/raid1/www/Hosts/bankrupt/TCR_Public/041110.mbx
T R O U B L E D C O M P A N Y R E P O R T E R
Wednesday, November 10, 2004, Vol. 8, No. 246
Headlines
ADELPHIA COMMS: Creditors Propose Plan Changes in Term Sheet
ADELPHIA COMMS: Time Warner & Comcast to Bid Jointly for Assets
AIR CANADA: Non-Union Representatives Wants To End Obligations
AIR CANADA: Will Release Third Quarter Financial Reports on Monday
AMERICAN SKIING: Extends 12% Sr. Sub. Debt Offering to Friday
AMERICAS MINING: S&P Puts B- Corp. Credit Rating on CreditWatch
AMERIQUEST MORTGAGE: Fitch Rates $14.3M Class M-10 Certs. BB+
ARMSTRONG: Och Ziff Wants to Correct Miscalculation in 3 Claims
ATA AIRLINES: Will Get $15.5 Million Financing from Indiana
ATA AIRLINES: Asks Court to Okay Midway Sale Bidding Procedures
ATA AIRLINES: Asks Court to Approve 3% AirTran Break-Up Fee
BALL CORP: Fitch Revises Outlook on Double-B Ratings to Positive
BEAR STEARNS: Fitch Junks Class B-4 & Puts Class B-5 on Default
CATHOLIC CHURCH: DuFresne Wants Postpetition Funds Segregated
CITIGROUP MORTGAGE: Fitch Puts Low-B Rating on Classes B-4 & B-5
CITIZENS COMMS: Moody's Rates Proposed $950 Sr. Unsec. Debts Ba3
CLARKEIES MARKETS: Owners Say Judicial Delay Causing Problems
CLEARLY CANADIAN: Sept. 30 Balance Sheet Upside-Down by $681,000
CONCENTRA OPERATING: Sept. 30 Balance Sheet Upside-Down by $65.7M
DELTA AIR LINES: Discloses Transformation Plan Updates
DUANE READE: Moody's Junks $195 Million Senior Subordinated Notes
ENRON CORP: Asks Court to Nix $24.6M Euell Energy Resources Claims
ENRON CORP: Court Okays Employee Claim Settlement Protocol
ENRON CORP: NASD Charges H&R Block with Fraud in Bond Sales
FEDERAL-MOGUL: Inks Stipulation Settling EPA's CERCLA Claims
GENEVA STEEL: Two Creditors File Competing Plans of Liquidation
GLOBAL CROSSING: Inks Amendment Increasing Bridge Loan to $125MM
HARBORVIEW MORTGAGE: S&P Assigns Low-B Ratings to 16 Classes
HYTEK MICROSYSTEMS: Auditors Continue to Air Going Concern Doubts
INDUR GINA INC: Case Summary & 11 Largest Unsecured Creditors
INDYMAC BANCORP: Fitch Assigns BB+ Rating to Preferred Securities
INTERSTATE BAKERIES: DIP Financing Amendment Adds Two Restrictions
INTERSTATE BAKERIES: Wants to Comply with Labor Agreements
INTERSTATE BAKERIES: Gets Open-Ended Extension for Lease Decisions
KAISER ALUMINUM: Liquidation Analysis Under Joint Liquidation Plan
KNOWLEDGE LEARNING: S&P Places B+ Rating on CreditWatch Negative
LEAP WIRELESS: Launching Planned Service in Fresno, California
MCI INC: Board Members Taking Stock for 25% of Their Fees
MOHEGAN TRIBAL: S&P Pares Issuer Credit Rating to BB from BB+
MURRAY INC: Wants to Retain Pachulski Stang as Bankruptcy Counsel
NATIONAL HEALTH: S&P Upgrades Corporate Credit Rating to BB-
NEENAH PAPER: Moody's Rates Planned $200M Senior Unsec. Notes B1
NET2000 COMMS: Wants to Expand Tax Services of Parente Randolph
NEW LIFE HOLINESS: Voluntary Chapter 11 Case Summary
NORTHWESTERN CORP: Posts $29.6 Mil. Net Loss in Third Quarter
PACIFIC GAS: Objects to Modesto Irrigation's $12 Million Claim
PG&E NATIONAL: Wants Court Nod on $12.7MM TransCanada Break-Up Fee
PG&E NATIONAL: New England Power Objects to Fossil Facilities Sale
PHILIP MORRIS: Oral Argument Today in Illinois on $10BB Judgment
PILGRIM'S PRIDE: Earns $72.3 Million of Net Income in 4th Quarter
PORTOLA PACKAGING: Moody's Junks $180 Mil. Senior Unsecured Notes
RCN CORP: Gets Court Nod to Terminate Consolidated Edison Lease
RELIANCE GROUP: Creditors Committee Files Reorganization Plan
ROGERS COMMS: S&P Cuts Corp. Credit Rating to BB After Acquisition
SMTC CORP: Pays Down Credit Facility by $3.9 Mil. in 3rd Quarter
SPIEGEL INC: Court Approves America Online Claim Settlement
STELCO INC: OAO Severstal Offers to Purchase All Assets
STEWART ENTERPRISES: S&P Rates Planned Senior Secured Debt BB+
TACTICA INT'L: Wants to Hire Piper Rudnick as Bankruptcy Counsel
TACTICA INT'L: Wants More Time to File Bankruptcy Schedules
TEKNI-PLEX: Gets Out of Default Status After Amending Bank Pact
THE KING SERVICE: Committee Hires Hodgson Russ as Counsel
THORNBURG MORTGAGE: Fitch Holds Senior Unsecured BB Rating
TK ALUMINUM: S&P Lifts Long-Term Corporate Credit Rating to CCC+
TRANSWESTERN PIPELINE: Fitch Withdraws Low-B Ratings After Sale
TRW AUTOMOTIVE: Opens First Manufacturing Plant in Romania
U.S. CAN: Look for Restated Financials by November 19
UAL CORP: U.S. Bank Must Turnover Some Funds Under Trust Agreement
UAL CORP: U.S. Bank to Appeal Judge Wedoff's Ruling in Dist. Court
UAL CORP: Wants Court to Schedule Sec. 1113(c) Conference
USOL INC: Voluntary Chapter 11 Case Summary
VANTAGEMED CORP: Equity Deficit Widens to $1.4 Mil. at Sept. 30
VANTAGEMED CORP: Names Steve Curd as New Chief Executive Officer
VARTEC TELECOM: Hires LeMaster Group as PR Consultants
WILLIAMS COS: Operating Performance Cues Moody's to Lift Ratings
WISE WOOD: Diamond Tree to Undertake Reverse Takeover Transaction
WORLDCOM INC: Judge Cote Approves ERISA Class Action Settlement
WORLDCOM INC: Asks Judge Gonzalez to Reject Galaxy's $20MM Claim
YOUTHSTREAM MEDIA: Joseph Corso Jr. Discloses 9.81% Equity Stake
* Upcoming Meetings, Conferences and Seminars
*********
ADELPHIA COMMS: Creditors Propose Plan Changes in Term Sheet
------------------------------------------------------------
The Official Committee of Unsecured Creditors of Adelphia
Communications Corp. and its subsidiaries reached a preliminary
agreement among its members and other substantial creditors on the
principal terms of a reorganization plan by which Adelphia will
emerge from bankruptcy as a stand- alone independent entity.
Those terms are contained in a term sheet which was unanimously
approved by the six-member committee, and which enjoys the support
of other holders of Adelphia's unsecured debt.
Under the Term Sheet, all Adelphia unsecured creditors will
receive common stock in the reorganized company, based upon an
agreed enterprise value of $17 billion, and after deducting or
reserving payments to bank lenders and other senior creditors.
The Term Sheet also provides for the compromise and settlement of
inter-creditor disputes among unsecured creditors, and for the
continuation of litigation against, among others, the Rigas
Family, Adelphia's auditors and its co-borrowing lenders (in order
to address objections to Adelphia's prior plan, lenders who are
not Agent Banks (as defined in the Term Sheet) or their successors
will be paid in full notwithstanding the pendency of the
litigation against them).
The Term Sheet also provides that the sales process launched by
Adelphia last month will continue. As more fully set forth in the
Term Sheet, and subject to the provisions of the Bankruptcy Code
and Bankruptcy Court approval, if a transaction is achieved which
provides greater value to unsecured creditors than that which is
provided under a stand-alone plan, the consideration offered in
such transaction will be substituted for that provided in the
stand-alone plan.
The Term Sheet has been delivered to Adelphia and the Committee is
hopeful that Adelphia will modify its stand-alone plan currently
on file to reflect the provisions of the Term Sheet. The
Committee reserves the right to seek leave of the Bankruptcy Court
to file its own plan of reorganization based upon the provisions
of the Term Sheet.
The Term Sheet may not be implemented unless and until:
(i) a plan of reorganization properly is filed which embodies
its terms,
(ii) a disclosure statement is approved with respect to such
plan,
(iii) the plan receives the necessary acceptances from impaired
stakeholders, and
(iv) the Bankruptcy Court approves the plan.
None of these events has yet occurred, no assurances are given
that any of these events will occur, no party has yet been
authorized to solicit or receive votes with respect to this
agreement, and no such solicitation is made hereby.
Adelphia Communications Responds
Adelphia Communications issued the following statement regarding
proposed amendments to its reorganization plan by the Committee of
Unsecured Creditors of Adelphia.
"The input from the Unsecured Creditors Committee was expected and
we are reviewing it in normal course as part of the overall
bankruptcy process. We are pleased that the Unsecured Creditors
Committee has made progress, and we view this as a productive
step. As we move forward with our dual track process of
simultaneously pursuing a sale of the Company and an emergence
from bankruptcy as a standalone company, we will evaluate these
proposed amendments as well as input from other constituents. We
remain committed to achieving maximum value for all of the
bankruptcy constituents."
Regarding the ongoing sale process, the Company said, "Our sale
process for the Company is robust. Due to the high number of
interested parties, and the time required for those parties to
conduct due diligence, final offers are expected in January,
2005."
Headquartered in Coudersport, Pennsylvania, Adelphia
Communications Corporation (OTC: ADELQ) is the fifth-largest cable
television company in the country. Adelphia serves customers in
30 states and Puerto Rico, and offers analog and digital video
services, high-speed Internet access and other advanced services
over its broadband networks. The Company and its more than 200
affiliates filed for Chapter 11 protection in the Southern
District of New York on June 25, 2002. Those cases are jointly
administered under case number 02-41729. Willkie Farr & Gallagher
represents the ACOM Debtors.
ADELPHIA COMMS: Time Warner & Comcast to Bid Jointly for Assets
---------------------------------------------------------------
Comcast Corporation and Time Warner have agreed to work together
to explore submitting a joint proposal to acquire cable assets of
Adelphia Communications Corporation, the fifth-largest cable
television company in the United States. Bloomberg News reports
that Adelphia Communications Corp.'s agreed to the joint bidding
arrangement. According to Dennis K. Berman and Peter Grant, staff
reporters at The Wall Street Journal, ACOM's board had considered
keeping Time Warner and Comcast apart.
Time Warner and Comcast have other significant relationships,
disclosed in Time Warner's latest Form 10-Q and other regulatory
filings.
Earlier this year, Time Warner sold a portion of its claims
against Adelphia to a third-party investor.
More than 40 prospective bidders have already signed
confidentiality agreements with ACOM. The value of ACOM's assets
is estimated to be worth $17 billion or more.
Headquartered in Coudersport, Pennsylvania, Adelphia
Communications Corporation (OTC: ADELQ) is the fifth-largest cable
television company in the country. Adelphia serves customers in
30 states and Puerto Rico, and offers analog and digital video
services, high-speed Internet access and other advanced services
over its broadband networks. The Company and its more than
200 affiliates filed for Chapter 11 protection in the Southern
District of New York on June 25, 2002. Those cases are jointly
administered under case number 02-41729. Willkie Farr & Gallagher
represents the ACOM Debtors.
AIR CANADA: Non-Union Representatives Wants To End Obligations
--------------------------------------------------------------
The Non-Union and ACPA Retiree Representatives ask Mr. Justice
Farley to amend the representation orders issued by the Ontario
Superior Court of Justice in June 2003 and September 2003, and
terminate their obligations with regards to their original
functions under those Orders.
The Non-Union Representatives also ask the CCAA Court to direct
the Applicants and their successors to provide copies of annual
actuarial reports and financial statements with respect to the
carrier's applicable registered and non-registered pension plans
to the Air Canada Pionairs, a retiree association that will
continue the monitoring role of the Non-Union Representatives.
As previously reported, the Non-Union Representatives provided
their consent to:
(1) the Air Canada 10-Year Solvency Pension Funding Relief
Term Sheet dated February 18, 2004;
(2) Air Canada's pension funding protocol with the Office of
the Superintendent of Financial Institutions dated
May 14, 2004;
(3) the regulation under the Pension Benefit Standards Act,
1985; and
(4) the arrangements made regarding Air Canada's supplementary
pension plans, retirement benefit plans and related
programs as authorized by the CCAA Court.
The Term Sheet stipulates an ongoing role for various groups,
including for the Air Canada Pionairs, during the period of time
in which Air Canada is subject to the special 10-year solvency
deficiency funding regulations. The Term Sheet requires Air
Canada to provide each (a) plan's pension committee, (b)
bargaining agent with members in the plan; and (c) incorporated
retiree or non-union employee association with members or former
members in the plan, with a copy of that plan's actuarial report,
simultaneous with the filing of that report with the OSFI.
The Non-Union Representatives believe that Air Canada Pionairs is
ideally situated and equipped to keep the retires aware and
informed of ongoing developments with respect to pension issues
related to the 10-year solvency deficiency regulation.
The Air Canada Pionairs is a volunteer organization with limited
financial resources. The monitoring role stipulated by the Term
Sheet will likely require that some actuarial and legal opinions
be obtained from time to time. To ensure that the continuing
monitoring role is properly carried out, the Non-Union
Representatives ask Mr. Justice Farley to direct Air Canada to pay
for the Pionairs' professional fees and reasonable disbursements
during the period Air Canada is subject to the Term Sheet.
Air Canada filed for CCAA protection on April 1, 2003 (Ontario
Superior Court of Justice, Case No. 03-4932) and filed a Section
304 petition in the U.S. Bankruptcy Court for the Southern
District of New York (Case No. 03-11971). Mr. Justice Farley
sanctioned Air Canada's CCAA restructuring plan on Aug. 23, 2004.
Sean F. Dunphy, Esq., and Ashley John Taylor, Esq., at Stikeman
Elliott LLP, in Toronto, serve as Canadian Counsel to the carrier.
Matthew A. Feldman, Esq., and Elizabeth Crispino, Esq., at Willkie
Farr & Gallagher serve as the Debtors' U.S. Counsel. When the
Debtors filed for protection from its creditors, they listed
C$7,816,000,000 in assets and C$9,704,000,000 in liabilities.
On September 30, 2004, Air Canada successfully completed its
restructuring process and implemented its Plan of Arrangement.
The airline exited from CCAA protection raising $1.1 billion of
new equity capital and, as of September 30, has approximately
$1.9 billion of cash on hand. (Air Canada Bankruptcy News, Issue
No. 51; Bankruptcy Creditors' Service, Inc., 215/945-7000)
AIR CANADA: Will Release Third Quarter Financial Reports on Monday
------------------------------------------------------------------
ACE Aviation Holdings Inc. will be releasing unaudited
consolidated third quarter financial statements of Air Canada by
November 15, 2004. Pending this release, the Corporation is
announcing its estimated unaudited consolidated operating income
in order to provide current information to stakeholders on its
recent operations given record high fuel prices and the
deteriorated performance of US carriers.
The Corporation expects to record an estimated $235 million of
unaudited consolidated operating income before reorganization and
restructuring items for the third quarter of 2004. This estimate
represents a major improvement from the $17 million of operating
income before restructuring and reorganization items reported in
the third quarter of 2003.
ACE Aviation Holdings Inc. Chairman, President and CEO Robert
Milton expressed satisfaction with the results. "Against the
current background of record oil prices, our estimated third
quarter operating profit of $235 million reflects the tremendous
progress made by Air Canada's employees over the last eighteen
months of restructuring," said Mr. Milton. "Revenues are strong
and unit costs are down, even in the face of a 41 per cent rise in
base fuel prices. These results would have been further improved
had post-emergence accounting been in effect.
"The airline again posted a record load factor every month this
quarter while operating at strong on time performance and flight
completion levels. While the third quarter is our seasonally
strongest quarter, the results achieved point to an airline that
is not only profitable in a difficult fuel and North American
yield environment, but also to an airline that is running well
operationally.
"Our new business model and product strategy is producing the
desired results and we are seeing growing customer confidence in
Air Canada as the airline of choice for the lowest fares to the
greatest number of destinations on an everyday basis. "The
progress reported ... was made possible through the hard work,
dedication and sheer resilience of Air Canada's employees. I
thank them for their ongoing support and willingness to accept the
necessary change to ensure the airline's successful restructuring.
And on behalf of all of us at Air Canada, I thank each and every
customer who supported us during the past eighteen months. We
remain committed to earn their ongoing loyalty through excellent
customer service and as always an uncompromising focus on safety,"
concluded Mr. Milton.
As a result of higher overall system traffic and yield,
consolidated passenger revenues have shown a marked recovery in
all markets with the exception of the U.S. trans-border market.
Air Canada estimates that consolidated system passenger revenues
will increase by approximately 12 per cent over the third quarter
of 2003. Passenger revenue per ASM (RASM) is expected to be up
approximately 6 per cent over 2003 levels.
Air Canada anticipates unit cost reductions of approximately
4 per cent from the same quarter last year (11 per cent excluding
fuel) on an ASM capacity increase of 6 per cent. These unit cost
reductions are mainly due to cost reduction initiatives undertaken
during the restructuring process, which largely began to take
effect in the third quarter of 2003.
Current record high fuel prices are a concern, however, the
increase in fuel expense has been partially mitigated by a fuel
surcharge in effect on U.S. trans-border and international travel
and by a stronger Canadian dollar.
As at October 13, 2004, the Corporation's consolidated cash
balance, measured on the basis of cash in its bank accounts,
amounted to approximately $1.9 billion.
As in prior quarters, as a result of restructuring under CCAA, the
third quarter 2004 results will reflect a number of very
significant reorganization and restructuring charges directly
associated with the restructuring which will be included in net
income. Air Canada's complete 2004 third quarter results will be
made available on Air Canada's Web site http://www.aircanada.com
and at http://www.SEDAR.comby November 15, 2004. A copy may also
be obtained on request by contacting Shareholder Relations at
(514) 422-7578.
Air Canada filed for CCAA protection on April 1, 2003 (Ontario
Superior Court of Justice, Case No. 03-4932) and filed a Section
304 petition in the U.S. Bankruptcy Court for the Southern
District of New York (Case No. 03-11971). Mr. Justice Farley
sanctioned Air Canada's CCAA restructuring plan on Aug. 23, 2004.
Sean F. Dunphy, Esq., and Ashley John Taylor, Esq., at Stikeman
Elliott LLP, in Toronto, serve as Canadian Counsel to the carrier.
Matthew A. Feldman, Esq., and Elizabeth Crispino, Esq., at Willkie
Farr & Gallagher serve as the Debtors' U.S. Counsel. When the
Debtors filed for protection from its creditors, they listed
C$7,816,000,000 in assets and C$9,704,000,000 in liabilities.
On September 30, 2004, Air Canada successfully completed its
restructuring process and implemented its Plan of Arrangement.
The airline exited from CCAA protection raising $1.1 billion of
new equity capital and, as of September 30, has approximately
$1.9 billion of cash on hand. (Air Canada Bankruptcy News, Issue
No. 51; Bankruptcy Creditors' Service, Inc., 215/945-7000)
AMERICAN SKIING: Extends 12% Sr. Sub. Debt Offering to Friday
-------------------------------------------------------------
American Skiing Company (OTC: AESK) extended the expiration date
for its tender offer for its 12% Senior Subordinated Notes due
2006 to 5:00 p.m., New York City time, on November 12, 2004. As of
the close of business on Monday, November 8, 2004, American Skiing
Company received tenders pursuant to the tender offer for
approximately $118,500,000 of its 12% Senior Subordinated Notes
due 2006.
The tender offer commenced on October 12, 2004 and will now expire
at 5:00 p.m., New York City time, on November 12, 2004, unless
further extended. Closing of the tender offer is subject to:
(i) the consummation of any necessary debt financing to fund
the total consideration for the Notes and to refinance
the existing credit facility of American Skiing Company
and
(ii) certain other customary conditions.
This news release is neither an offer to purchase nor a
solicitation of an offer to sell the Notes. The offer is being
made only by reference to the Offer to Purchase and Consent
Solicitation Statement and related applicable Consent and Letter
of Transmittal dated October 12, 2004. Copies of documents may be
obtained from Georgeson Shareholder Communications, Inc., the
Information Agent, at (212) 440-9800 or toll-free at (888) 264-
6999.
About the Company
Headquartered in Park City, Utah, American Skiing Company is one
of the largest operators of alpine ski, snowboard and golf resorts
in the United States. Its resorts include Killington and Mount
Snow in Vermont; Sunday River and Sugarloaf/USA in Maine; Attitash
Bear Peak in New Hampshire; Steamboat in Colorado; and The Canyons
in Utah. More information is available on the Company's Web site
at http://www.peaks.com/
* * *
As reported in the Troubled Company Reporter on Nov. 02, 2004,
American Skiing Company disclosed last week that KPMG LLP advised
it would be unable to deliver its audit report on the Company's
consolidated financial statements for the year ended
July 25, 2004, because it had not completed its assessment as to
whether substantial doubt exists about the Company's ability to
continue as a going concern. Specifically, KPMG is continuing to
assess the facts and circumstances surrounding the Company's 10.5%
Repriced Convertible Exchangeable Preferred Stock. As the Company
has previously disclosed, under the terms of the Preferred Stock
issue, the Company was required to the shares on November 12, 2002
to the extent that it had legally available funds to effect that
redemption. Prior to and since the November 12, 2002, redemption
date, based upon all relevant factors, the Company's Board of
Directors has determined that legally available funds do not exist
for the redemption of any of the preferred shares. The holder of
the Preferred Stock has made a demand for redemption and has not
agreed to extend the redemption date.
AMERICAS MINING: S&P Puts B- Corp. Credit Rating on CreditWatch
---------------------------------------------------------------
Standard & Poor's Ratings Services placed its 'B+' long-term
corporate credit rating on Grupo Mexico S.A. de C.V. on
CreditWatch with positive implications. Additionally, the 'B-'
long-term corporate credit ratings on Americas Mining Corp. and
its subsidiaries (Southern Peru Copper Corp., Minera Mexico S.A.
de C.V., and ASARCO Inc.) were placed on CreditWatch with positive
implications. Positive implications mean that the ratings could
be raised or affirmed following completion of Standard & Poor's
review.
"The CreditWatch placement reflects the companies' better
financial profile due to MM's recent debt refinancing, which
increased its financial flexibility and provided a better
maturities schedule," said Standard & Poor's credit analyst Juan
P. Becerra. During the past three years, AMC has had limited
access to financial markets. Nevertheless, debt reduction, due to
the current copper price environment, has allowed the company to
increase its financial flexibility. Standard & Poor's will be
reviewing the effect on the company's financial profile to resolve
the CreditWatch.
AMERIQUEST MORTGAGE: Fitch Rates $14.3M Class M-10 Certs. BB+
-------------------------------------------------------------
Ameriquest Mortgage Securities Inc., series 2004-R11, is rated by
Fitch Ratings as follows:
-- $1.303 billion class A-1 and A-2 certificates 'AAA';
-- $63.8 million class M-1 certificates 'AA+';
-- $32.3 million class M-2 certificates 'AA';
-- $16.5 million class M-3 certificates 'AA-';
-- $15 million class M-4 certificates 'A+';
-- $12.8 million class M-5 certificates 'A';
-- $12 million class M-6 certificates 'A-';
-- $7.5 million class M-7 certificates 'BBB+';
-- $5.3 million class M-8 certificates 'BBB';
-- $9 million class M-9 certificates 'BBB-';
-- $14.3 million privately offered class M-10 certificates
'BB+'.
Credit enhancement for the 'AAA' rated class A certificates
reflects:
* the 12.55% subordination provided by classes M-1
through M-10,
* monthly excess interest, and
* initial overcollateralization of 0.60%.
Credit enhancement for the 'AA+' rated class M-1 certificates
reflects:
* the 8.30% subordination provided by classes M-2 through
M-10,
* monthly excess interest, and
* initial OC.
Credit enhancement for the 'AA' rated class M-2 certificates
reflects:
* the 6.15% subordination provided by classes M-3 through
M-10,
* monthly excess interest, and
* initial OC.
Credit enhancement for the 'AA-' rated class M-3 certificates
reflects:
* the 5.05% subordination provided by classes M-4 through
M-10,
* monthly excess interest and
* initial OC.
Credit enhancement for the 'A+' rated class M-4 certificates
reflects:
* the 4.05% subordination provided by classes M-5 through
M-10,
* monthly excess interest, and
* initial OC.
Credit enhancement for the 'A' rated class M-5 certificates
reflects:
* the 3.20% subordination provided by classes M-6 through
M-10,
* monthly excess interest, and
* initial OC.
Credit enhancement for the 'A-' rated class M-6 certificates
reflects:
* 2.40% subordination provided by classes M-7 through
M-10,
* monthly excess interest and
* initial OC.
Credit enhancement for the 'BBB+' rated Class M-7 Certificates
reflects:
* the 1.90% subordination provided by Classes M-8 through
M-10,
* monthly excess interest, and
* initial OC.
Credit enhancement for the 'BBB' rated class M-8 certificates
reflects:
* the 1.55% subordination provided by classes M-9 and
M-10,
* monthly excess interest, and
* initial OC.
Credit enhancement for the 'BBB-' rated class M-9 certificates
reflects:
* the 0.95% subordination provided by class M-10,
* monthly excess interest, and
* initial OC.
Credit enhancement for the non-offered 'BB+' class M-10
certificates reflects:
* the monthly excess interest, and
* initial OC.
In addition, the ratings reflect the integrity of the
transaction's legal structure, as well as the capabilities of
Ameriquest Mortgage Company as master servicer. Deutsche Bank
National Trust Company will act as trustee.
As of the cut-off date, the group I mortgage loans have an
aggregate balance of $936,027,773. On the closing date, the
depositor will deposit approximately $234,006,906 into a
prefunding account. The amount in this account will be used to
purchase subsequent mortgage loans on or before the 90th day
following the closing date. The weighted average loan rate is
approximately 7.534%. The weighted average remaining term to
maturity -- WAM -- is 350 months. The average cut-off date
principal balance of the mortgage loans is approximately $148,411.
The weighted average original loan-to-value ratio -- OLTV -- is
77.64%, and the weighted average Fair, Isaac & Co. -- FICO --
score was 611. The properties are primarily located in:
* California (14.62%),
* Florida (10.20%), and
* New Jersey (9.41%).
As of the cut-off date, the group II mortgage loans have an
aggregate balance of $263,972,264.76. On the closing date, the
depositor will deposit approximately $65,993,056 into a prefunding
account. The amount in this account will be used to purchase
subsequent mortgage loans on or before the 90th day following the
closing date. The weighted average loan rate is approximately
7.064%. The WAM is 357 months. The average cut-off date
principal balance of the mortgage loans is approximately $476,484.
The weighted average OLTV is 79.88%, and the weighted average
Fair, Isaac & Co. score was 635. The properties are primarily
located in:
* California (48.71%),
* New York (11.91%), and
* Massachusetts (6.56%).
The mortgage loans were originated or acquired by Ameriquest
Mortgage Company, a specialty finance company engaged in the
business of originating, purchasing, and selling retail and
wholesale subprime mortgage loans.
ARMSTRONG: Och Ziff Wants to Correct Miscalculation in 3 Claims
---------------------------------------------------------------
OZ Management, LLC, as Investment Manager for OZ Master Fund,
Ltd., and OZF Management, L.P., as Investment Manager for OZF
Credit Opportunities Master Fund, Ltd., and OZF Credit
Opportunities Master Fund II, Ltd., are successors-in-interest to
Lincoln National Life Insurance Company, Connecticut General Life
Insurance Company and Silver Oak Capital, LLC.
Och Ziff asks the Court to amend Claim Nos. 2761, 2765 and 3723 to
correct a miscalculation in the originally filed amounts.
The ESOP Notes
By a Note Purchase Agreement dated as of June 19, 1989, AWI
authorized the issuance, sale and delivery of 9.00% Series B
Guaranteed Serial ESOP Notes Due 2001-2004, and 8.43% Series A
Guaranteed Serial ESOP Notes due 1989-2001. Pursuant to the Note
Purchase Agreement, the interest rate on the 9.00% Series B
Guaranteed Serial ESOP Note Due June 15, 2004, was automatically
adjusted to 8.92% in 1993 due to a change in the federal tax rate.
The Note Purchase Agreement states that upon an event of default,
the ESOP Notes will become immediately due and payable at the
principal amount together with accrued interest and the Yield-
Maintenance Premium. The Note Purchase Agreement defines Yield-
Maintenance Premium as a premium equal to the excess, if any, of
the Discounted Value of the Called Principal of that Note over the
sum of that Called Principal and the interest accrued as of the
Settlement Date, with respect to that Called Principal. The
Yield-Maintenance Premium will in no event be less than zero.
Richard S. Cobb, Esq., at Landis Rath & Cobb, LLP, in Wilmington,
Delaware, relates that this is a typical provision designed to
compensate lenders for any loss of yield that would otherwise
occur upon default or repayment of a loan.
Claim No. 2761
On August 14, 2001, Lincoln National timely filed Claim No. 2761
for $31,579,088, reflecting four categories of note claims:
-- 6.50% Senior Notes due August 15, 2005;
-- 6.35% Senior Notes due August 15, 2005;
-- 8.35% Series A Guaranteed Serial ESOP Notes due
June 15, 2001; and
-- 8.92% Series B Guaranteed Serial ESOP Notes due
June 15, 2004,
as well as the collection costs regarding all four notes incurred
through and including August 7, 2001.
On August 11, 2004, the entirety of the 8.92% Series B Notes claim
evidenced in Claim No. 2761 was assigned to OZ Master Fund, Ltd.,
and the appropriate claim transfer documents were filed with the
Court.
Claim No. 2761 was one of the claims addressed in the Debtors'
First Omnibus Objection to Claims. In that objection, the Debtors
sought the elimination of the portions of the claim amount
specifically relating to the 6.35% Series Notes and the 6.50%
Series Notes. Crucially, there was no objection to the portion of
the claim arising under the 8.92% Series B Notes. The Order
granting AWI's First Omnibus Objection to Claims, dated January
16, 2002, expunged portions of the claim consisting of the 6.35%
Senior Notes and the 6.50% Senior Notes. The Order granting AWI's
14th Omnibus Objection to Claims, dated October 27, 2003, expunged
the postpetition collection costs only. The portion of the claim
consisting of the 8.35% Series A Guaranteed Serial ESOP Notes due
June 15, 2001, and the 8.92% Series B Notes was not addressed in
the Court's order.
Claim No. 2765
On August 14, 2001, Connecticut General timely filed Claim No.
2765 for $15,670,186. Claim No. 2765 consisted of the 9.00%
Series B Guaranteed Serial ESOP Notes Due June 15, 2004, and
collection costs incurred regarding both Series A and Series B
Notes.
By transfers dated August 11, 2004, and October 6, 2004, the
entirety of the claim relating to the 9.00% Series B Notes was
assigned to three Och Ziff entities, OZ Master Fund, OZF Credit
Opportunities Master Fund, Ltd., and OZF Credit Opportunities
Master Fund II, Ltd.
Claim No. 2765 was one of the claims addressed in AWI's 7th
Omnibus Objection to Claims. In that objection, AWI sought the
elimination of portions of the claim consisting of the
postpetition collection costs. The Debtors did not make any
objection to the claim arising under the 9% Series B Notes. The
Order granting the 7th Omnibus Objection expunged the collection
costs only. The portion of the claim consisting of the 9% Series
B Notes was not addressed in the Order.
Claim No. 3723
On August 30, 2001, Silver Oak timely filed Claim No. 3723 for
$11,867,667. Claim No. 3723 was for amounts due under certain of
the 9% Series B Guaranteed Serial ESOP Notes due 2001-2004. The
calculation of the amount due on the claim included a "marketable
amount," which is the Yield-Maintenance Premium. However, the
calculation of the Yield-Maintenance Premium used to calculate the
total claim amount was in error, as was the calculation of accrued
prepetition interest. On October 6, 2004, $8,982,000 in principal
amount of the claim was assigned to three Och Ziff entities -- OZ
Master Fund, OZF Credit Opportunities Master Fund, and OZF Credit
Opportunities Master Fund II.
Claim No. 3723 was the subject of AWI's 7th Omnibus Objection to
Claims. While objection was made to any postpetition collection
costs, no objection was made to the claim as calculated -- a claim
that included the miscalculated Yield-Maintenance Premium. By
Order dated February 18, 2003, Claim No. 3723 was allowed for
$11,867,667, which includes the incorrect amount of the Yield-
Maintenance Premium.
The Claims Must Be Amended
Mr. Cobb contends that the amendments do not constitute a new
claim but merely corrects errors in the calculation and amount of
the existing claim. The Debtors and other parties-in-interest
were on constructive notice of the required Yield-Maintenance
Premium. The Debtors were a signatory to the Note Purchase
Agreement, which was expressly referenced in the Original Claim.
Moreover, the Debtors' 10-K filings for the years 2000-2003
subsequent to bankruptcy explicitly acknowledge an obligation
under the ESOP Note guarantees consistent with the amended amount
Och Ziff seeks.
Thus, Mr. Cobb maintains, the amendments are appropriate and
permissible under the circumstances. Yield-Maintenance Premiums
are in the nature of liquidated damages provisions and are
designed to compensate creditors for the loss of their investment
opportunity that occurs when the loan is prepaid or the debtor
defaults and the loan is accelerated.
According to Mr. Cobb, the Debtors will not be prejudiced by OCH
Ziff's correction of the claims, which contemplated that they
might be amended in the future. Moreover, the Debtors knew, even
before the Petition Date, that a Yield-Maintenance Premium would
become due in the event of a default as defined by the Note. The
amendments also will not unfairly prejudice other holders of
unsecured claim against the estate. While an increase in the
amount of Och Ziff's claim naturally will dilute the recovery to
other unsecured creditors, a wide variety of courts have found
that this fact alone does not constitute impermissible prejudice
sufficient to deny a claim amendment.
Furthermore, as the amendment would not alter the overall scheme
of the distribution classes under the Plan, creditors in other
classes will not be prejudiced. Instead, other unsecured
creditors would receive an unjust windfall if the amendments are
not permitted. Other unsecured creditors would receive a greater
pro rata share of recovery than they properly should.
Mr. Cobb notes that while the Original Claim was the subject of
Omnibus Claim Objections, those objections related to issues other
than the calculation of the Yield-Maintenance Premium. Since this
issue was never before the Court, Och Ziff maintains that the
subsequent Court Orders are not determinative as to its rights.
However, to the extent necessary, Och Ziff asks the Court to
reconsider and reopen the Orders to allow the claim amendments.
Headquartered in Lancaster, Pennsylvania, Armstrong World
Industries, Inc. -- http://www.armstrong.com/-- the major
operating subsidiary of Armstrong Holdings, Inc., designs,
manufactures and sells interior finishings, most notably floor
coverings and ceiling systems, around the world. The Company
filed for chapter 11 protection on December 6, 2000 (Bankr. Del.
Case No. 00-04469). Stephen Karotkin, Esq., Weil, Gotshal & Manges
LLP and Russell C. Silberglied, Esq., at Richards, Layton &
Finger, P.A., represent the Debtors in their restructuring
efforts. When the Debtors filed for protection from their
creditors, they listed $4,032,200,000 in total assets and
$3,296,900,000 in liabilities. (Armstrong Bankruptcy News, Issue
No. 68; Bankruptcy Creditors' Service, Inc., 215/945-7000)
ATA AIRLINES: Will Get $15.5 Million Financing from Indiana
-----------------------------------------------------------
ATA Airlines, Inc., the principal subsidiary of ATA Holdings Corp.
(OTC: ATAHQ.PK), reported that the Indiana Transportation Finance
Authority -- ITFA, with the financial support of the City of
Indianapolis, authorized a $15.5 million financing backed by more
than $50 million in ATA Airlines assets. The proposed financing
transaction is at a favorable interest rate and offers
commercially reasonable terms.
The financing transaction is intended to enable ATA Airlines to
complete a transaction with AirTran Airways, Inc. (NYSE: AAI) or
some other party within the next three months. That transaction
will enable ATA to reorganize and restructure its airline
operations with renewed focus on serving Indiana customers. ATA
Airlines agreed to pay for all fees and costs incurred by the ITFA
in connection with the financing transaction.
"The employees and management team of ATA Airlines are grateful to
everyone for the confidence they have expressed in our business.
Most of all, I thank Governor Joe Kernan for supporting his
hometown airline. Without his commitment, this would not have
been possible. I also want to thank Mayor Bart Peterson for his
help and for the grassroots efforts of those who have voiced their
support of ATA Airlines by encouraging the community to travel on
our airline. We continue to put the needs of our customers and
employees first, and we are very pleased to know that many people
in Indiana are supporting us," said George Mikelsons, ATA Holdings
Corp. Chairman and Chief Executive Officer.
"ATA Airlines appreciates the State of Indiana and the City of
Indianapolis helping to supply an interim financing arrangement
that allows us to move forward with our restructuring plan.
Governor Joe Kernan and Mayor Bart Peterson are providing the
bridge to get ATA Airlines to a stable future," said Gilbert
Viets, Executive Vice President and Chief Restructuring Officer.
The asset sale and lease agreements to be executed in connection
with the financing transaction require approval by the
Indianapolis Airport Authority's board of directors and the United
States Bankruptcy Court. ITFA members unanimously approved the
proposed financing and related sale and lease transactions on
November 8.
"ATA is an enormously important company in Indianapolis. ATA
started here under the good leadership of George Mikelsons, and we
want to help see it cement its future growth right here," said
Mayor Bart Peterson of Indianapolis.
The bi-partisan ITFA is one of the financing arms of Indiana State
government. Its members are appointed by Governor Kernan, and his
designee serves as chairman of the authority.
"ATA has been a strong asset to our entire Indiana community for
more than three decades, and I am pleased that the Transportation
Finance Authority unanimously approved this plan to assist the
airline," Kernan said. "At the state level, we remain committed
to doing what we can to help the company and its employees get
through this tough, transitional time."
Headquartered in Indianapolis, Indiana, ATA Airlines, owned by ATA
Holdings Corp. -- http://www.ata.com/-- is the nation's 10th
largest passenger carrier (based on revenue passenger miles) and
one of the nation's largest low-fare carriers. ATA has one of the
youngest, most fuel- efficient fleets among the major carriers,
featuring the new Boeing 737-800 and 757-300 aircraft. The
airline operates significant scheduled service from Chicago
Midway, Hawaii, Indianapolis, New York and San Francisco to over
40 business and vacation destinations. Stock of parent company,
ATA Holdings Corp., is traded on the Nasdaq Stock Exchange. The
Company and its debtor-affiliates filed for chapter 11 protection
on October 26, 2004 (Bankr. S.D. Ind. Case No. 04-19866, 04-19868
through 04-19874). Terry E. Hall, Esq., at Baker & Daniels,
represents the Debtors in their restructuring efforts. When the
Debtors filed for protection from their creditors, they listed
$745,159,000 in total assets and $940,521,000 in total debts.
ATA AIRLINES: Asks Court to Okay Midway Sale Bidding Procedures
---------------------------------------------------------------
The ATA Airlines and its debtor-affiliates are willing to consider
offers to enter into one or more transactions in addition to, or
in place of, their deal with AirTran Airways, Inc., for the sale
of all, or any substantial part of their assets, including but not
limited to, certain assets related to their operation at Midway
International Airport.
