/raid1/www/Hosts/bankrupt/TCR

/raid1/www/Hosts/bankrupt/TCR_Public/041004.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, October 4, 2004, Vol. 8, No. 214 Headlines 165-10 ARCHER AVE: Case Summary & 5 Largest Unsecured Creditors AAIPHARMA INC: Indicates Possible Default on 11.5% Sr. Sub. Notes ACCERIS COMMS: June 30 Balance Sheet Upside-Down by $51,672,000 AIR CANADA: Exits CCAA Protection & Implements Plan of Arrangement AIR CANADA: Promontoria Pays CDN$250M for 9% Stake in ACE Aviation AIR CANADA: Did Not Seek Federal Help on Bombardier Jets Purchase AIRGATE PCS: Provides Financial and Operating Guidance for 2004 AIRGATE PCS: S&P Junks Proposed $175 Million Senior Secured Notes AIRLEASE LTD: Completes Liquidation & Terminates Partnership ALASKACATCH LLC: Case Summary & 14 Largest Unsecured Creditors AMERIDEBT INC: Creditors Must File Proofs of Claim by Oct. 12 ARCAP RESECURITIZATION: Fitch Puts Low-B Ratings on Six Classes AVADO BRANDS: Appoints Raymond Barbrick as Chief Executive Officer BALLY TOTAL: Moody's Puts B2 Rating on Planned $175M Facility BEAUMONT HOUSING: Moody's Pares Revenue Bonds' Rating to Ba2 BELL CANADA: Union Says Toronto Office Should Remain Open BOSTON PROPERTY: Case Summary & 6 Largest Unsecured Creditors CALPINE CORP: Closes $785 Million Senior Secured Debt Offering CANADA PAYPHONE: Completes Reorg. to Become Globalive Subsidiary CATHOLIC CHURCH: U.S. Trustee Meets Tucson's Creditors on Dec. 2 CENCOTECH: Discloses $2,328,669 Stockholders' Deficit at July 31 CENDANT MORTGAGE: Fitch Puts Low-B Rating on Classes B-4 & B-5 CHALK MEDIA: Grants Insiders Options to Purchase 200,000 Shares COEUR D'ALENE: S&P Holds B- Corp. Credit & Sr. Unsec. Debt Ratings CONGOLEUM CORP: Retains Pillsbury as Substitute Bankruptcy Counsel COVANTA ENERGY: Wants Exclusive Periods Extended Until April 18 EDISON MISSION: Fitch Assigns Single-B Ratings on Senior Debts ELIZABETH ARDEN: Moody's Reviews Ratings for Possible Upgrade ENRON CORP: Gets Court Nod to Assign 12 Agreements to Prisma EXIDE TECH: Amends Severance Portion of Income Protection Plan FORT WORTH: Moody's Ratings Slide Three Notches to B3 FOXMEYER CORP: Bart Brown Requests $807 Per Hour for Work FULCRUM DIRECT: Asks Court to Dismiss Chapter 11 Cases GMAC COMMERCIAL: Moody's Junks Three Certificate Classes HA-LO INDUSTRIES: Court Will Hear Zurich Settlement Pact Today HEILIG-MEYERS: Unsecured Creditors Can Expect 7% to 48% Recovery HLM DESIGN: Auctioning Substantially All Assets on Wednesday HOLLINGER INC: Majority of Noteholders Agree to Amend Indenture HOLLINGER INC: Obtains Waiver on Periodic Reporting Requirements HOLLINGER INC: Closes Private Placement of $15M 2nd Priority Notes HOLLINGER: Still Reviewing Financial & Special Committee's Reports HORIZON ASSET: Fitch Assigns Low-B Ratings to Classes B-4 & B-5 HUMAN GENOME: S&P Junks $250M Convertible Subordinated Debt Issue HUNTSMAN LLC: Moody's Puts B2 Rating on Planned $350M Facility IMC GLOBAL: Fitch Assigns Low-B Ratings to Sr. Unsecured Debts INTERMET CORP: Files for Chapter 11 Protection in E.D. Michigan INTERMET CORPORATION: Voluntary Chapter 11 Case Summary INTERMET CORP: S&P's Rating Tumbles to D After Bankruptcy Filing INTERSTATE BAKERIES: Paying $1.2MM Prepetition Sales & Use Taxes INTRAWEST: Completes Consent Solicitation on 10.5% Senior Notes IPSCO INCORPORATED: Appoints Patricia Kampling as Treasurer JILLIAN'S ENT: Files Joint Liquidating Plan in W.D. Kentucky K KONSTRUCTION: Case Summary & 20 Largest Unsecured Creditors KAISER ALUMINUM: Court Okays QAL Sale Bidding Procedures KAISER: Century & Noranda Completes Gramercy Plant Acquisition KMART CORP: Eddie Lampert Discloses 46.69% Equity Stake in Kmart KRAMONT REALTY: Modifies & Extends $125 Million Credit Facility LEVEL 3: Fitch Junks Senior Unsecured & Convertible Debt Ratings LIFESTREAM TECH: Reports 169% Growth in July 2004 Shipments MAXIM CRANE: Committee Wants Stroock & Lavan as Counsel MEDIACOM COMMS: S&P Lowers Corporate Credit Rating to BB- MERRILL LYNCH: Fitch Puts Low-B Ratings on Six Cert. Classes MICROCELL: Campaigns for Acceptance of Rogers Wireless' Offer MICROCELL: Rogers Wireless Mails Offering Docs to Securityholders MORGAN COMMERCIAL: Fitch Junks Classes G & H Mortgage Certs. MORTGAGE CAPITAL: Moody's Slashes Class G Rating to Ca from B3 NEWCASTLE CDO: S&P Puts BB Rating on Class V $475 Million Notes NEW WEATHERVANE: Has Until Dec. 31 to Make Lease-Related Decisions NEXPAK CORP: Gets Court Nod to Hire Barrier as Financial Adviser NORTEL NETWORKS: Plans to Lay Off 3,250 Employees to Save $220M NORTEL NETWORKS: Has to File Financial Reports by October 31 NORTHWESTERN STEEL: IMA Advisors Bids $20K to Buy Un-Issued Stock NOVA CHEMICALS: Declares $0.10 Per Common Share Quarterly Dividend NOVA CHEMICALS: Fitch Puts BB+ Rating on Senior Unsecured Debt ONSITE TECHNOLOGY: U.S. Trustee Meeting with Creditors on Oct. 5 RAYTHEON: Likely Debt Cuts Prompts Fitch's Positive Outlook RCN CORP: Asks Court to Extend Removal Period to January 17 RELIANCE GROUP: Wants Court Okay on $166.5 Million PBGC Settlement RESIDENTIAL ACCREDIT: Corrections Cue Fitch to Lift Junk Rating SCHLOTZSKY'S INC: Slates Annual Shareholders Meeting for Dec. 9 SI CORPORATION: Moody's Junks Planned $230M Senior Secured Notes SMTC CORPORATION: Appoints John E. Caldwell as President and CEO SMTC CORP: Appoints Mr. Patrick Dunne Senior VP for Operations SMTC CORP: Planned Lay-Offs Will Cost $2.0 Mil. to $3.0 Mil. SMTC CORP: Will Effect One-For-Five Reverse Stock Split Today SOUTHERN STATES: S&P Places B Rating on Planned $100M Senior Notes SPIEGEL INC: Court Extends Exclusive Plan Filing to January 5 SR TELECOM: Robert E. Lamoureux Joins Board of Directors SUMMIT WASATCH: Voluntary Chapter 11 Case Summary SYDRAN GROUP: Selling 200+ Burger King Restaurants to Cerberus TOPS APPLIANCE: Congress Financial Wants DIP Loan Paid Now UAL CORP: Court Extends Exclusive Right to File Plan Until Nov. 1 UAL CORP: Objects to Chapter 11 Trustee Appointment ULTRA MOTORCYCLE: Trustee Selling a Bike for Pennies on the Dollar WESTERN REFINING: S&P Affirms B+ Corp. Rating & Lifts CreditWatch Z-TEL TECH: Begins Exchange Offer for Outstanding Preferred Stock * BOND PRICING: For the week of October 4 - October 8, 2004 ********* 165-10 ARCHER AVE: Case Summary & 5 Largest Unsecured Creditors --------------------------------------------------------------- Debtor: 165-10 Archer Avenue Incorporated 244 Madison Avenue, #272 New York, New York 10016 Bankruptcy Case No.: 04-16337 Type of Business: The Debtor owns and operates a 10-store strip mall located at 92-61 165th Street in Jamaica, New York. Chapter 11 Petition Date: September 30, 2004 Court: Southern District of New York (Manhattan) Debtor's Counsel: Arnold Mitchell Greene, Esq. Robinson Brog Leinwand Greene Genovese & Gluck, P.C. 1345 Avenue of the Americas, 31st Floor New York, NY 10105 Tel: 212-586-4050 Fax: 212-956-2164 Total Assets: $1,822,000 Total Debts: $1,242,002 Debtor's 5 Largest Unsecured Creditors: Entity Claim Amount ------ ------------ NYC Dept. of Tax and Finance $44,000 Con Edison $3,000 I.S.M. Electrical Contractors $11,850 Omni Title Agency $10,000 TCRM $9,878 AAIPHARMA INC: Indicates Possible Default on 11.5% Sr. Sub. Notes ----------------------------------------------------------------- aaiPharma Inc. (NASDAQ: AAII) will not make the October 1, 2004 interest payment on its 11.5% Senior Subordinated Notes due 2010, and will use the 30-day grace period provided under the Notes for failure to pay interest to enter into discussions with an ad hoc committee formed by certain holders of the Notes. An aggregate interest payment of $10.0 million was due on the Notes on Oct. 1, 2004. Failure to make the interest payment by October 31, 2004, would constitute an event of default under the Notes, permitting the trustee under the Notes or the holders of 25% of the Notes to declare the principal and interest thereunder immediately due and payable. The Company believes there is a likelihood that it will be in default of certain financial covenants under its senior credit facility, and is in ongoing active discussions with its lender to seek waivers and/or consents for these potential defaults. * * * As reported in the Troubled Company Reporter's on April 29, 2004, Standard & Poor's Ratings Services affirmed its 'CCC' corporate credit and 'CC' subordinated debt ratings on aaiPharma, Inc. At the same time, Standard & Poor's removed the ratings on the Wilmington, North Carolina-based specialty pharmaceutical company from CreditWatch. S&P's outlook on aaiPharma is negative. "The low speculative-grade ratings reflect the company's improved but still limited liquidity given the lack of visibility of aaiPharma's profitability and cash flow generation," said Standard & Poor's credit analyst Arthur Wong. ACCERIS COMMS: June 30 Balance Sheet Upside-Down by $51,672,000 --------------------------------------------------------------- Acceris Communications, Inc., (OTC-BB:ACRS.OB) reported its financial results for the second quarter ended June 30, 2004. The Company's total operating revenue from continuing operations for the second quarter ended June 30, 2004 was $26.5 million, a decrease of 28 percent from $37.0 million in the second quarter of 2003. Included in the three months ended June 30, 2003 is $4.1 million related to a network service offering that was discontinued in 2003. For the three months ended June 30, 2004, the Company had a loss from continuing operations of $8.2 million compared to a loss from continuing operations of $5.2 million for the second quarter of 2003. The Company's net loss was $8.2 million in the second quarter of 2004 compared to a loss of $4.8 million in the second quarter of 2003. The net loss per common share was $0.43 in the second quarter of 2004 versus a net loss per common share of $0.82 in the second quarter of 2003. For the six months ended June 30, 2004, the Company's total operating revenue was $61.7 million compared to $67.4 million in the first six months of 2003. The Company had a loss from continuing operations of $9.5 million compared to a loss from continuing operations of $20.7 million for the six months ended June 30, 2003. The Company recorded a net loss of $9.4 million for the six months ended June 30, 2004 versus a net loss of $20.6 million for the six months ended June 30, 2003. The net loss per common share was $0.49 for the six-month period in 2004 versus a net loss per common share of $3.53 in the first six months of 2003. As of June 30, 2004, stockholders' deficit widened to $51,672,000 compared to a $42,953,000 at December 31,2004. Recent significant events: -- Expanded local dial tone service into the states of Pennsylvania, Massachusetts and Florida, and ended the quarter with approximately 11,000 subscribers. -- In August, the Company implemented a plan to reduce operating costs and appropriately staff the organization in line with second quarter revenue and revenue expectations for the remainder of 2004. The softness in revenue can be attributed to the Company's decision to no longer pursue 10- 10-xxx business, which has a lower return and a higher churn rate from 1+ customers, particularly customers who call India as the primary destination. -- Strengthened board of directors with the additions of Mr. Jim Meenan as Vice Chairman and Mr. Frank Tanki as Chairman of the Audit Committee -- Initiated litigation in defense of VoIP patent portfolio -- Divested remaining interest in Buyers United Inc. "While we are disappointed with our financial results in the first half of the year, we have taken definitive steps in response to the regulatory uncertainties facing our industry and the softness in revenue that we have experienced. We are confident that our actions will generate improved operating results and cashflow," said Kelly Murumets, President of Acceris Communications. As reported in the Troubled Company Reporter on October 1, Acceris (OTCBB:ACRS) management concluded that the accounting principles as set forth in Emerging Issues Task Force Issue No. 00-27 -- EITF 00-27, regarding Beneficial Conversion Feature -- BCF, had not been properly applied in current and prior years to its convertible debentures issued in March 2001. The initial determination of the BCF in 2001 at the issue date was correct. However, adjustments to the number of shares and their conversion price were made under the debentures' anti-dilution provisions. The various anti-dilution events and their respective impacts on the number of shares and the conversion price were disclosed in the Company's previous public filings. However, the principles under EITF 00-27 also require a redetermination of the BCF at each date an anti-dilution event occurred. This redetermination was not completed in prior reporting periods. Additionally, the accumulation of unpaid interest costs on these same convertible debentures has been deemed to be interest paid in kind -- PIK, such interest also contains a conversion feature which once assessed as PIK interest required the determination of a BCF. This determination was not made by the Company in its prior reportings. This matter was first raised by the Company's recently appointed independent auditors, BDO Seidman, LLP, in the course of their review of the Company's prior public filings. After discussions among the Company's management, BDO, and the Company's prior auditors, PriceWaterhouseCoopers, LLP, the Company's management concluded that a correction of the prior accounting on this matter was required. The Company's management brought the matter for consideration before the Audit Committee and the full Board of Directors of the Company. Having considered the circumstances underlying the accounting errors and their effects upon the Company's prior filings, and having discussed the matter with the BDO and PWC representatives as well as the Company's management, the Audit Committee concluded that the previously issued financial statements should not be relied upon and approved and authorized the Company's management to amend certain previously filed public reports. About Acceris Acceris is a broad based communications company serving residential, small and medium-sized business and large enterprise customers in the United States. A facilities-based carrier, it provides a range of products including local dial tone and 1+ domestic and international long distance voice services, as well as fully managed and fully integrated data and enhanced services. Acceris offers its communications products and services both directly and through a network of independent agents, primarily via multi-level marketing and commercial agent programs. Acceris also offers a proven network convergence solution for voice and data in Voice over Internet Protocol -- VoIP -- communications technology and holds two foundational patents in the VoIP space. For further information, please visit Acceris' website at http://www.acceris.com/ AIR CANADA: Exits CCAA Protection & Implements Plan of Arrangement ------------------------------------------------------------------ Air Canada has successfully completed its restructuring process and implemented its Plan of Arrangement. The airline is exiting from CCAA protection with reduced operating costs, a strengthened balance sheet, a reorganized corporate structure and has a fleet renewal and commercial strategy intended to achieve sustained growth and profitability. The Corporation is well positioned to generate positive operating income and cash flow and has reduced its net debt and capitalized operating lease obligations from approximately $12 billion to less than $5 billion. In addition, the Corporation has raised $1.1 billion of new equity capital and, as of Thursday, has approximately $1.9 billion of cash on hand. "We're emerging from CCAA focused and well on our way to becoming a profitable, growing and competitive company in a rapidly changing industry," said Robert Milton, Chairman, President and CEO of ACE Aviation Holdings Inc. "We have not only reduced our cost structure and strengthened our balance sheet, we have fundamentally reinvented who we are. Air Canada can no longer be considered a traditional legacy carrier. At a time when our major competitors in the US are struggling, we have radically transformed this airline into a highly connected global network carrier offering the simplicity and ease of our low cost competitors." The different steps of the Plan were completed earlier today including the following transactions: -- The corporate reorganization of the Corporation became effective with the various business segments within the Air Canada group now established as separate legal entities. Under the new corporate structure, ACE Aviation Holdings Inc. is now the parent holding company under which the reorganized Air Canada and separate legal entities are held. In addition to Aeroplan, Air Canada Jazz, Destina.ca and Touram (Air Canada Vacations) which were already established as separate legal entities, Air Canada Technical Services, Air Canada Cargo and Air Canada Groundhandling were established as separate legal entities. -- The by-laws of ACE were implemented as part of the Plan and the new Board of Directors of ACE has taken office. The Board took several actions at its first-official meeting, held earlier Thursday. Robert Milton was appointed Chairman and Michael Green of Cerberus Operations was appointed Lead Director. In addition, the Board established two sub- committees of the Board comprised exclusively of independent directors - the Audit, Finance & Risk Committee and the Governance & Corporate Matters Committee. The ACE Board also approved a Directors' Stock Ownership Policy that will require independent directors to own a minimum amount of stock. -- The Global Restructuring Agreement with GECC (General Electric Capital Corporation) and affiliates became effective. The agreement provides for the restructuring of leases and an agreement on financing to be used for future acquisitions of new regional jet aircraft. The terms of the exit facility portion of the agreement were amended such that the term loan on exit is now approximately C$540 million. -- In accordance with the Standby Purchase Agreement with Deutsche Bank Securities Inc., ACE completed the issuance of shares under its rights offering for proceeds of $850 million. DB acted as standby purchaser and acquired the shares relating to unexercised rights. -- In accordance with the Investment Agreement with Cerberus ACE Investment, LLC, Promontoria Holding III B.V., an affiliate of Cerberus Capital Management L.P., subscribed for and purchased $250 million of convertible preferred shares of ACE, representing on an as converted basis 9.16 per cent of the fully diluted equity of ACE. -- The Corporation confirmed that 77,334,674 Class A variable voting shares (ACE.RV) of ACE and 11,480,430 Class B voting shares (ACE.B) of ACE were issued today and will start trading on the Toronto Stock Exchange (TSX) on October 4, 2004. Ernst & Young, as court-appointed Monitor and disbursing agent under the Plan, has retained in escrow 7,680,365 ACE shares pending the resolution of the disputed claims. Mr. Milton said the Plan and the business strategy will allow Air Canada to compete effectively in the current and future airline industry environment. "We've reduced our cost structure. We've redefined and enhanced our products and services. We've rationalized our fleet, introducing new wide body and, soon, new regional aircraft to ensure we have the right aircraft to optimally serve current and new destinations throughout our global network. And we've streamlined and enhanced our corporate structure with a view to maximizing the inherent value of our overall franchise and each of our business units." "Our successful restructuring was only possible through the willingness of our employees, lessors and creditors to embrace change. Today's outcome is also due in part to the efforts of the many individuals involved in the restructuring over the past 18 months. I thank them for their hard work and efforts in overcoming every hurdle along the way." "It has been a particularly difficult time for our employees and I thank them for their loyalty, dedication and sheer determination to ensure this great airline's survival. And I thank Air Canada's customers for their unwavering support throughout this process. We will continue to introduce innovative products that our customers value and that will keep them coming back. And we'll be further streamlining our processes to be more customer and employee friendly. [Thursday] marks a defining moment for the new Air Canada and I am confident customers and employees alike will soon recognize the signs of a newly energized airline poised for success." Headquartered in Saint-Laurent, Quebec Canada, Air Canada -- http://www.aircanada.ca/-- represents Canada's only major domestic and international network airline, providing scheduled and charter air transportation for passengers and cargo. The Company filed for CCAA protection on April 1, 2003 (Ontario Superior Court of Justice, Case No. 03-4932) and filed a Section 304 petition in the U.S. Bankruptcy Court for the Southern District of New York (Case No. 03-11971). Mr. Justice Farley sanctioned Air Canada's CCAA restructuring plan on Aug. 23, 2004. Sean F. Dunphy, Esq., and Ashley John Taylor, Esq., at Stikeman Elliott LLP, in Toronto, serve as Canadian Counsel to the carrier. Matthew A. Feldman, Esq., and Elizabeth Crispino, Esq., at Willkie Farr & Gallagher serve as the Debtors' U.S. Counsel. When the Debtors filed for protection from its creditors, they listed C$7,816,000,000 in assets and C$9,704,000,000 in liabilities. AIR CANADA: Promontoria Pays CDN$250M for 9% Stake in ACE Aviation ------------------------------------------------------------------ An investment in ACE Aviation Holdings Inc., the parent company of Air Canada, has been completed by Promontoria Holding III, an affiliate of Cerberus Capital Management, L.P. Cerberus is the equity sponsor in the restructuring of Air Canada. Pursuant to an Investment Agreement dated June 23, 2004 and the plan of reorganization, compromise and arrangement of Air Canada, Promontoria paid Cdn$250 million to acquire 12,500,000 (100%) of the Preferred Shares of ACE Aviation Holdings, Inc., representing, on an as-converted basis, 9.16% of the fully diluted equity of ACE. As at September 30, 2004, the Preferred Shares are convertible into approximately 10.7% of the Class A Variable Voting Shares of ACE and represent approximately 2.67% of the voting rights attached to voting securities of ACE. Promontoria is appointing three directors to ACE's 11-member board. As a result of the cross-convertibility between the Variable Voting Shares and ACE's Class B Voting Shares and the limit on votes attached to the Variable Voting Shares, the voting rights attached to the various classes of ACE shares and the ACE Preferred Shares will vary on a daily basis. In addition, the conversion rights of the ACE Preferred Shares may adjust over time, which will affect the voting rights attached to the ACE Preferred Shares. The securities of ACE are held for investment purposes, and Promontoria generally is restricted from transferring the Preferred Shares for a two-year period. Promontoria's investment in ACE securities will be reviewed on a continuing basis and its holdings may be increased or decreased in the future. Promontoria Holding III BV, is located at Amalialaan 41C, 1st Floor, 3743 KE BAARN, The Netherlands. Cerberus Capital Management, L.P. is a New York-based global private investment firm, which, together with its affiliates, manages in excess of US$14 billion of unlevered capital. Headquartered in Saint-Laurent, Quebec Canada, Air Canada -- http://www.aircanada.ca/-- represents Canada's only major domestic and international network airline, providing scheduled and charter air transportation for passengers and cargo. The Company filed for CCAA protection on April 1, 2003 (Ontario Superior Court of Justice, Case No. 03-4932) and Section 304 petition with the U.S. Bankruptcy Court for the Southern District of New York (Case No. 03-11971). Matthew A. Feldman, Esq., and Elizabeth Crispino, Esq., at Willkie Farr & Gallagher serve as the Debtors' U.S. Counsel. When the Debtors filed for protection from its creditors, they listed C$7,816,000,000 in assets and C$9,704,000,000 in liabilities. AIR CANADA: Did Not Seek Federal Help on Bombardier Jets Purchase ----------------------------------------------------------------- Air Canada confirmed that it has at no time approached the federal government for financial assistance for its acquisition of Bombardier Regional Jets, contrary to information attributed to government sources contained in an article that appears in Globe & Mail's September 29 edition. Air Canada has been assured by the manufacturer of competitive financing terms and it is the manufacturer's responsibility to arrange the terms to the buyer's satisfaction. Headquartered in Saint-Laurent, Quebec Canada, Air Canada -- http://www.aircanada.ca/-- represents Canada's only major domestic and international network airline, providing scheduled and charter air transportation for passengers and cargo. The Company filed for CCAA protection on April 1, 2003 (Ontario Superior Court of Justice, Case No. 03-4932) and filed a Section 304 petition in the U.S. Bankruptcy Court for the Southern District of New York (Case No. 03-11971). Mr. Justice Farley sanctioned Air Canada's CCAA restructuring plan on Aug. 23, 2004. Sean F. Dunphy, Esq., and Ashley John Taylor, Esq., at Stikeman Elliott LLP, in Toronto, serve as Canadian Counsel to the carrier. Matthew A. Feldman, Esq., and Elizabeth Crispino, Esq., at Willkie Farr & Gallagher serve as the Debtors' U.S. Counsel. When the Debtors filed for protection from its creditors, they listed C$7,816,000,000 in assets and C$9,704,000,000 in liabilities. AIRGATE PCS: Provides Financial and Operating Guidance for 2004 --------------------------------------------------------------- AirGate PCS, Inc. (Nasdaq:PCSA), a PCS Affiliate of Sprint, announced guidance for its fourth quarter ending Sept. 30, 2004. Three Months Ended September 30, 2004 (Dollars in millions) Low High ------- -------- Net additions 8,500 9,500 Total revenues $ 88 $ 92 EBITDA (1) $ 16 $ 18 Capital expenditures Approximately $4 (1) EBITDA excludes an approximately $10.9 million one-time adjustment related to the settlement with Sprint announced on September 14, 2004. About AirGate PCS AirGate PCS, Inc. is the PCS Affiliate of Sprint with the right to sell wireless mobility communications network products and services under the Sprint brand in territories within three states located in the Southeastern United States. The territories include over 7.4 million residents in key markets such as Charleston, Columbia, and Greenville-Spartanburg, South Carolina; Augusta and Savannah, Georgia; and Asheville, Wilmington and the Outer Banks of North Carolina. At June 30, 2004, AirGate PCS, Inc.'s balance sheet showed a $89,148,000 stockholders' deficit, compared to a $376,997,000 deficit at September 30, 2003. AIRGATE PCS: S&P Junks Proposed $175 Million Senior Secured Notes ----------------------------------------------------------------- Standard & Poor's Ratings Services assigned its 'CCC+' rating to AirGate PCS Inc.'s proposed $175 million senior secured floating- rate notes due 2011, to be issued under Rule 144A with registration rights. These notes have a first-priority lien on all assets and are guaranteed on a senior secured basis by all existing and future subsidiaries. Simultaneously, Standard & Poor's revised its ratings outlook on AirGate to positive from developing. The 'CCC+' corporate credit rating and the 'CCC-' rating on the company's senior subordinated notes (which are secured by a second lien on all assets) were affirmed. Proceeds from the notes issuance will be used to refinance about $135 million of bank debt and call about $2 million remaining of the company's 13.5% subordinated discount notes. The existing rating on the bank loan will be withdrawn upon completion of the deal. Pro forma for the refinancing, AirGate had total debt of about $334 million (about $380 million after adjusting for operating leases) at June 30, 2004. "The outlook revision reflects expectations of continued EBITDA growth and, after the refinancing, improved financial flexibility," explained Standard & Poor's credit analyst Michael Tsao. As AirGate has become a more mature business and achieved critical subscriber scale, EBITDA has increased to about $20 million (EBITDA margin of about 23%) during the quarter ended June 2004, from about $14 million (EBITDA margin of about 16%) the previous year. The combination of growing EBITDA and limited capital spending also enabled the company to generate about $30 million of free cash flow in the nine months ended June 2004. Continued subscriber growth and revenues from new data services should allow EBITDA growth to continue. The proposed refinancing will materially enhance financial flexibility by eliminating significant annual bank debt amortization totaling $131 million through 2008, thereby enabling AirGate to build up a liquidity cushion against competitive risks. Despite the outlook revision, ratings still reflect high competitive risk, potential operating challenges (stemming, in part, from its affiliate relationship with Sprint PCS), and high debt leverage. Atlanta, Georgia-based AirGate PCS is a wireless carrier and Sprint PCS affiliate. AirGate, which provided wireless voice and data services under the Sprint PCS brand to about 375,241 customers at June 30, 2004, is expected to face even more intense competitive pressure due to wireless number portability and nationwide wireless penetration approaching the 58% area. AIRLEASE LTD: Completes Liquidation & Terminates Partnership ------------------------------------------------------------ Airlease Management Services, Inc., formerly the General Partner of Airlease Ltd., A California Limited Partnership, said the dissolution, winding up and liquidation of Airlease has been completed and that the Partnership has filed a certificate of cancellation with the California Secretary of State, thereby terminating the Partnership's existence under California law. As previously announced, the Board of Directors of the former General Partner has approved a final cash distribution of $0.085 cents per unit which will be paid on October 15, 2004, to holders of record as of the close of business on September 30, 2004. Airlease Ltd., A California Limited Partnership has been engaged in the business of acquiring, either directly or through joint ventures, commercial jet aircraft, and leasing such aircraft or parts thereof to domestic and foreign airlines, freight carriers and charter companies. The general partner of the Partnership is Airlease Management Services, Inc. ALASKACATCH LLC: Case Summary & 14 Largest Unsecured Creditors -------------------------------------------------------------- Debtor: AlaskaCatch LLC aka Alaska Fishermen's Catch 224 West Washington Street, Suite 204 Sequim, Washington 98382 Bankruptcy Case No.: 04-22692 Type of Business: The Debtor is engaged in commercial fishing industry. See http://www.alaskacatch.com/ Chapter 11 Petition Date: September 29, 2004 Court: Western District of Washington (Seattle) Judge: Karen A. Overstreet Debtor's Counsel: Mark D. Northrup, Esq. Graham & Dunn PC Pier 70, 2801 Alaskan Way, Suite 300 Seattle, WA 98121-1128 Tel: 206-340-9628 Estimated Assets: $1 Million to $10 Million Estimated Debts: $1 Million to $10 Million Debtor's 14 Largest Unsecured Creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ Chignik Seafood Producers $350,533 Alliance P.O. Box 30 Chignik, AK 99564 Cunwood, Inc. $67,492 718 High Street P.O. Box 46 New London, WI 54961 A.I. Credit Corp. $64,692 1630 East Shaw Ave. Fresno, CA 93710 Western Pioneer Shipping $50,215 Alaska Dept. of Revenue Fish tax delinquency $36,975 Processor Tax due January 5, 2004 York International $30,000 Rainier Petroleum Corp. $26,604 SYSCO Food Services $18,362 Lake and Peninsula Borough Delinquent fish taxes $13,446 Centennial Investments $11,250 City of Chignik Fish taxes delinquent $8,227 Alaska Dept. of Labor & ESC Employee w/h $8,158 Workforce Dev. Employment ESC Employer due Security Tax October 4, 2004 The Mail Cache (Wireless $5,640 Matrix Corporation) Meridian Pacific Highway LLC $4,841 AMERIDEBT INC: Creditors Must File Proofs of Claim by Oct. 12 ------------------------------------------------------------- The United States Bankruptcy Court for the District of Maryland set October 12, 2004, as the deadline for all creditors owed money by AmeriDebt, Inc., on account of claims arising prior to June 5, 2004, to file their proofs of claim. Creditors must file their written proofs of claim on or before the October 12 Claims Bar Date and those forms must be delivered to: Mark D. Sammons Clerk of the Bankruptcy Court 6500 Cherrywood Lane, Ste. 300 Greenbelt, Maryland 20770 with a copy to the Debtor's counsel: Stephen W. Nichols, Esq. Deckelbaum Ogens & Raftery, Chartered 3 Bethesda Metro Center, Suite 200 Bethesda, Maryland 20814 For a governmental unit, the Claims Bar Date is December 2, 2004. Headquartered in Germantown, Maryland, AmeriDebt, Inc. -- http://ameridebt.org/-- is a credit counseling company. The Company filed for chapter 11 protection on June 5, 2004 (Bankr. D. Md. Case No. 04-23649). Stephen W. Nichols, Esq., at Deckelbaum Ogens & Raftery, Chartered, represents the Debtor in its restructuring efforts. When the Company filed for protection from its creditors, it listed $8,387,748 in total assets and $12,362,695 in total debts. ARCAP RESECURITIZATION: Fitch Puts Low-B Ratings on Six Classes --------------------------------------------------------------- ARCap 2004-RR3 Resecuritization, Inc., series 2004-RR3, commercial mortgage-backed securities pass-through certificates are rated by Fitch: -- $50,000,000 class A-1 'AAA'; -- $272,486,000 class A-2 'AAA'; -- $545,431,371 class X* 'AAA'; -- $40,907,000 class B 'AA'; -- $31,362,000 class C 'A'; -- $6,818,000 class D 'A-'; -- $16,363,000 class E 'BBB+'; -- $13,636,000 class F 'BBB'; -- $12,954,000 class G 'BBB-'; -- $18,408,000 class H 'BB+'; -- $8,863,000 class J 'BB'; -- $8,182,000 class K 'BB-'; -- $8,863,000 class L 'B+'; -- $12,954,000 class M 'B'; -- $5,454,000 class N 'B-'; -- $38,181,371 class O is not rated. * Notional amount and interest only. All classes are privately placed pursuant to Rule 144A of the Securities Act of 1933. The certificates represent beneficial ownership interest in the trust, primary assets of which are all or a portion of 57 classes of fixed-rate commercial mortgage- backed securities having an aggregate principal balance of approximately $545,431,371, as of the reference date. For a detailed description of Fitch's rating analysis, see 'ARCap 2004-RR3 Resecuritization, Inc., Series 2004-RR3,' dated Sept. 10, 2004, available on the Fitch Ratings web site at http://www.fitchratings.com/ AVADO BRANDS: Appoints Raymond Barbrick as Chief Executive Officer ------------------------------------------------------------------ Avado Brands (OTC:AVDO.PK) names Raymond P. Barbrick chief executive officer. Avado Brands is the parent company of Don Pablo's Mexican Kitchen, Hops Grillhouse & Brewery and the new Hops City Grille. Since 1992, Mr. Barbrick has been with Bertucci's Corp. and N.E. Restaurant Company of Northborough, Massachusetts. Since December 2001, he has served as president and chief operating officer for Bertucci's Corp. and also held the positions of executive vice president and chief operating officer and division president at the company. He spearheaded the chain's transformation from "pizzeria" to a full-service casual dining concept. In doing so, he developed and executed the strategic plan encompassing marketing, training and re-imaging of 67 units and a new expanded menu offering more than 60 items. Prior to his career with Bertucci's, Barbrick was part of the Back Bay Restaurant Group in Boston and held posts with MSM Management/CEV Corp., also of Boston. "Rick Barbrick is a proven and resourceful leader with an impressive background in foodservice and an outstanding track record for building and rebuilding companies. He will lead the continued turnaround of Avado Brands and build on the forward progress that has been made in our brands," said Avado Brands' interim Chief Executive Officer Kevin Leary of AlixPartners LLC. "I'm extremely proud to have been chosen to lead Avado Brands," Mr.Barbrick commented. "This company has two well-established concepts and a dedicated and determined team rich in foodservice talent. Together, we will build a stronger company that promises to have a very bright future." Avado Brands has been operating under Chapter 11 of the U.S. Bankruptcy Code since Feb. 4, 2004. Mr.Barbrick was selected through a collaborative search conducted by the company, members of the Official Committee of Unsecured Creditors and certain post- petition lenders to the company. The terms of Mr.Barbrick's employment were approved on Sept. 27, 2004, by the bankruptcy court overseeing the company's reorganization. Headquartered in Madison, Georgia, Avado Brands, Inc., owns and operates two proprietary brands comprised of 102 Don Pablo's Mexican Kitchens and 37 Hops Grillhouse & Breweries. The Company and its debtor-affiliates filed a voluntary chapter 11 petition on February 4, 2004 (Bankr. N.D. Tex. Case No. 04-31555). Deborah D. Williamson, Esq., and Thomas Rice, Esq., at Cox & Smith Incorporated represent the Debtors in their restructuring efforts. Miller Buckfire Lewis Ying & Co., LLC is providing financial advisory services. DDJ Capital is Avado's DIP lender. When the Debtors filed for protection from its creditors, they listed $228,032,000 in total assets and $263,497,000 in total debts. BALLY TOTAL: Moody's Puts B2 Rating on Planned $175M Facility ------------------------------------------------------------- Moody's assigned a B2 rating to Bally Total Fitness Holding Corporation's proposed $175 million senior secured term loan B facility and downgraded the senior implied rating to B3, concluding a review of the company's ratings for possible downgrade initiated on August 11, 2004. The ratings reflect Bally's significant leverage, limited free cash flows and increasing competition. The ratings outlook is stable. Moody's assigned these rating: * $175 million Senior Secured Term Loan B Facility, due 2009, rated B2; Moody's downgraded these ratings: * $100 million Senior Secured Revolving Credit Facility, due 2008, downgraded to B2; * $235 million 10.5% Senior Unsecured Notes, due 2011, downgraded to B3; * $300 million 9.875% Senior Subordinated Notes, due 2007, downgraded to Caa2; * Senior Implied, downgraded to B3; * Senior Unsecured Issuer, downgraded to Caa1. Proceeds from the new $175 million term loan B facility are expected to be used to repay Bally's accounts receivable securitization facility, repay borrowings outstanding under the revolving credit facility and provide additional cash to the company. The ratings are limited by Bally's significant leverage, limited free cash flow and increasing competition. Free cash flow (after capital expenditures) to total debt was about 