' debt or equity position in a Real Estate Investment or a Settlement resulting in a reduction in the aggregate value of the Real Estate Investment to a value that is less than 50% of the aggregate Mark-to-Market Carrying Value of the Real Estate Investment; and (iv) any party to the Real Estate Loan Transaction being either a person employed by the Debtors at any time on or after September 15, 2007, or an entity unaffiliated with the Debtors for which a person employed by the Debtors at any time on or after September 15, 2007, is materially involved in the negotiations of the Real Estate Loan Transaction, the Debtors will provide to the Creditors' Committee a summary of the proposed Real Estate Loan Transaction identifying the terms of the proposed Real Estate Loan Transaction. The Creditors' Committee will be required to submit any objections to a Real Estate Loan Transaction identified in a Real Estate Loan Transaction Summary so as to be received by the Debtors on or before 10 days after service of the summary; provided that if the Creditors Committee requests additional information regarding a transaction, its objection period will be suspended until the requested information is provided. If the Debtors and the Creditors' Committee are unable to consensually resolve the objection, the Debtors may file a motion seeking approval of the Real Estate Loan Transaction. If the Creditors' Committee does not timely object to a Real Estate Loan Transaction, or the Debtors and the Creditors' Committee resolve a timely objection, the Debtors may proceed with the transaction without further order of the Court or notice to or approval of any party. (4) The Debtors will be required to file a motion with the Court seeking approval of any Real Estate Loan Transaction that involves (i) a Real Estate Investment having an aggregate Mark-to-Market Carrying Value greater than $100 million, and (ii) the Debtors making a New Investment in an amount greater than $25 million. (5) The Debtors may enter into and consummate any Real Estate Loan Transaction that involves a Real Estate Investment having an aggregate Mark-to-Market Carrying Value of greater than $25 million without further order of the Court or notice to or approval of any party, if the transaction involves only (i) a non-material amendment to or modification of a Real Estate Investment, as determined by the Debtors after consultation with the Creditors Committee, and (ii) the Debtors making a New Investment in an amount not greater than $5 million; provided the Debtors will serve notice to the Creditors Committee of that transaction as soon as practicable but in no event later than promptly following the closing of the transaction. (6) Real Estate Investments managed by the Debtors that are cross-collateralized or cross-defaulted with each other will be aggregated for purposes of applying the thresholds to Real Estate Loan Transactions. (7) The Debtors ability to carry out the actions pursuant to the procedures will not override any notice, consent or other rights that any third parties may have pursuant to agreements with the Debtors. As part of the proposed procedures, the Debtors will file in Court, beginning not later than 105 days after entry of an order approving the procedures, a quarterly report of all Real Estate Loan Transactions entered into by the Debtors during the prior three months. About Lehman Brothers Lehman Brothers Holdings Inc. -- http://www.lehman.com/-- was the fourth largest investment bank in the United States. For more than 150 years, Lehman Brothers has been a leader in the global financial markets by serving the financial needs of corporations, governmental units, institutional clients and individuals worldwide. Lehman Brothers filed for Chapter 11 bankruptcy September 15, 2008 (Bankr. S.D.N.Y. Case No. 08-13555). Lehman's bankruptcy petition listed US$639 billion in assets and US$613 billion in debts, effectively making the firm's bankruptcy filing the largest in U.S. history. Several other affiliates followed thereafter. The Debtors' bankruptcy cases are handled by Judge James M. Peck. Harvey R. Miller, Esq., Richard P. Krasnow, Esq., Lori R. Fife, Esq., Shai Y. Waisman, Esq., and Jacqueline Marcus, Esq., at Weil, Gotshal & Manges, LLP, in New York, represent Lehman. Epiq Bankruptcy Solutions serves as claims and noticing agent. On September 19, 2008, the Honorable Gerard E. Lynch, Judge of the U.S. District Court for the Southern District of New York, entered an order commencing liquidation of Lehman Brothers, Inc., pursuant to the provisions of the Securities Investor Protection Act (Case No. 08-CIV-8119 (GEL)). James W. Giddens has been appointed as trustee for the SIPA liquidation of the business of LBI The Bankruptcy Court has approved Barclays Bank Plc's purchase of Lehman Brothers' North American investment banking and capital markets operations and supporting infrastructure for US$1.75 billion. Nomura Holdings Inc., the largest brokerage house in Japan, purchased LBHI's operations in Europe for US$2 plus the retention of most of employees. Nomura also bought Lehman's operations in the Asia Pacific for US$225 million. International Operations Collapse Lehman Brothers International (Europe), the principal UK trading company in the Lehman group, was placed into administration, together with Lehman Brothers Ltd, LB Holdings PLC and LB UK RE Holdings Ltd. Tony Lomas, Steven Pearson, Dan Schwarzmann and Mike Jervis, partners at PricewaterhouseCoopers LLP, have been appointed as joint administrators to Lehman Brothers International (Europe) on September 15, 2008. The joint administrators have been appointed to wind down the business. Lehman Brothers Japan Inc. and Lehman Brothers Holdings Japan Inc. filed for bankruptcy in the Tokyo District Court on September 16. Lehman Brothers Japan Inc. reported about JPY3.4 trillion (US$33 billion) in liabilities in its petition. Bankruptcy Creditors' Service, Inc., publishes Lehman Brothers Bankruptcy News. The newsletter tracks the Chapter 11 proceeding undertaken by Lehman Brothers Holdings, Inc., and other insolvency and bankruptcy proceedings undertaken by its affiliates. (http://bankrupt.com/newsstand/or 215/945-7000) LEHMAN BROTHERS: LBSF Has Nod to Sell Swap Stake to Goldman ----------------------------------------------------------- Lehman Brothers Special Financing Inc. won authority from the U.S. Bankruptcy Court for the Southern District of New York to sell its stake in a swap agreement known as 1992 ISDA Master Agreement with Structured Asset Receivable Trust Series 2005-1 for $7.03 million to Goldman Sachs Bank USA or its affiliate, Goldman Sachs Mitsui Marine Derivative Products L.P. The ISDA agreement dated December 15, 2004, allowed LBSF and the Trust to enter into an interest rate swap transaction, which is set to expire on January 21, 2015. Lehman Brothers Holdings Inc. serves as credit support provider for LBSF under the agreement. As of October 21, 2009, LBSF owes $127,041 to Structured Asset Receivable Trust while the trust owes $5,211,270 plus interest to LBSF. Under its deal with Goldman, LBSF agreed to assume, assign and transfer to Goldman all of its interest in the swap agreement in return for payment of $7.03 million, subject to adjustments to be agreed upon by the companies. Upon assumption of the swap agreement but immediately prior to assignment, Structured Asset Receivable Trust is required to pay $5,084,229 plus interest to LBSF. Meanwhile, LBHI's obligations under the swap agreement will not be assumed by Goldman. About Lehman Brothers Lehman Brothers Holdings Inc. -- http://www.lehman.com/-- was the fourth largest investment bank in the United States. For more than 150 years, Lehman Brothers has been a leader in the global financial markets by serving the financial needs of corporations, governmental units, institutional clients and individuals worldwide. Lehman Brothers filed for Chapter 11 bankruptcy September 15, 2008 (Bankr. S.D.N.Y. Case No. 08-13555). Lehman's bankruptcy petition listed US$639 billion in assets and US$613 billion in debts, effectively making the firm's bankruptcy filing the largest in U.S. history. Several other affiliates followed thereafter. The Debtors' bankruptcy cases are handled by Judge James M. Peck. Harvey R. Miller, Esq., Richard P. Krasnow, Esq., Lori R. Fife, Esq., Shai Y. Waisman, Esq., and Jacqueline Marcus, Esq., at Weil, Gotshal & Manges, LLP, in New York, represent Lehman. Epiq Bankruptcy Solutions serves as claims and noticing agent. On September 19, 2008, the Honorable Gerard E. Lynch, Judge of the U.S. District Court for the Southern District of New York, entered an order commencing liquidation of Lehman Brothers, Inc., pursuant to the provisions of the Securities Investor Protection Act (Case No. 08-CIV-8119 (GEL)). James W. Giddens has been appointed as trustee for the SIPA liquidation of the business of LBI The Bankruptcy Court has approved Barclays Bank Plc's purchase of Lehman Brothers' North American investment banking and capital markets operations and supporting infrastructure for US$1.75 billion. Nomura Holdings Inc., the largest brokerage house in Japan, purchased LBHI's operations in Europe for US$2 plus the retention of most of employees. Nomura also bought Lehman's operations in the Asia Pacific for US$225 million. International Operations Collapse Lehman Brothers International (Europe), the principal UK trading company in the Lehman group, was placed into administration, together with Lehman Brothers Ltd, LB Holdings PLC and LB UK RE Holdings Ltd. Tony Lomas, Steven Pearson, Dan Schwarzmann and Mike Jervis, partners at PricewaterhouseCoopers LLP, have been appointed as joint administrators to Lehman Brothers International (Europe) on September 15, 2008. The joint administrators have been appointed to wind down the business. Lehman Brothers Japan Inc. and Lehman Brothers Holdings Japan Inc. filed for bankruptcy in the Tokyo District Court on September 16. Lehman Brothers Japan Inc. reported about JPY3.4 trillion (US$33 billion) in liabilities in its petition. Bankruptcy Creditors' Service, Inc., publishes Lehman Brothers Bankruptcy News. The newsletter tracks the Chapter 11 proceeding undertaken by Lehman Brothers Holdings, Inc., and other insolvency and bankruptcy proceedings undertaken by its affiliates. (http://bankrupt.com/newsstand/or 215/945-7000) LEHMAN BROTHERS: Wants to Compel Norton Gold to Honor Contract -------------------------------------------------------------- Lehman Brothers Commercial Corp. asks the Court to compel Norton Gold Fields Ltd. to perform its obligations under a swap agreement. LBCC made the move following Norton Gold's refusal to pay LBCC more than $18 million as required under the agreement. Norton Gold allegedly refused to make the payment on grounds that LBCC defaulted under the agreement when it filed for bankruptcy protection, giving the Australian company the right to stop issuing payments. It also accused LBCC of not issuing confirmation, which specifies the payment to be made by the Australian company, since September 12, 2008. Although Norton Gold has the right to terminate the swap agreement, it reportedly did not do so because it would be required to make "significant termination payment" to LBCC, according to LBCC's attorney, Jayant Tambe, Esq., at Jones Day, in New York. Norton Gold, however, continues to observe the other terms of the agreement except its obligation to pay the $18 million, the lawyer claims in court papers. "Norton's failure to make the payments due and owing to LBCC is an impermissible exercise of control over property of the estate," Mr. Tambe says, adding that it was a violation of the automatic stay. A hearing to consider approval of LBCC's request is scheduled for December 16, 2009. About Lehman Brothers Lehman Brothers Holdings Inc. -- http://www.lehman.com/-- was the fourth largest investment bank in the United States. For more than 150 years, Lehman Brothers has been a leader in the global financial markets by serving the financial needs of corporations, governmental units, institutional clients and individuals worldwide. Lehman Brothers filed for Chapter 11 bankruptcy September 15, 2008 (Bankr. S.D.N.Y. Case No. 08-13555). Lehman's bankruptcy petition listed US$639 billion in assets and US$613 billion in debts, effectively making the firm's bankruptcy filing the largest in U.S. history. Several other affiliates followed thereafter. The Debtors' bankruptcy cases are handled by Judge James M. Peck. Harvey R. Miller, Esq., Richard P. Krasnow, Esq., Lori R. Fife, Esq., Shai Y. Waisman, Esq., and Jacqueline Marcus, Esq., at Weil, Gotshal & Manges, LLP, in New York, represent Lehman. Epiq Bankruptcy Solutions serves as claims and noticing agent. On September 19, 2008, the Honorable Gerard E. Lynch, Judge of the U.S. District Court for the Southern District of New York, entered an order commencing liquidation of Lehman Brothers, Inc., pursuant to the provisions of the Securities Investor Protection Act (Case No. 08-CIV-8119 (GEL)). James W. Giddens has been appointed as trustee for the SIPA liquidation of the business of LBI The Bankruptcy Court has approved Barclays Bank Plc's purchase of Lehman Brothers' North American investment banking and capital markets operations and supporting infrastructure for US$1.75 billion. Nomura Holdings Inc., the largest brokerage house in Japan, purchased LBHI's operations in Europe for US$2 plus the retention of most of employees. Nomura also bought Lehman's operations in the Asia Pacific for US$225 million. International Operations Collapse Lehman Brothers International (Europe), the principal UK trading company in the Lehman group, was placed into administration, together with Lehman Brothers Ltd, LB Holdings PLC and LB UK RE Holdings Ltd. Tony Lomas, Steven Pearson, Dan Schwarzmann and Mike Jervis, partners at PricewaterhouseCoopers LLP, have been appointed as joint administrators to Lehman Brothers International (Europe) on September 15, 2008. The joint administrators have been appointed to wind down the business. Lehman Brothers Japan Inc. and Lehman Brothers Holdings Japan Inc. filed for bankruptcy in the Tokyo District Court on September 16. Lehman Brothers Japan Inc. reported about JPY3.4 trillion (US$33 billion) in liabilities in its petition. Bankruptcy Creditors' Service, Inc., publishes Lehman Brothers Bankruptcy News. The newsletter tracks the Chapter 11 proceeding undertaken by Lehman Brothers Holdings, Inc., and other insolvency and bankruptcy proceedings undertaken by its affiliates. (http://bankrupt.com/newsstand/or 215/945-7000) LEHMAN BROTHERS: Court OKs Barclays Deal on Transfer of PIM Assets ------------------------------------------------------------------ James W. Giddens, the Trustee for the Liquidation of Lehman Brothers Inc., the broker-dealer of Lehman Brothers, said on December 10 the U.S. Bankruptcy Court has approved a settlement agreement with Barclays to finalize the transfer of Private Investment Management assets to former LBI customers. This milestone brings to a successful conclusion the Account Transfer phase of the Securities Investor Protection Act liquidation of LBI, Mr. Giddens said in a statement. Since the demise of Lehman in September 2008, the Trustee has overseen the successful transfer of 110,000 accounts containing more than $92 billion in customer assets to Barclays, Neuberger Berman, and other SIPC member broker dealers. Overall the Trustee is administering more than $110 billion in the liquidation of LBI, the largest broker-dealer ever to fail. The Trustee's transfers of accounts allowed customers to continue trading within days of LBI's filing, maintaining liquidity and investor confidence through a tumultuous time in the nation's markets. The PIM conversion of accounts -- effected in accordance with court orders, provisions of the SIPA statute, and regulatory intent -- was the only remaining aspect of the Account Transfers not yet fully complete. The Securities Investor Protection Corp., the U.S. Securities and Exchange Commission and the Federal Reserve Bank of New York all supported the Trustee's motion and the Account Transfer process, and with today's ruling their and the Trustee's goal of customer protection has in fact been achieved. The Trustee is acting pursuant to his principal duty to return property to public customers while at the same time maximizing the estate for all creditors. This settlement does not affect the Trustee's separate, pending claims against Barclays in the Rule 60(b) motion and adversary proceedings, requesting the Court rule that billions of dollars of disputed assets that Barclays is claiming remain the property of the LBI estate. The transfer of these assets would create an unfair windfall for Barclays at the expense of public customers. The Trustee continues to work through an enormous workload to resolve claims not covered by the Account Transfers in a fair, transparent and orderly process. The Trustee has determined more than 85% of asserted public customer claims filed by the June 1, 2009 deadline, and has made substantial progress in reconciling large, omnibus claims asserted by LBHI, LBIE and others. About Lehman Brothers Lehman Brothers Holdings Inc. -- http://www.lehman.com/-- was the fourth largest investment bank in the United States. For more than 150 years, Lehman Brothers has been a leader in the global financial markets by serving the financial needs of corporations, governmental units, institutional clients and individuals worldwide. Lehman Brothers filed for Chapter 11 bankruptcy September 15, 2008 (Bankr. S.D.N.Y. Case No. 08-13555). Lehman's bankruptcy petition listed US$639 billion in assets and US$613 billion in debts, effectively making the firm's bankruptcy filing the largest in U.S. history. Several other affiliates followed thereafter. The Debtors' bankruptcy cases are handled by Judge James M. Peck. Harvey R. Miller, Esq., Richard P. Krasnow, Esq., Lori R. Fife, Esq., Shai Y. Waisman, Esq., and Jacqueline Marcus, Esq., at Weil, Gotshal & Manges, LLP, in New York, represent Lehman. Epiq Bankruptcy Solutions serves as claims and noticing agent. On September 19, 2008, the Honorable Gerard E. Lynch, Judge of the U.S. District Court for the Southern District of New York, entered an order commencing liquidation of Lehman Brothers, Inc., pursuant to the provisions of the Securities Investor Protection Act (Case No. 08-CIV-8119 (GEL)). James W. Giddens has been appointed as trustee for the SIPA liquidation of the business of LBI The Bankruptcy Court has approved Barclays Bank Plc's purchase of Lehman Brothers' North American investment banking and capital markets operations and supporting infrastructure for US$1.75 billion. Nomura Holdings Inc., the largest brokerage house in Japan, purchased LBHI's operations in Europe for US$2 plus the retention of most of employees. Nomura also bought Lehman's operations in the Asia Pacific for US$225 million. International Operations Collapse Lehman Brothers International (Europe), the principal UK trading company in the Lehman group, was placed into administration, together with Lehman Brothers Ltd, LB Holdings PLC and LB UK RE Holdings Ltd. Tony Lomas, Steven Pearson, Dan Schwarzmann and Mike Jervis, partners at PricewaterhouseCoopers LLP, have been appointed as joint administrators to Lehman Brothers International (Europe) on September 15, 2008. The joint administrators have been appointed to wind down the business. Lehman Brothers Japan Inc. and Lehman Brothers Holdings Japan Inc. filed for bankruptcy in the Tokyo District Court on September 16. Lehman Brothers Japan Inc. reported about JPY3.4 trillion (US$33 billion) in liabilities in its petition. Bankruptcy Creditors' Service, Inc., publishes Lehman Brothers Bankruptcy News. The newsletter tracks the Chapter 11 proceeding undertaken by Lehman Brothers Holdings, Inc., and other insolvency and bankruptcy proceedings undertaken by its affiliates. (http://bankrupt.com/newsstand/or 215/945-7000) LENNY DYKSTRA: Patrizzi & Co. to Auction Off Watch and Trophies --------------------------------------------------------------- According to an article in The Wall Street Journal's Bankruptcy Beat, Patrizzi & Co. is auctioning Lenny Dykstra's designer watch and two trophies from his baseball glory days during an event it calls "Exceptional Watchmaking Masterpieces -- An Exclusive Collection of Remarkable Timepieces," according to a catalogue. The article notes Mr. Dykstra lost control of his bankruptcy case in September after Bankruptcy Judge Geraldine Mund ruled that he could no longer administer his own finances. A trustee was appointed to steer the proceedings back on course and generate cash for creditors by selling off Mr. Dykstra's personal belongings and real estate piece by piece. According to the article, Mr. Dykstra's assets for auction include: -- a Patek Phillippe watch made of 18 karat gold, which Patrizzi estimates to be worth between $28,000 and $35,000; -- Mr. Dykstra's 1986 World Series championship trophy and Plaque, estimated to be worth $18,000 to $25,000.; -- Mr. Dykstra's "silver slugger" and "player of the week" awards, which he received in 1993 and 1990 respectively, estimated to be worth $12,000 to $16,000. Westlake Village, California-based Lenny Dykstra is a former Major League Baseball All-Star. He was center fielder for the New York Mets and Philadelphia Phillies. He filed for Chapter 11 bankruptcy protection on July 7, 2009 (Bankr. C.D. Calif. Case No. 09-18409). M Jonathan Hayes, Esq., at the Law Office of M Jonathan Hayes, in Northridge, California, assists the Debtor in his restructuring effort. The Debtor listed up to $50,000 in assets and $10,000,001 to $50,000,000 in debts. LEXINGTON PRECISION: Hearing Set on Rival Plans' Disclosure Docs ---------------------------------------------------------------- Bill Rochelle at Bloomberg News reports that the Bankruptcy Court will convene a hearing on January 11 to consider approval of the disclosure statements explaining three competing reorganization proposals. In addition to the Company's plan, the creditors' committee and the secured lenders each filed their own. The parties have been fighting over whether the business is worth enough so value should be left for shareholders. About Lexington Precision Headquartered in New York, Lexington Precision Corp. -- http://www.lexingtonprecision.com/-- and its wholly-owned subsidiary Lexington Rubber Group, Inc. conduct their operations through two operating groups, the Rubber Group and the Metals Group. The business of the Rubber Group is conducted by LRGI while the business of the Metals Group is conducted by LPC. The Rubber Group is a manufacturer of tight-tolerance, molder rubber componets that are sold to customers who supply the automotive aftermarket, to customers who supply the automotive original-equipment manufacturers ("OEMs"), and to manufacturers of medical devices. The Metals Group manufactures a variety of high- volume components that are machined from aluminum, brass, steel, and stainless steel bars and blanks. The components produced by the Metals Group include airbag inflator components, solenoids for transmissions, fluid handling couplings, hydraulic valve blocks, power steering components, and wiper-system components, primarily for use by the automotive OEMs. 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). Christopher J. Marcus, Esq., and Victoria Vron, Esq., at Weil, Gotshal & Manges, represent the Debtors in their restructuring efforts. The Debtors selected Epiq Systems - Bankruptcy Solutions LLC as claims agent. The U.S. Trustee for Region 2 appointed six creditors to serve on an official committee of unsecured creditors. Paul N. Silverstein, Esq., and Jonathan Levine, Esq., at Andrews Kurth LLP, represent the Committee as counsel. LODGENET INTERACTIVE: Reaffirms Fourth Quarter 2009 Guidance ------------------------------------------------------------ LodgeNet Interactive Corporation's Chairman and CEO Scott C. Petersen was slated to participate in UBS' Global Media and Communications Conference December 9, 2009, in New York. Mr. Petersen was to discuss the Company's strategy, its success in proactively managing its business during the evolving economic conditions of 2009, and progress on its strategic initiatives to diversify revenue and drive free cash flow. During the presentation, Mr. Petersen was to reaffirm the Company's fiscal guidance for the fourth quarter 2009, which was originally provided on October 21, 2009. Some highlights of LodgeNet's recent strategic achievements include: -- Revenue Diversification: Revenue generated by sources other than guest entertainment purchases increased 15% during the first nine months of 2009 as compared to the same period in 2008 and now represents 40% of total revenue. -- Proactive Management: Given the economic environment, LodgeNet reduced its operating expenses by 25% and its capital expenditures by 70% during the first nine months 2009. As a result of this management approach, the Company increased its cash flow by four fold during the first 9 months of 2009, from $9.9 million in 2008 to $46.3 million in 2009. -- Debt Reduction: During the first nine months of 2009, LodgeNet reduced its debt by more than 15%, or $92 million. -- Innovative Product Arrangements: LodgeNet reduced its level of capital investment per interactive room by an average of 20% between new and renewal rooms in 2009, and further capital reductions representing a $50-$75, or 20%-25% savings per average system installation are anticipated through the innovative arrangements LodgeNet recently announced with LG Electronics and Philips, the two leading TV manufacturers for the hospitality market. The two electronics firms are now licensed to integrate LodgeNet's patented b-LAN communications technology directly into their televisions during assembly, creating out-of-the-box "LodgeNet ready" sets. -- Healthcare: LodgeNet's Healthcare division increased its facilities under contract in 2009 by 30% to more than 55 facilities nationwide. Recently, the division signed agreements with several award-winning hospitals and made inroads into the children's hospital segment, with Children's Hospitals and Clinics of Minnesota joining Morgan Stanley and Children's Pittsburgh, as well as the new Sanford Children's Hospital on LodgeNet's roster of well-known pediatric facilities. LodgeNet Healthcare has also been selected to address the needs of government armed forces facilities at the Veterans Administration hospital in Washington DC, and Naval hospitals in Jacksonville and Pensacola, Florida. -- The Hotel Networks: THN continues its emergence as an innovative programmer through the introduction of two additional content offerings. Starting in Jan 2010, the English-speaking RT World News Channel will be distributed through THN's private satellite network in over 800 major hotels. In early spring of 2010, Fashion TV "Jet Set Edition" will launch in select upscale hotels throughout the country. This customized channel will be produced with cooperation of FTV, the world's leader in Fashion programming, and will be carried on THN's Interactive channels. A copy of the presentation slides is available at no charge at: http://ResearchArchives.com/t/s?4b7f About LodgeNet Interactive Sioux Falls, South Dakota-based LodgeNet Interactive Corporation (Nasdaq:LNET) -- http://www.lodgenet.com/-- provides 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 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 of September 30, 2009, LodgeNet had $541.5 million in total assets against $610.5 million in total liabilities, resulting in $68.9 million in stockholders' deficiency. * * * As reported by the Troubled Company Reporter on June 10, 2009, Moody's affirmed LodgeNet's B3 corporate family rating, Caa1 probability of default rating and SGL-4 speculative grade liquidity rating (indicating poor liquidity). The rating continues to be influenced primarily by liquidity matters stemming from the company's very limited financial covenant compliance cushion. LOUISIANA FILM: Faces Trustee's Chapter 7 Liquidation Plea ---------------------------------------------------------- The Associated Press reports that Gerald Schiff, trustee to Louisiana Film Studios LLC, is asking the Bankruptcy Court to convert the Chapter 11 case of the former movie studio to Chapter 7 liquidation, arguing that the company is unlikely to achieve a successful Chapter 11 reorganization because it has no cash, employees and source of income. A hearing is set for Dec. 29, 2009, to consider the trustee's request. Louisiana Film Studios, LLC, was a movie studio based in Harahan, Louisiana. The AP recounts that fifteen current and former team members paid the money to Louisiana Film late in 2008 for what they thought would be state movie industry tax credits returning $1.33 for each dollar invested. State officials said the studio never applied for the credits and the money has not been returned. A group of the credit buyers that include 47 Construction, LLC, et al., filed a petition to put the Company into Chapter 11 protection on July 23, 2009 (Bankr. E.D. La. Case No. 09-12232). LYONDELL CHEMICAL: Akzo Nobel Wants to File Counterclaims --------------------------------------------------------- Akzo Nobel Paints LLC asks the Court to lift the automatic stay to serve counterclaims on Debtor Millenium Holdings LLC in the pending New York Supreme Court action "Millenium Holdings LLC v. The Glidden Company n/k/a Akzo Nobel Paints LLC," Index No. 600920/08 (New York County, Part 54), relating to certain contractual indemnification obligations owed by the Debtor to Akzo Nobel. The State Court Action arises out of agreements pursuant to which Millenium Holdings sold its paint business to Akzo Nobel. Millenium Holdings has sued Akzo Nobel in the State Court Action, contending that the parties' agreements obligate Akzo Nobel to indemnify the Debtor against certain liabilities and expenses, Maura K. Monaghan, Esq., at Debevoise & Plimpton LLP, in New York, relates. In a Purchase Agreement dated August 14, 1986, Hanson Trust PLC and HSCM-20, Inc., transferred their paints -- but not their pigments -- business to Imperial Chemical Industries PLC and ICI American Holdings, Inc. In 2000, the 1986 Purchase Agreement was novated to transfer all rights and obligations belonging to Hanson Trust and HSCM-20 under the contract to Millenium Holdings -- then known as Millenium Holdings Inc. -- and all rights and obligations of Imperial Chemical and ICI to The Glidden Company, according to Ms. Monaghan. Under the Purchase Agreement, Millenium Holdings and Akzo Nobel agreed to cross-indemnify each other for percentages of certain environmental, product safety, liability, and warranty claims. On December 13, 2000, Millenium Holdings, Akzo Nobel, among others, entered into a settlement agreement to resolve certain disputes arising between them concerning the interpretation and application of certain provisions of the Purchase Agreement. As part of the settlement, the parties executed a Novation Agreement, by which they agreed to novate and amend certain provisions of the Purchase Agreement, creating an Amended Purchase Agreement, Ms. Monaghan relates. The parties also agreed to amend the Purchase Agreement with respect to environmental indemnity obligations, by identifying sites for which each party was responsible. According to Ms. Monaghan, since the execution of the Purchase Agreement, there has been extensive litigation against Millenium Holdings or Akzo Nobel, or both, alleging personal injury, property damage, and public nuisance resulting from the presence of lead pigment or lead paint from old paint in poorly maintained residential housing. The parties have engaged in the required cleanup of various environmental sites. Akzo Nobel wishes to file two types of defenses and counterclaims against Millenium Holdings in the State Court Action: (1) Akzo Nobel seeks to recover any amounts due to it from the Debtor for expenses and liabilities associated with the paints or pigments, or both business pursuant to indemnity provisions of the 1986 Purchase Agreement. (2) Akzo Nobel seeks to recover from the Debtor any amounts due under the indemnity provisions for clean-up of environmental sites in the 1986 Purchase Agreement, as amended by the Settlement Agreement. Each of the claims is based on a right of recoupment and acts as a reduction to the amounts claimed by Millenium Holdings, Ms. Monaghan says. She notes that under New York law, recoupment is the reduction of a monetary claim "through a process whereby cross demands arising out of the same transaction are allowed to compensate one another and the balances only to be recovered." Alternatively, Akzo Nobel's counterclaims qualify as rights of set-off, which "allows entities that owe each other money to apply their mutual debts against each other, thereby avoiding the absurdity of making A pay B when B owes A," Ms. Monaghan tells the Court. She states that Akzo Nobel's recoupment defense is not subject to the automatic stay. However, Section 362(a)(7) of the Bankruptcy Code provides that the automatic stay bars "the setoff of any debt owing to the debtor that arose before the commencement of the case under this title against any claim against the debtor." In an abundance of caution, Akzo Nobel wishes to obtain relief from the automatic stay before asserting a set-off defense in the State Court Action. In addition, the same claims that are asserted as recoupment defenses may entitle Akzo Nobel to affirmative recoveries to the extent that its claims exceed any amounts that it owes to Millenium Holdings. Akzo Nobel wishes to obtain relief from the automatic stay to assert its rights to the affirmative recoveries in the State Court Action. Akzo Nobel only seeks permission to litigate its rights in the State Court Action, and agrees that the actual enforcement and collection of an affirmative judgment against Millenium Holdings, if one is entered, in the absence of a further relief from the stay, would be subject to further proceedings and rulings of the Court, Ms. Monaghan assures the Court. About Lyondell Chemical LyondellBasell Industries is one of the world's largest polymers, petrochemicals and fuels companies. It is the global leader in polyolefins technology, production and marketing; a pioneer in propylene oxide and derivatives; and a significant producer of fuels and refined products, including biofuels. Through research and development, LyondellBasell develops innovative materials and technologies that deliver exceptional customer value and products that improve quality of life for people around the world. Headquartered in The Netherlands, LyondellBasell -- http://www.lyondellbasell.com/-- is privately owned by Access Industries. Basell AF and Lyondell Chemical Company merged operations in 2007 to form LyondellBasell Industries, the world's third largest independent chemical company. LyondellBasell became saddled with debt as part of the US$12.7 billion merger. On January 6, 2009, LyondellBasell Industries' U.S. operations and one of its European holding companies -- Basell Germany Holdings GmbH -- filed voluntary petitions to reorganize under Chapter 11 of the U.S. Bankruptcy Code to facilitate a restructuring of the company's debts. The case is In re Lyondell Chemical Company, et al., Bankr. S.D.N.Y. Lead Case No. 09-10023). Seventy-nine Lyondell entities, including Equistar Chemicals, LP, Lyondell Chemical Company, Millennium Chemicals Inc., and Wyatt Industries, Inc. filed for Chapter 11. In May 2009, one of the cases was dismissed -- Case No. 09-10068 -- because it is duplicative of Case No. 09- 10040 relating to Debtor Glidden Latin America Holdings. The Hon. Robert E. Gerber presides over the case. Deryck A. Palmer, Esq., at Cadwalader, Wickersham & Taft LLP, in New York, serves as the Debtors' bankruptcy counsel. Evercore Partners serves as financial advisors, and Alix Partners and its subsidiary AP Services LLC, serves as restructuring advisors. AlixPartners' Kevin M. McShea acts as the Debtors' Chief Restructuring Officer. Clifford Chance LLP serves as restructuring advisors to the European entities. Lyondell Chemical estimated that consolidated assets total US$27.12 billion and debts total US$19.34 billion as of the bankruptcy filing date. Lyondell has obtained approximately US$8 billion in DIP financing to fund continuing operations. The DIP financing includes two credit agreements: a US$6.5 billion term loan, which comprises a US$3.25 billion in new loans and a US$3.25 billion roll-up of existing loans; and a US$1.57 billion asset-backed lending facility. Luxembourg-based LyondellBasell Industries AF S.C.A. and another affiliate were voluntarily added to Lyondell Chemical's reorganization filing under Chapter 11 on April 24, 2009, in order to seek protection against claims by certain financial and U.S. trade creditors. On May 8, 2009, LyondellBasell Industries added 13 non-operating entities to Lyondell Chemical Company's reorganization filing under Chapter 11 of the U.S. Bankruptcy Code. All of the entities are U.S. companies and were added to the original Chapter 11 filing for administrative purposes. The filings will have no impact on current business or operations as none of the entities manufactures or sells products. Bankruptcy Creditors' Service, Inc., publishes Lyondell Bankruptcy News. The newsletter tracks the Chapter 11 proceeding undertaken by Lyondell Chemical Company and its various affiliates. (http://bankrupt.com/newsstand/or 215/945-7000) LYONDELL CHEMICAL: Begins Filing Omnibus Claims Objections ---------------------------------------------------------- Lyondell Chemical Company and its units have begun filing omnibus objections to claims in their Chapter 11 cases. In their first omnibus claims objection, the Debtors sought and obtained the Court's approval to disallow and expunge 100 claims, aggregating $194,770,625, that are duplicative of certain claims. The corresponding "Surviving Claims" will remain on the claims register in the same priority as filed. The Surviving Claims are neither allowed nor disallowed at this time, subject to any future objection on any basis. In their second omnibus claims objection, the Debtors sought and obtained the Court's approval to disallow and expunge 100 claims, aggregating $2,271,617, that are duplicative of certain claims. In the third omnibus claims objection, the Debtors sought and obtained the Court's authority to disallow and expunge 100 claims, aggregating $301,199, that are duplicative of certain claims. LYONDELL BANKRUPTCY NEWS provides definitive coverage of the omnibus claims objections, the responses to those objections, and the orders entered by the Court in connection with the objections. About Lyondell Chemical LyondellBasell Industries is one of the world's largest polymers, petrochemicals and fuels companies. It is the global leader in polyolefins technology, production and marketing; a pioneer in propylene oxide and derivatives; and a significant producer of fuels and refined products, including biofuels. Through research and development, LyondellBasell develops innovative materials and technologies that deliver exceptional customer value and products that improve quality of life for people around the world. Headquartered in The Netherlands, LyondellBasell -- http://www.lyondellbasell.com/-- is privately owned by Access Industries. Basell AF and Lyondell Chemical Company merged operations in 2007 to form LyondellBasell Industries, the world's third largest independent chemical company. LyondellBasell became saddled with debt as part of the US$12.7 billion merger. On January 6, 2009, LyondellBasell Industries' U.S. operations and one of its European holding companies -- Basell Germany Holdings GmbH -- filed voluntary petitions to reorganize under Chapter 11 of the U.S. Bankruptcy Code to facilitate a restructuring of the company's debts. The case is In re Lyondell Chemical Company, et al., Bankr. S.D.N.Y. Lead Case No. 09-10023). Seventy-nine Lyondell entities, including Equistar Chemicals, LP, Lyondell Chemical Company, Millennium Chemicals Inc., and Wyatt Industries, Inc. filed for Chapter 11. In May 2009, one of the cases was dismissed -- Case No. 09-10068 -- because it is duplicative of Case No. 09- 10040 relating to Debtor Glidden Latin America Holdings. The Hon. Robert E. Gerber presides over the case. Deryck A. Palmer, Esq., at Cadwalader, Wickersham & Taft LLP, in New York, serves as the Debtors' bankruptcy counsel. Evercore Partners serves as financial advisors, and Alix Partners and its subsidiary AP Services LLC, serves as restructuring advisors. AlixPartners' Kevin M. McShea acts as the Debtors' Chief Restructuring Officer. Clifford Chance LLP serves as restructuring advisors to the European entities. Lyondell Chemical estimated that consolidated assets total US$27.12 billion and debts total US$19.34 billion as of the bankruptcy filing date. Lyondell has obtained approximately US$8 billion in DIP financing to fund continuing operations. The DIP financing includes two credit agreements: a US$6.5 billion term loan, which comprises a US$3.25 billion in new loans and a US$3.25 billion roll-up of existing loans; and a US$1.57 billion asset-backed lending facility. Luxembourg-based LyondellBasell Industries AF S.C.A. and another affiliate were voluntarily added to Lyondell Chemical's reorganization filing under Chapter 11 on April 24, 2009, in order to seek protection against claims by certain financial and U.S. trade creditors. On May 8, 2009, LyondellBasell Industries added 13 non-operating entities to Lyondell Chemical Company's reorganization filing under Chapter 11 of the U.S. Bankruptcy Code. All of the entities are U.S. companies and were added to the original Chapter 11 filing for administrative purposes. The filings will have no impact on current business or operations as none of the entities manufactures or sells products. Bankruptcy Creditors' Service, Inc., publishes Lyondell Bankruptcy News. The newsletter tracks the Chapter 11 proceeding undertaken by Lyondell Chemical Company and its various affiliates. (http://bankrupt.com/newsstand/or 215/945-7000) LYONDELL CHEMICAL: Has Nod to Hire SEG as Accounting Consultant --------------------------------------------------------------- Lyondell Chemical Co. and its units obtained the Court's authority to employ SolomonEdwardsGroup, LLC, as their accounting consultant, nunc pro tunc to July 31, 2009. SEG will assist with the Debtors' adoption of "fresh-start" accounting in their Chapter 11 cases. In anticipation of their emergence from Chapter 11, the Debtors have concluded that they need assistance with the Fresh Start Accounting Project because they lack the in-house resources to undertake these tasks. The Debtors' other retained financial professionals generally are not able, and have not been retained, to provide Fresh Start Accounting services, Gerald A. O'Brien, vice president of the Debtors, relates. SEG employees will perform the normal daily procedures of certain Debtors' accounting employees who have been selected to dedicate their time to the Fresh Start Accounting Project. SEG employees will perform these daily functions until the Debtors' employees complete their temporary assignment on the Fresh Start Accounting Project, according to Mr. O'Brien. The Services that SEG will provide are different from those provided by PricewaterhouseCoopers, in that SEG will supply employees to work for and with the Debtors' employees, whereas PricewaterhouseCoopers will produce and deliver the actual work product associated with the Fresh Start Accounting Project, Mr. O'Brien assures the Court. He adds that SEG will seek to coordinate any services performed at the Debtors' request with the Debtors' other professionals, as appropriate, to avoid duplication of effort. The Debtors SEG will pay the firm on an hourly basis, which will be reimbursed for any direct expenses incurred in connection with its retention in the Debtors' Chapter 11 cases and the performance of the Services. The current hourly rates of the individuals expected to comprise SEG's team are: Project manager (Margaret Stribling) $275 Senior accounting manager, Backfill (Daiquiri Lucas) $175 Accounting policy, Backfill (Tariq Zia) $175 Accounting lead, Backfill (Ken Hedrick) $145 Contract & claims review manager (Patrick Denetsosie) $125 Contract & claims Sr. consultant (Ellen Livingston) $95 Cash flow forecast lead (Aaron Tackett) $95 Technical advisors, if needed (Tom Burns/ $250 Wayne Wetterlund) Mr. O'Brien notes that SEG has requested payment of $250,000 as a retainer for future services to be performed, payable upon Court approval of the Application. The amount represents approximately 25% of the anticipated revenues to be generated through this engagement. If the Debtors hire any full time salaried SEG employee during the term of the agreement, the Debtors have agreed to pay a hiring fee of 30% of the employee's annual compensation subject to the payment terms and conditions provided in the statement of work and master agreement dated July 31, 2009, between SEG and the Debtors -- Audit Services Agreement, according to Mr. O'Brien. If the Debtors hire an hourly or interim SEG employee during the term of the Audit Services Agreement, a pro-rated permanent placement conversion charge will be incurred. The conversion fee is computed on the agreed annual starting salary offered by the Debtors to the interim SEG employee, Mr. O'Brien says. Candace Caley, a managing director at SEG, tells the Court that the firm is not providing and will not provide services to any individuals or entities that are present or recent former clients of SEG that are adverse to the Debtors or related to issues connected to the Debtors' bankruptcy. SEG is not providing and will not provide services to the Debtors that would be adverse to any of those entities, she adds. However, SEG has provided and likely will continue to provide services unrelated to the Debtors' Chapter 11 cases for those entities. SEG's assistance to these entities has been primarily related to auditing, tax, or other consulting services, Ms. Caley says. She assures the Court that no services have been provided to these creditors or other parties-in-interest, which could impact their rights in the Debtors' cases, nor does the firm's involvement in these cases compromise its ability to continue its auditing, tax, or consulting services. SEG is a disinterested person as the term is defined in Section 101(14) of the Bankruptcy Code, Ms. Caley attests. LYONDELL CHEMICAL: Review of Reclamation Issues Bifurcated ---------------------------------------------------------- Pursuant to Section 105 of the Bankruptcy Code and Rules 7042 and 9014 of the Federal Rules of Bankruptcy Procedure, Lyondell Chemical Company and certain of its debtor-subsidiaries and affiliates sought an obtained from