/raid1/www/Hosts/bankrupt/TCR_Public/041022.mbx
T R O U B L E D C O M P A N Y R E P O R T E R
Friday, October 22, 2004, Vol. 8, No. 230
Headlines
ABITIBI-CONSOLIDATED: Names Jacques Bougie to Board of Directors
ABITIBI-CONSOLIDATED: Declares $0.025 Dividend Per Common Share
ADESA INC: Declares 4th Quarter $0.075 Per Common Share Dividend
AMERICAN AIRLINES: Parent Posts $214 Million 3rd Quarter Net Loss
AMERICAN AIRLINES: Pilots Express Disappointment Over Q3 Results
AMERICAN PARA-TRANSIT: Voluntary Chapter 11 Case Summary
AMES DEPARTMENT: Connecticut Balks at Conveyance Tax Exemption
ARCH WESTERN: Moody's Puts Ba3 Rating on $250M Guaranteed Sr. Note
AXIA NETMEDIA: Will Release 2005 1st Quarter Results on Oct. 27
BETHLEHEM STEEL: 3 Firms Now Represent Trust in Preference Actions
BOISE CASCADE: Extends Debt Securities' Price Determination Date
BREUNERS HOME: Committee Balks At Modified Employee Retention Plan
CALPINE CORP: Prices $360 Million Preferred Equity Offering
CATHOLIC CHURCH: Tucson Not Required to Pay Utility Deposits
CHOICE ONE: Hires Chadbourne & Parke as Special Regulatory Counsel
CHOICE ONE: Can Continue Hiring Ordinary Course Professionals
COMM 2001-FL4: Moody's Pares Ratings on Five Classes to Low-B
CORN PRODUCTS: Moody's Reviewing Ba1 Ratings & May Upgrade
COTT CORPORATION: Gross Margin Dips as Production Costs Increases
COVANTA ENERGY: Liquidation Valuation Analysis Under Lake II Plan
CSFB MORTGAGE: Moody's Junks $2.9M Class K & $2.9M Class L Certs.
DELTA AIR: Sept. 30 Shareowners' Deficit Balloons to $3.58 Billion
DELTA AIR: Expects Positive Economic Impact in New China Flight
DOBSON CELLULAR: Moody's Puts B2 Rating on Planned $500M Sr. Notes
FALCON PRODUCTS: Market Cap Deficiency Spurs NYSE to Halt Trading
FALCON PRODUCTS: Rubin Brown Gornstein Resigns as Accountant
FAO INC: Deal With D.E. Shaw Buys its Vote to Accept Plan
FLYI: Reduced Liquidity Cues S&P to Put B- Rating on CreditWatch
FORT HILL: Files Chapter 11 Plan of Reorganization
GERDAU AMERISTEEL: Closes Offering of 70 Million Common Shares
HEALTHCORE LLC: List of Debtors' 29 Largest Unsecured Creditors
INTEGRATED ALARM: Moody's Puts B3 Rating on $125M Sr. Unsec. Notes
JAZZ GOLF: Raising $1M from Equity Offering to Finance Growth Plan
K&F INDUSTRIES: Launches Sr. Debt Offering & Consent Solicitation
K&F INDUSTRIES: Moody's Reviewing Low-B Ratings & May Downgrade
KEY ENERGY: Declares Financial Data to Get Noteholders' Consent
KMART CORP: $200M Synthetic Term Loan Pulled from Credit Agreement
MERRILL LYNCH: S&P Assigns Low-B Ratings on Six Cert. Classes
MERRILL LYNCH: S&P Affirms Class E Mortgage Cert.'s BB Rating
METRIS MASTER: Fitch Pares Ratings on Six Debt Classes to Low-B
METROPCS INC: Solicits Waivers from Senior Noteholders
MORGAN STANLEY: Moody's Places Ba2 Rating on Class $9.4M G1 Certs.
NASH FINCH: Moody's Puts B1 Rating on Planned $300M Secured Loan
NEW HAVEN FOUNDRY: Preference Suit Helps Tank Yale Industries
NEW SOUTHGATE LANES: Case Summary & 12 Largest Unsecured Creditors
NORTHWEST AIRLINES: Reports $46 Million Third Quarter Loss
NORTHWESTERN CORP: Moody's Puts Ba1 Rating on $200M Sr. Sec. Notes
OLD UGC: Files First Amended Joint Plan of Reorganization
OUTBOARD MARINE: 7th Cir. Says Faxed Proof of Claim Was a Mistake
PSA HOLDINGS INT'L: Case Summary & 20 Largest Unsecured Creditors
READY MIXED: S&P Junks Planned $150M Senior Subordinated Debt
SELECT MEDICAL: Merger News Cues Moody's to Review Low-B Ratings
SHERIDAN HEALTHCARE: S&P Puts B+ Rating on Planned $105M Term Loan
SIERRA PACIFIC: Moody's Assigns Ba2 Ratings on $325M Facilities
SIERRA PACIFIC: S&P Assigns BB Rating on $425M Secured Facilities
SPECTRASITE: Moody's Places Ba3 Rating on $900M Sr. Sec. Facility
STAPP TOWING CO: List of Debtor's 20 Largest Unsecured Creditors
TECNET INC: Trustee Hires Steve Donosky as Real Estate Broker
THAXTON GROUP: Southern Management Wants to Obtain $30MM DIP Loan
TOM'S FOODS: S&P Slices Corporate Credit Rating to CCC from B
TRUE TEMPER: Soft Market Trends Prompt Moody's to Shave Ratings
TRUMP HOTELS: Cuts New Deal to Underpin Chapter 11 Prepack in Nov.
W.R. GRACE: Sept. 30 Balance Sheet Upside-Down by $117.7 Million
W.R. GRACE: Wants to Restrict Equity Trading to Preserve NOLs
WOMEN FIRST: Wants Until December 27 to Decide on Leases
YALE INDUSTRIES: Intends to Voluntarily Liquidate its Business
ZOETICS INC: Case Summary & 20 Largest Unsecured Creditors
* Alvarez & Marsal Honored for Successful Restructuring of AMERCO
* FTI Consulting Hires 3 New Senior Managing Directors
* Hutchinson & Bloodgood Promotes Douglas Kawamura as Partner
*********
ABITIBI-CONSOLIDATED: Names Jacques Bougie to Board of Directors
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Abitibi-Consolidated Inc. (TSX: A; NYSE: ABY) Chairman of the
Board Richard Drouin reported the appointment of Jacques Bougie to
the Company's Board of Directors.
Mr. Bougie joined Montreal-based Alcan Aluminum Ltd. in 1979 and
served as the Company's President and Chief Executive Officer from
1993 to 2001. He holds degrees in law and business administration
from the Universite de Montreal, where he also received an
honorary doctorate in 2001. Mr. Bougie was made an Officer of the
Order of Canada in 1994. He currently is a director on the boards
of Nova Chemicals Inc., McCain Foods Ltd., Rona Inc., as well as
chair or member of a number of advisory committees and
foundations, including CGI Group Inc.
"I am delighted to welcome Jacques Bougie to the Board," commented
John Weaver, President and CEO. Mr. Bougie is a highly regarded
business leader who has met the diverse challenges of a resources-
based business. His wealth of knowledge and experience will be of
great benefit to Abitibi-Consolidated."
Abitibi-Consolidated is a global leader in newsprint & uncoated
groundwood (value-added groundwood) papers as well as a major
producer of wood products, generating sales of CAN $5.4 billion in
2003. The Company owns or is a partner in 27 paper mills,
22 sawmills, 4 remanufacturing facilities and 1 engineered wood
facility in Canada, the US, the UK, South Korea, China and
Thailand. With over 15,000 employees, excluding its PanAsia joint
venture, Abitibi-Consolidated does business in approximately
70 countries. Responsible for the forest management of 17.5
million hectares of woodlands, the Company is committed to the
sustainability of the natural resources in its care.
Abitibi-Consolidated is also the world's largest recycler of
newspapers and magazines, serving 16 metropolitan areas in Canada
and the United States and 130 local authorities in the United
Kingdom, with 14 recycling centres and approaching 20,000 Paper
Retriever(R) and paper bank containers.
* * *
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.
ABITIBI-CONSOLIDATED: Declares $0.025 Dividend Per Common Share
---------------------------------------------------------------
Abitibi-Consolidated Inc.'s (NYSE: ABY, TSX: A) Board of Directors
approved a dividend payment to shareholders of record on
November 1, 2004, amounting to 2.5 cents per common share, payable
on December 2, 2004.
Abitibi-Consolidated is a global leader in newsprint & uncoated
groundwood (value-added groundwood) papers as well as a major
producer of wood products, generating sales of CAN $5.4 billion in
2003. The Company owns or is a partner in 27 paper mills,
22 sawmills, 4 remanufacturing facilities and 1 engineered wood
facility in Canada, the US, the UK, South Korea, China and
Thailand. With over 15,000 employees, excluding its PanAsia joint
venture, Abitibi-Consolidated does business in approximately
70 countries. Responsible for the forest management of 17.5
million hectares of woodlands, the Company is committed to the
sustainability of the natural resources in its care.
Abitibi-Consolidated is also the world's largest recycler of
newspapers and magazines, serving 16 metropolitan areas in Canada
and the United States and 130 local authorities in the United
Kingdom, with 14 recycling centres and approaching 20,000 Paper
Retriever(R) and paper bank containers.
* * *
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.
ADESA INC: Declares 4th Quarter $0.075 Per Common Share Dividend
----------------------------------------------------------------
ADESA Inc. (NYSE: KAR) reported that the Company's board of
directors declared a 2004 fourth quarter dividend of $0.075 per
share of outstanding common stock. The dividend is payable
December 15, 2004, to shareholders of record on November 15, 2004.
"ADESA's newly established dividend policy reflects the Board's
continued confidence in the Company's future and reaffirms our
commitment to sharing ADESA's success with our shareholders,"
stated David G. Gartzke, Chairman and Chief Executive Officer of
ADESA, Inc. "We believe that this dividend, in tandem with our
pending share repurchase program and our ongoing commitment to
grow our operations, demonstrates our focus on sharing ADESA's
success with our shareholders both immediately and on a long-term
basis."
The Board of ADESA, Inc. currently intends that the Company will
follow a quarterly dividend policy of $0.075 per share of common
stock. Declaration, record and payment dates for each quarterly
dividend will be set at a later time.
Headquartered in Carmel, Indiana, ADESA, Inc. (NYSE: KAR) is North
America's largest publicly traded provider of wholesale vehicle
auctions and used vehicle dealer floorplan financing. The
Company's operations span North America with 53 ADESA used vehicle
auction sites, 28 Impact salvage vehicle auction sites and 81 AFC
loan production offices. For further information on ADESA, Inc.,
visit the Company's Web site at http://www.adesainc.com/
* * *
As reported in the Troubled Company Reporter on June 4, 2004,
Standard & Poor's Rating Services assigned its 'B+' rating to
ADESA Inc.'s proposed $125 million senior subordinated notes due
2012, and affirmed its 'BB' corporate credit and senior secured
ratings on the Carmel, Indiana-based operator of wholesale used-
vehicle auctions and provider of used-vehicle floorplan financing.
The outlook is stable.
AMERICAN AIRLINES: Parent Posts $214 Million 3rd Quarter Net Loss
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AMR Corporation, the parent company of American Airlines, Inc.,
reported a net loss of $214 million in the third quarter. This
compares to last year's third quarter net profit of $1 million.
"Our business was buffeted by three dramatic and harmful
developments during the third quarter," said AMR Chairman and CEO
Gerard Arpey. "The first was record high fuel prices. The second
was a weak revenue environment, which meant that despite our best
efforts -- and unlike other fuel-intensive businesses -- we have
been largely unable to pass the higher fuel costs on to our
customers. The third development was the unprecedented series of
hurricanes, which depressed revenue, increased costs and
repeatedly disrupted an important part of our network."
Skyrocketing fuel prices during the quarter resulted in a year-
over-year increase of more than 40 cents per gallon, which
translated into $342 million in incremental fuel costs compared to
a year ago. Meanwhile, American's revenue per available seat mile
declined 2.5 percent, driven by a 4.8 percent drop in passenger
yield (passenger revenue per passenger mile).
"Weak yields are an industry-wide phenomenon," Mr. Arpey said.
"Although many industries are getting hammered by high fuel
prices, the airline industry has largely been unable to price its
product in a way that reflects the higher cost of production. Low
cost carrier growth is partly responsible for the depressed fare
environment, but there are other factors at work too.
"Specifically, there is a growing disconnect between industry
capacity growth in the domestic marketplace and overall economic
growth," Mr. Arpey said. "While the economy has grown roughly
three and a half percent this year, available domestic seat miles
are up more than six percent. Making matters worse has been the
competitive behavior of some carriers either in or on the verge of
bankruptcy."
According to Mr. Arpey, the confluence of high fuel prices and low
fares has sharpened the company's focus on making the changes
necessary to improve the company's financial condition. "The
harsh reality is that despite our tremendous progress to date, our
cost structure remains too high for us to succeed in a world where
the price of oil is at such an extraordinary level," Mr. Arpey
said. "However, there is still a lot we can do, and are doing, to
increase revenues and reduce expenses."
That said, AMR anticipates the record high fuel prices to continue
in the fourth quarter -- a quarter that is typically seasonally
weak from a revenue perspective. Thus, AMR expects to incur a
fourth quarter loss significantly larger than that recorded in the
third quarter.
Mr. Arpey cited a series of steps American has taken to increase
revenues, cut costs and put the airline on a stronger financial
footing. One expected outcome of these initiatives is that there
will be a reduction in the size of the workforce, although the
details for accomplishing this are still being identified.
American's new initiatives include:
-- Aircraft Decisions -- American has decided to withdraw
capacity equivalent to 15 narrow-body aircraft in 2005 while
its regional affiliate, American Eagle, has reached an
agreement in principle with Embraer to not take delivery of
the last 18 ERJ-145 regional jet aircraft, scheduled for
delivery between July 2005 and February 2006.
-- Seat Decisions -- American will add back a portion of the
coach seats previously removed from its MD80, 737, 767 and
777 fleets. On the MD80 and 737 aircraft, only one of the
two rows of coach seats originally removed will be added
back to those airplanes. In addition, the MD80
reconfiguration will expand the first class cabin by two
seats, in recognition of the value American's customers
place on its first class product.
-- International Expansion -- American intends to increase
revenue by continuing its expansion in the growing
Asia/Pacific market. Yesterday, the airline announced that
it will launch daily nonstop service between Chicago and
Nagoya, Japan, on April 3, and resume daily nonstop service
between Dallas/Fort Worth and Osaka, Japan, on Nov. 1, 2005.
American is also vigorously seeking authority to begin
nonstop service between Chicago and Shanghai, China,
starting on May 1, 2005.
-- Simplified Operations -- American has decided to expand upon
an experiment it launched in the summer of 2004 in Chicago,
in which aircraft types were isolated to certain stations,
and flight crew and aircraft were scheduled together. This
change of approach will be implemented throughout American's
system in 2005, Mr. Arpey said. "We are pressing ahead
aggressively to streamline and simplify American's
operations."
-- Other Revenue Initiatives -- American's revenue initiatives
have involved a variety of fare actions in certain markets
as well as the introduction of ticketing fees. American now
charges $5 for tickets purchased through U.S. reservations
offices while a $10 fee applies to tickets bought at U.S.
airport locations. There also is now a fee for paper
tickets purchased through travel agents in certain European
countries, the Caribbean, Mexico and Latin America for
itineraries that are eligible for electronic tickets.
Additionally, the U.S. Department of Transportation recently
issued a favorable ruling, allowing U.S. carriers to apply
fuel surcharges to all of their international routes, which
should further improve revenue.
-- Dallas Reservations Office Consolidation -- To cut costs and
increase efficiency, American said it has decided to
consolidate its reservations office in south Dallas with its
much larger Southern Reservations Office near DFW Airport,
saving the company hundreds of thousands of dollars a year
in various expenses.
With regard to adding back seats, Mr. Arpey said American is
acting to increase revenue by eliminating a seating capacity
disadvantage largely attributable to the More Room Throughout
Coach program the airline launched several years ago. "When we
launched More Room Throughout Coach, healthy yields and robust
business travel were the norm, and both conditions were essential
to the success of More Room," Mr. Arpey said. "However, times
have changed, and we must acknowledge that in today's low-fare
environment, having fewer seats on our aircraft has put us at a
real revenue disadvantage compared to other airlines."
Mr. Arpey said that as a result of its aircraft and seating
changes, American's first quarter domestic capacity will decrease
approximately 5 percent. "Given our skyrocketing fuel costs, and
our limited ability to pass those costs on to our customers, we
feel it is prudent to draw down a portion of our domestic
schedule. And rather than decrease flight schedules across the
board, we will be focusing our cuts on specific markets where our
service is either redundant to service to nearby cities or is less
essential to our domestic network. At the same time, we are going
to intensify our focus on our areas of strength. For instance, we
now plan to increase our flying at Dallas/Fort Worth by 90
operations year over year, a larger increase than we had
previously announced," Mr. Arpey said.
As a result of the initiatives discussed, the company reported
that some special charges may be recognized in the fourth quarter
-- the amount and scope of which are currently being identified.
In addition, the company expects to record a gain of approximately
$145 million from the sale of its interest in Orbitz (an on-line
travel agency in which American holds an ownership stake), if the
closing of that sale occurs in the fourth quarter.
"Very challenging industry conditions are nothing new to the
people of American Airlines," Mr. Arpey said. "We remain
committed to continuing to evolve our company by wringing out
costs and inefficiency from everything we do. What's more, we are
determined to make the hard choices necessary to ensure our
company's competitiveness and ultimate success."
American Airlines is the world's largest carrier. American,
American Eagle and the AmericanConnection regional carriers serve
more than 250 cities in over 40 countries with more than 4,200
daily flights. The combined network fleet numbers more than 1,000
aircraft. American's award-winning Web site, http://AA.com/
provides users with easy access to check and book fares, plus
personalized news, information and travel offers. American
Airlines is a founding member of the oneworld(sm) Alliance.
AMR Corp.'s June 30, 2004, Balance Sheet shows liabilities
exceeding assets by $122 million.
AMERICAN AIRLINES: Pilots Express Disappointment Over Q3 Results
----------------------------------------------------------------
The Allied Pilots Association, collective bargaining agent for the
13,500 pilots of American Airlines (NYSE:AMR), issued this
statement during a meeting of its 18-member board of directors.
All 18 directors and the APA President, Vice President and
Secretary-Treasurer endorsed the statement:
"In 2003, amidst the backdrop of an eroding cash position and
legitimate belief that American Airlines was but a step away
from bankruptcy, the pilots of American Airlines decided to
invest more than $3.3 billion in the airline to secure our
future and maintain control of our fate. With this action, our
pilots demonstrated that they are not only commanders of the
aircraft during flight, but also leaders of the airline on the
ground. The other unions at American Airlines also chose to
invest in the airline to help prevent bankruptcy last year.
"It now appears that the positive results we anticipated from
this investment have been at least temporarily deferred by
external forces -- foremost among them the dramatic rise in oil
prices.
"Make no mistake, we are deeply disappointed with the third-
quarter results. That said, we believe our proactive approach
last year was prudent, appropriate and beyond Wall Street's
expectations. Nothing in the current situation convinces us
otherwise. The alternative, as illustrated by US Airways,
United Airlines and Delta Air Lines, is not appealing.
"While the APA Board of Directors has made no firm decisions on
what further action may become necessary, we are committed to
securing our pilots' careers. We are confident that all of our
other fellow employees likewise recognize the need to safeguard
the long-term viability of American Airlines."
Founded in 1963, the Allied Pilots Association is headquartered in
Fort Worth, Texas.
American Airlines is the world's largest carrier. American,
American Eagle and the AmericanConnection regional carriers serve
more than 250 cities in over 40 countries with more than 4,200
daily flights. The combined network fleet numbers more than 1,000
aircraft. American's award-winning Web site, http://AA.com/
provides users with easy access to check and book fares, plus
personalized news, information and travel offers. American
Airlines is a founding member of the oneworld(sm) Alliance.
AMR Corp.'s June 30, 2004, Balance Sheet shows liabilities
exceeding assets by $122 million and posted a $214 million net
loss in the quarter ending Sept. 30, 2004.
AMERICAN PARA-TRANSIT: Voluntary Chapter 11 Case Summary
--------------------------------------------------------
Debtor: American Para-Transit, Inc.
333 Jenkintown Commons
Jenkintown, Pennsylvania 19046
Bankruptcy Case No.: 04-34087
Type of Business: The Debtor is an affiliate of Aleph Management
Systems, Inc., which filed for chapter 11
protection on October 15, 2004 (Bankr. E.D. Pa.
Case No. 04-33939). Aleph Management Systems,
Inc., provides ground transportation services on
a contractual basis. The areas of business are
paratransit, charter, bus, and school bus
transportation. The Company also provides
financial and risk management services to
various companies.
Chapter 11 Petition Date: October 19, 2004
Court: Eastern District of Pennsylvania (Philadelphia)
Judge: Stephen Raslavich
Debtor's Counsel: Alan I. Moldoff, Esq.
Adelman Lavine Gold and Levin
Four Penn Center, Suite 900
Philadelphia, PA 19103-2808
Tel: 215-568-7515
Estimated Assets: $10 Million to $50 Million
Estimated Debts: $50 Million to $100 Million
The Debtor did not file a list of its 20-Largest Creditors.
AMES DEPARTMENT: Connecticut Balks at Conveyance Tax Exemption
--------------------------------------------------------------
Ames Department Stores and its subsidiaries ask the U.S.
Bankruptcy Court for the Southern District of New York to exempt
them from paying conveyance taxes in relation to the proposed sale
of their real property in Rocky Hill, Connecticut for
$3.7 million.
Connecticut's Revenue Services Department said that the relief
sought by the Debtors is not possible because they don't have a
confirmed chapter 11 plan pursuant to Section 1129 of the
Bankruptcy Code.
The Debtors quote Section 1146 of the Bankruptcy Code stating that
they can be exempted from paying the tax if it "will facilitate
the formulation and confirmation of a chapter 11 plan."
The Revenue Services urges the Court to deny the exemption sought
by the Debtors because it believes that the Debtors are not even
likely to confirm a plan of reorganization.
Ames Department Stores filed for chapter 11 protection on
August 20, 2001 (Bankr. S.D.N.Y. Case No. 01-42217). Albert
Togut, Esq., Frank A. Oswald, Esq. at Togut, Segal & Segal LLP and
Martin J. Bienenstock, Esq., and Warren T. Buhle, Esq., at Weil,
Gotshal & Manges LLP represent the Debtors in their restructuring
efforts. When the Company filed for protection from their
creditors, they listed $1,901,573,000 in assets and $1,558,410,000
in liabilities.
The Honorable Robert D. Drain issued a decision this week in In re
Beulah Church Of God In Christ Jesus, Inc., Bankruptcy Case No.
03-42705 (RDD) (Bankr. S.D.N.Y. Oct. 18, 2004), telling the New
York City Finance Department that the pre-confirmation sale of 23
of its 24 properties located in New York, Kings, Queens and Bronx
Counties would be exempt from the New York City real property
transfer tax and the New York City mortgage recording tax. In
Beulah Church's case, the City objected to the exemption arguing
that the Debtor's buildings were not sold "under a plan confirmed"
within the meaning of section 1146(c) of the Bankruptcy Code. The
Debtor, in turn, argued that section 1146(c) does not condition
exemption from the Transfer Taxes on confirmation of a chapter 11
plan before the closing of a sale, but, rather, that the sale may
be exempt provided that the sale is integral to plan confirmation,
or confirmation occurs because of the sale. In the Debtor's
interpretation, therefore, the phrase "under a plan confirmed", as
used in section 1146(c) of the Bankruptcy Code, means that the
sale is in view of, or in accordance with, and subject to, the
anticipated confirmation of a chapter 11 plan. Judge Drain
rejects the City's bright line interpretation of section 1146(c).
If the precise time of the sale were controlling, Judge Drain
suggests, clever, lucky and tricky lawyers would craft sales
agreements and plans that would make every transaction happen
post-confirmation. "I assume," Judge Drain says, "that Congress
intended the Debtor's approach, because it is reasonable to
conclude that Congress did not intend to impose an arbitrary and
illogical temporal distinction on sales necessary or integral to a
chapter 11 plan."
ARCH WESTERN: Moody's Puts Ba3 Rating on $250M Guaranteed Sr. Note
------------------------------------------------------------------
Moody's Investors Service assigned a Ba3 rating to Arch Western
Finance's proposed $250 million 6.75% guaranteed senior note issue
due 2013. All other ratings of Arch Western Finance and its
parent, Arch Coal Inc., were affirmed. Arch Western Finance's
notes are guaranteed by its parent, Arch Western Resources, a
subsidiary of Arch Coal.
Concurrent with the note issue, Arch Coal is offering 6.25 million
common share units, which, if successful, would raise proceeds of
approximately $200 million.
The Ba3 rating reflects Moody's belief that Arch Coal's free cash
flow will be negative over at least the next four years due to
extraordinarily high capital expenditures, which, when combined
with the potential for higher operating costs, especially in the
east, and the potential for a reversal of today's record coal
prices, could result in a material increase in leverage and
constrain the company's ability to service its debt. A large
proportion of the planned capex is non-discretionary since it is
targeted for annual payments for federal coal leases in the Powder
River Basin -- PRB. This coal will not be mined for many years
and, therefore, will not generate near-term cash flow. Moody's
also notes that increased costs and rail disruptions, combined
with a high proportion of locked in contracts, have thus far
prevented Arch Coal from materially benefiting from current high
spot coal prices. The rating outlook for both companies is
stable.
These ratings were assigned:
-- Arch Western Finance, LLC
* $250 million of 6.75% guaranteed senior notes due 2013,
Ba3
These ratings were affirmed:
-- Arch Western Finance, LLC
* $700 million of 6.75% guaranteed senior notes due 2013,
Ba3
-- Arch Coal, Inc.
* $350 million senior secured revolving credit facility
maturing in March 2007, Ba3
* $144 million of Perpetual Cumulative Convertible Preferred
Stock, B3
* Senior implied rating, Ba3
* Senior unsecured issuer rating, B1
The combined proceeds of the debt and equity offerings will be
used to repay debt at Arch Western and Arch Coal, and for general
corporate purposes. The net impact of the two offerings will be
to reduce Arch Coal's debt to capital ratio (including preferred
stock as debt) from approximately 61.9% at September 30, 2004 to
approximately 55.9% (pro forma for the two issues and anticipated
debt reduction).
Arch Coal will incur significantly higher than historic capex over
the next five years as it funds the recent $611 million
acquisition of the Little Thunder PRB reserves ($122 million per
annum), develops the Mountain Laurel mine in Central Appalachia
($190 million over three years), and funds maintenance capex. The
Little Thunder acquisition will not be mined for many years,
providing no near term incremental cash flow. A similar situation
may well exist if additional reserves are acquired, by lease or
otherwise. The Mountain Laurel mine is an important development
for the company that will provide high quality, low cost coal, but
will not be in full operation until 2007. This higher level of
capex with no immediate return on investment comes at a time when
the company continues to be pressured by rising costs,
particularly at its eastern operations. Arch Coal, like most
eastern producers, has been impacted by higher pension,
healthcare, steel, explosive and energy costs, and by rail
disruptions. The result has been an inability to materially
benefit from the higher coal prices now being experienced. The
high level of capex combined with continuing cost pressures place
Arch Coal at risk to a decline in spot coal prices, which Moody's
views as quite possible over the next two years. Moody's expects
that the Arch Western Resources operations should continue to
produce steady, low margin cash flow, which is lent up to the
parent. However, we do not expect Arch Western Resources's free
cash flow to be sufficient to offset the negative free cash flow
in the eastern operations, resulting in a possibility of higher
debt levels.
Arch Coal's Ba3 senior implied rating reflects:
(i) its high leverage,
(ii) mine development and reserve acquisition costs,
(iii) increased operating costs, particularly in the east,
(iv) significant dependence on one mine, and
(v) substantial liabilities for reclamation and employee
benefits, which totaled approximately $615 million as of
June 30, 2004.
In the eastern operations in particular, heightened regulatory
risk and permitting uncertainties are expected to continue. In
short, the profitability and scope of Arch Coal's eastern
operations may decline unless coal prices remain sufficiently high
to offset recent negative trends in:
* costs,
* reserve degradation, and
* mine development costs.
In Moody's opinion, long-term coal prices may continue to remain
at high levels, but in concert with rising costs, thereby keeping
profit margins relatively constant. This has been the historical
pattern for the coal industry and was the pattern over the last
three years, when most of the benefits of higher prices were
offset by higher costs.
The rating also considers:
(i) Arch Coal's relatively stable operating profile,
(ii) its size,
(iii) diversified asset and customer base,
(iv) favorable operating costs in the PRB,
(v) a high proportion of low-sulfur coal production and
reserves, and
(vi) its existing book of coal sales contracts.
Arch Western Resources' Ba3 rating reflects:
(i) its high leverage,
(ii) modest cash flow,
(iii) ties to Arch Coal, and
(iv) significant dependence on one mine, the combined Black
Thunder/North Rochelle mine.
Both Arch Coal and Arch Western Resources are also subject to
these risk,which can impact operating and financial performance:
* geologic,
* operating,
* environmental,
* regulatory, and
* permitting and bonding risks inherent to coal
mining.