2% in 2003 and Moody's expects it to be less than 5% for the years ending December 31, 2004 and 2005. Revenue growth will be a challenge for Bally due to the increase in the number of fitness club competitors and significant membership attrition rates. Bally has also experienced cost pressures with rent and other operating costs increasing significantly in 2004. As a result, anticipated free cash flow levels are unlikely to allow the company to materially reduce debt levels over the intermediate term, even with targeted reductions in capital spending and cost reduction efforts. The ratings are supported by: (i) Bally's impressive brand recognition, (ii) strong industry fundamentals, (iii) management's continued focus on improving the profitability of its existing base of fitness centers, and (iv) the expected improved liquidity after the refinancing. Demographic changes and the growing awareness of the importance of physical fitness should benefit Bally, which has a strong brand identity and the largest membership and facility base in the industry. Bally has scaled back its new club expansion plans and is focusing on maximizing the profitability of its existing club base. Capital expenditures were $36 million in 2003 and are expected to average $40 million to $50 million over the next few years, down from $75 million in 2002. Bally's profitability over the next few years will depend largely on its cost reduction efforts and the maturing of a large number of its fitness clubs opened in the last five years. Moody's understands that Bally expects to increase revenues through more flexible membership plans, improved marketing programs and increased focus on product and service offerings such as personal training, nutrition, retail and weight management programs, which have grown rapidly in recent years and carry higher margins. Bally's stable ratings outlook reflects the expectation that Bally will experience slow revenue growth and moderate improvements in profitability and cash flows over the next year. The outlook or ratings would likely improve if Bally were to significantly reduce leverage or significantly improve free cash flows on a sustainable basis either through revenue growth or improved operating margins. The outlook or ratings would likely come under pressure if the company were to increase its leverage or return to negative free cash flow generation. As of the date of this press release, Bally has not filed its Form 10-Q for the second quarter of 2004 nor has it announced the resolution of the accounting issues being investigated by the Securities and Exchange Commission. On September 24, 2004, Bally announced that it obtained the consent of its revolving credit lenders allowing it until November 1, 2004 to file its Form 10-Q for the second quarter, without the delayed delivery constituting a default under its revolving credit facility. The failure by Bally to file its Form 10-Q for the second quarter on a timely basis would constitute an event of default under its senior unsecured and senior subordinated note indentures if notice is given by the indenture trustee and a thirty day cure period expires. An adverse outcome arising from the SEC investigation or various lawsuits pending against the company or the triggering of an event of default would also pressure the rating. The B2 rating on the proposed $175 million term loan B facility reflects its seniority in the capital structure. The term loan B facility will be secured by a pledge of substantially all the assets of Bally and its subsidiaries and guaranteed by substantially all domestic subsidiaries. The revolving credit facility and proposed term loan B facility have been notched above the senior implied rating to reflect a combination of high quality receivables and the value of property and equipment. Assuming the transaction closes in the fourth quarter of 2004, total debt to EBITDA for 2004 is expected to be about 6 times. EBITDA less capital expenditures coverage of interest for 2004 and 2005 is expected to be weak at less than 2 times. The use of EBITDA and related EBITDA ratios as a single measure of cash flow without consideration of other factors can be misleading. Headquartered in Chicago, Illinois, Bally is the largest commercial operator of fitness centers in North America. Revenue for the year ended December 31, 2003 was approximately $953 million. BEAUMONT HOUSING: Moody's Pares Revenue Bonds' Rating to Ba2 ------------------------------------------------------------ Moody's Investors Service has downgraded the rating of the Housing Authority of the City of Beaumont Multifamily Mortgage Revenue Bonds, Series 1993A (Northridge Manor Project) to Ba2 from Ba1. The outlook on the approximately $2,660,000 of outstanding bonds is negative. The downgrade and negative outlook is based on very weak financials that has resulted from very low occupancy rates. Fiscal year 2003 audited financials show a debt service coverage of .27x. Because the Housing Authority has helped plug the property's operating deficits, debt service has been paid without having to tap the Debt Service Reserve Fund. The Authority has covered all operating deficits since 2001 and Moody's anticipates that future deficits will be paid for by the Authority. Occupancy was reported to be only 80% as of September 1, 2004 - extraordinarily low by Section 8 standards. In addition, the property had a low physical inspection score of 67c (out of 100) by the Department of Housing and Urban Development's Real Estate Assessment Center in August 2003. Northridge Manor is a 150-unit family apartment complex located within the city limits of Beaumont, Texas. The project has a mix of 1, 2, 3, and 4 bedroom apartments rented to low-income families. The project is owned and operated by the Housing Authority of the City of Beaumont. The revenues that are pledged to the payment of the bonds include payments received from the Housing Assistance Payment Contract (HAP) with the Department of Housing and Urban Development (HUD) as well as the tenant-paid portion of the rental revenues. Key Statistics (As Of The September 30, 2003 Audited Financial Statements): Recent Occupancy: 80% REAC score: 67c HAP expiration: 12/4/2009 Debt Maturity: 11/1/2010 Contract Rent as % of HUD Fair Market Rents: -- 1 BR: 87%; 2 BR: 82%; 3 BR: 74%; and 4 BR: 82% Debt Service Coverage: .27x Debt per Unit: $17,733 Operating expenses per unit: $4,012 Reserve and Replacement per unit: $563 Flow of Fund: Open at 1.00x The outlook on the bonds is negative based on the deteriorating financial performance of the project securing the bonds. BELL CANADA: Union Says Toronto Office Should Remain Open --------------------------------------------------------- Bell Canada is making a mistake in closing its Operator Services office in Toronto says the Communications, Energy and Paperworkers Union of Canada -- CEP. "Other options are available to Bell to keep Toronto Operator Services open," said CEP national representative Janice McClelland following Bell's announcement that it will close the office in June of next year, putting 35 women out of work "unilaterally and with no consultation with CEP." "The Toronto area is the richest source of profit for Bell and there is no need for the city to be losing these permanent, decent paying jobs. This seems like another demonstration of Bell's attempts to eliminate their on-going liability on pay equity by throwing women out of work," Ms. McClelland said. CEP Ontario Region vice president Cecil Makowski pledged the Union's total effort on behalf of the operators. "Many of these women are the primary support for their families and, quite frankly, Bell should be ashamed of itself for treating its employees this way," said Mr. Makowski. Bell Canada International -- 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. BOSTON PROPERTY: Case Summary & 6 Largest Unsecured Creditors ------------------------------------------------------------- Debtor: Boston Property Exchange Transfer Company, Inc. aka BPETCO aka BPE aka Benistar Property Exchange Trust Company, Inc. Clearwater House 2187 Atlantic Street Stamford, Connecticut 06902-6880 Bankruptcy Case No.: 04-12792 Chapter 11 Petition Date: October 1, 2004 Court: District of Delaware (Delaware) Judge: Joel B. Rosenthal Debtor's Counsel: Steven M. Yoder, Esq. The Bayard Firm 222 Delaware Avenue, Suite 900 Wilmington, Delaware 19899 Tel: 302 655-5000 Fax: 302-658-6395 Estimated Assets: $50 Million to $100 Million Estimated Debts: $10 Million to $50 Million Debtor's 6 largest unsecured creditors: Entity Nature Of Claim Claim Amount ------ --------------- ------------ Massachusetts Lumber Jury Verdict $6,930,187 Company, Inc. 829 Massachusetts Avenue Cambridge, Massachusetts 02139 Joseph Iantosca Jury Verdict $6,179,253 Faxon, Heights Trust Fern Realty Trust 65 Matthewson Drive, Suite S Weymouth, Massachusetts 02189 Gail A. Cahaly Jury Verdict $2,167,259 151 Phillips Brooks Road Westwood, Massachusetts 02090 Jeffrey M. Johnston Jury Verdict $1,266,659 41 Phillips Street Boston, Massachusetts 02114 Belridge Corporation Jury Verdict $1,205,988 65 Matheson Drive, Suite S Weymouth, Massachusetts 02189 Bellemore Associates, LLC Jury Verdict $1,072,117 26 South River Road Bedford, New Hampshire 03110 CALPINE CORP: Closes $785 Million Senior Secured Debt Offering --------------------------------------------------------------- Calpine Corporation (NYSE: CPN) received funding on its $785 million offering of 9-5/8% first-priority senior secured notes due 2014, offered at 99.212% of par. These notes are secured, directly and indirectly, by substantially all of the assets owned by Calpine, including its natural gas and power assets and the stock of Calpine Energy Services and other subsidiaries. Net proceeds from this offering will be used to redeem or repurchase existing indebtedness through open-market purchases, and as otherwise permitted by the company's indentures. The secured notes were offered in a private placement under Rule 144A, have not been registered under the Securities Act of 1933, and may not be offered in the United States absent registration or an applicable exemption from registration requirements. Calpine Corporation, generates power at plants it owns or leases in 21 states in the United States, three provinces in Canada and in the United Kingdom. Calpine is also the world's largest producer of renewable geothermal energy, and owns or controls approximately one trillion cubic feet equivalent of proved natural gas reserves in the United States and Canada. For more information about Calpine, visit http://www.calpine.com/ * * * As reported in the Troubled Company Reporter on Sept. 27, 2004, Standard & Poor's Ratings Services assigned its 'B+' rating to Calpine Corp.'s $785 million first-priority senior secured notes due in 2014, which is one notch higher than the company's corporate credit rating. Standard & Poor's also assigned its '1' recovery rating to the notes, indicating a high expectation of full recovery of principal if a default occurs. The rating on Calpine (B/Negative/--), a San Jose, California- based corporation engaged in the development, acquisition, ownership, and operation of power generation facilities, reflects Calpine's credit statistics are weak. CANADA PAYPHONE: Completes Reorg. to Become Globalive Subsidiary ---------------------------------------------------------------- Canada Payphone Corporation said that its proposal and reorganization contemplated in its press release of August 31, 2004 was completed effective September 30, 2004. As a result, all of the Common Shares of the Company held by the public shareholders were purchased by the Company for $0.02 per share and the shares delisted from trading on the TSX Venture Exchange. On completion of the transactions, the Company became a wholly owned subsidiary of Globalive, which intends to merge the operations of the Company into its other telecommunications services. Former shareholders wishing to claim the purchase price for their Common Shares must deposit with Computershare Investor Services Inc., the Company's depositary, the certificates representing their shares along with a duly completed letter of transmittal. Copies of the letter of transmittal have been sent to all shareholders and are also available from the Company or from the Company's filings with the securities regulatory authorities at http://www.sedar.com/ As reported in the Troubled Company Reporter on Sept. 03, Canada Payphone was granted an order pursuant to the British Columbia Business Corporations Act requiring that the Company purchase, and all of the shareholders of the Company sell, all of the issued and outstanding shares of the Company at a price of $0.02 per share. The Final Order was entered in connection with a previously disclosed offer from Globalive Communications, Inc., to acquire the Company for an aggregate consideration of $1,000,000, one half of which is to be distributed to creditors of the Company and the remaining half to be distributed to shareholders of the Company. The Offer was presented to the creditors of the Company by way of an Amended Proposal under the Company's proceedings under the Bankruptcy and Insolvency Act. The Amended Proposal, under which the Company's creditors are to receive $500,000 in full satisfaction of their claims was approved by a majority of the creditors of the Company and by the Quebec Superior Court, Commercial Chamber on August 27, 2004. Provided that the Final Order is not varied, completion of the transactions contemplated by the Offer, including payment to the Company's shareholders of $0.02 per share, will occur on September 30, 2004. During more than four months since the Company filed a Notice of Intention under the Bankruptcy and Insolvency Act, the Board of Directors of the Company investigated all possible alternatives available to the Company and is satisfied that the Globalive Offer is the best available for all stakeholders. Nevertheless, at the Company's request, the Final Order provides that the Company or any other interested person has liberty to apply on or before September 7, 2004 to amend the Final Order in the event that a transaction is proposed to the Company which is financially more attractive to the Company's stakeholders than the Offer. As reported in the Troubled Company Reporter on August 27, 2004, Globalive Communications, Inc., agreed to lend $500,000 to the Company which amount will be shared by the unsecured creditors of the Company to compromise and settle all of the Company's unsecured debts. About Canada Payphone Corporation Canada Payphone Corporation is Canada's leading competitive payphone service provider. Over the past few years, Canada Payphone has played an instrumental role in the deregulation of the competitive payphone industry and continues to create exciting business opportunities in the new era of public access communications. In 1999, Canada Payphone began installing payphones across Canada. An experienced telecommunications team and the latest advancements in payphone technology provide Canada Payphone's customers with superior service and reliability. Canada Payphone Corporation is currently registered in the TSX Venture Exchange under the symbol 'CPY'. CATHOLIC CHURCH: U.S. Trustee Meets Tucson's Creditors on Dec. 2 ---------------------------------------------------------------- The United States Trustee for Region 14 will convene a meeting of the Roman Catholic Church of the Diocese of Tucson's creditors on December 2, 2004, at 10:30 a.m., at the U.S. Trustee Meeting Room, located at 10 E. Broadway, Suite 104, in Tucson, Arizona. This is the first meeting of creditors required under 11 U.S.C. Sec. 341(a) in all bankruptcy cases. All creditors are invited, but not required, to attend. This Meeting of Creditors offers the one opportunity in a bankruptcy proceeding for creditors to question a responsible office of the Debtor under oath about the company's financial affairs and operations that would be of interest to the general body of creditors. The Roman Catholic Church of the Diocese of Tucson filed for chapter 11 protection (Bankr. D. Ariz. Case No. 04-04721) on September 20, 2004, and delivered a plan of reorganization to the Court on the same day. Susan G. Boswell, Esq., Kasey C. Nye, Esq., at Quarles & Brady Streich Lang LLP, represent the Tucson Diocese. 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 Portland Archdiocese in its restructuring efforts. Portland's 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. 6; Bankruptcy Creditors' Service, Inc., 215/945-7000) CENCOTECH: Discloses $2,328,669 Stockholders' Deficit at July 31 ---------------------------------------------------------------- Cencotech, Inc., (CTZ - TSX-V) reported the results of operations for the nine months ended July 31, 2004. During the first nine months of fiscal 2004, revenue was $1,000,743 as compared to $1,149,891 for the same period last year. The Company incurred a loss in the nine month period ended July 31st, 2004 of $848,594 or $0.05 per share as compared to $1,634,077 or $0.10 per share in the same period last year. As of July 31, 2004, Cencotech's stockholders' deficit widened to $2,328,669 compared to a $1,480,075 deficit at October 31, 2003. The debenture and secured loans in Cencotech and its subsidiary fell due July 31st, 2004 and have not been renewed. Discussions continue between the debt holders and Management, with respect to the disposition of the obligations. Management continues to explore with third parties a number of options to realize on the strategic value of the Company's assets and to enhance the cash flow from operations. Cencotech, Inc., was created to acquire and manage emerging high technology enterprises with sound business solutions for their customers. The Corporation's present products are designed to bring efficiency to the processing of currency and other value instruments in financial institutions, large retailers, public transportation operations and the gaming industry. Cencotech systems are "open-architectured" and have been developed to interface with client's legacy systems. CENDANT MORTGAGE: Fitch Puts Low-B Rating on Classes B-4 & B-5 -------------------------------------------------------------- Cendant Mortgage Capital LLC $120.0 million mortgage pass-through certificates, series 2004-5, are rated by Fitch: -- $19.3 million privately offered class A-1 certificates 'AAA'; -- $93.7 million classes A-2 through A-8, R-I, and R-II certificates (senior certificates) 'AAA'; -- $5.4 million privately offered class B-1 certificates 'AA'; -- $781,874 privately offered class B-2 certificates 'A'; -- $421,009 privately offered class B-3 certificates 'BBB'; -- $240,577 privately offered class B-4 certificates 'BB'; -- $180,433 privately offered class B-5 certificates 'B'. The 'AAA' rating on the senior certificates reflects the 6.00% subordination provided by: * the 4.45% class B-1; * the 0.65% class B-2; * the 0.35% class B-3; * the 0.20% class B-4; * the 0.15% class B-5; and * the 0.20% privately offered class B-6 (which is not rated by Fitch). Fitch believes the credit enhancement will be adequate to support mortgagor defaults, as well as bankruptcy, fraud, and special hazard losses in limited amounts. In addition, the ratings also reflect the quality of the underlying mortgage collateral, strength of the legal and financial structures, and the servicing capabilities of Cendant Mortgage Corporation, which is rated RPS1 by Fitch. The certificates represent ownership in a trust fund, which consists primarily of 242 one- to four-family conventional, 30-year fixed-rate mortgage loans secured by first liens on residential mortgage properties. As of the cut-off date, September 1, 2004, the mortgage pool has: * an aggregate principal balance of approximately $120,288,348; * a weighted average original loan-to-value ratio -- OLTV -- of 72.52%; * a weighted average coupon -- WAC -- of 6.20%; * a weighted average remaining term -- WAM -- of 359 months; and * an average balance of $497,059. The loans are primarily located in: * California (17.37%); * New York (14.15%); and * New Jersey (13.89%). None of the mortgage loans are 'high cost' loans as defined under any local, state, or federal laws. For additional information on Fitch's rating criteria regarding predatory lending legislation, see the press release 'Fitch Revises Rating Criteria in Wake of Predatory Lending Legislation,' dated May 1, 2003, available on the Fitch Ratings web site at http://www.fitchratings.com. All of the mortgage loans were either originated or acquired in accordance with the underwriting guidelines established by Cendant Mortgage Corporation. Any mortgage loan with an OLTV in excess of 80% is required to have a primary mortgage insurance policy. Approximately 1.86% of the mortgage loans are pledged asset loans. These loans, also referred to as 'Additional Collateral Loans,' are secured by a security interest, normally in securities owned by the borrower, which generally does not exceed 30% of the loan amount. Ambac Assurance Corporation provides a limited purpose surety bond, which guarantees that the trust receives certain shortfalls and proceeds realized from the liquidation of the additional collateral, up to 30% of the original principal amount of that additional collateral loan. Citibank N.A. will serve as trustee. For federal income tax purposes, an election will be made to treat the trust fund as two real estate mortgage investment conduits. CHALK MEDIA: Grants Insiders Options to Purchase 200,000 Shares --------------------------------------------------------------- Chalk Media Corp. granted options to purchase 200,000 shares pursuant to its Stock Option Plan. David Lewis, one of Chalk Media's directors was granted an additional 100,000 options. Calvin Mah, the Company's new CFO was granted 100,000 options. The options have an exercise price of $0.32 and are exercisable for five years. The grant of options is subject to the approval of the TSX Venture Exchange. About Chalk Media Corp. Chalk Media produces network television & in-flight entertainment programming and online training & marketing solutions. The company's award-winning television shows, ranging from Dave Chalk Computer Show to Dave Chalk Connected, have served to build a highly recognizable brand name. Leveraging this brand has allowed the company to build relationships with a blue-chip customer base and provide the customers with custom online training and marketing solutions. Chalk Media's custom solutions help industry-leading companies communicate more effectively with their customers, distribution partners and employees. As of June 30, 2004, Chalk Media's balance sheet showed a CDN$540,498 stockholders' deficit. COEUR D'ALENE: S&P Holds B- Corp. Credit & Sr. Unsec. Debt Ratings ------------------------------------------------------------------ Standard & Poor's Ratings Services affirmed its 'B-' corporate credit and senior unsecured debt ratings on Coeur D'Alene Mines Corporation and removed the ratings from CreditWatch, where they were placed on June 1, 2004, with positive implications. The outlook is stable. Coeur D'Alene, an Idaho-based silver and gold mining company, currently has about $180 million in debt. "The affirmation follows the company's announcement that it was unsuccessful in its proposed hostile takeover of Vancouver-based Wheaton River Minerals Ltd.," said Standard & Poor's credit analyst Paul Vastola. Coeur was unable to garner the required level of shareholder approval from Wheaton's shareholders. The proposed deal, had it been successful, was expected to result in a meaningful improvement in Coeur's business and financial profiles. The ratings on Coeur reflect its high business risk as a capital- intensive commodity-based company with a modest scope of operations, relatively high cost position, limited reserve base (averaging about 3.5 years), and a very weak financial performance. Ratings also incorporate the company's aggressive expansion plans and uncertainties regarding its ability to successfully develop lower-cost mining operations. Challenges include: * volatile prices, * governmental regulation, * environmental issues, * permitting, and * adverse geological conditions. The majority (currently about 66%) of Coeur's production is generated at its high-cost Rochester, Nevada and Galena, Idaho mines. Coeur has undertaken several initiatives to improve its cost profile and bolster its reserve base. New lower-cost production from its Cerro Bayo mine in Chile and its Martha mine in Argentina, together with cost reductions at its Rochester and Galena mines, should help lower Coeur's costs further by the end of 2004. However, reserves still are short lived at approximately 3.5 years. To address its short-lived reserve life, the company recently completed the final feasibility study for its Kensington gold project in Alaska but still needs to obtain additional permits to proceed with its development. Coeur also expects to soon complete its final feasibility study for its San Bartolome silver project in Bolivia. Currently, the company anticipates that it will proceed with both projects, likely before year-end 2004. CONGOLEUM CORP: Retains Pillsbury as Substitute Bankruptcy Counsel ------------------------------------------------------------------ Congoleum Corporation (AMEX:CGM) has sought Bankruptcy Court authority to retain the law firms Pillsbury Winthrop LLP of New York City and Okin, Hollander & DeLuca L.L.P. of Fort Lee, New Jersey as substitute counsel in its Chapter 11 proceedings. In light of ongoing unresolved disputed litigation concerning the retention of Saul Ewing LLP as counsel, the Bankruptcy Court will be asked to allow Saul Ewing to withdraw after a transition period. Roger S. Marcus, Chairman of the Board, commented, "We are very pleased that a firm such as Pillsbury Winthrop has agreed to represent us. We believe that this change in counsel at this time will help us stay on track towards a successful conclusion of our reorganization. Hiring substitute bankruptcy counsel will avoid the potential ongoing distraction of litigating the Saul Ewing retention further and assure us of continuity of counsel as we seek confirmation of our plan. Saul Ewing has our utmost gratitude and respect for the fine job they have done bringing us to this point." Congoleum also indicated that it will seek additional time from the Bankruptcy Court at the scheduled October 5, 2004 court date to continue its efforts to address certain concerns raised about its pending reorganization plan. Mr. Marcus commented further, "We believe that we are closer to resolving a number of issues, and that it is worth taking the time now to make our plan as solid as possible and minimize objections to the extent we can. We are optimistic that we will be in a position to proceed with the plan confirmation process in the near future, and anticipate this step will make that process go more smoothly." Headquartered in Mercerville, New Jersey, Congoleum Corporation -- http://www.congoluem.com/-- manufactures and sells resilient sheet and tile floor covering products with a wide variety of product features, designs and colors. The Company filed for chapter 11 protection on December 31, 2003 (Bankr. N.J. Case No. 03-51524). Domenic Pacitti, Esq., at Saul Ewing, LLP, represented the Debtors when they filed their "prepackaged" chapter 11 case. When the Company filed for protection from its creditors, it listed $187,126,000 in total assets and $205,940,000 in total debts. COVANTA ENERGY: Wants Exclusive Periods Extended Until April 18 --------------------------------------------------------------- Pursuant to Section 1121(d) of the Bankruptcy Code, four remaining Debtors -- Covanta Lake II, Inc., Covanta Warren Energy Resource Co., LP, Covanta Warren Holdings I, Inc., and Covanta Warren Holdings II, Inc. -- ask the United States Bankruptcy Court for the Southern District of New York to extend their exclusive period to file a plan through and including February 15, 2005, and their exclusive period to solicit acceptances of that plan through and including April 18, 2005. The Four Remaining Debtors are not subject to the confirmed Heber Plan, the Second Plans or the Covanta Tampa Plan. Vincent E. Lazar, Esq., at Jenner & Block, in Chicago, Illinois, relates that Covanta Lake II filed its Plan of Reorganization and Disclosure Statement on September 10, 2004. The Disclosure Statement Hearing is scheduled on October 20, 2004. Covanta Lake II needs more time to gain approval of its Disclosure Statement and to proceed with the solicitation and confirmation its Plan. The Covanta Warren Debtors are still in the process of formulating a plan and undertaking other matters necessary to confirm and consummate a plan. Specifically, the Covanta Warren Debtors continue to evaluate a restructuring of the contractual arrangements governing Covanta Warren Energy's operation of the waste-to-energy facility located at Oxford Township in Warren County, New Jersey. To maximize recoveries for their creditors, the Covanta Warren Debtors are considering three options for a plan: * litigating with counterparties to certain agreements with Covanta Warren Energy; * assuming or rejecting one or more executory contracts related to the Warren Facility; or * liquidating Covanta Warren Energy. Mr. Lazar assures the Court that the Four Remaining Debtors are committed to emerge from Chapter 11 bankruptcy as soon as possible. Numerous legal and financial issues have been raised in the restructuring process of the Debtors' cases, Mr. Lazar notes. As evidenced by the confirmation and consummation of the Heber Plan, the Second Plans, and the Covanta Tampa Plan, and the filing of the Covanta Lake II Plan, the Debtors have made substantial progress in addressing those issues. Additional time is now required, so that the Four Remaining Debtors can continue their work toward achieving the most favorable resolution of their cases. * * * The Court will convene a hearing on October 20, 2004, to consider the request. In the interim, Judge Blackshear extends the Four Remaining Debtors' Exclusive Plan Filing Period until October 21, 2004. Headquartered in Fairfield, New Jersey, Covanta Energy Corporation -- http://www.covantaenergy.com/-- is a publicly traded holding company whose subsidiaries develop, own or operate power generation facilities and water and wastewater facilities in the United States and abroad. The Company filed for Chapter 11 protection on April 1, 2002 (Bankr. S.D.N.Y. Case No. 02-40826). Deborah M. Buell, Esq., and James L. Bromley, Esq., at Cleary, Gottlieb, Steen & Hamilton represent the Debtors in their restructuring efforts. When the Debtors filed for protection from its creditors, they listed $3,280,378,000 in assets and $3,031,462,000 in liabilities. (Covanta Bankruptcy News, Issue No. 66; Bankruptcy Creditors' Service, Inc., 215/945-7000) EDISON MISSION: Fitch Assigns Single-B Ratings on Senior Debts -------------------------------------------------------------- Fitch Ratings has initiated credit ratings on the debt of Mission Energy Holding Company, Edison Mission Energy and Midwest Generation, LLC: * Mission Energy -- Senior secured debt 'B-'; * Edison Mission -- Senior unsecured 'B'; * Midwest Generation -- First priority lien term loan and revolver 'B+'; and * Midwest Generation -- Second priority notes 'B'. The Rating Outlook is Stable for the Mission Energy, Edison Mission and Midwest Generation securities. The ratings were initiated by Fitch as a service to users of its ratings and are based on public information. The ratings and Stable Rating Outlook reflect Mission Energy group's high debt leverage, weak coverage ratios and merchant generation exposure. The ratings also assume debt reduction, albeit from very high levels at June 30, 2004, with the expected proceeds from Mission Energy's recently announced agreement to sell its ownership interest in Contact Energy and its other international assets for approximately $3 billion. The transaction is expected to close by the end of this year and Mission Energy expects to book an approximate $550 million gain upon the transaction's close. Fitch anticipates that debt reduction associated with the transaction will approximate $5 billion, including unconsolidated, off-balance sheet obligations. The sale agreement is part of a larger restructuring plan initiated in the fourth quarter of 2003 to address then looming debt maturities that threatened to render Mission Energy and its subsidiaries insolvent. The ratings do not anticipate support from parent company Edison International. Partial implementation of the restructuring plan, which is likely to be completed in early 2005 with the closing of the proposed international asset sale and use of proceeds to repay debt, will avert the threat of insolvency for the near-to-intermediate term. This, combined with firmer wholesale energy prices, is expected to result in a more stable outlook for the companies. Nonetheless, Fitch expects Mission Energy and is subsidiaries to emerge from the restructuring with high debt relative to cash flows, limited financial flexibility and ongoing exposure to volatile wholesale energy markets. Lower wholesale power prices are a primary source of concern for investors, but lower fixed costs due to the ongoing restructuring and the fuel cost advantage provided by Mission Energy's coal-fired generation in Illinois and Pennsylvania is a partial mitigant. Midwest Generation, an indirect operating subsidiary of Energy Mission, operates approximately 5,600 megawatts of primarily coal- fired generating capacity located in Illinois. The output from the plant is sold under contracts with Exelon Generation that began rolling off in 2003 and will terminate in 2005, as well as the spot market and under short-term contracts. In addition to the international assets earmarked for divestiture, Energy Mission currently owns the three-unit 1,884-megawatt Homer City coal-fired facility in Pennsylvania and several cogeneration projects operating in California. Following the sale of its international interests, Energy Mission's will operate exclusively in the U.S. Mission Energy Holding Co. was formed in July 2001 to hold the common stock of Energy Mission. Mission Energy, Energy Mission and Midwest Generation are subsidiaries of Edison International senior unsecured debt rated 'BB' by Fitch. ELIZABETH ARDEN: Moody's Reviews Ratings for Possible Upgrade ------------------------------------------------------------- Moody's Investors Service has taken several actions regarding its ratings on Elizabeth Arden, Inc.: (1) placed all ongoing long-term ratings on review for possible upgrade; (2) upgraded the speculative grade liquidity rating to SGL-2 from SGL-3; (3) raised the senior unsecured issuer rating to B2 from B3; (4) upgraded, and subsequently will withdrawal, the senior unsecured notes rating to B2 from B3; (5) lowered, and subsequently withdrew, the senior secured notes rating to B2 from B1. The rating changes reflect the resolution of specific rating review actions related to the company's debt refinancing earlier this year, which simplified its capital structure. The review for possible upgrade is based on the improvement in Elizabeth Arden's cash flow and liquidity profile, which has resulted from continued prudent operational and financial management, in combination with lower interest expense, and which is likely to support strong debt protection measures going forward. These ratings were placed on review for possible upgrade: * Senior implied rating, B1; * $225 million 7.75% senior subordinated notes due 2014, B3. This rating was upgraded and placed on review for possible upgrade: * Senior unsecured issuer rating, to B2 from B3. This rating was upgraded and will be withdrawn: * 10.375% senior unsecured note due 2007, to B2 from B3. This rating were downgraded and will be withdrawn: * 11.75% senior secured notes due 2011, to B2 from B1. This rating was upgraded: * Speculative grade liquidity rating, to SGL-2 from SGL-3. Prior to being withdrawn, ratings on the senior secured and senior unsecured notes converged at the B2 rating level to reflect the repayment of senior secured debt and the release of collateral by the senior secured noteholders. Earlier this year, Elizabeth Arden used net proceeds from its $225 million subordinated notes issuance to repay $95 million of its 11.75% senior secured notes and the remaining $104 million of its 10.375% senior notes. Moody's has withdrawn coverage on the 11.75% senior secured notes due to the modest amount of notes outstanding (around $9 million). The upgrade of Elizabeth Arden's SGL rating to SGL-2 and the review for possible upgrade of the company's ongoing long term ratings are prompted by the company's improved cash flow profile and debt protection measures. Elizabeth Arden's refinancing at much lower interest rates follows its significant debt reduction during its prior fiscal year end (January 2004) from internal cash generation and equity issuance proceeds. As such, Elizabeth Arden is expected to have materially reduced annual interest expense going forward. Further supporting its improved cash flow profile, Elizabeth Arden: (i) achieved strong sales gains through June 2004 (on the continued strength of its mass retail business and recovery in the travel-related channels); (ii) has aggressively managed its working capital; and (iii) has maintained profit levels despite significant investments in new product launches and facility consolidation efforts. The cash benefits from these latter initiatives should begin to be realized over the coming holiday period. For the new fiscal year ended June 2004, Moody's estimates Elizabeth Arden's debt-to- EBITDA at around 3.3x, EBITDA less capex to interest at 2.4x, and funds from operations less capex to debt at 12%, all of which are strong for the B1 category and are likely to improve into fiscal 2005. The review will focus on: -- the company's longer-term financial and operating strategies now that the company has completed its integration of the acquired Elizabeth Arden business, -- balance sheet clean-up, and -- facility consolidation efforts over the past few years. In particular, Moody's will evaluate Elizabeth Arden's ability to sustain profit and cash flow levels and build sufficient cushion in its financial profile for potential volatility due to event risks, cyclical downturns, or market-related challenges. Further, Moody's review will focus on Elizabeth Arden's growth initiatives, including its emphasis on developing new celebrity-linked brands (e.g., Brittany Spears' new line) and the pace and financing strategy for any new acquisitions or licensing arrangements. Reflecting the cash flow improvements, Elizabeth Arden's SGL-2 speculative grade liquidity rating now recognizes that strong positive annual cash flow, existing cash balances and a $200 million senior secured revolving credit facility provide good liquidity to fund the company's typical seasonal operating needs over the coming twelve-month period. Key restraints to the rating are Elizabeth Arden's heavy reliance on the revolver and its limited readily available sources of capital in the event of unexpected shocks to its business. The company's revolver contains limited