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/raid1/www/Hosts/bankrupt/TCR_Public/041018.mbx T R O U B L E D C O M P A N Y R E P O R T E R Monday, October 18, 2004, Vol. 8, No. 226 Headlines ABITIBI-CONSOLIDATED: Will Release 3rd Qtr. Results on Oct. 21 ADVANCED MICRO: S&P Rates Planned $600 Mil. Sr. Unsec. Notes B- AGILYSYS INC: S&P Upgrades Corporate Credit Rating to BB- from B+ ASHBERRY EXETER LLC: List of 20 Largest Unsecured Creditors ALASKA AIRLINES: Names William MacKay Senior Vice President ANC RENTAL: Port of Portland Wants $1.8 Million Claim Paid ARI NETWORK: July 31 Balance Sheet Upside-Down by $6.6 Million ATX COMMUNICATIONS: Court Approves $5 Mil. DIP Financing Pact AUTONATION INC: Moody's Rates $200 Mil. Sr. Secured Facility Ba2 BAC SYNTHETIC: Fitch's Class D Rating Tumbles to DD from C BAM! ENTERTAINMENT: Nasdaq Halts Stock Trading in SmallCap Market BRIAZZ, INC.: Wants Plan-Proposal Period Stretched to December 4 BUSH INDUSTRIES: Hires Standard & Poor as Valuation Consultant CATHOLIC CHURCH: Tucson Wants to Maintain Existing Bank Accounts CBD MEDIA: Planned Debt Increase Cues S&P' to Watch B+ Rating CENTERPOINT ENERGY: Extends AT&T Relationship with $7.8 Mil. Pact CHECKERED FLAG: Case Summary & Largest Unsecured Creditor CITIZENS ENTERPRIZES: List of 16 Largest Unsecured Creditors COMMERCE ONE: Two Creditors Offer $4.1 Million to Buy Assets COOPER COMPANIES: Moody's Places Ba3 Ratings on Planned Facilities COVENTRY HEALTH: Merger Plans Cue Fitch to Put BB Ratings on Watch CSFB MORTGAGE: Moody's Reviewing Ba2 Rating on Class B-2 Tranche DELTA AIR: Amends & Extends Exchange Offer for $680 Million Debt DEVLIEG BULLARD: Committee Wants to Examine KPS Under Rule 2004 DOANE PET: Moody's Assigns Low-B & Junk Ratings on Debts DUNE ENERGY: Appoints Marshall Lynn Bass to Board of Directors EL COMANDANTE: Case Summary & 43 Largest Unsecured Creditors ENRON CORP: Judge Gonzalez Approves AES Entities Settlement Pact FAIRFAX FINANCIAL: Will Discuss 2004 3rd Qtr. Results on Oct. 29 FIRST UNION: Fitch Assigns BB Rating to $5M Class Q Certificates FOOTSTAR INC: Hires Ernst & Young to Audit Meldisco Business Unit FORT WORTH: Shutdown Prompts Moody's to Slash Ratings to Caa3 FOSTER WHEELER: Harry Rekas Departs from Directorship Position HARVEST ENERGY: Closes 7-7/8% Senior Debt Offering HAYES LEMMERZ: Clawson & Wallace Disclose Equity Stakes HCA INC: Share Repurchase Plan Cues Fitch to Pare Ratings to BB+ HOLLINGER INC: Court Appoints Kroll Lindquist as Inspector HORACE MANN HOME: Case Summary & 20 Largest Unsecured Creditors IMC GLOBAL: Moody's Still Reviewing Low-B Ratings & May Upgrade IMPACT MANAGEMENT INC: Case Summary & Largest Unsecured Creditor INTEGRATED ELECTRICAL: Retains Todd Matherne as Advisor for CEO INTEGRATED HEALTH: Rotech Wants Until Jan. 7 to File Final Report INTERNATIONAL MILL: Moody's Assigns Single-B & Caa Ratings INTERSTATE BAKERIES: Hires Stinson Morrison as Local Counsel INTRAWEST CORP: Pays $395 Mil. to Holders of 10.50% Senior Notes KAISER ALUMINUM: Ferazzi Wants to Retain Risk Int'l as Consultant KATELMAN FOUNDRY: Case Summary & 19 Largest Unsecured Creditors LAIDLAW INT'L: Greyhound Ratifies New Collective Bargaining Pacts LAKE AT LAS VEGAS: S&P Assigns Low-B Ratings to Facilities MARKWEST ENERGY: S&P Rates Planned $200M Sr. Unsec. Notes B+ MASTEC INC: Names C. Robert Campbell as Exec. Vice Pres. & CFO MAXIM CRANE: Files Amended Joint Plan of Reorganization MERRILL LYNCH: Class H's S&P Rating Tumbles to D MORGAN STANLEY: Fitch Assigns Low-B Ratings to Four Cert. Classes NORTEL NETWORKS: Completing Transfer of Operations in 1st Quarter NORTHWEST AIRLINES: Reaches Tentative Agreement with Pilots OGLEBAY NORTON: Tort Claimants Make Pitch for Official Committee OPTIMAL GEOMATICS: Equity Deficit Narrows to $1 Mil. at July 31 PACIFIC CROSSING: Wants Plan-Filing Period Extended to March 31 PACIFIC ENERGY: Will Release 2004 3rd Quarter Results on Oct. 27 PACIFIC GAS: Names Robert Howard as California Gas Transmission VP PAXSON COMMS: Seeks Declaratory Ruling on Redemption of NBC Shares PREMIER FARMS: Seeks to Dismiss Bankruptcy Case PREMIER FARMS: U.S. Trustee Raises Concerns about Case Dismissal RCN CORP: Court Approves Amended Disclosure Statement RCN CORP: Summary of Amended Plan & Disclosure Statement RELIZON COMPANY: Moody's Affirms B1 Ratings on Three Facilities REMINGTON ARMS: Profit Erosions Cue Moody's to Pare Low-B Ratings RFMSII: Moody's Reviewing Ba1 Rating on 2002-HS1 Class B Issue RICHARD MANNO: Case Summary & 20 Largest Unsecured Creditors ROCKWOOD SPECIALTIES: Moody's Rate $625 Mil. Sr. Sub. Notes B3 SACO I TRUST: Moody's Reviewing Ba2 Rating on Class B-2 Issue SANKATY HIGH YIELD: Fitch Affirms Low-B Ratings on Classes D & E SHAW GROUP: Posts $31 Million Net Loss for 2004 4th Quarter SMURFIT-STONE: Gets S&P's B+ Corporate Credit Rating After Merger SNOWVILLE FARMS: Case Summary & 20 Largest Unsecured Creditors SOUTHERN EXPOSURE INC: Voluntary Chapter 11 Case Summary STELCO: Monitor Ernst & Young Files 10th CCAA Restructuring Report STELCO INC: Non-Disclosure of GM Ultimatum "Reckless", Workers Say SUMMIT WASATCH: List of 6 Largest Unsecured Creditors SUTTER CBO: Credit Quality Decline Spurs Moody's to Cut Ratings TAHERA DIAMOND: Plans to Raise C$45 Million in Equity Financing TIRO ACQUISITION: Wants to Hire Pachulski Stang as Co-Counsel TRANSPORTATION TECH: Moody's Confirms Low-B & Junk Ratings US AIRWAYS: Gets Court Nod to Cut Wages & Benefits Until Feb. 15 US AIRWAYS: Establishes Reclamation Claims Procedures USA MOBILITY: Moody's Rates Planned Metrocall & Arch Loan at Ba3 WICKES INC: Wants Until Jan. 18 to Solicit Votes on Joint Plan WISCONSIN AVENUE: Fitch Raises Class C's Rating to BBB from BB- WISCONSIN AVENUE: Fitch Slashes Class D Rating to BB+ from AA WISCONSIN AVENUE: Fitch Affirms BB- Rating on $9.2M Class C Certs. WISE WOOD: Inks Agreement to Combine Businesses with Diamond Tree WOMEN FIRST: Committee Balks at Liquidating Chapter 11 Plan WOMEN FIRST: Committee Hires J.H. Cohn as Financial Advisor WORLDCOM INC: Resolves Claims Dispute with Neon Optica * Arent Fox Hosting Oct. 26 Cross-Border Insolvency Seminar * BOND PRICING: For the week of October 11 - October 15, 2004 ********* ABITIBI-CONSOLIDATED: Will Release 3rd Qtr. Results on Oct. 21 -------------------------------------------------------------- Abitibi-Consolidated Inc. (TSX: A;NYSE: ABY) will release third quarter results before the market opens on Thursday, October 21, 2004. Management will host a conference call and question-and-answer session to discuss earnings that day at 11:00 A.M. (Eastern). Participants will include President and Chief Executive Officer, John W. Weaver as well as Pierre Rougeau, Senior Vice-President, Corporate Development and Chief Financial Officer. To participate in the conference call, investors, analysts & business media may dial 1-800-387-6216 or 514-861-6560 ten minutes before the beginning of the call. Abitibi-Consolidated is a global leader in newsprint and uncoated groundwood (value-added groundwood) papers as well as a major producer of wood products, generating sales of $5.4 billion in 2003. With over 15,000 employees, excluding PanAsia, the Company does business in approximately 70 countries. Responsible for the forest management of 17.5 million hectares, Abitibi-Consolidated is committed to the sustainability of the natural resources in its care. The Company is also the world's largest recycler of newspapers and magazines, serving 16 metropolitan areas with more than 12,300 Paper Retriever(R) collection points and 14 recycling centres in Canada, the United States and the United Kingdom. Abitibi-Consolidated owns or is a partner in 27 paper mills, 22 sawmills, 4 remanufacturing facilities and 1 engineered wood facility in Canada, the U.S., the UK, South Korea, China and Thailand * * * As reported in the Troubled Company Reporter on June 15, 2004, Standard & Poor's Ratings Services assigned its 'BB' rating to Montreal, Quebec-based Abitibi-Consolidated Co. of Canada's US$200 million floating rate notes due 2011, and US$200 million 7.75% notes due 2011. The notes are unconditionally guaranteed by Abitibi-Consolidated Inc. At the same time, Standard & Poor's affirmed its 'BB' long-term corporate credit rating on Abitibi. The outlook is negative. ADVANCED MICRO: S&P Rates Planned $600 Mil. Sr. Unsec. Notes B- --------------------------------------------------------------- Standard & Poor's Ratings Services raised its corporate credit rating on Sunnyvale, California-based Advanced Micro Devices Inc. to 'B/Stable/--' from 'B-/Positive/--'; its rating on the company's senior secured debt to 'B+' from 'B'; and on the subordinated debt to 'B-' from 'CCC'. Additionally, Standard & Poor's assigned its 'B-' rating to the company's planned offering of $600 million in senior unsecured notes due 2012, offered under Rule 144a with registration rights. The outlook is stable. "The upgrade reflects the company's improving product position, operating performance, and debt maturity profile. Proceeds of the new issue will repay approximately $612 million in secured bank loan obligations of Advanced Micro's Dresden operations, which mature in 2005 and 2006," said Standard & Poor's credit analyst Bruce Hyman. Following the bank loan repayment, which reduces the total amount of senior secured debt and other priority liabilities in Advanced Micro's capital structure, senior unsecured debt is rated one notch below the corporate credit rating, rather than two notches as before. Advanced Micro had about $2.7 billion debt, guarantees, and capitalized leases outstanding at September 30, 2004, reflecting its 60% share of the obligations of its Spansion joint venture. The ratings continue to reflect: (1) Advanced Micro's high debt levels, (2) ongoing negative free cash flows, and (3) its second-tier position in the personal computer microprocessor industry. These factors are mitigated by the company's having achieved competitive product lines and manufacturing processes, and its market-leading position in the flash memory market. AGILYSYS INC: S&P Upgrades Corporate Credit Rating to BB- from B+ ----------------------------------------------------------------- NEW YORK (Standard & Poor's) Oct. 14, 2004 Standard & Poor's Ratings Services raised its corporate credit rating on Cleveland, Ohio-based Agilysys, Inc. to 'BB-' from 'B+'. The upgrade reflects improving profitability and debt protection metrics. The outlook is stable. As of June 30, 2004, Agilysys had adjusted (for capitalized operating leases) total debt of $212.8 million. "The ratings on Agilysys reflect a narrow business base, modest but improving profitability, and an acquisitive growth strategy," said Standard & Poor's credit analyst Martha Toll-Reed. These factors partly are offset by a good position in the North American computer systems distribution market, and moderately leveraged financial profile. The computer systems distribution market is global, highly competitive and relatively low-value-added. In addition, Agilysys competes against larger competitors with greater resources, and has significant supplier concentration. The company reported revenues of $1.4 billion and net income of $11.5 million in fiscal 2004. EBITDA margins exceeded 3% in the quarter ended June 30, 2004, up from about 2% in the prior-year period. Quarterly profitability levels are expected to demonstrate sustainable improvement on a year-over-year basis through calendar 2004, benefiting from Agilysys' ability to support revenue growth with modest increases in operating costs. Debt-protection metrics also have shown significant improvement, driven by revenue and earnings growth, as well as modest debt reductions. Total debt to EBITDA was 3.9x in the June 2004 quarter, compared with in excess of 6x the prior year. However, further improvements in Agilysys' financial profile could be limited by the company's strategic growth and acquisition goals. ASHBERRY EXETER LLC: List of 20 Largest Unsecured Creditors ----------------------------------------------------------- Ashberry Exeter LLC released a list of its 20 Largest Unsecured Creditors: Entity Nature Of Claim Claim Amount ------ --------------- ------------ Flooring Dist - Prop Management Business Debt $31,860 Goodman Company LP Business Debt $14,603 Sherwin Williams Business Debt $12,393 Whirlpool Contract/Retail Business Debt $8,686 American Electric Power Business Debt $8,668 C.G.C. Wholesale Carpets Business Debt $6,087 Maintenance USA Business Debt $3,745 For Rent Magazine Business Debt $3,434 United Parcel Service Business Debt $3,277 Management Maintenance Business Debt $2,970 Wilmar Industries Inc Business Debt $2,646 Brunner Lawn Care Company Business Debt $2,480 S&J Extreme Clean Inc Business Debt $1,920 Maintenance Warehouse Business Debt $1,890 Cook's Termite & Pest Control Business Debt $1,819 Holt Marketing Business Debt $1,736 FABCO Business Debt $1,575 BWC State Insurance Fund Business Debt $1,393 Corporate Processing Department Thrasher Buschmann Griffith Business Debt $1,128 Haven Willis Law Firm LLC Business Debt $1,105 Headquartered in Phoenix, Arizona, Ashberry Exeter LLC is a 22-building, 172-unit multi-family apartment complex. The Company filed for chapter 11 protection on September 16, 2004 (Bankr. D. Ariz. Case No. 04-16374). Dennis J. Wortman, Esq., at Dennis J. Wortman, P.C., in Phoenix, represents the Company in its restructuring efforts. When the Debtor filed for protection from its creditors, it estimated assets and debts of over $1 million. ALASKA AIRLINES: Names William MacKay Senior Vice President ----------------------------------------------------------- Alaska Airlines has appointed William L. MacKay senior vice president/Alaska. A 28-year veteran of the company, Mr. MacKay will reside in Anchorage and continue to be responsible for the airline's public and government affairs division systemwide. In addition, he will support the carriers' operating divisions by providing oversight, coordination and assistance to the divisions statewide. Formerly vice president of public and government affairs at the airline's corporate headquarters in Seattle, Mr. MacKay's appointment is part of a recent restructuring of the airline's overall management structure. "This promotion reflects the important contributions Bill has made over the years to Alaska Airlines through his unique connection to the 49th State," said Bill Ayer, chairman and CEO. "More to the point, it manifests the extraordinary importance we place on maintaining, improving and expanding the quality of our passenger and air cargo service throughout Alaska." Reporting to Mr. MacKay in Seattle to oversee the day-to-day activities of the public and government affairs department will be Joe Sprague who has been promoted to staff vice president of public and government affairs. Sprague, most recently managing director of government affairs in Washington, D.C., is a former Anchorage resident and served as director of sales for the airline in Alaska. "With these two appointments, Alaska Airlines has two key officers with very deep roots in the state to advocate on behalf of our Alaska employees, customers and communities," said Ayer. Prior to assuming his duties in Seattle, Mr. MacKay had served in Alaska as a regional vice president and as an assistant vice president of sales for the carrier. A 38-year veteran of the airline industry, Mr. MacKay has been with Alaska since 1976. Active in civic affairs in both Alaska and the Lower 48, Mr. MacKay is a member of the board of directors of the University of Alaska Foundation, Nature Conservancy of Alaska, Alaska Raptor Rehabilitation Center of Sitka, Jr. Achievement of Washington and the Seattle Chamber of Commerce. Mr. MacKay began his career in the airline industry with Continental Airlines in 1966. After joining Alaska, he served in the carrier's marketing department until moving to Alaska as regional vice president in 1983. About the Company Alaska Airlines is the nation's ninth largest carrier. Alaska and its sister carrier, Horizon Air, together serve more than 80 cities in Alaska, the Lower 48, Canada and Mexico. For more news and information, visit the Alaska Airlines Newsroom on the Internet at http://newsroom.alaskaair.com/ Seattle-based Alaska Air Group is the parent company of Alaska Airlines and Horizon Air Industries. The company and its sister carrier, Horizon Air, together serve 80 cities in Alaska, the Lower 48, Canada and Mexico. * * * As reported in the Troubled Company Reporter on Aug. 24, 2004, Alaska Airlines began offering a voluntary severance package to management employees as a precursor to a reorganization that will eliminate about 9% of its management positions between now and spring 2005. Alaska anticipates a reduction of up to 150 employees resulting in permanent annual savings ranging between $5 and $10 million. As previously reported, Standard & Poor's Ratings Services lowered its ratings on Alaska Air Group Inc. and subsidiary Alaska Airlines Inc., including lowering the corporate credit rating on both to 'BB-' from 'BB.' Ratings were removed from CreditWatch, where they were placed March 18, 2003. The outlook is negative. ANC RENTAL: Port of Portland Wants $1.8 Million Claim Paid ---------------------------------------------------------- ANC Rental and its debtor-affiliates asked the Court to disallow and expunge 150 claims, one of which is owned by the Port of Portland. Upon review of the claims register, the filed claims and their books and records, the Debtors assert that they have no liability for each of the claims. Portland Replies According to Kurt F. Gwynne, Esq., at Reed Smith, in Wilmington, Delaware, prior to the Petition Date, the Port of Portland entered into certain agreements with Debtors National Car Rental System, Inc., and Alamo Rent-A-Car, LLC, concerning the Debtors' rental car operations at Portland International Airport, including: * The Operating Agreement dated March 15, 1998, concerning National's car leasing facility at a new parking garage at the Airport; * A Lease of Airport Way Maintenance, Storage and Administrative Facilities, dated March 8, 1989, between National and the Port; and * Two Underground Storage Tank Use Agreements between National and the Port. National's obligations under the Agreements included responsibilities and liabilities pursuant to applicable environmental laws for any clean-up of petroleum or other hazardous substances or contaminants in the soil or groundwater at the Quick Turn-around area at the Airport, and the Debtors' leased facilities at the Airport on Airport Way, or elsewhere on the Airport property that is attributable to, or the responsibility of, National. By an amended Order entered on December 9, 2002, National assumed and assigned the Agreements to Debtor ANC Rental Corporation. ANC assumed all of National's responsibilities under the Agreements. Mr. Gywnne reports that National caused environmental contamination to occur in violation of the Agreements. As a result, National incurred liability for the environmental clean up costs under the Agreements. On January 14, 2003, the Port timely filed Claim No. 7990 for $1,847,000, asserting that National allowed an environmental contamination to occur in direct violation of the Agreements. On June 21, 2003, the Port filed Claim No. 10061 for $1,233,000, amending Claim No. 7990. In May 2003, the Debtors sought to assign the Agreements and Consents to Assignment to Vanguard Car Rental USA, Inc. The Port objected to the assignment of the Agreements on July 28, 2003. To settle their dispute, the Debtors, the Port and Vanguard agreed that ANC and National remain liable under the Agreements as to all liabilities, which arose prior to the Effective Date of the assignment to Vanguard. On August 31, 2004, the Debtors objected to the Port's original claim and asserted that their books and records do not reflect any amount owed to the Port. Mr. Gwynne points out that since the Debtors have not objected to Claim No. 10061, their Objection is ineffective as to that Claim. Mr. Gwynne further notes that the entries of a debtor's books and records, when presented alone, are insufficient evidence to overcome a properly filed proof of claim's prima facie evidence of validity. The Debtors' books and records are not equal in force to the prima facie validity of the Claim. Hence, the Port asks the Court to overrule the Debtors' Objection. Headquartered in Fort Lauderdale, Florida, ANC Rental Corporation, is the world's third-largest publicly traded car rental company. The Company filed for chapter 11 protection on November 13, 2001 (Bankr. Del. Case No. 01-11200). On April 15, 2004, Judge Walrath confirmed the Debtors' 3rd amended Chapter 11 Liquidation Plan, in accordance with Section 1129(a) and (b) of the Bankruptcy Code. Upon confirmation, Blank Rome, LLP, and Fried, Frank, Harris, Shriver & Jacobson, LLP, withdrew as the Debtors' counsel. Gazes & Associates, LLP, and Stevens & Lee, PC, serve as substitute counsel to represent the debtors' post-confirmation interests. When the Company filed for protection from their creditors, they listed $6,497,541,000 in assets and $5,953,612,000 in liabilities. (ANC Rental Bankruptcy News, Issue No. 61; Bankruptcy Creditors' Service, Inc., 215/945-7000) ARI NETWORK: July 31 Balance Sheet Upside-Down by $6.6 Million -------------------------------------------------------------- ARI Network Services, Inc. (OTCBB:ARIS), a leading provider of electronic parts catalogs and related technology and services to increase sales and profits for dealers in the manufactured equipment markets, reported increased revenues and record net income for the fiscal year ended July 31, 2004. ARI reported revenues of $13.4 million for fiscal 2004, a 7% increase from revenues of $12.6 for fiscal 2003. Operating income for fiscal 2004 was $1.3 million, compared to an operating loss of $341,000 in fiscal 2003. Net income was $1.1 million, compared to a loss of $1.3 million in fiscal 2003. For the fourth quarter of fiscal 2004, revenues were $3.5 million, up 9% from revenues of $3.2 million for the fourth quarter of the prior year. Operating income was $684,000 for the fourth quarter of fiscal 2004, compared to a loss of $71,000 for the comparable prior period. Net income was $628,000 for the fourth quarter of fiscal 2004, compared to a loss of $74,000 for the comparable prior period. "We anticipated that fiscal 2004 would be a good year for ARI, and it was," said Brian E. Dearing, chairman and chief executive officer. "The improved performance indicates that our strategies are working. In fiscal 2004, we continued to focus on our core catalog business, controlling expenses, strengthening our product portfolio and improving our balance sheet." "Recurring revenues in our core catalog business and total recurring revenues in our core market of equipment manufacturers, distributors and dealers both increased 14% in fiscal 2004. The improvement reflects an increase in the number of dealers we serve to over 27,000 at the end of fiscal 2004. We also benefited from the introduction of several new and enhanced products during the year." Earnings before interest, taxes, depreciation and amortization (EBITDA) increased to $3.0 million for fiscal 2004, compared to EBITDA of $1.6 million in fiscal 2003. For the fourth quarter of fiscal 2004, EBITDA was $916,000, compared to EBITDA of $902,000 for the same period in the prior year. "ARI's balance sheet also improved in fiscal 2004. We ended the year with a cash balance of $3.4 million up from $2.1 million at the end of last year and paid off $750,000 of debt principal during the year," said Dearing. Dearing also noted that common shares outstanding were reduced by 11% during the year as a result of the repurchase of common stock from the company's largest shareholder. In addition, stock options outstanding or grantable were reduced by 17% through a voluntary stock option exchange program completed in May 2004. "We strengthened our product portfolio in fiscal 2004 and early fiscal 2005 with enhancements to our Website Smart template-based website creation service and our EMPARTweb-ASP electronic parts catalog software. We also introduced our new ARI MailSmart personalized postcard service, and re-launched our acquisition program with the acquisition of VertX Commerce Corporation last October," said Dearing. "We expect to continue our momentum in fiscal 2005. We anticipate continuing increases in revenues, operating income and net income for the year," Dearing said. "We are at an inflection point this year, because we are consciously re-investing in our business after an extended period of cost-cutting," Dearing continued. "There will be a partially offsetting reduction in expenses due to the completion of the amortization of the Network Dynamics acquisition. Therefore, while net income will increase, EBITDA should increase only modestly or remain flat as we re-deploy cash back into the business to fund our future growth. With a growing customer base, new products in the pipeline, our ongoing focus on controlling expenses and a stronger financial position, we believe we are well positioned for future growth." About ARI ARI Network Services, Inc., is a leading provider of e-Catalog business solutions for sales, service and life-cycle product support for dealers, distributors and manufacturers in the equipment industry. ARI currently provides approximately 78 parts catalogs (many of which contain multiple lines of equipment) for approximately 60 equipment manufacturers in the U.S. and Europe. More than 88,000 catalog subscriptions are provided through ARI to over 27,000 dealers and distributors in more than 100 countries in a dozen segments of the worldwide equipment market including outdoor power, power sports, recreation vehicle, floor maintenance, auto and truck parts aftermarket, marine and construction. The Company builds and supports a full suite of multi-media electronic catalog publishing and viewing software for the Web or CD and provides expert catalog publishing and consulting services. ARI also provides dealer marketing services, including technology-enabled direct mail and a template-based dealer website service that makes it quick and easy for an equipment dealer to have a professional and attractive website. In addition, ARI e-Catalog systems support a variety of electronic pathways for parts orders, warranty claims and other transactions between manufacturers and their networks of sales and service points. ARI currently operates three offices in the United States and one in Europe and has sales and service agents in Australia, England and France providing marketing and support of its products and services. At July 31, 2004, ARI Network Services' balance sheet showed a $6,551,000 stockholders' deficit, compared to a $6,830,000 deficit at July 31, 2004. ATX COMMUNICATIONS: Court Approves $5 Mil. DIP Financing Pact ------------------------------------------------------------- ATX Communications, Inc., and its debtor-affiliates sought and obtained permission from the U.S. Bankruptcy Court for the Southern District of New York to enter into a postpetition credit agreement with Leucadia National Corporation. The Debtors convinced the Honorable Prudence Carter Beatty understands they need postpetition financing to continue operating their businesses, and pay wage, utility and rent obligations. Prepetition Secured Credit Agreement The Debtors entered into a prepetition Credit Agreement with a group of lenders in September 2000. JPMorgan Chase Bank serves as the collateral agent. The debt is secured by a first priority lien on substantially all of the Debtors' personal property, including cash and equity interests in other Debtors. Leucadia National acquired the Lenders' under the prepetition secured credit agreement in December 2003. As of the petition date, the Debtors owed $156 million plus accrued interest under the Prepetition Facility. Postpetition Credit Agreement Leucadia National will provide ATX Communications and its affiliates with $5 million of DIP financing to enable the Debtors to continue their businesses operations and maximize the value of their business and property. The Debtors believe that Leucadia's financing arrangement is the most favorable financing available under the circumstances. All borrowings under the Leucadia-backed DIP Facility will be secured by superpriority liens pursuant to 11 U.S.C. Sec. 364. Headquartered in Cynwyd, Pennsylvania, ATX Communications -- http://www.atx.com/-- is a local exchange and interexchange carrier providing integrated voice and date services, and operates a nationwide asynchronous transfer mode network. The Company and its affiliates filed for chapter 11 protection on January 15, 2004 (Bankr. S.D.N.Y. Case Nos. 04-10214 through 04-10245). Paul V. Shalhoub, Esq., and Marc Abrams, Esq., at Willkie, Farr, & Gallagher LLP, represent the Debtors in their restructuring efforts. When ATX filed for protection from their creditors, it listed $160,231,000 in total assets and $329,906,000 in total debts. AUTONATION INC: Moody's Rates $200 Mil. Sr. Secured Facility Ba2 ---------------------------------------------------------------- Moody's Investors Service assigned a Ba2 rating to AutoNation, Inc.'s new $200 million senior secured credit facility due 2005 and affirmed the company's existing ratings based on the company's continued strong operating metrics, strong and steady cash flow from continuing operations and settlement of tax liabilities. The ratings outlook remains positive. This rating is assigned: * $200 million senior secured credit facility due 2005, Ba2. These ratings are affirmed: * $300 million senior secured credit facility due 2006, Ba2; * $450 million senior unsecured notes due 2008, Ba2; * Senior implied rating, Ba1; * Senior unsecured issuer rating, Ba3; * Speculative grade liquidity rating, SGL-2. This rating is withdrawn: * $200 million senior secured credit facility due 2004, Ba2. There are no outstanding borrowings under the new $200 million senior secured credit facility or the $300 million senior secured credit facility. Moody's does not rate the company's $3.9 billion floorplan facility ($3.2 billion outstanding as of June 30, 2004) or the company's $400 million mortgage facility ($324 million outstanding as of June 30, 2004). The ratings reflect: (i) the competitive, fragmented and low margin nature of the auto retailing business, and (ii) the dependence of new car sales on general economic conditions and the level of auto manufacturer incentives. Ratings are also constrained by AutoNation's past financial policies including large share repurchases and significant contingent liabilities. AutoNation's business mix is weighted more heavily to domestic, mass market brands than some of its competitors and the company has tended to exhibit flat to slightly down same store new vehicle sales growth in many recent quarters. Profit margins could also be negatively impacted if interest rates rise, causing floorplan financing costs to increase. The ratings are supported by expectations that AutoNation will sustain the level of operational improvements seen over the last few years and continue to maintain industry leading margins. Ratings also reflect the expectation that AutoNation will have a measured and moderate program of acquisitions and share repurchases that will be primarily financed by the company's strong, steady cash flow generation capabilities. Cash flow generation is assisted by the company's highly profitable parts & service and finance & insurance businesses as well as by the company's highly variable cost structure. The positive outlook reflects the successful settling of tax liabilities relating to tax audits with a defined schedule of future payments. The company has continued to improve its operating metrics and is a significant free cash flow generator. Moody's believes that these gains will be sustained, even with a moderate increase in acquisition activity. As of June 30, 2004, AutoNation's adjusted debt/EBITDAR was: * 1.8x (with floorplan debt treated as payables), and * 5.2x (with floorplan debt). Total coverage was: * 7.5x (with floorplan debt treated as payables), and * 4.6x (with floorplan debt). For fiscal 2005, RCF/total debt is projected at: * 33% (with floorplan debt treated as payables), and * 13% (with floorplan debt), excluding extraordinary items. AutoNation's ratings could be upgraded if AutoNation continues to manage the company in a prudent and conservative manner and maintains ratios in the current ranges over the next few quarters. With floorplan debt treated as payables, an upgrade would be possible if the company maintains credit ratios such that adjusted debt/ EBITDAR is less than 2x, total coverage is greater than 7x and RCF/adjusted debt (excluding extraordinary tax payments) is 25% or greater. With floorplan treated as debt, an upgrade would be possible if the company maintains credit ratios such that adjusted debt/EBITDAR is less than 4.5x, total coverage is greater than 4x and RCF/adjusted debt (excluding extraordinary tax payments) is 10% or greater. A downgrade appears unlikely for AutoNation given it strong operating performance and credit metrics. Significant changes in financial policy and performance with non-vehicle debt rising above contemplated levels would be required for ratings to fall. Moody's rates AutoNation with a good speculative grade liquidity rating of SGL-2. Moody's believes that AutoNation's internally generated cash flow will be able to fund most of its capital expenditures, acquisitions and share repurchases. The company has significant sources of financing available under its bank facilities and floorplan financing, as well as additional capacity for mortgage financing. The company should comply comfortably with its covenants. The new as well as the existing bank facilities are guaranteed by AutoNation's direct and indirect subsidiaries. The facilities are secured by stock of direct subsidiaries, which are holding companies for the automobile retail subsidiaries of the borrower. This security is not sufficient in Moody's view to differentiate the rating of the bank facilities from AutoNation's unsecured guaranteed notes. Unsecured obligations are notched down from the senior implied rating because of the floorplan financing, which is secured by inventory, as well as the existence of mortgage debt, which is secured by retail properties. Headquartered in Ft. Lauderdale, Florida, AutoNation is the largest auto retailer in the U.S. For the latest twelve months ended June 30, 2004, AutoNation had sales of $19.7 billion. BAC SYNTHETIC: Fitch's Class D Rating Tumbles to DD from C ---------------------------------------------------------- Fitch Ratings downgraded one class of notes issued by BAC Synthetic CLO 2000-1 Limited, a synthetic balance sheet collateralized loan obligation established by Bank of America Securities CLO Corporation II to provide credit protection on a $10 billion portfolio of investment grade, corporate debt obligations. This rating action has been taken: -- $100,000,000 class D notes downgraded to 'DD' from 'C'. Bank of America has elected to terminate the swap. Under the terms of the transaction, Bank of America has the option to terminate the transaction beginning Oct. 14, 2003 and on each April and Oct. 14 thereafter. The class D notes will only receive $87,400,000. Classes A, B, and C have received their full principal, and class E was completely written down in October 14, 2003. BAM! ENTERTAINMENT: Nasdaq Halts Stock Trading in SmallCap Market ----------------------------------------------------------------- BAM! Entertainment, Inc.'s (Nasdaq: BFUN) common stock will cease trading on The Nasdaq SmallCap Market effective with the open of business on Friday, Oct. 15, 2004. The Company received a written notice of Compliance Determination on Oct. 13, 2004, from the Nasdaq Listing Qualifications Department stating that the Company's common stock is being delisted. As previously disclosed, the Nasdaq Listing Qualifications Panel determined by decision dated May 26, 2004, to continue the listing of the Company on The Nasdaq SmallCap Market pursuant to an exception. Specifically, on or before Sept. 30, 2004, the Registrant was required to publicly file its annual report on Form 10-K for the fiscal year ended June 30, 2004, evidencing shareholders' equity of at least $2,500,000. The Registrant failed to timely file the Form 10-K evidencing compliance with the terms of the exception. The Company anticipates that its common stock will continue to be quoted on the Pink Sheets Electronic Quotation Service following its delisting from Nasdaq. The Company's common stock may also become eligible for quotation on the OTC Bulletin Board if a market maker applies to register the stock in accordance with the applicable SEC rules, and if the application is cleared, neither of which is assured. The Company will release further timing and trading symbol information with regard to this when it becomes available. About BAM! Founded in 1999 and based in San Jose, California, BAM! Entertainment, Inc. is a developer, publisher and marketer of interactive entertainment software worldwide. The Company develops, obtains, or licenses properties from a wide variety of sources, including global entertainment and media companies, and publishes software for video game systems, wireless devices, and personal computers. More information about BAM! and its products can be found at the company's web site located at http://www.bam4fun.com/ At March 31, 2004, BAM! Entertainment's balance sheet shows a stockholders' deficit of $3,104,000, compared to a deficit of $3,260,000 at June 30, 2003. BRIAZZ, INC.: Wants Plan-Proposal Period Stretched to December 4 ---------------------------------------------------------------- Briazz, Inc., reminds the Honorable Philip H. Brandt that its post-petition financing arrangement includes a covenant requiring the Company to file a chapter 11 plan that the DIP Lender doesn't find objectionable. Any objectionable plan triggers an immediate default under the DIP Facility. Cynthia A. Kuno, Esq., at Crocker Kuno Ostrovsky LLC, tells Judge Brandt that Briazz's Restructuring Officer, William L. Zang, has been in active negotiations with representatives of the lender and other secured parties in an attempt to develop capital to successfully reorganize the Debtor. In the meantime, the Debtor continues to make operational adjustments in order to make the business financially viable. While the Debtor is moving toward formulating a confirmable Plan, it is impossible to file a confirmable plan today. The Debtor has a number of secured creditors that are pari passu with each other with a blanket security interest against the Debtor's asset. The majority of these creditors have been working cooperatively with each other and the Debtor; however there is one dissenting secured creditor. To continue negotiations without the distraction that another party-in-interest will attempt to file a chapter 11 plan, Briazz asks the Court for an extension of its exclusive periods pursuant to 11 U.S.C. Sec. 1121. Specifically, the Debtor asks that its exclusive plan-filing period be extended through December 4, 2004. Briazz asks that its exclusive period to solicit acceptances of that plan be extended through February 2, 2005. Judge Brandt will hold a hearing on October 28, 2004, to consider the Debtor's request. Objections, if any, must be filed and served by October 22, 2004. Headquartered in Seattle, Washington, Briazz Inc. -- http://www.briazz.com/-- serves fresh, high-quality lunch and breakfast foods and between-meal snacks from company owned cafes in urban markets. The Company filed for chapter 11 protection (Bankr. W.D. Wash. Case No. 04-17701) on