Interested parties may submit bids to purchase the Midway Assets
or submit an offer to enter into one or more transactions
differing from those contemplated in the Debtors' agreement with
AirTran. An Alternative Transaction may be an offer to acquire:
(i) the Midway Assets;
(ii) all, or substantially all, of the Assets including the
Midway Assets; or
(iii) all, or substantially all, of the Assets excluding the
Midway Assets.
A Potential Bidder must submit to the Debtors an executed
confidentiality agreement and its current audited financial
statements or other form of financial disclosure demonstrating its
ability to close a proposed transaction.
All bids must be submitted no later than 4:00 p.m. (Eastern
Standard Time) on November 23, 2004. The Debtors may, with the
approval of the ATSB Lenders, and in consultation with the
Official Committee of Unsecured Creditors and the City of
Chicago, extend the Bid Deadline.
To be qualified, a Bid must include:
(a) if the Qualified Bidder proposes a transaction comprised
of the Midway Assets, an executed purchase agreement
marked to show modifications to the Debtors' Definitive
Agreement with AirTran;
(b) if the Qualified Bidder proposes a transaction that is not
comprised of the Midway Assets, an executed purchase
agreement marked to show modifications to the Definitive
Agreement. At its discretion, a Qualified Bidder may also
provide a separate form of executed purchase agreement
that encompasses the Alternative Transaction; or
(c) if the Qualified Bidder proposes a Chapter 11 plan of
reorganization or liquidation, a separate form of
agreement that encompasses the Alternative Transaction.
At their discretion, the Debtors may consider only offers seeking
to purchase a substantial portion of the Midway Assets.
The Debtors may afford any Qualified Bidder reasonable time and
opportunity to conduct reasonable due diligence under the
circumstances.
A Bid must include a good faith deposit in the form of a certified
check, wire transfer or other form as is acceptable to the Debtors
equal to 10% of the bid value, in terms of cash and assumed debt.
Under no circumstances will the Good Faith Deposit be less than
$2,000,000 or greater than $10,000,000.
A Bid must not be contingent on obtaining financing or the outcome
of unperformed due diligence by the Qualified Bidder or the
amendment or renegotiation of a contract or lease to be assumed as
part of the Bid. The Bidder must also demonstrate adequate
assurance of future performance under any executory contracts or
unexpired leases to be assumed pursuant to the Bid.
The Qualified Bidder's offer is irrevocable until the later of:
(a) two business days after the closing of the Transaction by
which the all of the Assets that were the subject of the
Bid have been transferred of to one or more Qualified
Bidders; and
(b) 75 days after the Court approves the Transaction for the
transfer of all of the Assets that were the subject of
the Qualified Bid.
If one or more Qualified Bids -- other than AirTran's -- are
received, the Debtors will conduct an auction on December 1,
2004, at the offices of Baker & Daniels, in Indianapolis,
Indiana. The Debtors may adjourn or continue the Auction.
Good Faith Deposits of all Qualified Bidders will be held in an
interest-bearing escrow account. Except for the Successor Bidder
and the Backup Bidder, the Debtors will hold the Good Faith
Deposits of all Qualified Bidders until the later of (a) two
business days after the closing of the sale by which all of the
Assets that were the subject of the Bid have been disposed of to
one or more Qualified Bidders, and (b) 75 days after the Court
approves the Transaction with respect to all of the Assets that
were subject to the Qualified Bid.
If a Successful Bidder successfully consummates an approved
Transaction, the Successful Bidder's Good Faith Deposit will be
applied to the purchase price in the Transaction. If a
Successful Bidder fails to consummate an approved Transaction
because of a breach or failure to perform on the part of the
Successful Bidder, the Debtors will be entitled to:
(i) retain the Good Faith Deposit as part of their damages
resulting from the breach or failure to perform by the
Successful Bidder; and
(ii) seek all available damages from the Successful Bidder
occurring as a result of the Successful Bidder's failure
to perform.
The Debtors will hold the Good Faith Deposit of any Backup Bidder
until they consummate an approved Transaction with a Successful
Bidder for the portion of the Assets that were the subject of the
Backup Bid.
Bidding Procedures Must Be Approved
Terry E. Hall, Esq., at Baker & Daniels, in Indianapolis,
Indiana, asserts that the proposed Bidding Procedures are designed
to maximize the realizable value of the Debtors' Assets for the
benefit of their estates, particularly in light of the Debtors'
extensive prepetition efforts to negotiate a transaction with
respect to the Midway Assets. The Bidding Procedures provide a
comprehensive system to give notice to Qualified Bidders of the
Debtors' desire and willingness to consider offers for one or more
Transactions. The Bidding Procedures provide an efficient, fair,
and open framework for all interested Qualified Bidders to make
proposals to enter into a Transaction to acquire the Debtors'
Assets.
The AirTran Transaction has already been covered in the national
media. The Debtors expect that their efforts to solicit a higher
or otherwise better offer for their assets will receive continued
coverage in the media, including airline industry publications.
The Debtors will further publish a notice of the sale in The
Indianapolis Star and the national editions of The Wall Street
Journal and The New York Times. The Debtors will also post a copy
of the order approving the Bidding Procedures at
http://www.bmccorp.net-- the Web site of BMC Group, their notice,
claims and balloting agent.
By this motion, the Debtors ask the Court to approve the Bidding
Procedures.
Headquartered in Indianapolis, Indiana, ATA Airlines, owned by ATA
Holdings Corp. -- http://www.ata.com/-- is the nation's 10th
largest passenger carrier (based on revenue passenger miles) and
one of the nation's largest low-fare carriers. ATA has one of the
youngest, most fuel- efficient fleets among the major carriers,
featuring the new Boeing 737-800 and 757-300 aircraft. The
airline operates significant scheduled service from Chicago-
Midway, Hawaii, Indianapolis, New York and San Francisco to over
40 business and vacation destinations. Stock of parent company,
ATA Holdings Corp., is traded on the Nasdaq Stock Exchange. The
Company and its debtor-affiliates filed for chapter 11 protection
on Oct. 26, 2004 (Bankr. S.D. Ind. Case No. 04-19866, 04-19868
through 04-19874). Terry E. Hall, Esq., at Baker & Daniels,
represents the Debtors in their restructuring efforts. When the
Debtors filed for protection from their creditors, they listed
$745,159,000 in total assets and $940,521,000 in total debts.
(ATA Airlines Bankruptcy News, Issue No. 3; Bankruptcy Creditors'
Service, Inc., 215/945-7000)
ATA AIRLINES: Asks Court to Approve 3% AirTran Break-Up Fee
-----------------------------------------------------------
ATA Airlines and its debtor-affiliates ask the United States
Bankruptcy Court for the Southern District of Indiana to approve
certain bid protections for AirTran Airways, Inc.
The Debtors acknowledge AirTran's expenditure of time, energy and
resources in pursuing the sale of the Debtors' assets at Midway
International Airport. Hence, in the event the Debtors consummate
a transaction with another bidder, the Debtors will pay AirTran a
break-up fee of 3% of the Acquisition Price and reimburse AirTran
for all of its reasonable out-of-pocket fees and expenses, not to
exceed $1,000,000 in the aggregate.
However, AirTran will under no circumstances receive either the
Break-Up Fee or the Expense Reimbursement unless the parties have
negotiated and executed the Definitive Agreement.
Headquartered in Indianapolis, Indiana, ATA Airlines, owned by ATA
Holdings Corp. -- http://www.ata.com/-- is the nation's 10th
largest passenger carrier (based on revenue passenger miles) and
one of the nation's largest low-fare carriers. ATA has one of the
youngest, most fuel- efficient fleets among the major carriers,
featuring the new Boeing 737-800 and 757-300 aircraft. The
airline operates significant scheduled service from Chicago-
Midway, Hawaii, Indianapolis, New York and San Francisco to over
40 business and vacation destinations. Stock of parent company,
ATA Holdings Corp., is traded on the Nasdaq Stock Exchange. The
Company and its debtor-affiliates filed for chapter 11 protection
on Oct. 26, 2004 (Bankr. S.D. Ind. Case No. 04-19866, 04-19868
through 04-19874). Terry E. Hall, Esq., at Baker & Daniels,
represents the Debtors in their restructuring efforts. When the
Debtors filed for protection from their creditors, they listed
$745,159,000 in total assets and $940,521,000 in total debts.
(ATA Airlines Bankruptcy News, Issue No. 3; Bankruptcy Creditors'
Service, Inc., 215/945-7000)
BALL CORP: Fitch Revises Outlook on Double-B Ratings to Positive
----------------------------------------------------------------
Fitch Ratings has affirmed the ratings for Ball Corporation's
(NYSE: BLL) senior secured credit facilities and senior notes at
'BB+' and 'BB', respectively, and revised the Rating Outlook to
Positive. Approximately $1.6 billion of debt is affected by these
actions.
The ratings are supported by BLL's leading market positions,
stability of end markets and customers, steady margin performance,
and strong free cash flow generation. In the past two years, BLL
has successfully integrated the Schmalbach acquisition and has
utilized free cash flow to improve the balance sheet. Concerns
include higher share repurchases, potential leverage hikes related
to acquisition activities, price pressures in the plastics and
food can businesses, adverse weather conditions, and the uncertain
resolution of the German Deposit Law.
The Positive Outlook recognizes BLL's consistent delevering
efforts, improving financial performance, and the expectation that
the company will maintain current credit profile. Fitch believes
the company's targeted $250 million reduction in net debt in 2004
is achievable, given its margin expansion trend and strong free
cash flow generation. At the same time, Fitch expects the company
to significantly increase share repurchases beyond 2004 in the
absence of large acquisition opportunities, limiting further
balance sheet improvement.
BLL's credit profile is strong for the rating category: at
September 30, 2004 on an LTM basis:
* EBITDA/interest was 6.4 times (x),
* total adjusted debt/EBITDA was 2.5x, and
* total adjusted debt/capital was 64.5%.
With continued efforts to improve efficiency and an improved
operating environment, the year-end credit metrics should further
improve. However, Fitch expects the improvement in the company's
credit statistics to be moderated by the application of excess
cash flow to share repurchases and potential dividend increases in
the absence of acquisitions. Leverage could temporarily rise
again if there are acquisition activities.
Ball Corporation manufactures metal and plastic packaging,
primarily for beverages and foods, and is also a supplier of
aerospace and other technologies and services to commercial and
governmental customers. Major customers include Miller Brewing
Company, PepsiCo, Inc. and affiliates, Coca-Cola Company and
affiliates, all bottlers of Pepsi-Cola and Coca-Cola branded
beverages, and various U.S. government agencies.
BEAR STEARNS: Fitch Junks Class B-4 & Puts Class B-5 on Default
---------------------------------------------------------------
Fitch Ratings has taken rating actions on these Bear Stearns ARM
issue:
* Series 2001-4:
-- Class A affirmed at 'AAA';
-- Class B-1 upgraded to 'AAA' from 'AA';
-- Class B-2 upgraded to 'AA' from 'A';
-- Class B-3 upgraded to 'A' from 'BBB';
-- Class B-4 remains at 'CCC';
-- Class B-5 remains at 'D'.
The upgrades reflect a substantial increase in credit enhancement
relative to future loss expectations and affect $2,539,894 of
outstanding certificates. The affirmation reflects credit
enhancement consistent with future loss expectations and affects
$15,137,156 of outstanding certificates.
As of the October 2004 distribution date, the credit enhancement
levels for classes B-1, B-2, and B-3 in this transaction have at
least tripled from the original credit enhancement levels. Class
B-1 benefits from 12.64% enhancement (originally 3.25%); class B-2
benefits from 8.08% enhancement (originally 2.25%); and class B-3
benefits from 4.65% enhancement (originally 1.50%). In addition,
82% of the original collateral has paid down with no losses
recorded in the past year.
The mortgage pool consists of conventional 30-year, fully
amortizing, adjustable-rate mortgage loans secured by first liens
on one- to four-family residential properties.
CATHOLIC CHURCH: DuFresne Wants Postpetition Funds Segregated
-------------------------------------------------------------
Paul DuFresne asks Judge Perris to require the Archdiocese of
Portland in Oregon to open a bank account to preserve funds for
creditors.
Mr. DuFresne explains that Portland's financial disclosures and
invoices for professional services indicate that all of
Portland's assets will be depleted in less than four years.
Portland estimates that the current bankruptcy litigation will
last more than a decade and could take longer than 18 years.
Therefore, the continuation of the current course will exhaust all
of Portland's resources long before litigation is done.
"Assuming the information supplied by the Debtor is true and
correct, creditors have little incentive to continue with a
process which will leave them with nothing. Creditors [would]
instead demand immediate liquidation of all Archdiocesan assets
under Chapter 7 of the Bankruptcy code before the remaining assets
of the Debtor are expended," Mr. DuFresne says.
To encourage creditors to delay demand for Portland's liquidation,
a secure depository for money made available through Portland's
reorganization is required.
The Trustee Account will be an interest-bearing bank account. It
will be established at a financial institution selected by the
Official Committee of Tort Claimants and approved by the Court.
Portland will have no role in selecting or operating the Trustee
Account. Funds in the Trustee Account will be unavailable to pay
Portland's operational costs, or for professional fees, unless
specifically directed by the Court.
Mr. DuFresne also asks Judge Perris to appoint a trustee to
operate the Account. The Trustee will:
-- hold in trust for the creditors any real or personal
property which has been transferred to the Trustee prior to
sale. This may include proper storage and maintenance of
personal property, and management of real property; and
-- sell personal and real property which has been transferred
to the Trustee, with sale proceeds to be deposited in the
Trustee Account.
The Trustee may hire experts and purchase materials needed to
perform its tasks.
"The wishes or demands of the Debtor will play no role in the
Trustee's Duties," Mr. DuFresne says.
The Trustee will be selected by the Tort Committee, subject to
approval by the Court. Compensation for the Trustee will be paid
out of the Trustee Account.
Prior to the selection of the Trustee, or if the Trustee steps
down, the Tort Committee will assume the responsibilities of the
Trustee until the next Trustee is appointed.
Phoebe Joan O'Neill Objects
Phoebe Joan O'Neill tells Judge Perris that creating a separate
bank account to preserve funds for creditors and appointing a
trustee for that account would only serve to frustrate one of the
purposes of a Chapter 11, which is to allow the Archdiocese to
continue in business. Mr. DuFresne's proposal would, in effect,
shut down Portland and very likely related parishes, schools, and
cemeteries.
Ms. O'Neill points out that Mr. DuFresne is seeking the immediate
liquidation of Portland's assets under Chapter 7 of the Bankruptcy
Code.
"This is not a Chapter 7," Ms. O'Neill states.
Ms. O'Neill also contends that Mr. DuFresne's proposal only serves
the interests of tort claimants. They are not the only claimants
in Portland's case, Ms. O'Neill asserts. There are many business
creditors, several hundred thousand beneficial owners as well as
donors of restricted gifts and endowments.
Ms. O'Neill, however, agrees with Mr. DuFresne that parties-in-
interest in Portland's case need to proceed seriously, efficiently
and with an eye to conservation of Portland's resources.
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. 8;
Bankruptcy Creditors' Service, Inc., 215/945-7000)
CITIGROUP MORTGAGE: Fitch Puts Low-B Rating on Classes B-4 & B-5
----------------------------------------------------------------
Fitch Ratings has taken rating actions on the following Citigroup
Mortgage Loan Trust issues:
* Series 2003-UP3:
-- Class A affirmed at 'AAA';
-- Class B-1 affirmed at 'AA';
-- Class B-2 affirmed at 'A';
-- Class B-3 affirmed at 'BBB';
-- Class B-4 affirmed at 'BB';
-- Class B-5 affirmed at 'B'.
* Series 2003-UST1:
-- Class A affirmed at 'AAA';
The series 2003-UP3 affirmations reflect credit enhancement
consistent with future loss expectations and affect $207,739,622
of outstanding certificates. As of the October distribution
report, the mortgage pool is seasoned eleven months and 10% of the
collateral has paid off. Currently no losses have been reported.
The current credit enhancement for all classes has increased from
their original levels. Currently, class A benefits from 8.83% of
credit enhancement (originally 6%); classes B-1 benefits from
6.33% credit enhancement (originally 4.30%); class B-2 benefits
from 4.41% credit enhancement (originally 3%), class B-3 benefits
from 3.02% credit enhancement (originally 2.05%), class B-4
benefits from 2.28% credit enhancement (originally 1.55%) and
class B-5 benefits from 1.55% (originally 1.05%).
The series 2003-UST1 affirmation reflects credit enhancement
consistent with future loss expectations and affects $271,010,713
of outstanding certificates. As of the October distribution
report, the mortgage pool is seasoned eleven month and 22% of the
collateral has paid off. Currently, no losses have been reported
and less than 1% of the mortgage loans are delinquent.
The current credit enhancement for class A has increased from its
original level. Currently, class A benefits from 2.45% of credit
enhancement (originally 2%).
CITIZENS COMMS: Moody's Rates Proposed $950 Sr. Unsec. Debts Ba3
----------------------------------------------------------------
Moody's Investors Service has assigned a Ba3 rating to Citizens
Communications Company's proposed $700 million issuance of senior
unsecured notes due 2013, and a Ba3 rating to the company's
$250 million senior unsecured revolving credit facility maturing
in 2009. Moody's has also affirmed the company's other debt
ratings. The proposed debt issuance is intended to pre-fund the
partial refinancing of $875 million of debt maturing in the second
quarter of 2006, which will be accomplished if Citizens'
concurrent tender offer is successful. The ratings broadly
reflect Moody's view that Citizens operating cash flow will remain
strong despite continued access line erosion and concerns about
Citizens' aggressive dividend policy. The rating outlook remains
negative. The following is a summary of Moody's current ratings
and actions.
Citizens Ratings Assigned:
* Proposed $700 million senior unsecured notes -- Ba3
* $250 million senior unsecured revolving credit facility
-- Ba3
Citizens Ratings Affirmed:
* Senior Implied Rating -- Ba3
* Issuer Rating -- Ba3
* Speculative Grade Liquidity Rating -- SGL-2
* Senior Unsecured Shelf -- (P)Ba3
* Subordinate Shelf -- (P)B2
* Preferred Shelf -- (P)B3
Citizens Utilities Trust Rating Affirmed:
* Preferred Stock -- B2
The Ba3 senior implied rating continues to reflect high debt-to-
free cash flow and low fixed charge coverage ratios, which have
partially resulted from the company's decision to support a high
dividend yield. Moody's also remains concerned that the company's
access lines, already declining at an annual rate of 2%, may
decline further in the future if cable companies begin offering
telephone service in Citizens' territories. These strained
metrics are offset, however, by the company's relatively stable
operating cash flows and still high margins. As a predominantly
rural local exchange carrier -- RLEC, Citizens still benefits
somewhat from a relatively favorable competitive and regulatory
environment. This situation helps keep margins high and operating
cash flow stable.
The negative outlook incorporates Moody's expectation that the
company's high dividend payout leaves the company little room to
repay debt or increase capital spending should competition
intensify. The outlook could stabilize if Moody's believes the
company will improve total debt-to-EBITDA to around 3.5x and free
cash flow-to-adjusted debt nears 5%. The ratings could
deteriorate if Citizens confronts more cable competition and
Moody's believes the company is likely to lose more significant
market share.
Moody's estimates that Citizens' total debt to EBITDA for the
third quarter of 2004 was approximately 3.7x, while its free cash
flow relative to debt was less than 3%. Moody's is particularly
concerned about Citizens' weak fixed charge coverage, which when
viewed after dividend payments, was approximately 1.6x at 9/30/04.
Notably, nearly all of Citizens' debt is issued at the parent
company on a senior unsecured and non-guaranteed basis. And
importantly, the ratings specifically assume that management will
not alter this financing structure in future periods by
introducing structurally senior and secured indebtedness into the
consolidated capital structure, even though they have significant
flexibility as embedded in the very loosely structured indenture
agreements to do so. As such, Moody's rates neither the proposed
senior unsecured notes nor the recently closed bank credit
facility any differently than the existing senior unsecured debt,
and all of which is equivalent to the fundamental Ba3 senior
implied rating. In lieu of a security package that would have
likely resulted in notching among the different classes of debt,
the proposed note offering contains conditions that provide very
limited protections to effectively subordinate all of the
company's senior unsecured lenders. These conditions include
limitations on subsidiary indebtedness not to exceed $100 million
and limitations on liens whereby secured debt cannot exceed 10% of
total assets or 20% in the case of a senior secured credit
facility. The proposed notes do benefit from a change of control
provision, as is customary in the market for high yield
transactions, and the absence of such a provision for the existing
debt is noteworthy. While such a condition specifically benefits
only the proposed noteholders, all creditors should benefit from
the nominal reduction in event risk that results from this
provision.
Moody's remains particularly concerned, nonetheless, about the
lack of operating company guarantees and the company's ability to
offer security or to add secured debt, which could result in the
potential structural and/or effective subordination of the holding
company senior unsecured debt. Again, in the event that Citizens
chose to alter its capital structure in such a way in the future,
the notching between the holding company senior unsecured debt and
the senior implied rating would widen, and not necessarily by just
one notch.
Affirmation of the company's SGL-2 speculative grade liquidity
rating is supported by its ability to generate relatively stable
cash flow from operations of a sufficient magnitude to fund all
cash needs. In addition, Citizens continues to benefit from its
excess cash balance (almost $200 million cash-on-hand at 9/30/04)
and a $250 million committed revolving credit facility, as well as
limited near-term maturities of less than $10 million. Under its
revolving credit facility agreement, the company has access to
same-day borrowing subject to material adverse change
representation. Citizens' "good" liquidity profile lends further
support to its long-term ratings.
Citizens is a telecommunications company headquartered in
Stamford, Connecticut.
CLARKEIES MARKETS: Owners Say Judicial Delay Causing Problems
-------------------------------------------------------------
Clarkeies Market, L.L.C., filed for chapter 11 protection on
March 13, 2001 (Bankr. D. N.H. Case No. 01-10700). Clarkeies is
owned by Alan and Sue Clarke and operates two supermarkets located
in Groveton and Colebrook, New Hampshire. Mr. and Mrs. Clarke say
they were hoodwinked when they bought two additional stores
located in Woodsville and Berlin, New Hampshire, relied on bogus
financial information provided by Associated Grocers of New
England, Inc., overpaid for the stores, and because the grocery
stores were unable to generate sales and earnings sufficient to
pay debts, the company tumbled into chapter 11.
On October 3, 2001, Clerkeies sued Associated Grocers of New
England, Inc. (Adv. Pro. No. 01-01177). Fifteen months after a
trial concluded, the parties are still waiting for the Honorable
J. Michael Deasy to render his decision. Clarkeies Market is
looking for a $10 million judgment against Associated Grocers.
Mr. and Mrs. Clarke told an Associated Press reporter this week
that the business is now danger of going under because of the
delay. "Workers are worried about their jobs. Customers are
worried about losing more groceries in the North Country, where
they are already sparse," an AP report relates.
M. Elaine Beauchesne, Esq., at Pierce Atwood L.L.P., represents
the small New Hampshire grocery store chain.
CLEARLY CANADIAN: Sept. 30 Balance Sheet Upside-Down by $681,000
----------------------------------------------------------------
Clearly Canadian Beverage Corporation (OTCBB:CCBC) (TSX:CLV)
reported consolidated financial results for its third fiscal
quarter ended September 30, 2004.
Net loss for the three months ended September 30, 2004 was
$645,000 on sales of $3,273,000 compared to net loss of $781,000
on sales of $3,849,000 for the same period in 2003. This
represents a decline in sales of $576,000 over the same period in
2003.
Net loss for the nine months ended September 30, 2004 was
$1,935,000 (or $0.26 per share) on sales of $9,338,000 compared to
net loss of $2,086,000 (or $0.31 per share) on sales of
$10,888,000 for the same period in 2003. This represents a decline
in sales of $1,550,000 over the same period in 2003.
Sales in the third quarter of 2003 included $469,000 of Reebok
product sales as compared with no sales for the Reebok brand in
the third quarter of 2004. The decline in Reebok product sales is
attributable to Reebok having discontinued its licensing agreement
with the Company as of December 31, 2003, which resulted in the
Company depleting its remaining inventories of Reebok products in
the sell-off period in the first half of 2004. Management believes
sales performance for brand Clearly Canadian in the third quarter
of 2004 was adversely affected due to working capital constraints,
which limited the Company to supplying product at existing
distribution levels. Management also believes that the inability
to properly fund field marketing activities and to support sales
drives in the first nine months of this year resulted in missed
opportunities to expand distribution and availability.
While these factors had a negative impact on the Company's sales
in the third quarter, the Company's private label business
experienced continued growth in the period and in the nine months
ended September 30, 2004, as compared with the same periods in
2003.
"Clearly Canadian's management remains focused on pursuing
additional financing to support the Company's operations and
relations with existing suppliers and vendors and to allow for
more aggressive field marketing and sales activities for our
beverage products," said Douglas L. Mason, President of Clearly
Canadian Beverage Corporation.
"The roll-out of reformulated Clearly Canadian sparkling flavoured
water through a national network of distributors is now largely
complete. In our current financial condition we continue to face
considerable challenges to increase availability for the brand.
Consistent with the Company's strategy in the first nine months of
the year, we intend to work closely with our distributors to
continue collaborative efforts to develop additional focus on
brand Clearly Canadian and open new accounts," said Mason.
Gross profit for the three months ended September 30, 2004 was
$1,090,000 (33.3%) compared to $918,000 (23.8%) for the three
months ended September 30, 2003. Gross profit for the nine months
ended September 30, 2004 was $2,893,000 (31.0%) compared to
$2,978,000 (27.4%) for the nine months ended September 30, 2003.
The Company's gross profit has increased slightly in the third
quarter and remained consistent in the nine months ending
September 30, 2004 compared with the same periods last year after
removing the effects of a write down of inventories related to
label changes and discontinued packaging in September 2003. The
Company incurred higher shipping costs in the nine months ended
September 30, 2004, however, a change in sales mix during the
period to an increase in the product lines with higher margins
have offset the other direct cost of sales.
Selling, general and administrative expenses were $1,430,000 for
the three months ended September 30, 2004 compared to $1,576,000
for the same period in 2003, representing a reduction of 9.4%.
Selling, general and administrative expenses were $4,331,000 for
the nine months ended September 30, 2004 compared to $4,808,000
for the same period in 2004, representing a reduction of 9.9%. The
Company has closely controlled or reduced its spending in many
areas of selling, general and administrative expense. The decrease
is attributable in most part to cost efficiencies relating to
promotional items and a decrease in salaries and benefits.
At September 30, 2004, Clearly Canadian's balance sheet showed a
$681,000 stockholders' deficit, compared to $1,125,000 in positive
equity at December 31, 2003.
About the Company
Based in Vancouver, British Columbia, Clearly Canadian Beverage
Corporation markets premium alternative beverages, including
Clearly Canadian(R) sparkling flavoured water, Clearly Canadian
O+2(R) oxygen-enhanced water beverage and Tre Limone(R) sparkling
lemon drink which are distributed in the United States, Canada and
various other countries. Additional information on Clearly
Canadian may be obtained on the world wide web at
http://www.clearly.ca/
CONCENTRA OPERATING: Sept. 30 Balance Sheet Upside-Down by $65.7M
-----------------------------------------------------------------
Concentra Operating Corporation reported its results for the third
quarter ended September 30, 2004. The Company reported
consolidated Adjusted Earnings Before Interest Taxes Depreciation
and Amortization of $42,428,000 for the quarter, reflecting a
slight increase from $42,352,000 for the same period in the prior
year. Concentra computes Adjusted EBITDA in the manner prescribed
by its bond indentures. A reconciliation of Adjusted EBITDA to net
income is provided within this press release.
Revenue for the third quarter of 2004 increased 6% to $284,566,000
from $268,853,000 in the year-earlier period. The Company reported
an operating loss of $9,170,000 for the third quarter of 2004
compared with operating income of $31,127,000 in the third quarter
of last year. The Company's operating loss for the quarter
included non-cash impairment charges of $41,682,000 related to the
write-down of the goodwill and other long-lived assets of the
Company's Care Management Services segment. During the quarter,
the Company also incurred a pre-tax loss of $2,290,000 related to
the early retirement of the remaining $27,579,000 of its 13%
Senior Subordinated Notes. Including these charges, Concentra's
net loss for the third quarter was $26,295,000 versus net income
of $10,499,000 for the third quarter of 2003.
For the nine months ended September 30, 2004, Concentra's revenue
increased 7% to $839,612,000 from $781,281,000 in the same period
of 2003. Primarily due to the $41,682,000 in impairment charges
incurred during the third quarter, operating income decreased to
$53,243,000 from $82,880,000 for the first nine months of 2003. In
connection with its refinancing transactions, Concentra has also
incurred $14,105,000 in year-to-date charges related to the early
retirement of debt. Accordingly, the Company's net loss for the
first nine months of the year was $14,532,000 as compared to net
income of $29,769,000 in the first nine months of 2003. For the
year-to-date, Adjusted EBITDA was $125,750,000, up 7% from
$117,239,000 reported for the comparable period last year.
"We continued to achieve strong results in our Health Services
division during the most recently completed quarter," said Daniel
Thomas, Concentra's President and Chief Executive Officer. "With
same-center visit growth of 8.1% and increases in our other
ancillary services, we achieved a $5,441,000 increase in the gross
contribution from this segment of our business. Our Network
Services business segment also continued to demonstrate revenue
growth during the third quarter. However, as we previously
anticipated, our rates of growth in revenue and earnings slowed
during the quarter primarily due to the effects of changes to the
California fee schedule implemented earlier this year.
Nevertheless, on a combined basis, we continue to be pleased with
the overall success that our Health Services and Network Services
businesses have accomplished during 2004.
"In the third quarter, the results of our Care Management Services
segment continued to reflect decreases as compared to the prior
year," said Mr. Thomas. "These decreases and a culmination of
other events have caused us to incur a non-cash charge for the
impairment of our goodwill and certain other assets of this
business segment. It is also important to note that the results
from our Care Management Services segment were adversely affected
during the quarter due to approximately $2,500,000 in lease
termination, severance and other non-recurring expenses."
At September 30, 2004, Concentra had no borrowings outstanding
under its $100,000,000 revolving credit facility and had
$47,194,000 in cash and investments. At the conclusion of the
third quarter, the Company had a Days Sales Outstanding of 60
days, which represented a four-day reduction from the same period
last year. For the nine-month period ending September 30, 2004,
Concentra had net cash provided by operating activities of
$71,615,000.
The Company's non-cash impairment charges during the quarter were
comprised of a $36,008,000 charge for the impairment of goodwill
and a $5,674,000 charge for the impairment of other long-lived
assets. The Company's charges for the impairment of goodwill and
other long-lived assets were determined in accordance with the
provisions of Statement of Financial Accounting Standards ("SFAS")
142, Goodwill and Other Intangible Assets and SFAS 144, Accounting
for the Impairment or Disposal of Long-Lived Assets. These charges
will not result in future cash expenditures or have an impact on
the Company's liquidity or debt covenants.
At September 30, 2004, Concentra Operating's balance sheet showed
a $65,674,000 stockholders' deficit, compared to $44,010,000 in
positive equity at December 31, 2003.
About the Company
Concentra Operating Corporation, a wholly owned subsidiary of
Concentra Inc., is the comprehensive outsource solution for
containing healthcare and disability costs. Serving the
occupational, auto and group healthcare markets, Concentra
provides employers, insurers and payors with a series of
integrated services which include employment-related injury and
occupational health care, in-network and out-of-network medical
claims review and repricing, access to specialized preferred
provider organizations, first notice of loss services, case
management and other cost containment services. Concentra provides
its services to approximately 130,000 employer locations and 3,500
insurance companies, health plans and third party administrators
nationwide.
DELTA AIR LINES: Discloses Transformation Plan Updates
------------------------------------------------------
Delta Air Lines (NYSE: DAL) provided an update to the progress
made on its transformation plan and other financial information:
Tentative Agreement with
Air Line Pilots Association
On Oct. 28, 2004, Delta and its pilots union reached a tentative
agreement that will provide the company with $1 billion in annual
cost savings. The agreement:
(1) includes a 32.5 percent reduction to base pay rates on
Dec. 1, 2004;
(2) does not include any scheduled increases in base pay
rates; and
(3) includes benefit changes such as a 16 percent reduction
in vacation pay, increased cost sharing for active pilot
and retiree medical benefits, the amendment of the
defined benefit pension plan to stop service accrual as
of Dec. 31, 2004, and the establishment of a defined
contribution pension plan as of Jan. 1, 2005.
The tentative agreement is subject to a ratification vote by the
union membership, which is expected to be completed on Nov. 11,
2004. The agreement, if ratified, would become amendable on
Dec. 31, 2009.
Equity Grant
As part of its restructuring plan, Delta will provide an employee
incentive program for U.S. based employees, including pilots. One
element of this program is a broad-based, non-qualified stock
option grant. In the near term, the company plans to issue to
approximately 57,000 employees (excluding officers and directors)
stock options to purchase a total of approximately 63 million
shares of common stock, subject to New York Stock Exchange (NYSE)
acceptance of Deltas application for an exception from the NYSEs
shareowner approval requirement. The exercise price of the stock
options would be equal to the closing price of the common stock on
the NYSE on the date of the grant. The options would become
exercisable in three equal installments on the first, second and
third anniversaries of the grant date, and unexercised stock
options would expire at the close of business on the sixth
anniversary of the grant date.
In addition, also subject to NYSE approval, Delta expects to issue
up to 12 million shares of common stock to certain debt holders
who agree to defer indebtedness maturing in the near term, and
aircraft lessors who participate in the companys aircraft
financing concession program.
Newly Negotiated Vendor Agreements
Delta has received commitments from over 100 of its vendors and
suppliers for approximately $29 million in annual savings.
The company is in negotiations to obtain additional savings of
similar size from other vendors and suppliers.
Liquidity
Delta's commitments for financing include minimum cash
requirements. To comply with these requirements, the company
expects that it will need an additional $135 million in liquidity
in early 2006 above the amounts previously disclosed. This
projection assumes that the previously reported exchange offer is
consummated only with respect to the Short Term Existing
Securities, and that the collateral reserved for the Intermediate
and Long Term Existing Securities under the exchange offer is
instead used by Delta to secure additional financing in the range
of $130 million to $150 million.
As a result of the completion of certain initiatives, Delta has
achieved approximately $50 million of the additional $135 million
in additional liquidity it expects it will need in early 2006.
Delta is currently pursuing a number of other financing
transactions to meet the remaining $85 million.
Financing Commitment
As previously disclosed, Delta entered into a commitment letter
with GE Commercial Finance to provide Delta with $500 million of
financing, subject to significant conditions. The financing would
be secured by a portion of Deltas accounts receivable, aircraft,
real property, spare parts, flight simulators, ground equipment,
landing slots and international routes and a pledge of stock of
subsidiaries and other investments. The current market value and
orderly liquidation value of this collateral are preliminarily
estimated to be approximately $3.5 billion and $2.2 billion,
respectively.
The exchange offer is being made only to "qualified institutional
buyers," as such term is defined in Rule 144A under the Securities
Act of 1933, as amended. The exchange offer will not be registered
under the Securities Act of 1933, or any state securities laws.
Therefore, any securities issued in the exchange offer may not be
offered or sold in the United States absent an exemption from the
registration requirements of the Securities Act of 1933 and any
applicable state securities laws. This announcement is neither an
offer to sell nor a solicitation of an offer to buy the securities
offered in the exchange offer.
About the Company
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.
* * *
As reported in the Troubled Company Reporter on Sept. 16, 2004,
Delta Air Lines filed a Form 8-K with the Securities and Exchange
Commission to make changes in its Annual Report on Form 10-K for
the year ended December 31, 2003.
The Annual Report is being revised so it may be incorporated into
another document. Since Delta filed the Annual Report with the
SEC, significant events have occurred which have materially
adversely affected Delta's financial condition and results of
operations. These events, which have been reported in Delta's
subsequent SEC filings, include a further decrease in domestic
passenger mile yield and near historically high levels of aircraft
fuel prices. The Annual Report has been revised to disclose these
events and the possibility of a Chapter 11 filing in the near
term. Additionally, as a result of Delta's recurring losses, labor
and liquidity issues and increased risk of a Chapter 11 filing,
Deloitte & Touche LLP, Delta's independent auditors, has reissued
its Independent Auditors' Report to state that these matters raise
substantial doubt about the company's ability to continue as a
going concern.
As reported in the Troubled Company Reporter on August 23, 2004,
Standard & Poor's Ratings Services lowered Delta Air Lines, Inc.'s
corporate credit rating and the ratings on Delta's equipment trust
certificates and pass-through certificates to 'CCC'. Any
out-of- court restructuring of bond payments or a coercive
exchange would be considered a default and cause the company's
corporate credit rating to be lowered to 'D' -- default -- or 'SD'
-- selective default, S&P noted. Ratings on Delta's enhanced
equipment trust certificates, which are considered more difficult
to restructure outside of bankruptcy, were not lowered.
DUANE READE: Moody's Junks $195 Million Senior Subordinated Notes
-----------------------------------------------------------------
Moody's Investors Service lowered the ratings of the Term Loan and
9.75% Senior Subordinated Notes (2011) of Duane Reade Inc to B2
and Caa1, respectively. The downgrade reflects the mediocre
operating results over the previous several quarters and Moody's
revised expectation that sales, operating profit, and debt
protection measures will remain weak over the medium-term. The
ratings now recognize Moody's opinions that lease adjusted
leverage will not soon substantially improve from 7 ½ times
and fixed charge coverage will stay low at near 1 time, but the
company has adequate liquidity.
Moody's lowered ratings as follows:
-- $155 million Term Facility to B2 from B1,
-- $195 million 9.75% Senior Subordinated Note (2011) issue to
Caa1 from B3,
-- Senior Implied Rating to B2 from B1, and the
-- Long-Term Issuer Rating to Caa2 from Caa1.
Moody's does not rate the $250 million Revolving Credit Facility
that is collateralized by a first-lien on accounts receivable,
inventory, and pharmacy prescription files. The rating outlook is
stable.
Negatively impacting the ratings are the company's highly
leveraged financial condition, the exposure to the economic
fortunes of a restricted geographic region (Manhattan and
surrounding areas), and the thin EBITDA cushion for Term Facility
covenant compliance. Pressure on operating margins as low margin
drugs (relative to general merchandise) steadily make up a larger
proportion of the sales mix and weak trends in merchandise
comparable store sales also negatively impact the ratings.
However, the ratings recognize the company's leading market share
in the New York metropolitan area generally (and Manhattan
specifically), the relatively low cash outflows for repair &
maintenance given the modern condition of the company's store
base, and the expectation that prescription drug sales will remain
strong. Moody's understanding that the company will conserve free
cash flow by decreasing the pace of new store openings (relative
to recent years) and our opinion that the company has significant
asset value in the form of accounts receivable, inventory,
prescription drug files, and below-market leases also benefit the
ratings.
The stable rating outlook reflects Moody's expectations that
operating performance and debt protection measures will remain
near current levels and incremental permanent borrowings on the
Revolving Credit Facility will be minimal over the intermediate
term. Ratings would be negatively impacted if EBITDA margin
materially declines, debt protection measures or liquidity
resources deteriorate, or the company experiences difficulties at
remaining in compliance with bank loan covenants. Over the longer
term, ratings could be raised as sales and operating profit
recover, debt protection measures meaningfully improve (such as a
decline in lease-adjusted leverage below 6 times and an increase
in fixed charge coverage above 1 1/2 times), and the company
achieves good returns on investment with the planned development
of new stores inside and outside of Manhattan.
The B2 rating on the six-year Secured Term Loan considers that, in
addition to guarantees from the operating subsidiaries, this class
of debt has a second priority lien relative to the first priority
lien of the unrated Revolving Credit Facility with respect to the
most easily monetizable assets of accounts receivable, inventory,
and pharmacy files and a first-lien on all other assets. In spite
of the adequate asset coverage in a default scenario, the bank
loan is rated at the same level as the senior implied rating
because of the large proportion of the Revolving Credit Facility
in the company's debt structure. Given current levels of EBITDA,
Moody's believes that covenant compliance will remain
uncomfortably tight.
