/raid1/www/Hosts/bankrupt/TCR

/raid1/www/Hosts/bankrupt/TCR_Public/120629.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, June 29, 2012, Vol. 16, No. 179 Headlines ACL INVESTMENTS: Case Summary & 12 Largest Unsecured Creditors ADELPHIA COMMS: Buchanan Agrees to Pay $60MM to Settle Claims AEROGROW INTERNATIONAL: Incurs $3.5-Mil. Net Loss in Fiscal 2012 ALPHA NATURAL: Moody's Lowers CFR/PDR to 'B1'; Outlook Stable ALTEGRITY INC: Moody's Hikes Rating on $500MM Unsec Notes to Caa1 AMERICAN AIRLINES: Rejection of Chicago Ground Lease Approved AMERICAN AIRLINES: Retiree Committee Hiring Jenner & Block AMERICAN AIRLINES: Fee Examiner Proposes Bernstein as Counsel AMERICAN AIRLINES: Fee Examiner Taps Stuart Maue as Advisor APPLIED DNA: Sells 35.5 Million Common Shares for $1.5 Million APPLIED DNA: To Issue Add'l 250MM Under 2005 Incentive Plan ARCAPITA BANK: Court OKs Layoffs for 96, Incentives for 59 ARCH COAL: Moody's Lowers CFR/PDR to 'B2'; Outlook Stable BEHRINGER HARVARD: 2 Funds Struggle to Make Loan Payments BERNARD L. MADOFF: Wins Appeal Over $1.025BB Tremont Settlement BERNARD L. MADOFF: Younger Brother to Enter Guilty Plea BLITZ USA: To Shut Down Operations by End of July BLUE RAVEN: To Be Sold July 25 Without Formal Auction BROOKSTONE INC: S&P Withdraws 'B-' CCR on Lack of Market Interest BUFFETS INC: Second Amended Chapter 11 Plan Confirmed BUFFETS INC: Shutters Ryan's Grill Outlet in Houma, La. CAJUN ELECTRIC: 5th Cir. Clears SWEPCO of Reimbursement Obligation CAMBRIDGE HEART: Five Directors Elected at Annual Meeting CAPE JASMINE: Case Summary & 20 Largest Unsecured Creditors CCGI HOLDING: Moody's Withdraws 'B3' CFR on Debt Repayment CERIDIAN CORP: S&P Rates $720MM Senior Notes & Term Loan 'B-' CINRAM INT'L: Moody's Lowers CFR/PDR to 'C/D' Over CCAA Filing CHOICE HOTELS: S&P Cuts Rating on $250-Mil. Senior Notes to 'BB' CORNERSTONE BANCSHARES: Appoints Nathaniel Hughes as CEO CRYOPORT INC: Incurs $7.8 Million Net Loss in Fiscal 2012 D.R. HORTON: Strong Liquidity Cues Fitch to Affirm Low-B Ratings DBSI INC: Trustee Files Investor Suit Against Broker-Dealers DELTA AIR: Moody's Assigns 'Ba3' Rating to Class B Tranche DEWEY & LEBOEUF: Barclays, Citi Tell Ex-Partners to Repay Loans DOLLAR GENERAL: Moody's Rates $450MM Sr. Unsecured Notes 'Ba2' DM DEVELOPMENT: Involuntary Chapter 11 Case Summary EASTMAN KODAK: July 26 Hearing to Name Court for Patent Issues FASHION PLACE: Wins Confirmation of 2nd Amended Plan FIRST HORIZON: Mortgage Repurchase Cues Fitch to Lower Ratings FIRST SECURITY: Nine Directors Elected at Annual Meeting FISH & FISHER: Merchants & Farmers Bank Barred From Amending Suit FRANKLIN CREDIT: Sets July 6 as Record Date for Distribution GARLOCK SEALING: WD Pa. Court Defers to Delaware District Court GENERAL MOTORS: Salina Claims $13-Mil. Shortfall in Superfund Deal GENWORTH FINC'L: Moody's Places 'Ba1' Sub. Debt Rating on Review GEOEYE INC: S&P Lowers CCR to 'B-' on NGA Funding Uncertainty GLOBAL AVIATION: S&P Withdraws 'D' Corporate Credit Rating HAMPTON ROADS: Closes on $50MM Private Placement of Common Stock HEARTHSTONE HOMES: Panel's Deadline to Fight Disband Motion Moved HRK HOLDINGS: Manatee County Property Owner Files in Tampa INTELLIGRATED INC: S&P Affirms 'B' Corporate Credit Rating LDK SOLAR: Incurs $177 Million Net Loss in First Quarter LIBERTY INTERACTIVE: Moody's Affirms B1 CFR, Rates QVC Notes Ba2 LIGHTSQUARED INC: Falcone, Harbinger Sued for Securities Fraud LONG ISLAND RUBBISH: Judge Grossman Replaces Eisenberg LUMBER PRODUCTS: Rugby Acquires All Assets Under Section 363 Sale LYMAN LUMBER: Has Green Light to Hire Real Estate Counsel MARIANA RETIREMENT: Won't Appeal Case Dismissal Order MARITIME SERVICES: Case Summary & 20 Largest Unsecured Creditors MF GLOBAL: Canadian Settlement Brings $60.6 Million MMRGLOBAL INC: Extends Maturity of RHL Group Note for One Year MOUNTAIN COUNTRY: Court Accepts Involuntary Chapter 11 Petition MOUNTAIN NATIONAL: Bank Now "Significantly Undercapitalized" MP3TUNES LLC: CEO Not Covered by Automatic Stay in Chapter 7 NORTHAMPTON GENERATING: Gets Short Exclusivity Extension NORTHSTAR AEROSPACE: Wins Court OK to Auction Assets OASIS PETROLEUM: Moody's Lifts CFR to 'B2'; Rates New Notes 'B3' OPTIMUMBANK HOLDINGS: Fails to Comply with Nasdaq Bid Price Rule PAL CORPORATION: Case Summary & Largest Unsecured Creditor PETROPLUS HOLDINGS: JV to Convert Coryton Refinery Into Terminal PHILADELPHIA ORCHESTRA: No Creditors Vote Against Plan PHOENIX PREMIER: Plan Lacks "Good Faith" Requirement PLUM TV: Sells Business, Converts Case to Chapter 7 PREMIER PAVING: Creditors Can Hire Onsager Staelin as Counsel QVC INC: Fitch Assigns 'BB' Issuer Default Rating RE LOANS: Court Confirms Modified Fourth Amended Plan RESIDENTIAL CAPITAL: Has Final Approval of $1.4BB Barclays Loan RESIDENTIAL CAPITAL: Wins Nod of $220-Mil. Ally Facility RESIDENTIAL CAPITAL: Wins Approval to Use Cash Collateral RITZ CAMERA: Crystal Finance DIP Facility Has Interim Approval RITZ CAMERA: Sec. 341 Creditors' Meeting Set for July 31 RITZ CAMERA: Can Hire Kurtzman Carson as Claims Agent RITZ CAMERA: DIP Lender, Kimco Realty Tap Morgan Lewis as Counsel ROSETTA GENOMICS: NYSDOH Conditionally Approves miRview RUDEN MCCLOSKY: Reiterates Buyer's Chapter 7 Objections SAFETY-KLEEN: CBS Off Hook in Kansas Facility Cleanup SAGE COLLEGES: Moody's Affirms 'B2' Long-Term Debt Rating SATNAM LODGING: Case Summary & 20 Largest Unsecured Creditors SEALY CORP: Reports $1.6 Million Net Income in Q2 2012 SEQUA CORP: S&P Raises Corp. Credit Rating to 'B'; Outlook Stable SF FUEL: Voluntary Chapter 11 Case Summary SHAMROCK-HOSTMARK: 5 Hotels File for Chapter 11 in Chicago SM ENERGY: S&P Rates New $300MM Senior Unsecured Notes 'BB' STOCKTON, CA: Moody's Cuts General Fund Debt Rating to 'Caa3' SUNSHINE GROUP: Voluntary Chapter 11 Case Summary THERMOENERGY CORP: Has Development Agreement with Itea THERMODYNETICS INC: Suspending Filing of Reports with SEC TRAINOR GLASS: Hires Toney Capital to Auction Fishing Boat TRAINOR GLASS: Court Approves Branford as Auctioneer USG CORP: Contributes 1.2-Mil. Shares to Retirement Plan Trust VIEW SYSTEMS: Stegman & Company Replaces Seale as Accountants VITRO SAB: Must Have Stay Immediately to Halt Asset Seizures VUZIX CORP: Five Directors Elected at Annual Meeting WATERLOO GARDENS: Case Summary & 20 Largest Unsecured Creditors WATERLOO LANDSCAPING: Voluntary Chapter 11 Case Summary WATERSCAPE RESORT: Owes $11MM for Unpaid Work, Developer Says YOUR LOCAL MARKET: Case Summary & 20 Largest Unsec. Creditors ZAYO GROUP: S&P Keeps 'B' Corp. Credit Rating; Outlook Stable * Judge Rakoff Tips His Hand on Upcoming Safe-Harbor Case * Multiple Bankruptcies Add Only 90 Days for Tax Claims * Leveraged Buyout Financing Rekindles Junk-Bond Issuance * Moody's Says Weak Consumer Confidence Hits U.S. Gaming Sector * Moody's Cuts Ratings on Spanish Banks' North American Units * Pa. Lawmakers to Extend Bankr. Moratorium for Distressed Cities * Living Wills Give Banks a Chance to Uncover Own Weak Spots * BOOK REVIEW: Hospital Turnarounds - Lessons in Leadership ********* ACL INVESTMENTS: Case Summary & 12 Largest Unsecured Creditors -------------------------------------------------------------- Debtor: ACL Investments 2805 East Oakland Park Blvd, #108 Fort Lauderdale, FL 33306 Bankruptcy Case No.: 12-25527 Chapter 11 Petition Date: June 26, 2012 Court: United States Bankruptcy Court Southern District of Florida (Fort Lauderdale) Judge: Raymond B. Ray Debtor's Counsel: David H. Haft, Esq. LAW FIRM OF GARY M. SINGER, P.A. 4577 Nob Hill Rd #206 Sunrise, FL 33351 Tel: (954) 851-1448 Fax: (954) 252-2189 E-mail: david@garysingerlaw.com Estimated Assets: $100,001 to $500,000 Estimated Debts: $1,000,001 to $10,000,000 A copy of the Company's list of its 12 largest unsecured creditors filed together with the petition is available for free at http://bankrupt.com/misc/flsb12-25527.pdf The petition was signed by Carlos Prieto, general partner. ADELPHIA COMMS: Buchanan Agrees to Pay $60MM to Settle Claims ------------------------------------------------------------- Maria Chutchian at Bankruptcy Law360 reports that Buchanan Ingersoll & Rooney PC has agreed to pay $60 million to settle claims surrounding its representation of Adelphia Communications Corp. before the company filed for Chapter 11 protection, according to documents filed in New York bankruptcy court Wednesday. Of that amount, $20 million will go directly to the Adelphia Recovery Trust, and the remaining $40 million will be divided among the trust and Adelphia investors who filed separate claims against the firm, according to Bankruptcy Law360. About Adelphia Communications Based in Coudersport, Pennsylvania, Adelphia Communications Corporation was once the fifth-biggest cable company. Adelphia served customers in 30 states and Puerto Rico, and offered analog and digital video services, Internet access and other advanced services over its broadband networks. Adelphia collapsed in 2002 after disclosing that founder John Rigas and his family owed $2.3 billion in off-balance-sheet debt on bank loans taken jointly with the company. Mr. Rigas is serving 12 years in prison, and his son Timothy is serving 15 years. Adelphia Communications and its more than 200 affiliates filed for Chapter 11 protection (Bankr. S.D.N.Y. Lead Case No. 02-41729) on June 25, 2002. Willkie Farr & Gallagher represented the Debtors in their restructuring effort. PricewaterhouseCoopers served as the Debtors' financial advisor. Kasowitz, Benson, Torres & Friedman LLP and Klee, Tuchin, Bogdanoff & Stern LLP represented the Official Committee of Unsecured Creditors. Adelphia Cablevision Associates of Radnor, L.P., and 20 of its affiliates, collectively known as Rigas-Managed Entities, were entities that were previously held or controlled by members of the Rigas family. In March 2006, the rights and titles to these entities were transferred to certain subsidiaries of Adelphia Cablevision LLC. The RME Debtors filed for Chapter 11 protection (Bankr. S.D.N.Y. Case Nos. 06-10622 through 06-10642) on March 31, 2006. Their cases were jointly administered under Adelphia Communications and its debtor-affiliates' Chapter 11 cases. The Bankruptcy Court confirmed the Debtors' Joint Chapter 11 Plan of Reorganization on Jan. 5, 2007. That plan became effective on Feb. 13, 2007. The Adelphia Recovery Trust, a Delaware Statutory Trust, was formed pursuant to the Plan. The Trust holds certain litigation claims transferred pursuant to the Plan against various third parties and exists to prosecute the causes of action transferred to it for the benefit of holders of Trust interests. Lawyers at Kasowitz, Benson, Torres & Friedman, LLP (NYC), represent the Adelphia Recovery Trust. AEROGROW INTERNATIONAL: Incurs $3.5-Mil. Net Loss in Fiscal 2012 ---------------------------------------------------------------- Aerogrow International, Inc., filed with the U.S. Securities and Exchange Commission its annual report on Form 10-K disclosing a net loss of $3.55 million on $8.23 million of net product sales for the year ended March 31, 2012, a net loss of $7.92 million on $11.31 million of net product sales for the year ended March 31, 2011, and a net loss of $6.33 million on $17.25 million of net product sales for the year ended March 31, 2010. The Company's balance sheet at March 31, 2012, showed $4.37 million in total assets, $9.50 million in total liabilities and a $5.12 million total stockholders' deficit. AeroGrow reported an EBITDA profit of $298,000, representing the Company's first-ever full year EBITDA profit, and a $3.1 million improvement over the EBITDA loss reported in the prior year. The turnaround was driven by the Company's success in improving marketing efficiency, increasing gross margins, exiting low margin sales channels, and reducing overhead costs. "Delivering our first-ever full year EBITDA profit marks a proud day for AeroGrow," said Mike Wolfe, AeroGrow's President and Chief Executive Officer. "We've worked hard to restructure our operations, shift our focus to the direct-to-consumer sales channels and dramatically reduce our breakeven revenue level. Our results for the year show the benefits of those efforts." Ehrhardt Keefe Steiner & Hottman PC, in Denver, Colorado, did not include a "going concern" qualification in its reporton the financial statements for the fiscal year ended March 31, 2012. Last year, as reported in the TCR on Aug. 30, 2011, Eide Bailly LLP, in Fargo, North Dakota, said the Company does not currently have sufficient liquidity to meet its anticipated working capital, debt service and other liquidity needs in the near term, which raise substantial doubt about the Company's ability to continue as a going concern. On Nov. 17, 2011, Eide Bailly LLP resigned as the independent registered public accounting firm of the Company. Eide Bailly had been the independent registered public accounting firm of the Company since Nov. 1, 2008. A copy of the Form 10-K is available for free at: http://is.gd/DjelYT About AeroGrow Boulder, Colo.-based AeroGrow International, Inc., is a developer, marketer, direct-seller, and wholesaler of advanced indoor garden systems designed for consumer use and priced to appeal to the gardening, cooking, and healthy eating, and home and office decor markets. ALPHA NATURAL: Moody's Lowers CFR/PDR to 'B1'; Outlook Stable ------------------------------------------------------------- Moody's Investors Service downgraded the corporate family rating (CFR) of Alpha Natural Resources, Inc. (Alpha) to B1 from Ba2. Moody's also downgraded Alpha's probability of default rating (PDR) to B1 from Ba2 and senior unsecured ratings to B2 from Ba3. Moody's revised the company's Speculative Grade Liquidity (SGL) rating to SGL-2 from SGL-1. The outlook is stable. Moody's took the following rating actions: Downgrades: Issuer: Alpha Natural Resources, Inc Corporate Family Rating, Downgraded to B1 from Ba2 Probability of Default Rating, Downgraded to B1 from Ba2 Speculative Grade Liquidity Rating, Downgraded to SGL-2 from SGL-1 Multiple Seniority Shelf, Downgraded to (P)B2 from (P)Ba3 Senior Unsecured Regular Bond/Debenture, Downgraded to a range of B2, LGD4, 69% from a range of Ba3, LGD4, 68% Outlook Actions: Issuer: Alpha Natural Resources, Inc Outlook, Changed To Stable From Negative Ratings Rationale The downgrade reflects weakening operating performance due to the headwinds facing the US coal industry, and in particular the Central Appalachian region, including increasing costs due to difficult geology and regulatory pressures; weak international demand for metallurgical coal due to ongoing sovereign crisis in Europe and slowing growth rates in steel production in China; and weak domestic demand for steam coal due to ongoing coal to gas substitution, mild weather and environmental regulations that disadvantage coal. Alpha's acquisition of Massey Energy on June 1, 2011 significantly increased Alpha's exposure to the Central Appalachian region. After the acquisition, the company has the region's most shipments (by volume) and largest reserves and a commanding North American position in metallurgical coal. Unfortunately, this region has been most affected by the ongoing coal-to-gas substitution, increasing costs, as well as falling met coal prices and demand. Alpha has recently announced curtailment of coal mining operations in northern and southern Kentucky in response to the market conditions, in line with the reduced shipment guidance for 2012 provided in May 2012. Moody's expects that Alpha's Debt/ EBITDA, as adjusted, will be in the 4.5x -- 6.0x range in 2012, while EBIT/ Interest will be negative. Moody's believes that these metrics will deteriorate further in 2013, as the company will likely continue to operate at reduced volumes, while the average delivered price of thermal coal will decline due to the collapse in spot prices in the last several months. Moody's expects metallurgical coal market to remain soft for the next several months, which will limit the extent to which metallurgical coal business can offset the margin compression experienced on the thermal side. Moody's expects free cash flow to debt ratio to be below 5% in 2012, potentially declining further in 2013. Alpha's B1 corporate family rating continues to reflect its position as one of the top three U.S. coal companies in terms of production and reserves, its operating diversity with approximately 130 coal mines and a presence in Appalachia and the Powder River Basin (PRB), its ability to export coal though several East Coast and Gulf terminals, blending opportunities and synergies that arise from the Massey merger, and its spproximately 5 billion tons of reserves. While the change in SGL rating to SGL-2 from SGL-1 reflects the expected contraction in internal cash flows and tighter headroom under covenants, Alpha continues to have good liquidity, including approximately $700 million of cash, cash equivalents and marketable securities as of March 31, 2012, and availability of $1.1 billion under the revolver and AR securitization facilities. On June 27, 2012, Alpha announced credit facility amendments that temporarily relaxed financial covenants through the end of 2014. Although Moody's expects Alpha to be in compliance with its debt covenants, as revised, over the next twelve months, Moody's believes that the headroom under the interest coverage covenant may be tight in 2013. Factors that could lead to a further downgrade include a deterioration of prices, further cost increases, and permitting, regulatory, or litigation matters that impact output and costs. An increase in leverage above 5x on a sustained basis, persistently negative free cash flows, or an erosion of liquidity would be signs pointing to a possible downgrade. Although upward momentum on the ratings is limited due to industry conditions, an upgrade could result if operating performance improves and Debt/ EBITDA is considered sustainable below 4.5x, and free cash flow to debt is above 3%. The principal methodology used in rating Alpha was the Global Mining Industry Methodology published in May 2009. Other methodologies used include Loss Given Default for Speculative- Grade Non-Financial Companies in the U.S., Canada and EMEA published in June 2009. ALTEGRITY INC: Moody's Hikes Rating on $500MM Unsec Notes to Caa1 ----------------------------------------------------------------- Moody's Investors Service raised the ratings outlook of Altegrity, Inc. to stable from negative, assigned a B1 rating to the company's new $75 million revolver and withdrew the rating on the redeemed $90 million revolver. Additionally, the senior unsecured notes rating was upgraded to Caa1 from Caa2, reflecting significantly less secured debt ahead of the notes as a result of recent term loan repayments. All other ratings, including the B3 Corporate Family Rating ("CFR"), were affirmed. Rating assigned (and Loss Given Default Assessment): $75 million senior secured revolver expiring November 2014, B1 (LGD2, 26%) Rating withdrawn due to redemption: $90 million first lien revolver expiring August 2013, B1 (LGD2, 28%) Ratings upgraded (and LGD assessments adjusted) $290 million 10.5% senior unsecured notes due 2015, to Caa1 (LGD5, 76%) from Caa2 (LGD5, 79%) $210 million 12% senior unsecured notes due 2015, to Caa1 (LGD5, 76%) from Caa2 (LGD5, 79%) Ratings affirmed (and LGD assessments adjusted, as noted): Corporate Family Rating, B3 Probability of Default Rating, B3 $1,042 (originally $1,385) million senior secured term loans due 2015, B1 (LGD2, to 26% from 28%) $150 million 11.75% senior subordinated notes due 2016, Caa2 (LGD6, to 92% from 93%) Ratings Rationale "The change in outlook to stable from negative reflects positive revenue growth trends in Altegrity's commercial businesses, which we believe will drive higher consolidated earnings in fiscal 2013 than originally anticipated," stated Moody's analyst Suzanne Wingo. However, overall profits will likely be tempered by weak results in the government segment where the cost to complete certain security clearances has risen due to new requirements under the field investigations contract. Altegrity may have the opportunity to enhance margins in the government and commercial screening businesses through restructuring and integration initiatives that are currently underway. As such, Moody's expects required debt reduction and modest EBITDA growth to lower debt / EBITDA to about 6.7 times at the end of fiscal 2013, within the range of other companies also at the B3 rating level. Over the next twelve months, Moody's expects Altegrity to generate free cash flow of at least $50 million. The outlook change further reflects Altegrity's improved liquidity profile resulting from an effective extension in the maturity date of the revolver to November 2014 and from amended covenant levels. Altegrity's B3 CFR reflects high financial leverage, despite over $300 million of permanent debt reduction in the past year made from proceeds of a divestiture. Continuing macroeconomic softness and tepid employment churn rates are not expected to improve significantly, while uncertainty builds regarding a possible U.S. government budget sequestration and the potential negative impact on the government segment's investigation volumes. The ratings are supported by adequate liquidity, considerable size and scale, the diversification of revenues, leading market positions, and the value of the Kroll brand. The ratings could be downgraded if revenue and earnings decline such that interest coverage (EBITDA less capex / interest) approaches 1x, liquidity deteriorates, or the capital structure appears unsustainable. Conversely, the ratings could be upgraded if the government segment's revenue and cost structure stabilize such that debt to EBITDA can be sustained below 6x. Altegrity provides background investigations for the U.S. government; employment background screening for commercial customers; technology-driven legal services and software for data management; and investigative, analytic, consulting, due diligence, and security services. Altegrity is principally owned by investment funds affiliated with Providence Equity Partners. Annual revenues are approximately $1.5 billion. The principal methodology used in rating Altegrity was the Global Business & Consumer Service Industry Methodology published in October 2010. Other methodologies used include Loss Given Default for Speculative-Grade Non-Financial Companies in the U.S., Canada and EMEA published in June 2009. AMERICAN AIRLINES: Rejection of Chicago Ground Lease Approved ------------------------------------------------------------- Judge Sean Lane authorized the rejection of the ground lease between American Airlines, Inc., and the City of Chicago, effective June 21, 2012. The deadline to file a proof of claim arising from the rejection of the Ground Lease is on or before July 21. The Court also approved the letter agreement between American and Sky Chefs, Inc. On Oct. 8, 1969, Sky Chefs and the City entered into the Ground Lease, which afforded Sky Chefs the use and enjoyment of certain premises and facilities owned by the City at Chicago O'Hare International Airport. Sky Chefs subsequently assigned its interests under the Ground Lease to Skyhare Corp. In turn, Skyhare subleased its interest in the Ground Lease back to Sky Chefs by a Lease and Agreement. Fifteen years later, Skyhare assigned its interest in the Ground Lease to American. Sky Chefs also assigned its interest in the Lease and Agreement and its remaining interest in the Ground Lease to American. In turn, American subleased its interest in the Ground Lease back to Sky Chefs by an Agreement of Sublease for In-flight Kitchen Premises at Chicago-O'Hare International Airport. The City consented to the assignment of Skyhare's interests to American and the subletting of the Premises by American to Sky Chefs by the Sublease. The City further released Sky Chefs of its obligations under the Ground Lease. The Commissioner of Aviation of the City also gave its consent to the transactions. The Premises currently are not being used by American or Sky Chefs. The Debtors seek to reject the Premises because it constitutes an unnecessary ongoing expense and has no value to their estates. To consensually resolve issues relating to the Sublease, American and Sky Chefs negotiated an agreement, which provides that the Sublease will terminate; provided that until the Rejection Date, Sky Chefs' obligations under the Sublease will continue to apply. In turn, Sky Chefs will provide to American credits totaling $6.5 million against future amounts due from American to Sky Chefs for catering and related services. The Credits will be equally spread over a period of five years, with annual Credits in the amount of $1.3 million beginning on September 1, 2013. The Parties further agree that as of the Rejection Date, American waives any and all claims it may have against Sky Chefs relating in any way to Sky Chefs' obligations under the Sublease. Sky Chefs will retain no further obligations under the Sublease. About American Airlines AMR Corp. and its subsidiaries including American Airlines, the third largest airline in the United States, filed for bankruptcy protection (Bankr. S.D.N.Y. Lead Case No. 11-15463) in Manhattan on Nov. 29, 2011, after failing to secure cost-cutting labor agreements. AMR, previously the world's largest airline prior to mergers by other airlines, is the last of the so-called U.S. legacy airlines to seek court protection from creditors. American Airlines, American Eagle and the AmericanConnection carrier serve 260 airports in more than 50 countries and territories with, on average, more than 3,300 daily flights. The combined network fleet numbers more than 900 aircraft. The Company reported a net loss of $884 million on $18.02 billion of total operating revenues for the nine months ended Sept. 30, 2011. AMR recorded a net loss of $471 million in the year 2010, a net loss of $1.5 billion in 2009, and a net loss of $2.1 billion in 2008. AMR's balance sheet at Sept. 30, 2011, showed $24.72 billion in total assets, $29.55 billion in total liabilities, and a $4.83 billion stockholders' deficit. Weil, Gotshal & Manges LLP serves as bankruptcy counsel to the Debtors. Paul Hastings LLP and Debevoise & Plimpton LLP Groom Law Group, Chartered, are on board as special counsel. Rothschild Inc., is the financial advisor. Garden City Group Inc. is the claims and notice agent. Jack Butler, Esq., John Lyons, Esq., Felecia Perlman, Esq., and Jay Goffman, Esq., at Skadden, Arps, Slate, Meagher & Flom LLP serve as counsel to the Official Committee of Unsecured Creditors in AMR's chapter 11 proceedings. Togut, Segal & Segal LLP is the co-counsel for conflicts and other matters; Moelis & Company LLC is the investment banker, and Mesirow Financial Consulting, LLC, is the financial advisor. Bankruptcy Creditors' Service, Inc., publishes AMERICAN AIRLINES BANKRUPTCY NEWS. The newsletter tracks the Chapter 11 proceeding undertaken by AMR Corp. and its affiliates. (http://bankrupt.com/newsstand/or 215/945-7000). AMERICAN AIRLINES: Retiree Committee Hiring Jenner & Block ---------------------------------------------------------- The Section 1114 Committee of Retired Employees in American Airlines Inc.'s Chapter 11 cases seeks permission from the U.S. Bankruptcy Court for the Southern District of New York to retain Jenner & Block LLP as its counsel, nunc pro tunc to June 8, 2012. As the Retiree Committee's counsel, Jenner & Block will: (a) provide assistance, advice and representation concerning any proposed modification of the benefits to be provided to the Retirees; (b) negotiate with the Debtors concerning any proposed modification of the Retirees' benefits in general; (c) represent the Retiree Committee in any proceedings and hearings that involve or might involve matters pertaining to the benefits of the Retirees; (d) prepare on behalf of the Retiree Committee any necessary adversary complaints, motions, applications, orders and other legal papers relating to such matters; (e) advise the Retiree Committee of its powers and duties; (f) prosecute and defend litigation matters and such other matters concerning any proposed modification of the Retirees' medical benefits,or the Retirees' benefits in general, that might arise; (g) advise the Retiree Committee with respect to bankruptcy, general corporate, labor, employee benefits and litigation issues concerning any proposed modification of the Retirees' medical benefits, or the Retirees' benefits in general; and (h) perform such other legal services as may be necessary and appropriate for the efficient and economical resolution of the Retiree Committee's consideration of any proposal to modify the Retirees' benefits. Jenner & Block will be paid according to its professionals' hourly rates ranging from $560 to $1,050 for partners; $330 to $600 for associates; $180 to $295 for paralegals; and $165 to $180 for project assistants. The firm's professionals expected to be most active in this engagement are: Name Title Rate per Hour ---- ----- ------------- Catherine L. Steege Partner $850 Charles B. Sklarsky Partner $925 Marc B. Hankin Partner $875 Melissa M. Hinds Partner $575 David H. Hixson Associate $550 Michael H. Matlock Paralegal $295 The firm will also be reimbursed for expenses to be incurred. Catherine L. Steege, Esq., a partner at Jenner & Block LLP, in New York -- csteege@jenner.com -- discloses that her firm currently represents and has represented certain parties-in- interest in matters unrelated to the Debtors, a list of which is available for free at: http://bankrupt.com/misc/AmAir_JennerClients.pdf To address certain disclosures sought by the U.S. Trustee, Ms. Steege filed a supplemental disclosure to disclose that a certain Jenner & Block partner who owned 5,000 shares of AMR stock has sold her stock. She notes that three Jenner & Block partners and one associate served as clerks for judges in the Court. Specifically, Patrick Trostle clerked for Judge Francis G. Conrad from 1992 to 1994; Marc Hankin clerked for Judge Burton R. Lifland from 1992 to 1994; Heather McArn clerked for Judge Lifland from 1994 to 11996 and for Judge Arthur J. Gonzalez from 2007 to 2008; and Carl Wedoff clerked for Judge Stuart M. Bernstein from 2009 to 2011. It is expected that Mr. Hankin will perform work for the Retiree Committee and depending on the requirements of the client, Mr. Trostle, Ms. McArn or Mr. Wedoff may also perform work for the Retiree Committee. Ms. Steege further relates that American Airlines is not a current firm client and the firm last did work for American Airlines in 2009. The firm represented American Airlines in discrete matters primarily involving litigation. The most significant of these representations was the representation of American Airlines in connection with lawsuits filed over the 1994 American Eagle accident in Roselawn, Indiana, and the 2001 Queens, New York accident, and the representation of American Airlines between 1989 and 2003 in class action litigation mainly pending in the Circuit Court of Cook County, Illinois over the frequent flyer program. Jenner & Block has not represented American Airlines on any matters involving retiree benefits, labor issues, restructuring matters, corporate work or matters involving these Chapter 11 cases, she clarifies. Ms. Steege says Jenner & Block is a party to a two-year agreement with American Airlines entitled "Corporate Pricing Discount Terms' dated February 20, 2011, which applies to tickets purchased by the firm. As of November 29, 2011, Jenner & Block did not have any outstanding credits or other amounts owed to it by American Airlines. At the request of the U.S. Trustee, the firm will record its time and expenses utilizing these categories: attendance at committee meeting, committee administration, attendance at hearings, travel, expenses, fee/employment applications, benefits negotiations, discovery and trial preparation, claims, she adds. Ms. Steege maintains that Jenner & Block is a "disinterested person" as the term is defined in Section 101(14) of the Bankruptcy Code. About American Airlines AMR Corp. and its subsidiaries including American Airlines, the third largest airline in the United States, filed for bankruptcy protection (Bankr. S.D.N.Y. Lead Case No. 11-15463) in Manhattan on Nov. 29, 2011, after failing to secure cost-cutting labor agreements. AMR, previously the world's largest airline prior to mergers by other airlines, is the last of the so-called U.S. legacy airlines to seek court protection from creditors. American Airlines, American Eagle and the AmericanConnection carrier serve 260 airports in more than 50 countries and territories with, on average, more than 3,300 daily flights. The combined network fleet numbers more than 900 aircraft. The Company reported a net loss of $884 million on $18.02 billion of total operating revenues for the nine months ended Sept. 30, 2011. AMR recorded a net loss of $471 million in the year 2010, a net loss of $1.5 billion in 2009, and a net loss of $2.1 billion in 2008. AMR's balance sheet at Sept. 30, 2011, showed $24.72 billion in total assets, $29.55 billion in total liabilities, and a $4.83 billion stockholders' deficit. Weil, Gotshal & Manges LLP serves as bankruptcy counsel to the Debtors. Paul Hastings LLP and Debevoise & Plimpton LLP Groom Law Group, Chartered, are on board as special counsel. Rothschild Inc., is the financial advisor. Garden City Group Inc. is the claims and notice agent. Jack Butler, Esq., John Lyons, Esq., Felecia Perlman, Esq., and Jay Goffman, Esq., at Skadden, Arps, Slate, Meagher & Flom LLP serve as counsel to the Official Committee of Unsecured Creditors in AMR's chapter 11 proceedings. Togut, Segal & Segal LLP is the co-counsel for conflicts and other matters; Moelis & Company LLC is the investment banker, and Mesirow Financial Consulting, LLC, is the financial advisor. Bankruptcy Creditors' Service, Inc., publishes AMERICAN AIRLINES BANKRUPTCY NEWS. The newsletter tracks the Chapter 11 proceeding undertaken by AMR Corp. and its affiliates. (http://bankrupt.com/newsstand/or 215/945-7000). AMERICAN AIRLINES: Fee Examiner Proposes Bernstein as Counsel ------------------------------------------------------------- Robert J. Keach, Esq., the court-appointed fee examiner in American Airlines' Chapter 11 cases, seeks the Court's permission to retain Bernstein, Shur, Sawyer & Nelson, P.A., as his counsel, nunc pro tunc to May 1, 2012. As the Fee Examiner's counsel, Bernstein Shur will: (a) review the fee applications and related invoices for compliance with the applicable provisions of the Bankruptcy Code, the Bankruptcy Rules, the U.S. Trustee Guidelines, and the Local Rules and Orders of the Court; (b) assist the Fee Examiner in any hearings or other proceedings before the Court to consider the Fee Applications including, without limitation, advocating positions asserted in the reports filed by the Fee Examiner and on behalf of the Fee Examiner; (c) assist the Fee Examiner with legal issues raised by inquiries to and from the Retained Professionals and any other professional services provider retained by the Fee Examiner; (d) where necessary, attend meetings between the Fee Examiner and the Retained Professionals; (e) assist the Fee Examiner with the preparation of preliminary and final reports regarding professional fees and expenses; (f) assist the Fee Examiner in developing protocols and making reports and recommendations; and (g) provide other services as the Fee Examiner may seek. Bernstein Shur will be paid according to its professionals' customary hourly rates that range from $490-330 for shareholders; $250-$160 for associates; and $140-$110 for paraprofessionals. The firm will also be reimbursed for expenses incurred. The specific professionals who will be assigned in this engagement are: Name Title Rate per Hour ---- ----- ------------- Robert J. Keach Shareholder $490 Paul McDonald Shareholder $385 Leonard M. Gulino Shareholder $355 Michael A. Fagone Shareholder $340 David S. Anderson Shareholder $340 Jennifer Rood Shareholder $330 Jessica A. Lewis Associate $250 Halliday Moncure Associate $220 Jeremy Fischer Associate $200 Maire B. Corcoran Associate $190 Ellen M. Palminteri Associate $160 Angela Stewart Paralegal $140 Kathleen Sawyer Paralegal $110 Mr. Keach, in his capacity, as shareholder at Bernstein, Shur, Sawyer & Nelson, P.A., in Portland, Maine, discloses that certain former or current clients of the firm may be creditors of the Debtors in matters unrelated to the Debtors. He further discloses that he is a co-chair of the American Bankruptcy Institute Commission to Study the Reform of Chapter 11. He is a past president of the ABI and in various capacities at ABI, has worked with individuals associated with the retained professionals on ABI business or projects and served on seminar panels with individuals associated with the retained professionals. Bernstein Shur and Mr. Keach have represented clients adverse to clients represented by certain of the retained professionals. Bernstein Shur has also represented the Bank of New York Mellon, a member of the Creditors' Committee, on matters unrelated to the Debtors. Despite those disclosures, Mr. Keach insists that Bernstein Shur is a "disinterested person" as the term is defined in Section 101(14) of the Bankruptcy Code. About American Airlines AMR Corp. and its subsidiaries including American Airlines, the third largest airline in the United States, filed for bankruptcy protection (Bankr. S.D.N.Y. Lead Case No. 11-15463) in Manhattan on Nov. 29, 2011, after failing to secure cost-cutting labor agreements. AMR, previously the world's largest airline prior to mergers by other airlines, is the last of the so-called U.S. legacy airlines to seek court protection from creditors. American Airlines, American Eagle and the AmericanConnection carrier serve 260 airports in more than 50 countries and territories with, on average, more than 3,300 daily flights. The combined network fleet numbers more than 900 aircraft. The Company reported a net loss of $884 million on $18.02 billion of total operating revenues for the nine months ended Sept. 30, 2011. AMR recorded a net loss of $471 million in the year 2010, a net loss of $1.5 billion in 2009, and a net loss of $2.1 billion in 2008. AMR's balance sheet at Sept. 30, 2011, showed $24.72 billion in total assets, $29.55 billion in total liabilities, and a $4.83 billion stockholders' deficit. Weil, Gotshal & Manges LLP serves as bankruptcy counsel to the Debtors. Paul Hastings LLP and Debevoise & Plimpton LLP Groom Law Group, Chartered, are on board as special counsel. Rothschild Inc., is the financial advisor. Garden City Group Inc. is the claims and notice agent. Jack Butler, Esq., John Lyons, Esq., Felecia Perlman, Esq., and Jay Goffman, Esq., at Skadden, Arps, Slate, Meagher & Flom LLP serve as counsel to the Official Committee of Unsecured Creditors in AMR's chapter 11 proceedings. Togut, Segal & Segal LLP is the co-counsel for conflicts and other matters; Moelis & Company LLC is the investment banker, and Mesirow Financial Consulting, LLC, is the financial advisor. Bankruptcy Creditors' Service, Inc., publishes AMERICAN AIRLINES BANKRUPTCY NEWS. The newsletter tracks the Chapter 11 proceeding undertaken by AMR Corp. and its affiliates. (http://bankrupt.com/newsstand/or 215/945-7000). AMERICAN AIRLINES: Fee Examiner Taps Stuart Maue as Advisor ----------------------------------------------------------- Robert J. Keach, Esq., the court-appointed fee examiner in American Airlines' Chapter 11 cases, seeks permission from the Court to retain Stuart, Maue, Mitchell & James, Ltd., as his consultant, nunc pro tunc to June 7, 2012. As the Fee Examiner's consultant, Stuart Maue will: (a) assist the Fee Examiner in analyzing the fee applications of the retained professionals, to the extent the Fee Examiner determines such assistance is appropriate, for compliance with the applicable provisions of the Bankruptcy Code, the Bankruptcy Rules, the Guidelines, the Local Rules and any applicable orders of the Court; (b) assist the Fee Examiner with the preparation of periodic reports with respect to additional subjects regarding professional fees and expenses; and (c) provide other services as the Fee Examiner may seek. Stuart Maue's professionals will be paid according to their customary hourly rates ranging from $395 for the lead attorney; $275 to $375 for legal auditors and senior legal auditors; and $50 for data control personnel. The Fee Examiner expects that the bulk of the work done by Stuart Maue will be done by its lower rate auditors and personnel, and that legal review will be done largely by the Fee Examiner and professionals employed by Bernstein, Shur, Sawyer & Nelson, P.A. Stuart Maue will also be reimbursed for expenses to be incurred. James P. Quinn, president and chief operating officer of Stuart, Maue, Mitchell & James, Ltd., declares that his firm is a "disinterested person" as the term is defined in Section 101(14) of the Bankruptcy Code. About American Airlines AMR Corp. and its subsidiaries including American Airlines, the third largest airline in the United States, filed for bankruptcy protection (Bankr. S.D.N.Y. Lead Case No. 11-15463) in Manhattan on Nov. 29, 2011, after failing to secure cost-cutting labor agreements. AMR, previously the world's largest airline prior to mergers by other airlines, is the last of the so-called U.S. legacy airlines to seek court protection from creditors. American Airlines, American Eagle and the AmericanConnection carrier serve 260 airports in more than 50 countries and territories with, on average, more than 3,300 daily flights. The combined network fleet numbers more than 900 aircraft. The Company reported a net loss of $884 million on $18.02 billion of total operating revenues for the nine months ended Sept. 30, 2011. AMR recorded a net loss of $471 million in the year 2010, a net loss of $1.5 billion in 2009, and a net loss of $2.1 billion in 2008. AMR's balance sheet at Sept. 30, 2011, showed $24.72 billion in total assets, $29.55 billion in total liabilities, and a $4.83 billion stockholders' deficit. Weil, Gotshal & Manges LLP serves as bankruptcy counsel to the Debtors. Paul Hastings LLP and Debevoise & Plimpton LLP Groom Law Group, Chartered, are on board as special counsel. Rothschild Inc., is the financial advisor. Garden City Group Inc. is the claims and notice agent. Jack Butler, Esq., John Lyons, Esq., Felecia Perlman, Esq., and Jay Goffman, Esq., at Skadden, Arps, Slate, Meagher & Flom LLP serve as counsel to the Official Committee of Unsecured Creditors in AMR's chapter 11 proceedings. Togut, Segal & Segal LLP is the co-counsel for conflicts and other matters; Moelis & Company LLC is the investment banker, and Mesirow Financial Consulting, LLC, is the financial advisor. Bankruptcy Creditors' Service, Inc., publishes AMERICAN AIRLINES BANKRUPTCY NEWS. The newsletter tracks the Chapter 11 proceeding undertaken by AMR Corp. and its affiliates. (http://bankrupt.com/newsstand/or 215/945-7000). APPLIED DNA: Sells 35.5 Million Common Shares for $1.5 Million -------------------------------------------------------------- Applied DNA Sciences, Inc., issued and sold 35,576,568 shares of Common Stock at a purchase price of $0.04336 per share to an "accredited investor," as defined in regulations promulgated under the Securities Act of 1933, as amended, for gross proceeds of $1,542,600. The issuance of the common stock was completed in reliance upon the exemption from registration provided for by Section 4(2) of the Securities Act and by Rule 506 of Regulation D promulgated under the Securities Act. On June 6, 2012, a complaint for patent infringement was filed against the Company by Smartwater, Ltd., in the United States District Court for the District of Massachusetts in an action entitled Smartwater, Ltd. v. Applied DNA Sciences, Inc., No. 1:12- cv-11009-PBS. The complaint alleges that the Company infringed one or more claims under two of plaintiff's patents by selling or offering for sale, manufacturing and using certain of the Company's products, by inducing others to infringe and by contributing to infringement by others. The plaintiff seeks injunctive relief as well as awards of damages and attorneys' fees. The Company has not yet been served with the complaint. The Company believes that none of its products infringed any claims under either of plaintiff's patents and moreover notes that one of plaintiff's patents has expired. The Company denies the allegations in the complaint, believes they are without merit and intends to defend the action vigorously. About Applied DNA Stony Brook, N.Y.-based Applied DNA Sciences, Inc., is principally devoted to developing DNA embedded biotechnology security solutions in the United States. RBSM LLP, in New York, noted in its report on Applied DNA's fiscal 2011 financial results that the Company has suffered recurring losses and does not have significant cash or other material assets, nor does it have an established source of revenues sufficient to cover its operations, which raises substantial doubt about its ability to continue as a going concern. The Company reported a net loss of $10.51 million for the fiscal year ended Sept. 30, 2011, compared with a net loss of $7.91 million during the prior year. The Company's balance sheet at March 31, 2012, showed $1.45 million in total assets, $638,232 in total liabilities, all current, and $813,783 in total stockholders' equity. APPLIED DNA: To Issue Add'l 250MM Under 2005 Incentive Plan ----------------------------------------------------------- Applied DNA Sciences, Inc., filed with the U.S. Securities and Exchange Commission a Form S-8 registering an additional 250,000,000 shares of common stock, par value $0.001 per share, for future issuance under the Company's 2005 Incentive Stock Plan, as amended. The proposed maximum aggregate offering price is $12.50 million. Effective as of Jan. 27, 2012, the Company amended the Plan to increase the number of shares of common stock that may be issued under the Plan to 350,000,000 shares of common stock from 100,000,000 shares of common stock. A copy of the filing is available for free at http://is.gd/x2fhzv About Applied DNA Stony Brook, N.Y.