June 7, 2004. Cynthia A. Kuno, Esq., and J. Todd Tracy, Esq., at Crocker Kuno Ostrovsky LLC, represents the Company in its restructuring efforts. When the Debtor filed for protection from its creditors, it listed $5,400,000 in assets and $12,200,000 in liabilities. BUSH INDUSTRIES: Hires Standard & Poor as Valuation Consultant -------------------------------------------------------------- The U.S. Bankruptcy Court for the Western District of New York gave Bush Industries, Inc., permission to employ Standard & Poor's Corporate Value Consulting as its valuation consultant and expert. The Debtor tells the Court that it specifically hired Standard & Poor as its valuation consultant for the specific purpose of analyzing the fair market value of the Company's three primary operating business units: * Bush North America, * Bush Europe, and * Bush Technology. The Debtors explains that Standard & Poor's analysis of these three business units is based upon the premise that each of them will continue to operate under the Debtor's reorganization process. Standard & Poor will use an income approach and a market approach in determining the fair market value of the three business units. Gary T. Frantzen, Managing Director at Standard & Poor, is the lead professional in charge of the valuation consulting services to be provided by the Firm to the Debtor. Mr. Frantzen discloses that the Debtor paid a $10,000 retainer, and Standard & Poor will bill the Debtor $40,000 for its services. Mr. Frantzen adds that any other professional fees and expenses will be billed in the final invoice the Firm will submit to the Debtor upon the project's completion. Headquartered in Jamestown, New York, Bush Industries, Inc., -- http://www.bushindustries.com/-- is engaged in the manufacture and sale of ready-to-assemble furniture under the Bush, Eric Morgan and Rohr trade names and production of after market accessories for cell phones. The Company filed for chapter 11 protection on March 31, 2004 (Bankr. W.D.N.Y. Case No. 04-12295). Garry M. Graber, Esq., at Hodgson Russ LLP, represents the Debtor in its restructuring efforts. When the Company filed for protection from its creditors, it listed $53,265,106 in total assets and $169,589,800 in total debts. CATHOLIC CHURCH: Tucson Wants to Maintain Existing Bank Accounts ---------------------------------------------------------------- The United States Trustee has established certain operating guidelines for debtors-in-possession. The guidelines enable the U.S. Trustee to better supervise the administration of Chapter 11 cases. One of the guidelines requires Chapter 11 debtors to close all existing bank accounts and open new debtor-in-possession bank accounts. However, Susan G. Boswell, Esq., at Quarles & Brady Streich Lang LLP, in Tucson, Arizona, points out that courts have long recognized that the strict enforcement of bank account closing requirements does not serve the rehabilitative purposes of Chapter 11. Courts regularly have waived the requirements and permitted debtors to maintain their existing bank accounts and cash management systems, treating this request as a relatively "simple matter." Existing Accounts As of the Petition Date, the Roman Catholic Church of the Diocese of Tucson maintained one operating account and one payroll account at Bank One, N.A., and one account at Wells Fargo Bank. The Operating Account is the account through which all deposits and payment activity occurs. The Payroll Account is utilized for payroll for the employees of the Diocese. By limiting the number of its bank accounts to the minimum necessary to carry out its functions, the Diocese reduce the complexity of its cash management system and the accompanying risk of error and loss. Ms. Boswell contends that the U.S. Trustee's Guidelines do not have the force of law, and the Court may excuse compliance with certain of them. Ms. Boswell explains that all parties-in- interest, including employees, trade vendors, and employees and parishioners of the nine counties within the Diocese, will be best served by preserving operational continuity and avoiding the disruption and delay to payroll and to the Diocese's financial activities that would necessarily result from closing the Diocese's Existing Accounts and opening of new accounts. Accordingly, the Diocese asks Judge Marlar for permission to maintain and continue using its Existing Accounts in the names and with the account numbers existing immediately before the Petition Date. The Diocese also seeks authority to deposit funds in and withdraw funds from, any accounts by all usual means, including, but not limited to, checks, wire transfers, automated clearinghouse transfers, electronic funds transfers and other debits, and to treat the Existing Accounts for all purposes as debtor-in- possession accounts. Further, the Diocese wants the banks at which it maintains Existing Accounts, subject to and in accordance with the terms of any account agreements and applicable non-bankruptcy law, authorized and directed to accept and honor all representations or instructions from the Diocese as to which checks, drafts, wire transfers, or other transfers should be honored or dishonored. The Diocese also asks Judge Marlar to give its banks absolute authority to follow the representations and instructions, regardless of the particular transferee named on an item, the date of the item, and the banks' knowledge or belief as to the existence of Bankruptcy Court authorization for the transfer, provided that the banks are not required to honor any item as to which there are insufficient funds in the applicable account. Separate Tax Account The Diocese believes that its tax obligations can be paid most efficiently out of its Existing Accounts. The Diocese's monthly operating reports will also permit the U.S. Trustee to monitor tax payments. Ms. Boswell also tells Judge Marlar that the creation of new debtor-in-possession accounts designated solely for tax obligations is unnecessary and inefficient. Therefore, the Diocese ask the Court to waive the U.S. Trustee's Guideline requiring it to establish specific bank accounts for tax payments. The Diocese reserves the right to close certain of the Existing Accounts and open new debtor-in-possession accounts as may be necessary to facilitate the Diocese's Reorganization Case and operations, on notice to the U.S. Trustee. The Roman Catholic Church of the Diocese of Tucson filed for chapter 11 protection (Bankr. D. Ariz. Case No. 04-04721) on September 20, 2004, and delivered a plan of reorganization to the Court on the same day. Susan G. Boswell, Esq., Kasey C. Nye, Esq., at Quarles & Brady Streich Lang LLP, represent the Tucson Diocese. The Archdiocese of Portland in Oregon filed for chapter 11 protection (Bankr. Ore. Case No. 04-37154) on July 6, 2004. Thomas W. Stilley, Esq. and William N. Stiles, Esq. of Sussman Shank LLP represent the Portland Archdiocese in its restructuring efforts. Portland's Schedules of Assets and Liabilities filed with the Court on July 30, 2004, the Portland Archdiocese reports $19,251,558 in assets and $373,015,566 in liabilities. (Catholic Church Bankruptcy News, Issue No. 7; Bankruptcy Creditors' Service, Inc., 215/945-7000) CBD MEDIA: Planned Debt Increase Cues S&P' to Watch B+ Rating ------------------------------------------------------------- Standard & Poor's Ratings Services placed its ratings on Cincinnati, Ohio-based telephone directories publisher CBD Media LLC, including its 'B+' corporate credit rating, on CreditWatch with negative implications. Total debt outstanding at June 30, 2004, was $297 million. The CreditWatch listing follows CBD Media's announcement that it plans on increasing its term loan by approximately $25 million, and that its parent, CBD Holdings LLC, is considering a private placement of senior notes of up to $100 million. The proceeds from these offerings are expected to be used to pay a dividend to CBD Holdings' equity sponsors. As a result of the proposed transactions, the company's debt leverage will rise to a level that is above Standard & Poor's previous expectations. "In resolving our CreditWatch listings, we will review the company's pro forma capital structure, and management's and the equity sponsor's near-and longer-term growth objectives," said Standard & Poor's credit analyst Emile Courtney. If a downgrade for CBD were the outcome of Standard & Poor's analysis, it would be limited to one notch. CENTERPOINT ENERGY: Extends AT&T Relationship with $7.8 Mil. Pact ----------------------------------------------------------------- AT&T has won a $7.8 million integrated networking contract from CenterPoint Energy, one of the largest combined electricity and natural gas delivery companies in the nation. The three-year agreement renews a longstanding relationship between the two companies. CenterPoint Energy's diverse business units provide electric transmission and distribution, natural gas distribution and sales, interstate pipelines and gathering operations and more than 14,000 megawatts of power generation in Texas. CenterPoint Energy will rely on AT&T Toll-Free Service to help the company elevate service for its 5 million customers. As part of a trend-setting policy in Arkansas designed to make customer service a priority, CenterPoint Energy has pledged to answer at least 80 percent of incoming calls within 30 seconds. CenterPoint Energy's "80/30 rule" applies across all its business lines. "Our customers demand a high level of reliability and service from us and those demands are amplified when they reach out to us on the phone," said Mike Cline, CenterPoint director of information technology. "The communications network AT&T provides plays an important role in helping us to conduct business with integrity, accountability, initiative and respect." In addition to toll-free services, the contract covers calling card, frame relay, private line and Internet access services. CenterPoint Energy enjoys a single point of contact for all voice and data services, streamlined billing and discounts across the full array of services through AT&T OneNetr Service. Additionally, through the secure AT&T BusinessDirectr portal, CenterPoint Energy gains around-the-clock online access to tools that provide real- time reports on network performance and direct access to AT&T's ordering, billing and payment, status, inventory and trouble management systems. About AT&T For more than 125 years, AT&T (NYSE "T") -- http://www.att.com/-- has been known for unparalleled quality and reliability in communications. Backed by the research and development capabilities of AT&T Labs, the company is a global leader in local, long distance, Internet and transaction-based voice and data services. About CenterPoint Energy CenterPoint Energy, Inc., (NYSE: CNP - News), headquartered in Houston, Texas, is a domestic energy delivery company that includes electric transmission & distribution, natural gas distribution and sales, interstate pipeline and gathering operations, and more than 14,000 megawatts of power generation in Texas, of which approximately 2,500 megawatts are currently in mothball status. The company serves nearly five million metered customers primarily in Arkansas, Louisiana, Minnesota, Mississippi, Oklahoma, and Texas. Assets total over $21 billion. With more than 11,000 employees, CenterPoint Energy and its predecessor companies have been in business for more than 130 years. For more information, visit the Web site at http://www.CenterPointEnergy.com/ * * * Fitch Ratings anticipates no immediate changes in CenterPoint Energy, Inc.'s credit ratings or Rating Outlook following the disclosure that CenterPoint Energy could incur an after-tax charge of approximately $1.0 billion based on CenterPoint Energy's management assessment of pending true-up deliberations by the Public Utility Commission of Texas -- PUCT. Fitch currently rates CenterPoint Energy's senior unsecured debt 'BBB-' and its trust- preferred securities 'BB+'. The Rating Outlook for CenterPoint Energy is Negative. The conclusion of the true-up proceeding and subsequent securitization of stranded costs is the second of two anticipated deleveraging events factored into Fitch's ratings for CenterPoint Energy and its two wholly owned subsidiaries: * CenterPoint Energy Houston Electric, LLC (CEHE; 'BBB' general mortgage bonds, Negative Outlook); and * CenterPoint Energy Resources Corp. (CERC; 'BBB' senior unsecured, Negative Outlook). The first was the definitive agreement reached by CenterPoint Energy on July 21, 2004 to sell its 81% interest in Texas Genco Holdings for after-tax cash proceeds of $2.5 billion in a two-step transaction expected to be completed by early 2005. CenterPoint Energy's announcement of the potential after-tax charge reflects the wide gap between CenterPoint Energy's claimed true-up amount of $3.7 billion (excluding interest) and CenterPoint Energy's understanding of the current Public Utility Commission position, which could reduce the final true-up balance to as low as $1.7 billion or approximately $2.0 billion with accrued interest. Fitch estimates that a settlement based on current Public Utility Commission deliberations, combined with the anticipated TGN sale proceeds would delever CenterPoint Energy's consolidated balance sheet by at least $4.5 billion, a level consistent with the current ratings of CenterPoint Energy, CenterPoint Energy Houston, and CenterPoint Energy Resources. However, the scale of differentials between the respective positions of CenterPoint Energy and the PUCT increase the likelihood that protracted litigation could significantly delay the timing and ultimate receipt of securitization proceeds available to CenterPoint Energy. Fitch continues to monitor CenterPoint Energy's true-up proceeding and will consider revising the Rating Outlook to Stable once the outcome of the PUCT review becomes more clearly defined. Importantly, cash proceeds from the TGN sale will provide a liquidity backstop against CenterPoint Energy's 2005-2006 debt maturity profile in the event that the stranded cost recovery process were to experience a prolonged delay. CHECKERED FLAG: Case Summary & Largest Unsecured Creditor --------------------------------------------------------- Debtor: Checkered Flag Repair LLC P.O. Box 456 Thornburg, Virginia 22565 Bankruptcy Case No.: 04-39485 Type of Business: The Debtor is a supplier and dealer of contractor's equipment. Chapter 11 Petition Date: October 12, 2004 Court: Eastern District of Virginia (Richmond) Judge: Douglas O. Tice Jr. Debtor's Counsel: M. Maxine Cholmondeley, Esq. Cholmondeley & Associates, P.C. 6767 Forest Hill Avenue, Suite 103 Richmond, VA 23225 Tel: 804-320-4427 Total Assets: $1,080,000 Total Debts: $988,885 Debtor's Largest Unsecured Creditor: Entity Nature Of Claim Claim Amount ------ --------------- ------------ Treasurer for Real estate taxes for $4,885 Spotsylvania County 2003, 2004 CITIZENS ENTERPRIZES: List of 16 Largest Unsecured Creditors ------------------------------------------------------------ Citizens Enterprizes, Inc., released a list of its 16 Largest Unsecured Creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ Citizens National Bank Purchase Money $939,079 6002 South West Blvd. Fort Worth, TX 76109 Zion's Bank Purchase Money $1,090,733 P.O. Box 26304 Value of Collateral: Salt Lake City, UT 84126 $715,183 Mohammad & Sharon Siddique loans to corporation $348,768 7200 Waldon Court Colleyville, TX 76034 Bank of America line of credit and $56,773 overdrawn account Greensboro, NC 27420 Citizens National Bank Purchase Money $56,564 CitiCapital Purchase of car wash $60,000 equipment Value of Collateral: $5,000 Jody and Shemila loan to corporation $26,000 CD Harnett Purchase of grocery $5,380 supplies Comptroller of Public Affairs Sales Taxes $3,762 Aqua-Pro Carwash Carwash repairs $2,417 Gulf Coast Marketing Purchase of $1,931 merchandise Zep Manufacturing Purchase of $1,396 janitorial supplies Royal Cup Purchase of grocery $712 Supplies Coca Cola Enterprises Purchase of groceries $128 Small Business Administration Guaranty of Citizens $0 National Headquartered in Hillsboro, Texas, Citizens Enterprizes, Inc. filed for chapter 11 protection (Bankr. W.D.N.Y. Case No. 04-62213) on October 1, 2004. Erin B. Shank, Esq., at Erin B. Shank, P.C., represents the Company in its restructuring efforts. When the Debtor filed for protection from its creditors, it listed estimated assets of more than $500,000 and debts of more than $1 Million. COMMERCE ONE: Two Creditors Offer $4.1 Million to Buy Assets ------------------------------------------------------------ Commerce One Inc. tells the U.S. Bankruptcy Court for the Northern District of California, San Francisco Division, that it's received a $4.1 million offer from Commerce Asset Corp. to purchase substantially all of its assets. Subject to higher and better offers that might emerge in a competitive bidding process, Commerce One asks the Court for authority to do the deal and to approve a sale transaction under Sec. 363 of the Bankruptcy Code. This isn't a cash deal. Commerce Asset Corp. -- a joint venture between ComVest Investment Partners II and DCC Ventures LLC, two of Commerce One's largest creditors -- proposes to forgive $4.1 million of debt in exchange for Commerce One's assets. Commerce One owes about $5.1 million to its secured creditors. The Debtors propose that any competing bids must be delivered by Nov. 4, 2004, and top Commerce One's offer by $50,000. In the event Commerce Asset is outbid, the Debtors propose to pay Commerce One a $400,000 Breakup Fee. Commerce One thinks these bidding procedures and protections are entirely reasonable. Headquartered in San Francisco, California, Commerce One, Inc. -- http://www.commerceone.com/-- provides software services that enable businesses to conduct commerce over the Internet. Commerce One, Inc., and its wholly owned subsidiary, Commerce One Operations, Inc., filed for chapter 11 protection on Oct. 6, 2004 (Bankr. N.D. Calif. Case Nos. 04-32820 and 04-32821). Doris A. Kaelin, Esq., and Lovee Sarenas, Esq., at the Law Offices of Murray and Murray, represent the Debtors. When the Debtors filed for bankruptcy, they listed $14,531,000 in total assets and $12,442,000 in total debts. COOPER COMPANIES: Moody's Places Ba3 Ratings on Planned Facilities ------------------------------------------------------------------ Moody's Investors Service assigned Ba3 ratings to the proposed credit facilities of The Cooper Companies, Inc. Moody's also assigned a Ba3 senior implied rating, a B1 senior unsecured issuer rating, and an SGL-2 speculative grade liquidity rating to the company. The outlook for the ratings is stable. This is the first time Moody's has rated Cooper. New Ratings: * $275 Million 5 Year Senior Secured Revolving Credit Facility, rated Ba3 * $325 Million 5 Year Senior Secured Term Loan A, rated Ba3 * $150 Million 7 Year Senior Secured Term Loan B, rated Ba3 * Senior Implied Rating, rated Ba3 * Senior Unsecured Issuer Rating, rated B1 * Speculative Grade Liquidity Rating, rated SGL-2 The outlook for the ratings is stable. The ratings reflect: (i) the company's high leverage, integration risks associated with the Ocular Sciences, Inc. acquisition, and (ii) the company's aggressive growth strategy and continued interest in acquisitions. The ratings further reflect: (i) the highly competitive environment, (ii) the company's limited size relative to its competitors, and (iii) its primary focus on a single line of business. Credit strengths considered by Moody's include: (i) Cooper's strong historical performance and Ocular's favorable performance trends, (ii) the strong growth anticipated for the soft contact lens industry, (iii) the company's solid competitive position, and (iv) the company's history of success in acquiring and integrating companies. Additional factors recognized include the company's favorable product mix, which is more weighted toward specialty lenses than its competitors' mixes, and a degree of stability in revenue driven by the limited amount of switching of products by eye care professionals. The SGL-2 liquidity rating incorporates Moody's expectation for Cooper to generate more than sufficient cash flow from operations to fund capital expenditures, debt service and common dividends over the next twelve months ending October 31, 2005. Moody's believe the company will, in aggregate, generate free cash flow over the period, even after taking into consideration the high capital expenditures required by the company for growth. However, due to a seasonally weak first fiscal quarter, Cooper may not be able to generate sufficient cash flow to cover its cash requirements for the quarter ending January 31, 2005. The company may need to draw down slightly on its revolver. Moody's notes that the company's inability to fully self-fund all requirements during every period over the rating horizon limits the strength of the SGL rating. The SGL rating also takes into consideration the committed source of external funding for the company. Following the close of the transaction, the company will have $85 million of availability under its $275 million revolver. Moody's believes the amount of availability to be good additional liquidity, but not sufficient to provide strong liquidity for the company. Moody's expects the company to be comfortably in compliance with financial covenants, and will maintain access to its revolving credit facility. The financial covenants include: * maximum total leverage, * maximum senior leverage, * minimum fixed charge coverage, and * maximum debt to total capitalization ratios. The stable outlook is based on Moody's expectation for continued positive trends at the combined entity, but also reflects our concern that the company may not delever rapidly enough over the next two years to warrant a change in the ratings. Moody's anticipates continued top line growth for the company in the 10% range, driven by high single digit industry growth and minor acquisitions. Moody's expect EBITDA margins to be stable in the 28% range. The company should be able to offset margin pressure resulting from a geographic mix shift and a shift in mix to daily disposables lenses through improved manufacturing efficiencies, growth in the sales of higher margin specialty lenses, and acquisition synergies. However, Moody's is uncertain whether Cooper will be able to achieve the amount of synergies the company is anticipating, or how successful the company will be in improving operating efficiencies in sales, marketing, general and administrative functions. Moody's forecasted margins incorporate only minor benefits from the potential synergies and increase in operating efficiencies. Regardless, EBITDA and cash flow and free cash flow should continue to trend up for the company. Moody's expects the company to utilize at least a portion of free cash flow over the near term to reduce leverage. The company is currently at the higher end of its target leverage, with the ratio of debt to capital at the close of the transaction expected to be approximately 42%. However, Moody's also expects the company to continue to be active in acquisitions, particularly in the women's health business. Acquisitions may limit the company's ability to delever over the near term. If the company is successful in achieving margins in excess of our estimate over the next year to two years, cash flow improves accordingly, and leverage metrics improve, Moody's may consider changing the outlook or ratings. Prior to upgrading the company's ratings, Moody's would require the company to show sustainable free cash flow generation in the range of 15%-20% of total debt. The stable outlook anticipates the successful integration of Ocular. Cooper has demonstrated historically its ability to integrate acquired companies. However, Ocular is by far the largest acquisition ever attempted by the company. If the company encounters significant problems, particularly ones that may affect sales, Moody's may consider taking a negative rating action. The ratings and outlook assume individual acquisitions will not exceed $200-$250 million until the company has made significant progress in integrating Ocular. If the company does engage in transactions of that size, regardless of how the company intends to finance the deal, Moody's may downgrade the company's ratings due to a further increase in integration risks. In addition, the ratings may be downgraded if Moody's anticipates free cash flow coverage of debt will fall below 10% for a sustained period (approximately 18 months or more) as a result of acquisition activity. On July 28, 2004, Cooper announced that it has signed a definitive agreement for Cooper to acquire Ocular Sciences, Inc. Cooper will acquire Ocular for $44 per share of common stock, for a total purchase price of approximately $1.2 billion. The transaction will be funded with a combination of Cooper stock and approximately $600 million in cash. The transaction is expected to close in November. The company will finance the cash portion of the transaction, as well as refinance some existing debt, through proceeds from the new credit facilities. The credit facilities will consist of a $275 million revolver and $475 million of term loans. We expect the company to draw down $190 million on the revolver at the close of the transaction. The credit facilities represent most of the company's debt capital structure. As a result, Moody's rated the bank debt at the same level as the senior implied rating. Following the transaction, Cooper's level of debt will increase from $170 million at July 31, 2004 to $778 million. Pro forma free cash flow coverage of debt would decline to 7% from 24% for the twelve month period ended July 31, 2004. Pro forma adjusted debt to EBITDAR is estimated at 4.0 times, although pro forma interest coverage would be 6.3 times for the same twelve-month period. The company's free cash flow initially will be modest relative to debt. However, the company's liquidity will be good and will not be a concern. Over the next year to two years, Moody's expects free cash flow coverage to improve to at least the low teens range. Moody's also expect adjusted debt to EBITDAR to approach and drop below 3.0 times. As a result of the combination, Cooper's market position will improve to third place, ahead of Bausch & Lomb, from fourth place. Cooper will gain strength in the international markets, and will be able to penetrate more significantly the world's second largest contact lens market in Japan. The company will broaden it product portfolio and gain strength in the non-specialty lens segment as well. While the non-specialty lens business has lower growth, lower margins, and is more sensitive to pricing, it still represents over 70% of the industry. Moreover, Cooper will enhance its distribution network, with increased presence in the retail optical chain and mass merchandising optical shop markets. The acquisition will increase the company's size and scale, and broaden its product line. However, it will also increase the company's focus on the soft contact lens business. Cooper will generate close to 88% of sales from this segment, as compare to 80% prior to the transaction. The fundamentals for the industry are currently strong. Nonetheless, this reliance on primarily a single line of business is a limiting factor for the rating. Moody's notes that while the company may hold the #3 market position in an industry dominated by four competitors, it is well positioned to compete. It is strong in the higher margin, higher growth specialty lens segment, with 29% of the market (second largest market share). It is the leader in toric lenses, with approximately 35-40% market share and a considerably broader offering compared to competitors. Historically, the company has been gaining market shares from competitors due to a strong product portfolio. The Cooper Companies, headquartered in Pleasanton, California, manufactures and markets soft contact lenses worldwide. The company also manufactures diagnostic products, surgical instruments, and accessories for women's healthcare. For the twelve months ended July 31, 2004, the company generated approximately $470 million of revenues. COVENTRY HEALTH: Merger Plans Cue Fitch to Put BB Ratings on Watch ------------------------------------------------------------------ Fitch Ratings placed Coventry Health Care Inc.'s 'BB' long-term and senior unsecured debt rating on Rating Watch Negative. The rating action affects approximately $170.5 million of debt. The rating action follows Coventry's announcement that it intends to purchase First Health Group Corp., a national health benefits company serving group health, worker's compensation, and state public programs. Coventry intends to finance the expected purchase price of $1.8 billion with a combination of approximately $900 million of new debt and existing cash and $900 million of company stock. While the merger is expected to provide opportunities for diversification and network synergies, Fitch's concerns include the sizable amount of debt added to the balance sheet and additional debt burden associated with such financing and the integration risks Coventry faces in combining the two companies. On a pro forma basis, Fitch expects: * Coventry's debt-to-total capitalization to increase from 13.4% to over 34%, and * debt-to-EBITDA to increase from 0.3 times (x) to the 1.3x- 1.4x range. Fitch expects to resolve the Rating Watch status on or before the close of the transaction. Fitch's review will primarily focus on the integration challenges associated with the transaction. Fitch does not rate First Health. Coventry is a publicly traded managed health care company serving approximately 2.4 million members primarily in the Mid-Atlantic, Midwest, and Southeast regions. Coventry reported total revenue of $3.9 billion and stockholders equity of $2 billion at September 30, 2004. The ratings below were initiated by Fitch as a service to users of Fitch. The rating is based primarily on public information. CSFB MORTGAGE: Moody's Reviewing Ba2 Rating on Class B-2 Tranche ---------------------------------------------------------------- Moody's placed 11 tranches from CSFB Mortgage securitizations under review for possible upgrade. The rating review is based on an evaluation of outstanding Closed End Second deals. Moody's review will focus on historical performance of the deals and an examination of the current credit support levels, which are mainly derived from subordination, excess spread, and insurance when applicable. The relative level of credit enhancement has increased in these deals due to rapid prepayments and the deal's lock-out provisions. In addition, while the current economic environment caused some financial strain on borrowers, recent home price appreciation in most major housing markets has enabled even stressed borrowers to avoid foreclosure by selling their properties prior to any loss being experienced on the mortgage loans. These deals are under review for possible upgrade: Securitization Class Current Rating -------------- ----- -------------- CSFB Mortgage 2001-S13 S-B Baa2 CSFB Mortgage 2001-S18 B-1 Baa3 CSFB Mortgage 2001-S18 B-2 Ba2 CSFB Mortgage 2001-S23 M-2 A2 CSFB Mortgage 2001-S31 M-2 A2 CSFB Mortgage 2002-S6 M-1 Aa2 CSFB Mortgage 2002-S6 M-2 A2 CSFB Mortgage 2002-S12 M-1 Aa2 CSFB Mortgage 2002-S12 M-2 A2 CSFB Mortgage 2002-S12 B-1A Baa2 CSFB Mortgage 2002-S12 B-1B Baa2 DELTA AIR: Amends & Extends Exchange Offer for $680 Million Debt ---------------------------------------------------------------- October 13, 2004 / PR Newswire Delta Air Lines (NYSE: DAL) was amending and extending its offer to exchange up to $680 million aggregate principal amount of three series of newly issued senior secured notes to the holders of $2.6 billion aggregate principal amount of outstanding unsecured debt securities and enhanced pass through certificates. The table below sets forth the various series of unsecured debt securities and enhanced pass through trust certificates for which new notes are being offered. The Short-Term Existing Securities, the Intermediate Existing Securities and the Long-Term Existing Securities are exchangeable for the A-1 New Notes, the A-2 New Notes and the A-3 New Notes, respectively, subject to proration. Delta will not issue more than $235,000,000 aggregate principal amount of A-1 New Notes, $215,000,000 aggregate principal amount of A-2 New Notes and $230,000,000 aggregate principal amount of A-3 New Notes in the exchange offer. SHORT-TERM EXISTING SECURITIES: Outstanding For each $1,000 aggregate Existing principal amount of principal Securities Existing Securities: CUSIP and amount to be Series of ISIN No(s). (1) (2) exchanged Amount New Notes ----------- ----------- ----------- ------ --------- Pass Through $1,000 for 9 1/2% 247367AR6; $238,273,000 Certificates, tenders prior Senior US247367AR60 Series 2000-1C to the Early Secured Tender Date Notes due and $500 for 2008 tenders thereafter Pass Through 247367AV7; $91,782,000 Certificates, US247367AV72 Series 2001-1C INTERMEDIATE EXISTING SECURITIES: Outstanding For each $1,000 aggregate Existing principal amount of principal Securities Existing Securities: CUSIP and amount to be Series of ISIN No(s). (1) (2) exchanged Amount New Notes ----------- ----------- ----------- ------ --------- 24736QAY9; $27,500,000 US24736QAY98 9.250% Notes 10% Senior due 2007 Secured Notes due 2011 247361YT9; $247,772,000 US247361YT90 10.000% Notes due 2008 247361YC6; $499,340,000 US247361YC65; 7.900% Notes $450 247361YF9; due 2009 US247361YF96 247361QN1; $84,665,000 10.125% US247361QN13 Debentures $450 due 2010 247361WG9; $68,725,000 10.375% Notes $450 US247361WG97 due 2011 247367AZ8; $140,824,258 Pass Through US247367AZ86 Certificates, $450 Series 2002-1C LONG-TERM EXISTING SECURITIES: Outstanding For each $1,000 aggregate Existing principal amount of principal Securities Existing Securities: CUSIP and amount to be Series of ISIN No(s). (1) (2) exchanged Amount New Notes ----------- ----------- ----------- ------ --------- 247361AD0; $102,455,000 9.000% $400 12% Senior US247361AD09 Debentures Secured due 2016 Notes due 2014 247361WH7; $105,766,000 9.750% $400 US247361WH70 Debentures due 2021 247361XX1; $63,548,000 9.250% $400 US247361XX12 Debentures due 2022 247361XY9; $54,329,000 10.375% $400 US247361XY94 Debentures due 2022 247361YG7; $924,895,000 8.300% Notes $400 US247361YG79 due 2029 (1) Excludes any amounts held by Delta. (2) In the case of Pass-Through Certificates, Series 2002- 1C, the outstanding aggregate principal amount thereof means the outstanding pool balance of such certificates rather than the face amount of such certificates. "We want to encourage holders to tender early so that we can have a better sense of the success rate of the Exchange Offer earlier in the process. Accordingly, holders of Short-Term Existing Securities who tender at or prior to 11:59 p.m., New York City time, on Oct. 26, 2004, and whose tender is accepted by us, will receive $1,000 principal amount of A-1 New Notes for each $1,000 of Short-Term Existing Securities accepted by us, as opposed to $500 principal amount of A-1 New Notes if they tender after the Early Tender Date. In addition, we are offering to pay to each eligible holder of Intermediate Existing Securities or Long-Term Existing Securities who tenders on or prior to the Early Tender Date, and whose tender is accepted by us, a number of shares of our common stock that, using a per share current market valuation calculation as described below, have an aggregate current market value of: (i) $32.97 for each $1,000 principal amount of Intermediate Existing Securities accepted by us; and (ii) $27.39 for each $1,000 principal amount of Long-Term Existing Securities accepted by us. "We will not be required to issue any shares of our common stock for any Class of Existing Securities unless the Exchange Offer is consummated as to that Class. The number of shares to be issued for each $1,000 principal amount of Intermediate Existing Securities or Long-Term Existing Securities shall be equal to $32.97 or $27.39, respectively, divided by the greater of $3.60 and the average of the volume weighted average prices on the New York Stock Exchange between 9:30 a.m. and 4:00 p.m. for each trading day from and including Oct. 6, 2004, through and including Nov. 3, 2004, as reported by Bloomberg Financial LP (using the DAL Equity AQR function)," the Company said. The New Notes will be secured by a pool of collateral consisting of certain unencumbered aircraft, flight simulators and flight training equipment with an aggregate appraised current market value of $1.2 billion. If only the A-1 New Notes are issued, they will be secured by a pool of unencumbered aircraft with an aggregate appraised current market value of $0.4 billion. The A-1 New Notes will amortize from 2006 through 2008, the A-2 New Notes will amortize from 2009 through 2011 and the A-3 New Notes will amortize from 2012 through 2014. The New Notes will accrue interest from the settlement date at an annual rate of 9.5% in the case of the A-1 New Notes, 10% in the case of the A-2 New Notes and 12% in the case of the A-3 New Notes. Consummation of the exchange offer is subject to a number of significant conditions, which Delta can waive or amend in its sole discretion, including, without limitation: (1) Delta having determined that there are anticipated annual cost savings sufficient for it to achieve financial viability by way of an out-of-court restructuring, including reduction of pilot costs (before employee reward programs) of at least $1 billion annually by 2006 and achievement of other benefits of at least $1.7 billion annually by 2006 (in addition to the $2.3 billion of annual benefits (compared to 2002) expected to be achieved by the end of 2004 through previously implemented profit improvement initiatives) and that it is advisable to consummate the exchange offer with respect to all three series of New Notes or only with respect to the A-1 New Notes, as the case may be, as part of a successful out-of-court restructuring, (2) Delta receiving valid and unwithdrawn tenders of at least 75% of the aggregate principal amount of the Short-Term Existing Securities, at least 75% of the aggregate principal amount of the Intermediate Existing Securities and at least 75% of the aggregate principal amount of the Long-Term Existing Securities, (3) the New York Stock Exchange having approved Delta's application for an exception to the stockholder approval requirement for the issuance of equity in connection with the restructuring, and (4) the absence of certain adverse legal and market developments. The Exchange Offer is also subject to the condition, which may not be waived by Delta, that it has entered into a new contract with the Air Line Pilots Association, International that has been ratified by the ALPA membership that provides, in Delta's judgment, at least $1 billion of annual cost reduction by 2006 (before employee reward programs). The exchange offer will terminate at 5:00 p.m. on Nov. 18, 2004 unless extended. To date, $24,245,000 aggregate principal amount of Short-Term Securities, $18,115,000 aggregate principal amount of Intermediate-Term Securities and $49,932,000 aggregate principal amount of Long-Term Securities have been tendered. Because we have amended the exchange offer, Existing Securities, tendered on or before Oct. 13, 2004 will be returned to the tendering holders, but may be re-tendered. Tenders of securities made on or after Oct. 14, 2004, may not be withdrawn. The offering is being made only to "qualified institutional buyers," as such term is defined in Rule 144A under the Securities Act of 1933, as amended. The New Notes and shares of our Common Stock will not be registered under the