financial covenants and provides the appropriate size, flexibility and borrowing base advance rates to meet Elizabeth Arden's highly seasonal working capital needs. This seasonality results in Elizabeth Arden's significant usage of the credit facility to fund operating losses and inventory build for the holiday period, prior to collection from customers upon sell-through. Given the material upfront promotion and advertising that support the company's brands and its sensitivity to economic conditions and uncertain consumer receptivity, unexpectedly weak sales over the holiday period could result in reduced earnings and cash flows at the same time that the collateral and borrowing base percentages are reducing. Although the company does have unpledged trademark assets their value is not consistently reappraised and could deteriorate substantially in a distress scenario. At June 2004, Elizabeth Arden's had revolver borrowings of around $66 million, cash balances of around $23.5 million, and availability under the revolver was approximately $56 million, all in line with typical seasonal patterns. Moody's expects positive free cash flow for the coming year (which could be supplemented by the sale of its Miami Lakes property in excess of its mortgage balance), and takes some comfort from Elizabeth Arden's historical success in managing cash flow during difficult operating environments (such as the post 9-11 period). Further, Moody's anticipates that Elizabeth Arden will exceed its fixed charge covenant requirement of 1.1x, even under reasonably stressed scenarios, and this covenant only applies if borrowing availability declines below $50 million. Continued support for the ratings derives from Elizabeth Arden's portfolio of owned and distributed brands and its historical focus on innovation and customer service, which provide the company with critical mass in a highly fragmented industry and strengthen its relationships with retailers. The ratings also benefit from Elizabeth Arden's geographic and customer diversity, with only one customer, Wal-Mart, representing over 10% of sales. In addition, the company's historical focus on managing classic brands somewhat reduces its exposure to the fashion and faddish characteristics of the fragrance industry. Management's attention to cost controls and asset efficiency also benefit the ratings, as evidenced by the consolidation of its U.S. distribution centers. The ratings are restrained by Elizabeth Arden's: -- high seasonality, -- economic and travel-related sensitivity, -- high competition and brand support needs, and -- reliance on a few key brands and spokespersons. Moderate business disruption risks are present in Elizabeth Arden's reliance going forward on one U.S. distribution center. Elizabeth Arden, Inc., headquartered in Miami Lakes, Florida, is a global prestige fragrance and beauty products company. The company sells its products and distributes other brands through prestige and mid-tier department stores, and through mass merchandisers. Elizabeth Arden's owned brand portfolio includes several Elizabeth Arden brands, and it has an exclusive license for the Elizabeth Taylor brands. Sales for the fiscal year ended June 2004 were approximately $832 million. ENRON CORP: Gets Court Nod to Assign 12 Agreements to Prisma ------------------------------------------------------------ Sylvia Mayer Baker, Esq., at Weil Gotshal & Manges, in New York, relates that pursuant to the terms of the confirmed Plan, Enron Corp. and its debtor-affiliates formed Prisma Energy International, Inc., to hold the majority of their international energy infrastructure businesses. On April 20, 2004, the Debtors obtained Court approval of a contribution and separation agreement governing the transfer of assets to Prisma. Both the Plan and the Separation Agreement provide that the Debtors will transfer the Prisma Assets to Prisma in exchange for Prisma Shares commensurate with the value of the asset contributed. In consultation with the Official Committee of Unsecured Creditors, the Debtors and Prisma worked together to lay the foundation for the transfer of the Debtors' interests in the international energy infrastructure businesses to Prisma. To obtain the requisite consents, waivers and acknowledgments required to transfer the Prisma Assets, the Debtors and Prisma also worked together and largely completed the process of contacting counterparties, partners, applicable regulatory and government agencies, and other parties-in-interest. After the confirmation of the Plan and approval of the Separation Agreement, Ms. Mayer tells the Court that the Debtors are now prepared to transfer the first group of the Prisma Assets to Prisma, effective on or about August 31, 2004 -- the Assignment Date. Ms. Mayer expects that the first group of the Prisma Assets will include: * Elektro Eletricidade e Servicos, SA; * Vengas, SA; * the Cuiaba Project, which consists of EPE-Empresa Produtora de Energia Ltda., Gasocidente do Mato Grosso Ltda., Gasoriente Boliviano Ltda., and Transborder Gas Services Ltd.; * Transredes-Transporte de Hidrocarburos, SA; * Transportadora Brasileira Gasoduto Bolivia-Brasil SA; * Gas Transboliviano SA; * Accroven, SRL; * Puerto Quetzal Power LLC; * Trakya Elektrik Uretim ve Ticaret AS; * SK-Enron Co., Ltd.; and * Promigas SA ESP. After the Assignment Date, the Debtors anticipate transferring additional assets to Prisma. Executory Contracts The Debtors are parties to certain contracts and agreements, including certain shareholder or partnership agreements, articles or bylaws that function as shareholder type agreements, agreements related to the formation of certain of the First Prisma Assets, and certain credit and debt restructuring agreements related to receivables included in the First Prisma Assets. These Agreements, Ms. Mayer notes, generally govern the Debtors' rights in connection with their equity or debt interests in the First Prisma Assets. To effectively transfer the value and rights associated with the Debtors' equity interests in the First Prisma Assets, the Debtors determined that they must transfer the Agreements relating to those equity interests and debt to Prisma as well. Accordingly, the Debtors seek the Court's authority to assume and assign seven executory agreements to Prisma, nunc pro tunc to August 31, 2004: (1) Stockholders Agreement between Enron Global Power & Pipelines LLC and Centrans Energy Services, Inc., dated January 9, 1996; (2) Letter Agreement Providing Right of First Refusal by CDC Holdings (Barbados) Ltd. and CDC Group plc to Enron Caribbean Basin, dated September 28, 2000; (3) Credit Agreement, dated May 28, 1999; (4) Waiver of Rights and Deferral of Interest Payment Agreement, dated December 4, 2001; (5) Assignment and Assumption Agreement, dated October 15, 2000; (6) Waiver of Rights and Deferral of Interest Payment Agreement, dated December 4, 2001; and (7) Amended and Restated Terraco SPV Loan Agreement, dated September 17, 1999. Ms. Mayer assures the Court that no existing defaults under any of the Assumed and Assigned Agreements necessitate cure. The Assumed and Assigned Agreements are primarily agreements regarding shareholder and debt holder rights and contain no operating performance obligations. Non- Executory Contracts The Debtors also sought and obtained Court's permission to assign five non-executory agreements to Prisma, nunc pro tunc to August 31, 2004: (1) Master Voting Agreement by and among Enron do Brazil Holdings Ltd., Enron America do Sul Ltda., Enron (Bolivia) CV, Enron South Americal LLC, Enron International Bolivia Holdings Ltd., Enron Brazil Power Holdings I Ltd., Enron Transportadora Holdings Ltd., and Shell Cuiaba Holdings Ltd., Shell Gas (Latin America) BV, Shell Gas Transportadora do Brasil Ltda., and GasOriente Boliviano Ltda., GasMat Holdings Ltd., Gasocidente do Mato Grosso Ltda., EPE Holdings Ltd. EPE-Empresa Produtora de Energia Ltda., Transborder Gas Services Ltd. and TR Holdings Ltda., dated September 26, 2003; (2) EPE - Empresa Produtora de Energia Ltda. Contrato Social, dated August 2003; (3) Gasocidente do Mato Grosso Ltda. Contrato Social, dated August 2003; (4) Enron International Americas LLC Limited Liability Company Agreement, dated January 1, 2004; and (5) Enron International Americas LLC Amended and Restated Limited Liability Agreement, dated April 16, 2004. The Five Agreements are primarily associated with the Debtors' equity interests and debt in the First Prisma Assets. Ms. Mayer points out that the intrinsic value of the shareholder and debt holder rights afforded under the Five Agreements are included in the value of the equity interests and debt being transferred to Prisma, therefore, the assignment of the Agreements does not constitute a transfer of additional value to Prisma. Consequently, the Debtors will not receive additional consideration for the assignment of the Agreements. 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. 126; Bankruptcy Creditors' Service, Inc., 15/945-7000) EXIDE TECH: Amends Severance Portion of Income Protection Plan -------------------------------------------------------------- Craig H. Muhlhauser, President and Chief Executive Officer of Exide Technologies, discloses in a regulatory filing with the Securities and Exchange Commission that on September 14, 2004, the Company implemented certain amendments to its Income Protection Plan. The IPP is intended to provide participants with severance benefits in the event of termination of employment without cause or resignation under certain adverse circumstances. Under the material terms of the new amendments, executive officers will receive 12 months of severance regardless of whether the executive officer obtains new employment within the 12-month period. The IPP previously provided 24 months of severance which would terminate or be reduced to the extent the executive officer obtained compensation from new employment during that 24-month period. The reduction to 12 months of unmitigated severance will be transitioned over the next 24 months. The amended Income Protection Plan is applicable to these executive officers: -- Janice Jones, Executive Vice President, Global Human Resources; -- Ian Harvie, Interim Chief Financial Officer and Vice President, Corporate Controller; -- Stuart Kupinsky, Executive Vice President, Secretary and General Counsel; and -- Mitchell Bregman, President, Industrial Energy Americas. Headquartered in Princeton, New Jersey, Exide Technologies is the world-wide leading manufacturer and distributor of lead acid batteries and other related electrical energy storage products. The Company filed for chapter 11 protection on April 14, 2002 (Bankr. Del. Case No. 02-11125). Matthew N. Kleiman, Esq., and Kirk A. Kennedy, Esq., at Kirkland & Ellis, represent the Debtors in their restructuring efforts. On April 14, 2002, the Debtors listed $2,073,238,000 in assets and $2,524,448,000 in debts. (Exide Bankruptcy News, Issue No. 53; Bankruptcy Creditors' Service, Inc., 215/945-7000) FORT WORTH: Moody's Ratings Slide Three Notches to B3 ----------------------------------------------------- Moody's Investors Service downgraded Fort Worth Osteopathic Hospital's dba Osteopathic Medical Center of Texas underlying ratings to B3 and Baa3 and kept the ratings on Watchlist for further possible downgrade. These actions affect approximately $82 million of outstanding debt of which $7 million is uninsured. The outstanding debt includes the Series 1993, Series 1996 and Series 1997 bonds issued through the Tarrant County Health Facilities Development Corporation. With the exception of $7 million, these bonds are insured by MBIA and, therefore, carry long-term Aaa ratings based on the insurers claims paying ability. The Aaa rating is not under review. Moody's has been informed that Fort Worth Osteopathic Hospital will be filing a material event notice after missing two scheduled sinking bond fund payments in August and September 2004 due to lack of sufficient operating funds. Although the 2003 audited financial statements are not yet available, we have been informed by management that the organization has depleted its unrestricted cash reserves. The organization currently maintains a debt service reserve fund, which is funded at maximum annual debt service ($6.7 million). The next scheduled bond payment is October 15, 2004 and it is anticipated that payment will be drawn from the DSRF. In addition, Fort Worth Osteopathic Hospital has engaged a consulting firm to explore potential partnership options. Given the distressed financial situation of the hospital and resulting lack of disclosure of public information, Moody's is unable to comment on the hospital's current financial performance or position at this time; however, the hospital's financial situation will be a primary focus of our on-going review. Over the next ninety days our analysis will focus on the following areas: (1) Fort Worth's current financial position; (2) the likelihood of an affiliation or merger with another health system; and (3) the availability of assets to meet debt payments. FOXMEYER CORP: Bart Brown Requests $807 Per Hour for Work --------------------------------------------------------- Bart A. Brown, Jr., the chapter 7 trustee overseeing the liquidation of FoxMeyer Corporation and its debtor-affiliates' estates, tabulates that he's invested 8,106 hours over the past seven years in FoxMeyer's cases and will spend another 500 hours wrapping matters up. Mr. Brown filed his Final Fee Application last month asking the Honorable M. Bruce McCullough to approve payment of a final $6,940,000 fee and reimbursement of $250,782 in expenses. Outcome Exceeds Expectations The FoxMeyer story is remarkable. FoxMeyer was the fourth-largest pharmaceutical distributor in the United States in 1996, with $5 billion in annual sales. When FoxMeyer's chapter 11 cases converted to chapter 7 proceedings, the estate had $16 million of cash on hand and creditors had filed claims totaling more than $6 billion. Many creditors sold their claims for less than 25 cents- on-the-dollar in 1997. More than seven years later, administrative, priority and secured claims are paid in full and unsecured creditors are slated to receive a total 64.4% distribution to on account of their allowed claims. Based on the statutory cap for chapter 7 trustee compensation in 11 U.S.C. Sec. 326(a), Mr. Brown is asking for roughly two-thirds of what he could request. Seven years of litigation against Citibank, Andersen Consulting, SAP, The Buschman Companies, Avatex Corporation, Deloitte & Touche, McKesson Corp., CD Smith, General Electric Capital Corp., Abbey J. Butler, Melvin J, Estrin, and others, resulted in Mr. Brown recovering approximately $348 million for the benefit of FoxMeyer's creditors. "One of the more impressive things to me," John Barber, Vice President of Financial Revenue Cycle for GlaxoSmithkline PLC (holding a $19.4 million claim against FoxMeyer's estate), says, was the efficiency and speed with which Mr. Brown, Meade Monger (the claims agent) and lawyers at Kasowitz, Benson, Torres & Friedman LLP, "were able to work together to identify the Debtors' causes of action, prosecute causes of action, litigate objections to claims, and control both litigation expenses and overall costs of administering the Debtors' estates." Mr. Barber says that he didn't see that kind of speed or efficiency from the Debtors' six law firms, two accounting firms and two consulting firms hired before the chapter 7 conversion. He did see that "the costs of all the professionals were bleeding the estate dry." Mr. Brown and his professionals "achieved a result that has surpassed Farallon's expectations," William F. Mellin at Farallon Capital Management, LLC, adds. Funds managed by Farallon hold more than $100 million in FoxMeyer claims. "The success here is incredible," Matthew S. Barrett, Managing Director and Head of Analysis of the Distressed Investments Group at Oaktree Capital Management LLC. Oaktree holds unsecured claims totaling nearly $93 million in FoxMeyer's cases. "[T]here is no question in my mind," D. Jan Baker, Esq., a partner in the Corporate Restructuring Group of Skadden, Arps, Slate, Meagher & Flom LLP, says, "that Mr. Brown's final fee application [is] reasonable and warranted." Prior to joining Skadden Arps, Mr. Baker was a partner at the firm of Weil, Gotshal & Manges LLP. Weil Gotshal served as bankruptcy counsel for FoxMeyer. Mr. Baker notes that FoxMeyer filed for chapter 11 protection with the expectation of reorganizing and emerging. Unfortunately, that proved to be impossible and the company's assets were sold to McKesson Corp. in a Sec. 363 sale. "I am unaware of anyone at the company or outside the company," Mr. Baker says, "who believed that the estates' causes of action would yield enough funds to make a significant distribution to unsecured creditors, particularly in light of the very significant reclamation claims that had been asserted. * * * In all my years of practice, I do not recall ever seeing a chapter 7 case the size of the FoxMeyer cases that has yielded such a significant distribution to unsecured creditors. In my opinion, the recoveries obtained in [FoxMeyer's cases] are outstanding and far exceed my own expectation at the time the cases were converted as to the ultimate distribution to unsecured creditors." Comparable Awards Providing Judge McCullough with information about other big chapter 7 liquidations generating big fees, Mr. Brown relates that: * Tom H. Connolly, Esq., received $1,661 for his work in In re Guyana Development Corp., 201 B.R. 462 (Bankr. S.D. Tex. 1996); * In In re MiniScribe Corp., 241 B.R. 729 (Bankr. D. Colo. 1999), confirmed after remand, 257 B.R. 56 (Bank. D. Colo. 2000), the Court awarded the Trustee the equivalent of $1,712 per hour; * Richard C. Breeden collected a $13.85 million fee as trustee for The Bennett Funding Group (Bankr. N.D.N.Y. Case No. 96-61376, Memorandum-Decision dated Feb. 20, 2003); * James P. Hassett, as Trustee for O.P.M. Leasing Services, which filed for chapter 11 protection in 1981, received about $2.5 million (about $5 million in 2002 dollars); and * Mr. Hassett received an $8 million fee -- the full 3% of funds disbursed to creditors permissible under 11 U.S.C. Sec. 326(a) -- for services between Oct. 1989 and June 1996 as trustee for Continental Information Systems Corporation (Bankr. S.D.N.Y. Case Nos. 89-B-10073 through 89-B-10084 (PBA)). Mr. Brown can be reached at: Bart A. Brown, Jr. 8655 East Via De Ventura, Suite G244 Scottsdale, AZ 85258 Telephone (602) 852-9040 Fax (602) 852-9076 FoxMeyer Corporation, FoxMeyer Drug Company, and their subsidiaries, filed for chapter 11 protection on August 27, 1996 (Bankr. D. Del. Case Nos. 96-1329 through 96-1334). The estates were substantively consolidated and, on Nov. 8, 1996, substantially all of the pharmaceutical distributor's business operations were sold to McKesson Corporation. On March 18, 1997, the Debtors' chapter 11 cases were converted to chapter 7 liquidation proceedings and Mr. Brown was elected to serve as the Chapter 7 Trustee. FULCRUM DIRECT: Asks Court to Dismiss Chapter 11 Cases ------------------------------------------------------ Catalog clothing retailer Fulcrum Direct, Inc., and its debtor- affiliates ask the U.S. Bankruptcy Court for the District of Delaware to enter an order dismissing their chapter 11 cases pursuant to 11 U.S.C. Sec. 1112(b). Assets Sold Years Ago Through multiple sale transactions under Sec. 363 of the Bankruptcy Code, Fulcrum sold its portfolio of trademarked After the Stork, Storybook Heirlooms, zoe, Little Feet, SunSkins and Discount Direct brand names used on apparel and accessories worn by children, teens and young women. Delia's Inc. purchased most of Fulcrum's assets in late-1998 for $4.75 million in cash and the assumption of related leases as well as up to about $1.2 million in liabilities. Those liabilities consisted primarily of customer refunds and returns directly related to Fulcrum's Storybook Heirlooms trademark. D&O Litigation In February 2000, Fulcrum's Official Committee of Unsecured Creditors, represented by lawyers at Lowenstein Sandler PC, filed a class proof of claim on behalf of similarly situated unsecured creditors who extended credit to the Debtors on or after Nov. 1, 1997 -- the date on which the Class Claimants assert that the Debtors knew or should have known they were insolvent. The Class Claim was based on damages for the Debtors' officers and directors' alleged tortuous conduct, including negligent misrepresentations for failure to disclose the Debtors' insolvency. On Dec. 26, 2000, Judge Walrath approved a settlement among IBJ Whitehall Business Credit Corporation (the Debtors' lender), the Debtors and the Committee. That settlement pact was a condition precedent to another settlement agreement among IBJ Whitehall, the former officers and directors named as defendants in a New York action, and Fulcrum's D&O Insurer. Because the litigation has been resolved, Joel A. Waite, Esq., at Young Conaway Stargatt & Taylor, LLP, Fulcrum's counsel, tells the Court, all that remains for the Committee, as the Class Representative, to do is to distribute the settlement proceeds to the Class Claimants. That, Mr. Waite indicates, can be done outside of the bankruptcy process. Accordingly, Fulcrum asks Judge Walrath to dismiss their bankruptcy cases pursuant to Bankruptcy Code Sec. 1112(b) without prejudice to the to the Committee's continued existence to distribute the Class Claimants' portion of the D&O Settlement Proceeds to the Class Claimants. Fulcrum Direct, Inc., and its Fulcrum West, LLC and Equipment Bond Purchaser, Inc., debtor-affiliates filed for chapter 11 protection on July 30, 1998 (Bankr. D. Del. Case No. 98-1767 (MFW)). GMAC COMMERCIAL: Moody's Junks Three Certificate Classes -------------------------------------------------------- Moody's Investors Service downgraded six classes and confirmed or affirmed twelve classes of GMAC Commercial Mortgage Securities, Inc. Series 2000-C3 Mortgage Pass-Through Certificates are: -- Class A-1, $94,088,122, Fixed, affirmed at Aaa -- Class A-2, $851,355,000, Fixed, affirmed at Aaa -- Class X, Notional, affirmed at Aaa -- Class B, $53,964,000, Fixed, affirmed at Aa2 -- Class C, $57,138,000, Fixed, affirmed at A2 -- Class D, $12,125,802, Fixed, affirmed at A3 -- Class E, $35,054,000, WAC, affirmed at Baa2 -- Class F, $19,120,000, WAC, affirmed at Baa3 -- Class H, $9,878,000, WAC, affirmed at Ba1 -- Class J, $25,494,000, WAC, confirmed at Ba2 -- Class K, $4,461,000, WAC, confirmed at Ba3 -- Class L, $9,560,000, WAC, confirmed at B1 -- Class M, $15,933,000, WAC, downgraded to Caa1 from B2 -- Class N, $3,186,000, WAC, downgraded to Caa2 from B3 -- Class O, $3,186,000, WAC, downgraded to Caa3 from Caa2 -- Class S-MAC-1, $12,998,601, Fixed, downgraded to Baa3 from A3 -- Class S-MAC-2, $9,147,163, Fixed, downgraded to Ba2 from Baa2 -- Class S-MAC-3, $5,521,998, Fixed, downgraded to Ba3 from Baa3 As of the September 15, 2004 distribution date, the transaction's aggregate balance has decreased by approximately 4.6% to $1.26 billion from $1.32 billion at securitization. The Certificates are collateralized by 171 mortgage loans secured by commercial and multifamily properties. The pool includes three shadow rated loans representing 22.2% of the pool and a conduit component that represents 77.8% of the pool. The conduit loans range in size from less than 1.0% of the pool to 4.0% of the pool, with the top 10 conduit loans representing 28.3% of the pool. Five loans representing 1.9% of the pool have defeased and are secured by U.S. Government securities. Three loans have been liquidated from the pool, resulting in aggregate realized losses of approximately $3.9 million. Six loans representing 1.2% of the pool are in special servicing. Moody's has estimated aggregate losses of approximately $2.0 million for all of the specially serviced loans. On September 8, 2004 Moody's placed Classes J, K, L, M, N and O on review for possible downgrade due to concerns regarding overall pool performance. Classes S-MAC1, S-MAC2 and S-MAC3 were also placed on review due to concerns about the performance of the MacArthur Center Loan, the second largest loan in the pool. Moody's has concluded its review of this transaction and is downgrading the pooled classes due to realized and anticipated losses from the specially serviced loans, a decline in the performance of the conduit component and LTV dispersion. Moody's was provided with full-year 2003 operating results for approximately 93.1% of the performing loans. Moody's loan to value ratio ("LTV") for the conduit component is 88.0%, compared to 82.6% at securitization. Based on Moody's analysis, 11.3% of the conduit pool has a LTV greater than 100.0%, compared to 0.0% at securitization. The downgrade of Classes S-MAC-1, S-MAC-2 and S-MAC-3 is due to a decline in the property's operating performance, as discussed below. The largest shadow rated loan is the Arizona Mills Loan ($141.3 million - 11.7%), which is secured by a 1.2 million square foot regional mall located in Tempe, Arizona. The property has experienced a small decline in overall occupancy, from 97.0% at securitization to 94.2% currently, but this decline has been offset by increased revenue. Moody's current net cash flow is $21.6 million, compared to $19.0 million at securitization. Moody's current shadow rating is A3, compared to Baa2 at securitization. The second shadow rated loan is the MacArthur Center Loan, which consists of a $97.2 million senior loan representing 8.0% of the pool and a $42.3 million junior loan, which supports Classes S-MAC-1, S-MAC-2, S-MAC-3 and S-MAC-4. The security for the loan is a leasehold mortgage on a 943,000 square foot regional mall located in downtown Norfolk, Virginia. The center, which was developed by the Taubman Group and opened in 1999, is anchored by Dillard's and Nordstrom. The center's financial performance has been negatively impacted by a decrease in revenue as well as increased operating expenses. Although occupancy has remained relatively stable since securitization, several tenants have renegotiated rent payments or are paying percentage rent in lieu of base rent, it is expected that these concessions will lessen as the center becomes more established. In-line sales for 2003 were $365 per square foot, an increase of approximately 11.0% since securitization. The property is 88.1% occupied, compared to 89.5% at securitization. Moody's adjusted net cash flow is $14.1 million, compared to $16.7 million at securitization. Moody's current shadow rating of the senior loan is A3, compared to Aa3 at securitization. The third shadow rated loan is the AmeriSuites Loan ($30.0 million - 2.5%), which is secured by a portfolio of seven limited service and one extended stay hotels. The hotels are located in eight states and total 965 guestrooms. The portfolio's performance has been stable since securitization despite a decline in RevPAR. The portfolio's weighted average RevPAR for 2003 was $57.96, compared to $61.05 at securitization. Moody's current shadow rating is Baa2, the same as at securitization. The top three conduit loans represent 8.8% of the outstanding pool balance. The largest conduit loan is the 199 Broadway Building Loan ($48.4 million - 4.0%), which is secured by a 636,000 square foot Class A office building located in downtown Denver, Colorado. Although the property's occupancy has remained stable since securitization, performance has been negatively impacted by a significant increase in operating expenses. The property is 93.4% occupied, compared to 96.0% at securitization. Moody's LTV is 85.8%, compared to 75.5% at securitization. The second largest conduit loan is the St. Croix Apartments Loan ($29.4 million - 2.4%), which is secured by a 360-unit apartment complex located in Naples, Florida. Performance has been negatively impacted by decreased revenue and increased operating expenses. The property is 90.0% occupied, compared to 95.8% at securitization. Moody's LTV is 87.2%, compared to 85.4% at securitization. The third largest conduit loan is the 201 East 14th - Coral Tower Loan ($28.2 million - 2.3%), which is secured by a 91-unit apartment building located in New York City. The property has maintained 100.0% occupancy since securitization. New York University has master-leased the apartment units and basement space under a 10-year lease that expires in 2010. The ground floor retail is leased to drug/convenience store under a 15-year lease that expires in 2015. Moody's LTV is 63.1%, compared to 70.3% at securitization. The pool's collateral is a mix of: * retail (41.8%), * multifamily (28.5%), * office (16.1%), * hotel (7.5%), * industrial and self storage (3.7%), * U.S. Government securities (1.6%), and * other (0.8%). The collateral properties are located in 32 states. The highest state concentrations are: * Arizona (13.6%), * Florida (11.2%), * California (10.8%), * Virginia (10.6%), and * Texas (9.6%). All the loans are fixed rate. HA-LO INDUSTRIES: Court Will Hear Zurich Settlement Pact Today -------------------------------------------------------------- The HA2003 Liquidating Trust, successor in interest to the assets of HA 2003, Inc. (f/k/a HA-LO Industries Inc.) entered into an agreement with Zurich American Insurance Company to settle claims asserted against HA-LO's former officers and directors. In its action against Zurich, the Liquidating Trust asserts that Zurich has an obligation under a D&O insurance policy to pay approximately $45 million to cover the legal obligations of HA-LO's former CEO in connection with a settlement that resolved claims asserted by the Debtor. In exchange for a payment of $17 million, the Liquidating Trust has agreed that it will not pursue any further claims against Zurich, including claims that Zurich owes or may in the future owe additional amounts in excess of its policy limits to any of the directors and officers covered by its policy. The Liquidating Trust asks the U.S. Bankruptcy Court for the Northern District of Illinois to approve this Compromise and Settlement Agreement with Zurich. The Court will consider the request at a hearing at 10:00 a.m., this morning, October 4, 2004, in Chicago. The Settlement Agreement provides that the Zurich Policy is exhausted and that, pursuant to Section 363(f) of the Bankruptcy Code, the coverages, causes of action, and all other rights and interests in and under the Zurich Policy are sold by the Estate to Zurich free and clear of all liens on, claims against, or interests in the Zurich Policy, effective as of the date on which the Liquidating Trust receives full payment of the $17 million settlement amount. Copies of the pleadings are available for review at the Clerk of Court or by written request to: Steven C. Florsheim, Esq. Sperling & Slater, P.C. 55 W. Monroe Street, Suite 3200 Chicago, Illinois 60603 HA-LO Industries, Inc., provided full service, innovative brand marketing in the custom and promotional products industry. The Company filed for chapter 11 protection on July 30, 2001. Adam G. Landis, Esq., Eric Lopez Schnabel, Esq., and Mary Caloway, Esq., at Klett Rooney Lieber & Schorling represent the Debtors in their liquidating efforts. HEILIG-MEYERS: Unsecured Creditors Can Expect 7% to 48% Recovery ---------------------------------------------------------------- As previously reported in the Troubled Company Reporter, Heilig- Meyers Company and its wholly owned subsidiaries, Heilig- Meyers Furniture Company, Heilig-Meyers Furniture West, Inc., HMY Star, Inc., HMY RoomStore, Inc., and MacSaver Financial Services, Inc., and their Official Committee of Unsecured Creditors filed a Joint Plan of Reorganization and Disclosure Statement with the U.S. Bankruptcy Court for the Eastern District of Virginia. The Bankruptcy Court will conduct a hearing for the purpose of making a determination as to the adequacy of the Disclosure Statement. Once the Bankruptcy Court approves the Disclosure Statement, the Companies will ask creditors to vote in favor or against the Plan. Under the terms of the proposed Plan, pre-petition creditors will receive beneficial interests in a Liquidation Trust in settlement of their claims. The proposed Plan contemplates that only one of the Companies, HMY RoomStore, Inc., will emerge as a reorganized business enterprise. All other assets will be transferred to a Liquidation Trust to be converted to cash over time for distribution to the beneficiaries of the Liquidation Trust. Additionally, the Reorganized RoomStore common stock will be transferred to the Liquidation Trust for the benefit of the holders of allowed unsecured claims under the Plan. The holders of existing common stock of Heilig-Meyers Company will receive no distribution under the proposed Plan and will have no interest in the Liquidation Trust, and it is anticipated that the existing shares of common stock will be cancelled. Reorganized RoomStore will continue to operate stores under The RoomStore name. The Debtors' Plan provides for full payment of all: * Administrative Expense Claims; * Priority Tax Claims; * Other Priority Claims; * Secured Claims held by Wachovia Bank, N.A.; * Secured Claims held by Prudential; * Secured Claims arising under Synthetic Lease Transactions; * Secured Bondholder Claims; and * all other Secured Claims. Unsecured Creditors are grouped into three subclasses and the Debtors' Disclosure Statement describes their treatment: Estimated Class Type of Claim Proposed Treatment Recovery ----- ------------- ------------------ --------- 5(a) RoomStore A distribution of 48% Unsecured 0.008065% of the shares Claims of New RoomStore Common Stock for every $10,000 RoomStore Unsecured Claims held in the Liquidation Trust. 5(b) Funded Debt Subject to dilution on 10% Unsecured account of the Master Claims Trust Claim, and without accounting for any recovery on account of the Lender Avoidance Action, and subject to adjustment for additional cash paid to holders of Secured Claims, a Cash Distribution from the Liquidation Trust. 5(c) Heilig Subject to dilution on 7% Unsecured account of the Master Claims Trust Claim, and without accounting for any recovery on account of the Lender Avoidance Action, and subject to adjustment for additional cash paid to holders of Secured Claims, a Cash Distribution from the Liquidation Trust. Capstone Corporate Recovery, LLC, the Debtors' finanical advisor, estimates that the value of the equity in Reorganized RoomStore will be approximately $60 million as of March 1, 2005, which is the Plan's assumed Effective Date. The key driver behind that estimate is management's earnings projections for Reorganized RoomStore: Reorganized RoomStore Projected Consolidated Statements of Operations (Amounts in Millions) FY2004 FY2005 FY2006 FY2007 FY2008 FY2009 ------ ------ ------ ------ ------ ------ Total Revenues $354.9 $372.3 $411.8 $480.1 $543.0 $586.3 Net Income $1.9 $2.7 $1.0 $2.7 $4.5 $7.4 EBITDA $5.6 $6.1 $6.5 $10.5 $14.2 $19.5 The Debtors are convinced that creditors recover more under their plan than they would in a chapter 7 liquidation. Capstone concludes, in a hypothetical chapter 7 liquidation, the Debtors' estates would be reduced to a $36 to $39 million pile of cash, and the estates would be administratively insolvent, returning between 64% and 90% of what's owed to postpetition creditors. The RoomStore offers a wide selection of professionally coordinated home furnishings in complete room packages at value- oriented prices. The RoomStore operates 64 stores located in Pennsylvania, Maryland, Virginia, North Carolina, South Carolina and Texas. Heilig-Meyers Company filed for chapter 11 protection on Aug. 16, 2000 (Bankr. E.D. Va. Case No. 00-34533), reporting $1.3 billion in assets and $839 million in liabilities. When the Company filed for bankruptcy protection it operated hundreds of retail stores in more than half of the 50 states. In April 2001, the company shut down its Heilig-Meyers business format. In June 2001, the Debtors sold its Homemakers chain to Rhodes, Inc. GOB sales have been concluded and the Debtors are liquidating their remaining Heilig- Meyers assets. The Debtors are working to effect a restructuring of their RoomStore business operations with the expectation of bringing that business out of bankruptcy as a reorganized company. Bruce H. Matson, Esq., Troy Savenko, Esq., and Katherine Macaulay Mueller, Esq., at LeClair Ryan, P.C., in Richmond, Va., represent the Debtors. HLM DESIGN: Auctioning Substantially All Assets on Wednesday ------------------------------------------------------------ HLM Design, Inc., and its debtor-affiliates sought and obtained approval of uniform bidding procedures from the U.S. Bankruptcy Court for the Western District of North Carolina, Charlotte Division, in connection with the sale of substantially all of the Company's assets pursuant to Section 363 of the Bankruptcy Code. The Debtors plan to hold an auction on Wednesday, Oct. 6. Heery International, Inc., is the stalking-horse bidder. Pursuant to an Asset Purchase Agreement, Heery agrees to: (1) purchase substantially all of the Debtors' assets for $5,200,000; and (2) assume certain specified liabilities and cure costs, not to exceed $1,118,200, associated with certain executory contracts to be assumed and assigned. Should another bidder win the auction, the Debtors will: (1) pay Heery a $250,000 break-up fee; and (2) reimburse Heery for all of its costs, fees and expenses, subject to a $200,000 cap. The Honorable George R. Hodges will be asked to approve the sale to the highest and best bidder on Thursday, October 7, at 9:30 a.m. Copies of the bidding procedures and other due diligence materials are available by faxing a written request to: Ms. Kimberly Eisert Hamilton, Gaskins, Fay & Moon Fax (704) 344-1483 Heery International, Inc., -- http://www.heery.com/-- is a full- service architecture, interior design, engineering, facilities planning and design, construction management and program management firm with over 1000 employees located throughout the United States and Europe. Headquartered in Charlotte, North Carolina, HLM Design -- http://www.hlmdesign.com/-- provides architectural, engineering and project planning services. The Company and its debtor-affiliates filed for chapter 11 protection on Aug. 27, 2004 (Bankr. W.D. N.C. Case No. 04-33049). Travis W. Moon, Esq., at Hamilton, Gaskins, Fay & Moon, PLLC, represents the Debtors in their restructuring efforts. When the Debtors filed for protection they listed approximately $4 million in total assets and more than $10 million in total debts on a consolidated basis. HOLLINGER INC: Majority of Noteholders Agree to Amend Indenture --------------------------------------------------------------- Hollinger Inc. (TSX:HLG.C) (TSX:HLG.PR.B) has received consents from holders of a majority in aggregate principal amount of its outstanding 11.875% Senior Secured Notes due 2011 approving amendments to the indenture governing the Senior Notes and the related security agreement. Hollinger has executed a supplemental indenture and first supplement to security agreement giving effect to the amendments, which provide, among other things for a temporary suspension of Hollinger's obligation under the Senior Indenture to furnish to the U.S. Securities and Exchange Commission, the holders of Senior Notes and the trustee of the Senior Notes periodic and other reports under applicable U.S. federal securities laws until January 1, 2006. The amendments also permit Hollinger: -- to incur indebtedness in an aggregate amount outstanding not to exceed US$15 million (and to grant a second priority security interest in the collateral supporting the Senior Notes in connection therewith) through the issuance of notes substantially similar to the Senior Notes pursuant to an indenture substantially similar to the Senior Indenture. -- to direct the trustee of the Senior Notes to apply up to approximately US$10.5 million, currently being held as cash collateral under the Senior Indenture, to satisfy future interest payment obligations on the outstanding Senior Notes. In connection with obtaining the foregoing consents to the Senior Indenture, a majority in aggregate principal amount of holders of the Senior Notes also waived any and all defaults or events of default under, and non-compliance with certain covenants of, the Senior Indenture relating to events occurring on or prior to the date hereof, including any default or event of default arising from the failure of Hollinger to file an annual report on Form 20-F pursuant to applicable U.S. federal securities laws with the SEC and transmit such report to all holders and the trustee of the Senior Notes. Hollinger also announced the closing of the private placement of US$15 million in aggregate principal amount of 11.875% Senior Secured Notes due March 1, 2011 at 100% of the face amount. The net proceeds from the sale of the Second Priority Notes totaled approximately US$13.9 million, after deducting the expenses of the offering. Hollinger intends to use the net proceeds for general corporate purposes. Peter G. White, Co-Chief Operating Officer of Hollinger, said, "We are extremely pleased to have successfully reached an agreement with our noteholders regarding the consents and a waiver of the event of default resulting from Hollinger International's delay in completing its financial statements and to have concluded an important financing. Together, these achievements remove significant financial pressure on Hollinger Inc. and substantially improve the company's liquidity position." Hollinger has agreed to pay all holders of Senior Notes, whether they have tendered a consent or not, a fee of US$35 in cash per US$1,000 principal amount of Senior Notes. The record date to determine holders entitled to receive the consent fee is Sept. 28, 2004. As of the record date, US$78 million principal amount of the Senior Notes was outstanding. The Second Priority Notes have been guaranteed by Ravelston Management Inc., a wholly-owned subsidiary of The Ravelston Corporation Limited, the controlling shareholder of Hollinger, and by an indirect wholly-owned subsidiary of Hollinger. The Second Priority Notes are secured by a second priority lien on the collateral securing the Senior Notes, which includes 14.99 million shares of Class B common stock of Hollinger International Inc. owned, directly and indirectly, by Hollinger. 