the Court, with respect to certain remaining unresolved reclamation claims against the Debtors, an order bifurcating the Court's consideration of: (i) certain legal defenses to reclamation claims based on the existence of prior liens on the goods sought to be reclaimed -- Prior Lien Defense; and (ii) all other aspects of the asserted reclamation claims and the Debtors' defenses to those claims. The Debtors also ask the Court to establish a briefing schedule governing the consolidated litigation of the Prior Lien Defense, and, if necessary after the Court's determination regarding the Prior Lien Defense, set a date or dates for one or more conferences regarding the litigation of the remaining reclamation claims. The Debtors believe that the Prior Lien Defense will provide a complete defense to all or substantially all of the outstanding reclamation claims. The proposed bifurcated structure will promote an efficient and fair resolution of the reclamation claims, according to Christopher R. Mirick, Esq., at Cadwalader, Wickersham & Taft LLP, in New York. On January 26, 2009, approximately 100 parties asserted demands for the return of goods delivered to the Debtors within 45 days before the Petition Date. Although there were 79 original Debtors in the Chapter 11 cases, Reclamation Claims were only asserted against Basell USA Inc., Basell North America Inc., Equistar Chemicals, LP, Houston Refining LP, Lyondell Chemical Company, Millenium Chemicals Inc., Millenium Petrochemicals Inc., Millenium Specialty Chemicals Inc., and LyondellBasell Advanced Polyolefins USA Inc., Mr. Mirick relates. The Court's February 26, 2009 Order established certain procedures as the sole and exclusive method for the resolution of the Reclamation Claims. Pursuant to the Reclamation Order, no later than 120 days after the Petition Date, the Debtors were required to file a notice listing the Reclamation Claims and the amount, if any, that the Debtors determined to be valid for each claim, Mr. Mirick notes. The Debtors filed the Reclamation Notice with the Court on May 6, 2009, valuing the vast majority of Reclamation Claims at zero. Approximately 50 Reclamation Claimants objected to the Reclamation Notice and to the Debtors' determination of the amount and validity of their claims. Subsequently, the Debtors have contacted each of the Objecting Claimants to resolve the objections. As of July 15, 2009, 11 of these Objections were resolved. Several additional parties have advised the Debtors of their intent to withdraw their objections, according to Mr. Mirick. The Reclamation Claims of 49 of the Non-Objecting Claimants, identified in the Reclamation Notice as holding claims valued at zero, are deemed disallowed. As set forth in the Reclamation Notice, the Debtors reserved the right to assert a different amount with respect to the Reclamation Claims valued at other than zero after concluding further evaluation of the claims. The Debtors have since determined that, without exception, all Reclamation Claims are subordinate to the prior rights of a security interest in the applicable goods or proceeds, and are, therefore, valueless, Mr. Mirick says. Proposed Procedures and Briefing Schedule According to Mr. Mirick, the proposed procedures and briefing schedule are intended to address only the validity and extent of the Reclamation Claims. The Debtors seek no finding that the Reclamation Claimants are not entitled to a different claim for the value of the goods delivered during the 45-day reclamation period, whether under Section 503(b)(9) of the Bankruptcy Code, as an unsecured claim or otherwise. The rights of all Reclamation Claimants to assert other claims with respect to the goods they sought to reclaim, and the right of the Debtors to object to any claims asserted, are reserved. The Debtors submit that it is appropriate to bifurcate the consideration of issues relating to the Prior Lien Defense from any other issues raised by Reclamation Claimants -- Non Prior Lien Reclamation Issues. The Prior Lien Defense is a common legal defense applicable to all of the Reclamation Claims and presents a threshold issue as to the validity of each Reclamation Claim. If the Court determines that the Prior Lien Defense is applicable, further litigation of the Non Prior Lien Reclamation Issues will be unnecessary because a ruling in favor of the Debtors would render all of the Reclamation Claims valueless, according to Mr. Mirick. The applicability of the Prior Lien Defense can be resolved through legal briefs and a single hearing, potentially preserving the resources of the Debtors, the Reclamation Claimants, and the Court, while obviating the need for heavily fact-intensive litigation of the Non Prior Lien Reclamation Issues, Mr. Mirick says. The Debtors request that any and all litigation, including discovery, related to the Non Prior Lien Reclamation Issues be stayed and postponed until after the Court has ruled on the applicability of the Debtors' Prior Lien Defense. If further judicial development of the Non Prior Lien Reclamation Issues is warranted, appropriate scheduling orders can be entered at that time. The Debtors propose that this briefing schedule be established for the litigation of the Prior Lien Defense: * The Debtors' initial brief in support of the Prior Lien Defense will be filed with the Court and served on all necessary parties no later than 30 days after entry of the order, at 5:00 p.m., Eastern Time. * All briefs in response to the Initial Brief must be filed with the Court and served on all necessary parties no later than 30 days after the deadline for filing the Initial Brief, at 5:00 p.m., Eastern Time. * The Debtors may, but will not be required to, file a reply to the Response Briefs with the Court and serve it on all necessary parties no later than 15 days after the deadline for filing of the Response Briefs, at 5:00 p.m., Eastern Time. * A hearing would be held at the Court's convenience after completion of the briefing schedule. If, and to the extent, the Debtors do not prevail with respect to the Prior Lien Defense, the Debtors will substantively litigate the merits of the remaining Reclamation Claims. If this litigation becomes necessary, the Debtors further request that the Court hold one or more scheduling conferences at which the Court would establish the parameters for the separate litigation of each of the remaining Reclamation Claims. If the Court determines that the Prior Lien Defense asserted by the Debtors is applicable to the Reclamation Claims and renders the claims valueless, the scheduling conference would not be necessary, according to Mr. Mirick. The Reclamation Claimants would remain entitled to pursue any other claim they may have for the value of the goods that were the subject of their Reclamation Claims, whether under Section 503(b)(9), as an unsecured claim, or otherwise, subject to the Debtors' right to object to those claims on any applicable basis. In a separate filing, the Official Committee of Unsecured Creditors reserved its rights relating to the Motion. According to its counsel, Steven D. Pohl, Esq., at Brown Rudnick LLP, in Boston, Massachusetts, the Creditors Committee has no objection to the proposed procedures. However, the Creditors Committee expressly reserves all of its rights in connection with the Reclamation Claims. After having obtained the Court's authority, the Creditors Committee, among other things, will be seeking to avoid, on behalf of the Debtors' estates, many of the Reclamation Claims subject to prior security interests. In particular, the Creditors Committee reserves, inter alia, (i) any and all real defenses, including that any Reclamation Claims otherwise subordinate to prior security interests pursuant to Section 546(c) of the Bankruptcy Code will be subordinate to the unsecured claims against the relevant Debtor's estate in the event that the prior security interests are avoided and preserved for the benefit of the Debtors' estates pursuant to Section 551 of the Bankruptcy Code, (ii) any and all equitabe defenses, and (iii) any other rights, equitable or otherwise, in relation to the reconciliation and adjudication of the Reclamation Claims. About Lyondell Chemical LyondellBasell Industries is one of the world's largest polymers, petrochemicals and fuels companies. It is the global leader in polyolefins technology, production and marketing; a pioneer in propylene oxide and derivatives; and a significant producer of fuels and refined products, including biofuels. Through research and development, LyondellBasell develops innovative materials and technologies that deliver exceptional customer value and products that improve quality of life for people around the world. Headquartered in The Netherlands, LyondellBasell -- http://www.lyondellbasell.com/-- is privately owned by Access Industries. Basell AF and Lyondell Chemical Company merged operations in 2007 to form LyondellBasell Industries, the world's third largest independent chemical company. LyondellBasell became saddled with debt as part of the US$12.7 billion merger. On January 6, 2009, LyondellBasell Industries' U.S. operations and one of its European holding companies -- Basell Germany Holdings GmbH -- filed voluntary petitions to reorganize under Chapter 11 of the U.S. Bankruptcy Code to facilitate a restructuring of the company's debts. The case is In re Lyondell Chemical Company, et al., Bankr. S.D.N.Y. Lead Case No. 09-10023). Seventy-nine Lyondell entities, including Equistar Chemicals, LP, Lyondell Chemical Company, Millennium Chemicals Inc., and Wyatt Industries, Inc. filed for Chapter 11. In May 2009, one of the cases was dismissed -- Case No. 09-10068 -- because it is duplicative of Case No. 09- 10040 relating to Debtor Glidden Latin America Holdings. The Hon. Robert E. Gerber presides over the case. Deryck A. Palmer, Esq., at Cadwalader, Wickersham & Taft LLP, in New York, serves as the Debtors' bankruptcy counsel. Evercore Partners serves as financial advisors, and Alix Partners and its subsidiary AP Services LLC, serves as restructuring advisors. AlixPartners' Kevin M. McShea acts as the Debtors' Chief Restructuring Officer. Clifford Chance LLP serves as restructuring advisors to the European entities. Lyondell Chemical estimated that consolidated assets total US$27.12 billion and debts total US$19.34 billion as of the bankruptcy filing date. Lyondell has obtained approximately US$8 billion in DIP financing to fund continuing operations. The DIP financing includes two credit agreements: a US$6.5 billion term loan, which comprises a US$3.25 billion in new loans and a US$3.25 billion roll-up of existing loans; and a US$1.57 billion asset-backed lending facility. Luxembourg-based LyondellBasell Industries AF S.C.A. and another affiliate were voluntarily added to Lyondell Chemical's reorganization filing under Chapter 11 on April 24, 2009, in order to seek protection against claims by certain financial and U.S. trade creditors. On May 8, 2009, LyondellBasell Industries added 13 non-operating entities to Lyondell Chemical Company's reorganization filing under Chapter 11 of the U.S. Bankruptcy Code. All of the entities are U.S. companies and were added to the original Chapter 11 filing for administrative purposes. The filings will have no impact on current business or operations as none of the entities manufactures or sells products. Bankruptcy Creditors' Service, Inc., publishes Lyondell Bankruptcy News. The newsletter tracks the Chapter 11 proceeding undertaken by Lyondell Chemical Company and its various affiliates. (http://bankrupt.com/newsstand/or 215/945-7000) LYONDELL CHEMICAL: Committee Prepares Reliance-Backed Plan ---------------------------------------------------------- The Official Committee of Unsecured Creditors in Lyondell Chemical Co.'s cases asks the Bankruptcy Court to allow it to file an alternative Chapter 11 plan for Lyondell Chemical Company. As reported by the TCR on Dec. 9, 2009, Lyondell Chemical has reached a settlement in a suit that its unsecured creditors' committee brought against a group of banks over the leveraged buyout of the bankrupt company by Basell AF S.C.A. To recall, the Creditors Committee commenced a lawsuit against Citibank N.A., Deutsche Bank, and other banks that funded the 2007 acquisition of Lyondell Chemical by Basell AF. Having accumulated heavy debt because of the merger, LyondellBasell was in a full- blown liquidity crisis and was running out of money to fund its operations only three months following the merger. The Creditors Committee asserted claims of, among other things, fraudulent transfer, breach of fiduciary duty, avoidance of unperfected senior liens. Although the Creditors Committee filed the lawsuit, Lyondell retained the rights to settle. Under the settlement, unsecured creditors would be given $300 million cash on emergence from Chapter 11 along with a trust to bring lawsuits. However, according to the Creditors Committee, the settlement is both "procedurally inappropriate and, on a substantive basis, woefully inadequate." In the event the settlement is not approved, and without an appropriate litigation reserve, Lyondell won't be able to confirm a Chapter 11 plan, the Committee says. The Creditors Committee says its alternative reorganization proposal would create a litigation reserve where the plan could be confirmed while the creditors continue suing the banks, in the process setting cash aside for the lenders should they eventually win. The Creditors Committee says its plan would contemplate a transaction with a strategic investor such as Reliance Industries Limited. The price or the amount of Reliance's investment was not disclosed. A hearing on the matter is schedule for December 15. About Lyondell Chemical LyondellBasell Industries is one of the world's largest polymers, petrochemicals and fuels companies. It is the global leader in polyolefins technology, production and marketing; a pioneer in propylene oxide and derivatives; and a significant producer of fuels and refined products, including biofuels. Through research and development, LyondellBasell develops innovative materials and technologies that deliver exceptional customer value and products that improve quality of life for people around the world. Headquartered in The Netherlands, LyondellBasell -- http://www.lyondellbasell.com/-- is privately owned by Access Industries. Basell AF and Lyondell Chemical Company merged operations in 2007 to form LyondellBasell Industries, the world's third largest independent chemical company. LyondellBasell became saddled with debt as part of the US$12.7 billion merger. On January 6, 2009, LyondellBasell Industries' U.S. operations and one of its European holding companies -- Basell Germany Holdings GmbH -- filed voluntary petitions to reorganize under Chapter 11 of the U.S. Bankruptcy Code to facilitate a restructuring of the company's debts. The case is In re Lyondell Chemical Company, et al., Bankr. S.D.N.Y. Lead Case No. 09-10023). Seventy-nine Lyondell entities, including Equistar Chemicals, LP, Lyondell Chemical Company, Millennium Chemicals Inc., and Wyatt Industries, Inc. filed for Chapter 11. In May 2009, one of the cases was dismissed -- Case No. 09-10068 -- because it is duplicative of Case No. 09- 10040 relating to Debtor Glidden Latin America Holdings. The Hon. Robert E. Gerber presides over the case. Deryck A. Palmer, Esq., at Cadwalader, Wickersham & Taft LLP, in New York, serves as the Debtors' bankruptcy counsel. Evercore Partners serves as financial advisors, and Alix Partners and its subsidiary AP Services LLC, serves as restructuring advisors. AlixPartners' Kevin M. McShea acts as the Debtors' Chief Restructuring Officer. Clifford Chance LLP serves as restructuring advisors to the European entities. Lyondell Chemical estimated that consolidated assets total US$27.12 billion and debts total US$19.34 billion as of the bankruptcy filing date. Lyondell has obtained approximately US$8 billion in DIP financing to fund continuing operations. The DIP financing includes two credit agreements: a US$6.5 billion term loan, which comprises a US$3.25 billion in new loans and a US$3.25 billion roll-up of existing loans; and a US$1.57 billion asset-backed lending facility. Luxembourg-based LyondellBasell Industries AF S.C.A. and another affiliate were voluntarily added to Lyondell Chemical's reorganization filing under Chapter 11 on April 24, 2009, in order to seek protection against claims by certain financial and U.S. trade creditors. On May 8, 2009, LyondellBasell Industries added 13 non-operating entities to Lyondell Chemical Company's reorganization filing under Chapter 11 of the U.S. Bankruptcy Code. All of the entities are U.S. companies and were added to the original Chapter 11 filing for administrative purposes. The filings will have no impact on current business or operations as none of the entities manufactures or sells products. Bankruptcy Creditors' Service, Inc., publishes Lyondell Bankruptcy News. The newsletter tracks the Chapter 11 proceeding undertaken by Lyondell Chemical Company and its various affiliates. (http://bankrupt.com/newsstand/or 215/945-7000) MAJESTIC STAR: Cash Collateral Use Expires December 18 ------------------------------------------------------ Majestic Star Casino LLC won't be able to use its lenders' cash collateral after December 18, unless the Bankruptcy Court enters another order allowing it to further use cash collateral. Bill Rochelle at Bloomberg News reports that Majestic Star was given at the end of November authority by the bankruptcy judge to use cash until Dec. 18. Another hearing for a more extended use of cash was schedule for Dec. 17. According to the report, the first- and second-lien secured lenders consented to the use of cash accompanied by the usual bells and whistles. About Majestic Star The Majestic Star Casino, LLC -- aka Majestic Star Casino, aka Majestic Star -- is based in Las Vegas, Nevada. It is a wholly owned subsidiary of Majestic Holdco, LLC, which is a wholly owned subsidiary of Barden Development, Inc. The Company was formed on December 8, 1993, as an Indiana limited liability company to provide gaming and related entertainment to the public. The Company commenced gaming operations in the City of Gary at Buffington Harbor, located in Lake County, Indiana on June 7, 1996. The Company is a multi-jurisdictional gaming company with operations in three states -- Indiana, Mississippi and Colorado. The Company filed for Chapter 11 bankruptcy protection on November 23, 2009 (Bankr. D. Delaware Case No. 09-14136). The Company's affiliates -- The Majestic Star Casino II, Inc., The Majestic Star Casino Capital Corp., Majestic Star Casino Capital Corp. II, Barden Mississippi Gaming, LLC, Barden Colorado Gaming, LLC, Majestic Holdco, LLC, and Majestic Star Holdco, Inc. -- also filed separate Chapter 11 petitions. Kirkland & Ellis LLP is the Debtors' bankruptcy counsel. James E. O'Neill, Esq., Laura Davis Jones, Esq., and Timothy P. Cairns, Esq., at Pachulski Stang Ziehl & Jones LLP are the Debtors' Delaware counsel. Xroads Solutions Group, LLC, is the Debtors' financial advisor, while EPIQ Bankruptcy Solutions LLC are the Debtors' claims and notice agent. The Majestic Star Casino, LLC's balance sheet at June 30, 2009, showed total assets of $406.42 million and total liabilities of $749.55 million. When it filed for bankruptcy, the Company listed up to $500 million in assets and up to $1 billion in debts. MCDERMOTT INTERNATIONAL: S&P Puts 'BB+' Rating on Negative Watch ---------------------------------------------------------------- Standard & Poor's Ratings Services placed its ratings on parent McDermott International Inc. and subsidiary McDermott (J. Ray) S.A. (J. Ray), including the 'BB+' corporate credit rating, on CreditWatch with negative implications. At the same time, S&P affirmed the ratings on subsidiaries McDermott Inc. and The Babcock & Wilcox Power Generation Group Inc., including the 'BB+' corporate credit rating. The outlook on these subsidiaries remains positive. "We base the CreditWatch placement on McDermott International's announcement that it plans to separate its operating subsidiaries J. Ray and The Babcock & Wilcox Co. (which will include the company's power generations systems business, as well as the government operations) into two independent, publicly traded companies," said Standard & Poor's credit analyst Robyn Shapiro. S&P expects the transaction to close in nine to 12 months. To resolve the CreditWatch listing on McDermott International and J. Ray, Standard & Poor's will meet with management to discuss the details of this transaction. "We will assess J. Ray's stand- alone business, as this entity is less likely to continue to benefit from its current relationship with the company's other businesses," she continued. The outlook on McDermott Inc. and B&W PGG remain positive. On a stand-alone basis, the proposed combined B&W businesses will be less diverse once they are separate from J. Ray. However, McDermott Inc. and B&W PGG could support higher ratings if company power generations systems business and government operations continue to develop solid track records of operating performance, and a commitment to a conservative financial policy. MCSTAIN ENTERPRISES: Court Dismisses Chapter 11 Bankruptcy Case --------------------------------------------------------------- Paula Moore at Denver Business Journal reports that the Bankruptcy Court dismissed the Chapter 11 case of McStain Enterprises Inc. The Company was unable to come up with an effective and confirmable plan before the deadline set by the court. The company will keep creditors informed of its financial status each month. Louisville, Colorado-based McStain Enterprises, Inc., aka McStain Neighborhoods, filed for Chapter 11 on May 28, 2009 (Bankr. D. Colo. Case No. 09-20249). Joli A. Lofstedt, Esq., at Connolly, Rosania & Lofstedt, P.C., represents the Debtor in its restructuring efforts. The Debtor has assets and debts both ranging from $10 million to $50 million. MERIDIAN RESOURCE: Fortis Extends Forbearance Until December 14 --------------------------------------------------------------- The Meridian Resource Corporation and certain of its subsidiaries on December 4, 2009, entered into the Eighth Amendment to their Forbearance and Amendment Agreement with Fortis Capital Corp., as administrative agent, and the other lenders and agents party to the Company's Amended and Restated Credit Agreement, dated as of December 23, 2004. The Eighth Forbearance Amendment extends to December 14, 2009, the date by which the Fortis Forbearance Agreement will terminate if, by such date, Meridian has not entered into a Transaction Agreement. The Eighth Forbearance Amendment also extends to December 14, 2009, the date of the next borrowing base redetermination. The Fortis Forbearance Agreement will terminate if, by such date, Meridian has not entered into (a) a merger agreement pursuant to which Meridian will merge with or into or be acquired by or transfer all or substantially all of its assets to another person; (b) a capital infusion agreement pursuant to which one or more persons will contribute subordinated debt or equity capital to Meridian in an amount sufficient to enable Meridian to pay to the Lenders an amount equal to 100% of its borrowing base deficiency; or (c) a purchase and sale agreement pursuant to which Meridian agrees to sell one or more oil and gas properties for net proceeds sufficient to enable Meridian to pay to the Lenders an amount equal to 100% of its borrowing base deficiency, plus any incremental borrowing base deficiency resulting from such sales. On October 20, 2009, the Company entered into the Third Forbearance Amendment, which extended to November 15, 2009, the date by which the Fortis Forbearance Agreement would terminate if, by such date, Meridian had not entered into a Transaction Agreement. Under the Third Forbearance Amendment, Meridian was also required to pay to the Lenders on November 15 an amendment fee of 0.25% of the aggregate outstanding borrowings under the Amended and Restated Credit Agreement. On December 2, 2009, the Company entered into the Seventh Forbearance Amendment, effective November 30, which extended to December 4 the date by which the cash flow budget for the month of November 2009 may be furnished to Fortis, as required by the Fortis Forbearance Agreement. Concurrently with the execution of the Fortis Forbearance Agreement, Meridian entered into (a) a Forbearance Agreement with Fortis Capital Corp. and Fortis Energy Marketing & Trading GP, (b) a Forbearance and Amendment Agreement with The CIT Group/Equipment Financing, Inc., and (c) a Forbearance and Amendment Agreement with Orion Drilling Company, LLC. The termination of the forbearance period under the Fortis Forbearance Agreement will also result in the termination of the forbearance periods under each of the Hedge Forbearance Agreement, the CIT Forbearance Agreement and the Orion Forbearance Agreement. On December 4, 2009, Fortis Capital Corp., Fortis Energy Marketing & Trading GP and the Company and certain of its subsidiaries entered into the First Amendment to Forbearance Agreement, which extended to December 14, 2009, the forbearance period under the Hedge Forbearance Agreement. On December 4, 2009, The CIT Group/Equipment Financing, Inc., the Company and certain of its subsidiaries entered into the First Amendment to Forbearance and Amendment Agreement, which extended to December 14, 2009, the forbearance period under the CIT Forbearance Agreement. Meridian said it cannot give any assurance that, on or before the December 14, 2009 expiration of the forbearance periods, it will be able to enter into a Transaction Agreement or that it will otherwise be able to satisfy obligations under the agreements to which the forbearance agreements relate, nor can Meridian give any assurance that its Lenders will grant the Company any further extensions under the Fortis Forbearance Agreement. The members of the lending syndicate under the Eighth Amendment are: * FORTIS CAPITAL CORP., as Administrative Agent, Co-Lead Arranger, Bookrunner, Issuing Lender, and a Lender; * THE BANK OF NOVA SCOTIA, as Co-Lead Arranger, Syndication Agent, and a Lender; * COMERICA BANK, as a Lender; * U.S. BANK NATIONAL ASSOCIATION, as a Lender; * ALLIED IRISH BANKS plc, as a Lender A full-text copy of the Eighth Amendment is available at no charge at http://ResearchArchives.com/t/s?4b81 In August 2009, the Company did not have sufficient cash available to repay the deficiency and, consequently, failed to pay the amount when due and went into default under the credit facility for that failure. Meridian negotiated a forbearance agreement with its bank group which was signed on September 3, 2009 regarding the deficiency and default. The forbearance agreement has been extended for several times, the purpose of which is to allow Meridian more time to execute potential solutions for the deficiency per the requirements. About Meridian Resource Based in Houston, Texas, The Meridian Resource Corporation (NYSE:TMR) -- http://www.tmrc.com/-- is an independent oil and natural gas company engaged in the exploration, exploitation, acquisition and development of oil and natural gas in Louisiana, Texas, and the Gulf of Mexico. Meridian has access to an extensive inventory of seismic data and, among independent producers, is a leader in using 3-D seismic and other technologies to analyze prospects, define risk, target and complete high- potential wells for exploration and development. Meridian has a field office in Weeks Island, Louisiana. At September 30, 2009, the Company had $190,339,000 in total assets, including $18,090,000 in total current assets, against $120,634,000 in total current liabilities and $17,736,000 in asset retirement obligations. The Company noted that its default under the debt agreements, which has been mitigated in the short term by certain forbearance agreements, negatively impacts future cash flow and the Company's access to credit or other forms of capital. There is substantial doubt as to the Company's ability to continue as a going concern for a period longer than the next 12 months, the Company said. It added that it might have to seek protection under federal bankruptcy laws if it is unable to comply with the forbearance agreements or if those agreements expire. METRO-GOLDWYN-MAYER: Forbearance on Debt Extended; Mulled Sale -------------------------------------------------------------- Shasha Dai at Dow Jones LBO Wire reports that Metro-Goldwyn- Mayer, Inc., said its lenders agreed to extend forbearance on its debt until Jan. 31, 2010, in support of its evaluation of alternatives. According to Dow Jones, MGM was also evaluating options, including a sale of the Company. Reuters, citing people familiar with the matter, states that MGM sent confidentiality agreements to 20 interested parties including Time Warner Inc, News Corp, Lions Gate Entertainment Corp., and Sony Corp, as a prelude to letting interested parties examine its books. Reuters relates that two sources said that former News Corp. president Peter Chernin also wanted to take a look at MGM. The sources, according to Reuters, said that MGM was considering an auction process, but its creditors would like to see how likely bidders value the Company. Reuters reports that MGM was setting up a virtual data room to give bidders access to information. Metro-Goldwyn-Mayer, Inc., is an independent, privately held motion picture, television, home video, and theatrical production and distribution company. The Company owns the world's largest library of modern films, comprising approximately 4,000 titles, and over 10,400 episodes of television programming. MGM is owned by an investor consortium, comprised of Providence Equity Partners, TPG Capital, Sony Corporation of America, Comcast Corporation, DLJ Merchant Banking Partners and Quadrangle Group. As reported by the Troubled Company Reporter on September 30, 2009, The New York Post, citing multiple sources, said discussions between debtholders and equity owners on a restructuring of Metro- Goldwyn-Mayer's massive debt load have begun on a contentious note, with both sides threatening to force MGM into bankruptcy in order to gain leverage and extract better terms from the other. Bloomberg also said that MGM is in talks to skip interest payments and restructure $3.7 billion in bank loans. MGM asked creditors to waive $12 million monthly interest payments until February 15 2010. Nikki Finke at Deadline Hollywood reported in October 2009 that MGM said it needed $20M in short-term cash flow to cover overhead, and an additional $150 million to get through the end of year and continue funding its projects. According to filmshaft.com in October, MGM was having difficulty making interest payments on its $3.5 billion in debt. MICHAEL KHUONG TO: Case Summary & 20 Largest Unsecured Creditors ---------------------------------------------------------------- Joint Debtors: Michael Khuong To Chau-Thuy Anh Tran aka Connie Tran 43611 Parisville Ct. Sterling, VA 20166 Bankruptcy Case No.: 09-20063 Chapter 11 Petition Date: December 9, 2009 Court: United States Bankruptcy Court Eastern District of Virginia (Alexandria) Judge: Stephen S. Mitchell Debtors' Counsel: Mark Christian Orndorff, Esq. 6059-C Arlington Blvd. Falls Church, VA 22044 Tel: (703) 536-3800 Fax: (703) 536-3802 Email: mcolaw@vacoxmail.com Estimated Assets: $1,000,001 to $10,000,000 Estimated Debts: $1,000,001 to $10,000,000 According to the schedules, the Company has assets of $1,002,310, and total debts of $1,632,139. A full-text copy of the Debtors' petition, including a list of their 20 largest unsecured creditors, is available for free at: http://bankrupt.com/misc/vaeb09-20063.pdf The petition was signed by the Joint Debtors. MICHAEL STUP: Case Summary & 11 Largest Unsecured Creditors ----------------------------------------------------------- Debtor: Michael C. Stup PO Box 528 Braddock Heights, MD 21714 Bankruptcy Case No.: 09-34013 Chapter 11 Petition Date: December 9, 2009 Court: United States Bankruptcy Court District of Maryland (Greenbelt) Debtor's Counsel: Christopher R. Wampler, Esq. Wampler, Souder & Sessing, LLC One Central Plaza 11300 Rockville Pike, Ste. 610 Rockville, MD 20852 Tel: (301) 881-8895 Fax: (301) 881-8896 Email: cwampler@wssfirm.com Estimated Assets: $1,000,001 to $10,000,000 Estimated Debts: $1,000,001 to $10,000,000 A full-text copy of Mr. Stup's petition, including a list of his 11 largest unsecured creditors, is available for free at: http://bankrupt.com/misc/mdb09-34013.pdf The petition was signed by Mr. Stup. NATIONAL BEEF: S&P Puts 'B+' Ratings on CreditWatch Positive ------------------------------------------------------------ Standard & Poor's placed its 'B+' corporate credit and 'B-' senior unsecured debt ratings on National Beef Packing Co. LLC on CreditWatch with positive implications. This indicates that S&P could either raise or affirm the ratings following completion of its review. "The CreditWatch listing is based on the company's continued improved operating performance and credit measures in fiscal 2009," said Standard & Poor's credit analyst Patrick Jeffrey. "We estimate it has reduced debt leverage to 1.5x for the 12 months ended Sept. 30, 2009, from 2.1x in fiscal 2008, and the company has maintained adequate liquidity while using free cash flow to reduce debt." Despite weaker demand for beef in 2009 compared with 2008, NBP effectively managed its cost structure and working capital to help grow its EBITDA and generate free cash flow over the past two years. National Beef Inc., a holding company entity of NBP, has filed an IPO for up to $337 million. If completed, the company has indicated that a portion of proceeds would be used to repay some of NBP's funded debt, including $27 million of remaining balances on its senior unsecured notes due 2011. Upon completion of the IPO, S&P will discuss with management the company's capital structure, liquidity, and strategy for maintaining operating stability in a difficult economy. Although S&P will either raise or affirmed the ratings after its review, S&P could also withdraw the rating on the senior unsecured notes due 2011 if that debt is fully repaid. NATIONAL HOME: Files for Chapter 11 Bankruptcy ---------------------------------------------- National Home Centers Inc. filed for Chapter 11 bankruptcy as it attempts to renegotiate its debt to lender CIT Group Inc., Worth Sparkman at arkansasbusiness.com reports. "We could not reach a resolve...It is our mission in life to pay our creditors but we're frozen [for the time being,]" Company founder and chief executive officer Dwain Newman was quoted as stating. Base in Springdale, National Home Centers Inc. supplies materials to homebuilders in northwest and central Arkansas. The Company listed assets and liabilities between $10 million and $50 million in its petition. NCI BUILDING: Reports $748.4 Million Fiscal Year Net Loss --------------------------------------------------------- NCI Building Systems, Inc., reported a net loss of $103.6 million for the three months ended November 1, 2009, from net income of $24.6 million for the quarter ended November 2, 2008. The Company reported a net loss of $748.4 million for the fiscal year ended November 1, 2009, from net income of $78.8 million for the fiscal year ended November 2, 2008. For the fourth quarter, sales were $244.4 million, up 2.5% sequentially from sales of $238.4 million in the 2009 third quarter, but down 52% from the $508.9 million reported for last year's fourth quarter. Gross margin was 24.8% compared to 25.6% in the prior quarter and 24.4% in last year's fourth quarter. Sales were $967.9 million for the fiscal 2009 from $1.76 billion for fiscal 2008. Adjusted operating income exclusive of change in control charges of $11.2 million, restructuring and impairment charges of $1.9 million, and environmental and other contingencies of $1.1 million was $10.5 million compared to $11.5 million on the same basis in the prior quarter and $54.0 million on the same basis in last year's fourth quarter. On a GAAP basis, the Company incurred an operating loss for the 2009 fourth quarter of $3.7 million compared to operating income of $10.3 million in the prior quarter and $51.0 million in last year's fourth quarter. Adjusted EBITDA, defined as earnings before interest, taxes depreciation and amortization and other non-cash items in accordance with our term loan credit agreement, was $18.5 million for the 2009 fourth quarter compared with $21.4 million in the prior quarter and $60.1 million in last year's fourth quarter. In the fourth quarter, the Company reported a net loss applicable to common shares of $115.3 million, or $3.59 per diluted share, which included non cash debt extinguishment and refinancing costs of $99.2 million. Exclusive of these and other identified special charges, the net income applicable to common shares would have been $333,000, or $0.04 per diluted share. In the prior quarter, NCI reported net income of $4.0 million or $0.20 per diluted share; net income in last year's fourth quarter was $24.6 million or $1.26 per diluted share. The weighted average number of common shares outstanding used in the calculation of fourth quarter 2009 per share amounts was 29,655,000, reflecting the partial period impact of the Company's refinancing, which was completed on October 20, 2009. As part of its refinancing, the Company acquired its existing convertible notes in exchange for approximately $90 million in cash and 70.2 million of its common shares. At the end of the quarter, there were approximately 90.4 million shares of common stock outstanding. Inventory levels decreased 5.8% sequentially to $71.5 million from $75.9 million in the prior quarter. Measured in tons, inventory on hand at the end of the fourth quarter was approximately 16% lower sequentially. Annualized inventory turnover was 10.1 turns for the fourth quarter, compared to 8.3 turns in the third quarter and 6.9 turns in the year-ago fourth quarter. Net cash from operating activities was $20 million for the fourth quarter and $95.4 million for fiscal 2009. Capital expenditures in the fourth quarter were $3.8 million; full year 2009 capital expenditures were $21.7 million, inclusive of the $14.1 million investment in NCI's new insulated panel plant. Fiscal 2010 capital expenditures are expected to be between $10 million and $12 million. The Company continues to evaluate the tax deductibility of certain recapitalization transaction expenses. The Company expects that this review will be completed prior to the filing of its Annual Report and may result in an additional tax benefit to the Company, ranging between $750,000 and $1.5 million. At November 1, 2009, the Company had $613.4 million in total assets against total current liabilities of $179.3 million, long-term debt of $135.4 million, deferred income taxes of $19.1 million, other long-term liabilities of $8.0 million, and Series B cumulative convertible participating preferred stock of $222.8 million. Recent Corporate Developments On October 20, 2009, the Company announced the completion of its recapitalization transaction with Clayton, Dubilier & Rice, Inc., managed funds. In addition to the $250 million equity investment by the CD&R funds, NCI: -- Completed its exchange offer to acquire its existing convertible notes; -- Refinanced its existing term loan by repaying approximately $143 million and modified the terms and maturity of the remaining $150 million of debt; and -- Entered into a $125 million asset-based revolving credit facility, which remains undrawn. "Through these transactions, NCI has gained the resources to ride out the economic downturn and re-start our growth strategy. CD&R is widely respected as a long-term investor and business builder and brings both financial and operating resources to NCI," Mr. Chambers said. "Their significant investment is a strong endorsement of our business, growth strategy and our future prospects." Outlook "Industry forecasts do not indicate any meaningful pick-up in nonresidential construction activity in 2010," noted Mr. Chambers. "Within what promises to be a continued difficult business environment, we will focus on retaining and building upon our market leadership positions through: -- greater investment in technology and systems to support NCI's builder network while reducing costs and delivery times; -- continuing to develop new products, and expanding NCI's end markets; and -- potentially making selective acquisitions," Mr. Chambers concluded. A full-text copy of the Company's earnings release is available at no charge at http://ResearchArchives.com/t/s?4b7e About NCI Building Based in Houston, Texas, NCI Building Systems, Inc. (NYSE: NCS) is one of North America's largest integrated manufacturers of metal products for the nonresidential building industry. NCI is comprised of a family of companies operating manufacturing facilities across the United States and Mexico, with additional sales and distribution offices throughout the United States and Canada. NCI proposed a financial restructuring to address an immediate need for liquidity in light of a potentially imminent default under, and acceleration of, its existing credit facility, which was to occur as early as November 6, 2009 (which would have, in turn, lead to a default under, and acceleration of, its other indebtedness, including the $180.0 million in principal amount of 2.125% Convertible Senior Subordinated Notes due 2024, and the high likelihood that the Company would be required to repurchase the convertible notes on November 15, 2009, the first scheduled mandatory repurchase date under the convertible notes indenture. In October 2009, NCI Building and Clayton, Dubilier & Rice, Inc. on completed a $250 million equity investment in the Company by CD&R-managed funds. The CD&R-managed funds acquired newly issued preferred stock resulting in an ownership position in the Company of roughly 68.5% on an as-converted basis. NCI BUILDING: To Redeem 2.125% Convertible Sr. Sub Notes Due 2024 ----------------------------------------------------------------- NCI Building Systems, Inc., announced the expiration of its cash tender offer, commenced on November 9, 2009, to purchase its outstanding 2.125% Convertible Senior Subordinated Notes due 2024. The tender offer expired as of 11:59 p.m. New York City time on December 8, 2009. No holder of Notes has delivered any tender pursuant to the tender offer. NCI also announced its election to redeem the remaining principal amount of roughly $58,750 of its outstanding Notes. NCI expects the redemption to occur on December 29, 2009. The redemption of and payment on the Notes will be made by The Bank of New York Mellon Trust Company, N.A., the paying agent and the trustee of the indenture governing the notes, in accordance with terms and procedures specified in the redemption notice. NCI will pay for the Notes with cash on hand. NCI will redeem the Notes at a redemption price in cash equal to 100% of the principal amount of the Notes, together with accrued and unpaid interest on the Notes payable up to, but excluding, the Redemption Date. In connection with the redemption, from December 9, 2009, until the close of business on December 28, 2009, each holder of Notes has the right, at its option, to require NCI to convert the principal amount of the holder's Notes, or any portion of the principal amount of Notes that is a multiple of $1,000, into cash and fully paid shares of NCI's common stock in accordance with the terms, procedures and conditions outlined in the indenture for the Notes. As of December 9, 2009, the conversion rate for the Notes is 24.9121 shares of common stock per $1,000 in principal amount of the Notes. The closing price of NCI's common stock was $2.02 on December 8, 2009. The redemption is being made solely pursuant to a notice of redemption dated December 9, 2009, which were mailed to the holders of the Notes by NCI. Copies of the notice of redemption may be obtained from The Bank of New York Mellon Trust Company, N.A., the trustee and paying agent for the Notes, by contacting the trustee at: 601 Travis Street, 16th Floor, Houston, TX, 77002, Attention: Kash Asghar, (713) 483-6649. About NCI Building Based in Houston, Texas, NCI Building Systems, Inc. (NYSE: NCS) is one of North America's largest integrated manufacturers of metal products for the nonresidential building industry. NCI is comprised of a family of companies operating manufacturing facilities across the United States and Mexico, with additional sales and distribution offices throughout the United States and Canada. NCI proposed a financial restructuring to address an immediate need for liquidity in light of a potentially imminent default under, and acceleration of, its existing credit facility, which was to occur as early as November 6, 2009 (which would have, in turn, lead to a default under, and acceleration of, its other indebtedness, including the $180.0 million in principal amount of 2.125% Convertible Senior Subordinated Notes due 2024, and the high likelihood that the Company would be required to repurchase the convertible notes on November 15, 2009, the first scheduled mandatory repurchase date under the convertible notes indenture. In October 2009, NCI Building and Clayton, Dubilier & Rice, Inc. on completed a $250 million equity investment in the Company by CD&R-managed funds. The CD&R-managed funds acquired newly issued preferred stock resulting in an ownership position in the Company of roughly 68.5% on an as-converted basis. NELSON EDUCATION: Moody's Corrects Ratings on Four Senior Loans --------------------------------------------------------------- In Downgrades section, Moody's substitutes these ratings: -- Senior Secured Bank Credit Facility, Downgraded to B1 (LGD5, 85%) from Ba3 (LGD5, 83%) -- Senior Secured Second Lien Term Loan, Downgraded to Caa2 (LGD3, 32%) from Caa1 (LGD3, 31%) with -- Senior Secured Bank Credit Facility, Downgraded to B1 (LGD3, 32%) from Ba3 (LGD3, 31%) -- Senior Secured Second Lien Term Loan, Downgraded to Caa2 (LGD5, 85%) from Caa1 (LGD5, 83%) Moody's Investors Service downgraded Nelson Education Ltd.'s corporate family rating and probability of default rating to B3 from B2 and also repositioned the company's ratings outlook to negative from stable. The CFR and PDR downgrades primarily result from expectations that weak operational and financial performance as characterized by approximately break-even free cash flow generation will continue for the foreseeable future. The company has made little progress in growing revenues and expanding margins, and there is no expectation of current nominal levels of free cash flow expanding materially during the near- to mid-term. Accordingly, the company has little ability in Moody's estimation of being able to repay its significant debt burden. With that, and given the company's revolving credit