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/raid1/www/Hosts/bankrupt/TCR_Public/041005.mbx T R O U B L E D C O M P A N Y R E P O R T E R Tuesday, October 5, 2004, Vol. 8, No. 215 Headlines ACE AVIATION: S&P Assigns Single-B Corporate Credit Rating ADELPHIA: Century Gets Court OK to Tap Lazard as Investment Banker ADVANCE AUTO: S&P Puts BB+ Rating on $670M Sr. Secured Facility AIR CANADA: Court Grants Permanent Injunction Against US Creditors AIR CANADA: Gets Court Nod to Discharge Property Registrations AIR CANADA: Gets Westjet's Consent to Release Documents to Jetsgo ALAMOSA HOLDINGS: Sets Dividend for Convertible Preferred Stock ALDERWOODS: Completes Security Plan Sale to Citizens Insurance AMERICAN RESTAURANT: Files for Chapter 11 Protection in C.D. Cal. AMERICAN RESTAURANT: Case Summary & 20 Largest Unsecured Creditors APPLIED EXTRUSION: Amin J. Khoury Retires as Chairman & CEO BERMITE RECOVERY: Case Summary & 15 Largest Unsecured Creditors BIOVAIL: Resolves Teva Dispute & Expands Relationship BLUE MOUNTAIN STEEL: Case Summary & 20 Largest Unsecured Creditors BREUNERS HOME: U.S. Trustee Picks 7-Member Creditors' Committee CHASE MANHATTAN: Moody's Cuts Financial Strength Rating to C+ COOPER COMPANIES: S&P Puts BB Rating on Proposed $750M Facility CSFB MORTGAGE: Fitch Puts BB Rating on Class C-B-4 Certificates DALLAS AEROSPACE: Case Summary & 2 Largest Unsecured Creditors DEVLIEG BULLARD: Hires Mesirow Financial as Investment Banker ECHOSTAR COMMS: Subsidiary Completes Early Redemption of Sr. Notes ECHOSTAR DBS: Moody's Assigns Ba3 to $1 Bil. Senior Note Issuance EL PASO CORP: S&P Rating Not Affected by GulfTerra Equity Sale ENRON CORP: Houston Defendants Say Discovery Protocol Too Coercive EPIC DATA: Names Paul Blanchet to Board of Directors FEDERAL-MOGUL: Insurers Want to Nullify Certain Law Firm Ballots FOOTSTAR INC: Disappointed Over Kmart's Objection to Assume Pact FORBES MEDI-TECH: KPMG Expresses Going Concern Doubts FOSTER WHEELER: Adds Four New Directors, Doubling Size of Board FRIEDMAN'S INC: Key Vendors Agree to Junior Lien Credit Program GALEY & LORD: Gets Court Nod to Hire Garden City as Claims Agent GLOBAL DIGITAL: Jerome Artigliere Resigns as President & CEO GLOBAL DIGITAL: Inks Forbearance Agreement with Laurus Fund GOPHER STATE: Hires Ravich Meyer as Bankruptcy Counsel GREAT ATLANTIC: Settles Class Action Suit with 29 Franchisees HARVEST ENERGY: S&P Puts B- Rating on Planned $200 Million Bonds HAWAIIAN AIRLINES: Two Plans of Reorganization on the Table HAWAIIAN AIRLINES: Disclosure Statement Hearing Convenes Today HOLLINGER: Sr. Noteholders Waive Defaults & OK New $15MM Borrowing HOLLYWOOD CASINO: Amends Acquisition Pact with Eldorado Resorts ILLINOIS POWER: Fitch Raises Sr. Debt & Preferred Stock Ratings ILLINOIS POWER: S&P Raises Corporate Credit Rating From B to A- INTELLIGROUP INC: Softbank Completes $15MM Major Equity Investment INTELLIGROUP INC: Releases Disclosure & Internal Control Info INTERMET CORP: Gets $60 Million DIP Financing Commitment INTERMET CORP.: Lists of the Debtors' Largest Unsecured Creditors INTERSTATE BAKERIES: Honors Prepetition Employee Obligations KAISER: PBGC to Assume Responsibility for Steelworker Pension Plan KERASOTES SHOWPLACE: S&P Puts B Rating on Planned $300M Facility LOEHMANN'S CAPITAL: Moody's Junks $35M Sr. Secured Class B Notes LOGAN PARK CARE: Voluntary Chapter 11 Case Summary MASTR SEASONED: Fitch Affirms Classes 15-B's Low-B Ratings MEDIACOM LLC: Moody's Assigns Low-B Ratings on 14 Debt Issues N-VIRO INT'L: Employs Daniel Haslinger as Manager & Director NORTHWEST AIRLINES: CEO Richard Anderson Will Depart on Nov. 1 OWENS CORNING: Wants Court Okay on Lexington Lease Pact Amendment P-COM INC: Secures $5 Million Debenture Funding Commitment PARMALAT USA: Has Until October 20 to File Chapter 11 Plan PARMALAT USA: Proposes Supplemental Surplus Asset Sale Procedures PATHMARK STORES: Inks $250 Million Senior Secured Credit Facility PETRACOM MEDIA: Plan Confirmation Hearing Convenes Today PROVIDIAN FIN'L: 4% Convertible Notes Can be Swapped for Shares RCN CORP: Asks Court to Extend Lease Decision Period to Jan. 17 RELIANCE GROUP: Court Reschedules Confirmation Hearing to Oct. 20 RIVERSIDE: Tolko Asks Court to Nullify Shareholder Rights Plan RLJ LLC: Case Summary & 20 Largest Unsecured Creditors SPIEGEL INC: American Port Wins New Hampton Property for $1.8 Mil. SPORTS CLUB: Engages Stonefield Josephson as New Accountant ST. ANTHONY'S: S&P Lowers Ratings on $11.4 Million Bonds to BB+ STELCO INC: Plans to Terminate Bargaining Pact Amidst Strike Plans SUCCESS FACTORY: Case Summary & 20 Largest Unsecured Creditors TECH LABORATORIES: Strained Liquidity Triggers Going Concern Doubt TRESTLE HOLDINGS: Losses & Deficits Prompt Going Concern Doubt TXU CORP: Releases Independent Environmental Study TXU GAS: Atmos Energy Pays $1.9 Billion Cash in Merger Pact U.S. CAN: Delayed Quarterly Report Spurs S&P's B Credit Rating UAL CORP: Judge Wedoff Strikes Informational Brief from Record UNITED SUBCONTRACTORS: S&P Assigns B+ Facility & Loan Ratings US AIRWAYS: Mesa Air Group Sr. Management Reduce Salaries by 23% VANTAGEMED CORP: Partners with DrFirst in Distribution Agreement VITROTECH CORP: Amends Hi-Tech's Mineral Purchase & Royalty Pacts WRC MEDIA INC: S&P Lowers Corporate Credit Rating One Notch to B- * Large Companies with Insolvent Balance Sheets ********* ACE AVIATION: S&P Assigns Single-B Corporate Credit Rating ---------------------------------------------------------- Standard & Poor's Ratings Services assigned its 'B' long-term corporate credit rating to Montreal, Quebec-based ACE Aviation Holdings Inc. and its wholly owned subsidiary, Air Canada. The outlook is stable. "The ratings on ACE reflect the carrier's higher cost structure relative to its domestic competitors, the structural volatility in passenger demand, the company's exposure to high fuel prices, and the reliance on a new business plan to restore profitability," said Standard & Poor's credit analyst Kenton Freitag. "These concerns are partially offset by good liquidity and its extensive, well-positioned network," Mr. Freitag added. ACE has emerged from bankruptcy protection with reasonable prospects for a lower cost structure, although achieving planned levels of labor productivity and fuel costs are lingering concerns. ACE gained concessions in bankruptcy that will result in labor savings, reductions in aircraft rent, and reductions in various other operating costs. The carrier has also eliminated a substantial portion of its debt burden, which should result in lower interest costs. These initiatives are expected to narrow the cost gap with domestic low- cost carriers. Primary concerns are the airline's ability to achieve planned levels of labor productivity, which are more critical to reducing labor costs than wage concessions, and that fuel costs will not moderate from current levels. Although ACE is still the dominant carrier in Canada, it faces strong competitive challenges from low-cost carriers in most of it domestic markets and increasingly in transborder (U.S.) markets. In such markets, maintaining yields at levels that are at a premium to low-cost carriers will be challenging. A large part of ACE's strategy is essentially based on maintaining a higher-yield relative to its competitors through higher frequency service and a simplified pricing strategy. Core to achieving these goals is higher use of regional jets; the carrier is slated to dramatically increase its use of regional jets in the next three years as a means of offering higher frequency service while not expanding its capacity. ADELPHIA: Century Gets Court OK to Tap Lazard as Investment Banker ------------------------------------------------------------------ The U.S. Bankruptcy Court for the Southern of New York says Century Communications Corporation, an Adelphia Business Solutions, Inc. debtor-affiliate, can employ Lazard Freres & Co., LLC, as its sole investment banker to provide general restructuring advice in connection with a possible sale of Century/ML Cable Venture or any Century/ML interest or subsidiary division. As reported in the Troubled Company Reporter on Aug. 5, 2004, Lazard will: -- assist Century Communications in identifying and evaluating candidates for a potential Century/ML sale transaction; -- advise Century Communications in connection with negotiations; and -- assist in the consummation of the Century/ML Transaction. The Century/ML Transaction may take the form of a merger or a sale of assets or equity securities or other interests. Lazard and Century Communications agree to this compensation scheme: (a) In the event the Century/ML Transaction involves a sale of less than or equal to 55% of the equity in Century/ML, Lazard will be paid a $2,000,000 fee. (b) In the event that the Transaction involves a sale of more than 55% of Century/ML's equity, Lazard will be entitled to a fee equal to the applicable percentage of the aggregate consideration received in the transaction. (c) One-half of any fee payable to Lazard in connection with a Century/ML Transaction will be credited against any fees subsequently payable pursuant to the Engagement Letter between ACOM and Lazard dated June 1, 2002. (d) In addition to any fees that may be payable to Lazard and regardless of whether any transaction occurs, Century Communications will promptly reimburse Lazard for all: * reasonable out-of-pocket expenses, including travel and lodging, data processing and communications charges and courier services; and * other reasonable fees and expenses, including expenses of counsel, if any. Century Communications Corporation filed for Chapter 11 protection on June 10, 2002. Century's case has been jointly administered to the proceedings of Adelphia Communications Corporation. Century operates cable television services in Colorado, California and Puerto Rico. Century is an indirect wholly owned subsidiary of Adelphia Communications and an affiliate of Adelphia Business Solutions, Inc. Lawyers at Willkie, Farr & Gallagher represent Century. Headquartered in Coudersport, Pennsylvania, Adelphia Communications Corporation (OTC: ADELQ) is the fifth-largest cable television company in the country. Adelphia serves customers in 30 states and Puerto Rico, and offers analog and digital video services, high-speed Internet access and other advanced services over its broadband networks. The Company and its more than 200 affiliates filed for Chapter 11 protection in the Southern District of New York on June 25, 2002. Those cases are jointly administered under case number 02-41729. Willkie Farr & Gallagher represents the ACOM Debtors. Headquartered in Coudersport, Pa., Adelphia Business Solutions, Inc., now known as TelCove -- http://www.adelphia-abs.com/-- is a leading provider of facilities-based integrated communications services to businesses, governmental customers, educational end users and other communications services providers throughout the United States. The Company filed for Chapter 11 protection on March 27, 2002 (Bankr. S.D.N.Y. Case No. 02-11389) and emerged under a chapter 11 plan on April 7, 2004. Judy G.Z. Liu, Esq., at Weil, Gotshal & Manges LLP represents the Debtors in their restructuring efforts. When the Company filed for protection from its creditors, it listed $2,126,334,000 in assets and $1,654,343,000 in debts. The Company emerged from bankruptcy on April 7, 2004. ADVANCE AUTO: S&P Puts BB+ Rating on $670M Sr. Secured Facility --------------------------------------------------------------- Standard & Poor's Ratings Services raised its ratings on Advance Auto Parts Inc. and Advance Stores Co. Inc. The corporate credit rating was raised to 'BB+' from 'BB'. The outlook is stable. The ratings revision reflects the company's improved credit measures and stable operating performance. At the same time, Standard & Poor's assigned its 'BB+' bank loan rating to Advance Stores Co. Inc.'s proposed $670 million senior secured credit facility. A recovery rating of '2' was also assigned to the facility, indicating the expectation for a substantial (80%-100%) recovery of principal in the event of a default. The company anticipates using a majority of the proceeds from its tranche A and B term loans to refinance around $335 million of debt under its current term loans, and up to $175 million of proceeds from a delayed draw facility to repurchase common shares. The revolver will be used to pay fees and expenses and for other operational needs. Pro forma for the transaction, Advance Auto Parts will have total debt outstanding of $513 million ($1.2 billion including capitalized operating leases). Credit measures will remain consistent with the 'BB+' rating level. Pro forma for the transaction, lease-adjusted debt to EBITDA will be in the mid 2x area, and trailing-12-month EBITDA interest coverage will be in the low 5x area. "The ratings on Roanoke, Virginia-based Advance Auto Parts Inc. and its primary operating subsidiary, Advance Stores Co. Inc., reflect the company's participation in the competitive automotive parts retail market and its history of aggressive acquisitions," said Standard & Poor's credit analyst Stella Kapur. "These risks are mitigated by Advance's leading position in the auto supply retail segment, its improved operating performance and credit measures over the past few years, and its success in integrating previous acquisitions," Ms. Kapur adds. Long-term industry demographics remain favorable, as the average age of vehicles continues to increase, and light trucks and SUVs, with their higher average ticket price for parts, represent a greater percentage of vehicle sales. However, Standard & Poor's anticipates a somewhat less favorable near-term environment given the impact that high gasoline prices may be having on consumers' spending habits. Consumers may be deferring maintenance or passing on purchases of automobile accessories given the increased costs of gasoline. Despite this risk, we believe that Advance Auto will be able to digest some marginal softness in retail sales while maintaining credit measures in line with current ratings as it completes its $200 million share repurchase program. However, current ratings do not factor in further significant debt-financed acquisitions in the next few years. AIR CANADA: Court Grants Permanent Injunction Against US Creditors ------------------------------------------------------------------ Marc E. Richards, Esq., at Blank Rome, LLP, appeared before Judge Beatty in the U.S. Bankruptcy Court for the Southern District of New York to obtain a permanent injunction, enjoining and restraining U.S. creditors from commencing actions against Air Canada or its U.S. assets. Mr. Richards appeared before the U.S. Court on behalf of Ernst & Young, Inc., in its capacity as the Foreign Representative of Air Canada. According to Mr. Richards, a permanent injunction will enable Air Canada and its successors to carry out the terms of the airline's Consolidated Plan of Reorganization, Compromise and Arrangement sanctioned by the Ontario Superior Court of Justice, and prevent frustration of Air Canada's restructuring effort. The Plan of Arrangement, Mr. Richards explains, provides, among other things, for the compromise of all claims against Air Canada by existing creditors in consideration of a significant amount of the equity in the reorganized entity, ACE Aviation Holdings Inc. "To give effect to the terms of the Plan of Arrangement and the Sanction Order in the United States, it is necessary for the [U.S. Bankruptcy Court] to convert the Preliminary Injunction currently in force in these proceedings to a permanent injunction," Mr. Richards says. Mr. Richards tells Judge Beatty that the Monitor's request is designed to grant comity to the Canadian Court and to facilitate Air Canada's emergence from protection under the Companies' Creditors Arrangement Act. Pursuant to the Sanction Order, the Canadian Court orders and requests: "the aid and recognition of any court or any judicial, regulatory or administrative body in any province or territory of Canada . . . and the Federal Court of Canada and any judicial, regulatory or administrative tribunal or other court or any judicial, regulatory or administrative body of the United States of America and the states or other subdivisions of the United States of America and of any other nation or state to act in aid of and to be complementary to this Court in carrying out the terms of this order." Judge Beatty Grants Permanent Injunction Judge Beatty finds that the entry of a permanent injunction in the United States against U.S. creditors is consistent with the relevant factors set forth in Section 304 of the Bankruptcy Code. Accordingly, Judge Beatty gives the Plan of Arrangement and the Sanction Order full force and effect in the United States and elsewhere within the jurisdiction of the U.S. Court, and with regard to all parties subject to the U.S. Court's jurisdiction. Judge Beatty rules that the Plan of Arrangement and the Sanction Order will be binding on and enforceable against Air Canada's creditors and all other relevant parties. On the Implementation Date of the Plan, each Affected Unsecured Claim will be settled, compromised and released in accordance with the Plan of Arrangement, and the ability of an Affected Unsecured Creditor to proceed against Air Canada in respect of an Affected Unsecured Claim will be forever discharged and restrained. All proceedings with respect to Affected Unsecured Claims are permanently stayed, subject only to the right of the Affected Unsecured Creditors to receive distributions in accordance with the Plan of Arrangement. A Creditor that did not receive a notice of the claims process established by the Claims Orders issued by the CCAA Court or file a Proof of Claim in accordance with the provisions of the Claims Orders is forever barred from making any claim against Air Canada. That Creditor will not be entitled to any distribution under the Plan of Arrangement, and the claim is forever extinguished. 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. On September 30, 2004, Air Canada successfully completed its restructuring process and implemented its Plan of Arrangement. The airline exited from CCAA protection raising $1.1 billion of new equity capital and, as of September 30, has approximately $1.9 billion of cash on hand. (Air Canada Bankruptcy News, Issue No. 50; Bankruptcy Creditors' Service, Inc., 215/945-7000) AIR CANADA: Gets Court Nod to Discharge Property Registrations -------------------------------------------------------------- The Ontario Superior Court of Justice: (1) gave Air Canada authority to take actions and execute and file discharges, financing change statements and other documents as necessary, on the behalf of the registrants of certain dischargeable registrations. As the authorized signing authority, the Applicants can discharge each of the Dischargeable Registrations. (2) directed the Registrar of the RPMRR or the supervising body of each applicable registry to accept the documents for filing and registration purposes. (3) found that effective as at the Implementation Time of their Plan of Reorganization, Compromise and Arrangement, the financing statements registered with respect to the Dischargeable Registrations are null and void. As reported in the Troubled Company Reporter on Sept. 9, 2004, Air Canada's four global restructuring agreements with General Electric Capital Corporation and certain of its affiliates provide for a $681,000,000 exit facility upon the Applicants' emergence from bankruptcy. The Exit Facility will be secured against substantially all of the assets of the Applicants, ACE Aviation Holdings, Inc., and ACE's other subsidiaries. Pursuant to the parties' term sheet, all of the Applicants' obligations under any agreement with, or for the benefit of, GE Capital, including the Exit Facility, are to be secured by a first priority security interest on all of the existing and after acquired property of the Applicants, other than leased assets, assets financed by other parties, and certain other excluded property. Under the Exit Facility, GE Capital requires the Applicants to represent and warrant that there are no registrations registered against the Applicants, which do not relate to valid security interest. In addition, as part of their cost reduction program, the Applicants negotiated with their lessor and secured creditors to reduce the number of jurisdictions in which the Applicants are required to maintain security registrations. The Applicants are attempting to "clean up" the personal property registers in each of the Canadian provinces and territories, including the Registrar of the Register of Personal and Movable Real Rights of the Province of Quebec, and the District of Columbia by removing any registration that is not properly registered there or that is no longer required to be registered there. The Applicants, through their counsel, Bennett Jones, LLP, and Stikeman Elliott, LLP, conducted name searches of the personal property registry of each Canadian province and territory, including the RPMRR in Quebec, and the District of Columbia for personal property security registrations against each of the Applicants. The Applicants and their counsel determined whether each registration was properly registered and should be maintained. Each registration determined not to relate to a valid security interest or which was deemed to be no longer required was categorized into one of six categories: (1) Underlying lease or financing paid out, terminated or expired; (2) Underlying lease or financing restructured and new filings have been done with respect to the restructured lease or financing in agreed jurisdictions; (3) Air Canada is no longer required to maintain registrations in this jurisdiction but security interest still valid and perfected in other designated jurisdictions. Discharges authorized by secured party; (4) Air Canada is no longer required to maintain registrations in this jurisdiction but security interest still valid and perfected in other designated jurisdictions; (5) Unable to verify status of underlying lease or financing -- will require secured party to confirm that registrations still needed upon being served with materials; and (6) Registration made in contravention with Initial CCAA Order. The determination of whether a particular registration was a Dischargeable Registration was based on a review of the relevant Applicant's obligation with respect to the collateral, the collateral description set out in the registration and, in some cases, information from the registrant itself. No determination was made as to whether any action is required in the case of registrations filed in favor of GE Canada Finance Holding Company and General Electric Capital Canada, Inc. On August 25, 2004, Bennett Jones sent a detailed letter to the known registrant of each of the Dischargeable Registrations to inform the registrant, among others, that the registration did not relate to a valid security interest or was no longer required. In effect, the letter seeks confirmation of the nature and status of a registration from the registrant. The letter asks the registrant to authorize and consent to the discharge of its registration. Black-lined copies of the lists of the Dischargeable Registrations are available at no charge at: http://bankrupt.com/misc/dischargeable_registrations_other_provinces.DOC -- and -- http://bankrupt.com/misc/dischargeable_registrations_Quebec_RPMRR.DOC 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. On September 30, 2004, Air Canada successfully completed its restructuring process and implemented its Plan of Arrangement. The airline exited from CCAA protection raising $1.1 billion of new equity capital and, as of September 30, has approximately $1.9 billion of cash on hand. (Air Canada Bankruptcy News, Issue No. 49; Bankruptcy Creditors' Service, Inc., 215/945-7000) AIR CANADA: Gets Westjet's Consent to Release Documents to Jetsgo ----------------------------------------------------------------- WestJet Airlines and co-founder Mark Hill have given their consent to Air Canada, enabling the airline to provide certain documents in Air Canada's possession to Jetsgo, as requested by Jetsgo President and CEO Michel Leblanc on September 13, 2004. The documents were recovered from the garbage or recycling of Mr. Hill by investigators retained by Air Canada in its investigation of WestJet. Included is a document identified in court filings as, "Jetsgo November 2003 Summary of Domestic Load Factors." Air Canada agreed to release the documents pending approval from WestJet and Hill. As a result of their consent, Air Canada has now provided the documents to Jetsgo's counsel. "We have just received the documents and will study them in order to determine the appropriate course of action," said Leblanc. "We appreciate the timely consent from WestJet and Mr. Hill facilitating the release of the documents and we thank Air Canada for their cooperation." Air Canada alleged that WestJet and Mr. Hill improperly accessed an employee travel Web site, which contained confidential information for use by current and former Air Canada employees and retirees. That Web site, according to Air Canada, contained confidential information about its passenger bookings. As part of an Air Canada investigation, shredded documents relating to Jetsgo's business were found in the garbage or recycling of Mr. Hill, co-founder and then Vice President of WestJet. The documents were reconstructed, and the existence of the Jetsgo information was made public in Court filings made in the Air Canada-WestJet proceedings. The documents themselves were not filed with the Court by Air Canada, apparently because of their confidential nature. In a Sept. 7, letter to Robert Milton, President and CEO of Air Canada, Mr. Leblanc requested that Air Canada make the documents available to Jetsgo to assist the company with its investigation into the nature of the information contained in the recovered documents. Air Canada agreed to the request, provided WestJet and Mr. Hill consented. Subsequently, Mr. Leblanc wrote to Clive Beddoe, President and CEO of WestJet, on Sept. 13, requesting cooperation in making the documents available. 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. On September 30, 2004, Air Canada successfully completed its restructuring process and implemented its Plan of Arrangement. The airline exited from CCAA protection raising $1.1 billion of new equity capital and, as of September 30, has approximately $1.9 billion of cash on hand. ALAMOSA HOLDINGS: Sets Dividend for Convertible Preferred Stock --------------------------------------------------------------- Alamosa Holdings, Inc. (NASDAQ/NM: APCS), the largest (based on number of subscribers) PCS Affiliate of Sprint (NYSE: FON), which operates the largest all-digital, all-CDMA Third-Generation wireless network in the United States, said its dividend, record and ex-dividend dates for its 7.5% Series B Convertible Preferred stock. The Company has set a record date of October 19, 2004, for the dividend payment, with the dividend payable on November 1, 2004, at an annual rate of 7.5% of the $250 per share liquidation preference, in respect to the period from August 1, 2004 through October 31, 2004. The ex-dividend date will be October 15, 2004. Through July 31, 2008, Alamosa Holdings has the option to pay dividends on the Series B Convertible Preferred Stock in: (1) cash; (2) shares of the Alamosa Holdings' Series C convertible preferred stock; (3) shares of Alamosa Holdings common stock; or (4) a combination thereof. The Company's Board of Directors has elected to pay the full amount of the dividend in cash. About the Company Alamosa Holdings, Inc. (CCC+/Developing/--) is the largest PCS Affiliate of Sprint based on number of subscribers. Alamosa has the exclusive right to provide digital wireless mobile communications network services under the Sprint brand name throughout its designated territory located in Texas, New Mexico, Oklahoma, Arizona, Colorado, Utah, Wisconsin, Minnesota, Missouri, Washington, Oregon, Arkansas, Kansas, Illinois and California. Alamosa's territory includes licensed population of 15.8 million residents. ALDERWOODS: Completes Security Plan Sale to Citizens Insurance -------------------------------------------------------------- Alderwoods Group, Inc.'s (NASDAQ:AWGI) subsidiary Mayflower National Life Insurance Company completed the sale of all of the outstanding shares of Security Plan Life Insurance Company to Citizens Insurance Company of America. Mayflower received cash proceeds from this sale of $85 million and Alderwoods Group expects to record a pre-tax gain on the sale of approximately $16 million in the third quarter of its 2004 fiscal year. After payment of applicable taxes and expenses associated with the transaction and the recapitalization of Mayflower, which remains subject to regulatory approval, Alderwoods Group expects to realize net proceeds of approximately $60 million from this transaction. The Company plans to use the net proceeds of the sale to further reduce its outstanding long-term debt. "We are very pleased to have completed this transaction with Citizens Insurance Company for our non-strategic life insurance business," said Paul Houston, President and Chief Executive Officer of Alderwoods Group. "With the sale of Security Plan Life Insurance and other assets previously identified for sale, we continue to make progress on our divestiture program and on our objective to strengthen Alderwoods' balance sheet." Houston added, "Having completed the sale of Security Plan Life Insurance, our wholly owned subsidiary Mayflower will continue to focus on building its funeral pre-need insurance business." Alderwoods Group is the second largest operator of funeral homes and cemeteries in North America, based upon total revenue and number of locations. As of June 19, 2004, the Company operated 716 funeral homes, 130 cemeteries and 61 combination funeral home and cemetery locations throughout North America. Of the Company's total locations, 59 funeral homes, 53 cemeteries and four combination funeral home and cemetery locations were held for sales as of June 19, 2004. The Company provides funeral and cemetery services and products on both an at-need and pre-need basis. In support of the pre-need business, the Company operates insurance subsidiaries that provide customers with a funding mechanism for the pre-arrangement of funerals. * * * As reported in the Troubled Company Reporter on July 27, 2004, Standard & Poor's Ratings Services it affirmed its 'B+' corporate credit rating on the funeral home and cemetery operator Alderwoods Group, Inc., and assigned its 'B' debt rating to the company's proposed $200 million senior unsecured notes due in 2012. At the same time, Standard & Poor's also assigned its 'BB-' senior secured bank loan rating and its '1' recovery rating to Alderwoods' proposed $75 million revolving credit facility, which matures in 2008, and to its proposed term loan B, which matures in 2009. The existing term loan had $242 million outstanding at March 27, 2004, but will be increased in size. The bank loan ratings indicate that Standard & Poor's expects a full recovery of principal in the event of a default, based on an assessment of the loan collateral package and estimated asset values in a distressed default scenario. The company is expected to use the proceeds from the new financings to redeem $320 million of 12.25% senior unsecured notes, repay a $25 million subordinated loan, and fund transaction costs. As of March 27, 2004, the company had $614 million of debt outstanding. The ratings outlook has been revised to positive from stable to indicate that, in time, the ratings could be raised if Alderwoods can continue to demonstrate improved operating performance and if it can sustainably deleverage. The decline in leverage would give the company additional financial capacity to weather adverse competitive factors, such as periodic weaknesses in death rates and rising consumer preference for lower cost death-care services. "The low-speculative-grade ratings on funeral and cemetery services provider Alderwoods Group, Inc., reflect its highly leveraged financial profile, uncertainties related to the longer term success of a new business plan, and the company's vulnerability to periods of business weakness," said Standard & Poor's credit analyst Jill Unferth. "These factors are mitigated by the relatively favorable long-term predictability of the funeral home and cemetery business." AMERICAN RESTAURANT: Files for Chapter 11 Protection in C.D. Cal. ----------------------------------------------------------------- American Restaurant Group, Inc., filed a chapter 11 petition in the United States Bankruptcy Court for the Central District of California. The bankruptcy filing followed the announced agreement reached between the Company and members of an ad hoc committee of holders of over 70% of its Secured Notes on the terms of a comprehensive financial restructuring to be implemented through a pre-negotiated Plan of Reorganization. As reported in the Troubled Company Reporter on Sept. 29, the financial restructuring will substantially deleverage the Company's balance sheet, allowing American Restaurant to decrease its funded debt and accrued interest from approximately $202 million to approximately $23 million, by exchanging approximately $162 million of Secured Notes, accrued interest, and various other obligations for approximately 98% of the common stock of the reorganized Company. Upon completion of the financial restructuring, American Restaurant's annual cash interest costs will be reduced by approximately $19 million. In addition, American Restaurant obtained from its existing lender, Wells Fargo Foothill, part of Wells Fargo & Company (NYSE: WFC), a commitment to extend a $30 million DIP facility that will enable the Company to continue its operations seamlessly during the restructuring process. Moreover, Wells Fargo Foothill provided a commitment letter to ARG providing for $40 million of new financing upon the consummation of the Plan. Headquartered in Los Altos, California, American Restaurant Group, Inc., through its subsidiaries operating as Stuart Anderson's, specializes in U.S.D.A. Choice fresh-cut steak; seasoned, seared, and slow-roasted prime rib; and a variety of seafood entrees complete with 'all the fixin's'. The company and its debtor- affiliates filed a chapter 11 petition on Sept. 28, 2004 (Bankr. C.D. Cal. Case No. 04-30732). Thomas R. Kreller, Esq., at Milbank, Tweed, Hadley & Mccloy represents the Debtors in their restructuring efforts. When the Debtor filed for bankruptcy protection, it estimated $1 million to $10 million of assets and more than $100 million in total debts. AMERICAN RESTAURANT: Case Summary & 20 Largest Unsecured Creditors ------------------------------------------------------------------ Debtor: American Restaurant Group Inc. 4410 El Camino Real Suite 201 Los Altos, California 94022 Bankruptcy Case No.: 04-30732 Debtor affiliates filing separate chapter 11 petitions: Entity Case No. ------ -------- ARG Enterprises Inc. 04-30734 ARG Property Management Corp. 04-30736 Type of Business: The Debtor owns and operates more than 90 Stuart Anderson's steakhouse restaurants. See http://www.stuartandersons.com/ Chapter 11 Petition Date: September 28, 2004 Court: Central District of California (Los Angeles) Judge: Thomas B. Donovan Debtors' Counsel: Thomas R. Kreller, Esq. Milbank, Tweed, Hadley & Mccloy 601 South Figueroa Street 30th Floor Los Angeles, CA 90017 Tel: 213-892-4000 Estimated Assets Estimated Debts ---------------- --------------- American Restaurant Group $1 M to $10 M More than $100 M Inc. ARG Enterprises Inc. $10 M to $50 M More than $100 M ARG Property Management $10 M to $50 M More than $100 M Corp. Debtors' 20 Largest Unsecured Creditors: Entity Nature Of Claim Claim Amount ------ --------------- ------------ Indentured Trustee Notes $110,980,000 Bank of New York 101 Barclay st., 8 West New York, NY 10286 Robert F. Adelman Lease Reject $1,252,985 509 West 77th St. c/o Richfield Plumbing Richfield, MN 55423 Ed Orr Hertzke Holsteins, Lease Reject $1,113,348 Ltd.; West Colorado Square, Ltd.; and Opera Galleria, LLC 826 9th St., Ste. 200 Orr Land Company Greeley, CO 80631 Morton Gray Lease Reject $1,069,537 Morton and Christine Gray, Trustees for the Morton John Gray and Christine Gray Family Trust 4700 Foulger Drive Santa Rosa, CA 95405 Dennis H. Keith Lease Reject $983,955 Trustee of the Dennis H. Keith Living Trust - 1999 No. RLT 99-601M 7460 Margerum Ave. San Diego Stacey Bolon (CNL); and Lease Reject $884,733 Christoper Tessitore, Esq. Commercial Net Lease Realty Services, Inc. 450 South Orange Ave., Ste. 900 Orlando, FL 32801 Sharon Nardozza Lease Reject $862,571 Brian C. Malk, Trustee of The Brian C. Malk Trust 3655 Noble Dr., Ste. 650 c/o Midtown Niki Group San Diego, CA 92122 Jan Lampe Lease Reject $680,001 James J. Lampe & Janet K. Lampe 101 South Rainbow #28-C201 Las Vegas, NV 98145 Steven W. Humphries Lease Reject $654,727 Louise Humphries, Trustee 5540 E. Bay Trail Court Northwest Properties LLC Boise, ID 83716 Mike Bostedo, Corp. Trust Lease Reject $635,122 Services CMBS, CNL Funding CNL Funding 2000-A, LP 11000 Broken Land Pkwy. Wells Fargo Bank Minnesota Columbia, MD 21044 Mark Holden Lease Reject $571,990 Paradise Village Investment Company 11411 N. Tatum Blvd. c/o Westcor Partners Phoenix, AZ 85028 Orix Real Estate Capital Landlord $177,596 Markets Frank Newell Lease Reject $175,480 ARG Propertie I, LLC Landlord $171,080 Victoria Ward Ltd. Landlord $37,146 BP Management Inc. Landlord $33,963 Frank and/or Deborah Hsu Landlord $32,817 Oppenheimer Menlo Associates Landlord $30,928 West Valley Partnership Landlord $26,619 Oppenheimer Park Associates Landlord $25,149 APPLIED EXTRUSION: Amin J. Khoury Retires as Chairman & CEO ----------------------------------------------------------- Applied Extrusion Technologies, Inc. (NASDAQ NMS:AETC) announced the resignation of Amin J. Khoury as the Company's Chairman of the Board of Directors and CEO effective upon the consummation of the Company's previously announced restructuring. Upon his retirement, Mr. Khoury will be succeeded by David N. Terhune, who has been the President of AET since 1999 and has led the Company as its Chief Operating Officer since 1995. In addition, Mr. Khoury has agreed to provide consulting and advisory services to the board of directors of the reorganized Company on terms and conditions to be agreed. Mr. Khoury commented: "I am pleased to have been able to help steer the Company through the difficult past year and a half. David Terhune has worked tirelessly and enthusiastically as the Company's Chief Operating Officer for the last nine years and I am pleased that he will be taking on the CEO position. I feel confident that the Company will emerge from this process financially strong and wish Mr. Terhune and the Company every success in the future." Separately, the Company announced that it would set October 8, 2004 as the record date for voting on, and receipt of distributions under, its prepackaged chapter 11 plan of reorganization. The Company expects to commence the solicitation process at or around the middle of October and to consummate the restructuring at or around the end of this year or the beginning of next year. The reorganized Company will become a non-reporting company pursuant to the U.S. securities laws. Applied Extrusion Technologies, Inc. is a North American developer and manufacturer of specialized oriented polypropylene films used primarily in consumer products labeling and flexible packaging application. * * * As reported in the Troubled Company Reporter on July 5, 2004, Standard & Poor's Ratings Services lowered its corporate credit rating on Applied Extrusion Technologies, Inc., to 'D' from 'CCC'. Standard & Poor's also lowered its rating on the company's $275 million 10.75% senior notes due 2011 to 'D' from 'CC'. The downgrade follows the New Castle, Delaware-based company's failure to make the $14.8 million interest payment due July 1, 2004, on its $275 million senior notes. "In light of very weak operating results, the company obtained an amendment to financial covenants under its credit agreement for the third fiscal quarter of 2004. However, the amendment restricts the company from paying interest due on July 1, 2004, on its senior notes unless it has excess availability under its current credit facility of $20 million after giving effect to the interest payment. Currently, the company would not have the excess availability required under the amendment to make the interest payment," said Standard & Poor's credit analyst Liley Mehta. BERMITE RECOVERY: Case Summary & 15 Largest Unsecured Creditors --------------------------------------------------------------- Debtor: Bermite Recovery, L.L.C. 3200 North Central Ave., #100 Phoenix, Arizona 85012 Bankruptcy Case No.: 04-17294 Chapter 11 Petition Date: September 30, 2004 Court: District of Arizona (Phoenix) Judge: Charles G. Case II Debtor's Counsel: Alisa C. Lacey, Esq. Stinson Morrison Hecker LLP 1850 North Central Avenue #2100 Phoenix, AZ 85004 Tel: 602-279-1600 Fax: 602-240-6925 Estimated Assets: $10 Million to $50 Million Estimated Debts: $10 Million to $50 Million Debtor's 15 Largest Unsecured Creditors: Entity Nature Of Claim Claim Amount ------ --------------- ------------ Arthur J. Gallagher & Co. Trade debt $485,000 c/o Joseph C. Tixier, Sr. Counsel Two Pierce Place Itasca, IL 60143 Seebach & Seebach Trade Debt $231,392 800 Wilshore Blvd., #1020 Los Angeles, CA 90017 Ikon Office Solutions Trade Debt $53,796 Legalink Los Angeles Trade Debt $20,927 A & E Court Reporters Trade Debt $8,138 Agello, Frank P., Esq. Trade Debt $7,740 McCutchen, Doyle, Brown & Trade Debt $6,895 Enersen, LLP Winter Reporting, Inc. Trade Debt $6,368 Song, Joon Young, Esq. Trade Debt $5,175 William E. Hoffman PC Trade Debt $3,000 California Deposition Trade Debt $1,854 Reporters The Superior Group Trade Debt $1,373 Corporation Service Company Trade Debt $1,310 Pacific Legal, Inc. Trade Debt $485 Wilson George Court Trade Debt $327 Reporters BIOVAIL: Resolves Teva Dispute & Expands Relationship ----------------------------------------------------- Biovail Corporation (NYSE:BVF) (TSX:BVF) and Teva Pharmaceutical Industries Ltd. (Nasdaq:TEVA) disclosed that the pending arbitration between the two companies relating to a dispute over their existing agreement has been amicably resolved in its entirety, with each side granting a full release to the other in respect of the subject matter of that arbitration. In addition, the companies have expanded their business relationship for controlled release generic products and active raw materials. Under agreements entered into by their respective subsidiaries, Biovail granted Teva a four-year extension to the ten-year product-by-product supply terms for each of the currently marketed products covered by the exclusive marketing and product development agreement that was originally established in 1997, granted Teva an option on one additional bioequivalent product under development by Biovail, and transferred in their entirety Biovail's product development files and related intellectual property for two extended release generic products, which Teva will now continue to develop and ultimately manufacture on its own. In consideration for these agreements, Teva agreed to make up-front and milestone based payments and also agreed to an increase in the gross margin percentage shared with Biovail under the exclusive marketing agreement for the balance of its extended term. Teva and Biovail affiliates also entered into a long-term API supply agreement under which Biovail will increase its purchases for raw material from Teva's API division. These transactions confer financial benefits to both parties. Additional details were not disclosed. Mr. Eugene Melnyk, Chairman and CEO of Biovail commented: "Our arbitration has resulted in an expansion of our relationship with Teva on different fronts providing mutual benefits to both parties. We look forward to continuing our productive relationship with Teva." Mr. Israel Makov, CEO of Teva said: "These new agreements allow both parties to benefit from our mutual strengths and should provide Teva with the opportunity to further expand its portfolio of controlled release generic products." Teva Pharmaceutical Industries Ltd., headquartered in Israel, is among the top 25 pharmaceutical companies and among the largest generic pharmaceutical companies in the world. The company develops, manufactures and markets generic and innovative human pharmaceuticals and active pharmaceutical ingredients. Close to 90% of Teva's sales are in North America and Europe. Biovail Corporation is an international full-service pharmaceutical company, engaged in the formulation, clinical