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 31, 2004, 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 August 19, 2004, Hollinger received a Notice of Event of Default from the trustee under the Indenture notifying Hollinger that an event of default has occurred under the Indenture. As a result, pursuant to the terms of the Indenture, the trustee under the Indenture or the holders of at least 25 percent of the outstanding principal amount of the Notes will have the right to accelerate the maturity of the Notes. Approximately US$5 million in interest on the Notes was due on September 1, 2004. Hollinger has deposited the full amount of such interest payment with the trustee under the Indenture and noteholders will receive their interest payment in a timely manner. There was in excess of US$267.4 million aggregate collateral securing the US$78 million principal amount of the Notes outstanding. Hollinger also received notice from staff of the Midwest Regional Office of the U.S. Securities and Exchange Commission that they intend to recommend to the Commission that it authorize civil injunctive proceedings against Hollinger for certain alleged violations of the U.S. Securities Exchange Act of 1934 and the Rules thereunder. The notice includes an offer to Hollinger to make a "Wells Submission", which Hollinger will be making, setting forth the reasons why it believes the injunctive action should not be brought. A similar notice has been sent to some of Hollinger's directors and officers. As reported in the Troubled Company Reporter on September 7, 2004, the Honourable Mr. Justice Colin L. Campbell of the Ontario Superior Court of Justice has ordered that an inspector be appointed pursuant to s. 229(1) of the Canada Business Corporations Act to conduct an investigation of Hollinger, Inc., as requested by Catalyst Fund General Partner I Inc., a Hollinger shareholder. HOLLINGER INC: Obtains Waiver on Periodic Reporting Requirements ---------------------------------------------------------------- Hollinger, Inc., (TSX: HLG.C; HLG.PR.B) received consents from holders of a majority in aggregate principal amount of its outstanding 11.875% Senior Secured Notes due 2011 approving amendments to the indenture governing the Senior Notes and the related security agreement. Hollinger executed a supplemental indenture and first supplement to security agreement giving effect to the amendments, which provide, among other things, for a temporary suspension of Hollinger's obligation under the Senior Indenture to furnish to the U.S. Securities and Exchange Commission, the holders of Senior Notes and the trustee of the Senior Notes periodic and other reports under applicable U.S. federal securities laws until January 1, 2006. The amendments also permit Hollinger to incur indebtedness in an aggregate amount outstanding not to exceed US$15 million (and to grant a second priority security interest in the collateral supporting the Senior Notes in connection therewith) through the issuance of notes substantially similar to the Senior Notes pursuant to an indenture substantially similar to the Senior Indenture. The amendments further permit Hollinger to direct the trustee of the Senior Notes to apply up to approximately $10.5 million, currently being held as cash collateral under the Senior Indenture, to satisfy future interest payment obligations on the outstanding Senior Notes. In connection with obtaining the consents to the Senior Indenture, a majority in aggregate principal amount of holders of the Senior Notes also waived any and all defaults or events of default under, and non-compliance with certain covenants of, the Senior Indenture relating to events occurring on or prior to the date hereof, including any default or event of default arising from the failure of Hollinger to file an annual report on Form 20-F pursuant to applicable U.S. federal securities laws with the SEC and transmit such report to all holders and the trustee of the Senior Notes. Peter G. White, Co-Chief Operating Officer of Hollinger, said, "We are extremely pleased to have successfully reached an agreement with our noteholders regarding the consents and a waiver of the event of default resulting from Hollinger International's delay in completing its financial statements and to have concluded an important financing. Together, these achievements remove significant financial pressure on Hollinger Inc. and substantially improve the company's liquidity position." Hollinger has agreed to pay all holders of Senior Notes, whether they have tendered a consent or not, a fee of $35 in cash per $1,000 principal amount of Senior Notes. The record date to determine holders entitled to receive the consent fee is September 28, 2004. As of the record date, $78 million principal amount of the Senior Notes was outstanding. As reported in the Troubled Company Reporter on August 31, 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 was not in compliance with its obligation to deliver to relevant parties its filings under the indenture governing its senior secured notes due 2011. $78 million principal amount of Notes are outstanding under the Indenture. On August 19, 2004, Hollinger received a Notice of Event of Default from the trustee under the Indenture notifying Hollinger that an event of default has occurred under the Indenture. As reported in the Troubled Company Reporter on Sept. 17, Hollinger and Hollinger International, Inc., continue to pursue, on a without prejudice basis, the conclusion of mutually acceptable arrangements to permit the audit of Hollinger's 2003 annual financial statements to begin as soon as possible. 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 and its auditors need time to review the final report of the investigation by the Special Committee established by Hollinger International, which report was released on August 30, 2004, and to assess its impact, if any, on the results of operations of Hollinger International before it can complete and file its 2003 annual financial statements. Hollinger Inc.'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 31, Hollinger received notice from staff of the Midwest Regional Office of the U.S. Securities and Exchange Commission that they intend to recommend to the Commission that it authorize civil injunctive proceedings against Hollinger for certain alleged violations of the U.S. Securities Exchange Act of 1934 and the Rules thereunder. The notice includes an offer to Hollinger to make a "Wells Submission", which Hollinger will be making, setting forth the reasons why it believes the injunctive action should not be brought. A similar notice has been sent to some of Hollinger's directors and officers. As reported in the Troubled Company Reporter on September 7, the Honourable Mr. Justice Colin L. Campbell of the Ontario Superior Court of Justice has ordered that an inspector be appointed pursuant to s. 229(1) of the Canada Business Corporations Act to conduct an investigation of Hollinger, Inc., as requested by Catalyst Fund General Partner I Inc., a Hollinger shareholder. HOLLINGER INC: Closes Private Placement of $15M 2nd Priority Notes ------------------------------------------------------------------ Hollinger, Inc., (TSX: HLG.C; HLG.PR.B) reported the closing of the private placement of $15 million in aggregate principal amount of 11.875% Senior Secured Notes due March 1, 2011 at 100% of the face amount. The net proceeds from the sale of the Second Priority Notes totaled approximately $13.9 million, after deducting the expenses of the offering. Hollinger intends to use the net proceeds for general corporate purposes. The Second Priority Notes have been guaranteed by Ravelston Management Inc., a wholly owned subsidiary of The Ravelston Corporation Limited, the controlling shareholder of Hollinger, and by Hollinger's indirect wholly owned subsidiary. The Second Priority Notes are secured by a second priority lien on the collateral securing the Senior Notes, which includes 14.99 million shares of Class B common stock of Hollinger International Inc. owned, directly and indirectly, by Hollinger. Hollinger Inc.'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 31, 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 was not in compliance with its obligation to deliver to relevant parties its filings under the indenture governing its senior secured notes due 2011. $78 million principal amount of Notes are outstanding under the Indenture. On August 19, 2004, Hollinger received a Notice of Event of Default from the trustee under the Indenture notifying Hollinger that an event of default has occurred under the Indenture. Hollinger also received notice from staff of the Midwest Regional Office of the U.S. Securities and Exchange Commission that they intend to recommend to the Commission that it authorize civil injunctive proceedings against Hollinger for certain alleged violations of the U.S. Securities Exchange Act of 1934 and the Rules thereunder. The notice includes an offer to Hollinger to make a "Wells Submission", which Hollinger will be making, setting forth the reasons why it believes the injunctive action should not be brought. A similar notice has been sent to some of Hollinger's directors and officers. As reported in the Troubled Company Reporter on Sept. 7, the Honourable Mr. Justice Colin L. Campbell of the Ontario Superior Court of Justice has ordered that an inspector be appointed pursuant to s. 229(1) of the Canada Business Corporations Act to conduct an investigation of Hollinger, Inc., as requested by Catalyst Fund General Partner I Inc., a Hollinger shareholder. As reported in the Troubled Company Reporter on Sept. 17, Hollinger and Hollinger International, Inc., continue to pursue, on a without prejudice basis, the conclusion of mutually acceptable arrangements to permit the audit of Hollinger's 2003 annual financial statements to begin as soon as possible. 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 and its auditors need time to review the final report of the investigation by the Special Committee established by Hollinger International, which report was released on August 30, 2004, and to assess its impact, if any, on the results of operations of Hollinger International before it can complete and file its 2003 annual financial statements. HOLLINGER: Still Reviewing Financial & Special Committee's Reports ------------------------------------------------------------------ Hollinger International, Inc., provided an 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 Company are currently subject to a cease trade order in respect of securities of the Company issued by the OSC on June 1, 2004. The cease trade order results from the delay in filing the Company's annual financial statements for the year ended December 31, 2003 and related MD&A, its interim financial statements for the three months ended March 31, 2004 and related MD&A and its Annual Information Form 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 Company is required to make pursuant to Ontario securities laws. The Company previously announced on July 20, 2004 that it did not anticipate that it would be in a position to file its interim financial statements and related MD&A for the six month period ended June 30, 2004 by the filing date required by applicable Canadian securities legislation, since it was not expected that the report of the Special Committee of the board of directors of the Company, established to investigate allegations raised by certain of the Company's shareholders, would be available sufficiently in advance of that time. The Company confirms that those interim financial statements and related MD&A have not been so filed. The Company continues to believe that it needs additional time to review the Special Committee's report was filed with the U.S. District Court for the Northern District of Illinois on August 30, 2004 and to assess, together with the auditors of the Company, its impact, if any, on the results of operations of the Company before the Company can complete and file the financial statements and related MD&As and the AIF in question. The Company will continue to provide bi-weekly updates, as contemplated by the OSC Policy, until the financial statements and related MD&As and AIF have been filed. As reported in the Troubled Company Reporter on September 1, 2004, Hollinger International, Inc.'s special Committee of its Board of Directors filed with the U.S. District Court for the Northern District of Illinois its Report of findings of its investigation into allegations raised by certain of the Company's shareholders and other matters uncovered in the course of the Special Committee's work. A full-text copy of the 513-page Report is available at no charge at: http://www.sec.gov/Archives/edgar/data/868512/000095012304010413/y01437exv99 w2.htm The Company said that the Special Committee filed the Report with the Court consistent with the terms of the Consent Judgment entered into by the Company and the U.S. Securities and Exchange Commission on January 16, 2004. As previously announced, the Special Committee has filed a lawsuit on the Company's behalf in the Court against defendants including certain directors and former directors and officers, as well as the Company's controlling shareholder and its affiliated companies. Hollinger International Inc. is a newspaper publisher with English-language newspapers in North America 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, as well as a portfolio of new media investments and a variety of other assets. * * * As reported in the Troubled Company Reporter on August 06, Moody's Investors Service changed the rating outlook on Hollinger International Publishing, Inc., to positive from stable and has withdrawn other ratings. Details of this rating action are: Ratings withdrawn: * $45 million Senior Secured Revolving Credit Facility, due 2008 -- Ba2 * $210 million Term Loan "B", due 2009 -- Ba2 * $300 million of 9% Senior Unsecured Notes, due 2010 -- B2 Ratings confirmed: * Senior Implied rating -- Ba3 * Issuer rating -- B2 The outlook is changed to positive. The ratings withdrawal follows the announcement by Hollinger International, Inc., that it has fully repaid and retired its senior secured credit facilities and that it has completed a tender offer for substantially all of its senior unsecured notes. HORIZON ASSET: Fitch Assigns Low-B Ratings to Classes B-4 & B-5 --------------------------------------------------------------- Fitch rates First Horizon Asset Securities Inc. mortgage pass- through certificates, series 2004-6: -- $281.6 million class I-A-1 through I-A-7, I-A-PO, I-A-R, II-A-1, and II-A-PO certificates 'AAA'; -- $3,667,000 class B-1 'AA'; -- $1,410,000 class B-2 'A'; -- $846,000 class B-3 'BBB'; -- $423,000 class B-4 'BB'; -- $423,000 class B-5 'B'. The class B-6 certificates are not rated by Fitch. The 'AAA' rating on the senior certificates reflects the 2.55% subordination provided by: * the 1.30% class B-1; * the 0.50% class B-2, the 0.30% class B-3; * the 0.15% privately offered class B-4; * the 0.15% privately offered class B-5; and * the 0.15% privately offered class B-6 certificates. The ratings on the class B-1, B-2, B-3, B-4, and B-5 certificates are based on their respective subordination. Fitch believes the credit enhancement will be adequate to support mortgagor defaults as well as bankruptcy, fraud and special hazard losses in limited amounts. In addition, the ratings reflect the quality of the mortgage collateral, strength of the legal and financial structures, and the servicing capabilities of First Horizon Home Loan Corporation, currently rated 'RPS2' by Fitch Ratings. As of the cut-off date, September 1, 2004, the trust will consist of two pool groups. The certificates whose class designation begins with 'I' and 'II' correspond to pools I and II, respectively. The group I mortgage loans have an aggregate principal balance of $240,020,687 of conventional, fully amortizing, 30-year fixed-rate mortgage loans secured by first liens on one- to four-family residential properties. The average principal balance of the loans in this pool is approximately $502,135. The mortgage pool has a weighted average original loan-to-value ratio -- OLTV -- of 72.13%. The weighted average FICO score is approximately 741. Rate-Term and Cash-out refinance loans account for 17.07% and 5.48% of the pool, respectively. The states that represent the largest portion of the mortgage loans are: * California (25.01%); * Virginia (13.21%); * Maryland (6.86%); * Tennessee (6.04%); and * Washington (5.64%). All other states represent less than 5% of the pool balance as of the cut-off date. The group II mortgage loans have an aggregate principal balance of $42,032,270, of conventional, fully amortizing, 15-year fixed-rate mortgage loans secured by first liens on one- to four-family residential properties. The average principal balance of the loans in this pool is approximately $500,384. The mortgage pool has a weighted average OLTV of 62.73%. The weighted average FICO score is approximately 741. Rate-Term and Cash-out refinance loans account for 43.94% and 16.63% of the pool, respectively. The states that represent the largest portion of the mortgage loans are: * California (16.99%); * Tennessee (12.05%); * Washington (10.21%); * Massachusetts (6.66%); and * Texas (5.13%). All other states represent less than 5% of the pool balance as of the cut-off date. None of the mortgage loans are 'high cost' loans as defined under any local, state or federal laws. For additional information on Fitch's rating criteria regarding predatory lending legislation, see the press release issued May 1, 2003, entitled 'Fitch Revises Rating Criteria in Wake of Predatory Lending Legislation', available on the Fitch Ratings web site at http://www.fitchratings.com. All of the mortgage loans were originated or acquired in accordance with First Horizon Home Loan Corporation's underwriting guidelines. The trust, First Horizon Mortgage Pass-Through Trust 2004-6, was created for the sole purpose of issuing the certificates. For federal income tax purposes, an election will be held to treat the trust as two real estate mortgage investment conduits -- REMICs. The Bank of New York will act as trustee. HUMAN GENOME: S&P Junks $250M Convertible Subordinated Debt Issue ----------------------------------------------------------------- Standard & Poor's Ratings Services assigned a 'CCC' subordinated debt rating to the proposed $250 million, 2.25% convertible subordinated debt issue of Human Genome Sciences, Inc., a development-stage biopharmaceutical company. The amount of the notes can be increased by $50 million and the debt will mature in 2011. At the same time, Standard & Poor's affirmed its 'B-' corporate credit rating on Human Genome. All of the net proceeds from the offering will be used to repurchase a portion of the company's outstanding convertible subordinated debt, $500 million of which is due in early 2007. "The low, speculative-grade ratings on Rockville, Maryland-based Human Genome reflect the risks associated with new drug development and the large amounts of cash required to fund the company's R&D program and manufacturing projects," said Standard & Poor's credit analyst Arthur Wong. "These negative factors are only minimally offset by the potential commercialization of the products in Human Genome's early-stage pipeline and the financial cushion provided by the company's on-hand cash." Human Genome is focused on the development of gene-based protein and antibody drugs in the areas of cancer, immunology, and infectious disease. It faces significant business challenges inherent to drug development including development and regulatory risk. Its limited size and lack of a track record in successful new drug development add additional risk to its business profile. Indeed, the company is investing heavily in R&D and the building of production capacity to manufacture its own therapies. In the 12 months ended June 30, 2004, R&D expense was significant, at roughly $205 million, and capital expenditures were high, at $84 million. In addition, R&D expenditures are expected to rise as more of the company's drug candidates enter the latter, more expensive stages of clinical development. Although Human Genome' ongoing restructuring is projected to reduce general and administrative expenditures, these expenses are much smaller than R&D. Nevertheless, despite its considerable cash needs, the company maintains adequate financial flexibility with its current cash balance to fund these expenditures in the near term. HUNTSMAN LLC: Moody's Puts B2 Rating on Planned $350M Facility -------------------------------------------------------------- Moody's Investors Service assigned a B1 rating to Huntsman LLC's proposed $350 million senior secured asset-based revolving credit facility due 2009 and a B2 rating to its $715 million senior secured term loan B due 2010. Proceeds from the new credit facilities will be used to refinance the company's existing credit facilities. As part of this rating action, Moody's revised the company's ratings outlook to stable from negative. The outlook revision reflects Moody's belief that an improving global economy will translate into a tighter supply/demand balance for many of Huntsman products, thereby raising cash flow from operations and other key credit metrics, particularly in 2005. The outlook revision also considers that this new transaction will improve Huntsman's financial flexibility. Nevertheless, the ratings consider that company's operating performance for the 1st half of 2004 was weaker than anticipated. Moody's is also concerned that continuing increases in feedstock costs will limit the company's ability to generate free cash flow over the near- term. Ratings Assigned: -- Huntsman LLC * $350 million guaranteed senior secured revolving credit facility due 2009 - B1 * $715 million guaranteed senior secured term loan B due 2010 -- B2 Ratings Affirmed: * $451 million guaranteed senior secured notes due 2010 -- B2 * $300 million guaranteed senior unsecured notes due 2012 -- B3 * $275 million guaranteed senior secured revolving credit facility due 2006 -- B1 * $606 million guaranteed senior secured term loan A due 2007 -- B2 * $96 million guaranteed secured term loan B due 2007 -- B2 * Senior Implied -- B2 * Issuer Rating -- Caa1 The ratings continue to reflect Huntsman's: (i) trough-like credit metrics with debt to EBITDA of 8.9 times for the LTM ended June 30, 2004, (ii) thin LTM operating margins of 2.6%, (iii) weak EBITDA coverage of interest expense (1.3 times on an LTM basis), and (iv) negative equity. Operating margins are improving from the low levels experienced in 2003, but remain subject to unusual volatility in feedstock prices. Despite the feedstock volatility, the ratings anticipate an improvement in EBITDA margins in 2004 relative to 2003, and a material improvement in 2005. The ratings are supported by the company's: (i) established market positions, (ii) aggressive cost reduction activities, (iii) improving outlook for major products such as ethylene, (iv) polypropylene and ethylene glycol, and (v) limited debt maturities until 2006. Moody's excludes the financial performance of Huntsman International LLC when calculating the financial metrics for HLLC. The notching of Huntsman's revolving credit facility (rated B1) one level above the senior implied recognizes the benefit of first priority liens and collateral support under the borrowing base. Availability is subject to a formula based on the sum of 85% of net eligible receivables and 65% of net eligible inventories. The revolver is secured by first priority security interests in all domestic accounts receivable, inventory, and intangibles as well as a pledge in all shares of stock of domestic subsidiaries (excluding Huntsman's interest in Huntsman International Holdings LLC) and a percentage of its ownership interest in certain foreign subsidiaries. Additionally, the revolving credit facility will benefit from a second priority lien in the same assets that secure the first priority liens of the term loan B. The revolver will also include a $50 million sub-limit for letters of credit. The notching of the company's $715 million term loan B (rated B2) at the level of the senior implied reflects the benefit of first priority security interests in the company's domestic real property and equipment and by Huntsman's ownership interest in Huntsman International Holdings LLC. The term loan B will also benefit from second priority liens in the same assets securing the revolving credit facility. Although both the revolving credit facility both benefit from first priority liens on different classes of assets, Moody's believes that collateral support under the revolver is more significant, justifying the notching above the senior implied. The lenders position is further supported by: (i) excess cash flow sweep; and (ii) by limitations on indebtedness, asset sales, and sale/leaseback transactions. All material restricted domestic subsidiaries will guarantee the credit facility, including Huntsman Specialty Chemicals Corporation, and Huntsman Specialty Chemicals Holding Corporation. Moody's notes that Huntsman's senior secured notes benefit from liens on the same assets that secure the senior credit facility, and will be pari passu with term loan B. The stable outlook reflects Moody's expectation that Huntsman's will generate modestly negative free cash flow in 2004 and positive free cash flow in 2005. To the extent it appears unlikely that Huntsman's will not generate positive free cash flow in 2005, due to a weaker than anticipated economic recovery or an inability to pass through higher feedstock prices, Moody's will likely review the outlook or ratings. The ratings could be lowered if the company fails to keep financial metrics well above levels required under the amended credit facilities. In September 2004, the Huntsman companies announced a proposed initial public offering of common stock. A registration statement is expected to be filed in 4Q2004. This announcement was not a factor in the outlook revision, although completion of such an offering might, depending on the size and use of proceeds, apply positive pressure to the ratings. The ratings consider that Huntsman's operating performance should continue to improve, providing the North American and global economies continue to improve in 2005. Moody's is encouraged by improving sales volumes in Polymers and Base Chemicals, which increased 7% and 10%, respectively, for 1H2004 over 1H2003. Additionally, Base Chemicals EBITDA has increased sharply to $23 million in 2Q2004 from negative $4 million in 2Q2003. Industry fundamentals should support higher industry utilization rates, with no new significant olefins capacity expansion anticipated for the medium-term. Moody's also notes that Huntsman's cash from operations increased to positive $2 million in 1H2004 from negative $63 million in 2H2003, reflecting higher gross profit and more favorable working capital movements. However, Moody's is somewhat concerned that improvements in Huntsman's operating margins and cash flow have appeared to lag some of its competitors, potentially due to its mix of business. Moreover, the continued escalation in feedstock prices tempers Moody's forecast for Huntsman's profitability. The ratings also recognize that the new financing improves Huntsman's financial flexibility. Upon completion of the new bond offering, the company will have no material debt maturities (excluding certain debt at its unrestricted Australian subsidiaries, for which the company was not in compliance) until 2007 when $112 million of debt matures. As of June 30, 2004, the company would have had cash of $31 million and approximately $79 million outstanding and about $16 million of LOC under its proposed $350 million revolving credit facility. Huntsman LLC, headquartered in Salt Lake City, Utah, is a global producer of commodity petrochemicals and polymers, as well as a number of performance chemicals including surfactants, amines and carbonates. Revenues were approximately $3.5 billion for the LTM ended June 30, 2004. IMC GLOBAL: Fitch Assigns Low-B Ratings to Sr. Unsecured Debts -------------------------------------------------------------- Fitch Ratings assigned prospective credit ratings to debt at IMC Global, Inc., and The Mosaic Company. IMC Global's ratings are currently on Rating Watch Positive pending the completion of the merger with Cargill Crop Nutrition. On a prospective basis, IMC's public debt would be upgraded: -- Senior unsecured debt (without subsidiary guarantees) to 'BB-' from 'B'; -- Senior unsecured debt (with subsidiary guarantees) to 'BB' from 'B+'; -- Senior secured bonds (related to Phosphate Resource Partners LP) to 'BB-' from 'B'; -- Mandatory convertible preferred securities to 'B' from 'CCC+'. If the merger transactions between IMC Global and Cargill Crop occur as expected, Fitch would likely affirm IMC's ratings at the prospective level with a Stable Rating Outlook. Fitch will assign a 'BB+' rating to Mosaic's senior secured credit facility once the new facility is effective. IMC's and Mosaic's prospective ratings incorporate the immediate benefits of the proposed merger between IMC and Cargill Crop. The ratings consider: (i) Mosaic's strong global market position in phosphates and potash; (ii) its sizeable sales and earnings level; and (iii) its high debt level. The ratings recognize the potential improvement in phosphate profitability if Mosaic realizes significant synergies due to overlap in phosphate businesses. The ratings recognize the impact of improving market trends, particularly in the potash industry. Furthermore, the ratings incorporate the proposed amendments to IMC's existing bond indentures and resulting guarantees from Mosaic and certain Cargill Crop assets. If merger transactions are not executed as expected or the proposed amendments and guarantees are not accepted by the majority of IMC and Phosphate Resource bondholders, the prospective ratings are subject to revision. Mosaic will be one of the world's largest phosphate and potash producers with proforma sales of $4.7 billion and $578 million EBITDA in 2004. Mosaic will have an estimated 14% of global concentrated phosphates production and 15% of global potash production. Fitch sees IMC's potash business, Cargill Crop low cost phosphate rock mines, and Cargill Crop's Brazilian fertilizer business as positive aspects of Mosaic's business portfolio. The combination of IMC's business portfolio with that of Cargill Crop creates a company that is better able to support IMC's $2.1 billion debt through higher earnings and operating cash flow. In addition, Mosaic and certain assets from Cargill Crop will guarantee IMC's and Phospate Resource's existing public debt if the majority of IMC and Phosphate resource bondholders consents to indenture amendments. Fitch expects Mosaic to earn more than $600 million in EBITDA for its fiscal year 2005. Debt is expected to increase due to purchase accounting. Moreover, Fitch does not expect significant debt reduction until 2007 since operating cash flow would be diverted to integration and synergy efforts in the near-term. Fitch expects Mosaic's credit metrics to be near 4.0 times (x) for total debt-to-EBITDA and 3.0x EBITDA-to-interest incurred in the next twelve to eighteen months. Mosaic will be formed from the combination of IMC Global's phosphate and potash businesses with Cargill Crop's phosphate and distribution businesses. The merger will be a stock for stock transaction for IMC shareholders with IMC shareholders owning 33.5% of Mosaic and Cargill, Inc. owning 66.5%. IMC will then become a wholly owned subsidiary of Mosaic. Pursuant to the merger with Cargill Crop, IMC will also merge its phosphate subsidiary with Phosphate Resources. The Mosaic Company, headquartered in Minneapolis, Minnesota, will be one of the largest global suppliers of phosphate and potash fertilizers and one of the lowest cost producers in the world. On a proforma basis, Mosaic would have had approximately $4.7 billion in revenue, approximately $578 million in EBITDA, and $2.1 billion in debt for the year ended May 31, 2004. INTERMET CORP: Files for Chapter 11 Protection in E.D. Michigan --------------------------------------------------------------- INTERMET Corporation (Nasdaq: INMT) has filed for voluntary Chapter 11 reorganization with the U.S. Bankruptcy Court in the Eastern District of Michigan. The company expects manufacturing operations to continue without interruption during the reorganization proceedings. INTERMET's European operations are not included in the Chapter 11 filing. The Chapter 11 filing is in response to the unprecedented rise in raw-material costs, especially for scrap steel, in North America and Europe. INTERMET's cost of scrap steel has increased from an average of approximately $160 per ton at the beginning of 2003 to approximately $395 per ton at the end of August 2004. The company announced on September 17, 2004, that raw-material price increases have been the major contributor to a projected loss for the third quarter of 2004. To finance its operations to continue the uninterrupted supply of products to its customers, INTERMET has applied to the Bankruptcy Court for interim use of cash collateral with the consent of the agent for the lenders that have a security interest in the cash. The company believes that this source of funds, if permitted for use by the Bankruptcy Court, should be sufficient to operate the business at least through mid-October. To strengthen its liquidity, INTERMET has been negotiating secured debtor-in-possession (DIP) financing packages of up to $50 million in principal amount with various of its pre-petition lenders. One firm commitment and another detailed proposal have been received and are under review by the company, with resolution expected in a matter of days. In either case, the DIP financing would be subject to various conditions, including satisfactory results of a due diligence investigation and approval by the Bankruptcy Court. Approval by the pre-petition lenders also might be required. Gary F. Ruff, Chairman and CEO of INTERMET, said, "After a thorough review of our options, we decided to file under Chapter 11 because it provides a measure of stability and the best protection to all our constituents by allowing us to pursue a comprehensive restructuring. The company thus far has made every effort to mitigate the rise in the cost of raw materials, especially scrap steel. However, we operate within an extraordinarily competitive industry already challenged by relentless price and margin compression. When you add in unprecedented raw-material cost increases, it creates a situation that must be addressed." INTERMET and its financial advisor Conway MacKenzie & Dunleavy are developing a restructuring plan, which will be subject to confirmation by the Bankruptcy Court. This plan will be the culmination of a complete review of the company's current financial condition along with an extensive evaluation of manufacturing operations in North America. INTERMET's restructuring plan will encompass raw-material cost-recovery practices that will be developed in cooperation with its customers and that more accurately reflect current market conditions; improvements in the company's manufacturing operations; and a revised capital structure. Headquartered in Troy, Michigan, INTERMET Corporation -- http://www.intermet.com/-- is a manufacturer of powertrain, chassis/suspension and structural components for the automotive industry. The company has approximately 6,000 employees worldwide. INTERMET CORPORATION: Voluntary Chapter 11 Case Summary ------------------------------------------------------- Lead Debtor: INTERMET Corporation 5445 Corporate Drive Troy, Michigan 48098 Bankruptcy Case No.: 04-67597 Debtor affiliates filing separate chapter 11 petitions: Entity Case No. ------ -------- Intermet U.S. Holding, Inc. 04-67598 Alexander City Casting Co., Inc. 04-67599 Ganton Technologies, Inc. 04-67600 Intermet Holding Company 04-67601 SUDM, Inc. 04-67602 Ironton Iron, Inc. 04-67603 Intermet Illinois, Inc. 