Securities Act of 1933, or any state securities laws. Therefore, the New Notes and shares of Common Stock may not be offered or sold in the United States absent an exemption from the registration requirements of the Securities Act of 1933 and any applicable state securities laws. This announcement is neither an offer to sell nor a solicitation of an offer to buy the New Notes or shares of Common Stock. About the Company Delta Air Lines -- http://delta.com/-- is proud to celebrate its 75th anniversary in 2004. Delta is the world's second largest airline in terms of passengers carried and the leading U.S. carrier across the Atlantic, offering daily flights to 493 destinations in 87 countries on Delta, Song, Delta Shuttle, the Delta Connection carriers and its worldwide partners. Delta's marketing alliances allow customers to earn and redeem frequent flier miles on more than 14,000 flights offered by SkyTeam, Northwest Airlines, Continental Airlines and other partners. Delta is a founding member of SkyTeam, a global airline alliance that provides customers with extensive worldwide destinations, flights and services. * * * As reported in the Troubled Company Reporter on Sept. 16, 2004, Delta Air Lines filed a Form 8-K with the Securities and Exchange Commission to make changes in its Annual Report on Form 10-K for the year ended December 31, 2003. The Annual Report is being revised so it may be incorporated into another document. Since Delta filed the Annual Report with the SEC, significant events have occurred which have materially adversely affected Delta's financial condition and results of operations. These events, which have been reported in Delta's subsequent SEC filings, include a further decrease in domestic passenger mile yield and near historically high levels of aircraft fuel prices. The Annual Report has been revised to disclose these events and the possibility of a Chapter 11 filing in the near term. Additionally, as a result of Delta's recurring losses, labor and liquidity issues and increased risk of a Chapter 11 filing, Deloitte & Touche LLP, Delta's independent auditors, has reissued its Independent Auditors' Report to state that these matters raise substantial doubt about the company's ability to continue as a going concern. As reported in the Troubled Company Reporter on August 23, 2004, Standard & Poor's Ratings Services lowered Delta Air Lines, Inc.'s corporate credit rating and the ratings on Delta's equipment trust certificates and pass-through certificates to 'CCC'. Any out-of- court restructuring of bond payments or a coercive exchange would be considered a default and cause the company's corporate credit rating to be lowered to 'D' -- default -- or 'SD' -- selective default, S&P noted. Ratings on Delta's enhanced equipment trust certificates, which are considered more difficult to restructure outside of bankruptcy, were not lowered. DEVLIEG BULLARD: Committee Wants to Examine KPS Under Rule 2004 --------------------------------------------------------------- The Official Committee of Unsecured Creditors appointed in DeVlieg Bullard II Inc.'s chapter 11 proceeding, wants to examine KPS Special Situations Fund L.P., the company's 95% shareholder, pursuant to Rule 2004 of the Federal Rules of Bankruptcy Procedure. The Committee wants to explore KPS' role, if any, in the Debtor's tumble into bankruptcy. The Committee wants KPS to provide a stack of documents and it wants to depose David Shapiro and Stephen Presser. KPS purchased the company out of its prior bankruptcy for around $31.25 million -- $18.5 in cash and the balance in promissory notes. The Committee hints that two notes totaling $16 million KPS delivered to the Company should be recharacterized as equity contributions. Judge Walrath will entertain the Committee's Application at a hearing on Nov. 1, 2004. Objections, if any, must be filed and served by Oct. 20. Headquartered in Machesney Park, Illinois, DeVlieg Bullard II, Inc. -- http://www.devliegbullard.com/-- provides a comprehensive portfolio of proprietary machine tools, aftermarket replacement parts, field service and premium workholding products. The Company filed for chapter 11 protection on July 21, 2004 (Bankr. D. Del. Case No. 04-12097). James E. Huggett, Esq., at Flaster Greenberg, represents the Company in its restructuring efforts. When the Debtor filed for protection from its creditors, it estimated debts and assets of over $10 million. DOANE PET: Moody's Assigns Low-B & Junk Ratings on Debts -------------------------------------------------------- Moody's Investors Service assigned a B2 rating to the prospective senior secured credit facilities of Doane Pet Care Company and downgraded Doane's existing ratings. The prospective credit facilities will refinance Doane's existing credit facilities. The downgrade reflects Moody's expectation of continued high debt levels, as well as refinancing risk related to Doane's senior subordinated notes, which mature in May 2007. Although the prospective credit facilities will strengthen Doane's liquidity profile, and a more favorable commodity price environment is expected to benefit FY05 earnings, Moody's expects Doane's free cash flow to be limited relative to outstanding debt, and debt levels, therefore, to remain high. The ratings outlook is negative pending material positive earnings response to the more favorable commodity cost environment in FY05 and refinancing of the company's senior subordinated notes. Moody's ratings actions were: -- Doane Pet Care Company: * Existing $50 million senior secured revolver -- to B2 from B1, * Existing $165 million senior secured term loans -- to B2 from B1, * Prospective $35 million senior secured revolver -- B2 assigned, * Prospective $195 million term loan -- B2 assigned, * $212 million 10.75% senior unsecured notes, due 2010 -- to B3 from B2, * $150 million 9.75% senior subordinated notes, due 2007 -- to Caa2 from Caa1 -- Doane Products Company: * $98 million redeemable preferred securities -- to Ca from Caa2. * Senior Implied Rating -- to B3 from B2, * Unsecured Issuer Rating -- to Caa1 from B3, * Ratings Outlook -- Negative. Moody's will withdraw its ratings on Doane's existing revolver and term loans, which mature in 2005, when the new credit facilities are closed. Doane's ratings are limited by a weak balance sheet and a high level of debt. Moody's expects free cash flow to remain limited relative to debt, even with some expected earnings improvement. As a result, debt is unlikely to be reduced materially to more manageable levels. In addition, the company will need to refinance its senior subordinated notes, which could be challenging at current debt levels, particularly if earnings improvement lags expectations. The ratings also consider Doane's exposure to volatile commodity input, packaging and fuel costs. While contracts negotiated with customers over the past year provide a mechanism to pass through a portion of commodity cost changes (upward and downward), Moody's believes the company still faces some practical limits on pricing flexibility in the highly competitive pet food segment. The company's products compete with the national brands of some of the nation's largest food and consumer products companies, which have substantial resources and financial flexibility. These companies have higher margins on their branded products than Doane and may choose not to pass on cost increases to gain market share. If private label price increases outpace branded price increases, narrowing the gap between branded and private label product prices, private label volumes can be negatively impacted, as they were during FY04. And, when commodity input costs fall, Wal-Mart and other large food retailers are likely to look for price decreases or other support from their branded and private label suppliers, which may restrain the extent of Doane's ability to significantly improve margins and sustain volume growth in a more favorable cost environment. Doane's ratings gain material support from its dominant position in private label dry pet food in the US, the large scale of its dry pet food manufacturing operations, its distribution reach, and the strength of its relationship with Wal-Mart. Doane is the leading manufacturer of private label pet food, supplying 70% of private label volume in the US, and is the second largest manufacturer of dry pet food in the US, with a 23% volume share of the market. The company has had a long-standing relationship with Wal-Mart and Sam's Club, which account for about 45% of Doane's sales. Doane's business with Wal-Mart is supported by closely tied logistics and an infrastructure positioned to efficiently supply key products, including Wal-Mart's Ol' Roy dog food, the largest selling pet food brand by volume in the US. Doane's ratings also take into account the company's success in moving contracts with its major customers over the past year to a form that shares, on average 50%, of commodity cost movements, which enabled price increases during FY04 and which should help reduce volatility going forward. In addition, the ratings recognize that Doane's European operations (about 26% of sales) could be sold without negative impact on the company's US business platform and could provide opportunity for debt reduction and de- leveraging if sold at a high enough multiple of cash flow. Doane's balance sheet includes a significant component of intangible assets (45%) and common equity is nil. Low returns on assets suggest potential for asset write-downs. Pro forma debt of $583 million represents 7.4x LTM adjusted EBITDA (6/30/04) and 6.8x estimated FY04 adjusted EBITDA. Free cash flow after interest expense, taxes and capital spending is estimated at about 1.5% for FY04. Earnings and cash flow improvement is likely during FY05 due to a more favorable commodity cost environment. However, Moody's expects free cash flow to remain very limited relative to debt, restraining the company's ability to reduce debt levels. Interest coverage is weak, with adjusted EBITDA less capex representing 1.2x cash interest expense. The new credit facility improves liquidity by reducing pricing, extending the maturity, and providing reasonable cushion under financial covenants. The covenants tighten over time, however, which could narrow the cushion if earnings improvement lags expectations. The B2 rating on the senior secured credit facilities is notched up from the senior implied rating to reflect their preferential position in the capital structure. The facilities have upstream and downstream guarantees and are secured by substantially all the domestic assets and stock of the company and its domestic subsidiaries and by 66% of the stock of its foreign subsidiaries. Moody's believes there would be sufficient value for full coverage of outstandings in a distressed scenario. The prospective credit facilities will mature 91 days before the senior subordinated notes or in five years, if the senior subordinated notes are refinanced. The existing facilities mature in 2005. The B3 rating on the unsecured notes is at the senior implied rating, reflecting their position in the capital structure, effectively behind the secured credit facilities, but contractually ahead of the senior subordinated notes. The unsecured notes have downstream guarantees from Doane's domestic subsidiaries. The Caa2 rating on the senior subordinated notes is notched down two levels from the senior implied to reflect their contractual subordination to a large amount of senior debt (the senior secured credit facilities and senior unsecured notes) and Moody's expectation that asset coverage of the subordinated notes would be weak in a distressed scenario, even with realization of a relatively high value for intangible assets. The subordinated notes have downstream guarantees from Doane's domestic subsidiaries. The redeemable preferred stock is notched down two levels from the senior subordinated notes to reflect its junior position in the capital structure. The preferred is at a holding company and does not have downstream guarantees. The cumulative deferred dividends are a growing liability, and the 14.25% dividend will increase in steps to 17.25% if the preferred is not redeemed in September 2007. Doane Pet Care Company is based in Brentwood, Tennessee. DUNE ENERGY: Appoints Marshall Lynn Bass to Board of Directors -------------------------------------------------------------- Dune Energy, Inc. (OTC BB:DENG.OB) reported the appointment of Marshall Lynn Bass to its Board of Directors. Commenting on the appointment, Alan Gaines, Dune's Chairman and CEO, stated, "I am pleased to have the counsel of Mr. Bass on Dune's Board. Mr. Bass brings extensive energy investment banking experience which will be of great value to management and shareholders as we continue to pursue our acquisition strategy." Mr. Bass possesses more than nine-years experience in energy investment banking and consulting, with a particular emphasis on North American natural gas upstream and midstream companies. Mr. Bass currently serves as a Principal with Weisser, Johnson & Co., an energy-focused boutique investment bank based in Houston, Texas. Weisser Johnson was founded in 1991 and that firm has completed M&A transactions and arranged financings approximating $.5 billion. Mr. Bass holds a BS Economics Honors from Purdue University, and an MBA in Finance from Rice University. Dune Energy, Inc. is a diversified energy company with operations presently focused in South Texas. * * * As reported in the Troubled Company Reporter on July 2, 2004, in the audit report of Dune Energy Inc. for the year ended Dec. 31, 2003, the Company's independent auditors stated that the Company's accumulated deficit and working capital deficit raises substantial doubt about the Company's ability to continue as a going concern. The Company needs to raise additional capital to achieve its business objectives. The Company intends to acquire the capital it needs by raising additional funds through the issuance of debt and/or equity securities and by selling to third parties prospects and/or other rights in its interests in the Welder acreage and Los Mogotes. There can be no assurances that the Company will be able to raise additional capital or that the terms on which such capital is raised will be acceptable. Further, there can be no assurances that the Company will be successful in its efforts to sell any interests in its prospects or that the terms of any such transactions will be acceptable. To the extent that the Company relies upon third parties to drill the wells required to maintain its interest in the Welder acreage, its ability to achieve its business objectives will be dependent on the efforts of others. EL COMANDANTE: Case Summary & 43 Largest Unsecured Creditors ------------------------------------------------------------ Lead Debtor: El Comandante Management Company LLC PO Box 1675 Canovanas, Puerto Rico 00729-1675 Bankruptcy Case No.: 04-12972 Debtor affiliates filing separate chapter 11 petitions: Entity Case No. ------ -------- Housing Development Associates, S.E. 04-12973 El Comandante Capital Corporation 04-12974 Type of Business: The Company operates the only thoroughbred racetrack in Puerto Rico. A new on-line betting system (SEA H�pico-Sistema Electronico de Apuestas) allows bettors to place their wagers online with the racetrack. The system include over 675 outlets with room for continued expansion. See http://comandantepr.com/english/informaciongeneral.htm Chapter 11 Petition Date: October 15, 2004 Court: District of Delaware (Delaware) Judge: Peter J. Walsh Debtor's Counsel: Daniel K. Astin, Esq. The Bayard Firm 222 Delaware Avenue, Suite 900 PO Box 25130 Wilmington, Delaware 19899-5130 Tel: 302-655-5000 Fax: 302-658-6395 Estimated Assets Estimated Debts ---------------- --------------- El Comandante Management Company LLC $1M to $10M $1M to $10M Housing Development Associates, S.E. $10M to $50M $50M to $100M El Comandante Capital Corporation $50M to $100M $50M to $100M A. El Comandante Management Company LLC's 21 largest unsecured creditors: Entity Claim Amount ------ ------------ Secretario de Hacienda $2,422,350 [Address not provided] Departamento de Recursos Naturales y Ambiental $48,209 Policom, Incorporated $38,149 PR Telephone Company $28,468 Ranger American of Puerto Rico $26,884 Gould Paper Marketing Corporation $24,642 Landa Umpierre PSC $20,000 The Marketing Center $17,000 Arteaga & Arteaga $14,530 Producciones Paractuar $11,000 Satellite Services International $8,320 Edgar Hernandez Patino $7,853 Atlantic Air Conditioning $3,844 Impact Marketing Corporation $6,940 Incompass $4,510 The Communications Group $4,510 Media Power Group $4,400 Otis Elevator $4,045 PPG Industries, Incorporated $3,742 RGB Broadcast Service Corporation $3,372 Outek Caribbean District, Incorporated $2,959 B. Housing Development Associates, S.E.'s 18 largest unsecured creditors: Entity Claim Amount ------ ------------ Kelley Drye & Warren LLP $40,000 Arthur Andersen LLP $27,280 Infocom, Incorporated $10,000 Municipio de San Juan $4,133 ALAS Business Products, Incorporated $0 Arthur Andersen LLP $0 Covington & Burling $0 Cynthia Rivera Morales $0 Delaware Secretary of State $0 Division of Corporation Depository Trust Company $0 First Bank $0 Gretchen Gronau $0 Ivan Baella $0 Jorge Figueroa $0 Landa Umpierre & CPA Construction $0 Pietrantoni Mendez & Alvarez $0 Policom $0 Wiemann Enterprises LLC $0 C. El Comandante Capital Corporation's 4 largest unsecured creditors: Entity Claim Amount ------ ------------ ADP Investor Communication $0 Banco Popular de Puerto Rico Trust Division $0 CT Corporation System $0 Landa Umpierre $0 ENRON CORP: Judge Gonzalez Approves AES Entities Settlement Pact ---------------------------------------------------------------- Enron Corp., Enron North America Corp., Enron Power Marketing, Inc., Enron Asia Pacific/Africa/China LLC, Enron Capital & Trade Resources International Corp., and Enron Energy Services, Inc., on one hand, and The AES Corporation, Constellation New Energy, Inc., f/k/a AES New Energy, Inc., Central Illinois Lighting Company, AES Deepwater, Inc., AES Eastern Energy, LP, AES Drax Power Ltd., Delano Energy Company, Inc., on the other hand, entered into various contracts underlying master agreements and other agreements that provided for the trading of energy commodities. As credit support for one or more of the Contracts, the Debtors and the AES Entities issued various guaranty agreements. Melanie Gray, Esq., at Weil, Gotshal & Manges, LLP, in New York, relates that the AES Entities filed thirteen claims against the Debtors: Claimant Claim No. Claim Amount -------- --------- ------------ AES Deepwater 19519 $229,750 AES Deepwater 19520 229,750 AES Deepwater 13891 229,750 AES Eastern 18703 713,231 AES Drax 19736 5,498,902 AES Drax 19391 5,498,902 AES Delano 18218 2,434,086 AES Delano 18704 2,434,086 AES Nigeria Barge 23731 7,700,000 AES Barry 19759 2,885,948 AES Indian Queens 15469 37,384 AES Efoots Point 19232 1,916,858 AES Corp. 18566 5,460,586 AES Corp. 19414 5,460,586 AES Ironwood 15400 225,000 AES Ironwood 15401 225,000 On December 10, 2002, EPMI filed an adversary proceeding against CILCO, Constellation and AES, seeking declaratory relief and damages under certain of the Contracts and certain of the AES Guaranties and objecting to the claims. On November 14, 2003, Enron and EESI filed an adversary proceeding, against Cilcorp to avoid and recover transfers. The Debtors and the AES Entities reached an agreement as to the payment of unpaid amounts in connection with the termination of the Contracts and revocation of the Guaranties, to the extent not already terminated or revoked. The Settlement Agreement provides: (a) that CILCO will pay to the Debtors a termination payment; (b) that the Parties will exchange mutual releases of obligations and other specified matters related to the Contracts and Guaranties; and (c) the dismissal of the CILCO and Cilcoro Adversary Proceeding. (d) that each claim filed by or on behalf of any of the AES Entities against any of the Debtors or their affiliates in connection with the Contracts or the Guaranties, will be deemed irrevocably withdrawn with prejudice except for: -- Claim No. 19011 filed by Lake Worth Generation, LLC, against National Energy Production Corporation for $73,537,820 and Claim No. 11287 filed by Constellation against ENA for $5,460,587 will not be withdrawn and will be treated in accordance with the Settlement Agreement; and -- Claim No. 19391 filed by AES Drax against Enron for $5,498,902 will be allowed, provided that any balance including any contingent, disputed or unliquidated amounts, will be disallowed. (e) liabilities scheduled by certain of the Debtors on their Schedules of Assets and Liabilities that are specifically related to the AES Entities will be deemed irrevocably withdrawn, with prejudice. Pursuant to Rule 9019 of the Federal Rule of Bankruptcy Procedure and the Safe Harbor Agreements Termination Protocol, the Debtors ask the Court to approve the Settlement Agreement. Ms. Gray asserts that the Settlement Agreement resolves any disagreement as to the forward value of the Contracts and resolves certain obligations of the parties under the Guaranties and Letters of Credit. Furthermore, the Settlement Agreement will enable the Debtors and the Constellation Entities to avoid potential future disputes and litigation regarding termination payments due under the Contracts. * * * Judge Gonzalez approves the Settlement Agreement. Headquartered in Houston, Texas, Enron Corporation is in the midst of restructuring various businesses for distribution as ongoing companies to its creditors and liquidating its remaining operations. Before the company agreed to be acquired, controversy over accounting procedures had caused Enron's stock price and credit rating to drop sharply. The Company filed for chapter 11 protection on December 2, 2001 (Bankr. S.D.N.Y. Case No. 01- 16033). Judge Gonzalez confirmed the Company's Modified Fifth Amended Plan on July 15, 2004, and numerous appeals followed. Martin J. Bienenstock, Esq., and Brian S. Rosen, Esq., at Weil, Gotshal & Manges, LLP, represent the Debtors in their restructuring efforts. (Enron Bankruptcy News, Issue No. 127; Bankruptcy Creditors' Service, Inc., 15/945-7000) FAIRFAX FINANCIAL: Will Discuss 2004 3rd Qtr. Results on Oct. 29 ---------------------------------------------------------------- Fairfax Financial Holdings Limited will hold its quarterly conference call at 8:30 a.m. Eastern Time on Friday, Oct. 29, 2004 to discuss its third quarter results which will be announced after the close of markets on Thursday, October 28 and will be available at that time on its Web site at http://www.fairfax.ca/ The call, consisting of a presentation by the company followed by a question period, may be accessed at (416) 695-5259 or (877) 461-2814. A replay of the call will be available from shortly after the termination of the call until 10:00 p.m. Eastern Time on Friday, November 12, 2004. The replay may be accessed at (416) 695-5275 or (888) 509-0081. Fairfax Financial Holdings Limited is a financial services holding company, which, through its subsidiaries, is engaged in property, casualty and life insurance and reinsurance, investment management and insurance claims management. * * * As reported in the Troubled Company Reporter on September 2, 2004, Fitch Ratings placed the ratings of Fairfax Financial Holdings Limited and its rated subsidiaries and affiliates on Ratings Watch Negative. The ratings previously had a Negative Outlook. This action, Fitch said, largely reflected concerns as to increasing liquidity pressures at Fairfax, as well as a continued decline in transparency of management's public disclosures, which make it increasingly difficult for third parties to judge Fairfax' creditworthiness. Fitch's ratings of Fairfax are based primarily on public information. Fairfax Financial Holdings Limited: -- Long-term issuer 'B+'/Rating Watch Negative; -- Senior debt 'B+'/Rating Watch Negative. FIRST UNION: Fitch Assigns BB Rating to $5M Class Q Certificates ---------------------------------------------------------------- Fitch Ratings affirms First Union National Bank Commercial Mortgage Trust's commercial mortgage pass-through certificates, series 2000-C2, as follows: -- $136.1 million class A-1 'AAA'; -- $686.9 million class A-2 'AAA'; -- Interest-only class IO 'AAA'; -- $55.7 million class B 'AA'; -- $42.9 million class C 'A'; -- $17.1 million class D 'A-'; -- $18.6 million class E 'BBB+'; -- $17.1 million class F 'BBB'; -- $14.3 million class G 'BBB-'; -- $5 million class Q 'BB'. Class Q represents the interests in the Trust Fund corresponding to the junior portion of the Schneider Automation Facility loan and is not part of the pool balance. Fitch does not rate H, J, K, L, M, N, and O certificates. The rating affirmations reflect the stable pool performance and minimal paydown since issuance. As of the September 2004 distribution date, the pool has paid down 4.5% to $1.09 billion from $1.14 billion at issuance. Wachovia Bank, N.A., as master servicer, collected year-end 2003 financials for 96.4% of the transaction. Among those properties that reported at YE 2003, the weighted average debt service coverage ratio -- DSCR -- based on net cash flow -- NCF -- increased to 1.41 times (x) from 1.35x at issuance for the same loans. There are currently five loans (1.76%) in special servicing, consisting of: * two real estate owned (REO) properties (1.44%), and * three loans in foreclosure (0.32%). The largest specially serviced loan (1.1%) is collateralized by a retail property in Chesapeake, Virginia. This loan transferred to special servicing in September 2002 after Ames vacated 30% of the net rentable area -- NRA. The property became REO in June 2004 and Lennar Partners, Inc., as special servicer, is preparing the property to be listed for sale. Fitch is concerned about the seventh largest loan (2.6%), collateralized by an office property in Belmont, California with a heavy concentration in technology tenants. Occupancy at the property has declined to 49.5% as of September 2004. Two tenants, comprising 3.2% of the NRA, are expected to vacate upon their Oct. 31, 2004 lease expirations. Furthermore, an additional six tenants, comprising 27.7% of the NRA, have leases that roll within the next five months. Fitch also reviewed the performance of the deal's two credit assessed loans and their underlying collateral, the Park Plaza Mall and the Schneider Automation Facility. The DSCR for each loan is calculated using servicer provided net operating income less reserves and capital expenditures divided by a Fitch stressed debt service. Based on their stable to improved performance, both loans maintain investment grade credit assessments. The Park Plaza Mall loan (3.8%) is the second largest loan in the pool. This loan is secured by 265,144 square feet of a 549,144 square foot regional mall located in Little Rock, Arkansas. The YE 2003 DSCR was 1.73x. The Schneider Automation Facility loan has a pooled senior note (3%) and a junior portion, which represents class Q. This loan is secured by a 382,761 sf research and development building in North Andover, Massachusetts. The property is 100% leased with the lease guaranteed by Schneider Electric SA, an investment grade rated entity. The YE 2003 DSCR for the senior note was 1.40x. FOOTSTAR INC: Hires Ernst & Young to Audit Meldisco Business Unit ----------------------------------------------------------------- The U.S. Bankruptcy Court for the Southern District of New York gave its stamp of approval on Oct. 6, 2004, for Footstar, Inc., and its debtor-affiliates to employ Ernst and Young LLP, as their internal auditors. The Debtors' tell the Court that they hired Ernst and Young for the specific purpose of assisting them in the internal audit of their Meldisco business segment. Ernst and Young will: a) review and make a reconciliation of the Meldisco Division's Accounts Payable balance for the quarter and month respectively ending on September 30, 2003, and October 31, 2003; b) review of the close and reconciliation procedures for all the combined Meldisco Accounts Payable balances commencing with the December 30, 2003 accounts payable balances; c) document the selected processes and controls for the internal audit to be determined by the Debtors' management; and d) perform other matters that may be designated by the management and the audit committee of the Debtors' Board of Directors. Daniel S. Kaplan, a Partner at Ernst and Young, discloses that the Debtors did not pay a retainer, but will reimburse the Firm for all other fees and expenses incurred during the course of the Firm's engagement to the Debtors. Mr. Kaplan reports Ernst and Young's professionals bill: Designation Hourly Rate ----------- ----------- Partners and Principals $ 450 - 505 Senior Managers 385 - 465 Managers 285 - 405 Seniors 180 - 290 Staff 120 - 185 To the best of the Debtors' knowledge, Ernst and Young is "disinterested" as the term is defined in Section 101(14) of the Bankruptcy Code. Footstar's Meldisco unit sells shoes in Kmart stores under a long- standing agreement. Footstar, Inc. sought authority from the Bankruptcy Court on August 12, 2004, seeking to assume the Kmart contract. Kmart's balked and told the Bankruptcy Court it wants the contract terminated. The deal is critical to Footstar's ability to reorganize. Footstar already sold its Footaction and Just For Feet units. Headquartered in West Nyack, New York, Footstar Inc., retails family and athletic footwear. As of August 28, 2004, the Company operated 2,373 Meldisco licensed footwear departments nationwide in Kmart, Rite Aid and Federated Department Stores. The Company also distributes its own Thom McAn brand of quality leather footwear through Kmart, Wal-Mart and Shoe Zone stores. The Company and its debtor-affiliates filed for chapter 11 protection on March 3, 2004 (Bankr. S.D.N.Y. Case No. 04-22350). Paul M. Basta, Esq., at Weil Gotshal & Manges represents the Debtors in their restructuring efforts. When the Debtor filed for protection, it listed $762,500,000 in total assets and $302,200,000 in total debts. FORT WORTH: Shutdown Prompts Moody's to Slash Ratings to Caa3 ------------------------------------------------------------- Moody's Investors Service lowered Fort Worth Osteopathic Hospital's (d/b/a Osteopathic Medical Center of Texas) underlying and unenhanced ratings to Caa3 from B3. The rating action affects $80 million of outstanding debt issued through the Tarrant County Health Facilities Development Corporation, including the Series 1997, Series 1996 and 1993 bonds, of which $7.1 million is uninsured (according to documents filed with Nationally Recognized Municipal Securities Information Repositories). The ratings are removed from Watchlist where they were placed on September 30. At this time Moody's are assigning a negative outlook to the ratings. With the exception of $7.1 million of the Series 1993 bonds (2028 maturities), the bonds are insured by MBIA and, therefore, carry long-term Aaa ratings based on the insurers claims paying ability. The Aaa rating is not under review. The bonds are secured by a pledge of gross revenues and mortgage on the hospital. The downgrade is the result of the hospital's recent announcement that it will be shutting down operations within the week with many of the hospital's services discontinued as of Friday, October 8. The bonds are secured by a mortgage of the hospital facility, as well as a pledge of gross revenues. In addition, a debt service reserve fund in the amount of $6.7 million was held by the bond trustee as of September 30, 2003 according to the latest unaudited financial information available. The next bond payments are due November, 15th. Management has not been communicative with us. Approximately $72.7 million of the outstanding debt is insured by MBIA, and bondholders of the insured bonds are expected to receive full payment. However, based on Moody's analysis of the hospital's September 2003 financial statements, Moody's believe recovery for the remaining $7.1 million of uninsured bondholders will be limited despite the mortgage securing the bonds. There are a number of risks that could result in a decline in the value of those assets and increase liabilities between now and the closing. The hospital will have to support expenses associated with its wind-down until closing, including supporting certain personnel and paying severance. These risks could ultimately impair recovery for bondholders and other creditors. As of September 30, 2003, Moody's estimate the hospital had about $20 million in liquid assets (including cash and accounts receivable), which has likely been reduced since that time with management reporting a depleted cash position. Moody's also note that a parent corporation exists; however, it does not appear that Health Care of Texas, Inc. (d/b/a Osteopathic Health System of Texas) can provide any support. The hospital has made over $10 million of distributions to the parent corporation since 2000 to support operating deficits at non-obligated entities. The remainder of hospital assets, along with proceeds from any liquidation of assets, would be available to pay the hospital's liabilities, including long-term debt, but Moody's expect the proceeds to be modest. Future rating changes will be based on our assessment of ultimate recovery values. FOSTER WHEELER: Harry Rekas Departs from Directorship Position -------------------------------------------------------------- Foster Wheeler Ltd. (OTCBB: FWLRF) said, effective Thursday, Oct. 14, Harry P. Rekas has resigned from the company's board of directors for personal reasons. "The board and I were looking forward to working with Harry and regret that he will be unable to serve with us," said Raymond J. Milchovich, chairman, president and CEO. "We wish him the best going forward." As reported in the Troubled Company Reporter on Oct. 5, 2004, Diane C. Creel, Roger L. Heffernan, Harry P. Rekas, and David M. Sloan have been elected to Foster Wheeler Ltd.'s board of directors. On the same date, John Clancey, Martha Clark Goss, and John Stuart have resigned from the board, bringing the total number of current directors to eight. About the Company Foster Wheeler, Ltd., is a global company offering, through its subsidiaries, a broad range of design, engineering, construction, manufacturing, project development and management, research, plant operation and environmental services. At June 25, 2004, Foster Wheeler Ltd.'s balance sheet showed an $856,601,000 stockholders' deficit, compared to an $872,440,000 deficit at December 26, 2003. The Company's pro- forma financial statements contained in the Prospectus detailing its recent successful equity-for-debt exchange projects a $400 million reduction in total debt and a concomitant increase in shareholder equity. HARVEST ENERGY: Closes 7-7/8% Senior Debt Offering -------------------------------------------------- Harvest Energy Trust (TSX: HTE.UN) reports the closing of its U.S.$250 million offering of 7-7/8% Senior Notes due 2011. The net proceeds of U.S.$241 million from the notes offering will be used to permanently repay Harvest's $70 million bank bridge facility with the balance used to repay a portion of its outstanding revolving credit facility. Management believes this financing has enhanced Harvest's financial flexibility. Harvest also announces that a cash distribution of $0.20 per trust unit will be paid on November 15, 2004 to Unitholders of record on October 29, 2004. Harvest trust units are expected to commence trading on an ex-distribution basis on October 27, 2004. This distribution amount represents Distributable Cash earned in the month of October 2004. Harvest Energy Trust -- http://www.harvestenergy.ca/-- is a Calgary-based energy trust actively managed to deliver stable monthly cash distributions to its Unitholders through its strategy of acquiring, enhancing and producing crude oil, natural gas and natural gas liquids. Harvest trust units are traded on the Toronto Stock Exchange under the symbol "HTE.UN". * * * As reported in the Troubled Company Reporter on Oct. 5, 2004, Standard & Poor's Ratings Services assigned its 'B+' long-term corporate credit rating to Calgary, Alta.