Arch Western Resources rating also reflects:
(i) the overall good quality of the company's mines and coal
reserves, which operate in three distinct western coal
fields,
(ii) its favorable market position as a supplier of low sulfur
and compliance coal to numerous utility customers,
(iii) its competitive costs, and
(iv) its contracted fixed price contracts.
Arch Western Resources is relatively unburdened by workers' comp
and retiree healthcare costs. However, Arch Western Resources pro
forma debt to EBITDA is approximately 4.7x (using Arch Western
Resources, North Rochelle and Canyon Fuel full year 2003 plus the
$250 million senior note issue. Arch Western Resources now
consolidates 100% of Canyon Fuel, following the acquisition by
Arch Coal of the 35% of Canyon Fuel Arch Western Resources did not
own. Arch Coal's 35% minority interest is reflected in Arch
Western Resources' net income. Canyon Fuel conducts all of the
company's coal mining activities in the state of Utah. Arch Coal
anticipates that the addition of 35% of Canyon Fuel will add
incremental annual EBITDA of $15 million. The recently acquired
North Rochelle mine produced $41.6 million of EBITDA in 2003, and
Arch Western Resources anticipates annual synergies of $15 to
$20 million from the combination of North Rochelle and Black
Thunder.
The stable outlook reflects:
(i) the Arch Coal's extensive operations and reserves,
(ii) its long-term sales contracts, and
(iii) coal's importance as a fuel for electricity generation.
These factors help insulate Arch Coal from the impact of changes
to mining, environmental and electric utility regulations and
provide flexibility for adapting to changes in regional coal
demand. The ratings could be raised if Arch Coal is able to
demonstrate that it can generate consistent free cash flow
sufficient to meaningfully reduce debt. The rating could be
lowered if:
(i) the company's leverage and debt protection measurements
weaken, which could result from a return to the margins
experienced in the past few years, coupled with the
elevated capex levels now anticipated, or if
(ii) it undertakes debt financed acquisitions.
In the 2001 to 2003 period the company's EBIT (excluding "other"
income and expense) averaged 6 cents per ton of coal sold,
equivalent to an operating profit margin of .5%.
Arch Western Resources' high leverage and certain structural
features of its senior notes reflect provisions imposed by its
acquisition from ARCO in June 1998. In order to avoid triggering
a tax liability, Arch Western Resources' debt cannot be guaranteed
by Arch Coal and cannot amortize below $675 million until June 1,
2013. However, cash moves freely between Arch Coal and Arch
Western Resources and a sizable receivable, documented as
promissory notes, is growing on the balance sheet of Arch Western
Resources, reflecting cash that it has transferred to Arch Coal
since 1998. The lenders to Arch Western Resources have a first
priority secured interest in the Arch Coal promissory notes.
These notes are unsecured obligations of Arch Coal and are
structurally subordinated to debt and other liabilities (such as
reclamation and workers' comp) of Arch Coal's subsidiaries. Arch
Coal also provides administrative, selling, engineering, and
financial services to Arch Western Resources, and pays income
taxes that Arch Western Resources might otherwise have to pay.
Also, Arch Coal is the direct lessee for about 55% of Arch Western
Resources' coal reserves. For all of these reasons, and because
of the importance of Arch Western Resources to Arch Coal, Moody's
believes that Arch Western Resources and Arch Coal should be rated
the same.
Arch Western Resources is a large producer of compliance and low
sulfur coal with operations in Wyoming, Utah and Colorado. It
sold 70 million tons of coal in 2003 and had revenues of
$500 million. Arch Coal, Inc. is one of the largest coal
companies in the US. In addition to its western operations, which
are conducted by Arch Western Resources, Arch Coal operates in
West Virginia and Kentucky. Arch Coal sold 109 million tons of
coal in 2003 and had revenues of $1.4 billion. Both companies are
headquartered in St. Louis.
AXIA NETMEDIA: Will Release 2005 1st Quarter Results on Oct. 27
---------------------------------------------------------------
Axia NetMedia Corporation will release its fiscal First Quarter
2005 results the morning of October 27, 2004. In addition, the
Corporation's 2004 Annual Meeting will be held on
October 27, 2004 at 11:00 a.m., at Axia's corporate offices at
3300 - 450 1st St. S.W. It will be webcast via Canada NewsWire.
Additionally, a conference call for the investment community on
the fiscal First Quarter 2005 results will be held at 9:00 a.m.
(Eastern Time) and 7:00 a.m. (Mountain) on October 28, 2004.
2004 Annual Meeting Webcast
Axia NetMedia Corporation's 2004 Annual Meeting will be held on
Wednesday, October 27, 2004 at 11:00 a.m. (Mountain Time) at the
corporate offices of Axia - 33rd Floor, 450 1st St. S.W., Calgary
T2P 5H1.
A live webcast of the meeting will be available on Wednesday,
October 27, 2004 at 1 p.m. (Eastern) and 11:00 a.m. (Mountain) at:
http://www.newswire.ca/webcast/viewEventCNW.html?eventID=899580
Click on the "listen to webcast" icon on the screen.
A replay will be available via Axia's Web site www.axia.com, or
at:
http://www.newswire.ca/webcast/viewEventCNW.html?eventID=899580
Fiscal First Quarter 2005 Results and Conference Call
Axia will release its Fiscal First Quarter 2005 results the
morning of Wednesday, October 27, 2004. A conference call for the
investment community will be held on Thursday, October 28, 2004 at
9:00 a.m. (Eastern) and 7:00 a.m. (Mountain). Axia Chairman and
Chief Executive Officer Art Price will be available with President
Murray Wallace and Chief Financial Officer Peter McKeown.
To participate in the conference call, please dial (416) 640-4127
in Toronto and internationally. If you are connecting from other
parts of Canada, dial 1-800-814-4853. Call 10 minutes prior to
the start of the call.
A live webcast (listen only mode) of the conference call will be
available at:
http://www.newswire.ca/en/webcast/viewEvent.cgi?eventID=918060
A replay of the conference call will be available at (416)
640-1917 or 1-877-289-8525, passcode 21096025 followed by the
number sign, from 11 a.m. (ET) October 28 to midnight Thursday,
November 4, 2004, or through the webcast archives at
http://www.newswire.ca.
About Axia
Axia NetMedia Corporation helps organizations and individuals meet
the needs of the Knowledge Economy by combining the power of next-
generation, Real Broadband networks with high-end e-learning
applications. Axia has 176 employees and trades on the Toronto
Stock Exchange under the symbol AXX.
Axia NetMedia Corporation helps organizations and individuals meet
the needs of the Knowledge Economy by combining the power of high-
speed Real Broadband networks with high-end e-learning
applications. Axia has 176 employees and trades on the Toronto
Stock Exchange under the symbol "AXX". For more information, visit
its website at http://www.axia.com/
* * *
As reported in the Troubled Company Reporter on May 28, 2004,
Standard & Poor's Ratings Services assigned its 'B' corporate
credit rating to industrial products manufacturer AXIA Inc. The
outlook is stable.
At the same time, Standard & Poor's assigned its 'B' bank loan
rating and its recovery rating of '4' to AXIA's proposed
$150 million senior secured credit facility, based on preliminary
terms and conditions.
"The ratings on AXIA reflect its modest financial base, as
evidenced by revenues of less than $200 million, a very aggressive
financial policy, weak credit protection measures, thin free cash
flow, some customer concentration, and exposure to rising interest
rates," said Standard & Poor's credit analyst Dominick D'Ascoli.
These negatives overshadow defensible positions in several niche
product lines, low-cost operations, and good operating margins.
BETHLEHEM STEEL: 3 Firms Now Represent Trust in Preference Actions
------------------------------------------------------------------
As previously reported, the Bethlehem Steel Corporation
Liquidating Trust was deemed substituted as plaintiff in all of
the complaints filed by Bethlehem Steel Corporation and its
debtor-affiliates to avoid preferential transfers.
The Liquidating Trust retained three separate law firms:
(1) Gazes & Associates, LLP,
(2) Weil Gotshal & Manges, LLP, and
(3) Kramer Levin Naftalis & Frankel, LLP,
to represent the Liquidating Trust in the Preference Actions.
The Liquidating Trust and the Preference Counsel have agreed to
have those Preference Actions as to which Weil Gotshal & Manges,
LLP, and Kramer Levin Naftalis & Frankel, LLP, currently represent
the Liquidating Trust, transferred to Gazes & Associates, LLP.
None of the Preference Actions is past the discovery stage.
It would be extremely cumbersome for the Liquidating Trustee to
prepare and file, and for the Court to process, consents to change
attorney in each of the affected Preference Actions.
The Court promptly approves the parties' stipulation. Judge
Lifland waives the requirement under Rule 9013-1(b) of the Local
Bankruptcy Rules for the Southern District of New York for the
filing of a separate memorandum of law.
Headquartered in Bethlehem, Pennsylvania, Bethlehem Steel
Corporation -- http://www.bethlehemsteel.com/-- was the second-
largest integrated steelmaker in the United States, manufacturing
and selling a wide variety of steel mill products including hot-
rolled, cold-rolled and coated sheets, tin mill products, carbon
and alloy plates, rail, specialty blooms, carbon and alloy bars
and large diameter pipe. The Company filed for chapter 11
protection on October 15, 2001 (Bankr. S.D.N.Y. Case No.
01-15288). Jeffrey L. Tanenbaum, Esq., and George A. Davis, Esq.,
at WEIL, GOTSHAL & MANGES LLP, represent the Debtors in their
restructuring, the centerpiece of which was a sale of
substantially all of the steelmaker's assets to International
Steel Group. When the Debtors filed for protection from their
creditors, they listed $4,266,200,000 in total assets and
$4,420,000,000 in liabilities. Bethlehem obtained confirmation of
a chapter 11 plan on October 22, 2003, which took effect on Dec.
31, 2003. (Bethlehem Bankruptcy News, Issue No. 54; Bankruptcy
Creditors' Service, Inc., 215/945-7000)
BOISE CASCADE: Extends Debt Securities' Price Determination Date
----------------------------------------------------------------
Boise Cascade Corporation (NYSE: BCC) extended the price
determination date in connection with its tender offer for its
debt securities for up to $800 million of aggregate consideration.
The Total Consideration and the Tender Offer Consideration will be
determined as of 2:00 p.m., New York City time, today,
October 22, 2004 unless otherwise modified.
Boise retained Banc of America Securities LLC as the sole dealer
manager and solicitation agent for the offer. Holders can direct
questions about the offer to:
Banc of America Securities LLC
High Yield Special Products
Tel. No. 888-292-0070 (U.S. toll-free)
212-847-5834 (collect)
Holders can request documentation from D.F. King & Co., Inc., the
information agent for the offer, at 800-901-0068 (U.S. toll-free)
and 212-269-5550 (collect).
About the Company
Boise Cascade Corporation, headquartered in Boise, Idaho, provides
solutions to help customers work more efficiently, build more
effectively, and create new ways to meet business challenges. We
own or control more than 2 million acres of timberland, primarily
in the United States, to support our manufacturing operations.
Boise's sales were $10.6 billion in the first nine months 2004.
Boise Office Solutions, headquartered in Itasca, Illinois, is a
division of Boise and a premier multinational contract and, under
the OfficeMax(R) brand, retail distributor of office supplies and
paper, technology products, and office furniture. Boise Office
Solutions had sales of $6.6 billion in the first nine months 2004.
Boise Building Solutions, headquartered in Boise, Idaho, is a
division of Boise and manufactures plywood, lumber, particleboard,
and engineered wood products. The business also operates 27
facilities that distribute a broad line of building materials,
including wood products manufactured by Boise. Boise Building
Solutions posted sales of $3.0 billion in the first nine months
2004.
Boise Paper Solutions, headquartered in Boise, Idaho, is a
division of Boise and a manufacturer of office papers, a majority
of which are sold through Boise Office Solutions. Boise Paper
Solutions also manufactures printing, forms, and converting
papers; value-added papers; newsprint; containerboard and
corrugated containers; and market pulp. The division had sales of
$1.5 billion in the first nine months 2004. Visit the Boise
website at http://www.bc.com/
* * *
As reported in the Troubled Company Reporter on Oct. 11, 2004,
Moody's Investors Service assigned the ratings to Boise Cascade,
LLC.
Ratings assigned:
-- Senior implied rated Ba3
-- Senior unsecured issuer rating rated B1
-- $1.33 billion guaranteed senior secured term loan B due
2011 rated Ba3
-- $1.225 billion guaranteed term loan C due 2010, rated Ba3
-- $350 million revolving credit facility due 2010, rated
Ba3
-- $250 million guaranteed senior unsecured notes, due 2012
rated B1
-- $400 million guaranteed senior subordinated notes due 2014
rated B2
Speculative Grade Liquidity rating rated SGL-2
The outlook is stable.
BREUNERS HOME: Committee Balks At Modified Employee Retention Plan
------------------------------------------------------------------
The U.S. Bankruptcy Court for the District of Delaware approved
Breuners Home Furnishing Corp.'s key employee retention plan in
July that proposed to pay select individuals who remained in the
company's employ trough Oct. 31, 2004. Breuners says it won't be
possible to wind up the company's affairs by October 31, and still
needs these key employees. To solve the problem, Breuners
proposes to pay additional retention bonuses to these people. The
Debtor indicates that the business should be wound down by year-
end.
Breuners originally asked the Bankruptcy Court for authority to
pay up to $1,145,800 to 117 key employees. After the Committee
complained, Breuners agreed to contract the amount to $975,000
plus an additional $25,000 amount that would require Committee
approval. Breuners now wants to add $101,000 to the pot. The
Committee objects.
"The Committe is not convinced, at this point, that additional
funds are required by the Debtors in view of the reduction in
personnel causing a reduction in the need for funds to retain Key
Personnel," Platzer, Swergold, Karlin, Levine, Goldberg & Jaslow,
LLP, counsel to the Committee, tells the Court. "Further, the
Committee does not believe that given the current economic
environment, personnel presently employed will not foresake
employment solely by reason of the Debtors' inability to provide
them with an enhanced bonus beyond the bonus which they would have
been entitled to under the original key employee retention
program. The employees are receiving their current salary and
will neither stay or leave by virtue of the additional bonuses."
A further increase in the KERP does nothing, the Committee
indicates, to encourage the wind down of the Debtors' business
operation.
Headquartered in Lancaster, Pennsylvania, Breuners Home
Furnishings Corp., -- http://www.bhfc.com/-- was one of the
largest national furniture retailers focused on the middle to
upper-end segment of the market. The Company, along with its
debtor-affiliates, filed for chapter 11 protection on
July 14, 2004 (Bankr. Del. Case No. 04-12030). Great American
Group, Gordon Brothers, Hilco Merchant Resources, and Zimmer-
Hester were brought on board within the first 30 days of the
bankruptcy filing to conduct Going-Out-of-Business sales at the
furniture retailer's 47 stores. Bruce Grohsgal, Esq., and Laura
Davis Jones, Esq., at Pachulski, Stang, Ziehl, Young & Jones
represent the Debtors in their restructuring efforts. The Company
reported more than $100 million in estimated assets and debts when
it sought protection from its creditors.
CALPINE CORP: Prices $360 Million Preferred Equity Offering
-----------------------------------------------------------
Calpine Corporation's (NYSE: CPN) indirect, wholly owned
subsidiary Calpine (Jersey) Limited priced its $360 million
offering of two-year, Redeemable Preferred Shares at U.S. LIBOR
plus 700 basis points. Calpine expects the transaction to close
today, October 22, 2004.
The proceeds of the offering of the Redeemable Preferred Shares
will be initially loaned to Calpine's 1,200-megawatt Saltend
cogeneration power plant located in Hull, Yorkshire, England, and
the payments of principal and interest on such loan will fund
payments on the Redeemable Preferred Shares. The net proceeds of
the Redeemable Preferred Shares offering will ultimately be used
as permitted by the company's indentures.
Calpine Corporation is a North American power company dedicated to
providing electric power to customers from clean, efficient,
natural gas-fired and geothermal power plants. The company
generates power at plants it owns or leases in 21 states in the
United States, three provinces in Canada and in the United
Kingdom.
* * *
As reported in the Troubled Company Reporter on Oct. 13, 2004,
Standard & Poor's Ratings Services assigned its 'CCC+' rating to
Calpine Corp.'s (B/Negative/--) $736 million unsecured convertible
notes due 2014. The rating on the notes is the same as Calpine's
existing unsecured debt and two notches lower than the corporate
credit rating. The outlook is negative.
As reported in the Troubled Company Reporter on Oct. 6, 2004,
Fitch Rates Calpine Corp.'s:
-- $785 million first priority senior secured notes due
2014 'BB-';
-- $736 million senior unsecured convertible notes due 2014
'CCC+';
-- outstanding second priority senior secured notes 'B+';
-- outstanding senior unsecured notes to 'CCC+' from 'B-'.
Calpine's outstanding High Tides trust preferred securities are
unchanged at 'CCC'. The Rating Outlook for Calpine remains
Stable.
CATHOLIC CHURCH: Tucson Not Required to Pay Utility Deposits
------------------------------------------------------------
Under Section 366 of the Bankruptcy Code, public utility providers
may require adequate assurance of future payments in the form of a
deposit or other security so as not to alter, refuse, or
discontinue service. Specifically, Section 366(b) provides that:
"Such utility may alter, refuse, or discontinue service if
neither the trustee nor the debtor, within 20 days after the
[Petition Date], furnishes adequate assurance of payment in
the form of a deposit or other security, for service after
such date. On request of a party-in-interest and after notice
and hearing, the court may order reasonable modification of
the amount of the deposit or other security necessary to
provide adequate assurance of payment."
To maintain and keep public utility services available and to
avoid the unnecessary expense associated with negotiating with
public utility providers, posting additional deposits, or
incurring the expense associated with actions brought pursuant to
Section 366, the Roman Catholic Church of the Diocese of Tucson
asks Judge Marlar to declare that it has complied with Section
366 and that its utility service providers are adequately assured
of payment for future services.
The Diocese asserts that (i) the allowance of any postpetition
claims of utility providers, (ii) the fact that there are no
prepetition amounts owing to any utility providers, and (iii) the
past payment history of the Diocese are sufficient to satisfy the
requirements of Section 366.
Susan G. Boswell, Esq., at Quarles & Brady Streich Lang, LLP, in
Tucson, Arizona, relates that she contacted Tucson Electric Power,
Southwest Gas, and the City of Tucson Water. They have all
consented to the request. There are no outstanding balances owed
to utilities.
"Motion granted," Judge Marlar rules from the bench.
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)
CHOICE ONE: Hires Chadbourne & Parke as Special Regulatory Counsel
------------------------------------------------------------------
The U.S. Bankruptcy Court for the Southern District of New York
gave Choice One Communications Inc., and its debtor-affiliates,
permission to employ Chadbourne & Parke LLP, as their special
regulatory counsel on an interim basis.
The Court scheduled a hearing to consider the Debtors' application
to employ Chadbourne & Parke on a permanent basis at 10:00 a.m.,
on October 25, 2004.
Chadbourne & Parke will:
a) render specialized expertise to the Debtors in connection
with legal representation;
b) advise the Debtors concerning regulatory and transactional
matters in the telecommunication industry; and
c) render other services and tasks to the Debtors generally
incidental to its role as special regulatory counsel.
Dana Frix, Esq., a Partner at Chadbourne & Parke, discloses that
the Firm received a $50,000 retainer. Ms. Frix will bill the
Debtors $560 per hour for her services.
Ms. Frix reports Chadbourne & Parke's lead professionals
performing services to the Debtors:
Professional Designation Hourly Rate
------------ ----------- -----------
Kemal Hawa Associate $ 420
Steve Lee Associate 275
Theodore Navitskas Associate 275
Ms. Frix reports Chadbourne & Parke's other professionals bill:
Designation Hourly Rate
----------- -----------
Partners $ 475 - 750
Counsel 435 - 595
Associates 275 - 460
Paralegals 120 - 195
To the best of the Debtors' knowledge, Chadbourne & Parke is
"disinterested" as the term is defined in Section 101(14) of the
Bankruptcy Code.
Headquartered in Rochester, New York, Choice One Communications,
Inc. -- http://www.choiceonecom.com/-- is an Integrated
Communications Provider offering voice and data services including
Internet solutions, to businesses in 29 metropolitan areas
(markets) across 12 Northeast and Midwest states. Choice One
reported $323 million of revenue in 2003, and provides services to
more than 100,000 clients. The Company and its 18 debtor-
affiliates filed for chapter 11 protection on October 5, 2004
(Bankr. S.D.N.Y. Case No. 04-16433). Jeffrey L. Tanenbaum, Esq.,
and Paul M. Basta, Esq., at Weil Gotshal & Manges LLP, represent
the Debtors in their restructuring efforts. When the Debtors
filed for bankruptcy, they reported $354,811,000 in total assets
and $1,078,478,000 in total debts on a consolidated basis.
CHOICE ONE: Can Continue Hiring Ordinary Course Professionals
-------------------------------------------------------------
The Honorable Robert D. Drain of the U.S. Bankruptcy Court for the
Southern District of New York gave Choice One Communications Inc.,
and its debtor-affiliates, permission on an interim basis, to
continue to retain, employ and pay professionals they turn to in
the ordinary course of their business without bringing formal
employment applications to the Court.
The Court scheduled a hearing to consider the Debtors' application
to employ the Ordinary Course Professionals on a permanent basis
at 10:00 a.m., on October 25, 2004.
The Debtors relate that the Ordinary Course Professionals they
employ render a wide range of services, including accounting,
legal and tax services, that impact their day-to-day operations.
The Debtors explain that because of the additional cost associated
with the preparation of employment applications for each Ordinary
Course Professional who will receive relatively small fees, it
would be impractical and inefficient to require the Debtors to
submit individual applications and proposed retention orders for
each of the professionals.
The Debtors add that it is essential that the employment of the
Ordinary Course Professionals be continued on an ongoing basis to
avoid disruption of their normal business operations.
The Debtors assure the Court that:
a) each Ordinary Course Professional shall be paid 100% of the
fees and expenses they will bill the Debtors provided that
each professional will submit to the Debtors an invoice
detailing the services rendered and disbursements incurred,
b) no Ordinary Course Professional will be paid in excess of
$50,000 per month or an aggregate amount of $350,000 per
month for all the professionals retained by the Debtors,
and
c) if an Ordinary Course Professional bills the Debtors more
than $50,000 in a single month, the professional will be
required to file a fee application in order to be paid the
full amount of their fees and disbursements in accordance
with sections 330 and 331 of the Bankruptcy Code.
Although some of the Ordinary Course Professional may hold minor
amounts of unsecured claims, the Debtors do not believe any of
them have an interest adverse to the Debtors, their creditors or
other parties in interest.
Headquartered in Rochester, New York, Choice One Communications,
Inc. -- http://www.choiceonecom.com/-- is an Integrated
Communications Provider offering voice and data services including
Internet solutions, to businesses in 29 metropolitan areas
(markets) across 12 Northeast and Midwest states. Choice One
reported $323 million of revenue in 2003, and provides services to
more than 100,000 clients. The Company and its 18 debtor-
affiliates filed for chapter 11 protection on October 5, 2004
(Bankr. S.D.N.Y. Case No. 04-16433). Jeffrey L. Tanenbaum, Esq.,
and Paul M. Basta, Esq., at Weil Gotshal & Manges LLP, represent
the Debtors in their restructuring efforts. When the Debtors
filed for bankruptcy, they reported $354,811,000 in total assets
and $1,078,478,000 in total debts on a consolidated basis.
COMM 2001-FL4: Moody's Pares Ratings on Five Classes to Low-B
-------------------------------------------------------------
Moody's Investors Service downgraded five classes and affirmed
four classes of COMM 2001-FL4, Commercial Mortgage Pass-Through
Certificates as follows:
-- Class B, $11,302,081, Floating, affirmed at Aaa
-- Class X-2, Notional, affirmed at Aaa
-- Class K-PS, $2,381,000, Floating, downgraded to B3 from Ba1
-- Class L-PS, $1,163,000, Floating, downgraded to B3 from Ba2
-- Class M-PS, $7,037,000, Floating, downgraded to B3 from Ba3
-- Class K-CH, $806,652, Floating, downgraded to Ba1 from Baa1
-- Class M-CH, $2,276,267, Floating, downgraded to Ba3 from
Baa3
-- Class L-KC, $1,718,000, Floating, affirmed at Baa2
-- Class M-KC, $1,300,000, Floating, affirmed at Baa3
The Certificates are collateralized by three mortgage loans, which
range in size from 19.0% to 60.9% of the pool based on current
principal balances. As of the October 15, 2004 distribution date,
the transaction's aggregate certificate balance has decreased by
approximately 84.4% to $134.6 million from $862.7 million at
closing. The mortgage loans do not provide for principal
amortization. The pool balance reduction is due to eight loan
payoffs and the partial payoff of the Cherry Hill Office Portfolio
Loan.
Class B is affirmed. Moody's does not rate pooled Classes C, D
and E. Classes K-PS, L-PS and M-PS pertain to the 100 Pine Street
Loan and have been downgraded due to poor performance. Classes
K-CH and M-CH pertain to the Cherry Hill and have also been
downgraded due to poor performance. Classes L-KC and M-KC relate
to the Key Center Loan and are affirmed.
The 100 Pine Street Loan, which represents 60.9% of the pool
balance, is secured by a 394,000 square foot Class A- office
building located in San Francisco's financial district. The
property is currently 65.2% occupied, compared to 97.7% at
securitization although occupancy is anticipated to increase to
81.0% due to recent lease executions. Rent achievement for the
majority of the new and renewal leases range from $28.00 per
square foot to $32.00 per square foot, significantly lower than
the $70.00 to $80.00 per square foot rents of a few years ago.
While much of the building has rolled to market levels,
approximately 20.0% of the building exceeds current market rent
levels. Moody's loan to value ratio -- LTV -- for the portion of
the debt in the trust ($208 per square foot) is in excess of
100.0%. There is a $4.5 million leasing reserve, which serves as
additional collateral. Total secured debt approximates $299 per
square foot, substantially in excess of Moody's estimated
collateral value. The borrower is an affiliate of:
* Citigroup Global Investments,
* WAFRA Investment Advisory Inc., and
* UNICO Properties.
The loan matures in January 2006.
The Cherry Hill Portfolio Loan, which comprises 19.0% of the pool
balance, is secured by two Class B office buildings located in
Cherry Hill, New Jersey. The buildings contain approximately
600,000 square feet of space. The properties continue to have
significant exposure to expiring leases and tenant retention since
securitization has been poor. Since securitization, the Three
Executive Campus Building (434,400 square feet) lost GE Capital
(197,800 square feet) and Comcast (76,000 square feet) as tenants.
Stone & Webster, which leases 97,300 square feet, has vacated and
its rent payments will cease in early 2005. Based on the
borrower's most recent rent roll, occupancy in the first quarter
of 2005 will amount to 57.3%, accounting for executed leases and
forthcoming expirations. Lease proposals currently in negotiation
could increase occupancy to 73.2%. The other property,
Haddonfield Business Center (172,100 square feet), is currently
85.6% occupied but has 46.0% of its space expiring in 2005. While
trust debt is $43 per square foot (total debt - $70 per square
foot), historical tenant losses, upcoming lease expirations, and
low rent achievement are causes for concern. The debt matures in
December 2004 and the borrower has not indicated whether it will
exercise its remaining 12-month extension option or pay off the
debt. Moody's LTV is approximately 81.0% based, in part, on
assumed additional lease-up.
The Key Center Loan, which represents 20.1% of the pool balance,
is secured by a 435,715 square foot Class A office building
located in Buffalo, New York. The property is currently 75.3%
occupied, compared to 81.0% at securitization. Significant
tenants include Delaware North, Key Bank USA (Moody's senior
unsecured rating A1), and Ernst & Young. The borrower is an
affiliate of Edwin Zafir. Current cash flow as adjusted by
Moody's is $4.8 million, essentially the same as at
securitization. Moody's LTV is 64.0%, the same as at
securitization. The borrower has expressed its intention to pay
off the loan in November 2004.
CORN PRODUCTS: Moody's Reviewing Ba1 Ratings & May Upgrade
----------------------------------------------------------
Moody's Investors Service placed the debt ratings of Corn Products
International (senior implied Ba1) under review for possible
upgrade. Ratings placed under review are as follows:
* Senior implied rating - Ba1,
* $255MM senior unsecured notes, due 2007 - Ba1,
* $200MM senior unsecured notes, due 2009 - Ba1,
* $145MM senior unsecured shelf - (P) Ba1,
* Senior unsecured issuer rating - Ba1.
The review is prompted by Corn Products International's steady
improvement in operating performance over the past few years,
which has been accompanied by debt reduction, improved debt
protection measures, and less reliance on subsidiary borrowings.
The review will focus on:
(i) the ability of Corn Products to sustain its improved
operating performance given the competitive nature of the
industry;
(ii) the company's strategies, and associated risks, for
continued growth of higher margin, overseas businesses;
(iii) the prospects for continuing to improve returns on its US
business; and
(iv) the evolution of its Mexican business in response to the
tariff disputes.