04-67604 Cast-Matic Corporation 04-67605 Lynchburg Foundry Comany 04-67606 Intermet International, Inc. 04-67607 Northern Castings Corporation 04-67608 Columbus Foundry, L.P. 04-67609 Tool Products, Inc. 04-67610 Wagner Havana, Inc. 04-67611 Diversified Diemakers, Inc. 04-67612 Sudbury, Inc. 04-67613 Wagner Castings Company 04-67614 Type of Business: The Company designs and manufactures machine precision iron and aluminum castings for the automotive and industrial markets. See http://www.intermet.com/ Chapter 11 Petition Date: September 29, 2004 Court: Eastern District of Michigan (Detroit) Judge: Marci B. McIvor Debtor's Counsel: Salvatore Barbatano, Esq. Foley & Lardner LLP 150 West Jefferson Avenue, Suite 1000 Detroit, Michigan 48226 Tel: 313-963-6200 Fax: 313-963-9308 Financial Condition as of June 30, 2004: Total Assets: $735,821,000 Total Debts: $592,816,000 Lists of the Debtors' largest unsecured creditors were not available at press time. INTERMET CORP: S&P's Rating Tumbles to D After Bankruptcy Filing ---------------------------------------------------------------- Standard & Poor's Ratings Services lowered its ratings on Intermet Corporation to 'D' and removed them from CreditWatch, where they were placed on September 20, 2004. The rating action followed the company's announcement that it has filed for voluntary Chapter 11 reorganization in the U.S. Bankruptcy Court in the Eastern District of Michigan. At June 30, 2004, the Troy, Michigan-based automotive casting manufacturer had approximately $372 million of total debt outstanding. "Intermet's financial performance was significantly affected by very high raw materials costs, which the company was largely unable to pass on to customers, and by operating problems at several of its manufacturing plants," said Standard & Poor's credit analyst Heather Henyon. INTERSTATE BAKERIES: Paying $1.2MM Prepetition Sales & Use Taxes ---------------------------------------------------------------- In connection with the normal operation of their businesses, the Debtors incur various tax liabilities, including state and local sales, use, and franchise taxes. Prior to the Petition Date, Interstate Bakeries Corporation and its debtor-affiliates generally paid their tax obligations as they became due. The Debtors sought and obtained the Court's authority to pay, in their sole discretion, prepetition sales and use taxes which their directors, officers or employees may be personally liable. The Court also authorized all applicable banks, when requested by the Debtors, to receive, process, honor, and pay all checks or electronic transfers drawn on the Debtors' accounts to pay the Taxes, whether the checks were presented prior to or after the Petition Date, provided that sufficient funds are available in the applicable accounts to make the payments. The Debtors estimate that the total Sales & Use Taxes to be paid is approximately $1,265,000. J. Gregory Milmoe, Esq., at Skadden Arps Slate Meagher & Flom, LLP, in New York, relates that Sales and Use Taxes accrue daily in the ordinary course of the Debtors' business, and are calculated based on statutorily mandated percentages of the Debtors' sales. In some cases, the Sales and Use Taxes are paid in arrears, once collected by the Debtors. Many jurisdictions, however, require the Debtors to remit estimated Sales & Use Taxes on a periodic basis during the month or quarter in which sales are made. The Debtors then generally timely file a sales and use tax return with the relevant taxing authority reporting the actual sales and use tax due, paying any further amounts owed for the month or quarter. The Debtors submit that most, if not all, of the Sales & Use Taxes likely constitute so-called "trust fund" taxes that are required to be collected from third parties and held in trust for payment to the taxing authorities. To the extent that the Sales & Use Taxes are "trust fund" taxes collected by the Debtors for remittance to Taxing Authorities, they are not property of the Debtors' estates under Section 541(d) of the Bankruptcy Code. The Debtors, therefore, have no equitable interest at all in the Sales & Use Taxes and are obligated to remit those taxes to the appropriate Taxing Authority. Mr. Milmoe notes that most, if not all, of the Sales & Use Taxes would likely be entitled to priority status under Section 507(a)(8) of the Bankruptcy Code, and payment in full -- either immediately or over time -- will be required under any reorganization plan. "Further, even if certain of the Sales Taxes are not entitled to priority status under section 507 of the Bankruptcy Code, the Debtors believe that such amounts should be paid as a use of estate property outside the ordinary course of business on the grounds that the payments are necessary for a successful reorganization." In addition, many states in which the Debtors operate have laws providing that, because the Sales & Use Taxes constitute "trust fund" taxes, officers or directors or other responsible employees could, under certain circumstances, be held personally liable for the payment of these taxes. To the extent any accrued Sales & Use Taxes of the Debtors were unpaid as of the Petition Date in those jurisdictions, the Debtors' officers and directors could be subject to lawsuits during the pendency of the Chapter 11 cases. Headquartered in Kansas City, Missouri, Interstate Bakeries Corporation is a wholesale baker and distributor of fresh baked bread and sweet goods, under various national brand names, including Wonder(R), Hostess(R), Dolly Madison(R), Baker's Inn(R), Merita(R) and Drake's(R). The Company employs approximately 32,000 in 54 bakeries, more than 1,000 distribution centers and 1,200 thrift stores throughout the U.S. The Company and seven of its debtor-affiliates filed for chapter 11 protection on September 22, 2004 (Bankr. W.D. Mo. Case No. 04-45814). J. Eric Ivester, Esq., and Samuel S. Ory, Esq., at Skadden, Arps, Slate, Meagher & Flom LLP represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $1,626,425,000 in total assets and $1,321,713,000 (excluding the $100,000,000 issue of 6.0% senior subordinated convertible notes due August 15, 2014 on August 12, 2004) in total debts. (Interstate Bakeries Bankruptcy News, Issue No. 2; Bankruptcy Creditors' Service, Inc., 215/945-7000) INTRAWEST: Completes Consent Solicitation on 10.5% Senior Notes --------------------------------------------------------------- Intrawest Corporation (NYSE: IDR; ITW:TSX) successfully completed its Consent Solicitation relating to the $394,160,000 principal amount of its 10.5% Senior Notes due February 1, 2010. The Consent Solicitation was conducted in conjunction with Intrawest's offer to purchase all of the outstanding 2010 Notes and expired at 5:00 p.m., New York time, on Tuesday September 28, 2004. A total of $354,771,000, or approximately 90%, of the aggregate outstanding principal amount of 2010 Notes was tendered in the Offer to Purchase and Consent Solicitation prior to the Consent Date. Accordingly, Intrawest executed a first supplemental indenture to the indenture governing the 2010 Notes, the effect of which is to eliminate substantially all of the restrictive covenants contained in the indenture. The total consideration to be paid for each validly tendered 2010 Note and properly delivered consent will be based upon a fixed spread of 50 points over the yield to maturity on the Price Determination Date of the 7.5% U.S. Treasury Note due February 15, 2005, and includes a consent payment of $10.00 per $1,000 principal amount of 2010 Notes to the holders who tendered their 2010 Notes and delivered their consents prior to 5:00 p.m. on September 28, 2004. Holders of validly tendered 2010 Notes will also be entitled to receive accrued and unpaid interest up to, but not including, the payment date. The Offer, as described in Intrawest's Offer to Purchase and Consent Solicitation dated September 15, 2004 and related Letter of Transmittal, expires at midnight, New York time, on Oct. 13, unless it is extended or terminated earlier. Payment for 2010 Notes tendered on or prior to the Expiration Date will be made on the second business day immediately following the Expiration Date. The yield to maturity of each reference U.S. Treasury Note used in the fixed spread formula will be set at 2:00 p.m., New York time, on the second business day prior to the Expiration Date. Intrawest Corporation (IDR:NYSE; ITW:TSX) develops and operates village-centered resorts. The company owns or controls 10 mountain resorts, including Whistler Blackcomb, North America's most popular mountain resort. Intrawest also owns Sandestin Golf and Beach Resort in Florida and has a premier vacation ownership business, Club Intrawest. The Company is developing additional resort villages at six resorts in North America and Europe. The Company has a 45 per cent interest in Alpine Helicopters Ltd., owner of Canadian Mountain Holidays, the largest heli-skiing operation in the world. Intrawest is headquartered in Vancouver, British Columbia and is located on the World Wide Web at http://www.intrawest.com/ As reported in the Troubled Company Reporter on Sept. 24, Moody's Investors Service assigned a B1 rating to Intrawest Corporation's U.S. dollar-denominated 7.5% senior unsecured note offering, due 2013 and Canadian dollar-denominated 7.5% senior unsecured note offering, due 2009, for an aggregate amount of approximately US$325 million. In addition, these rating actions were taken by Moody's: * Ratings assigned: -- U.S. dollar-denominated 7.5% senior notes, due 2013 rated B1 -- Canadian dollar-denominated 7.5% senior notes, due 2009 rated B1 * Ratings affirmed: -- Senior implied rating at Ba3 -- Senior unsecured issuer rating at B1 -- US$350 million 7.5% senior notes due 2013 rated B1 -- US$125 million 10.5% senior notes due 2010 rated B1 -- US$135 million 10.5% senior notes due 2010 rated B1 -- US$125 million 10.5% senior notes due 2010 rated B1 The ratings outlook is stable. As reported in the Troubled Company Reporter on Sept. 23, 2004, Standard & Poor's Ratings Services assigned its 'B+' senior unsecured debt rating to Vancouver, B.C.-based developer and operator of village-centered resorts Intrawest Corp.'s U.S. dollar-denominated 7.5% senior notes due 2013 and its Canadian dollar-denominated notes due 2009, for a total aggregate principal amount of about US$325 million. At the same time, Standard & Poor's affirmed its 'BB-' long-term corporate credit rating on Intrawest. The outlook is positive. IPSCO INCORPORATED: Appoints Patricia Kampling as Treasurer ----------------------------------------------------------- IPSCO, Inc., (NYSE: IPS; Toronto) appointed Patricia Kampling as Treasurer, effective immediately. Ms. Kampling brings 20 years of financial and management experience to IPSCO. She has an extensive background in treasury, financial planning and analysis, investor relations, acquisitions, integration, strategic planning and SEC reporting. From 2000 to 2002 Ms. Kampling served as Senior Vice President and Chief Financial Officer of Exelon Enterprises, a business unit of Exelon Corporation, one of the nation's largest electric utilities and generation companies. Prior to Exelon's formation through the merger of Unicom and PECo Energy, she was Treasurer of Unicom Corporation and ComEd. During her 21-year career with Exelon, she received numerous promotions in the finance, treasury and engineering functions. Ms. Kampling earned her MBA in Finance from the University of Chicago and her B.S. in Engineering and B.A. in Economics from Swarthmore College in Pennsylvania. IPSCO's Senior Vice President and Chief Financial Officer, Vicki Avril, is pleased to welcome Ms. Kampling to IPSCO. "Ms. Kampling's 20 years of broad financial experience in finance and treasury, combined with a mechanical engineering background, makes her a strong addition to the IPSCO financial and management team," stated Avril. Ms. Kampling will be based at IPSCO's operational headquarters in Lisle, Illinois and will report directly to Ms. Avril. IPSCO is an edge electric furnace flat rolled steel producer with steelworks in Regina, Saskatchewan; Montpelier, Iowa; and Mobile County, Alabama, having a combined annual design capacity of 3,500,000 tons. IPSCO operates modern coil processing facilities in Regina, Saskatchewan; Surrey, British Columbia; St. Paul, Minnesota; Toronto, Ontario; and Houston Texas. In addition, as a leader in the development of high strength steel and pipe, IPSCO operates pipe mills at six locations in Canada and the United States producing a wide range of tubular products including oil and gas well casing and tubing, line pipe, standard pipe and hollow structural sections. IPSCO trades as IPS on both the Toronto and New York Stock Exchanges. For further information on IPSCO, please visit the company's web site at http://www.ipsco.com/ * * * As reported in the Troubled Company Reporter on February 26, 2004, Standard & Poor's Ratings Services lowered its ratings on steel producer IPSCO Inc., including the long-term corporate credit rating, which was lowered to 'BB' from 'BB+'. At the same time, Standard & Poor's lowered its rating on the company's 5.5% cumulative redeemable first preferred shares to 'B' from 'B+'. The downgrade affects about US$425 million in unsecured debt. The outlook is stable. The downgrade is the result of the company's persistently weak profitability and cash flow, as well as its aggressive capital structure amid difficult operating conditions in the North American steel minimill sector. Although the company's revenues are expected to increase with the general improvement in steel market conditions, higher input costs stemming from currently tight scrap steel supplies could limit profit and cash flow growth. JILLIAN'S ENT: Files Joint Liquidating Plan in W.D. Kentucky ------------------------------------------------------------ Jillian's Entertainment Holdings, Inc., and its debtor-affiliates filed their Joint Liquidating Plan of Reorganization with the U.S. Bankruptcy Court for the Western District of Kentucky, Louisville Division. A full-text copy of the Plan is available for a fee at: http://www.researcharchives.com/download?id=040812020022 The Plan provides that each and every claim against any Debtor will be deemed asserted against the consolidated estates of the Debtors. The Plan groups claims and interests into seven classes and describes the treatment of each: Class Treatment ----- --------- 1 - Prepetition Lender Impaired. On the Effective Date or Secured Claims as soon as practical, will receive in full satisfaction, settlement, release and discharge of and in exchange for the Allowed Prepetition Lender Secured Claims: i) the prepetition lender disbursement; or ii) such other treatment as to which the Debtors and the Administrative Agent have agreed upon in writing. 2 - Other Secured Claims Impaired. On the later of the Effective Date or the date a claim becomes an Allowed Class 2 claim, each holder will receive one of the following distribution in full satisfaction, settlement, release and discharge: i) cash equal to the fair market value of the property upon which a lien has been asserted securing such claim subject to and reduced by such holder's sale expense pro rata share of the sale costs; ii) the property securing such Allowed Class 2 claim; or iii) such other treatment as which the Debtors and the holder have agreed upon in writing. 3 - Other Priority Clamis Unimpaired. On the later of the Effective Date or the date a Class 3 claim becomes an Allowed Other Priority Claim, each holder will receive in full satisfaction, settlement, release and discharge of and in exchange for such Class 2 Claim: i) cash equal to the unpaid portion of such Allowed Priority Claim; or ii) such other treatment as to which the Debtors and such holder have agreed upon in writing. 4 - Unsecured Claims Impaired. Holders will receive a pro rata share of the Unsecured Claim Pool and the Residual Proceeds, if any, at such tiem when all Unsecured Claims have been Allowed or otherwise resolved. The Plan Administrator, however, in its sole discretion, may distribute a percentage of the respective pro rata shares of the Unsecured Claim Pool to Holders of Allowed Unsecured Claims prior to such time when all Unsecured Claims becomes Allowed or otherwise resolved. 5 - Subordinated Note Impaired. On the Effective Date, the Claims Subordinated Note Claims will be canceled and the holders will not receive or retain any distribution or property on account of such subordinated note claims under the Plan. 6 - Intercompany Claims Impaired. On the Effective Date, all claims in this Class will be cancelled and holders will not receive any distribution on account of such claim under the Plan. 7 - Equity Interests Impaired. On the Effective Date, all equity interests will be cancelled and the holders of equity interests will not receive or retain any distribution or property. The Bankruptcy Court approved the sale of substantially all of the Debtors' assets to Dave & Buster's Inc. (NYSE: DAB) and Gemini Investors III, L.P., for approximately $65 million on Sept. 24, 2004, under Section 363 of the U. S. Bankruptcy Code. The parties intend to close the sale by the end of October and no later than November 20. The sale proceeds will be used to fund the Debtors' Liquidating Plan. Headquartered in Louisville, Kentucky, Jillian's Entertainment Holdings, Inc. -- http://www.jillians.com/-- operates more than 40 restaurant and entertainment complexes in about 20 states. The Company filed for chapter 11 protection on May 23, 2004 (Bankr. W.D. Ky. Case No. 04-33192). Edward M. King, Esq., at Frost Brown Todd LLC and James H.M. Sprayregen, Esq., at Kirkland & Ellis LLP, represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed estimated assets of more than $100 million and estimated debts of over $50 million. K KONSTRUCTION: Case Summary & 20 Largest Unsecured Creditors ------------------------------------------------------------- Lead Debtor: K Konstruction Inc. 29693 North Highway 12 Wauconda, Illinois 60084 Bankruptcy Case No.: 04-36147 Type of Business: The Debtor is a concrete contractor. Chapter 11 Petition Date: September 29, 2004 Court: Northern District of Illinois (Chicago) Judge: John H. Squires Debtor's Counsel: Ariel Weissberg, Esq. Weissberg & Associates Ltd. 401 South Lasalle Street, Suite 403 Chicago, IL 60605 Tel: 312-663-0004 Estimated Assets: $1 Million to $10 Million Estimated Debts: $1 Million to $10 Million Debtor's 20 Largest Unsecured Creditors: Entity Nature Of Claim Claim Amount ------ --------------- ------------ Caterpillar Financial 76 D8K Crawel $541,852 Services Corp. Tractor/Cab P.O. Box 340001 77V05923 Attn: Kyle Fitzgerald Nashville, TN 37203 Illinois Dept. of Revenue Taxes $164,739 P.O. Box 19447 Springfield, IL 62794 Palatine Oil $140,971 P.O. Box 985 Palatine, IL 60078 Pattern Industries $106,779 Citicapital Commercial Corp. $80,799 Antioch Tire $59,232 B.B.S. LLC Agreed Judgment $40,000 Order Federal Motor Carriers $37,760 Harts Tractor $21,100 Thilman & Filippini LLC $19,121 Internal Revenue Service $17,775 Phesant Run $16,088 R A Adams $15,380 Cassidy Tre $15,000 Putzmeister $12,806 United Concrete (McHenry) $10,484 Waukegan Colors $10,340 R G Smith $9,118 Great Lakes Equipment $8,350 CCS West $8,324 KAISER ALUMINUM: Court Okays QAL Sale Bidding Procedures -------------------------------------------------------- Comalco Limited has agreed to allow the Debtors to subject the QAL interests to an auction. To maximize the realizable value for the QAL Interests, the Debtors sought and obtained the Court's permission to adopt a competitive bidding process. The Debtors will require potential bidders to submit offers by October 25, 2004. A competing offer must, at a minimum, include: * at least $321,000,000 as purchase price; * the purchase price adjustments; * additional amounts required to be paid; and * the assumption of the Assumed Interests and Liabilities. If a threshold qualified bid is submitted, the Minimum Bid Price for all bidders other than Comalco and the party submitting the Threshold Qualified Bid must include a Base Share Price at least equal to the Threshold Qualified Bid Price, plus $1,000,000. Competing bidders must submit a $40,000,000 deposit as well as written evidence of ability to consummate the transaction satisfactory to the Debtors. If the Debtors receive one or more Qualified Bids, other than Comalco's, the Debtors will hold an auction on October 28, 2004, at the offices of Jones Day in New York. At the Auction, Qualified Bidders may increase their bids at $1,000,000 increments. The Debtors will announce the successful bidder at the Auction. The Court will hold a hearing to consider approval of the sale to the Successful Bidder on November 8, 2004. If the Successful Bidder fails to consummate the sale for any reason, the Successful Bidder's deposit will be forfeited in favor of the Debtors. Then, the Debtors will turn to the next highest bidder to consummate the sale. The Court authorizes the Debtors to pay Comalco $11,000,000 as termination fee, plus any applicable Australian goods and services taxes, if they consummate the sale with a successful bidder other than Comalco. Headquartered in Houston, Texas, Kaiser Aluminum Corporation -- http://www.kaiseral.com/-- operates in all principal aspects of the aluminum industry, including mining bauxite; refining bauxite into alumina; production of primary aluminum from alumina; and manufacturing fabricated and semi-fabricated aluminum products. The Company filed for chapter 11 protection on February 12, 2002 (Bankr. Del. Case No. 02-10429). Corinne Ball, Esq., at Jones, Day, Reavis & Pogue, represent the Debtors in their restructuring efforts. On September 30, 2001, the Company listed $3,364,300,000 in assets and $3,129,400,000 in debts. (Kaiser Bankruptcy News, Issue No. 50; Bankruptcy Creditors' Service, Inc., 215/945-7000) KAISER: Century & Noranda Completes Gramercy Plant Acquisition -------------------------------------------------------------- Century Aluminum Company (Nasdaq:CENX), together with Noranda Aluminum, Inc., has completed its acquisition of Kaiser's Gramercy alumina plant in Gramercy, Louisiana, and Kaiser's related bauxite assets in Jamaica. Century and Noranda each paid one-half of the approximately $23 million purchase price. The prospective transaction was previously announced in July when a bankruptcy court approved Century and Noranda as the successful bidders for these Kaiser assets. The Gramercy refinery has the capacity to produce 1.25 million metric tons of alumina a year. Century and Noranda each purchase approximately 500,000 metric tons of this alumina a year for their respective primary aluminum reduction plants in Hawesville, KY and New Madrid, MO. The refining process chemically converts bauxite into alumina, the raw material from which primary aluminum is produced. Century owns 615,000 metric tons per year (mtpy) of primary aluminum capacity. The company owns and operates a 244,000-mtpy plant at Hawesville, KY, a 170,000-mtpy plant at Ravenswood, WV and a 90,000- mtpy plant at Grundartangi, Iceland. Century also owns a 49.67-percent interest in a 222,000-mtpy reduction plant at Mt. Holly, SC. Alcoa Inc. owns the remainder and is the operating partner. Century's corporate offices are located in Monterey, California. Headquartered in Houston, Texas, Kaiser Aluminum Corporation -- http://www.kaiseral.com/-- operates in all principal aspects of the aluminum industry, including: * mining bauxite; * refining bauxite into alumina; * production of primary aluminum from alumina; and * manufacturing fabricated and semi-fabricated aluminum products. The Company filed for chapter 11 protection on February 12, 2002 (Bankr. Del. Case No. 02-10429). Corinne Ball, Esq., at Jones, Day, Reavis & Pogue, represent the Debtors in their restructuring efforts. On September 30, 2001, the Company listed $3,364,300,000 in assets and $3,129,400,000 in debts. KMART CORP: Eddie Lampert Discloses 46.69% Equity Stake in Kmart ---------------------------------------------------------------- ESL Investments, Inc., CRK Partners, LLC, CRK Partners II, LP, and Edward S. Lampert disclose in recent filings with the Securities and Exchange Commission their acquisition of 19,322 shares of Kmart Holding Corporation's common stock as of August 24, 2004. Mr. Lampert may be deemed to be indirect beneficial owners of 42,033,426 shares of Kmart Holding Stock as of August 24, 2004. As of August 6, 2004, 89,647,641 shares of Kmart Holding Stock were outstanding. Thus, Mr. Lampert is deemed to control 46.89% of the total outstanding Kmart common stock. Shares in Kmart Holding Corp. closed at $88.06 in trading last week. At that price, Mr. Lampert's investment in the retailer tops $3.7 billion. CRK LLC is the general partner of CRK II. ESL is the managing member of CRK LLC. Mr. Lampert is a controlling stockholder of ESL and a director and Chairman of the Board of Kmart Holding Corporation. Headquartered in Troy, Michigan, Kmart Corporation (n/k/a KMART Holding Corporation) -- http://www.bluelight.com/-- is the nation's second largest discount retailer and the third largest merchandise retailer. Kmart Corporation currently operates approximately 2,114 stores, primarily under the Big Kmart or Kmart Supercenter format, in all 50 United States, Puerto Rico, the U.S. Virgin Islands and Guam. The Company filed for chapter 11 protection on January 22, 2002 (Bankr. N.D. Ill. Case No. 02-02474). Kmart emerged from chapter 11 protection on May 6, 2003. John Wm. "Jack" Butler, Jr., Esq., at Skadden, Arps, Slate, Meagher & Flom, LLP, represented the retailer in its restructuring efforts. The Company's balance sheet showed $16,287,000,000 in assets and $10,348,000,000 in debts when it sought chapter 11 protection. (Kmart Bankruptcy News, Issue No. 81; Bankruptcy Creditors' Service, Inc., 215/945-7000) KRAMONT REALTY: Modifies & Extends $125 Million Credit Facility --------------------------------------------------------------- Kramont Realty Trust (NYSE:KRT) has modified and extended its $125 million secured revolving credit facility. Selected modified terms and conditions include: -- Reduction in interest rate margin to a minimum of LIBOR plus 130 basis points to a maximum of LIBOR plus 175 basis points depending upon corporate leverage from the prior interest rate margin range of LIBOR plus 175 basis points to 225 basis points, which is projected to generate approximately a 50 basis point reduction in the effective interest rate margin -- Right to increase facility amount up to $200 million during the next 24 months -- Maturity extended for two years to December 20, 2007 -- Option to extend for one additional year to December 20, 2008 -- Addition of $20 million swingline loan feature -- Certain other modifications resulting in increased availability and flexibility to the Trust The bank group includes Bank of America, Commerzbank AG, US Bank, Wilmington Trust, Wachovia Bank, Compass Bank and First Trust Bank. Banc of America Securities is the sole lead arranger and Bank of America is the administrative agent. "This reduction in interest rate margin coupled with the maturity extension to December 2007 together with the other enhancements to the credit facility is evidence of our excellent relationship with our bank group resulting from the continued improvements in our financial position and operating results," stated Carl Kraus, Senior Vice President and Chief Financial Officer. Fitch Ratings and Moody's Investors Service have assigned their low-B ratings to Kramont's preferred stock issues, as previously detailed in the Troubled Company Reporter. Headquartered in Plymouth Meeting, Pennsylvania, Kramont is an $800 million (undepreciated book capitalization) owner, manager, developer and redeveloper of neighborhood and community shopping centers located primarily in the Mid-Atlantic, Northeast and Southeast regions. The Company is a self-administered, self- managed equity real estate investment trust specializing in neighborhood and community shopping center acquisitions, leasing, development, redevelopment and management. The Company owns, operates, manages and has under development 91 properties encompassing nearly 12.2 million square feet in 16 states. Nearly 80 percent of Kramont's centers are grocery, drug or value retail anchored. For more information, visit http://www.kramont.com/ LEVEL 3: Fitch Junks Senior Unsecured & Convertible Debt Ratings ---------------------------------------------------------------- Fitch Ratings assigned an initial rating of CCC to the senior unsecured debt of Level 3 Communications, Inc., and Level 3 Financing, Inc. Additionally, Fitch assigned a CC rating to the convertible subordinated obligations of Level 3. The Rating Outlook is Stable. Fitch's ratings reflect the company's high leverage, which is expected to remain above 10 times through 2005, lack of revenue growth, and expectation for negative free cash flow at least through 2005. While the company has reduced debt to approximately $5 billion in 2004, compared with a level above $6 billion in 2002, EBITDA will decline in 2004, compared with 2003, due to integration costs associated with its ICG and Allegiance dial-up modem transactions. This will result in moderately higher leverage in 2004, compared with that of 2003. Additionally, negative free cash flow is expected to range between $200 million-$250 million in 2004 as a result of significantly higher capital spending coupled with the lower EBITDA level. Revenue is also expected to decline in 2004 as a result of the rationalization of excess contract capacity by a key customer, America Online. The company expects that the AOL capacity rationalization will negatively impact revenues by $100 million- $150 million in 2004. Fitch expects that revenue growth will improve in 2005, but this improvement will be muted due to the expiration of a digital subscriber line -- DSL -- aggregation contract with Verizon that Fitch estimates at approximately $50 million. Offsetting this loss as well as continued dial-up service revenue contraction will be the incremental revenue addition from Level 3's acquisition of ICG and new government contracts, as well as introductory voice over internet protocol -- VoIP -- revenue growth. Nevertheless, Fitch expects revenues to remain approximately flat in 2005, compared with that of 2004, but margins should return to 2003 levels and capital spending should moderate to a level approximating $200 million annually. As a result, Level 3 should experience an increase in EBITDA and a reduction in negative free cash flow. Fitch believes that a cash flow neutral position will not be achieved prior to the 2006-2007 time frame. The company maintains good liquidity and the ability to fund cash flow shortfalls and debt maturities at least through 2006. Level 3's current cash balance through second-quarter 2004 was $957 million. A material maturity risk exists in 2008 when approximately $2.4 billion of long-term debt comes due. The company could meet this obligation through a refinancing that could include secured debt and holding company or intermediate holding company unsecured debt, as well as cash or equity. It should be noted that secured debt is limited by existing covenants to 1.5 times consolidated cash flow. Currently, the company does not have a bank facility in place. Not withstanding all the near-term credit issues surrounding Level 3, an important issue that will influence its long-term competitive and financial position is its success in attracting VoIP operators to its service portfolio. The company has shown initial success with VoIP winning seven of nine requests for proposals associated with this service, as well as signing 80 value-added reseller -- VAR -- agreements. Fitch expects that VoIP-based services will be successful in penetrating the traditional wireline market with a meaningful impact starting in 2006 and beyond. Fitch's Stable Rating Outlook reflects the company's strong cash position and the expectation that it will continue to meet its obligations through at least 2006. LIFESTREAM TECH: Reports 169% Growth in July 2004 Shipments ----------------------------------------------------------- Lifestream Technologies, Inc. (OTCBB:LFTC), the leading supplier of cholesterol monitors and professional screening instruments, reported a 169% increase of shipments for the month of July over the same period in 2003. Preliminary numbers indicate $581,486 shipped during July 2004 as compared to $216,052 for the previous July. "It appears that our increased distribution, acceptance by the viewers of the television shopping network and other marketing efforts are increasing awareness and impacting demand at the retail shelf," said Christopher Maus, President and CEO. "These shipment numbers indicate the Company is on target as we begin the next phase of our rollout strategy. Our new Health Risk Assessment product, which began limited rollout in September, will further aid the health conscious consumer in creating a healthier lifestyle. Lifestream continues to grow the market with expanded distribution. We will continue our efforts to increase product awareness and support our retailers as we now have what can be truly considered national distribution." "This increase in shipments is a good indicator of our success in increasing distribution and creating awareness," stated Nikki Nessan, VP, Finance. "However, Lifestream's revenue recognition policy does not necessarily result in revenue recognition at the time product is shipped. As a result, shipments are not an indicator of the revenue to be reported on our financial statements." About Lifestream Technologies Lifestream Technologies, Inc., a Nevada corporation headquartered in Post Falls, Idaho, is a marketer of a proprietary total cholesterol measuring device for at-home use by health conscious consumers and at-risk medical patients. The Company's product line aids the health conscious consumer in monitoring their risk of heart disease. By regularly testing cholesterol at home, individuals can monitor the benefits of their diet, exercise and drug therapy programs. Monitoring these benefits can support the physician and the individual's efforts to improve compliance. Lifestream's products also integrate a smart card reader further supporting compliance by storing test results on an individual's personal health card for future retrieval, trend analysis and assessment. * * * Going Concern Doubt In its Form 10-QSB for the quarter period ended March 31, 2004, filed with the Securities and Exchange Commission, Lifestream Technologies reported substantial operating and net losses, as well as negative operating cash flow, since its inception. As a result, the Company continued to have significant working capital and stockholders' deficits at June 30, 2003. In recognition of such, the Company's independent certified public accountants included an explanatory paragraph in their report on the Company's consolidated financial statements for the fiscal year ended June 30, 2003, that expressed substantial doubt regarding the Company's ability to continue as a going concern. The Company will continue to require additional financing to fund its longer-term operating needs, including its continued conducting of those marketing activities it deems critical to building broad public awareness of, and demand for, its current consumer device. The amount of additional funding needed to support it until that point in time at which it forecasts that its business will become self-sustaining from internally generated cash flow is highly dependent upon the ability to continue conducting marketing activities and the success of these campaigns on increasing awareness to consumers and pharmacists. MAXIM CRANE: Committee Wants Stroock & Lavan as Counsel ------------------------------------------------------- The Official Committee of Unsecured Creditors appointed in Maxim Crane Works LLC's chapter 11 case asks the U.S. Bankruptcy Court for the Western District of Pennsylvania for permission to retain Stroock & Stroock & Lavan LLP as its bankruptcy counsel, nunc pro tunc to June 24, 2004. Stroock & Stroock & Lavan will: a) assist, advise and represent the Committee with respect to the administration of these cases, as well as issues arising from or related to the Debtors, the Committee or the Debtors' estates; b) provide all necessary legal advice with respect to the Committee's powers and duties; c) assist the Committee in maximizing the value of the Debtors' assets for the benefit of all creditors; d) pursue confirmation of a plan of reorganization; e) investigate, as the Committee deems appropriate, among other things, the assets, liabilities, financial condition and operations of the Debtors; f) commence and prosecute necessary and appropriate actions and proceedings on behalf of the Committee that may be relevant to these cases; g) review, analyze or prepare, on behalf of the Committee, all necessary applications, motions, answers, orders, reports, schedules and other legal papers; h) communicate with the Committee's constituents and others as the Committee may consider desirable in furtherance of its responsibilities; i) appear before this Court to represent the interests of the Committee; j) confer with professional advisors retained by the Committee so as to more properly advise the Committee; and k) perform all other legal services for the Committee that are appropriate and necessary in these cases. Wendell H. Adair, Jr., Esq., at Stroock & Stroock, discloses the Firm's professionals' hourly billing rates: Designation Billing Rate ----------- ------------ Partners $535 - $750 Associates/Special Counsel $205 - $600 Paraprofessionals $150 - $260 Mr. Adair assures the Court that the Firm does not hold any interest materially adverse to the Debtors or their estates. Headquartered in Pittsburgh, Pennsylvania, Maxim Crane Works, LLC -- http://www.maximcrane.com/-- is a full service crane rental company. The Company, along with its affiliates, filed for chapter 11 protection (Bankr. W.D. Pa. Case No. 04-27861) on June 14, 2004. Douglas Anthony Campbell, Esq., at Campbell & Levine, LLC, represents the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they estimated debts and assets of over $100 million. MEDIACOM COMMS: S&P Lowers Corporate Credit Rating to BB- --------------------------------------------------------- Standard & Poor's Ratings Services lowered its ratings on cable TV system operator Mediacom Communications Corporation and related entities. The corporate credit rating was lowered to 'BB-' from 'BB' and the senior unsecured debt ratings were lowered to 'B' from 'B+'. The bank loan rating on the senior secured credit facility of Mediacom Broadband Group was lowered to 'BB-' from 'BB+', and a recovery rating of '2' was assigned to the facility, indicating the expectation for a substantial (80%-100%) recovery of principal in the event of a payment default. The bank loan ratings on the senior secured credit facilities of Mediacom Midwest Group and Mediacom USA Group were lowered to 'BB' from 'BB+'. A recovery rating of '1' was assigned to these facilities, indicating the expectation for a full recovery of principal in the event of a payment