/raid1/www/Hosts/bankrupt/TCR_Public/041012.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 12, 2004, Vol. 8, No. 221
Headlines
ADELPHIA COMMUNICATIONS: Wants to Sell Substantially All Assets
ADELPHIA COMMS: Asks Court to OK Bidding Protocol for Core Assets
ADELPHIA COMMUNICATIONS: Wants to Net Claims with 4 Cable Stations
AIR CANADA: Gets Court Nod to Deliver ACE Shares to Escrow Agent
ALEXANDER SECURITIES: Case Summary & Largest Unsecured Creditors
ALLIED WASTE: Moody's Cuts Senior Implied Rating to B2 From Ba3
AMARILLO BIOSCIENCES: Taps Lopez Blevins as New Accountants
AMERICAN INTERNATIONAL: Files Chapter 11 Petition in W.D. La.
AMERICANA PUBLISHING: Continuous Losses Spur Going Concern Doubt
AMERIQUEST MORTGAGE: Fitch Puts BB+ Rating on M-10 Mortgage Certs.
AT&T CORP: Moody's Affirms Ba1 Ratings After Restructuring News
AXIA NETMEDIA: Settles Bell West Disputes & Inks New Partnership
BANCO DEL PINCHINCHA: Fitch Raises Ratings to 'B-' From 'CCC+'
BEACON HILL: Moody's Junks Senior Secured & Subordinated Notes
BLUE MOON: Losses & Deficits Trigger Going Concern Doubt
BMC INDUSTRIES: Hires Fredrikson & Byron as Bankruptcy Co-Counsel
BORDEN CHEMICAL: Moody's Affirms Junk & Low-B Ratings
BOWNE & CO: Moody's Reviews Single-B Ratings for Possible Upgrade
CANWEST MEDIA: Exchange Offer Cues Moody's to Review Low-B Ratings
CASE FINANCIAL: New Set of Directors to Conduct Financial Query
CHI-CHI'S: Wants Plan-Filing Period Stretched to Oct. 3, 2005
CHOICE ONE: Section 341(a) Meeting Slated for December 10
CHOICE ONE: Moody's Withdraws Ratings After Chapter 11 Filing
CONE MILLS: Indenture Trustee Objects to 2nd Amended Plan
CONSECO MH: S&P's Senior & Subordinate Rating Tumbles to D from CC
CRAIG MANUFACTURING: Case Summary & 20 Largest Unsecured Creditors
DELACO COMPANY: U.S. Trustee Picks 8-Member Creditors' Committee
DII INDUSTRIES: Judge Fitzgerald OKs DIP Financing Pact Amendment
DIVINE INC: Judge Feeney Approves Committee's Disclosure Statement
ENRON: Oregon Electric Offers $43MM Rate Credit to PGE Customers
FACTORY 2-U: Proposes to Pay $237,000 to Retain 28 Key Employees
GADZOOKS INC: Reports 24.2% September Same Store Sales Increase
GALEY & LORD: Hires TRG Turnaround as Operational Adviser
GARDEN RIDGE: Wants Court to Make Landlord Committee Go Away
GENERAL GROWTH: Board Approves Warrants Offering
GLOBAL CROSSING: Sees $40+ Mil Savings from Service & Job Cuts
GLOBAL CROSSING: Settles General Electric Claim for $350,000
GRAHAM PACKAGING: Closes $1.2B Blow-Molded Plastic Container Biz
HARMONY MOTORS: Case Summary & 9 Largest Unsecured Creditors
HOLLINGER INC: Court Dismisses International's $1.25B Lawsuit
HOLLINGER CANADIAN: Inks Facilitation Agreement with International
HOLLINGER PARTICIPATION: Moody's Puts B3 Rating on Senior Notes
INTEGRATED ELECTRICAL: Moody's Cuts Senior Implied Rating to B1
INTERPOOL INC: Files March 2004 Quarterly Report with SEC
INTERSTATE BAKERIES: Shareholders Form Equity Holders Committee
INTERSTATE BAKERIES: Interim PACA & PASA Claim Procedures Approved
INTRAWEST CORP: Prices 10.50% Debt Offering & Consent Solicitation
ISLE OF CAPRI: Replacing Biloxi Casino with $90 Million Facility
JEAN COUTU: Will Webcast First Quarter 2004 Results on Oct. 19
KAISER ALUMINUM: Asks Court for Okay to Reject Gramercy Contracts
METRIS COMPANIES: Fitch Raises Senior Debt Rating to B- from CCC
MILESTONE CAPITAL: Judge Winfield Confirms Chapter 11 Plan
MIRANT AMERICAS: Court Approves Kern Oil Settlement Pact
MIRAVANT MEDICAL: Inks $15 Million Convertible Debt Credit Line
NATIONAL CENTURY: Trust Wants $2.5 Mil. Fraudulent Transfer Back
NATIONAL MENTOR: Moody's Assigns Low-B Ratings to Various Debts
NRG ENERGY: CFTC Says Action Should Remain in Minn. Dist. Court
NORTHWESTERN CORP: Court Gives Oral Confirmation to Chap. 11 Plan
OCWEN RESIDENTIAL: Fitch Junks B-3 Mortgage Certificates
OMNI FACILTY: Hires Houlihan Lokey as Investment Banker
ONE PRICE: Committee Wants Cases Converted to Chapter 7
OWENS CORNING: CSFB Proposes Protocol to Review Medical Records
PARMALAT: Citigroup Challenges Italian Government on Restructuring
PARMALAT USA: Wants to Continue Litigating Beyer State Court Suit
PARMALAT USA: Milk Products Gets Court Nod to Ink Escrow Agreement
PMA CAPITAL: Moody's Rates Sr. Secured Convertible Debt at B3
PRIME HOSPITALITY: Completes Merger with Blackstone Affiliate
ROANOKE TECHNOLOGY: Inks $13.3 Million Equity Financing Deal
ROWECOM INC.: Judge Feeney Approves Debtors' Disclosure Statement
ROYAL OLYMPIC: Limits Greek Stops Following Stay Violation
SPIEGEL INC: Settlement Pact Resolves IBM Credit Claims
STELCO INC: Majority of Steelworkers Plan to Strike at AltaSteel
STELCO INC: Hires UBS Securities as Investment Banking Consultant
TRANSTECHNOLOGY CORP: To Appeal NYSE Delisting Determination
UAL CORP: Court Denies IFS Appointment as Pension Plan Fiduciary
UAL CORP: Asks Court to Approve Settlement with MyPoints.com
UAL CORP: USTA Responds to Objection on Claim Payment Request
UNITED AGRI: Extends Senior Debt Tender Offer to Oct. 21
VALOR TELECOM: Moody's Cuts Senior Implied Rating to B2 from B1
VENTAS INC: Prices $125 Million of 6-5/8% Senior Notes Due 2014
VIASYSTEMS: Closes Rights Offering & Standby Commitment Pact
VILLAS OF PARKHAVEN: Case Summary & 16 Largest Unsecured Creditors
WORLDCOM INC: Gets Court Nod to Assume Office Lease from SG/SPV
* Large Companies with Insolvent Balance Sheets
*********
ADELPHIA COMMUNICATIONS: Wants to Sell Substantially All Assets
---------------------------------------------------------------
In lieu of their dual-track emergence strategy of pursuing both a
stand-alone plan of reorganization and a sale process, Adelphia
Communications Corp. and its debtor-affiliates now ask the
Bankruptcy Court for explicit authority to sell substantially all
of their assets.
The ACOM Debtors employed UBS Securities, LLC, and Allen &
Company, LLC, as mergers and acquisitions financial advisors and
Sullivan & Cromwell, LLP, as legal advisors to help them with the
sale process.
Marc Abrams, Esq., at Willkie Farr & Gallagher, in New York,
relates that during the Summer of 2004, the ACOM Debtors, their
M&A Advisors, and bankruptcy counsel engaged in extensive analysis
and discussions regarding the competitive landscape auction
dynamics and overall value optimization -- all with the purpose of
designing "a robust sale process."
Based on the analysis and discussions with many potential bidders,
the ACOM Debtors developed a two-phase process for the sale of
their assets in one or a series of transactions:
(a) a solicitation of initial indications of interest; and
(b) assuming that the indications of interests received in
Phase I hold sufficient promise, a formal bid process in
which selected bidders from Phase I will be invited to
submit final and binding offers to purchase the ACOM
Debtors' assets or stock.
Phase I
The ACOM Debtors developed a list of potential bidders. Each
potential bidder was sent a form non-disclosure agreement. The
Debtors also prepared a letter to potential bidders designed to
elicit each bidder's interest in the sale and relevant
information. On September 22, 2004, the Debtors began sending the
Preliminary Interest Letter and a Confidential Information
Memorandum, describing the Debtors' businesses, assets and related
items to each potential bidder that executed a non-disclosure
agreement.
The Preliminary Interest Letter provides that bids will be
entertained for a sale of the Company as a whole in one or a
series of transactions involving designated clusters of assets.
The clusters were configured and designed to create a competitive
dynamic by:
* exciting the interest of multiple bidders for each cluster,
including members of the private equity and broader
financial community, where transactions of a magnitude
contemplated by an entire company acquisition rarely occur
even on a joint venture basis due to the substantial capital
needed to be pooled to complete that transaction;
* making cable systems suitable to strategic buyers available
to them on a less than entire company basis; and
* maintaining a modicum of flexibility by providing the
Debtors the option of confirming a stand-alone plan
involving all of their assets or, in conjunction with the
sale of some but not all clusters, less than all of their
assets.
The Debtors prepared a Phase I Web-based management presentation
through which Chief Executive Officer William Schleyer, President
and Chief Operating Officer Ronald Cooper, and Chief Financial
Officer Vanessa Wittman will provide potential bidders with an
overview of the Debtors and their operations. The presentation,
which is only available to prospective bidders who have executed
an non-disclosure agreement, sets the stage for the more advanced
levels of due diligence and management presentations that are
planned by the Debtors for Phase II.
On September 15, 2004, the ACOM Debtors and their advisors
convened a series of meetings with constituencies that are either
estate fiduciaries or parties to the Sales Protocol in order to
update them of the sale activities.
Phase II
Once the ACOM Debtors have received preliminary non-binding
indications of interest in Phase I and consequent greater
visibility to potential values and bidders, they will commence
Phase II. During Phase II, the Debtors will:
* provide bidders with access to management and the virtual
data room;
* conduct the final auction process and clarify, refine and
evaluate bids that are timely submitted;
* draft and negotiate a formal agreement; and
* provide assistance to financing sources.
* * *
According to Bloomberg News, Charter Communications Corp., the
fourth-largest U.S. cable-television operator; Time Warner, Inc.,
the world's largest media company; and Comcast Corp. are among the
potential bidders for ACOM's assets.
Time Warner and Comcast are considering making a joint bid.
Chitra Somayaji reports that Charter Communications will need the
participation and support of its Chairman Paul Allen, who holds
93% of the company's voting rights.
ACOM refuses to comment on reports about potential or likely
bidders due to the confidential nature of the bidding process.
"[W]e reiterate Adelphia's intent to conduct an orderly and fair
sales process that maximizes value for our bankruptcy
constituents," ACOM Vice President of Corporate Communications,
Paul Jacobson, said in a statement.
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. (Adelphia
Bankruptcy News, Issue No. 70; Bankruptcy Creditors' Service,
Inc., 215/945-7000)
ADELPHIA COMMS: Asks Court to OK Bidding Protocol for Core Assets
-----------------------------------------------------------------
To facilitate the sale of substantially all of their assets,
Adelphia Communications Corporation and its debtor-affiliates
propose to establish the timing and method for the submission of
bids for all or a portion of the Debtors in a one-step auction.
The ACOM Debtors are entertaining bids for the sale of all of
their assets, directly or in the form of equity interests, in a
single transaction or in a series of transactions involving
assets the Debtors have clustered in seven groupings in order to
maximize the efficacy of the auction.
The salient terms of the proposed Bidding Procedures are:
A. Deadline
The deadline for submission of a final and binding written
proposal to effect a possible acquisition of the Debtors or
one or more designated clusters of the Debtors' assets is 5:00
p.m. Eastern Standard Time on ________.
Bids must be sent:
UBS Investment Bank
299 Park Avenue, 39th Floor
New York, NY 10171
Attention: Lee LeBrun, Managing Director
Allen & Company LLC
711 Fifth Avenue
New York, NY 10022
Attention: Thomas J. Kuhn, Managing Director
B. Transaction
Bids may be submitted for:
-- 100% of the capital stock or assets of the ACOM Debtors;
or
-- one or more system clusters the Debtors have identified
to Bidders.
C. Purchase Agreement Revision
All Bids must include a copy of a form acquisition agreement
marked electronically to show any changes, as well as a clean
electronic version of the mark-up. The amount and magnitude
of proposed modifications of the Agreement will be a
significant factor in the evaluation of the Bids. A copy of
the Agreement will be provided to Bidders during Phase II.
D. Internal Approvals
A Bid must indicate that the Bidder is prepared to execute the
Revised Agreement promptly upon notification of its acceptance
by the ACOM Debtors without any further internal organization
authorizations.
E. Purchase Price and Consideration
All Bids must state:
-- the total price in U.S. dollars, and form of
consideration, that is being offered; and
-- in the alternative, the total price, in U.S. dollars,
and form of consideration, that is being offered in the
event any of the cable systems nominally owned or
controlled by the Rigas Family but are managed by the
ACOM Debtors that are otherwise included in the Bid, are
not included in the Transaction.
Any Bid that contains securities as part of the consideration
must contain the description of the securities being offered,
including historical liquidity, trading performance, and
market value, and the mechanisms for protecting the value
being offered in the Bid through Closing, taking into account
the need for bankruptcy-related and regulatory approvals,
along with any other factors deemed relevant.
F. Closing Conditions
All conditions to closing required by a Bidder are to be set
forth in the Revised Agreement. The Debtors have a strong
preference for transactions that include as few conditions as
possible and that minimize the time expected to be required to
satisfy the conditions.
G. Financing
Bids may not be subject to any financing condition. To the
extent a Bid relies on third-party financing sources, the Bid
must be accompanied by a signed, binding and irrevocable
commitment letter from the third-party financing source or
comparable commitment from any equity source, subject in each
case only to conditions no more extensive than those
conditions to the Bidder's obligations to effect the
Transaction under the Revised Agreement. To the extent a Bid
relies on internal financing sources, the Bid must be
accompanied by sufficient evidence of financial capacity to
consummate the Transaction and satisfy all obligations and
potential obligations pursuant to the Revised Agreement. Bids
that are viewed as imposing an inappropriate degree of
financing risk will be placed at a significant disadvantage.
H. Stapled Financing
The Debtors will seek to make available pre-arranged financing
to Bidders solely for the purpose of facilitating the
consummation of a Transaction contemplated by any Bid.
Bidders may arrange for their own financing, and their
prospective lenders will be afforded an adequate opportunity
to complete all necessary due diligence prior to the
Submission Date. The terms of any Stapled Financing will be
subject to separate negotiations between the Bidder and the
lender.
I. Due Diligence
Bids may not be subject to a due diligence condition.
J. Required Third-Party Approvals
A Bid must disclose the shareholder, regulatory or other
approvals, consents or filings required to consummate the
Transaction, including the proposed steps and estimated time
to obtain the approvals. Bids that require, as a condition to
closing, local franchise authority approvals -- the failure of
which to obtain prior to closing would have a material adverse
effect on the Bidder -- will be placed at a significant
disadvantage.
K. Prospective Purchaser
Each Bid must disclose the identity of the Bidder's
organization and details of its immediate and ultimate
ownership, including confirmation that the Bid is made as
principal for the Bidder's account and, if not, the basis upon
which the Bidder is acting and, in the case of a consortium
approved by the Debtors, the identities of all other
participants. If the Bidder is a private equity Bidder, the
Bid must disclose the size of the fund, the level of
investments customarily made and the level of equity
customarily committed to an investment.
L. Subsequent Sales
Each Bid must disclose any agreements or understandings
between the Bidder and any third-party with respect to the
Transaction that is the subject of the Bid or with respect to
a possible transaction involving any assets of the Debtors.
M. Evaluation of Bids
Bids submitted will be evaluated by ACOM's Board of Directors,
in consultation with the M&A Advisors, with input from ACOM's
management and other advisors. A Bid will be deemed accepted
only when a definitive agreement will have been executed and
delivered by the Debtors.
N. Expiration
Each Bid must indicate that it will remain in effect and be
irrevocable until 5:00 p.m. EST on ________.
O. Advisors
A Bid must specify the names and contact information of
outside advisors, including financial and legal advisors
engaged or planned to be engaged to assist in the Transaction.
P. Expenses
Each Bidder will be responsible for all costs it may incur
during the investigation and pursuit of a proposed
Transaction except as otherwise may be agreed to by the
Debtors.
Q. Reservation of Rights
The Debtors, in their sole discretion, reserve the right to:
-- consider any factors in determining which Bid to accept;
-- reject any and all Bids without assigning any reasons;
-- alter the Bidding Procedures at any time and in any
manner if the modifications are determined in good faith
by the Board to maximize the value of the estate to its
stakeholders;
-- terminate discussions with any or all Bidders;
-- negotiate with any party individually or simultaneously
with other Bidders;
-- negotiate with any Bidder with respect to any
transaction involving the Debtors or any of their
assets;
-- consummate any transaction, without prior notice to any
Bidder or other potential parties to a transaction; and
-- discontinue the sale process at any time.
In no event will the ACOM Debtors have any obligation or
liability to a Bidder except pursuant to a definitive
agreement, entered into by the Debtors with that Bidder.
The Debtors will not have any liability to any Bidder as a
result of the rejection of any Bid or the acceptance of
another Bid.
Marc Abrams, Esq., at Willkie Farr & Gallagher, in New York,
asserts that the Bidding Procedures are fair and reasonable, and
will serve to procure the highest offer or offers for the
Debtors' assets or equity.
The ACOM Debtors believe that the typical auction process
involving both an initial auction and a formal secondary topping
auction, is not applicable in their case. A one-step merger and
acquisition auction will yield superior results, Mr. Abrams says.
No-Shop Requirement
The ACOM Debtors also ask Judge Gerber to approve a no-shop
requirement.
Mr. Abrams explains that generally, the No-Shop requirement
provides that the Debtors and their professionals will not:
(a) solicit or encourage any other third party proposals; or
(b) negotiate or enter into discussions with any third party
other than the Successful Bidder with respect to at least
10% of the assets that are the subject of the Transaction
with the Successful Bidder.
Should the Board determine that it must entertain, negotiate or
otherwise engage in activity that otherwise would be prohibited
by the No-Shop Requirement, the Board or its advisors or
designees would be permitted to do so, subject to the
determination by the Board that the alternative transaction
constitutes a superior proposal.
Break-Up Fee
In the event that the Agreement with the Buyer is terminated, the
Debtors propose to pay a break-up fee to the Buyer promptly after
the earlier of the consummation of a:
(a) Court-approved plan of reorganization; and
(b) transaction or series of transactions involving at least
80% of the Assets.
The Debtors firmly believe that an upfront grant of authority to
award the Break-Up Fee will contribute significantly to a robust
auction by inducing bidders to submit preemptive bids.
With the Court's permission the Debtors filed the proposed Break-
Up Fee Amount under seal.
According to Mr. Abrams, the Break-Up Fee is sensitive business
information. "If the Debtors are required to disclose . . . the
proposed maximum Break-Up Fee, the Debtors' negotiating leverage
would be diminished. By filing the Break-Up Fee under seal,
bidders will not know the maximum fee the Debtors may be
authorized to pay, enhancing the Debtors' ability to secure lower
fees." Mr. Abrams notes that given that the Debtors are an
extremely valuable business enterprise, even a minor increase in
the Break-Up Fee will result in significant additional costs to
their estates.
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. (Adelphia
Bankruptcy News, Issue No. 70; Bankruptcy Creditors' Service,
Inc., 215/945-7000)
ADELPHIA COMMUNICATIONS: Wants to Net Claims with 4 Cable Stations
------------------------------------------------------------------
Adelphia Communication Corporation believes it holds valid claims
against Animal Planet LLC, The Travel Channel LLC, Discovery
Communications, Inc., and Discovery Health Ventures LLC
aggregating $12,809,483. ACOM's Claims arose under agreements
with the Four Entities prior to the Petition Date, which include:
* January 1, 1997 Cable Affiliate Agreement with Animal
Planet;
* January 1, 1998 Cable Affiliate Agreement with Travel
Channel;
* January 1, 1997 Participating Operator Guarantee, July 1,
1997 Cable Affiliate Rebate Renewal Agreement and January 1,
1997 Learning Channel Participating Operator Guarantee
Agreement with Discovery Communications; and
* March 31, 2000 Term Sheet for Affiliation Consent with
Discovery Health as successor-in-interest.
The Prepetition Agreements with Discovery Communications
incorporate terms of certain agreements for distribution of
Discovery Channel and Learning Channel between Discovery
Communications and the National Cable Television Cooperative.
The Four Entities assert under the Prepetition Agreements, they
also hold valid claims against ACOM, aggregating $13,567,776.
ACOM and the Four Entities wish to settle the claims against each
other through a stipulation.
ACOM and the Four Entities agreed to enter into new postpetition
agreements for distribution of programming services that were
subject of the Prepetition Agreements. They also agreed to amend
their existing agreements for distribution of programming services
known as Discovery Kids Channel, BBC America, Discovery Times
Channel, Discovery Home Channel, The Science Channel, Discovery
Health Channel and Discovery Wings Channel.
Accordingly, ACOM and the Four Entities ask the Court to approve
their settlement agreement, which provides that:
(a) ACOM will recoup or offset the ACOM Claims against the
Four Entities' Claims;
(b) the ACOM Debtors will take actions necessary to effectuate
the Settlement;
(c) Claim Nos. 7407 through 7410 are disallowed and expunged
to reflect the offset;
(d) the Four Entities will indemnify and hold harmless ACOM,
its affiliates and successors against any losses and
claims, provided however that for the avoidance of doubt,
in no event will the indemnification be deemed to apply to
any claim by the National Cable against ACOM related to
ACOM's failure to reimburse National Cable for any amount
it paid to the Four Entities on ACOM's behalf;
(e) the Settlement is in full satisfaction of the Four
Entities' Claims; and
(f) the Parties will be deemed to have waived and released
each other from all prepetition claims relating to the
Prepetition Agreements and each will be forever barred
from collecting any amounts under the Prepetition
Agreements, which relates to a prepetition claim.
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. (Adelphia
Bankruptcy News, Issue No. 69; Bankruptcy Creditors' Service,
Inc., 215/945-7000)
AIR CANADA: Gets Court Nod to Deliver ACE Shares to Escrow Agent
----------------------------------------------------------------
Air Canada and its debtor-affiliates intend to make minor
modifications to their Plan of Arrangement to address complexities
in distributing shares of ACE Aviation Holdings, Inc., to the non-
union employees pursuant to the non-union employees' accepted
claims.
The aggregate accepted Claims and the approximate aggregate number
of ACE shares to be distributed on the Initial Distribution Date
for each of the three non-union employee groups pursuant to the
Claims Process are:
Accepted No. of
Claims Shares
-------- ------
Air Canada Mainline CN$26,000,000 139,500
Jazz CN$2,700,000 14,500
ZIP CN$70,000 375
ACE will enter into an agency agreement under which an escrow
agent will:
-- temporarily hold the aggregate number of ACE shares
distributed pursuant to the non-union employees' accepted
claims;
-- communicate with the non-union employees;
-- determine from each non-union employee whether he or she
wants to receive his or her entitlement to ACE shares, or
to have those shares sold on his or her behalf;
-- ensure that appropriate taxes are withheld and paid, if
required; and
-- ensure that non-union employees receive their maximum
entitlement in accordance with their individual wishes.
Ernst & Young, Inc., finds that the Applicants' proposal will
streamline the distribution of ACE shares to non-union employees
and maximize the entitlement to be received by each individual
non-union employee, while enabling the Applicants to meet any
necessary withholding tax obligations.
Accordingly, the Monitor sought and obtained the Ontario Superior
Court of Justice's authority to distribute the ACE shares due to
the non-union employees to the Escrow Agent.
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
Nos. 49 & 50; Bankruptcy Creditors' Service, Inc., 215/945-7000)
ALEXANDER SECURITIES: Case Summary & Largest Unsecured Creditors
----------------------------------------------------------------
Debtor: J. Alexander Securities, Inc.
523 West 6th Street, Suite 606
Los Angeles, California 90014
Bankruptcy Case No.: 04-31166
Type of Business: The Debtor is a securities broker and dealer.
Chapter 11 Petition Date: October 5, 2004
Court: Central District of California (Los Angeles)
Judge: Sheri Bluebond
Debtor's Counsel: Nikola M. Mikulicich Jr., Esq.
1874 South Pacific Coast Highway #203
Redondo Beach, CA 90277
Tel: 310-375-4923
Estimated Assets: $500,000 to $1 Million
Estimated Debts: $1 Million to $10 Million
Debtor's 19 Largest Unsecured Creditors:
Entity Nature Of Claim Claim Amount
------ --------------- ------------
Dominion Investments Limited Tort Claim $3,900,000
c/o Christopher Lovell
Lovell Stewart Halepian LLP
500 Fifth Avenue
New York, NY 10010
Oster Services Limited Tort Claim $3,900,000
c/o Christopher Lovell
Lovell Stewart Halepian LLP
500 Fifth Avenue
New York, NY 10010
Francis J. Pizzulli Arbitration award $1,400,000
718 Wilshire Blvd.
Santa Monica, CA 90401
Geotermica, Ltd. Arbitration award $1,400,000
c/o Douglas W. Beck
Manatt, Phelps & Phillips LLP
11355 W. Olympic Blvd.
Los Angeles, CA 90067
Herbert Black Tort Claim $1,000,000
c/o Paul Rothstein
626 NE 1st St.
Gainesville, FL 32601
NASD Department of Fines $150,000
Enforcement
David B. Stocker Loan $132,000
Kerry Feldman Tort Claim $50,000
Reuters America Inc. Liquidated damages $35,759
and business services
Patrick Sheedy Unclaimed deposit $35,000
SunGard Trading Services Business Services $23,902
Ronald J. Stauber Inc. Legal services $20,000
Richard N. Friedman Professional Services $15,623
SBC Payment Center Telecommunication $15,230
Services
The NASDAQ Stock Market Business services $9,280
Blue Cross of California Health Insurance $4,728
Pacific Center Office rent $4,757
E Signal Business services $3,328
The Hatford Insurance $2,884
ALLIED WASTE: Moody's Cuts Senior Implied Rating to B2 From Ba3
---------------------------------------------------------------
Moody's Investors Service downgraded the credit ratings of Allied
Waste North America, Inc., its wholly owned subsidiary, Browning-
Ferris Industries, Inc., and its parent company Allied Waste
Industries, Inc. (Senior Implied to B2 from Ba3). This rating
action concludes the review for possible downgrade, which was
initiated on September 14, 2004.
The downgrade primarily reflects the recent material decline in
the company's financial and operational performance because of
reduced volumes and increased cash requirements to service its
aging fleet. Moody's believes that free cash flow generation has
decreased nearly 60% for the twelve-month period ended
June 30, 2004, compared to fiscal year ended December 2003.
Moody's expects this ratio to fall further by year-end 2004 due to
planned capex. In addition, Moody's believes that the decline in
Allied's operating margins should approach 260 basis points by
year end 2004 as compared to year end 2003.
Moody's B2 Senior Implied rating incorporates the aforementioned
decline in free cash flow balanced with a belief that management
will successfully address its operating problems. Among the
initiatives that could improve the level of free cash flow
generation are:
(i) the ability of the company to regain lost landfill
volume;
(ii) the timely reduction of fleet maintenance and repair
expenses and the level of investment in the new fleet;
(iii) the achievement of cost reduction goals from the
company's Standards and Best Practices Program; and
(iv) the ability to absorb fuel increases in excess of fuel
surcharges.
The company's high leverage combined with its weak cash flow
generation form the basis for Moody's negative outlook.
The company's weaker performance was primarily driven by higher
than anticipated costs of implementation of its Standards and Best
Practices Program as well as by the significantly higher fleet
maintenance and repair, which resulted from a lower percentage of
capital expenditures for the fleet over the last two years. The
company's margins were also adversely affected by lost landfill
volume as a result of an ill-fated price strategy, which relied,
in part, on the expectation of a stronger economy.
The company's projected cash flows depend on achieving volume
growth at landfills and achieving operating cost improvements
associated with its best practices rollout. It also assumes no
adverse judgment on Allied's appeal to the IRS concerning a 1999
capital loss item, which if disallowed would result in a
$350 million cash payment.
While the company has had net debt reductions in 2004, leverage
has increased due to weaker operating performance. Measured as
Debt to EBITDA, leverage is high at just over 5 times. Moody's
expects this ratio to worsen for the second half. Of greater
concern is the very weak free cash flow to debt ratio of 1.7%,
which is low for the current rating category.
Interest protection measurements have weakened. EBITDA less capex
to interest was 1.2 times for the twelve months ended
June 30, 2004 versus 1.3 times at year end 2003. If earnings
remain flat, this ratio should improve because of the lower
interest expense obtained by the 2004 refinancings. However,
fixed charge coverage, measured as EBIT plus 1/3 rent over
interest expense, 1/3 rent, tax-adjusted cash dividends and the
current portion of long term debt was insufficient at 0.9 times
for the twelve months ended June 30, 2004. Moody's does not
anticipate significant improvement in this ratio in the near
future.
The downgrade of the company's Speculative grade liquidity rating
to SGL-4 from SGL-2 reflects its weakened liquidity profile in
light of recent operating performance and greater uncertainty
regarding the company's future cash generating ability. The
company's lower than expected cash from operations for the next
twelve months suggests that the company might need to borrow for
higher planned capital expenditures and for a portion of scheduled
debt maturities. The company continues to use a large proportion
of its revolver for letters of credit. While revolver
availability is slightly down from last year, it is expected to be
sufficient for the coming year. The ability of the company to tap
this source of liquidity is significantly diminished by the lower
EBITDA cushion on the company's leverage financial covenant test.
The weaker cash generation, the risk of impaired access to its
revolver, combined with a lack of alternate liquidity due to its
high leverage and lack of unencumbered assets, creates a weak
liquidity profile for the company.
These rating actions were taken:
-- Allied Waste Industries, Inc.
* Senior Implied Rating, downgraded to B2 from Ba3;
* Senior Unsecured Issuer Rating, downgraded to Caa2 from
B3;
* $230 million issue of 4.25% guaranteed senior subordinated
convertible bonds due 2034, downgraded to Caa2 from B3;
* $345 million issue of mandatory convertible preferred
stock -- conversion date of April 2006, downgraded to Caa3
from Caa1;
* The Speculative Grade Liquidity Rating downgraded to SGL-4
from SGL-2.
-- Allied Waste North America, Inc.
* $1.5 billion guaranteed senior secured revolving credit
facility due 2008, downgraded to B1 from Ba2;
* $200 million guaranteed senior secured Tranche A
Credit-Linked Deposits due 2010, downgraded to B1 from
Ba2;
* $1.185 billion senior secured Tranche B Term Loan due
2010, downgraded to B1 from Ba2;
* $250 million senior secured Tranche C Term Loan due 2010,
downgraded to B1 from Ba2;
* $150 million senior secured Tranche D Term Loan due 2010,
downgraded to B1 from Ba2;
* $600 million issue of 7.625% guaranteed senior secured
notes due 2006, downgraded to B2 from Ba3;
* $750 million issue of 8.5% guaranteed senior secured notes
due 2008, downgraded to B2 from Ba3;
* $600 million issue of 8.875% guaranteed senior secured
notes due 2008, downgraded to B2 from Ba3;
* $425 million issue of 6.125% guaranteed senior secured
notes due 2014, downgraded to B2 from Ba3;
* $350 million issue of 6.5% guaranteed senior secured notes
due 2010, downgraded to B2 from Ba3;
* $400 million issue of 5.75% guaranteed senior secured
notes due 2011, downgraded to B2 from Ba3;
* $275 million issue of 6.375% guaranteed senior secured
notes due 2011, downgraded to B2 from Ba3;
* $375 million issue of 9.25% guaranteed senior secured
notes due 2012, downgraded to B2 from Ba3;
* $450 million issue of 7.875% guaranteed senior secured
notes due 2013, downgraded to B2 from Ba3;
* $400 million issue of 7.375% guaranteed senior unsecured
notes due 2014, downgraded to Caa1 from B2;
* $270 million issue of 10% guaranteed senior subordinated
notes due 2009, downgraded to Caa2 from B3;
-- Browning-Ferris Industries, Inc. - (assumed by Allied Waste
North America, Inc.)
* $69.4 million issue of 7.875% senior secured notes due
2005, downgraded to B2 from Ba3;
* $161.1 million issue of 6.375% senior secured notes due
2008, downgraded to B2 from Ba3;
* $99.5 million issue of 9.25% secured debentures due 2021,
downgraded to B2 from Ba3;
* $360 million issue of 7.4% secured debentures due 2035,
downgraded to B2 from Ba3;
* $23 million 7.5% Pollution Control Bond Series 1995-A due
2010 downgraded to Caa1 from B3;
* Approximately $200 million of industrial revenue bonds
downgraded to Caa1 from B2.
Allied Waste North America, Inc., a wholly owned operating
subsidiary of Allied Waste Industries, Inc., is based in
Scottsdale, Arizona. Allied is a vertically integrated, non-
hazardous solid waste management company providing collection,
transfer, and recycling and disposal services for residential,
commercial and industrial customers. The company reported
revenues of $5.25 billion and total liabilities of $ 11.3 billion
at December 31, 2003.
AMARILLO BIOSCIENCES: Taps Lopez Blevins as New Accountants
-----------------------------------------------------------
Amarillo Biosciences, Inc., has engaged Lopez, Blevins, Bork &
Associates, L.L.P., as its principal accountant to audit the
Company's financial statements. The decision to change
accountants was approved by the Board of Directors following the
dismissal of Malone & Bailey, PLLC, as the Company's independent
auditors.
Going Concern Doubt
Malone & Bailey's report, dated April 16, 2004, on Amarillo
Biosciences, Inc.'s financial statements dated December 31, 2003,
included a statement that the Company has suffered recurring
losses and citing its need to raise additional capital, raising
substantial doubt about the Company's ability to continue as a
going concern.
AMERICAN INTERNATIONAL: Files Chapter 11 Petition in W.D. La.
-------------------------------------------------------------
American International Petroleum Corporation (OTC: AIPN) filed,
together with its wholly owned subsidiary, American International
Refinery, Inc., petitions for Chapter 11 reorganization with the
United States Bankruptcy Court for the Western District of
Louisiana, Lafayette-Opelousas Division. This filing is being made
as a part of AIPC's attempts to reorganize its debt and capital
structure. AIPC's other subsidiaries are not included or affected
by the Chapter 11 filing. In conjunction with petitions for
Chapter 11 reorganization, AIPC asked the Bankruptcy Court to
consider a variety of "first day motions." These include motions
seeking court permission to jointly administer bankruptcy cases
and retain legal professionals to support the company's
reorganization actions.
AIRI Purchase Agreement
On Oct. 5, 2004, AIRI signed an agreement, subject to bankruptcy
court approval and the results of the auction process, to sell
substantially all of AIRI's assets to a third party purchaser. The
sale transaction is subject to certain closing conditions,
including approval of the bankruptcy court. The transaction will
be consummated as soon as all conditions are met. In an effort to
maximize value for all its creditor constituencies, AIRI is
seeking permission of the court to conduct the sale to a third
party under section 363 of the U.S. Bankruptcy Code. A key element
of this process will be a competitive bidding auction at which all
qualified parties can, and are encouraged to, bid for the assets
of AIRI.
Headquartered in Lake Charles, Louisiana, American International
Petroleum Corporation is a petroleum company which, through
certain subsidiaries, is involved in oil and gas exploration and
development in Kazakhstan. The Company, together with its wholly
owned subsidiary, American International Refinery, Inc., filed for
chapter 11 protection on Oct. 7, 2004 (Bankr. W.D. La. Case No.