The Caa1 rating on the Senior Subordinated Note issue considers
that this debt is guaranteed by the company's operating
subsidiaries. However, this subordinated class of debt is
contractually subordinated to significant amounts of more senior
obligations. As of September 2004, the more senior claims
principally would have been comprised of the asset-based Revolving
Credit Facility, the secured Term Loan, and $85 million of trade
accounts payable.
For the past year, the Duane Reade's front-end comparable store
sales have been substantially lower than its chain drug store
peers as the slowdown in the New York City economy has adversely
impacted customer traffic. Operating margin (excluding one-time
charges) has declined to 1.8% in the first nine months of 2004
from 2.6% and 4.8% in 2003 and 2002, respectively. Relative to
prior expectations, Moody's now believes delays in revenue and
operating profit growth will postpone substantial improvements in
financial flexibility. Going forward, Moody's anticipates that
the company will maintain adequate liquidity by adjusting the pace
of its new store development program.
Duane Reade Inc, headquartered in New York City, operates 255 drug
stores principally in Manhattan and the outer boroughs of New York
City. Revenue for the twelve months ending September 2004 equaled
$1.4 billion.
ENRON CORP: Asks Court to Nix $24.6M Euell Energy Resources Claims
------------------------------------------------------------------
On March 18, 2002, Euell Energy Resources, Inc., filed Claim No.
1408 against Enron Corporation for $24,550,000 based on a theory
of breach of contract. On October 9, 2002, Euell filed Claim No.
7537 to amend Claim No. 1408 and add a theory of recovery based
on fraudulent misrepresentation.
On September 3, 2002, Euell filed Claim No. 3497 against Enron
North America for $24,550,000 based on a theory of breach of
contract. On October 9, 2002, Euell filed Claim No. 7536 to
amend Claim No. 3497 and add a theory of recovery based on
fraudulent misrepresentation.
Each of the Euell Claims:
(a) arises from exactly the same set of alleged facts,
(b) asserts exactly the same amount of lost profit damages
from those facts, and
(c) is based on the same two legal theories -- breach of
contract and/or fraudulent misrepresentation.
Euell claims that it suffered damages because ENA and Enron
failed to procure a letter of credit, which according to Euell,
caused Euell to forfeit its bid to purchase from and resell oil
to the Department of Energy's Strategic Petroleum Reserve.
Specifically, Euell alleges that:
(a) On October 2, 2000, Euell was awarded a contract by the
DOE, under which Euell agreed to purchase a specified
amount of oil from the SPR and sell back an equal amount
plus 10% in one year.
(b) To close the Transaction, Euell had to provide an
irrevocable letter of credit before close of business
October 10, 2000.
(c) With knowledge that Euell was a high bidder, Renard D.
Euell, Euell's president, contacted either Patrick Danaher
or John Nowlan, vice presidents in ENA's trading group,
about participating in the Transaction by posting a letter
of credit, agreeing to provide the replacement oil and
sharing in the profit. One of these ENA vice presidents
allegedly responded that ENA and Enron was interested in
the Transaction and requested the bidding documentation
from Euell.
(d) In an October 6, 2000 telephone call, Mr. Nowlan allegedly
represented that ENA and Enron was opening the letter of
credit, but Mr. Euell subsequently learned that ENA and
Enron would not provide a letter of credit, stating that
Euell should have known "there was no deal."
(e) Because ENA and Enron allegedly misrepresented its
intention, or breached its alleged agreement, to post a
letter of credit and participate in the Transaction, Euell
was not able to close with the DOE and allegedly lost
profits amounting to $24,550,000.
The Debtors dispute the allegations for five reasons, among
others:
(1) ENA -- for whom Messrs. Nowlan and Danaher worked -- and
not Enron would have engaged in this type of transaction,
if there were a transaction at all.
(2) In any event, neither ENA nor Enron accepted Euell's offer
to participate in the Transaction.
(3) No representation was made that a letter of credit was in
place or that ENA or Enron would participate in the
Transaction. In fact, Messrs. Nowlan and Danaher told Mr.
Euell that ENA was not prepared to enter into the
Transaction.
(4) At best, Euell and ENA entered into preliminary
negotiations about a possible transaction, after Euell
already had been awarded the contract.
(5) As there is no writing memorializing any transaction, this
alleged agreement violates the statute of frauds under
Texas law.
The Debtors have reviewed the Euell Claims and have determined
that they should be disallowed and expunged because Euell has no
legitimate claims against the Debtors. In addition, each claim
is valued by Euell at $24,550,000, but each claim is based on the
same transaction or occurrence, and therefore, under no
circumstances does Euell hold claims totaling $98,200,000. If
any of the Euell Claims constitutes a "claim" under Section
101(5) of the Bankruptcy Code, Euell would, at most, hold an
unsecured claim for $24,550,000. Nevertheless, even if the
duplicate claims -- Claim Nos. 1408 and 7537 -- against Enron are
expunged, the Debtors maintain that Euell holds no remaining
substantive claim against ENA, whether based on breach of
contract or fraud.
Moreover, the Euell Claims are unliquidated claims which, (a)
fail to state a claim relief and (b) with respect to which any
damages are so speculative that they must be valued at zero
dollars.
In accordance with the Estimation Procedures, the Debtors ask the
Court to disallow and expunge the Euell Claims or, in the
alternative, estimate those claims at zero dollars for all
purposes, including for distribution purposes.
Headquartered in Houston, Texas, Enron Corporation is in the midst
of restructuring various businesses for distribution as ongoing
companies to its creditors and liquidating its remaining
operations. Before the company agreed to be acquired, controversy
over accounting procedures had caused Enron's stock price and
credit rating to drop sharply. The Company filed for chapter 11
protection on December 2, 2001 (Bankr. S.D.N.Y. Case No.
01-16033). Judge Gonzalez confirmed the Company's Modified Fifth
Amended Plan on July 15, 2004, and numerous appeals followed.
Martin J. Bienenstock, Esq., and Brian S. Rosen, Esq., at Weil,
Gotshal & Manges, LLP, represent the Debtors in their
restructuring efforts. (Enron Bankruptcy News, Issue No. 128;
Bankruptcy Creditors' Service, Inc., 15/945-7000)
ENRON CORP: Court Okays Employee Claim Settlement Protocol
----------------------------------------------------------
James A. Beldner, Esq., at Kronish Lieb Weiner & Hellman LLP, in
New York, recounts that in June 2002, the Official Committee of
Unsecured Creditors, certain former Enron employees, the AFL-CIO
and the National Rainbow/PUSH Coalition, and the Official
Employment-Related Issues Committee filed a joint motion for the:
(a) final approval of a settlement among them of litigation
commenced by the Former Employees, seeking severance pay
on behalf of all similarly situated former Enron
employees on the terms and subject to the conditions set
forth in the Stipulation of Settlement, dated June 14,
2002; and
(b) authorization for the Employee Committee to commence and
prosecute the 90-Day Bonus Avoidance Actions on behalf of
the Debtors' estates, in order to provide potential
additional distributions to settling former employees
pursuant to the Settlement.
As part of the severance package to be awarded to Settling Former
Employees, the Settlement provided for the assignment by the
Debtors to the Employee Committee of the proceeds of potential
avoidance actions against certain former Enron employees that
received significant lump-sum payments that Enron labeled as "90-
day Retention Bonuses." Mr. Beldner estimates the amount of
transfers potentially subject to challenge as Avoidance Actions
to total $73 million.
The Debtors agreed to channel the net proceeds from the Avoidance
Actions to Settling Former Employees as potential additional
payments. The Avoidance Actions, however, excluded any claim or
action against any current employees and any former employees
whose employment was terminated by Enron on or after March 1,
2002, without cause or due to their death or disability, on whose
behalf the Debtors obtained releases. As part also of the
Settlement, the Debtors granted the Employee Committee standing
to prosecute the Avoidance Actions.
The Severance Settlement Order
On August 28, 2002, the Court entered a Severance Settlement
Order:
-- approving the Joint Motion;
-- allowing the assignment of the proceeds of the Avoidance
Actions to the Employee Committee; and
-- authorizing the Employee Committee to prosecute the
Avoidance Actions.
The Clarification Order
On May 12, 2003, the Court entered a clarification order pursuant
to Sections 105(a), 1103(c)(5) and 1109(b) of the Bankruptcy
Code. Among others, the Clarification Order authorized the
Employee Committee to:
-- commence certain avoidance actions on the Estates' behalf;
-- seek to avoid and recover the proceeds of the Avoidance
Actions, whether or not the transferees received the bonus
proceeds prepetition or postpetition; and
-- utilize all legal authority under state or federal law to
prosecute the Avoidance Actions, whether or not the
transferees actually received the proceeds postpetition.
The Severance Settlement Trust Agreement
As set forth in the Severance Settlement Fund Litigation Trust
Agreement, the Employee Committee, with its counsel, created a
Severance Settlement Fund Litigation Trust to receive and
distribute Avoidance Action proceeds. The Severance Settlement
Trust Agreement outlines and governs the relationship between the
Employee Committee and its professionals with respect to
collection of the Avoidance Actions.
The Declaratory Judgment Action
Certain of the recipients of the Avoidance Actions filed a
declaratory judgment action against the Employee Committee. At
the Employee Committee's request, the Court dismissed the
Declaratory Judgment Action. Mr. Beldner tells the Court that
the Employee Committee has now filed suit against all of the
recipients of the Avoidance Actions on behalf of the Debtors'
estates in the United States Bankruptcy Court for the Southern
District of Texas, Houston Division.
Proposed Litigation Settlement Procedures
The Employee Committee proposes that all settlements of Avoidance
Actions effected through a settlement agreement containing a
waiver of claims provision will be entered into without further
notice and will not require any further order of the Bankruptcy
Court or any other court. The net proceeds of the Avoidance
Actions will flow exclusively to the unsecured creditors
comprising the Settling Former Employees.
The form settlement agreement generally requires that the
defendant waive any and all claims against the Debtors' estates
that defendant may have pursuant to Section 502(h) of the
Bankruptcy Code and Rule 3002(c)(3) of the Federal Rules of
Bankruptcy Procedure.
The Employee Committee anticipates that, if not all, the majority
of settlements of Avoidance Actions will be effected through the
Waiver of Claim Provision which provision will waive Section
502(h) and Rule 3002(c)(3) Claims.
With respect to settlement of Avoidance Action claims that are
not resolved through use of a form of release containing the
Waiver of Claim Provision, the Employee Committee proposes that:
(a) The Employee Committee can settle and grant releases with
respect to an Avoidance Action claim settled in the
aggregate for $1,000,000 or less without further Court
order. In the context of the billions of dollars of
claims asserted in Enron's cases, the impact of any
Section 502(h) or Rule 3002(c)(3) claims on the Debtors'
bankruptcy estates is minor, since those claims will be
paid various fractional dividends projected to be received
by general unsecured creditors.
(b) Avoidance Action claims settled in the aggregate for
$1,000,000 or more will be subject to approval by the
Court pursuant to Bankruptcy Rule 9019.
Proposed Settlement Procedures
Will Afford Greater Distribution
There are about 290 actions being prosecuted by the Employee
Committee, Mr. Beldner notes. Of those actions, 16 or 5.5%, are
claims to recover more than $1,000,000 from potential defendants.
Because of the small number of actions seeking more than
$1,000,000, the Litigation Settlement Procedures will reduce the
costs of prosecuting the Avoidance Actions by avoiding the
unnecessary costs of seeking approval for each and every
settlement agreement. The Employee Committee believes that the
reduction in litigation costs will ultimately provide a greater
distribution and speed up the delivery of money to the Settling
Former Employees.
Mr. Beldner further points out that only settlements not
incorporating the Waiver of Claim Provision have the potential to
impact the general unsecured creditors of the Debtors' estates.
Since the Employee Committee expects that most or all settlements
will incorporate a waiver, the Court's approval of the proposed
procedures will save the parties and the Court from the necessity
of engaging in proceedings that have no impact on general
unsecured creditors.
Judge Gonzalez Sets Two Conditions
Judge Gonzalez authorizes the Employee Committee to utilize their
proposed Litigation Settlement Procedures without further notice
or further order from any court as long these two conditions are
met:
(1) The Settlement Agreement, including the Waiver of Claims
Provision, does not materially deviate from the form of
the Court's draft settlement agreement, as determined by
the Debtors and the Creditors' Committee; and
(2) Neither the Debtors nor the Creditors' Committee objects
to a proposed settlement within ten days of its being
delivered in final form by the Employee Committee or, if
an objection is made, until the Debtors and Creditors'
Committee agree in writing to consent to the settlement or
until further Court order.
The Court's Draft Settlement Agreement is available for free at:
http://bankrupt.com/misc/SettlementDraft.pdf
Judge Gonzalez further rules that:
(a) Any claim or portion of a claim released in an approved
settlement will be deemed withdrawn with prejudice;
(b) Existing settlements of Avoidance Actions, executed on or
before May 1, 2004, which, in the aggregate may require
payments of no more than $400,000, are approved without
the requirement of Waiver of Claims Provision, upon
written notice by the Debtors and the Creditors' Committee
that the settlements are not objectionable.
Headquartered in Houston, Texas, Enron Corporation is in the midst
of restructuring various businesses for distribution as ongoing
companies to its creditors and liquidating its remaining
operations. Before the company agreed to be acquired, controversy
over accounting procedures had caused Enron's stock price and
credit rating to drop sharply. The Company filed for chapter 11
protection on December 2, 2001 (Bankr. S.D.N.Y. Case No.
01-16033). Judge Gonzalez confirmed the Company's Modified Fifth
Amended Plan on July 15, 2004, and numerous appeals followed.
Martin J. Bienenstock, Esq., and Brian S. Rosen, Esq., at Weil,
Gotshal & Manges, LLP, represent the Debtors in their
restructuring efforts. (Enron Bankruptcy News, Issue No. 128;
Bankruptcy Creditors' Service, Inc., 15/945-7000)
ENRON CORP: NASD Charges H&R Block with Fraud in Bond Sales
-----------------------------------------------------------
The National Association of Securities Dealers charged H&R Block
Financial Advisors, Inc., with fraud in connection with the sale
of millions of dollars of Enron Corporation bonds after Enron's
finances, and its bond ratings, had begun to collapse.
NASD charged that during the five-week period preceding the Enron
bankruptcy filing -- while Enron's financial crisis was unfolding
publicly and official investigations were being launched -- H&R
Block's brokers made affirmative misrepresentations to customers,
touted the supposed benefits of the Enron bonds, and failed to
disclose the serious and significant risks associated with an
investment in the bonds. From October 29, 2001 through
November 27, 2001, approximately 200 H&R Block brokers recommended
and sold over $16 million worth of Enron bonds to more than
800 customers in approximately 40 states. As an incentive, H&R
Block paid its brokers sales credits significantly higher than
those typically paid for similar bonds. NASD charged that H&R
Block received profits of over $500,000.
When Enron declared bankruptcy on December 2, 2001, the value of
those bonds plummeted to a fraction of the original investment,
causing most H&R Block customers who invested in the bonds to lose
substantially all of their investment.
"This is an especially troubling case where hundreds of
unsuspecting individual investors innocently relied on their H&R
Block brokers to give fair and honest advice concerning
investments," said NASD Vice Chairman Mary L. Schapiro. "But H&R
Block brokers betrayed that trust by selling these investors
highly risky Enron bonds, using misleading information at a time
when the brokers knew, or should have known, of the company's
serious financial problems -- problems which foreshadowed the
collapse of the firm. That H&R Block gave the brokers extra
financial incentives to sell these troubled bonds is simply
intolerable behavior."
NASD charged that H&R Block's representatives failed to disclose
risks of investing in the bonds, including:
(1) that Enron had recently experienced a number of credit
rating downgrades by major rating agencies;
(2) that the bonds were on negative credit watch for additional
potential downgrades;
(3) that Enron had restated its financials for the past four
years by over $552 million for accounting errors;
(4) that Enron had disclosed in a public filing with the
Securities and Exchange Commission that its financial
problems were threatening its ability to continue as a
going business concern;
(5) that the SEC was conducting an investigation into
investments associated with partnerships related to the
company, and
(6) that H&R Block itself had removed another Enron security
from the firm's approved list because of concerns about,
among other things, the company's debt ratings and the SEC
investigation.
NASD also alleged that some H&R Block brokers made affirmative
misstatements to customers, including representations that an
investment in the Enron bonds was safe, that Enron was a large
company that could not or would not fail, and that Enron's credit
rating was higher than it was.
In addition, NASD charged that H&R Block violated NASD rules by
failing to establish and maintain an adequate supervisory system
to monitor the sales of Enron bonds by its registered
representatives.
Under NASD rules, a respondent named in a complaint can file a
response and request a hearing before an NASD disciplinary panel.
Possible sanctions include a fine, suspension, bar, or expulsion
from the NASD.
H&R Block Responds
H&R Block Inc. (NYSE:HRB) is disappointed the NASD decided to
bring charges against its H&R Block Financial Advisors -- HRBFA --
business unit related to the sale of Enron bonds in late 2001, a
period during which Enron's bonds carried an investment grade
rating. H&R Block said it believes the charges will prove
unfounded.
"We deeply regret that our clients experienced losses from the
devaluation of Enron bonds," said Nick Spaeth, senior vice
president and chief legal officer of H&R Block Inc. "However, the
lost value was the result of mismanagement and bankruptcy at Enron
that later came to light, not the result of actions or omissions
on the part of H&R Block Financial Advisors. At the time of sale,
these bonds were rated investment grade by the national rating
services, and evidence of internal fraud at Enron had yet to be
discovered."
The company also pointed out that at the time of the bond sales,
Enron was the country's seventh largest corporation whose common
stock was widely held and recommended by the research analysts who
covered it.
In its communications with the NASD about this issue, which
encompassed total sales to HRBFA clients of approximately
$15 million of Enron bonds, the company has made the following
points:
-- The bonds were obtained from traditional industry sources
and offered to clients at then current market prices; and
-- HRBFA was not involved in any investment banking or other
consultative arrangements involving Enron Corp.
H&R Block disagrees with the NASD's conclusions and believes the
company's position will be validated through the NASD hearing
process.
Investors can obtain more information about, and the disciplinary
record of, any NASD-registered broker or brokerage firm by using
NASD's BrokerCheck. NASD makes BrokerCheck available at no charge
to the public. In 2003, members of the public used this service
to conduct more than 2.8 million searches for existing brokers or
firms and requested almost 180,000 reports in cases where
disclosable information existed on a broker or firm. Investors
can link directly to BrokerCheck at
http://www.nasdbrokercheck.com/ Investors can also access this
service by calling 1-800-289-9999.
About H&R Block
H&R Block Inc. -- http://www.hrblock.com/-- is a diversified
company with subsidiaries that deliver tax services and financial
advice, investment and mortgage products and services, and
business accounting and consulting services. The world's largest
tax preparation company, H&R Block in fiscal year 2004 served
21.6 million clients at more than 11,000 retail offices worldwide
and with software and online services. H &R Block is the only
major tax preparation and financial services company that focuses
primarily on helping middle-income Americans achieve their
financial objectives. Investment services and securities products
are offered through H&R Block Financial Advisors Inc., member
NYSE, SIPC. H &R Block Inc is not a registered broker-dealer. H&R
Block Mortgage Corp. offers retail mortgage products. Option One
Mortgage Corp. offers wholesale mortgage products and a range of
mortgage services. RSM McGladrey Inc. serves mid-sized businesses
with accounting, tax and consulting services.
About NASD
The NASD is the leading private-sector provider of financial
regulatory services, dedicated to investor protection and market
integrity through effective and efficient regulation and
complementary compliance and technology-based services. NASD
touches virtually every aspect of the securities business -- from
registering and educating all industry participants, to examining
securities firms, enforcing both NASD rules and the federal
securities laws, and administering the largest dispute resolution
forum for investors and member firms. For more information, visit
http://www.nasd.com/
Headquartered in Houston, Texas, Enron Corporation is in the midst
of restructuring various businesses for distribution as ongoing
companies to its creditors and liquidating its remaining
operations. Before the company agreed to be acquired, controversy
over accounting procedures had caused Enron's stock price and
credit rating to drop sharply. The Company filed for chapter 11
protection on December 2, 2001 (Bankr. S.D.N.Y. Case No. 01-
16033). Judge Gonzalez confirmed the Company's Modified Fifth
Amended Plan on July 15, 2004, and numerous appeals followed.
Martin J. Bienenstock, Esq., and Brian S. Rosen, Esq., at Weil,
Gotshal & Manges, LLP, represent the Debtors in their
restructuring efforts.
FEDERAL-MOGUL: Inks Stipulation Settling EPA's CERCLA Claims
------------------------------------------------------------
Federal-Mogul Corporation and its debtor-affiliates and the United
States Government ask the U.S. Bankruptcy Court for the District
of Delaware to approve a stipulation, which embodies a compromise
between Debtors Federal-Mogul Corporation and F-M Ignition
Company, on the one hand, and the United States Government, acting
on behalf of the United States Environmental Protection Agency and
the Internal Revenue Service, on the other hand.
James E. O'Neill, Esq., at Pachulski Stang Ziehl Young Jones &
Weintraub, in Wilmington, Delaware, relates that the Stipulation
is a stand-alone agreement, but it is also an integral part of a
settlement agreement entered into by the Debtors and the
Government with regards to the resolution of certain environmental
claims.
The Stipulation recognizes that the EPA holds Secured Claims for
$213,080 against Federal-Mogul and F-M Ignition under the
Comprehensive Environmental Response, Compensation and Liability
Act. In addition, the EPA holds secured claims against certain
Debtors, which are addressed in the Settlement Agreement.
The EPA Claims are based on certain past and future response costs
for environmental clean-up at four sites:
Site Claim Amount
---- ------------
Hellertown Manufacturing Company $100,000
Superfund Site in Hellertown,
Northampton County, Pennsylvania
Malone Service Company, 66,569
Swan Lake Plant Superfund Site in Texas City,
Galveston County, Texas
Reclamation Oil Company Site, in Detroit, 44,697
Wayne County, Michigan
Spectron, Inc., Superfund Site in Elkton, 1,814
Cecil County, Maryland
The EPA Claims regarding the Malone and Reclamation Oil
Environmental Sites are further classified by the Settlement
Agreement as being allowed against Federal-Mogul. The Debtors and
the EPA also agreed that the EPA Claims regarding the Hellertown
and the Spectron Environmental Sites are potential liabilities of
F-M Ignition. Furthermore, in the interests of settling the EPA
Claim regarding the Hellertown Environmental Site, Federal-Mogul
and F-M Ignition, without admitting past or future responsibility
for the Hellertown Environmental Site or acknowledging any legal
basis for liability on the part of Federal-Mogul, agreed that the
EPA will have an EPA Claim for $100,000, with respect to the
Hellertown Environmental Site, which will be allocated as:
(i) $9,574 to F-M Ignition; and
(ii) $90,426 to Federal-Mogul.
Apart from the compromises reached as part of the Settlement
Agreement, Federal-Mogul and the IRS agreed that Federal-Mogul, as
parent of the consolidated tax group, is entitled to the refund of
federal income taxes for the years 1985 to 2000, which are
substantially in excess of the EPA Claims.
During the negotiations, the Government asserted that it has the
right to set off the EPA Claims against the Tax Refunds, pursuant
to Section 553 of the Bankruptcy Code.
Mr. O'Neill says that the Debtors have reviewed the law applicable
to the Government's asserted rights of setoff and have determined
that the Debtors have the ability to consent to a setoff by the
Government of the EPA Claims owed by Federal-Mogul and F-M
Ignition to the EPA against the Tax Refunds owed by the IRS to the
Debtors. This determination is based on the Debtors' conclusion
that for purposes of setoff, individual agencies of the United
States Government are deemed to be a single entity for purposes of
satisfying the mutuality requirements of Section 553 of the
Bankruptcy Code.
Accordingly, the parties stipulate and agree that:
(a) The EPA holds allowed secured claims against Federal-Mogul
under Section 502, aggregating $201,692. The EPA also
holds allowed secured claims, against Federal-Mogul,
aggregating $11,388. The Claims are secured by rights of
offset asserted by the Government;
(b) The Government, on behalf of the EPA and the IRS, will be
entitled to reduce the amount of the Tax Refunds plus any
interest thereon payable to Federal-Mogul, as the agent
for the consolidated tax group, by $213,080, with the
amounts to be applied by the United States to satisfy,
fully and completely, the Allowed Secured Claims granted
to EPA pursuant to the Settlement Agreement and the
Stipulation;
(c) The EPA Claim relating to the Spectron Enviromental Site
and that portion of the EPA Claim relating to the
Hellertown Environmental Site that is allocated to FM-
Ignition will be deemed to be offset against that portion
of the Tax Refunds that is attributable to F-M Ignition
while the remainder of the EPA Claims will be deemed to be
offset against Tax Refunds attributable to Federal-Mogul;
(d) The IRS will pay the $213,080 it withheld from the Tax
Refunds to the EPA, which will deposit that amount into
site-specific accounts for each of the Environmental Sites
within the EPA Hazardous Substance Superfund to be
retained and used to conduct or finance response actions
at or in connection with the Environmental Sites, or to be
transferred by EPA to the Hazardous Substance Superfund,
or to be deposited into the EPA Hazardous Substance
Superfund in the first instance; and
(e) The Government and the EPA withdraw their request to the
IRS, made by a letter dated May 13, 2004, for a temporary
freeze of the Tax Refunds, and the IRS acknowledges
receipt of the withdrawal of that request.
David E. Street, Esq., at the Environmental Enforcement Section of
the U.S. Department of Justice, in Washington, D.C., signed the
Stipulation on the Government's behalf.
Headquartered in Southfield, Michigan, Federal-Mogul Corporation -
- http://www.federal-mogul.com/-- is one of the world's largest
automotive parts companies with worldwide revenue of some
$6 billion. The Company filed for chapter 11 protection on
October 1, 2001 (Bankr. Del. Case No. 01-10582). Lawrence J.
Nyhan, Esq., James F. Conlan, Esq., and Kevin T. Lantry, Esq., at
Sidley Austin Brown & Wood and Laura Davis Jones, Esq., at
Pachulski, Stang, Ziehl, Young, Jones & Weintraub, represent the
Debtors in their restructuring efforts. When the Debtors filed
for protection from its creditors, they listed $10.15 billion in
assets and $8.86 billion in liabilities. (Federal-Mogul Bankruptcy
News, Issue No. 66; Bankruptcy Creditors' Service, Inc.,
215/945-7000)
GENEVA STEEL: Two Creditors File Competing Plans of Liquidation
---------------------------------------------------------------
Geneva Steel LLC's creditors -- Silver Point Capital, LP, and
Anderson Geneva LLC -- filed competing plans of liquidation with
the U.S. Bankruptcy Court for the District of Utah, Central
Division.
Anderson's Plan
Anderson proposes to acquire the bulk of the Debtor's remaining
assets by a cash payment on the Effective Date and by a series of
periodic cash payments thereafter.
The Plan contemplates for the continuation of the Official
Committee of Unsecured Creditors to administer the claims and
resolve disputed claims and pursue causes of action on the
estate's behalf.
Holders of general unsecured claims who opt not to be treated as
administrative convenience claims are projected to receive 55% to
57% of the face amount of their claims.
Silver Point's Plan
Silver Point holds a secured claim against Geneva Steel under the
Bank Credit Agreement along with two other creditors -- Albert
Fried & Company, LLC, and Emergency Steel Loan Guarantee Board.
Silver Point's Plan incorporates and provides a scheme for Geneva
Steel to liquidate its estates over a limited period of time.
The Plan proposes to fund Geneva Steel's Liquidating Plan with an
initial equity investment comprised of a minimum of
$35 million in cash.
On the Effective Date, a new entity -- Asset LLC -- will be
established to issue securities and administer the Debtor's
assets. Silver Point will receive Series A Preferred LLC
Interests and 75% of the common LLC Interests in exchange for its
cash equity investment and its secured claims.
The other two creditors under the Bank Credit Agreement will be
paid in full through the combination of cash, new secured notes
and Senior B Preferred LLC Interests.
General Unsecured Creditors will get to elect whether to receive
20 cents for a dollar of their allowed claim in cash or Series C
Preffered LLC Interests and up to 25% of the Common LLC interests.
Geneva's Plan
Geneva's Plan provides for the orderly liquidation of all of the
Debtor's remaining assets and for the distribution of the net
proceeds to the estate's creditors. The Debtor has sold in
February its major steel-making equipment to Qingdao Iron & Steel
Group Co., Ltd., for $40 million. Sale Proceeds from other
facilities and equipment amounted to approximately
$46 million.
The Debtor's remaining assets include:
* a 1,750 acres of real property in Utah,
* 66 water rights from various sources such as wells,
springs, drains and the Provo River, and
* emission reduction credits
which are expected to generate not less than $166 million.
Under the terms of the Plan:
* administrative claims of about $4.8 million,
* priority tax claims amounting to 50$,00,
* secured bank claims with estimated allowed claims of
$128.3 million,
* other secured claims amounting to $228,000, and
* other priority claims of about $2 million
will recover 100% of their claims on or shortly after the
Effective Date.
General unsecured creditors electing to receive membership
interests will receive their pro rata share of 80% of the
membership interest in a new liquidating entity. That 80% equity
stake results in an estimated recovery from 44% to 57%.
Those unsecured creditors choosing to receive cash are expected to
recover about 20% of their claims.
On the Effective Date, Geneva Steel will be dissolved and
Liquidating LLC will be established to administer the liquidation
of the Debtor's assets.
Headquartered in Provo, Utah, Geneva Steel LLC, owns and operates
an integrated steel mill. The Company filed for chapter 11
protection on January 25, 2002 (Bankr. Utah Case No. 02-21455).
Andrew A. Kress, Esq., Keith R. Murphy, Esq., and Stephen E.
Garcia, Esq., at Kaye Scholer LLP represent the Debtor in its
restructuring efforts. When the company filed for protection from
its creditors, it listed $262 million in total assets and
$192 million in total debts.
GLOBAL CROSSING: Inks Amendment Increasing Bridge Loan to $125MM
----------------------------------------------------------------
On November 2, 2004, Global Crossing Limited completed the
definitive documents for a $25 million increase of the existing
$100 million bridge loan facility made available by STT Crossing
Ltd, a subsidiary of Singapore Technologies Telemedia Pte Ltd, to
the Global Crossing's primary operating subsidiary in the United
Kingdom, Global Crossing (UK) Telecommunications Limited.
A full-text copy of Amendment No. 1 to the Credit Agreement is
available for free at:
http://www.sec.gov/Archives/edgar/data/1061322/000119312504189549/dex991.htm
Daniel O'Brien, the Company's Executive Vice President and Chief
Financial Officer, discloses to the Securities and Exchange
Commission that on November 5, 2004, Global Crossing UK borrowed
the additional $25 million under the Bridge Loan Facility,
bringing the aggregate principal amount outstanding to $125
million.
To meet Global Crossing's previously disclosed liquidity
requirements through the end of 2004, Mr. O'Brien relates, STT
Crossing and another affiliate of ST Telemedia that holds the
$200 million in principal amount of Global Crossing North
American Holdings, Inc.'s Senior Secured Notes due 2006, have
agreed to defer:
-- an interest payment of $11 million due December 15, 2004,
on the Senior Secured Notes; and
-- an interest payment of approximately $4.0 million due on
December 31, 2004, under the Bridge Loan Facility,
until the earlier of the completion of the Global Crossing UK
secured debt financing and January 15, 2005.
STT Crossing has also agreed to defer the final maturity date of
the Bridge Loan Facility from December 31, 2004, to the earlier
of the completion of the Global Crossing UK secured financing and
January 15, 2005.
According to Mr. O'Brien, Global Crossing is currently seeking to
arrange financing intended to provide it with the additional
liquidity needed to refinance the Bridge Loan Facility and
provide for its long term liquidity requirements. This financing
is expected to include a secured debt financing by Global
Crossing UK and a working capital facility secured by certain
accounts receivable. Global Crossing believes it will complete
the Global Crossing UK secured debt financing in mid-December
2004.
Headquartered in Florham Park, New Jersey, Global Crossing Ltd.
-- http://www.globalcrossing.com/-- provides telecommunications
solutions over the world's first integrated global IP-based
network, which reaches 27 countries and more than 200 major cities
around the globe. Global Crossing serves many of the world's
largest corporations, providing a full range of managed data and
voice products and services. The Company filed for chapter 11
protection on January 28, 2002 (Bankr. S.D.N.Y. Case No.
02-40188). When the Debtors filed for protection from their
creditors, they listed $25,511,000,000 in total assets and
$15,467,000,000 in total debts. Global Crossing emerged from
chapter 11 on Dec. 9, 2003. (Global Crossing Bankruptcy News,
Issue No. 69; Bankruptcy Creditors' Service, Inc., 215/945-7000)
HARBORVIEW MORTGAGE: S&P Assigns Low-B Ratings to 16 Classes
------------------------------------------------------------
Standard & Poor's Ratings Services raised its ratings on four
classes from two HarborView Mortgage Loan Trust transactions. At
the same time, ratings are affirmed on 98 other classes of
certificates from various HarborView transactions. Approximately
$3.43 billion in certificates is affected.
The raised ratings are the result of accelerated principal
prepayments and the shifting interest payment structure of the
transactions. This has allowed credit support percentages to
increase to levels that are adequate for the raised ratings.
Projected credit support for these certificates ranged from 1.99x
to 2.67x the support levels associated with the higher rating
levels.
The affirmations are based on pool performance that has allowed
credit support to remain at levels that are adequate to support
the current ratings on the certificates.
The performance of all of the HarborView pools has been very good.
Cumulative losses have been virtually non-existent. The only pool
to experience a loss was 2000-1, which, as of October 2004, had a
cumulative loss total of $222.51. Credit support for all of the
HarborView transactions is provided through subordination.
The underlying collateral for these transactions consists mostly
of 30-year, fixed- and adjustable-rate mortgage loans secured by
first liens on one- to four-family properties.
Ratings Raised
HarborView Mortgage Loan Trust
Rating
Series Class To From
------ ----- -- ----
2000-1 B-1 AAA AA+
2000-1 B-2 AA A+
2000-1 B-3 A- BBB
2000-2 B-3 AAA AA+
Ratings Affirmed
HarborView Mortgage Loan Trust
Series Class Rating
------ ----- ------
2000-1 A-R, IA-2, X, IIA, IIIA AAA
2000-2 A-3, A-R, X-1, X-2 AAA
2000-2 B-1 AAA
2000-2 B-2 AAA
2001-1 A-3, A-R, X AAA
2003-1 A, A-R AAA
2003-1 B-1 AA
2003-1 B-2 A
2003-1 B-3 BBB
2003-1 B-4 BB
2003-1 B-5 B
2003-2 1-A, A-R, 2-A-1, 2-X, 2-A-2, 3-A AAA
2003-2 B-1 AA
2003-2 B-2 A
2003-2 B-3 BBB
2003-2 B-4 BB
2003-2 B-5 B
2003-3 1A-1, A-R, 2A-1, 2A-2, 2A-3, A-X AAA
2003-3 B-1 AA
2003-3 B-2 A
2003-3 B-3 BBB
2003-3 B-4 BB
2003-3 B-5 B
2004-1 1-A, 2-A, 3-A, 4-A, X, A-R AAA
2004-1 B-1 AA
2004-1 B-2 A
2004-1 B-3 BBB
2004-1 B-4 BB
2004-1 B-5 B
2004-2 1A-1, 2A-1, AX, A-R AAA
2004-2 B-1 AA
2004-2 B-2 A
2004-2 B-3 BBB
2004-2 B-4 BB
2004-2 B-5 B
2004-3 1-A, 2-A, A-R AAA
2004-3 B-1 AA
2004-3 B-2 A
2004-3 B-3 BBB
2004-3 B-4 BB
2004-3 B-5 B
2004-4 1-A, 2-A, 3-A, X-1, X-2, A-R AAA
2004-4 B-1 AA
2004-4 B-2 A
2004-4 B-3 BBB
2004-4 B-4 BB
2004-4 B-5 B
2004-5 1-A, 2-A-1, 2-A-2A, 2-A-2B, 2-A-3 AAA
2004-5 2-A-4, 2-A-5, 2-A-6, 3-A, X, AR AAA
2004-5 B1 AA
2004-5 B2 A
2004-5 B3 BBB
2004-5 B4 BB
2004-5 B5 B
HYTEK MICROSYSTEMS: Auditors Continue to Air Going Concern Doubts
-----------------------------------------------------------------
Hytek Microsystem manufactures high reliability micro-electronic
circuits used in military applications, geophysical exploration,
medical instrumentation, satellite systems, industrial
electronics, opto-electronics and other OEM applications. Although
Hytek has research and design capabilities, most of its products
are "build-to-print" as specified by its customers. The Company
also has some standard product offerings, including thermo-
electric cooler controllers, laser diode drivers, heaters and
delay lines.
For the third quarter of fiscal 2004, these standard products
accounted for approximately 5% of net revenues, down from
approximately 15% during the third quarter of fiscal 2003. As of
October 2, 2004, Hytek had 93 full and part-time employees.
During the third quarter of fiscal 2004, the Company had two major
customers, Medtronic, Inc., and DRS Power & Control Technology,
Inc. that together accounted for 40% of Hytek's net revenues.
Hytek is currently the only supplier for a certain Medtronic
medical product. Hytek has been informed that Medtronic is in the
process of developing another supply source for this product.
However, because of Hytek's satisfactory delivery and quality
performance, Medtronic continues to place orders with the Company
at historical levels and Hytek no longer believes that its
revenues to Medtronic will decline during the fourth quarter of
2004. Should any of its major customers have a long-term slowdown
in demand, become a credit risk or discontinue their relationship
with Hytek, it would have a material adverse effect on the
Company's financial position, cash flows and results of
operations.
Additionally, if the current orders in the Company's backlog
scheduled to be shipped are changed as to timing or are cancelled,
this could have a material adverse effect on the Company's
financial position, cash flows and results of operations.
Hytek's current fiscal 2004 internal revenue forecast indicates a
revenue level similar to fiscal 2003, although the Company now
expects an operating loss for fiscal 2004 between $250,000 to
$450,000. This forecast is based on a combination of firm backlog
and a forecast of orders anticipated to be placed and shipped
during the balance of fiscal 2004. In the event that forecast
orders do not become actual sales, or are placed later in the
fiscal year than anticipated, the fiscal 2004 revenue results
could be lower than anticipated, which would have a material
adverse effect on fiscal 2004 financial position, cash flows and
results of operations.
Hytek's cash position increased $61,000 during the third quarter
of fiscal 2004. The Company has not had an available line of
credit since its facility with Bank of the West was canceled in
May 2003, at which time the bank converted the Company's
outstanding balance of $295,000 to a short-term note. The
outstanding principal balance due on this note payable of $135,000
was paid in full on May 14, 2004 under the terms of the note
agreement.
On May 10, 2004, Hytek entered into a non-binding term sheet to
secure up to a $1,500,000 credit facility. This proposed credit
facility would be based upon certain percentages of the Company's
trade accounts receivable and raw materials inventory. The
proposed credit facility would bear interest at prime plus 2.5%
and be collateralized by substantially all of Hytek's assets.
During the third quarter, Hytek determined that this arrangement's
proposed terms and conditions, as well as the associated costs of
maintaining such arrangement, were not favorable to the Company.
Therefore, the Company discontinued negotiations on this proposed
credit facility and is continuing to seek other financing
arrangements and alternatives, including improving its internal
cash flow from operations.
Going Concern Doubt
Hytek Microsystems experienced operating losses on an annual basis
in fiscal 2001, 2002 and 2003 and has had an accumulated deficit
since December 29, 2001. The report of independent auditors on
the Company's January 3, 2004 financial statements includes an
explanatory paragraph indicating there is substantial doubt about
Hytek's ability to continue as a going concern.