-based Harvest Energy Trust and its 'B-' senior unsecured debt rating to the proposed $200 million seven-year bond to be issued by Harvest Operations Corporation, a wholly owned subsidiary of Harvest Energy Trust. The debt is fully guaranteed by the trust and all its wholly owned subsidiaries. HAYES LEMMERZ: Clawson & Wallace Disclose Equity Stakes ------------------------------------------------------- Hayes Lemmerz International, Inc., President and Chief Executive Officer Curtis J. Clawson discloses to the Securities and Exchange Commission that he beneficially owns 131,014 shares of the company's common stock. Securities Securities Owned Date Acquired Acquired Price After Transaction ------------- ---------- ----- ----------------- 09/23/2004 4,150 $10.20 120,164 09/23/2004 850 $10.19 121,014 10/08/2004 6,115 $9.05 127,129 10/08/2004 300 $9.09 127,429 10/08/2004 385 $9.10 127,814 10/08/2004 200 $9.07 128,014 10/11/2004 3,000 $9.45 131,014 Hayes Lemmerz Director Henry D.G. Wallace reports that he acquired 1,500 shares of the company's common stock on September 24, 2004, for $10.28 per share. Mr. Wallace now beneficially owns a total of 6,349 shares. The Company has 37,847,078 shares of common stock outstanding as of September 7, 2004. (Hayes Lemmerz Bankruptcy News, Issue No. 54; Bankruptcy Creditors' Service, Inc., 215/945-7000) HCA INC: Share Repurchase Plan Cues Fitch to Pare Ratings to BB+ ---------------------------------------------------------------- Fitch Ratings downgraded HCA, Inc.'s senior unsecured debt and bank facility ratings to 'BB+' from 'BBB-' following the company's announcement that it intends to repurchase approximately $2.5 billion of the company's shares in a debt-funded transaction. HCA's Rating Outlook is Stable. HCA announced that its board has approved a share repurchase of up to $2.5 billion in the form of a modified 'dutch' auction tender offer. The company has indicated that it intends to finance the repurchase entirely with debt proceeds. While HCA's leverage and coverage metrics would remain relatively strong, the additional debt burden comes at a time when the company has experienced margin erosion over the past several quarters due to industry-prevalent issues, including continued soft admission trends and increasing bad debt expense stemming from increasing numbers of uninsured patients. While not a wholesale collapse in margins, real margin pressure is evident as HCA's EBITDA margin for the last 12 months ended June 30, 2004 was 16.3%, down from 17.1% for fiscal 2003. Additionally, the company indicated that volume growth for the third quarter is likely to be only 0.9% on a same store basis and that bad debt levels continued to increase with third-quarter bad debt as a percentage of net revenues of 11.9%, up from 11.3% in the second quarter. The added debt burden, in Fitch's view, limits HCA's financial flexibility, while issues such as volume growth and bad debt expense remain largely unresolved in terms of their trend lines, and, with regard to bad debt, the structural impact on the industry from continued increases in the number of uninsured patients. As such, the constrained financial flexibility may hinder HCA's ability to withstand continued margin pressure at a given rating category. Additionally, increased leverage limits HCA's ability to react to accretive acquisition opportunities should current multiples improve. Fitch does note that even modest improvement in volume trends should have the effect of at least partially restoring traditional margin levels and that underlying demographics would indicate an eventual rebound in volumes. However, given the volatile nature of admission trends over the past 18-24 months, the timing of a return to 'traditional' levels of volume growth cannot be predicted with realistic accuracy. HCA's debt at June 30, 2004 was approximately $8.4 billion and is expected to increase beyond $10.8 billion by year-end 2004. Cash flow from operations for 2004 is expected to be approximately $2.4 billion, and HCA estimated a capital expenditure commitment of $1.6 billion and a $200 million cash dividend in 2004. Fitch anticipates that leverage (total debt/EBITDA) will be between 2.7 times (x) and 2.8x at year-end 2004. HOLLINGER INC: Court Appoints Kroll Lindquist as Inspector ---------------------------------------------------------- Hollinger, Inc., (TSX:HLG.C; HLG.PR.B) reported that Mr. Justice Colin L. Campbell of the Ontario Superior Court of Justice has signed an Order appointing Kroll Lindquist Avey, Inc., as an inspector pursuant to s. 229(1) of the Canada Business Corporations Act to conduct an investigation of certain of the affairs of Hollinger, as requested by Catalyst Fund General Partner I Inc., a shareholder of Hollinger. The parties have agreed that, until certain potential conflicts of interest issues involving Kroll are resolved, Kroll will not commence any inspection activities. Under the Order, the inspector is principally to investigate and report to the Court upon the facts in relation to any Related Party Transaction between Hollinger (including any of its subsidiaries, other than Hollinger International Inc. or its subsidiaries), and a Related Party for the period January 1, 1997 to date. For the purposes of the Order, a "Related Party" is defined as, among others: * Lord Black, * Barbara Amiel-Black, * David Radler, * Peter White, * J.A. Boultbee, * Daniel Colson, * Peter Atkinson, and * any corporation (other than International), partnership or other entity that is controlled, or owned, directly or indirectly, as to more than 10% by such persons, individually or as a group. The inspector is required to deliver a preliminary report to the Court by November 13, 2004. The costs of the inspector for the initial 30 day period are to be paid by Hollinger. Thereafter, the responsibility for the inspector's costs is to be determined by the Court. The application commenced by Catalyst in the Ontario Superior Court of Justice seeking an order removing all of the directors of Hollinger (except for Robert J. Metcalfe and Allan Wakefield, each of whom was appointed as a director of Hollinger on September 27, 2004) and an injunction restraining any non-arm's length transactions involving Hollinger without notice to and approval of the Court, has been adjourned until October 29, 2004. In connection with adjournment, and until the date upon which the application is heard and determined, Hollinger and certain of its directors have undertaken that they will not enter into any Related Party Transactions (with certain exceptions for ordinary course transactions) without two business days' advance notice to Catalyst. Hollinger's principal asset is its approximately 68.0% voting and 18.2% equity interest in Hollinger International. Hollinger International is an international newspaper publisher with English-language newspapers in the United States and Israel. Its assets include the Chicago Sun-Times and a large number of community newspapers in the Chicago area, The Jerusalem Post and The International Jerusalem Post in Israel, a portfolio of new media investments and a variety of other assets. * * * As reported in the Troubled Company Reporter on August 31, 2004,as a result of the delay in the filing of Hollinger's 2003 Form 20-F (which would include its 2003 audited annual financial statements) with the United States Securities and Exchange Commission by June 30, 2004, Hollinger is not in compliance with its obligation to deliver to relevant parties its filings under the indenture governing its senior secured notes due 2011. $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. HORACE MANN HOME: Case Summary & 20 Largest Unsecured Creditors --------------------------------------------------------------- Debtor: Horace Mann Home for the Aged, Inc. dba Heather Manor 600 East 5th Street Des Moines, Iowa 50309 Bankruptcy Case No.: 04-06368 Type of Business: The Company operates a retirement community. See http://www.heathermanor.com/ Chapter 11 Petition Date: October 14, 2004 Court: Southern District of Iowa (Des Moines) Judge: Lee M. Jackwig Debtor's Counsel: Anita L. Shodeen, Esq. Beving, Swanson & Forrest, P.C. 321 East Walnut Street, Suite 200 Des Moines, Iowa 50309 Tel: 515-237-1186 Fax: 515-288-9409 Estimated Assets: $1 Million to $10 Million Estimated Debts: $1 Million to $10 Million Debtor's 20 largest unsecured creditors: Entity Nature Of Claim Claim Amount ------ --------------- ------------ Martin Bros Distributing Business debt $32,604 Company Inc. United HealthCare Insurance Co Business debt $19,149 Excel Mechanical Co Inc. Business debt $15,860 Arthur J. Gallagher Risk Business debt $13,944 Management Service McKesson Medical Surgical Business debt $11,640 Minnestoa Supply Inc Reinhart Foodservice Inc. Business debt $11,544 MidAmerican Energy Company Business debt $8,957 Grell, Ralson Business debt $5,053 Iowa Carpet One Business debt $4,947 Nogg Chemical & Paper Co Inc. Business debt $4,837 Bolton & Hay Inc. Business debt $4,719 Estate of Ida Wiles Business debt $4,705 MetLife Small Business Center Business debt $3,263 InteliStaf Healthcare Inc. Business debt $2,533 Anderson Erickson Dairy Co Business debt $2,371 O'Keefe Elevator Company Inc. Business debt $2,352 Office Depot Inc. Business debt $1,953 Neighborcare Pharmacy Business debt $1,569 Des Moines High Tech Business debt $1,500 Electric LLC Dex Media East LLC Business debt $1,471 IMC GLOBAL: Moody's Still Reviewing Low-B Ratings & May Upgrade --------------------------------------------------------------- The ratings of IMC Global Inc. (B1 senior implied) and Phosphate Resource Partners (Caa1 senior unsecured) remain on review for possible upgrade. The review was prompted by the announcement in January of 2004 that IMC and Cargill Crop Nutrition, a wholly owned business unit of Cargill, Incorporated (A2 senior unsecured, stable outlook) had reached an agreement to merge. The combined company, to be called The Mosaic Company, will remain a public entity, owned approximately 66.5% by Cargill and 33.5% by existing IMC shareholders. While, IMC's (B1 senior implied) existing ratings remain on review for possible upgrade, Moody's expects that the senior implied rating will move up by one level to Ba3. Other debt ratings will also likely move up one or more levels upon completion of the proposed merger in late October 2004. The likely outlook for Mosaic's ratings would be stable. Moody's rating actions follow the receipt of enough information on the ultimate merger structure to provide the information necessary to provide guidance on IMC's existing ratings. Moody's views the proposed merger as positively impacting Mosaic's ability to service its debt. This positive impact is directly related to (1) the essentially debt free contribution of Cargill Crop Nutrition's assets, (2) the near-term prospect for a multi year recovery in Mosaic's primary fertilizer businesses, and, to a lesser extent, and (3) the $145 million of potential operating and financial synergies that are anticipated to result from the merger by the end of 2007. Moody's believes that it is management's intention to run the new company with a credit profile that suggests an investment grade rating over time. Mosaic had, as of May 31, 2004, pro-forma LTM Revenues and Operating Income (as estimated by management) of $4.5 billion and $185 million respectively. Total debt, almost all of which is contributed by IMC, is about $2.1 billion. The potential upward movement in the ratings is limited by the still sizeable debt burden at $2.1 billion and the limited prospects for free cash flow generation over the near term, which could be used to reduce debt. Further concerns, related to the phosphate business, center on the high raw material costs that while supporting higher product prices also limit the margin expansion/cash flow generation that would typically result from the very strong pricing environment. These concerns do not extend to the currently robust potash business. Moody's also notes that the current high global crop prices are a key factor in the robust recovery in plant nutrient prices and if these prices were to be pressured the length of any recovery could be shortened. Consequently, Moody's long-term projections for Mosaic's financial performance are limited due to the volatile nature of the agricultural and fertilizer industries. The outlook on Mosaic's debt ratings would likely be stable. If the current global recovery in the plant nutrient industry is stronger than anticipated such that free cash flow generation is closer to ten percent of total debt for an extend period of time the outlook and/or the ratings would be raised. There is limited downward pressure on the ratings, provided that the global agricultural economy remains strong. However, any unanticipated decline in projected operating margins could put negative pressure on the outlook or ratings. In its ongoing review of IMC's ratings, Moody's will focus on ensuring that the assumptions that were provided in making our rating determinations will not materially change. If the transaction structure as proposed or our assumptions about the company and its operations as presented through the execution period change our ratings conclusions may change. Moody's actions are predicated on these assumptions: (1) there is no material change in debt or legal organizational structures as proposed; (2) the terms of the proposed capital structures are not changed in any material amounts; (3) the proposed bank transactions occur, in a timely manner, without any material changes to terms or covenants; (4) the merger will receive the necessary regulatory approvals in a timely fashion; (5) the merger will close within the suggested time frame; and (6) the successful, timely, consent solicitation and amendment process with IMC's existing debt holders that provides Mosaic management with the operational flexibility to effectively integrate the businesses. With respect to ratings of Phosphate Resource Partners LP, the review considered the implications of IMC's plan to acquire all of the publicly held units of Phosphate Resource. Moody's notes that while the PLP bonds participate in the new guarantees provided in the consent solicitation the PLP bonds will not participate in the upstream guarantees from IMC subsidiaries that some of the existing IMC bonds benefit from. Ratings remaining under review for possible upgrade: -- IMC Global Inc. * B1 Guaranteed senior unsecured notes -- would likely move to Ba3 * B2 Senior unsecured notes and debentures -- would likely move to B1 * Ba3 Existing Guaranteed senior secured credit facility -- would likely move to Ba2 and then would likely be withdrawn as new facilities are put in place * Caa1 Mandatory convertible preferred shares -- would likely move to B3 * (P)B2/(P)B3/(P)Caa1 Universal shelf (senior unsecured/subordinated/preferred) -- would likely move to (P)B1/(P)B2/(P)B2 * B1 Senior Implied -- would likely move to Ba3 * B2 Issuer Rating -- would likely move to B1 -- Phosphate Resource Partners LP * Caa1 Senior unsecured notes -- would likely move to Ba3 In the unlikely event the merger is not completed, Moody's will conclude its review of IMC and may confirm or lower the ratings, after consideration of the outlook for its core products, its financial liquidity, and ability to service its debt. IMC Global Inc., headquartered in Lake Forest, Illinois, is a leading global producer of phosphate and potash fertilizers and animal feed ingredients. IMC reported revenues of $2.4 billion for the LTM ended June 30, 2004. Cargill is a privately held, leading global agribusiness based in Minnetonka, Minnesota. IMPACT MANAGEMENT INC: Case Summary & Largest Unsecured Creditor ---------------------------------------------------------------- Debtor: Impact Management, Inc. 32039 Virginia Way Laguna Beach, California 92651 Bankruptcy Case No.: 04-16363 Chapter 11 Petition Date: October 14, 2004 Court: Central District of California (Sta. Ana) Judge: J. Barr Debtor's Counsel: Thomas W. Harris, Jr., Esq. Law Office of Thomas W. Harris, Jr. 20101 Southwest Birch Street, Suite 200 Newport Beach, California 92660-1750 Tel: 949-477-2390 Estimated Assets: $1 Million to $10 Million Estimated Debts: $1 Million to $10 Million Debtor's Largest Unsecured Creditor: Entity Nature Of Claim Claim Amount ------ --------------- ------------ Garth Rolfe Loan $20,000 INTEGRATED ELECTRICAL: Retains Todd Matherne as Advisor for CEO --------------------------------------------------------------- Integrated Electrical Services, Inc. (NYSE: IES) has retained Todd A. Matherne, age 50, to support IES' chief executive officer Roddy Allen in the performance of his duties as interim chief financial officer. Roddy Allen, said, "We are pleased to announce that Todd Matherne has joined us as an advisor. He brings 28 years of senior management experience to this position as well as relevant industry and large public company experience to our senior management team. Todd is well respected in the financial and legal communities and has a solid understanding of IES' customers, vendors, sureties and lenders. The board and management look forward to working with Todd as we move IES forward." Mr. Matherne has held senior financial officer and operations positions with Baker Hughes, Service Corporation International, Encompass Services Corporation and WEDGE Group Incorporated. He is a licensed CPA and began his career in 1976 with Ernst & Young. Mr. Matherne served as the Disbursing Agent under Encompass' confirmed chapter 11 plan. About the Company Integrated Electrical Services, Inc. is the leading national provider of electrical solutions to the commercial and industrial, residential and service markets. The company offers electrical system design and installation, contract maintenance and service to large and small customers, including general contractors, developers and corporations of all sizes. * * * As reported in the Troubled Company Reporter on Oct. 12, 2004, 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 said 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 Aug. 13, 2004, the company announced that it would be delaying the filing of its fiscal 2004 third quarter 10-Q. On Aug. 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 Dec. 15, 2004. Furthermore, although the company received a waiver from the senior subordinated bond holders through Dec. 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. INTEGRATED HEALTH: Rotech Wants Until Jan. 7 to File Final Report ----------------------------------------------------------------- The Reorganized Rotech Debtors ask the United States Bankruptcy Court for the District of Delaware to further: (1) delay the automatic entry of a final decree closing their Chapter 11 cases until January 31, 2005; and (2) extend the date for filing a final report and accounting to the earlier of January 7, 2005, or 15 days before the hearing on any request to close their Chapter 11 cases. This is without prejudice to the Rotech Debtors' right to seek further extension or a final decree closing their cases before January 31, 2005. Robert S. Brady, Esq., at Young Conaway Stargatt & Taylor, LLP, in Wilmington, Delaware, tells the Court that the Reorganized Rotech Debtors have been working diligently since the Effective Date of the Rotech Plan to review and reconcile the proofs of claim filed in their Chapter 11 cases and to prosecute or resolve all pending claims objections. They have made substantial progress with respect to the claims administration process to date. In May 2004, the Reorganized Rotech Debtors made an initial distribution to the allowed claimholders under the Rotech Plan. At that point, the Reorganized Debtors estimated that there were about 75 claims subject to pending objections. Since that time, the Reorganized Rotech Debtors have aggressively pursued settlement and prosecution of the remaining Rotech claim objections. On October 6, 2004, the Court entered seven orders disposing of substantially all of the pending Rotech claim objections. The Reorganized Rotech Debtors expect to make a prompt initial distribution with respect to any claims allowed as a result of those orders. The Reorganized Rotech Debtors believe that the only claim reconciliation matters remaining are: * the settlement of four litigation-related claims; * a final resolution of the Internal Revenue Services' outstanding claims; and * the final reconciliation of claims filed against both Integrated Health Services, Inc. and Rotech. With respect to the Litigation Claims and the IRS Claims, the Reorganized Rotech Debtors are in active negotiations with the claimants to resolve the issues before the November 10, 2004, hearing scheduled in these cases. With respect to claims filed against both IHS and Rotech, the Reorganized Rotech Debtors are actively reconciling these claims to resolution by the November 10 hearing. After the final resolution of all claims, the Reorganized Rotech Debtors will make a final distribution to all general unsecured creditors. Mr. Brady contends that delaying entry of a final decree will help ensure that the distribution made under the Rotech Plan will only benefit actual creditors, and will be in appropriate amounts. Without the delay, a final report and accounting will not be accurate since the claims administration process has not yet been concluded. The Court will convene a hearing on November 10, 2004 to consider the Rotech Debtors' request. By application of Del.Bankr.LR 9006-2, the deadline for filing a final report and accounting is automatically extended through the conclusion of that hearing. Headquartered in Owings Mills, Maryland, Integrated Health Services, Inc. -- http://www.ihs-inc.com/-- IHS operates local and regional networks that provide post-acute care from 1,500 locations in 47 states. The Company filed for chapter 11 protection on February 2, 2000 (Bankr. Del. Case No. 00-00389). Michael J. Crames, Esq., Arthur Steinberg, Esq., and Mark D. Rosenberg, Esq., at Kaye, Scholer, Fierman, Hays & Handler, LLP, represent the Debtors in their restructuring efforts. On September 30, 1999, the Debtors listed $3,595,614,000 in consolidated assets and $4,123,876,000 in consolidated debts. (Integrated Health Bankruptcy News, Issue No. 83; Bankruptcy Creditors' Service, Inc., 215/945-7000) INTERNATIONAL MILL: Moody's Assigns Single-B & Caa Ratings ---------------------------------------------------------- Moody's Investors Service assigned a B1 senior implied rating to International Mill Service, Inc., a provider of on-site services for steel mills. Moody's also assigned a B1 rating to the company's first lien senior secured credit facilities and a B3 rating to its second lien term loan. The rating outlook for International Mill is stable. This is the first time Moody's has rated the debt of International Mill. These ratings were assigned: * B1 for the $125 million six-year term loan secured by a first priority lien in all the assets of the company, * B1 for the $25 million five-year revolving credit facility, which is also secured by a first lien in all assets, * B3 for the $30 million seven-year term loan secured by a second priority lien in the collateral securing the first lien facilities, * B1 senior implied, and * Caa1 senior unsecured issuer rating. The B1 senior implied rating reflects International Mill's role as an entrenched provider of mill services at over 40 North American steel plants and its favorable track record of retaining customers and expanding services and revenues at a broad cross section of mills. International Mill often performs several services for each of its customers, which represent a balanced mix of integrated and electric arc furnace (minimill) steel producers. Moody's noted that International Mill's business has been quite stable, which is unusual for a company in the steel industry. Stability has been enhanced by International Mill's long-standing customer relationships, good reputation, and long-term contracts. Moody's believes that steel mills will continue to outsource non- core services such as material handling, metal recovery and slag processing to companies such as International Mill. While the majority of International Mill's sales are linked to its customers' production levels and are, therefore, cyclical, International Mill also introduced other fees that are independent of production levels. Moody's ratings are constrained by: (i) the limited scale of International Mill's business, (ii) a high level of customer concentration, and (iii) its dependence on sales to one industry. These factors, when combined with its highly leveraged capital structure (revenues of $170 million are equivalent to its pro forma debt), make International Mill vulnerable to the loss of a large customer, a general downturn in the steel industry, or shifts in outsourcing trends. Customer concentration is high -- one steel company accounted for 27% of International Mill's sales in 2003 and the top five accounted for roughly 70% of sales. While appreciative of International Mill's market position, Moody's believes that material growth may be difficult to achieve. Furthermore, since the winning of new business usually requires upfront capital investment and locks International Mill into multi-year contracts, management must exercise great care when bidding on new business in order to ensure that long-term value is created. The B1 senior implied rating reflects the risks posed by these fundamental business characteristics. Lastly, International Mill's MS's few tangible assets and the specialized nature of its fixed assets lessens the likelihood of full loan recovery should cash flow significantly diminish and IMS experience a payment default. International Mill's stable outlook is supported by its diverse customer base, long-term contracts with a current duration of six years, and Moody's favorable near-term outlook for the steel industry. International Mill's ratings or rating outlook could be enhanced by a reduction in debt coupled with a continuation of its recent financial performance. Its ratings could be pressured by: (i) erosion of credit metrics, (ii) the loss of any large customers, (iii) the loss of key members of management, and (iv) by acquisitions that are not accompanied by free cash flow. International Mill is being purchased by Wellspring Capital Management. The purchase will be financed by the first and second lien term debt, small amounts of borrowings under the revolving credit facility, assumption of $12 million of capital leases and installment notes, and contributed equity from Wellspring. The transaction is expected to close in the fourth quarter of 2004. The revolver and the $125 million term loan are rated the same as the senior implied rating due to the fact that they represent a large proportion of International Mill's total debt. These two facilities are secured by a first priority perfected lien in all of International Mill's assets. The $30 million seven-year term loan is secured by a second priority lien on all assets, and is rated B3, two notches lower than the first lien facilities, due to the limited value of the tangible assets comprising the collateral and the high level of total debt relative to enterprise value. International Mill's services are embedded within the activities of the steel mills and are performed by International Mill's employees utilizing International Mill-owned equipment. International Mill's services include: * material handling; * metal recovery and slag processing; * surface conditioning (also termed "scarfing"); and * other related services. Outsourcing of these services is very common in the steel industry as the mills prefer to focus on core steel making activities. International Mill has 23 customers in the US and Canada, and works at mills responsible for approximately 30% of total North American steel production. International Mill worked at some of these mills for over 15 years. Over the last five years, International Mill's revenues have ranged between $158 million and $181 million and EBITDA has been similarly stable. Steel company bankruptcies and challenging industry conditions have impacted historical results, but greatly improved steel market conditions and increased North American steel production should solidify these figures. International Mill's liquidity will be provided by unused availability under its $25 million credit facility. International Mill has essentially no net working capital so its liquidity needs are minimal, although it may use the revolver to fund equipment purchases and growth capex. International Mill has a leading North American market position as a provider of on-site steel mill services such as material handling, metal recovery and slag processing. For the 12 months ended August 31, 2004, International Mill had revenues of $170 million. INTERSTATE BAKERIES: Hires Stinson Morrison as Local Counsel ------------------------------------------------------------ Ronald B. Hutchison, Chief Financial Officer of Interstate Bakeries Corporation, tells the Court that Interstate Bakeries and its debtor-affiliates need to be represented by a local and special counsel. The Debtors selected Stinson Morrison Hecker, LLP, as their local and special counsel because the firm's attorneys have extensive experience with and knowledge of the Debtors' corporate affairs. Stinson is expected to: (a) assist in the preparation and filing of Debtors' Chapter 11 Voluntary Petition, Schedules, and Statement of Financial Affairs; (b) advise the Debtors with respect to their Chapter 11 rights, powers and duties and operation and disposition of the Debtors' property; (c) represent the Debtors in their Chapter 11 cases and in any adversary proceeding commenced in or in connection with their Chapter 11 cases; (d) assist in the preparation of applications, answers, proposed orders, reports, motions and other pleadings and papers that may be required in the Debtors' Chapter 11 cases; (e) provide legal assistance and advice to the Debtors in connection with the sales of the Debtors' assets and preparation and submission of Chapter 11 plans; and (f) perform any other legal services as counsel for the Debtors that may be required by the Debtors or the Bankruptcy Court. Mr. Hutchison assures the Court Stinson will take appropriate steps to avoid unnecessary duplication of services provided by other professionals employed by the Debtors. Stinson's duties as special counsel include, without limitation, representation of the Debtors in all matters adverse to certain creditors and parties-in-interest where the Debtors' general bankruptcy counsel, Skadden, Arps, Slate, Meagher & Flom, LLP, is precluded from representing the Debtors. Paul M. Hoffmann, a partner at Stinson, assures Judge Venters that the firm's partners and associates: (a) do not have any connection with the Debtors or their affiliates, their creditors, the United States Trustee or any person employed in the Office of the United States Trustee, or any other significant party-in-interest, or their attorneys and accountants; and (b) do not hold or represent any interest adverse to the estates. During the year prior to the Petition Date, Stinson received $250,000 from the Debtors in payment of professional fees and expenses. Additionally, Mr. Hoffmann discloses that Stinson received a $180,000 retainer for fees and expenses to be rendered to the Debtors during these chapter 11 cases. Stinson has applied the retainer as a credit against the Debtors' account. The amount of fees and expenses to be paid in the future will be as determined and allowed by the Court on a basis of hourly rates and actual costs incurred or other basis as the Court will authorize. The firm's hourly rates for 2004 are: Partners $225 - 400 Associates 130 - 210 Paralegals 100 - 150 Legal Assistants 80 - 120 Document Clerks 50 - 80 Mr. Hoffman assures the Court that Stinson has not shared or agreed to share any of its compensation from the Debtors with any other person, other than a partner of the firm. 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: Pays $395 Mil. to Holders of 10.50% Senior Notes ---------------------------------------------------------------- Intrawest Corporation successfully completed its tender offer and consent solicitation relating to the $394.16 million principal amount of its 10.50% Senior Notes due February 1, 2010. Intrawest's offer to purchase any or all of the outstanding 2010 Notes (expired at midnight, New York time, on Wednesday, October 13, 2004). A total of $359,921,000, or 91.3%, of the aggregate outstanding principal amount of 2010 Notes was validly tendered in the Offer prior to the Expiration Date. Intrawest accepted for payment the 2010 Notes tendered prior to the Expiration Date and paid on October 15, 2004 total consideration of $395,002,589 (comprised of purchase price, consent payment and accrued interest) to the holders of the 2010 Notes so tendered. Holders of 2010 Notes who tendered prior to 5:00 p.m., New York time, on September 28, 2004 (the "Consent Date") will receive a purchase price of $1,076.03 per $1,000 principal amount of 2010 Notes tendered (of which $10.00 is a consent payment), and holders of 2010 Notes who have tendered after the Consent Date, but prior to the Expiration Date, will receive a purchase price of $1,066.03 per $1,000 principal amount of 2010 Notes tendered. As previously announced, Intrawest executed on the Consent Date a first supplemental indenture to the indenture governing the 2010 Notes, the effect of which is to eliminate substantially all of the restrictive covenants contained in the indenture. Upon acceptance for payment of the tendered 2010 Notes, the terms of the first supplemental indenture have become operative. Intrawest Corporation operates and develops 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. KAISER ALUMINUM: Ferazzi Wants to Retain Risk Int'l as Consultant ----------------------------------------------------------------- Anne M. Ferazzi, the legal representative for the Future Silica, CTPV and Hearing Loss Claimants, sought and obtained the United States Bankruptcy Court for the District of Delaware's approval to retain Risk International Services, Inc., as her Insurance Coverage Consultant. Ms. Ferazzi relates that Kaiser Aluminum Corporation and its debtor-affiliates have been covered by a number of insurance policies that may be obligated to provide indemnity coverage to the Debtors with respect to claims for personal injury arising from exposure to silica or coal tar pitch volatiles. The Debtors' coverage under these policies is a significant asset of the Debtors' estate. Pursuit of those claims will require substantial investigation into the policies which have covered the Debtors and the extent of coverage. Ms. Ferazzi selected Risk International because of its expertise and experience in analyzing insurance coverage and recovery issues. Over the past twelve years, Risk International has located over $40,000,000,000 in missing policy limits for its insurance research clients and has further recovered over $350,000,000 in insurance payments for long-tail environmental and toxic tort claims. Risk International has agreed to: (a) advise Ms. Ferazzi regarding matters of Debtors' insurance coverage available for payment of claims of silica-related and CTPV-related disease claims, including gaps in coverage, overlapping coverage provided by multiple carriers and availability of excess insurance coverage; (b) exchange correspondence and information with insurance carriers regarding claims and defenses and provide settlement analyses to Ms. Ferazzi; and (c) render other necessary advice as Ms. Ferazzi may require. Risk International will be compensated for its services in accordance with its normal hourly rates. The hourly rates for the professionals who will provide services to Ms. Ferazzi are: Name Position Hourly Rate -------------- --------------------- ----------- David Anderson Senior Claims Counsel $260 Olathe, Kansas Wendy Cressman Senior Claims Examiner 150 Cleveland, Ohio Risk International's rates are subject to periodic adjustment to reflect economic, experience and other similar factors. Ms. Ferazzi says Risk International has not received a retainer in this case. David P. Anderson, Esq., a director at Risk International, attests that the Firm and its professionals do not have any connection of any kind or nature with the Debtors, their creditors or other parties connected with the Chapter 11 cases. Risk International estimates its compensation for fees and reimbursement for its reasonable expenses for the first three months of employment to be $50,000. 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. 51; Bankruptcy Creditors' Service, Inc., 215/945-7000) KATELMAN FOUNDRY: Case Summary & 19 Largest Unsecured Creditors --------------------------------------------------------------- Debtor: Katelman Foundry, Inc. PO Box 589 Council Bluffs, Iowa 51502 Bankruptcy Case No.: 04-06254 Type of Business: The Company manufactures structural and miscellaneous steel for commercial and industrial construction. See http://www.katelmanfoundry.com/ Chapter 11 Petition Date: October 8, 2004 Court: Southern District of Iowa (Des Moines) Judge: Lee M. Jackwig Debtor's Counsel: Donald F. Neiman, Esq. Jeffrey D. Goetz, Esq. Bradshaw, Fowler, Proctor & Fairgrave 801 Grand Avenue #3700 Des Moines, Iowa 50309-2727 Tel: 515-246-5877 Fax: 515-246-5808 Total Assets: $2,413,536 Total Debts: $1,297,065 Debtor's 19 largest unsecured creditors: Entity Nature Of Claim Claim Amount ------ --------------- ------------ Vulcraft Trade debt $231,128 PO Box 3066 Omaha, Nebraska 68103-0066 B-S Steel of Kansas, Inc. Trade debt $110,657 PO Box 15139 Fairfax Kansas City, Kansas 66115 Namasco Trade debt $58,947 3212 East 19th Court Des Moines, Iowa 50313 Midwest Mfg. & Welding Trade debt $57,381 Norfolk Iron & Metal Co. Trade debt $51,530 All Steel Products, Inc. Trade debt $20,425 Vogel West Inc. Trade debt $14,417 Sheffield Steel Corporation Trade debt $14,360 Valmont Ind. Trade debt $10,956 The Bilco Company Trade debt $6,037 Abstract Painting & Trade debt $4,540 Decorating, Inc. Curtis Welding & Trade debt $4,331 Fabrication Inc. Cardinal Home Products Trade debt $3,164 Sullivan & Ward, PC Trade debt $3,000 Waters and Daughters, LLC Trade debt $2,000 Drafting and Design Nebraska Welding, Ltd. Trade debt $1,833 Hilti, Inc. Trade debt $1,641 Midwest Industrial Tools Trade debt $1,503 R & B Wagner, Inc. Trade debt $1,318 LAIDLAW INT'L: Greyhound Ratifies New Collective Bargaining Pacts ----------------------------------------------------------------- Greyhound Lines, Inc., a wholly owned subsidiary of Laidlaw International, Inc. (NYSE: LI), released the following statement from Stephen E. Gorman, president and chief executive officer. "We have been informed by the leadership of the International Association of Machinists and Aerospace Workers (IAM&AW) that the members have ratified new collective bargaining agreements with the company. The ratification of the new agreements is good news for Greyhound customers and employees. These agreements are another important step toward building sustainable profitability and ensuring we are a viable business in the future." The agreements become effective Oct. 1, 2004 and expire on Sept. 30, 2007. More than 300 employees are represented under the new agreements. Greyhound is the largest North American provider of intercity bus transportation, serving more than 3,300 destinations with 18,000 daily departures across the continent. The company also provides Greyhound PackageXpress (GPX), as well as Greyhound Travel Services including vacation packages, charters, sightseeing and shore services. For fare and schedule information and to buy tickets call 1-800-231-2222 or visit the Web site at http://www.greyhound.com Headquartered in Arlington, Texas, Laidlaw, Inc., now known as Laidlaw International, Inc., -- http://www.laidlaw.com/-- is North America's #1 bus operator. Laidlaw's school buses transport more than 2 million students daily, and its Transit and Tour Services division provides daily city transportation through more than 200 contracts in the US and Canada. Laidlaw filed for chapter 11 protection on June 28, 2001 (Bankr. W.D.N.Y. Case No. 01- 14099). Garry M. Graber, Esq., at Hodgson Russ LLP represents the Debtors. Laidlaw International emerged from bankruptcy on June 23, 2003. (Laidlaw Bankruptcy News, Issue No. 50; Bankruptcy Creditors' Service, Inc., 215/945-7000) LAKE AT LAS VEGAS: S&P Assigns Low-B Ratings to Facilities ---------------------------------------------------------- Standard & Poor's Ratings Services assigned its 'B+' issuer credit rating to Lake at Las Vegas Joint Venture and LLV-1 LLC. At the same time, Standard & Poor's assigned its 'BB' bank loan rating to a $360 million senior first lien credit facility and its 'B+' bank loan rating to a $100 million senior second lien credit facility provided to Lake at Las Vegas Joint Venture and LLV-1 LLC. Additionally, '1' recovery ratings are assigned to both facilities. The 'BB' rated first lien facility is rated higher than the co- issuer credit ratings; this and the '1' recovery rating indicate that bank lenders can expect a full recovery of principal in the event of a default. The outlook is stable. "The ratings reflect an operating cash-flow stream that remains largely contingent upon potentially cyclical land sales from within the Lake Las Vegas Resort, a maturing master-planned community located in Henderson, Nev.," said Standard & Poor's credit analyst James Fielding. "Risks associated with a very narrow geographic concentration are partially mitigated by favorable housing supply and demand characteristics within the Las Vegas market, a substantial investment in infrastructure that favorably positions this higher-end lake-front community relative to other master-planned communities in the marketplace, and moderate levels of rapidly amortizing debt relative to the value of real estate held for sale." Despite the likely easing of recently robust growth, favorable longer-term supply and demand characteristics in the Las Vegas market are expected to support the underlying value of this large, and concentrated parcel of land. In the longer-term, the credit profile of the borrowers could improve as land parcels are sold and the bank loans are repaid, resulting in improved loan-to-value ratios. MARKWEST ENERGY: S&P Rates Planned $200M Sr. Unsec. Notes B+ ------------------------------------------------------------ Standard & Poor's Ratings Services assigned its 'B+' corporate credit rating to midstream natural gas master limited partnership MarkWest Energy Partners L.P. At the same time, Standard & Poor's assigned its 'B+' rating to the company's proposed $200 million senior unsecured notes due 2014. The outlook is stable. The Denver, Colorado-based company will have about $200 million of debt outstanding after issuing the notes. Proceeds from the note offering will be used to repay the amount currently drawn under the company's bank credit facility and for general corporate purposes. The borrowings were used to complete the company's acquisition of gas gathering and processing assets in eastern Texas for $240 million. MarkWest's management plans to add a processing facility to the system in Texas, which was acquired in July in an effort to improve its competitiveness in a highly competitive area. The ratings for MarkWest Energy reflect a below-average business and financial profile that incorporates the influence of the credit quality of its general partner, MarkWest Hydrocarbon Inc. Weaknesses include: (1) a financial profile that exhibits commodity price sensitivity that is relatively high for an MLP, (2) a short operating history in a region--the Southwest--that is the probable source of much of its future growth, and (3) the small scale of its operations relative to competitors and its MLP peers. Strengths include: (1) a long history of operations in its core Appalachian region (a stable gas-producing basin), (2) a recognition of the need to reduce commodity price risk that should improve its business risk profile over time, and (3) a growth strategy that is aimed at greater geographical and operational diversification that will help reduce its reliance on MarkWest Hydrocarbon. The stable outlook relies on continued efforts to manage the unpredictable natural gas gathering and processing cash flows and a prudent acquisition strategy that focuses on risk minimization and diversification as much as on the ability to increase unit distributions. Steady progress in reducing financial risk is also implicit in the rating, with targeted interest coverage approaching 2.5x for earnings and 4x for cash flow. MarkWest Energy's capital structure should remain weighted more heavily toward equity to preserve credit quality. MASTEC INC: Names C. Robert Campbell as Exec. Vice Pres. & CFO -------------------------------------------------------------- MasTec, Inc. (NYSE: MTZ) has appointed C. Robert Campbell as its Executive Vice President and Chief Financial Officer. Mr. Campbell has over 25 years of senior financial management experience. Immediately prior to joining MasTec, he was Executive Vice President and CFO for TIMCO Aviation Services, Inc. At TIMCO, he headed all financial and legal functions and was instrumental in its restructuring and turnaround. Prior to TIMCO, Mr. Campbell was the President and CEO of BAX Global, Inc. and Executive Vice President-Finance and CFO for Advantica Restaurant Group, Inc. From 1974 until 1995, Mr. Campbell held various senior management positions with Ryder System, Inc., including 10 years as Executive Vice President and CFO of its Vehicle Leasing and Services Division. Mr. Campbell, who is a Certified Public Accountant, has a Bachelor of Science degree in Industrial Relations from the University of North Carolina, an MBA from Columbia University and a Master of Science in Accounting from Florida International University. Austin J. Shanfelter, MasTec's President and CEO stated, "Bob Campbell's appointment as our new CFO is another big step in rebuilding our corporate team. In looking at candidates for the CFO position, we wanted an individual with not only strong financial and accounting skills, but one who also had a successful track record in strategic planning and a keen sense of customer service. We found all of those skills in Bob. He brings with him a wealth of experience and is committed to enhancing our financial reporting and long- range planning and providing better service to our expanding customer base." MasTec -- http://www.mastec.com/-- is a leading communications, broadband, intelligent traffic and energy infrastructure service provider. The Company designs, builds, installs, maintains, upgrades and monitors internal and external networks for leading companies and government entities. * * * As reported in the Troubled Company Reporter on August 25, Standard & Poor's Ratings Services withdrew its corporate credit, senior secured, and subordinated debt ratings on MasTec, Inc. The ratings had been placed on CreditWatch negative on March 17, 2004. At Dec. 31, 2003, MasTec had approximately $237 million of debt outstanding. "We believe that there currently is insufficient information available to support a ratings opinion," said Standard & Poor's credit analyst Heather Henyon. MasTec has yet to file financial statements for the first or second quarters of 2004 and has not announced any specific timeline for that information to be made available. As previously reported on May 13, 2004, Standard & Poor's Ratings Services lowered its corporate credit rating on MasTec, Inc., to 'B' from 'BB-', its senior secured bank loan rating to 'B+' from 'BB', and its subordinated debt rating to 'CCC+' from 'B'. At the same time, all ratings remain on CreditWatch with negative implications, where they were placed on March 17, 2004. Total debt (including present value of operating leases) was $226 million at Sept. 30, 2003, for the Miami, Fla.