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/raid1/www/Hosts/bankrupt/TCR_Public/040823.mbx T R O U B L E D C O M P A N Y R E P O R T E R Monday, August 23, 2004, Vol. 8, No. 178 Headlines A.B. DICK: U.S. Trustee Names 5-Member Creditors' Committee ACTUANT CORP: Moodys's Upgrades Senior Implied Rating to Ba2 ADELPHIA BUSINESS: Resolves Grande Communication's $877K Claims ALDERWOODS: Issues New 7-3/4% Notes & Completes Debt Refinancing ALDERWOODS: 98.6% of 12-1/4% Noteholders Agree to Amend Indenture AMES DEPARTMENT: Wants Exclusive Periods Extended Until Feb. 28 AQUILA INC: $300 Million PIES Offering Gets S&P's B- Rating AQUILA INC: Fitch Affirms Low-B Senior Ratings with Stable Outlook BAYOU STEEL: Reorganized Co. Posts FY '04 3rd Qtr $6.1M Net Income BEA CBO: Fitch Affirms Low-B Ratings on 2 Classes & Junks 2 Others BELL CANADA: Digital Bundle Customers Can Now Earn Aeroplan Miles BRAND SERVICES: S&P Cuts Rating to B Following Covenant Violations BREUNERS HOME: Wants to Employ Pachulski Stang as Attorneys BRIAZZ: Wants Open-Ended Deadline to Decide on Unexpired Leases CATHOLIC CHURCH: Court Approves AICCO Financing Agreement CHAPCO CARTON: Wants to Retain Adelman & Gettleman as Counsel CHAS COAL: Creditors Must File Proofs of Claim by September 20 CHIQUITA BRANDS: Names Jay Braukman as New Chief Financial Officer CIRTRAN CORP: Reports $4 Mil. Stockholders' Deficit at June 30 CITRICO INTERNATIONAL: Section 304 Petition Summary COMPRESSION POLYMERS: Moody's Puts B1 Rating on $23M Loan Add-on COTT CORP: Moody's Upgrades Sr. Sub. Rating to Ba3 & Debt to Ba1 CROWN PACIFIC: Interfor Gets Court OK to Acquire Asset for $73.3M DELTA AIR: Debt Restructuring Risks Prompts S&P's Junk Ratings DRESSER INC: June 30 Balance Sheet Upside-Down by $318.3 Million DUNES PLAZA: Signs-Up Hogan & Hartson as Bankruptcy Counsel DYER FABRICS: Wants to Employ Harris Shelton as Bankruptcy Counsel ELECTRIC MACHINERY: EarthFirst Technologies Completes Acquisition ENCORE ACQUISITION: Inks New 5-Year Credit Facility with BofA ENRON CORP: Wants to Recover $9.4 Million from 36 Creditors FLEMING COMPANIES: Asks Court to Okay Grace Foods Settlement Pact FOOTSTAR INC: Inks $15MM Pact to Sell Gaffney Distribution Center GURVINDER SINGH UBEROI TRUST: Voluntary Chapter 11 Case Summary HALLIBURTON: Smith Int'l to Pay $41 Mil. for Patent Infringement HEALTHSOUTH CORP: John Chamberlain Resigns from Board of Directors HI-RISE RECYCLING: Hires Kestrel as Bankruptcy Consultants HOLLINGER INC: Appeals Order Staying Counterclaims Against Int'l HOLLINGER INC: Appoints P. Carroll & D.M.J. Vale as Directors HOLLINGER CDN: Plans to Trade on NEX to Provide Owners Liquidity HOME CARE: Hires Arnstein & Lehr as Bankruptcy Counsel I2 TECHNOLOGIES: Names Michael McGrath to Board of Directors INTERSTATE HOTELS: Moody's Assigns B2 Senior Implied Rating ITSV INC: Defendants Confirm Receipt of Trustee's $151MM Lawsuit IVACO INC: Ontario Court Approves Asset Sale to Heico Affiliate JEAN COUTU: FY '03-'04 Results Broadcast Available Until Sept. 17 J.P. MORGAN: S&P Affirms Single-B Ratings on Two Cert. Classes KENDRICK ENGINEERING: List of 20 Largest Unsecured Creditors LITFUNDING CORP: Court Confirms 2nd Amended Reorganization Plan LORAL SPACE: Files Proposed Reorganization Plan in S.D.N.Y MATRIA HEALTHCARE: S&P Reinstates BB- $35MM Credit Facility Rating MEDIA GROUP: U.S. Trustee Appoints 5-Member Creditors' Committee MILLENIUM ASSISTED: Gets OK to Use Cash Collateral Until Sept. 3 MORTGAGE CAPITAL: Fitch Affirms Low-B Ratings on Four Classes NEWMARKET TECH: Acquires 20% Equity Stake in Sensitron Inc. NORTEL NETWORKS: Reports Preliminary 2nd Quarter Financial Results NORTEL NETWORKS: S&P Keeps Low-B Ratings On CreditWatch Developing OCTAGON INVESTMENT: S&P Puts BB Rating on $10.75M Class B-2L Notes OHIO VALLEY HEALTH: S&P Cuts Ratings Three Notches to B from BB OM GROUP: S&P's Low-B Credit & Sub. Debt Ratings on CreditWatch OMNI FACILITY: Committee Turns to Capstone for Financial Advice ONSITE TECH: Employs Hughes Watters as Bankruptcy Counsel OSE USA: Appoints Edmond Tseng as Interim President OWENS CORNING: Asbestos Claims Estimation Hearing Begins Jan. 13 PARKER DRILLING: $137.7 Million of 10-1/8% Notes Are Tendered PENINSULA GAMING: S&P Assigns B+ Credit & Senior Debt Ratings PENN TRAFFIC: Files Plan to Emerge from Chapter 11 Protection POLYPORE: Moody's Single-B & Junk Ratings on Review Pending IPO PRESTIGE BRANDS: Reports First Quarter FY 2005 Results PRIME HOSPITALITY: S&P Puts Low-B Ratings on CreditWatch Negative PROTECTION ONE: Extends Standstill Pact with Quadrangle Master SIRIUS SATELLITE: Extends Rights Agreement with Bank of New York SIGHT RESOURCE: Gets Nod to Use CadleRock's Cash Collateral SK GLOBAL: Gets Court Nod to Settle with John Roberts for $950K SOLUTIA INC: Equity Committee Wants to Examine Debtors SOUTHWALL TECH: Appoints Maury Austin as Permanent SVP & CFO STRUCTURED ASSET: Fitch Junks 2 Classes & Rates Another 2 Low-B SUPERIOR GALLERIES: Retains CCG for Investor Relations Program SURFSIDE RESORTS: Asks Court to Dismiss Chapter 11 Case TANGO INC: Begins Discussions With Potential Acquisition Targets UNITED AIR: Workers Urge Court to Appoint a Chapter 11 Trustee US AIRWAYS: Bank of New York Holds an Allowed $192MM Secured Claim W.R. GRACE: Directors Face Class Action Lawsuit Over 401(k) Plan WINSTAR COMMS: Court Approves Settlement with Holdings & IDT Corp. WORLDCOM INC: MCI Officers Dispose of 40,589 Common Shares * BOND PRICING: For the week of August 23 - August 28, 2004 ********* A.B. DICK: U.S. Trustee Names 5-Member Creditors' Committee ----------------------------------------------------------- The United States Trustee for Region 3 appointed five creditors to serve on the Official Committee of Unsecured Creditors in A.B. Dick and its debtor-affiliates' chapter 11 cases: 1. Delaware Asset Management Attn: Carl Mabry 2005 Market Street Philadelphia, Pennsylvania 19103 Phone: 215-255-1667, Fax: 215-255-1296 2. International Union, UAW Attn: Niraj R. Ganatta 8000 East Jefferson Avenue Detroit, Michigan 48214 Phone: 313-929-5216, Fax: 313-926-5240 3. Mitsubishi Imaging (MPM), Inc. Attn: Donald W. Bowin 555 Theodore Fremd Avenue Rye, New York 10580 Phone: 914-925-3219, Fax: 914-921-1695 4. Konica-Minolta Business Solutions, USA, Inc. Attn: Sharon Uhoefer 100 Williams Drive Ramsey, New Jersey 07446 Phone: 201-825-4000, Fax: 201-825-7331 5. Esko Productio A/S Attn: Marion L. Tyson 1955 Vaughn Road, Suite 101 Kennesaw, Georgia 30144 Phone: 770-427-5700, Fax: 770-427-7844 Official creditors' committees have the right to employ legal and accounting professionals and financial advisors, at the Debtors' expense. They may investigate the Debtors' business and financial affairs. Importantly, official committees serve as fiduciaries to the general population of creditors they represent. Those committees will also attempt to negotiate the terms of a consensual chapter 11 plan -- almost always subject to the terms of strict confidentiality agreements with the Debtors and other core parties-in-interest. If negotiations break down, the Committee may ask the Bankruptcy Court to replace management with an independent trustee. If the Committee concludes reorganization of the Debtors is impossible, the Committee will urge the Bankruptcy Court to convert the Chapter 11 cases to a liquidation proceeding. Headquartered in Niles, Illinois, A.B. Dick Company -- http://www.abdick.com/-- is presently a leading global supplier to the graphic arts and printing industry, manufacturing and marketing equipment and supplies for the global quick print and small commercial printing markets. The Company, along with its affiliates, filed for chapter 11 protection on July 13, 2004 (Bankr. Del. Case No. 04-12002). Frederick B. Rosner, Esq., at Jaspen Schlesinger Hoffman and Jami B. Nimeroff, Esq., at Buchanan Ingersoll, P.C., represent the Debtors in their restructuring efforts. When the Company filed for protection from its creditors, they listed over $10 million in estimated assets and estimated debts in over more than $100 million. ACTUANT CORP: Moodys's Upgrades Senior Implied Rating to Ba2 ------------------------------------------------------------ Moody's Investors Service has upgraded Actuant Corporation's ratings. At the same time, Moody's has assigned a new rating to the company's senior credit facility. The rating outlook is stable. Ratings upgraded: -- Senior implied rating, to Ba2 from Ba3; and -- Senior unsecured issuer rating, to Ba3 from B1. New rating assigned: -- Ba2 on the $250 million senior unsecured revolving credit facility, due 2009. Moody's does not rate Actuant's $150 million 2% convertible senior subordinated notes, due 2023. Meanwhile, Moody's has withdrawn ratings on the 13% senior subordinated notes, due 2009, following the recent completion of a tender offer. The rating upgrade reflects Actuant's improving credit profile and its demonstrated ability to deliver steady performance during the recent economic downturn. The rating action also considers the considerable debt reduction the company has accomplished in recent years, substantially reduced financing costs, good liquidity condition, and a focused management team. On the other hand, the ratings are constrained by its exposure to cyclical industrial end-markets, integration risks related to its acquisition growth strategy, and its relatively small size. The stable rating outlook reflects Moody's expectation that Actuant is likely to continue to benefit from the current economic upswing over the medium term. However, this is offset by risks associated with potential acquisitions that the company is likely to pursue to generate growth. Moody's says that Actuant has steadily improved its credit profile since the spin-off of its electronics enclosures business -- APW -- in July 2000. The company's total debt has been reduced from approximately $451 million at the time of the spin-off to approximately $239 million (including $27 million under an accounts receivable securitization facility) as of May 31, 2004. Accordingly, its EBITDA debt leverage has declined from 4.1 times to 2.4 times in the same period. The de-leveraging has been accomplished mainly through internal cash flow generation, business divestitures, and a $99.7 million equity offering in February 2002. After weathering the recent economic downturn with solid performance, Actuant is currently enjoying a cyclical rebound in many of its end-markets. Sales in the nine months through May 31, 2004, excluding the impact of acquisitions and foreign currency rate changes, increased 8% to $539 million. Operating profits for the nine months increased 23% to $66.1 million from $53.6 million in the prior year. Moody's expects the company to continue to enjoy top-line growth over the next 12-18 months, although it may be at a slower pace. This would call for acquisitions to supplement organic growth, which gives rise to concerns over integration risks. However, given its track record, the company seems to have developed a disciplined approach in terms of target selection and acquisition size, and this would somewhat mitigate the integration risks. Over the past twelve months, Actuant has engaged in a series of refinancing transactions that have led to substantially reduced interest expense, stronger liquidity and longer maturity. Through the combination of repurchasing substantially all of its $200 million 13% senior subordinated notes and issuing in November 2003 $150 million 2% convertible senior subordinated debentures, Actuant has substantially reduced its on-going interest expense on funded debt. A $50 million commercial paper program set up in March 2004 helps further lower funding costs. In February 2004, the company entered into a new $250 million five-year senior revolving credit facility, which extended maturity to 2009. As of May 31, 2004, availability under the revolver was approximately $220 million. Actuant Corporation, headquartered in Milwaukee, Wisconsin, is a diversified global provider of highly engineered position and motion control systems and branded tools end-users in a variety of industries. ADELPHIA BUSINESS: Resolves Grande Communication's $877K Claims --------------------------------------------------------------- On September 27, 2000, Adelphia Business Solutions Long Haul, L.P., now known as Telcove Long Haul, LP, entered into Indefeasible Right of Use Agreements with Grande Communications Networks, Inc., for certain networks in San Antonio and Austin, Texas. In connection with the construction of the Networks, Grande built certain lateral routes off of the Networks for ABIZ's telecommunications services to reach their customers. ABIZ has not fully paid for the construction of the Laterals. Consequently, Grande filed secured claims aggregating $877,514. Grande alleged that the Claims are secured by perfected mechanics' liens for work performed on the Laterals. Grande and ABIZ dispute the value of the Laterals and the value of the Claims. In a Court-approved stipulation, the parties agree that: (a) ABIZ and Grande will value the Laterals at 75% percent of the Claims, resulting in a $219,378 unsecured claim and a $658,136 secured claim; (b) ABIZ will surrender the Laterals and pay $7,678 to Grande in full and complete satisfaction of the Claims, whether secured or unsecured; and (c) Grande and ABIZ will exchange mutual releases. Headquartered in Coudersport, Pa., Adelphia Business Solutions, Inc., now known as TelCove -- http://www.adelphia-abs.com/-- is a leading provider of facilities-based integrated communications services to businesses, governmental customers, educational end users and other communications services providers throughout the United States. The Company filed for Chapter 11 protection on March 27, 2002 (Bankr. S.D.N.Y. Case No. 02-11389) and emerged under a chapter 11 plan on April 7, 2004. Judy G.Z. Liu, Esq., at Weil, Gotshal & Manges LLP represents the Debtors in their restructuring efforts. When the Company filed for protection from its creditors, it listed $2,126,334,000 in assets and $1,654,343,000 in debts. The Company emerged from bankruptcy on April 7, 2004. (Adelphia Bankruptcy News, Issue No. 67; Bankruptcy Creditors' Service, Inc., 215/945-7000) ALDERWOODS: Issues New 7-3/4% Notes & Completes Debt Refinancing ---------------------------------------------------------------- Alderwoods Group, Inc., (NASDAQ: AWGI) closed its previously announced offering of $200 million of 7-3/4% senior notes due 2012. The Notes will rank equally with any future senior unsecured indebtedness of the Company. In addition to the issuance of the Notes, the debt refinancing includes amendments to the Company's senior secured credit facility to increase the principal amount of term loan borrowings by up to $175 million, extend the term loan maturity and reduce the term loan amortization payments and increase the availability under the revolving portion of the facility from $50 million to $75 million. The Company will use the proceeds from the Notes offering, together with available cash and additional term loan borrowings under the amendments to its senior secured credit facility, to repurchase outstanding 12-1/4% senior notes due 2009 tendered pursuant to the Company's recently completed tender offer and consent solicitation, pay all amounts outstanding under its subordinated bridge loan due 2005 and pay the related tender premium, fees and expenses. The Notes have not been registered under the Securities Act of 1933 or the securities laws of any state and may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements under the Securities Act and any applicable state securities laws. The Company provides funeral and cemetery services and products on both an at-need and pre-need basis. In support of the pre-need business, it operates insurance subsidiaries that provide customers with a funding mechanism for the pre-arrangement of funerals. * * * As reported in the Troubled Company Reporter on July 27, 2004, Standard & Poor's Ratings Services it affirmed its 'B+' corporate credit rating on the funeral home and cemetery operator Alderwoods Group, Inc., and assigned its 'B' debt rating to the company's proposed $200 million senior unsecured notes due in 2012. At the same time, Standard & Poor's also assigned its 'BB-' senior secured bank loan rating and its '1' recovery rating to Alderwoods' proposed $75 million revolving credit facility, which matures in 2008, and to its proposed term loan B, which matures in 2009. The existing term loan had $242 million outstanding at March 27, 2004, but will be increased in size. The bank loan ratings indicate that Standard & Poor's expects a full recovery of principal in the event of a default, based on an assessment of the loan collateral package and estimated asset values in a distressed default scenario. The company is expected to use the proceeds from the new financings to redeem $320 million of 12.25% senior unsecured notes, repay a $25 million subordinated loan, and fund transaction costs. As of March 27, 2004, the company had $614 million of debt outstanding. The ratings outlook has been revised to positive from stable to indicate that, in time, the ratings could be raised if Alderwoods can continue to demonstrate improved operating performance and if it can sustainably deleverage. The decline in leverage would give the company additional financial capacity to weather adverse competitive factors, such as periodic weaknesses in death rates and rising consumer preference for lower cost death-care services. "The low-speculative-grade ratings on funeral and cemetery services provider Alderwoods Group, Inc., reflect its highly leveraged financial profile, uncertainties related to the longer term success of a new business plan, and the company's vulnerability to periods of business weakness," said Standard & Poor's credit analyst Jill Unferth. "These factors are mitigated by the relatively favorable long-term predictability of the funeral home and cemetery business." ALDERWOODS: 98.6% of 12-1/4% Noteholders Agree to Amend Indenture ----------------------------------------------------------------- Alderwoods Group, Inc., (NASDAQ:AWGI) completed its previously announced cash tender offer and consent solicitation for any and all of its $320,752,500 outstanding principal amount of 12-1/4% Senior Notes due 2009 (CUSIP No. 014383AC7 and ISIN No. US014383AC79). A total of approximately $316.2 million aggregate principal amount of the Notes (approximately 98.6%) was tendered prior to the expiration date of 9:00 a.m., New York City time, Thursday, August 19, 2004. Alderwoods Group has accepted for purchase and paid for all Notes tendered pursuant to the Offer. On August 4, 2004, Alderwoods Group announced the execution of a supplemental indenture effecting certain amendments to the indenture governing the Notes. The amendments, which eliminate or modify substantially all of the restrictive covenants in the indenture, became operative Thursday. Banc of America Securities LLC acted as Alderwoods Group's exclusive dealer manager and solicitation agent in connection with the Offer. About Alderwoods Group The Company provides funeral and cemetery services and products on both an at-need and pre-need basis. In support of the pre-need business, it operates insurance subsidiaries that provide customers with a funding mechanism for the pre-arrangement of funerals. * * * As reported in the Troubled Company Reporter on July 27, 2004, Standard & Poor's Ratings Services it affirmed its 'B+' corporate credit rating on the funeral home and cemetery operator Alderwoods Group, Inc., and assigned its 'B' debt rating to the company's proposed $200 million senior unsecured notes due in 2012. At the same time, Standard & Poor's also assigned its 'BB-' senior secured bank loan rating and its '1' recovery rating to Alderwoods' proposed $75 million revolving credit facility, which matures in 2008, and to its proposed term loan B, which matures in 2009. The existing term loan had $242 million outstanding at March 27, 2004, but will be increased in size. The bank loan ratings indicate that Standard & Poor's expects a full recovery of principal in the event of a default, based on an assessment of the loan collateral package and estimated asset values in a distressed default scenario. The company is expected to use the proceeds from the new financings to redeem $320 million of 12.25% senior unsecured notes, repay a $25 million subordinated loan, and fund transaction costs. As of March 27, 2004, the company had $614 million of debt outstanding. The ratings outlook has been revised to positive from stable to indicate that, in time, the ratings could be raised if Alderwoods can continue to demonstrate improved operating performance and if it can sustainably deleverage. The decline in leverage would give the company additional financial capacity to weather adverse competitive factors, such as periodic weaknesses in death rates and rising consumer preference for lower cost death-care services. "The low-speculative-grade ratings on funeral and cemetery services provider Alderwoods Group, Inc., reflect its highly leveraged financial profile, uncertainties related to the longer term success of a new business plan, and the company's vulnerability to periods of business weakness," said Standard & Poor's credit analyst Jill Unferth. "These factors are mitigated by the relatively favorable long-term predictability of the funeral home and cemetery business." AMES DEPARTMENT: Wants Exclusive Periods Extended Until Feb. 28 --------------------------------------------------------------- Ames Department Stores, Inc., and its debtor-affiliates have been diligently laboring to maximize values for creditors and, as of August 17, 2004, have: (a) sold all their inventory; (b) fully satisfied their obligations under their postpetition financing facilities; (c) rejected or assumed and assigned the majority of their unexpired nonresidential real property leases in accordance with Section 365 of the Bankruptcy Code; (d) been settling and reconciling creditors' claims; (e) commenced and are continuing to prosecute and collect substantial sums from avoidance actions; and (f) sold, or are in the process of selling, their remaining real estate holdings. However, Martin J. Bienenstock, Esq., at Weil, Gotshal & Manges, LLP, in New York, tells Judge Gerber of the U.S. Bankruptcy Court for the Southern District of New York that the Debtors are not in a position to determine if a recovery will be available for prepetition creditors. The Debtors need to complete the process of liquidating their real property interests, reconciling administrative expense claims and prosecuting avoidance actions. Accordingly, the Debtors ask the Court to extend their exclusive periods to file a plan through February 28, 2005, and to solicit acceptances of that plan through April 29, 2005. The Debtors will not be able to develop a confirmable Chapter 11 plan until they determine the full extent of their administrative obligations and the resources available to satisfy those obligations. An extension of the deadline will avoid motion practice and unnecessary intrusion on management's time. Mr. Bienenstock reports that: (a) While the Debtors have successfully disposed the majority of their real property interests, other major real estate assets, including the Debtors' home office building, have yet to be liquidated; (b) The Debtors anticipate that they will have approximately $94,000,000 in administrative expense claims, many of which still need to be reconciled; (c) The Debtors have commenced and continue to prosecute approximately 2,000 Preference Actions. The Debtors anticipate the Preference Actions will continue well into 2005; and (d) The Debtors are also in the process of negotiating a sale of their distribution center in Leesport, Pennsylvania. The Debtors anticipate that the sale of their Leesport Distribution Center will generate significant liquidity to facilitate an interim distribution to creditors holding administrative expense claims. Mr. Bienenstock argues that a termination of exclusivity at this time can only negatively impact the progress made to date. No other party currently has a plan to propose, and no one will be precluded from asking the Court's permission to propose a plan if exclusivity is extended. An extension only causes a putative plan proponent to ask permission before filing a plan. This way irresponsible or destructive plans and their concomitant effect on recoveries can be avoided. By any reasonable measure, the Debtors' Chapter 11 cases are sufficiently large and complex to warrant extension of the Exclusive Periods. Mr. Bienenstock also notes that by taking prompt action to halt operations, reconcile claims, liquidate assets and recover avoidable preferences, the Debtors have not delayed making the decisions necessary to achieve a consensual Chapter 11 plan. Moreover, the Debtors have kept sight of the need to deal with all parties-in-interest in these cases. The Debtors and their professionals have consistently conferred with various constituencies on all major substantive and administrative matters in these cases, often altering their position in deference to the views of the Committee, the U.S. Trustee, or other parties-in- interest. An extension of the Exclusive Periods will not prejudice any party-in-interest, but rather will avert prematurity and afford the Debtors an opportunity to propose a realistic and viable Chapter 11 plan. * * * The Court will convene a hearing to consider the Debtors' request on September 29, 2004, at 9:45 a.m. Accordingly, Judge Gerber extends the Debtors' Exclusive Filing Deadline to and including the conclusion of that hearing. Headquartered in Rocky Hill, Connecticut, Ames Department Stores, Inc., is a regional discount retailer that, through its subsidiaries, currently operates 452 stores in nineteen states and the District of Columbia. The Company filed for chapter 11 protection on August 20, 2001 (Bankr. S.D.N.Y. Case No. 01-42217). Albert Togut, Esq., Frank A. Oswald, Esq. at Togut, Segal & Segal LLP and Martin J. Bienenstock, Esq., and Warren T. Buhle, Esq., at Weil, Gotshal & Manges LLP represent the Debtors in their restructuring efforts. When the Company filed for protection from their creditors, they listed $1,901,573,000 in assets and $1,558,410,000 in liabilities. (AMES Bankruptcy News, Issue No. 57; Bankruptcy Creditors' Service, Inc., 215/945-7000) AQUILA INC: $300 Million PIES Offering Gets S&P's B- Rating ----------------------------------------------------------- Standard & Poor's Ratings Services assigned its 'B-' rating to Aquila Inc.'s (B-/Negative/--) $300 million premium income equity securities -- PIES -- offering. The outlook is negative. Kansas City, Missouri-based energy provider Aquila has about $2.8 billion of debt. The PIES carry a coupon of 6.75% and represent mandatory convertible senior notes, which will convert into common stock no later than Sept. 15, 2007. Net proceeds will be used toward reducing liabilities and improving the company's weak financial profile. The ratings on Aquila reflect the company's marginal credit measures and insufficient cash flow from operations to offset a burdensome debt level, not quite mitigated by management's efforts to refocus on its traditional utility business. Due to weak cash flow generation from operations, asset sales have been necessary for Aquila to reduce its debt levels. Management has achieved progress toward stemming a deteriorating financial profile with the execution of its asset sales program, and the company has alleviated some of its most pressing liquidity concerns. However, the negative outlook reflects that although Aquila has made significant progress repositioning itself as a domestic utility business, concerns remain over the company's burdensome debt level and lack of cash flow generation. Rating stabilization is predicated on Aquila's ability to achieve further debt reduction, successful rate increases, and cost reductions. AQUILA INC: Fitch Affirms Low-B Senior Ratings with Stable Outlook ------------------------------------------------------------------ Fitch Ratings assigned a 'B-' rating to the 12,000,000 premium income equity securities -- PIES -- expected to be issued by Aquila, Inc. At the same time, Fitch has revised Aquila's Rating Outlook to Stable from Negative and affirmed the existing ratings. The PIES will represent $300 million of mandatorily convertible senior notes. Proceeds from the issuance will be used to retire long-term debt and other liabilities. Approximately $2.9 billion of securities are affected, including the PIES. Each of the 12,000,000 PIES represents $25 million of principal amount of mandatorily convertible notes. The PIES will automatically convert to common shares of Aquila on Sept. 15, 2007 at the conversion rate, unless converted to shares earlier at the option of the holder or upon the occurrence of certain other events. The conversion rate is dependent on the closing price of Aquila's common shares over the 20-day period prior to the Sept. 15, 2007 conversion date but would be capped at a 22% price appreciation. Fitch's 'B-' rating primarily reflects concerns regarding significant debt relative to cash flow and the negative drag on cash from remaining merchant operations. While much progress has been made in returning the company to its domestic utility roots, Aquila remains highly leveraged and generates insufficient cash flow to satisfy debt and other obligations. Further restructuring efforts, as well as a favorable operating and regulatory environment, are necessary to restore financial strength. Additional credit concerns include the relatively weak cash flow from electric operations that results from the lack of a fuel adjustment mechanism in Missouri combined with high fuel costs, as well as an increase in other operating costs. Most of Aquila's jurisdictions, including its largest, Missouri, use historical test years for ratemaking purposes, which creates recovery lags. High fuel prices and the requirement to prepay certain gas suppliers and pipelines during peak winter heating months increase the need for working capital. In efforts to improve utility earnings and cash flow, Aquila received a number of rate increases and continues to seek rate increases and regulatory remedies for rising fuel costs including; (1) a pending rate case in Kansas for $19 million; (2) the initiation of an Interim Energy Charge; and (3) a request for an Accounting Adjustment Order in MO, and an $8.2 million rate increase in Colorado. The revision of the Rating Outlook to Stable considers the benefits to liquidity and financial flexibility that result from the inflow of capital from the PIES and the concurrent issuance of about $102 million proceeds from the sale of common shares, the previous termination of the bulk of unregulated operations, including two unprofitable tolling contracts, the recent settlements with surety providers, and the expected future benefits from termination of most of the long term gas delivery contracts. The $389 million aggregate net proceeds from the new securities will reduce the near term risk of default and provide more time to execute on remaining financial and operational repositioning plans Going forward, Fitch believes the elimination of the Elwood tolling agreement ($37 million of annual capacity payments), execution of the termination of 92% of unprofitable gas prepayment contracts as planned, additional non-core asset sales, the return of collateral associated with the trade book wind-down and improvement of utility results through operational restructuring and rate adjustments would lead to an improvement in credit quality. Aquila owns and operates electric and gas distribution networks in seven Midwestern states as well as non-regulated operations that continue to wind down. Electric operations consist of vertically integrated electric utilities serving 445,890 customers in Colorado, Kansas and Missouri. Aquila owns or leases 2,075MW of electric generation capacity, which provides approximately 60% of the electricity required to serve its customer load. The balance of load is served through long term power purchase agreements and spot market electricity purchases. Gas operations consist of gas distribution utilities serving 900,777 customers in Colorado, Iowa, Kansas, Michigan, Minnesota, Missouri and Nebraska. The gas utilities own 1,569 miles of gas transmission pipelines and 19,301 miles of gas distribution mains and service lines. Non-regulated operations are mainly conducted through the Merchant Services subsidiary and consist of peaking merchant generation plants, the Elwood tolling contract, Everest Communications and a legacy trading book. Ratings affirmed by Fitch: Aquila -- Senior secured 'B+'; -- Senior unsecured 'B-'; -- Rating Outlook revised to Stable. BAYOU STEEL: Reorganized Co. Posts FY '04 3rd Qtr $6.1M Net Income ------------------------------------------------------------------ Bayou Steel Corporation reported its financial results for its third fiscal quarter and the nine months ending June 30, 2004. Bayou Steel emerged from bankruptcy pursuant to a plan of reorganization that became effective on February 18, 2004. Accordingly, for accounting purposes, financial statements for periods after February 18, 2004 related to a new reporting entity in many respects are not directly comparable to prior periods of the old reporting entity. Among other changes, there have been substantial reductions in debt and revaluations of assets and other liabilities. The Company reported net income for the third quarter of fiscal 2004 totaling $6.1 million compared to a net loss for the Predecessor Company of $3.6 million for the same prior year quarter. For the nine months ended June 30, 2004, the Company earned $7.9 million from February 18, 2004 through June 30, 2004 and the Predecessor Company reported $15.8 million in income, including $19.3 million in reorganization adjustments, from October 1, 2003 through February 17, 2004. For the prior year comparable nine months, the Predecessor Company lost $30.2 million. Third quarter sales for fiscal 2004 were $59.3 million on shipments of 118,734 tons. This was sharply higher than the $37.7 million in sales on shipments of 120,100 tons for the prior year third quarter and this measure was not affected by the reorganization. Average selling prices increased $186 per ton or 60% compared to the third fiscal quarter of fiscal 2003 and $90 per ton or 22% compared to the second quarter of fiscal 2004. The selling price increase has generally been related to the sharply escalating prices for scrap and the increasing prices for alloys and fuel, which the Company has been able to pass through to its customers because of strong demand for the Company's products. Jerry M. Pitts, President and CEO of Bayou Steel Corporation commented, "The Company's recent results reflect continued strong pricing throughout the period. We expect pricing strength to continue in our fourth fiscal quarter. While we expect that costs will continue to rise, we do expect pricing to keep pace with these increases." Mr. Pitts continued, "Our efforts are focused toward building a solid foundation so that we can be competitive and profitable not only in this favorable market environment but also when the business enters a downturn." Headquartered in Dallas, Texas, Bayou Steel Corporation manufacturers light structural and merchant bar products in LaPlace, Louisiana and Harriman, Tennessee. The Company also operates three stocking locations along the inland waterway system near Pittsburgh, Chicago, and Tulsa. The Debtors filed for chapter 11 protection on January 22, 2003 (Bankr. N.D. Texas Case No. 03-30816) and emerged from bankruptcy under a plan of reorganization that became effective on February 18, 2004. That plan wiped more than $100 million from Bayou's balance sheet. Patrick J. Neligan, Jr., Esq., at Neligan, Tarpley, Andrews & Foley, LLP, represent the Debtors in their restructuring efforts. BEA CBO: Fitch Affirms Low-B Ratings on 2 Classes & Junks 2 Others ------------------------------------------------------------------ Fitch Ratings affirms the rating of two classes of notes issued by BEA CBO 1998-1, Ltd./Corp., which closed May 21, 1998. These rating actions are effective immediately: -- $99,669,909 class A-2A notes affirms at 'B-'; -- $17,424,809 class A-2B notes affirms at 'B-'. The rating for the $26,000,000 class A-3 remains at 'CC'. In addition, the rating for the $45,000,000 class B remains at 'C'. BEA 1998-1 is a collateralized bond obligation -- CBO -- managed by Prudential Investment Management, Inc. The collateral of BEA 1998-1 is composed of high