-based Applied DNA Sciences, Inc., is principally devoted to developing DNA embedded biotechnology security solutions in the United States. RBSM LLP, in New York, noted in its report on Applied DNA's fiscal 2011 financial results that the Company has suffered recurring losses and does not have significant cash or other material assets, nor does it have an established source of revenues sufficient to cover its operations, which raises substantial doubt about its ability to continue as a going concern. The Company reported a net loss of $10.51 million for the fiscal year ended Sept. 30, 2011, compared with a net loss of $7.91 million during the prior year. The Company's balance sheet at March 31, 2012, showed $1.45 million in total assets, $638,232 in total liabilities, all current, and $813,783 in total stockholders' equity. ARCAPITA BANK: Court OKs Layoffs for 96, Incentives for 59 ---------------------------------------------------------- Lisa Uhlman at Bankruptcy Law360 reports that U.S. Bankruptcy Judge Sean H. Lane on Tuesday approved a bid by Arcapita Bank BSC to implement a program under which it will terminate some employees, give incentives to others and settle claims with employees over certain prepetition compensation promises it made. According to Bankruptcy Law360, Judge Lane granted the motion, allowing the bankrupt Bahraini bank to institute a 96-person reduction in force, provide retention or incentive bonuses to 59 other employees, and settle potential claims filed by employees over its prepetition incentive plans. About Arcapita Bank Arcapita Bank B.S.C., also known as First Islamic Investment Bank B.S.C., along with affiliates, filed for Chapter 11 protection (Bankr. S.D.N.Y. Lead Case No. 12-11076) in Manhattan on March 19, 2012. The Debtors said they do not have the liquidity necessary to repay a US$1.1 billion syndicated unsecured facility when it comes due on March 28, 2012. Falcon Gas Storage Company, Inc., later filed a Chapter 11 petition (Bankr. S.D.N.Y. Case No. 12-11790) on April 30, 2012. Falcon Gas is an indirect wholly owned subsidiary of Arcapita that previously owned the natural gas storage business NorTex Gas Storage Company LLC. In early 2010, Alinda Natural Gas Storage I, L.P. (n/k/a Tide Natural Gas Storage I, L.P.), Alinda Natural Gas Storage II, L.P. (n/k/a Tide Natural Gas Storage II, L.P.) acquired the stock of NorTex from Falcon Gas for $515 million. Arcapita guaranteed certain of Falcon Gas' obligations under the NorTex Purchase Agreement. The Debtors tapped Gibson, Dunn & Crutcher LLP as bankruptcy counsel, Linklaters LLP as corporate counsel, Towers & Hamlins LLP as international counsel on Bahrain matters, Hatim S Zu'bi & Partners as Bahrain counsel, KPMG LLP as accountants, Rothschild Inc. and financial advisor, and GCG Inc. as notice and claims agent. Milbank, Tweed, Hadley & McCloy LLP represents the Official Committee of Unsecured Creditors. Houlihan Lokey Capital, Inc., serves as its financial advisor and investment banker. Founded in 1996, Arcapita is a global manager of Shari'ah- compliant alternative investments and operates as an investment bank. Arcapita is not a domestic bank licensed in the United States. Arcapita is headquartered in Bahrain and is regulated under an Islamic wholesale banking license issued by the Central Bank of Bahrain. The Arcapita Group employs 268 people and has offices in Atlanta, London, Hong Kong and Singapore in addition to its Bahrain headquarters. The Arcapita Group's principal activities include investing on its own account and providing investment opportunities to third-party investors in conformity with Islamic Shari'ah rules and principles. The Arcapita Group has roughly US$7 billion in assets under management. On a consolidated basis, the Arcapita Group owns assets valued at roughly US$3.06 billion and has liabilities of roughly US$2.55 billion. The Debtors owe US$96.7 million under two secured facilities made available by Standard Chartered Bank. Arcapita explored out-of-court restructuring scenarios but was unable to achieve 100% lender consent required to effectuate the terms of an out-of-court restructuring. Subsequent to the Chapter 11 filing, Arcapita Investment Holdings Limited, a wholly owned Debtor subsidiary of Arcapita in the Cayman Islands, issued a summons seeking ancillary relief from the Grand Court of the Cayman Islands with a view to facilitating the Chapter 11 cases. AIHL sought the appointment of Zolfo Cooper as provisional liquidator. ARCH COAL: Moody's Lowers CFR/PDR to 'B2'; Outlook Stable --------------------------------------------------------- Moody's Investors Service has downgraded Arch Coal Inc's corporate family rating (CFR) and probability of default rating to B2 from B1. At the same time, Moody's downgraded the ratings on the company's senior unsecured debt to B3 from B2, and ratings on secured credit facility to Ba3 from Ba2. The Speculative Grade Liquidity rating of SGL-3 is unchanged. The outlook is stable. Moody's took the following rating actions: Downgrades: Issuer: Arch Coal, Inc. Probability of Default Rating, Downgraded to B2 from B1 Corporate Family Rating, Downgraded to B2 from B1 Senior Secured Bank Credit Facility, Downgraded to Ba3, LGD2, 23% from Ba2, LGD2, 21% Senior Unsecured Regular Bond/Debenture, Downgraded to B3, LGD4, 67% from B2, LGD4, 69% Issuer: Arch Coal, Inc. Outlook, Changed To Stable From Negative Ratings Rationale The downgrade reflects Moody's expectation that Arch's credit metrics will contract and liquidity will deteriorate in 2012, due to challenges facing the company's thermal coal business and the softness in the metallurgical coal market. The company has recently announced plans to curtail production in Kentucky, Virginia and West Virginia, reducing Appalachian thermal coal production by more than 3 million tons annually. Moody's also expects that sales volume from Arch's Powder River Basin (PRB) business will decline by 12-16% in 2012 as compared to 2011, while the margins will contract in the Appalachian business on lower metallurgical coal prices and higher costs, even as the mix of sales shifts in favor of met from thermal. Moody's expects that Arch's Debt/EBITDA, as adjusted, will be in excess of 8x in 2012, while EBIT will approach break-even. Moody's also believes that credit metrics will deteriorate further in 2013, as volumes will likely remain suppressed into 2013, while delivered prices for thermal coal will contract due to lower spot prices in 2012. Moody's expects metallurgical coal market to remain soft for the next several months, due to the ongoing sovereign crisis in Europe and slowing growth rates in steel production in China. This will limit the extent to which metallurgical coal business can offset the margin compression experienced on the thermal side. Moody's expects negative free cash flows in 2012 and 2013. The SGL-3 liquidity rating reflects Moody's expectation that over the next twelve to eighteen months, Arch will have sufficient liquidity, but that the liquidity position will deteriorate. Subsequent to the May closing of the $1.4 billion term loan and subsequent repayment of the existing revolver borrowings and $450 million senior unsecured notes of Arch Western Finance, Arch had in excess of $500 million in cash and full availability of $600 million under the amended credit facility. Even though credit facility amendments included covenant relief, Moody's expects that absent robust recovery in metallurgical coal markets, the headroom under covenants will be tight in 2013. Moody's expects that outstanding revolver borrowings will increase through 2013, to accommodate negative free cash flows over that horizon. The deterioration in Arch's financial performance is largely driven by the market conditions and challenges facing the US thermal coal industry. Unusually warm weather in the US and low natural gas prices in 2011-2012 led to a collapse in coal prices across most coal producing regions and production cuts across the industry, with utilities decreasing their coal-fired generation in favor of lower-priced gas. For the longer term, sustainable low natural gas prices, combined with environmental regulations disadvantaging coal, will slowly continue to erode coal's position as a raw material for electric generation. Arch's B2 CFR continues to reflect its geographic and operating diversity, low level of legacy liabilities, extensive high quality and low-cost reserves, and access to multiple transportation options. Factors that constrain the rating include highly levered capital structure subsequent to the ICG acquisition. A further downgrade would be considered if Debt/ EBITDA is expected to remain above 6x on a sustained basis, if free cash flow is persistently negative, if quarterly earnings continue to erode, or if there are substantial concerns over the company's liquidity position or covenant compliance. While upward momentum to the ratings is limited due to industry conditions, an upgrade would be considered if Moody's expected Debt/EBITDA ratio, as adjusted, to trend towards 4.5x and free cash flows to be positive. The principal methodology used in rating Arch was the Global Mining Industry Methodology published in May 2009. Other methodologies used include Loss Given Default for Speculative- Grade Non-Financial Companies in the U.S., Canada and EMEA published in June 2009. * * * Bill Rochelle, the bankruptcy columnist for Bloomberg News, reports that Moody's has dongraded Arch Coal's ratings for the second time since May. The new Moody's corporate grade of B2 is one level below the downgrade issued in May by Standard & Poor's. Moody's now gives Arch's senior unsecured debt a rating of B3. BEHRINGER HARVARD: 2 Funds Struggle to Make Loan Payments --------------------------------------------------------- Bruce Kelly at InvestmentNews reports that Behringer Harvard Holdings LLC is struggling to make payments on loans in two of its offerings -- and is losing real estate assets as a result. According to the report, after months of failed negotiations over $48.3 million of debt, the non-traded Behringer Harvard Opportunity REIT I Inc. this month had several properties go into bankruptcy protection. The report also relates the Behringer Harvard Short-Term Opportunity Fund I LP this month entered a "deed in lieu of foreclosure agreement" that transferred properties to the lender. The Behringer Harvard fund had owed $20.2 million on those properties. The report relates the two real estate offerings have been in decline for some time. Both saw their estimated valuations decline dramatically over the last year: -- Behringer Harvard Opportunity REIT I saw its estimated value decline 46% at the end of 2011 to $4.12 a share, from $7.66 a year earlier. -- Behringer Harvard Short-Term Opportunity Fund I LP, which had about $130 million in total assets, saw its valuation drop to 40 cents a share, down drastically from $6.48 a share as of Dec. 31, 2010. The report also notes: -- Opportunity REIT I, with $524.4 million in total assets, is sitting on an additional $68.4 million in debt that is maturing this year. -- the move to shed real estate cuts the total assets of the Short-Term Opportunity Fund I essentially in half. On a pro forma basis and taking into account the recent loss of real estate, the fund had $64.5 million in total assets -- compared with $112.5 million in total assets at the end of March, according to a filing with the Securities and Exchange Commission. BERNARD L. MADOFF: Wins Appeal Over $1.025BB Tremont Settlement --------------------------------------------------------------- Bill Rochelle, the bankruptcy columnist for Bloomberg News, reports that Bernard L. Madoff Investment Securities Inc. won an appeal June 27 that could free $1.025 billion for distribution to creditors within four months, if there's no further appeal. The report recounts that the Madoff trustee sued Tremont Group Holdings Inc., Oppenheimer Acquisition Corp., Massachusetts Mutual Life Insurance Co. and affiliates for $2.1 billion in funds received directly from the Madoff firm. Oppenheimer owns the Tremont hedge fund. The Bloomberg report relates that the settlement authorized the trustee to recover $1.025 billion cash from the second-largest group of feeder funds that funneled money into the Madoff Ponzi scheme. In return for the $1.025 billion payment into escrow, the foreign and domestic investment funds will receive about $3 billion in approved customer claims. The settlement was structured so distributions on the funds' claims will be paid directly to the funds' customers. Investors in other Tremont funds, the report relates, appealed the settlement. Those funds were so-called net winners which managed to take more out of the Madoff firm than they invested. Consequently, they don't have customer claims against the Madoff firm under a ruling by the U.S. Court of Appeals upheld this week by the U.S. Supreme Court. In the appeal decided Wednesday, they wanted the settlement set aside so they too could have claims against the Madoff firm. According to the report, Madoff trustee Irving Picard, Tremont and Mass Mutual all joined together requesting dismissal of the appeal. U.S. District Judge George B. Daniels agreed and threw out the appeal Tuesday. Judge Daniels said in his 5-page opinion that the other funds weren't customers, weren't even creditors of the Madoff firm, weren't aggrieved by the settlement and thus lacked standing, or the right to appeal. The funds on the losing side have 30 days to appeal. If they don't seek further review in the U.S. Court of Appeals, the settlement agreement requires holding the $1.025 billion in escrow for an additional 90 days before it can be distributed to customers. Mr. Rochelle notes that coupled with a decision by the U.S. Supreme Court this week not to allow an appeal on the method of claim calculation, the June 27 victory means Madoff customers are in for significant distributions in upcoming months. Appeals have been preventing Mr. Picard from distributing most of about $11 billion collected for the benefit of customers. About $7.2 billion is being held up because other customers have a right of appeal until July 16 from court approval of a forfeiture by the late Jeffry M. Picower. Mr. Picard said he will make distributions in the "near future." He didn't say exactly when or how much. The Tremont appeal is Picard v. Tremont Group Holdings Inc., 11-cv-07330, U.S. District Court, Southern District of New York (Manhattan). 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 Dec. 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.). Mr. Picard has retained AlixPartners LLP as claims agent. 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 US$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.) The SIPA Trustee has said that as of March 31, 2012, through prepetition litigation and other settlements, he has successfully recovered, or reached agreements to recover, more than $9 billion -- over 50% of the principal lost in the Ponzi scheme by those who filed claims -- for the benefit of all customers of BLMIS. The liquidation has so far has cost the Securities Investor Protection Corp. $1.3 billion, including $791 million to pay a portion of customers' claims. Mr. Picard has so far made only one distribution in October of $325 million for 1,232 customer accounts. Uncertainty created by the appeals has limited Mr. Picard's ability to distribute recovered funds. Outstanding appeals include the $5 billion Picower settlement and the $1.025 billion settlement. BERNARD L. MADOFF: Younger Brother to Enter Guilty Plea ------------------------------------------------------- Chad Bray, writing for The Wall Street Journal, reports that Bernard Madoff's younger brother, Peter, is expected to plead guilty to criminal charges and has agreed to go to prison for 10 years, in the first admission of wrongdoing by a family member in a multibillion-dollar investment business that turned out to be "just one big lie." According to WSJ, Peter Madoff, 66, is expected to plead guilty to two charges at a hearing Friday in Manhattan federal court, including falsifying the records of an investment adviser and a broad conspiracy count to commit securities fraud and other crimes, according to a letter sent to U.S. District Judge Laura Taylor Swain and filed in court on Wednesday. WSJ says Peter Madoff, the firm's chief compliance officer, however, isn't expected to admit to knowing about the fraud itself. Instead, he is expected to admit to conduct that enabled the fraud to continue, even if he didn't know new investor money was being used to pay older investors or that no trading was being conducted at the investment firm. According to the report, as part of his plea, Peter Madoff has agreed to forfeit about $143.1 billion, a figure that represents essentially all the money that went into and out of the firm during the time prosecutors believe he was culpable. The figure exceeds his assets, all of which he will have to give up to the government. 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 Dec. 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.). Mr. Picard has retained AlixPartners LLP as claims agent. 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 US$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.) The SIPA Trustee has said that as of March 31, 2012, through prepetition litigation and other settlements, he has successfully recovered, or reached agreements to recover, more than $9 billion -- over 50% of the principal lost in the Ponzi scheme by those who filed claims -- for the benefit of all customers of BLMIS. The liquidation has so far has cost the Securities Investor Protection Corp. $1.3 billion, including $791 million to pay a portion of customers' claims. Mr. Picard has so far made only one distribution in October of $325 million for 1,232 customer accounts. Uncertainty created by the appeals has limited Mr. Picard's ability to distribute recovered funds. Outstanding appeals include the $5 billion Picower settlement and the $1.025 billion settlement. BLITZ USA: To Shut Down Operations by End of July ------------------------------------------------- Rachel Feintzeig at Dow Jones' DBR Small Cap reports that Blitz USA Inc. is abandoning its efforts to reorganize and instead is vowing to shut down operations by the end of July. About Blitz USA Blitz U.S.A. Inc., is a Miami, Oklahoma-based manufacturer of plastic gasoline cans. The company, controlled by Kinderhook Capital Fund II LP, filed for bankruptcy protection to stanch a hemorrhage resulting from 36 product-liability lawsuits. Parent Blitz Acquisition Holdings, Inc., and its affiliates filed for Chapter 11 protection (Bankr. D. Del. Case Nos. 11-13602 thru 11-13607) on Nov. 9, 2011. The Hon. Peter J. Walsh presides over the case. Blitz USA disclosed $36,194,434 in assets and $41,428,577 in liabilities in its schedules. Daniel J. DeFranceschi, Esq., at Richards, Layton & Finger, represents the Debtors in their restructuring efforts. The Debtors tapped Zolfo Cooper, LLC, as restructuring advisor; and Kurtzman Carson Consultants LLC serves as notice and claims agent. Lowenstein Sandler PC from Roseland, New Jersey, represents the Official Committee of Unsecured Creditors. The Chapter 11 case is financed with a $5 million secured loan from Bank of Oklahoma. Bank of Oklahoma, as DIP agent, is represented by Samuel S. Ory, Esq., at Frederic Dorwart Lawyers in Tulsa. In April 2012, Hopkins Manufacturing Corp. acquired the assets of Blitz USA's unit, F3 Brands LLC, a major manufacturer of oil drains, drain pans, lifting aids and automotive ramps. Blitz USA said in court documents the sale netted the Debtors $14.6 million, which was applied against secured debt. BLUE RAVEN: To Be Sold July 25 Without Formal Auction ----------------------------------------------------- Bill Rochelle, the bankruptcy columnist for Bloomberg News, reports that Blue Raven Technology Inc. will return to bankruptcy court in Boston on July 25 to seek authority to sell the business for $1.4 million to private-equity investor Leading Ridge Capital Partners LLC from Rockville, Maryland. Although there won't be a formal auction before the sale-approval hearing, other prospective buyers are invited to make offers. If Leading Ridge loses out, the bankruptcy judge said he will award a $50,000 breakup fee. About Blue Raven Blue Raven Technology, Inc., filed a Chapter 11 petition (Bankr. D. Mass. Case No. 12-14693) on May 30, 2012. Blue Raven is a provider of parts and repair services for consumer electronics and computers. The Company had $17.7 million of revenue in 2011, an 18% decline from the year before. The company blamed its problems on the bankruptcies of electronics retailers that had been major customers. David B. Madoff, Esq., at Madoff & Khoury LLP, in Foxboro, serves as counsel. The Debtor disclosed $2.143 million in assets and $8.284 million in liabilities as of the Chapter 11 filing. BROOKSTONE INC: S&P Withdraws 'B-' CCR on Lack of Market Interest ----------------------------------------------------------------- Standard & Poor's Ratings Services withdrew its unsolicited 'B-' corporate credit rating on Merrimarck, N.H.-based Brookstone Inc. due to lack of market interest. "At the same time, we withdrew our unsolicited 'CCC+' issue-level and '5' recovery ratings on Brookstone Co. Inc.'s $125.6 million 13% second-lien notes due Oct. 15, 2014. The notes are guaranteed by Brookstone," S&P said. BUFFETS INC: Second Amended Chapter 11 Plan Confirmed ----------------------------------------------------- BankruptcyData.com reports that Buffets Restaurants Holdings filed with the U.S. Bankruptcy Court a Second Amended Chapter 11 Plan and Second and Third Amended Plan Supplements. The Court subsequently entered an order confirming the Plan, under which administrative claims, priority tax claims, D.I.P. financing, claims and other priority claims are expected to receive a 100% cash payment. General unsecured claims are expected an 8 to 9% recovery rate. About Buffets Inc. Buffets Inc., the nation's largest steak-buffet restaurant company, operates 494 restaurants in 38 states, comprised of 483 steak-buffet restaurants and 11 Tahoe Joe's Famous Steakhouse(R) restaurants, and franchises 3 steak-buffet restaurants in two states. The restaurants are principally operated under the Old Country Buffet(R), HomeTown(R) Buffet, Ryan's(R) and Fire Mountain(R) brands. Buffets employs 28,000 team members and serves 140 million customers annually. Buffets Inc. and all of its subsidiaries filed Chapter 11 petitions (Bankr. D. Del. Lead Case No. 12-10237) on Jan. 18, 2012, after it reached a restructuring support agreement with 83% of its lenders to eliminate virtually all of the Company's roughly $245 million of outstanding debt. In its schedules Buffets Inc. disclosed $384,810,974 in assets and $353,498,404 in liabilities. The Debtors are seeking to reject leases for 83 underperforming restaurants. Buffets had 626 restaurants when it began its prior bankruptcy case (Bankr. D. Del. Case Nos. 08-10141 to 08-10158). It emerged from bankruptcy in April 2009. Higher gasoline and energy costs, along with a decline in guest count, have hampered the Debtors' ability to service their long- term debt and caused a liquidity strain, forcing the Company to return to Chapter 11 bankruptcy. In the new Chapter 11 case, Buffets Inc.'s legal advisors are Paul, Weiss, Rifkind, Wharton & Garrison LLP and Young, Conaway, Stargatt & Taylor, LLP. The Company's financial advisor is Moelis, Inc. Epiq Bankruptcy Solutions LLC serves as claims, noticing and balloting agent. An ad hoc committee of secured lenders is represented by Willkie Far & Gallagher LLP and Blank Rome LLP as counsel and Conway, Del Genio, Gries & Co. as financial advisors. Credit Suisse, as DIP Agent and Prepetition First Lien Agent, is represented by Skadden Arps Slate Meagher & Flom as counsel. The U.S. Trustee has appointed a 5-member Official Committee of Unsecured Creditors in the Debtors' cases. In March 2012, Buffets Inc. received court approval for an incentive bonus program that may pay as much as $2.3 million to executives if cash flow targets are met. There was an April 30 hearing schedule on another program to pay bonuses for a successful sale of the business that could cost $2.7 million. In April 2012, Buffets Inc. filed an amended bankruptcy exit plan that proposes to pay $4 million to a pool of unsecured creditors who are owed more than $44 million. Unsecured creditors are expected to recover about 9% of their claims. BUFFETS INC: Shutters Ryan's Grill Outlet in Houma, La. ------------------------------------------------------- Tri-Parish Times reports that the Ryan's Grill and Buffet in Houma, La., closed last week as part of the Chapter 11 bankruptcy of Buffets Inc. According to the report, the only local public notice was a sign posted on the building that announced the restaurant at 1520 Martin Luther King Blvd. was no longer in business. Of the nine Louisiana Ryan's locations, the only other to close was the eatery in Deridder, although the chain did close other locations throughout the south, including some located in Virginia, Tennessee and Georgia. About Buffets Inc. Buffets Inc., the nation's largest steak-buffet restaurant company, operates 494 restaurants in 38 states, comprised of 483 steak-buffet restaurants and 11 Tahoe Joe's Famous Steakhouse(R) restaurants, and franchises 3 steak-buffet restaurants in two states. The restaurants are principally operated under the Old Country Buffet(R), HomeTown(R) Buffet, Ryan's(R) and Fire Mountain(R) brands. Buffets employs 28,000 team members and serves 140 million customers annually. Buffets Inc. and all of its subsidiaries filed Chapter 11 petitions (Bankr. D. Del. Lead Case No. 12-10237) on Jan. 18, 2012, after it reached a restructuring support agreement with 83% of its lenders to eliminate virtually all of the Company's roughly $245 million of outstanding debt. In its schedules Buffets Inc. disclosed $384,810,974 in assets and $353,498,404 in liabilities. The Debtors are seeking to reject leases for 83 underperforming restaurants. Buffets had 626 restaurants when it began its prior bankruptcy case (Bankr. D. Del. Case Nos. 08-10141 to 08-10158). It emerged from bankruptcy in April 2009. Higher gasoline and energy costs, along with a decline in guest count, have hampered the Debtors' ability to service their long- term debt and caused a liquidity strain, forcing the Company to return to Chapter 11 bankruptcy. In the new Chapter 11 case, Buffets Inc.'s legal advisors are Paul, Weiss, Rifkind, Wharton & Garrison LLP and Young, Conaway, Stargatt & Taylor, LLP. The Company's financial advisor is Moelis, Inc. Epiq Bankruptcy Solutions LLC serves as claims, noticing and balloting agent. An ad hoc committee of secured lenders is represented by Willkie Far & Gallagher LLP and Blank Rome LLP as counsel and Conway, Del Genio, Gries & Co. as financial advisors. Credit Suisse, as DIP Agent and Prepetition First Lien Agent, is represented by Skadden Arps Slate Meagher & Flom as counsel. The U.S. Trustee has appointed a 5-member Official Committee of Unsecured Creditors in the Debtors' cases. Buffets Inc. revealed in January that its lenders agreed to convert $245 million in senior secured debt to a 100% equity stake in the reorganized company. In April 2012, Buffets Inc. filed an amended bankruptcy exit plan that proposes to pay $4 million to a pool of unsecured creditors who are owed more than $44 million. Unsecured creditors are expected to recover about 9% of their claims. CAJUN ELECTRIC: 5th Cir. Clears SWEPCO of Reimbursement Obligation ------------------------------------------------------------------ The U.S. Court of Appeals for the Fifth Circuit affirmed, in part, and reverse, in part, a bankruptcy court's ruling, affirmed by the district court, that held Southwestern Electric Power Company liable for legal expenses incurred by the Committee of Certain Members appointed in the Chapter 11 bankruptcy case of Cajun Electric Power Cooperative. The Fifth Circuit affirmed the bankruptcy court's dismissal of SWEPCO's counterclaim and reversed its judgment that the CCM is entitled to recover under a 1997 agreement. In December 1994, Cajun Electric, a Louisiana electrical cooperative comprised of 12 member cooperatives, filed for bankruptcy protection under Chapter 11. Shortly thereafter, 10 of the 12 member cooperatives formed an informal committee known as the Committee of Certain Members for purposes of the bankruptcy case. The CCM worked with SWEPCO to submit a joint plan of reorganization. Under the proposed plan, SWEPCO would acquire Cajun Electric's assets and the CCM members would enter into long- term agreements to purchase electricity from SWEPCO. In January 1997, during the plan confirmation process, three of the CCM members decided to withdraw from the CCM and support another reorganization plan. The withdrawing members moved the bankruptcy court to disqualify the CCM's counsel based on conflicts of interest and the court granted the members' motion. Soon after, SWEPCO gave the CCM, then comprising seven members, $1 million to help with the additional costs necessary to retain new counsel. On April 17, 1997, SWEPCO and the CCM signed the Term Sheet of Members and SWEPCO whereby SWEPCO agreed to reimburse additional expenses incurred by the CCM during the bankruptcy proceedings. By February 1999, two of the four proposed reorganization plans had been withdrawn, leaving only the SWEPCO/CCM plan and a plan supported by Cajun Electric's Chapter 11 trustee still in the running for confirmation. On Feb. 11, 1999, the bankruptcy court denied confirmation of both remaining plans, but invited the trustee and the SWEPCO/CCM group to submit revised plans, which they did on April 19, 1999. On May 14, 1999, SWEPCO and the CCM filed a supplemental disclosure statement pursuant to 11 U.S.C. Sec. 1125(b) providing information about their revised plan. The disclosure statement included a section titled "Reimbursement of Costs and Fees," which purported to describe the "only agreements as to reimbursement of fees and expenses" between SWEPCO and the CCM. The reimbursement agreements in the supplemental disclosure were similar to those in the 97 Agreement, but included changes in key language and provisions not present in the 97 Agreement. The plan confirmation process continued until Aug. 18, 1999, when the district court ordered the parties to appear at the federal courthouse in Baton Rouge, Louisiana, and participate in settlement negotiations. The parties appeared on Aug. 25, 1999, and reached a settlement that same day. Under the settlement agreement, SWEPCO and the CCM would withdraw their plan and the plan supported by Cajun Electric's Chapter 11 trustee -- by then known as the "Creditors' Plan" -- would be confirmed. The settlement agreement also provided for partial repayment of the expenses SWEPCO and the CCM incurred during the bankruptcy proceedings. SWEPCO was to receive a $7.5 million administrative expense claim to be paid by the bankruptcy estate and the CCM was to receive $9 million to be paid by proponents of the winning plan. The settlement agreement made no mention of the reimbursement agreements described in the 97 Agreement or the supplemental disclosure. The settlement agreement was approved by the district court and was incorporated into the winning plan, which was confirmed by the bankruptcy court on Oct. 14, 1999. On Feb. 20, 2000, the CCM filed an application for $9 million in expense reimbursement. The application was approved and the CCM eventually received the $9 million. On June 19, 2001, roughly 20 months after the winning plan was confirmed, the CCM filed suit against SWEPCO in Louisiana state court asserting a breach of contract claim. The CCM alleged that the 97 Agreement required SWEPCO to repay the CCM for legal expenses incurred during the Cajun Electric bankruptcy case and that SWEPCO had failed to do so. SWEPCO removed the case to the bankruptcy court pursuant to 28 U.S.C. Sec. 1452 and filed an answer and counterclaim. In its counterclaim, SWEPCO alleged that it was entitled to repayment of the $1 million it gave the CCM under a refund provision set forth in the supplemental disclosure. The parties filed cross motions for summary judgment. The bankruptcy court granted the CCM's motion for summary judgment, denied SWEPCO's motion for summary judgment, and dismissed SWEPCO's counterclaim. The court ruled that SWEPCO owed the CCM $2,610,778.63 pursuant to the 97 Agreement and entered a judgment for that amount, plus interest, on Feb. 2, 2006. SWEPCO filed a notice of appeal in the district court on Feb. 10, 2006. On Sept. 26, 2011, the district court entered an order affirming the bankruptcy court's judgment for the reasons provided by the bankruptcy court. SWEPCO appealed to the Fifth Circuit. According to the Fifth Circuit, SWEPCO's reimbursement obligation was immediately enforceable beginning Jan. 1, 1997, but the CCM, for whatever reason, chose not to seek payment until after the SWEPCO/CCM plan was denied on Feb. 11, 1999, and another plan was confirmed on Oct. 14, 1999. The Fifth Circuit said both of these events were sufficient to extinguish SWEPCO's liability under the plain language of Section VI of the 97 Agreement. It was the CCM's own failure to assert its right to reimbursement which permitted SWEPCO to avoid liability. The case is SOUTHWESTERN ELECTRIC POWER COMPANY (SWEPCO), Appellant, v. COMMITTEE OF CERTAIN MEMBERS OF CAJUN ELECTRIC, Appellee, No. 11-31022 (5th Cir.). A copy of the Fifth Circuit's per curiam decision dated June 25, 2012, is available at http://is.gd/M4Edy7from Leagle.com. CAMBRIDGE HEART: Five Directors Elected at Annual Meeting --------------------------------------------------------- Cambridge Heart, Inc., held its annual meeting of stockholders on June 25, 2012. At the annual meeting, the stockholders elected Roderick de Greef, Ali Haghighi-Mood, John McGuire, Paul McCormick, and Jeffrey Wiggins to the board of directors to serve until the next annual meeting of stockholders and the election of their successors. The amendment to the Certificate of Incorporation increasing the number of shares of common stock authorized for issuance from 250,000,000 to 500,000,000 was approved. The stockholders ratified the appointment of McGladrey LLP as the Company's independent registered public accounting firm for the fiscal year ending Dec. 31, 2012. As of June 25, 2012, 100,112,960 shares of the Company's common stock were outstanding. On an as-converted basis, the Company has 124,659,416 shares of common stock issued and outstanding, including 100,112,960 shares of common stock issued, 4,180,602 shares issuable upon conversion of the Series C-1 Convertible Preferred Stock and 20,365,854 shares issuable upon conversion of the Series D Convertible Preferred Stock. About Cambridge Heart Tewksbury, Mass.-based Cambridge Heart, Inc., is engaged in the research, development and commercialization of products for the non-invasive diagnosis of cardiac disease. In its report on the financial statements for the year ended Dec. 31, 2011, McGladrey & Pullen, LLP, in Boston, Massachusetts, expressed substantial doubt about Cambridge Heart's ability to continue as a going concern. The independent auditors noted that of the Company's recurring losses, inability to generate positive cash flows from operations, and liquidity uncertainties from operations. The Company reported a net loss of $5.40 million in 2011, compared with a net loss of $5.17 million in 2010. The Company's balance sheet at March 31, 2012, showed $2.54 million in total assets, $4.68 million in total liabilities, $12.74 million in convertible preferred stock, and a $14.89 million total stockholders' deficit. CAPE JASMINE: Case Summary & 20 Largest Unsecured Creditors ----------------------------------------------------------- Debtor: Cape Jasmine Court Trust c/o Resources Group LLC 900 Las Vegas Blvd S. #810 Las Vegas, NV 89107 Bankruptcy Case No.: 12-17498 Chapter 11 Petition Date: June 26, 2012 Court: United States Bankruptcy Court District of Nevada (Las Vegas) Judge: Bruce A. Markell Debtor's Counsel: Ryan Alexander, Esq. LAW OFFICES OF RYAN ALEXANDER 200 E. Charleston Blvd Las Vegas, NV 89104 Tel: (702) 222-3476 Fax: (702) 252-3476 E-mail: ryan@thefirm-lv.com Scheduled Assets: $1,080,000 Scheduled Liabilities: $2,959,037 A copy of the Company's list of its 20 largest unsecured creditors filed together with the petition is available for free at http://bankrupt.com/misc/nvb12-17498.pdf The petition was signed by Eddie Haddad, registered agent. Affiliates that filed separate Chapter 11 petitions: Petition Debtor Case No. Date ------ -------- ---- 4208 Rollingstone Dr Trust 12-12363 03/01/12 Bourne Valley Court Trust 12-16387 05/31/12 Villa Vecchio Court Trust 12-15254 05/02/12 CCGI HOLDING: Moody's Withdraws 'B3' CFR on Debt Repayment ---------------------------------------------------------- Moody's Investors Service has withdrawn all ratings assigned to CCGI Holding Corporation and its subsidiary Covad Communications Group, Inc. as a result of the company's notification that it has repaid existing debt with a new, unrated facility, warranting the rating withdrawal. Since Moody's does not rate any of CCGI's new debt, Moody's has also withdrawn the company's Corporate Family Rating and Probability of Default Rating. Issuer: CCGI Holding Corporation Outlook Actions: Outlook, Changed To Rating Withdrawn From Stable Withdrawals: Probability of Default Rating, Withdrawn, previously rated B3 Corporate Family Rating, Withdrawn, previously rated B3 Issuer: Covad Communications Group, Inc. Outlook Actions: Outlook, Changed To Rating Withdrawn From Stable Withdrawals: US$165M Senior Secured Bank Credit Facility, Withdrawn, previously rated B2 US$25M Senior Secured Bank Credit Facility, Withdrawn, previously rated B2 US$165M Senior Secured Bank Credit Facility, Withdrawn, previously rated a range of LGD3, 34 % US$25M Senior Secured Bank Credit Facility, Withdrawn, previously rated a range of LGD3, 34 % Ratings Rationale The principal methodology used in rating CCGI Holding Corporation was the Global Telecommunications Industry Methodology published in December 2010. Other methodologies used include Loss Given Default for Speculative-Grade Non-Financial Companies in the U.S., Canada and EMEA published in June 2009. San Jose, CA, based CCGI Holding Corporation is a competitive telecommunications provider that was formed via a merger of Covad Communications Group, Inc., MegaPath, Inc., and Speakeasy Broadband Services LLP in September 2010. The combined company is a national broadband service provider of high-speed internet, voice, security and managed IP/MPLS network, which is currently available in 44 states and 235 major metropolitan areas. CERIDIAN CORP: S&P Rates $720MM Senior Notes & Term Loan 'B-' ------------------------------------------------------------- Standard & Poor's Ratings Services assigned Minneapolis-based Ceridian Corp.'s proposed $720 million senior notes due 2019 and extended term loan B its 'B-' issue-level rating and '3' recovery rating. "The '3' recovery rating indicates our expectation of meaningful (50%-70%) recovery in the event of a payment default by the borrower," S&P said. The company is issuing the notes in conjunction with an amend-and- extend transaction of part of its currently outstanding bank debt. "Our existing ratings on Ceridian, including our 'B-' corporate credit rating, remain unchanged. The outlook is stable," S&P said. "The issue-level rating on Ceridian's senior secured debt is 'B-' (the same as the corporate credit rating) and the recovery rating is '3', indicating the expectation for meaningful (50%-70%) recovery in the event of a payment default. The rating on the company's unsecured debt issue is 'CCC' (two notches lower than the corporate credit rating) and the recovery rating is '6', indicating the expectation for negligible (0%-10%) recovery in the event of a payment default," S&P said. "The ratings on Ceridian reflect a very aggressive capital structure with an unfavorable maturity schedule," said Standard & Poor's credit analyst Jacobs Schlanger, "as well as the effects of a weak economy on the company's revenue and operating earnings. The proposed transactions will ease the impact of the nearer term maturities as well as provide some covenant relief. In addition, significant recurring revenue streams and defensible market positions partially offset the broader economic factors." "Our stable rating outlook reflects Ceridian's modest near-term debt maturities, the eased leverage covenant, which provides sufficient headroom over the near term, and the company's significant base of recurring revenues. We expect revenue to slowly grow in conjunction with the economic recovery, introduction of new offerings, and expansion into new markets. Liquidity is ample enough to handle near-term maturities. However, the highly leveraged capital structure limits a possible upgrade," S&P said. "Although the company has largely addressed the 2014 maturity wall, we could lower our ratings as the company approaches the 2015 maturity wall and there are no plans in place to restructure or repay the debt, or if covenant headroom drops to less than 10%," S&P said. CINRAM INT'L: Moody's Lowers CFR/PDR to 'C/D' Over CCAA Filing -------------------------------------------------------------- Moody's Investors Service downgraded the probability of default rating (PDR) for Cinram International Inc. to D from Caa3 as a result of the company and certain affiliates filing petitions for reorganization under the Companies' Creditors Arrangements Act (CCAA). The company's corporate family rating, senior secured first-out credit facility rating and senior secured second-out credit facilities' ratings were downgraded to C, Caa3 and C, respectively. Cinram's speculative grade liquidity rating remains unchanged at SGL-4. The rating outlook remains unchanged at negative. Moody's will withdraw all of the these ratings shortly (refer to Moody's ratings withdrawal policy on moodys.com). Rating actions: Issuer: Cinram International Inc. Corporate Family Rating, downgraded to C from Caa3 Probability of Default Rating, downgraded to D from Caa3 Senior Secured First-out Revolving Facility downgraded to Caa3 (LGD3, 31%) from B2 (LGD2, 10%) Senior Secured Second-out Revolving Facility downgraded to C (LGD5, 74%) from Caa3 (LGD3, 45%) Senior Secured Bank Credit Facility downgraded to C (LGD5, 74%) from Caa3 (LGD3, 45%) Speculative Grade Rating, affirmed at SGL-4 (poor) Outlook remains Negative Ratings Rationale The downgrade follows the company and certain of affiliates filing petitions for reorganization under the Companies' Creditors Arrangements Act (CCAA). The principal methodology used in rating Cinram International was the Global Manufacturing Industry Methodology published in December 2010. Other methodologies used include Loss Given Default for Speculative-Grade Non-Financial Companies in the U.S., Canada and EMEA published in June 2009. CHOICE HOTELS: S&P Cuts Rating on $250-Mil. Senior Notes to 'BB' ---------------------------------------------------------------- Standard & Poor's Ratings Services assigned its 'BBB' issue-level rating to Choice Hotels International Inc.'s proposed $350 million senior secured credit facility due 2016, which consists of a $200 million revolver and a $150 million term loan. "At the same time, we assigned this facility our '1' recovery rating, reflecting our expectation for very high recovery (90% to 100%) for lenders in the event of a payment default. Additionally, we lowered our issue-level rating on Choice's $250 million senior unsecured notes due 2020 to 'BB' from 'BB+' and removed the rating from CreditWatch with negative implications. We also revised our recovery rating on these notes to '5' from '4', reflecting the finalization of financing terms for Choice's planned dividend recapitalization and our expectation for modest recovery (10% to 30%) for lenders in the event of a payment default. The 'BB' issue-level and '5' recovery rating on the company's $400 million 5.75% senior unsecured notes due 2022 are affirmed," S&P said. Ratings List Choice Hotels International Inc. Corporate Credit Rating BB+/Stable/-- Rating Assigned Proposed $200 mil sr sec notes due 2016 BBB Recovery rating 1 Proposed $150 term loan BBB Recovery rating 1 Rating Affirmed $400 mil. 5.75% sr. unsec nts due 2022 BB Downgraded; CreditWatch Action To From Senior Unsecured US$250 mil 5.70% sr nts due 2020 BB BB+/Watch Neg Recovery Rating 5 4 CORNERSTONE BANCSHARES: Appoints Nathaniel Hughes as CEO -------------------------------------------------------- Cornerstone Bancshares, Inc., appointed Nathaniel F. Hughes as Chief Executive Officer; J. Robert Vercoe, Jr., as Chief Credit Officer; and John H. Coxwell, Sr., as Executive Officer. Mr. Coxwell brings a 30-plus-year career as a Certified Public Accountant and financial institution specialist to his new position. His extensive CPA experience includes managerial positions with Deloitte & Touche and, most recently, 13 years as Managing Partner of Hazlett, Lewis & Bieter, PLLC. In his new role with Cornerstone, he will be responsible for working in conjunction with President Frank Hughes to oversee and manage all bank operations. "We are extremely pleased to welcome John aboard," said Mr. Hughes. "He brings a wealth of expertise and in-depth knowledge that will make him an outstanding addition to the management team and a tremendous asset to Cornerstone." About Cornerstone Bancshares Chattanooga, Tenn.