-based provider of infrastructure services. The downgrade follows MasTec's announcement of a net loss for the 2004 first quarter that is significantly greater than the year- earlier loss as well as a delay in its Form 10Q filing for the first quarter because of an unfinished audit for full-year 2003. market conditions in the specialty contractor industry are weak, resulting in declining margins and higher leverage. "We continue to be concerned about the breakdown of certain financial controls and policies, the length of time it is taking to complete the 2003 audit, and the liquidity profile, including obtaining a waiver or amendment to bank covenants," said Standard & Poor's credit analyst Heather Henyon. MAXIM CRANE: Files Amended Joint Plan of Reorganization ------------------------------------------------------- Maxim Crane LLC and its debtor-affiliates filed with the U.S. Bankruptcy for the Western District of Pennsylvania their Amended Joint Plan of Reorganization. A full-text copy of the Plan is available for a fee at: http://www.researcharchives.com/download?id=040812020022 Under the terms of the Plan: * administrative claims; * DIP Facility claims; * priority tax claims; * other priority claims; and * other secured claims will be paid in full on the Effective Date. General Unsecured claims will receive, on the Effective Date, their pro rata share of New Series B Warrants. Equity interests holders and any stock options, warrants, including the OPCO Note claims and the HOLDCO Debenture claims will be cancelled and the Debtors obligations will be discharged. The Reorganized Debtors will emerge as two separate corporate entities: * Reorganized Maxim Crane Holdings and * Reorganized Maxim Crane. The operation of the Reorganized Debtors will be funded from existing cash balances and from the Emergence Credit Facility of $300 million. Headquartered in Pittsburgh, Pennsylvania, Maxim Crane Works, LLC -- http://www.maximcrane.com/-- is a full service crane rental company. The Company, along with its affiliates, filed for chapter 11 protection (Bankr. W.D. Pa. Case No. 04-27861) on June 14, 2004. Douglas Anthony Campbell, Esq., at Campbell & Levine, LLC, represents the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they estimated debts and assets of over $100 million. MERRILL LYNCH: Class H's S&P Rating Tumbles to D ------------------------------------------------ Standard & Poor's Ratings Services raised its ratings on four classes from Merrill Lynch Mortgage Investors Inc.'s mortgage pass-through certificates series 1998-C2. Concurrently, the rating on one other class has been lowered, and the ratings on four other certificates from the same series are affirmed. The raised and affirmed ratings reflect credit enhancement levels that adequately support the existing ratings. The lowered rating reflects anticipated losses connected to the specially serviced assets. In addition, the lowered rating on class H reflects ongoing liquidity issues regarding the certificate's receipt of timely interest and the likelihood that cumulative interest shortfalls will be repaid. As of Sept. 16, 2004 the trust collateral consisted of 277 loans with an aggregate outstanding principal balance of $780.0 million, down from 401 loans amounting to $1.1 billion at issuance. The master servicer, Wachovia Securities N.A. provided recent net cash flow debt service coverage -- DSC -- figures for 71.1% of the pool. Based on this information, Standard & Poor's calculated a weighted average DSC of 1.52x, up from 1.42x at issuance. The pool has experienced eight losses aggregating to $23.5 million (2.2%). The top 10 loans have: * an aggregate outstanding balance of $134.6 million (17.3%); and * reported a 2003 weighted average DSC of 1.31x, down from 1.33x at issuance. Because the ninth-largest loan did not report any 2003 financial data, the DSC figure from the first-half 2004 was used in this calculation. The fourth- and sixth-largest loans did not report any 2003 financial data and both of these loans have been paid in full subsequent to the Sept. 16, 2004 remittance report. As part of its surveillance review, Standard & Poor's reviewed recent property inspections provided by Wachovia for assets underlying the top 10 loans, and all these assets were characterized as "good" or "excellent." There is one top 10 loan in special servicing, and two of the top 10 loans are on Wachovia's watchlist. There are 18 assets with an aggregate balance $48.4 million (6.2%) that are with the special servicer, GMAC Commercial Mortgage Corp.: -- Three of these assets are REO (2.0%), -- three are more than 90-plus days delinquent (1.0%), -- one is 60-plus days delinquent (0.1%), and -- the remaining specially serviced loans (3.4%) are current in their debt service payments. The seventh-largest asset in the trust is REO and consists of a 109,000-sq.-ft. office building in St. Louis, Missouri with an outstanding balance of $12.4 million (1.6%). The sole tenant vacated the building in 2001 after it was acquired by Tyco International. The tenant continued to pay rent until May 2003 when the loan was transferred to the special servicer for monetary default. Since then, one tenant signed a lease, and occupancy at the property now stands at approximately 20.0%. Standard & Poor's anticipates more than a moderate loss upon liquidation. The two other REO assets are secured by lodging properties in Rock Hill, South Carolina with outstanding balances of $1.7 million (0.2%) and $1.5 million (0.2%), respectively. Each asset also has approximately $0.7 million in outstanding servicer advances. Standard & Poor's expects substantial losses upon the disposition of both assets. Two other loans that were specially serviced as of the last remittance date are no longer in the trust collateral. This includes a lodging asset located in San Francisco, California with a total exposure of $6.5 million that was liquidated for $5.4 million. A $2.4 million loan on an office building in Jacksonville, Florida has been repaid in full. In addition to these assets, seven loans (all secured by lodging properties) with an aggregate balance of $14.5 million (1.9%) have been transferred back to the master servicer subsequent to the September remittance report. Only one of the six remaining loans in special servicing has a balance in excess of $2.0 million, and Standard & Poor's expects a significant loss only on the lodging property in Edinburg, Texas, which has a $1.4 million balance. The master servicer's watchlist consists of 69 loans with an aggregate balance of $169.0 million (21.7%) and includes two of the top 10 loans. The fourth-largest loan has an outstanding balance of $14.3 million and is secured by a 144-unit health care property in Lincolnshire, Illinois. The loan was transferred to the watchlist because its 2002 DSC was 0.81x, a figure that has increased to 1.12x in 2003. The sixth-largest loan was also reported on the watchlist, but this loan has paid off in full subsequent to the latest remittance report. The Horizon Court Office Building, a single-tenant, 114,000-sq.-ft. property in Columbus, Ohio, has an outstanding balance of $10.7 million; this is the only other loan on the watchlist with a balance in excess of $8.0 million. This loan appears on the watchlist because the tenant that occupies the entire building has a lease that expires in April 2005. The tenant has not indicated if it will remain in the building. The remaining loans on the watchlist appear primarily due to DSC or occupancy issues and 20 of these loans have a balance of less than $1.0 million. The collateral in this transaction is located in 35 states, with more than 40.0% of the concentration in: * California (17.4%), * Texas (16.0%), and * New York (8.3%). Property concentrations are found in: * multifamily (38.9%), * retail (27.2%), and * lodging (13.1%) assets. Standard & Poor's stressed the specially serviced loans, loans on the watchlist, and other loans with credit issues in its analysis. The resultant credit enhancement levels adequately support the raised, affirmed, and lowered ratings. Ratings Raised Merrill Lynch Mortgage Investors Inc. Mortgage Pass-Through Certificates Series 1998-C2 Rating Class To From Credit Enhancement (%) ----- -- ---- ---------------------- B AAA AA 31.3 C AAA A 23.6 D A- BBB 14.5 E BBB+ BBB- 12.4 Rating Lowered Merrill Lynch Mortgage Investors Inc. Mortgage Pass-Through Certificates Series 1998-C2 Rating Class To From Credit Enhancement (%) ----- -- ---- --------------------- H D CCC 1.3 Ratings Affirmed Merrill Lynch Mortgage Investors Inc. Mortgage Pass-Through Certificates Series 1998-C2 Class Rating Credit Enhancement (%) ----- ------ ---------------------- A-2 AAA 35.5 F B 4.8 G B- 4.1 IO AAA - MORGAN STANLEY: Fitch Assigns Low-B Ratings to Four Cert. Classes ----------------------------------------------------------------- Morgan Stanley Dean Witter Capital I Inc., commercial mortgage pass-through certificates, series 2000-LIFE1, are affirmed by Fitch Ratings: -- $66.1 million class A-1 at 'AAA'; -- $439 million class A-2 at 'AAA'; -- Interest only class X at 'AAA'; -- $22.4 million class B at 'AA'; -- $25.9 million class C at 'A'; -- $8.6 million class D at 'A-'; -- $17.2 million class E at 'BBB'; -- $6.9 million class F at 'BBB-'; -- $13.8 million class H at 'BB+'; -- $6.9 million class J at 'BB'; -- $5.2 million class K at 'BB-'; -- $13.8 million class L at 'B'; The $1.7 million class G and the $11.1 million class M are not rated by Fitch. The rating affirmations reflect the consistent loan performance and minimal reduction of collateral balance since issuance. As of the September 2004 distribution date, the pool's collateral balance has decreased 7.3% to $638.6 million from $689 million at issuance. Wells Fargo Bank, N.A., the master servicer, provided year-end 2003 financials for 89% of the loans by balance. The YE 2003 weighted average debt service coverage ratio -- DSCR -- improved to 1.58 times (x) from 1.50x at issuance. Five loans (5.7%) reported year-end 2003 DSCRs below 1.00x. Three loans (1.9%) are currently in special servicing. The largest specially serviced loan (1.2%) is secured by a multifamily property in Marietta, Georgia. The property is real estate owned (REO) and is currently listed for sale. The second largest specially serviced loan (0.4%) is secured by an office property located in Hudson, Ohio. The loan transferred to the special servicer in 2003 when the sole tenant at the property vacated its space and ceased paying rent. The loan is currently in foreclosure and a deed in lieu has been negotiated with the borrower. In addition, the borrower is being required to turnover the lease termination fee. NORTEL NETWORKS: Completing Transfer of Operations in 1st Quarter ----------------------------------------------------------------- Nortel Networks Corporation (NYSE:NT)(TSX:NT) and its principal operating subsidiary, Nortel Networks Limited, provided a status update pursuant to the alternative information guidelines of the Ontario Securities Commission. These guidelines contemplate that the Company and NNL will normally provide bi-weekly updates on their affairs until such time as they are current with their filing obligations under Canadian securities laws. The Company and NNL reported that there have been no material developments in the matters reported in their status updates of June 2, 2004, June 29, 2004, July 13, 2004, July 27, 2004, August 10, 2004, August 19, 2004, September 2, 2004, September 16, 2004 and September 30, 2004. Flextronics Transaction Nortel Networks announced earlier an update concerning the status of the agreement announced June 29, 2004, for the Company to divest certain manufacturing operations and related activities to Flextronics. In the earlier update, Nortel Networks confirmed the transfer of the optical design operations and related assets in Ottawa, Canada and Monkstown, Northern Ireland is expected to close in the fourth quarter of 2004 while the transfer of the Montreal manufacturing activities, originally planned for the fourth quarter of 2004, is now expected to be completed in the first quarter of 2005. As previously announced, the balance of the divesture is anticipated to close in the first half of 2005, subject to completion of the required information and consultation processes with the relevant employee representatives. As part of the closing schedule, the transfer of the Calgary manufacturing activities is anticipated to close in the second quarter of 2005. The change in schedule is not expected to have a material effect on Nortel Networks 2004 year end cash balance or the previously announced timeline for anticipated cost savings from related internal efficiencies. About Nortel Networks Nortel Networks is an industry leader and innovator focused on transforming how the world communicates and exchanges information. The Company is supplying its service provider and enterprise customers with communications technology and infrastructure to enable value-added IP data, voice and multimedia services spanning Wireless Networks, Wireline Networks, Enterprise Networks, and Optical Networks. As a global company, Nortel Networks does business in more than 150 countries. More information about Nortel Networks can be found on the Web at www.nortelnetworks.com/ or http://www.nortelnetworks.com/media_center * * * As reported in the Troubled Company Reporter on June 25, 2004, Standard & Poor's Ratings Services said that its long-term corporate credit rating and other long-term ratings on Nortel Networks Corp. and Nortel Networks Ltd. remain on CreditWatch with developing implications, where they were placed Apr. 28, 2004. As previously reported, Standard & Poor's lowered its 'B' long- term corporate credit rating and other long-term ratings on Nortel Networks Corp. and Nortel Networks Ltd. to 'B-'. NORTHWEST AIRLINES: Reaches Tentative Agreement with Pilots ----------------------------------------------------------- Northwest Airlines Corporation (Nasdaq: NWAC), the parent of Northwest Airlines, has reached a tentative agreement with its pilots, represented by the NWA unit of the Air Line Pilots Association International (ALPA). The agreement is subject to approval by the ALPA Master Executive Council and ratification by Northwest Airlines pilots. The agreement also calls for a satisfactory restructuring of Northwest's $975 million revolving credit facility, prior to contract implementation. The tentative agreement includes: -- $300 million in annual labor cost savings from the company's pilots and its salaried workers with pilots contributing $265 million in annual wage; -- benefit and other contract changes; and -- salaried and management employees taking $35 million in annual salary and benefit reductions. If all of the terms of the tentative agreement are satisfied, pilot and salaried employee labor cost reductions could be effective as early as Dec. 1, 2004. Northwest currently is in contract discussions with representatives of the International Association of Machinists and Aerospace Workers, and the Transport Workers of America. Preliminary contract discussions will commence in the coming weeks with the: -- Aircraft Mechanics Fraternal Association, -- Professional Flight Attendants Association, -- Northwest Airlines Meteorology Association, and -- Aircraft Technical Support Association. Northwest Airlines is the world's fifth largest airline with hubs at Detroit, Minneapolis/St. Paul, Memphis, Tokyo, and Amsterdam, and approximately 1,500 daily departures. Northwest is a member of SkyTeam, a global airline alliance partnership with Aeromexico, Air France, Alitalia, Continental Airlines, CSA Czech Airlines, Delta Air Lines, KLM Royal Dutch Airlines, and Korean Air. SkyTeam offers customers one of the world's most extensive global networks. Northwest and its travel partners serve more than 900 cities in more than 160 countries on six continents. At June 30, 2004, Northwest Airlines Corp.'s balance sheet showed a $2,421,000,000 stockholders' deficit, compared to a $2,011,000,000 deficit at Dec. 31, 2003. OGLEBAY NORTON: Tort Claimants Make Pitch for Official Committee ---------------------------------------------------------------- A group representing 13,000 people alleging injury from exposure to asbestos-containing products and 480 individuals alleging injury from exposure to silica products asks the U.S. Bankruptcy Court for the District of Delaware to direct the U.S. Trustee to appoint an official tort claimants' committee in the chapter 11 cases involving Oglebay Norton Company and its debtor-affiliates. The group says the Official Committee of Unsecured Creditors does not adequately represent the interests of the 96,000 claimants the Debtors know about to date. Judge Rosenthal denied an earlier bid by these tort claimants for an official committee on Aug. 24, 2004. The group hopes that Judge Rosenthal's decision to deny confirmation of the company's chapter 11 plan will inspire a different ruling this time around. The group says that insurance information and the company's ability to pay tort claims in the future is critical to understanding whether any future plan is or isn't a good deal. The Problematic Plan As previously reported, Judge Rosenthal denied confirmation of the Second Amended Joint Plan of Reorganization filed by Oglebay Norton Company and its debtor-affiliates on July 23, 2004. Unsecured commercial creditors liked the Plan because it proposed to reinstate their claims or pay them in full in cash. The holders of the Company's Senior Subordinated Notes accepted the Plan's proposal to swap their bonds for an equity stake the Reorganized Company, delivering about a quarter-on-the-dollar in value to the noteholders. Current shareholders were slated to receive warrants to purchase new equity in exchange for their existing shares. Personal injury tort claimants didn't like the Plan at all. Judge Rosenthal rejected the Debtors' proposal for generic "pass-through" treatment for the asbestos and silica tort claims, rather than a concrete, supportable proposal to resolve and pay these claims. Exclusivity Intact for the Moment At the Debtors' behest, Judge Rosenthal approved an extension of the company's exclusive plan filing period afforded under 11 U.S.C. Sec. 1121 through October 20, 2004. Judge Rosenthal granted a concomitant extension of the company's exclusive period to solicit acceptances of a plan through December 20, 2004. Headquartered in Cleveland, Ohio, Oglebay Norton Company, mines, processes, transports and markets industrial minerals for a broad range of applications in the building materials, environmental, energy and industrial market. The Company and its debtor- affiliates filed for chapter 11 protection on February 23, 2004 (Bankr. D. Del. Case Nos. 04-10559 through 04-10560). Daniel J. DeFranceschi, Esq., at Richards, Layton & Finger represents the Debtors in their restructuring efforts. When the Debtor filed for protection from its creditors, it listed $650,307,959 in total assets and $561,274,523 in total debts. OPTIMAL GEOMATICS: Equity Deficit Narrows to $1 Mil. at July 31 --------------------------------------------------------------- Optimal Geomatics Inc., TSX-V: OPG reported its financial results for the second quarter ended July 31, 2004. Optimal's second quarter revenue was $1.8 million, an increase of 32% over the $1.3 million of revenue in the preceding quarter, and an increase of 12% over revenue for the same period of the previous year. Year-to-date revenue was $3.1 million, an increase of 32% compared to the same period last year. The net loss for the six months ended July 31, 2004 was $575,488, a significant improvement compared to the net loss of $1.4 million during the same period last year, an increase in net loss of $16,789 compared to the net loss of $186,233 in the first quarter of the current fiscal year. This increase in the net loss is due to the movement of the Canadian dollar. The Company experienced a cash outflow of $86,983 from operating activities in the current quarter compared with a cash outflow from operating activities of $300,657 in the preceding quarter and $161,647 in the same quarter of the prior year. The Company ended the quarter with cash and cash equivalents of $317,880. Optimal Geomatic's balance sheet shows a $1,025,067 stockholders' deficit at July 31, 2004, compared to a $2,491,415 deficit at April 30, 2004. Business highlights for the quarter and to the time of reporting: -- Record revenue of $1.8 million for second quarter and $3.1 million YTD -- Received contract from Central Networks (UK), to supply pole testing and analysis services of their overhead power line networks -- Received additional contracts from existing customers, Connectiv, and United Utilities -- Received contracts from Gas Service Utility Companies, Oklahoma Natural Gas, and Kansas Gas Service Colum Caldwell, President and CEO commented, "Optimal has continued to create new opportunities and retain strong relationships with our current customers this quarter. Contracts won in this quarter have helped the Company build on its creditability in the marketplace and steadily strive to be a leader in the electric and pipeline outsourcing industry. The Company is growing stronger quarter on quarter." Financial Changes The following summarized the major changes that the Company has made to our financial statements at this time to comply with the prevailing Canadian Institute of Chartered Accountants Handbook requirements and recommendations, as well as to promote the efficiency and professionalism in financial information delivery and presentation. A. The Company incorporated two changes in accounting policies, namely Stock-based Compensation and Foreign exchange translation. The Stock-based compensation compliance is mandatory for fiscal years beginning on or after Jan. 1, 2004, that means the current fiscal period (February 1, 2004 to October 31, 2004) falls into this mandatory period. For all prior periods up to last fiscal year end of January 31, 2004, the total stock-based compensation expense restated was $121,454. For the current fiscal year, Optimal expensed $23,605 and $20,162 in each of the first and second quarter respectively. As at the quarter end July 31, 2004 with the amendment to the original Stock Option Plan 2,285,000 stock options have been granted and are outstanding. These changes now allow for a wider more equitable distribution of stock based compensation throughout every level of the organization. B. The second accounting policy change is the method of foreign currency translation of the accounts of the Company's UK subsidiary. The Company determined that our UK subsidiary is a self-sustaining subsidiary and hence the current rate method for translation should be used as their operations are primarily independent, revenue and cost are based on its local market, and their result of operations are expected to be sufficient to finance day-to-day activities beginning the current fiscal year. The advantage of adopting this translation method is that the results of operations will not be distorted by the translation gain or losses as these gains or losses are presented as a component of shareholders equity unless there is significant reduction in the investment of the subsidiary. The Company has deferred $32K and $26K of translation loss on the Q1 and Q2 balance sheets respectively by applying this more appropriate translation method. Colum Caldwell adds, "The UK organization has seen significant changes to its circumstances and is now financially and operationally independent from the Vancouver office. I wish to congratulate Nigel Appleton, the Managing Director in the UK and his team for their outstanding performance over the past year." Besides the two accounting policy changes, Optimal has also restated it's January 31st, 2004 audited financial statements and its Q1 interim financial statements in order to comply with the CICA Handbook Section 3860 on financial instruments. The adoption of the Section 3860 involves assigning a fair value, using the Black-Scholes option-pricing model, to the convertible feature of liabilities and allocating that fair value to equity. The Company is required to apply the Handbook section on both convertible debentures and convertible loans payable by allocating a portion of the liabilities to equity, which represents the fair value of their convertible feature, and then amortize the allocated value to interest expense on a straight line basis over the term of debentures or the expected life of the loan. The effect on the prior year of the restatement is, that we amortized a total of $161,376 in additional interest expense related to the amortization of the discount of the debentures and loans payable for the year ended January 31, 2004 (and $50,593 for year ended January 31, 2003). For the current fiscal year, the interest expense amortized was $56,278 for each of Q1 and Q2. Although with the redemption and conversion of the debentures, the adoption of the policy at this time may seem a mute point. The Company believes it is best practice at this time to deal with this technical accounting issue on financial instruments. In order to comply with applicable securities rules Optimal re- filed the First Quarter financial statements incorporating the above changes and adoptions. The Company also re-stated and re- issued our annual report for the year-ended January 31st, 2004 since Handbook section 3860 was not applied on the debentures and loans payable outstanding in that period and the amount involved is $161,376. The changes to the presentation of the financial statements will act as an enhancement in the efficiency and professionalism in financial information delivery. The amended Q1 financial statements will adopt the new statement presentation format as in the Q2 financial statements. Optimal's fiscal year end has changed from January 31 to October 31, effective October 31 2004. This will allow the Company to communicate its fourth quarter results in a fashion, which is clearer for the financial community. Two of Optimal's Debenture holders, Patonhill Investments Limited and KARL consultants Limited converted their debentures with principal amount of $1.2 million and $393,500 respectively into common shares of the Company at a price of $0.29 per share. The accrued interest outstanding at the time of the conversion Sept 3, 2004 will be repaid out of funds generated from operations and any ensuing financing. The final debenture holder, Custom House Capital Limited whose principal amount is $392,800 is redeeming its debentures as at Oct 18, 2004. Colum Caldwell commented, "The conversion and redemption of these debentures removes $1.9 million of long term debt from the balance sheet and greatly improves the financial health of the Company. I would like to thank the debenture holders for their investment in Optimal in 2002, when sales from the financial year ending January 2002 were only $398,580. They showed great belief in the future operations of the Company." There will be a conference call today, Oct 18 at 9:30am PST to discuss the results of our second quarter. Analysts, investment professionals, shareholders, members of the media, and other interested parties who wish to participate can dial in by calling 604-899-1159 for Vancouver participants and 403-232-6311 outside Vancouver, then dial pass code 20315 followed by the number sign. Alternatively, you can listen to the playback by visiting the website after the call, http://www.optimalgeo.com/ Optimal Geomatics specializes in providing highly accurate aerial mapping solutions to a customer-base, which is primarily composed of Electric and Gas utilities. Optimal employs a number of aerial surveying systems, including its proprietary technology for data acquisition, and applies innovative technology, techniques, and expertise for in-house processing. The Company's unique mapping products and services help utilities reduce cost, improve efficiency, and better-manage their assets by turning raw data into highly valuable geospatial information and engineering reports. Optimal's customers include many of the major utilities across North America and the United Kingdom. PACIFIC CROSSING: Wants Plan-Filing Period Extended to March 31 --------------------------------------------------------------- Pacific Crossing Ltd. wants its exclusive period during which to propose and file a chapter 11 plan extended through Mar. 31, 2005. The trans-Pacific fiber optic cable owner also wants its exclusive period in which to solicit acceptances of that plan stretched to May 31, 2005. The company is continuing to explore asset sale transactions and has to resolve disputes with Asia Global Crossing and Global Crossing Ltd. before a coherent and confirmable plan can be proposed. The Honorable Peter J. Walsh will review the Company's request at a hearing on October 21, 2004. Pacific Crossing Ltd. and its subsidiaries operate the PC-1 undersea fiber optic cable system. The PC-1 system, which represents the state-of-the-art in subsea cable installations, is a self-healing fiber optic telecommunications network with a bi-directional design capacity of 640 gigabytes per second and is approximately 20,900 kilometers or 13,000 miles in length. The system has landing stations in Grover Beach, Calif.; Harbour Pointe, Wash.; Ajigaura, Japan; and Shima, Japan, and currently operates at a capacity of 180 Gbps. PCL and its subsidiaries filed for Chapter 11 protection July 19, 2002 (Bankr. D. Del. Case No. 02-12088). PACIFIC ENERGY: Will Release 2004 3rd Quarter Results on Oct. 27 ---------------------------------------------------------------- Pacific Energy Partners, L.P. (NYSE:PPX), will release its third quarter 2004 financial results on Wednesday, October 27, 2004, after the market closes. A conference call to discuss the third quarter results will take place on Thursday, October 28, 2004, at 2:00 pm Eastern Time. The dial in number for the live call is 800-259-0251, and the passcode is 50466777. The call will be available one hour after the end of the conference call and will be replayed for one week by dialing 888- 286-8010 and using 27345728 as the passcode. The call will also be available both live and via replay on the Pacific Energy Partners, L.P. website at http://www.PacificEnergy.com/ Pacific Energy Partners, L.P. (Moody's, Ba2 Corporate Credit Rating) is a Delaware limited partnership headquartered in Long Beach, California. Pacific Energy Partners is engaged principally in the business of gathering, transporting, storing and distributing crude oil and other related products in California and the Rocky Mountain region. Pacific Energy Partners generates revenues primarily by charging tariff rates for transporting crude oil on its pipelines and by leasing capacity in its storage facilities. Pacific Energy Partners also buys, blends and sells crude oil, activities that are complimentary to its pipeline transportation business. PACIFIC GAS: Names Robert Howard as California Gas Transmission VP ------------------------------------------------------------------ Pacific Gas and Electric Company's board of directors has elected Robert T. Howard as vice president of California Gas Transmission. This appointment became effective on Sept. 27, 2004. Mr. Howard, 51, will oversee the utility's 5,700-mile natural gas transmission pipeline system. Prior to joining Pacific Gas and Electric Company, Mr. Howard served as vice president and general manager with Gas Transmission Northwest, a subsidiary of National Energy and Gas Transmission, and formerly a subsidiary of Pacific Gas and Electric Company. Mr. Howard held a series of positions of increasing responsibility during his 14 years of service with GTN, including serving as vice president of pipeline operations and vice president of rates and regulatory affairs. Before joining GTN in 1990, Mr. Howard was a principal at Barakat, Mr. Howard and Chamberlin, a utility consulting firm that he co-founded in 1984. Mr. Howard previously worked for Pacific Gas and Electric Company and Southern California Edison Company in a variety of supervisory and analytical roles in the 1970s and early 1980s. Mr. Howard currently serves on the board of directors for the Interstate Natural Gas Association of America and on the Executive Committee for the INGAA Foundation. He is also chairman of the Industry Strategy Committee for the National Association of State Fire Marshals on pipeline safety. Mr. Howard earned a bachelor's degree in economics from the University of Texas at Arlington in 1974 and a master's degree in economics from Claremont. Headquartered in San Francisco, California, Pacific Gas and Electric Company -- http://www.pge.com/-- a wholly owned subsidiary of PG&E Corporation (NYSE:PCG), is one of the largest combination natural gas and electric utilities in the United States. The Company filed for Chapter 11 protection on April 6, 2001 (Bankr. N.D. Calif. Case No. 01-30923). James L. Lopes, Esq., William J. Lafferty, Esq., and Jeffrey L. Schaffer, Esq., at Howard, Rice, Nemerovski, Canady, Falk & Rabkin represent the Debtors in their restructuring efforts. On June 30, 2001, the Company listed $23,216,000,000 in assets and $22,152,000,000 in debts. Pacific Gas and Electric emerged from chapter 11 protection on April 12, 2004, paying all creditors 100 cents-on- the-dollar plus post-petition interest. (Pacific Gas Bankruptcy News, Issue No. 84; Bankruptcy Creditors' Service, Inc., 215/945-7000) PAXSON COMMS: Seeks Declaratory Ruling on Redemption of NBC Shares ------------------------------------------------------------------ Paxson Communications Corporation (AMEX:PAX) filed its answer and a counterclaim to the suit filed in the Delaware Chancery Court August 2004 by NBC Universal, Inc., a subsidiary of General Electric Company (NYSE:GE). Paxson's answer largely denies the allegations of the NBC complaint, in which NBC is challenging the 16.2% dividend rate established Sept. 15, 2004, with respect to the Series B Convertible Preferred Stock investment held by NBC. The Company's counterclaim seeks a declaratory ruling that Paxson is not obligated to redeem, and will not be in default under the terms of the Investment Agreement under which NBC made its initial $415 million investment in the Company if Paxson does not redeem, the Series B Preferred Stock held by NBC on or before Nov. 13, 2004. NBC delivered a notice of demand for redemption on Nov. 13, 2003, and has since alleged, both through statements to the press and in its complaint filed in Delaware, that the Company is obligated to redeem, and will be in default if it does not redeem, NBC's investment on or before Nov. 13, 2004. Lowell W. Paxson, Chairman and CEO, said: "We decided that it was in the best interests of our shareholders and the investment community to have the court confirm that under the plain and unambiguous terms of the Investment Agreement, we are not obligated to redeem the NBC preferred investment by November 13, 2004, and will not be in default under the