yield bonds invested in non-emerging markets corporate bonds and emerging markets corporate debt. Payments are made semi-annually in June and December and the reinvestment period ended in December 2002. Included in this review, Fitch discussed the current state of the portfolio with the asset manager and its portfolio management strategy. According to the July 4, 2004 trustee report, the portfolio includes $16.46 million (15.15%) in defaulted assets. The class A overcollateralization test is failing at 72.00% with a trigger of 120.00% and the class B overcollateralization test is failing at 46.77% with a trigger of 109.00%. The ratings of the class A-2A and A-3 notes address the likelihood that investors will receive full and timely payments of interest, as per the governing documents, as well as the stated balance of principal by the stated maturity date. The rating of the class A- 2B notes addresses the likelihood that investors will receive the aggregate outstanding amount of principal by the stated maturity date. The rating of the class B notes addresses the likelihood that investors will receive ultimate and compensating interest payments, as per the governing documents, as well as the stated balance of principal by the stated maturity date. Fitch will continue to monitor BEA 1998-1 closely to ensure accurate ratings. Deal information and historical data on BEA 1998-1 is available on the Fitch Ratings web site at http://www.fitchratings.com/ BELL CANADA: Digital Bundle Customers Can Now Earn Aeroplan Miles ----------------------------------------------------------------- Aeroplan, Canada's leading loyalty program and Bell Canada, Canada's leading communications company, entered into a national, multi-year, multi-channel relationship that will provide Aeroplan members with another innovative way to accumulate Aeroplan Miles. This partnership will offer Aeroplan members who subscribe to the Digital Bundle from Bell the opportunity to accumulate 1 Aeroplan Mile for every $1 spent on a combination of high-speed Internet, wireless and digital television services. Aeroplan members will be able to take advantage of this mileage accumulation opportunity with Bell starting in November 2004. "Our new relationship with Bell Canada is a strategic and powerful affirmation of Aeroplan's brand promise, our continued expansion as a loyalty program and our capability to attract high calibre partners who are leaders in their respective markets," said Rupert Duchesne, President and Chief Executive Officer, Aeroplan. "Aeroplan members have told us that they want new opportunities to earn valuable Aeroplan Miles with premier brands like Bell Canada; [the] announcement is the first in a series of partner relationships planned for the coming year that are designed to respond to the needs of our members." In addition to potentially benefiting Aeroplan's millions of members, this partnership provides significant growth potential for Aeroplan as it pursues its business mandate to acquire partners in each major segment of the retail, service, small business and corporate marketplace. "Bell Canada continues to innovate and deliver new ways of providing value to its customers who expect simple, one-stop shopping. Partnering with Aeroplan to deliver Aeroplan Miles to customers of the Digital Bundle from Bell shows our appreciation for their on-going loyalty," said Alek Krstajic, Chief Marketing Officer, Consumer Markets, Bell Canada. In addition to the savings offered with the Digital Bundle, Bell customers who subscribe to more than one service such as wireline, wireless, Internet, or digital television will receive comprehensive billing details on Bell's One Bill. Customers can choose automatic withdrawal, cheque, phone, Internet, or ATM payment methods. Bell Canada -- http://www.bci.ca/-- provides connectivity to residential and business customers through wired and wireless voice and data communications, local and long distance phone services, high speed and wireless Internet access, IP-broadband services, e-business solutions and satellite television services. Bell Canada is wholly owned by BCE Inc. Bell Canada is operating under a court supervised Plan of Arrangement, pursuant to which it intends to monetize its assets in an orderly fashion and resolve outstanding claims against it in an expeditious manner with the ultimate objective of distributing the net proceeds to its shareholders and dissolving the company. Bell Canada is listed on the Toronto Stock Exchange under the symbol BI. Aeroplan, a wholly owned subsidiary of Air Canada, is known as one of the most rewarding loyalty programs in the industry. Aeroplan has been voted the world's Best Frequent Flyer Program for the second consecutive year at the 2003 OAG (Official Airline Guide) Airline of the Year Awards in April 2003. BRAND SERVICES: S&P Cuts Rating to B Following Covenant Violations ------------------------------------------------------------------ Standard & Poor's Ratings Services lowered its corporate credit rating on scaffolding service provider Brand Services Inc. to 'B' from 'B+'. The outlook is negative. The outlook is negative pending a review of the company's amended financial covenants in its bank credit facility. Chesterfield, Missouri-based Brand had about $290 million of debt as of June 30, 2004. "The rating action follows Brand's disclosure that during the second quarter, the company violated the minimum interest coverage and maximum leverage ratio under its senior secured credit facility," said Standard & Poor's credit analyst Steven K. Nocar. "Although the company received a waiver for the second-quarter violation, the company projects noncompliance with these covenants for the period ended Sept. 30, 2004," he continued. The downgrade reflects: -- Profitability and free cash flow metrics that have underperformed expectations when Standard & Poor's raised its ratings in late 2002. Brand had been expected to reduce debt by at least $60 million by year-end 2004; to date, Brand has paid down about only $25 million. Consequently, expected improvement in credit measures has not been realized. -- Concerns about the medium-term financial performance of the company. While Brand is expected to receive waivers to cover the next two periods, the covenant violations are of particular concern as refinery maintenance activity was unusually heavy during the first quarter of this year. Although maintenance activity is expected to pick up again by the fourth quarter of 2004 and remain fairly robust into 2006, scaffolding demand could fall significantly after 2006, as the refining industry reduces its clean-fuels spending. The negative outlook reflects the uncertainty regarding the outcome of Brands credit facility covenant negotiations. If Brand successfully amends its credit facility to provide for more flexible financial covenants, Standard & Poor's would likely revise the outlook to stable. Conversely, the ratings could be downgraded if the borrowing capacity under the company's credit facility becomes restricted or the financial covenants are insufficiently relaxed such that the company would likely confront a repetitive stream of covenant breaches. BREUNERS HOME: Wants to Employ Pachulski Stang as Attorneys ----------------------------------------------------------- Breuners Home Furnishings Corp., and its debtor-affiliates ask the U.S. Bankruptcy Court for the District of Delaware for permission to hire Pachulski, Stang, Ziehl, Young, Jones & Weintraub PC as their bankruptcy Counsel. In preparing for its representation of the retailer, Pachulski Stang acquired familiarity with the Debtors' business affairs and many potential legal issues that may arise in the context of their chapter 11 cases. Pachulski Stang will: a) provide legal advice with respect to their powers and duties as debtors-in-possession in the continued operation of their business and management of their properties; b) prepare and pursue motions for the approval of procedures relating to the sales of the Debtors' assets; c) prepare and pursue confirmation of a plan and approval of a disclosure statement; d) prepare other necessary applications, motions, answers, orders, reports and other legal papers on behalf of the Debtors; e) appear and protect the interests of the Debtors before the Court; and f) perform all other legal services for the Debtors which may be necessary and proper in these proceedings. The principal attorneys and paralegals designated to represent the Debtor and their current standard hourly rates are: Professionals Hourly Rate ------------- ----------- Richard M. Pachulski $675 Laura Davis Jones 595 Bruce Grohsgal 435 Jeffrey N. Pomeranz 465 Werner Disse 390 Jonathan J. Kim 375 J. Rudy Freeman 325 Shannon Brooks (paralegal) 150 Camille Ennis (paralegal) 135 To the best of the Debtors knowledge, Pachulski Stang is a "disinterested person" as the term is defined in Section 101(14) of the Bankruptcy Code. Headquartered in Lancaster, Pennsylvania, Breuners Home -- http://www.bhfc.com/-- is one of the largest national furniture retailers focused on the middle to upper-end segment of the market. The Company, along with its debtor-affiliates, filed for chapter 11 protection on July 14, 2004 (Bankr. Del. Case No. 04-12030). Liquidators Great American Group, Gordon Brothers, Hilco Merchant Resources, and Zimmer-Hester) were brought on board within the first 30 days of the bankruptcy filing to conduct Going-Out-of-Business sales at the furniture retailer's 47 stores. Bruce Grohsgal, Esq. and Laura Davis Jones, Esq., at Pachulski, Stang, Ziehl, Young & Jones represent the Debtors in their restructuring efforts. The Company reported more than $100 million in assets and liabilities when it sought protection from its creditors. BRIAZZ: Wants Open-Ended Deadline to Decide on Unexpired Leases --------------------------------------------------------------- Briazz, Inc., asks the U.S. Bankruptcy Court for the Western District of Washington at Seattle for more time to determine whether to assume, assume and assign, or reject its unexpired nonresidential real property leases. The Debtor tells the Court that at this point, it is unable to determine the necessity or propriety of assuming the leases. The Debtor is actively working towards the preparation of a Plan of Reorganization. Briazz reminds the Court that the Debtor-in- Possession financing facility requires the Company to confirm a plan of reorganization by December 31, 2004. Consequently, the Debtor asks the Court for an extension of time to make lease-related decisions through the earlier of: (a) the confirmation of a Plan of Reorganization; or (b) December 31, 2004 Headquartered in Seattle, Washington, Briazz Inc. -- http://www.briazz.com/-- serves fresh, high-quality lunch and breakfast foods and between-meal snacks from company owned cafes in urban markets. The Company filed for chapter 11 protection (Bankr. W.D. Wash. Case No. 04-17701) on June 7, 2004. Cynthia A. Kuno, Esq., and J. Todd Tracy, Esq., at Crocker Kuno Ostrovsky LLC, represents the Company in its restructuring efforts. When the Debtor filed for protection from its creditors, it listed $5,400,000 in assets and $12,200,000 in liabilities. CATHOLIC CHURCH: Court Approves AICCO Financing Agreement --------------------------------------------------------- The Archdiocese of Portland in Oregon asks the U.S. Bankruptcy Court for authority to enter into a secured insurance premium finance agreement with A.I. Credit Corp., or its subsidiary, AICCO, Inc. The Archdiocese of Portland Debtor needs to pay premiums for various insurance policies, including property, general liability and workers' compensation. The Archdiocese wants to stretch those premium payments over time to avoid depleting its available cash resources. The Court authorizes the Archdiocese of Portland in Oregon to grant A.I. Credit Corp. or its subsidiary, AICCO, Inc., a first priority security interest in the Policies, including: (a) all funds that is or may become due under the Financing Agreement because of a loss under the Policies that reduces unearned premiums, subject to the interest of any applicable mortgagee or loss payee; (b) any return of premiums or unearned premiums under the Policies; and (c) any dividends that may become due the Debtor in connection with the Policies. In the event that the returned or unearned premiums or other amounts due under the Policies are insufficient to pay the total amount owing by the Debtor to AICCO, any remaining amount owing to AICCO, including reasonable attorney's fees and costs, will be an allowed claim in the Debtor's case with priority as an administrative expense. The Lien granted to AICCO in connection with the Policies will be senior to any security interests or liens granted to any other secured creditors in the Debtor's case. Because AICCO has extended credit to the Debtor in good faith, the reversal or modification of these provisions on appeal will not affect the validity of the debt owed to AICCO or the priority of its Liens. The Archdiocese of Portland in Oregon filed for chapter 11 protection (Bankr. Ore. Case No. 04-37154) on July 6, 2004. Thomas W. Stilley, Esq. and William N. Stiles, Esq. of Sussman Shank LLP represent the debtor in its restructuring efforts. In its Schedules of Assets and Liabilities filed with the Court on July 30, 2004, the Portland Archdiocese reports $19,251,558 in assets and $373,015,566 in liabilities. (Catholic Church Bankruptcy News, Issue No. 4; Bankruptcy Creditors' Service, Inc., 215/945-7000) CHAPCO CARTON: Wants to Retain Adelman & Gettleman as Counsel ------------------------------------------------------------- Chapco Carton Company asks the U.S. Bankruptcy Court for the Northern District of Illinois for authority to retain Adelman & Gettleman as its bankruptcy counsel. Adelman & Gettleman will: a) provide the Debtor legal advice with respect to its powers, duties, rights and obligations as debtor-in-possession in the continued management of its property an affairs; b) attend meetings and negotiate with representatives of creditors and other parties in interest; c) assist the Debtor in the formulation, preparation, implementation and consummation of a plan of reorganization and disclosure statement, if necessary or appropriate, and all related agreements and/or documents and to take any actions necessary to achieve confirmation of such plan; d) examine and take all actions necessary to protect and preserve the Debtor's estate, including the prosecution of such litigation as may be necessary or appropriate on behalf of the estate; e) prepare on behalf of the Debtor, such applications, motions, complaints, orders, reports and other legal papers as may be necessary; and f) perform all other legal services and provide such legal advice to the Debtor as necessary. The principal attorneys who will represent the Debtor and their current hourly billing rates are: Professionals Rates ------------- ----- Howard L. Adelman $395 Chad H. Gettleman 395 Henry B. Merens 395 Brad A. Berish 365 Mark A. Carter 365 Adam P. Silverman 365 Nathan Q. Rugg 245 Stanley F. Orzula 215 Sam Banayan 215 Mr. Adelman, who leads the team in this engagement, assures the Court that the Firm is a "disinterested person" as that term is defined in Section 101(14) of the bankruptcy code. Headquartered in Bolingbrook, Illinois, Chapco Carton -- http://www.chapcocarton.com/-- sells and distributes folding cartons used for retail packaging in food, candy, office supplies and automotive parts industries. The Company filed for chapter 11 protection on July 13, 2004 (Bankr. N.D. Ill. Case No. 04-26000). When the Debtor filed for protection from its creditors, it listed $15,232,256 in total assets and $19,220,379 in total debts. CHAS COAL: Creditors Must File Proofs of Claim by September 20 -------------------------------------------------------------- The United States Bankruptcy Court for the Eastern District of Kentucky, London Division, set September 20, 2004, as the deadline for all creditors owed money on account of claims arising prior to June 17, 2004, by Chas Coal, LLC, to file their proofs of claim. Creditors must file written proofs of claim and claim forms must be delivered to: United States Bankruptcy Court Clerk Post Office Box 1111, Lexington, Kentucky 40588-1111 Creditors who have claims against the Debtor but fail to file their proofs of claim on or before the Bar Date will be forever barred from asserting their claims. Headquartered in London, Kentucky, Chas Coal, LLC -- http://www.chascoal.com/-- is a provider of high quality, low sulfur Eastern Kentucky coal. The Company filed for chapter 11 protection on June 17, 2004 (Bankr. E.D. Ky. Case No. 04-60972). Robert Gregory Lathram, Esq., in London, Kentucky, represents the Debtor in its restructuring efforts. When the Company filed for protection from its creditors, it listed $28,080,624 in total assets and $8,601,895 in total debts. CHIQUITA BRANDS: Names Jay Braukman as New Chief Financial Officer ------------------------------------------------------------------ Chiquita Brands International, Inc., (NYSE: CQB) named John (Jay) W. Braukman III, 50, as its new senior vice president and chief financial officer. Mr. Braukman will be responsible for all aspects of the company's financial operations worldwide. Mr. Braukman succeeds James B. Riley, who will remain with the company through the end of August to ensure a smooth transition. In addition, Chiquita promoted Manuel Rodriguez to senior vice president of government and international affairs. The company also announced that the heads of its Fresh Cut Fruit and Asian operations were leaving the company. "Since joining Chiquita earlier this year, one of my first priorities has been to ensure that we have the right people in the right positions throughout the company," said Fernando Aguirre, chairman and chief executive officer. "I am dedicated to building a high-performance organization as we pursue growth opportunities and the company's transformation into a more consumer- and marketing-centric organization." Mr. Braukman: Former GE and Telecom Industry Veteran Brings Diverse Financial and International Experience to CFO Role "Jay has a very strong financial background with excellent experience derived from working in both large multinational and emerging growth companies, including 25 years with one of the world's premier companies, General Electric," Mr. Aguirre said. "He brings extensive international experience and has held a number of key financial and accounting positions during his career. I look forward to him joining the Chiquita team." "I'm delighted to come to Chiquita and look forward to helping the company increase shareholder value," Mr. Braukman said. "Chiquita has a solid financial foundation that offers many prospects to leverage its tremendous brand into new growth opportunities." Prior to joining Chiquita, Mr. Braukman served as chief operating officer of ITC DeltaCom, a provider of integrated communications services in the southeastern United States, since its merger with BTI Telecom in October 2003. Before the ITC^DeltaCom and BTI merger, Mr. Braukman had served as BTI's chief operating officer and chief financial officer. From March 2000 to December 2001, he had served as executive vice president and chief financial officer for Rhythms NetConnections, a broadband service provider. Before joining Rhythms, Mr. Braukman served as a senior finance officer at a variety of General Electric businesses, including chief financial officer of GE's $8.5 billion Information Technology Solutions business unit, which had operations and a workforce of 13,000 across the United States, Mexico, Canada, Brazil, Europe and Australia. Mr. Braukman also served as chief financial officer of GE's Italian operations, Nuovo Pignone, a global diversified business with sales of $1.6 billion and eight manufacturing locations. As CFO for Nuovo Pignone, he was responsible for the financial leadership of GE Power Systems Europe as well as the European Finance Council. He also served as CFO of GE's Transportation Systems business based in Pennsylvania, where he provided financial and business development leadership for a $1.4 billion business serving the transportation industry worldwide. Mr. Braukman holds a bachelor's degree in business administration with a major in accounting from the University of Cincinnati. Mr. Rodriguez: Successfully Managing International Regulatory Strategies Chiquita also named Manuel Rodriguez, 55, senior vice president of government and international affairs. Rodriguez becomes a member of the company's Management Committee of senior executives who provide strategic counsel and report directly Aguirre. "Manuel has demonstrated tremendous leadership in successfully managing complex governmental relationships and labor negotiations for Chiquita for many years," said Mr. Aguirre. "He has been instrumental in directing our strategy and conveying Chiquita's positions on key local and international regulatory and labor matters. This promotion is well-deserved." Mr. Rodriguez is responsible for Chiquita's relationships with governmental and regulatory agencies worldwide, including directing the company's strategy with regard to the European Union as it moves toward a tariff-only banana import regime. In addition, Rodriguez will continue to manage the company's labor relations, in particular, its relationships with key international and regional unions, including the International Union of Foodworkers -- IUF -- and Coordinating Committee of Banana Workers' Unions -- COLSIBA. Most recently, Mr. Rodriguez served as Chiquita's vice president of government affairs and associate general counsel. He began his career with the company in 1980, having served in various senior legal and labor relations positions. Mr. Rodriguez earned his master of laws degree from Columbia University and his J.D. degree from the University of Puerto Rico. He received a bachelor of science degree in psychology and a certificate in Latin American Studies from St. Joseph's College. Operational Leaders for Fresh Cut Fruit & Asia to Leave Company The company announced two additional management changes: Jill Albrinck, senior vice president of Fresh Cut Fruit, and Chris Augustijns, president of Chiquita Fresh Group - Asia, are leaving the company. Ms. Albrinck joined Chiquita in 2002 to lead the company's strategy and new business development efforts, bringing with her an excellent record of accomplishment with turnarounds and corporate growth strategies. In this role, she also led the company's performance improvement program that delivered valuable cost reductions. Later, Ms. Albrinck assumed the leadership for the company's Processed Fruit Ingredients business and Chiquita Fresh Cut Fruit, a new business that was launched in the Midwestern United States in November 2003. "Jill has made significant contributions to Chiquita since the company emerged from bankruptcy more than two years ago, and we owe her a great deal as she helped advance the company's turnaround and led the launch of one of our growth opportunities - Chiquita Fresh Cut Fruit," Mr. Aguirre said. "Our Chiquita Fresh Cut Fruit business is up and running with good feedback from customers and consumers. We are now looking for a new leader to take this business to the next level." The company announced that Mr. Aguirre would lead this business on an interim basis until new leadership is named. Mr. Augustijns, hired at Chiquita in July from Coca-Cola, resigned his position to return to Coke. The soft-drink company pursued Mr. Augustijns after his departure and convinced him to return to Coca-Cola. "We will continue our growth plans in the region with the strong team currently in place," said Mr. Aguirre. "We still have a robust operation in Asia and an excellent joint venture partner. We will reopen our search for a new leader for this business immediately." CIRTRAN CORP: Reports $4 Mil. Stockholders' Deficit at June 30 -------------------------------------------------------------- CirTran Corp. (OTC BB: CIRT), an international full-service contract electronics manufacturer of printed circuit board assemblies, cables and harnesses, has reported a gross revenue of $1,924,242 for the second quarter of 2004, which represents a 361% increase over the same period from the previous year, 2003. Year- to-date gross revenue is recorded at $2,603,604, which represents a 279% increase over the same period from the previous year, 2003. Iehab J. Hawatmeh, president and CEO of CirTran Corp., commented, "We are very pleased with the company's second quarter revenues and financial results. We attribute this to improved efficiency and effective marketing and we stay committed to continuing to improve our operational efficiency while we activate more marketing programs to sustain our long- and short-term growth." The company is pleased to announce the following financial highlights for the second quarter of 2004: -- Gross revenue for the second quarter up 361% compared to same period last year. -- Gross revenue for the first six months up 279% compared to same period last year. -- Gross profit for the second quarter up 148% compared to same period last year. -- Gross profit for the first six months up 164% compared to same period last year. Net loss for the second quarter 2004 of $361,964 includes a $315,000 expense for acquisition and organizational costs for the startup of CirTran-Asia division. -- Accounts receivables up more than 1,000% since Dec. 31, 2003. -- Total assets for the second quarter up more than 82% since Dec. 31, 2003. -- Accounts payable for the second quarter down more than 27% since Dec. 31, 2003. -- Stockholders deficit for the second quarter down more than 18% since Dec. 31, 2003. -- Sales backlog for the second quarter in excess of $8,000,000 (company record). Trevor M. Saliba, executive vice president of worldwide business development of CirTran Corp., commented, "CirTran's unique marketing program and sales model continues to prove itself as evidenced by the second quarter sales increase and our record backlog. We are projecting to continue to see increased sales each new quarter based on our current backlog and pipeline of projects that we are in the final stages of negotiation." Pursuant to the multiple multimillion-dollar contract wins to date, the company's backlog is currently in excess of $8,000,000 and will increase accordingly during the third and fourth quarters of 2004. About CirTran Corp. Founded in 1993, CirTran Corp. has established itself as a premier full-service contract electronics manufacturer by building printed circuit board assemblies, cables, and harnesses to the most exacting specifications. CirTran is headquartered in Salt Lake City with a state-of-the-art 40,000-square-foot facility. CirTran also provides "just-in-time" inventory management techniques that minimize the OEM's investment in component inventories, personnel and related facilities, thereby reducing costs and ensuring speedy time to market. For further information about CirTran, visit the company's Web site located at http://www.cirtran.com/ At June 30, 2004, CirTran Corp.'s balance sheet showed a $4,015,036 stockholders' deficit, compared to a $4,941,251 deficit at December 31, 2003. CITRICO INTERNATIONAL: Section 304 Petition Summary --------------------------------------------------- Petitioners: Kenneth Krys and Christopher Stryde, as provisional joint liquidators of the Debtor Debtor: Citrico International Limited Ugland House P.O. Box 309 G.T. South Church Street George Town Grand Cayman Cayman Islands Case No.: 04-73442 Type of Business: The Debtor manufactures and markets citrus products for the food, beverage, pharmaceutical and nutraceutical industries. Section 304 Petition Date: August 17, 2004 Court: Northern District of Georgia (Atlanta) Judge: Petitioners' Counsels: A. Alexander Teel, Esq. James C. Cifelli, Esq. Lamberth, Cifelli, Stokes & Stout, PA East Tower, Suite 550 3343 Peachtree Road, North East Atlanta, GA 30326-1022 Tel: 404-262-7373 Estimated Assets: $10 Million to $50 Million Estimated Debts: $50 Million to $100 Million COMPRESSION POLYMERS: Moody's Puts B1 Rating on $23M Loan Add-on ---------------------------------------------------------------- Moody's Investors Service affirmed the ratings of Compression Polymers Holdings, LLC, and its subsidiary Compression Polymers Corp., a manufacturer of engineered extruded plastic sheet products. Moody's has also assigned a B1 rating to the $23 million add-on to the existing senior secured term loan. The rating outlook is stable. Ratings affirmed: -- B1 for the $20 million senior secured revolver, due 2009; -- B1 for the $90 million first-lien senior secured term loan, due 2010; -- B2 for the $30 million second-lien senior secured term loan, due 2010; -- B1 senior implied rating; and -- B3 senior unsecured issuer rating. Rating assigned: -- B1 for the $23 million add-on to first-lien senior secured term loan, due 2010; Proceeds from the $23 million add-on will be used to finance a $23 million dividend payment to existing shareholders, which consist of Whitney & Co., LLC, Clearview Capital, LLC, The Crane Group and company management. This dividend follows a $30 million dividend payment made in February 2004 to shareholders. Moody's says that the rating affirmation considers Compression Polymers' strong financial performance in the first half of 2004 and the likelihood that this level of performance will be sustained over the next 18 to 24-month time period. For the first half of 2004, sales increased 33% over the prior year period while EBITDA was up 31%. The solid revenue growth was driven primarily by very strong sales of synthetic lumber products. Moody's believes that geographic expansion and increasing acceptance of Compression Polymers' synthetic lumber products underpin its strong growth potential over the medium term. On the other hand, the ratings continue to be constrained by Compression Polymers' high exposure to rising resin prices, modest cash flow generation, small size and significant customer concentration risk. Rising resin prices continue to pressure Compression Polymers' profit margins as the company only has limited ability to pass through cost increases to its customers. This, coupled with higher working capital investment to support revenue growth, is likely to continue to depress cash flow generation over the near to medium term. The stable rating outlook balances the company's strong growth potential and in particular, that of its synthetic lumber business, against the risk of further de-capitalization by shareholders that could constrain its financial flexibility and potential improvement in its credit profile. The B1 rating on the $20 million revolver and the $113 million first-lien senior secured credit facilities reflects their seniority in the company's debt structure and the support provided by junior debt. The B2 on the $30 million second-lien senior secured term loan reflects its subordination to first-lien debt and lack of collateral support. Both the first-lien and second- lien facilities will be governed by the same covenant package and secured by a first-lien and second-lien, respectively, on the capital stock as well as all domestic assets of the company and its subsidiaries. All facilities will be guaranteed on a senior secured basis by all of the company's current and future domestic subsidiaries and Holdings. Headquartered in Moosic, Pennsylvania, Compression Polymers Holdings, LLC is a manufacturer of engineered extruded plastic sheet products. COTT CORP: Moody's Upgrades Sr. Sub. Rating to Ba3 & Debt to Ba1 ---------------------------------------------------------------- Moody's Investors Service upgraded the ratings for Cott Corporation recognizing the company's strong and consistent financial and operating performance throughout the recent past and affirming Moody's expectation of continued success over the ratings horizon. The ratings reflect Cott's proven abiity to achieve consecutively strong profitability (EBIT return on assets at or above 15%) and cash flow metrics (free cash flow to debt approaching 20%) while maintaining good earnings and asset quality. Financial leverage has reduced significantly over the past two years as Debt to EBIT is now approximately 2 times (approximately 1.6 times EBITDA) down from 4 times (3 times EBITDA). The ratings incorporate: (1) Cott's acquisitive growth strategy; (2) albeit with some financial limitations; and (3) are supported by the company's record of prudent purchases and well executed integration. The ratings also acknowledge Cott's strong position in the retailer brands market, which continues to grow share and profitability to retailers globally. The ratings are limited by capacity constraints and the related adverse effects on margins (i.e. increased distribution and manufacturing costs from outsourcing to co-packers) caused by greater than anticipated volume. Also, the ratings reflect some concern about the normal business challenges of weather, increased raw materials, interest, and currency costs. In Moody's opinion, liquidity should be very good in the near term as Cott maintains strong net cash generated by operations, which covers capital expenditures - including growth spending. There are no near term maturities (although, the credit facility matures in December 2005) and cash on hand, across geographies, averages approximately $28 million. Average availability under the $150 million of no less than approximately $60 million (net of roughly $4 million letters of credit outstanding) should remain accessible given Moody's expectation of ample cushion under Cott's financial covenants throughout each quarter in the near term, absent event risk. Liquidity is further supported by the ability to access to the capital markets. The change in the ratings outlook to stable from positive at prior rating levels reflects tolerance for modest adverse fluctuations in credit statistics before triggering a negative outlook. Specifically, modest stretching of metrics for a limited amount of debt-funded acquisitions, which are within Cott's core competencies, would likely be acceptable at current rating levels. Relatively small acquisition baskets in the current credit agreement provide comfort. Material erosion in margins or overall profitability, increases in cash consumption or financial leverage, or integration difficulties could warrant a negative ratings outlook. Moody's upgraded the following: -- Approximately $150 million senior secured revolver, maturing in December 2005, to Ba1 from Ba3 (revolver was upsized from $75 million and consists of $125 million in the US and Canada plus GBP 15 million or aproximately equivalent USD 25 million); -- $275 million 8% senior subordinated note, due 2011, to Ba3 from B2; -- Senior implied rating to Ba2 from Ba3; and -- Senior unsecured issuer rating to Ba3 from B1. Ratings outlook changed to stable from positive at prior rating levels. The upgrade of the revolver rating to Ba1 from Ba3 reflects ample collateral coverage in a distress scenario given its priority position in the capital structure. These, combined with the apparently good quality of collateral and the presence of debt and tangible equity cushion beneath the secured bank debt, warrant notching above the Ba2 senior implied rating. The upgrade of the senior subordinated note to Ba3 from B2, with the compression of the notching to one level below the Ba2 senior implied rating from two levels previously, reflects the perceived strength of the enterprise and recovery value in the event of default. The Ba3 rating incorporates the contractual subordination to senior debt (consisting of approximately $80 million revolver outstandings, approximately $7.5 million capital leases, plus approximately $185 million of accounts payable and accrued liabilities as of July 3, 2004). Headquartered in Toronto, Ontario, Cott Corporation is the world's largest retailer brand soft drink supplier with a leading position in take-home carbonate soft drink markets in the US, Canada, and the UK. For the last twelve months ended July 3, 2004, revenue was approximately $1.6 billion, EBIT was approximately $162 million, and EBITDA was approximately $225 million. CROWN PACIFIC: Interfor Gets Court OK to Acquire Asset for $73.3M ----------------------------------------------------------------- The U.S. Bankruptcy Court in Phoenix, Arizona approved the acquisition of the sawmill assets of Crown Pacific Limited Partners and its affiliates in the U.S. Pacific Northwest by International Forest Products Limited (TSX IFP.A). Interfor announced on July 9 that it entered into an agreement to buy three Crown Pacific mills in Port Angeles and