testing, registration, manufacture, sale and promotion of pharmaceutical products utilizing advanced drug-delivery technologies. For more information about Biovail, visit the company's Web site at http://www.biovail.com/ * * * As reported in the Troubled Company Reporter on March 11, 2004, Standard & Poor's Ratings Services revised its outlook on the pharmaceutical company to negative from stable. At the same time, S&P affirmed its ratings on Mississauga, Ontario-based Biovail, including the 'BB+' long-term corporate credit rating. The action was in response to the company's lower 2004 earnings guidance. BLUE MOUNTAIN STEEL: Case Summary & 20 Largest Unsecured Creditors ------------------------------------------------------------------ Debtor: Blue Mountain Steel, Inc. PO Box 21770 Carson City, Nevada 89721 Bankruptcy Case No.: 04-52920 Type of Business: The Company specializes in steel foundries, construction metals, steel mills, ornamental glass, metal, and stone, reinforced concrete and anchors, architectural and ornamental metalwork. Chapter 11 Petition Date: October 1, 2004 Court: District of Nevada (Reno) Judge: Gregg W. Zive Debtor's Counsel: Alan R. Smith, Esq. Law Offices of Alan R. Smith 505 Ridge Street Reno, Nevada 89501 Tel: (775) 786-4579 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 ------ --------------- ------------ CFI Trust Funds Employee Benefits- $495,000 Department 7273 Union Contract Los Angeles, California 90088 PDM Steel Goods and Services $454,563 PO Box 50430 Sparks, Nevada 89435 K & T Steel Corporation Goods and Services $117,531 SMI Joint Goods and Services $71,275 Amico Klemp Goods and Services $69,216 H & E Equipment Goods and Services $45,256 Starmark Medical Benefits $40,292 B.T. Mancini. Company, Inc. Goods and Services $38,390 Marah USA, Inc. Insurance Premium $33,044 Power Fasteners Goods and Services $31,457 Orco Construction Supply Goods and Services $30,201 Intermountain Good and Services $27,714 Galvanizing, Inc. Dock West, Inc. Goods and Services $27,700 Hodell-Natco Goods and Services $27,604 Industries, Inc. A-L Sierra Welding Products Goods and Services $25,378 Praxair, Inc. Goods and Services $20,456 Hertz Equipment Rental Goods and Services $20,188 Silver State Industries Goods and Services $20,127 Silver State Steel Goods and Services $20,127 Ahern Rentals Goods and Services $17,074 BREUNERS HOME: U.S. Trustee Picks 7-Member Creditors' Committee --------------------------------------------------------------- The United States Trustee for Region 3 appointed seven creditors to serve on an Official Committee of Unsecured Creditors in Brueners Home Furnishings Corp.'s chapter 11 case: 1. Broyhill Furniture Industries, Inc. c/o Furniture Brands International Attn: Jerry Lybarger 101 S. Hanley Road, Ste 1900 St. Louis, Missouri Phone: 314-862-7132, Fax: 314-863-7047 2. Local 177 Union Pension Fund Attn: Wayne Femicola 282 Hillside Avenue Hillside, New Jersey 07205 Phone: 973-923-7070, Fax: 973-923-2631 3. Darby Corporation Attn: Stephanie S. Mannino 256 Orchard Street Westfield, New Jersey 07090 Phone: 908-233-8803 4. La-Z-Boy Incorporated Attn: David Carpenter 4620 Grandover Parkway Greenboro, North Carolina 27417 Phone: 336-315-4224, Fax: 336-315-4383 5. J. Royale Furniture, Inc. Attn: Jacklyn Scarduzu Dopke, Esq. 1610 Deborah Herman Road Conover, North Carolina 28613 Phone: 828-322-1262 6. Kimball Home Attn: R. Chappel Philips 1600 Royal Street Jasper, Indiana 47549 Phone: 812-482-1600, Fax: 812-482-8832 7. The Valspar Corporation Attn: Jeffrey S. Hanson 1101 South Third Street Minneapolis, Minnesota 55415 Phone: 612-375-7848, Fax: 612-375-7728 Official creditors' committees have the right to employ legal and accounting professionals and financial advisors, at the Debtors' expense. They may investigate the Debtors' business and financial affairs. Importantly, official committees serve as fiduciaries to the general population of creditors they represent. Those committees will also attempt to negotiate the terms of a consensual chapter 11 plan -- almost always subject to the terms of strict confidentiality agreements with the Debtors and other core parties-in-interest. If negotiations break down, the Committee may ask the Bankruptcy Court to replace management with an independent trustee. If the Committee concludes reorganization of the Debtors is impossible, the Committee will urge the Bankruptcy Court to convert the Chapter 11 cases to a liquidation proceeding. Headquartered in Lancaster, Pennsylvania, Breuners Home Furnishings Corp., -- http://www.bhfc.com/-- is one of the largest national furniture retailers focused on the middle to upper-end segment of the market. The Company, along with its debtor-affiliates, filed for chapter 11 protection on July 14, 2004 (Bankr. Del. Case No. 04-12030). Great American Group, Gordon Brothers, Hilco Merchant Resources, and Zimmer-Hester were brought on board within the first 30 days of the bankruptcy filing to conduct Going-Out-of- Business sales at the furniture retailer's 47 stores. Bruce Grohsgal, Esq., and Laura Davis Jones, Esq., at Pachulski, Stang, Ziehl, Young & Jones represent the Debtors in their restructuring efforts. The Company reported more than $100 million in estimated assets and debts when it sought protection from its creditors. CHASE MANHATTAN: Moody's Cuts Financial Strength Rating to C+ ------------------------------------------------------------- Moody's Investors Service lowered the bank financial strength rating of Chase Manhattan Bank USA from B- to C+, in anticipation of its merger with Bank One Delaware. The long-term deposit ratings of Chase USA of Aa2 were affirmed. All rating outlooks are stable. This action aligns the financial strength rating (FSR) of Chase USA with the rating that had applied to Bank One Delaware N.A. (C+) prior to the merger. Bank FSRs represent Moody's opinion of a bank's intrinsic safety and soundness and exclude certain credit support elements, such as parent support, that are incorporated in long-term deposit ratings. The FSR of C+ reflects the leading market share that Chase USA will have in the U.S. bank credit card market, as well as the challenges facing management to increase the profitability of the card franchise, to levels closer to that of bank-affiliated industry leaders. The C+ rating is still higher than FSRs of most leading non-bank credit card companies, reflecting Chase USA's stronger funding profile and the benefits derived from the overlap in its customer base with its affiliates. Finally the rating also reflects the challenges facing the entire credit card industry, including intense competition and prospects for slow receivables growth. If management can strengthen profitability through cost saves, as well as improved pricing, collection and marketing strategies then this may lead to upgrades of the FSR. At the same time, the scale of the existing operation, and the prospects for cost saves, places considerable support under the C+ FSR. Chase USA is the surviving entity and the issuer, FSR and deposit ratings of Bank One Delaware N.A, ratings are withdrawn. Chase USA is a leading credit card issuer with approximately $130 billion of managed receivables outstanding. COOPER COMPANIES: S&P Puts BB Rating on Proposed $750M Facility --------------------------------------------------------------- Standard & Poor's Ratings Services assigned a 'BB' corporate credit rating to The Cooper Companies Inc., a soft contact lens manufacturer, in advance of the company's planned merger with Ocular Sciences. The $1.2 billion transaction is expected to close in November 2004, pending regulatory approval. Consolidated debt for the merged businesses will be about $775 million. Standard & Poor's also assigned a 'BB' rating to Cooper's proposed $750 million credit facility. Proceeds will be used to support the acquisition of Ocular, refinance existing debt, and provide for working capital and general corporate purposes. "Notwithstanding Cooper's expanded scale, scope, and international penetration after the merger, the rating is based on Cooper's single product line focus and its No. 3 position (18% global market share) in the $3.5 billion soft contact lens industry relative to two large competitors with materially greater resources," said Standard & Poor's credit analyst Cheryl Richer. "The ratings also reflect the risks inherent in integrating its largest-ever acquisition and temporarily elevated leverage following the merger," Ms. Richer adds. Cooper manufactures and markets a broad range of soft contact lenses, emphasizing value-added, specialty products: * toric lenses -- correct astigmatism, as well as cosmetic, multifocal, dry eye, and * premium lenses Ocular's focus has been on the commodity end of the scale, specifically in spherical contact lenses. These products that face greater competition and pricing pressures are: * disposable lenses -- designed for monthly, biweekly, and daily replacement, and * reusable lenses -- replaced annually and quarterly Dependence on this one product line exposes Cooper to challenges from these dominant industry players: * Vistakon division of Johnson & Johnson -- AAA/Stable/A-1+, which has a 37% global market share, and * CIBA Vision/Wesley Jessen, owned by Novartis AG -- AAA/Stable/A-1+, which has a 27% share. These rivals have much greater financial resources, which could be applied to marketing and/or research and development efforts. In addition, contact lens users have other alternatives, such as eyeglasses or surgical procedures. Still, historic customer switching patterns for these consumable products are low, and users tend to be guided by their health care professionals. Industry demographics are favorable, with projected 8% annual growth driven by: * growing teen population --the primary users -- * increased incidence of myopia, and * continued improvement in soft contact lens visual acuity, * comfort, and * care Earnings and sales should be relatively stable, as the product is recession resistant and its sales are not seasonal. The trend toward disposable lenses should also drive volume upward, offsetting any attendant softening in price. Besides increasing the breadth of Cooper's product portfolio, the merger with Ocular Sciences will provide other synergies. Ocular has a strong relationship with retail chains, while Cooper has emphasized sales through independent practitioners such as optometrists and ophthalmologists. Furthermore, both companies are in the process of improving their manufacturing processes, which should increase capacity and improve the cost structure. Volume is important in this high fixed-cost business, and the trend toward disposable lenses should improve manufacturing capacity utilization. The acquisition will also provide Cooper with another distribution channel in Japan -- the largest market after the U.S. -- where Ocular boasts a stronger presence. CSFB MORTGAGE: Fitch Puts BB Rating on Class C-B-4 Certificates --------------------------------------------------------------- Credit Suisse First Boston Mortgage Acceptance Corp., mortgage pass-through certificates, series 2004-6, is rated: -- $566.8 million classes I-A-1 through I-A-9, AR, AR-L, II-A-1, II-A-2, III-A-1, III-A-2, IV-A-1 through IV-A- 13, V-A-1, C-P, C-X, A-X and A-P (senior certificates) 'AAA'; -- $5.1 million class C-B-1 certificates 'AA'; -- $2.2 million class C-B-2 certificates 'A'; -- $1.3 million class C-B-3 certificates 'BBB'; -- $926,440 privately offered class C-B-4 certificates 'BB'; -- $926,440 privately offered class C-B-5 certificates NR; -- $555,868 privately offered class C-B-6 certificates NR; -- $1.5 million class B-1 certificates NR; -- $599,251 class B-2 certificates NR; -- $299,625 class B-3 certificates NR; -- $199,750 privately offered class B-4 certificates NR; -- $99,875 privately offered class B-5 certificates NR; -- $199,752 privately offered class B-6 NR. The mortgage loans are separated into five loan groups: Loan groups I and IV are cross collateralized with the class C-B certificates that support these class certificates: * I-A, AR, AR-L, A-P A-X, and * IV-A-1 through IV-A-13. Loan groups II, III, and V are cross collateralized with the class B certificates that support these class certificates: * II-A-1, II-A-2, III-A-1, III-A-2, V-A-1, C-P and C-X. The certificates generally receive distributions based on collections on the mortgage loans in the corresponding loan group or loan groups. The 'AAA' rating on the senior certificates of group I and group IV reflects the 3.00% subordination provided by: * the 1.40% class C-B-1; * the 0.60% class C-B-2; * the 0.35% class C-B-3; * the 0.25% privately offered class C-B-4; * the 0.25% privately offered class C-B-5 (not rated by Fitch); and * the 0.15% privately offered class C-B-6 (not rated by Fitch) certificates. The ratings on the class C-B-1, C-B-2, C-B-3, and C-B-4 certificates are based on their respective subordination. The 'AAA' rating on the senior certificates of group II, group III and group V reflects the 1.50% subordination provided by the subordinate class B certificates. Fitch believes the above 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, the primary servicing capabilities of Washington Mutual Mortgage Securities Corp., which is rated 'RPS2+' by Fitch, and the master servicing capabilities of Wells Fargo Bank, N.A., which is rated 'RMS1' by Fitch. The trust will contain five groups of fixed-rate mortgage loans secured by first liens on one- to four-family residential properties with an approximate aggregate principal balance of $570,326,760. The mortgage loans in Group I initially consists of 471 fixed-rate mortgage loans with an aggregate principal balance of $250,228,392, as of the cut-off date, September 1, 2004. The mortgage pool has a weighted average LTV of 69.83% with a weighted average mortgage rate of 5.777%. Cash-out refinance loans account for 15.78% and second homes 4.15%. The average loan balance is $531,270 and the loans are primarily concentrated in: -- California (49.83%); -- New York (10.98%); and -- Florida (4.29%). The mortgage loans in Group II consists of 200 fixed-rate mortgage loans with an aggregate principal balance of $104,127,562, as of the cut-off date. The mortgage pool has a weighted average LTV of 54.98% with a weighted average mortgage rate of 5.037%. Cash-out refinance loans account for 22.94% and second homes 3.70%. The average loan balance is $520,638 and the loans are primarily concentrated in: -- California (44.56%); -- Illinois (6.04%); -- Massachusetts (6.00%); -- New York (5.67%); and -- New Jersey (5.54%). The mortgage loans in Group III consists of 533 fixed-rate mortgage loans with an aggregate principal balance of $50,269,570, as of the cut-off date. The mortgage pool has a weighted average LTV of 62.34% with a weighted average mortgage rate of 5.285%. Cash-out refinance loans account for 24.68% and second homes 4.74%. The average loan balance is $94,314 and the loans are primarily concentrated in: -- California (16.01%); -- Florida (11.04%); -- Texas (9.42%); -- New York (6.08%); and -- Pennsylvania (5.25%). The mortgage loans in Group IV consists of 221 fixed-rate mortgage loans with an aggregate principal balance of $120,347,936, as of the cut-off date. The mortgage pool has a weighted average LTV of 67.40% with a weighted average mortgage rate of 6.327%. Cash-out refinance loans account for 23.62% and second homes 0.57%. The average loan balance is $544,561 and the loans are primarily concentrated in: -- California (21.69%); -- Florida (9.79%); and -- Massachusetts (5.79%). The mortgage loans in Group V consists of 233 fixed-rate mortgage loans with an aggregate principal balance of $120,778,917, as of the cut-off date. The mortgage pool has a weighted average LTV of 59.03% with a weighted average mortgage rate of 5.238%. Cash-out refinance loans account for 25.81% and second homes 6.16%. The average loan balance is $518,364 and the loans are primarily concentrated in: -- California (46.70%); -- New York (10.76%); and -- New Jersey (8.29%). 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, please 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. U.S. Bank National Association will serve as trustee. CSFB Mortgage, a special purpose corporation, deposited the loans in the trust, which issued the certificates. For federal income tax purposes, an election will be made to treat the trust as multiple real estate mortgage investment conduits -- REMICs. DALLAS AEROSPACE: Case Summary & 2 Largest Unsecured Creditors -------------------------------------------------------------- Debtor: Dallas Aerospace, Inc. 1875 North Interstate 35 Carrollton, Texas 75006 Bankruptcy Case No.: 04-80663 Type of Business: The Company is a Texas-based aftermarket supplier of engines, engine parts, and engine management and leasing services, with facilities in Dallas, Texas, and Miami, Florida. Chapter 11 Petition Date: October 1, 2004 Court: Northern District of Texas (Dallas) Debtor's Counsel: John Mark Chevallier, Esq. McGuire, Craddock & Strother 3550 Lincoln Plaza 500 North Akard Street Dallas, Texas 75201 Tel: (214)954-6800 Fax: 214-954-6801 Estimated Assets: $1 Million to $10 Million Estimated Debts: $10 Million to $50 Million Debtor's 2 largest unsecured creditors: Entity Nature Of Claim Claim Amount ------ --------------- ------------ CIS Air Corporation Judgment Claim $695,432 45 Broadway Suite 1105 New York, New York 10006 United Technologies Corporation Contract Claim Unknown Pratt & Whiney Division 400 Main Street East Hartford, Connecticut 06108 DEVLIEG BULLARD: Hires Mesirow Financial as Investment Banker ------------------------------------------------------------- The U.S. Bankruptcy Court for the District of Delaware gave DeVlieg Bullard II, Inc., permission to retain Mesirow Financial, Inc., as its investment banker. Mesirow Financial worked for the Debtor since March 22, 2004, in a strategic effort to sell certain of the Debtor's operating assets on a going concern basis. The Firm is therefore familiar with the Debtor's business and operations and with potential sale transactions for the Debtor's assets. Mesirow Financial will: a) assist the Debtor in analyzing and evaluating its business, operations, and financial position; b) prepare an offering memorandum describing the Debtor, its historical performance and prospects (including existing contracts, marketing and sales, labor force and management, and anticipated financial results of the Debtor); c) work with the Debtor in developing a list of suitable potential buyers who will be contacted on a discreet and confidential basis after approval by the Debtor; d) assist the Debtor in the preparation and implementation of a marketing plan; e) assist the Debtor in coordinating the data room and with potential purchasers due diligence investigations; f) assist the Debtor in evaluating proposals which are received from potential purchasers; g) assist the Debtor in structuring and negotiating the proposed sale of its assets; and h) meet with the Debtor's Board of Directors to discuss the proposed sale of its assets and its financial implications; Mr. Jeffrey A. Golman, Vice-Chairman at Mesirow Financial, discloses that the Debtor paid a $50,000 retainer. Mr. Golman reports that for every successful sale of the Debtor's assets, business and equity securities, Mesirow Financial will bill the Debtor a success fee of 2.5% of the aggregate amount received by Debtor for a completed sale. Mr. Golman adds that the Firm will also charge a minimum success fee of $400,000 that is payable upon closing of a sale. Mesirow Financial does not have any interest adverse to the Debtor or its estate. Headquartered in Machesney Park, Illinois, DeVlieg Bullard II, Inc. -- http://www.devliegbullard.com/-- provides a comprehensive portfolio of proprietary machine tools, aftermarket replacement parts, field service and premium workholding products. The Company filed for chapter 11 protection on July 21, 2004 (Bankr. D. Del. Case No. 04-12097). James E. Huggett, Esq., at Flaster Greenberg, represents the Company in its restructuring efforts. When the Debtor filed for protection from its creditors, it estimated debts and assets of over $10 million. ECHOSTAR COMMS: Subsidiary Completes Early Redemption of Sr. Notes ------------------------------------------------------------------ EchoStar Communications Corporation (NASDAQ: DISH) confirmed that effective Oct. 1, 2004, its subsidiary, EchoStar DBS Corporation, completed the previously announced redemption of all of its outstanding 10-3/8 percent Senior Notes due 2007. In accordance with the terms of the indenture governing the notes, the outstanding principal amount of $1 billion was repurchased three years early at 105.188 percent, for a total of approximately $1.052 billion. About EchoStar EchoStar Communications Corporation (NASDAQ: DISH) serves more than 10.1 million satellite TV customers through its DISH Network(TM) and is a leading U.S. provider of advanced digital television services. DISH Network's services include hundreds of video and audio channels, Interactive TV, HDTV, sports and international programming, together with professional installation and 24-hour customer service. EchoStar has been a leader for 24 years in satellite TV equipment sales and support worldwide. EchoStar is included in the Nasdaq-100 Index (NDX) and is a Fortune 500 company. Visit EchoStar's Web site at www.echostar.com or call 800-333-DISH (3474). At June 30, 2004, EchoStar Communications' balance sheet showed a $1,739,832,000 stockholders' deficit, compared to a $1,032,524,000 at December 31, 2003. ECHOSTAR DBS: Moody's Assigns Ba3 to $1 Bil. Senior Note Issuance ----------------------------------------------------------------- Moody's Investors Service assigned a Ba3 rating to the recent $1 billion issuance of 6-5/8% senior unsecured notes by EchoStar DBS Corporation EDBS, a wholly owned indirect subsidiary of direct broadcast satellite pay television service provider EchoStar Communications Corporation. Moody's also withdrew the former Ba3 rating for EDBS' existing $1 billion of 10-3/8% senior unsecured notes due 2007, which were scheduled to be called on Oct. 1, 2004. Finally, Moody's revised the rating outlook to stable from positive, and affirmed all other existing ratings at current levels. Affected securities, current ratings and actions: EchoStar Communications Corporation * $1 Billion of 5-3/4% Convertible Subordinated Notes due 2008, B2 affirmed * Senior Implied Rating, Ba3 affirmed * Issuer Rating, B1 affirmed * Liquidity Rating, SGL-1 affirmed * Rating Outlook, Stable (previously Positive) EchoStar DBS Corporation * $1 Billion of 6-5/8% Senior Unsecured Notes due 2014, Ba3 assigned * $446 Million remaining amount of 9-1/8% Senior Unsecured Notes due 2009, Ba3 affirmed * $500 Million of Senior Unsecured Floating Rate Notes due 2008, Ba3 affirmed * $1 Billion of 5-3/4% Senior Unsecured Notes due 2008, Ba3 affirmed * $1 Billion of 6-3/8% Senior Unsecured Notes due 2011, Ba3 affirmed * $1 Billion of 10-3/8% Senior Unsecured Notes due 2007, WR withdrawn The ratings continue to reflect: (i) the company's moderately high financial leverage and modest coverage levels; (ii) a very competitive operating environment, and related expectations of higher costs to both grow and retain subscribers; and (iii) ongoing concerns about diminishing returns on invested capital and the long-term strategic position of the company, including the viability of the current business model on a stand-alone basis. Moody's believes that these broad-based financial and business risks have been compounded of late by an apparent strategic shift to more aggressive fiscal policies for the company, which again tempers what might otherwise be a stronger credit profile and translate into higher ratings, and notwithstanding that the company continues to operationally perform well and maintains comparatively modest balance sheet leverage. Moody's also notes the incremental risks associated with the company's increasingly flexible indenture agreements and the relative lack of transparency in forecasted performance levels as serving to also somewhat constrain ratings. The ratings garner support, however, from the company's very good liquidity position: (i) highlighted by the SGL-1 liquidity rating, which derives most of its strength from the maintenance of a still large excess cash position; (ii) the large and still rapidly growing size of its subscriber base, which continues to exhibit relatively moderate churn and has recently evidenced better ARPU growth, albeit mostly rate driven; and (iii) positive free cash flow generation; and historically steady balance sheet improvements - at least until fairly recently - particularly on a comparative basis relative to the industry peer group. The shift back to a stable rating outlook incorporates Moody's belief that the company's credit profile is no longer likely to improve to a level meriting a Ba2 senior implied rating over the near-to-intermediate term, nor is it likely to deteriorate of a sufficient magnitude to warrant a return to single-B ratings, for a variety of reasons. Specifically, Moody's notes the significant ($1 billion) use of excess cash balances as recently announced (mostly in the second quarter of 2004) to buy back common stock. Although a $1 billion program had been put in place last year, the full magnitude and rapidity of the share repurchases was not anticipated, nor was the incremental $1 billion program that was recently authorized. The recently completed new debt financing lends goes directly against management's prior representations that further deleveraging transactions were likely to be completed on an opportunistic and permanent basis, and this latter point had been a considerable factor supporting the outlook revision to a positive bias when the last round of financing was completed in September 2003. The $2.5 billion of net new proceeds that was raised then was supposed to have been earmarked in part to fund the anticipated $1+ billion calling of the 10-3/8% senior notes of EDBS (along with the approximately $1.625 billion of former 9-3/8% senior notes that have already been extinguished). Instead, a recent press release from the company suggested that this latest financing would be utilized to fund the previously announced call of the 10-3/8% notes. While cash is clearly fungible, the implication is that the prior financings were in fact utilized to effect the stock buy-backs. This was clearly not the expectation when the rating outlook was changed to positive at the same time the financings were completed last year. For some time, Moody's has reasonably expected that the older, higher coupon debt on the company's books (when the business profile was somewhat more suspect, and the ratings were lower to reflect the same) would be opportunistically refinanced with lower cost debt. Strong operating performance continued to potentially support higher ratings, nonetheless, even after the second quarter disclosure that the stock repurchase program had been completed. Now, in conjunction with the new debt financing, it seems clear that the previously anticipated permanent deleveraging of the company's balance sheet is no longer expected. Moody's effectively views the new debt financing as yet another means of funding the new share repurchase program, the appropriateness of which we are somewhat skeptical of even at current rating levels. As such, the former positive rating outlook is no longer warranted. It is now expected that the company may well have to releverage itself again in order to fund requisite capital and operating costs associated with the more competitive business environment which exists today and is expected to be heightened further in future periods, particularly in consideration of recent announcements by The DIRECTV Group related to expansion of its satellite fleet to incorporate the ability to provide a more robust offering of high definition television signals, and ongoing bundling enhancements that are being made by leading cable companies. Even though the rating outlook is stable, Moody's still remains concerned about the company's medium-to-long-term fundamental business prospects, particularly in the absence of a competitive and economically viable high-speed Internet service offering. With virtually all major cable system operators having substantially completed their network upgrade programs by now, EchoStar must regularly combat more competitive bundled service offerings from cable companies, including more widespread provisioning of telephony services. This is in addition to high- speed data services now being offered by all cable companies, which are still very much in high demand. The relative lack of product differentiation, and specifically the growing reliance on others to provide a competitive service offering, is exactly why Moody's believes that EchoStar should have a stronger credit profile and more financial flexibility than its cable TV company peers. In Moody's estimation, the wireless technological platform of DBS continues to have some clear limitations and comparative disadvantages relative to wireline cable infrastructure, particularly when it comes to providing ancillary non-video (and some advanced video) services. While EchoStar's SBC partnership has partially mitigated some of these concerns, the economic relationship and ultimate success of it remains highly uncertain, particularly as SBC and other leading telephone companies continue to push fiber out closer to the home. Moody's continues to think that it will become more and more costly for the DBS companies to continue growing, and remains concerned about the adequacy of returns on incremental invested capital. Going forward, both EchoStar and DIRECTV will have to better exhibit growing levels of ARPU and free cash flow in order to clearly demonstrate justification for the larger amounts of cash increasingly being expended for each new (and retained) subscriber. The Ba3 senior unsecured ratings for the debt of EDBS reflect the significance of these claims in the consolidated capitalization of the company, and specifically the absence of any senior secured claims on most of the company's assets. However, Moody's again notes the ability to layer in a substantial amount of secured debt in accordance with the very flexible indenture covenants, even though such an outcome is not anticipated. The Ba3 ratings for the EDBS securities also incorporate the existence of a meaningful amount of junior capital in the form of both the convertible subordinated notes and the common equity of the ultimate parent holding company. The B2 rating for the subordinated debt of EchoStar Communications reflects the junior ranking of this obligation, which is both contractually and structurally subordinated to the senior unsecured and all subsidiary claims of the company. EchoStar Communications Corporation is a leading provider of direct broadcast satellite pay television services to approximately 10.1 million subscribers. The company maintains its headquarters in Englewood, Colorado. EL PASO CORP: S&P Rating Not Affected by GulfTerra Equity Sale -------------------------------------------------------------- Standard & Poor's Ratings Services announced that El Paso Corporation (B-/Negative) completed the sale of its interests in GulfTerra Energy Partners L.P. This will not affect the ratings or outlook on the company. The sale, from which El Paso realized $1.02 billion and $425 million previously, had been expected by Standard & Poor's and was reflected in the ratings and outlook on El Paso. Significantly, the transaction increases the total amount of assets sales the company has closed under its long-range plan to $3.2 billion. The plan targeted asset sales in a range of $3.3 billion to $3.9 billion and proceeds from these sales are essential to El Paso's efforts to reduce debt. Meeting the asset sales target is one of several critical steps the company must complete in its reorganization plan to transform its operations, reduce leverage, and restore credibility. Rating improvement will depend on El Paso's execution of this reorganization and ability to meet its large debt maturities through the intermediate term. ENRON CORP: Houston Defendants Say Discovery Protocol Too Coercive ------------------------------------------------------------------ Twenty-one Houston Defendants -- Phillip Allen, Donald W. Black, Richard B. Buy, Mark A. Frevert, Eric Gonzales, Mark E. Haedicke, Sheila Knudsen, Douglas A. Leach, Thomas A. Martin, R. Davis Maxey, Peggy B. Menchaca, Mark S. Muller, Scott M. Neal, Scott J. Porter, Stuart Rexrode, Mark Russ, Colleen Sullivan-Shaklovitz, Mark E. Taylor, Cindy Olson, Tri-C Resources, Inc., and Luminant Worldwide Corp. -- complain that the proposed avoidance action discovery procedures is unfair and violative of due process. Enron Corp. and its debtor-affiliates and the Official Committee of Unsecured Creditors propose to force defendants to choose between attending a deposition and consenting to consolidation and not being able to obtain discovery. According to David R. Jones, Esq., at Munsch Hardt Kopf & Harr, in Houston, Texas, the Debtors and the Committee seek to abrogate all notions of due process and prevent the Houston Defendants from presenting a defense. The Joint Motion also ignores the Court's prior admonitions regarding venue for discovery. The cooperation and negotiation process that the Debtors claim is a "farce," Mr. Jones asserts. The Houston Defendants were excluded from the process even though they notified the Debtors that they wanted to participate. The Houston Defendants also do not want discovery to be consolidated. Each avoidance action involves distinct claims and each defendant has unique personal defenses. The Houston Defendants identify more objectionable provisions in the Debtors' and the Committee's proposals: Debtors' Proposal Houston Defendants' Response ----------------- ---------------------------- Limits the Debtors' expert to This blatantly violates one deposition and forces the due process rights of defendants to agree to the Houston Defendants. consolidation if the defendant participates in the deposition. Limits the Debtors' disclosures The Debtors must provide the to "the identity of employees required disclosures. who are likely to be the most The Houston Defendants are knowledgeable regarding the entitled to understand the transaction at issue." basis for the allegations made in the complaint. Limits document requests This blatantly violates due to one set per side not to process rights of the exceed 25 separate requests Defendants. There is no and limits manner in which authority limiting document requests can be phrased. requests prior to commencement of discovery neither in the manner in which the Defendants may phrase their document requests. Limits the number of This blatantly violates due requests and requires the process rights. The Federal Defendants to obtain Rules provide sufficient admissions via depositions safeguards for the Debtors if or document requests. they believe the requests for admissions are improper or abusive. Limits non-expert depositions This blatantly violates due to four per side. process rights and unduly influences the development of each individual's defense. Responses to Contention Local Rules of the Bankruptcy Interrogatories are not due Court for the Southern until 10 months after fact District of New York provides depositions are completed. that Contention Interrogatories must be answered before discovery ends to allow the Defendants to take discovery on any unexpected contentions. Discovery Plan provides no The Defendants should be information regarding afforded the opportunity to general interrogatories. propound interrogatories in accordance with the Local Rules for the Bankruptcy Court for the Southern District of New York. Accordingly, the Houston Defendants ask the Court to deny the Joint Motion in its entirety. 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) EPIC DATA: Names Paul Blanchet to Board of Directors ---------------------------------------------------- Epic Data International Inc. (TSX: EKD) appointed Mr. Paul Blanchet to its Board of Directors effective immediately. Mr. Blanchet brings over 25 years of enterprise software operations experience to the board. He has been involved in developing, deploying and supporting many information systems and products in the global utility and field service marketplaces. Through his career he has provided significant value through his participation in the senior management teams of leading wireless data software solution companies including MDSI Mobile Data Solutions Inc., eMobile Data International Inc, and others. Peter Murphy, Epic Data's President & Chief Executive Officer, commented: "We are delighted that Paul has agreed to join our Board. Epic Data is making exciting progress in the market with our latest discrete manufacturing offerings and Paul's depth of experience in delivering new software solutions into the marketplace will be invaluable to us. The Board and I look forward to working closely with him to continue the job of building a successful company." About Epic Data International Inc. For 30 years Epic Data has been a leader in automatic identification and data capture solutions for the world's most progressive aerospace, automotive, high technology and heavy machinery manufacturers. We increase plant productivity and velocity while identifying the continuous improvement initiatives vital to winning in today's competitive manufacturing environments. Epic Data's enterprise mobility solutions for parking enforcement and route management increase productivity while improving customer service and worker safety by connecting mobile personnel to central offices in real time. People and technology make Epic Data the global leader in automated data capture solutions for the extended enterprise. At June 30, 2004, Epic Data's balance sheet shows a stockholders' deficit of $54,614,000, compared to a deficit of $49,511,000 at September 30, 2003. FEDERAL-MOGUL: Insurers Want to Nullify Certain Law Firm Ballots ---------------------------------------------------------------- Seventeen law firms representing asbestos plaintiffs filed substantive pleadings or otherwise appeared in the bankruptcy proceedings of Federal-Mogul Corporation and its debtor- affiliates, John S. Spadaro, Esq., at Murphy Spadaro & Landon, in Wilmington, Delaware, relates. In addition, more than a hundred firms are expected to cast ballots on the Debtors' Plan. However, as of September 10, 2004, only five firms filed pleadings purporting to comply with the requirements of Rule 2019 of the Federal Rules of Bankruptcy Procedure: (1) Kelley & Ferraro, L.L.P., filed on October 5, 2001; (2) Ness, Motley, Loadholt, Richardson & Poole, filed on November 5, 2001; (3) Patten, Wornom, Hatten & Dismonstein, filed on November 8, 2001; (4) Verified Statement of James F. Humphreys & Associates, L.C., filed on November 6, 2001; and (5) Law Offices of Peter G. Angelos, P.C., filed on January 22, 2002. Rule 2019 states that: "In a . . . chapter 11 reorganization case . . . every entity . . . representing more than one creditor . . . shall file a verified statement setting forth (1) the name and address of the creditor . . . (2) the nature and amount of the claim . . . and the time of acquisition thereof . . . (3) a recital of the pertinent facts and circumstances in connection with the employment of the entity . . . and (4). . . . The statement shall include a copy of the instrument, if any, whereby the entity . . . is empowered to act on behalf of creditors." The provisions of Rule 2019 are mandatory. The required disclosure is necessary so that the bankruptcy courts and the U.S. Trustee can take prompt action to prevent conflicts of interest, ensure that each creditor holding an allowed claim votes only once, and that no unauthorized votes are cast by counsel with respect to a plan of reorganization. Mr. Spadaro asserts that none of the Filed Statements complies with even the barest minimum of requirements under Rule 2019. No Filed Statement contains the addresses of the purported claimants, the amount of the claim or the time acquired. Only one statement contains the nature of the purported claims. The Filed Statements are wholly inadequate. The Filed Statements are also deficient containing only an inadmissible statement that the firms have the authorization to represent alleged claimants. In fact, none of the Non-Complying Law Firms supplied any evidence that they are entitled to cast ballots on the claimants' behalf. The evidence provided in the Filed Statements is non-existent. The Non-Complying Law Firms have withheld substantive information from the Court and parties- in-interest. Mr. Spadaro contends that failure to comply with the mandatory requirements of Rule 2019: -- impedes the verification of votes cast and certification of the ballots; -- degrades the integrity of the bankruptcy process and the Court's enforcement of the Bankruptcy Code; and -- facilitates the continuation of conflicts of interest. Certain Underwriters at Lloyds, London and certain London Market Insurance Companies ask the Court to: (a) deny the Non-Complying Law Firms the right to be heard in the Debtors' case; and (b) invalidate all ballots submitted by Non-Complying Law Firms for the Debtors' Plan. London Market Insurers, Mr. Spadaro says, have a sufficient stake in the outcome of the proceedings to warrant their invocation of the Court's jurisdiction and to justify the exercise of the Court's remedial powers. As insurers and potential indemnitors of the Debtors, the London Market Insurers have a substantial pecuniary interest in ensuring that their defenses to coverage are not prejudiced by the Plan. In addition, they have a contractual interest in ensuring that the Debtors comply with the terms of the policies. The Non-Complying Law Firm's failure to comply with Rule 2019 injures the interests of the London Market Insurers by making it more likely that the Plan, which deems all allowed claims to be a judgment determining the legal liability of the Debtors in the full allowed amount of each claim, will be confirmed. Because the Non-Complying Entities will be casting ballots on behalf of purported claimants where no authorization to cast votes has been manifested, it is impossible to determine whether the claimants voted on multiple occasions or intended to vote at all. Thus, the injury is fairly traceable to the conduct of the Non-Complying Law Firms. Rule 9010(c) of the Federal Rules of Bankruptcy Procedure, on the other hand, is a specific exception from the otherwise general rule that the official power of attorney form must be used when filing a proof of claim or voting a ballot applicable only to an attorney who represents one creditor. Rule 9010(c) does not override Rule 2019(a). Rule 2019's mandatory provisions apply where an attorney represents multiple alleged claimants rather than one claimant. Mr. Spadaro points out that the Debtors previously argued that the form of ballots approved by the Court in the Voting Procedures Order entered on June 14, 2004, is sufficient to include all of the information otherwise required by Rule 2019. The assertion is flatly wrong, Mr. Spadaro avers, because the ballots do not substitute for Rule 2019 compliance. At minimum, the ballots do not require disclosure of: (1) the address of each creditor; (2) a recital of the pertinent facts and circumstances in connection with the employment of counsel; or (3) a copy of the instrument, if any, whereby counsel is empowered to act on behalf of the creditor. Headquartered in Southfield, Michigan, Federal-Mogul Corporation -- http://www.federal-mogul.com/-- is one of the world's largest automotive parts companies with worldwide revenue of some $6 billion. The Company filed for chapter 11 protection on Oct. 1, 2001 (Bankr. Del. Case No. 01-10582). Lawrence J. Nyhan, Esq., James F. Conlan, Esq., and Kevin T. Lantry, Esq., at Sidley Austin Brown & Wood and Laura Davis Jones, Esq., at Pachulski, Stang, Ziehl, Young, Jones & Weintraub, represent the Debtors in their restructuring efforts. When the Debtors filed for protection from its creditors, they listed $10.15 billion in assets and $8.86 billion in liabilities. (Federal-Mogul Bankruptcy News, Issue No. 64; Bankruptcy Creditors' Service, Inc., 215/945-7000) FOOTSTAR INC: Disappointed Over Kmart's Objection to Assume Pact ---------------------------------------------------------------- Footstar, Inc., responded to Kmart Corporation's filing of its objection to Footstar's motion to assume, as part of its Chapter 11 reorganization, its executory contract with Kmart: -- "We are disappointed that Kmart has taken this action. We believe Kmart's objections have no merit, and we intend to vigorously defend and pursue our right