-based Cornerstone Bancshares, Inc. is a bank holding company. Its wholly-owned subsidiary, Cornerstone Community Bank, is a Tennessee-chartered commercial bank with five full-service banking offices located in Hamilton County, Tennessee. Cornerstone reported net income of $1.03 million in 2011, compared with a net loss of $4.70 million in 2010. The Company's balance sheet at March 31, 2012, showed $417.47 million in total assets, $381.58 million in total liabilities and $35.88 million in total stockholders' equity. Cornerstone said in its 2011 annual report that as of Dec. 31, 2011, the Company had one loan, currently being serviced by Midland Loan Services for the FDIC, which totaled approximately $3 million. The loan contains certain compliance covenants which include stated minimum or maximum target amounts for Cornerstone's capital levels, the Bank's capital levels, nonperforming asset levels at the Bank and the ability of Cornerstone to meet the required debt service coverage ratio, which is computed on the four most recent consecutive fiscal quarters. Due to the level of nonperforming assets of the Bank and not currently meeting the required debt service coverage ratio, Cornerstone was not in compliance with these two covenants at Dec. 31, 2011. However, Cornerstone had previously obtained waivers through Dec. 31, 2011. During March 2012, Cornerstone obtained from the FDIC a waiver of the covenant compliance requirements through Dec. 31, 2012, granted that all payments are made in accordance with the aforementioned repayment schedule. However, if the Company is unable to comply with those covenants or obtain an additional waiver from the lender for violations that occur after Dec. 31, 2012, if any, the lender may declare the loan in default and take possession of the Bank's common stock. If this event were to occur, Cornerstone's assets and operations would be substantially reduced and therefore its ability to continue as a going concern would be in substantial doubt. Consent Order The Company disclosed in the Form 10-Q for the quarter ended June 30, 2010, that following the issuance of a written report by the Federal Deposit Insurance Corporation and the Tennessee Department of Financial Institutions concerning their joint examination of Cornerstone Community Bank in October 2009, the Bank entered a consent order with the FDIC on April 2, 2010, and a written agreement with the TDFI on April 8, 2010, each concerning areas of the Bank's operations identified in the report as warranting improvement and presenting substantially similar plans for making those improvements. The consent order and written agreement, which the Company collectively refers to as the "Action Plans", convey specific actions needed to address certain findings from the joint examination and to address the Company's current financial condition. The Action Plans contain a list of strict requirements ranging from a capital directive, which requires the Company to achieve and maintain minimum regulatory capital levels in excess of the statutory minimums to be well-capitalized, to developing a liquidity risk management and contingency funding plan, in connection with which the Company will be subject to limitations on the maximum interest rates it can pay on deposit accounts. The Action Plans also contain restrictions on future extensions of credit and requires the development of various programs and procedures to improve the Company's asset quality as well as routine reporting on its progress toward compliance with the Action Plans to the Board of Directors, the FDIC and the TDFI. As of April 2, 2010, the date of the Action Plans, the Bank was deemed to be "adequately capitalized." CRYOPORT INC: Incurs $7.8 Million Net Loss in Fiscal 2012 --------------------------------------------------------- Cryoport, Inc., filed with the U.S. Securities and Exchange Commission its annual report on Form 10-K disclosing a net loss of $7.83 million on $555,637 of revenue for the year ended March 31, 2012, compared with a net loss of $6.15 million on $475,504 of revenue during the prior fiscal year. The Company's balance sheet at March 31, 2012, showed $6.21 million in total assets, $2.48 million in total liabilities and $3.72 million in total stockholders' equity. KMJ Corbin & Company LLP, in Costa Mesa, California, issued a "going concern" qualification on the consolidated financial statements for the fiscal year ended March 31, 2012. The independent auditors noted that the Company has incurred recurring operating losses and has had negative cash flows from operations since inception. Although the Company has working capital of $4,024,120 and cash & cash equivalents of $4,617,535 at March 31, 2012, management has estimated that cash on hand, which include proceeds from the offering received in the fourth quarter of fiscal 2012, will only be sufficient to allow the Company to continue its operations only into the fourth quarter of fiscal 2013. These matters raise substantial doubt about the Company's ability to continue as a going concern. A copy of the Form 10-K is available for free at: http://is.gd/GJlayT About CryoPort Inc. Headquartered in Lake Forest, Calif., CryoPort, Inc. (OTC BB: CYRXD) -- http://www.cryoport.com/-- provides innovative cold chain frozen shipping system dedicated to providing superior, affordable cryogenic shipping solutions that ensure the safety, status and temperature of high value, temperature sensitive materials. The Company has developed a line of cost-effective reusable cryogenic transport containers capable of transporting biological, environmental and other temperature sensitive materials at temperatures below 0-degree Celsius. D.R. HORTON: Strong Liquidity Cues Fitch to Affirm Low-B Ratings ---------------------------------------------------------------- Fitch Ratings has affirmed its ratings for D.R. Horton, Inc. (NYSE: DHI), including the company's long-term IDR at 'BB'. Fitch has also revised DHI's Rating Outlook to Positive from Stable. The ratings for DHI reflect the company's strong liquidity position, the successful execution of its business model, geographic and product line diversity and steady capital structure. Fitch expects better prospects for the housing industry this year. That being the case, there are still challenges facing the housing market that are likely to meaningfully moderate the early stages of this recovery. Nevertheless, DHI has the financial flexibility to navigate through the still challenging market conditions and continue to selectively and prudently invest in land opportunities. Builder and investor enthusiasm have for the most part surged so far in 2012. However, housing metrics have not entirely kept pace. Year-over-year comparisons have been solidly positive on a consistent basis. However, month-to-month the statistics (single- family starts, new home and existing home sales) have been erratic and, at times, below expectations. However, these macro numbers in May were generally positive: single-family starts (+3.2%), new home sales (+7.6%) and existing home sales (-1.5%). Home prices have also been more encouraging of late, turning positive for some series: FHFA +1.8% March, CoreLogic +2.2% April (excluding distressed +2.6% April), Lender Processing Services (LPS) +0.9% March, and Case-Shiller's 20-city price index (+1.3%) in April. Also, in any case, for the large public homebuilders spring has so far been a resounding success. As Fitch noted in the past, the housing recovery will likely occur in fits and starts. Fitch has raised its housing forecasts for 2012 since the beginning of the year. However, the forecast still assumes a relatively modest rise off a very low bottom. Fitch forecasts single-family housing starts to increase about 12%, with single- family new home sales to expand approximately 10%. DHI successfully managed its balance sheet during the housing downturn and generated significant operating cash flow. DHI had been aggressively reducing its debt over the past few years. Homebuilding debt declined from roughly $5.5 billion at June 30, 2006 to $1.94 billion currently (including $350 million of 4.75% senior notes due 2017 issued in April 2012), a 65% reduction. Pro forma debt-capitalization is 41.8%. Net debt-capitalization is 26.6%. DHI has lowered its homebuilding debt levels meaningfully in each of the last three fiscal years (as shown below): -- By $336.3 million in fiscal 2009; -- By $991.3 million in fiscal 2010;and -- By $497.2 million in fiscal 2011. This was accomplished through debt repurchases, maturities and early redemptions. Through the first six months of fiscal 2012 (ending March 31, 2012), DHI has repurchased an additional $10.8 million of senior notes. DHI has $172 million of senior notes maturing in May 2013. DHI's next major debt maturity is in January 2014, when $145 million of senior notes mature. DHI currently has solid liquidity with unrestricted homebuilding cash of $662.2 million and marketable securities of $299.1 million as of March 31, 2012. DHI maintains a 6.8-year supply of lots (based on last 12 months deliveries), 71.3% of which are owned and the balance controlled through options. The options share of total lots controlled is down sharply over the past five years as the company has written off substantial numbers of options. Fitch expects DHI to continue rebuilding its land position and increase its community count. The primary focus will be optioning (or in some cases, purchasing for cash) finished lots, wherein DHI can get a faster return of its capital. DHI's cash flow from operations during the LTM period ending March 31, 2012 was a negative $46.6 million. For all of fiscal 2012, Fitch expects DHI to be cash flow negative. The ratings also reflect DHI's relatively heavy speculative building activity (at times averaging 50-60% of total inventory and 50% at March 31, 2012). DHIhas historically built a significant number of its homes on a speculative basis (i.e. begun construction before an order was in hand). A key focus is on selling these homes either before construction is completed or certainly before a completed spec has aged more than a few months. This has resulted in consistently attractive margins. DHI successfully executed this strategy in the past, including during the severe housing downturn. Nevertheless, Fitch is generally more comfortable with the more moderate spec targets of 2004 and 2005, wherein spec inventory accounted for roughly 35- 40% of homes under construction. Future ratings and Outlooks will be influenced by broad housing market trends as well as company-specific activity, such as -- Trends in land and development spending; -- General inventory levels; -- Speculative inventory activity (including the impact of high cancellation rates on such activity); -- Gross and net new order activity; -- Debt levels; -- Free cash flow trends and uses; and -- DHI's cash position. Negative rating actions could occur if the recovery in housing does not continue and DHI prematurely and aggressively steps up its land and development spending. This could lead to consistent and significant negative quarterly cash flow from operations and diminished liquidity position. Conversely, Fitch may consider taking positive rating actions if the recovery in housing persists, or accelerates and is significantly better than Fitch's current outlook. Fitch may consider positive rating action if the housing recovery persists and DHI shows continuous improvement in credit metrics while maintaining a healthy liquidity position. Fitch has affirmed the following ratings for DHI and revised the Rating Outlook to Positive: -- Long-term IDR at 'BB'; -- Senior unsecured debt at 'BB'. DBSI INC: Trustee Files Investor Suit Against Broker-Dealers ------------------------------------------------------------ Jake Simpson at Bankruptcy Law360 reports that the litigation trustee for DBSI Inc. filed an investor lawsuit against a host of broker-dealer firms in Delaware federal court Wednesday, accusing them of aiding DBSI officials in conducting a $500 million Ponzi scheme. Trustee James R. Zazzali filed suit against 40 brokerages and brokerage parent firms and more than 100 named individuals for alleged securities violations related to the sale of DBSI financial instruments to investors. Mr. Zazzali is seeking millions in compensatory damages from the firms to pay back investors, Bankruptcy Law360 relates. About DBSI Inc. Headquartered in Meridian, Idaho, DBSI Inc. and its affiliates were engaged in numerous commercial real estate and non-real estate projects and businesses. On Nov. 10, 2008, and other subsequent dates, DBSI and 180 of its affiliates filed for Chapter 11 protection (Bankr. D. Del. Lead Case No. 08-12687). DBSI estimated assets and debts between $100 million and $500 million as of the Chapter 11 filing. Lawyers at Young Conaway Stargatt & Taylor LLP represent the Debtors as counsel. The Official Committee of Unsecured Creditors tapped Greenberg Traurig, LLP, as its bankruptcy counsel. Kurtzman Carson Consultants LLC is the Debtors' notice claims and balloting agent. Joshua Hochberg, a former head of the Justice Department fraud unit, served as an Examiner and called the seller and servicer of fractional interests in commercial real estate an "elaborate shell game" that "consistently operated at a loss" in his report released in October 2009. McKenna Long & Aldridge LLP was counsel to the Examiner. On Sept. 11, 2009, the Honorable Peter J. Walsh entered an Order appointing James R. Zazzali as Chapter 11 trustee for the Debtors' estates. On Oct. 26, 2010, the trustee of DBSI Inc. won court confirmation of its Chapter 11 plan of liquidation, paving the way for it to pay creditors and avoid years of expensive litigation over its complex web of affiliates. The plan, which was declared effective Oct. 29, 2010, was jointly proposed by DBSI's unsecured creditors and the bankruptcy trustee in charge of DBSI and its 170-plus affiliates. Pursuant to DBSI Inc.'s confirmed Chapter 11 plan, the DBSI Real Estate Liquidating Trust was established as of the effective date and certain of the Debtors' assets, including the Debtors' ownership interest in Florissant Market Place was transferred to the RE Trust. Mr. Zazzali and Conrad Myers were appointed as the post-confirmation trustees. Messrs. Zazzali and Myers are represented by lawyers at Blank Rime LLP and Gibbons P.C. DELTA AIR: Moody's Assigns 'Ba3' Rating to Class B Tranche ---------------------------------------------------------- Moody's Investors Service assigned Baa2 and Ba3 ratings, respectively, to the Class A and Class B Pass Through Certificates, Series 2012-1 of the 2012-1 Pass Through Trusts that Delta Air Lines, Inc. will establish. Assignments: Issuer: Delta Air Lines, Inc. Senior Secured Enhanced Equipment Trust, A Tranche Assigned Baa2 Senior Secured Enhanced Equipment Trust, B Tranche Assigned Ba3 Ratings Rationale The ratings of the Certificates consider the credit quality of Delta as obligor of the underlying equipment notes, Moody's opinion of the collateral protection of the Notes, the credit support provided by the liquidity facilities and certain structural characteristics of the Notes such as the applicability of Section 1110 of Title 11 of the United States Code (the "Code") and the cross-collateralization and cross-default features. The assigned ratings reflect Moody's opinion of the ability of the Pass-Through Trustees to make timely payment of interest and the ultimate payment of principal on the A- and B-Tranches' final scheduled regular distribution dates of May 7, 2020 and May 7, 2019, respectively. The Certificates' proceeds will fund the purchase of equipment notes ("Notes") to be issued by Delta for 31 vintage aircraft; 17 narrow-bodies and 14 wide-bodies: nine Airbus A319-100s delivered new to Northwest Airlines, Inc. in 2002, seven Airbus A320-200s delivered new to Northwest Airlines, Inc. between 1998 and 2002, one 2001-vintage Boeing B757-200, eight Boeing B767-300ERs delivered new to Delta between 1995 and 1997, and six 2000-vintage Boeing B767-400ERs. The transaction proceeds will partially or entirely fund the refinancing of existing financings to which each of the aircraft is currently pledged, including the company's Series 2002-1 EETC, Northwest Airlines' 2001-2 EETC or Delta's senior secured credit facilities arranged in April 2011. Amounts due under the Certificates will be subordinated to any amounts due on the separate Class A and Class B Liquidity Facilities, which Natixis, S.A., acting through its New York Branch, will provide. At 12.4 years, the average age of the aircraft in this transaction will be the oldest at issuance of any recent newly-issued EETC. While not anticipated, under a Delta bankruptcy scenario, differences in aircraft mix across the company's EETCs and plans for a reorganized network would affect decision-making with respect to which, if any, of its EETCs Delta could disaffirm pursuant to Section 1110 of the U.S. Bankruptcy Code. The older age of the aircraft in each of Delta's 2012-1 and 2011-1 EETCs could increase the probabilities of disaffirmation relative to the other of Delta's EETCs under a default scenario. Moody's estimate of the loan-to-value of the Certificates is in line with those of Delta's other EETCs, particularly 2011-1. Moody's estimates the initial loan-to-value of the tranches at just above 60% and just above 80%, respectively. These LTV percentages are based on Moody's estimates of current market values, before the priority claim of the liquidity facilities and before applying an LTV benefit for cross-collateralization of three percentage points in this transaction. The ratings assignment also reflects Moody's belief that the wide- body aircraft in this transaction will remain important to Delta's route network, notwithstanding their older vintages. Delta currently has no wide-body aircraft on order and Moody's believes it would likely be difficult to garner more than a handful of wide-body delivery slots in the near term because of the current backlogs for the B777 and A330 aircraft. As well, the Airbus narrow-body collateral would likely remain relevant as these aircraft represent some of the younger narrow-body vintages in the fleet. Any combination of future changes in the underlying credit quality or ratings of Delta, unexpected material changes in the value of the aircraft pledged as collateral, and/or changes in the status or terms of the liquidity facilities or the credit quality of the liquidity provider could cause Moody's' to change its ratings of the Certificates. The principal methodology used in rating Delta was the Enhanced Equipment Trust And Equipment Trust Certificates Industry Methodology published in December 2010. Delta Air Lines, Inc., headquartered in Atlanta, Georgia, is one of the world's largest airlines, providing scheduled air transportation for passengers and cargo throughout the U.S. and around the world. DEWEY & LEBOEUF: Barclays, Citi Tell Ex-Partners to Repay Loans --------------------------------------------------------------- Sara Randazzo, writing for The Am Law Daily, reports that Barclays and Citibank are clamping down on former Dewey & LeBoeuf partners who took out loans to fulfill their capital contribution obligations to the firm, and Citi has initiated legal action against at least one former partner to get its money back. According to Am Law Daily, at the time they were hired, Dewey partners were given until the end of the calendar year in which they joined the firm to chip in 36% of their target compensation as a capital contribution. Through the years, Dewey worked first with Barclays, and later with Citibank, to establish loan programs that the firm stressed were the easiest way for partners to quickly fulfill their capital obligations. Dewey acted as the middle man in the granting of the loans, according to several former partners who participated in the programs, and often agreed to pay the interest for a number of years to ease the burden on its partners. According to two former partners, the amount asked of Dewey partners increased as target compensation increased, even though -- as is now widely reported -- the firm failed for years to pay partners what was promised. According to Am Law Daily, now that Dewey is dead, former partners are personally obligated to pay back any loans they took out, with interest, and the banks have started taking action to get their money. The report relates two former partners say they have received statements directly from Citi and Barclays, with both banks suggesting unfavorable terms for repayment; another partner says there has been no word yet from Citi and believes others are in the same situation. Am Law Daily relates Citi has taken legal action against former Houston partner Steven Otillar, an oil and gas lawyer now with Akin Gump Strauss Hauer & Feld. The bank filed a summons in New York state court May 31 seeking repayment of roughly $209,670, which court papers say accounts for a $207,000 loan given Sept. 2, 2011, plus interest. The amount equates to a target compensation of $575,000, the report notes. According to Citi's filing, the loan contained a clause that triggered the default of the note if Mr. Otillar ceased being a partner at Dewey. The report says a representative for Citi declined to comment on the lawsuit or the loan program. A press representative for Barclays did not return a request for comment Tuesday afternoon. About Dewey & LeBoeuf New York-based law firm Dewey & LeBoeuf LLP sought Chapter 11 bankruptcy (Bankr. S.D.N.Y. Case No. 12-12321) to complete the wind-down of its operations. The firm had struggled with high debt and partner defections. Dewey disclosed debt of $245 million and assets of $193 million in its chapter 11 filing late evening on May 29, 2012. Dewey & LeBoeuf was formed by the 2007 merger of Dewey Ballantine LLP and LeBoeuf, Lamb, Greene & MacRae LLP. At its peak, Dewey employed about 2,000 people with 1,300 lawyers in 25 offices across the globe. When it filed for bankruptcy, only 150 employees were left to complete the wind-down of the business. Dewey's offices in Hong Kong and Beijing are being wound down. The partners of the separate partnership in England are in process of winding down the business in London and Paris, and administration proceedings in England were commenced May 28. All lawyers in the Madrid and Brussels offices have departed. Nearly all of the lawyers and staff of the Frankfurt office have departed, and the remaining personnel are preparing for the closure. The firm's office in Sao Paulo, Brazil, is being prepared for closure and the liquidation of the firm's local affiliate. The partners of the firm in the Johannesburg office, South Africa, are planning to wind down the practice. The firm's ownership interest in its practice in Warsaw, Poland, was sold to the firm of Greenberg Traurig PA on May 11 for $6 million. The Pension benefit Guaranty Corp. took $2 million of the proceeds as part of a settlement. Judge Martin Glenn oversees the case. Albert Togut, Esq., at Togut, Segal & Segal LLP, represents the Debtor. Epiq Bankruptcy Solutions LLC serves as claims and notice agent. The petition was signed by Jonathan A. Mitchell, chief restructuring officer. JPMorgan Chase Bank, N.A., as Revolver Agent on behalf of the lenders under the Revolver Agreement, hired Kramer Levin Naftalis & Frankel LLP. JPMorgan, as Collateral Agent for the Revolver Lenders and the Noteholders, hired FTI Consulting and Gulf Atlantic Capital, as financial advisors. The Noteholders hired Bingham McCutchen LLP as counsel. The U.S. Trustee formed two committees -- one to represent unsecured creditors and the second to represent former Dewey partners. The creditors committee hired Brown Rudnick LLP led by Edward S. Weisfelner, Esq., as counsel. The Former Partners hired Tracy L. Klestadt, Esq., and Sean C. Southard, Esq., at Klestadt & Winters, LLP, as counsel. Dewey & LeBoeuf has won Court authority to use lenders' cash collateral through July 31, 2012. DOLLAR GENERAL: Moody's Rates $450MM Sr. Unsecured Notes 'Ba2' -------------------------------------------------------------- Moody's Investors Service assigned a Ba2 rating to Dollar General Corporation's proposed $450 million senior unsecured notes due 2017. All other ratings including its Ba1 Corporate Family Rating, and SGL-1 Speculative Grade Liquidity rating were affirmed. The rating outlook is positive. Ratings Rationale The proceeds of the proposed $450 million senior unsecured notes will be used to repay the senior subordinate notes due 2017. Following the repayment, the senior subordinate notes will be retired and its Ba3 rating withdrawn. Moody's views the refinancing as a credit positive as the rating agency believes it will likely reduce interest expense, thus improving interest coverage. The following rating is assigned subject to final documentation: $450 million senior unsecured notes due 2017 at Ba2 (LGD 5,86%) The following rating will be withdrawn upon their repayment: Senior subordinate notes due 2017 at Ba3 (LGD 6, 97%) The following ratings are affirmed: Corporate Family Rating at Ba1 Senior Secured Term Loan B1 at Ba1 (LGD 3, 43%) Senior Secured Term Loan B2 at Ba2 (LGD 4, 68%) Extended Senior Secured Term Loan Tranche C at Ba1 (LGD 3, 43%) Speculative Grade Liquidity rating at SGL-1 The Ba1 Corporate Family Rating is supported by Dollar General's market position as the largest dollar-store chain in the U.S. Moody's views the dollar store sector favorably and expects that it will continue to grow given its low price points and its relative resistance to economic cycles. The rating also reflects Dollar General's solid credit metrics and its very good liquidity. The rating acknowledges that Dollar General's earnings are expected to continue to grow at a healthy rate despite a limited ability to pass on cost pressures to a price sensitive customer which will limit Dollar General's gross margin. Dollar General's ratings are constrained by its geographic concentration. While operating over 10,000 stores in 40 states, Dollar General is heavily concentrated in the south, which accounts for approximately 47% of their store base. However, this concentration risk may slowly dissipate as Dollar General continues to grow its store count and break ground in new states, much like their recent launch into California. The positive outlook acknowledges the reduction of KKR's equity ownership to below 50% which triggers a change in the composition of the board of directors such that KKR no longer controls the board. The positive outlook reflects that Moody's expects the composition of the board to likely change over the next twelve to eighteen months and that the revised board is likely to support balanced and conservative financial policies. An upgrade would require Dollar General's board of directors to evidence support of financial policies which allow the company to maintain credit metrics consistent with a higher rating over the long term. Quantitatively, an upgrade would require debt to EBITDA to remain below 3.0 times and EBITA to interest expense remain above 4.5 times. Ratings could be downgraded should Dollar General's financial policies become more aggressive. Ratings could also be downgraded should Dollar General's operating performance deteriorate or debt levels increase such that debt to EBITDA is sustained above 4.0 times or EBITA to interest expense falls below 3.5 times. The principal methodology used in rating Dollar General was the Global Retail Industry Methodology published in June 2011. Other methodologies used include Loss Given Default for Speculative- Grade Non-Financial Companies in the U.S., Canada and EMEA published in June 2009. Dollar General Corporation, headquartered in Goodlettsville, Tennessee, owns and operates over 10,000 extreme value general merchandise stores. Revenues are over $15 billion. DM DEVELOPMENT: Involuntary Chapter 11 Case Summary --------------------------------------------------- Alleged Debtor: DM Development LLC dba Doylem Development LLC 1175 York Avenue New York, NY 10065 Case Number: 12-12709 Involuntary Chapter 11 Petition Date: June 26, 2012 Court: Southern District of New York (Manhattan) Judge: Martin Glenn Petitioner's Counsel: Pro Se DM Development LLC's petitioner: Petitioner Nature of Claim Claim Amount ---------- --------------- ------------ Financial Service Advisory Fees $257,000 Advisors P.O. Box 1649 Lake Worth, FL 33460 EASTMAN KODAK: July 26 Hearing to Name Court for Patent Issues -------------------------------------------------------------- Bill Rochelle, the bankruptcy columnist for Bloomberg News, reports that when Eastman Kodak Co. holds a hearing in bankruptcy court on July 2 for approval of procedures for selling digital imaging technology, the bankruptcy judge won't know yet whether a federal district judge will take away the right to make decisions regarding patent disputes. The report recounts that when Kodak sued Apple Inc. this month for a declaration about ownership of 10 patents, Apple responded by filing a request for a federal district judge to take the dispute out of bankruptcy court. On June 27, U.S. District Judge George B. Daniels called for a hearing on July 26 to decide if making a patent decision is beyond the competence of the bankruptcy court. According to the report, when the bankruptcy court in New York conducts the hearing on July 2, there will be objections from high-technology companies contending he doesn't have the right to rule on issues involving technology ownership. The ruling Judge Daniels will make after the July 26 hearing may decide the extent to which the bankruptcy court can make rulings on disputes regarding patent rights in the course of selling Kodak technology. Companies objecting to having decisions made in bankruptcy court include Intel Corp., Ricoh Co. Ltd., Nikon Corp., Motorola Solutions Inc., and Apple. About Eastman Kodak Rochester, New York-based Eastman Kodak Company and its U.S. subsidiaries on Jan. 19, 2012, filed voluntarily Chapter 11 petitions (Bankr. S.D.N.Y. Lead Case No. 12-10202) in Manhattan. Subsidiaries outside of the U.S. were not included in the filing and are expected to continue to operate as usual. Kodak, founded in 1880 by George Eastman, was once the world's leading producer of film and cameras. Kodak sought bankruptcy protection amid near-term liquidity issues brought about by steeper-than-expected declines in Kodak's historically profitable traditional businesses, and cash flow from the licensing and sale of intellectual property being delayed due to litigation tactics employed by a small number of infringing technology companies with strong balance sheets and an awareness of Kodak's liquidity challenges. In recent years, Kodak has been working to transform itself from a business primarily based on film and consumer photography to a smaller business with a digital growth strategy focused on the commercialization of proprietary digital imaging and printing technologies. Kodak has 8,900 patent and trademark registrations and applications in the United States, as well as 13,100 foreign patents and trademark registrations or pending registration in roughly 160 countries. Kodak disclosed $5.10 billion in assets and $6.75 billion in liabilities as of Sept. 30, 2011. The net book value of all assets located outside the United States as of Dec. 31, 2011 is $13.5 million. Attorneys at Sullivan & Cromwell LLP and Young Conaway Stargatt & Taylor, LLP, serve as counsel to the Debtors. FTI Consulting, Inc., is the restructuring advisor. Lazard Freres & Co. LLC, is the investment banker. Kurtzman Carson Consultants LLC is the claims agent. A group of second lien lenders are represented by Akin Gump Strauss Hauer & Feld LLP. The Official Committee of Unsecured Creditors has tapped Milbank, Tweed, Hadley & McCloy LLP, as its bankruptcy counsel. FASHION PLACE: Wins Confirmation of 2nd Amended Plan ---------------------------------------------------- Fashion Place Dental, Inc., won confirmation of its Second Amended Plan of Reorganization dated Feb. 7, 2012. The Amended Disclosure Statement was approved on Feb. 22. The hearing on confirmation of the Plan was held May 3 at 11:00 a.m. A copy of Bankruptcy Judge R. Kimball Mosier's Findings of Fact and Conclusions of Law in Support of Order Confirming Debtor's Second Amended Plan of Reorganization dated June 25, 2012, is available at http://is.gd/0w0zAffrom Leagle.com. Fashion Place Dental, Inc., filed for Chapter 11 bankruptcy (Bankr. D. Utah Case No. 10-35809) on Nov. 12, 2010, estimating under $1 million in assets and debts. A copy of the petition is available for free at http://bankrupt.com/misc/utb10-35809.pdf The Debtor is represented by: Michael C. Van, Esq. Clay A. Alger, Esq. SHUMWAY VAN & HANSEN Las Vegas, NV Telephone: (702) 478-7770 Facsimile: (702) 478-7779 E-mail: michael@shumwayvan.com FIRST HORIZON: Mortgage Repurchase Cues Fitch to Lower Ratings -------------------------------------------------------------- Fitch Ratings has downgraded the ratings of First Horizon National Corporation (FHN) and lead bank First Tennessee Bank, N.A. (FTBNA). Fitch has also placed FHN's long- and short-term Issuer Default Ratings (IDRs) on Rating Watch Negative. The downgrade follows FHN's announcement that it will be taking a very large mortgage repurchase provision in 2Q'12. FHN expects to report $250 million in pre-tax charges related to mortgage repurchases, as compared to an average of approximately $50 million the prior three quarters. As a result, FHN will likely report a loss for the full year 2012. Even excluding this charge, FHN's earnings profile had been trending lower than similarly rated peers for several quarters. Previously, Fitch viewed an outsized charge as a negative rating driver, and this provision represents a material charge for the company. Although FHN's ability to quantify potential mortgage repurchase losses was previously limited because it no longer services a large portion of loans sold to the agencies and lacked access to underlying loan data, this charge was still outside of Fitch's expectations. Fitch will be reviewing all the ratings in the very near term. Accordingly, there is the potential of further downgrades to FHN's rating. FHN's ability to return profitability measures more in line with peer averages will be one of the key rating drivers in the next review. Potential private label put-back risk, which to date has not been an issue for FHN, will also be incorporated in the upcoming review. Fitch has downgraded and placed on Rating Watch Negative the following ratings: First Horizon National Corporation -- Long-term IDR to 'BBB' from 'BBB+'; -- Viability to 'bbb' from 'bbb+'; -- Subordinated debt to 'BBB-' from 'BBB'; -- Senior to 'BBB' from 'BBB+'. First Tennessee Bank, N.A. -- Long-term IDR to 'BBB' from 'BBB+'; -- Viability to 'bbb' from 'bbb+'; -- Long-term deposits to 'BBB+' from 'A-'; -- Short-term deposits to 'F2' from 'F1'; -- Subordinated debt to 'BBB-' from 'BBB'; -- Preferred stock to 'B+' from 'BB-'. First Tennessee Capital II -- Preferred stock to 'BB-' from 'BB'. Fitch affirms the following ratings: First Horizon National Corporation -- Support at '5'; -- Support Floor at 'NF'. First Tennessee Bank, N.A. -- Support at '5'; -- Support Floor at 'NF'. Fitch has placed the following rating on Rating Watch Negative: First Horizon National Corporation -- Short-term IDR 'F2'. First Tennessee Bank, N.A. -- Short-term IDR 'F2'; -- Short-term debt 'F2'. FIRST SECURITY: Nine Directors Elected at Annual Meeting -------------------------------------------------------- The annual meeting of shareholders of the First Security Group, Inc., was held on June 20, 2012. The Company's common stock holders elected seven directors to serve until the 2013 Annual Meeting of Shareholders and until their successors have been elected and qualified, namely: (1) William C. Hall; (2) Carol H. Jackson; (3) Robert P. Keller; (4) Ralph L. Kendall; (5) Kelly P. Kirkland; (6) Michael D. Kramer; and (7) Larry D. Mauldin. William F. Grant, III, and Robert R. Lane were elected by First Security's Series A Preferred Stock holder as directors to serve until the 2013 Annual Meeting of Shareholders and until their successors are elected and qualified, or until all dividends payable on all outstanding shares of the Series A Preferred Stock have been declared and paid in full. A non-binding resolution approving the compensation of First Security's executive officers was approved. The shareholders approved the adoption of the First Security Group, Inc., 2012 Long-Term Incentive Plan. The appointment of Crowe Horwath LLP as First Security's independent public accounting firm for the fiscal year ending Dec. 31, 2012, was ratified. About First Security Group First Security Group, Inc., is a bank holding company headquartered in Chattanooga, Tennessee, with $1.2 billion in assets as of Sept. 30, 2010. Founded in 1999, First Security's community bank subsidiary, FSGBank, N.A., has 37 full- service banking offices, including the headquarters, along the interstate corridors of eastern and middle Tennessee and northern Georgia and 325 full-time equivalent employees. In Dalton, Georgia, FSGBank operates under the name of Dalton Whitfield Bank; along the Interstate 40 corridor in Tennessee, FSGBank operates under the name of Jackson Bank & Trust. In the auditors' report accompanying the financial statements for year ended Dec. 31, 2011, Joseph Decosimo and Company, PLLC, in Chattanooga, Tennessee, expressed substantial doubt about the Company's ability to continue as a going concern. The independent auditors noted that the Company has recently incurred substantial losses. The Company is also operating under formal supervisory agreements with the Federal Reserve Bank of Atlanta and the Office of the Comptroller of the Currency and is not in compliance with all provisions of the Agreements. Failure to achieve all of the Agreements' requirements may lead to additional regulatory actions. The Company reported a net loss of $23.06 million in 2011, a net loss of $44.34 million in 2010, and a net loss of $33.45 million in 2009. The Company's balance sheet at March 31, 2012, showed $1.13 billion in total assets, $1.06 billion in total liabilities and $61.83 million in total stockholders' equity. FISH & FISHER: Merchants & Farmers Bank Barred From Amending Suit ----------------------------------------------------------------- Bankruptcy Judge Edward Ellington barred Merchants & Farmers Bank from filing a third amended complaint and raise new claims against Frank Coxwell and Coxwell & Associates, PLLC, saying the bank sat on new evidence for two months without bringing it to the attention of the Court even though M&F Bank knew that a Motion to Dismiss the lawsuit was pending. Only now -- two months after M&F Bank had filed its response to the Motion to Dismiss, and after the Court had entered an Opinion and Final Judgment dismissing Coxwell from the lawsuit -- does M&F seek permission to amend the Second Amended Complaint. "By analogy, it is as if in a poker game, after the players have placed their bets, and after they have turned over their cards, a losing player now wants to draw again to improve his hand. It appears that the two-month delay was a deliberate strategy, a gamble that did not pay off. M&F cannot disavow its failed strategy by blaming Coxwell for not producing the new evidence earlier," Judge Ellington said. The Court also said M&F Bank has over-inflated the significance of the new evidence, saying it does not cure the deficiencies in the allegations of the Second Amended Complaint. The Second Amended Complaint named Coxwell as a defendant, as well as certain creditors of Fish & Fisher. All of the creditors, according to M&F Bank, received varying amounts of proceeds from an arbitration award received by Fish & Fisher and then disbursed by Coxwell in satisfaction of certain debts owed by Fish & Fisher. Coxwell had been retained as counsel for Fish & Fisher to undertake this responsibility. M&F Bank, who was also a creditor of Fish & Fisher, received no payment from the arbitration award. The lawsuit is MERCHANTS AND FARMERS BANK, v. FISH & FISHER, INC., DEBTOR, FRANK COXWELL, COXWELL & ASSOCIATES, PLLC, SEKCO, INC., H&E EQUIPMENT SERVICES, INC., PUCKETT MACHINERY COMPANY, WARING OIL COMPANY, LLC, McGRAW RENTAL & SUPPLY COMPANY, INC., UNITED STATES OF AMERICA, AND PRECIOUS MARTIN, Adv. Proc. No. 11-00027 (Bankr. S.D. Miss.). A copy of the Court's June 25, 2012 Findings of Fact and Conclusions of Law is available at http://is.gd/5r5gv8 from Leagle.com. On Aug. 7, 2009, M&F and two other creditors filed an involuntary Chapter 7 petition (Bankr. S.D. Miss. Case No. 09-02747) against Fish & Fisher. An order for relief was entered on Sept. 23, 2009. At the behest of Fish & Fisher, the Court converted the case to a Chapter 11 case on March 2, 2010. FRANKLIN CREDIT: Sets July 6 as Record Date for Distribution ------------------------------------------------------------ Franklin Credit Holding Corporation gave notice to the Financial Industry Regulatory Authority of the proposed record date of July 6, 2012, to identify stockholders for purposes of the proposed distribution to each stockholder of the Company, as of the close of business of the Record Date, of a pro rata share of the Company's 80% interest in its mortgage servicing subsidiary, Franklin Credit Management Corporation, pursuant to the proposed Prepackaged Plan of Reorganization of Franklin Credit Holding Corporation. Although the confirmation hearing in the bankruptcy case is scheduled for July 18, 2012, there can be no assurance that the Bankruptcy Court will confirm the Prepackaged Plan, that the Bankruptcy Court will approve the Record Date, or that there will be a pro rata distribution of the Company's 80% interest in its mortgage servicing subsidiary, Franklin Credit Management Corporation, to each stockholder of the Company, effective as of the close of business on the Record Date. About Franklin Credit Holding Franklin Credit Holding Corporation (OTC BB: FCMC) -- http://www.franklincredit.com/-- is a specialty consumer finance company primarily engaged in the servicing and resolution of performing, re-performing and nonperforming residential mortgage loans, including specialized loan recovery servicing, and in the analysis, pricing, due diligence and acquisition of residential mortgage portfolios for third parties. The Company's executive, administrative and operations offices are located in Jersey City, N.J. Franklin Credit Holding Corporation filed a Chapter 11 bankruptcy petition (Bankr. D. N.J. Case No. 12-24411) in Newark, New Jersey, on June 4, 2012. Franklin Credit also filed a prepackaged plan. The Debtor is seeking a combined hearing on the plan and the explanatory disclosure statement. Judge Donald H. Steckroth presides over the case. Lawyers at McCarter & English, LLP, serves as the Debtor's counsel. In its petition, the Debtor estimated $1 million to $10 million in assets and $500 million to $1 billion in debts. In a recent regulatory filing with the U.S. Securities and Exchange Commission, Franklin Credit Holding's balance sheet at March 31, 2012, showed $29.02 million in total assets, $874.02 million in total liabilities, and a $845 million total stockholders' deficit. The petition was signed by Paul Colasono, executive vice president and chief financial officer. The Plan provides for the liquidation of its assets -- the ownership of 80% of the stock in non-debtor Franklin Credit Mortgage Corp. -- with the proceeds or the fair market value of the assets being distributed in accordance with the Bankruptcy Code. The fair market value of FCMC will be distributed through the payment of $250,000 in cash on the effective date of the Plan and an aggregate $1.11 million over a period of five years, evidenced by a promissory note guaranteed by Thomas J. Axon, the chairman and president of the Debtor and FCMC, and the owner of 20% of the common shares of FCMC, and 45.2% of the common shares of the Debtor. The payments will be made by FCMC, and will be the primary source of cash for distributions contemplated by the Plan. IN exchange for the payment by FCMC, the Debtor's interests in the stock of FCMC will be distributed, pro-rata, to holders of allowed interests. The Plan provides for payment in full of allowed priority non-tax claims. The secured claims of the legacy lenders totaling $820.6 million will be unaltered by the Plan. Huntington National Bank and Huntington Finance LLC will release the Debtor from any obligations in connection with their secured claims of $4.7 million. Holders of general unsecured claims estimated to total $1.9 million will receive their pro rata share of the proceeds of the liquidation of the remaining assets. The Court has established July 18, 2012, as the hearing on the adequacy of the Disclosure Statement. GARLOCK SEALING: WD Pa. Court Defers to Delaware District Court --------------------------------------------------------------- District Judge Nora Barry Fischer in the Western District of Pennsylvania declined to rule on 3 of the 12 separate appeals initiated by Garlock Sealing Technologies, LLC, from Bankruptcy Judge Judith K. Fitzgerald's Memorandum Opinion and Order issued Oct. 7, 2011, denying Garlock's motions to access records in asbestos-related Chapter 11 bankruptcies of: -- Pittsburgh Corning; North American Refractories; and Mid-Valley Inc., which are pending before the Bankruptcy Court for the Western District of Pennsylvania; and -- Owens Corning; Armstrong World Industries, et al.; W.R. Grace & Co.; USG Corp. et al.; United States Mineral Products Company; Kaiser Aluminum Corp.; ACandS Inc.; Combustion Engineering Inc.; Flintkote Company, which are pending before the Bankruptcy Court for the District of Delaware. The consolidated opinion and order resolved motions filed by Garlock in nine bankruptcy cases in the Delaware Bankruptcy Court and three bankruptcies in the Western District of Pennsylvania Bankruptcy Court. This procedural nuance is possible because Judge Fitzgerald is assigned to hear bankruptcy cases in both Bankruptcy Courts. Garlock filed 12 separate appeals of Judge Fitzgerald's rulings, including three appeals pending before the Western District of Pennsylvania District Court and nine appeals in the Delaware District Court. Garlock admits that its appeals are identical in that they all challenge the same rulings by the Bankruptcy Court and raise the same arguments on appeal. The substance of Garlock's briefing in the two fora appears virtually indistinguishable, aside from required changes to the case caption and parties in each case. Garlock's appeals focus on its desire to access Fed.R.Bankr.P. Rule 2019 statements filed by creditor committees and law firms in the bankruptcy cases. The parties with an actual interest in the 12 appeals include Garlock, law firms and creditor committees, while the 12 debtors have more of a tangential interest in avoiding Garlock's attempts to intervene in their respective cases. Judge Fischer said she will exercise discretion and stay the 3 proceedings pending disposition of the appeals before the Delaware District Court. Judge Fischer cited, among others, the need to avoid duplicative litigation. Judge Fischer said the parties could have stipulated to a transfer of the WDPA appeals to Delaware or alternatively, reached a stipulation wherein the parties in the WDPA appeals would agree to be bound by the decision from District Judge Leonard P. Stark, who is assigned to the Delaware appeals. Judge Fischer also noted that, after the stay is lifted, Judge Stark's decision will likely be very persuasive to the WDPA Court. According to Judge Fischer, based on her review of the litigation, it appears that any decision rendered at the District Court level, whether it be issued by Judge Stark or Judge Fischer, will be further appealed to the United States Court of Appeals for the Third Circuit. As such, there is simply no benefit to having two separate District Courts analyze this case simultaneously. A copy of Judge Fischer's Memorandum Opinion dated June 21 is available at http://is.gd/znOx6dfrom Leagle.com. About Garlock Sealing Headquartered in Palmyra, New York, Garlock Sealing Technologies LLC is a unit of EnPro Industries, Inc. (NYSE: NPO). For more than a century, Garlock has been helping customers efficiently seal the toughest process fluids in the most demanding applications. On June 5, 2010, Garlock filed a voluntary Chapter 11 petition (Bankr. W.D. N.C. Case No. 10-31607) in Charlotte, North Carolina, to establish a trust to resolve all current and future asbestos claims against Garlock under Section 524(g) of the U.S. Bankruptcy Code. The Debtor estimated $500 million to $1 billion in assets and up to $500 million in debts as of the Petition Date. Affiliates The Anchor Packing Company and Garrison Litigation Management Group, Ltd., also filed for bankruptcy. The filing covers only Garlock operations in Palmyra, New York and Houston, Texas. Garlock Rubber Technologies, Garlock Helicoflex, Pikotek, Technetics, Garlock Europe and Garlock operations in Canada, Mexico or Australia are not affected by the filing, nor is EnPro Industries or any other EnPro operating subsidiary. Albert F. Durham, Esq., at Rayburn Cooper & Durham, P.A., represents the Debtor in its Chapter 11 effort. Garland S. Cassada, Esq., at Robinson Bradshaw & Hinson, serves as counsel for asbestos matters. The Official Committee of Asbestos Personal Injury Claimants in the Chapter 11 cases is represented by Travis W. Moon, Esq., at Hamilton Moon Stephens Steele & Martin, PLLC, in Charlotte, NC, Elihu Inselbuch, Esq., at Caplin & Drysdale, Chartered, in New York, and Trevor W. Swett III, Esq., Leslie M. Kelleher, Esq., and Jeanna Rickards Koski, Esq., in Washington, D.C. 20005. Joseph W. Grier, III, the Court-appointed legal representative for future asbestos claimants, has retained A. Cotten Wright, Esq., at Grier Furr & Crisp, PA, and Richard H. Wyron, Esq., and Jonathan P. Guy, Esq., at Orrick, Herrington & Sutcliffe LLP, as his co- counsel. About 124,000 asbestos claims are pending against Garlock in stateand federal courts across the country. The Company says majority of pending asbestos actions against it is stale and dormant -- almost 110,000 or 88% were filed more than four years ago and more than 44,000 or 35% were filed more than 10 years ago. GENERAL MOTORS: Salina Claims $13-Mil. Shortfall in Superfund Deal ------------------------------------------------------------------ Amanda Bransford at Bankruptcy Law360 reports that the town of Salina, N.Y., on Wednesday objected to a $39.2 million settlement between the trust that succeeded General Motors Co. and the U.S. Environmental Protection Agency, saying it underestimates the company's contributions to the town's cleanup costs by $13 million. About General Motors With its global headquarters in Detroit, Michigan, General Motors Company (NYSE:GM, TSX: GMM) -- http://www.gm.com/-- is one of the world's largest automakers, traces its roots back to 1908. GM employs 208,000 people in every major region of the world and does business in more than 120 countries. GM and its strategic partners produce cars and trucks in 30 countries, and sell and service these vehicles through the following brands: Baojun, Buick, Cadillac, Chevrolet, GMC, Daewoo, Holden, Isuzu, Jiefang, Opel, Vauxhall, and Wuling. GM's largest national market is China, followed by the United States, Brazil, the United Kingdom, Germany, Canada, and Italy. GM's OnStar subsidiary is the industry leader in vehicle safety, security and information services. General Motors Co. was formed to acquire the operations of General Motors Corp. through a sale under 11 U.S.C. Sec. 363 following Old GM's bankruptcy filing. The U.S. government once owned as much as 60.8% stake in New GM on account of the financing it provided to the bankrupt entity. The deal was closed July 10, 2009, and Old GM changed its name to Motors Liquidation Co. On Nov. 1, 2011, Moody's Investors Service raised New GM's Corporate Family Rating and Probability of Default Rating to Ba1 from Ba2, and its secured credit facility rating to Baa2 from Baa3. Moody's also raised the Corporate Family Rating of GM's financial services subsidiary -- GM Financial -- to Ba3 from B1. On Oct. 7, 2011, Fitch Ratings upgraded the Issuer Default Ratings of New GM, General Motors Holdings LLC, and General Motors Financial Company Inc., to 'BB' from 'BB-'. On Oct. 3, 2011, Standard & Poor's Ratings Services raised its corporate credit rating on New GM to 'BB+' from 'BB-'; and revised the rating outlook to stable from positive. "We also raised our issue-level rating on GM's debt to 'BBB' from 'BB+'; the recovery rating remains at '1'," S&P said. About Motors Liquidation General Motors Corporation and three of its affiliates filed for Chapter 11 protection (Bankr. S.D.N.Y. Lead Case No. 09-50026) on June 1, 2009. 