facility comes due in 2013 with the first lien term loan due a year later, it is not too early to begin to consider execution risks related to their refinancing. With the company's significant leverage and the potential it could remain substantially unchanged, much improved credit market conditions may be required in order to facilitate a refinancing of the unamortized residual of Nelson's term loan. The negative outlook signals the potential for additional negative rating actions as the maturity of the term loan approaches. With no sizable near-term debt maturities, break-even to modest free cash flow generation and full access to its un-drawn committed revolving credit facility, liquidity over the next four quarters continues to be assessed as "good." Downgrades: Issuer: Nelson Education Ltd. -- Corporate Family Rating, Downgraded to B3 from B2 -- Probability of Default Rating, Downgraded to B3 from B2 -- Senior Secured Bank Credit Facility, Downgraded to B1 (LGD3, 32%) from Ba3 (LGD3, 31%) -- Senior Secured Second Lien Term Loan, Downgraded to Caa2 (LGD5, 85%) from Caa1 (LGD5, 83%) Outlook Actions: Issuer: Nelson Education Ltd. -- Outlook, Changed To Negative From Stable Moody's most recent rating action related to Nelson was taken on 3 February 2009 at which time Moody's affirmed Nelson's B2 corporate family rating along with the stable outlook. Nelson's ratings were assigned by evaluating factors Moody's believes are relevant to the credit profile of the issuer, such as i) the business risk and competitive position of the company versus others within its industry, ii) the capital structure and financial risk of the company, iii) the projected performance of the company over the near to intermediate term, and iv) management's track record and tolerance for risk. These attributes were compared against other issuers both within and outside of Nelson's core industry and Nelson's ratings are believed to be comparable to those of other issuers of similar credit risk. Headquartered in Toronto, Ontario, Canada, Nelson Education Ltd. is a privately owned leading provider of publishing services for the Canadian educational market operating in two segments: Higher Education and Schools (K-12). NEW ENERGY SYSTEMS: Completes Acquisition of Anytone ---------------------------------------------------- New Energy Systems Group, formerly China Digital Communication Group, on December 7 completed the acquisition of Anytone International (H.K.) Co., Ltd. and its wholly owned subsidiary, Shenzhen Anytone Technology Co., Ltd., a rapidly growing Shenzhen- based high tech, integrated product research, manufacturing and marketing company for lithium batteries. New Energy Systems Group paid $33.7 million for the company consisting of $10.0 million in cash and the remaining $23.7 million by issuing approximately 3.6 million shares of common stock based on an average stock price of $6.60 per share. Mr. Fushun Li, Chief Executive Officer, commented, "We are pleased to have successfully completed the acquisition of Anytone, a rapidly growing manufacturer of lithium ion batteries, at an attractive purchase price of 5.0x 2010 projected net income. Anytone brings an impressive track record, having achieved annual revenue growth in excess of 100% over the past four years. This acquisition broadens our product offering and expands our distribution channels. Moreover, we expect to benefit from meaningful operating leverage and economies of scale. We believe this acquisition demonstrates our ability to successfully identify and complete attractive acquisitions. We continue to have a very healthy balance sheet and will opportunistically consider other acquisitions that we believe will create additional shareholder value." Anytone -- http://www.anytone.com.cn/-- manufactures and sells mobile power resources based on lithium ion batteries for a full spectrum of products, including mobile phones, notebook computers, digital cameras, MP4s, PMPs, PDAs, solar and digital applications. Many of Anytone's products generate 4-7 times more power than the original OEM battery's capacity. The company's power sources support some of the best known products in the world, including Apple's iPod family of products. Anytone had 7 practical patents and 23 appearance design patents by the State Intellectual Property Office of the People's Republic of China (SIPO). The company is also awaiting approval for its new innovation patent by SIPO. The company has also obtained CE, FCC, 3C, ROHS, UL and other certifications. About New Energy Systems Group With offices in New York and Shenzhen, China, New Energy Systems Group (OTCBB: NEWN) -- http://www.chinadigitalcommunication.com/ -- manufactures and distributes lithium ion batteries. The company assembles and distributes finished batteries through its sales network and channel partners. The company also sells high- quality lithium-ion battery shell and cap products to major lithium-ion battery cell manufacturers in China. The company's products are used to power mobile phones, MP3 players, laptops, digital cameras, PDAs, camera recorders and other consumer electronic digital devices. On November 17, 2009, China Digital obtained approval from FINRA to change its name to New Energy Systems Group. In conjunction with the name change, the company's CUSIP number was changed to 643847106 and the stock began trading under the ticker symbol "NEWN" on November 18. At September 30, 2009, the Company had $17,622,130 in total assets against $3,197,717 in total liabilities, all current. At September 30, 2009, the Company had accumulated deficit of $4,660,858 and stockholders' equity of $14,424,413. Going Concern In its quarterly report on Form 10-Q, the Company said it believes it has sufficient cash to continue its current business through September 30, 2010, due to expected increased sales revenue and net income from operations. "However we have suffered recurring losses in the past and have a large accumulated deficit. These conditions raise substantial doubt about the Company's ability to continue as a going concern," the Company said. The Company has taken certain restructuring steps to provide the necessary capital to continue its operations. These steps included 1) acquire profitable operations through issuance of equity instruments, and 2) to continue actively seeking additional funding and restructure the acquired subsidiaries to increase profits and minimize the liabilities. NII HOLDINGS: Moody's Upgrades Corporate Family Rating to 'B1' -------------------------------------------------------------- Moody's Investors Service has upgraded NII Holdings', Inc., Corporate Family and Probability of Default Ratings to B1 from B2. The upgrade was prompted by the company's strong operating performance during the currently weak economic environment and its recent success in acquiring new spectrum licenses as it expands into new markets and offers new services. In a related rating action Moody's assigned a B1(LGD3, 46%) rating to the proposed offering of $500 million of guaranteed Senior Notes due 2019 to be issued by NII Capital Corp., a subsidiary of NII. The proposed offering by NII Capital Corp. is expected to be used for general corporate purposes, including spectrum acquisitions, network expansion, deployment of new technologies and possibly the repurchase of some of the convertible notes issued by NII. The outlook is stable. The upgrade to B1 is based on Moody's expectation that continued strong operating performance, a moderately leveraged capital structure (approximately 3.6x Moody's adjusted and pro forma for the new issuance as of the LTM period ended Q3'09) and a healthy liquidity profile will provide the company with the financial flexibility to pursue its strategic objectives without significantly weakening its credit profile. Moody's believe that management is committed to maintaining a strong balance sheet as it recasts the business towards mobile broadband services over the next few years. However, the B1 rating also reflects NII's small size and market position across its operating regions, the presence of substantially larger, better funded competitors capable of disrupting NII's niche market positions, and technology risk associated with the company's dependence on Motorola Inc.'s integrated Digital Enhanced Network technology. Moody's believes recent operating and financial results have demonstrated the value of NII's brand and focus on customer care, the importance its subscribers place on access to Push-to-Talk services and management's ability to successfully adapt to market challenges. Moody's notes that while NII's post-pay plans are typically more expensive than those found in the pre-pay market, subscriber trends and churn improved materially in 3Q 2009 despite ongoing economic weakness and heightened competition, especially in its largest markets. These ratings/assessments were affected by this action: NII Holdings, Inc.: -- Corporate Family Rating upgraded to B1 from B2 -- Probability of Default Rating upgraded to B1 from B2 NII Capital Corp.: -- $800 million of 10.00% Senior Notes due August 15, 2016 affirmed at B1, but its loss given default assessment is changed to (LGD3, 46%) from (LGD3, 39%) -- $500 million of 10.00% Senior unsecured notes due 2019 rated B1 (LGD3, 46%) NII's credit metrics and liquidity position are consistent with higher rated Telecom peers; however, Moody's believes these metrics are intermediate in nature. While the company is close to completing core network expansion in its largest markets and is in the process of building out 3G networks in some of its smaller markets, it will likely pursue spectrum acquisitions (especially in its two largest markets, Mexico and Brazil) to develop new services and expand into new regions in an attempt to capitalize on the healthy growth opportunities in Latin America. Since Moody's believes that the investment associated with expansion in these two large markets will be significant, Moody's do not expect the company to reengage in shareholder-friendly financial policies unless growth prospects diminish. The stable outlook is based on Moody's expectation that NII will maintain adjusted debt/EBITDA leverage below 4.0x over the rating horizon and that the company's operating performance, particularly churn, will remain strong. The last rating action was on August 7, 2009, at which time Moody's assigned a first time B2 Corporate Family Rating to NII Holdings, Inc. The individual debt instrument ratings were determined using Moody's Loss Given Default Methodology and reflect the expected size and positioning of the issuance within NII's capital structure. With headquarters in Reston, Virginia, NII is an international wireless operator with subscribers in Mexico, Brazil, Argentina, Peru, and Chile. NII had over 7.0 million largely post-pay, business subscribers in those five countries and generated $4.2 billion in revenue for the LTM period ended Q309. NOVELOS THERAPEUTICS: Delays Effective Date of Resale Prospectus ---------------------------------------------------------------- Novelos Therapeutics, Inc., filed Amendment No. 1 to Form S-1 Registration Statement under the Securities Act of 1933 to delay the effective date of the Registration Statement. The Registration Statement and accompanying prospectus relate to the resale, from time to time, of up to 58,745,592 shares of the Company's common stock by stockholders. Of the total shares of common stock offered in the prospectus, 37,649,442 are issuable upon conversion of shares of the Company's Series E Preferred Stock and 21,096,150 are issuable upon the exercise of common stock purchase warrants. The selling stockholders will receive all of the proceeds from the sales. The Company will receive no part of the proceeds. The Company is paying the expenses incurred in registering the shares, but all selling and other expenses incurred by the selling stockholders will be borne by the selling stockholders. The Company's common stock is quoted on the OTC Electronic Bulletin Board of the National Association of Securities Dealers, Inc., under the symbol "NVLT.OB." On December 4, 2009, the last reported sale price of the common stock on the OTC Electronic Bulletin Board was $0.75 per share. At September 30, 2009, the Company had $5,996,461 in total assets against total current liabilities of $7,408,800, deferred revenue -- noncurrent of $408,334, redeemable preferred stock of $20,381,810. At September 30, 2009, the Company had accumulated deficit of $63,211,609 and stockholders' deficiency of $22,202,483. Novelos Therapeutics said it will require additional capital to continue operations beyond the third quarter of 2010. Novelos Therapeutics noted the report from its independent registered public accounting firm dated March 17, 2009 and included with its annual report on Form 10-K indicated that factors existed that raised substantial doubt about its ability to continue as a going concern. About Novelos Therapeutics Based in Newton, Massachusetts, Novelos Therapeutics, Inc. is a drug development company focused on the development of therapeutics for the treatment of cancer and hepatitis. Novelos owns exclusive worldwide intellectual property rights (excluding Russia and other states of the former Soviet Union, but including Estonia, Latvia and Lithuania) related to certain clinical compounds and other pre-clinical compounds based on oxidized glutathione. ORLEANS HOMEBUILDERS: 10-Q Delay Cues NYSE Non-Compliance Notice ---------------------------------------------------------------- Orleans Homebuilders, Inc., on December 1, 2009, received a written notice from the NYSE Amex LLC stating that the Company is not in compliance with the Exchange's continued listing criteria set forth in Sections 134 and 1101 of the NYSE Amex LLC Company Guide because it failed to timely file its Quarterly Report on Form 10-Q for the period ended September 30, 2009. The written notice further stated that the failure to file the Form 10-Q constitutes a material violation of the Company's listing agreement with the Exchange authorizing the Exchange to suspend and, unless prompt corrective action is taken, remove the Company's common stock from the Exchange pursuant to Section 1003(d) of the Company Guide. In connection with the Company's failure to file its Form 10-K for the fiscal year ended June 30, 2009, the Company submitted a plan of compliance to the Exchange on November 16, 2009, advising the Exchange of the actions the Company intended to take to bring the Company into compliance with the applicable provisions of the Company Guide by February 2, 2010. The plan of compliance also addressed the Company's failure to file the Form 10-Q. The Company may, however, submit a revised plan of compliance with the Exchange on or before December 15, 2009, advising the Exchange of the actions the Company intends to take to bring the Company into compliance with the applicable provisions of the Company guide by February 2, 2010. The Company did not timely file its Form 10-K and Form 10-Q as this would have required unreasonable effort and expense. The Company is working as expeditiously as possible to finalize its accounting and related disclosure for the periods covered by its Form 10-K and Form 10-Q and currently expects to file the Form 10- K and currently expects to filed the Form 10-K and Form 10-Q in early 2010. The Company can, however, offer no assurance that it will file its Form 10-K or Form 10-Q at or before the times provided. About Orleans Homebuilders Based in Bensalem, Pennsylvania, Orleans Homebuilders, Inc. (Amex: OHB) -- http://www.orleanshomes.com/-- develops, builds and markets high-quality single-family homes, townhouses and condominiums. The Company serves a broad customer base including first-time, move-up, luxury, empty nester and active adult homebuyers. The Company currently operates in the following eleven distinct markets: Southeastern Pennsylvania; Central and Southern New Jersey; Orange County, New York; Charlotte, Raleigh and Greensboro, North Carolina; Richmond and Tidewater, Virginia; Chicago, Illinois; and Orlando, Florida. The Company's Charlotte, North Carolina operations also include adjacent counties in South Carolina. PEANUT CORP: Officers, Trustee Settle Defense Funds Dispute ----------------------------------------------------------- Law360 reports that the Bankruptcy Court has approved a settlement between the trustee winding down Peanut Corp. of America and the company president and former officers, resolving a dispute over $1 million paid out by an insurance company for PCA's legal defense costs. Following a nationwide outbreak of Salmonella poisoning that reports say sickened more than 700 people and killed nine, Peanut Corporation of America -- http://www.peanutcorp.com/-- filed a Chapter 7 bankruptcy petition in February 2009 (Bankr. W.D. Va. Case No. 09-60452). The Company estimated its assets and liabilities in the range of $1 million to $10 million at the time of the filing. PENN TRAFFIC: Court Pushes Base Price Hearing to December 15 ------------------------------------------------------------ According to syracuse.com, the U.S. Bankruptcy Court in Wilmington moved the hearing to set a base price for the sale of Penn Traffic Co. to a group led by some investment and liquidation firms to Dec. 15, 2009, a week before the auction of the Company's assets. About Penn Traffic Syracuse, New York-based The Penn Traffic Company -- dba P&C Foods, Bi-Lo Foods, and Quality Markets -- operates supermarkets in Pennsylvania, upstate New York, Vermont, and New Hampshire under the Bilo, P&C and Quality trade names. The Company filed for Chapter 11 bankruptcy protection on November 18, 2009 (Bankr. D. Delaware Case No. 09-14078). Ann C. Cordo, Esq., and Gregory W. Werkheiser, Esq., at Morris, Nichols, Arsht & Tunnell assist the Company in its restructuring effort. Donlin Recano is the Company's claims agent. The Company listed $150,347,730 in assets and $136,874,394 in liabilities as of May 4, 2009. These affiliates also filed separate Chapter 11 petition: Sunrise Properties, Inc.; Pennway Express, Inc.; Penny Curtiss Baking Company, Inc.; Big M Supermarkets, Inc.; Commander Foods Inc.; P and C Food Markets, Inc. of Vermont; and P.T. Development, LLC. PENN TRAFFIC: Inks Comprehensive Agency Pact with Liquidator Group ------------------------------------------------------------------ As reported in the Troubled Company Reporter on December 10, 2009, Penn Traffic Co. is liquidating 74 of 79 stores in going-out-of- business sales to commence by January and conclude by March 12. A group of liquidators, including affiliates of Gordon Brothers Group LLC and Nassi Group LLC, will guarantee the Company will recover at least $36.5 million, with $29.2 million paid before the GOB sale begins. If the sale produces enough to cover the guaranteed payment, the expenses of the sale and a $6.5 million fee for the liquidators, the excess will be split evenly by Penn Traffic and the liquidators. The Liquidators' offer is subject to higher and betters offers at an auction on December 30. Initial competing bids are due December 21. The sale hearing will be conducted promptly following the auction. The Bankruptcy Court will convene a hearing to consider approval of the proposed auction process. As to the four remaining stores, Penn Traffic has an agreement to sell the stores to competitor Price Chopper Operating Co., Inc. for $12.3 million plus assumption of specified liabilities. The Company is being forced to sell the assets by the first- and second-lien lenders who were otherwise cutting off the continued right to use cash. The first lien agent is represented by Paul Hastings, Janofsky & Walker, LLP. Greenberg Traurig, LLP, represents the second lien agent. A copy of the comprehensive agency agreement with the group of liquidators comprised of KROC Capital Services, LLC, Gordon Brothers Group, LLC, The Nassi Group, LLC, SB Capital Group, LLC and DJM Realty Services, LLC is available for free at: http://researcharchives.com/t/s?4b82 A copy of the asset purchase agreement with Price Chopper Operating Co., Inc. is available for free at: http://researcharchives.com/t/s?4b83 About Penn Traffic Syracuse, New York-based The Penn Traffic Company -- dba P&C Foods, Bi-Lo Foods, and Quality Markets -- operates supermarkets in Pennsylvania, upstate New York, Vermont, and New Hampshire under the Bilo, P&C and Quality trade names. The Company filed for Chapter 11 bankruptcy protection on November 18, 2009 (Bankr. D. Delaware Case No. 09-14078). Ann C. Cordo, Esq., and Gregory W. Werkheiser, Esq., at Morris, Nichols, Arsht & Tunnell assist the Company in its restructuring effort. Donlin Recano is the Company's claims agent. The Company listed $150,347,730 in assets and $136,874,394 in liabilities as of May 4, 2009. These affiliates also filed separate Chapter 11 petition: Sunrise Properties, Inc.; Pennway Express, Inc.; Penny Curtiss Baking Company, Inc.; Big M Supermarkets, Inc.; Commander Foods Inc.; and C Food Markets, Inc. of Vermont; and P.T. Development, LLC. PILGRIM'S PRIDE: Judge Lynn to Confirm Chapter 11 Plan ------------------------------------------------------ Judge D. Michael Lynn of the U.S. Bankruptcy Court in the Northern District of Texas, Fort Worth Division, said, at the culmination of the December 8, 2009 hearing to consider confirmation of the Plan of Reorganization of Pilgrim's Pride Corporation and its debtor affiliates, that he will confirm the plan once some provisions are resolved. The Plan contemplates for the Debtors' emergence from bankruptcy with at least $1,650,000,000 in available financing and that JBS USA Holdings, Inc., the Plan Sponsor, will purchase 64% of the common stock of the Reorganized PPC in exchange for $800 million in Cash, to be used by the Reorganized Debtors to, among other things, fund distributions to holders of Allowed Claims. Shareholders will be entitled to purchase the remaining 36% of the Reorganized PPC common stock. The plan satisfies Pilgrim's Pride's debts and offers an "appropriate return to equity holders," Dow Jones Newswire quoted Judge Lynn as saying in concluding the company's day-long confirmation hearing. Amended Plan Prior to the Confirmation Hearing, on December 4, 2009, the Debtors submitted to Judge Lynn an Amended Plan of Reorganization reflecting amendments with respect to these matters: (1) Exit facility. The amount of the Exit Facility is increased from $1.650 billion to an amount up to $1.750 billion. (2) Treatment of Priority Tax Claims. Under the Amended Plan, each holder of an Allowed Priority Tax Claim will receive Cash in an amount equal to the Allowed Priority Tax Claim, including any interest on the Allowed Priority Tax Claim required to be paid pursuant to the Bankruptcy Code from the late of the Petition Date and the date the relevant tax becomes past due through the later of the Effective Date and the date on which the Priority Tax Claim will become an Allowed Priority Tax Claim; (3) Distribution of Allowed Secured Tax Claims. Under the Amended Plan, except to the extent that a holder of an Allowed Secured Tax Claim has been paid by the Debtors prior to the Effective Date or agrees to a less favorable treatment, each holder will receive Cash in an amount equal to the Allowed Secured Tax Claim, including any interest on the Allowed Secured Tax Claim required to be paid pursuant to the Bankruptcy Code from the late of the Petition Date and the date the relevant tax becomes past due through the later of the Effective Date and the date on which the Secured Tax Claim will become an Allowed Secured Tax Claim; (4) Releases related to Claims and Equity Interests. The Amended Plan releases the Debtor, the Reorganized Debtor and "Protected Person" from all claims and causes of action that exist as of the Effective Date and arise from the Claim or Equity Interest of that holder. "Protected Persons" means (a) the present and former directors, officers, employees, affiliates, agents, financial advisors, investment bankers, attorneys, and representatives of the Debtors, including the Chief Restructuring Officer, (b) the Committees, (c) the agents and lenders under the Prepetition BMO Credit Agreement, (d) the agents and lenders under to the Prepetition CoBank Credit Agreement, (e) the agents and lenders under the DIP Credit Agreement, (f) Pilgrim Interests, Ltd., solely in its capacity as guarantor under the Guarantee Agreements, (g) the Plan Sponsor, and (h) their present and former directors, officers, employees, affiliates, agents, financial advisors, investment bankers, attorneys, and representatives. (5) Releases of Indemnified Protected Persons. On the Effective Date, and in consideration for the obligations of the Debtors and the Reorganized Debtors under the Plan, each person or entity that has a claim or cause of action (i) against any Protected Person having a right to seek indemnification or contribution, whether pursuant to common law or otherwise, from the Debtors, (ii) that is not otherwise released pursuant to Section 10.8(a) of the Amended Plan and (iii) with respect to which there is insurance coverage, regardless of amount, will release and discharge unconditionally and forever that Indemnified Protected Person from any and all claims and causes of action that exist as of the Effective Date relating to the Debtors, the Debtors' estates, or the Chapter 11 Cases and will seek payment of that claim or cause of action solely from the applicable insurance polic(ies). (6) Optional releases. On the Effective Date, and in consideration for the obligations of the Debtors and the Reorganized Debtors under the Plan, each person or entity that has a claim or cause of action against any Protected Person that is not otherwise released pursuant to Section 10.8(a) of the Plan will have an option, subject to entry, without further court approval, into an appropriate stipulation with the Debtors or the Reorganized Debtors, as applicable, to (i) if there is no applicable insurance coverage, file a Proof of Claim against the Debtors relating to that person or entity's claim or cause of action, which proof of claim will be resolved and paid pursuant to the terms of the Plan, and unconditionally and forever release that claim or cause of action against the relevant Protected Person, or (ii) if there is applicable insurance coverage, seek payment of the claim or cause of action solely from the applicable insurance policy and unconditionally and forever release any and all claims or causes of action against the relevant Protected Person, Debtors and Reorganized Debtors. (7) Claims of governmental units. Nothing in the Plan or the Confirmation Order will operate as a waiver of or a release or exculpation of any claim or cause of action (x) held by a Governmental unit against any non-Debtor or (y) held by a Governmental Unit against any Debtor, other than those Claims of any Governmental Unit that are subject to the deadlines established by the Bar Date Order or order on the requests for payment of administrative expenses. Nor will anything in the Plan or the Confirmation Order enjoin any Governmental Unit from bringing any claim, suit, action, or other proceeding against any party or person for liability under any Non-Released Government Claim. For the avoidance of doubt, a Governmental Unit includes, as examples, and without limitation, the Food Safety and Inspection Service, the Grain Inspection, Packers and Stockyards Administration, the Agriculture Marketing Service, and the Food and Nutrition Service of the United States Department of Agriculture. A blacklined copy of the Amended Plan is available for free at http://bankrupt.com/misc/PPC_POR_blacklined.pdf The Debtors also filed a Memorandum of Law maintaining that their Plan is confirmable. The Debtors have acknowledged the objections of certain entities to the Amended Plan. In order to address certain of the objections, the Debtors have made modifications to the Plan. The Debtors state further that the Amended Plan has responded more fully to certain of the legal and factual arguments raised in the Objections that the Debtors have not yet resolved. The Debtors submit further that the Amended Plan satisfies all of the confirmation requirements of Section 1129 of the Bankruptcy Code, thus, the Amended Plan should be confirmed and the objections overruled. The Debtors also supplemented their Amended Plan with new exhibits to the Plan Supplement containing (i) an amended list of Executory Contracts and Unexpired Leases to be assumed, (ii) an amended list of Officers of the Reorganized Debtors, (iii) an amended list of the Initial Directors of the Reorganized Debtors. The Debtors also included their Annual Report for the fiscal year ended September 26, 2009 as an addition to the Amended Plan Supplement. A full-text copy of the Amended Plan Supplement is available for free at: http://bankrupt.com/misc/PPC_AmdPlanSupp_Dec4.pdf On December 9, the Debtors, to reflect amended or new Executory Contracts and Unexpired Leases to be assumed, filed a second Amended Plan Supplement, a full-text copy of which is available for free at http://bankrupt.com/misc/PPC_2ndAmdPlanSupp_Dec9.pdf The Official Committee of Unsecured Creditors informs the Court that it supports the Debtors' Amended Plan, and submits that the Plan should be confirmed. Similarly, the Debtors' Chief Restructuring Officer, William Snyder, believes that the Liquidation Analyses are based on sound assumptions, and provide a reasonable estimate of the liquidation values upon conversion of the Chapter 11 Cases to a case under chapter 7 of the Bankruptcy Code. Pursuant to these analyses, Mr. Snyder believes that the Debtors determined that confirmation of the Plan will provide holders of Allowed Class 10(a) Equity Interests a recovery that is equal to or greater than members of that Class would receive pursuant to a chapter 7 liquidation of each Debtor or consolidated Debtors. In this regard, Mr. Snyder maintains that confirmation of the Plan is appropriate, is in the best interests of all parties in interest and should, thus, be granted. Plan Gets Overwhelming Support The Debtors' voting and solicitation agent, Kurtzman Carson Consultants, filed a report with the Court showing that the Debtors received overwhelming support from holders of Class 10(a) which is the only Class entitled to vote on the Plan. More than 90% of ballots submitted by holders of Class 10(a) Claims were cast in favor of the Plan. Tabulation of Class 10(a) Ballots: Total Equity Interests in Class: 77,141,489 1. Vote on the Plan Equity Equity Interests Interest (Accept) Percentage (Reject) Percentage --------- ------------ --------- ---------- 47,860,549 90.62% 4,952,343 9.38% 2. Vote on the Short Term Incentive Plan Equity Equity Interests % of % of Interest % of % of (For) Votes Class (Against) Votes Class --------- ----- ----- --------- ----- ----- 45,756,032 86,10% 59.31% 7,384,308 13.90% 9.57% 3. Vote on Long Term Incentive Plan Equity Equity Interests % of % of Interest % of % of (For) Votes Class (Against) Votes Class --------- ----- ----- --------- ----- ----- 45,729,284 86.05% 59.28% 7,411,056 13.95% 9.61% KCC was also requested to determine the voting results if the shares controlled by "insiders" were not included in the Tabulation. KCC identified the Pilgrim family as the only "insiders" that properly voted. KCC identified the Pilgrim family shares by reviewing the records provided by the Bank of New York Mellon, as transfer agent. A total of 25,814,120 shares were identified as Pilgrim Family shares, of which 25,789,164 were represented by timely submitted ballots. KCC presented a summary of the voting results with respect to the Voting Securities Class if votes of "insiders" are not counted: Total Equity Interests in Class: 77,141,489 1. Vote on the Plan Equity Equity Interests Interest (Accept) Percentage (Reject) Percentage --------- ------------ --------- ---------- 22,071,385 81.6% 4,952,343 18.33% 2. Vote on the Short Term Incentive Plan Equity Equity Interests % of % of Interest % of % of (For) Votes Class (Against) Votes Class --------- ----- ----- --------- ----- ----- 19,966,868 73.00% 25.88% 7,384,308 27.00% 9.57% 3. Vote on Long Term Incentive Plan Equity Equity Interests % of % of Interest % of % of (For) Votes Class (Against) Votes Class --------- ----- ----- --------- ----- ----- 19,940,120 72.90% 25.85$ 7,411,056 27.10% 9.61% KCC received a number of ballots that were not included in the tabulation. KCC stored these ballots at KCC's office and are available for inspection by or submission to the Court. A full-text copy of the ballots that were not tabulated is available free of charge at: http://bankrupt.com/misc/PPC_nontabulatedballots.pdf Black Horse Wants to Designate Insider Votes as Not Cast in Good Faith Prior to the release of the voting results, Black Horse Capital Management LLC as manager for Black Horse Capital LP, Black Horse Capital (QP) LP and Black Horse Capital Master Fund Ltd. -- owners of equity interest in Pilgrim's Pride Corporation and holders of PPC 8-3/8% Senior Subordinated Notes -- ask the Court to designate all votes cast by Lonnie "Bo" Pilgrim, Lonnie Ken Pilgrim, entities related to the Pilgrim family, and the Chief Executive Officer, Don Jackson -- the "Insiders" -- in Class 10(a) Equity Interests with respect to the Debtors' Amended Plan of Reorganization, as not cast in good faith pursuant to Section 1126(e) of the Bankruptcy Code. On behalf of Black Horse, Catherine L. Steege, Esq., at Jenner & Block LLP, in Chicago, Illinois, points out that the only class impaired by, and thus entitled to vote on, the Plan is Class 10(a) Equity Interests in the Debtors, of which Black Horse is a member. Black Horse expects, however, that the Debtors will contend that the Plan has been accepted by Class 10(a) almost entirely due to the votes by Insiders controlling a majority of the shares of the Debtors, Mr. Steege relates. These Insiders have been offered various incentives, and therefore clearly have motives, which are ulterior to and different from the motives and incentives facing ordinary non-insider shareholders, she avers. The short time frame for the exchange could have a "depressing effect" on the value of Pilgrim's Pride's stock because the shares would be sold before the company is "sufficiently far out of bankruptcy," Mark MacDonald, Esq., an attorney for Black Hors, told Dow Jones. Mr. MacDonald said the Pilgrim family, which owns the majority of the company's stock, will benefit from the plan through continued employment. He pointed out that Mr. Bo Pilgrim is slated to collect $7.5 million in fees over the next five years as a consultant to JBS. Senior Vice President Lonnie Ken Pilgrim would continue to draw a more than $250,000 a year for his work at the company, Mr. McDonald added. Judge Lynn, however, rejected Black Horse's argument that the $7.5 million to be paid to "Bo" Pilgrim should be available to all shareholders, Dow Jones related. "The fact that JBS entered into a transaction with Mr. Pilgrim should not affect" whether a plan should be approved by the court, Judge Lynn ruled, as reported by Dow Jones. The Debtors objected to Black Horse's motion contending that the Debtors' balloting agent identified the Pilgrim family shares by reviewing the records of the Bank of New York Mellon, as transfer agent. KCC found that even if excluding the votes of the Pilgrim family, 81.67% of Class 10(a) voted to accept the Plan, which is more than the required two-thirds vote under Section 1129 of the Bankruptcy Code, Stephen A. Youngman, Esq., at Weil, Gotshal & Manges LLP in Dallas, Texas said. Therefore, the Debtors contend that the Motion is moot. Proceeding with the Motion would be a waste of estate resources and the Court's time, Mr. Youngman asserted. Judge Lynn also ruled that the evidence presented showed the company didn't negotiate Mr. Pilgrim's "insider treatment," and that committee appointed to represent the equity holders consented to the consulting deal. The judge did say that he wouldn't immediately approve releases for Pilgrim's Pride executives, attorneys and lenders, Dow Jones related. Judge Lynn, according to the report, said he would "more narrowly tailor" the release provision of the bankruptcy plan and issue a written opinion. About Pilgrim's Pride Headquartered in Pittsburgh, Texas, Pilgrim's Pride Corporation (Pink Sheets: PGPDQ) -- http://www.pilgrimspride.com/-- employs roughly 41,000 people and operates chicken processing plants and prepared-foods facilities in 14 states, Puerto Rico and Mexico. The Company's primary distribution is through retailers and foodservice distributors. Pilgrim's Pride Corp. and six other affiliates filed Chapter 11 petitions on December 1, 2008 (Bankr. N.D. Tex. Lead Case No. 08-45664). The Debtors' operations in Mexico and certain operations in the United States were not included in the filing and continue to operate as usual outside of the Chapter 11 process. Pilgrim's Pride has engaged Stephen A. Youngman, Esq., Martin A. Sosland, Esq., and Gary T. Holzer, Esq., at Weil, Gotshal & Manges LLP, as bankruptcy counsel. Lazard Freres & Co., LLC, is the Company's investment bankers and William K. Snyder of CRG Partners Group LLC is chief restructuring officer. Kurtzman Carson Consulting LLC serves as claims and notice agent. Kelly Hart and Brown Rudnick represent the official equity committee. Attorneys at Andrews Kurth LLP represents the official committee of unsecured creditors. As of December 27, 2008, the Company had US$3,215,103,000 in total assets, US$612,682,000 in total current liabilities, US$225,991,000 in total long-term debt and other liabilities, and US$2,253,391,000 in liabilities subject to compromise. Bankruptcy Creditors' Service, Inc., publishes Pilgrim's Pride Bankruptcy News. The newsletter tracks the Chapter 11 proceeding of Pilgrim's Pride Corp. and its various affiliates. (http://bankrupt.com/newsstand/or 215/945-7000) PILGRIM'S PRIDE: Addresses Plan Confirmation Objection ------------------------------------------------------ Prior to the confirmation hearing, various parties submitted objections to the confirmation of the reorganization plan of Pilgrim's Pride Corp. William T. Neary, the United States Trustee for Region 6 asked that the "No Government Release" language be included in the Confirmation Order. Holders of various notes issued by the Debtors also objected. Black Horse Capital Management LLC and its affiliates, owners of more than 3,000,000 shares of the Debtors' common stock and holders of the Debtors' 8-3/8 Senior Subordinated Notes, said the Plan is not proposed in good faith and is not fair and equitable to holders of the Debtors' common stock. Various lessors including Bank of America Leasing & Capital, LLC, objected to the Plan in connection with the terms of the assumption of their contracts. Plaintiffs Jennifer Hall and Jose Rocha in the RICO Action filed in the United States District Court for the Northern District of Alabama, Northwestern Division on March 16, 2007, against two employees of the Debtors' Russelville, Alabama processing plant, pointed out that the Plan ontains certain objectionable release and injunction provisions. Taxing Authorities that include The Fort Worth Independent School District and the Arlington Independent School District taxing units object to the confirmation of the Plan to the extent that the plan treats the Taxing Units' claim as anything other than a secured claim. Certain growers that include The Arkansas Growers asked the Court to deny confirmation of the Plan because it does not comply with Section 502(c) of the Bankruptcy Code, which authorizes estimation of claims in bankruptcy. The Growers also complain that their interests are impaired because (i) the overbroad releases contemplated by the Plan deprive the Growers of legal rights to which they would otherwise be entitled, and (ii) the lack of a reserve to ensure payment of the Growers' claims subjects them to risks and to expense not present for other Class 7 creditors. FMC Corporation, a vendor and provider of salmonella control services to the Debtors under the Spectrum Supply Contract, stands against the confirmation of the Debtors' Plan of Reorganization unless the Debtors specify their intentions to assume or reject the Spectrum Supply Contract. Debtors' Response to Confirmation Objections The Debtors' counsel, Stephen A. Youngman, Esq., at Weil, Gotshal & Manges LLP, in Dallas, Texas, tells the Court that although the Debtors have been able to resolve, or believe that they have resolved, a number of Plan confirmation objections and cure amount objections, other Plan Objections and Cure Amount Objections remain unresolved. The Debtors, Mr. Youngman says, intend to address any unresolved Plan Objection at the hearing to confirm the Plan. Any unresolved Cure Amount Objections, however, will be adjourned to the next available omnibus hearing date. For reasons stated in a table prepared by the Debtors to address each Plan Objection and Cure Amount Objection, the Debtors ask the Court to overrule the Plan Objections to the extent they have not already been withdrawn or resolved. A full-text copy of the table of the objections and the Debtors' response to each of their objections is available for free at: http://bankrupt.com/misc/PPC_Plan_objectionlist.pdf The Debtors, in support of the confirmation of their Plan, submit their Witness and Exhibit List in connection of the Court's December 8, 2009 Confirmation Hearing. About Pilgrim's Pride Headquartered in Pittsburgh, Texas, Pilgrim's Pride Corporation (Pink Sheets: PGPDQ) -- http://www.pilgrimspride.com/-- employs roughly 41,000 people and operates chicken processing plants and prepared-foods facilities in 14 states, Puerto Rico and Mexico. The Company's primary distribution is through retailers and foodservice distributors. Pilgrim's Pride Corp. and six other affiliates filed Chapter 11 petitions on December 1, 2008 (Bankr. N.D. Tex. Lead Case No. 08-45664). The Debtors' operations in Mexico and certain operations in the United States were not included in the filing and continue to operate as usual outside of the Chapter 11 process. Pilgrim's Pride has engaged Stephen A. Youngman, Esq., Martin A. Sosland, Esq., and Gary T. Holzer, Esq., at Weil, Gotshal & Manges LLP, as bankruptcy counsel. Lazard Freres & Co., LLC, is the Company's investment bankers and William K. Snyder of CRG Partners Group LLC is chief restructuring officer. Kurtzman Carson Consulting LLC serves as claims and notice agent. Kelly Hart and Brown Rudnick represent the official equity committee. Attorneys at Andrews Kurth LLP represents the official committee of unsecured creditors. As of December 27, 2008, the Company had US$3,215,103,000 in total assets, US$612,682,000 in total current liabilities, US$225,991,000 in total long-term debt and other liabilities, and US$2,253,391,000 in liabilities subject to compromise. Bankruptcy Creditors' Service, Inc., publishes Pilgrim's Pride Bankruptcy News. The newsletter tracks the Chapter 11 proceeding of Pilgrim's Pride Corp. and its various affiliates. (http://bankrupt.com/newsstand/or 215/945-7000) PILGRIM'S PRIDE: Gets Jan. 31 Extension of DIP Loans ---------------------------------------------------- Pilgrim's Pride Corp. and its units obtained the Court's authority to enter into the Fourth Amendment to the Amended and Restated Postpetition Credit Agreement by and among the Debtors, the DIP Lenders, and Bank of Montreal. The DIP Credit Agreement and the Debtors' use of Cash Collateral currently expire on December 1, 2009 -- before the currently scheduled December 8, 2009 Confirmation Hearing, thus necessitating an extension of the term of the DIP Credit Agreement and the use of Cash Collateral, Martin A. Sosland, Esq., at Weil, Gotshal & Manges, LLP, in Dallas, Texas, asserts. Mr. Sosland states that although the Debtors believe that the Proposed Plan of Reorganization will be confirmed and will be substantially consummated before the end of December 2009, out of abundance of caution, the Debtors are seeking an extension of the maturity of the DIP Credit Agreement and the use of Cash Collateral through the earlier of January 31, 2010, and certain other termination events. Mr. Sosland tells the Court that certain DIP Lenders -- BMO, Cooperatieve Centrale Raiffeisen-Boerenleenbank B.A., U.S. Bank National Association, and ING Capital LLC -- have agreed to amend the Credit Agreement to accommodate the Debtors' request without any further monetary consideration being provided to the DIP Lenders in exchange for the amendment. In addition, in connection with the amendment, the Debtors have asked that the DIP Lenders permanently reduce the DIP Commitments to $250,000,000. In connection therewith, the Continuing Lenders committed to extend these amounts of DIP Loans to the Debtors: Bank of Montreal $104,166,675 Rabobank Nederland New York Branch $104,166,675 U.S. Bank $25,000,000 ING Capital LLC $16,666,650 Wells Fargo Bank National Association, Calyon New York Branch, Natixis New York Branch, SunTrust Bank, and First National Bank of Omaha also consent to the Fourth DIP Financing Amendment and agree that from and after the effective date of the Fourth Amendment, they will cease to be Lenders under the DIP Credit Agreement. About Pilgrim's Pride Headquartered in Pittsburgh, Texas, Pilgrim's Pride Corporation (Pink Sheets: PGPDQ) -- http://www.pilgrimspride.com/-- employs roughly 41,000 people and operates chicken processing plants and prepared-foods facilities in 14 states, Puerto Rico and Mexico. The Company's primary distribution is through retailers and foodservice distributors. Pilgrim's Pride Corp. and six other affiliates filed Chapter 11 petitions on December 1, 2008 (Bankr. N.D. Tex. Lead Case No. 08-45664). The Debtors' operations in Mexico and certain operations in the United States were not included in the filing and continue to operate as usual outside of the Chapter 11 process. Pilgrim's Pride has engaged Stephen A. Youngman, Esq., Martin A. Sosland, Esq., and Gary T. Holzer, Esq., at Weil, Gotshal & Manges LLP, as bankruptcy counsel. Lazard Freres & Co., LLC, is the Company's investment bankers and William K. Snyder of CRG Partners Group LLC is chief restructuring officer. Kurtzman Carson Consulting LLC serves as claims and notice agent. Kelly Hart and Brown Rudnick represent the official equity committee. Attorneys at Andrews Kurth LLP represents the official committee of unsecured creditors. As of December 27, 2008, the Company had US$3,215,103,000 in total assets, US$612,682,000 in total current liabilities, US$225,991,000 in total long-term debt and other liabilities, and US$2,253,391,000 in liabilities subject to compromise. Bankruptcy Creditors' Service, Inc., publishes Pilgrim's Pride Bankruptcy News. The newsletter tracks the Chapter 11 proceeding of Pilgrim's Pride Corp. and its various