default. All ratings were removed from CreditWatch, where they were placed with negative implications on September 1, 2004, based on business risk concerns related to customer losses. The outlook is stable. "The downgrades are based on concerns about Mediacom's weakened business profile, reflected by a 4.4% year-over-year loss of basic video subscribers as of June 30, 2004, compared with 1.4% a year earlier," noted Standard & Poor's credit analyst Eric Geil. "The ratings reflect mature revenue growth prospects for video services, competitive pressure on video customer levels from intense satellite direct-to-home TV -- DTH -- competition, less lucrative characteristics of the company's smaller markets, potential for increased competition from telephone companies, and high financial risk from largely debt-financed cable system acquisitions and rebuilding projects," Mr. Geil adds. "Partly tempering these factors are the company's good business risk profile from its position as the still-dominant provider of pay television services in its markets, revenue growth from high- speed data, potential growth from cable telephony (which the company will launch in 2005), and healthy liquidity from modest free cash flow and substantial bank borrowing availability," says Mr. Geil. Mediacom serves 1.49 million basic cable subscribers over upgraded systems passing 2.7 million homes in medium- and smaller-size markets. Until 2003, Mediacom was less affected by DTH competition than larger-market cable TV operators because of minimal availability of satellite-delivered local channels in the company's service areas. These signals are now available to about 89% of Mediacom's homes passed, up dramatically from 15% at the end of 2002. DTH companies have also boosted subscriber acquisition spending to subsidize multiple set installations and increasingly popular digital video recorders. Recently launched joint sales efforts between local phone companies and DTH operators to offer bundled video, data, and voice services could undermine Mediacom's edge in offering bundled video and data services. MERRILL LYNCH: Fitch Puts Low-B Ratings on Six Cert. Classes ------------------------------------------------------------ Merrill Lynch Mortgage Trust, series 2004-KEY2, commercial mortgage pass-through certificates are rated by Fitch: -- $59,000,000 class A-1 'AAA'; -- $268,059,000 class A-1A 'AAA'; -- $193,737,000 class A-2 'AAA'; -- $92,126,000 class A-3 'AAA'; -- $345,746,000 class A-4 'AAA'; -- $1,114,730,373 class XC 'AAA' -- $1,081,992,000 class XP 'AAA' -- $26,474,000 class B 'AA'; -- $8,361,000 class C 'AA-'; -- $22,295,000 class D 'A'; -- $12,540,000 class E 'A-'; -- $15,328,000 class F 'BBB+'; -- $11,147,000 class G BBB'; -- $15,328,000 class H BBB-'; -- $6,967,000 class J 'BB+'; -- $5,573,000 class K 'BB'; -- $4,181,000 class L 'BB-'; -- $2,786,000 class M 'B+'; -- $2,787,000 class N 'B'; -- $5,574,000 class P 'B-'; -- $16,721,373 class Q not rated; -- $410,000 class DA not rated. These classes are offered publicly: -- A-1, A-2, A-3, A-4, B, C, D, and E. These classes are privately placed pursuant to Rule 144A of the Securities Act of 1933: -- XC, XP, A-1A, F, G, H, J, K, L, M, N, P, Q, and DA. The certificates represent beneficial ownership interest in the trust, primary assets of which are 115 fixed-rate loans having an aggregate principal balance of approximately $1,114,730,373 as of the cutoff date. For a detailed description of Fitch's rating analysis, see the report 'Merrill Lynch Mortgage Trust 2004-KEY2,' dated Sept. 9, 2004, available on the Fitch Ratings web site at http://www.fitchratings.com. MICROCELL: Campaigns for Acceptance of Rogers Wireless' Offer ------------------------------------------------------------- Microcell Telecommunications, Inc., (TSX:MT.A; MT.B) reported the mailing of the Directors' Circular detailing the previously announced recommendation of the Board of Directors that holders of its Class A Restricted Voting Shares and Class B Non-Voting Shares accept the offers from Rogers Wireless, Inc., announced on September 20, 2004, and tender their shares into the offers. The Directors' Circular will be filed in Canada on SEDAR at http://www.sedar.com/and will also be available on Microcell's Web site at http://www.microcell.ca/ In making its recommendation to the holders of shares, Microcell Telecommunications' Board of Directors carefully considered all aspects of the Rogers offers as well as the factors described in the Directors' Circular. The Board of Directors received on September 19, 2004 opinions from its financial advisors, JP Morgan Securities Inc. and Rothschild, to the effect that the consideration being offered to the holders of the shares was fair, from a financial point of view, to holders as of the date. Securityholders are encouraged to carefully review the Directors' Circular and other relevant materials, as they may be amended or supplemented from time to time. Microcell Telecommunications will be filing with the U.S. Securities and Exchange Commission a solicitation/recommendation statement on Schedule 14D-9. Securityholders are urged to read the solicitation and recommendation statement, as it may be amended from time to time, because it contains important information. Investors can obtain a free copy of materials filed by Microcell with the SEC on the SEC's Web site at http://www.sec.gov/ As reported in the Troubled Company Reporter on June 02, Microcell Telecommunications announced the mailing of the Directors' Circular containing the previously announced recommendation of the Board of Directors that holders of Microcell's Class A Restricted Voting Shares, Class B Non-Voting Shares, Warrants 2005 and Warrants 2008 not tender into the unsolicited offers from TELUS Corporation commenced on May 17, 2004. As reported in the Troubled Company Reporter on Sept. 22, Rogers Wireless Communications, Inc., Rogers Communications, Inc., and Microcell Telecommunications entered into an agreement under which Rogers Wireless will make an all cash take-over bid for Microcell's securities. In light of this development, TELUS extended its all-cash offers to purchase all of the issued and outstanding publicly traded shares (TSX: MT.A, MT.B) and warrants (TSX: MT.WT.A, MT.WT.B) of Microcell with a view to evaluating the terms and conditions of the Rogers bid and the likelihood of that bid being completed. TELUS will continue to assess its options with respect to any further extensions and amendments to its bid once the Rogers bid is available. The TELUS offers, as extended, will be open for acceptance until 9 p.m., Toronto time, on October 12, 2004, unless further extended or withdrawn. The TELUS offers were previously scheduled to expire at 9 p.m., Toronto time, on September 20, 2004. The TELUS offers are otherwise unchanged, and continue to be for Cdn.$29 per Class A restricted voting share and Class B non-voting share, Cdn.$9.67 per Warrant 2005 and Cdn.$8.89 per Warrant 2008. As of the close of business on September 20, 2004, 837 class A restricted voting shares, 172,311 class B non-voting shares, 91,166 Warrants 2005 and 91,398 Warrants 2008 of Microcell had been deposited to the offers and not withdrawn from the offers. About the Offers TELUS retained RBC Capital Markets to act as its financial advisor in connection with the offers. RBC Dominion Securities, Inc., and RBC Capital Markets Corporation are acting in Canada and the United States, respectively, as dealer managers in connection with the offers. About the Company Microcell Telecommunications, Inc., is a major provider, through its subsidiaries, of telecommunications services in Canada dedicated solely to wireless. Microcell offers a wide range of voice and high-speed data communications products and services to approximately 1.2 million customers. Microcell operates a GSM network across Canada and markets Personal Communications Services -- PCS -- and General Packet Radio Service -- GPRS -- under the Fido(R) brand name. Microcell has been a public company listed on the Toronto Stock Exchange since October 15, 1997, and is a member of the S&P/TSX Composite Index. As reported in the Troubled Company Reporter on Sept. 23, Moody's Investor's Service continues to review for possible upgrade the Caa1 Senior Implied and Ca Issuer ratings of Microcell Telecommunications, Inc., and the B3 First Priority Senior Secured and Caa2 Second Priority Senior Secured ratings of Microcell Solutions, Inc. The review, which initially commenced in May 2004 following the C$1.1 billion cash bid for Microcell by TELUS Corporation, will now consider the announcement that Rogers Wireless Communications, Inc., Rogers Communications, Inc., and Microcell have entered into an agreement under which Wireless will make a C$1.4 billion cash bid for Microcell's securities. The agreement is subject to regulatory approvals and Microcell shareholder acceptance. The review will consider the potential for either of the TELUS or Wireless bids to be completed, and Microcell's debt to be fully repaid. As reported in the Troubled Company Reporter on May 18, Standard & Poor's Ratings Services placed its 'CCC+' long-term corporate credit ratings and the 'B-' senior secured debt rating, on Microcell Telecommunications Inc. on CreditWatch with positive implications following Telus Corp.'s announced cash bid for 100% of the shares of Microcell. At the same time, the ratings on the company's subsidiary, Microcell Solutions Inc., were also placed on CreditWatch with positive implications. "Should the bid be successful, Microcell's existing debt would likely be redeemed in its entirety," said Standard & Poor's credit analyst Joe Morin. Microcell currently has about C$400 million in senior secured bank debt outstanding. Under the credit facility covenants, a change of control in Microcell could result in an acceleration of the debt, which can be exercised at the option of lenders. In addition, the debt can be voluntarily prepaid at any time. Standard & Poor's assumes that if the debt is not accelerated by creditors, Telus would prepay the debt given the facility's higher interest rates and collateral features. MICROCELL: Rogers Wireless Mails Offering Docs to Securityholders ----------------------------------------------------------------- Rogers Wireless, Inc., a wholly owned subsidiary of Rogers Wireless Communications Inc., mailed offering documents to the securityholders of Microcell Telecommunications, Inc., in connection with its cash offers for all of the issued and outstanding Class A Restricted Voting shares, Class B Non-Voting shares, Warrants 2005 and Warrants 2008 of Microcell, at a price of C$35.00 per Class A share, C$35.00 per Class B share, C$15.79 per Warrant 2005 and C$15.01 per Warrant 2008. The offers will be open for acceptance until 5:00 p.m., Eastern Standard Time (EST), on November 5, 2004, unless extended or withdrawn by Rogers Wireless. If the offers are extended, RWI will publicly announce the extension prior to 9:00 a.m. EST, on the next business day following the date the offers were scheduled to expire. Rogers Wireless will provide a copy of the notice to the Toronto Stock Exchange and will advise the depositary to notify Microcell securityholders in writing. Rogers Wireless operates Canada's largest integrated wireless voice and data network, providing advanced voice and wireless data solutions to customers from coast to coast on its GSM/GPRS network, the world standard for wireless communications technology. The Company has approximately 4.1 million wireless voice, data and messaging customers, and has offices in Canadian cities across the country. Rogers Wireless, Inc., is a wholly owned subsidiary of Rogers Wireless Communications Inc., which is currently 55% owned by Rogers Communications Inc. and 34% owned by AT&T Wireless Services, Inc. Microcell Telecommunications, Inc., is a major provider, through its subsidiaries, of telecommunications services in Canada dedicated solely to wireless. Microcell offers a wide range of voice and high-speed data communications products and services to over 1.2 million customers. Microcell operates a GSM network across Canada and markets Personal Communications Services -- PCS -- and General Packet Radio Service -- GPRS -- under the Fido(R) brand name. Microcell has been a public company since October 15, 1997, and is listed on the Toronto Stock Exchange. * * * As reported in the Troubled Company Reporter on Sept. 23, Moody's Investor's Service continues to review for possible upgrade the Caa1 Senior Implied and Ca Issuer ratings of Microcell Telecommunications, Inc., and the B3 First Priority Senior Secured and Caa2 Second Priority Senior Secured ratings of Microcell Solutions, Inc. The review, which initially commenced in May 2004 following the C$1.1 billion cash bid for Microcell by TELUS Corporation, will now consider the announcement that Rogers Wireless Communications, Inc., Rogers Communications, Inc., and Microcell have entered into an agreement under which Wireless will make a C$1.4 billion cash bid for Microcell's securities. The agreement is subject to regulatory approvals and Microcell shareholder acceptance. The review will consider the potential for either of the TELUS or Wireless bids to be completed, and Microcell's debt to be fully repaid. MORGAN COMMERCIAL: Fitch Junks Classes G & H Mortgage Certs. ------------------------------------------------------------ Fitch Ratings downgrades J.P. Morgan Commercial Mortgage Finance Corp.'s mortgage pass-through certificates, series 1998-C6: -- $19.9 million class G to 'CCC' from 'B-'; -- $6 million class H to 'CC' from 'CCC'. Fitch also removes class G from Rating Watch Negative. This class is removed from Rating Watch Negative and affirmed: -- $39.8 million class F 'BB'. This class is upgraded by Fitch: -- $39.8 million class C to 'AA+' from 'AA-'. In addition, Fitch affirms these classes: -- $74.3 million class A-2 'AAA'; -- $245.9 million class A-3 'AAA'; -- Interest-only class X 'AAA'; -- $47.8 million class B 'AAA'' -- $47.8 million class D 'BBB'; -- $15.9 million class E 'BBB-'. Fitch does not rate the $8.9 million Class NR certificates. The downgrade of classes G and H is due to expected losses on the specially serviced loans, which are expected to impact principal distributions to class H. Classes F and G are removed from Rating Watch Negative as the specially serviced loans are closer to resolution. These classes continue to incur interest shortfalls. The upgrade to class C is primarily attributable to an increase in subordination levels due to loan payoffs and amortization. As of the September 2004 distribution date, the pool's certificate balance has been reduced by 31% to $546.1 million from $796.4 million at issuance. Realized losses to date total $5.0 million, or 0.63% of the original principal balance. Midland Loan Services, the master servicer, L.P., collected year- end 2003 financials for 94% of the pool. The pool's weighted average debt service coverage ratio -- DSCR -- was 1.60 times as of YE 2003 versus 1.64x at issuance. Four loans (9%) are currently 90 days delinquent and in special servicing. Losses are likely on three of these loans. The largest specially serviced loan (5%) is secured by a retail property in Honolulu, Hawaii. Costco, the major tenant, vacated, and current occupancy is only 31%. The issuer is planning to repurchase the loan. The second largest specially serviced loan (1.60%) is secured by a hotel in San Mateo, California. The hotel is 100% vacant, and the special servicer is considering foreclosure or acceptance of a discounted payoff as workout options. The third largest loan (1.6%) is secured by an industrial property in Dallas, Texas. The property is being marketed for sale. Of the four investment-grade credit assessed loans in the pool at issuance, one loan (10%) paid in full and two (19%) remain investment-grade. The Fitch-stressed DSCR for each loan was calculated using servicer-provided net operating income less reserves divided by a Fitch-stressed debt service payment. The Shannon Portfolio (6%), secured by 11 multifamily properties in North Carolina, has experienced performance deterioration since issuance due to economic factors and soft market conditions and is no longer considered investment-grade. The YE 2003 DSCR has decreased to 0.74x from 1.47x at issuance. Average occupancy has declined to 74% as of June 2004 from 93% at issuance. The Crystal Gateway Marriott (10%) is a 697-room full-service hotel in Arlington, Virginia. The YE 2003 DSCR was 1.86x, compared with 1.60x at issuance. Occupancy was 77% as of YE 2003, down from 80% at issuance. Four and Five Skyline Drive (8%) are two office buildings in Falls Church, Virginia, with a total of 509,808 square feet. The YE 2003 DSCR was 1.94x, up from 1.35x at issuance. Occupancy was 89% as of YE 2003, compared with 95% at issuance. MORTGAGE CAPITAL: Moody's Slashes Class G Rating to Ca from B3 -------------------------------------------------------------- Moody's Investors Service upgraded the ratings of three classes, affirmed the ratings of four classes and downgraded the rating of one class of Mortgage Capital Funding, Inc., Multifamily/Commercial Mortgage Pass-Through Certificates, Series 1996-MC2 are: -- Class A-3, $11,654,661, Fixed, affirmed at Aaa -- Class X, Notional, affirmed at Aaa -- Class B, $27,483,332, Fixed, affirmed at Aaa -- Class C, $22,902,777, Fixed, upgraded to Aaa from A1 -- Class D, $18,322,221, Fixed, upgraded to Aaa from Baa1 -- Class E, $11,451,388, Fixed, upgraded to Aa2 from Baa2 -- Class F, $25,193,054, Fixed, affirmed at Ba2 -- Class G, $16,031,943, Fixed, downgraded to Ca from B3 As of the September 20, 2004 distribution date, the transaction's aggregate balance has decreased by approximately 68.6% to $143.8 million from $458.1 million at closing. The Certificates are collateralized by 56 mortgage loans secured by commercial and multifamily properties. The loans range in size from less than 1.0% of the pool to 6.2% of the pool, with the top 10 loans representing 42.8% of the pool. Three loans have been liquidated from the pool, resulting in aggregate realized losses of approximately $3.0 million. Four loans representing 12.4% of the pool are in special servicing. The largest loans in special servicing are the Holiday Inn Woodlawn and Hampton Inn Executive Loans, two cross- collateralized loans that represent the largest exposure in the pool. Moody's estimated aggregate losses of approximately $10.5 million for all of the specially serviced loans. Moody's was provided with year-end 2003 operating results for approximately 97.3% of the performing loans in the pool. Excluding the two REO loans, Moody's loan to value ratio -- LTV -- is 78.2%, compared to 76.8% at Moody's last full review in April 2003 and 81.4% at securitization. The upgrade of Classes C, D and E is due to significant increases in credit support for those classes. The downgrade of Class G is due to realized and expected losses from the specially serviced loans, LTV dispersion and interest shortfalls ($168,621). Based on Moody's analysis, 18.3% of the pool has a LTV greater than 100.0%, compared to 9.2% at last review. The top three loan exposures represent 23.0% of the outstanding pool balance. The largest exposure consists of the Holiday Inn Woodlawn Loan ($8.5 million - 5.9%) and the Hampton Inn Executive Loan ($4.2 million - 2.9%), two cross-collateralized loans secured by two hotel properties located in Charlotte, North Carolina. The two properties contain a total of 586 rooms. The loans were transferred to special servicing in April 2002 due to payment default and became REO in January 2004. Each property faces significant competition in a soft hotel market. Moody's LTV is significantly in excess of 100.0%, the same as at the last review. The second largest exposure consists of the Northridge Commons Loan ($8.5 million - 5.9%) and the Laurel Commons Loan ($3.1 million - 1.9%), two cross collateralized loans secured by two retail centers located approximately 20 miles west of Detroit, Michigan. The centers total 163,500 square feet and are 100.0% occupied. Moody's LTV is 72.9%, compared to 76.2% at last review. The third largest exposure is the Stage Center Loan ($8.9 million - 6.2%), which is secured by a 141,000 square foot retail center located 13.5 miles northeast of Memphis, Tennessee. The property, which is 78.0% occupied compared to 96.0% at securitization, is anchored by Piggly Wiggly. A second anchor, Walgreens, vacated the premises in 2002. Based on financial information provided by the master servicer, the loan's debt service coverage ratio is below 1.0x. Moody's LTV is in excess of 100.0%, compared to 94.9% at last review. The pool's collateral is a mix of: * retail (42.1%), * multifamily (34.0%), * hotel (10.8%), * office (6.4%), * industrial and self storage (3.4%), and * healthcare (3.3%). The collateral properties are located in 22 states. The highest state concentrations are: * North Carolina (19.5%), * Tennessee (12.7%), * Michigan (8.6%), * Florida (6.7%), and * Georgia (6.6%). All of the loans are fixed rate. NEWCASTLE CDO: S&P Puts BB Rating on Class V $475 Million Notes --------------------------------------------------------------- Standard & Poor's Ratings Services assigned its ratings to Newcastle CDO V Ltd./Newcastle CDO V Corp.'s $475 million notes. Newcastle CDO V Ltd./Newcastle CDO V Corporation is a cash flow CDO backed primarily by CMBS, REIT debt securities, other ABS, and loans. The ratings are based on: (1) adequate credit support provided in the form of overcollateralization, subordination, and excess spread; (2) characteristics of the underlying collateral pool, consisting primarily of CMBS, REIT debt securities, other ABS, and loans; (3) hedge agreements entered into with an appropriately rated counterparty to mitigate the interest rate risk created by having certain fixed-rate assets and certain floating-rate liabilities; (4) scenario default rates of 25.00% for class I, 19.48 for class II, 16.20% for class III, 11.86% for class IV, and 6.05% for class V; and (5) break-even loss rates of 29.17% for class I, 23.17% for class II, 19.01% for class III, 17.32% for class IV, and 9.69% for class V; (6) weighted average rating of 'BBB'; (7) weighted average maturity for the portfolio of seven years; (8) S&P default measure -- DM -- of 0.50%; (9) S&P variability measure -- VM -- of 1.50%; (10) S&P correlation measure -- CM -- of 1.53; and (11) rated overcollateralization -- ROC -- of 109.41% for class I, 111.38% for class II, 108.79% for class III, 107.53% for class IV, and 106.47% for class V. Interest on the class II, III, IV, and V notes may be deferred up until the legal final maturity of September 2039 without causing a default under these obligations. The ratings on the class II, III, IV, and V notes, therefore, address the ultimate payment of interest and principal. Additional information on CDOs is available on RatingsDirect, Standard & Poor's Web-based credit analysis system, at http://www.ratingsdirect.com/and on the Standard & Poor's Web site at http://www.standardandpoors.com/ Ratings Assigned Newcastle CDO V Ltd./Newcastle CDO V Corporation Class Rating Amount (mil. $) ----- ------ --------------- I AAA 388.0 II AA 23.5 III A 23.0 IV-FL BBB 8.0 IV-FX BBB 12.0 V BB 20.5 Pref. shares N.R. 25.0 N.R. - Not rated. NEW WEATHERVANE: Has Until Dec. 31 to Make Lease-Related Decisions ------------------------------------------------------------------ The Honorable Peter J. Walsh of the U.S. Bankruptcy Court for the District of Delaware extended, until Dec. 31, 2004, the period within which New Weathervane Retail Corporation and its debtor- affiliates can elect to assume, assume and assign or reject their unexpired nonresidential real property leases. The Debtors remind the Court that on July 21, 2004, they entered into a Letter Agreement with Fair Vane Corp., under which Fair Vane will purchase the majority of the Debtors' remaining assets, including the majority of its leases, for $2.7 million. The Debtors explain that the extension period will give them more time to finish the liquidation of their properties and bridge the period until Fair Vane closes on the sale and assumes the majority of their leases. The Debtors add that the extension will give them more time to determine what value they can extract from their headquarters property and unfinished store spaces. The Debtors assure the Court that no lessor will be prejudiced by the extension as they continue to perform their postpetition obligations as required by section 365(d)(3) of the Bankruptcy Code. Headquartered in New Britain, Connecticut, New Weathervane Retail Corporation -- http://www.wvane.com/-- is a women's specialty retailer. The Company filed for chapter 11 protection on June 3, 2004 (Bankr. Del. Case No. 04-11649). William R. Firth, III, Esq., at Pepper Hamilton LLP, represents the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $28,710,000 in total assets and $24,576,000 in total debts. NEXPAK CORP: Gets Court Nod to Hire Barrier as Financial Adviser ---------------------------------------------------------------- The U.S. Bankruptcy Court for the Northern District of Ohio gave NexPak Corporation, and its debtor-affiliates, permission to retain Barrier Advisors, L.P., as their financial and operation advisors. Barrier Advisors worked for the Debtors since January 2004 and is familiar with the Debtors' operations, debt structure, accounting and financial systems, business and financial operations. Barrier Advisors will: a) provide financial advice and assistance in connection with the operation of the Debtors' business; b) provide financial advice to the Debtors with respect to any necessary financing, including debtor in possession financing and exit financing in their chapter 11 cases; c) provide financial advise and assistance to the Debtors in obtaining approval of the Plan of Reorganization and in making any needed modifications to the Plan; d) provide financial advice and assistance to the Debtors in structuring any new securities to be issued in connection with the Plan or any other plan of reorganization; e) provide financial advice and assistance in preparing the financial analyses to refine and finalize the Plan, or any other plan of plan of reorganization, including any financial summaries, analyses or valuations needed for a related disclosure statement; f) assist the Debtors in negotiating with their various stakeholders; g) provide financial advice and assistance in the preparation of financial reports required in connection with the Debtors' chapter 11 cases, including reports and other information to be filed with the Court, submitted to the Office of the United States Trustee or other parties in interest; h) assist the Debtors' analyses of claims asserted against their estates; i) provide operational advice and assistance with respect to the implementation of the Debtors' business plan and operations under chapter 11; j) provide financial testimony for the Debtors in their cases as requested; and k) provide other financial or operational advisory services as may be requested by the Debtors and agreed to by Barrier Advisors. Mr. Kent Laber, Managing Director at Barrier Advisors discloses that the Firm received a $112,500 retainer and a prepetition payment of $120,457.68 for services rendered by the Firm prior to the Petition Date. Mr. Laber reports that Barrier Advisors will charge the Debtors a monthly advisory fee of $75,000 for it services. To the best of the Debtors knowledge, Barrier Advisors is "disinterested" as the term is defined in Section 101(14) of the Bankruptcy Code. Headquartered in Uniontown, Ohio, NexPak Corporation, -- http://www.nexpak.com/-- manufactures and supplies standard and custom packaging for DVD, CD, video, audio, and professional media formats. The Company filed for chapter 11 protection on July 18, 2004 (Bankr. N.D. Ohio Case No. 04-63816). Ryan Routh, Esq., and Shana F. Klein, Esq., at Jones Day represent the Company in its restructuring efforts. When the Company filed for protection from its creditors it reported approximately $101 million in total assets and total debts approximating $209 million. NORTEL NETWORKS: Plans to Lay Off 3,250 Employees to Save $220M --------------------------------------------------------------- Nortel Networks Corporation (NYSE:NT)(TSX:NT) and its principal operating subsidiary, Nortel Networks Limited, provided a status update pursuant to the alternative information guidelines of the Ontario Securities Commission. These guidelines contemplate that Nortel Networks and Limited will normally provide bi-weekly updates on their affairs until the time as they are current with their filing obligations under Canadian securities laws. Work Plan Nortel Networks and Nortel Limited announced an update to their work plan previously announced on August 19, 2004, including details concerning anticipated workforce reductions, the timing for completion and associated updates on estimated cost and savings impacts. The work plan involves focused workforce reductions, a voluntary retirement program, real estate optimization and other cost containment actions such as reductions in information services costs, outsourced services and other discretionary spending. The Company currently expects the workforce reduction notifications to be completed by June 30, 2005 and the real estate actions to be completed by the end of 2005. "The decisions made to reduce our employee community and refine operational efficiencies have been undertaken in a very considered way," said Bill Owens, president and chief executive officer, Nortel Networks. "Our workforce actions are focused to disproportionately protect customer and sales facing roles as well as continue our focus on new innovative solutions. Our overall objective is to grow the business and to ensure that we have the appropriate levels of investment in key growth businesses and markets. The work plan outlined ... will allow us to trim our cost structure by streamlining our business to drive more efficient operations. This plan demonstrates our commitment to 'costs, cash and revenues' as strategic imperatives in managing our business and driving growth." Workforce The Company's work plan now includes targeted workforce reductions of approximately 3,250 employees. Approximately two-thirds of the employees are expected to be notified by December 31, 2004 with the remainder expected to be notified by June 30, 2005. These focused headcount reductions are intended to result in ongoing cost reductions in research and development expenses, selling, general and administrative expenses, and cost of sales. These actions are subject to the completion of required jurisdictional consultation and regulatory approvals. The anticipated approximate regional impacts of the reductions are set out below. Approximate Employee Region Reductions ------ ----------- United States 1,400 Canada 950 Europe, Middle East and Africa (EMEA) 650 Other 250 Real Estate The work plan also includes the reduction of approximately 2 million square feet of occupied space as a result of the workforce reductions and improved space utilization through consolidation of locations. The Company expects the real estate actions to be completed by the end of 2005. Costs The Company now estimates charges to the income statement associated with its overall work plan in the aggregate of approximately $450 million comprised of approximately $220 million with respect to the workforce reductions and approximately $230 million with respect to the real estate actions. No charges are expected to be recorded with respect to the other cost containment actions. Approximately 35 percent of the aggregate income statement charges are expected to be incurred in 2004 with the remainder in 2005. The associated cash costs of the work plan of approximately $430 million are split approximately equally between the workforce reductions and real estate actions. Approximately 10 percent of these cash costs are expected to be incurred in 2004 and approximately 40 percent are expected to be incurred in 2005. The remaining 50 percent of the cash costs relates to the real estate actions and are expected be incurred in 2006 through to 2022 for ongoing lease costs related to impacted real estate facilities. The Company also expects to incur capital cash costs of approximately US$50 million in 2005 for facility improvements related to the real estate actions. Overall costs of the work plan are higher than previous estimates principally due to more extensive real estate actions, which are expected to result in increased longer term cost savings. Cost Savings The Company anticipates cost savings from the implementation of the work plan of approximately $500 million in 2005, which are expected to increase on an annualized basis beyond 2005 as the full impact of the work plan is realized. Business Model Nortel Networks continues to expect to reduce its operating expenses to 35 percent of revenues or lower on an annualized basis in 2005. This expectation takes into consideration the implementation of the work plan as outlined above and incremental investments associated with the Company's previously announced strategic plan including its focus on the government and defense customer segments, marketing initiatives, and solutions that support secure, reliable, converged networks. If Nortel Networks and Nortel Limited fail to file the Reports within the waiver period, there can be no assurance that Nortel Limited would receive any further waivers or any extensions of the waiver beyond its scheduled expiry date. If the waiver expires prior to the filing of the Reports, EDC would have the right at such time to require Nortel Limited to cash collateralize the support outstanding under the EDC Support Facility and to exercise its rights against the collateral under related security agreements. As previously announced, the Company and NNL expect to file the Reports by the end of October 2004. Nortel Networks offers converged multimedia networks that eliminate the boundaries among voice, data and video. These networks use innovative packet, wireless, voice and optical technologies and are underpinned by high standards of security and reliability. For both carriers and enterprises, these networks help to drive increased profitability and productivity by reducing costs and enabling new business and consumer services opportunities. Nortel Networks does business in more than 150 countries. For more information, visit Nortel Networks 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, the Integrated Market Enforcement Team of the Royal Canadian Mounted Police recently advised Nortel that it will commence a criminal investigation into the Company's financial accounting situation. As reported in the Troubled Company Reporter on August 12, Nortel'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. As reported in the Troubled Company Reporter on June 25, Standard & Poor's Ratings Services said that its 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. 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 is undergoing an independent review of its financial results reported in each of its quarters of 2003 and for earlier periods including 2002 and 2001. The company has not been in a position to file its Form 10K for 2003 and has recently announced that it will not be in a position to file the relevant financial statements in second- quarter 2004. Relating to this, the CEO and CFO were terminated for cause, and four senior finance executives were placed on paid leave pending further progress of the review; the company is also undergoing investigations by the SEC and Ontario Securities Commission, and is the subject of a criminal investigation in the U.S. NORTEL NETWORKS: Has to File Financial Reports by October 31 ------------------------------------------------------------ Nortel Networks Corporation's (NYSE:NT)(TSX:NT) principal operating subsidiary, Nortel Networks Limited obtained a new waiver from Export Development Canada under the EDC performance- related support facility. It is a waiver of certain defaults related to the delay by Nortel Networks and Nortel Limited in filing their respective 2003 Annual Reports on Form 10-K, Q1 2004 Quarterly Reports on Form 10-Q and Q2 2004 Quarterly Reports on Form 10-Q, in each case with the U.S. Securities and Exchange Commission, the trustees under the Company's and Nortel Limited's public debt indentures and EDC. The waiver also applies to certain additional breaches under the EDC Support Facility relating to the delayed filings and the previously announced restatement of Nortel Networks' and Nortel Limited's financial results. The new waiver from EDC will remain in effect until the earlier of certain events including: -- the date on which the Reports have been filed with the SEC; or -- October 31, 2004. Nortel Limited's prior waiver from EDC, previously announced on August 20, 2004, expired on September 30, 2004. The EDC Support Facility provides up to $750 million in support, all presently on an uncommitted basis. Once the Reports have been filed with the SEC and the related breaches cured, the $300 million revolving small bond sub-facility of the EDC Support Facility would again become committed support. As of Sept. 29, there was approximately US$273 million of outstanding support utilized under the EDC Support Facility, approximately US$201 million of which was outstanding under the small bond sub- facility. If Nortel Networks and Nortel Limited fail to file the Reports within the waiver period, there can be no assurance that Nortel Limited would receive any further waivers or any extensions of the waiver beyond its scheduled expiry date. If the waiver expires prior to the filing of the Reports, EDC would have the right at such time to require Nortel Limited to cash collateralize the support outstanding under the EDC Support Facility and to exercise its rights against the collateral under related security agreements. As previously announced, the Company and NNL expect to file the Reports by the end of October 2004. Nortel Networks offers converged multimedia networks that eliminate the boundaries among voice, data and video. These networks use innovative packet, wireless, voice and optical technologies and are underpinned by high standards of security and reliability. For both carriers and enterprises, these networks help to drive increased profitability and productivity by reducing costs and enabling new business and consumer services opportunities. Nortel Networks does business in more than 150 countries. For more information, visit Nortel Networks 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, the Integrated Market Enforcement Team of the Royal Canadian Mounted Police recently advised Nortel that it will commence a criminal investigation into the Company's financial accounting situation. As reported in the Troubled Company Reporter on August 12, Nortel'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. 