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. Garden City Group is the claims and notice agent of the Debtors. The U.S. Trustee appointed an Official Committee of Unsecured Creditors and a separate Official Committee of Unsecured Creditors Holding Asbestos-Related Claims. Lawyers at Kramer Levin Naftalis & Frankel LLP served as bankruptcy counsel to the Creditors Committee. Attorneys at Butzel Long served as counsel on supplier contract matters. FTI Consulting Inc. served as financial advisors to the Creditors Committee. Elihu Inselbuch, Esq., at Caplin & Drysdale, Chartered, represented the Asbestos Committee. Legal Analysis Systems, Inc., served as asbestos valuation analyst. The Bankruptcy Court entered an order confirming the Debtors' Second Amended Joint Chapter 11 Plan on March 29, 2011. The Plan was declared effect on March 31, 2011. GENWORTH FINC'L: Moody's Places 'Ba1' Sub. Debt Rating on Review ---------------------------------------------------------------- Moody's Investors Service has placed the debt ratings of Genworth Financial, Inc. ("Genworth"; NYSE: GNW, senior debt at Baa3) and the insurance financial strength (IFS) ratings of its US Mortgage Insurance (MI) operating companies on review for downgrade. In the same rating action, Moody's downgraded the IFS ratings of Genworth's primary life insurance operating subsidiaries to A3 from A2 with a stable outlook. A complete list of affected ratings is given below. Moody's ratings on Genworth Financial Mortgage Insurance Pty Limited (Genworth Australia, IFS at A1) and Genworth Financial Mortgage Indemnity Limited (Genworth Indemnity, IFS at A2) are unaffected by the rating action and remain on review for downgrade. Ratings Rationale US Life Operations Commenting on the downgrade of the IFS rating of the US life operations, Moody's Senior Vice President Scott Robinson said, "Although Genworth Life Insurance Company (primary US life operating company of Genworth) remains well capitalized (NAIC Risk Based Capital (RBC) ratio of 425% as of Q1 2012) and has a leading market position in long term care (LTC) insurance and a strong position in term insurance, Moody's views it as having a weaker credit profile when compared with some of its similarly rated peers." Regarding its business profile, the company's solid brand and broad product suite is somewhat offset by the company's lack of "lower risk" type products and concentrated position in long- term care, which Moody's considers to be a "higher risk" product. Related to its financial profile, the rating agency said the company's profitability, although improving, remains low compared to peers. On a statutory basis, this has hurt the company's level of unassigned surplus, which restricts the amount of ordinary dividends that can be paid to the holding company. The rating agency noted that the company is taking a number of actions to improve its unassigned surplus position. The A3 IFS rating for the life operations is supported by the company's relatively diversified earnings, competitive positions in income and protection products, and proactive steps management has taken to raise capital and address upcoming debt maturities at the holding company. These strengths are somewhat offset by the holding company's modest financial flexibility, pressure from shareholders to take "shareholder-friendly" actions to improve market / book value, and a lack of lower risk product reserves. US Mortgage Insurance (GMICO) Genworth Mortgage Insurance Corporation's (`GMICO'- collectively all rated US MI operating company affiliates) Ba1 insurance financial strength rating has been placed on review for downgrade due to the uncertainty about the strength of its parent (under review for possible downgrade) and about the likelihood of future capital support -- which might be limited in most scenarios -- see section on holding company below. The review will also evaluate GMICO's ability to continue writing new business given the firm's high risk to capital level and the year-end expiration of most regulatory and counterparty waivers. Other issues in consideration are the firm's contemplated structural alternatives. GMICO's current rating reflects the firm's modest capitalization, continued dependence on regulatory forbearance to write new business and some implicit support from its parent. The rating also takes into consideration the weak credit trends in the US housing market, substantial remaining uncertainty about the role of private mortgage insurers in the post mortgage-reform environment and improved underwriting prospects for GMICO following the exit of two competitors. Holding Company Commenting on the review for downgrade of Genworth, Robinson said: "The review will focus on the evaluation of holding company financial flexibility over the near to medium term. We will consider management actions and plans to enhance flexibility, limit the potential downside impact of the lower rated US MI on the rest of the operations, as well as potential parental support." Genworth's Baa3 senior debt rating is currently 3 notches lower than the A3 IFS ratings of the company's life insurance operating entities, the standard notching practice for insurance groups. Prior to the rating action, the notching differential between the main life insurance operating entities and the holding company was 4 notches, a reflection of the lower credit profile and downside risks of US MI, including its potential need for additional support. Rating Drivers - life insurance group Moody's commented that the following could lead to an upgrade in the IFS rating for the life insurance entities: 1) Losses and capital requirements of the stress case scenario for the US MI operations are determined to have a modest impact on the group; 2) 2012 US life insurance GAAP operating earnings > $300 million, excluding the impact of life block transactions; 3) US Life Insurance sales growing at industry rate without disproportionate growth in LTC; and 4) Unassigned surplus as of year-end 2012 > $100 million. Conversely, the following could lead to a further downgrade of the IFS rating for the life insurance entities: 1) 2012 US life insurance GAAP operating earnings < $250 million, excluding the impact of life block transactions; 2) Financial leverage in excess of 30% and/or earnings coverage less than 2x on a sustained basis; and 3) Unassigned surplus as of year-end 2012 < $100 million. Rating Drivers -- US mortgage insurance The following factors could lead to confirmation of the ratings of the US mortgage insurance subsidiaries: 1) Greater certainty about ability to maintain new business flows over the medium term (12-24 months) 2) Parent's willingness to provide capital support 3) Significant improvement in rate of new delinquencies and/or cures 4) Statutory loss ratio less than 100% and 5) A regulatory framework that improves the market opportunity for private mortgage insurers. Conversely, the following factors could lead to a downgrade of GMICO: 1) Weakening parental support of the US MI operation 2) Non-renewal of GSE and regulatory agreement/forbearance when they expire 3) Restructuring of operations that would result in reduced new business flows for the flagship, Genworth Mortgage Insurance Corporation 4) Risk to Capital greater than 40x and 5) Statutory loss ratio greater than 200%. Rating Drivers - holding company According to Moody's, the following could lead to a confirmation of the holding company's ratings: 1) De-linkage from the US MI operations so that a downside scenario would not impact holding company creditors or determination that a downside scenario would have a modest impact on the group; 2) Capital actions that enhance holding company financial flexibility without hurting long-term earnings power of the company. On the other hand, the following could result in a downgrade of the holding company's ratings: 1) Failure to de-link the US MI from holding company creditors or determination that a downside scenario would have more than a modest impact on the group; 2) Failure to take capital actions that enhance holding company financial flexibility without hurting long-term earnings power of the company. The principal methodologies used in rating Genworth were "Moody's Global Rating Methodology for Life Insurers," published in May 2010 and "Moody's Global Rating Methodology for the Mortgage Insurance Industry" published in February 2007. The following ratings were placed on review for downgrade: Genworth Financial, Inc. -- senior unsecured debt rating at Baa3, junior subordinated debt rating at Ba1(hyb), senior unsecured shelf rating at (P)Baa3, subordinate shelf rating at (P)Ba1, preferred shelf rating at (P)Ba2, short-term debt rating for commercial paper at P-3 Genworth Mortgage Insurance Corporation -- insurance financial strength rating at Ba1 Genworth Residential Mortgage Insurance Corporation of NC -- insurance financial strength rating at Ba1 Genworth Seguros de Credito a la Vivienda -- insurance financial strength rating at Baa3, national scale insurance financial strength rating at Aa3.mx The following ratings were downgraded with a stable outlook: Genworth Life Insurance Company -- insurance financial strength rating to A3 from A2, short term insurance financial strength rating to P-2 from P-1 Genworth Life and Annuity Insurance Company -- insurance financial strength rating to A3 from A2, short term insurance financial strength rating to P-2 from P-1 Genworth Life Insurance Company of New York -- insurance financial strength rating to A3 from A2 Genworth Global Funding Trusts -- funding agreement-backed senior secured Medium-Term Note Program to (P)A3 from (P)A2 Genworth Global Funding Trusts 2006-C; 2006-E; 2007-A; 2007-3 through 4; 2008-1 through 2; 2008-5; 2008-7; 2008-9 through 49 -- funding agreement-backed senior secured debt rating to A3 from A2 Genworth Life Institutional Funding Trust -- funding agreement- backed senior secured debt to A3 from A2, senior secured debt to A3 from A2, backed senior secured Medium-Term Note Program to (P)A3 from (P)A2 General Repackaging ACES SPC, Series 2007-2; Series 2007-3; Series 2007-6; Series 2007-7 -- funding agreement-backed senior secured debt rating to A3 from A2; Genworth Financial, Inc., headquartered in Richmond, Virginia, reported total assets of $111 billion and total shareholders' equity of $15.9 billion as of March 31, 2012. Moody's insurance financial strength ratings are opinions of the ability of insurance companies to pay punctually senior policyholder claims and obligations. GEOEYE INC: S&P Lowers CCR to 'B-' on NGA Funding Uncertainty ------------------------------------------------------------- Standard & Poor's Ratings Services lowered its ratings on GeoEye Inc., including the corporate credit rating to 'B-' from 'B+'. The outlook is developing. "We also lowered all issue-level ratings by two notches. In addition, we withdrew the rating on subsidiary ORBIMAGE Inc., as there is no debt associated with this entity," S&P said. "The rating actions reflect what we consider heightened risk of a substantial reduction of U.S. government revenues beginning in late 2012 or in late 2013," said Standard & Poor's credit analyst Michael Weinstein, "which, in our view, would severely reduce the company's profitability and cash flow generation.' Accordingly, we have revised our business risk assessment to 'vulnerable' and our financial risk assessment to 'highly leveraged.'" "GeoEye said it received notice from the National Geospatial- Intelligence Agency (NGA) that the government agency would not fully renew the EnhancedView service-level agreement (SLA) for the contract year Sept. 1, 2012 through Aug. 31, 2013. Instead, the NGA proposed a new three-month option, which it intends to exercise, providing service revenue to GeoEye from Sept. 1, 2012 through Nov. 30, 2012 of $39.75 million. The NGA also proposed an additional nine-month option for the remainder of the contract year through Aug. 31, 2013, providing $119.25 million of revenue. However, the agency said the second option is based on the availability of U.S. government funding," S&P said. "In addition, the NGA told GeoEye that it is proposing to change a cost-sharing agreement for the development of GeoEye-2, a new satellite scheduled to launch in the first half of 2013. Of the $181 million that the NGA previously agreed to fund, GeoEye expects that it will receive $111 million within the next 30 days. The remaining $70 million in funding depends on certain milestones being met, with no guarantees that funding beyond the $181 million will be provided," S&P said. "The developing outlook indicates there is a one-third or greater possibility of a downgrade and a one-third or greater possibility of an upgrade over the next year, pending further clarity around the NGA's funding decisions for GeoEye's services. We could lower the rating if the NGA decided not to exercise the additional nine- month option for the next contract year and all SLA revenues ceased in December 2012. We could also lower the rating if the likelihood of GeoEye losing all or most of its government business became more likely," S&P said. "Conversely, we could raise the rating if the company were to receive greater clarity about future funding for the SLA program and once GeoEye-2 became fully operational. However, we believe an upgrade would be limited to one notch given the likelihood of ongoing funding risks. The ability to diversify with other customers would be a positive factor, but given long lead times for new business wins, this is likely to be a positive rating factor on its own in the next year," S&P said. GLOBAL AVIATION: S&P Withdraws 'D' Corporate Credit Rating ---------------------------------------------------------- Standard & Poor's Ratings Services withdrew all of its ratings, including the 'D' corporate credit rating, on Global Aviation Holdings Inc. "As part of our final recovery analysis prior to withdrawing the ratings, we revised the recovery rating on the company's first-lien debt to '4', indicating our expectation that lenders will receive an average recovery (30%-50%), from '3'," S&P said. "We revised the recovery rating to reflect the inclusion of the debtor-in-possession (DIP) financing as a priority claim in the capital structure," S&P said. Global Aviation filed for Chapter 11 bankruptcy protection on Feb. 5, 2012. Prior to its filing, the company's earnings had been under significant pressure from the depressed state of the air cargo market and reduced demand from the military. Despite efforts to reduce costs and improve operating efficiency, the company faced a liquidity squeeze. The company had no bank lines and was totally dependent on internally generated cash flow for liquidity, S&P noted. HAMPTON ROADS: Closes on $50MM Private Placement of Common Stock ---------------------------------------------------------------- Hampton Roads Bankshares, Inc., issued an aggregate 71,428,572 common shares at a price of $0.70 per share to Anchorage Capital Group, L.L.C., CapGen Capital Group VI LP and The Carlyle Group pursuant to the terms of a standby purchase agreement between the Investors and the Company. The Company plans to raise an additional approximately $30 million to $45 million in capital by issuing from 42,836,460 to 64,285,714 common shares in a public rights offering that it expects to undertake during the third quarter of 2012. In the Rights Offering, the Company will grant each of its shareholders other than the Investors non-transferable rights to purchase up to, but no more than, a pro rata share of the maximum $95 million in capital to be raised in the Private Placement and the Rights Offering. The rights will be distributed to shareholders of record as of May 31, 2012, and may be exercised at $0.70 per share, the same price per share paid by the Investors in the Private Placement. The Rights Offering will commence upon the registration statement for the Rights Offering shares being declared effective by the Securities and Exchange Commission. The Investors have agreed not to participate in the Rights Offering and have agreed to serve as standby purchasers of all or a portion of the shares offered but not purchased in the Rights Offering. The number of shares the Investors purchase as standby purchasers and the ultimate size of the combined capital raise will depend on the level of shareholder participation in the Rights Offering. In addition, the Investors have terminated warrants they hold to purchase 1,836,302 shares of the Company's common stock at a current exercise price, subject to adjustment, of $10.00 per share. The Company expects to use the proceeds from the Private Placement and Rights Offering for general corporate purposes, which will include, but not be limited to, making capital contributions to its banking subsidiaries. About Hampton Roads Bankshares Hampton Roads Bankshares, Inc. (NASDAQ: HMPR) -- http://www.hamptonroadsbanksharesinc.com/-- is a bank holding company that was formed in 2001 and is headquartered in Norfolk, Virginia. The Company's primary subsidiaries are Bank of Hampton Roads, which opened for business in 1987, and Shore Bank, which opened in 1961. Currently, Bank of Hampton Roads operates twenty- eight banking offices in the Hampton Roads region of southeastern Virginia and twenty-four offices in Virginia and North Carolina doing business as Gateway Bank & Trust Co. Shore Bank serves the Eastern Shore of Maryland and Virginia through eight banking offices and fifteen ATMs. Effective June 17, 2010, the Company and its banking subsidiary, Bank of Hampton Roads ("BOHR"), entered into a written agreement with the Federal Reserve Bank of Richmond and the Bureau of Financial Institutions of the Virginia State Corporation Commission. The Company's other banking subsidiary, Shore Bank, is not a party to the Written Agreement. Under the terms of the Written Agreement, among other things, BOHR agreed to develop and submit for approval plans to (a) strengthen board oversight of management and BOHR's operations, (b) strengthen credit risk management policies, (c) improve BOHR's position with respect to loans, relationships, or other assets in excess of $2.5 million which are now, or may in the future become, past due more than 90 days, are on BOHR's problem loan list, or adversely classified in any report of examination of BOHR, (d) review and revise, as appropriate, current policy and maintain sound processes for determining, documenting, and recording an adequate allowance for loan and lease losses, (e) improve management of BOHR's liquidity position and funds management policies, (f) provide contingency planning that accounts for adverse scenarios and identifies and quantifies available sources of liquidity for each scenario, (g) reduce the Bank's reliance on brokered deposits, and (h) improve BOHR's earnings and overall condition. The Company reported a net loss of $98 million in 2011, compared with a net loss of $210.35 million in 2010. The Company's balance sheet at March 31, 2012, showed $2.13 billion in total assets, $2.02 billion in total liabilities and $105.29 million in total shareholders' equity. HEARTHSTONE HOMES: Panel's Deadline to Fight Disband Motion Moved ----------------------------------------------------------------- The U.S. Bankruptcy Court approved a stipulation that extends to July 2 the deadline for the official committee of unsecured creditors in the Hearthstone Homes, Inc. bankruptcy case and the U.S. Trustee to file an objection or respond to the request of C. Randel Lewis, the Chapter 11 trustee, to disband the committee. The Chapter 11 Trustee's request to disband was reported in the June 5, 2012 edition of the Troubled Company Reporter. The Committee was appointed on March 2, 2012. The Court entered an order appointing the Chapter 11 Trustee on March 21. The Chapter 11 Trustee filed on April 17 the Debtor's schedules and statement of affairs. Each member of the Committee is scheduled as holding a secured claim to the extent it claims a construction lien on the 40 new homes which are the subject of the Chapter 11 Trustee's motion to sell free and clear. The Chapter 11 Trustee said the continuation of the Committee is no longer necessary or proper in the Chapter 11 case because, among other things: (a) the Committee's role and duties in this case are duplicative of those of the Trustee and are, thus, unnecessary; (b) the Trustee is capable of adequately representing the interests of unsecured creditors in this case; (c) the continuation of the Committee will create substantial unnecessary administrative expenses to be borne by the bankruptcy estate in this case; (d) each member of the Committee in fact claims a security interest in some or all of the proceeds to be realized from the sale of the 40 properties containing homes in progress all to the detriment of the unsecured creditors of this estate. According to the Chapter 11 Trustee, the Committee continues to interfere with the Trustee's orderly administration of this case. On May 16, 2012, the Committee filed an objection to the Trustee's motion to sell free and clear of liens, claims and encumbrances. The Committee demands an allocation of the purchase price of the 40 homes being sold stating that: "Without such valid allocation and/or statement of intention as to the disposition of the sale proceeds to provide for payment to the construction lien creditors who may have a lien on only one or two of the properties, it is impossible for the lien creditor to determine whether they have a basis to challenge the purchase price." The Trustee says that the properties being conveyed are only partially completed and with the Wells Fargo's mortgages have total lien claims asserted against them well in excess of the sale proceeds. Unsecured creditors, according to the Trustee, would have no interest as "lien creditors" in an allocation of the purchase price in as much as there is no equity in any of the properties containing the 40 partially completed homes which the Trustee seeks to sell in bulk pursuant to the sales motion. "Yet this objection by the Committee in its official capacity supposedly representing unsecured creditors requires the Trustee's time and the resources of the Bankruptcy Estate to respond and needlessly burdens the Estate," the Trustee states. About Hearthstone Homes Hearthstone Homes, Inc., filed a Chapter 11 petition in Omaha, Nebraska (Bankr. D. Neb. Case No. 12-80348) on Feb. 24, 2012. ketv.com reported that Hearthstone Homes filed for Chapter 11 bankruptcy protection after a deal to sell the company fell through. Hearthstone Homes' principal business activities have been the purchase, development and sale of residential real property for 40 years. Chief Judge Thomas L. Saladino presides over the case. The Debtor is represented by Robert F. Craig, P.C. Hearthstone estimated assets and debts of $10 million to $50 million as of the Chapter 11 filing. Wells Fargo N.A., the primary lender, is represented by lawyers at Croker Huck Kasher DeWitt Anderson & Gonderinger LLC. The U.S. Trustee appointed seven unsecured creditors to serve on the Official Committee of Unsecured Creditors. HRK HOLDINGS: Manatee County Property Owner Files in Tampa ---------------------------------------------------------- Palmetto, Florida-based HRK Holdings, LLC, filed a bare-bones Chapter 11 petition (Bankr. M.D. Fla. Case No. 12-09868) in Tampa on June 27, 2012. The Debtor estimated assets and liabilities of $10 million to $50 million. The Debtor, according to court filings, owns real property in Manatee County that accommodates a phosphogypsum stack system, a portion of which is used as an alternate disposal area for the management of dredge materials pursuant to a contract with Port Manatee and as authorized under an administrative agreement with the Florida Department of Environmental Protection. The property is directly east of the entrance to Port Manatee adjacent to the east side of U.S. Highway 41. The Debtor acquired the Property from the Chapter 7 trustee of Mulberry Phosphate Company, the parent of Piney Point Phosphates, Inc. Until 2001, Piney Point owned and operated a fertilizer manufacturing plant, which was abandoned upon the filing of the Mulberry Chapter 7 case. The Debtor is represented by Barbara A Hart, Esq., at Stichter, Riedel, Blain & Prosser, in Tampa. INTELLIGRATED INC: S&P Affirms 'B' Corporate Credit Rating ---------------------------------------------------------- Standard & Poor's Ratings Services affirmed its 'B' corporate credit rating on Ohio-based automated materials-handling systems provider Intelligrated Inc. The outlook is stable. "At the same time, we assigned a 'B' issue rating and '3' recovery rating to the company's proposed new $250 million first-lien credit facility (comprising a $215 million term loan due 2019 and a $35 million revolver due 2017). The '3' recovery rating indicates our expectation of a meaningful (50%-70%) recovery in a payment default scenario. We also assigned our 'CCC+' issue rating and '6' recovery rating to the company's proposed new $90 million second-lien credit facility due 2020. The '6' recovery rating indicates our expectation of negligible (0%-10%) recovery in a payment default scenario," S&P said. "The issue and recovery ratings on the existing $155 million senior secured credit facility will be withdrawn on the loan upon repayment of the facility," S&P said. "The affirmation of the corporate credit rating on Intelligrated primarily reflects its 'highly leveraged' financial risk profile, which more than offsets its 'weak' business risk profile," S&P said. "We expect Intelligrated's credit measures to improve modestly in 2012 with help from moderate organic growth, cost savings, and EBITDA margins above 10%," said Standard & Poor's credit analyst Carol Hom. "Intelligrated is one of two leading materials-handling solutions providers, and holds roughly 25% of the $1.6 billion niche North American market. The company designs, manufactures, installs, and services automated material-handling systems (conveyor belts, sortation products, and warehouse control software) for a variety of end markets: retail distribution, food and beverage, parcel- handling, pharmaceutical, direct-to-consumer, e-commerce, and related sectors. Revenues come from three core business segments: distribution and fulfillment (60% of revenues in 2011), manufacturing systems (19%), and customer service and other (21%). Intelligrated will be owned by funds advised by private-equity firm Permira Advisers LLC," S&P said. "We believe Intelligrated will continue to benefit from its large installed base in North America that, given the high costs associated with switching systems providers, should support customer retention. We believe its customer base is fairly diverse, and it should continue to benefit from its long-standing customer relationships through its product offerings and customer service business," S&P said. "We expect overall revenue growth for 2012 to be similar to our economist's current view of U.S. equipment spending of about 7%. We believe Intelligrated's financial risk profile will remain highly leveraged," S&P said. LDK SOLAR: Incurs $177 Million Net Loss in First Quarter -------------------------------------------------------- LDK Solar Co., Ltd., reported a net loss of US$177.15 million on US$200.10 million of net sales for the three months ended March 31, 2012, compared with a net loss of US$564.55 million on US$420.16 million of net sales for the quarter ended Dec. 31, 2011. The Company's balance sheet at March 31, 2012, showed US$6.63 billion in total assets, US$5.96 billion in total liabilities, US$228.21 million in redeemable non-controlling interests and US$447.32 million in total equity. "Our revenue was within the expected range as our results reflected first quarter seasonality and the continued difficult solar industry conditions," stated Xiaofeng Peng, Chairman and CEO of LDK Solar. "Industry-wide overcapacity continued and drove price declines across the entire solar supply chain, which significantly reduced our revenue and negatively impacted our margins." A copy of the press release is available for free at: http://is.gd/qEXd75 About LDK Solar LDK Solar Co., Ltd. -- http://www.ldksolar.com-- based in Hi-Tech Industrial Park, Xinyu City, Jiangxi Province, People's Republic of China, is a vertically integrated manufacturer of photovoltaic products, including high-quality and low-cost polysilicon, solar wafers, cells, modules, systems, power projects and solutions. LDK Solar was incorporated in the Cayman Islands on May 1, 2006, by LDK New Energy, a British Virgin Islands company wholly owned by Xiaofeng Peng, LDK's founder, chairman and chief executive officer, to acquire all of the equity interests in Jiangxi LDK Solar from Suzhou Liouxin Industry Co., Ltd., and Liouxin Industrial Limited. KPMG in Hong Kong, China, said in a May 15, 2012, audit report there is substantial doubt on the ability of LDK Solar Co., Ltd. to continue as a going concern. According to KPMG, the Group has a net working capital deficit and is restricted to incur additional debt as it has not met a financial covenant ratio under a long-term debt agreement as of Dec. 31, 2011. These conditions raise substantial doubt about the Group's ability to continue as a going concern. LIBERTY INTERACTIVE: Moody's Affirms B1 CFR, Rates QVC Notes Ba2 ---------------------------------------------------------------- Moody's Investors Service affirmed Liberty Interactive Corporation ("LINTA") Corporate Family Rating at B1. Moody's also assigned a Ba2 (LGD 2, 28%) rating to QVC., Inc. ("QVC") proposed $500 million senior secured notes due 2022. The rating outlook remains stable. The SGL rating was unchanged at SGL-1. The following ratings were affirmed and LGD assessments amended: Liberty Interactive LLC Corporate Family Rating at B1 Probability of Default Rating at B1 Senior unsecured notes at B3 (LGD5 82%) from (LGD 5 78%) Senior unsecured exchangeable notes at B3 (LGD5 82%) from (LGD 5 78%) Speculative Grade Liquidity rating at SGL -- 1 QVC Inc. senior unsecured notes (various) at Ba2 (LGD 2 28%) from (LGD 2 23%) The following rating was assigned QVC Inc. $500 million of senior unsecured notes at Ba2 (LGD 2 28%) Ratings Rationale Proceeds from the new note offering are expected to be temporarily used to repay amounts owed under QVC Inc.'s (unrated) $2.0 billion revolving credit facility ($382 million drawn as of 3/31/2012). This refinancing is also considered in the context of LINTA's previously disclosed intentions to establish two 'tracker' stocks at LINTA -- "Liberty Interactive" -- which will have attributed to it QVC, the interests in LINTA's ecommerce companies as well as its strategic stake in HSN, Inc. (Ba1/stable) - and Liberty Ventures -- which will hold the companies non-consolidated non- strategic stakes ( which had a market value of around $4.0 billion as of March 31, 2012) and cash. As part of this establishment of this new tracking stock structure, it expects that QVC's total debt would increase to approximately $3.3-3.5 billion (compared to approximately $2.4 billion as of March 31, 2012). Pro-forma for the issuance of the new notes this indicates that QVC would likely draw around $0.8-1.0 billion under the $2.0 billion revolving credit facility. The affirmation of the B1 rating of LINTA reflects the solid revenue trends and high operating margins at QVC as well as the companies solid overall liquidity profile. The B1 rating also reflects the company's historically aggressive financial policies and risks that assets held may be utilized in a manner to benefit shareholders more than bondholders, though event risk is lower following the significant disposals by the company over the past couple years. The B1 Corporate Family Rating reflects expectations that LINTA's financial policies will remain aggressive. Debt/EBITDA for the LTM period ending 3/31/12 (incorporating Moody's standard analytical adjustments) is approximately 3.9 times, though it would increase to approximately 4.4 times when QVC's debt increases to the targeted $3.3-3.5 billion level as discussed above. Moody's also notes QVC's debt could increase further -- it has a public target range of debt/EBITDA (using the company's definition which does not incorporate Moody's adjustments) of 2.0-2.5 times and the company will be just under 2 times on a pro-forma basis. As such, the company has an estimated $800 million of debt capacity while remaining within its public targets, which could result in adjusted leverage approaching the high four times. The stable rating outlook reflects Moody's expectation that LINTA will more actively pursue opportunistic transactions including share repurchases. Moody's also expects Liberty to retain a solid liquidity position and that the QVC business will continue to show stable performance, notwithstanding economic pressures in Europe where the company has a meaningful exposure. The ratings could be downgraded if liquidity weakens, the asset composition or risk profile meaningfully changes, QVC's operating performance deteriorates meaningfully, or debt-to-EBITDA is sustained above 6.25x. LINTA's ratings could be upgraded if debt-to-EBITDA is sustained in a low 4x range or lower factoring in potential opportunistic transactions, that revenue and operating performance is stable or growing, and liquidity remains healthy. Permanent reduction in the company's non-QVC debt instruments would be positive as well. The principal methodology used in rating Liberty Interactive Corporation was the Global Retail Industry Methodology published in June 2011. Other methodologies used include Loss Given Default for Speculative-Grade Non-Financial Companies in the U.S., Canada and EMEA published in June 2009. LIGHTSQUARED INC: Falcone, Harbinger Sued for Securities Fraud -------------------------------------------------------------- The Securities and Exchange Commission on Wednesday filed fraud charges against New York-based hedge fund adviser Philip A. Falcone and his advisory firm, Harbinger Capital Partners LLC for illicit conduct that included misappropriation of client assets, market manipulation, and betraying clients. The SEC also charged Peter A. Jenson, Harbinger's former Chief Operating Officer, for aiding and abetting the misappropriation scheme. Additionally, the SEC reached a settlement with Harbinger for unlawful trading. In a separate, settled action, the SEC charged Harbert Management Corporation, whose affiliates served as the managing members of two Harbinger-related entities, as a controlling person in the market manipulation. The SEC alleges that Falcone used fund assets to pay his taxes, conducted an illegal "short squeeze" to manipulate bond prices, secretly favored certain customers at the expense of others, and that Harbinger unlawfully bought equity securities in a public offering, after having sold short the same security during a restricted period. "T[he] charges read like the final exam in a graduate school course in how to operate a hedge fund unlawfully," said Robert Khuzami, Director of the SEC's Division of Enforcement. "Clients and market participants alike were victimized as Falcone unscrupulously used fund assets to pay his personal taxes, manipulated the market for certain bonds, favored some clients at the expense of others, and violated trading rules intended to prohibit manipulative short sales." The SEC filed actions in U.S. District Court for the Southern District of New York against Falcone, Jenson, and Harbinger, and, in connection with the illegal trading scheme, separately instituted and settled administrative and cease-and-desist proceedings against Harbinger. In particular, the SEC alleges that: -- Falcone fraudulently obtained $113.2 million from a hedge fund that he advised and misappropriated the proceeds to pay his personal taxes; -- Falcone and two Harbinger investment managers through which Falcone operated manipulated the price and availability of a series of distressed high-yield bonds by engaging in an illegal "short squeeze;" -- Falcone and Harbinger secretly offered and granted favorable redemption and liquidity rights to certain strategically-important investors in exchange for those investors' consent to restrict redemption rights of other fund investors, and concealed the arrangement from the fund's directors and investors; and -- Harbinger engaged in illegal trades in connection with the purchase of common stock in three public offerings after having sold the same securities short during a restricted period. "Not only are hedge fund managers expected to be savvy investors, they are supposed to serve the interests of their clients. Here, in addition to raiding a fund for personal benefit and cutting secret deals with favored investors, Falcone then lied to investors about what he had done," said Bruce Karpati, Chief of the Asset Management Unit in the SEC's Division of Enforcement. Describing the illegal short squeeze, Gerald W. Hodgkins, Associate Director of the SEC's Division of Enforcement said, "After he took control of an entire issue of high-yield bonds, Falcone kept buying with an eye toward rigging the market and punishing short sellers to settle a score. In the process, Falcone hijacked the market for the bonds and illegally manipulated their price and availability. The Division will continue to police the bond market to make sure it operates as an efficient market, free of the corrosive effects of manipulators such as Falcone." Misappropriation Scheme In the misappropriation scheme, the SEC alleges that Falcone unlawfully used fund assets to pay his personal taxes. In 2009 Falcone owed federal and state authorities $113.2 million in taxes. Declining to pursue other financing options, such as pledging his personal assets as collateral for a bank loan, Falcone elected instead to take a $113.2 million loan from the Harbinger Capital Partners Special Situations Fund, L.P. -- the same fund from which Harbinger had earlier suspended investors from redeeming. Falcone authorized the transfer of fund assets to himself in a transaction that Jenson helped structure. Falcone and Harbinger never sought or obtained consent from investors prior to using the fund's assets to benefit Falcone. As part of the misappropriation scheme, the SEC alleges that Falcone and Harbinger, aided by Jenson, made several material misrepresentations and omissions in seeking legal advice regarding the loan and in subsequent communications with investors, including, among other things: -- the financing alternatives available to Falcone; -- the circumstances that led to Falcone's need for the loan; -- the ability of the Special Situations Fund to furnish the loan, without disadvantaging investors; -- the terms and conditions of the loan, including the interest rate charged and the amount of collateral posted by Falcone; and -- the role of Harbinger's outside legal counsel in vetting the transaction. The SEC also alleges that Falcone and Harbinger delayed disclosing the loan for approximately five months because of their concern that disclosure of Falcone's financial condition might have a negative impact on investor withdrawals and on Falcone's ability to attract more investments for other Harbinger funds. Falcone repaid the loan in 2011, after the Commission commenced its investigation. Market Manipulation/Illegal Short Squeeze In a separate civil action, the SEC alleges that from 2006 through early 2008 Falcone and two Harbinger investment management entities manipulated the market in a series of distressed high- yield bonds issued by MAAX Holdings Inc. In this fraudulent scheme, Falcone and the Harbinger entities allegedly orchestrated an illegal "short squeeze" -- a market manipulation scheme in which an investor constricts the supply of a security, through large purchases or other means, with the intent of forcing settlement from short sellers at arbitrary and inflated prices. The SEC's complaint alleges that at Falcone's direction, Harbinger purchased a large position in the MAAX bonds during April and June of 2006. After hearing rumors that a Wall Street financial services firm was shorting the MAAX bonds and also encouraging its customers to do the same, Falcone decided to seek revenge. In September 2006, Falcone directed the Harbinger-managed funds to buy every available bond in the market, often purchasing the bonds from short sellers. Ultimately, Falcone raised the funds' stake to approximately 13% more than the available supply of the MAAX bonds. At one point, Harbinger had purchased 22 million more bonds than MAAX had ever issued. Contemporaneously with these purchases, Falcone locked up the MAAX bonds the Harbinger funds had purchased in a custodial account at a bank in Georgia to prevent his brokers from lending out the bonds to sellers seeking to deliver the bonds to purchasers after short sales. Having seized control of the supply of the MAAX bonds, Falcone then demanded that the Wall Street firm and its customers settle their outstanding MAAX short sales, not disclosing that it would be virtually impossible to find bonds available for delivery. The Wall Street firm bid daily for the bonds, which quickly doubled in price. Then, Falcone engaged in a series of transactions with certain short sellers at arbitrary, inflated prices, while at the same time valuing the funds' holdings on his books at a small fraction of the prices he charged the covering short sellers. Preferential Redemption Scheme In its action alleging misappropriation, the SEC also alleges that in a further breach of Falcone and Harbinger's fiduciary duties to their clients, Falcone and Harbinger engaged in unlawful preferential redemptions for the benefit of certain favored investors. In 2009, while soliciting required investor approval to restrict withdrawals from another Harbinger fund, Falcone and Harbinger secretly exempted certain large investors that Falcone deemed to be strategically important from soon-to-be imposed liquidity restrictions -- provided those investors voted to approve restrictions that would temporarily stabilize the decline in Harbinger's assets under management. Ultimately, pursuant to these 'vote buying' agreements, Falcone and Harbinger allegedly permitted these investors who were connected to certain favored institutional investors to withdraw a total of approximately $169 million. Harbinger concealed these quid pro quo arrangements from the independent directors and from fund investors. Other Illegal Trading by Harbinger In a separate administrative and cease-and-desist proceeding, the SEC found that between April and June 2009, Harbinger violated Rule 105 of Regulation M of the Securities Exchange Act of 1934 (Exchange Act). Rule 105 is an anti-manipulation rule that prohibits short selling securities during a restricted period and then purchasing the same securities in a public offering. The Commission's Order censures Harbinger and requires the firm to cease and desist from committing or causing any violations of Rule 105 now or in the future. Harbinger will pay disgorgement in the amount of $857,950, prejudgment interest in the amount of $91,838, and a civil monetary penalty in the amount of $428,975. Harbinger consented to the issuance of the Order without admitting or denying any of the Commission's findings. Settlement with Harbert Management Company In a separate complaint also filed in U.S. District Court for the Southern District of New York, the SEC filed a settled civil action against Harbert and two related investment entities -- HMC- New York Inc. and HMC Investors, LLC -- for their role in the illegal short squeeze. The SEC alleges in its complaint against Harbert that during the entire period of the short squeeze, Defendants Harbert, HMC-NY and HMC Investors, directly or indirectly, possessed the power to control Falcone and the investment managers through which he operated. HMC-NY and HMC Investors, two entities controlled by Harbert, served as the managing members of two limited liability