to assume the contract. -- "The relationship between Footstar's Meldisco division and Kmart has been in place for more than 40 years and has been profitable and beneficial for both companies. -- "Assumption of the contract makes good business sense, is in the best interests of all of Footstar's stakeholders, and will form a strong basis on which to develop a plan of reorganization for a stand-alone Meldisco business and emerge from Chapter 11. -- "As we work through the court process to resolve this issue, it will be business as usual at Footstar, including our Meldisco business. We will continue to focus on developing a strong Meldisco business that maximizes free cash flow through sales, expense management and improving the turnover of our inventory. We will continue to move forward with the Chapter 11 process." Footstar, Inc. filed a motion with the Bankruptcy Court on August 12, 2004 seeking its approval to assume the Kmart contract. Headquartered in West Nyack, New York, Footstar Inc., retails family and athletic footwear. As of August 28, 2004, the Company operated 2,373 Meldisco licensed footwear departments nationwide in Kmart, Rite Aid and Federated Department Stores. The Company also distributes its own Thom McAn brand of quality leather footwear through Kmart, Wal-Mart and Shoe Zone stores. The Company and its debtor- affiliates filed for chapter 11 protection on March 3, 2004 (Bankr. S.D.N.Y. Case No. 04-22350). Paul M. Basta, Esq., at Weil Gotshal & Manges represents the Debtors in their restructuring efforts. When the Debtor filed for protection it listed $762,500,000 in total assets and $302,200,000 in total debts. FORBES MEDI-TECH: KPMG Expresses Going Concern Doubts ----------------------------------------------------- Forbes Medi-Tech Inc. (NASDAQ:FMTI) (TSX:FMI) filed the audited financial statements of the Company for the year ended Dec. 31, 2003 were filed on SEDAR and EDGAR and were distributed as required by applicable securities regulations in April 2004. These financial statements were prepared in accordance with Canadian GAAP, and were audited by the Company's auditors, KPMG LLP, in accordance with Canadian generally accepted auditing standards and auditing standards generally accepted in the United States of America. The financial statements also contained a note reconciling the statements to U.S. GAAP. NASDAQ has recently informed the Company that pursuant to NASDAQ'S Marketplace Rule 4350(b)(1)(B), the Company must make a separate public announcement disclosing that the "Comments By Auditor For U.S. Readers On Canada - U.S. Reporting Difference" included by KPMG LLP with the Company's audited financial statements was, according to Nasdaq, a going concern audit opinion qualification. The Company's financial statements fully comply with Canadian GAAP and no alteration or amendment is required to any financial filings. About Forbes Medi-Tech Inc. Forbes Medi-Tech Inc. is a biopharmaceutical company dedicated to the research, development and commercialization of innovative prescription pharmaceutical and nutraceutical products for the prevention and treatment of cardiovascular and related diseases. Forbes' scientific platform is based on core sterol technology. By extracting plant sterols from by-products of the forestry industry, Forbes has developed cholesterol-lowering agents for use in pharmaceutical compounds, functional foods and dietary supplements. FOSTER WHEELER: Adds Four New Directors, Doubling Size of Board --------------------------------------------------------------- Diane C. Creel, Roger L. Heffernan, Harry P. Rekas, and David M. Sloan have been elected to Foster Wheeler Ltd.'s (OTCBB: FWLRF) board of directors. On the same date, John Clancey, Martha Clark Goss, and John Stuart have resigned from the board, bringing the total number of current directors to eight. "We are very excited about being able to access the depth of experience and expertise the new directors bring to our board as we continue to move forward to complete our balance sheet restructuring and re-energize our business," said Raymond J. Milchovich, chairman, president and CEO. "We also extend our sincere appreciation to John, Martha, and John for their many contributions to Foster Wheeler during their years of service." -- Diane C. Creel Diane Creel is the chairman, chief executive officer and president of Ecovation, Inc., a waste stream technology company. Ms. Creel's previous experience includes service as chief executive officer and president of Earth Tech, where she was the first woman to hold the chief executive position of a publicly held engineering firm in the United States. Ms. Creel currently serves on the board of directors of Allegheny Technologies Inc., Teledyne Technologies, Inc., the American Funds of Capital Research Management, and Goodrich Corporation. She holds BA and MA degrees in journalism from the University of South Carolina, and she has done post-graduate work at the University of Pennsylvania's Wharton School and at Harvard University. -- Roger L. Heffernan Roger Heffernan has garnered almost 40 years of operations experience at a number of private equity firms and Fortune 500 companies. He co-founded CRM Partners following several years as an executive with a private equity firm. Prior to that, Mr. Heffernan served as vice president of manufacturing at General Instrument Corporation, and as a manufacturing executive at IBM Corporation and ITT Corporation. He has particularly strong experience in turnaround and restructuring activities, management process redesign, diverse manufacturing operations, and lean manufacturing disciplines. Mr. Heffernan holds a BBA in Accounting from Manhattan College, an MBA in Management from Pace University, and he has completed the Executive Manufacturing Program at the Harvard Graduate School of Business. -- Harry P. Rekas Harry Rekas has successfully managed a variety of equity portfolios ranging in size from a few million dollars to in excess of one billion dollars. Over the past 20 years he has been associated with Bessemer Trust, AIG Global Investment, Citibank Global Asset Management, and Oppenheimer Capital Corp., among others. Prior to his investment management work, Mr. Rekas was an officer with Computer Sciences Corporation and Fidelity Bank. Mr. Rekas served as a Captain in the U.S. Air Force. He holds a BS in Economics from the University of Pennsylvania's Wharton School, and an MBA from Pepperdine University. -- David M. Sloan David Sloan is an international business consultant who has been deeply involved in multinational financial and commercial matters for almost 30 years. He currently serves as president of Corporate Strategies International, Inc. and is a senior consultant to The Scowcroft Group. Previously, he was an executive vice president with Charles Percy & Associates and held a number of positions of increasing responsibility in the U.S. State Department. Mr. Sloan is currently a member of the board of directors of Counterpart International. He holds a Master of Arts in Law and Diplomacy from The Fletcher School of Law & Diplomacy, Tufts University, and he graduated cum laude with a BA in Political Science from Tufts University. About the Company Foster Wheeler, Ltd., is a global company offering, through its subsidiaries, a broad range of design, engineering, construction, manufacturing, project development and management, research, plant operation and environmental services. At June 25, 2004, Foster Wheeler Ltd.'s balance sheet showed an $856,601,000 stockholders' deficit, compared to an $872,440,000 deficit at December 26, 2003. The Company's pro- forma financial statements contained in the Prospectus detailing its recent successful equity-for-debt exchange projects a $400 million reduction in total debt and a concomitant increase in shareholder equity. * * * As reported in the Troubled Company Reporter on Sept. 24, 2004, Standard & Poor's Ratings Services lowered its corporate credit rating on Foster Wheeler Ltd. to 'SD' from 'CCC-'. At the same time, Standard & Poor's lowered its senior unsecured and subordinated debt ratings on the Clinton, New Jersey -based engineering and construction company to 'D' from 'CC'. The senior secured bank loan ratings were affirmed but will be withdrawn shortly, once the company's new bank facility is closed. "The rating actions follow the company's announcement that it has completed its equity-for-debt exchange offer. Since Foster Wheeler was able to exchange several of its debt securities for other financial instruments that, in aggregate, appear to have a much lower value than par, we view the exchange as coercive and, thus, a default," said Standard & Poor's credit analyst Joel Levington. The corporate credit rating of 'SD' reflects the fact that Foster Wheeler's senior secured bank facility was not part of the exchange offer, and the company remains current on that obligation with respect to interest. "When that facility is replaced with another bank deal, we will withdraw the rating," Mr. Levington said. The exchange offer was necessitated by several years of poor operating performance -- involving, among other things, bidding disciplines, change-order management, and risk and control policies -- all of which led to significant negative cash generation and charges in excess of $1 billion. FRIEDMAN'S INC: Key Vendors Agree to Junior Lien Credit Program --------------------------------------------------------------- As of September 27, 2004, Friedman's Inc. (OTC: FRDM.PK), the Value Leader in fine jewelry retailing, had received vendor agreements under its secured trade credit program representing more than $15 million in obligations owed by Friedman's to participating vendors. Under its new amended and restated credit facility which closed on September 7, 2004, Friedman's had been required to reserve $9.5 million of availability pending the receipt of vendor agreements totaling at least $15 million in obligations owed by Friedman's as of July 31, 2004. Mr. Sam Cusano, Friedman's CEO, said: "Friedman's recognizes and appreciates the continued support of our key vendors as we move forward with the Company's ongoing restructuring efforts. The current level of vendor participation in Friedman's secured trade credit program, together with the elimination of the reserve under the new credit facility, helps to ensure adequate liquidity as we move forward. Still, the delay in shipments and the more prudent credit policies being implemented by the Company, as well as the impact of the recent hurricanes, have had an adverse effect on recent sales. I expect this trend will continue as we work through production and availability of merchandise issues in obtaining a full assortment of inventory for the upcoming holiday season. We greatly appreciate the support of our vendors and believe that their participation in the trade credit program will clearly help Friedman's with its long-term strategic plan to improve value for all stakeholders." As previously announced, under the terms of the secured trade credit program, Friedman's has agreed to grant participating vendors a junior lien to secure amounts past due to such vendors as of July 31, 2004, and amounts due for new shipments from participating vendors which are delivered by the earlier of the duration of a vendor's participation in the trade credit program or December 31, 2005. Friedman's has agreed to repay amounts due to participating vendors as of July 31, 2004 over a fifteen month period ending on December 31, 2005, and to repay amounts due for new shipments in the ordinary course of business. As part of Friedman's ongoing restructuring, the definitive terms for the Company's secured trade credit program were reached through negotiations between Friedman's and an informal committee of its largest vendors, which committee was organized at the Company's request. Mr. Michael Schaffet, Chief Operating Officer, of M. Fabrikant & Sons, a member of the informal vendor committee, said: "In light of our long-standing and valued relationship with Friedman's, we are pleased to have been able to play an instrumental role in working with Friedman's to restructure its vendor obligations and help resolve its recent liquidity issues. We look forward to strengthening our relationship as we work with Friedman's through the upcoming holiday sales season and beyond." About Friedman's Founded in 1920, Friedman's Inc. -- http://www.friedmans.com/-- is a leading specialty retailer based in Savannah, Georgia. The Company is the leading operator of fine jewelry stores located in power strip centers and regional malls. The company's most recently published balance sheet -- dated June 28, 2003 -- shows $496 million in assets and $190 million in liabilities. The Company explains that its year-end closing process was delayed because of an investigation by the Department of Justice, a related informal inquiry by the Securities and Exchange Commission, and its Audit Committee's investigation into allegations asserted in a August 13, 2003, lawsuit filed by Capital Factors Inc., a former factor of Cosmopolitan Gem Corporation, a former vendor of Friedman's, as well as other matters. Ernst & Young has been working on a restatement of the company's financials. The company's signaled that a 17% or greater increase to allowances for accounts receivable can be expected. Also, Friedman's Inc. has been notified that the New York Stock Exchange (NYSE) has made a determination to delist the company's Class A Common Stock that traded under the ticker symbol FRM on the NYSE effective May 11, 2004. Friedman's is evaluating an appeal of the decision of the NYSE. The Company noted that while it is disappointed with the NYSE's decision, the delisting from the Exchange does not affect Friedman's day-to-day business operations. The Company also noted that although its common stock is not eligible for trading on the NASD over-the-counter bulletin board -- OTC, the Company understands that market makers have independently begun to make market in the company's common stock on the Pink Sheets under the symbol "FRDM." GALEY & LORD: Gets Court Nod to Hire Garden City as Claims Agent ---------------------------------------------------------------- The U.S. Bankruptcy Court for the Northern District of Georgia gave Galey & Lord, Inc., and its debtor-affiliates, permission to retain The Garden City Group, Inc., as its claims, noticing and balloting agent. The Garden City Group worked for the Debtors in their recent bankruptcy cases and the Firm is therefore best prepared in providing claims, noticing and balloting services to the Debtors in an efficient, effective and responsible manner. The Garden City Group will: a) notify all potential creditors of the filing of the Debtors' bankruptcy petitions and the setting of the first meeting of creditors, pursuant to section 341 of the Bankruptcy Code and under the proper provisions of the Bankruptcy Rules; b) maintain an official copy of the Debtors' schedule of assets and liabilities and statement of financial affairs, listing the Debtors' known creditors and the amount owed; c) notify all potential creditors of the existence and amount of their respective claims as evidenced by the Debtors' books and records and set forth in the schedules of assets and liabilities and statement of financial affairs; d) furnish a notice of the last day of the filing of proofs of claims and a form for the filing of a proof of claim, after the notice and form are approved by the Court; e) file with the Clerk a copy of the notice, a list of persons to whom it was mailed, and the date the notice was mailed, within ten days of service; f) docket all claims received, maintain the official claims registers for each Debtor on behalf of the Clerk, and provide the Clerk with certified duplicate unofficial Claims Registers on a monthly basis, unless otherwise directed; g) specify in the applicable Claims Register, the information for each claim docketed: (i) the claim number assigned, (ii) the date received, (iii) the name and address of the claimant and agent who filed the claim, and (iv) the classification of the claim; h) record all transfers of claims and provide any notices of the transfers as required by Bankruptcy Rule 3001; i) make changes in the Claims Register pursuant to a Court Order; j) turn over to the Clerk copies of the Claims Registers for the Clerk's review, upon completion of the docketing process for all claims received to date by the Clerk's office; k) maintain the official mailing list for each Debtor of all entities that have filed proof of claim, in which the list shall be available upon request by a party-in-interest or the Clerk; l) assist with the solicitation, calculation, and tabulation of votes and distribution as required in further confirmation of a plan of reorganization by providing services including: (i) reviewing any disclosure statements or ballots, (ii) mailing voting documents to the appropriate parties, (iii) coordinating the distribution of any voting and non- voting documents, (iv) handling requests for voting documents and responding to related telephone inquiries, (v) receiving and examining any ballots and master ballots cast and date-stamping the original ballots, (vi) tabulating any ballot or master ballots received prior to a voting deadline, and (vii) preparing a voting certification to be filed with the Court; and m) box and transport all original documents in proper format at the close of the case, as provided by the Clerk's office, to the Federal Records Center. Mr. Michael J. Sherin, Chairman at The Garden City Group discloses that the Firm received a $5,000 pre-petition retainer with any excess to be applied to post-petition fees in the first bill. Mr. Sherin reports The Garden City Group's professionals bill: Designation Hourly Rate ----------- ----------- Senior Programmer $150 - 175 Programmer 125 - 150 Senior VP Systems & Managing Director 250 Vice President 275 Director/Assistant VP 150 Senior Project Manager 135 Project Manager 95 Quality Assurance 75 - 125 Supervisor 70 - 90 To the best of the Debtors knowledge, The Garden City Group is "disinterested" as that term is defined in Section 101(14) of the Bankruptcy Code. Headquartered in Atlanta, Georgia, Galey & Lord, Inc., a leading global manufacturer of textiles for sportswear, including denim, cotton casuals and corduroy, and its debtor-affiliates filed for chapter 11 protection on August 19, 2004 (Bankr. N.D. Ga. Case No. 04-43098). Jason H. Watson, Esq., and John C. Weitnauer, Esq., at Alston & Bird LLP, and Joel H. Levitin, Esq., at Dechert LLP, represent the Debtor in its restructuring efforts. When the Debtor filed for protection from its creditors, it listed $533,576,000 in total assets and $438,035,000 in total debts. GLOBAL DIGITAL: Jerome Artigliere Resigns as President & CEO ------------------------------------------------------------ Global Digital Solutions, Inc. (OTCBB:GDSI), which specializes in advanced communications solutions, said Chairman of the Board, Richard Sullivan, along with board members Arthur Notterman and Garrett Sullivan resigned as directors. On September 22, 2004, William J. Delgado, Executive Vice President, was appointed to the Board of Directors. Subsequently, Jerome C. Artigliere, President, CEO, COO and Director tendered his resignation from all positions within Global Digital. Mr. Delgado has assumed all roles previously held by Mr. Artigliere. Effective September 24, 2004, Daniel McKelvey and Marcos T. Santos were appointed to the Board of Directors of Global Digital. Daniel McKelvey has over 15 years of experience in corporate finance, private equity and business consulting specializing in the technology and capital markets industries. He is a co-founder and managing member of Forte Capital Partners, a private equity firm based in San Francisco, focused on the technology and telecommunications industries. In 1996, Mr. McKelvey also co- founded and directed the investment banking practice of Forte Capital, a New York-based asset management firm with over $500 million in assets. Prior to that, he spent eight years working for Accenture (formerly Andersen Consulting) risk management systems. At Accenture, he worked with Donaldson Lufkin & Jenrette and Goldman Sachs in New York and The Capital Group in Los Angeles. He received a bachelor of science in mathematics and computer science with honors from the University of New Hampshire. Marcos T. Santos has been a managing member of Forte Capital Partners from 1999 to present. From 1997-1998, Mr. Santos was the manager of the San Francisco Consulting Group, which provided business development, strategy and business integration projects at Fortune 500 companies. From 1991-1997, Mr. Santos was a manager at Accenture (formerly Andersen Consulting). Mr. Santos obtained a bachelor of science in electrical engineering with an emphasis in computer science and a master of science in management science from Stanford University. About Global Digital Solutions, Inc. Global Digital Solutions, Inc. is headquartered in Sacramento, California. Operating as a telecommunications integrator, the company has developed a host of proprietary service solutions designed to optimize inter-office communications. The Company designs, implements and maintains high-speed, state of the art networks in conjunction with our technology partners to provide our customers with scaleable, cost effective and reliable systems that meet today's demanding needs and tomorrow's ever-changing requirements. * * * Liquidity & Capital Resources In its Form 10-QSB for the quarterly period ended March 31, 2004, filed with the Securities and Exchange Commission, Global Digital Solutions, Inc. reported that it requires additional capital in order to meet its ongoing corporate obligations and in order to continue and expand its current and strategic business plans. Global Digital has generated significant losses from operations, and has experienced declining revenues and profit margins. Additionally, Global Digital has negative tangible net worth at March 31, 2004. Global Digital has been unable to bid on certain contracts because they have been unable to obtain the required bonding, which is unavailable due to Global Digital's poor financial position. GLOBAL DIGITAL: Inks Forbearance Agreement with Laurus Fund ----------------------------------------------------------- Global Digital Solutions, Inc. (OTCBB:GDSI), which specializes in advanced communications solutions, received notice from Laurus Capital Management, LLC, that Global Digital is in default for non-payment of interest due under its borrowing agreement. On September 27, 2004, Laurus Funds and the Company entered into a standstill/forbearance agreement for a period of sixty days. As reported in the Troubled Company Reporter on Aug. 9, Global Digital secured a $3 million convertible financing facility from Laurus Master Fund, Ltd., a New York-based institutional fund that specializes in direct investments in growing, small capitalization companies. The financing facility is a three-year, revolving fixed price convertible note that bears an interest rate of prime plus 8%; provided that such interest rate will be reduced to prime plus 3% upon completion of an equity raise satisfactory to Laurus Funds. The structure allows for portions of the outstanding balance to be converted into equity, thereby increasing the funding amounts available to the Company. Change of Accountants Effective September 29, 2004, the board of directors of Global Digital have accepted the resignation of Rubin, Brown, Gornstein & Co., LLP, as the Company's principal accountants. In addition, the board of directors has engaged the firm of Russell Bedford Stefanou Mirchandani LLP as the Company's new principal accountants. During Global Digital's fiscal year ending June 30, 2004 and the interim period through the date of resignation, there were no disagreements on any matter of accounting principles or practices, financial statement disclosure, or auditing scope of procedure and there were no "reportable events" with Global Digital. On September 28, 2004, Global Digital has received approximately $404,000 in bridge financing. Upon receipt of this financing and long-term equity financing for Global Digital of at least $2,000,000 USD, Messrs. Sullivan and Artigliere have agreed to return approximately 14,100,000 common shares back to Global Digital. Global Digital is currently in negotiations for the long- term equity financing. William J. Delgado, Global Digital's CEO, stated, "Global Digital has undergone significant changes within the past two weeks. With the addition of the new board members and the core operational team in place, and, upon commencement of the long-term financing, Global Digital is poised and ready to execute its business plan." About Global Digital Solutions, Inc. Global Digital Solutions, Inc. is headquartered in Sacramento, California. Operating as a telecommunications integrator, the company has developed a host of proprietary service solutions designed to optimize inter-office communications. The Company designs, implements and maintains high-speed, state of the art networks in conjunction with our technology partners to provide our customers with scaleable, cost effective and reliable systems that meet today's demanding needs and tomorrow's ever-changing requirements. * * * Liquidity & Capital Resources In its Form 10-QSB for the quarterly period ended March 31, 2004, filed with the Securities and Exchange Commission, Global Digital Solutions, Inc. said it requires additional capital in order to meet its ongoing corporate obligations and in order to continue and expand its current and strategic business plans. Global Digital has generated significant losses from operations, and has experienced declining revenues and profit margins. Additionally, Global Digital has negative tangible net worth at March 31, 2004. Global Digital has been unable to bid on certain contracts because they have been unable to obtain the required bonding, which is unavailable due to Global Digital's poor financial position. GOPHER STATE: Hires Ravich Meyer as Bankruptcy Counsel ------------------------------------------------------ The U.S. Bankruptcy Court for the District of Minnesota gave Gopher State Ethanol, LLC, permission to employ Ravich Meyer Kirkman McGrath & Nauman, A Professional Association, as its bankruptcy counsel. Ravich Meyer will: a) represent the Debtor in connection with all matters related to its chapter 11 case; b) assist and represent the Debtor in all matters pertaining to the discharge of its duties under the Bankruptcy Code; and c) perform other legal services necessary or as required by the Debtor. Michael L. Meyer, Esq., Michael F. McGrath, Esq., and Will R. Tansey, Esq., are the lead attorneys in Gopher State's restructuring. Mr. Meyer discloses that the Debtor paid a $51,829.69 retainer. For their professional services, Mr. Meyer will bill the Debtor at an hourly rate of $325, while Mr. McGrath will charge $290 per hour and Mr. Tansey will charge $170 per hour. Ravich Meyer does not have any interest adverse to the Debtor or its estate. Headquartered in St. Paul, Minnesota, Gopher State Ethanol, LLC, manufactures ethanol. The Company filed for chapter 11 protection on August 11, 2004 (Bankr. D. Minn. Case No. 04-34706). When the Debtor filed for protection from its creditors, it listed $12,019,824 in total assets and $36,759,602 in total debts. GREAT ATLANTIC: Settles Class Action Suit with 29 Franchisees ------------------------------------------------------------- The Great Atlantic & Pacific Tea Company, Inc. reported the settlement of a class action by 29 operating and former franchisees of its Food Basics discount grocery operations in Ontario, Canada. The settlement is subject to court approval. Approximately half of the $32 million settlement represents the Company's purchase of stores from franchisees participating in the action, which involved a dispute over certain terms contained in the previous franchise agreement. Christian Haub, Chairman of the Board, President and Chief Executive Officer of A&P, said "The resolution of this matter enables us to continue growing our strong discount business in Ontario with a larger complement of corporately owned stores, while at the same time strengthening our continuing franchise stores." Founded in 1859, A&P was one of the nation's first supermarket chains, and is today among North America's largest. The Company operates 643 stores in 11 states, the District of Columbia and Ontario, Canada under the following trade names: A&P, Waldbaum's, The Food Emporium, Super Foodmart, Super Fresh, Farmer Jack, Sav- A-Center, Dominion, The Barn Markets, Food Basics and Ultra Food & Drug. * * * As reported in the Troubled Company Reporter on August 16, 2004, Moody's Investors Service downgraded all ratings of The Great Atlantic & Pacific Tea Company, Inc., including the bank loan to B2 from Ba3, the three senior note issues to Caa1 from B3, and the Speculative Grade Liquidity Rating to SGL-3 from SGL-2. The downgrade is prompted by A&P's high cash burn rate and the demonstrated inability to tangibly improve weak operations. Benefiting the ratings are Moody's opinion that cash balances largely will finance free cash flow deficits over the next four quarters and A&P's important positions in its core markets around New York City and Toronto. The rating outlook continues to be negative. These ratings were downgraded: -- $400 million revolving credit facility to B2 from Ba3; -- $220 million of 7.75% senior notes (2007) to Caa1 from B3; -- $217 million of 9.125% senior notes (2011) to Caa1 from B3; -- $200 million of 9.375% senior notes (2039) to Caa1 from B3; -- Senior unsecured shelf to (P)Caa1 from (P)B3; -- Subordinated shelf to (P)Caa2 from (P)Caa1; -- Junior subordinated shelf to (P)Caa2 from (P)Caa1; -- Preferred stock shelf to (P)Caa3 from (P)Caa2; -- Preferred trust securities issued by A&P Finance I, A&P Finance II, and A&P Finance III to (P)Caa2 from (P)Caa1; -- Speculative Grade Liquidity rating to SGL-3 from SGL-2; -- Senior implied rating to B3 from B2; and the -- Long-term issuer rating to Caa1 from B3. HARVEST ENERGY: S&P Puts B- Rating on Planned $200 Million Bonds ---------------------------------------------------------------- Standard & Poor's Ratings Services assigned its 'B+' long-term corporate credit rating to Calgary, Alta.-based Harvest Energy Trust and its 'B-' senior unsecured debt rating to the proposed $200 million seven-year bond to be issued by Harvest Operations Corporation, a wholly owned subsidiary of Harvest Energy Trust. The debt is fully guaranteed by the trust and all its wholly owned subsidiaries. The proposed bond issue is rated two notches below the corporate credit rating, as the priority debt, ranking ahead of the $200 million, accounts for more than 30% of the trust's asset base. The outlook is stable. "With a limited number of internal growth prospects, reserve replacement and growth for Harvest is expected to continue to come through further acquisitions, exposing the trust to future capital expenditures and limiting opportunities for Harvest to improve its ratings," said Standard & Poor's credit analyst Michelle Dathorne. "Nevertheless, we expect Harvest should be able to generate some free cash flow for debt reduction, given the current strong hydrocarbon price environment, and the trust's fixed payout distribution policy. In addition, Harvest's policy of hedging a high proportion of its production will limit the trust's exposure to falling hydrocarbon prices," Ms. Dathorne added. Harvest is a regional oil and gas producer operating in four core areas in the Western Canadian Sedimentary Basin. Formed in July 2002, Harvest has built its proven reserves through acquisitions and, to a much smaller extent, through exploration and development activities. The company's reserves and production mix are weighted towards liquids, which currently account for 85% of the company's gross proven reserves and 86% of its forecasted 2004 production. Harvest's aggressive financial risk profile reflects the company's aggressive capital structure; however, the trust's extensive hedging program serves to offset much of the volatility inherent in the cyclical and competitive oil and gas industry. Harvest's leverage at year-end is anticipated to be about 60% total debt to capital as a result of the EnCana Corporation acquisition. Should hydrocarbon prices remain strong the company is expected to reduce debt, and leverage is targeted to be approximately 40%. Harvest's high proportion of hedged production, in addition to its fixed payout distribution policy, provides strong cash flow protection. If hydrocarbon prices remain at their current robust levels, the EBITDA interest coverage and total debt to EBITDA ratios are expected to be about 11x and 1x, respectively. However, if the trust chooses to sustain its distributions in a low to midcycle hydrocarbon price environment, Harvest Energy's financial profile may be compromised. HAWAIIAN AIRLINES: Two Plans of Reorganization on the Table ----------------------------------------------------------- Boeing Capital Corporation and Corporate Recovery Group delivered a notice to the U.S. Bankruptcy Court for the District of Hawaii withdrawing their alternative plan of reorganization. In addition, Madison 50 Air Partners, LLC, an entity formed by Harbert Distressed Investment Fund, LP (and affiliated with Jefferies & Co.), also formally withdrew an alternative plan of reorganization it had filed for Hawaiian Airlines. As a result of the withdrawal of these two plans, there are now on file two alternative plans of reorganization for Hawaiian Airlines: * the Joint Plan of reorganization supported by RC Aviation, Holdings, the chapter 11 trustee, and the Creditors Committee, and * an alternative plan filed by Hawaiian Investment Partners Group LLC, the Hawaiian Reorganization Committee LLC and Robert C. Knopp. Lawrence Hershfield, Chief Executive Officer of Holdings, stated that "We have made substantial progress in the reorganization of Hawaiian Airlines." RC Aviation, LLC and Hawaiian Holdings, Inc. (Amex: HA) announced that on September 27, 2004, the Bankruptcy Court approved the terms of the previously announced restructuring and settlement between Boeing and Hawaiian Airlines, Inc., relating to the modification and assumption of leases between Hawaiian Airlines and Boeing Capital Corporation for 11 Boeing 717-200s and 3 Boeing 767-300ERs. RC Aviation and Holdings are co-proponents of a plan of reorganization for Hawaiian Airlines, together with Joshua Gotbaum, the chapter 11 trustee for Hawaiian Airlines, and the Official Committee of Unsecured Creditors of Hawaiian Airlines. Pursuant to the settlement agreement, Boeing's claim against Hawaiian Airlines was also allowed in the amount of $66.5 million. In addition, RC Aviation agreed to purchase that claim from Boeing. Harbert has invested as a minority member in RC Aviation by contributing a portion of the funds to be used to purchase the Boeing claim. "We hope that Bankruptcy Court approval of the settlement with Boeing and RC Aviation's purchase of the Boeing claim will expedite the confirmation of the Joint Plan and the conclusion of Hawaiian Airlines' chapter 11 case," Mr. Hershfield said. Headquartered in Honolulu, Hawaii, Hawaiian Airlines, Inc., -- http://hawaiianair.com/-- is a subsidiary of Hawaiian Holdings, Inc. (Amex and PCX: HA). The Company provides primarily scheduled transportation of passengers, cargo and mail. Flights operate within the South Pacific and to points on the west coast as well as Las Vegas. Since the appointment of a bankruptcy trustee in May 2003, Hawaiian Holdings has had no involvement in the management of Hawaiian Airlines and has had limited access to information concerning the airline. The Company filed for chapter 11 protection on March 21, 2003 (Bankr. D. Hawaii Case No. 03-00817). Joshua Gotbaum serves as the chapter 11 trustee for Hawaiian Airlines, Inc. Mr. Gotbaum is represented by Tom E. Roesser, Esq., and Katherine G. Leonard at Carlsmith Ball LLP and Bruce Bennett, Esq., Sidney P. Levinson, Esq., Joshua D. Morse, Esq., and John L. Jones, II, Esq., at Hennigan, Bennett & Dorman LLP. HAWAIIAN AIRLINES: Disclosure Statement Hearing Convenes Today -------------------------------------------------------------- The Honorable Robert J. Faris of the U.S. Bankruptcy Court for the District of Hawaii will hold a hearing today, October 5, 2004, to consider the adequacy of information contained in the Disclosure Statement filed by Hawaiian Airlines, Inc., on August 30, 2004. The Disclosure Statement, together with the Joint Plan of Reorganization, were co-proposed by Joshua Gotbaum, the chapter 11 Trustee of Hawaiian Airlines' chapter 11 case, the Official Committee of Unsecured Creditors, Hawaiian Holdings, Inc., HHIC, Inc., and RC Aviation LLC. A full-text copy of the Disclosure Statement explaining the Joint Plan is available for a fee at: http://www.researcharchives.com/download?id=040812020022 Under the terms of the Joint Plan, all claims, including unsecured claims, will be paid in full. Unsecured creditors can elect to get either 50 percent of their claim in cash and the remainder in HHI Common Stock or 100 percent in cash. Shares in Hawaiian Holdings, Inc., Hawaiian Airlines' parent company, currently trade north of $6 per share. Three Disclosure Statement Objections At today's Disclosure Statement hearing, Judge Faris will be asked to find that the Disclosure Statement, pursuant to 11 U.S.C. Sec. 1125, contains "adequate information" -- meaning information of a kind, and in sufficient detail, as far as is reasonably practicable in light of the nature and history of the debtor and the condition of the debtor's books and records, that would enable a hypothetical reasonable investor typical of holders of claims or interests of the relevant class to make an informed judgment about the plan. Three parties-in-interest say the Disclosure Statement isn't adequate: (A) Air Line Pilots Association Rebecca L. Covert, Esq., at Takahashi, Masui, Vasconcellos & Covert, filed an objection to Disclosure Statement on behalf of the Air Line Pilots Association, International. The Air Line Pilots objection complains about freezing the Pilot's Plan and the absence of any wage increase for the next three years. The Pilots complain that the Plan is funded on the backs of the employees who are the only stakeholders to have made economic sacrifices in this case and are the only parties who will not be made whole. (B) American Airlines American Airlines, Inc., filed an $11 million claim against Hawaiian Airlines. Under the terms of the Plan, American's Claim is classified as a Lease Related Claim and is reduced to $790,000. The balance of the Claim has been classified as an unsecured claim. American disputes this classification and treatment of its claim. (C) Internal Revenue Service Keith S. Blair, Esq., of the U.S. Department of Justice, says the Disclosure Statement is ambiguous. Mr. Blair tells the Court that the Internal Revenue Service filed a $128 million claim for unpaid taxes on account of deductions it wasn't entitled to take on its tax returns. The IRS wants the Disclosure Statement to explain how the carrier will treat and when it will pay the government's $128 million claim. The Chapter 11 Trustee has said in pleadings filed with the Bankruptcy Court that the IRS' claim is probably closer to $23 million. Next Steps If Judge Faris puts his stamp of approval on the Disclosure Statement, copies will then be printed and transmitted to creditors with copies of the Joint Plan. The carrier's impaired creditors will be asked to vote to accept or reject the Joint Plan. The Plan Proponents will be looking for acceptances from creditors holding at least two-thirds of the dollars and more than one-half of the number of claims in each class. The Plan Proponents will then return to Judge Faris, lay out their case that the Joint Plan complies with the 13 requirements set forth in 11 U.S.C. Sec. 1129, and ask him to confirm the Joint Plan. Headquartered in Honolulu, Hawaii, Hawaiian Airlines, Inc., -- http://hawaiianair.com/-- is a subsidiary of Hawaiian Holdings, Inc. (Amex and PCX: HA). The Company provides primarily scheduled transportation of passengers, cargo and mail. Flights operate within the South Pacific and to points on the west coast as well as Las Vegas. Since the appointment of a bankruptcy trustee in May 2003, Hawaiian Holdings has had no involvement in the management of Hawaiian Airlines and has had limited access to information concerning the airline. The Company filed for chapter 11 protection on March 21, 2003 (Bankr. D. Hawaii Case No. 03-00817). Joshua Gotbaum serves as the chapter 11 trustee for Hawaiian Airlines, Inc. Mr. Gotbaum is represented by Tom E. Roesser, Esq., and Katherine G. Leonard at Carlsmith Ball LLP and Bruce Bennett, Esq., Sidney P. Levinson, Esq., Joshua D. Morse, Esq., and John L. Jones, II, Esq., at Hennigan, Bennett & Dorman LLP. HOLLINGER: Sr. Noteholders Waive Defaults & OK New $15MM Borrowing ------------------------------------------------------------------ Hollinger, Inc., (TSX:HLG.C; HLG.PR.B) reported that on September 30, 2004, a majority in aggregate principal amount of holders of its outstanding 11.875% Senior Secured Notes due 2011 waived any and all defaults or events of default under, and non-compliance with certain covenants of, the indenture governing the Senior Notes relating to events occurring on or prior to September 30, 2004. In addition, Hollinger received consents from holders of a majority in aggregate principal amount of its Senior Notes approving amendments to the Senior Indenture and the related security agreement, which, among other things, permit Hollinger to incur indebtedness in an aggregate amount outstanding not to exceed $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. As a result, on September 30, 2004, Hollinger completed a private placement of $15 million in aggregate principal amount of 11.875% Senior Secured Notes due 2011. Changes in Capital Structure As of the close of business on September 30, 2004, Hollinger and its subsidiaries (other than Hollinger International and its subsidiaries) had approximately $14.0 million of cash or cash equivalents on hand and Hollinger owned, directly or indirectly, 792,560 shares of Class A Common Stock and 14,990,000 shares of Class B Common Stock of Hollinger International. The increase in Hollinger's cash and cash equivalents on hand during the period since its September 15, 2004 status update is substantially due to the receipt by the company of the net proceeds of the private placement of the Second Priority Notes. Based on the September 30, 2004 closing price of the shares of Class A Common Stock of Hollinger International on the New York Stock Exchange of $17.29, the market value of Hollinger's direct and indirect holdings in Hollinger International was $272,880,462.40. All of Hollinger's direct and indirect interest in the shares of Class A Common Stock of Hollinger International are being held in escrow with a licensed trust company in support of future retractions of its Series II Preference Shares and all of Hollinger's direct and indirect interest in the shares of Class B Common Stock of Hollinger International are pledged as security in connection with the Senior Notes and Second Priority Notes. In addition, Hollinger previously deposited with the trustee under the Senior Indenture approximately $10.5 million in cash as collateral in support of the Senior Notes (which cash collateral is also now collateral in support of the Second Priority Notes, subject to being applied to satisfy future interest payment obligations on the outstanding Senior Notes as permitted by the recent amendments to the Senior Indenture. Consequently, there is currently in excess of $269.6 million aggregate collateral securing the $78 million principal amount of the Senior Notes outstanding and the $15 million principal amount of the Second Priority Notes outstanding. As has been reported in the media, a loan made by Domgroup Ltd., a wholly owned subsidiary of Hollinger, to The Ravelston Corporation Limited, in the principal amount of Cdn$1.1 million has been repaid in full with interest. 