The review will also consider the company's ongoing financial
policies, including the likely extent of debt funding for its
growth initiatives and acquisitions, as well as the expected
degree of structural subordination of the parent company unsecured
notes to outstanding subsidiary debt as the company continues to
grow its overseas businesses (subsidiary debt, while materially
reduced, is currently about 22% of total debt).
Corn Products International, based in Bedford Park, Illinois, is
the third largest corn refiner in the world, and manufactures a
variety of corn-based sweetener, starches and related products.
COTT CORPORATION: Gross Margin Dips as Production Costs Increases
-----------------------------------------------------------------
Cott Corporation (NYSE:COT; TSX:BCB), reported record sales for
the third quarter ended October 2, 2004. The retailer brand soft
drink manufacturer announced that sales for the quarter rose by
13.5% to $442.4 million. Excluding the impact of foreign exchange
sales were up 11% from year ago, an increase of 7% when
acquisitions are also excluded. Net income for the quarter was
$22.1 million, a decrease of 14% from last year and diluted
earnings per share were $0.31 vs. $0.36 last year, a decline of
14%.
"A strong top line in the US, driven by the continued growth of
retailer brands there, helped drive our third quarter sales to new
highs." said John K. Sheppard, Cott's president and chief
executive officer. "However, as growth continued to exceed our
original expectations we saw higher than expected logistical and
manufacturing costs in the US again this quarter. Our number one
priority is in getting these costs back in line."
On an interim basis, Sheppard would be taking on day-to-day
responsibility for the US business unit, in addition to his CEO
duties, while a search is conducted for a president of the US
business unit. In a related move, Paul Richardson, previously
responsible for the US business unit, was named to the position of
EVP, Global Sourcing, where he will continue to make an important
contribution.
"This is the right move for the US business and for our
shareowners." said Frank E. Weise, Cott's chairman. "John has a
demonstrated track record of sustained success in the US, which
saw strong sales, earnings and market share growth under his
leadership."
The Company reported that sales for the first nine months of the
year rose to $1,277 million, up 19% from prior year, up 12%
excluding the impact of foreign exchange and acquisitions. Net
income increased 10% to $66.9 million from $60.8 million in the
same period last year. Earnings per diluted share rose 8% to
$0.93, as compared to $0.86 for last year's first nine months.
Third Quarter 2004
Sales for the third quarter were $442.4 million, an increase of
13.5% from the same period last year, up 11% excluding the impact
of foreign exchange. The Company's U.S. business unit reported a
19% increase over the same period last year, an increase of 13%
excluding acquisitions. Sales in the U.K./Europe business unit
rose by 7%, down 5% excluding the impact of foreign exchange,
while sales in Canada declined 10%, a decrease of 15% excluding
the impact of foreign exchange. Sales in Mexico were
$10.8 million, up from $6.9 million in the prior year.
Gross margin of 16.0% was below the prior year's 19.3%,
principally due to higher logistical and plant production costs,
including additional co-pack fees, inter-plant shipping costs and
higher manufacturing costs. Operating income decreased by 18% to
$37.9 million. Income taxes for the third quarter of
$8.3 million, were favorably impacted by a $2 million reduction in
accrued tax liability.
Nine Months 2004
For the first three quarters of 2004 sales rose 19% to $1.277
billion, up 16% excluding the impact of foreign exchange, an
increase of 12% when both foreign exchange and acquisitions are
excluded. The U.S. business unit reported a 21% gain versus the
same period last year, 14.5% excluding acquisitions, while in the
U.K./Europe sales were up 21% for nine months, up 7% excluding the
impact of foreign exchange. In Canada, sales increased by 1%, but
decreased 5% after foreign exchange is taken into account. Sales
in Mexico were $29.6 million for the nine months as compared to
$16 million for the prior year. Earnings per diluted share in the
first nine months of this year grew by 8%, reaching $0.93 vs.
$0.86 per diluted share last year.
Gross margin was 17.8% for the nine months compared to 19.4% for
the same period in 2003, impacted by manufacturing and logistics
costs. Operating income increased 5% to $121.5 million.
Operating cash flow for the first three quarters of 2004,
including capital expenditures was $31.6 million compared with
$73.1 million for the same period last year. The cash generated
was primarily used to fund acquisitions.
Acquisitions
Cott's U.S. subsidiary, Cott Beverages Inc., has acquired certain
of the assets of Metro Beverage Co., a soft drink manufacturer
based in Columbus, Ohio and of Elan Waters, Blairsville, Georgia.
These acquisitions are expected to add $15 million a year to
Cott's sales. They will provide additional production capacity to
help the Company address US manufacturing requirements and ensure
sufficient capacity for 2005. These acquisitions increase the
number of bottling plants to 11 in the US and 21 worldwide.
2004 Outlook
For the full year 2004, the company revised its earnings guidance.
EPS is now expected at $1.15-$1.19, down from the $1.23-$1.27
previously announced, and EBITDA is anticipated to be between
$210 and $215 million, down from prior guidance of between
$220 and $225 million. Sales growth is still expected to be
between 16%-19%, and CAPEX will amount to $65 million for the
year.
About Cott Corporation
Cott Corporation is the world's largest retailer brand soft drink
supplier, with the leading take home carbonated soft drink market
shares in this segment in its core markets, the United States,
Canada and the United Kingdom.
* * *
As reported in the Troubled Company Reporter on Sept. 2, 2004,
Standard & Poor's Rating Services revised its outlook for Cott
Corp. to positive from stable. At the same time, Standard &
Poor's affirmed its 'BB' long-term corporate credit and 'B+'
subordinated debt ratings on Toronto, Ontario-based Cott Corp.
Total debt outstanding was about US$362 million at July 3, 2004.
As reported in the Troubled Company Reporter on Aug. 23, 2004,
Moody's Investors Service upgraded the ratings for Cott
Corporation recognizing the company's strong and consistent
financial and operating performance throughout the recent past and
affirming Moody's expectation of continued success over the
ratings horizon.
COVANTA ENERGY: Liquidation Valuation Analysis Under Lake II Plan
-----------------------------------------------------------------
Covanta Lake II, Inc., prepared a liquidation analysis, which
reflects the projected outcome of the hypothetical, orderly
liquidation of the Reorganizing Debtor under Chapter 7 of the
Bankruptcy Code. Anthony J. Orlando, President of Covanta Lake
II, tells the United States Bankruptcy Court for the Southern
District of New York that the projected liquidation proceeds to
each Class were less than or equal to the estimated recoveries
under the proposed Chapter 11 Plan of Reorganization.
Underlying the Liquidation Analysis are a number of estimates and
assumptions that, although developed and considered by management,
are inherently subject to economic, competitive, litigation and
other contingencies beyond the Reorganizing Debtor and its
management's control. It is possible that the time needed to
dispose of the assets could exceed the timeframes assumed in the
analysis, causing an adverse impact on the depicted recoveries.
Similarly, other assumptions with respect to the liquidation
process may be subject to change. Upon liquidation, there is a
general risk of unanticipated events, which could have a
significant impact on projected cash receipts and disbursements.
Cash flows could be impaired due to:
-- an adverse impact on clients' and other parties'
perceptions;
-- a loss of vendor support or change in terms; and
-- the cost, delay, and uncertainty of outcome of litigation
with, among others, Lake County and certain other
creditors.
Additionally, Mr. Orlando notes that the proceeds from the
liquidation have not been discounted to reflect any delay in
distributions following the completion of the liquidation process.
Applying an additional discount factor to the proceeds from the
liquidation to account for any delay would result in a lower range
of recoveries for certain creditors. For these reasons, there can
be no assurance that the values reflected in the Liquidation
Analysis or recovery percentages would be realized if the
Reorganizing Debtor was, in fact, liquidated under Chapter 7, and
actual results could vary materially from those shown in the
analysis.
Major assumptions made in the Liquidation Analysis include:
* The Chapter 7 Trustee will not operate the Facility based on
the assumption that in the absence of a settlement with Lake
County, the County or the bondholders will foreclose on the
Facility;
* The liquidation of assets is projected to be completed
between January 1, 2005, through July 1, 2005. Because the
Reorganizing Debtor has no tangible assets other than the
assets related to the Facility, there will be no meaningful
liquidation of tangible assets;
* During the liquidation process, the Reorganizing Debtor will
cease operating its business as a going concern;
* Since minimal cash is generated by the Reorganizing Debtor
during the liquidation process, most if not all of the
liquidation proceeds are assumed to be consumed by the
liquidating trustee fees, operating expenses and other
similar expenses;
* The only potential cash realizations are from litigation
proceeds, the collection of energy receivables and the sale
of the Reorganizing Debtor's parts inventory;
* In a Chapter 7 liquidation, there will be no agreement by
Covanta Energy to voluntarily reduce the amount of its
Intercompany DIP Claim or its Intercompany Administrative
Expense Claim as provided in the Plan;
* All Allowed Claims will be treated in the same priority as
set forth in the Plan;
* There may be a substantial increase in claims triggered by
the termination of contracts under a Chapter 7 liquidation;
* Under a Chapter 7 liquidation, there will be no Settlement
Agreement with Lake County. Therefore, no proceeds or
benefits from the Settlement Agreement are assumed in a
liquidation;
* The Settlement Agreement is assumed to have no value in a
liquidation scenario; and
* The Adversary Proceeding filed by the Reorganizing Debtor
against the County will survive the Chapter 7 liquidation.
Due to the uncertainty in the outcome of the litigation, the
value of the Reorganizing Debtor's rights in the Adversary
Proceeding, if any, are too speculative to include in the
Liquidation Analysis.
Estimated Proceeds Available for Distribution
(In Thousands)
Estimated
Projected Recovery %
Book Value ----------
at 12/31/04 Low High Low High
----------- --- ---- --- ----
Cash on Hand (a) $3 N/A N/A $0 $0
Restricted
Funds Held
in Trust (b) $9,973 0% 0% $0 $0
Receivables, net (c) $8,406 0% 7% $0 $593
Parts Inventory $509 25% 50% $127 $254
Property, Plant
& Equipment,
net (d) $30,750 0% 0% $0 $0
Unbilled Service
& Other
Receivables (e) $9,444 0% 0% $0 $0
Goodwill & Other
Intangibles $1,918 0% 0% $0 $0
------ ------ ------
Total Assets $61,003 $127 $847
=======
Less: Liquidation
and Operating
Costs ($127) ($847)
------ ------
Estimated Proceeds
Available for
Distribution $0 $0
Less: DIP Loan from
Covanta Energy ($1,000) ($900)
Less: Administrative
Claims
(Professional
Expenses) ($800) ($700)
Less: Administrative
Claims
(Ordinary Course
A/P) ($200) ($200)
Less: Administrative
Claims
(Property Taxes) ($3,920) ($3,920)
Less: Administrative
Claims
(Post-petition
Intercompany) ($7,100) ($7,100)
Less: Priority Tax
Claims
(Pre-petition) ($1,395) ($1,395)
------ ------
Net Proceeds for
Secured and
Unsecured Claims ($14,415) ($14,215)
====== ======
Average
Estimated Estimated Estimated
Description of Allowed Recovery Recovery
Allowed Claims Claims Amount Percentage
-------------- -------- --------- ----------
Secured Bond Claims (f) $53,200 $9,973 19%
Unsecured Claims (g) $99,300 $0 0%
Notes:
(a) As of August 31, 2004, the Reorganizing Debtor had
$895,000 of cash on hand. The cash is forecasted to be
substantially utilized by December 31, 2004;
(b) Includes cash held by the Indenture Trustee for debt
service payments. The Reorganizing Debtor will not have
access to this fund;
(c) Includes 37% of receivables from Lake County -- subject to
set-offs; 7% energy receivables -- assumed collectible;
and 56% debt principal receivable -- pass-through
expense;
(d) As the Mortgage for the facility and land has been pledged
to the Indenture Trustee, the Reorganizing Debtor will not
have access to the foreclosed fixed assets. Additionally,
there is no equity value in the fixed assets, which would
remain with the Reorganizing Debtor;
(e) Includes primarily non-cash accruals -- accretion revenue
-- utilized for accounting purposes only;
(f) The Secured Bond Claims would receive recoveries from the
Restricted Funds Held by the Indenture Trustee. The
Bondholders may receive additional recoveries from the
County and other sources, including the net proceeds, if
any, received from the sale or liquidation of the
Facility. Absent a service agreement with the County, net
proceeds from the sale or liquidation of the Facility may
be minimal; and
(g) Unsecured Claims include Prepetition Intercompany Claims
aggregating $18,000,000, non-tax County Claims aggregating
$81,000,000 and Allowed Unsecured Claims aggregating
$300,000 not including claims previously disallowed by the
Court.
There can be no assurance that the values reflected in the
liquidation analysis would be realized if the Reorganizing Debtor
were, in fact, to undergo a liquidation, and actual results could
vary materially from those shown.
Headquartered in Fairfield, New Jersey, Covanta Energy Corporation
-- http://www.covantaenergy.com/-- is a publicly traded holding
company whose subsidiaries develop, own or operate power
generation facilities and water and wastewater facilities in the
United States and abroad. The Company filed for Chapter 11
protection on April 1, 2002 (Bankr. S.D.N.Y. Case No. 02-40826).
Deborah M. Buell, Esq., and James L. Bromley, Esq., at Cleary,
Gottlieb, Steen & Hamilton represent the Debtors in their
restructuring efforts. When the Debtors filed for protection from
its creditors, they listed $3,280,378,000 in assets and
$3,031,462,000 in liabilities. On March 10, 2004, Covanta Energy
Corporation and its core subsidiaries emerged from chapter 11 as a
wholly owned subsidiary of Danielson Holding Corporation. Some of
Covanta's non-core subsidiaries have liquidated under separate
chapter 11 plans. (Covanta Bankruptcy News, Issue No. 67;
Bankruptcy Creditors' Service, Inc., 215/945-7000)
CSFB MORTGAGE: Moody's Junks $2.9M Class K & $2.9M Class L Certs.
-----------------------------------------------------------------
Moody's Investors Service upgraded the ratings of four classes,
downgraded the ratings of three classes and affirmed the ratings
of five classes of Credit Suisse First Boston Mortgage Securities
Corp., Commercial Mortgage Pass-Through Certificates, Series
2002-FL1:
-- Class A-X, Notional, affirmed at Aaa
-- Class A-Y-1, Notional, affirmed at Aaa
-- Class A-Y-2, Notional, affirmed at Aaa
-- Class A-Y-3, Notional, affirmed at Aaa
-- Class D, $5,377,349, Floating, upgraded to Aaa from Baa2
-- Class E, $4,523,958, Adjusted WAC, upgraded to Aa2 from Baa3
-- Class F, $3,916,324, Adjusted WAC, upgraded to A2 from Ba1
-- Class G, $3,426,784, Adjusted WAC, upgraded to Baa3 from Ba2
-- Class H, $3,916,324, Adjusted WAC, affirmed at Ba3
-- Class J, $2,937,243, Adjusted WAC, downgraded to B3 from B1
-- Class K, $2,936,585, Adjusted WAC, downgraded to Caa2 from
B2
-- Class L, $2,937,243, Adjusted WAC, downgraded to Caa3 from
B3
As of the October 18, 2004 distribution date, the transaction's
aggregate balance has decreased by approximately 85.7% to
$42.7 million from $297.6 million at closing. The Certificates
are collateralized by two mortgage loans secured by commercial
properties. Both loans are in special servicing due to balloon
default. Moody's has estimated aggregate losses of approximately
$12.6 million for both loans. There have been no losses to the
pool since securitization.
Moody's loan to value ratio -- LTV -- for the pool is in excess of
100.0%, as it was at Moody's last full review in September 2003.
Although the pool has experienced a decline in overall
performance, Moody's is upgrading Classes D, E, F and G due to the
significant increase in credit support for those classes. The
downgrade of Classes J, K and L is due to a decline in pool
performance.
The largest loan in the pool is the Summerlake Village Apartments
Loan ($35.3 million - 82.6%), which is secured by an 857-unit
apartment complex and a 42,000 square foot retail center located
in Dallas, Texas. The loan's performance has been impacted by
rental concessions and increased expenses for the multifamily
component and declining rent in the retail portion. The loan was
transferred to special servicing in August 2004 for pending
maturity. The loan matured in September 2004. Moody's LTV is
significantly in excess of 100.0%.
The second loan is the Bank One Office Building Loan ($7.5 million
- 17.4%), which is secured by a 129,000 square foot office
building located in Colorado Springs, Colorado. The property is
68.7% occupied, compared to 74.0% at securitization. The loan
matured in January 2004 and was transferred to special servicing
for maturity default. The borrower has requested an extension and
has made a $550,000 principal payment. Moody's LTV is in excess
of 100.0%, compared to 87.2% at last review.
Both of the loans are floating rate, indexed off of one-month
LIBOR and are interest only.
DELTA AIR: Sept. 30 Shareowners' Deficit Balloons to $3.58 Billion
------------------------------------------------------------------
Delta Air Lines (NYSE: DAL) reported a net loss of $646 million
for the September 2004 quarter compared to a $164 million net loss
for the September 2003 quarter.
Excluding the non-cash charges, the September 2004 quarter net
loss was $592 million. In the September 2003 quarter, Delta
reported a net loss of $172 million, excluding the unusual items
described below. As announced previously, Delta no longer records
income tax benefits related to current period operations. This
change was effective in the June 2004 quarter and will continue
for the foreseeable future.
"Last month we outlined the key elements of Delta's transformation
plan which targets $1 billion in annual pilot cost savings, as
well as participation from Delta's other stakeholders," said
Gerald Grinstein, Delta's chief executive officer. "As Delta's
financial situation continues to deteriorate, time is of the
essence."
Financial Performance
September 2004 quarter operating revenues increased 5.9 percent,
while passenger unit revenues decreased 3.7 percent, compared to
the September 2003 quarter. Continued weak domestic yields, down
5.9 percent as compared to the prior-year quarter, drove the
decline in passenger unit revenues. Four major hurricanes
impacted a significant portion of Delta's Southeastern operations
during the quarter, resulting in an estimated revenue loss of
approximately $50 million.
The load factor for the September 2004 quarter was 77.7 percent, a
1.0 point increase as compared to the September 2003 quarter.
Consolidated system capacity was up 9.0 percent and Mainline
capacity rose 8.7 percent from the prior-year quarter. These
increases were primarily driven by the restoration of capacity
that was reduced in 2003 as a result of the war in Iraq. Detailed
traffic, capacity, load factor, yield and passenger unit revenue
information is provided in Table 1 below.
Operating expenses for the September 2004 quarter increased
14.9 percent from the September 2003 quarter and consolidated
system unit costs increased 5.4 percent. Fuel expense was the
primary driver of the increase, rising 63.1 percent, or
$304 million, with over 88 percent of the increase resulting from
higher fuel prices. For the full year 2004, Delta expects its
fuel costs to exceed the prior year levels by $950 million with
$820 million of the increase driven by higher fuel prices.
Excluding non-cash charges described, operating expenses for the
September 2004 quarter increased 13.4 percent, consolidated system
unit costs increased 4.1 percent and Mainline unit costs increased
3.1 percent from the September 2003 quarter. Excluding these
charges, fuel price neutralized unit costs, for the consolidated
system decreased 2.5 percent and Mainline fuel price neutralized
unit costs decreased 3.7 percent.
"A combination of record high fuel prices and the weak domestic
yield environment has materially impacted our financial results,"
said Michael J. Palumbo, Delta's executive vice president and
chief financial officer. "This further demonstrates the urgent
need for us to achieve our targeted benefits through our
transformation plan."
As disclosed in the March 2004 quarter, Delta settled all of its
fuel hedge contracts in February 2004, prior to their scheduled
settlement dates, resulting in a deferred gain of $82 million. In
the September 2004 quarter, Delta recognized a reduction in fuel
expenses of $23.5 million, which represents a portion of this
deferred gain. Giving effect to this deferred gain, Delta's
average total fuel price for the quarter was $1.20 per gallon.
At Sept. 30, 2004, Delta had $1.77 billion in cash, of which
$1.45 billion was unrestricted. Capital expenditures for the
quarter were approximately $270 million, including $155 million
for aircraft. Subsequent to September 30, Delta contributed its
remaining 2004 funding obligation of $44 million to its defined
benefit pension plan for pilots (Pilot Plan), and completed the
sale of eight MD-11 aircraft and four spare engines for
$227 million.
Transformation Plan
While Delta has continued to make progress on its Profit
Improvement Initiatives begun in 2002, the company needs
substantial further reductions to its cost structure in order to
achieve viability. The company completed an extensive strategic
review through which it derived its transformation plan, announced
on September 8, 2004.
The transformation plan combined with the Profit Improvement
Initiatives is intended to deliver approximately $5 billion in
annual benefits by 2006, as compared to 2002, while at the same
time improving the service offered to Delta's customers. The plan
calls for participation from the company's key stakeholders, such
as creditors, lessors, vendors, employees and shareowners. It
should be noted that even if Delta is successful in achieving the
targeted benefits from its transformation plan, the company will
still have substantial liquidity needs in 2005.
In connection with its transformation plan, Delta expects to
record significant one-time adjustments in the December 2004
quarter. These adjustments relate to, among other things:
(1) a gain from the elimination of the subsidy it offers for
retiree and survivor healthcare coverage; and
(2) charges from voluntary and involuntary employee reduction
programs. Delta cannot reasonably estimate the net impact
of these adjustments at this time.
September 2004 Quarter Non-cash Charges
In the September 2004 quarter, Delta recorded two non-cash charges
totaling $54 million. These charges are:
(1) A $40 million asset impairment charge associated with our
agreement to sell eight MD-11 aircraft. This charge is
recorded in accordance with Statement of Financial
Accounting Standards (SFAS) No. 144.
(2) A $14 million settlement charge related to the company's
Pilot Plan. This charge relates to the lump sum
distributions under the Pilot Plan for 61 pilots who
retired. As a result of the lump sum distributions, Delta
must accelerate the recognition of actuarial losses in
accordance with SFAS 88. 5 Delta expects to record a
settlement charge in the December 2004 quarter that is
greater than the settlement charge recorded in the
September 2004 quarter.
September 2003 Quarter Unusual Items
In the September 2003 quarter, Delta recorded a $9 million gain,
net of tax, from the extinguishment of debt and a $1 million
charge, net of tax, related to derivative and hedging activities
accounted for under SFAS 133.
Consolidated Statements of Operations
Delta's Consolidated Statements of Operations for the three and
nine month periods ended September 30, 2004 and 2003 show Delta's
net loss as reported under Generally Accepted Accounting
Principles in the United States (GAAP), as well as net loss
excluding the items described above. Delta believes this
information is helpful to investors to evaluate recurring
operational performance because:
(1) the asset impairment and the pilot settlement charges
are not representative of current period operations;
(2) the extinguishment of debt in 2003 is not representative of
core operations; and
(3) the SFAS 133 charge in 2003 reflects volatility in earnings
driven by changes in the market which are beyond the
company's control (Delta no longer excludes SFAS 133
charges due to the reduction in our fuel hedge portfolio
and other investments).
Delta Air Lines -- http://delta.com/-- 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.
At September 30, 2004, Delta Air Lines' reports a $3.58 billion
shareholder deficit. This compares to a $659 million shareholder
deficit at December 31, 2003.
DELTA AIR: Expects Positive Economic Impact in New China Flight
---------------------------------------------------------------
Delta Air Lines (NYSE: DAL) said that its proposed service linking
China to the Southeast in 2006 will provide an annual economic
impact of almost $400 million and offer more convenient service to
more cities than any other airline.
In a filing of direct exhibits with DOT as part of the 2005/2006
U.S.-China Air Services case, Delta said it expects to serve
nearly 163,000 passengers in its first year of operations if the
carrier is awarded the rights to provide daily, non-stop Atlanta
to Beijing service beginning in March 2006.
"Delta is extremely grateful for the outpouring of support for its
application so far," said Gerald Grinstein, CEO. "The DOT has
received more than 12,000 letters, underlining the importance and
the need for service between the growing China market and Atlanta,
our nation's largest hub. These letters are from customers, 120
local and state officials, and 50 members of Congress, as well as
an incredible 8,000-plus from Delta employees. As their
enthusiastic response indicates, the people of Delta continue to
be our company's most valuable asset, and I continue to be
inspired by their unwavering commitment to this airline."
According to data in the filing from Georgia officials, China is
Georgia's sixth-largest and fastest-growing export market, with
more than a 220 percent increase in exports since 1999. Georgia
Gov. Sonny Perdue noted in a letter to the DOT that "a new
passenger service route from Atlanta to Beijing would fill a void
that Georgians and the Southeast's 55 million citizens have in
accessing China for business and leisure travel."
The eastern United States is currently the fastest-growing travel
market to China. Delta's Atlanta to Beijing service would remedy
this void and stimulate new trade and investment from the
southeastern United States. The size and scope of Delta's Atlanta
hub will enable non-stop-to-non-stop service to China for almost
150 U.S. communities. Of these, more than 50 U.S. communities
will receive their first non-stop-to-non-stop Beijing service, and
66 U.S. communities will receive their first competitive non-stop-
to-non-stop U.S.-China service. Delta's proposed service will
reduce flying time for vast numbers of travelers and shippers
throughout the eastern and southeastern U.S.
More than 71 percent of U.S.-Beijing passengers travel to and from
interior U.S. cities. "No applicant comes close to Delta in terms
of network benefits," the carrier said in its filing.
The carrier plans to use its Boeing 777 aircraft, which features
Delta's award-winning BusinessElite service.
For many years, Delta has sought access to the China market.
Combined with the huge connecting opportunities provided by the
Atlanta hub -- the largest hub in the world -- this daily service
will enable Delta to provide convenient, single-connection service
to China, the carrier said.
Delta Air Lines -- http://delta.com/-- 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.
At September 30, 2004, Delta Air Lines' reports a $3.58 billion
shareholder deficit. This compares to a $659 million shareholder
deficit at December 31, 2003.
DOBSON CELLULAR: Moody's Puts B2 Rating on Planned $500M Sr. Notes
------------------------------------------------------------------
Moody's Investors Service assigned a B2 rating to the proposed
first priority senior secured notes due 2011 and a B3 to the
second priority notes due 2012 being issued by Dobson Cellular
Systems, Inc., a subsidiary of Dobson Communications Corp. In
addition, Moody's downgraded Dobson Communications' senior implied
rating to Caa1 and its senior unsecured rating to Ca, among other
ratings actions which are summarized below. The ratings outlook
remains negative.
Dobson Communications Corporation
-- Senior implied rating downgraded to Caa1 from B2
-- Issuer rating downgraded to Ca from Caa1
-- $300 million 10.875% Senior Notes due 2010 downgraded to Ca
from Caa1
-- $594.5 million 8.875% Senior Notes due 2013 downgraded to Ca
from Caa1
-- 12.25% Senior Exchangeable Preferred Stock due 2008
downgraded to C from Caa3
-- 13% Senior Exchangeable Preferred Stock due 2009 downgraded
to C from Caa3
American Cellular Corporation, (f.k.a. ACC Escrow Corp.)
-- $900 million 10% Senior Notes due 2011 downgraded to Caa1
from B3
Dobson Cellular Systems, Inc.
-- $75 million (reduced from $150 million) senior secured
revolving credit facility due 2008 affirmed at B1
-- $550 million senior secured term loan due 2010 rating
withdrawn
-- $250 million (assumed proceeds) First Priority Fixed Rate
Senior Secured Notes due 2011 assigned B2
-- $250 million (assumed proceeds) First Priority Floating Rate
Senior Secured Notes due 2011 assigned B2
-- $200 million (assumed proceeds) Second Priority Senior
Secured Notes due 2012 assigned B3
The downgrade of the senior implied rating to Caa1 reflects the
much weaker than expected cash flow in 2004 and beyond for the
Dobson Communications family and the resulting negative
consolidated free cash flows of the company. Further, the
downgrade reflects the expectation that, absent material
improvement in cash flow generation from the Dobson Cellular
subsidiary, Dobson Communications' capital structure is
unsustainable.
At Dobson Cellular Systems, the primary operating subsidiary of
Dobson Communications, the B1 rating on the $75 million revolving
credit facility reflects:
(i) its priority position in the company's capital structure
with the only first lien claim on the accounts
receivable,
(ii) inventory and other working capital assets of Dobson
Cellular and its subsidiaries, and
(iii) a shared first lien claim (shared with the B2 rated
notes) on all other assets.
The B2 rating on the first priority secured notes due 2011
reflects their good position in the consolidated company's capital
structure, ranking behind only any outstandings under the revised
$75 million revolving credit available to Dobson Cellular.
The B3 rating on the second priority secured notes due 2012
reflects their more junior position behind the Dobson Cellular
revolving credit and the first priority secured notes.
Dobson Cellular and its subsidiaries serve close to 900,000
subscribers and are expected to generate just over $200 million in
EBITDA (on a pro forma basis for recent transactions) in 2004.
Moody's estimates interest expense to run approximately
$55 million per year and capital expenditures to be $70 million
per year after the completion of the company's GSM overlay. This
yields interest coverage (EBITDA - capex / interest) of 2.4x, and
debt/EBITDA of 3.5x at the Dobson Cellular level. In Moody's
opinion, these are decent credit statistics and along with the
structural seniority of all these obligations and the collateral
and guarantee packages supporting these lenders, are supportive of
the single-B ratings at the Dobson Cellular subsidiary.