companies that acted as the general partners of the funds advised by Falcone. Harbert and its affiliates also provided hedge fund administrative, legal, compliance, risk assessment and other services to the funds. In these capacities, Harbert, HMC-NY and HMC Investors knew of Falcone's trades in the MAAX bonds, but failed to take appropriate steps to address Falcone's manipulative conduct. The SEC charged the Harbert defendants as controlling persons pursuant to Section 20(a) of the Exchange Act, alleging that they are jointly and severally liable for Falcone's and the Harbinger investment managers' violations of the antifraud provisions of the Exchange Act. Without admitting or denying the allegations of the complaint, Defendants Harbert, HMC-NY and HMC Investors have agreed to pay a civil penalty in the amount of $1 million. The Harbert defendants also have consented to the entry of a judgment enjoining them from violations of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder. The proposed settlement with Harbert is subject to approval by the court. In the pending federal court actions concerning the first three fraudulent schemes, the Commission seeks a variety of sanctions and relief including injunctions against Falcone and Harbinger from violations of the anti-fraud provisions of the Securities Act of 1933, the Exchange Act, and the Investment Advisers Act of 1940. In addition, the Commission seeks to enjoin Harbinger and Falcone from controlling any person who violates the anti-fraud provisions of the Exchange Act. As for monetary relief, the Commission seeks disgorgement of ill-gotten gains, prejudgment interest, and civil money penalties from Falcone and Harbinger. The Commission further seeks to prohibit Falcone from serving as an officer and director of any public company. Against Jenson, the Commission seeks to enjoin Jenson from aiding and abetting future violations of the anti-fraud provisions of the Exchange Act and Advisers Act and seeks to obtain monetary penalties. The SEC's investigation was a coordinated effort between teams from the SEC's headquarters and the New York Regional Office, including Conway T. Dodge, Jr., Robert C. Besse, Ken C. Joseph, Mark Salzberg, Brian Fitzpatrick, and David Stoelting. Messrs. Joseph, Salzberg, and Fitzpatrick are members of the Enforcement Division's Asset Management Unit. Mr. Stoelting and David Gottesman will lead the SEC's litigation team. * * * Juliet Chung, writing for The Wall Street Journal, reports Mr. Falcone, 49, declined to comment. His lawyer, Matthew Dontzin, Esq., said the allegations are "without merit and will all be vigorously defended in the courthouse." WSJ relates Mr. Dontzin said the fraud allegation is "unsupportable" and that the loan "was obtained after receiving considered written legal advice from a leading national law firm on the basis of fully disclosed facts." WSJ also reports the attorney for Peter A. Jenson, Harbinger's former Chief Operating Officer, declined to comment. WSJ also relates the SEC said in its complaint that Mr. Falcone and Harbinger also favored some of their biggest investors with "side deals" that would allow them to withdraw money more easily from the firm. In return, the investors agreed to vote in support of a restructuring plan that would limit other clients' ability to pull their funds, the SEC said. According to WSJ, people familiar with the matter said the three investors, which weren't named in the complaint, were Goldman Sachs Group Inc., Pacific Alternative Asset Management Company LLC and HSBC Holdings' private bank. The investors haven't been accused of wrongdoing; spokesmen for the firms declined to comment. "We are pleased to put this legacy matter behind us," a Harbert spokesman said, according to WSJ. Harbinger and Harbert ended their relationship in 2009, according to the spokesman. About LightSquared LightSquared Inc. and 19 of its affiliates filed Chapter 11 bankruptcy petitions (Bankr. S.D.N.Y. Lead Case No. 12-12080) on May 14, 2012, as the Company seeks to resolve regulatory issues that have prevented it from building its coast-to-coast integrated satellite 4G wireless network. LightSquared had invested more than $4 billion to deploy an integrated satellite-terrestrial network. In February 2012, however, the U.S. Federal Communications Commission told LightSquared the agency would revoke a license to build out the network as it would interfere with global positioning systems used by the military and various industries. In March 2012, the Company's partner, Sprint, canceled a master services agreement. LightSquared's lenders deemed the termination of the Sprint agreement would trigger cross-defaults under LightSquared's prepetition credit agreements. LightSquared and its prepetition lenders attempted to negotiate a global restructuring that would provide LightSquared with liquidity and runway necessary to resolve its issues with the FCC. Despite working diligently and in good faith, however, LightSquared and the lenders were not able to consummate a global restructuring on terms acceptable to all interested parties, prompting the bankruptcy filing. As of the Petition Date, the Debtors employed roughly 168 people in the United States and Canada. As of Feb. 29, 2012, the Debtors had $4.48 billion in assets (book value) and $2.29 billion in liabilities. LightSquared also sought ancillary relief in Canada on behalf of all of the Debtors, pursuant to the Companies' Creditors Arrangement Act (Canada) R.S.C. 1985, c. C-36 as amended, in the Ontario Superior Court of Justice (Commercial List) in Toronto, Ontario, Canada. The purpose of the ancillary proceedings is to request the Canadian Court to recognize the Chapter 11 cases as a "foreign main proceeding" under the applicable provisions of the CCAA to, among other things, protect the Debtors' assets and operations in Canada. The Debtors named affiliate LightSquared LP to act as the "foreign representative" on behalf of the Debtors' estates. Judge Shelley C. Chapman presides over the Chapter 11 case. Lawyers at Milbank, Tweed, Hadley & McCloy LLP serve as counsel to the Debtors. Kurtzman Carson Consultants LLC serves as claims and notice agent. Counsel to UBS AG as agent under the October 2010 facility is Melissa S. Alwang, Esq., at Latham & Watkins LLP. The ad hoc secured group of lenders under the Debtors' October 2010 facility was formed in April 2012 to negotiate an out-of- court restructuring. The members are Appaloosa Management L.P.; Capital Research and Management Company; Fortress Investment Group; Knighthead Capital Management LLC; and Redwood Capital Management. Counsel to the ad hoc secured group is Thomas E. Lauria, Esq., at White & Case LLP. Philip Falcone's Harbinger Capital Partners indirectly owns 96% of LightSquared's outstanding common stock. Harbinger and certain of its managed and affiliated funds and wholly owned subsidiaries, including HGW US Holding Company, L.P., Blue Line DZM Corp., and Harbinger Capital Partners SP, Inc., are represented in the case by Stephen Karotkin, Esq., at Weil, Gotshal & Manges LLP. LONG ISLAND RUBBISH: Judge Grossman Replaces Eisenberg ------------------------------------------------------ Judge Dorothy Eisenberg has been removed from the involuntary Chapter 11 case filed against Long Island Rubbish Removal Eastern Corp. due to a related case In re Anthony Farino (Bankr. E.D.N.Y. Case No. 12-73869) filed June 21, 2012. Judge Robert Grossman will take her spot. Winters Bros. Holdings, LLC, of West Bay Shore, New York, filed an involuntary Chapter 11 petition against Long Island Rubbish Removal Eastern Corp. (Bankr. E.D.N.Y. Case No. 12-73870) in Central Islip on June 21, 2012. Winters Bros. is represented by the Law Offices of Raymond A. Giusto, P.C. LUMBER PRODUCTS: Rugby Acquires All Assets Under Section 363 Sale ----------------------------------------------------------------- Rich Christianson at Closets Daily reports Rugby Architectural Building Products said it acquired substantially all of the assets of Lumber Products through a stalking horse bid under Section 363 of the U.S. Bankruptcy Code. The purchase includes seven former Lumber Products locations in Tualatin and Eugene, OR; Kent and Spokane, WA; Boise, ID, Salt Lake City, UT; Albuquerque, NM, plus Lumber Products' distribution center in Chandler, AZ. All of the properties have assumed the Rugby name and the distribution center will be consolidate with Rugby's Phoenix operation into a new metro center. According to the report, the buy out of Lumber Products represents Rugby's ninth acquisition since 2010. Since then, the company said it has more than doubled its revenue base and grown to 20 distribution centers across the country. "The acquisition of Lumber Products supports our strategy to diversify geographically, extending Rugby's footprint into key western markets," the report quotes David Hughes, Rugby president and CEO, as saying. "Furthermore, the transaction enhances our product offerings in our core industrial base of products, as well as increases our value-added components and service offerings targeted at the commercial and residential construction sector." Rugby is owned by Leading Ridge Capital Partners, a private equity firm, with offices in Maryland and New York, specializing in acquisitions, recapitalizations, and investments in value-added distribution, logistics, and light manufacturing companies in the lower-middle market. About Lumber Products Lumber Products -- http://www.lumberproducts.com/-- is a wholesale distributor of some of the finest hardwood lumber, hardwood plywood, and door and millwork products to the Northwest, Intermountain, and Southwest states since 1938. It has headquarters in Tualatin, Oregon, and operations in Oregon, Washington, Idaho, Montana, Utah, Arizona, and New Mexico. Lumber Products is the sole owner of Lumber Products Holding and Management Company. Holdco is the sole owner of: Lumber Products Holding and Management Company; Sunrise Wood Products, Inc.; Lumber Products Washington, Inc.; Components & Millwork, Inc.; Wood Window Distributors, Inc.; D&J Wood Resources, Inc.; and Brady International Hardwoods Company. Lumber Products filed for Chapter 11 bankruptcy (Bankr. D. Ore. Case No. 12-32729) on April 11, 2012, listing under $50 million in assets and debts. Judge Elizabeth L. Perris presides over the case. The petition was signed by Craig Hall, president and chief operating officer. The Debtor owes Wells Fargo in excess of $22.8 million. Wells Fargo is represented by Lane Powell PC. Edward C. Hostmann, the Chapter 11 trustee, is represented by Tonkon Torp LLP. LYMAN LUMBER: Has Green Light to Hire Real Estate Counsel --------------------------------------------------------- Lyman Lumber Company sought and obtained permission from the U.S. Bankruptcy Court to employ Real Property Law Group as real estate counsel. Real Property Law Group will advise the Debtors on Washington foreclosure law and other local legal standards that will impact the Debtors' treatment of their properties in Woodinville and Longview, Washington under a plan of liquidation. The Debtors may also call on Real Property Law Group to provide other legal services with respect to sale or disposition of the properties if such matters arise. The Debtors estimate that the engagement may require no more than several hours of work by the Real Property Law Group, though that may increase depending on developments with respect to the properties. The firm's Kathleen J. Hopkins will lead the engagement. Ms. Hopkins' hourly rate is $350 and other professionals at her firm also bill at $350 per hour. Ms. Hopkins attests that the firm is a "disinterested person" as the term is defined in Section 101(14) of the Bankruptcy Code. About Lyman Lumber Lyman Lumber Company sells building supplies, such as framing beams, roofing materials, siding and drywall to residential builders. The 113-year old company and several affiliates sought Chapter 11 petition (Bankr. D. Minn. Lead Case No. 11-45190) on Aug. 4, 2011. Judge Dennis O'Brien presides over the cases. Lyman Lumber estimated $50 million to $100 million in assets and $100 million to $500 million in debts. The petition was signed by James E. Hurd, president and chief executive officer. The affiliates that filed for Chapter 11 are: Lyman Holding Company; Automated Building Components, Inc.; Building Material Wholesalers; Carpentry Contractors Corp.; Construction Mortgage Investors Co.; Lyman Development Co.; Lyman Lumber of Wisconsin, Inc.; Lyman properties LLC; Mid-America Cedar, Inc.; Woodinville Lumber, Inc.; and Woodinville Construction Services LLC. Cynthia A. Moyer, Esq., Douglas W. Kassebaum, Esq., James L. Baillie, Esq., and Sarah M. Gibbs, Esq., at Fredrikson & Bryon, P.A., serve as the Debtors' bankruptcy counsel. BGA Management, LLC d/b/a Alliance Management, developed and executed a sale process and marketing strategy for the Debtors' assets. The Official Committee of Unsecured Creditors of Lyman Lumber Company tapped Fafinsky, Mark & Johnson, P.A., as its counsel. Alliance Management is the turnaround consultant. Conway MacKenzie, Inc. is the panel's financial advisor. When they filed for bankruptcy, the Debtors had in hand a term sheet with SP Asset Management, LLC, a unit of Steel Partners Holdings L.P., to serve as stalking horse bidder for the assets of the Debtors. New York City-based Steel Partners is a diversified holding company that owns and operates businesses in a variety of industries. At an October 2011 auction, SP Asset Management and two other bidders lost to BlackEagle Partners. BlackEagle acquired the Debtors' Midwest operations, including its Chanhassen location, Automated Building Components, Carpentry Contractors Corp., and Lyman Lumber of Wisconsin. BlackEagle paid roughly $23 million. The transaction was effective Oct. 28, 2011. BlackEagle Partners owns US LBM Holdings, a collection of eight building products distributors serving the Midwest, Northeast, and Mid-Atlantic in nine states with more than 40 locations. Edward C. Hostmann has been appointed as Chapter 11 trustee in the case. MARIANA RETIREMENT: Won't Appeal Case Dismissal Order ----------------------------------------------------- Haidee V. Eugenio at Saipian Tribune reports that NMI Retirement Fund administrator Richard Villagomez told Senate and House of Representatives members that the pension agency is not appealing a federal judge's dismissal of the Fund's Chapter 11 bankruptcy petition, to the relief of some lawmakers, although some remain skeptic. According to the report, as far as lawmakers were concerned, this was the first time Mr. Villagomez made such statement that the Fund will not appeal the bankruptcy petition dismissal. About NMI Retirement Fund The Northern Mariana Islands Retirement Fund -- http://www.nmiretirement.com/-- is a public corporation of the Commonwealth of the Northern Mariana Islands that receives and invests retirement contributions and pays certain benefits to or on account of certain retirees of the Commonwealth government, their survivors, and certain disabled persons. The Fund, through its administrator Richard Villagomez, filed a Chapter 11 bankruptcy petition in the U.S. District Court for the Northern District of Mariana Islands in Saipan (Case No. 12-00003) on April 17, 2012. The Fund is represented by Brown Rudnick LLP and the Law Office of Braddock J. Huesman, LLC. The Fund said in court papers that the Chapter 11 filing was precipitated by the discrepancy between the Debtor's current ability to pay benefits to beneficiaries and the Debtor's current obligations to those same beneficiaries. The Fund said it would exhaust its cash by July 2014. It has been unable to collect a $325 million judgment against the islands' government, and the commonwealth decided to reduce contributions toward workers' pensions. As a result of continuous underfunding, which necessitated withdrawing from its portfolio to cover funding shortfalls, the value of the Fund's assets has fallen from $353,475,412 in 2009 to its current level of $268,448,997, the Debtor's counsel has said. The counsel also said the Fund is subject to liabilities (both current and actuarial) totaling about $911 million. An official committee of unsecured creditors, consisting of Fund members, has been appointed in the case. U.S. Bankruptcy Judge Robert J. Faris held a hearing on June 1, 2012, where he said from the bench that the fund isn't eligible for Chapter 11 because it's an agent of the commonwealth government. The judge, however, said he won't formally dismiss the case until July or August. MARITIME SERVICES: Case Summary & 20 Largest Unsecured Creditors ---------------------------------------------------------------- Debtor: Maritime Services Corp. dba ProBuild Construction LLC dba Craft and Design LLC dba Maritime Services Corp UK 3457 Guignard Drive Hood River, OR 97031-8603 Bankruptcy Case No.: 12-34978 Chapter 11 Petition Date: June 26, 2012 Court: United States Bankruptcy Court District of Oregon Judge: Randall L. Dunn Debtor's Counsel: Joseph A. Field, Esq. 621 SW Morrison St #1225 Portland, OR 97205 Tel: (503) 228-9115 E-mail: joe@fieldjerger.com Scheduled Assets: $3,999,859 Scheduled Liabilities: $7,505,821 A copy of the Company's list of its 20 largest unsecured creditors filed together with the petition is available for free at http://bankrupt.com/misc/orb12-34978.pdf The petition was signed by George Selfridge, CEO. MF GLOBAL: Canadian Settlement Brings $60.6 Million --------------------------------------------------- Bill Rochelle, the bankruptcy columnist for Bloomberg News, reports that the trustee liquidating MF Global Inc. is seeking approval of a settlement to generate $60.6 million for customers with foreign accounts. The trustee for the Canadian affiliate was making a $43 million claim against the U.S. broker for funds held for its customers. At the same time, the U.S. broker was seeking $103.6 million which the Canadian trustee admitted were segregated for customers. The two claims will be offset, generating $60.6 million for distribution to customers of the U.S. brokerage if the bankruptcy judge in New York approves the settlement at a July 11 hearing. About MF Global New York-based MF Global (NYSE: MF) -- http://www.mfglobal.com/-- is one of the world's leading brokers of commodities and listed derivatives. MF Global provides access to more than 70 exchanges around the world. The firm is also one of 22 primary dealers authorized to trade U.S. government securities with the Federal Reserve Bank of New York. MF Global's roots go back nearly 230 years to a sugar brokerage on the banks of the Thames River in London. MF Global Holdings Ltd. and MF Global Finance USA Inc. filed voluntary Chapter 11 petitions (Bankr. S.D.N.Y. Case Nos. 11-15059 and 11-5058) on Oct. 31, 2011, after a planned sale to Interactive Brokers Group collapsed. As of Sept. 30, 2011, MF Global had $41,046,594,000 in total assets and $39,683,915,000 in total liabilities. It is easily the largest bankruptcy filing so far this year. Judge Honorable Martin Glenn presides over the Chapter 11 case. J. Gregory Milmoe, Esq., Kenneth S. Ziman, Esq., and J. Eric Ivester, Esq., at Skadden, Arps, Slate, Meagher & Flom LLP, serve as bankruptcy counsel. The Garden City Group, Inc., serves as claims and noticing agent. The petition was signed by Bradley I. Abelow, Executive Vice President and Chief Executive Officer of MF Global Finance USA Inc. The Securities Investor Protection Corporation commenced liquidation proceedings against MF Global Inc. to protect customers. James W. Giddens was appointed as trustee pursuant to the Securities Investor Protection Act. He is a partner at Hughes Hubbard & Reed LLP in New York. Jon Corzine, the former New Jersey governor and co-CEO of Goldman Sachs Group Inc., stepped down as chairman and chief executive officer of MF Global just days after the bankruptcy filing. U.S. regulators are investigating about $633 million missing from MF Global customer accounts, a person briefed on the matter said Nov. 3, according to Bloomberg News. Bankruptcy Creditors' Service, Inc., publishes MF GLOBAL BANKRUPTCY NEWS. The newsletter tracks the Chapter 11 proceeding undertaken by MF Global Holdings and other insolvency and bankruptcy proceedings undertaken by its affiliates. (http://bankrupt.com/newsstand/or 215/945-7000) MMRGLOBAL INC: Extends Maturity of RHL Group Note for One Year -------------------------------------------------------------- MMRGlobal, Inc., MyMedicalRecords, Inc., (MMR) and The RHL Group, Inc., on June 22, 2012, entered into a Sixth Amended and Restated Promissory Note, effective as of April 29, 2012. The Amended Note amends and restates that certain Fifth Amended and Restated Promissory Note, effective April 29, 2011, by extending the maturity date of the Existing Note for one year to April 29, 2013. The Amended Note does not materially alter the terms of the Existing Note other than for the fact that there were no loan origination fees charged by The RHL Group on this renewal. The RHL Group is a significant stockholder of the Company and is wholly-owned by Robert H. Lorsch, Chairman, Chief Executive Officer and President of the Company and of MMR. Historically, the Existing Notess have, over time, increased the maximum amount of MMR's obligations in earlier notes from $100,000 to $1,000,000 to $3,000,000. The maximum amount of the Amended Note remains at $3,000,000. The Amended Note continues to bear interest at the lesser of 10% or the highest rate then permitted by law, and is secured by a Security Agreement, which has been in effect since July 31, 2007, and has been renewed and amended from time to time in connection with the amendments and renewals of the Credit Facility. The Amended Note has a balance of $1,426,100, and a total Unpaid Balance, which includes guarantees and unpaid consulting fees, of $2,301,100. In connection with the Amended Note, the Company has issued The RHL Group a warrant to purchase 2,852,200 shares of the Company common stock at $0.02 per share. Sales of Equity Securities On various dates between May 5, 2012, and June 25, 2012, the Company entered into eleven different Convertible Promissory Notes with eleven different unrelated third-parties for principal amounts totaling $215,000. The Notes bear interest at a rate of 6% per annum payable in cash or shares of common stock or a combination of cash and shares of common stock. The decision whether to pay in cash, shares of common stock or combination of both will be at the Company's sole discretion. At any time from and after the earliest to occur of: (i) the approval of the stockholder's of the Company of the increase in the authorized shares of the Company's common stock from 650,000,000 to 950,000,000; or (ii) the availability of sufficient unreserved shares, the Company will be entitled to convert any portion of the outstanding and unpaid conversion amount into fully paid and non-assessable shares of common stock. If the Company were to elect to convert those Notes, a total of 10,750,000 shares would be issued upon conversion. On June 22, 2012, the Company granted a total of 6,250,000 shares of common stock at $0.02 per share as an incentive to eight employees and three consultants for past and future services rendered. All shares vest on Jan. 22, 2013, and are forfeitable before that time. On June 22, 2012, the Company granted a total of 19,884,775 shares of common stock to four board members, two employees and two consultants in exchange for a reduction in accounts payable in the amount of $397,696 in total. All shares vest on Jan. 22, 2013, and are restricted before that time. On June 22, 2012, the Company granted 2,852,200 warrants to purchase shares of the Company's common stock to The RHL Group in connection with the renewal of the Sixth Amended and Restated Line of Credit Note. This warrant has an exercise price of $0.02 per share, with a contractual life through June 26, 2017, vests at commencement and has an aggregate value of $57,044, which will be recorded as interest expense. The Company generally used the proceeds of the foregoing sales of securities for repayment of indebtedness, working capital and other general corporate purposes. Annual Meeting Results MMRGlobal, Inc., held its 2012 annual meeting of stockholders on June 20, 2012, at the Beverly Wilshire, a Four Seasons Hotel, located at 9500 Wilshire Boulevard, Beverly Hills, California. At the Annual Meeting, the Company's stockholders: (a) elected Mike Finley and Bernard Stolar to serve on the Company's Board of Directors as Class III directors for a term of three years expiring upon the Company's 2015 annual meeting of stockholders or until each of their respective successors are duly elected and qualified; (b) ratified the appointment of Rose Snyder & Jacobs as the Company's independent registered public accounting firm for the fiscal year ending Dec. 31, 2012; (c) approved the amendment to the Company's Amended and Restated Certificate of Incorporation, as amended as of the date of the Annual Meeting, to increase the authorized number of shares of the Company's common stock from 650 million shares to 950 million shares; and (d) approved the adoption of the MMRGlobal, Inc., 2011 Equity Incentive Plan, which authorizes the issuance of a variety of equity awards, including stock options, stock purchase awards, stock bonus awards, stock appreciation rights, stock unit awards and other stock awards. About MMRGlobal Los Angeles, Calif.-based MMR Global, Inc. (OTC BB: MMRF) -- http://www.mmrglobal.com/-- through its wholly-owned operating subsidiary, MyMedicalRecords, Inc., provides secure and easy-to- use online Personal Health Records (PHRs) and electronic safe deposit box storage solutions, serving consumers, healthcare professionals, employers, insurance companies, financial institutions, and professional organizations and affinity groups. In the auditors' report accompanying the financial statements for year ended Dec. 31, 2011, Rose, Snyder & Jacobs LLP, in Encino, California, expressed substantial doubt about the Company's ability to continue as a going concern. The independent auditors noted that the Company has incurred significant operating losses and negative cash flows from operations during the years ended Dec. 31, 2011, and 2010. The Company reported a net loss of $8.88 million in 2011, compared with a net loss of $17.90 million in 2010. The Company reported a net loss of $10.3 million in 2009. The Company's balance sheet at March 31, 2012, showed $1.90 million in total assets, $7.96 million in total liabilities, and a $6.05 million stockholders' deficit. MOUNTAIN COUNTRY: Court Accepts Involuntary Chapter 11 Petition --------------------------------------------------------------- Bankruptcy Judge Ronald O. Pearson officially placed Mountain Country Partners, LLC, under Chapter 11 bankruptcy on Monday, ruling that a group of investors who filed an involuntary petition against the Company have standing to advance the involuntary petition. The Court cited the Company's inability to pay its debt to the Petitioning Creditors. MCP had opposed the petition. Mountain Country Partners was formed to purchase the assets of Buffalo Properties, LLC, an oil and gas company which was previously a debtor in the U.S. Bankruptcy Court for the Southern District of West Virginia. A Bankruptcy Court auction occurred in September 2006, and a representative of MCP bid $7,000,000 for the estate assets. Apparently, at the time of the bid, MCP did not have the purchase monies on hand. From September 2006, through November 2006, MCP raised over $9.5 million from investors. The investors purchased promissory notes and limited partnership membership interests. Most of the investors were persons who attended one of Ronald LeGrand's real estate courses. Mr. LeGrand is the managing member of MCP. The total amount invested by the Petitioning Creditors was $1,882,812. MCP had never filed a registration statement with the SEC. The investors received a one page promissory note that gave them the option to withdraw their investment within 90 days and receive 125% times their investment or withdraw their investment after one year and receive 150% times their investment or convert their investment into shares and become a part owner of MCP. An $800,000 equity investment would convert to a 1% ownership interest in the Company. By comparison, Mr. LeGrand and the other initial members paid nothing for their majority ownership interests. The Operating Agreement of MCP states that it is effective Oct. 10, 2006. However, the agreement was not ready on that date and was not provided to investors until several weeks later. The investors had already placed their money with MCP and by the time the Operating Agreement was prepared checks were already deposited in the MCP bank account. The Initial Members of the company were Ronald F. LeGrand; Kenneth Gwynn; Steve Rhodes; Ryan Cunningham; Frederick E. Wheat, Jr.; and Katisha Hill. None of those persons made any significant monetary contribution for their membership interest. In its ruling, the Court noted that the confidential financial information provided by MCP shows that it lost $685,085 in 2011, including non-cash expenses of $102,980 for depletion and $189,044 for depreciation. MCP does not have sufficient resources to rework the old wells. MCP does not have the ability to raise new capital. MCP previously sold its Kentucky operations and the funds from that sale have been expended. Although MCP has based its future upon oil production, as compared to gas production, questions exist about the scope of the leases to allow the drilling of new wells. Further, MCP does not hold leases to the Marcellus Shale formations. Thus, it appears MCP does not have the ability to pay the Petitioning Creditors on debts that became due years ago. A copy of the Court's June 25, 2012 Order is available at http://is.gd/erkc5Gfrom Leagle.com. Seven individual investors filed an involuntary Chapter 11 bankruptcy petition against Jacksonville, Florida-based Mountain Country Partners, LLC (Bankr. S.D. W.Va. Case No. 12-20094) on Feb. 17, 2012. Judge Ronald G. Pearson presides over the case. Joseph W. Caldwell, Esq., at Caldwell & Riffee, represent the petitioners. MOUNTAIN NATIONAL: Bank Now "Significantly Undercapitalized" ------------------------------------------------------------ The designation of Mountain National Bank was changed to "significantly undercapitalized" effective upon the Bank's filing of an amended Dec. 31, 2011, Report of Condition and Income with its federal regulators on May 30, 2012, in which its tangible equity capital ratio was 2.10%. The Bank's tangible equity capital ratio as of March 31, 2012, as reflected in its amended Call Report filed with the federal regulators on June 14, 2012, improved further to 2.45%. As a result of no longer being designated as "critically undercapitalized", the Bank is no longer required under applicable Prompt Corrective Action regulations to be placed into conservatorship or receivership within 90 days of that designation under certain circumstances. In addition, the Bank is no longer prohibited by virtue of the FDIC's prompt corrective action statute from: (i) entering into any material transaction other than in the usual course of business, including any investment, expansion, acquisition, sale of assets, or other similar action with respect to which the Bank is required to provide notice to its federal regulator; (ii) extending any credit for any highly leveraged transactions; (iii) amending the Bank's charter or bylaws, except to the extent necessary to carry out any other requirement of law, regulation, or order; (iv) making any material change in accounting methods; (v) engaging in any covered transaction as defined in Section 23A(b) of the Federal Reserve Act (12 U.S.C. Section 371c(b)); (vi) paying excessive compensation or bonuses; and (vii) paying interest on new or renewed liabilities at a rate that would increase the Bank's weighted average cost of funds to a level significantly exceeding the prevailing rates of interest on insured deposits in the Bank's normal market areas. The Bank remains, however, subject to other regulatory restrictions prohibiting the acceptance, renewal or rolling over of brokered deposits and the paying of interest on deposits above certain national rate caps. Notwithstanding the improvement in the Bank's designation for Prompt Corrective Action purposes, the Bank remains obligated to submit a capital restoration plan acceptable to its federal regulator, which plan will be required to be guaranteed by the Company. The Company and the Bank continue to diligently work to evaluate and pursue strategic alternatives, including, but not limited to, the sale of common or preferred stock, the sale of all or certain of the assets of the Bank or the Company or the merger of the Bank or the Company with another financial institution or its holding company. There can be no assurance that the Company or the Bank will be successful in obtaining outside additional capital or merging with or being acquired by another company or submitting an acceptable capital restoration plan. There can also be no assurance that the Bank's tangible equity capital ratio will not in the future fall below 2%. About Mountain National Mountain National is a bank holding company registered with the Board of Governors of the Federal Reserve System under the Bank Holding Company Act of 1956, as amended. The Company provides a full range of banking services through its banking subsidiary, Mountain National Bank. The Company conducts its banking activities from its main office located in Sevierville, Tennessee and through eight additional branch offices in Sevier County, Tennessee, as well as a regional headquarters and two branch offices in Blount County, Tennessee. The Company's balance sheet at June 30, 2011, showed $521.40 million in total assets, $509.90 million in total liabilities, and stockholders equity of $11.50 million. The Company and its principal subsidiary, Mountain National Bank, are subject to various regulatory capital requirements administered by the federal banking agencies. In February 2010, the Bank agreed to an Office of the Comptroller of the Currency ("OCC") minimum capital requirement ("IMCR") to maintain a minimum Tier 1 capital to average assets ratio of 9% and a minimum total capital to risk-weighted assets ratio of 13%. The Bank had 4.61% of Tier 1 capital to average assets and 7.69% of total risk-based capital to risk-weighted assets ratio at June 30, 2011, and was therefore not in compliance with the IMCR. As a result, the OCC may bring additional enforcement actions, including a consent order or a capital directive, against the Bank. Based upon its capital levels at June 30, 2011, the Bank's capital shortfall was approximately $23,374,000 for the Tier 1 capital to average assets requirement and approximately $20,342,000 for the total capital to risk-weighted assets requirement. MP3TUNES LLC: CEO Not Covered by Automatic Stay in Chapter 7 ------------------------------------------------------------ District Judge William H. Pauley, III, denied the request of Michael Robertson to stay a copyright infringement action in view of the bankruptcy filing by co-defendant MP3 tunes, LLC. The lawsuit is, CAPITOL RECORDS, INC. et al., Plaintiffs, v. MP3TUNES, LLC et al., Defendants, No. 07 Civ. 9931 (S.D.N.Y.). Mr. Robertson is MP3tunes' chief executive officer and sole current employee. MP3tunes filed a Chapter 7 petition for liquidation (Bankr. S.D. Calif. Case No. 12-06037) on April 27, 2012. In the Petition, MP3tunes lists assets of $7,754 and liabilities totaling $2,108,966.37. Mr. Robertson argues that the automatic stay of the lawsuit should be extended to him for three reasons: (1) MP3tunes is a necessary party and this action cannot proceed without it, (2) the Bankruptcy Trustee should have an opportunity to assess the claims made against Robertson and their impact on the bankruptcy estate, and (3) sections 362(a) and 105 of the Bankruptcy Code authorize the District Court to stay the action. The District Judge held that in general, automatic stays under the Bankruptcy Code are limited to debtors and do not extend to officers and principals of the debtor. The Court also held that Mr. Robertson has not shown any immediate adverse economic effect or irreparable harm to the MP3tunes estate if the action continues against him. MP3tunes is a shell corporation with almost no assets and will be liquidated in short-order. Because MP3tunes seeks liquidation under Chapter 7, and not reorganization under Chapter 11, Mr. Robertson cannot articulate how continuing the action against him could affect MP3 tunes' ability to reorganize. "While Plaintiffs' claims against MP3tunes may survive Chapter 7 by operation of law, see 11 U.S.C. 727(a)(1), as a practical matter, MP3tunes is no longer a going concern. Accordingly, this action should not be halted over the academic question of whether the soon-defunct MP3tunes will be prejudiced if Plaintiffs' claims against Robertson proceed," Judge Pauley said. The Court directs the parties to submit a joint proposed case management schedule by July 6, 2012. Counsel for the parties are further directed to participate in a telephone conference with the Court on July 9 at 12:00 p.m., to discuss the proposed case management schedule and set a trial date. Plaintiffs are directed to circulate a call-in number and a list of participants prior to the call. A copy of the District Court's June 25, 2012 Memorandum & Order is available at http://is.gd/1BPAkKfrom Leagle.com. NORTHAMPTON GENERATING: Gets Short Exclusivity Extension -------------------------------------------------------- Bill Rochelle, the bankruptcy columnist for Bloomberg News, reports that Northampton Generating Co. LP persuaded the bankruptcy judge again to enlarge the time within which the company has exclusive right to propose a reorganization plan. Where Northampton wanted an enlargement of exclusivity by three months to Sept. 30, the court in Charlotte, North Carolina, only pushed the deadline out to Aug. 17. About Northampton Generating Northampton Generating Co. LP is the owner of a 112 megawatt electric generating plant in Northampton, Pennsylvania. The plant is fueled with waste products, including waste coal, fiber waste, and tires. The power is sold under a long-term agreement to an affiliate of FirstEnergy Corp. Northampton Generating filed for Chapter 11 bankruptcy (Bankr. W.D.N.C. Case No. 11-33095) on Dec. 5, 2011. Hillary B. Crabtree, Esq., and Luis Manuel Lluberas, Esq., at Moore & Van Allen PLLC, in Charlotte, N.C., serve as counsel to the Debtors. Houlihan Lokey Capital, Inc., is the financial advisor. The Debtor estimated assets and debts of up to $500 million. Debt includes $73.4 million owing on senior bonds issued through the Pennsylvania Economic Development Financing Authority. No request for the appointment of a trustee or examiner has been made, and no statutory committee or trustee has been appointed in this case. NORTHSTAR AEROSPACE: Wins Court OK to Auction Assets ---------------------------------------------------- Northstar Aerospace (USA) Inc. and its Canadian parent will conduct an auction in Chicago where private-equity investor Wynnchurch Capital Ltd. will open the bidding with its $70 million offer, pursuant to joint cross-border bidding procedures approved by courts in Canada and the U.S. U.S. Bankruptcy Judge Mary Walrath authorized the Debtors to conduct an auction on July 17, 2012 at 10:00 a.m. If no qualified competing bids are submitted by July 13, the auction will be cancelled. There's a hearing on July 24 to approve the sale. Absent higher and better offers, Northstar will seek court approval to sell the business for $70 million cash to Wynnchurch. Judge Walrath and her counterpart in Canada, Justice Geoffrey Morowitz of the Ontario Superior Court, signed off on the bid procedures at a joint hearing linked by video between Delaware and Toronto, Lance Duroni at Bankruptcy Law360 reports. Peg Brickley at Dow Jones' DBR Small Cap reports that Philadelphia's Versa Capital Management has emerged as a potential contender in the bidding for Northstar Aerospace. In an objection, Versa said that Wynnchurch's stalking horse bid appears to be predicated on modified contracts with the Debtors' top customer, Boeing Co., but the terms of the new deal have not been disclosed. The Pension Benefit Guaranty Corporation, according to BankruptcyData.com, filed an objection to the proposed bidding procedures. The objection asserts, "First, the Joint Bidding Procedures should be amended to require a statement as to whether Pension Plan liability will be assumed by the bidder, and to permit credit to be granted for any assumption of Pension Plan liability. Through allowing this additional form of credit, a more robust bidding process may occur, and the unsecured claim pool may be less diluted. Second, the schedule for bidding is simply too short." About Northstar Aerospace Chicago, Illinois-based Northstar Aerospace -- http://www.nsaero.com/-- is an independent manufacturer of flight critical gears and transmissions. With operating subsidiaries in the United States and Canada, Northstar produces helicopter gears and transmissions, accessory gearbox assemblies, rotorcraft drive systems and other machined and fabricated parts. It also provides maintenance, repair and overhaul of components and transmissions. Its plants are located in Chicago, Illinois; Phoenix, Arizona and Milton and Windsor, Ontario. Northstar employs over 700 people across its operations. Northstar Aerospace, along with affiliates, filed for Chapter 11 protection (Bankr. D. Del. Lead Case No. 12-11817) in Wilmington, Delaware, on June 14, 2012, to sell its business to affiliates of Wynnchurch Capital, Ltd., absent higher and better offers. Attorneys at SNR Denton US LLP and Bayard, P.A. serve as counsel to the Debtors. The Debtors have obtained approval to hire Logan & Co. Inc. as the claims and notice agent. Certain Canadian affiliates are also seeking protection pursuant to the Companies' Creditors Arrangement Act, R.S.C.1985, c. C-36, as amended. As of March 31, 2012, Northstar disclosed total assets of $165.1 million and total liabilities of $147.1 million. Approximately 60% of the assets and business are with the U.S. debtors. OASIS PETROLEUM: Moody's Lifts CFR to 'B2'; Rates New Notes 'B3' --------------------------------------------------------------- Moody's Investors Service upgraded Oasis Petroleum Inc's (Oasis) Corporate Family Rating (CFR) to B2 from B3, upgraded the rating on the existing senior unsecured notes to B3 from Caa1, and assigned a B3 rating to the company's proposed $300 million notes due 2023. The outlook is stable. This concludes the review for upgrade initiated on April 2, 2012. "The upgrade of the CFR to B2 reflects the company's strong returns due to a high proportion of oil production and modest finding and development (F&D) costs, rapidly improving scale, and a longer track record in the Williston Basin," commented Jonathan Kalmanoff, Moody's Analyst. Issuer: Oasis Petroleum Inc , Upgrades: Probability of Default Rating, Upgraded to B2 from B3 Corporate Family Rating, Upgraded to B2 from B3 Multiple Seniority Shelf, Upgraded to (P)B3 from (P)Caa1 Senior Unsecured Regular Bond/Debenture, Upgraded to B3 from Caa1 Assignments: Senior Unsecured Regular Bond/Debenture, Assigned 65 - LGD4 to B3 Outlook Actions: Outlook, Changed To Stable From Rating Under Review Ratings Rationale The B2 CFR reflects the company's small but rapidly improving scale relative to similarly rated peers, single basin concentration, and relatively early stage of operations. The rating is supported by very strong returns with oil representing 92% of production, a high quality Williston Basin asset base with a large drilling inventory, and leverage which is low on a net debt basis. Gross leverage is expected to decline as the company deploys its large cash balance to fund production growth. The B3 senior unsecured note rating reflects both the overall probability of default of Oasis, to which Moody's assigns a PDR of B2, and a loss given default of LGD4-65%. The size of the senior secured revolver's priority claim relative to the senior unsecured notes results in the notes being rated one notch beneath the B3 CFR under Moody's Loss Given Default Methodology. The SGL-2 reflects good liquidity through the second quarter of 2013. While Moody's expects significant negative free cash flow, the company's March 31, 2012 pro forma cash balance of $581 million and borrowing base credit facility availability of $500 million will provide sufficient liquidity. The credit facility, which matures in 2016, has a total commitment of $1 billion and a borrowing base of $500 million as of April 3, 2012, pro forma for the proposed notes issuance. The borrowing base is subject to redetermination twice per year in April and October. Financial covenants under the facility are net debt to EBITDAX of no more than 4.0x, and a current ratio of at least 1.0x, and Moody's expects the company to remain well within compliance with these covenants through the second quarter of 2013. There are no debt maturities prior to 2016 when the credit facility matures. Substantially all of the company's assets are pledged as collateral for the revolving credit facility. Any asset sales with proceeds in excess of 5% of the borrowing base then in effect automatically reduce the borrowing base. Therefore, depending on usage at the time, an asset sale may or may not provide additional liquidity to Oasis. Moody's could upgrade the ratings if average daily production increases to 30 mboe/d, while maintaining a leveraged full-cycle ratio (LFCR) of at least 2.5x, and reducing leverage (on a gross debt basis) in line with expectations. Moody's could downgrade the ratings if Oasis experiences a deterioration of operating performance resulting in a LFCR below 2.0x, or if RCF / debt is expected to be sustained below 20%. The principal methodology used in rating Oasis Petroleum was the Global Independent Exploration and Production Industry Methodology published in December 2011. Other methodologies used include Loss Given Default for Speculative-Grade Non-Financial Companies in the U.S., Canada and EMEA published in June 2009. Oasis Petroleum Inc. is an independent E&P company headquartered in Houston, Texas. OPTIMUMBANK HOLDINGS: Fails to Comply with Nasdaq Bid Price Rule ---------------------------------------------------------------- OptimumBank Holdings, Inc., received a letter from The Nasdaq Stock Market indicating that the Company is not in compliance with Listing Rule 5550(a)(2) because the closing bid price per share of its common stock has been below $1.00 per share for 30 consecutive business days. In accordance with Listing Rule 5810(c)(3)(A), the Company has been provided with a 180 calendar day grace period, or until Dec. 17, 2012, to regain compliance with the Bid Price Rule. To regain compliance with the Bid Price Rule, the closing bid price of the Company's common stock must remain at $1.00 per share or more for a minimum of ten consecutive business days. Thereafter, the Company can receive an additional 180-day grace period if the Company meets the continued listing requirement for market value of publicly held shares and all other initial listing standards for The Nasdaq Capital Market, except for the bid price requirement. The Company must also notify Nasdaq of its intent to cure the deficiency during the second grace period, by effecting a reverse stock split, if necessary. If the Company meets these requirements, Nasdaq will grant the Company an additional 180 calendar days to regain compliance with the Bid Price Rule. However, if it appears to Nasdaq that the Company will not be able to cure the deficiency, or if the Company is otherwise not eligible, Nasdaq will provide notice that the Company's securities will be subject to delisting. At that time, the Company may appeal the delisting determination to a Hearings Panel. The Company is evaluating its options to resolve the deficiency, including a possible reverse stock split. About OptimumBank Holdings Fort Lauderdale, Fla.