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 is undergoing an independent review of its financial results reported in each of its quarters of 2003 and for earlier periods including 2002 and 2001. The company has not been in a position to file its Form 10K for 2003 and has recently announced that it will not be in a position to file the relevant financial statements in second- quarter 2004. Relating to this, the CEO and CFO were terminated for cause, and four senior finance executives were placed on paid leave pending further progress of the review; the company is also undergoing investigations by the SEC and Ontario Securities Commission, and is the subject of a criminal investigation in the U.S. NORTHWESTERN STEEL: IMA Advisors Bids $20K to Buy Un-Issued Stock ----------------------------------------------------------------- Phillip V. Martino, the chapter 7 trustee overseeing the liquidation of Northwestern Steel & Wire Co., received a $20,000 cash offer from IMA Advisors, Inc., for all authorized but un- issued shares of stock in the Northwestwen Steel & Wire Co. Northwestern's Articles of Incorporation and supporting resolutions authorze the corporation to up to 75,000,000 shares of common stock; only 24,484,823 were ever issued. The stock was publicly traded during before the company filed for bankruptcy protection. In exchange for the $20,000, Mr. Martino tells the U.S. Bankruptcy Court for the Northern District of Illinois, he'll sell the estate's right, title and interest, if any, in and to the shares to IMA. The Trustee hasn't received any other offers for the shares, doesn't know of any established market in which to sell shares in defunct companies, and he "doubts that he could obtain more than $20,000 for the Stock," though he'll try in a open court auction before the Honorable Manuel Barbosa in Rockford at 9:30 a.m. on Oct. 20, 2004. To the best of the Trustee's knowledge, IMA has no connection with the Debtor. The Trustee is unaware of any tax consequence that will arise from the sale, and the transaction brings $20,000 of cash into the estate at a very low cost. Accordingly, the Trustee says, the transaction benefits the estate and should be approved pursuant to 11 U.S.C. Sec. 363. In the event any party wants to make a higher and better offer for the Stock, the Trustee requires that the competing bidder file an objection to the sale motion no later than Oct. 18, 2004, appear in court on Oct. 20, offer no less than $22,000, and deliver to him a cashiers' check for 20% of the proposed purchase price prior to the auction. IMA Advisors can be reached at: IMA Advisors, Inc. 10777 Westheimer, Suite 1100 Houston, TX 77042 Telephone (713) 267-9367 Fax (240) 358-5913 Attention: Mark Rice, CEO Mobile (713) 443-7688 E-mail: mmrice@msn.com Northwestern Steel and Wire Corporation was a major mini-mill producer of structural steel components and selected wire products. The Company filed chapter 11 protection on December 19, 2000 (Bankr. N.D. Ill. Case No. 00-74075) and converted to a chapter 7 liquidation proceeding on July 12, 2002. Phillip V. Martino, Esq., at Piper Rudnick LLP, serves as the chapter 7 trustee and is represented by himself and Colleen E. McManus, Esq., at Piper Rudnick. Janet E. Henderson, Esq., and Kenneth P. Kansa, Esq., at Sidley Austin Brown & Wood represented the Debtor in its chapter 11 proceeding before operations ceased, the case was converted and the Chapter 7 Trustee was appointed. NOVA CHEMICALS: Declares $0.10 Per Common Share Quarterly Dividend ------------------------------------------------------------------ NOVA Chemicals Corporation's Board of Directors declared a $0.10 per common share quarterly dividend, payable on Nov. 15, to shareholders of record at the close of business on Oct. 29, 2004. NOVA Chemicals (S&P, BB+ Long-Term Corporate Credit Rating, Positive) produces ethylene, polyethylene, styrene monomer and styrenic polymers, which are used in a wide range of consumer and industrial goods. NOVA Chemicals manufactures its products at 18 operating facilities located in the United States, Canada, France, the Netherlands and the United Kingdom. The company also has five technology centers that support research and development initiatives. NOVA Chemicals Corporation shares trade on the Toronto and New York stock exchanges under the trading symbol NCX. Visit NOVA Chemicals on the Internet at http://www.novachemicals.com/ NOVA CHEMICALS: Fitch Puts BB+ Rating on Senior Unsecured Debt -------------------------------------------------------------- Fitch Ratings initiated ratings on Nova Chemicals Corporation's senior unsecured debt at 'BB+'. At the same time, Fitch assigned a rating to Nova's senior secured credit facility at 'BBB'. The Rating Outlook is Stable. The ratings are supported by NOVA Chemical's: * size, * market position in North America and Europe, * low cost position as a domestic ethylene and polyethylene producer, and * significant earnings leverage during the peak of the chemical cycle. The company's strategy is to remain focused on cyclical commodities including ethylene, polyethylene, styrene, and styrenic polymers. Nova Chemicals has adequate liquidity, a manageable maturity schedule, and increased financial flexibility by extending expiration dates for its senior secured credit facility and accounts receivable securitization program until 2007. The total return swap agreement for Nova Chemical's outstanding retractable preferred shares also expires in 2007. Concerns include: * the potential for softening in demand with rapidly increasing raw material and product prices, * cash burn and weak performance in the styrenics business, and * potential share repurchase activity not supported by operational cash flow. Growth rates for styrene and styrene derivatives are modest, excluding emerging markets like Eastern Europe and China. Therefore Nova Chemicals is likely to realize more modest volume growth in their primary target markets, North America and Western Europe. The Stable Rating Outlook reflects the improvement in Nova Chemicals's olefin and polyolefins business and the strengthening of the economies around the world. The petrochemical industry is realizing higher operating rates and tightening of supply demand fundamentals, which will enable producers to gain greater pricing power. Margin expansion has occurred in 2004 and, in general, is expected to continue as market fundamentals strengthen. Fitch remains moderately concerned about the sustainability of the recovery with increasing energy costs and the overall effect of high petrochemical prices on demand. As of June 30, 2004, Nova's balance sheet debt plus accounts receivable program balance and outstanding retractable preferred shares totaled $1.9 billion. The company had a total debt-to-EBITDA of 4.8 times and total adjusted debt-to-EBITDAR, incorporating gross rent, of 5.2x for the latest 12 months ending June 30, 2004. EBITDAR to interest incurred plus rental expense was 2.7x for the same period. Balance sheet debt consists of $31 million in nonrecourse project finance borrowings, $550 million in medium- term notes, and $912 million in senior unsecured notes and debentures. In addition, the company's $200 million A/R program was fully utilized at the end of the second quarter. Other indebtedness of the company includes $198 million in retractable preferred shares. In relation to the retractable preferred shares, approximately $65 million is held as restricted cash and included in other current assets. As a result of this cash collateral, the notional amount of the total return swap for the retractable preferred shares is approximately $126 million. Nova Chemicals has a manageable maturity schedule, with approximately $103 million due in 2005 and $302 million due in 2006. The company will likely redeem the outstanding retractable preferred shares prior to the expiration of the total return swap agreement in 2007. Nova Chemicals is expected to have financial flexibility to repay and/or replace such debt maturities and retractable preferred shares given Fitch's base case projections for operating cash flow, access to the debt market, and availability under its credit facility. Nova Chemicals Corporation is a multinational producer of commodity chemicals, including ethylene, polyethylene, styrene, and polystyrene. The company generated EBITDA of $238 million on $3.95 billion sales in 2003. A majority of its assets are located in Canada and the U.S. In North America, NOVA is the fifth largest producer of ethylene and polyethylene. The company reports two business segments, olefins/polyolefins and styrenics. The U.S. accounts for 72% of sales, Canada accounts for 5%, Europe and rest of the world accounts for 23%. Polyethylene and styrenic polymers are used in rigid and flexible packaging, containers, plastic bags, plastic pipe, electronic appliances, housing and automotive components, and consumer goods. ONSITE TECHNOLOGY: U.S. Trustee Meeting with Creditors on Oct. 5 ---------------------------------------------------------------- The U.S. Trustee for Region 7 will convene a meeting of OnSite Technology, L.L.C., creditors at 10:00 a.m., on October 5, 2004, at the Office of the U.S. Trustee, Suite 3401, 515 Rusk Avenue, Houston, Texas 77002. This is the first meeting of creditors required under U.S.C. Sec 341(a) in all bankruptcy cases. All creditors are invited, but not required, to attend. This Meeting of Creditors offers the opportunity in a bankruptcy proceeding for creditors to question a responsible office of the Debtor under oath about the company's financial affairs and operations that would be of interest to the general body of creditors. Headquartered in Houston, Texas, Onsite Technology, L.L.C. -- 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 from its creditors, it listed more than $10 million in estimated assets and more than $1 million in estimated debts. RAYTHEON: Likely Debt Cuts Prompts Fitch's Positive Outlook ----------------------------------------------------------- Fitch Ratings affirmed Raytheon's credit ratings, including: * the 'BBB-' rating on Raytheon's senior unsecured debt and bank facilities; * the 'BB+' rating on RC Trust I's trust preferred securities; and * the 'F3' rating on Raytheon's commercial paper program. The Rating Outlook is revised to Positive from Stable. The Outlook revision is based on the amount of debt reduction Raytheon is likely to achieve in 2004 and the impact lower debt levels will have on its credit statistics. Raytheon lowered its debt levels by approximately $1 billion so far in 2004, and announced a tender offer for an additional $1 billion of debt. Fitch estimates that Raytheon will be able to accomplish this debt reduction with existing cash resources and free cash flow. The Outlook revision is also supported by the performance of the company's defense segments, strong cash flow performance in the first half of the year, and stabilization in the business jet market. Raytheon's ratings reflect: * the competitive position of the company's defense businesses, * the high levels of U.S. defense spending, * strong backlog, * solid liquidity position, and * the satisfaction of most of the engineers and constructors -- E&C -- obligations. Concerns center on pending lawsuits and investigations, and the financial performance and competitive position of Raytheon Aircraft -- RAC. Previously, a concern had been the low level of Raytheon's credit statistics, compared with other 'BBB-' companies. Taking into account the year-to-date debt reduction, Fitch estimates that the company raised its credit metrics to levels appropriate for the current rating. With the tender announced, Raytheon's credit ratios will continue to improve, but future rating actions will depend on continued strong operating performance, future levels of cash generation, and cash deployment plans in 2005. At June 27, 2004, Raytheon had a liquidity position of $3.0 billion, consisting of $1.1 billion of cash and short-term investments and $2.1 billion of availability under its $2.3 billion of credit lines, offset by $168 million of short-term debt and current debt maturities. Raytheon's debt-to-EBITDAP ratio for the last 12 months ending June 27, 2004, improved to 3.0 times (x) from 3.5x in 2003. Interest coverage also improved to 4.4x for the last 12-month period, compared with 3.9x in 2003. These ratios exclude the impact of one-time items totaling $276 million in the Network Centric Systems and Technical Services segments during 2003. Including these charges, the debt-to-EBITDAP ratios for the last 12 months and 2003 were 3.4x and 4.1x, respectively. RCN CORP: Asks Court to Extend Removal Period to January 17 ----------------------------------------------------------- Section 1452 of the Judiciary Procedures Code governs the removal of state court actions to federal court: "(a) A party may remove any claim or cause of action in a civil action other than a proceeding before the United States Tax Court or a civil action by a governmental unit to enforce such governmental unit's police or regulatory power, to the district court for the district where such civil action is pending, if such district court has jurisdiction of such claim or cause of action under section 1334 of this title." RCN Cable TV of Chicago, Inc., RCN Entertainment, Inc., ON TV, Inc., 21st Century Telecom Services, Inc., and RCN Telecom Services of Virginia, Inc., are from time to time named as party in state court judicial actions arising in connection with any one of a variety of matters in which they may be involved. Because these Debtors have been primarily focused on stabilizing and maximizing the value of their business during the pendency of the Chapter 11 cases, they have not had the opportunity to devote sufficient time to assess whether there are any pending actions, which should be removed. While the Debtors are not aware of any pending state court litigation to which they are a party, the Debtors require an extension of their deadline to file notices of removal. D.J. Baker, Esq., at Skadden, Arps, Slate, Meagher & Flom, LLP, in New York, explains that the preservation of the Debtors' right to remove actions will afford them a sufficient opportunity to assess whether there are any pending actions that can and should be removed. Accordingly, the Debtors ask the Court to extend their Removal Period through and including January 17, 2005. Mr. Baker assures Judge Drain that the Debtors' adversaries will not be prejudiced by the extension because the adversaries may not prosecute an action against the Debtors absent relief from the automatic stay. Additionally, nothing will prejudice any party to a proceeding the Debtors seek to remove from pursuing remand. Headquartered in Princeton, New Jersey, RCN Corporation -- http://www.rcn.com/-- provides bundled Telecommunications services. The Company, along with its affiliates, filed for chapter 11 protection (Bankr. S.D.N.Y. Case No. 04-13638) on May 27, 2004. Frederick D. Morris, Esq., and Jay M. Goffman, Esq., at Skadden Arps Slate Meagher & Flom LLP, represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $1,486,782,000 in assets and $1,820,323,000 in liabilities. (RCN Corp. Bankruptcy News, Issue No. 12; Bankruptcy Creditors' Service, Inc., 215/945-7000) RELIANCE GROUP: Wants Court Okay on $166.5 Million PBGC Settlement ------------------------------------------------------------------ The Official Unsecured Creditors' Committee and the Official Unsecured Bank Committee ask Judge Gonzalez to approve a stipulation to settle the Pension Benefit Guaranty Corporation's Claims. The PBGC filed 12 claims against the Reliance Group Holdings, Inc., Pension Plan and the Reliance Insurance Company Retirement Plan. The aggregate value of the PBGC Claims was $200,000,000 in both the Debtors' cases. The PBGC alleged that its Claims were entitled to administrative or some other priority under the Bankruptcy Code. If allowed, the PBGC Claims would have exceeded the Debtors' cash, potentially presenting an insurmountable hurdle to any reorganization plan for either Debtor. The Committees disagreed with the PBGC's stance, and objected to the amounts and priority of the Claims. In response, PBGC announced that it would take over and terminate the RGH Pension Plan and asked RGH to enter into an "Agreement for Appointment of Trustee and Termination of Pension Plan." In support of the request, the PBGC commenced an action before the United States District Court for the Southern District of New York. The Action is still pending. The continued litigation with the PBGC will delay the Debtors' reorganization process and cause further erosion of the estate's assets. Rather than litigate disputes with the PBGC, the Committees decided to amicably resolve the controversy. The Stipulation provides that: (1) The PBGC will receive an allowed general unsecured claim against Reliance Financial Services Corporation's estate for $82,500,000; (2) The PBGC will receive an allowed general unsecured claim against the RGH estate for $81,000,000; (3) The PBGC will receive an administrative claim against the RFSC estate for $3,000,000. This claim will be payable solely from 50% of the first $6,000,000 of future proceeds otherwise available for distribution to Reorganized RFSC common stockholders under the RGH/RFSC Settlement. (4) The PBGC will dismiss the District Court Action and withdraw the Plan Objection; (5) Certain liabilities imposed by the Employee Retirement Income Security Act will be exempted from the releases contained in the Chapter 11 Plan the Bank Committee proposed for RFSC; (6) The PBGC will not assert claims against insurance policies that are referenced in the PA Settlement Agreement; (7) RGH will execute the Agreement for Appointment of Trustee and Termination of Pension Plan. The PBGC will terminate the RGH Pension Plan; and (8) Although the Debtors are not signatories to the Stipulation, it will be binding on the Debtors and their estates. Additionally, the Committees and the estates will not challenge the validity of the lien filed by the PBGC against the assets of Reliance Development Group, Inc., a non-debtor affiliate. The Committees and their professionals have concluded that the PBGC Stipulation will result in a favorable outcome for the Debtors' estates and their creditors. While much progress in these proceedings has been made so far, the PBGC's claims presented a significant hurdle. The PBGC Stipulation will reduce the PBGC Claims against each Debtor, as well as lower their priority to general unsecured status. The PBGC litigation will immediately cease, which will conserve time and resources that are dear to the estates. The withdrawal of PBGC's objection to the Chapter 11 Plan for RFSC also eliminates a major hurdle to plan confirmation. Headquartered in New York, New York, Reliance Group Holdings, Inc. -- http://www.rgh.com/-- is a holding company that owns 100% of Reliance Financial Services Corporation. Reliance Financial, in turn, owns 100% of Reliance Insurance Company. The holding and intermediate finance companies filed for chapter 11 protection on June 12, 2001 (Bankr. S.D.N.Y. Case No. 01-13403) listing $12,598,054,000 in assets and $12,877,472,000 in debts. The insurance unit is being liquidated by the Insurance Commissioner of the Commonwealth of Pennsylvania. (Reliance Bankruptcy News, Issue No. 61; Bankruptcy Creditors' Service, Inc., 215/945-7000) RESIDENTIAL ACCREDIT: Corrections Cue Fitch to Lift Junk Rating --------------------------------------------------------------- Fitch has taken action on these Residential Accredit Loan, Inc. mortgage-pass through certificate. * Residential Accredit Loans, Inc., mortgage asset-backed pass-through certificates, series 2000-QS1: -- Classes A, CB, NB, R affirmed at 'AAA'; -- Class M-1 affirmed at 'AAA'; -- Class M-2 affirmed at 'AAA'; -- Class M-3 upgraded to 'BBB' from 'BB+'; -- Class B-1 upgraded to 'B-' from 'CCC'. Subsequent to recent rating actions affecting the subject securitization, Fitch was made aware of a certain reporting error of the servicer regarding the performance of the transaction. As a result, Fitch has re-reviewed the transaction taking into account the corrected performance data. The September 24, 2004 negative rating actions taken on series 2000-QS1, were due to poor performance of the underlying collateral in which reported losses reduced the remaining credit enhancement for: * B-1 to $0; * M-3 to $793,947; and * M-2 bonds to $1,610,726. Since this rating action, it has been brought to our attention that collateral losses during the prior month were wrongly reported by the servicer. Lower losses experienced during the reporting period have resulted in the re-establishment of and increase in credit enhancement for the above-referenced bonds. Credit enhancement is now reported for: * B-1 to $307,597; * M-3 to $1,041,202; and * M-2 to $1,633,715. As of the August 2004 distribution date, the pool factor (current mortgage loans outstanding as a percentage of the initial pool) for the securitization was 7%. In addition, cumulative losses totaling $993,862 have been incurred. Currently, delinquencies in 30, 60, 90, FC, and REO are: * 5.81%; * 5.60%; * 4.09%; * 3.30%; and * 1.17%, respectively. After loan level analysis, Fitch foresees a low level of losses from the 7 loans currently in FC and REO. In addition, forthcoming losses will be somewhat mitigated by the fact that two loans currently in FC have various mortgage insurance policies. Fitch now believes the M-3 and B-1 bonds can be upgraded, essentially affirming their pre-September 24 rating levels of 'BBB' and 'B-', respectively, and that the more senior classes can continue to be affirmed at their current and pre-September 24 ratings of 'AAA'. These upgrades affect a total of $2,674,918 in certificates while the affirmations affect $13,068,972. SCHLOTZSKY'S INC: Slates Annual Shareholders Meeting for Dec. 9 --------------------------------------------------------------- Schlotzsky's, Inc. (OTC: BUNZQ) has set December 9, 2004, for its annual shareholders meeting. The time and location for the meeting will be disclosed in conjunction with the distribution of its proxy statement. "Our Board felt that it would be an imprudent use of valuable resources to hold a shareholders meeting in June or July given, among other reasons, the uncertainty of the Company's future at that time," said Sam Coats, Schlotzsky's President and CEO. The Company will accept shareholder proposals until Wednesday, October 20, 2004. Headquartered in Austin, Texas, Schlotzsky, Inc. -- http://www.schlotzskys.com/-- is a franchisor and operator of restaurants. The Debtors filed for chapter 11 protection on August 3, 2004 (Bankr. W.D. Tex. Case No. 04-54504). Amy Michelle Walters, Esq., and Eric Terry, Esq., at Haynes & Boone, LLP, represent the Debtors in their restructuring efforts. When the Debtors filed for protection from its creditors, they listed $111,692,000 in total assets and $71,312,000 in total debts. SI CORPORATION: Moody's Junks Planned $230M Senior Secured Notes ---------------------------------------------------------------- Moody's Investors Service assigned a Caa1 to SI Corporation's proposed $230 million issue of senior secured notes due 2012. In a related action, Moody's assigned a senior implied rating of Caa1, a senior unsecured issuer rating of Caa2 and a speculative grade liquidity rating of SGL-3. The outlook is stable. The proceeds from the proposed note offering, together with approximately $31.4 million of borrowings under a proposed credit facility, will be used to repay outstandings under financings, which mature over 2005 to 2007, including: (1) term loans ($202 million), (2) an asset securitization facility ($32.4 million), (3) a revolving credit facility ($16 million), and (4) to pay transaction fees (approximately $11 million). The ratings reflect: (i) the risk of availability and the price volatility of polypropylene, which accounts for approximately 50% of cost of goods sold; (ii) the sustainability of economy driven improvements in price and volume for core products seen for the first nine months ended June 27, 2004; (iii) concerns about the high leverage vis a vis the company's future cash generating ability; (iv) the history of operating losses and free cash flow deficits and subsequent impairment of assets despite significant restructuring efforts since fiscal 2001; (v) and minimal equity base which includes an accumulated deficit of 67% of total assets. The ratings incorporate: (i) the continued operating losses in the construction materials segment which accounted for 30% of sales for the first nine months of fiscal 2004 ended June 27, 2004; (ii) significant customer concentration with 42% of total sales for the first nine months of fiscal 2004 with two customers; (iii) and cyclical product demand. The ratings also reflect the company's significant market share for their primary products and operational efficiencies and savings gleaned from the company's cost reduction and efficiency initiatives and adequate liquidity. The outlook for the rating is stable. Economy driven improvements in price and volume for core products for the first nine months ended June 27, 2004 along with the company's operational efforts may prove stabilizing for the company in the near term. However, continued net losses, a lack of improvement in cash generation or the lack of a reduction in leverage over the next year could pressure the outlook and ratings. Similarly, any significant adverse outcome of several pending legal proceedings could lead to a downgrade. Alternatively, sustained improvements in leverage, liquidity, cash generation and margins from a steady demand for core products could lead to an improvement in the ratings. The Caa1 rating on the senior secured notes reflects Moody's belief that the value of the pledged assets or the estimated enterprise value of the company, when viewed separately, may not offer sufficient protection to the bondholders in a distress scenario. Moody's evaluation considered the significant impact to earnings of: (i) economic cyclicality, the volatile price of polypropylene, (ii) the recent earnings performance of the two operating segments (iii) and an expected reliance on financial rather than strategic buyers. The rating also recognizes the prior claim of lenders on the accounts receivable and inventory under a proposed $100 million asset based revolver due 2009 which is not rated by Moody's. The SGL-3 rating reflects Moody's opinion that the company possesses adequate liquidity. Moody's believes the company could stay in compliance with the fixed charge covenant as defined in the credit agreement, which would provide access to an adequate liquidity cushion to cover any unplanned cash shortfalls. Assuming the company generates the same level of cash from operations in fiscal 2005 as expected for fiscal 2004, Moody's estimates that over the next four quarters, the company may need to borrow to cover seasonal working capital needs and capex. Availability is limited by the borrowing base formula as well as by a fixed charge covenant threshold test of 1.1 times should availability fall below $15 million. The lack of unencumbered assets limits the company's to raise new sources of financing if needed. Despite very significant reductions in fixed capacity, the simplification of SKUs and increased focus on manufacturing efficiencies since fiscal 2001, the company's gross margins declined from 27.6% for fiscal year end September 28, 2002 to 20.4% for fiscal year end September 28, 2003. Only in the last twelve months ended June 27, 2004 did the gross margin show an improvement to 21.6% related to higher capacity utilization and improved unit pricing as a result of a stronger economy and better ability to pass on the increased cost of polypropylene. Free cash flow, measured as last twelve months ended June 27, 2004 cash from operations, normalized to exclude a one time benefit from working capital management in the quarter ended September 2002, less capital expenditures, is modest at $15 million despite benefiting from capex being below 50% of depreciation. Free cash flow was negative in both 2001and 2003. Pro forma for the transaction, debt (inclusive of $13.4 million of capital leases) will increase from $263.8 million to $274.8 million. Pro forma debt to free cash flow for the last twelve months dated June 27, 2004 at 5.5% signals a weak ability to support debt reduction. Measured as pro forma total debt to last twelve months ended June 27, 2004 EBITDA, leverage rises to 6 times from 5.7 times prior to the transaction. (Measured as pro forma total debt to the last twelve months ended August 29, 2004, leverage would be 4.7 times.) Interest protection measurements are very weak. Both the ratio of earnings to fixed charges and EBIT to interest expense have been negative to insufficient since fiscal year end 2000. Pro forma for the last twelve months ended June 27, 2004, the earnings to fixed charge coverage is 0.32. EBITDA-CAPEX to interest improved from 1.06 in 2002 and 0.75 for FYE 2003, to 2.1 times for the last twelve months ended June 27, 2004 pro forma for the transaction. However, the calculation benefits from capex at less than half of depreciation in the most recent period. The company restated its fiscal year end September 2003 financials on September 10, 2004 citing an understatement of the cumulative impact of the adoption of SFAS 142. The restatement reflected a $210 million write-off of the entire goodwill balance as of the date of adoption. Despite the reduction in asset base, Moody's believes that full year 2004 EBIT return on assets will be modest. The last twelve months EBIT for June 27, 2004 represented a 2% return on average total assets. The company completed a financial restructuring during the first quarter of 2002. The $150 million of 17% senior subordinated loans due 2008 were exchanged for $25 million in cash and 33% of common equity of SI (approximately $20 million). The proceeds of a $45 million equity cash injection from Investcorp financed the cash portion of the debt exchange as well as a $20 million repayment on the company's credit facility plus related restructuring expenses. Investcorp subsequently purchased $10 million of the equity issued to the debt holders in the restructuring. Investcorp's resulting ownership share of common stock is 83%. The proposed $230 million issue of notes will be secured on a first priority basis by all fixed assets and a pledge of 100% of the capital stock of the company. There will be a second priority lien on accounts receivable and inventory. The notes will be guaranteed on a senior secured basis by all domestic restricted subsidiaries (none currently exist) that guarantee any debt and the notes will be guaranteed by the parent company, SIND Holdings, Inc. to the extent it continues to guarantee other debt. The asset based revolver has a first priority lien accounts receivable and on inventory and a second lien on all assets including 100% of the capital stock of the company. The borrowing base is expected to be 90% of eligible accounts receivable plus a percentage of inventory up to a maximum advance of $40 million. There will be a $20 million sublimit for letters of credit. During each January, February and March of the first four years of the facility, and subject to a fixed charge coverage ratio threshold test, a seasonal availability facility may be provided to supplement the borrowing base in an amount equal to $10 million, $7.5 million, $5 million and $2.5 million for 2005, 2006, 2007 and 2008 respectively. SI Corporation, based in Chattanooga, Tennessee, is one of the largest North American manufacturers and marketers of synthetic fabrics and fibers that provide support, strength and stabilization solutions for the furnishings (69% of sales) and construction materials markets (31% of last twelve months ended June 27, 2004). The company is a wholly owned subsidiary of SIND Holdings, Inc., which is controlled by Investcorp. SMTC CORPORATION: Appoints John E. Caldwell as President and CEO ---------------------------------------------------------------- SMTC Corporation's (Nasdaq: SMTX) (TSX: SMX) Board of Directors appoints Mr. John E. Caldwell as President and Chief Executive Officer effective immediately. Since October 2003, Mr. Caldwell has been interim President and Chief Executive Officer and has also served as Chairman of the Board of Directors of SMTC since March 2004. Mr. Caldwell brings extensive executive experience to SMTC, including leadership in business transformation and growth strategy. Previously, he held the positions of President and Chief Executive Officer at Geac Computer Corporation and CAE, Inc. At Geac, one of Canada's leading software companies, Mr. Caldwell guided a major turnaround, restoring this company to sustained profitability and positive cash generation. Over his six year tenure as President and Chief Executive Officer of CAE Inc., Mr. Caldwell led the repositioning of the company and grew its flight simulation and industrial businesses to global leadership, more than doubling earnings in the period. In keeping with the Company's commitment to maintain sound governance practices, Mr. Caldwell intends to relinquish his position as Chairman in due course in order to separate the role of Chairman of the Board and Chief Executive Officer. "We are making considerable progress in implementing our transformation plan, positioning SMTC to extend its customer base, restoring revenue and earnings growth and increasing value for our shareholders. I am excited about being a permanent member of the leadership team at this important juncture," stated Mr. Caldwell. SMTC Corporation provides advanced electronic manufacturing services globally. The Company's electronics manufacturing, technology and design centers are located in Appleton, Wisconsin; Boston, Massachusetts; San Jose, California; Toronto, Canada; and Chihuahua, Mexico with a third party facility in Chang An, China. SMTC offers technology companies and electronics OEMs a full range of value-added services. SMTC supports the needs of a growing, diversified OEM customer base primarily within the industrial, networking, communications and computing markets. SMTC is a public company incorporated in Delaware with its shares traded on the Nasdaq National Market System under the symbol SMTX and on The Toronto Stock Exchange under the symbol SMX. Visit SMTC's web site, http://www.smtc.com/,for more information about the Company. * * * As reported in the Troubled Company Reporter on April 8, SMTC Corporation filed its annual report on Form 10-K with the United States Securities and Exchange Commission on March 30, 2004. In response to a recent Nasdaq requirement, SMTC announced that the Auditors' Report, included in the Company's Annual Report on Form 10-K, included an unqualified audit opinion with an explanatory paragraph related to uncertainties about the Company's ability to continue as a going concern, based upon the Company's historical financial performance and the classification of its long-term debt as a current liability at December 31, 2003, due to its maturity on October 1, 2004. The going concern issue is expected to be resolved as a result of the series of recapitalization transactions, as announced on February 17, 2004, which addressed the nearing maturity of the debt. On March 4, 2004, the Company closed an equity private placement into escrow for net proceeds of Cdn$37 million. The private placement and other components of the recapitalization transactions are subject to stockholder approval. The Company expects to seek approval for those transactions at the Annual Meeting in May 2004. Separately, SMTC is addressing its financial performance by the implementation of a multi-phased turnaround plan. The operational restructuring phase has been completed, resulting in alignment ofcosts with expected revenue. Further phases of the turnaround plan are underway that are designed to improve revenue and earnings going forward. SMTC CORP: Appoints Mr. Patrick Dunne Senior VP for Operations -------------------------------------------------------------- SMTC Corporation's (Nasdaq: SMTX) (TSX: SMX) Board of Directors appointed Mr. Patrick Dunne to the position of Senior Vice President, Operations. Mr. Dunne will be responsible for the Company's assembly and solutions operations as well as supply chain and engineering services. Mr. Dunne brings to the position extensive manufacturing and general management experience. Mr. Dunne was a co-founder of Qualtron Teoranta, an Irish based interconnect business that was acquired by SMTC in 2000. Subsequently, he held various business development and operational positions at SMTC, including most recently Senior Vice President, Solutions Operations located in Franklin, Massachusetts. "We are delighted to announce Patrick Dunne's appointment. He brings an exceptional background, company knowledge and strong leadership capabilities to this position. In his most recent role, Patrick was instrumental in significantly improving the operational and financial performance of the Solutions business," stated John Caldwell. SMTC's Chief Operating Officer, Mr. Phil Woodard, who has been on a leave of absence since June, has chosen to retire from the Company. "My career with SMTC has been a very rewarding experience. I believe the company is absolutely on the right track to regain growth and reach its full potential. I plan to continue to be associated with the Company in an advisory capacity," commented Mr. Woodard. SMTC Corporation provides advanced electronic manufacturing services globally. The Company's electronics manufacturing, technology and design centers are located in Appleton, Wisconsin; Boston, Massachusetts; San Jose, California; Toronto, Canada; and Chihuahua, Mexico with a third party facility in Chang An, China. SMTC offers technology companies and electronics OEMs a full range of value-added services. SMTC supports the needs of a growing, diversified OEM customer base primarily within the industrial, networking, communications and computing markets. SMTC is a public company incorporated in Delaware with its shares traded on the Nasdaq National Market System under the symbol SMTX and on The Toronto Stock Exchange under the symbol SMX. Visit SMTC's web site, http://www.smtc.com/,for more information about the Company. * * * As reported in the Troubled Company Reporter on April 8, SMTC Corporation filed its annual report on Form 10-K with the United States Securities and Exchange Commission on March 30, 2004. In response to a recent Nasdaq requirement, SMTC announced that the Auditors' Report, included in the Company's Annual Report on Form 10-K, included an unqualified audit opinion with an explanatory paragraph related to uncertainties about the Company's ability to continue as a going concern, based upon the Company's historical financial performance and the classification of its long-term debt as a current liability at December 31, 2003, due to its maturity on October 1, 2004. The going concern issue is expected to be resolved as a result of the series of recapitalization transactions, as announced on February 17, 2004, which addressed the nearing maturity of the debt. On March 4, 2004, the Company closed an equity private placement into escrow for net proceeds of Cdn$37 million. The private placement and other components of the recapitalization transactions are subject to stockholder approval. The Company expects to seek approval for those transactions at the Annual Meeting