Management has developed a plan to address these issues that is
believes will allow the Company to continue as a going concern
through at least the end of fiscal 2004 and is currently updating
that plan for fiscal 2005. This plan includes sustaining revenues
through its backlog and projected new business in the ensuing
year, increasing the gross margin percentage and reducing
operating expenses as necessary. Although management believes the
plan will be successful, there is no assurance that these events
will occur.
Founded in 1974 and headquartered in Carson City, Nevada, Hytek
specializes in hybrid microelectronic circuits that are used in
military applications, geophysical exploration, medical
instrumentation, satellite systems, industrial electronics, opto-
electronics and other OEM applications.
INDUR GINA INC: Case Summary & 11 Largest Unsecured Creditors
-------------------------------------------------------------
Debtor: Indur Gina Inc.
3701 Steilacoom Boulevard South West
Lakewood, WA 98499
Bankruptcy Case No.: 04-50489
Chapter 11 Petition Date: November 4, 2004
Court: Western District of Washington (Tacoma)
Judge: Philip H. Brandt
Debtor's Counsel: Joel G. Green, Esq.
Tax Attorneys, Inc.
800 Bellevue Way North East, Suite 300
Bellevue, WA 98004
Tel: 425-637-3060
Total Assets: $1,317,138
Total Debts: $1,696,970
Debtor's 11 Largest Unsecured Creditors:
Entity Nature of Claim Claim Amount
------ --------------- ------------
Chevron Value of Collateral: $450,000
P.O. Box 2001 $10,000
Concord, CA 94529
Pierce County $21,000
Assessor/ Treasurer
2401 S. 35th Street, Rm. 142
Tacoma, WA 98409
Raymond G. Sandoval $11,000
RGS Legal
801 Pine Street, Suite 100
Seattle WA 98101
Coke of Tacoma $2,076
Lakeview Light and Power $2,076
The Hanlin Moss Group $350
Corporate Express $305
Integra Telephone $300
Windermere Commercial/Metro $203
Inc.
Terrence C. Posey $175
Lakewood Refuse Service, Inc. $133
INDYMAC BANCORP: Fitch Assigns BB+ Rating to Preferred Securities
-----------------------------------------------------------------
Fitch Ratings affirmed the 'BBB-' senior unsecured ratings of
IndyMac Bancorp and IndyMac Bank, FSB. The Rating Outlook is
Stable. The complete list of ratings is available at the end of
this release.
The affirmation reflects the company's solid operating
performance, more diversified and stable funding profile, and
markedly improved credit metrics with the expectation that these
underlying credit strengths will remain. Future rating actions
will be based on IndyMac Bancorp's success in executing its
expanded branch banking strategy, enhancing its overall franchise
value, and sustaining operating strength in a changing mortgage
environment amid greater competition. A key challenge for IndyMac
Bancorp will be its ability to demonstrate the durability and
consistency of its business model in a period of industry
transition.
Competitive forces have compressed net interest margins across the
industry over the past few quarters and Fitch expects IndyMac
Bancorp's net interest margin to remain pressured as the company
has shifted its focus towards lower-yielding adjustable-rate
products. However, an important rating consideration is the
company's ability to stabilize margins and avoid a downward trend.
In addition, Fitch notes that NDE recently has increased its
emphasis on subprime mortgage lending and will evaluate the
company's strategy in this segment, especially the impact on
credit performance and capital considerations at both the bank and
holding company going forward.
As with most other financial institutions, Fitch presently aligns
the senior debt ratings of the bank and holding company. Although
modest at this point, if NDE becomes an active user of the holding
company for funding and other business purposes that results in a
material difference in the credit fundamentals of the bank and
holding company, Fitch could bifurcate the ratings, which could
result in a downgrade of the holding company one notch.
As noted in the company's regulatory filings, IndyMac Bancorp is
engaged in litigation with Washington Mutual Mortgage Securities
Corporation regarding a contractual dispute about standard
representations and warranties on loans sold to PNC Mortgage
Corporation prior to its acquisition by Washington Mutual in 2001.
Although the dispute has not been resolved, Fitch believes that
the outcome of the litigation will be manageable, as the company
maintains a reserve for potential losses relating to
representations and warranties, and does not reflect on IndyMac
Bancorp's overall underwriting standards; historically, IndyMac
Bancorp's loan repurchases related to representations and
warranties have been nominal.
Ratings affirmed with stable outlook:
* IndyMac Bancorp
-- Long-term rating 'BBB-';
-- Short-term rating 'F2';
-- Individual rating 'B/C';
-- Support '5'.
* IndyMac Bank, FSB
-- Long-term issuer rating 'BBB-';
-- Long-term deposit rating 'BBB';
-- Short-term rating 'F2';
-- Short-term deposit rating 'F2';
-- Individual rating 'B/C';
-- Support '5'.
* IndyMac Capital Trust
-- Preferred securities 'BB+'.
INTERSTATE BAKERIES: DIP Financing Amendment Adds Two Restrictions
------------------------------------------------------------------
As reported in the Troubled Company Reporter on Oct. 25, 2004,
Interstate Bakeries Corp. received final approval from the
Bankruptcy Court of its $200 million debtor-in-possession
financing agreement to continue purchasing goods and services, pay
employee salaries and benefits and fund ongoing operations and
other working capital needs during its voluntary restructuring
process.
In a regulatory filing with the Securities and Exchange
Commission, IBC and its debtor-affiliates disclose that they
entered into a First Amendment to the DIP Agreement with JPMorgan
Chase Bank, as Agent, on Nov. 1, 2004.
The First Amendment, among other things, clarifies the Debtors'
ability to continue their ordinary course of business practice of
using exchange-traded futures, in addition to options, to hedge
against fluctuations in prices in commodities used in the
company's business, although this practice remains subject to
certain restrictions.
The First Amendment also clarifies definitions related to the
determination of the borrowing base under the DIP Agreement:
* Inventory Reserves
"Inventory Reserves" is amended to mean a reserve for
amounts owing to landlords or warehousemen for Inventory
stored at leased facilities or public warehouses, which are
not the subject of an access agreement acceptable to the
JPMorgan, in the amount of:
(i) to the extent the Debtors are able to determine the
average rental expense for any facility, the Rent
Reserve; plus
(ii) in all other events, the Inventory Value of the
Inventory stored at other leased facilities or public
warehouses.
* Derivative Agreements
Each of the Debtors will not enter into any agreement with
respect to any swap, forward, future or derivative
transaction or option or similar agreement involving, or
settled by reference to, one or more rates, currencies,
commodities, equity or debt instruments or securities, or
economic, financial or pricing indices or measures of
economic, financial or pricing risk or value or any similar
transaction or any combination of these transactions other
than exchange-traded futures and option contracts designed
to hedge against fluctuations in prices for wheat, corn,
oil, fuel and other commodities used in the Debtors'
business:
(i) entered into in the ordinary course of the Debtors'
business, consistent with past practices and not for
speculative purposes; and
(ii) for which aggregate expenditures, including, but not
limited to, expenditures for brokerage commissions,
exchange or clearing fees, open trade equity, futures
margins and options premiums, by the Debtors during
any fiscal year will not exceed $10,000,000.
Headquartered in Kansas City, Missouri, Interstate Bakeries
Corporation is a wholesale baker and distributor of fresh baked
bread and sweet goods, under various national brand names,
including Wonder(R), Hostess(R), Dolly Madison(R), Baker's Inn(R),
Merita(R) and Drake's(R). The Company employs approximately
32,000 in 54 bakeries, more than 1,000 distribution centers and
1,200 thrift stores throughout the U.S. The Company and seven of
its debtor-affiliates filed for chapter 11 protection on September
22, 2004 (Bankr. W.D. Mo. Case No. 04-45814). J. Eric Ivester,
Esq., and Samuel S. Ory, Esq., at Skadden, Arps, Slate, Meagher &
Flom LLP, represent the Debtors in their restructuring efforts.
When the Debtors filed for protection from their creditors, they
listed $1,626,425,000 in total assets and $1,321,713,000
(excluding the $100,000,000 issue of 6.0% senior subordinated
convertible notes due August 15, 2014 on August 12, 2004) in total
debts. (Interstate Bakeries Bankruptcy News, Issue No. 6;
Bankruptcy Creditors' Service, Inc., 215/945-7000)
INTERSTATE BAKERIES: Wants to Comply with Labor Agreements
----------------------------------------------------------
Interstate Bakeries Corporation and its debtor-affiliates seek the
Court's authority to:
(1) comply with existing grievance procedures under their
collective bargaining agreements with unions;
(2) engage in arbitration;
(3) pay the fees and costs of the arbitrators;
(4) liquidate union grievances;
(5) extend certain expired or expiring Collective Bargaining
Agreements; and
(6) implement existing agreements and enter into and implement
ongoing agreements with the unions in connection with the
Collective Bargaining Agreements.
The Debtors are parties to about 500 Collective Bargaining
Agreements with various unions, including the International
Brotherhood of Teamsters and the Bakery Confectionery Tobacco
Workers & Grain Millers International Union. The Unions
represent nearly 81% of the Debtors' workforce.
Under the Collective Bargaining Agreements, a significant
percentage of the Debtors' employees and former employees were
subject to, and entitled to various benefits. The Debtors
believe that their relationships with the Unions and the Union
Employees will have a significant effect on the Debtors' ongoing
operations and their ability to reorganize.
The Debtors anticipate that they will discuss key reorganization
issues with the Unions on a regular basis. Ultimately, these
discussions must address the treatment of the Collective
Bargaining Agreements in connection with the Debtors'
reorganization.
Under these circumstances, the Debtors find it important to
obtain temporary authority to continue their existing
relationships with their Unions and Union Employees during the
course of their bankruptcy cases, while the Debtors address Union
issues on a global basis. Taking precipitous actions to alter
existing relationships and agreements with the Unions at this
time would only serve to undermine the Debtors' ability to
maintain smooth business operations, preserve a "business as
usual" atmosphere and, ultimately, engage in constructive
discussions with the Unions regarding the important restructuring
issues raised by the Debtors' bankruptcy cases and the Collective
Bargaining Agreements.
Grievances
The Collective Bargaining Agreements provide for certain
procedures designed to foster the expeditious, consistent and
fair resolution of disputes that arise between the Union, its
Employees and the Debtors. Grievances typically involve claims
for compliance with, or requests to determine the meaning and
proper application of, the Agreements and address matters of pay,
benefits, discipline, and discharge under the Agreements.
The assertion of a Grievance typically involves a multi-step
adjustment process subject to detailed rules and deadlines under
the applicable Grievance Procedures specified in the governing
Collective Bargaining Agreement. As the Grievance progresses
through the steps of the Grievance Procedures, additional persons
or parties at higher levels in the Debtors and the Unions
generally may become involved. Ultimately, Grievances may be
resolved by final and binding arbitration, or consensually by
settlement between the parties.
As of the Petition Date, 290 Grievances and 36 arbitrations were
pending. If the Unions were to prevail in full, the prepetition
Grievances and arbitrations represent claims for an estimated
$1,135,000 in monetary relief. In addition, about $25,000 in
unpaid prepetition settlements and arbitrators' fees still remain
unpaid. Based on their past experience, the Debtors believe that
Grievances will be initiated in the normal course of business
based on prepetition and postpetition issues.
Extension of Labor Agreements
Mr. Hoffmann relates that the Debtors' Collective Bargaining
Agreements have a specific term of duration, typically three to
five years. At any given time, and as is typical in labor
relations outside of bankruptcy, a number of these Agreements
have recently expired or will shortly expire. Hence, the Debtors
have regularly entered into short-term reinstatements of or
extensions to the Agreements that will allow them to assess their
business needs, and allow them and the Union to continue to
negotiate, before entering into a new, long-term agreement.
If the Debtors do not negotiate extensions to expiring and
expired Collective Bargaining Agreements, Union Employees could
strike, causing substantial harm to the Debtors' businesses.
The Debtors want to enter into and implement Extensions that may
extend the term of an Agreement up to one year and may change
terms and conditions of employment on both a retroactive and
going forward basis, including changing wages and benefits.
Nonetheless, in the event that changes result in a monetary claim
attributable to a prepetition period or event, the Debtors will
not pay the claim except as otherwise authorized by the Court.
Side Agreements
Numerous issues arise that either are not specifically addressed
in the Collective Bargaining Agreements to the satisfaction of
the Debtors and the Unions, or subject to further agreements of
the parties. These issues typically involve relatively narrow
subjects for a small number of Union Employees, like:
(a) the establishment of transition or termination benefits
for certain individual Union Employees or small groups of
Union Employees;
(b) the resolution of issues related to the physical
characteristics of certain workplace locations, like
available equipment or amenities; or
(c) modifications to work terms at a limited number of
locations, for a limited period of time or impacting a
small or discrete group of Union Employees.
To address these issues, the Debtors and the Unions enter into
retrospective and prospective side agreements governing these
matters, as supplements to the Collective Bargaining Agreements.
Mr. Hoffmann maintains that the Side Agreements are essential
because the Collective Bargaining Agreements do not specifically
address each day-to-day issue arising in the Debtors' businesses.
Before the Petition Date, the Debtors and the Unions entered into
several Side Agreements that remain partially or fully
unperformed by the Debtors.
Given the complexity of the relationships between the Debtors and
their Unions, the Debtors expect that the need to enter into new
Side Agreements to implement the terms of the Collective
Bargaining Agreements and address local issues with the Unions
will arise on a regular basis during their Chapter 11 cases.
Protocol for Extending Labor Agreements
or Entering into Side Agreements
According to Mr. Hoffmann, the Debtors must comply with certain
procedures to enter into and implement an Extension, a
Prepetition Side Agreement or a New Side Agreement. These
procedures strike the desired balance of providing the Debtors
and the Unions with sufficient flexibility to address issues as
they arise while giving key parties-in-interest notice and an
opportunity to object to the Extensions and Side Agreements.
The Procedures provide that:
* For each Extension, New Side Agreement, or implementation of
a Prepetition Side Agreement agreed to by the Debtors and
the Union, the Debtors will provide five business days'
prior written notice to counsel to the Committee, counsel
to the agent for the Debtors' prepetition lenders, counsel
to the agent for the Debtors' postpetition lenders, and the
Office of the United States Trustee, with a copy of the
Notice being provided to the Union, before implementing the
Extension, New Side Agreement or Prepetition Side
Agreements.
* If a Notice Party objects to the implementation of an
Extension, New Side Agreement or Prepetition Side Agreement,
the Notice Party must deliver to the Debtors, their counsel,
and the Union or counsel for the Union, a written objection
within five business days of that Notice Party's receipt of
the Notice. If no objection is received within the period,
the Extension, New Side Agreement or implementation of a
Prepetition Side Agreement will be deemed approved without
any further action by the Debtors or the Court.
* If a Notice Party objects before the expiration of the
objection period, and the Debtor and the Notice Party are
unable to resolve the objection, the Debtors will not be
authorized to implement the Extension, New Side Agreement,
or Prepetition Side Agreement without further Court order,
which the Debtors may or may not seek in their sole
discretion.
Responses
(1) Various Unions
The International Brotherhood of Teamsters, the International
Association of Machinists and Aerospace Workers, and the Bakery,
Confectionery, Tobacco Workers, and Grain Millers International
Union collectively represent 25,000 of the Debtors' 32,600
employees, and are parties to 491 collective bargaining
agreements with the Debtors.
The Unions support the Debtors' request.
The Unions, however, make it clear that:
-- the Debtors are obligated as a matter of law to:
(a) continue honoring and complying with their Collective
Bargaining Agreements, including the grievance and
arbitration provisions of those agreements,
(b) bargain with the Unions on an on-going basis over
mandatory subjects of bargaining that arise during the
contracts' terms; and
(c) bargain with the Unions for extensions or renewals of
expiring Collective Bargaining Agreements, all without
the necessity for Court approval; and
-- the Collective Bargaining Agreements have been assumed by
operation of law and that the Debtors are obligated to
perform under the Agreements.
(2) Ad Hoc Committee of Equity Security Holders
The Ad Hoc Equity Committee asserts that the Debtors should not
be given sole discretion to enter into and to implement Grievance
Settlements without notice to other parties-in-interest and an
opportunity to object, including, specifically, the Ad Hoc
Committee, or an official equity committee, if and when
appointed. Those settlements might set precedent in the case or
fix claims, the size of which could siphon away value from
equity.
As a party-in-interest in the Debtors' Chapter 11 cases, the Ad
Hoc Equity Committee wants to be included as a "Notice Party" for
all purposes under the Debtors' request.
The Ad Hoc Committee also notes that the time period to object to
any Grievance Settlement, Extension, Prepetition Side Agreement,
or New Side Agreement is too short and may prejudice the
Committee. The Ad Hoc Committee will need additional time to
review potential Grievance Settlement, Extension, or Side
Agreement. The Committee asks the Court to give it 20 days'
notice with an opportunity to object.
Unions Respond to Ad Hoc Committee Objection
The International Brotherhood of Teamsters and the International
Association of Machinists and Aerospace Workers ask the Court to
deny the Ad Hoc Committee's request since:
-- the Ad Hoc Committee, being a minority group of
shareholders, has no legal or other right to participate in
collective bargaining or grievance adjustment; and
-- it would be unlawful for the management to condition
grievance adjustment on the Ad Hoc Committee's
participation.
Frederick Perillo, Esq., at Gratz, Miller & Brueggeman, S.C., in
Milwaukee, Wisconsin, explains that if the Ad Hoc Committee is
allowed to object to each proposed grievance settlement, the
grievance machinery in each of the more than 400 collective
bargaining agreements will come to a halt.
"The Court and interested parties will spend literally hundreds
of hours holding hearings over the reasonableness of settlements
on grievances," Mr. Perillo says.
Mr. Perillo asserts that implementing the Ad Hoc Committee's
objection procedures for grievance settlements will undoubtedly
destroy the morale of the union employees whose continued service
is imperative to the Debtors' reorganization and jeopardize the
long-term prospects for success in the Debtors' Chapter 11 cases.
Employees will have no assurance of stability in their daily
working conditions or confidence that an accessible, fair, swift
and final procedure for adjudicating the numerous small, daily
complaints of the labor relations world will be followed.
"It would never be lawful however for management to make its
grievance resolutions subject to objection by a minority
shareholder group, as is the Ad Hoc Committee -- because a
minority of shareholders will never legally be able to bind the
debtor, and absent such apparent and actual authority at the
bargaining table, the debtor will necessarily violate federal law
in every single grievance it adjusts," Mr. Perillo contends.
"A minority of shareholders, or even a majority, has no right to
intrude upon the procedures established under the parties'
collective bargaining agreements pursuant to the [National Labor
Relations Act]," Mr. Perillo adds.
The Bakery, Confectionery, Tobacco Workers and Grain Millers
International Union supports the Teamsters and IAM's stand
against the Ad Hoc Committee.
According to Adrienne H. Wyker, at Blake & Uhlig, P.A., in Kansas
City, Missouri, it is well beyond the role of shareholders to
participate directly in the labor relations regime established by
an entity's management and its workers' union. Granting
shareholders that unprecedented right -- either individually or
collectively through an ad hoc committee -- simply affords those
thousands of shareholders a potential stranglehold on the entire
collective bargaining process and hinders, rather than advances,
the smooth operation of the Debtors' business.
Headquartered in Kansas City, Missouri, Interstate Bakeries
Corporation is a wholesale baker and distributor of fresh baked
bread and sweet goods, under various national brand names,
including Wonder(R), Hostess(R), Dolly Madison(R), Baker's Inn(R),
Merita(R) and Drake's(R). The Company employs approximately
32,000 in 54 bakeries, more than 1,000 distribution centers and
1,200 thrift stores throughout the U.S. The Company and seven of
its debtor-affiliates filed for chapter 11 protection on September
22, 2004 (Bankr. W.D. Mo. Case No. 04-45814). J. Eric Ivester,
Esq., and Samuel S. Ory, Esq., at Skadden, Arps, Slate, Meagher &
Flom LLP, represent the Debtors in their restructuring efforts.
When the Debtors filed for protection from their creditors, they
listed $1,626,425,000 in total assets and $1,321,713,000
(excluding the $100,000,000 issue of 6.0% senior subordinated
convertible notes due August 15, 2014 on August 12, 2004) in total
debts. (Interstate Bakeries Bankruptcy News, Issue No. 5;
Bankruptcy Creditors' Service, Inc., 215/945-7000)
INTERSTATE BAKERIES: Gets Open-Ended Extension for Lease Decisions
------------------------------------------------------------------
As reported in the Troubled Company Reporter on Oct. 25, 2004,
Interstate Bakeries Corporation and its debtor-affiliates are
parties to over 1,200 real property leases. As part of their
restructuring efforts, the Debtors are in the process of
evaluating all owned and leased real estate, including the Real
Property Leases. In considering their options with respect to the
Real Property Leases, the Debtors are evaluating a variety of
factors to determine whether it is appropriate to assume, assume
and assign, or reject particular Real Property Leases.
Given the exceptionally large number of Real Property Leases in
their bankruptcy proceedings, the Debtors need more time to fully
and adequately determine whether to accept or reject particular
Real Property Leases. If the current lease decision period is
not extended, the Debtors may be compelled, prematurely, to
assume substantial, long-term liabilities under the Real Property
Leases or forfeit benefits associated with some Real Property
Leases to the detriment of the Debtors' ability to operate and
preserve the going-concern value of their business for the
benefit of all creditors and other parties-in-interest.
Accordingly, the Debtors ask the Court to extend their lease
decision period through the confirmation of a plan.
J. Eric Ivester, Esq., at Skadden Arps Slate Meagher & Flom, LLP,
in Chicago, Illinois, relates that the Debtors' decision to
assume or reject particular Real Property Leases, and the timing
of those assumptions or rejections, depends in large part on the
overall operational reorganization and whether a particular
location will play a future role in the Debtors' plan going
forward. The measure of whether a particular Real Property Lease
will be assumed or rejected will depend, for the most part, on
the outcome of the overall operational reorganization.
Mr. Ivester discloses that the Debtors are formulating their
strategic operating plan, however, many locations are still being
evaluated. Given the complexity of the Debtors' business
operation, it is not possible to determine at this early stage
whether certain of those locations will remain a part of the
Debtors' business. The Debtors also are conducting a market
analysis at many of the locations to determine whether there is
value to the Debtors in an assignment -- rather than a rejection
-- of certain Real Property Leases. These decisions cannot be
made properly and responsibly without an extension of the time
within which the Real Property Leases must either be assumed or
rejected.
Responses
(1) G.C. Acquisitions Corp.
G.C. Acquisitions Corp. leases a non-residential real property
located at Woodman Road & Patterson Road, in Dayton, Ohio, to the
Debtors. G.C. Acquisitions opposes an open-ended, indefinite
extension of the Debtors' Lease Decision Deadline.
G.C. Acquisitions believes that a 120-day extension of the
Deadline will:
-- appropriately balance the Debtors' need for additional time
to assess their leases with the lessors' need for certainty
in the treatment of their leases; and
-- comport with the Debtors' request to have time to file and
obtain confirmation of a plan of reorganization.
G.C. Acquisitions agrees to another 60-day extension if the
Debtors file a plan within 120 days after the Petition Date.
(2) Louarts Corp.
Brian N. Spector, Esq., at Jennings, Strouss & Salmon, plc, in
Phoenix, Arizona, tells the Court that Louarts Corp. does not
oppose a reasonable extension of the Debtors' Lease Decision
Deadline as long as all obligations under their lease with
Louarts are timely performed pending assumption or rejection of
the lease as required by Section 365(d)(3).
Louarts, however, opposes an open-ended Deadline. There is no
assurance that the confirmation of a reorganization plan will
occur in the Debtors' bankruptcy cases, much less when that will
occur, Mr. Spector says.
The Debtors lease from Louarts the premises located at 1911 North
Route 50, in Bourbonnais, Illinois.
* * *
Judge Venters extends the Debtors' Lease Decision Deadline until
the confirmation of a reorganization plan.
With respect to the Louarts Lease, the Debtors must make a
decision whether to assume or reject the Lease until the earlier
of the effective date of a plan or September 21, 2005.
Headquartered in Kansas City, Missouri, Interstate Bakeries
Corporation is a wholesale baker and distributor of fresh baked
bread and sweet goods, under various national brand names,
including Wonder(R), Hostess(R), Dolly Madison(R), Baker's Inn(R),
Merita(R) and Drake's(R). The Company employs approximately
32,000 in 54 bakeries, more than 1,000 distribution centers and
1,200 thrift stores throughout the U.S. The Company and seven of
its debtor-affiliates filed for chapter 11 protection on September
22, 2004 (Bankr. W.D. Mo. Case No. 04-45814). J. Eric Ivester,
Esq., and Samuel S. Ory, Esq., at Skadden, Arps, Slate, Meagher &
Flom LLP, represent the Debtors in their restructuring efforts.
When the Debtors filed for protection from their creditors, they
listed $1,626,425,000 in total assets and $1,321,713,000
(excluding the $100,000,000 issue of 6.0% senior subordinated
convertible notes due August 15, 2014 on August 12, 2004) in total
debts. (Interstate Bakeries Bankruptcy News, Issue No. 6;
Bankruptcy Creditors' Service, Inc., 215/945-7000)
KAISER ALUMINUM: Liquidation Analysis Under Joint Liquidation Plan
------------------------------------------------------------------
The estates of Alpart Jamaica, Inc., and Kaiser Jamaica
Corporation have already been substantially liquidated and
converted to cash proceeds, subject only to:
(a) the anticipated future release in full of $20,000,000 to
be held in a cash collateral account to secure the
obligations of the Liquidating Debtors and the Other
Kaiser Debtors under the DIP Financing Facility; and
(b) the receipt of any proceeds generated from the successful
prosecution or settlement of any preference actions,
fraudulent conveyance actions, rights of set-off, and
other claims or causes of action under Chapter 5 of the
Bankruptcy Code and other applicable bankruptcy and non-
bankruptcy law.
The Liquidating Debtors are not aware of the existence of any
claim against a third party that would constitute a Recovery
Action. The Liquidating Debtors have been informed that the
Official Committee of Unsecured Creditors conducted an analysis of
potential preference actions and determined that there were no
viable preference actions concerning payments made by the
Liquidating Debtors.
Liquidation Analysis
Because the liquidation value of each Liquidating Debtor is
limited to the amount of cash held or to be held in each
Liquidating Debtor's Trust Accounts, the liquidation analysis
focused on the additional costs and the diminution in value to the
Liquidating Debtors' Estates that would occur if the Chapter 11
cases were converted to cases under Chapter 7 of the Bankruptcy
Code. That is, in the event of a conversion of the Chapter 11
cases to cases under Chapter 7, the liquidation value available to
holders of Unsecured Claims and Interests would be reduced by:
(a) the costs, fees, and expenses of the liquidation, as well
as other administrative expenses of the Liquidating
Debtors' Chapter 7 cases;
(b) unpaid Administrative Claims of the Chapter 11 cases; and
(c) Priority Claims and Priority Tax Claims.
The Liquidating Debtors' costs of liquidation in Chapter 7 cases
would include, among other things, the compensation of a trustee
or trustees, as well as counsel and other professionals retained
by the trustees. The trustees and any newly retained
professionals would have to expend considerable time and effort to
review and understand the issues raised by the liquidation,
thereby duplicating the efforts of the Liquidating Debtors and
their professionals and resulting in the incurrence of fees and
expenses anticipated to exceed materially the fees and expenses
that would be incurred by the Distribution Trustee and its
professionals under the Plan. The trustee's fees in any Chapter
7 case, which could be as much as 3% of the assets in the
Liquidating Debtors' Estates under Section 326 of the Bankruptcy
Code -- or $9,000,000 in the aggregate -- also are anticipated to
exceed the fees to be paid to the Distribution Trustee.
Moreover, since any newly retained professionals would lack the
institutional knowledge of the facts and circumstances underlying
Claims and Recovery Actions, it is likely that Disputed Claims
would be settled at higher amounts and Recovery Actions at lower
amounts, thereby resulting in lower recoveries to holders of
Unsecured Claims. Finally, due to the lack of familiarity with
the Liquidating Debtors of any trustees appointed in the Chapter
7 cases, distributions in the Chapter 7 cases likely would be made
substantially later than the Effective Date assumed in connection
with the Plan and this delay would reduce the present value of
distributions to creditors, including holders of Unsecured Claims.
In that regard, the Liquidating Debtors believe that creditors
will receive greater and more expeditious distributions under the
Plan than they would receive through a Chapter 7 liquidation. The
Plan is, therefore, in the best interests of each Claim holder.
Alternative Chapter 11 Liquidation
The Plan has been negotiated by the Liquidating Debtors and
representatives of certain of the Liquidating Debtors' most
significant creditors, including the Creditors Committee and,
therefore, the Liquidating Debtors believe that negotiating an
alternative liquidation plan under Chapter 11 is unlikely to alter
significantly the relative treatment of Claims.
Headquartered in Houston, Texas, Kaiser Aluminum Corporation --
http://www.kaiseral.com/-- operates in all principal aspects of
the aluminum industry, including mining bauxite; refining bauxite
into alumina; production of primary aluminum from alumina; and
manufacturing fabricated and semi-fabricated aluminum products.
The Company filed for chapter 11 protection on February 12, 2002
(Bankr. Del. Case No. 02-10429). Corinne Ball, Esq., at Jones
Day, represent the Debtors in their restructuring efforts. On
June 30, 2004, the Debtors listed $1.619 billion in assets and
$3.396 billion in debts. (Kaiser Bankruptcy News, Issue No. 53;
Bankruptcy Creditors' Service, Inc., 215/945-7000)
KNOWLEDGE LEARNING: S&P Places B+ Rating on CreditWatch Negative
----------------------------------------------------------------
Standard & Poor's Ratings Services placed its ratings on child-
care and early childhood education provider Knowledge Learning
Corp. (including the 'B+' corporate credit rating) on CreditWatch
with negative implications.
The CreditWatch listing follows Knowledge Learning's announced
merger agreement with KinderCare Learning Centers Inc. (B+/Watch
Neg/--) in a cash-financed transaction of more than $1 billion
(including the assumption of debt).
CreditWatch with negative implications means that the ratings
could be lowered or affirmed following the completion of Standard
& Poor's review.
"The combination of the two companies will create the largest for-
profit U.S. operator of early childhood education centers with
approximately 1,980 centers, revenues of about $1.4 billion, and
EBITDA of roughly $200 million," said Standard & Poor's credit
analyst Jesse Juliano. However, Standard & Poor's expects that
the acquisition would significantly increase lease-adjusted debt
leverage at a time when the industry has been experiencing soft
demand. In addition, KLC, which more than doubled its size a year
ago to 750 centers with its acquisition of ARAMARK Educational
Resources, will be challenged to integrate such a sizable
acquisition into its existing network. However, KLC's successful
integration of ARAMARK does provide us with some confidence in
management's ability to integrate KinderCare.
Standard & Poor's plans to meet with management to resolve the
CreditWatch listing by the close of the transaction, which is
expected within the next several months.
LEAP WIRELESS: Launching Planned Service in Fresno, California
--------------------------------------------------------------
Leap Wireless International, Inc. (OTCBB:LEAP), a leading provider
of innovative and value-driven wireless communications services,
reported its expectations with respect to the service it plans to
launch in Fresno, California.
The Company currently expects that:
-- The network it plans to build in the Fresno market, together
with planned expansions of its Visalia and Modesto/Merced
networks, will increase covered potential customers by
approximately one million, bringing total potential
customers served by Leap's cluster of markets in
California's Central Valley to approximately two million;
-- Capital expenditures to build-out and launch the Fresno
market, as well as the related expansion of the Visalia and
Modesto/Merced markets, are expected to be between $20 and
$25 million (excluding the cost of purchasing the Fresno
spectrum); and,
-- Additional cash requirements, excluding capital
expenditures, are expected to be less than $8 million.
"We believe that the guidance we are issuing, which reflects our
plans for a highly efficient build-out and significant expansion
of covered potential customers, serves to underscore the value
that we expect the launch of the Fresno market will bring to the
business," said Bill Freeman, chief executive officer of Leap. "We
expect the addition of Fresno to yield improved operational
performance within this cluster of markets by allowing us to more
effectively serve our customers up and down the Central San
Joaquin Valley. We firmly believe that the expansion strategy
represented by the addition of Fresno is the right strategy for
the business going forward and we intend to carefully and
selectively review other opportunities as we continue to solidify
our market position."
As previously announced, the Company agreed to purchase a wireless
license covering the Fresno, Calif. area from Alpine-Fresno C, LLC
for approximately $27.1 million (plus the reimbursement of certain
construction expenses not to exceed $500,000). The sale to Leap
was approved by the bankruptcy court overseeing the bankruptcy of
the seller. The sale is subject to approval from the Federal
Communications Commission (FCC), and an application seeking FCC
consent to the transfer of the license to Cricket is pending
before the FCC. Although a party involved in the bankruptcy of the
seller has filed an objection to the application, the Company
expects to receive FCC approval in early 2005 and anticipates the
launch of the Fresno market by the end of next year.
About the Company
Headquartered in San Diego, California, Leap Wireless
International Inc. is a customer-focused company providing
innovative communications services for the mass market. Leap
pioneered the Cricket Comfortable Wireless(R) service that lets
customers make all of their local calls from within their local
calling area and receive calls from anywhere for one low, flat
rate.
The Company filed for chapter 11 protection on April 13, 2003
(Bankr. S.D. Calif. Case No. 03-03470). The Honorable Louise
DeCarl Adler entered an order confirming the Company's Fifth
Amended Plan on October 22, 2003, which became effective on
Aug. 17, 2004. Robert A. Klyman, Esq., Michael S. Lurey, Esq., and
Eric D. Brown, Esq., at Latham and Watkins LLP represent the
Debtors in their restructuring efforts.
At June 30, 2004, Reorganized Leap Wireless' balance sheet showed
a $940,294,000 stockholders' deficit, compared to an $893,356,000
deficit at Dec. 31, 2003.
MCI INC: Board Members Taking Stock for 25% of Their Fees
---------------------------------------------------------
MCI, Inc.'s (Nasdaq: MCIP) Board of Directors will invest 25
percent of their directors' fees in MCI Common Stock. Under a
process announced August 12, 2004, MCI has withheld 25 percent of
all directors' fees earned during the previous quarter and will
transfer those funds to a broker, who will purchase the shares on
behalf of each director. Shares will be held in individual
accounts in each director's name. All shares purchased will be
subject to certain long-term retention requirements.
About the Company
MCI, Inc. (Nasdaq: MCIP) is a leading global communications
provider, delivering innovative, cost-effective, advanced
communications connectivity to businesses, governments and
consumers. With the industry's most expansive global IP backbone,
based on the number of company-owned points of presence, and
wholly owned data networks, MCI develops the converged
communications products and services that are the foundation for
commerce and communications in today's market. For more
information, go to http://www.mci.com/
* * *
As reported in the Troubled Company Reporter on Sept. 22, 2004,
Fitch Ratings has assigned an initial rating of 'B' to MCI Inc.'s,
$5.665 billion outstanding of senior unsecured notes. The senior
unsecured notes were issued in conjunction with MCI's emergence
from bankruptcy on April 20, 2004. The notes are guaranteed by
all existing and future restricted subsidiaries of MCI. The
Rating Outlook is Negative.
MOHEGAN TRIBAL: S&P Pares Issuer Credit Rating to BB from BB+
-------------------------------------------------------------
Standard & Poor's Ratings Services lowered its ratings on Mohegan
Tribal Gaming Authority -- MTGA, the entity formed to own and
operate the Mohegan Sun casino, including its issuer credit rating
to 'BB' from 'BB+'.
At the same time, all ratings on MTGA were removed from
CreditWatch where they were placed on October 15, 2004. The
outlook is stable. As of June 30, 2004, pro forma for the July
2004 offering of $225 million senior sub notes, total debt
outstanding was approximately $1.2 billion, including
approximately $115 million of tax-exempt off-balance sheet Tribal
debt.
The downgrade follows the company's announcement on Oct. 15, 2004,
that it entered into a definitive agreement to acquire Pocono
Downs racetrack from Penn National Gaming for $280 million. MTGA
anticipates spending up to $225 million to purchase the gaming
license and build-out the racetrack for the planned installation
of up to 3,000 slot machines at the facility. The deal is subject
to customer approvals and is expected to close by the end of 2004.
"Given increased spending expected over the next couple of years,
MTGA's leverage is expected to rise to level that is weak for the
previous ratings," said Standard & Poor's credit analyst Peggy
Hwan. While leverage had increased to this level in the past as
the company completed the phase II expansion of Mohegan Sun,
ratings were held at the time because it was expected that free
cash flow would be used to reduce debt, and that over time,
leverage would be maintained at a level more in line with the
previous ratings. It is now Standard & Poor's expectation that
MTGA will continue to pursue opportunities beyond its core market.
"Given our analysis of MTGA's current business profile, debt
leverage is commensurate with the new ratings," added Ms. Hwan.
MURRAY INC: Wants to Retain Pachulski Stang as Bankruptcy Counsel
-----------------------------------------------------------------
Murray, Inc., asks the U.S. Bankruptcy Court for the Middle
District of Tennessee for permission to employ Pachulski, Stang,
Ziehl, Young, Jones & Weintraub PC, as its bankruptcy counsel.
Pachulski Stang will:
a) provide legal advice with respect to the Debtor's powers
and duties as debtor in possession in the continued
management of its assets and properties;
b) prepare and pursue confirmation of Debtor's plan and
approval of the Debtor's disclosure statement;
c) prepare necessary applications, motions, answers, orders,
and other legal papers on behalf of the Debtor;
d) appear in Court and protect the interest of the Debtor
before the Court; and
e) perform all other legal services for the Debtor which
may be necessary and proper in this case and related
proceedings.
The principal attorneys and paralegals of Pachulski Stang and
their standard hourly rates:
Professional Rate
------------ ----
Richard M. Pachulski $675
Laura Davis Jones $595
Michael R. Seidl $375
Malhar S. Pagay $375
Sandra G. McLamb $255
Tim O'Brien $140
Camille Ennis $135
G. Allan Shaw, Chief Executive Officer of Murray, discloses that
Murray delivered a $250,000 retainer to Pachulski Stang prior to
the chapter 11 filing.
To the best of the Debtor's knowledge, Pachulski Stang is a
"disinterested person" as that term is defined in Section 101(14)
of the Bankruptcy Code.
Headquartered in Brentwood, Tennessee, Murray Inc. --
http://www.murray.com/-- manufactures lawn tractors, mowers,
snowthrowers, chipper shredders, and karts. The Company filed for
chapter 11 protection on Nov. 8, 2004 (Bankr. M.D. Tenn. Case No.
04-13611). Paul G. Jennings, Esq., at Bass, Berry & Sims PLC
represents the Debtor in its restructuring efforts. When the
Debtor filed for protection from its creditors, it estimated more
than $100 million in total debts and assets.
NATIONAL HEALTH: S&P Upgrades Corporate Credit Rating to BB-
------------------------------------------------------------
Standard & Poor's Ratings Services raised its corporate credit
rating on National Health Investors Inc. to 'BB-' from 'B+'. In
addition, ratings are raised on the company's senior unsecured
debt. The outlook is stable.
"The raised ratings acknowledge the company's progress over the
past few years in working through troubled investments," said
credit analyst George Skoufis. "The upgrades also reflect a much
stronger financial profile, reflected by a strong cash position,
low leverage, and stronger debt protection measures. Offsetting
credit considerations include a smaller overall portfolio,
additional troubled investments that the company continues to
address, and an external advisory structure."
Progress to date working through problem investments should result
in more stable portfolio level cash flow going forward. The
company's good liquidity position very comfortably addresses near-
term capital and debt refinancing needs. Further improvement to
current ratings would be driven by the successful resolution of
remaining underperforming assets, while maintaining the currently
sound financial profile.
NEENAH PAPER: Moody's Rates Planned $200M Senior Unsec. Notes B1
----------------------------------------------------------------
Moody's Investors Service assigned a B1 rating to Neenah Paper,
Inc.'s proposed $200 million guaranteed senior unsecured notes due
2014, and a Ba3 rating to the company's proposed $150 million
senior secured revolving credit facility. In addition, Moody's
assigned a B1 senior implied rating, B3 senior unsecured issuer
rating, and SGL-2 speculative grade liquidity rating to the
company. The outlook for the ratings is stable. This is the
first time Moody's has rated the debt of Neenah.