Investment Agreement if we do not redeem NBC's investment." NBC's delivery of its Nov. 13, 2003 notice of demand for redemption commenced a one year period during which the Company could, but is not obligated to, redeem the Series B Preferred Stock held by NBC. The Investment Agreement provides that the Company would be required to redeem the Series B Preferred Stock only if, during such one year period, the Company's debt and preferred instruments permitted such a redemption and the Company had the funds on hand to complete such a redemption. During the one-year period that will end Nov. 13, 2004, the Company has not been permitted under the terms of its debt and preferred covenants to redeem the Series B Preferred Stock investment of NBC nor has the Company had funds on hand to consummate such a redemption. It is highly unlikely that either of these conditions will be satisfied on or before Nov. 13, 2004. The Company is not required to redeem NBC's investment, and will not be in default under these circumstances because under the terms of the Investment Agreement, the Company is not obligated to redeem NBC's Series B Preferred Stock unless both conditions are satisfied. A more complete summary of the terms of the Company's agreements with NBC is contained in the Company's Annual Report on Form 10-K for the fiscal year ended Dec. 31, 2003, as filed with the Securities and Exchange Commission. About Paxson Communications Corporation Paxson Communications Corporation owns and operates the nation's largest broadcast television distribution system and PAX TV, a family television programming network. PAX TV reaches 87% of U.S. television households via nationwide broadcast television, cable and satellite distribution systems. For more information, visit PAX TV's website at http://www.pax.tv/ * * * As reported in the Troubled Company Reporter on August 27, 2004, Standard & Poor's Ratings Services lowered its corporate credit rating on Paxson Communications Corp. to 'B-' from 'B' due to the lack of convincing progress toward completing a strategic transaction that would boost liquidity. The outlook is negative. The West Palm Beach, Florida-based television station owner and operator had approximately $978.8 million of debt outstanding on June 30, 2004. "The rating action reflects Standard & Poor's concerns that Paxson has not executed a strategic transaction, including either an investment by a strategic partner or an outright sale of the company, that assures long-term liquidity," said Standard & Poor's credit analyst Alyse Michaelson. In the absence of a viable longer-term strategy, concerns related to the cash flow generating capabilities of Paxson's assets, its onerous debt burden with certain debt requiring cash interest in 2006, and the redemption request by the National Broadcasting Company, Inc., have intensified. Liquidity is far from sufficient to fund NBC's roughly $575 million redemption request, although the redemption request cannot trigger a default. PREMIER FARMS: Seeks to Dismiss Bankruptcy Case ----------------------------------------------- Donald H. Molstad, Esq., at Molstad Law Firm asks the U.S. Bankruptcy Court for the Northern District of Iowa, Western Division, to dismiss the chapter 11 proceeding of Premier Farms LC. The Debtor has decided to ask that its chapter 11 case be dismissed after the Court rejected its Disclosure Statement this past August. A full-text copy of that inadequate Disclosure Statement is available for a fee at: http://www.researcharchives.com/bin/download?id=040812020022 The Court will consider the Debtor's request tomorrow, October 19, 2004, at 1:30 p.m. Headquartered in Clarion, Iowa, Premier Farms, is a livestock breeder. The Company filed for protection on August 12, 2003 (Bankr. N.D. Iowa Case No. 03-04632). Donald H. Molstad, Esq., in Sioux City, Iowa, represents the Debtor in its restructuring efforts. When the Company filed for protection from its creditors, it listed $22,614,949 in total assets and $93,907,881 in total debts. PREMIER FARMS: U.S. Trustee Raises Concerns about Case Dismissal ---------------------------------------------------------------- Habbo G. Fokkena, the U.S. Trustee for the Northern District of Iowa objects to Premier Farms, LC's motion to dismiss its chapter 11 proceeding. The U.S. Trustee points out four things the Debtor hasn't done while under chapter 11 protection: a) the Debtor did not file and serve its monthly reports for July, August, September and October; b) the quarterly fee for the second quarter of 2004 was underpaid by $2,000; c) the Debtor owes an estimated quarterly fee of $10,000 for the third quarter of 2004; and d) the Debtor owes a quarterly fee for the partial fourth quarter of 2004. The U.S. Trustee wants these four deficiencies cured before the case is dismissed. Headquartered in Clarion, Iowa, Premier Farms, is a livestock breeder. The Company filed for protection on August 12, 2003 (Bankr. N.D. Iowa Case No. 03-04632). Donald H. Molstad, Esq., in Sioux City, Iowa, represents the Debtor in its restructuring efforts. When the Company filed for protection from its creditors, it listed $22,614,949 in total assets and $93,907,881 in total debts. RCN CORP: Court Approves Amended Disclosure Statement ----------------------------------------------------- RCN Corporation and certain of its subsidiaries filed an Amended Plan and Disclosure Statement on Oct. 12, 2004. At the Oct. 13, 2004 hearing, Judge Drain finds that the Debtors' Amended Disclosure Statement contains adequate information within the meaning of Section 1125 of the Bankruptcy Code. Accordingly, the Court approves the Debtors' Amended Disclosure Statement. Objections to the Disclosure Statement are overruled to the extent not withdrawn or resolved. The Court will consider the confirmation of the Debtors' Amended Plan on Dec. 8, 2004, at 10:00 am. Parties who wish to object to the confirmation of the Debtors' Amended Plan must file their objections by Nov. 30, 2004, at 4:00 pm. Only timely filed and served written objections will be considered. Headquartered in Princeton, New Jersey, RCN Corporation -- http://www.rcn.com/-- provides bundled Telecommunications services. The Company, along with its affiliates, filed for chapter 11 protection (Bankr. S.D.N.Y. Case No. 04-13638) on May 27, 2004. Frederick D. Morris, Esq., and Jay M. Goffman, Esq., at Skadden Arps Slate Meagher & Flom LLP, represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $1,486,782,000 in assets and $1,820,323,000 in liabilities. (RCN Corp. Bankruptcy News, Issue No. 13; Bankruptcy Creditors' Service, Inc., 215/945-7000) RCN CORP: Summary of Amended Plan & Disclosure Statement -------------------------------------------------------- RCN Corporation and its debtor-affiliates' Amended Plan of Reorganization filed on Oct. 12, 2004, provides for certain modifications to the classification and treatment of claims. Pursuant to the Debtors' Amended Plan of Reorganization: (A) Bank Claims in Class 2 will be repaid in full in cash. The aggregate amount of Allowed Class 2 Bank Claims is estimated at $432.5 million, less any principal payments in accordance with the Cash Collateral Order; (B) Evergreen Claims in Class 3 will be reinstated as modified pursuant to the New Evergreen Credit Agreement; (C) Holders of RCN General Unsecured Claims in Class 5 will receive their pro rata share of Cash distribution equal to no more than $12,500,000 as well as their pro rata share of 100% of the shares of Reorganized RCN common stock, subject to dilution by: -- the exercise of the management incentive options and the new warrants; and -- the conversion of any convertible second-lien notes; (D) Holders of Subsidiary General Unsecured Claims will receive Cash distribution equal to 100% of the amount of each Allowed Subsidiary General Unsecured Claim; and (E) If the holders of RCN General Unsecured Claims, as a class, vote to accept the Plan: -- the holders of Preferred Interests in Class 7 will receive new warrants to purchase Reorganized RCN common stock equal to 1.75% of the new common stock, if the holders of Preferred Interests, as a class, vote to accept the Plan; and -- the holders of Class 8 Equity Interests will receive new warrants to purchase Reorganized RCN common stock equal to 0.25% of the new common stock. The new warrants will be exercisable into 2% of the new common stock of Reorganized RCN, before giving effect to the management incentive options and conversion of any convertible second-lien notes, at a strike price of $34.16 per share. The new warrants will vest as of the Plan Effective Date. The Debtors anticipate that the aggregate amount of the Allowed Subsidiary General Unsecured Claims will be less than $500,000, excluding any amounts to resolve, by way of litigation or otherwise, the claims of Chicago Access Corporation and the City of Chicago, asserted against Debtors RCN Cable TV of Chicago, Inc., and 21st Century Telecom Services, Inc. In the event the Allowed Subsidiary General Unsecured Claims in all Class 6 sub-classes aggregate in excess of $500,000, excluding the claims of Chicago Access and the City of Chicago, the Official Committee of Unsecured Creditors, as co-proponent of the Plan, reserves the right to withdraw or further modify the Plan with respect to one or more subsidiary Debtors to impair the treatment of Class 6 Subsidiary General Unsecured Claims. The Debtors intend to fund the Amended Plan with proceeds from the closing of the exit facility by and between Reorganized RCN, certain of its subsidiaries, and Deutsche Bank. Changes to Evergreen Credit Agreement The Debtors outline the salient modifications to the New Evergreen Credit Agreement: (a) Maturity will be 7-3/4 years from the Plan Effective Date; (b) Interest rate will be: 12.5% from the Effective Date through and including March 31, 2006, and will be payable quarterly, in-kind; and 6.25% payable quarterly in cash, and 6.95% payable quarterly in-kind from April 1, 2006, through and including the maturity date. In any quarter, the Debtors may elect, with Deutsche Bank's consent, to pay the full amount of interest for that quarter in cash at 12.5% interest rate; (c) Mandatory prepayment provisions will be modified to the extent necessary so that they are no more favorable to Evergreen than similar provisions in the Exit Facility; (d) Obligations and liens will be subordinated to the Exit Facility obligations on terms substantially similar to those currently set forth in the Evergreen Credit Agreement; (e) Representations, warranties, covenants, and events of default will be modified as necessary so that the terms of the New Evergreen Credit Agreement are no more restrictive to the Debtors and their subsidiaries than the terms of the Exit Facility; and (f) Covenants will be additionally modified to permit the incurrence of the obligations in respect of the Exit Facility. Convertible Second-Lien Notes Pursuant to the Amended Plan, Reorganized RCN may choose to issue Convertible Second-Lien Notes in lieu of the Second-Lien Notes contemplated by the Exit Facility. In this event, Reorganized RCN will issue Convertible Second-Lien Notes in a transaction or transactions exempt from registration under the Securities Act by reason of Section 4(2) of the Securities Act. The principal terms of any Convertible Second-Lien Notes issued by Reorganized RCN under the Plan are: Authorization: $150 million principal amount, with each $1,000 note initially convertible into 41.667 shares of New Common Stock, equal to 14.5% of the common stock of Reorganized RCN subject to dilution by the Management Incentive Options Total Issued: 6,250,000 shares of common stock Term: 7-1/2 years after the Effective Date Coupon: Assuming that the Convertible Second-Lien Notes are secured by a first lien on the equity in the RCN subsidiary that owns the equity interests in Megacable S.A. de. C.V., the Convertible Second-Lien Notes will bear interest at an annual rate equal to: * 4.5% if $100 million principal amount of the Convertible Second-Lien Notes is issued; * 5% if $125 million principal amount of the Convertible Second-Lien Notes is issued; and * 6% if $150 million principal amount of the Convertible Second-Lien Notes is issued. Assuming that the Convertible Second-Lien Notes are secured by a second lien on the equity in the RCN subsidiary that owns the equity interests in Megacable, the Convertible Second-Lien Notes will bear interest at a rate per year equal to: * 6.5% if $100 million principal amount of the Convertible Second-Lien Notes is issued; * 7% if $125 million principal amount of the Convertible Second-Lien Notes is issued; and * 7.5% if $150 million principal amount of the Convertible Second-Lien Notes is issued. Interest will be paid semi-annually, commencing on the six-month anniversary of the Effective Date. In the event of a change of control of Reorganized RCN, holders of the Convertible Second-Lien Notes may require Reorganized RCN to purchase the Convertible Second-Lien Notes at a principal amount equal to 101% of par plus accrued interest and a premium designed to protect holders against the effects of a change in control, which may include a make- whole premium or adjustment to the conversion rate. Signatories to any commitment letter in connection with Convertible Second-Lien Notes, including members of the Creditors Committee, will share Pro Rata in a commitment fee of 1% of the principal amount of the Convertible Second-Lien Notes. Any commitment will remain outstanding until January 31, 2005. The RCN Companies may purchase an extension of the commitment to February 28, 2005, for an amount equal to 0.25% of the principal amount of the Convertible Second-Lien Notes, payable on or before January 15, 2005. A further extension to March 31, 2005, may be purchased for an equal amount, payable on or before February 15, 2005. Any extension fees will be shared Pro Rata by signatories to the commitment letter, as extended. There is no definitive agreement on the terms of any Convertible Second-Lien Notes. Thus, there can be no assurance that the terms ultimately governing any notes will be as favorable to RCN as those described. Collateral: RCN's obligations under the Convertible Second-Lien Notes will be guaranteed by each of its direct and indirect domestic subsidiaries. RCN's obligations under the Convertible Second-Lien Notes and the obligations of the subsidiary guarantors will be secured by a second lien on: (1) substantially all of RCN's and each subsidiary guarantor's present and future tangible and intangible assets, including, without limitation, all receivables, contract rights, securities, inventory, equipment, real estate, intellectual property, promissory notes and all of the equity interests in each of the subsidiary guarantors; and (2) at least 65% of the total outstanding voting stock in each of RCN's, or any subsidiary guarantor's, foreign subsidiaries. The Convertible Second-Lien Notes will be junior only to the lien securing the term loans under the Exit Facility, but not on the Convertible Second-Lien Notes which will rank pari passu in right of payment with the senior first-lien financing. The Convertible Second-Lien Notes will also be secured by a first lien or second lien, as the case may be, on the equity in the RCN subsidiary that owns the 48.93% equity interest in Megacable. Megacable Megacable, S.A. de. C.V., is the largest cable television provider in Mexico. The Debtors disclose that in January 1995, the RCN Companies, through a wholly owned subsidiary, purchased a 40% equity interest in Megacable from Mazon Corporativo, S.A. de. C.V. In July 1999, the RCN Companies' ownership interest in Megacable increased to 48.93%. The RCN Companies do not have management control over Megacable's operations and presently do not receive cash dividends from it. New Common Stock Registration Rights Under the New Common Stock Registration Rights Agreement, the Amended Plan provides that Reorganized RCN will, among other things: * use its commercially reasonable efforts to cause the Shelf Registration to be declared effective by the Securities and Exchange Commission not later than the 90th day after the date of its initial filing; and * keep the Shelf Registration effective for a period ending on the earlier of the date: -- on which all covered securities have been sold pursuant to the Shelf Registration or otherwise; -- on which all covered securities are eligible to be sold without volume or manner of sale restrictions under Rule 144 under the Securities Act except as otherwise provided in the New Common Stock Registration Rights Agreement; -- that is the three-year anniversary of the date on which the Shelf Registration statement is declared effective by the Securities and Exchange Commission; and -- when there are no remaining Registerable Securities outstanding. Convertible Second-Lien Notes Registration Rights Any initial sale of the Convertible Second-Lien Notes is expected to be exempt from registration as a private placement pursuant to Section 4(2) of the Securities Act. Reorganized RCN will have: (a) 60 days after the date of the filing with the SEC of its Form 10-K for the fiscal year ended December 31, 2004, to file a shelf registration statement with the SEC to register the Convertible Second-Lien Notes and the shares of common stock of Reorganized RCN underlying the Convertible Second-Lien Notes; and (b) 90 days after the date of the filing of the Notes Shelf Registration Statement to cause the Notes Shelf Registration Statement to become effective. In no event will the Notes Shelf Effective Deadline be later than September 30, 2005. Reorganized RCN will keep the Notes Shelf Registration Statement effective for three years following the Notes Shelf Effective Deadline. Reorganized RCN will pay a penalty equal to 25 basis points per annum on the Convertible Second-Lien Notes for each quarter, up to eight quarters, during any period that Reorganized RCN fails to: -- file the Notes Shelf Registration Statement by the Filing Deadline; -- cause the Notes Shelf Registration Statement to be declared effective by the Notes Shelf Effective Deadline; or -- cause the Notes Shelf Registration Statement to be declared effective by September 30, 2005. Reorganized RCN will list the New Common Stock on the New York Stock Exchange or NASDAQ National Market Systems within 90 days of the Notes Shelf Effective Deadline. Failure to list the New Common Stock within the 90-day period will result in a penalty equal to 25 basis points per annum, payable by Reorganized RCN on the Convertible Second-Lien Notes for each quarter, up to eight quarters, during any period that the listing has not occurred. Valuation of the Reorganized Debtors The Amended Plan states that the valuation of the Reorganized Debtors does not give effect to any possible dilution due to conversion of any Convertible Second-Lien Notes that are issued under the Plan or the effect of the possible exercise of the right of first refusal to acquire Pepco Communications, LLC's interest in Starpower Communications, LLC, if the purchase is funded by additional borrowings under the Exit Facility. Starpower and Pepco Starpower is a Delaware limited liability company formed in 1997 as a joint venture between RCN Telecom Services of Washington, D.C., Inc., and Pepco. RCN DC is a wholly owned subsidiary of the RCN Companies and is not a Debtor in the Chapter 11 Cases. RCN DC and Pepco each own 50% membership interests in Starpower. On July 28, 2004, Pepco advised RCN DC that Pepco received an offer to purchase all of Pepco's membership interests in Starpower for $29 million. The parties have agreed that RCN DC will have until October 29, 2004, to exercise its election to purchase Pepco's membership interests. If the election is made after October 15, 2004, RCN DC will pay Pepco an additional $100,000 in cash consideration at closing. If the election is made after October 22, 2004, RCN DC will pay Pepco another $100,000 in cash consideration at closing. No amounts are due if RCN DC does not exercise its election to purchase Pepco's membership interest. The parties have agreed that, if RCN DC exercises its election, they will endeavor to close any transaction as promptly as reasonably practicable under the circumstances, but in no event later than December 31, 2004, unless the parties otherwise agree. RCN DC has not yet made any election with respect to the purchase of Pepco's membership interests in Starpower. RCN DC is in the process of carefully analyzing the proposed purchase terms and the economics of a proposed acquisition by RCN DC. However, based on its assessment to date, RCN DC's preliminary intention is to elect to purchase Pepco's membership interests. A blacklined copy of RCN's Amended Reorganization Plan is available at no charge at: http://bankrupt.com/misc/rcn_blacklined_disclosure_statement.pdf Headquartered in Princeton, New Jersey, RCN Corporation -- http://www.rcn.com/-- provides bundled Telecommunications services. The Company, along with its affiliates, filed for chapter 11 protection (Bankr. S.D.N.Y. Case No. 04-13638) on May 27, 2004. Frederick D. Morris, Esq., and Jay M. Goffman, Esq., at Skadden Arps Slate Meagher & Flom LLP, represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $1,486,782,000 in assets and $1,820,323,000 in liabilities. (RCN Corp. Bankruptcy News, Issue No. 13; Bankruptcy Creditors' Service, Inc., 215/945-7000) RELIZON COMPANY: Moody's Affirms B1 Ratings on Three Facilities --------------------------------------------------------------- Moody's Investors Service affirmed the B1 ratings on the Relizon Company's senior secured bank credit facilities following the announcement that Relizon Holdings LLC has reached a definitive agreement to sell its marketing solutions subsidiary, The Relizon eCRM Company (doing business as Epsilon Data Management), which was acquired in November 2001 and generates approximately 15% of the company's total revenues, for approximately $300 million. Ratings affirmed include: * $9.9 million senior secured tranche A term loan facility, due 2009 -- B1 * $210 million senior secured tranche B term loan facility, due 2011 -- B1 * $40 million senior secured revolving facility, due 2009 -- B1 * Senior Implied rating -- B1 * Issuer rating -- B3 The rating outlook is stable. The company intends to amend its current bank facilities in order to use a substantial majority of the proceeds from the asset sale to make a distribution to its shareholders, the largest of which is the Carlyle Group, which acquired the business from The Reynolds and Reynolds Company in August 2000. In addition to amending the credit facilities to permit the distribution, the company intends to reduce outstanding debt by $30 million. The ratings confirmation reflects the company's strong competitive position, improved operating performance and focused management, which are balanced against financial risk, associated with high financial leverage and reduced free cash flow, which will result from the asset sale. In addition, Moody's believes that despite losing some business product diversity and economic scale with this transaction, Relizon's remaining businesses will continue to maintain a leading market position in traditional printing products, which pro forma for the divestiture of Epsilon will represent more than half of total sales, and billing solutions. The rating is constrained by the limited scale and scope of the business in an industry where size brings with it many economic benefits, particularly given the substantial fixed cost structure. The stable outlook is predicated on continued improvement in operating performance, the maintenance of significant liquidity through internally-generated free cash flow and availability under the $40 million revolver, especially given recent working capital gains that could potentially reverse and increased capital spending, and financial leverage remaining below 3.5x adjusted debt-to-consolidated EBITDA and lease and pension adjusted debt- to-consolidated EBITDAR below 5.0x. After a few years of generally unfavorable economic conditions resulting in organic revenue declines and operating margin contraction, the company's operating performance has improved due to a stabilizing revenue base that has benefited from aggressive customer acquisition and an improving economic environment and cost cutting, including the rationalization of its fixed plant, both of which have resulted in more stable EBIT margins over the last few quarters. In addition to generally unfavorable economic conditions creating soft customer demand, Moody's believes the industry is experiencing secular pressure from electronic disintermediation, particularly in the forms and labels business, which is one of Relizon's specializations. With the drop in demand, the competitive landscape has been marred by printing overcapacity and pricing pressure given the industry's large fixed cost bases that have gone underutilized. While Relizon has increased its market share, EBIT margins have suffered contracting from fiscal 2001 to fiscal 2003. Moody's expects Relizon will continue to participate in the wave of consolidation occurring in the printing industry as that is where most growth will occur given waning demand for traditional print products and the benefits of economic scale. The company's revenues represent just 5% of the U.S. conventional form products industry and an even smaller amount of the total $155 billion total U.S. print industry. The overall print industry remains fragmented, with less than 10 companies generating revenues of more than $1 billion, and approximately 50 companies with revenues of more than $100 million. Despite potential debt-financed acquisitions and the cash distribution to shareholders, Moody's expects the company will keep adjusted debt-to-adjusted EBITDA financial leverage below 3.5x and lease adjusted debt-to-adjusted EBITDAR below 5.0x. While this transaction and an increase in capital expenditures over the next couple of years will result in a lower level of free cash flow generation, Moody's anticipates free cash flow-to-debt will remain fairly stable. Should the company diverge from these levels significantly, there will be some pressure on the B1 ratings. The secured credit facility is rated at parity with the senior implied rating as it represents the preponderance of Relizon's debt structure with no perceived junior capital beneath this senior-most debt. Relizon was acquired by the Carlyle Group in 2000 for 5.1 times EBITDA, and Epsilon was acquired by Relizon for 5.3 times EBITDA in 2001. Based upon these multiples, senior secured lenders enjoy only modest asset protection in a downside scenario. The Issuer rating is rated two notches below the senior implied rating, signaling the lack of asset protection afforded to creditors below the senior secured level to the extent that senior unsecured debt is raised in the future. Notably, the book value of Relizon's capital assets falls substantially short of its debt obligations. Relizon Company is a privately owned provider of document marketing and billing solutions. The company is based in Dayton, Ohio. REMINGTON ARMS: Profit Erosions Cue Moody's to Pare Low-B Ratings ----------------------------------------------------------------- Moody's Investors Service downgraded the debt ratings of Remington Arms Company, Inc. reflecting the company's weakened financial position following profit erosion over the past several quarters. The ratings outlook is negative. These ratings were downgraded: * Senior implied rating, to B2 from B1; * $200 million 10.5% senior unsecured notes due 2011, to B3 from B2; * Senior unsecured issuer rating to B3 from B2. The ratings downgrade and negative outlook reflect Remington's profit erosion since its leveraged recapitalization in fiscal 2003, which the company attributes to economic weakness and, more recently, to seasonal product mix shifts. Despite the sale of its Stren fishing line business for $44 million earlier this year, Remington has been unable to maintain credit measures appropriate for its prior rating category. In particular, Moody's notes that LTM June 2004 debt-to-EBITDA (adjusted for seasonal working capital) is around 7x and free cash flow is negative. In addition to the economic and seasonal impacts, profit and cash flows have been impacted by investments in new business initiatives in law enforcement/security, which have uncertain returns. Although management has recently indicated a more optimistic outlook for the business, Moody's remains concerned about second half operating performance given ongoing commodity price pressures and weakening consumer spending trends. Further rating downgrades are likely in the event that Remington is unable to stabilize earnings over this period and return to positive free cash flow generation. In addition, the ratings could be negatively impacted if the company increases its debt burden to fund unexpected strategic initiatives. Conversely, the ratings outlook could be stabilized through a sustainable improvement in profitability that supports debt repayment capacity (free cash flow) in the mid-single digits as a percentage of funded debt and continued access to borrowing lines. In this regard, Moody's notes favorably that the bank group has been supportive through credit agreement amendments, the last of which permits the repayment of $5 million of the senior notes. Operating gains could be spurred by a rebound in industry demand or strong acceptance of the company's new products. The ratings would be positively impacted by equity sponsor actions in support of growth and profit enhancement initiatives and/or debt repayment. Remington's weakened financial condition heightens ongoing rating concerns, including high regulatory and product liability risks and the discretionary nature of its products. Sales also remain largely seasonal (dependent upon the fall hunting season) and weather sensitive. The company continues to be faced with cash payment requirements related to: (i) its underfunded pension plan ($6.4 million contribution expected in fiscal 2004), (ii) dividend payments to service interest on holding company notes (as governed by Remington's debt agreements), and (iii) potential business disruption or operational flexibility issues related to its significantly unionized workforce (approximately 42% in fiscal-year 2003) . Notwithstanding these concerns, the ratings continue to benefit from the company's long-standing, leading market shares in its key categories (shotguns, rifles, and ammunition), as developed over its 188-year history, and the relatively stable long-term demand profile of the firearms industry. The company's strong market positions and customer relationships are sustained by an ongoing focus on research and development that has consistently produced market-leading product innovations. Remington Arms Company, Inc., with executive offices in Madison, North Carolina, designs, manufactures, and markets rifles, shotguns, ammunition, and hunting and gun care accessories under the Remington name. The company's products are sold through independent dealers, Wal-Mart and sporting goods retailers. Remington was purchased from Dupont in 1993 by affiliates of Clayton, Dubilier & Rice and management. In 2003, Clayton, Dubilier & Rice sold the majority of its equity position to affiliates of Bruckmann, Rosser & Sherill. The transaction was concurrent with the company's recapitalization, which funded a $100 million dividend. Sales for the twelve-month period ended June 30, 2004 were approximately $370.7 million. RFMSII: Moody's Reviewing Ba1 Rating on 2002-HS1 Class B Issue -------------------------------------------------------------- Moody's placed eight tranches from RFMSII Home Equity securitizations under review for possible upgrade. The rating review is based on an evaluation of outstanding Closed End Second deals. Moody's review will focus on historical performance of the deals and an examination of the current credit support levels, which are mainly derived from subordination, excess spread, and insurance when applicable. The relative level of credit enhancement has increased in these deals due to rapid prepayments and the deal's lockout provisions. In addition, while the current economic environment caused some financial strain on borrowers, recent home price appreciation in most major housing markets has enabled even stressed borrowers to avoid foreclosure by selling their properties prior to any loss being experienced on the mortgage loans. These deals are under review for possible upgrade: Securitization Class Current Rating -------------- ----- -------------- RFMSII Home Equity 2002-HS1 M-1 Aa2 RFMSII Home Equity 2002-HS1 M-2 A2 RFMSII Home Equity 2002-HS1 M-3 Baa1 RFMSII Home Equity 2002-HS1 B Ba1 RFMSII Home Equity 2002-HS2 M-1 Aa2 RFMSII Home Equity 2002-HS2 M-2 A2 RFMSII Home Equity 2002-HS2 M-3 Baa1 RFMSII Home Equity 2002-HS2 B Baa3 RICHARD MANNO: Case Summary & 20 Largest Unsecured Creditors ------------------------------------------------------------ Debtor: Richard Manno and Company Inc. 42 Lamar Street West Babylon, New York 11704-0000 Bankruptcy Case No.: 04-86418 Type of Business: The Company manufacturers and imports fasteners, electronic hardware and machined parts for breadboard, prototype, and production applications. See http://www.richardmanno.com/ Chapter 11 Petition Date: October 8, 2004 Court: Eastern District of New York (Central Islip) Judge: Dorothy Eisenberg Debtor's Counsel: Norman Klasfeld, Esq. 488 Madison Avenue New York, New York 10022 Tel: 212-688-0004 Total Assets: $1,937,369 Total Debts: $1,441,666 Debtor's 20 largest unsecured creditors: Entity Nature Of Claim Claim Amount ------ --------------- ------------ North Fork Bank Credit Line $198,924 James Thomas Promissory Notes $120,000 Zara Instruments Goods $81,508 Ferranti Steel Materials $60,232 Specialty Sales Commissions $46,639 Connecticut Centerless Labor $46,395 Grinding P.M. Metals Goods & Machinery $45,452 Citibank Advantage Goods & Services $44,080 McCormick Associates, Inc. Commissions $40,559 Morton Industrial Sales Commissions $39,424 Admiral Metals Materials $34,625 De Haitre & Associates Commissions $32,897 Spartan Instrument Goods $31,529 R.L. English Company Commissions $30,823 American Express Goods & Services $25,741 LM Enterprises Commissions $24,624 Alliance Bearing Industries Goods $21,069 S.T. Screw Products Goods $20,128 Mullane Sales Commissions $18,903 Yunfungmetal Goods $17,988 ROCKWOOD SPECIALTIES: Moody's Rate $625 Mil. Sr. Sub. Notes B3 -------------------------------------------------------------- Moody's Investors Service affirmed the ratings (B1 senior implied) of Rockwood Specialties Group, Inc. In addition, Moody's assigned B3 ratings to Rockwood's new $625 million senior subordinated notes due 2014. These notes, in combination with about $490 million in equity and $1.9 billion in credit facilities, will be used to provide long term financing for the acquisition of four businesses of Dynamit Nobel from mg technologies AG, and to refinance Rockwood's existing senior subordinated credit facility. The company's rating outlook is negative. The assigned prospective ratings on the new credit facilities are moved to permanent ratings given the receipt of audited financials on the Dynamit Nobel businesses and full documentation on the credit facilities. The ratings on the prior credit facilities have been withdrawn. Ratings affirmed: * Senior Implied -- B1 * Issuer Rating -- B2 * Guaranteed senior secured revolving credit facility, $250 million due 2010 -- B1 * Guaranteed senior secured term loan A, $204 million due 2011 -- B1 * Guaranteed senior secured term loan B, $1,145 million due 2012 -- B1 * Guaranteed senior secured term loan C, $334 million due 2012 -- B1 * Guaranteed senior subordinated credit facility, $625 million -- B3 * Guaranteed senior subordinated notes, $375 million due 2011 -- B3 Ratings issued: * Guaranteed senior subordinated notes, $625 million due 2014 -- B3 The ratings take into account: (i) Rockwood's high leverage with debt to LTM EBITDA of 6.3 times (using actual exchange rates and including about $229 million in holding company PIK debt - not rated), (ii) weak free cash flow initially, (iii) moderate interest coverage, and (iv) negative tangible net worth. The ratings also reflect the significant increase in business risk due to the size of the acquired businesses relative to Rockwood's existing operations. Moreover, the combination of these factors will leave the company weakly placed in the ratings category until it can increase free cash flow and begin to reduce debt. The negative outlook reflects Moody's expectation that free cash flow will be very weak during the first 12-18 months as severance costs and important capital investments in the new businesses prevent any meaningful reduction in debt. In Moody's opinion, this leaves the company exposed to unanticipated exogenous events that could negatively impact the company's credit profile. The B1 senior implied ratings are supported by the company's larger size, unusual diversity of products and end markets, and strong EBITDA margins. Furthermore, the combined entity has leading market positions in the vast majority of its businesses, limited exposure to volatile energy and petrochemicals costs, high switching costs for certain products and elevated organic growth rates in some businesses. Moody's notes that adjusted EBITDA margins for the acquired businesses were 19.6% in 2003 dropping to 17.9% for the first six months of 2004, roughly the same as Rockwood's existing operations. The ratings are also supported by improvements in Rockwood's operating performance in 2004 and support from equity sponsors KKR and CSFB, who will contribute an additional $425 million of new equity in the transaction for a total investment of roughly $816 million (including $78 million of holdco PIK notes held by KKR) since the company's recapitalization from Laporte PLC in September 2000. In Moody's opinion, the ratings are also supported by the company's ability to divest several businesses to strategic buyers at multiples that are in excess of the price paid by Rockwood. Furthermore, Moody's believes that even in a distressed situation the value of the businesses should cover Rockwood's outstanding debt and operating company liabilities. The B1 rating assigned to the senior secured credit facility reflects the benefits and limitations of the collateral, including the fact that a substantial portion of the company's assets and sales are outside of North America. Moody's believes that in a distressed situation the collateral may not cover amounts outstanding under the credit facilities. Rockwood's UK subsidiary will be able to borrow under the revolving credit facility and Tranches A and C of the term facility. Rockwood's obligations under the credit facilities will be guaranteed by Rockwood Specialties International, Inc. (Rockwood's parent), and Rockwood's domestic subsidiaries. The credit facilities will be secured by an interest in substantially all of the assets of Rockwood and its domestic subsidiaries, with certain exceptions, and by a pledge of certain stock and intra-company debt. Any outstandings under the credit facility at Rockwood's UK subsidiary, Rockwood Specialties Limited will be securitized by the tangible assets of the UK subsidiaries and certain assets of Rockwood's German, Canadian, Italian, and Singapore subsidiaries. The lenders' position is further supported by excess cash flow provisions and limitations on capital expenditures. The new senior subordinated notes will be unsecured and guaranteed by each of the company's domestic subsidiaries on a senior subordinated basis, excluding certain subsidiaries that are formed in