2003 Audit Still Not Finished 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 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, 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. $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 the interest payment with the trustee under the Indenture and noteholders will receive their interest payment in a timely manner. There was in excess of $267.4 million aggregate collateral securing the $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 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. HOLLYWOOD CASINO: Amends Acquisition Pact with Eldorado Resorts --------------------------------------------------------------- Hollywood Casino Shreveport and Eldorado Resorts LLC had amended their previously announced agreement providing for the acquisition of the Company by Eldorado in order to extend the deadline for entering into final acquisition documents from September 30, 2004, until October 20, 2004. The Agreement, as amended, remains in full force and effect. As reported in the Troubled Company Reporter on September 1, the Agreement also contemplates a financial restructuring of HCS that will significantly reduce outstanding secured debt obligations and annual cash interest payments, while rationalizing its capital structure. Under the proposed restructuring, holders of the Company's existing secured notes are to receive $140 million of new first mortgage notes, $20 million of PIK Preferred Equity Securities, a 25% non-voting equity interest in the reorganized company, and cash in an amount to be determined, in exchange for existing secured notes in the principal face amount of $189 million plus accrued interest. The Company intends to effectuate the sale and related financial restructuring transaction through a prepackaged Chapter 11 bankruptcy reorganization to be filed in the fourth quarter of this year. The Agreement remains subject to final documentation, subsequent noteholder solicitation and acceptance, filing with and approval by the Bankruptcy Court of the Agreement, Louisiana Gaming Control Board approval and certain other conditions. About Eldorado Resorts Eldorado Resorts LLC owns and operates the Eldorado Hotel & Casino in Reno, Nevada, and is a joint venture partner with Mandalay Resort Group in the Silver Legacy Resort Casino, also located in Reno. The Eldorado Hotel & Casino, had net operating revenues of $133,000,000 in 2003, has over 84,000 square feet of gaming space, including over 1,800 slot machines and approximately 75 table games, 817 guest rooms, 12,000 square feet of convention space and is renowned for its eight restaurants. The Silver Legacy Resort Casino had 2003 net operating revenues of $152,000,000. The Silver Legacy has over 87,000 square feet of gaming space, including over 2,000 slot machines and 80 table games, 1,170 guest rooms, 90,000 square feet of exhibit and convention space, and operates six distinctive restaurants. About Hollywood Casino Headquartered in Shreveport, Louisiana, Hollywood Casino Shreveport operates a casino hotel and resort featuring riverboat gambling. Its creditors filed an involuntary chapter 11 protection on September 10, 2004 (Bankr. W.D. La. Case No. 04-13259). Robert W. Raley, Esq. at 290 Benton Road Spur, Bossier City, LA 71111 and Timothy W. Wilhite, Esq. at Downer, Hammond & Wilhite, L.L.C. represent the petitioners in their involuntary petition against the Debtor. The Company owed $34,958,113 to the petitioners. ILLINOIS POWER: Fitch Raises Sr. Debt & Preferred Stock Ratings --------------------------------------------------------------- Fitch upgrades Illinois Power Company's debt ratings: -- Senior secured to 'BBB' from 'B'; -- Senior unsecured to 'BBB-' from 'CCC+'; -- Preferred stock to 'BB+' from 'CC'. The company's ratings are also removed from Ratings Watch Positive. The Outlook is Positive. The ratings action follows the acquisition of Illinois Power by Ameren Corp (senior unsecured 'A-'), which has a significantly stronger credit profile than its previous parent, Dynegy Corp. (senior unsecured 'CCC'). Ameren will infuse cash in the form of equity into Illinois Power and plans to use a significant portion of those funds to reduce at least $750 million of Illinois Power debt. Fitch expects that near-term reduction in debt to result in leverage commensurate with the assigned ratings. The Positive Outlook reflects Ameren's plan to further reduce leverage to a level stronger than assumed in current ratings. The reduction in debt will also lead to improvement in cash flow as interest expenses will decrease. Additionally the company's cash flow and earnings are expected to improve through Ameren's centralized cost-efficient management of its subsidiaries' electric and gas operations. The ratings also take into consideration Illinois Power's stable cash flows and low-risk business profile as a regulated distribution utility. The exposure to commodity price volatility is limited by its fixed-priced all-requirements power agreement for 70% of its load with its former parent company DYN through 2006. The counterparty risk with Dynegy Corp. is a credit concern. This is partially mitigated by Ameren's strong presence in the wholesale power market in the region. Ameren is seeking an all- requirements contract for the remaining 30% of Illinois Power's POLR needs. Illinois Power is a transmission and distribution utility serving more than 590,000 electric and 410,000 gas customers in Illinois. Dynegy Corp. provides electricity, natural gas, and natural gas liquids to wholesale customers in the U.S. and to retail customers in Illinois. ILLINOIS POWER: S&P Raises Corporate Credit Rating From B to A- --------------------------------------------------------------- Standard & Poor's Ratings Services raised its corporate credit rating on Illinois Power Co. to 'A-' from 'B' as a result of the completed acquisition of the company by Ameren Corporation (A- /Negative/A-2). Also, Standard & Poor's removed the rating from CreditWatch with positive implications. The outlook is negative. Both the rating and the outlook on Illinois Power reflect the consolidated credit quality of the company's new parent company, Ameren. "In resolving the CreditWatch listing, Standard & Poor's views Illinois Power as core to Ameren's business strategy," said Standard & Poor's credit analyst John Kennedy. "Because there are no regulatory mechanisms or other structural barriers in Illinois that sufficiently restrict access by the parent to the utility's cash, we view the default risk of Illinois Power as the same as Ameren," continued Mr. Kennedy. INTELLIGROUP INC: Softbank Completes $15MM Major Equity Investment ------------------------------------------------------------------ Intelligroup, Inc., (Nasdaq: ITIGE), a global provider of strategic IT outsourcing services, has completed the $15 million private placement of an aggregate of 17,647,058 shares of the Company's common stock at a purchase price of $0.85 per share with SOFTBANK Asia Infrastructure Fund, L.P., an affiliate of SOFTBANK Corporation, and Venture Tech Assets Pvt. Ltd. The purchasers now own approximately 50.3% of the Company's outstanding common stock. "We strongly believe in the long history of valuable services provided by Intelligroup, the strength of its referenceable customer base, and its management team," remarked Ravi Adusumalli, Director with SAIF. "Further, we believe that the Company is extremely well-positioned to benefit from the increasing demand for onsite and offshore ERP implementation and support services. While we are designating a majority of the Board of Directors, we have faith in the current management team to lead the Company into the next level of competitiveness and profitability." "This investment by SOFTBANK is testament to the strength of our customer base, employees and business model. It reinforces our strategy and vision for Intelligroup," commented Arjun Valluri, Chairman and Chief Executive Officer of Intelligroup. "This investment is also a clear sign to our customers and employees that Intelligroup is a stable long-term player with great underlying fundamentals. We look forward to working closely with SOFTBANK moving forward to improve and grow our business." In connection with this transaction, SAIF and Venture Tech can designate five out of nine members of the Company's Board of Directors. The new Board members designated include: -- Andrew Yan, Executive Managing Director of SAIF; -- Ravi Adusumalli, Director of SAIF; -- Ajit Isaac, Managing Director of PeopleOne Consulting; -- Sandeep Reddy, Director of Venture Tech; and -- Srinivas Raju, Chairman of the Board of SIFY. As part of the transaction, Klaus Besier and Nic DiIorio have resigned from the current Board of Directors. Simultaneously with this transaction, the Company amended its credit facility with PNC Business Credit. This amendment included a waiver of the default previously announced by the Company. The Company believes the combination of the $15 million investment and the amendment to the credit facility adequately addresses the Company's liquidity needs. The Company has scheduled a conference call today, October 5, 2004, at 1:00 PM EDT to discuss the matters contained in recent press releases. A live broadcast of the call can be accessed on the web at http://www.intelligroup.com/or by telephone at (800) 289-0496 (United States) or (913) 981-5519 (International), access code Intelligroup. Please access the web site before 12:45 PM to register, download any necessary software and access any accompanying presentation materials. For those who cannot access the live event, the conference call will be archived on the Intelligroup website for 12 months. A replay of the conference call will also be available by telephone 24 hours a day from 4:00 PM EDT on October 5, 2004, through 12:00 AM EDT on Tuesday, October 19, 2004, by calling (888) 203-1112 in the United States or (719) 457-0820 internationally, access code 994562. About SOFTBANK Asia Infrastructure Fund SAIF is a private equity fund investing in communications, media and information technology product and service companies who are based, have key operations or significant growth potential in the Asia-Pacific region. SAIF was founded in February 2001 following the formation of a strategic partnership between SOFTBANK Corporation and Cisco Systems, the founding limited partner of the fund. Cisco is a key financial and strategic partner for SAIF. About Intelligroup Intelligroup, Inc. -- http://www.intelligroup.com/-- is a global provider of strategic IT outsourcing services. Intelligroup develops, implements and supports information technology solutions for global corporations and public sector organizations. The Company's onsite/offshore delivery model has enabled hundreds of customers to accelerate results and significantly reduce costs. With extensive expertise in industry-specific enterprise solutions, Intelligroup has earned a reputation for consistently exceeding client expectations. * * * As reported in the Troubled Company Reporter on Sept. 28, the Company is in default under its revolving credit facility as a result of the failure to file its Form 10-Q for the 2004 second quarter in a timely manner, and expects it would also be in default under certain financial covenants based on likely second quarter results. The Company is working with its senior lender to obtain waivers for such defaults. Although the Company believes at this time that it will obtain waivers of these defaults from the lender under its revolving credit facility, if the Company cannot obtain such waivers, the indebtedness outstanding under its revolving credit facility could be accelerated. INTELLIGROUP INC: Releases Disclosure & Internal Control Info ------------------------------------------------------------- Intelligroup, Inc., (Nasdaq: ITIGE), a global provider of strategic IT outsourcing services, released an evaluation of its disclosure controls and its internal controls. The Company's management, including its new finance and accounting management, continues to evaluate and improve upon the effectiveness of its disclosure controls and internal controls. In its most recent evaluation, the Company's management concluded that the Company's disclosure controls were designed to ensure that material information relating to the Company and its subsidiaries was made known to the Company's senior management. However, primarily because the Company experienced difficulty in providing information required to be disclosed in the reports that it files or submits under the Exchange Act within the time periods required by the federal securities laws, the Company's management concluded that its disclosure controls were not effective, and the Company management is working to remedy and improve its reporting capabilities. To provide background behind some of the Company's recent challenges, the Company has also announced various changes in the Company's internal controls over financial reporting. These changes include the implementation of a significant upgrade to the Company's financial systems, as well as significant personnel changes, including the hiring of a new Chief Financial Officer and other new hires to the financial management and staff. These changes have materially affected the Company's internal control over financial reporting in the following manner: (i) the upgraded financial system has resulted in a change of internal processes relating to financial reporting, requiring staff training and adjustment; (ii) the upgraded financial system has resulted in intensive manual processes requiring additional resources of the Company; (iii) the upgraded financial system has resulted in a slower closing process; and (iv) the changes to the financial department staff have resulted in a loss of historical know-how. The Company conducted this internal control review in conjunction with the Company's ongoing assessment in preparation for providing the required certifications under Section 404 of the Sarbanes- Oxley Act of 2002 and to remedy existing material weaknesses with its internal controls. The Company has taken certain steps in this regard including, and without limitation: (i) the Company has established an internal team, sponsored by the Chief Financial Officer and including participation by other executives, responsible for the assessment and testing of internal controls and the remediation, if necessary, of identified issues with the Company's internal controls; (ii) the Company has retained a large, nationally recognized accounting and consulting firm to assist and advise the Company in relation to these efforts; and (iii) an internal project plan relating to these efforts was adopted by the team and the team is currently executing against this plan. The Company is initially focused on its key business areas including timesheet entry, contract administration, billing, revenue recognition, and subcontractor processes. This assessment has raised the these areas of concern and focus: (i) increasing the Company's control over the accuracy of the financial information being entered into the financial systems; (ii) evaluating the Company's processes, policies and procedures and, where appropriate, improving and increasing the enforcement of the same; (iii) training the Company's new and existing financial department resources in the upgraded financial system and training back-up personnel in critical areas; and (iv) evaluating the segregation of duties as it relates to key financial reporting roles and improving managerial oversight of such resources. The Company's internal control review is also evaluating whether internal control deficiencies contributed to the reporting errors that gave rise to the previously announced restatement of financial statements for prior periods and to the liquidity issues which were mentioned in conjunction with the recently- closed $15,000,000 private placement transaction with SOFTBANK Asia Infrastructure Fund, L.P. and Venture Tech Assets Pvt. Ltd. The Company discussed the foregoing conditions with its Audit Committee and will continue to regularly update and receive input from its Audit Committee moving forward. As noted, the Company has not yet filed a report on Form 10-Q for the quarter ended June 30, 2004 and will not timely file a Report on Form 10-Q for the quarter ended September 30, 2004. As discussed, this is primarily the result of turnover in its accounting staff which occurred while working through a financial system conversion as well as delay associated with the Company's restatement of its prior periods. In designing and evaluating the Company's internal controls and disclosure controls, the Company's management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applied its judgment in evaluating the cost-benefit relationship of possible controls and procedures. "Clearly we have challenges in regard to reporting information to our investing public", said David Distel the Company's Chief Financial Officer. "We have been making steady progress on improving our internal controls and expect to be able to resume regular timely financial reports as soon as we are able to conclude on the previously announced restatement of financial results for historical periods. We recognize this is important to our shareholders and reiterate our commitment in this regard". Mr. Distel continued, "Our fundamental business remains strong and given our recent cash infusion, we are excited about the prospects for our business and putting these reporting challenges behind us." The Company further announced an update to its NASDAQ listing status. As announced on August 19, 2004, the Company received a delisting notice from the NASDAQ Listing Qualification Department regarding the Company's failure to timely file its quarterly report on Form 10-Q. The Company has met with a NASDAQ listing panel in regard to these issues. In addition and as expected, the Company recently received a notice from NASDAQ that its recently closed $15,000,000 private placement transaction with SOFTBANK Asia Infrastructure Fund, L.P., and Venture Tech Assets Pvt. Ltd resulted in the Company not being in compliance with the shareholder approval, proxy solicitation and listing of additional share requirements as set forth in the Nasdaq Marketplace Rules 4350(i)(1)(B); 4350(i)(1)(D) and 4310(c)(17), respectively. The Company continues to work with NASDAQ in regard to these issues. Given its failure to comply with the above-mentioned NASDAQ rules, the Company can give no assurances that the Company will continue to be listed on the NASDAQ or regain compliance in terms of existing deficiencies. About Intelligroup Intelligroup, Inc. -- http://www.intelligroup.com/-- is an information technology services strategic outsourcing partner to the world's largest companies. Intelligroup develops, implements and supports information technology solutions for global corporations and public sector organizations. The Company's onsite/offshore delivery model has enabled hundreds of customers to accelerate results and significantly reduce costs. With extensive expertise in industry-specific enterprise solutions, Intelligroup has earned a reputation for consistently exceeding client expectations. * * * As reported in the Troubled Company Reporter on Sept. 28, the Company is in default under its revolving credit facility as a result of the failure to file its Form 10-Q for the 2004 second quarter in a timely manner, and expects it would also be in default under certain financial covenants based on likely second quarter results. The Company is working with its senior lender to obtain waivers for such defaults. Although the Company believes at this time that it will obtain waivers of these defaults from the lender under its revolving credit facility, if the Company cannot obtain such waivers, the indebtedness outstanding under its revolving credit facility could be accelerated. INTERMET CORP: Gets $60 Million DIP Financing Commitment -------------------------------------------------------- INTERMET Corporation (Nasdaq: INMT) has obtained a commitment for a twelve-month secured debtor-in-possession revolving credit facility of up to $60 million in principal amount from one of its pre-petition lenders. The DIP facility, which will provide INTERMET with $20 million of availability upon Bankruptcy Court approval, is subject to execution of definitive loan documentation and various other conditions, including the placement of a lien on substantially all of INTERMET's assets having priority over the liens of the company's pre-petition lenders. The company expects to apply for Bankruptcy Court approval this week. The remaining $40 million of availability under the DIP facility is subject to various additional conditions and limitations, including: -- the lender's satisfaction with its due diligence investigation; -- approval by the lender of a budget prepared by INTERMET; and -- final approval by the Bankruptcy Court. INTERMET will be subject to customary financial and other covenants under the terms of the DIP facility. On October 1, 2004, the company obtained the Bankruptcy Court's approval of several "first-day" motions. The first-day motions were filed by INTERMET and its domestic subsidiaries in the U.S. Bankruptcy Court for the Eastern District of Michigan, as part of its petition for relief under Chapter 11 of the U.S. Bankruptcy Code filed on September 29, 2004, as previously announced. Specifically, the Bankruptcy Court entered an order approving the company's continued use of cash collateral pending either a further hearing to authorize additional use of cash collateral, if necessary, on October 15, 2004, or the availability of its DIP financing. The company believes that access to its cash collateral should be adequate for the conduct of business without drawing upon the DIP facility at least through mid-October. The Bankruptcy Court also entered an order permitting the company to pay pre- petition employee wages, salaries and benefits during its restructuring under Chapter 11. The company expects the Bankruptcy Court to consider certain other of its first-day motions on Friday, October 8, 2004. The bankruptcy cases of INTERMET and its domestic subsidiaries are being jointly administered and have been assigned to the Honorable Marci McIvor. The case number of the main case, which should be referred to for all docket entries in the cases, is 04-67597. Gary F. Ruff, Chairman and CEO of INTERMET, said, "We are pleased that we have been able to quickly secure a DIP-financing commitment and approval of our first-day motions so that we can move forward with our restructuring efforts. We are particularly encouraged to have received a commitment for up to $60 million, which is $10 million more than we initially anticipated receiving. The orders entered by the Bankruptcy Court, coupled with our anticipated DIP financing, will provide us with needed liquidity as we design and implement our restructuring plan." 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 and its debtor-affiliates filed for chapter 11 protection on September 29, 2004 (Bankr. E.D. Mich. Case No. 04-67597). Salvatore Barbatano, Esq., at Foley & Lardner LLP represents the Debtors in their restructuring efforts. When the Debtors filed for bankruptcy, they listed $735,821,000 in total assets and $592,816,000 in total debts. INTERMET CORP.: Lists of the Debtors' Largest Unsecured Creditors ------------------------------------------------------------------ INTERMET Corporation and its debtor-affiliates released lists of their 20-largest unsecured creditors: (A) INTERMET Corporation, Bankr. Case No. 04-67597 Creditor Nature of Claim Claim Amount -------- --------------- ------------ US Bank National Association Co-Guarantor on $175,000,000 as Indenture Trustee unsecured bond Attn: Corporate Trust Admin. indebtedness 180 East 5th St., Suite 200 St. Paul, MN 55101 Yxlon International, Inc. __________ $520,719 3400 Gilchrist Road Akron, OH 44260 KPMG LLP Trade Debt $359,015 150 W. Jefferson Detroit, MI 48226 Attn: Marlene Baud (212) 983-0200 Ernst & Young LLP __________ $300,000 500 Woodward Ave. Detroit, MI 48226 Mercer Human Resource __________ $102,442 5720 LBJ Freeway, Suite 200 Dallas, TX 75240 Line Precision, Inc. Trade Debt $92,693 21666 W. Eight Mile Farmington Hills, MI 48336 Attn: Stanley Clark rclark@lineprecisions.com (248) 474-5280 COR Solutions, Inc. Trade Debt $89,137 1563 Paysphere Circle Chicago, IL 60674 SRI Quality System Registrar Trade Debt $83,084 105 Bradford Road, Suite 400 Wexford, PA 15090 Attn: Will Bennet (724) 934-9000 Deltamation, Inc. Trade Debt $76,710 2605 S. Euclid Ave. Bay City, MI 48706 Squire, Sanders & Dempsey Trade Debt $62,212 EGH/Timerland Three L. Trade Debt $58,867 Marsh USA Inc. Trade Debt $56,250 Taft, Stettinius & Hollister Trade Debt $50,929 Kelly General Construction Co. Trade Debt $47,610 Amtech International Trade Debt $38,286 Sprint Trade Debt $37,342 United American Insurance Trade Debt $36,364 South East State LLC Trade Debt $33,334 Wayne Booth Investments Trade Debt $25,300 Meissner Modellbau GmBH Trade Debt $22,218 Bodine Electric Trade Debt $20,854 (B) Intermet U.S. Holding, Inc., Bankr. Case No. 04-67598 Creditor Nature of Claim Claim Amount -------- --------------- ------------ US Bank National Association Co-Guarantor on $175,000,000 as Indenture Trustee unsecured bond Attn: Corporate Trust Admin. indebtedness 180 East 5th St., Suite 200 St. Paul, MN 55101 David J. Joseph Company Trade Debt $2,002,885 Brokerage Service Division 300 Pike Street Cincinnati, OH 45202 Attn: Jim Becker, VP Trading jb@djj.com (513) 621-8770 Miller and Company LLC Trade Debt $511,052 35239 Eagle Way Chicago, IL 60678 Attn: Susan Dude (847) 695-2400 Industrial Supply Corp. Trade Debt $393,593 1905 Westwood Ave. Richmond, VA 23227 Attn: Barbara Robertson (804) 355-8041 Hill and Griffith Co. Trade Debt $267,453 1085 Summer St. Cincinnati, OH 45204 Attn: Fred Kahmann (513) 921-1075 Muscogee County Tax Commissioner Trade Debt $208,755 100 10th Street Columbus, GA 31901 Attn: Lula Huff (706) 653-4211 HA International, LLC Trade Debt $131,481 Borden Chemical 22668 Network Place Chicago, IL 60673 Industrial Powder Coatings Trade Debt $125,133 202 Republic Street Norwalk, CT 44857 Attn: Missy Smith (419) 668-4436 Wedron Silica-Fairmount Trade Debt $117,115 P.O. Box 73402-N Cleveland, OH 44193 YUSA Corporation Trade Debt $115,003 151 Jamison Road NW Washington Courthouse, OH 43160 Attn: Takeshi Kawai (740) 335-0335 Wheelabrator Abrasives Trade Debt $101.546 1691 Phoenix Blvd. Atlanta, GA 30349 Attn: Bill Koshut (540) 586-0856 Heat Treating Services Trade Debt $89,293 915 Cesar E. Chavez Ave. Pontiac, MI 48340 Attn: Dawn Wahley (248) 858-2230 Polymet Alloys, Inc. Trade Debt $75,377 1757 Highway 31 Saginaw, AL 35137 Attn: Sandy Vinson (205) 620-1266 Elkem Metals, Inc. Trade Debt $72,141 Manpower, Inc. Trade Debt $66,498 Metokote Corporation Trade Debt $65,655 Robinson Foundry Trade Debt $65,287 Foseco, Inc. Trade Debt $55,706 New River Solid Waste Management Trade Debt $53,741 Dexter Fastener Tech., Inc. Trade Debt $50,503 Georgia Power Company Trade Debt $48,307 (C) Alexander City Casting Co., Inc., Bankr. Case No. 04-67599 Creditor Nature of Claim Claim Amount -------- --------------- ------------ US Bank National Association Co-Guarantor on $175,000,000 as Indenture Trustee unsecured bond Attn: Corporate Trust Admin. indebtedness 180 East 5th St., Suite 200 St. Paul, MN 55101 (D) Ganton Technologies, Inc., Bankr. Case No. 04-67600 Creditor Nature of Claim Claim Amount -------- --------------- ------------ US Bank National Association Co-Guarantor on $175,000,000 as Indenture Trustee unsecured bond Attn: Corporate Trust Admin. indebtedness 180 East 5th St., Suite 200 St. Paul, MN 55101 IMCO Recycling Trade Debt $2,113,833 430 W. Garfield Coldwater, MI 49036 Attn: Don Pomeroy, Controller (517) 279-9596 Dana Corporation Trade Debt $530,127 Plumley Division 100 Plumley Drive Paris, TN 38242 Attn: Robert Richter (419) 525-4500 (731) 642-5582 Aluminum Resources, Inc. Trade Debt $349,162 789 Swan Dr. Smyrna, TN 37167 Attn: Mark Morris (615) 355-6500 VJ Mattson Trade Debt $266,610 9200 W. 191st Mokena, IL 60448 Attn: John Chwasyczewski (708) 631-1990 Trelleborg Automotive Trade Debt $211,200 Trelleborg Rubore, Inc. 445 Enterprise Ct. Bloomfield Hills, MI 48302 Attn: George Caplea, Exec. VP (248) 631-0100 Behr Metals Trade Debt $210,896 1100 Seminary Street Rockford, IL 61109 Attn: Tom Beck (815) 987-2755 Spectro Alloys Corp. Trade Debt $208,666 13220 Doyle Path Rosemount, MN 55068 Attn: Mitch Kvasnick (651) 437-2815 Quadra Trade Debt $169,957 1810 Renaissance Blvd. Sturtevant, WI 53177 Attn: Craig Kilpatrick (262) 417-1301 Al Cast Company Trade Debt $165,332 8821 N. University Peoria, IL 61615 Attn: Steven Wessels (309) 691-5513 Commercial Alloys Trade Debt $154,879 1831 E. Highland Rd. Twinsburg, OH 44087 Attn: Linda Ayala layala@commercialalloys.com (330) 405-5440 Pulaski Electric, Inc. Trade Debt $124,254 128 South 1st Street Pulaski, TN 38478 Kaztex Energy Management Trade Debt $115,367 (Wisconsin Energy Corporation) 250 Bishops Way P.O. Box 1040 Brookfield, WI 53005 W.G. Strohwig Tool Trade Debt $108,165 3285 Industrial Road Richfield, WI 53066 Attn: Mike Retzer (262) 628-4477 Bellwright Industries Trade Debt $93,960 10186 Bellwright Rd. Summerville, SC 29483 Citation Corporation Trade Debt $86,826 W129 N5460 Oak Lane Menomonee Falls, WI 53052 Attn: Mark Thones (262) 781-8210 G.E. Capital Corporation Trade Debt $85,915 600 W. Peachtree NW Atlanta, GA 30308 Attn: ___________________ (404) 877-1729 Freudenberg-Nok Trade Debt $85,394 General Partnership One Nok Drive Cleveland, OH 30528 Attn: Trellis Reed (706) 865-1665 Intercon Waterproofing Consultants Trade Debt $78,003 820 Water Street Racine, WI 53403 Merwin Stoltz Co. Trade Debt $73,138 RES Manufacturing Trade Debt $63,774 (E) Intermet Holding Company, Bankr. Case No. 04-67601 Creditor Nature of Claim Claim Amount -------- --------------- ------------ None. (F) SUDM, Inc., Bankr. Case No. 04-67602 Creditor Nature of Claim Claim Amount -------- --------------- ------------ US Bank National Association Co-Guarantor on $175,000,000 as Indenture Trustee unsecured bond Attn: Corporate Trust Admin. indebtedness 180 East 5th St., Suite 200 St. Paul, MN 55101 (G) Ironton Iron, Inc., Bankr. Case No. 04-67603 Creditor Nature of Claim Claim Amount -------- --------------- ------------ US Bank National Association Co-Guarantor on $175,000,000 as Indenture Trustee unsecured bond Attn: Corporate Trust Admin. indebtedness 180 East 5th St., Suite 200 St. Paul, MN 55101 (H) Intermet Illinois, Inc., Bankr. Case No. 04-67604 Creditor Nature of Claim Claim Amount -------- --------------- ------------ US Bank National Association Co-Guarantor on $175,000,000 as Indenture Trustee unsecured bond Attn: Corporate Trust Admin. indebtedness 180 East 5th St., Suite 200 St. Paul, MN 55101 (I) Cast-Matic Corporation, Bankr. Case No. 04-67605 Creditor Nature of Claim Claim Amount -------- --------------- ------------ US Bank National Association Co-Guarantor on $175,000,000 as Indenture Trustee unsecured bond Attn: Corporate Trust Admin. indebtedness 180 East 5th St., Suite 200 St. Paul, MN 55101 Alcan Aluminum Corporation Trade Debt $1,425,071 6060 Parkland Blvd. Cleveland, OH 44124 Attn: JoAnne Longworth, VP (440) 423-6600 ALFE Heat Treating, Inc. Trade Debt $251,939 200 Wedcor Ave. Wabash, IN 46992 Attn: Claire Annette, Director (260) 747-9422 FLIR Systems, Inc. Trade Debt $47,339 Jerz Machine Tool Corp. Trade Debt $47,261 Pyrotek, Inc. Trade Debt $41,541 Hiler Industries Trade Debt $38,689 J&L Industrial Supply Trade Debt $37,111 Jackson, Shields & Yeiser Trade Debt $35,631 Scope Services, Inc. Trade Debt $32,498 C.P.C. Inc. Trade Debt $27,674 Wood Temporary Staffing Trade Debt $25,662 Metallurg Trade Debt $21,191 Allied Van Lines, Inc. Trade Debt $15,948 Cutting Tools & Service Trade Debt $15,184 QME Quality Mold & Engineering Trade Debt $11,440 Pioneer Foundry Trade Debt $11,340 Dimetek International Trade Debt $11,323 _____________________ Trade Debt $10,690 Capital Technologies, Inc. Trade Debt $10,109 McMaster-Carr Supply Company Trade Debt $10,056 (J) Lynchburg Foundry Company, Bankr. Case No. 04-67606 Creditor Nature of Claim Claim Amount -------- --------------- ------------ US Bank National Association Co-Guarantor on $175,000,000 as Indenture Trustee unsecured bond Attn: Corporate Trust Admin. indebtedness 180 East 5th St., Suite 200 St. Paul, MN 55101 David J. Joseph Company Trade Debt $2,698,856 Brokerage Service Division 300 Pike Street Cincinnati, OH 45202 Attn: Jim Becker, VP Trading jb@djj.com (513) 621-8770 Autocom Manufacturing Trade Debt $479,392 11621 Mount Elliott Ct., Ste. 108 Hamtramck, MI 48212 Miller and Company LLC Trade Debt $371,297 35239 Eagle Way Chicago, IL 60678 Attn: Stephanie Lowe 9700 W. Higgins Rd., Ste. 1000 Rosemont, IL 60018 (800) 727-9847 Alabama By-Products Corp. Trade Debt $220,585 900 Huntsville Ave. Tarrant, AL 35211 Attn: Ray Lewis (800) 321-4015 CC Metals & Alloys, Inc. Trade Debt $165,274 University Corporate Centre 300 Corporate Parkway, Suite 216N Amherst, NY 14226 Attn: Mitch Burk (800) 833-2200 Foseco, Inc. Trade Debt $129,868 20200 Sheldon Road Brookpark, OH 44142 Attn: Mike Bell (800) 321-3132 Elkem Metals, Inc. Trade Debt $107,632 22493 Network Place Chicago, IL 60673 Attn: Linda Talbot (800) 848-9795 Wheelabrator Abrasives, Inc. Trade Debt $104,478 #1 Abrasive Ave. Bedford, VA 23523 Attn: Brenda Walker (800) 358-7466 R.I. Lampus Co. Trade Debt $84,636 816 R.I.. Lampus Ave. Springdale, PA 15144 Attn: Shelly (724) 274-5035 Piedmont Foundry Supply, Inc. Trade Debt $84,235 3191 Rogers Land Cloverdale, VA 24077 Attn: Bob Brimingham (540) 992-3911 Commercial Steel Erection, Inc. Trade Debt $76,951 153 Ragland Road Madison Heights, VA 24572 Attn: Danny Moon (434) 845-7536 Omnisource Ft. Wayne Trade Debt $70,992 Waste Management Trade Debt $69,190 Globe Metallurgical, Inc. Trade Debt $62,799 Umetco, Inc. Trade Debt $54,680 Tuscola Saginaw Bay Railway Trade Debt $51,143 Wexford Sand Company Trade Debt $49,969 Colonial Energy, Inc. Trade Debt $48,209 HA International, LLC Trade Debt $47,475 Hill and Griffith Co. Trade Debt $46,652 (K) Intermet International, Inc., Bankr. Case No. 04-67607 Creditor Nature of Claim Claim Amount -------- --------------- ------------ None. (L) Northern Castings Corporation, Bankr. Case No. 04-67608 Creditor Nature of Claim Claim Amount -------- --------------- ------------ US Bank National Association Co-Guarantor on $175,000,000 as Indenture Trustee unsecured bond Attn: Corporate Trust Admin. indebtedness 180 East 5th St., Suite 200 St. Paul, MN 55101 Behr Iron & Steel Co. Trade Debt $508,134 1100 Seminary Street Rockford, IL 61104 Attn: April Potts (815) 987-2600 Alter Trading Corporation Trade Debt $153,187 689 Craig Road St. Louis, MO 63141 Attn: ___________________ info@altertrading.com (314) 872-2400 Minnesota Power Trade Debt $127,777 30 West Superior Street Duluth, MN 55802 Attn: ___________________ (218) 722-2625 Miller and Company LLC Trade Debt $119,068 35239 Eagle Way Chicago, IL 60678 Attn: John Adcock, President 9700 W. Higgins Rd., Ste. 1000 Rosemont, IL 60018 (847) 695-2400 Elkem Metals, Inc. Trade Debt $100,806 22493 Network Place Chicago, IL 60673 Attn: Bill Ferguson, VP Airport Office Park Bldg. 2 400 Rouser Road Moon Township, PA 15108 b.Ferguson@elkem.com (412) 299-7200 American Colloid Company Trade Debt $75,827 1500 West Shure Drive Arlington Heights, IL 60004 Attn: Christopher Kodosky (800) 426-5564 Cast Corporation Trade Debt $49,285 Leading Edge Enterprises Trade Debt $______ ________________________ __________ $______ Bob Scofield Trucking Trade Debt $22,650 EMSCO, Inc. Trade Debt $21,824 DISA Industries, Inc. Trade Debt $21,637 Baldwin Supply Co. Trade Debt $18,625 Tritec of Minnesota, Inc. Trade Debt $14,548 Vickers Engineering Trade Debt $14,101 Airgas - North Central Trade Debt $12,463 Carpenter Brothers, Inc. Trade Debt $11,582 Minnesota Industries Trade Debt $11,359 National Metal Abrasive, Inc. Trade Debt $10,060 ________________________ __________ $_____ (M) Columbus Foundry, L.P., Bankr. Case No. 04-67609 Creditor Nature of Claim Claim Amount -------- --------------- ------------ US Bank National Association Co-Guarantor on $175,000,000 as Indenture Trustee unsecured bond Attn: Corporate Trust Admin. indebtedness 180 East 5th St., Suite 200 St. Paul, MN 55101 David J. Joseph Company Trade Debt $4,190,955 Brokerage Service Division 300 Pike Street Cincinnati, OH 45202 Attn: Jim Becker, VP Trading jb@djj.com (513) 621-8770 Primetrade, Inc. Trade Debt $846,819 11301 Carmel Commons Blvd. Charlotte, NC 28226 Attn: Ann Jorgensen annjorgensen@primetradeusa.com (704) 541-3942 American Colloid Company Trade Debt $319,735 1500 West Shure Drive Arlington Heights, IL 60004 Attn: Christopher Kodosky (800) 426-5564 Metokote Corporation Trade Debt $201,484 1340 Neubrecht Road Lima, OH 45801 Attn: ___________________ 100 S. L. White Blvd. Lagrange, GA 30241 (706) 885-1060 Muscogee County Tax Department Trade Debt $180,783 100 10th Street Columbus, GA 31901 Attn: Lula Huff (706) 653-4211 Interstate Electrical Supply Trade Debt $178,161 2300 2nd Ave. Columbus, GA 31901 Attn: Debby Hatcher dhatcher@interstate-electrical.com (706) 324-1000 Perfect Patterns, Inc. Trade Debt $160,390 5730 Miller Court Columbus, GA 31909 Attn: Mike Delmar, Owner (706) 561-4949 UMETCO, Inc. Trade Debt $158,229 8651 East Seven Mile Road Detroit, MI 48234 Attn: Kris Bolle, Controller kris@u-metco.com (313) 366-1010 Larpen Metallurgical Service Trade Debt $153,713 1111 Western Drive Hartford, WI 53027 Attn: Darlene Longanecker darlene@larpen.com (262) 673-9709 Elkem Metals, Inc. Trade Debt $128,583 22493 Network Place Chicago, IL 60673 Attn: Bill Ferguson, VP Airport Office Park Bldg. 2 400 Rouser Road Moon Township, PA 15108 b.Ferguson@elkem.com (412) 299-7200 Hickman, Williams & Company Trade Debt $127,570 250 E. 5th Street Cincinnati, OH 45202 Attn: Pam Evans, Controller pevans@hickwill.com (513) 621-1946 Wheelabrator Abrasives, Inc. Trade Debt $115,941 1691 Phoenix Blvd. Atlanta, GA 30349 Attn: Christy Travis ctravin.wbr@wheelabr.com (770) 991-7404 Motion Industries, Inc. Trade Debt $98,134 506 Manchester Expressway Columbus, GA 31904 Attn: Nancy Watson nancy.Watson@motion-ind.com (706) 324-0313 Wheelabrator Abrasives, Inc. Trade Debt $92,049 1691 Phoenix Blvd. Atlanta, GA 30349 Attn: Christy Travis ctravin.wbr@wheelabr.com (770) 991-7404 Industrial 1 Supply Co. Trade Debt $84,897 800 15th Street Columbus, GA 31901 - and - W.T. Harvey Lumber (Parent Company) 800 15th Street Columbus, GA 31901 Attn: ___________________ (706) 322-8204 Norfolk Southern Corporation Trade Debt $80,984 Three Commercial Place, Suite 2000 Norfolk, VA 23510 Globe Metallurgical Inc. Trade Debt $79,451 Washington City Road 32 Beverly, OH 45715 Smith Gray Electric Co. Trade Debt $76,009 1508 Cusseta Rd. Columbus, GA 31901 Gentry machine Works, Inc. Trade Debt $67,307 Southern States Toyotalift Trade Debt $64,822 (N) Tool Products, Inc., Bankr. Case No. 04-67610 Creditor Nature of Claim Claim Amount -------- --------------- ------------ US Bank National Association Co-Guarantor on $175,000,000 as Indenture Trustee unsecured bond Attn: Corporate Trust Admin. indebtedness 180 East 5th St., Suite 200 St. Paul, MN 55101 Spectro Allots Corp. Trade Debt $1,440,877 13220 Doyle Path Rosemount, MN 55068 Attn: Mitch Kvasnick (651) 437-2815 Penn Tool Co. Trade Debt $840,496 1776 Springfield Ave. Maplewood, NJ 07040 G.W. Smith and Sons, Inc. Trade Debt $234,674 1700 Spaulding Road Dayton, OH 45432 Midvale Manufacturing Company Trade Debt $159,338 6310 Main Street NE Minneapolis, MN 55421 Kurt Manufacturing Company Trade Debt $143,762 5280 Main Street NE Minneapolis, MN 55421 Spherion Trade Debt $120,739 11 S. LaSalle Street Chicago, IL 60603 Attn: ___________________ (213) 917-1515 Arrow Cryogenics Trade Debt $110,215 1671 93rd Lane Northeast Blaine, MN 55449 Attn: Linda Ackley linda@arrowcryogenics.com (763) 780-3367 Sub-Mex Trade Debt $99,367 9129 E. U.S. Highway 36 Avon, IN 45123 Carlton Bates Company Trade Debt $93,776 3600 West 69th Street Little Rock, AR 72209 Noranda Aluminum Trade Debt $91,888 181 Bay Street, Suite 200 BCE Place Toronto, Ontario M5J 2T3 CANADA Attn: Lou McDonald 291 St. Jude Industr. New Madrid, MO 63869 (573) 643-2361 Motion Industries, Inc. Trade Debt $90,780 1605 Alton Road Birmingham, AL 35210 Verizon Wireless Trade Debt $88,192 P.O. Box 660108 Dallas, TX 75266 Spray Rite, Inc. Trade Debt $81,546 5401 South Zero Street Ft. Smith, AR 72917 Attn: Judy Evert (479) 648-3351 Lafrance Manufacturing Co. Trade Debt $77,744 P.O. Box 1008 Maryland Heights, MO 63043 Metalmatic Trade Debt $72,569 Xcel Energy Trade Debt $67,733 Lab Safety Supply Inc. Trade Debt $64,085 Chem Trend Incorporated Trade Debt $63,922 Centerpoint Energy Marketing Trade Debt $54,012 Spectrum Industries Trade Debt $51,161 Process & Power Inc. Trade Debt $49,960 (O) Wagner Havana, Inc., Bankr. Case No. 04-67611 Creditor Nature of Claim Claim Amount -------- --------------- ------------ US Bank National Association Co-Guarantor on $175,000,000 as Indenture Trustee unsecured bond Attn: Corporate Trust Admin. indebtedness 180 East 5th St., Suite 200 St. Paul, MN 55101 Traxle Mfg. Trade Debt $10,400 Central Warehouse Company Trade Debt $2,100 Safety-Kleen Corp. Trade Debt $1,889 Burdick Plumbing Trade Debt $1,373 Watts Copy Systems, Inc. Trade Debt $405 Automatic Data Processing Trade Debt $211 Springfield Clinic Trade Debt $59 Ill-Mo Products Co. Trade Debt $13 (P) Diversified Diemakers, Inc., Bankr. Case No. 04-67612 Creditor Nature of Claim Claim Amount -------- --------------- ------------ US Bank National Association Co-Guarantor on $175,000,000 as Indenture Trustee unsecured bond Attn: Corporate Trust Admin. indebtedness 180 East 5th St., Suite 200 St. Paul, MN 55101 Spectro Alloys Corp. Trade Debt $660,938 13220 Doyle Path Rosemount, MN 55068 Attn: Don Wastner (651) 437-2815 Norsk Hydro Canada, Inc. Trade Debt $633,970 P.O. Box 2354 Carol Stream, IL 60132 Attn: Jim Keating Suite 600 Scotia Centre 235 Water Street St. John's Newfoundland A1C 1B6 CANADA (709) 726-9091 AMACOR Trade Debt $431,030 1820 East 32nd Street Anderson, IN 46013 Attn: Chuck Moisan (765) 643-5873 U.S. Magnesium, LLC Trade Debt $351,294 238 North 2200 West Salt Lake City, UT 84116 Attn: Steve Goddard (801) 532-2043 Dana Corporation Trade Debt $322,836 4500 Dorr Street Toledo, OH 43615 Attn: Robert Richter (419) 535-4500 Eastern Alloys Trade Debt $234,226 Henry Hennings Drive Maybrook, NY 12543 Attn: Connie Grossman cgrossman@eazall.com (845) 427-2151 Davis Tool & Die Trade Debt $199,295 888 Bolger Court Fenton, MO 63026 Attn: Bill Davis (636) 343-0828 Cometals Trade Debt $182,462 2050 Center Avenue, Suite 250 Fort Lee, NJ 07024 Attn: ___________________ (201) 302-0888 Dead Sea Magnesium Ltd. Trade Debt $137,063 3800 Hamlin Road MC - 4 - A 05 Auburn Hills, MI 48326 Attn: Nick Fanetti (819) 386-4456 Perry Machine and Die Trade Debt $118,607 27124 Highway J Perry, MO 63462 Attn: Paul Betty (573) 565-2231 Midland Industries, Inc. Trade Debt $99,095 1424 N. Halstead Street Chicago, IL 60622 Attn: ___________________ midland@zincbig.com (312) 664-7300 Unisource Worldwide Inc. Trade Debt $77,230 6600 Governors Lane Parkway Norcross, GA 30071 - and - Unisource Worldwide Inc. 1801 Hollister Whitney Quincy, IL 62305 Attn: ___________________ (217) 223-4300 Toyota Tsusho America Trade Debt $63,687 Allied Metal Company Trade Debt $51,947 Central Welding Supplies Trade Debt $49,213 Industrial Finishings Trade Debt $47,709 Idraprince, Inc., Trade Debt $46,539 KELM Acubar Company Trade Debt $45,948 Key Products, Inc. Trade Debt $44,588 HTE Technologies Trade Debt $38,489 (Q) Sudbury, Inc., Bankr. Case No. 04-67613 Creditor Nature of Claim Claim Amount -------- --------------- ------------ US Bank National Association Co-Guarantor on $175,000,000 as Indenture Trustee unsecured bond Attn: Corporate Trust Admin. indebtedness 180 East 5th St., Suite 200 St. Paul, MN 55101 (R) Wagner Castings Company, Bankr. Case No. 04-67614 Creditor Nature of Claim Claim Amount -------- --------------- ------------ US Bank National Association Co-Guarantor on $175,000,000 as Indenture Trustee unsecured bond Attn: Corporate Trust Admin. indebtedness 180 East 5th St., Suite 200 St. Paul, MN 55101 David J. Joseph Company Trade Debt $1,175,264 Brokerage Service Division 300 Pike Street Cincinnati, OH 45202 Attn: Jim Becker, VP Trading jb@djj.com (513) 621-8770 Frisby PMC Trade Debt $392,683 37246 Eagle Way Chicago, IL 60678 Attn: Jim Silvers jsilvers@frisby-pmc.com John Tuzzolino jtuzzolino@frisby-pmc.com (847) 439-3000 Illinois Power Company Trade Debt $276,306 500 S. 27th St. Decatur, IL 62521 Primetrade Trade Debt $233,387 11301 Carmel Commons Blvd. Charlotte, NC 28226 Attn: Markus Sabert (704) 541-3942 Climate Control Demirco LLC/CCI Trade Debt $158,547 2120 N. 22nd Street Decatur, IL 62526 Attn: Steve Hubner, Controller (217) 422-0057 Mennie's Machine Co. Trade Debt $140,075 Rural Route One Granville, IL 61326 Attn: Hubert Mennie Route 71 & Mennie Drive Mark, IL 61340 hi@mennies.com (815) 339-2226 Wabel Tool Co. Trade Debt $133,075 1020 E. Eldorado St. Decatur, IL 62521 Attn: Bill Friend, Controller bfirend@wabeltool.com (217) 429-3656 CPM Trade Debt $109,165 ___________________ ___________________ King-Lar Co. Trade Debt $103,558 2020 E. Olive St. Decatur, IL 62526 Attn: ___________________ (217) 428-8518 Elkem Metals, Inc. Trade Debt $101,898 Airport Office Park Bldg. 2 400 Rouser Road Moon Township, PA 15108 Attn: Bill Ferguson, VP b.Ferguson@elkem.com (412) 299-7200 Busche Enterprise Division, Inc. Trade Debt $91,602 2125 Reliable Parkway Chicago, IL 60686 Attn: Lawrence Hiller, Chairman 1563 E. State Road 8 Albion, IN 46701 hiller@rmisp.com (312) 961-4547 Bearing Distributors, Inc. Trade Debt $73,541 Bentonite Performance Minerals Trade Debt $62,012 DISA Industries, Inc. Trade Debt $58,806 Christy-Foltz, Inc. Trade Debt $53,402 Bodine Electric of Decatur Trade Debt $50,971 Metro Metal Products, Inc. Trade Debt $50,896 Springfield Electric Trade Debt $49,827 Onyx Waste Services Midwest Trade Debt $48,550 HA International, LLC Trade Debt $40,536 INTERMET Corporation and 17 debtor-affiliates filed for chapter 11 protection on Sept. 29, 2004 (Bankr. E.D. Mich. Case Nos. 04-67597 through 04-67614). INTERMET -- see http://www.intermet.com/-- designs and manufactures machine precision iron and aluminum castings for the automotive and industrial markets. Salvatore Barbatano, Esq., at Foley & Lardner LLP, represents the Debtors in their restructuring. As of June 30, 2004, the company reported $735,821,000 in assets and $592,816,000 in liabilities. INTERSTATE BAKERIES: Honors Prepetition Employee Obligations ------------------------------------------------------------ Interstate Bakeries Corporation and its debtor-affiliates employ around 32,600 employees, approximately 81% of whom are covered by one of approximately 491 union contracts or collective bargaining agreements. Of the employees, around 10% are salaried, 60% are hourly, and 30% are commissioned. The Debtors also utilize the services of independent contractors pursuant to formal and informal arrangements. The continued and uninterrupted service of the Employees is essential to the Debtors' continuing operations and a successful Chapter 11 process. Accordingly, to minimize the personal hardship the Employees will suffer if prepetition employee-related obligations are not paid when due and to maintain the Employees' morale during this critical time, the Debtors sought and obtained the Court's authority to: (a) pay Employee claims for prepetition wages, salaries, bonuses, and other accrued compensation; (b) honor sick leave, vacation time, holiday vacation time, and severance policies; (c) reimburse all prepetition Employee business expenses; (d) make prepetition contributions and pay benefits under certain Employee benefit plans; and (e) honor workers' compensation obligations. Judge Venters also permitted the Debtors to pay all local, state and federal withholding and payroll-related taxes relating to prepetition periods, including but not limited to, all withholding taxes, Social Security taxes, and Medicare taxes, unemployment taxes as well as all other withholdings like union dues and garnishment contributions, if any. The Court further directs the applicable banks and other financial institutions to receive, process, honor and pay all prepetition checks drawn on the Debtors' payroll accounts to make the payments. Compensation Obligations (1) Salaries and Wages The Debtors pay salaried, hourly, and commissioned employees through payroll systems maintained internally. The average aggregate monthly payroll for the Debtors' salaried, hourly, and commissioned employees is $110.6 million. All Employees are paid by check. The Debtors estimate that $12 million of payroll checks may not have cleared the Debtors' accounts prior to the Petition Date. In addition, the Debtors estimate that approximately $26 million of net salary and wages will have accrued but have not been paid prior to the Petition Date. On average, this equates to approximately $1,166 per Employee. The Debtors believe that none of their Employees are owed in excess of $4,925 for prepetition wages or salary and, thus, each Employee would have a priority claim with respect to his or her entire prepetition wages or salary pursuant to Section 507(a)(3) of the Bankruptcy Code for amounts earned within the 90 days prior to the Petition Date. (2) Directors' Compensation The Directors who are not salaried employees of, or consultants to, the Debtors receive an annual retainer of $30,000 plus $2,000 for each board meeting attended in person and $1,000 for each telephonic board meeting. In addition, Directors who are members of committees of the Board of Directors and who are not salaried employees of, or consultants to, the Debtors are entitled to receive compensation for each meeting attended. The Debtors estimate that $48,000 of compensation for seven of the Debtors' Directors accrued prepetition but remains unpaid. (3) Bonuses The Board of Directors approved a fiscal year 2005 incentive bonus plan for certain employees. As of the Petition Date, 2,891 Employees participate in the Bonus Pool. The Bonus Plan provides that any bonuses will be payable after fiscal year 2005 -- which ends on May 28, 2005. Moreover, in fiscal 2004, a number of key executives and employees did not qualify for a bonus under fiscal 2004's incentive plan. Because of this and the Board of Directors' desire to reward outstanding individual performers, the Board of Directors authorized the CEO to distribute discretionary bonuses in an aggregate amount of $500,000. The CEO, however, was excluded from eligibility. Ronald B. Hutchison joined the Debtors as Executive Vice President and Chief Financial Officer on July 13, 2004. Pursuant to his employment agreement, Mr. Hutchison participates in the Bonus Plan. Nonetheless, because of his recent retention, he is guaranteed to receive a minimum bonus of $100,000 for fiscal year 2005. Other Compensation (1) Vacation, Sick Leaves and Holidays For the Debtors' Employees, vacation "credits" accrue at a rate based on the Employee's length of service. The Debtors estimate that the total annual cost for Employees' vacation time is $77 million, and the estimated liability for Employees' unused earned vacation time as of the Petition Date is $52 million. (2) Severance Prior to the Petition Date, there were the Interstate Brands Corporation Severance Benefit Plan and the severance provisions of the Collective Bargaining Agreements. The Severance Plans provide for the payment of severance pay and benefits to terminated Employees who meet specified criteria, like full-time employment and execution of a release. The amount of severance pay and duration of continued health and welfare benefits are based on an Employee's years of service to the Debtors. On September 19, 2004, the Debtors closed their bakery located in Monroe, Louisiana, and in the ordinary course of business, the Debtors terminated certain individuals. In addition, the Debtors anticipate closing their Buffalo, New York bakery in October 2004. As of the Petition Date, approximately 53 terminated Employees remain eligible to receive pension and medical benefits pursuant to the Severance Plans, and five of the Terminated Employees remain eligible for severance pay. For each of these five Louisiana bakery workers -- all of which have been Employees of the Debtors for more than 10 years -- severance pay exceeds the $4,925 limit, and in the aggregate is approximately $60,000. (3) Miscellaneous Payroll Deductions The Debtors withhold certain amounts from their Employees' paychecks to make payments on behalf of Employees for, among other things, union dues, court orders, charitable donations, U.S. savings bonds, uniform rentals, and miscellaneous health-related items. The Debtors subsequently forward these deductions to appropriate third party recipients. The Debtors believe that, as of the Petition Date, the amount of the Miscellaneous Payroll Deductions deducted from their Employees' paychecks but not yet remitted to the appropriate third-party recipients is insubstantial. (4) Reimbursable Business Expenses Pursuant to their normal business practices, the Debtors routinely reimburse Employees for certain expenses incurred within the scope of their employment. The business expenses include business travel expenses and other similar items reimbursable under the Debtors' existing policies. The Debtors estimate that approximately $800,000 in Expenses has been incurred by certain Employees and has not yet been reimbursed to these Employees. Similarly, the Debtors reimburse certain Employees' relocation expenses in order to incent desirable candidates to accept or change positions with the Debtors. The Debtors currently use SIRVA Relocation to administer the Debtors' relocation program. SIRVA processes the Employees' reimbursement requests, pays the requests, and seeks reimbursement from the Debtors. Based on a September 17, 2004 invoice, the Debtors owe approximately $26,000 for relocation expenses incurred for 17 Employees. In addition, upon the initiation of an Employee into the relocation program, the Debtors pay SIRVA a fixed fee of 14.5% of the estimated sale price of the Employee's house to cover closing and other costs. Because this fee is paid upon an Employee's initiation into the relocation program, SIRVA is not owed money for any home sales that have already occurred. The Debtors also routinely reimburse Directors for travel and other reasonable expenses incurred while fulfilling their duties to attend meetings of the Board of Directors. As of the Petition Date, certain Directors have not been reimbursed for expenses. Employee Benefit Plans and Programs (1) Medical and Insurance Benefits In the ordinary course of their business, the Debtors provide medical, dental and prescription drug insurance, long-and short-term disability insurance, life insurance, accidental death and dismemberment insurance, flexible spending account plans and other related benefits to their Employees. The benefits are provided through both company-sponsored and multi-employer, Taft-Hartley plans. The company-sponsored plans provide coverage for all non-union Employees and approximately 50% of union Employees. The Taft-Hartley plans cover the remaining union Employees. As of the Petition Date, the Debtors estimate that the outstanding unpaid amount for the Medical and Insurance Benefits is approximately $35 million, of which $20 million constitute self-insured reserves and $15 million constitute accrued amounts payable to the multi-employer plans. (2) Retirement Savings Plan The Debtors maintain nine defined contribution retirement plans qualified under Section 401(k) of the Internal Revenue Code for both certain non-union and union Employees. In fiscal 2004, the Debtors contributed $17.8 million to the Retirement Savings Plans. As of the Petition Date, the Debtors' estimated liability for the Retirement Savings Plans is approximately $10 million, and the Debtors are in possession of approximately $650,000 of employee contributions. (3) Pension Plans The Debtors provide their Employees with defined benefit pensions via the 46 multi-employer, Taft-Hartley plans and the IBC Defined Benefit Plan. Pursuant to the Pension Plans, a benefit is payable to the Employee or other designated beneficiary upon the Employee's retirement from the company, total and permanent disability, or death. The Debtors' aggregate average monthly cost for the Multi- employer Plans is approximately $11.3 million. As of the most recent actuarial analysis, on March 31, 2004, the IBC Defined Benefit Plan had assets with market values of approximately $54 million. The IBC Defined Benefit Plan had liabilities on an actuarial basis of $64 million. On July 15, 2004, the Debtors made a quarterly contribution of approximately $550,000. The next quarterly contribution is scheduled to be made on October 15, 2004. The Debtors also provide the IBC Supplemental Executive Retirement Plan for certain of their current and retired executives. To assist the Debtors in funding the IBC SERP, the Debtors established an irrevocable Rabbi Trust. The Rabbi Trust has assets of approximately $5.6 million. As of the end of fiscal year 2004, the Debtors' estimated liability for the IBC SERP is approximately $24.6 million. Furthermore, the Debtors provide the Interstate Brands Corporation 1993 Non-Qualified Deferred Compensation Plan for certain of their current and retired executives. Thirteen current employees and six retirees have funds in the plan of approximately $3.2 million. The Debtors have miscellaneous individual contracts with certain Employees and retirees that provide for a pension annuity. As of the Petition Date, approximately 73 retirees receive approximately $49,000 per month of pension annuities. In addition, 13 Employees have executed similar Individual Retirement Agreements, and nine of these Employees are fully vested in the rights under those Agreements. (4) Retiree Medical Benefits The Debtors provide retiree medical benefits under a company- sponsored plan to approximately 1,700 former employees and dependents. The Debtors provide different levels of medical, dental, life insurance and prescription drug programs to retired union and non-union employees. The Retiree Medical Benefits liability is self-insured. Claims are administered by several third-party administrators, predominately CIGNA, and paid by the Debtors. During the 2004 fiscal year, the Retiree Medical Benefits annual expense was approximately $14.7 million. As of the Petition Date, the Debtors' self-insured reserves for both Employee and retiree medical benefits are approximately $20 million. Based on current actuarial analyses, the Debtors estimate their cumulative long-term liability for fully performing their existing Retiree Medical Benefits obligations to all eligible retired Employees, active Employees with accrued rights to the Retiree Medical Benefits, and their dependents is approximately $106 million as of the end of fiscal year 2004. (5) Employee Stock Plans Prior to the Petition Date, the Debtors maintained the 1991 Interstate Bakeries Corporation Employee Stock Purchase Plan. Pursuant to the Stock Plan, Employees may elect to have funds deducted from their compensation on a regular basis in order to purchase Interstate common stock at the then existing market price. As of the Petition Date, $150,000 in withheld funds is being held for approximately 5,000 Employees. These funds are Employee wages that the Debtors have yet to pay to the Employees. (6) Leased Car Program The Debtors provide cars to approximately 764 executives, key Employees who as a regular part of their responsibilities must travel between facilities and Employees in sales positions. Pursuant to the Leased Car Program, the Debtors make monthly payments on the cars for a period of two to three years, and at the end of the payment period, the Debtors have certain end of lease term obligations. The Debtors' estimated monthly cost is approximately $310,000. The Debtors estimate that their unpaid liability under the Leased Car Program is approximately $310,000 as of the Petition Date. (7) Miscellaneous Executive Benefits The Debtors provide miscellaneous benefits to their executives at the vice president level and above, including financial planning and life insurance. These benefits vary on a sliding scale from $2,000 to $7,500 per year depending on the executive's level in the organization. The Debtors' estimated annual cost for providing the Executive Benefits Programs is no more than $110,000. (8) Scholarship The Debtors regularly: (a) make charitable donations to organizations like the Boys and Girls Club, the National Kidney Foundation, and the United Way, (b) award scholarships to the children of the Debtors' Employees, (c) donate to the general scholarship funds of colleges, and (d) match Employee contributions to post-secondary institutions. In fiscal 2004, the costs associated with these programs were approximately $150,000. Other Benefits The Debtors have military duty, jury duty and medical reason leave policies. The Debtors also offer their Employees various service awards and sponsor a variety of Employee social functions. The Debtors believe that the amounts owing on the Petition Date under all of the Other Benefits Programs are negligible. Workers' Compensation Obligations The Debtors are required to maintain workers' compensation policies and programs and to provide Employees with workers' compensation coverage for claims arising from or related to their employment with the Debtors. Accordingly, the Debtors maintain workers' compensation programs in all states in which they operate pursuant to the applicable requirements of local law. The Debtors expect that cash payments related to workers' compensation claims for the next 12 months will be approximately $62 million. Administration of Employee Benefits As is customary in the case of most large companies, the Debtors in the ordinary course of their business have contractual relationships with third parties to outsource the administration of the Employee benefit plans and programs, including their flexible spending accounts, medical, dental, short term disability and 401(k) programs. The Debtors also employ actuarial services in connection with the administration of their pension and health plans and employ claims and risk management services with respect to their workers' compensation plans. The Debtors estimate that their average monthly cost with respect to the processing or administrative costs incident to maintaining or paying third parties to maintain and provide record keeping relating to the various Employee benefit programs is $1.3 million. 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) KAISER: PBGC to Assume Responsibility for Steelworker Pension Plan ------------------------------------------------------------------ Kaiser Aluminum Corporation (OTCBB:KLUCQ) has been notified by the Pension Benefit Guaranty Corporation that the PBGC will assume responsibility for the Kaiser Aluminum Pension Plan retroactive to April 30, 2004. The plan covers active and retired employees at certain of Kaiser's facilities who are represented by the United Steelworkers of America. The PBGC's action was not unexpected. In February 2004, Kaiser had obtained a ruling from the U.S. Bankruptcy Court for the District of Delaware that the company met the legal requirements for a distress termination of the KAP and several other plans. Subsequently, Kaiser applied for distress termination of the plan effective April 30, 2004. The PBGC assumed responsibility for Kaiser's salaried employee pension plan in December 2003 and the inactive pension plan in June 2004. The company's Form 10-Q for the second quarter of 2004 provides additional information on pension-related matters. 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. KERASOTES SHOWPLACE: S&P Puts B Rating on Planned $300M Facility ---------------------------------------------------------------- Standard & Poor's Ratings Services assigned its 'B' corporate credit rating to Kerasotes Showplace Theatres Holdings LLC. At the same time, Standard & Poor's assigned its 'B' rating and a recovery rating of '4' to Kerasotes' operating subsidiary Kerasotes Showplace Theatres LLC's proposed $300 million senior secured bank credit facility, indicating expectations of a marginal recovery of principal (25%-50%) in a default scenario. The outlook is stable. Pro forma as of June 30, 2004, the Chicago, Illinois-based movie exhibitor will have $200 million in debt. Proceeds from the $200 million bank term loan and $27 million in common equity from Providence Equity Partners will be used to repay about $109 million in existing bank debt and to fund a $100 million dividend. The $100 million revolving credit portion of the facility will be undrawn at closing and be used, together with operating cash flow, to fund Kerasotes' theater expansion and renovation plans. "The ratings on Kerasotes reflect the risks related to the company's aggressive expansion plan, its high pro forma leverage following the large shareholder dividend, its somewhat older theater portfolio, its significant cash flow concentrations, and the mature and highly competitive nature of the industry," said Standard & Poor's credit analyst Steve Wilkinson. These risks are only partially mitigated by the company's strong regional market position, its leading EBITDA margins, and the operating flexibility provided by its high degree of theater ownership (about 60% of its venues), he added. Kerasotes is the eighth-largest movie exhibitor in the U.S. by screen count, with 76 theaters and 564 screens in six Midwestern states. Many of its theaters are located in small-to-midsize markets but also in suburban areas of Chicago, Minneapolis, and Indianapolis. The company has good competitive positions in most of its markets, and its full access to films in 95% of its theaters compares it favorably with the other leading theater chains. However, Kerasotes also has significant cash flow concentrations, with 50% of its theater-level cash flow generated by its top 10 theaters (25% of total screens), and more than 80% of its screens and cash flow split between Illinois and Indiana. In addition, about half of its theaters are over 10 years old and lack popular features such as stadium seating and a high number of screens to allow for a wide selection of movies and showtimes. These venues may be underutilized and deteriorate if faced with competition. Accordingly, Kerasotes is implementing an aggressive new theater expansion and upgrade program over the next five years to increase total screens by about 50%. This program has the potential to improve the company's business profile by modernizing its circuit and reducing its reliance on its top 10 theaters. In the near term, it will entail execution and financial risks, as the size and pace of the expansion is much higher than past levels. Planned spending exceeds the current net value of the company's fixed assets and will result in significant deficits in discretionary cash flow. LOEHMANN'S CAPITAL: Moody's Junks $35M Sr. Secured Class B Notes ---------------------------------------------------------------- Moody's Investors Service confirmed the B2 senior implied rating of Loehmann's Capital Corp. following changes in the financing structure of the pending acquisition of Loehmann's Holdings, Inc. by Crescent Capital. A B3 rating is assigned to Loehmann's Capital Corp.'s $75 million senior secured Class A fixed and floating rate notes maturing October 2011, and a Caa1 rating is assigned to the $35 million senior secured Class B notes. The rating outlook is stable. The Caa1 rating of the previous $110 million senior secured notes offering is withdrawn. The ratings take into account the announcement that Loehmann's Holdings, Inc., the parent of Loehmann's Capital Corp., will be acquired by affiliates of Crescent Capital, a private equity firm owned by First Islamic Investment Bank in an approximately $189 million transaction, which will be financed with the $110 million in senior notes to be issued by Capital, approximately $3 million in management rollover equity, and $76 million in cash equity from Crescent. The transaction value represents a multiple of roughly 6.3 times adjusted LTM EBITDA of roughly $30 million. Pro forma senior leverage, assuming $5 million in letters of credit against the $35 million unrated asset-backed revolving credit facility and the $75 million Class A notes, measured on a debt/adjusted LTM EBITDA at closing will be roughly 2.67x. The ratings consider: (i) Loehmann's Capital relatively high total leverage resulting from this transaction; (ii) the fiercely, and increasingly, competitive environment in the retail apparel segment; (iii) potential for reductions in supply as the company is completely reliant on overstocks from manufacturers at a time when supply-chain discipline and improvements are increasing; and (iv) risks inherent in its growth strategy. This expansion risk is magnified by the previous failure of existing management in carrying out a similarly aggressive strategy in the late-1990's which, coupled with a refocus of the product line, led to the 1999 Chapter 11 bankruptcy filing. While this expansion plan will not be accompanied by any change in product line, the opening of 15-25 full-line stores and 15-25 shoe stores over the next five years, especially as the retail apparel environment is more competitive than the late-1990's, significantly increases the risk profile of this credit. The ratings also consider: (i) Loehmann's Capital leading position in the off-price designer apparel retailing segment, (ii) its solid franchise and loyal customer base, (iii) seasoned management team, and (iv) the approximately 40% equity contribution emanating from Crescent. The stable outlook reflects the fact that the ratings provide some cushion for missteps as Loehmann's pursues its growth strategy. Ratings could be upgraded if Loehmann's growth strategy is handled successfully, which would be evidenced by incremental improvement in EBITDA and free cash flow. Downward pressure would be created by the failure to generate positive returns from the new store growth program, depression in operating margins or any increases in interest expense. The B3 rating of the senior secured class A notes recognizes its minimal asset coverage balanced by its favorable position in the capital structure, with the $79 million in cash equity providing more than 1-1 balance, and the $35 million senior secured class B notes, which are subordinate to the class A notes in terms of payment, providing additional cushion. Assuming a fully drawn revolver, an enterprise value multiple of 3.67 times LTM adjusted EBITDA of approximately $30 million is required for full repayment. Security for the notes consists of a first lien on all assets of Loehmann's Capital Corp., and a first lien on all assets of Loehmann's Operating Corp. other than accounts receivable and inventory (which are subject to a first lien in favor of the revolving credit banks), as well as guarantees of the lease and its payments from Loehmann's Holdings, Inc., Loehmann's Financial Corp., and Loehmann's Real Estate, Inc. The Caa1 rating of the senior secured class B notes recognizes its unfavorable position in the capital structure and payment subordination in favor of the class A notes, scant asset coverage and the significant enterprise value multiple of 4.84x that is required for full repayment. The Caa2 senior unsecured issuer rating is notched down from the senior notes rating due to the lack of hard collateral coverage and the resulting incrementally higher multiple that would be necessary to extinguish senior unsecured claims. The SGL-3 speculative grade liquidity rating reflects the expectation that Loehmann's Operating Co., will maintain adequate liquidity to service the lease payments to Capital, and that its internally generated cash flow and cash on hand will be sufficient to fund its working capital, capital expenditures and debt amortization requirements for the next 12-18 months. Loehmann's Operating new $35 million revolving credit facility is expected to be used only to issue letters of credit (average of approximately $5 million) during the next 12 months. Availability under the credit agreement is subject to a borrowing base and the company is expected to be in compliance with its one financial covenant, a limitation on capital expenditures. There are no additional sources of liquidity for the company to tap, as upon completion of the transaction all assets will be fully encumbered. Loehmann's Capital Corp., headquartered in The Bronx, New York, is a leading off-price retailer of apparel and accessories, and operates 48 stores throughout the U.S. LOGAN PARK CARE: Voluntary Chapter 11 Case Summary -------------------------------------------------- Lead Debtor: Logan Park Care Center, Inc. P.O. Box 1350 Logan, West Virginia 25601 Bankruptcy Case No.: 04-22601 Debtor affiliates filing separate chapter 11 petitions: Entity Case No. ------ -------- Mingo Health Care Center, Inc. 04-22602 Park Crest Holdings, Inc. 04-22603 JAWS American Holdings, Ltd. 04-22604 JAWS American Southern Companies 04-22605 Type of Business: The Debtor operates a nursing facility. Chapter 11 Petition Date: September 30, 2004 Court: Southern District of West Virginia (Charleston) Judge: Ronald G. Pearson Debtor's Counsel: W.B. Sorrells, Esq. W.B. Sorrells, LC 202 Kanawha Boulevard, West P.O. Box 6576 Charleston, WV 25362 Tel: 304-343-3400 Fax: 304-343-3474 Estimated Assets: $1 Million to $10 Million Estimated Debts: $1 Million to $10 Million The Debtors did not file a list of its 20-Largest Creditors. MASTR SEASONED: Fitch Affirms Classes 15-B's Low-B Ratings ---------------------------------------------------------- MASTR Seasoned Securitization Trust 2004-1, is rated: -- $710.3 million classes 1-A-1, 2-A-1 through 2-A-6, 3-A- 1, 4-A-1, 4-A-2, AX, PO, A-LR, and A-UR ($709,905,934, senior certificates) are rated 'AAA'; -- $208,000 class 15-B-3 'BBB'; -- $139,000 privately offered class 15-B-4 'BB'; -- $69,000 privately offered class 15-B-5 'B'. The transaction consists of four groups: group 1 is standalone and groups 2, 3, and 4 are cross collateralized. The 'AAA' ratings on the group 1 senior certificates reflect the 1.00% subordination provided by: * the 0.40% class 15-B-1 (not rated by Fitch); * the 0.20% class 15-B-2 (not rated by Fitch); * the 0.15% class 15-B-3; * the 0.10% privately offered class 15-B-4; * the 0.05% privately offered class 15-B-5; and * the 0.10% privately offered class 15-B-6 (not rated by Fitch) certificates. The 'AAA' ratings on the group 2 senior certificates reflect the 2.50% subordination provided by subordinate class 30-B and C-B certificates. The 'AAA' ratings on the group 3 and 4 senior certificates reflect the 2.75% subordination provided by subordinate class HY-B and C-B certificates. Fitch Ratings 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 master servicing capabilities of Wells Fargo Bank Minnesota, N.A., which is rated 'RMS1' by Fitch Ratings. The underlying collateral for all groups consists of seasoned fixed-rate or hybrid ARMs mortgage loans. Group 1 in aggregate contains 352 conventional, fully amortizing 15-year fixed-rate mortgage loans secured by first liens on one- to four-family residential properties with an aggregate scheduled principal balance of $138,691,735. The average unpaid principal balance of the aggregate pool as of the cut-off date (September 1, 2004) is $394,011. The weighted average original loan-to-value ratio -- LTV -- is 61.00%. The weighted average credit score of the borrowers is 735. Approximately 11.34% of the pool was originated under a reduced (non Full/Alternative) documentation program. There are no investor properties. The weighted average mortgage interest rate is 6.518% and the weighted average remaining term to maturity is 179 months. The states that represent the largest portion of the aggregate mortgage loans are: -- California (17.70%); -- New York (16.35%); -- Texas (13.26%); and -- Florida (12.51%). All other states represent less than 5% of the pool balance as of the cut-off date. Groups 2, 3, and 4 in aggregate contain 1,372 conventional, fully amortizing 30-year fixed-rate and 3/1, 5/1, and 7/1 hybrid adjustable-rate mortgage loans secured by first liens on one- to four-family residential properties with an aggregate scheduled principal balance of $587,593,856. The average unpaid principal balance of the aggregate pool as of the cut-off date (September 1, 2004) is $428,275. The weighted average original loan-to-value ratio is 70.39%. The weighted average credit score of the borrowers is 717. Approximately 20.28% of the pool was originated under a reduced (non Full/Alternative) documentation program. Investor properties comprise 0.70% of the loans. The weighted average mortgage interest rate is 6.671% and the weighted average remaining term to maturity is 320 months. The states that represent the largest portion of the aggregate mortgage loans are: -- California (30.35%); -- New York (10.07%); -- Texas (8.57%); and -- New Jersey (6.85%). 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, please see the press release issued May 1, 2003 entitled 'Fitch Revises Rating Criteria in Wake of Predatory Lending Legislation.' MASTR, a special purpose corporation, deposited the loans into the trust, which issued the certificates. U.S. Bank National Association will act as trustee. For federal income tax purposes, elections will be made to treat the trust fund as multiple real estate mortgage investment conduits -- REMICs. MEDIACOM LLC: Moody's Assigns Low-B Ratings on 14 Debt Issues ------------------------------------------------------------- Moody's Investors Service lowered its ratings for the senior unsecured bonds of intermediate holding company Mediacom LLC, a wholly-owned subsidiary of Mediacom Communications Corporation, confirmed the existing Ba3 ratings for the senior secured bank credit facilities available to various subsidiaries of LLC, which are Mediacom Southeast LLC, Mediacom Minnesota LLC and various other subsidiaries, collectively, the "LLC Subsidiaries", and assigned Ba3 ratings for the proposed bank credit facilities being arranged for the LLC Subsidiaries, which will replace the existing facilities and the ratings for which will be withdrawn upon successful completion of the transaction. Moody's also affirmed all ratings for Mediacom and its other subsidiaries, including Mediacom Broadband LLC and its own operating subsidiaries (Mediacom Iowa LLC and various other subsidiaries, collectively, the "Broadband Subsidiaries"). This concludes Moody's review of the LLC and LLC Subsidiaries' ratings, which commenced September 15, 2004 after public disclosure by management of: (i) the proposed refinancing of the LLC Subsidiaries' bank credit facilities; and (ii) Moody's communication of a potentially negative reaction to the same. The rating outlook is stable. The Moody's rating actions and current ratings for the company and subsidiaries: Mediacom Communications Corporation: * Senior Implied Rating -- B1 (affirmed) * Issuer Rating -- Caa1 (affirmed) * Liquidity Rating -- SGL-2 (affirmed) * Rating Outlook -- Stable (for all entities) * $172.5 million of 5.25% Senior Unsecured Convertible Notes due July 2006 -- Caa1 (affirmed) Mediacom LLC: * $200 million of 8.5% Senior Unsecured Notes due 2008 -- B3 (downgraded from B2) * $125 million of 7.875% Senior Unsecured Notes due 2011 -- B3 (downgraded from B2) * $500 million of 9.5% Senior Unsecured Notes due 2013 -- B3 (downgraded from B2) Mediacom Southeast LLC et.al.: * $600 million Senior Secured Revolver due 2013 (new) -- Ba3 (assigned) * $200 million Senior Secured Term Loan A due 2013 (new) -- Ba3 (assigned) * $500 million Senior Secured Term Loan B due 2013 (new) -- Ba3 (assigned) * $450 million (approximately $380 million remaining) Senior Secured Revolver due 2008 -- Ba3 (confirmed) * $100 million Senior Secured Term Loan due 2008 -- Ba3 (confirmed) Mediacom Minnesota LLC et.al.: * $450 million (approximately $380 million remaining) Senior Secured Revolver due 2008 -- Ba3 (confirmed) * $100 million Senior Secured Term Loan due 2008 -- Ba3 (confirmed) Mediacom Broadband LLC: * $400 million of 11.0% Senior Unsecured Notes due 2013 -- B2 (affirmed) Mediacom Iowa LLC: * $600 million (reduces beginning 12/31/04) Senior Secured Revolver due 2010 -- Ba3 (affirmed) * $300 million Senior Secured Term Loan due 2010 -- Ba3 (affirmed) * $500 million Senior Secured Term Loan due 2010 -- Ba3 (affirmed) The B1 senior implied rating continues to broadly reflect: (i) the risks associated with the company's high financial leverage and moderate interest and fixed charge coverage levels; (ii) execution risks related to the ongoing roll-out of new services, including digital video and high speed Internet, and the pending roll-out of telephony services in partnership with Sprint, all of which have the potential to reverse recent negative performance trends and drive incremental cash flow growth and improved asset returns; (iii) heightened competition from direct broadcast satellite operators and, increasingly, traditional telephone service providers, and related concerns about subscriber retention and the costs to affect the same; and (iv) growing concerns about the underlying value of the company's assets relative to its consolidated debt burden. Nonetheless, the B1 senior implied rating also continues to incorporate: (i) the benefits associated with the company's large size, improving technological profile and good geographic diversification which afford economies of scale and new business opportunities, and somewhat mitigate potential cyclical effects related to the economy and/or market- specific trends; (ii) a good liquidity position, as reflected in the SGL-2 rating, supported principally by the large committed and available lines of credit until more meaningful positive free cash flow levels, which may not come until 2008 can be realized; and (iii) related prospects for more meaningful deleveraging and balance sheet strengthening thereafter. Management's commitment to refrain from any re-leveraging initiatives and the use of debt financing prior to reducing outstanding debt to less than 6.0x EBITDA also served to support Moody's maintenance of the B1 senior implied rating, and the current stable rating outlook as well. The ratings ascribed to the company's individual debt instruments also continue to incorporate their relative ranking, structural considerations and specific terms and conditions embedded in the respective governing documentation for the same, as well as the company's broader organizational structure overall. The downgrade of the LLC bond ratings specifically reflects a notching revision following the perceived deterioration of relative recovery prospects for this instrument in a downside scenario proforma for the proposed bank debt refinancing. Moody's believes this could entail a more significant amount of both available and drawn lines of credit, and a corresponding shift to a more top-heavy capitalization for the company. More specifically, Moody's views the probability that the company will look to opportunistically call certain of its public debt instruments, potentially funded with incremental borrowings under the new (or even the existing) bank credit facilities at a considerably lower cost, as high, particularly as the call premiums decline further over time. Such a shift in the capital mix of the company, although potentially not significant on an absolute basis, would be to the detriment of remaining LLC creditors at the intermediate holding company, and particularly so in a more distress scenario at a subsequent point in time wherein additional claims of a senior nature would likely also then be present. This would be additive to the already weak relative position of LLC creditors given their existing structural subordination to a substantial amount of subsidiary obligations which already exist. Notably, however, no downward rating revisions have been taken with respect to the securities of Broadband. This is notwithstanding the similarly "compressed" notching of the existing rated securities, which admittedly are not terribly dissimilar to LLC in terms of how they are structured. Moody's continues to believe that the overall quality of the Broadband assets is better, however, and attributes part of the relative attractiveness of these assets to a potentially larger number of prospective buyers in a downside scenario. This tends to support maintenance of a one-notch differential between the LLC and Broadband holding company notes - specifically, one less notch off of the senior implied rating for the Broadband debt relative to the LLC debt. The resultant implication, however, is that the Broadband notes remain weakly positioned in their current B2 rating category. In this regard, Moody's suggested that any subsequent shift in Broadband's own capital mix (whether on an actual or anticipated basis) to a more top-heavy structure and/or potentially just in the absence of a requisite reversal of recent negative operating trends as noted within the Broadband asset base, could prompt a similar downward rating action for the Broadband notes in the future. In particular, Moody's notes that its prior concerns about the need to reverse poor legacy customer service issues and the increased incidence of overbuilder competition and more aggressive DBS marketing as new local markets are rolled out may now be showing signs of heightened relevance given accelerated subscriber losses (including digital customers) and slowing RGU growth - not just in the LLC systems, but also in the Broadband systems. Also of note is the confirmation vs. downgrade of the existing Ba3 LLC Subsidiaries' bank loan ratings, and the identical Ba3 ratings, which have been assigned to the proposed new LLC Subsidiaries' facilities. In addition to upstream guarantees from the company's operating subsidiaries, these senior-most bank debt claims continue to benefit from the still large amount of junior capital that remains underneath them in the form of both public debt and common equity, and notwithstanding projected and recent declines, respectively, in the absolute amount of downside cushion afforded by this capital. In the context of Moody's review, it became clear that the perceived distinctions between the two pools of assets held by Broadband and LLC were still not quite meaningful enough to warrant different ratings. In particular, confirmation of the LLC bank debt ratings reflects Moody's belief that these obligations remain sufficiently well protected, even in a downside scenario, based on still high underlying asset values relative to both current and anticipated potential borrowings. The same is true for the Broadband bank group and its respective indirect claim on the Broadband assets, which again continue to be perceived as having somewhat better value than the LLC assets. The Caa1 rating for the convertible notes of the ultimate parent company continues to incorporate some level of equity-like risk and a potential sub-par recovery level in an event of default scenario. It would be somewhat remiss not to acknowledge that there are several benefits for the company proforma for the successful completion of the proposed bank debt refinancing. Moody's notes the improved liquidity profile which will be stronger than that which exists today, mainly as evidenced in the form of increased bank capacity (although it is not yet clear just how much), and for a longer period of time given the absence of a reducing revolver in the new facility. Depending on market perception of the deal, it is expected that the company may be able to obtain some interest cost savings, as well, which would only enhance its already comparatively low cost debt capital. Maturities will be extended, even though requisite amortization payments will be larger than those under the current agreements given the larger amount of term debt borrowings. Moody's does not dispute that these benefits serve to temporarily reduce the probability of a default for LLC, if not the whole company, as more time is afforded for management to proactively deal with the heightened competitive environment and potentially more negative operating trends. However, while the company's liquidity profile should be enhanced by the pending transaction -- again, subject to market receptivity -- the relatively weak free cash flow characteristics of the company's operations, both at present and as anticipated over the near-to-intermediate term, serve to constrain prospective upward rating movement to the SGL-1 level. Additionally, Moody's fundamental concerns about the company's business prospects over the long term remain substantially unchanged from those articulated in the late '90s, when ratings for Mediacom were originally assigned. They have arguably grown during more recent periods. Moody's believes that operating performance may continue to lag expectations given much more fierce competition in future periods. While management was able to successfully integrate the former AT&T Broadband properties in 2002 and performed largely in accordance with expectations throughout most of 2003, recent trends over the last year have been somewhat more negative than even previously anticipated, particularly with respect to basic subscriber losses and slower RGU growth. Moody's believes that the company will have to start competing more on price than it has been willing to do to date, which will likely lead to further margin compression and higher requisite capital spending. The larger anticipated capital spending may be necessary for investments to finish upgrading network infrastructure to more robust levels capable of delivering more bandwidth capacity, as well as for more significant subsidization of consumer equipment in conjunction with more aggressive promotional offerings and more advanced and