Marysville Washington, and in Gilchrist Oregon for US$57.3 million, plus working capital estimated at US$16 million. The transaction is scheduled to close on Sept. 1, 2004. "We are very pleased that this deal has been approved by the courts," said Duncan Davies, Interfor's President and Chief Executive Officer. "This acquisition is consistent with our goal of expanding geographically and expanding our product lines." "We look forward to working with the Crown Pacific employees who will be joining Interfor and to building on well-established relationships with customers and vendors." The addition of the Crown Pacific sawmills will increase Interfor's total lumber capacity to almost 1.3 billion board feet per year and add more than C$120 million to the Company's annual sales revenue. The mills have a combined annual capacity of 335 million board feet. Interfor produces a diversified range of quality wood products for sale to world markets. The Company currently has six sawmills in southern coastal British Columbia and one sawmill in the central interior region of the province. The Company also has four remanufacturing facilities including one in Sumas, Washington. Headquartered in Portland, Oregon, Crown Pacific Partners, L.P., is an integrated forest products company. Crown Pacific owns and manages approximately 524,000 acres of timberland in Oregon and Washington, and uses modern forest practices to balance growth with environmental protection. Crown Pacific operates mills in Oregon and Washington, which produce dimension lumber, and also distributes lumber products through its Alliance Lumber operation. The Debtors filed for chapter 11 protection on June 29, 2003 (Bankr. D. Ariz. Case No. 03-11260). Alisa C. Lacey, Esq., and C. Taylor Ashworth, Esq., at Osborn Maledon, P.A., represent the Debtors in their restructuring efforts. DELTA AIR: Debt Restructuring Risks Prompts S&P's Junk Ratings -------------------------------------------------------------- Standard & Poor's Ratings Services lowered its ratings on Delta Air Lines, Inc., including lowering the corporate credit rating to 'CCC' from 'CCC+', reflecting an increasing risk of an out-of- court restructuring of debt. The outlook is negative. Delta announced a consent solicitation seeking permission from holders of many equipment trust certificates and pass-through certificates (but not enhanced equipment trust certificates) to lift limitations on the airline's ability to buy and hold the certificates in order "to provide Delta with greater flexibility to effect a successful out-of-court restructuring." Restructuring of bond payments or a coercive exchange would be considered a default and cause the company's corporate credit rating to be lowered to 'D' -- default -- or 'SD' -- selective default. Ratings of equipment trust certificates and pass-through certificates were lowered two notches, to 'CCC', the same level as the revised corporate credit rating. Ratings of most senior classes of enhanced equipment trust certificates, which are considered more difficult to restructure outside of bankruptcy, were not lowered. "Delta's consent solicitation provides the clearest signal yet that the company will seek to restructure selected debt obligations outside of bankruptcy," said Standard & Poor's credit analyst Philip Baggaley. The changes sought would make possible certain types of debt restructuring, such as a tender offer or exchange offer, if certificate-holders agree. Separately, Delta's CEO, Gerald Grinstein, presented the conclusions of an extensive strategic review and recommended a turnaround plan to the company's board of directors. Details were not disclosed, but Mr. Grinstein said in a letter to employees that it would involve further pay and benefit cuts for all employees, and changes in the airline's routes, fleet, and fare structure. Liquidity, previously substantial, is dwindling rapidly, with $2.0 billion of unrestricted cash at June 30, 2004, down from $2.7 billion at Dec. 31, 2003. The company indicated that it expects its cash position to decline at a similar rate during the second half of the year, which would imply year-end cash of $1.5 billion. Although this amount in itself would not necessarily trigger a bankruptcy filing, expectations of further cash losses during the seasonally weak first quarter might persuade Delta to file for Chapter 11 unless it had secured the labor concession it is seeking. The outlook is negative. Ratings could be lowered if Delta does not make rapid progress toward significant cost reductions in its negotiations with pilots, or if there are further moves toward out-of-court debt restructuring. In addition, material deterioration in Delta's already weak financial profile could trigger a downgrade. DRESSER INC: June 30 Balance Sheet Upside-Down by $318.3 Million ---------------------------------------------------------------- Dresser, Inc., provided financial results for the quarter ended June 30, 2004. The Company recorded revenues of $495.9 million and net income of $18.1 million, compared to revenues of $394.9 million and a loss of $16.9 million during the comparable period in 2003. Year-on-year improvements in revenue and income were recorded in all operating segments. Approximately $13.5 million of the year-on-year increase in revenue was due to the previously announced acquisition of the distribution business of Nuovo Pignone S.p.a. in June. Steve Lamb, President and Chief Executive Officer of Dresser, Inc., said, "We are pleased with the trend of improvements in our business that started in the second half of 2003. Our markets are gradually turning more favorable in North America, while international business remains robust. Improving markets, combined with the results from our restructuring and internal operational improvement efforts, are helping to sustain the positive momentum in our business." Gross profit in the second quarter of 2004 was $143.4 million, compared to $101.1 million for the first quarter of 2003. Increases were due primarily to higher revenues, cost reduction efforts and lower restructuring and other expenses. Gross margin for the three-month period ended June 30, 2004, was 28.9%, compared to 25.6% for the same period in 2003. In 2003, gross margins were adversely affected by a strike in the Company's natural gas engine business. Selling, Engineering, General and Administrative expenses of $103.7 million in the second quarter of 2004 were 20.9% of revenues, compared to SEG&A expenses of $95.1 million representing 24.1% of revenues in the same period last year. In 2003, there were expenses related to the acquisition of the assets of Tokheim North America and re-audit costs that impacted SEG&A expenses. Operating income in the second quarter of 2004 was $39.7 million, an increase of $33.7 million from $6.0 million in the second quarter of 2003. Approximately $0.6 million of the increase was due to the Nuovo Pignone distribution business acquisition. Operating margin in the first quarter of 2004 was 8.0%, compared to 1.5% in the second quarter of 2003. During the second quarter of 2004, the Company realized a $1.7 million gain from the sale of excess land in Waukesha, Wisconsin, $1.8 million in favorable settlements of legal matters, and a $1.6 million benefit from the integration of Company-provided retiree prescription drug benefits with recent changes to the Medicare program. There was also a $1.0 million write-off of an environmental indemnification, which offset a portion of the gains. The Company posted net income of $18.1 million for the quarter ended June 30, 2004, compared to a net loss of $16.9 million for the year-ago period. EBITDA for the second quarter of 2004 was $51.8 million, an increase of $29.2 million from $22.6 million in the same period last year. Cash and cash equivalents totaled $92.4 million on June 30, 2004, compared to $102.2 million on June 30, 2003. Borrowings under the Company's senior secured credit facility, senior unsecured term loans, and senior subordinated notes were $1,089.7 million at the end of the second quarter of 2004, compared to $952.0 million at the end of the second quarter of 2003. The Company financed the acquisition of the distribution business, including certain retail fueling systems and gas metering operations, of Nuovo Pignone in the second quarter by borrowing $175 million under its senior secured credit facility as an add-on to its existing term loan C. Total debt, including capital leases, on June 30, 2004, was $1,103.0 million compared to $980.2 million on June 30, 2003. Bookings for the quarter ended June 30, 2004 were $507.7 million, up $59.3 million from bookings of $448.4 million in the quarter ended June 30, 2003. Bookings increased in all operating segments. Approximately $12.4 million in the bookings increase was due to the Nuovo Pignone distribution business acquisition in the quarter. Backlog on June 30, 2004 was $559.7 million, compared to $458.7 million on June 30, 2003. Backlog increases were recorded in all three operating segments, with $53.9 million of the increase attributable to the Nuovo Pignone distribution business acquisition. At June 30, 2004, Dresser, Inc.'s balance sheet showed a $318.3 million stockholders' deficit, compared to a $312.6 deficit at December 31, 2003. Consolidated Second Quarter 2004 Results Compared to First Quarter 2004 Results Revenues of $495.9 million in the second quarter of 2004 were up $59.6 million from revenues of $436.3 million in the first quarter of 2004, with strong increases in the flow control and measurement systems segments, partially offset by a decrease in the compression and power systems segment. Gross profit in the second quarter of 2004 was $143.4 million compared to $124.4 million for the first quarter of 2004. Gross margin of 28.9% in the second quarter of 2004 was up slightly from 28.5% for the first quarter of 2004, primarily due to the benefits of higher sales volume. SEG&A expenses of $103.7 million were 20.9% of revenues in the second quarter of 2004, down from $104.7 million or 24.0% of revenues, in the first quarter of 2004. The decrease was primarily due to restructuring expenses and previously-announced executive retirement and separation expenses in the first quarter of 2004, partially offset by volume related increases. There was $1.3 million of restructuring expenses in the second quarter of 2004, compared to $3.5 million in the first quarter of 2004. Operating income of $39.7 million for the quarter ended June 30, 2004 was up $20.0 million from the $19.7 million recorded in the quarter ended March 31, 2004. Operating margin was 8.0% in the second quarter of 2004, compared to 4.5% in the first quarter of 2004. Net income of $18.1 million in the second quarter of 2004 improved $36.5 million from the $18.4 million net loss in the first quarter of 2004. The first quarter of 2004 included a $16.9 million write-off of deferred financing costs in conjunction with the previously announced refinancing of the Company's senior secured credit facility, in addition to the other charges described. EBITDA in the second quarter of 2004 of $51.8 million increased by $20.1 million from the $31.7 million recorded in the first quarter of 2004. Cash and cash equivalents totaled $92.4 million on June 30, 2004, compared to $106.8 million on March 31, 2004. Changes in operating working capital (receivables, plus inventory, less payables) resulted in a use of cash of approximately $13.9 million, and capital expenditures totaled $15.6 million during the second quarter of 2004. Borrowings under the Company's senior secured credit facility, senior unsecured term loans and senior subordinated notes were $1,089.7 million at the end of the second quarter of 2004 compared to $914.9 million of borrowings under the senior secured credit facility and senior subordinated notes at the end of the first quarter of 2004. Total debt on June 30, 2004, was $1,103.0 million, compared to $926.8 million on March 31, 2004. Bookings of $507.7 million in the second quarter of 2004 were up from bookings of $446.4 in the first quarter of 2004 mainly due to market strength in measurement systems and compression and power systems. Flow control bookings were slightly down due to delays in project business bookings. Backlog increased to $559.7 million on June 30, 2004 from, $486.3 million on March 31, 2004. Increases in measurement systems and compression and power systems were partially offset by a slight decrease in flow control backlog. The acquisition of the Nuovo Pignone distribution business in June contributed $53.9 million to backlog growth. "Strengthening markets and normal seasonal increases provided good revenue growth compared to the first quarter," stated Mr. Lamb. "We also benefited from the acquisition of the distribution business of Nuovo Pignone at the beginning of June. Overall, trends are favorable for our business and are expected to continue throughout the year." Continued Mr. Lamb, "Although our operational improvement efforts are gaining traction, there are still many opportunities for us to improve our business. We continue to focus on improving our margins by concentrating on our operational excellence efforts." Consolidated First Half 2004 versus First Half 2003 For the six months ended June 30, 2004, revenues were $932.1 million, compared to $766.3 million for the first half of 2003. Increases were recorded in all three operating segments. Contributing to the increase in revenues in the measurement systems segment were the acquisition of Tokheim North America assets in March of 2003 and the acquisition of the distribution business of Nuovo Pignone in June of 2004. Gross profit in the first half of 2004 improved to $267.8 million from $201.0 million for the same period last year. Increases were due primarily to higher revenues, cost reduction efforts and lower restructuring and other expenses. Gross margin for the first six months of 2004 was 28.7% compared to 26.2% in 2003. In 2003 gross margins were adversely affected by a strike in the natural gas engine business. Operating income was $59.4 million for the six months ended June 30, 2004, compared to $17.3 million for the six months ended June 30, 2003. Operating margin in 2004 was 6.4% compared to 2.3% in 2003. Net loss for the first half of 2004 was $0.3 million compared to a net loss of $23.0 million for the first half of 2003. EBITDA for the six months ended June 30, 2004, was $83.5 million compared to $48.4 million for the same period last year. Flow Control Revenues and Operating Income Up Year-on-Year And Sequentially In the Flow Control segment, revenues for the second quarter of 2004 were $295.7 million, up $47.7 million from $248.0 million in the second quarter of 2003. All product lines in the Flow Control segment recorded increases from the year-ago period, partially offset by $5.8 million of revenues in 2003 from an Italian valve unit that was divested in the fourth quarter of 2003 as previously announced. There was a favorable impact from foreign currency exchange rates in all product lines. Gross profit of $87.3 million in the second quarter of 2004 was up $15.4 million from $71.9 million in the second quarter of 2003, primarily due to improved revenues and reduced restructuring charges. Gross margin of 29.5% in the second quarter of 2004 was slightly improved from gross margin of 29.0% for the year ago quarter. Operating income of $21.4 million for the quarter ended June 30, 2004, was up $2.3 million from operating income of $19.1 million recorded in the same quarter last year. Operating margin in the second quarter of 2004 was 7.2%, compared to operating margin of 7.7% in the second quarter of 2003. Margins were impacted by higher commissions and marketing expenses related to revenue growth. Bookings of $273.9 million in the second quarter of 2004 were up slightly from $270.6 million in the second quarter of 2003. Increases in the control valve and pressure relief valve businesses more than offset a decrease in bookings from the sale of the Italian valve unit. Backlog of $356.0 million on June 30, 2004 increased $7.4 million from $348.6 million on June 30, 2003. On a sequential basis, revenues in the second quarter of 2004 of $295.7 million were up from $255.8 million recorded in the first quarter of 2004 due to strengthening markets, improved throughput and seasonal effects. Gross profit of $87.3 million in the second quarter of 2004 was up $14.0 million from gross profit of $73.3 million in the first quarter of 2004 on increased sales and lower restructuring expenses. Gross margin of 29.5% in the second quarter of 2004 was up from 28.7% in the first quarter of 2004. Operating income of $21.4 million in the second quarter of 2004 was up $11.0 million from $10.4 million in the first quarter of 2004, primarily due to increased revenues and lower restructuring expenses. Operating margin in the second quarter of 2004 was 7.2%, compared to 4.1% in the first quarter of 2004. Bookings of $273.9 million in the second quarter of 2004 were down from bookings of $275.9 million in the first quarter of 2004, mainly due to delays in project business. Backlog of $356.0 million on June 30, 2004 decreased from $371.4 million on March 31, 2004, primarily due to reduction of excess backlogs. Said Mr. Lamb, "Our natural gas solutions business saw improvement in the U.S. market, while our control valve and pressure relief valve businesses saw strengthening international demand in Europe and Asia-Pacific. We are positioning our flow control businesses to take advantage of these favorable trends with a continuing focus on operational efficiency improvements." Measurement Systems Operating Results Continue to Improve On a year-on-year basis, second quarter 2004 Measurement Systems revenues were $129.8 million, up $37.8 million from $92.0 million in the corresponding period of 2003. Increased revenues were primarily due to the acquisition of the Nuovo Pignone distribution business of $13.5 million, and higher U.S., European, and Brazilian sales. Gross profit of $37.0 million in the second quarter of 2004 was up $16.1 million from gross profit of $20.9 million in the second quarter of 2003. Cost reduction efforts in North America and Europe along with increases in sales were primarily responsible for the gains. Gross margin in the second quarter of 2004 was 28.5% compared to 22.7% in the second quarter of 2003. Transition costs associated with the acquisition of the assets of Tokheim North America in March of last year impacted 2003 gross margins. Operating income in the second quarter of 2004 was $18.2 million, up $13.4 million from second quarter 2003 operating income of $4.8 million, primarily due to volume effects and lower capacity costs. The acquisition of the Nuovo Pignone distribution business contributed $0.6 million in 2004 operating income. Operating margin in the second quarter of 2004 was 14.0% compared to operating margin of 5.2% in the same period last year. Bookings of $143.5 million in the second quarter of 2004 were up from $102.7 million in the same period last year due to improved conditions in both the U.S. and international markets and the Nuovo Pignone distribution business acquisition, which contributed $12.4 million in bookings. Backlog on June 30, 2004 was $128.4 million, compared to $50.5 million on June 30, 2003, primarily due to strong bookings in North America and the Nuovo Pignone distribution business acquisition, which contributed $53.9 million to backlog. On a sequential basis, second quarter 2004 revenues of $129.8 million were up $32.2 million from first quarter 2004 revenues of $97.6 million on seasonal strength and the Nuovo Pignone distribution business acquisition. Gross profit of $37.0 million in the second quarter of 2004 was up $9.1 million from gross profit of $27.9 million in the first quarter of 2004 on higher revenues. Gross margin in the second quarter of 2004 was 28.5% compared to gross margin of 28.6% in the first quarter of 2004. Operating income in the second quarter of 2004 was $18.2 million, up $6.2 million from first quarter 2004 operating income of $12.1 million on higher volume. Operating margin of 14.0% in the second quarter of 2004 was up compared to 12.4% operating margin in the first quarter of 2004, mainly due to volume effects. Bookings of $143.5 million in the second quarter of 2004 were up from bookings of $97.4 million in the first quarter of 2004 mainly due to seasonal effects. The Nuovo Pignone distribution business acquired in the second quarter of 2004 contributed $12.4 million to bookings. Backlog on June 30, 2004 was $128.4 million compared to $58.3 million on March 31, 2004. End of June backlog includes $53.9 million of backlog from the Nuovo Pignone distribution business acquisition. Said Mr. Lamb, "With the acquisition of the distribution business of Nuovo Pignone in June, and the formation of a joint venture with our long-time licensee in China in April, we believe we are well positioned in strategic growth areas around the world. We continue to see good growth opportunities in international markets and key domestic markets." Compression and Power Systems Segment Results Improve Year-on-Year Operating Results Down Sequentially as Excess Backlog Is Reduced Compression and power systems revenue in the second quarter of 2004 was $71.9 million, up $16.0 million from $55.9 million for the same period in 2003. Sales of both natural gas engines and engine parts increased in the second quarter of 2004 compared to the same period last year, which was adversely affected by strike- related delays in shipments. Contributing to increases in revenue was increased demand for engines used in power generation. Gross profit of $19.1 million in the period ended June 30, 2004 was up $10.7 million from gross profit of $8.4 million for the same period last year. Increases were mainly due to higher revenues. Gross margin of 26.6% in the second quarter of 2004 was up from 15.0% in the same period last year. The strike in 2003 in the natural gas engine business negatively affected margins for the year-ago period. Operating income for the quarter ended June 30, 2004 was $7.8 million, compared to an operating loss of $4.3 million for the quarter ended June 30, 2003. Included in the 2004 operating income is a gain of $1.7 million from the sale of excess land adjacent to our facility in Waukesha, Wisconsin. Operating margin was 10.9% in the second quarter of 2004. Bookings of $90.3 million in the second quarter of 2004 increased from $74.9 million in the second quarter of 2003, due to increased demand for natural gas engines in power generation and blowers used in waste water treatment. Backlog on June 30, 2004 was $75.3 million, compared to backlog of $61.0 million on June 30, 2003. On a sequential basis, revenue of $71.9 million in the second quarter of 2004 was down $12.5 million from $84.4 million in the first quarter of 2004. Revenue decreased mainly due to the elimination of excess backlog in the first quarter caused by the strike in 2003. Gross profit of $19.1 million for the quarter ended June 30, 2004 was down $4.2 million from gross profit of $23.3 million in the quarter ended March 31, 2004. Decreases in gross profit were due to decreases in revenues. Gross margin in the second quarter of 2004 was 26.6%, compared to 27.6% in the first quarter of 2004, mainly due to a decrease in sales volume. Operating income of $7.8 million for the second quarter of 2004 was down compared to $9.2 million for the first quarter of 2004, mainly on decreases in sales volume. Operating income in the second quarter includes a gain of $1.7 million on the sale of excess land. Operating margin in both the first and second quarters of 2004 was 10.9%. Bookings of $90.3 million in the second quarter of 2004 were up from bookings of $73.1 million in the first quarter of 2004 as a result of increased market demand for engines used in gas compression and power generation, as well as engine parts. Backlog on June 30, 2004, was $75.3 million compared to backlog of $56.6 million on March 31, 2004. Said Mr. Lamb, "Although sequentially revenues and operating income were down in the second quarter, the decreases were mainly due to the elimination of the excess backlog accumulated during the 2003 strike in our natural gas engine business in the first quarter." Headquartered in Dallas, Dresser, Inc., is a worldwide leader in the design, manufacture and marketing of highly engineered equipment and services sold primarily to customers in the flow control, measurement systems, and compression and power systems segments of the energy industry. Dresser has a widely distributed global presence, with over 8,500 employees and a sales presence in over 100 countries worldwide. The Company's website can be accessed at http://www.dresser.com/ DUNES PLAZA: Signs-Up Hogan & Hartson as Bankruptcy Counsel ----------------------------------------------------------- Dunes Plaza Associates and Sherwood Plaza Associates, Ltd., ask the U.S. Bankruptcy Court for the Southern District of New York for permission to employ Hogan & Hartson, LLP, as their bankruptcy counsel. Hogan & Hartson will: a) give the Debtors advice with respect to the powers and duties of the Debtors in the continued management and operation of the business and the property; b) negotiate with creditors of the Debtors and other parties in interest in formulation a plan of reorganization, and to take legal steps necessary to confirm such plan; c) prepare on behalf of the Debtors applications, motions, complaints, answers, orders, reports, other pleadings and documents in and in connection with the Chapter 11 cases; d) appear before the Court and the U.S. Trustee and to protect the interests of the Debtors and the estates; e) provide other legal services for the Debtors in connection with the Chapter 11 cases; and f) provide other legal services for the Debtors, as they may request and as may be necessary or appropriate. The Debtors tell the Court that Hogan & Hartson has extensive experience and knowledge in the field of debtor and creditors' rights and is well-qualified to represent them in their cases. The professionals of Hogan & Hartson will charge the Debtors at hourly rates ranging from: Position Hourly Rate -------- ----------- partners $450 to 675 counsels 450 associates 245 to 425 paralegals 90 to 190 To the best of the Debtors knowledge, Hogan & Hartson is a "disinterested person" as the term is defined in Section 101(14) of the Bankruptcy Code. Dunes Plaza Associates and Sherwood Plaza Associates, Ltd., own, as tenants-in-common, of a freestanding retail building in Brandon, Florida. Originally leased for $929,264 per year, Kmart occupied the store and then sublet it to Hechinger's and then to Burlington Coat Factory, the current tenant. Burlington pays $643,200 in annual rent, which is insufficient to service the Debtors' $24.8 million mortgage obligations. The Debtors filed for chapter 11 protection on August 18, 2004 (Bankr. S.D.N.Y. Case No. 04-15403). DYER FABRICS: Wants to Employ Harris Shelton as Bankruptcy Counsel ------------------------------------------------------------------ Dyer Fabrics, Inc., asks the U.S. Bankruptcy Court for the Western District of Tennessee for permission to employ Harris, Shelton, Dunlap, Conn & Ryder, PLLC, as its bankruptcy counsel. The Debtor has been informed that Harris Shelton professionals who will render services to the company are members in good standing with the highest court of one or more state bars. The Debtors submit that the retention of Harris Shelton, with its knowledge and experience in bankruptcy, will contribute greatly to the efficient administration of the Debtor's estate. Harris Shelton will: a) advise the Debtor with respect to its powers and duties as debtor-in-possession in the continued operation of its business and management of its property; b) assist the Debtor in the preparation of its statement of financial affairs, schedules, statement of executory contracts and unexpired leases, and any papers or pleadings, or any amendments thereto that the Debtor is required to file in this case; c) represent the Debtor in any proceeding that is instituted to reclaim property or obtain relief from the automatic stay imposed by Section 362 of the Bankruptcy Code or that seeks the turnover or recovery of property; d) provide assistance, advice and representation concerning the formulation, negotiation and confirmation of a plan of reorganization and accompanying ancillary documents; e) provide assistance, advice and representation concerning any investigation of the assets, liabilities and financial condition of the Debtor that may be required; f) represent the Debtor at hearings or matters pertaining to affairs as debtor-in-possession; g) prosecute and defend litigation matters and such other matters that might arise during this case; h) provide counseling and representation with respect to the assumption or rejection of executory contracts and leases and other bankruptcy-related matters arising from this case; i) represent the Debtor in matters that may arise in connection with its business operations, its financial and legal affairs, its dealings with creditors and other parties-in-interest and any other matters, which may arise during the bankruptcy case; j) render advice with respect to the myriad of general corporate and litigation issues relating to this case, including, but not limited to, real estate, securities, corporate finance, tax and commercial matters, and assist the Debtor in connection with any necessary application, orders, reports or other legal papers and to appear on behalf of the Debtor in proceedings instituted by or against the Debtor; and k) perform such other legal services as may be necessary and appropriate for the efficient and economical administration of this Chapter 11 case. The principal attorneys who will be responsible for representing the Debtor and their hourly rates are: Professionals Hourly Rate ------------- ----------- John L. Ryder $250 Steven N. Douglass 235 Jonathan E. Scharff 225 Jim Demere 150 Beverly Curtis 60 Headquartered in Dyersburg, Tennesse, Dyer Fabrics, a textile wholesaler manufacturer, filed for chapter 11 protection on July 9, 2004 (Bankr. W.D. Tenn. Case No. 04-30609). When the Debtor filed for protection, it reported more than $10 million in assets and debts. ELECTRIC MACHINERY: EarthFirst Technologies Completes Acquisition ----------------------------------------------------------------- EarthFirst Technologies, Inc. (OTCBB:EFTI) completed a common stock exchange agreement with Electric Machinery Enterprises, Inc. Effective immediately, EME has become a wholly owned subsidiary of EFTI. EME is a seventy-year-old company based in Tampa, Florida. Its principal businesses are: (1) Providing electrical contracting services both as a prime contractor and a subcontractor, electrical support for industrial and commercial buildings, power generation stations, and water and sewage plants in both domestic and foreign markets; (2) Through EME Modular Structures, Inc., EME is engaged in the construction of concrete modular buildings, with emphasis on the modular classroom market; and (3) Through EME General Contractors, Inc., EME constructs and services towers used in the cellular telephone industry. EME is established as a preferred contractor on Caribbean, Central and South American major construction projects. EME has been consistently profitable throughout its long history. EFTI has been working closely with EME for more than a year on a reorganization strategy to conclude a bankruptcy filing that was precipitated by an adverse court decision on a disputed construction contract. EFTI plans to complete the consolidation of administrative and operational functions at the 140,000 square foot EME complex located on eleven acres in Tampa, Florida. CEO John Stanton stated, "The acquisition of EME, with 2003 revenues of approximately $45 million, will provide an ideal platform to commercialize certain of EFTI's technologies. We still have some work to do to confirm a Plan of Reorganization for EME. However, we believe that the conclusion of this transaction will facilitate a successful conclusion of the reorganization process." EarthFirst Technologies, Incorporated and its subsidiaries -- http://www.earthfirsttech.com/-- are dedicated to producing environmentally superior products from carbon-rich solid and liquid materials currently considered wastes. The Company has conducted more than five years of extensive research and development on advanced technologies to achieve this goal. Based in Tampa, Florida, Electric Machinery Enterprises, Inc., filed for chapter 11 protection on May 29, 2003 (Bankr. M.D. Fla. Case No. 03-11047). The Debtor filed a chapter 11 plan in September 2003 premised on this transaction with EarthFirst Technologies. EME's Chapter 11 filing was precipitated by an adverse court decision on a disputed construction contract. EME has appealed this ruling, and resolution of the matter is provided for in EME's Plan of Reorganization. ENCORE ACQUISITION: Inks New 5-Year Credit Facility with BofA ------------------------------------------------------------- Encore Acquisition Company (NYSE:EAC) has entered into a new five- year senior secured credit facility under which Bank of America will serve as administrative agent. The initial borrowing base available under the facility will be $400 million, which may be increased up to $750 million according to the borrowing base calculations provided for in the facility. The facility replaces Encore's previous $300 million credit facility, which had a $270 million borrowing base and would have matured in June 2006. The new credit facility is secured by a first-priority lien on Encore's proved oil and natural gas reserves and matures on August 19, 2009. Encore had $53 million drawn under its previous credit facility at June 30, 2004. Organized in 1998, Encore is a growing independent energy company engaged in the acquisition, development and exploitation of North American oil and natural gas reserves. Encore's oil and natural gas reserves are in four core areas: * the Cedar Creek Anticline of Montana and North Dakota; * the Permian Basin of West Texas and Southeastern New Mexico; * the Mid Continent area, which includes the Arkoma and Anadarko Basins of Oklahoma, the North Louisiana Salt Basin, the East Texas Basin and the Barnett Shale near Fort Worth, Texas; and * the Rocky Mountains. * * * As reported in the Troubled Company Reporter's April 5, 2004 edition, Standard & Poor's Ratings Services assigned its 'B' rating to Encore Acquisition Co.'s $150 million senior subordinated notes due 2014. At the same time, Standard & Poor's affirmed its 'BB-' corporate credit and 'B' subordinated debt ratings on the independent oil and gas exploration and production company. S&P said the outlook was stable. "The ratings affirmation reflects the fact that even with the increased debt Encore will take on to fund this transaction, financial measures will remain appropriate for current ratings," said Standard & Poor's credit analyst Brian Janiak. ENRON CORP: Wants to Recover $9.4 Million from 36 Creditors ----------------------------------------------------------- On or within 90 days before the Petition Date, the Enron Corporation and its debtor-affiliates made, or caused to be made, transfers to 36 creditors: Creditor Amount -------- ------ American Express $1,096,324 American Heating Company 21,884 American Skiing Company 112,072 American Steel Company 34,490 Columbus Ready Mix 63,352 Comfort Systems USA 22,572 Community Products, LLC 56,314 Compangnie Generale De Logistique 1,894,388 Concar Detroit One, LLC 65,049 Condea Vista Chemical Company 84,900 GM Mechanical Corporation 28,463 Local 598 Trust Funds 217,459 Lorentzen & Wettre USA, Inc. 118,024 Parks Metal Fabricators, Inc. 304,693 Parsons Energy & Chemicals Group 33,511 Pascor Atlantic Corporation 119,178 Passaic Valley Water Commission 125,523 Patch, Inc. 205,358 PCE Pacific, Inc. 175,728 Pennsylvania Transformer 50,111 Penske Logistics 1,208,607 Peri Formwork Systems 27,670 PGA National Resort & Spa 31,008 Pinnacle Welding & Fabrication, Inc. 141,151 Pitney Bowes 346,568 Port Carteret 73,733 Powell Electronic, Inc. 854,144 Power Con Mechanical 128,460 Power Engineers, Inc. 180,755 Steadfast Bridges 59,848 Steam Supply & Rubber Company 20,888 Steel Fabricators of Monroe, Inc. 215,869 Steel Service Corporation 953,516 Stowe Woodward Company 170,550 Strawberry Holdings, Inc. 195,599 Struble Air Conditioning 46,783 ------------- TOTAL $9,484,542 ============= Neil Berger, Esq., at Togut, Segal & Segal, LLP, in New York, relates that: (a) the Transfers constitute transfers of interest of the Debtors' property; (b) the