affiliates. (http://bankrupt.com/newsstand/or 215/945-7000) PLIANT CORP: Emerges From Bankruptcy as Berry Plastics Unit ----------------------------------------------------------- Berry Plastics Corporation said December 3, 2009, it has completed the acquisition of 100% of the common stock of Pliant Corporation for an acquisition purchase price of $561 million. Pliant emerged from bankruptcy effective December 3, 2009, and became a wholly owned direct subsidiary of Berry. The acquisition was funded with the proceeds from the private placement of notes in October. As reported by the Troubled Company Reporter, Berry Plastics on October 29, 2009, said it would issue, through its two newly formed, wholly owned subsidiaries: -- $370 million of first priority senior secured notes due 2015; and -- $250 million of second priority senior secured notes due 2014. The First Priority Notes will bear interest at a rate of 8-1/4% payable semiannually, in cash in arrears, on May 15 and November 15 of each year, commencing May 15, 2010 and will mature on November 15, 2015. The Second Priority Notes will bear interest at a rate of 8-7/8% payable semiannually, in cash in arrears, on March 15 and September 15 of each year, commencing March 15, 2010, and will mature on September 15, 2014. The newly acquired business will be operated as Berry's Specialty Films Division and will be run by R. David Corey, the former Chief Operating Officer of Pliant. Berry's current Flexible Films Division will now be known as the Film Products Division. A full-text copy of Berry's disclosure on Form 8-K filed with the Securities and Exchange Commission is available at no charge at: http://ResearchArchives.com/t/s?4b79 About Pliant Corp Headquartered in Schaumburg, Illinois, Pliant Corporation produces value-added film and flexible packaging products for personal care, medical, food, industrial and agricultural markets. Pliant operates 16 manufacturing facilities around the world, and employs approximately 2,800 people with annual net sales of $900 million for the 12 months ended September 30, 2009. Barclays Capital acted as the exclusive financial advisor to Apollo Management, Graham Partners and Berry Plastics in conjunction with the Pliant restructuring process. Pliant and 10 of its affiliates filed for Chapter 11 protection on January 3, 2006 (Bankr. D. Del. Lead Case No. 06-10001). James F. Conlan, Esq., at Sidley Austin LLP, and Edmon L. Morton, Esq., and Robert S. Brady, Esq., at Young, Conaway, Stargatt & Taylor, represented the Debtors in their restructuring efforts. The Debtors tapped McMillan Binch Mendelsohn LLP, as Canadian counsel. As of September 30, 2005, the Company had $604.3 million in total assets and $1.19 billion in total debts. The Debtors emerged from Chapter 11 on July 19, 2006. Pliant Corp. and its affiliates again filed for Chapter 11 after reaching terms of a pre-packaged restructuring plan. The voluntary petitions were filed February 11, 2009 (Bank. D. Del. Case Nos. 09-10443 through 09-10451). The Hon. Mary F. Walrath presides over the cases. Jessica C.K. Boelter, Esq., at Sidley Austin LLP, in Chicago, Illinois, and Edmon L. Morton, Esq., at Robert S. Brady, Esq., at Young Conaway Stargatt & Taylor, LLP, in Wilmington, Delaware, provide bankruptcy counsel to the Debtors. Epiq Bankruptcy Solutions LLC acts as claims and noticing agent. The U.S. Trustee for Region 3 appointed five creditors to serve on an official committee of unsecured creditors. The Creditors Committee selected Lowenstein Sandler PC as its counsel. As of September 30, 2008, the Debtors had $688.6 million in total assets and $1.03 billion in total debts. About Berry Plastics Berry Plastics Corporation manufactures and markets plastic packaging products, plastic film products, specialty adhesives and coated products. At June 27, 2009 the Company had 64 production and manufacturing facilities, with 58 located in the United States. Berry is a wholly-owned subsidiary of Berry Plastics Group, Inc. Berry Group is primarily owned by affiliates of Apollo Management, L.P. and Graham Partners. Berry, through its wholly owned subsidiaries operates in four primary segments: Rigid Open Top, Rigid Closed Top, Flexible Films, and Tapes/Coatings. The Company's customers are located principally throughout the United States, without significant concentration in any one region or with any one customer. At September 26, 2009, the Company had total assets of $4.401 billion against total liabilities of $4.079 billion, resulting in stockholders' equity of $321.7 million. Berry Plastics reported a net loss of $26.2 million for the fiscal year ended September 26, 2009, from a net loss of $101.1 million for fiscal year ended September 27, 2008, and net loss of $116.2 million for fiscal year ended September 27, 2008. * * * As reported by the Troubled Company Reporter on June 10, 2009, Standard & Poor's Ratings Services raised its corporate credit rating on Berry Plastics Group to 'B-' from 'SD' and the senior unsecured debt rating to 'CCC' from 'D'. The recovery ratings on Group's senior unsecured debt remain unchanged at '6', indicating S&P's expectation for negligible recovery (0% to 10%) in a payment default. S&P affirmed all its ratings on Group's wholly owned operating subsidiary Berry Plastics Corp. The outlook is stable. PLUG POWER: Receives NASDAQ Non-Compliance Notice ------------------------------------------------- Plug Power Inc. disclosed that it received a notice on December 8, 2009 from the NASDAQ Stock Market. The notice stated that the Company was not in compliance with NASDAQ Marketplace Rule 5450(a)(1) because the bid price of the Company's common stock closed below the required minimum $1.00 per share for the previous 30 consecutive business days. The NASDAQ notice has no immediate effect on the listing of the Company's common stock. In accordance with NASDAQ rules, Plug Power has a period of 180 calendar days, until June 7, 2010, to regain compliance with the minimum bid price rule. If at any time before June 7, 2010, the bid price of the Company's common stock closes at $1.00 per share or more for a minimum of 10 consecutive business days, NASDAQ will notify the Company that it has regained compliance with the minimum bid price rule. In the event the Company does not regain compliance with the Rule prior to the expiration of the 180-day period, NASDAQ will notify the Company that its securities are subject to delisting. However, the Company may appeal the delisting determination to a NASDAQ hearing panel and the delisting will be stayed pending the panel's determination. At this hearing, the Company would present a plan to regain compliance and NASDAQ would then subsequently render a decision. The Company is currently evaluating its alternatives to resolve the listing deficiency. On September 30, 2009, Plug Power had cash, cash equivalents and available-for-sale securities of $71.1 million and net working capital of $70.4 million. About Plug Power Inc. Plug Power Inc. -- http://www.plugpower.com/-- is an established leader in the development and deployment of clean, reliable energy solutions, integrates fuel cell technology into motive and continuous power products. The Company is actively engaged with private and public customers in targeted markets throughout the world. PROTOSTAR LTD: SES Offers $185MM Cash for Protostar II ------------------------------------------------------ Bill Rochelle at Bloomberg News reports that an affiliate of SES SA has a contract to buy ProtoStar Ltd.'s ProtoStar II satellite for $185 million cash, absent higher and better bids at an auction on December 16. If the proposed revised auction procedure is approved, SES will be the stalking horse bidder at the auction. Competing bids would be due December 14. The sale hearing will be on December 18, two days following the auction. ProtoStar says it expects the auction will be "competitive." The ProtoStar II satellite was launched in May and became operational in June. As reported by the TCR on Nov. 12, ProtoStar has won approval to sell the ProtoStar I satellite and related equipment for $210 million to an affiliate of Intelstat Holdings Ltd. The Official Committee of Unsecured Creditors has a suit pending where it contends secured lenders don't have valid liens securing aUS$10 million working capital loan and US$183 million in 12.5% and 18% secured notes. The creditors believe the noteholders and working capital lenders filed notices of their security interests in the wrong place, as a result invalidating their liens. If the Creditors Committee wins the lawsuit, the lenders would have an unsecured creditor status and they won't be paid ahead of other creditors. About ProtoStar Ltd. Hamilton, HM EX, Bermuda-based ProtoStar Ltd. is a satellite operator formed in 2005 to acquire, modify, launch and operate high-power geostationary communication satellites for direct-to- home satellite television and broadband internet access across the Asia-Pacific region. The Company and its affiliates filed for Chapter 11 on July 29, 2009 (Bankr. D. Del. Lead Case No. 09-12659.) The Debtor selected Pachulski Stang Ziehl & Jones LLP as Delaware counsel; Law Firm of Appleby as their Bermuda counsel; UBS Securities LLC as financial advisor & investment banker and Kurtzman Carson Consultants LLC as claims and noticing agent. The Debtors have tapped UBS Securities LLC as investment banker and financial advisor. In their petition, the Debtors listed between US$100 million and US$500 million each in assets and debts. As of December 31, 2008, ProtoStar's consolidated financial statements, which include non- debtor affiliates, showed total assets of US$463,000,000 against debts of US$528,000,000. RADIENT PHARMACEUTICALS: Alpha Capital Holds 6.633% Equity Stake ---------------------------------------------------------------- Alpha Capital Anstalt disclosed that it beneficially owns 1,375,042 shares or roughly 6.633% of the Common Stock of Radient Pharmaceuticals Corporation. Headquartered in Tustin, California, Radient Pharmaceuticals Corporation is an integrated pharmaceutical company devoted to the research, development, manufacturing, and marketing of diagnostic, and premium skin care products. At September 30, 2009, the Company had $26,160,438 in total assets against $4,927,694 in total liabilities. The September 30 balance sheet showed strained liquidity: The Company had $246,048 in total current assets against $2,950,658 in total current liabilities. Going Concern Qualification On April 15, 2009, Radient Pharmaceuticals (formerly AMDL, Inc.) filed with the SEC an Annual Report on Form 10-K in which included an audit opinion with a "going concern" explanatory paragraph which expresses doubt, based upon current financial resources, as to whether AMDL can meet its continuing obligations without access to additional working capital. RADLAX GATEWAY: Court to Consider Transfer of Case on December 23 ----------------------------------------------------------------- The Hon. A. Benjamin Goldgar of the U.S. Bankruptcy Court for the Northern District of Illinois will consider Bomel Construction Co., Inc.'s motion to transfer the Chapter 11 cases of RadLAX Gateway Hotel, LLC, et al. on December 23, 2009, at 10:30 a.m. As reported in the Troubled Company Reporter on Nov. 18, 2009, creditor Bomel asked the Court to transfer the Debtors cases to the Central District of California. Bomel wanted the case transferred in the interest of justice and the convenience of the parties. Oak Brook, Illinois-based RadLAX Gateway Hotel, LLC, operates a hotel. The Company and its affiliates filed for Chapter 11 on Aug. 17, 2009 (Bankr. N.D. Ill. Case Nos. 09-30047 - 09-30032). David M. Neff, Esq., at Perkins Coie LLP, represents the Debtors in their restructuring efforts. In their petition, the Debtors listed $50,000,001 to $100,000,000 in assets and $100,000,001 to $500,000,000 in debts. RANCHER ENERGY: Court Okays New Month to Month Lease with Landlord ------------------------------------------------------------------ In a regulatory filing Monday, Rancher Energy Corp. discloses that on December 3, 2009, the Bankruptcy Court approved the month to month lease between the Company and its landlord, LBA Realty Fund III - Company III, LLC, whereby the Company agrees to pay $5,000 per month. The order also canceled the original lease entered into by the Company in 2006. Rancher Energy Corp., aka Rancher Energy Oil & Gas Corp., fka Metalix, Inc., develops and produces oil in North America. It operates three fields, including the South Glenrock B Field, the Big Muddy Field, and the Cole Creek South Field in the Powder River Basin, Wyoming in the Rocky Mountain region of the United States. The Company was formerly known as Metalex Resources, Inc. and changed its name to Rancher Energy Corp. in April 2006. Rancher Energy Corp. was founded in 2004 and is headquartered in Denver, Colorado. Rancher Energy filed for Chapter 11 bankruptcy protection on October 28, 2009 (Bankr. D. Colo. Case No. 09-32943). Herbert A. Delap, Esq., who has an office in Denver, Colorado, assists the Debtor in its restructuring efforts. The Company listed $10,000,001 to $50,000,000 in assets and $10,000,001 to $50,000,000 in liabilities. At September 30, 2009, the Company's balance sheets showed $32.4 million in total assets, $12.6 million in total liabilities, and $19.8 million in total shareholders' equity. A full-text copy of the Company's Form 10-Q for the three months ended September 30, 2009., is available for free at: http://researcharchives.com/t/s?4abd S & K FAMOUS: Court Confirms Plan; Unsec. Claims Get 6% Recovery ---------------------------------------------------------------- S&K Famous Brands Inc. received an order from the Bankruptcy Court confirming its proposed Chapter 11 plan. The Debtor and the Official Committee of Unsecured Creditors have sponsored a liquidating Chapter 11 plan that offers (i) holders of secured, perfected consignment and other priority claims a 100% recovery of their claims, (ii) holders of general unsecured claims, totaling $34.9 million with a recovery on up to six cents on the dollar and (iii) holders of convenience claims with a 10% recovery. A full-text copy of the disclosure statement is available for free at http://ResearchArchives.com/t/s?4717 A full-text copy of the plan of liquidation is available for free at http://ResearchArchives.com/t/s?4718 Headquartered in Glen Allen, Virginia, S & K Famous Brands, Inc. -- http://www.skmenswear.com/-- had 214 retail stores selling men's swimwear. The Company shut 78 stores before it filed for bankruptcy, and later shut 30 more stores. The Debtor filed for Chapter 11 protection on February 9, 2009 (Bank. E.D. Va. Case No. 09-30805). Lynn L. Tavenner, Esq., Paula S. Beran, Esq., at Tavenner & Beran, PLC and McGuireWoods LLP represent the Debtor in its restructuring efforts. Its financial advisor is Alvarez & Marsal North America LLC. The Debtor's DIP Lender is Wells Fargo Retail Finance LLC as administrative and collateral agent. The Debtor listed total assets of $41,440,100 and total debts of $35,499,00. SAND TECHNOLOGY: Posts Net Loss for Fifth Consecutive Year ---------------------------------------------------------- SAND Technology Inc. posted a net loss for the fifth consecutive year, reporting a net loss of: * C$1,192,000 for the fiscal year ended July 31, 2009, * C$1,272,000 for fiscal 2008, * C$2,526,000 for fiscal 2007, * C$3,927,000 for fiscal 2006, and * C$7,363,000 for fiscal 2005. The Company recorded revenue of C$7,049,000 in fiscal 2009, C$6,998,000 in fiscal 2008, C$6,729,000 in fiscal 2007, C$5,477,000 in fiscal 2006 and C$6,096,000 in fiscal 2005. As of July 31, 2009, the Company had total assets of C$2,740,000 against total liabilities of C$5,113,000, resulting in shareholders' deficit of C$2,373,000. As of July 31, 2009, the Company had a negative Working Capital of C$363,000, from positive working capital the past four years: C$85,000 in fiscal 2008, C$238,000 in fiscal 2007, C$1,852,000 in fiscal 2006 and C$5,820,000 in fiscal 2005. According to the Company, in light of operating losses suffered in the current and past years, its ability to realize its assets and discharge its liabilities depends on the continued financial support of its shareholders and debenture holders, its ability to obtain additional financing and its ability to achieve revenue growth. The Company said it is executing a business plan to allow it to continue as a going concern which is to continue to search for additional sources of debt and equity financing, and achieve profitability through cost containment and revenue growth. There can be no assurance that the Company's activities will be successful. On October 28, 2009, SAND Technology Co-Founder and Chief Executive, Arthur Ritchie, said that on reaching the age of 65, he plans to retire and step down as CEO by the end of October. He agreed to remain as the company's Chairman working in an advisory capacity. Additionally he will focus on assisting the CEO's smooth transition including strengthening existing customer and partner relationships. Tom O'Donnell, current board member and a major shareholder of SAND, was appointed as President and CEO effective November 1, 2009. Mr. O'Donnell is the CEO and founder of Edge Specialists -- an independent software vendor of derivative trading tools. He is a co-inventor of two extensive trading software patents, a C.P.A. and a graduate of Harvard Business School. His extensive career in the software and financial markets makes him highly qualified for his new role. A full-text copy of the Company's annual report on Form 20-F is available at no charge at http://ResearchArchives.com/t/s?4b77 About SAND Technology Headquartered in Montreal, in Canada, SAND Technology Inc. (OTCBB:SNDTF) provides Data Management Software and Best Practices for storing, accessing, and analyzing large amounts of data on- demand while lowering TCO, leveraging existing infrastructure and improving operational performance. SANDRIDGE ENERGY: Moody's Assigns 'B3' Rating on $400 Mil. Notes ---------------------------------------------------------------- Moody's Investors Service assigned a B3 (LGD 4; 63%) rating to SandRidge Energy's pending $400 million ten-year senior unsecured note offering. Moody's affirmed SD's existing B3 note ratings (adjusting the LGD point scores to B3 (LGD 4; 63%) from (LGD 5; 75%) and B2 Corporate Family Rating. The rating outlook is stable. Together with approximately $400 million in common and preferred stock offerings, note proceeds will fund SD's pending $800 million acquisition of Permian Basin oil and gas properties from Forest Oil. Though the acquisition comes at a very high cost per current daily flowing barrel of oil equivalent, the acquisition funding mix adequately mitigates risk to bondholders at the current ratings. Approximately 46% of SD's estimated 80 mmboe of acquired proven reserves is proven developed. SD is paying an extremely high $105,000/Boe per flowing daily Boe of production for Forest's oil- weighted Permian Basin properties, believing that it has identified 1,500 qualified drilling locations. In paying a less extreme $22.72/Boe of PD reserves, it appears that the producing portion of the properties contains a very large proportion of low productivity wells late in their decline curves. The approximately 1,000 producing wells on the property do in fact average a low roughly 7.6 Boe of daily production per well. However, the ratings are supported by an improved asset mix. The acquisition intensifies SD's existing Permian oil-weighted activity in the Central Basin Platform and adds important diversification of production and reserve replacement risk to SD's asset mix. In particular, the acquisition takes some pressure off of SD's core Pinon Field program in the West Texas Overthrust Belt to drive production replacement and growth. It also boosts oil and natural gas liquids up from 17% to 26% of production. The company remains well hedged, with approximately 75% of expected 2010 production hedged at an attractive $8.90/Mcfe, protecting SD's 2010 capital program. Nevertheless, SD remains very highly leveraged and it will significantly outspend 2010 cash flow for drilling and development. Organic leverage reduction would be restricted to the degree to which production and PD reserves grow faster than debt with successful productive drilling. SD will need to begin reversing two consecutive quarters of production decline arising from curtailed 2009 drilling activity and a production bottleneck in the Pinon Field that will exist until the Century gas processing plant is completed to treat SD's CO2-laden Pinon natural gas production. Moody's estimates that the acquisition cost, loaded for future capital spending needed to bring the acquired proven undeveloped and PDNP reserves to production, equates to approximately $15/boe to $16/boe in outlays for the acquired total proven reserves. Including 75% of the preferred stock as debt, Moody's estimate pro-forma leverage of $14.98/Boe on PD reserves and an extremely high $54,555/Boe of daily production. Excluding the preferred shares from leverage, leverage on PD reserves would be approximately $13/Boe and leverage on daily production would be approximately $48,000/Boe. Leverage on PD reserves remains substantially unchanged but leverage on production increases approximately 7% over third quarter 2009 levels. Rating improvement would depend on continued cost effective drilling results, positive sequential quarter production trends roughly commensurate to the amount of capital reinvested, and substantial leverage reduction. Downside risk could result if SD's drilling programs under- perform, if SD fails to substantially reduce leverage over the course of 2010, or it otherwise materially boosts leverage in the meantime as measured on production PD and total reserves. After a sustained period of negligible reinvestment by Forest, SD believes the properties and identified drilling locations will readily respond commercially to drilling capital and a comparatively large drilling program. SD estimates that initial production per new well would average 124 Boe per day, though subsequently decline steeply by an average of 60% in the first year of production. This will require substantial sustained annual drilling on the properties to hold production steady or generate growth. The last rating action was May 11, 2009, when Moody's assigned a B3 (LGD; 75%) rating to SandRidge's senior unsecured note offering with a stable outlook. Moody's also affirmed SD's B2 Corporate Family Rating, B2 Probability of Default Rating, and B3 senior unsecured note rating. The LGD point estimates were changed to LGD5; 75% from LGD 5; 70%. SandRidge Energy, Inc., is headquartered in Oklahoma City, Oklahoma. SANDRIDGE ENERGY: S&P Raises Corporate Credit Rating to 'B+' ------------------------------------------------------------ Standard & Poor's Ratings Services said that it raised its corporate credit rating on SandRidge Energy Inc. to 'B+' from 'B'. S&P removed the ratings from CreditWatch where they were placed on Dec. 2, 2009, with positive implications, following SandRidge's announcement that it intends to purchase $800 million of oil and gas properties from Forest Oil Corp. (BB-/Stable/--). The outlook is stable. Standard & Poor's also raised its ratings on the company's existing senior unsecured notes to 'B+' (same as the corporate credit rating) from 'B-' and revised the recovery rating to '4', indicating expectation of average (30%-50%) recovery in the event of a payment default, from '5'. In addition, Standard & Poor's assigned its issue-level and recovery ratings to the company's pending $400 million senior unsecured notes issuance. The issue rating is 'B+' (the same as the corporate credit rating) and the recovery rating is '4', indicating expectation of average (30%-50%) recovery in the event of a payment default. "The two-notch upgrade in the notes reflects the raising of the corporate credit rating and the revision of the recovery rating to '4'," said Standard & Poor's credit analyst David Lundberg. "The ratings on SandRidge Energy Inc. reflect its highly leveraged financial profile and geographic concentration in the Pinon Field in West Texas, as well as S&P's expectation that near-term natural gas prices will remain weak," added Mr. Lundberg. The ratings also reflect SandRidge's competitive finding and development costs, strong hedge positions, and experienced management team. The pending acquisition improves SandRidge's business risk profile by providing the company a more balanced production mix between natural gas and liquids, as well as a new geographic operating area in the Permian Basin. The properties SandRidge will acquire contain an estimated 80 million barrel of oil equivalent (boe) of total proved reserves, of which an estimated 65% are liquids and 44% developed. Current daily production is approximately 7,600 boe. As a result of the acquisition, SandRidge expects 2010 production will increase to roughly 365 million cubic feet equivalent (mmcfe) per day from 274 mmcfe currently. Liquids are expected to constitute 27% of total production, up from 17% currently. The stable outlook balances the company's strong hedge position and improved production mix with S&P's bearish near-term outlook for natural gas prices and the company's expected cash flow deficit in 2010. A positive rating action is unlikely until S&P gain further confidence in near-term natural gas fundamentals and the company reduces leverage by at least a half a turn on an EBITDAX basis. S&P could consider a negative rating action if liquidity becomes tighter toward the end of 2010 or early 2011 as a result of weak natural gas prices combined with its aggressive capital spending plan, or if adjusted debt to EBITDAX increases above 4.5x. SEMGROUP LP: Consummates Plan, Exits Chapter 11 ----------------------------------------------- SemGroup LP implemented the Chapter 11 plan that the bankruptcy court approved in an Oct. 28 confirmation order. The Plan, which distributes more than $2.5 billion in value to its stakeholders, was declared effective November 30. The Plan is supported by access to a $500 million exit financing facility. Distributions to creditors will begin immediately. Creditors will receive distributions in the form of cash, common stock and common stock warrants, as well as interests in a Litigation Trust. SemGroup expects its common stock to begin trading on a National Security Exchange by mid-2010. "While the restructuring was a challenging process, we are truly proud of the results. We are implementing a plan that was overwhelmingly supported by our creditors and that provides SemGroup with the liquidity and financial flexibility needed to compete in the current economic environment and beyond," said Norm Szydlowski, the company's president and chief executive officer. "We are emerging from Chapter 11 restructuring with all of our major businesses intact," Szydlowski said. "This will ensure the company remains a leader in the processing, transporting, terminalling and storing of energy." About SemGroup LP SemGroup, L.P. -- http://www.semgrouplp.com/-- is a midstream service company that provides diversified services for end users and consumers of crude oil, natural gas, natural gas liquids and refined products. Services include purchasing, selling, processing, transporting, terminalling and storing energy. SemGroup serves customers in the United States, Canada, Mexico and Wales. SemGroup L.P. and its debtor-affiliates filed for Chapter 11 protection on July 22, 2008 (Bankr. D. Del. Lead Case No. 08-11525). 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, represent the Debtors in their restructuring efforts. 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., is the appointed monitor of SemCanada Crude Company and its affiliates' reorganization proceedings before the Canadian Companies' Creditors Arrangement Act. The CCAA stay expires on November 21, 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. SemGroup, LP, has won confirmation from the U.S. Bankruptcy Court of its Fourth Amended Plan of Reorganization on October 28, 2008. Bankruptcy Creditors' Service, Inc., publishes SemGroup Bankruptcy News. The newsletter tracks the Chapter 11 proceedings undertaken by SemGroup L.P. and its various affiliates. (http://bankrupt.com/newsstand/or 215/945-700) SIX FLAGS: LACSD Wants to Compel Assumption of Contract ------------------------------------------------------- The Los Angeles County Sheriff's Department asks the Court to compel the Debtors to assume a supplemental written contract entered into between the County of Los Angeles and the Debtors. Further, LACSD asks the Court to require that the Debtors provide immediate security for payment to the LACSD for postpetition services that LACSD has provided the Debtors. Under the supplemental written contract, the LACSD provides supplemental law enforcement services at the Debtors' Magic Mountain facility located in the unincorporated community of Valencia, California. The term of the Supplemental Services Agreement is for five years, commencing December 1, 2008, through November 30, 2013, and has an estimated value of an annual sum of $758,208. Jeffrey C. Wisler, Esq., at Connolly Bove Lodge & Hutz LLP, in Wilmington, Delaware, tells the Court that services on the Supplemental Agreement are ongoing, and postpetition payments have been made to the County and are current. However, he says, since the filing of the Debtors' Chapter 11 case, the Debtors have not sought to assume the Supplemental Services Agreement and the Debtors have provided no assurance of payment in light of the prepetition amounts which remain outstanding in the amount of $328,022. The Court will convene a hearing to consider this motion on December 18, 2009. Objections, if any, will be due by December 11. About Six Flags Headquartered in New York City, Six Flags, Inc., is the world's largest regional theme park company with 20 parks across the United States, Mexico and Canada. Six Flags filed for Chapter 11 protection on June 13, 2009 (Bankr. D. Del. Lead Case No. 09-12019). Paul E. Harner, Esq., Steven T. Catlett, Esq., and Christian M. Auty, Esq., at Paul, Hastings, Janofsky & Walker LLP in Chicago, Illinois, act as the Debtors' lead counsel. Daniel J. DeFranceschi, Esq., and L. Katherine Good, Esq., at Richards, Layton & Finger, P.A., in Wilmington, Delaware, act as local counsel. Cadwalader Wickersham & Taft LLP, serves as special counsel. Houlihan Lokey Howard & Zukin Capital Inc., serves as financial advisors, while KPMG LLC acts as accountants. Kurtzman Carson Consultants LLC serves as claims and notice agent. As of March 31, 2009, Six Flags had $2,907,335,000 in total assets and $3,431,647,000 in total liabilities. Bankruptcy Creditors' Service, Inc., publishes Six Flags Bankruptcy News. The newsletter provides gavel-to-gavel coverage of the Chapter 11 proceedings undertaken by Six Flags Inc. and its various affiliates. (http://bankrupt.com/newsstand/or 215/945- 7000). SIX FLAGS: To Seal Reports on Non-Debtor Park --------------------------------------------- Six Flags Inc. and its units seek the Court's authority, pursuant to Rule 2015.3 of the Federal Rules of Bankruptcy Procedure, to file under seal Rule 2015.3 Reports for a Non-Debtor Park. Rule 2015.3 requires the Debtors to file, within five days before the first date set for the meeting of creditors under section 341 of the Bankruptcy Code and no less than every six months thereafter, Reports for "each entity that is not a publicly traded corporation or a debtor in a case under Chapter 11, and in which the estate holds a substantial or controlling interest." Rule 2015.3(c) creates a presumption that an entity of which the estate controls or owns at least 20% interest will be presumed to be an entity in which the estate has a substantial or controlling interest." Section 107(c) of the Bankruptcy Code, however, allows the Court "for cause" to protect an individual in connection with certain types of information, including any means of identification, "where disclosure of that information would create an undue risk of . . . unlawful injury to the individual or the individual's property." On September 24, 2009, the Debtors filed their Periodic Report regarding operations and profitability of entities in which the Debtors hold substantial or controlling interest. The Debtors did not include financial information regarding the Non-Debtor Park in that report. The Non-Debtor Park is located in a potentially unstable region of a foreign county. The Debtors believe that publicizing the Rule 2015.3 Reports for the Non-Debtor Park -- and making available commercial information relating to the Non-Debtor Park's employees, assets and liabilities -- would compromise personnel safety and employee well-being at the Non-Debtor Park. Moreover, the Debtors believe that given the region's instability, the financial risks that would flow from publicizing this information would significantly harm the Debtors' estates. The Debtors submit that the filing under seal of the Rule 2015.3 Reports relating to the Non-Debtor Park, which contain commercial information posing a risk of significant harm to the Non-Debtor Park, its employees and other personnel, would allay these pressing concerns, and that the filing of these reports under seal is necessary and appropriate in these circumstances. If the Debtors' request to file under seal is granted, the Debtors propose to provide unredacted copies of the Rule 2015.3 Reports for the Non-Debtor Park to the Receiving Parties, subject to their agreement to keep the Rule 2015.3 Reports confidential. The Court will convene a hearing to consider this motion on December 18, 2009, at 2:00 p.m., Eastern Standard Time. Objections will be due by December 8. About Six Flags Headquartered in New York City, Six Flags, Inc., is the world's largest regional theme park company with 20 parks across the United States, Mexico and Canada. Six Flags filed for Chapter 11 protection on June 13, 2009 (Bankr. D. Del. Lead Case No. 09-12019). Paul E. Harner, Esq., Steven T. Catlett, Esq., and Christian M. Auty, Esq., at Paul, Hastings, Janofsky & Walker LLP in Chicago, Illinois, act as the Debtors' lead counsel. Daniel J. DeFranceschi, Esq., and L. Katherine Good, Esq., at Richards, Layton & Finger, P.A., in Wilmington, Delaware, act as local counsel. Cadwalader Wickersham & Taft LLP, serves as special counsel. Houlihan Lokey Howard & Zukin Capital Inc., serves as financial advisors, while KPMG LLC acts as accountants. Kurtzman Carson Consultants LLC serves as claims and notice agent. As of March 31, 2009, Six Flags had $2,907,335,000 in total assets and $3,431,647,000 in total liabilities. Bankruptcy Creditors' Service, Inc., publishes Six Flags Bankruptcy News. The newsletter provides gavel-to-gavel coverage of the Chapter 11 proceedings undertaken by Six Flags Inc. and its various affiliates. (http://bankrupt.com/newsstand/or 215/945- 7000). SIX FLAGS: Wants to Seal Exit Financing Fee Letters --------------------------------------------------- Six Flags Inc. and its units seek the Court's authority to file under seal confidential fee letters between the Debtors and (i) J.P. Morgan Securities, Inc./JPMorgan Chase Bank, N.A., Bank of America Securities LLC/Bank of America, N.A., Barclays Capital,, and Deutsche Bank Securities Inc./Deutsche Bank Trust Company Americas; and (ii) TW-SF LLC, an affiliate of Time-Warner, Inc. Further, the Debtors ask the Court to direct that the Fee Letters remain confidential and under seal, except for the Court, the Office of the U.S. Trustee for the District of Delaware, and those parties-in-interest provided with a hard-copy of the Fee Letters at the December 4, 2009, Disclosure Statement Hearing. Daniel J. DeFrancheschi, Esq., at Richards, Layton & Finger, P.A., in Wilmington, Delaware, says the Fee Letters contain confidential commercial information regarding payments to be made by the Debtors to their Lenders in connection with the Debtors' proposed exit financing in these Chapter 11 Cases. Moreover, the Fee Letters contain explicit, bargained-for confidentiality provisions that recognize the significance of protecting their contents from disclosure to any other party, with certain narrowly-circumscribed exceptions. About Six Flags Headquartered in New York City, Six Flags, Inc., is the world's largest regional theme park company with 20 parks across the United States, Mexico and Canada. Six Flags filed for Chapter 11 protection on June 13, 2009 (Bankr. D. Del. Lead Case No. 09-12019). Paul E. Harner, Esq., Steven T. Catlett, Esq., and Christian M. Auty, Esq., at Paul, Hastings, Janofsky & Walker LLP in Chicago, Illinois, act as the Debtors' lead counsel. Daniel J. DeFranceschi, Esq., and L. Katherine Good, Esq., at Richards, Layton & Finger, P.A., in Wilmington, Delaware, act as local counsel. Cadwalader Wickersham & Taft LLP, serves as special counsel. Houlihan Lokey Howard & Zukin Capital Inc., serves as financial advisors, while KPMG LLC acts as accountants. Kurtzman Carson Consultants LLC serves as claims and notice agent. As of March 31, 2009, Six Flags had $2,907,335,000 in total assets and $3,431,647,000 in total liabilities. Bankruptcy Creditors' Service, Inc., publishes Six Flags Bankruptcy News. The newsletter provides gavel-to-gavel coverage of the Chapter 11 proceedings undertaken by Six Flags Inc. and its various affiliates. (http://bankrupt.com/newsstand/or 215/945- 7000). SMURFIT-STONE: PwC Charges $2.3 Mil. for Feb. to June Work ---------------------------------------------------------- These professionals sought and obtained approval of their quarterly applications for payment of fees and reimbursement of expenses incurred from February to June 2009: Professional Fees Expenses ------------ ---- -------- PricewaterhouseCoopers LLP 2,316,009 192,488 Sidley Austin LLP 1,462,929 32,252 Ernst & Young LLP 792,901 22,965 FTI Consulting, Inc. 775,000 21,027 Kramer Levin Naftalis & 712,844 29,907 Frankel LLP Houlihan Lokey Howard & 600,000 46,081 Zukin Capital, Inc. Studley, Inc. 516,265 413,012 Lazard Freres & Co. LLC 500,000 6,756 Armstrong & Teasdale LLP 354,589 28,490 Bennett Jones LLP 164,459 39,479 Young Conaway Stargatt & 98,843 15,070 Taylor LLP Pachulski Stang Ziehl 34,244 9,447 & Jones LLP 26,493 7,290 Warren H. Smith & Associates 494 0 P.C. About Smurfit-Stone Smurfit-Stone Container Corp. -- http://www.smurfit-stone.com/-- is one of the leading integrated manufacturers of paperboard and paper-based packaging in North America and one of the world's largest paper recyclers. The Company operates 162 manufacturing facilities that are primarily located in the United States and Canada. The Company also owns roughly one million acres of timberland in Canada and operates wood harvesting facilities in Canada and the United States. The Company employs roughly 21,250 employees, 17,400 of which are based in the United States. For the quarterly period ended September 30, 2008, the Company reported roughly $7.450 billion in total assets and $5.582 billion in total liabilities on a consolidated basis. Smurfit-Stone and its U.S. and Canadian subsidiaries filed for Chapter 11 protection on January 26, 2009 (Bankr. D. Del. Lead Case No. 09-10235). Certain of the company's affiliates, including Smurfit-Stone Container Canada Inc., a wholly owned subsidiary of SSCE, and certain of its affiliates, filed to reorganize under the Companies' Creditors Arrangement Act in the Ontario Superior Court of Justice in Canada. Smurfit-Stone joined pulp- and paper-related bankruptcies as rising Internet use hurts magazines and newspapers. Corporacion Durango SAB, Mexico's largest papermaker, sought U.S. bankruptcy in October. Quebecor World Inc., a magazine printer and Pope & Talbot Inc., a pulp-mill operator, also sought cross-border bankruptcies for their operations in the U.S. and Canada. James F. Conlan, Esq., Matthew A. Clemente, Esq., Dennis M. Twomey, Esq., and Bojan Guzina, Esq., at Sidley Austin LLP, in Chicago, Illinois; and Robert S. Brady, Esq., and Edmon L. Morton, Esq., at Young Conaway Stargatt & Taylor in Wilmington, Delaware, serve as the Debtors' bankruptcy counsel. PricewaterhouseCooper LLC, serves as the Debtors' financial and investment consultants. Lazard Freres & Co. LLC acts as the Debtors' investment bankers. Epiq Bankruptcy Solutions LLC acts as the Debtors' notice and claims agent. Bankruptcy Creditors' Service, Inc., publishes Smurfit-Stone Bankruptcy News. The newsletter tracks the Chapter 11 proceeding and ancillary foreign proceedings undertaken by Smurfit-Stone Container Corp. and its various affiliates. (http://bankrupt.com/newsstand/or 215/945-7000) SMURFIT-STONE: M. Jackson Disposed of 19,800 Shares of Stock ------------------------------------------------------------ In separate Form 4 filings with the United States Securities and Exchange Commission made from November 16 to December 2, 2009, these officers of Smurfit-Stone Container Corporation reported that on these dates, they disposed shares of SSCC common stock in different transactions: Ownership Shares After Name/Position Disposed Price Transaction Date ------------- -------- ----- ----------- ---- Jackson, Mack C. III 19,816 $0.51 500 11/13/09 SrVP & GM Containerboard Mills Neumann, Susan 7,500 0.49 0 11/16/09 SrVP Corp. Communications O'Connor, James J. 750 0.48 2,524 11/30/09 Director About Smurfit-Stone Smurfit-Stone Container Corp. -- http://www.smurfit-stone.com/-- is one of the leading integrated manufacturers of paperboard and paper-based packaging in North America and one of the world's largest paper recyclers. The Company operates 162 manufacturing facilities that are primarily located in the United States and Canada. The Company also owns roughly one million acres of timberland in Canada and operates wood harvesting facilities in Canada and the United States. The Company employs roughly 21,250 employees, 17,400 of which are based in the United States. For the quarterly period ended September 30, 2008, the Company reported roughly $7.450 billion in total assets and $5.582 billion in total liabilities on a consolidated basis. Smurfit-Stone and its U.S. and Canadian subsidiaries filed for Chapter 11 protection on January 26, 2009 (Bankr. D. Del. Lead Case No. 09-10235). Certain of the company's affiliates, including Smurfit-Stone Container Canada Inc., a wholly owned subsidiary of SSCE, and certain of its affiliates, filed to reorganize under the Companies' Creditors Arrangement Act in the Ontario Superior Court of Justice in Canada. Smurfit-Stone joined pulp- and paper-related bankruptcies as rising Internet use hurts magazines and newspapers. Corporacion Durango SAB, Mexico's largest papermaker, sought U.S. bankruptcy in October. Quebecor World Inc., a magazine printer and Pope & Talbot Inc., a pulp-mill operator, also sought cross-border bankruptcies for their operations in the U.S. and Canada. James F. Conlan, Esq., Matthew A. Clemente, Esq., Dennis M. Twomey, Esq., and Bojan Guzina, Esq., at Sidley Austin LLP, in Chicago, Illinois; and Robert S. Brady, Esq., and Edmon L. Morton, Esq., at Young Conaway Stargatt & Taylor in Wilmington, Delaware, serve as the Debtors' bankruptcy counsel. PricewaterhouseCooper LLC, serves as the Debtors' financial and investment consultants. Lazard Freres & Co. LLC acts as the Debtors' investment bankers. Epiq Bankruptcy Solutions LLC acts as the Debtors' notice and claims agent. Bankruptcy Creditors' Service, Inc., publishes Smurfit-Stone Bankruptcy News. The newsletter tracks the Chapter 11 proceeding and ancillary foreign proceedings undertaken by Smurfit-Stone Container Corp. and its various affiliates. (http://bankrupt.com/newsstand/or 215/945-7000) SMURFIT-STONE: Monitor Supports Edmonton Sale --------------------------------------------- Deloitte & Touche, Inc., the monitor in the proceedings under the Companies' Creditors Arrangement Act commenced by Smurfit-Stone Container Canada, Inc., et al., delivered its ninth monitor report to the Superior Court of Justice (Commercial List) for the Province of Ontario, in Canada. The Monitor informs the Court that the purpose of the Ninth Report is to provide the Court with an overview of the proposed sale by MBI Limited/Limitee, as general partner of Smurfit MBI, of: * the Edmonton container plant property, located at 8705-24 Street, Edmonton, Alberta to General Realty Group Ltd. or its nominee, and * an industrial building located at 220 Water Street, Whitby, Ontario to Andreas Apostolopoulos, in trust for a company to be formed or an existing corporation and without personal liability, and to provide the Monitor's recommendation. General Realty executed an offer to purchase the Edmonton Property for $4.5 million, subject to certain adjustments. General Realty has provided a $500,000 deposit, which will be paid to MBI Limited/Limitee in the event the transactions contemplated by the Offer to Purchase do not close as a result of a breach of the Offer to Purchase by General Realty. The purchase price payable for the Whitby Facility is $2,150,000, subject to certain adjustments. Mr. Apostolopoulos has provided a deposit of $50,000 and is to provide a second $50,000 deposit upon the satisfaction or waiver of certain conditions. The Deposits will be paid to MBI Limited/Limitee in the event the transactions contemplated by the Agreement of Purchase and Sale do not close due to the default of Mr. Apostolopoulos. The forecasted net sale proceeds are approximately $4.1 million for the Edmonton Facility and $1.7 million for the Whitby Facility. The Monitor discloses that the proceeds of both Sales will be applied to SSC Canada's outstanding obligations under the DIP Facility -- which is presently approximately $7.2 million -- to the extent any obligations remain outstanding. The balance of any sale proceeds will go into SSC Canada's general operating account. The Monitor submits that using the net sale proceeds from the transactions to pay down the DIP Facility is a prudent use of the funds by the CCAA Entities. A full-text copy of the Monitor's 9th Report is available for free at http://bankrupt.com/misc/SSC9thMonRep.pdf About Smurfit-Stone Smurfit-Stone Container Corp. -- http://www.smurfit-stone.com/-- is one of the leading integrated manufacturers of paperboard and paper-based packaging in North America and one of the world's largest paper recyclers. The Company operates 162 manufacturing facilities that are primarily located in the United States and Canada. The Company also owns roughly one million acres of timberland in Canada and operates wood harvesting facilities in Canada and the United States. The Company employs roughly 21,250 employees, 17,400 of which are based in the United States. For the quarterly period ended September 30, 2008, the Company reported roughly $7.450 billion in total assets and $5.582 billion in total