multiple set-top equipment deployment in the home. This includes telephony-related spending, although that will arguably be offset somewhat by partial funding from partners. The resultant reduction in anticipated cash flow growth, and specifically free cash flow growth, serves to temper the strength of the B1 senior implied rating, particularly with the passage of time, and also reduces the prospect of upward rating migration back to the former Ba3 rating level over the near-to-intermediate term. Given the certainty of an even more fiercely competitive operating environment in future periods, as outlined on multiple occasions in Moody's prior research, it has been deemed increasingly imperative for incumbent cable operators to have, maintain, and grow their financial flexibility in order to better mitigate these growing business risks. The strength of the company's liquidity position and the relatively low probability of near-to- intermediate term default, both of which again are arguably improved somewhat proforma for the assumed successful completion of the proposed refinancing transaction, lends considerable support to maintenance of the stable rating outlook. Moreover, the enhanced liquidity profile for LLC in particular may prove even more important to the company's success given recently heightened concerns about potential damage and ongoing business disruption stemming from the surge of hurricane activity in many of its southeastern markets. If Mediacom fails to stabilize the erosion of basic subscribers, customer relationships, and the slowdown in RGU growth, particularly now that most of the DBS local TV signal rollouts having been completed, Moody's would likely consider a negative outlook. Additionally, meaningful negative deviations from targeted deleveraging plans could also negatively pressure the company's ratings. Conversely, operating developments such as faster than anticipated traction with the telephony business, lower than anticipated basic subscriber erosion, or a better pricing environment could drive upward rating movement, as well as more rapid deleveraging. A positive outlook will only likely be warranted, however, if the company improves its balance sheet strength by undertaking some sort of equity-driven recapitalization, either through a potential M&A transaction or via a secondary equity issuance, which is deemed unlikely unless the current share price appreciates considerably. Moody's does not expect that ratings will be raised over the next 12-to-18 months based solely on fundamental operational improvements and/or organic performance levels. Ratings are likely to be maintained to the extent that the company merely meets or modestly exceeds management projections, which have been shared with the rating agency. Mediacom Communications Corporation is a domestic multiple system cable operator serving approximately 1.49 million subscribers in a wide variety of small markets. Mediacom LLC and Mediacom Broadband are wholly-owned intermediate holding company subsidiaries of Mediacom Communications, the operating subsidiaries of which served approximately 702 thousand and 789 thousand subscribers, respectively, at the end of June 2004. The company maintains its headquarters in Middletown, New York. N-VIRO INT'L: Employs Daniel Haslinger as Manager & Director ------------------------------------------------------------ N-Viro International Corporation employed Daniel J. Haslinger as Manager, and a member of the Company's Board of Directors. The Company and Mr. Haslinger agreed to enter into an employment arrangement which is terminable "at will" for $1,500 per month, retroactive to August 16, 2004. The Company also executed a Storage Site Agreement with MicroMacro Integrated Technologies, Inc. and Daniel J. and Rebecca S. Haslinger, dated September 27, 2004. MMIT is a company owned by Mr. Haslinger. The Company, MMIT and the Haslingers agreed to enter into an agreement to utilize property to transfer material produced at the Company's Toledo Bayview wastewater treatment facility for $5,000 per month, retroactive to August 16, 2004. Going Concern Doubt N-Viro International Corporation has in the past sustained operating and net losses. The Company has used substantial amounts of working capital in its operations, which has reduced the Company's liquidity to a low level. At June 30, 2004, current liabilities exceed current assets by $981,745. These matters raise substantial doubt about the Company's ability to continue as a going concern. N-Viro International recorded a net loss of $99,000 for the six months ended June 30, 2004, compared to a net loss of $522,000 for the same period ended in 2003, a decrease in the loss of approximately $423,000. The Company conducts business in markets outside the United States, and expects to continue to do so. In addition to the risk of currency fluctuations, the risks associated with conducting business outside the United States include: social, political and economic instability; slower payment of invoices; underdeveloped infrastructure; underdeveloped legal systems; and nationalization. The Company has not entered into any currency swap agreements which may reduce these risks. The Company may enter into such agreements in the future if it is deemed necessary to do so. Current economic and political conditions in the Asia Pacific and Middle East regions have affected the Company outlook for potential revenue there. The Company cannot predict the full impact of this economic instability, but it could have a material adverse effect on revenues and profits. The Company had a working capital deficit of $982,000 at June 30, 2004, compared to a working capital deficit of $1,642,000 at December 31, 2003, an increase in working capital of $660,000. Current assets at June 30, 2004 included cash and investments of $146,000 (including restricted cash of $75,000), which is an increase of $22,000 from December 31, 2003. The increase in working capital was principally due to the private placement of unregistered common stock with four stockholders for $435,188, the Company issuing stock for payment of trade payables for approximately $254,000 and the exercise of stock warrants and options totaling approximately $111,000, offset by the operating loss for the six month period. About the Company N-Viro International Corporation incorporated in April 1993, and became a public company on October 12, 1993. The Company business strategy is to market the N-Viro Process, which produces a sludge product with multiple commercial uses having an "exceptional quality" as defined in the Section 503 Sludge Regulations under the Clean Water Act of 1987. To date, its revenues have been derived primarily from the licensing of the N-Viro Process to treat and recycle wastewater sludge generated by municipal wastewater treatment plants and from the sale to licensees of the alkaline admixture used in the N-Viro Process. The Company also operates N-Viro facilities for third parties on a start-up basis and currently operate one N-Viro facility on a contract management basis. NORTHWEST AIRLINES: CEO Richard Anderson Will Depart on Nov. 1 -------------------------------------------------------------- Northwest Airlines Corporation (NASDAQ: NWAC) announced Friday that its board of directors elected Douglas M. Steenland, age 53, Northwest's current president, to the additional position of chief executive officer, effective immediately. Richard H. Anderson, age 49, who has been chief executive officer since 2001, has informed the board that he will become executive vice president of UnitedHealth Group (NYSE: UNH) on November 1. Mr. Anderson will remain on the Northwest board. For the past three years, Doug Steenland and Richard Anderson have led this company through the most difficult period in the history of the airline industry, said Gary L. Wilson, Northwest's chairman. Together, they set the strategic direction of the company, which has positioned Northwest as the strongest of the legacy carriers. They developed and implemented a strategy that's produced superior operating performance, aggressive cost containment, and prudent long-term investments in the business. They also put together a first-rate management team that's well prepared to continue to drive this strategy. The board of directors is very pleased that Doug, who has been our president since 2001 and a key member of the Northwest senior management team since 1991, will continue to lead the company. His in-depth knowledge of all areas of the global airline industry, his expertise in major strategic areas and his outstanding leadership skills will be a powerful asset as we continue our drive to return the company to profitability. We are extremely grateful to Richard for his many contributions to Northwest, especially in the areas of operational excellence, airport and fleet renewal, and the use of technology. We wish him much success as he applies his many strengths to a new industry at UnitedHealth Group, Mr. Wilson added. It is a privilege to lead Northwest's 39,000 employees at this important time for our company, Mr. Steenland said. Despite the increasingly challenging environment, we have accomplished much together: excellent operating performance, a significant revenue premium, industry-leading liquidity, and a global network, recently enhanced by our membership in SkyTeam. With our very experienced management team, I intend to follow our proven strategy, working with our employees to achieve a competitive cost structure and building Northwest for long-term success. My proudest accomplishment at Northwest has been working with the best employees in the airline industry, Mr. Anderson said. This company has a long track record of dealing with challenges and finding ways to succeed. Under Doug's proven leadership, I know Northwest's people will continue to run a great airline, put customers first, and secure the future of Northwest. The New CEO Mr. Steenland, who joined Northwest in 1991 as vice president, deputy general counsel, is currently responsible for: * alliances, where he oversees the company's relationships with its 16 airline partners, as well as the SkyTeam alliance; * government affairs, which includes legislative, executive branch, and regulatory issues; * labor relations, which includes all relations with the company's seven unions, as well as the negotiations and administration of the company's collective bargaining agreements; * human resources; * corporate and brand communications, which includes advertising, media relations and employee communications; and * legal affairs. Mr. Steenland is also chairman and chief executive officer of Northwest Airlines Cargo, Inc., the number two trans-Pacific cargo airline. Prior to joining Northwest, Mr. Steenland was a senior partner at the Washington, D.C., law firm of Verner, Liipfert, Bernhard and Hand. Mr. Steenland was graduated in 1976 with highest honors from the National Law Center at George Washington University. He is a member of the board of directors of Northwest Airlines, MAIR Holdings, Inc., The Guthrie Theater and The Minnesota Symphony Orchestra. Organizational Changes Northwest announced four key executive appointments made in connection with the naming of the new CEO: * Tim Griffin, executive vice president of marketing and distribution, will assume additional responsibility for sales and customer relations and becomes executive vice president marketing and sales. * Phil Haan, executive vice president responsible for international and information services, will assume additional responsibility for alliances, in-flight services and cargo. * Bernie Han will continue as executive vice president and chief financial officer. * Andy Roberts, currently senior vice president-technical operations, will become executive vice president-operations with responsibility for technical operations, engineering, flight operations/systems operations control, customer service and materials management. All of these executives will report directly to Mr. Steenland. S&P Says Departure Doesn't Affect Ratings Standard & Poor's Ratings Services understands that these management changes are expected to be smooth and not result in a change in Northwest's strategy. Accordingly, they have "no implications for the company's ratings or outlook," S&P says. S&P notes that Messrs. Anderson and Steenland have worked together in their current positions since 2001. Securing concessionary agreements from the airline's labor unions, an area of responsibility for Mr. Steenland, continues to be the key challenge facing the company. Negotiations with the pilots to secure an initial round of concessions are believed to be well advanced, S&P indicated in a statement released Friday. Philip A. Baggaley, CFA, is the S&P analyst that follows S&P-rated carriers. Mr. Baggaley can be reached at (212) 438-7683. S&P rates Northwest debt at a single-B with a negative outlook. Seventh Major Carrier With a New CEO Northwest Airlines is the seventh major carrier to change its CEO in the past three years, Micheline Maynard at The New York Times reports. Gordon M. Bethune will step down as Continental's CEO at the end of the year. Glenn F. Tilton took the helm at United Airlines in September 2002. New CEOs have recently arrived at US Airways, Delta, American Airlines and Southwest. Northwest's Financial Condition Ms. Maynard recaps the highlights of Northwest's financial position: * Northwest has $2.6 billion in cash -- more than Delta and three times what US Airways has; * Northwest's pension plans are underfunded by $3.7 billion; * Northwest has lost $1.2 billion since 2001. About Northwest Airlines Northwest Airlines is the world's fifth largest airline with hubs at Detroit, Minneapolis/St. Paul, Memphis, Tokyo, and Amsterdam, and approximately 1,500 daily departures. Northwest is a member of SkyTeam, a global airline alliance partnership with Aeromxico, Air France, Alitalia, Continental Airlines, CSA Czech Airlines, Delta Air Lines, KLM Royal Dutch Airlines, and Korean Air. SkyTeam offers customers one of the world' most extensive global networks. Northwest and its travel partners serve more than 900 cities in more than 160 countries on six continents. In 2003, consumers from throughout the world recognized Northwests efforts to make travel easier. Northwests WorldPerks program was named the most popular North American frequent flyer program by readers of TIME Asia in the 2003 TIME Readers Travel Choice Awards. A 2003 J.D. Power and Associate study of airports ranked Minneapolis/St. Paul and Detroit, home to Northwests two largest hubs, in second and fourth place among large domestic airports in overall customer satisfaction. For more information about Northwest, see http://www.nwa.com/ OWENS CORNING: Wants Court Okay on Lexington Lease Pact Amendment ----------------------------------------------------------------- Pursuant to a certain Lease Indenture dated as of January 11, 2000, Owens Corning and its debtor-affiliates leased from Lexington Chester Industrial, LLC, a production and distribution facility in Chester, South Carolina, which is utilized for the manufacture and distribution of Cultured Stone products. The annual rent under the Lease is currently $1,619,072. The Lease will expire on December 31, 2020. The Debtors have the option, but are not obligated to: -- extend the lease term for two additional five-year terms; or -- purchase the Facility for the lesser of $18,500,000 or the fair market value. In the alternative, the Debtors may allow the Lease to expire without extending its term or exercising the purchase option. The Debtors assumed the Lease on December 1, 2000. By this motion, the Debtors ask Judge Fitzgerald to: (a) approve an amendment to the Lease that provides for construction of an expansion to the Facility at Lexington's expense and an attendant increase in base rent; (b) approve necessary related agreements, including a Development Agreement and a Purchase Order; and (c) authorize them, after completion of the Expansion, to enter into an amended and restated lease. J. Kate Stickles, Esq., at Saul Ewing, LLP, in Wilmington, Delaware, relates that the proposed Expansion consists of a single story, 203,500-square foot building to be attached to the existing Facility, and will result in an approximate doubling of the Facility's size. The Facility is currently operating at 100% capacity and does not have sufficient space for the storage of finished products. As a result, the Debtors are forced to store finished products manufactured at the Facility at an off-site warehouse 20 miles away. The Debtors' reliance on the off-site warehouse results in the incurrence of additional handling and shuttling costs as well as other operating inefficiencies. The Development Agreement Under the terms of the Development Agreement between the Debtors and Lexington dated as of September 14, 2004, the Debtors will be responsible for coordinating and overseeing the construction of the Expansion, but Lexington will pay all costs of the Expansion directly over to the general contractor. The projected cost will be no more than $6 million. In the event that the actual cost of the Expansion exceeds $6 million, the Development Agreement contains provisions, obligating Lexington, subject to certain terms and conditions, to fund up to an additional $600,000 of improvements. Should the cost of completing the Expansion exceed $6.6 million, the additional costs are subject to negotiations with Lexington and potential funding by the Debtors. After the Expansion is completed, the annual rent for the Facility is projected to increase by 33%, to $2,150,178. The Debtors chose M.B. Kahn Construction Co., Inc., to act as the general contractor in connection with construction of the Expansion. The Debtors and M.B. Kahn entered into a certain purchase order, dated as of September 14, 2004. Headquartered in Toledo, Ohio, Owens Corning -- http://www.owenscorning.com/-- manufactures fiberglass insulation, roofing materials, vinyl windows and siding, patio doors, rain gutters and downspouts. The Company filed for chapter 11 protection on October 5, 2000 (Bankr. Del. Case. No. 00-03837). Mark S. Chehi, Esq., at Skadden, Arps, Slate, Meagher & Flom represents the Debtors in their restructuring efforts. At June 30, 2004, the Company's balance sheet shows $7.3 billion in assets and a $4.3 billion stockholders' deficit. (Owens Corning Bankruptcy News, Issue No. 84 Bankruptcy Creditors' Service, Inc., 215/945-7000) P-COM INC: Secures $5 Million Debenture Funding Commitment ---------------------------------------------------------- P-Com, Inc. (OTC Bulletin Board: PCMC), a worldwide provider of broadband wireless access products and services, expects third quarter revenue to range from $6.2 million to $6.4 million. Based upon this outlook, the Company anticipates that it will revise its previously announced 2004 revenue goal of $30.0 million. The Company has secured a commitment for $5.0 million in debenture financing. The debenture financing is in addition to the previously announced renewal of its credit facility with Silicon Valley Bank for an additional year. The credit facility allows for maximum borrowings up to $4.0 million. "Although our revenue and overall financial performance in 2004 will certainly show significant improvement compared with 2003 revenue of $20.8 million, the continued softness in the wireless communications equipment marketplace and the lengthening of the sales cycle has somewhat tempered our previous 2004 full year outlook," said Sam Smookler, President and CEO of P-Com. "We are currently reassessing our outlook for the remainder of this year in light of these developments and will update our 2004 guidance during our third quarter financial results conference call. "Despite the current challenges, there are numerous revenue opportunities that we are aggressively pursuing for the fourth quarter and into early 2005. In addition, we are pleased with the progress that we have made during the past 12 months including successfully executing our balance sheet restructuring plan, putting in place programs to further streamline our operating infrastructure and implementing new sales strategies, including sales expansion into the Asian market. Given P-Com's new product introductions planned for the remainder of 2004 and into 2005, including our recently announced launch of next generation SPEEDLAN wireless routers in our license-exempt product group, we continue to have confidence in our ability to reinvigorate sales growth and ultimately achieve profitability." Third Quarter Conference Call The Company will release final financial results for the third quarter ending September 30, 2004 on a conference call scheduled for Friday, October 29, 2004 at 10:00 a.m. Pacific Time/1:00 p.m. Eastern Time. The dial in number for the conference call is 800- 218-0713 for domestic participants and 303-262-2130 for international participants. A taped replay of the conference call will also be available beginning approximately one hour after the call's conclusion and will remain available through 11:59 p.m. Pacific Time on Monday, November 8, 2004. This replay can be accessed by dialing 800-405- 2236 for domestic callers and 303-590-3000 for international callers, using the passcode 11010154#. To listen to a live broadcast over the Internet, go to http://www.p-com.com/and click on the Investor Relations page. A replay of the conference call will be available at http://www.p-com.com/A press release outlining P-Com's financial results for third quarter of 2004 will be distributed on Friday, October 29, 2004 before the market opens. About P-Com, Inc. P-Com, Inc. develops, manufactures, and markets point-to-point, spread spectrum and point-to-multipoint, wireless access systems to the worldwide telecommunications market. P-Com's broadband wireless access systems are designed to satisfy the high-speed, integrated network requirements of Internet access and private networks. Cellular and personal communications service (PCS) providers utilize P-Com point-to-point systems to provide backhaul between base stations and mobile switching centers. Government, utility, and business entities use P-Com systems in public and private network applications. For more information visit http://www.p-com.com/or call 408-866-3666. * * * Going Concern Doubt In its Form 10-Q for the quarterly period ended June 30, 2004, filed with the Securities and Exchange Commission, P-Com Inc., reports that for the six-month period ended June 30, 2004, the Company used $4.3 million cash in its operating activities. Also, while the Company had approximately $4.9 million in cash and cash equivalents at June 30, 2004, and working capital of approximately $4.9 million, the Company's deteriorating cash position relative to projected future cash requirements, raise substantial doubt about the Company's ability to continue as a going concern. PARMALAT USA: Has Until October 20 to File Chapter 11 Plan ---------------------------------------------------------- Parmalat USA Corporation, and its U.S. debtor-affiliates, entered into a stipulation with General Electric Capital Corporation, as agent and lender, Citibank, N.A., and the Official Committee of Unsecured Creditors to amend the final Court order authorizing Parmalat USA to obtain $35,000,000 in debtor-in-possession financing. Pursuant to the Stipulation, the DIP Lenders require Parmalat by: October 15, 2004 to close the sale of substantially all the assets of Milk Products of Alabama, LLC, on terms acceptable to GE Capital in its sole discretion; October 20, 2004 to file a plan of reorganization and accompanying disclosure statement acceptable to the Lenders; December 3, 2004 to obtain bankruptcy court approval for the Disclosure Statement; and December 31, 2004 to confirm their Reorganization Plan. Parmalat's failure to comply with the agreed timeline will constitute an Event of Default under the DIP Financing Facility. GE Capital also agrees to extend the maturity date of the DIP Financing Facility to October 20, 2004. Headquartered in Wallington, New Jersey, Parmalat USA Corporation -- http://www.parmalatusa.com/-- generates more than 7 billion euros in annual revenue. The Parmalat Group's 40-some brand product line includes milk, yogurt, cheese, butter, cakes and cookies, breads, pizza, snack foods and vegetable sauces, soups and juices and employs over 36,000 workers in 139 plants located in 31 countries on six continents. The Company filed for chapter 11 protection on February 24, 2004 (Bankr. S.D.N.Y. Case No. 04-11139). Gary Holtzer, Esq., and Marcia L. Goldstein, Esq., at Weil Gotshal & Manges LLP represent the Debtors in their restructuring efforts. On June 30, 2003, the Debtors listed EUR2,001,818,912 in assets and EUR1,061,786,417 in debts. PARMALAT USA: Proposes Supplemental Surplus Asset Sale Procedures ----------------------------------------------------------------- In furtherance of their efforts to maximize the value received from the sale of the non-operating real properties, Parmalat USA Corporation and its U.S. debtor-affiliates employed Keen Realty, LLC, to market and sell most of the Non-Operating Properties. Keen engaged in a nationwide marketing campaign with respect to the Non-Operating Properties to obtain the highest offers for the Properties. Specifically, Keen listed the Non-Operating Properties on its Web site and on http://www.loopnet.com/-- a popular Web site for commercial real estate. Keen continues to update the listings as additional information is received. Additionally, Keen sent a flier via electronic mail to over 55,000 commercial real estate subscribers, distributed a press release to over 1,100 regional trade, news, and business publications, and sent 11,200 two-sided color brochures via direct mail to investors, consultants, and real estate professionals identified through Keen's custom database and targeted mailing lists. Keen also placed advertisements in several publications, including The New York Times, Crain's New York, The Newark Star Ledger, and The Philadelphia Inquirer, and placed signs on each of the Non- Operating Real Properties. Through Keen's efforts, Farmland Dairies, LLC, received indications of interest from parties who are considering buying some of the Non-Operating Properties. For example, with respect to a parcel of Non-Operating Property in West Caldwell, New Jersey, Keen received 178 inquiries by telephone and electronic mail, and 58 parties visited the property at four open houses hosted by Keen. Six parties have expressed an interest in signing a contract for the property and are currently reviewing a form of contract provided by Farmland. Similarly, with respect to a parcel of Non-Operating Property in East Vincent, Pennsylvania, Keen received 71 inquiries by telephone and electronic mail, and 19 parties visited the property at two open houses hosted by Keen. Four parties have expressed an interest in signing a contract for the property and are currently reviewing a form of contract provided by Farmland. Farmland believes that several of the Non-Operating Real Properties will receive offers of over $1,000,000. The Need for a Stalking Horse Process Keen has advised Farmland that the value to Farmland's estate could be maximized with respect to certain of the Non-Operating Properties by entering into stalking horse contracts with a single bidder with a standard break-up fee provision and holding auctions with respect to the property. The Sale Procedures Order provides that "the Debtors are authorized to take all actions and execute all documents necessary or appropriate to effectuate the sale of the Non-Operating Properties." Out of an abundance of caution, Farmland asks the Court to supplement the Sale Procedures Order to provide explicitly for authorization to utilize, at Farmland's discretion, a stalking horse and auction process. Farmland also asks Judge Drain to approve the payment of a break-up fee. Supplemental Sale Procedures Farmland will continue its marketing and sales efforts with respect to the Non-Operating Properties, and conduct an auction of some of the parcels of Non-Operating Properties where Farmland, through its advisors, determines that signing a stalking horse contract and proceeding with an auction is likely to maximize the value to the estate. Farmland will sign stalking horse contracts with standard provisions providing for the payment of a break-up fee, provided that the break-up fee does not exceed 3% of the stalking horse bidder's proposed purchase price. Farmland will provide notice of the auction and the proposed stalking horse contract, including the terms of the break-up fee, to interested parties, who will have an opportunity to object, prior to Farmland entering into the contract. After the selection of the winning bid following a bidding process and auction, Farmland will provide notice of the winning bidder and the terms of the winning bid to the Notice Parties, who will have an opportunity to object prior to Farmland's consummating the sale. Farmland will negotiate the terms of a stalking horse agreement, including the break-up fee, with the bidder at arm's length. Farmland will not utilize the sale procedures to sell Non- Operating Property to an insider. Headquartered in Wallington, New Jersey, Parmalat USA Corporation -- http://www.parmalatusa.com/-- generates more than 7 billion euros in annual revenue. The Parmalat Group's 40-some brand product line includes milk, yogurt, cheese, butter, cakes and cookies, breads, pizza, snack foods and vegetable sauces, soups and juices and employs over 36,000 workers in 139 plants located in 31 countries on six continents. The Company filed for chapter 11 protection on February 24, 2004 (Bankr. S.D.N.Y. Case No. 04-11139). Gary Holtzer, Esq., and Marcia L. Goldstein, Esq., at Weil Gotshal & Manges LLP represent the Debtors in their restructuring efforts. On June 30, 2003, the Debtors listed EUR2,001,818,912 in assets and EUR1,061,786,417 in debts. (Parmalat Bankruptcy News, Issue No. 32; Bankruptcy Creditors' Service, Inc., 215/945-7000) PATHMARK STORES: Inks $250 Million Senior Secured Credit Facility ----------------------------------------------------------------- Pathmark Stores, Inc. (Nasdaq: PTMK) has entered into an amended and restated $250 million senior secured credit facility dated as of October 1, 2004, with a group of lenders led by Fleet Retail Group, a Bank of America Company. The term of the amended and restated facility will be five years and will consist of a $180 million revolving Credit Facility and a $70 million term loan. The amended and restated facility replaces the prior five-year revolving facility and seven year term loan. Eileen Scott, Pathmark's Chief Executive Officer said, "We are pleased to have put in place a new five-year facility, which lowers our borrowing costs, increases our financial flexibility and strengthens our liquidity." Pathmark Stores, Inc. is a regional supermarket currently operating 142 supermarkets primarily in the New York - New Jersey and Philadelphia metropolitan areas. * * * As reported in the Troubled Company Reporter on Sept. 16, Moody's Investors Service downgraded all ratings of Pathmark Stores, Inc., including the Senior Subordinated Note (2012) issue to B3, and assigned a stable outlook. The rating downgrade was prompted by the increasing intensity of grocery retailing competition in the company's trade area and Moody's expectation that stabilizing revenue and operating profit will prove challenging. Constraining the ratings are: * Moody's belief that the company will run free cash flow deficits over the intermediate term, * the company's highly leveraged financial condition, and * the pressures on already low-margins in the highly competitive supermarket industry. However, the wide regional recognition of the "Pathmark" trade name and the good productivity of a typical Pathmark store support the assigned ratings. The company intends to refinance its bank loan before the current quarter ends in October 2004 to avoid violating financial covenants such as EBITDA falling below the mandatory minimum. Ratings lowered are as follows: -- $350 million 8.75% Senior Subordinated Notes (2012) to B3 from B2, -- Senior Implied Rating to B1 from Ba3, and -- Unsecured Issuer Rating to B2 from B1. Moody's does not rate the current $175 million secured Revolving Credit Facility commitment or the $46 million secured Term Loan. The company indicates that it is negotiating a replacement $250 million bank loan. The ratings reflect: * the company's leveraged financial condition (especially adjusted for operating leases), * exposure to economic conditions of a limited geography roughly between New York City and Philadelphia, and * Moody's expectation that capital expenditures and term loan amortization will modestly exceed operating cash flow over the medium term. In Moody's opinion, the company still needs to make up for a lengthy period of underinvestment prior to the Sept. 2000 reorganization by renovating stores as quickly as liquidity permits. However, the ratings acknowledge Pathmark's status as a well-recognized supermarket operator in its trade areas, potential operating efficiencies resulting from high sales per square foot, and the progress made in updating its store base. The stable outlook considers Moody's opinions that Pathmark has adequate liquidity and a defendable position in its trade areas around New York City and Philadelphia. Ratings would decline if: * the company fails to progress at growing revenue and simultaneously maintaining decent margins, * operating cash flow does not soon cover debt service and a normalized level of capital investment, or * working capital becomes a material use of cash. However, the ability to internally finance an adequate capital investment program, stability in market share, and improving debt protection measures (such as lease adjusted leverage falling towards 4.5 times and fixed charge coverage exceeding 1.5 times) could eventually reduce the business and financial risks facing Pathmark. The B3 rating on the senior subordinated notes considers that this debt is subordinated to significant amounts of more senior obligations. Contractually senior claims include the $175 million secured revolving credit facility commitment, the $46 million secured Term Loan, and $222 million of capital lease obligations and mortgages. The senior subordinated notes are also effectively junior to $89 million of trade accounts payable. The majority of revenue and assets are located at the issuing entity and almost all operating subsidiaries guarantee the notes. The company had $91 million of revolving credit facility borrowing capacity as of July 31, 2004. Operating margin decreased to 1.4% for the quarter ending July 31, 2004 compared to 2.8% in the same period of 2003 as Pathmark has adjusted gross margin in order to maintain market share. Moody's believes that market share for Pathmark has remained steady over recent periods as its comparable store sales have approximately equaled other supermarket operators with substantial operations in and around New York City and Philadelphia. For the twelve months ending July 31, 2004, lease adjusted leverage equaled about 4.9 times and fixed charge coverage was around 1.1 times. As the company invests in its store base, Moody's expects that operating challenges will pressure debt protection measures over the next several years. PETRACOM MEDIA: Plan Confirmation Hearing Convenes Today -------------------------------------------------------- On August 26, 2004, Petracom of Joplin, LLC and its debtor- affiliates filed their Joint Amended Plan of Reorganization with the United States Bankruptcy Court for the Middle District of Florida. A hearing to consider confirmation of the Plan will begin today, October 5, 2004 at 1:30 p.m., Eastern time, before the Honorable Alexander L. Paskay in Tampa. Headquartered in Lutz, Florida, Petracom Media, LLC, and its debtor-affiliates, collectively operate 18 radio stations representing a number of different program formats (i.e., talk, country and western, pop, etc.). Petracom Media filed for chapter 11 protection on February 17, 2004 (Bankr. M.D. Fla. Case No. 04- 02908). Petracom of Joplin, LLC, filed a separate chapter 11 petition on October 9, 2004 (Bankr. M.D. Fla. Case No. 03-20980). Harley E. Riedel, Esq. Stichter, Riedel, Blain & Prosser, represents the Debtors. When the Company filed for protection from its creditors, it estimated debts and assets in the $10 to $50 million range. PROVIDIAN FIN'L: 4% Convertible Notes Can be Swapped for Shares --------------------------------------------------------------- Providian Financial Corporation's (NYSE:PVN) $287.5 million of 4% Convertible Notes due May 15, 2008 issued pursuant to a supplemental indenture between the Company and Bank One Trust Company, N.A., as Trustee, dated May 27, 2003, will be convertible pursuant to section 2.01(a)(i) of the Supplemental Indenture. The Supplemental Indenture provides that the Notes are convertible if the closing price of the Company's common stock exceeds $14.31 per share (110% of the conversion price) for at least 20 trading days of the 30 consecutive trading day period ending on the last day of the preceding calendar quarter. Holders of the Notes may convert the Notes into shares of the Company's common stock during the next fiscal quarter (October 1, 2004 until December 31, 2004) at the conversion rate then in effect. In accordance with Financial Accounting Standards Board Statement of Financial Accounting Standards No. 128, Earnings Per Share, the dilutive effect of the Notes will be reflected in diluted earnings per share by application of the if-converted method. Accordingly, the Company will include 22,101,793 additional shares in the its diluted earnings per common share calculation for the entirety of the quarter ended September 30, 2004. The dilutive impact of assuming conversion will be partially offset by the related add- back of debt interest expense related to the Notes to net income in accordance with the if-converted method under SFAS No. 128. FASB's Emerging Issues Task Force finalized its proposed rule, "Accounting Issues Related to Certain Features of Contingently Convertible Debt and the Effect on Diluted Earnings Per Share" ("EITF Issue No. 04-8"), on September 30, 2004. EITF Issue No. 04- 8 is subject to formal ratification by FASB in October 2004. Assuming such ratification, the dilutive effects from the assumed conversion of the Company's contingently convertible notes would be reflected in the Company's fourth quarter 2004 diluted earnings per common share calculation. About Providian San Francisco-based Providian Financial is a leading provider of credit cards to mainstream American customers throughout the U.S. By combining experience, analysis, technology and outstanding customer service, Providian seeks to build long-lasting relationships with its customers by providing products and services that meet their evolving financial needs. * * * As reported in the Troubled Company Reporter on Sept. 10, 2004, Standard & Poor's Ratings Services affirmed its ratings on Providian Financial Corp., including its 'B' long-term counterparty credit rating, and its bank subsidiary, Providian National Bank, including its 'BB-/B' counterparty credit ratings, and revised the outlook to positive from stable. "The outlook revision acknowledges the improvement in financial performance that Providian has achieved following the company's ill-fated growth strategy involving a broad expansion into the subprime market, including new account origination and the expansion of credit lines to existing subprime customers," said Standard & Poor's credit analyst John K. Bartko, C.P.A. As a result, loss frequency increased beyond management's expectations and ultimately, the strategy resulted in precipitous weakening of asset quality measures, large losses, and the company's stock price plummeting. RCN CORP: Asks Court to Extend Lease Decision Period to Jan. 17 --------------------------------------------------------------- RCN Corp. and its debtor-affiliates are parties to certain unexpired non-residential real property leases. The Unexpired Leases involve agreements under which the Debtors lease space to house their hub sites and other telecommunications equipment. The telecommunications equipment that is housed on the premises covered by the Unexpired Leases plays an essential role in the Debtors' ability to continue to provide telecommunications services to their customers. Pursuant to Section 365(d)(4) of the Bankruptcy Code, a debtor's unexpired leases that are not assumed or voluntarily rejected within the initial 60 days of a Chapter 11 case, and are not the subject of a motion filed before the expiration of the 60th day to extend the statutory period, are deemed rejected. The court, however, can extend the debtor's Lease Decision Period for cause. D. Jansing Baker, Esq., at Skadden, Arps, Slate, Meagher & Flom, LLP, in New York, tells Judge Drain that the Debtors' decision to assume or reject the Unexpired Leases, as well as the timing of the assumption or rejection, depends in large part on whether their Plan of Reorganization is confirmed and ultimately consummated. Mr. Baker also notes that RCN Cable TV of Chicago, Inc., and 21st Century Telecom Services, Inc., which are not proponents of the Plan, are parties to potentially valuable Unexpired Leases. Hence, the Debtors' ability to assume or reject their Unexpired Leases must be preserved. Accordingly, the Debtors ask the Court to extend their lease Decision Period through and including the earlier of the effective date of the Plan or January 17, 2005. Mr. Baker asserts that the extension must be approved because: (a) The Debtors are paying for use of the property at the applicable lease rates and are continuing to perform their other obligations under the Unexpired Leases in a timely fashion. Thus, at this time, there are no defaults under the Unexpired Leases; (b) The Debtors fully intend to remain current with respect to all outstanding postpetition obligations under the Unexpired Leases; (c) There is no reason why the Debtors' continued occupancy of the premises during the extension of time sought could or would damage the Lessors beyond the compensation that is available to the Lessors under the Bankruptcy Code. There would be no harm to the Lessors should the Court extend the Debtors' Lease Decision Period; and (d) The Unexpired Leases are important assets of the Debtors. The Debtors may be unable to successfully operate their business without the continued use of the leased property. The Debtors' business is largely dependent on providing telecommunications services to their customers. The loss of the leased premises used to house the Debtors' hub sites and other telecommunications equipment would impair the Debtors' continued operations, as that equipment is essential to the Debtors' ability to continue to provide telecommunications services to their customers. Mr. Baker assures the Court that the extension will not prejudice the Lessors to the Unexpired Leases. The Debtors are moving rapidly towards the solicitation, confirmation and consummation of the Plan. Accordingly, the Lessors should know within the coming months whether their Unexpired Leases will be assumed or rejected. The extension will also provide RCN Chicago and 21st Century Telecom with sufficient time to review their Unexpired Leases. In contrast, if the Lease Decision Period is not extended, the Debtors might be compelled to prematurely assume long-term liabilities under the Unexpired Leases, potentially creating administrative expense claims in excess of applicable rejection damage claims, to the detriment of the Debtors' creditors and estates. 