-based OptimumBank Holdings, Inc. is a is a one-bank holding company and owns 100% of OptimumBank, a state (Florida)-chartered commercial bank. The Bank offers a variety of community banking services to individual and corporate customers through its three banking offices located in Broward County, Florida. The Bank's wholly-owned subsidiaries are OB Real Estate Management, LLC, OB Real Estate Holdings, LLC, OB Real Estate Holdings 1503, LLC, and OB Real Estate Holdings 1695, LLC, all of which were formed in 2009. OB Real Estate Management, LLC, is primarily engaged in managing foreclosed real estate. OB Real Estate Holdings, LLC, OB Real Estate Holdings 1503, LLC, and OB Real Estate Holdings 1695, LLC, hold and dispose of foreclosed real estate. The Company reported a net loss of $3.74 million in 2011, compared with a net loss of $8.45 million in 2010. The Company's balance sheet at March 31, 2012, showed $152.93 million in total assets, $144.76 million in total liabilities and $8.17 million in total stockholders' equity. Regulatory Enforcement Actions On April 16, 2010, the Bank consented to the issuance of a Consent Order by the Federal Deposit Insurance Corporation and the State of Florida Office of Financial. The Consent Order covers areas of the Bank's operations that warrant improvement and imposes various requirements and restrictions designed to address these areas, including the requirement to maintain certain minimum capital ratios. Management believes that the Bank is currently in substantial compliance with all the requirements of the Consent Order except for the following requirements: * Scheduled reductions by Oct. 31, 2011, and April 30, 2012, of 60% and 75%, respectively, of loans classified as substandard and doubtful in the 2009 FDIC Examination; * Retention of a qualified chief executive officer and chief lending officer; and * Development of a plan to reduce Bank's concentration in commercial real estate loans acceptable to the supervisory authorities. The Bank has implemented comprehensive policies and plans to address all of the requirements of the Consent Order and has incorporated recommendations from the FDIC and OFR into these policies and plans. PAL CORPORATION: Case Summary & Largest Unsecured Creditor ---------------------------------------------------------- Debtor: PAL Corporation 4014 North Wilson Drive Shorewood, WI 53211-1849 Bankruptcy Case No.: 12-29714 Chapter 11 Petition Date: June 26, 2012 Court: United States Bankruptcy Court Eastern District of Wisconsin (Milwaukee) Debtor's Counsel: Jonathan V. Goodman, Esq. LAW OFFICES OF JONATHAN V. GOODMAN Suite 707, 788 North Jefferson Street Milwaukee, WI 53202-3739 Tel: (414) 276-6760 Fax: (414) 287-1199 E-mail: jgoodman@ameritech.net Estimated Assets: $1,000,001 to $10,000,000 Estimated Debts: $1,000,001 to $10,000,000 The Company's list of its 20 largest unsecured creditors has only one entry: Entity Nature of Claim Claim Amount ------ --------------- ------------ Waste Management Services $1,000 Louisville, KY 40290-1054 The petition was signed by Arthur L. Post, president. PETROPLUS HOLDINGS: JV to Convert Coryton Refinery Into Terminal ---------------------------------------------------------------- Karlee Weinmann at Bankruptcy Law360 reports that a U.K. oil facility previously operated by now-insolvent Petroplus Holdings AG will be refashioned into a terminal under a joint venture among Shell UK Ltd., Royal Vopak and Greenergy, the companies said Tuesday. Bankruptcy Law360 relates that the announcement ends uncertainty that has swirled around the Coryton refinery since its former owner fell into bankruptcy in December, forcing refinery administrator PricewaterhouseCoopers LLP to either find a buyer or shut down the facility altogether. About Petroplus Based in Zug, Switzerland, Petroplus Holdings AG is one of Europe's largest independent oil refiners. Petroplus was forced to file for insolvency in late January after struggling for months with weak demand due to the economic slowdown in Europe and overcapacity amid tighter credit conditions, high crude prices and competition from Asia and the Middle East, MarketWatch said in a March 28 report. According to MarketWatch, Petroplus said in March a local court granted "ordinary composition proceedings" for a period of six months. As part of the court process, Petroplus intends to sell its assets to repay its creditors. Some of Petroplus' units in countries other than Switzerland have filed for "different types of proceedings" and are currently controlled by court-appointed administrators or liquidators, which started the process to sell assets, including the company's refineries. PHILADELPHIA ORCHESTRA: No Creditors Vote Against Plan ------------------------------------------------------ Bill Rochelle, the bankruptcy columnist for Bloomberg News, reports that when the Philadelphia Orchestra opens the June 29 confirmation hearing, the ensemble will report to the judge that not a single creditor voted against approval of the Chapter 11 reorganization plan. If the judge approves the plan by signing a confirmation order, it will allow the orchestra to exit from bankruptcy begun in April 2011. According to the report, the plan is based on settlements with the musicians' union, the musicians' pension plan, the Pension Benefit Guaranty Corp., and the Kimmel Center, where the orchestra performs. Donations from the orchestra's board will cover the $5.49 million cost of the plan that extinguishes $100 million in debt. The report relates that the orchestra incurred $8.9 million in professional fees and other costs while in Chapter 11. The orchestra has almost no secured debt. For the $35.5 million claim resulting from termination of the existing musicians' pension plan, the pension fund will receive a $1.75 million cash payment under a settlement agreement. The PBGC receives $1.3 million in installments. General unsecured creditors are to receive 50 percent in cash on claims totaling about $555,000. About Philadelphia Orchestra The Philadelphia Orchestra -- http://www.philorch.org/-- claims to be among the world's leading orchestras. Bloomberg News says the orchestra became the first major U.S. symphony to file for bankruptcy protection, surprising the music world. Previous conductors include Fritz Scheel (1900-07), Carl Pohlig (1907-12), Leopold Stokowski (1912-41), Eugene Ormandy (1936-80), Riccardo Muti (1980-92), Wolfgang Sawallisch (1993-2003), and Christoph Eschenbach (2003-08). Charles Dutoit is currently chief conductor, and Yannick Nezet-Seguin has assumed the title of music director designate until he takes up the baton as The Philadelphia Orchestra's next music director in 2012. The Philadelphia Orchestra Association, Academy of Music of Philadelphia, Inc., and Encore Series, Inc., filed separate Chapter 11 petitions (Bankr. E.D. Pa. Case Nos. 11-13098 to 11-13100) on April 16, 2011. Judge Eric L. Frank presides over the case. The Philadelphia Orchestra Association is being advised by Dilworth Paxson LLP, its legal counsel, and Alvarez & Marsal, its financial advisor. Curley, Hessinger & Johnsrud serves as its special counsel. Philadelphia Orchestra disclosed $15,950,020 in assets and $704,033 in liabilities as of the Chapter 11 filing. Encore Series, Inc., tapped EisnerAmper LLP as accountants and financial advisors. Roberta A. DeAngelis, the U.S. Trustee for Region 3, appointed seven members to the official committee of unsecured creditors in the Debtors' case. Reed Smith LLP serves as the Committee's counsel. The orchestra postpetition signed a new contract with musicians and authority to terminate the existing musicians' pension plan. PHOENIX PREMIER: Plan Lacks "Good Faith" Requirement ---------------------------------------------------- District Judge G. Murray Snow dismissed Phoenix Premier Properties LLC's appeal from a bankruptcy court ruling that said the Debtors' plan of reorganization lacks the good faith requirement and the requirement of an accepting impaired class required by 11 U.S.C. Sec. 1129(a)(3)." (Doc. 13 at 4-5; Doc. 14-1 at 3). In affirming the Bankruptcy Court's decision, the District Court held that, given the totality of the circumstances, it cannot say the Bankruptcy Court committed clear error in its decision that the Debtor's Plan lacked the good faith required under 11 U.S.C. Sec. 1129(a)(3). On Aug. 31, 2010, Phoenix Premier engaged Coleman & Deere as prepetition counsel for various landlord tenant matters. C&D was incorporated on the same date. C&D claims to have been unaware of the planned bankruptcy proceedings, but required $5,000 up-front at as an "evergreen retainer." Phoenix Premier and C&D further agreed at or about this time that C&D would invoice Phoenix Premier for $1,000 in "earned fees," due immediately. While Phoenix Premier paid the "evergreen retainer," which C&D holds in its trust account, Phoenix Premier never paid the $1,000. This $1,000 is C&D's only claim against Phoenix Premier. Phoenix Premier filed a Plan of Reorganization, to which Federal National Mortgage Association objected. Following two subsequent amended Plans of reorganization from Phoenix Premier, on Oct. 26, 2011, the Bankruptcy Court heard argument as to whether the Plan was submitted in Good Faith. The Debtor's Second Amended Plan identified seven classes of creditors. Class Three consisted of FNMA's secured, first priority lien, and Class Four consisted of C&D's claim secured by the amount held in trust. When Phoenix Premier filed its "Report of Ballots for Debtor's Plan of Reorganization Dated May 6, 2011," C&D was the only consenting impaired claim. Under the Second Amended Plan, the terms of the proposed impairment were that Phoenix Premier would pay half of C&D's claim 30 days after the effective date of the Plan, and the second half 60 days after, and waive a late fee and interest due on the late amount. In return, C&D "[would] release the $5,000.00 security retainer being held in its trust account." On Nov. 30, 2011 the Bankruptcy Court ruled on the Good Faith Dispute, finding that "(i) the secured claim of Coleman & Deere, PLC was the Debtor's only possible consenting impaired class in the Bankruptcy Case, [and] (ii) that the secured claim of Coleman & Deere, PLC could simply be offset by the retainer held by Coleman & Deere, PLC." As a result, the Court further ordered that "Debtor's plan lacks the good faith requirement and the requirement of an accepting impaired class required by 11 U.S.C. Sec. 1129(a)(3)." Phoenix Premier took an appeal. FNMA elected to have the appeal heard by the District Court. The case before the District Court is, Phoenix Premier Properties LLC, Debtor, Appellant, v. Federal National Mortgage Association, aka Fannie Mae, Appellee, No. CV-12-187-PHX-GMS (D. Ariz.). A copy of the District Court's June 25, 2012 Order is available at http://is.gd/TgfQYifrom Leagle.com. Mesa, Arizona-based Phoenix Premier Properties LLC filed for Chapter 11 bankruptcy (Bankr. D. Ariz. Case No. 10-28387) on Sept. 3, 2010, estimated $1 million to $10 million in both assets and debts. Phoenix Premier owned a single piece of real property valued variously at $3.2 million and $2.3 million. The apartment complex secured a $2,132,000 claim held by Federal National Mortgage Association. The FNMA loan came due in June 2010 and Phoenix Premier was unable either to repay the loan or to find lenders willing to refinance the property. Judge Redfield T. Baum, Sr. presides over the case. Richard William Hundley, Esq., at Berens, Kozub & Kloberdanz, PLC, serves as the Debtor's counsel. The petition was signed by Vesna Djordjevich, member. PLUM TV: Sells Business, Converts Case to Chapter 7 --------------------------------------------------- Bill Rochelle, the bankruptcy columnist for Bloomberg News, reports that the Chapter 11 reorganization of Plum TV Inc. was converted at the end of last week to a liquidation in Chapter 7 where a trustee was appointed. The operator of television stations in resort markets sold the business in April to Media Greenhouse LLC for $1.17 million cash and debt assumption. According to the report, the company said that the remaining $100,000 isn't sufficient to pay the costs of the reorganization case and permit confirming a Chapter 11 plan. There are as much as $3 million in unsecured claims, according to court papers. Plum TV, Inc. fdba Plum TV LLC, owner of television stations in Colorado, eastern Long Island, New York; Martha's Vineyard and Nantucket, Massachusetts; Miami and Idaho, filed a Chapter 11 petition (Bankr. S.D.N.Y. Case No. 12-10017) on Jan. 3, 2011, in Manhattan. Adam L. Rosen, Esq., at Silverman Acampora LLP, in Jericho, New York, serves as counsel to the Debtor. The Debtor estimated up to $10 million in assets and up to $50 million in liabilities as of Chapter 11 filing. PREMIER PAVING: Creditors Can Hire Onsager Staelin as Counsel ------------------------------------------------------------- The Unsecured Creditors' Committee of Premier Paving Inc. sought and obtained approval from the U.S. Bankruptcy Court to retain Onsager, Staelin & Guyerson, LLC as counsel. The firm's rates are: Personnel Rates --------- ----- Christian Onsager $350 per hour Michael Guyerson $325 per hour David Rich $300 per hour J. Brian Fletcher $260 per hour Alice A. White $250 per hour Andrew Johnson $220 per hour David M. Little $210 per hour Paralegal(s) $100 per hour Onsager, Staelin & Guyerson attests that the firm is a "disinterested person" as the term is defined in Section 101(14) of the Bankruptcy Code. Denver, Colorado-based Premier Paving Inc. -- http://www.premierpavinginc.com/-- operates a full-service highway construction company, which services include paving, grading and milling, geo-textiles, trucking, traffic control and quality control. Premier Paving also owns and operates an asphalt plant. Premier Paving filed for Chapter 11 bankruptcy (Bankr. D. Colo. Case No. 12-16445) on April 2, 2012. Judge Michael E. Romero presides over the case. Lee M. Kutner, Esq., at Kutner Miller Brinen, P.C., serves as the Debtor's counsel. In its petition, the Debtor estimated up to $50 million in assets and debts. The petition was signed by David Goold, treasurer. A four-member Official Unsecured Creditors Committee has been appointed in the case. QVC INC: Fitch Assigns 'BB' Issuer Default Rating ------------------------------------------------- Fitch Ratings has assigned a 'BBB-' rating to QVC, Inc.'s $500 million senior secured note offering due 2022. Proceeds will be used to reduce borrowings under the company's revolving bank facility ($382 million outstanding) and for general corporate purposes. The notes will be secured and guaranteed on a pari passu basis with QVC's existing $2 billion senior secured notes and its $2 billion revolver. For additional information regarding Liberty Interactive LLC (Liberty) and QVC, please see Fitch's credit report published on June 4, 2012. QVC's notes (including the new offering) and bank revolver benefit from a security interest in the capital stock of QVC and are guaranteed by QVC's material domestic subsidiaries. The secured collateral may be removed as QVC's leverage has been below 2.0x for two consecutive fiscal quarters, as permitted under the company's credit agreement. The collateral package, the equity of QVC and the equity of QVC's material subsidiaries (released on Feb. 16, 2011), would be reinstated for both the banks and the senior notes in the event that LTM leverage exceeded 3.0x for two consecutive quarters. By maintaining the current collateral (QVC's capital stock), QVC receives a 25 basis point benefit in its revolver pricing. The new notes are expected to have covenants and provisions materially similar to the existing notes. These provisions include a 101% change of control offer which is triggered if more than 30% of the voting power is acquired by a person other than a Permitted Holder (as defined), such voting power exceeds the voting power of the Permitted Holders, and QVC's secured notes are rated non-investment grade. Additional indebtedness is limited by a 2x interest coverage incurrence test, with standard carve outs. Total debt with the same security and guarantee package is limited to $5 billion (consistent with the company's credit agreement). The previously issued notes (due 2017, 2019 and 2020) limited pari passu debt to $4.5 billion, which will be exhausted after this issuance ($2 billion revolver and $2.5 billion in secured notes, including this offering). The recapitalization of Liberty Interactive Corp's (Liberty Corp.) common stock, into Liberty Interactive and Liberty Ventures tracking stock is expected to be completed by the end of the third quarter. As of March 31, 2012, Fitch calculates QVC's unadjusted gross leverage (pro forma for the $500 million offering) at 1.7x and Liberty's unadjusted gross leverage at 3.8x. Liberty is expected to fund a portion of the initial cash balance for Liberty Ventures with borrowings under QVC's revolver; Fitch expects a QVC revolver balance of $1.3 billion to $1.5 billion. Assuming a $1.5 billion QVC revolver balance, Fitch calculates QVC and Liberty's unadjusted gross leverage at 2.3x and 4.4x respectively. While Liberty's leverage exceeds its 4x target, Fitch believes EBITDA growth at QVC over the next 12 months and upcoming Liberty maturities in 2013 will reduce Liberty's leverage to 4x. QVC's EBITDA grew 4% in 2011 and 7% in the first quarter of 2012. The ratings reflect Fitch's expectation that the company will continue to manage leverage on a Liberty consolidated basis. Over the long term, Fitch expects Liberty's gross unadjusted leverage to be managed within 4x and QVC unadjusted gross leverage to be managed within 2.5x. Fitch's IDRs for Liberty and QVC reflect the consolidated legal entity/obligor credit profile, rather than the Liberty Interactive/Venture tracking stock structure. This view is primarily driven by Fitch's interpretation of the Liberty bond indentures. Fitch believes that the company could not spin out QVC without consent of the bondholders, based on the current asset mix at Liberty. QVC generates 86% and 95% of Liberty's revenues and EBITDA, respectively. In addition, Fitch believes QVC makes up a meaningful portion of Liberty's equity value. Any spin off of QVC would likely trigger the 'substantially all' asset disposition restriction within the Liberty indentures. The 'BBB-' rating on the QVC bank facility and notes take into account placement in the capital structure, giving it strong recovery prospects. QVC's individual business profile and credit metrics would warrant an IDR greater than 'BB' on a standalone basis. Fitch expects that the ratings would remain unchanged in the event that the remaining security is released. Fitch believes liquidity at Liberty Interactive will be sufficient to support operations and QVC's expansion into other markets. Acquisitions and share buybacks are expected to be a primary use of free cash flow (FCF). Fitch believes that there is sufficient liquidity and cash generation (from investment dividends and tax sharing between Liberty Interactive and Liberty Ventures) to support debt service and disciplined investment at Liberty Venture. Key Rating Drivers: -- Fitch believes that the current financial policy is consistent with the current ratings. If the company were to manage to more conservative leverage targets, ratings may be upgraded. -- Conversely, changes to financial policy (including more aggressive leverage targets) and asset mix changes that weakened bondholder protection, could pressure the ratings. Liquidity: Consolidated liquidity at Liberty as of March 30, 2012, included $794 million in cash and $1.6 billion available under the QVC $2 billion credit facility, which expires in September 2015. Fitch calculates FCF of approximately $800 million for the LTM ended March 2012, excluding cash flows related to the spun-out Liberty Starz/Capital assets. Fitch expects FCF to be in the $725 million to $825 million range in 2012. In addition, the company's balance sheet includes approximately $4.5 billion in public holdings. Fitch believes these assets could be liquidated in the event that Liberty LLC needed additional liquidity. Liberty LLC's near-term maturities include $1.1 billion of exchangeable debentures that may be put to the company in 2013 and approximately $309 million in senior notes maturing in 2013. Fitch believes Liberty LLC has sufficient liquidity (including the Time Warner basket of stocks) to handle these maturities. Fitch rates Liberty and QVC as follows: Liberty -- IDR at 'BB'; -- Senior unsecured debt at 'BB'. QVC -- IDR at 'BB'; -- Senior secured debt at 'BBB-'. The Rating Outlook is Stable. RE LOANS: Court Confirms Modified Fourth Amended Plan ----------------------------------------------------- Bankruptcy Judge Barbara J. Houser confirmed the Modified Fourth Amended Joint Chapter 11 Plan of Reorganization, Dated June 1, 2012, filed by R.E. Loans LLC, R.E. Future LLC, and Capital Salvage. The Plan was negotiated at arm's-length among the Debtors, the Official Committee of Noteholders, Wells Fargo Capital Finance, and the Debtors' largest unsecured creditor, the Liquidating Trust for Mortgage Fund '08 LLC, Development Specialists, Inc., and their advisors. The Court also approved the Debtors' entry into an exit credit facility with Wells Fargo. On the Plan effective date, Mackinac Partners LLC will serve as manager of Reorganized R.E. Loans and R.E. Future and James A. Weissenborn will serve as president and sole director of Reorganized Capital Salvage. Dennis Faulkner will serve as trustee under the Liquidating Trust to be established under the Plan. The ruling says each of the Reorganized Debtors is barred and enjoined from filing a voluntary petition under Chapter 7 or 11 of the Bankruptcy Code prior to one year after the indefeasible payment in full in cash of all obligations owing under the Wells Fargo Exit Facility. A copy of the Court's Findings of Fact, Conclusions of Law, and Order Confirming Debtors' Modified Fourth Amended Joint Chapter 11 Plan of Reorganization, issued June 26, 2012, is available at http://is.gd/8QbDvwfrom Leagle.com. About R.E. Loans R.E. Loans, LLC, was, for many years, in the business of providing financing to home builders and developers of real property. R.E. Future LLC and Capital Salvage own the real property obtained following foreclosure proceedings initiated by R.E. Loans against its borrowers. R.E. Loans is the sole shareholder of Capital Salvage and the sole member of R.E. Future. B-4 Partners LLC is the sole member of R.E. Loans. As a result of the multiple defaults by R.E. Loans' borrowers, R.E. Loans has transitioned from being a lender to becoming a property management company. Lafayette, California-based R.E. Loans, R.E. Future and Capital Salvage filed for Chapter 11 bankruptcy (Bankr. N.D. Tex. Case Nos. 11-35865, 11-35868 and 11-35869) on Sept. 13, 2011. Judge Barbara J. Houser presides over the case. Stutman, Treister & Glatt Professional Corporation, in Los Angeles, and Gardere, Wynne Sewell LLP, in Dallas, represent the Debtors as counsel. James A. Weissenborn at Mackinac serves as R.E. Loans' chief restructuring officer. The Debtors tapped Hines Smith Carder as their litigation and outside general counsel. The Debtors tapped Alixpartners, LLP as noticing agent, and Latham & Watkins LLP as special counsel in real estate matters. R.E. Loans disclosed $713.6 million in assets and $886.0 million in liabilities as of the Chapter 11 filing. Akin Gump Strauss Hauer & Feld LLP, in Dallas, represents the Official Committee of Noteholders. The Debtors' Plan provides that the rights of the Noteholders and the Holders of General Unsecured Claims will depend on whether the Noteholders vote to accept the Plan and implement the Plan Compromise. No payments will be made by the Reorganized Debtors on account of any Allowed Claims (other than Secured Tax Claims) until the Wells Fargo Exit Facility is indefeasibly paid in full in Cash. RESIDENTIAL CAPITAL: Has Final Approval of $1.4BB Barclays Loan --------------------------------------------------------------- The U.S. Bankruptcy Court for the Southern District of New York permitted Residential Capital, LLC, and its debtor affiliates, on a final basis, to borrow up to $1.45 billion in postpetition secured superpriority financing from Barclays Bank PLC. Under the Barclays DIP Loan, the Debtors can access up to: (i) $190,000,000 under the revolving loan facility; (ii) $1,060,000,000 under the A-1 term loan facility; and (iii) $200,000,000 under the A-2 term loan facility. In exchange, the DIP Lenders will be granted superpriority expense claims. Judge Glenn further held that upon a written request by the Debtors, after consultation by the Debtors with the Official Committee of Unsecured Creditors, the Administrative Agent agrees to work with the Debtors and the Creditors' Committee to seek amendments to the DIP Credit Agreement that would permit the Debtors to consummate a sale of the portion of the Collateral that is either (a) the Collateral that is the subject of the Ally Sale Agreement or (b) the Collateral that is the subject of the Nationstar Sale Agreement prior to consummating a sale of the assets subject to the other Original Sale Agreement as defined in the DIP Credit Agreement without requiring that the DIP Obligations be paid in full upon consummation of such sale. The Debtors further agree to promptly provide to counsel for the Creditors' Committee copies of the invoices, redacted for privilege as appropriate, received by the Debtors on account of fees and expenses incurred by professionals retained by the Administrative Agent as provided for in the Credit Documents. Any objections to the Barclays DIP Motion or the supplemental notice with respect to the entry of this final order that have not been withdrawn, waived or settled, and all reservation of rights included therein, are hereby denied and overruled, Judge Glenn ruled. With respect to the alleged rights of setoff and recoupment that the Objecting MBS Trustees have asserted with respect to the Receivables generated before the Petition Date, each Objecting MBS Trustee will receive a superpriority administrative claim to the extent it is determined by the Court that the Objecting MBS Trustee has valid setoff rights. That superpriority administrative claim will be junior in priority and subordinate to the Superpriority Claims granted to the Collateral Agent, the Administrative Agent, and the DIP Lenders. As to the Objecting MBS Trustees' alleged rights of setoff against Receivables generated post-petition and alleged rights of recoupment, the Objecting MBS Trustees will postpone the exercise of any such rights until the full repayment of the DIP Obligations. The Objecting MBS Trustees are The Bank of New York Mellon Trust Company, N.A., Deutsche Bank Trust Company Americas, Deutsche Bank National Trust Company, U.S. Bank National Association and Wells Fargo Bank, N.A. Judge Glenn clarified that neither the Green Planet Servicing Funds nor the GPS Loan Pool as defined in Green Planet Servicing, LLC's Objection may be utilized in connection with or pledged as collateral under the DIP Facilities. A full-text copy of the Barclays DIP Final Order dated June 22, 2012, is available for free at: http://bankrupt.com/misc/ResCap_BarclaysDIPFinalOrd.pdf About ResCap Residential Capital LLC, the unprofitable mortgage subsidiary of Ally Financial Inc., filed for bankruptcy protection (Bankr. S.D.N.Y. Lead Case No. 12-12020) on May 14, 2012. Neither Ally Financial nor Ally Bank is included in the bankruptcy filings. ResCap, one of the country's largest mortgage originators and servicers, was sent to Chapter 11 with 50 subsidiaries amid "continuing industry challenges, rising litigation costs and claims, and regulatory uncertainty," according to a company statement. ResCap disclosed $15.68 billion in assets and $15.28 billion in liabilities as of March 31, 2012. ResCap is selling its mortgage origination and servicing businesses to Nationstar Mortgage LLC, and its legacy portfolio, consisting mainly of mortgage loans and other residual financial assets, to Ally Financial. Together, the asset sales are expected to generate approximately $4 billion in proceeds. Centerview Partners LLC and FTI Consulting are acting as financial advisers to ResCap. Morrison & Foerster LLP is acting as legal adviser to ResCap. Curtis, Mallet-Prevost, Colt & Mosle LLP is the conflicts counsel. Rubenstein Associates, Inc., is the public relations consultants to the Company in the Chapter 11 case. Morrison Cohen LLP is advising ResCap's independent directors. Kurtzman Carson Consultants LLP is the claims and notice agent. Ray C. Schrock, Esq., at Kirkland & Ellis LLP, in New York, serves as counsel to Ally Financial. Bankruptcy Creditors' Service, Inc., publishes RESIDENTIAL CAPITAL BANKRUPTCY NEWS. The newsletter tracks the Chapter 11 proceeding undertaken by affiliates of Residential Capital LLC and its affiliates (http://bankrupt.com/newsstand/or 215/945-7000). RESIDENTIAL CAPITAL: Wins Nod of $220-Mil. Ally Facility -------------------------------------------------------- Judge Martin Glenn permitted Residential Capital LLC and its affiliates, on a final basis, to borrow up to $220 million in postpetition financing on a secured, superpriority basis from parent, Ally Financial Inc. Judge Glenn recognized that the Debtors need to obtain the full amount of the financing available under the AFI DIP Loan in order to permit the orderly continuation of the operation of their businesses, including the continued funding of the GNMA Buyouts to ensure their compliance with the Ginnie Mae Guide and maintain their current issuer status. Before the Petition Date, the Debtors funded the repurchase of whole loans from Ginnie Mae pools in order to, among other things, avoid GMAC Mortgage being in violation of delinquency triggers applicable to it under Chapter 18 of the Ginnie Mae Guide -- the GNMA Buyouts. Pursuant to the Final AFI DIP Order, the Debtors are authorized to borrow up to $220 million under the AFI DIP Loan; provided, that the aggregate amount of AFI prepetition and postpetition draws under the AFI Loan Agreement authorized under this final order may not exceed $600 million. The amount available under the AFI DIP Loan will be $200 million, and any additional borrowings in excess of $200 million will be made at the sole discretion of AFI. Ally will receive superiority administrative expense claims in its capacity as the lender under the AFI DIP Loan. The Debtors also won final Court permission to use cash collateral of AFI and the holders of the 9.625% Junior Secured Notes Due 2015, solely for the purposes detailed within the initial 20-week forecast of anticipated cash receipts and disbursements as set forth in the Debtors' Motion. The Debtors will provide AFI and the holders with adequate protection for any diminution in value of the collateral. Judge Glenn clarifies that this final order will not modify or affect the terms and provisions of, nor the rights and obligations under: (a) the Board of Governors of the Federal Reserve System Consent Order, dated April 13, 2011, by and among AFI, Ally Bank, ResCap, GMAC Mortgage, LLC, the Board of Governors of the Federal Reserve System, and the Federal Deposit Insurance Corporation; (b) the consent judgment entered April 5, 2012 by the U.S. District Court for the District of Columbia, dated February 9, 2012; (c) the Order of Assessment of a Civil Money Penalty Issued Upon Consent Pursuant to the Federal Deposit Insurance Act, as amended, dated February 10, 2012; and (d) all related agreements with AFI and Ally Bank and their subsidiaries and affiliates. Moreover, all rights of the Objecting MBS Trustees to challenge the effect of paragraph 30 of the Interim Ally DIP Order, including whether that provision was binding and effective upon the Objecting MBS Trustees, are fully preserved. Solely in connection with permitting the use of Prepetition Collateral, including Cash Collateral, or exercising any rights or remedies as and when permitted pursuant to the Ally DIP Final Order or the Prepetition Obligations, the Adequate Protection Parties will not be deemed, from and after the Petition Date, to be in control of the operations of the Debtors or to be acting as a "responsible person" or "owner or operator" with respect to the operation or management of the Debtors so long as the Adequate Protection Parties' actions do not constitute, within the meaning of Section 9601(20)(F) of the U.S. Comprehensive Environmental Response, Compensation and Liability Act. Nothing in this final order or the AFI DIP Loan will permit the Debtors to violate Section 959(b) of Title 28 of the U.S. Code. Likewise, nothing in this final order will in any way be construed or interpreted to impose or allow the imposition upon the Adequate Protection Parties any liability for any claims arising from the prepetition or postpetition activities of any of the Debtors and their respective affiliates. Judge Glenn also held that none of the Green Planet Servicing Funds constitute property of the Debtors' estate, nor will the Green Planet Servicing Funds, as defined in the objection of Green Planet Servicing, LLC, constitute Cash Collateral. Moreover, no rights of any entity under Sections 555, 556, 559, 560 and 561 of the Bankruptcy Code will be affected by the entry of this final order as to any contract or transaction of the kind listed in such sections of the Bankruptcy Code. Any objection that has not been withdrawn or resolved is, to the extent not resolved, hereby overruled, Judge Glenn ruled. A full-text copy of the Final Ally DIP Order dated June 25, 2012, is available for free at: http://bankrupt.com/misc/ResCap_AllyDIPFinalOrd.pdf About ResCap Residential Capital LLC, the unprofitable mortgage subsidiary of Ally Financial Inc., filed for bankruptcy protection (Bankr. S.D.N.Y. Lead Case No. 12-12020) on May 14, 2012. Neither Ally Financial nor Ally Bank is included in the bankruptcy filings. ResCap, one of the country's largest mortgage originators and servicers, was sent to Chapter 11 with 50 subsidiaries amid "continuing industry challenges, rising litigation costs and claims, and regulatory uncertainty," according to a company statement. ResCap disclosed $15.68 billion in assets and $15.28 billion in liabilities as of March 31, 2012. ResCap is selling its mortgage origination and servicing businesses to Nationstar Mortgage LLC, and its legacy portfolio, consisting mainly of mortgage loans and other residual financial assets, to Ally Financial. Together, the asset sales are expected to generate approximately $4 billion in proceeds. Centerview Partners LLC and FTI Consulting are acting as financial advisers to ResCap. Morrison & Foerster LLP is acting as legal adviser to ResCap. Curtis, Mallet-Prevost, Colt & Mosle LLP is the conflicts counsel. Rubenstein Associates, Inc., is the public relations consultants to the Company in the Chapter 11 case. Morrison Cohen LLP is advising ResCap's independent directors. Kurtzman Carson Consultants LLP is the claims and notice agent. Ray C. Schrock, Esq., at Kirkland & Ellis LLP, in New York, serves as counsel to Ally Financial. Bankruptcy Creditors' Service, Inc., publishes RESIDENTIAL CAPITAL BANKRUPTCY NEWS. The newsletter tracks the Chapter 11 proceeding undertaken by affiliates of Residential Capital LLC and its affiliates (http://bankrupt.com/newsstand/or 215/945-7000). RESIDENTIAL CAPITAL: Wins Approval to Use Cash Collateral --------------------------------------------------------- Judge Martin Glenn authorized Residential Capital LLC and its affiliates, on a final basis, to use the cash collateral of Citibank N.A. under the Citibank MSR (mortgage servicing rights) Facility, in accordance with a budget approved by Citibank, a copy of which is available for free at: http://bankrupt.com/misc/ResCap_0620CashCollBudget.pdf The Debtors are authorized to use the MSR Cash Collateral for the period from the entry of this final order through the date that is the earliest to occur of: (a) the expiration of the remedies notice period; (b) the date on which maturity of the DIP Facility is accelerated pursuant to the DIP Loan Agreement as a result of an event of default thereunder; (c) the effective date of a Chapter 11 plan for any Debtor with Assets exceeding $10 million; or (d) the initial scheduled date of maturity of the DIP Facility, up to a maximum of 18 months from the closing date of the DIP Facility. The MSR Cash Collateral may be used during the specified period solely (x) to fund the cash needs related to the operations and assets of the assets that comprise the Prepetition MSR Collateral, including funding advances or repurchase obligations owed by the Debtors with respect to such Prepetition MSR Collateral; and (y) to fund an allocated portion of the Debtors' costs of administering these Chapter 11 cases based on the value of the Prepetition MSR Collateral relative to the value of the Debtors' other assets (any such MSR Cash Collateral used to pay such allocated administrative costs. As adequate protection of the interests of Citibank, Citibank will be granted adequate protection liens and allowed superpriority administrative expense claim. Nothing in this final order will prejudice the rights of the Official Committee of Unsecured Creditors to seek to avoid or otherwise challenge the validity, extent, priority or perfection of security interests, and liens of Citibank, Judge Glenn held. The Creditors' Committee must commence, as appropriate, a contested matter or adversary proceeding raising such claim, objection or challenge within 120 days after entry of the final order. All objections to the Citibank Cash Collateral Motion to the extent not withdrawn or resolved are withdrawn, the Court ruled. A full-text copy of the Final Cash Collateral Order dated June 20, 2012, is available for free at: http://bankrupt.com/misc/ResCap_CashCollFinalOrd.pdf About ResCap Residential Capital LLC, the unprofitable mortgage subsidiary of Ally Financial Inc., filed for bankruptcy protection (Bankr. S.D.N.Y. Lead Case No. 12-12020) on May 14, 2012. Neither Ally Financial nor Ally Bank is included in the bankruptcy filings. ResCap, one of the country's largest mortgage originators and servicers, was sent to Chapter 11 with 50 subsidiaries amid "continuing industry challenges, rising litigation costs and claims, and regulatory uncertainty," according to a company statement. ResCap disclosed $15.68 billion in assets and $15.28 billion in liabilities as of March 31, 2012. ResCap is selling its mortgage origination and servicing businesses to Nationstar Mortgage LLC, and its legacy portfolio, consisting mainly of mortgage loans and other residual financial assets, to Ally Financial. Together, the asset sales are expected to generate approximately $4 billion in proceeds. Centerview Partners LLC and FTI Consulting are acting as financial advisers to ResCap. Morrison & Foerster LLP is acting as legal adviser to ResCap. Curtis, Mallet-Prevost, Colt & Mosle LLP is the conflicts counsel. Rubenstein Associates, Inc., is the public relations consultants to the Company in the Chapter 11 case. Morrison Cohen LLP is advising ResCap's independent directors. Kurtzman Carson Consultants LLP is the claims and notice agent. Ray C. Schrock, Esq., at Kirkland & Ellis LLP, in New York, serves as counsel to Ally Financial. Bankruptcy Creditors' Service, Inc., publishes RESIDENTIAL CAPITAL BANKRUPTCY NEWS. The newsletter tracks the Chapter 11 proceeding undertaken by affiliates of Residential Capital LLC and its affiliates (http://bankrupt.com/newsstand/or 215/945-7000). RITZ CAMERA: Crystal Finance DIP Facility Has Interim Approval -------------------------------------------------------------- Ritz Camera & Image, LLC and Ritz Interactive LLC won an interim order authorizing them to obtain secured, superpriority postpetition financing, consisting of a revolving credit facility of $15,585,000 and a term loan facility of $4,915,000, with Crystal Financial LLC as administrative and collateral agent for the DIP lenders. Specifically, the Debtors are authorized to request extensions of credit up to an aggregate principal amount of $3,000,000 at any one time outstanding. The Debtors also obtained permission to use cash collateral securing their obligations to the pre-bankruptcy lenders. The Debtors owe not less than $16.32 million in prepetition term and revolving loans provided by secured lenders also led by Crystal Finance LLC, as administrative agent. The DIP credit agreement, among others, requires the Debtors to continue to employ WeinsweigAdvisors LLC as restructuring advisors. The DIP lenders permit the Debtors to dispose of assets in connection with a sale transaction that results in the repayment of the loan in full in cash at the closing of the sale transaction commencing no later than Sept. 14, 2012. The agreement caps any employment compensation to David M. Ritz to $325,000 per annum. The DIP facility also imposes these milestones: By 45 days after the Borrowers must have obtained an petition date extension of the deadline to assume or reject leases to not less than 210 days from the petition date By July 6, 2012 Borrowers will have distributed an information memorandum in connection with a going concern sale By July 6, 2012 Borrowers will have filed a motion seeking approval of bidding and sale guidelines By July 31, 2012 Hearing held on sale guidelines By Aug. 3, 2012 Borrowers will have obtained approval of sale guidelines By Aug. 6, 2012 Borrowers will have solicited bids in connection with a going concern sale or full chain liquidation By Aug. 16, 2012 Borrowers will have executed an agency documents in connection with selecting a stalking horse bidder By Sept. 6, 2012 Borrowers will have conducted an auction for a going concern sale or full chain liquidation By Sept. 10, 2012 Sale approval hearing By Sept. 14, 2012 Borrowers will have closed a deal The Court will hold a final hearing July 17 at 3:00 p.m. on the DIP financing. Crystal Finance is represented in the case by: Robert A.J. Barry, Esq. MORGAN LEWIS & BOCKIUS LLP 225 Franklin Street, 16th Floor Boston, MA 02110 - and - Wendy S. Walker, Esq. MORGAN LEWIS & BOCKIUS LLP 101 Park Avenue New York, NY 10178 - and - Robert S. Brady, Esq. Edmon Morton, Esq. YOUNG CONAWAY STARGATT & TAYLOR LLP Rodney Square 100 North King Street Wilmington, DE 19801 About Ritz Camera Beltsville, Maryland-based Ritz Camera & Image LLC -- http://www.ritzcamera.com-- sells digital cameras and accessories, and electronic products. It sought Chapter 11 protection (Bankr. D. Del. Case No. 12-11868) on June 22, 2012, to close unprofitable stores. Ritz claims to be the largest camera and image chain the U.S., operating 265 camera stores in 34 states as well as an Internet business. Ritz Camera intends to shut 128 locations and cut its staff in half. Included in the closing are 10 locations in Maryland and 4 in Virginia. Affiliate Ritz Interactive Inc., owner e-commerce Web sites that include RitzCamera.com and BoatersWorld.com, also filed for bankruptcy. RCI's predecessor, Ritz Camera Centers, Inc., sought Chapter 11 protection (Bankr. D. Del. Case No. 09-10617) on Feb. 22, 2009. Ritz generated $40 million by selling all 129 Boater's World Marine Centers. A group that included the company's chief executive officer, David Ritz, formed Ritz Camera & Image to buy at least 163 of the remaining 375 camera stores. The group paid $16.25 million in cash and a $7.8 million note. Later, Ritz sold a $4 million account receivable for $1.5 million to an owner of the company that owed the debt. In the 2009 petition, Ritz disclosed total assets of $277 million and total debts of $172.1 million. Lawyers at Cole, Schotz, Meisel, Forman & Leonard, P.A., served as bankruptcy counsel. Thomas & Libowitz, P.A., served as the Debtor's special corporate counsel and conflicts counsel. Marc S. Seinsweig, at FTI Consulting, Inc., served as the Debtor's chief restructuring officer. Kurtzman Carson Consultants LLC acted as claims and noticing agent. Attorneys at Cooley Godward Kronish LLP and Bifferato LLC represented the official committee of unsecured creditors as counsel. In April 2010, the Court approved a liquidating Chapter 11 plan proposed by the company and the official creditor's committee. Under the Plan, unsecured creditors were to recover 4% to 14% of their claims. In the 2012 petition, RCI estimated total assets and liabilities of $50 million to $100 million. The Debtors owe not less than $16.32 million for term and revolving loans provided by secured lenders led by Crystal Finance LLC, as administrative agent. Attorneys at Cole, Schotz, Meisel, Forman & Leonard, P.A., serve as bankruptcy counsel. Kurtzman Carson Consultants LLC is the claims agent. WeinsweigAdvisors LLC's Marc Weinsweig has been appointed as Ritz's CRO. Mark L. Desgrosseilliers, Esq., and Ericka F. Johnson, Esq., at Womble Carlyle Sandridge & Rice, LLP, represent liquidators Gordon Brothers Retail Partners LLC and Hilco Merchant Resources LLC. RITZ CAMERA: Sec. 341 Creditors' Meeting Set for July 31 -------------------------------------------------------- Roberta A. DeAngelis, the United States Trustee for Region 3, proposes to hold a Meeting of Creditors pursuant to 11 U.S.C. Sec. 341(a) of the bankruptcy cases of Ritz Camera & Image, L.L.C., et al., on Tuesday, July 31, 2012, at 11:00 a.m. The meeting will be held at J. Caleb Boggs Federal Building, 2nd Floor, Room 2112. Beltsville, Maryland-based Ritz Camera & Image LLC -- http://www.ritzcamera.com-- sells digital cameras and accessories, and electronic products. It sought Chapter 11 protection (Bankr. D. Del. Case No. 12-11868) on June 22, 2012, to close unprofitable stores. Ritz claims to be the largest camera and image chain the U.S., operating 265 camera stores in 34 states as well as an Internet business. Ritz Camera intends to shut 128 locations and cut its staff in half. Included in the closing are 10 locations in Maryland and 4 in Virginia. Affiliate Ritz Interactive Inc., owner e-commerce Web sites that include RitzCamera.com and BoatersWorld.com, also