liabilities on a consolidated basis. Smurfit-Stone and its U.S. and Canadian subsidiaries filed for Chapter 11 protection on January 26, 2009 (Bankr. D. Del. Lead Case No. 09-10235). Certain of the company's affiliates, including Smurfit-Stone Container Canada Inc., a wholly owned subsidiary of SSCE, and certain of its affiliates, filed to reorganize under the Companies' Creditors Arrangement Act in the Ontario Superior Court of Justice in Canada. Smurfit-Stone joined pulp- and paper-related bankruptcies as rising Internet use hurts magazines and newspapers. Corporacion Durango SAB, Mexico's largest papermaker, sought U.S. bankruptcy in October. Quebecor World Inc., a magazine printer and Pope & Talbot Inc., a pulp-mill operator, also sought cross-border bankruptcies for their operations in the U.S. and Canada. James F. Conlan, Esq., Matthew A. Clemente, Esq., Dennis M. Twomey, Esq., and Bojan Guzina, Esq., at Sidley Austin LLP, in Chicago, Illinois; and Robert S. Brady, Esq., and Edmon L. Morton, Esq., at Young Conaway Stargatt & Taylor in Wilmington, Delaware, serve as the Debtors' bankruptcy counsel. PricewaterhouseCooper LLC, serves as the Debtors' financial and investment consultants. Lazard Freres & Co. LLC acts as the Debtors' investment bankers. Epiq Bankruptcy Solutions LLC acts as the Debtors' notice and claims agent. Bankruptcy Creditors' Service, Inc., publishes Smurfit-Stone Bankruptcy News. The newsletter tracks the Chapter 11 proceeding and ancillary foreign proceedings undertaken by Smurfit-Stone Container Corp. and its various affiliates. (http://bankrupt.com/newsstand/or 215/945-7000) SMURFIT-STONE: Claims Up from 40s to 60s in November Trading ------------------------------------------------------------ Bill Rochelle at Bloomberg News, citing reports filed with the bankruptcy court, says that during November, 902 claims were traded. The aggregate face amount of the claims was $418 million. Unsecured claims against Smurfit-Stone Container Corp. have risen in the secondary market from the low 40% range to the low to mid 60% in the last four to six weeks, according to SecondMarket Inc., which describes itself as the largest secondary market for illiquid assets. About Smurfit-Stone Smurfit-Stone Container Corp. -- http://www.smurfit-stone.com/-- is one of the leading integrated manufacturers of paperboard and paper-based packaging in North America and one of the world's largest paper recyclers. The Company operates 162 manufacturing facilities that are primarily located in the United States and Canada. The Company also owns roughly one million acres of timberland in Canada and operates wood harvesting facilities in Canada and the United States. The Company employs roughly 21,250 employees, 17,400 of which are based in the United States. For the quarterly period ended September 30, 2008, the Company reported roughly $7.450 billion in total assets and $5.582 billion in total liabilities on a consolidated basis. Smurfit-Stone and its U.S. and Canadian subsidiaries filed for Chapter 11 protection on January 26, 2009 (Bankr. D. Del. Lead Case No. 09-10235). Certain of the company's affiliates, including Smurfit-Stone Container Canada Inc., a wholly owned subsidiary of SSCE, and certain of its affiliates, filed to reorganize under the Companies' Creditors Arrangement Act in the Ontario Superior Court of Justice in Canada. Smurfit-Stone joined pulp- and paper-related bankruptcies as rising Internet use hurts magazines and newspapers. Corporacion Durango SAB, Mexico's largest papermaker, sought U.S. bankruptcy in October. Quebecor World Inc., a magazine printer and Pope & Talbot Inc., a pulp-mill operator, also sought cross-border bankruptcies for their operations in the U.S. and Canada. James F. Conlan, Esq., Matthew A. Clemente, Esq., Dennis M. Twomey, Esq., and Bojan Guzina, Esq., at Sidley Austin LLP, in Chicago, Illinois; and Robert S. Brady, Esq., and Edmon L. Morton, Esq., at Young Conaway Stargatt & Taylor in Wilmington, Delaware, serve as the Debtors' bankruptcy counsel. PricewaterhouseCooper LLC, serves as the Debtors' financial and investment consultants. Lazard Freres & Co. LLC acts as the Debtors' investment bankers. Epiq Bankruptcy Solutions LLC acts as the Debtors' notice and claims agent. Bankruptcy Creditors' Service, Inc., publishes Smurfit-Stone Bankruptcy News. The newsletter tracks the Chapter 11 proceeding and ancillary foreign proceedings undertaken by Smurfit-Stone Container Corp. and its various affiliates. (http://bankrupt.com/newsstand/or 215/945-7000) SPANSION INC: Creditors Aim To File Own Ch. 11 Plan --------------------------------------------------- Law360 reports that the unsecured creditors of Spansion Inc. on Wednesday asked to be allowed to file a rival Chapter 11 plan for the flash memory chip maker, arguing that an amended restructuring plan filed by Spansion, with the consent of a consortium of convertible debt holders, is an attempt to punish the unsecured creditors. Spansion Inc. (NASDAQ: SPSN) -- http://www.spansion.com/-- is a Flash memory solutions provider, dedicated to enabling, storing and protecting digital content in wireless, automotive, networking and consumer electronics applications. Spansion, previously a joint venture of AMD and Fujitsu, is the largest company in the world dedicated exclusively to designing, developing, manufacturing, marketing, selling and licensing Flash memory solutions. Spansion Inc., Spansion LLC, Spansion Technology LLC, Spansion International, Inc., and Cerium Laboratories LLC filed voluntary petitions for Chapter 11 on March 1, 2009 (Bankr. D. Del. Lead Case No. 09-10690). On February 9, 2009, Spansion's Japanese subsidiary, Spansion Japan Ltd., voluntarily entered into a proceeding under the Corporate Reorganization Law (Kaisha Kosei Ho) of Japan to obtain protection from its creditors as part of the company's restructuring efforts. None of Spansion's subsidiaries in countries other than the United States and Japan are included in the U.S. or Japan filings. Michael S. Lurey, Esq., Gregory O. Lunt, Esq., and Kimberly A. Posin, Esq., at Latham & Watkins LLP, have been tapped as bankruptcy counsel. Michael R. Lastowski, Esq., at Duane Morris LLP, is the Delaware counsel. Epiq Bankruptcy Solutions LLC, is the claims agent. The United States Trustee has appointed an official committee of unsecured creditors in the case. As of September 30, 2008, Spansion disclosed total assets of US$3,840,000,000, and total debts of US$2,398,000,000. Spansion Japan Ltd. filed a Chapter 15 petition on April 30, 2009 (Bankr. D. Del. Case No. 09-11480). The Chapter 15 Petitioner's counsel is Gregory Alan Taylor, Esq., at Ashby & Geddes. It said that Spansion Japan had US$10 million to US$50 million in assets and US$50 million to US$100 million in debts. Bankruptcy Creditors' Service, Inc., publishes Spansion Bankruptcy News. The newsletter tracks the Chapter 11 proceeding undertaken by Spansion Inc. and its affiliates (http://bankrupt.com/newsstand/or 215/945-7000) SPRINT NEXTEL: Directly Owns 48,924,061 iPCS Common Shares ---------------------------------------------------------- Sprint Nextel Corp. has filed an initial statement of beneficial ownership of common shares in iPCS, Inc., on Form 3 with the Securities and Exchange Commission. Pursuant to an agreement and plan of merger, dated as of October 18, 2009, by and among iPCS, Inc., Sprint Nextel Corporation, and Ireland Acquisition Corporation, a wholly-owned subsidiary of Sprint Nextel, Ireland Acquisition commenced a tender offer to purchase all of the issued and outstanding shares of common stock, par value $0.01 per share, of iPCS, for $24.00 per share, net to the seller in cash, without interest and less any applicable withholding taxes, upon the terms and subject to the conditions set forth in the Offer to Purchase dated October 28, 2009, and in the related letter of transmittal. As a result of the merger, the separate corporate existence of the Ireland Acquisition ceased and the iPCS continues as the surviving corporation of the merger and a wholly-owned subsidiary of Sprint Nextel. Sprint Nextel discloses that it acquired all of the shares not previously tendered pursuant to the offer at the offer price. As a result it now directly owns 48,924,061 shares of common stock of iPCS, par value $0.01 per share. About iPCS, Inc. Schaumburg, Illinois-based iPCS, Inc. (NASDAQ: IPCS) - http://ipcswirelessinc.com/-- through its operating subsidiaries, is a Sprint PCS Affiliate of Sprint Nextel Corporation with the exclusive right to sell wireless mobility communications network products and services under the Sprint brand in 81 markets including markets in Illinois, Michigan, Pennsylvania, Indiana, Iowa, Ohio and Tennessee. The territory includes key markets such as Grand Rapids (MI), Fort Wayne (IN), the Tri-Cities region of Tennessee (Johnson City, Kingsport and Bristol), Scranton (PA), Saginaw-Bay City (MI), Central Illinois (Peoria, Springfield, Decatur, and Champaign) and the Quad Cities region of Illinois and Iowa (Bettendorf and Davenport, IA, and Moline and Rock Island, IL). As of September 30, 2009, iPCS' licensed territory had a total population of approximately 15.1 million residents, of which its wireless network covered approximately 12.7 million residents, and iPCS had approximately 720,100 subscribers. At September 30, 2009, iPCS, Inc.'s consolidated balance sheets showed $559.2 million in total assets and $592.2 million in total liabilities, resulting in a $33.0 million shareholders' deficit. In October 2009, Standard & Poor's Ratings Services placed iPCS Inc., including its 'B' corporate credit rating, on CreditWatch with positive implications following an agreement to be merged with Sprint Nextel (BB/Negative/--). Moody's Investors Service affirmed iPCS, Inc.'s B3 corporate family and probability of default ratings, B1 rating of the Company's 1st lien notes and the Caa1 rating of 2nd lien notes. About Sprint Nextel Overland Park, Kansas-based Sprint Nextel Corporation -- http://www.sprint.com/-- offers a comprehensive range of wireless and wireline communications services bringing the freedom of mobility to consumers, businesses and government users. Sprint Nextel is widely recognized for developing, engineering and deploying innovative technologies, including two wireless networks serving more than 48 million customers at the end of the third quarter of 2009 and the first and only 4G service from a national carrier in the United States; industry-leading mobile data services; instant national and international push-to-talk capabilities; and a global Tier 1 Internet backbone. As of September 30, 2009, the company had $55.648 billion in total assets against $37.414 billion in total liabilities. As of September 30, 2009, the company had $5.9 billion in cash, cash equivalents and short-term investments and $1.6 billion in borrowing capacity available under its revolving bank credit facility, for total liquidity of $7.5 billion. * * * Sprint Nextel carries Moody's Investors Service's Ba1 corporate family rating. Standard & Poor's Ratings Services said its rating on Sprint Nextel (BB/Negative/--) is not affected by the company's definitive agreement to acquire iPCS Inc. SPX CORPORATION: Fitch Says Rating Trends Stable ------------------------------------------------ According to Fitch Ratings, the number of negative rating actions for the U.S. Diversified Industrials sector is likely to be much lower in 2010 than in 2009 as rating trends are expected to stabilize. A return to economic growth across many regions, the gradual completion of restructuring and downsizing programs, focus by issuers on stronger balance sheets, and a more stable operating environment compared to the early phase of the global recession will all contribute to more stability next year. The pace of ratings downgrades in the broader U.S. corporate bond market slowed materially in the third quarter of 2009, which would be consistent with expectations for a slowly improving global economy and better performance by most companies in the diversified industrial sector. 'Currently, Negative Rating Outlooks among diversified companies rated by Fitch significantly outnumber Positive Outlooks, but as issuers repair their credit profiles, Negative Outlooks could be revised to Stable and upgrades could increase,' said Eric Ause, Senior Director at Fitch. 'Positive rating actions would be expected to occur late in the credit cycle, possibly after 2010 as a return to stronger credit metrics may be slower than usual, which reflects the severity of the recent recession, simultaneous stresses in the credit markets that have pressured liquidity, and the potentially anemic pace of an economic rebound.' Issuers Expected to Rebuild Balance Sheets in 2010: Entering 2010, leverage is at relatively high levels for many diversified companies. Higher-than-normal leverage is not unusual at this stage of the credit cycle and is due largely to lower operating results. When operating results eventually improve, leverage can also be expected to improve. However, the recovery is anticipated to be slow which could hinder a return to lower leverage. This concern is partly mitigated by a trend towards managing balance sheets more conservatively in response to difficult capital markets and the evident value of liquidity. Several diversified companies issued meaningful amounts of equity in the first nine months of 2009 (GE, JCI, KMT, TXT), not including ETN which issued equity in 2008, and two issuers (GE, TXT) cut their dividends. Acquisition activity has been quiet but could increase in 2010, reflecting recent increases in valuations. Rebound in Operating Performance Expected to be Slow: Sales in 2010 for U.S. diversified companies are expected to improve slowly from trough levels reported during 2009, but the recovery from the recent recession could be fitful. Fitch anticipates that a full recovery will not occur until late-cycle sectors of the economy begin to revive, possibly as late as 2011. Underpinning Fitch's Diversified outlook is the firm's most recent global economic outlook, which as of October 2009 calls for global GDP to shrink 2.8% in 2009, the first time annual growth has been negative since WWII, followed by expected global growth recovery to 2% in 2010 and 2.7% in 2011. In the major advanced economies (MAEs) where diversified companies still conduct the bulk of their business, GDP is forecast to decline 3.7% in 2009 and return to a tepid growth rate of 1.2% in 2010. Fitch expects GDP to grow 6.5% in the BRIC countries (Brazil, Russia, India, China) in 2010. Although global GDP looks set to return to positive growth, the absolute level of GDP is low, and it is possible that in the U.S. GDP may not return to the 2008 level until 2011. Mixed Revenue Outlook: Diversified companies typically are composed of a mix of early-, mid- and late-cycle businesses. They also sell into diverse geographic end-markets. As a result, the pace at which sales recover will vary by issuer depending on each issuer's customer base. On a sequential basis, demand generally stopped falling by the third quarter of 2009. In many late-cycle markets, orders have stopped falling, although actual sales could decline for another quarter or two. Most issuers remain cautious about predicting the strength and timing of a rebound in sales. Normal economic signals are obscured by several factors: 1) inventory destocking earlier in 2009, followed by re-stocking which would represent a non-recurring boost to sales, 2) the U.S. cash-for- clunkers program that accelerated the replacement of older vehicles in the automotive sector, and 3) stimulus spending in China and cash-for-clunkers programs in Europe. Late-cycle businesses such as non-residential construction will remain weak well into 2010, offsetting improvements in early cycle businesses. In the aerospace sector, Fitch expects large commercial aircraft deliveries by Boeing and Airbus to decline approximately 5% (excluding potential 787 deliveries) from 2009, but there is a risk of additional production cuts, especially in 2011. However, high backlogs at Boeing and Airbus should buffer the expected decline. The aerospace aftermarket could show some improvement in late 2010 after declining sharply in 2009 due to a reduction in the number of flights and the cannibalization of parked planes by the airlines. Business jet deliveries appear likely to decline further in 2010 following a very weak year in 2009. Fitch expects business jet deliveries for all of 2009 to fall 35-40% from a cyclical peak in 2008, and a peak to trough decline of 50% would not be unrealistic. Diversified companies with material exposure to aerospace include GE, ETN, HON, TXT and UTX. Non-residential construction is expected to fall 12% in 2010 following a 16% decline in 2009 according to the American Institute of Architects' most recent Consensus Construction Forecast. It is possible that conditions could be weak well beyond 2010, depending on trends in vacancy rates and the availability of financing. Most diversified companies have some exposure to non-residential construction through electrical products (CBE, HUBB, ETN, TNB), controls and systems (HON, JCI), elevators (UTX), scaffolding (HSC) and a wide variety of other products and services. Some non-residential markets will benefit from expected spending related to stimulus and energy conservation projects, particularly institutional buildings for which the outlook is not as negative as it is for office, retail and industrial buildings. The U.S. market is expected to fare worse than other regions around the globe. Europe is also weak. Developing markets have largely performed better than developed markets and should return to normal growth more quickly. As the U.S. represents a large share of total non-residential construction, a protracted downturn in non-residential construction will temper the impact of improving results in other parts of the economy. Residential construction also is a significant market for diversified companies. The sector has shrunk so much over the past few years that there is not much downside risk. On the other hand, it is not clear how quickly the sector will recover given the large inventory of homes, a lack of liquidity affecting private financing, and declining valuations that leave many homeowners with negative equity. The outlook is more positive for shorter-cycle, consumption oriented businesses (services and parts) that should benefit from a resumption of stable economic activity. However, absolute sales levels are currently low and growth seems likely to be tepid as there are few end-markets where strong demand is expected. Sales growth could vary across sectors depending on their location in the capital investment chain. Sales of longer-lived parts and equipment may only recover gradually as existing production capacity and equipment is brought to full capacity or used up. Exceptions include certain energy and infrastructure markets. These markets are less directly tied to economic cycles than to long-term demand for energy and to demographic trends that affect public funding for water and transportation projects. Margins to Benefit from Cost Controls and Stabilizing Sales: During 2010 diversified companies can be expected to rebuild margins as they complete restructuring efforts and align costs with lower sales levels. Margin performance has varied widely in 2009. Some companies (UTX, TNB, FLS) reacted early or were able to take advantage of a variable cost structure to limit margin declines. In other cases, orders and sales dropped sharply, particularly in short-cycle businesses, contributing to temporary quarterly losses (KMT, ETN, JCI). Profitability typically was restored by the third quarter of 2009 when sales stopped falling at the rapid pace that occurred in the first half of the year. Although conditions should be more stable in 2010 than during 2009, demand remains weak and diversified companies will be challenged to balance the risk of excess capacity with the possible loss of market share when demand eventually improves. In late-cycle businesses, margins could remain under pressure well into 2010 until the recession runs its course. This concern is mitigated by a long order cycle, relative to short-cycle businesses, that helps smooth out production and reduce sales volatility. Cancellations by customers remain a risk, however, as does the availability of financing that often is an important factor in long-cycle projects. Government stimulus spending may limit these risks depending on where and when it is used. Other items could also affect margins in 2010. Raw material costs have fallen dramatically since peaking in 2008. However, some costs, such as oil and copper, have subsequently rebounded, highlighting volatility as an ongoing risk. In the near term, a weak economy can be expected to keep raw material costs at moderate levels. Pricing represents another risk. To date there has been limited pricing pressure, but it could increase as old contracts run off and as diversified companies and their customers continue to adjust to a period of low demand. Finally, pension expense could increase depending on market conditions. Any cash impact on pension contributions would appear to become more significant after 2010. Restructuring to Wind Down Gradually: As restructuring is gradually completed, margins in 2010 will be supported by lower costs and the absence of restructuring charges. Any increases in volume would also support margins through better absorption. Margins in 2010 may not increase to levels seen prior to the recession, but they should improve on a sequential basis compared to cyclical lows, many of which occurred in the second quarter of 2009. Steep sales declines in the first half of 2009 depressed operating margins, sometimes causing losses in certain businesses as capacity couldn't be reduced quickly enough to offset lower volumes. Temporary cost reductions were initiated by a large number of diversified companies during 2009 to protect profits and preserve liquidity. Their eventual reversal could partly negate the positive impact of restructuring. Some temporary cost reductions have already been reversed, but others remain in place and may not be reversed until economic conditions improve further. Temporary cuts included furloughs and reductions to compensation such as bonuses and 401(k) plans. Free Cash Flow Could Decline Modestly: Fitch anticipates that cash from operating activities in the near term may be only slightly lower than historical levels, relative to income. As explained above, aggressive restructuring has enabled many diversified companies to limit margin declines to modest levels. Working capital reductions have supported cash flow during 2009 as sales have fallen. Sales growth in 2010 could reverse this trend and require cash to be invested in working capital, but amounts likely would not be large given expectations for slow economic growth. Pension liabilities continue to be a concern. Although asset returns in 2009 have been favorable, interest rates remain low and may negate a portion of asset returns when net pension liabilities are calculated at the end of 2009. In many cases, required pension contributions in 2010 may remain low, but they could increase in subsequent years unless further strong asset returns and/or an increase in the discount rate help to reduce net pension liabilities. Fitch does not expect capital expenditures to increase substantially in 2010 compared to reduced levels in 2009. The primary driver is the lack of investment opportunities related to slow growth, although some issuers in 2009 reduced capital spending in an effort to preserve liquidity in the face of difficult conditions in the debt markets. As with working capital, any benefit to free cash flow would likely be reversed once sales improve and companies look to take advantage of internal growth opportunities. Uncertain Impact of Discretionary Expenditures: Acquisitions may become more common in 2010 as visibility into end-market demand improves further. Most diversified companies continue to maintain a list of potential acquisitions and could act quickly. Acquisition activity was relatively low in 2009 due to a focus by some issuers on preserving liquidity, the related issue of limited availability or high cost of financing, the unwillingness of sellers to accept low prices, and a priority on restructuring existing operations. Share repurchases could increase in 2010 but are not likely, in Fitch's view, to be nearly as substantial as in previous years. Issuers are focused on maintaining a strong balance sheet to offset the impact of weaker earnings, a lack of confidence in the availability of financing, and uncertainty about the economy. Even UTX and SPW, which are among the more consistent companies with respect to discretionary cash deployment, have scaled back share repurchases until conditions improve. Liquidity and Financing Expected to be Manageable: Disruptions in the capital markets during the past two years have faded but could have a long tail. Government support played a major role in stabilizing the capital markets and it continues to be important. Despite investor confidence that contributed to strong market returns during 2009, it is unclear to what degree the capital markets still depend on government support or how quickly government support will be phased out. Diversified companies sell into end-markets where financing may be needed to fund projects or large equipment. If the availability of financing continues to be problematic for customers of diversified companies, future sales could be negatively affected. Among the diversified companies rated by Fitch, financing continues to be available and liquidity concerns have been addressed successfully. The only exception was TXT's drawdown of its bank facilities in February 2009 as a defensive action to protect its liquidity while it proceeds with the wind-down of non- captive financing at Textron Financial. Even so, TXT was subsequently able to issue debt and equity. Although issuers are able to access the capital markets, there are concerns about market reliability. Issuers are likely to be less sensitive to conditions in the commercial paper market in 2010 than during the past one to two, largely because they have taken a more cautious approach to managing their balance sheets in response to the previous capital market disruptions. A number of issuers paid down commercial paper balances with proceeds from long-term debt or equity, while others paid down commercial paper as a way to reduce total debt and control leverage. Due to continuing uncertainty surrounding the capital markets, issuers could continue to look for opportunities to issue debt in 2010 while interest rates are favorable. Bank financing has become more restrictive, most notably when issuers look to renew revolving credit facilities that typically represent an important source of liquidity. Previous market losses and growing delinquencies that normally accompany recessions have pressured bank to improve their capitalization and reduce their risk exposure. As a result, banks are offering less favorable terms. In most cases, revolving credits are being renewed at lower amounts, shorter terms and higher pricing. If such terms don't eventually return toward previous levels, issuers may consider increasing their reliance on long-term debt and other sources of financing. Strategic Implications: The impact of the recession on credit metrics for certain issuers (ETN, JCI, TXT) has been exacerbated by a variety of factors such as acquisitions, end-market exposure, or strategic actions. Depending on the path of the economic recovery, more time than usual may be needed to return credit metrics to normal levels at these and other issuers similarly affected. Debt reduction can be expected to be a priority. However, a long-term risk is the possibility that it may be difficult to regain stronger credit metrics while at the same time funding strategically important activities such as acquisitions. As a result, there potentially could be a trade-off, at least in the short run, between profitability and competitiveness on one hand and, on the other hand, a strong balance sheet and financial flexibility. Issuers in the Diversified Industrial Sector: Fitch-rated issuers and their current Issuer Default Ratings in the U.S. diversified industrial sector: -- Cooper Industries (CBE) ('A'; Outlook Stable) -- Dover (DOV) ('A'; Outlook Negative) -- Eaton (ETN) ('A-'; Outlook Negative) -- Flowserve (FLS) ('BB+'; Outlook Positive) -- Fluor (FLR) ('A-'; Outlook Stable) -- Harsco (HSC) ('A-'; Outlook Stable) -- Honeywell (HON)('A'; Outlook Negative) -- Hubbell (HUBB) ('A'; Outlook Stable) -- IDEX (IEX) ('BBB+'; Outlook Stable) -- ITT Corporation (ITT) ('A-'; Outlook Stable) -- Johnson Controls (JCI)('BBB'; Outlook Stable) -- Kennametal (KMT) ('BBB-'; Outlook Negative) -- Parker-Hannifin (PH) ('A'; Outlook Stable) -- Rockwell Automation (ROK) ('A'; Outlook Negative) -- SPX Corporation (SPW) ('BB+; Outlook Stable) -- Textron (TXT) ('BB+'; Outlook Negative) -- Thomas & Betts (TNB) ('BBB'; Outlook Stable) -- Tyco International Ltd. (TYC) ('BBB+'; Outlook Stable) -- United Technologies (UTX) ('A+'; Outlook Stable) STERLING MINING: Minco Silver Submits US$12.5-Mil. Offer -------------------------------------------------------- Minco Silver Corporation has made a firm offer of US$12,500,000 to acquire a 100% interest in Sterling Mining Company. On December 2, 2009, Sterling filed with the United States Bankruptcy Court in the District of Idaho a disclosure statement providing information concerning Sterling's proposed plan of reorganization indicating that Minco Silver's offer is the best offer. Pursuant to the provisions of Sterling's plan of reorganization Minco Silver will credit bid the full amount of its' secured claim estimated at USD$9,400,000, with the balance (approximately USD$3,100,000) paid in cash. Minco Silver continues to fund Sterling's expenses associated with the care and maintenance of the Sunshine Mine and all of its' administrative costs pursuant to the terms and conditions of the Court approved Supplemental Post Petition Secured Financing Agreement. The Canadian Press says Minco Silver's US$12.5 million credit bid -- comprised of a US$9.4 million secured claim and US$3.1 million cash -- surpasses the US$11.75 million offer of Alberta Star Development Corp. About Minco Silver Minco Silver Corporation is a TSX listed company focusing on the acquisition and development of silver dominant projects. The Company owns 90% interest in the world class Fuwan Silver Deposit, situated along the northeast margin of the highly prospective Fuwan Silver Belt. Minco Silver is extremely pleased with the positive results of its Bankable Feasibility Study demonstrating a robust deposit is and is working towards bringing the Fuwan Silver Deposit into production. About Sterling Mining Based in Coeur d'Alene, Idaho, Sterling Mining Company (OTCBB:SRLM and FSE:SMX) -- http://www.SterlingMining.com/-- is a mineral resource development and exploration company. The company has a long term lease on the Sunshine Mine in North Idaho's Coeur d'Alene Mining District. The Sunshine Mine is comprised of 5,930 patented and unpatented acres, and historically produced over 360 million ounces of silver from 1884 until its closure in early 2001. Sterling Mining leased the Sunshine Mine in June 2003, along with a mill, extensive mining infrastructure and equipment, a large land package, and a database encompassing a long history of exploration, development and production. As of September 30, 2008, Sterling Mining had $31.9 million in total assets, and $13.2 million in total current liabilities and $1.6 million in total long-term liabilities. In its schedules, the Debtor listed total assets of $11,706,761 and total debts of $14,159,010. Sterling Mining filed for bankruptcy protection on March 3, 2009 (Bankr. D. Idaho Case No. 09-20178). Bruce A. Anderson, Esq., at Elsaesser Jarzabek Anderson Marks Elliott & McHugh, Chartered represents the Debtor as counsel. STERLING MINING: Plan Allocates $500,000 for Unsec. Creditors ------------------------------------------------------------- Sterling Mining Company filed with the U.S. Bankruptcy Court for the District of Idaho a Chapter 11 Plan of Reorganization and the accompanying Disclosure Statement. The Debtors will begin soliciting votes on the Plan after the approval of the adequacy of the information in the Disclosure Statement. According to the Disclosure Statement, the Plan contemplates the full repayment of all secured debt of the allowed secured creditors, with interest. The Plan provides for the full payment of all administrative claims on or before the effective date. The Plan provides for the full payment of unclassified priority claims for the internal Revenue Service on or before the effective date. The Plan provides for a dividend of $500,000, more or less, to be applied pro rata to all allowed unsecured general claims. The Claims will be paid on or before the effective date, with no interest, with the balance of the claims discharged by a discharge entered in the case. All common stock interests, or other claims equity interests in Sterling will be cancelled, and the equity security holders will receive nothing through the proposed plan of reorganization. The Debtor anticipates the sale of its common stock and transfer of ownership of the company to fund the Chapter 11 plan. A full-text copy of the Disclosure Statement is available for free at http://bankrupt.com/misc/__________ A full-text copy of the Chapter 11 Plan is available for free at: http://bankrupt.com/misc/SterlingMining_Ch11Plan.pdf Based in Coeur d'Alene, Idaho, Sterling Mining Company (OTCBB:SRLM and FSE:SMX) -- http://www.SterlingMining.com/-- is a mineral resource development and exploration company. The company has a long term lease on the Sunshine Mine in North Idaho's Coeur d'Alene Mining District. The Sunshine Mine is comprised of 5,930 patented and unpatented acres, and historically produced over 360 million ounces of silver from 1884 until its closure in early 2001. Sterling Mining leased the Sunshine Mine in June 2003, along with a mill, extensive mining infrastructure and equipment, a large land package, and a database encompassing a long history of exploration, development and production. As of September 30, 2008, Sterling Mining had $31.9 million in total assets, and $13.2 million in total current liabilities and $1.6 million in total long-term liabilities. In its schedules, the Debtor listed total assets of $11,706,761 and total debts of $14,159,010. Sterling Mining filed for bankruptcy protection on March 3, 2009 (Bankr. D. Idaho Case No. 09-20178). Bruce A. Anderson, Esq., at Elsaesser Jarzabek Anderson Marks Elliott & McHugh, Chartered represents the Debtor as counsel. TAYLOR BEAN: Will County Treasurer Works to Help Homeowners ----------------------------------------------------------- The Plainfield Sun reports that Will County Treasurer Pat McGuire and his staff were helping more than 1,000 homeowners whose second-installment property taxes remain unpaid one month after Taylor, Bean & Whitaker Mortgage Corp. went bankrupt. According to The Sun, TBW had in escrow second-installment taxes on 1,737 Will County properties, and payment on 506 of them had reached the treasurer as of September 22. The Sun quoted Mr. McGuire as saying, "TBW did not call, e-mail, or mail its customers to tell them it filed Chapter 11 on August 24 and dumped their mortgages on four other companies. TBW customers who called us after we put out a press release August 28 said they hadn't known their lender went belly up. The same thing happened this week after we sent late-payment reminders." Taylor Bean & Whitaker Mortgage Corp., the 12th largest U.S. mortgage lender and servicer of loans, filed for bankruptcy protection on August 24 after being suspended from doing business with U.S. agencies and Freddie Mac, the government-supported mortgage company. Taylor has blamed probes into one of its banks for the suspensions. Taylor Bean filed for Chapter 11 on August 24 (Bankr. M.D. Fla. Case No. 09-07047). Edward J. Peterson, III, Esq., at Stichter, Riedel, Blain & Prosser, PA, in Tampa, Florida, represents the Debtor. Troutman Sanders LLP is special counsel. BMC Group Inc. serves as claims agent. Taylor Bean has more than $1 billion of both assets and liabilities, and between 1,000 and 5,000 creditors, according to the bankruptcy petition. TEXTRON INC: Fitch Says Rating Trends Stable --------------------------------------------- According to Fitch Ratings, the number of negative rating actions for the U.S. Diversified Industrials sector is likely to be much lower in 2010 than in 2009 as rating trends are expected to stabilize. A return to economic growth across many regions, the gradual completion of restructuring and downsizing programs, focus by issuers on stronger balance sheets, and a more stable operating environment compared to the early phase of the global recession will all contribute to more stability next year. The pace of ratings downgrades in the broader U.S. corporate bond market slowed materially in the third quarter of 2009, which would be consistent with expectations for a slowly improving global economy and better performance by most companies in the diversified industrial sector. 'Currently, Negative Rating Outlooks among diversified companies rated by Fitch significantly outnumber Positive Outlooks, but as issuers repair their credit profiles, Negative Outlooks could be revised to Stable and upgrades could increase,' said Eric Ause, Senior Director at Fitch. 'Positive rating actions would be expected to occur late in the credit cycle, possibly after 2010 as a return to stronger credit metrics may be slower than usual, which reflects the severity of the recent recession, simultaneous stresses in the credit markets that have pressured liquidity, and the potentially anemic pace of an economic rebound.' Issuers Expected to Rebuild Balance Sheets in 2010: Entering 2010, leverage is at relatively high levels for many diversified companies. Higher-than-normal leverage is not unusual at this stage of the credit cycle and is due largely to lower operating results. When operating results eventually improve, leverage can also be expected to improve. However, the recovery is anticipated to be slow which could hinder a return to lower leverage. This concern is partly mitigated by a trend towards managing balance sheets more conservatively in response to difficult capital markets and the evident value of liquidity. Several diversified companies issued meaningful amounts of equity in the first nine months of 2009 (GE, JCI, KMT, TXT), not including ETN which issued equity in 2008, and two issuers (GE, TXT) cut their dividends. Acquisition activity has been quiet but could increase in 2010, reflecting recent increases in valuations. Rebound in Operating Performance Expected to be Slow: Sales in 2010 for U.S. diversified companies are expected to improve slowly from trough levels reported during 2009, but the recovery from the recent recession could be fitful. Fitch anticipates that a full recovery will not occur until late-cycle sectors of the economy begin to revive, possibly as late as 2011. Underpinning Fitch's Diversified outlook is the firm's most recent global economic outlook, which as of October 2009 calls for global GDP to shrink 2.8% in 2009, the first time annual growth has been negative since WWII, followed by expected global growth recovery to 2% in 2010 and 2.7% in 2011. In the major advanced economies (MAEs) where diversified companies still conduct the bulk of their business, GDP is forecast to decline 3.7% in 2009 and return to a tepid growth rate of 1.2% in 2010. Fitch expects GDP to grow 6.5% in the BRIC countries (Brazil, Russia, India, China) in 2010. Although global GDP looks set to return to positive growth, the absolute level of GDP is low, and it is possible that in the U.S. GDP may not return to the 2008 level until 2011. Mixed Revenue Outlook: Diversified companies typically are composed of a mix of early-, mid- and late-cycle businesses. They also sell into diverse geographic end-markets. As a result, the pace at which sales recover will vary by issuer depending on each issuer's customer base. On a sequential basis, demand generally stopped falling by the third quarter of 2009. In many late-cycle markets, orders have stopped falling, although actual sales could decline for another quarter or two. Most issuers remain cautious about predicting the strength and timing of a rebound in sales. Normal economic signals are obscured by several factors: 1) inventory destocking earlier in 2009, followed by re-stocking which would represent a non-recurring boost to sales, 2) the U.S. cash-for- clunkers program that accelerated the replacement of older vehicles in the automotive sector, and 3) stimulus spending in China and cash-for-clunkers programs in Europe. Late-cycle businesses such as non-residential construction will remain weak well into 2010, offsetting improvements in early cycle businesses. In the aerospace sector, Fitch expects large commercial aircraft deliveries by Boeing and Airbus to decline approximately 5% (excluding potential 787 deliveries) from 2009, but there is a risk of additional production cuts, especially in 2011. However, high backlogs at Boeing and Airbus should buffer the expected decline. The aerospace aftermarket could show some improvement in late 2010 after declining sharply in 2009 due to a reduction in the number of flights and the cannibalization of parked planes by the airlines. Business jet deliveries appear likely to decline further in 2010 following a very weak year in 2009. Fitch expects business jet deliveries for all of 2009 to fall 35-40% from a cyclical peak in 2008, and a peak to trough decline of 50% would not be unrealistic. Diversified companies with material exposure to aerospace include GE, ETN, HON, TXT and UTX. Non-residential construction is expected to fall 12% in 2010 following a 16% decline in 2009 according to the American Institute of Architects' most recent Consensus Construction Forecast. It is possible that conditions could be weak well beyond 2010, depending on trends in vacancy rates and the availability of financing. Most diversified companies have some exposure to non-residential construction through electrical products (CBE, HUBB, ETN, TNB), controls and systems (HON, JCI), elevators (UTX), scaffolding (HSC) and a wide variety of other products and services. Some non-residential markets will benefit from expected spending related to stimulus and energy conservation projects, particularly institutional buildings for which the outlook is not as negative as it is for office, retail and industrial buildings. The U.S. market is expected to fare worse than other regions around the globe. Europe is also weak. Developing markets have largely performed better than developed markets and should return to normal growth more quickly. As the U.S. represents a large share of total non-residential construction, a protracted downturn in non-residential construction will temper the impact of improving results in other parts of the economy. Residential construction also is a significant market for diversified companies. The sector has shrunk so much over the past few years that there is not much downside risk. On the other hand, it is not clear how quickly the sector will recover given the large inventory of homes, a lack of liquidity affecting private financing, and declining valuations that leave many homeowners with negative equity. The outlook is more positive for shorter-cycle, consumption oriented businesses (services and parts) that should benefit from a resumption of stable economic activity. However, absolute sales levels are currently low and growth seems likely to be tepid as there are few end-markets where strong demand is expected. Sales growth could vary across sectors depending on their location in the capital investment chain. Sales of longer-lived parts and equipment may only recover gradually as existing production capacity and equipment is brought to full capacity or used up. Exceptions include certain energy and infrastructure markets. These markets are less directly tied to economic cycles than to long-term demand for energy and to demographic trends that affect public funding for water and transportation projects. Margins to Benefit from Cost Controls and Stabilizing Sales: During 2010 diversified companies can be expected to rebuild margins as they complete restructuring efforts and align costs with lower sales levels. Margin performance has varied widely in 2009. Some companies (UTX, TNB, FLS) reacted early or were able to take advantage of a variable cost structure to limit margin declines. In other cases, orders and sales dropped sharply, particularly in short-cycle businesses, contributing to temporary quarterly losses (KMT, ETN, JCI). Profitability typically was restored by the third quarter of 2009 when sales stopped falling at the rapid pace that occurred in the first half of the year. Although conditions should be more stable in 2010 than during 2009, demand remains weak and diversified companies will be challenged to balance the risk of excess capacity with the possible loss of market share when demand eventually improves. In late-cycle businesses, margins could remain under pressure well into 2010 until the recession runs its course. This concern is mitigated by a long order cycle, relative to short-cycle businesses, that helps smooth out production and reduce sales volatility. Cancellations by customers remain a risk, however, as does the availability of financing that often is an important factor in long-cycle projects. Government stimulus spending may limit these risks depending on where and when it is used. Other items could also affect margins in 2010. Raw material costs have fallen dramatically since peaking in 2008. However, some costs, such as oil and copper, have subsequently rebounded, highlighting volatility as an ongoing risk. In the near term, a weak economy can be expected to keep raw material costs at moderate levels. Pricing represents another risk. To date there has been limited pricing pressure, but it could increase as old contracts run off and as diversified companies and their customers continue to adjust to a period of low demand. Finally, pension expense could increase depending on market conditions. Any cash impact on pension contributions would appear to become more significant after 2010. Restructuring to Wind Down Gradually: As restructuring is gradually completed, margins in 2010 will be supported by lower costs and the absence of restructuring charges. Any increases in volume would also support margins through better absorption. Margins in 2010 may not increase to