However, those cash flow figures only yield $75 million of nominal
free cash flow (EBITDA less interest and capital spending) to
support Dobson Cellular's own working capital requirements and
then to upstream dividends to Dobson Cellular's parent, Dobson
Communications. Dobson Communications' two senior unsecured notes
total $894.5 million in principal amount and require $85.4 million
of annual coupon payments. While Dobson Communications has
sufficient liquidity in the form of cash to meet its obligations
in the near term, longer term that cash will be exhausted and as
outlined above the amounts available to be upstreamed from Dobson
Cellular could prove to be insufficient to meet all Dobson
Communications obligations without material improvement in cash
flows.
Consequently, because Dobson Cellular will be incurring more
structurally senior, secured debt at the Dobson Cellular level
($700 million - or more if the proposed transaction is increased -
up from $573.9 million at 2Q04), thereby further subordinating the
unsecured debt at Dobson Communications, and because cash flows
available to be upstreamed to Dobson Communications from Dobson
Cellular are likely to be insufficient to cover Dobson
Communications' debt service obligations, Moody's has downgraded
the two senior unsecured notes at Dobson Communications to Ca from
Caa1, and the two rated preferred stock issues to C from Caa3.
These ratings reflect the likelihood of substantial impairment
(potentially above 50%) to the Dobson Communications unsecured
lenders claims and the very poor prospects of any recovery for the
holders of the preferred stock of Dobson Communications in a
potential default scenario.
American Cellular Corporation is also a wholly owned subsidiary of
Dobson Communications, but the indenture to American Cellular's
10% senior notes due 2011 severely limit cash from being
upstreamed from American Cellular to Dobson Communications.
Further, American Cellular posted negative free cash flow in the
first half of 2004, and although Moody's expects American Cellular
to be slightly free cash flow positive in 2005, such amounts are
expected to be quite modest. Thus, the Dobson Communications
ratings are not impacted positively or negatively by American
Cellular's financial position. Moody's downgrade of the American
Cellular senior unsecured notes to Caa1 from B3 reflects the
weaker than expected cash flows generated by this subsidiary,
American Cellular's thin liquidity, and the high probability that
the company will seek to attain a small, secured bank credit
facility that would rank ahead of these notes in order to bolster
liquidity at this subsidiary.
Moody's is maintaining a negative rating outlook, although due to
the already low levels the Dobson Communications unsecured and
preferred stock ratings are unlikely to be lowered further. The
senior implied rating, however, is likely to be lowered as Dobson
Communications' liquidity exhausts should cash flows not increase
to levels that would support all of the company's debt service
obligations with a more comfortable cushion. The rating outlook
could be stabilized if the longer term outlook on the parent
company's liquidity improves, whether from higher levels of
internally generated cash flows, or from assets sales, should
these generate significant additional liquidity.
Headquartered in Oklahoma City, Dobson Communications Corp is a
provider of wireless telecommunications services to suburban and
rural areas of the US with 1.6 million subscribers at the end of
June 2004, and LTM revenues of $950 million.
FALCON PRODUCTS: Market Cap Deficiency Spurs NYSE to Halt Trading
-----------------------------------------------------------------
Falcon Products, Inc., said the New York Stock Exchange had
determined on Oct. 19, 2004, that the trading of Falcon's common
stock on the NYSE be suspended immediately.
The decision of the NYSE was reached in view of the fact that
Falcon had fallen below the NYSE's continued listing standard
regarding average global market capitalization over a consecutive
30 trading day period of not less than $50,000,000 and total
stockholders' equity of not less than $50,000,000.
As previously disclosed by Falcon, the NYSE accepted a plan
provided by Falcon that would have brought it into conformity with
this continued listing standard. However, Falcon had since been
unable to meet certain material aspects of that plan. The NYSE
also noted the various matters disclosed in Falcon's Form 8-K that
led to the resignation of Falcon's independent public accounting
firm.
Franklin A. Jacobs, Chairman and Chief Executive Officer of
Falcon, stated, "We do not believe that the NYSE's decision has
any significant bearing on our business and we have no plans to
challenge their decision."
Falcon understands that market makers have made application to
sponsor the quotation of Falcon's common stock on the Over the
Counter Bulletin Board and anticipates that trading of its common
stock on the OTCBB will be initiated shortly, assuming such
applications are accepted.
The OTCBB is a regulated quotation service that displays real-time
quotes, last-sale prices and volume information for over-the-
counter equity securities. Information on the OTCBB can be found
at http://www.otcbb.com/
Falcon Products, Inc. is the leader in the commercial furniture
markets it serves, with well-known brands, the largest
manufacturing base and the largest sales force. Falcon and its
subsidiaries design, manufacture and market products for the
hospitality and lodging, food service, office, healthcare and
education segments of the commercial furniture market. Falcon,
headquartered in St. Louis, Missouri, currently operates 8
manufacturing facilities throughout the world and has
approximately 2,100 employees.
* * *
As reported in the Troubled Company Reporter on March 22, 2004,
Standard & Poor's Ratings Services lowered its corporate credit
rating on furniture manufacturer Falcon Products Inc. to 'CCC'
from 'B-', and lowered its subordinated debt rating on the company
to 'CC' from 'CCC'. The outlook is negative.
"The downgrade on St. Louis, Missouri-based Falcon Products Inc.
reflects the lower than expected profitability resulting from the
continued softness within the furniture segments the company
serves, as well as the company's breach of certain bank
covenants," said Standard & Poor's credit analyst Martin S.
Kounitz.
FALCON PRODUCTS: Rubin Brown Gornstein Resigns as Accountant
------------------------------------------------------------
Falcon Products, Inc., reported the resignation of Rubin, Brown,
Gornstein & Co. LLP as its independent public accounting firm.
Rubin, Brown had been engaged by the Audit Committee of Falcon's
Board of Directors on July 9, 2004.
Rubin, Brown did not render any reports on Falcon's financial
statements during the period of its engagement. During the period
of Rubin, Brown's engagement, there were no disagreements between
Falcon and Rubin, Brown over accounting principles or practices,
financial statement disclosure, or auditing scope or procedure.
Rubin, Brown did bring to the attention of the Audit Committee of
Falcon's Board of Directors its concerns about:
(i) certain items of information that had come to its
attention that, if further investigated, might have caused
it to be unwilling to rely on management's representations
or be associated with Falcon's financial statements, and
(ii) certain deficiencies in Falcon's accounting controls
related to accounting for inventory. The Audit Committee
was aware of the deficiencies in controls and Falcon had
already put in place a series of corrective actions.
Mr. Jacobs further stated, "Our Audit Committee has commenced an
investigation into the matters raised by Rubin, Brown, with the
assistance of independent counsel, and is actively engaged in
retaining a new accounting firm. We are hopeful that the
investigation and the search for a new accounting firm can be
completed promptly."
Falcon Products, Inc. is the leader in the commercial furniture
markets it serves, with well-known brands, the largest
manufacturing base and the largest sales force. Falcon and its
subsidiaries design, manufacture and market products for the
hospitality and lodging, food service, office, healthcare and
education segments of the commercial furniture market. Falcon,
headquartered in St. Louis, Missouri, currently operates 8
manufacturing facilities throughout the world and has
approximately 2,100 employees.
* * *
As reported in the Troubled Company Reporter on March 22, 2004,
Standard & Poor's Ratings Services lowered its corporate credit
rating on furniture manufacturer Falcon Products Inc. to 'CCC'
from 'B-', and lowered its subordinated debt rating on the company
to 'CC' from 'CCC'. The outlook is negative.
"The downgrade on St. Louis, Missouri-based Falcon Products Inc.
reflects the lower than expected profitability resulting from the
continued softness within the furniture segments the company
serves, as well as the company's breach of certain bank
covenants," said Standard & Poor's credit analyst Martin S.
Kounitz.
FAO INC: Deal With D.E. Shaw Buys its Vote to Accept Plan
---------------------------------------------------------
D.E. Shaw Laminar Portfolios LLC purchased two equipment notes
from Kayne Anderson Non-Traditional Investments and its affiliates
for $3.9 million. Liens on furniture, fixtures and equipment in
FAO Schwarz and Zany Brainy stores secure repayment of those
obligations. FAO, Inc., and the Official Committee of Unsecured
Creditors appointed in FAO's chapter 11 cases challenged the
amount owed under the notes. D.E. Shaw, in turn, voted to reject
the Company's Liquidating Chapter 11 Plan. That negative vote
stalled the confirmation process.
Negotiations followed among FAO, the Committee and D.E. Shaw.
Those talks culminated in an agreement to pay D.E. Shaw
$3.1 million from the estate and end the debate. D.E. Shaw will
then a vote for the plan. The parties ask the U.S. Bankruptcy
Court for the District of Delaware to approve this compromise and
settlement under Rule 9019 of the Federal Rules of Bankruptcy
Procedure. The parties will ask the Honorable Joel B. Rosenthal
for his stamp of approval at a hearing on October 27, 2004, on
both the settlement pact and the plan of liquidation.
Earlier this year, Judge Rosenthal approved the sale of certain
FAO Schwarz business assets, including its flagship store on Fifth
Avenue in Manhattan, a second store in Las Vegas, and its catalog
and Internet businesses, to a member of the D. E. Shaw group of
companies in a transaction valued at approximately $41 million.
At August 31, 2004, FAO Inc. reported it was sitting on
$38,956,855 of cash.
FAO Inc. (n/k/a Children's Books & Toys, Inc.) and its wholly
owned subsidiaries ZB Company, Inc., FAO Schwarz, Inc. (n/k/a Toy
Soldier, Inc.), The Right Start, Inc. (n/k/a TRS Liquidation Co.),
and Targoff-RS, LLC, filed on December 4, 2003 (Bankr. D. Del.
Case No. 03-13672). Mark D. Collins, Esq., at Richards Layton &
Finger, represents the Debtors. When the failed toy retailer
filed for bankruptcy, it listed $102,079,000 in assets and
$85,898,000 in liabilities.
FLYI: Reduced Liquidity Cues S&P to Put B- Rating on CreditWatch
----------------------------------------------------------------
Standard & Poor's Ratings Services placed its ratings on FLYi
Inc., including the 'B-' corporate credit rating, on CreditWatch
with negative implications. Approximately $230 million of rated
securities is affected.
"The FLYi CreditWatch placement is based on concerns regarding the
company's reduced liquidity," said Standard & Poor's credit
analyst Betsy Snyder.
At June 30, 2004, the company had unrestricted cash and short-term
investments of $345 million, fairly substantial for an airline of
its size. However, since then, this amount has likely declined
significantly, due to low load factors, weak pricing, and high
fuel costs.
On June 16, 2004, the company began operating as Independence Air,
a low-fare airline based at Washington Dulles Airport in Virginia.
It has since terminated its relationships with United Air Lines
Inc. and Delta Air Lines Inc., in which it served as a feeder
partner under fee-per-departure agreements that resulted in fairly
stable earnings and cash flow. Since FLYi began operating
independently, it has suffered from weak load factors (only 44% in
September 2004) compared with an industry average in excess of
70%.
Like other airlines, it has also been negatively affected by the
ongoing weak fare environment and high fuel costs. The company
has significant capital requirements over the near term, primarily
substantial aircraft operating lease payments. In addition, if
Delta were to file for Chapter 11 bankruptcy protection, FLYi
could be responsible for lease payments on the 30 aircraft it was
operating for Delta even though that relationship has ended.
FLYi will report its third-quarter earnings on Oct. 27, 2004. At
that time, Standard & Poor's will be able to better assess the
extent to which its liquidity has been affected in order to
resolve the CreditWatch.
FORT HILL: Files Chapter 11 Plan of Reorganization
--------------------------------------------------
Fort Hill Square Associates and its debtor-affiliate filed their
Joint Plan of Reorganization in the U.S. Bankruptcy Court for the
District of Massachusetts, Eastern Division.
The Plan proposes to recapitalize the Companies' debt and equity
in a structured environment and it does not consolidate the
Debtors' estates. Any claim held against a particular Debtor will
be satisfied solely from the cash and assets of that Debtor.
Don Chiofaro, President and Treasurer of Fort Hill, discloses that
Fort Hill's entered into a new senior debt financing with
Prudential Real Estate Investors and other third parties. He
anticipates that the estate will secure $701 million in new
financing to fund the Chapter 11 Plan and provide the Reorganized
Debtors with working capital.
IP Company is the Debtors' largest secured creditor. The Plan
proposes to satisfy the Debtors' obligations to IP Company --
amounting to $650 million -- using the cash coming from Prudential
and another third party. The Plan delivers two New Notes to IP
Property in full satisfaction of its secured claim:
* a First Payment Note in the amount of $421,000,000, bearing
interest at 5% per year, and maturing in very short order;
and
* a Second Payment Note in the amount of $230,830,000, bearing
interest at 8% per year and maturing in five years.
The Debtors are prepared to argue that these New Notes deliver the
"indubitable equivalent" to IP Company as required under the
Bankruptcy Code.
Under the terms of the Plan:
* administrative claims
* priority tax claims
* miscellaneous secured claims
* Boston Funding acquired claims
will be paid in full on the latter of the Effective Date or when
the claim becomes allowed.
General Unsecured creditors who will vote for the Plan will
receive payment of their allowed claims on the Effective date and
will receive a new contract to provide goods and services that
were provided prior to the confirmation date for a term of three
years
Original equity interest holders will receive an interest in the
Reorganized Debtors proportional to their interests in the
original equity.
Headquartered in Boston, Massachusetts, Fort Hill Square
Associates, manages and develops One International Place that
consists of two separate but interconnected office towers
consisting of over 1.8 million square feet. The Company filed for
chapter 11 protection on May 7, 2004 (Bankr. Mass. Case No. 04-
13855). Alex M. Rodolakis, Esq., at Hanify & King represents the
Debtors in their restructuring efforts. When the Company filed
for protection from their creditors, they listed both estimated
assets and debts of over $100 million.
GERDAU AMERISTEEL: Closes Offering of 70 Million Common Shares
--------------------------------------------------------------
Gerdau Ameristeel Corporation (TSX: GNA.TO, NYSE: GNA) completes
its offering of 70 million common shares, of which Gerdau S.A.,
its parent, indirectly purchased 35 million common shares and the
remaining 35 million common shares have been purchased by an
underwriting syndicate for distribution to the public.
The common shares were sold in the United States and Canada at a
price of $4.70, or Cdn. $5.90, per share for total gross proceeds
of $329 million, or Cdn. $413 million. If the underwriters
exercise their overallotment option in full (for 5.25 million
common shares) and Gerdau S.A., as it has agreed, purchases an
additional 5.25 million common shares, the total gross proceeds
will be approximately $378 million, or Cdn. $475 million.
The proceeds of this offering will be used to finance Gerdau
Ameristeel's previously announced proposed acquisition of certain
assets and working capital of four long steel product mills and
four downstream facilities, which are referred to as North Star
Steel, from Cargill, Incorporated, to fund capital expenditures
and working capital and for general corporate purposes.
Merrill Lynch, Pierce, Fenner & Smith Incorporated and BMO Nesbitt
Burns Inc. were joint book-running managers for the public
offering in the United States and Canada. CIBC World Markets
Corp., J.P. Morgan Securities Inc. and Morgan Stanley & Co.
Incorporated acted as underwriters.
The common shares commenced trading on the New York Stock Exchange
on October 15, 2004 under the symbol GNA.
Gerdau Ameristeel is the second largest minimill steel producer in
North America with annual manufacturing capacity of over
6.4 million tons of mill finished steel products. Through its
vertically integrated network of 11 minimills (including one 50%-
owned minimill), 13 scrap recycling facilities and 32 downstream
operations, Gerdau Ameristeel primarily serves customers in the
eastern half of North America. The company's products are
generally sold to steel service centers, fabricators, or directly
to original equipment manufacturers for use in a variety of
industries, including construction, automotive, mining and
equipment manufacturing.
* * *
As reported in the Troubled Company Reporter on Oct. 11, 2004,
Moody's Investors Service placed the ratings of Gerdau Ameristeel
Corporation under review for possible upgrade in response to much-
improved steel market conditions and the company's announcement of
a common share offering, which, if successful, will finance the
acquisition of certain assets of North Star Steel from Cargill,
Incorporated. Moody's review will likely continue until the
conclusion of the later of the share offering and the North Star
acquisition.
The ratings were placed under review for possible upgrade:
* US$405 million of 10.375% senior unsecured notes due 2011,
currently B2,
* senior implied rating -- B1, and
* senior unsecured issuer rating -- B3.
As reported in the Troubled Company Reporter on Oct. 08, 2004,
Standard & Poor's Ratings Services raised its corporate credit
rating on Gerdau Ameristeel Corp. to 'BB-' from 'B+'.
In addition, Standard & Poor's raised its rating on Gerdau
Ameristeel's $350 million senior secured revolving credit facility
to 'BB' from 'BB-'.
The bank loan rating is rated one notch higher than the corporate
credit rating indicating a high expectation of full recovery of
principal in the event of a default. Standard & Poor's also raised
the company's senior unsecured debt rating to 'B+' from 'B'. The
outlook is stable.
HEALTHCORE LLC: List of Debtors' 29 Largest Unsecured Creditors
---------------------------------------------------------------
HealthCore LLC and its debtor-affiliates released a list of their
29 Largest Unsecured Creditors:
A. HealthCore LLC
Entity Nature of Claim Claim Amount
------ --------------- ------------
Elan Financial Services $18,910
Capital Blue Cross $15,157
State Worker's Insurance Fund Worker's Comp. $15,000
Keeper Wood Allen & Rahal Legal Services $10,878
Old Guard Insurance Insurance $10,650
Carekeeper Software $5,627
Nextel $5,159
Biehl & Biehl $3,358
Staples $3,146
Sprint Phone Services $2,829
Office Max $2,777
Unum Provident Insurance $1,568
Yellow Book USA $1,503
XYZ Printing Company $1,384
AT&T $839
Verizon Enterprises Cellular Phone $600
Service
B. HealthCore of Maryland LLC
Entity Nature of Claim Claim Amount
------ --------------- ------------
Keeper Wood Allen & Rahal Legal Services $2,798
Verizon Baltimore Phone Services $317
Bayside Office Support $67
C. HealthCore of Ohio, LLC
Entity Nature of Claim Claim Amount
------ --------------- ------------
Cincinnati Inquirer $3,358
Elan Financial Services $2,250
Elan Financial Services $2,250
McCauley Crossings $1,896
Time Warner $654
Keeper Wood Allen & Rahal Legal Services $623
Infolink $279
BCI $150
American Electric Power $80
Cinergy $43
Headquartered in Carlisle, Pennsylvania, HealthCore LLC provides
staffing for health care facilities throughout Pennsylvania. The
Company, along with its affiliates, filed for chapter 11
protection (Bankr. M.D. Pa. Case No. 04-06101) on October 8, 2004.
Robert E. Chernicoff, Esq., at Cunningham & Chernicoff PC,
represents the Company in its restructuring efforts. When the
Debtors filed for protection from their creditors, they estimated
assets of more than $500,000 and debts of more than $1 Million.
INTEGRATED ALARM: Moody's Puts B3 Rating on $125M Sr. Unsec. Notes
------------------------------------------------------------------
Moody's Investors Service assigned a B3 rating to the proposed
$125 million senior unsecured notes issuance of Integrated Alarm
Services Group, Inc., and a speculative grade liquidity rating of
SGL-4. The ratings reflect:
(i) the company's significant leverage,
(ii) small size,
(iii) high industry attrition rates,
(iv) financial and operational risks related to acquisitions
and weak liquidity.
The ratings also take into account:
(i) the recurring revenue stream from the company's alarm
contract portfolio,
(ii) solid EBITDA margins and
(iii) limited capital expenditure requirements.
The ratings outlook is stable.
Moody's assigned these first time ratings:
* $125 million Senior Unsecured Notes (Guaranteed), rated B3,
* Senior Implied, rated B3,
* Issuer Rating, rated Caa1,
* Speculative Grade Liquidity Rating, rated SGL-4.
Proceeds from the proposed $125 million senior unsecured notes to
be issued pursuant to Rule 144A of the Securities Act are expected
to be used to repay $48 million of existing debt, acquire
substantially all of the assets and assume certain of the
liabilities of National Alarm Computer Center, Inc., a subsidiary
of Tyco International Ltd., for about $51 million, pay fees and
expenses, and provide additional liquidity to the company. The
acquisition of National Alarm includes contracts to monitor alarm
systems on behalf of dealers, a retail portfolio of contracts to
monitor alarm systems for residential and commercial subscribers,
an alarm monitoring facility and a dealer loan portfolio. The
company expects to close on a new $30 million revolving credit
facility due 2007 (not rated by Moody's) concurrent with the
senior unsecured notes issuance to be used primarily to fund
acquisitions and for general corporate purposes.
The ratings recognize:
(i) significant leverage relative to the company's small
revenue base;
(ii) larger and better capitalized competitors;
(iii) intense competition to secure relationships with dealers
and acquire alarm monitoring contracts;
(iv) significant attrition rates of residential and commercial
subscribers; and
(v) financial and operational risks related to the National
Alarm acquisition and other prospective acquisitions.
The company has increased its revenues from about $21 million in
2001 to about $84 million in the latest twelve months -- LTM --
period ended June 30, 2004, primarily through acquisitions. The
National Alarm acquisition will be the company's largest
acquisition to date. Projected debt to revenues at Dec. 31, 2004
is expected to exceed 1.5 times. Moody's expects that the company
will continue to focus on growth through acquisition of alarm
monitoring contracts for its own portfolio and contracts monitored
on behalf of dealers. The success of this strategy will depend on
such factors as:
(i) purchase multiples,
(ii) the quality of assets purchased,
(iii) attrition rates, and
(iv) management's ability to integrate acquisitions and manage
a fast growing company.
Positive factors reflected by the ratings include:
(i) the company's strong position in the business of
monitoring alarm systems on behalf of dealers,
(ii) recurring revenue streams from the company's dealer and
retail alarm contract portfolio,
(iii) solid EBITDA margins,
(iv) potential margin expansion from increases in the
company's portfolio of alarm monitoring contracts, and
(v) limited capital expenditure requirements.
The stable ratings outlook reflects Moody's expectation that debt
levels will continue to increase as the cost of alarm contract
acquisitions exceeds free cash flow from operations. The ratings
or outlook will likely benefit if the company demonstrates the
success of its acquisition strategy through increased revenues,
operating margins and improved leverage ratios. The outlook or
ratings would likely come under pressure if the company fails to
execute on its acquisition strategy as evidenced by growing
attrition rates and deteriorating leverage ratios.
Obligations under the proposed $125 million senior unsecured notes
will be guaranteed on a senior basis by all current and future
subsidiaries of the company. The B3 rating on the notes, notched
at the senior implied level, reflects the preponderance of senior
unsecured guaranteed debt in the capital structure. The notes
will be effectively subordinated to all senior secured debt of the
company and its subsidiaries. The notes will be pari passu with
all existing and future senior unsecured indebtedness and senior
to all existing and future subordinated indebtedness.
The proposed $30 million revolving credit facility will be secured
by a first priority security interest in substantially all
tangible and intangible assets of the company and a pledge of 100%
of the stock of its operating subsidiaries. Availability under
the revolving credit facility is subject to a borrowing base based
on a multiple of recurring monthly revenues from certain retail
alarm monitoring contracts.
The assignment of the SGL-4 rating reflects the company's weak
liquidity profile over the next twelve months. The company has
significant projected cash needs including amounts required for
projected alarm monitoring contract acquisitions, required debt
amortization and capital expenditures. These cash needs are
expected to exceed the company's cash on hand and free cash flows
from operations in the next twelve months. If the company
completes expected contract acquisitions and does not obtain
additional financing, the company will need to rely on its
$30 million revolving credit facility. Liquidity could be
constrained if the integration of acquisitions is not completed
successfully and in a timely manner or the company is required to
fund certain loan commitments assumed in connection with the
National Alarm acquisition. Integrated Alarm's revolver is
expected to contain a minimum fixed charge coverage ratio
covenant. Moody's expects the company to be in compliance with
this covenant for the next twelve months while maintaining
adequate cushion under the covenant for each quarter. The SGL
rating will be sensitive to the timing and amount of contract
acquisitions and the company's ability to grow free cash flow from
operations.
For the LTM period ended June 30, 2004, free cash flow (defined as
cash flow from operations less capital expenditures) to total debt
was 9.8%. Moody's projects that free cash flow to total debt will
improve to over 15% in 2005. For the LTM period, EBITDA to
interest was 2.1 times and is expected to improve to about 3 times
in 2005. For the LTM period, total debt to EBITDA was 3.4 times
and is expected to remain over 3 times in 2005.
Headquartered in Albany, New York, Integrated Alarm is a provider
of alarm monitoring services. Revenue for the LTM period ended
June 30, 2004 was approximately $60 million.
JAZZ GOLF: Raising $1M from Equity Offering to Finance Growth Plan
------------------------------------------------------------------
The Directors of Jazz Golf Equipment Inc. reported a new common
share issue through a private placement at a price of $0.08 per
share. The main shareholder, ENSIS Growth Fund Inc. and the
Directors and Officers of the Corporation have committed to
participate in the private placement, which is expected to result
in gross proceeds of approximately $1,000,000. The funds will be
used to finance the Company's growth plan for the year ending
August 31, 2005.
As part of the private placement the Corporation received $500,000
from ENSIS pursuant to a two-year loan, convertible to common
shares at a price of $0.08 per share. The loan bears interest at
the same rate as ENSIS' current loan to Jazz. ENSIS agreed to
convert the loan into common shares on a matching basis. An
additional investment of approximately $250,000 has been committed
to the private placement by the Directors and Officers of the
Corporation. The remaining balance of $250,000 is expected to be
raised from existing shareholders and other qualifying investors.
Additional details regarding the private placement will be
announced as they are finalized.
The transaction with ENSIS is a related party transaction that is
exempt from the requirements of TSX Venture Policy 5.9 pursuant to
sections 5.6(8) and 5.8(5) of OSC Rule 61-501.
Jazz Golf Equipment Inc. manufactures and distributes, primarily
in Canada, high quality golf clubs and accessories.
Jazz Golf's latest publicly disclosed balance sheet, dated
May 31, 2004, shows a $6,649,696 shareholder deficit.
K&F INDUSTRIES: Launches Sr. Debt Offering & Consent Solicitation
-----------------------------------------------------------------
K&F Industries, Inc., is commencing a cash tender offer and
consent solicitation. The Company is offering to purchase any and
all of its 9-1/4% Senior Subordinated Notes due 2007 and 9-5/8%
Senior Subordinated Notes due 2010. The Offers will expire at
5:00 p.m., New York City time, on November 18, 2004, unless
extended or terminated. The Offers are being made in connection
with the proposed acquisition of the Company by AAKF Acquisition,
Inc., an affiliate of Aurora Capital Group.
In conjunction with the Offers, K&F is soliciting consents to
certain proposed amendments to the indentures governing the two
series of Notes, which amendments would eliminate substantially
all of the restrictive covenants and certain events of default
contained in the respective indentures. Adoption of the proposed
amendments requires the consent of at least a majority in
aggregate principal of Notes of the applicable series outstanding.
The Offers and Consent Solicitations are being made pursuant to an
Offer to Purchase and Consent Solicitation Statement, dated
October 20, 2004, and related documents, which set forth the
complete terms and conditions of the Offers and the Consent
Solicitations. The Consent Solicitations will expire at
5:00 p.m., New York City time, on November 4, 2004, unless
extended or terminated.
Subject to the terms and conditions of the Offers and the Consent
Solicitations, holders who tender Notes pursuant to an Offer on or
prior to the Consent Expiration Date will be entitled to receive
an amount in cash equal to the Total Consideration applicable to
such Notes. Holders who tender Notes pursuant to an Offer after
the Consent Expiration Date, but on or prior to the Offer
Expiration Date, will be entitled to receive only the Offer
Consideration applicable to such Notes. In addition, Holders who
tender Notes will receive accrued and unpaid interest with respect
to such Notes up to, but not including, the applicable payment
date.
The "Total Consideration" for each $1,000 principal amount of the
2007 Notes tendered and accepted for purchase pursuant to the
Offer for the 2007 Notes shall be an amount equal to $1,020,
comprised of:
(i) $990, the "Offer Consideration" for the 2007 Notes, plus
(ii) $30, the "2007 Note Consent Payment".
The "Total Consideration" for each $1,000 principal amount of the
2010 Notes tendered and accepted for purchase pursuant to the
Offer for the 2010 Notes shall be an amount equal to the present
value on the applicable payment date of the sum of:
(i) $1,048.13 (the redemption price the Company would be
required to pay per $1,000 principal amount of the 2010
Notes to redeem the 2010 Notes on Dec. 15, 2006, which is
the first date on which the 2010 Notes are redeemable)
plus
(ii) all scheduled interest payments per $1,000 principal
amount of the 2010 Notes from the applicable payment date
to the Earliest Redemption Date, such present value to be
determined on the basis of a yield to the Earliest
Redemption Date equal to the sum of:
(x) the bid-side yield to maturity of the 2-5/8% U.S.