Debtors made, or caused to be made, the Transfers to, or for the benefit of, the Creditors; (c) the Debtors made, or caused to be made, the Transfers for, or on account of, antecedent debts owed to the Creditors prior to the dates on which the Transfers were made; (d) the Debtors were insolvent when the Transfers were made; and (e) the Transfers enabled the Creditors to receive more than they would have received if: -- Enron's cases were administered under Chapter 7 of the Bankruptcy Code; -- the Transfers had not been made; and -- the Creditors had received payment of the debt to the extent provided by the Bankruptcy Code. Thus, Mr. Berger contends that the Transfers constitute avoidable preferential transfers pursuant to Section 547(b) of the Bankruptcy Code. In accordance with Section 550(a), the Debtors may recover from the Creditors the amount of the Transfers, plus interest. In the alternative, Mr. Berger asserts that the Transfers are avoidable fraudulent transfers under Section 548(a)(1)(B) because: (a) the Transfers constitute transfers of interest in the Debtors' property; (b) the Transfers were to or for the benefit of the Creditors; (c) the Debtors received less than reasonable equivalent value in exchange for some or all of the Transfers; (d) the Debtors were insolvent, or became insolvent, or had unreasonably small capital in relation to their businesses or their transactions at the time or as a result of the Transfers; and (e) the Transfers were made within one year before the Petition Date. Accordingly, the Debtors ask the Court to: (i) avoid and set aside the Transfers pursuant to Section 547(b); (ii) in the alternative, avoid and set aside the Transfers pursuant to Section 548(a)(1)(B); (iii) direct the Creditors to immediately pay them an amount equal to the Transfers pursuant to Section 550(a), together with interest from the date of the Transfers; and (iv) award them attorney's fees, costs and other expenses incurred Headquartered in Houston, Texas, Enron Corporation is in the midst of restructuring various businesses for distribution as ongoing companies to its creditors and liquidating its remaining operations. Before the company agreed to be acquired, controversy over accounting procedures had caused Enron's stock price and credit rating to drop sharply. The Company filed for chapter 11 protection on December 2, 2001 (Bankr. S.D.N.Y. Case No. 01- 16033). Judge Gonzalez confirmed the Company's Modified Fifth Amended Plan on July 15, 2004, and numerous appeals followed. Martin J. Bienenstock, Esq., and Brian S. Rosen, Esq., at Weil, Gotshal & Manges, LLP, represent the Debtors in their restructuring efforts. (Enron Bankruptcy News, Issue No. 121; Bankruptcy Creditors' Service, Inc., 215/945-7000) FLEMING COMPANIES: Asks Court to Okay Grace Foods Settlement Pact ----------------------------------------------------------------- Christopher J. Lhulier, Esq., at Pachulski, Stang, Ziehl, Young, Jones & Weintraub, PC, in Wilmington, Delaware, relates that Grace Foods, Inc., owes Fleming Companies, Inc.: $5,476,655 under two promissory notes in connection with the sale of Fleming's wholesale grocer distribution business to C&S Acquisition, LLC; and $982 for goods delivered and services rendered. The parties agree on a global compromise that will resolve all outstanding amounts Grace owes the Debtors. The primary terms of the Settlement Agreement are: (a) Grace Foods will pay the Debtors the full amount of the A/R Balance; (b) The Debtors will release Grace Foods' personal property that is the subject of any and all mortgages, security agreements, liens and encumbrances placed on the personal property by any agreement between the Debtors and Grace Foods; (c) The Debtors and C&S authorize Grace Foods, at its own expense, to prepare and record any release with respect to any and all security agreements, liens and encumbrances placed on the assets of Grace Foods; and (d) The parties will grant each other a general release from all claims or causes of action arising under or in connection with the Debtors' cases or any business dealings between the Debtors and Grace Foods. Mr. Lhulier notes that with the Settlement Agreement, the Debtors receive 100% of the outstanding A/R balance in return for the General Release. The Debtors do not believe that they are relinquishing any bona fide claims. The Debtors will also avoid further litigation costs. Accordingly, the Debtors ask the Court to approve their Settlement Agreement with Grace Foods pursuant to Rule 9019 of the Federal Rules of Bankruptcy Procedure. Headquartered in Lewisville, Texas, Fleming Companies, Inc. -- http://www.fleming.com/-- is the largest multi-tier distributor of consumer package goods in the United States. The Company filed for chapter 11 protection on April 1, 2003 (Bankr. Del. Case No. 03-10945). Judge Walrath confirmed Fleming's Third Amended Plan on July 26, 2004, under which Core-Mark Holding Company, Inc., will emerge as a rehabilitated company and be owned by Fleming's unsecured creditors. Richard L. Wynne, Esq., Bennett L. Spiegel, Esq., Shirley Cho, Esq., and Marjon Ghasemi, Esq., at Kirkland & Ellis, represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $4,220,500,000 in assets and $3,547,900,000 in liabilities. (Fleming Bankruptcy News, Issue No. 42; Bankruptcy Creditors' Service, Inc., 215/945-7000) FOOTSTAR INC: Inks $15MM Pact to Sell Gaffney Distribution Center ----------------------------------------------------------------- Footstar, Inc. has entered into an agreement to sell its distribution center in Gaffney, South Carolina for approximately $15.1 million. The facility will be acquired by Automated Distribution Systems, L.P., a leading third party distribution and logistics solutions provider. The transaction is subject to certain closing conditions and Bankruptcy Court approval, and is expected to be completed as soon as practicable once Court approval is received following a Court-supervised auction on September 14, 2004. Footstar wound down its operations at the Gaffney distribution center following the sale of Footstar's athletic footwear business in May 2004. As previously reported on July 22, the Company sold its distribution center in Mira Loma, California and is now outsourcing all of its warehousing and distribution to FMI International LLC, a third-party provider of logistics services. Dale W. Hilpert, Chairman, President and Chief Executive Officer, said, "The sale of the Gaffney facility is important as we continue repositioning our logistics network and strengthening our operations. We look forward to completing the sale of this facility while we continue developing a plan of reorganization so that we can emerge successfully from Chapter 11 and maximize value for all of our stakeholders." Footstar, Inc. -- http://www.footstar.com/-- which filed for Chapter 11 bankruptcy protection (Bankr. S.D.N.Y. Case No.: 04-22350) on March 3, 2004, is a leading footwear retailer. As of May 1, 2004, the Company operates 2,498 Meldisco licensed footwear departments nationwide and 36 Shoe Zone stores. The Company also distributes its own Thom McAn brand of quality leather footwear through Kmart, Wal-Mart and Shoe Zone stores. Paul M. Basta, Esq. of Weil Gotshal & Manges represents the debtor in its restructuring efforts. When the company filed for bankruptcy protection, it listed total assets of $762,500,000 and total debts of $302,200,000. GURVINDER SINGH UBEROI TRUST: Voluntary Chapter 11 Case Summary --------------------------------------------------------------- Debtor: Gurvinder Singh Uberoi Trust 5121 Latrobe Drive Windermere, Florida 34786 Bankruptcy Case No.: 04-09370 Chapter 11 Petition Date: August 17, 2004 Court: Middle District of Florida (Orlando) Judge: Arthur B. Briskman Debtor's Counsel: Adam Pollack, Esq. Faulkner & Pollack, P.A 5151 Adanson Street #100 Orlando, Florida 32804 Estimated Assets: $1 Million to $10 Million Estimated Debts: $1 Million to $10 Million The Debtor did not file a list of its 20-largest creditors. HALLIBURTON: Smith Int'l to Pay $41 Mil. for Patent Infringement ---------------------------------------------------------------- Halliburton (NYSE:HAL) confirmed that the United States District Court for the Eastern District of Texas in Tyler, Texas, has entered a final judgment in its patent infringement lawsuit against Smith International and has awarded Halliburton Energy Services $41 million. In addition to the $24 million in actual damages that was awarded through the jury's June 25 verdict, Halliburton also has been awarded $12 million in enhanced damages, $4 million in attorney fees and nearly $1 million in prejudgment interest. Further, a permanent injunction was issued barring Smith from designing roller cone drill bits in the United States using methods covered by the patents, and from making, using, selling or offering for sale in the United States any infringing roller cone drill bits. The injunction also prohibits Smith from using its IDEAS software to design a roller cone drill bit in the United States except where specified infringing features have been removed and allows Halliburton to monitor Smith's bit designing procedures and bit designs in the United States for an initial three-year period. Separately, Halliburton has agreed to permit Smith to sell its existing inventory of infringing bits through November in return for a fee. "We're pleased with the outcome of this case and to continue moving forward with providing superior drill bit technology and products to our customers around the world," explained John Gibson, chief executive officer, Halliburton's Energy Services Group. "But we continue to pursue similar litigation against Smith in Italy and the United Kingdom to further protect that superior technology," said Gibson. Security DBS, Halliburton's drill bit business, filed the lawsuit in September 2002 seeking damages for Smith's willful infringement of Halliburton's patented roller cone drill bit technology. The jury found that Smith's competing bits willfully infringed three of Halliburton's patents, and rejected Smith's claims that the patents are invalid. In its recent order, the court also rejected Smith's claims that Halliburton's patents are unenforceable and enjoined Smith from further infringement of the patents. About Smith International Smith International, Inc. is a leading worldwide supplier of premium products and services to the oil and gas exploration and production industry, the petrochemical industry and other industrial markets through its four principal business units - M-I SWACO, Smith Technologies, Smith Services and Wilson. About Halliburton Halliburton, founded in 1919, is one of the world's largest providers of products to the petroleum and energy industries. The company serves its customers with a broad range of products and services through its Energy Services Group and Engineering and Construction Group business segments. The company's World Wide Web site can be accessed at http://www.halliburton.com/ HEALTHSOUTH CORP: John Chamberlain Resigns from Board of Directors ------------------------------------------------------------------ John S. "Jack" Chamberlin has voluntarily resigned from the HealthSouth Corporation (OTC Pink Sheets: HLSH) Board of Directors effective August 19, 2004, as part of the previously announced board transition plan. In the past twelve months, HealthSouth has added six new directors and expects another to join in September, as previously announced. Robert P. May, Chairman of the Board of HealthSouth, said, "We want to thank Jack for his many years of dedicated service and tireless efforts on behalf of HealthSouth and its shareholders. His work over the past 18 months, especially his leadership role in recruiting new board members and chairing the CEO Search Committee, has been an important part in HealthSouth's turnaround efforts and in helping set a new course for the future." "It has been an honor and privilege to serve as a director of HealthSouth and to guide the Company on its way to recovery," said Mr. Chamberlin. "I believe that HealthSouth is well positioned to move ahead and I wish the employees and my fellow board members every success." About HealthSouth HealthSouth employs approximately 3,500 people in Birmingham and is the nation's largest provider of outpatient surgery, diagnostic imaging and rehabilitative healthcare services, operating facilities nationwide and abroad. HealthSouth can be found on the Web at http://www.healthsouth.com/ * * * As reported in the Troubled Company Reporter on July 5, 2004, HealthSouth Corporation (OTC Pink Sheets: HLSH) announced that it will permanently close HealthSouth Metro West Hospital effective midnight September 2, 2004. The Company says its efforts to recruit and retain the physicians necessary to make the hospital profitable have been unsuccessful and that the facility continues to lose in excess of $500,000 every month. The hospital employs approximately 500 full-time, part-time and pool employees. Eligible employees will receive severance packages in accordance with HealthSouth policy. In addition, HealthSouth will offer resume workshops, internal and external job fairs and opportunities with local employment agencies to assist employees in finding new positions in the Birmingham area. The Company will also network with other employers in the Birmingham area to solicit job availabilities. "This was a very difficult decision for us to make," said HealthSouth Metro West CEO Don Lilly. "Over the past four and a half years we have all worked diligently to turn the hospital around and have invested millions of dollars in the facility. Unfortunately we have been unsuccessful in making the hospital financially viable. Our primary focus at this point is to help our employees find new positions and to ensure a smooth transition for our patients and physicians." The company acknowledges certain obligations to the City of Fairfield Healthcare Authority and intends to work with the Authority to fulfill those commitments. In addition, the Company will work to procure an appropriate buyer for the hospital buildings and will maintain Metro West's physical plant until an appropriate use for the property is determined. Notice is being provided to appropriate employees, health providers and local government agencies in accordance with provisions of the Worker Adjustment and Retraining Notification Act (29 U.S.C.A. Sections 2101 et seq.). In addition, the Company will be notifying the appropriate parties in regards to the closing of the hospital's emergency department, which will be effective on July 31, 2004. HI-RISE RECYCLING: Hires Kestrel as Bankruptcy Consultants ---------------------------------------------------------- Hi-Rise Recycling Companies, Inc., asks the U.S. Bankruptcy Court for the Northern District of Ohio, Eastern Division, for authority to employ Kestrel Consulting LLC as its bankruptcy consultants. The Debtor believes that because of Kestrel Consulting's extensive knowledge of business reorganizations and experience in advising distressed companies, it is well qualified to handle the many potential issues that may arise in its chapter 11 case. Kestrel Consulting has already begun to initiate contact with potential strategic and financial buyers of Hi-Rise Recycling. Specifically, Kestrel will: a) review and familiarize itself with the business and financial condition of the Debtor and other matters it deems relevant and conduct analysis in connection with any potential Sale transaction. b) assist the Debtor in developing a strategy to be used in negotiating the form and structure of the Sale Transaction, giving consideration to matters such as timing, access to financing, debt capacity, disclosure, and confidentiality; c) assist the Debtor in preparing a confidential information memorandum about the business to be utilized in discussions with prospective buyers, and in the preparation and negotiation of any confidentiality agreements to be entered into by third parties potentially interested in participating in a Sale Transaction, all of which shall be subject to approval in advance by the Debtor; d) identify all prospective buyers and then will contact all buyers approved by the Debtor; e) assist the Debtor in preparing presentations, discussions, and due diligence materials and in negotiations relating to a possible Sale Transaction; f) assist the Debtor in the negotiation of a letter of intent and definitive documents; g) testify at any sale hearing on a Sale Transaction; h) render such other financial advisory and investment banking services as are customary for similar transactions; and i) discuss its activities as bankruptcy consultants to Debtor, including the sale process, directly with General Electric Credit Corporation, its counsel and other representatives and respond to inquiries regarding the sale process. Kestrel Consulting received a $25,000 retainer fee and agrees to give a 30% discount to the Debtor if the firm's fees exceed $250,000. Stephen J. Hopkins heads the professionals from Kestrel and will charge at an hourly rate of $450. Henry M. Nahmad will assist Mr. Hopkins at an hourly rate of $200. For the other professionals and associates from the Firm, the hourly rates ranges from $200 to $375. Headquartered in Wooster, Ohio, Hi-Rise Recycling, manufactures and distributes industrial recycling and waste handling equipment in North America. The company filed for chapter 11 protection on August 16, 2004 (Bankr. N.D. Oh. Case No. 04-64352). When the Debtor filed for protection it listed more than $1 million in estimated assets and more than $10 million in estimated debts. HOLLINGER INC: Appeals Order Staying Counterclaims Against Int'l ---------------------------------------------------------------- Hollinger, Inc., appeals the decision of Justice Farley of the Ontario Superior Court of Justice temporarily staying the counterclaims of Hollinger, The Ravelston Corporation Limited and Ravelston Management, Inc., against Hollinger International, Inc., for outstanding management fees and damages for oppression of Hollinger and intentional interference with Hollinger's economic relations. The Ravelston Corporation Limited and Ravelston Management, Inc., also appeals the decision of Justice Farley denying their request that the jurisdiction of the complaint filed by Hollinger International against Hollinger and others in Illinois be moved from Illinois to Ontario. The hearing in respect of the application to the Ontario Superior Court of Justice commenced by Catalyst Fund General Partner I, Inc., seeking an order directing an investigation under the Canada Business Corporations Act has been rescheduled to take place on August 25 and 26, 2004. Hollinger's principal asset is its approximately 68.0% voting and 18.2% equity interest in Hollinger International. Hollinger International is an international newspaper publisher with English-language newspapers in the United States and Israel. Its assets include the Chicago Sun-Times and a large number of community newspapers in the Chicago area, The Jerusalem Post and The International Jerusalem Post in Israel, a portfolio of new media investments and a variety of other assets. * * * As reported in the Troubled Company Reporter on August 16, 2004, Hollinger's 2003 annual financial statements cannot be completed and audited until Hollinger International's 2003 annual financial statements are completed. Hollinger International has advised Hollinger that it believes that it needs to review the final report of the Special Committee established by Hollinger International before it can complete its 2003 annual financial statements. Hollinger understands that the work of the Special Committee is ongoing and its final report has not yet been issued. As a result of the delay in the completion and audit of its annual financial statements for the year ended December 31, 2003, Hollinger will not be in a position to file its second quarter interim financial statements (and related interim Management's Discussion & Analysis) for the six month period ended June 30, 2004 by the required filing date under applicable Canadian securities laws. As a result of the delay in the filing of Hollinger's 2003 Form 20-F (which would include its 2003 audited annual financial statements) with the United States Securities and Exchange Commission by June 30, 2004, Hollinger is not in compliance with its obligation to deliver to relevant parties its filings under the indenture governing its senior secured notes due 2011. US$78 million principal amount of Notes are outstanding under the Indenture. On July 16, 2004, Hollinger received a notice of default from the trustee under the Indenture dated July 8, 2004 notifying Hollinger of its failure to file and deliver its 2003 Form 20-F in accordance with the terms of the Indenture and indicating that if the default continued unremedied for a period 30 days after receipt of the notice (being on or about August 15, 2004), an event of default would occur under the Indenture. As a result of the delay in the completion and audit of its 2003 annual financial statements, Hollinger was not in a position to file and deliver its 2003 Form 20-F yesterday, August 15, 2004. As a result, an event of default occurred under the Indenture and the trustee under the Indenture or the holders of at least 25 percent of the outstanding principal amount of the Notes will then have the right to accelerate the maturity of the Notes. Hollinger is actively exploring alternatives with a number of parties in connection with modifying the terms of, or refinancing, the Notes in order that Hollinger's debt obligations reflect the company's current circumstances and the improved security available to noteholders since the original issue date in March 2003. HOLLINGER INC: Appoints P. Carroll & D.M.J. Vale as Directors ------------------------------------------------------------- Hollinger Inc. (TSX:HLG.C) (TSX:HLG.PR.B) appointed Paul A. Carroll, Q.C. and Donald M.J. Vale, both of Toronto, as directors of Hollinger. Mr. Carroll is the President and Chief Executive Officer of Carnarvon Capital Corporation, a Toronto-based investment management and venture capital company. Prior to January 31, 2003, he was Counsel to Gowling Lafleur Henderson LLP, a major Canadian law firm, and its predecessor firm, Smith Lyons. Mr. Vale has held a succession of senior executive positions including with Philips Electronics (Holland) Ltd., Matsushita Electric Company of Japan, NBS Technologies Inc. and Sharp Electronics Corporation of Japan. His earlier career included positions at NatWest in London and Shell. He holds an MBA degree from the University of Western Ontario. Mr. Vale is currently the Principal of United Global Enterprises Inc., a consulting firm specializing in executive interim management and global business turnaround assignments. Messrs. Carroll and Vale are also independent members of the board of directors of Argus Corporation Limited. In addition, Messrs. Carroll and Vale have been appointed as additional members of Hollinger's Audit Committee, Independent Committee and Corporate Governance and Compensation Committee. Status of Selected Civil Proceedings Notice of an Appeal has been filed by Hollinger in respect of the decision of Justice Farley of the Ontario Superior Court of Justice temporarily staying the counterclaims of Hollinger, The Ravelston Corporation Limited and Ravelston Management Inc. against Hollinger International Inc. for outstanding management fees and damages for oppression of Hollinger and intentional interference with Hollinger's economic relations. Notice of an Appeal has also been filed by The Ravelston Corporation Limited and Ravelston Management Inc. of the decision of Justice Farley denying their request that the jurisdiction of the complaint filed by Hollinger International against Hollinger and others in Illinois be moved from Illinois to Ontario. The hearing in respect of the application to the Ontario Superior Court of Justice commenced by Catalyst Fund General Partner I Inc. seeking an order directing an investigation under the Canada Business Corporations Act has been rescheduled to take place on August 25 and 26, 2004. Hollinger's principal asset is its approximately 68.0% voting and 18.2% equity interest in Hollinger International. Hollinger International is an international newspaper publisher with English-language newspapers in the United States and Israel. Its assets include the Chicago Sun-Times and a large number of community newspapers in the Chicago area, The Jerusalem Post and The International Jerusalem Post in Israel, a portfolio of new media investments and a variety of other assets. The company's September 30, 2003, balance sheet shows a working capital deficit of about $293 million. HOLLINGER CDN: Plans to Trade on NEX to Provide Owners Liquidity ---------------------------------------------------------------- Hollinger Canadian Newspapers, Limited Partnership is providing this update in accordance with Ontario Securities Commission Policy 57-603 Defaults by Reporting Issuers in Complying with Financial Statement Filing Requirements. Certain management and other insiders of the Partnership are currently subject to a cease trade order in respect of securities of the Partnership issued by the OSC on June 1, 2004. The cease trade order results from the delay in filing the Partnership's annual financial statements for the year ended December 31, 2003, its interim financial statements for the three months ended March 31, 2004 and its Annual Information Form -- AIF -- by the required filing dates. The cease trade order will remain in place until two business days following receipt by the OSC of all filings that the Partnership is required to make pursuant to Ontario securities laws. The Partnership previously announced on July 20, 2004 that it did not anticipate that it would be in a position to file its interim financial statements for the six-month period ended June 30, 2004 on or prior to the filing date required by applicable Canadian securities legislation, since it was not expected that the final report of the Special Committee would be available sufficiently in advance of that time. The Partnership confirms that those interim financial statements have not been so filed. The Partnership believes that it needs to review the final report of the Special Committee of Hollinger International, Inc., before it can complete and file the financial statements and the AIF in question. The work of the Special Committee is ongoing and its final report has not yet been issued. The Partnership will continue to provide bi-weekly updates, as contemplated by the OSC Policy, until the financial statements and AIF have been filed. On August 5, 2004 the Partnership announced that it had received an expression of interest from Hollinger International to make an offer to acquire the outstanding Units of the Partnership not already held by Hollinger International and its affiliates, through a Canadian affiliate of Hollinger International. As previously announced by the Partnership, the Toronto Stock Exchange formally suspended the Units from trading on the TSX as of 5:00 p.m. Toronto time on August 6, 2004. The Units were suspended from trading on the TSX due to the failure of Hollinger Canadian Newspapers G.P., Inc., the general partner of the Partnership to have at least two independent directors on its board of directors, as required by the TSX continued listing requirements. The Limited Partnership Agreement governing the Partnership requires the General Partner to have at least three independent directors. The General Partner currently has one independent director. The General Partner is currently engaged in discussions with NEX, a separate trading board of the TSX Venture Exchange, concerning whether the Units could be listed for trading on NEX. The Partnership will provide an update concerning those discussions as soon as a formal decision has been made by NEX. A NEX listing would provide Unitholders with a liquidity alternative in the event that an offer is made for the outstanding Units through an affiliate of Hollinger International. HOME CARE: Hires Arnstein & Lehr as Bankruptcy Counsel ------------------------------------------------------ Home Care Home Health Agency, Inc., asks the U.S. Bankruptcy Court for the Northern District of Illinois for permission to employ Arnstein & Lehr as its bankruptcy counsel. The Debtor's parent company, Mayer Eisenstein, M.D., S.C., is also seeking to retain Arnstein & Lehr as its attorneys in its chapter 11 case. Home Care assures the Court that there is no existing conflict in its representation since there are no inter-company claims or causes of action the Debtor is aware of. Arnstein & Lehr is expected to: a) provide legal advice with respect of the Debtor's powers and duties as debtor-in-possession in the continued operation of its businesses and management of its property; b) pursue confirmation of a plan and approval of a disclosure statement; c) prepare, on behalf of the Debtor, all necessary applications, motions, answers, orders and other bankruptcy or non-bankruptcy law, as dictated by the demands of the case, or as required by the Court, and representing the Debtor in any hearings or proceedings related thereto; d) appear and protect the interests of the Debtor before the Court; e) negotiate with the Debtor's creditor body; f) assist the Debtor with the disposition of its assets; and g) perform all other legal services for the Debtor which may be necessary and proper in this case. The principal professionals who will represent the Debtor and their current hourly rates are: Professionals Billing Rate ------------- ------------ James A. Chatz $375 per hour Barry A. Chatz 375 per hour Miriam R. Stein 270 per hour Joy E. Mason 235 per hour Lola A. Nesteruk 120 per hour Headquartered in Troy, New York, Home Health -- http://www.homefirst.com/-- provides a full range of services in family health care in the greater Chicago metropolitan area with five medical centers. The Company filed for chapter 11 protection on July 14, 2004 (Bankr. N.D. Ill. Case No. 04-26224). When the Debtor filed for protection from its creditors, it listed less than $50,000 in assets and more than $10 million in estimated debts. I2 TECHNOLOGIES: Names Michael McGrath to Board of Directors ------------------------------------------------------------ Business and Technology visionary Michael E. McGrath, a renowned expert on supply chain management product development and strategy, will join the i2 Technologies, Inc. (OTC:ITWO) Board of Directors. Mr. McGrath is co-founder of Pittiglio Rabin Todd & McGrath (PRTM), a leading management consulting firm to technology-based companies. He retired as chairman and CEO of PRTM's Atlantic Region in July after spending 28 years building the company into a world-class management consulting firm. While at PRTM, he initiated the company's product development consulting practice and led efforts in refining the PACE(R) methodology, establishing it as one of the most successful and effective models of the product development process for technology-based industries. In 1993, Mr. McGrath created the Supply-Chain Operations Reference- model(R) (SCOR(R)) to define a standard for the supply chain management process, which is now managed as an industry standard by the Supply-Chain Council. Mr. McGrath also founded IDe, a leading provider of integrated solutions for Development Chain Management in June 1998, and has served as IDe chairman since October of that year. Mr. McGrath has worked as a consultant to more than 100 companies in the US, Europe, and Asia and is the author or co-author of five books and numerous articles. Mr. McGrath holds a bachelor's degree in Computer Science and Management Science from Boston College and a master's in business administration from Harvard Business School. He is also a certified public accountant. Prior to co-founding PRTM in 1976, he worked for Price Waterhouse & Co., Texas Instruments and McCormack & Dodge, where he contributed to the pioneering efforts to create the packaged applications software industry. "We are pleased to have Michael McGrath join the i2 Board of Directors," said i2 chairman and CEO Sanjiv Sidhu. "He brings a wealth of technology experience to the Board, as well as best practices experience from the more than 100 companies he's consulted with through the years. We welcome his presence as an outside Director, and I look forward to his contributions." In addition to Mr. Sidhu, Mr. McGrath joins current Board members Harvey B. Cash, Richard Clemmer, Robert Crandall, and Pranav Parikh. His term begins this month and will run until the annual meeting to be held later this year. About i2 i2 is a leading provider of closed-loop supply chain management solutions. The company designs and delivers software that helps customers optimize and synchronize activities involved in successfully managing supply and demand. i2's worldwide customer base consists of some of the world's market leaders -- including seven of the Fortune global top 10. Founded in 1988 with a commitment to customer success, i2 remains focused on delivering value by implementing solutions designed to provide a rapid return on investment. Learn more at http://www.i2.com/ At June 30, 2004, i2 Technologies, Inc.'s balance sheet showed a $197,902,000 net stockholders' deficit, compared to a $296,938,000 deficit at December 31, 2003. INTERSTATE HOTELS: Moody's Assigns B2 Senior Implied Rating ----------------------------------------------------------- Moody's Investors Service has assigned a B2 senior implied rating to Interstate Hotels & Resorts, Inc., and its consolidated subsidiaries. The B2 ratings previously assigned to the firm's five-year $75 million secured term loan and to the three-year $60 million revolver of Interstate Operating Company, L.P., a subsidiary of Interstate Hotels & Resorts, Inc., are unaffected. Interstate Hotels & Resorts, Inc. guarantees these bank credit facilities, which are secured by the capital stock and assets of the borrower, assets of the guarantor, and benefit from the first lien rights to receive management contract payments. This is the first time Moody's has assigned a senior implied rating to the company. The rating outlook is stable. Moody's said that the B2 senior implied rating assumes that in a distressed scenario, there is likely to be sufficient collateral coverage of the first-priority lien term loan and bank credit facility, which currently is the only class of debt outstanding. Should the company issue additional rated debt junior in rank or structurally subordinated to the first-priority bank debt, Moody's would likely rate that debt below the senior implied rating. The B2 senior implied also reflects: (1) Interstate's modest scale in the hotel management business relative to major hotel brand managers, such as Marriott International, Starwood and Hilton; (2) moderately high financial leverage; and (3) expected low recovery value, in the case of distress, as well as execution risks associated with its expanded investment strategy to invest in hotel properties. These weaknesses are balanced by Interstate's healthy cash flow coverage measures, low operating leverage, established and solid operating platform, relatively stable management contract cash flows (which are less volatile than the underlying hotel cash flows), ability to manage through the recent severe lodging downcycle, and good diversification by geography, hotel segment and brand affiliation. The firm also benefits from a net operating loss balance of over $19 million that is likely to be realized over the near term. Additional positive factors include management's efforts to reduce its exposure to its corporate housing business, which is not core to its long-term strategy. In Moody's view, one of the key challenges Interstate Hotels & Resorts faces is growing its cash flow diversification through expansion into hotel ownership, and to materially increase hotel contracts under management. Moody's thinks that organic growth opportunities are limited as hotel management contracts typically depend on a change in ownership of hotels, absent non-performance of contracts by a hotel manager. Interstate intends to grow its hotel management contract business by stepping up its hotel joint venture acquisitions. This strategy entails considerable execution risk given highly competitive market conditions for hotel acquisitions. This risk is heightened by the material amount of leverage that Interstate could utilize to fund its share of joint venture investments. Interstate's pro forma leverage for the secured facility transaction will be 3.2x (Debt/EBITDA). The