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: Court Reschedules Confirmation Hearing to Oct. 20 ----------------------------------------------------------------- Judge Gonzalez reschedules the hearing to confirm the Official Unsecured Bank Committee's Second Amended Plan of Reorganization for Reliance Financial Services Corporation to October 20, 2004, at 10:00 a.m. On July 6, 2004, the Official Unsecured Bank Committee delivered to the Bankruptcy Court its Second Amended Plan of Reorganization and First Amended Disclosure Statement for Reliance Financial Services Corporation. The First Amended Disclosure Statement explaining that Plan was approved by the Court on July 7. The Second Amended Plan and Disclosure Statement relates that the Section 847 Refund recoveries and other tax assets will not be available if Reorganized RFSC liquidates. If the Chapter 11 Case is converted to a Chapter 7, it is unlikely that there will be a recovery by Reorganized RFSC from the Section 847 Refunds and other tax assets. To the extent that Claim Holders opt-out of assigning their Litigation Claims to Reliance Group Holdings, Inc., they will not be entitled to receive RFSC Litigation Proceeds. Members of Classes 2 and 4a without Litigation Claims will share in any distribution of the RFSC Litigation Proceeds, unless they have elected to opt-out. The Second Amended Plan notes that $461,479,986 in Class 4a Claims has been asserted. However, the Bank Committee and the Official Committee of Unsecured Creditors intend to object to all 4a Claims. As a result, the amount of General Unsecured Claims allowed by the Court will likely be significantly less. The Second Amended Plan clarifies the Release Provisions. The Plan will not release a party from liability arising from willful misconduct, gross negligence, intentional fraud or breach of fiduciary duty that resulted in personal profit at the expense of the estate. The Plan will not release any party for knowing misuse of confidential information. The Plan will not limit the liability of the Debtors', RGH's or the Committees' professionals to their clients. The releases do not cover former and current directors, officers and executives of Reorganized RFSC and RGH from actions prior to June 12, 2001. This includes events connected to the Reliance D&O Action or other actions by M. Diane Koken, the Insurance Commissioner of the Commonwealth of Pennsylvania, as Liquidator of Reliance Insurance Company. The Second Amended Plan prohibits any transfer of New RFSC Common Stock amounting to over 50% that would cause an "ownership change" for tax purposes. There will be no transfer of shares of New RFSC Common Stock that would result in Reorganized RFSC becoming a member of an affiliated group of corporations. During the first 35 days after the first anniversary of the Effective Date, shares of New RFSC Common Stock may only be transferred pursuant to a tender offer by High River, LP, or its affiliates. The tender offer will be extended to all holders of New RFSC Common Stock to tender their shares, up to a maximum of 49.9% of the outstanding shares. If more than 49.9% of the New RFSC Common Stock are tendered, the shares will be purchased on a pro rata basis, based on the number of shares tendered by each holder. If High River and its affiliates would own less than 80% of New RFSC Common Stock, the tender offer will be withdrawn, all tendered shares returned to their holders and no transfer will be permitted. The Holder of an Allowed Liquidator Claim is entitled to full settlement in exchange for its Claim, the payments under the Tax Sharing Agreement and the PA Settlement Agreement, which includes 50% of the Section 847 Refunds and the Liquidator D&O Litigation Proceeds. To the extent payments are provided for under both Agreements, the arrangement will not result in duplicate payments. After the Effective Date and as soon as the disposition of the books and records of RFSC and Reorganized RFSC is legally feasible, the CEO will seek to dispose of the books and records, with notice to the Liquidator and other interested parties. If the Liquidator requires the books and records or determines that they should not be disposed of, the Liquidator will be allowed the opportunity to take possession of the books and records. 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) RIVERSIDE: Tolko Asks Court to Nullify Shareholder Rights Plan -------------------------------------------------------------- In another attempt to ensure the successful closure of its bid to overtake Riverside Forest Products Limited, Tolko Industries Ltd. asked the British Columbia Supreme Court to declare that the shareholder rights plan of Riverside Forest is null and void and of no force and effect. The basis of the petition is the fact that, with an authorized capital of only 25,000,000 common shares of which 9,434,987 have been issued, Riverside cannot issue the enormous number of shares required under the rights plan if the plan is triggered. Riverside would have to be able to issue in excess of 76,000,000 additional common shares and they are unable to do so. Trevor Jahnig, Tolko's Vice-President of Finance and CFO, said: "Tolko's application to the court is supported by Canadian case law which established the principle that, in order for such a rights plan to be valid, it cannot just have the threat of diluting Tolko's holdings but Riverside must also have the ability to carry through with that threat. Riverside's ability is restricted by the absence of the necessary authorized share capital." "Shareholder rights plans are intended to give a company time to respond to a takeover bid and seek out a competing bid," Jahnig said. "At the close of our offer, Riverside will have had 46 days since we informed them of our interest in making an offer. That is more than enough time to find and announce a competing bid. Riverside's shareholders should not be further constrained in their ability to accept Tolko's offer." Tolko's application will be heard today, October 5, 2004, which is prior to expiry of its bid on October 6, 2004. As reported in the Troubled Company Reporter on Aug. 27, 2004, Tolko Industries extended an unsolicited offer week to purchase all the outstanding shares of Riverside Forest for C$29.00 per share in cash. Tolko is the 2nd largest shareholder of Riverside, holding 1.758 million or 18.6% of the approximately 9.4 million Riverside shares outstanding. The total value of the transaction is estimated at C$340 million based on the net debt outstanding of Riverside as of June 30, 2004. Riverside Forest, however, encouraged the company's shareholders to take no action on the hostile takeover bid formally launched by Tolko Industries Limited to acquire all Riverside shares it does not currently own for $29 per share, as reported in the Troubled Company Reporter on September 2, 2004. Based on the price of Riverside's stock at the close of market on August 31, 2004, Tolko's offer represents a 9% discount to Riverside's stock price . As reported in the Troubled Company Reporter on Sept. 16, 2004, Riverside Forest released the unaudited consolidated financial statements as at and for the 11-month period ended Aug. 31, 2004, to further substantiate its stand. Gordon W. Steele, Riverside Chairman, President and Chief Executive Officer, said: "In light of Tolko Industries Ltd.'s recent offer to purchase all of the outstanding common shares of the Company, we wanted to ensure that shareholders have Riverside's most recent financial information available to them. In our view, the strength of the Company's financial results and its balance sheet confirm the financial inadequacy of the Tolko bid." In response to attempts of Riverside Forest's Board of Directors to block Tolko's moves, Tolko Industries announced its intent to vary its August 31, 2004 offer to acquire all of Riverside Forest's outstanding common shares by reducing the minimum tender condition currently contained in the offer from 75% to 51%, as reported in the Troubled Company Reporter on Sept. 24, 2004. Trevor Jahnig, Tolko's Vice-President of Finance & CFO identified six main issues that the shareholders must consider in deciding against of for its offer: 1. Comparison with recent transactions (West Fraser/Weldwood & Canfor/Slocan) Weldwood is significantly larger and has broader, more diverse product offerings and is not a comparable company to Riverside. Also, the comparison of Enterprise Value to EBITDA multiples using a trailing 12 month EBITDA number do not reflect the highly cyclical nature of the forest sector where transactions have occurred at different points in the cycle. Using a more appropriate method such as the multiple of Enterprise Value to Trend EBITDA shows that Tolko's offer is consistent with the multiple paid on the Slocan transaction. Furthermore, we believe both Weldwood and Slocan have been consistently stronger performers than Riverside. 2. Riverside's business or growth prospects. Riverside's recent financial results are not sustainable as they are being driven by peak of cycle commodity prices for both lumber and plywood. Looking back across various commodity price cycles, Riverside has generated a net loss in four of its last 10 fiscal years. 3. Riverside's substantial cash on hand. The Riverside Directors' Circular fails to point out that Riverside has non-investment grade debt outstanding of $197.0 million, which is in excess of Riverside's current cash balance. 4. Softwood Duty Refunds The amount and timing of duty refunds, if any, is highly speculative. 5. Timber tenure take-back compensation Riverside estimates that it will receive after-tax compensation of $28 million ($65/m3 or $100/m3 pre-tax) for timber tenure take-back from the BC government. The BC government recently announced they had reached agreement with Weyerhaeuser to pay $27/m3 (pre-tax) in compensation. Riverside's estimate assumes it will receive compensation that is approximately four times higher than the most recent compensation paid. 6. Access to Riverside's Data Room Tolko's initial request for access to Riverside's Data Room was refused. Subsequent to that refusal, access was offered under terms and conditions Tolko finds unacceptable especially in light of the fact that we believe we are the most strategic buyer. As reported in the Troubled Company Reporter on October 1, 2004, Riverside's Board of Directors made these points as a rebuttal: -- Riverside's Board of Directors stands by the statements made in its Directors' Circular, and urges shareholders not to be swayed by Tolko's self-serving efforts at rebuttal. -- Tolko's offer is at $29 per Share. The closing price of the Shares on the Toronto Stock Exchange on September 28, 2004 was $34.90. Since the announcement of the offer on August 25, 2004, the trading price of Riverside's shares has consistently been significantly greater than Tolko's offer, reflecting the market's concurrence with the Board's view that the offer undervalues Riverside. -- Tolko is seeking to acquire Riverside at the lowest possible price. Riverside's Board and its advisers are working hard to develop and present to shareholders an alternative to Tolko's offer that will deliver full and fair value for their shares. Riverside is engaged in a robust strategic process designed to maximize value for all of Riverside's shareholders. -- Tolko has complained that it has not been granted access to Riverside's data room. In fact, Tolko has been offered access to the data room on terms that other potential bidders have found acceptable, with appropriate modification. Tolko has declined to participate in Riverside's process on that basis. -- Tolko is free to improve upon its offer. Although it has been invited, many times, to do so, it has consistently declined, preferring instead to hint at what it might do in the future. Riverside's Board cannot make decisions on the basis of that hints or speculation about what Tolko or another bidder may or may not do, but can only deal with concrete proposals before it. -- By reducing its minimum tender condition, Tolko has signalled that it would be satisfied with obtaining control of Riverside, without giving any indication of its plans for Riverside's business, or of the manner in which it intends to deal with minority shareholders. -- Tolko has also failed to indicate how it proposes to fund the obligation, which would be triggered by a change of control, to repurchase all of Riverside's outstanding $150 million notes due 2014 for an amount equal to 101% of the principal amount thereof. -- Prior to Tembec Inc.'s public announcement on September 28, Riverside had no knowledge of any purchase or ownership of Riverside shares by Tembec. Riverside is actively pursuing discussions about potential transactions with a number of interested parties, of which Tembec is only one. Riverside Forest Products Limited is the fourth largest lumber producer in British Columbia with over 1.0 Bbf of annual capacity and an annual allowable cut of 3.1 million cubic metres. The company is also the second largest plywood and veneer producer in Canada. * * * As reported in the Troubled Company Reporter on August 27, 2004, Standard & Poor's Ratings Services placed its 'B+' long-term corporate credit and senior unsecured debt ratings on Kelowna, B.C.-based Riverside Forest Products Ltd. on CreditWatch with developing implications following the company's announcement that it would reject an unsolicited takeover offer from privately held Tolko Industries Ltd. RLJ LLC: Case Summary & 20 Largest Unsecured Creditors ------------------------------------------------------ Debtor: RLJ, LLC aka Southern Lightning aka National Wholesale Lightning aka RLJ aka SL aka Building Services aka Southern Lighting Building Services aka Entegrity Sales 1024 Executive Park Avenue Baton Rouge, Louisiana 7080 Bankruptcy Case No.: 04-13232 Chapter 11 Petition Date: October 1, 2004 Court: Middle District of Louisiana (Baton Rouge) Judge: Douglas D. Dodd Debtor's Counsel: William H. Patrick, III, Esq. Heller, Draper, Hayden, Patrick & Horn, L.L.C. 650 Poydras Street, Suite 2500 New Orleans, Louisiana 70130 Tel: (504) 568-1888 Fax: (504) 522-0949 Estimated Assets: $1 Million to $10 Million Estimated Debts: $500,000 to $1 Million Debtor's 20 largest unsecured creditors: Entity Nature Of Claim Claim Amount ------ --------------- ------------ Corporate Mechanical Trade Debt $154,220 Bell South Advertising & Trade Debt $40,799 Publishing Corporation United Lighting Sales Trade Debt $16,941 Decker Enterprises Trade Debt $15,229 Kuehne & Foot Trade Debt $9,256 LITETRONICS Trade Debt $6,810 Atlas Refrigeration Supply Trade Debt $6,060 Vanguard LLC Trade Debt $3,079 Reulet Electric Supplies Trade Debt $3,000 Capital One, F.S.B. Trade Debt $2,878 Cingular Trade Debt $2,864 Clear Channel Trade Debt $2,667 Broadcasting, Inc. Office Depot Trade Debt $2,366 Kemper Insurance Trade Debt $1,669 Companies Cherbonnier, Mayer & Trade Debt $1,188 Associates Jani-Kare Janitorial Service Trade Debt $900 Modern Business Machines Trade Debt $890 The Home Depot CRC/GECF Trade Debt $801 The Houston Chronicle Trade Debt $476 Birmingham Post-Herald Trade Debt $449 SPIEGEL INC: American Port Wins New Hampton Property for $1.8 Mil. ------------------------------------------------------------------ New Hampton Realty Corp., Inc., received no qualified overbids for its real property, thus, no auction was conducted. Accordingly, American Port Services, Inc., is deemed the successful bidder, with $1,898,100 as the successful bid. Spiegel Inc. and its debtor-affiliates previously sought the Court's authority to sell a real property located at 2101, 2201, 2221 and 2401 Aluminum Avenue in Hampton, Virginia to American Port Services, Inc., for $1,898,100, free and clear of all encumbrances, pursuant to a Purchase Agreement and subject to higher and better bids. The Property is owned by New Hampton Realty Corp., Inc., and consists of 46 acres of an undeveloped piece of land that is not currently being used for any purpose. The Stalking Horse Bidder Andrew V. Tenzer, Esq., at Shearman & Sterling, LLP, in New York, relates that in connection with their ongoing review of their business operations, the Debtors determined that the sale of the New Hampton Property at this time will enable them to obtain its realizable value and avoid the expense of further upkeep, which includes the continued payment of real property taxes. On May 5, 2003, the Debtors entered into a letter agreement with Keen Realty, LLC, pursuant to which Keen is authorized to market properties identified by the Debtors as excess locations. Under the Letter Agreement, Keen is entitled to a commission of 4% of the gross proceeds of the sales in which it has provided services. At the Debtors' request, Keen then engaged CB Richard Ellis, Inc., as its local broker. Keen and CB Richard began marketing the New Hampton Property to potential buyers in September 2003. Keen and CB Richard have shown the New Hampton Property to a number of interested parties, and received six different written offers for it. The offers were evaluated on price, as well as the reputation of the potential buyers, and their ability to close the sale transaction with the fewest contingencies. After extensive consultation with their advisors, and consideration of the terms and conditions of and risks associated with each offer, the Debtors determined that American Port's offer for the New Hampton Property was the highest and best offer available. Therefore, the Debtors agreed to accept American Port's offer subject to the conduct of an auction soliciting higher and better bids. The sale negotiations began in earnest in March 2004, with American Port being fully advised that the Debtors had filed a Chapter 11 case, that Bankruptcy Court approval of the sale would be required, and that the sale would be subject to overbid pursuant to bidding procedures to be agreed to by the parties and approved by the Court. On June 25, 2004, American Port and the Debtors entered into the Purchase Agreement. American Port has made a $94,905 initial deposit of funds with Lawyers Title Services, Inc., the escrow agent for the transaction. An additional $94,905 deposit will be made within three business days after American Port's approval and waiver of all the matters subject to its due diligence review. The remainder of the Purchase Price will be paid by American Port at the closing, unless a higher bidder prevails at the auction. The Purchase Agreement The Debtors propose to sell, assign, transfer, convey and deliver to American Port the New Hampton Property free and clear of all liens, claims, interests and encumbrances assumed by American Port pursuant to the Purchase Agreement. Any interests against or in the Property will attach solely to the proceeds from the Sale, in the order of priority and with the same validity, force and effect that these interests may now have against the Property. The significant terms of the Purchase Agreement are: (a) Purchase Price The purchase price for the Property is $1,898,100, payable by American Port in: (i) $94,905 on the parties' execution of the Purchase Agreement, by delivery to "Lawyers Title Services, Inc., as escrow agent," by wire transfer of immediately available funds to the Escrowee's Account, or by American Port's unendorsed certified or bank check payable to the order of the Escrowee; (ii) $94,905 within three business days after the expiration of the Due Diligence Period in the event New Hampton has not elected to terminate the Purchase Agreement, by delivery to the Escrowee, by wire transfer of immediately available funds to the Escrow Account, or by American Port's unendorsed certified or bank check payable to the order of Lawyers Title; and (iii) the balance of the Purchase Price on the Closing Date by wire transfer of immediately available funds to the Escrow Account. (b) Purchase and Sale of Assets At the Closing, New Hampton will sell, assign, transfer, convey and deliver to American Port, and American Port will purchase and accept from the Debtors, the Property free and clear of all encumbrances -- with all duly perfected and unavoidable liens on Property attaching to the Purchase Price -- other than Permitted Encumbrances under Section 363 of the Bankruptcy Code. (c) "As Is" Purchase Except as provided in the Purchase Agreement: (i) American Port represents and warrants that it is relying solely on its own inspections, investigations, studies, tests and analyses in purchasing the New Hampton Property and is purchasing the Property as is, where is, with all faults now known or later discovered; and (ii) There are no warranties express or implied with respect to the acquired assets, their merchantability or fitness for a particular purpose or as to any other matter whatsoever. (d) Break-up Fee If the Bankruptcy Court approves a bid other than that submitted by American Port, American Port will be entitled to payment of a break-up fee in cash. (e) Waiver of Right of First Refusal Pursuant to a Waiver Agreement between New Hampton and the Industrial Development Authority of the City of Hampton, Virginia, predecessor-in-interest to Regional Redevelopment Housing Authority for Hampton and Newport News, Virginia, the IDA agreed to waive its right of first refusal in connection with the Proposed Sale. (f) Title to the Property The Purchase Agreement requires American Port to direct the Escrowee to deliver to the Sale parties, within 10 days after the execution of the Purchase Agreement, the Escrowee's commitment to issue an Owner's Policy of Title Insurance with respect to the Property. Within 10 days after the issuance of the Title Commitment or any update, continuation or supplement of the Title Commitment, American Port will deliver to New Hampton a written statement setting forth any encumbrances affecting, or other defects in or objections to, title to the Property disclosed by materials other than the Permitted Encumbrances to which American Port objects. If American Port notifies New Hampton of any Additional Exceptions, New Hampton will be entitled to reasonable adjournments of the Closing during which it may attempt to remove the Additional Exceptions, provided, however, that New Hampton will not be required to bring any action or proceeding, or take any steps, or otherwise incur any expense to remove any Additional Exception. If for any reason New Hampton is unable or unwilling to remove any Additional Exception as of the Closing Date, New Hampton will so notify American Port, and American Port will elect to: (i) terminate the Agreement by giving notice to the Debtors; or (ii) perform all of American Port's obligations and accept title to the Property subject to the uncured Additional Exceptions without any abatement of the Purchase Price or liability on the part of the Debtors. (g) Due Diligence Period The Purchase Agreement provides American Port with a right, ending on the 60th day after the execution of the Purchase Agreement, to conduct engineering and environmental studies at the New Hampton Property and certain other due diligence. Within the first 30 days of the Due Diligence Period, American Port will notify New Hampton of its findings relating to these studies. American Port will have the time from the execution of the Purchase Agreement through the Outside Date to conduct a wetlands delineation of the Property and to obtain confirmation of the delineation from the Army Corps of Engineers. If American Port's inspection reveals any discrepancy between the condition of the Property as disclosed in the Due Diligence Materials and the actual condition of the Property, American Port will assume responsibility for up to $100,000 in costs to cure the discrepancy and will waive the discrepancy as a condition to closing. In the event the cost to cure the discrepancy exceeds $100,000 in the aggregate, American Port will notify New Hampton in writing by 5:00 p.m. on the 35th day of the Due Diligence Period and New Hampton will have the right, but not the obligation, to cure this Material Discrepancy to the extent that the cost to cure exceeds $100,000. If New Hampton elects to cure the Material Discrepancy, it will give American Port a credit against the Purchase Price at Closing in the amount of the cost to cure the Material Discrepancy, less $100,000. New Hampton will have five business days to respond to the Material Discrepancy Notice. If New Hampton elects not to cure, it will terminate the Agreement, in which case American Port will be entitled to a return of the Down Payment, including the interest, and the parties will have no further obligations under the Purchase Agreement. (h) Seller's Remedies If the sale of the Property to American Port is not consummated because of American Port's default or the failure of a condition to New Hampton's obligation to close or the termination of the Purchase Agreement, and if American Port is not otherwise entitled to the return of the Down Payment, New Hampton will be entitled to retain the Down Payment as New Hampton's liquidated damages and as its exclusive remedy for the default or failure. American Port's Remedies In the event that on the Closing Date, New Hampton will be unable to perform its obligations or to satisfy any applicable condition, then the parties will jointly instruct the Escrowee to promptly return to American Port the Down Payment, together with any accrued interest. The Purchase Agreement will then be deemed terminated and New Hampton will not have any further liability or obligation to American Port nor will American Port have any further liability or obligation to New Hampton, except for liabilities or obligations as are specifically stated to survive the Agreement's termination. American Port's right to a refund of the Down Payment and reimbursement of the expenses will be its sole and exclusive remedy in the event that New Hampton fails to close the sale of the Property after the Approval Date. The Debtors believe that American Port does not have any interest with respect to the Purchase Agreement that is materially adverse to those of the Debtors, their estates or other creditors, and will verify the same with respect to any bidder at the auction. 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) SPORTS CLUB: Engages Stonefield Josephson as New Accountant ----------------------------------------------------------- The Sports Club Company, Inc. (AMEX:SCY) reported that Stonefield Josephson, Inc. has agreed to act as the Company's independent registered public accounting firm to audit the Company's financial statements for the year ended December 31, 2004. The Company did not consult the new accountant prior to its engagement regarding the application of accounting principles to a specific completed or proposed transaction, or the type of audit opinion that might be rendered on the Company's financial statements. Going Concern Doubt The Sports Club has experienced recurring net losses of $40.7 million, $22.7 million and $18.4 million during the years ended December 31, 2001, 2002 and 2003, respectively. The Company has also experienced net cash flows used in operating activities of $6.0 million, $4.4 million and $3.5 million during the years ended December 31, 2001, 2002 and 2003, respectively. Additionally, the Company may incur a significant loss and net cash flows used in operating activities during the year ending December 31, 2004. The Company has had to raise funds through the offering of equity securities in order to make the interest payments due on its Senior Secured Notes. The historical and estimated future results of operations and cash flows raise doubt about the Company's ability to continue as a going concern. Club Memberships The Company's continued existence is primarily dependent upon its ability to increase membership levels at its six most recently opened Clubs. Five Clubs were opened during 2000 and 2001 and The Sports Club/LA-Beverly Hills was opened in October 2003. Recently opened Clubs that have not yet achieved mature membership levels have operated at a loss or only a slight profit as a result of fixed expenses that, together with variable operating expenses, approximate or exceed current revenues. Increasing membership levels at these six most recently opened Clubs is the key to producing operating profits and positive cash flows from operating activities. The Company is constantly generating programs to market the Clubs to potential new members as well as striving to reduce its membership attrition rates. The Company has also pursued aggressive cost cutting programs that have reduced general and administrative expenses (including employment costs) from $8.5 million during the year ended December 31, 2001 to $7.8 million during the year ended December 31, 2003. Direct and selling expenses have also dropped as a percentage of revenues during the last three years. If the Company is unable to increase membership levels or reduce costs to the point where cash flows from operating activities are sufficient to make the September 15, 2004 or future interest payments, the Company would be required to sell assets or issue additional equity or debt securities. There can be no assurance that the Company will be able to sell assets or additional equity or debt securities to generate the funds with which to make such payments, or that any such sales would be on terms and conditions reasonable to the Company. Revenues The Sports Club's revenues for the three months ended June 30, 2004, were $37.7 million, compared to $32.6 million for the same period in 2003, an increase of $5.1 million, or 15.6%. Revenue increased by $2.0 million as a result of the opening of The Sports Club/LA-Beverly Hills on October 7, 2003. Revenue increased by another $2.3 million at the five new Clubs opened in 2001 and 2002 primarily as a result of a 7.9% increase in membership at these Clubs and to annual rate increases for monthly dues and other ancillary services. Revenue increased by $798,000 as a result of increased cost reimbursements due the Company primarily from its management of The Sports Club/LA-Miami, a non-owned Club in Florida. Revenue decreased by $35,000 at the Company's SportsMed subsidiary primarily due to decreased patient visits, revenue increased by $70,000 primarily due to increased management fees earned from the Company's management of The Sports Club/LA-Miami and revenue decreased by $9,000 at its three mature Clubs. Expenses Company direct expenses increased by $3.5 million (13.2%) to $29.8 million for the three months ended June 30, 2004, versus $26.3 million for the same period in 2003. Direct expenses increased by $2.1 million as a result of the opening of The Sports Club/LA-Beverly Hills on October 7, 2003. Direct expenses increased by $846,000 at the five Clubs opened in 2000 and 2001 primarily as a result of an increase in variable direct expenses associated with the 7.9% revenue growth that occurred at these five Clubs between June 30, 2003 and June 30, 2004. Direct expenses increased by $511,000 at the Company's three mature Clubs and its SportsMed subsidiary primarily due to increased payroll costs. Direct expenses as a percent of revenue for the three months ended June 30, 2004, decreased to 79.1% from 80.8% for the same period in 2003. As membership levels and therefore revenues increase at the six new Sports Club/LA Clubs, the direct expense percentage should decrease. There is no assurance, however, that such membership or revenue growth will occur. Reimbursed costs were $1.2 million for the three months ended June 30, 2004, versus $448,000 for the same period in 2003, an increase of $798,000. These costs primarily relate to The Sports Club/LA- Miami, which is a non-owned Club that The Sports Club manages for its owner. The Sports Club receives a management fee for managing the Club and is reimbursed for all costs advanced on the owner's behalf. Management fees and reimbursed costs are recorded as revenue and the reimbursed costs are also recorded as expenses in the Company's consolidated financial statements. The effect of reimbursed costs on its loss from operations is therefore zero, since reimbursed costs are both reported as revenue and as operating costs in the consolidated financial statements. The reimbursed costs of $448,000 for the three months ended June 30, 2003, represent pre-opening expenses incurred by The Sports Club on the owner's behalf. The reimbursed costs of $1.2 million, for the three months ended June 30, 2004, represent operating costs of the Club, which opened in November 2003. The increase of $798,000 compared to the same period in 2003 is due to the Club becoming fully operational. General and administrative expenses were $2.2 million for the three months ended June 30, 2004, versus $2.0 million for the same period in 2003, an increase of $210,000. Payroll and payroll related expenses for the three months ended June 30, 2004 increased by $40,000, primarily due to normal annual compensation increases. Accounting and legal fees increased by approximately $50,000 primarily due to the new audit and accounting requirements mandated by the Sarbanes-Oxley legislation. In the second quarter of 2004, the Company retained an investment bank to assist it in evaluating alternatives to restructure the Company's debt levels and paid them $120,000 for their services during the quarter. General and administrative expenses decreased as a percentage of revenue to 5.8% for the three months ended June 30, 2004, from 6.1% for the same period in 2003. Management believes that general and administrative expenses should continue to decrease as a percentage of future revenues as The Sports Club expands and achieves economies of scale. There is no assurance, however, that said expansion or economies of scale will be achieved. The Company's selling expenses were $1.3 million for the three months ended June 30, 2004, versus $1.2 million for the same period in 2003, an increase of $34,000, or 2.8%. Selling expenses increased by $139,000 as a result of the opening of The Sports Club/LA-Beverly Hills on October 7, 2003 and decreased by $105,000 at the Company's other Clubs primarily due to the timing of promotions, media and direct mail programs. Selling expenses as a percentage of revenue decreased to 3.4% for the three months ended June 30, 2004, from 3.8% for the same period in 2003. Depreciation and amortization expenses were $3.2 million for the three months ended June 30, 2004, versus $3.0 million for the same period in 2003, an increase of $199,000, or 6.7%. Depreciation and amortization expenses increased by $151,000 as a result of the opening of The Sports Club/LA-Beverly Hills on October 7, 2003, and by $48,000 due principally to capital additions made at other Clubs during 2003 and 2004. Pre-opening expenses of $636,000 for the three months ended June 30, 2003 consisted of expenses related to The Sports Club/LA- Beverly Hills, which opened on October 7, 2003. Net interest expense increased by $417,000 (12.8%) to $3.7 million for the three months ended June 30, 2004, versus $3.3 million for the same period in 2003. Net interest expense increased by $312,000 as a result of interest incurred on a new $20.0 million five-year mortgage loan, which funded on June 12, 2003. Net interest expense increased by $150,000 due to the termination of the capitalization of interest on construction costs for The Sports Club/LA-Beverly Hills, which opened on October 7, 2003. Net interest expense increased by $46,000 primarily due to loan guarantee fees incurred on the new $20.0 million mortgage loan and decreased by $91,000 primarily due to a reduction of equipment financing loans, and the payoff of the former credit line with the Company's bank. Minority Interests The Sports Club minority interests increased by $442,000 to $479,000 for the three months ended June 30, 2004, versus $37,000 for the same period in 2003. Minority interests increased by $442,000, as a result of the accrual of a minority interest at the Company's Reebok Sports Club/NY. The quarter ended June 30, 2004, was the first quarter the Company recorded a minority interest in the profits of the Reebok partnership. Tax Provisions The tax provisions recorded for the three months ended June 30, 2004 and 2003 are comprised of New York City and New York State income taxes incurred on pre-tax earnings at Reebok Sports Club/NY. The Sports Club did not record any federal or state deferred tax benefit related to its consolidated pre-tax losses incurred for the three months ended June 30, 2004 and 2003. After the tax provisions and dividends on preferred stock of $495,000 in 2004 and $350,000 in 2003, the Company's consolidated net loss attributable to common shareholders was $4.8 million, or $0.26 per basic and diluted share for the three months ended June 30, 2004, versus a loss of $4.8 million, or $0.26 per basic and diluted share for the three months ended June 30, 2003. Comparison of Six Months Ended June 30, 2004 to Six Months Ended June 30, 2003 Revenues for the six months ended June 30, 2004, were $74.9 million, compared to $65.3 million for the same period in 2003, an increase of $9.6 million, or 14.7%. Revenue increased by $3.7 million as a result of the opening of The Sports Club/LA-Beverly Hills on October 7, 2003. Revenue increased by another $4.0 million at the five new Clubs opened in 2001 and 2002 primarily as a result of an 7.9% increase in membership at these Clubs and to annual rate increases for monthly dues and other ancillary services. Revenue increased by $1.8 million as a result of increased cost reimbursements due the Company from its management of The Sports Club/LA-Miami, a non-owned Club in Florida. Revenue increased by $59,000 at the SportsMed subsidiary primarily due to increased patient visits and revenue increased by $150,000 due to increased management fees earned primarily from management of The Sports Club/LA-Miami. Revenue decreased by $63,000 at The Sports Club's three mature Clubs. Direct expenses increased by $7.2 million (13.6%) to $59.9 million for the six months ended June 30, 2004, versus $52.7 million for the same period in 2003. Direct expenses increased by $4.0 million as a result of the opening of The Sports Club/LA-Beverly Hills on October 7, 2003. Direct expenses increased by $2.2 million at the five Clubs opened in 2000 and 2001 primarily as a result of an increase in variable direct expenses associated with the 7.9% revenue growth that occurred at these five Clubs between June 30, 2003 and June 30, 2004. Direct expenses increased by $1.0 million at the three mature Clubs and at the SportsMed subsidiary primarily due to increased payroll costs. Direct expenses as a percent of revenue for the six months ended June 30, 2004, decreased to 79.9% from 80.7% for the same period in 2003. As membership levels, and therefore revenues increase at the six new Sports Club/LA Clubs, the direct expense percentage should decrease. There is no assurance, however, that such membership or revenue growth will occur. Reimbursed costs were $2.5 million for the six months ended June 30, 2004, versus $705,000 for the same period in 2003, an increase of $1.8 million. These costs relate to The Sports Club/LA-Miami, the non-owned Club that the Company manages for its owner. The Company receives a management fee for managing the Club and is reimbursed for all costs advanced on the owner's behalf. As stated above, management fees and reimbursed costs are recorded as revenue and the reimbursed costs are also recorded as expenses in the Company's consolidated financial statements. The effect of reimbursed costs on loss from operations is therefore zero, since reimbursed costs are both reported as revenue and as operating costs in the Company's consolidated financial statements. The reimbursed costs of $705,000, for the six months ended June 30, 2003, represent pre-opening expenses incurred by The Sports Club on the owner's behalf. The reimbursed costs of $2.5 million, for the six months ended June 30, 2004, represent operating costs of the Club, which opened on October 7, 2003. The increase of $1.8 million compared to the same period in 2003 is due to the Club becoming fully operational. General and administrative expenses were $4.3 million for the six months ended June 30, 2004, versus $4.0 million for the same period in 2003, an increase of $283,000. Payroll and payroll- related expenses for the six months ended June 30, 2004 increased by $112,000, primarily due to normal annual compensation increases. Accounting and legal fees increased by approximately $87,000 primarily due to the new audit and accounting requirements mandated by the Sarbanes-Oxley legislation. In the second quarter of 2004, the Company retained an investment bank to assist in evaluating alternatives to restructure of debt levels and paid them $120,000 for their services during the first six months of 2004. There were other minor increases and decreases in other general and administrative expenses accounting for a net decrease of $36,000. General and administrative expenses decreased as a percentage of revenue to 5.7% for the six months ended June 30, 2004, from 6.1% for the same period in 2003. Management believes that general and administrative expenses should continue to decrease as a percentage of future revenues as the Company expands and achieves economies of scale. There is no assurance, however, that said expansion or economies of scale will be achieved. Selling expenses were $2.8 million for the six months ended June 30, 2004, versus $2.6 million for the same period in 2003, an increase of $198,000 or 7.6%. Selling expenses increased by $316,000 as a result of the opening of The Sports Club/LA-Beverly Hills on October 7, 2003 and decreased by $118,000 at the other Clubs primarily due to the timing of media advertising. Selling expenses as a percentage of revenue decreased to 3.7% for the six months ended June 30, 2004, from 4.0% for the same period in 2003. Depreciation and amortization expenses were $6.3 million for the six months ended June 30, 2004, versus $5.9 million for the same period in 2003, an increase of $411,000, or 6.9%. Depreciation and amortization expenses increased by $316,000 as a result of the opening of The Sports Club/LA-Beverly Hills on October 7, 2003 and by $95,000 primarily due to capital additions made at the Company's other Clubs during 2003 and 2004. Pre-opening expenses of $46,000 and $776,000 for the six months ended June 30, 2004 and six months ended June 30, 2003, respectively, consisted of expenses related to The Sports Club/LA- Beverly Hills, which opened on October 7, 2003. The Company recorded a non-recurring charge of $1.1 million during the six months ended June 30, 2004. This charge is comprised of various costs, primarily legal fees and investment banking fees, related to a "Going Private/Equity Investment" transaction that was initiated in April 2003 and abandoned in February 2004. Net interest expense increased by $825,000 (12.6%) to $7.4 million for the six months ended June 30, 2004, versus $6.5 million for the same period in 2003. Net interest expense increased by $714,000 as a result of interest incurred on a new $20.0 million five-year mortgage loan, which funded on June 12, 2003. Net interest expense increased by $150,000 due to the termination of the capitalization of interest on the construction costs for The Sports Club/LA-Beverly Hills, which opened on October 7, 2003. Net interest expense increased by $112,000 primarily due to loan guarantee fees incurred on the new $20.0 million mortgage loan and decreased by $151,000 due principally to a reduction of equipment financing loans, and the payoff of the former credit line with the Company's bank. The Sports Club's minority interests increased by $442,000 to $517,000 for the six months ended June 30, 2004, versus $75,000 for the same period in 2003. Minority interests increased by $442,000, as a result of the accrual of a minority interest at the Company's Reebok Sports Club/NY. The quarter ended June 30, 2004, was the first quarter that the Company recorded a minority interest in the profits of the Reebok partnership. The tax provisions recorded for the six months ended June 30, 2004 and 2003 are comprised of New York City and New York State income taxes incurred on pre-tax earnings at Reebok Sports Club/NY. The Company did not record any federal or state deferred tax benefit related to its consolidated pre-tax losses incurred for the six months ended June 30, 2004 and 2003. After the tax provisions and dividends on preferred stock of $876,000 in 2004 and $698,000 in 2003, consolidated net loss attributable to common shareholders was $11.1 million, or $0.60 per basic and diluted share for the six months ended June 30, 2004, versus a loss of $9.1 million, or $0.50 per basic and diluted share for the six months ended June 30, 2003. Liquidity and Capital Resources Historically, The Sports Club has satisfied its liquidity needs through various debt arrangements, sales of common or Preferred Stock and cash flows from operations. Its primary liquidity needs the past several years has been the development of new Clubs and the interest cost associated with its $100.0 million Senior Secured Notes. In order to make the March 15, 2004 interest payment on the Senior Secured Notes, the Company issued $6.5 million of a newly-created class of Series D Convertible Preferred Stock. The Company is not certain that amounts it will generate from operations through September 15, 2004 will be sufficient for it to make the Senior Secured Note interest payment due on September 15, 2004. If cash flows from operations are insufficient to make the September 15, 2004 or future interest payments, the Company would be required to dispose of assets or sell additional equity or debt securities to generate cash to make such payments. There can be no assurance that the Company will be able to sell assets or issue additional equity or debt securities, or that any such sales or issuances will be on reasonable terms. If unable to complete such sales or issuances