filed for bankruptcy. RCI's predecessor, Ritz Camera Centers, Inc., sought Chapter 11 protection (Bankr. D. Del. Case No. 09-10617) on Feb. 22, 2009. Ritz generated $40 million by selling all 129 Boater's World Marine Centers. A group that included the company's chief executive officer, David Ritz, formed Ritz Camera & Image to buy at least 163 of the remaining 375 camera stores. The group paid $16.25 million in cash and a $7.8 million note. Later, Ritz sold a $4 million account receivable for $1.5 million to an owner of the company that owed the debt. In the 2009 petition, Ritz disclosed total assets of $277 million and total debts of $172.1 million. Lawyers at Cole, Schotz, Meisel, Forman & Leonard, P.A., served as bankruptcy counsel. Thomas & Libowitz, P.A., served as the Debtor's special corporate counsel and conflicts counsel. Marc S. Seinsweig, at FTI Consulting, Inc., served as the Debtor's chief restructuring officer. Kurtzman Carson Consultants LLC acted as claims and noticing agent. Attorneys at Cooley Godward Kronish LLP and Bifferato LLC represented the official committee of unsecured creditors as counsel. In April 2010, the Court approved a liquidating Chapter 11 plan proposed by the company and the official creditor's committee. Under the Plan, unsecured creditors were to recover 4% to 14% of their claims. In the 2012 petition, RCI estimated total assets and liabilities of $50 million to $100 million. The Debtors owe not less than $16.32 million for term and revolving loans provided by secured lenders led by Crystal Finance LLC, as administrative agent. Attorneys at Cole, Schotz, Meisel, Forman & Leonard, P.A., serve as bankruptcy counsel. Kurtzman Carson Consultants LLC is the claims agent. WeinsweigAdvisors LLC's Marc Weinsweig has been appointed as Ritz's CRO. Mark L. Desgrosseilliers, Esq., and Ericka F. Johnson, Esq., at Womble Carlyle Sandridge & Rice, LLP, represent liquidators Gordon Brothers Retail Partners LLC and Hilco Merchant Resources LLC. Crystal Finance, the DIP lender, is represented by Morgan, Lewis & Bockius and Young Conaway Stargatt & Taylor LLP. RITZ CAMERA: Can Hire Kurtzman Carson as Claims Agent ----------------------------------------------------- Ritz Camera & Image LLC sought and obtained authority from the Court to employ Kurtzman Carson Consultants LLC as claims and noticing agent. KCC's Albert Kass attests that his firm is a "disinterested person" as that term is defined in Section 101(14) of the Bankruptcy Code, and does not hold or represent an interest materially adverse to the Debtors' estates. Under the parties' services agreement, KCC will invoice the Debtors monthly for services rendered to the Debtors during the preceding month, except that if the total fees and expenses are expected to exceed $10,000 in a single month, the Debtors may, upon KCC's demand, make advance payment. Prior to the petition date, the Debtors paid KCC a $15,000 retainer. About Ritz Camera Beltsville, Maryland-based Ritz Camera & Image LLC -- http://www.ritzcamera.com-- sells digital cameras and accessories, and electronic products. It sought Chapter 11 protection (Bankr. D. Del. Case No. 12-11868) on June 22, 2012, to close unprofitable stores. Ritz claims to be the largest camera and image chain the U.S., operating 265 camera stores in 34 states as well as an Internet business. Ritz Camera intends to shut 128 locations and cut its staff in half. Included in the closing are 10 locations in Maryland and 4 in Virginia. Affiliate Ritz Interactive Inc., owner e-commerce Web sites that include RitzCamera.com and BoatersWorld.com, also filed for bankruptcy. RCI's predecessor, Ritz Camera Centers, Inc., sought Chapter 11 protection (Bankr. D. Del. Case No. 09-10617) on Feb. 22, 2009. Ritz generated $40 million by selling all 129 Boater's World Marine Centers. A group that included the company's chief executive officer, David Ritz, formed Ritz Camera & Image to buy at least 163 of the remaining 375 camera stores. The group paid $16.25 million in cash and a $7.8 million note. Later, Ritz sold a $4 million account receivable for $1.5 million to an owner of the company that owed the debt. In the 2009 petition, Ritz disclosed total assets of $277 million and total debts of $172.1 million. Lawyers at Cole, Schotz, Meisel, Forman & Leonard, P.A., served as bankruptcy counsel. Thomas & Libowitz, P.A., served as the Debtor's special corporate counsel and conflicts counsel. Marc S. Seinsweig, at FTI Consulting, Inc., served as the Debtor's chief restructuring officer. Kurtzman Carson Consultants LLC acted as claims and noticing agent. Attorneys at Cooley Godward Kronish LLP and Bifferato LLC represented the official committee of unsecured creditors as counsel. In April 2010, the Court approved a liquidating Chapter 11 plan proposed by the company and the official creditor's committee. Under the Plan, unsecured creditors were to recover 4% to 14% of their claims. In the 2012 petition, RCI estimated total assets and liabilities of $50 million to $100 million. The Debtors owe not less than $16.32 million for term and revolving loans provided by secured lenders led by Crystal Finance LLC, as administrative agent. Attorneys at Cole, Schotz, Meisel, Forman & Leonard, P.A., serve as bankruptcy counsel. Kurtzman Carson Consultants LLC is the claims agent. WeinsweigAdvisors LLC's Marc Weinsweig has been appointed as Ritz's CRO. Mark L. Desgrosseilliers, Esq., and Ericka F. Johnson, Esq., at Womble Carlyle Sandridge & Rice, LLP, represent liquidators Gordon Brothers Retail Partners LLC and Hilco Merchant Resources LLC. Crystal Finance, the DIP lender, is represented by Morgan, Lewis & Bockius and Young Conaway Stargatt & Taylor LLP. RITZ CAMERA: DIP Lender, Kimco Realty Tap Morgan Lewis as Counsel ----------------------------------------------------------------- Shopping center owner Kimco Realty Corporation has made an appearance in the bankruptcy case of Ritz Camera & Image LLC. Kimco is represented by: Neil E. Herman, Esq. MORGAN, LEWIS & BOCKIUS LLP 101 Park Avenue New York, NY 10178 Tel: (212) 309-6669 E-mail: nherman@morganlewis.com Morgan, Lewis & Bockius is also representing the Debtors' DIP lender, Crystal Finance is represented in the case by: Robert A.J. Barry, Esq. MORGAN LEWIS & BOCKIUS LLP 225 Franklin Street, 16th Floor Boston, MA 02110 E-mail: rbarry@morganlewis.com - and - Wendy S. Walker, Esq. MORGAN LEWIS & BOCKIUS LLP 101 Park Avenue New York, NY 10178 E-mail: wwalker@morganlewis.com - and - Rachel Jaffe Mauceri, Esq. MORGAN LEWIS & BOCKIUS LLP 1701 Market Street Philadelphia, PA 19103-2921 The DIP lender is also represented by Robert S. Brady, Esq., and Edmon Morton, Esq., at Young Conaway Stargatt & Taylor LLP. Another shopping center owner, Strawberry Village Retail LLC, also made an appearance in the case. It is represented by: Jeffrey H. Lowenthal, Esq. Robert W. Biederman, Esq. STEYER LOWENTHAL BOODROOKAS ALVAREZ & SMITH LLP One California Street, Third Floor San Francisco, CA 94111 Telephone: (415) 421-3400 Facsimile: (415) 421-2234 Email: jlowenthal@steyerlaw.com Rbiederman@steyerlaw.com Other creditors that made an appearance in the case include: * Brixmor Property Group, Inc., represented by David L. Pollack, Esq. -- pollack@ballardspahr.com , blunt@ballardspahr.com * Cousins Properties Incorporated, represented by Dustin Parker Branch, Esq. -- dustin.branch@kattenlaw.com , carole.levine@kattenlaw.com ; adelle.shafer@kattenlaw.com laura.nefsky@kattenlaw.com * GGP Limited Partnership, represented by Kristen N. Pate, Esq. -- ggpbk@ggp.com , ggpbk@ggp.com * Highland Park ISD represented by Elizabeth Banda Calvo, Esq. -- rgleason@pbfcm.com , ebcalvo@pbfcm.com * Simon Property Group, Inc., represented by Ronald Mark Tucker, Esq. -- rtucker@simon.com , bankruptcy@simon.com * Westfield, LLC, represented by Niclas A. Ferland, Esq. -- niclas.ferland@leclairryan.com As reported by the Troubled Company Reporter, Roberta A. DeAngelis, United States Trustee for Region 3, will hold an organizational meeting on July 2, 2012, at 11:00 a.m. in the bankruptcy case of Ritz Camera. The meeting will be held at The DoubleTree Hotel in Wilmington Delaware. The sole purpose of the meeting will be to form a committee or committees of unsecured creditors in the Debtors' cases. About Ritz Camera Beltsville, Maryland-based Ritz Camera & Image LLC -- http://www.ritzcamera.com-- sells digital cameras and accessories, and electronic products. It sought Chapter 11 protection (Bankr. D. Del. Case No. 12-11868) on June 22, 2012, to close unprofitable stores. Ritz claims to be the largest camera and image chain the U.S., operating 265 camera stores in 34 states as well as an Internet business. Ritz Camera intends to shut 128 locations and cut its staff in half. Included in the closing are 10 locations in Maryland and 4 in Virginia. Affiliate Ritz Interactive Inc., owner e-commerce Web sites that include RitzCamera.com and BoatersWorld.com, also filed for bankruptcy. RCI's predecessor, Ritz Camera Centers, Inc., sought Chapter 11 protection (Bankr. D. Del. Case No. 09-10617) on Feb. 22, 2009. Ritz generated $40 million by selling all 129 Boater's World Marine Centers. A group that included the company's chief executive officer, David Ritz, formed Ritz Camera & Image to buy at least 163 of the remaining 375 camera stores. The group paid $16.25 million in cash and a $7.8 million note. Later, Ritz sold a $4 million account receivable for $1.5 million to an owner of the company that owed the debt. In the 2009 petition, Ritz disclosed total assets of $277 million and total debts of $172.1 million. Lawyers at Cole, Schotz, Meisel, Forman & Leonard, P.A., served as bankruptcy counsel. Thomas & Libowitz, P.A., served as the Debtor's special corporate counsel and conflicts counsel. Marc S. Seinsweig, at FTI Consulting, Inc., served as the Debtor's chief restructuring officer. Kurtzman Carson Consultants LLC acted as claims and noticing agent. Attorneys at Cooley Godward Kronish LLP and Bifferato LLC represented the official committee of unsecured creditors as counsel. In April 2010, the Court approved a liquidating Chapter 11 plan proposed by the company and the official creditor's committee. Under the Plan, unsecured creditors were to recover 4% to 14% of their claims. In the 2012 petition, RCI estimated total assets and liabilities of $50 million to $100 million. The Debtors owe not less than $16.32 million for term and revolving loans provided by secured lenders led by Crystal Finance LLC, as administrative agent. Attorneys at Cole, Schotz, Meisel, Forman & Leonard, P.A., serve as bankruptcy counsel. Kurtzman Carson Consultants LLC is the claims agent. WeinsweigAdvisors LLC's Marc Weinsweig has been appointed as Ritz's CRO. Mark L. Desgrosseilliers, Esq., and Ericka F. Johnson, Esq., at Womble Carlyle Sandridge & Rice, LLP, represent liquidators Gordon Brothers Retail Partners LLC and Hilco Merchant Resources LLC. ROSETTA GENOMICS: NYSDOH Conditionally Approves miRview ------------------------------------------------------- The New York State Department of Health has given Rosetta Genomics conditional approval for its miRview lung assay for testing on patient samples from the State. New York is the only U.S. state that requires an independent regulatory review process for laboratory-developed tests. With this approval, Rosetta Genomics can offer miRview lung in all 50 U.S. states. In making the assay available pending final approval, the NYSDOH requires the Company to provide any additional information they request within 60 business days. miRview lung is the Company's proprietary microRNA- based assay that accurately identifies the four main subtypes of lung cancer using small amounts of tumor cells. "Lung cancer is the second most common cancer and is the primary cause of cancer-related death in both men and women in the U.S. With the introduction of targeted lung cancer therapies, such as Avastin and Alimta, and with other targeted drugs entering the clinical arena, accurate classification and subtyping of lung cancer is becoming increasingly important to better assess differential side effects and efficacy profiles and to enhance treatment strategies," said Kenneth A. Berlin, President and Chief Executive Officer of Rosetta Genomics. "With a sensitivity of 95% for very small sample sizes, such as cytological samples, we believe this assay can be a useful tool for pathologists and we are very pleased to have approval to market this important cancer diagnostic for the benefit of physicians and patients in New York." About Rosetta Located in Rehovot, Israel, Rosetta Genomics Ltd. is seeking to develop and commercialize new diagnostic tests based on a recently discovered group of genes known as microRNAs. MicroRNAs are naturally expressed, or produced, using instructions encoded in DNA and are believed to play an important role in normal function and in various pathologies. The Company has established a CLIA- certified laboratory in Philadelphia, which enables the Company to develop, validate and commercialize its own diagnostic tests applying its microRNA technology. In its auditors' report for the 2011 financial statements, Kost Forer Gabbay & Kasierer, in Tel-Aviv, Israel, expressed substantial doubt about Rosetta Genomics' ability to continue as a going concern. The independent auditors noted that the Company has incurred recurring operating losses and generated negative cash flows from operating activities in each of the three years in the period ended Dec. 31, 2011. The Company reported a net loss after discontinued operations of $8.83 million on $103,000 of revenues for 2011, compared with a net loss after discontinued operations of $14.76 million on $279,000 of revenues for 2010. The Company's balance sheet at Dec. 31, 2011, showed $2.04 million in total assets, $2.40 million in total liabilities, and a stockholders' deficit of $356,000. Bankruptcy Warning The Company said in its annual report for the year ended Dec. 31, 2011, "We have used substantial funds to discover, develop and protect our microRNA tests and technologies and will require substantial additional funds to continue our operations. Based on our current operations, our existing funds, including the proceeds from the January 2012 debt financing, will only be sufficient to fund operations until late May, 2012. We intend to seek funding through collaborative arrangements and public or private equity offerings and debt financings. Additional funds may not be available to us when needed on acceptable terms, or at all. In addition, the terms of any financing may adversely affect the holdings or the rights of our existing shareholders. For example, if we raise additional funds by issuing equity securities, further dilution to our then-existing shareholders may result. Debt financing, if available, may involve restrictive covenants that could limit our flexibility in conducting future business activities. If we are unable to obtain funding on a timely basis, we may be required to significantly curtail one or more of our research or development programs. We also could be required to seek funds through arrangements with collaborators or others that may require us to relinquish rights to some of our technologies, tests or products in development or approved tests or products that we would otherwise pursue on our own. Our failure to raise capital when needed will materially harm our business, financial condition and results of operations, and may require us to seek protection under the bankruptcy laws of Israel and the United States." RUDEN MCCLOSKY: Reiterates Buyer's Chapter 7 Objections ------------------------------------------------------- Jonathan Randles at Bankruptcy Law360 reports that Ruden McClosky PA on Wednesday echoed concerns raised by its planned purchaser, Greenspoon Marder PA, over a possible conversion to Chapter 7 bankruptcy, saying the move would add unnecessary administrative costs and delay payments to creditors. Bankruptcy Law360 relates that Ruden McClosky's protest of converting its bankruptcy from Chapter 11 rehashed many of the same concerns raised a day earlier by Greenspoon in a separate objection filed in Florida bankruptcy court, with both firms claim the appointment of a Chapter 7 trustee would not only add costs. About Ruden McClosky Founded in 1959, Ruden McClosky P.A., fdba Ruden, McClosky, Smith, Schuster & Russell, P.A. -- http://www.ruden.com/-- was a full- service law firm serving the legal needs of clients throughout Florida, the U.S., and internationally. It had eight offices in Florida. In August 2011, the firm was reportedly in merger talks with Cleveland, Ohio-based Benesch firm. In September 2011, founder Donald McClosky died after a long battle with cancer. Ruden McClosky filed for Chapter 11 protection (Bankr. S.D. Fla. Case No. 11-40603) on Nov. 1, 2011, in its hometown of Fort Lauderdale, with a plan to sell a substantial portion of its assets for $7.6 million to Fort Lauderdale-based Greenspoon Marder, subject to higher and better offers at an auction. Judge Raymond B. Ray oversees the case. Leslie Gern Cloyd, Esq., and Paul Steven Singerman, Esq. -- lcloyd@bergersingerman.com and singerman@bergersingerman.com -- at Berger Singerman, P.A., serve as the Debtor's counsel. Development Specialists, Inc., serves as the Debtor's restructuring advisors. The Debtor tapped Steven J. Gutter, P.A., as its special litigation counsel in connection with collection of accounts receivable, and authorization to settle accounts receivable claims in the ordinary course of business. The petition was signed by DSI's Joseph J. Luzinski, who serves as chief restructuring officer. Kurtzman Carson Consultants LLC serves as the Debtor's claims and noticing agent. In its petition, the Debtor estimated $10 million to $50 million in both assets and debts. An official committee of unsecured creditors has been appointed in the case, and is represented by Segall Gordich, P.A. The Committee tapped Soneet Kapila, CPA, and the firm of Kapila & Company as its financial advisor. Counsel to the Debtor's lender, Wells Fargo Bank, N.A., is Jonathan Helfat, Esq., at Otterbourg, Steindler, Houston & Rosen, P.C. Counsel to Greenspoon Marder, the proposed purchaser, is R. Scott Shuker, Esq., at Latham, Shuker, Eden & Beaudine, LLP. SAFETY-KLEEN: CBS Off Hook in Kansas Facility Cleanup ----------------------------------------------------- Gavin Broady at Bankruptcy Law360 reports that a federal judge on Tuesday tossed a suit against CBS Corp. over pollution liabilities at a Kansas waste management site, bringing an end to a long- running dispute over cleanup obligations the network acquired with its purchase of the formerly bankrupt Safety-Kleen Corp. Bankruptcy Law360 relates that U.S. Magistrate Judge James O'Hara booted plaintiff Clean Harbors Inc.'s Resource Conservation and Recovery Act suit after the company -- which purchased the Coffeyville, Kan., facility from Safety-Kleen in 2002 -- failed to establish what additional obligations CBS should be liable for. About the Debtor Headquartered in Delaware, Safety-Kleen Corporation -- http://www.safety-kleen.com/-- provides specialty services such as parts cleaning, site remediation, soil decontamination, and wastewater services. The Company, along with many affiliates, filed for Chapter 11 protection (Bankr. D. Del. Case No. 00-02303) on June 9, 2000. Gregg M. Galardi, Esq., at Skadden, Arps, Slate, Meagher, represented the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they disclosed $3,031,304,000 in assets and $3,333,745,000 in liabilities. Safety-Kleen emerged from Chapter 11 in Dec. 2003 under a plan of reorganization confirmed by Judge Walsh on Aug. 1, 2003, that transferred ownership of the Company to its secured creditors and created a litigation and claims resolution trust for the benefit of unsecured creditors. SAGE COLLEGES: Moody's Affirms 'B2' Long-Term Debt Rating --------------------------------------------------------- Moody's Investors Service has affirmed The Sage Colleges' B2 long- term debt rating on the Series 1999 fixed rate bonds and the B2 underlying rating on the Series 2002 variable rate demand bonds, issued through the City of Albany Industrial Development Agency (Albany IDA) and Rensselaer County Industrial Development Agency (Rensselaer IDA), respectively. The outlook remains negative. Summary Rating Rationale The B2 rating and negative outlook for The Sage Colleges is based on extremely thin liquidity (23 days at close of fiscal year 2011) to support operations and demand debt, reliance on an operating line of credit for annual cyclical cash flow needs, and recent additional bank collateralization requirements for the Manufacturers and Traders Trust Company (M&T) operating line of credit to which funds were legally allocated from previously restricted endowment monies. The fact that nearly all of Sage's unrestricted funds are securitizing a cyclical cash flow operating line is a credit negative, ultimately placing the fixed rate bondholders in a subordinate position that could impact expected recovery in the event of default. The rating also considers the recent positive momentum in operating results, student demand and enrollment improvements, and fund raising successes driven by a focused management team. Challenges * Frail balance sheet, including $2.6 million in monthly liquidity at the close of fiscal year (FY) 2011, with $5.5 million used during FY 2011 to pay off a bank term loan and heavy reliance on a line of credit to manage cyclical cash flow. Sage's reported monthly liquidity was 23 days in FY 2011, down from 86 days in FY 2010. Though mitigated during FY 2012 with new donor receipts and donor-restricted funds reclassified as unrestricted, substantially all unrestricted resources are held as collateral. * Significant bank concentration with a letter of credit and a line of credit provided by Manufacturers and Traders Trust Company (rated A2/P-1). Further, the college's endowment assets are held at M&T and nearly all of Sage's unrestricted investments collateralize the full available $6.0 million line of credit. * Heavy reliance on tuition and auxiliaries revenues at nearly 86% of Moody's adjusted operating revenues for FY 2011, though revenue streams are distributed among the four program-diverse Sage colleges. * High concentration of private equity fund investments and manager concentration, with nearly 44% of the limited level of investments distributed among four managers in private, hedged and multi-strategy equity funds. The allocation is notable given the pooled endowment size of $20.5 million as of March 31, 2012. Strengths * Improvement in financial performance in FY 2011, with the first positive operating margin of 1.5% (Moody's calculated) since FY 2007, as a result of new enrollment revenue and expense containment. Management projects a net surplus for FY 2012, up 58% over the same period last year. The three year average operating margin was negative 3.3%, operating cash flow margin was 8.6%, and overall debt service coverage was 2.5 times. Management has demonstrated the ability to achieve healthy increases of net tuition revenue through enrollment growth and control of discounting. * Notable improvement in the market position of the college with 17.4% growth in full-time equivalent enrollment in the fall 2008 to fall 2011 period and management expectations for continued growth in the fall of 2012 despite the challenging climate. * Improved donor support with $25 million raised since May 2011, a marked contrast to the three-year annual average of $4.7 million in FY 2011. The gifts include $20 million of support received in March and April 2012, which though largely earmarked for capital projects, more than $7 million will be directed to endowment. Management expects continued strength in donor support in the next few years during the current comprehensive campaign. * Focused and strategically aligned governance and management teams that understand the key challenges are building a track record of success. * Absence of debt derivatives, as a swap on the series 2002 bonds expired on March 1, 2012. Outlook The negative outlook reflects Moody's expectation that The Sage College's will continue to face thin liquidity over the short to medium term along with a competitive student market environment. These factors are partially offset by the recent trend of net tuition revenue growth and fundraising gains driven by focused and strategically aligned governance and management teams. What Could Change The Rating Up Sustained balanced operations in the near term; significant improvement in liquidity position and non-reliance on external liquidity for operations; removal of bank collateralization of unrestricted liquidity; extraordinary donor support What Could Change The Rating Down Return to operating deficits and deterioration of unrestricted assets; inability to increase net student revenue, continued deterioration in liquidity; inability to access needed liquidity; downgrade of M&T Bank and resulting acceleration of debt repayment by Sage Methodology The principal methodology used in this rating was U.S. Not-for- Profit Private and Public Higher Education in August 2011. SATNAM LODGING: Case Summary & 20 Largest Unsecured Creditors ------------------------------------------------------------- Debtor: Satnam Lodging, L.L.C. 1051 N. Cambridge St. Kansas City, MO 64120 Bankruptcy Case No.: 12-42607 Chapter 11 Petition Date: June 26, 2012 Court: United States Bankruptcy Court Western District of Missouri (Kansas City) Judge: Arthur B. Federman Debtor's Counsel: Lydia M. Carson, Esq. CARSON LAW CENTER, P.C. 4004 Washington St. Kansas City, MO 64111 Tel: (816) 333-1110 E-mail: lydiacarsonlaw@yahoo.com Scheduled Assets: $5,958,378 Scheduled Liabilities: $4,306,534 A copy of the Company's list of its 20 largest unsecured creditors filed together with the petition is available for free at http://bankrupt.com/misc/mowb12-42607.pdf The petition was signed by Daljeet Mann. SEALY CORP: Reports $1.6 Million Net Income in Q2 2012 ------------------------------------------------------ Sealy Corporation filed with the U.S. Securities and Exchange Commission its quarterly report on Form 10-Q disclosing net income of $1.67 million on $312.03 million of net sales for the three months ended May 27, 2012, compared with a net loss of $377,000 on $321.29 million of net sales for the three months ended May 29, 2011. The Company reported net income of $2.91 million on $624.32 million of net sales for the six months ended May 27, 2012, compared with a net loss of $1.27 million on $626.82 million of net sales for the six months ended May 29, 2011. The Company's balance sheet at May 27, 2012, showed $923.55 million in total assets, $988.20 million in total liabilities and a $64.64 million total stockholders' deficit. "We delivered solid financial and operational performance in the second quarter of 2012," stated Larry Rogers, Sealy's President and Chief Executive Officer. "Our increased gross margin and Adjusted EBITDA performance for the quarter were driven by the successful rollout of our Next Generation Stearns & Foster line, and our strategic commitment to driving profitable sales." A copy of the Form 10-Q is available for free at: http://is.gd/jEQjrT About Sealy Corp. Trinity, North Carolina-based Sealy Corp. (NYSE: ZZ) -- http://www.sealy.com/-- is the largest bedding manufacturer in the world with sales of $1.5 billion in fiscal 2008. The Company manufactures and markets a broad range of mattresses and foundations under the Sealy(R), Sealy Posturepedic(R), including SpringFree(TM), PurEmbrace(TM) and TrueForm(R); Stearns & Foster(R), and Bassett(R) brands. Sealy operates 25 plants in North America, and has the largest market share and highest consumer awareness of any bedding brand on the continent. In the United States, Sealy sells its products to approximately 3,000 customers with more than 7,000 retail outlets. The Company reported a net loss of $9.88 million for the 12 months ended Nov. 27, 2011, and a net loss of $13.74 million during the prior year. The Company reported a net loss of $15.20 million for the three months ended Nov. 27, 2011. * * * Sealy carries 'B' local and issuer credit ratings, with stable outlook, from Standard & Poor's. SEQUA CORP: S&P Raises Corp. Credit Rating to 'B'; Outlook Stable ----------------------------------------------------------------- Standard & Poor's Ratings Services raised its corporate credit rating on Tampa, Fla.-based Sequa Corp. to 'B' from 'B-'. "At the same time, we raised our issue ratings on Sequa's secured credit facility to 'B' from 'B-' and unsecured notes to 'CCC+' from 'CCC'. The recovery ratings remain unchanged," S&P said. "The upgrade reflects our expectations that Sequa's credit protection measures, though still weak, will continue to improve over the next year due to increasing earnings and some debt reduction," said Standard & Poor's credit analyst Chris DeNicolo. "These improvements reflect strengthening core markets--especially airline and commercial aerospace sectors, cost reductions and efficiency initiatives, new contracts, a full year of earnings from the Roll Coater acquisition last year, and acquisition synergies." "The ratings on Sequa reflect its 'highly leveraged' financial profile and weak, albeit improving, credit ratios that resulted from an LBO in 2007, the debt-financed Roll Coater acquisition last year, and until recently, poor profitability. Standard & Poor's views the company's business risk profile as 'fair,' reflecting its major positions in cyclical and competitive niche markets." "Market improvements beginning in 2010 and continuing throughout 2011--specifically in the airline and automotive sectors--and into 2012 have since helped to restore credit metrics and decrease the company's leverage. We expect further improvements in commercial aerospace and autos through 2012, but military sales likely will be flat or down, and the metal coating business likely will see only modest growth because of weak nonresidential construction," Mr. DeNicolo said. "The outlook is stable. The ongoing economic recovery, strengthening core markets, Sequa's various actions aimed at increasing efficiency, a full year of Roll Coater earnings, and some debt reduction should improve credit protection measures over the next 12 to 18 months. However, we are unlikely to raise the rating further until the company addresses the maturity of its revolver in 2013 and refinances its debt due in 2014 and 2015," S&P said. SF FUEL: Voluntary Chapter 11 Case Summary ------------------------------------------ Debtor: SF Fuel, LLC 503 North Oakwood Road Oakwood, IL 61858 Bankruptcy Case No.: 12-91037 Chapter 11 Petition Date: June 26, 2012 Court: United States Bankruptcy Court Central District of Illinois (Danville) Judge: Gerald D. Fines Debtor's Counsel: Steven L. Blakely, Esq. ACTON & SNYDER, LLP 11 E North St Danville, IL 61832 Tel: (217) 442-0350 E-mail: slblakely4@yahoo.com Estimated Assets: $1,000,001 to $10,000,000 Estimated Debts: $1,000,001 to $10,000,000 The Debtor did not file a list of its largest unsecured creditors together with its petition. The petition was signed by Mir Iqbal, manager. SHAMROCK-HOSTMARK: 5 Hotels File for Chapter 11 in Chicago ---------------------------------------------------------- Five hotels owned by investment fund Shamrock-Hostmark Hotel Fund sought Chapter 11 protection on June 27, 2012, in Chicago. Shamrock-Hostmark Princeton Hotel, LLC (Bankr. N.D. Ill. Case No. 12-25860) and four affiliates filed motions to use cash collateral, maintain existing bank accounts, continue customer practices and pay prepetition employee obligations. A hearing on the motions is scheduled for July 2, 2012, at 2:00 p.m. The Debtors have not sought joint administration of their Chapter 11 cases. Shamrock-Hostmark Princeton owns the DoubleTree by Hilton Hotel Princeton located in Princeton, New Jersey. The hotel currently has 238 rooms and has 100 employees employed by an affiliate. Shamrock-Hostmark Princeton borrowed $15.76 million from General Electric Capital Corp. in 2006 to fund renovations to convert the hotel from a Radisson brand to a DoubleTree brand. Although the hotel's performance has shown signs of significant improvements in the past two years, the Debtor says that the maturity of the GE loan on May 31 prompted the Chapter 11 filing. The Debtor entered into negotiations with the lender to extend or refinance the loan. Those negotiations proved unsuccessful and, on June 18, 2012, the Lender issued a notice of default to the Debtor and threatened to foreclose on the hotel. Affiliates of Shamrock-Hostmark Princeton also incurred loans totaling $84.4 million from GE. Shamrock-Hostmark Princeton and its affiliates believe that chapter 11 will afford them opportunity to restructure or refinance the loans and stabilize the hotels over the next several years as the economy continues to recover from one of the worst recessions in the country's history. Debtor-affiliates that also sought Chapter 11 protection are: Debtor Hotel Owned ------ ----------- Shamrock-Hostmark Texas Hotels, L.P. Crowne Plaza Hotel San Antonio, TX Shamrock-Hostmark Palm Desert Hotels, LLC Embassy Suites Palm Desert Palm Desert, CA Shamrock-Hostmark Andover Hotels, LLC Wyndham Boston Andover Andover, MA Shamrock-Hostmark Tampa Westshores Hotel, LLC DoubleTree by Hilton Hotel Tampa Airport - Westshore Tampa, FL SM ENERGY: S&P Rates New $300MM Senior Unsecured Notes 'BB' ----------------------------------------------------------- Standard & Poor's Ratings Services assigned its 'BB' senior unsecured issue rating to Denver-based SM Energy Co.'s proposed $300 million senior unsecured notes due 2023. "The recovery rating on the notes is '4', indicating our expectation of average (30% to 50%) recovery in the event of a payment default. SM Energy's 'BB' corporate credit rating and stable outlook are unaffected. The exploration and production company intends to use proceeds to repay outstanding borrowings on its credit facility and for general corporate purposes," S&P said. "The ratings on Denver, Colo.-based SM Energy Co. reflect what Standard & Poor's views as the company's 'weak' business risk as a midsize player in the volatile and capital-intensive oil and natural gas exploration and production (E&P) industry. The ratings also reflect the company's 'significant' financial risk," S&P said. "SM Energy's production base--557 million cubic feet equivalent (Mmcfe) per day in first-quarter 2012--is comparable with other rated midsize U.S. E&P companies. The company has increased its production rapidly in recent years. For full-year 2011, production was about 170 billion cubic feet equivalent (Bcfe), up about 54% from 2010 production. Management expects a further 30% to 33% increase in production for 2012 compared with 2011. We believe SM Energy is well-positioned in the Eagle Ford (in Texas) and Bakken (centered on North Dakota) fields, where ongoing drilling efforts should enable the company to realize its growth goals," S&P said. RATINGS LIST SM Energy Co. Corporate credit rating BB/Stable/-- New Rating Proposed $300 mil sr unsecd nts due 2023 BB Recovery rating 4 STOCKTON, CA: Moody's Cuts General Fund Debt Rating to 'Caa3' ------------------------------------------------------------- Moody's Investors Service has downgraded to Caa3 various general fund-supported debt of the city of Stockton, California. Moody's has downgraded the city's pension obligation debt to Caa3 from B3 and its lease revenue debt to Caa3 from Caa1. The outlook on these bonds is negative. Moody's has confirmed the rating on the city's water enterprise debt at Ba3, the city's sewer enterprise debt at Ba1 and two of the city's community facilities districts' special tax bonds at Baa2. The outlook on these bonds is developing. Moody's has also withdrawn the city's issuer rating for business reasons. Ratings Rationale Moody's rating action on the city's general fund supported bonds reflects the city's June 26 adoption of a budget that would suspend payments on some of its lease and pension obligation bonds backed by its general fund in fiscal 2013 in order to close an approximately $26 million budget gap. The rating action also incorporates the city's announcement that it will likely file for bankruptcy protection after the failure of a 3-month mediation process with its creditors. The Caa3 rating level assumes losses to bondholders will be greater than 20%. The negative outlook reflects the high likelihood that losses could exceed Moody's estimates. The city completed California's AB 506 mediation process on June 25 and has authorized a bankruptcy filing in the event negotiations failed. In order to come into balance, the proposed 2013 fiscal year budget relies heavily on the suspension of $12 million in debt service. This $12 million figure represents approximately 46% of the city's budget solutions. The city is running out of cash and faces limited time and options to fix its structural imbalance. Moody's believes that the magnitude of the budget gap and heavy reliance on debt service reductions as part of the budget solutions is an indication of the likelihood of a high level of losses that the city's pension obligation and lease bonds would experience in bankruptcy. Under the bankruptcy code, these bonds would be treated as unsecured debt and would likely be subject to restructuring and losses in order to facilitate a recovery. The confirmation of the ratings of the city's water and sewer enterprise debt and community facilities districts' special tax bonds reflects Moody's view that losses are unlikely, although how the bonds continue to perform in a potential bankruptcy remains uncertain. Moody's believes that in bankruptcy a court should find the city's enterprise and special tax debt to be backed by a pledge of special revenues, entitling bondholders to receive debt service payments despite the automatic stay, which prevents a borrower from making payments to creditors in bankruptcy. Debt service payments could, however, be subordinate to operating expenses of the systems. As of 2010, both the water and sewer system operations were satisfactory, but the city has not issued an audit since then. The developing outlook reflects the inherent uncertainty of a bankruptcy process that could last for up to several years. What Could Change The Ratings - Up -- For the pension obligation and lease revenue bonds, a lower level of losses than that Moody's is assuming and restored structural balance in the city's budget. -- For the enterprise and special tax bonds, a continuation of debt service payments in full in bankruptcy and evidence that bondholders will receive the full value of their principal, without adjustment. What Could Change The Ratings - Down -- For the pension obligation and lease revenue bonds, indications that expected recovery in a bankruptcy has deteriorated beyond currently anticipated levels. -- For the enterprise and special tax bonds, a disruption of debt service and indications that the bonds would be subject to a loss in principal. Principal Rating Methodology The principal methodology used in this rating was General Obligation Bonds Issued by U.S. Local Governments published in October 2009. SUNSHINE GROUP: Voluntary Chapter 11 Case Summary ------------------------------------------------- Debtor: Sunshine Group Travel Center, Inc. 503 North Oakwood Road Oakwood, IL 61858 Bankruptcy Case No.: 12-91038 Chapter 11 Petition Date: June 26, 2012 Court: United States Bankruptcy Court Central District of Illinois (Danville) Judge: Gerald D. Fines Debtor's Counsel: Steven L. Blakely, Esq. ACTON & SNYDER, LLP 11 E North St Danville, IL 61832 Tel: (217) 442-0350 E-mail: slblakely4@yahoo.com Estimated Assets: $1,000,001 to $10,000,000 Estimated Debts: $1,000,001 to $10,000,000 The Debtor did not file a list of its largest unsecured creditors together with its petition. The petition was signed by Mir Iqbal, president. THERMOENERGY CORP: Has Development Agreement with Itea ------------------------------------------------------ ThermoEnergy Corporation, on June 20, 2012, entered into an agreement with Itea S.p.A. for the development of pressurized oxy- combustion in North America. The Company's subsidiary, Unity Power Alliance LLC, will utilize the proprietary technology of Itea and ThermoEnergy Power Systems LLC for these purposes: (i) advancing, developing and promoting the use of the coal application of pressurized oxy-combustion in North America; (ii) constructing a pilot plant utilizing that technology; (iii) subsequently constructing a demonstration facility based on the technology as implemented in the Pilot Plant; and (iv) if Funding Opportunity DE-FOA-0000636, for which UPA has applied to the U.S. Department of Energy, is awarded to UPA, performing that contract. The Company has also agreed that Itea may, at any time on or before Dec. 20, 2012, acquire a 50% ownership interest in UPA for nominal consideration. The Agreement provides that, following Itea's acquisition of an ownership interest, UPA will be governed by a four-member Board of Directors, with two directors nominated by us and two directors nominated by Itea. The Managing Director of UPA will be one of the directors whom the Company nominates. The Company's Board of Directors has designated Cary G. Bullock, the Company's Chairman and CEO, and Robert Marrs, the Company's Vice President - International Business Development, to serve on the UPA Board of Directors, with Mr. Marrs to be designated as Managing Director. On June 20, 2012, the Company, TEPS, Itea and UPA entered into a Detailed License Contract. The Company and TEPS have granted to UPA a non-exclusive, non-transferable royalty-free license to use the Company's intellectual property and know-how relating to oxy- combustion at very high pressures and Itea has granted to UPA a non-exclusive, non-transferable royalty-free license to use Itea's intellectual property and know-how relating to oxy-combustion at somewhat lower pressures. The licenses to UPA become effective upon Itea's acquisition of an ownership interest in UPA, and are limited to use in the Project. A copy of the Agreement is available for free at: http://is.gd/mOI6Iw A copy of the License Agreement is available for free at: http://is.gd/xnhQ8a About ThermoEnergy Corporation Little Rock, Ark.