Treasury Note due Nov. 15, 2006, as calculated by
the dealer manager in accordance with standard
market practice, based on the bid price for the
Reference Note as of 2:00 p.m., New York City time,
two business days after the Consent Expiration Date,
which is currently expected to be Nov. 8, 2004, as
displayed on Page PX5 of the Bloomberg Government
Pricing Monitor or any recognized quotation source
selected by the dealer manager in its sole
discretion if the Quotation Report is not available
or is manifestly erroneous, plus
(y) 100 basis points (such Total Consideration being
rounded to the nearest cent per $1,000 principal
amount of the 2010 Notes ) minus
(iii) accrued and unpaid interest from the last interest payment
date up to, but not including, the applicable payment
date.
The $30 consent payment for each $1,000 principal amount of the
2010 Notes tendered on or prior to the Consent Expiration Date and
accepted for purchase pursuant to the Offer for the 2010 Notes is
included in the Total Consideration. The "Offer Consideration"
for the 2010 Notes is equal to the Total Consideration minus the
2010 Note Consent Payment.
Holders who tender their Notes will be required to consent to the
proposed amendments, and holders may not deliver consents without
tendering their Notes. Holders who tender and consent at or at
any time prior to 5:00 p.m., New York City time, on the Consent
Expiration Date may not withdraw their tenders and revoke their
consents at any time. Holders who tender and consent after
5:00 p.m., New York City time, on the Consent Expiration Date may
withdraw their tenders and revoke their consents at any time prior
to 5:00 p.m., New York City time, on the Offer Expiration Date.
The Offers and Consent Solicitations are subject to the closing of
the Acquisition, the completion by K&F of financing transactions
to fund consummation of the Offers and Consent Solicitations and
certain other customary conditions. Each Offer is not conditioned
on the completion of the other Offer.
Holders should tender their Notes and deliver consents pursuant to
instructions set forth in the Offer to Purchase and Consent
Solicitation Statement, which is being mailed to all holders of
Notes and sets forth more fully the terms and conditions of the
Offers and Consent Solicitations.
Additional copies of the Tender Documents may be obtained from
D.F. King & Co., Inc., the information agent, at (212) 269-5550
(banks and brokers call toll free) or (800) 628-8532 (toll free).
Lehman Brothers Inc. is the dealer manager for the Offers and the
solicitation agent for the Consent Solicitations. All inquiries
regarding the terms of the Offers and Consent Solicitations should
be made to the Liability Management Group at Lehman Brothers Inc.
at (212) 528-7581 (call collect) or (800) 438-3242 (toll free).
About the Company
K&F Industries, Inc., is one of the world's leading manufacturers
of aircraft wheels, brakes and anti-skid systems for commercial,
general aviation and military aircraft. The Company is also the
leading worldwide manufacturer of aircraft fuel tanks as well as a
producer of aircraft iceguards, inflatable oil booms and other
products made from coated fabrics for commercial and military
applications.
Moody's Investors Service placed the ratings of K & F Industries,
Inc. under review for possible downgrade following the
announcement of the proposed acquisition of the company by
U.S.-based private equity firm Aurora Capital from K&F's current
owners, Bernard L. Schwartz and Lehman Brothers Merchant Banking,
for $1.06 billion in cash.
K&F INDUSTRIES: Moody's Reviewing Low-B Ratings & May Downgrade
---------------------------------------------------------------
Moody's Investors Service placed the ratings of K & F Industries,
Inc. under review for possible downgrade following the
announcement of the proposed acquisition of the company by
U.S.-based private equity firm Aurora Capital from K&F's current
owners, Bernard L. Schwartz and Lehman Brothers Merchant Banking,
for $1.06 billion in cash.
The affected ratings include:
* $145 million 9-1/4% senior subordinated notes due 2007, rated
B3;
* $250 million 9.625% senior subordinated notes due 2010, rated
B3;
* $30 million senior secured revolving credit facility due
2007, rated Ba3;
* Senior implied rating of B1; and
* Unsecured issuer rating of B2.
The ratings review will focus on the impact of potential
acquisition financing on the capital structure and credit
statistics of the company post-acquisition. Specifically, Moody's
will review:
(1) the extent to which additional debt is used to finance the
acquisition by Aurora Capital, and the terms of the new
debt securities,
(2) the earnings and cash flow outlook for the company's
operations, and the company's ability to repay higher
potential debt levels associated with the transaction going
forward, and
(3) the company's future strategies and management structure
that may ensue as the result of K&F's new ownership.
K & F Industries, Inc., headquartered in New York City, is a
leading manufacturer of wheels, brakes and brake control systems
for commercial, general aviation and military aircraft through its
subsidiary Aircraft Braking Systems Corporation. In addition, the
company is the world's leading manufacturer of flexible bladder-
type fuel tanks for aircraft through its subsidiary Engineered
Fabrics Corporation. 2003 revenues totaled $343 million.
KEY ENERGY: Declares Financial Data to Get Noteholders' Consent
---------------------------------------------------------------
Oct. 20 /PRNewswire-FirstCall/
Key Energy Services, Inc. (NYSE: KEG - News) released select
financial data for the month ended August 31, 2004. The Company
is providing this information to investors as part of the consent
from the holders of the Company's 6-3/8% senior notes due 2013 and
its 8-3/8% senior notes due 2008.
Total revenues $ 95,812,000
Total current assets 253,398,000
Total current liabilities 154,870,000
Long-term debt, less current portion $455,958,000
Activity Update
Activity levels for the Company's operations continue to remain
strong although recent heavy rains, primarily in the Permian
Basin, have had a short- term negative impact on the Company's rig
hours. Weekly rig hours for the four weeks ending Oct. 16, 2004
averaged approximately 51,200. Additionally, the national pricing
increases previously announced by the Company have been
implemented.
Key Energy Services, Inc., is the world's largest rig-based,
onshore well service company. The Company provides diversified
energy operations including well servicing, contract drilling,
pressure pumping, fishing and rental tool services and other
oilfield services. The Company has operations in all major
onshore oil and gas producing regions of the continental United
States and internationally in Argentina, Canada and Egypt.
* * *
As reported in the Troubled Company Reporter on August 19, 2004,
Standard & Poor's Ratings Services' 'B' corporate credit rating on
Key Energy Services Inc. remains on CreditWatch with developing
implications.
Midland, Texas-based Key had about $485 million of total debt
outstanding as of June 30, 2004.
KMART CORP: $200M Synthetic Term Loan Pulled from Credit Agreement
------------------------------------------------------------------
On October 7, 2004, parties to that certain Credit Agreement,
dated as of May 6, 2003, agreed to remove the $200,000,000
synthetic term loan portion of the facility. As a result, the
facility costs that Kmart Corporation is required to pay will be
reduced.
The Credit Agreement is among Kmart, as Borrower, the other
Credit Parties, the Lenders, and:
-- General Electric Capital Corporation, as Administrative
Agent, Co-Collateral Agent and Lender,
-- GECC Capital Markets Group, Inc., as Co-Lead Arranger and
Co-Book Runner,
-- Fleet Retail Finance Inc., as Co-Syndication Agent, Co-
Collateral Agent and Lender,
-- Fleet Securities, Inc., as Co-Lead Arranger and Co-Book
Runner,
-- Bank of America, N.A., as Co-Syndication Agent and Lender,
-- Banc of America Securities LLC, as Co-Lead Arranger and Co-
Book Runner,
-- GMAC Commercial Finance LLC, as Co-Documentation Agent, and
-- Foothill Capital Corporation, as Co-Documentation Agent.
A full-text copy of the original Credit Agreement is available for
free at:
http://sec.gov/Archives/edgar/data/1229206/000095012403002032/k77648exv10w1.txt
Kmart had asked the Lenders to extend a revolving credit and
letter of credit facility of up to $2,000,000,000 for the purpose
of funding a portion of the payments to be made by Kmart and the
other Credit Parties under the Plan of Reorganization, to fund
certain fees and expenses incurred by Kmart in connection with the
Credit Agreement and to provide:
(a) working capital financing for Kmart and the other Credit
Parties;
(b) funds for other general corporate purposes of Kmart and
the other Credit Parties; and
(c) funds for other purposes permitted.
Headquartered in Troy, Michigan, Kmart Corporation (n/k/a KMART
Holding Corporation) -- http://www.bluelight.com/-- is the
nation's second largest discount retailer and the third largest
merchandise retailer. Kmart Corporation currently operates
approximately 2,114 stores, primarily under the Big Kmart or Kmart
Supercenter format, in all 50 United States, Puerto Rico, the U.S.
Virgin Islands and Guam. The Company filed for chapter 11
protection on January 22, 2002 (Bankr. N.D. Ill. Case No.
02-02474). Kmart emerged from chapter 11 protection on May 6,
2003. John Wm. "Jack" Butler, Jr., Esq., at Skadden, Arps, Slate,
Meagher & Flom, LLP, represented the retailer in its restructuring
efforts. The Company's balance sheet showed $16,287,000,000 in
assets and $10,348,000,000 in debts when it sought chapter 11
protection. (Kmart Bankruptcy News, Issue No. 82; Bankruptcy
Creditors' Service, Inc., 215/945-7000)
MERRILL LYNCH: S&P Assigns Low-B Ratings on Six Cert. Classes
-------------------------------------------------------------
Standard & Poor's Ratings Services today assigned its preliminary
ratings to Merrill Lynch Mortgage Trust 2004-BPC1's $1.246 billion
commercial mortgage pass-through certificates series 2004-BPC1.
The preliminary ratings are based on information as of
October 20, 2004. Subsequent information may result in the
assignment of final ratings that differ from the preliminary
ratings.
The preliminary ratings reflect:
(1) the credit support provided by the subordinate classes of
certificates,
(2) the liquidity provided by the fiscal agent,
(3) the economics of the underlying loans, and
(4) the geographic and property type diversity of the loans.
Classes A-1, A-2, A-3, A-4, A-5, B, C, and D are currently being
offered publicly. The remaining classes will be offered
privately.
Standard & Poor's analysis determined that, on a weighted average
basis, the pool has:
* a debt service coverage of 1.55x,
* a beginning LTV of 90.2%, and
* an ending LTV of 78.4%.
A copy of Standard & Poor's complete presale report for this
transaction can be found on RatingsDirect, Standard & Poor's Web-
based credit analysis system, at http://www.ratingsdirect.com/
The presale can also be found on the Standard & Poor's Web site at
http://www.standardandpoors.com/ Select Credit Ratings, and then
find the article under Presale Credit Reports.
Preliminary Ratings Assigned
Merrill Lynch Mortgage Trust 2004-BPC1
Class Rating Amount ($)
----- ------ ----------
A-1 AAA 55,381,000
A-2 AAA 138,500,000
A-3 AAA 171,324,000
A-4 AAA 40,800,000
A-5 AAA 503,278,000
A-1A AAA 182,874,000
B AA 26,486,000
C AA- 12,464,000
D A 18,696,000
E A- 9,348,000
F BBB+ 15,580,000
G BBB 10,906,000
H BBB- 15,580,000
J BB+ 6,232,000
K BB 4,674,000
L BB- 6,232,000
M B+ 4,674,000
N B 3,116,000
P B- 3,116,000
Q N.R. 17,138,659
XC* AAA 1,246,399,659**
XP* AAA 1,214,080,000**
* Interest-only class
** Notional amount
N.R. - Not rated
MERRILL LYNCH: S&P Affirms Class E Mortgage Cert.'s BB Rating
-------------------------------------------------------------
Standard & Poor's Ratings Services affirmed its rating on class E
from Merrill Lynch Mortgage Investors Inc.'s series 1996-C1 and
removed it from CreditWatch with negative implications, where it
was placed March 23, 2004. Concurrently, the ratings on two other
ratings from the same transaction are raised and two are affirmed.
The affirmation on class E reflects the repayment of prior
interest shortfalls following the liquidation of an outlet center
in Eddyville, Kentucky. The shortfalls resulted when final
liquidation proceeds were not sufficient to repay outstanding
advances.
The raised and affirmed ratings reflect credit enhancement levels
that adequately support the ratings through various stress
scenarios.
As of the Sept. 25, 2004 remittance report, the pool consisted of
67 loans with an aggregate principal balance of $225.9 million,
down from 159 loans totaling $647.2 million at issuance. The
master servicer, GMAC Commercial Mortgage Corp., provided 2003 net
cash flow -- NCF -- debt service coverage -- DSC -- figures for
63% of the pool. Based on this information, Standard & Poor's
calculated a weighted average DSC of 1.39x, whereas the DSC for
the outstanding loans at issuance was 1.36x. Nineteen loans,
comprising 20% of the pool, are not required to report financials.
To date, there have been realized losses on five loans totaling
$20.7 million.
As of September 2004, there are three specially serviced mortgage
loans totaling $8.6 million (3.8%). In addition to the specially
serviced loans, there is another loan that is 30 days delinquent
($6.3 million) that is with the master servicer.
Two of the specially serviced assets are 90-plus days delinquent.
One of the 90-plus day delinquent loans has a balance of
$3.9 million (with total exposure of $4.2 million), and is secured
by a 61,304 square foot outlet center in Post Falls, Idaho.
Occupancy levels at the center have fallen to 51%, resulting in a
DSC of 0.26x. The declines in occupancy and DSC are due to
increased competition from Wal-Mart as well as surrounding
competition. The only two national tenants are Dress Barn and
Casual Corner, the second of which is on a year-to-year lease.
Based on a February 2004 appraisal, a severe loss is expected.
The other 90-plus day delinquent loan has a balance of $1.6
million and is secured by a 118-room hotel in Little Rock,
Arkansas. A recent appraisal suggests losses upon disposition.
The remaining specially serviced loan has a balance of
$3.3 million. The loan matured in April 2003 and is in the
process of finalizing a second extension through April 2005. The
loan is secured by a 242,500-sq.-ft. office/industrial warehouse
property in Hutchins, Texas (southeast of downtown Dallas) that
was built in 1986.
The 30-day delinquent mortgage totals $6.4 million, and is secured
by a 440-unit apartment complex in Dallas, Texas, built in 1982.
The borrower has expressed interest in paying off the mortgage.
GMAC Commercial received a commitment letter, and estimates the
payment date to occur before year-end. As of March 2004, the
property reported a 1.06x (year-to-date) DSC, down from 1.29x at
issuance. Occupancy levels for the same periods were 71% and 91%,
respectively.
GMAC Commercial reported 25 loans totaling $79.4 million (31.7% of
the pool) on its watchlist. The watchlist includes three of the
top 10 mortgages in the pool, which appear because of DSC issues,
as well as one 30-day delinquent mortgage.
The fourth-largest loan has a balance of $9.6 million. The
mortgage is secured by a 376-unit multifamily property in Las
Vegas. GMAC Commercial reported occupancy of 87% and DSC of
1.15x, down from 92% and 1.28x, respectively, at issuance. The
owner has made the expenditures to improve the occupancy levels.
The fifth-largest mortgage totals $7.7 million, and is secured by
a 360-unit apartment complex in Denton, Texas (60 miles northwest
of Dallas), built in 1985. As of May 2004, occupancy was reported
at 83%, resulting in a DSC of 1.04x, down from 96% and 1.30x,
respectively, at issuance. Management has increased occupancy
levels to 94% (as of September 2004) by offering concessions.
The sixth-largest loan has a balance of $7.2 million, and is
secured by a 253-unit multifamily property in Fort Collins,
Colorado. As of December 2003, occupancy was reported at 75%,
resulting in DSC of 0.65x, down from 98% and 1.36x, respectively,
at issuance. The decline in performance is largely the result of
the low interest rate environment, resulting in decreased demand
for rental housing.
The pool is geographically diverse, with properties located in 24
states. Concentrations in excess of 10% exist in:
* Nevada (18%), and
* Texas (16%).
The property type concentration of the pool includes:
* multifamily (56%),
* retail (27%), and
* an assortment of other property types.
Standard & Poor's stressed the specially serviced, watchlist, and
other loans in the pool that appeared to be underperforming. The
resultant credit enhancement levels support the raised and
affirmed ratings.
Ratings Raised
Merrill Lynch Mortgage Investors Inc.
Commercial mortgage pass-through certs series 1996-C1
Rating
Class To From Credit Support
----- -- ---- --------------
C AAA AA 50.53%
D A BBB 36.21%
Rating Affirmed And Removed From Creditwatch Negative
Merrill Lynch Mortgage Investors Inc.
Commercial mortgage pass-through certs series 1996-C1
Rating
Class To From Credit Support
----- -- ---- --------------
E BB BB/Watch Neg 14.73%
Ratings Affirmed
Merrill Lynch Mortgage Investors Inc.
Commercial mortgage pass-through certs series 1996-C1
Class Rating Credit Support
----- ------ --------------
A-3 AAA 84.90%
B AAA 67.71%
METRIS MASTER: Fitch Pares Ratings on Six Debt Classes to Low-B
---------------------------------------------------------------
Fitch Ratings affirms ratings for the class A securities and
upgrades class B and class C securities issued from Metris Master
Trust. The rating actions, which affect approximately
$2.05 billion of credit card backed securities, reflects
stabilizing trust credit quality metrics and Metris Companies
Inc.'s progress in addressing near-term liquidity risks, as well
as accounting, regulatory, and servicing concerns. These actions
do not affect any series issued that are insured by
MBIA, Inc.
Since Fitch's last rating action, key trust performance metrics
have continued to show improvements. While still at elevated
levels, trust vintage default rates appear to have declined from
their peaks, and delinquency trends have posted improvements in
recent months. Trust credit quality has continued to improve with
trust reported losses averaging 18.48% year-to-date in 2004,
compared with 20.62% in 2003 and 15.82% in 2002. Delinquencies of
60 plus days for the most recent reporting period were at 9.74%,
compared with 11.23% in the December 2003 reporting period.
Driving this improvement has been:
(1) the company's revamped credit line management initiatives,
(2) heightened collections efforts, and
(3) new underwriting guidelines.
Fitch expects that further improvement in trust credit quality
metrics will remain challenged by the denominator effect caused by
portfolio attrition and limited new account growth. Residual
effects of older, weaker, performing vintages will continue to
represent a significant proportion of the trust receivable base.
Positively, trust-reported gross yield has been relatively stable
and in-line with historical performance, averaging 26.79% over the
past 12 months, while the monthly payment rate has shown
improvement with the past 12-month average of 7.43%.
The master trust has experienced improving excess spread levels,
which have increased from historical lows in 2003. Driving this
improvement has been:
(1) the relatively stable portfolio yield,
(2) historically low short-term interest rates, and
(3) improving credit metrics.
Excess spread levels have increased steadily since the beginning
of 2004, with the October 2004 period reporting one-month and
three-month average excess spread at 5.22% and 5.56%,
respectively. The improvement in excess spread has allowed for
spread account deposit to be released back to the company. After
reviewing the stress scenarios, Fitch believes available credit
enhancement is commensurate with newly assigned ratings. As such,
ratings on outstanding trust series are adjusted as indicated
below.
While Fitch recognizes relative improvements in terms of
performance metrics as well as liquidity, Metris will remain
challenged as a niche credit card issuer in a competitive market.
Fitch also remains concerned with the company's ongoing Securities
and Exchange Commission investigation of the company's SEC
fillings in 2001 and Internal Revenue Service review of the
company's tax strategy. Fitch will continue to monitor
management's assessment of these items.
On Oct. 8, 2004, Fitch upgraded the senior debt rating of Metris
to 'B-' from 'CCC'. Ratings of Direct Merchants Credit Card Bank,
N.A. are affirmed at a long-term 'B' and short-term 'B'. The
Rating Outlook for Metris and DMCCB is Stable. This action
affected approximately $150 million of outstanding unsecured debt.
The ratings upgrade primarily reflects the company's improving
operating performance coupled with strengthened liquidity, which
Fitch believes will be sustainable over the near to intermediate
term.
Series 2001-2
-- $559.39 million class A floating-rate asset-backed
securities affirmed at 'A-';
-- $99.45 million class B floating-rate asset-backed securities
to 'BBB' from 'BB+';
-- $91.16 million class C floating-rate secured notes 'BB+'
from 'B'.
Series 2000-3
-- $372.9 million class A floating-rate asset-backed securities
affirmed at 'A-';
-- $66.29 million class B floating-rate asset-backed securities
to 'BBB' from 'BB+'
-- $60.77 million class C floating-rate secured notes to 'BB+'
from 'B'.
Series 2000-1
-- $447.52 million class A floating-rate asset-backed
securities affirmed at 'A-';
-- $67.96 million class B floating-rate asset-backed securities
to 'BBB' from 'BB+';
-- $84.53 million class C floating-rate secured notes to 'BB+'
from 'B'.
METROPCS INC: Solicits Waivers from Senior Noteholders
-------------------------------------------------------
MetroPCS, Inc., is soliciting consents from the holders of its
$150.0 million aggregate principal amount of outstanding
10-3/4% Senior Notes due 2011 to a limited waiver, for up to
180 days, of any default or event of default arising from a
failure by MetroPCS to file with the Securities and Exchange
Commission, and furnish to the holders of notes, reports required
to be filed pursuant to the Securities Exchange Act of 1934.
Holders of the notes are referred to MetroPCS' Consent
Solicitation Statement dated October 20, 2004 and the related
Letter of Consent for the detailed terms and conditions of the
consent solicitation.
MetroPCS retained Bear, Stearns & Co. Inc. to serve as its
solicitation agent and Mellon Investor Services LLC to serve as
the information agent and tabulation agent for the consent
solicitation. Questions concerning the terms of the consent
solicitation should be directed to:
Bear, Stearns & Co. Inc.
Global Liability Management Group
383 Madison Avenue, 8th Floor
New York, NY 10179
Telephone: (877) 696-BEAR (toll free)
(877) 696-2327 (toll free)
Requests for documents may be directed to:
Mellon Investor Services LLC
85 Challenger Road, 2nd Floor
Ridgefield Park, NJ 07660
Attention: Reorganization Dept.
Banks and brokers may call the tabulation agent at (201) 329-8794,
and all others may call (877) 698-6870.
This announcement is not an offer to purchase or sell, a
solicitation of an offer to purchase or sell or a solicitation of
consents with respect to any securities. The solicitation is
being made solely pursuant to MetroPCS' Consent Solicitation
Statement dated October 20, 2004 and the related Letter of
Consent.
About MetroPCS, Inc.
Dallas-based MetroPCS, Inc. is a wholly owned subsidiary of
MetroPCS Communications, Inc. and a provider of wireless
communications services. Through its subsidiaries, MetroPCS, Inc.
holds 18 PCS licenses in the greater Miami, San Francisco, Atlanta
and Sacramento metropolitan areas. MetroPCS offers customers flat
rate plans with unlimited anytime local and long distance minutes
with no contract. MetroPCS is among the first wireless operators
to deploy an all-digital network based on third generation
infrastructure and handsets. For more information, visit the
MetroPCS web site at http://www.metropcs.com/
* * *
As reported in the Troubled Company Reporter on Oct. 13, 2004,
Standard & Poor's Ratings Services revised its outlook on Dallas,
Texas-based wireless service provider MetroPCS Inc. to negative
from positive. The outlook revision reflects two concerns.
"First, the company is rapidly approaching the Nov. 8, 2004,
deadline for filing its second-quarter SEC Form 10-Q in order to
avoid triggering a technical default, which could result in
acceleration in repayment of about $150 million of 10.75% senior
notes due 2011. Such acceleration could lead to a liquidity issue
in the near term," said Standard & Poor's credit analyst Michael
Tsao.
The delay in filing was caused by an ongoing internal
investigation into understatement of revenues and net income for
the quarter ended March 2004 (the accounting problem also caused
the withdrawal of a plan for an IPO).
Second, the accounting problem may be wider in scope than
initially expected by Standard & Poor's, given that the company
recently fired its principal accounting officer and announced that
previously issued financial statements for the years ended in
December 2002 and 2003 and subsequent interim period should not be
relied upon. The accounting problem and any associated internal
control issue could lead to regulatory ramifications.
MORGAN STANLEY: Moody's Places Ba2 Rating on Class $9.4M G1 Certs.
------------------------------------------------------------------
Moody's Investors Service upgraded the ratings of two classes,
downgraded the rating of one class and affirmed the ratings of two
classes of Morgan Stanley Dean Witter Capital I Inc., Commercial
Mortgage Pass-Through Certificates, Series 2002-XLF:
-- Class A, $80,230,771, Floating, affirmed at Aaa
-- Class B, $36,636,539, Floating, upgraded to Aaa from Aa2
-- Class C, $13,818,778, Floating, upgraded to Aaa from Aa3
-- Class G1, $9,447,061, Floating, downgraded to Ba2 from Baa3
-- Class G4, $$8,545,785, Floating, affirmed at Baa3
The Certificates are collateralized by three whole loans and one
senior participation interest, which range in size from 24.7% to
42.1% of the transaction based on current principal balances. As
of the October 5, 2004 distribution date, the transaction's
aggregate certificate balance has decreased by approximately 74.3%
to $251.1 million from $976.3 million at securitization due to the
payoff of five loans initially in the pool and amortization
associated with four loans.
Classes A through F are pooled classes, which benefit from pool
diversity, while Classes G1, G4 and G5 depend on the performance
of a specific loan for debt service and ultimate repayment.
Moody's rates pooled classes A through C as well as two of the
three remaining rake classes offered.
Moody's current weighted average loan to value ratio -- LTV -- is
68.1%, compared to 66.8% at securitization. Classes B and C have
been upgraded due to increased credit support. Class G1 has been
downgraded to reflect the poor performance of the Westbrook
Portfolio Loan. Class G4 pertains to the Hilton Portfolio Loan
and is affirmed.
The top two loans represent 75.3% of the outstanding trust
balance. The largest loan is the Westbrook Portfolio Loan
($105.5 million -- 42.1%). The loan, which is interest only
through its initial maturity date of August 2005, is secured by
18 office buildings located in eight separate metropolitan areas:
* Denver, Colorado,
* Orlando, Florida,
* Chicago, Illinois,
* Kansas City, Missouri,
* Columbus, Ohio,
* Philadelphia, Pennsylvania,
* Dallas, Texas, and
* Richmond, Virginia.
The loan balance has decreased by approximately 44.4% since
securitization due to the payment of release premiums associated
with the release of nine buildings. At securitization the
portfolio had a total area of approximately 3.8 million square
feet, compared to the current total area of approximately
2.4 million square feet, representing a 36.8% reduction in size.
At securitization the loan amount per square foot was $50.00,
compared to $44.00 currently. As of August 2004 the portfolio was
approximately 59.6% leased (63.0% - 2003, 69.5% - 2002) compared
to 78.1% at securitization. The weakness in the Denver, Columbus
and suburban Chicago office markets has been a contributing factor
to the portfolio's current reduced occupancy level. The loan has
two one-year extension options beyond its August 2005 maturity
date. The floating rate loan requires monthly amortization of
0.10% of the outstanding loan amount during any extension term. A
mezzanine loan in the amount of $62.8 million is held outside the
trust. Moody's LTV excluding the mezzanine loan is 71.3%,
compared to 65.2% at securitization. The loan is shadow rated
Ba2, compared to Baa3 at securitization.
The second largest exposure is a senior participation interest in
the Hilton Portfolio Loan ($83.5 million -- 33.2%), which is
secured by four full-service hotels including the Miami Airport
Hilton, Hilton Costa Mesa, Hilton Suites Auburn Hills and Embassy
Suites Portland. The hotel portfolio has a total of 1,484 rooms.
The hotels are located in four states -- Florida, California,
Michigan, and Oregon. For the five-month period ending June 2004,
the portfolio had a weighted average occupancy of 77.5% and RevPAR
of $81.18. The loan is a senior participation with a
$14.0 million junior participation held outside the trust. This
floating rate loan was interest only through December 2002, with
amortization based on a 25-year schedule through loan maturity in
October 2006. Moody's LTV is 65.7%, essentially the same as at
securitization. The loan is shadow rated Baa3, the same as at
securitization.
The third largest loan is the Treasure Coast Loan ($61.9 million
-- 24.7%) secured by the Treasure Coast Square Mall, an 871,690
square foot enclosed regional mall in Jensen Beach, Florida. The
subject mall is the only regional mall and dominant middle-market
retail center serving the greater Fort Pierce MSA. The mall is
anchored by:
* Burdines-Macy's (a division of Federated Department Stores,
Inc.; Moody's senior unsecured rating Baa1),
* Dillard's (Moody's senior unsecured rating B2),
* J.C. Penney (Moody's senior unsecured rating Ba3), and
* Sears (Moody's senior unsecured rating Baa1).
The collateral includes only the J.C. Penney and Sears stores
totaling 220,776 square feet, and the in-line space totaling
360,318 square feet. The in-line space was 75.5% occupied as of
June 2004, compared to 80.2% at securitization. Comparable in-
line sales were $387 per square foot in 2003, compared to $309 at
the time of securitization. This floating rate loan is interest
only with a maturity date of January 2006 with no extension
options. The loan sponsor is Simon Property Group (Moody's
preferred stock rating Baa3). Moody's LTV is 66.0%, compared to
72.4% at securitization.
NASH FINCH: Moody's Puts B1 Rating on Planned $300M Secured Loan
----------------------------------------------------------------
Moody's Investors Service assigned a B1 rating to the proposed
$300 million secured bank loan of Nash Finch Company. Moody's
also affirmed the senior implied and issuer ratings at B1 and B2,
respectively.
Proceeds from the new bank loan principally will refinance the
existing term loan and 8.5% senior subordinated note (2008) issue.