04-52479). Robin B. Cheatham, Esq., and Dean W. Ferguson, Esq.,
at Adams & Reese LLP represent the Debtors in their restructuring
efforts. When the Debtors filed for protection from their
creditors, they estimated total assets between $1 million to
$10 million, and total debts between $10 million to $50 million.
AMERICANA PUBLISHING: Continuous Losses Spur Going Concern Doubt
----------------------------------------------------------------
Americana Publishing Inc.'s financial statements for the year
ended December 31, 2003 showed a $2.5 million operating loss
and the Company's financial statements for the six months ended
June 30, 2004, show a $2.2 million operating loss. These factors,
among others, raise substantial doubt about Americana Publishing's
ability to continue as a going concern.
The Company has historically financed its operations through the
sale of common stock. The Company now supports its operations
primarily through sale of its products and, to a lesser extent,
through sale of its common stock. The Company's revenues have
averaged $100,000 per month for 2004. This revenue has not been
adequate to cover current monthly cash expenditures thus requiring
the Company to raise additional capital to support operations.
Currently, management believes revenues will increase to adequate
levels to support cash expenditures. In addition management has
implemented a plan to lower cash expenditures and is actively
pursuing additional sources of capital. There is no assurance that
adequate revenues will be achieved to support operations. Until
it earns enough revenue from the sales of its products to support
its operations, the Company will require additional financing.
Management states that the Company does not earn enough in
revenues to maintain its operations. To date, in addition to its
revenues, the Company has funded operations with loans from its
officers and directors and sales of its securities. Americana
Publishing will continue to need money to operate, and, other than
an asset-based line of credit factoring agreement with Langsam
Borenstein Partnership, has no commitments for funding from any
third party. Its officers and directors are not required to
continue to loan money to the Company and there is no guarantee
that sales of Company securities will raise enough money to
continue its operations. If unsuccessful in obtaining funds when
needed, Americana Publishing will be required to severely curtail,
and possibly to even cease, its operations.
About Americana Publishing, Inc.
Americana Publishing, Inc. is a vertically integrated multimedia
publishing company whose primary business is publishing and
selling audio books, print books and electronic books in a variety
of genres. Sales of its products are conducted through the
Internet as well as a distribution network of more than 35,000
retail stores, libraries and truck stops. According to the Audio
Publishers Association, annual sales of audio books are nearly $2
billion. Currently 42 million Americans listen to audio books and
58 percent of that group listen to more than two per month.
AMERIQUEST MORTGAGE: Fitch Puts BB+ Rating on M-10 Mortgage Certs.
------------------------------------------------------------------
Ameriquest Mortgage Securities Inc. 2004-R10 are rated by Fitch:
-- $1.41 billion class A-1, A-2, A-3, and A-4 certificates
'AAA';
-- $53.5 million class M-1 certificates 'AA+';
-- $45.9 million class M-2 certificates 'AA';
-- $29.8 million class M-3 certificates 'AA-';
-- $21.2 million class M-4 certificates 'A+';
-- $25.5 million class M-5 certificates 'A';
-- $21.2 million class M-6 certificates 'A-';
-- $17.0 million class M-7 certificates 'BBB+';
-- $15.3 million class M-8 certificates 'BBB';
-- $14.5 million class M-9 certificates 'BBB-';
-- $17.0 million non-offered class M-10 certificates 'BB+'.
Credit enhancement for the 'AAA' rated class A certificates
reflects the 15.35% subordination provided by:
* classes M-1 through M-10,
* monthly excess interest, and
* initial overcollateralization -- OC -- of 1.70%.
Credit enhancement for the 'AA+' rated class M-1 certificates
reflects the 12.20% subordination provided by:
* classes M-2 through M-10,
* monthly excess interest, and
* initial OC.
Credit enhancement for the 'AA' rated class M-2 certificates
reflects the 9.50% subordination provided by
* classes M-3 through M-10,
* monthly excess interest, and
* initial OC.
Credit enhancement for the 'AA-' rated class M-3 certificates
reflects the 7.75% subordination provided by:
* classes M-4 through M-10,
* monthly excess interest, and
* initial OC.
Credit enhancement for the 'A+' rated class M-4 certificates
reflects the 6.50% subordination provided by:
* classes M-5 through M-10,
* monthly excess interest, and
* initial OC.
Credit enhancement for the 'A' rated class M-5 certificates
reflects the 5.00% subordination provided by:
* classes M-6 through M-10,
* monthly excess interest, and
* initial OC.
Credit enhancement for the 'A-' rated class M-6 certificates
reflects 3.75% subordination provided by:
* classes M-7 through M-10,
* monthly excess interest, and
* initial OC.
Credit enhancement for the 'BBB+' rated class M-7 certificates
reflects the 2.75% subordination provided by:
* classes M-8 through M-10,
* monthly excess interest, and
* initial OC.
Credit enhancement for the 'BBB' rated class M-8 certificates
reflects the 1.85% subordination provided by:
* classes M-9, M-10,
* monthly excess interest, and
* initial OC.
Credit enhancement for the 'BBB-' rated class M-9 certificates
reflects the 1.00% subordination provided by:
* class M-10,
* monthly excess interest, and
* initial OC.
Credit enhancement for the non-offered 'BB+' class M-10
certificates reflects the monthly excess interest and initial OC.
In addition, the ratings reflect the integrity of the
transaction's legal structurem, as well as the capabilities of
Ameriquest Mortgage Company as master servicer. Deutsche Bank
National Trust Company will act as trustee.
As of the cut-off date, the Group I mortgage loans have an
aggregate balance of $1,040,115,456. On the closing date, the
depositor will deposit approximately $320,035,131 into a
prefunding account. The amount in this account will be used to
purchase subsequent mortgage loans on or before the 90th day
following the closing date.
The weighted average loan rate is approximately 7.724%. The
weighted average remaining term to maturity is 349 months. The
average cut-off date principal balance of the mortgage loans is
approximately $145,410. The weighted average original loan-to-
value ratio is 74.36%, and the weighted average Fair, Isaac & Co.
-- FICO -- score was 601.
The properties are primarily located in:
* California (16.35%),
* Florida (9.91%), and
* New York (9.34%).
As of the cut-off date, the Group II mortgage loans have an
aggregate balance of $259,884,921. On the closing date, the
depositor will deposit approximately $79,964,492 into a prefunding
account. The amount in this account will be used to purchase
subsequent mortgage loans on or before the 90th day following the
closing date.
The weighted average loan rate is approximately 7.266%. The
weighted average remaining term to maturity is 355 months. The
average cut-off date principal balance of the mortgage loans is
approximately $344,218. The weighted average original loan-to-
value ratio is 76.20%, and the weighted average Fair, Isaac & Co.
(FICO) score was 608.
The properties are primarily located in:
* California (49.37%),
* New York (11.50%), and
* Massachusetts (6.57%).
The mortgage loans were originated or acquired by Ameriquest
Mortgage Company. Ameriquest Mortgage is a specialty finance
company engaged in the business of originating, purchasing, and
selling retail and wholesale subprime mortgage loans.
AT&T CORP: Moody's Affirms Ba1 Ratings After Restructuring News
---------------------------------------------------------------
Moody's Investors Service affirmed AT&T Corporation's debt ratings
subsequent to the company's recent restructuring and headcount
reduction announcement.
Moody's affirmed these ratings:
* Senior Implied Rating, Ba1
* Senior unsecured debt, Ba1
* Senior unsecured shelf, (P) Ba1
* Short-term debt, NP
* Liquidity Rating, SGL-1
The outlook is negative for all ratings.
AT&T recently announced a non-cash asset impairment charge of
$11.4 billion and continued headcount reductions (roughly 7,000
employees during the second half of the year), the latter of which
will result in a third-quarter 2004 charge of $1.1 billion. Given
pricing pressures, regulatory changes, and the advent of new
technologies (e.g. VoIP), Moody's had expected a material asset
write-down. However, the magnitude of the $11.4 billion asset
impairment charge did exceed our expectations. While the write-
down is certainly material and surpassed our expectations, Moody's
believes that the current Ba1 senior implied rating and negative
outlook sufficiently incorporated a major charge; Moody's has,
therefore, affirmed the current ratings.
The negative outlook reflects Moody's concern regarding the pace
of earnings and cash flow declines should the competitive
environment not stabilize. Furthermore, Moody's is increasingly
concerned that limited growth opportunities may cause AT&T to
respond to market pressures and increase leverage by returning
some of its sizeable cash balances to shareholders.
These events or factors would have further negative implications
for the ratings:
(i) A further material deterioration in revenue, EBITDA, and
credit metrics;
(ii) another material asset impairment; any return of
additional capital to shareholders, beyond current
dividend levels; or
(iii) a recapitalization of the firm
AT&T's SGL-1 rating reflects Moody's view that the company can
meet all of its estimated obligations over the next twelve months
through internal resources. However, we note that AT&T's
liquidity profile is in a state of transition. While AT&T
currently has strong free cash flow ($3.38 billion for the TTM
ended 6/30/04), and significant balance sheet cash ($2.46 billion
as of Q2'04), its free cash flow-generating ability appears to be
deteriorating -- as reflected by the recent asset impairment. In
2004, Moody's expects AT&T to generate a little more than
$2.0 billion in free cash flow ($1.07 billion actual through the
first half of 2004).
External sources of liquidity include a committed $1.0 billion
364-day revolving credit facility (with no term-out), maturing in
October 2005. The credit facility has same-day availability and
does not include a continuing MAC clause. Similar to the recently
replaced $2 billion credit facility, Moody's believes that the new
credit agreement also contains a leverage test (2.25x) and an
interest coverage test (3.5x). In addition, the company has
receivables securitization programs at AT&T Consumer Services and
AT&T Business Services, $1.35 billion in aggregate (reduced from
$1.45 billion in March 2004). The programs do not contain ratings
triggers but do include the same covenants as the credit facility.
AT&T Corp. is a leading provider of global telecommunications
services and is headquartered in New York City.
AXIA NETMEDIA: Settles Bell West Disputes & Inks New Partnership
----------------------------------------------------------------
Axia NetMedia Corporation settled outstanding issues with Bell
West Inc. and entered into a new partnership with Bell.
"A new partnership and successful settlement enables Axia to focus
on the future," says Art Price, Chairman and CEO of Axia NetMedia
Corporation. Mr. Price added, "Axia is pleased to move forward in
partnership with Bell to ensure the Alberta SuperNet lives up to
its potential."
The disputes related to construction and operation of the
Alberta SuperNet. An arbitration decision in September 2004
resolved the operational issues. The settlement successfully
resolves the remaining issues without arbitration. As part of the
settlement, both companies have agreed that specific terms of the
agreement will remain confidential.
The companies also agreed that Axia will advise Bell on the use of
wireless technology in Bell's western network. Bell will also
sponsor Axia's interactive media services for educational
institutions. The agreement has an initial term in place until
June 30, 2005.
"Not only have we resolved issues, we have come out with a new
commitment to work together," added Mr. Price. "Axia is excited
to devote all of our energy to SuperNet operation and service."
Axia NetMedia Corporation helps organizations and individuals meet
the needs of the Knowledge Economy by combining the power of high-
speed Real Broadband networks with high-end e-learning
applications. Axia has 176 employees and trades on the Toronto
Stock Exchange under the symbol "AXX". For more information, visit
its website at http://www.axia.com/
* * *
As reported in the Troubled Company Reporter on May 28, 2004,
Standard & Poor's Ratings Services assigned its 'B' corporate
credit rating to industrial products manufacturer AXIA Inc. The
outlook is stable.
At the same time, Standard & Poor's assigned its 'B' bank loan
rating and its recovery rating of '4' to AXIA's proposed
$150 million senior secured credit facility, based on preliminary
terms and conditions.
"The ratings on AXIA reflect its modest financial base, as
evidenced by revenues of less than $200 million, a very aggressive
financial policy, weak credit protection measures, thin free cash
flow, some customer concentration, and exposure to rising interest
rates," said Standard & Poor's credit analyst Dominick D'Ascoli.
These negatives overshadow defensible positions in several niche
product lines, low-cost operations, and good operating margins.
BANCO DEL PINCHINCHA: Fitch Raises Ratings to 'B-' From 'CCC+'
--------------------------------------------------------------
Fitch Ratings upgraded the long-term rating of Ecuador's Banco del
Pichincha and Subsidiaries to 'B-' from 'CCC+'. The Rating
Outlook is Stable. The upgrade follows a similar action taken on
Ecuador's long-term rating that reflects improvements in the
government's access to financing, spending restraint, and export
growth.
At the same time, Fitch has affirmed the bank's support rating at
'5'. The 'B-' rating indicates that significant credit risk is
present, but a limited margin of safety remains. Financial
commitments are currently being met; however, capacity for
continued payment is contingent upon a sustained, favorable
business and economic environment.
The assigned ratings reflect Banco del Pichincha's strong
franchise and prominent position within Ecuador, as well as its
broad and well-diversified deposit base. The ratings also
consider the bank's weak, but improving, financial performance and
tight capital position. In addition, Fitch has also considered
that the bank has recently gone through a stress period, sparked
by rumors against the bank, which it has managed successfully,
demonstrating the strength of its liquidity cushion, but also its
vulnerability to market conditions.
Importantly, the bank has consistently maintained high liquidity
levels since the last banking crisis and has taken prompt action
to rebuild this cushion. Please refer to Fitch Research, available
on the Fitch Ratings web site at http://www.fitchratings.comto
access the most recent full rating report on Banco del Pichincha,
published in July.
Banco del Pichincha comprises 20 financial companies located
mainly in Ecuador, Peru, Colombia, the Bahamas, and Miami. Its
principal subsidiary is Banco del Pichincha, the largest bank in
Ecuador, with an established position in corporate, middle market,
and consumer banking and domestic loan and deposit market shares
of 25.6% and 27.8%, respectively, at the end of 2003.
Control of Banco del Pichincha is held by Fidel Egas Grijalva, a
well-regarded Ecuadorian entrepreneur who held an equity stake,
directly and indirectly, of 68.3% at the end of 2003.
BEACON HILL: Moody's Junks Senior Secured & Subordinated Notes
--------------------------------------------------------------
Moody's Investors Service lowered the rating on two classes of
notes issued by Beacon Hill CBO, LTD, a collateralized bond
obligation. The ratings of these notes have been reduced from B1
on watch for possible downgrade to C:
* the $9,716,882 (current outstanding amount) Class B-1 Second
Priority Senior Secured Floating Rate Notes due 2035; and
* the $11,595,689 (current outstanding amount) Class B-2 Second
Priority Senior Secured Fixed Rate Notes due 2035
The rating of the U.S.$8,608,014 (current outstanding amount)
Class C Senior Subordinated Secured Fixed Rate Notes due 2035 has
been reduced from Caa1 on watch for possible downgrade to C.
The Class A-1 Priority Senior Secured Floating Rate Notes due 2030
and the Class A-2 First Priority Senior Secured Floating Rate
Notes due 2030 are not affected by this rating action because they
are wrapped by MBIA Insurance Corporation.
According to Moody's, the downgrade has been prompted by the
continuing loss of par and deterioration in the overall credit
quality of the underlying assets. Moody's noted that the CBO
continues to violate its overcollateralization tests, its interest
coverage tests and other collateral quality tests.
Rating Action: Downgrade
Issuer: Beacon Hill CBO, LTD
Tranche Description:
U.S.$9,716,882 (current outstanding amount) Class B-1 Second
Priority Senior Secured Floating Rate Notes due 2035
Previous Rating: B1 on watch for possible downgrade.
Rating Action: C
Tranche Description:
U.S. $11,595,689 (current outstanding amount) Class B-2
Second Priority Senior Secured Fixed Rate Notes due 2035
Previous Rating: B1 on watch for possible downgrade.
Rating Action: C
Tranche Description:
U.S. $8,608,014 (current outstanding amount) Class C Senior
Subordinated Secured Fixed Rate Notes due 2035
Previous Rating: Caa1 on watch for possible downgrade.
Rating Action: C
BLUE MOON: Losses & Deficits Trigger Going Concern Doubt
--------------------------------------------------------
Blue Moon Group, Inc., has incurred losses from operations over
the years and anticipates additional losses in fiscal year 2004.
In addition, the Company has negative working capital of
$1,044,706. These circumstances raise substantial doubt about the
Company's ability to continue as a going concern.
As of March 31, 2004 the Company had $106,425 in cash. Sufficient
cash to finance operations for the short term is required.
Historically, Blue Moon has financed its operations with short-
term convertible debt or through the issuance of equity in the
form of its common stock. During the current period ended Mar. 31,
2004, the Company issued net new debt for cash of approximately
$385,000 and $166,878, respectively. Significant increases in
capital will be required to fund the Company's aggressive business
plan and support the manufacturing and distribution requirements
of its current artist distribution contracts. While there is no
assurance that the Company will be successful in raising the
required capital management states that all indications through
its current financing negotiations suggest that it will receive
substantial capital.
Blue Moon Group, Inc. has completed a total restructuring of its
operations and has changed its product and business mix. The
Company is actively pursuing acquisition and joint ventures with
companies having recording artists under contract for
distribution, promotion and concert dates.
The Company has embarked on a search to find various entertainment
companies whose acquisition would be synergistic with current
operations. The signing of artists to recording and distribution
contracts is a key focus for the immediate revenue generating
capacity of the Company.
About the Company
Blue Moon Group, Inc., is an entity designed to provide
traditional sales of recorded music from artists who have
contracted the Company to provide distribution. The Company will
also generate revenue from promotions, artist recording sessions
and the sales of other prerecorded music.
BMC INDUSTRIES: Hires Fredrikson & Byron as Bankruptcy Co-Counsel
-----------------------------------------------------------------
The U.S. Bankruptcy Court for the District of Minnesota gave BMC
Industries, Inc., and its debtor-affiliates permission to employ
Fredrikson & Byron, P.A., as their local counsel and bankruptcy
co-counsel.
Fredrikson & Byron will:
a) analyze the Debtors' financial situation and render advice
and assistance in determining how to proceed with their
bankruptcy cases;
b) assist with the preparation of filing of the petition,
exhibits, attachments, schedules, statements, and lists for
stay motions and other documents required by the Bankruptcy
Code, the Bankruptcy Rules, the Local Rules or the Court in
the course of the Debtors' bankruptcy cases;
c) represent the Debtors at the meeting of creditors;
d) negotiate with creditors and other parties in interest;
e) make and respond to motions, applications and other
requests for relief on behalf of the Debtors, including the
possible sale of the Debtors' assets;
f) develop with other professionals retained by the Debtors a
plan of reorganization and disclosure statement; and
g) perform other services requested by the Debtors or services
reasonably necessary to represent the Debtors in their
bankruptcy cases.
Clinton E. Cutler, Esq., a Shareholder at Fredrikson & Byron
discloses that the Debtors paid a $73,500 retainer.
Mr. Cutler reports Fredrikson & Byron's professionals bill:
Professional Designation Hourly Rate
------------ ----------- -----------
Clinton E. Cutler Shareholder $330
Heather Thayer Senior Associate 240
Ryan Murphy Associate 175
Leslie Anderson Senior Paralegal 125
Jeannine Christensen Paralegal 95
To the best of the Debtors' knowledge, Fredrikson & Byron is
disinterested" as the term is defined in Section 101(14) of the
Bankruptcy Code.
Headquartered in Ramsey, Minnesota, BMC Industries Inc. --
http://www.bmcind.com/-- is a multinational manufacturer and
distributor of high-volume precision products in two business
segments, Optical Products and Buckbee Mears. The Company, along
with its affiliates, filed for chapter 11 protection (Bankr. D.
Minn. Case No. 04-43515) on June 23, 2004. Jeff J. Friedman, Esq.,
at Katten Muchin, Zavis Rosenman and Clinton E. Cutler, Esq., at
Fredrikson & Byron, P.A., represent the Debtors in their
restructuring efforts. When the Debtor filed for protection from
its creditors, it listed $105,253,000 in assets and $164,751,000
in liabilities.
BORDEN CHEMICAL: Moody's Affirms Junk & Low-B Ratings
-----------------------------------------------------
Moody's Investors Service affirmed the ratings of Borden Chemical
Inc. The ratings affirmation follows the company's announcement
that it has signed a definitive agreement to acquire German-based
Bakelite AG from its parent company, Rutgers AG. The purchase
price is expected to range from $215 million to $245 million and
the company anticipates that the acquisition will be funded with
add-on senior secured second lien notes. The transaction is
expected to close at the end of 2004 or early 2005. The ratings
affirmation reflects Moody's belief that it is unlikely that
Borden's ratings will be downgraded as a result of this
acquisition based on the fact that it is emerging from a trough in
the chemical cycle. The ratings affirmation is also based on
Moody's expectations that pro forma credit metrics will slightly
improve and that liquidity will remain adequate. Based on actual
EBITDA of $149 million for the LTM ended June 30, 2004, Borden's
debt to EBITDA (including debt added in the recent
recapitalization) was 6.3 times. Although Moody's has not placed
Borden's ratings under review, we plan to meet with Borden
management in the near-term to get historical financial
information on the assets to be acquired and additional details on
potential synergies. The ratings affirmation assumes that Borden
will successfully issue additional senior secured notes and that
the revolver will not be used to fund the transaction. The
following summarizes the ratings activity:
Ratings Affirmed:
* $150 million floating rate senior secured second lien notes
due 2010 - B3
* $325 million fixed rate senior secured second lien notes due
2014 - B3
* $175 million senior secured revolver due 2009 - B1
* $440 million senior unsecured notes and debentures due 2016
through 2023 - Caa1
* $47 million senior unsecured debentures due 2019 - Caa1
* $34 million senior unsecured industrial revenue bonds due
2009 - Caa1
* Senior Implied - B2
* Senior Unsecured Issuer Rating - Caa1
Borden's ratings are supported by the fact that the acquisition
improves the company's scale while expanding its product portfolio
and manufacturing footprint, particularly in Europe. Moreover,
Moody's anticipates that there should be opportunities for cost
reductions and production efficiencies or capacity
rationalization. However, Moody's is concerned over Borden's
ability to reduce costs in Bakelite's European operations over the
near-term. Additionally, Moody's is concerned that the
acquisition expands the company's business into epoxy resins,
which has faced challenging industry conditions. Upon meeting
with Borden management, Moody's will further examine the operating
performance of the acquired entity, the quality of its assets,
capital expenditure requirements, planned feedstock arrangements
(particularly for epoxy resins), the extent of labor-force
unionization, and potential environmental liabilities. To the
extent that any of these issues could have an adverse impact on
Borden's credit profile, Moody's will reconsider the current
ratings.
The negative outlook continues to reflect Moody's concern over
Borden's ability to generate free cash flow (defined as cash from
operations less capital expenditures) given the potential for
near-term restructuring expenses as it integrates Bakelite AG, as
well as Borden's high non-operating costs (i.e., pension costs and
environmental and litigation expenses), higher interest expense as
a result of the recent recapitalization, and continued volatility
in raw material prices. To the extent that the company integrates
Bakelite without material challenges, while reducing unadjusted
leverage to below 5 times on a sustainable basis and generates
consistent free cash flow to debt of 5 to 10%, Moody's will
consider stabilizing the outlook or upgrading the ratings.
Conversely, negative ratings pressure will be applied if the
integration poses significant challenges, or if a weaker than
anticipated recovery or higher input prices result in debt to
EBITDA exceeding 8.0 times or negative free cash flow over the
next twelve months.
Borden Chemical, Inc., based in Columbus, Ohio, is a chemical
producer of resins, formaldehyde, and coatings. The company
reported revenues of $1.51 billion for the LTM ended
June 30, 2004.
BOWNE & CO: Moody's Reviews Single-B Ratings for Possible Upgrade
-----------------------------------------------------------------
Moody's Investors Services placed all ratings for Bowne & Co.,
Inc., on review for possible upgrade.
The ratings affected include Bowne & Company Inc.'s:
* $75 million Convertible Subordinated Debentures due 2033 -- B3
* Senior Implied Rating -- B1
* Issuer Rating -- B2
This action follows the company's announcement that it has entered
into an agreement to sell Bowne Business Solutions, Inc., (but not
its litigation services business) to Williams Lea Group Limited
for a cash consideration of $180 million.
The review will focus on:
(i) the likelihood that this transaction will close according
to the terms of the agreement,
(ii) the degree to which debt will be permanently reduced from
the proceeds of the sale, and
(iii) the impact that any debt reduction will have on the
company's financial profile.
In addition the review will assess:
(i) recent improvements in the company's operating
performance,
(ii) the sustainability of the recent rebound in the financial
services print sector, and
(iii) the possibility that the liquidity resulting from the
sale might be used to for acquisition activity and stock
repurchases.
Neither Bowne's existing $115 million senior unsecured credit
facility nor its $60 million privately placed senior unsecured
notes are rated by Moody's.
Bowne & Co., a global provider of document management solutions,
is headquartered in New York City. It recorded sales of
approximately $1 billion in 2003.
CANWEST MEDIA: Exchange Offer Cues Moody's to Review Low-B Ratings
------------------------------------------------------------------
Moody's Investors Service placed all ratings of CanWest Media Inc.
under review, with uncertain direction. This action is prompted
by an exchange offer made today by CanWest's parent, 3815668
Canada Inc., which will, in effect, merge CanWest's C$900 million
of junior subordinated debt with its C$600 million (equivalent) of
senior subordinated debt. The rating direction is uncertain
because the proposed transaction will significantly alter the debt
balance of the company, with currently unclear rating implications
for each class of debt.
The review will consider CanWest's existing business prospects,
the financial impact of the proposed transaction, including a
reduction in interest expense, covenant implications and normal
notching considerations, including expectations for debt levels at
each rating class. Moody's will also monitor the offer for the
required 2/3rds approval by November 15th.
Ratings affected by this action:
* Senior Implied rating Ba3
* Senior Secured, rated Ba3:
-- Revolving Credit Authorization, due November 2006
C$413 million
-- Tranche E, due August 2009 US$488 million
* Senior Unsecured Notes, rated B1:
-- 7.625%, due 2013 US$200 million
* Issuer rating B1
* Senior Subordinated Unsecured Notes, rated B2:
-- 10.625% due 2011 US$425 million
CanWest Media, Inc., is a newspaper publisher and a radio and TV
broadcaster, with operations in Canada, Australia, New Zealand,
and the Republic of Ireland. CanWest Media is based in Winnipeg,
Manitoba, Canada.
CASE FINANCIAL: New Set of Directors to Conduct Financial Query
---------------------------------------------------------------
Case Financial, Inc.'s (OTCBB:CSEF) Board of Directors appointed
Michael A. Schaffer, William J. Rapaglia, Lawrence C. Schaffer and
Waddy Stephensen, replacing Clifford R. Evans, John Irvine and
William Polly as directors. Also resigning at that meeting was
director Harvey Bibicoff.
The new Board intends to conduct a full investigation of the
finances of the Company over the past several years, take whatever
actions it deems appropriate, and move ultimately in a new
business direction.
Going Concern Doubt
In their report dated January 9, 2004 on the financial statements
for the fiscal year ended September 30, 2003, the Company's
independent auditors expressed substantial doubt about the
Company's ability to continue as a going concern. The Company
incurred net losses of $3,127,190 and $1,512,452 during the year
and nine months ended September 30, 2003 and June 30, 2004,
respectively. There was an accumulated deficit of $11,378,173 as
of June 30, 2004, total liabilities exceeded total assets by
$3,046,368 as of June 30, 2004, and the Company has been
experiencing cash flow problems. Those conditions raise
substantial doubt about the Company's ability to continue as a
going concern.
About the Company
Case Financial, Inc. was incorporated in 1998 and completed a
reverse acquisition with Asia Web Holdings, Inc., a publicly
traded company incorporated in the State of Delaware, on May 24,
2002. As part of the transaction, Asia Web changed its name to
Case Financial, Inc. and continued the business of the Company.
The previous entities, Case Financial, Inc and Case Financial
Funding, Inc., are referred to herein as "Prior CFI". Case
Financial Inc. and its subsidiaries, Case Financial, LLC and Case
Capital Corporation, provide pre-settlement and post-settlement
litigation funding services to attorneys (and, previously,
plaintiffs) involved in personal injury and other contingency
litigation, conducted primarily within the California courts.
CHI-CHI'S: Wants Plan-Filing Period Stretched to Oct. 3, 2005
-------------------------------------------------------------
Chi-Chi's, Inc., asks the U.S. Bankruptcy Court for the District
of Delaware to extend its exclusive periods afforded under 11
U.S.C. Sec. 1121 by another year. Specifically, the Debtor asks
the Bankruptcy Court to preserve the Company's exclusive right to
file a chapter 11 plan through Oct. 3, 2005, and asks the Court
for an extension, through Dec. 7, 2005, to solicit acceptances of
that plan from its creditors.
The Honorable Charles G. Case will convene a hearing on Nov. 1,
2004, to consider the request. Objections, if any, must be filed
and served by Oct. 25.
As reported in the Class Action Reporter on Feb. 24, 2004,
Chi-Chi's has to resolve claims asserted by some 600 Hepatitis
Claimants, three of which died from the virus after eating tainted
green onions imported from Mexico at a restaurant located in the
Beaver Valley Mall, about 25 miles northwest of Pittsburgh, in
November 2003. Chi-Chi's reports approximately 250 of those
claims have been settled to date. It's impossible, the Debtor
indicates, to propose a confirmable plan until the extent of the
Hepatitis Claims is quantified.
Headquartered in Irvine California, Chi-Chi's, Inc., is a direct
or indirect operating subsidiary of Prandium and FRI-MRD
Corporation and each engages in the restaurant business. The
Debtors filed for chapter 11 protection on October 8, 2003 (Bankr.
Del. Case No. 03-13063-CGC). Bruce Grohsgal, Esq., Laura Davis
Jones, Esq., Rachel Lowy Werkheiser, Esq., and Sandra Gail McLamb,
Esq., at Pachulski, Stang, Ziehl Young & Jones represent the
Debtors in their restructuring efforts. The Debtors estimated $50
to $100 million in assets and more than $100 million in
liabilities when they filed for bankruptcy.
CHOICE ONE: Section 341(a) Meeting Slated for December 10
----------------------------------------------------------
The United States Trustee for Region 2 will convene a meeting of
Choice One Communications Inc. and its debtor-affiliates'
creditors at 2:00 p.m., on December 10, 2004, at 80 Broad Street,
Second Floor in New York, New York. This is the first meeting of
creditors required under 11 U.S.C. Sec. 341(a) in all bankruptcy
cases.
All creditors are invited, but not required, to attend. This
Meeting of Creditors offers the one opportunity in a bankruptcy
proceeding for creditors to question a responsible office of the
Debtor under oath about the company's financial affairs and
operations that would be of interest to the general body of
creditors.
Headquartered in Rochester, New York, Choice One Communications,
Inc. -- http://www.choiceonecom.com/-- is an Integrated
Communications Provider offering voice and data services including
Internet solutions, to businesses in 29 metropolitan areas
(markets) across 12 Northeast and Midwest states. Choice One
reported $323 million of revenue in 2003, and provides services to
more than 100,000 clients. The Company and its 18 debtor-
affiliates filed for chapter 11 protection on October 5, 2004
(Bankr. S.D.N.Y. Case No. 04-16433). Jeffrey L. Tanenbaum, Esq.,
and Paul M. Basta, Esq., at Weil Gotshal & Manges LLP, represent
the Debtors in their restructuring efforts. When the Debtors
filed for bankruptcy, they reported $354,811,000 in total assets
and $1,078,478,000 in total debts on a consolidated basis.
CHOICE ONE: Moody's Withdraws Ratings After Chapter 11 Filing
-------------------------------------------------------------
Moody's Investors Service has withdrawn all ratings for Choice One
Communications, Inc., including:
* $350 million Senior Secured credit facility -- WR (previously
Ca)
* Senior Implied Rating -- WR (previously Ca)
* Senior Unsecured Issuer Rating -- WR (previously C)
The rating action follows the company's recent pre-packaged
Chapter 11 bankruptcy filing. Under the reorganization plan, the
company will convert a significant portion of its outstanding debt
to equity. When Moody's lowered its ratings for the company in
mid-2002, liquidity concerns were cited and ratings were pegged
more closely to anticipated recovery levels under an assumed event
of default scenario in which creditors were deemed to have "poor
recovery prospects." Choice One will convert $404 million of
senior debt into $175 million of new senior secured notes and 90%
of the common equity of the reorganized company. Choice One will
also convert $252 million of subordinated debt into the remaining
10% of common equity and into two series of seven-year warrants.
The reorganization plan also provides for $20 million of DIP
financing to be later replaced by $30 million of permanent bank
debt financing.
Choice One's difficulties stemmed from intense competition in the
CLEC space combined with excessive leverage, which resulted in
significant liquidity issues.
Choice One Communications is headquartered in Rochester, New York.
CONE MILLS: Indenture Trustee Objects to 2nd Amended Plan
---------------------------------------------------------
The Bank of New York, as the Indenture Trustee representing the
interests of holders of $100 million of publicly traded bonds
issued by Cone Mills Corporation, argues that the Debtors' Second
Amended Plan is flawed and should not be confirmed.
The Honorable Mary F. Walrath put her stamp of approval on Cone
Mills' First Amended Disclosure Statement explaining its Second
Amended Chapter 11 Plan of Liquidation at a hearing on Aug. 20,
2004. That action allowed the company to transmit the Plan and
Disclosure Statement to creditors for a vote. Judge Walrath will
hold a hearing to consider confirmation of the Plan, on Oct. 18,
2004, at 2:00 p.m., in Wilmington.
The Bank of New York complains that the Plan overstates claims
held by secured bank lenders and Prudential Insurance Company of
America and that they're received payments from Cone Mills that
should reduce the amount of their claims.
Glenn E. Siegel, Esq., at Dechert LLP, tells Judge Walrath that
BNY calculates the overstated claims should be reduced by:
Bank Lenders Prudential
------------ ----------
Claim Stated in Plan $50,500,000 $21,600,000
Unapplied payments (2,700,000) (434,000)
Improper penalties (1,200,000) (617,000)
----------- -----------
Proper Claim Amount $46,600,000 $20,549,000
=========== ===========
By lowering the amount of the Bank Lenders' and Prudential's
claims, greater value will flow to the Bondholders BNY
represents. BNY also complains that the Plan provides improper
releases to the Banks and Prudential.
Headquartered in Greensboro, North Carolina, Cone Mills
Corporation was one of the leading denim manufacturers in North
America.
The Company, with its debtor-affiliates filed for chapter 11
protection on September 24, 2003 (Bankr. Del. Case No. 03-12944).
Cone Mills filed a Chapter 11 Liquidation Plan following a sale of
substantially all of the company's assets to WL Ross & Co. in
March 2004, for $46 million plus assumption of certain
liabilities. WL Ross, in turn, merged Cone Mills' assets with
Burlington Industries' assets to form International Textile Group.
Pauline K. Morgan, Esq., at Young, Conaway, Stargatt & Taylor
represents the Debtors. When the Company filed for protection
from its creditors, it listed $318,262,000 in total assets and
$224,809,000 in total debts.
CONSECO MH: S&P's Senior & Subordinate Rating Tumbles to D from CC
------------------------------------------------------------------
Standard & Poor's Ratings Services today lowered its rating on the
subordinate B-1 class of Conseco MH Senior/Subordinate Pass-
Through Trust 2000-3 to 'D' from 'CC'.
The lowered rating reflects the reduced likelihood that investors
will receive timely interest and the ultimate repayment of their
original principal investment. This transaction reported an
outstanding liquidation loss interest shortfall for its B-1 class
on the October 2004 payment date. Standard & Poor's believes that
interest shortfalls for this transaction will continue to be
prevalent in the future, given the adverse performance trends
displayed by the underlying pool of collateral, as well as the
location of B-1 write-down interest at the bottom of the
transaction payment priorities (after distributions of senior
principal).
Standard & Poor's will continue to monitor the outstanding ratings
associated with this transaction in anticipation of future
defaults.
CRAIG MANUFACTURING: Case Summary & 20 Largest Unsecured Creditors
------------------------------------------------------------------
Debtor: Craig Manufacturing, Inc.