levels seen prior to the recession, but they should improve on a sequential basis compared to cyclical lows, many of which occurred in the second quarter of 2009. Steep sales declines in the first half of 2009 depressed operating margins, sometimes causing losses in certain businesses as capacity couldn't be reduced quickly enough to offset lower volumes. Temporary cost reductions were initiated by a large number of diversified companies during 2009 to protect profits and preserve liquidity. Their eventual reversal could partly negate the positive impact of restructuring. Some temporary cost reductions have already been reversed, but others remain in place and may not be reversed until economic conditions improve further. Temporary cuts included furloughs and reductions to compensation such as bonuses and 401(k) plans. Free Cash Flow Could Decline Modestly: Fitch anticipates that cash from operating activities in the near term may be only slightly lower than historical levels, relative to income. As explained above, aggressive restructuring has enabled many diversified companies to limit margin declines to modest levels. Working capital reductions have supported cash flow during 2009 as sales have fallen. Sales growth in 2010 could reverse this trend and require cash to be invested in working capital, but amounts likely would not be large given expectations for slow economic growth. Pension liabilities continue to be a concern. Although asset returns in 2009 have been favorable, interest rates remain low and may negate a portion of asset returns when net pension liabilities are calculated at the end of 2009. In many cases, required pension contributions in 2010 may remain low, but they could increase in subsequent years unless further strong asset returns and/or an increase in the discount rate help to reduce net pension liabilities. Fitch does not expect capital expenditures to increase substantially in 2010 compared to reduced levels in 2009. The primary driver is the lack of investment opportunities related to slow growth, although some issuers in 2009 reduced capital spending in an effort to preserve liquidity in the face of difficult conditions in the debt markets. As with working capital, any benefit to free cash flow would likely be reversed once sales improve and companies look to take advantage of internal growth opportunities. Uncertain Impact of Discretionary Expenditures: Acquisitions may become more common in 2010 as visibility into end-market demand improves further. Most diversified companies continue to maintain a list of potential acquisitions and could act quickly. Acquisition activity was relatively low in 2009 due to a focus by some issuers on preserving liquidity, the related issue of limited availability or high cost of financing, the unwillingness of sellers to accept low prices, and a priority on restructuring existing operations. Share repurchases could increase in 2010 but are not likely, in Fitch's view, to be nearly as substantial as in previous years. Issuers are focused on maintaining a strong balance sheet to offset the impact of weaker earnings, a lack of confidence in the availability of financing, and uncertainty about the economy. Even UTX and SPW, which are among the more consistent companies with respect to discretionary cash deployment, have scaled back share repurchases until conditions improve. Liquidity and Financing Expected to be Manageable: Disruptions in the capital markets during the past two years have faded but could have a long tail. Government support played a major role in stabilizing the capital markets and it continues to be important. Despite investor confidence that contributed to strong market returns during 2009, it is unclear to what degree the capital markets still depend on government support or how quickly government support will be phased out. Diversified companies sell into end-markets where financing may be needed to fund projects or large equipment. If the availability of financing continues to be problematic for customers of diversified companies, future sales could be negatively affected. Among the diversified companies rated by Fitch, financing continues to be available and liquidity concerns have been addressed successfully. The only exception was TXT's drawdown of its bank facilities in February 2009 as a defensive action to protect its liquidity while it proceeds with the wind-down of non- captive financing at Textron Financial. Even so, TXT was subsequently able to issue debt and equity. Although issuers are able to access the capital markets, there are concerns about market reliability. Issuers are likely to be less sensitive to conditions in the commercial paper market in 2010 than during the past one to two, largely because they have taken a more cautious approach to managing their balance sheets in response to the previous capital market disruptions. A number of issuers paid down commercial paper balances with proceeds from long-term debt or equity, while others paid down commercial paper as a way to reduce total debt and control leverage. Due to continuing uncertainty surrounding the capital markets, issuers could continue to look for opportunities to issue debt in 2010 while interest rates are favorable. Bank financing has become more restrictive, most notably when issuers look to renew revolving credit facilities that typically represent an important source of liquidity. Previous market losses and growing delinquencies that normally accompany recessions have pressured bank to improve their capitalization and reduce their risk exposure. As a result, banks are offering less favorable terms. In most cases, revolving credits are being renewed at lower amounts, shorter terms and higher pricing. If such terms don't eventually return toward previous levels, issuers may consider increasing their reliance on long-term debt and other sources of financing. Strategic Implications: The impact of the recession on credit metrics for certain issuers (ETN, JCI, TXT) has been exacerbated by a variety of factors such as acquisitions, end-market exposure, or strategic actions. Depending on the path of the economic recovery, more time than usual may be needed to return credit metrics to normal levels at these and other issuers similarly affected. Debt reduction can be expected to be a priority. However, a long-term risk is the possibility that it may be difficult to regain stronger credit metrics while at the same time funding strategically important activities such as acquisitions. As a result, there potentially could be a trade-off, at least in the short run, between profitability and competitiveness on one hand and, on the other hand, a strong balance sheet and financial flexibility. Issuers in the Diversified Industrial Sector: Fitch-rated issuers and their current Issuer Default Ratings in the U.S. diversified industrial sector: -- Cooper Industries (CBE) ('A'; Outlook Stable) -- Dover (DOV) ('A'; Outlook Negative) -- Eaton (ETN) ('A-'; Outlook Negative) -- Flowserve (FLS) ('BB+'; Outlook Positive) -- Fluor (FLR) ('A-'; Outlook Stable) -- Harsco (HSC) ('A-'; Outlook Stable) -- Honeywell (HON)('A'; Outlook Negative) -- Hubbell (HUBB) ('A'; Outlook Stable) -- IDEX (IEX) ('BBB+'; Outlook Stable) -- ITT Corporation (ITT) ('A-'; Outlook Stable) -- Johnson Controls (JCI)('BBB'; Outlook Stable) -- Kennametal (KMT) ('BBB-'; Outlook Negative) -- Parker-Hannifin (PH) ('A'; Outlook Stable) -- Rockwell Automation (ROK) ('A'; Outlook Negative) -- SPX Corporation (SPW) ('BB+; Outlook Stable) -- Textron (TXT) ('BB+'; Outlook Negative) -- Thomas & Betts (TNB) ('BBB'; Outlook Stable) -- Tyco International Ltd. (TYC) ('BBB+'; Outlook Stable) -- United Technologies (UTX) ('A+'; Outlook Stable) TEXTRON INC: Fitch Says Sector's Outlook Steady, Risks Remain ------------------------------------------------------------- Credit quality in the U.S. commercial aerospace industry will remain under pressure in 2010, while the U.S. defense sector is likely to experience more stability, according to Fitch Ratings. Fitch expects deliveries in all commercial aerospace original equipment segments to decline in 2010, but aftermarket sales should begin to improve modestly. Defense spending will continue to grow in the low single digits. 'Beyond 2010 the industry faces some key issues: likely additional production cuts at Boeing and Airbus, and possible declines in U.S. Department of Defense modernization spending,' said Craig Fraser, Managing Director at Fitch. 'Rating upgrades are unlikely in 2010, and downgrades remain a risk for some commercial aerospace companies.' Credit metrics for many A&D companies deteriorated in 2009, but they are likely to be steady in 2010. Profits and cash flows could be helped by improvement in the high-margin aftermarket, the full-year impact of 2009 cost reductions, and defense growth, but they will be held back by higher pension expense and weak commercial OE markets. Fitch says liquidity remains strong after improving in 2009 because of lower share repurchases and some opportunistic debt issuance, but the company expects cash deployment will increase during 2010, particularly for acquisitions and pension contributions. Key risks for the sector include the weak global economic recovery, exogenous shocks (terrorism, disease pandemic, etc.), large U.S. government deficits, and execution on new programs. The 787 program remains a continuing source of risk for Boeing and its suppliers. Flight hours and airline traffic have moved off of cyclical lows, but they remain at depressed levels. A general risk is that some production rates have not been revised downward materially despite the weak economy. Fitch does not expect that financing availability will be a limit on aircraft deliveries in 2010, although some concerns remain in the aircraft finance business. Longer-term, Fitch considers the commercial outlook solid because of large backlogs and the need to build aerospace infrastructure in developing regions. Commercial Aerospace: These expectations for key commercial aerospace segments are incorporated into Fitch's forecasts: -- Large Commercial Aircraft: Fitch expects LCA deliveries from Boeing and Airbus will decline approximately 5% in 2010 to 920 aircraft, with revenues down 5%-10%. These estimates incorporate the announced production cuts for the A320 family (down two aircraft per month) and B777 (down almost 30%), but they exclude possible 787 deliveries (discussed below). Fitch believes there is a strong chance of additional production cuts, but these are more likely to take place in 2011. Long manufacturing lead times, advance payment requirements, and indications of sold-out 2010 production schedules support the argument against additional cuts next year, unless they are announced in the next few months to take effect at the end of 2010. Fitch's forecasts will include additional 5%-15% cuts beginning in 2011. Fitch forecasts the additional LCA production reductions in 2011 because of a moderate global economic recovery, airline capacity reductions in 2008 and 2009, substantial airline losses, and deliveries that are exceeding typical aircraft retirements. However, the eventual production declines should be moderate relative to prior LCA cycles as a result of large backlogs, production restraint since the last downturn, some remaining overbooking in the delivery plans, and the geographic diversity of the customer base. In addition, the long-term nature of aircraft assets, as well as operating cost savings, provide incentive for customers to continue taking delivery of aircraft despite cyclically weak airline traffic. If the projected production cuts are managed with sufficient lead time, both the manufacturers and the supply base should be able to adjust their cost structures in time to prevent deterioration of their credit profiles. Fitch expects LCA orders to be low in 2010 and 2011, a continuation of the trend in 2009, in which there have been only 287 net orders through November compared to 867 deliveries during the same period. There were 142 cancellations through November, and Boeing has indicated that it had approximately 215 deferrals in the first three quarters. Low orders are not a credit concern given that Boeing and Airbus had a combined backlog of 6,849 aircraft at the end of November, equal to more than seven years of production at estimated 2010 rates. Excluding 787 and A350 backlogs, the industry still has almost six years worth of orders. Boeing's 787 program will continue to be a key concern for the LCA sector and its supply base in 2010. If Boeing meets its current schedule, Fitch estimates the company could deliver 10-15 787s in late 2010, but there is considerable risk to the schedule, including an aggressive flight testing program, certification, and the production ramp-up. Boeing will be building 787s through the flight testing program, exposing the company to the risk of reworking some aircraft if problems are discovered during the flight tests. Uncertainty over customer penalties and supplier claims add to the 787s risks. Through November, the 787 accounted for the bulk of Boeing's order cancellations (83 out of 111), although the company still has 840 firm orders for the aircraft. -- Commercial Aftermarket/Services: The commercial aftermarket will likely be the first part of the aerospace industry to recover from the downturn. Fitch forecasts aftermarket spending will be flat to up 5% in 2010, with a weak first half offset by an improved second half. The expected economic rebound should drive airline traffic growth and eventually will lead to rising flight hours and capacity, which are the primary drivers of aftermarket spending. Some inventory rebuilding and completion of deferred maintenance should also help the aftermarket recover in 2010. Business jet utilization has also been improving off of a low base, which will aid aftermarket spending in that sector. Fitch's general concern for the aftermarket is that current conditions are still very weak, with many companies reporting double digit declines year-over-year in the third quarter. Some capacity metrics are still negative despite indications of increased airline traffic. Fitch will have more conviction on the outlook for this sector once capacity starts to increase. Companies with healthy exposures to this high-margin segment include Goodrich, Honeywell, Rockwell Collins, Transdigm, and United Technologies. -- The business jet market was the worst commercial aerospace sector in 2009, suffering a rapid and severe downturn. Industry deliveries fell 38% through September, and Fitch expects a 35%-40% unit decline for the year, with revenues likely down 25%-30%. An eventual peak-to-trough unit decline of 50% or more for the industry is not out of the question, and Fitch expects aircraft deliveries to fall another 5%-10% in 2010 from 2009 levels. The large unit declines result from hundreds of order cancellations and the failure of light jet manufacturer Eclipse Aviation. Although utilization rates have started to rise and corporate profits have turned up, Fitch expects continued weakness in the sector because utilization rates are still well below peak levels and the corporate profit improvement is largely due to cost cutting. This sector will continue to be volatile because of the discretionary nature of the product, the availability of numerous substitute forms of travel, and the relationship to corporate profits. A key development in the sector in the past five years has been strong orders from outside North America, and these international orders could be the catalyst for an upturn beyond 2010. Manufacturers in this sector include Bombardier, Dassault Aviation, Embraer, General Dynamics, Hawker Beechcraft, and Textron, as well as key suppliers such as Honeywell. -- The regional aircraft market (regional jets and turboprops) has many of the same drivers as the LCA market, but it has lower backlogs. Orders so far in 2009 have been weak, and the outlook for this sector is negative for 2010. Regional jets deliveries from Bombardier and Embraer will probably fall about 15% in 2009 and at least 15% in 2010, excluding possible deliveries from new entrants in the market. Fitch estimates that turboprop deliveries from Bombardier and ATR (a joint venture between EADS and Finmeccanica) will rise modestly in 2009, but they will likely decline 5% in 2010. New entrants into the regional jet market remain an important part of the sector's outlook, and in 2010 the market will likely see the initial deliveries of Sukhoi's Superjet 100 and China's ARJ21. Defense: High U.S. DoD spending levels continue to support defense sector credit quality, and the outlook is still favorable in the near term because spending in fiscal year 2010 will continue to rise. The core DoD budget should grow approximately 4% in FY2010, and modernization spending (procurement plus R&D), the most relevant part of the budget for defense contractors, should be up 2%-3%. Fitch believes that FY2010 is probably the peak in modernization spending, and there are several risks to monitor in FY2011 and beyond. These include the Obama Administration's first full budget in FY2011, the Quadrennial Defense Review, and the large projected federal budget deficits in FY2009-FY2011. In addition to spending levels, some other changes proposed by the new administration could have a detrimental impact on defense contractors, including acquisition reform and the 'insourcing' of services previously contracted out by the DoD. Fitch believes core modernization spending could decline 1%-2% in FY2011, although the overall core budget could rise. The FY2011 budget and QDR will likely continue the changes the Obama administration introduced in the current year's budget, and Fitch is not anticipating any dramatic shifts. Fitch expects supplemental spending that supports operations in Iraq and Afghanistan will fall over the next several years, but for several reasons the decline will be gradual, and the supplemental spending will not disappear. Spending related to Iraq will be down, but spending in Afghanistan will increase. Some security spending by the U.S. in Iraq will likely be replaced by Iraqi government spending, which could continue to be a source of revenues to U.S. contractors. Finally, the DoD will need to refurbish or replace some equipment and material that is in poor condition or left in Iraq. Given the strong credit metrics and liquidity at most of the leading defense contractors, ratings in the sector are unlikely to be pressured by modest declines in modernization spending. Program execution and cash deployment probably present greater risks. Defense company backlogs fell in the first three quarters of 2009 due to some program cancellations, although orders in the fourth quarter could reverse some of the decline. Liquidity and Cash Deployment: Strong liquidity and financial flexibility helped the North American A&D industry withstand the difficult economy in 2009, and the industry even improved its liquidity position in the past 12 months, although at the expense of increasing total debt to $60 billion from $55 billion. At the end of the third quarter the top 15 A&D companies rated by Fitch in North America had $35 billion in cash compared to approximately $5 billion in current debt maturities and short-term debt. The only material credit facilities set to expire in 2010 (GD, L-3, and RTN) have already been replaced. Many companies in the sector pulled back on discretionary expenditures in 2009 (share repurchases fell $10 billion, for example) in the interests of building liquidity. With stabilization appearing in some parts of the A&D sector, Fitch expects greater cash deployment in 2010. Acquisition activity began to increase in the past quarter, and Fitch expects this will continue in 2010. Share repurchases and dividend increases will likely rise as well. Higher pension contributions will be another use of cash in 2010. The A&D sector has seven of the largest 25 pension plans in corporate America, and some are significantly underfunded. The situation is mitigated for defense contractors, which get some recovery of pension costs in government contracts. Harmonization of Cost Accounting Standards and the Pension Protection Act is something to watch during 2010. In Fitch's view, Boeing will have the most significant liquidity pressures in 2010. Delays in the 787 and 747-8 programs over the past 18 months have negatively affected Boeing's credit quality because of inventory build-up, delayed advance payments, and higher development expenses. Cash flow pressures will likely persist into 2011 due to continued inventory build-up in support of initial 787 deliveries. Although free cash flow will probably be positive in 2009, Fitch believes that break-even or negative free cash flow is possible in 2010 depending on the ultimate schedule for 787 deliveries, production rates on other aircraft models, and the company's working capital management, which has been good in 2009 considering the 787 inventory pressures and reduced advances because of lower orders. Aircraft Finance: Fitch does not expect that financing availability will be a limit on aircraft deliveries in 2010, although some concerns remain in the aircraft finance business. The aircraft finance market was not as bad as feared in 2009, and Fitch expects this trend to continue because credit markets have improved and lower forecasted aircraft deliveries will mean a lower financing requirement than in 2009. Fitch projects funding requirements will be $60-$65 billion for LCA and regional aircraft in 2010, about $5 billion lower than in 2009. An additional $10-$15 billion could be needed for business jets, also down versus 2009. Concerns in the aircraft finance market include the damaged business models of some large aircraft lessors, the exit of some banks from the market, and indications that pre-delivery payment financing was difficult for some airlines in 2009. Several factors offset these concerns, including strong support from export credit agencies, the emergence of some regional financial players in the market, better capital markets activity in the past few months, and the ability of Boeing and Airbus to provide customer financing. Fitch estimates that ECAs could support approximately 25% of LCA deliveries in 2009, illustrating the benefit the industry has received from indirect government support. It looks like Boeing and Airbus will finance less than $2 billion of new aircraft in 2009, leaving the companies with the capacity to help customers in 2010 if needed. New aircraft serve as attractive lending collateral due to the mobility of the assets, operating efficiency compared to previous aircraft generations, and unique treatment in bankruptcy in some jurisdictions. The comments above apply to new aircraft financing, not refinancings of existing debt. Fitch estimates that there will be $14 billion of maturing airline debt in the U.S. alone in 2010- 2011. Economic Assumptions: Underpinning Fitch's A&D outlook is the firm's most recent global economic outlook, which as of October 2009 calls for global GDP to shrink 2.8% in 2009, followed by global growth recovery to 2% in 2010 and 2.7% in 2011. GDP should rise, but from a low base, and expansion will be weak relative to previous recoveries. There is some uncertainty in 2011 due to likely tightening of monetary and fiscal stimulus. Fitch expects GDP to grow 6.5% in the BRIC countries (Brazil, Russia, India, China) in 2010. Although global GDP looks set to return to positive growth, the absolute level of GDP is low and, in the U.S., it is possible that GDP may not return to the 2008 level until 2011. Fitch's specific A&D assumptions include no recovery in 2010 other than early cycle parts such as aftermarket. Late cycle segments such as original equipment will continue to be weak, showing some volume declines, although nowhere near as dramatic as in 2009 or in the last downturn that began in 2001. A more detailed report on the global 2010 aerospace & defense industry outlook will be available on the Fitch Ratings Web site at 'www.fitchratings.com' in January. Fitch-rated issuers and their current Issuer Default Ratings in the North American aerospace/defense sector: -- Alliant Techsystems Inc. (ATK) ('BB'; Outlook Stable); -- Boeing Company (BA) ('A+'; Outlook Negative); -- Bombardier Inc. (BBD/B) ('BB+'; Outlook Negative); -- General Dynamics Corporation (GD) ('A'; Outlook Stable); -- Goodrich Corporation (GR) ('BBB+'; Outlook Stable); -- Honeywell International Inc. (HON) ('A'; Outlook Negative); -- ITT Corporation (ITT) ('A-'; Outlook Stable) -- L-3 Communications Corporation (LLL) ('BBB-'; Outlook Stable); -- Lockheed Martin Corporation (LMT) ('A-'; Outlook Stable); -- Northrop Grumman Corporation (NOC) ('BBB+'; Outlook Stable); -- Raytheon Company (RTN) ('A-'; Outlook Stable); -- Rockwell Collins, Inc. (COL) ('A'; Outlook Stable); -- Textron Inc. (TXT) ('BB+'; Outlook Negative); -- Transdigm Group (TDG) ('B'; Outlook Stable); -- United Technologies Corporation (UTC) ('A+'; Outlook Stable). TRADEWINDS AIRLINES: Not in Default on $30MM Loan, Court Ruled -------------------------------------------------------------- Jennifer Dixon at Detroit Free Press reports that U.S. District Judge Victoria Roberts rejected a request by Detroit's two public pensions to declare TradeWinds Airlines in default on a $30 million investment, ruling that the dispute should go to trial. Free Press relates that the pensions had asked Judge Roberts to find Donald V. Watkins in default on a $30 million loan to purchase TradeWinds Airlines when the Company declared bankruptcy. Judge Roberts, according to Free Press, ruled that a trial is needed to consider Mr. Watkins' allegations that TradeWinds Airlines was pushed into bankruptcy after he refused requests from pension fund trustees for favors, including the use of his jet for a speaker at an NAACP dinner. Free Press says that no trial date has been set. Judge Roberts dismissed Mr. Watkins' countersuit against the pensions but allowed his case against the pensions' investment adviser, Adrian Anderson of North Point Advisors, to proceed, the report states. Headquartered at the Triad International Airport in Greensboro, North Carolina, TradeWinds Airlines LLC -- http://www.tradewinds-airlines.com/-- operates A300-B4F freighter aircraft for domestic and foreign customers. The company has operations at Miami International Airport and in Puerto Rico. The airline filed for Chapter 11 protection on July 25, 2008 (Bankr. S. D. Fla. Case No. 08-20394). Scott L. Baena, Esq., at Bilzin Sumberg Baena Price & Axelrod LLP represents the airline in its restructuring effort. The airline listed assets of between $1 million and $10 million, and debts of between $10 million and $50 million. TRANSDIGM GROUP: Fitch Says Sector's Outlook Steady, Risks Remain ----------------------------------------------------------------- Credit quality in the U.S. commercial aerospace industry will remain under pressure in 2010, while the U.S. defense sector is likely to experience more stability, according to Fitch Ratings. Fitch expects deliveries in all commercial aerospace original equipment segments to decline in 2010, but aftermarket sales should begin to improve modestly. Defense spending will continue to grow in the low single digits. 'Beyond 2010 the industry faces some key issues: likely additional production cuts at Boeing and Airbus, and possible declines in U.S. Department of Defense modernization spending,' said Craig Fraser, Managing Director at Fitch. 'Rating upgrades are unlikely in 2010, and downgrades remain a risk for some commercial aerospace companies.' Credit metrics for many A&D companies deteriorated in 2009, but they are likely to be steady in 2010. Profits and cash flows could be helped by improvement in the high-margin aftermarket, the full-year impact of 2009 cost reductions, and defense growth, but they will be held back by higher pension expense and weak commercial OE markets. Fitch says liquidity remains strong after improving in 2009 because of lower share repurchases and some opportunistic debt issuance, but the company expects cash deployment will increase during 2010, particularly for acquisitions and pension contributions. Key risks for the sector include the weak global economic recovery, exogenous shocks (terrorism, disease pandemic, etc.), large U.S. government deficits, and execution on new programs. The 787 program remains a continuing source of risk for Boeing and its suppliers. Flight hours and airline traffic have moved off of cyclical lows, but they remain at depressed levels. A general risk is that some production rates have not been revised downward materially despite the weak economy. Fitch does not expect that financing availability will be a limit on aircraft deliveries in 2010, although some concerns remain in the aircraft finance business. Longer-term, Fitch considers the commercial outlook solid because of large backlogs and the need to build aerospace infrastructure in developing regions. Commercial Aerospace: These expectations for key commercial aerospace segments are incorporated into Fitch's forecasts: -- Large Commercial Aircraft: Fitch expects LCA deliveries from Boeing and Airbus will decline approximately 5% in 2010 to 920 aircraft, with revenues down 5%-10%. These estimates incorporate the announced production cuts for the A320 family (down two aircraft per month) and B777 (down almost 30%), but they exclude possible 787 deliveries (discussed below). Fitch believes there is a strong chance of additional production cuts, but these are more likely to take place in 2011. Long manufacturing lead times, advance payment requirements, and indications of sold-out 2010 production schedules support the argument against additional cuts next year, unless they are announced in the next few months to take effect at the end of 2010. Fitch's forecasts will include additional 5%-15% cuts beginning in 2011. Fitch forecasts the additional LCA production reductions in 2011 because of a moderate global economic recovery, airline capacity reductions in 2008 and 2009, substantial airline losses, and deliveries that are exceeding typical aircraft retirements. However, the eventual production declines should be moderate relative to prior LCA cycles as a result of large backlogs, production restraint since the last downturn, some remaining overbooking in the delivery plans, and the geographic diversity of the customer base. In addition, the long-term nature of aircraft assets, as well as operating cost savings, provide incentive for customers to continue taking delivery of aircraft despite cyclically weak airline traffic. If the projected production cuts are managed with sufficient lead time, both the manufacturers and the supply base should be able to adjust their cost structures in time to prevent deterioration of their credit profiles. Fitch expects LCA orders to be low in 2010 and 2011, a continuation of the trend in 2009, in which there have been only 287 net orders through November compared to 867 deliveries during the same period. There were 142 cancellations through November, and Boeing has indicated that it had approximately 215 deferrals in the first three quarters. Low orders are not a credit concern given that Boeing and Airbus had a combined backlog of 6,849 aircraft at the end of November, equal to more than seven years of production at estimated 2010 rates. Excluding 787 and A350 backlogs, the industry still has almost six years worth of orders. Boeing's 787 program will continue to be a key concern for the LCA sector and its supply base in 2010. If Boeing meets its current schedule, Fitch estimates the company could deliver 10-15 787s in late 2010, but there is considerable risk to the schedule, including an aggressive flight testing program, certification, and the production ramp-up. Boeing will be building 787s through the flight testing program, exposing the company to the risk of reworking some aircraft if problems are discovered during the flight tests. Uncertainty over customer penalties and supplier claims add to the 787s risks. Through November, the 787 accounted for the bulk of Boeing's order cancellations (83 out of 111), although the company still has 840 firm orders for the aircraft. -- Commercial Aftermarket/Services: The commercial aftermarket will likely be the first part of the aerospace industry to recover from the downturn. Fitch forecasts aftermarket spending will be flat to up 5% in 2010, with a weak first half offset by an improved second half. The expected economic rebound should drive airline traffic growth and eventually will lead to rising flight hours and capacity, which are the primary drivers of aftermarket spending. Some inventory rebuilding and completion of deferred maintenance should also help the aftermarket recover in 2010. Business jet utilization has also been improving off of a low base, which will aid aftermarket spending in that sector. Fitch's general concern for the aftermarket is that current conditions are still very weak, with many companies reporting double digit declines year-over-year in the third quarter. Some capacity metrics are still negative despite indications of increased airline traffic. Fitch will have more conviction on the outlook for this sector once capacity starts to increase. Companies with healthy exposures to this high-margin segment include Goodrich, Honeywell, Rockwell Collins, Transdigm, and United Technologies. -- The business jet market was the worst commercial aerospace sector in 2009, suffering a rapid and severe downturn. Industry deliveries fell 38% through September, and Fitch expects a 35%-40% unit decline for the year, with revenues likely down 25%-30%. An eventual peak-to-trough unit decline of 50% or more for the industry is not out of the question, and Fitch expects aircraft deliveries to fall another 5%-10% in 2010 from 2009 levels. The large unit declines result from hundreds of order cancellations and the failure of light jet manufacturer Eclipse Aviation. Although utilization rates have started to rise and corporate profits have turned up, Fitch expects continued weakness in the sector because utilization rates are still well below peak levels and the corporate profit improvement is largely due to cost cutting. This sector will continue to be volatile because of the discretionary nature of the product, the availability of numerous substitute forms of travel, and the relationship to corporate profits. A key development in the sector in the past five years has been strong orders from outside North America, and these international orders could be the catalyst for an upturn beyond 2010. Manufacturers in this sector include Bombardier, Dassault Aviation, Embraer, General Dynamics, Hawker Beechcraft, and Textron, as well as key suppliers such as Honeywell. -- The regional aircraft market (regional jets and turboprops) has many of the same drivers as the LCA market, but it has lower backlogs. Orders so far in 2009 have been weak, and the outlook for this sector is negative for 2010. Regional jets deliveries from Bombardier and Embraer will probably fall about 15% in 2009 and at least 15% in 2010, excluding possible deliveries from new entrants in the market. Fitch estimates that turboprop deliveries from Bombardier and ATR (a joint venture between EADS and Finmeccanica) will rise modestly in 2009, but they will likely decline 5% in 2010. New entrants into the regional jet market remain an important part of the sector's outlook, and in 2010 the market will likely see the initial deliveries of Sukhoi's Superjet 100 and China's ARJ21. Defense: High U.S. DoD spending levels continue to support defense sector credit quality, and the outlook is still favorable in the near term because spending in fiscal year 2010 will continue to rise. The core DoD budget should grow approximately 4% in FY2010, and modernization spending (procurement plus R&D), the most relevant part of the budget for defense contractors, should be up 2%-3%. Fitch believes that FY2010 is probably the peak in modernization spending, and there are several risks to monitor in FY2011 and beyond. These include the Obama Administration's first full budget in FY2011, the Quadrennial Defense Review, and the large projected federal budget deficits in FY2009-FY2011. In addition to spending levels, some other changes proposed by the new administration could have a detrimental impact on defense contractors, including acquisition reform and the 'insourcing' of services previously contracted out by the DoD. Fitch believes core modernization spending could decline 1%-2% in FY2011, although the overall core budget could rise. The FY2011 budget and QDR will likely continue the changes the Obama administration introduced in the current year's budget, and Fitch is not anticipating any dramatic shifts. Fitch expects supplemental spending that supports operations in Iraq and Afghanistan will fall over the next several years, but for several reasons the decline will be gradual, and the supplemental spending will not disappear. Spending related to Iraq will be down, but spending in Afghanistan will increase. Some security spending by the U.S. in Iraq will likely be replaced by Iraqi government spending, which could continue to be a source of revenues to U.S. contractors. Finally, the DoD will need to refurbish or replace some equipment and material that is in poor condition or left in Iraq. Given the strong credit metrics and liquidity at most of the leading defense contractors, ratings in the sector are unlikely to be pressured by modest declines in modernization spending. Program execution and cash deployment probably present greater risks. Defense company backlogs fell in the first three quarters of 2009 due to some program cancellations, although orders in the fourth quarter could reverse some of the decline. Liquidity and Cash Deployment: Strong liquidity and financial flexibility helped the North American A&D industry withstand the difficult economy in 2009, and the industry even improved its liquidity position in the past 12 months, although at the expense of increasing total debt to $60 billion from $55 billion. At the end of the third quarter the top 15 A&D companies rated by Fitch in North America had $35 billion in cash compared to approximately $5 billion in current debt maturities and short-term debt. The only material credit facilities set to expire in 2010 (GD, L-3, and RTN) have already been replaced. Many companies in the sector pulled back on discretionary expenditures in 2009 (share repurchases fell $10 billion, for example) in the interests of building liquidity. With stabilization appearing in some parts of the A&D sector, Fitch expects greater cash deployment in 2010. Acquisition activity began to increase in the past quarter, and Fitch expects this will continue in 2010. Share repurchases and dividend increases will likely rise as well. Higher pension contributions will be another use of cash in 2010. The A&D sector has seven of the largest 25 pension plans in corporate America, and some are significantly underfunded. The situation is mitigated for defense contractors, which get some recovery of pension costs in government contracts. Harmonization of Cost Accounting Standards and the Pension Protection Act is something to watch during 2010. In Fitch's view, Boeing will have the most significant liquidity pressures in 2010. Delays in the 787 and 747-8 programs over the past 18 months have negatively affected Boeing's credit quality because of inventory build-up, delayed advance payments, and higher development expenses. Cash flow pressures will likely persist into 2011 due to continued inventory build-up in support of initial 787 deliveries. Although free cash flow will probably be positive in 2009, Fitch believes that break-even or negative free cash flow is possible in 2010 depending on the ultimate schedule for 787 deliveries, production rates on other aircraft models, and the company's working capital management, which has been good in 2009 considering the 787 inventory pressures and reduced advances because of lower orders. Aircraft Finance: Fitch does not expect that financing availability will be a limit on aircraft deliveries in 2010, although some concerns remain in the aircraft finance business. The aircraft finance market was not as bad as feared in 2009, and Fitch expects this trend to continue because credit markets have improved and lower forecasted aircraft deliveries will mean a lower financing requirement than in 2009. Fitch projects funding requirements will be $60-$65 billion for LCA and regional aircraft in 2010, about $5 billion lower than in 2009. An additional $10-$15 billion could be needed for business jets, also down versus 2009. Concerns in the aircraft finance market include the damaged business models of some large aircraft lessors, the exit of some banks from the market, and indications that pre-delivery payment financing was difficult for some airlines in 2009. Several factors offset these concerns, including strong support from export credit agencies, the emergence of some regional financial players in the market, better capital markets activity in the past few months, and the ability of Boeing and Airbus to provide customer financing. Fitch estimates that ECAs could support approximately 25% of LCA deliveries in 2009, illustrating the benefit the industry has received from indirect government support. It looks like Boeing and Airbus will finance less than $2 billion of new aircraft in 2009, leaving the companies with the capacity to help customers in 2010 if needed. New aircraft serve as attractive lending collateral due to the mobility of the assets, operating efficiency compared to previous aircraft generations, and unique treatment in bankruptcy in some jurisdictions. The comments above apply to new aircraft financing, not refinancings of existing debt. Fitch estimates that there will be $14 billion of maturing airline debt in the U.S. alone in 2010- 2011. Economic Assumptions: Underpinning Fitch's A&D outlook is the firm's most recent global economic outlook, which as of October 2009 calls for global GDP to shrink 2.8% in 2009, followed by global growth recovery to 2% in 2010 and 2.7% in 2011. GDP should rise, but from a low base, and expansion will be weak relative to previous recoveries. There is some uncertainty in 2011 due to likely tightening of monetary and fiscal stimulus. Fitch expects GDP to grow 6.5% in the BRIC countries (Brazil, Russia, India, China) in 2010. Although global GDP looks set to return to positive growth, the absolute level of GDP is low and, in the U.S., it is possible that GDP may not return to the 2008 level until 2011. Fitch's specific A&D assumptions include no recovery in 2010 other than early cycle parts such as aftermarket. Late cycle segments such as original equipment will continue to be weak, showing some volume declines, although nowhere near as dramatic as in 2009 or in the last downturn that began in 2001. A more detailed report on the global 2010 aerospace & defense industry outlook will be available on the Fitch Ratings Web site at 'www.fitchratings.com' in January. Fitch-rated issuers and their current Issuer Default Ratings in the North American aerospace/defense sector: -- Alliant Techsystems Inc. (ATK) ('BB'; Outlook Stable); -- Boeing Company (BA) ('A+'; Outlook Negative); -- Bombardier Inc. (BBD/B) ('BB+'; Outlook Negative); -- General Dynamics Corporation (GD) ('A'; Outlook Stable); -- Goodrich Corporation (GR) ('BBB+'; Outlook Stable); -- Honeywell International Inc. (HON) ('A'; Outlook Negative); -- ITT Corporation (ITT) ('A-'; Outlook Stable) -- L-3 Communications Corporation (LLL) ('BBB-'; Outlook Stable); -- Lockheed Martin Corporation (LMT) ('A-'; Outlook Stable); -- Northrop Grumman Corporation (NOC) ('BBB+'; Outlook Stable); -- Raytheon Company (RTN) ('A-'; Outlook Stable); -- Rockwell Collins, Inc. (COL) ('A'; Outlook Stable); -- Textron Inc. (TXT) ('BB+'; Outlook Negative); -- Transdigm Group (TDG) ('B'; Outlook Stable); -- United Technologies Corporation (UTC) ('A+'; Outlook Stable). TRIBUNE CO: Plan Exclusivity Extended Until February --------------------------------------------------- Tribune Co. asked Judge Kevin J. Carey of the U.S. Bankruptcy Court for the District of Delaware to further extend its exclusive periods to file a plan of reorganization through March 31, 2010 and to solicit acceptances of that Plan through May 31, 2010. Senior secured lenders owed $4.4 billion by Tribune Co. tried to persuade the judge to terminate exclusivity to allow them to file a reorganization plan for the operating subsidiaries of Tribune. Following a hearing, the bankruptcy judge extended until February the Company's exclusive right to propose a plan, Bill Rochelle at Bloomberg News reported. Until that time, the secured lenders won't be able to file a Chapter 11 plan, unless it negotiates a consensual plan with tribune. About Tribune Co. Headquartered in Chicago, Illinois, Tribune Co. -- http://www.tribune.com/-- is a media company, operating businesses in publishing, interactive and broadcasting, including ten daily newspapers and commuter tabloids, 23 television stations, WGN America, WGN-AM and the Chicago Cubs baseball team. The Company and 110 of its affiliates filed for Chapter 11 protection on Dec. 8, 2008 (Bankr. D. Del. Lead Case No. 08- 13141). The Debtors proposed Sidley Austion LLP as their counsel; Cole, Schotz, Meisel, Forman & Leonard, PA, as Delaware counsel; Lazard Ltd. and Alvarez & Marsal North Americal LLC as financial advisors; and Epiq Bankruptcy Solutions LLC as claims agent. As of Dec. 8, 2008, the Debtors have $7,604,195,000 in total assets and $12,972,541,148 in total debts. Bankruptcy Creditors' Service, Inc., publishes Tribune Bankruptcy News. The newsletter tracks the chapter 11 proceeding undertaken by Tribune Company and its various affiliates. (http://bankrupt.com/newsstand/or 215/945-7000) TRONOX INC: Inks Exit Financing Letters With Goldman & GECC ----------------------------------------------------------- In a Form-8K filing with the United States Securities and Exchange Commission, Tronox Incorporated disclosed that while the sale process continues, the Company, on November 10, 2009, entered into letter agreements with each of General Electric Capital Corporation and Goldman Sachs Lending Partners LLC each to act as financing source and arranger, respectively, in connection with providing new debtor in possession to exit financing for a $125 million asset backed revolver facility and a $300 million first lien term loan. Michael J. Foster, vice president, general counsel and secretary of Tronox Incorporated, says that if the Company is able to reach agreement with its stakeholders regarding a standalone reorganization and chooses to pursue a reorganization rather than a sale, and if the Company, GE and Goldman's efforts are successful and a plan of