rating agency believes this level of leverage is moderately high given the firm's modest scale, exposure to lodging cycle and limited access to capital markets. The performance of hotels managed by Interstate is improving, reflecting continued recovery in the lodging industry, which should boost Interstate's cash flow performance. However, the company's largest managed portfolio, hotels owned by MeriStar Hospitality Corporation, has been underperforming due mainly to significant deferred capital expenditures and recently initiated renovations by MeriStar. Under a recently renegotiated agreement between Interstate and MeriStar, MeriStar owes termination fees to Interstate on management contracts that were terminated upon a change in ownership. MeriStar also obtained at-will termination rights to terminate management contracts covering up to 600 rooms a year upon payment of termination fees. The stable rating outlook reflects Moody's expectations that Interstate's earnings and balance sheet will continue to improve as the firm implements its growth plans. Ratings improvement will depend on the firm's ability to successfully execute on its growth strategy and achieve greater cash flow diversification through additional management contracts and hotel investments. Downward pressure on firm's ratings would most likely result should the implementation of its investment and other growth initiatives prove more challenging than anticipated. Negative ratings adjustment would also result should Interstate be unable to replace terminated management contracts. Interstate Hotels & Resorts [NYSE: IHR] is the largest independent operator of hotel properties in the USA. As of June 30, 2004, the company managed 269 hotels, which included branded limited-service properties, as well as branded full-service service and independent properties, in the USA, Canada, Portugal and Russia. Interstate participates in hotel joint ventures through which it has ownership stakes in 29 hotels which it also manages. ITSV INC: Defendants Confirm Receipt of Trustee's $151MM Lawsuit ---------------------------------------------------------------- iPayment Inc. (Nasdaq:IPMT) accounting firms Ernst & Young and Arthur Anderson have been served with the Summons and Complaint as named Defendants in the fraud suit filed last Friday, August 6, 2004, by Howard M. Ehrenberg, Trustee, in the U.S. Bankruptcy Court in Los Angeles. The lawsuit alleges that iPayment's accountants were actively involved in the evaluation of their shares prior to a public offering in March 2003, and perpetrated an arbitrary and fraudulent evaluation to aid its client, iPayment, in the scheme to defraud. The Attorneys for the Trustee, Pratter & Young of Los Angeles, have uncovered concrete evidence and allege on behalf of Trustee Ehrenberg that shares in the company were valued at various times within a three-year period without justification. Prices ranged from $8.00 per share, $7.00 per share, $.37 per share, and, then, finally up to $16.00 per share when the company finally became publicly traded. The Trustee alleges in the complaint that at no time had the company had any profits or any significant unencumbered assets to justify such disparate evaluations. Further inquiry led Mr. Michael Pratter to respond to such discrepancies found in the investigation by his firm and the Trustee. "The evaluations were clearly specious and apparently calculated only for the purpose of insuring and placing majority control in the hands of the then Chairman Mr. Greg Daily and the then C.E.O. Carl Grimstad. It was part of the conspiracy, as is alleged in our Complaint on behalf of Trustee Ehrenberg, which in effect defrauded the creditors and shareholders of the company. It robbed them of the benefit of the tremendous growth in the company's value and kept it in control of these two insiders." The company's shares have declined in price since the announcement of the lawsuit and have fallen more than $8.00 or 20% in value on increase in trading volume of 75% on some days. The lawsuit has resulted in the naming and serving of 23 Defendants alleged to be involved in the conspiracy and includes the company's accountants, attorneys Richard Schubert, former attorneys Brobeck, Phelger and Harrison and present attorneys Steven Holland and David Brown of Morgan, Lewis & Bockius, San Francisco. Various officers and subsidiaries have also been named. In addition to disgruntled creditors and shareholders, Mr. Pratter reported that people are calling his office every day, supplying much information as well as alleging other wrongdoings on the part of Daily and Grimstad. Some of the allegations are the canceling of the health insurance for sick employees of companies taken over by iPayment, the wrongful termination of employment despite promises to the contrary, and the termination of stock options promised but never given. Former employees also allege the use of call girls, drugs and wild spending, by the companies' officers to entertain customers and prospective customers of iPayment. Robert J. Young, Esq., of Pratter & Young, on behalf of Trustee Ehrenberg, had no comment on the veracity of these allegations but did say that his firm's "investigation was continuing at a surprising and rapid pace at this stage of the litigation." He had no further comments. The case is now before Judge Vincent Zurzolo, U.S. Bankruptcy Judge. The first hearing, a Status Conference, will be heard on October 21, 2004 at 10:00 A.M. As reported in the Troubled Company Reporter on August 9, 2004, Pratter & Young, Attorneys, filed a complaint in the United States Bankruptcy Court on behalf of a U.S. Bankruptcy Court Trustee, Howard M. Ehrenberg, against iPayment Inc., its Chairman, Greg Daily, C.E.O. Carl Grimstad, and C.F.O. Robert Torino, along with other companies, law firms, accounting firms and individuals, for $151,000,000. ITSV, Inc., filed for bankruptcy protection on July 26, 2002 (Bankr. C.D. Calif. Case No. 02-31259). The Bankruptcy Clerk in Los Angeles notified creditors of a possible dividend in ITSV's case and the need to file proofs of claim in early May 2004. The Chapter 7 Trustee overseeing the liquidation is: Howard M. Ehrenberg, Esq. SULMEYER KUPETZ BAUMANN & ROTHMAN 333 South Hope St., 35th Floor Los Angeles, CA 90071-1406 Telephone (213) 626-2311 The Trustee's lawsuit alleges that in 2002 iPayment and its officers perpetrated fraud, with the help of their accountants and law firms, against various individuals and corporations, when they formed the company and failed to disclose to potential investors and creditors of the predecessor companies the true nature of evaluations in compliance with the Sarbanes Oxley Act, and other statutes in effect at the time, which require full disclosure to investors before public offerings. Commenting on the announcement, Attorney Michael S. Pratter said: "We are disappointed to report the failure of our concerted and repeated efforts to resolve a dispute between the Trustee and iPayment. It became necessary to file this significant suit for redress and damages against those officers, directors, accountants, and law firms involved in the formation of iPayment." The suit was filed for treble damages totaling $151 million on the grounds that the company was formed by a conspiracy between the named defendants to mislead and defraud the public in the evaluation of the company in its inception in order to gain a much more significant share of the initial founders' stock. Pratter added: "In keeping with our stated objectives, we hope that in the long-term, the company will not be adversely affected by this litigation. However, should the Trustee be successful, it could not only result in a substantial decrease in the market cap of the company but the very existence of the company could be undermined." "The stock of the iPayment is trading currently at $40.40 per share and earned a dividend of $.32 per share this quarter. Estimates are that the suit will result in a charge against earnings and a reduction of the market cap of $668,000,000 by at least 20-30% in the first quarter of 2005," Messrs. Ehrenberg and Young stated in a press release distributed Friday afternoon. Further, the company's original attorneys and accountants, the defunct firms of Brobeck, Harrison and Phelger, LLP, and Arthur Anderson LLP, have been joined in the suit along with their successors, Morgan Lewis and Ernst & Young. All these advisors are accused of furthering and participating in the conspiracy to assert a lower market cap to investors based upon an unrealistically low evaluation, all of which enabled Grimstad, Daily, and a group of insiders to gain a larger share of the company after going public. The suit alleges that just two months prior to evaluating the company at $.37 per share, Auerbach & Co. made an offer for the company for $7.00 per share which the Defendants, these officers and directors of iPayment, turned down. iPayment, Inc., based in Nashville, Tenn., says the lawsuit and the underlying allegations are without merit, and the company intends "to vigorously defend against them." iPayment provides credit and debit card-based payment processing services to over 95,000 small merchants across the United States. iPayment's payment processing services enable merchants to process both traditional card-present, or "swipe," transactions, as well as card-not-present transactions, including transactions over the internet or by mail, fax or telephone. IVACO INC: Ontario Court Approves Asset Sale to Heico Affiliate --------------------------------------------------------------- The Ontario Superior Court of Justice approved the sale of substantially all of the assets of Ivaco, Inc., to an affiliate of Heico, LLC, in accordance with the Purchase and Sale Agreements previously announced. The transaction is expected to close before year-end. The Court also approved the sale of the assets of Ivaco Inc.'s wholly owned subsidiary IMT Corporation. The sale of the assets of IMT Corporation is expected to be completed in mid- September 2004. Mr. Randall Benson, Chief Restructuring Officer, said: "This is another significant step in the path to complete the restructuring of Ivaco. We are pleased that the Court has endorsed this sale transaction and we look forward to completing the remaining requirements to close as quickly as possible." The Court has extended the period of Court protection under the Companies' Creditors Arrangement Act until December 15, 2004. Ivaco is a Canadian corporation and is a leading North American producer of steel, fabricated steel products and precision machined components. Ivaco's modern steel operations include Canada's largest rod mill, which has a rated production capacity of 900,000 tons of wire rods per annum. In addition, its fabricated steel products operations have a rated production capacity in the area of 350,000 tons per annum of wire, wire products and processed rod, and over 175,000 tons per annum of fastener products. Ivaco shares are listed on The Toronto Stock Exchange (IVA). JEAN COUTU: FY '03-'04 Results Broadcast Available Until Sept. 17 ----------------------------------------------------------------- A full replay of an August 20, 2004 Jean Coutu Group conference call is available until September 17, 2004. The conference call was a discussion on the financial results for the fiscal year 2003-2004. Speaker for the conference call is Francois J. Coutu, President and Chief Executive Officer of The Jean Coutu Group, Inc. An interested party can listen to the replay by dialing 1-800-408-3053 (access code 3088595(pound key)). About The Jean Coutu Group The Jean Coutu Group, Inc., is now the fourth largest drugstore chain in North America and the second largest in both the eastern United States and Canada. The Company and its combined network of 2,204 corporate and affiliated drugstores (under the banners of Eckerd, Brooks, PJC Jean Coutu, PJC Clinique and PJC Sante Beaute) employ more than 59,600 people. The Group's United States operations employ over 45,600 persons and comprises 1,549 Eckerd and 336 Brooks drugstores, all corporate owned stores located in 18 states of the Northeast, mid-Atlantic and Southeastern United States. The Group's Canadian operations and the drugstores affiliated to its network employ over 14,000 persons and comprises 277 PJC Jean Coutu drugstores, 40 PJC Clinic and 2 PJC Sant, Beaut, all franchised, in Quebec, New Brunswick and Ontario. * * * As reported in the Troubled Company Reporter on July 21, 2004, Standard & Poor's Ratings Services rated Jean Coutu Group Inc.'s US$250 million senior unsecured notes 'B'. The new notes will replace a like amount of the company's initially proposed US$1.2 billion senior subordinated notes, to be reduced to US$950 million. The 'BB' bank loan ratings and the '1' recovery rating indicate that lenders can expect full recovery of principal in the event of a default. The outlook is negative. "The ratings on Jean Coutu reflect the company's very high lease- adjusted pro forma leverage resulting from the acquisition; its integration risk associated with the Eckerd stores; and the challenge to enhance their profitability, particularly in the front-end; and somewhat constrained liquidity," said Standard & Poor's credit analyst Don Povilaitis. These factors are partially offset by management's track record of successful drugstore integration in both the U.S. and Canada, the scale of the acquisition, which will allow the company to become the fourth- largest drugstore chain operator in North America, and favorable long-term industry dynamics. J.P. MORGAN: S&P Affirms Single-B Ratings on Two Cert. Classes -------------------------------------------------------------- Standard & Poor's Ratings Services raised its ratings on classes B, C, D, and E of J.P. Morgan Chase Commercial Mortgage Securities Corp.'s commercial mortgage pass-through certificates series 2002-FL1. At the same time, the ratings on classes A-2, F, G, H, J, K, and X-FL are affirmed. The raised and affirmed ratings reflect the stable operating performance of the floating-rate mortgage pool and loan payoffs that have increased credit support levels that adequately support the ratings under various stress scenarios. As of August 2004, the trust collateral consisted of 16 floating- rate commercial mortgages indexed to one-month LIBOR with an outstanding balance of $141.445 million. The pool has paid down 80% since issuance with no realized losses to date. The master servicer, Wachovia Bank N.A., reported full-year 2003 net cash flows -- NCFs -- for the entire pool except for the Terrace Place Apartments loan (2.69% of the pool), which has not submitted any financials for 2003. Based on Wachovia's reported NCFs and the issuer's LIBOR assumption in annex A (LIBOR at 4.00%), Standard & Poor's calculated the current weighted average debt servicer coverage ratio -- DSCR -- for the pool to be 1.67x, up from 1.63x at issuance for the same loans under the same LIBOR assumption. Presently, there are two loans with the special servicer, Lennar Partners, Inc., with a current combined balance of $10.6 million, or 7.50% of the pool balance. One of the specially serviced loans, Terrace Place Apartments, is 30-plus days delinquent and past its maturity of July 10, 2004. All other loans in the pool are current. Neither is expected to incur losses that would significantly impact the rated classes. Details of the two loans are as follows: -- Terrace Place Apartments is secured by a 21-unit multifamily property in Brooklyn, New York, that was constructed in 2000. It has a current balance of $3.8 million (2.69% of the pool, $180,952 per unit). The borrower has not submitted any financials since 2002 and the loan is now past maturity. The loan does not have any extensions. The units charge free market rents. The loan was recently transferred to Lennar. -- Brookfield Commons Building has a current balance of $6.8 million (4.81% of the pool, $74 per sq. ft.). It is secured by a 91,875-sq.-ft. office building in Richmond, Virginia, that was built in 1975. The loan had been delinquent due to the loss of a large tenant, but the loan has now been brought current. Current occupancy is 52%. Lennar is negotiating a forbearance agreement with the borrower to allow time to re-tenant, market, and sell the property. The current servicer's watchlist includes six loans totaling $34.0 million (24%). The largest loan on the watchlist, One North Arlington, has a current balance of $8.5 million (6% of the pool, $52.48 per sq. ft.) and appears on the watchlist due to low occupancy. The loan is current and is secured by a 161,718-sq.- ft. office building in Arlington Heights, Illinois that was built in 1986. The borrower requested an extension but failed a DSCR test due to the loss of one large tenant. A new tenant was signed June 1, 2004 for a substantial portion of the vacated space, but with one year's free rent. Current occupancy has recovered to 91.6% as of July 2004. The other loans appear on the watchlist due to low DSCRs or pending maturities. The pool has geographic concentrations in: * Texas (34.5%); * California (21.6%); * Florida (15.9%); * Pennsylvania (6.1%); and * Illinois (6.0%). Significant collateral type concentrations include: * office (55.7%); * multifamily (33.14%); and * retail (8.2%). Standard & Poor's stressed various loans in the mortgage pool, paying closer attention to the specially serviced and watchlisted loans. The expected losses and resultant credit enhancement levels adequately support the current rating actions. Ratings Raised J.P. Morgan Chase Commercial Mortgage Securities, Corp. Commercial mortgage pass-thru certs series 2002-FL1 Rating Class To From Credit Enhancement ----- -- ---- ------------------ B AAA AA 54.27% C AAA A 42.59% D AA A- 38.78% E A- BBB+ 32.82% Ratings Affirmed J.P. Morgan Chase Commercial Mortgage Securities, Corp. Commercial mortgage pass-thru certs series 2002-FL1 Class Rating Credit Enhancement ----- ------ ------------------ A-2 AAA 66.66% F BBB 29.24% G BBB- 23.52% H BB 14.46% J B 13.18% K B- 11.60% X-FL AAA NA KENDRICK ENGINEERING: List of 20 Largest Unsecured Creditors ------------------------------------------------------------ Kendrick Engineering & Manufacturing Company, Inc., released a list of its 20 largest unsecured creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ Internal Revenue Service $510,000 1100 Comerce Street Mail Code 5027-DAL Dallas, TX 75242 GE Capital Value of Security: $191,406 $127,048 Spartech $114,082 Scott Porter, Tax Assessor $30,741 Arcolectric Corp $28,439 Accurrate Metal Stamping, Inc. $27,932 Wells Fargo Equipment Value of Security: $26,486 $10,000 GMAC Value of Security: $21,291 $15,000 Uniroyal Engineered Prod. $18,780 Atena Healthcare $13,975 Signet Technical Sales, Inc. $11,650 Auldridge Matthews & von Tunglen $10,000 LITECO $7,544 Texileleather $6,543 All Star Corrugated $5,983 United Cooperative Services $5,624 TFW Industrial Supply $5,461 Image Exhibits $5,107 SUSPA $4,754 Concept, Inc. $4,512 Headquartered in Godley, Texas, Kendrick Engineering & Manufacturing Company, designs and manufactures plastic vacuum molded products for the automotive industry. The Company filed for chapter 11 protection (Bankr. N.D. Tex. Case No. 04-47515) on August 2, 2004. Eric A. Liepins, Esq., in Dallas, Texas, represents the Company in its restructuring efforts. When the Debtor filed for protection from its creditors, it estimated debts and assets of over $1 million. LITFUNDING CORP: Court Confirms 2nd Amended Reorganization Plan --------------------------------------------------------------- LitFunding Corp. and its subsidiary, California LitFunding, both Nevada corporations are pleased to report that their Second Amended Joint Plan of Reorganization (Plan) under Chapter 11 of the Bankruptcy Code was confirmed by the United States Bankruptcy Court, Central District of California, Los Angeles Division, on May 26, 2004. The order confirming that ruling was entered into the court record on June 17, 2004 and became effective on June 21, 2004. The Plan divides all claims into different "classes" based upon their particular legal rights and characteristics. The "treatment" or payment terms accorded each class of claims in the Plan varies with each class. The material payment provisions in the Plan can be summarized as follows: -- The "class of claims" comprised of debenture holders will be paid in full over a period of five years, with interest; -- The class of claims comprised of recourse unsecured claims, will receive distributions over a period of approximately eighteen months equal to 100% of the principal balance owed on such claims; (Each of these claimants will also receive a distribution of common stock); -- The claims held by the IEP Claimants (the IEP Claimants are the claimants that provided the Litfunding Companies substantially all of the funding the Litfunding Companies advanced to law firms and plaintiffs for litigation financing) have been incorporated into a single composite non-recourse promissory note in the amount of $26,275,709. The IEP Plan Note balance will be paid solely from the collections received by the Lifunding Companies from the lawsuits financed by the Litfunding Companies prior to February 26, 2004. As these funds are collected from the Contract Pool, they will be remitted to a Distribution Agent, less a fixed monthly "administrative charge" payable to the LitFunding Companies. The Distribution Agent, who was selected by the IEP Claimants, will then be responsible for paying the funds out to the IEP Claimants. If for any reason the funds collected from Contract Pool and remitted to the Distribution Agent is not sufficient to fully retire the balance owed on the IEP Note, then the sum of the "administrative charges" deducted by LitFunding Companies to fund their overhead, plus the sums paid to the recourse unsecured creditors from and after October 2004, must be remitted to the IEP Claimants (the amount would be the lesser of the totality of these deductions or the shortfall on the IEP Note). This latter obligation, which totals $1,590,000, is set forth in a second promissory note referred to as the Contingent Administrative Note. If the IEP Plan Note is paid in full, the Contingent Administrative Note is automatically cancelled. As of the date of the Plan, the Company's approximate liabilities were $27.5 million of which approximately $26.3 million is comprised of the obligations in the IEP Plan Note and in the Contingent Administrative Note. Approximate assets were $10 million not including accrued fees which LitFunding is precluded from recognizing prior to case settlement. That is a GAAP requirement. As of the date the order was entered, the Company had 9,410,850 shares of its common stock issued and outstanding. The Company also has 1,418,500 options and 970,000 warrants to purchase shares of its common stock outstanding with employees and related parties as of the date the order was entered; beyond those totals, approximately 500,000 options will be issued under the Plan to ordinary creditors. The Plan confirms the non-recourse nature of the claims held by the IEP Claimants. Although this non-recourse debt is substantial, as of this writing, the LitFunding Companies believe that the collections from the Contract Pool will range between $30 million dollars and $36 million dollars within the next two years, which should be sufficient to fully retire the IEP Plan Note. However, there is no assurance that sums within this range will in fact be realized from this source, or that they will be realized within this time frame, since the collections are solely dependent upon the results achieved in the underlying lawsuits. If the LitFunding Companies are successful in retiring the IEP Plan Note from the collections generated from the Contract Pool as anticipated, the Contingent Administrative Note will be cancelled, leaving the LitFunding Companies with a very modest debt burden, and the right to retain all future collections from the Contract Pool. In contrast, if the LitFunding Companies are not successful in timely retiring the IEP Plan Note, they will have to promptly find a source of funds to retire the obligations arising under the Contingent Administrative Note. The Company believes that it is emerging from bankruptcy as a re- energized company with reduced debt burden and a single business purpose. Its management takes the position that to have completed such a large and complex restructuring after the unwarranted and debilitating litigation of the past 14 months is a remarkable achievement and that the Company owes its thanks to a dedicated core staff and outside experts that worked so hard to help navigate the bankruptcy process. As LitFunding emerges from bankruptcy it intends to apply this same effort and tenacity to rebuilding its capital and growing profitably. In Company estimation, the LitFunding Companies have been among the nation's largest litigation funding companies and one of the very few specializing in providing funds to plaintiff's attorneys. Historically, it has made advances on a purely non-recourse basis. However, it intends to start marketing its new full recourse loan product in the third quarter of 2004. Management anticipates that this product, which accrues interest payments quarterly, will limit Company exposure to losses and allow for earlier recognition of revenue. At the same time, management believes that the new program will help LitFunding respond to the continuous demand from the legal community for more traditional borrowing vehicles. In addition, management expects that these loans will carry a lower, more comfortable interest rate in comparison to the fees the Company currently charges for its non-recourse advance product. Management anticipates that the new program will eventually represent up to 50% of LitFunding's core business. Management is also confident that the move to Nevada, scheduled for completion no later than December 31, 2004, will further strengthen and consolidate recovery from the bankruptcy. It is believed that the move will enable the Company to take advantage of more favorable prevailing commercial and tax laws than experienced currently. The LitFunding Companies remain committed to aggressively expanding its geographic market penetration and hopes to explore opportunities to acquire assets or other companies in this industry. * * * As reported in the Troubled Company Reporter on August 10, 2004, LitFunding Corp (OTC BB: LFDG) signed a non-binding Letter of Intent with Pacific Dawn Capital, LLC, for a multi-stage $2.5 million round of funding. As proposed, Pacific Dawn will either make a capital investment or make a loan to a limited liability company formed together with LitFunding USA, the new wholly owned operating subsidiary of LitFunding. Under the terms of the agreement, the limited liability company will receive fees for originating, servicing and managing investments made with these funds. After the return of capital invested to Pacific Dawn, both the limited liability company and Pacific Dawn will participate equally in the fees generated from the investments made. Dr. Morton Reed, Chairman and President announced that this new source of capital so soon after LitFunding emerged from bankruptcy clearly underscores the viability of LitFunding and announces that the company is back in business and ready to resume it's pre- eminent role as the primary source of capital to the plaintiff attorney's market. Additionally, LitFunding is proud to announce that it intends to expand it's product line of non-recourse advances to include a market driven need for full recourse lending at lower interest rates than the fees currently charged. LORAL SPACE: Files Proposed Reorganization Plan in S.D.N.Y ---------------------------------------------------------- Loral Space & Communications Ltd. (OTC Bulletin Board: LRLSQ) and certain of its subsidiaries filed a proposed plan of reorganization with the U.S. Bankruptcy Court for the Southern District of New York. The Plan is supported by the Official Committee of Unsecured Creditors appointed in Loral's chapter 11 case. The company expects to exit chapter 11 under current management before the end of the year. The Plan, which is subject to confirmation by the bankruptcy court, resulted from negotiations between the company and the Creditors' Committee to implement the previously announced agreement in principle. It provides, among other things, that: * Loral's two businesses, Space Systems/Loral and Loral Skynet, will emerge intact as separate subsidiaries of reorganized Loral (New Loral). * Space Systems/Loral, the satellite design and manufacturing business, will emerge debt-free. * The common stock of New Loral will be owned by Loral bondholders, Loral Orion bondholders and other unsecured creditors. In addition, bondholders and other creditors of Loral Orion will receive an aggregate of $200 million in new senior secured notes to be issued by reorganized Loral Skynet, New Loral's satellite services subsidiary. * New Loral will emerge as a public company and will seek listing on a major stock exchange. * Existing common and preferred stock will be cancelled and no distribution will be made to current shareholders. To view Loral's reorganization plan: http://bankrupt.com/misc/loral.pdf Loral Space & Communications is a satellite communications company. In addition to having Loral Skynet as its subsidiary, Loral, through its Space Systems/Loral subsidiary is a world-class leader in the design and manufacture of satellites and satellite systems for commercial and government applications including direct-to-home television, broadband communications, wireless telephony, weather monitoring and air traffic management. Loral Space & Communications and various affiliates filed for chapter 11 protection (Bankr. S.D.N.Y. Case No. 03-41710) on July 15, 2003. Stephen Karotkin, Esq., and Lori R. Fife, Esq., at Weil, Gotshal & Manges LLP, represent the Debtors in their restructuring efforts. When the company filed for bankruptcy, it listed total assets of $2,654,000,000 and total debts of $3,061,000,000. MATRIA HEALTHCARE: S&P Reinstates BB- $35MM Credit Facility Rating ------------------------------------------------------------------ Standard & Poor's Ratings Services reinstated its 'BB-' senior secured debt rating on disease-state management and fulfillment services provider Matria Healthcare Inc.'s $35 million revolving credit facility due October 2005. At the same time, Standard & Poor's affirmed its 'B+' corporate credit rating and its 'B-' subordinated debt rating on Matria's $84 million of 4.875% convertible senior subordinated notes due in 2024. Standard & Poor's initially withdrew the senior secured rating because they believed that the $35 million revolving credit facility would be refinanced as part of Matria's transaction to retire $122 million of outstanding 11% senior notes. However, because the revolving credit facility will remain outstanding, Standard & Poor's is reinstating the rating. The outlook is stable. "The low-speculative-grade ratings on Matria Healthcare, a disease-state management and fulfillment services provider to patients, physicians, and health plans, reflect the company's limited scale of operations, its position as a small vendor supplying products for larger medical products manufacturers, and the decline in its women's health segment," said Standard & Poor's credit analyst Jesse Juliano. "These concerns are offset by the fact that Matria has acquired businesses during the past few years that have broadened its clinical infrastructure and disease-state management platforms. The company is also operating with relatively moderate debt leverage." Through more than 40 offices in the U.S. and around the world, Marietta, Georgia-based Matria manages chronic diseases and episodic conditions including: diabetes, cardiovascular diseases, respiratory disorders, high-risk obstetrics, cancer, chronic pain, and depression. The company also designs and develops medical products through its Facet Technologies business, and plans to expand into neonatal intensive-care case management in the near term. Employers, managed-care organizations, and pharmaceutical companies are Matria's disease-management clients, and the company has recently signed important new contracts. However, there have been a number of new entrants into the disease-management industry, and it is expected to be more competitive as the benefits of the business become more widely accepted. Also, selling, general, and administrative costs could continue to rise as the company grows to meet the demand of new disease-management contracts. MEDIA GROUP: U.S. Trustee Appoints 5-Member Creditors' Committee ---------------------------------------------------------------- The United States Trustee for Region 2 appointed five creditors to serve on an Official Committee of Unsecured Creditors in The Media Group, Inc.'s and its debtor-affiliates' Chapter 11 cases: 1. HUPA International, Inc. Attn: Peter G. Kruzynski, Esq. Susman, Duffy & Segaloff, P.C. P.O. Box 1684, 55 Whitney Avenue New Haven, Connecticut 06507 Phone: 909-598-9876, Fax: 909-595-8851 2. Shuttleworth Williams, PLLC Attn: Alexander H. Schwartz, Esq. 3695 Post Road, Suite 203, P.O. Box 701 Southport, Connecticut 06890-0701 Phone: 203-255-9829, Fax: 203-255-9839 3. Donald R. Droppo Curtis Packaging Corporation 44 Berkshire Road Sandy Hook, Connecticut 06482 Phone: 203-426-5861, Fax: 203-426-3951 4. Daniel E. Bruso Cantor Colburn, LLP 55 Griffin Road South Bloomfield, Connecticut 06002 Phone: 860-286-2929, Fax: 860-286-0115 5. Richard Frazer, Jr. Crescent Marketing, Inc. P.O. Box 1500 10285 Eagle Drive North Collins, New York 14111 Phone: 716-007-0145, Fax: 716-337-0146 Official creditors' committees have the right to employ legal and accounting professionals and financial advisors, at the Debtors' expense. They may investigate the Debtors' business and financial affairs. Importantly, official committees serve as fiduciaries to the general population of creditors they represent. Those committees will also attempt to negotiate the terms of a consensual chapter 11 plan -- almost always subject to the terms of strict confidentiality agreements with the Debtors and other core parties-in-interest. If negotiations break down, the Committee may ask the Bankruptcy Court to replace management with an independent trustee. If the Committee concludes reorganization of the Debtors is impossible, the Committee will urge the Bankruptcy Court to convert the Chapter 11 cases to a liquidation proceeding. Headquartered in Stamford, Connecticut, The Media Group, distributes and markets automotive additives and general merchandise. The company filed for chapter 11 protection on July 9, 2004 (Bankr. Conn. Case No. 04-50845). Douglas S. Skalka, Esq., at Neubert Pepe and Monteith represents the Debtor in its restructuring efforts. When the Debtor filed for protection from its creditors, it listed $10,915,723 in total assets and $14,743,552 in total debts. MILLENIUM ASSISTED: Gets OK to Use Cash Collateral Until Sept. 3 ---------------------------------------------------------------- Millenium Assisted Living Residence at Freehold, LLC, secured a further authority to use its secured creditors' cash collateral through September 3, 2004 in accordance with a Weekly Budget projecting: Aug. 14 Aug. 21 Aug. 28 Sept. 4 ------- ------- ------- ------- Available Cash 174,148 67,031 109,951 67,512 Total Expenses 135,356 47,319 105,263 7,385 Net Ordinary Income 27,709 5,920 (35,024) 55,439 Net Cash 13,792 19,712 4,688 40,127 The Department of Housing & Urban Development is the Assignee of Arbor National Commercial Mortgage, LLC, which was the Debtor's primary secured creditor asserting a first lien on all of the Debtor's prepetition assets including: -- accounts receivable, -- inventory, -- land, -- building, -- machinery and equipment, but excluding furniture and furnishings which are subject to the alleged first lien of Arthur Shuster, Inc. As of the Petition Date, the Debtor owed HUD $25,000,000. The Debtor needs access to the cash collateral to finance ongoing postpetition operations and prevent serious damage to the estate. The Debtor needs sufficient unencumbered funds to meet its ongoing payroll and other normal operating expenses. Headquartered in Freehold, New Jersey, Millenium Assisted Living Residence at Freehold, LLC, filed for chapter 11 protection on June 7, 2004 (Bankr. N.J. Case No. 04-29097). Larry Lesnik, Esq., and Sheryll S. Tahiri, Esq., at Ravin Greenberg PC, represent the Debtor in its restructuring efforts. When the Company filed for protection from its creditors, it estimated over $10 million