30 Loretto Street
Irvington, New Jersey 07111
Bankruptcy Case No.: 04-42405
Type of Business: The Company provides a full line of stainless-
steel restaurant equipment, including chef's
tables, cafeteria and back-bar style line-ups
(like display cases and dry cabinets), and
refrigerators. See http://www.craigmfg.com/
Chapter 11 Petition Date: October 8, 2004
Court: District of New Jersey (Newark)
Judge: Chief Judge Rosemary Gambardella
Debtor's Counsel: Bruce J. Wisotsky, Esq.
Ravin, Greenberg PC
101 Eisenhower Parkway
Roseland, New Jersey 07068-1028
Tel: (973) 226-1500
Estimated Assets: $500,000 to $1 Million
Estimated Debts: $1 Million to $10 Million
Debtor's 20 largest unsecured creditors:
Entity Claim Amount
------ ------------
Tad Metals, Inc. North East $143,923
Horizon BC/BS of NJ $63,060
Component Hardware Group, Inc. $49,456
Benihana $47,610
Amada America, Inc. $42,500
Cleveland Metal Exchange, Ltd. $23,403
United Refrigeration Inc. $22,432
Auerbach & Associates $20,239
APW/Wyott Foodservice Equipment $19,188
M. Tucker Company, Inc. $17,224
Hamilton Family $17,000
American Express $15,894
Travelers Indemnity & Affiliates $15,344
International Corporation $14,817
Cohen, Friedman, Dorman, et al. $13,425
Gerber Metal Supply Company $12,525
Royal Waffle King $9,908
PSE&G $9,438
Stainless Tubular Products, Inc. $8,862
Heatcraft, Inc. $8,395
DELACO COMPANY: U.S. Trustee Picks 8-Member Creditors' Committee
----------------------------------------------------------------
The United States Trustee for Region 2 appointed eight creditors
to serve on an Official Committee of Unsecured Creditors in The
Delaco Company's chapter 11 case:
1. Kelly R. Logston
1315 Montezuma Street, #302
Columbus, Texas 78934-2100
Tel: 979-732-5117
2. Ben Johnson
321 Soughmoor Drive
Natchez, Mississippi 39120
Tel: 601-304-0263
3. Harold May
80210 Blackwell Road
Freeport, Ohio 43073
Tel: 740-942-2145
4. Annette Brown
1440 Blackstone
St. Louis, Missouri 63112
Tel: 314-381-3961
5. Leola Johnson
Attn: Ora May Pittman
P.O. Box 740
Foxworth, Mississipi 39483
Tel: 601-736-8032
6. Lauren Baxter
7047 W. Bonnie Drive, Apartment 123
Westland, Michigan 48185
Tel: 734-467-4967
7. Mary Jane Ryskamp
602 Dakota Avenue
Brick, New Jersey 08724
8. Mary Ray
2745 South 3600 West
West Valley, Utah 84119
Tel: 801-637-6261
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 New York, New York, The Delaco Company is a
leading over-the-counter pharmaceutical drug company whose major
products have included SlimFast and Dexatrim. The Company filed
for chapter 11 protection on February 12, 2004 (Bankr. S.D.N.Y.
Case No. 04-10899). Laura Engelhardt, Esq., at Skadden, Arps,
Slate, Meagher & Flom represents the Debtor in its restructuring
efforts. When the Company filed for protection from its creditors,
it listed both estimated debts and assets of more than $100
million.
DII INDUSTRIES: Judge Fitzgerald OKs DIP Financing Pact Amendment
-----------------------------------------------------------------
As previously reported, Michael G. Zanic, Esq., at Kirkpatrick &
Lockhart, LLP, in Pittsburgh, Pennsylvania, relates that on
January 13, 2004, the U.S. Bankruptcy Court for the Western
District of Pennsylvania approved, on a final basis, the
$350,000,000 DIP Financing Agreement of DII Industries, LLC, and
its debtor-affiliates with Halliburton Energy Services, Inc., and
Halliburton Company. Under the terms of the DIP Financing
Agreement, the contractual obligation of Halliburton and HESI to
extend financing to the Debtors expired on June 30, 2004.
Mr. Zanic tells Judge Fitzgerald that pending the occurrence of
the Effective Date, the Debtors require a reliable source of
financing for their business operations. The Debtors have
determined that extending the DIP Financing Agreement is the most
practical and cost-effective way to meet this ongoing need for
credit.
Accordingly, the parties have agreed to extend the Date of
Termination under the DIP Financing Agreement to
December 31, 2004, unless the DIP Financing Agreement is earlier
terminated due to the occurrence of an Event of Default. No
additional consideration will be paid to Halliburton or HESI for
the extension, and the terms and conditions applicable to
extensions of credit will remain unchanged.
Court Extends Termination Date
Judge Fitzgerald extends the Date of Termination of the DIP
Financing Agreement until December 31, 2004, unless it is earlier
terminated due to the occurrence of an event of default.
DIP Commitment is Increased to $500 million
The Debtors have determined that the $350 million cap on borrowing
under the DIP Financing Agreement is no longer sufficient to meet
their ongoing credit needs. Specifically, the Debtors need an
increased Commitment under the DIP Financing Agreement to support
the issuance of substantial letters of credit that are required in
connection with their business engagements, while at the same time
maintaining their ability to access a revolving line of credit
sufficient to finance continued business operations.
Due to the impracticability and expense of seeking additional
financing from an unaffiliated source at this late juncture in
their Reorganization Cases, the Debtors have determined, in an
exercise of their business judgment, that an amendment of the DIP
Financing Agreement is the most practical and cost-effective way
to meet their increased needs for credit.
Therefore, the Debtors have requested, and Halliburton Company and
Halliburton Energy Services, Inc., have agreed, to enter into an
Amendment, which will increase the Commitment under the DIP
Financing Agreement to $500 million. No additional consideration
will be paid to Halliburton or HESI for this amendment to the DIP
Financing Agreement, and the terms and conditions applicable to
extensions of credit under the DIP Financing Agreement will remain
otherwise unchanged.
This increase in the Debtors' borrowing capacity is necessary to
the continued orderly operation and expansion of their businesses,
Jeffrey N. Rich, Esq., at Kirkpatrick & Lockhart,
LLP, in New York, explains.
Accordingly, Judge Fitzgerald approves the amendment to the DIP
Financing Agreement.
The Debtors state that no fees will be paid to Halliburton or
HESI in connection with the Amendment and, with the exception of
the increased Commitment amount, the terms of the DIP Financing
Agreement will remain in full force and effect.
Headquartered in Houston, Texas, DII Industries, LLC, is the
direct or indirect parent of BPM Minerals, LLC, Kellogg Brown &
Root, Inc., Mid-Valley, Inc., KBR Technical Services, Inc.,
Kellogg Brown & Root Engineering Corporation, Kellogg Brown & Root
International, Inc., (Delaware), and Kellogg Brown & Root
International, Inc., (Panama). KBR and its subsidiaries provide a
wide range of services to energy and industrial customers and
government entities in over 100 countries. DII has no business
operations. DII and its debtor-affiliates filed a prepackaged
chapter 11 petition on December 16, 2003 (Bankr. W.D. Pa. Case No.
02-12152). Jeffrey N. Rich, Esq., Michael G. Zanic, Esq., and
Eric T. Moser, Esq., at Kirkpatrick & Lockhart LLP, represent the
Debtors in their restructuring efforts. On June 30, 2004, the
Debtors listed $6.255 billion in total assets and $5.295 billion
in total liabilities. (DII & KBR Bankruptcy News, Issue No. 20;
Bankruptcy Creditors' Service, Inc., 215/945-7000)
DIVINE INC: Judge Feeney Approves Committee's Disclosure Statement
------------------------------------------------------------------
The Honorable Joan N. Feeney of the U.S. Bankruptcy Court for the
District of Massachusetts, Eastern Division, approved the
disclosure statement prepared by the Official Committee of
Unsecured Creditors appointed in divine, Inc.'s, chapter 11 cases
to explain their plan of liquidation for the company. With an
approved disclosure statement in hand, the Committee will now ask
divine's creditors to vote to accept or reject the plan. A
favorable vote will pave the way for confirmation of the plan at a
hearing on Nov. 23, 2004. Objections, if any, to confirmation of
the plan must be filed and served by Nov. 16.
The Liquidating Plan proposes to pay all administrative priority
claims, secured claims and unsecured priority claims in full. The
Plan projects general unsecured creditors will recover about 27%
of what they're owed (excluding any recoveries on account of D&O
Insurance). RoweCom will hold an allowed unsecured claim for
$50,808,071 against divine. No distributions flow to divine's
equity holders under the Plan.
divine, Inc., an affiliate of RoweCom Inc., described itself as an
extended enterprise company, serving to make the most of customer,
employee, partner, and market interactions, and through a holistic
blend of Technology, services, and hosting solutions, to assist
its clients in extending their enterprise. The Company filed for
chapter 11 protection on February 25, 2003 (Bankr. Mass. Case No.
03-11472). Christopher J. Panos, Esq., at Craig and Macauley,
P.C., represents the Official Committee of Unsecured Creditors.
Richard E. Mikels, Esq., Kevin J. Walsh, Esq., Adrienne K. Walker,
Esq., at Mintz, Levin, Cohn, Ferris, Glovsky and Popeo and J.
Douglas Bacon, Esq., Stephen R. Tetro, Esq., and Adam R. Skilken,
Esq., represent the Debtors. When the Debtors filed or protection
from their creditors, they listed $271,372,593 in total assets and
$191,957,065 in total debts.
ENRON: Oregon Electric Offers $43MM Rate Credit to PGE Customers
----------------------------------------------------------------
Oregon Electric Utility Company has offered a guaranteed
$43 million rate credit to PGE customers if its proposal to
purchase the utility is approved by the Oregon Public Utility
Commission. The rate credit - a significant increase from the
$15 million Oregon Electric proposed on Aug. 16 - is higher than
the $36 million credit Enron provided when it purchased PGE. The
$43 million credit would be payable over five years beginning in
2007.
In testimony filed yesterday, Oct. 11, in response to the
testimony of OPUC Staff and intervenors in the approval
proceeding, Oregon Electric also made it clear that PGE would
receive the benefit of up to $94 million in contractual protection
from Enron against potential liabilities and losses unrelated to
Enron, in addition to the contractual protection against Enron-
related liabilities previously offered to PGE, in a total amount
up to $1.25 billion.
"Oregon Electric's proposal provides irrefutable rate relief and
other significant benefits to PGE customers," said Peter O.
Kohler, M.D., prospective chairman of Oregon Electric and PGE. "In
contrast, no such benefits will be enjoyed by ratepayers and PGE
if the status quo is preserved. It's time to make PGE an
independent Oregon utility once again."
Additionally, Oregon Electric has agreed to rigorous provisions
that protect PGE's financial well-being, such as not paying
dividends to shareholders until at least $250 million in Oregon
Electric debt is repaid. Collectively, these provisions go beyond
the conditions that were placed on Enron when it purchased PGE,
conditions which have been highly effective in protecting the
utility during Enron's bankruptcy. Yesterday's filing also
provided additional transparency into Oregon Electric's governance
and ownership, as well as made commitments to provide the OPUC
with additional information regarding PGE's expenditures.
"We are sensitive to the perceived concerns of OPUC staff and
stakeholders, given the Enron experience. For that reason, in the
spirit of cooperation that Oregon Electric's ownership portends,
we have agreed to more onerous conditions than previously imposed
on an owner of an Oregon utility," said Kelvin Davis, a partner in
the investment group backing Oregon Electric's proposal to acquire
PGE. "Coupled with those protections are a $43 million rate
credit, liability protections, local board leadership and other
benefits that together clearly demonstrate that Oregon Electric's
ownership of PGE will provide undeniable benefits to customers and
Oregonians at large."
"Beyond the rate credit and other immediate benefits, Oregon
Electric will usher in a new era of collaboration among PGE's
stakeholders. This investor group also has deep experience in
helping make good companies even better, which will inure to the
long-term benefit of customers," said Dr. Kohler.
In its final filing, Oregon Electric restated the reasons why its
acquisition of PGE would result in a net benefit to PGE's
customers. If the Oregon Electric proposal is approved, the
following benefits will be achieved:
-- An end to Enron: An immediate end to Enron's ownership of
PGE, ensuring renewed stability and certainty backed by
responsible shareholder support
-- A $43 million rate credit: Customers will receive a total
rate credit of $43 million, to be paid over five years
beginning in 2007
-- Local headquarters remain: PGE's headquarters will stay in
Portland, jobs will stay in Oregon, and PGE will continue
its charitable leadership in the community
-- The creation of a new board with substantial local
representation: Oregon Electric has designated seven leading
Oregonians to serve on the PGE board, including an Oregon
chairman
-- Protection against Enron-related and other liabilities: PGE
will benefit from certain contractual protections from Enron
provided under the purchase contract against potentially
material Enron-related liabilities and against certain other
non-Enron related liabilities and losses.
-- Service quality: A commitment to reinforcing high quality
service standards, including a 10-year extension of service
quality measures that are currently in place
-- Addressing customer concerns: Periodic access by customer
organizations and other PGE stakeholder groups to the PGE
Board of Directors, providing these constituencies with the
opportunity to voice concerns directly to the board
-- Capital reinvestment: Substantial future capital
reinvestment in PGE, ensuring reliability and efficiency
from existing assets and the acquisition and development of
new resources
-- Long-term efficiency and cost-effectiveness: A commitment to
undertaking a comprehensive review of the company post-
closing, with the goal of identifying efficiency and
productivity gains that ensure customers receive safe and
reliable electricity as cost-effectively as possible
-- A significant Oregon taxpayer: Oregon Electric will be a
substantial Oregon taxpayer and will not consolidate its
returns with any other operating company, as happened in the
Enron era
-- More renewables: A commitment to vigorously pursue a target
of using cost-effective renewable resources to fulfill 10
percent of PGE's peak capacity by 2012
-- Organizational accountability for environmental initiatives:
The appointment of a manager within PGE with the appropriate
responsibility and authority to work with the advocacy
groups for renewable energy sources, sustainability, energy
efficiency, and environmental matters
-- Greater assistance to low-income customers: A doubling of
cash contributions for the next 10 years that PGE currently
makes to Oregon HEAT, a non-profit organization that assists
low-income families in paying utility bills, which will be
paid for with Oregon Electric shareholder (rather than
customer) funds
"The Oregon Electric proposal provides clear and substantial
benefits to PGE customers, benefits that will not be available if
PGE remains under the cloud of Enron's ownership," added Davis.
About Oregon Electric Utility Company
Oregon Electric Utility Company is a new Oregon company formed for
the sole purpose of investing in Portland General Electric. Oregon
Electric's goal is to maintain PGE as an independent utility based
in Oregon, serving local customers, and contributing to the health
of the community and the growth of the regional economy.
The company is backed by Texas Pacific Group, one of the leading
private equity firms in the country. In addition, respected
Northwest leaders and industry experts have committed to join the
new PGE board upon approval of the transaction. They include:
-- Peter Kohler, M.D., President of Oregon Health & Science
University
-- Kirby Dyess, former Corporate Vice President and Director of
Operations at Intel Capital, and currently a Principal with
Austin Capital Management, LLC
-- Maria Eitel, Vice President and Senior Advisor for Corporate
Responsibility, Nike, Inc., and President, Nike Foundation
-- Gerald Grinstein, Principal, Madrona Investment Group LLC,
and CEO, Delta Air Lines, Inc.
-- Jerry Jackson, former Executive Vice President and Group
President, Utility Operations, Entergy Corporation
-- Duane McDougall, former President and CEO, Willamette
Industries, Inc.
-- Robert Miller, Chairman, Rite Aid Corp. and former CEO, Fred
Meyer, Inc.
-- M. Lee Pelton, Ph.D., President, Willamette University
-- Tom Walsh, President, Tom Walsh & Co.
-- In addition, Peggy Fowler, CEO of PGE, and David Bonderman
and Kelvin Davis, partners of Texas Pacific Group, will also
join the Board.
On November 18, 2003, Oregon Electric Utility Company signed a
binding agreement with Enron to acquire all of Portland General
Electric for approximately $2.35 billion. The Oregon Electric
proposal is now pending review and approval before the Oregon
Public Utility Commission.
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.
FACTORY 2-U: Proposes to Pay $237,000 to Retain 28 Key Employees
----------------------------------------------------------------
Factory 2-U Stores Inc. asks the U.S. Bankruptcy Court for the
District of Delaware for permission to pay $237,000 to 28 key
employees. The retailer doesn't want to lose these 28 key
employees as the company wraps-up its GOB sales being run by The
Alamo Group, Garcel, Inc. d/b/a/ The Great American Group and The
Ozer Group LLC, and liquidates its estates. The Debtor has
learned that some of these key employees have received job offers
from competitors and thinks the loss of these employees at this
juncture would be devastating.
The key employee bonuses range from $780 to $75,000 and the Debtor
proposes to pay the bonuses when a key employee's employment
actually terminates, provided they don't jump ship early. The key
employees hold positions in the Debtor's operational, accounting,
human resources, real estate and IT departments.
The Bankruptcy Court will hold a hearing to review the proposal
on Oct. 22, 2004. Objections, if any, must be filed and served
by Oct. 15.
Headquartered in San Diego, California, Factory 2-U Stores, Inc.
-- http://www.factory2-u.com/-- operates a chain of off-price
retail apparel and housewares stores in 10 states, mostly in the
western and southwestern US, sells branded casual apparel for the
family, as well as selected domestics, footwear, and toys and
household merchandise. The Company filed for chapter 11
protection on January 13, 2004 (Bankr. Del. Case No. 04-10111).
M. Blake Cleary, Esq., and Robert S. Brady, Esq., at Young Conaway
Stargatt & Taylor, LLP, represent the Debtors in their
restructuring efforts. When the Debtors filed for protection from
their creditors, they listed $136,485,000 in total assets and
$73,536,000 in total debts.
GADZOOKS INC: Reports 24.2% September Same Store Sales Increase
---------------------------------------------------------------
Gadzooks, Inc. (OTC Pink Sheets: GADZQ) reported sales for the
five weeks of fiscal September ended Oct. 2, 2004 totaled
$13.2 million. Comparable store sales increased 24.2 percent for
the September period. Total sales for the first 35 weeks of fiscal
2004 were $126.8 million. The Company reported a 17.3 percent and
a 20.7 percent increase in same store sales for August and July
2004, respectively.
As it continues to operate under the protection of Chapter 11
Bankruptcy Code, the Company also reported that it is involved in
continuing discussions with its existing lender, as well as other
lending sources, to address its seasonal liquidity needs.
Gadzooks' exclusive period to file a chapter 11 plan runs through
the end of the month. Gadzooks has advised the U.S. Bankruptcy
Court for the Northern District of Texas, Dallas Division, that it
is negotiating with the Official Committee of Unsecured Creditors
and Official Committee of Equity Holders. The Company hopes to
file a consensual plan by the end of the month.
Dallas-based Gadzooks is a specialty retailer of casual clothing,
accessories and shoes for 16-22 year-old females. Gadzooks now
operates 243 stores in 40 states.
Headquartered in Carrollton, Texas, Gadzooks, Inc.
-- http://www.gadzooks.com/-- is a mall-based specialty retailer
providing casual apparel and related accessories for youngsters,
between the ages of 14 and 18. The Company filed for chapter 11
protection on February 3, 2004 (Bankr. N.D. Tex. Case No. 04-
31486). Charles R. Gibbs, Esq., and Keith Miles Aurzada, Esq., at
Akin Gump Strauss Hauer & Feld, LLP represent the Debtor in its
restructuring efforts. When the Company filed for protection from
its creditors, it listed $84,570,641 in total assets and
$42,519,551 in total debts.
GALEY & LORD: Hires TRG Turnaround as Operational Adviser
---------------------------------------------------------
The U.S. Bankruptcy Court for the Northern District of Georgia
gave Galey & Lord, Inc., and its debtor-affiliates permission to
retain TRG Turnaround and Crisis Management, as their operational
advisors.
TRG Turnaround worked for the Debtors since May 2004 to analyze
the viability of an operational restructuring of the Debtors'
business given the financial performance for the fiscal year.
Based on the analysis, the Firm developed an operational
restructuring plan with aggressive but achievable cost cutting and
revenue generating strategies.
TRG Turnaround will:
a) oversee the implementation and tracking of the operational
restructuring plan and develop additional operational
restructuring initiatives to improve the Debtors' business;
b) develop, refine, implement and monitor the Debtors'
turnaround efforts while the Debtors' sale process is
proceeding;
c) refine and monitor the progress of the Debtors' business
plan and turnaround strategy, which will serve as the
operating foundation of the Debtors' Turnaround Plan;
d) present the Debtor's Turnaround Plan to their creditors as
required by the Debtors;
e) provide assistance to executives and management of the
Debtors in the management and enhancement of their
liquidity issues;
f) report to the Debtors' Board of Directors on the progress
of the Turnaround Plan; and
g) provide critical advice and guidance to the Debtors in the
process leading to the completion of the proposed sale of
their assets.
John S. Sumner, Jr., Principal at TRG Turnaround, discloses that
the Debtor paid a $100,000 retainer.
Mr. Sumner reports that TRG Turnaround will bill the Debtor an
hourly rate of $175 to $475 per hour for its professional
services, depending on the staff members assigned to the project.
The Firm will charge the Debtors $100 per hour for research
services. Mr. Sumner adds that TRG Turnaround's expenses for
providing professional services under this arrangement will not
exceed $30,000 per week.
To the best of the Debtors' knowledge, TRG Turnaround is
"disinterested" as the 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.
GARDEN RIDGE: Wants Court to Make Landlord Committee Go Away
------------------------------------------------------------
Garden Ridge Corp. wants the Honorable Louis H. Kornreich to halt
an ad hoc committee of landlords' further participation in the
retailer's chapter 11 proceeding. Garden Ridge calls the Landlord
Group a "Frankenstein of a committee" that's caused "unnecessary
and value-destroying disruptions" in its chapter 11 case. Garden
Ridge additionally complains that the Landlord Group has failed to
comply with the disclosure requirements imposed under Rule 2019 of
the Federal Rules of Bankruptcy Procedure.
Garden City says it doesn't know who it's actually fighting with.
The Landlord Committee was supposedly comprised of 20 members in
May. Today, the Debtor finds that at least five of those 20
resigned and another five won't confirm or deny whether they
continue to serve on the Committee. Where "membership is
amorphous at best," the company argues, an ad hoc committee
shouldn't be allowed to participate as a core party-in-interest in
a chapter 11 restructuring.
As previously reported in the Troubled Company Reporter, the
Landlords urge Judge Kornreich to terminate the Debtors' exclusive
period pursuant to 11 U.S.C. Sec. 1121. The Landlord Committee
says it's arranged for $85 million in new financing to fund a plan
of reorganization. The Landlord Committee wants the opportunity to
file and pursue confirmation of its plan.
Headquartered in Houston, Texas, Garden Ridge Corporation --
http://gardenridge.com/-- is a megastore home decor retailer that
offers decorating accessories like baskets, candles, crafts, home
accents, housewares, party supplies, pictures and frames, pottery,
seasonal items, and silk and dried flowers. The company filed for
chapter 11 protection on February 2, 2004 (Bankr. Del. Case No.
04-10324). Joseph M. Barry, Esq., at Young Conaway Stargatt &
Taylor LLP represents the Debtors in their restructuring efforts.
When the Company filed for protection from its creditors, it
listed estimated debts and assets of over $100 million each.
GENERAL GROWTH: Board Approves Warrants Offering
------------------------------------------------
General Growth Properties, Inc.'s (NYSE:GGP) Board of Directors
approved a warrants offering that will allow all holders of record
of GGP common stock and all holders of record of common and
convertible preferred units of limited partnership of GGP Limited
Partnership to purchase additional shares of GGP's common stock.
The Warrants Offering is being conducted in connection with GGP's
pending merger with The Rouse Company (NYSE:RSE), which was
announced on Friday, Aug. 20, 2004.
In the Warrants Offering, each Holder will be allocated, at no
charge, 0.1 non-transferable warrants for each share or common
unit (assuming conversion of the preferred units into common
units, in accordance with the terms of the preferred units) owned,
as of the close of business on Monday, Oct. 18, 2004. Each whole
warrant represents a right to purchase one share of GGP common
stock. Fractional warrants allocated to a record holder after
aggregating all warrants to which the record holder is entitled
will be rounded to the nearest whole number. Accordingly, Holders
owning in the aggregate 4 or fewer shares or common units
(assuming conversion of the preferred units into common units, in
accordance with the terms of the preferred units) will not be
allocated any warrants.
Each warrant will enable Holders to purchase a share of GGP common
stock at a cash subscription price per share equal to the average
of the high and the low trading prices for GGP common stock on the
NYSE on Tuesday, Oct. 19, Wednesday, Oct. 20, and Thursday,
Oct. 21, 2004.
Each warrant carries with it a basic subscription privilege and an
oversubscription privilege. The basic subscription privilege
entitles the Holder to purchase one share of GGP common stock at
the subscription price. Pursuant to the oversubscription
privilege, each Holder that exercises its basic subscription
privilege in full also may subscribe for additional shares at the
same subscription price per share, to the extent that other
Holders do not exercise their warrants in full. If an insufficient
number of shares is available to fully satisfy the
oversubscription privilege requests, the available shares will be
sold pro rata among Holders who exercised their oversubscription
privilege. No Holder will be allocated more shares than such
Holder's subscription.
The founders of GGP and their families have committed to "back-
stop" the Warrants Offering to ensure that not less than
$500 million will be raised in the Warrants Offering. The
Bucksbaum family will comply with this back-stop obligation by
subscribing for any common stock not subscribed for in the
Warrants Offering to close any gap between the amount subscribed
for and $500 million.
After the close of the market and the establishment of the
subscription price on Thursday, Oct. 21, 2004, GGP will issue a
press release announcing the subscription period for the Warrants
Offering and the subscription price. GGP currently expects to
launch the Warrants Offering on Monday, Oct. 25, 2004.
GGP expects to mail subscription certificates and a prospectus
describing the Warrants Offering to all Holders shortly after the
record date. The warrants will expire if they are not exercised by
5:00 p.m., New York City time, on the day GGP establishes as the
last day of the subscription period. GGP currently expects the
subscription period to end as of the close of business on Tuesday,
Nov. 9, 2004, which is the day of the Rouse shareholder vote. It
is currently anticipated that the Rouse merger will close on
Friday, Nov. 12, 2004. If the Rouse merger does not close, GGP
will cancel this Warrants Offering and all exercises of warrants
will be void. If GGP cancels the Warrants Offering, any money
received from subscribing Holders will be refunded promptly,
without interest or deduction. GGP may extend or cancel the
Warrants Offering for any reason.
About the Company
General Growth Properties, Inc. is the country's second largest
shopping center owner, developer and manager. General Growth
currently has ownership interest in, or management responsibility
for, a portfolio of 178 regional shopping malls in 41 states.
* * *
Moody's Investors Service placed its ratings of General Growth
Properties, Inc., and its subsidiaries on review for possible
downgrade. At the same time, Moody's placed its ratings of The
Rouse Company on review for possible downgrade.
Ratings under review for possible downgrade are as follows:
Price Development Company, L.P.,
-- Senior debt rated Baa3
GGP Properties Limited Partnership
-- Senior debt shelf rated (P)Ba1
General Growth Properties, Inc.
-- Preferred stock shelf rated (P)Ba1
The Rouse Company
-- Senior debt rated Baa3;
-- senior debt shelf at (P) Baa3; and
-- Preferred stock shelf at (P)Ba1
The review was prompted by General Growth's announcement that it
has signed a definitive agreement to acquire The Rouse Company for
an estimated purchase value of $12.6 billion, including cash and
assumed debt. The transaction will be funded initially with
roughly $9.75 billion in bank loans. General Growth will retain
The Rouse Company as a wholly-owned operating subsidiary. The
closing of the transaction, expected to occur in the fourth
quarter of 2004, is contingent upon approval by the shareholders
of The Rouse Company.
Strategic benefits--scale, diversity, and increased market share--
of the transaction are mitigated by the substantial pro forma
leverage, and in particular variable-rate debt, and weaker
coverage measures for General Growth over the short term. The
merger should enhance General Growth's earnings, while extending
the REIT's competitive position with higher-end and fashion-
oriented retailers. In Moody's view, assets in Rouse's property
portfolio are highly productive, generating in excess of $400 in
sales per square foot, which is higher than General Growth's
existing mall portfolio. Notwithstanding these positives, the
credit risk profile of General Growth will increase materially
given its already leveraged capital structure and its financial
flexibility will be further constrained due to a modest level of
unencumbered assets.
Moody's review will focus on the progress and consummation of the
proposed acquisition, the ultimate capital structure, and the
resulting corporate and legal structure, including potential
structural subordination of Rouse's bonds. Moody's also will
consider in its review General Growth's long-term strategic plan
for non-core assets in Rouse's portfolio, potential cost savings
and integration risks related to the transaction.
The Rouse Company [NYSE: RSE], headquartered in Columbia,
Maryland, is a real estate investment trust primarily engaged in
the acquisition, development and management of retail centers,
office buildings, mixed-use projects and other commercial
properties across the United States.
GLOBAL CROSSING: Sees $40+ Mil Savings from Service & Job Cuts
--------------------------------------------------------------
Global Crossing (Nasdaq: GLBCE) filed an amendment to its 2003
annual report on Form 10-K, which includes restated audited
financial statements for 2003, and two Form 10-Qs, which
include its financial results for the first and second quarters of
2004, late last week. Grant Thornton LLP, the company's
predecessor auditors for the three years ended December 31, 2003,
reissued their audit reports on the company's financial statements
for the fiscal years ended December 31, 2002 and 2001, and issued
an audit report on the company's restated financial statements for
the year ended December 31, 2003. With these filings, the company
has regained compliance with SEC filing and NASDAQ listing
requirements.
The company also announced that it has reached an important
agreement with certain affiliates of its majority shareholder,
Singapore Technologies Telemedia (ST Telemedia) to recapitalize
its current debt holdings in Global Crossing and provide
additional short-term liquidity to the company. The company
believes that these steps will facilitate the execution of debt
financings in the fourth quarter of 2004 intended to meet Global
Crossing's long-term funding requirements.
In addition, Global Crossing announced a business restructuring
plan to streamline and better focus its operations to broadly
serve enterprise customers with higher margin global, IP and
managed services offerings and to de-emphasize lower margin legacy
services, designed to accelerate the point at which the company
reaches operating cash flow break-even.
"With the initiatives announced [Fri]day, we've regained
compliance with SEC reporting and NASDAQ listing requirements,
taken an important first step in securing long-term capital, and
laid out a business framework for achieving our goal of becoming a
leader in global telecommunications," said John Legere, Global
Crossing's chief executive officer. "We're looking forward now to
concentrating on Global Crossing's future, as we tighten our focus
on providing customers with the global, IP services our network
was built to deliver."
2003 Restatement
As previously announced, the company has restated its 2003
results. The amount of the adjustment to its 2003 cost of access
expenses is $67 million, with an additional approximately $12
million balance sheet reclassification related to cost of access
amounts recorded upon the company's emergence from bankruptcy.
The restatement resulted in:
(i) an increase of approximately $79 million in total cost of
access liabilities from $150 million to $229 million as
of December 31, 2003;
(ii) an increase of approximately $2 million in cost
of access expense for the period December 10, 2003 to
December 31, 2003, resulting in an increase in the
operating loss for this period from $8 million to $10
million and an increase in the net loss from $9 million
to $11 million for this period; and
(iii) an increase of approximately $65 million in cost of
access expense for the period January 1, 2003 to
December 9, 2003, resulting in an increase in the
operating loss for this period from $133 million to
$198 million and an increase in the net loss from
$230 million to $295 million, excluding gains on
emergence from bankruptcy.
Audited, restated 2003 financial statements can be found in the
company's Annual Report on Form 10-K/A for December 31, 2003 at
http://www.globalcrossing.com/
First Quarter 2004 Financial Results
The first quarter of 2004 reflects the first full quarter of
results for the company since its emergence from bankruptcy on
December 9, 2003.
"Notwithstanding the difficult competitive environment evidenced
by declining revenues industry-wide, we have continued to make
progress, and our first half results are generally in line with
our expectations," said Mr. Legere. "We continue to develop new
products and services that leverage our unique global IP
footprint, operate our network at the highest levels of quality
performance, and customer satisfaction measures have shown steady
increases. We are ready for growth."
Revenue
Total revenue for the first quarter of 2004 was $690 million,
compared to $735 million for the same period in 2003. Telecom
services revenue for the first quarter of 2004 was $664 million,
compared to $671 million for the same period in 2003, excluding
$19 million reduction of non-cash indefeasible rights of use (IRU)
deferred revenue in 2003, or $690 million as reported. In
addition to the lower IRU revenue resulting from the writedown of
IRU deferred revenue due to fresh start accounting, results were
also affected by the continued competitive pricing environment for
telecommunications services, partially offset by volume increases
in both carrier and enterprise businesses.
Despite the overall revenue decline, revenue growth was recorded
in key products such as IP access, IP VPN and managed services
sold to customers in government, research and education, cable,
service provider (XSP) and wireless markets. For example, IP
services volumes in enterprise and carrier markets grew by more
than 50 percent year over year in the first quarter. Volume
growth of IP services in the specific areas mentioned above is in
line with the company's strategy of shifting its mix to higher-
margin data services.
Of the total telecom services revenue reported for the first
quarter of 2004, enterprise services accounted for 38 percent, as
compared to 40 percent for the same period of 2003. Carrier
services were 61 percent of total telecom services revenue,
compared to 59 percent in the first quarter of 2003, and consumer
services remained at one percent.
Of the enterprise services revenue in the first quarter of 2004,
52 percent was attributable to voice services compared to 54
percent for the same period in 2003, and 48 percent was
attributable to data services compared to 46 percent in the first
quarter of 2003. This favorable shift from voice to data was
primarily driven by an increase in managed services and lower
attrition of data customers relative to voice customers. In
general, margins on data services provided to our customers are
substantially higher than legacy voice margins.
Of the carrier services revenue in the first quarter of 2004,
excluding non-cash IRU revenue, 87 percent was attributable to
voice services, and 13 percent was attributable to data services,
unchanged from the same period in 2003. Despite pricing pressure
in the industry, carrier voice revenue grew 4 percent, driven by
international long distance voice. Excluding non-cash IRU
revenue, carrier data revenue would have shown approximately a 7
percent year-over-year increase.
Global Marine revenue declined to $26 million from $45 million for
the first quarter of 2003, principally as a result of the
expiration of a significant customer maintenance contract at the
beginning of 2004.
Excluding Global Marine, the sale of which was announced on
August 16, 2004, and the impact of the writedown of non-cash
deferred IRU revenues, Global Crossing's revenues declined
approximately 1 percent versus the prior year, driven primarily by
the decline in sales to financial markets customers and small
businesses.
Cost Management
Cost of access declined to $479 million (representing 72 percent
of telecom services revenue) for the first quarter of 2004,
compared to $504 million (representing 73 percent of telecom
services revenue) for the same period of 2003, as a result of
initiatives to lower access unit prices. These initiatives
included network optimization, use of strategic and
competitive access providers and increased end office versus
tandem switch termination. Consolidated third party maintenance
costs for the first quarter were $27 million, compared to $29
million in the first quarter of 2003, with the decrease driven by
continued network vendor optimization.
Consolidated operating expenses for the first quarter of 2004 were
$236 million, compared to $240 million for the same period in
2003. Telecom services operating expenses were $195 million,
compared to $188 million in the same period of 2003. Telecom
operating expenses increased in part as a result of non-cash stock
compensation expense of $5 million related to stock-based
incentives issued since Global Crossing's emergence from
bankruptcy on December 9, 2003. In addition, incentive
compensation of $2 million and restructuring expenses of $2
million were recorded as operating expenses in 2004, whereas the
comparable amounts for 2003 were included in reorganization
costs (as opposed to operating expenses) while in bankruptcy.
Excluding the impact of expenses related to stock compensation,
incentive compensation and restructuring, telecom services
operating expenses declined $2 million in the first quarter of
2004 as compared to the same period in 2003.