reorganization is confirmed, the proceeds from the DIP to Exit Facilities would be used to refinance the Company's existing indebtedness, fund a potential settlement with the United States Government and be available for general corporate purposes following the Company's exit from bankruptcy. About Tronox Inc. Headquartered in Oklahoma City, Tronox Incorporated (Pink Sheets: TRXAQ, TRXBQ) is the world's fourth-largest producer and marketer of titanium dioxide pigment, with an annual production capacity of 535,000 tonnes. Titanium dioxide pigment is an inorganic white pigment used in paint, coatings, plastics, paper and many other everyday products. The Company's four pigment plants, which are located in the United States, Australia and the Netherlands, supply high-performance products to approximately 1,100 customers in 100 countries. In addition, Tronox produces electrolytic products, including sodium chlorate, electrolytic manganese dioxide, boron trichloride, elemental boron and lithium manganese oxide. Tronox has $1.6 billion in total assets, including $646.9 million in current assets, as at September 30, 2008. The Company has $881.6 million in current debts and $355.9 million in total noncurrent debts. Tronox Inc., aka New-Co Chemical, Inc., and 14 other affiliates filed for Chapter 11 protection on January 13, 2009 (Bankr. S.D.N.Y. Case No. 09-10156). The case is before Hon. Allan L. Gropper. Richard M. Cieri, Esq., Jonathan S. Henes, Esq., and Colin M. Adams, Esq., at Kirkland & Ellis LLP in New York, represent the Debtors. The Debtors also tapped Togut, Segal & Segal LLP as conflicts counsel; Rothschild Inc. as investment bankers; Alvarez & Marsal North America LLC, as restructuring consultants; and Kurtzman Carson Consultants serves as notice and claims agent. An official committee of unsecured creditors and an official committee of equity security holders have been appointed in the cases. The Creditors Committee has retained Paul, Weiss, Rifkind, Wharton & Garrison LLP as counsel. Until September 30, 2008, Tronox Inc. was publicly traded on the New York Stock Exchange under the symbols TRX and TRX.B. Since then, Tronox Inc. has traded on the Over the Counter Bulletin Board under the symbols TROX.A.PK and TROX.B.PK. As of December 31, 2008, Tronox Inc. had 19,107,367 outstanding shares of class A common stock and 22,889,431 outstanding shares of class B common stock. Bankruptcy Creditors' Service, Inc., publishes Tronox Bankruptcy News. The newsletter tracks the Chapter 11 proceeding undertaken by Tronox Inc. and its 14 affiliates. (http://bankrupt.com/newsstand/or 215/945-7000) TRONOX INC: Professionals Reduce April to Aug Fees by $434,000 -------------------------------------------------------------- Professionals retained in Tronox Inc.'s bankruptcy cases filed interim applications for the allowance of fees and expenses incurred for the period from April 1 through August 31, 2009: A. Debtors Professional Period Fees Expenses ------------ ------ ---- -------- Kirkland & Ellis LLP 04/01/2009- $4,513,496 $178,421 08/31/2009 Alvarez & Marsal North 04/01/2009- $1,231,214 $78,379 America, LLC 08/31/2009 Rothschild Inc. 04/21/2009- $1,000,000 $99,797 08/31/2009 Ernst & Young LLP 04/01/2009- $195,845 $941 08/31/2009 Togut, Segal & Segal LLP 04/01/2009- $155,513 $960 08/31/2009 Kirkland & Ellis LLP serves as the Debtors' main counsel. Alvarez & Marsal North America, LLC, serves as the Debtors' crisis managers. Ernst & Young LLP is the Debtors' auditor and tax advisor. Rothschild Inc. is the Debtors' financial advisor and investment banker. Togut, Segal & Segal LLP serves as the Debtors' conflicts counsel. B. Official Committee of Unsecured Creditors Professional Period Fees Expenses ------------ ------ ---- -------- Paul, Weiss, Rifkind, 04/01/2009- $866,733 $26,172 Wharton & Garrison LLP 08/31/2009 Pillsbury Winthrop Shaw 03/13/2009- $857,269 $32,621 Pittman LLP 08/31/2009 Jefferies & Company, Inc. 04/01/2009- $600,000 $33,860 08/31/2009 Kasowitz, Benson, Torres & 04/01/2009- $227,567 $2,500 Friedman LLP 06/30/2009 Official Committee of 04/01/2009- $0 $23,103 Unsecured Creditors 08/31/2009 Paul, Weiss, Rifkind, Wharton & Garrison LLP serves as the Creditors' Committee's main counsel. Pillsbury Winthrop Shaw Pittman LLP serves as the Committee's bankruptcy counsel. Kasowitz, Benson, Torres & Friedman LLP serves as the Committee's conflicts counsel. Jefferies & Company, Inc. is the Committee's financial advisor. U.S. Trustee Responds The U.S. Trustee relates that the Retained Professionals seek fees totaling $8,416,423 and reimbursement of out-of-pocket expenses totaling $375,276. In response to the comments and concerns of the U.S. Trustee, the Retained Professionals have agreed to voluntarily reduce their requests for interim compensation in the aggregate amount of $434,338 and to voluntarily reduce their reimbursement of out-of- pocket expenses in the aggregate amount of $16,796. At the request of the U.S. Trustee, the Retained Professionals have also agreed that the Court may reduce the compensation awarded by a percentage to be determined by the Court pending the final resolution of the cases. * * * After the Professionals resolved the informal objections of the U.S. Trustee with respect to the Applications, the Court has granted by fee applications of these professionals: A. Debtors Professional Period Fees Expenses ------------ ------ ---- -------- Kirkland & Ellis LLP 04/01/2009- $4,573,496 $175,589 08/31/2009 Alvarez & Marsal North 04/01/2009- $1,232,214 $73,931 America, LLC 08/31/2009 Rothschild Inc. 04/21/2009- $800,000 $99,376 08/31/2009 Ernst & Young LLP 04/01/2009- $162,009 $941 08/31/2009 Togut, Segal & Segal LLP 04/01/2009- $120,410 $960 08/31/2009 B. Official Committee of Unsecured Creditors Professional Period Fees Expenses ------------ ------ ---- -------- Paul, Weiss, Rifkind, 04/01/2009- $673,368 $26,172 Wharton & Garrison LLP 08/31/2009 Jefferies & Company, Inc. 04/01/2009- $600,000 $32,286 08/31/2009 Official Committee of 04/01/2009- $0 $23,103 Unsecured Creditors 08/31/2009 C. Official Committee of Equity Security Holders Professional Period Fees Expenses ------------ ------ ---- -------- Pillsbury Winthrop Shaw 03/13/2009- $557,815 $31,621 Pittman LLP 08/31/2009 About Tronox Inc. Headquartered in Oklahoma City, Tronox Incorporated (Pink Sheets: TRXAQ, TRXBQ) is the world's fourth-largest producer and marketer of titanium dioxide pigment, with an annual production capacity of 535,000 tonnes. Titanium dioxide pigment is an inorganic white pigment used in paint, coatings, plastics, paper and many other everyday products. The Company's four pigment plants, which are located in the United States, Australia and the Netherlands, supply high-performance products to approximately 1,100 customers in 100 countries. In addition, Tronox produces electrolytic products, including sodium chlorate, electrolytic manganese dioxide, boron trichloride, elemental boron and lithium manganese oxide. Tronox has $1.6 billion in total assets, including $646.9 million in current assets, as at September 30, 2008. The Company has $881.6 million in current debts and $355.9 million in total noncurrent debts. Tronox Inc., aka New-Co Chemical, Inc., and 14 other affiliates filed for Chapter 11 protection on January 13, 2009 (Bankr. S.D.N.Y. Case No. 09-10156). The case is before Hon. Allan L. Gropper. Richard M. Cieri, Esq., Jonathan S. Henes, Esq., and Colin M. Adams, Esq., at Kirkland & Ellis LLP in New York, represent the Debtors. The Debtors also tapped Togut, Segal & Segal LLP as conflicts counsel; Rothschild Inc. as investment bankers; Alvarez & Marsal North America LLC, as restructuring consultants; and Kurtzman Carson Consultants serves as notice and claims agent. An official committee of unsecured creditors and an official committee of equity security holders have been appointed in the cases. The Creditors Committee has retained Paul, Weiss, Rifkind, Wharton & Garrison LLP as counsel. Until September 30, 2008, Tronox Inc. was publicly traded on the New York Stock Exchange under the symbols TRX and TRX.B. Since then, Tronox Inc. has traded on the Over the Counter Bulletin Board under the symbols TROX.A.PK and TROX.B.PK. As of December 31, 2008, Tronox Inc. had 19,107,367 outstanding shares of class A common stock and 22,889,431 outstanding shares of class B common stock. Bankruptcy Creditors' Service, Inc., publishes Tronox Bankruptcy News. The newsletter tracks the Chapter 11 proceeding undertaken by Tronox Inc. and its 14 affiliates. (http://bankrupt.com/newsstand/or 215/945-7000) TRUE TEMPER: Wins Confirmation of Modified Plan ----------------------------------------------- Bill Rochelle at Bloomberg News reports that True Temper Sports Inc. obtained confirmation of its Chapter 11 plan, although with a change allowing general unsecured creditors to pass through bankruptcy unaffected and still be able to collect on their claims. The U.S. Trustee for Region 3 objected to the original iteration of the Plan because some unsecured trade suppliers, who were to receive less than full payment, weren't permitted to vote on the plan. Other unsecured creditors, taking nothing from the plan, were given "little or no notice," according to the U.S. Trustee's objection. According to Mr. Rochelle, the Court's confirmation order provides that general unsecured creditors will be unaffected by the bankruptcy, enabling them to collect their debts. The Plan restructures senior debt into a combination of exit financing and equity in the reorganized debtor. Debt holders and stockholders -- the plan investors -- are injecting $70 million cash that will be used pay down first-lien debt totaling $105.6 million. The remainder of the first-lien debt will be converted into a new term loan under the plan. The Plan Investors will obtain most of the new stock of the reorganized company. The holders of $45 million in second-lien debt are to receive 11.4% of the new stock. About True Temper True Temper is the leading manufacturer of golf shafts in the world, and is consistently the number one shaft on all professional tours globally. The Company markets a complete line of shafts under the True Temper(R), Grafalloy(R) and Project X(R) shaft brands, and sells these brands in more than 30 countries throughout the world. True Temper is proudly represented by more than 800 individuals in ten facilities located in the United States, Europe, Japan, China and Australia. As of June 28, 2009, the Company had $180.4 million in total assets and $319.0 million in total liabilities, resulting in stockholders' deficit of $138.5 million. True Temper filed for Chapter 11 on Oct. 8, 2009 (Bankr. D. Del Case No. 09-13446). Marion M. Quirk, Esq., at Cole, Schotz, Meisel, Forman & Leonard, represents the Debtor in its restructuring effort. Logan & Company serves as claims and notice agent. Bankruptcy Judge Peter J. Walsh handles the case. TVI CORP: Wins Confirmation of Reorganization Plan -------------------------------------------------- The Bankruptcy Court signed an order confirming the reorganization plan of TVI Corp. on Dec. 8. The Company's name is changing to Immediate Response Technologies Inc. The Chapter 11 plan provides for secured lender Branch Banking & Trust Co., owed $17.4 million, to receive $700,000 cash along with all the new equity and a deficiency claim for about $12 million. Unsecured creditors split up $390,000 cash. The Signature special events business is being sold for $1.3 million. About TVI Corporation Headquartered in Glenn Dale, Maryland, TVI Corporation -- http://www.tvicorp.com/-- supplies military and civilian emergency first responder and first receiver products, personal protection products and quick-erect shelter systems. The products include powered air-purifying respirators, respiratory filters and quick-erect shelter systems used for decontamination, hospital surge systems and command and control. The users of these products include military and homeland defense/homeland security customers. The Company and two of its affiliates filed for Chapter 11 protection on April 1, 2009 (Bankr. D. Md. Lead Case No. 09-15677). Christopher William Mahoney, Esq., Jeffrey W. Spear, Esq., and Joel M. Walker, Esq., at Duane Morris LLP, represent the Debtors in their restructuring efforts. Alan M. Grochal, Esq., and Maria Ellena Chavez-Ruark, Esq., at Tydings and Rosenberg, serve as counsel to the official committee of unsecured creditors. TVI listed assets of $23.3 million and debt totaling $37.3 million in its bankruptcy petition. UNITED MARITIME: S&P Assigns Corporate Credit Rating at 'B' ----------------------------------------------------------- Standard & Poor's Ratings Services assigned its 'B' corporate credit rating to United Maritime Group LLC. At the same time, S&P assigned a 'B' rating to the proposed $200 million second-lien notes, the same as the corporate credit rating, as well as a '4' recovery rating, indicating expectations of an average (30%-50%) recovery in a payment default scenario. The ratings on Tampa-based United Maritime reflect its highly leveraged financial profile and participation in the highly competitive and capital-intensive shipping industry. The ratings also reflect exposure to cyclical demand swings in certain end markets and vulnerability to weather-related disruptions in business operations. "The stable outlook reflects S&P's expectations that the company will generate gradually improving earnings and cash flow, but remain highly leveraged," said Standard & Poor's credit analyst Funmi Afonja. There is little room in the rating for deterioration in the financial profile. If earnings decline due to rate or volume pressures, causing funds flow from operations to total debt to fall to below 10% or debt to EBITDA to rise above 5.5x, S&P could lower its ratings. "We consider an upgrade unlikely over the near term due to the need to replace business that is being shifted from a key customer, and the weak economic environment," she continued. US CONCRETE: Wisconsin Investment Board Dumps Equity Stake ---------------------------------------------------------- State of Wisconsin Investment Board disclosed it no longer holds shares of US Concrete, Inc. Houston, Texas-based US Concrete, Inc., operates in two business segments: ready-mixed concrete and concrete-related products and precast concrete products. As reported by the Troubled Company Reporter on November 20, 2009, Moody's Investors Service downgraded U.S. Concrete's corporate family rating and probability of default rating to Caa1 from B2, its senior subordinated notes to Caa2 from B3, its speculative grade liquidity rating to SGL-4 from SGL-2, and changed the rating outlook to negative from stable. The downgrades reflect continued volume deterioration of ready-mixed concrete and precast concrete, resulting from weak construction activity across all market segments. Moody's believes that non-residential construction will decline in 2010 and ready-mixed concrete prices will weaken. As a result, the company's profitability is expected to continue to suffer and its debt-to-EBITDA leverage to remain elevated over the next year. The downgrades also reflect weakened liquidity and the potential for credit agreement covenant violations in 2010. On November 17, the TCR said Standard & Poor's Ratings Services lowered its corporate credit rating on U.S. Concrete to 'CCC+' from 'B-'. At the same time, S&P lowered the issue-level rating on the company's senior subordinated notes due 2014 to 'CCC' (one notch below the corporate credit rating) from 'CCC+'. The recovery rating is '5', indicating S&P's expectation of modest recovery (10%-30%) in the event of a payment default. The outlook is negative. "The downgrade reflects S&P's concern regarding U.S. Concrete's deteriorating operating performance as a result of depressed commercial construction activity and S&P's expectations that the company's liquidity profile will further weaken for the remainder of 2009 and into 2010," said Standard & Poor's credit analyst Tobias Crabtree. The Company swung to a net loss of $61,298,000 for the three months ended September 30, 2009, from net income of $1,906,000 for the year ago period. The Company posted a net loss of $77,140,000 for the nine months ended September 30, 2009, from a net loss of $2,898,000 for the year ago period. At September 30, 2009, the Company had $425,208,000 in total assets against $418,443,000 in total liabilities. Retained deficit was $264,072,000 at September 30, 2009. UTGR INC: Taps John McLaughlin to Supervise Twin River Operations ----------------------------------------------------------------- Paul Grimaldi at The Providence Journal reports that the U.S. bankruptcy court will let UTGR Inc.'s Twin River slot parlor to hire John J. McLaughlin, formerly president of Centaur Gaming, to oversee operations at the Lincoln gambling venue. Court documents say that Mr. McLaughlin will advise the lenders taking over the financially troubled slot parlor on how to improve Twin River's operations in advance of a potential sale. According to The Journal, Mr. McLaughlin will evaluate Twin River's physical condition, analyze its spending and revenue, and review its marketing and entertainment programs. The Journal relates that under the terms of a six-month contract, Mr. McLaughlin will be paid $30,000 monthly, plus expenses. Mr. McLaughlin needs an operator's license from the Rhode Island Department of Business Regulation. Paul Grimaldi at The Journal relates that the Twin River slot parlor's lawyers sought court authorization to transfer the ownership of the Lincoln gambling venue by October 23 to its major lenders. The Journal states that as part of the transition agreement negotiated between the slot parlor's owners, its lenders and the State of Rhode Island, the UTGR board of directors will leave their post. The report says that the state and the major lenders will each appoint one member to an oversight board. UTSTARCOM INC: Green Quits as Human Resources & Real Estate Head ---------------------------------------------------------------- UTStarcom Inc. reports that on December 1, 2009, Mark Green left his position as Senior Vice President, Worldwide Human Resources and Real Estate. Mr. Green's departure was in connection with the Company's plans to relocate certain functions in China and is governed by the terms and conditions set forth in the Executive Involuntary Termination Severance Pay Plan. Going Concern Doubt At September 30, 2009, the Company's consolidated balance sheets showed $1.004 billion in total assets, $707.0 million in total liabilities, and $297 million in total stockholders' equity. The Company incurred net losses of $150.3 million, $195.6 million and $117.3 million during the years ended December 31, 2008, 2007, and 2006, respectively. During the nine months ended September 30, 2009, the Company incurred a net loss of $186.3 million. The Company recorded operating losses in 18 of the 19 consecutive quarters in the period ended September 30, 2009. At September 30, 2009, the Company had an accumulated deficit of $1.03 billion. The Company incurred net cash outflows from operations of $55.2 million and $225.1 million in 2008 and 2007 respectively. Cash used in operations was $89.2 million during the nine months ended September 30, 2009. The Company said it expects to continue to incur losses and negative cash flows from operations over at least the remainder of 2009. The Company's only committed source for borrowings is a credit facility in China. During the third quarter of 2009, a $263.5 million credit facility expired and was not renewed. The remaining approximately $58.6 million credit facility expires in the fourth quarter of 2009. While improvements in operating results, cash flows and liquidity are anticipated as management's initiatives to control and reduce costs while maintaining and growing its revenue base are fully implemented, the Company believes its recurring losses and expected negative cash flows from operations raise substantial doubt about its ability to continue as a going concern. The Company's independent registered public accounting firm included an explanatory paragraph highlighting this uncertainty in the Company's annual Report on Form 10-K for the year ended December 31, 2008. About UTStarcom UTStarcom, Inc. (Nasdaq: UTSI) -- http://www.utstar.com/-- is a global leader in IP-based, end-to-end networking solutions and international service and support. The Company sells its solutions to operators in both emerging and established telecommunications markets around the world. UTStarcom enables its customers to rapidly deploy revenue-generating access services using their existing infrastructure, while providing a migration path to cost-efficient, end-to-end IP networks. The Company was founded in 1991 and is headquartered in Alameda, California. UTSTARCOM INC: Shah Capital Management Discloses 6.25% Stake ------------------------------------------------------------ Shah Capital Management disclosed it holds in the aggregate 8,004,957 shares or roughly 6.25% of the common stock of UTStarcom, Inc., as of December 4, 2009. Going Concern Doubt At September 30, 2009, the Company's consolidated balance sheets showed $1.004 billion in total assets, $707.0 million in total liabilities, and $297 million in total stockholders' equity. The Company incurred net losses of $150.3 million, $195.6 million and $117.3 million during the years ended December 31, 2008, 2007, and 2006, respectively. During the nine months ended September 30, 2009, the Company incurred a net loss of $186.3 million. The Company recorded operating losses in 18 of the 19 consecutive quarters in the period ended September 30, 2009. At September 30, 2009, the Company had an accumulated deficit of $1.03 billion. The Company incurred net cash outflows from operations of $55.2 million and $225.1 million in 2008 and 2007 respectively. Cash used in operations was $89.2 million during the nine months ended September 30, 2009. The Company said it expects to continue to incur losses and negative cash flows from operations over at least the remainder of 2009. The Company's only committed source for borrowings is a credit facility in China. During the third quarter of 2009, a $263.5 million credit facility expired and was not renewed. The remaining approximately $58.6 million credit facility expires in the fourth quarter of 2009. While improvements in operating results, cash flows and liquidity are anticipated as management's initiatives to control and reduce costs while maintaining and growing its revenue base are fully implemented, the Company believes its recurring losses and expected negative cash flows from operations raise substantial doubt about its ability to continue as a going concern. The Company's independent registered public accounting firm included an explanatory paragraph highlighting this uncertainty in the Company's annual Report on Form 10-K for the year ended December 31, 2008. About UTStarcom UTStarcom, Inc. (Nasdaq: UTSI) -- http://www.utstar.com/-- is a global leader in IP-based, end-to-end networking solutions and international service and support. The Company sells its solutions to operators in both emerging and established telecommunications markets around the world. UTStarcom enables its customers to rapidly deploy revenue-generating access services using their existing infrastructure, while providing a migration path to cost-efficient, end-to-end IP networks. The Company was founded in 1991 and is headquartered in Alameda, California. VERMILLION INC: Disclosure Statement Approved for Voting -------------------------------------------------------- Bill Rochelle at Bloomberg News reports that Vermillion Inc. is now soliciting votes for its reorganization plan after it obtained approval of the explanatory disclosure statement. At the hearing on Dec. 8, the judge didn't bend to an objection by shareholders contending they were entitled to vote in view of the potential for a "massive dilution" of their stockholding. The Plan calls for holders of $2.365 million in 4.5% notes to be paid in cash or elect to take new stock. The holders of $12.1 million in 7% unsecured notes can choose between having the debt reinstated or taking new stock. Existing shareholders would retain their stock while $2 million in unsecured debt would be paid in full. The confirmation hearing for approval of the plan is tentatively set for Jan. 7. Vermillion, Inc. -- http://www.vermillion.com/-- is dedicated to the discovery, development and commercialization of novel high- value diagnostic tests that help physicians diagnose, treat and improve outcomes for patients. Vermillion, along with its prestigious scientific collaborators, has diagnostic programs in oncology, hematology, cardiology and women's health. Vermillion is based in Fremont, California. The Company filed for Chapter 11 on March 30, 2009 (Bankr. D. Del. Case No. 09-11091). Francis A. Monaco Jr., Esq., and Mark L. Desgrosseilliers, Esq., at Womble Carlyle Sandridge & Rie, PLLC, represent the Debtor as counsel. At September 30, 2008, the Debtor had $7,150,000 in total assets and $32,015,000 in total liabilities. VIRGIN MOBILE: Cancels Registration of Class A Common Stock ----------------------------------------------------------- Virgin Mobile USA, Inc., filed with the Securities and Exchange Commission a Form 15 to terminate the registration of its Class A Common Stock, par value $0.01 per share, and suspend its duty to file reports. Pursuant to the Agreement and Plan of Merger, dated as of July 27, 2009, by and among Virgin Mobile USA, Sprint Nextel Corporation and Sprint Mozart, Inc., a wholly owned subsidiary of Sprint Nextel, Merger Sub merged with and into Virgin Mobile USA with the Company continuing as the surviving corporation in the merger as a wholly owned subsidiary of Sprint Nextel. About Virgin Mobile USA Based in Warren, New Jersey, Virgin Mobile USA, Inc., is a mobile virtual network operator, commonly referred to as an MVNO, offering prepaid, or pay-as-you-go, and, following the acquisition of Helio LLC in August 2008, postpaid wireless communications services, including voice, data, and entertainment content, without owning a wireless network. The Company uses the "Virgin Mobile" name and logo under license from Virgin Enterprises Ltd. The Company offers its services over the nationwide Sprint PCS network under the terms of the Amended and Restated PCS Services Agreement between the Company and Sprint Nextel. The Company conducts its business within one operating segment. Net income attributable to Virgin Mobile USA common stockholders was $8.0 million for the three months ended September 30, 2009, from net income of $3.7 million for the year ago period. Net income attributable to Virgin Mobile USA common stockholders was $38.2 million for the nine months ended September 30, 2009, from net income of $12.0 million for the year ago period. Total operating revenue was $293.0 million for the three months ended September 30, 2009, from $326.5 million for the same period a year ago. Total operating revenue was $937.9 million for the nine months ended September 30, 2009, from $976.4 million for the same period a year ago. As of September 30, 2009, Virgin Mobile had $307.4 million in total assets against $551.6 million in total liabilities. As of September 30, 2009, total deficit was $244.2 million. VISION FOODS: Case Summary & 4 Largest Unsecured Creditors ---------------------------------------------------------- Debtor: Vision Foods LLC 1600 NE Coronado Drive, Ste. 242 Blue Springs, MO 64014 Bankruptcy Case No.: 09-46015 Chapter 11 Petition Date: December 9, 2009 Court: United States Bankruptcy Court Western District of Missouri (Kansas City)) Judge: Arthur B. Federman Debtor's Counsel: Lisa A. Epps, Esq. Spencer Fane Britt & Browne LLP 1000 Walnut Street, Suite 1400 Kansas City, MO 64106 Tel: (816) 292-8881 Fax: (816) 474-3216 Email: lepps@spencerfane.com Estimated Assets: $1,000,001 to $10,000,000 Estimated Debts: $50,001 to $100,000 A full-text copy of the Debtor's petition, including a list of its 4 largest unsecured creditors, is available for free at: http://bankrupt.com/misc/mowb09-46015.pdf The petition was signed by Sean Tebbe, manager of the Company. WABASH NATIONAL: Zachman Quits as SVP & Chief Operating Officer --------------------------------------------------------------- Wabash National Corporation reports that Joseph M. Zachman, Senior Vice President and Chief Operating Officer, on December 1, 2009, resigned from the Company effective immediately. Mr. Zachman has been a key member of the Company's leadership team for the past four and a half years and has contributed greatly to improve the overall operational execution of our manufacturing businesses. However, in light of the current economic environment, including the depressed demand levels within the trailer industry, the Company is continuously challenged to look at its organizational structure to assure it is sized properly and effectively for the current operating environment. Mr. Zachman's resignation is a result of this depressed demand environment. Mr. Zachman is expected to execute a general release and receive the severance benefits. On December 7, Wabash National filed Amendment No. 3 to its Form S-1 Registration Statement under the Securities Act of 1933 to delay the effective date of the Registration Statement. The Registration Statement and accompanying prospectus relates to the offer and sale from time to time of up to 24,762,636 shares of the Company's common stock by selling stockholder, or its donees, pledgees, transferees or other successors-in-interests. The shares of common stock being sold are originally issuable upon the exercise of a warrant held by the selling stockholder, or its donees, pledgees, transferees or other successors-in-interests. The Company will not receive any of the proceeds from the sale of these shares, but will incur expenses in connection with the offering. A full-text copy of Amendment No. 3 is available at no charge at: http://ResearchArchives.com/t/s?4b74 As reported by the Troubled Company Reporter, Wabash on July 17, 2009, entered into a Third Amended and Restated Loan and Security Agreement, which was effective August 3, 2009, with Bank of America, N.A., as a lender and as agent and the other lender parties. The Credit Agreement has a maturity date of August 3, 2012. The Amended Facility has a capacity of $100 million, subject to a borrowing base, and borrowings outstanding totaled $25.5 million at August 3, 2009. The lenders waived certain events of default that had occurred under the previous credit facility and waived the right to receive default interest during the time the events of default had continued. At September 30, 2009, the Company's consolidated balance sheets showed $240.5 million in total assets, $176.7 million in total liabilities, $19.4 million in preferred stock, and $44.4 million in shareholders' equity. The Company reported current assets of $88.4 million and current liabilities of $138.0 million at September 30, 2009, resulting in a working capital deficit of $49.6 million. About Wabash National Headquartered in Lafayette, Indiana, Wabash National Corporation is one of the leading manufacturers of semi-trailers in North America. Established in 1985, the company specializes in the design and production of dry freight vans, refrigerated vans, flatbed trailers, drop deck trailers, dump trailers, truck bodies and intermodal equipment. Its innovative core products are sold under the DuraPlate(R), ArcticLite(R), FreightPro(TM) Eagle(R) and Benson(TM) brand names. The company operates two wholly owned subsidiaries; Transcraft (R) Corporation, a manufacturer of flatbed, drop deck, dump trailers and truck bodies; and Wabash National Trailer Centers, trailer service centers and retail distributors of new and used trailers and aftermarket parts throughout the U.S. WORLDSPACE INC: Has Until January 31 to File Chapter 11 Plan ------------------------------------------------------------ The Hon. Peter J. Walsh of the U.S. Bankruptcy Court for the District of Delaware extended Worldspace Inc., et al.'s exclusive period to file their Chapter 11 plan and to solicit acceptances of that plan until January 31, 2010, and April 1, 2010. WorldSpace, Inc. (WRSPQ.PK) -- http://www.1worldspace.com/-- provides satellite-based radio and data broadcasting services to paying subscribers in 10 countries throughout Europe, India, the Middle East, and Africa. 1worldspace(TM) satellites cover two- thirds of the earth and enable the Company to offer a wide range of services for enterprises and governments globally, including distance learning, alert delivery, data delivery, and disaster readiness and response systems. 1worldspace(TM) is a pioneer of satellite-based digital radio services. The Debtors and their affiliates operate two geostationary satellites, AfriStar and Asia Star, which are in orbit over Africa and Asia. The Debtor and two of its affiliates filed for Chapter 11 bankruptcy protection on October 17, 2008 (Bankr. D. Del., Case No. 08-12412 - 08-12414). James E. O'Neill, Esq., Laura Davis Jones, Esq., and Timothy P. Cairns, Esq., at Pachulski Stang Ziehl & Jones, LLP, represent the Debtors as counsel. Neil Raymond Lapinski, Esq., and Rafael Xavier Zahralddin-Aravena, Esq., at Elliot Greenleaf, represent the Official Committee of Unsecured Creditors. When the Debtors filed for bankruptcy, they listed total assets of $307,382,000 and total debts of $2,122,904,000. YMCA OF DUTCHESS COUNTY: Files in Poughkeepsie, New York -------------------------------------------------------- The Young Men's Christian Association of Dutchess County filed for Chapter 11 (Bankr. S.D.N.Y. Case No. 09-38454) in the face of foreclosure by Mahopac National Bank. The YMCA in Poughkeepsie, New York, listed assets and debt both totaling about $1.5 million. Secured debt is $1.1 million. YOUNG MENS CHRISTIAN: Case Summary & 20 Largest Unsec. Creditors ---------------------------------------------------------------- Debtor: Young Mens Christian Association of Dutchess County aka Dutchess County YMCA P.O. Box 3084 Poughkeepsie, NY 12603 Bankruptcy Case No.: 09-38454 Chapter 11 Petition Date: December 9, 2009 Court: United States Bankruptcy Court Southern District of New York (Poughkeepsie) Judge: Cecelia G. Morris Debtor's Counsel: Thomas Genova, Esq. Genova & Malin Hampton Business Center, 1136 Route 9 Wappingers Falls, NY 12590-4332 Tel: (845) 298-1600 Fax: (845) 298-1265 Email: genmallaw@optonline.net Estimated Assets: $1,000,001 to $10,000,000 Estimated Debts: $1,000,001 to $10,000,000 According to the schedules, the Company has assets of $1,521,389 and total debts of $1,536,144. A full-text copy of the Debtor's petition, including a list of its 20 largest unsecured creditors, is available for free at: http://bankrupt.com/misc/nysb09-38454.pdf The petition was signed by Elaine Trumpetto, president of the Company. YRC WORLDWIDE: Gets NASDAQ Exception in Debt for Equity Exchange ---------------------------------------------------------------- YRC Worldwide Inc. on December 8, 2009, said it has received an exception from the NASDAQ Listing Qualifications Department relating to shareholder approval of the issuance of up to 42 million shares of the Company's common stock and up to 5 million shares of the Company's new Class A convertible preferred stock in the Company's pending exchange offer of its contingent convertible senior notes and USF-8 1/2% notes with an aggregate face value of approximately $536.8 million. Assuming full participation in the exchange offer, the holders of the outstanding notes will own 95% of the Company's common stock (and voting power) on an as-if converted basis following the exchange offer. The exception granted by NASDAQ allows YRCW common stock to continue to be listed and traded on the NASDAQ exchange following the completion of the debt for equity exchange. In connection with the transactions contemplated by the exchange offer, the Company requested and on December 8, 2009, received from NASDAQ an exception from certain NASDAQ shareholder approval rules pursuant to the "financial viability exception" set forth in NASDAQ Listing Rule 5635(f). Absent this exception, NASDAQ Listing Rules would have required shareholder approval prior to the issuance of the shares of the Company's common stock and Class A convertible preferred stock to be issued in the exchange offer. To obtain this exception, the Company was required to demonstrate to NASDAQ that the delay associated with the effort to secure shareholder approval would have seriously jeopardized the Company's financial viability. As also required by NASDAQ, on November 20, 2009, the Audit/Ethics Committee of the Company's Board of Directors expressly approved the Company's reliance on this exception. A notice to shareholders regarding the Company's reliance on the financial viability exception was mailed to shareholders in accordance with NASDAQ Listing Rules. A full-text copy of the Notice is available at no charge at http://ResearchArchives.com/t/s?4b7d Bankruptcy Warning As reported in the Troubled Company Reporter on November 11, 2009, YRC Worldwide told investors it would file for bankruptcy if it cannot complete a $536 million debt exchange offer that will enable it to tap into a $106 million revolver credit reserve. YRC said the uncertainty regarding its ability to generate sufficient cash flows and liquidity to fund operations raises substantial doubt about its ability to continue as a going concern. YRC reported a net loss of $158.7 million for the three months ended September 30, 2009, from a net loss of $720.8 million for the same period a year ago. The Company posted a net loss of 741.5 million for the nine months ended September 30, 2009, from a net loss of $731.4 million for the same period a year ago. At September 30, 2009, the Company had $3.281 billion in total assets against total current liabilities of $1.687 billion, long- term debt, less current portion of $892.0 million, deferred income taxes, net of $131.4 million, pension and post retirement of $384.9 million, and claims and other liabilities of $410.2 million, resulting in shareholders' deficit of $225.5 million. About YRC Worldwide Headquartered in Overland Park, Kansas, YRC Worldwide Inc. -- http://www.yrcw.com/-- a Fortune 500 company and one of the largest transportation service providers in the world, is the holding company for a portfolio of successful brands including YRC, YRC Reimer, YRC Glen Moore, YRC Logistics, New Penn, Holland and Reddaway. YRC Worldwide has the largest, most comprehensive network in North America with local, regional, national and international capabilities. Through its team of experienced service professionals, YRC Worldwide offers industry-leading expertise in heavyweight shipments and flexible supply chain solutions, ensuring customers can ship industrial, commercial and retail goods with confidence. YRC WORLDWIDE: Has Significant Support for Debt-For-Equity Offers ----------------------------------------------------------------- YRC Worldwide Inc. has extended its offer to exchange up to 42 million shares of the Company's common stock and up to 5 million shares of the Company's new Class A convertible preferred stock for its outstanding contingent convertible senior notes and the USF-8 1/2% notes due 2010 issued by the Company's subsidiary, YRC Regional Transportation, Inc., with an aggregate face value of approximately $536.8 million, until 11:59 p.m., New York City time, on December 15, 2009, unless further extended by the Company. The exchange offer had been scheduled to expire at 11:59 p.m., New York City time, on December 8, 2009. On December 9, 2009, YRC Worldwide said a significant number of its note holders have tendered their notes pursuant to the company's debt-for-equity exchange offers. The company extended the expiration date for the exchange offers to provide additional time for all conditions to the offers to be met. YRC said the Securities and Exchange Commission has continued to review the company's Registration Statement on Form S-4 relating to the exchange offers and has not yet declared the Registration Statement effective, which is a condition of the offers, among others. The exchange offers include each of the outstanding series of notes: -- the company's 5.0% Net Share Settled Contingent Convertible Senior Notes and 5.0% Contingent Convertible Senior Notes due 2023, -- the company's 3.375% Net Share Settled Contingent Convertible Senior Notes and 3.375% Contingent Convertible Senior Notes due 2023, and -- the 8-1/2 % Guaranteed Notes due April 15, 2010 of the company's wholly owned subsidiary, YRC Regional Transportation, Inc. The company said that it is encouraged by the response to the exchange offers, which the company commenced following several months of ongoing, active implementation of its comprehensive plan. The plan is designed to place the company on a more solid financial base with an enhanced capital structure and improved operations and cost structure, making it more competitive and well positioned to take advantage of any upturn in the economy. As of 11:59 p.m. on December 8, 2009, note holders tendered a total of 72% of the aggregate principal amount of the outstanding notes pursuant to the exchange offers, which is below the minimum percentage required as a condition to the offers. The company will exchange the notes for shares of the company's common stock and new Class A convertible preferred stock in such amounts as are set forth in the company's Registration Statement on Form S-4, as amended, that the company originally filed with the SEC on November 9, 2009, which together on an as-if converted basis, if the note holders tender all of the outstanding notes in the exchange offers, would represent approximately 95% of the company's issued and outstanding common stock. To validly tender their notes, the participating note holders will be required to become party to a mutual release with the company and consent to an amendment of the terms of the notes that would remove substantially all of the material covenants other than the obligation to pay principal and interest on the notes and those relating to the conversions rights of convertible notes, and eliminate or modify the related events of default. Rothschild, Inc. and Moelis & Company LLC are acting as lead dealer managers in connection with the exchange offer. Holders of the notes may contact Rothschild at (800) 753-5151 (U.S. toll- free) or collect at (212) 403-3716 and Moelis at (866) 270-6586 (U.S. toll-free) or collect at (212) 883-3813 with any questions they may have regarding the exchange offers. Bankruptcy Warning As reported in the Troubled Company Reporter on November 11, 2009, YRC Worldwide told investors it would file for bankruptcy if it cannot complete a $536 million debt exchange offer that will enable it to tap into a $106 million revolver credit reserve. YRC said the uncertainty regarding its ability to generate sufficient cash flows and liquidity to fund operations raises substantial doubt about its ability to continue as a going concern. YRC reported a net loss of $158.7 million for the three months ended September 30, 2009, from a net loss of $720.8 million for the same period a year ago. The Company posted a net loss of 741.5 million for the nine months ended September 30, 2009, from a net loss of $731.4 million for the same period a year ago. At September 30, 2009, the Company had $3.281 billion in total assets against total current liabilities of $1.687 billion, long- term debt, less current portion of $892.0 million, deferred income taxes, net of $131.4 million, pension and post retirement of $384.9 million, and claims and other liabilities of $410.2 million, resulting in shareholders' deficit of $225.5 million. About YRC Worldwide Headquartered in Overland Park, Kansas, YRC Worldwide Inc. -- http://www.yrcw.com/-- a Fortune 500 company and one of the largest transportation service providers in the world, is the holding company for a portfolio of successful brands including YRC, YRC Reimer, YRC Glen Moore, YRC Logistics, New Penn, Holland and Reddaway. YRC Worldwide has the largest, most comprehensive network in North America with local, regional, national and international capabilities. Through its team of experienced service professionals, YRC Worldwide offers industry-leading expertise in heavyweight shipments and flexible supply chain solutions, ensuring customers can ship industrial, commercial and retail goods with confidence. * Commercial Mortgage Defaults Rise to 3.4% in Quarter ------------------------------------------------------ The default rate on commercial mortgages more than doubled in the third quarter to 3.4 percent from 1.37 percent a year earlier, Bill Rochelle reported, citing a report from Real Estate Econometrics LLC. * Fitch Reports Improved High Yield Default Outlook; Risks Linger ----------------------------------------------------------------- Fitch Ratings projects that the U.S. high yield default rate will continue to decline in 2010 to a range of 6%-7% by year-end, a marked improvement from 2009's results but still above the long- term average annual rate of 4.7%. The pace of U.S. high yield defaults slowed considerably in the second half of 2009 with both the number of issuers defaulting on their debt obligations and the par value of bonds affected by the defaults falling by half compared with the difficult first six months of the year. After soaring to 9.5% in June, with 103 issuers defaulting on a combined $79.7 billion in bonds, defaults fell to 42 issuers affecting $36.8 billion in bonds from July to November, resulting in a November year-to-date default rate of 13.6% (on $116.5 billion). Fitch believes that with additional defaults in December, the default rate will end 2009 just shy of the lower end of the agency's full year forecast of 15%-18%. 'Pressure on corporate credit quality has continued to ease in 2009 with downgrades steadily retreating quarter over quarter,' said Mariarosa Verde, Managing Director of Fitch Credit Market Research. 