in debts and assets. MORTGAGE CAPITAL: Fitch Affirms Low-B Ratings on Four Classes ------------------------------------------------------------- Fitch Ratings upgrades Mortgage Capital Funding, Inc.'s, multifamily/commercial mortgage pass-through certificates, series 1997-MC2, as follows: -- $43.5 million class C to 'AA+' from 'AA-'. In addition, Fitch affirms these certificates: -- $379.8 million class A-2 'AAA'; -- Interest-only class X 'AAA'; -- $52.2 million class B 'AAA'; -- $39.2 million class D 'A-'; -- $43.5 million class F 'BB; -- $8.7 million class G 'BB-'; -- $19.6 million class H 'B'; -- $10.9 million class J 'B-'. Fitch does not rate the $26.1 million class E and the $12.2 million class K certificates. Class A-1 has been paid in full. The upgrades are primarily the result of increased subordination levels due to loan payoffs and amortization. As of the July 2004 distribution date, the pool's aggregate principal balance has been reduced by 27.0%, to $635.8 million from $870.6 million at issuance. Of the 181 original loans in the pool, 138 loans remain outstanding. The pool is well diversified by loan size and geographic location, as evidenced by the top five loans representing 16.7% and 15.6% collateralized by properties located in California. Midland Loan Services, the master servicer, collected year-end 2003 financial statements for 82% of the pool balance. The YE 2003 weighted average debt service coverage ratio (DSCR) for these loans was 1.52 times (x), compared to 1.51x at issuance for the same loans. To date, realized losses total $5.2 million and affect class K. Five loans (3.8%) are in special servicing, of which four are over 90 days delinquent. The largest specially serviced loan is secured by a retail property in Victorville, California, and remains current in its debt service payments. The property's performance declined as a result of the anchor tenant, House2Home, filing for bankruptcy and subsequently vacating the property in 2001. As part of the temporary modification agreement, the borrower deposited lease termination fees into an escrow account that have been used to make timely payments of the debt service since the bankruptcy filing. The funds in the escrow account are expected to be depleted by October 2004. The property is currently only 12% occupied. As a result, the borrower is discussing options with the special servicer that would allow a new tenant to occupy the vacant space. The second largest specially serviced loan (1.0%) is secured by a limited-service hotel property in Brookfield, Wisconsin and is 90+ days delinquent. Performance at the property has declined, and with a scheduled maturity date of September 2004, the special servicer is currently exploring workout options. Fitch is also concerned with the high percentage of Fitch Loans of Concern (13.05%) in the pool. The largest loan of concern (2.7%) is secured by the Fisherman's Wharf Ramada Plaza, a full-service hotel property located in San Francisco. While the loan has remained current, the property has suffered a decline in performance as a result of reduced tourism, as well as competition from competing hospitality properties. DSCR as of YE 2003 was 0.52x, with occupancy at 69%, versus 1.56x and 87%, respectively, at issuance. NEWMARKET TECH: Acquires 20% Equity Stake in Sensitron Inc. ----------------------------------------------------------- NewMarket Technology, Inc. (OTCBB:NMKT) and Sensitron Inc. announced an affiliate partnership to pursue sales of Sensitron's wireless CareTrends(TM) technology in the Healthcare market segment. The partnership includes NewMarket acquiring a 20% equity stake in Sensitron. Sensitron Inc. is a Silicon Valley-based Wireless Healthcare innovations company that has developed the CareTrends(TM) Wireless Bridge System. The system minimizes transcription errors and eliminates lag time between reading, capturing and documenting clinical data because it directly communicates vital signs and other data from wirelessly enabled point-of-care medical devices at the bedside. The Sensitron technology was featured on NBC 11 Health Watch (video segment available on Sensitron website) in the San Francisco Bay Area. The proprietary Sensitron technology offers Cisco Systems (Nasdaq:CSCO) technology integrated into the overall solution and is featured on Cisco's website. The streaming video segment can be viewed by selecting the May 5th video news release at http://newsroom.cisco.com/dlls/feature_archive.html Sensitron, Inc. -- http://www.sensitron.net/-- is a technology company pioneering the development of Health Resource Management (HRM). It has developed the CareTrends(TM) System, an enterprise software and wireless vital signs monitoring system, to improve patient quality of care and decrease healthcare costs. The technology is currently installed in a number of hospitals with several additional hospitals already contracted for installation. Sensitron is lead by a telecommunications veteran of 23 years. Rajiv Jaluria has experience at Sprint (NYSE:PCS) and Bell Labs (NYSE:LU) with M.S. and Ph.D. (research only) degrees in Electrical Engineering from Purdue University and a MBA from Pepperdine University. "Mr. Jaluria visited our facilities this week to learn about our existing wireless and RFID solutions," said Philip Verges, CEO of NewMarket Technology. "We are both enthusiastic about the potential of Sensitron's technology in a healthcare application and believe their CareTrends(TM) System will change hospital management as it is known today. We also recognize the potential of Sensitron's technology in other industry segment applications and intend to move quickly to exchange technical knowledge and expertise between Sensitron and our existing wireless technologies so that we can promptly take advantage of the cross-selling opportunities." "We simply believe in the NewMarket business model," said Rajiv Jaluria, CEO of Sensitron. "My entire career has been about introducing new technologies to market. I have experience in both Fortune 500 research and development departments as well as with the traditional venture capital route; NewMarket has come up with a better mousetrap. The model they have pioneered makes sense and shows more promise than the traditional startup models that I have been part of in the past. NewMarket and Sensitron will be partners with the promise of synergy and opportunity a key reason for this partnership. We are confident in our ability to expand with NewMarket into the Healthcare market segment and excited by the opportunity to integrate our technology into NewMarket's existing technologies for application in additional market segments." About NewMarket Technology Inc. In 2002, NewMarket (formerly IPVoice Communications Inc.) -- http://www.newmarkettechnology.com/-- launched a business plan to continuously introduce emerging communication technologies to market. The plan included a financing model for early technologies and an approach to creating economies of scale through a specialized service and support organization intended specifically for the emerging technology industry. The Company posted six consecutive profitable quarters through 2003 and established an annualized $15 million in revenue. In 2003, NewMarket acquired Infotel Technologies in Singapore and IP Global Voice, led by CEO Peter Geddis, a former Executive Vice President and Chief Operating Officer of Qwest Communications (NYSE:Q). In 2004, the Company diversified its communications technology offering into the healthcare and homeland security industries with the respective acquisitions of Medical Office Software Inc. and Digital Computer Integration Corp. RKM IT Solutions of Caracas, Venezuela, was also recently acquired as NewMarket's entry into the Latin American market. * * * Liquidity and Capital Resources In the Form 10-QSB for the quarterly period ended March 31, 2004, NewMarket reports: "At March 31, 2003, the Company had cash of $16,300 and a working capital deficit of $1,510,700 as compared to cash of $1,395,000 and working capital surplus of $252,000 at March 31, 2004. This improved working capital situation was due primarily to the implementation of the previously herein described new business model implemented in June 2002, which includes as part of the plan the acquisitions made over the last year. In addition we have been successful attracting investment capital to carry out this business model. "Since inception, the Company has financed operations primarily through equity security sales and convertible debt. The nature of the growth strategy of the Company will require further funding to be acquired either through equity or debt. Accordingly, if revenues are insufficient to meet needs, we will attempt to secure additional financing through traditional bank financing or a debt or equity offering; however, because the rapid growth and nature of the acquisitions of the Company and the potential of a future poor financial condition, we may be unsuccessful in obtaining such financing or the amount of the financing may be minimal and therefore inadequate to implement our continuing plan of operations. There can be no assurance that we will be able to obtain financing on satisfactory terms or at all, or raise funds through a debt or equity offering. In addition, if we only have nominal funds by which to conduct our operations, it will negatively impact our potential revenues." NORTEL NETWORKS: Reports Preliminary 2nd Quarter Financial Results ------------------------------------------------------------------ Nortel Networks Corporation (NYSE:NT) (TSX:NT) reported estimated limited preliminary unaudited financial results for the first and second quarters of 2004, prepared in accordance with United States generally accepted accounting principles, and new strategic initiatives to reset its business model. These initiatives include a new streamlined organizational structure to improve alignment with enterprise and carrier customers, which is intended to enable the Company to build on its market leadership in developing the converged networks of the future and improve business efficiency and operating cost performance in an increasingly competitive market. The streamlined organizational structure will lead to an approximate 10 per cent workforce reduction. Nortel Networks also provided an update regarding the progress of the Audit Committee's continuing independent review, including the termination for cause of seven finance executives. The Company also provided an update on the progress of its restatements and revisions to prior period financial results. The announcements serve as a status update by the Company and its principal operating subsidiary Nortel Networks Limited pursuant to the alternative information guidelines of the Ontario Securities Commission. These guidelines contemplate that the Company and NNL will normally provide bi-weekly updates on their affairs until such time as they are current with their filing obligations under Canadian securities laws. "We are pleased to be able to communicate preliminary first and second quarter 2004 results and details of a new streamlined organization," said Bill Owens, president and chief executive officer, Nortel Networks. "With the restatement moving toward completion, we are focusing our full attention on driving the business forward with a focus on costs, cash and revenues as overall strategic imperatives. With our proven strengths in high performance high reliability networks, supported by our new simplified organization, we are well-positioned to deliver the secure, reliable converged networks customers are demanding to increase their own competitiveness." Estimated Limited Preliminary Unaudited Results for the First and Second Quarters of 2004 Estimated unaudited revenues for the first six months of 2004 were approximately US$5.1 billion, with approximately US$2.5 billion in the first quarter and US$2.6 billion in the second quarter. Estimated unaudited net earnings per share in the first half of 2004 were US$0.00 to US$0.02, with US$0.00 to US$0.01 in the first quarter and US$0.00 to US$0.01 in the second quarter, in each case on a fully diluted basis. Estimated unaudited net earnings in the second quarter of 2004 included a benefit of approximately US$0.02 per share on a fully diluted basis related to a customer contract settlement in South America. Estimated unaudited revenues by segment on a percentage of revenue basis for the first and second quarters of 2004 were: Percentage of Revenue Q1 2004 Q2 2004 Wireless Networks 51% 51% Enterprise Networks 21% 22% Wireline Networks 18% 17% Optical Networks 10% 10% "The revenue performance reflects our customers' continued investment in our solutions as a provider of choice in building secure converged networks and their ongoing confidence in Nortel Networks," said Owens. Recent business highlights are included in the annex to this press release. Gross Margin Gross margin for the first six months of 2004 is estimated at approximately US$2.2 billion, or approximately 43 percent of revenues, with approximately US$1.1 billion in each of the first and second quarters. Margins in the second quarter reflect lower margins related to initial wireless deployments and the mix of wireless revenues in the quarter. Expenses Selling, general and administrative expenses and research and development expenses combined are estimated at approximately US$2.1 billion for the first six months of 2004 and were approximately equal in the first and second quarters. Cash Cash balance at the end of the second quarter of 2004 was approximately US$3.7 billion and was approximately US$3.6 billion at the end of the first quarter of 2004. Timing of Final Unaudited Results These estimated limited preliminary unaudited results are subject to change and to a number of important limitations described below under "Status of Restatement and Filing of Financial Statements". The final unaudited results for the first and second quarters of 2004 will be available upon the filing of the quarterly reports for such periods, which the Company expects to file by the end of the third quarter of 2004. Strategic Plan Nortel Networks believes significant opportunities for growth exist across the marketplace and particularly in emerging markets such as China and India as customers evolve their networks to high performance converged networks underpinned by high security and reliability. Security and reliability have always been fundamental requirements for service provider networks of all types and they are increasingly important to governments, defense interests and enterprises around the world. Nortel Networks is driving its strategy with the aim of growing market share and to leverage its strength in high performance, high reliability networks in opportunities such as those mentioned above. Existing and new competitors are aggressively positioning themselves to capture significant growth opportunities. At the same time, the financial results for the first and second quarters of 2004 announced today indicate that the Company's business operations are not achieving the targeted operating cost performance. "We have put in place a strategic plan that recognizes industry dynamics and the evolution of the converged network, and leverages our acknowledged strengths in high reliability networks and strong customer loyalty. The plan further reflects our renewed commitment to best corporate practices and ethical conduct," said Owens. "Building on this foundation, it is our intention to be optimally positioned to maximize strategic opportunities as they arise. Our ability to be proactive will be fueled by a dedicated emphasis on costs, cash and revenues." The impact of the strategic plan outlined today, and detailed in the annex to this press release, will lead to an anticipated focused reduction in employees of approximately 3,500, or an estimated 10 per cent of the workforce. This workforce reduction is expected to be substantially completed by year-end, and will be subject to completion of the appropriate information and consultation processes with the relevant employee representatives in certain jurisdictions, as required by law. The Company currently estimates costs of approximately US$300 million to US$400 million in connection with this work plan and is targeting annualized cost savings of approximately US$450 million to US$500 million. The details of this work plan and the timing of the financial statement impacts are expected to be finalized by the end of the third quarter of 2004. "In an increasingly cost-competitive environment, we are taking the steps necessary to continue to grow market share and, together with the actions announced today, are taking the important steps to improve our profitability and cash generation," said Owens. "I am saddened that these actions will necessitate a decrease in our workforce. Nortel Networks employees have demonstrated remarkable loyalty during this challenging period. I recognize the impact these measures will have on these fine people who have served Nortel Networks well." The principal components of the strategic plan are: -- a renewed commitment to best corporate practices and ethical conduct, including through the establishment of a chief ethics and compliance officer; -- a streamlined organizational structure to reflect alignment with carrier converged networks; -- an increased focus on the enterprise market and customers; -- optimized research and development programs for secure, "5 9s" reliable converged networks; -- the establishment of a chief strategy officer to drive partnerships, new markets and acquisitions; -- the establishment of a chief marketing officer to drive overall marketing strategy; -- the strategic review of embedded services to assess opportunities in professional services business; and -- a distinct focus on government and defense customer segments. Business Outlook The Company continues to expect the market will grow in the low to mid-single digits in 2004 compared to 2003, and that its revenues will grow faster than the market. Nortel Networks expects, through the implementation of its strategic plan, to reduce its operating expenses to 35 percent of revenues or lower on an annualized basis in 2005. Considering the impacts of the strategic plan and higher costs associated with initial customer deployments in emerging markets, the Company expects gross margins in the range of 40 to 44 percent of revenues through 2005. Status of Audit Committee Independent Review Personnel Actions The independent review by the Nortel Networks Audit Committee is continuing. The Audit Committee expects to complete that portion of its inquiry which affects the Company's and NNL's ability to finalize and file their audited financial statements for the year 2003 in sufficient time to enable the Company and NNL to file such financial statements by the end of the third quarter of 2004. The Audit Committee anticipates that there will be additional work done on remedial measures, internal controls, and improvements to processes beyond the filing of the Company's and NNL's audited 2003 financial statements. The Audit Committee review has focused on the establishment, timing of, support for and release of accruals and provisions. Based on the Committee's work to date, the Company has found that a significant number of accruals and provisions were established and/or released in 2002 and 2003 that were not in accordance with applicable generally accepted accounting principles. The Audit Committee's objective is to arrive at a full understanding of the facts and circumstances that gave rise to these errors before audited financial statements for the year 2003 are finalized and filed. As previously announced on April 28, 2004, the Company terminated for cause each of its former president and chief executive officer, chief financial officer and controller. Today, the Company announced that seven individuals with significant responsibilities for financial reporting at the line of business and regional levels have also been terminated for cause. Four of these individuals had previously been placed on paid leaves of absence, as announced on April 28, 2004. In making these and the previous determinations, the Board of Directors found that each of these ten individuals had primary, or substantial, responsibility for the Company's financial reporting; that if not aware, each ought to have been aware that the establishment and/or release to income of such accruals and provisions were not in accordance with applicable generally accepted accounting principles; and that the improper application of generally accepted accounting principles with respect to these accruals and provisions misstated the Company's financial statements. The Company will demand repayment by these individuals of payments made under Company bonus plans in respect of 2003, and will take further additional action with respect to these individuals, if appropriate. The Board of Directors reiterated its commitment to continue to fully cooperate with the ongoing investigations of these matters by the regulatory and law enforcement authorities in both Canada and the United States. As previously announced, the Company has retained outside consultants to assist it in reviewing and assessing its finance organization and the development and implementation of appropriate processes and financial systems. The Audit Committee's independent review is also focused on remedial measures, strengthening internal controls and improvements to processes. Together, the recommendations from these assessments, when completed and presented to the Board of Directors, are intended to strengthen internal controls over financial reporting and address the material weaknesses in internal controls previously identified by the Company's independent auditors. The Company will provide additional details as to these recommendations in connection with the filing of its financial statements for 2003 and for the first and second quarters of 2004 and related periodic reports. Status of Restatement and Filing of Financial Statements The Company and NNL continue to dedicate significant resources to the process to complete their financial statements as soon as practicable. As previously announced, the Company and NNL continue to work on the restatement and revisions of their financial results for each fiscal quarter in 2003 and for 2002 and 2001, and the preparation of their financial statements for the full year 2003 and the first and second quarters of 2004. As previously announced, the Company and NNL expect to file, by the end of the third quarter of 2004, financial statements for the year 2003 and the first and second quarters of 2004 and related periodic reports, and follow thereafter, as soon as practicable, with any required amendments to periodic reports for prior periods. Based on the Company's work to date, it currently does not expect changes to the principal estimated impacts from such restatements and revisions to the Company's results previously outlined in the Company's press release dated July 13, 2004, except for the following: -- approximately three-quarters of the reduction in 2003 net earnings identified to date impacts the first half of 2003 (up from two-thirds previously estimated), with the remaining approximate one-quarter reduction impact to the second half of 2003. The Company's work to date with respect to the restatements and revisions and the principal estimated impacts mentioned above and the Company's expectations as to timing of the filing of financial statements and related periodic reports remain subject to a number of important limitations, including: -- the principal impacts are estimated impacts which have been identified by the Company based on the work done to date and are not projections of the final total impacts. As such, the principal estimated impacts continue to be preliminary, partial and subject to change; -- the ongoing work of the Nortel Networks Audit Committee independent review; -- the ongoing work to be done by the Company related to the restatements and revisions and the impact of accounting for certain other matters, including foreign exchange; -- the previously disclosed material weaknesses in Nortel Networks internal controls over financial reporting; -- the review or audit of the Nortel Networks financial statements by Nortel Networks independent auditors, Deloitte & Touche LLP, as the above estimates of the principal impacts of the restatements identified to date have not been the subject of a review or audit engagement by Nortel Networks independent auditors; and -- the final determination of the impact of adjustments arising from subsequent events on the Company's results of operation or financial position. The financial results of NNL are consolidated into the Company's results. NNL's financial statements for the applicable periods will also be restated upon the related restatements of the Company's financial statements. NNL's preferred shares are publicly traded in Canada. Other Matters EDC Support Facility NNL is currently in discussions with Export Development Canada to obtain a new waiver under the EDC performance-related support facility of certain defaults related to the delay by the Company and NNL in filing their respective Q2 2004 Quarterly Reports on Form 10-Q, and to extend the current waiver, scheduled to expire on August 30, 2004, related to the delayed filings of their 2003 Annual Reports on Form 10-K and Q1 2004 Quarterly Reports on Form 10-Q, in each case with the U.S. Securities and Exchange Commission, the trustees under Nortel Networks public debt indentures and EDC. The existing waiver also applies to certain other breaches that have arisen or may arise under the EDC Support Facility relating to the delayed filings and the restatement of the Company's and NNL's financial results. If NNL fails to obtain a waiver relating to the Q2 Reports by August 24, 2004, or an extension of the current waiver by August 30, 2004, EDC would have the right at such times to require NNL to cash collateralize the support outstanding under the EDC Support Facility and to exercise its rights against the collateral under NNL's related security agreements. There can be no assurance that NNL will receive any new waivers or any extension of the existing waiver from EDC. The EDC Support Facility provides up to US$750 million in support, all presently on an uncommitted basis. As of August 15, 2004, there was approximately US$274 million of outstanding support utilized under the EDC Support Facility. Status of Legal Proceedings A proposed class proceeding has been commenced before the Ontario Superior Court of Justice against the Company, NNL and various current and former officers and directors claiming damages of Cdn. $250 million for alleged breaches of trust and fiduciary duty, oppressive conduct and misappropriation of corporate assets and trust property in respect of the payment of cash bonuses to executives, officers and employees in 2003 and 2004 under the Nortel Networks Return to Profitability bonus program. The claim alleges that the bonus payments were paid based on falsely reported financial performance and diverted the profits of the Company and NNL that ought to have been shared with the Company's shareholders. The claim also seeks an order under the Canada Business Corporations Act directing that an investigation be made respecting these bonus payments. Except as to the matters described above, the Company and NNL reported that there have been no other material developments in the matters reported in their status updates of June 2, 2004, June 29, 2004, July 13, 2004, July 27, 2004 and August 10, 2004 and the Company's press release "Nortel Networks Updates Status of RCMP Review" dated August 16, 2004. Nortel Networks is an industry leader and innovator focused on transforming how the world communicates and exchanges information. The Company is supplying its service provider and enterprise customers with communications technology and infrastructure to enable value-added IP data, voice and multimedia services spanning Wireless Networks, Wireline Networks, Enterprise Networks, and Optical Networks. As a global company, Nortel Networks does business in more than 150 countries. More information about Nortel Networks can be found on the Web at http://www.nortelnetworks.com/ or http://www.nortelnetworks.com/media_center/ * * * As reported in the Troubled Company Reporter on August 18, 2004, the Integrated Market Enforcement Team of the Royal Canadian Mounted Police recently advised the Company that it will commence a criminal investigation into the Company's financial accounting situation. As reported in the Troubled Company Reporter on August 12, 2004, the Company's directors and officers, and certain former directors and officers are facing allegations from certain shareholders in the U.S. District Court for the Southern District of New York that the directors and officers breached fiduciary duties owed to the Company during the period from 2000 to 2003. NORTEL NETWORKS: S&P Keeps Low-B Ratings On CreditWatch Developing ------------------------------------------------------------------ Standard & Poor's Ratings Services' long-term corporate credit rating and other long-term ratings on Nortel Networks, Corp., and Nortel Networks, Ltd., remain on CreditWatch with developing implications, where they were placed April 28, 2004. The CreditWatch developing listing indicates that ratings may be raised, lowered, or affirmed. As previously reported Standard & Poor's lowered its 'B' long-term corporate credit rating and other long-term ratings on Nortel Networks Corp. and Nortel Networks Ltd. to 'B-'. Brampton, Ontario-based Nortel Networks reported preliminary estimated unaudited results for the first and second quarters of 2004 and provided an update on its audit committee independent review. Nortel Networks' announcement affirmed the expected timing for filing of the company's financial statements with the various regulatory bodies, on or before Sept. 30, 2004. In response to competitive market conditions, the company also announced a further restructuring and reorganization. "Having Nortel Networks affirm the expected timing of filing audited financial statements substantially reduces the uncertainty of a potential put of those indentures," said Standard & Poor's credit analyst Mark Mettrick. Since March 30, 2004, as a result of the delays in filing audited financial statements for 2003, bondholders have had a right to file a notice of noncompliance. Such notice could accelerate repayment if not cured within 90 days. Given that no debtholder action has been taken, and that the company is now likely within a deliverable 90-day cure period, the risk of an actual acceleration and default on the debt is materially reduced. Although the expected filing of audited financial statements and lower possibility of a bondholder put are positive for the company, the ratings on Nortel Networks will remain on CreditWatch until the company is in full compliance with its indentures. Standard & Poor's will than assess the company's business prospects and the effect of the restructuring and reorganization on its financial profile. The preliminary estimates highlight the continued competitive pressures in the market, with Nortel Networks announcing that gross margins will not be within the previous target range. Nevertheless, the new restructuring will help to further align costs. Favorable resolution of these matters could lead to the ratings on Nortel Networks being raised when removed from CreditWatch. Based on profitability targets set for 2005, the company would be in a position to generate positive operating income and cash flow in 2005. Cash costs associated with the restructuring are expected to be less than estimated costs savings of US$450 million to US$500 million annually. Conversely, if the ongoing internal and external investigations should uncover systematic problems, which could affect the company's future operations, the ratings could be lowered. Standard & Poor's will meet with the company after completion of its independent review and filing of its financial statements to determine the effect on these matters on the ratings on the company. OCTAGON INVESTMENT: S&P Puts BB Rating on $10.75M Class B-2L Notes ------------------------------------------------------------------ Standard & Poor's Ratings Services assigned its preliminary ratings to Octagon Investment Partners VII Ltd./Octagon Investment Partners VII (Delaware) Corp.'s $373.40 million fixed- and floating-rate notes due 2016. The preliminary ratings are based on information as of Aug. 19, 2004. Subsequent information may result in the assignment of final ratings that differ from the preliminary ratings. The preliminary ratings reflect: -- The credit enhancement provided to each class of notes through the subordination of cash flows to more junior classes and preferred shares; -- The transaction's cash flow structure, which has been subjected to various stresses requested by Standard & Poor's; -- The experience of the collateral manager; and -- The legal structure of the transaction, including the bankruptcy remoteness of the issuer. A copy of Standard & Poor's complete presale report for this transaction can be found on RatingsDirect, Standard & Poor's Web- based credit analysis system, at http://www.ratingsdirect.com/ The presale can also be found on the Standard & Poor's Web site at http://www.standardandpoors.com/ Select Credit Ratings, and then find the article under Presale Credit Reports. Preliminary Ratings Assigned Octagon Investment Partners VII Ltd. Octagon Investment Partners VII (Delaware) Corp. Class Rating Amount (mil. $) ----- ------ --------------- X AAA 6.40 A-1L AAA 294.00 A-2L AA 23.00 A-3L A- 16.50 B-1L BBB 22.75 B-2L BB 10.75 OHIO VALLEY HEALTH: S&P Cuts Ratings Three Notches to B from BB --------------------------------------------------------------- Standard & Poor's Ratings Services lowered its underlying ratings -- SPURs -- and standard long-term ratings three notches to 'B' from 'BB' on Belmont County, Ohio's and Ohio County Commission, W.Va.'s bonds, issued for Ohio Valley Health Services and Educational Corp., West Virginia. The outlook is stable. The lower rating reflects the system's historically unprofitable operations, which were exacerbated by challenges at Ohio Valley Medical Center, the system's West Virginia-based hospital -- that led to deeper operating losses in 2003 and 2002, as well as weaker professional and general liability insurance coverage, including limited catastrophic coverage, for both the hospitals and particularly for Ohio Valley Medical Center due to its self- insurance exposure. The rating also reflects limited balance sheet flexibility due to low liquidity and upcoming capital projects that will limit the system's ability to strengthen its balance sheet. These credit weaknesses are mitigated by improved results for the latter half of 2003 and interim 2004 for the system as a whole due to a number of revenue-enhancement and cost-saving initiatives, improved business volumes, and profitability at East Ohio Regional Hospital, the system's Ohio-based hospital, and a competitive advantage in geographic coverage. "The stable outlook reflects the expectation that the system's initiatives to turn around operations will continue and provide adequate cash flow to fund future capital projects," said Standard & Poor's credit analyst Anita Varghese. "However, while management is strategically investing in [East Ohio Regional Hospital], it will also need to address [Ohio Valley Medical Center's] aging facility and financial viability," she added. Ohio Valley Health Services and Educational Corp. operates the 121-bed OVMC in Wheeling, West Virginia and the 78-bed East Ohio Regional Hospital across the Ohio River, in Martins Ferry, Ohio, offering broad geographic reach. However, Ohio Valley Health Services and Educational Corp., which is situated in a service area with a declining population and below-average income levels, needs to expand its business by taking market share away from its main competitor, the 252-bed Wheeling Hospital. The obligated group consists of the parent and the two hospitals. OM GROUP: S&P's Low-B Credit & Sub. Debt Ratings on CreditWatch --------------------------------------------------------------- Standard & Poor's Ratings Services' 'B+' corporate credit and 'B-' subordinated note ratings on Cleveland, Ohio-based OM Group Inc. remain on CreditWatch, but the implications are revised to developing from negative. "The revision reflects the potential that the ratings could be raised upon a satisfactory outcome of the independent auditors' review of