Increases in real estate, operations, and sales and marketing
expenses, as well as expenses related to compliance with Section
404 of Sarbanes Oxley, were more than offset by lower bad debt
expense, in part, the result of strong collections and risk
management efforts, and lower general and administrative
expenses.
Global Marine's operating expenses declined to $41 million from
$52 million for the first quarter of 2003. This decline was
primarily attributed to reduced installation projects and
maintenance contract requirements resulting in lower third party
project costs.
EBITDA & Net Losses
For the first quarter of 2004, Consolidated EBITDA (as defined)
was a loss of $52 million, compared to a loss of $38 million for
the same period in 2003. The increase in the consolidated EBITDA
loss was substantially impacted by a $9 million increase in Global
Marine EBITDA (as defined) loss from $2 million in the first
quarter of 2003 to $11 million for the same period in 2004,
principally due to expiration of a significant maintenance
contract.
Telecom EBITDA (as defined) loss increased from $36 million in the
first quarter of 2003 to $41 million for the same period in 2004.
Excluding the impact of the $19 million reduction in deferred
revenues from prior period IRU sales and the $9 million of 2004
stock compensation, incentive compensation and restructuring
expenses discussed above, Telecom EBITDA loss narrowed
significantly in 2004. This improvement was driven by gross
margin increases as a result of cost of access initiatives and
improvements in bad debt expense.
Global Crossing's consolidated loss applicable to common
shareholders in the first quarter of 2004 was $113 million, versus
a loss of $97 million in the first quarter of 2003.
Capital Expenditures
For the first quarter of 2004, cash paid for capital expenditures
and capital leases was approximately $33 million, compared to $49
million for the first quarter of 2003, a 33 percent improvement
year over year.
With its core network substantially completed in mid-2001, Global
Crossing has continued to reduce its capital expenditure
requirements, with more than two thirds of such expenditures being
made for success-based initiatives, particularly customers'
growing network demands. Capital expenditures also included
investments in our global IP infrastructure, including edge
equipment and the conversion of switching infrastructure from time
division multiplexing (TDM) technology to voice over Internet
protocol (VoIP) technology, which now carries approximately 40
percent of the company's voice traffic.
Second Quarter 2004 Financial Results
Revenue Declines
For the second quarter of 2004, total revenue was $648 million,
compared to $744 million for the same period in 2003. Telecom
services revenue for the second quarter of 2004 was $626 million,
compared to $677 million for the second quarter of 2003, excluding
the $21 million reduction of non-cash IRU revenue in 2003, or $698
million as reported. In addition to the IRU revenue change, the
year-over-year decrease in telecom revenue was primarily
attributable to the continued competitive pricing environment,
partially offset by an increase in sales volume.
Additionally, the previously announced initiative by Global
Crossing to address volatile and low margin services by tightening
payment terms, particularly in the international long distance
reseller market, reduced revenue but improved working capital and
cash performance. Overall, in the second quarter of 2004,
international long distance revenue declined approximately $20
million from the first quarter of 2004, driven in part by
the initiation of this program late in the first quarter. Lastly,
sales to legacy trader voice customers in the financial markets,
as well as the small-business sector, continued to decline in the
second quarter.
Telecom services revenue declined by $38 million or 6 percent in
the second quarter of 2004, as compared to the first quarter of
2004, primarily driven by the company's efforts to tighten payment
terms in the international long distance reseller market. In
addition, the carrier voice business declined due to continued
competitive pressures in certain domestic voice markets.
Of the total telecom services revenue reported for the second
quarter of 2004, enterprise services accounted for 40 percent, as
compared to 38 percent for the same period of 2003. Carrier
services were 59 percent of total telecom services revenue,
compared to 61 percent in the second quarter of 2003, and
consumer services remained at 1 percent of total telecom revenue.
Voice services were 52 percent of enterprise services revenue in
the second quarter of 2004, compared to 53 percent for the same
period in 2003. Data services comprised 48 percent of enterprise
services in the second quarter, compared to 47 percent in the
second quarter of 2003. Although data revenue is down year-over-
year, primarily due to declining revenue in non-core customer
markets like small business, other areas of the enterprise data
business showed signs of growth. Similar to first quarter, the
company experienced increased volume and revenue in managed
services, IP access and sales of IP VPNs to strategic customers in
the government, and research and educational networks industries.
Of the carrier services revenue in the second quarter of 2004,
excluding non-cash IRU revenue, 87 percent was attributable to
voice services, and 13 percent was attributable to data services,
unchanged from the same period in 2003. Carrier service revenues
decreased in the second quarter of 2004 as compared with the
second quarter of 2003 (excluding IRUs) as a result of continued
competitiveness in the domestic North American wireline voice
business. This was partially offset by increases in sales volumes
in the wireless sector, voice business outside of the U.S., and
data services globally.
Global Marine revenue declined to $22 million from $46 million for
the second quarter of 2003, primarily due to the expiration of a
significant maintenance contract at the beginning of 2004. As a
result of its sale, Global Marine will be recorded as a
discontinued operation commencing in the third quarter of 2004.
Excluding Global Marine Services and the impact of fresh start
accounting on non-cash revenues, revenues declined 8 percent in
the second quarter of 2004 compared to the same period in 2003.
Cost Management
For the second quarter of 2004, cost of access declined to $450
million (representing 72 percent of telecom services revenue),
compared to $499 million (representing 71 percent of telecom
services revenue) for the same period in 2003. Although overall
sales volumes increased, cost of access charges decreased as a
result of access reduction initiatives, including network
optimization, better dispute resolution, use of strategic and
competitive access providers and increased end office versus
tandem switch termination. Consolidated third party maintenance
costs for the second quarter were $24 million, compared to $28
million in the second quarter of 2003, with the decrease driven by
continued vendor maintenance optimization.
Consolidated operating expenses for the second quarter of 2004
were $225 million, compared to $230 million for the same period in
2003. Telecom services operating expenses were $189 million in
both periods. Excluding the impact of non-cash stock compensation
expense of $8 million related to stock-based incentives since the
company's emergence from bankruptcy on December 9, 2003 and
incentive compensation of $2 million, for which the comparable
amounts for 2003 were included in reorganization costs (as opposed
to operating expenses) for that year, and excluding the impact of
$2 million of professional services expenses relating to our cost
of access restatement and the one-time benefit from a UK real
estate tax refund of $11 million, telecom services operating
expenses declined slightly in the second quarter of 2004,
as compared to the same period in 2003.
Global Marine's operating expenses were $36 million, compared to
$41 million for the second quarter of 2003. This decline was
primarily attributed to reduced installation projects and
maintenance contract requirements resulting in lower third party
project costs.
EBITDA & Net Losses
For the second quarter of 2004, Consolidated EBITDA was a loss of
$51 million, compared to a loss of $13 million for the same period
in 2003. The increase in Consolidated EBITDA loss reflected a $20
million reduction in Global Marine EBITDA from a $10 million
profit in the second quarter of 2003 to a $10 million loss for the
same period in 2004, primarily due to the expiration of a
significant maintenance contract.
Telecom EBITDA loss increased from $23 million in the second
quarter of 2003 to $41 million for the same period in 2004.
Excluding the impact of the $21 million reduction in deferred
revenues from prior period IRU sales, the $10 million of 2004
stock and incentive compensation discussed above, the $2 million
of professional services expenses relating to our cost of access
restatement and the one-time benefit from the $11 million UK real
estate tax refund, Telecom EBITDA improved modestly versus the
prior year. This improvement resulted from cost management
efforts and was partially offset by the reduction in revenue.
Consolidated loss applicable to common shareholders in the second
quarter of 2004 was $112 million, versus a loss of $27 million in
the second quarter in 2003. In addition to the change in
Consolidated EBITDA noted above, the increase in net loss in the
second quarter of 2004 compared to the same period in 2003
resulted primarily from the absence of prior year foreign exchange
gains and from a non-cash tax expense in 2004 resulting from fresh
start accounting, as well as somewhat higher depreciation and
interest expense.
Capital Expenditures
For the second quarter of 2004, cash capital expenditures and
capital lease obligations were approximately $28 million, compared
to $46 million for the second quarter of 2003. Capital
expenditures for the second quarter of 2004 decreased for the same
reasons as outlined for the first quarter of 2004.
Cash and Debt Position
As of June 30, 2004, unrestricted cash and cash equivalents were
approximately $139 million. Of this amount, $53 million was
associated with Global Marine. As a result of the previously
announced sale of Global Marine to Bridgehouse Marine Ltd., cash
on hand at Global Marine transferred to new ownership with the
sale of the business. Global Crossing's total debt, excluding
capital leases, as of June 30, 2004 was $240 million, including
$200 million in senior secured notes and $40 million from the
first drawdown on a bridge loan facility provided by ST Telemedia.
Financing and Liquidity Outlook
Global Crossing entered into a $100 million bridge loan facility
with a subsidiary of ST Telemedia in May 2004. Under this
agreement, the company has fully drawn down the $100 million
facility to date. The company drew down the funds in three
installments:
-- $40 million on June 1,
-- $40 million on August 2, and
-- $20 million on October 1.
The Bridge Loan Facility is scheduled to mature on December 31,
2004.
The company expects it will need an additional $40 million of
financing to fund its anticipated liquidity requirements through
the end of 2004. The company will also need to refinance the
Bridge Loan Facility at its maturity on December 31, 2004.
Moreover, based on the company's current projections,
the company will need to raise substantial additional financing to
meet its anticipated liquidity needs beyond 2004. The additional
funding is required due to access costs higher than estimated at
the time initial liquidity guidance was provided, professional
fees related to the cost of access reviews and other changes to
the company's 2004 business outlook.
Global Crossing is currently seeking to arrange financing to
provide it with the additional liquidity needed through the end of
2004 and beyond, and to refinance the Bridge Loan Facility. Such
financing may include a secured debt financing by Global Crossing
(UK) Telecommunications Ltd. (GCUK) and a working capital facility
secured by certain accounts receivable.
A subsidiary of ST Telemedia has provided a commitment, subject to
certain conditions, documentation and completion of any necessary
collateral filings, to increase the availability under the Bridge
Loan Facility by $25 million, to $125 million. This additional
$25 million is intended to be advanced in early November to meet
the company's anticipated liquidity needs through November,
by which time the company believes that the secured debt financing
by GCUK can be completed with currently anticipated proceeds of
$300 million or more. This financing, together with a working
capital facility, is intended to meet the company's long-term
funding requirements. If the GCUK debt financing is not completed
in November 2004, the company would require additional funding.
ST Telemedia has indicated to Global Crossing its non-binding
intention to provide financial support, in certain circumstances,
as described in the company's filings today.
The company has entered into an agreement with STT Communications,
STT Crossing and STT Hungary that provides for a refinancing of
the Bridge Loan Facility and the 11 percent Senior Secured Notes
held by these affiliates of ST Telemedia simultaneously with the
new secured debt financing by GCUK. The agreement also permits
the company to incur debt under a working capital facility.
Under the agreement, the following would occur simultaneously with
the closing of a secured debt financing by GCUK:
(1) the security interests securing the Senior Secured Notes
and the Bridge Loan Facility would be released;
(2) $50 million (plus any amount borrowed under the
additional $25 million Bridge Loan Facility commitment)
of the Senior Secured Notes would be repaid; and
(3) the Bridge Loan Facility and the remaining Senior Secured
Notes would be refinanced by $250 million principal
amount of 4.7 percent payable-in-kind secured debt
instruments that would be mandatorily convertible
into common equity of Global Crossing Ltd. after four
years, or converted earlier at ST Telemedia's option,
into approximately 16.2 million shares of common stock of
the company (assuming conversion after four years),
subject to certain adjustments.
The new secured debt instruments would be secured in a manner
substantially similar to the Senior Secured Notes, except that
they would not have liens on assets of GCUK. The agreement is
subject to completion of definitive documentation satisfactory to
the parties and a number of other material conditions.
Business Restructuring
Given the current environment in telecommunications, the company
has continued to review and refocus its business plan for 2005 and
beyond, investing in areas that offer optimum future growth such
as global IP enterprise offers, new carrier data offerings, and
additional means of distributing the robust suite of IP
capabilities to all end users. At the same time, the company is
reevaluating unprofitable and non-strategic areas of the business.
"We are focusing our efforts on areas of our business that offer
long-term growth and viability, and those in which Global Crossing
will maintain a lasting differentiated position," explained Mr.
Legere. "As we move forward, we will invest selectively in these
strategic products and services, while devoting fewer resources
to, or exiting, unprofitable parts of our business. Through these
efforts, we have a great opportunity to enhance our global IP
service offerings and deliver even better service to customers,
while providing significant ongoing value to shareholders."
Eliminating Low-Margin Services
As a result of the business evaluation, the company will be
restructured to focus on areas that capitalize on its IP network
and capabilities, while expanding its distribution capabilities
through system integrators and other indirect channels. The
company will de-emphasize or divest its operations in consumer,
small business, trader voice, calling card and other lower margin
services.
Cutting 600 Jobs
As a result of this effort, the company will incur restructuring
costs estimated at a range of $12 to $14 million for severance
associated with the reduction of approximately 600 full-time
employees (15 percent of current workforce) and real estate
consolidation costs estimated at $4 to $5 million. The headcount
reductions and real estate consolidation will achieve a combined
savings of approximately $41 to $47 million per year. Further
savings are planned through the outsourcing of certain business
processes. In addition, specific vendor contracts and the
associated liabilities associated with streamlining of the
business will be evaluated.
Conference Call Replay
The company held a conference call yesterday to discuss its
financial results. A replay of the call is available until
Monday, October 18, 2004 at 11:30 a.m., Eastern time. The replay
call-in number is + 1-402-977-9140. The access number is
21210903.
About Global Crossing
Global Crossing (Nasdaq: GLBCE) provides telecommunications
solutions over the world's first integrated global IP-based
network. Its core network connects more than 300 cities and 30
countries worldwide, and delivers services to more than 500 major
cities, 50 countries and 6 continents around the globe. The
company's global sales and support model matches the network
footprint and, like the network, delivers a consistent customer
experience worldwide.
Global Crossing IP services are global in scale, linking the
world's enterprises, governments and carriers with customers,
employees and partners worldwide in a secure environment that is
ideally suited for IP-based business applications, allowing e-
commerce to thrive. The company offers a full range of managed
data and voice products including Global Crossing IP VPN Service,
Global Crossing Managed Services and Global Crossing VoIP
services, to more than 40 percent of the Fortune 500, as well as
700 carriers, mobile operators and ISPs. Visit
http://www.globalcrossing.com/for more information about
Global Crossing.
GLOBAL CROSSING: Settles General Electric Claim for $350,000
------------------------------------------------------------
General Electric Capital Corporation filed an administrative
expense proof of claim -- Claim No. 10364 -- for $2,693,952, in
connection with postpetition unpaid rent and maintenance
obligations relating to two aircraft leases:
-- Aircraft Lease Agreement between GECC and GC Pacific
Landing Corp., dated November 25, 2998, in which GECC
leased to GC Pacific a Gulfstream Aerospace Model GIV
Aircraft and two Rolls Royce Tay MK611-8 engines; and
-- Aircraft Lease Agreement, dated March 15, 2000, between
GECC and GC Pacific, in which GECC leased to GC Pacific a
Canadair Challenger Model CL-600-2A12, and two General
Electric Model CF34-1A engines bearing.
Accordingly, the GX Debtors and GECC agree that:
(a) the Debtors will pay GECC $350,000 as an administrative
expense in full satisfaction of the GECC Claim; and
(b) the parties will release and discharge each other from
all claims that are based on or that arise out of the GECC
Claim or the Aircraft Leases.
Headquartered in Florham Park, New Jersey, Global Crossing Ltd.
-- http://www.globalcrossing.com/-- provides telecommunications
solutions over the world's first integrated global IP-based
network, which reaches 27 countries and more than 200 major cities
around the globe. Global Crossing serves many of the world's
largest corporations, providing a full range of managed data and
voice products and services. The Company filed for chapter 11
protection on January 28, 2002 (Bankr. S.D.N.Y. Case No. 02-
40188). When the Debtors filed for protection from their
creditors, they listed $25,511,000,000 in total assets and
$15,467,000,000 in total debts. Global Crossing emerged from
chapter 11 on Dec. 9, 2003. (Global Crossing Bankruptcy News,
Issue No. 67; Bankruptcy Creditors' Service, Inc., 215/945-7000)
GRAHAM PACKAGING: Closes $1.2B Blow-Molded Plastic Container Biz
----------------------------------------------------------------
Graham Packaging Company, L.P., has completed its acquisition of
the blow-molded plastic container business of Owens-Illinois, the
world's largest manufacturer of glass containers, at a price of
approximately $1.2 billion.
The purchase positions Graham Packaging to become a leading global
producer of value-added blow-molded plastic packaging.
"We are extremely pleased to complete this transaction and we will
now begin to rapidly integrate these two first-class companies,"
said Graham Packaging Chairman and CEO Philip R. Yates. "We are
delighted to welcome the Owens-Illinois plastic blow-molding team
to join and strengthen our effort to become the clear customer-
preferred global leader in value-added, technology- based plastic
packaging.
"We appreciate all the support we have received from employees,
customers, suppliers and the financial community for making this
combination a reality. O-I's plastic container business is an
industry leader and a great company. This business is a good match
with Graham Packaging in terms of its emphasis on technology,
commitment to high quality, and its culture of customer service,"
said Yates. "Our customers will enjoy the benefits of more
resources resulting in even better value in terms of products,
services, and innovative technology."
About the Company
Graham Packaging Company, L.P., based in York, Pennsylvania, USA,
is a worldwide leader in the design, manufacture and sale of
technology-based, customized blow-molded plastic containers for
the branded food and beverage, household, specialty container and
automotive lubricants markets. The company, subsequent to the
acquisition of O-I's plastic container business, will employ
approximately 9,000 people at 90 plants throughout North America,
Europe and South America. It produced more than 16 billion units
and had total worldwide net sales of $2.1 billion over the last 12
months ending in June 2004 on a pro forma basis. The Blackstone
Group of New York is the majority owner of Graham Packaging.
* * *
As reported in the Troubled Company Reporter on Sept. 16, Moody's
Investors Service rated the proposed debt of Graham Packaging
Company, L.P., which arises from its definitive agreement on
July 28, 2004 to purchase the Plastic Container unit of Owens-
Illinois, Inc., for approximately $1.2 billion [Owens-Illinois has
a senior implied rating of B2 with a stable outlook].
Despite Graham more than doubling its revenue pro-forma for this
sizable acquisition, Moody's affirmed Graham's existing B2 senior
implied rating. Proceeds from the proposed financings are
intended to:
* finance the acquisition;
* refinance Graham's existing $700 million secured credit
facility (rated B2);
* repay Graham's outstanding $325 million 8.75% senior
subordinated notes, due 2008 (rated Caa1), as well as the
outstanding $169 million 10.75% senior discount notes, due
2009 (rated Caa2), issued at Graham Packaging Holdings
Company; and
* pay related expenses.
Pro-forma for the proposed transactions, the affirmation of the B2
senior implied rating recognizes Graham's proven ability to
operate successfully throughout the recent past despite
substantial financial leverage, as evidenced by its ability to
maintain industry-leading margins and adequate liquidity. The
rating affirmation reflects the complementary nature of the
proposed acquisition and attributes value to the realization of
some synergies within the near term after combination.
However, the rating remains constrained by the paucity of free
cash flow relative to sizable pro-forma debt, which exceeds pro-
forma consolidated revenue. Moreover, Moody's has concerns about
the quality of earnings, pro-forma for the proposed transactions,
given the high concentration of customers (one customer is
approximately 17% of consolidated revenue and the top fifteen
customers account for close to 70%) and the material amount of
add-backs to EBIT given the negative unadjusted pro-forma EBIT.
HARMONY MOTORS: Case Summary & 9 Largest Unsecured Creditors
------------------------------------------------------------
Debtor: Harmony Motors Inc.
1804 Highway 78 East
Oxford, Alabama 36203
Bankruptcy Case No.: 04-43427
Chapter 11 Petition Date: October 8, 2004
Court: Northern District Of Alabama (Anniston)
Judge: James S. Sledge
Debtor's Counsel: Harry P. Long, Esq.
P.O. Box 1468
Anniston, AL 36202
Tel: 256 237-3266
Estimated Assets: Unstated
Estimated Debts: $1 Million to $10 Million
Debtor's 9 Largest Unsecured Creditors:
Entity Claim Amount
------ ------------
Wells Fargo $100,000
Internal Revenue Service $30,000
State of Alabama $20,000
Wells Fargo $18,500
MBNA America $14,000
AmSouth Bank $11,700
Compass Bank $10,000
American Express $4,600
American Express $3,000
HOLLINGER INC: Court Dismisses International's $1.25B Lawsuit
-------------------------------------------------------------
Hollinger, Inc., (TSX: HLG.C; HLG.PR.B) reported that the Hon.
Blanche M. Manning of the United States District Court of Northern
Illinois Eastern Division dismissed the amended complaint filed by
Hollinger International Inc. against Hollinger and others in
Illinois claiming damages, including treble damages under
applicable provisions of the Racketeer Influenced and Corrupt
Organizations Act, of US$1.25 billion, plus attorney fees and
costs.
Hon. Manning dismissed the counts of the complaint which assert
RICO claims on a with prejudice basis noting such claims are
barred by the RICO statute. After dismissing the RICO claims, the
Court declined to retain jurisdiction over the remaining state law
claims and therefore dismissed the remaining claims on a without
prejudice basis.
Peter White, Co-Chief Operating Officer of Hollinger Inc. said,
"We are extremely pleased with Judge Manning's decision. We
continue to believe that all of the claims against Hollinger Inc.
are without merit and, if any of them are re-filed, we will defend
against them vigorously."
International Responds
Hollinger International, Inc., said that its claims against the
Defendants for their clear and repeated breaches of fiduciary duty
to the Company will be pursued vigorously by the Special Committee
of the Board of Directors. The Special Committee will review its
various alternatives for pursuing these claims, including a
possible appeal of the Court's dismissal of the Company's claims
under the Racketeering Influenced and Corrupt Organizations Act,
18 U.S.C. 1962 and 1964 -- RICO. Judge Manning has set a
conference for October 14, 2004 for the Company to advise the
Court as to how the Special Committee proposes to proceed in
pursuing it claims.
Gordon A. Paris, Interim Chairman, President and Chief Executive
Officer of International, and Chairman of the Special Committee,
said: "The Court's dismissal of the Special Committee's claims on
technical grounds does not in any way diminish the strength or
merits of the breach of fiduciary duty claims that have been
asserted against these Defendants. In the interest of the
Company and its shareholders, the Special Committee will pursue
these claims aggressively and seek restitution for funds diverted
by the Defendants from the Company."
The Special Committee was created to investigate allegations
raised by certain of the Company's shareholders and any other
matters uncovered in the course of its work. Consistent with the
terms of the Consent Judgment entered into by the Company and the
U.S. Securities and Exchange Commission earlier this year, the
Special Committee filed with the Court on August 30, 2004 its
Report of the findings of its investigation. The 513-page Report
chronicles the methods by which certain directors and former
directors and officers as well as the Company's controlling
shareholder and its affiliated companies transferred more than
$400 million to themselves over the past seven years.
Hollinger International Inc. is a newspaper publisher with
English-language newspapers in North America, Israel and Canada.
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, several local
newspapers in Canada, a portfolio of new media investments, and a
variety of other assets.
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.
HOLLINGER CANADIAN: Inks Facilitation Agreement with International
------------------------------------------------------------------
In November 2000, Hollinger International Inc. and Hollinger
Canadian Newspapers, Limited Partnership received approximately
Cdn $766.8 million aggregate principal amount of 12.125% Fixed
Rate Subordinated Debentures due November 15, 2010 issued by a
wholly owned subsidiary of CanWest Global Communications Corp.
called 3815668 Canada Inc.
The CanWest Debentures are guaranteed by CanWest and were issued
to Hollinger in partial payment for the sale by Hollinger of
certain Canadian newspaper and internet assets to CanWest. In
2001, Hollinger International and Hollinger Canadian sold
participations in approximately Cdn. $757 million principal amount
of the CanWest Debentures to a special purpose trust.
Notes of the Participation Trust, denominated in U.S. dollars,
were in turn issued and sold by the Participation Trust to third
parties. As a result of the periodic interest payments on the
CanWest Debentures made in kind and a partial redemption by the
Issuer of the CanWest Debentures in 2003, as of July 31, 2004,
there were outstanding approximately Cdn. $872 million aggregate
principal amount of CanWest Debentures. Hollinger International
and Hollinger Canadian are the record owners of all of these
CanWest Debentures, but as of July 31, 2004, beneficially owned
only approximately Cdn$5 million and Cdn $82 million principal
amount respectively of CanWest Debentures, with the balance
beneficially owned by the Participation Trust.
International & Canadian Inks Facilitation Agreement
On October 7, 2004, Hollinger International and Hollinger Canadian
entered into a Facilitation Agreement with the Issuer and
CanWest, which Facilitation Agreement is part of a larger
transaction in which the Issuer proposes to offer to exchange the
Trust Notes for new debentures to be issued by the Issuer. The
CanWest Exchange Offer is or will be subject to a number of
conditions, including that at least two-thirds of the outstanding
principal amount of Trust Notes be tendered in the CanWest
Exchange Offer. The CanWest Exchange Offer commenced on
October 7, 2004 and is expected to close on or around the 25th
succeeding business day, subject to CanWest's right to extend,
amend the terms of, or withdraw the CanWest Exchange Offer. In
the Facilitation Agreement, Hollinger has agreed, among other
things:
(i) to use its reasonable best efforts to facilitate the
West Exchange Offer; and
(ii) to sell to the Issuer for cash all of the CanWest
entures beneficially owned by Hollinger.
Hollinger's obligation to sell the CanWest Debentures to the
Issuer, and the Issuer's obligation to purchase the CanWest
Debentures, is conditioned upon the closing of the CanWest
Exchange Offer. There can be no assurance that this transaction
will be completed. If it is completed, the specific amount
received by Hollinger International and Hollinger Canadian will
depend upon the prevailing exchange rate between the U.S. dollar
and the Canadian dollar. Assuming an exchange rate of US $0.7922
per Cdn $1.00, upon completion, the cash proceeds to be received
by Hollinger International will be approximately US $38 million
and the cash proceeds to be received by Hollinger Canadian will be
approximately US $78 million. This amount will increase if the
Canadian dollar becomes stronger than the Assumed Rate, and will
decrease if the Canadian dollar becomes weaker than the Assumed
Rate.
Hollinger Canadian Newspapers, Limited Partnership owns and
operates of 13 daily and non-daily community newspapers, 55 trade
magazines and directories, 7 newsletters, the Northern Miner
weekly industry newspaper, and four business publications in
electronic formats (TSX: HCN.UN)
* * *
As reported in the Troubled Company Reporter on Aug. 23, 2004, the
Toronto Stock Exchange formally suspended Hollinger Canadian's
Units from trading on the TSX as of 5:00 p.m. Toronto time on
August 6, 2004. The Units were suspended from trading on the TSX
due to the failure of Hollinger Canadian Newspapers G.P., Inc.,
the general partner of the Partnership to have at least two
independent directors on its board of directors, as required by
the TSX continued listing requirements. The Limited Partnership
Agreement governing the Partnership requires the General Partner
to have at least three independent directors. The General Partner
currently has one independent director.
HOLLINGER PARTICIPATION: Moody's Puts B3 Rating on Senior Notes
---------------------------------------------------------------
Moody's Investors Service placed its B3 rating on Hollinger
Participation Trust's Senior Notes on review for possible upgrade.
This action is prompted by an exchange offer made by Canwest Media
Inc.'s parent, 3815668 Canada Inc., to replace the existing debt
issued by Hollinger Participation with new notes directly from
Holdco. Canwest and Holdco also intend to amalgamate, following
which the new Holdco notes will become direct Senior Subordinated
debt of Canwest, and Hollinger Participation will be wound up. At
that time, Moody's anticipates concluding the review and
withdrawing the rating for HPT.
The review will consider the potential for the offer to be
accepted by the required 2/3rds majority of existing holders of
the Holdco notes.
Hollinger Participation Trust is a Delaware business trust formed
for the purpose of issuing the Participation Notes and purchasing
and holding a participation interest from Hollinger International,
Inc., in the underlying debentures of 3815668 Canada Inc.
INTEGRATED ELECTRICAL: Moody's Cuts Senior Implied Rating to B1
---------------------------------------------------------------
Moody's Investors Service downgraded the ratings of Integrated
Electrical Services, Inc., and maintained the company on review
for possible further downgrade following various events including
the continued postponement of release of the company's fiscal 2004
third quarter 10-Q, concerns surrounding the timing of future
filings, the resignation of the company's Chief Financial Officer,
and the decision by its Chief Operating Officer to step down, an
adverse decision in recent litigation, and concern that recent
events may impact the company's surety bonding. he downgrade also
reflects difficulty in accessing the company's recent financial
performance as a result of the continued delay in filing its
audited financials for the third quarter of 2004.
Moody's has downgraded these ratings and left them on review for
further possible downgrade:
* Senior Implied, downgraded to B1 from Ba3;
* Senior Unsecured Issuer Rating, downgraded to B2 from B1;
* $173 million (remaining balance) of 9.375% senior
subordinated notes due 2009 (in two series), downgraded to B3
from B2.
On August 2, 2004, Integrated Electrical announced that it was
rescheduling its fiscal 2004 third quarter earnings release and
conference call due to its ongoing evaluation of certain large and
complex projects at one subsidiary that experienced project
management changes in the latter part of the third quarter. On
August 13, 2004, the company announced that it would be delaying
the filing of its fiscal 2004 third quarter 10-Q. On August 16,
2004, the company disclosed that it had identified potential
problems at one of its subsidiaries and an additional issue in one
contract at another subsidiary. This review resulted in
adjustments to operating income of $5.7 million. Integrated
Electrical's auditors, Ernst & Young, advised the company that as
a result of these issues, there were material weaknesses in
complying with Sarbanes-Oxley and that the filing of the 10-Q
would occur simultaneously with the release of the fiscal 2004
year-end audit, which is expected to occur on or before December
15, 2004. Furthermore, although the company received a waiver
from the senior subordinated bond holders through December 15,
2004, failure to file its fiscal 2004 third quarter 10-Q by this
date could trigger a default. A notice of default under the
senior subordinated notes triggers a cross default under the bank
credit agreement.
Integrated Electrical announced on September 29, 2004 that Richard
L. China has resigned his position as Chief Operating Officer to
accept the appointment of Senior Vice President, Strategic
Business Development. The company also announced on the same day
that Jeffrey Pugh, Chief Financial Officer since June 7, 2004,
resigned to pursue other opportunities. Although these factors on
their own may not be a concern, these announcements have occurred
during a period of turmoil and could suggest that other issues are
brewing or that the problems run deeper than is currently obvious.
Seemingly unrelated, a verdict against the company was announced
in a case pending in the 133rd District Court of Harris County,
Texas that arose out of the proposed sale of a subsidiary of the
Company and an employment claim by a former officer of the
subsidiary. Potential losses were initially estimated not to
exceed $30 million and may be much lower if the judge reduces the
amount, the company settles, or wins upon appeal. Irrespective of
the eventual outcome, this is additional uncertainty that comes
during a tough time in the company's history. Moody's is
concerned that these factors may affect future negotiations with
its insurance providers and thereby result in higher surety
bonding costs or reduced availability. Recent events could also
affect the company's contract win rates adversely. Integrated
Electrical already seen its borrowing base (as a percent of
receivables) adjusted slightly as a result of recent events.
Although the lack of audited financial results makes the ratings
decision more difficult, the company's last twelve months results
through March 31, 2004 had placed the company weakly within its
previous ratings category. Specifically, for this period,
earnings before interest and taxes (EBIT) to total assets was
under 8.5%, EBITDA less capital expenditures to interest was only
about 2.6 times and EBIT margin was under 5%. Furthermore, free
cash flow after capital expenditures to debt of 8% is more
indicative of a B1 Senior Implied rating than a Ba3.
Moody's continued review will focus on Integrated Electrical's
progress in addressing weaknesses in its internal controls,
including integrating many disparate subsidiary companies into a
smoothly functioning national corporation and the methods employed
in properly estimating revenues, costs and percentage of
completion on contracts. In addition, the review will address
Integrated Electrical's continuing relationships with its bank
group and surety provider, litigation risks, and the company's
ongoing liquidity. Total liquidity, comprised of unrestricted
cash and revolver availability, is believed to currently total
over $50 million.
Formed in 1997 and headquartered in Houston, Texas, Integrated
Electrical Services, Inc., is a national provider of electrical
and communications solutions to the commercial and industrial,
residential, and service markets.
INTERPOOL INC: Files March 2004 Quarterly Report with SEC
---------------------------------------------------------
Interpool, Inc. (IPLI.PK) filed its Form 10-Q report for the three
months ended Mar. 31, 2004 with the SEC on Oct. 8, 2004.
Interpool reported revenues of $95.4 million for the three months
ended Mar. 31, 2004, compared to restated revenues of $90 million
for the same period of 2003. Net income was $11.1 million for the
first quarter of 2004 versus restated net income of $11.8 million
for the corresponding quarter of 2003.
Martin Tuchman, Chairman and Chief Executive Officer, said, "The
increased size of our container fleet contributed positively to
our increased revenues. Continued strong demand for intermodal
equipment resulted in utilization rates for our operating lease
chassis of 96% and 98% for our operating lease containers. We also
continue to make good progress with our financial reporting catch
up and expect to have all of our quarterly reports for 2004 filed
prior to Dec. 31."
The company will hold a conference call on Thursday, Oct. 14, 2004
at 2:00 p.m., Eastern Daylight Time. Interested investors should
call 1-888-841-5035 ten minutes prior to the time of the
conference call. Callers from outside North America should call
1-973-582-2830 and hold for a live operator. Identify yourself
and your company and inform the operator that you are
participating in the Interpool First Quarter 2004 Earnings
Conference Call.
If you are unable to access the Conference Call at 2:00 PM, please
call 1-973-341-3080 to access the taped digital replay. To access
the replay, please call and enter the digital pin #5274212. This
replay will first be available at 4:00 p.m. on Oct. 14th and will
be available until Thursday, October 21st at 11:59 p.m. Eastern
Daylight Time.
Investors will also have the opportunity to listen to the
Conference Call live at the company's web site at
http://www.interpool.com/
To listen to the live call via the Internet, please go to the web
site at least fifteen minutes early to register, download, and
install any necessary audio software. For those who cannot listen
to the live web cast, a replay will be available two hours after
the call is completed and will remain available for one month.
Interpool is one of the world's leading suppliers of equipment and
services to the transportation industry. The company is the
world's largest lessor of intermodal container chassis and a
world-leading lessor of cargo containers used in international
trade.
* * *
As reported in the Troubled Company Reporter on Sept. 17, 2004,
Fitch Ratings has assigned a 'B' rating to Interpool, Inc.'s
6% $150 million unsecured notes due 2014. As part of the offering,
note investors have also been issued warrants for approximately
8.3 million shares of common stock exercisable at $18 per share.
Interpool's Rating Outlook was revised to Positive from Negative
on July 9, 2004. Fitch also rates Interpool's senior secured debt
and preferred stock 'BB-' and 'CCC+', respectively.
Fitch views Interpool's successful issuance of unsecured debt as
continued positive momentum in the company's recovery from its
financial management and operational challenges in 2003.
Additional long-term unsecured capital will benefit the company's
capital structure and help to provide additional financial
flexibility. This offering is a component of a strategy that,
over the long term, should simplify Interpool's capital structure
and provide additional liquidity resources.
Additional positives include the ongoing implementation of a new
accounting and information technology infrastructure, which will
likely significantly enhance the company's operational integrity.
Interpool has also made significant progress towards returning to
a timely SEC filing status by completing its 2003 10-K filing in
August. Interpool is expected to become current with its SEC
filings before the end of 2004.
The note issuance is pari passu with Interpool's existing
$210 million of senior unsecured notes. Partial proceeds from the
new issuance will be used to repurchase from the investors in the
new notes approximately $49 million of the company's outstanding
senior unsecured notes due in 2007. Interpool has indicated that
the remaining proceeds will be used for general corporate purposes
and to facilitate intermodal equipment fleet growth.