The ratings reflect the secular changes in the supermarket
industry that are causing weak sales at most conventional grocery
retailers and Moody's expectation that the company will increase
shareholder returns. However, Moody's belief that part of
discretionary free cash flow will be used to improve the balance
sheet and the company's position as an important grocery supplier
to independent supermarkets and military commissaries benefit the
ratings. The rating outlook is stable.
The rating assigned is:
-- $300 million secured bank loan at B1.
Ratings affirmed are:
-- Senior Implied Rating at B1, and the
-- Issuer Rating at B2.
Moody's will withdraw the rating on the $165 million issue of 8.5%
senior subordinated notes (2008) following completion of this
transaction.
In spite of good debt protection measures for the assigned
ratings, the secular changes in the supermarket industry in which
non-traditional grocery retailers are capturing significant market
share, the company's geographic concentration in the slow-growth
Great Plains and Upper Midwest regions, and Moody's expectation
that Nash Finch will increase shareholder returns over the next
several years limit the ratings. Moody's believes that retail
sales of Nash Finch and its wholesale customers, along with most
other conventional wholesalers and retailers, have permanently
weakened because of increased competition from non-traditional
grocery retailers such as the supercenters.
However, the ratings consider the anticipated good liquidity
position and Moody's expectation that the company will annually
prepay at least $20 million of debt. The company's status as an
important grocery wholesaler in the Great Plains and Upper Midwest
regions, Nash Finch's leading market share as a grocery supplier
to military installations along the East Coast and in Europe, and
our belief that sales growth in the wholesale segment will at
least offset the expected decline of the retail segment also
benefit the ratings.
The stable rating outlook anticipates that the company will
modestly improve its financial profile as it emphasizes its
wholesale and military segments relative to the pressured retail
segment. Ratings would be negatively impacted if retail
performance at corporate and customer supermarkets does not
stabilize, Nash Finch cannot build on its strong position as a
grocery distributor for supermarkets and military commissaries, or
the company does not prepay the bank loan with discretionary free
cash flow. Over the longer term, ratings could be raised as debt
protection measures improve (such as lease-adjusted leverage
falling toward 3 times) and the company takes advantage of
opportunities in the consolidating grocery distribution industry.
The B1 rating on the proposed secured Bank Loan (to be comprised
of a $100 million Revolving Credit Facility and a $200 million
Term Loan B) considers that substantially all assets of the
company and its subsidiaries provide collateral. The arranger --
Nash Finch Company -- directly owns most assets and carries out
the majority of operations, but the debt also enjoys the
guarantees of the operating subsidiaries. While there is no
scheduled Term Loan amortization before maturity, the bank
agreement requires prepayment with a portion of defined excess
cash flow. The dividend payout ratio is limited to 25%. This
bank loan is rated at the same level as the senior implied rating
because secured debt comprises most debt, in spite of Moody's
opinion that sellable assets fully cover the bank loan.
Going forward, Moody's expects that Nash Finch will increasingly
emphasize the wholesale division relative to the retail division.
Retail operating margin and average unit volume have substantially
declined relative to prior years as competition from non-
traditional grocery retailers has increased. The company has
closed 22 poorly performing stores over the past two quarters. In
contrast, distribution margin and revenue have grown partially due
to new account wins over the last eighteen months as Fleming, the
largest grocery wholesaler, has liquidated. Pro-forma for the
pending capital structure, Moody's calculates that lease adjusted
leverage (using gross rent expense) equaled about 4 times and
fixed charge coverage was around 3 times. Moody's expects that
free cash flow will grow going forward as the company reduces
investment in the retail segment and focuses on growing volume in
the wholesale segment, which has substantial overcapacity.
Nash Finch Company, headquartered in Edina, Minnesota, is a
leading grocery distributor to retailers and military commissaries
and operates 88 retail stores in the Upper Midwest and Great
Plains regions of the United States. Revenue for the 12 months
ending June 2004 was about $4.0 billion.
NEW HAVEN FOUNDRY: Preference Suit Helps Tank Yale Industries
-------------------------------------------------------------
Kenneth A. Nathan, the Chapter 7 Trustee overseeing the
liquidation of New Haven Foundry, Inc., sued Yale Industries Inc.
to recover an alleged $1,000,000 preference payment. Yale
believes New Haven received the prepetition payments in the
ordinary course of business for the services performed on castings
and shipped to Chrysler Corporation, and will defend the lawsuit
on that basis.
This week, Margate Industries, Inc. (Pink sheets: CGUL.PK)
announced that it intends to begin a voluntary liquidation of Yale
Industries Inc. because that litigation and two other major
bankruptcy filings in the foundry industry have put too much
pressure on its business.
New Haven Foundry, Inc., filed for bankruptcy on November 27, 2001
(Bankr. E.D. Mich. Case No. 01-62954) and is liquidating under
chapter 7. The Trustee has indicated in papers filed with the
bankruptcy court that funds should be available for distribution
to New Haven Foundry's unsecured creditors.
NEW SOUTHGATE LANES: Case Summary & 12 Largest Unsecured Creditors
------------------------------------------------------------------
Debtor: New Southgate Lanes, Inc.
21400 Southgate Park Boulevard
Maple Heights, Ohio 44137
Bankruptcy Case No.: 04-23215
Chapter 11 Petition Date: October 14, 2004
Court: Northern District of Ohio (Cleveland)
Judge: Randolph Baxter
Debtor's Counsel: Irving S. Bergrin, Esq.
27600 Chagrin Boulevard, #340
Cleveland, OH 44122
Tel: 216-831-6580
Total Assets: $1,133,800
Total Debts: $1,120,995
Debtor's 12 Largest Unsecured Creditors:
Entity Nature Of Claim Claim Amount
------ --------------- ------------
Shirwin Inc. Loan $132,445
Carol Hunziker Purchase of business $110,198
Walter Music & Vending Services $22,420
Bank One NA Credit Card $20,419
Purchases
American Express Credit Card $13,397
Purchases
Bank One NA Credit Card $9,312
Purchases
Konica Minolta Bus. Solutions Lease $7,500
AMF Bowling Products Services $7,144
Fay, Sharpe Legal services $4,377
Treasurer,Cuyahoga County Personal property tax $3,434
Gilbert,Mayor & Co. Accting services $1,707
Dell Financial Services Purchase Money $592
Security
Value of Collateral:
$300
Net Unsecured: $292
NORTHWEST AIRLINES: Reports $46 Million Third Quarter Loss
----------------------------------------------------------
Northwest Airlines Corporation (Nasdaq: NWAC), the parent of
Northwest Airlines, reported a $46 million third quarter net loss.
This compares to the third quarter of 2003 when the airline
reported a net profit of $42 million.
Doug Steenland, president and chief executive officer, said, "As
in recent quarters, our operating performance was negatively
impacted by record high fuel cost that continues to drive the
dynamics of the airline industry. As an example of our efforts to
address high fuel prices, on Tuesday we expanded a $10 each-way
fuel surcharge to nearly all of our domestic fares."
"Northwest continued to perform well against its major competitors
by maintaining an industry-leading revenue premium and a strong
cash balance. Our strong positions in domestic heartland markets
and our international passenger and cargo operations benefited us
during the quarter. We also continued our aggressive drive to
reduce non-labor costs." He continued, "Operationally, the
airline ran well during the third quarter. I want to thank the
38,000 employees of Northwest who provided reliable customer
service during the peak summer months."
"Concerning labor cost restructuring, as anticipated, we have
announced a tentative two-year agreement with our pilots. The
proposed agreement, subject to ratification by Northwest pilots
and a satisfactory restructuring of our revolving credit facility,
includes $300 million in annual labor cost savings from pilots and
salaried workers."
"As scheduled, we are now in contract discussions with ground
workers represented by the International Association of Machinists
and Aerospace Workers (IAM), and flight dispatchers represented by
the Transport Workers of America (TWU). In addition, preliminary
contract discussions will start shortly with the Aircraft
Mechanics Fraternal Association (AMFA), the Professional Flight
Attendants Association (PFAA), Northwest Airlines Meteorology
Association (NAMA), and Aircraft Technical Support Association
(ATSA)," Steenland added.
Financial Results
Operating revenues in the third quarter increased 13.4% versus the
third quarter of 2003 to $3.05 billion.
Operating expenses increased 16.8% versus a year ago to $2.97
billion. Unit costs excluding fuel increased by 1.1%. During the
quarter, fuel averaged $1.24 per gallon, up 64.6% versus the third
quarter of last year.
"Northwest continues to execute its long-term business strategy in
part by continuing to maintain one of the strongest cash balances
in our industry. We are working with our bank partners to
restructure our $975 million revolving credit facility well in
advance of its scheduled maturity," said Bernie Han, executive
vice president and chief financial officer.
Northwest's quarter-end cash balance was $2.68 billion, of which
$2.54 billion was unrestricted.
New Top Executive
Northwest Airlines announced on October 1 that its board of
directors had elected Doug Steenland, the airline's president, to
the additional position of chief executive officer following the
decision of Richard Anderson to join UnitedHealth Group.
Mr. Steenland, who joined Northwest in 1991, was elected president
and named to the company's board in 2001.
SkyTeam Alliance
In mid-September, Northwest, Continental Airlines and KLM Royal
Dutch Airlines became full members of the SkyTeam global airline
alliance. The three new carriers add to SkyTeam's extensive
network of hub airports and destination cities, allowing member
airlines to provide their passengers with increased travel
options. The three new members add 10 additional hub locations
and 141 new destinations to the SkyTeam network. Northwest's
entry into SkyTeam provides its customers with greater frequent
flyer mileage accrual and redemption possibilities. Customers
traveling with any of the nine member airlines can earn miles
toward WorldPerks Elite status and redeem miles on any of the nine
airline members. In addition, Northwest customers enjoy other
SkyTeam benefits, including one-stop check-in for connecting
flights.
One issue that continues to affect Northwest is the heavy burden
of taxation. "Our ability to return to profitability is hampered
by the amount of taxes and fees that we must impose on passenger
tickets. In the case of Northwest Airlines, we paid $325 million
in transportation taxes and fees during the third quarter to
various government entities. We are continuing to work with
federal officials in an effort to minimize ticket taxes on an
industry that has an even greater tax burden than alcohol and
tobacco," Steenland added.
Northwest Airlines will webcast its third quarter results
conference call at 11:30 a.m. Eastern Daylight Time (10:30 a.m.
Central) today. Investors and the news media are invited to
listen to the call through the company's investor relations Web
site at http://ir.nwa.com/
About Northwest Airlines
Northwest Airlines is the world's fourth 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.
Northwest' Sept. 30, 2004, balance sheet shows liabilities exceed
assets by just over $2.4 billion.
NORTHWESTERN CORP: Moody's Puts Ba1 Rating on $200M Sr. Sec. Notes
------------------------------------------------------------------
Moody's Investors Service assigned a Ba1 rating to NorthWestern
Corporation's proposed $200 million of senior secured notes and
$250 million of senior secured bank credit facilities.
The notes and bank credit facilities are expected to comprise the
financing for NorthWestern's exit from Chapter 11. The bank
credit facilities are expected to be evenly split between a 7-year
term loan B facility and a 5-year revolving credit facility.
Moody's also assigned a Ba1 rating to approximately $280 million
of the prepetition senior secured debt that will be reinstated
upon exit from bankruptcy. Furthermore, Moody's assigned a Senior
Implied Rating of Ba1, an Issuer Rating of Ba2, and an SGL-2
rating. The rating outlook for NorthWestern is stable.
NorthWestern expects to complete its Chapter 11 bankruptcy
proceedings and emerge as a reorganized entity within 30 days.
The company's second amended and restated plan of reorganization
received written confirmation from the Bankruptcy Court. Under
the Plan, the company's prepetition senior secured creditors and
trade vendors with claims of less than $20,000 will get 100%
recovery. Approximately $1.3 billion of senior unsecured and
subordinated debt will be extinguished and exchanged for
$710 million of equity.
Proceeds from the planned note offering and the term loan, along
with cash on hand will be used to repay the balance due under the
company's existing senior secured bank credit facility. The new
revolver will initially be used to provide some $15 million of
letters of credit. The remaining balance under the revolver will
be available to meet general working capital needs.
The Ba1 Senior Implied rating for NorthWestern reflects:
(1) the company's expected emergence from bankruptcy
proceedings within 30 days;
(2) significant improvement in the capital structure that is
expected to result from the debt-for-equity exchange
embodied in the Plan;
(3) a significant shift in management's strategy back to the
basics of its core regulated electric and gas utility
business, which should provide generally stable and
predictable cash flows; and
(4) improved regulatory relationships, including a settlement
that affords more protections for investors from riskier
non-regulated investments.
The company also faces significant challenges, which include:
(1) resolving various lawsuits and an investigation being
conducted by the Securities and Exchange Commission;
(2) regulatory uncertainty that might still exist in
Northwestern's Montana service territory;
(3) completing remaining non-utility asset sales, proceeds from
which we expect will be used to reduce debt;
(4) renegotiating contracts with qualifying facilities, which
form part of the default supply portfolio in Northwestern's
Montana service territory;
(5) uncertainty surrounding the Montana Public Service
Commission's periodic review of the prudency of electric
and natural gas purchases, which could result in potential
under recovery of default supply costs; and
(6) cash funding to shore up the pension fund.
Northwestern's business risk profile will improve considerably
upon emergence from bankruptcy, as management is in the final
stages of satisfying conditions necessary to release funds from
its divestiture of non-regulated investments that contributed
significantly to its financial difficulties and eventual
bankruptcy.
The Ba1 rating for NOR's senior secured debt considers the
benefits of the collateral. The collateral under the Montana and
South Dakota/Nebraska first mortgage bond -- FMB -- indentures is
comprised of a first mortgage lien on substantially all of
Northwestern's utility property, subject to the exclusion of
certain real property and assets that is typical in FMB
indentures. The rating of the senior secured debt is not notched
up from the Ba1 Senior Implied Rating. This takes into
consideration that virtually all of the company's debt will
initially be secured under the FMB indentures, as well as the
simplified business and legal structure of the reorganized
Northwestern.
The Ba2 Issuer Rating reflects Moody's opinion of Northwestern's
unsupported ability to meet its senior unsecured financial
obligations and contracts.
The SGL-2 rating reflects the company's liquidity profile over the
next 12 months. This is supported by the company's intention to
keep $10 million of unrestricted cash on hand, which in
combination with expected free cash flow after capital
expenditures and dividends significantly exceeds scheduled debt
maturities. The SGL-2 also takes into account that the company is
expected to have a 5-year bank revolver that will be largely
unused and appears to have reasonable head room under the
covenants.
Moody's expects Northwestern's ratio of funds from operations to
debt to average in the 15% to 20% range over the next few years.
Upon emergence from bankruptcy, the company's capital structure
will initially be comprised of approximately $850 million of debt
and $710 million of common equity. Moody's expects debt reduction
to occur as NOR uses its excess cash to repay maturing debt over
the next few years.
The stable rating outlook for Northwestern reflects the company's
lower-risk "back-to-basics" strategy to focus on the business of
being an electric and gas utility. It also considers recent
regulatory rulings designed to limit the scope of non-regulated
activities in the future.
The Honorable Charles G. Case II of the U.S. Bankruptcy Court for
the District of Delaware entered a written order confirming
NorthWestern Corporation's Second Amended and Restated Plan of
Reorganization earlier this week. NorthWestern anticipates the
Plan's effective date will be Nov. 1, 2004, at which time the
company will formally exit Chapter 11 reorganization. As
previously announced, the court issued an oral ruling confirming
the Plan on Oct. 8, 2004.
Headquartered in Sioux Falls, South Dakota, NorthWestern
Corporation (Pink Sheets: NTHWQ) -- http://www.northwestern.com/
-- provides electricity and natural gas in the Upper Midwest and
Northwest, serving approximately 608,000 customers in Montana,
South Dakota and Nebraska. The Debtors filed for chapter 11
protection on September 14, 2003 (Bankr. Del. Case No. 03-12872).
Scott D. Cousins, Esq., Victoria Watson Counihan, Esq., and
William E. Chipman, Jr., Esq., at Greenberg Traurig, LLP, and
Jesse H. Austin, III, Esq., and Karol K. Denniston, Esq., at Paul,
Hastings, Janofsky & Walker, LLP, represent the Debtors in their
restructuring efforts. On the Petition Date, the Debtors reported
$2,624,886,000 in assets and liabilities totaling $2,758,578,000.
OLD UGC: Files First Amended Joint Plan of Reorganization
---------------------------------------------------------
Old UGC, Inc., and UnitedGlobalcom, Inc., filed with the U.S.
Bankruptcy Court for the Southern District of New York their First
Amended Joint Plan of Reorganization.
The Plan is the result of months of meetings and negotiation among
the Debtor and its two largest creditors -- UnitedGlobalCom and
IDT United, Inc. The Plan intends to restructure Old UGC's 10.75%
Senior Secured Discount Notes due on 2008.
The Plan provides that on the Effective Date, Old UGC will
exchange shares of its Class A Common Stock for all outstanding
Senior Notes held by IDT United and shares of its Class B Common
Stock for all outstanding Senior Notes in the aggregate amount of
$700 million held by UnitedGlobalCom.
The Debtor will issue to IDT shares of Class A Common Stock equal
in number to its pro rata share of New Common Stock in exchange
for $599 million in principal amount at maturity of its senior
notes.
Under the terms of the Plan:
* administrative claims;
* priority tax claims;
* miscellaneous secured claims;
* classified priority claims;
* public noteholder claims;
* general unsecured creditors; and
* litigation claims
will be settled in full on the Effective Date.
Senior Notes held by the public and Old UGC common stock will be
reinstated and all accrued interest will be paid in cash.
Headquartered in Denver, Colorado, Old UGC, Inc.--
http://www.UnitedGlobalcom.com/-- is one of the largest broadband
communications providers outside the United States and provides
full range of video, voice, high-speed Internet, telephone and
programming services. The Company filed for chapter 11 protection
on January 12, 2004 (Bankr. S.D.N.Y. Case No. 04-10156). David A.
Levine, Esq., at Cooley Godward, LLP and Jay R. Indyke, Esq., at
Kronish Lieb Weiner & Hellman, LLP represent the Debtors in their
restructuring efforts. When the Company filed for protection from
their creditors, they listed $846,050,022 in total assets and
$1,371,351,612 in total debts.
OUTBOARD MARINE: 7th Cir. Says Faxed Proof of Claim Was a Mistake
-----------------------------------------------------------------
The United States Court of Appeals for the Seventh Circuit handed
down a ruling this week that tells Travis Boats & Motors,
Incorporated, it was a big mistake to fax its $1,138,216.90 proof
of claim against Outboard Marine Corporation on the day claims
were due.
Travis Boats received a Notice in the mail in late-August 2002
directing Outboard Marine's creditors to mail their proofs of
claim to a designated post office box so as to be received by the
claims agent by November 15, 2002. Travis Boats didn't follow
those instructions and didn't give the 7th Cir. any good reason
for not following those instructions. Travis Boat faxed its proof
of claim to counsel for the chapter 7 trustee on November 15,
2002. The trustee, in turn, mailed it to the claims agent. The
claims agent received the faxed document on Nov. 21 -- six days
late.
The chapter 7 trustee objected to the late-filed claim and the
Bankruptcy Court sustained the Trustee's objection. Travis moved
for reconsideration; the Bankruptcy Court declined the invitation.
Travis appealed to the District Court, but its plea fell on deaf
ears.
On appeal to the 7th Cir., Travis Boats argued that it complied
with the Notice of Bar Date by faxing its proof of claim to the
OMC claims agent on the Bar Date. In the alternative, Travis
Boats asserted that its faxed claim should be deemed timely
pursuant to Rule 5005(c) of the Federal Rules of Bankruptcy
Procedure, or that its claim should be characterized as a timely-
filed informal claim. In addition, Travis Boats maintained that
the courts below erred in disallowing the claim, instead of
subordinating the claim under 11 U.S.C. Sec. 726(a)(3).
The 7th Cir. says Travis' compliance argument is unpersuasive.
The Notice was clear and Travis didn't follow instructions. The
7th Cir. rejects Travis' equitable arguments because they weren't
raised in the lower courts. The 7th Cir. agrees, however, that
the claim should not be disallowed. Section 726(a)(3) of the
Bankruptcy Code provides that tardy unsecured claims are
subordinated to timely-filed unsecured claims. So, Travis hold an
allowed unsecured tardy claim that can be paid after all timely-
filed unsecured claims are paid in full, which is a very unlikely
result.
Kevin T. Keating, Esq., at Keating & Shure, represented Travis
Boats in this matter.
Outboard Marine filed for chapter 11 protection on December 22,
2000 (Bankr. N.D. Ill. Case No. 00-37405). On August 20, 2001,
the cases were converted to a Chapter 7 liquidation, and Alex D.
Moglia was appointed on August 24, 2001, to serve as the Chapter 7
Trustee. Kathleen H. Klaus, Esq., at Shaw Gussis Fishman Glantz
Wolfson & Towbin, LLC serves as Counsel to the Chapter 7 Trustee.
PSA HOLDINGS INT'L: Case Summary & 20 Largest Unsecured Creditors
-----------------------------------------------------------------
Lead Debtor: PSA Holdings International Corporation
1301 Rankin Drive
Troy, Michigan 48083
Bankruptcy Case No.: 04-13031
Debtor affiliates filing separate chapter 11 petitions:
Entity Case No.
------ --------
PSA Quality Systems (Ohio), Inc. 04-13030
PSA Quality Systems (Delaware), Inc. 04-13032
PSA Quality Systems (El Paso), Inc. 04-13033
PSA Global Wiring I, LLC 04-13034
PSA Transportation, Inc. 04-13035
Type of Business: The Company is a major provider of containment,
sorting, rework, repack, inventory management,
material handling, warehousing, distribution,
customer representation, sequencing and
subassembly services for automotive
manufacturers, Tier One suppliers, and other
industries. See http://www.psaquality.com/
Chapter 11 Petition Date: October 20, 2004
Court: District of Delaware (Delaware)
Debtors' Counsel: John Henry Knight, Esq.
Paul N. Heath, Esq.
Kimberly D. Newmarch, Esq.
Richards, Layton & Finger, P.A.
One Rodney Square
PO BOX 551
Wilmington, Delaware 19899
Tel: 302-651-7700
Fax: 302-651-7701
- and -
Michael S. Fox, Esq.
Adam H. Friedman, Esq.
Peter G. Lavery, Esq.
Traub, Bonacquist, & Fox, LLP
655 Third Avenue
New York, New York 10017
Tel: (212) 476-4770
Fax: (212) 476-4787
Total Assets Total Debts
------------ -----------
PSA Holdings International
Corporation $1M to $10M $10M to $50M
PSA Quality Systems (Ohio), Inc. $1M to $10M $10M to $50M
PSA Quality Systems Delaware, Inc. $1M to $10M $10M to $50M
PSA Quality Systems El Paso, Inc. $1M to $10M $10M to $50M
PSA Global Wiring I, LLC $1M to $10M $10M to $50M
PSA Transportation, Inc. $1M to $10M $10M to $50M
Consolidated list of Debtor's 20 largest unsecured creditors:
Entity Nature Of Claim Claim Amount
------ --------------- ------------
Integrated Human Capital Trade Debt $957,366
7300 Viscount Suite 103
El Paso, Texas 79925
Fax: 915-781-2668
Jobl USA Trade Debt $845,920
PO Box 1480
Toledo, Ohio 43603-1480
Fax: 419-255-3279
TDS Automotive Trade Debt $361,365
201 East Drahner Road
Oxford, Michigan 48371
Fax: 817-633-8171
Minute Men Staffing Trade Debt $320,591
4621 West Vernor Avenue
Detroit, Michigan 48209
Fax: 313-849-3555
Westaff Trade Debt $161,391
Labor Connections, Inc. Trade Debt $159,814
Labor Ready Trade Debt $91,692
Integrity Staffing Solutions Trade Debt $69,804
Express Personnel Services Trade Debt $57,408
Randstad Trade Debt $53,341
Allied Insurance Managers Trade Debt $49,455
Berry Moorman Professional Trade Debt $46,122
Corporation
Delphi Packard Electric Trade Debt $38,111
EDS Canada, Inc. Trade Debt $36,668
Sterling Personnel Trade Debt $35,470
Adecco Employment Services Trade Debt $33,117
Kelley Services, Inc. Trade Debt $32,950
Ashley Livonia South, LLC Trade Debt $31,945
MIMCO Trade Debt $31,517
Quick Fuel Trade Debt $31,293
READY MIXED: S&P Junks Planned $150M Senior Subordinated Debt
-------------------------------------------------------------
Standard & Poor's Ratings Services assigned its 'B' corporate
credit rating to Raleigh, North Carolina-based Ready Mixed
Concrete Co. and its 'CCC+' subordinated debt rating to a planned
issue of $150 million of senior subordinated notes due 2012. The
outlook is stable.
"Proceeds from the transaction will be used to help fund the
acquisition of the company by Audax Group in a very aggressively
leveraged transaction," said Standard & Poor's credit analyst
Wesley E. Chinn.
Ready Mixed Concrete's credit quality reflects:
(1) the cyclicality of the company's end markets,
(2) limited geographical diversity of operations,
(3) a modest revenue base, periodic acquisition activity, and
(4) very aggressive debt leverage.
These factors are partially offset by:
(1) a solid position in its regional markets of:
(a) North Carolina,
(b) South Carolina, and
(c) southern Virginia, and
(2) strong operating margins.
Ready-mixed concrete (a stone-like compound that results from
combining aggregates--such as gravel, crushed stone, and sand--
with water, various admixtures, and cement) is a fragmented,
consolidating industry with about 2,500 independent producers.
This fragmentation and relatively low-- albeit increasing --
barriers to entry to new ready-mix concrete manufacturing
operations contribute to highly competitive market conditions.
Demand for ready-mixed concrete depends on the level of
construction activity in a given geographic market. Because the
market for a ready-mix plant generally is the area within a 25-
mile radius, results are susceptible to swings in the level of
construction activity occurring in local residential, commercial,
street and highway, and other public infrastructure markets.
Ready Mixed Concrete's revenue base doubled to $150 million last
year with the acquisition of Unicon Concrete in late 2002 for
$64 million. Aided by this and other acquisitions in recent
years and price and volume increases, a meaningful rise in
revenues to the $160 million to $170 million for 2004 is likely.
Still, Ready Mixed Concrete's revenue base remains modest compared
with other rated competitors. Operations are limited
geographically, which increases the potential for financial
volatility arising from regional economic conditions and local
seasonal weather fluctuations that influence the level of
construction activity.
SELECT MEDICAL: Merger News Cues Moody's to Review Low-B Ratings
----------------------------------------------------------------
Moody's Investors Service extended the review of Select Medical
Corporation initiated on May 17, 2004. At the time of the May
2004 review, Moody's placed the ratings of Select under review for
possible downgrade following the announcement on May 11, 2004 that
the Centers for Medicare & Medicaid Services had proposed
reimbursement changes for long-term acute care hospitals that
operate as hospitals within a hospital. On August 2, 2004,
Medicare & Medicaid Services announced the final rule changes for
reimbursement for long-term acute care hospitals. Moody's was in
the process of evaluating the new changes on the operations and
cash flow prospects of Select when the buyout was announced.
On October 18, 2004, Select announced an agreement to merge with a
new company formed by an investment group led by Welsh, Carson,
Anderson & Stowe and including Thoma Cressey Equity Partners and
certain members of Select's management team. Under the terms of
the merger agreement, each share of Select common stock, other
than certain shares held by the stockholders participating in the
buying group, will be converted into the right to receive
$18.00 per share in cash. The transaction is valued at
approximately $2.3 billion, including consideration for Select's
existing indebtedness.
These ratings remain under review for possible downgrade:
* Ba3 senior implied rating
* B1 senior unsecured issuer rating
* $175 million 9.5% senior subordinated notes due 2009, rated
B2
* $175 million 7.5% senior subordinated notes due 2013, rated
B2
Moody's rating review will focus primarily on the anticipated
effects of the reimbursement rule change for long Medicare &
Medicaid Services term acute care hospitals announced by Medicare
& Medicaid Services in August 2004. Further, Moody's will
incorporate that analysis on a capital structure of Select that
Moody's believes will contain more financial leverage following
the buyout announcement.
The transaction is expected to close in the first quarter of 2005,
and therefore Moody's anticipates its review will extend to that
time.
Select Medical is a leading operator of specialty hospitals in the
United States. Select operates 83 long-term acute care hospitals
in 25 states. Select operates four acute care medical
rehabilitation hospitals in New Jersey. Select is also a leading
operator of outpatient rehabilitation clinics in the United States
and Canada, with approximately 761 locations. Select also
provides medical rehabilitation services on a contracted basis at
nursing homes, hospitals, assisted living and senior care centers,
schools, and worksites.
SHERIDAN HEALTHCARE: S&P Puts B+ Rating on Planned $105M Term Loan
------------------------------------------------------------------
Standard & Poor's Ratings Services assigned its 'B+' corporate
credit rating to physician staffing and practice management
company, Sheridan Healthcare Inc.
At the same time, Standard & Poor's assigned its 'B+' bank loan
rating and its '3' recovery rating to Sheridan's proposed
$105 million term loan due in 2010 and $40 million revolving
credit facility due in 2009, indicating that lenders can expect a
meaningful recovery of principal (50%-80%) in the event of
default. Standard & Poor's also assigned its 'B-' rating and its
'5' recovery rating to the company's proposed $65 million second
lien loan, indicating that lenders can expect a negligible
recovery of principal (0%-25%) in the event of default. The
outlook is stable.