Kimberly Clark is spinning off its fine paper, technical paper,
and Canadian pulp operations into a single independent publicly
traded company, Neenah, through a tax-free distribution to its
existing shareholders. Neenah will use proceeds from the note
offering and approximately $30 to $35 million of borrowings under
the revolving credit facility to pay a dividend of approximately
$215 million to a subsidiary of KC, $10 million in debt issuance
costs, and to fund working capital of approximately $5 to
$10 million. After the distribution, KC will not own any of the
common equity of Neenah, although the two companies will have
various contractual agreements including a pulp supply agreement
and a corporate services agreement. Neenah's three operating
segments will have a focus in:
* premium writing, text/cover, and other specialty paper (the
fine paper segment);
* durable, saturated and coated papers (the technical paper
segment); and
* softwood and hardwood market pulp.
The B1 senior implied rating reflects the modest scale of Neenah's
operations, the high level of customer concentration and
considerable volume declines within its fine paper segment over
the past several years, and significant exposure to market pulp,
where its operating costs are quite high. The ratings also
recognize the considerable challenge of improving the cost
structure at the Terrace Bay pulp facility, the eventual task of
building a core customer base for its pulp operation external to
KC, and high capital investment requirements.
Neenah's ratings are supported by the company's relatively good
credit metrics, adequate liquidity, and reasonable asset values,
in addition to the benefit provided by a multi-year pulp supply
agreement with Kimberly Clark that assures minimum pulp tonnage
during the initial years of the contract.
Although the fine paper segment only represents approximately 28%
of Neenah's net sales on a pro forma historic basis, it would have
accounted for the majority of the company's pre-tax income. In
2003, fine paper generated sales of approximately $202 million and
pre-tax income of $63 million with pre-tax margins of 31%, while
technical papers generated pre-tax income of $16.6 million and
pulp had a loss of approximately ($40) million. However, actual
tonnage and pre-tax income of fine paper declined considerably
from 1999, and although the first half of 2004 showed some
improvement, volumes remained significantly below historic levels.
In addition, with relatively low operating rates for fine papers,
any pick-up in volume would likely impact near-term cash flows due
to increased working capital needs.
Neenah's pulp operations consist of two Canadian mills, Terrace
Bay and Pictou, with aggregate capacity of approximately 700,000
tonnes of market pulp. In 2003, Terrace Bay and Pictou produced
approximately 123,000 tonnes and 50,000 tonnes of hardwood pulp --
NBHK, respectively. As part of the new pulp supply agreement with
KC, a minimum of 440,000 tonnes of Neenah's pulp production in the
initial years will be sold to KC at discounts to market prices
that will be substantially higher than what was used by KC
historically. The agreement also sets a minimum and maximum price
for NBSK pulp shipped to North America prior to December 31, 2007.
Although the pulp agreement secures a destination for a high
proportion of Neenah's pulp sales, KC volume levels will be
considerably below pre-spin levels and the contractual tonnage
declines over time, with a base minimum commitment of 345,000
tonnes of NBSK and zero tonnes of NBHK reached in 2009. Either
company can also elect a two year phase down period, to begin no
earlier than January 1, 2009, that would reduce the base minimum
of NBSK to 277,500 tonnes in the first year and 185,000 tonnes in
the second year. In addition, pricing remains market based, less
agreed upon discounts, for both NBSK and NBHK and could fall to
levels that would result in operating losses for the pulp segment,
while limiting upside potential. The agreement is also "Take-or-
Pay" to each company with penalties in the event either party is
unable to fulfill its volume requirements, except for instances
that constitute force majeure.
Price discounts under the new contract are significantly higher
than discounts historically taken by KC. If the new price
discounts had been in effect in 2003 and 2002, Neenah's pulp
operations would have generated an aggregate pre-tax loss of
approximately ($55) million versus a loss of ($13) million as
reported.
Contributing to the poor operating performance of the pulp segment
is the relatively high cost position of Terrace Bay, which is
unlikely to generate a profit under the current cost structure
even at today's relatively high prices for NBSK. To address this
weakness, management is expected to direct investments to the
Terrace Bay mill and introduce various costs saving initiatives,
which would likely include the mill's wood costs. However, there
is no assurance management will be successful in lowering costs to
levels where Terrace Bay is cost competitive with its peers or be
able to meet the requirements under the pulp supply agreement on
an economical basis. Neenah plans to take a non-cash charge of
approximately $110 million immediately after the spin-off to
write-down the carrying value of Terrace Bay's assets, which will
be deemed impaired under the guidelines of SFAS 144.
Neenah will also incur a sizeable amount of capex over the next
couple of years, which may result in negative free cash flow over
the intermediate term. A combination of addressing the high cost
structure at Terrace Bay and various environmental projects at
Pictou result in aggregate capital expenditures of about
$97 million through the end of 2006. The company will also pay an
initial dividend of ten cents per share, or approximately
$1.4 million, with subsequent dividends determined by Neenah's
board of directors.
From a competitive standpoint, Neenah competes in the premium
paper market (fine paper segment) with several non-public
companies, but also competes with companies such as International
Paper that are considerably larger and have greater financial
resources. In regards to pulp, Neenah's operations are very
modest overall, with over half of its production currently at a
cost disadvantage.
The fine paper segment has significant customer concentration,
with the top three customers accounting for 49% of total fine
paper sales in 2003. In addition, the company must establish a
customer base for market pulp external to KC.
Although Neenah's operating performance has declined over the past
several years, the relatively strong performance of the fine paper
and technical paper segments has offset the negative results of
the pulp operations. On a pro forma basis as of Sept. 30, 2004,
LTM EBITDA to debt was under 3x and EBITDA minus Capex to gross
interest was over 4x. Liquidity should also remain adequate
despite an expectation that free cash flow may be negative over
the near term due to increased levels of capex and dividends.
The Ba3 senior secured credit facility rating reflects the benefit
provided by a first priority lien on all tangible and intangible
assets of the company including all timberlands as well as the
joint and several guarantees provided by all domestic and Canadian
subsidiaries. The B1 rating for the guaranteed senior unsecured
notes reflects the benefits the notes derive from joint and
several guarantees from all domestic subsidiaries as well as from
the Canadian subsidiaries as long as the Canadian subsidiaries
guarantee any other debt of the company.
The SGL-2 speculative grade liquidity rating reflects Moody's
opinion that the company will possess good liquidity over the
following 12 months. Moody's expects the company will be able to
fund all cash needs, with the possible exception of extraordinary
capex, from internal sources, and that availability under the bank
facility will remain adequate. Borrowings under the $150 million
revolving credit facility are expected to be approximately $30 to
$35 million following the spin-off. The revolver has only one
financial covenant, a fixed charge coverage ratio, and this is
tested only in the event revolver availability is under
$30 million. The SGL-2 rating also incorporates the absence of
any alternate source of available liquidity, with all tangible and
intangible assets of the company encumbered by the bank revolver.
The stable outlook reflects the expectation that the company will
successfully transition to its own back office and management
systems, begin to execute its cost reduction plans at Terrace Bay,
and maintain volumes and margins in its fine paper and technical
segments, in addition to maintaining adequate liquidity. Factors
that could negatively impact the rating and/or outlook would be an
inability to execute on cost initiatives at Terrace Bay,
deterioration in volumes and/or margins in the fine paper segment,
or inability to successfully renegotiate new labor agreements.
The rating and/or outlook could be positively impacted by material
cost reductions at Terrace Bay and by demonstrated strengthening
of performance at the fine paper segment.
Neenah Paper, Inc., headquartered in Alpharetta, Georgia, is a
producer of fine and specialty papers and market pulp.
NET2000 COMMS: Wants to Expand Tax Services of Parente Randolph
---------------------------------------------------------------
Michael B. Joseph, the Chapter 7 Trustee of the estate of Net2000
Communications, Inc. and its debtor affiliates, asks the U.S.
Bankruptcy for the District of Delaware for permission to modify
the retention of the tax services of Parente Randolph, LLC, the
Trustee's accountants.
Parente Randolh worked for the Trustee since July 16, 2003,
performing services in connection with the preparation and review
of the Debtor's tax filings, notices and returns. The additional
services the Trustee is requesting are not covered by the first
Retention Letter agreement between the Trustee and the Firm.
Parente Randolph is expected to:
a) prepare the federal and appropriate state income tax
returns for the year ended December 31, 2003, and
subsequent years as needed; and
b) for the years ending Dec. 31, 1999 through Dec. 31, 2002:
(i) review the federal tax notices relayed to payroll
tax, corporate income tax, and corporate excise tax
assessments, including penalties and interests,
(ii) determine the validity of those tax assessments to
be reviewed,
(iii) correspond with the applicable tax authorities
regarding the tax assessments and prepare tax
filings as required based upon the analysis of the
tax assessments,
(iv) ascertain that the Debtor's books and records
support the information to be set forth in the tax
filings,
(v) advise the Trustee if the books and records of the
Debtor proved to be inadequate in information and
require reconstruction,
(vi) provide the Trustee with an estimate of the fees
necessary to reconstruct the Debtors' books and
records in order to satisfy Parente Randolph's tax
return preparation requirements; and
(vii) perform any other services that may be required by
the Trustee or his professionals from time to tome
and as agreed by Parente Randolph.
Joseph C. O'Neill, a CPA at Parente Randolph, discloses that the
Firm will be a paid a total of $15,000 for the expanded tax
services to the Trustee.
Mr. O'Neill discloses Parente Randolph's professionals bill:
Designation Hourly Rate
----------- -----------
Directors $219 - 400
Tax Principal 219 - 295
Senior Associates 179 - 280
Tax Manager 179 - 235
Staff 75 - 175
Tax Staff 75 - 165
Paraprofessional 70 - 110
Parente Randoplh does not represent any interest adverse to the
Trustee, the Debtors or their estate.
Headquartered in Reston, Virginia, Net2000 Communications, Inc., a
provider of state-of-the-art broadband telecommunications services
to high-end customers, obtained Court approval to convert its
chapter 11 cases to chapter 7 liquidation proceedings on
May 13, 2002 (Bankr. Del. Case No. 01-11324). Michael G. Wilson,
Esq. and Jason W. Harbour, Esq. at Morris, Nichols, Arsht &
Tunnell represent the Debtors as they wind up their operations.
Raymond H. Lemisch, Esq., at Adelman Lavine Gold and Levin serves
as the Chapter 7 Trustee's counsel. When the Company filed for
chapter 11 protection, it listed total assets of $256,786,000 and
total debts of $170,588,000.
NEW LIFE HOLINESS: Voluntary Chapter 11 Case Summary
----------------------------------------------------
Debtor: New Life Holiness Church
aka New Life Ministries
6368 Highway 51 North
Millington, Tennessee 38053
Bankruptcy Case No.: 04-37391
Type of Business: The Debtor operates a church.
Chapter 11 Petition Date: November 5, 2004
Court: Western District of Tennessee (Memphis)
Judge: David S. Kennedy
Debtor's Counsel: Jerome C. Payne, Esq.
Jerome C. Payne, P.C.
605 Poplar Avenue
Memphis, TN 38105
Tel: 901-524-1177
Estimated Assets: $1 Million to $10 Million
Estimated Debts: $500,000 to $1 Million
The Debtor did not file a list of its 20 Largest Creditors.
NORTHWESTERN CORP: Posts $29.6 Mil. Net Loss in Third Quarter
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NorthWestern Corporation (Nasdaq: NWEC) d/b/a NorthWestern Energy
reported financial results for the third quarter ended
September 30, 2004, and filed the Company's third quarter 2004
Form 10-Q with the Securities and Exchange Commission.
On Sept. 14, 2003, NorthWestern filed a voluntary petition for
relief under Chapter 11 of the Federal Bankruptcy Code in the
United States Bankruptcy Court for the District of Delaware under
case number 03- 12872. Pursuant to the Chapter 11 filing,
NorthWestern retains control of its assets and is authorized to
operate its business as a debtor-in-possession while being subject
to the jurisdiction of the Bankruptcy Court. Included in the
consolidated financial statements are subsidiaries that are not
party to the Chapter 11 case and are not debtors. The assets and
liabilities of such nondebtor subsidiaries are not considered to
be material to the consolidated financial statements or are
included in discontinued operations. In addition, in order to
wind-down its affairs in an orderly manner, NorthWestern's
subsidiary, Netexit, Inc. (f/k/a Expanets, Inc.), filed a
voluntary petition for relief under the provisions of Chapter 11
of the Federal Bankruptcy Code in the United States Bankruptcy
Court for the District of Delaware on May 4, 2004. NorthWestern's
confirmed Plan of Reorganization became effective on Nov. 1, 2004,
and the Company emerged from Chapter 11.
Beginning in the third quarter of 2003, the Company's consolidated
financial statements have been prepared in accordance with the
American Institute of Certified Public Accountants Statement of
Position (SOP) 90-7, "Financial Reporting by Entities in
Reorganization Under the Bankruptcy Code," and on a going concern
basis, which contemplates continuity of operations, realization of
assets, and liquidation of liabilities in the ordinary course of
business. As a result of the Company's Chapter 11 filing, the
realization of assets and liquidation of liabilities are subject
to uncertainty. Under SOP 90-7, certain liabilities existing prior
to the Chapter 11 filing are classified as Liabilities Subject to
Compromise on the Consolidated Balance Sheets. Additionally,
certain items are reported as separate line items on the income
statement. This includes professional fees and expenses directly
related to the Chapter 11 proceeding entitled reorganization
professional fees and expenses, interest income and gains (losses)
on the settlement of claims, which are entitled reorganization
items. Finally, the extent to which reported interest expense
differs from the contractual rate of interest is disclosed in the
Company's Consolidated Statements of Income (Loss).
Consolidated Financial Results
NorthWestern reported a consolidated loss on common stock in the
third quarter of 2004 of $29.6 million, compared with a
consolidated loss on common stock of $52.7 million in the third
quarter of 2003. During the third quarter of 2004, the Company
incurred reorganization items totaling $19.0 million and
reorganization professional fees and expenses totaling
$10.5 million. The reorganization items included a $19.5 million
loss related to a proposed settlement with CornerStone Propane,
which was offset by a $0.5 million gain on claims settlement.
These items were offset somewhat by a $7.6 million decrease in
operating, general and administrative expenses during the third
quarter of 2004 as compared to the same period in 2003, and a
decrease in interest expense of $23.3 million, compared to the
same period in 2003, due to the cessation of recording of interest
expense on the Company's unsecured debt because of the bankruptcy
filing. Consolidated losses on common stock were $17.4 million for
the nine months ended Sept. 30, 2004, compared with a
$100.6 million loss for the same period in 2003. This improvement
is primarily related to the items discussed above along with a
$29.9 million change in results from discontinued operations due
to current year disposal activities and a $14.9 million decrease
in interest paid on preferred securities of subsidiary trusts also
due to the cessation of recording interest expense.
Consolidated revenues in the third quarter of 2004 were
$248.9 million, an increase from $234.6 million in the third
quarter of 2003. This increase was primarily due to an
$11.3 million increase in regulated gas revenues and an $8.5
million increase in nonregulated gas revenues, offset by a
decrease in electric revenues of $5.2 million. Consolidated
revenues were $818.5 million for the nine months ended
September 30, 2004, compared with $757.2 million in the same
period in 2003. The increase was primarily due to a $45.8 million
increase in regulated gas revenues and a $21.9 million increase in
nonregulated gas revenues, offset by a decrease in electric
revenues of $8.0 million.
Consolidated gross margin in the third quarter of 2004 was
$112.8 million, compared to $113.5 million in the third quarter of
2003. Margins as a percentage of revenues decreased to 45.3
percent for 2004, from 48.4 percent for 2003. The Company's gross
margin as a percentage of revenue is primarily impacted by the
fluctuations that occur in power supply costs, which are collected
in rates from customers. While fluctuations impact gross margin as
percentage of revenue, they have no actual impact on gross margin
amounts as they are directly passed through to customers. For the
nine months ended Sept. 30, 2004, consolidated gross margin was
$348.8 million, compared with $351.6 million for the same period
in 2003.
Results from Continuing Utility Operations
NorthWestern's electric and natural gas utility operations
reported operating income of $25.7 million in the third quarter of
2004, compared with operating income of $34.1 million in the same
period in 2003. Operating income from electric operations in the
third quarter of 2004 was $28.0 million, compared with
$35.0 million in the third quarter of 2003. Natural gas operations
reported a $2.3 million operating loss in the third quarter of
2004, compared with a $0.8 million loss from the same period in
2003. The decrease in electric and natural gas operating income
was primarily due to an increase in operating, general and
administrative expenses resulting from higher insurance costs,
property taxes and increased allocation of corporate expenses.
For the nine months ended Sept. 30, 2004, operating income from
electric and natural gas operations was $83.0 million, compared
with $112.8 million in the same period in 2003. Operating income
from electric operations during the nine-month period of 2004 was
$67.0 million, compared with $91.4 million during the same period
in 2003. This decrease was primarily due to increased operating,
general and administrative expenses and out of market costs
associated with our qualifying facilities contracts. Operating
income from natural gas operations during the nine-month period of
2004 was $16.0 million, compared with $21.4 million in the same
period in 2003. This decrease primarily resulted from the higher
operating, general and administrative expenses partially offset by
the decrease in the write-off of gas supply costs.
Electric revenues for the third quarter of 2004 were
$178.2 million, compared with revenues of $183.4 million in the
same period in 2003. Regulated revenues decreased $8.8 million
during the third quarter of 2004, compared to the same period in
2003 primarily due to a $4.1 million decrease in sales of excess
purchased power in the secondary market, a $2.5 million decrease
in average rates and a $2.3 million decrease in sales volumes to
core customers. As purchased power costs and sales in the
secondary market are also reflected in cost of sales, there is no
gross margin impact. The decrease in electric regulated revenues
was partially offset by an increase of $3.2 million in wholesale
revenues resulting from higher prices. Electric revenues for the
nine-month period of 2004 were $504.9 million, compared to
$512.9 million for the same period in 2003.
Natural gas revenues in the third quarter of 2004 were
$69.0 million, compared to $48.7 million in the same period in
2003. Regulated revenues increased $11.3 million during the third
quarter of 2004 as compared with the same period in 2003 primarily
due to an $8.7 million increase in sales of surplus gas and a
$2.7 million increase in sales volumes to core customers. As the
energy supply costs and sales of surplus gas are also reflected in
cost of sales, there is no gross margin impact. In addition,
nonregulated revenues increased approximately $8.5 million,
primarily due to an increase in sales volume from the addition of
ethanol plant customers. Natural gas revenues for the nine months
ended Sept. 30, 2004, were $307.3 million, compared with
$237.1 million in the same period in 2003.
Electric gross margin in the third quarter of 2004 was
$94.6 million and remained flat with the third quarter of 2003 as
a decrease in retail margin was offset by an increase in wholesale
margin. For the nine months ended Sept. 30, 2004, electric gross
margin was $266.2 million, compared with $270.8 million during the
same period in 2003. The decrease was primarily attributable to
increases in 2004 out of market costs associated with our
qualifying facilities contracts.
Natural gas gross margin was $16.9 million in the third quarter of
2004 and remained flat with the same period in 2003. For the nine
months ended Sept. 30, 2004, natural gas gross margin was
$77.8 million, compared with $75.7 million in the same period in
2003. The increase in gross margin in 2004 was primarily due to
lower gas cost disallowances in 2004 as compared to 2003.
Retail electric volumes in the third quarter of 2004 totaled
2,364,328 megawatt hours, compared to 2,404,789 megawatt hours in
the same period in 2003. The 1.7 percent decrease in retail
volumes was due to cooler than normal weather across the Company's
service areas in Montana and South Dakota. Wholesale electric
volumes in the third quarter of 2004 were 659,632 megawatt hours,
compared with 499,254 megawatt hours in the same period in 2003.
For the nine-month period in 2004, retail electric volumes were
6,886,777 megawatt hours, compared with 6,641,588 megawatt hours
in the same period in 2003. Wholesale electric volumes in the
third quarter of 2004 were 1,702,045 megawatt hours, compared with
1,495,523 megawatt hours in the same period in 2003.
Retail natural gas volumes were 2,340,801 dekatherms during the
third quarter of 2004, compared with 2,170,766 dekatherms in the
same period in 2003. Nonregulated wholesale natural gas volumes
total 3,514,011 dekatherms, compared with 2,204,438 dekatherms
during the same period in 2003. The increase was due primarily to
volumes sold to ethanol facilities in South Dakota. For the nine-
month period of 2004, retail natural gas volumes were 20,008,938
dekatherms, compared with 20,115,151 dekatherms during the same
period in 2003. Nonregulated wholesale natural gas volumes were
10,743,248 dekatherms, compared with 7,110,305 dekatherms during
the same period in 2003.
Liquidity and Capital Resources
As of Sept. 30, 2004, cash and cash equivalents were
$111.2 million, compared with $15.2 million at Dec. 31, 2003. Cash
provided by continuing operations during the nine months ended
Sept. 30, 2004, totaled $160.1 million, compared to cash used in
continuing operations of $103.3 million during the same period in
2003. The increase was substantially due to significant
improvements in working capital and a reduced net loss, primarily
due to the suspension of interest payments on unsecured debt
during the Company's reorganization.
As previously reported on Nov. 1, 2004, NorthWestern entered into
a new $225 million credit facility. The facility consists of a
$125 million, five- year revolving tranche and a $100 million,
seven-year tranche. The revolving tranche replaced the Company's
Debtor-In-Possession facility and is available for general
corporate purposes and for the issuance of letters of credit. The
Company currently has made no draws on the facility and has
approximately $15 million in letters of credit posted against the
facility.
Concurrently with the establishment of the new credit facility,
NorthWestern issued $225 million of 5.875 percent senior secured
notes due Nov. 1, 2014. Borrowings under the term portion of the
new credit facility, together with the net proceeds of the notes
offering and available cash, were used to repay our $390 million
senior secured term loan.
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.
The Court entered a written order confirming the Debtors' Second
Amended and Restated Plan of Reorganization, which took effect on
November 1, 2004.
PACIFIC GAS: Objects to Modesto Irrigation's $12 Million Claim
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When the California legislature deregulated the energy market, it
created a mechanism to permit PG&E and other electric utilities
to recover costs of energy generation-related assets that had
been included in Pacific Gas and Electric Company's rates but
might not have been recoverable in a competitive market.
Specifically, PG&E was authorized to recover Competition
Transition Charges from all customers. CTCs were calculated by
deducting the cost of power from the generation rate. When the
costs of power exceeded the generation rate, some departed
customers claimed that they should be able to recover their
differences between the rate and costs as "negative CTCs," even
though there is no statutory or regulatory authority for the
recovery or negative CTCs.
Modesto Irrigation's Claim
In an effort to attract customers of PG&E, Modesto Irrigation
District agreed to pay the CTC charges of customers that switched
to Modesto Irrigation as a power provider. Modesto Irrigation
asserts that to the extent its customers would be entitled to
recover negative CTCs, it also has a claim against PG&E for the
negative CTCs.
Modesto Irrigation filed Claim No. 11027 for $11,999,044.
PG&E's Objection
On April 1, 2004, PG&E objected to Claim No. 11027. PG&E did not
ask the Court to disallow Modesto Irrigation's entire claim,
rather, it objected to:
(a) the claim for negative CTCs; and
(b) the New Hogan Power Plant Claims.
Modesto Irrigation subsequently withdrew its New Hogan Power
Plant Claims.
PG&E contends that the Negative CTCs Components have no legal
basis and, even if they did, Modesto Irrigation has no standing
to assert them. PG&E notes that the contracts between Modesto
Irrigation and its customers did not assign to Modesto Irrigation
any right to claim Negative CTCs.
Modesto Irrigation's Response
Modesto Irrigation argues that even though its agreements with
its customers do not explicitly reflect any transfer of Negative
CTC Claims, if any, from the customers, it should be permitted to
present parol evidence that the parties intended those agreements
to assign those claims. Modesto Irrigation states that it would
present declarations from customers indicating that they intended
to assign their rights even though the contracts merely address
Modesto Irrigation's assumption of their liabilities.
On August 16, 2004, the Court asked for further briefing from
PG&E and Modesto Irrigation on the issue of whether the parol
evidence rule precludes Modesto Irrigation from introducing
evidence of terms, which were not incorporated in its contracts
with its customers. Accordingly, both parties filed supplemental
briefs in September 2004. A continued status conference on
PG&E's objection to Modesto Irrigation's Claim is currently set
for November 8, 2004.
Court's Opinion
Judge Montali believes that the parol evidence rule precludes
admission of Modesto Irrigation's proffered evidence and that
PG&E's objection to Modesto Irrigation's claim for negative CTCs
should be sustained.
In Ankeny v. Meyer, 184 B.R. 64, 70, the Ninth Circuit notes that
the parol evidence rule "generally prohibits the introduction of
any extrinsic evidence, whether oral or written, to vary, alter
or add to the terms of an integrated written instrument."
"Although the rule results in the exclusion of evidence, it
'is not a rule of evidence but is one of substantive law.'" The
parol evidence rule does not exclude evidence based on its
probative value or other reasons ordinarily requiring exclusion.
In other words, Judge Montali says, extrinsic or parol evidence
"is legally irrelevant and cannot support a judgment."
Section 1856(b) of the California Code
of Civil Procedure is Inapplicable
Moreover, the Court disagrees with Modesto Irrigation's argument
that Section 1856(b) of the California Code of Civil Procedure
permits the introduction of parol evidence because its contracts
with its customers were not fully integrated and because the
purported additional terms are consistent with the written
contracts. Judge Montali notes that the Contracts are fully
integrated, and even if they were not, the additional terms --
that the customers intended to assign negative CTC Claims to
Modesto Irrigation -- are inconsistent with the Contracts.
The Contracts between Modesto Irrigation and its customers do not
contain integration clauses. The exclusion of that clause,
however, does not necessarily mean that the contract is not "a
complete and exclusive statement of the terms of the agreement."
In determining whether a contract is integrated -- and thus a
"complete and exclusive statement of the terms of the agreement"
-- the court should consider:
(a) whether the written agreement appears to state a complete
agreement;
(b) whether the alleged oral agreement directly contradicts
the writing;
(c) whether the oral agreement might naturally be made as a
separate agreement; and
(d) whether a jury might be misled by the introduction of the
offered parol evidence.
The Court contends that the Contracts constitute complete
agreements because they fully describe the Modesto Irrigation-
customer relationship. The Contracts describe:
* the electric service to be provided by Modesto Irrigation;
* the date of commencement of services & the rate schedule;
* the application of CTC exemptions;
* rights-of-way and easements;
* ownership of facilities;
* assignments; and
* a disclaimer of certain warranties.
Section 1856(e) and (g) Are Also Inapplicable
Modesto Irrigation sought to shield its proffered extrinsic
evidence from the parol evidence rule by arguing that the
Contracts are ambiguous or are subject to reformation because of
mutual mistake, thereby bringing subsections (e) and (g) of
Section 1856 into play.
Subsection (e) provides that where "a mistake or imperfection of
the writing is put in issue by the pleadings, this section does
not exclude evidence relevant to that issue."
Subsection (g) provides that parol evidence is admissible "to
explain an extrinsic ambiguity or otherwise interpret the terms
of the agreement, or to establish illegality or fraud." Modesto
Irrigation's arguments are not persuasive, Judge Montali says.
The Court will assume that the proffered evidence will indeed
indicate that the parties intended for Modesto Irrigation to
receive the customers' rights, if any, to recover negative CTCs
from PG&E. The Court will further assume that that evidence is
credible.
"Even taking into account this proffered evidence, however, the
court concludes that the contracts are not ambiguous. [Modesto
Irrigation] has not pointed to any actual language in the
contract which is ambiguous or susceptible to the interpretation
that the negative CTCs were assigned to [Modesto Irrigation];
rather, it is attempting to add terms to a contract containing
unambiguous language and terms. Because the language of the
contract is not 'reasonably susceptible' to the interpretation
urged by [Modesto Irrigation], the extrinsic evidence is
inadmissible," Judge Montali says.
In any event, even if the contract were ambiguous, Judge Montali
asserts that the evidence consisting of testimony of what the
parties subjectively intended and understood -- as opposed to
contemporaneous extrinsic evidence reflecting that intent -- is
not competent evidence.
"The proffered unstated intent of the customers simply is
irrelevant." Therefore, the Court rules, Section 1856(g) is
inapplicable and does not protect Modesto Irrigation from the
application of the parol evidence rule.
Modesto Irrigation also contends that, pursuant to Section
1856(e), introduction of parol evidence is necessary to reform
the contract to correct a mutual mistake between it and its
customers. According to Modesto Irrigation, the omission of a
clause in which the customers conveyed their negative CTC rights
to Modesto Irrigation "was nothing more than a mutual error that
can now be remedied by review of the parol evidence and
reformation of the agreement."
The Court will not utilize the parol evidence rule to reform a
contract when the affected contracting parties, including the
customers, are not parties to the contested matter. More
importantly, the contested matter is not an action to reform the
contract; the purported mutual mistake has not been placed at
issue in a complaint or other pleading in an action between the
contracting parties. As such, Judge Montali says, Section
1856(e) is inapplicable.
Court Will Apply Parol Evidence Rule
Thus, the Court will apply the parol evidence rule and not
consider the extrinsic evidence which Modesto Irrigation seeks to
admit. Judge Montali will grant PG&E's request to disallow the
negative CTC components of Modesto Irrigation's claims because
Modesto Irrigation lacks standing to pursue those claims.
Modesto Irrigation is asserting claims, which belong -- if at all
-- to its customers, and the contracts between Modesto Irrigation
and its customers do not assign those claims to Modesto
Irrigation.
Headquartered in San Francisco, California, Pacific Gas and
Electric Company -- http://www.pge.com/-- a wholly owned
subsidiary of PG&E Corporation (NYSE:PCG), is one of the largest
combination natural gas and electric utilities in the United
States. The Company filed for Chapter 11 protection on April 6,
2001 (Bankr. N.D. Calif. Case No. 01-30923). James L. Lopes,
Esq., William J. Lafferty, Esq., and Jeffrey L. Schaffer, Esq., at
Howard, Rice, Nemerovski, Canady, Falk & Rabkin represent the
Debtors in their restructuring efforts. On June 30, 2001, the
Company listed $23,216,000,000 in assets and $22,152,000,000 in
debts. Pacific Gas and Electric emerged from chapter 11
protection on April 12, 2004, paying all creditors 100 cents-on-
the-dollar plus post-petition interest. (Pacific Gas Bankruptcy
News, Issue No. 86; Bankruptcy Creditors' Service, Inc.,
215/945-7000)
PG&E NATIONAL: Wants Court Nod on $12.7MM TransCanada Break-Up Fee
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John Lucian, Esq., at Blank Rome, LLP, in Baltimore, Maryland,
reports that TransCanada Hydro Northeast, Inc., was unwilling to
hold open its offer to purchase the Hydro Facilities under the
terms of the Purchase Agreement unless it is compensated for the
considerable time, money, and energy it expended in pursuing a
transaction with USGen New England, Inc.
Accordingly, the parties agreed that if the Purchase Agreement is
terminated as a result of USGen pursuing a Qualified Bid, which
is superior to the offer made by TransCanada, USGen will
reimburse TransCanada for its actual reasonable expenses not to
exceed $5,000,000 and pay a $12,750,000 break-up fee. The
Expense Reimbursement Fee and the Break-Up Fee will constitute
administrative superpriority expenses of USGen's estate under
Sections 503(b), 507(a)(1), and 507(b) of the Bankruptcy Code in
full satisfaction of any and all claims of TransCanada relating
to the termination of the Purchase Agreement. The Expense
Reimbursement Fee and the Break-Up Fee would be payable in
accordance with the terms of the Purchase Agreement.
The Break-Up Fee represents 2.5% of the total purchase price
before giving effect to TransCanada's assumption of various
Assigned Contracts and Leases and other obligations.
Mr. Lucian assures the Court that the payment of the Expense
Reimbursement Fee and the Break-Up Fee will not diminish USGen's
estate. Moreover, USGen will not terminate the Purchase
Agreement so as to incur the obligation to pay the Expense
Reimbursement Fee and the Break-Up Fee, unless to accept a
Qualified Bid which is superior to the offer made by TransCanada.
Hence, USGen seeks the Court's authority to pay the Expense
Reimbursement Fee and the Break-Up Fee.
Headquartered in Bethesda, Maryland, PG&E National Energy Group,
Inc. -- http://www.pge.com/-- (n/k/a National Energy & Gas
Transmission, Inc.) develops, builds, owns and operates electric
generating and natural gas pipeline facilities and provides energy
trading, marketing and risk-management services. The Company
filed for Chapter 11 protection on July 8, 2003 (Bankr. D. Md.
Case No. 03-30459). Matthew A. Feldman, Esq., Shelley C. Chapman,
Esq., and Carollynn H.G. Callari, Esq., at Willkie Farr &
Gallagher represent the Debtors in their restructuring efforts.
When the Company filed for protection from its creditors, it
listed $7,613,000,000 in assets and $9,062,000,000 in debts. NEGT
received bankruptcy court approval of its reorganization plan in
May 2004, and emerged from bankruptcy on Oct. 29, 2004. (PG&E
National Bankruptcy News, Issue No. 30; Bankruptcy Creditors'
Service, Inc., 215/945-7000)
PG&E NATIONAL: New England Power Objects to Fossil Facilities Sale
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On September 3, 2004, USGen New England, Inc., USG Services
Company, LLC, as employer, First Massachusetts Land Company, LLC,
and Dominion Energy New England, Inc., entered into a Fossil
Asset Purchase and Sale Agreement as of September 3, 2004.
John Lucian, Esq., at Blank Rome, LLP, in Baltimore, Maryland,
relates the salient terms of the Sale Agreement:
A. Purchase and Sale of Transferred Assets
USGen will sell to Dominion its rights, title and interest to
certain of its assets, free and clear of all liens, except for
permitted liens, including:
* USGen's fossil fuel powerhouses and related buildings
located at the Brayton Point facility and the Salem
Harbor facility in the State of Massachusetts, and the
Manchester Street facility in the State of Rhode Island;
* all equipment, inventory, machinery, goods, supplies,
furniture, fixtures, keys, furnishings, tools, Spare
Parts and other tangible personal property primarily
relating to the operation of the Plants;
* to the extent assignable, all Intellectual Property;
* all books and records relating to the Plants;
* each of the contracts, agreements, purchase commitments
for materials and other services and personal property
leases, entered into by USGen primarily relating to the
Business or the Plants;
* all real property leases under which USGen is a lessee or
a lessor and that relate primarily to any Plant, the
Owned Real Estate, or to the Business;
* to the extent assignable, all Permits relating primarily
to or necessary for the operation of the Business or the
Transferred Assets;
* all real property interests described in the title
insurance commitments, together with all improvements,
structures and fixtures, and all easements, privileges,
rights-of-way, riparian and other water rights, lands
underlying any adjacent streets or roads, appurtenances,
licenses, and other rights pertaining to or accruing to
the benefit of the property;
* all of USGen's inventories located at or in transit to
the Plants or primarily relating to the Business;
* all Emissions Credits; and
* to the extent permitted by Applicable Law, all of USG
Services' books and records relating to employees.
B. Purchase Price
Dominion will pay $536,424,000 in cash, plus adjustments.
Within 30 days after the Closing, USGen will prepare and
deliver to Dominion an Adjustment Statement, which reflects:
(i) the net book value, as reflected on USGen's books as
of the Closing Date, of all Fuel Inventory; and
(ii) the Major Maintenance and Capital Expenditures Amount.
The Adjustment Amount is the sum of the Inventory Adjustment
Amount plus the Major Maintenance and Capital Expenditures
Amount, as of the Closing Date.
A full-text copy of the Asset Purchase and Sale Agreement is
available at http://bankrupt.com/misc/purchase_agreement.pdfat
no charge.
USGen received several offers for the Fossil Facilities. USGen
selected Dominion's offer because it represented the best
opportunity to maximize the value of the Transferred Assets.
Mr. Lucian asserts that the sale of the Fossil Facilities,
including the Transferred Assets, under present conditions, is
the best way to:
-- preserve USGen's value;
-- protect the jobs of the remaining experienced and valued
personnel; and
-- preserve the remaining value of the Transferred Assets for
the benefit of creditors.
This is especially the case given the volatile nature of the
pricing for fuels used by the Fossil Facilities. Given this
volatility, Dominion has asked a prompt sale so as to avoid
uncertainties and reduce the possible effects on its bid.
By this motion, USGen asks the Court:
(a) for authority to enter into the Sale Agreement with
Dominion or its designee, subject to higher or better
Offers;
(b) to sell the sell the Assets, free and clear of any and all
Liens and Interests with any Liens and Interests;
(c) to assume and assign to Dominion certain assigned
contracts and unexpired leases;
(d) to find that Dominion is a good faith purchaser within the
meaning of Section 363(m) of the Bankruptcy Code; and
(d) determine that pursuant to Section 1146(c), the Sale is
exempt from stamp, transfer, recording or similar taxes.
New England Power Objects
New England Power Company, together with The Narragansett
Electric Company and their affiliates, contends that the proposed
sale of USGen New England, Inc.'s rights, title and interest to
its assets related to its fossil fuel powerhouses and related
buildings located in the Brayton Point facility and the Salem
Harbor facility in the State of Massachusetts, and the Manchester
Street facility in the State of Rhode Island, is an improper sub
rosa plan. USGen seeks to sell substantially all of its assets,
in a manner that affects creditors' rights, without an approved
disclosure statement and reorganization plan.
Roger Frankel, Esq., at Swidler Berlin Shereff Friedman, LLP, in
Washington, D.C., asserts that the Sale Motion is not a
functional substitute for the adequate information that an
approved disclosure statement would contain.
Mr. Frankel also notes that USGen proposes to assume and then
assign to the successful bidder certain agreements with New
England Power. But those agreements are part of the August 5,
1997 Asset Purchase Agreement between New England Power and
USGen, which USGen has suggested it will reject. Thus, the Sale
Motion violates the well-settled principle that where an
executory contract contains several agreements, the debtor must
either assume or reject the whole contract.
Furthermore, the Asset Purchase Agreement and its incorporated
agreements implemented a comprehensive plan for divestiture of
New England Power's generating assets. The plan, which was
approved by the Federal Energy Regulatory Commission, was
prompted by the policies, regulation and orders of the FERC, and
by legislation and regulation of the Commonwealth of
Massachusetts and the State of Rhode Island, to foster
competition in the wholesale and retail supply of electricity for
the benefit of consumers.
According to Mr. Frankel, the agreements necessary to accomplish
the divestiture were tied together under the Asset Purchase
Agreement to achieve the important public purpose. The Sale
Motion makes no provision for a determination by either the FERC
or any other adjudicatory body with jurisdiction that the
cessation of performance of USGen's Asset Purchase Agreement
obligations is in the public interest. Mr. Frankel maintains
that the divestiture transaction between New England Power and
USGen was beneficial to New England Power's customers because it
allowed New England Power to mitigate its stranded costs.
* * *
Judge Mannes will convene a hearing on November 18, 2004, at
10:30 a.m. EST to consider the sale of USGen's Fossil Facilities
to Dominion Energy New England, Inc., or another a winning
bidder.
New England Power Company's objection will be taken up at the
Sale Hearing. Responses to the Objection must be filed by
November 12, 2004. All other objections to the Sale Motion that
have not been withdrawn, waived or settled, are overruled.
Headquartered in Bethesda, Maryland, PG&E National Energy Group,
Inc. -- http://www.pge.com/-- (n/k/a National Energy & Gas
Transmission, Inc.) develops, builds, owns and operates electric
generating and natural gas pipeline facilities and provides energy
trading, marketing and risk-management services. The Company
filed for Chapter 11 protection on July 8, 2003 (Bankr. D. Md.
Case No. 03-30459). Matthew A. Feldman, Esq., Shelley C. Chapman,
Esq., and Carollynn H.G. Callari, Esq., at Willkie Farr &
Gallagher represent the Debtors in their restructuring efforts.