prior to the date such interest payments are due, the Company's ability to continue to operate its business would be materially adversely affected. The Sports Club is currently exploring financing alternatives with holders of its Series D Convertible Preferred and believes that the Company will be able to finalize a transaction that will allow it to meet its September 15 interest payment obligation with respect to the Senior Secured Notes; however, no assurance can be given that such financing will be completed in a timely fashion. In addition, the Company has engaged an independent investment banker to assist it in selling certain assets or Clubs in order to generate cash for working capital purposes and to retire a portion of the Senior Secured Notes. While optimistic that such sales will be completed, no assurance can be given that such transactions will be consummated. Additional funds will be required to provide working capital and to service interest payments on the Senior Secured Notes. In addition, The Sports Club will not consider future acquisitions or the development or management of new Clubs unless such transactions could be structured in a way that would not require the expenditure of capital; could be done in partnership with other development partners or other third parties; could be expected to generate cash flow; or would further enhance The Sports Club/LA brand name in the market place. Operating Activities The Company's cash balance on June 30, 2004 was $3.7 million. During the first six months of 2004, its earnings before interest, taxes, depreciation and amortization were $3.8 million. Management believes the Company will continue to generate positive EBITDA and that such amount will increase as its new Clubs continue to mature. The Sports Club has various deposits that secure its performance under several contracts. Management expects to receive back $1.0 million of such deposits in the third quarter of 2004 and $2.7 million in the fourth quarter of 2004. The Sports Club Company, based in Los Angeles, owns and operates luxury sports and fitness complexes nationwide under the brand name "The Sports Club/LA." ST. ANTHONY'S: S&P Lowers Ratings on $11.4 Million Bonds to BB+ --------------------------------------------------------------- Standard & Poor's Ratings Services lowered its rating on Alton, Illinois' $11.4 million outstanding revenue bonds series 1996, issued for St. Anthony's Health Center, to 'BB+' from 'BBB-'. The rating action reflects the health center's: -- weak operating performance, evidenced by a loss for the 2004 six-month interim period, -- generating thin debt service coverage; -- slim and declining liquidity; -- ongoing equity transfers to affiliated entities, specifically to a local physician group; and -- weak service area economy. Factors precluding a lower rating at this time include: -- better reimbursement from managed care payers; -- formulation of a turnaround plan; and -- increased admissions in 2003, although they have been soft during the 2004 six-month interim period due to the loss of several physicians. The outlook is stable based on the expectation that management's turnaround plan will address the health center's challenges: -- continued weak operations, -- diminished liquidity, -- ongoing transfers to the health system, and -- age of the health center "Should operations and liquidity continue to decline during the next one to two years, a further lowering of the rating will be likely," said Standard & Poor's credit analyst Charlene Butterfield. The bonds are secured by a pledge of gross receipts of St. Anthony's Health Center. Because audited systemwide financial results are unavailable, the rating and this report refer only to the hospital's results; dilution of income outside the hospital, however, is factored into the rating. St. Anthony's Health Center operates two facilities, with 243 beds in Alton, Illinois. STELCO INC: Plans to Terminate Bargaining Pact Amidst Strike Plans ------------------------------------------------------------------ Stelco Inc. (TSX:STE) commented on USWA Local 8782's issuance of 90 days notice of a potential strike at the Company's Lake Erie facility. The notice is required under the June 23rd Agreement between Stelco and its USWA Locals. The Agreement establishes a framework governing discussions on collective bargaining, restructuring and other matters during the Company's Court- supervised restructuring process. Courtney Pratt, Stelco President and Chief Executive Officer, said, "We are extremely disappointed that the Local would take this step only two days after it agreed to extend the Agreement till November 26, 2004. Having a clear 90-day window to any strike action is important to our customers. "We will take all steps necessary to preserve the interests of our valued customers in light of this damaging action. We are contacting and working with them to provide as much stability, certainty and information as possible during this period. "We are also reviewing all of the options available to us given [the] events. With the key section of the June 23rd Agreement now gone, we have concluded that we have no choice but to provide the Locals with the required seven days notice of our decision to terminate the Agreement. "I'm surprised that the Local would take this step at this time. The Company has spent months working to initiate and to advance the dialogue on issues that affect the future of the Company and all of its stakeholders, including our unionized personnel. We have recently made what I thought was progress in our discussions with the USWA. We have addressed a number of irritants to the union Locals through what has been constructive cooperation during recent weeks. "The Company has worked hard to advance this process in the face of continuing legal challenges and delays. But today's action by the Local throws an obstacle in the way of meaningful progress towards our goal of preserving jobs, providing certainty to our pensioners and ensuring Stelco's viability in all market conditions. It raises unnecessary concerns among our customers, concerns that can only be to the detriment of all stakeholders. "As I've said repeatedly, Stelco can achieve a positive outcome to its restructuring process if all parties work together and want it to happen. I hope the Local will keep in mind the legitimate interests of all stakeholders in the coming weeks." Stelco, Inc. -- http://www.stelco.ca/-- which is currently undergoing CCAA restructuring proceedings, is a large, diversified steel producer. Stelco is involved in all major segments of the steel industry through its integrated steel business, mini-mills, and manufactured products businesses. Consolidated net sales in 2003 were $2.7 billion. SUCCESS FACTORY: Case Summary & 20 Largest Unsecured Creditors -------------------------------------------------------------- Debtor: Success Factory, Inc. 5201 Highway 90 West Mobile, Alabama 36619-4201 Bankruptcy Case No.: 04-15705 Type of Business: The Debtor is a manufactured housing retailer and developer serving the Mobile, Alabama, market since 1999. See http://www.affordablehousingservices.com/ Chapter 11 Petition Date: October 1, 2004 Court: Southern District of Alabama (Mobile) Debtor's Counsel: Michael B. Smith, Esq. Michael B. Smith, P.C. P.O. Box 40127 Mobile, AL 36640 Tel: 251-441-8077 Total Assets: $611,503 Total Debts: $2,061,563 Debtor's 20 Largest Unsecured Creditors: Entity Claim Amount ------ ------------ AmSouth Bank $1,000,000 P.O. Box 11407 Birmingham, AL 35246 Textron Financial $280,000 4550 North Point Parkway #400 Alpharetta, GA 30022 Paul & Georgia Schulz $278,000 2854 Briarfield Lane Mobile, AL 36693 AmSouth Bank Of Alabama $60,000 AmSouth Bank $50,300 Wells Fargo Bank $41,000 Alabama Department Of Revenue $36,000 Rock Financial, Inc. $21,500 Advanta Bank $21,000 U.S. Bancorp Card Services, Inc. $20,500 Mobile County Department Of Revenue $18,000 Chase Bankcard Services, Inc. $12,000 American Express $12,000 American Express $12,000 MBNA America $11,000 Ford Motor Credit Company $8,000 Stylecrest $6,800 Mobile Register $3,700 Blevins, Inc. $1,140 WBLX/ Cumulus Broadcasting $742 TECH LABORATORIES: Strained Liquidity Triggers Going Concern Doubt ------------------------------------------------------------------ As a result of operating losses and negative cash flows experienced during 2001, 2002 and 2003, Tech Laboratories, Inc., has a tenuous liquidity position. If sales do not improve or alternate financing is not obtained, substantial doubt exists about Tech Labs' ability to continue as a going concern. The Company has signed a stand-by equity distribution agreement with Cornell Capital Partners in May 2004, which could potentially provide approximately $8.5 million of future equity financing. The Company filed an SB-2 registration Statement in August 2004 registering the shares included in this agreement. During the first half of 2004, the Company is still suffering from the economic downturn. The Company's operating activities utilized cash of $32,587 during the six months ended June 30, 2004, as compared to generating cash of $4,770 during the six months ended June 30, 2003. About Tech Laboratories, Inc. Tech Laboratories, Inc. manufactures, markets and sells a product creating a new paradigm of automating and securing high-tech networks at the physical layer. The Company's primary product, DynaTraX(TM), a patented (US6414953B1) high-speed digital matrix cross-connect switch with a revolutionary new technology, can significantly reduce network downtime and achieve substantial cost-savings in data and telecommunications networking environments. DynaTraX(TM) has the ability to create a critical and meaningful solution to stop hackers from intruding into networks, thereby thwarting cyber-terrorists. DynaTraX(TM) electronically disconnects a hacker, detected by Intrusion Detection Software, and reconnects him to a simulated network within 60-90 nanoseconds that allows you to hold and trace him. At June 30, 2004, Tech Laboratories' balance sheet showed a $156,050 stockholders' deficit, compared to a $606,891 deficit at June 30, 2003. TRESTLE HOLDINGS: Losses & Deficits Prompt Going Concern Doubt -------------------------------------------------------------- Trestle Holdings, Inc., has suffered recurring losses from operations since its inception and had an accumulated deficit of approximately $42,027,000 at June 30, 2004. The recovery of the Company's assets is dependent upon continued operations of the Company. Trestle's recovery is dependent upon future events, the outcome of which is undetermined. The Company intends to continue to attempt to raise additional capital, but there can be no certainty that such efforts will be successful. Going Concern Doubt Primarily as a result of its recurring losses and lack of liquidity, the Company has received a report from its independent auditors that includes an explanatory paragraph describing the uncertainty as to Trestle Holdings' ability to continue as a going concern. To continue operations, or if its current level of operations change, the Company will be required to secure additional working capital, by way of equity or debt financing, or otherwise, to sustain continuing operations. There can be no assurance that the Company will be able to secure sufficient financing or on terms acceptable to the Company. If unable to obtain adequate funds if and when needed, Trestle would be required to delay, limit or eliminate some or all of its proposed operations. If additional funds are raised through the issuance of equity securities, the percentage ownership of its current stockholders is likely to, or will, be reduced. Trestle Holdings, Inc., through its wholly owned subsidiary, Trestle Acquisition Corp., develops and sells digital imaging and telemedicine applications linking dispersed users and data primarily in the healthcare and pharmaceutical markets. Trestle's digital imaging products - MedMicro and MedScan - provide a digital platform to share, store, and analyze tissue images. Trestle's MedReach product provides healthcare organizations with a cost effective platform for remote examination, diagnosis, and treatment of patients. TXU CORP: Releases Independent Environmental Study -------------------------------------------------- TXU Corp. (NYSE: TXU) released an independent study titled, "TXU Activities Regarding Actual and Potential U.S. Air Emissions and Climate Change Policies." The study was developed as part of an agreement with TXU shareholders, including Sister Susan Mika of the Benedictine Sisters and others, regarding TXU's environmental activities. TXU has worked cooperatively with the Benedictine Sisters on environmental reporting issues since the 1980s. The independent study, by NERA Economic Consulting in collaboration with Marc Goldsmith & Associates, evaluated TXU's processes for following and evaluating air emissions and climate policies and reviewed the company's actions regarding previous major air emissions policies and compliance. Additionally, the study considered the financial consequences and related risks to TXU of prospective air emissions and climate change policies, including an assessment of the financial effects of reducing emissions now in anticipation of future requirements. The study concluded that TXU has the appropriate processes and procedures in place and uses appropriate economic methodologies to evaluate financial consequences of environmental regulatory policy changes and scenarios. NERA's analysis also concluded that absent certain specific circumstances, TXU's shareholders would not benefit if the company devoted major financial resources now to reduce its carbon dioxide emissions in advance of uncertain future emission regulations. Notably, the study concludes that TXU's efforts have consistently resulted in compliance with air emissions limits. "It is important to note that because of the competitive nature of the electricity market in which TXU participates in Texas, the results of this study are not necessarily transferable to other companies, other markets, or to the electricity sector as a whole," said Mike McCall, TXU Power Senior Vice President for Environmental, Fuels and Safety. "Participation in the development of this study as well as the discussions with our shareholder groups helps us better understand and prepare to meet future potential regulatory changes." The study is available to TXU shareholders and the public on TXU Corp.'s website in the Environment section at http://www.txucorp.com/envcom/default.asp/ This report is in addition to TXU's annual Environmental Review, which is also available online. About the Company TXU Corp., a Dallas-based energy company, manages a portfolio of competitive and regulated energy businesses in North America, primarily in Texas. In TXU Corp.'s unregulated business, TXU Energy Retail provides electricity and related services to more than 2.6 million competitive electricity customers in Texas, more customers than any other retail electric provider in the state. TXU Power owns and operates over 18,300 megawatts of generation in Texas, including 2,300 MW of nuclear-fired and 5,837 MW of lignite/coal-fired generation capacity. The company is also the largest purchaser of wind-generated electricity in Texas and among the top five purchasers in North America. TXU Corp.'s regulated electric distribution and transmission business, TXU Electric Delivery Company, complements the competitive operations, using asset management skills developed over more than one hundred years, to provide reliable electricity delivery to consumers. TXU Electric Delivery operates the largest distribution and transmission system in Texas, providing power to 2.9 million electric delivery points over more than 98,000 miles of distribution and 14,000 miles of transmission lines. Visit http://www.txucorp.com/for more information about TXU Corp. * * * As reported in the Troubled Company Reporter on May 11, 2004, TXU Corp. announced it has reached an agreement, which resulted in the dismissal of a lawsuit brought against TXU by owners of approximately 39 percent of certain TXU equity-linked debt securities issued in October 2001. Under the terms of the agreement, TXU will repurchase all of the approximately 8.1 million equity-linked debt securities (NYSE:TXU PrC) (approximately $400 million stated amount), held by the plaintiffs for an aggregate price of $47.75 per unit. The lawsuit was filed on October 9, 2003 in New York. In the litigation, the plaintiffs alleged that a termination event had occurred and that the plaintiffs are not required to buy common stock under the common stock purchase contracts, which apply to the securities. The lawsuit also alleged that an event of default had occurred under the terms of the related notes. The common stock purchase contracts require the holders to buy TXU common stock on specified dates in 2004 and 2005. The lawsuit, which is currently on appeal after the trial court granted TXU's motion to dismiss, will be dismissed by agreement of the parties. TXU GAS: Atmos Energy Pays $1.9 Billion Cash in Merger Pact ----------------------------------------------------------- Atmos Energy Corporation (NYSE:ATO) has completed its acquisition of the natural gas distribution and pipeline operations of TXU Gas Company, making Atmos Energy the country's largest natural-gas- only utility. Atmos Energy paid approximately $1.905 billion in cash for the operations after making certain adjustments pursuant to the merger agreement. It is financing the transaction with an interim 364-day revolving credit facility led by Merrill Lynch and plans to arrange for permanent funding before the end of 2004. Funding will consist of between $500 million and $600 million in equity, including the issuance of about $235 million in equity in July 2004, and the remainder in long-term debt of between $1.3 billion and $1.4 billion. The estimated net proceeds from the sale are expected to approximate the carrying value of the net assets sold. The TXU Gas operations are expected to be immediately accretive to fiscal 2005 earnings, contributing from 5 cents to 10 cents to Atmos Energy's diluted earnings per share, the company said. "Atmos Energy now serves 3.1 million natural gas customers -- more than any other pure natural gas utility in the United States," said Robert W. Best, chairman, president and chief executive officer of Atmos Energy Corporation. "Atmos Energy also now operates one of the largest intrastate natural gas pipelines, which should create added value in the future." The acquired operations serve approximately 1.5 million customers located in the Dallas-Fort Worth Metroplex and more than 500 other communities across the northern half of Texas. The operations will become a separate division of Atmos Energy Corporation and will be renamed Atmos Energy(R) in coming months. Prior to the close of the transaction, TXU Gas Company called for redemption all of the outstanding shares of its Adjustable Rate Cumulative Preferred Stock, Series F. The redemption will result in the simultaneous redemption by Computershare Trust Company, Inc., as Depositary Agent, of all of the outstanding Depositary Preferred Shares, Series F (NYSE: TGF PrF), each representing a one-fortieth interest in a share of Series F Preferred Stock. The Redemption Date is November 5, 2004, and the Redemption Price is $25.00 per Depositary Share, plus unpaid accumulated dividends, if any, to the Redemption Date. The Company irrevocably deposited with JPMorgan Chase Bank an amount sufficient to pay the Redemption Price. Dividends in respect of these preferred securities will cease to accrue on the Redemption Date. Payment of the November 1, 2004 regular quarterly dividend will be made to holders of record on October 15, 2004 in the usual manner. Payment of the Redemption Price (excluding the dividend to be paid on November 1, 2004) will be made beginning on the Redemption Date upon surrender of the Depositary Shares at either of the following addresses of the Depositary Agent: Preferred Address: Computershare Trust Company, Inc. 350 Indiana Street Suite 800 Golden, CO 80401 Attn: John Harmann Alternate Address: Computershare Trust Company of New York Wall Street Plaza 88 Pine Street, 19th Floor New York, NY 10005 In addition, prior to the close of the merger transaction, TXU Gas irrevocably deposited with the applicable trustees an aggregate of approximately $450 million for the defeasance of all of its outstanding debt securities, which are as follows: -- 7-1/8% Notes due June 15, 2005 ($150 million); -- Remarketed Reset Notes due January 1, 2008 ($125 million); and -- Floating Rate Capital Securities ($150 million). The Floating Rate Capital Securities will be redeemed on Oct. 31, 2004, and the Remarketed Reset Notes due January 1, 2008 will be redeemed on July 1, 2005. The 7-1/8% Notes due 2005 will be repaid at maturity. About the Company TXU Gas Company is engaged in the purchase, transmission, distribution and sale of natural gas in north-central, eastern, and western regions in Texas, and the company also provides energy asset management services. TXU Gas is a wholly owned subsidiary of TXU Corp. * * * As reported in the Troubled Company Reporter on June 21, Fitch Ratings maintains the Rating Watch Evolving status on the following ratings for TXU Gas Co.: --Senior unsecured debt 'BBB-'; --Preferred stock 'BB+'. TXU Corp. (senior unsecured debt rated 'BBB-'; preferred stock rated 'BB+'; Stable Outlook by Fitch) announced its plans to sell essentially all of the assets of TXU Gas to Atmos Energy for $1.925 billion, which is approximately book value. The transaction requires the review of the Justice Department under the Hart- Scott-Rodino Act and regulatory approvals in Missouri, Virginia, and Iowa. The transaction is expected to close by the end of the year. U.S. CAN: Delayed Quarterly Report Spurs S&P's B Credit Rating -------------------------------------------------------------- Standard & Poor's Ratings Services placed its 'B' corporate credit rating and other ratings of U.S. Can Corporation on CreditWatch with negative implications following the company's announcement that it has delayed filing its report for the quarter ended July 4, 2004, with lenders to its credit agreement and the SEC. The delay results from an ongoing internal review being conducted to address accounting and financial reporting issues related to the operations of U.S. Can's aerosol can manufacturing facility in Laon, France. Lombard, Illinois-based U.S. Can had total debt outstanding of about $556 million at April 4, 2004. "The CreditWatch placement reflects uncertainties regarding the quality and adequacy of the company's accounting controls and the accuracy of financial reporting, and the potential for deterioration of credit quality following a restatement," said Standard & Poor's credit analyst Liley Mehta. The company intends to file its quarterly report on or about November 5, 2004, and to restate its financial statements for certain prior periods -- the company is a voluntary filer with the SEC. U.S. Can initially announced that it had discovered accounting inconsistencies at its Laon operations in mid August and obtained a waiver from lenders to delay filing its second- quarter report until September 27, 2004; the company has now requested that the waiver extend through November 5, 2004. Under the terms of the waiver, the company has restricted availability to its new $65 million revolving credit facility -- completed in June 2004 -- through the waiver period. While Standard & Poor's expects liquidity to be restored following the restatements, the revolving credit facility restrictions have raised additional concerns about near-term liquidity in the absence of a fast resolution to the accounting issues. In addition, the company remains highly leveraged, and the unexpected earnings revision will result in a further deterioration to the company's already weak financial profile. The CreditWatch listing will be resolved after Standard & Poor's has reviewed the 10-Q for the second quarter of 2004 as well as restated financial statements of prior years, and has discussed with management what steps are being taken to strengthen the company's accounting and management control systems and practices. With annual revenues of about $837 million, U.S. Can produces steel aerosol and other general-line metal containers primarily for personal care, household, automotive, paint, industrial and specialty packaging products in the U.S., Europe, and Latin America; plastic containers in the U.S.; and metal food cans in Europe. International operations account for about a third of the company's annual sales and include aerosol can and metal food can sales in Europe. UAL CORP: Judge Wedoff Strikes Informational Brief from Record -------------------------------------------------------------- On September 23, 2004, UAL Corp. and its debtor-affiliates filed a 107-page Informational Brief. The Brief includes a legal "primer" on pension plans and the basics of the Employee Retirement Income Security Act and the Pension Benefit Guaranty Corporation. The Brief also contains a description of the Debtors' pension plans, their pension obligations, and a preliminary analysis of the effects that a termination and replacement of the pension plans would have on the Debtors' employees and retirees. It also includes a legal argument on the Debtors' decision to cease their minimum funding obligations and a discourse on the nature of the PBGC's claims in bankruptcy court upon pension plan termination. Robert S. Clayman, Esq., at Guerrieri, Edmond & Clayman, in Washington, D.C., representing the International Association of Machinists and Aerospace Workers, AFL-CIO and the Association of Flight Attendants, asserts that the Brief is filled with factual claims, none of which are supported by sworn affidavits or otherwise verified. Mr. Clayman also questions the veracity of the Brief's contents. The Brief's projections on pension benefits and pension funding issues are based on the Debtors' preliminary analyses only. There is no evidentiary foundation to offer credibility or reliability of the speculative and evolving projections. Mr. Clayman asks the Court to strike the Informational Brief. There is no cause for the Court to consider the Brief. The Brief does not request any opinion or ruling from the Court. The filing of the Brief is "wholly improper" and will only prejudice the resolution of future pension plan issues. Mr. Clayman points out that motions, not briefs, are the proper vehicle for submitting legal argument and factual matters to a court. The Debtors should be ordered to refrain from further Court filings that do not conform to Court rules. If the Debtors are truly interested in seeking alternatives to terminating the pension plans, as they profess, they should not be speaking out of turn, distracting the Court and forcing the Unions to shift their attention to a forum away from the intense, ongoing pension discussions. PBGC Supports the IAM's Request The Pension Benefit Guaranty Corporation joins the Unions in labeling the Brief an improper filing that provides "no realistic opportunity to respond, and serves no legitimate purpose." In a letter sent to the Debtors' counsel, James H.M. Sprayregen, Esq., at Kirkland & Ellis, PBGC General Counsel, James J. Keightley, notes that the length and complexity of the document indicates that it was conceived over a long period of time. The Brief "requests no remedy, and expects no response, it is merely a visible 'ex parte' contact." The Brief is little more than a press release explaining the Debtors' view of the law and factual circumstances surrounding their refusal to pay hundreds of millions of dollars in pension liability. According to Jeffrey B. Cohen, PBGC Deputy General Counsel, the Brief is "an abuse of the judicial process," an effort to substantiate a one-sided view of the facts and the law. It circumvents the rules of evidence by loading the record with "endless pages of hearsay." The Brief should be stricken and the Court should order the Debtors to refrain from filing any further pleadings that do not properly seek some form of relief. Debtors Respond James H.M. Sprayregen, Esq., at Kirkland & Ellis, says that bankruptcy courts regularly accept informational briefs to provide stakeholders with an opportunity to better comprehend major issues. The Debtors have been filing briefs since the first day of these proceedings and have been filing status reports that are purely informational, without attempts to strike by another party. Mr. Sprayregen explains that the pension issue has proven complex and volatile. The Brief is intended to provide greater understanding of the challenges and alternatives facing the Debtors. The Debtors hope that the Brief will stimulate further discussions and cooperation with their stakeholders to resolve the pension controversy. Besides addressing the pension issues, Mr. Sprayregen notes that the Brief serves three additional purposes: (1) The Brief responds to the request for appointment of a trustee filed by the Unions. The Request primarily focuses on the Debtors' decisions to not contribute to their pension plans to procure exit financing. The Brief explains how the Debtors reached these decisions and provides an overview of viable alternatives; (2) The Brief responds to comments the Court made at the August 2004 Hearing. The Court stated that it was attempting to become more familiar with ERISA, the functioning of the PBGC and alternatives to restructure pensions. The Brief provides a non-technical, common sense explanation of those topics and how they apply to the Debtors; and (3) The Brief provides transparency by illuminating how the Debtors are examining its pension issues. The Unions, who have been yelling about a lack of transparency on the pension issue, now seek to prevent the Debtors from sharing relevant information. The Debtors are merely trying to ensure that as many parties as possible are fully informed. * * * Judge Wedoff sides with the Unions and the PBGC by striking the Brief from the record. The Brief is removed from the docket and the Debtors are ordered to not make any further filings which do not conform to Court rules. 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) UNITED SUBCONTRACTORS: S&P Assigns B+ Facility & Loan Ratings ------------------------------------------------------------- Standard & Poor's Ratings Services assigned its 'B+' corporate credit rating to Salt Lake City, Utah-based installation services company United Subcontractors Inc. At the same time, Standard & Poor's assigned its 'B+' secured debt ratings and '4' recovery ratings to the company's $30 million revolving credit facility and $155 million first-lien term loan. These ratings indicate the likelihood that the first-lien lenders would recover a marginal portion (25% to 50%) of principal in a default scenario. A 'B-' secured debt rating and '5' recovery rating were assigned to the company's $26 million second lien term loan, indicating Standard & Poor's expectation that the second-lien lenders' recovery of principal in a default would be marginal (0% to 25%). The term loan proceeds, together with $70.3 million of preferred equity, $1.5 million of common equity, and $33.6 million of privately placed senior subordinated notes will be used to finance the $275 million acquisition of United Subcontractors by private equity firm Wind Point Partners, certain management, and other investors. A $0.7 million existing seller note is included in the purchase price, and about 20% of total equity is being rolled over by existing management. The purchase price and related fees represent 5.47x last-12-months' EBITDA of $52.4 million. "The ratings reflect the company's modest revenue base and narrow product focus within cyclical end markets, as well as its very aggressive debt leverage," said Standard & Poor's credit analyst Cynthia Werneth. "Nevertheless, these risks are tempered by fairly favorable prospects for residential construction and insulation demand, and favorable competitive dynamics within this segment," Ms. Werneth adds. United Subcontractors was formed in 1998 through the merger of 16 leading regional insulation installers and has grown via numerous small acquisitions since then. Many of the principals of the 16 original firms are current owners and regional managers. The company's primary line of business is the installation of insulation in new homes, which accounts for about 75% of last-12-months' revenues of $280 million. US AIRWAYS: Mesa Air Group Sr. Management Reduce Salaries by 23% ---------------------------------------------------------------- Mesa Air Group, Inc.'s (Nasdaq: MESA) senior management will reduce their salaries by 23%, adjusted proportionately for its US Airways code share revenues and credit such savings to US Airways in support of its restructuring efforts. In addition, Mesa will ask its US Airways Express employees, on a voluntary basis, to agree to a deferral of up to 23% of their salaries. All deferrals will be credited to US Airways and repaid upon US Airways emergence from bankruptcy. In addition, at such time any employee who elects to participate will also receive a bonus equal to 20% of their deferral. "We strongly support the efforts being made by US Airways to return to long-term profitability," said Jonathan Ornstein, Mesa Air Group's Chairman and Chief Executive Officer. "In addition, we very much appreciate the sacrifices being made by all US Airways' employees to help their company and we intend to stand shoulder to shoulder with them during this difficult period." About Mesa Air Group Mesa Air Group, Inc., with projected 2005 revenues in excess of $1 billion, currently operates 180 aircraft with over 1,000 daily system departures to 181 cities, 41 states, the District of Columbia, Canada, Mexico and the Bahamas. It operates in the West and Midwest as America West Express; the Midwest and East as US Airways Express; in West and Midwest as United Express; in Kansas City with Midwest Airlines and in New Mexico and Texas as Mesa Airlines. The Company, which was founded in New Mexico in 1980, has approximately 4,400 employees. Mesa is a member of Regional Aviation Partners and the Regional Aviation Association. Headquartered in Arlington, Virginia, US Airways' primary business activity is the ownership of the common stock of US Airways, Inc., Allegheny Airlines, Inc., Piedmont Airlines, Inc., PSA Airlines, Inc., MidAtlantic Airways, Inc., US Airways Leasing and Sales, Inc., Material Services Company, Inc. and Airways Assurance Limited, LLC. Under a chapter 11 plan declared effective on March 31, 2003, USAir emerged from bankruptcy with the Retirement Systems of Alabama taking a 40% equity stake in the deleveraged carrier in exchange for $240 million infusion of new capital. US Airways and its subsidiaries filed another chapter 11 petition on September 12, 2004 (Bankr. E.D. Va. Case No. 04-13820). Brian P. Leitch, Esq., Daniel M. Lewis, Esq., and Michael J. Canning, Esq. at Arnold & Porter LLP, and Lawrence E. Rifken, Esq. and Douglas M. Foley, Esq. at McGuireWoods LLP represent the Debtors in its restructuring efforts. In the Company's second bankruptcy filing, it lists $8,805,972,000 in total assets and $8,702,437,000 in total debts. VANTAGEMED CORP: Partners with DrFirst in Distribution Agreement ---------------------------------------------------------------- VantageMed Corporation (OTC Bulletin Board: VMDC.OB) and DrFirst, Inc., announced a distribution agreement under which VantageMed will integrate DrFirst's RCOPIA(SM) electronic prescribing management solution with VantageMed's RidgeMark(R) practice management software solution. The HL7-based integration will enable the two systems to work together to bring the power and benefits of handheld charge capture and electronic prescribing to RidgeMark users. "By combining RCOPIA's electronic prescribing and charge capture capabilities with RidgeMark, one of the industry's leading practice management systems, providers will now be able to electronically write and transmit prescriptions from their office or on the road, leveraging RCOPIA's mobile capabilities and its interfaces with the pharmacy benefit management companies on one end and the pharmacies on the other," said John Bartos, Jr., President of DrFirst. According to Richard M. Brooks, Chief Executive Officer for VantageMed, "This represents a great partnership for our company and our customers. Our HL7-based interfaces allow us to integrate with best in class clinical systems such as DrFirst's RCOPIA. By integrating these two highly successful and widely used programs, we feel that we are giving RidgeMark users access to the ideal end to end solution for mobile electronic prescribing and charge capture." About DrFirst Utilizing the latest advancements in Internet, security, wireless, web and Personal Digital Assistant (PDA) technology, DrFirst provides a suite of integrated, affordable, intuitive and easily implemented products and services for the healthcare community. DrFirst's products include electronic prescribing, charge capture and secure messaging. These comprehensive solutions solve critical communication, business productivity and clinical needs of physicians, clinics, and health systems. More information about DrFirst can be found at http://www.drfirst.com/ About VantageMed VantageMed is a provider of healthcare information systems and services distributed to over 12,000 customer sites nationwide. Its suite of software products and services automates administrative, financial, clinical and management functions for physicians and other healthcare providers as well as provider organizations. For more information about RidgeMark, please call 877-879-8633, or visit http://www.vantagemed.com/ At June 30, 2004, VantageMed Corporation's balance sheet showed a $1,180,000 stockholders' deficit, compared to a $483,000 deficit at December 31, 2003. VITROTECH CORP: Amends Hi-Tech's Mineral Purchase & Royalty Pacts ----------------------------------------------------------------- VitroTech Corporation (OTC Bulletin Board: VROT) has entered into a letter agreement with each of Hi-Tech Environmental Products LLC, Enviro Investment Group, LLC, Red Rock Canyon, LLC and Valley Springs Mineral, LLC to restructure the terms on which VitroTech purchases minerals from each of the Mine Companies and to reduce the royalty payable to Hi-Tech. VitroTech acquires raw minerals for use in production of its products from the Mine Companies under a series of agreements. Those agreements originally provided for fixed per pound payments to be made to the Mine Companies for each pound of mineral sold and collected by VitroTech. Under the original contracts, payments escalated over time with 2004 payments being $0.875 per pound increasing to $1.00 per pound plus inflation adjustments in future years. The agreements also established certain annual minimum purchase requirements. The minimum purchase requirements under the original agreements began at 7.5 million pounds in 2005 with annual scheduled escalations. Under the terms of the letter agreement, the fixed per pound payment obligation has been eliminated. In its place, VitroTech will be obligated to pay to the Mine Companies 10% of the sales price of all minerals sold by VitroTech. Additionally, the annual minimum purchase requirement has been modified to provide for no minimum purchases in 2004 or 2005 with minimum purchases in subsequent years being fixed at the highest sales level in any prior year. VitroTech acquired its core processing technologies from Hi-Tech under an agreement that provided for royalty payments by VitroTech in an amount equal to $1.00 per pound of material sold and collected by VitroTech. Under the terms of the letter agreement, the fixed per pound royalty payment to Hi-Tech has been eliminated. In its place, VitroTech will be obligated to pay to Hi-Tech 5% of the sales price of all minerals sold by VitroTech. As consideration for the agreements of Hi-Tech and the Mine Companies to modify their existing agreements with VitroTech, VitroTech agreed to issue to Hi-Tech and the Mine Companies an aggregate of 5,000,000 shares of common stock on January 3, 2005. Up to an additional 12,107,657 shares of VitroTech common stock may be issued to Hi-Tech and Mine Companies between 2006 and 2010 based on pounds of mineral actually sold and the price of VitroTech common stock. The letter agreement is expected to be formalized in amendments to the current definitive agreements with Hi-Tech and the Mine Companies. VitroTech interim CEO, Glenn Easterbrook, stated, "We believe that the restructuring of our supply agreement with the mines and our royalty agreement with Hi-Tech is a significant milestone in VitroTech's corporate life. With the mineral payments and the royalty payment being tied to a percent of sales price, we will have much greater flexibility in our ability to serve our customers and preserve acceptable margins. We believe that this development, along with the restructuring of our minimum purchase obligations, will allow us to increase both sales and profitability as well as better position VitroTech in the capital markets." About VitroTech Corporation VitroTech Corporation is a materials technology and research company, headquartered in Santa Ana, California, with rights to purchase, process and sell approximately 35 billion pounds of rare amorphous aluminosilicate deposits which are used to produce its primary products, Vitrolite(R) and Vitrocote(R). These products enhance both the physical qualities and production of plastics, paint/coatings, and a variety of other market segments http://www.vitrotechcorp.com/ WRC MEDIA INC: S&P Lowers Corporate Credit Rating One Notch to B- ----------------------------------------------------------------- Standard & Poor's Ratings Services lowered its ratings on WRC Media Inc., including lowering its corporate credit rating to 'B-' from 'B'. At the same time, the ratings were removed from CreditWatch, where they were placed on June 6, 2003. Total debt and preferred stock as of June 30, 2004, was about $443 million. The rating outlook is negative. New York, New York-based WRC Media is a supplemental education publisher serving the school, library, and home markets. "The downgrade reflects the company's heightened financial risk resulting from declining profitability, increasing debt and preferred stock levels, and the lackluster environment for supplementary educational spending resulting from state and local budgetary constraints," said Standard & Poor's credit analyst Hal F. Diamond. * Large Companies with Insolvent Balance Sheets ----------------------------------------------- Total Shareholders Total Working Equity Assets Capital Company Ticker ($MM) ($MM) ($MM) ------- ------ ------------ ------- -------- Airgate PCS Inc. CSA (89) 270 9 Akamai Tech. AKAM (157) 190 55 Alaska Comm. Syst. ALSK (12) 650 85 Alliance Imaging AIQ (50) 641 27 Amazon.com AMZN (791) 1,888 645 AMR Corp. AMR (122) 30,001 (1,784) Amylin Pharm. Inc. AMLN (11) 429 357 Atherogenics Inc. AGIX (1) 106 94 Blount International BLT (382) 420 (55) CableVision System CVC (1,546) 11,141 (489) Cell Therapeutic CTIC (65) 162 72 Centennial Comm CYCL (547) 1,540 13 Choice Hotels CHH (175) 267 (25) Cincinnati Bell CBB (615) 2,022 (17) Compass Minerals CMP (132) 647 111 Cubist Pharmacy CBST (58) 172 42 Delta Air Lines DAL (2,671) 24,175 (2,273) Deluxe Corp DLX (251) 1,531 (987) Domino Pizza DPZ (677) 449 (33) Echostar Comm DISH (1,740) 6,037 639 Graftech International GTI (30) 1,036 294 Hawaian Holdings HA (160) 236 (60) Idenix Pharm. IDIX (1) 77 42 Imax Corporation IMAX (51) 215 9 Indevus Pharm. IDEV (34) 205 164 Inex Pharm. IEX (2) 66 40 Kinetic Concepts KCI (77) 616 201 Lodgenet Entertainment LNET (133) 273 (8) Lucent Tech. Inc. LU (3,064) 15,970 2,472 Maxxam Inc. MXM (629) 1,040 96 McDermott Int'l MDR (361) 1,246 (34) McMoran Exploration MMR (78) 163 49 Memberworks Inc. MBRS (46) 453 (11) Millennium Chem. MCH (47) 2,331 580 Northwest Airlines NWAC (2,172) 14,391 (290) Nextel Partner NXTP (19) 1,855 261 ON Semiconductor ONNN (315) 1,262 254 Per-se Tech. Inc. PSTI (34) 157 43 Phosphate Res. PLP (439) 316 5 Pinnacle Airline PNCL (31) 144 20 Qwest Communication Q (1,909) 25,106 (555) Rightnow Tech. RNOW (12) 38 (9) SBA Comm. Corp. SBAC (19) 934 5 Sepracor Inc SEPR (669) 718 393 St. John Knits Int'l SJKI (57) 206 77 UST Inc. UST (36) 1,590 518 Valence Tech. VLNC (57) 16 (3) Vector Group Ltd. VGR (41) 552 105 WR Grace & Co. GRA (169) 2,987 750 Western Wireless WWCA (142) 2,665 1 Young Broadcast YBTVA (1) 799 89 ********* 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. 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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. 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