The Sunrise, Florida-based company has will have $170 million in
debt.
As part of financial sponsor J.W. Childs' acquisition of Sheridan
from Vestar Capital Partners, we expect that the proceeds from the
term loan and second lien loan, in addition to approximately
$162 million of equity will be used to purchase Sheridan's
existing equity and debt, and cover related fees and expenses.
"After the proposed transaction, Sheridan's financial profile will
be in line with the rating category, but has little cushion for
potential operating difficulties," said Standard & Poor's credit
analyst Jesse Juliano.
The low speculative-grade ratings on privately held Sheridan
reflect:
(1) the company's narrow operating focus, and
(2) relatively high payor and regional concentrations.
The ratings also reflect:
(1) Sheridan's exposure to malpractice risk,
(2) the threat of increased competition, and
(3) the company's high debt burden.
These concerns are partially offset by an industry trend toward
physician outsourcing, the company's leading niche positions in
anesthesia and neonatology staffing, and Sheridan's consistent
organic growth.
SIERRA PACIFIC: Moody's Assigns Ba2 Ratings on $325M Facilities
---------------------------------------------------------------
Moody's Investors Service affirmed the ratings for Sierra Pacific
Resources (SPR; Sr. Unsec. B2) and those of its utility
subsidiaries, Nevada Power Company (NPC; Sr. Sec. Ba2) and Sierra
Pacific Power Company (SPPC; Sr. Sec. Ba2). At the same time,
Moody's revised the rating outlooks for the three companies to
stable from negative.
In addition, Moody's assigned Ba2 ratings to Nevada Power's
recently closed $250 million secured revolving credit facility and
Sierra Pacific Power's planned $75 million secured revolving
credit facility.
The change in rating outlook to stable from negative for Sierra
Power Resources, Nevada Power, and Sierra Pacific Power reflects:
(1) expected improvement in the utilities' financial and
operating performance following supportive regulatory
decisions;
(2) a recent favorable development in the court proceedings
relating to Enron's claims for liquidated damages under
terminated power contracts with Nevada Power and Sierra
Pacific Power; and
(3) progress in filling the utilities' short supply position.
The United States District Court of the Southern District of New
York recently rendered a decision to vacate the judgment
previously entered by the Bankruptcy Court for the Southern
District of New York against Nevada Power and Sierra Pacific Power
in favor of Enron Power Marketing, Inc. for liquidated damage
claims related to the terminated power supply agreements with the
utilities. In remanding the case back to the Bankruptcy Court,
the District Court judge called for fact finding on several
issues, including but not limited to:
(1) whether Enron was reasonable in making its demands for
collateral;
(2) whether the utilities' assurances were "reasonably
satisfactory"; and
(3) whether Enron even had the ability to perform under the
contracts when they were terminated.
Although the final outcome of this case remains in question, the
parties to the case have agreed that the mostly non-cash
$335 million of collateral currently held in escrow to facilitate
the utilities' appeal process will remain sufficient throughout
the proceedings. Given the circumstances surrounding this case,
Moody's believes that it is unlikely to be resolved in the near
term and therefore should not pose a funding risk over that time
horizon.
Meanwhile, Moody's notes that Sierra Power Resources and its
utilities have completed financings for repayment or early
refinancing of obligations, thereby mitigating earlier concerns
about near-term refinancing risks. Furthermore, additional
revenues approved in Nevada Power's and Sierra Pacific Power's
most recent general and deferred energy rate cases are providing a
boost to their respective cash flows and represent signs of more
supportive treatment by the Public Utility Commission of Nevada.
As a result, Moody's expects funds from operations coverage of
interest for the companies to move comfortably above 2 times over
the next year or so.
The Public Utility Commission also recently approved Nevada
Power's amended integrated resource plan and related long-term
financing request. The regulatory ruling supports the utility's
decision to fill some of its short supply position by purchasing
the partially completed 1,200 MW natural gas combined-cycle Moapa
generation plant from Duke Energy. Long-term financing authority
was also granted to allow Nevada Power to pay the $182 million
acquisition price and to fund the roughly $375 million of
additional costs to complete the construction by the summer peak
period of 2006. In yet another sign of supportive regulation by
the PUCN, Nevada Power's request for the Moapa plant to be
designated as a "critical facility" to meet peak demand was
approved. In doing so, the Public Utility Commission provides
Nevada Power with an opportunity to earn at least a 2% premium
over the current 10.25% allowed return on equity for this asset.
An additional 1% premium ROE will be available if Neavada Power
meets certain in service target dates. As this asset is placed
into Nevada Power's rate base, the supportive regulatory treatment
should provide a further boost to cash flow and leave Nevada Power
less dependent on more volatile wholesale market power purchases.
The Ba2 ratings assigned to the recently closed $250 million and
planned $75 million revolving credit facilities for Nevada Power
and Sierra Pacific Power, respectively, reflect the pari-passu
status of the lenders under the utilities' respective General and
Refunding Mortgage Bond Indentures. Nevada Power borrowed
$150 million under the new three-year facility, which together
with cash on hand was used to fund the initial purchase of the
Moapa plant. The currently undrawn balance is available for
general corporate purposes, including Moapa-related construction
costs not otherwise covered by internally generated funds.
Moody's notes that Nevada Power may upsize the $250 million
facility by $100 million to replace its more expensive
$100 million synthetic credit facility, depending on market
interest during the syndication process. Furthermore, Nevada
Power plans to access the long-term debt markets in early 2005 to
repay the drawn amounts under the revolver, thereby freeing up
access to the facility for working capital needs.
In Sierra Pacific Power's case, the $75 million three-year
facility will be a lower-cost replacement for the company's
existing $50 million synthetic bank revolver and will be used for
general corporate purposes. Sierra Pacific Power's facility will
be reduced to $50 million after 364 days from closing, unless
additional Public Utility Commission's long-term financing
authority is obtained beforehand.
The revolving facilities for both Nevada Power and Sierra Pacific
Power have similar terms and conditions, including:
(1) limitations on debt,
(2) restrictions on dividends, and
(3) financial covenants calling for a minimum 2x interest
coverage test and a maximum 68% debt level.
Based on expected improvement in utility financial performance,
Moody's expects ample headroom to be maintained against the
financial covenants.
Improvement in the outlook or ratings of Sierra Power Resources,
Nevada Power, and Sierra Pacific Power could result if the
utilities continue to strengthen their cash flow generating
capabilities as a result of continuation of more supportive
treatment from the Public Utility Commission in expected future
proceedings. Improvement could also stem from a victory by Nevada
Power and Sierra Pacific Power in overcoming Enron's claims.
Favorable developments in other lawsuits and the Federal Energy
Regulatory Commission 206 complaint proceedings would also help in
this regard.
Ratings affirmed for Sierra Pacific Resources include:
* B2 Senior unsecured debt and issuer ratings
* (P)B2 Shelf registration for senior unsecured debt
* (P)Caa1 Shelf registration for junior subordinated debt
* (P)Caa1 Shelf registration for Trust Preferred Securities of
Sierra Pacific Resources Capital Trusts I and II
Ratings affirmed for Nevada Power Company include:
* Ba2 Senior secured debt
* Ba2 Senior secured bank facility
* B1 Senior unsecured debt and Issuer ratings
* B3 Trust preferred securities of NVP Capital Trusts I and III
* Ratings affirmed for Sierra Pacific Power Company include:
* Ba2 Senior secured debt
* Ba2 Senior secured bank facility
* B1 Issuer rating
* Caa1 Preferred stock
Sierra Pacific Resources is a holding company, whose principal
subsidiaries, Nevada Power Company and Sierra Pacific Power
Company, are electric, and electric and gas utilities,
respectively. Sierra Pacific Resources also holds relatively
modest nonutility investments through other subsidiaries. Sierra
Pacific Resources' headquarters is in Reno, Nevada.
SIERRA PACIFIC: S&P Assigns BB Rating on $425M Secured Facilities
-----------------------------------------------------------------
Standard & Poor's Ratings Services assigned its 'BB' rating to the
proposed $350 million secured revolving credit facility at Nevada
Power Co. (NPC; B+/Negative/--) and $75 million secured revolving
credit facility at Sierra Pacific Power Co. (SPP; B+/Negative/--).
The outlook is negative.
Both bank agreements, which will be led by Union Bank of
California, will be for three years, and will be secured by the
utilities' general and refunding -- G&R -- bonds. Standard &
Poor's also assigned its '1' recovery rating to the bank
facilities, indicating a high expectation of full recovery of
principal. The '1' rating incorporates the overcollateralization
of the G&R bonds that secure the bank facilities with utility
property at the utilities.
Nevada Power will use the line to acquire Duke Energy's Moapa gas
plant and to fund ongoing construction before being taken out with
long-term financing, and to replace a $100 million synthetic bank
loan facility. Sierra Pacific Power will use the proceeds to
replace its outstanding $50 million synthetic bank loan facility.
These facilities, which were negotiated earlier this year, were
structured facilities where funds were always drawn down and
invested in money market instruments when the utilities did not
need the funds. Thus, the facilities cost Nevada Power and Sierra
Pacific Power 250 basis points when funds were not drawn and LIBOR
plus 250 basis points for borrowings. The proposed bank lines are
true revolvers and thus considerably more economic, with only a
small commitment fee for undrawn funds. Sierra Pacfic Power's
revolver will decrease to $50 million if the utility fails to
acquire long-term debt authority from the Public Utilities
Commission of Nevada for the additional $25 million within a year.
Ratings on Sierra Pacific Resources and its utility subsidiaries
Nevada Power Co. and Sierra Pacific Power Co. reflect a weak
consolidated business and financial profile. An uncertain but
stabilizing regulatory climate in Nevada and a short generation
capacity position that creates exposure to the volatile wholesale
power markets are the principal sources of business risk for
Sierra Pacific.
"The negative outlook reflects a financial profile that is still
slightly weak for the rating and the risk posed by the exposure to
wholesale power markets until [Nevada Power] can build new
generation," said Standard & Poor's credit analyst Swami
Venkataraman. "This exposure may result in power procurement
costs significantly higher than forecast and cause liquidity and
cost recovery issues."
The negative outlook also reflects the risk of a negative outcome
in the Enron litigation that would require SRP to make the
additional $275 million in termination payments, and the prospect
of a partial or complete disallowance of these costs during a
subsequent prudence review by the Public Utilities Commission.
However, with much improved prospects for not having to make
termination payments following the recent federal court ruling and
continued collection of deferred power costs, Sierra Pacific and
its subsidiaries' outlook could be revised to stable if
consolidated financial ratios improve to levels consistent with
the 'B+' corporate credit rating.
SPECTRASITE: Moody's Places Ba3 Rating on $900M Sr. Sec. Facility
-----------------------------------------------------------------
Moody's Investors Service upgraded the senior implied rating of
SpectraSite, Inc. to Ba3 from B1, and the company's senior
unsecured debt ratings to B2. Moody's also assigned a Ba3 rating
to the proposed $900 million in senior secured credit facilities
of SpectraSite Communications, Inc. among other ratings actions.
The outlook for all these ratings is positive.
SpectraSite, Inc.
* Senior implied rating upgraded to Ba3 from B1
* Issuer rating upgraded to B2 from B3
* $200 million 8.25% Senior Notes due 2010 upgraded to B2 from
B3
SpectraSite Communications, Inc.
* $200 million senior secured revolving credit assigned Ba3
* $300 million senior secured delayed draw term loan assigned
Ba3
* $400 million senior secured term loan assigned Ba3
* Existing credit facilities due 2007 ratings withdrawn
The upgrade of the senior implied rating to Ba3 reflects the
strong and consistent cash flow growth, both historical and
projected, of the company as well as the expiration last August of
a significant tower purchase commitment that went substantially
unutilized. The Ba3 senior implied rating reflects the strong
financial profile of the company, with substantial free cash flows
and very good liquidity, combined with the low business risk of
the communications tower leasing business model. The rating also
reflects Moody's expectation that management's stated intention to
keep the ratio of total debt to EBITDA between 4 to 5 times (up
from approximately 3.5 times currently) will hold over the ratings
horizon (two to three years).
The Ba3 rating on the $900 million of new senior secured credit
facilities of SpectraSite Communications, Inc. (a subsidiary of
the ultimate parent, SpectraSite, Inc.) reflect the preponderance
of these obligations in the company's capital structure. While
only half of that total amount is expected to be drawn at closing,
this will represent close to 70% of balance sheet debt. Further,
Moody's expects SpectraSite to utilize a portion of the undrawn
availability to refinance the holding company notes, to repurchase
stock or pay dividends, or to make additional investments in the
business.
The B2 rating on the 8.25% Senior Notes due 2010 issued by
SpectraSite, Inc. reflect their structural subordination to
outstandings under the above mentioned secured credit facility as
well as other liabilities of the companies subsidiaries.
In 2003, SpectraSite generated $102.9 million in cash provided by
operations and spent $24.5 million on capital expenditures and
another $28.5 million to acquire additional towers. In 2004,
SpectraSite should generate over $140 million in cash from
operations and spend approximately $50 million of capital
expenditures and another $53.6 million to complete the SBC tower
purchase commitment. Going forward, cash from operations will
increase as revenue grows and interest expense declines due to the
current refinancing. While capital expenditures are likely to
increase from current levels, Moody's assumes SpectraSite will
engage in no large scale acquisition spending. Thus Moody's
expects free cash flow (defined as cash from operations less
capital expenditures) to exceed $100 million in 2005, or 15% of
the $650 million of balance sheet debt.
Moody's ratings outlook is positive. SpectraSite is likely to
seek to return value to its shareholders, and the new credit
facility provides ample flexibility to do so. The ratings
pressure would likely result should SpectraSite institute a
dividend policy that would reduce the ratio of free cash flow to
debt below 10%, increase leverage through large acquisitions, or
should revenue growth subside. The ratings could be improved
should SpectraSite devote a large portion of its free cash flow to
permanent debt repayment.
Based in Cary, North Carolina, SpectraSite, Inc. is an independent
owner and operator of approximately 7,800 wireless communications
towers in the US with LTM revenues of $333 million.
STAPP TOWING CO: List of Debtor's 20 Largest Unsecured Creditors
----------------------------------------------------------------
Stapp Towing Co., Inc. released a list of its 20 Largest Unsecured
Creditors:
Entity Nature of Claim Claim Amount
------ --------------- ------------
John O'Keefe Claim Amount $1,875,283
c/o Dale Jefferson
Martin, Disiere, Jefferson &
Wisdom, LLP
808 Travis, Ste. 1800
Houston, TX 77002
American Express Claim Amount $38,812
Union Planters Bank Claim Amount $34,894
Komatsu Financial Claim Amount $33,765
J.A.M. Marine Service Claim Amount $31,929
Sam's Club Claim Amount $22,386
Diesel Engine and Parts Claim Amount $21,930
Citicapital Claim Amount $16,679
Service Pump and Company Claim Amount $10,345
Comp USA Claim Amount $10,000
Lamorte Burns & Company Claim Amount $9,868
Apache Oil Company Claim Amount $9,845
Hertz Equipment Rental Claim Amount $9,642
RVW Claim Amount $9,479
Kelly Wire Rope Claim Amount $8,859
Mann Frankfort Claim Amount $8,300
Gulf Coast Ignition Claim Amount $8,056
United Diesel, Inc. Claim Amount $8,005
Jotun Paints Claim Amount $7,881
R. C. Schmidt & Sons Claim Amount $7,562
Headquartered in Dickinson, Texas, Stapp Towing Co., Inc. provides
tugboat and towing services. The Company filed for chapter 11
protection (Bankr. S.D. Tex. Case No. 04-82115) on October 11,
2004. Thomas Baker Greene, III, Esq., at Kajander & Greene,
represents the Company in its restructuring efforts. When the
Debtor filed for protection from its creditors, it estimated both
assets and debts of more than $1 Million.
TECNET INC: Trustee Hires Steve Donosky as Real Estate Broker
-------------------------------------------------------------
The U.S. Bankruptcy Court for the Northern District of Texas,
Dallas Division, gave Scott M. Seidel, the Chapter 7 Trustee in
Tecnet, Inc.'s bankruptcy proceeding, permission to employ Steve
Donosky and Steve Donosky Company as his real estate agent and
broker.
The Trustee tells the Court that he employed Steve Donosky Company
to specifically assist him in marketing and securing a fair
purchase price for Tecnet, Inc.'s property located at 10050
Shoreview Road, Dallas, Texas 75238.
The Trustee adds that Steve Donosky Company is qualified to act as
real estate broker because of its familiarity with Tecnet, Inc.'s
property and the real estate market in the area.
The Trustee explains that Steve Donosky Company will be paid a
commission of six percent for a completed sale of Tecnet, Inc.'s
property and is authorized to share this commission with outside
real estate brokers that may assist with the sale of the property.
Steve Donosky Company does not represent any interest adverse to
the Trustee, the Debtor or its estate.
Headquartered in Garland, Texas, TecNet, Inc., provides
telecommunication services, filed for chapter 11 protection on
April 8, 2004 (Bankr. N.D. Tex. Case No. 04-34162) and its case
was converted to a chapter 7 liquidation proceeding on
June 4, 2004. Scott M. Siedel serves as the chapter 7 Trustee.
Mark A. Weisbart, Esq., represents the Debtor in its restructuring
efforts. When the Company filed for protection from its
creditors, it listed estimated debts of over $10 million and
estimated debts of over $100 million.
THAXTON GROUP: Southern Management Wants to Obtain $30MM DIP Loan
-----------------------------------------------------------------
Thaxton Group, Inc., intends to structure a chapter 11 plan under
which Southern Management Corp. emerges as an intact and viable
business. Southern Management needs financing between now and its
emergence from chapter 11 and will need access to working capital
thereafter. Bank of America offered to lend Southern Management
$30 million under the terms of a DIP Facility that will roll into
a $45 million Exit Facility. Thaxton asks the U.S. Bankruptcy
Court for the District of Delaware for authority to enter into the
loan agreement, pay BofA a $225,000 DIP Loan Commitment Fee now,
and pay a $112,500 Exit Loan Commitment Fee when the exit
financing facility springs to life.
Headquartered in Lancaster, South Carolina, The Thaxton Group,
Inc., is a diversified consumer financial services company. The
Company filed for Chapter 11 protection on October 17, 2003
(Bankr. Del. Case No. 03-13183). The Debtors are represented by
Michael G. Busenkell, Esq., and Robert J. Dehney, Esq., at Morris,
Nichols, Arsht & Tunnell.
TOM'S FOODS: S&P Slices Corporate Credit Rating to CCC from B
-------------------------------------------------------------
Standard & Poor's Ratings Services lowered its ratings on
privately owned regional snack food manufacturer and distributor
Tom's Foods Inc., including its corporate credit rating to 'CCC'
from 'B'. At the same time, the ratings were removed from
CreditWatch, where they were placed Aug. 20, 2004. The outlook is
negative.
Standard & Poor's estimates that the Columbus, Georgia-based
company had about $66.4 million of total debt outstanding at
September 11, 2004.
The downgrade reflects Standard & Poor's concerns about Tom's
Foods' ability to refinance, in a timely manner, its $17 million
revolving credit facility due Oct. 22, 2004, and its $60 million
10.5% senior secured notes due Nov. 1, 2004.
The prior termination date for the revolving credit facility was
August 31, 2004, and the company extended this to Sept. 30, 2004,
while it worked on a transaction to refinance both the credit
facility and notes. The company obtained a subsequent extension
through October 22, 2004.
"We will continue to monitor Tom's Foods liquidity position and
its ability to meet these obligations when they become due," said
Standard & Poor's credit analyst Alison Birch.
TRUE TEMPER: Soft Market Trends Prompt Moody's to Shave Ratings
---------------------------------------------------------------
Moody's Investors Service downgraded the debt ratings of True
Temper Sports, Inc., reflecting soft trends in the golf equipment
market, which have weakened the company's financial position and
slowed debt repayment expectations. The rating outlook remains
stable.
These ratings were downgraded:
* Senior implied rating to B2 from B1;
* $20 million senior secured revolving credit facility due
March 15, 2009 to B2 from B1;
* $110 million senior secured term loan b due March 15, 2011 to
B2 from B1;
* $125 million 8 3/8% senior subordinated notes due March 15,
2011 to Caa1 from B3;
* Senior unsecured rating to B3 from B2.
The ratings downgrade reflects ongoing pressure on profits and
cash flows, which is not allowing for credit measures or debt
reduction at the pace consistent with higher rating levels.
Severe second quarter declines in golf shaft sales (approximately
94% of its total revenues) negatively impacted profitability,
resulting in an increase in LTM debt-to-EBITDA to approximately
7x, versus Moody's expectation for rapid deleveraging from pro
forma levels of 6.7x at the time of its recapitalization earlier
this year. Management attributes the sales declines to overall
softness in the golf industry and delays of new product
introductions by the golf equipment manufacturers. Further, the
performance sports segment, True Temper's prospective source of
diversification away from the golf market, also performed poorly
in the second quarter. Moody's remains concerned that profits
will remain under pressure during the remainder of the year and
into 2005, particularly as the company looks to manage down
increased inventory levels and faces uncertain discretionary
consumer spending and potential volatility in raw material prices.
Importantly, Moody's now expects free cash flow as a percentage of
funded debt in the mid-to-high single digit range, versus earlier
expectations for double-digits levels that would correspond with
rapid deleveraging.
Notwithstanding these concerns, the stable ratings outlook
reflects Moody's expectation that True Temper's positive cash flow
profile, supportive bank actions, and ongoing rating strengths
comfortably position the new rating levels over the coming
quarters. The company's healthy margins, modest capital spending
requirements, low borrowing costs, and lack of significant cash
tax obligations, are likely to provide debt reduction capacity
consistent with the revised rating levels. However, financial
covenants have been reset to achievable levels to provide
continued access to borrowing lines (revolver remains undrawn).
The stable outlook is further supported by True Temper's
long-standing dominant market position and innovation capability
in the steel golf shaft market, and by management's proven track
record of disciplined cost controls, working capital management,
and debt reduction during difficult operating periods.
Moody's revised ratings allow for modest continued deterioration
over the next few quarters, but more severe and protracted
deterioration would likely result in negative rating actions.
Moody's expects True Temper to remain cash flow positive near or
above the 5 to 7% range relative to funded debt in order to remain
at its current rating with a stable outlook. Over the next
12 months, Moody's anticipates limited upward rating pressure.
True Temper Sports, Inc., a wholly owned subsidiary of True Temper
Corporation with corporate headquarters in Memphis, Tennessee, is
the leading manufacturer of steel golf club shafts. The company
supplies steel shafts to all major club designers and
distributors, with an estimated worldwide share of 68% according
to management's estimates. The company also participates in the
premium-end of the graphite golf shaft market and manufactures
tubular components for other recreational sports including hockey,
lacrosse and bicycling. Net sales for the twelve-month period
ended June 27, 2004 were approximately $108 million.
TRUMP HOTELS: Cuts New Deal to Underpin Chapter 11 Prepack in Nov.
------------------------------------------------------------------
Trump Hotels & Casino Resorts, Inc. (OTCBB: DJTC.OB), Donald J.
Trump, and holders of approximately 57% of Trump Atlantic City
Associates' First Mortgage Notes due 2006, approximately 68% of
Trump Casino Holdings, LLC's First Priority Mortgage Notes due
2010 and approximately 81% of Trump Casino Holdings, LLC's Second
Priority Notes due 2010 entered into a Support Agreement in
connection with the recapitalization of the Company pursuant to a
plan of reorganization. As part of the Plan, Donald J. Trump, who
will remain the Company's Chairman and Chief Executive Officer,
will invest approximately $71.4 million into the recapitalized
Company. Mr. Trump's investment will consist of a $55 million cash
equity investment and the conversion of approximately $16.4
million principal amount of TCH Second Priority Notes owned by
him into shares of the recapitalized Company's common stock. Upon
consummation of the Plan, Mr. Trump is expected to remain the
largest individual stockholder of the Company, with beneficial
ownership of approximately 27% of the Company's common stock.
The Plan calls for an approximately $400 million reduction in the
Company's indebtedness with a reduced interest rate of 8.5%,
representing annual interest expense savings of approximately $98
million. The Plan also permits a working capital facility of up to
$500 million secured by a first priority lien on substantially all
of the Company's assets (the "Working Capital Facility"), which is
expected to allow the Company to refurbish and expand its current
properties and permit the Company to enter into new and emerging
jurisdictions, among other uses.
Donald J. Trump, the Company's Chief Executive Officer and
Chairman, commented on the Plan, "I have never been more excited
about the prospects for our Company. We now have the capacity to
significantly expand the Trump brand into the ever-evolving gaming
industry. I anticipate THCR achieving the same level of success as
my other business and real estate endeavors." Scott C. Butera, the
Company's Executive Vice President of Corporate and Strategic
Development, added, "We are very pleased that we have come to a
mutually beneficial agreement with our bondholders which
successfully achieves our financial and strategic objectives and
provides significant value to our stakeholders. In addition, we
have developed strong working relationships with many
institutional investors who we hope will continue to support the
growth of our operations and brand. We are now positioned to
capitalize on the numerous opportunities present in today's gaming
and entertainment industry." Mr. Butera continued, "The proposed
capital structure streamlines our organization and is expected to
provide for increased operational efficiencies and financial
flexibility. It will also make our Company easier to understand to
the public and investment community."
Under the Plan, the holders of the TAC Notes and the unaffiliated
holders of the TCH Notes would exchange their notes (approximately
$1.8 billion aggregate principal amount) for an aggregate of
approximately $74 million in cash, an aggregate of $1.25 billion
principal amount of a new series of 8.5% senior second priority
mortgage notes with a ten-year maturity and secured by a lien on
substantially all of the Company's assets, subject to the Working
Capital Facility (the "New Notes"), and approximately $395 million
of common stock of the Company valued at the same per share
purchase price as Mr. Trump's investment (assuming the
unaffiliated stockholders of the Company fully exercise the
warrants discussed below).
Existing unaffiliated stockholders of the Company would retain
their interests in their current common stock (which would be
diluted to 0.05% of the total equity interests of the
recapitalized Company and are expected to be reclassified pursuant
to a reverse stock split upon consummation of the Plan). The
existing unaffiliated stockholders would also receive one-year
warrants upon consummation of the Plan to purchase common stock at
the same per share purchase price as Mr. Trump's investment.
Proceeds from the exercise of the warrants (as well as any
remaining shares of the $50 million of the Company's common stock
reserved for warrant exercises, if not all of the warrants are
exercised) would be distributed to the holders of the TAC
Notes. If all of the warrants are exercised, the Company's
unaffiliated stockholders would hold approximately 8.3% of the
Company's common stock, the holders of TAC Notes would hold
approximately 63.7% of the Company's common stock and the holders
of the TCH First Priority Notes would hold approximately 1.4% of
the Company's common stock, each on a fully-diluted basis.
Houlihan Lokey Howard & Zukin has been serving as the financial
advisor to the TAC Noteholders involved in the discussions.
David R. Hilty, Managing Director in the Financial Restructuring
Group of Houlihan Lokey Howard & Zukin, commented, "This
recapitalization puts the Company in a strong financial position
with immediate access to significant capital. The TAC Noteholders
are enthusiastic to be teaming up with Mr. Trump and to capitalize
on the many opportunities generated by the Trump brand."
Chanin Capital Partners has been serving as the financial advisor
to the TCH Noteholders involved in the discussions. "We are
pleased that the Company has reached a consensual recapitalization
with such a large percentage of its stakeholders. The transaction
will position THCR for future growth and expansion," stated
Russell A. Belinsky, Senior Managing Director of Chanin Capital
Partners.
Upon consummation of the Plan, the Company is expected to transfer
to Mr. Trump the former Trump's World's Fair site in Atlantic
City, New Jersey and the Company's 25% interest in the Miss
Universe pageant. The Company would also enter into a development
agreement with the Trump Organization, pursuant to which the Trump
Organization would have a right of first offer to serve as project
manager, construction manager and/or general contractor with
respect to construction and development projects for casinos and
casino hotels and related lodging at the Company's existing and
future properties. Mr. Trump has also agreed to grant the Company
and its subsidiaries a new trademark license agreement for use of
his name and likeness as well as enter into a services agreement
with the Company.
The Support Agreement contemplates that the Company would commence
reorganization proceedings by late November 2004 and that the Plan
would be confirmed by mid-April 2005 and consummated by May 1,
2005. The Company intends to arrange for up to $100 million
interim financing during the proceedings.
Gregg H. Feinstein, Director of Mergers & Acquisitions at
Jefferies & Company, who advised the Special Committee of
independent Directors of the Company's Board of Directors, noted,
"This transaction is the culmination of a significant effort on
the part of many constituencies. The public stockholders will have
a compelling opportunity to share in the value which the Company
believes will be generated going forward."
The implementation of the Plan is subject to a number of
conditions typical in similar transactions including, among other
things, the negotiation of the investment agreement and other
documentation relating to the Company's arrangements with Donald
J. Trump, the Plan and accompanying disclosure statement, the
indenture governing the New Notes and other transaction documents.