'While upgrades are still limited, encouraging economic data and a return to more normal credit market activity has caused spreads to tighten to summer 2008 levels, a reflection of the market's improved risk appetite and confidence.' Fitch's data shows that corporate downgrades fell again in October and November, contracting some 35% compared with the third quarter and following a 50% dip in the third quarter. Rating trends have reflected broader market developments with both economic and funding conditions coming back from the brink earlier in the year. Another positive sign emerged in October when the Federal Reserve Senior Loan Officer Survey showed fewer banks tightening standards on commercial and industrial loans than in previous quarters (15% of respondents reported tightening standards, down by half from the July survey and far less than the extraordinary spike of more than 80% recorded in the fall of 2008). However, the recent survey still showed net tightening, suggesting that as with other hopeful developments, much is still riding on the sustainability and strength of the recovery going into 2010. Continued progress on the economic front is critical, more so than in prior recessions because leverage overall remains high and, as described more fully below, a considerable number of defaults over the past year have been in the form of out of court debt exchanges which, while offering some debt relief, have not cut debt to the same extent as formal bankruptcy. Earlier research conducted by Fitch showed that the average high yield company that defaulted and emerged from bankruptcy from 2000 to 2006, emerged with just a third of its pre-bankruptcy debt. In contrast to this, recent debt exchanges have generally left the affected companies still saddled with high debt burdens, evidenced by the fact that most remain rated 'CCC' or lower following the exchange. 'A concern going into 2010 is not only the risk of new defaults but also a heightened risk of serial defaults,' Verde added. 'If growth proves weak, some of the debt restructuring measures adopted over the past year may have only been successful in helping companies defer rather than avoid bankruptcy.' Fitch finds that at the end of November, 'CCC' rated issues continued to represent a sizeable 30% of the U.S. high yield market (and with issues rated 'B-', 40%). Of the $230 billion in 'CCC' paper still outstanding, more than a third is associated with companies that have already done some type of debt exchange, but even excluding these companies, the 'CCC' pool remains large. This illustrates that there is still substantial default vulnerability if anticipated economic growth does not occur. In addition while there has been an impressive rebound in high yield bond issuance in 2009, a closer look reveals that the issuance has had a strong conservative streak. A record 41% of issuance has consisted of senior secured bonds. Also 'CCC' rated issuance, the ultimate litmus test of the market's risk appetite has made up just 9% of new bonds -- sharply lower than the share of the market rated 'CCC'. Fitch finds that defaults in 2009 have been accompanied by dismal recovery rates. To date, the weighted average recovery rate on 2009 defaults is 26% of par. However, as with other years, recovery rates have been uneven. 'The weighted average recovery rate on distressed debt exchanges has averaged 39% of par in 2009, nearly twice the 23% rate recorded on the rest of the year's defaults,' said Eric Rosenthal, Senior Director of Fitch Credit Market Research. Recovery rates were particularly grim in the first half of the year but, as expected with a rebounding equity market and a deceleration in defaults, bounced back in the second half. Fitch expects recovery rates to continue to firm in 2010 with recovery rates more in line with historical averages of 30% to 40%. Despite a new annual high in the dollar value of high yield bond defaults (according to Fitch's U.S. High Yield Default Index the previous peak was 2002's $109.8 billion), several technical developments put downward pressure on the default rate in 2009. First, an unprecedented share of defaults (30% of the year's defaulted issuers) consisted of distressed debt exchanges rather than bankruptcy filings. Fitch estimates that this shaved 1% off the default rate since, in contrast to a bankruptcy filing, not all outstanding debt was affected by the exchanges. In addition, the high yield market grew a surprising 10% in size as new bonds issued as part of the exchanges quickly returned to the universe of performing issues and as the high yield bond market absorbed $62 billion in new secured bonds, the majority issued to refinance existing leveraged loans. The growth in the market's size deducted an additional 1% from the year's default rate. * Fitch Reports Steady Outlook Aerospace & Defense; Risks Remain ---------------------------------------------------------------- Credit quality in the U.S. commercial aerospace industry will remain under pressure in 2010, while the U.S. defense sector is likely to experience more stability, according to Fitch Ratings. Fitch expects deliveries in all commercial aerospace original equipment segments to decline in 2010, but aftermarket sales should begin to improve modestly. Defense spending will continue to grow in the low single digits. 'Beyond 2010 the industry faces some key issues: likely additional production cuts at Boeing and Airbus, and possible declines in U.S. Department of Defense modernization spending,' said Craig Fraser, Managing Director at Fitch. 'Rating upgrades are unlikely in 2010, and downgrades remain a risk for some commercial aerospace companies.' Credit metrics for many A&D companies deteriorated in 2009, but they are likely to be steady in 2010. Profits and cash flows could be helped by improvement in the high-margin aftermarket, the full-year impact of 2009 cost reductions, and defense growth, but they will be held back by higher pension expense and weak commercial OE markets. Fitch says liquidity remains strong after improving in 2009 because of lower share repurchases and some opportunistic debt issuance, but the company expects cash deployment will increase during 2010, particularly for acquisitions and pension contributions. Key risks for the sector include the weak global economic recovery, exogenous shocks (terrorism, disease pandemic, etc.), large U.S. government deficits, and execution on new programs. The 787 program remains a continuing source of risk for Boeing and its suppliers. Flight hours and airline traffic have moved off of cyclical lows, but they remain at depressed levels. A general risk is that some production rates have not been revised downward materially despite the weak economy. Fitch does not expect that financing availability will be a limit on aircraft deliveries in 2010, although some concerns remain in the aircraft finance business. Longer-term, Fitch considers the commercial outlook solid because of large backlogs and the need to build aerospace infrastructure in developing regions. Commercial Aerospace: These expectations for key commercial aerospace segments are incorporated into Fitch's forecasts: -- Large Commercial Aircraft: Fitch expects LCA deliveries from Boeing and Airbus will decline approximately 5% in 2010 to 920 aircraft, with revenues down 5%-10%. These estimates incorporate the announced production cuts for the A320 family (down two aircraft per month) and B777 (down almost 30%), but they exclude possible 787 deliveries (discussed below). Fitch believes there is a strong chance of additional production cuts, but these are more likely to take place in 2011. Long manufacturing lead times, advance payment requirements, and indications of sold-out 2010 production schedules support the argument against additional cuts next year, unless they are announced in the next few months to take effect at the end of 2010. Fitch's forecasts will include additional 5%-15% cuts beginning in 2011. Fitch forecasts the additional LCA production reductions in 2011 because of a moderate global economic recovery, airline capacity reductions in 2008 and 2009, substantial airline losses, and deliveries that are exceeding typical aircraft retirements. However, the eventual production declines should be moderate relative to prior LCA cycles as a result of large backlogs, production restraint since the last downturn, some remaining overbooking in the delivery plans, and the geographic diversity of the customer base. In addition, the long-term nature of aircraft assets, as well as operating cost savings, provide incentive for customers to continue taking delivery of aircraft despite cyclically weak airline traffic. If the projected production cuts are managed with sufficient lead time, both the manufacturers and the supply base should be able to adjust their cost structures in time to prevent deterioration of their credit profiles. Fitch expects LCA orders to be low in 2010 and 2011, a continuation of the trend in 2009, in which there have been only 287 net orders through November compared to 867 deliveries during the same period. There were 142 cancellations through November, and Boeing has indicated that it had approximately 215 deferrals in the first three quarters. Low orders are not a credit concern given that Boeing and Airbus had a combined backlog of 6,849 aircraft at the end of November, equal to more than seven years of production at estimated 2010 rates. Excluding 787 and A350 backlogs, the industry still has almost six years worth of orders. Boeing's 787 program will continue to be a key concern for the LCA sector and its supply base in 2010. If Boeing meets its current schedule, Fitch estimates the company could deliver 10-15 787s in late 2010, but there is considerable risk to the schedule, including an aggressive flight testing program, certification, and the production ramp-up. Boeing will be building 787s through the flight testing program, exposing the company to the risk of reworking some aircraft if problems are discovered during the flight tests. Uncertainty over customer penalties and supplier claims add to the 787s risks. Through November, the 787 accounted for the bulk of Boeing's order cancellations (83 out of 111), although the company still has 840 firm orders for the aircraft. -- Commercial Aftermarket/Services: The commercial aftermarket will likely be the first part of the aerospace industry to recover from the downturn. Fitch forecasts aftermarket spending will be flat to up 5% in 2010, with a weak first half offset by an improved second half. The expected economic rebound should drive airline traffic growth and eventually will lead to rising flight hours and capacity, which are the primary drivers of aftermarket spending. Some inventory rebuilding and completion of deferred maintenance should also help the aftermarket recover in 2010. Business jet utilization has also been improving off of a low base, which will aid aftermarket spending in that sector. Fitch's general concern for the aftermarket is that current conditions are still very weak, with many companies reporting double digit declines year-over-year in the third quarter. Some capacity metrics are still negative despite indications of increased airline traffic. Fitch will have more conviction on the outlook for this sector once capacity starts to increase. Companies with healthy exposures to this high-margin segment include Goodrich, Honeywell, Rockwell Collins, Transdigm, and United Technologies. -- The business jet market was the worst commercial aerospace sector in 2009, suffering a rapid and severe downturn. Industry deliveries fell 38% through September, and Fitch expects a 35%-40% unit decline for the year, with revenues likely down 25%-30%. An eventual peak-to-trough unit decline of 50% or more for the industry is not out of the question, and Fitch expects aircraft deliveries to fall another 5%-10% in 2010 from 2009 levels. The large unit declines result from hundreds of order cancellations and the failure of light jet manufacturer Eclipse Aviation. Although utilization rates have started to rise and corporate profits have turned up, Fitch expects continued weakness in the sector because utilization rates are still well below peak levels and the corporate profit improvement is largely due to cost cutting. This sector will continue to be volatile because of the discretionary nature of the product, the availability of numerous substitute forms of travel, and the relationship to corporate profits. A key development in the sector in the past five years has been strong orders from outside North America, and these international orders could be the catalyst for an upturn beyond 2010. Manufacturers in this sector include Bombardier, Dassault Aviation, Embraer, General Dynamics, Hawker Beechcraft, and Textron, as well as key suppliers such as Honeywell. -- The regional aircraft market (regional jets and turboprops) has many of the same drivers as the LCA market, but it has lower backlogs. Orders so far in 2009 have been weak, and the outlook for this sector is negative for 2010. Regional jets deliveries from Bombardier and Embraer will probably fall about 15% in 2009 and at least 15% in 2010, excluding possible deliveries from new entrants in the market. Fitch estimates that turboprop deliveries from Bombardier and ATR (a joint venture between EADS and Finmeccanica) will rise modestly in 2009, but they will likely decline 5% in 2010. New entrants into the regional jet market remain an important part of the sector's outlook, and in 2010 the market will likely see the initial deliveries of Sukhoi's Superjet 100 and China's ARJ21. Defense: High U.S. DoD spending levels continue to support defense sector credit quality, and the outlook is still favorable in the near term because spending in fiscal year 2010 will continue to rise. The core DoD budget should grow approximately 4% in FY2010, and modernization spending (procurement plus R&D), the most relevant part of the budget for defense contractors, should be up 2%-3%. Fitch believes that FY2010 is probably the peak in modernization spending, and there are several risks to monitor in FY2011 and beyond. These include the Obama Administration's first full budget in FY2011, the Quadrennial Defense Review, and the large projected federal budget deficits in FY2009-FY2011. In addition to spending levels, some other changes proposed by the new administration could have a detrimental impact on defense contractors, including acquisition reform and the 'insourcing' of services previously contracted out by the DoD. Fitch believes core modernization spending could decline 1%-2% in FY2011, although the overall core budget could rise. The FY2011 budget and QDR will likely continue the changes the Obama administration introduced in the current year's budget, and Fitch is not anticipating any dramatic shifts. Fitch expects supplemental spending that supports operations in Iraq and Afghanistan will fall over the next several years, but for several reasons the decline will be gradual, and the supplemental spending will not disappear. Spending related to Iraq will be down, but spending in Afghanistan will increase. Some security spending by the U.S. in Iraq will likely be replaced by Iraqi government spending, which could continue to be a source of revenues to U.S. contractors. Finally, the DoD will need to refurbish or replace some equipment and material that is in poor condition or left in Iraq. Given the strong credit metrics and liquidity at most of the leading defense contractors, ratings in the sector are unlikely to be pressured by modest declines in modernization spending. Program execution and cash deployment probably present greater risks. Defense company backlogs fell in the first three quarters of 2009 due to some program cancellations, although orders in the fourth quarter could reverse some of the decline. Liquidity and Cash Deployment: Strong liquidity and financial flexibility helped the North American A&D industry withstand the difficult economy in 2009, and the industry even improved its liquidity position in the past 12 months, although at the expense of increasing total debt to $60 billion from $55 billion. At the end of the third quarter the top 15 A&D companies rated by Fitch in North America had $35 billion in cash compared to approximately $5 billion in current debt maturities and short-term debt. The only material credit facilities set to expire in 2010 (GD, L-3, and RTN) have already been replaced. Many companies in the sector pulled back on discretionary expenditures in 2009 (share repurchases fell $10 billion, for example) in the interests of building liquidity. With stabilization appearing in some parts of the A&D sector, Fitch expects greater cash deployment in 2010. Acquisition activity began to increase in the past quarter, and Fitch expects this will continue in 2010. Share repurchases and dividend increases will likely rise as well. Higher pension contributions will be another use of cash in 2010. The A&D sector has seven of the largest 25 pension plans in corporate America, and some are significantly underfunded. The situation is mitigated for defense contractors, which get some recovery of pension costs in government contracts. Harmonization of Cost Accounting Standards and the Pension Protection Act is something to watch during 2010. In Fitch's view, Boeing will have the most significant liquidity pressures in 2010. Delays in the 787 and 747-8 programs over the past 18 months have negatively affected Boeing's credit quality because of inventory build-up, delayed advance payments, and higher development expenses. Cash flow pressures will likely persist into 2011 due to continued inventory build-up in support of initial 787 deliveries. Although free cash flow will probably be positive in 2009, Fitch believes that break-even or negative free cash flow is possible in 2010 depending on the ultimate schedule for 787 deliveries, production rates on other aircraft models, and the company's working capital management, which has been good in 2009 considering the 787 inventory pressures and reduced advances because of lower orders. Aircraft Finance: Fitch does not expect that financing availability will be a limit on aircraft deliveries in 2010, although some concerns remain in the aircraft finance business. The aircraft finance market was not as bad as feared in 2009, and Fitch expects this trend to continue because credit markets have improved and lower forecasted aircraft deliveries will mean a lower financing requirement than in 2009. Fitch projects funding requirements will be $60-$65 billion for LCA and regional aircraft in 2010, about $5 billion lower than in 2009. An additional $10-$15 billion could be needed for business jets, also down versus 2009. Concerns in the aircraft finance market include the damaged business models of some large aircraft lessors, the exit of some banks from the market, and indications that pre-delivery payment financing was difficult for some airlines in 2009. Several factors offset these concerns, including strong support from export credit agencies, the emergence of some regional financial players in the market, better capital markets activity in the past few months, and the ability of Boeing and Airbus to provide customer financing. Fitch estimates that ECAs could support approximately 25% of LCA deliveries in 2009, illustrating the benefit the industry has received from indirect government support. It looks like Boeing and Airbus will finance less than $2 billion of new aircraft in 2009, leaving the companies with the capacity to help customers in 2010 if needed. New aircraft serve as attractive lending collateral due to the mobility of the assets, operating efficiency compared to previous aircraft generations, and unique treatment in bankruptcy in some jurisdictions. The comments above apply to new aircraft financing, not refinancings of existing debt. Fitch estimates that there will be $14 billion of maturing airline debt in the U.S. alone in 2010- 2011. Economic Assumptions: Underpinning Fitch's A&D outlook is the firm's most recent global economic outlook, which as of October 2009 calls for global GDP to shrink 2.8% in 2009, followed by global growth recovery to 2% in 2010 and 2.7% in 2011. GDP should rise, but from a low base, and expansion will be weak relative to previous recoveries. There is some uncertainty in 2011 due to likely tightening of monetary and fiscal stimulus. Fitch expects GDP to grow 6.5% in the BRIC countries (Brazil, Russia, India, China) in 2010. Although global GDP looks set to return to positive growth, the absolute level of GDP is low and, in the U.S., it is possible that GDP may not return to the 2008 level until 2011. Fitch's specific A&D assumptions include no recovery in 2010 other than early cycle parts such as aftermarket. Late cycle segments such as original equipment will continue to be weak, showing some volume declines, although nowhere near as dramatic as in 2009 or in the last downturn that began in 2001. A more detailed report on the global 2010 aerospace & defense industry outlook will be available on the Fitch Ratings Web site at 'www.fitchratings.com' in January. Fitch-rated issuers and their current Issuer Default Ratings in the North American aerospace/defense sector: -- Alliant Techsystems Inc. (ATK) ('BB'; Outlook Stable); -- Boeing Company (BA) ('A+'; Outlook Negative); -- Bombardier Inc. (BBD/B) ('BB+'; Outlook Negative); -- General Dynamics Corporation (GD) ('A'; Outlook Stable); -- Goodrich Corporation (GR) ('BBB+'; Outlook Stable); -- Honeywell International Inc. (HON) ('A'; Outlook Negative); -- ITT Corporation (ITT) ('A-'; Outlook Stable) -- L-3 Communications Corporation (LLL) ('BBB-'; Outlook Stable); -- Lockheed Martin Corporation (LMT) ('A-'; Outlook Stable); -- Northrop Grumman Corporation (NOC) ('BBB+'; Outlook Stable); -- Raytheon Company (RTN) ('A-'; Outlook Stable); -- Rockwell Collins, Inc. (COL) ('A'; Outlook Stable); -- Textron Inc. (TXT) ('BB+'; Outlook Negative); -- Transdigm Group (TDG) ('B'; Outlook Stable); -- United Technologies Corporation (UTC) ('A+'; Outlook Stable). * Fitch Says Rating Trends Stable for Diversified Industrials ---------------------------------------------------------------- According to Fitch Ratings, the number of negative rating actions for the U.S. Diversified Industrials sector is likely to be much lower in 2010 than in 2009 as rating trends are expected to stabilize. A return to economic growth across many regions, the gradual completion of restructuring and downsizing programs, focus by issuers on stronger balance sheets, and a more stable operating environment compared to the early phase of the global recession will all contribute to more stability next year. The pace of ratings downgrades in the broader U.S. corporate bond market slowed materially in the third quarter of 2009, which would be consistent with expectations for a slowly improving global economy and better performance by most companies in the diversified industrial sector. 'Currently, Negative Rating Outlooks among diversified companies rated by Fitch significantly outnumber Positive Outlooks, but as issuers repair their credit profiles, Negative Outlooks could be revised to Stable and upgrades could increase,' said Eric Ause, Senior Director at Fitch. 'Positive rating actions would be expected to occur late in the credit cycle, possibly after 2010 as a return to stronger credit metrics may be slower than usual, which reflects the severity of the recent recession, simultaneous stresses in the credit markets that have pressured liquidity, and the potentially anemic pace of an economic rebound.' Issuers Expected to Rebuild Balance Sheets in 2010: Entering 2010, leverage is at relatively high levels for many diversified companies. Higher-than-normal leverage is not unusual at this stage of the credit cycle and is due largely to lower operating results. When operating results eventually improve, leverage can also be expected to improve. However, the recovery is anticipated to be slow which could hinder a return to lower leverage. This concern is partly mitigated by a trend towards managing balance sheets more conservatively in response to difficult capital markets and the evident value of liquidity. Several diversified companies issued meaningful amounts of equity in the first nine months of 2009 (GE, JCI, KMT, TXT), not including ETN which issued equity in 2008, and two issuers (GE, TXT) cut their dividends. Acquisition activity has been quiet but could increase in 2010, reflecting recent increases in valuations. Rebound in Operating Performance Expected to be Slow: Sales in 2010 for U.S. diversified companies are expected to improve slowly from trough levels reported during 2009, but the recovery from the recent recession could be fitful. Fitch anticipates that a full recovery will not occur until late-cycle sectors of the economy begin to revive, possibly as late as 2011. Underpinning Fitch's Diversified outlook is the firm's most recent global economic outlook, which as of October 2009 calls for global GDP to shrink 2.8% in 2009, the first time annual growth has been negative since WWII, followed by expected global growth recovery to 2% in 2010 and 2.7% in 2011. In the major advanced economies (MAEs) where diversified companies still conduct the bulk of their business, GDP is forecast to decline 3.7% in 2009 and return to a tepid growth rate of 1.2% in 2010. Fitch expects GDP to grow 6.5% in the BRIC countries (Brazil, Russia, India, China) in 2010. Although global GDP looks set to return to positive growth, the absolute level of GDP is low, and it is possible that in the U.S. GDP may not return to the 2008 level until 2011. Mixed Revenue Outlook: Diversified companies typically are composed of a mix of early-, mid- and late-cycle businesses. They also sell into diverse geographic end-markets. As a result, the pace at which sales recover will vary by issuer depending on each issuer's customer base. On a sequential basis, demand generally stopped falling by the third quarter of 2009. In many late-cycle markets, orders have stopped falling, although actual sales could decline for another quarter or two. Most issuers remain cautious about predicting the strength and timing of a rebound in sales. Normal economic signals are obscured by several factors: 1) inventory destocking earlier in 2009, followed by re-stocking which would represent a non-recurring boost to sales, 2) the U.S. cash-for- clunkers program that accelerated the replacement of older vehicles in the automotive sector, and 3) stimulus spending in China and cash-for-clunkers programs in Europe. Late-cycle businesses such as non-residential construction will remain weak well into 2010, offsetting improvements in early cycle businesses. In the aerospace sector, Fitch expects large commercial aircraft deliveries by Boeing and Airbus to decline approximately 5% (excluding potential 787 deliveries) from 2009, but there is a risk of additional production cuts, especially in 2011. However, high backlogs at Boeing and Airbus should buffer the expected decline. The aerospace aftermarket could show some improvement in late 2010 after declining sharply in 2009 due to a reduction in the number of flights and the cannibalization of parked planes by the airlines. Business jet deliveries appear likely to decline further in 2010 following a very weak year in 2009. Fitch expects business jet deliveries for all of 2009 to fall 35-40% from a cyclical peak in 2008, and a peak to trough decline of 50% would not be unrealistic. Diversified companies with material exposure to aerospace include GE, ETN, HON, TXT and UTX. Non-residential construction is expected to fall 12% in 2010 following a 16% decline in 2009 according to the American Institute of Architects' most recent Consensus Construction Forecast. It is possible that conditions could be weak well beyond 2010, depending on trends in vacancy rates and the availability of financing. Most diversified companies have some exposure to non-residential construction through electrical products (CBE, HUBB, ETN, TNB), controls and systems (HON, JCI), elevators (UTX), scaffolding (HSC) and a wide variety of other products and services. Some non-residential markets will benefit from expected spending related to stimulus and energy conservation projects, particularly institutional buildings for which the outlook is not as negative as it is for office, retail and industrial buildings. The U.S. market is expected to fare worse than other regions around the globe. Europe is also weak. Developing markets have largely performed better than developed markets and should return to normal growth more quickly. As the U.S. represents a large share of total non-residential construction, a protracted downturn in non-residential construction will temper the impact of improving results in other parts of the economy. Residential construction also is a significant market for diversified companies. The sector has shrunk so much over the past few years that there is not much downside risk. On the other hand, it is not clear how quickly the sector will recover given the large inventory of homes, a lack of liquidity affecting private financing, and declining valuations that leave many homeowners with negative equity. The outlook is more positive for shorter-cycle, consumption oriented businesses (services and parts) that should benefit from a resumption of stable economic activity. However, absolute sales levels are currently low and growth seems likely to be tepid as there are few end-markets where strong demand is expected. Sales growth could vary across sectors depending on their location in the capital investment chain. Sales of longer-lived parts and equipment may only recover gradually as existing production capacity and equipment is brought to full capacity or used up. Exceptions include certain energy and infrastructure markets. These markets are less directly tied to economic cycles than to long-term demand for energy and to demographic trends that affect public funding for water and transportation projects. Margins to Benefit from Cost Controls and Stabilizing Sales: During 2010 diversified companies can be expected to rebuild margins as they complete restructuring efforts and align costs with lower sales levels. Margin performance has varied widely in 2009. Some companies (UTX, TNB, FLS) reacted early or were able to take advantage of a variable cost structure to limit margin declines. In other cases, orders and sales dropped sharply, particularly in short-cycle businesses, contributing to temporary quarterly losses (KMT, ETN, JCI). Profitability typically was restored by the third quarter of 2009 when sales stopped falling at the rapid pace that occurred in the first half of the year. Although conditions should be more stable in 2010 than during 2009, demand remains weak and diversified companies will be challenged to balance the risk of excess capacity with the possible loss of market share when demand eventually improves. In late-cycle businesses, margins could remain under pressure well into 2010 until the recession runs its course. This concern is mitigated by a long order cycle, relative to short-cycle businesses, that helps smooth out production and reduce sales volatility. Cancellations by customers remain a risk, however, as does the availability of financing that often is an important factor in long-cycle projects. Government stimulus spending may limit these risks depending on where and when it is used. Other items could also affect margins in 2010. Raw material costs have fallen dramatically since peaking in 2008. However, some costs, such as oil and copper, have subsequently rebounded, highlighting volatility as an ongoing risk. In the near term, a weak economy can be expected to keep raw material costs at moderate levels. Pricing represents another risk. To date there has been limited pricing pressure, but it could increase as old contracts run off and as diversified companies and their customers continue to adjust to a period of low demand. Finally, pension expense could increase depending on market conditions. Any cash impact on pension contributions would appear to become more significant after 2010. Restructuring to Wind Down Gradually: As restructuring is gradually completed, margins in 2010 will be supported by lower costs and the absence of restructuring charges. Any increases in volume would also support margins through better absorption. Margins in 2010 may not increase to levels seen prior to the recession, but they should improve on a sequential basis compared to cyclical lows, many of which occurred in the second quarter of 2009. Steep sales declines in the first half of 2009 depressed operating margins, sometimes causing losses in certain businesses as capacity couldn't be reduced quickly enough to offset lower volumes. Temporary cost reductions were initiated by a large number of diversified companies during 2009 to protect profits and preserve liquidity. Their eventual reversal could partly negate the positive impact of restructuring. Some temporary cost reductions have already been reversed, but others remain in place and may not be reversed until economic conditions improve further. Temporary cuts included furloughs and reductions to compensation such as bonuses and 401(k) plans. Free Cash Flow Could Decline Modestly: Fitch anticipates that cash from operating activities in the near term may be only slightly lower than historical levels, relative to income. As explained above, aggressive restructuring has enabled many diversified companies to limit margin declines to modest levels. Working capital reductions have supported cash flow during 2009 as sales have fallen. Sales growth in 2010 could reverse this trend and require cash to be invested in working capital, but amounts likely would not be large given expectations for slow economic growth. Pension liabilities continue to be a concern. Although asset returns in 2009 have been favorable, interest rates remain low and may negate a portion of asset returns when net pension liabilities are calculated at the end of 2009. In many cases, required pension contributions in 2010 may remain low, but they could increase in subsequent years unless further strong asset returns and/or an increase in the discount rate help to reduce net pension liabilities. Fitch does not expect capital expenditures to increase substantially in 2010 compared to reduced levels in 2009. The primary driver is the lack of investment opportunities related to slow growth, although some issuers in 2009 reduced capital spending in an effort to preserve liquidity in the face of difficult conditions in the debt markets. As with working capital, any benefit to free cash flow would likely be reversed once sales improve and companies look to take advantage of internal growth opportunities. Uncertain Impact of Discretionary Expenditures: Acquisitions may become more common in 2010 as visibility into end-market demand improves further. Most diversified companies continue to maintain a list of potential acquisitions and could act quickly. Acquisition activity was relatively low in 2009 due to a focus by some issuers on preserving liquidity, the related issue of limited availability or high cost of financing, the unwillingness of sellers to accept low prices, and a priority on restructuring existing operations. Share repurchases could increase in 2010 but are not likely, in Fitch's view, to be nearly as substantial as in previous years. Issuers are focused on maintaining a strong balance sheet to offset the impact of weaker earnings, a lack of confidence in the availability of financing, and uncertainty about the economy. Even UTX and SPW, which are among the more consistent companies with respect to discretionary cash deployment, have scaled back share repurchases until conditions improve. Liquidity and Financing Expected to be Manageable: Disruptions in the capital markets during the past two years have faded but could have a long tail. Government support played a major role in stabilizing the capital markets and it continues to be important. Despite investor confidence that contributed to strong market returns during 2009, it is unclear to what degree the capital markets still depend on government support or how quickly government support will be phased out. Diversified companies sell into end-markets where financing may be needed to fund projects or large equipment. If the availability of financing continues to be problematic for customers of diversified companies, future sales could be negatively affected. Among the diversified companies rated by Fitch, financing continues to be available and liquidity concerns have been addressed successfully. The only exception was TXT's drawdown of its bank facilities in February 2009 as a defensive action to protect its liquidity while it proceeds with the wind-down of non- captive financing at Textron Financial. Even so, TXT was subsequently able to issue debt and equity. Although issuers are able to access the capital markets, there are concerns about market reliability. Issuers are likely to be less sensitive to conditions in the commercial paper market in 2010 than during the past one to two, largely because they have taken a more cautious approach to managing their balance sheets in response to the previous capital market disruptions. A number of issuers paid down commercial paper balances with proceeds from long-term debt or equity, while others paid down commercial paper as a way to reduce total debt and control leverage. Due to continuing uncertainty surrounding the capital markets, issuers could continue to look for opportunities to issue debt in 2010 while interest rates are favorable. Bank financing has become more restrictive, most notably when issuers look to renew revolving credit facilities that typically represent an important source of liquidity. Previous market losses and growing delinquencies that normally accompany recessions have pressured bank to improve their capitalization and reduce their risk exposure. As a result, banks are offering less favorable terms. In most cases, revolving credits are being renewed at lower amounts, shorter terms and higher pricing. If such terms don't eventually return toward previous levels, issuers may consider increasing their reliance on long-term debt and other sources of financing. Strategic Implications: The impact of the recession on credit metrics for certain issuers (ETN, JCI, TXT) has been exacerbated by a variety of factors such as acquisitions, end-market exposure, or strategic actions. Depending on the path of the economic recovery, more time than usual may be needed to return credit metrics to normal levels at these and other issuers similarly affected. Debt reduction can be expected to be a priority. However, a long-term risk is the possibility that it may be difficult to regain stronger credit metrics while at the same time funding strategically important activities such as acquisitions. As a result, there potentially could be a trade-off, at least in the short run, between profitability and competitiveness on one hand and, on the other hand, a strong balance sheet and financial flexibility. Issuers in the Diversified Industrial Sector: Fitch-rated issuers and their current Issuer Default Ratings in the U.S. diversified industrial sector: -- Cooper Industries (CBE) ('A'; Outlook Stable) -- Dover (DOV) ('A'; Outlook Negative) -- Eaton (ETN) ('A-'; Outlook Negative) -- Flowserve (FLS) ('BB+'; Outlook Positive) -- Fluor (FLR) ('A-'; Outlook Stable) -- Harsco (HSC) ('A-'; Outlook Stable) -- Honeywell (HON)('A'; Outlook Negative) -- Hubbell (HUBB) ('A'; Outlook Stable) -- IDEX (IEX) ('BBB+'; Outlook Stable) -- ITT Corporation (ITT) ('A-'; Outlook Stable) -- Johnson Controls (JCI)('BBB'; Outlook Stable) -- Kennametal (KMT) ('BBB-'; Outlook Negative) -- Parker-Hannifin (PH) ('A'; Outlook Stable) -- Rockwell Automation (ROK) ('A'; Outlook Negative) -- SPX Corporation (SPW) ('BB+; Outlook Stable) -- Textron (TXT) ('BB+'; Outlook Negative) -- Thomas & Betts (TNB) ('BBB'; Outlook Stable) -- Tyco International Ltd. (TYC) ('BBB+'; Outlook Stable) -- United Technologies (UTX) ('A+'; Outlook Stable) * Lawmakers Revise Creditor Haircut For Failing Banks ----------------------------------------------------- According to Law360, Reps. Brad Miller, D-N.C., and Dennis Moore, D-Kan., plan to offer an amendment to financial regulatory reform legislation that would reduce the amount by which the Federal Deposit Insurance Corp. can limit the claims of secured creditors of failed banks. * SIPC Chief Struggles with Madoff Claims ----------------------------------------- After decades largely spent shutting down no-name firms with a few hundred customers, Stephen P. Harbeck, the president and CEO of the Securities Investors Protection Corp. has spent the last year overseeing the largest bankruptcy on record, the failure of Lehman Brothers and the Ponzi scheme run by Bernard L. Madoff, according to ABI. * Barnes & Thornburg Brings Bankruptcy Pro to Atlanta ----------------------------------------------------- Law360 reports that Barnes & Thornburg LLP has added its first bankruptcy practitioner to its Atlanta office, luring a partner away from Kilpatrick Stockton LLP. * Scott Slaby Joins McDonald Hopkins as IP Associate ---------------------------------------------------- Scott M. Slaby has joined the Cleveland office of McDonald Hopkins LLC as an Associate in the firm's Intellectual Property Practice. Slaby has six years of experience counseling clients on obtaining and protecting intellectual property rights. In particular, he assists clients in domestic and foreign patent preparation and procurement in the chemical, biochemical, and mechanical arts. Slaby also prepares legal opinions regarding patentability, validity, and right to market. He has handled matters involving a variety of areas in the chemical and life-science arts. Slaby's experience includes trademark prosecution and counseling, as well as IP Due Diligence, and assisting in patent, trademark, copyright, and trade secret litigation, licensing, and agreement matters. Slaby received his J.D., summa cum laude, from Cleveland-Marshall College of Law in 2003. He received a Master of Science degree from John Carroll University in 1997 and a Bachelor of Science degree from John Carroll University in 1995. About McDonald Hopkins With more than 130 attorneys in Chicago, Cleveland, Columbus, Detroit, and West Palm Beach, McDonald Hopkins is a business advisory and advocacy law firm focused on business law, litigation, business restructuring and bankruptcy, healthcare, and estate planning. The president of McDonald Hopkins is Carl J. Grassi. * BOOK REVIEW: Unique Value - The Secret of All Great Business Strategies -------------------------------------------------------------- Author: Andrea Dunham and Barry Marcus, with Mark Stevens and Patrick Barwise Publisher: BeardBooks Softcover: 303 pp. List Price: $34.95 trade paper (reprint of 1993 book published by Macmillan). "Never stop leveraging what you do uniquely well," the authors tell the reader. This is the aim of a corporation seeking to profit from its unique value. Any good businessperson will know how to do this leveraging in his or her given business environment. The challenge, however, is determining the corporation's unique value; which is, in most cases, an interrelated set of strengths. The book instructs the reader on the process and method for determining unique value: how to recognize it; how to inculcate it into the corporate culture, and how to keep it in focus and preserve it during changing business conditions. Using many charts and diagrams, Dunham and Marcus illustrate their trademarked Unique Value = ROI Model. ROI -- return on investment -- is a familiar business ratio. It is not ordinarily linked to something called "unique value." But the authors make a compelling argument that the two are related. In fact, a case can be made that nearly every business achieves its ROI from its unique value, even though ROI is the universally accepted financial measure of a corporation's productivity. With Dunham and Marcus offering this new perspective on ROI, one quickly realizes that unique value (and ROI) is a function of marketing, customer relations, strategic planning, and other less tangible corporate factors. Although the authors do not elaborate on the relationship between unique value and these factors, it is easy to draw the conclusion that ROI is as much a result of image or market presence as it is financial planning and management. The Unique Value Model is best seen as a pyramid with the "informing concept" of the Unique Value strategy at its peak. The pyramid has four bases: Consumer/Customer, Business Systems and Skills, Product/Technology, and Competition. These are the four major interrelated factors of any business organization. The authors posit that each of these has to be "analyzed, structured, and fully understood" for the Unique Value = ROI Model to be informative and effective. The Unique Value Model serves as an inherent guide, or touchstone, for managing a corporation. Unique Value is ultimately concerned with decision-making and operations. This is what Marcus and Dunham mean by their advice to "never stop leveraging what you do uniquely well." The authors demonstrate how corporate managers can apply their knowledge of Unique Value to shape employee activity and interactions with customers or clients, plan marketing campaigns, decide upon the content and style of advertising, follow closely what certain competitors are doing, look for particular acquisitions, and other practices upon which the success of corporation depends. Mid- and lower-level employees may not even know there is such a core concept as Unique Value; but they will be a part of its embodiment from the leadership of executives and managers. IBM, Frito-Lay, Seagram's, Yamaha, and Holiday Inn are among the prominent businesses that are used as examples of how Unique Value can be applied to ROI. Aspects of the model are already widely, though, in many cases, only partially practiced by successful corporations. After reading this book, it's hard to imagine how a corporation can be successful without heeding the principles of unique value. The challenges posed by today's business environment are greater than ever. Competition is fierce, both at home and from abroad; consumer demands are fickle; and politics pervades everything from taxes to the environment. Corporations that can clearly articulate and unerringly implement their Unique Value have an advantage over their competitors. As the originators of the Unique Value = ROI Model, Marcus and Dunham no one can do a better job on instructing corporate leaders on this matter of vital interest to corporations. Andrea Dunham and Barry Marcus were partners in founding the management and marketing consulting firm Dunham & Marcus. One of the major developers of the proprietary Unique Value = ROI Model, Marcus is now CEO of Unique Value International, a consulting firm in the areas of marketing and brand development. ********* 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. The Sunday TCR delivers securitization rating news from the week then-ending. 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. Marites Claro, Joy Agravante, Rousel Elaine Tumanda, Howard C. Tolentino, Joseph Medel C. Martirez, Denise Marie Varquez, Philline Reluya, Ronald C. Sy, Joel Anthony G. Lopez, Cecil R. Villacampa, Sheryl Joy P. Olano, Carlo Fernandez, Christopher G. Patalinghug, and Peter A. Chapman, Editors. Copyright 2009. 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 **