connection with receivables facilities. The new notes rank pari passu in right of payment with Rockwood's senior subordinated notes due 2011. The B3 rating of the senior subordinated notes reflects the fact that these obligations will be contractually subordinated to a significant amount of senior secured debt and liabilities at the operating companies. Pro forma for this financing, the percentage of senior debt in Rockwood's total capital structure will be about 47%. Rockwood's B1 senior implied rating anticipates: (i) the successful integration of the acquired assets, (ii) reductions in cash expenses and working capital levels, (iii) improvements in credit metrics, and (iv) that revolver borrowings will primarily be used to support seasonal working capital needs. Further, it assumes that the company does not issue significant amounts of additional debt, notwithstanding provisions of the bank and bond indentures and covenants. The ratings could be lowered if the company fails to achieve expected improvements in operating income and free cash flow in 2005, if additional acquisitions are made, if debt levels rise, or if the audited financials are materially different from the numbers disclosed. The outlook could move to stable if the company raises free cash flow above $100-125 million per year on an annual basis. Following completion of the transaction, Moody's views Rockwood's liquidity as adequate. Rockwood's financial liquidity is provided by its $250 million revolving credit facility. Although small relative to $2.5 billion in total revenues, seasonal working capital swings are not large, and other liquidity demands are expected to be modest. Rockwood Specialties Group, Inc., headquartered in Princeton, New Jersey, is a global producer of specialty chemicals, including additives, specialty compounds and electronics. Pro forma revenues (including the contribution of the Dynamit Nobel assets) were $2.4 billion in 2003. SACO I TRUST: Moody's Reviewing Ba2 Rating on Class B-2 Issue ------------------------------------------------------------- Moody's placed four tranches from SACO I Trust 2002-1 securitization under review for possible upgrade. The rating review is based on an evaluation of outstanding Closed End Second deals. Moody's review will focus on historical performance of the deals and an examination of the current credit support levels, which are mainly derived from subordination, excess spread, and insurance when applicable. The relative level of credit enhancement has increased in these deals due to rapid prepayments and the deal's lock-out provisions. In addition, while the current economic environment caused some financial strain on borrowers, recent home price appreciation in most major housing markets has enabled even stressed borrowers to avoid foreclosure by selling their properties prior to any loss being experienced on the mortgage loans. These deals are under review for possible upgrade: Class Current Rating ----- -------------- M-1 Aa2 M-2 A2 B-1 Baa2 B-2 Ba2 SANKATY HIGH YIELD: Fitch Affirms Low-B Ratings on Classes D & E ---------------------------------------------------------------- Fitch Ratings affirms all of the rated notes issued by Sankaty High Yield Partners II, L.P. The affirmation of these notes is a result of Fitch's annual rating review process. These rating actions are effective immediately: -- $394,941,438 senior secured revolving credit facility affirmed at 'AA'; -- $237,000,000 class A first senior secured notes affirmed at 'AAA'; -- $57,000,000 class B second senior secured notes affirmed at 'A'; -- $77,000,000 class C senior subordinated secured notes affirmed at 'BBB'; -- $37,500,000 class D subordinated secured notes affirmed at 'BB'; -- $22,500,000 class E junior subordinated secured notes affirmed at 'B'. Sankaty II, a market value collateralized debt obligation that closed on Nov. 23, 1999, is managed by Sankaty Advisors, LLC. The fund was established to invest in a portfolio of: * senior secured bank loans, * high yield bonds, * mezzanine and special situation investments, and * structured product transactions. The class A notes benefit from an insurance policy provided by Financial Security Assurance Inc. Without giving effect to this policy, the rating of the class A notes would be affirmed at 'AA'. As of the Sept. 2, 2004 valuation date, the fund's portfolio was well diversified by issuer and asset category. The largest three issuers, which are classified as liquid investments, represent approximately 7% of the total market value of the fund's assets. Performing bank loans priced at or above 90% of par represented approximately 51% of the market value of the Sankaty II portfolio. Sankaty Advisors has been able to maintain sufficient overcollateralization (OC) levels while continuing to distribute funds to the equity holders. According to the Sept. 2, 2004 valuation report, the class A, class B, class C, class D, and class E OC tests were 110.7%, 109.4%, 106.9%, 105.7%, and 106.8%, respectively, relative to test levels of 100% each. It is important to note that a small portion of the fund's market value at Sept. 2, 2004 consisted of Sankaty-affiliated CDO positions. Fitch is satisfied with the manner in which Sankaty Advisors is monitoring and managing these exposures. Based on the diversity of the fund's portfolio, the cushion of the OC tests, the conservative valuation of the semi-liquid and illiquid investments, the continued distributions to equity holders, and the track record and experience of Sankaty Advisors LLC in the high-yield loan, mezzanine and special situation asset classes, Fitch has affirmed all of the rated liabilities issued by Sankaty High Yield Partners II, L.P. SHAW GROUP: Posts $31 Million Net Loss for 2004 4th Quarter ----------------------------------------------------------- The Shaw Group Inc. (NYSE: SGR) reported the financial results for its fourth quarter and fiscal year ended August 31, 2004. Net income for the fourth quarter of fiscal 2004 was $10.0 million, or $0.16 per diluted share, which includes $0.6 million, or $0.01 per share, loss from discontinued operations. This compares to net income of $9.2 million, or $0.24 per diluted share, which includes $0.1 million, less than $0.01 per diluted share, loss from discontinued operations, for the three months ended Aug. 31, 2003. For the fourth quarter of fiscal 2004, revenues were $823.2 million compared to $765.1 million in the prior year's fourth quarter. For the fiscal year ended August 31, 2004, the Company reported a net loss of $31.0 million, or $0.53 per diluted share, which includes $4.7 million, or $0.08 per diluted share, loss from discontinued operations. This compares to net income of $20.9 million, or $0.54 per diluted share, which included a $0.2 million, or $0.01 per diluted share, loss from discontinued operations, for the year ended August 31, 2003. Revenues for the year ended August 31, 2004 were $3.1 billion, compared to $3.3 billion for the year ended August 31, 2003. Shaw's backlog totaled $5.8 billion at August 31, 2004, a $1.0 billion increase from the prior year. Approximately 43%, or $2.5 billion, of the backlog is expected to be converted during fiscal 2005. Approximately 50% of the backlog is in the environmental and infrastructure sector, primarily contracts with Federal government agencies, and approximately 38% of the backlog is comprised of projects for nuclear, fossil-fuel and other power generation plants. J.M. Bernhard, Jr., Chairman and Chief Executive Officer of The Shaw Group Inc., said, "We are very pleased with our fourth quarter net income of $0.16 per share and positive net cash from operations of $13 million. This is our second consecutive quarter of positive results in both categories, reflecting the continued hard work of our entire Shaw team to put several difficult projects behind us and to focus on project execution and improving markets." Mr. Bernhard added, "We have continued to diversify our services. During 2004, our revenues were less driven by large fossil-fuel power construction projects than in prior years. However, we have seen signs of improvement in the fossil-fuel sector recently as evidenced by the addition of two new combined cycle engineering and construction projects and our FGD scrubber projects. These new fossil-fuel projects compliment our strong nuclear power, process, and expanding environmental and infrastructure sectors. As we look forward into 2005 and beyond, we are well positioned with our premier technology and professional capabilities to pursue the significant opportunities afforded by improving markets, especially in the petrochemical processing and FGD scrubber arenas." The Shaw Group, Inc., is a leading global provider of engineering, procurement, construction, maintenance, fabrication, manufacturing, consulting, remediation, and facilities management services for government and private sector clients in the power, process, environmental, infrastructure and emergency response markets. A Fortune 500 Company, The Shaw Group is headquartered in Baton Rouge, Louisiana, and employs approximately 17,000 people at its offices and operations in North America, South America, Europe, the Middle East and the Asia-Pacific region. For further information, please visit the Company's website at http://www.shawgrp.com/ * * * As reported in the Troubled Company Reporter on Feb. 10, 2004, Standard & Poor's Ratings Services affirmed its 'BB' corporate credit rating and its other ratings on The Shaw Group Inc. At the same time, Standard & Poor's revised the outlook on the company to negative from stable. SMURFIT-STONE: Gets S&P's B+ Corporate Credit Rating After Merger ----------------------------------------------------------------- Standard & Poor's Ratings Services assigned its 'B+' corporate credit rating to Smurfit-Stone Container Enterprises Inc., currently known as Stone Container Corp. This company will be the surviving entity after the planned merger of Smurfit-Stone Container Corp.'s two operating subsidiaries, Stone Container Corp. and Jefferson Smurfit Corp. At the same time, based on preliminary terms and conditions, Standard & Poor's assigned its 'BB-' senior secured debt rating (one notch above the corporate credit rating) and a recovery rating of '1' to Smurfit-Stone Container Enterprises Inc.'s new $2.322 billion credit facility. The borrowers will be Smurfit- Stone Container Enterprises Inc. and its wholly owned subsidiary, Smurfit-Stone Container Canada Inc. These ratings indicate that lenders can expect full recovery of principal in the event of payment default. The new credit facility will replace two existing credit facilities -- one at each operating subsidiary -- that mature in 2005. The company expects to meet the merger requirements contained in certain bond indentures. The company is also expected to close shortly on a new accounts receivable securitization program to replace two existing facilities that mature shortly. In addition, Standard & Poor's affirmed all its existing ratings on Smurfit-Stone Container Corp. and its subsidiaries. The outlook is stable. Total consolidated debt, including off-balance-sheet accounts receivable and lease financing, as of June 30, 2004, was $5.4 billion. "The planned merger of Smurfit-Stone's operating subsidiaries has no impact on Standard & Poor's assessment of its credit quality or that of its subsidiaries, although the organization should realize modest cost savings and operating efficiencies by eliminating duplicate administrative and operational functions," said Standard & Poor's credit analyst Cynthia Werneth. Since Smurfit-Stone was formed in 1998, Standard & Poor's assigned the same corporate credit rating to each entity, based on the fact that the two subsidiaries are managed as a single enterprise and its belief that one is unlikely to go bankrupt without the other. The ratings on Chicago, Illinois-based Smurfit-Stone Container Corp. and its subsidiaries reflect its: (1) narrow product focus, (2) industry cyclicality, and (3) high debt levels. Smurfit-Stone is the world's largest producer of containerboard and corrugated containers. Improving demand and pricing, together with significant restructuring actions taken in late 2003, should begin to meaningfully benefit results in the second half of 2004 and strengthen credit measures to levels commensurate with the ratings. In addition, the planned refinancings will extend the company's debt maturity schedule and should reduce financing costs somewhat. SNOWVILLE FARMS: Case Summary & 20 Largest Unsecured Creditors -------------------------------------------------------------- Debtor: Snowville Farms, LLC 2588 North Fairfield Layton, Utah 84041 Bankruptcy Case No.: 04-36559 Chapter 11 Petition Date: October 12, 2004 Court: District of Utah (Salt Lake City) Judge: William T. Thurman Debtor's Counsel: M. Darin Hammond, Esq. Smith Knowles & Hamilton 4723 Harrison Boulevard, Suite 200 Ogden, UT 84403 Tel: 801-476-0303 Fax: 801-476-0399 Estimated Assets: $1 Million to $10 Million Estimated Debts: $1 Million to $10 Million Debtor's 20 Largest Unsecured Creditors: Entity Claim Amount ------ ------------ Barnes Bank $500,000 33 South Main Street Kaysville, UT 84037 Hanging T Farms $100,000 3585 W. Highway 38 Malad, ID 83252 First National Equipment $55,872 John Deere $51,035 Circle B Irrigation $40,420 Bank One $38,837 Mrs. Fields $35,000 Farm Bureau $22,662 Golden Spike $21,754 A T & T $20,022 Cook Dorigatti $15,895 Ford Credit $15,068 MBNA America $13,805 MBNA America $12,535 James Barnes, Trustee $12,500 Miller Gas $12,003 Sherwood Mall $10,040 Discover Card $9,172 Terra Law $8,495 Bank of America $8,436 SOUTHERN EXPOSURE INC: Voluntary Chapter 11 Case Summary -------------------------------------------------------- Debtor: Southern Exposure, Inc. aka Clearwater 8 Alhambra Road Massapequa, New York 11758 Bankruptcy Case No.: 04-86515 Debtor affiliates filing separate chapter 11 petitions: Entity Case No. ------ -------- On The Waterfront LLC 04-86516 Chapter 11 Petition Date: October 12, 2004 Court: Eastern District of New York (Central Islip) Judge: Dorothy Eisenberg Debtor's Counsel: Edward Zinker, Esq. Zinker & Herzberg, LLP 278 East Main Street PO Box 866 Smithtown, New York 11787-0866 Tel: (631) 265-2133 Estimated Assets: $1 Million to $10 Million Estimated Debts: $1 Million to $10 Million The Debtors did not file a list of their 20 largest unsecured creditors. STELCO: Monitor Ernst & Young Files 10th CCAA Restructuring Report ------------------------------------------------------------------ Stelco, Inc., (TSX:STE) announced that the Tenth Report of the Monitor, Ernst & Young Inc., in the matter of the Company's Court- supervised restructuring was filed on Thursday, October 14, 2004. The Report devotes considerable attention to the Company's proposal for a capital raising process that will be the subject of a Court hearing tomorrow, October 19, 2004. The Company noted that in its Report the Court-appointed Monitor concurs with Stelco that it is imperative that the process be commenced; expresses the view that the proposed process is open, fair, reasonable and provides for substantial stakeholder input, and recommends that the Court approve the 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. STELCO INC: Non-Disclosure of GM Ultimatum "Reckless", Workers Say ------------------------------------------------------------------ United Steelworkers' National Director Ken Neumann and Ontario/Atlantic Director Wayne Fraser say Stelco Inc.'s failure to disclose to the union that General Motors wanted the company to reach a settlement with Local 8782 by Oct. 15 is irresponsible and reckless. "Meetings with company officials never included information about GM and its concerns," said Neumann. "Instead Stelco revealed the Oct. 15 deadline at the last minute as a threat to the 1,000 workers at the Lake Erie operation." Wayne Fraser added, "Stelco's behaviour is not geared to achieving labour peace. Instead, it is a reckless way to do business, by risking the income generated by its largest customer. This kind of extreme brinkmanship doesn't reflect a company that is supposed to be on the edge of bankruptcy. "Our union has experience with restructuring and saving jobs in the steel industry. Stelco has never wanted our help. They have only wanted to gut our contracts and take money away from retirees." Stelco is now back at the bargaining table with Local 8782. "The company has got to be held accountable for risking the livelihoods of workers and the health of the communities that depend on those jobs," Mr. Neumann said. "From Edmonton to Hamilton to Montreal, Stelco has a lot to answer for." Last week a strike vote was held by members of Local 5220 in Edmonton. The result was 82 per cent in favour. Meanwhile, workers in all the Stelco subsidiaries report business as usual, with gain-sharing payouts yielding as much as $1,500 per employee. Stelco and the union will be back in court tomorrow Oct. 19, where the company is expected to seek support for its strategic plan. The union will oppose any motion to sell the company off piece by piece. SUMMIT WASATCH: List of 6 Largest Unsecured Creditors ----------------------------------------------------- Summit Wasatch, LLC, released a list of its 6 Largest Unsecured Creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ William Russ $0 Steven Quesenberry Trustee for $0 Oversecured Trust Deed Thomas J. Erbin Trustee for $0 Oversecured Trust Deed Backman-Stewart Title Trustee for $0 Services, Ltd. Oversecured Trust Deed Bank of Utah Trustee for $0 Oversecured Trust Deed Daniel J. Torkelson Trustee for $0 Oversecured Trust Deed Headquartered in Tremonton, Utah, Summit Wasatch, LLC filed for chapter 11 protection (Bankr. D. Utah Case No. 04-35773) on September 28, 2004. Howard P. Johnson, Esq., in Salt Lake City, Utah, represents the Company in its restructuring efforts. When the Debtor filed for protection from its creditors, it listed assets of $11,802,550 and debts of more than $2,621,665. SUTTER CBO: Credit Quality Decline Spurs Moody's to Cut Ratings --------------------------------------------------------------- Moody's Investors Service lowered the ratings of two classes of notes issued by Sutter CBO 2000-2 Ltd.: * to Ba1 (from Baa2 under review for downgrade) (1) $16,000,000 Class B-1L Floating Rate Notes; and (2) $24,000,000 Class B-1 9.36% Notes; * to Caa1 (from Ba2 under review for downgrade), the $19,000,000 Class B-2 11.36% Notes. According to Moody's, this action is due to continuing deterioration in both the par and credit quality of the collateral pool. Moody's reported that, as of the latest monthly report, the transaction was violating the weighted average rating factor test as well the Caa basket allowance. Excluding defaulted securities, Moody's noted that the weighted average rating factor of the collateral pool (excluding Defaulted Securities and cash held as Eligible Investments) was approximately 3373 (2900 limit) and the Caa basket was 26.09% (7.5% limit). TAHERA DIAMOND: Plans to Raise C$45 Million in Equity Financing --------------------------------------------------------------- Tahera Diamond Corporation (TSX-TAH) filed a preliminary short form prospectus in all provinces of Canada in connection with an offering of common shares to raise approximately Cdn.$45 million. The offering will be conducted through a syndicate of underwriters led by GMP Securities Ltd., and including TD Securities Inc., National Bank Financial Inc., Dundee Securities Corporation, Westwind Partners Inc. and Paradigm Capital Inc. Tahera plans to use the net proceeds of the offering towards the financing of the development and construction of the Jericho Diamond Mine and for general working capital purposes. The offering is subject to certain conditions, including the approval of the Toronto Stock Exchange. Tahera Diamond Corporation -- http://www.tahera.com-- is a unique Canadian diamond Company focused on developing its wholly owned Jericho Diamond Project as Canada's Next And Nunavut's First Diamond Mine. Tahera recently entered into a letter of intent with Tiffany & Co., one of the world's leading jewelers, with respect to a diamond purchase, marketing, and finance agreement for the Jericho Diamond Project. Tahera has several other very prospective diamond projects in Canada's prolific Slave Craton. The common shares of the Company trade on the TSX under the symbol 'TAH'. * * * As reported in the Troubled Company Reporter on Troubled Company July 29, 2004, at June 30, 2004, stockholders' deficit narrowed to CDN$1,319,000 from a $43,340,000 deficit at December 31, 2003. TIRO ACQUISITION: Wants to Hire Pachulski Stang as Co-Counsel ------------------------------------------------------------- Tiro Acquisition LLC and its debtor-affiliates ask the U.S. Bankruptcy Court for the District of Delaware for permission to retain Pachulski, Stang, Ziehl, Young, Jones & Weintraub PC as co- counsel to McDonald Hopkins Co., LPA, in their reorganization. Pachulski Stang is expected to: a) provide legal advice with respect to the Debtors powers and duties as debtors-in-possession in the continued management of their assets and properties; b) prepare and pursue confirmation of Debtors' plan and approval of the disclosure statement; c) prepare necessary applications, motions, answers, orders, reports and other legal papers on behalf of the Debtors; d) appear in Court to protect the interests of the Debtors; and e) perform all other legal services for the Debtors which may be necessary and proper in these proceedings. The principal attorneys and paralegals who will provide legal services to the Debtors and their current hourly rates: Professional Rate ------------ ---- Laura Davis Jones $595 James E. O'Neill 415 Rachel Lowy Werkheiser 295 Timothy O'Brien 135 Camille Ennis 135 Pachulski Stang will closely coordinate with McDonald Hopkins to avoid duplication of services and effort. To the best of the Debtors' knowledge, Pachulski Stang is a "disinterested person" as that term is defined in Section 101(14) of the Bankruptcy Code. Headquartered in Southport, Connecticut, Tiro Acquisition -- http://www.tiroinc.com/-- develops, manufactures and packages hair care and other products for professional salons. The Company and its debtor-affiliates filed for chapter 11 protection on October 12, 2004 (Bankr. D. Del. Case No. 04-12939). When the Debtor filed for protection, it listed more than $10 million in assets and debts. TRANSPORTATION TECH: Moody's Confirms Low-B & Junk Ratings ---------------------------------------------------------- Moody's Investors Service confirmed all ratings for Transportation Technologies Industries, Inc., thereby concluding the rating agency's review for possible upgrade. The review had been initiated in connection with Transportation Tech's May 2004 filing of an S-1 registration statement for an initial public offering, which was expected to raise approximately $150 million of gross proceeds. However, while Transportation Tech has not withdrawn the registration statement, the equity offering has stalled to this point. The amount and timing of an IPO transaction -- along with any corresponding debt reduction that might directly result -- are now quite uncertain. The rating outlook is now stable. Moody's took these specific rating actions: -- Confirmed the B2 rating for Transportation Tech's $165 million of guaranteed senior secured first-lien credit facilities, consisting of: * $50 million revolving credit facility due March 2009; * $115 million term loan due March 2009 -- Confirmed the B3 rating for Transportation Tech's $100 million guaranteed senior secured second-lien term loan due March 2009; -- Confirmed the Caa1 rating for Transportation Tech's $100 million of 12.5% senior subordinated unsecured notes due March 2010; -- Confirmed Transportation Tech's B2 senior implied rating; -- Confirmed Transportation Tech's B3 senior unsecured issuer rating. The rating confirmations and stable outlook reflect Transportation Tech's high existing leverage and marginal cash interest coverage, which are consistent with levels exhibited other issuers within the B2 senior implied rating category. Given the uncertainty surrounding the likelihood of execution and the allocation of funds associated with a future IPO, Moody's is not currently incorporating the potential impact of an equity offering into our evaluation of the company's credit protection measures. In contrast, the earlier action placing Transportation Tech's ratings on review for possible upgrade had been based upon indications that the company would use a sizable portion of the net proceeds from the pending IPO to reduce outstanding debt. The rating actions are additionally supported by the fact that Transportation Tech's much anticipated near-term reduction in leverage through cash flow generation appears to be delayed, despite the cyclical recoveries being realized within the company's critical heavy duty truck and industrial end markets. Cash from operations has fallen below expectations due to the fact that rising raw materials costs -- most notably for scrap steel -- have been offsetting the company's otherwise improving fixed cost absorption. Transportation Tech's Gunite division has been the most negatively impacted because current surcharge agreements are only providing partial compensation for increases in the cost of scrap steel. The company does plan to pursue further surcharge negotiations since costs continue to rise and demand remains strong. The company's Brillion division already has in place automatic monthly or quarterly customer pricing adjustments that provide for nearly full recovery of incremental steel materials costs. Over the past twelve months Transportation Tech has additionally had to invest approximately $27 million in incremental working capital to support the higher sales volume. While the revenue growth is desirable, the company has so far been unable to generate positive free cash flow during the cyclical upturn. The company also expects capital expenditures to be modestly above historical run rate levels over the next few years in order to be compliant with MACT environmental requirements. Transportation Tech's ratings also continue to reflect the company's leading positions in its end markets during the current period of cyclical recovery. The company maintains one of the broadest portfolios of truck components and number one or number two market positions for the majority of its products sold to the OEM market. Liquidity provided by the $50 million revolving credit facility continues to be adequate. Current usage on the revolver consists of approximately $24 million of letters of credit and seasonal working capital support, with the company presently maintaining full effective availability of the facility commitment after factoring in covenant restrictions. Future events that could negatively affect Transportation Tech's ratings or outlook include: (i) an unanticipated setback to the economy that materially dampens the rebound of the truck markets, (ii) an inability to pass increasing raw materials costs on to customers, (iii) stepped up pressures from customers to lower pricing, (iv) a transaction that further leverages the company or replaces any of the pay-in-kind preferred instruments with more debt-like obligations, (v) the loss of significant contracts or market share, or a decline in liquidity. Future events that have the potential to positively impact the company's ratings or outlook include: (i) debt reduction achieved from operating cash flow generation and completion of an equity offering, (ii) a rebound in truck demand at the high end of expectations that generates substantial increases in revenues and fixed cost absorption, (iii) market share gains, substantial new business contracts, successful and sustainable reduction in the company's exposure to commodity input price risk, and (iv) continued progress with the company's cost cutting efforts. Debt/EBITDAR (including the present value of operating leases and off-balance sheet letters of credit as debt) declined modestly to 6.3x for the last twelve months ended June 30, 2004, compared to 6.6x during the fiscal year ended December 31, 2003. This leverage ratio notably excludes the approximately $177 million current accreted value of the company's four series of PIK preferred stock, which Moody's believes are defined by a high degree of equity-like characteristics. EBIT covered cash interest by 1.3x and represented an 8.2% return on assets for the LTM period ended June 30, 2004. EBIT and EBITDAR used in the above ratios were $4.4 million below reported amounts, reflecting an environmental remediation liability recovery net of a non- recurring impairment charge. Transportation Tech, headquartered in Chicago, Illinois, is a leading manufacturer of components for medium-duty and heavy-duty trucks, buses, and specialty vehicles. The company designs, produces and markets a wide range of wheel-end components, complex iron castings, truck body and chassis parts, seating systems, and steerable axles. Since Transportation Tech's going-private leveraged buyout transaction in 2000, the company has been owned by a group consisting of affiliates of Trimaran Capital Partners, the Caravelle Investment Fund, the Albion Alliance Mezzanine Fund, and management. Revenues have increased by nearly 20% over the last twelve months to approximately $500 million. US AIRWAYS: Gets Court Nod to Cut Wages & Benefits Until Feb. 15 ---------------------------------------------------------------- The U.S. Bankruptcy Court for the Eastern District of Virginia granted the request of US Airways and its debtor-affiliates for interim wage & benefit reductions. But the reductions will only be effective until February 15, 2005, six weeks short of what the Debtors sought. Judge Stephen S. Mitchell specifically authorized the Debtors to make these interim modifications to the relevant Collective Bargaining Agreements: A. Air Line Pilots Association, International: (1) 21% base rates reduction (excluding MidAtlantic Airways); (2) 10% pension plan employer contribution rate; (3) suspension of the Company's obligation under the ALPA Agreement regarding Minimum Aircraft and Minimum Block Hours, as set forth in the July 2002 Restructuring Agreement as amended; and (4) provision allowing the Company's Vice President of Flight Operations to establish the monthly pay cap at 85, 90 or 95 hours by Position. B. Association of Flight Attendants-Communications Workers of America (1) 21% base rates reduction (excluding MidAtlantic Airways); (2) suspension of the Company's obligation under the provisions of the parties' January 2003 Restructuring Agreement regarding Minimum Aircraft; and (3) a provision allowing the Company's Vice President of Inflight to increase the monthly obligation for all flight attendants in a given base by either five or ten hours. C. Communication Workers of America (1) 21% base rates reduction (excluding MidAtlantic Airways or Mainline Express CWA-represented employees); (2) suspension of the employer match contribution to the defined contribution retirement plan and suspension of the current employer base contribution, to be replaced with a flat 3% employer base contribution; and (3) non-applicability of the Company's obligations to maintain a minimum number of aircraft as set forth in the groups' January 2003 Restructuring Agreements. D. International Association of Machinists and Aerospace Workers -- Mechanics: (1) 21% base rates reduction; (2) suspension of the employer match to the employees' 401K plans; (3) non-applicability of the Company's obligations to maintain a minimum number of aircraft as set forth in the group's January 2003 Restructuring Agreement; and (4) provision permitting the Company to outsource all heavy base maintenance activities on all Airbus narrow-bodied and wide-bodied aircraft, provided that no mechanic and related employees will be furloughed as a result of the outsourcing. E. International Association of Machinists and Aerospace Workers -- Fleet Service: (1) 21% base rates reduction (excluding MidAtlantic Airways and Mainline Express); (2) reduction of employer contributions to the IAM National Pension Fund to a flat 3%; and (3) non-applicability of the Company's obligations to maintain a minimum number of aircraft as set forth in the group's January 2003 Restructuring Agreement. F. International Association of Machinists and Aerospace Workers -- Maintenance Training Specialists: (1) 21% base rates reduction; (2) reduction of employer contributions to the IAM National Pension Fund to a flat 3%; and (3) nonapplicability of the Company's obligations to maintain a minimum number of aircraft as set forth in the group's January 2003 Restructuring Agreement. Extreme Financial Distress As reported in the Troubled Company Reporter on October 6, 2004, the Debtors argue they are in extreme financial distress. Unless industry conditions further deteriorate, the Debtors say they have sufficient cash to operate through January 2005. However, if they do not accumulate cash during the next few months, there is a high probability of irreparable harm to their asset base, material downsizing, massive layoffs and liquidation. Brian P. Leitch, Esq., at Arnold & Porter, in Denver, Colorado, explained that the Debtors must accrue roughly $200,000,000 in additional cash by early 2005. The only way to reduce cash outflow is to immediately implement $38,000,000 in monthly wage and benefit reductions. Judge Mitchell Sees the Problem "What we have here is a ticking fiscal time-bomb," Judge Mitchell observed from the bench. "Because the meltdown might happen some months from now does not mean that the relief is not needed," Judge Mitchell indicated in his ruling granting the Debtors' request following a four-day hearing. Economic Effects The Debtors have yet to calculate the full financial effect of the Court's decision. The Court's order entered Friday will cut the average US Airways salary from $59,509 to $47,012, The Associated Press reports. This will put the airline's salary grade below the other five major traditional carriers as well as Southwest Airlines. But wages at JetBlue and America West -- the two carriers the Debtors seeks to emulate -- will still be less, the AP adds. The Debtors are pleased by the Judge's decision. "Our request for interim relief was a regrettable but necessary step to build cash and assure our customers of our ability to continue operations," US Airways Chief Executive Officer Bruce R. Lakefield said. "Judge Mitchell's thoughtful and expeditious decision on this matter, in combination with the agreement with the ATSB to allow use of cash for the next three months, provides us with an opportunity to successfully complete our Transformation Plan. But the interim relief is not a substitute for permanent relief, and we will continue to make all our resources available to quickly reach consensual agreements with the Association of Flight Attendants, the Communications Workers of America, and the International Association of Machinists," Mr. Lakefield continued. Workers' Responses The Debtors' largest labor unions, the International Association of Machinists and the Association of Flight Attendants disputed the wage and benefit cuts since they were first proposed. The unions, Bloomberg News relates, argued that the carrier failed to prove it needs the temporary reductions to avoid going out of business. The Communications Workers of America, representing customer service and reservations agents, expects that the Debtors "will immediately begin pressing workers for additional, longer-term cuts in pay, benefits and working conditions." The Flight Attendants' Union denounced the 21% pay cuts as "unfair and excessive." While they acknowledged that Judge Mitchell reduced the relief from what the company originally demanded, the cuts will still be devastating. "Flight attendants have been targeted for punitive treatment by a company that awarded pay raises to its non-contract employees just prior to its bankruptcy filing, while sticking our members with an overwhelming burden for its inept management practices," said Perry Hayes, president of the Association of Flight Attendants-CWA Master Executive Council at US Airways. Headquartered in Arlington, Virginia, US Airways' primary business activity is the ownership of the common stock of: * US Airways, Inc., * Allegheny Airlines, Inc., * Piedmont Airlines, Inc., * PSA Airlines, Inc., * MidAtlantic Airways, Inc., * US Airways Leasing and Sales, Inc., * Material Services Company, Inc., and * Airways Assurance Limited, LLC. Under a chapter 11 plan declared effective on March 31, 2003, USAir emerged from bankruptcy with the Retirement Systems of Alabama taking a 40% equity stake in the deleveraged carrier in exchange for a $240 million infusion of new capital. US Airways and its subsidiaries filed another chapter 11 petition on September 12, 2004 (Bankr. E.D. Va. Case No. 04-13820). Brian P. Leitch, Esq., Daniel M. Lewis, Esq., and Michael J. Canning, Esq., at Arnold & Porter LLP, and Lawrence E. Rifken, Esq., and Douglas M. Foley, Esq., at McGuireWoods LLP, represent the Debtors in their restructuring efforts. In the Company's second bankruptcy filing, it lists $8,805,972,000 in total assets and $8,702,437,000 in total debts. US AIRWAYS: Establishes Reclamation Claims Procedures ----------------------------------------------------- US Airways, Inc., and its debtor-affiliates sought and obtained the authority of the U.S. Bankruptcy Court for the Eastern District of Virginia, on an interim basis, to implement exclusive, global procedures for reconciliation and treatment of reclamation claims. Brian P. Leitch, Esq., at Arnold & Porter, relates that the Debtors ordered a wide variety of goods from numerous domestic and international vendors on varying credit terms. The Goods are delivered to the Debtors' facilities for future use. As of the Petition Date, the Debtors were in possession of Goods that had been delivered, but had not been invoiced by the vendors. Under both state law and the Bankruptcy Code, vendors who ship goods on credit may have the right to reclaim those Goods. Under the Bankruptcy Code, vendors' common law or statutory reclamation rights are supplemented and qualified by Section 546(c) of the Bankruptcy Code. Section 546(c)(1) provides that all vendors who have sold goods to a debtor in the ordinary course of business may reclaim the goods if: (1) the debtor was insolvent when it received the goods; (2) the vendor submits a written demand to the debtor for the reclamation of the goods; (3) the demand was made within 10 days after the debtor's receipt of the goods; (4) the goods are identifiable; (5) the debtor had possession of the goods when the debtor received the written reclamation demand; and (6) the debtor is entitled to reclamation under state law. Mr. Leitch expects the Debtors to receive numerous reclamation demands from various Sellers asserting their alleged reclamation rights and seeking return of the Goods. According to Mr. Leitch, it is of paramount importance for the Debtors to maintain normal business operations and avoid costly and distracting Reclamation Claim litigation. If the Debtors are unable to establish and implement an exclusive, global set of reclamation procedures, they will face the simultaneous defense of multiple reclamation adversary proceedings when the Debtors need to focus on critical aspects of the reorganization process. Many of the Reclamation Claims will be valid. Therefore, the Debtors will adopt a set of exclusive, global procedures for the reconciliation and treatment of all Reclamation Claims. This will avoid piecemeal litigation that would interfere with the Debtors' reorganization efforts. The