The Positive Rating Outlook reflects Fitch's view that Interpool
will continue its progress towards returning to a timely SEC
filing status and that, shortly thereafter, the company will seek
to re-establish its listing on the New York Stock Exchange. Fitch
also believes that, despite the challenges that the company has
faced with its accounting, operations, and limited capital markets
access, Interpool's liquidity and capitalization remain adequate.
This has been a function of management's conservative operating
strategy as well as favorable operating conditions in the
intermodal equipment leasing market over the past twelve months.
Interpool's remaining challenges focus on the completion of
quarterly financial statements for fiscal 2004. However,
Interpool has so far been able to meet or exceed its publicly
announced filing deadlines for the year. Additional challenges
center on refinancing or extending its revolving credit facility
within the next ten months to provide additional back-up committed
liquidity, and discussions in this regard are currently underway.
Interpool must also complete the overhaul and upgrade of its
information technology and accounting infrastructure.
INTERSTATE BAKERIES: Shareholders Form Equity Holders Committee
---------------------------------------------------------------
An Ad Hoc Committee of Equity Holders was formed within the past
few days to represent the shareholders of Interstate Bakeries
Corporation (NYSE:IBC) after the Company and certain subsidiaries
and affiliates filed for protection from its creditors under
Chapter 11 in the U.S. Bankruptcy Court for the Western District
of Missouri. The Committee is comprised of seven institutional
investors that reportedly hold in the aggregate approximately 30%
of Company's shares outstanding.
The Committee has retained Sonnenschein Nath & Rosenthal LLP as
Counsel and Houlihan Lokey Howard & Zukin as Financial Advisor to
the Committee, and intends to seek the appointment of an Official
Committee of Equity Holders.
Peter Wolfson, counsel to the Ad Hoc Committee, stated, "The
members of the Committee look forward to playing a constructive
role in Interstate's prompt and successful emergence from
Chapter 11."
Matthew Niemann of Houlihan Lokey commented, "We believe this is
an unusual Bankruptcy case where shareholders' interests deserve
to, and will, be protected and promoted. We look forward to
assisting the Committee in this endeavor."
Sonnenschein Nath & Rosenthal LLP, a leading law firm with 700
attorneys in nine U.S. offices and a global reach throughout Asia,
Europe and Latin America, serves many of the world's largest and
best-known businesses, nonprofit organizations and individuals.
Founded in 1906, the firm is a leader in innovative legal
services, serving its clients through integrated, inter-office
cooperation and teamwork among practice groups to provide
efficient, effective, and timely legal services and business
counseling.
Houlihan Lokey Howard & Zukin, an international investment bank,
provides a wide range of services, including mergers and
acquisitions, financing, financial opinions and advisory services,
financial restructuring, and merchant banking. Houlihan Lokey has
the largest financial restructuring practice of any investment
bank in the country. In 2003, Houlihan Lokey ranked as the No. 1
M&A advisor for transactions under $200 million and the No. 4
advisor for transactions under $1 billion. The firm has been the
No. 1 provider of fairness opinions for the past four years.
Houlihan Lokey has over 600 employees in nine offices in the
United States and the United Kingdom.
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: Interim PACA & PASA Claim Procedures Approved
------------------------------------------------------------------
Interstate Bakeries Corporation and its debtor-affiliates ask the
Court to establish procedures to resolve prepetition claims under
the Perishable Agricultural Commodities Act of 1930 and the
Packers and Stockyards Act of 1921.
The Debtors want to adopt uniform procedures pursuant to which
the Debtors' suppliers and vendors must submit their PACA or PASA
claims and that prevent the suppliers and vendors from
instituting any action to enforce PACA and PASA Trust Claims
except pursuant to the Court-approved procedures.
The Debtors also seek permission to pay valid PACA and PASA Trust
Claims.
The Debtors believe that a small, but important, number of their
suppliers and vendors will file notices under the PACA, the PASA
and state statutes of similar effect to preserve any rights they
may have. Hence, the prompt and full payment of all claims
asserted under the PACA or PASA, to the extent the claims are
valid, is important.
Paul M. Hoffmann, Esq., at Stinson Morrison Hecker, LLP, in
Kansas City, Missouri, explains that it is essential to the
operations of the Debtors that the flow of fresh produce and
other goods and merchandise continue unimpeded. Though the
Debtors do not in general use goods covered by either PACA or
PASA, in a few instances, the lack of certain goods may result in
the Debtors' inability to produce certain products. This
inability could result in empty shelves and an adverse impact to
the Debtors' business disproportionate to the resulting lack of
sales.
The Debtors anticipate that many of the PACA and PASA Trust
Claims may be valid, in whole or in part, subject to certain
defenses the Debtors may have. In addition, while the Debtors do
not concede that any of the elements necessary to prove a PACA or
PASA Trust Claim will be shown by any of their vendors, the
Debtors seek to adopt uniform procedures for determining and
settling all valid PACA and PASA Trust Claims so that litigation
regarding these claims does not interfere with their
reorganization efforts.
Absent the Settlement Procedures and the payments, the Debtors
could be subjected to actions from the suppliers and vendors,
which would result in the unnecessary expenditure and
misallocation of the Debtors' limited financial and human
resources.
Mr. Hoffmann reminds the Court that, as a matter of law, holders
of valid PACA and PASA Trust Claims are entitled to payment from
the applicable statutory trust ahead of the Debtors' other
creditors.
Because assets in a PACA Trust and PASA Trust do not constitute
property of the Debtors' estates, the payment of PACA and PASA
Trust Claims and the establishment of the Settlement Procedures
do not prejudice the Debtors' creditors, and are appropriate.
Payments to holders of PACA and PASA Trust Claims are consistent
with the intent of the PACA and PASA, and will inure to the
benefit of the Debtors and all parties-in-interest by
facilitating the continued purchase and receipt of fresh produce
and other products, avoiding potential disruption to the Debtors'
business operations.
PACA and PASA Statutory Schemes
Before the Petition Date, certain of the Debtors' vendors sold
goods to the Debtors that may be deemed:
(a) "perishable agricultural commodities," as the term is
defined under the PACA and other eligible goods covered by
state statutes of similar effect; and
(b) "livestock" as that term is defined by the PASA and other
eligible goods covered by the PASA and state statutes of
similar effect.
As the U.S. District Court for the Southern District of New York
has explained:
"PACA regulates trading in perishable agricultural
commodities, essentially fruits and vegetables. [PACA] was
amended in 1984 upon a finding by Congress that a burden on
commerce in these goods was caused by certain financial
credit arrangements, whereby dealers would receive delivery
of goods without having to pay for them. The 1984 Amendment
provides that upon delivery of goods to the purchaser, a
statutory trust automatically arises on behalf of unpaid
suppliers or sellers."
The statutory constructive trust under the PACA is imposed on a
buyer's entire inventory of "perishable agricultural commodities"
and all products, receivables or proceeds related to the sale.
According to Mr. Hoffmann, the PASA creates a statutory trust
scheme, which is virtually identical to the PACA's in respect of
the delivery of "livestock" and other eligible goods.
The statutory trust created under the PACA or PASA, from which
trust beneficiaries may seek collection, is composed of:
(a) the purchaser's inventory of the PACA or PASA Goods;
(b) products derived from the PACA or PASA Goods; and
(c) accounts receivable and proceeds obtained with respect to
the sale of the PACA or PASA Goods or products derived.
Proposed Treatment of PACA/PASA Trust Claims
Both the PACA and the PASA impose procedural steps that must be
taken by a seller to preserve its rights as a trust beneficiary.
Under the PACA, an unpaid supplier of perishable agricultural
commodities must have provided:
"written notice of intent to preserve the benefits of the
trust to the . . . dealer . . . within thirty calendar days
(i) after expiration of the time prescribed by which payment
must be made, as set forth in regulations issued by the
Secretary [of Agriculture], (ii) after expiration of such
other time by which payment must be made, as the parties
have expressly agreed to in writing before entering into the
transaction, or (iii) after the time the supplier, seller,
or agent has received notice that the payment instrument
promptly presented for payment has been dishonored. The
written notice to the . . . dealer . . . shall set forth
information in sufficient detail to identify the transaction
subject to the trust. When the parties expressly agree to a
payment time different from that established by the
Secretary [i.e., ten days], a copy of any such agreement
shall be filed in the records of each party to the
transaction and the terms of payment shall be disclosed on
invoices, accountings, and other documents relating to the
transaction."
The PASA imposes a similar requirement of giving notice, but also
requires filing the notice with the Secretary of the Agriculture.
Failure to comply with these requirements renders the claim
concerning the PACA or PASA Goods a general, unsecured claim.
In this regard, the Debtors require potential holders of PACA or
PASA Trust Claims to provide evidence that the holders have
satisfied all of the statutory requirements to preserve their
rights as trust beneficiaries and have valid PACA/PASA Trust
Claims.
The Debtors propose these procedures for the processing and
treatment of all PACA and PASA Trust Claims:
(A) The Claimant must provide the PACA/PASA Notice and set
forth information identifying the transaction subject to
the trust. The Claimant must serve the written notice to:
Interstate Bakeries Corporation
12 East Armour Boulevard,
Kansas City, Missouri 64111
(Attn: Edwin F. Gladbach, Esq.)
with a copy to:
Skadden, Arps, Slate, Meagher & Flom, LLP
333 West Wacker Drive, Suite 2100,
Chicago, Illinois 60606
(Attn: J. Eric Ivester, Esq.)
(B) Within 10 days of the Debtors' receipt of a PACA/PASA
Notice, the Debtors will serve a copy of order approving
the Settlement Procedures by regular mail on the Claimant.
The Claimant will have 15 days from the date of mailing of
the Order within which to file an objection to the
Procedures, provided, however, the PACA/PASA Claimant must
file an objection within 60 days of the entry of the
Order. The Order will become final with respect to any
party that does not timely file an objection as specified.
(C) The Debtors will attempt to reach a consensual resolution
of the PACA or PASA Trust Claims with the Claimants. To
the extent a consensual resolution is reached, the Debtors
will pay the Claimant in accordance with the procedures.
(D) The Debtors will file a report within 75 days of the
Petition Date, on notice to parties-in-interest, listing
the PACA and PASA Trust Claims that were not resolved, and
providing amounts which the Debtors believe are valid, if
any.
(E) Any Claimants who elect to accept the Claim amount as
contained in the Report do not need to do anything.
(F) A Claimant objecting to the inclusion, omission or amount
of any asserted PACA or PASA Trust Claim as detailed in
the Report must provide the Debtors with evidence or
documentation:
(1) demonstrating the basis for the dispute, including a
statement identifying which information on the
Debtors' Report is incorrect;
(2) specifying the correct information;
(3) stating any legal or factual basis for the objection;
and
(4) including supporting evidence including, but not
limited to:
* the initial PACA/PASA Notice;
* evidence demonstrating when goods were shipped and
received;
* copies of purchase orders and invoices; and
* any other information as the Debtors may reasonably
request.
(G) Objections must be served on the Debtors, with a copy to
Skadden, so as to be received no later than the 20th day
after the Report is filed.
(H) The failure of an Objecting Claimant to materially comply
with these procedures will constitute a waiver of the
Objecting Claimant's right to object to the proposed
treatment and allowed amount of the PACA or PASA Trust
Claim, unless the Court orders otherwise.
(I) Any Claimant who fails to object to the Claim listed on
the Report at the end of the Objection Period will be
deemed to have assented to the Claim amount listed on the
Report.
(J) If no Objection is received to a particular PACA or PASA
Trust Claim within the Objection Period, the Claim will be
deemed allowed in the amount set forth in the Report, and
the Debtors will pay in full the allowed Claim within 10
business days after the Objection Period.
(K) The Debtors are authorized to negotiate with all Objecting
Claimants and to adjust the PACA or PASA Trust Claim
amount to reach an agreement regarding the Objecting
Claimant's Claim. In the event the Debtors and an
Objecting Claimant are able to settle on the amount or
treatment of the disputed Claim, the Claim will be deemed
allowed in the settled amount.
(L) In the event that no consensual resolution of the
Objecting Claimant's Claim is reached within 60 days of
the end of the Objection Period, the Debtors will file a
motion for determination of the Objecting Claimant's
Claim. The Claim will be deemed allowed as fixed by the
Court in the Determination Hearing or as agreed to by the
Debtors and the Objecting Claimant prior to a
determination by the Court.
(M) Subject to agreement by the parties, the Debtors will
pay in full all valid and allowed PACA and PASA Trust
Claims within 10 business days after the date the Claim is
deemed allowed.
Any Claimant who accepts payment from the Debtors on account of a
valid PACA or PASA Trust Claim will be deemed to have waived,
released, and discharged:
(a) any and all PACA or PASA trust liability of the Debtors;
and
(b) any claim that any funds or other property of the Debtors
is held in trust and does not constitute "property of the
estate."
In the event that the Claimant has a non-PACA or PASA prepetition
claim against the Debtors, the Claimant retains the right to
assert that claim, provided that any claim is unrelated to the
PACA or PASA Trust claim.
By payment and acceptance under the Settlement Procedures, the
Debtors and the holder of a PACA or PASA Trust Claim will be
deemed to agree that the Debtors do not in any way waive any
claims they may have against any vendor relating to preferential
or fraudulent transfers, or other potential avoidance actions,
claims, counterclaims or offsets with respect to these vendors.
Rather, the Debtors expressly reserve their rights to pursue the
preferential or fraudulent transfers, or other potential
avoidance actions, claims, counterclaims or offsets with respect
to the vendors, and any and all other claims they may seek to
advance against any vendor in the future other than those arising
specifically in connection with the allowed PACA or PASA Trust
Claim. The Debtors specifically reserve the right to object on
any grounds to any claim filed by the vendors.
* * *
The Court approves the Debtors' Request on an interim basis.
Judge Venters will conduct a final hearing on November 3, 2004,
with respect to the PACA/PASA Trust Claims Procedures.
Any party-in-interest objecting to the Debtors' Request must file
written objections no later than October 27, 2004.
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. 3;
Bankruptcy Creditors' Service, Inc., 215/945-7000)
INTRAWEST CORP: Prices 10.50% Debt Offering & Consent Solicitation
------------------------------------------------------------------
Intrawest Corporation announced the pricing terms of its
previously announced tender offer and consent solicitation for its
outstanding 10.50% Senior Notes due Feb. 1, 2010.
The reference security for the 2010 Notes is the 7-1/2% U.S.
Treasury Note due Feb. 15, 2005 and the purchase price has been
based upon a spread of 50 points over the yield to maturity as of
Friday's date on the Reference Security. The total consideration
per $1,000 principal amount of 2010 Notes validly tendered in the
Offer prior to 5:00 p.m., New York time, on September 28, 2004 is
$1,076.03, of which $10.00 is a consent payment. Holders who have
tendered or will tender their 2010 Notes after the Consent Date
but on or prior to the Expiration Date will receive consideration
of $1,066.03 per $1,000 principal amount of 2010 Notes validly
tendered.
The Offer, as described in Intrawest's Offer to Purchase and
Consent Solicitation dated September 15, 2004 and related Letter
of Transmittal, expires at midnight, New York time, on October 13,
2004 unless it is extended or terminated earlier. Payment
for 2010 Notes tendered on or prior to the Expiration Date and
accepted for payment will be made on the second business day
immediately following the Expiration Date. Tendering holders of
the 2010 Notes will also receive accrued and unpaid interest up
to, but not including, the payment date.
This announcement is not an offer to purchase, nor a solicitation
of an offer to purchase the 2010 Notes. The conditions to the
Offer continue to be as set out in the Offer Documents. The Offer
Documents should be read carefully before any decision is made
with respect to the Offer.
Intrawest Corporation is the world's leading operator and
developer of village-centered resorts. Intrawest owns or controls
10 mountain resorts in North America's most popular mountain
destinations, including Whistler Blackcomb, a host venue for the
2010 Winter Olympic Games. Intrawest also owns Sandestin Golf and
Beach Resort in Florida and has a premier vacation ownership
business, Club Intrawest. Intrawest is developing five additional
resort villages at locations in North America and Europe. The
company has a 45 per cent interest in Alpine Helicopters Ltd.,
owner of Canadian Mountain Holidays, the largest heli-skiing
operation in the world. Intrawest is headquartered in Vancouver,
British Columbia. For more information, visit
http://www.intrawest.com/
* * *
As reported in the Troubled Company Reporter on Sept. 24, 2004,
Moody's Investors Service assigned a B1 rating to Intrawest
Corporation's U.S. dollar-denominated 7.5% senior unsecured note
offering, due 2013 and Canadian dollar-denominated 7.5% senior
unsecured note offering, due 2009, for an aggregate amount of
approximately US$325 million. In addition, these rating actions
were taken by Moody's:
* Ratings assigned:
-- U.S. dollar-denominated 7.5% senior notes, due 2013
rated B1
-- Canadian dollar-denominated 7.5% senior notes, due 2009
rated B1
* Ratings affirmed:
-- Senior implied rating at Ba3
-- Senior unsecured issuer rating at B1
-- US$350 million 7.5% senior notes due 2013 rated B1
-- US$125 million 10.5% senior notes due 2010 rated B1
-- US$135 million 10.5% senior notes due 2010 rated B1
-- US$125 million 10.5% senior notes due 2010 rated B1
The ratings outlook is stable.
As reported in the Troubled Company Reporter on Sept. 23, 2004,
Standard & Poor's Ratings Services assigned its 'B+' senior
unsecured debt rating to Vancouver, B.C.-based developer and
operator of village-centered resorts Intrawest Corp.'s U.S.
dollar-denominated 7.5% senior notes due 2013 and its Canadian
dollar-denominated notes due 2009, for a total aggregate principal
amount of about US$325 million. At the same time, Standard &
Poor's affirmed its 'BB-' long-term corporate credit rating on
Intrawest. The outlook is positive.
ISLE OF CAPRI: Replacing Biloxi Casino with $90 Million Facility
----------------------------------------------------------------
Isle of Capri Casinos, Inc. (Nasdaq: ISLE) officers will replace
the casino at its Biloxi, Mississippi property with a new state-
of-the-art casino facility. The approximately $90 million new
casino will feature expanded gaming space and several amenities.
Timothy M. Hinkley, Isle of Capri Casinos, Inc. president and COO,
said, "The addition of this new casino facility continues the
evolution of the company's first property, which opened in 1992
and pioneered gaming in the south. The replacement casino will
showcase the next generation of the growing Isle brand, while
providing a new and exciting gaming experience for our customers."
The ability to replace the existing casino is subject to a number
of conditions, including the approval of regulatory and governing
bodies.
Isle of Capri Casinos, Inc., a leading developer and owner of
gaming and entertainment facilities, operates 16 casinos in 14
locations. The company owns and operates riverboat and dockside
casinos in Biloxi, Vicksburg, Lula and Natchez, Mississippi;
Bossier City and Lake Charles (two riverboats), Louisiana;
Bettendorf, Davenport and Marquette, Iowa; and Kansas City and
Boonville, Missouri. The company also owns a 57 percent interest
in and operates land-based casinos in Black Hawk (two casinos) and
Cripple Creek, Colorado. Isle of Capri's international gaming
interests include a casino that it operates in Freeport, Grand
Bahama, and a two-thirds ownership interest in casinos in Dudley
and Wolverhampton, England. The company also owns and operates
Pompano Park Harness Racing Track in Pompano Beach, Florida.
* * *
As reported in the Troubled Company Reporter's March 18, 2004,
Edition, Standard & Poor's Ratings Services revised its outlook on
Isle of Capri Casinos, Inc. to negative from stable. At the same
time, Standard & Poor's affirmed its ratings on the company,
including its 'BB-' corporate credit rating.
The outlook revision follows Isle's announcement that the company
has been selected by the Illinois Gaming Board as the successful
bidder for the 10th Illinois gaming license. The company bid
$518 million for the license. Subject to final approval by the
Illinois Gaming Board and Bankruptcy Court approval, Isle intends
to construct a $150 million casino in Rosemont, which will include
40,000 square feet of gaming space and 1,200 gaming positions,
with expected completion to occur eight months after construction
commences. Given initial capital spending plans, increased debt
associated with the Illinois project, and pro forma for Standard &
Poor's estimate of cash flow for the Rosemont property's first
full year of operation, debt to EBITDA, adjusted for operating
leases, will be between 5.0x and 5.5x by the company's fiscal year
end in April 2005. The company has not yet disclosed its plans for
financing the cost of the license and the new casino.
"The ratings reflect Isle's aggressive growth strategy, the
second-tier market position of many of its properties, and
increased expansion capital spending," said Standard & Poor's
credit analyst Peggy Hwan. "These factors are offset by the
company's diverse portfolio of casino assets, relatively steady
historical operating performance, and credit measures that have
historically been maintained in line with the rating."
JEAN COUTU: Will Webcast First Quarter 2004 Results on Oct. 19
--------------------------------------------------------------
The Jean Coutu Group Inc. reported that the release of the results
for the first quarter ended August 28, 2004, and the related
regularly scheduled conference call will take place on
October 19, 2004. The release date for the first quarter results
had been previously scheduled for October 13, 2004.
The delay is due to the first-time consolidation of the activities
of Eckerd, a transaction which closed on July 31, 2004. The
balance sheet and one-month operating results of Eckerd will be
included in the first quarter financial statements of Jean Coutu.
Concurrently, PJC is changing its reporting currency to US
dollars. The complexity of these items and the related accounting
work are the sole reasons for the delay.
Jean Coutu requested an extension to the required filing deadline
for its interim financial statements from the administrative
agents of its credit facilities.
Financial analysts are invited to attend the Jean Coutu Group
conference call during which the financial results for the first
quarter of fiscal 2004-2005 will be presented:
Tuesday, October 19, 2004 at 9:00 A.M ET
Speaker: Fran?ois J. Coutu, President and Chief
Executive Officer of The Jean Coutu Group
(PJC) Inc.
Dial number: 1 800 387-6216
Conference Name: Conference call with The Jean Coutu Group
Media and other interested individuals are invited to listen to
the live or deferred broadcast on the Jean Coutu Group corporate
website at http://www.jeancoutu.com/ A full replay will also be
available by dialing 1 800 408-3053 until November 17, 2004
(access code 3103823 (pound sign)).
The Jean Coutu Group, Inc., is now the fourth largest drugstore
chain in North America and the second largest in both the eastern
United States and Canada. The Company and its combined network of
2,204 corporate and affiliated drugstores (under the banners of
Eckerd, Brooks, PJC Jean Coutu, PJC Clinique and PJC Sante Beaute)
employ more than 59,600 people. The Group's United States
operations employ over 45,600 persons and comprises 1,549 Eckerd
and 336 Brooks drugstores, all corporate owned stores located in
18 states of the Northeast, mid-Atlantic and Southeastern United
States.
The Group's Canadian operations and the drugstores affiliated to
its network employ over 14,000 persons and comprises 277 PJC Jean
Coutu drugstores, 40 PJC Clinic and 2 PJC Sant, Beaut, all
franchised, in Quebec, New Brunswick and Ontario.
* * *
As reported in the Troubled Company Reporter on July 21, 2004,
Standard & Poor's Ratings Services rated Jean Coutu Group Inc.'s
US$250 million senior unsecured notes 'B'. The new notes will
replace a like amount of the company's initially proposed
US$1.2 billion senior subordinated notes, to be reduced to
US$950 million. The 'BB' bank loan ratings and the '1' recovery
rating indicate that lenders can expect full recovery of principal
in the event of a default. The outlook is negative.
"The ratings on Jean Coutu reflect the company's very high lease-
adjusted pro forma leverage resulting from the acquisition; its
integration risk associated with the Eckerd stores; and the
challenge to enhance their profitability, particularly in the
front-end; and somewhat constrained liquidity," said Standard &
Poor's credit analyst Don Povilaitis. These factors are partially
offset by management's track record of successful drugstore
integration in both the U.S. and Canada, the scale of the
acquisition, which will allow the company to become the fourth-
largest drugstore chain operator in North America, and favorable
long-term industry dynamics.
KAISER ALUMINUM: Asks Court for Okay to Reject Gramercy Contracts
-----------------------------------------------------------------
Kaiser Aluminum & Chemical Corporation and Kaiser Bauxite Company
have identified executory contracts and unexpired leases that will
not be assumed and assigned as part of the sale of their alumina
refinery operations in Gramercy, Louisiana, and Kaiser Bauxite's
interests in and related to Kaiser Jamaica Bauxite Company. The
Debtors seek the Court's authority to reject these Contracts and
Leases.
The Excluded Contracts are:
(1) Aluminum Supply Contracts
Before the Petition Date, KACC entered into alumina supply
contracts with various parties, including United States Aluminate
Company, Inc., J.M. Huber Corporation, Thermal Ceramics, and The
PQ Corporation. KACC agreed to annually provide those parties
with their required supply of alumina hydrate products from
production at the Gramercy Refinery. Each of the Contracts, aside
from the J.M. Huber Corporation contract, contains an evergreen
provision automatically extending the term of the Contract
annually unless otherwise terminated by the parties. Gramercy
Alumina, LLC, and St. Ann Bauxite Limited, the buyers of the
Gramercy Refinery, do not intend to assume the Alumina Supply
Contracts. KACC wants to reject the Contracts because it will no
longer be able to fulfill its obligations under the contracts
after the sale.
(2) Steam Supply Contract
In connection with the operations at the Gramercy Refinery, on
February 22, 2003, KACC purchased from CII Carbon, LLC, the steam
generated by CII's coke boiler located near the Gramercy
Refinery. Gramercy Alumina and St. Ann Bauxite have elected not
to assume the Contract. The Contract should be rejected, KACC
argues, since it will not otherwise have a need for the steam
supplied by CII's coke boiler once the sale is consummated.
(3) Bauxite Supply Agreement
Under a November 13, 2001 Bauxite Purchase Agreement, KBC sells to
Sherwin Alumina, L.P., a specified quantity of Jamaican bauxite
produce by Kaiser Jamaica. The Bauxite Purchase Agreement expires
on December 31, 2009. However, Gramercy Alumina and St. Ann
Bauxite did not assume the Supply Agreement. Considering the sale
of Kaiser Bauxite's interests in Kaiser Jamaica, Kaiser Bauxite
will no longer be able to fulfill its obligations under the Supply
Agreement after the sale.
(4) Terminaling Agreement and Related Lease
Before the Petition Date, KACC and Hall-Buck Marine Services
Company entered into a Transportation and Terminaling Agreement.
Hall-Buck provided KACC with certain transportation, terminaling,
and loading services. The Terminaling Agreement expires on
May 30, 2005. Pursuant to the Terminaling Agreement, Hall-Buck
was required to construct a facility to render loading services
for bulk products from the Gramercy Refinery. As contemplated by
the Terminaling Agreement, the Facility was constructed on
property adjacent to the Gramercy Refinery that is owned by KACC.
As a result, KACC entered into a lease allowing Hall-Buck to
operate the Facility on its property.
In 1999, Kinder Morgan Operating, LP, acquired Hall-Buck and
assumed Hall-Buck's obligations under the Terminaling Agreement
and the Lease.
The Terminaling Agreement gives KACC an option to purchase the
Facility, with the purchase price gradually reducing during the
term of the Agreement. Because the Terminaling Agreement has been
in place for over 20 years, the purchase price of the Facility
eventually had become $0. In June 2004, KACC advised Kinder
Morgan that it was exercising the purchase option. KACC will
transfer the Facility to Gramercy Alumina and St. Ann Bauxite as
part of the sale.
Gramercy Alumina and St. Ann Bauxite have opted not to assume the
Terminaling Agreement and Lease in connection with the sale. As a
result, KACC will no longer need the services provided by Kinder
Morgan after the sale.
(5) Rental and Service Agreement
Before the Petition Date, American Equipment Company, Inc., agreed
to rent to KACC certain mobile equipment used in the operations of
the Gramercy Refinery and provide KACC with related management
services in connection with the rented equipment. The Rental and
Service Agreement expires on March 31, 2006.
Gramercy Alumina and St. Ann Bauxite will not assume the Rental
and Service Agreement. Hence, KACC wants to walk away from the
Rental and Service Agreement because the equipment or services
AMECO provides will no longer be needed once the Gramercy
Refinery sale is consummated.
Kinder Morgan Objects
On behalf of Kinder Morgan Operating, LP, Patricia Williams
Prewitt, Esq., at Locke Liddell & Sapp, LLP, in Houston, Texas,
argues that it is black letter law that an executory contract must
be assumed in toto or rejected in toto. The purpose for this
requirement is to preclude Kaiser Aluminum & Chemical Corporation
from receiving the benefits of an executory while rejecting its
burdens.
KACC attempts to retain only the favorable portion of the
Terminaling Agreement -- the Option Agreement -- while rejecting
the burden or cure of the $377,121 default under the Terminaling
Agreement. KACC fails to show how it is entitled to assume only
a portion of a unilateral contract.
Ms. Prewitt asserts that the option to purchase the Facility from
Kinder Morgan is indivisible from the Transportation and
Terminaling Agreement. The option KACC is attempting to exercise
is for the right to purchase the Facility that was constructed
pursuant to the terms of the Terminaling Agreement. However, no
independent consideration was given for the option provision of
the Terminaling Agreement. The Terminaling Agreement has always
been treated as one indivisible contract by the parties. The
option provision should not be characterized as a separate
contract.
Responses to Kinder Morgan's Objection
(1) KACC
Contrary to Kinder Morgan's allegations, Daniel J. DeFranceschi,
Esq., at Richards, Layton & Finger, in Wilmington, Delaware, tells
Judge Fitzgerald that Kaiser Aluminum & Chemical Corporation is
not attempting to assume or assign the Purchase Option. By its
letter to Kinder Morgan, dated June 11, 2004, KACC already
exercised the Purchase Option, after which the Terminaling
Agreement expired by its own terms. The Terminaling Agreement
provides that the "Agreement shall terminate upon the exercise of
any options by Kaiser." Therefore, there is nothing left to
assume and assign under the Terminaling Agreement.
Assuming that the Court were to somehow find that the exercise of
the Purchase Option was ineffective, KACC still should not be
required to assume the entire Terminaling Agreement to effectuate
the Purchase Option. Mr. DeFranceschi contends that the rejection
of the Terminaling Agreement would not serve to relinquish KACC's
non-executory, matured rights under the Agreement. KACC's
rejection of the Terminaling Agreement does not undo the non-
executory obligations that have accrued under it. KACC now holds
a vested property right to take over the Facility free of charge,
having performed and paid for terminaling services under the
Terminaling Agreement for over twenty years. However, Kinder
Morgan will not recognize these vested rights until KACC further
pays Kinder Morgan's ransom demands -- the full amount of its
untimely-filed, prepetition, unsecured claim.
KACC asks the Court to reject Kinder Morgan's strategy out of hand
and order that the rejection of the Terminaling Agreement does not
strip its estate from the vested rights under the Purchase Option.
(2) Gramercy Alumina and St. Ann Bauxite
Gramercy Alumina, LLC, and St. Ann Bauxite Limited ask the Court
to overrule Kinder Morgan's objection and allow Kaiser Aluminum &
Chemical Corporation to reject the Terminaling Agreement and
Lease so that the sale of the Gramercy Refinery can close as
currently scheduled for the end of September 2004.
According to Michael D. Debaecke, Esq., at Blank Rome, LLP, in
Wilmington, Delaware, Kinder Morgan is merely attempting to saddle
Gramercy Alumina and St. Ann Bauxite with an uneconomic contract
by holding the Debtors hostage and delaying the closing of the
sale.
Mr. Debaecke asserts that Kinder Morgan's Objection should be
overruled because:
(a) the Terminaling Agreement expired by its own terms on
June 11, 2004, when KACC exercise its rights under the
Option;
(b) the Option in the Terminaling Agreement was not, as of the
Petition Date, an executory contract within the meaning of
Section 365 of the Bankruptcy Code; and
(c) even if the Option was considered and executory contract
within the meaning of Section 365, it was and is in all
respects severable from other aspects of the Terminaling
Agreement in accordance with the controlling law of the
Contract.
* * *
To avoid unnecessary litigation, the Debtors and Kinder Morgan and
its affiliate, Kinder Morgan Bulk Terminals, Inc., agree that the
Sale Order does not effectuate the rejection of any portion of the
Terminaling Agreement.
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, represent the Debtors in their restructuring efforts. On
June 30, 2004, the Debtors listed $1.619 billion in assets and
$3.396 billion in debts. (Kaiser Bankruptcy News, Issue No. 50;
Bankruptcy Creditors' Service, Inc., 215/945-7000)
METRIS COMPANIES: Fitch Raises Senior Debt Rating to B- from CCC
----------------------------------------------------------------
Fitch upgraded the senior debt rating of Metris Companies Inc. to
'B-' from 'CCC'. Ratings of Direct Merchants Credit Card Bank,
N.A. are affirmed at a long-term 'B' and short-term 'B.' The
Rating Outlook for Metris and DMCCB is Stable.
This action affects approximately $150 million of outstanding
unsecured debt due in July 2006.
The ratings upgrade primarily reflects the company's improving
operating performance coupled with strengthened liquidity, which
Fitch believes will be sustainable over the near to intermediate
term. Improvements in credit quality are the result of more
disciplined underwriting and enhanced collections efforts.
Notwithstanding improving charge-off and delinquency trends, Fitch
views current loss rates as elevated, although manageable within
the current ratings. Fitch's action also recognizes Metris'
markedly improved liquidity position gained through committed
funding from MBIA and the conduits.
In addition, excess spread levels in the Metris Master Trust have
rebounded. Along with this, Metris successfully raised $300
million through a term loan transaction and used a portion of
these proceeds to retire debt maturing in November 2004 of $100
million.
While Fitch recognizes relative improvements in terms of operating
performance and liquidity, Metris will remain challenged as a
niche credit card lender to develop successful new credit card
products and marketing initiatives, particularly in a competitive
credit card market.
Fitch also remains concerned with the ongoing Securities and
Exchange Commission investigation of the company's SEC filings in
2001 and Internal Revenue Service review of the company's tax
strategy. Fitch will continue to monitor management's assessment
of these items. However, Fitch cannot ascertain the eventual
resolution of these issues. A material and adverse outcome in
either situation could prompt further review of the company.
Ratings upgraded with a Stable Outlook:
Metris Companies Inc.:
-- Senior unsecured debt to 'B-' from 'CCC'.
Ratings affirmed with a Stable Outlook:
Direct Merchants Credit Card Bank N.A.:
-- Long-term at 'B';
-- Short-term at 'B'.
MILESTONE CAPITAL: Judge Winfield Confirms Chapter 11 Plan
----------------------------------------------------------
The U.S. Bankruptcy Court for the District of New Jersey entered
its Order Approving Disclosure Statement and Confirming First
Amended Plan of Liquidation of Milestone Capital, Inc., and
EliteAgents Mortgage Services, Inc., Case Nos. 03-41805 (NLW) and
03-41806 (NLW).
The Bankruptcy Court found that the Plan complies with the
applicable requirements for confirmation set forth in 11 U.S.C.
Section 1129. Pursuant to the Bankruptcy Court's entry of the
Order Approving Disclosure Statement and Confirming First Amended
Plan of Liquidation, the current Directors will remain seated
until the reorganization set forth in the First Amended Plan of
Liquidation is completed. The Directors were given authority by
the Bankruptcy Court to appoint new members to the Board, to enter
into agreements, contracts, and oversee all matters as authorized
by law to reincorporate in Delaware, adopt new Bylaws and do all
things necessary under the Plan of Reorganization. The current
terms of the Board of Directors and officers will be terminated
upon completion of the reorganization, with the exception of John
Dunn, who was allowed to resign all positions on August 16, 2004.
Pursuant to the Plan, as confirmed by the Bankruptcy Court, all
prior operational assets were liquidated and the proceeds are
being paid per the approved Claim Schedule to creditors and for
the administration of the estate. The Company is currently
negotiating for an acquisition under the Plan, although no
agreements have been signed or executed.