When the Company filed for protection from its creditors, it
listed $7,613,000,000 in assets and $9,062,000,000 in debts. NEGT
received bankruptcy court approval of its reorganization plan in
May 2004, and emerged from bankruptcy on Oct. 29, 2004. (PG&E
National Bankruptcy News, Issue No. 30; Bankruptcy Creditors'
Service, Inc., 215/945-7000)
PHILIP MORRIS: Oral Argument Today in Illinois on $10BB Judgment
----------------------------------------------------------------
Lawyers for Philip Morris USA head to the Illinois Supreme Court
today to argue that the $10 billion judgment entered in the Price
class action lawsuit over a year ago by Madison County Circuit
Court Judge Nicholas Byron should be overturned.
Philip Morris contends that the Price Plaintiffs were required --
but failed -- to prove four things in the Madison County trial:
(1) Everyone who purchased Marlboro Lights and Cambridge
Lights in Illinois over a 30-year period was deceived into
believing that Lights delivered less tar and nicotine and
were safer than full-flavor cigarettes;
(2) This alleged deception was a substantial factor in
everyone's decision to buy Lights;
(3) No one actually got less tar and nicotine; and
(4) Everyone was damaged, even though Lights cost the same as
full-flavored cigarettes.
Common sense, Philip Morris tells the Illinois Supreme Court,
suggests that the Price Plaintiffs could not possibly prove all of
these elements in a single trial for the entire class of over
1 million people -- and they did not. Although the circuit court
made findings on these issues -- findings copied verbatim
(including typographical errors) from the plaintiffs' proposed
order -- those findings misconstrued both the law and the factual
record in a trial that was so unfair that it denied Philip Morris
USA due process.
Philip Morris contends that the circuit court never should have
certified this class because each class member's claim depends on
highly individualized facts. Indeed, resolving the claims of the
class representatives could not -- and did not -- "establish a
right of recovery" in all other class members. Indeed, most
testifying class members (17 out of 23) chose to continue
purchasing light cigarettes even after learning of the alleged
deception. Just as important, these class members continued
smoking Lights even after learning of plaintiffs' contentions that
Lights are "more harmful."
Philip Morris' View
The truth, Philip Morris says, is that the plaintiffs did not
prove deception, causation, and injury for all class members. In
reaching the contrary conclusion, the circuit court ignored the
class members' own testimony and misread both the law and the
evidence. Philip Morris gives the Illinois Supreme Court six
examples:
(a) Tar and Nicotine Delivery. In finding that no class
member got less tar and nicotine, the circuit court
relied on Dr. Neal Benowitz. But Dr. Benowitz testified
that compensation (e.g., smoking a "light" cigarette
differently so as to receive the same nicotine as one
would receive from a full-flavor cigarette) was complete
only "on average" and that "some people take in less [tar
and nicotine] and some people take in more."
(b) Deception. In finding that every class member was
deceived, the court improperly relied on plaintiffs'
experts' assumption that all class members believed
Lights were safer than their full-flavor counterparts.
This assumption lacked any evidentiary support and was
contradicted by plaintiffs' own survey and every other
consumer survey in evidence.
(c) Proximate Causation. In finding that every Lights
purchase was caused by the alleged deception, the court
failed to apply the proper legal standard (the
"substantial factor" test) and found causation even
though plaintiffs' own experts could not say what role
the alleged deception played in any class member's
purchasing decision.
(d) "More Dangerous". In finding that Lights were "more
dangerous" than full-flavor cigarettes, the court ignored
the testimony of plaintiffs' own experts that Lights
could not be considered "more dangerous" based upon "the
standards that scientists would use."
(e) Statute of Limitations. In concluding that Philip Morris
had no limitations defense against any class member, the
court disregarded the undisputed facts and denied PMUSA
the opportunity to demonstrate that any class member had
sufficient notice to trigger the running of the statute.
This ruling thus violated state law and due process.
Philip Morris argues that the result of these and other errors was
a $10.1 billion Judgment that violated controlling law and was
"unreasonable, arbitrary, [and] not based on evidence." If
upheld, Philip Morris says, the Judgment would allow individuals
to recover merely because they are part of a class, not because
plaintiffs proved their claims.
Finally, Philip Morris notes, plaintiffs defend the Judgment as
wise regulatory policy, supposedly consistent with regulatory
decisions made by some foreign countries. However, Congress and
the Federal Trade Commission -- not the circuit court -- have the
responsibility to determine U.S. policy in this area. In
exercising that responsibility, the FTC made a deliberate decision
to allow PMUSA to use terms such as "lowered tar and nicotine" and
"lights" as long as they were substantiated by the FTC Method.
The circuit court's finding that PMUSA's use of those terms
nonetheless violated state law (giving rise to massive liability)
collides with the regulatory regime established by Congress and
the FTC. Accordingly, plaintiffs' claims are barred by Illinois
law and federal preemption.
With respect to the damages award, Philip Morris says that the
Price Plaintiffs failed to prove any economic loss, and
undoubtedly failed to prove that all class members paid too much
for Lights. In truth, PMUSA says, plaintiffs' experts
acknowledged at trial that Lights are and have been priced the
same as regular, or full-flavor, cigarettes.
Key Pleadings
The key pleadings before the Supreme Court of Illinois in this
matter today are:
* Philip Morris' Opening Brief, available at no charge at
http://bankrupt.com/misc/96236-Opening-Brief.pdf
* The Plaintiff's Response, available at no charge at
http://bankrupt.com/misc/96236-Response.pdf
* Philip Morris' Reply Brief, available at no charge at
http://bankrupt.com/misc/96236-Reply-Brief.pdf
Supersedeas Bond
Philip Morris' financial obligations are secured by a modified
supersedeas bond consisting of:
* four cash deposits totaling $800,000,000 delivered to
the Clerk of the Madison County Circuit Court over the
past year;
* an existing $6 billion 7% long-term note issued by
Altria Group, Inc., to Philip Morris USA in April 2002,
placed into escrow with an Illinois financial institution;
and
* semi-annual $210 million deposits of interest due on
the intercompany note into the escrow account, since
October 1, 2003.
If Philip Morris prevails in its appeal from the Price Judgment,
all of the money, plus accrued interest, less a to-be-determined
administrative fee, is returned to the Company.
With Philip Morris' agreement not to pursue any appeal of this
bonding requirement, Judge Byron held that this atypical bond is
sufficient to secure payment of the Judgment all the way to the
U.S. Supreme Court.
Philip Morris Lawsuit
The underlying class action lawsuit pending before the Madison
County Circuit Court and is styled Price (f/k/a Miles) v. Philip
Morris, Cause No. 00-L-112. Stephen Tillery, Esq., at Korein and
Tillery and Michael Brickman, Esq., at Richardson, Patrick,
Westbrook & Brickman in Charleston, South Carolina, represent the
Plaintiff Class. George Lombardi, Esq., and Jeffrey Wagner, Esq.,
at Winston & Strawn serve as national defense counsel to Philip
Morris.
R.J. Reynolds
Korein and Tillery and Richardson Patrick have a carbon copy
lawsuit against R.J. Reynolds Tobacco Company and R.J. Reynolds
Tobacco Holdings, Inc., pending before Judge Moran in Madison
County. That case, captioned Turner v. R.J. Reynolds (a/k/a
Wallace v. R.J. Reynolds), Cause No. 00-L-113 (Ill. Cir. Ct.), was
tendered to the Madison County clerk a minute after the Price
complaint was filed and assigned to Circuit Judge George J. Moran.
On November 14, 2001, in Turner v. R. J. Reynolds Tobacco Co.,
Judge Moran certified a class defined as "[a]ll persons who
purchased defendants' DORAL Lights, WINSTON Lights, SALEM Lights
and CAMEL Lights, in Illinois, for personal consumption, between
the first date that defendants sold DORAL Lights, WINSTON Lights,
SALEM Lights and CAMEL Lights through the date the court certifies
this suit as a class action. . . ." On June 6, 2003, RJR Tobacco
filed a motion to stay the case pending Philip Morris' appeal of
the Price v. Philip Morris case. On July 11, 2003, the judge
denied the motion, and RJR Tobacco appealed to the Illinois Fifth
District Court of Appeals. The Court of Appeals denied this
motion on October 17, 2003. On October 20, 2003, the trial judge
ordered that the case be stayed for 90 days, or pending the result
of the Price appeal. The order stated that a hearing would be
held at the end of the 90 days to determine if the stay should be
continued. However, on October 24, 2003, a justice on the
Illinois Supreme Court ordered an emergency stay of all
proceedings pending review by the entire Illinois Supreme Court of
RJR Tobacco's emergency stay/supremacy order request filed on
October 15, 2003. On November 5, 2003, the Illinois Supreme Court
granted RJR Tobacco's motion for a stay pending the court's final
appeal decision in Price.
RJR denies all of the Turner Plaintiffs' substantive allegations
and asserts 16 separate defenses. Daniel F. Kolb, Esq., Anne
Berry Howe, Esq., and Matthew B. Stewart, Esq., at Davis, Polk &
Wardwell, represent R.J. Reynolds Tobacco Holdings, Inc., and
Elizabeth Grove, Esq., Mark A. Belasic, Esq., and Sean P.
Costello, Esq., at Jones, Day, Reavis & Pogue represent R.J.
Reynolds Tobacco Co.
Brown & Williamson
The Tillery-Brickman Duo has a third lawsuit concerning light
cigarettes on the Madison County docket: Howard v. Brown &
Williamson, Cause No. 00-L-136 (Ill. Cir. Ct.), filed August 2,
2002.
On December 18, 2001, in Howard v. Brown & Williamson Tobacco
Corp., another Madison County, Illinois state court judge
certified a class defined as "[a]ll persons who purchased
Defendant's MISTY Lights, GPC Lights, CAPRI Lights and KOOL Lights
cigarettes in Illinois for personal consumption, from the first
date that Defendant sold MISTY Lights, GPC Lights, CAPRI Lights
and KOOL Lights cigarettes in Illinois through this date." On June
6, 2003, the trial judge issued an order staying all proceedings
pending resolution of the Price v. Philip Morris case. The
plaintiffs appealed this stay order to the Illinois Fifth District
Court of Appeals, which heard oral argument on October 7, 2003.
The Court of Appeals has not yet issued a decision in this appeal,
and the case remains stayed.
William E. Hoffman, Esq., W. Randall Bassett, Esq., Barry Goheen,
Esq., and Gordon Smith, Esq., at King & Spaulding and Frank N.
Gundlach, Esq., at Armstrong Teasdale, LLP, represent B&W.
Light Cigarette Litigation
In the mid-1950's, the scientific community reached a consensus
that cigarette smoking could cause disease, including lung
disease. Publication of this information in the press resulted in
a sharp drop in the consumption of cigarettes (per capita in the
U.S.) as the public became aware that cigarette smoking caused
lung cancer. In an effort to prevent smokers from quitting for
health reasons, the tobacco industry began marketing filtered
cigarettes and "low tar and nicotine" cigarettes.
In 1964, the Surgeon General released a report concluding that
cigarette smoking caused lung cancer in men, and cigarette
consumption in the U.S. once again declined. In response to the
public health efforts to inform and protect the public, the
tobacco industry modified the design of the cigarette in an effort
to reassure the public that smoking filtered or "low tar"
cigarettes was safe, or at least safer than unfiltered or high tar
products.
The three lawsuits were filed separately in February 2001 in the
Circuit Court of Madison County, Illinois. The Plaintiffs allege
that the Three Tobacco Companies:
(A) falsely represented that their "light" cigarettes deliver
lowered tar and nicotine in comparison to regular full-
flavor cigarettes when in fact "light" cigarettes are by
design not significantly lower in tar and nicotine than
regular full-flavor cigarettes when actually smoked; and
(B) intentionally manipulated the design of their "light"
cigarettes in order to maximize nicotine delivery while
falsely claiming that the "light" cigarettes have lowered
tar and nicotine content.
The Tobacco Companies deny they have done anything wrong. The
Plaintiffs want refunds of the purchase price paid for light
cigarettes for violation of Illinois false advertising and
consumer fraud laws.
What's a Light Cigarette?
The Plaintiffs argue that the term "light" is based on misleading
smoking machine tar and nicotine yields
Consumers equate the term "light" with "healthy." To the average
consumer, "light" means a product contains less of an unhealthy
ingredient. In the case of food and alcohol, the Food and Drug
Administration (FDA) regulates the use of the terms "light" and
"low," so that a "light" food product must contain significantly
fewer calories and less fat than its "regular" counterpart; a
"light" alcohol product such as beer contains fewer calories than
regular beer, and its alcohol content must be below a specified
percentage. The strict governmental regulation of the use of such
terms has no doubt served to reinforce the perception among
consumers that "light" means "healthy," even though there is no
similar regulation of the terms "light" or "low" as applied to
cigarettes. Nevertheless, there is a widespread belief among
consumers that "light" cigarettes contain less tar and nicotine, a
misperception fostered by light cigarette advertisements. In
fact, "light" cigarettes are lower in tar and nicotine only when
they are "smoked" artificially by a machine in a laboratory.
Because of the way in which people smoke cigarettes, they do not
receive those lower tar and nicotine levels.
In an attempt to avoid Federal Trade Commission, tobacco companies
voluntarily agreed among themselves in 1970 to a set of smoking
machine standards. Already aware that people do not smoke in the
same way the machine "smokes," the industry set about to fool the
smoking machine. Tobacco scientists designed "light" cigarettes
which resulted in very low levels of tar and nicotine when smoked
by machine, but much higher levels of tar and nicotine when smoked
by people. Those design features included making the cigarette
burn faster (so there will be fewer puffs during smoking-machine
testing), expanding the tobacco (less tobacco weight per
cigarette), and placing microscopic ventilation holes in the
cigarette filter which draw in air and dilute the smoke stream
when the cigarette is puffed.
"Compensatory" Smoking Behavior
Although they were designing "light" cigarettes to trick the
smoking machine, tobacco manufacturers recognized that smokers
would "compensate" - unconsciously modify their smoking behavior -
in a variety of ways to maintain their intake of nicotine.
Because of "compensation," smokers of "low tar" cigarettes would
not substantially reduce their intake of tar or nicotine or their
disease risk. Unaware of their "compensatory" behavior, smokers
of "light" cigarettes puff more frequently and take deeper puffs.
Most consumers do not even know the cigarette filter has
ventilation holes which smokers unwittingly block with their
fingers or lips.
Low Tar Cigarettes Do Not Reduce Disease Risk
Use of the phrase "low tar" spread until "low tar" cigarettes
became the dominant cigarette in the U.S. market. Ninety-seven
percent of the cigarettes sold in the United States are filtered
cigarettes. Nevertheless, lung cancer rates have climbed in the
U.S. in spite of the overwhelming popularity of "low tar"
cigarettes. It is now generally recognized in the scientific
community that these "low yield" products have not resulted in a
meaningful reduction in disease risk.
Light Doesn't Mean Less Tar
The Tobacco Companies say that the Plaintiffs misunderstand their
use of the English language. Light means not full-flavored, they
say, rather than safer or less inhaled tars and other toxic
substances.
Aurora Fatima Antonio provides continuing coverage about these
three lawsuits in the Class Action Reporter. See
http://www.beardgroup.com/class_action_reporter.htmlfor
additional information about that Beard Group publication.
PILGRIM'S PRIDE: Earns $72.3 Million of Net Income in 4th Quarter
-----------------------------------------------------------------
Pilgrim's Pride Corporation (NYSE: PPC) reported record net income
of $72.3 million for the fourth fiscal quarter ended October 2,
2004. Included in the fiscal 2004 fourth quarter earnings is a
non-recurring recovery of $23.8 million, or $14.8 million net of
tax, attributable to recoveries under a business interruption
insurance policy related to the October 2002 recall of certain
deli meats by the Company. Excluding this non-recurring recovery,
fourth quarter earnings were still a record at $57.5 million, or
$0.87 per share. Also included in this quarter's results were
turkey restructuring and related charges in the amount of $8.2
million, or $5.1 million net of tax, or $0.08 per share. Excluding
the non-recurring recovery and restructuring related items, fourth
quarter earnings were $62.6 million, or $0.95 per share.
For fiscal 2004, which ended October 2, 2004, the Company reported
record net income of $125.4 million, or $2.00 per share. Included
in the fiscal 2004 earnings are non-recurring recoveries of $24.8
million, or $15.4 million net of tax, or $0.25 per share,
attributable to recoveries under a business interruption insurance
policy related to the October 2002 recall of certain deli meats by
the Company and proceeds from settlements of vitamin and
methionine antitrust lawsuits. Excluding these non-recurring
recoveries, fiscal 2004 earnings were still a record at $110.0
million, or $1.75 per share. Also included in this year's results,
were turkey restructuring and related charges in the amount of
$72.1 million, or $44.3 million net of tax, or $0.71 per share.
Excluding the non-recurring recoveries and restructuring related
items, fiscal 2004 earnings were $154.3 million, or $2.46 per
share.
The Company is providing 2004 fiscal fourth quarter and annual
earnings information excluding non-recurring recoveries and
restructuring related information because it believes some
investors may be interested in earnings exclusive of these unusual
items.
"Our record performance in both the fourth fiscal quarter and
annual period ended October 2, 2004 reflects both the successful
integration of the ConAgra chicken division acquisition and the
benefits of pursuing a growth strategy centered around our
Prepared Foods business, which grew more than 25 percent on a pro
forma basis over the past fiscal year," commented O.B. Goolsby,
President and Chief Executive Officer of Pilgrim's Pride.
"Responding to our customer's growing demand for high-quality,
convenient meat proteins will remain a key priority for us going
forward. Looking ahead to fiscal 2005, we expect the continuation
of favorable consumer trends, rising export demand and projections
for a further drop in commodity grain prices to create a positive
growth environment that will enable us to continue delivering
value to our shareholders," Mr. Goolsby concluded.
The results reported for fiscal 2004's fourth fiscal quarter
compare to fiscal 2003's fourth quarter net income of $25.1
million, or $0.61 per share. Included in the fiscal 2003 fourth
quarter results was an $11.2 million gain, or $6.3 million net of
tax and related employee incentive plan accruals, or $0.15 a
share, attributable to proceeds received from the federal
government to reimburse for losses incurred due to avian influenza
and proceeds from settlements of vitamin and methionine antitrust
lawsuits. In addition, the fiscal 2003 fourth quarter included a
non-cash reduction of tax expense of $16.9 million, or $0.41 per
share, associated with the reversal of a valuation allowance on
net operating losses in the Company's Mexico operations. Excluding
the non-recurring recoveries and Mexico tax valuation change from
the fourth quarter of 2003, earnings would have been $1.9 million.
The results reported for fiscal 2004 compare to fiscal 2003's net
income of $56.0 million. Included in fiscal 2003 results was a
$26.6 million gain, or $15.0 million net of tax and related
employee incentive plan accruals, which was attributable to
proceeds received from the federal government to reimburse for
losses incurred due to avian influenza. In addition, fiscal 2003
included a gain of $56.0 million, or $31.6 million net of tax and
related employee incentive plan accruals, attributable to proceeds
from settlements of vitamin and methionine antitrust lawsuits. In
addition, fiscal 2003 included a non-cash reduction of tax expense
of $16.9 million, associated with the reversal of a valuation
allowance on net operating losses in the Company's Mexico
operations. Excluding the non-recurring recoveries and Mexico tax
valuation change from fiscal 2003 results, earnings would have
been $(7.5) million.
The Company is providing 2003 fiscal fourth quarter and annual
earnings information excluding non-recurring recoveries and Mexico
tax valuation change because it believes some investors may be
interested in earnings exclusive of these unusual items.
The Company also reported record net sales for the fourth fiscal
quarter ending October 2, 2004, of $1.49 billion, an increase of
$780.5 million, or 110.0 percent, compared with net sales of
$709.5 million for the same period last year, with the increase
resulting primarily from the acquisition of ConAgra Foods, Inc.'s
Chicken Division, which was effective November 23, 2003, along
with positive industry and consumption trends.
The Company also reported record net sales for fiscal 2004 of
$5.36 billion, an increase of $2.74 billion, or 104.6 percent,
compared with net sales of $2.62 billion for the same period last
year, with the increase resulting primarily from the acquisition
of ConAgra Foods, Inc.'s Chicken Division, which was effective
November 23, 2003, along with positive industry and consumption
trends.
About the Company
Pilgrim's Pride Corporation is the second-largest poultry producer
in the United States and Mexico, and the largest in Puerto Rico.
Pilgrim's Pride employs more than 40,000 people and has major
operations in Texas, Alabama, Arkansas, Georgia, Kentucky,
Louisiana, North Carolina, Pennsylvania, Tennessee, Virginia, West
Virginia, Puerto Rico and Mexico, with other facilities in
Arizona, California, Iowa, Mississippi, Utah and Wisconsin.
Pilgrim's Pride products are sold to foodservice, retail and
frozen entrie customers. The Company's primary distribution is
through retailers, foodservice distributors and restaurants
throughout the United States (including Puerto Rico) and in the
Northern and Central regions of Mexico. For more information,
please visit http://www.pilgrimspride.com/
* * *
As reported in the Troubled Company Reporter on Nov. 08, 2004,
Standard & Poor's Ratings Services revised its outlook on
vertically integrated poultry processor Pilgrim's Pride Corp. to
stable from negative.
At the same time, Standard & Poor's assigned its preliminary 'BB-
/B+' ratings on the company's $500 million debt securities Rule
415 shelf filing, which allows Pilgrim's Pride to issue senior
unsecured or subordinated debt. Also, Standard & Poor's affirmed
its ratings on the company, including its 'BB' corporate credit
rating. Pittsburg, Texas-based Pilgrim's Pride had about
$796 million of debt that was outstanding (including accounts
receivable securitization) at July 3, 2004.
PORTOLA PACKAGING: Moody's Junks $180 Mil. Senior Unsecured Notes
-----------------------------------------------------------------
Moody's Investors Service downgraded the debt ratings for Portola
Packaging, Inc., and retained the negative ratings outlook due to
Moody's revised view that Portola's run-rate financial position is
likely to remain at current depressed levels, relative to
historical performance.
The downgrades also reflect adverse price and product mix as well
as poor visibility into Portola's earnings. The latter arises in
part from fluctuating demand in certain products, such as
cosmetics packaging sold by Portola Tech Industries (approximately
11% of consolidate revenue). Retaining the negative ratings
outlook reflects continued concern about the company's inability
to generate adequate levels of sustained free cash flow, which is
pressuring Portola's already thin liquidity cushion (minimal
unrestricted cash on hand, no free cash flow, modest borrowing
base availability under the committed revolver in the low teens).
Results continue to be significantly below expectations, which
were just revised in April 2004. The ratings could be further
downgraded should there be any further deterioration in Portola's
access to its secured revolver or any increase to the company's
high financial leverage (debt to EBITDA approaching 8 times; total
debt reaching parity to revenue; negative cash flow).
Moody's downgraded Portola's ratings as follows:
* $180 million 8.25% guaranteed senior unsecured note, due
2012, to Caa1 from B2
* $50 million borrowing based senior secured revolver to B3
from B1
* Senior implied rating to Caa1 from B2
* Senior unsecured issuer rating to Caa2 from B3 (non-
guaranteed exposure)
The ratings outlook remains negative.
The ratings actions reflect the cumulative effects of
deterioration in profitability and cash flow given Portola's lower
than expected volume, prolonged price discounting (notably in one
part of the UK business, which in total is close to 20% of
consolidated revenue), and required capital investment to remain
competitive. Financial shortfalls are also attributed to the
absence of full replacement of lost business from the snap-cap
patent expiration. The ratings express Moody's expectation of
impaired enterprise value throughout the intermediate term as the
company struggles to improve revenue mix and to meet market
expectations. Additionally, the ratings incorporate the negative
effects of persistently high energy and raw material cost and the
related lag time passing increases through to customers. Both the
ratings outlook and the ratings remain highly sensitive to
execution and financing of Portola's international expansion.
More favorably, the ratings express relative stability in
Portola's dairy, juice, and water businesses. Long-term customer
relationships coupled with a high percentage of business under
long-term contract further support the ratings.
Lowering the rating of the existing $50 million revolver to B3
from B1 reflects Moody's estimation of less eligible collateral
and reflects the probability of covenant violations prompting the
need for reconfiguration from its current form and substance.
Lowering the rating of the senior notes to Caa1 from B2 reflects
Moody's view that given Portola's impaired enterprise value and
the expectation of continued softness on a run-rate basis, the
severity of loss in a distress scenario has materially increased.
Significant downward pressure on the bonds remains and further
downgrades could result should there be negative variances under
Moody's currently revised expectations.
Headquartered in San Jose, California, Portola Packaging, Inc.
designs, manufactures, and markets a broad range of products and
services including tamper evident plastic closures, bottles, and
related equipment and services for the dairy, fruit juice, bottled
water, sports drinks, and other non-carbonated beverage markets.
For the fiscal year ended August 31, 2004, consolidated revenue
was approximately $240 million.
RCN CORP: Gets Court Nod to Terminate Consolidated Edison Lease
---------------------------------------------------------------
Pursuant to a Master Lease Agreement dated August 23, 2000,
Consolidated Edison Co. leases to RCN Telecom Services, Inc., six
entire floors and other areas in the building located at 118-29
Queens Boulevard, in Forest Hills, New York. The Master Lease
expires on September 29, 2012.
RCN Corporation executed a guaranty in favor of ConEd of certain
of RCN Telecom's obligations under the Master Lease.
RCN and its affiliates' operations do not require all six floors
of the Building. Accordingly, RCN Corp. subleased a substantial
portion of the Original Premises to JetBlue Airways Corporation
pursuant to a sublease dated June 10, 2002. The Sublease expires
on September 29, 2012.
Lease Termination and Recognition Agreement
RCN Corp. and RCN Telecom do not believe that they will have any
use for the Original Premises as part of their future business
plans. Additionally, the rent payable to ConEd under the Master
Lease is in excess of the rent payable to RCN Telecom under the
Sublease. RCN Telecom, therefore, sustains an operating loss on
the Sublease each month. The total projected loss under the
Sublease through its current expiration date is $1.7 million.
Moreover, RCN Telecom's total obligations, excluding projected
revenue from the Sublease, under the Master Lease through its
expiration exceed $25 million.
D. Jansing Baker, Esq., at Skadden, Arps, Slate, Meagher & Flom,
LLP, in New York, relates that the termination of the Master
Lease and Guaranty would release RCN Corp. and RCN Telecom from
the inherent risk of leasing real property, and would allow them
to exit the leasing business.
After extensive, arm's-length and good faith negotiations, RCN
Corp., RCN Telecom and ConEd agreed to terminate the Lease.
The Lease Termination and Recognition Agreement provides that:
(a) The Master Lease and Guaranty will terminate on the
occurrence of certain events described in the Agreement;
(b) ConEd will recognize JetBlue as its direct tenant on the
terms set forth in the Sublease;
(c) RCN Corp. and RCN Telecom will pay ConEd $1.7 million,
subject to certain adjustments; and
(d) ConEd will release RCN Corp. and RCN Telecom from all
liabilities under the Master Lease and Guaranty except for
liabilities to third parties arising prior to the
effective date of the Agreement.
At the Debtors' request, the Court approved the Agreement.
Headquartered in Princeton, New Jersey, RCN Corporation --
http://www.rcn.com/-- provides bundled Telecommunications
services. The Company, along with its affiliates, filed for
chapter 11 protection (Bankr. S.D.N.Y. Case No. 04-13638) on
May 27, 2004. Frederick D. Morris, Esq., and Jay M. Goffman,
Esq., at Skadden Arps Slate Meagher & Flom LLP, represent the
Debtors in their restructuring efforts. When the Debtors filed
for protection from their creditors, they listed $1,486,782,000 in
assets and $1,820,323,000 in liabilities. (RCN Corp. Bankruptcy
News, Issue No. 14; Bankruptcy Creditors' Service, Inc.,
215/945-7000)
RELIANCE GROUP: Creditors Committee Files Reorganization Plan
-------------------------------------------------------------
On November 2, 2004, the Official Unsecured Creditors' Committee
delivered to the Bankruptcy Court a reorganization plan for
Reliance Financial Services Corporation and related disclosure
statement.
The Creditors' Committee filed, essentially, the same plan of
reorganization that was formulated by the Official Unsecured Bank
Committee. The Creditors Committee altered the Bank Committee's
Plan by including the particulars of the Committees' stipulation
with the Pension Benefit Guaranty Corporation, which has been
approved by the Court. The economic terms of the Creditors
Committee's Plan are identical to those of the Bank Committee's
Plan.
As previously reported, the Stipulation settles:
-- the PBGC's claims against RFSC and Reliance Group Holdings;
-- the PBGC's objection to the Bank Committee's Plan; and
-- an action the PBGC commenced against RGH and Paul Zeller, a
member of the Benefit Plans Committee of RGH, before the
U.S. District Court for the Southern District of New York.
The PBGC will be allowed general unsecured claims for $82,500,000
against RFSC and $81,000,000 against RGH. The PBGC will also
receive a $3,000,000 administrative claim against RFSC.
A free copy of the Creditors' Committee's Reorganization Plan for
RFSC is available at:
http://bankrupt.com/misc/RFSPlan20041102.pdf
A free copy of the Creditors' Committee's Disclosure Statement is
available at:
http://bankrupt.com/misc/RFSDS20041102.pdf
Headquartered in New York, New York, Reliance Group Holdings, Inc.
-- http://www.rgh.com/-- is a holding company that owns 100% of
Reliance Financial Services Corporation. Reliance Financial, in
turn, owns 100% of Reliance Insurance Company. The holding and
intermediate finance companies filed for chapter 11 protection on
June 12, 2001 (Bankr. S.D.N.Y. Case No. 01-13403) listing
$12,598,054,000 in assets and $12,877,472,000 in debts. The
insurance unit is being liquidated by the Insurance Commissioner
of the Commonwealth of Pennsylvania. (Reliance Bankruptcy News,
Issue No. 63; Bankruptcy Creditors' Service, Inc., 215/945-7000)
ROGERS COMMS: S&P Cuts Corp. Credit Rating to BB After Acquisition
------------------------------------------------------------------
Standard & Poor's Ratings Services lowered its long-term corporate
credit ratings on Rogers Communications Inc. -- RCI, Rogers Cable
Inc., and Rogers Wireless Inc. -- RWI -- to 'BB' from 'BB+'
following RWI's successful tender for various equity securities of
Microcell Telecommunications Inc. Given the success of the offer,
and lack of any other material conditions RWI is expected to
complete the acquisition of Microcell in the near term. The
outlook is currently stable.
At the same time, these ratings were also revised:
* the senior unsecured debt ratings on RCI were lowered to 'B+'
from 'BB-';
* the senior secured debt ratings on Rogers Cable were lowered
to 'BB+' from 'BBB-';
* the senior subordinated guaranteed debentures on Rogers Cable
were lowered to +', from 'BB-'; and
* the senior secured debt ratings on RWI were lowered to 'BB'
from 'BB+'.
RCI has three main operating subsidiaries:
* Rogers Cable (100%),
* Rogers Media (100%), and
* RWI (89.3%).
The ratings are assigned on the basis of the consolidated
financial risk and business profiles on RCI and its subsidiaries.
"Although the acquisition of Microcell will have a long-term
positive effect on RWI and RCI, the ratings are being lowered due
to the additional leverage that will be incurred from the
Microcell acquisition, decreased financial flexibility, and RCI's
aggressive financial policy," said Standard & Poor's credit
analyst Joe Morin.
The stable outlook reflects our expectations for improved credit
metrics in the medium term, and for maintenance of pro forma
leverage (debt to EBITDA) between 5.5x and 6.0x in the near term.
If RCI is unsuccessful in refinancing various bridge financings
with long-term debt at RWI in the near term and financial
flexibility is severely constrained as a result, the ratings could
be lowered further. The stable outlook also reflects expectations
for the successful integration of Microcell by RWI, and no
deterioration in operating or financial performance at RWI and
Rogers Cable in the medium term.
SMTC CORP: Pays Down Credit Facility by $3.9 Mil. in 3rd Quarter
----------------------------------------------------------------
SMTC Corporation (Nasdaq: SMTX, TSE: SMX), a global electronics
manufacturing services provider, reported third quarter net
earnings of $2.9 million on revenue of $60.8 million. This
compared with net earnings of $2.6 million on revenue of
$77.0 million for the same quarter last year and net earnings of
$1.0 million on revenue of $66.3 million for the second quarter of
2004.
In the third quarter of 2004, the Company settled two legal
disputes. The first dispute related to the settlement of a claim
for obsolete inventory previously written down. The Company
recovered $1.8 million which was recorded in cost of sales. The
second dispute related to the early termination of a lease
obligation which was successfully settled, resulting in a $1.7
million favourable adjustment to a previously recorded
restructuring charge. Also in the third quarter of 2004, the
Company recorded restructuring charges related to plant
optimization and cost containment measures of $1.0 million. Net
earnings for the same quarter last year included earnings from
discontinued operations of $1.3 million and net earnings from the
second quarter of 2004 included earnings from discontinued
operations of $0.8 million.
Gross profit for the third quarter of 2004 was $7.3 million, or
12.1% of revenue, compared with $8.1 million, or 10.6% of revenue,
for the same period in the prior year and $7.3 million, or 11.1%
of revenue, for the second quarter of 2004. Excluding the proceeds
from the settlement of the obsolete inventory claim, gross profit
for the third quarter of 2004 was $5.5 million or 9.1% of revenue.
For the nine months ended October 3, 2004, the Company reported
revenue of $196.6 million, compared with $229.2 million for the
first nine months of 2003. Net earnings for the nine months ended
October 3, 2004 were $3.8 million, or $0.39 per share, compared
with a net loss of $37.2 million, or a loss of $6.48 per share,
for the first nine months of 2003.
The Company recently announced it has entered into a long-term
supply agreement with Radio Systems Corporation -- RSC, a new
customer, following the completion of manufacturing qualification
on an initial product family. Under this agreement, the Company
will supply RSC with a full suite of electronic manufacturing
services including engineering, printed circuit board and final
product assembly and logistics services for RSC's end customer
order fulfillment requirements.
"In a challenging environment, SMTC performed satisfactorily in
the quarter," stated John Caldwell, President and Chief Executive
Officer. "We have made considerable progress in executing our
transformation plan. Our third quarter results met our internal
targets. Our focus over the next few quarters will be on value-
adding performance for our current customers, new customer
acquisitions and strict cost containment."
On October 4, 2004 the Company completed a reverse stock split of
its issued and outstanding common stock whereby every five shares
of common stock were exchanged for one common share, resulting in
7,775,194 common shares outstanding. The Company's subsidiary,
SMTC Manufacturing Corporation of Canada, completed a reverse
stock split of its issued and outstanding exchangeable shares
whereby every five shares of exchangeable shares were exchanged
for one exchangeable share, resulting in 6,866,152 exchangeable
shares outstanding. In accordance with generally accepted
accounting principles, all previously reported per share amounts
have been adjusted to reflect the reverse stock split.
As previously announced, the Company had received a notice from
Nasdaq that its common stock failed to maintain a minimum bid
price of $1.00, as required by the Marketplace Rules of The Nasdaq
Stock Market. The Company was recently notified by Nasdaq that it
has regained compliance with the minimum bid price requirement of
$1.00 per share.
The Company generated cash from operations of $3.9 million during
the third quarter of 2004 resulting in a reduction in the
outstanding revolving credit facility from $13.3 million as at
July 4, 2004 to $9.7 million as at October 3, 2004. Remittances
from customers are applied to the revolving credit facility on a
daily basis, and accordingly, the Company will report no cash
balance on its balance sheet.
"We are pleased with our progress in improving the balance sheet
of the Company," said Jane Todd, Senior Vice President Finance and
Chief Financial Officer. "Since completing the recapitalization
transactions in June, we have improved our supply chain
relationships and performance through shortening payment cycles.
At the same time we were able to reduce our total debt from
$44 million last quarter to $40 million this quarter".
As a result of a technical accounting requirement (Financial
Accounting Standard Board's Emerging Issues Task Force Issue No.
95-22, Balance Sheet Classification of Borrowings Outstanding
under Revolving Credit Agreements that Include Both a Subjective
Acceleration Clause and a Lock-Box Arrangement), the Company will
restate its balance sheet as at July 4, 2004 to reclassify the
revolver balance of $13.3 million from a long-term liability to a
current liability. The restated balance sheet has no effect on the
Company's previously reported Statement of Operations or on its
ability to draw on the credit facility. The Company currently is
in discussions with its lender to amend its three-year credit
agreement to allow the amount outstanding under the revolving
credit facility at the end of the third quarter of $9.7 million to
be classified as long-term debt. While the Company is encouraged
with the progress made with the lender, there can be no assurance
the amendment will be completed.
About the Company
SMTC Corporation is a global provider of advanced electronic
manufacturing services. The Company's electronics manufacturing,
technology and design centers are located in Appleton, Wisconsin;
Boston, Massachusetts; San Jose, California; Toronto, Canada; and
Chihuahua, Mexico with a third party facility in Chang An, China.
SMTC offers technology companies and electronics OEMs a full range
of value-added services. SMTC supports the needs of a growing,
diversified OEM customer base primarily within the industrial,
networking, communications and computing markets. SMTC is a public
company incorporated in Delaware with its shares traded on the
Nasdaq National Market System under the symbol SMTX and on The
Toronto Stock Exchange under the symbol SMX. Visit SMTC's web
site, http://www.smtc.com/for more information about the Company.
* * *
As reported in the Troubled Company Reporter on April 8, 2004,
SMTC Corporation filed its annual report on Form 10-K with the
United States Securities and Exchange Commission on March 30,
2004. In response to a recent Nasdaq requirement, SMTC announced
that the Auditors' Report, included in the Company's Annual Report
on Form 10-K, included an unqualified audit opinion with an
explanatory paragraph related to uncertainties about the Company's
ability to continue as a going concern, based upon the Company's
historical financial performance and the classification of its
long-term debt as a current liability at December 31, 2003, due to
its maturity on October 1, 2004.
SPIEGEL INC: Court Approves America Online Claim Settlement
-----------------------------------------------------------
On May 23, 2003, Spiegel, Inc., and its debtor-affiliates each
filed its Schedules of Assets and Liabilities. America Online,
Inc., is scheduled to have general unsecured non-priority claims
for:
-- $244,570 against Spiegel Catalog, Inc.;
-- $22,303 against Eddie Bauer, Inc.; and
-- $241,557 against Newport News, Inc.
On September 30, 2003, America Online filed:
Claim No. Debtor Claim Amount
--------- ------ ------------
2765 Spiegel Catalog $259,488
2766 Eddie Bauer 24,500
2767 Newport News 221,655
The Debtors reviewed their books and records and found that
America Online has general unsecured non-priority claims against:
Debtor Claim Amount
------ ------------
Spiegel Catalog $244,570
Eddie Bauer 10,833
Newport News 212,928
The Debtors and America Online have engaged in good-faith
discussions. The parties stipulate that:
(1) America Online's Claim No. 2765 is fixed and allowed as a
general unsecured non-priority claim against Spiegel
Catalog for $244,570;
(2) America Online's Claim No. 2766 is fixed and allowed as a
general unsecured non-priority claim against Eddie Bauer
for $10,833; and
(3) America Online's Claim No. 2767 is fixed and allowed as a
general unsecured non-priority claim against Newport News
for $212,928.
* * *
Judge Blackshear approves the stipulation.
Headquartered in Downers Grove, Illinois, Spiegel, Inc. --
http://www.spiegel.com/-- is a leading international general
merchandise and specialty retailer that offers apparel, home
furnishings and other merchandise through catalogs, e-commerce
sites and approximately 560 retail stores. The Company filed for
Chapter 11 protection on March 17, 2003 (Bankr. S.D.N.Y. Case No.