-based ThermoEnergy Corporation is a clean technologies company engaged in the worldwide development of advanced municipal and industrial wastewater treatment systems and carbon reducing clean energy technologies. After auditing the 2011 results, Grant Thornton LLP, in Boston, Massachusetts, expressed substantial doubt about the Company's ability to continue as a going concern. The independent auditors noted that the Company incurred a net loss for the year ended Dec. 31, 2011, and, as of that date, the Company's current liabilities exceeded its current assets by $3,387,000 and its total liabilities exceeded its total assets by $4,603,000. The Company reported a net loss of $17.38 million in 2011, compared with a net loss of $14.85 million during the prior year. The Company's balance sheet at March 31, 2012, showed $5.26 million in total assets, $10.66 million in total liabilities, and a $5.39 million total stockholders' deficiency. THERMODYNETICS INC: Suspending Filing of Reports with SEC --------------------------------------------------------- Thermodynetics, Inc., filed a Form 15 notifying of its suspension of its duty under Section 15(d) to file reports required by Section 13(a) of the Securities Exchange Act of 1934 with respect to its common stock, par value $0.01 per share. There were 900 holders of the common shares as of June 25, 2012. About Thermodynetics Thermodynetics, Inc., is engaged in managing its real estate and business holdings, and investing in other companies. In June 2011 the Company acquired the rights to a software program that is to be marketed in the wagering industry. The software is designed to assist individuals in selecting winning wagers in horse racing events. The Company is currently in default on their line of credit and its long-term mortgages. During June, 2010, the Company's bank commenced two legal proceedings. Certain of the Company's assets are being offered for sale which, upon consummation of a successful sale, would be expected to cure the defaults. The Company's balance sheet at Dec. 31, 2011, showed $3.91 million in total assets, $3.48 million in total liabilities and $431,000 stockholders' equity. TRAINOR GLASS: Hires Toney Capital to Auction Fishing Boat ---------------------------------------------------------- Trainor Glass Company, doing business as Trainor Modular Walls, Trainor Solar and Trainor Florida, sought and obtained permission from the U.S. Bankruptcy Court to employ Toney Capital Holdings LLC -- d/b/a National Liquidators/National Yacht Sales -- to auction the Debtor's 2006 Grady White 27' fishing boat. The terms of the Agreement is the earlier of (i) 6 months; (ii) the sale of the Boat by Auction; or (iii) termination on 30 days' written notice by either party. Under the Agreement, the Debtor will pay National a 10% commission on the Auction sale of the Boat, during the term of the Agreement and within 12 months thereafter if the sale is consummated with a buyer procured by National. The Debtor attests that the firm is a "disinterested person" as the term is defined in Section 101(14) of the Bankruptcy Code. About Trainor Glass Trainor Glass Company, doing business as Trainor Modular Walls, Trainor Solar, and Trainor Florida, filed for Chapter 11 bankruptcy (Bankr. N.D. Ill. Case No. 12-09458) on March 9, 2012. Trainor was founded in 1953 by Robert J. Trainor Sr. to pursue a residential glass business in Chicago, Illinois. Trainor's business model was focused on quality fabrication, design, engineering, and installation of glass products and framing systems in virtually every architectural application, including (a) new construction, (b) green-building solutions, (c) building rehabilitation, (d) storefronts and entrances, (e) tenant interiors, and (f) custom-specialty work. The Hon. Carol A. Doyle oversees the Chapter 11 case. David A. Golin, Esq., Michael L. Gesas, Esq., and Kevin H. Morse, Esq., at Arnstein & Lehr LLP, serve as the Debtor's counsel. High Ridge Partners, Inc., serves as its financial consultant. The Debtor scheduled $14,276,745 in assets and $64,840,672 in liabilities. A three-member official committee of unsecured creditors has been appointed in the case. The committee retained Sugar Felsenthal Grais & Hammer LLP as counsel. TRAINOR GLASS: Court Approves Branford as Auctioneer ---------------------------------------------------- Trainor Glass Company, doing business as Trainor Modular Walls, Trainor Solar, and Trainor Florida, sought and obtained permission from the U.S. Bankruptcy Court to employ Branford Auctions LLC as auctioneer. Trainor Glass Company, doing business as Trainor Modular Walls, Trainor Solar, and Trainor Florida, filed for Chapter 11 bankruptcy (Bankr. N.D. Ill. Case No. 12-09458) on March 9, 2012. Trainor was founded in 1953 by Robert J. Trainor Sr. to pursue a residential glass business in Chicago, Illinois. Trainor's business model was focused on quality fabrication, design, engineering, and installation of glass products and framing systems in virtually every architectural application, including (a) new construction, (b) green-building solutions, (c) building rehabilitation, (d) storefronts and entrances, (e) tenant interiors, and (f) custom-specialty work. The Hon. Carol A. Doyle oversees the Chapter 11 case. David A. Golin, Esq., Michael L. Gesas, Esq., and Kevin H. Morse, Esq., at Arnstein & Lehr LLP, serve as the Debtor's counsel. High Ridge Partners, Inc., serves as its financial consultant. The Debtor scheduled $14,276,745 in assets and $64,840,672 in liabilities. A three-member official committee of unsecured creditors has been appointed in the case. The committee retained Sugar Felsenthal Grais & Hammer LLP as counsel. USG CORP: Contributes 1.2-Mil. Shares to Retirement Plan Trust -------------------------------------------------------------- USG Corporation, on June 26, 2012, contributed 1,249,219 shares of its common stock, par value $.10 per share, to the USG Corporation Retirement Plan Trust, the trust maintained in connection with the defined benefit pension plan sponsored by the Company. The Contributed Shares were valued for purposes of the contribution at $16.01 per share, or approximately $20 million in the aggregate, by Evercore Trust Company, N.A., an independent fiduciary that has been appointed as investment manager with respect to the Contributed Shares. The Contributed Shares were issued to The Northern Trust Company, as trustee of the Trust, in reliance upon the exemption from registration provided by Section 4(2) of the Securities Act of 1933, as amended, and in furtherance of the Registrant?s funding of the Trust. On June 26, 2012, the Company also entered into a Registration Rights Agreement with Evercore, in its capacity as investment manager for the Contributed Shares. The Registration Rights Agreement requires, among other things, that the Company file with the Securities and Exchange Commission a shelf registration statement on Form S-3 to register the Contributed Shares for the purpose of resale from time to time by the Trust. Under the Registration Rights Agreement, the Registrant is required to use its commercially reasonable efforts to cause the registration statement to remain continuously effective until all Contributed Shares have been sold by the Trust, all of the Contributed Shares may be sold in accordance with Rule 144 promulgated by the SEC under the Act or 90 days after the number of Contributed Shares held by the Trust is less than 1% of the Company's then outstanding shares of common stock, whichever occurs earlier. The Company registered the resale of the Contributed Shares by the Trust with the SEC on June 26, 2012. About USG Corporation Based in Chicago, Ill., USG Corporation -- http://www.usg.com/-- through its subsidiaries, manufactures and distributes building materials producing a wide range of products for use in new residential, new nonresidential and repair and remodel construction, as well as products used in certain industrial processes. The company filed for Chapter 11 protection on June 25, 2001 (Bankr. Del. Case No. 01-02094). When the Debtors filed for protection from their creditors, they disclosed $3.252 billion in assets and $2.739 billion in liabilities. The Debtors emerged from bankruptcy protection on June 20, 2006. The Company reported a net loss of $390 million in 2011 and a net loss of $405 million in 2010. The Company's balance sheet at March 31, 2012, showed $3.73 billion in total assets, $3.57 billion in total liabilities and $154 million in total stockholders' equity. * * * As reported by the TCR on Aug. 15, 2011, Standard & Poor's Ratings Services lowered its corporate credit rating on USG Corp. to 'B' from 'B+'. "The downgrade reflects our expectation that USG's operating results and cash flow are likely to be strained over the next year due to the ongoing depressed level of housing starts and still- weak commercial construction activity," said Standard & Poor's credit analyst Thomas Nadramia. "It is now more likely, in our view, that any meaningful recovery in housing starts may be deferred until late 2012 or into 2013. As a result, the risk that USG's liquidity in the next 12 to 24 months will continue to erode (and be less than we incorporated into our prior ratings) has increased. The ratings previously incorporated a greater improvement in housing starts, which would have enabled USG to reduce its negative operating cash flow in 2012 and achieve breakeven cash flow or better by 2013." In the Sept. 14, 2011, edition of the TCR, Fitch Ratings has downgraded USG Corporation's Issuer Default Rating (IDR) to 'B-' from 'B'. The Rating Outlook remains Negative. The ratings downgrade and the Negative Outlook reflect Fitch's belief that underlying demand for the company's products will remain weak through at least 2012 and the company's liquidity position is likely to deteriorate in the next 18 months. With the recent softening in the economy and lowered economic growth expectations for 2011 and 2012, the environment may at best support a relatively modest recovery in housing metrics over the next year and a half. Fitch had previously forecast a slightly more robust housing environment in 2011 and 2012. Moreover, new commercial construction is expected to decline further this year and may only grow moderately next year. VIEW SYSTEMS: Stegman & Company Replaces Seale as Accountants ------------------------------------------------------------- Seale and Beers, CPAs, LLC, was dismissed as View Systems, Inc.'s independent accountant on June 21, 2012. Because the Company has no standing audit committee the Company's full Board of Directors participated in and approved the decision to change independent accountants. Seale and Beers was initially engaged on March 30, 2012, to serve as the Company's independent accountant for the year ended Dec. 31, 2011. Seale & Beers was dismissed as the Company's independent accountant prior to completing its audit of the Company's financial statements for the year ended Dec. 31, 2011, and prior to rendering an opinion on those financial statements for that period. In connection with its audit of financial statements for the year ended Dec. 31, 2011, there have been no disagreements with Seale & Beers on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements if not resolved to the satisfaction of Seale & Beers would have caused it to make reference thereto in its report on the financial statements. Seale & Beers has advised the Company that its audit procedures, especially those with respect to revenue recognition, have not been resolved to Seale & Beers's satisfaction prior to its dismissal. On June 22, 2012, the Company engaged Stegman & Company as its new registered independent public accounting firm. Stegman & Company is headquartered in Baltimore, Maryland and has 12 partners and 25 staff members. During the two most recent fiscal years and the interim periods preceding the engagement, the Company has not consulted Stegman & Company regarding (i) the application of accounting principles to a specific transaction, either completed or proposed, or the type of audit opinion that might be rendered on the Company's financial statements, or (ii) any matter that was either the subject of a disagreement as that term is used in Item 304(a)(1)(iv) of Regulation S-K and the related instructions to Item 304 of Regulation S-K or a reportable event as that term is used in Item 304(a)(1)(v) and the related instructions to Item 304 of Regulation S-K. This decision to engage Stegman & Company was approved by the full Board of Directors of the Company. Because the Company has no standing audit committee the Company's full Board of Directors participated in and approved the decision to change independent accountants. About View Systems Baltimore, Md.-based View Systems, Inc., develops, produces and markets computer software and hardware systems for security and surveillance applications. The Company reported a net loss of $368,329 on $576,735 of net revenues for the nine months ended Sept. 30, 2011, compared with a net loss of $294,065 on $722,042 of net revenues for the same period during the prior year. The Company's balance sheet at Sept. 30, 2011, showed $1.48 million in total assets, $1.82 million in total liabilities, and a $339,294 total stockholders' deficit. As reported in the TCR on March 15, 2011, Robert L. White & Associates, Inc., in Cincinnati, Ohio, expressed substantial doubt about View Systems' ability to continue as a going concern, following the Company's 2010 results. The independent auditors noted that the Company had a net loss of $513,353 for the year ended Dec. 31, 2010, and has an accumulated deficit of $22,837,787 at Dec. 31, 2010. VITRO SAB: Must Have Stay Immediately to Halt Asset Seizures ------------------------------------------------------------ Bill Rochelle, the bankruptcy columnist for Bloomberg News, reports that Vitro SAB will be able to appeal directly to the U.S. Court of Appeals in New Orleans from a ruling on June 13 by a U.S. bankruptcy judge in Dallas refusing to enforce the glassmaker's Mexican reorganization plan in the U.S. Unless Vitro convinces the appeals court to impose a stay pending appeal, bondholders will be able to begin seizing assets of the company and subsidiaries after June 29. According to the report, Vitro is appealing because a bankruptcy judge in Dallas ruled that the Mexican reorganization was "manifestly contrary" to U.S. law and public policy. In the opinion of the bankruptcy judge, the Mexican plan improperly allowed Vitro subsidiaries to chop down their guarantees on $1.2 billion in defaulted bonds without having been in bankruptcy themselves. On Wednesday, the 5th Circuit in New Orleans granted a direct appeal, allowing the parties to skip an intermediate appeal to a federal district judge. Vitro came up short because the circuit court, in the same order June 27, refused to accelerate the appeal. Carolyn King, one of the three circuit judges who made Wednesday's ruling, would have held oral argument quickly after the last brief was filed. She also would have called on the bankruptcy judge "to decide promptly" on additional "strong objections" the bankruptcy judge said he didn't reach because he already found the Mexican reorganization defective. Until the circuit court accepted the appeal, there was a watershed hearing scheduled June 28 in Dallas where Vitro would have asked District Judge Royal Furgeson to enjoin the bondholders from attaching assets. The bankruptcy judge refused to stop attachment of assets after June 29. On learning that the circuit court granted the direct appeal, Judge Furgeson canceled the June 28 hearing, thus requiring Vitro to move quickly in the circuit court for a stay pending appeal. Before Judge Furgeson canceled the stay hearing, holders of 60 percent of the defaulted bonds filed papers urging the district court not to impose a stay. According to the report, the bondholders argued the subsidiaries could fend off asset seizure by filing their own bankruptcies. The bondholders urge the courts to follow the general rule that special circumstances are required before one company's bankruptcy becomes reason for halting legal action against a non-bankrupt affiliate. The bondholders also contend the subsidiaries could obtain a stay by filing bonds in the lawsuits in New York State court where the creditors are obtaining judgments on the defaulted bonds. The appeal in the Circuit Court is Vitro SAB de CV v. Ad Hoc Group of Vitro Noteholders (In re Vitro SAB de CV), 12-90055, 5th U.S. Circuit Court of Appeals (New Orleans). Vitro's motion in district court for a stay pending appeal was In re Vitro SAB de CV, 11-3554, U.S. District Court, Northern District of Texas (Dallas). About Vitro SAB Headquartered in Monterrey, Mexico, Vitro, S.A.B. de C.V. (BMV: VITROA; NYSE: VTO), through its two subsidiaries, Vitro Envases Norteamerica, SA de C.V. and Vimexico, S.A. de C.V., is a global glass producer, serving the construction and automotive glass markets and glass containers needs of the food, beverage, wine, liquor, cosmetics and pharmaceutical industries. Vitro is the largest manufacturer of glass containers and flat glass in Mexico, with consolidated net sales in 2009 of MXN23,991 million (US$1.837 billion). Vitro defaulted on its debt in 2009, and sought to restructure around US$1.5 billion in debt, including US$1.2 billion in notes. Vitro launched an offer to buy back or swap US$1.2 billion in debt from bondholders. The tender offer would be consummated with a bankruptcy filing in Mexico and Chapter 15 filing in the United States. Vitro said noteholders would recover as much as 73% by exchanging existing debt for cash, new debt or convertible bonds. Concurso Mercantil & Chapter 15 Proceedings Vitro SAB on Dec. 13, 2010, filed its voluntary petition for a pre-packaged Concurso Plan in the Federal District Court for Civil and Labor Matters for the State of Nuevo Leon, commencing its voluntary concurso mercantil proceedings -- the Mexican equivalent of a prepackaged Chapter 11 reorganization. Vitro SAB also commenced parallel proceedings under Chapter 15 of the U.S. Bankruptcy Code (Bankr. S.D.N.Y. Case No. 10-16619) in Manhattan on Dec. 13, 2010, to seek U.S. recognition and deference to its bankruptcy proceedings in Mexico. Early in January 2011, the Mexican Court dismissed the Concurso Mercantil proceedings. But an appellate court in Mexico reinstated the reorganization in April 2011. Following the reinstatement, Vitro SAB on April 14, 2011, re-filed a petition for recognition of its Mexican reorganization in U.S. Bankruptcy Court in Manhattan (Bankr. S.D.N.Y. Case No. 11- 11754). The Vitro parent received sufficient acceptances of its reorganization by using the US$1.9 billion in debt owing to subsidiaries to vote down opposition by bondholders. The holders of US$1.2 billion in defaulted bonds opposed the Mexican reorganization plan because shareholders could retain ownership while bondholders aren't being paid in full. Vitro announced in March 2012 that it has implemented the reorganization plan approved by a judge in Monterrey, Mexico. In the present Chapter 15 case, the Debtor seeks to block any creditor suits in the U.S. pending the reorganization in Mexico. Chapter 11 Proceedings A group of noteholders opposed the exchange -- namely Knighthead Master Fund, L.P., Lord Abbett Bond-Debenture Fund, Inc., Davidson Kempner Distressed Opportunities Fund LP, and Brookville Horizons Fund, L.P. Together, they held US$75 million, or approximately 6% of the outstanding bond debt. The Noteholder group commenced involuntary bankruptcy cases under Chapter 11 of the U.S. Bankruptcy Code against Vitro Asset Corp. (Bankr. N.D. Tex. Case No. 10-47470) and 15 other affiliates on Nov. 17, 2010. Vitro engaged Susman Godfrey, L.L.P. as U.S. special litigation counsel to analyze the potential rights that Vitro may exercise in the United States against the ad hoc group of dissident bondholders and its advisors. A larger group of noteholders, known as the Ad Hoc Group of Vitro Noteholders -- comprised of holders, or investment advisors to holders, which represent approximately US$650 million of the Senior Notes due 2012, 2013 and 2017 issued by Vitro -- was not among the Chapter 11 petitioners, although the group has expressed concerns over the exchange offer. The group says the exchange offer exposes Noteholders who consent to potential adverse consequences that have not been disclosed by Vitro. The group is represented by John Cunningham, Esq., and Richard Kebrdle, Esq. at White & Case LLP. A bankruptcy judge in Fort Worth, Texas, denied involuntary Chapter 11 petitions filed against four U.S. subsidiaries. On April 6, 2011, Vitro SAB agreed to put Vitro units -- Vitro America LLC and three other U.S. subsidiaries -- that were subject to the involuntary petitions into voluntary Chapter 11. The Texas Court on April 21 denied involuntary petitions against the eight U.S. subsidiaries that didn't consent to being in Chapter 11. Kurtzman Carson Consultants is the claims and notice agent to Vitro America, et al. Alvarez & Marsal North America LLC, is the Debtors' operations and financial advisor. The official committee of unsecured creditors appointed in the Chapter 11 cases of Vitro America, et al., has selected Sarah Link Schultz, Esq., at Akin Gump Strauss Hauer & Feld LLP, in Dallas, Texas, and Michael S. Stamer, Esq., Abid Qureshi, Esq., and Alexis Freeman, Esq., at Akin Gump Strauss Hauer & Feld LLP, in New York, as counsel. Blackstone Advisory Partners L.P. serves as financial advisor to the Committee. The U.S. Vitro companies sold their assets to American Glass Enterprises LLC, an affiliate of Sun Capital Partners Inc., for US$55 million. U.S. subsidiaries of Vitro SAB are having their cases converted to liquidations in Chapter 7, court records in January 2012 show. In December, the U.S. Trustee in Dallas filed a motion to convert the subsidiaries' cases to liquidations in Chapter 7. The Justice Department's bankruptcy watchdog said US$5.1 million in bills were run up in bankruptcy and hadn't been paid. On June 13, 2012, U.S. Bankruptcy Judge Harlin "Cooter" Hale in Dallas entered a ruling that precluded Vitro from enforcing its Mexican reorganization plan in the U.S. The judge ruled that the Mexican reorganization was "manifestly contrary" to U.S. public policy because it bars the bondholders from holding Vitro operating subsidiaries liable to pay on their guarantees of the bonds. The Mexican plan reduced the debt of subsidiaries on $1.2 billion in defaulted bonds even though they weren't in bankruptcy in any country. VUZIX CORP: Five Directors Elected at Annual Meeting ---------------------------------------------------- Vuzix Corporation held its annual meeting of stockholders at the Doubletree Hotel at 1111 Jefferson Road, Rochester, New York, on June 22, 2012. Paul J. Travers, Grant Russell, William Lee, Jose Cecin and Michael Scott were each elected as directors of Vuzix Corporation to serve until the 2013 annual meeting of stockholders or until their successors have been elected and qualified. The stockholders also ratified the board of directors' appointment of EFP Rotenberg, LLP, as the Company's independent registered public accounting firm for 2012. About Vuzix Corp. Rochester, New York-based Vuzix Corporation (TSX-V: VZX) OTC BB: VUZI) -- http://www.vuzix.com/-- is a supplier of Video Eyewear products in the defense, consumer and media & entertainment markets. The Company reported a net loss of $3.87 million in 2011, a net loss of $4.55 million in 2010, and a net loss of $3.25 million in 2009. The Company's balance sheet at Dec. 31, 2011, showed $5.81 million in total assets, $12.64 million in total liabilities, and a $6.82 million total stockholders' deficit. After auditing the 2011 annual report, EFP Rotenberg, LLP, in Rochester, New York, expressed substantial doubt about the Company's ability to continue as a going concern. The independent auditors noted that the Company has incurred substantial losses from operations in recent years. In addition, the Company is dependent on its various debt and compensation agreements to fund its working capital needs. And while there are no financial covenants with which the Company must comply with, these debts are past due in some cases. Bankruptcy Warning The Company said in its 2011 annual report that its future viability is dependent on its ability to execute these plans successfully. If the Company fails to do so for any reason, the Company would not have adequate liquidity to fund its operations, would not be able to continue as a going concern and could be forced to seek relief through a filing under U.S. Bankruptcy Code. WATERLOO GARDENS: Case Summary & 20 Largest Unsecured Creditors --------------------------------------------------------------- Debtor: Waterloo Gardens, Inc. 200 N. Whitford Road Exton, PA 19341-2099 Bankruptcy Case No.: 12-16080 Chapter 11 Petition Date: June 26, 2012 Court: United States Bankruptcy Court Eastern District of Pennsylvania (Philadelphia) Judge: Jean K. FitzSimon Debtor's Counsel: Albert A. Ciardi, III, Esq. Jennifer E. Cranston, Esq. CIARDI CIARDI & ASTIN, P.C. One Commerce Square 2005 Market Street, Suite 1930 Philadelphia, PA 19103 Tel: (215) 557-3550 Fax: (215) 557-3551 E-mail: aciardi@ciardilaw.com jcranston@ciardilaw.com Estimated Assets: $1,000,001 to $10,000,000 Estimated Debts: $10,000,001 to $50,000,000 A copy of the Company's list of its 20 largest unsecured creditors is available for free at http://bankrupt.com/misc/paeb12-16080.pdf The petition was signed by Robert LeBoutillier, president. Affiliate that filed separate Chapter 11 petition: Petition Debtor Case No. Date ------ -------- ---- Waterloo Landscaping, Inc. 12-16081 06/26/12 WATERLOO LANDSCAPING: Voluntary Chapter 11 Case Summary ------------------------------------------------------- Debtor: Waterloo Landscaping, Inc. 200 N. Whitford Road Exton, PA 19341-2099 Bankruptcy Case No.: 12-16081 Chapter 11 Petition Date: June 26, 2012 Court: United States Bankruptcy Court Eastern District of Pennsylvania (Philadelphia) Judge: Stephen Raslavich Debtor's Counsel: Albert A. Ciardi, III, Esq. Jennifer E. Cranston, Esq. CIARDI CIARDI & ASTIN, P.C. One Commerce Square 2005 Market Street, Suite 1930 Philadelphia, PA 19103 Tel: (215) 557-3550 Fax: (215) 557-3551 E-mail: aciardi@ciardilaw.com jcranston@ciardilaw.com Estimated Assets: $1,000,001 to $10,000,000 Estimated Debts: $10,000,001 to $50,000,000 The Debtor did not file a list of its largest unsecured creditors together with its petition. The petition was signed by Robert LeBoutillier, president. Affiliate that filed separate Chapter 11 petition: Petition Debtor Case No. Date ------ -------- ---- Waterloo Gardens, Inc. 12-16080 06/26/12 WATERSCAPE RESORT: Owes $11MM for Unpaid Work, Developer Says ------------------------------------------------------------- Jake Simpson at Bankruptcy Law360 reports that New York contractor Pavarini McGovern LLC, the former construction manager for the Cassa NY Hotel development, moved for summary judgment Monday in New York bankruptcy court in a $10.8 million adversary suit against Cassa developer Waterscape Resort LLC for allegedly diverting lien law trust funds. Pavarini said that despite claims by Waterscape that the contractor performed subpar work on the hotel project and missed repeated deadlines, it is entitled to $10.8 million of the funds secured by Waterscape's sale of Cassa hotel property under the dispute, according to Bankruptcy Law360. About Waterscape Resort Waterscape Resort LLC, aka Cassa NY Hotel And Residences, is a Delaware limited liability company formed on or about Jan. 24, 2005. The principal office of the Debtor is at 15 West 34th Street, New York, New York 10001. On July 19, 2005, Waterscape acquired the property, consisting of the three contiguous buildings at 66, 68 and 70 West 45th Street in Manhattan, for the sum of $20 million to develop the property into a 45-storey condominium project including a luxury hotel, a restaurant and luxury residential apartments. The purchase was financed with a $17 million acquisition loan and mortgage from U.S. Bank Association. Construction of the hotel and residential units, given the name Cassa NY Hotel and Residences, commenced in July 2007. By the end of September 2010, the hotel and residential units were completed. The Debtor generates its revenue from guests who stay at the hotel and in the Debtor's residential condominium units, and from sales of unsold residential condominium units. The Debtor's hotel and rental business has produced gross revenues of approximately $17 million to $18 million on an annual basis, and by the end of September 2010, the Debtor had sold five residential apartment units for a total of approximately $12,710,340. The Debtor's Cassa NY Hotel and Residences features 165 hotel rooms, and above the hotel units, 57 residences. The Debtor's restaurant will occupy the first level below ground, but will be visible from the ground floor hotel lobby. The Debtor's restaurant is not yet open for business. The Debtor has for several months been embroiled in litigation with numerous contractors and subcontractors who have asserted alleged mechanics lien claims against the Property totaling approximately $20 million. As of the Petition Date, the Debtor had outstanding approximately $134.4 million of secured loan principal obligations under credit facilities with US Bank and USB Capital Resources, Inc. The debt is secured by liens upon all of the assets of the Debtor, including mortgages on the Debtor's real property, together with liens on all rents, proceeds and cash of the Debtor, pledges of member interests in Waterscape, and guarantees by Waterscape members and other third-party grantors. The Debtor's secured debt was incurred under three separate agreements for: (i) an acquisition and project loan; (ii) a construction loan; and (iii) a mezzanine loan; each of which was made in connection with the acquisition or development of the Debtor's property. Over the last several months, the Debtor engaged in extensive negotiations with the Secured Lenders regarding the parameters of a comprehensive restructuring. The Debtor also engaged in extensive marketing efforts and negotiations to sell its hotel assets to a non-insider buyer. The restructuring discussions between the Debtor and the Secured Lenders reached an impasse, and on March 21, 2011, UBS, the junior of the two Secured Lenders, filed a foreclosure action against the Debtor in the Supreme Court of the State of New York, County of New York. The Debtor then filed for Chapter 11 bankruptcy protection (Bankr. S.D.N.Y. Case No. 11-11593) on April 5, 2011. Brett D. Goodman, Esq., and Lee William Stremba, Esq., at Troutman Sanders LLP represent the Debtor as Bankruptcy Counsel. Holland & Knight LLP serves as its special litigation counsel. The Debtor disclosed $214,285,027 in assets and $158,756,481 in liabilities as of the Chapter 11 filing. A 3-member Official Committee of Unsecured Creditors has been appointed in the Debtor's Chapter 11 case. Schiff Hardin LLP, serves as the Committee's counsel. As reported in the TCR on July 25, 2011, U.S. Bankruptcy Judge Stuart Bernstein confirmed Waterscape Resort LLC's reorganization plan on July 22, 2011, which calls for repaying much of the company's debt with proceeds from the $128 million sale of the hotel section of the development. The Plan was filed on May 6, 2011. YOUR LOCAL MARKET: Case Summary & 20 Largest Unsec. Creditors ------------------------------------------------------------- Debtor: Your Local Market, LLC 410 Bellevue Way NE Bellevue, WA 98004 Bankruptcy Case No.: 12-16623 Chapter 11 Petition Date: June 26, 2012 Court: United States Bankruptcy Court Western District of Washington (Seattle) Judge: Timothy W. Dore Debtor's Counsel: Christine M. Tobin-Presser, Esq. BUSH STROUT & KORNFELD LLP 601 Union St Ste 5000 Seattle, WA 98101 Tel: (206) 292-2110 E-mail: ctobin@bskd.com Estimated Assets: $1,000,001 to $10,000,000 Estimated Debts: $1,000,001 to $10,000,000 A copy of the Company's list of its 20 largest unsecured creditors filed together with the petition is available for free at http://bankrupt.com/misc/wawb12-16623.pdf The petition was signed by Jason Brown, manager. ZAYO GROUP: S&P Keeps 'B' Corp. Credit Rating; Outlook Stable ------------------------------------------------------------- Standard & Poor's Ratings Services' ratings on Louisville, Colo.- based Zayo Group LLC, including the 'B' corporate credit rating and stable outlook, remain unchanged following the company's proposed $120 million add-on to its term loan facility due 2019. The proposal will increase the size of the facility to $1.62 billion from $1.5 billion. The issue-level rating on the senior secured debt remains 'B' with a '4' recovery rating. The '4' recovery rating indicates expectations for average (30%-50%) recovery of principal in the event of default. "We expect the company to use funds from the transaction to increase liquidity and potentially fund future acquisitions," S&P said. "Our ratings on Zayo continue to reflect a financial risk assessment of 'highly leveraged' and a business risk assessment of 'weak,'" S&P said. RATINGS LIST Zayo Group LLC Corporate Credit Rating B/Stable/-- Senior Secured $1.62 bil term loan fac due 2019 B Recovery Rating 4 * Judge Rakoff Tips His Hand on Upcoming Safe-Harbor Case --------------------------------------------------------- Bill Rochelle, the bankruptcy columnist for Bloomberg News, reports that in footnotes to two recent rulings on other subjects, U.S. District Judge Jed Rakoff may have tipped his hand that he will rule in the next few weeks in favor of financial institutions by expanding the sweep of the so-called safe harbor protecting swaps from attack in bankruptcy cases. Mr. Rochelle recounts that Judge Rakoff first ruled in September that the safe harbor contained in Section 546(e) of the U.S. Bankruptcy Code precludes trustee Irving Picard from suing to recover fictitious profits taken out of Bernard L. Madoff Investment Securities LLC more than two years before bankruptcy. Mr. Picard is taking the ruling up on appeal to the U.S. Court of Appeals in Manhattan, seeking reversal and the right to sue going back six years. Mr. Rochelle adds that an affiliate of ABN Amro Bank NV persuaded Judge Rakoff to take a lawsuit out of bankruptcy court dealing with a similar safe harbor for swaps. In a brief filed this month, the bank wants Judge Rakoff to dismiss the suit because the money that originally emanated from Madoff came into its hands as part of a swap transaction with a feeder fund. The bank argues that the safe harbor for swaps in Section 546(g) bars the suit because the money came from a swap. Although the trustee will file his opposition papers later, the trustee has already argued that the safe harbor doesn't apply because he's not attempting to void the transaction between the feeder fund and the bank. Mr. Picard says the swap safe harbor doesn't apply because he's going after the bank as a subsequent recipient of funds fraudulently transferred from the Madoff firm to the feeder fund. Mr. Picard's argument is based on the notion that the recovery he seeks against the bank as a subsequent transferee is made possible by Section 550. That section isn't one of the enumerated sections covered by the safe harbors in Section 546, the trustee says. That's where Rakoff's footnotes come into play, according to Mr. Rochelle. In substantially identical language in footnotes in two short opinions on June 25 and May 15, Judge Rakoff said he "rejects" the argument that the safe harbor doesn't apply just because the trustee isn't attempting to recover from a swap party on a fraudulent transfer theory. Without citing authority, Judge Rakoff said in his footnotes that the safe harbor applies any time the original transfer would invoke the safe harbor. In the dispute with AMB Amro, the bank will file a reply brief on July 25. No date has been set as yet for oral argument in Judge Rakoff's court. The case involving ABN Amro and swaps is part of Securities Investor Protection Corp. v. Bernard L. Madoff Investment Securities LLC, 12-mc-00115, U.S. District Court, Southern District of New York (Manhattan). * Multiple Bankruptcies Add Only 90 Days for Tax Claims ------------------------------------------------------- Bill Rochelle, the bankruptcy columnist for Bloomberg News, reports that U.S. District Judge Carlos Murguia ruled on June 26 in Kansas City that the Internal Revenue Service can tag on only one 90-day extension under Section 507(a)(8) of the U.S. Bankruptcy Code when deciding if a tax debt is entitled to priority. The case, which involved individuals who had been in Chapter 7 or Chapter 13 on four occasions, is U.S. v. Montgomery, 11-2107, U.S. District Court, District of Kansas (Kansas City). * Leveraged Buyout Financing Rekindles Junk-Bond Issuance --------------------------------------------------------- Katy Burne at Dow Jones' Daily Bankruptcy Review reports that Consolidated Container Co. expects to sell $250 million of high- yield bonds to pay for its takeover by a private equity group, the latest sign of a post-crisis rebound in bond sales to fund leveraged buyouts and a slowly increasing number of mergers and acquisitions. Based in Atlanta, Georgia, Consolidated container Company LLC is a domestic developer, manufacturer and marketer of rigid plastic containers for mostly branded consumer products and beverage companies. Revenues for the twelve months ended March 31, 2012 were approximately $739 million. * Moody's Says Weak Consumer Confidence Hits U.S. Gaming Sector --------------------------------------------------------------- The recent improvement in US gaming revenue appears to be stalling as consumer confidence weakens, US payroll expansion slows, and retail sales soften, says Moody's Investors Service in a new special comment "US Gaming: A More Cautious Consumer Steps Away from the Casino." "The improving trend in gaming revenues in place since the middle of last year appears to be stalling," said Peggy Holloway, a Moody's Vice President -- Senior Credit Officer. "Momentum started slowing in March, and then in May gaming jurisdictions reported outright declines in gaming revenue." Casino operators with significant near-term maturities or highly leveraged capital structures such as Caesars Entertainment Corp, Revel Atlantic City, LLC, and CityCenter Holdings LLC are at greatest risk, says Moody's. While declining gas prices and low interest rates have boosted consumers' disposable income and could arrest this decline in gaming demand, Moody's points to a sharp decline in consumer sentiment, coupled with still-high unemployment and fear of contagion from the European debt crisis as troubling signs for the sector. Another poor sign is the difficulty of absorbing new supply in some markets. Newer casinos such as Revel in Atlantic City, Resorts World in New York and Rivers Casino in Illinois do not appear to be boosting gaming demand in their markets, says Moody's. The report also highlights regional challenges in the Northeast and Central US gaming regions, including potential oversupply and negative growth. The Southeast US region saw stronger growth, but that's mainly because last year casinos were still closed by flooding on the Mississippi River, says Moody's. * Moody's Cuts Ratings on Spanish Banks' North American Units ------------------------------------------------------------- Moody's Investors Service has downgraded certain long-term supported ratings of Banco Santander S.A.'s (Santander) and Banco Bilbao Vizcaya Argentaria, S.A.'s (BBVA) North American bank subsidiaries. Following the downgrades, Moody's placed the subsidiaries' long- and short-term ratings, including their standalone bank financial strength ratings (BFSR)/baseline credit assessments (BCA), on review for downgrade. The actions follow the downgrades of Santander (standalone BFSR/BCA to C-/baa2 from C/a3, on review for further downgrade) and BBVA (standalone BFSR/BCA to D+/baa3 from C/a3, on review for further downgrade). These actions are discussed in the press release "Moody's downgrades Spanish banks," dated 25 June 2012 and available on moodys.com. LIST OF AFFECTED RATINGS Subsidiaries of Santander: - Santander Holdings USA, Inc.: all long- and short-term ratings (senior at Baa2) placed on review for downgrade - Sovereign Bank, N.A.: long-term bank deposit, senior debt and issuer ratings downgraded to Baa1 from A3; subordinate debt rating downgraded to Baa2 from Baa1; all long- and short-term ratings, including the standalone BFSR/BCA of C-/baa1, placed on review for downgrade - Sovereign Real Estate Investment Trust: non-cumulative preferred stock rating downgraded to Ba1 (hyb) from Baa3; placed on review for further downgrade - Sovereign Capital Trust IV: Ba1 (hyb) preferred stock rating placed on review for downgrade - Sovereign Capital Trust V: (P)Ba1 preferred stock rating placed on review for downgrade - Sovereign Capital Trust VI: Ba1 (hyb) preferred stock rating placed on review for downgrade - Banco Santander Puerto Rico: long-term bank deposit, senior debt and issuer ratings downgraded to Baa1 from A3; all long- and short-term ratings placed on review for downgrade; the standalone BFSR/BCA of C-/baa1, which was placed on review for downgrade on April 10, 2012 because of Puerto Rico's difficult operating environment, remains on review Subsidiaries of BBVA: - BBVA USA Bancshares, Inc.: long-term issuer rating downgraded to Baa3 from Baa1 and placed on review for further downgrade - Compass Bank: long-term bank deposit, senior debt and issuer ratings downgraded to Baa2 from A3; subordinate debt rating downgraded to Baa3 from Baa1; all long- and short-term ratings, including the standalone BFSR/BCA of C-/baa2, placed on review for downgrade - Phoenix Loan Holdings: non-cumulative preferred stock rating downgraded to Ba2 (hyb) from Baa3 and placed on review for further downgrade - Banco Bilbao Vizcaya Argentaria Puerto Rico: long-term bank deposit, senior debt and issuer ratings downgraded to Baa2 from A3; subordinate debt rating downgraded to Baa3 from Baa1; all long- and short-term ratings placed on review for downgrade; the standalone BFSR/BCA of C-/baa2, which was placed on review for downgrade on April 10, 2012, remains on review Ratings Rationale The downgrades reflect the potential adverse effects of Santander's and BBVA's lower capacity to support their subsidiaries in North America, reflected by their lower standalone ratings. The downgrades of the parents' ratings were driven by the reduced creditworthiness of the Spanish sovereign, as captured by Moody's recent three-notch downgrade of Spain's government bond rating (Baa3, on review for further downgrade), which implies a weaker credit profile for Spanish banks. This results from the banks' multiple linkages with the sovereign, including (i) the impact of the government's financial position on the domestic economy; and (ii) the large exposures of most banks to their domestic government and to other counterparties that depend on the credit strength of the government. The downgrade of Santander's and BBVA's standalone ratings, which are now one notch below the respective standalone ratings of their North American bank subsidiaries, means that the subsidiaries' ratings will no longer benefit from any uplift from parental support, with the exception of Santander Holdings USA, Inc. and its capital trust subsidiaries. Previously, Santander's North American bank subsidiaries benefited from one notch of parental support uplift, while BBVA's North American subsidiaries benefited from two notches of uplift. The ratings of Santander Holdings USA, Inc. and its capital trust subsidiaries continue to benefit from one notch of uplift given the parent's continued capacity to support these subsidiaries. This is reflected by Santander's higher standalone rating of baa2, one notch above Santander Holdings USA, Inc.'s intrinsic financial strength of baa3. Moody's has also attached a hybrid (hyb) indicator to the non-cumulative preferred stock ratings of Sovereign Real Estate Investment Trust & Phoenix Loan Holdings. Rationale For Reviews For Downgrade Following the downgrades, all of the North American subsidiaries' ratings were placed on review for downgrade. The reviews reflect the potential adverse effects from weakening creditworthiness at the parent level on the standalone financial strength of their subsidiaries. During its reviews of the bank subsidiaries' standalone ratings, Moody's will focus on the independence and resilience of the North American banks' financial strength in the event that the parents' creditworthiness is further affected and their ratings lowered. Generally, Moody's is comfortable with subsidiaries' standalone ratings exceeding those of their parents, but this is typically limited by linkages between the subsidiary and the parent bank. The extent to which the regulatory framework in the US insulates the subsidiaries from potential adverse developments in Spain will also be factored into Moody's review of the ratings. Rating Methodologies The methodologies used in these ratings were Bank Financial Strength Ratings: Global Methodology published in February 2007, and Incorporation of Joint-Default Analysis into Moody's Bank Ratings: Global Methodology published in March 2012. * Pa. Lawmakers to Extend Bankr. Moratorium for Distressed Cities ----------------------------------------------------------------- According to American Bankruptcy Institute, Harrisburg Patriot- News reported that Pennsylvania lawmakers intend to extend the moratorium on bankruptcy for financially distressed cities, including Harrisburg, to Nov. 30, 2012. * Living Wills Give Banks a Chance to Uncover Own Weak Spots ------------------------------------------------------------ Evan Weinberger at Bankruptcy Law360 reports that up to nine of the world's largest financial institutions will submit "living wills" to federal regulators Sunday that provide a blueprint for taking them apart during a crisis, a process attorneys say has helped institutions understand their own weaknesses. * BOOK REVIEW: Hospital Turnarounds - Lessons in Leadership ----------------------------------------------------------- Editors: Terence F. Moore and Earl A. Simendinger Publisher: Beard Books Softcover: 244 pages Price: $34.95 Review by Henry Berry Hospital Turnarounds - Lessons in Leadership is a compilation of twelve essays on the many approaches that have been taken to resuscitate hospitals in distressed situations. Most of the essayists are CEOs or presidents of hospitals or healthcare organizations, and their stories are all different and compelling in their own way. The hospitals differ in their size, marketplace, facilities, and services offered. The causes of their distress vary and the strategies that were used to overcome them are wide-ranging. All-in-all, it makes for an engaging collection of success stories. The authors have extensive experience in the healthcare system, and nearly all have held top leadership posts in several public and private hospitals. Most importantly, all have been involved in successful turnarounds at some time in their careers. Two of the authors are from the field of marketing, which can play a significant role in hospital turnarounds. The number of troubled hospitals rises and falls over time, depending on many factors, including the state of the U.S. economy. There are always some hospitals in a distressed situation or teetering close to it. In spite of the fact that healthcare is a basic need in U.S. society, hospitals are constantly vulnerable to financial problems because of competition, changing medical technology, new approaches to healthcare from improved drugs and public awareness, and medical malpractice lawsuits. Any or all of these factors can be financially crippling and, even if the financial impact is minimized, a hospital's reputation can be damaged. Like any other business organization, hospitals can also run into difficulty because of poor management or labor problems. The first and last chapters, "Introduction" and "Turnarounds: An Epilogue," respectively, are written by the co-editors. The balance of the chapters contain first-hand accounts of hospital turnarounds, with the authors asked by the co-editors to "document the role of the various publics." The authors do this, offering their assessment of the role of the board of directors, medical staff, management team, volunteers, and other relevant "publics" in the respective turnarounds. A common thread in this book is that the import and activities of these publics were different in every turnaround. Each turnaround had to address its own grievous, overriding problem or set of problems. Each turnaround had its own cast of characters who brought different backgrounds and skills to the turnaround. As a result, each path taken to overcoming the distressed situation was different. No matter what the cause or causes of a hospital's distressed situation, in nearly every case the problems were first realized when a financial problem became apparent. Thus, turnarounds are inevitably focused on improving a hospital's financial situation. As one of the authors notes, "A turnaround is most often the result of increased revenues and decreased expenses." The approach taken by some of the authors was to focus on "[increasing] revenues to improve the operating margins of their organizations." Many other turnarounds were accomplished by focusing on reducing expenses. Invariably, however, a combination of both was needed and working toward these paired objectives required a new strategic thinking and the development of operational capabilities that prepared the hospital for long-term survival in continually changing market conditions. One author's prescription for success was, "Upward communication, fluidity of organizational structure, a reduction of unnecessary bureaucratic rules and policies, and ambitious yet realistic goals and objectives." These practices are present in healthy companies and usually missing in distressed companies. Implementation of these business practices is essential for a hospital to return to a favorable financial footing. Another author addressed "organizational burnout," which must be corrected if a hospital is to survive. Burnout is evident when "the sum of an organization's actual output is decreasing over time when compared with its potential output." The challenge facing hospital executives and turnaround specialists is to reduce -- and ideally, eliminate -- the gap between actual and potential output. The smaller the gap, the more efficient, productive, and healthy the organization. These are just a few of the observations and lessons provided in this collection of essays. Through engaging first-person accounts of rescue stories, the reader learns what a turnaround is all about, how to diagnose a distressed situation, and how to formulate a strategy that implements specific corrective actions. Terence F. Moore has been involved in the Michigan hospital system as President and CEO of Mid-Michigan Health, Board Member of the Michigan Hospital Association, and Chair of the East Michigan Hospital Association. He is also a fellow of the American College of Healthcare Executives. Earl A. Simendinger is a professor of management at the College of Business at the University of Tampa who for 20 years was a hospital administrator. Also a fellow in the American College of Healthcare Executives, he has written many books and articles on management and organizational 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. Jhonas Dampog, Marites Claro, Joy Agravante, Rousel Elaine Tumanda, Howard C. Tolentino, Joseph Medel C. Martirez, Denise Marie Varquez, Ronald C. Sy, Joel Anthony G. Lopez, Cecil R. Villacampa, Sheryl Joy P. Olano, Ivy B. Magdadaro, Carlo Fernandez, Christopher G. Patalinghug, and Peter A. Chapman, Editors. Copyright 2012. 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 ***