Pursuant to the Order, all of the property of Company's estate
vested in the Plan Trustee, free and clear of all claims, liens,
encumbrances, charges or other interests, and all executory
contracts and unexpired leases were rejected. The Bankruptcy Court
also placed an injunction against all entities that may have held,
currently hold, or may hold a debt, claim or other liability or
interest against the Company dischargeable upon confirmation of
the Plan and permanently enjoined any action on account of such
debt, claim, liability, interest or right. The Bankruptcy Court
further terminated all claims arising or related to stock, stock
options, stock plans for employees, officers and directors,
warrants and convertible provisions within the debt instruments by
creditors. The Bankruptcy Court also ordered that the common stock
of the Company be diluted by reverse split of issued and
outstanding common shares of the Company. Under the Order
Confirming, each share of the Company's common stock issued and
outstanding was reclassified as, and changed to, 822nd of 1 share
of common stock at a $0.001 par value.
The Bankruptcy Court also ordered that the:
-- Company reincorporate and redomicile from the State of
Colorado to the State of Delaware and that the name of the
Company be changed to Telestone Technologies Corporation;
-- Board of Directors be authorized under the Plan to issue
common shares pursuant to an Exchange Agreement at the time
of closing or in escrow in which effective control or
majority ownership of the Company is given to the acquired
or acquiring business entity without the need of shareholder
approval;
-- Board of Directors be authorized to amend the Company's
By-Laws and amend the Company's fiscal year to a date
established and set forth in an Exchange Agreement without
the need of shareholder approval; and that the Board of
Directors be authorized and directed to conduct a
shareholder meeting with the consent of a majority of
shareholders at such time as set by the Board of Directors
within forty-five (45) days of the closing of the Exchange
Agreement, but no sooner than ten (10) days following the
Company's filing of an 8K under the Securities Act of 1934
giving full financial disclosure and the mailing of an
Information Statement pursuant to the Act.
Pursuant to the Bankruptcy Court Order, the Company reincorporated
in the State of Delaware on August 13, 2004, by filing a
Certificate of Incorporation filed with the State of Delaware. The
Company is now authorized to issue a total of 110,000,000 shares
with 100,000,000 being shares of common stock with a par value of
$0.001, and 10,000,000 being shares of preferred stock with a par
value of $0.001. The Company's new name is Telestone Technologies
Corporation implementing this reclassification.
Pursuant to the Bankruptcy Court Order and on August 17, 2004, the
Company approved the reverse split of issued and outstanding
common shares. Under the Bankruptcy Court's Order, the Company's
common stock issued and outstanding was reclassified as, and
changed to, 822nd of 1 share of common stock at a par value of
$0.001. A Certificate of Amendment was filed with the Delaware
Secretary of State on August 17, 2004.
Pursuant to the Bankruptcy Court Order, the Company adopted and
approved new corporate By-Laws applicable to the laws of the State
of Delaware. These By-Laws do not substantially deviate or differ
significantly from the previous By-Laws of the Company.
As a result of the Company's name change, a new trading symbol
will be issued by the NASD. Shares of the Company's common stock
will currently be traded on the "Pink Sheets" under the symbol
"MLSP" until the new trading symbol is assigned.
On the 16th day of August 2004, the Company received the
resignation of John Dunn as Director and Officer. Mr. Dunn's
resignation was accepted by the Board of Directors. It is stated
that Mr. Dunn did not resign as a result of any disagreement with
Management or the current Board of Directors.
Headquartered in Fairfield, New Jersey, Milestone Capital, Inc.,
originates, processes, and closes mortgages that originate from
financial professionals through the usage of the company's
internally developed mortgage origination software. The Company
and its debtor-affiliate filed for chapter 11 protection on
Sept. 26, 2003 (Bankr. D. N.J. Case No. 03-41806). Joseph H.
Lemkin, Esq., at Duane, Morris LLP, represents the Debtors in
their chapter 11 cases. When the Debtors filed for protection
from their creditors, they listed $1,700,811 in total assets and
$2,855,612 in total debts. The Company filed its First Amended
Joint Plan of Liquidation in July 2004.
MIRANT AMERICAS: Court Approves Kern Oil Settlement Pact
--------------------------------------------------------
Mirant Americas Energy Marketing, LP, a Mirant Corporation and its
debtor-affiliate and Kern Oil & Refining Co. were parties to
several agreements, pursuant to which MAEM sold natural gas to
Kern Oil from January 1, 2003, through December 31, 2005. On
January 27, 2004, MAEM filed a complaint against Kern Oil with the
Bankruptcy Court.
To resolve the issues relating to the Contracts and the Adversary
Proceeding, the Debtors sought and obtained the Court's approval
to enter into an agreement with Kern Oil.
The Agreement provides that:
(a) Kern Oil will pay MAEM an aggregate of $729,622, comprised
of:
-- $294,622 for natural gas burned by Kern Oil in
September 2003; and
-- $435,000 for natural gas burned by Kern Oil in November
2003 and the charges MAEM incurred from Southern
California Gas Company;
(b) Kern Oil will be granted an allowed, prepetition, non-
priority, general unsecured claim for $600,000 against
MAEM's estate;
(c) Claim No. 6243 will be amended to honor all the terms of
the Agreement, including acknowledgement of the $600,000
Claim;
(d) MAEM will dismiss the Complaint with prejudice and Kern
Oil will dismiss the Counterclaims with prejudice;
(e) The Debtors and Kern Oil mutually release each other from
all claims, demands, actions, or causes of action that:
-- arose from or relate to any amendment, rejection, or
breach of, or default under the Contracts; and
-- are the subject of the Adversary Proceeding.
Headquartered in Atlanta, Georgia, Mirant Corporation --
http://www.mirant.com/-- together with its direct and indirect
subsidiaries, generate, sell and deliver electricity in North
America, the Philippines and the Caribbean.
The Company filed for chapter 11 protection on July 14, 2003
(Bankr. N.D. Tex. 03-46590). Thomas E. Lauria, Esq., at White &
Case LLP, represent the Debtors in their restructuring efforts.
When the Company filed for protection from their creditors, they
listed $20,574,000,000 in assets and $11,401,000,000 in debts.
(Mirant Bankruptcy News, Issue No. 46; Bankruptcy Creditors'
Service, Inc., 215/945-7000)
MIRAVANT MEDICAL: Inks $15 Million Convertible Debt Credit Line
---------------------------------------------------------------
Miravant Medical Technologies (OTCBB:MRVT), a pharmaceutical
development company specializing in PhotoPoint(TM) photodynamic
therapy, has entered into a non-binding letter of intent with a
group of existing Miravant investors to provide the company a
convertible debt line-of-credit up to $15 million.
Upon execution of the definitive agreement, funds will be
available at the Company's discretion in increments of up to
$1 million per month, with convertible debentures for the
principal borrowed amounts and associated warrants for shares of
common stock to be issued and priced at the time of each
borrowing. The transaction is subject to the negotiation and
execution of definitive documents. In addition to this line of
credit, the Company had cash of approximately $8 million as of
Sept. 30, 2004.
Gary S. Kledzik, Ph.D., chairman and chief executive officer,
stated, "We are very pleased to enter into this letter of intent
with investors who have held an interest in Miravant for many
years. The additional funding that the completed transaction will
provide will enable us to focus on our business plan to complete
our New Drug Application process for PHOTREX."
About Miravant
Miravant Medical Technologies specializes in the development of
pharmaceuticals and devices for photoselective medicine,
developing its proprietary PhotoPoint photodynamic therapy (PDT)
for large potential markets in ophthalmology, dermatology,
cardiovascular disease and oncology. PhotoPoint PDT uses light-
activated drugs to selectively target diseased cells and blood
vessels. The Company's lead drug, PHOTREX (rostaporfin, SnET2), is
in development as a treatment for patients with wet age-related
macular degeneration and has received an approvable letter from
the U.S. Food and Drug Administration (FDA). The Company has
collaborative and securities purchase agreements with Guidant
Corporation in support of PDT applications in cardiovascular
disease.
At June 30, 2004, Miravant Medical's balance sheet showed a
$884,000 stockholders' deficit, compared to a $7,027,000 deficit
at December 31, 2003.
NATIONAL CENTURY: Trust Wants $2.5 Mil. Fraudulent Transfer Back
----------------------------------------------------------------
Mary E. Tait, Esq., at Jones Day, in Columbus, Ohio, relates that
PrimeRx.com, Inc., acquired Network Pharmaceuticals, Inc., in
early 1999. PrimeRx, formerly known as PrimeMed Pharmacy Services
Group, Inc., is a company that manages pharmacy benefits for
managed care patients.
On April 6, 2000, PrimeRx and e-Medsoft.com, Inc., now known as
Med Diversified, Inc., entered into a Management Services and
Joint Venture Agreement. The Management Agreement provided for
Med Diversified to exercise management control over PrimeRx and
its subsidiaries, including Network.
Subsequently, Med Diversified approached National Century
Financial Enterprises, Inc., and NPF XII, Inc., regarding the
potential participation of certain of PrimeRx's business divisions
in NPF XII's accounts receivable financing program. On
March 2, 2001, NPF XII and PrimeRx entered into a Sale and
Subservicing Agreement, where NPF XII provided accounts receivable
financing to certain of PrimeRx's business divisions.
At the same time that Med Diversified was negotiating for the
provision of financing to PrimeRx, Network and its principals were
involved in a dispute with Med Diversified over the operations of
PrimeRx and its subsidiaries.
On March 19, 2001, Med Diversified, Network and certain other
parties entered into a settlement agreement, in an attempt to
resolve the disputes. However, the 2001 Settlement Agreement
failed to resolve the disputes between Med Diversified and
Network.
The 2001 California Action
On July 16, 2001, Network filed a lawsuit against Med Diversified
and NCFE in the Los Angeles County, California Superior Court.
Network amended its Complaint on September 13, 2001. Network
asserted, among other things, that Med Diversified did not have
the authority to commit PrimeRx to the Subservicing Agreement, and
that, as a result, NCFE wrongly received in excess of $1 million
in accounts receivable -- Network later reduced the alleged amount
of accounts receivable to $879,815. This gave rise to claims for
conversion, "an accounting and declaratory relief that it was
entitled to the proceeds of the receivables." The Debtors' books
and records indicated that $1,339,266 was advanced to PrimeRx
pursuant to the Subservicing Agreement and that proceeds of
PrimeRx accounts receivable aggregating $6,021 were collected by
NPF XII in respect of those advances. Network also asserted
numerous claims against Med Diversified, alleging that NCFE was
vicariously liable for Med Diversified's wrongdoing because Donald
Ayers was a board member of both Med Diversified and NCFE. The
First Amended Complaint alleged that NCFE was vicariously liable
for fraud, breach of warranties, breach of fiduciary duty, aiding
and abetting in the breach of fiduciary duty, intentional and
negligent interference with contractual relations, defamation,
unfair competition, unfair business practices and extortion.
California Arbitration
At the request of Med Diversified and NCFE, the California
Litigation was subsequently ordered into an arbitration in
California, based on an arbitration clause contained in the 2001
Settlement Agreement. On June 25, 2002, after completion of the
first phase of the Arbitration, Network and NCFE stipulated that
Network will dismiss NCFE from both the California Litigation and
the Arbitration, without prejudice.
2002 Settlement Agreement
On July 1, 2002, Med Diversified, NCFE, Network and other parties
involved in the California Litigation entered into a settlement
agreement. The 2002 Settlement Agreement provided for an
$8.5 million judgment to be entered in the Arbitration against Med
Diversified.
The Stipulated Judgment was not to be confirmed by the Los
Angeles County, California Superior Court until the earlier of:
(a) Med Diversified or NCFE being involved in a bankruptcy
filing, appointment of a receiver or an assignment for the
benefit of creditors; or
(b) a failure by:
-- NCFE to pay Network $2,500,000 no later than July 1,
2002; or
-- Med Diversified to pay Network $2,500,000 no later
than August 1, 2003.
$2.5 Million Transfer
On July 1, 2002, NCFE transferred $2,500,000 to an account in the
name of Network's lawyer in the Arbitration, Ron Hodges, Esq., at
Marshak, Shulman, Hodges & Bastian, LLP, for Network's benefit.
In November 2002, Med Diversified filed for Chapter 11 bankruptcy
protection and never made its $2,500,000 payment to Network
provided for under the 2002 Settlement Agreement.
The Network Claim Against NCFE
On April 21, 2003, Network filed Claim No. 314 against NCFE,
asserting a general unsecured claim for $8,500,000. NCFE objected
to Claim No. 314 on the basis that the attachment to the Claim
only referenced a liability on the part of Med Diversified and did
not assert any valid liability on the part of NCFE.
On March 26, 2004, Network amended its claim, asserting a general
unsecured claim for $6,000,000 against NCFE.
Avoidance Action
The Unencumbered Assets Trust, as successor to and transferee of
the Debtors, argue that the Debtors received no value or benefit
from the settlement of the Arbitration or NCFE's payment of the
Transfer. Network's release of the Debtors never became effective
as a result of Med Diversified's failure to meet its $2,500,000
payment obligation.
Network retained the Transfer for its own use, and has not in any
way reimbursed the Debtors. The Transfer has unjustly enriched
Network to the detriment of the Debtors, and thereby the Trust.
Hence, it is inequitable for Network to retain the Transfer
without reimbursing the Trust.
The $2,500,000 payment by NCFE to Network on July 1, 2002, was an
avoidable fraudulent conveyance under Sections 544 and 548 of the
Bankruptcy Code and other applicable law.
Thus, the Trust asks the Court to:
(a) avoid the Transfer as a fraudulent transfer;
(b) award money judgment in its favor in an amount equal to
the Transfer pursuant to Section 550(a) of the Bankruptcy
Code;
(c) award money judgment in its favor and against Network in
the amount Network was unjustly enriched, presently
estimated to be $2,500,000 plus all fees and costs awarded
and interest; and
(d) disallow the Amended Network Claim in its entirety.
Headquartered in Dublin, Ohio, National Century Financial
Enterprises, Inc. -- http://www.ncfe.com/-- through the CSFB
Claims Trust, the Litigation Trust, the VI/XII Collateral Trust,
and the Unencumbered Assets Trust, is in the midst of liquidating
estate assets.
The Company filed for Chapter 11 protection on November 18, 2002
(Bankr. D. Ohio Case No. 02-65235). The Court confirmed the
Debtors' Fourth Amended Plan of Liquidation on April 16, 2004.
Paul E. Harner, Esq., at Jones Day, represents the Debtors in
their restructuring efforts. (National Century Bankruptcy News,
Issue No. 47; Bankruptcy Creditors' Service, Inc., 215/945-7000)
NATIONAL MENTOR: Moody's Assigns Low-B Ratings to Various Debts
---------------------------------------------------------------
Moody's Investors Service assigned B1 ratings to the proposed
credit facilities of National MENTOR, Inc., and a B3 rating to the
company's proposed senior subordinated notes. Moody's also
assigned a B1 senior implied rating, a B2 senior unsecured issuer
rating, and a SGL-2 speculative grade liquidity rating to the
company. The outlook for the company is stable. This is the
first time Moody's assigned public debt ratings to MENTOR.
New Ratings:
* $80 Million Revolving Credit Facility due 2010 -- B1
* $170 Million Term Loan B due 2011 -- B1
* $150 Million Senior Subordinated Notes due 2012 -- B3
* Senior Implied Rating -- B1
* Senior Unsecured Issuer Rating -- B2
* SGL - 2
* Outlook -- Stable
The credit ratings reflect:
(i) the company's high leverage,
(ii) its reliance on government payors as a source of funding
for most of its customers,
(iii) a tough reimbursement environment and uncertainty
regarding the timing and magnitude of an anticipated
improvement, and
(iv) the challenge faced by the company and its competitors in
managing employee turnover and labor expenses.
The ratings also consider:
(i) the high level of competition in the company's fragmented
markets,
(ii) a degree of revenue concentration in Minnesota,
(iii) the company's recent history and continued interest in
minor acquisitions, and
(iv) risks relating to a smooth transition in the chief
executive officer position.
Credit strengths recognized by the ratings include:
(i) the company's consistent and mostly favorable performance
trends,
(ii) good growth in the demand for services in the company's
market segments, and
(iii) anticipated stability in revenue driven by the long
average length of stay of the company's clients.
Moody's also notes the company's strong position in the industry,
as characterized by its size, national network, long history,
broad continuum of service, and financial strength relative to
local providers, and the company's experienced management team.
The SGL-2 speculative grade liquidity rating is based on Moody's
expectation that internally generated cash flow will be sufficient
to fund working capital, capital expenditures and debt service
over the next twelve months ending September 30, 2005. This
rating also considers the significant amount of external committed
funding the company is expected to have upon the close of the $80
million revolver. Given the company's consistent historical
performance, we expect the company to be in compliance with
financial covenants under the proposed credit facility, and thus
to maintain access to this committed source. The specific levels
for the covenants have not been determined yet. However, we
anticipate that the company will have modest cushion relative to
its projected performance of 15-20%.
The SGL rating, however, is limited partly due to the low absolute
amount of free cash flow the company is expected to produce. We
expect cash flow from operations to be slightly more than two
times the amount of capital expenditures. However, capital
expenditure requirements are low for the company, at a minimal
percentage of revenue. Relative to the company's debt, free cash
flow is not significant. Based on the company's historical
performance, Moody's also notes that the company may generate
negative free cash flow in any particular quarter due to timing of
certain payments or receipt of cash from customers. Finally, the
SGL rating also recognizes that the company lacks an alternate
source of liquidity, since all assets will be encumbered under the
credit agreement.
The stable outlook incorporates Moody's expectation of continued
consistent performance at the company, as well as an expectation
that leverage will remain high over the next few years. Moody's
believes that the company's projection of sales growth in the high
single digit range is reasonable. However, while the company has
done a good job in maintaining margins, concerns remain that
margins may come under pressure, especially if labor expenses
continue to rise and the increases in rates from government payors
don't improve over the coming years. EBITDA (in absolute dollar
terms) should continue to trend up for the company. Cash flow
should trend up as well, although in 2005 it will decline from the
LTM June 30, 2004 level due to the timing of working capital
payments and increased cash interest expense resulting from the
refinancing.
In spite of the expected positive performance trends, Moody's
believes that there will be limited upward momentum for the
ratings over the next two years. The amount of free cash flow
generated by the company will be limited relative to debt (mid
single digit range relative to total debt). Moreover, we
anticipate that the company will utilize at least a portion of
free cash flow to fund minor acquisitions. If enough
opportunities arise, Moody's can envision MENTOR spending an
amount in excess of free cash flow on acquisitions. Therefore,
over the next few years, Moody's expects the amount of de-
leveraging to be limited and unlikely to be sufficient to warrant
an upgrade to the ratings.
Conversely, the outlook and ratings may be revised
negatively/downgraded if the company takes on additional leverage
to fund acquisitions. Mentor's leverage is quite high, with free
cash flow coverage of debt projected at approximately 4% for the
year ended September 30, 2004, and Adjusted Debt to EBITDAR at
5.4 times. The statistics are at the weaker end of the B1 rating
category. Therefore, the company has little capacity to take on
additional leverage without seeing ratings impacted. Adjusted
debt as calculated in the leverage metrics includes eight times
the company's rental expense. Moody's notes, however, that more
than half of the company's facilities leases are under two years
in duration.
Moody's may also downgrade the company's ratings if margin
deterioration leads to a weakening in the credit metrics.
Managing labor expenses has been a challenge and may become more
problematic if the economy and labor market improves. Given the
high employee turnover rate in the industry, the company will be
forced to raise wages and benefits to attract employees.
However, should the reimbursement environment improve, margin
pressure from labor expenses may be partly mitigated. While the
budgets at most states are strengthening, many are still in
deficits. Therefore, uncertainty remains over the timing of when
the company will begin to experience meaningful rate increases.
Nonetheless, Moody's does expect the reimbursement trend to turn
positive over the near to intermediate term.
MENTOR is seeking new funding to refinance its existing credit
facilities, to refinance debt at the parent holding company, and
to redeem the preferred stock issued at the parent holding
company. The refinancing will result in a simplified capital
structure as well as a lower cost of capital for the company.
Moody's rated the new credit facilities at the same level as the
senior implied rating. Moody's did not notch up on the bank debt
due to the high proportion of committed bank debt (including
undrawn amounts under the revolver) relative to committed debt
capital, and due to the limited amount of tangible assets securing
the facilities. The senior subordinated notes are rated two
notches below the senior implied rating due to the contractual and
effective subordination.
Following the refinancing, leverage will remain mostly unchanged
for the company, but high. Proceeds from the newly proposed debt
will be used, in part, to redeem $116.4 million of preferred stock
held primarily by the equity sponsor Madison Dearborn Partners.
Moody's considers the preferred stock to be debt. Therefore, the
transaction will not be a leveraging event. However, cash
interest expense will increase. The company wasn't paying a cash
dividend on the preferred securities, or cash interest on the
holding company notes, but now will need to pay cash interest on
the new debt securities.
For the year ended September 2004, the company is estimated to
have generated free cash flow coverage of debt of 4%. Coverage is
expected to improve to 6% for the year ending September 30, 2005.
For the same two periods, Adjusted Debt to EBITDAR is estimated at
5.4 times and is projected to improve to approximately 4.9 times.
EBITDA / Interest, however, will deteriorate in 2005 to 2.9 times
from 3.2 times estimated for the year 2004 due to an increase in
interest expense resulting from the refinancing of the preferred
stock.
National MENTOR, Inc., headquartered in Boston, Massachusetts, is
a leading provider of home and community-based services for
individuals with mental retardation and other developmental
disabilities, at-risk youth and persons with acquired brain
injury.
NRG ENERGY: CFTC Says Action Should Remain in Minn. Dist. Court
---------------------------------------------------------------
Samuel S. Kohn, Esq., at Kirkland & Ellis, in New York, relates
that on July 1, 2004, the Commodity Futures Trading Commission
filed a complaint against Debtor NRG Energy, Inc., in the United
States District Court for the District of Minnesota. The
Commission avers that for a nine-month period ending approximately
one year prior to the commencement of NRG's bankruptcy, former NRG
employees made numerous "false, misleading, or knowingly
inaccurate" reports concerning natural gas transactions, which
were used in the creation of a price index published in an
industry letter. The Commission alleges that the false reports
are violations of Section 9(a)(2) of the Commodity Exchange Act
and further alleges that NRG is liable for these violations
pursuant to Section 2(a)(1)(B) of the Act. The Commission seeks
both the entry of a permanent injunction and "such other and
further remedial and ancillary relief as [the Minnesota District
Court] may deem necessary and appropriate."
Mr. Kohn points out that the Commission's filing of the Minnesota
Complaint in the Minnesota District Court is a willful and
deliberate violation of the injunctive and reservation of
jurisdiction provisions of the NRG Plan and Confirmation Order.
CFTC Responds
Glynn L. Mays, Senior Assistant General Counsel, in Washington,
D.C., argues that NRG Energy, Inc.'s request is not supported by
the terms of NRG's Reorganization Plan or the Confirmation Order.
It has no other purpose or result, except improper interference
with the exercise of governmental police power, contrary to
Congressional policy under the Bankruptcy Code.
To recall, NRG sought to bar the continuation of a law
enforcement action brought about by the Commodity Futures Trading
Commission currently pending in the Minnesota District Court,
unless re-filed in the Bankruptcy Court, and sanction the
Commission for alleged violation of the Confirmation Order.
In NRG's view, the Commission's injunctive action is the same as
the "claim" that the Bankruptcy Court has already disallowed and
is otherwise barred under the Plan. Mr. Mays contends that an
action for injunctive relief does not involve a "claim" within
the meaning of the Bankruptcy Code or under the Reorganization
Plan. The Commission's enforcement action seeks an injunction,
restraining and enjoining NRG from violating Section 13(a)(2) of
the Agriculture Code. Although violations of the Commodity
Exchange Act may be a basis for civil monetary penalties or other
monetary relief, the Commission's enforcement action does not
seek that relief against NRG.
Furthermore, Section 1334(b) of the Judiciary Procedures Code
gives the district court, and the bankruptcy court by referral,
only "original but not exclusive" jurisdiction over civil
proceedings "related to" cases under Chapter 11. Thus, Mr. Mays
clarifies that the Commission's actions do not, as a matter of
law, avoid or somehow interfere with the Bankruptcy Court's
jurisdiction, since jurisdiction of the enforcement action is
clearly proper in either the Bankruptcy Court or in the District
Court for the District of Minnesota.
Mr. Mays tells Judge Beatty that to force the Commission's
injunctive action into the Bankruptcy Court would only increase
the burden on NRG, the Commission, and the Court. Even though
all jurisdiction granted to the district courts in Section 1134
of the Judiciary Procedures Code has been referred to the
Bankruptcy Court by the U.S. District Court for the Southern
District of New York, the Bankruptcy Court nonetheless may not
"determine" the Commission's injunctive action. It may only make
proposed findings of fact and conclusions of law that are then
open to broad do novo review. This potentially cumbersome
procedure merely multiplies the possible proceedings to no one's
benefit. Withdrawal of the reference from the Bankruptcy Court
would also need to be considered.
In sum, there would be no advantage to transferring the
Commission's injunctive action to the Bankruptcy Court.
Consequently, Mr. Mays asserts that the Commission's action
should remain in the Minnesota District Court.
NRG Energy, Inc. owns and operates a diverse portfolio of power-
generating facilities, primarily in the United States. Its
operations include baseload, intermediate, peaking, and
cogeneration facilities, thermal energy production and energy
resource recovery facilities. The company, along with its
affiliates, filed for chapter 11 protection (Bankr. S.D.N.Y. Case
No. 03-13024) on May 14, 2003. The Company emerged from chapter 11
on December 5, 2003, under the terms of its confirmed Second
Amended Plan. James H.M. Sprayregen, P.C., Matthew A. Cantor,
Esq., and Robbin L. Itkin, Esq. at Kirkland & Ellis, represented
NRG Energy in its $10 billion restructuring. (NRG Energy
Bankruptcy News, Issue No. 34; Bankruptcy Creditors' Service,
Inc., 215/945-7000)
NORTHWESTERN CORP: Court Gives Oral Confirmation to Chap. 11 Plan
-----------------------------------------------------------------
The U.S. Bankruptcy Court for the District of Delaware has issued
an oral ruling confirming the Company's Second Amended and
Restated Plan of Reorganization in all respects and overruling
all objections to the Plan. The effective date for the Plan is
expected to be in the next several weeks, at which time
NorthWestern will emerge from Chapter 11.
Gary G. Drook, President and Chief Executive Officer of
NorthWestern, said, "This is a tremendous day for the 'new'
NorthWestern. Our financial restructuring, which was one of the
most expeditious of any utility company undergoing this process,
has enabled us to significantly reduce our debt and continue
providing our customers with the dependable service they expect
without having to increase distribution rates. I am pleased that
we have been able to accomplish our objectives quickly and
efficiently, and I am excited about the future of this company."
Upon emergence, the Plan contemplates that NorthWestern will have
an enterprise value of approximately $1.5 billion. The Company's
debt will be approximately $900 million upon emergence, which is a
decrease of approximately $1.3 billion from approximately
$2.2 billion as of Dec. 31, 2003. The Plan contemplates that the
Company's equity position will be approximately $710 million.
As previously announced, NorthWestern's financial reorganization
will be achieved through a debt-for-equity swap. Upon the Plan's
effective date, NorthWestern's existing common stock will be
cancelled, and no distribution will be available for current
shareholders. The terms of the Plan include:
-- Holders of senior unsecured notes of the Company and
general unsecured claims in excess of $20,000 will receive,
pro rata, 92 percent of newly issued common stock.
-- Holders of NorthWestern's Trust Originated Preferred
Securities, and other subordinated creditors who so choose,
will be eligible to receive, pro rata, 8 percent of the
common stock and warrants exercisable for an additional 13
percent of the common stock in the reorganized NorthWestern.
-- Unsecured convenience claims of $20,000 or less each will be
paid in full in cash.
-- Holders of secured bonds, including the Company's First
Mortgage, Pollution Control and Gas Transition Bonds, will
not be impaired and will be reinstated.
-- Environmental claims will be not be impaired and will be
satisfied in full. With respect to the Milltown Dam
Superfund site, the Company will fulfill its obligations
consistent with the previous court-approved settlement.
The Company said that its newly issued common stock will be listed
on a major exchange upon or shortly following the Company's
emergence from Chapter 11. NorthWestern will announce the new
stock symbol and date on which trading will begin in the near
term. The Plan anticipates that the reorganized company's new
Board of Directors will consider paying a dividend on the new
common stock, although there can be no assurance if or when a
dividend will be paid.
Headquartered in Sioux Falls, South Dakota, NorthWestern
Corporation (Pink Sheets: NTHWQ) -- http://www.northwestern.com/
-- provides electricity and natural gas in the Upper Midwest and
Northwest, serving approximately 608,000 customers in Montana,
South Dakota and Nebraska. The Debtors filed for chapter 11
protection on September 14, 2003 (Bankr. Del. Case No. 03-12872).
Scott D. Cousins, Esq., Victoria Watson Counihan, Esq., and
William E. Chipman, Jr., Esq., at Greenberg Traurig, LLP, and
Jesse H. Austin, III, Esq., and Karol K. Denniston, Esq., at Paul,
Hastings, Janofsky & Walker, LLP, represent the Debtors in their
restructuring efforts. On the Petition Date, the Debtors reported
$2,624,886,000 in assets and liabilities totaling $2,758,578,000.
OCWEN RESIDENTIAL: Fitch Junks B-3 Mortgage Certificates
--------------------------------------------------------
Fitch Ratings has taken these rating actions on four Ocwen
Residential MBS Corp. issues:
Ocwen Residential MBS Corp. mortgage pass-through certificates,
series 1998-R1:
-- Class A affirmed at 'AAA';
-- Class B-1 affirmed at 'AA';
-- Class B-2 affirmed at 'A';
-- Class B-3 downgraded to 'BBB-' from 'BBB'.
Ocwen Residential MBS Corp. mortgage pass-through certificates,
series 1998-R2:
-- Class AF- AA affirmed at 'AAA' .
Ocwen Mortgage loan asset backed certificates, series 1998-OFS1:
-- Class A affirmed at 'AAA';
-- Class M-1 affirmed at 'AA+';
-- Class M-2 affirmed at 'A';
-- Class B downgraded to 'BBB-' from 'BBB' and removed from
Rating Watch Negative.
Ocwen Mortgage loan asset backed certificates, series 1998-OFS4:
-- Class B affirmed at 'BBB-'.
Ocwen Residential MBS Corp. mortgage pass-through certificates,
series 1999-R2:
-- Class A affirmed at 'AAA';
-- Class B-1 affirmed at 'AA';
-- Class B-2 downgraded to 'BBB' from 'A';
-- Class B-3 downgraded to 'CCC' from 'B'.
The affirmations, affecting $167,024,044 of debt, reflect credit
enhancement consistent with future loss expectations. The
negative rating actions are the result of poor collateral
performance and the deterioration of asset quality beyond original
expectations and affect $35,567,889 of outstanding certificates.
The series 1998-R1 transaction is collateralized by fixed-rate and
adjustable-rate, first lien seasoned mortgage loans. All of the
mortgage loans that have defaulted in the past are now considered
reperforming loans. The current pool factor (current mortgage
loans outstanding as a percentage of the initial pool) is 27%.
The mortgage pool is currently 77 months seasoned. As of the
August 2004 distribution, there are 2,314 mortgage loans
remaining, 940 loans of which are in the delinquency buckets. The
90 plus delinquencies represent 27.7% of the mortgage pool, and
foreclosures and REO represent 3.97% and 1.48%, respectively.
The mortgage assets of the 1998-R2 transaction consist of fixed-
and adjustable-rate mortgage loans. All the mortgage loans that
have defaulted in the past are now considered reperforming loans.
Fitch only rated class A at 'AAA'. The current pool factor is
19%. There are 299 mortgage loans remaining.
As of the August 2004 distribution, the nonrated -- NR --
subordinate bonds consist of classes B-1 through B-6 with total
outstanding certificates balance of $14,265,400. The class A
current certificate balance is $9,042,674.
The series 1998-OFS1 transaction is backed by fixed-rate and
adjustable-rate mortgage loans. The mortgage pool supporting the
trust is substantially paid down, with the current pool factor at
5.57%. The high level of losses incurred has resulted in the
decline of overcollateralization -- OC -- to approximately
$1,085,917, or 12.31% of the collateral balance, as of the August
2004 distribution date.
Monthly excess spread generated within the transaction is
generally decreasing over time. As of the August distribution,
monthly excess spread was approximately $57,064. The three-month
and six-month average monthly loss is approximately $95,087 and
$90,583, respectively. The 90 plus delinquencies represent 36.38%
of the mortgage pool; foreclosures and REO represent 8.34% and
9.3%, respectively.
The series 1998-OFS4 transaction is backed by fixed-rate and
adjustable-rate mortgage loans. The mortgage pool supporting the
trust is substantially paid down, with the current pool factor at
9.22%. Fitch only rated class B at 'BBB-'. Class B benefits from
monthly excess interest and 12.59% enhancement (originally 2.25%)
in the form of overcollateralization. The monthly excess interest
was $174,114 in August 2004, and the monthly losses have averaged
$197,811 over the past six months.
The series 1999-R2 transaction is collateralized by fixed-rate
seasoned mortgage loans. Substantially all of the mortgage loans
have defaulted in the past and are reperforming mortgage loans.
The current pool factor is 28%. As of the August 2004
distribution, the current pool balance is $33,249,012. The
mortgage pool is currently 68 months seasoned.
There are 491 mortgage loans remaining, 481 loans of which are in
the delinquency buckets. The 90 plus delinquencies represent
72.05% of the mortgage pool, foreclosures and REO represent 4.53%
and 1.86%, respectively.
The mortgage loans in the above transactions with the exception of
series 1998-OFS1 and 1998-OFS4 were acquired from the U.S.
Department of Housing and Urban Development -- HUD -- and are
reperforming mortgage loans. The goal of HUD was to make mortgage
credit readily available to American home buyers, particularly
those with low or moderate income.
The mortgage loans are being serviced by Litton Loan Servicing,
LP. Litton, a subsidiary of Credit Based Asset Servicing and
Securitization LLC -- CBASS -- is rated 'RPS1' for subprime and
high loan to value -- HLTV -- products and 'RSS1' as special
servicer by Fitch.
OMNI FACILTY: Hires Houlihan Lokey as Investment Banker
-------------------------------------------------------
The U.S. Bankruptcy Court for the Southern District of New York
gave Omni Facility Services, Inc., and its debtor-affiliates
permission to employ Houlihan Lokey Howard & Zukin Capital, as
their investment banker.
The Debtors hired Houlihan Lokey in connection with the
disposition and marketing of the assets of their two separate
business groups, the Landscaping Group and the Architectural
Maintenance Group.
The Landscaping Group consists of four companies:
-- Omni Landscaping, Inc.,
-- The Morrel Group, Inc.,
-- Spring Gardens, Inc., and
-- Omni Service Management, Inc.
The Architectural Maintenance Group consists of a single company:
-- Remco Maintenance Corp.
Houlihan Lokey will:
a) review the financial position, financial history,
operations, competitive environment, and assets of the
Landscaping Group and Remco Maintenance;
b) assist the Debtors in effectuating a sale, merger, joint
venture or other combination or disposition of the
Landscaping Group and Remco Maintenance, their assets, or
any portions of their stock;
c) assist the Debtors in developing and implementing a
coordinated sales effort with respect to the proposed
disposition of the Landscaping Group and Remco Maintenance;
d) assist the Debtors in identifying, contacting, and
soliciting interest from potential acquirers, investors and
strategic partners to facilitate the proposed disposition
of the Landscaping Group and Remco Maintenance;
e) prepare and update a package of financial and operating
information for the interaction and dissemination of
information to potential investors for the Landscaping
Group and Remco Maintenance;
f) assist the Debtors in evaluating proposals regarding the
proposed dispositions and in negotiating and structuring
the financial aspects of the proposed dispositions;
g) attend meetings and assist in negotiations with potential
acquirers;
h) provide factual and expert testimony regarding the sale
process and valuation as may be necessary in connection
with the proposed dispositions; and
i) consult with the Debtors' management and counsel regarding
the proposed dispositions of the Landscaping Group and
Remco Maintenance and the potential investors.
Saul E. Burian, a Director at Houlihan Lokey, discloses that the
Debtors paid a $150,000 retainer.