03-11540). James L. Garrity, Jr., Esq., and Marc B. Hankin, Esq.,
at Shearman & Sterling, represent the Debtors in their
restructuring efforts. When the Company filed for protection from
its creditors, it listed $1,737,474,862 in assets and
$1,706,761,176 in debts. (Spiegel Bankruptcy News, Issue No. 33;
Bankruptcy Creditors' Service, Inc., 215/945-7000)
STELCO INC: OAO Severstal Offers to Purchase All Assets
-------------------------------------------------------
OAO Severstal, a leading global steel producer with over
14 million tons in production capacity, offered to acquire all the
assets of Stelco Inc., which has been operating under the
protection of the Companies' Creditors Arrangement Act for the
past nine months. As a result of the proposed transaction, and
the addition of the estimated four million tons that Stelco
produces yearly, Severstal would be one of the largest steel
producers in the world.
In an offer letter sent from Vadim Makhov, Deputy Chief Executive
Officer of Severstal Group and Chairman of Severstal North America
to Stelco's Hamilton-based management team, Severstal proposes to
create a new subsidiary which will acquire all the assets of
Stelco and seek to complete long term agreements with Stelco's
employees. Under its proposal, Severstal will assume or refinance
Stelco's secured debt, pay cash to Stelco's unsecured bond and
trade creditors, contribute approximately C$400 million in
necessary capital improvements and work with the company and
labour to address the company's OPEB and pension issues.
Mr. Makhov also indicated that the offer is not conditioned on
financing and that Severstal has the necessary approvals from its
Board of Directors for its offer.
As a result of the transaction, the new company would be
affiliated with SNA, Severstal's North American operating
subsidiary. Severstal's corporate strategy is focused on long-
term profitable growth, and the acquisition of Stelco is a symbol
of the firm's commitment to the sustainability and future success
of the steel industry in Canada.
"We have followed this situation carefully over the past nine
months and firmly believe that a credible solution for the
challenges facing Stelco must reflect the compelling industry
dynamics and benefit all constituencies. This offer presents a
complete, long term solution for Stelco and its constituencies and
would place it within the structure of a world class company
dedicated to the steel business for the long run," Mr. Makhov
commented.
"While we have noted the company's improved financial performance
recently, the long term challenges facing the company have not
changed. Through completion of this transaction, we firmly
believe by becoming part of a fast-growing, international company,
Stelco will be a vigorous company, continuing to serve its
customers reliably and efficiently, contributing to its
communities and providing new opportunities for all employees,"
Mr. Makhov added.
In the offer, Mr. Makhov also notes that Severstal has significant
expertise and experience in similar situations, the most recent of
which is the Rouge Steel Plant in Dearborn, Michigan, which was
purchased out of bankruptcy last year and is now operating
profitably.
"We are dedicated to operating world class facilities and have
demonstrated our commitment to this industry and the North
American market through the Rouge Steel acquisition last year.
The significant progress we have made since then has been achieved
with the cooperation of the community, government, unions and
management as well as our major customers. We are convinced we
can achieve similar results in Canada working cooperatively with
the Federal, Provincial and local governments, the community and
the unions," he commented.
About OAO Severstal
OAO Severstal is the principal operating company within a major
Russia-based industrial group with substantial assets in
metallurgy; mining; automobile manufacture; machinery;
transportation and other businesses. The company's principal
activity is the production and sale of steel and steel products.
The Group operates more than 30 plants in 14 regions of Russia and
in the United States, produces approximately 14 million tons of
steel annually, and exports to more than 100 countries.
For the six months ended June 30, 2004, on a consolidated basis,
Severstal generated EBITDA of US$843 million, representing an
EBITDA margin of 31%, which is among the highest margins produced
by any steelmaker globally. The company has substantial cash
balances (in excess of US$1.2 billion as of June 30, 2004) and
ready access to capital markets.
About Stelco
Stelco, Inc. -- http://www.stelco.ca/-- which is currently
undergoing CCAA restructuring proceedings, is a large, diversified
steel producer. Stelco is involved in all major segments of the
steel industry through its integrated steel business, mini-mills,
and manufactured products businesses. Consolidated net sales in
2003 were $2.7 billion.
STEWART ENTERPRISES: S&P Rates Planned Senior Secured Debt BB+
--------------------------------------------------------------
Standard & Poor's Ratings Services assigned its 'BB+' rating and
its '1' recovery rating to the proposed senior secured bank credit
facility of large funeral home and cemetery operator Stewart
Enterprises Inc. At the same time, Standard & Poor's affirmed its
'BB' corporate credit and 'B+' subordinated debt ratings on
Stewart. When the transaction is completed, the 'BB' rating on
the existing senior secured bank credit facility will be
withdrawn. As of July 31, 2004, the Jefferson, Louisiana-based
company had about $437 million of debt outstanding.
"The speculative-grade ratings on Stewart reflect its operating
concentration in a competitive, fragmented industry with stable
but modest long-term growth prospects and a rising consumer
preference for lower cost services," said Standard & Poor's credit
analyst David Peknay. "The company's relatively efficient
operations, an improving balance sheet, and a large contracted
revenue backlog partly offset these factors."
Stewart operates a nationwide network of 251 funeral homes and 147
cemeteries in the U.S. and Puerto Rico and is the third-largest
rated operator in North America behind Service Corp. International
and Alderwoods Group Inc.
Notwithstanding the company's backlog of more than $2 billion in
pre-need sales contracts, which should convert to revenue as
services are rendered over time, Stewart faces challenging
industry trends. North America has been experiencing a lower-
than-average death rate, resulting in lower funeral volumes and
weaker-than-average cemetery and cemetery merchandise sales.
Cremation services, which can generate higher margins but less
revenue than funeral services, are now 37% of volume. Price
competition among providers is also considerable, although in
North America, Stewart's revenue per funeral has been steadily
increasing as customized funeral plans have gained acceptance.
TACTICA INT'L: Wants to Hire Piper Rudnick as Bankruptcy Counsel
----------------------------------------------------------------
Tactica International, Inc., asks the U.S. Bankruptcy Court for
the Southern District of New York for permission to employ Piper
Rudnick LLP as its general bankruptcy counsel.
Piper Rudnick is expected to:
(a) advise the Debtor with respect to its powers and duties as
debtor and debtor in possession in the continued
management and operation of its business and property;
(b) attend meetings and negotiate with representatives of
creditors and other parties in interest, and advise and
consult on the conduct of cases, including all of the
legal and administrative requirements of operating in
Chapter 11;
(c) advise the Debtor in connection with any contemplated
sales of assets or business combinations, including:
(i) negotiating any asset, stock purchase, merger or
joint venture agreements,
(ii) formulating and implementing any bidding
procedures,
(iii) evaluating competing offers, drafting appropriate
corporate documents with respect to the proposed
sale of assets, and
(iv) counseling the Debtor in connection with the
closing of any proposed sale of assets;
(d) advise the Debtor in connection with any postpetition
financing and cash collateral arrangements, and negotiate
and draft documents related to postpetition financing and
cash collateral;
(e) provide advice and counsel with respect to the Debtor's
prepetition financing arrangements;
(f) provide advice to the Debtor in connection with issues
relating to financing and capital structure under
any plan or reorganization, and negotiate and draft
documents related to financing and capital structure;
(g) advise the Debtor on matters relating to the evaluation
of the assumption or rejection of unexpired leases and
executory contracts;
(h) advise the Debtor with respect to legal issues arising in
the Debtor's ordinary course of business, including:
(i) attendance at senior management meetings, meetings
with the Debtor's financial and turnaround
advisors, and meetings of the board of directors,
(ii) advise the Debtor on employee, workers'
compensation, employee benefits, labor, tax,
environmental, banking, insurance, securities,
corporate, business operation, contract, joint
ventures, real property, press/public affairs and
regulatory matters, and
(iii) advise the Debtor with respect to continuing
disclosure and reporting obligations, if any,
under securities laws;
(i) Take all necessary action to protect and preserve the
Debtor's estate, including:
(i) the prosecution of actions on its behalf, and
the defense of any actions commenced against the
Debtor's estate, and
(ii) any negotiation concerning litigation in which the
Debtor may be involved, and the prosecution of
objections to claims filed against the estate;
(j) prepare on behalf of the Debtor all motions,
applications, answers, orders, reports and papers
necessary to the administration of the estate;
(k) negotiate and prepare on the Debtor's behalf any plans of
reorganization, disclosure statements and related
agreements and documents, and take any necessary action
on behalf of the Debtor to obtain confirmation of these
plans;
(l) attend meetings with third parties and participate in
negotiations with respect to any plans of reorganization,
disclosure statements and related agreements;
(m) appear before the Court and any appellate courts, and
protect the interests of the Debtor's estate before such
courts; and
(n) perform all other necessary legal services to the Debtor
in connection with its Chapter 11 cases.
Timothy W. Walsh, Esq., a Member of Piper Rudnick, is the lead
attorney for Tactica's restructuring. Mr. Walsh discloses that
the Firm received a $68,000 retainer.
Mr. Walsh reports Piper Rudnick's professionals bill:
Designation Hourly Rate
----------- -----------
Attorneys $225 to $525
Paralegals $65 to $225
Piper Rudnick does not represent any interest adverse to the
Debtor or its estate.
Headquartered in New York, New York, Tactica International, Inc.
-- http://www.igia.com/-- designs, develops and markets personal
and home care items under the IGIA and Singer brands. Product
categories include hair care, dental care, skin care, sports and
exercise, household and kitchen. Tactica holds an exclusive
license to market a line of floor care products under the Singer
name. Tactica also owns rights to the "As Seen On TV" trademark.
The Company filed for chapter 11 protection on Oct. 21, 2004
(Bankr. S.D.N.Y. Case No. 04-16805). Timothy W. Walsh, Esq., at
Piper Rudnick, LLP, represent the Debtor in its restructuring
effort. When the Company filed for protection from its creditors,
it reported assets amounting to $10,568,890 and debts amounting to
$14,311,824.
TACTICA INT'L: Wants More Time to File Bankruptcy Schedules
-----------------------------------------------------------
The U.S. Bankruptcy Court for the Southern District of New York
gave Tactica International, Inc., to file its schedules of assets
and liabilities, statement of financial affairs, and schedule of
executory contracts and unexpired leases on an interim basis. The
Debtor has until November 23, 2004, to file those documents.
The Court has scheduled a hearing at 10:00 a.m., on Nov. 23, 2004,
to consider the Debtor's original motion to extend the time to
file its Schedules until December 6, 2004.
Tactica International reminds the Court that it had limited time
and staffing available to perform the required review of its
accounts and affairs necessary to accurately prepare its Schedules
because of the time it devoted to resolving a dispute with
Innotrac Corporation, its largest secured creditor.
This dispute has been resolved pursuant to a Stipulation Agreement
between the Debtor and Innotrac Corp. and approved by the Court on
an interim basis on October 25, 2004.
The Debtor tells the Court that the extension will give it more
time to complete and file the documents for the Schedules as
expeditiously as possible.
Headquartered in New York, New York, Tactica International, Inc.
-- http://www.igia.com/-- designs, develops and markets personal
and home care items under the IGIA and Singer brands. Product
categories include hair care, dental care, skin care, sports and
exercise, household and kitchen. Tactica holds an exclusive
license to market a line of floor care products under the Singer
name. Tactica also owns rights to the "As Seen On TV" trademark.
The Company filed for chapter 11 protection on Oct. 21, 2004
(Bankr. S.D.N.Y. Case No. 04-16805). Timothy W. Walsh, Esq., at
Piper Rudnick, LLP, represent the Debtor in its restructuring
effort. When the Company filed for protection from its creditors,
it reported assets amounting to $10,568,890 and debts amounting to
$14,311,824.
TEKNI-PLEX: Gets Out of Default Status After Amending Bank Pact
---------------------------------------------------------------
Tekni-Plex, Inc., released a statement this week saying that as of
Sept. 24, 2004, it has amended its bank agreement and it is no
longer in default of any covenants contained in that agreement.
Headquartered in Somerville, New Jersey, Tekni-Plex is a
diversified manufacturer of packaging products and materials for
the consumer products, healthcare, and food industries.
* * *
As reported in the Troubled Company Reporter on Sept. 22, 2004,
consistent with the credit concerns cited in past press releases
and underscored by the negative ratings outlook (assigned in
November 2003), Moody's Investors Service downgraded the ratings
of Tekni-Plex, Inc. The downgrades incorporate the company's
recent announcement that it expects to report a net loss for its
fiscal year ended July 2004 (10K not yet filed) and, as a result,
is not in compliance with existing bank covenants.
Moody's downgraded these ratings:
* $315 million 12.75% senior subordinated notes, due 2010, to
Caa2 from B3;
* $275 million 8.75% second lien senior notes, due 2013, to
Caa1 from B2;
* Senior secured first lien credit facilities to B3 from B1;
* Senior implied rating to B3 from B1;
* Senior unsecured issuer rating (non-guaranteed exposure) to
Caa2 from B3;
The ratings outlook remains negative.
THE KING SERVICE: Committee Hires Hodgson Russ as Counsel
---------------------------------------------------------
The U.S. Bankruptcy Court for the Northern District of New York
gave the Official Committee of Unsecured Creditors of The King
Service, Inc., permission to employ Hodgson Russ LLP as its
counsel.
Hodgson Ross will:
a) assist the Committee in generating the best results for the
members of the Committee;
b) represent the Committee in appearing at court hearings and
in litigations;
c) assist the Committee in conducting Committee meetings; and
d) assist the Committee in negotiating with the Debtor and its
unsecured creditors.
Richard L. Weisz, Esq., and Deborah L. Kelly, Esq., are the lead
attorneys for the Committee. For their professional services, Mr.
Wiesz will charge $265 per hour while Ms. Kelly will charge
$245 per hour. For associates and paralegals of the Firm who will
render services to the Committee, they will charge $150 per hour.
Mr. Weisz adds that all the fees and expenses of Hodgson Russ will
be paid from a carveout agreed to by the Debtor's postpetition
lenders.
Hodgson Russ does not represent any interest adverse to the
Committee, the Debtor or its estate.
Headquartered in Troy, New York, The King Service, operates
gasoline service stations, convenience stores and a fuel oil
business. The Company filed for chapter 11 protection on
July 14, 2004 (Bankr. N.D.N.Y. Case No. 04-14661). Howard M.
Daffner, Esq., at Segel, Goldman, Mazzota & Siegel, PC. represents
the Debtor in its restructuring efforts. When the Debtor filed
for protection, it listed $12,090,890 in total assets and
$13,498,949 in total debts.
THORNBURG MORTGAGE: Fitch Holds Senior Unsecured BB Rating
----------------------------------------------------------
Fitch Ratings affirms Thornburg Mortgage, Inc.'s senior unsecured
debt rating at 'BB'. The Rating Outlook is revised to Positive
from Stable. Approximately $255 million of securities are
affected by Fitch's action.
The Outlook revision reflects improvements that Thornburg has
begun to make to its funding profile over the past 12 months, as
well as an improving unencumbered asset base and a tightening
interest rate repricing gap. The company has started to reduce
its reliance on the reverse repurchase -- REPO -- market that is
predominantly provided by investment and commercial banks. This
has been achieved as Thornburg has made greater use of
collateralized debt obligations -- CDO -- and a $5 billion
commercial paper conduit program (CP conduit, rated 'F1+' by
Fitch).
Both the CDO and CP conduit financing provide the company with a
much broader and more diverse array of potential investors than is
available through the REPO market. Adding a more diverse range of
investors should help the company be more resilient in the event
of credit tightening in the REPO market. In addition, the CDO
facility provides funding that is better matched from a term and
interest rate perspective. Management has targeted that both the
CP conduit and CDO funding sources will each constitute around 30%
of total funding. Fitch will look for the company to achieve
these targets as a component of resolving the Outlook.
Thornburg has also continued to improve its interest rate duration
gap, which declined to 2.6 months at the end of September and
averaged 3.6 months over the first nine months of 2004. The lower
the duration gap, the lower the expected change in earnings as a
result of changes in interest rates. Of the company's nearly
$25 billion of indebtedness, approximately $21 billion is hedged
into fixed rate for the life of the assets that it is supporting.
The company also continues to improve its unencumbered asset base.
Coverage of unsecured debt by unencumbered assets increased to
3.48 times (x) at Sept. 30, 2004 from 2.89x at Sept. 30, 2003.
This occurred primarily as a result of increasing levels of equity
capital throughout the year. The quality of the company's
unencumbered pool is strong as it predominantly comprises 'AAA'
rated residential mortgage-backed securities -- RMBS, jumbo prime
mortgage loans, and cash. Fitch will look for the company to
maintain strong unencumbered asset coverage as it continues to
grow its balance sheet.
Thornburg's other strengths center on its strong risk-adjusted
capitalization. The company's securitizations are retained on
balance sheet and, in addition, there is less than $18 million of
capitalized servicing rights as of September 30, 2004. As a
result, the asset classes that cause significant capital charges
at other mortgage issuers are not meaningful for Thornburg. In
addition, the company's asset quality is solid, and comprises
predominantly 'AAA' RMBS and jumbo prime residential mortgages
with a weighted average FICO score of 736 and a weighted average
loan to value of 66%. Thornburg has not had a credit loss in its
mortgage loan portfolio for 11 quarters.
Fitch's concerns about Thornburg center on the company's short-
term funding profile relative to its long-term asset base. While
the increased use of CDO funding, as well as the continued growth
of the equity base have helped, the company's capital base still
comprises about 71% short-term capital at September 30, 2004.
Still, this has declined from 89% at December 31, 2002. Despite
the size and depth of the market for RMBS and mortgages leading to
a strong liquidity profile for Thornburg's asset base, Fitch
continues to believe that the company has meaningful roll-over
risk. As part of this, Fitch will continue to look for the
company to grow its base of long-term and unsecured capital,
including through issuance of senior notes and CDOs, which should
help to improve financial flexibility and decrease the component
of the company's financing that is subject to refinance risk on a
quarter-to-quarter basis.
Fitch also notes the increased competition in the whole loan and
RMBS market, which has broadly reduced yields across the market
for many mortgage investors. Thornburg has been largely insulated
from this due to its exclusive focus on the super-prime portion of
the jumbo market, while most of the market is focused on the
conforming and subprime spaces. Nevertheless, several new or
newly focused mortgage REITs have been increasingly active in
Thornburg's area of the jumbo prime market. This may affect
yields over time.
Over the intermediate term Fitch is also focused on the company's
trends in net interest margin. For nine months of 2004, the
company's net interest margin declined to 1.28% from 1.65% for the
same period of the previous year. Management continues to seek
ways to minimize volatility in net interest margin. For example,
in the third quarter, the company added additional hedging to help
minimize the impact of future rate increases. Fitch also
recognizes that the company's margins may be pressured as
alternative sources of funding are layered into the balance sheet.
CDO financing in particular is more expensive than the company's
traditional REPO book. Nevertheless, Fitch believes taking on
additional cost is justified by the benefits of matched funding.
Thornburg Mortgage is based in Santa Fe, NM and is the nation's
largest mortgage real estate investment trust -- REIT. The
company is focused on underwriting, purchasing, and holding
investments in adjustable-rate residential mortgages. T hornburg
originates and purchases adjustable-rate jumbo mortgages backed by
single-family residential properties owned by predominantly high
quality borrowers. The company is also an originator as well as
purchaser of mortgage-backed securities from Freddie Mac, Fannie
Mae, and a diverse range of private institutions. As of
June 30, 2004, the company was the nation's approximately 60th
largest overall originator of residential mortgages. As of
September 30, 2004, Thornburg had $26.4 billion of assets and
$1.7 billion of shareholders' equity.
TK ALUMINUM: S&P Lifts Long-Term Corporate Credit Rating to CCC+
----------------------------------------------------------------
Standard & Poor's Ratings Services took its ratings on the
Bermuda-based aluminum auto parts manufacturer TK Aluminum Ltd.
off CreditWatch and raised its long-term corporate credit rating
on the company to 'CCC+' from 'CCC'. The outlook is stable.
At the same time, the long-term rating on the guaranteed
E240 million senior unsecured notes that TKA issued through its
financing unit, Teksid Aluminum Luxembourg S.a.r.l. S.C.A., was
also taken off CreditWatch and raised to 'CCC-' from 'CC'.
The rating actions follow the resolution of TKA's price dispute
with a significant customer, and the subsequent increased
likelihood that the company will be able to generate sufficient
profit to meet its financial covenants and other liabilities in
future quarters. The ratings were originally placed on
CreditWatch on June 25, 2004.
Standard & Poor's was previously uncertain about the level of
profitability that TKA would be able to sustain in light of the
problematic price dispute with its important North American
customer. In this context, we thought it possible that the
company's financial covenants could be breached--thereby
jeopardizing its liquidity.
"The price dispute has now been resolved, and it seems likely that
covenants will be met through 2004," said Standard & Poor's credit
analyst Barbara Castellano. "As a result, we believe the credit
risk of TKA has improved, although visibility is still weak and
significant challenges remain."
TKA is expected to remain in compliance with its financial
covenants. Standard & Poor's does not factor in any further
deterioration in the company's business environment, or in the
results of TKA itself.
Teksid Aluminum is a leading independent manufacturer of aluminum
engine castings for the automotive industry. Teksid's principal
products include cylinder heads, cylinder blocks, transmission
cases and suspension components. Teksid operates 15 manufacturing
facilities in Europe, North America, South America and Asia.
Information about Teksid Aluminum is available on the Web at
http://www.teksidaluminum.com/
TRANSWESTERN PIPELINE: Fitch Withdraws Low-B Ratings After Sale
---------------------------------------------------------------
Fitch Ratings has withdrawn ratings for Transwestern Pipeline
Co.'s 'B+' indicative senior unsecured debt and 'BB' rated
$150 million four-year revolving credit facility and the
$400 million five-year term loan.
Transwestern's debt had been on Rating Watch Positive since May
21, 2004 following the announcement by Enron Corp. that it had
reached agreement to sell Transwestern's parent holding company,
CrossCountry Energy, LLC. The eventual winner of the bidding
process for CrossCounrty was CCE Holdings, LLC, a joint venture
between Southern Union Company, rated 'BBB', with a Stable
Outlook, and GE Commercial Finance Energy Financial Services
Completion of the purchase could occur before year-end 2004, at
which time all outstanding debt under Transwestern's Bank
Facilities is expected to be refunded. Transwestern's below
investment grade status primarily reflected the general
uncertainty of the Enron bankruptcy and its limited access to
capital markets and not its operating performance, which had
remained stable.
TRW AUTOMOTIVE: Opens First Manufacturing Plant in Romania
----------------------------------------------------------
TRW Automotive Holdings Corp. (NYSE: TRW) reported the opening of
its first plant in Romania. The steering wheel manufacturing site
has opened in Romania with 250 people in a 23,000 square foot
facility.
Early next year, the business will move into a new, purpose-built
41,000 square foot plant, located in Timisoara, Romania -- nearly
doubling the size of the operation to allow for the plans to
increase employees from 250 today to around 1,100 by the end of
2005. The initial phase of this project represents an investment
of $16 million.
The plant will supply the current TRW Automotive customer base for
steering wheels, including DaimlerChrysler, Volkswagen Group, BMW
and Toyota across Europe and Renault Dacia locally. The facility
also has the capacity to expand into other occupant safety systems
product areas such as airbags or seatbelts in the future.
Steve Lunn, executive vice president and chief operating officer,
TRW Automotive, said: "We are proud to have established TRW's
first presence in Romania to support our European steering wheel
customers. This move enables us to continue to provide our
outstanding quality products with an improved cost base for this
business."
Plant manager, Giuseppe Papparlardo, who also leads TRW's Naples,
Italy, steering wheel plant, added "We have been fortunate to
establish an excellent labor force. Each employee has been through
an extensive three-month training course in areas such as leather
wrapping and sewing. This training program will continue as we
expand our operations."
About the Company
With 2003 sales of $11.3 billion, TRW Automotive ranks among the
world's top 10 automotive suppliers. Headquartered in Livonia,
Michigan, USA, the Company, through its subsidiaries, employs
approximately 61,000 people in 22 countries. TRW Automotive
products include integrated vehicle control and driver assist
systems, braking systems, steering systems, suspension systems,
occupant safety systems (seat belts and airbags), electronics,
engine components, fastening systems and aftermarket replacement
parts and services. All references to "TRW Automotive," "TRW" or
the "Company" in this press release refer to TRW Automotive
Holdings Corp. and its subsidiaries, unless otherwise indicated.
TRW Automotive news is available on the Internet at
http://www.trwauto.com/
* * *
As reported in the Troubled Company Reporter on Nov. 01, 2004,
Fitch Ratings assigns an indicative rating of 'BB+' to the
proposed new $300 million term loan. The proposed term loan will
be utilized to take-out TRW Automotive Intermediate Holdings
Corp.'s existing $600 million pay-in-kind seller note, payable to
Northrop Grumman Corp.
U.S. CAN: Look for Restated Financials by November 19
-----------------------------------------------------
U.S. Can Corporation expects to file its Form 10-K/A for the year
ended December 31, 2003, Form 10-Q/A for the quarter ended
April 4, 2004 and its Form 10-Q for the quarter ended July 4, 2004
on or before November 19, 2004.
As previously announced on September 30, 2004, the Company is
restating its financial statements for the years ended
December 31, 2002 and 2003 and subsequent interim periods. The
Company had delayed the filing of its quarterly report for the
quarter ended July 4, 2004 as a result of an ongoing internal
review being conducted by the audit committee of the Board of
Directors of the Company and its independent advisors to address
accounting and financial reporting issues relating to the
operations of its manufacturing facility in Laon, France. The
Company has been in consultation with its independent accountants,
Deloitte & Touche LLP, during this review process.
The Company has dedicated significant resources, and worked with
its independent auditors, in order to complete its audited and
restated financial statements and related periodic reports.
Despite the significant work completed to date, the Company will
not be in a position to file its restated financial statements and
related periodic reports by November 5, 2004 as previously
announced. The Company now expects that it will file the audited
and restated financial statements and related reports on or prior
to November 19, 2004. The Company's expectation as to the timing
of these filings, however, is subject to change. Until its work
and the related audit work by Deloitte & Touche LLP is completed,
the Company cannot be certain that no additional revisions will be
necessary.
Based on the Company's work to date, the preliminary unaudited
financial results for each of the years ended December 31, 2002
and 2003, and the quarters ended April 4, 2004 and July 4, 2004
are set forth in the tables contained in Appendix I to this press
release.
As previously disclosed, on October 1, 2004 the Company entered
into an amendment to its senior credit facility in which the
lenders agreed, among other things, to waive certain events of
default if the Company furnished required information to the
lenders by November 5, 2004. The Company has furnished the
required financial information to the lenders in accordance with
the amendment and is currently in compliance with all of its
covenants under that credit facility.
The principal estimated impacts of the restatement reflect:
-- Increases in the reported amounts of cost of goods sold,
causing corresponding increases in net loss of $5.9 million,
$7.8 million and $2.5 million for December 31, 2002,
December 31, 2003 and the quarter ended April 4, 2004
respectively;
-- Decreased working capital, principally as a result of
decreased accounts receivable and increased accounts payable
and accrued expenses; and
-- Increased short-term borrowings of $5.9 million in the
aggregate.
The Company's published financial statements for the years ended
December 31, 2002 and 2003 and subsequent interim periods,
including all earnings releases and other communications relating
to such time periods, should not be relied upon until the issuance
by the Company of restated and audited financial statements for
December 31, 2002 and 2003 and restated financial statements for
subsequent periods, including the quarter ended April 4, 2004.
About the Company
U.S. Can Corporation is a leading manufacturer of steel containers
for personal care, household, automotive, paint and industrial
products in the United States and Europe, as well as plastic
containers in the United States and food cans in Europe.
As of April 4, 2004, U.S. Can's equity deficit widened to
$354,477,000 compared to a $345,904,000 deficit at
December 31, 2003.
* * *
As reported in the Troubled Company Reporter on Oct. 5, 2004,
Standard & Poor's Ratings Services placed its 'B' corporate credit
rating and other ratings of U.S. Can Corporation on CreditWatch
with negative implications following the company's announcement
that it has delayed filing its report for the quarter ended
July 4, 2004, with lenders to its credit agreement and the SEC.
Lombard, Illinois-based U.S. Can had total debt outstanding of
about $556 million at April 4, 2004.
UAL CORP: U.S. Bank Must Turnover Some Funds Under Trust Agreement
------------------------------------------------------------------
United Air Lines, Inc., commenced a proceeding against U.S. Bank,
N.A., seeking a turnover pursuant to Section 542(b) of the
Bankruptcy Code, of certain construction bond funds held by U.S.
Bank under a trust agreement for the benefit of bondholders.
U.S. Bank serves as the trustee pursuant to the terms of a Trust
Agreement dated April 1, 2004, with the California Statewide
Communities Development Authority. The Development Authority
issued California Statewide Communities Development Authority
Special Revenue Bonds (United Air Lines, Inc., -- Los Angeles
International Airport Cargo Project) Series 2001 in the aggregate
principal amount of $34,590,000. The Bonds were issued to
finance the costs of constructing certain improvements at LAX.
The Development Authority deposited proceeds from the sale of the
Bonds into a construction fund established pursuant the Trust
Agreement. All amounts in the Construction Fund are pledged to
the repayment of principal and interest on the Bonds and are held
in trust for the benefit of the bondholders.
The Construction Fund was designed to reimburse United for its
costs in constructing the LAX Project. United, in turn, is
obligated to make payments under a Payment Agreement with the
Development Authority of the principal and interest on the Bonds.
For United to obtain disbursements from the Construction Fund, it
must submit to U.S. Bank a "Written Request of Corporation."
Payment to United is to be made "upon receipt" of a Written
Request.
United's Claims
In the Complaint, United alleges three different turnover claims
against U.S. Bank, all seeking reimbursement for construction
expenses:
$1,191,547 for costs incurred before the Petition Date.
United submitted the Written Request to U.S. Bank
on December 5, 2002;
$233,824 for costs incurred prepetition. United submitted
the Written Request on December 13, 2002, a few
days after United petitioned for Chapter 11; and
$30,093 for postpetition costs. The Written Request has
never been submitted to U.S. Bank. United,
however, argues that a Written Request was
ministerial and peripheral and, therefore, not
required.
Payment of interest on the Bonds was due on April 1, 2003,
October 1, 2003, and April 1, 2004. United has not made the
payments. The failure to make the payment constitutes a default
under the Trust Agreement and the Payment Agreement.
U.S. Bank's Counterclaims
In response to the Complaint, U.S. Bank sought a declaration that
the funds are not property of United's bankruptcy estate, or
alternatively, that it has (i) a perfected security interest in
the funds, (ii) recoupment rights in the funds or (iii) setoff
rights in the funds.
As there are no material facts in dispute and the relevant
agreements are unambiguous, United and U.S. Bank filed requests
for summary judgment.
Conclusions of Law
The Court holds that each of the three claims for reimbursement
asserted by United raises distinct legal issues:
(1) Postpetition Costs
With respect to United's claim for payment of postpetition
costs associated with the Lax Project, Judge Wedoff rules
that United needed to submit a Written Request before U.S.
Bank has a payment obligation of any kind. This
requirement cannot be ignored. Since United failed to
submit a Written Request, U.S. Bank has no obligation to
pay United's postpetition claim.
(2) December 13 Draw Request
Judge Wedoff states that the December 13 Draw Request
represent a valid claim against U.S. Bank. The Claim,
however, is fully subject to setoff under Section 553,
since U.S. Bank has a much larger prepetition claim
against United. Mutuality exists because United is
obligated to pay U.S. Bank, as trustee, and the Bank is
obligated to pay United.
United's obligations to U.S. Bank exceeds $34,000,000
since its payment to date have covered interest accruing
on the bond issue.
(3) December 5 Draw Request
The costs associated with the December 5 Draw Request were
incurred prepetition and United's request itself was
submitted prepetition. Therefore, Judge Wedoff rules that
U.S. Bank is mistaken in arguing that (x) it had a right
to withhold payment to verify the accuracy of the
information United submitted and (y) United's filing
constituted an Event of Default that suspended U.S. Bank's
payment obligation. Judge Wedoff explains that United's
right to reimbursement from the Construction Fund arose
upon the submission of a request in the proper form.
Neither the Trust Agreement nor the Payment Agreement
imposes any duty on U.S. Bank to confirm the validity of
the submission. Because U.S. Bank had a non-discretionary
duty to honor the request "upon receipt," equitable
principles, as enforced under California law, require
turnover of the funds.
Accordingly, Judge Wedoff grants United's request for turnover as
to the December 5 Draw Request. United's request for turnover
with respect to the other claims is denied.
U.S. Bank's request for summary judgment declaring that the
amounts in the Construction Fund are not property of the estate
is denied with respect to the December 5 Draw Request. Summary
judgment is granted with respect to United's other draw requests.
Judge Wedoff allows U.S. Bank to set off the amount sought in the
December 13 Draw Request against its Claims under the Payment
Agreement with United.
Headquartered in Chicago, Illinois, UAL Corporation --
http://www.united.com/-- through United Air Lines, Inc., is the
holding company for United Airlines -- the world's second largest
air carrier. The Company filed for chapter 11 protection on
December 9, 2002 (Bankr. N.D. Ill. Case No. 02-48191). James H.M.
Sprayregen, Esq., Marc Kieselstein, Esq., David R. Seligman, Esq.,
and Steven R. Kotarba, Esq., at Kirkland & Ellis, represent the
Debtors in their restructuring efforts. When the Debtors filed
for protection from their creditors, they listed $24,190,000,000
in assets and $22,787,000,000 in debts. (United Airlines
Bankruptcy News, Issue No. 64; Bankruptcy Creditors' Service,
Inc., 215/945-7000)
UAL CORP: U.S. Bank to Appeal Judge Wedoff's Ruling in Dist. Court
------------------------------------------------------------------
U.S. Bank, N.A., will take an appeal from Judge Wedoff's order
issued with respect to the Adversary Proceeding commenced by
United Air Lines, to the U.S. District Court for the Northern
District of Illinois.
U.S. Bank will ask the District Court to find whether Judge
Wedoff erred in:
-- determining that U.S. Bank had a non-discretionary duty to
honor United's December 5 Draw Request upon receipt;
-- determining that United's right to reimbursement from the
Construction Fund is absolute on its submission of a draw
request in the proper form;
-- in determining that since neither the Trust Agreement nor
the Payment Agreement imposes any duty on U.S. Bank to
confirm the validity of a submission, U.S. Bank is wholly
without the discretionary power to confirm whether a draw
request should be honored;
-- in applying the equitable maxim of "that which ought to
have been done is to be regarded as done, in favor of him
to whom, and against him from whom, performance is due" to
determine that the funds from the December 5 Draw Request
are property of United's bankruptcy estate;
-- in applying an equitable remedy to transform United's
contract claim into a property interest;
-- in exercising its equitable powers to treat the funds
associated with the December 5 Draw Request as having been
transferred to United with the effect of terminating any
security interest held by U.S. Bank; and
-- in exercising its equitable powers to treat the funds
associated with the December 5 Draw Request as being held
in trust by U.S. Bank for United thereby destroying the
mutuality required for setoff.
United's Cross Appeal
United Air Lines also was not satisfied with Judge Wedoff's
ruling. United will ask the District Court to find whether Judge
Wedoff was correct in granting summary judgment to U.S. Bank and
denying its request for a turnover of:
-- the $233,824 from the Construction Fund, representing costs
of the LAX construction project that United incurred
prepetition, but requisitioned four days after the Petition
Date; and
-- the $30,093, representing costs of the LAX construction
project that United incurred postpetition, but under a
promise of reimbursement from U.S. Bank.
Headquartered in Chicago, Illinois, UAL Corporation --
http://www.united.com/-- through United Air Lines, Inc., is the
holding company for United Airlines -- the world's second largest
air carrier. The Company filed for chapter 11 protection on
December 9, 2002 (Bankr. N.D. Ill. Case No. 02-48191). James H.M.
Sprayregen, Esq., Marc Kieselstein, Esq., David R. Seligman, Esq.,
and Steven R. Kotarba, Esq., at Kirkland & Ellis, represent the
Debtors in their restructuring efforts. When the Debtors filed
for protection from their creditors, they listed $24,190,000,000
in assets and $22,787,000,000 in debts. (United Airlines
Bankruptcy News, Issue No. 64; Bankruptcy Creditors' Service,
Inc., 215/945-7000)
UAL CORP: Wants Court to Schedule Sec. 1113(c) Conference
---------------------------------------------------------
UAL Corporation and its debtor-affiliates ask the Court to conduct
a scheduling conference at the November 19, 2004 Hearing to
discuss the rejection of their Collective Bargaining Agreements
under 11 U.S.C. Section 1113(c).
In the meantime, the Debtors will use their best efforts to reach
consensual resolutions with the unions. The schedule allows the
parties to negotiate as long as possible while potentially
providing the relief the Debtors need by mid-January 2005.
James H.M. Sprayregen, Esq., at Kirkland & Ellis, in Chicago,
Illinois, tells Judge Wedoff that the Debtors need additional
labor cost savings before exiting bankruptcy, above and beyond
savings from pension plan termination. Low yields and sharply
higher fuel costs have accelerated the deadline for realizing
cost savings. To maintain adequate cash balances, satisfy DIP
covenants and procure exit financing, the Debtors must have these
labor cost savings by mid-January 2005. To that end, the Debtors
are presenting their unions with proposals to modify the CBAs and
stand ready to negotiate.
To allow more time for negotiations and maximize the chances of a
consensual resolution, the Debtors want to proceed at the latest
possible time which would enable the Court to rule by mid-January
2005. Once the hearing date is set, the Debtors will work with
the unions to develop a schedule that allows for discovery and
pre-hearing proceedings.
The Debtors will start negotiations from the position that they
will not be required to maintain the defined benefit pension
plans. If an agreement on the pension issue cannot be reached,
the Debtors will invoke the ERISA distress termination standard
of 29 U.S.C. Section 1341(c). Therefore, Mr. Sprayregen says,
the Court may want to address the potential scheduling interplay
between Section 1113 and an ERISA distress termination at the
November 19 Hearing.
Flight Attendants Will Fight For Every Dime
CHICAGO, Illinois -- November 5, 2004 -- United Airlines
declared war on its employees today, proposing cuts in wages,
benefits and work rules. The Association of Flight Attendants-
CWA United Airlines Master Executive Council received the latest
litany of United Airlines' demand for concessions that totals
$137,614,000 annually. This demand is over and above the annual
$314 million already sacrifice by flight attendants and the
hundreds of millions of dollars United's management intends to
extract from employees by terminating their pension plans. The
union promised to fight the company 'over every dime.'
Greg Davidowitch, president of the United Airlines Flight
Attendant Master Executive Council, today made the following
statement regarding United's demands:
"The Company's demands are disastrous. If management stands
by these stipulations they will destroy United Airlines. We're
not going to let that happen. We will fight them at the
bargaining table and we will fight them in court. AFA will not
stand by and let management destroy the flight attendant career
and United Airline.
"The devastating effects these proposed changes will visit
upon the flight attendants is not the product of real need but
managements' desire. What is most tragic about what the company
is attempting to do is that it will be viewed by many if not most
of our members as a plan of employee liquidation. The Company's
demands from flight attendants are not fair, equitable, nor
necessary for a successful reorganization. Management and their
lawyers are doing this because they think they can get away with
it under the protection of bankruptcy."
The leadership of the United Flight attendants will convene
a special meeting beginning Friday, November 12, 2004.
More than 46,000 flight attendants, including the 21,000 flight
attendants at United, join together to form AFA, the world's
largest flight attendant union. AFA is part of the 700,000 member
strong Communications Workers of America, AFL-CIO. Visit us at
http://www.unitedafa.org
MEC President's Letter
November 5, 2004
Ladies and Gentlemen:
United Airlines declared war on us in proposed cuts in
wages, benefits and work rules. AFA received the latest
litany of United Airlines' demand for concessions that
totals $137,614,000 annually and imposes a cost-savings
allocation on Flight Attendants that is fifty-five percent
higher than the previous concessionary allocations. This
demand is over and above the annual $314 million we have
already sacrificed and the hundreds of millions of dollars
United's management intends to extract from employees by
terminating pension plans. We will fight the company 'over
every dime.'