in May 2004. Separately, SMTC is addressing its financial performance by the implementation of a multi-phased turnaround plan. The operational restructuring phase has been completed, resulting in alignment ofcosts with expected revenue. Further phases of the turnaround plan are underway that are designed to improve revenue and earnings going forward. SMTC CORP: Planned Lay-Offs Will Cost $2.0 Mil. to $3.0 Mil. ------------------------------------------------------------ As part of the execution of its transformation plan, SMTC Corporation's (Nasdaq: SMTX) (TSX: SMX) reported changes to its manufacturing operations which will seek to provide greater focus on new customer and new product introduction and technical activities, improve capacity utilization, align its cost structure to expected revenue, and to remain profitable on a sustained basis. SMTC's Toronto, Ontario site will become the Company's technical center of excellence, with particular emphasis on assisting current and new customers to develop, prototype and bring new products to full production. This site also will continue to manufacture low volume, high complexity printed circuit board assemblies. The Company's Chihuahua, Mexico facility will serve as SMTC's primary assembly operation offering customers high quality services in a highly efficient, cost effective site. SMTC's operations in Franklin, Massachusetts and San Jose, California will continue to specialize in high precision metal manufacturing and system integration activities. Similarly, SMTC's engineering design services capability and manufacturing relationship with China based Alco Electronic will continue. Steamlining In addition, the Company is streamlining its overhead, selling, general and administrative structure to improve productivity and customer responsiveness and to provide greater focus on key market segments. As the result of operational and administrative changes, the Company expects to incur restructuring charges of between $2.0 million and $3.0 million related to a layoff of approximately 150 employees, and relocation and transition costs during the third and fourth quarters. Also, the Company settled a claim in its favour for $1.9 million, related to a four-year dispute over obsolete inventory with a former customer. This will be recorded in the Company's third quarter statement of income. Separately, SMTC is concluding a settlement of a three year old building lease dispute involving the payment of $750,000 over an eighteen month period. This will result in a favourable adjustment of approximately $1.7 million, to a previously recorded restructuring provision, to be recorded in this fiscal year. Mr. John E. Caldwell, President and Chief Executive Officer commented "SMTC's transformation plan remains on track. The changes announced are important steps towards sustaining profitability, enhancing competitiveness and providing current and prospective customers with greater value and attention." The Company does not expect the restructuring charges and recoveries to impact our revenue and earnings guidance and expects to continue to be profitable in the third and fourth quarters. Revenue for the year likely will be near the bottom of the range of previously announced guidance of $250 to $260 million. SMTC Corporation provides advanced electronic manufacturing services globally. The Company's electronics manufacturing, technology and design centers are located in Appleton, Wisconsin; Boston, Massachusetts; San Jose, California; Toronto, Canada; and Chihuahua, Mexico with a third party facility in Chang An, China. SMTC offers technology companies and electronics OEMs a full range of value-added services. SMTC supports the needs of a growing, diversified OEM customer base primarily within the industrial, networking, communications and computing markets. SMTC is a public company incorporated in Delaware with its shares traded on the Nasdaq National Market System under the symbol SMTX and on The Toronto Stock Exchange under the symbol SMX. Visit SMTC's web site, http://www.smtc.com/,for more information about the Company. * * * As reported in the Troubled Company Reporter on April 8, SMTC Corporation filed its annual report on Form 10-K with the United States Securities and Exchange Commission on March 30, 2004. In response to a recent Nasdaq requirement, SMTC announced that the Auditors' Report, included in the Company's Annual Report on Form 10-K, included an unqualified audit opinion with an explanatory paragraph related to uncertainties about the Company's ability to continue as a going concern, based upon the Company's historical financial performance and the classification of its long-term debt as a current liability at December 31, 2003, due to its maturity on October 1, 2004. The going concern issue is expected to be resolved as a result of the series of recapitalization transactions, as announced on February 17, 2004, which addressed the nearing maturity of the debt. On March 4, 2004, the Company closed an equity private placement into escrow for net proceeds of Cdn$37 million. The private placement and other components of the recapitalization transactions are subject to stockholder approval. The Company expects to seek approval for those transactions at the Annual Meeting in May 2004. Separately, SMTC is addressing its financial performance by the implementation of a multi-phased turnaround plan. The operational restructuring phase has been completed, resulting in alignment ofcosts with expected revenue. Further phases of the turnaround plan are underway that are designed to improve revenue and earnings going forward. SMTC CORP: Will Effect One-For-Five Reverse Stock Split Today ------------------------------------------------------------- SMTC Corporation (Nasdaq: SMTX) will be filing with the Delaware Secretary of State an amendment to the Company's charter to effect a one-for-five reverse stock split of its outstanding shares of common stock. The amendment was approved by stockholders at the Company's Annual Meeting held on May 20, 2004, and the reverse stock split became effective at 12:01 A.M. (Eastern Time) today, October 4, 2004. The Company expects that its common stock will begin trading on a post-split basis today under the temporary trading symbol "SMTXD" for approximately 20 trading days before reverting to "SMTX" on November 1, 2004. As a result of the reverse stock split, approximately 38.8 million of the Company's outstanding shares will be reduced to approximately 7.8 million shares. In addition, the number of authorized shares of common stock will be reduced from 130 million to 26 million shares. The Company will pay cash in lieu of issuing any fractional shares that would otherwise be issuable to its stockholders of record as a result of the split. The Company's transfer agent, Mellon Investor Services LLC, will serve as the exchange agent to implement the split and will notify record holders of the procedures to exchange their stock certificates. Stockholders holding shares of common stock in brokerage accounts or in street name will not be required to take any further action to effect the exchange of their stock certificates. SMTC's subsidiary, SMTC Manufacturing Corporation of Canada, will implement a one-for-five reverse stock split of its outstanding exchangeable shares effective as of October 4, 2004 so that one exchangeable share will continue to be exchangeable for one share of common stock following the reverse stock split. SMTC Corporation provides advanced electronic manufacturing services. The Company's electronics manufacturing, technology and design centers are located in Appleton, Wisconsin; Boston, Massachusetts; San Jose, California; Toronto, Canada; and Chihuahua, Mexico with a third party facility in Chang An, China. SMTC offers technology companies and electronics OEMs a full range of value-added services. SMTC supports the needs of a growing, diversified OEM customer base primarily within the industrial, networking, communications and computing markets. SMTC is a public company incorporated in Delaware with its shares traded on the Nasdaq National Market System under the symbol SMTX and on The Toronto Stock Exchange under the symbol SMX. Visit SMTC's web site, http://www.smtc.com/,for more information about the Company. * * * As reported in the Troubled Company Reporter on April 8, SMTC Corporation filed its annual report on Form 10-K with the United States Securities and Exchange Commission on March 30, 2004. In response to a recent Nasdaq requirement, SMTC announced that the Auditors' Report, included in the Company's Annual Report on Form 10-K, included an unqualified audit opinion with an explanatory paragraph related to uncertainties about the Company's ability to continue as a going concern, based upon the Company's historical financial performance and the classification of its long-term debt as a current liability at December 31, 2003, due to its maturity on October 1, 2004. The going concern issue is expected to be resolved as a result of the series of recapitalization transactions, as announced on February 17, 2004, which addressed the nearing maturity of the debt. On March 4, 2004, the Company closed an equity private placement into escrow for net proceeds of Cdn$37 million. The private placement and other components of the recapitalization transactions are subject to stockholder approval. The Company expects to seek approval for those transactions at the Annual Meeting in May 2004. Separately, SMTC is addressing its financial performance by the implementation of a multi-phased turnaround plan. The operational restructuring phase has been completed, resulting in alignment ofcosts with expected revenue. Further phases of the turnaround plan are underway that are designed to improve revenue and earnings going forward. SOUTHERN STATES: S&P Places B Rating on Planned $100M Senior Notes ------------------------------------------------------------------ Standard & Poor's Ratings Services assigned its 'B' rating to supply and marketing cooperative Southern States Cooperative Inc.'s proposed $100 million senior unsecured notes due 2012. At the same time, Standard & Poor's assigned its 'B+' corporate credit rating. The senior unsecured rating is notched down from the corporate credit rating because of the amount of secured debt, which will likely be drawn during periods of peak working capital usage. The cooperative is currently negotiating a proposed $165 million asset backed revolving credit facility that will be unrated. Proceeds from these issues will be used to refinance the company's existing senior credit facilities, repay certain other term debt, to terminate its interest rate swap agreements, and for general corporate purposes. The ratings are subject to review of final documentation. The outlook is negative. Pro forma for the refinancing, total rated debt on Richmond, Virginia-based Southern States is about $100 million. The ratings on Southern States reflect: (1) the inherent cyclical nature and seasonality of the cooperative's agricultural-based businesses, (2) low-margins, (3) fairly high debt levels, (4) recent financial difficulties, and (5) modest discretionary cash flow. These factors are somewhat mitigated by the cooperative's position as a leading regional supply and marketing cooperative on the East Coast of the U.S. and a modest debt maturity schedule. "We expect that Southern States will maintain its positions in its regional markets. However, because of the seasonality of revenues and earnings as well as the vagaries of agribusiness, there will likely be some volatility in earnings and credit protection measures," said Standard & Poor's credit analyst Jayne Ross. Southern States' ability to, on average, maintain credit measures above the median will be a key factor for the ratings. SPIEGEL INC: Court Extends Exclusive Plan Filing to January 5 ------------------------------------------------------------- At Spiegel Inc. and its debtor-affiliates' request, Judge Blackshear further extends their: * exclusive period to file a reorganization plan through and including January 5, 2005; and * exclusive period to solicit acceptances for that plan through and including March 8, 2005. James L. Garrity, Jr., Esq., at Shearman & Sterling, LLP, in New York, relates that the Debtors have taken significant steps toward formulating a reorganization plan. The Debtors have sold their Spiegel Catalog and Newport News businesses. The Debtors have marketed the Eddie Bauer business and have received bids that they are considering as they work with the Official Committee of Unsecured Creditors to develop a Chapter 11 exit strategy. Mr. Garrity notes that although significant progress has been made, much work remains to be done. For instance, it is currently contemplated that it would not be prudent to negotiate a plan absent further progress with respect to the potential sale of the Eddie Bauer business. Therefore, the extension of the Exclusive Periods is necessary to allow the Debtors sufficient time to negotiate and prepare a viable plan. Mr. Garrity believes that the extension of the Exclusive Periods will not harm the creditors but rather maximize the value of the Debtors' estates for the benefit of their creditors and other stakeholders. Headquartered in Downers Grove, Illinois, Spiegel, Inc. -- http://www.spiegel.com/-- is a leading international general merchandise and specialty retailer that offers apparel, home furnishings and other merchandise through catalogs, e-commerce sites and approximately 560 retail stores. The Company filed for Chapter 11 protection on March 17, 2003 (Bankr. S.D.N.Y. Case No. 03-11540). James L. Garrity, Jr., Esq., and Marc B. Hankin, Esq., at Shearman & Sterling represent the Debtors in their restructuring efforts. When the Company filed for protection from its creditors, it listed $1,737,474,862 in assets and 1,706,761,176 in debts. (Spiegel Bankruptcy News, Issue No. 32; Bankruptcy Creditors' Service, Inc., 215/945-7000) SR TELECOM: Robert E. Lamoureux Joins Board of Directors -------------------------------------------------------- SR Telecom(TM), Inc., (TSX: SRX; Nasdaq: SRXA) reported that Mr. Robert E. Lamoureux has been elected to its Board of Directors. "Mr. Lamoureux brings an extraordinary set of skills to our Board", said Lionel Hurtubise, Chairman of SR Telecom's Board of Directors. "Bob extensive background in a range of financial services disciplines, as well as audit and corporate governance practice adds an important dimension to our team. His expertise will serve us very well as we drive the Company towards profitability and extend our presence in the global broadband fixed wireless marketplace." Mr. Lamoureux's business career includes over three decades with PricewaterhouseCoopers, where he was appointed partner in 1981. During his tenure, Mr. Lamoureux was engagement partner on a number of Canada's major corporations in both the manufacturing and financial services industries. He also led the firm's Financial Services Internal Audit practice, and initiated and led PricewaterhouseCoopers' national corporate governance practice. In 2001, Mr. Lamoureux joined the Institute of Corporate Directors -- ICD, where he is currently a director, Chair of the Ontario Chapter and a member of its Communications and Membership committees. He is also Lead Director, Chair of the Audit Committee and a member of the Nomination and Governance Committee of Royal Group Technologies Ltd. SR Telecom (TSX: SRX, Nasdaq: SRXA) provides Broadband Fixed Wireless Access (BFWA) technology, which links end-users to networks using wireless transmissions. For over two decades, the Company's products and solutions have been used by carriers and service providers to deliver advanced, robust and efficient telecommunications services to both urban and remote areas around the globe. SR Telecom's products have been deployed in over 120 countries, connecting nearly two million people. The Company's unrivalled portfolio of BFWA products enables its growing customer base to offer carrier-class voice, broadband data and high-speed Internet services. Its turnkey solutions include equipment, network planning, project management, installation and maintenance. SR Telecom is an active member of WiMAX Forum, a cooperative industry initiative, which promotes the deployment of broadband wireless access networks by using a global standard and certifying interoperability of products and technologies. * * * As reported in the Troubled Company Reporter on May 5, 2004, Standard & Poor's Ratings Services lowered its long-term corporate credit and senior unsecured debt ratings on SR Telecom, Inc., to 'CCC' from 'CCC+'. The outlook is negative. "The ratings action reflects continued poor operating performance and material negative free operating cash flow in 2003, and follows the company's announcement that it plans to undertake additional restructuring of its operations," said Standard & Poor's credit analyst Michelle Aubin. The negative outlook reflects the possibility that the ratings on SR Telecom could be lowered further if the company's operating performance and liquidity position do not improve. SUMMIT WASATCH: Voluntary Chapter 11 Case Summary ------------------------------------------------- Debtor: Summit Wasatch, LLC 111 West Main Tremonton, Utah 84337 Bankruptcy Case No.: 04-35773 Chapter 11 Petition Date: September 28, 2004 Court: District of Utah (Salt Lake City) Debtor's Counsel: Howard P. Johnson, Esq. 352 East 900 South Salt Lake City, UT 84111 Tel: 801-359-7987 Estimated Assets: $10 Million to $50 Million Estimated Debts: $1 Million to $10 Million The Debtor did not file a list of its 20-Largest Creditors. SYDRAN GROUP: Selling 200+ Burger King Restaurants to Cerberus -------------------------------------------------------------- The Sydran Group and its affiliates have entered into a definitive Asset Purchase Agreement to sell their 226 BURGER KING(R) restaurants to Strategic Restaurants Acquisition Corp., an affiliate of Cerberus California, Inc. The Sydran Group operates BURGER KING(R) restaurants in Alabama, Arkansas, California, Florida, Kansas City, Louisiana, and Mississippi. The transaction, which has the support of Burger King Corporation, will be implemented through a Chapter 11 case that was filed late Friday. Operations will continue without interruption. Jerry Comstock, Chief Executive Officer of Strategic Restaurants, brings 30 years of experience in the food service and retail industries to this acquisition. "I am very excited about my affiliation with the BURGER KING(R) and WHOPPER(R) brands. Our goal is to marry the significant size and talent base in this franchise group with our financial resources to provide great service to our guests and value to our shareholders." Comstock adds, "BURGER KING restaurants have for years served the best- tasting burgers in the industry. The combination of new menu items with the gold standard of burgers, the WHOPPER sandwich, makes for an unbeatable dining experience that caters to every member of the family. We couldn't be happier about joining forces with the team at Burger King Corporation and the former Sydran team." Sydran Group's President and Chief Executive Officer, Matthew Schoenberg, is pleased about the announced purchase agreement. "The agreement with Strategic Restaurants represents the culmination of a four-year restructuring effort with our major lenders and a year-long process to find a buyer for the company. We have found the right buyer in Strategic Restaurants and the right operator in Jerry Comstock. This agreement will strengthen and maximize the value of the business and best serves the interests of our employees and business partners and gives Burger King Corporation and our customers a strong and proven operator for the future. Our commitment to our customers, vendors and employees remain unwavering. We intend to quickly conclude the deal as the centerpiece of the company's Chapter 11 plan." "This is an important, positive step for our franchise system, and we are very pleased to have an experienced leader like Jerry Comstock to help re- energize these restaurants," said John Chidsey, President, Burger King, North America. "We are pleased to have the capability and operating culture of Strategic Restaurants added to our system, especially given their commitment to invest much-needed capital into the restaurants. We expect to see positive results from the reorganization, as we have seen elsewhere when new franchise partners enter the system." About Burger King Corporation The BURGER KING(R) system operates more than 11,220 restaurants in all 50 states and in 60 countries and territories around the world. Ninety-one percent of BURGER KING restaurants are owned and operated by independent franchisees, many of them family-owned operations that have been in business for decades. Burger King Holdings, Inc., the parent company, is private and independently owned by an equity sponsor group comprised of Texas Pacific Group, Bain Capital and Goldman Sachs Capital Partners. In fiscal year ending June 30, 2003, Burger King Corporation had system-wide sales of $11.1 billion. To learn more about BURGER KING, please visit the company's website at http://www.burgerking.com/ TOPS APPLIANCE: Congress Financial Wants DIP Loan Paid Now ---------------------------------------------------------- Congress Financial Corporation will ask the Honorable Donald H. Steckroth at a hearing on Oct. 12, 2004, to direct Donald V. Biase, the Chapter 7 Trustee overseeing the chapter 7 liquidation of Tops Appliance City, Inc., to immediately pay, remit and turnover $325,000 owed on account of a post-petition secured, super priority financing arrangement. Congress extended $1.6 million of DIP Financing to the Debtor after it sought chapter 11 protection and has recovered about $1.2 million to date. "[T]he Trustee . . . has funds on hand well in excess of the amount needed pay Congress," the lender's lawyers tell Judge Steckroth, adding that paying what's owed Congress now will benefit other creditors by halting the accrual of interest and other charges. On June 26, 2000, the Chapter 7 Trustee filed an Adversary Proceeding against Congress alleging fraudulent and preferential transfers. The Bankruptcy Court dismissed the Trustee's complaint on summary judgment. The District Court affirmed the dismissal, and the Third Circuit agreed earlier this year. Because the Trustee's appeals are now exhausted, Congress also asks the Bankruptcy Court to formally close Adversary Proceeding No. 00-3460. Stanley Lane, Esq., at Otterbourg, Steindler, Houston & Rosen, P.C., and Joseph H. Lemkin, Esq., at Duane Morris LLP, represent Congress Financial in this matter. Tops Appliance City, Inc., was a retailer of home appliances, air conditioners, housewares, and kitchen cabinetry, operating eight stores in New York and New Jersey and generating nearly $80 million in annual revenue. Tops filed for Chapter 11 protection on February 2, 2000 (Bankr. D. N.J. Case No. 00-30924). Cole, Schotz, Meisel, Forman & Leonard, P.A. of Hackensack, New Jersey, represented Tops. On April 17, 2000, the chapter 11 case converted to a chapter 7 liquidation. Hilco Trading Co., Inc., and Garcel, Inc., teamed-up to liquidate the Debtor's inventory. Richard B. Honig, Esq., at Hellering Lindeman Goldstein & Siegal LLP in Newark, represent the Chapter 7 Trustee. UAL CORP: Court Extends Exclusive Right to File Plan Until Nov. 1 ----------------------------------------------------------------- Judge Wedoff extends UAL Corporation and its debtor-affiliates' period within which they have the exclusive right to file a Plan until November 1, 2004. The period within which the Debtors have the exclusive period to solicit acceptances for the plan is extended until Dec. 31, 2004. The Court will again consider the Debtors' request at the October 15, 2004, hearing. ALPA Supports Extension The United Chapter of the Air Line Pilots Association] supported a 30-day extension for the Company to propose a workable restructuring plan for United. We expect the Company to take advantage of this grace period to address in a sincere and productive manner the serious issues confronting the pilots. "At the same time, it must be said that the United pilots are growing increasingly concerned that the Company's current management team may not be able to craft a bankruptcy exit that preserves a strong, profitable enterprise. We will need the answer to this question during the next several weeks or we will be compelled to explore other solutions." 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 Debtors 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. 60; Bankruptcy Creditors' Service, Inc., 215/945-7000) UAL CORP: Objects to Chapter 11 Trustee Appointment --------------------------------------------------- As previously reported, the International Association of Machinists and Aerospace Workers asked 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. The Association of Flight Attendants-CWA, AFL-CIO, agrees with the International Association of Machinists that a Chapter 11 trustee must be appointed in UAL Corp. and its debtor-affiliates' cases. In addition to the breaches of fiduciary duty highlighted by the IAM, the AFA identified "numerous examples of the Debtors' gross mismanagement, as well as incompetence and dishonesty." Debtors Object James H.M. Sprayregen, Esq., at Kirkland & Ellis, in Chicago, Illinois, tells Judge Wedoff that the International Association of Machinists' request to appoint a Chapter 11 trustee is "part of a campaign it is waging to force senior management to flinch from the critical remaining question in United's reorganization: whether the fervent desire of the Company to maintain its defined benefit pension plans remains compatible with the imperative of creating a financeable business plan and a viable plan of reorganization." The Request is simply another tactic by the IAM to disrupt the Debtors' proceedings through provocative public statements and "a hornet's nest of litigation." Mr. Sprayregen reiterates that no final decision on the pension plans has been made. But the IAM's Request, like the IAM's other intrusive efforts, is designed to prevent the Debtors' management from considering the hard questions that their enormous pension liabilities pose. At previous junctures in past, these pressure tactics forced the Debtors to take the path of least resistance, rather than face difficult and unpleasant realities. However, avoidance of hard choices is no longer an option. Given the Debtors' current situation, "the path of least resistance is a dead-end street." Mr. Sprayregen notes that the IAM is eager to point out the Debtors' shortcomings in these proceedings. However, this stance ignores the Debtors' significant accomplishments, for example, in increased on-time performance, reduced passenger complaints and lower incidents of mishandled baggage. Most important, the Debtors have stanched the red ink that swept them into bankruptcy in 2002, reducing losses from $1,970,000,000 for the first half of 2003, to a loss of $706,000,000 for the same period in 2004. The Debtors have generated positive cash flow from operations for nine of the last 12 months, net of restructuring and other non- operational expenses. Mr. Sprayregen contends that the IAM's Request is dismissible when viewed in isolation. The IAM has not come close to climbing the evidentiary mountain necessary to warrant the extraordinary remedy of a trustee. Rather, the Request is a scattershot of unrelated facts, including irrelevant facts, outright misstatements and conclusory pronouncements untethered to specific examples or relevant case law. There is no way the Bankruptcy Court can find that the Debtors' managers have demonstrated the extreme and egregious conduct required to support a trustee appointment. Mr. Sprayregen also asserts that the Association of Flight Attendants' Joinder is an attempted act of retribution against the Debtors for "speaking truthfully and acting responsibly" on the pension plan issue. Like the IAM, the AFA wants the Bankruptcy Court to declare the pension plans untouchable. In essence, the AFA wants the Debtors to enter into a permanent state of denial about the multi-billion dollar pension liability. The AFA's Joinder is defective because it does not address the issues that are pertinent to appointment of a trustee. The AFA acts as if a trustee will exert control over an uncontrollable issue -- the pension plans in relation to the Debtors' financial state. Mr. Sprayregen reminds the Court that any trustee will have a broader responsibility than restoring pension contributions to the underfunded plans. In other words, the AFA's efforts are misguided because the appointment of a trustee will not solve their primary complaint. At this point, the Debtors are formulating a viable business plan that will confront the legacy pension obligations head on. Termination and replacement of the pension plans will probably be necessary to procure exit financing. If all efforts involved in formulating this business plan generate an alternative to pension plan termination and replacement, no one will be more pleased than the Debtors' managers, many of whom stand to lose a great deal in the event of pension plan termination. The Debtors' management has not been perfect or infallible. However, throughout this restructuring, the Debtors have been competently and professionally run. Decisions have been made in a rational and transparent manner and the Board of Directors has been functioning admirably. There are no grounds for supplanting this management team under any interpretation of the Bankruptcy Code. 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 Debtors 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. 61; Bankruptcy Creditors' Service, Inc., 215/945-7000) ULTRA MOTORCYCLE: Trustee Selling a Bike for Pennies on the Dollar ------------------------------------------------------------------ The chapter 7 trustee overseeing the liquidation of Ultra Motorcycle Co.'s estate will take bids on Oct. 20, 2004, for a 2001 Titanium I Model motorcycle manufactured by the Debtor. The Trustee says the value of the bike is $24,500. John Russell, the current title holder, says the value of the cycle is $13,500. These values are stated as of the time the motorcycle was, according to the Trustee's allegations in Adversary Proceeding No. 03-01393, fraudulently conveyed to Mr. Russell or the transfer constituted an avoidable preference. To settle the Adversary Proceeding, the Trustee and Mr. Russell have agreed to auction the motorcycle. Mr. Russell has offered $3,500, subject to higher and better offers. Photos of the motorcycle and detailed bidding procedures are posted at: http://clients.bbklaw.net/bankruptcy/bksales.cfm On Oct. 20, 2004, the Trustee will take bids at an auction in his office in Riverside, Calif. The motorcycle is currently in Mr. Russell's possession in South Salem, New York. The Trustee will start the bidding at $3,500 and accept higher and better bids in $100 increments. Ultra Motorcycle Co. was a leading designer, manufacturer and distributor of high-quality, American-made heavyweight cruiser motorcycles. As previously reported in the Troubled Company Reporter, the company filed for chapter 11 protection in 2001 (Bankr. C.D. Calif. Case No. RS01-18794 MG) when its secured creditor, Finova Mezzanine Capital Inc., threatened a foreclosure sale. The chapter 11 filing halted the foreclosure. The case, however, converted to a chapter 7 liquidation proceeding in Nov. 2001. Robert S. Whitmore in Riverside, Calif. (Telephone 909-267- 9292), serves as the Chapter 7 Trustee. Franklin C. Adams, Esq., at Best Best & Krieger LLP, serves as counsel to the Chapter 7 Trustee. SJS Entertainment Corp. purchased substantially all of Ultra's operating assets. WESTERN REFINING: S&P Affirms B+ Corp. Rating & Lifts CreditWatch ----------------------------------------------------------------- Standard & Poor's Ratings Services affirmed its 'B+' corporate credit rating on privately held independent petroleum refiner Western Refining Company L.P. The ratings were removed from CreditWatch, where they were placed on September 1, 2004, following Western's announcement that it sold the Kaston Pipeline Company to Kinder Morgan Energy Partners L.P. for about $100 million. The outlook is stable. After the sale, El Paso, Texas-based Western Refining's total debt is $60 million. Although Western Refining made good progress on reducing its debt burden (pro forma debt to capital is about 27%, down from roughly 50% last year), Standard & Poor's is affirming the current ratings as Western's desire to expand its refining base and history of funding acquisitions using mostly debt increases the probability that leverage will increase over the medium term. "Because total debt peaked at $125 million after the September 2003 acquisition of ChevronTexaco's North Refinery, Western has reduced debt by about $65 million, including $27 million of debt reduction from the pipeline sale," said Standard & Poor's credit analyst Steven Nocar. The ratings on Western reflect its position as a small, independent petroleum refiner operating in a very competitive, erratically profitable, and capital-intensive industry. This weakness is mitigated by relatively profitable operations supported by Western's rather attractive geographic niche and its improved capital structure. The stable outlook reflects the expectation that the company will manage its growth plans in a manner that does not significantly increase debt leverage above its historical peak (about 50%), maintain adequate liquidity, and that clean fuels spending and other capital spending requirements will be funded internally. If Western continues to operate with similar or lower debt leverage for a protracted period, the ratings may be revaluated. Z-TEL TECH: Begins Exchange Offer for Outstanding Preferred Stock ----------------------------------------------------------------- Z-Tel Technologies, Inc. (Nasdaq:ZTEL), parent company of Z-Tel Communications, Inc., a leading provider of enhanced wireline and broadband telecommunications services, has commenced an offer to exchange shares of its common stock for all of its outstanding classes and shares of preferred stock. Z-Tel has offered to exchange its three outstanding series of convertible preferred stock as follows: -- for its Series D Convertible Preferred Stock, which as of September 27, 2004 3,976,723 shares with a liquidation preference of $16.55 per share and a conversion price of $8.47 per share were outstanding, to exchange 25.69030 shares of its common stock, for each share of its Series D Preferred Stock (representing an exchange price of approximately $0.644 per share); -- for its 8% Convertible Preferred Stock, Series E, which as of September 27, 2004 4,166,667 shares with a liquidation preference of $16.26 per share and a conversion price of $8.08 per share were outstanding, to exchange 25.24216 shares of its common stock, for each share of its Series E Preferred Stock (representing an exchange price of approximately $0.644 per share); and -- for its 12% Junior Redeemable Convertible Preferred Stock, Series G, which as of September 27, 2004 171.214286 shares outstanding with had a liquidation preference of $144,974.90 per share and conversion price of $1.28 per share were outstanding, to exchange 161,469.4 shares of its common stock, for each share of its Series G Preferred Stock (representing an exchange price of approximately $0.898 per share). If all of the holders of the outstanding preferred stock elect to exchange their shares, on a fully diluted basis, the holders of the Series D Preferred Stock will own approximately 34.0% of Z- Tel's outstanding common stock, the holders of the Series E Preferred Stock approximately 35.0%, the holders of the Series G Preferred Stock approximately 9.2%, the existing holders of the common stock approximately 13.8% and approximately 8.0% will be available for issuance under a new management equity incentive plan. The 1818 Fund III, L.P., an affiliate of Brown Brothers Harriman & Co., owns all of the outstanding Series E Preferred Stock and 73% of the outstanding Series G Preferred Stock and has agreed that it will exchange all of the Series E Preferred Stock and Series G Preferred Stock owned by it if substantially all of the Series D Preferred Stock and the remaining Series G Preferred Stock is also exchanged by the holders thereof. The exchange offer by Z-Tel is due to expire at 5:00 p.m., EST, on October 28, 2004 unless extended or earlier terminated. The exchange offer is being made in reliance upon the exemption from registration provided by Section 3(a)(9) of the Securities Act of 1933 and is conditioned upon: (i) receipt of the approval of Z-Tel's shareholders of certain matters to be voted upon at a special meeting to be called by Z-Tel and (ii) the tender of all shares of preferred stock owned by The 1868 Fund III, L.P. The complete terms and conditions of the offers are set forth in the Offer to Exchange and Letter of Transmittal that is being mailed to holders of the preferred stock. Copies of the Offer to Purchase and Letter of Transmittal may be obtained from Z-Tel by contacting Andrew L. Graham, the Exchange and Information Agent for the exchange offer, at (813) 233-4567. Stockholders are urged to read the Offer to Exchange and Letter of Transmittal because they contain important information concerning the exchange offer. About the Company Z-Tel offers consumers and businesses nationwide enhanced wire line and broadband telecommunications services. All Z-Tel products include proprietary services, such as Web-accessible, voice-activated calling and messaging features, which are designed to meet customers' communications needs intelligently and intuitively. Z-Tel is a member of the Cisco Powered Network Program and makes its services available on a wholesale basis to other communications and utility companies, including Sprint. For more information about Z-Tel and its innovative services, visit http://www.ztel.com/ At June 30, 2004, Z-Tel Technologies' balance sheet showed a $159,022,000 stockholders' deficit, compared to a $131,019,000 deficit at December 31, 2003. * BOND PRICING: For the week of October 4 - October 8, 2004 ----------------------------------------------------------- Issuer Coupon Maturity Price ------ ------ -------- ----- American & Foreign Power 5.000% 03/01/30 71 AMR Corp. 4.500% 02/15/24 63 AMR Corp. 9.000% 09/15/16 62 Burlington Northern 3.200% 01/01/45 57 Calpine Corp. 4.750% 11/15/23 68 Comcast Corp. 2.000% 10/15/29 43 DEX Media Inc. 9.000% 11/15/13 73 Inland Fiber 9.625% 11/15/07 47 Level 3 Comm. Inc. 2.875% 07/15/10 65 Level 3 Comm. Inc. 11.250% 03/15/10 72 Missouri Pacific RR 4.750% 01/01/30 74 National Vision 12.000% 03/30/09 62 Northern Pacific Railway 3.000% 01/01/47 56 Northwest Airlines 8.700% 03/15/07 73 Northwest Airlines 10.500% 04/01/09 74 US West Capital 6.500% 11/15/18 73 US West Capital Fdg. 6.875% 07/15/28 72 ********* 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, Rizande B. Delos Santos, Jazel P. Laureno, Cherry Soriano-Baaclo, Marjorie Sabijon, Terence Patrick F. Casquejo 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 ***