Mr. Burian reports that the Firm will receive a $600,000 cash
transaction fee, plus 6% of the aggregate gross consideration for
a completed sale of Omni Landscaping that is priced between $20
million and $25 million. If the sale exceeds $25 million, the
aggregate gross consideration is 10% provided that the cash
transaction fee is reduced by $75,000.
Mr Burian adds that Houlihan Lokey will receive a $150,000 cash
transaction fee, plus 6% of the aggregate gross consideration for
a sale of Remco Maintenance that is priced between $3 million and
$7 million. If the sale exceeds $7 million, the aggregate gross
consideration is 10% provided that the cash transaction fee is
reduced by $75,000.
To the best of the Debtors' knowledge, Houlihan Lokey is
"disinterested" as the term is defined in Section 101(14) of the
Bankruptcy Code.
Headquartered in South Plainfield, New Jersey, Omni Facility
Services, Inc. -- http://www.omnifacility.com/-- provides
architectural, janitorial, landscaping, and electrical services.
The Company filed for chapter 11 protection on June 9, 2004
(Bankr. S.D.N.Y. Case No. 04-13972). Frank A. Oswald, Esq., at
Togut, Segal & Segal LLP, represents the Debtors in their
restructuring efforts. When the Debtors filed for protection from
their creditors, they listed $80,334,886 in total assets and
$100,285,820 in total debts.
ONE PRICE: Committee Wants Cases Converted to Chapter 7
-------------------------------------------------------
The Official Committee of Unsecured Creditors in One Price
Clothing Stores, Inc., and its debtor-affiliates' chapter 11 cases
asks the U.S. Bankruptcy Court for the Southern District of New
York to convert the Debtors' chapter 11 proceedings to chapter 7
liquidation.
The Committee explains that the Debtors have ceased all business
operations, sold or abandoned all of their tangible assets, sold
or rejected all of their retail leases and employ only a handful
in their accounting and IT departments. The Debtors' estates are
currently administratively insolvent and continue to accrue unpaid
administrative expenses day-by-day.
The Committee submits that no legitimate purpose is being served
by these cases remaining under chapter 11. Rather, these cases
should be converted and an independent chapter 7 trustee should be
appointed to administer the Debtors' estates in an orderly manner.
The Committee stresses that the Secured Creditors failed to
release to the Debtors sufficient funds to satisfy chapter 11
administrative expenses as they become due. The Debtors' financial
reports show that more than $2 million in administrative expenses
for severance, vacation and sick pay claims remain unpaid.
Mark T. Power, Esq., at Hahn & Hessen LLP, represents the
Committee.
Headquartered in Duncan, South Carolina, One Price Clothing
Stores, Inc. -- http://www.oneprice.com/-- operates a chain of
off price specialty retail stores. These stores offer a wide
variety of contemporary, in-season apparel and accessories for the
entire family. The Company, together with its two affiliates,
filed for chapter 11 protection on February 9, 2004 (Bankr.
S.D.N.Y. Case No. 04-40329). Neil E. Herman, Esq., at Morgan,
Lewis & Bockius, LLP represents the Debtors in their restructuring
efforts. When the Company filed for protection from its creditors,
it listed $110,103,157 in total assets and $112,774,600 in total
debts.
OWENS CORNING: CSFB Proposes Protocol to Review Medical Records
---------------------------------------------------------------
Rebecca L. Butcher, Esq., at Landis, Rath & Cobb, in Wilmington,
Delaware, informs Judge Fullam that the recently disclosed medical
reports reveal that by 2002, Owens Corning and its debtor-
affiliates' own experts determined that the vast majority of non-
malignant claims settled and paid by the Debtors never should have
been paid. The reports also value the Debtors' asbestos
liabilities at a fraction of what the Debtors propose in their
plan of reorganization.
The expert valuation reports are:
(1) Thomas E. Vasquez, Ph.D., Forecast of Future Asbestos
Claims and Indemnity: Owens Corning and Fibreboard;
(2) Mark W. Mayer, Report on Owens Corning's Prepetition
Asbestos Personal Injury and Wrongful Death Claims; and
(3) Dr. Gary Friedman, Owens Corning Impaired Non-malignant
Claims Submissions 1994-1999
Ms. Butcher relates that the Vasquez Report was finally produced
to Credit Suisse First Boston two years later on August 27, 2004.
The Mayer Report, dated May 21, 2002, was only produced on
August 29, 2004. Although Dr. Friedman rendered his report in
2002, the Debtors concealed its existence from the litigants and
the Court -- until now.
The Vasquez Report
Dr. Vasquez of Analysis Research Planning Corporation had been
retained to estimate the value of future asbestos-related personal
injury claims that will be filed against Owens Corning and
Fibreboard. The results of his analysis showed that Owens
Corning's future asbestos liability, discounted to present value,
ranged from $2.0 billion to $3.2 billion. Significantly, Dr.
Vasquez's estimates included discounting to nuisance value the
vast majority of the non-malignant claims asserted against Owens
Corning, based on the conclusion that the claimants did not assert
claims that qualified on a medical basis for payment under Owens
Corning's settlement agreements under the National Settlement
Program. The NSP is a program with strong financial incentives
for submitting valid, properly documented claims.
A free copy of the Vasquez Report is available at:
http://bankrupt.com/misc/vasquez_report.pdf
The Mayer Report
Mr. Mayer was the Controller, Vice President Restructuring for
Owens Corning. The Mayer Report purports to summarize the status
of asbestos personal injury and wrongful death claims asserted
against Owens Corning on or before October 4, 2000. The results
reported in the Mayer Report estimate the value of these claims
between $1.414 and $1.736 billion. However, the Mayer Report
simply applied the NSP settlement values to all pending claims
without factoring in the discount Dr. Vasquez used -- or indeed
any method at all -- to weed out bogus claims, which accounted for
the vast majority of the non-malignant claims.
A free copy of the Mayer Report is available at:
http://bankrupt.com/misc/mayer_report.pdf
According to Ms. Butcher, the combined value of Owens Corning's
asbestos liabilities reported in the Vasquez Report and Mayer
Report range from $3.4 to $4.9 billion. The Debtors had these
estimates in their possession in January 2003 when they submitted
their proposed plan of reorganization to the Bankruptcy Court with
a $10.7 billion embedded future and current asbestos liability
estimate, but suppressed them. They also suppressed these
estimates when they submitted a disclosure statement in respect of
their Plan which included the same $10.7 billion estimate.
The Friedman Report
The Friedman Report was conducted to assist the Debtors to:
-- "estimate the percentage of impaired nonmalignant claims
under NSP criteria that can be anticipated to be included
in the population of total future claims asserted against
[Owens Corning],"; and
-- "generate a reliable base of evidence of information on
which the [Debtors' asbestos valuation expert], Dr. Thomas
Vasquez, could rely."
Specifically, the Friedman Report was designed to give Dr. Vasquez
information to estimate the percentage of "impaired nonmalignant
claims under NSP criteria that can be anticipated to be included
in the total population of total future claims asserted against
the" Debtors. Significantly, the Vasquez Report determined that
91% of all future claims against the Debtors would allege non-
malignant diseases.
The Friedman Report analyzed the medical records of 1,691 cases of
claimed non-malignant asbestosis claims. The cases were randomly
selected from 22,578 non-malignant asbestos claims submitted to
the Debtors under the NSP. The case files reviewed by Dr.
Friedman included an analysis of X-ray reports, Pulmonary Function
Test reports, and other data, with an emphasis on the X-ray
reports and the PFT reports. Dr. Friedman was not able to review
the actual X-rays.
Dr. Friedman concluded that only 13.3% of the claims met the
minimal medical standards that had been agreed to by the Debtors
and the asbestos plaintiffs' law firms to establish compensable
claims under the NSP. Dr. Friedman found that 87.3% of a random
sample of settled non-malignant claims lacked supporting medical
evidence. However, even this number is apparently too low, as Dr.
Friedman found that "a review of the radiographic reports and
International Labor Organization forms raises serious questions
concerning their reliability." The factors are likely to place
downward pressure on the 13.3%.
Dr. Friedman notes that "the first step in determining impairment
is predicated upon a reliable radiographic interpretation." Dr.
Friedman stated that disturbing and overwhelming evidence that the
radiographic interpretations of B-readers in the selected Owens
Corning cases submitted to him are not reliable. He made some
general observations concerning B-readers:
"During the years that these radiographs were interpreted
[1994-1999], there were over 600 [B] readers in the United
States. Assuming that the 1,691 cases submitted represented a
true national epidemic of asbestos disease as suggested by
the recent onslaught of claim submissions, it would be
reasonable to assume that there would be a broad
representation of physicians detecting such disease. Of the
1,691 claims submitted, 772 were submitted by [Dr. Raymond
Harron] (46%), 229 by [Dr. Jay Segarra], 212 by [Dr. Keubler],
87 by Dr. L accounting for 1300 cases or 76.8% of all claims.
If Dr. JB is added, these five B-readers account for 1360 or
80.4% of claims. Dr. Harron alone accounted for approximately
45.6% of all claims submitted in this study.
Because such a small number of physicians account for a large
percentage of the claims previously submitted, and because of
the prominent role which . . . interpretation plays in the
existing agreements, the need to objectively evaluate the
reliability of their reports cannot be underestimated."
None of the X-ray readings of the five B-readers withstands even
cursory scrutiny. The medical work is so deeply ingrained in the
Debtors' claims history necessarily makes the claims history
unreliable.
A free copy of the Friedman Report is available at:
http://bankrupt.com/misc/friedman_report.pdf
The Johns Hopkins Study
Dr. Friedman's findings and conclusions have now been confirmed by
a recent independent, controlled, peer-reviewed report performed
by a team at Johns Hopkins Medical Institutions, which found
massive overreadings of non-malignant asbestosis in a sample of
492 X-rays evaluated in the first instance by doctors retained by
plaintiffs' attorneys. The study is entitled "Comparison of 'B'
Readers Interpretation of Chest Radiographs For Asbestos Related
Changes by Joseph N. Gitlin, et al."
The Johns Hopkins study engaged seven B-readers, one of whom was
unable to finish participation in the study and was replaced. The
study reviewed 492 X-rays previously read by B-readers retained by
plaintiffs' lawyers, of which 478 were deemed of readable quality.
The panel of B-readers were "'blinded' as to the identities of the
study sponsors, the possible litigants, the previous or initial
readers, and the individuals whose examinations they interpreted."
Whereas the plaintiffs' readers had interpreted 96% of the chest
X-rays deemed readable by the Hopkins panel as consistent with
asbestosis, the Johns Hopkins researchers found only 4.5% of the
same set of cases positive. A Johns Hopkins researcher was 159
times more likely to conclude that an X-ray was negative than a B-
reader retained in litigation operating under the economic
incentives.
Based on a statistical analysis, the Johns Hopkins study
determined that there was a probability of less than 1 in 10,000
"that the differences noted between initial and consultant readers
are due to chance alone."
A free copy of the Johns Hopkins study is available at:
http://bankrupt.com/misc/chest_radiographic_interpretations_and_asbestos.pdf
In view of Dr. Friedman's recommendations, the Debtors'
concealment of the expert's reports for more than two years, and
the Asbestos Claimants Committee's recent attack on the Johns
Hopkins study as being too small and not sufficiently
representative or random, CSFB, as agent for the Debtors' bank
lenders, asks Judge Fullam to:
(a) set up procedures (i) for the prompt production of a
random sampling of Medical Records, including X-rays, from
asbestos personal injury claimants who have claims
alleging non-malignant asbestos personal injuries against
Owens Corning, as well as (ii) to establish a document
depository for inspection by experts retained by CSFB; and
(b) modify the Scheduling Order dated August 19, 2004,
regarding claims estimation issues, to allow the Bank
lenders sufficient time to conduct their own study. The
modification is necessary for the Banks to prepare their
case in light of the recent disclosure of the Friedman,
Vasquez and Mayer Reports that the Debtors concealed, as
well as the recent Johns Hopkins study. The Banks seek
adjournment and modification of the January 13, 2005,
estimation trial date.
To implement Dr. Friedman's recommendations, CSFB propose to adopt
these procedures:
(1) NERA Economic Consulting, the Banks' consultant, will
immediately generate a random sample of Owens Corning
claimants from Owens Corning's claims database. CSFB will
serve the random sample on all parties. The Random Sample
will be large enough to generate the Medical Records of
1,000 current claimants even assuming that not all
claimants respond or provide X-rays. Any party objecting
to the Random Sample will file and serve the objections
within three business days of the service of the Random
Sample;
(2) A depository for the X-rays and other Medical Records will
be established by CSFB that "will maintain the chain of
custody, physical condition and confidentiality of the
X-rays and other Medical Records consistent with the
Health Insurance Portability and Accountability Act of
1996";
(3) All claimants listed on the Random Sample must produce to
the depository:
(a) all original X-ray films and Computer Tomography scans
and records;
(b) all records of pulmonary function tests;
(c) all reports generated in connection with the H
readings of any X-rays;
(d) all medical histories or reports relating to the
claimants' alleged asbestos-related disease or
impairment from any medical doctor; and
(e) any records of hospitalization or treatment relating
to any alleged asbestos-related disease or impairment.
The production will be made within 30 days of resolution
of any objections to the Random Sample. The Medical
Records in the depository will be available for review and
analysis by experts retained by the parties who have
signed a depository procedures and confidentiality
agreement;
(5) CSFB will conduct a study of the Medical Records, which
will be completed no later than 100 days after the
deadline for submission of Medical Records to the
Depository;
(6) Experts retained by the parties may issue supplemental
expert reports with respect to the Study within 20 days of
the completion of the Study;
(7) Each expert issuing a report will make him or herself
available for deposition within 15 days after the issuance
of his or her supplemental report; and
(8) A hearing for estimation of claims be held starting 20
days after completion of expert depositions.
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.
85 Bankruptcy Creditors' Service, Inc., 215/945-7000)
PARMALAT: Citigroup Challenges Italian Government on Restructuring
------------------------------------------------------------------
Citigroup (NYSE:C) has initiated a legal challenge against the
Italian governmental authorities responsible for the Parmalat
restructuring, arguing that the proposed restructuring, as
approved by the authorities, violates the rights of Citigroup and
other creditors and investors.
In proceedings commenced Friday in the Administrative Court of
Lazio in Italy, Citigroup argues that the Ministry of Productive
Activities and the Ministry of Agriculture and Forestry -- which
have oversight of the Parmalat Extraordinary Commissioner -- have
failed to ensure a fair process for considering claims.
The Extraordinary Commissioner, who is a government official
appointed by the Minister of Productive Activities, has
recommended the rejection of substantially all of Citigroup's
legitimate claims with only EUR 2,015,441.88 worth of Citigroup's
EUR 538,680,996.69 in claims recognized on the provisional list of
admitted creditors published by the Extraordinary Commissioner on
August 10, 2004. A similar approach has been adopted towards other
financial institutions.
William J. Mills, CEO of Citigroup's Global Corporate and
Investment Bank for Europe, Middle East and Africa, commented:
"The law requires that all creditors be treated equally during
bankruptcy proceedings, and instead the rights of creditors have
been trampled upon repeatedly. We believe that the plan, as
approved, does not respect this fundamental principle and
therefore undermines the goal of the administration and creates
unnecessary legal and financial risk for New Parmalat."
Mr. Mills added: "No one has come forward with any evidence of
wrongdoing by Citigroup, or with any indication that Citigroup was
aware of Parmalat's massive and sustained fraud. The proposed
rejection of our claims in the Parmalat bankruptcy is unfair,
entirely without basis and in our view contrary to the law. As
Parmalat's largest creditor and a victim of this fraud, Citigroup
will pursue all opportunities for appropriate redress of its
losses."
The Italian government supervised restructuring process provides
that only the admitted creditors will be entitled to vote the
restructuring plan and thereafter become shareholders of "New
Parmalat." Citigroup believes that the effect of the decisions of
the Ministries and the Extraordinary Commissioner (whom they are
responsible for supervising), if upheld, would be to expropriate
Citigroup's rights as the largest single creditor of Parmalat,
thus depriving it of its right to become, at the time the
restructuring is implemented, a significant shareholder of "New
Parmalat."
Citigroup (NYSE:C), the pre-eminent global financial services
company has some 200 million customer accounts and does business
in more than 100 countries, providing consumers, corporations,
governments and institutions with a broad range of financial
products and services, including consumer banking and credit,
corporate and investment banking, insurance, securities brokerage,
and asset management. Major brand names under Citigroup's
trademark red umbrella include Citibank, CitiFinancial, Primerica,
Smith Barney, Banamex, and Travelers Life and Annuity.
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: Wants to Continue Litigating Beyer State Court Suit
-----------------------------------------------------------------
On February 19, 2004, Parmalat USA Corporation and Farmland
Dairies, LLC, filed a lawsuit against Beyer Farms, Inc., Henry
Beyer and Michael Beyer before the Supreme Court of the State of
New York in and for the County of New York. The U.S. Debtors seek
to recover:
(i) a $1,493,141 unpaid balance due, plus interest, for
goods and services provided to Beyer Farms between
January 20, 2000, and November 29, 2003, pursuant to a
Supply Agreement dated December 1, 1998, entered into
by Beyer Farms and Sunnydale Farms, Inc., Farmland's
predecessor-in-interest; and
(ii) a $40,000 unpaid balance for milk, milk products and
other merchandise sold at an agreed upon price
commencing on September 4, 1999, through December 4,
1999, for which Henry and Michael Beyer jointly and
severally guaranteed payment pursuant to a guarantee
dated January 20, 2000.
Beyer Farms denies owing the Outstanding Amounts. Instead, Beyer
Farms asserted several counterclaims against Farmland totaling
$1,667,000. Beyer Farms alleges that:
-- it is due a credit not less than $337,700 for purchased
milk and Milk Products;
-- Farmland or Parmalat USA breached a December 2003
agreement to issue Beyer Farms a certain milk and milk
product wholesale distribution route having a fair market
value of not less than $300,000, in consideration of
substantial commercial damages caused to Beyer Farms'
business by Parmalat USA or its distributor; and
-- Parmalat USA owes Beyer Farms $1,000,000 as a result of
Beyer Farms' arrangement for Parmalat USA to become the
Processor for Dean Foods, Inc., and to supply Beyer Farms
and Tuscan/Lehigh Dairies, Inc., with milk and milk
products.
The automatic stay imposed by Section 362 of the Bankruptcy Code
prohibits Beyer Farms from asserting the Counterclaims against the
U.S. Debtors, and any other continued prosecution and defense of
the State Court Action.
In a stipulation, the U.S. Debtors and Beyer Farms agree that the
automatic stay will be modified solely to permit the parties to
litigate the State Court Action and to take actions necessary or
appropriate to exercise their rights of appeal, until the rights
have been exhausted. Beyer Farms, however, is barred from
enforcing or executing upon any settlement or judgment in its
favor entered by a court of competent jurisdiction.
Beyer Farms is entitled to set off or recoup any amounts relating
to the judgment entered in its favor with respect to the
Counterclaims against amounts relating to judgment entered in
favor of the U.S. Debtors.
The automatic stay will remain in effect for all other purposes.
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)
PARMALAT USA: Milk Products Gets Court Nod to Ink Escrow Agreement
------------------------------------------------------------------
Corollary to the sale of the business of Milk Products of Alabama,
a Parmalat USA Corporation and its debtor-affiliate, to Dean Foods
Company, Judge Drain of the U.S. Bankruptcy Court for the Southern
District of New York authorizes Milk Products to:
-- enter into an escrow agreement with Products, Citibank,
N.A., London Branch, and The Bank of New York, as escrow
agent; and
-- deposit a portion of the proceeds of the sale into escrow.
The Sale Escrow will be equal to the aggregate unpaid amount of
all accounts receivables Citibank purchased from Milk Products
under the Parmalat Receivables Purchase Agreement that are
outstanding as of the closing of the Sale.
Milk Products' accounts receivables are excluded from the Sale.
Bank of New York will hold and administer the deposited funds and
any income earned on the funds. Bank of New York will pay and
distribute the amounts it holds in accordance with the Agreement.
Milk Products and Citibank agree that for tax reporting purposes,
and for any tax year, all interest or other income earned from the
investment of the Escrow Amount will be allocable solely to Milk
Products to the extent permitted by applicable law.
As Escrow Agent, Bank of New York will charge a $2,500 one-time
acceptance fee payable at the time of the closing of the
Agreement. Bank of New York will also be paid a $6,000 annual
administrative fee to cover the duties and responsibilities
related to account administration and servicing. The annual
administrative fee is payable in advance for the year and will not
be prorated.
Bank of New York will also receive compensation with respect to
investments in money market mutual funds, disbursement fee,
counsel fees and other miscellaneous fees. It will also be
entitled to reimbursement of expenses.
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. 33; Bankruptcy Creditors'
Service, Inc., 215/945-7000)
PMA CAPITAL: Moody's Rates Sr. Secured Convertible Debt at B3
-------------------------------------------------------------
Moody's Investors Service assigned a B3 rating to PMA Capital
Corporation's $86.25 million of 7.5% Senior Secured Convertible
Debentures that it offered to exchange for its currently
outstanding 4.25% Senior Convertible Debentures. In the same
rating action, Moody's affirmed PMA Capital's long-term debt
ratings (senior unsecured debt at B3). Moody's rates PMA Capital
Insurance Company B1 and The PMA Insurance Group companies Ba1,
for insurance financial strength, respectively. The outlook for
the ratings is developing.
The New Convertible Debentures will be secured equally and ratably
with PMA Capital's outstanding 8.5% Monthly Income Senior Notes
due 2018 by a first lien on 20% of the capital stock of PMA
Capital's operating subsidiaries. While this provision
effectively subordinates any unexchanged Old Convertible
Debentures in right of payment relative to the New Convertible
Debentures and the 2018 Notes, Moody's stated that it did not
warrant a notching differential between these instruments because
a claim on 20% of the equity of regulated insurance companies does
not significantly improve recovery values.
Moody's stated that the extension of the put date on the New
Convertible Debentures Notes to June 2009 from September 2006 on
the Old Convertible Debentures gives PMA Capital additional
financial flexibility. During 2004, PMA Capital may receive up to
$23.2 million in dividends from the PMA Insurance companies
without prior regulatory approval. Moody's estimates that PMA
Capital now has unrestricted dividend capacity coverage of
interest and fixed charges (interest payments and holding company
expenses) of approximately 2.1 and 1.2 times, respectively.
The Ba1 insurance financial strength ratings of the PMA Insurance
companies reflect Moody's concerns about the erosion in its
written premiums as well as the potential for adverse loss reserve
development. Renewal rates at PMA Insurance, which primarily
writes workers' compensation and integrated disability coverages,
have been approximately 60% (compared to historic norms of about
80%), with 2Q2004 NPW falling approximately 31% compared to
2Q2003, as some credit-sensitive business has migrated toward more
highly rated carriers. Approximately 85% of PMA Insurance's
business is produced by independent agents and brokers. These
distributors typically have minimum financial security thresholds
in order to place business or require a waiver from the customer
if these thresholds are not met. Moody's views PMA Insurance's
ability to maintain its franchise by retaining and producing
adequately-priced business to be a key rating consideration going
forward.
With respect to PMA Re, the company's surplus position has
increased by $61 million since it was placed into run-off, and
stood at $236 million as of June 30, 2004. The holding company
has purchased an adverse development reinsurance cover for PMA Re,
which also includes business written by Caliber One, PMA Capital's
excess and surplus lines business that was placed into run-off in
2002. To the extent the run-off of PMA Re's liabilities is
manageable and does not exhaust the adverse development cover,
there should be sufficient policyholder surplus (and, importantly,
unassigned surplus) at PMA Re to upstream dividends to the holding
company to repurchase the New Convertible Debentures between 2006
and 2009.
The rating agency stated that the developing outlook on PMA
Capital and its subsidiaries reflects the potential for either
positive or negative rating pressure over the next 12 to 18
months. Specifically, the continued orderly run-off of PMA Re's
liabilities and a stabilization of the PMA Insurance business
operations could place positive pressure on the group's ratings.
Conversely, significant adverse loss reserve development at either
PMA Re or PMA Insurance could negatively impact the ratings.
This rating has been assigned with a developing outlook:
* PMA Capital Corporation
-- $86.25 million Senior Secured Convertible Debentures due
2022 at B3;
These ratings have been affirmed with developing outlooks:
* PMA Capital Corporation
-- senior unsecured debt at B3,
-- prospective senior unsecured debt at (P)B3,
-- prospective subordinated debt at (P)Caa2, and
-- prospective preferred stock at (P)Caa3;
* PMA Capital Trust I
-- prospective preferred securities at (P)Caa2; and
* PMA Capital Trust II
-- prospective preferred securities at (P)Caa2.
PMA Capital, headquartered in Philadelphia, Pennsylvania, is an
insurance holding company whose operating subsidiaries provide
specialty risk management products and services to its customers
in the United States. As of June 30, 2004, PMA Capital had
shareholders' equity of $444 million.
Moody's insurance financial strength ratings are opinions of the
ability of insurance companies to punctually repay senior
policyholder claims and obligations.
PRIME HOSPITALITY: Completes Merger with Blackstone Affiliate
-------------------------------------------------------------
Prime Hospitality Corp. (NYSE: PDQ) has completed its merger with
an affiliate of The Blackstone Group. Under the terms of the
merger agreement, the Company's stockholders will receive
$12.25 per share in cash, without interest.
The Company also announced that as of 8:00 A.M. New York City Time
on Friday, Oct. 8, 2004, the expiration time of the tender offer,
approximately $173,183,000 aggregate principal amount of the
Company's 8-3/8% Senior Subordinated Notes due 2012, constituting
approximately 96.9% of the Notes, had been tendered and not
withdrawn in connection with the previously announced cash tender
offer for the Notes. All Notes validly tendered and not withdrawn
in the offer have been accepted for payment. In addition, the
Company announced that in connection with the receipt of the
requisite consents to the proposed amendments, the First
Supplemental Indenture governing the Notes has been executed and
the amendments are operative.
About The Blackstone Group
The Blackstone Group, a private investment firm with offices in
New York, London and Hamburg, was founded in 1985. Blackstone's
Real Estate Group has raised five funds, representing over $6
billion in total equity, and has a long track record of investing
in hotels and other commercial properties. In addition to Real
Estate, The Blackstone Group's core businesses include, Private
Equity, Corporate Debt Investing, Marketable Alternative Asset
Management, Mergers and Acquisitions Advisory, and Restructuring
and Reorganization Advisory. The Blackstone Group can be accessed
on the Internet at http://www.blackstone.com
About Prime Hospitality Corp.
Prime Hospitality Corp., one of the nation's premiere lodging
companies, owns, manages, develops and franchises more than 250
hotels throughout North America. The Company owns and operates
three proprietary brands, AmeriSuites(R) (all suites), PRIME
Hotels & Resorts(R) (full-service) and Wellesley Inns & Suites(R)
(limited service). Also within Prime's portfolio are owned and/or
managed hotels operated under franchise agreements with national
hotel chains including Hilton, Sheraton, Hampton, and Holiday Inn.
Prime can be accessed over the Internet at
http://www.primehospitality.com/
* * *
As reported in the Troubled Company Reporter on August 23, 2004,
Standard & Poor's Ratings Services placed its 'BB-' corporate
credit and 'B' subordinated debt ratings on Prime Hospitality,
Corp., on CreditWatch with negative implications.
Fairfield, New Jersey-based hotel operator had about $223 million
of debt outstanding at the end of June 2004.
"The CreditWatch listing reflects the planned acquisition of Prime
by affiliates of The Blackstone Group for $12.25 per share, or a
total value of more than $790 million including debt," said
Standard & Poor's credit analyst Sherry Cai. The transaction is
expected to close in the fourth quarter of 2004, subject to
shareholder approval and other customary conditions.
ROANOKE TECHNOLOGY: Inks $13.3 Million Equity Financing Deal
------------------------------------------------------------
Roanoke Technology Corp. (OTC Bulletin Board: RNKE) has received a
$13.3 million financial commitment from Cornell Capital Partners,
L.P.
Pursuant to the terms of the funding agreements with Cornell
Capital Partners, L.P., a New Jersey-based domestic investment
fund, RNKE has obtained $1,300,000 in Convertible Securities and a
firm commitment of $12,000,000 under a Standby Equity Distribution
Agreement. RNKE may, at its discretion, issue shares to Cornell at
any time over the next two years. The maximum aggregate amount of
the equity placements pursuant to the agreement is $12 million.
Subject to this limitation, RNKE may draw down up to $500,000 per
week. The facility may be used in whole or in part entirely at
RNKE's discretion, subject to an effective registration.
"This recent round of financing and our developing relationship
with Cornell Capital is a milestone for our Company," said RNKE
C.E.O. David Smith. "They've recently helped restructure our debt
and this new funding instrument will provide us additional working
capital."
"We are eager to assist Roanoke Technology Corp. in meeting its
ongoing financing needs and we look forward to a long-term
relationship with the company," said Walter Bukowski, Vice
President of Cornell Capital.
About Cornell Capital
Based in Jersey City, New Jersey, Cornell Capital Partners, L.P.
began operations in January 2001 to address the financing needs of
publicly traded companies. Since then, Cornell Capital has
successfully financed numerous public companies.
About Roanoke Technology Corp.
Roanoke Technology Corp. was incorporated December 11, 1997 as
Suffield Technologies Corp., its original name, under the laws of
the State of Florida. The Company is headquartered in Rocky Mount,
North Carolina and does business as Top-10 Promotions, Inc. The
Company is engaged in the design, development, production, and
marketing of technology to provide enhanced internet marketing
capabilities. For additional information about Roanoke Technology
Corp., visit http://www.roanoketechnology.com/
* * *
As reported in the Troubled Company Reporter's May 3, 2004
edition, Roanoke Technology Corporation has suffered losses from
operations and may require additional capital to continue as a
going concern as the Company develops its new markets.
Management believes the Company will continue as a going concern
in its current market and is actively marketing its services which
would enable the Company to meet its obligations and provide
additional funds for continued new service development. In
addition, management is currently negotiating several additional
contracts for its services. Management is also embarking on other
strategic initiatives to expand its business opportunities.
However, there can be no assurance these activities will be
successful. There is also uncertainty with regard to managements
projected revenue being in excess of its operating expenditures
for the fiscal year ending October 31, 2004.
Items of uncertainty include the Company's liabilities with regard
to its payroll tax liability in excess of $700,000 and its Small
Business Administration loan with a principal balance of $270,807
plus accrued interest. The Company has been in default of these
liabilities and has had negotiations regarding resolution of these
matters. The outcome of these negotiations was uncertain as of
October 31, 2003. If the Company is not successful in these
negotiations or payment, there is substantial doubt as to the
ability of the Company to continue as a going concern.
On December 25, 2003 the Company negotiated an installment
agreement with the Internal Revenue Service with regard to its
payroll tax liability. The agreement calls for payments of $5,000
per month for 48 months with a balloon payment for the balance
owed at the end of that period. The Company's President, Dave
Smith, signed for personal liability of the Trust Fund portion in
the amount of $321,840 plus penalties and interest should the
Company default on these payments. Should the Company default on
these payments and any other current tax compliance, the Company's
property can be taken to satisfy the liability.
During the year ended October 31, 2003, the Company often remained
current with its monthly payment for its Small Business
Administration loan. Of the $270,807 balance owed, the Company has
a past due balance of $131,150. The lender holds the Company's
furniture and equipment as collateral for this loan.
ROWECOM INC.: Judge Feeney Approves Debtors' Disclosure Statement
-----------------------------------------------------------------
The Honorable Joan Feeney of the U.S. Bankruptcy Court for the
District of Massachusetts, Eastern Division, approved the
disclosure statement prepared by RoweCom, Inc., and its debtor-
affiliates, to explain their plan of liquidation. With an
approved disclosure statement in hand, the Debtors will now ask
their creditors to vote to accept or reject the plan. A favorable
vote will pave the way for confirmation of the plan at a hearing
on Nov. 23, 2004. Objections, if any, to confirmation of the plan
must be filed and served by Nov. 16.
The Liquidating Plan proposes to pay all administrative priority
claims, secured claims and unsecured priority claims in full. The
Plan projects general unsecured creditors will recover between 16%
and 28% of what they're owed. RoweCom will collect approximately
27% of an allowed unsecured claim for $50,808,071 under divine,
Inc.'s chapter 11 plan. No distributions flow to RoweCom's equity
holders under the Plan.
Rowecom, Inc., offered content sources and innovative technologies
and provides information specialists, particularly in the library,
with complete solutions serving all their information needs, in
print or electronic format. The Company, together with six of its
affiliates, filed for chapter 11 protection on January 27, 2003
(Bankr. Mass. Case No. 03-10668). Stephen E. Garcia, Esq., Mindy
D. Cohn, Esq., at Kaye Scholer LLC and Jeffrey D. Sternklar, Esq.,
Jennifer L. Hertz, Esq., at Duane Morris, LLP represent the
Debtors in their restructuring efforts. When the Company filed for
protection from its creditors, it listed estimated assets and
debts of over $50 million each.
ROYAL OLYMPIC: Limits Greek Stops Following Stay Violation
----------------------------------------------------------
Royal Olympic Cruise Lines (OTC: ROCLF), which is currently
operating two cruise ships, Triton and World Renaissance, under
the protection of Article 45 of law 1892/1990 on the basis of
decisions of the Greek courts, is altering the sailing itineraries
of the ships, effective immediately and until further notice, to
limit the vessels to Greek destinations.
This decision followed the arrest of the ships by a creditor in
Turkish ports on Sunday, Oct. 3rd, from which they were released
the next day. The arrest was a result of the failure of the
Turkish court to respect the stay issued in the Greek Article 45
proceeding. ROCL is taking all necessary steps to overcome this
difficulty in the future, but in the meantime will alter its
itineraries as indicated.
Discussions with creditors and lenders are continuing, as well as
efforts to clear the legal issue in Turkey to conform with
European laws. The above are serious material issues for the
company. The company continues to seek capital needed to continue
operations, but the inability to maintain the protection of the
Greek court outside the European Union, if not resolved, is
expected to increase the difficulty of arranging an organized
financial restructuring.
Management is committed to completing its fall schedule with as
little alteration as possible and appreciates the continued
support of its clients and creditors.
As reported in the Troubled Company Reporter on Sept. 2, 2004, the
Greek Court administrating the Section 45 proceeding regarding
Royal Olympic Cruise Lines' subsidiaries has issued a decision to
extend the period of time for the company to present a
restructuring plan consented to by 51% of its creditors until
Nov. 27, 2004.
Royal Olympic Cruise Lines is currently operating two cruise ships
under the protection of Article 45 of the Greek Courts.
Discussions with creditors and lenders continue and the company
continues to seek capital needed to continue operations of the
company.
* * *
As reported in the Troubled Company Reporter on June 18, 2004,
Royal Olympic Cruise Lines said it would miss the filing deadline
for its Annual Report on Form 20-F for the fiscal year ended
November 30, 2003. The company had previously filed for a 15 day
extension of the original filing date of June 1.
The extension request and current delay are brought about due to
the more complicated accounting and finance position stemming from
the ongoing Article 45 process in Greece involving the Company's
subsidiaries.
As previously announced, the Company had applied for listing on
the Nasdaq SmallCap market after failing to meet the criteria for
continued listing on the Nasdaq National Market. Delisting from
the Nasdaq National Market had been delayed during the pendency of
the Company's application to the Small Cap Market. It is expected
that Nasdaq will now reinstitute delisting procedures due to the
Company's failure to file its 20F on time.
SPIEGEL INC: Settlement Pact Resolves IBM Credit Claims
-------------------------------------------------------
Spiegel, Inc., scheduled IBM Corporation and IBM Credit, LLC, as
having a $983,702 general unsecured non-priority claim on its
Schedules of Assets and Liabilities. In addition, Eddie Bauer,
Inc., scheduled the IBM Entities as having a $129,377 general
unsecured non-priority claim, while Spiegel Group Teleservices,
Inc., scheduled that the IBM Entities have a claim for $345.
On July 10, 2003, IBM Credit filed Claim No. 315 against Spiegel
for $278,318. On September 19, 2003, IBM Corp. filed Claim No.