Debtors propose a comprehensive set of procedures: (1) Reclamation Demands (a) Sellers seeking to reclaim Goods from the Debtors will submit a written demand to: US Airways Group, Inc. 2345 Crystal Drive Arlington, Virginia 22227 Attn: Anita Beier, Senior VP and Controller McGuireWoods LLP 1750 Tysons Boulevard, Suite 1800 McLean, Virginia 22102-4215 Attn: Lawrence E. Rifken FTI Consulting, Inc. 622 Third Avenue, 31st Floor New York, New York, 10017 Attn: Scott Rinaldi (b) The Reclamation Demand must list the Goods and the basis for the Reclamation Claim, with applicable invoices and delivery documentation; and (c) Sellers that fail to timely submit a Reclamation Demand waive all rights; (2) The Statement of Reclamation (a) Within the later of 45 days of the Petition Date or receipt of a timely Reclamation Demand, the Debtors will provide the Seller with a copy of the Reclamation Order; (b) The Statement of Reclamation will set forth the basis of the Reclamation Claim and its relative validity; (c) Sellers may assent to the Reclamation Claim as set forth in the Statement of Reclamation by returning the Statement to US Airways Group, McGuireWoods and FTI within 60 days; and (d) Sellers must indicate dissent on the Statement of Reclamation and return it to all of the addressees identified above; (3) Fixing of Reclamation Claims (a) Each Reclamation Claim by a Seller who assents or fails to comply with the Reclamation Procedures will be deemed an Allowed Reclamation Claim; (b) The Debtors will negotiate with all Dissenting Sellers to adjust Reclamation Claim to reach an Agreement; and (c) If no consensual resolution of a Dissenting Seller's Reclamation Claim is reached within 60 days, the Debtors will file a motion for determination of the Dissenting Seller's Reclamation Claim; (4) Treatment of Allowed Reclamation Claims (a) The Debtors may satisfy any Reclamation Claim by making the Goods available for pick-up by the Seller; (b) Allowed Reclamation Claims where the Debtors make the Goods available will be paid; (i) in full as administrative expense priority claims; (ii) in accordance with the provisions of the Bankruptcy Code in the event of a liquidation of the Debtors; or (iii) in whole or in part in the Debtors' business judgment; and (5) The Debtors' Reserved Defenses (a) Seller cannot reclaim goods delivered to a debtor that was not insolvent; (b) Seller may reclaim only goods delivered without the seller's knowledge of the buyer's insolvency; (c) Seller may reclaim only goods with reclamation demand before 10 days after the buyer's receipt of the goods; (d) the reclamation demand must be in writing; (e) Seller may reclaim goods that are identifiable and not commingled or altered; (f) Seller may reclaim goods only if in the possession of the debtor at the time the debtor received the reclamation demand; (g) Seller cannot reclaim goods that have been transferred to a "buyer in the ordinary course" or a "good faith purchaser;" and (h) Seller may reclaim goods only if not subject to superior rights or interests of a secured lender or creditor. Mr. Leitch explains that the attention of the Debtors' management and operational personnel will be diverted from more important operational issues if the Reclamation Procedures are not approved. The Debtors do not have the resources to respond to and resolve each Reclamation Claim on an ad hoc basis as numerous, individual adversary proceedings are filed or other actions are taken by the Sellers to enforce reclamation rights. Dealing with adversary proceedings would force the Debtors to expend critical personnel resources and incur unnecessary litigation costs to defend piecemeal litigation. The Reclamation Procedures will effectively and efficiently streamline the process of resolving the Reclamation Claims for the Debtors and Sellers alike. Headquartered in Arlington, Virginia, US Airways' primary business activity is the ownership of the common stock of: * US Airways, Inc., * Allegheny Airlines, Inc., * Piedmont Airlines, Inc., * PSA Airlines, Inc., * MidAtlantic Airways, Inc., * US Airways Leasing and Sales, Inc., * Material Services Company, Inc., and * Airways Assurance Limited, LLC. Under a chapter 11 plan declared effective on March 31, 2003, USAir emerged from bankruptcy with the Retirement Systems of Alabama taking a 40% equity stake in the deleveraged carrier in exchange for a $240 million infusion of new capital. US Airways and its subsidiaries filed another chapter 11 petition on September 12, 2004 (Bankr. E.D. Va. Case No. 04-13820). Brian P. Leitch, Esq., Daniel M. Lewis, Esq., and Michael J. Canning, Esq., at Arnold & Porter LLP, and Lawrence E. Rifken, Esq., and Douglas M. Foley, Esq., at McGuireWoods LLP, represent the Debtors in their restructuring efforts. In the Company's second bankruptcy filing, it lists $8,805,972,000 in total assets and $8,702,437,000 in total debts. (US Airways Bankruptcy News, Issue No. 65; Bankruptcy Creditors' Service, Inc., 215/945-7000) USA MOBILITY: Moody's Rates Planned Metrocall & Arch Loan at Ba3 ---------------------------------------------------------------- Moody's Investors Service assigned a Ba3 senior implied rating to USA Mobility, Inc. and a Ba3 rating to the proposed $140 million senior secured term loan for Metrocall, Inc. and Arch Wireless Operating Company, Inc. (as co-borrowers), among other rating actions. The rating outlook is stable. The ratings assigned are: -- USA Mobility, Inc. * Senior Implied rating -- Ba3 * Issuer rating -- B2 * SGL rating -- 2 -- Metrocall, Inc. and Arch Wireless Operating Company, Inc. (co-borrowers) * $140 million senior secured term loan due 2006 -- Ba3 The Ba3 ratings reflect the downward financial and operating trends that plague the paging industry as customers substitute cellular/PCS phones, PDAs and other wireless devices for pagers. The ratings also account for: (i) the quite modest financial leverage the company is taking on to complete its pending merger, (ii) the company's history of and commitment to rapidly repaying debt, (iii) strong interest coverage ratios, and (iv) robust free cash flows. The SGL-2 short-term liquidity rating reflects the strong free cash flow generating ability of the new company, offset by the lack of any liquidity facility and other unsecured assets that could be readily monetized. In March 2004, Metrocall Holdings, Inc. and Arch Wireless, Inc. announced their intention to merge in a stock-for-stock, tax-free merger to form USA Mobility, Inc. In the merger, Arch common shareholders will receive one share of USA mobility common stock for each share of Arch that they hold (19.9 million in aggregate). Metrocall common shareholders receiving stock will receive 1.876 shares of USA Mobility for each of the approximately 4 million shares of Metrocall that they hold (approximately 7.6 million USA Mobility shares in aggregate). Metrocall shareholders will also receive approximately $75 per share in cash for the remaining 2 million shares of Metrocall common stock (approximately $150 million in aggregate). This cash portion is being paid to preserve and accelerate utilization of Arch's tax attributes for the benefit of USA Mobility going forward. On a pro-forma basis Arch and Metrocall shareholders will own 72.5% and 27.5% of USA Mobility, respectively. The $140 million in proceeds from the senior secured term loan will be used, in combination with cash on hand, to fund the $150 million payment to Metrocall shareholders and to pay approximately $23 million in financing fees, M&A and integration costs. The senior secured term loan will be the joint and several obligation of Metrocall, Inc. and Arch Wireless Operating Company, Inc. The new secured term loan is guaranteed by USA Mobility, Inc. (the parent of the co-borrowers) and all of the co-borrowers' existing and future direct and indirect subsidiaries and will be secured by perfected first priority pledges of all of the equity interests held by USA Mobility in the co-borrowers and their subsidiaries, as well as, all tangible and intangible assets. The co-borrowers will be obligated to mandatorily prepay the loan with any proceeds from: * debt issuances (100%), * equity issuances (50%), * asset dispositions subject to carve-outs or exceptions or reinvestment provisions (100%), and * excess cash flow (50%). The loan's tenure is two years, and will amortize at 50% in year one and two. USA Mobility will be subject to maximum leverage, interest coverage, and maximum capital expenditures covenants (which have yet to be determined). The paging industry has been hurt by the increasing popularity of PCS and cellular technology as consumers have substituted multi- functioning, voice and data phones in place of single function, numeric, short message pagers. The total number of units in service has declined from 45 million in 1999 to 12 million in 2003, as retail and consumer customers have switched to alternative wireless applications. The paging industry has consolidated around a core group of enterprise customers and service providers. In 1999, Arch and Metrocall commanded 13% and 16%, respectively, of the market, which was scattered with many small to large players. As of 2003, Arch and Metrocall held 36% and 30% of total paging units in service, respectively, with the number of competitors greatly reduced due to consolidation; Verizon Wireless, SBC, and SkyTel are the main competitors. As the paging industry has returned to its origins as service provider to the enterprise/business-to-business market place, churn has begun to slow. The company estimates that roughly 85% of current pager usage is from the business-to-business market, which has a lower churn rate, as paging services remain critical for select enterprise customers. The primary revenue base is mid- to large-size businesses, government, healthcare and emergency services. The paging sector continues to experience subscriber attrition (27% from FYE02 to 9/30/04, pro forma for merger) and revenue erosion (30% from FYE02 to 9/30/04, pro forma for merger). Moody's notes the main risk is how precipitously the user base will decline over the two year life of the loan, and how that will affect the robust cash-flow generating profile of the company. The combination of these two carriers into USA Mobility will create the largest national paging company in the US. The merger permits the combined companies greater opportunity to reduce their operating costs ahead of the rapid revenue decline that is expected to continue. The company hopes to generate synergies through network consolidation, sales and distribution consolidation and general and administrative overhead restructuring (primarily through headcount reduction). The ratings are supported by the USA Mobility's strong cash flow generation as a percentage of total debt (amounting to 150% pro forma for the proposed transaction), as the company manages its operations for cash. Moody's notes that capital expenditures have been well below depreciation historically and the company has aggressively cut costs, primarily through headcount reduction, in efforts to keep expenses declining faster than the decline in revenues. The stable rating outlook incorporates Moody's belief that the merged entity will be able to continue to generate strong free cash flows to quickly pay down debt. The senior secured term loan will mature in two years and Moody's believes that USA Mobility will be able to repay the loan in its entirety over the rating time horizon. Downward pressure on the ratings would likely result from a more precipitous decline in operating and financial results than expected (greater than 25%). Also any softening of management's commitment to be debt free within two years would also negatively affect the rating. Positive ratings movement could derive from any sustainable stabilization in revenues and subscribers. USA Mobility, Inc., will be the merged entity of Arch Wireless, Inc. and Metrocall Holdings, Inc., following the consummation of the proposed merger. The company generated combined revenue of $863 million for the 12 months ended June 30, 2004. The company will be headquartered in Alexandria, Virginia. WICKES INC: Wants Until Jan. 18 to Solicit Votes on Joint Plan -------------------------------------------------------------- Wickes Inc. and its debtor-affiliate ask the U.S. Bankruptcy Court for the Northern District of Illinois, Eastern Division, to extend, until January 18, 2005, the period within which they can solicit acceptances of their Joint Plan of Reorganization filed this past July. The Debtors tell the Court that they are making good faith progress toward an orderly and successful liquidation. To stabilize their businesses, the Debtors obtained a $115 million DIP financing facility and implemented a key employee retention program and severance policy. The Debtors have sold substantially all of their assets and need more time to address the dispute raised by the Bondholders' Committee about the handling of certain sale proceeds. A report about that dispute appeared in the Troubled Company Reporter on Friday, October 15, 2004. Headquartered in Vernon Hills, Illinois, Wickes Inc. -- http://www.wickes.com/-- is a retailer and manufacturer of building materials, catering to residential and commercial building professionals, repairs and remodeling contractors and project do-it-yourself consumers. Wickes Inc. filed for chapter 11 protection on January 20, 2004 (Bankr. N.D. Ill. Case No. 04-02221). Richard M. Bendix Jr., Esq., at Schwartz Cooper Greenberger & Krauss represents the Debtor in its restructuring efforts. When the Company filed for protection from its creditors, it listed $155,453,000 in total assets and $168,199,000 in total debts. WISCONSIN AVENUE: Fitch Raises Class C's Rating to BBB from BB- --------------------------------------------------------------- Fitch upgrades Wisconsin Avenue Securities subordinate REMIC pass- through certificates, series 1995-M4: -- $779,242 class B to 'AAA' from 'BBB'; -- $1.4 million class C to 'BBB' from 'BB-'. The $16.9 million class A-3 and interest-only class XS certificates were exchanged for Federal National Mortgage Association guaranteed REMIC pass-through certificates and are not rated by Fitch. The $824,269 class D certificates are also not rated by Fitch. The class A-1 and A-2 certificates have paid off. The certificates are currently collateralized by 14 mortgage loans, which are secured by multifamily cooperative properties. By loan balance, 74% of the portfolio is located within the New York City metropolitan area. Fitch viewed this concentration positively because cooperatives within the New York City market have performed extremely well historically. As of the September 2004 distribution date, the pool's aggregate principal balance has been reduced by 82% to $19.8 million from $109.9 million at issuance. No loans are delinquent or in special servicing. NCB, FSB, the master servicer, provided year-end 2003 operating statements on approximately 100% of the outstanding loans. Fitch's year-end 2003 stressed weighted average debt service coverage ratio -- DSCR -- is 3.39times (x) versus 4.02x at YE 2002 and 3.10x at issuance. The stressed DSCRs were calculated based on Fitch-stressed mortgage constants and NOI derived from hypothetical market rental income (rather than the cooperative's maintenance and other revenues) less current actual borrower reported expenses. The hypothetical market rental income is based on conservative market rental rates at origination. Two loans, representing 1.6% of the pool, have stressed year-end 2003 DSCRs below 1.00x. The largest loan (1%) is a co-op located in Bronxfield New York, and the decline in DSCR was caused by an increase in repair and maintenance expenses. The second largest loan (0.6%) is a co-op located in Brooklyn, New York, and the decline in DSCR was caused by an increase in property insurance. WISCONSIN AVENUE: Fitch Slashes Class D Rating to BB+ from AA ------------------------------------------------------------- Fitch upgrades Wisconsin Avenue Securities, subordinate REMIC mortgage pass-through certificates, series 1996-M3 as follows: -- $2.5 million class B to 'AAA' from 'AA'; -- $2.8 million class C to 'AAA' from 'BBB'; -- $1.9 million class D to 'AA' from 'BB+'. The $16.6 million class A-3 certificates were exchanged for Federal National Mortgage Association guaranteed REMIC pass- through certificates and are not rated by Fitch. The $2.5 million class E certificates are also not rated by Fitch. Classes A-1 and A-2 are paid in full. The certificates are currently collateralized by 18 mortgage loans, which are secured by multifamily cooperative properties. The properties are all located in the State of New York. Fitch views this concentration positively because cooperatives within the New York City market have performed extremely well historically. Currently, no loans are delinquent or in special servicing. As of the September 2004 distribution date, the pool's aggregate principal balance has been reduced by 92% to $26.4 million from $312.7 million at issuance. The master servicer, NCB, FSB, collected operating statements for year-end 2003 on 96% of the loans remaining in the pool. The year-end 2003 Fitch stressed weighted-average debt service coverage ratio (DSCR) slightly declined to 4.01 times (x) from 4.05x as of YE 2002. The Fitch-stressed DSCRs were calculated based on Fitch-stressed mortgage constants and net operating income -- NOI -- derived from hypothetical market rental income (rather than cooperative revenues) less current actual borrower reported expenses. The hypothetical market rental income is based on conservative market rental rates at origination. WISCONSIN AVENUE: Fitch Affirms BB- Rating on $9.2M Class C Certs. ------------------------------------------------------------------ Fitch Ratings upgrades Wisconsin Avenue Securities, subordinate REMIC mortgage pass-through certificates, series 1996-M5: -- $3.3 million class B to 'AA' from 'A' In addition, Fitch affirms this class: -- $9.2 million class C at 'BB-' The $52.6 million class A-3 certificates were exchanged for Federal National Mortgage Association guaranteed REMIC pass- through certificates and are not rated by Fitch. The $8.6 million class D certificates are also not rated by Fitch. The certificates are collateralized by 22 mortgage loans, secured by multifamily properties. The properties are diversified among nine states with the highest concentrations in: * Ohio, * California, and * Georgia. As of the September 2004 distribution date, the transaction's aggregate principal balance has decreased 72% to $61.5 million from $216 million at issuance. ORIX Real Estate Capital Markets, LLC, the master servicer, collected operating statements for 100% of the loans in the pool. The year-end 2003 weighted-average debt service coverage ratio -- DSCR -- is 1.07 times(x), a decrease from 1.25x at YE 2002 and 1.28x at issuance. One loan (8.6%) is delinquent and in special servicing due to the inability to obtain refinancing at maturity. WISE WOOD: Inks Agreement to Combine Businesses with Diamond Tree ----------------------------------------------------------------- Diamond Tree Resources Ltd. and Wise Wood Corporation signed a Letter of Intent respecting a proposed business combination between the two companies. The Letter of Intent was authorized by the boards of directors of Diamond Tree and Wise Wood following the receipt of recommendations to such effect from special committees established by each corporation. Diamond Tree is a private Alberta corporation engaged in the exploration and production of oil and natural gas in the central region of Alberta. For purposes of the business combination, the net asset value of Diamond Tree has been set at $42 million and each share of Wise Wood will have an ascribed value of $0.25, which represents a 38 % premium to the closing price of the common shares of Wise Wood on September 24, 2004 (the date of the last board lot trade in Wise Wood shares on the TSX Venture Exchange prior to announcement of the business combination). The Letter of Intent contemplates that Diamond Tree and Wise Wood will, with the assistance of their respective professional advisers, determine a transaction structure for the business combination. Representatives of Diamond Tree and Wise Wood expect to finalize the transaction structure for the business combination (and related matters, including the composition of the board of directors of the continuing entity) and enter into definitive agreements on or prior to October 25, 2004, at which time Diamond Tree and Wise Wood expect to issue a further press release setting out additional details concerning the transaction. Tristone Capital, Inc., has been engaged to provide both Diamond Tree and Wise Wood with fairness opinions respecting the business combination. Diamond Tree is in the process of having prepared a National Instrument 51-101 Report on Reserves Data by an Independent Qualified Reserves Evaluator, which will be filed with the TSX Venture Exchange as part of the approval process. Wise Wood is a publicly traded corporation, the principal asset of which consists of a 50% interest in a joint venture with Innovative Coke Expulsion Ltd. The joint venture provides decoking/descaling services to the upstream petroleum industry. It is anticipated that, following completion of the business combination, the continuing entity will take steps to divest itself of the joint venture interest. Mr. Fred Moore, the current President of Wise Wood, has agreed to oversee the proposed divestiture of the joint venture interest. Diamond Tree and Wise Wood anticipate that, in conjunction with the proposed business combination, the combined entity will undertake a non-brokered private placement of common shares in an amount up to $2 million. It is expected that the private placement will be offered to employees and directors of the combined entity and that the sale price of the securities will be priced at $0.25 per share (prior to giving effect to any consolidation that may be effected in connection with the business combination). Completion of the business combination is subject to a number of conditions in favor of Diamond Tree and Wise Wood, respectively, including the execution and delivery of definitive documentation providing for the business combination, board approval of such definitive documentation, completion of satisfactory due diligence inquiries, receipt of favorable fairness opinions, receipt of all necessary regulatory approvals (including the consent of the TSX Venture Exchange), receipt of third party approvals, approval of the shareholders of Diamond Tree and Wise Wood (as required), approval of the holders of outstanding convertible debentures of Wise Wood (if required) and a threshold for the exercise of dissent rights (5%) not being exceeded (if the business combination is structured in such a manner as to give rise to statutory dissent rights). Wise Wood Corporation provides oil and gas companies with de- coking and de-scaling services through its Joint Venture operations with Innovative Coke Expulsion Inc. In its most recent financial statements dated June 30, 2004 Wise Wood generated revenue of $5.23 million and net income of $0.24 million. The Company is incorporated under the Alberta Business Corporations Act. The Company became a public company on Dec. 2, 2001, and was then classified as a Capital Pool Company -- CPC -- as defined in Policy 2.4 of the TSX Venture Exchange. Effective with its Qualifying Transaction on May 3, 2002, the Company ceased to be a CPC. On May 20, 2003 the Company changed its name from Wise Wood Energy Ltd. to Wise Wood Corporation. * * * Wise Wood Corporation's June 30, 2004 financial report indicated that Wise Wood incurred substantial losses since its inception and, despite an improvement in cash flows during fiscal 2004, had a substantial working capital deficiency at June 30, 2004, and was in violation of certain of its financial covenants with its banker. These factors called the ability of the Company to continue as a going concern into question. WOMEN FIRST: Committee Balks at Liquidating Chapter 11 Plan ----------------------------------------------------------- The Official Committee of Unsecured Creditors doesn't like the liquidating chapter 11 plan filed by Women First Healthcare Inc. The Plan proposes to distribute the proceeds from the sale of the company's assets to creditors. The Committee complains that the Plan proposes to pay secured creditors' claims before the Liquidating Trustee has time to review and object to them. Earlier this year, the Committee, stepping into the Estate's shoes, filed suit against Women First's secured creditors, noteholders and preferred shareholders. The Committee contends, in its pending Adversary Proceeding, among other things, that the defendants engaged in prepetition transactions that reshuffled the right-hand side of the company's balance sheet but caused the company to sink deeper and deeper into the pit of insolvency. The Committee doesn't want to face the risk that confirmation of the plan would result in distributions to the defendants that would, in short, eviscerate the lawsuit. Judge Walrath is scheduled to convene a confirmation hearing in Wilmington on Oct. 19. Headquartered in San Diego, California, Women First HealthCare, Inc. -- http://www.womenfirst.com/-- is a specialty pharmaceutical company dedicated to improve the health and well- being of midlife women. The Company filed for chapter 11 protection on April 29, 2004 (Bankr. Del. Case No. 04-11278). Robert A. Klyman, Esq., at Latham & Watkins LLP, and Michael R. Nestor, Esq., and Sean Matthew Beach, Esq., at Young Conaway Stargatt & Taylor represent the Debtor in its restructuring efforts. Kirt F. Gwynne, Esq., at Reed Smith LLP, represents the Official Committee of Unsecured Creditors. When the Company filed for protection from its creditors, it listed $49,089,000 in total assets and $73,590,000 in total debts. WOMEN FIRST: Committee Hires J.H. Cohn as Financial Advisor ----------------------------------------------------------- The U.S. Bankruptcy Court for the District of Delaware gave the Official Committee of Unsecured Creditors of Women First Healthcare, Inc., permission to employ J.H. Cohn LLP, as its financial advisor. J.H. Cohn will: a) evaluate the necessity and benefits of proposed sales of the Debtor's assets as requested by the Committee; b) assist the Committee in its investigation of avoidance actions and other claims; c) assist the creditors in negotiating a plan of liquidation as requested by the Committee; d) attend court hearings and meetings; e) render other bankruptcy and consulting services as deemed necessary by the Committee; Howard L. Konicov, a Certified Public Accountant and Partner at J.H. Cohn, is the lead professional performing consulting and financial advise to the Committee. Mr. Konicov explains that J.H. Cohn will charge the Committee, instead of the Debtor, for the Firm's fees and expenses. Mr. Konicov will charge the Committee $425 per hour for his services. Mr. Konicov reports J.H. Cohn's professionals bill: Designation Hourly Rate ----------- ----------- Partner $425 Director 385 Senior Manager 330 Manager 300 Supervisor 275 Senior Accountant 230 Staff 175 Paraprofessional 120 J.H. Cohn does not have any interest adverse to the Committee, the Debtor or its estate. Headquartered in San Diego, California, Women First HealthCare, Inc. -- http://www.womenfirst.com/-- is a specialty pharmaceutical company dedicated to improve the health and well- being of midlife women. The Company filed for chapter 11 protection on April 29, 2004 (Bankr. Del. Case No. 04-11278). Robert A. Klyman, Esq., at Latham & Watkins LLP, and Michael R. Nestor, Esq., and Sean Matthew Beach, Esq., at Young Conaway Stargatt & Taylor represent the Debtor in its restructuring efforts. Kirt F. Gwynne, Esq., at Reed Smith LLP, represents the Official Committee of Unsecured Creditors. When the Company filed for protection from its creditors, it listed $49,089,000 in total assets and $73,590,000 in total debts. WORLDCOM INC: Resolves Claims Dispute with Neon Optica ------------------------------------------------------ As previously reported, NEON Optica, Inc. complains that the Worldcom Inc. Debtors have made inconsistent representations as to the status of a prepetition services agreement and related schedule. Hence, NEON asks the United States Bankruptcy Court for the Southern District of New York to clarify whether the agreements have been assumed or rejected in the Debtors' Chapter 11 case. Paul N. Silverstein, Esq., at Andrews Kurth LLP, in New York, relates that UUNet Technologies, Inc. and NEON are parties to a Master Services Agreement dated July 2000 that set the general terms of fiber optic services between the parties. The Services Agreement contemplates that the parties would enter into a separate schedule for the services they agreed to provide, which would specify the terms on pricing, ordering procedures, billing procedures, and others. In August 2000, UUNet and NEON entered into a Private Optical Network Service Schedule subject to the terms of the Services Agreement. Pursuant to the Schedule and the Services Agreement, NEON was obligated to provide UUNet with three dedicated fiber optic networks for UUNet's exclusive use and benefit. In return UUNet was to pay a $305,544 monthly fee for the circuits. To provide the services under the Services Agreement and the Schedule, NEON constructed fiber routes and facilities, entered into long-term fiber optic leases, and installed fiber optic equipment at certain locations owned or leased by the Debtors and third parties. NEON's equipment is currently valued at $3,000,000. NEON is continuing to incur costs for these fiber optic leases and to maintain the facilities. From the Petition Date until the end of January 2004, the Debtors continued to actively use the Optical Networks provided by NEON under the Schedule. According to Mr. Silverstein, the Optical Networks that were being provided under the Schedule were critical to the Debtors' ongoing operations and could not be terminated until such time the Debtors found alternative fiber optic routes. After the confirmation of the Debtors' Plan, the Debtors apparently had not secured any alternative routes and it was necessary for them to continue to receive services from NEON under the Schedule. Before the Plan confirmation, NEON's representatives contacted UUNet to determine if the Debtors were intending to reject the Services Agreement and the Schedule. The Debtors advised NEON that those agreements were not going to be rejected because the Optical Networks were critical for their ongoing operations. After these conversations, the Debtors and NEON continued performing under the Services Agreement and the Schedule. NEON was unaware at that time that the Services Agreement and the Schedule were listed in a Plan Supplement as executory contracts to be rejected. Relying on the Debtors' representations, NEON entered into an agreement, which sets forth the amount of its prepetition claim, and continued to provide services under the Services Agreement and the Schedule, while the Debtors continued to accept those services and use the Optical Networks. In February 2004, NEON sent its monthly invoice to the Debtors for the February services. It was then that NEON discovered that the Services Agreement and the Schedule were rejected. The Debtors informed NEON that they would not make any further payments to NEON for the provision of circuits. Upon investigation, NEON discovered that the Debtors were utilizing the Optical Networks being provided under the Schedule in January 2004. And sometime in January 2004, the Debtors had found an alternative to NEON's Optical Networks and no longer needed those Optical Networks for their ongoing operations. Mr. Silverstein tells the Court that the Debtors' contracts represent a significant amount of NEON's total revenue. NEON needs to determine exactly where its stands with respect to these agreements. Parties Stipulate To resolve their remaining disputes, the Debtors and Neon Optica, Inc., agree that: (a) In addition to the Initial Allowed Amount, Neon will have an Allowed WorldCom General Unsecured Claim for $8,403,361; (b) Neon will pay the Debtors $3,007; (c) MCI will distribute New Common Stock and cash to Neon as holder of a WorldCom General Unsecured Claim in an amount equal to the Additional Allowed Amount; (d) Neon will withdraw its request. Neon's Additional Claims will be expunged and disallowed; and (e) The payments and the consideration contemplated by the Settlement Agreement are deemed in full and complete satisfaction, release and discharge of all claims asserted or which could have been asserted in Neon's Claim, including: -- any administrative expense claim arising under any contract or any claim for damages arising from the rejection of any contract, including the rejection of: * Master Services Agreement, dated July 13, 2000; and * Private Optical Network Services Schedule, dated August 21, 2000; and -- any claim for damages arising from the rejection, termination, breach or otherwise relating to circuits or services provided under the MSA and the Service Schedule. 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) * Arent Fox Hosting Oct. 26 Cross-Border Insolvency Seminar ----------------------------------------------------------- Arent Fox PLLC and Simmons & Simmons are hosting a cross-border insolvency and restructuring seminar in New York on Tuesday, October 26, 2004, for senior executives at accounting firms, brokerage firms, financial institutions, distressed debt services firms and brokers of distressed debt. The Program Lawyers from both firms will discuss European and U.S. issues in cross-border insolvencies, bankruptcies and restructurings. Differences in court procedures and legislative approaches in various jurisdictions will be highlighted. Common problems and approaches will be explored and discusses, including creditor preferences, potential director liability and selected debtor protections in various European and U.S. jurisdictions. The Schedule 12:15 p.m. Registration and buffet lunch 12:45 p.m. The European Union Insolvency Regulation: a pan-European approach and how to choose the best jurisdiction 1:15 p.m. Chapter 11 Filings in the U.S.: trigger events for filing a non-U.S. company and potential sanctions for breach of Chapter 11 1:45 p.m. Advising directors on personal liability in European insolvencies 2:15 p.m. Handling distressed investors: goals and strategies 2:45 p.m. Questions & Answers Co-Moderators Peter Manning Robert E. Grossman Partner, Simmons & Simmons Partner, Arent Fox London, England New York, New York Speakers The European Union Insolvency Regulation: A Pan-European Approach and How to Choose the Best Jurisdiction Hans-Hermann Aldenhoff Partner, Simmons & Simmons Duseldorf, Germany Chapter 11 Filings in the U.S.: Trigger Events for Filing for a Non-U.S. Company and Potential Sanctions for Breach of Chapter 11 Schuyler G. Carroll Partner, Arent Fox New York, New York Advising Directors on Personal Liability in European Insolvencies Peter Manning Partner, Simmons & Simmons London, England Handling Distressed Investors: Goals and Strategies Heidi J. Sorvino Partner, Arent Fox New York, New York For more information or to reserve a seat, contact: Arleen McDermott Arent Fox PLLC Telephone (212) 492-3293 mcdermott.arleen@arentfox.com Arent Fox PLLC -- http://www.arentfox.com/-- is a law firm that has earned a national reputation for understanding and appreciating the challenges that each client faces in its world. "We take the time to learn our clients' business strategies and practices to help them better achieve their goals and to find the best solution to their problems," the Firm advertises. With offices in New York and Washington, D.C., the Firm has a wide range of expertise in business transactions, corporate and regulatory compliance, real estate, finance, tax, financial restructuring and bankruptcy, government relations and regulation, litigation, corporate securities and mergers and acquisitions, labor and employement law, and the global business market. Simmons & Simmons -- http://www.simmons-simmons.com/-- has a broad based practice and focuses on key industry sectors and legal service areas, helping clients access its lawyers according to their individual needs. "Providing clients with worldclass legal advice, whenever and wherever they need it," Simmons & Simmons advertises, "is truly at the heart of our business." * BOND PRICING: For the week of October 11 - October 15, 2004 ------------------------------------------------------------- Issuer Coupon Maturity Price ------ ------ -------- ----- AAIPharma Inc. 11.000% 04/01/10 73 Adelphia Comm. 3.250% 05/01/21 29 Adelphia Comm. 6.000% 02/15/06 25 American & Foreign Power 5.000% 03/01/30 73 American Airline 4.250% 09/23/23 65 AMR Corp. 4.500% 02/15/24 60 AMR Corp. 9.000% 08/01/12 58 AMR Corp. 9.000% 09/15/16 58 Applied Extrusion 10.750% 07/01/11 61 Bank New England 8.750% 04/01/99 12 Burlington Northern 3.200% 01/01/45 57 Calpine Corp. 4.750% 11/15/23 58 Calpine Corp. 7.750% 04/15/09 56 Calpine Corp. 7.785% 04/01/08 63 Calpine Corp. 8.500% 02/15/11 58 Calpine Corp. 8.625% 08/15/10 59 Calpine Corp. 8.750% 07/15/07 74 Comcast Corp. 2.000% 10/15/29 43 Continental Airlines 4.500% 02/01/07 70 Continental Airlines 5.000% 06/15/23 70 Delta Air Lines 7.700% 12/15/05 53 Delta Air Lines 7.711% 09/18/11 56 Delta Air Lines 7.779% 11/18/05 61 Delta Air Lines 7.900% 12/15/09 36 Delta Air Lines 8.000% 06/03/23 40 Delta Air Lines 8.300% 12/15/29 28 Delta Air Lines 8.375% 12/10/04 73 Delta Air Lines 9.000% 05/15/16 29 Delta Air Lines 9.250% 03/15/22 28 Delta Air Lines 9.750% 05/15/21 28 Delta Air Lines 10.000% 08/15/08 41 Delta Air Lines 10.125% 05/15/10 35 Delta Air Lines 10.375% 02/01/11 35 Dobson Comm. Corp. 8.875% 10/01/13 63 Dobson Comm. Corp. 10.875% 07/01/10 71 Evergreen Int'l Avi. 12.000% 05/15/10 62 Federal-Mogul Co. 7.500% 01/15/09 26 Finova Group 7.500% 11/15/09 47 Foamex L.P. 9.875% 06/15/07 72 Horizon PCS Inc. 13.750% 06/15/11 10 Iridium LLC/CAP 14.000% 07/15/05 11 Inland Fiber 9.625% 11/15/07 45 Kaiser Aluminum & Chem. 12.750% 02/01/03 18 Kulicke & Soffa 0.500% 11/30/08 72 Level 3 Comm. Inc. 2.875% 07/15/10 70 Level 3 Comm. Inc. 6.000% 09/15/09 57 Level 3 Comm. Inc. 6.000% 03/15/10 54 Level 3 Comm. Inc. 11.250% 03/15/10 75 Liberty Media 3.750% 02/15/30 67 Liberty Media 4.000% 11/15/29 71 Mirant Corp. 2.500% 06/15/21 65 Mirant Corp. 5.750% 07/15/07 64 Mississippi Chem. 7.250% 11/15/07 60 National Vision 12.000% 03/30/09 62 Northern Pacific Railway 3.000% 01/01/47 57 Northwest Airlines 7.875% 03/15/08 62 Northwest Airlines 8.700% 03/15/07 70 Northwest Airlines 9.875% 03/15/07 73 Northwest Airlines 10.000% 02/01/09 65 Northwest Airlines 10.500% 04/01/09 75 O'Sullivan Ind. 13.375% 10/15/09 48 Owens Corning 7.000% 03/15/09 50 Owens Corning 7.500% 05/01/05 45 Owens Corning 7.500% 08/01/18 49 Pegasus Satellite 12.375% 08/01/06 65 Pen Holdings Inc. 9.875% 06/15/08 51 Primus Telecom 3.750% 09/15/10 55 Primus Telecom 8.000% 01/15/14 73 RCN Corp. 10.000% 10/15/07 51 RCN Corp. 10.125% 01/15/10 51 RCN Corp. 11.125% 10/15/07 51 Reliance Group Holdings 9.000% 11/15/00 19 RJ Tower Corp. 12.000% 06/01/13 68 Syratech Corp. 11.000% 04/15/07 60 Trico Marine Service 8.875% 05/15/12 45 Triton Pcs. Inc. 8.750% 11/15/11 71 Triton Pcs. Inc. 9.375% 02/01/11 74 Tower Automotive 5.750% 05/15/24 45 United Air Lines 9.125% 01/15/12 4 United Air Lines 10.670% 05/01/04 3 Univ. Health Services 0.426% 06/23/20 56 US West Capital Fdg. 6.875% 07/15/28 75 Westpoint Stevens 7.875% 06/15/08 0 ********* 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 ***