OM's restated financial statements and if earnings continue at improved levels," said Standard & Poor's credit analyst Wesley E. Chinn. With the recent completion of the investigation by the chemical company's audit committee, OM expects to restate its financial statements for 1999 through 2003. The audit committee has determined that certain adjustments to inventory and other accounts were improperly recorded for a number of years, resulting in overstatements--totaling $115 million to $120 million--of earnings before income taxes for 1999, 2000, and 2001. During 2002 and 2003, most of those improper adjustments were written off, resulting in understatements--$116 million to $121 million-- of earnings before income taxes for those two years. The company now expects that the aggregate reduction to retained earnings as of Sept. 30, 2003, from the restatements described and the negative impact of restatement issues that relate to periods prior to 1999 will be less than $25 million. Following completion of the audit of the restated years by the company's independent auditors, OM expects to file its 2003 Form 10-K, including audited restated financial statements for 2001 to 2003, and 2004 Form 10-Qs with the SEC by Oct. 31, 2004. The restated financial statements and audit committee investigation are subject to review by the SEC. The CreditWatch listing will be resolved once Standard & Poor's has reviewed the audited restated financial statements and discussed with management its accounting controls and practices, business fundamentals (including the political and civil instability risks associated with the Democratic Republic of Congo, its principal cobalt supplier country, and long-term nickel supply uncertainties), financial plans, and shareholder class action lawsuits related to the decline in the company's stock price after the 2002 third-quarter earnings announcement. OMNI FACILITY: Committee Turns to Capstone for Financial Advice --------------------------------------------------------------- The Official Unsecured Creditors Committee appointed in Omni Facility Resources, Inc.'s and its debtor-affiliates' chapter 11 cases seeks permission from the U.S. Bankruptcy Court for the Southern District of New York to employ Capstone Corporate Recovery, LLC, as its financial advisor. Capstone will: a. advise and assist the Committee in its analysis and monitoring of the Debtors' historical, current and projected financial affairs, including without limitation to, schedules of assets and liabilities, statement of financial affairs, periodic operating reports, analyses of cash receipts and disbursements, analyses of cash flow forecasts, analyses of trust accounting, analyses of various asset and liability accounts, analyses of cost-reduction programs, analyses of any unusual or significant transactions between the Debtors and any other entities including business acquisitions, and analyses of proposed restructuring transactions; b. monitor any sale processes undertaken by the Debtors to sell all or parts of the Debtors' businesses; c. assist and advise the Committee and counsel in reviewing and evaluating any court motions filed or to be filed by the Debtors or any other parties-in-interest; d. analyze and critique the terms and conditions of any debtor-in-possession financing arrangements; e. advise and assist the Committee in evaluating the retention arrangements for advisor to be retained by the Debtors; f. advise and assist the Committee and counsel in identifying and/or reviewing preference payments, fraudulent conveyances and other causes of action; g. analyze the Debtors' assets and unsecured creditors recovery under various recovery scenarios; h. analyze alternative reorganization scenarios in an effort to maximize the recovery to general unsecured creditors and develop negotiation strategies to support the Committee's position; i. assist and advise the Committee in evaluating and analyzing restructuring proposals by the Debtors, including reviewing and providing analysis of any plan of reorganization and disclosure statement relating to the Debtors; j. develop a monitoring process that enables the Committee to effectively evaluate the Debtors' performance on an ongoing basis; and k. provide other services that are consistent with the Committee's role and duties as may be requested from time to time. Capstone Corporate will charge hourly fees ranging from $50 to $495. To the best of the Committee's knowledge, the Firm is "disinterested" as the term is defined in Section 101(14) of the Bankruptcy Code. Headquartered in South Plainfield, New Jersey, Omni Facility -- http://www.omnifacility.com/-- provides architectural, janitorial, landscaping and electrical services. The Debtor filed for chapter 11 protection on June 9, 2004 (Bankr. S.D.N.Y. Case No. 04-13972). Frank A. Oswald, Esq., at Togut, Segal & Segal LLP, represents the Company in its restructuring efforts. When the Debtor filed for protection, it listed $80,334,886 in total assets and $100,285,820 in total debts. ONSITE TECH: Employs Hughes Watters as Bankruptcy Counsel --------------------------------------------------------- Onsite Technology, LLC seeks approval from the U.S. Bankruptcy Court for the Southern District of Texas to employ Hughes, Watters & Askanase LLP as its counsel. The Debtor selected Hughes Watters because the Firm has substantial expertise and experience in bankruptcy matters and will be able to provide the full range of services needed in its case. Hughes Watters will: a) advise and consult with the Debtor about its powers and duties as a debtor-in-possession in the continued operation of its business; b) represent the Debtor in cash collateral and debtor-in- possession financing negotiations and litigation; c) represent the Debtor concerning disposition of its executory contracts; d) assist the Debtor in the development, negotiation, litigation and confirmation of a chapter 11 plan of reorganization and the preparation of a disclosure statement in respect thereof, concerning treatment of secured and unsecured claims; e) prepare the necessary applications, motions, complaints, adversary proceedings, answers, orders, reports and other pleadings and legal documents, in connection with matters affecting the Debtor and its estate; f) take actions as may be necessary to preserve and protect the Debtor's assets, including if required by facts, the prosecution of avoidance actions and adversary or other proceedings on Debtor's behalf, defense of actions commenced against the Debtor, negotiations concerning litigation in which Debtor is involved, objection and estimation of claims filed against the estate; and g) perform other legal services that the Debtor may request in connection with this case. David Askanase, Esq., reports that his Firm received a $50,000 retainer shortly before the Company filed for bankruptcy protection. Mr. Askanase does not disclose the hourly rates of professionals at his firm. To the best of the Debtor's knowledge, Hughes Watters is a "disinterested person" as the term is defined in Section 101(14) of the Bankruptcy Code. Headquartered in Houston, Texas, Onsite Technology -- http://www.onsite2.com/-- offers an alternative way of recycling waste materials. The Company filed for chapter 11 protection on August 10, 2004 (Bankr. S.D. Tex. Case No. 04-41399). Anne E. Catmull, Esq., at Hughes Watters & Askanase LLP, represents the Debtor. When the Debtor filed for protection, it listed above $10 million in estimated assets with more than a million in estimated debts. OSE USA: Appoints Edmond Tseng as Interim President --------------------------------------------------- Steve Lerner resigned as President of OSE USA, Inc. (OTCBB:OSEE) effective August 18. Prior to joining OSE USA in April of 2004, Mr. Lerner was founder and chief executive officer of Gigasys Corporation of Carlisle, Massachusetts; he is a recognized authority in microelectronics packaging and test foundry services with significant international experience in both S.E. Asia and Europe. Mr. Lerner resigned to pursue other personal interests. Until Mr. Lerner's replacement is selected and confirmed, Chairman of the Board of Directors Edmond Tseng will act as President of the Company. Founded in 1992, OSE USA has been the nation's leading onshore advanced technology IC packaging foundry. In May 1999, Orient Semiconductor Electronics, Ltd., one of Taiwan's top IC assembly and packaging services companies, acquired a controlling interest, boosting its U.S. expansion efforts. The Company discontinued manufacturing operations in 2003 in order to concentrate on the distribution segment of the market. About OSE USA When it comes to packaging chips, OSE USA stops just short of wrapping them up with a bow. OSE USA (formerly Integrated Packaging Assembly Corporation) receives wafers from its customers, cuts the wafers into individual chips, adds wire leads, and encases each chip in protective plastic, ready for installation into such products as PCs, cars, cameras, and telecommunications equipment. Customers include Atmel (32% of sales), Orbit Semiconductor, and Cirrus Logic. Taiwan-based chip maker Orient Semiconductor Electronics owns three-quarters of OSE USA. At June 27, 2004, OSE USA's balance sheet showed a $46,151,000 stockholders' deficit, compared to a $45,211,000 deficit at December 31, 2003. OWENS CORNING: Asbestos Claims Estimation Hearing Begins Jan. 13 ---------------------------------------------------------------- The Honorable John P. Fullam, Sr., the U.S. District Court judge overseeing parts of Owens Corning's chapter 11 proceeding, will hold an initial hearing on Jan. 13, 2005, to determine whether the $16 billion value ascribed to the company's liability for asbestos-related personal injury claims is too high, on the mark or too low. As previously reported in the Troubled Company Reporter, and elsewhere, Owens Corning, with the support of its asbestos claimant constituencies and some creditors, has proposed a chapter 11 plan premised on a $16 billion valuation for asbestos-related claims. The holders of Owens Corning's bank debt vehemently oppose that valuation. The initial asbestos claims estimation hearing will be held on Jan. 13, at 10:00 a.m., in Courtroom 15A at 601 Market Street in Philadelphia. Judge Fullam directs that parties intending to present expert testimony at the Jan. 13 hearing file and serve expert reports by Oct. 15, 2004. Depositions of any experts are to be completed by Dec. 15, 2004. Judge Fullam is persuaded, at this juncture, that historical data available from Owens Corning's and Fibreboard's asbestos claims databases and the parties' experience in other asbestos-related litigation and restructurings, viewed in light of the expert testimony at the Jan. 13 hearing "should probably suffice for Claims Estimation purposes." If by the end of the Jan. 13 hearing Judge Fullam thinks he needs more information, he'll ask for it at that time. Headquartered in Toledo, Ohio, Owens Corning -- http://www.owenscorning.com/-- manufactures fiberglass insulation, roofing materials, vinyl windows and siding, patio doors, rain gutters and downspouts. The Company filed for chapter 11 protection on October 5, 2000 (Bankr. Del. Case. No. 00-03837). Mark S. Chehi, Esq., at Skadden, Arps, Slate, Meagher & Flom represents the Debtors in their restructuring efforts. At June 30, 2004, the Company's balance sheet shows $7.3 billion in assets and a $4.3 billion stockholders' deficit. PARKER DRILLING: $137.7 Million of 10-1/8% Notes Are Tendered ------------------------------------------------------------- Parker Drilling Company (NYSE: PKD) announced the current status of its cash tender offer for up to $80 million aggregate principal amount of its $235.6 million of 10-1/8% Senior Notes due 2009 (CUSIP Nos. 701081 AK 7 and 701081 AJ 0), which is set to expire at 5:00 p.m., New York City time, on September 2, 2004, unless extended or earlier terminated. As of 5:00 p.m., New York City time, on Thursday, August 19, 2004, approximately $137.7 million in outstanding principal amount of the Notes had been tendered to the Company. As previously announced, the Company will purchase $80 million aggregate principal amount of Notes from tendering holders on a pro rata basis. Lehman Brothers Inc. is acting as Dealer Manager for the tender offer. The Tender Agent and Information Agent is D.F. King & Co., Inc. Persons with questions regarding the tender offer should contact Lehman Brothers Inc., Attention: Liability Management Group at 800-438-3242 or 212-528-7581, and copies of the tender offer materials may be obtained from D.F. King & Co., Inc. at 800- 859-8511 or 212-269-5550. Parker Drilling is a global drilling company providing drilling rigs, labor management, and rental tools to the energy industry. Parker's primary business segment is drilling rigs with 21 in the United States Gulf of Mexico and 44 internationally. * * * As reported in the Troubled Company Reporter on August 19, 2004, Moody's assigned a B2 rating to Parker Drilling's pending $150 million of senior unsecured floating rate 6 year notes, and affirmed its existing B2 senior unsecured note and B1 secured bank debt ratings. Though Parker Drilling has achieved some important milestones, the rating outlook remains negative, pending: * completion of its remaining $90 million of asset sales; * commensurate debt reduction; * demonstration of positive second half 2004 operating cash flow momentum on improving rig utilization and rig dayrates; and * visibility that, once the asset sales are completed, the cash generating power of the pro-forma rig portfolio adequately supports the existing or higher ratings. To achieve and sustain a stable rating outlook, Moody's would expect 2005 operating cash flow to amply cover interest expense, capital spending, and working capital needs as Parker Drilling's business mix evolves following its asset sales and as additional international business comes on line. PENINSULA GAMING: S&P Assigns B+ Credit & Senior Debt Ratings ------------------------------------------------------------- Standard & Poor's Ratings Services placed its 'B+' corporate credit and senior secured debt ratings on Peninsula Gaming, LLC, on CreditWatch with negative implications following the company's announcement that second quarter operating performance was weaker than expected. Total debt outstanding as of June 30, 2004, was about $274 million. "The CreditWatch listing reflects our expectation that poor operating results will result in credit measures for fiscal 2004 being materially weaker than previously anticipated," said Standard & Poor's credit analyst Craig Parmelee. Disappointing results stem partly from increased competition surrounding the Diamond Jo Casino, but primarily operational start-up issues at Old Evangeline Downs -- OED. The company recently announced several efforts to address many of the issues associated with OED, such as management changes, which may lead to improved performance over time. However, debt leverage, as measured by total debt to EBITDA, is expected to be above 7x at the end of 2004, a level, which is weak for the ratings. In resolving the CreditWatch listing, Standard & Poor's will meet with Peninsula Gaming's management to further discuss the operating challenges at OED and to assess prospects for improving the performance of this property. Standard & Poor's has determined that if the corporate credit rating is lowered as a result of the review, it will be limited to one notch. PENN TRAFFIC: Files Plan to Emerge from Chapter 11 Protection ------------------------------------------------------------- The Penn Traffic Company filed its Plan of Reorganization with the U. S. Bankruptcy Court for the Southern District of New York late last week. Upon approval of the Plan by the Court, Penn Traffic expects to emerge from chapter 11 in the fall of 2004 with significantly reduced debt and with its core business intact, including 109 company-operated stores, its wholesale/franchise business and the Penny Curtiss bakery. Penn Traffic filed for chapter 11 protection on May 30, 2003 in order to facilitate a restructuring of its operations and debt load. Upon consummation of the Plan of Reorganization: -- Penn Traffic's post-petition secured lenders will be repaid in full in the approximate amount of $26 million; -- Holders of allowed unsecured claims in the approximate aggregate amount of $277 million will receive their pro rata share of 100% of the newly issued common stock of reorganized Penn Traffic, subject to dilution in respect of new common stock that may be issued to management of reorganized Penn Traffic and new common stock that may be issued in respect of a disputed claim in the amount of $125 million asserted by the Pension Benefit Guaranty Corporation; -- Penn Traffic's existing common stock will be cancelled; and -- Up to 10% of the newly issued common stock in Penn Traffic will be reserved for issuance pursuant to management incentive stock grants. Cash requirements to satisfy the Company's obligations under the Plan will be funded from its excess cash and borrowings under a new secured exit financing facility to be entered into by the Company. Prior to its chapter 11 filing, Penn Traffic had approximately $337 million in funded debt. It is anticipated that total debt upon the Company's expected emergence from chapter 11 in the fall of 2004 will be approximately $88 million. The Company's filing of its Plan of Reorganization reflects the dramatic turnaround in the Company's operating performance and financial condition since it entered chapter 11. Key elements of the turnaround at Penn Traffic include: -- The sale or closing of unprofitable and non-core operations, including the Big Bear supermarket chain and approximately 37 additional supermarkets. -- Substantial improvements in working capital management through changes in operating philosophy and discipline. -- Implementation of operating cost reductions through overhead reductions and facility consolidations. -- Implementation of new product, marketing and distribution initiatives. -- A greatly improved liquidity position - as of today's filing, Penn Traffic has paid down approximately $132 million in secured debt, and will convert an additional $105 million in funded debt and $172 million in unsecured claims to equity in reorganized Penn Traffic. Robert Chapman, President and CEO of Penn Traffic, said: "We are extremely proud of our achievements in restructuring Penn Traffic. The new Penn Traffic will have a solid core of very healthy and competitive supermarkets, and our bakery operations and wholesale/ franchise businesses remain strong. We believe the steps we have taken to improve liquidity and operating performance, and to dramatically reduce our debt, have put Penn Traffic on strong footing for the future. This achievement is very much a testament to the hard work and dedication of all of the Company's employees, as well as the loyal support of our business partners. We are very excited to enter this new phase in Penn Traffic's history." Headquartered in Rye, New York, Penn Traffic Company distributes through retail and wholesale outlets. The Group through its supermarkets carries on the retail and wholesale distribution of food, franchise supermarkets and independent wholesale accounts. The Company filed for chapter 11 protection on May 30, 2003 (Bankr. S.D.N.Y. Case No. 03-22945). Kelley Ann Cornish, Esq., at Paul Weiss Rifkind Wharton & Garrison, represent the Debtors in their restructuring efforts. When the grocer filed for protection from their creditors, they listed $736,532,614 in total assets and $736,532,610 in total debts. POLYPORE: Moody's Single-B & Junk Ratings on Review Pending IPO --------------------------------------------------------------- Moody's Investors Service will maintain the ratings of Polypore Incorporated on review for possible upgrade pending greater clarity regarding the likely outcome of the company's initial public offering, as well as receipt of financial results for the second quarter ended approximately June 30, 2004. Moody's initially placed the ratings of review for possible upgrade on June 10, 2004 in connection with the S-1 registration filing by holding company Polypore International for up to $345 million of gross proceeds. These specific ratings for Polypore remain on review for possible upgrade: -- B1 rating for Polypore's approximately $500 million of guaranteed senior secured credit facilities, consisting of: -- $90 million revolving credit facility due May 2010; -- $370 million term loan due November 2011; --- Euro 36 million term loan due November 2011; -- Caa1 rating for Polypore's $225 million guaranteed senior subordinated notes due May 2012; -- Caa1 rating for Polypore's Euro 150 million guaranteed senior subordinated notes due May 2012; -- B2 senior implied rating; -- Caa1 senior unsecured issuer rating. Polypore reported on August 12, 2004, that the IPO was postponed because of adverse market conditions, which developed during August, presumably due to the high volume of deals in the market, summer vacation schedules, and current geopolitical unrest. Polypore's decision to postpone its IPO is consistent with actions taken by a series of other companies following the disappointing pricing garnered by several recent transactions. A few days following Polypore's postponement of the IPO, the company also announced that it is extending its offer to Purchase up to $65 million in aggregate principal amount of its outstanding 8-3/4% senior subordinated dollar notes due 2012 and up to Euro 44 million in aggregate principal amount of its outstanding 8-3/4% senior subordinated Euro notes due 2012 until September 30, 2004, which is 30 days following the original August 31, 2004 tender maturity date. Polypore is not precluded from further extending or otherwise amending the terms of the tender offer. Polypore's obligation to accept validly tendered notes is conditioned upon the satisfaction of certain conditions, including the consummation of the initial public offering of common stock by Polypore International, Inc. Polypore has not established a minimum principal amount of notes that must be tendered. Moody's expects to resolve the review action by early October 2004. The final outcome of the review will be dependent upon whether the IPO does actually transpire, the size and pricing of the final offering terms, the ultimate application of proceeds, and an update regarding the company's recent performance trends and future prospects. Moody's expects that the maximum upwards rating potential is one notch due to the expectations that Polypore will use approximately $150 million of the IPO proceeds to redeem holding company preferred stock held by affiliates of equity sponsor Warburg Pincus. In the event that debt reduction associated with the IPO is downsized materially or that the IPO does not ultimately transpire, Moody's will evaluate whether recent performance trends warrant maintaining a stable rating outlook or improving the rating outlook to positive. Polypore, headquartered in Charlotte, North Carolina, is a leading worldwide developer, manufacturer and marketer of specialized polymer-based membranes used in separation and filtration processes. The company is managed under two business segments. The energy storage segment, which currently represents approximately two-thirds of total revenues, produces separators for lead-acid and lithium batteries. The separations media segment, which currently represents approximately one-third of total revenues, produces membranes used in various healthcare and industrial applications. For the LTM period ended April 3, 2004, Polypore's revenues approximated $479 million. PRESTIGE BRANDS: Reports First Quarter FY 2005 Results ------------------------------------------------------ Prestige Brands, Inc. reported results for its quarter ended June 30, 2004. On February 6, 2004, Prestige Brands International, LLC acquired all of the outstanding capital stock of Medtech Holdings, Inc. and The Denorex Company. On March 5, 2004, the Company acquired all of the outstanding capital stock of the Spic and Span Company. On April 6, 2004, the Company acquired all of the outstanding capital stock of Bonita Bay Holdings, Inc. Results herein include the results of Medtech, Denorex, Spic and Span and Bonita Bay for the quarter ended June 30, 2004. Pro forma results for the quarter ended June 30, 2003 reflect the operations of Medtech, Denorex, Spic and Span and Bonita Bay. Prestige Brands Quarterly Report for the Three Months Ended June 30, 2004 can be accessed at the Company's web site at http://www.prestigebrandsinc.com/and clicking on the investor relations section. Actual Results Net sales increased by $48.4 million from $19.4 million for the quarter ended June 30, 2003 to $67.8 million for the quarter ended June 30, 2004. Operating income for the quarter ended June 30, 2004 was $10.7 million, $6.3 million greater than operating income of $4.4 million for the quarter ended June 30, 2003. Net loss was $5.1 million for the quarter ended June 30, 2004 compared to net income of $1.4 million for the quarter ended June 30, 2003. Pro Forma Results Net sales for the quarter ended June 30, 2004 of $67.8 million improved by 7.2 % over pro forma net sales of $63.2 million for the quarter ended June 30, 2003. Contribution margin for the quarter ended June 30, 2004 of $17.9 million was lower than the pro forma contribution margin of $22.1 million for the quarter ended June 30, 2003 primarily due to a $5.2 million charge related to the amortization of a step-up in inventory related to the acquisitions referenced above. Earnings before interest, taxes, depreciation, amortization and certain other non-recurring items (EBITDA) was $18.2 million for the quarter ended June 30, 2004, a 3.3% increase over pro forma EBITDA of $17.6 million for the quarter ended June 30, 2003. Segment Results The Company has three operating segments. The Over-the-Counter Segment generated $34.6 million of net sales and $11.9 million contribution margin in the quarter ended June 30, 2004 compared to pro forma net sales of $29.8 million and contribution margin of $12.3 million in the quarter ended June 30, 2003. The Household Products Segment generated $24.7 million of net sales and $4.6 million of contribution margin in the quarter ended June 30, 2004. The Household Products Segment pro forma net sales and contribution margin was $23.4 million and $6.8 million, respectively, for the quarter ended June 30, 2004. The Personal Care Segment generated $8.4 million of net sales and $1.4 million of contribution margin in the quarter ended June 30, 2004 compared to pro forma net sales of $10.0 million and contribution margin of $2.9 million in the quarter ended June 30, 2003. Integration Activities During the quarter, the Company successfully implemented the integration plans put in place at the time of the Bonita Bay acquisition. The consolidation of the three operating companies is now substantially complete. Among the actions completed are the following: The staffs of the companies are now fully merged in our Irvington, New York and Jackson, Wyoming offices. Planned head count reductions are completed. We consolidated all of our warehousing and logistics functions from three facilities to one facility effective June 1. All customer orders and invoicing are flowing through our Jackson, Wyoming ordering processing/customer service organization. We eliminated duplicate advertising agencies, media buying agencies, coupon clearing companies and sales brokers. In announcing the Company's results today, CEO Peter Mann said, "We are happy to report that our first quarter results show strong year-on-year growth. Within this excellent overall performance, Compound W and, in particular the new Compound W Freeze Off product, Clear Eyes, Spic & Span, Murine and New Skin delivered particularly robust growth. The consolidation of the former Prestige, Medtech and Spic & Span companies has gone very much according to plan and we are now enjoying the financial and operating synergies that we were expecting when we completed the acquisitions." About GTCR Founded in 1980, GTCR Golder Rauner, LLC is a leading private equity investment firm and long term strategic partner for outstanding management teams. GTCR currently manages more than $6.0 billion in equity and mezzanine capital invested in a wide range of companies and industries. For more information, please see http://www.gtcr.com/ About Prestige Prestige Brands is a leading branded consumer products company with a diversified portfolio of well recognized brands in the over-the-counter drug, household cleaning and personal care categories. Our major brands include the following: Comet (R), Chloraseptic (R), Compound W (R), New Skin (R), Clear Eyes (R), Murine (R), Spic and Span (R), Cutex (R) and Denorex(R). Prestige Brands is controlled by affiliates of GTCR Golder Rauner, LLC. Prestige Brands' headquarters are located at 90 North Broadway, Irvington, New York 10533. Further information can be found on the Company's web site: http://www.prestigebrandsinc.com/ * * * As reported in the Troubled Company Reporter on July 30, 2004, Standard & Poor's Ratings Services placed its 'B' corporate credit rating on Prestige Brands Inc. on CreditWatch with negative implications, as well as the company's 'B' senior secured debt rating and its 'CCC+' senior subordinated debt rating. PRIME HOSPITALITY: S&P Puts Low-B Ratings on CreditWatch Negative ----------------------------------------------------------------- Standard & Poor's Ratings Services placed its 'BB-' corporate credit and 'B' subordinated debt ratings on Prime Hospitality, Corp., on CreditWatch with negative implications. Fairfield, New Jersey-based hotel operator had about $223 million of debt outstanding at the end of June 2004. "The CreditWatch listing reflects the planned acquisition of Prime by affiliates of The Blackstone Group for $12.25 per share, or a total value of more than $790 million including debt," said Standard & Poor's credit analyst Sherry Cai. The transaction is expected to close in the fourth quarter of 2004, subject to shareholder approval and other customary conditions. Blackstone is expected to convert 37 of Prime's owned Wellesley Inn & Suites to one of its extended stay brands. Earlier this year, Blackstone completed the acquisition of Extended Stay America for $3.1 billion. Blackstone plans to finance the transaction with an approximately $680 million mortgage debt and $172 million equity. Prime expects to tender for the outstanding subordinated debt issues of about $178 million. "We expect to withdraw our ratings on Prime after the completion of the tender offer for the outstanding subordinated debt," added Ms. Cai. PROTECTION ONE: Extends Standstill Pact with Quadrangle Master -------------------------------------------------------------- On June 28, 2004, Protection One, Inc. reached an agreement to further extend the standstill agreements among the Company, Protection One Alarm Monitoring, Inc., Network Multi-Family Security Corporation, POI Acquisition, L.L.C., POI Acquisition I, Inc. and Quadrangle Master Funding Ltd. The terms of the new extensions require the applicable Quadrangle Group LLC affiliate(s), under certain conditions, to continue to forbear until July 6, 2004 from: (i) exercising any rights and taking any enforcement and collection actions as a result of the occurrence of specified defaults under the revolving credit facility and (ii) exercising any rights to which such affiliate is entitled as a result of its equity ownership in the Company. Thereafter, the term of the standstill agreements shall be automatically extended for three consecutive one week periods unless the Quadrangle Group LLC affiliate(s) deliver a written notice to the Company. The Company intends to defer: (i) payment of the semi-annual interest payment due June 30, 2004 on its outstanding $29.9 million aggregate principal amount of its 135/8% senior subordinated discount notes due 2005 and (ii) the quarterly interest payment due on its $215.5 million principal amount revolving credit facility with affiliates of Quadrangle Group. About the Company Protection One is a leading provider of property monitoring services, providing monitoring and maintenance of alarm systems to approximately 1 million customers. As of December 2003, Protection One had approximately $561 million of operating lease-adjusted debt. * * * As reported in the Troubled Company Reporter on April 13, 2004, Standard & Poor's Ratings Services lowered its corporate credit and senior unsecured ratings on Topeka, Kansas-based Protection One Alarm Monitoring Inc. to 'CC' from 'CCC-' and affirmed its 'C' subordinated debt rating. The outlook is negative. The ratings were removed from CreditWatch, where they were placed on Jan. 15, 2003, following concerns associated with Westar Energy Inc.'s (BB+/Positive/--) intention to sell its 88% interest in Protection One. On Feb. 17, 2004, Westar sold approximately 87% of the issued and outstanding shares of Protection One to affiliates of Quadrangle Group LLC for approximately $122 million. "The ratings downgrade reflects the company's projected insufficient liquidity and cash flows relative to its debt burden, combined with the loss of Westar as a source of external capital, the near-term expiration of its standstill agreement with Quadrangle, and covenant breaches associated with change in control provisions under Protection One's note issues," said Standard & Poor's credit analyst Ben Bubeck. The company is in negotiations with creditors and bondholders regarding a debt restructuring. The outlook is negative. In its recently filed 10-K, Protection One indicated that it has begun preliminary discussions regarding a proposed restructuring with Quadrangle, which was assigned the rights and obligations as lender under Protection One's $216 million revolving credit facility, and certain holders of Protection One's public debt. In the near term, Protection One faces an expiration of its standstill agreement with Quadrangle and a potential default on its subordinated notes if covenant breaches resulting from a change in control clause are not addressed. Standard & Poor's will continue to monitor the status of Protection One's negotiations with Quadrangle and holders of its public debt. If creditors negotiate an exchange at less than full value, it will be viewed as tantamount to a default. SIRIUS SATELLITE: Extends Rights Agreement with Bank of New York ---------------------------------------------------------------- Sirius Satellite Radio's Board of Directors has extended the expiration date of the rights issued under the Rights Agreement between The Bank of New York and the Company from July 1, 2004 to January 15, 2005. About SIRIUS SIRIUS -- http://www.SIRIUS.com/-- is the only satellite radio service bringing listeners more than 100 streams of the best music and entertainment coast-to-coast. SIRIUS offers 61 music streams with no commercials, along with over 40 world-class sports, news and entertainment streams for a monthly subscription fee of only $12.95, with greater savings for upfront payments of multiple months or a year or more. SIRIUS is also the official satellite radio partner of the NFL. Stream Jockeys create and deliver uncompromised music in virtually every genre to our listeners 24 hours a day. Satellite radio products bringing SIRIUS to listeners in the car, truck, home, RV and boat are manufactured by Kenwood, Panasonic, Clarion and Audiovox, and are available at major retailers including RadioShack, Circuit City, Best Buy, Car Toys, Good Guys, Tweeter, Ultimate Electronics, Sears and Crutchfield. SIRIUS is the leading OEM satellite radio provider, with exclusive partnerships with DaimlerChrysler, Ford and BMW. Automotive brands currently offering SIRIUS radios in select new car models include BMW, MINI, Chrysler, Dodge, Jeep(R), Nissan, Infiniti, Mazda, Audi, Ford and Lincoln-Mercury. Automotive brands that have announced plans to offer SIRIUS in select models include Mercedes-Benz, Jaguar, Volvo, Volkswagen, Land Rover and Aston Martin. Genmar Holdings, the world's largest manufacturer of recreational boats, Formula Boats and Winnebago, the leading supplier of recreational vehicles and motor homes, also offer SIRIUS. Hertz currently offers SIRIUS in 29 vehicle models at 53 major locations around the country. * * * As previously reported, Standard & Poor's Ratings Services assigned its 'CCC-' rating to Sirius Satellite Radio Inc.'s new $250 million convertible notes due 2009. At the same time, Standard & Poor's affirmed its existing ratings, including its 'CCC' corporate credit rating, on