1776 against Spiegel for $470,670. The IBM Entities have not
filed a proof of claim against any other Debtor.
The Debtors have reviewed their books and records and found that
the IBM Entities have general unsecured non-priority claims
against:
* Spiegel for $417,281;
* Eddie Bauer for $25,528;
* Eddie Bauer-Canada for $35,347; and
* Spiegel Group Teleservices for $182.
The Debtors also found out that there exists a prepetition
credit in favor of Ultimate Outlet, Inc., against the IBM
Entities equal to $18,607.
The Debtors and the IBM Entities have engaged in good-faith
discussions to resolve the IBM claims. The parties agree that:
(a) IBM Credit is deemed to have allowed general unsecured
non-priority claims against Spiegel and Eddie Bauer for
$9,927 and $8,011, and no other claims against the
Debtors;
(b) IBM Corp. is deemed to have allowed general unsecured non-
priority claims against:
-- Spiegel for $388,747;
-- Eddie Bauer for $17,517;
-- Eddie Bauer-Canada for $35,346; and
-- Spiegel Group Teleservices for $182; and
(c) The Stipulation will constitute a valid withdrawal of the
Proofs of Claim and the withdrawal will be with prejudice.
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)
STELCO INC: Majority of Steelworkers Plan to Strike at AltaSteel
----------------------------------------------------------------
Members of the United Steelworkers voted over 82 per cent to
strike if necessary at Stelco-owned AltaSteel.
The vote was completed late Friday with a turnout of 197 out of
270 eligible voters.
The AltaSteel vote follows a 90-day notice of strike action by the
1,000 Steelworkers at Stelco's Lake Erie works in Nanticoke,
Ontario.
The Union and AltaSteel have been without a contract since July
31st, when the previous contract expired; subsequent negotiations
on a new contract have broken down over proposed changes in
pension plans. The proposed changes would keep existing unionized
employees on their current defined benefits plan, and place
unionized employees hired in future into a defined contribution
plan very similar to one already in place for the company's
professional and managerial salaried employees.
The key issue at the Edmonton steel bar facility is the workers'
pension plan, which the company wants to weaken.
Earlier on Friday, Stelco issued a release blaming the union for
the non-renewal of a supply contract with General Motors.
"While union lawyers and representatives were trying to work out
an agreement with the company, (Stelco Pres. Courtney) Pratt's
hired help withheld information from the union about customer
contracts and instead issued a provocative press release aimed at
intimidating the union and its members," said a statement by the
Steelworkers' Local 8782.
Stelco Inc. announced that one of its largest customers has served
notice that it will remove its business from the Company for 2005
unless it receives assurances of Stelco's ability to provide
security of supply through the coming year.
In a letter received on October 7, the customer cited the
uncertainty of supply caused by USWA Local 8782's issuance of 90
days notice of a potential strike at the Company's Lake Erie
facility. The letter stated that, even though the customer has
reached agreement with Stelco on the pricing terms for a 2005
contract, it is concerned about the possibility of a strike during
that period.
As a result, the customer indicated that it cannot enter into a
2005 contract with the Company unless it receives assurances soon
that Stelco will be able to perform throughout the term of the
proposed agreement.
Courtney Pratt, Stelco's President and Chief Executive Officer,
said, "This is an extremely serious development, one that has
significant consequences for Stelco's employees, retirees, other
stakeholders and the communities in which we operate.
"We've indicated for months that our customers needed and wanted
assurance as to security of supply. The 90 days written notice
provision was an essential part of the June 23rd Agreement in
which the Company and the USWA Locals, including Local 8782,
established a framework for discussions on collective bargaining,
restructuring and other issues. Local 8782 rendered this key
customer protection provision irrelevant last Friday when it
provided 90 days notice of a potential strike.
"We continue to do everything we can to preserve the interests and
address the concerns of our customers. We are reviewing our
options, working with customers, and pursuing solutions with Local
8782. "Last week I expressed the hope that the Local would keep
in mind the legitimate interests of all stakeholders in light of
its actions. We are now face-to-face with the consequences of the
issuance of the 90 days strike notice. I again urge the Local to
work with us to retain the business of our key customers. If we
cannot provide this important customer with the assurance it seeks
in the coming days, it may seriously jeopardize our business."
"We are obviously disappointed by the results of the vote," said
Peter Ouellette, President and CEO of AltaSteel. "We believe that
our final offer was very generous, since it moves our current
employees to the forefront of pension benefits in the country."
Ouellette also expressed grave concern about the uncertainty that
the vote now brings to plant operations. "We cannot run a
business this way," he said, referring to the fact that the Union
can now shut down the business at any time, with 72 hours notice.
"Our customers and suppliers require confidence that we will
continue to make and sell steel. They don't get that if the Union
stands ready to pull the plug at any moment."
About AltaSteel
AltaSteel is a steelmaking mini-mill operation situated in the
County of Strathcona. The facility produces over 300,000 tons of
steel per year, employs 350 people and has revenues in excess of
$100 million a year. AltaSteel supplies grinding media to the
mining industry throughout North America, and finished and semi-
finished bar products to the manufacturing, oil, construction, and
steel service industries. AltaSteel is a wholly owned subsidiary
of Stelco Inc.
About Stelco
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 $2.7 billion.
STELCO INC: Hires UBS Securities as Investment Banking Consultant
-----------------------------------------------------------------
Stelco, Inc., (TSX:STE) released the details of its arrangements
with UBS Securities Canada, Inc., and its affiliates to provide
investment banking services to the Company as part of its
restructuring efforts.
The hiring of UBS in August followed an intense review of
financial advisors capable of providing the investment banking
services required by the Company. Under its engagement UBS is
responsible for advising and assisting the Company in respect of
all of the financial aspects of its restructuring including
finding sources of capital to fund Stelco's critical capital
expenditures, which are fundamental to its successful
restructuring.
UBS responsibilities include:
(1) preparing the necessary offering documents,
(2) coordinating due diligence, and
(3) analyzing, structuring and negotiating the financial
aspects of any such transaction.
The engagement contemplates various types of financing solutions
such as an equity rights offering to creditors, private equity
investment or asset or share sales. Fee arrangements with UBS
include a contingent capital markets advisory fee of US$ 3 million
payable in the event that Stelco successfully implements a plan of
arrangement under the Companies' Creditors Arrangement Act.
Monthly work fees payable to UBS are partially creditable against
such capital markets advisory fee in the event it becomes payable.
Monthly work fees are also partially creditable against
transaction fees if any are earned by UBS under the engagement.
The capital markets advisory fee itself is also creditable in part
against transaction fees.
Hap Stephen, Stelco's Chief Restructuring Officer, commenting on
the arrangements with UBS, said, "We conducted a detailed review
of options with various investment banking firms and concluded
that UBS had both the strong credentials and steel company
experience that would be valuable to Stelco.
With respect to fees, we would expect the financing to be centred
on one of an equity rights offering to creditors, a private equity
investment or a sale of the Company. A sale of one or more
subsidiaries is also likely to occur as well. If an equity rights
offering to creditors is the method used to finance the
restructuring, the fees will be limited to the fixed capital
markets advisory fee reduced by a portion of the monthly work
fees. Private equity carries a 2% fee. A sale of the Company or
its subsidiaries is based on a sliding scale in accordance with
industry norms."
The Company repeated its previous statement that it has not
indicated a preferred transaction or a preferred outcome resulting
from this process.
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.
TRANSTECHNOLOGY CORP: To Appeal NYSE Delisting Determination
------------------------------------------------------------
TransTechnology Corporation (NYSE:TT) intends to appeal a
determination by the New York Stock Exchange, announced earlier
Friday, that its common stock - ticker symbol TT - should be
delisted from the NYSE. Under NYSE procedures, a listed company
has the right to a review of an NYSE delisting determination by a
Committee of the Board of Directors of the NYSE. It is the current
intention of the Company to avail itself of this right of review
and appeal the NYSE's decision. A request for review must be filed
in writing within 10 business days after receiving the notice from
the NYSE and the review is scheduled not less than 25 business
days after the request is filed. It is the Company's understanding
that a suspension date will be announced if the subsequent review
of the delisting determination by the Committee finds that the
Company should be suspended. It is also the Company's
understanding that its common stock will continue to be listed
pending the announcement of a suspension date, subject to certain
conditions. The NYSE has indicated that it may, at any time,
suspend a security if it believes that continued dealings in the
security on the NYSE are not advisable.
As previously announced, the NYSE had accepted a plan provided by
the Company that would have brought the Company into conformity
with the NYSE's continued listing standards. However, the Company
was unable to demonstrate compliance by the expiration of the 18-
month plan period.
About the Company
TransTechnology Corporation -- http://www.transtechnology.com/--
operating as Breeze-Eastern -- http://www.breeze-eastern.com/--
is the world's leading designer and manufacturer of sophisticated
lifting devices for military and civilian aircraft, including
rescue hoists, cargo hooks and weapons-lifting systems. The
company, which employs approximately 180 people at its facility in
Union, New Jersey, reported sales of $64.6 million in the fiscal
year ended March 31, 2004.
At June 27, 2004, TransTechnology Corporation's balance sheet
shows a stockholders' deficit of $4,353,000 compared to a deficit
of $3,787,000 at March 31, 2004.
UAL CORP: Court Denies IFS Appointment as Pension Plan Fiduciary
----------------------------------------------------------------
The United States Bankruptcy Court for the Northern District of
Illinois denied UAL Corporation and its debtor-affiliates' request
for the appointment of Independent Fiduciary Services, Inc., as
Pension Plan fiduciary under a Fiduciary Services Agreement
entered by the Debtors and IFS on Sept. 3, 2004.
The Fiduciary Services Agreement, outlined these powers and
duties:
(1) IFS, with the concurrence of Labor Department, is
appointed independent fiduciary of the Plans;
(2) IFS will review the Plans' funding policies and make
recommendations to the Board;
(3) IFS will investigate and analyze and pursue or assert any
claims, obligations, debts or liabilities owing to the
Plans connected with the funding or contribution
provisions of the Plans;
(4) IFS will take appropriate action including initiation of
litigation for breaches of fiduciary duty;
(5) The Debtors will pay IFS $175,000 for its services for the
first three months and $50,000 for each month thereafter;
(6) IFS will be entitled to reimbursement for reasonable
out-of-pocket costs;
(7) IFS will maintain a $10,000,000 fiduciary liability
insurance;
(8) The Debtors will indemnify, defend, reimburse and hold IFS
harmless against any losses or other claims for services
performed, other than losses arising from gross
negligence, willful or intentional misconduct or criminal
conduct; and
(9) The Agreement may be terminated with 60 days' notice.
Objections
As reported in the Troubled Company Reporter on Sept. 23, 2004,
Ira Bodenstein, the United States Trustee for Region 11, does not
object to the appointment of an independent fiduciary and does
not question the Debtors' business judgment that Independent
Fiduciary Services is qualified to act in that capacity.
However, the U.S. Trustee does not want the Bankruptcy Court to
enter "a comfort order." Mr. Bodenstein says that the
appointment of an independent fiduciary is within the ordinary
course of business, so no order is necessary or appropriate. The
U.S. Trustee asks the Court to deny the Debtors' request as
unnecessary.
The International Association of Machinists does not object to the
appointment of an independent fiduciary. However, the IAM
objects to the proposed agreement between the Debtors and IFS.
This Agreement, when placed alongside the Department of Labor
Agreement, inconsistently restricts IFS' duties and obligations
to the potential detriment of the IAM member plan beneficiaries.
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)
UAL CORP: Asks Court to Approve Settlement with MyPoints.com
------------------------------------------------------------
UAL Corporation and its debtor-affiliates ask the Court for
authorization to enter a Settlement Agreement and Mutual Release
with MyPoints.com, Inc., MyPoints Offline Services, Inc., and
certain obligors under the notes with MyPoints Offline Services.
Debtor MyPoints Offline Services holds three outstanding
promissory Notes that are in dispute. The first Note for
$100,000, dated March 4, 1997, was executed by FC Associates,
LLC. The second Note for $862,500, dated September 11, 1998, was
executed by David Fialkow. The third Note for $862,500, also
issued on September 11, 1998, was executed by Joel Cutler.
On January 12, 2000, Debtor MyPoints.com acquired the outstanding
shares of MyPoints Offline Services for $16,700,000. Under the
acquisition, MyPoints.com was to register the new shares "as soon
as practicable" on a Form S-3 under the Securities Act of 1933.
In September 2000, MyPoints.com filed the Form S-3 covering the
shares. However, the Obligors under the notes contend that
MyPoints.com failed to file the Form S-3 in a timely fashion.
The Obligors allege that this delay caused a drop in
MyPoints.com's share price that hit them with $1,200,000 in
losses. Due to the alleged monetary loss, the Obligors have
refused to repay the Notes as due.
The Debtors and the Obligors engaged in negotiations to settle
this dispute, which resulted in the Settlement Agreement.
Pursuant to the Agreement, the Obligors will pay MyPoints.com
$925,000 in full satisfaction of the Notes. In return,
MyPoints.com and MyPoints Offline Services will release each of
the Obligors from any claims, causes of action, liabilities or
obligations related to the Notes.
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)
UAL CORP: USTA Responds to Objection on Claim Payment Request
-------------------------------------------------------------
The United States Tennis Association, Inc., previously asked the
United States Bankruptcy Court for the Northern District of
Illinois to compel UAL Corporation and its debtor-affiliates to
pay its administrative expense for certain material benefits the
Debtors realized before rejecting their executory contracts.
The USTA is the national governing body for tennis in the United
States and owns the exclusive rights to all activities related to
the annual U.S. Open tennis tournament held at USTA National
Tennis Center, in Flushing, New York. The USTA is a New York
State not-for-profit organization that qualifies as an exempt
organization under Section 501(c)(6) of the Internal Revenue
Code. The USTA establishes rules of play and standards of
sportsmanship, sanctions and conducts tournaments and
competitions. The USTA conducts its business through a national
headquarters and staff located in White Plains, New York, and
through 17 geographic sectional associations.
The USTA and the Debtors entered into a Sponsorship Agreement
effective January 1, 2001. The Agreement was to run until
December 31, 2005.
Pursuant to the Agreement, the Debtors were to pay the USTA
$1,400,000 in cash, 50% on January 1, 2004, and 50% on June 1,
2004. In addition, the Debtors were to provide "value in kind,"
namely air travel credits, frequent flyer benefits and airport
club memberships. For 2004, the Debtors were to provide the USTA
with $265,000 of value in kind.
Debtors Return Serve
As reported in the Troubled Company Reporter on Oct. 11, 2004,
James H.M. Sprayregen, Esq., at Kirkland & Ellis, asserts that the
Sponsorship Agreement required the Debtors to pay the USTA for all
services provided in 2004. Since the Debtors realized only a
small percentage of the USTA's services, it is entitled to an
administrative expense for half the agreed-upon amount.
Mr. Sprayregen states that the USTA has not provided, nor can it
provide, evidence that the benefits received were worth "anywhere
near $700,000." Therefore, the Court should deny the Request.
USTA Hits a Return
A central element of the Sponsorship Agreement was the United
States Tennis Association's designation of the Debtors as the
preferred airline and sole official airline partner. The Debtors
had the right to publicize this status to the public and
competitors for the duration of the contract. No other airline
could obtain or use that designation.
This right gave the Debtors unlimited opportunities to publicize
this unique status as to the time or place of exercise. In other
words, the marketing opportunities were infinite. However, the
Debtors' objection implies that exclusive sponsorship and the
preferred airline designation by the USTA have no value and are
irrelevant. This makes no economic sense, Richard Levy, Jr.,
Esq., at Pryor, Cashman, Sherman & Flynn, in New York City, says.
The Court should not allow the Debtors to dissect this
arrangement that, by its nature, could not be broken into
discrete pieces. The Agreement hinged on the exclusive status
granted on an international stage.
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. 62; Bankruptcy Creditors' Service,
Inc., 215/945-7000)
UNITED AGRI: Extends Senior Debt Tender Offer to Oct. 21
--------------------------------------------------------
UAP Holding Corp. and United Agri Products, Inc., are each
extending the expiration date for the previously announced offers
to purchase for cash any and all of UAP Holdings' outstanding
$125,000,000 principal amount at maturity of 10-3/4% Senior
Discount Notes due 2012 and any and all of United Agri Products'
outstanding $225,000,000 principal amount of 8-1/4% Senior Notes
due 2011.
The tender offers by the Companies, each previously scheduled to
expire at 5:00 p.m., New York City Time, on Friday, Oct. 8, 2004,
will now expire at 5:00 p.m., New York City Time, on Thursday,
Oct. 21, 2004, unless further extended.
As of 5:00 p.m., New York City Time, on Oct. 7, 2004, all
$125,000,000 aggregate principal amount at maturity of the 10-3/4%
Discount Notes and all $225,000,000 aggregate principal amount of
the 8 1/4% Notes have been validly tendered and have not been
withdrawn in the offers to purchase and consent solicitations.
Each Company's tender offer is conditioned on, among other things:
(a) the consummation of UAP Holdings' offering of Income
Deposit Securities and
(b) United Agri Products amending its existing revolving credit
facility and entering into a new senior secured second lien
term loan facility, the net proceeds of both of which will
be used, among other things, to pay the considerations for
the Notes purchased in the tender offers.
Information regarding the pricing, tender and delivery procedures
and conditions to the tender offer and consent solicitation are
contained in the Offer to Purchase and Consent Solicitation
Statement dated Apr. 26, 2004, as supplemented by the Supplement
thereto dated May 6, 2004 and the accompanying Letter of
Transmittal and Consent.
UBS Investment Bank is acting as dealer manager for the tender
offers and consent solicitations. MacKenzie Partners, Inc. is
acting as information agent. Questions about the tender offers may
be directed to the Liability Management Group of UBS Investment
Bank at (888) 722-9555 x4210 (toll free) or (203) 719-4210
(collect), or to MacKenzie Partners, Inc. at (212) 929-5500
(collect) or (800) 322-2885 (toll free). Copies of the Offer
Documents and other related documents may be obtained from the
information agent.
The tender offer and consent solicitation are being made solely on
the terms and conditions set forth in the Offer Documents. Under
no circumstances shall this press release constitute an offer to
buy or the solicitation of an offer to sell the Notes or any other
securities of the Companies. It also is not a solicitation of
consents to the proposed amendments to the indentures and
registration rights agreements. No recommendation is made as to
whether holders of the Notes should tender their Notes or give
their consent.
About the Companies
UAP Holdings is a holding company with no significant assets or
operations other than the ownership of 100% of the stock of United
Agri Products. United Agri Products is the largest private
distributor of agricultural and non-crop inputs in the United
States and Canada. It markets a comprehensive line of products
including crop protection chemicals, seeds and fertilizers to
growers and regional dealers. In addition, as part of its product
offering, United Agri Products provides a broad array of value-
added services including crop management, biotechnology advisory
services, custom blending, inventory management and custom
applications of crop inputs. United Agri Products maintains a
comprehensive network of approximately 350 distribution and
storage facilities and five formulation and blending plants,
strategically located throughout the United States and Canada.
* * *
As reported in the Troubled Company Reporter's May 13, 2004
edition, Standard & Poor's Ratings Services lowered its corporate
credit rating on crop protection and agriculture distributor
United Agri Products, Inc., to 'B' from 'B+'.
It also lowered the rating on UAP's existing $500 million senior
secured revolving credit facility to 'B+' from 'BB-'. The lower
ratings reflect the company's anticipated more aggressive
financial profile after its parent company, UAP Holdings Corp.,
proposed a $625 million issuance of income deposit securities
(IDS).
At the same time, Standard & Poor's assigned a rating of 'CCC'
to the senior subordinated notes of UAP Holdings Corp. The
ratings on UAP Holdings' existing senior discount notes have been
lowered to 'CCC+' from 'B-', while the ratings on United Agri
Products' senior unsecured notes have been lowered to 'B-' from
'B'. However, these ratings will be withdrawn upon issuance of
the income deposit securities, which will be used to retire the
debt.
UAP Holdings' proposed $625 million IDS issuance will consist of
common stock and subordinated notes.
The new bank loan and subordinated debt ratings are based on
preliminary offering statements and are subject to review upon
final documentation. The ratings on both UAP and UAP Holdings
have been removed from CreditWatch, where they were placed
April 13, 2004.
"Standard & Poor's believes that the IDS structure reflects a
more aggressive financial policy," said Standard & Poor's
credit analyst Ronald Neysmith. "Previously, UAP did not pay
dividends on its common stock. However, as a result of the IDS
offering, UAP will be distributing roughly 75% of its cash flow as
interest and dividends, thereby materially reducing financial
flexibility."
VALOR TELECOM: Moody's Cuts Senior Implied Rating to B2 from B1
---------------------------------------------------------------
Moody's Investors Service assigned new ratings for Valor
Telecommunications Enterprises, LLC and Valor Telecommunications
Enterprises II, LLC, in accordance with the company's proposed
recapitalization. The company's senior implied rating was lowered
to B2, from B1, proforma for the assumed successful completion of
this planned recapitalization. Moody's also withdrew the former
provisional ratings associated with the company's previously
proposed income deposit securities -- IDS -- offering, which was
never completed.
The effective downgrade of Valor's senior implied rating to B2
from B1 predominantly reflects the increased leverage associated
with the proposed recapitalization. Although Moody's views the
business risk of rural local exchange carriers -- RLECs -- like
Valor to be relatively benign, the company's weak balance sheet
reflected by high debt relative to total access lines and cash
flow constrains the long-term ratings. Moody's expects that the
company's lack of financial flexibility may ultimately limit its
ability to pursue new growth initiatives and weaken its long-term
competitiveness, particularly vis-a-vis emerging VoIP service
offerings.
The outlook for all ratings, which is contingent on the successful
completion of the proposed transaction, is stable. The stable
outlook reflects Moody's belief that despite increased competition
and declining access lines Valor will continue to generate stable
positive free cash flow. Since the senior credit facility requires
a 75% cash sweep, the company's leverage, and hence financial
risk, should decrease, helping to offset potential competitive
pressure.
Moody's has taken these rating actions:
(1) Ratings associated with the proposed recapitalization:
-- Valor Telecommunications Enterprises, LLC and Valor
Telecommunications Enterprises II, LLC (Co-Borrowers
under the facilities)
* Senior Implied -- B2
* Issuer rating -- Caa1
* $1400 million Senior Secured Credit Facility -- B2
* $205 million Second Lien Loan -- B3
* $135 million Subordinate Loan -- Caa1
* Rating Outlook -- Stable
(2) These ratings associated with the formerly announced IDS
transaction have been withdrawn:
-- Valor Telecommunications, LLC:
* $890 million senior secured bank credit facility -- WR
(formerly (P)B2)
-- Valor Communications Group, Inc.:
* Senior Implied Rating -- WR (formerly (P)B2)
* Issuer Rating -- WR (formerly (P)B3)
Moody's also withdrew the former senior implied and
issuer ratings for Valor Telecommunications Southwest,
LLC, and plans to withdraw the ratings for Valor's
existing debt when it is refinanced with proceeds from
the newly proposed transaction debt.
-- Valor Telecommunications Enterprises, LLC:
* Senior Secured Bank Credit Facility - Ba3 (to be
withdrawn)
* Valor Telecommunications Southwest, LLC:
* Senior Implied Rating - WR (formerly B1)
* Issuer Rating -- WR (formerly B2)
The effective downgrade reflects the company's change in financial
strategy rather than changes in industry dynamics, the company's
strategic focus or competitive position. The ratings continue to
be constrained by the slow growth inherent in the RLEC industry.
Moody's also believes that growth opportunities are more likely to
come from acquisitions, rather than future cost savings, and
recognizes that the financial covenants in the Valor senior loan
agreements may restrain the company's ability to fund future
acquisitions. Relatively low perceived business risk and
efficient execution continue to support the ratings. Valor's
margins are consistently in the top of its peer group. Valor
faces modest access line loss, limited threats from wireless and
technology substitution, and cable competition in only its largest
markets (currently). The ratings also incorporate Valor's:
(a) leading position in its incumbent markets,
(b) proven ability to generate stable and predictable revenue,
and
(c) its improving capacity to drive operating cash flow.
Valor's ratings may come under pressure if cable competition
ultimately puts forth a stronger than expected VoIP launch in
Valor's key markets. Similarly, a potential adverse regulatory
ruling that results in a meaningful compression of Valor's margins
and hence profitability could strain the ratings. Moody's
believes that Valor's liquidity is sufficient to meet its near
term liquidity. Valor's long-term ratings will be negatively
impacted if the company adopts an aggressive acquisition strategy
that notably reduces its liquidity. The Valor ratings may improve
if the company can reduce it debt relative to access lines to a
level that brings it more in line with its peers, while
maintaining stable margins.
Moody's does not notch the senior secured bank loan above Valor's
B2 senior implied rating. The senior secured credit facility
benefits from a 1st priority claim on substantially all assets,
and a senior secured 1st priority guarantee from the parent
company and intermediate holding companies. The senior 1st
priority secured debt accounts for more than 80% of the firm's
capitalization. Therefore, Moody's believes that the risk profile
of this debt is not substantially different from that of the firm
as a whole. The 2nd lien loan is one notch below the senior
implied rating. The 2nd lien loan benefits from a subordinate
claim on the same asset as the 1st priority facility, and a 2nd
priority guarantee from the parent company. Finally, the
subordinate loan is two notches below the senior implied rating.
Notably, the subordinate loan ranks pari passu with other senior
obligations of the corporate entity, excluding permitted
indebtedness as defined by the senior credit facilities, and is
senior to other contractually subordinated obligations.
Valor, headquartered in Irving, Texas, is a rural local exchange
carrier that provides telecommunications services in four states
in the South Western U.S.
VENTAS INC: Prices $125 Million of 6-5/8% Senior Notes Due 2014
---------------------------------------------------------------
Ventas, Inc. (NYSE: VTR) has priced a private offering of
$125 million of 6-5/8% Senior Notes due 2014. The sale of the
Notes is expected to close on Oct. 15, 2004.
The Notes are being issued by Ventas's operating partnership,
Ventas Realty, Limited Partnership, and a wholly owned subsidiary,
Ventas Capital Corporation. The Notes will mature on Oct. 15,
2014, and will be senior, unsecured obligations, ranking pari
passu with all existing and future senior unsecured indebtedness
of the Issuers and the Company. The Company will unconditionally
guarantee the Notes. Interest on the Notes will be payable
semiannually on Apr. 15 and Oct. 15 of each year, commencing on
Apr. 15, 2005.
The Company said it currently intends to use the net proceeds of
the offering to repay a portion of the outstanding indebtedness
under its revolving credit facility.
The Notes have not been and will not be registered under the
Securities Act of 1933, as amended, or any state securities laws
and may not be offered or sold in the United States absent
registration or an applicable exemption from the registration
requirements of the Securities Act and applicable state laws.
About the Company
Ventas, Inc., is a leading healthcare real estate investment trust
that owns healthcare and senior housing assets in 39 states. Its
properties include hospitals, nursing facilities and assisted and
independent living facilities. More information about Ventas can
be found on its website at http://www.ventasreit.com/
* * *
As reported in the Troubled Company Reporter on June 30, 2004,
Standard & Poor's Ratings Services raised its corporate credit
ratings on Ventas Inc., its operating partnership Ventas Realty
L.P., and Ventas Capital Corp. to 'BB' from 'BB-'. In addition,
ratings are raised on the company's senior unsecured debt, which
totals $366 million. Concurrently, the outlook is revised to
stable from positive.
"The upgrades acknowledge the company's steady improvement in both
its business and financial profiles," said Standard & Poor's
credit analyst George Skoufis. "Recent acquisitions have targeted
improving Ventas' diversification, foremost its concentration with
its primary tenant Kindred Healthcare Inc. Growing cash flow and
profits, and lower leverage have contributed to stronger debt
protection measures. Credit weaknesses remain, however, including
Ventas' continued reliance on un-rated Kindred, the risk of future
changes to government reimbursement, and constrained, but
improved, financial flexibility."
VIASYSTEMS: Closes Rights Offering & Standby Commitment Pact
------------------------------------------------------------
Viasystems Group, Inc., the parent of Viasystems, Inc., said its
rights offering to holders of shares of its common stock and its
class B senior convertible preferred stock for an aggregate of
5,555,555 additional shares of its common stock expired in
accordance with its terms at 5:00 p.m., New York City time, on
Oct. 4, 2004. Pursuant to a standby commitment agreement, certain
Viasystems Group stockholders purchased the shares of Viasystems
Group common stock that were not subscribed for in the rights
offering. As a result, Viasystems Group received gross proceeds
of approximately $50 million. Net proceeds of the offering will be
applied in the expansion of Viasystems' printed circuit board
operations in China.
"This transaction provides Viasystems with the expansion capital
to maintain our leading position in China's PCB industry," said
David M. Sindelar, Chief Executive Officer. "Our global customer
base looks to us for a full range of PCB solutions, from complex
design and prototyping to cost-effective, high-volume production.
This current expansion program will help Viasystems continue to
meet our customers' needs."
In connection with the consummation of the rights offering,
certain affiliates of Hicks, Muse, Tate & Furst Incorporated
exchanged 297,763 shares of Viasystems Group class A junior
preferred stock held by them with an aggregate liquidation
preference of $30 million for 2,625,673 shares of Viasystems Group
common stock with an aggregate value of approximately
$23.63 million, based on the rights offering subscription price.
The shares of Viasystems Group's common stock offered pursuant to
the rights offering were not registered under the Securities Act
of 1933, as amended, or any state securities laws and may not be
offered or sold in the United States absent registration or an
applicable exemption from the registration requirements of the
Securities Act or applicable state securities laws.
Viasystems Group, Inc. is a global provider of electro-mechanical
components and assemblies. The company's 22,000 employees serve
more than 100 customers in the automotive, consumer, computer and
data communications, industrial and instrumentation, and
telecommunications markets.
* * *
Standard & Poor's Ratings Services affirmed its 'B' corporate
credit and other ratings for St. Louis, Missouri-based Viasystems
Inc., and revised its outlook on the company to stable from
positive.
"The outlook revision reflects the withdrawal of the company's
filing for an IPO of its common stock of up to $275 million,
removing our previous expectation that credit protection measures
would improve because of debt repayment with the planned IPO
proceeds," said Standard & Poor's credit analyst Emile Courtney.
Total debt was approximately $470 million as of March 2004.
The ratings reflect Viasystems Inc.'s highly fragmented and
competitive printed circuit board manufacturing market, volatile
sales levels and profitability through the business cycle, and
high debt leverage. These partly are offset by the company's low-
cost manufacturing locations and its leading original equipment
manufacturer customer base. Viasystems manufactures PCBs for
electronics OEMs and wire harnesses for consumer appliance makers.
Following Viasystems' voluntary reorganization, completed in
January 2003, the company extinguished about $740 million in debt.
Viasystems has closed and consolidated more than 50% of its
manufacturing facilities since 2001, locating its remaining
manufacturing sites primarily in China and Mexico, both low-cost
areas.
VILLAS OF PARKHAVEN: Case Summary & 16 Largest Unsecured Creditors
------------------------------------------------------------------
Debtor: Villas of Parkhaven, Ltd.
2320 Highland Avenue, Suite 230
Birmingham, Alabama 35205
Bankruptcy Case No.: 04-08815
Type of Business: The Debtor operates an apartment that consists
of 256 residential units containing 214,784
square feet of total rentable space within
16 two-story buildings.
Chapter 11 Petition Date: September 7, 2004
Court: Northern District of Alabama (Birmingham)
Judge: Benjamin G. Cohen
Debtor's Counsel: W. Clark Watson, Esq.
Balch & Bingham
P.O. Box 306
Birmingham, AL 35201
Tel: 205-226-3466
Estimated Assets: $1 Million to $10 Million
Estimated Debts: $10 Million to $50 Million
Debtor's 16 Largest Unsecured Creditors:
Entity Nature Of Claim Claim Amount
------ --------------- ------------
Assessor & Collector of $74,571
Taxes Grayson Co.
Lon Smith Roofing Trade Debt $31,998
Century Maintenance Supply Trade Debt $688
Office Depot Trade Debt $592
Wilmar Supply Company, Inc. Trade Debt $460
Classified Ventures, LLC Trade Debt $270
Texoma Carpet Cleaning Trade Debt $226
Dee's Cleaning Services Trade Debt $140
Jorge Hernandez Trade Debt $96
Dennison Oxygen Company Trade Debt $71
City of Sherman Water Dept. Utility Service Unknown
Entergy Solutions, Ltd. Utility Service Unknown
I.E.S.I. (Waste Desposal) Utility Service Unknown
Lenox Mortgage LTD Deficiency Unknown
c/o Aspen Square
TXU Energy Utility Service Unknown
TXU Gas Utility Service Unknown
WORLDCOM INC: Gets Court Nod to Assume Office Lease from SG/SPV
---------------------------------------------------------------
In January 1995, Worldcom, Inc. and its debtor-affiliates leased
from SG/SPV Property I, LLC, an office space located at 1400 Urban
Center Drive, Vestavia Hills, in Alabama. Stewart Stein, Esq., at
Stinson Morrison Hecker, LLP, in Kansas City, Missouri, relates
that the Lease, as amended from time to time, is still in effect.
With the United States Bankruptcy Court for the Southern District
of New York's permission, the Debtors will assume the Lease and
its related amendments.
Headquartered in Clinton, Mississippi, WorldCom, Inc., now known
as MCI -- http://www.worldcom.com/-- is a pre-eminent global
communications provider, operating in more than 65 countries and
maintaining one of the most expansive IP networks in the world.
The Company filed for chapter 11 protection on July 21, 2002
(Bankr. S.D.N.Y. Case No. 02-13532). On March 31, 2002, the
Debtors listed $103,803,000,000 in assets and $45,897,000,000 in
debts. The Bankruptcy Court confirmed WorldCom's Plan on October
31, 2003, and on April 20, 2004, the company formally emerged from
U.S. Chapter 11 protection as MCI, Inc. (Worldcom Bankruptcy News,
Issue No. 62; Bankruptcy Creditors' Service, Inc., 215/945-7000)
* Large Companies with Insolvent Balance Sheets
-----------------------------------------------
Total
Shareholders Total Working
Equity Assets Capital
Company Ticker ($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 (575) 1,512 36
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. The prices at which
equity securities trade in public market are determined by more
than a balance sheet solvency test.
A list of Meetings, Conferences and Seminars appears in each
Wednesday's edition of the TCR. Submissions about insolvency-
related conferences are encouraged. Send announcements to
conferences@bankrupt.com.
Each Friday's edition of the TCR includes a review about a book of
interest to troubled company professionals. All titles are
available at your local bookstore or through Amazon.com. Go to
http://www.bankrupt.com/books/to order any title today.
Monthly Operating Reports are summarized in every Saturday edition
of the TCR.
For copies of court documents filed in the District of Delaware,
please contact Vito at Parcels, Inc., at 302-658-9911. For
bankruptcy documents filed in cases pending outside the District
of Delaware, contact Ken Troubh at Nationwide Research &
Consulting at 207/791-2852.
*********
S U B S C R I P T I O N I N F O R M A T I O N
Troubled Company Reporter is a daily newsletter co-published by
Bankruptcy Creditors' Service, Inc., Fairless Hills, Pennsylvania,
USA, and Beard Group, Inc., Frederick, Maryland USA. Yvonne L.
Metzler, Emi Rose S.R. Parcon, Rizande B. Delos Santos, Jazel P.
Laureno, Cherry Soriano-Baaclo, Marjorie Sabijon, Terence Patrick
F. Casquejo and Peter A. Chapman, Editors.
Copyright 2004. All rights reserved. ISSN: 1520-9474.
This material is copyrighted and any commercial use, resale or
publication in any form (including e-mail forwarding, electronic
re-mailing and photocopying) is strictly prohibited without prior
written permission of the publishers. Information contained
herein is obtained from sources believed to be reliable, but is
not guaranteed.
The TCR subscription rate is $675 for 6 months delivered via e-
mail. Additional e-mail subscriptions for members of the same firm
for the term of the initial subscription or balance thereof are
$25 each. For subscription information, contact Christopher Beard
at 240/629-3300.
*** End of Transmission ***