The Plan would also be subject to applicable government approvals,
including court approval of the Plan and related solicitation
materials, gaming authority approvals and other relevant filings.
The definitive terms and conditions of the Plan would be outlined
in a disclosure statement that would be sent to security holders
entitled to vote on the Plan after confirmation by the court.
UBS Investment Bank has been serving as the Company's financial
advisor in connection with the Plan. Tom Benninger, Global Head of
UBS' Restructuring Group, commented, "This transaction was
designed to provide many substantial benefits for the Company and
its constituents. We are pleased to have been involved in the
development of such a promising plan."
The recapitalized Company intends to apply to have its new common
stock listed on the New York Stock Exchange or other national
securities exchange upon the consummation of the Plan.
About the Company
Through its subsidiaries, THCR owns and operates four properties
and manages one property under the Trump brand name. THCR's owned
assets include Trump Taj Mahal Casino Resort and Trump Plaza Hotel
and Casino, located on the Boardwalk in Atlantic City, New Jersey,
Trump Marina Hotel Casino, located in Atlantic City's Marina
District, and the Trump Casino Hotel, a riverboat casino located
in Gary, Indiana. In addition, the Company manages Trump 29
Casino, a Native American owned facility located near Palms
Springs, California. Together, the properties comprise
approximately 451,280 square feet of gaming space and 3,180 hotel
rooms and suites. The Company is the sole vehicle through which
Donald J. Trump conducts gaming activities and strives to provide
customers with outstanding casino resort and entertainment
experiences consistent with the Donald J. Trump standard of
excellence. THCR is separate and distinct from Mr. Trump's real
estate and other holdings.
W.R. GRACE: Sept. 30 Balance Sheet Upside-Down by $117.7 Million
----------------------------------------------------------------
W. R. Grace & Co. (NYSE:GRA) reported that 2004 third quarter
sales totaled $579.9 million compared with $521.0 million in the
prior year quarter, an increase of 11.3%.
Revenue from higher volumes and improved product mix accounted for
most of the increase, with favorable currency translation and
acquisitions also contributing. Grace reported third quarter net
income of $48.0 million, compared with a loss of $9.9 million, in
the third quarter of 2003. The 2004 third quarter includes:
-- a noncore pre-tax charge of $20.0 million to account for an
increase in Grace's estimated liability for vermiculite-
related environmental costs, and
-- a noncore pre-tax net gain of $50.0 million from the
settlement of litigation relating to the contamination of a
non-operating parcel of land.
Pre-tax income from core operations in the third quarter of 2004
was $57.7 million compared with $50.3 million in the third quarter
of 2003, a 14.7% increase. The incremental margin from added
sales together with successful productivity initiatives offset
higher costs of petroleum-based raw materials, transportation
fuels and energy. "Our businesses continued to deliver solid
growth and productivity," said Grace's Chairman and Chief
Executive Officer Paul J. Norris. "Sales and operating income
from our Davison businesses were particularly strong, reflecting
increased demand for our higher performing products in Europe and
North America and lower operating costs from more efficient
manufacturing processes. However, the high cost of commodity-
based raw materials and energy are likely to continue to dampen
near-term profitability."
For the first nine months of 2004, Grace reported sales of
$1,670.8 million, a 13.7% increase over 2003. Favorable currency
translation and acquisitions accounted for 6.1 percentage points
of the increase. Net income through September 2004 was
$85.1 million, compared with a net loss of $5.7 million, for the
comparable 2003 period. The year-to-date improvement in net
income is primarily attributable to higher pre-tax income from
core operations, which was $145.5 million in 2004 compared with
$97.4 million in 2003, a 49.4% increase, and from the net gain on
the settlement of property litigation described above. Operating
margins were 8.7% versus 6.6% last year. The increase in
operating profit and margins was principally attributable to
strong sales growth, cost structure improvements from productivity
initiatives and favorable foreign currency translation.
At September 30, 2004, W.R. Grace's balance sheet showed a
$117.7 million, compared to a $163.8 million deficit at
December 31, 2003.
Core Operations
Davison Chemicals
Refining Technologies and Specialty Materials
Third quarter sales for the Davison Chemicals segment were
$303.8 million, up 13.8% from the prior year quarter, mainly
reflecting volume increases from growth programs, improved
economic conditions, and acquisitions. Excluding the effects of
favorable currency translation, sales were up 11.0% for the
quarter. Sales of refining technologies products, which include
fluid cracking catalysts, hydroprocessing catalysts and
performance additives, were $169.1 million in the third quarter,
up 9.4% compared with the prior year quarter (7.8% after
accounting for favorable currency translation). Most of the
increase resulted from favorable product mix factors, including
sales of higher performing catalysts, and added revenue from the
pass-through of certain raw material cost increases.
Sales of specialty materials products, which include silica-based
engineered materials, specialty catalysts and separations
products, were $134.7 million, up 19.7% compared with the third
quarter of 2003, reflecting strong volume from specialty catalysts
and engineered materials in all key regions. Sales from the
acquisition of Alltech International (completed August 2, 2004)
and favorable currency translation, primarily from the stronger
Euro, contributed about 11.3 percentage points of the increase.
Operating income of the Davison Chemicals segment for the third
quarter was $42.6 million, 31.1% higher than the 2003 third
quarter. Operating margin was 14.0%, higher than the prior year
quarter by 1.8 percentage points. The increase in operating
income was driven primarily by improved sales in North America and
in Europe, as well as favorable foreign currency effects. Third
quarter operating margin was enhanced by increased sales of a
higher margin product mix and lower manufacturing costs,
offsetting increases in the cost of raw materials and energy.
Year-to-date sales for the Davison Chemicals segment were
$872.5 million, up 13.7% from 2003 (excluding currency translation
impacts, sales were up 9.6%). Year-to-date operating income was
$112.1 million, compared with $80.1 million for the prior year, a
40.0% increase. Year-to-date operating results reflect similar
economic conditions, product mix factors and cost improvements to
those experienced in the third quarter.
Performance Chemicals
Construction Chemicals, Building Materials
Sealants and Coatings
Third quarter sales for the Performance Chemicals segment were
$276.1 million, up 8.7% from the prior year quarter. Favorable
currency translation accounted for 2.7 percentage points of the
increase. Sales of specialty construction chemicals, which
include concrete admixtures, cement additives and masonry
products, were $139.7 million, up 16.3% versus the year-ago
quarter (13.6% excluding favorable currency translation impacts).
Revenues from an October 1, 2003 acquisition in Germany accounted
for about one-third of the increase. Sales were up in all
geographic regions, mainly reflecting the continued success of
growth initiatives. Sales of specialty building materials, which
include waterproofing and fire protection products, were
$65.6 million, up 0.9% compared with a very strong third quarter
of 2003 (down 1.4% excluding favorable currency translation
impacts). The third quarter results reflect increased sales of
waterproofing materials, particularly specialty below-grade
waterproofing and tapes for window and door flashing. Sales of
fire protection products were down year-over-year mainly due to
hurricane-related project delays. Sales of specialty sealants and
coatings, which include container sealants, coatings and polymers,
were $70.8 million, up 2.8% compared with the third quarter of
2003 (about even with the prior year excluding favorable currency
translation impacts). Operating income for the Performance
Chemicals segment was $39.5 million, a record quarter and up 2.3%
compared with a strong prior year, driven primarily by sales
growth. Operating margin of 14.3% was 0.9 percentage points lower
than the 2003 third quarter margin, attributable to higher raw
material and transportation costs, partially offset by
productivity gains.
Year-to-date sales of the Performance Chemicals segment were
$798.3 million, up 13.8% from 2003 (excluding currency translation
impacts, sales were up 9.6%). Year-to-date operating income was
$106.0 million compared with $76.5 million for the prior year, a
38.6% increase, reflecting strong sales in all regions, including
sales from the German acquisition, and positive results from
productivity and cost containment initiatives.
Corporate Costs and Other Matters
Third quarter corporate costs related to core operations were
$24.4 million compared with $20.8 million in the prior year
quarter; year-to-date corporate costs were $72.6 million compared
with $59.2 million last year. The third quarter and year-to-date
increases are primarily attributable to performance-related
compensation.
These special items are reflected in the third quarter:
1) Grace recorded a net gain of $50.0 million from the
settlement of litigation under an agreement with Honeywell
International Inc. related to environmental contamination of
a non-operating parcel of land.
2) Grace recorded a $20.0 million increase in its estimated
liability for vermiculite-related environmental costs to
reflect Grace's current understanding of the timeframe and
related costs necessary to remediate properties in and
around Libby, Montana.
Cash Flow and Liquidity
Grace's year-to-date cash flow provided by operating activities
was $167.4 million for 2004, compared with $63.9 million for the
comparable period of 2003. Year-to-date pre-tax income from core
operations before depreciation and amortization in 2004 was $225.9
million, 30.2% higher than 2003. These results reflect the higher
income from core operations described. Cash used for investing
activities was $92.6 million through September 2004, primarily for
capital replacements and business acquisitions. In addition,
Grace contributed $19.8 million to its qualified U.S. pension
plans as permitted by a Bankruptcy Court order issued in August.
At September 30, 2004, Grace had available liquidity in the form
of cash ($385.1 million), net cash value of life insurance
($97.1 million) and unused credit under its debtor-in-possession
facility ($213.5 million). Grace believes that these sources and
amounts of liquidity are sufficient to support its strategic
initiatives and Chapter 11 proceedings for the foreseeable future.
Headquartered in Columbia, Maryland, W.R. Grace & Co., --
http://www.grace.com/-- supplies catalysts and silica products,
especially construction chemicals and building materials, and
container products globally. The Debtors filed for chapter 11
protection on April 2, 2001 (Bankr. Del. Case No: 01-01139).
James H.M. Sprayregen, Esq., at Kirkland & Ellis and Laura Davis
Jones, Esq., at Pachulski, Stang, Ziehl et al. represent the
Debtors in their restructuring efforts.
W.R. GRACE: Wants to Restrict Equity Trading to Preserve NOLs
-------------------------------------------------------------
To preserve the future tax benefits related to its significant
U.S. federal net operating losses, W. R. Grace & Co. (NYSE:GRA)
asked the U.S. Bankruptcy Court for the District of Delaware
impose notice requirements and potential restrictions on stock
acquisitions by those persons or entities that:
(i) currently own 4.75% or more of Grace common stock or
(ii) seek to acquire 4.75% or more of Grace common stock.
Pursuant to the Order, Grace would have the right to object in
Bankruptcy Court to such persons or entities acquiring Grace
common stock if such acquisition would pose a material risk of
adversely affecting Grace's ability to utilize its NOLs. Under
U.S. tax rules, NOLs are subject to potentially severe limitations
in the event of ownership changes triggering a change in control
(as defined under the Internal Revenue Code). The Order would
remain in effect until Grace emerges from Chapter 11.
On April 2, 2001, Grace and 61 of its United States subsidiaries
and affiliates, including its primary U.S. operating subsidiary W.
R. Grace & Co.-Connecticut, filed voluntary petitions for
reorganization under Chapter 11 of the United States Bankruptcy
Code in the United States Bankruptcy Court for the District of
Delaware. Grace's non-U.S. subsidiaries and certain of its U.S.
subsidiaries were not part of the Filing. Since the Filing, all
motions necessary to conduct normal business activities have been
approved by the Bankruptcy Court.
On October 15, 2004, Grace filed a motion with the U.S. Bankruptcy
Court in Delaware to delay filing its proposed plan of
reorganization until November 16, 2004. The Plan was due to be
filed on October 14, 2004. In a meeting held on October 14, 2004,
among Grace and the official representatives of the asbestos
creditors and the future asbestos claimants, sufficient progress
was made for the parties to conclude that additional negotiations
could lead to a consensual Chapter 11 plan. The asbestos
committees and the future asbestos claimants' representative
support this motion, which Grace has requested be considered at
its scheduled omnibus hearing on October 25, 2004. Grace expects
to continue discussions with the official committees representing
asbestos claimants, general unsecured creditors, and equity
holders and with the future asbestos claimants' representative
over the next several weeks. If negotiations do not lead to the
filing of a consensual plan, Grace is prepared to file its own
plan of reorganization, which would provide for the Bankruptcy
Court to determine Grace's asbestos-related liability based on
estimation protocols.
Whether Grace proposes its own plan of reorganization or a
consensual plan with the support of creditors and equity holders,
Grace is likely to make use of Section 524(g) of the Bankruptcy
Code to resolve its asbestos-related liabilities. Section 524(g)
requires, among other things, that a trust be established through
which all current and future claims would be channeled for
resolution, and that at least a majority of the voting securities
of the reorganized Grace be owned by, or contingently available
to, the trust to resolve such claims.
As stated in Grace's second quarter Form 10-Q, Grace is
reevaluating its asbestos-related liability in light of the
requirement to propose a plan of reorganization as discussed. The
measure of such liability, and the ultimate net cost to Grace,
depends on a number of factors that require Bankruptcy Court
approval such as:
-- the definition of an allowed claim;
-- the actual or estimated claims that meet such definition;
-- the value of allowed claims based on severity of medical
condition;
-- the risk of property damage related to Zonolite(R) Attic
Insulation, if any;
-- the number of properties qualifying for asbestos abatement
and the cost of remediation;
-- the method of funding an asbestos trust;
-- the availability of funds under litigation settlement
agreements with Sealed Air Corporation and Fresenius Medical
Care; and,
-- the availability of insurance and timing of insurance
recovery.
Grace will address these matters as part of a proposed plan of
reorganization. The liability for asbestos-related litigation
reflected in this release has not been adjusted for these
uncertainties.
Most of Grace's noncore liabilities and contingencies (including
asbestos-related litigation, environmental claims, tax matters and
other obligations) are subject to compromise under the Chapter 11
process. The Chapter 11 proceedings, including related litigation
and the claims valuation process, could result in allowable claims
that differ materially from recorded amounts. Grace will adjust
its estimates of allowable claims as facts come to light during
the Chapter 11 process that justify a change, and as Chapter 11
proceedings establish court-accepted measures of Grace's noncore
liabilities. See Grace's recent Securities and Exchange
Commission filings for discussion of noncore liabilities and
contingencies.
Headquartered in Columbia, Maryland, W.R. Grace & Co., --
http://www.grace.com/-- supplies catalysts and silica products,
especially construction chemicals and building materials, and
container products globally. The Debtors filed for chapter 11
protection on April 2, 2001 (Bankr. Del. Case No: 01-01139).
James H.M. Sprayregen, Esq., at Kirkland & Ellis and Laura Davis
Jones, Esq., at Pachulski, Stang, Ziehl et al. represent the
Debtors in their restructuring efforts.
WOMEN FIRST: Wants Until December 27 to Decide on Leases
--------------------------------------------------------
Women First Healthcare, Inc., asks the U.S. Bankruptcy Court for
the District of Delaware to extend until December 27, 2004, their
time to decide whether to assume, assume and assign, or reject the
unexpired lease of its headquarters' real property located in San
Diego, California.
The Debtor needs an operating facility to conduct its business
with respect to its remaining assets in order to maintain asset
value during the marketing and sale process.
The Debtor tells the Court that if the current deadline is not
extended, it may be compelled prematurely to assume liabilities
under the unexpired lease or forfeit benefits associated with the
unexpired leases.
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.
YALE INDUSTRIES: Intends to Voluntarily Liquidate its Business
--------------------------------------------------------------
Margate Industries, Inc. (Pink sheets: CGUL.PK) intends to begin a
voluntary liquidation of Yale Industries Inc.
The Yale, Mich.-based provider of specialty services to the
foundry industry has determined that it no longer can continue in
business for four reasons:
* The Company continues to lose money because of insufficient
customer based sales. The American Auto Industry continues
to outsource foundry and related products to offshore
countries located in South America, Europe, and Asia.
* The Company does not have the resources or credit
capabilities to convert its current operation, Yale
Industries Inc., into another business.
* The Company is being sued by the trustee attorneys for the
bankruptcy of New Haven Foundry, Inc., which is claiming
the Company received preferential payments in excess
$1,000,000. Yale believes New Haven received these
payments in the ordinary course of business for the
services performed on castings and shipped to Chrysler
Corporation. Yale will defend the lawsuit on that basis.
New Haven Foundry, Inc., filed for bankruptcy on Nov. 27,
2001 (Bankr. E.D. Mich. Case No. 01-62954) and is
liquidating under chapter 7.
* Two more major foundry groups filed for bankruptcy in
September 2004. One of these [Berlin Foundry Corp. (Bankr.
N.D. Ala. Case No. 04-08145, jointly administered with
Citation Corporation, Bankr. Case No. 04-08130] is a major
customer of the Company.
With this trend continuing and the increased cost due to defending
a lawsuit the Company has reached a point where it must liquidate
in order to pay off its creditors and legal fees. The Company is
notifying its remaining customers that they will be given until
December 15, 2004 to find another source to process their
products.
The Company will immediately begin selling its assets to pay off
the bank and its creditors.
The Company will attempt to find an existing non-public entity
that would be interested in going public and offer the Margate
shareholders stock in exchange for their stock.
ZOETICS INC: Case Summary & 20 Largest Unsecured Creditors
----------------------------------------------------------
Debtor: Zoetics, Inc.
270 Lafayette, Suite 1202
New York, New York 10012
Bankruptcy Case No.: 04-16747
Type of Business: The Company is a marketing specialist in
customer value creation, online or traditional.
The Company is also an industry leader and
innovator in the analysis and redesign of
business practices, products and services,
persuasion channels, marketing processes,
measurement and valuation systems, e-commerce,
and e-persuasion systems.
See http://www.zoetics.com/
Chapter 11 Petition Date: October 20, 2004
Court: Southern District of New York (Manhattan)
Judge: Allan L. Gropper
Debtor's Counsel: B. Lane Hasler, Esq.
B. Lane Hasler P.C.
4112 North Hermitage Avenue
Chicago, Illinois 60613
Tel: (312) 893-0551
Fax: (773) 975-2462
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
------ --------------- ------------
AT&T Corporation Sale Contract $4,700,000
180 Park Avenue
Building 104, Room 2K34
Florham Park, New Jersey 07932
Attn: Thomas Frost
Tel: 973-360-7300
Russell Brand Note Payable $1,500,000
1581 James Avenue
Redwood City, California 94002
Tel: 415-806-3065
BDO Seidman Trade $287,284
330 Madison Avenue
New York, New York 10017
Attn: Vincent Flanagan
Tel: 212-885-8000
SBA Note Payable $200,000
B. Scott Minerd Guaranty/Contingent $132,701
Arthur Trotman Note Payable $100,000
Henry Syvertsen Guaranty/Contingent $70,425
Murray Klein Guaranty/Contingent $69,973
Eckert Seamans Chernin Trade $69,000
Taylor Nelson Trade $54,000
Sofres Intersearch
James M. Lane Note Payable $50,000
Impact-It, Inc. Trade $44,365
Batzel Palm-Leis Trade $24,185
Patrick Tighe Wages $23,141
Bob Plunkett Production Trade $19,879
The Customer Equity Trade $18,327
Group SA Ltd.
Long, Baker & Tishkoff LLP Trade $18,013
Health Pass Trade $15,000
Michael Oyster Wages $12,219
Arising Internet Services Trade $10,000
* Alvarez & Marsal Honored for Successful Restructuring of AMERCO
-----------------------------------------------------------------
The Arizona chapter of the Turnaround Management Association has
honored Alvarez & Marsal, a leading global professional services
firm, with the prestigious "Turnaround of the Year" award in
recognition of the firm's successful restructuring of AMERCO, the
parent company of U-Haul International, Inc., which emerged from
bankruptcy in March of 2004.
Spearheaded by A&M Managing Director Richard Williamson, the
engagement involved a team of talented professionals including
Shawn Hassel, Marc Liebman, and Josh Skevington.
"When AMERCO exited bankruptcy, it secured a rare place in
history, emerging from Chapter 11 with a global capital structure
that resulted in zero dilution in shareholder value," said Mr.
Williamson. "By the end of the swift restructuring process,
AMERCO's common equity value increased by over 350%, or over $350
million in market capitalization, and nearly $300 million in value
was restored to the investments of preferred stock and unsecured
debt holders. The success of this complex restructuring exceeded
even our own high expectations and we are honored to be recognized
by the Arizona chapter of the TMA for our efforts."
A&M was retained as AMERCO's exclusive financial advisors in May
of 2003 on the eve of a threatened involuntary bankruptcy filing
by bondholders. Less than one year later, through A&M's efforts,
AMERCO executed one of the most successful capital structure
restructurings on record - developing a complex, consensual
restructuring plan that involved 100% payout to existing creditors
(in cash and securities) and zero dilution to preferred and common
stock holders.
A&M's success was rooted in a bottoms up financial analysis that
helped to unravel the company's confusing financial statements.
The analysis also enabled the team to identify AMERCO's hidden
value and cash flow generating capabilities, which provided the
basis for the restructuring plan. The comprehensive plan was
presented to, negotiated with and approved by a diverse group of
debt and equity holders, comprised of many of the largest and most
sophisticated financial institutions in the U.S.
The Turnaround Management Association is a premier professional
community dedicated to corporate renewal and turnaround
management.
About Alvarez & Marsal
Founded in 1983, Alvarez & Marsal is a global professional
services firm that helps businesses and organizations in the
corporate and public sectors navigate complex business and
operational challenges. With professionals based in locations
across the U.S., Europe, Asia, and Latin America, Alvarez & Marsal
delivers a proven blend of leadership, problem solving and value
creation. Drawing on its strong operational heritage and hands-on
approach, Alvarez & Marsal works closely with organizations and
their stakeholders to mobilize and address business issues,
implement change and favorably influence results. Its service
offerings include Turnaround Management Consulting, Crisis and
Interim Management, Creditor Advisory, Financial Advisory, Dispute
Analysis and Forensics, Real Estate Advisory, Business Consulting
and Tax Advisory. For more information about the firm, visit
http://www.alvarezandmarsal.com/
* FTI Consulting Hires 3 New Senior Managing Directors
------------------------------------------------------
FTI Consulting, Inc. (NYSE: FCN), the premier provider of
corporate finance/restructuring, forensic and litigation
consulting, and economic consulting, announced three senior level
new hires. Michael Eisenband, Steven D. Simms and Samuel E. Star
have joined the company as senior managing directors in the
Corporate Finance/Restructuring practice working within its
national Creditor Rights team.
Michael Eisenband will be responsible for working with FTI's
Corporate Finance/Restructuring leaders and client base to
continue to build a national market-leading Creditor Rights
offering. He joins FTI Consulting's New York office with more
than 16 years experience in restructuring work for creditors and
companies in Chapter 11 bankruptcies and out-of-court workouts
with a particular focus on creditors' rights.
Mr. Eisenband, renown nationally as an industry leader in
providing restructuring services to creditor committees, was
previously a managing director at Ernst & Young Corporate Finance
LLC and national director of its Creditor Rights practice. Some
of Mr.Eisenband's notable engagements have included Service
Merchandise, Phar-mor, Impath Clinical Labs and Penn Traffic.
Mr. Eisenband holds a BS in Accounting from the State University
of New York in Buffalo. He is a member of the American Institute
of Certified Public Accountants and the New York State Society of
Certified Public Accountants, where he is a former member of the
Insolvency Committee. He holds NASD Series 7, 24 and 63 licenses.
He is a Board Member of the New York Chapter of Turnaround
Management Association and a member of the Governing Board to the
Commercial Finance Association.
With over 15 years of corporate finance and restructuring
experience, Steven D. Simms also joins FTI's Creditor Rights team
working out of New York. Prior to joining FTI Consulting, he was
a managing director at Ernst & Young Corporate Finance LLC. With
a broad array of experience, Mr. Simms has advised creditor
groups, companies and lenders on all aspects of corporate
restructurings, mergers, acquisitions, valuation, strategic
business planning, and debt and equity financings.
Mr. Simms served as a financial advisor in transactions across
many industries including food and beverage wholesaling and
retailing, restaurant, textile and apparel, and general
manufacturing. Some of Mr. Simms notable engagements have
included Chi Chi's, Eagle Food Centers, World Kitchen, Pillowtex
Corporation and Avado Brands. Prior to joining Ernst & Young, Mr.
Simms spent seven years as a loan officer at The Bank of New York,
providing acquisition, growth and working capital financing to
companies in various industries.
Mr. Simms holds a BS in Consumer Economics from Cornell University
and an MBA in Finance from New York University's Stern School of
Business. He holds NASD Series 7, 24 and 63 licenses.
Samuel E. Star joins FTI's national Creditor Rights team working
out of New York. Prior to joining FTI Consulting, he also served
as a managing director at Ernst & Young LLC specializing in
providing services to creditors in Chapter 11 and out-of-court
workout situations. He is a leader in advising all types of
creditor constituencies in both large and small cases.
With over 17 years in the restructuring business, Mr. Star has
worked on client engagements spanning multiple industries
including airlines, healthcare, metals, retail and consumer
products, telecommunications and textiles. Significant cases have
included Adelphia Business Solutions, American Pad and Paper,
Agway and Cone Mills. His responsibilities have included review
of business plans, assessment of asset disposition programs,
evaluation and negotiation of restructuring proposals and the
development of exit strategies; all focused on maximizing
recoveries for unsecured creditors.
Mr. Star holds a BS in Accounting from the State University of New
York in Albany and NASD Series 7, 24 and 63 licenses. He is a
certified public accountant and member of the American Bankruptcy
Institute and has been a frequent speaker for various
organizations on matters impacting the rights of unsecured
creditors.
Commenting on the new appointments, Jack Dunn, FTI's president and
chief executive officer and said, "We continue to expand our
intellectual capital through the hiring of these three highly
skilled professionals that, along with our existing professionals,
serve to distinguish FTI from its peers."
"Mike's extensive experience in creditor's rights matters
qualifies him as the ideal choice to lead FTI's Creditor Rights
offering. We are gratified that Steve and Sam have agreed to help
us in that effort given their equally outstanding experience," Mr.
Dunn continued.
About FTI Consulting
FTI is the premier provider of corporate finance/restructuring,
forensic and litigation consulting, and economic consulting.
Strategically located in 24 of the major US cities and London,
FTI's total workforce of approximately 1,000 employees includes
numerous PhDs, MBA's, CPAs, CIRAs and CFEs who are committed to
delivering the highest level of service to clients. These clients
include the world's largest corporations, financial institutions
and law firms in matters involving financial and operational
improvement and major litigation.
* Hutchinson & Bloodgood Promotes Douglas Kawamura as Partner
-------------------------------------------------------------
Hutchinson and Bloodgood LLP, a leading Certified Public
Accountant and Consulting firm serving the metro Los Angles area
for over eighty-two years, reported the promotion of Douglas W.
Kawamura, CPA to Partner.
Mr. Kawamura joined Hutchinson and Bloodgood LLP in 2002 as the
Director of Estate and Income Tax Planning. He has played a
strategic role in shaping the firm's team of estate planning
advisors and thriving business and tax practice. As a member of
the Firm's Tax Committee, Mr. Kawamura also specializes in
corporate, partnership, trust and individual income taxation. Mr.
Kawamura also has extensive international tax and ESOP background.
His diverse practice includes manufacturers, wholesale
distribution companies, real estate investors, professional
organizations, and high net worth individuals.
"It is often difficult to understand the laws governing estate
taxes; the planning process can be very complex. Doug's
leadership of the Firm's Estate and Income Planning Group is a
tremendous resource for our clients," said Michael W. Machado CPA,
Managing Partner for Hutchinson and Bloodgood LLP. "Estate
planning is a lifelong process in which you start by evaluating
your situation, develop a plan or vision for your family and take
the necessary steps to make the plan a reality. I look forward to
leading the firm's Estate Planning Group and to provide creative
solutions for our clients. Our goal will be to provide our
clients with a road map that allows the client to achieve their
wishes while still minimizing the tax impact to the family,"
commented Mr. Kawamura.
Prior to joining Hutchinson and Bloodgood LLP, Mr. Kawamura was a
Tax Partner in a Westside CPA firm and a Senior Tax Manager with
the fifth largest CPA firm in the nation. A graduate of Golden
Gate University, San Francisco, he has a Master of Science degree
in Taxation. Mr. Kawamura 's Bachelor of Science degree in
Accounting is from California State University of Sacramento.
In addition to membership in the American Institute of Certified
Public Accountants - Tax Section and the California Society of
CPAs, Mr. Kawamura is active with the San Gabriel Estate Planning
Council. He has also been a Sub-Chairman of the Taxation
Committee - Los Chapter of the California Society of CPAs and past
officer of the Los Angeles Estate Planning Council.
About Hutchinson and Bloodgood LLP
Hutchinson and Bloodgood LLP has a reputation of providing quality
service for over eighty-two years. Its success is due to a pro-
active client service philosophy that provides continuous personal
service to each client in the areas of management advisory,
technology consulting services, business valuations, auditing,
accounting and taxation. Hutchinson and Bloodgood LLP originated
in Glendale, California and has grown to five offices with
eighteen partners and a professional staff of over one hundred
individuals. The Glendale office is located at 101 N. Brand Blvd.,
Ste. 1600, Glendale, CA 91203, (818) 637-5000. For more
information about Hutchinson and Bloodgood LLP visit their website
at http://www.hbllp.com/
*********
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-
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for the term of the initial subscription or balance thereof are
$25 each. For subscription information, contact Christopher
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*** End of Transmission ***