the satellite radio broadcaster. The outlook is stable. The New York, New York- based firm has approximately about $450 million in debt. "The company is expected to use the proceeds for general corporate purposes, including expanding distribution and product development," according to Standard & Poor's credit analyst Steve Wilkinson. He noted, "The added liquidity is important to ratings stability given the considerable cash being consumed as Sirius works to accelerate subscriber growth." SIGHT RESOURCE: Gets Nod to Use CadleRock's Cash Collateral ----------------------------------------------------------- The Honorable Judge Jeffery P. Hopkins gave his stamp of approval to Sight Resource Corporation and its debtor-affiliates' request for authority to use cash collateral to finance their ongoing postpetition business operations. Fleet National Bank entered into several loan agreements and arrangements with the Debtors before the Petition Date. Under the terms of the Loan Documents, the Debtors granted Fleet -- now CadleRock Joint Venture, L.P., as successor-in-interest to Fleet -- as security for their obligations under the Loan Agreements, security interests in and liens on all personal property, including, without limitation, the Debtors' inventory, accounts and accounts receivable, documents, instruments, chattel paper, general intangibles, investment property and goods, and all the proceeds and products. As of the Petition Date, the outstanding principal balance due CadleRock is $508,945 plus $389 in accrued but unpaid interest. The Debtors estimate that as of the Petition Date, the value of the tangible assets that secure the indebtedness is $5,400,000. Judge Hopkins determines that the Debtors do not have sufficient available sources of working capital and financing to operate their businesses and require the immediate use of the Cash Collateral. The Debtors need the Cash Collateral to: (i) fund their payroll expenses, (ii) maintain the supply of vendors' goods and services, and (iii) pay their post-petition rent under the real property leases for those retail locations which the Debtors intend to keep open. The Debtors' need to use Cash Collateral is immediate and is necessary to prevent severe and irreparable harm to them and the bankruptcy estates. To provide CadleRock with adequate protection for any diminution in the value of its interests in the Cash Collateral, the Debtors grant CadleRock automatically perfected postpetition replacement security interests and liens in their postpetition assets, with the same prepetition validity and priority. Headquartered in Cincinnati, Ohio, Sight Resource Corporation -- http://www.sightresource.com/-- manufactures, distributes and sells eyewear and related products and services through retail eye care centers. The Company filed for protection on June 24, 2004 (Bankr. S.D. Ohio Case No. 04-14987). Jennifer L. Maffett, Esq., and Louis F. Solimine, Esq., at Thompson Hine LLP, represent Sight Resource and its debtor-affiliates in their restructuring efforts. When the Debtors filed for protection, they listed $5,400,000 in total assets and $12,500,000 in total debts. SK GLOBAL: Gets Court Nod to Settle with John Roberts for $950K --------------------------------------------------------------- U.S. Bankruptcy Court for the Southern District of New York permits SK Global America, Inc., to settle with John Roberts, Inc. As reported in the Troubled Company Reporter on July 23, 2004, before its bankruptcy petition date, SK Global America commenced an action against John Roberts, in the Supreme Court of the State of New York, County of New York, in which the Debtor asserted two separate causes of action based on: (a) payments made by Roberts to Blue Apparel, which violated the Debtor's security interests in Roberts' accounts receivable -- the First Claim; and (b) Roberts' receipt of certain goods from Blue Apparel, which constituted a conversion of those goods from the Debtor -- the Second Claim. The Debtor sought to recover $615,040 in damages on the First Claim and $484,109 on the Second Claim. On June 12, 2003, the Supreme Court entered a summary judgment in favor of the Debtor in connection with the First Claim. The ruling was subsequently affirmed on appeal. Roberts sought to reargue the appeal, while simultaneously appealing the Summary Judgment to the New York Court of Appeals. Subsequent to the Petition Date, the Debtor filed a motion seeking summary judgment on the Second Claim. That motion was denied in January 2004. In face of this contentious litigation, and as a result of extensive, arm's-length, and good faith negotiations, as well as an exchange of documentation, the parties decided to resolve their issues consensually, without further litigation. The Debtor and Roberts agreed to settle the Action pursuant to a settlement agreement. The salient terms of the Settlement Agreement are: (a) Roberts will deliver to the Debtor's counsel, Bingham McCutchen, LLP, $950,000, by certified check, bank check, or wire transfer made payable to Bingham McCutchen to be held by it in escrow pending Court approval of these provisions. The Debtor will cause Bingham McCutchen to provide written notice to Roberts' counsel via telecopier within three business days of Court approval. Upon receipt of the Court Approval Notice, Bingham McCutchen will release the Settlement Amount to the Debtor; (b) Each Party will deliver to counsel for the other executed General Releases, which will be held in escrow pending Court approval; and (c) The Debtor will cause its counsel to execute and deliver to Roberts' counsel a Stipulation of Discontinuance with prejudice, which Roberts' counsel will hold in escrow pending receipt of the Court Approval Notice, after which time Roberts will cause its counsel to file the Stipulation. Scott E. Ratner, Esq., at Togut, Segal & Segal, LLP, in New York, contends that in the event the disputes are not resolved through the proposed Settlement Agreement, continued litigation is likely to result in additional, unnecessary expense for the Debtor. Mr. Ratner submits that the settlement and compromise between the parties is appropriate and highly favorable to the Debtor, and should be approved. Headquartered in Fort Lee, New Jersey, SK Global America, Inc., is a subsidiary of SK Global Co., Ltd., one of the world's leading trading companies. The Debtors file for chapter 11 protection on July 21, 2003 (Bankr. S.D.N.Y. Case No. 03-14625). Albert Togut, Esq., and Scott E. Ratner, Esq., at Togut, Segal & Segal, LLP, represent the Debtors in their restructuring efforts. When they filed for bankruptcy, the Debtors reported $3,268,611,000 in assets and $3,167,800,000 of liabilities. (SK Global Bankruptcy News, Issue Nos. 20 and 21; Bankruptcy Creditors' Service, Inc., 215/945-7000) SOLUTIA INC: Equity Committee Wants to Examine Debtors ------------------------------------------------------ The Official Committee of Equity Security Holders of the chapter 11 cases of Solutia, Inc., and its debtor-affiliates has informally attempted to obtain from the Debtors information needed to analyze the contingent legacy liabilities disclosed in the Debtors' petition, as well as the value of the Debtors' business going forward. However, every informal attempt has been rejected. This leaves the Equity Committee with no choice but to obtain the information through the implementation of Rule 2004 of the Federal Rules of Bankruptcy Procedure. According to Craig A. Barbarosh, Esq., at Pillsbury Winthrop, LLP, in New York, the Debtors' unwillingness to provide the requested documents is wholly unwarranted. The Equity Committee initially attempted to gather material necessary to perform its responsibilities by analyzing the available public information regarding the Debtors. However, that information was inadequate and incomplete for purposes of understanding the Debtors' continuing exposure to Legacy Liabilities, the issues and circumstances surrounding the Spin-Off, and the value of the Debtors' operations on a forward-looking basis. Mr. Barbarosh clarifies that the Equity Committee does not seek to burden the Debtors by its requests for discovery. Rather, the Equity Committee merely seeks to answer questions, the resolution of which is likely to be of paramount importance to the administration and potential reorganization of the Debtors' estates. Accordingly, pursuant to Bankruptcy Rule 2004, the Equity Committee asks the U.S. Bankruptcy Court for the Southern District of New York to compel Solutia to produce responsive documents and to appear for oral examination through one or more of its authorized representatives. Headquartered in St. Louis, Missouri, Solutia, Inc. -- http://www.solutia.com/-- with its subsidiaries, make and sell a variety of high-performance chemical-based materials used in a broad range of consumer and industrial applications. The Company filed for chapter 11 protection on December 17, 2003 (Bankr. S.D.N.Y. Case No. 03-17949). When the Debtors filed for protection from their creditors, they listed $2,854,000,000 in assets and $3,223,000,000 in debts. (Solutia Bankruptcy News, Issue No. 20; Bankruptcy Creditors' Service, Inc., 215/945-7000) SOUTHWALL TECH: Appoints Maury Austin as Permanent SVP & CFO ------------------------------------------------------------ Southwall Technologies Inc. (OTCBB:SWTX), a global developer, manufacturer and marketer of thin-film coatings for the electronic display, automotive glass and architectural markets, has appointed Maury Austin as permanent Senior Vice President and Chief Financial Officer, effective immediately. Mr. Austin has been performing the duties of interim Chief Financial Officer since February 2004. A 24-year veteran of Silicon Valley Technology companies, Mr. Austin most recently served as Chief Financial Officer of Vicinity Corporation from 2000 until its acquisition by Microsoft in 2003. Austin also served as Chief Financial Officer of Symmetricom from 1999 to 2000 and was Chief Financial Officer and Chief Operating Officer of Flashpoint Technologies prior to that. He held a variety of senior positions at Apple Computer between 1988 and 1997, including the post of Vice President and General Manager of the Imaging Division. Mr. Austin has an undergraduate degree in Business from the University of California at Berkeley along with a Masters in Business administration from Santa Clara University. "Maury has done a great job in the last six months in helping Southwall return to profitability. We are very pleased to have Maury permanently join us," said Thomas G. Hood, Southwall's President and Chief Executive Officer. About Southwall Technologies Inc. Southwall Technologies Inc. designs and produces thin film products that selectively absorb, reflect or transmit light. Southwall products are used in a number of automotive, electronic display and architectural glass products to enhance optical and thermal performance characteristics, improve user comfort and reduce energy costs. Southwall is an ISO 9001:2000-certified manufacturer and sells advanced thin film coatings to over 25 countries around the world. Southwall's customers include Audi, BMW, DaimlerChrysler, Hewlett-Packard, Mitsubishi Electric, Mitsui Chemicals, Peugeot-Citroen, Philips, Pilkington, Renault, Saint- Gobain Sekurit, and Volvo. At June 27, 2004, Southwall Technologies Inc.'s balance sheet showed a $5,378,000 stockholders' deficit, compared to a $1,721,000 in positive equity at December 31, 2003. STRUCTURED ASSET: Fitch Junks 2 Classes & Rates Another 2 Low-B --------------------------------------------------------------- Fitch Ratings downgrades 3 and affirms 7 classes of Structured Asset Securities Corp. residential mortgage-backed certificates, as follows: Structured Asset Securities Corp., Mortgage Pass-Through Certificates, Series 2000-3 -- Class A affirmed at 'AAA'; -- Class B-1 affirmed at 'AAA'; -- Classes B-2 and BX affirmed at 'A'; -- Class B-3 downgraded to 'B' from 'BB' and removed from Rating Watch Negative; -- Class B-4 remains at 'C'. Structured Asset Securities Corp., Mortgage Pass-Through Certificates, Series 2001-9 -- Class A affirmed at 'AAA'; -- Class B-1 affirmed at 'AA'; -- Class B-2 affirmed at 'A'; -- Class B-3 downgraded to 'BB' from 'BBB' and removed from Rating Watch Negative; -- Class B-4 downgraded to 'C' from 'CCC'. SASCO 2000-3 consists of four mortgage groups. Within these four groups are component classes B1 through B6. Each group of components is backed by a separate mortgage group. Each mortgage group provides for its respective level of credit enhancement and the groups are not crossed collateralized. Because the components are not severable and each component shares solely in its affiliated group's performance, each rated class reflects the performance of the weakest component outstanding. The downgrade of SASCO 2000-3 class B-3 and SASCO 2001-9 classes B-3 and B-4 are taken due to the level of losses incurred, future loss expectations and the high delinquencies in relation to the applicable credit support levels as of the July 2004 distribution date. The affirmations reflect credit enhancement consistent with future loss expectations. SUPERIOR GALLERIES: Retains CCG for Investor Relations Program -------------------------------------------------------------- Superior Galleries, Inc. (OTCBB:SPGR) has retained CCG Investor Relations and Strategic Communications to implement and manage its investor relations program. CCG Partner Sean Collins commented, "We welcome the opportunity to enhance the market recognition of Superior Galleries, given its distinctive investment appeals, its recent achievement of record financial results and the eminence of its management in the trading of rare coins and other fine collectibles. It isn't often that you get to work with a company whose CEO was instrumental in creating the basic standards that are used throughout the industry, as Silvano DiGenova did in pioneering the design of the rare-coin grading set and co-founding what is today the premier electronic trading network in the industry, the Certified Coin Exchange." Silvano DiGenova, CEO of Superior, commented, "CCG's depth and breadth of services set it apart in our search for an investor relations counselor and public relations resource. We believe that with CCG's help, we can provide investors with the proper context to better appreciate Superior's financial and operational achievements. In our business, unrecognized or under-recognized value is the key to opportunity, and we believe that by working with CCG, we can help the investing public realize the under- recognized value of our industry-leading company." About CCG CCG provides investor relations and strategic communications for over 30 publicly traded and private companies throughout the country. The full-service corporate communications agency has expertise in representing companies in the financial, retailing, Internet, semiconductor, medical device and biotech sectors and maintains its corporate headquarters in Sherman Oaks (Los Angeles). For further information, contact CCG directly, or visit its Web site at http://www.ccgir.com/ About Superior Galleries Superior Galleries, Inc. is a publicly traded company, acting as a dealer and auctioneer in rare coins and other fine collectibles. The firm markets its products through its prestigious location in Beverly Hills, California and the company's web site at sgbh.com At June 30, 2004, Superior Galleries, Inc.'s balance sheet showed a $1,083,417 stockholders' deficit, compared to a $1,572,090 deficit at June 30, 2003. SURFSIDE RESORTS: Asks Court to Dismiss Chapter 11 Case ------------------------------------------------------- Surfside Resorts and Suites, Inc., asks the U.S. Bankruptcy Court for the Middle District of Florida, Jacksonville Division, to dismiss its chapter 11 case. The Debtor tells the Court that there is a very slim chance for it to propose or effectuate a plan of reorganization. The Debtor reports that Bray & Gillespie IX, LLC, a secured creditor, asked the Court to prohibit the Debtor to use cash collateral. Bray & Gillespie is secured by a first mortgage on Debtor's ocean front hotel property and the income and revenues from the hotel's operations. The Debtor currently owes $8 million to Bray & Gillespie. Bray & Gillespie and the Debtor entered into a Stipulation allowing limited use of cash collateral. In that stipulation, the Debtor consents to relief from the automatic stay to permit Bray & Gillespie to proceed to foreclose on the Company's property after September 8, 2004. The Debtor tells the Court that it has been diligently searching for financing to satisfy its indebtedness to Bray & Gillespie and raise additional funds to convert its present hotel condition into a time-share facility. That hasn't happened. In the alternative, the Debtor could sell the real property and the hotel's ongoing operations. The Company estimates that the value of its oceanfront real property is $15,000,000. No buyer has surfaced. In the event that the Debtor is unable to obtain refinancing or a sale of the property, and the foreclosure by Bray & Gillespie is concluded, there would be few assets or cash from which unsecured creditors could be paid. If the case is converted to Chapter 7, there are no unencumbered assets available to be liquidated by a trustee which would result in any distribution to unsecured creditors because all real property, cash and cash collateral, personal property and furnishings are pledged as collateral to either Bray & Gillespie or other secured creditors. Headquartered in Ormond Beach, Florida, Surfside Resort and Suites, Inc., operates vacation resort, restaurant and lounge. The Company filed for chapter 11 protection on June 9, 2004 (Bankr. M.D. Fla. Case No. 04-05948). Walter J. Snell, Esq., represent the Debtor in its restructuring efforts. When the Company filed for protection from its creditors, it listed $19,598,145 in total assets and $9,289,843 in total debts. TANGO INC: Begins Discussions With Potential Acquisition Targets ---------------------------------------------------------------- Tango Incorporated (OTCBB:TNGO) will begin engaging in discussions with potential acquisition targets. The Company has identified potential targets that would complement its existing facility in Portland. According to Todd Violette, Chairman & COO of Tango, "Now that our shareholders have approved the Resolution allowing us to structure Tango as a Business Development Corporation, we expect to pursue the mandate that management has been given and look to acquire a strong cash flowing business before the end of this calendar year. By pursuing this plan, and with the potential targets we have in mind, we are looking to add an additional $5 million to $10 million in revenue. The margins from these businesses could significantly add to shareholder value." About Tango Tango Incorporated is a leading garment manufacturing and distribution company, with a goal of becoming a dominant leader in the industry. Tango pursues opportunities, both domestically and internationally. Tango provides major branded apparel the ability to produce the highest quality merchandise, while protecting the integrity of their brand. Tango serves as a trusted ally, providing them with quality production and on-time delivery, with maximum efficiency and reliability. Tango becomes a business partner by providing economic solutions for development of their brand. Tango provides a work environment that is rewarding to its employees and at the same time has an aggressive plan for growth. Tango is currently producing for many major brands, including Nike, Nike Jordan and RocaWear. * * * Auditors Express Doubt In its Form 10-QSB for the quarterly period ended April 30, 2004, filed with the Securities and Exchange Commission, Tango Incorporated reports: "As of April 31, 2003 and 2004, our auditors indicated in their audit report that our net loss and working capital deficit raised substantial doubt that we would be able to continue as a going concern." UNITED AIR: Workers Urge Court to Appoint a Chapter 11 Trustee -------------------------------------------------------------- Pursuant to Section 1104(a) of the Bankruptcy Code, the International Association of Machinists and Aerospace Workers asks Judge Wedoff of the U.S. Bankruptcy Court for the Northern District of Illinois to appoint a Chapter 11 trustee of the cases of United Airlines, Inc., and its debtor-affiliates. "The actions taken by the Debtors' management constitute gross mismanagement of the Debtors and a breach of management's fiduciary duties to the estates and creditors, and warrant the immediate appointment of a Chapter 11 trustee," Sharon L. Levine, Esq., at Lowenstein Sandler, in Roseland, New Jersey, says. In 2001, when it first became apparent that the Debtors' Pension Plans were at risk, the IAM offered the airline to participate in the IAM's National Pension Plan. The NPP is a multi-employer pension plan, jointly trusteed by the IAM and contributing employers, with more than $6,000,000,000 in assets. The Debtors refused and elected a volatile pension benefit, more easily funded in an environment of rising stock prices and higher interest rates, but burdensome in a cyclical economic downturn. Then the well-documented fiascoes in the Section 1113 and 1114 process ensued. During this time, the unions negotiated in good faith with the Debtors, despite their suspicions about the veracity of management. Then, the Air Transportation Stabilization Board rejected the Debtors' request for a loan guarantee. Without warning, the Debtors publicly announced their decision to withhold the July 15, 2004 Pension Plan contribution. Later, the Debtors announced in open court that they would not fund further pension payments during the Chapter 11 cases. Throughout this process, the unions have not had a voice. The Debtors excluded the IAM and other unions from discussions during this entire process. If included, the unions would have introduced less drastic alternatives. It appears that the Debtors intend to terminate their Pension Plans or force the Pension Benefit Guaranty Corporation to terminate the underfunded Plans, shifting a portion of the funding burden to the government through the PBGC. The unions trusted the Debtors' management to do the right thing before; they should not do so again without a Chapter 11 trustee. Ms. Levine argues that it is inappropriate to devise a business plan and obtain DIP Financing based on projections that fail to include a necessary operating expense in the form of Pension Plan contributions. After all, the Debtors would not submit a business plan that excludes taxes, landing fees, rent, utilities or other operational expenses. "This irresponsible business plan disproportionately requires that employees [bear] the risk and burden of the Debtors' restructuring," Ms. Levine states. The Debtors' conduct has damaged the estates and their creditors, specifically the employees eligible to receive pension benefits. The underfunded pensions will produce massive administrative expense liabilities, which could render the estate administratively insolvent. Cherry picking operational expenses is a violation of the Bankruptcy Code and a breach of the Debtors' fiduciary duty. In addition, entering the DIP Facility with the determination not to make further pension contributions was a breach of the Debtors' fiduciary duties. Also, the Debtors have yet to formulate a viable business plan deemed credible by the capital markets. These transgressions mandate an immediate need for a Chapter 11 trustee. Headquartered in Chicago, Illinois, UAL Corporation -- http://www.united.com/-- through United Air Lines, Inc., is the holding company for United Airlines -- the world's second largest air carrier. The Company filed for chapter 11 protection on December 9, 2002 (Bankr. N.D. Ill. Case No. 02-48191). James H.M. Sprayregen, Esq., Marc Kieselstein, Esq., David R. Seligman, Esq., and Steven R. Kotarba, Esq., at Kirkland & Ellis represent the Debtors in their restructuring efforts. When the Company filed for protection from their creditors, they listed $24,190,000,000 in assets and $22,787,000,000 in debts. (United Airlines Bankruptcy News, Issue No. 57; Bankruptcy Creditors' Service, Inc., 215/945-7000) US AIRWAYS: Bank of New York Holds an Allowed $192MM Secured Claim ------------------------------------------------------------------ The Bank of New York, as Trustee under a Trust Indenture dated June 1, 1990, between the Port Authority of New York and New Jersey and the Trustee, filed Claim No. 2839, asserting a claim for $192,652,472 against US Airways, Inc. Pursuant to the Confirmation Order, The Bank of New York retains liens on its collateral and has an Allowed Class USAI-1 Secured Claim based on Claim No. 2839. In accordance with the order of the U.S. Bankruptcy Court for the Eastern District of Virginia confirming the Chapter 11 Plan, US Airways assumed all of its obligations under the documents and cured all existing defaults on the Effective Date, except those specified in Section 365(b)(2) of the Bankruptcy Code. US Airways objected to Claim No. 2839 on the ground that it was unsubstantiated. On May 10, 2004, The Bank of New York filed a response. To settle the dispute, the Reorganized Debtors and The Bank of New York agree to allow Claim No. 2839 as a Class USAI-1 Secured Claim pursuant to the Confirmation Order, with no effect on The Bank of New York's rights. The Bank of New York is not entitled to a distribution on account of Claim No. 2839. All other claims by The Bank of New York against US Airways are withdrawn. (US Airways Bankruptcy News, Issue No. 60; Bankruptcy Creditors' Service, Inc., 215/945-7000) W.R. GRACE: Directors Face Class Action Lawsuit Over 401(k) Plan ---------------------------------------------------------------- On June 17, 2004, a purported class action lawsuit was filed in the United States District Court for the District of Massachusetts against W.R. Grace & Co.'s directors and certain current and former officers. The Complaint was brought on behalf of persons who were participants in, or beneficiaries of, Grace's savings and investment plan, which is a defined contribution retirement plan under Section 401(k) of the Internal Revenue Code, at any time between July 1, 1999 and February 27, 2004. The Class Action was also brought against certain of Grace's benefits administration and investment committees, Fidelity Management Trust Company, State Street Bank & Trust Company, and other "unknown fiduciary defendants." One of the investment options under the S&I Plan was Grace common stock. The Retirement Plan Investors assert that the decline in the price of Grace common stock during the Class Period resulted in significant losses to S&I Plan participants. The Investors alleges that the Grace Defendants were fiduciaries of the S&I Plan under the Employee Retirement Income Security Act of 1974 and that they breached their fiduciary duties under ERISA by failing to sell or take other appropriate action with regard to Grace common stock held by the S&I Plan during the Class Period. The Grace Defendants should have known that the stock had become an imprudent investment, principally as a result of the risk related to Grace's asbestos-related liabilities. The Grace Defendants failed to disclose to the S&I Plan participants the risk of investing in Grace common stock. The Investors ask the Massachusetts District Court to award monetary payment to the S&I Plan to compensate for losses resulting from the Grace Defendants' breaches of fiduciary duties. The Investors also ask the District Court for injunctive protection. In a regulatory filing with the Securities and Exchange Commission, W.R. Grace Chairman and Chief Executive Officer Paul J. Norris discloses that the company believes that prosecution of the Class Action is stayed by its Chapter 11 proceedings. Grace likely would have an obligation to indemnify the Defendants for any liability arising out of the Complaint. However, Grace believes that the allegations are without merit and that any liability arising from these allegations would be covered by its fiduciary liability insurance. Headquartered in Columbia, Maryland, W.R. Grace & Co., -- http://www.grace.com/-- supplies catalysts and silica products, especially construction chemicals and building materials, and container products globally. The Debtors filed for chapter 11 protection on April 2, 2001 (Bankr. Del. Case No: 01-01139). James H.M. Sprayregen, Esq., at Kirkland & Ellis and Laura Davis Jones, Esq., at Pachulski, Stang, Ziehl et al. represent the Debtors in their restructuring efforts. (W.R. Grace Bankruptcy News, Issue No. 69; Bankruptcy Creditors' Service, Inc., 215/945- 7000) WINSTAR COMMS: Court Approves Settlement with Holdings & IDT Corp. ------------------------------------------------------------------ Christine C. Shubert, the Chapter 7 Trustee overseeing the liquidation of Winstar Communications, Inc.'s estate, sought and obtained the approval of the U.S. Bankruptcy Court for the District of Delaware to approve her settlement agreement with Winstar Holdings, LLC, and IDT Corporation. The Trustee alleged that Winstar Holdings withheld and failed to return to the Chapter 7 estate certain assets totaling $3.3 million, which were excluded from the sale of Winstar Communication's assets to Winstar Holdings. Winstar Holdings denied the Trustee's allegations. In addition, Winstar Holdings sought a $1.4 million reimbursement from the Trustee and asserted that the Debtors are required to pay the Federal Communications Commission $9 million to transfer certain LMDS licenses to it. On June 27, 2003, the Trustee filed a complaint against Winstar Holdings to recover the Property. Winstar Holdings denied all liability and sought a judgment in excess of $11 million. The Trustee asserted affirmative defenses to Winstar Holding's Counterclaim, denying all liability. On March 3, 2004, the Parties signed a stipulation whereby Winstar Holdings withdrew without prejudice its LMDS License Claim and the Trustee withdrew without prejudice her request for partial judgment on the pleadings relating to the LMDS License Claim. Without admitting any liability on the part of either party, the Parties agree to settle the Trustee's Claim, the LMDS License Claim and the Counterclaim. The Parties believe that the Agreement will benefit the Debtors' estates because it will allow them to avoid the time and expense of litigation. As reported in the Troubled Company Reporter on July 6, 2004, the salient provisions of the Settlement Agreement are: (1) In full satisfaction of the Claim, the LMDS License Claim and the Counterclaim, the Winstar Holdings will pay the Trustee $2,000,000 without further delay; (2) In consideration of the Settlement Payment, the Trustee and Winstar Holdings will exchange mutual releases from any and all claims, actions, liabilities, debts and causes of action relating to or pertaining to the Claim, LMDS License Claim and Counterclaim; (3) The mutual release will not apply to any cross claims for contribution and indemnity between and among the Trustee, the Debtors and Winstar Holdings arising out of or relating to the pending adversary proceeding captioned as Corporate Telecommunications Group, Inc. v. Christine C. Shubert, Chapter 7 Trustee, et al., Adversary No. 03-3028; The Parties will file a stipulation in the CTG Litigation permitting them to assert cross claims for contribution and indemnity against each other arising out of the claims in the CTG Litigation; (4) The Parties agree that the Trustee has satisfied Winstar Holding's claim for $222,503 in connection with the funds collected by the Trustee relating to the Northwest Nexus bank accounts; (5) The Trustee will fully and competently defend against any and all claims against her asserted by CTG. The Trustee will not enter into any settlement with CTG without the prior written consent and approval of Winstar Holdings. Winstar Holdings will not be liable to indemnify the Trustee for any settlement effected without Winstar Holdings' consent; and (6) The terms, conditions, requirements and obligations of the Parties in the Asset Purchase Agreement will remain in full force and effect. (Winstar Bankruptcy News, Issue Nos. 57 and 58; Bankruptcy Creditors' Service, Inc., 215/945- 7000) WORLDCOM INC: MCI Officers Dispose of 40,589 Common Shares ---------------------------------------------------------- In separate filings with the Securities and Exchange Commission, 10 officers of MCI, Inc., disclose that they recently sold or otherwise disposed of shares of common stocks in the company: No. of Shares Shares Selling Still Officer Designation Sold Price Owned -------- ----------- ------ ----- ------- Andreotti, Pres.-Enterprise Cindy K. Markets 1,881 $16.60 68,245 Blakely, Robert T. Exec-VP & CEO 4,265 $16.60 154,688 Briggs, Pres.-Operations Fred M. & Technology 1,881 $16.60 68,425 Capellas, Michael D. Pres. & CEO 22,581 $16.60 818,934 Cassaccia, Executive VP Daniel L. Human Resources 1,756 $16.60 63,695 Crane, Pres., Int'l & Jonathan C. Wholesale Mkts 1,545 $16.60 68,581 Huyard, Pres-US Sales & Wayne Service 2,509 $16.60 90,993 Kelly, Exec-VP & Gen. Anastasia D. Counsel 2,038 $16.60 73,932 Slusser, Sr. VP & Eric Controller 753 $16.60 27,297 Trent, Grace SVP Comm & Chief Chen of Staff 1,380 $16.60 50,046 Headquartered in Clinton, Mississippi, WorldCom, Inc., now known as MCI -- http://www.worldcom.com/ -- is a pre-eminent global communications provider, operating in more than 65 countries and maintaining one of the most expansive IP networks in the world. The Company filed for chapter 11 protection on July 21, 2002 (Bankr. S.D.N.Y. Case No. 02-13532). On March 31, 2002, the Debtors listed $103,803,000,000 in assets and $45,897,000,000 in debts. The Bankruptcy Court confirmed WorldCom's Plan on October 31, 2003, and on April 20, 2004, the company formally emerged from U.S. Chapter 11 protection as MCI, Inc. (Worldcom Bankruptcy News, Issue No. 59; Bankruptcy Creditors' Service, Inc., 215/945-7000) * BOND PRICING: For the week of August 23 - August 28, 2004 ----------------------------------------------------------- Issuer Coupon Maturity Price ------ ------ -------- ----- Adelphia Comm. 3.250% 05/01/21 24 American & Foreign Power 5.000% 03/01/30 70 AMR Corp. 4.500% 02/15/24 64 AMR Corp. 9.000% 08/01/12 63 AMR Corp. 9.000% 09/15/16 66 AMR Corp. 10.200% 03/15/20 60 Burlington Northern 3.200% 01/01/45 55 Calpine Corp. 4.750% 11/15/23 75 Calpine Corp. 7.750% 04/15/09 60 Calpine Corp. 8.500% 02/15/11 61 Calpine Corp. 8.625% 08/15/10 61 Calpine Corp. 8.750% 07/15/07 67 Charter Comm. Holdings 10.000% 05/15/11 75 Comcast Corp. 2.000% 10/15/29 40 Continental Airlines 5.000% 06/15/23 74 Cummins Engine 5.650% 03/01/98 73 CV Therapeutics 2.000% 05/16/23 75 Delta Air Lines 7.700% 12/15/05 39 Foamex L.P. 9.875% 06/15/07 75 Greyhound Lines 8.500% 03/31/07 75 Inland Fiber 9.625% 11/15/07 44 Kulicke & Soffa 0.500% 11/30/08 69 Level 3 Comm. Inc. 2.875% 07/15/10 64 Level 3 Comm. Inc. 6.000% 09/15/09 54 Level 3 Comm. Inc. 6.000% 03/15/10 53 Liberty Media 3.750% 02/15/30 65 Liberty Media 4.000% 11/15/29 69 Missouri Pacific 4.750% 01/01/30 75 National Vision 12.000% 03/30/09 62 Northern Pacific Railway 3.000% 01/01/47 54 Northwest Airlines 7.875% 03/15/08 64 Northwest Airlines 8.700% 03/15/07 67 Northwest Airlines 9.875% 03/15/07 69 Northwest Airlines 10.000% 02/01/09 66 Primus Telecom 3.750% 09/15/10 60 Univ. Health Services 0.426% 06/23/20 58 ********* 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. Each Friday's edition of the TCR includes a review about a book of interest to troubled company professionals. All titles are available at your local bookstore or through Amazon.com. Go to http://www.bankrupt.com/books/to order any title today. Monthly Operating Reports are summarized in every Saturday edition of the TCR. For copies of court documents filed in the District of Delaware, please contact Vito at Parcels, Inc., at 302-658-9911. For bankruptcy documents filed in cases pending outside the District of Delaware, contact Ken Troubh at Nationwide Research & Consulting at 207/791-2852. ********* S U B S C R I P T I O N I N F O R M A T I O N Troubled Company Reporter is a daily newsletter co-published by Bankruptcy Creditors' Service, Inc., Fairless Hills, Pennsylvania, USA, and Beard Group, Inc., Frederick, Maryland USA. Yvonne L. Metzler, Emi Rose S.R. Parcon, Bernadette C. de Roda, Rizande B. Delos Santos, Jazel P. Laureno, Cherry Soriano-Baaclo, Marjorie Sabijon and Peter A. Chapman, Editors. Copyright 2004. 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 $675 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 ***