The Company's demands are disastrous. If management
stands by these stipulations they will destroy United
Airlines. We're not going to let that happen. We will
fight them at the bargaining table and we will fight them in
court. AFA will not stand by and let management destroy our
careers and our airline.
These proposed changes are not the product of real need
but managements' desire. United's senior executives see
bankruptcy as the time to engage in a crime spree of
opportunity. Only in bankruptcy can a company unilaterally
gut its labor contracts, retiree health benefits and
pensions. The current industry circumstances provide the
Company with a pretext for this most recent rampage.
Management is grossly exaggerating both the depth and
duration of their purported predicament in order to achieve
what would otherwise be unthinkable and unattainable.
Equally disturbing is that in the midst of this alleged
crisis, management also seeks concessions that are both
petty and punitive. For some of its proposals the Company
has not even determined the amount of cost-savings it would
realize. For others, the cost of the benefit is minimal for
it only applies in the case of the extraordinary.
What is most tragic about what the company is
attempting to do is that it will be viewed by many if not
most of our members as a plan of employee liquidation. The
Company's demands from us are not fair, equitable, nor
necessary for a successful reorganization. Management and
their lawyers are doing this because they think they can get
away with it under the protection of bankruptcy.
The Section 1113(c) term sheet, named after the Section
of Bankruptcy Code that permits companies to reject
collective bargaining agreements, is posted on our Web site
in the non-public section for your review. A review of the
Section 1113 Bankruptcy Code and our options within it is
also posted on the Web site. All of this information may
also be obtained through your Local Council. We encourage
every Member to review United's demands to carefully
understand the extent to which these concessions would
affect our jobs and communicate your comments and concerns
to your Local Council Office.
The United Master Executive Council will convene a
Special Meeting beginning Friday, November 12, 2004 in order
to determine our response to the company. As with every
other challenge we have faced in United's bankruptcy, we are
working closely with our legal and financial advisors to
determine our best course of action.
It is imperative that you have all of the information
necessary for us to base our decisions and actions on facts.
I encourage each of you to avoid rumor and speculation.
Please check Dear AFA, AFA E-lines, and our Web site often.
At no other time has it been more important that we
reject attempts to divide us and embrace our strength in
solidarity.
In Solidarity,
Greg Davidowitch, President
United Master Executive Council
Headquartered in Chicago, Illinois, UAL Corporation --
http://www.united.com/-- through United Air Lines, Inc., is the
holding company for United Airlines -- the world's second largest
air carrier. The Company filed for chapter 11 protection on
December 9, 2002 (Bankr. N.D. Ill. Case No. 02-48191). James H.M.
Sprayregen, Esq., Marc Kieselstein, Esq., David R. Seligman, Esq.,
and Steven R. Kotarba, Esq., at Kirkland & Ellis, represent the
Debtors in their restructuring efforts. When the Debtors filed
for protection from their creditors, they listed $24,190,000,000
in assets and $22,787,000,000 in debts. (United Airlines
Bankruptcy News, Issue No. 65; Bankruptcy Creditors' Service,
Inc., 215/945-7000)
USOL INC: Voluntary Chapter 11 Case Summary
-------------------------------------------
Debtor: USOL, Inc.
dba U.S. Online
203 West 8th Avenue, Suite. 316
Amarillo, Texas 79101
Bankruptcy Case No.: 04-21355
Type of Business: The Company is a wholly owned subsidiary of
USOL Holdings, Inc. The Company provides
bundled communications services, primarily to
multi-family properties.
See http://www.usolholdings.com/
Chapter 11 Petition Date: November 8, 2004
Court: Northern District of Texas (Amarillo)
Judge: Robert L. Jones
Debtor's Counsel: Roger S. Cox, Esq.
Sanders Baker
PO Box 2667
Amarillo, Texas 79105-2667
Tel: (806) 372-2020
Fax: (806) 372-3725
Estimated Assets: $1 Million to $10 Million
Estimated Debts: $1 Million to $10 Million
The Debtor did not file a list of its 20 Largest Unsecured
Creditors.
VANTAGEMED CORP: Equity Deficit Widens to $1.4 Mil. at Sept. 30
---------------------------------------------------------------
VantageMed Corporation (OTC Bulletin Board: VMDC.OB) reported
financial results for the quarter and nine months ended
September 30, 2004. Total revenues for the quarter ended
September 30, 2004 were $5.9 million and were up 4.3% from the
year ago quarter and down 4.2% from the prior quarter revenues of
$6.1 million. Revenues for the nine months ended Sept. 30, 2004
were $17.1 million, 5.3% higher than revenues of $16.2 million for
the nine months ended September 30, 2003.
Net income before interest, taxes, depreciation and amortization
-- EBITDA -- totaled a negative ($188,000) for the quarter ended
September 30, 2004 compared to a positive $85,000 for the previous
quarter and compared to a positive $454,000 for the year ago
quarter. EBITDA for the nine months ended September 30, 2004 was
a negative ($677,000) compared to a negative ($784,000) for the
nine months ended September 30, 2003. EBITDA for the three and
nine months ended September 30, 2004 includes a $50,000 gain on
the sale of the DentalMate business and the nine months ended
September 30, 2004 includes a $147,000 benefit resulting from the
termination and buyout of a lease. EBITDA for the three and nine
months ended September 30, 2003 includes a $524,000 gain on the
sale of the DentalMate business.
VantageMed reported a net loss of ($301,000), or ($0.04) per basic
and diluted share, for the quarter ended September 30, 2004
compared to a net loss of ($28,000), or ($0.00), for the previous
quarter and net income of $298,000, or $0.04, for the year ago
quarter. Net loss for the nine month period ended Sept. 30, 2004
was ($1.0) million, or ($0.12) per basic and diluted share,
compared to a loss of ($1.4) million, or ($0.16), for the nine
months ended September 30, 2003.
At September 30, 2004, VantageMed's balance sheet showed a
$1,453,000 stockholders' deficit, compared to a $483,000 deficit
at December 31, 2003.
Richard M. Brooks, Chairman and Chief Executive Officer,
commented, "We continue to enhance the delivery capabilities of
our client services organization as part of our ongoing efforts to
provide world class products and services. Our continued
investments in HIPAA compliant, industry leading SecureConnect EDI
services are also yielding positive results in terms of increased
transaction volumes. Order activity was flat with the same
quarter in the prior year and was lighter than anticipated during
the third quarter of 2004 due in part to longer sales cycles at
several larger customers. Year to date we have signed 158
RidgeMark orders compared to 63 signed in the prior year to date
period."
About VantageMed
VantageMed is a provider of healthcare information systems and
services distributed to over 12,000 customer sites nationwide. Its
suite of software products and services automates administrative,
financial, clinical and management functions for physicians and
other healthcare providers as well as provider organizations. For
more information about RidgeMark, please call 877-879-8633, or
visit our website at http://www.vantagemed.com/
VANTAGEMED CORP: Names Steve Curd as New Chief Executive Officer
----------------------------------------------------------------
VantageMed Corporation (OTC Bulletin Board: VMDC.OB) reported the
appointment of Steve Curd as VantageMed's new Chief Executive
Officer.
Richard M. Brooks, Chairman of the Board, commented, "I am excited
to announce the appointment of Steve Curd as VantageMed's new CEO.
After a five-month search we are fortunate to have found such a
talented and experienced executive. His extensive technology
knowledge, industry experience and operational successes will
provide valuable assets for VantageMed's shift to growth and
profitability. I look forward to working with Steve, the balance
of the executive team and our dedicated employees as they strive
to provide world class products and services to our valued
customers." Mr. Brooks has been a member of the Board of
Directors since March 2001 and was appointed CEO in April 2002 and
Chairman in May 2002.
"The combination of VantageMed's advanced practice management
solutions, internal clearinghouse operation, SecureConnect, and
the ChartKeeper clinical product, provides a powerful engine for
growth. I am thrilled to be joining the VantageMed team," stated
Steve Curd, VantageMed's new CEO.
Mr. Curd brings to VantageMed a wealth of experience in healthcare
IT including direct experience with practice management systems,
EDI services and health plan operations. Mr. Curd held the
position of COO and CIO at Healtheon/WebMD where he led the
company through rapid growth and a successful initial public
offering. Before joining Healtheon, Mr. Curd was Chief
Information Officer at UnitedHealth Group, one of the largest and
most innovative leaders in the delivery of health care services.
Prior to UnitedHealth, Steve held the position of Vice President
at CIGNA Systems. Mr. Curd holds a Masters of Business
Administration from the Wharton School and a Bachelors degree in
Physics and Mathematics from William Jewell College.
About VantageMed
VantageMed is a provider of healthcare information systems and
services distributed to over 12,000 customer sites nationwide.
Its suite of software products and services automates
administrative, financial, clinical and management functions for
physicians and other healthcare providers as well as provider
organizations. For more information about RidgeMark, please call
877-879-8633, or visit our website at www.vantagemed.com/
At September 30, 2004, VantageMed's balance sheet showed a
$1,453,000 stockholders' deficit, compared to a $483,000 deficit
at December 31, 2003.
VARTEC TELECOM: Hires LeMaster Group as PR Consultants
------------------------------------------------------
Vartec Telecom, Inc., and its debtor-affiliates ask the U.S.
Bankruptcy Court for the Northern District of Texas, Dallas
Division, for permission to employ LeMaster Group, Ltd., as their
public relations consultants.
LeMaster Group will:
a) prepare a comprehensive communications strategy to
facilitate the Debtors' operations in chapter 11;
b) prepare public announcements of these cases and as
needed, for significant events in these cases as they
occur;
c) prepare other communications to all relevant audiences;
d) work closely with the Debtors management, internal
communications staff and other professionals; and
e) perform all other communications and strategic services
for the Debtors that may be necessary and proper in \
these proceedings.
The Debtors believe that LeMaster's employment is in the nature of
ordinary course retention but, out of an abundance of caution seek
the Court's approval.
Lisa LeMaster, of LeMaster Group, Ltd., tells the Court that the
Debtors will not pay the Firm for its professional services in
excess of $25,000.
Headquartered in Dallas, Texas, Vartec Telecom Inc. --
http://www.vartec.com/-- provides local and long distance service
and is considered a pioneer in promoting 10-10 calling plans. The
Company and its affiliates filed for chapter 11 protection on
November 1, 2004 (Bankr. N.D. Tex. Case No.
04-81695). Daniel C. Stewart, Esq., William L. Wallander, Esq.,
and Richard H. London, Esq., at Vinson & Elkins represent the
Debtors in their restructuring efforts. When the Company filed
for protection from its creditors, it listed more than
$100 million in assets and debts.
WILLIAMS COS: Operating Performance Cues Moody's to Lift Ratings
----------------------------------------------------------------
Moody's Investors Service raised the long-term debt ratings of The
Williams Companies, Inc. and its natural gas pipeline
subsidiaries. Moody's raised Williams' senior implied rating to
Ba3 from B2 and its senior unsecured rating to B1 from B3.
Moody's raised the senior unsecured ratings of Northwest Pipeline
Corporation and Transcontinental Gas Pipe Line Corporation to Ba2
from B1. Moody's affirmed Williams Production RMT Company's
ratings. The outlook for Williams and its subsidiaries is stable.
This concludes Moody's review of Williams' ratings, which had
reflected progress the company had made in a number of areas
including operating performance, leverage and liquidity. Moody's
also affirmed Williams' SGL-2 speculative grade liquidity rating,
which reflects our expectation of good liquidity for the 12 months
ending September 30, 2005.
Williams has effectively completed the asset sales program and
business restructuring it had carried out since early 2002,
leaving it with three core natural gas businesses of regulated
interstate gas pipelines, midstream gas gathering and processing,
and exploration and production -- E&P. Williams' operating cash
flow and free cash flow (net of capex) have improved consistently
through the first three quarters of 2004 and both are expected to
continue improving through 2005 and 2006. Gas pipelines provide
fairly stable operating cash flow, while capex is expected to
increase $100 million in each of the next two years primarily for
pipeline integrity and some expansion. Midstream has benefited
from higher NGL prices and processing margins, as well as the
installation of the Devil's Tower platform in the Gulf of Mexico
-- GOM. Continued improvement should come from higher volumes in
the Rocky Mountains and the deepwater GOM. Williams' E&P segment
has improved principally from an 18% increase in gas production
year to date as a significant gas price hedge position has muted
higher natural gas prices. Production is expected to continue
growing at 15-20% over the next two years and revenue should
increase as lower price hedges roll off. Overall, Williams'
reported profit is impacted by a variety of issues unrelated to
core operating performance, including the recent decision to
remain in the power business and use hedge accounting, which will
reverse prior income gains booked under mark-to-market accounting.
However, Williams' cash flow from operations should more than
double in 2004 compared to 2003 and is expected to increase 7-10%
per year in 2005 and 2006. While capex is expected to increase as
well over this period, annual free cash flow should be in the $300
to $400 million range.
Williams has made substantial progress in debt repayment during
2004, having repaid just under $3.9 billion of debt. Total funded
debt is currently about $8.1 billion. WMB has accomplished this
using cash on hand, about $1 billion in asset sales proceeds and
the return of margin deposits and cash collateral replaced with
letters of credit. Williams has repaid debt through normal debt
maturities, debt tenders, open market redemptions and an exchange
offer for most of its FELINE PACS. Moody's anticipates that
Williams will continue to reduce its debt in 2005, albeit at a
much more modest pace than during 2004. In addition to reducing
the total amount of debt, Williams has extended its maturities
such that it has no material maturities until 2011. Leverage, as
measured by debt to cash flow, has improved markedly during 2004
from the combination of absolute debt reduction and improved
operating cash flow. Leverage should continue declining over the
near term from continued debt reduction and improving cash flow.
Williams has improved its liquidity significantly during 2004 by
replacing its $800 million cash collateralized credit facility
with new facilities totaling $1.775 billion. WMB currently has
$500 million five-year unsecured credit facilities that are used
to issue letters of credit to support its power business and
enterprise risk management activities. The company has a
$1.275 billion three-year secured facility, which was upsized in
August, and is also used for letters of credit. Williams had
total liquidity of about $1.8 billion at September 30, 2004,
consisting of $1 billion of cash and about $800 million of
capacity under its $1.275 billion revolving credit facility. This
amount of liquidity is comfortably above Williams' stated goal of
$1-1.3 billion of total liquidity. Moody's expects that Williams
management will remain disciplined in maintaining significant
liquidity going forward.
One of the challenges in assessing Williams' overall credit
quality is its presence in the electric power generation business
where it controls 7,700 MW of capacity. Williams in effect has
created a virtual power company through a series of contracts.
The most significant of these are tolling contracts, which provide
the right, but not the obligation, to run an electric generation
plant owned by another entity. The financial obligations
associated with this tolling optionality are about $400 million
per year, with some contracts extending to 2022. Williams has
mitigated some of these obligations through another series of
contracts, including resale of tolling, full requirements
transactions, forward power sales and various hedges. Over the
near term, the tolling obligations are effectively covered by
these other sources of revenue but in the medium to long term the
obligations become a net financial burden. A sensitivity analysis
of the net present value of these cash flows indicates the implied
obligation ranges from under $1 billion, giving full credit to
offsetting contracted revenue, to over $3 billion, giving no
credit to offsetting revenue. However, an expected case that
risks the various revenue streams yields an obligation in the
$1.5-2 billion range. By way of comparison, Williams should
generate about $2 billion EBITDA and $1.4 billion cash flow from
operations in 2005, which implies the net tolling obligations add
a turn to a turn and a half of leverage to the overall company.
Moody's believes that Williams' natural gas businesses --
pipelines, midstream and E&P -- have credit metrics that are more
consistent with a Ba2 senior implied rating but the burden of the
tolling obligations reduces the overall company's rating to the
Ba3 level.
Williams' total secured debt is currently about $800 million or
just under 10% of total funded debt. Most of this debt is the
$0.5 billion Williams Production RMT term loan B. The other
material piece of secured debt is the $1.275 billion revolving
credit facility that is secured by Williams' midstream assets.
This facility is currently unfunded and used for letters of
credit. In a stress scenario where this facility became fully
drawn, total secured debt would increase to about 20% of total
funded debt. Given this level of secured debt and the possibility
of structurally superior debt in the capital structure, Moody's
upgraded the senior unsecured rating to B1 from B3 or one notch
below the senior implied rating.
Williams' two interstate natural gas pipelines, Transco and
Northwest, have strong credit metrics on a standalone basis that
are more consistent with their investment grade peers. However,
with Williams' corporate rating at Ba3 and the ability to extract
cash or increase leverage at the pipelines we believe it is
prudent to maintain the current one notch differential.
Therefore, we have upgraded the pipelines' senior unsecured
ratings to Ba2 from B1.
Williams' Ba3 senior implied rating reflects its integrated
natural gas businesses including the stable cash flow from its
regulated interstate gas pipelines and growing midstream and E&P
businesses, declining leverage with no material debt maturities
until 2011, strong liquidity and disciplined management.
Williams' rating is restrained by its presence in the electric
power generation sector, which adds to adjusted debt through net
tolling obligations and increases liquidity demands related to its
various hedge positions. The rating also considers Williams'
absolute leverage, the relatively high percentage of proved
undeveloped reserves in the E&P sector and commodity price
volatility in the midstream. Williams' outlook could move to
positive through a combination of continued improvement in
operating cash flow, lower debt levels, and greater mitigation of
the power tolling obligations. The outlook could move to negative
as a result of deteriorating operating performance, negative free
cash flow, weaker liquidity or greater volatility in enterprise
risk management.
Ratings affected include those of The Williams Companies, Inc. and
its rated subsidiaries.
The Williams Companies, Inc., headquartered in Tulsa, Oklahoma, is
an integrated natural gas company with operations in interstate
natural gas pipelines, midstream gas, E&P and electric power
generation.
WISE WOOD: Diamond Tree to Undertake Reverse Takeover Transaction
-----------------------------------------------------------------
Diamond Tree Resources Ltd. and Wise Wood Corporation will
undertake their previously announced business combination through
a reverse takeover of Wise Wood by Diamond Tree. To that end, the
corporations have entered into a Non Arms Length Pre-Acquisition
Agreement, dated October 29, 2004, which provides that Wise Wood:
(1) will mail an offer to purchase all of the outstanding
shares of Diamond Tree to the shareholders and option
holders of Diamond Tree and will, subject to satisfaction
of the conditions associated with such offer, and
(2) purchase all of the 40,900,000 outstanding Diamond Tree
shares (including pursuant to the compulsory acquisition
provisions set out in the Business Corporations Act
(Alberta), if necessary).
In exchange for each Diamond Tree share, Wise Wood will issue four
common shares of Wise Wood. If Wise Wood acquires all of the
outstanding shares of Diamond Tree, Wise Wood will issue
approximately 163,600,000 common shares to the existing Diamond
Tree shareholders. As the existing Diamond Tree shareholders will
hold approximately 92% of the outstanding shares of Wise Wood
following completion of the transactions contemplated by the
offer, the transaction will constitute a reverse takeover of Wise
Wood. Subject to the receipt of all necessary regulatory
approvals, it is anticipated that the Wise Wood offer will be
mailed to the holders of Diamond Tree shares and Diamond Tree
options on November 24, 2004. Under the rules of the TSX Venture
Exchange, Wise Wood may not complete the proposed purchase of
Diamond Tree shares unless such transaction is approved by the
shareholders of Wise Wood, on a majority of the minority basis.
A meeting of the Wise Wood shareholders has been scheduled for
December 21, 2004 to consider, and if thought fit, approve the
acquisition of Diamond Tree shares and certain related matters.
Wise Wood has made application to the TSX Venture Exchange for a
waiver of any sponsorship requirements relating to the business
combination.
Diamond Tree is a private Alberta corporation engaged in the
exploration and development of oil and natural gas in Alberta.
For purposes of the business combination transaction, the value of
Diamond Tree has been set at $42 million and each share of Wise
Wood will have an ascribed value of $0.25, which represents a 38%
premium to the closing price of the common shares of Wise Wood on
October 14, 2004 (the date that the proposed business combination
was announced). Diamond Tree has averaged 1,200 BOE per day for
the first six months of 2004 and is currently producing
approximately 1,200 BOE per day, comprised of approximately 70%
natural gas and 30% oil and natural gas liquids. Diamond Tree is
currently tying-in two wells that are expected to add
approximately 200 BOE per day of production. Reserve Reports
(prepared in accordance with National Instrument 51-101) have been
produced by qualified reserve evaluators in respect of Diamond
Tree's principal oil and gas properties. These reports are
expected to be filed with securities regulatory authorities
concurrently with the filing of the management information
circular to be forwarded to Wise Wood shareholders in anticipation
of the shareholders' meeting (scheduled for December 21, 2004) at
which time the business combination is to be considered and voted
upon. Those reports, when filed, will be available through the
SEDAR web site at http://www.sedar.com/
In addition, Diamond Tree has entered into an acquisition
agreement with Edenshaw Resources Ltd., pursuant to which Diamond
Tree has made an offer to purchase all of the outstanding shares
of Edenshaw. The acquisition transaction is expected to be
completed on or prior to November 17, 2004. The assets of
Edenshaw consist of working interests in lands and wells in the
Ferrybank area of Alberta, where Diamond Tree holds the majority
working interest and acts as operator. The Edenshaw acquisition
will result in Diamond Tree increasing its working interest in the
Ferrybank area from 80% to 100%. Reserve Reports (prepared in
accordance with National Instrument 51-101) have been produced by
qualified reserve evaluators in respect of the Edenshaw interests.
These reports are expected to be filed with securities regulatory
authorities concurrently with the filing of the management
information circular to be forwarded to Wise Wood shareholders in
anticipation of the Wise Wood shareholders' meeting referred to
above. Those reports, when filed, will be available through the
SEDAR web site.
Following completion of the business combination between Wise Wood
and Diamond Tree, it is anticipated that the business of Wise Wood
will be changed and that the resulting issuer will become an oil
and gas exploration and development entity. At present, the
principal asset of Wise Wood is its 50% interest in a joint
venture with a private corporation, Innovative Coke Expulsion Inc.
That joint venture carries on the business of cleaning pipelines
and refinery piping and tubing and providing related services to
the petroleum industry. As this asset does not fit in with the
planned direction of the resulting issuer, efforts to divest of
this joint venture interest at an early opportunity will continue.
Mr. Fred Moore, the current President of Wise Wood, has agreed to
oversee this disposition.
In connection with the business combination, it is anticipated
that, subject to shareholder approval, the name of Wise Wood will
be changed to "Diamond Tree Energy Ltd." and that the outstanding
shares of the Corporation following the reverse takeover
transaction will be consolidated on the basis of one new share for
each ten old shares.
Tristone Capital Inc. has been engaged to provide both Diamond
Tree and Wise Wood with fairness opinions respecting the business
combination.
The Board of Directors of Diamond Tree, on the advice of a special
committee established to consider and make recommendations in
respect of the business combination, has resolved to recommend
acceptance of the Wise Wood offer to the holders of Diamond Tree
shares. Diamond Tree has received verbal advice from Tristone
Capital Inc., that the consideration to be offered by Wise Wood is
fair, from a financial perspective, to the holders of Diamond Tree
shares. The Board of Directors of Wise Wood has also determined,
based upon the advice of Tristone and recommendations from its
special committee, that the business combination is fair, from a
financial perspective, to the shareholders of Wise Wood.
Ownership
Upon completion of the business combination, and subject to the
closing of a concurrent private placement, there will be
18,711,800 post consolidated common shares issued and outstanding
and 23,701,800 post consolidated common shares on a fully diluted
basis. Mr. Don Copeland, of Calgary, Alberta, directly and
indirectly, will own 5,431,962 post consolidated common shares or
29.0% (6,016,962 post consolidated common shares on a fully
diluted basis or 25.4%). No other person is expected to own more
than 10% of the issued and outstanding shares of the resulting
issuer. Following the business combination, the directors and
senior officers and their associates and affiliates, as a group,
are expected to own, directly or indirectly, 7,954,444 post
consolidated common shares of the resulting issuer or 42.5%. On a
fully diluted basis, those directors, and senior officers and
their associates and affiliates, as a group, are expected to own,
directly or indirectly, 12,134,444 post consolidated common shares
of the resulting issuer or 51.2% post consolidated common shares
of the resulting issuer.
Private Placement
Diamond Tree and Wise Wood anticipate that, in conjunction with
the proposed business combination, the combined entity will
undertake a non-brokered private placement of common shares in an
amount up to $2.5 million. It is expected that the private
placement will be offered only to directors, officers and
employees of the resulting issuer and that the sale price of the
securities will be $2.50 per share ($0.25 on a pre-consolidation
basis). The private placement is expected to result in the
issuance of an additional one million shares (post consolidation).
In addition, it is anticipated that 2.5 million (post
consolidation) performance warrants (priced at this same issue
price of the Diamond Tree shares to be issued in connection with
the business combination) will be made available to directors,
officers and employees of the resulting issuer. Those warrants
are to be subject to performance hurdles and vesting conditions
that will be finalized by the Board of Directors of the resulting
issuer following the business combination. The shares may be
escrowed in accordance with TSX Venture Exchange Policy 5.4(1.6).
The private placement and the performance warrants will be subject
to shareholder and TSX Venture Exchange approval.
A number of the directors and officers of Wise Wood are also
directors and officers of Diamond Tree and hold shares in the
capital of Diamond Tree. Mr. Don Copeland, the Chairman of Wise
Wood is the Chief Executive Officer and a director of Diamond
Tree. Mr. Copeland and members of his immediate family
beneficially own, directly or indirectly, approximately 32 % of
the outstanding shares of Diamond Tree. Mr. Gary Unrau is a
director of both Diamond Tree and Wise Wood and he and members of
his family own approximately 7.3% of the outstanding Diamond Tree
shares. Mr. Fred Moore, the President of Wise Wood, is a director
of Diamond Tree and beneficially owns, directly or indirectly,
approximately 2.5% of the outstanding Diamond Tree shares. None
of the common directors and officers of Wise Wood and Diamond Tree
were part of the special committee formed by each corporation to
review the terms of the business combination.
New Board of Directors
Following completion of the reverse takeover, it is anticipated
that the Board of Directors of Wise Wood will consist of:
* Don D. Copeland,
* Fred Moore,
* Howard Dixon,
* Tom Alford,
* Kelly Ogle,
* Gary Unrau, and
* Charles Berard.
The senior officers of Wise Wood are expected to be:
* Don D. Copeland (Chairman & Chief Executive Officer),
and
* Kelly Ogle (President).
Additional key staff members will include:
* Kelly Tomyn (Vice President Finance), and -
* David Keenan (Vice President Engineering).
Mr. Don Copeland is currently a director, Chairman and Chief
Executive Officer of Diamond Tree. Mr. Copeland incorporated
Diamond Tree in April 2001. Mr. Copeland also acted as President
of Diamond Tree from April 2001 until October 2004, when Mr. Kelly
Ogle was appointed to that position. From January 1999 to
April 2001, Mr. Copeland acted as a director and as Chairman,
President and Chief Executive Officer of Titanium Oil & Gas Ltd.,
a private, Alberta corporation engaged in the exploration and
development of oil and gas in western Canada. Titanium was sold
to Husky Energy in April 2001. Mr. Copeland also serves as a
director and chairman of the Board of Wise Wood, positions he has
held since June 2000.
Mr. Kelly Ogle is currently a director and President of Diamond
Tree, having been appointed to those positions in October 2004.
From January 2003 to August 2004, Mr. Ogle acted as President and
Chief Executive Officer of Ranchgate Energy Inc., a public
corporation the shares of which were listed on the Toronto Stock
Exchange. From September 2001 to January 2003, Mr. Ogle served as
President and Chief Executive Officer of Ranchgate Oil and Gas
Limited, a private oil and gas corporation.
Ms. Kelly Tomyn is currently the Vice President, Finance of
Diamond Tree, having been appointed to that position in
October 2004. Ms. Tomyn acted as the Vice President, Finance of
Ranchgate Energy Inc. from January 2003 to August 2004 and as Vice
President, Finance of Ranchgate Oil and Gas Limited from September
2002 to January 2003. From December 2000 to June 2002, Ms Tomyn
acted as Vice President, Finance of Saddle Resources Inc., a
public oil and gas corporation and as Vice President, Finance of
Cedar Energy Inc. (a private oil and gas corporation) from
December 2000 to June 2001. From July 1999 to July 2000, Ms.
Tomyn was the Vice President, Finance of Westpoint Energy Inc., a
public oil and gas corporation. During the period from October
1998 to June 1999, Ms. Tomyn acted as the Controller of
Shiningbank Energy Management Inc., the management corporation for
the Shiningbank Energy Trust, a public oil and gas energy trust.
Mr. David Keenan has recently been promoted to Vice President
Engineering of Diamond Tree Resources Ltd. Mr. Keenan is a
professional engineer with 14 years of oil and gas experience.
Prior to joining Diamond Tree, Mr. Keenan worked for Summit
Resources from October 1999 to July 2002 and was with Rigel Oil
and Gas from 1991 to 1999.
Mr. Fred Moore is currently President and Chief Executive Officer
of Wise Wood, positions he has held since May 2002. Mr. Moore is
a director of both Wise Wood and Diamond Tree. Mr. Moore has
acted as the President of NPS Ventures Ltd. (a private investment
corporation) since 1983. Since March, 2002, Mr. Moore has been
the President of Nusco Supply & Manufacturing Inc., a private oil
and gas services corporation.
Mr. Thomas Alford has been a director and the President, Chief
Executive Officer and Chief Financial Officer of Iroc Systems
Corp. (a public corporation that supplies safety and environmental
equipment to the oil and gas industry), since December 2001. The
common shares of Iroc Systems Corp. are listed on the TSX Venture
Exchange. From December 1997 to October 2000, Mr. Alford was the
President and Chief Executive Officer of Bonus Resource Services
Corp. (a public oil and gas services corporation), the common
shares of which were listed on the Toronto Stock Exchange.
Mr. Gary Unrau holds a BSc. in Geology and has acted as a self
employed businessman and consultant since July 1995.
Mr. Charles Berard is a Partner with Macleod Dixon LLP, Calgary,
Alberta (a legal services firm), a position he has held since
1981. Mr. Berard serves as a director and/or corporate secretary
of various public entities, including Vermillion Energy Trust,
Clear Energy Inc., Verenex Energy Inc. and Western Oil Sands Inc.
Wise Wood Corporation provides oil and gas companies with de-
coking and de-scaling services through its Joint Venture
operations with Innovative Coke Expulsion Inc. In its most recent
financial statements dated June 30, 2004 Wise Wood generated
revenue of $5.23 million and net income of $0.24 million.
The Company is incorporated under the Alberta Business
Corporations Act. The Company became a public company on Dec. 2,
2001, and was then classified as a Capital Pool Company -- CPC
-- as defined in Policy 2.4 of the TSX Venture Exchange.
Effective with its Qualifying Transaction on May 3, 2002, the
Company ceased to be a CPC.
On May 20, 2003 the Company changed its name from Wise Wood Energy
Ltd. to Wise Wood Corporation.
* * *
Wise Wood Corporation's June 30, 2004, financial report indicated
that Wise Wood incurred substantial losses since its inception
and, despite an improvement in cash flows during fiscal 2004, had
a substantial working capital deficiency at June 30, 2004, and was
in violation of certain of its financial covenants with its
banker. These factors called the ability of the Company to
continue as a going concern into question.
WORLDCOM INC: Judge Cote Approves ERISA Class Action Settlement
---------------------------------------------------------------
Several parties filed objections to the Settlement Agreement
before the U.S. District Court for the Southern District of New
York:
(1) Merrill Lynch
Merrill Lynch objected to the proposed bar order contained
in the Agreement. Merrill Lynch argued that the bar order
may not allow the amount of any judgment entered against it
in the litigation to be reduced by the full amount of its
right to contribution from the defendants who have settled
the litigation.
(2) Fifteen class members
The Class Members complain:
-- that the amount of the Agreement is too small;
-- that the settlement caps the recovery of some class
members in a way that unfairly disadvantages those with
larger losses;
-- that WorldCom has paid too little, shifting the payments
to its insurance companies and minimizing any impact on
the company itself;
-- of the size of the proposed award of attorney's fees and
expenses. They argue that counsel has not had an adequate
incentive to press WorldCom for more money.
The Class Members also worry that Bernard Ebbers will not
contribute the $400,000 required by the Agreement or satisfy
the promissory note of up to $4,000,000. The Class Members
want the WorldCom employees, specifically Dona Miller and
Pamela Titus, prosecuted and required to contribute to the
settlement from their own money. Each of the WorldCom
directors must also be required to liquidate all of their
assets and contribute to the settlement.
The Class Members further complain of the current MCI
management, including the salaries of its current management
team and its dividend practices.
The Class Members also argue that those members who went to
the trouble of filing proofs of claim should receive more
from the settlement.
On October 15, 2004, the District Court held a hearing to
determine the fairness of the Agreement.
District Court's Decision
In a 32-page Opinion and Order dated October 18, 2004, Judge
Denise Cote rules that "[t]here is no basis to find that this
settlement is tainted by collusion." Judge Cote notes that the
Agreement was indisputably the result of arm's-length, protracted
negotiations. The settlement was reached despite significant
hurdles and persistent denials of liability by certain of the
defendants.
Accordingly, Judge Cote approves the Settlement Agreement.
The Objections are denied. Judge Cote holds that the Objections
do not alter the conclusion that the amount of the Settlement and
its terms are entitled to approval.
Judge Cote further rules that 20% of the cash settlement fund will
be reserved for potential distribution to counsel.
A full-text copy of the District Court Order is available at no
charge at:
http://bankrupt.com/misc/ERISA_settlement_order.pdf
Headquartered in Clinton, Mississippi, WorldCom, Inc., now known
as MCI -- http://www.worldcom.com/-- is a pre-eminent global
communications provider, operating in more than 65 countries and
maintaining one of the most expansive IP networks in the world.
The Company filed for chapter 11 protection on July 21, 2002
(Bankr. S.D.N.Y. Case No. 02-13532). On March 31, 2002, the
Debtors listed $103,803,000,000 in assets and $45,897,000,000 in
debts. The Bankruptcy Court confirmed WorldCom's Plan on October
31, 2003, and on April 20, 2004, the company formally emerged from
U.S. Chapter 11 protection as MCI, Inc. (Worldcom Bankruptcy News,
Issue No. 63; Bankruptcy Creditors' Service, Inc., 215/945-7000)
WORLDCOM INC: Asks Judge Gonzalez to Reject Galaxy's $20MM Claim
----------------------------------------------------------------
Galaxy Long Distance, Inc., filed Claim No. 12138, an unsecured
claim for $20,000,000, against TTI National, Inc., MCI WorldCom
Network Services, Inc., and WorldCom, Inc. The Claim is
predicated on the Debtors' efforts to collect a debt owing them
from Galaxy, which efforts included filing an involuntary
bankruptcy petition against Galaxy before the U.S. Bankruptcy
Court for the Middle District of Florida. The Galaxy Claim
contains a copy of the counterclaim Galaxy filed against the
Debtors in response to the Debtors' complaint against Galaxy to
collect amounts for services rendered.
Before the Debtors filed for bankruptcy, Galaxy and the Debtors
were involved in litigation in the Florida Bankruptcy Court and in
the U.S. District Court for the Middle District of Florida.
Galaxy sought payment from the Debtors for damages under Section
303(i) of the Bankruptcy Code.
Both the Bankruptcy Court and District Court proceedings were
stayed pending confirmation of the Debtors' reorganization plan.
After confirmation of the Plan, Galaxy's Bankruptcy Court
dismissed Galaxy's Section 303(i) request for want of prosecution.
The Debtors deny owing any money to Galaxy under Section 303(i) or
otherwise. To the contrary, the Debtors believe that they are
owed money from Galaxy.
Against this backdrop, the Debtors ask Judge Gonzalez to disallow
Galaxy's Claim in its entirety.
Headquartered in Clinton, Mississippi, WorldCom, Inc., now known
as MCI -- http://www.worldcom.com/-- is a pre-eminent global
communications provider, operating in more than 65 countries and
maintaining one of the most expansive IP networks in the world.
The Company filed for chapter 11 protection on July 21, 2002
(Bankr. S.D.N.Y. Case No. 02-13532). On March 31, 2002, the
Debtors listed $103,803,000,000 in assets and $45,897,000,000 in
debts. The Bankruptcy Court confirmed WorldCom's Plan on October
31, 2003, and on April 20, 2004, the company formally emerged from
U.S. Chapter 11 protection as MCI, Inc. (Worldcom Bankruptcy News,
Issue No. 63; Bankruptcy Creditors' Service, Inc., 215/945-7000)
YOUTHSTREAM MEDIA: Joseph Corso Jr. Discloses 9.81% Equity Stake
----------------------------------------------------------------
Joseph Corso Jr., beneficially owns three million eight hundred
fifty thousand (3,850,000) shares of the common stock of
YouthStream Media Networks, Inc., an amount which represents 9.81%
of the outstanding common stock of the Company. Mr. Corso Jr.
holds sole voting power over the stock.
YouthStream Media Networks, Inc. operates a retail business,
Beyond the Wallr (also known as Trent Graphics), which sells
decorative wall posters and related items through a chain of
retail stores and on-campus sales events.
At June 30, 2004, YouthStream Media's balance sheet showed a
$12,855,000 stockholders' deficit, compared to a $10,699,000
deficit at Sept. 30, 2003.
* Upcoming Meetings, Conferences and Seminars
---------------------------------------------
November 29-30, 2004
BEARD GROUP & RENAISSANCE AMERICAN MANAGEMENT
The Eleventh Annual Conference on Distressed Investing
Maximizing Profits in the Distressed Debt Market
The Plaza Hotel - New York City
Contact: 1-800-726-2524; 903-592-5168;
or dhenderson@renaissanceamerican.com
December 2-4, 2004
AMERICAN BANKRUPTCY INSTITUTE
Winter Leadership Conference
Marriott's Camelback Inn, Scottsdale, Arizona
Contact: 1-703-739-0800 or http://www.abiworld.org/
March 9-12, 2005
TURNAROUND MANAGEMENT ASSOCIATION
2005 Spring Conference
JW Marriott Desert Ridge, Phoenix, Arizona
Contact: 312-578-6900 or http://www.turnaround.org/
April 28- May 1, 2005
AMERICAN BANKRUPTCY INSTITUTE
Annual Spring Meeting
J.W. Marriot, Washington, D.C.
Contact: 1-703-739-0800 or http://www.abiworld.org/
June 2-4, 2005
ALI-ABA
Partnerships, LLCs, and LLPs: Uniform Acts, Taxation,
Drafting, Securities and Bankruptcy
Omni Hotel, San Francisco
Contact: 1-800-CLE-NEWS; http://www.ali-aba.org/
July 14 -17, 2005
AMERICAN BANKRUPTCY INSTITUTE
Ocean Edge Resort, Brewster, Massachusetts
Contact: 1-703-739-0800 or http://www.abiworld.org/
July 27- 30, 2005
AMERICAN BANKRUPTCY INSTITUTE
Southeast Bankruptcy Workshop
Kiawah Island Resort and Spa, Kiawah Island, S.C.
Contact: 1-703-739-0800 or http://www.abiworld.org/
October 19-23, 2005
TURNAROUND MANAGEMENT ASSOCIATION
2005 Annual Convention
Chicago Hilton & Towers, Chicago
Contact: 312-578-6900 or http://www.turnaround.org/
November 2-5, 2005
NATIONAL CONFERENCE OF BANKRUPTCY JUDGES
Seventy Eighth Annual Meeting
San Antonio, Texas
Contact: http://www.ncbj.org/
December 1-3, 2005
AMERICAN BANKRUPTCY INSTITUTE
Winter Leadership Conference
Hyatt Grand Champions Resort, Indian Wells, Calif.
Contact: 1-703-739-0800 or http://www.abiworld.org/
The Meetings, Conferences and Seminars column appears in the
Troubled Company Reporter each Wednesday. Submissions via e-mail
to conferences@bankrupt.com are encouraged.
*********
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
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*** End of Transmission ***